TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Saturday, August 8, 2015

NY Times: IRS To Unveil New Rules Curtailing Family Limited Partnerships

FLPNew York Times:  Navigating Tougher I.R.S. Rules for Family Partnerships, by Paul Sullivan:

The Internal Revenue Service is about to toughen the rules on a type of investment vehicle that has been abused by some very wealthy families to avoid millions of dollars in taxes.

The wealthy are allowed to use family limited partnerships, family limited liability companies and their variants to hold family businesses, real estate or other illiquid, hard-to-value investments. And they can discount the value of the assets because that is seen as the only way people outside the family would buy in, particularly since nonfamily members have no control over what the partnership does.

But some partnerships have put marketable securities, even cash, into the entities and still claimed a discount even though the investments have a value that is easy to determine. Others have taken steep and unreasonable discounts on the value of the partnership shares solely on the basis that the entity itself is family-owned.

A few have gone so far as to value the assets they hold at a steep discount for estate tax purposes only to turn around and liquidate the partnerships and distribute the cash as soon as the statute of limitations on estate tax audits has passed.

Stung by its mixed record in challenging these entities in court, the I.R.S. could soon get help from the United States Treasury. Cathy Hughes, an attorney-adviser at the Treasury’s office of tax policy, said in May that new regulations restricting what would be allowed with family partnerships could be released as soon as mid-September.

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August 8, 2015 in IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 821

IRS Logo 2Forbes:  Dear IRS Employees: Emails Go To Congress, So Let's Text, by Robert W. Wood:

For more than two years, President Obama has denied there is an IRS problem, quipping that there is not a smidgen of corruption at the IRS. He has long claimed that any missteps were innocent, entirely the fault of bonehead decisions in local offices. ...

Yet it is harder and harder to believe. IRS documents have revealed a Lois Lerner email about teaching IRS staffers to understand the potential pitfalls of revealing too much information to Congress. Forget email. Instead, the IRS used a neat instant messaging system that automatically deleted office communications. House Oversight Committee documentation suggests it was used deliberately by IRS officials to evade public scrutiny. The fact that the IRS use instant messaging to hide internal communications came out more than a year ago, yet it is still pooh poohed by the administration. ...

Some of the real juice may be in text or instant messages. In 2013, when the IRS targeting scandal was brewing, Ms. Lerner asked an IRS IT specialist if the IRS saved texts? The response was music to Ms. Lerner’s ears. No, they are not automatically saved, was IT’s response. The IT person went on to say that saving them was possible, though, so be careful. “Perfect,” was Ms. Lerner’s reply. And remember all those many millions of dollars of taxpayer money the IRS spent looking?

Yet House Members were recently told by the Inspector General that the IT staff of the IRS said they were never even asked for backup tapes to find Lerner’s emails. Deputy Inspector General Tim Camus said finding the emails was easy. “They were right where you would expect them to be,” he told the Oversight Committee. ...

Mr. Koskinen has testified before Congress numerous times. On March 26, 2014, he pledged that the IRS would produce all of Ms. Lerner’s emails. Yet he knew there were big problems, and the ‘facts’ and dates just don’t line up. Mr. Koskinen lamented the lost or destroyed backup tapes. Mr. Koskinen testified he had “confirmed” that all of the tapes were unrecoverable.

In fact, approximately 700 backup tapes had not been erased and contained relevant information. The inspector general said the 700 still-good backup tapes recovered were found within 15 days of the IRS’s informing Congress they were not recoverable! What was so difficult? The inspector general’s staff simply drove to Martinsburg, WV and asked for the tapes. The IRS had never even asked whether the tapes existed. Well, maybe they sent a text.

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August 8, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, August 7, 2015

Carly Fiorina, Republican Debate Winner, Is The Daughter Of The Late 9th Circuit Judge (And Tax Prof) Joseph Sneed

CarlyCarly Fiorina, the consensus winner of last night's Republican presidential debate, is the daughter of the late Ninth Circuit Judge Joseph Sneed, who was a Tax Prof at Texas (1947-57), Cornell (1957-62), and Stanford (1962-71), as well as Dean of Duke Law School (1971-73). He was the author of two opinions that are staples in most income tax casebooks:

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August 7, 2015 in Legal Education, Tax | Permalink | Comments (0)

Weekly Tax Roundup

Krugman Slams Piketty's 'New' Book On Inequality

PikettyNew York Times Book Review:  Thomas Piketty, The Economics of Inequality (Harvard University Press 2015), reviewed by Paul Krugman (Princeton):

Let me be blunt: I don’t know how the decision was made to release this “new” Piketty book in its current form, but it’s not at all the book one might have expected. It is, instead, a slightly revised version of a volume first published in 1997, when Mr. Piketty was in his mid-20s.

And by slightly I mean very slightly. Even the data tables have not, for the most part, been updated, in many cases containing no information later than 1995. Perhaps more important, the basic outlines of the argument haven’t been updated to reflect later scholarship — not even Mr. Piketty’s own work with Mr. Saez. As the author concedes in a note to readers, “This book does not fully take into account the results of the past 15 years of international research on the historical dynamics of inequality.”

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August 7, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (2)

Beyond Gilson: The Art Of Business Lawyering

Praveen Kosuri (Pennsylvania), Beyond Gilson: The Art of Business Lawyering, 19 Lewis & Clark L. Rev. 463 (2015):

Thirty years ago, Ronald Gilson asked the question, “what do business lawyers really do?” Since that time legal scholars have continued to grapple with that question and the implicit question of how business lawyers add value to their clients. This article revisits the question again but with a more expansive perspective on the role of business lawyer and what constitutes value to clients.

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August 7, 2015 in Scholarship, Tax | Permalink | Comments (1)

Infanti: The House Of Windsor — Accentuating the Heteronormativity In The Tax Incentives For Procreation

Anthony C. Infanti (Pittsburgh), The House of Windsor: Accentuating the Heteronormativity in the Tax Incentives for Procreation, 89 Wash. L. Rev. 1185 (2014):

Following the Supreme Court’s decision in United States v. Windsor, many seem to believe that the fight for marriage equality at the federal level is over and that any remaining work in this area is at the state level. Belying this conventional wisdom, this essay continues my work plumbing the gap between the promise of Windsor and the reality that heteronormativity has been one of the core building blocks of our federal tax system. Eradicating embedded heteronormativity will take far more than a single court decision (or even revenue ruling); it will take years of work uncovering the subtle ways in which heteronormativity pervades our federal tax laws and of identifying means of eliminating that heteronormativity. To further this work and in keeping with the theme of this symposium issue, “Compensated Surrogacy After Windsor,” this essay explores the unremitting heteronormativity of the federal tax incentives for procreation as they apply to compensated surrogacy, which is the only practical option for gay couples wishing to procreate.

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August 7, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 820

IRS Logo 2New York Times, Senate Report Cites I.R.S. Mismanagement in Targeting of Tea Party Groups:

A Senate committee on Wednesday closed a two-year investigation with unanimous agreement that mismanagement at the Internal Revenue Service led it to improperly target conservative groups seeking tax-exempt status. But a report by the panel did not suggest that any laws were broken, and Republicans and Democrats were divided over whether White House politics was behind the problems.

