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Wednesday, April 2, 2014

Thomas Presents The Psychic Cost of Tax Evasion Today at Duke

ThomasKathleen Delaney Thomas (North Carolina) presents The Psychic Cost of Tax Evasion at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Tax evasion presents the government with a formidable task. We are losing hundreds of billions of dollars in tax revenue each year due to underreporting by individual taxpayers. According to deterrence theory, policymakers should be able to reduce evasion by making it more costly for taxpayers. This could be accomplished by raising the audit rate, increasing tax penalties, or some combination of both. However, budgetary limitations and political hurdles have made these strategies difficult for the government to employ.

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April 2, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Knoll Presents Tax Discrimination in the European Union and Beyond Today at Washington University

KnollMichael S. Knoll (Pennsylvania) presents Tax Discrimination in the European Union and Beyond (with Ruth Mason (Virginia)) at Washington University today as part of its International Tax Speakers Series hosted by Adam H. Rosenzweig:

The centerpiece of the 28-member European Union is the single market—a market free of internal barriers in which goods, capital, labor, and services move as easily between the member states as within them. The European Union’s highest judicial body, the Court of Justice of the European Union (CJEU), is charged with ensuring that the laws of the EU member states do not undercut the single market. The CJEU has interpreted various provisions contained in the foundational treaties of the European Union that create the single market to encompass a prohibition on tax discrimination. Over the last thirty years, the CJEU has concluded that numerous long-standing member state tax policies constitute prohibited tax discrimination. At the same time, the CJEU has failed to articulate a clear guiding principle in its tax discrimination cases. The combination of aggressive enforcement and the failure to provide clear guidance on the meaning of tax discrimination has attracted extensive critical commentary. Our goals in this essay and related work are to identify the guiding principle behind the CJEU’s interpretation of tax discrimination, to explain that principle in economic terms, to describe what strict adherence to that principle requires, to recommend to the CJEU how it should apply that principle in light of the legal and institutional constraints it faces, to apply our recommended approach to specific areas of the law, and to assess how closely the CJEU’s jurisprudence corresponds to our recommendations.

April 2, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Yin Delivers Lecture on Reforming (and Saving) the IRS by Respecting the Public’s Right to Know at Temple

YinGeorge K. Yin (Virginia) delivered the 2014 Fogel Lecture at Temple on Monday on Reforming (and Saving) the IRS by Respecting the Public’s Right to Know:

The current controversy involving possible political targeting by the IRS in administering the exempt organization (EO) tax laws is simply the latest in a long succession of similar allegations spanning at least five decades. This article proposes to address the problem through increased transparency of the IRS’s administrative actions involving EOs. Greater transparency responds directly to the public’s frustration in not being able to monitor the agency and gain confidence that the laws are being applied in an even-handed manner.

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April 2, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

We Should Slash Taxes on Parents by Jacking Them Up for Nonparents

CHildfreeSlate:  Tax the Childless: We Should Slash Taxes on Parents by Jacking Them Up for Nonparents, by Reihan Salam:

[A]s a childless professional in my mid-30s, I often reflect on the sacrifices working parents make to better the lives of their children. And I have come to the reluctant conclusion that I ought to pay much higher taxes so that working parents can pay much lower taxes. I believe this even though I also believe a not inconsiderable share of my tax dollars are essentially being set on fire by our frighteningly incompetent government. Leviathan is here to stay, whether I like it or not, and someone has to pay for it. That someone should be me, and people like me.

Giving working parents a meaningful tax break is going to cost quite a lot of money—so much money that raising taxes on the ultrarich alone won’t be enough. Recently Utah Sen. Mike Lee, a Tea Party Republican first elected in 2010, released a tax plan, the Family Fairness and Opportunity Tax Reform Act, that preserves the current $1,000 child credit, the personal exemption for children, and the earned income tax credit while adding a new $2,500 child credit. Unlike the current child credit, Lee’s new credit never phases out, so it can be of use to higher-income families. Under Lee’s plan, a middle-income family with two kids earning $70,000 could expect a $5,000 tax cut, which sounds about right.

The problem with Lee’s plan is that it would massively increase the deficit. The Tax Policy Center finds that it would reduce revenues over the next decade by $2.4 trillion relative to the current law baseline. Lee doesn’t propose this, but the most straightforward way to offset the lost tax revenue from parents would be to raise taxes on nonparents.

(Hat Tip:  Glenn Reynolds.)

April 2, 2014 in Tax | Permalink | Comments (7)

Johnson: Reforming the § 183 Hobby Loss Rules

Tax Analysys Logo (2013)Calvin H. Johnson (Texas), Horse Losses and Other Pleasures, 142 Tax Notes 443 (Apr. 1, 2014):

Current law denies the deduction of losses from equestrian and other such activities if not undertaken for profit. The IRS wins almost all the contested cases, but the test is too indeterminate for the Service to enforce on a tax return.

The following proposal would defer the deduction of business losses until the claimed future income from the activity comes in. Loss deferral would apply automatically to activities specified by statute, including those associated with horses, dogs, airplanes, cars, and collectibles, and to activities from which significant participants derive recreation or pleasure. Deferral is limited to activities suppressed as a result of recreational value to encourage the general diversification of investments and to allow room for congressionally intended tax incentives.

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April 2, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

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April 2, 2014 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

Cauble: Safe Harbors in Tax Law

Emily Cauble (DePaul), Safe Harbors in Tax Law, 47 Conn. L. Rev. ___ (2015):

Safe harbors pervade tax law. Yet, the academic literature offers no comprehensive account of why they exist. This Article begins to fashion that account by developing a theoretical framework for understanding the functional purposes that safe harbors serve. In order to analyze safe harbors’ functional purposes, this Article compares and contrasts them with rules and standards.

Articulating the reasons for adopting safe harbors has important practical implications. For instance, analyzing the functions of safe harbors can shed light on the use of other rule-standard hybrids such as rebuttable or irrebuttable presumptions. In addition, this Article provides direction to lawmakers considering the enactment or redesign of a particular safe harbor. For example, recently commentators have advocated for additional clarity in the area of law governing tax-exempt organizations’ political campaign activities. The analysis in this Article has important implications for the manner in which lawmakers ought to provide any such additional clarity.

April 2, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 328

IRS Logo 2 The Heritage Foundation:  IRS Targeting: Is the Obama Administration Conducting a Serious Investigation?, by Hans A. von Spakovsky:

A Jan. 8 letter from the Committee to Attorney General Holder outlined the Justice Department’s refusal to provide any information or updates on the status of the Department’s investigation. The letter notes that the FBI offered to meet with Rep. Jordan to do exactly that but later “rescinded” the offer “after [Justice] Department officials apparently interfered.”