“This bipartisan investigation shows gross mismanagement at the highest levels of the I.R.S. and confirms an unacceptable truth: that the I.R.S. is prone to abuse,” Senator Orrin G. Hatch, Republican of Utah and the chairman of the Senate Finance Committee, said in a statement after his panel voted behind closed doors to release the report of more than 400 pages.

An I.R.S. official acknowledged the agency had singled out nonprofit applicants with “Tea Party” or “patriots” in their titles.

Mr. Hatch added that “the committee found evidence that the administration’s political agenda guided the I.R.S.’s actions with respect to their treatment of conservative groups.” But the committee’s senior Democrat, Senator Ron Wyden of Oregon, said in the same news release that the inquiry had found “pure bureaucratic mismanagement without any evidence of political interference.”

“Groups on both sides of the political spectrum were treated equally in their efforts to secure tax-exempt status,” Mr. Wyden said.

The two parties’ differences of interpretation left them where they began more than two years ago, after Republicans and conservative groups first accused the I.R.S. of singling out applications of Tea Party-affiliated organizations seeking tax-exempt status for extra scrutiny and delays. Even so, the overall bipartisanship of the conduct and the conclusions of the Finance Committee investigation was notable given both the charged nature of the allegations and the more partisan parallel inquiries in the Republican-controlled House.

“Our investigation found that from 2010 to 2013, I.R.S. management was delinquent in its responsibility to provide effective control, guidance and direction over the processing of applications for tax-exempt status filed by Tea Party and other political advocacy organizations,” the committee concluded.

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August 7, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Thursday, August 6, 2015

Mehrotra Reviews Zelenak's Learning To Love Form 1040

Learning to Love 1040Ajay K. Mehrotra (Indiana), Reviving Fiscal Citizenship, 113 Mich. L. Rev. 943 (2015) (reviewing Lawrence Zelenak (Duke), Learning to Love Form 1040: Two Cheers for the Return-Based Mass Income Tax (University of Chicago Press, 2013)): 

In recent years, numerous lawmakers, policy analysts, and scholars have been decrying the many defects of the present U.S. income tax system. Few have attempted to defend our return-based mass income tax. This essay reviews Learning to Love Form 1040, Lawrence Zelenak’s stirring and persuasive defense of a simplified version of our present federal income tax system. In contrast to the conventional economic critiques, Zelenak explores the underappreciated social, cultural, and political benefits of a return-based, mass income tax. Chief among these, he argues, is the existing regime’s potential to raise the tax consciousness of the average citizen and to enhance modern notions of fiscal citizenship.

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August 6, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (1)

Defusing The Student Loan Forgiveness Tax Bomb

IBRFollowing up on my previous post, The 'Tax Bomb' Facing Lawyers Who Enroll In Income-Based Student Loan Repayment Plans:  Steven Chung (Lawyerist), Defusing the Student Loan Forgiveness Tax Bomb:

For those who are struggling to repay their federal student loans, there are alternative repayment plans available. The programs are known as Income Based Repayment (IBR) and Pay As You Earn (PAYE). These plans lower borrowers’ monthly student loan payments based on a percentage of their monthly income. If they stay on these plans for twenty to twenty-five years, then any balances remaining are forgiven.

While these plans sound tempting, there are caveats. First, these plans are not available for private loans, which includes companies like SoFi. Second, Lawyerist writer Lisa Needham warned that income-based student loan repayment plans are a trap. According to Jacob Gershman’s article in the Wall Street Journal, some will have to get ready for a hefty tax bomb once their federal student loans are forgiven starting in 2032.

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August 6, 2015 in Tax | Permalink | Comments (6)

Senate Releases Summaries of Tax Extenders Bill; Joint Tax Committee's Dynamic Scoring Says Bill Will Cover 11% Of Its Costs

The Senate Finance Committee yesterday released updated summaries (here and here) of the committee-passed tax extenders legislation (S. 1946). In connection with the bill, the Joint Committee on Taxation released A Report To The Congressional Budget Office Of The Macroeconomic Effects Of The “Tax Relief Extension Act Of 2015”.

Bloomberg, Tax Cut Pays Part of Its Way in Test of Republican Scoring:

A bipartisan U.S. Senate bill that would revive and extend dozens of lapsed tax breaks would spur economic growth and cover about 11 percent of its own costs, according to Congress’s nonpartisan scorekeeper.

The analysis released Tuesday is an early test of Republicans’ focus on what’s known as dynamic scoring. It refers to the principle that legislation can be significant enough to change the size of the economy and affect the U.S. budget.

Republicans say that’s a more accurate way to study bills, and they’ve changed budget rules to include the analyses. Democrats are dubious, citing the uncertainty of projections.

Jared Bernstein (Center on Budget and Policy Priorities), Dynamic Scoring in Action: Unwarranted Certainty:

Jared

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August 6, 2015 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

The IRS Scandal, Day 819

IRS Logo 2Senate Finance Committee, Bipartisan Investigative Report on the IRS's Processing of 501(c)(3) and 501(c)(4) Applications for Tax-Exempt Status Submitted by "Political Advocacy" Organizations From 2010-2013 (145 pages):

While much has been reported about the alleged political targeting over the last two years, it is important to stress that this Committee has conducted the only bipartisan investigation into the matter. Consequently, this report will perhaps serve as the definitive account of events transpiring at the IRS and the management failures and other causes that were at the root of the IRS's actions. Hopefully, this report will provide a roadmap for how Congress and the public can act to make sure this type of conduct does not happen again. ...

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August 6, 2015 in Congressional News, IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, August 5, 2015

Ring: Another Perspective On The Role Of Tax Professionals

JotwellDiane Ring (Boston College), Who Should Be Invited to the Tax Dinner? Another Perspective on the Role of Tax Professionals (Jotwell) reviewing Gillian Brock (Auckland) & Hamish Russell (Toronto), Abusive Tax Avoidance and Institutional Corruption: The Responsibilities of Tax Professionals):

Brock and Russell’s article [argues that] the functioning of the tax system depends, in part on our acknowledgement that certain behavior is important to its successful operation, even though that behavior may not have been formalized explicitly into the law. ... [I]t has been ... difficult to establish a shared vision of the moral responsibility for curbing abusive tax avoidance. But Brock and Russell seek to ignite this conversation through their fresh perspective. ...

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August 5, 2015 in Scholarship, Tax | Permalink | Comments (1)

Dynasty Trusts Enable The Wealthy To Control Their Assets Even Beyond The Grave

MadoffThe Nation, How the Rich Can Keep Their Homes, Businesses, Artwork, and Wealth Tax-Free—Forever: Dynasty Trusts Enable the Wealthy to Control Their Assets Even Beyond the Grave, by Mike Koncza:

It’s a common-sense notion that society’s wealth shouldn’t be governed by ghosts. “Our Creator made the earth for the use of the living and not of the dead,” wrote Thomas Jefferson. (Also: “One generation of men cannot foreclose or burthen its use to another.”) But in our new age of inequality—the top 10 percent now own nearly 80 percent of all wealth—old concerns about wealth and inheritance are coming back from the dead.

Americans have, historically, had a simple approach to dealing with wealth after its holder dies: You can do whatever you want with your property, but not for very long. Rich people can disinherit children. They can put extreme conditions on how their successors can inherit, like requiring marriage. They can build monuments to themselves or give everything to their pets. But they can only do it so long. Eventually, time catches up with them and their estates dissolve.

Or at least that’s how it used to be. Remember that the dead can’t actually do any of this themselves because they are, in fact, dead. Instead, a trust is empowered to carry out the last wishes of the deceased. A trust is simply a legal entity that contains property; people tell a trust what they want to do, and the trust acts like a ghost, enforcing their wishes beyond the grave. But there’s a safeguard built in to prevent abuses: Trusts have been governed by something called the rule against perpetuities, which places a roughly 100-year limit on how long they can exist. This prevents people with no connection to the living world from putting restrictions on our country’s wealth.

In recent years, the safeguard of time has been eroded. As the tax expert Ray D. Madoff documents in her 2010 book Immortality and the Law: The Rising Power of the American Dead, we are experiencing a rapid rise of dynasty trusts, which massively expand the power of the dead over the wealth of the living.

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August 5, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (5)

Former Davis Polk Tax Partner Now Plays A Different Tune: Music (And The Brain)

BallanAmerican Lawyer, Former Davis Polk Partner Now Playing A Different Tune:

Instead of spending his Thursday afternoon negotiating a stock purchase agreement or working on a capital markets transaction, as would normally be the case, tax attorney Harry Ballan was in the New York City borough of the Bronx helping facilitate a therapeutic music session with a group of seven veterans.

As the now-retired Davis Polk & Wardwell partner explained it, his new job is to make sure that group members, many of whom suffer from post-traumatic stress disorder, have the right instruments to participate in the music circle and to give piano lessons after the session is over.

Ballan, 55, has transitioned into a senior counsel position at Davis Polk in order to pursue a lifelong interest in a problem that is seemingly unrelated to the practice of tax law: how music can be used to understand the brain.

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August 5, 2015 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 818

IRS Logo 2Judicial Watch v. U.S. Department of Justice, No. 14-1024 (July 31, 2015):

The plaintiff submitted a FOIA request to the defendant, seeking “[a]ll Justice Department records from the Interactive Case Management System detailing the number of hours DOJ Attorney Barbara Bosserman expended on the investigation of the Internal Revenue Service targeting of conservative organizations seeking tax-exempt status in the 2010 and 2012 election cycles.” After failing to respond to the plaintiff’s request, or advise the plaintiff of its ability to appeal such a non-response, the plaintiff initiated the instant suit. ...

[T]he Court finds that the time records contain protected attorney work product and that disclosure under FOIA is not required. ...

In the present case, the defendant’s time records contain “Ms. Bosserman’s accounts of the tasks as she performed them, including notes about locations visited, persons consulted, staff briefings, and other case developments.” This material was prepared in contemplation of an ongoing criminal investigation and provided to supervisors to assist them in overseeing the investigation and potential prosecution of certain IRS employees. As a result, according to the defendant, the time records provide “a roadmap of [the DOJ’s] investigative plans” and their disclosure would “prematurely reveal the scope and focus of the investigation.” Thus, “in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.’” 

Consistent with the great weight of authority at both the federal and state level, the portions of Ms. Bosserman’s time records detailing the locations visited, persons contacted, staff briefings, and other case developments are protected from disclosure as attorney work product.

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August 5, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, August 4, 2015

Shaheen: Understanding Lockout

Fadi Shaheen (Rutgers-Newark), Understanding Lockout, 69 Tax L. Rev. ___ (2016):

Based on the notion that the size of an initially-smaller but faster-growing investment would eventually reach and exceed the size of an initially-larger but slower-growing investment, the “full-value model” developed in this paper shows that the assumption that repatriation is eventually unavoidable is not necessary for the new view result to hold. This idea establishes the new view optimum as the benchmark retention optimum for defining lockout and narrows down the real income reasons for lockout to only one: an expected reduction in the repatriation tax rate, either statutorily or effectively through tax planning.

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August 4, 2015 in Scholarship, Tax | Permalink | Comments (0)

WaPo: IRS Commissioner Promises Not to Revoke Tax-Exempt Status of Colleges That Oppose Gay Marriage

White House Same Sex MarriageWashington Post, IRS Commissioner Promises Not to Revoke Tax-exempt Status of Colleges That Oppose Gay Marriage:

After the Supreme Court’s decision on gay marriage, religious leaders feared that religious universities, nonprofits and other institutions could lose their tax-exempt status. IRS Commissioner John Koskinen has promised the Senate Judiciary Oversight Subcommittee that his agency would not go after the tax-exempt status of religious colleges and universities that oppose gay marriage.

During a hearing Wednesday conducted by the Senate Subcommittee on Oversight, Agency Action, Federal Rights and Federal Courts, Sen. Mike Lee (R-Utah) asked Koskinen whether the IRS would “not, in the absence of a directive by Congress or by the courts,” take action to remove religious schools’ tax exemption.

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August 4, 2015 in IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 817

IRS Logo 2New York Observer:  Judge Slams Hillary and Huma, Orders Answers, by Sidney Powell:

Judge Sullivan has chipped away at the IRS and its lies and obstruction. ... A hero for his dismissal of the indictment against Senator Ted Stevens and his appointment of a special prosecutor—as told in my non-fiction thriller LICENSED TO LIE: Exposing Corruption in the Department of Justice—Judge Sullivan is proving to be more and more like Judge John Sirica who kept asking questions until the Watergate scandal was fully exposed. Judge Sullivan also has the Freedom of Information Act suit by Judicial Watch against the IRS, about which we have often written. It’s because of Judge Sullivan that more and more emails have come to light—along with exposing the lies of Internal Revenue Service Commissioner Koskinen and assorted acts of destruction of evidence. Only Wednesday of this week, Judge Sullivan dismantled counsel for the Department of Justice and the IRS for their “absurd and ridiculous” stalling tactics in revealing the emails evidencing the Lois Lerner scandal and raised the specter of holding Commissioner Koskinen in contempt. Thanks to Judge Sullivan, Judge Leon, and other Article III judges like them, the country has a chance of learning the truth.

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August 4, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Monday, August 3, 2015

Caron Named Associate Dean For Research And Faculty Development At Pepperdine

Caron 2012 PhotoPress Release, Paul L. Caron Named Associate Dean for Research and Faculty Development:

Paul L. Caron, Professor of Law at Pepperdine School of Law, has been named Associate Dean for Research and Faculty Development, effective August 1, 2015.

Caron joined the Pepperdine tenured faculty in 2013 after serving as the D & L Straus Distinguished Visiting Professor in the spring semesters in 2010 2013. He previously was Associate Dean of Faculty and Charles Hartsock Professor of Law at the University of Cincinnati College of Law.

In announcing the appointment, Deanell Reece Tacha, Duane and Kelly Roberts Dean and Professor of Law at Pepperdine, said, "I am delighted that Paul has agreed to serve in this important position. We are fortunate to have someone with Paul’s experience and perspective on the changing role of law faculty during these challenging times in legal education."