It is certainly true that the FBI cannot disclose sensitive information during an ongoing criminal investigation, but an active investigation does not prevent the FBI and the Justice Department from giving Congress basic information regarding the status of an investigation that does not compromise their work.  ...

Yet lawyers representing dozens of the targeted conservative groups have recently testified before this Committee and have said that their clients have not been contacted or interviewed by any FBI agents. 

I find that simply incredible – that nine months after the Attorney General announced he was opening an investigation, neither the FBI nor the Justice Department has conducted basic interviews with the victims to gather information about their dealings with the IRS officials and employees who may have been involved in wrongdoing.

In addition to the unjustified refusal of the Department to provide this Committee with any information about its investigation, there is the troubling selection of a Civil Rights Division lawyer, Barbara Bosserman, as the lead lawyer in the investigation. This scandal involves the possibility of public corruption – misbehavior by federal employees in the IRS.  It is the Public Integrity Section of the Criminal Division – not the Civil Rights Division – that has long been responsible for investigating and prosecuting this type of public corruption. 

Bosserman works in the most politicized division within the entire Justice Department. ... The Justice Department’s pick of Barbara Bosserman to lead or be involved in making decisions about this investigation raises the appearance of a conflict of interest because of her extensive political donations to President Barack Obama, who recently said there was “not even a smidge of corruption” in the IRS scandal – even though the  investigation is supposedly not complete.

When this first became public, Justice Department spokeswoman Dena Iverson claimed that Bosserman could not be removed from the investigation because “[i]t is contrary to department policy and a prohibited personnel practice under federal law to consider the political affiliation of career employees or other non-merit factors in making personnel decisions." The problem with this claim is that it is not true.

Taking a lawyer off a particular case because of a possible conflict of interest or the appearance of such a conflict is not a “prohibited personnel practice” like firing, terminating, or changing the pay of someone for political reasons. Indeed, Justice Department regulations clearly state that DOJ lawyers must avoid even “an appearance of a conflict of interest likely to affect the public perception of the integrity” of an investigation or prosecution.

No one questions the right of career employees to make political donations. This is allowed under the Hatch Act and applicable DOJ regulations, as explained by the Justice Department’s Ethics Office. But Bosserman’s considerable campaign contributions certainly raises the appearance of a possible conflict of interest in terms of the public’s perception of her ability to make unbiased, objective decisions in an investigation that could prove very embarrassing to the president she supports – a president who has already signaled through his public statements what he thinks the outcome of the investigation ought to be. ...

Given the allegations in the IRS case, especially the suspicion that conservative organizations were specifically targeted by IRS officials to help dampen public opposition to President Obama’s reelection, the Justice Department should make every effort to conduct a thorough investigation and avoid any questions about the objectivity of the attorneys and investigators involved in the investigation. ...

The involvement of the Civil Rights Division and the appearance of possible bias by one of the supervising, if not lead, lawyers in this investigation is a very serious issue. When combined with the refusal of the Justice Department and the FBI to provide even basic information about the status of the investigation, as well as the seemingly unjustifiable delays in talking to key witnesses in the conservative organizations targeted by the IRS, it raises substantial questions about whether or not a serious, objective, unbiased investigation is being conducted.

This Committee should continue to attempt to get more information about the integrity of the government’s investigation and should pursue its oversight function vigorously.  Otherwise, what happened at the IRS will happen again, and federal employees will believe that they can engage in wrongdoing by targeting the political opposition of the administration without fear of any consequences.

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April 2, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, April 1, 2014

Biggs Presents The Risk to State and Local Budgets Posed by Public Employee Pensions Today at NYU

BiggsAndrew Biggs (American Enterprise Institute) presents The Risk to State and Local Budgets Posed by Public Employee Pensions at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

State and local government employee pension plans fund guaranteed retirement benefit using portfolios of risky assets. Plan sponsors value stable contribution rates and attempt to mitigate volatility of contribution rates using policies including smoothing of investment returns and long amortization periods for unfunded liabilities. These policies, combined with the assumption that investment returns stabilize over the long term, seemingly allow plans to offer generous, guaranteed benefits to participants funded by low, stable contributions from employers. But in many cases, plan stakeholders take this conclusion as an article of faith rather than the result of quantitative analysis. I employ a simple model of financing for a mature pension to analyze how market risk and stabilization policies interact to affect annual required contribution. The model shows that stabilization policies can reduce volatility of employer contributions over the short term. But long-term fluctuations in investment earnings ultimately express themselves in contribution rates that may vary significantly from a deterministic calculation based upon the assumption of constant returns. A plan employing typical smoothing policies has a very low probability of becoming insolvent, so long as it makes required contributions at all times. However, plans could expect that, at least once over a 100-year period, required contributions would exceed ten times the baseline rate. If a plan economically unable or politically unwilling to make any and all contributions as required, then insolvency of the fund becomes a possibility.

April 1, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kahng Presents The Taxation of Intellectual Capital at Florida

KahngLily Kahng (Seattle) presented The Taxation of Intellectual Capital, 66 Fla. L. Rev. ___ (2014), at Florida on Friday as part of its Graduate Tax Colloquium Series:

Intellectual capital — broadly defined to include nonphysical sources of value such as patents and copyrights, computer software, organizational processes and know-how — has a long history of being undervalued and excluded from measures of economic productivity and wealth. In recent years, however, intellectual capital has finally gained wide recognition as a central driver of economic productivity and growth. Scholars in fields such as knowledge management, financial accounting and national accounting have produced a wealth of research that significantly advances our conceptual understanding of intellectual capital and introduces new methodologies for identifying and measuring its economic value.

This Article is the first to analyze and assess the taxation of intellectual capital within this broader interdisciplinary landscape. Informed by the recent research and reform efforts in knowledge management, financial accounting and national accounting, the Article finds that the tax law, which allows most investments in intellectual capital to be deducted, is fundamentally flawed. This results in the loss of hundreds of billions of dollars in tax revenues, costly misallocations of resources and a grave deviation from the accurate measure of income. The Article argues that, consistent with the prevailing view in other fields, investments in intellectual capital ought to be capitalized under the tax law. Drawing upon the work of reform proponents in other fields as well as their critics, the Article considers whether and to what extent the advances in other disciplines can be adapted to the tax system. Based on this analysis, it proposes the tax law be reformed to require businesses to capitalize and amortize over five years a broad array of intellectual capital investments including research and development, advertising, worker training and strategic planning.