Caron said, “I am honored to have the opportunity to serve in this role. Although I have only been here two years, I wholeheartedly embrace Pepperdine’s unique mission in legal education and look forward to working with my wonderful colleagues as we all strive to be better scholars, teachers, and mentors.”

Caron has written over 50 books and scholarly articles, including most recently Federal Wealth Transfer Taxation (Foundation Press, 7th ed. 2015) (with Paul McDaniel & Jim Repetti); Tax Regulation, Transportation Innovation, and the Sharing Economy, 82 U. Chi. L. Rev. Dialogue 69 (2015) (with Jordan Barry); Thomas Piketty and Inequality: Legal Causes and Tax Solutions, 64 Emory L.J. Online 2073 (2015); and California Dreamin’: Tax Scholarship in a Time of Fiscal Crisis, 48 U.C. Davis L. Rev. 405 (2014) (with Joe Bankman).

He is the publisher and editor of Tax Prof Blog, the most popular tax blog on the Internet; and the owner and publisher of the Law Professor Blogs Network of more than 50 blogs in other areas of law edited by law professors around the country.

Caron has been named one of the 100 most influential people in tax and accounting for nine years running by Accounting Today. He was named the sixth most influential person in legal education in 2014 by The National Jurist.

Caron succeeds Robert J. Pushaw, who has served as Associate Dean for Research and Faculty Development since 2013. Dean Tacha said, "I am enormously grateful for all of Bob’s work over the past two years in assisting faculty in their scholarly pursuits. Bob has done a wonderful job managing our support for faculty development, including travel, summer research grants, and faculty colloquia. I am delighted that Bob has agreed to continue mentoring our faculty on an informal basis."

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August 3, 2015 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (9)

The Best Legal Job Market for Millenials? Tax Law

Tax LawHuffington Post:  The Best Legal Job Market for Millenials? Tax Law, by Debra Carpenter:

According to the National Association for Law Placement, the job market for new law school graduates doesn't look that great at first glance. ... [But] there is one specialty seeing significant growth and has a wealth of opportunity: tax law. Earning a master's degree in tax law opens the door to a variety of career options.

As Richard Ainsworth, Director of the Graduate Tax Program at Boston University says, "Today's complex and global regulatory environment has made tax law one of the most challenging areas of practice, but also one of the most necessary areas of specialization for attorneys." Some of the reasons for the increased need for tax specialists, according to Ainsworth, include:

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August 3, 2015 in Legal Education, Tax | Permalink | Comments (3)

Manhire: Congress Reduces Home Concrete To Rubble

ManhireTaxProf Blog op-ed:  Congress Reduces Home Concrete to Rubble; Clarifies Law, by J. T. Manhire (Texas A&M):

Last week, two important tax provisions rode on the coattails of H.R. 3236, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015,” as it passed both the U.S. House and Senate. One of the provisions (§ 2006) changes the filing deadlines for some tax returns and the FBAR form. The other (§ 2005 and the subject of this post) takes a wrecking ball to the 2012 U.S. Supreme Court decision in U.S. v. Home Concrete & Supply, LLC.

Generally, the IRS has only three years to audit a tax return and assess a deficiency under I.R.C. § 6501(a). This statute of limitations (SOL) period can be extended under I.R.C. § 6501(e)(1)(A) to six years if the taxpayer omits more than 25 percent from gross income. In the underlying controversy in Home Concrete, the IRS held that a taxpayer overstating a tax basis (thereby understating the gain from a sale) is the same as omitting gross income from a return, thus subjecting the taxpayer to the six rather than three year SOL period. A majority of the Court disagreed with the IRS and held that the three, not six, year SOL period applied. The Court held that it previously determined the matter in 1958 under Colony, Inc. v. Commissioner, that the understatement of gain on its own does not subject the taxpayer to the six-year SOL period.

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August 3, 2015 in Tax | Permalink | Comments (2)

The IRS Scandal, Day 816

IRS Logo 2Forbes:  Watchdog Finds Deficient IRS Controls Leave Room For Targeting, by Robert W. Wood:

Should you be audited based on your religion? Your political beliefs? How about which charities you support? Plainly, the answer to all these questions is no. Yet there are still questions how our tax system measures up, especially when it comes to the still-in-the-news topic of exempt organization targeting. In his recent appearance on The Daily Show, President Obama still denies any targeting.

For more than two years, we have seen a long list of excuses with no one taking responsibility. There was no targeting, we were told. Well, if there was, it was organic, like that spontaneous demonstration from an internet video in Benghazi. Any targeting was not directed, it was those rogue IRS employees in Cincinnati who did it entirely on their own.

Besides, emails show there was no directive about targeting. Sorry, it turns out some of our emails are missing. Hey, hard drives crash. We recycle them too. Liberals got targeted too. There’s no smidgen of corruption. Cash bonuses? Those are unrelated. And the latest in the long line of excuses: it was all the Republicans’ fault.

Actually it turns out that the U.S. Government Accountability Office–the GAO–reports that the part of the IRS that reviews tax exemptions is really at risk for targeting activities. The GAO is an independent, nonpartisan agency working for Congress, often called the congressional watchdog. The GAO, headed by the Comptroller General of the United States, investigates how the federal government spends taxpayer dollars.

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August 3, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

TaxProf Blog Weekend Roundup

Sunday, August 2, 2015

Tax Panel Today At SEALS

SEALs Logo (2013)The Southeastern Association of Law Schools 2015 Annual Conference concludes today in Boca Raton, FL with this tax panel:

Workshop on Tax Law
Discussion Group:  Tax Policy
This discussion group is broadly concerned with issues of taxation. Discussants will address individual income tax, corporate income tax, state and local tax, estate and gift tax, tax expenditure policy, international tax, and entitlements. While these disparate themes might seem only loosely related, a common thread of the difficulties of balancing equity, simplicity, incentives, and transparency runs through all of them. These scholars will grapple with the central tax topics of the day and address the looming concerns that must be dealt with by all levels of government.

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August 2, 2015 in Conferences, Tax | Permalink | Comments (0)

The Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5:

  1. [290 Downloads]  Capital Accounts in LLCs and in Partnerships: Powerful Default Rules and Potential Tax Significance, by Donald Weidner (Dean, Florida State)
  2. [140 Downloads]  How I Learned to Stop Worrying and Love Our Homeowner Tax Rules, by David Hasen (Colorado)
  3. [131 Downloads]  Safe Harbors, Sure Shipwrecks, by Susan Morse (Texas)
  4. [129 Downloads]  The International Tax Regime — A Centennial Reconsideration, by Reuven Avi-Yonah (Michigan)
  5. [95 Downloads]  Reforming REIT Taxation (Or Not), by Brad Borden (Brooklyn)

August 2, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 815

IRS Logo 2Forbes:  19 Facts On IRS Targeting President Obama Can't Blame On Republicans, by Robert W. Wood:

On The Daily Show, President Obama blamed Republicans for the IRS scandal:

“You’ve got this back office, and they’re going after the Tea Party. Well, it turned out, no, Congress had passed a crummy law that didn’t give people guidance in terms of what it was they were trying to do. They did it poorly and stupidly. The truth of the matter is that there was not some big conspiracy there. They were trying to sort out these conflicting demands. You don’t want all this money pouring through non-for- profits, but you also want to make sure everybody is being treated fairly.”