April 1, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

McMahon: What Innocent Spouse Relief Says about Women and the Rest of Us

Stephanie Hunter McMahon (Cincinnati), What Innocent Spouse Relief Says about Women and the Rest of Us, 37 Harvard J.L. & Gender 141 (2014):

Every time spouses sign joint returns, they knowingly or not accept joint and several liability. Therefore, either spouse may be held liable for all of the tax due on the joint return. Joint and several liability’s more efficient tax collection procedure may conflict with a spouse’s equitable claims to have innocently signed the return while being lied to, abused, or manipulated. The question for Congress is how to balance these competing demands. Innocent spouse relief provides some tax relief for spouses Congress does not believe should be jointly and severally liable. Innocent spouse relief also offers an opportunity to explore how the government views married women, as wives have always composed the lion share of seekers and recipients of innocent spouse relief. The relief currently provided is both over- and under-inclusive by not offering relief to all spouses or former spouses who are unable to assess the validity of their returns but offering relief to some who both knew and helped orchestrate the tax evasion. This paper argues that, instead of existing innocent spouse relief, the IRS should respect joint filers’ agency when signing joint returns and grant relief only when a joint filer was unable to exercise that agency. In the event that a spouse is coerced into signing the return, relief needs to be speedier and less burdensome in application than under today’s law to increase the equity of the tax system and reduce the administrative costs on both the taxpayer and the government.

April 1, 2014 in Scholarship, Tax | Permalink | Comments (0)

Mankiw: The Growth of Pass-Through Entities

Greg Mankiw (Harvard), The Growth of Pass-Through Entities:

Over the past few decades, there has been an amazing shift in how businesses are taxed.  See the figure below, which is from CBO.  Businesses are more and more taxed as pass-through entities, where the income shows up on personal tax returns rather than on corporate returns.  (Here is an article discussing how the mutual giant Fidelity recently switched from one form to the other.)

This phenomenon complicates the interpretation of tax return data.  For example, when one looks at the growth of the 1 percent, or the 0.1 percent, in the Piketty-Saez data, that growth is likely exaggerated because some income is merely being shifted from corporate returns. I don't know how much.  If someone has already quantified the magnitude of this effect, please email me the answer. If not, someone should write that paper.

April 1, 2014 in Tax | Permalink | Comments (1)

Senate Holds Hearing Today on Caterpillar's Tax Reduction Strategies

CaterpillarThe Permanent Subcommittee on Investigations Subcommittee of the Senate Homeland Security and Governmental Affairs Committee holds a hearing today on Caterpillar's Offshore Tax Strategy (webcast):

Panel #1:

Panel #2:

  • Thomas F. Quinn (PricewaterhouseCoopers, Chicago)
  • Steven R. Williams (PricewaterhouseCoopers, McLean, VA)
  • James G. Bowers (PricewaterhouseCoopers, Dallas)

Panel #3:

  • Julie A. Lagacy (Finance Services Division, Caterpillar)
  • Robin D. Beran (Chief Tax Officer, Caterpillar)
  • Rodney Perkins (Former Senior International Tax Manager, Caterpillar)

Press and blogosphere:

April 1, 2014 in Congressional News, Tax | Permalink | Comments (0)

Fleischer: Curb Your Enthusiasm for Pigouvian Taxes

Victor Fleischer (San Diego), Curb Your Enthusiasm for Pigouvian Taxes:

Pigouvian (or "corrective") taxes have been proposed or enacted on dozens of products and activities that may be harmful in excess: carbon, gasoline, fat, sugar, guns, cigarettes, alcohol, traffic, zoning, executive pay, and financial transactions, among others. Academics of all political stripes are mystified by the public’s inability to see the merits of using Pigouvian taxes more frequently to address serious social harms.

This enthusiasm for Pigouvian taxes should be tempered. A Pigouvian tax is easy to design — as a uniform excise tax — if one assumes that each individual causes the same amount of harm with each incremental increase in activity on the margin. This assumption of uniform marginal social cost pairs well with the limited information and enforcement capacity of tax institutions. But when marginal social cost varies significantly, a Pigouvian tax will not lead to an optimal allocation of economic resources. Focusing on carbon emissions, where the assumption of uniform marginal social cost happens to be reasonable, obscures this common design flaw.

Broadly speaking, Pigouvian taxes should be employed only when (1) the harm is (or is properly analogized to) global pollution, and where the harm does not vary based on the source, or (2) the variation in marginal social cost is easily observed and categorized, as with traffic congestion charges.

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April 1, 2014 in Scholarship, Tax | Permalink | Comments (1)

Kleinbard: Stateless Income and Its Remedies

Edward Kleinbard (USC), Stateless Income and Its Remedies:

This outline presentation (I) quickly reviews the current status of business tax reform efforts in the United States, with particular attention to the international treatment of foreign direct investment, (II) summarizes the economic predicates required for territorial tax systems to advance economic efficiency, (III) explains why the phenomenon of stateless income means that those predicates are not met today, and are unlikely to be met in the future, and (IV) analyzes current U.S. legislative international tax proposals. In doing the last of these, the presentation points out how the legislative proposal advanced by Dave Camp, Chairman of the House Ways and Means Committee, might inadvertently operate to treat “good” operating income as subpart F income in a range of plausible cases.

April 1, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 327

IRS Logo 2In a stunning bipartisan agreement, President Barack Obama, Attorney General Eric Holder, IRS Commissioner John Koskinen, House Committee on Oversight and Government Reform Chair Darrell Issa and Ranking Member Elijah Cummings committed to aggressively pursue investigations into the IRS's targeting of conservative groups in advance of the 2012 presidential election.

President Obama

I have now had the opportunity to review the Treasury Department watchdog’s report on its investigation of IRS personnel who improperly targeted conservative groups applying for tax-exempt status.  And the report’s findings are intolerable and inexcusable.  The federal government must conduct itself in a way that’s worthy of the public’s trust, and that’s especially true for the IRS.  The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity.  This report shows that some of its employees failed that test. 

I’ve directed Secretary Lew to hold those responsible for these failures accountable, and to make sure that each of the Inspector General’s recommendations are implemented quickly, so that such conduct never happens again.  But regardless of how this conduct was allowed to take place, the bottom line is, it was wrong.  Public service is a solemn privilege.  I expect everyone who serves in the federal government to hold themselves to the highest ethical and moral standards.  So do the American people.  And as President, I intend to make sure our public servants live up to those standards every day.

Attorney General HolderI understand why the American public might question the impartiality of the DOJ's investigation headed by Barbara Bosserman in light of her political contributions to both of President Obama's campaigns.  I have thus rescinded her appointment and appointed one of the few DOJ attorneys who did not donate to President Obama's campaigns to lead the investigation.

IRS Commissioner KoskinenInspired by the example of my predecessor Randolph Thrower who died on March 8, I commit to complying fully and completely with the investigation by the House Committee on Oversight and Government Reform.  As the first step, the IRS will not take "years" to supply Lois Lerner's emails to the committee but instead will turn them over by April 15.