Really, Mr. President? For effect, perhaps he should reprise his testy “not even a smidgen of corruption” remark to Fox News. The President keeps claiming there is no evidence the IRS was used for political targeting. You be the judge:

[List of 19 facts about the targeting scandal.]

Washington Examiner, IRS Back Under Fire on Tea Party Targeting:

A series of new revelations Wednesday and Thursday put the Internal Revenue Service back under fire for its alleged efforts to curtail the power of conservative nonprofits.

First, the Government Accountability Office uncovered evidence that holes in the tax agency's procedure for selecting nonprofit groups to be audited could allow bias to seep into the process.

Then, during a heated House Ways and Means Committee hearing Thursday morning, lawmakers exposed the lack of safeguards that could prevent IRS officials from going after groups with which they disagreed.

Meanwhile, the conservative watchdog Judicial Watch released documents Wednesday that suggested the IRS targeted the donors of certain tax-exempt organizations.

The controversies focused renewed scrutiny on the embattled agency, which has been fending off allegations of discrimination against conservatives since 2013.

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August 2, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, August 1, 2015

This Week's Ten Most Popular TaxProf Blog Posts

Hillary Clinton Releases Her 2007-2014 Joint Tax Returns Reporting $139 Million Income; 99% Of Charitable Contributions Went To Clinton Family Foundation

Clinton 3Hillary Clinton late Friday afternoon released her 2007-2014 tax returns, showing that she and Bill reported $139.1 million in adjusted gross income, paid $43.9 million in taxes (a 31.6% tax rate), and made $15 million (10.8% of their AGI) of charitable contributions, $14.9 million of which went to the Clinton Family Foundation and the Clinton Global Initiative.

I previously blogged the Clintons' tax returns for prior years:

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August 1, 2015 in Political News, Tax | Permalink | Comments (6)

Tax Panel Today At SEALS

SEALs Logo (2013)The Southeastern Association of Law Schools 2015 Annual Conference continues today in Boca Raton, FL with this tax panel:

Workshop on Tax Law
International and Corporate Taxation
Tax planning today takes place against a backdrop of weak tax institutions, uncertain economic prospects, globalization, and change. Our panel examines how innovation, change, and uncertainty affect a range of tax issues. Topics include possible reforms to the international tax system, specifically transfer pricing and the foreign tax credit, how tax innovations interact with corporate governance, how small business lobbies for its issues, and how the tax code addresses technological changes.

  • Jennifer Bird-Pollan (Kentucky) (moderator)
  • Christine Allie (Widener-Delaware)
  • Rifat Azam (Radzyner School of Law, Herzliya, Israel)
  • Cliff Fleming (BYU)
  • Omri Marian (UC-Irvine)
  • Orly Mazur (SMU)
  • Amir Pichhadze (Michigan)
  • Cristina Trenta (Orebro University, Sweden)

Tax Profs at dinner:

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August 1, 2015 in Conferences, Tax | Permalink | Comments (0)

The IRS Scandal, Day 814

IRS Logo 2New York Post editorial, Obama’s Pathetic Attempt to Spin the IRS Scandal:

No sooner did President Obama claim last week the IRS scandal was just a mirage than new evidence emerged to show it was anything but.

The conservative group Judicial Watch says documents it obtained “confirm” the agency targeted the donors of certain tax-exempt organizations. And the Government Accountability Office faulted IRS procedures, saying they failed to prevent bias in the selection of nonprofits for audits. That’s key, since the agency has been accused of targeting conservative groups. ...

Of course, the biggest scandal of all is that Team Obama has managed to stonewall and leave the public hanging. And that no one has been held accountable.

Forbes:  President Obama Challenges IRS Scandal Narrative, by Peter J. Reilly:

So the latest in the interminable IRS scandal now on Day [810] by TaxProf Count is that President Obama has said in an interview with Jon Stewart on the Daily Show that there is no scandal involving the targeting of conservatives.  What he sees as scandalous is the underfunding of the IRS which allows people to avoid paying taxes they legitimately owe and the complexity of the Tax Code which allows multinational corporations to entirely avoid paying federal income tax.

The President’s explanation of the targeting scandal is that Congress had passed a crummy law that did not give good guidance and that people did a poor job of trying to sort out conflicting demands.   After all government is a human enterprise.

The President’s statement has drawn some sharp reaction.  The Daily Caller headline is “Obama Lies To Jon Stewart’s Face About IRS”. I had to check this out. ...

Supporters of the scandal narrative can, of course, point out many particulars that are not addressed in the President’s statement – hard drives, the TIGTA report that indicated inappropriate criteria were used.  On the other hand they have yet to come up with that really great smoking gun piece of evidence that links the President to all the tsoris that Lois Lerner and the Cincinnati gang that couldn’t sort straight dished out to Tea Party applicants for exempt status. Too bad that the President watched the Watergate hearings when he was a kid and knows better than to have damning tapes like the one I imagined back in January.

If the smoking gun is actually ever found, this interview might go down in history as Obama’s “I did not have sexual relation with that woman” moment.

Wall Street Journal, Notable & Quotable: Contempt and the IRS; A Federal Judge Asks Why the IRS Commissioner Shouldn’t be Held in Contempt for Failing to Comply with a Court Order to Produce Lois Lerner’s Emails.

From a hearing before U.S. District Court Judge Emmet G. Sullivan in Washington on Wednesday. The judge is questioning Justice Department attorney Geoffrey Klimas about his explanation of why the government hadn’t filed a motion for him to reconsider his order to produce the emails of former IRS official Lois Lerner being sought by the watchdog group Judicial Watch:

The Court: Wait a minute. Why would it have been inappropriate if you said it’s clear that the Court had issued an oral order? And we’ve said that—I’ve said that four times. If it was clear that there was an order outstanding, why would it have been inappropriate for the government to file a motion to reconsider that clear oral order? I don’t get it.

Mr. Klimas: To clarify, it was our understanding that there was a directive from the Court that was going to be followed up with a written order. It appears—

The Court: An order to be followed up by an order?

Mr. Klimas: It appears that the understanding was misplaced.

The Court: So you needed two orders to have a clearly enforceable order? You don’t need two orders to have a clearly enforceable order, do you?

Mr. Klimas: No, Your Honor.

The Court: So there’s no reason for not complying. This is ridiculous. This is absurd. I thought you were going to say that you didn’t think the Court had issued an oral order, but that’s not what you’re saying. It’s clear from the transcript that the Court had clearly ordered rolling production on a weekly 11 a.m. basis. So why shouldn’t the Court hold the Commissioner of the IRS in contempt for not having complied with a clearly enforceable order?