Chairman IssaI deeply regret cutting off the microphone of my dear friend Elijah Cummings at our last hearing and I promise to include him as a full and equal partner in all future committee actions in this matter.

Ranking Member Cummings:   This is one of the most alarming abuses of government power that I have ever seen.  I’m very concerned about it, we gotta get to the bottom of it, and by the way … we gotta do it in a bipartisan way.

For details of the agreement, see here.

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April 1, 2014 in IRS Scandal, Tax | Permalink | Comments (2)

Monday, March 31, 2014

Piketty: Capital in the Twenty-First Century

CapitalThomas Piketty (Paris School of Economics), Capital in the Twenty-First Century (Harvard University Press, 2014):

What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In Capital in the Twenty-First Century, Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality.

Piketty shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality—the tendency of returns on capital to exceed the rate of economic growth—today threatens to generate extreme inequalities that stir discontent and undermine democratic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again.

A work of extraordinary ambition, originality, and rigor, Capital in the Twenty-First Century reorients our understanding of economic history and confronts us with sobering lessons for today.

The New Yorker, Piketty’s Inequality Story in Six Charts:

In this week’s magazine, I’ve got a lengthy piece about “Capital in the Twenty-first Century,” a new book about rising inequality by Thomas Piketty, a French economist, that is sparking a lot of comment and debate. (Brad DeLong has a useful summary of some early reviews.) I’ll go further into that discussion in future posts, but first I thought it might be useful to portray the gist of Piketty’s story in a series of charts.

  Chart 1

Chart 2

New York Times:  Q&A: Thomas Piketty on the Wealth Divide, by Eduardo Porter:

Income inequality moved with astonishing speed from the boring backwaters of economic studies to “the defining challenge of our time.” It found Thomas Piketty waiting for it.

A young professor at the Paris School of Economics, he is one of a handful of economists who have devoted their careers to understanding the dynamics driving the concentration of income and wealth into the hands of the few. He has distilled his findings into a new book, “Capital in the Twenty-First Century,” which is being published this week. In the book, Mr. Piketty provides a sort of unified theory of capitalism that explains its lopsided distribution of rewards.

Financial Times op-ed:  Save Capitalism From the Capitalists by Taxing Wealth, by Thomas Piketty

March 31, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Joint Tax Committee Releases Overview of the Federal Tax System as in Effect for 2014

Joint Tax CommitteeThe Joint Committee on Taxation has released Overview of the Federal Tax System as in Effect for 2014 (JCX-25-14) (Mar. 28, 2014):

This document ... provides a summary of the present-law Federal tax system as in effect for 2014.

The current Federal tax system has four main elements: (1) an income tax on individuals and corporations (which consists of both a “regular” income tax and an alternative minimum tax); (2) payroll taxes on wages (and corresponding taxes on self-employment income) to finance certain social insurance programs; (3) estate, gift, and generation-skipping taxes, and (4) excise taxes on selected goods and services. This document provides a broad overview of each of these elements.

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March 31, 2014 in Congressional News, Tax | Permalink | Comments (0)

AEI Hosts Conference Today on The Economic Effects of Territorial Taxation

AEI LogoThe American Enterprise Institute hosts a conference today on The Economic Effects of Territorial Taxation (webcast):

As Congress deliberates business tax reform options, the international aspects often prove most complex. All Group of Eight countries other than the United States have territorial tax systems that exempt 95 to 100 percent of qualified dividends repatriated from foreign subsidiaries.

This half-day conference, cohosted by AEI and the International Tax Policy Forum, will explore the economic effects of territorial taxation. Panelists will use their international experience to examine the effects of international tax rules on base erosion and profit shifting, repatriation of foreign profits, and cross-border mergers and acquisitions and headquarters location. The conference will conclude with a luncheon address by Jason Furman, chairman of the White House Council of Economic Advisers.

Introductory Remarks:

  • Alex Brill, AEI
  • John Samuels, General Electric

Panel #1:  Base Erosion and Profit Shifting Under Worldwide and Territorial Taxation

  • Dhammika Dharmapala (Illinois)
  • Kevin Markle (University of Waterloo)
  • Alan D. Viard (American Enterprise Institute) (commentator)
  • Michael Graetz (Columbia) (moderator)

Panel II:  Repatriation of Foreign Profits in Japan, the U.K., and the U.S.

  • Sebastien Bradley (Drexel)
  • Peter Egger (ETH Zurich)
  • Fritz Foley (Harvard)
  • Rosanne Altshuler (Rutgers) (commentator)
  • Alan Auerbach (UC-Berkeley) (moderator)

Panel #3:  Home-Country Tax Effects on Mergers, Inversions, and Headquarters Location

  • Susan Morse (Texas)
  • Paul Oosterhuis (Skadden)
  • Johannes Voget (University of Mannheim)
  • James Hines (Michigan) (commentator)
  • Mihir Desai (Harvard) (moderator)

Luncheon Address:  Jason Furman (Council of Economic Advisers)

March 31, 2014 in Conferences, Tax | Permalink | Comments (0)

The IRS Scandal, Day 326

IRS Logo 2Wall Street Daily:  Renegade Government Agency Silences Political Opponents, by Floyd Brown (President, Western Center for Journalism):

Congressman Darrell Issa, the Chairman of the House Oversight & Government Reform Committee, is hopping mad.

After months of waiting, the IRS still hasn’t provided his committee with the emails and documents that are necessary for Congress’ ongoing investigation.

Instead, the man Obama hired to clean up the IRS, John Koskinen, continues to stonewall the Committee. He answered questions during testimony and even had the chutzpah to say that providing the IRS documents and emails could take years. Several members were visibly angry.

The flash point was the issue of accessing Lois Lerner’s email. ... [T]he standoff continues. Lerner won’t testify, and the IRS won’t give Congress Lerner’s emails, which would reveal what she was doing and what she was telling the frontline IRS workers. It’s a shameful debacle.

Even more disheartening is that the man tasked with cleaning up the IRS has now turned into a cover-up artist. We expect the IRS to treat everyone the same, regardless of political views. The notion that certain people, like Catherine Engelbrecht, were targeted because of their political views is a frightening prospect.

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March 31, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

TaxProf Blog Weekend Roundup

Sunday, March 30, 2014

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 on SSRN, with a new paper debuting on the list at #2:

  1. [466 Downloads]  The Economics of Tax Law, by Daniel Shaviro (NYU)
  2. [361 Downloads]  Submission to Finance Department on Implementation of FATCA in Canada, by Allison Christians (McGill) & Arthur J. Cockfield (Queen's)
  3. [283 Downloads]  2012 Developments in Connecticut Estate and Probate Law by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid & Riege, Hartford))
  4. [273 Downloads]  As American as Apple Inc.: International Tax and Ownership Nationality, by Chris William Sanchirico (Pennsylvania)
  5. [170 Downloads]  Deferral and Exemption of the Income of Foreign Subsidiaries: A Review of the Basic Analytics, by Alvin C. Warren (Harvard)

March 30, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Wall Street Journal Tax Tips

March 30, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 325

IRS Logo 2Washington Examiner editorial:  Lois Lerner Could Go to Jail in Contempt Clash:

This may come as a shock to Lois Lerner, but the House of Representatives has the authority to jail her unless she changes her mind about refusing to answer questions about her role in the IRS scandal. Essentially, what is required for that to happen is for a House majority to vote for a motion holding her in contempt and House Speaker John Boehner to then direct the House sergeant at arms to arrest and confine her. Under the Constitution, the House can do that under its “inherent contempt” authority, which was initially exercised in 1795 during the First Congress and on multiple occasions thereafter. Lerner could be held until January 2015 when a new Congress is seated, which could issue another subpoena and throw her in the clink again if she still balks at testifying. 

According to a 2012 Congressional Research Service report, inherent contempt has the unique advantage that it doesn’t require “the cooperation or assistance of either the executive or judicial branches. The House or Senate can, on its own, conduct summary proceedings and cite the offender for contempt.” The prospect of an eight or nine month stretch in the congressional slammer might have a sobering effect on Lerner. On the other hand, neither the House nor the Senate has used this authority since 1935, according to the CRS report, because the process can be “unseemly” and time-consuming.

Plus, Lerner may be on solid ground in thinking Boehner and other House Republicans don't have the political spine to jail her. But just as the South's “massive resistance” in the 1950s to racial integration was doomed to fail because it could not be sustained over time, the Obama administration's comprehensive refusal since November 2010 to cooperate with legitimate congressional oversight by House committees may be sowing seeds of frustration that eventually undercut Lerner's calculation of how long she can keep silent. Chairman Darrell Issa of the House Committee on Oversight and Government Reform, and Rep. Jim Jordan, who heads that panel's oversight subcommittee, are patient individuals but perhaps not that patient.

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March 30, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (9)

Saturday, March 29, 2014

Crane Presents When Is a Tax on Value (Not) a Tax on Income? at Washington University

CraneCharlotte Crane (Northwestern) presented When Is a Tax on Value (Not) a Tax on Income? An Exploration of the Puzzles in PPL v. Commissioner at Washington University yesterday as part of its International Tax Speakers Series hosted by Adam H. Rosenzweig:

This paper uses the issues raised by PPL v. United States (569 U.S. ___ (2013)) to explore whether an income tax can be distinguished from a wealth tax (or other tax on a single value) in a way that could be implemented, either for the purpose of defining those taxes for which the foreign tax credit was originally designed, or for the purpose of distinguishing income taxes from those tax instruments that remain beyond the reach of Congress even with the 16th amendment. It identifies two possible interrelated distinctions, that is, that an “income tax” must contain within its terms the criteria for ensuring that, should it be reimposed, proper allowance would be given for the initial imposition, and, if values are taxed without realization, later impositions must allow adjustment if those values will never be realized. (In simpler terms, unless a tax uses “basis” in a meaningful way, it is not an income tax.)

March 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Krugman and Mankiw Debate Optimal Tax Theory, Economic Models, and Civility

New York Times:  Wealth Over Work, by Paul Krugman (Princeton):

It seems safe to say that Capital in the Twenty-First Century, the magnum opus of the French economist Thomas Piketty, will be the most important economics book of the year — and maybe of the decade. Mr. Piketty, arguably the world’s leading expert on income and wealth inequality, does more than document the growing concentration of income in the hands of a small economic elite. He also makes a powerful case that we’re on the way back to “patrimonial capitalism,” in which the commanding heights of the economy are dominated not just by wealth, but also by inherited wealth, in which birth matters more than effort and talent. ...

Despite the frantic efforts of some Republicans to pretend otherwise, most people realize that today’s G.O.P. favors the interests of the rich over those of ordinary families. I suspect, however, that fewer people realize the extent to which the party favors returns on wealth over wages and salaries. And the dominance of income from capital, which can be inherited, over wages — the dominance of wealth over work — is what patrimonial capitalism is all about. 

To see what I’m talking about, start with actual policies and policy proposals. It’s generally understood that George W. Bush did all he could to cut taxes on the very affluent, that the middle-class cuts he included were essentially political loss leaders. It’s less well understood that the biggest breaks went not to people paid high salaries but to coupon-clippers and heirs to large estates. True, the top tax bracket on earned income fell from 39.6 to 35 percent. But the top rate on dividends fell from 39.6 percent (because they were taxed as ordinary income) to 15 percent — and the estate tax was completely eliminated. ...

This tilt of policy toward the interests of wealth has been mirrored by a tilt in rhetoric; Republicans often seem so intent on exalting “job creators” that they forget to mention American workers. ...

Many conservatives live inside an intellectual bubble of think tanks and captive media that is ultimately financed by a handful of megadonors. Not surprisingly, those inside the bubble tend to assume, instinctively, that what is good for oligarchs is good for America.

Not Class Warfare, Optimal Taxation, by Greg Mankiw (Harvard):

Today's column by Paul Krugman is classic Paul: It takes a policy favored by the right, attributes the most vile motives to those who advance the policy, and ignores all the reasonable arguments in favor of it.

In this case, the issue is the reduction in capital taxes during the George W. Bush administration. Paul says that the goal here was "defending the oligarchy's interests."

Really? As Paul well knows, there is a large literature in economics suggesting that an optimal tax system imposes much lower taxes on capital income than on wage income (or consumption).

New York Times:  Too Much Faith In Models, Capital Taxation Edition, by Paul Krugman (Princeton):

Yesterday I offered a rousing defense of the use of simplified models in economics. So maybe it’s appropriate that today I offer a caution: you should use models, but you should always remember that they’re models, and always beware of conclusions that depend too much on the simplifying assumptions. And I have a case in point, which ties into one of my other big concerns: the appropriate taxation of capital income.

Greg Mankiw is upset at my suggestion that the Bush administration was motivated by class interests in its determination to slash taxes on capital income and eliminate estate taxes. He wants us to know that it was all about optimal taxation, as dictated by economic theory.

Well, we could have a political discussion: How many people really, truly believe that George W. Bush chose to slash taxes on dividends and phase out the inheritance tax because Greg Mankiw and Glenn Hubbard told him that this was the conclusion from economic theory? Can we have a show of hands?

But let me instead point out that the case for zero or low taxation of capital income rests on very strong, very unrealistic assumptions — basically perfectly rational intertemporally optimizing agents, with dynasties behaving as if they were infinitely lived individuals. Question those assumptions, and the whole case falls apart. Don’t take my word for it — read Peter Diamond and Emmanuel Saez, who also point out that the intertemporal optimizing model of saving is in fact rejected by lots of evidence. ...