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August 1, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, July 31, 2015

Clintons Reaped Millions From Foreign Bank After Hillary Intervened In UBS Tax Case To Reduce IRS's Requested Disclosures Of Americans' Offshore Accounts By 91%

Wall Street Journal, UBS Deal Shows Clinton’s Complicated Ties; Donations to Family Foundation Increased After Secretary of State’s Involvement in Tax Case:

FruitfulA few weeks after Hillary Clinton was sworn in as secretary of state in early 2009, she was summoned to Geneva by her Swiss counterpart to discuss an urgent matter. The Internal Revenue Service was suing UBS AG to get the identities of Americans with secret accounts.

If the case proceeded, Switzerland’s largest bank would face an impossible choice: Violate Swiss secrecy laws by handing over the names, or refuse and face criminal charges in U.S. federal court.

Within months, Mrs. Clinton announced a tentative legal settlement—an unusual intervention by the top U.S. diplomat. UBS ultimately turned over information on 4,450 accounts, a fraction of the 52,000 sought by the IRS, an outcome that drew criticism from some lawmakers who wanted a more extensive crackdown.

From that point on, UBS’s engagement with the Clinton family’s charitable organization increased. Total donations by UBS to the Clinton Foundation grew from less than $60,000 through 2008 to a cumulative total of about $600,000 by the end of 2014, according to the foundation and the bank.

The bank also joined the Clinton Foundation to launch entrepreneurship and inner-city loan programs, through which it lent $32 million. And it paid former president Bill Clinton $1.5 million to participate in a series of question-and-answer sessions with UBS Wealth Management Chief Executive Bob McCann, making UBS his biggest single corporate source of speech income disclosed since he left the White House.

There is no evidence of any link between Mrs. Clinton’s involvement in the case and the bank’s donations to the Bill, Hillary and Chelsea Clinton Foundation, or its hiring of Mr. Clinton. But her involvement with UBS is a prime example of how the Clintons’ private and political activities overlap.

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July 31, 2015 in Political News, Tax | Permalink | Comments (2)

Weekly Tax Roundup

Weekly SSRN Tax Roundup

Fleischer: How to Tax Gordon Gekko

GreedNew York Times Deal Book:  How to Tax Gordon Gekko, by Victor Fleischer (San Diego):

The plot of Oliver Stone’s 1987 movie Wall Street revolves around the betrayal of Bud Fox by his mentor and hero, Gordon Gekko.

Bud persuades his father, a maintenance foreman at Bluestar Airlines, to vouch for him and secure union concessions that are critical to a buyout plan. But Gekko betrays Bud and puts in motion a plan to strip the company’s assets, raid the overfunded pension plan and liquidate the company. Bud retaliates by getting his friends at Jackson Steinem to dump the stock. Gekko is forced to sell at a loss. Bud faces down Gekko, wearing a wire as part of a plea deal with federal authorities.

It’s a heck of a good story that captured the spirit of Wall Street in the 1980s.

Political speechwriters also try to capture the spirit of the times. But it seems that Hillary Rodham Clinton's team is three decades behind.

The story on Wall Street today is asset management, not corporate raiders.

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July 31, 2015 in Tax | Permalink | Comments (0)

Tax Panels Today At SEALS

SEALs Logo (2013)The Southeastern Association of Law Schools 2015 Annual Conference continues today in Boca Raton, FL with these tax panels:

Workshop on Tax Law
Tax Policy
What strategies should government use to create tax policy that results in a just result? How can states create tax laws that motivate the kinds of economic behavior they want? What is the right way to think about the taxable unit? What strategies can governments employ through the tax code to promote environmental sustainability? The panelists will consider a variety of issues related to tax policy in all of its forms.

  • Neil Buchanan (George Washington) (moderator)
  • Tessa Davis (South Carolina)
  • Anu Ghai (Lafayette College)
  • Shu-Yi Oei (Tulane)
  • Del Wright (Valparaiso)

Workshop on Tax Law
State and Local Tax and Policy Panel

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July 31, 2015 in Conferences, Tax | Permalink | Comments (0)

The IRS Scandal, Day 813

IRS Logo 2Wall Street Journal editorial, The Taxman’s Politics: New Evidence That IRS Bias May Have Extended to Tax Audits:

The Obama Administration has made a two-year career of dismissing concern about IRS policies targeting conservative tax-exempt groups. That evasion just got harder. New information shows the agency may have shown similar bias in tax audits.

A new Government Accountability Office report says protocols in place at the IRS Exempt Organizations unit made it possible for groups to be unfairly targeted for audit “based on the organization’s religious, educational, political, or other views.” That’s our emphasis. The report also shows a process that allowed reviewers to wield significant discretion over whether certain groups were selected for scrutiny. ...

The IRS is dismissing the findings as hypothetical. At a House Ways and Means hearing Thursday, IRS Commissioner John Koskinen told Rep. Peter Roskam that “at this point we do not have indications that anyone improperly was selected for an exam.” But information from Treasury Inspector General for Tax Administration J. Russell George suggests IRS audit selection has already led to improperly selected audits.

In fiscal years 2013 through 2015, Mr. George initiated 102 internal investigations based on complaints by tax-exempt groups and individuals who say they were unfairly targeted for audit. It’s not public how many of those 102 may have been improperly targeted. But according to the House Ways and Means Committee, 12 presented facts so egregious that the IRS referred them to the Justice Department for criminal prosecution. Not for tax evasion, mind you, but for improper conduct by IRS employees.  

A criminal referral is a big step, suggesting the audit selections met a high bar of evidence that IRS employees may have knowingly violated the law when choosing an audit target. Thursday’s hearing also included testimony from groups that believe they were improperly audited. ...

Mr. Koskinen, the IRS director, has already shown through his previous stonewalling that his assurances can’t be trusted. We hope Congress keeps digging into the growing evidence of a politicized tax agency.

New York Times editorial, The I.R.S. Gives Up on ‘Dark Money’:

The federal government has all but surrendered to the powerful, rich donors whose anonymous contributions threaten to undermine the 2016 elections. The commissioner of the Internal Revenue Service, John Koskinen, signaled as much on Thursday when he told a House committee that there would be no change in the tax code in 2016 to end its growing abuse by political operatives using nonprofit “social welfare” institutions to disguise the identities of affluent campaign contributors.

“I don’t want people thinking we are trying to get these regs done so we can influence the election,” Mr. Koskinen declared later to reporters. The statement was remarkable for blessing further procrastination at the I.R.S., whose clear obligation is to enforce existing law in a way that would end the current flood of “dark money” financing politics. The commissioner said the earliest that tighter rules could take effect would be 2017. The I.R.S. has been increasingly timorous on this issue ever since House Republicans opened partisan hearings into complaints that I.R.S. officials have been biased against conservative political groups that claim tax exemptions as nonprofit social welfare groups.

The fact is, the I.R.S. should be dedicated to enforcing the law against phony social welfare claims by all political schemers, from the right or the left. This abuse of the tax law mushroomed after the Supreme Court’s reckless Citizens United decision in 2010 that ended limits on campaign spending by corporations and unions. Since 2006, when only $5.2 million was spent by exempt organizations that do not disclose donors, spending increased 60-fold, to more than $300 million in the 2012 presidential cycle, according to the Center for Responsive Politics. An even bigger infusion is expected in 2016 from big-money donors shielded by the social welfare fiction. ...

It is a gross insult to taxpayers to make them underwrite the brazen evasions of campaign operatives bundling dark money. The abuse is compounded by the latest I.R.S. retreat from its responsibility.

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July 31, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Thursday, July 30, 2015

Senate Holds Hearing Today On The Impact Of The U.S. Tax Code On The Market For Corporate Control And Jobs

Senate LogoThe Senate Permanent Subcommittee on Investigations held a hearing today on Impact of the U.S. Tax Code on the Market for Corporate Control and Jobs:

The hearing explored the impact of the U.S. corporate tax code on foreign acquisitions of U.S. businesses and the ability of U.S. businesses to expand by acquisition.

In connection with the hearing, the majority staff released a 133-page report, which examines the tax motivations behind acquisitions and mergers by Valeant Pharmaceuticals, Burger King, and InBev.

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July 30, 2015 in Congressional News, Tax | Permalink | Comments (0)

Simkovic: The Student Loan Marriage Penalty

Michael Simkovic (Seton Hall), Student Loan Marriage Penalty:

How should marriage affect legal determinations of ability to pay, and therefore obligation to pay?  These are questions that tax scholars have long debated.  Similar issues are now being debated in higher education circles because of the growth of income-based student loan repayment plans. ...

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July 30, 2015 in Legal Education, Tax | Permalink | Comments (0)

Avi-Yonah: The Case For A Destination-Based Corporate Tax

Reuven S. Avi-Yonah (Michigan), The Case for a Destination-Based Corporate Tax:

In 1993, I published a paper advocating a destination-based corporate income tax (DBCT) (Avi-Yonah, 1993). Under DBCT, multinational enterprises (MNEs) would be treated as unitary businesses and taxed based on where they sell their goods or services, i.e., on a destination basis rather than (as in current corporate taxes) primarily on an origin basis. I have subsequently elaborated on this proposal with Kim Clausing and Mike Durst (Avi-Yonah, Clausing and Durst, 2009).

In recent years, DBCT has attracted some support by economists, such as Alan Auerbach and Mike Devereaux (Auerbach, Devereux and Simpson, 2008; Devereux and de la Feria, 2014). While the economists tend to advocate a cash flow DBCT, i.e., a corporate tax that is more consumption than income based because MNEs will be allowed to expense capital outlays, both types of taxes apply to corporate rents in the same way. Moreover, the economists’ proposals raise similar issues as mine, e.g., in regard to compatibility with treaties or with WTO rules.

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July 30, 2015 in Scholarship, Tax | Permalink | Comments (0)

Tax Panel Today At SEALS

SEALs Logo (2013)The Southeastern Association of Law Schools 2015 Annual Conference continues today in Boca Raton, FL with this tax panel:

Workshop on Tax Law
The United States Tax Court – A Constitutional and Administrative Conundrum
The 2014 decision of the DC Circuit in Kuretski has focused attention on the constitutional location of the U.S. Tax Court in the federal government. In resolving a separation of powers challenge stemming from the President's power to remove a Tax Court judge for cause under I.R.C. § 7443(f), Kuretski held that the Tax Court is part of the Executive Branch. Yet, Congress established it as a court of record under Article I in 1969, when it ended the Tax Court's status as an independent agency. Moreover, in Freytag, the Supreme Court said the Tax Court exercises judicial power. This panel will discuss the various options for where the Tax Court resides in the constitutional scheme.

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July 30, 2015 in Conferences, Tax | Permalink | Comments (0)

Mann: The Tax Policy Implications Of Economists/Policymakers Miscommunication

Roberta F. Mann (Oregon), Economists are from Mercury, Policymakers are from Saturn: The Tax Policy Implications of Communication Failure, 5 Wm. & Mary Pol'y Rev. 50 (2013):

SaturnPolicymaking lawyers and economists are different types of people who come together in the policymaking realm. Sometimes policymakers rely on economic analysis to make decisions. Sometimes policymakers use economic analysis to support decisions already made. In particular, economic analysis has played a large role in the formation of tax and budgetary policy. However, there is a problem. Not only do economists and lawyers communicate differently, they think, perceive, react and respond differently. They almost seem to be from different planets, speaking different languages. While both lawyers and economists use “stories” to persuade, economic analysis cloaks the story in a complex mathematical model, opaque to those without training in economic theory. The results of economic modeling can obscure the decisions that policymakers and the public need to make — about the direction of the tax system, the nation, and the economy. This article examines the roles economists and lawyers play in the development and implementation of the income tax system. 

July 30, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 812

IRS Logo 2Wall Street Journal, Federal Judge Threatens to Hold IRS Chief in Contempt:

A federal judge threatened to hold Internal Revenue Service Commissioner John Koskinen in contempt of court on Wednesday, after the agency didn’t comply with an order to provide documents in a case about its alleged targeting of conservative groups. 

Washington Times, Obama Digs In, Refuses to Fire IRS Commissioner:

President Obama has no intention of firing IRS Commissioner John Koskinen, the White House said Wednesday in response to Republican lawmakers calling for his ouster.

Mr. Koskinen “is a man of the highest integrity,” said White House deputy press secretary Eric Schultz, who called him “the right person to lead this agency.”

Senate Judiciary Subcommittee on Oversight, Federal Agency Action, Federal Rights and Federal Courts Hearing:

Panel #1:  John Koskinen (IRS Commissioner)

Panel #2:

  • Cleta Mitchell (Foley & Lardner, Washington , D.C. ) (Testimony)
  • Stephen Spaulding (Common Cause Washington , D.C. ) (Testimony)
  • Edward Greim (Graves Garret, Kansas City) (Testimony)
  • Lawrence Noble (George Washington University Law School) (Testimony)
  • Toby Marie Walker (Waco Tea Party, Waco , TX) (Testimony)
  • Diana Aviv (Independent Sector, Washington , D.C. ) (Testimony)
  • Jenny Beth Martin (Tea Party Patriots, Woodstock , GA) (Testimony)
  • Gregory Colvin (Public Citizen, Washington , D.C. ) (Testimony)
  • Jay Sekulow (American Center for Law and Justice, Washington , D.C.) (Testimony)

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July 30, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, July 29, 2015

Senate Permanent Subcommittee on Investigations Shifts Focus From Business To Government

Senate LogoBloomberg, Senate Body Shifts Focus After Years Probing Apple, Goldman, UBS, by Jesse Drucker & Richard Rubin:

A U.S. Senate investigative subcommittee, which has used its power for more than a decade to scrutinize corporations and financial institutions for wrongdoing, is shifting its focus to keeping tabs on the government.

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July 29, 2015 in Congressional News, Tax | Permalink | Comments (0)

Jack Manhire Leaves IRS To Join Texas A&M Law School

ManhireTexas A&M Press Release, Jack Manhire Leaves IRS, Treasury to Join Texas A&M Law:

John T. (“Jack”) Manhire, Jr., former Chief of Legal Analysis for the IRS Office of Professional Responsibility and National Program Chair, Executive Education for the U.S. Treasury Executive Institute, has accepted a position as Director of Program Development at Texas A&M University School of Law.