The point here is that the economic case for not taxing capital rests on a stylized model that we know does a bad job of capturing real behavior; the case for taxing capital rests on considerations of equity and concerns about excessive concentration of wealth that are very much grounded in real-world observation. You don’t have to be a know-nothing to argue that the second case trumps the first.

Using models without believing that they represent The Truth is hard; it’s very easy to fall off that tightrope one way or the other. But it’s what you have to do if you want to do useful economics.

Too Little Faith in People, Tax Policy Edition, by Greg Mankiw (Harvard):

Paul Krugman responds to my post about a recent column of his.  He is correct that not all economists agree that low capital taxation is desirable; he appropriately cites Diamond and Saez, who are on the high-capital-tax side of this debate. FYI, here is another recent paper, written in part as a response to Diamond and Saez, which finds that optimal rates of capital taxation, while positive, are quite low.

But that is not really the issue. If Paul had said "reasonable economists disagree, here are the arguments, and here is why I tend to favor one side rather than the other" I would not have objected.  Instead, in his original column, he wrote as if there were no reasonable arguments for the policy pursued by the Bush administration, and he attributed the most vile motives to those who advanced the policy.

This episode illustrates a fundamental difference between Paul and me.  I try not to assume the worst in other people, just because they disagree with me.

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March 29, 2014 in Tax | Permalink | Comments (13)

The IRS Scandal, Day 324

Friday, March 28, 2014

George H.W. Bush Wins JFK Profile in Courage Award for Breaking 'No New Taxes' Pledge

JFKThe John F. Kennedy Presidential Library and Museum today named Former President George H. W. Bush this year’s recipient of the John F. Kennedy Profile in Courage Award "in recognition of the political courage he demonstrated as President when he agreed to a 1990 budget compromise which reversed his 1988 campaign pledge not to raise taxes and put his re-election prospects at risk."

And I'm the one who will not raise taxes. My opponent now says he'll raise them as a last resort, or a third resort. But when a politician talks like that, you know that's one resort he'll be checking into. My opponent won't rule out raising taxes. But I will. And the Congress will push me to raise taxes and I'll say no. And they'll push, and I'll say no, and they'll push again, and I'll say, to them, ‘Read my lips: no new taxes.’ 

“This year’s Profile in Courage Award recipients exemplify what President Kennedy most admired in public servants: extraordinary courage in serving the greater good,” said [Jack Schlossberg, President Kennedy’s grandson], who is a member of the Profile in Courage Award committee. “In his first term in office, President George H. W. Bush risked his reputation and ultimately his political career by forging an important compromise on the budget in 1990 that moved our country forward, and should not be forgotten. ...

In 1990, with the federal deficit at $200 billion and the Congressional Budget Office suggesting it could double, President Bush negotiated with congressional Democrats to enact a budget deal which included spending cuts and tax increases aimed at reducing the deficit by approximately $500 billion over the following five years. The 1990 bipartisan budget agreement set annual limits on discretionary spending by Congress on defense, domestic programs and international affairs. It also, for the first time, created “pay as you go” rules for entitlements and taxes. In order to reach the deal, Bush agreed to a tax increase as part of the compromise, and he was pilloried by conservatives for doing so. Although he recognized the 1990 budget deal might doom his prospects for reelection, he did what he thought was best for the country and has since been credited with helping to lay the foundation of the economic growth of the 1990s that followed.

New York Times, A Profile in Courage Prize for George Bush (the Other One), by Andrew Rosnethal:

The Republican Party did not much tolerate dissent from its ideological orthodoxy in 1990, as Mr. Bush learned the painful way. Now it doesn’t tolerate the slightest deviation. Mr. Norquist, who is still trying to cripple government by forcing Republicans to oppose any tax, no matter how small or sensible, was outraged by the Foundation’s choice.

He took to Twitter faster than you can say “no independent thinking.”


That tweet may be the ultimate tribute to Mr. Bush. He didn’t lie to anyone. He changed his mind because it was the right thing to do, and that’s what Mr. Norquist cannot tolerate.

March 28, 2014 in Tax | Permalink | Comments (2)

The Tax Lawyer Publishes New Issue

The Tax Lawyer (2013)The Tax Lawyer has published Vol. 67, No. 2 (Winter 2014):

March 28, 2014 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (0)

Weekly Tax Roundup

March 28, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

March 28, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

March 28, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Christians & Cockfield: The Implementation of FATCA in Canada

FATCAAllison Christians (McGill) & Arthur J. Cockfield (Queen's University), Submission to Finance Department on Implementation of FATCA in Canada:

The United States enacted a tax reform in 2010 known as the Foreign Account Tax Compliance Act (FATCA), which will impose an extensive third-party monitoring and disclosure regime on financial institutions around the world in an effort to “smoke out” American tax cheats and expose their undeclared foreign assets to the U.S. Internal Revenue Service (IRS). The flow of information from Canadian financial institutions directly to the IRS that is required by FATCA would violate a number of laws in Canada. Accordingly, the United States has requested changes to these laws. The Canadian government now seeks to accommodate these requests in the form of an “intergovernmental agreement” (IGA) with the United States, which will be enacted into law as the Canada–United States Enhanced Tax Information Exchange Agreement Implementation Act (the Implementation Act) pursuant to a proposal released for comment by the Department of Finance. The Department of Finance invited public comments on these documents. We examined the proposed Implementation Act and the IGA and we find that they raise a number of serious issues ranging from likely constitutional violations to violations of international law. We submit these comments in the hope that they will help lawmakers and the public understand that FATCA, while intended to catch tax evaders, is poised instead to impose serious and unjustified harms on people who live around the world as non-resident U.S. citizens and green card holders, as well as their family members and business associates.

March 28, 2014 in Scholarship, Tax | Permalink | Comments (0)

Tax LL.M. Program Rankings by Tax Hiring Authorities

Tax TalentFollowing up on my post on the new 2015 U.S. News Tax Rankings: TaxTalent asked U.S. corporate tax hiring authorities to rank the following programs:

  • Undergraduate Accounting
  • MS Tax
  • MAcc
  • MAcc Tax
  • MBA Tax
  • JD Tax
  • LL.M. Tax

For the LL.M. Tax Survey, respondents were asked to select up to five schools (out of 31) with LL.M. Tax programs that they hold in highest regard when hiring candidates.  Respondent Profile: 144 currently employed heads of corporate in-house tax departments.

2014 LLM

For the J.D. Tax Survey, respondents were asked to select up to five schools (out of 20) with JD Tax programs that they hold in highest regard when hiring candidates.  It is a bizarre list of 20 law schools, as it omits 14 of the 15 schools ranked in tax by U.S. News (Georgetown is the only school ranked by both U.S. News and Tax Talent.) 