Some of his prior positions include Director of Technical Analysis & Guidance (Policy and Procedure) for the IRS Taxpayer Advocate Service, and Attorney-Advisor (Tax) to the IRS National Taxpayer Advocate. Before entering full-time government service, he practiced law privately for over a decade, primarily in the field of federal tax controversies, and was Division Chief, Tax Law for the U.S. Coast Guard Auxiliary National Office.

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July 29, 2015 in IRS News, Tax, Tax Prof Moves | Permalink | Comments (6)

Kadet: Attacking Profit Shifting — The Approach Everyone Forgets

Jeffery M. Kadet (University of Washington), Attacking Profit Shifting: The Approach Everyone Forgets, 148 Tax Notes 193 (July 15, 2015):

Kadet uses hypothetical but realistic examples to show how the IRS could combat profit shifting by directly taxing the effectively connected income of controlled foreign corporations. He also urges Treasury to update the ECI regulations as soon as possible to reflect current technology and modern business models and practices. 

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July 29, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 811

IRS Logo 2Judicial Watch Press Release, IRS Produces Recovered Lerner Emails:

Judicial Watch released 906 pages of newly recovered Lois Lerner emails from the IRS that are believed to recently have been recovered by the IRS’ internal watchdog – the Treasury Inspector General for Tax Administration (TIGTA).  The IRS released the emails under a court order by U.S. District Court Judge Emmet Sullivan.  The new documents show that Lois Lerner and other top officials in the Exempt Organizations Unit of the Internal Revenue Service (IRS), including soon-to-be Acting IRS Commissioner Steve Miller, closely monitored and approved the controversial handling of tax-exempt applications by Tea Party organizations.  The documents also show that at least one group received an inquiry from the IRS in order to buy time and keep the organization from contacting Congress. ...

“These recovered Lois Lerner emails had to be dragged out of the Obama IRS, which is still resisting a federal court order requiring disclosure of Lerner’s ‘lost’ emails,” said Judicial Watch President Tom Fitton.  “This material shows that the IRS’ cover-up began years ago.  We now have smoking-gun proof that top officials in the Obama IRS unlawfully harassed taxpayers just to keep them from complaining to Congress about IRS’ targeting and abuse.  No wonder the Obama IRS has had such little interest in preserving or finding Lois Lerner’s emails.”

Americans for Tax Reform, IRS Used Instant Messaging System to Hide Internal Communications:

The IRS used a “wholly separate” instant messaging system that automatically deleted office communications, according to documentation released by the House Oversight Committee on Monday. The system appears to have been purposefully used by agency officials responsible for the targeting of conservative non-profits, in order to evade public scrutiny.

MSNBC (The Maddow Blog), House Republicans Pretend IRS ‘Scandal’ Still Exists:

It’s been about two years since Republicans and much of the Beltway media thought it had finally uncovered a real White House “scandal.” According to the narrative, the Obama administration used the Internal Revenue Service to “target” conservatives, which represented an outrageous abuse of power.

For about a week, it looked like a serious, proper controversy, worthy of outrage. Soon after, however, the whole thing collapsed – the tax agency scrutinized liberal, conservative, and non-ideological groups, effectively ending the story. Every allegation, including conspiracy theories about White House involvement, evaporated into nothing. For two years, GOP lawmakers looked for evidence of wrongdoing, and for two years they found no proof to bolster their apoplexy.

It came as a bit of a surprise, then, to see 21 House Republicans hold a press conference late yesterday, trying anew to breathe life into a discredited story. ...

Just so we’re clear, these House Republicans still haven’t uncovered any evidence of official wrongdoing, and they didn’t accuse Koskinen of having any role in “targeting” anyone. Rather, the GOP lawmakers are convinced Koskinen hasn’t done enough to help them find evidence to substantiate allegations that fell apart two years ago.

Or put another way, they want to fire the IRS guy who replaced the other IRS guy who was fired over a “scandal” that never really existed in the first place. ...

[Y]yesterday’s press conference appeared to be an example of House Republicans throwing a tantrum just for the sake of throwing a tantrum – they still have no evidence of an actual scandal and they offered literally nothing new yesterday other than their own misplaced outrage.

This isn’t even a close call. Cummings pointed to the recent release of a report from the IRS inspector general’s office, which made explicitly clear to the Oversight Committee that there’s just nothing here. Republicans accused Lois Lerner of deliberately crashing a hard drive; the inspector general found the opposite. Republicans said back-up tapes were intentionally destroyed; the inspector general found the opposite. Republicans said Koskinen tried to hide information from Congress; the inspector general found the opposite. Republicans said the IRS hid damaging emails; the inspector general found the opposite.

Why GOP lawmakers even bothered with yesterday’s press conference is something of a mystery. Maybe they were bored. Maybe someone needed a pretense for a new fundraising letter. Whatever the reasoning, there’s still no reason to take any of this nonsense seriously.

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July 29, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Tuesday, July 28, 2015

Hickman: The Tax Court Delivers An APA-Based Smackdown

Hickman 2014 2TaxProf Blog op-ed:   Altera Corp. & Subs. v. Commissioner: The Tax Court Delivers An APA-Based Smackdown, by Kristin Hickman (Minnesota):

Since the Supreme Court decided the Mayo Foundation case in 2011, the government has done everything it can to limit the scope of the Supreme Court’s 2011 Mayo Foundation decision.  Even though the Mayo Foundation Court declined “to carve out an approach to administrative review good for tax law only” and otherwise signaled fealty to general administrative law norms in the tax context, the IRS and the Department of Justice have repeatedly pursued a narrow construction of Mayo Foundation, and the Tax Court has often been happy to play along.  Not today.

In Altera Corp. & Subs. v. Comm’r,, 145 T.C. No. 3 (July 27, 2015) the Tax Court unanimously invalidated regulations under Section 482 requiring participants in qualified cost-sharing arrangements to include stock-based compensation costs in the cost pool in order to comply with the arm’s length standard, on grounds that the regulations were not the product of reasoned decisionmaking as required by Administrative Procedure Act (APA) § 706(2)(A) and Motor Vehicle Manufacturers Association of the United States v. State Farm Mutual Automobile Insurance Co.,, 463 U.S. 29 (1983), known in administrative law circles as State Farm.  From top to bottom, the Altera opinion reads like a treatise on general administrative law requirements and norms.  Without delving into the policy details of the regulation at issue, the following paragraphs summarize the Tax Court’s opinion and its potential implications.

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July 28, 2015 in New Cases, Scholarship, Tax | Permalink | Comments (2)

Boston College Seeks To Hire A Tax Prof

Boston College Law School Logo (2014)Boston College Law School:

BOSTON COLLEGE LAW SCHOOL expects to make two faculty appointments in fields that might include constitutional law and/or taxation. Hiring rank would be dependent on the background and experience of the applicant. Applicants must possess a J.D. or equivalent degree and outstanding academic credentials. Relevant experience in private practice, government service, or a judicial clerkship is strongly preferred.

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July 28, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

More On Hillary Clinton's Capital Gains Tax Plan

HillaryFollowing up on Sunday's post, Hillary Clinton's Capital Gains Tax Plan

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July 28, 2015 in Political News, Tax | Permalink | Comments (0)