March 28, 2014 in Law School Rankings, Legal Education, Tax, Tax Faculty Rankings | Permalink | Comments (5)

Feds Partner With TurboTax to Push Income-Based Repayment on Student Loan Borrowers, Despite Potential Hefty Back-End Tax Bite

TurboTax (2013)Politico:  Student Loan Debt Deal Comes With Tax Catch:

Millions of taxpayers struggling with student loan debt are being pitched what may seem like a dream come true this tax season: lower monthly payments and a chance to see a chunk of their debt disappear.

But there’s a catch: the potential for a huge tax bill down the road.

The new push from the Departments of Treasury and Education uses tax time to promote the opportunity for a borrower to have their entire debt repaid after 20 or 25 years. The agencies are partnering with TurboTax, the tax software used by more than 18 million Americans, to advertise the deal.

It’s part of an administration-wide effort to make college affordable, but consumer advocates worry that the tax-time pairing fails to fully disclose that the debt forgiveness counts as income and will likely lead to a bill from the Internal Revenue Service. Some even liken it to the too-good-to-be-true mortgages that played a role in the collapse of the housing market. ...

A new element of the program this year involves the marketing effort by TurboTax, sold by Intuit. Turbo Tax users will see information about loan repayment options and a link to the Department of Education website in a section of the program called “My Money Tools.”

March 28, 2014 in Tax | Permalink | Comments (2)

The IRS Scandal, Day 323

Thursday, March 27, 2014

Fleischer & Blank: Bitcoin and Notice 2014-21

NY Times Dealbook (2013)Following up on Wedmesday's TaxProf Blog op-ed, Omri Marian (Florida): Bitcoin and Notice 2014-21:  New York Times DealBook:  Taxes Won’t Kill Bitcoin, but Tax Reporting Might, by Victor Fleischer (San Diego):

Bitcoin is a digital representation of value, not a real currency, according to the latest pronouncement from the IRS.  The IRS on Tuesday released guidance indicating that Bitcoins and other so-called virtual currencies that do not have the status of legal tender in any jurisdiction would be treated as property, not currency, for tax purposes. The guidance also indicates that Bitcoin transactions are subject to the same information reporting and withholding requirements as similar transactions in dollars.

There were “no real surprises” in the guidance, according to Omri Marian, a University of Florida law professor who has written about the potential for Bitcoin to be used to evade taxes. The I.R.S. guidance follows similar action by taxation authorities in Japan, Canada and Australia. ...

From a business perspective, the most important aspect of the guidance may be buried in the plumbing. Payments made using virtual currency are now clearly subject to the same information and backup withholding requirements as other property transactions. ...

To the extent that Bitcoin’s success depends on anonymity and on avoiding the burden of government regulation, this I.R.S. guidance is an unwelcome blow. Bitcoin users are not accustomed to telling their counterparties who they are, let alone what their Social Security number is.

While some people may choose to ignore the I.R.S. guidance, more established digital economy merchants (like Etsy and eBay vendors) and settlement systems (like PayPal) will tend to comply.

Bitcoin cannot thrive in the underground economy alone, and unless its users pay taxes like other grown-ups, the I.R.S. guidance virtually ensures that it will be a passing fad. 

Update:  Tax Vox Blog, You Could Owe Capital Gains Taxes When You Spend Bitcoin, by Steven Rosenthal

March 27, 2014 in IRS News, Tax | Permalink | Comments (0)

Suffolk Offers Three Year J.D./Tax LL.M. Degrees

Sufolk Law SchoolSuffolk University Law School is launching a new Tax LL.M. Program in May 2015 that will permit Suffolk students to earn J.D. and Tax LL.M. degrees in three years:

The heart of the program is an intensive 12-credit, 10-week summer program that allow Suffolk Law students to obtain a tax LLM and a JD in the same three-year period (day students) or four-year period (evening students) required for obtaining only a law degree. At graduation, successful students would receive both a JD and LLM degree.

In addition to the summer session, tax LLM students must take an additional eight credits of required courses and six credits of electives.

The tax LLM program also will be available for students who have already completed law school at Suffolk or elsewhere. These students will generally need to take tax courses in addition to the intensive summer to have the same total tax law education as Suffolk students simultaneously obtaining a JD and tax LLM.

The National Jurist quotes Associate Dean Anthony Polito, Faculty Director of the Tax LL.M. Program:  "Compared to the J.D. program, the only additional classes would be those in the summer session, so law students could graduate with J.D. and LL.M. degrees for about half the cost of attending a separate LL.M. program."

Suffolk joins other law schools like Boston UniversityLoyola-L.A. Northwestern, and Washington University that offer three-year J.D./Tax LL.M. programs. Other law schools (like Georgetown, NYU, and San Diego) offer seven-semester J.D./Tax LL.M. programs.

March 27, 2014 in Legal Education, Tax | Permalink | Comments (1)

Caron & Repetti: Revitalizing the Estate Tax: Five Easy Pieces

TaxSymposiumHeaderPaul L. Caron (Pepperdine) & James R. Repetti (Boston College), Revitalizing the Estate Tax: Five Easy Pieces, 142 Tax Notes 1231 (Mar. 17, 2014) (Symposium on Tax Reform in a Time of Crisis):

In a previous article, we argued that contrary to the state of the law over 35 years ago — when George Cooper wrote his seminal article on the estate tax (A Voluntary Tax? New Perspectives on Sophisticated Estate Tax Avoidance, 77 Colum. L. Rev. 161 (1977)) — taxpayers today generally ‘‘can reduce the value of assets subject to transfer tax in many instances only if they are willing to assume the risk that the reduction may be economically real and reduce the actual value of assets transferred to heirs or, alternatively, in narrow situations if they are willing to incur some tax risk.’’ (The Estate Tax Non-Gap: Why Repeal a Voluntary Tax?, 20 Stan. L. & Pol’y Rev. 153 (2009)) In another article, we documented the dramatic increase in income and wealth inequality over the past 30 years and the accompanying adverse social consequences and long-term negative effect on economic growth. (Occupy the Tax Code: Using the Estate Tax to Reduce Inequality and Spur Economic Growth, 40 Pepp. L. Rev. 1255 (2013)) We argued that tax policy historically has played an important role in reducing inequality and that the estate tax is a particularly apt reform vehicle in light of the role of inherited assets among the very rich and the adverse economic effects of that inherited wealth. In this article, we advance five estate and gift tax reform proposals that would generate needed revenue, reduce inequality, and contribute to economic growth: (1) disallow minority discounts when the transferred asset or business is controlled by family before and after the transfer; (2) maintain parity between the unified credit exemption amounts for the estate and gift taxes; (3) reduce the wealth transfer tax exemptions to $3.5 million, increase the maximum tax rate to 45 percent, and limit the generation-skipping transfer tax (GSST) exemption period to 50 years; (4) restrict the ability for gifts made in trust to qualify for the gift tax annual exclusion; and (5) impose a lifetime cap on the amount that can be contributed to a grantor retained annuity trust (GRAT).

March 27, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Brennan Presents Smooth Retirement Accounts at Boston College

BrennanThomas J. Brennan (Northwestern) presented Smooth Retirement Accounts at Boston College yesterday as part of its Tax Policy Workshop Series hosted by James Repetti and Diane Ring and funded by the Paulus Endowment for Tax Programs:

I introduce the concept of “smooth retirement accounts” (SRAs) to provide a method for taxing retirement savings evenly over time. I contrast this with the back-loaded taxation of traditional accounts, and I use lifetime utility maximization models to demonstrate that future non-linear and uncertain tax brackets can distort savings incentives and portfolio allocations for traditional account holders. I also contrast SRAs with the front-loaded taxation of Roth accounts, and I argue that SRAs would bring a reasonable portion of retirement account taxes into the current budget window without leading to the extreme result of Roth accounts that leave no tax receipts beyond the year of contribution. Because SRAs can eliminate investment and savings distortions for taxpayers, as well as help set government budgetary incentives correctly, I recommend that they be created by Congress as a replacement for the current choices of Roth and traditional accounts.

March 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tax Analysts Hosts Conference Today on Is It Time For a Taxpayer Bill of Rights?

TA ConfTax Analysts hosts a roundtable discussion on Taxpayers and the IRS: Is It Time For a Taxpayer Bill of Rights? at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

On January 9, 2014, National Taxpayer Advocate Nina E. Olson released the 2013 Annual Report to Congress, urging the IRS to implement administratively a comprehensive, principle-based TBOR. That proposal, comprising 10 rights modeled on the U.S. Constitution's Bill of Rights, is designed to strengthen the IRS’s ability to serve taxpayers. However, the lack of resources needed to implement these rights could prevent the IRS from proceeding. The speakers and the conversation that follows will provide a historical perspective on prior legislation, discuss recommendations for adopting a TBOR, and debate the timing and politics involved in its implementation.

  • Nina E. Olson (National Taxpayer Advocate)
  • Christopher S. Rizek (Caplin & Drysdale, Washington, D.C.)
  • Alan J. Wilensky (Former Acting Assistant Secretary for Tax Policy, U.S> Treasury Department)
  • Moderator:  Christopher E. Bergin (President and Publisher, Tax Analysts)

March 27, 2014 in Conferences, Tax, Tax Analysts | Permalink | Comments (0)

The IRS Scandal, Day 322

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March 27, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Wednesday, March 26, 2014

Soled Presents Basis, Pass-Through Entities, and Taxpayer Noncompliance Today at Duke

SoledJay A. Soled (Rutgers) presents Tax Basis Determinations, Pass-Through Entities, and Taxpayer Noncompliance (with James Alm (Tulane)) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

In the United States, one of the most popular ways to conduct business is to use a pass-through entity such as a partnership, limited liability company, or S corporation. Investor taxpayers in such pass-through entities commonly hold their ownership interest for years or decades. Over this lengthy period of time, a taxpayer’s tax basis in the entity is subject to constant annual adjustments, which generally have no immediate tax consequences.

However, when the pass-through entity investment is later sold or liquidated, tax basis determinations are of critical importance, and these determinations enable taxpayers to calculate their concomitant gains or losses. At this pivotal juncture, accurately determining taxpayers’ tax bases in these investments is highly unlikely, and the IRS’s ability to detect taxpayers’ tax basis reporting inaccuracies is virtually nonexistent.

This analysis examines the phenomenon of taxpayers who do not know their tax basis in pass-through entity investments and the consequences associated with such ignorance. Also provided are projected revenue losses associated with taxpayers purposefully or inadvertently inflating the tax basis that they have in their pass-through entity investments.

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March 26, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Gamage Presents A Framework for Analyzing the Optimal Choice of Tax Instruments Today at UC-Irvine

Gamage (2014)David Gamage (UC-Berkeley) presents A Framework for Analyzing the Optimal Choice of Tax Instruments, 68 Tax L. Rev. ___ (2014), at UC-Irvine today as part of its Faculty Colloquium Series

What mix of policy instruments should governments employ to raise revenues or to promote distribution? The dominant answer to this question in the tax theory and public finance literatures is that (with limited exceptions) governments should rely exclusively on a progressive consumption tax. Thus, among other implications, the dominant view is that governments should not tax capital income or wealth, and that legal rules should not be designed to promote distribution.

In contrast, this Article argues that governments should make use of a number of tax and non-tax policy instruments to raise revenues and to promote distribution. Furthermore, this Article argues that governments may have much greater capacity to raise revenues and to promote distribution at lower efficiency costs than is generally recognized. Whereas the existing theoretical literature focuses on a small number of distortionary costs that result from taxation (in particular, on labor-to-leisure and saving-to-spending distortions), this Article analyzes the implications of taxpayers engaging in a diverse variety of tax-gaming responses. To the extent that taxpayers respond to different tax instruments through different forms of tax gaming, this Article demonstrates that governments can raise revenues and promote distribution more efficiently by employing a variety of different policy instruments.

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March 26, 2014 in Scholarship, Tax | Permalink | Comments (0)

Edgar Presents Corrective Taxation, Leverage, and Compensation in a Bloated Financial Sector Today at Toronto

EdgarTim Edgar (Osgoode Hall) presents Corrective Taxation, Leverage, and Compensation in a Bloated Financial Sector at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The financial crisis of 2007–2009 reinvigorated academic and policymaking interest in the design of prudential regulatory regimes governing the financial sector as a policy instrument intended to moderate financial instability. The crisis also motivated interest in the role of taxation as a complement to these regimes. Yet in practice, the use of tax instruments has been modest. This article considers three tax instruments that could serve this complementary role. Political economy considerations aside, it is suggested that the use of bank leverage taxes by policymakers as the tax instrument of choice is unsurprising. As recognized in the literature, however, a corrective taxation case can be made for an increase in the rate of such taxes as an instrument to eliminate the availability of cheap debt for systemically important institutions. Although returns to risk taking is a potentially robust tax base, the weak behavioral properties of this tax instrument have apparently diminished its appeal for policymakers, while a revenue-raising imperative that might otherwise motivate its adoption is muted considerably by the adoption of a bank leverage tax. Perhaps somewhat surprisingly, the tax literature does not consider the case for an excise tax on bonus and performance-based compensation as an instrument to alter the structure of compensation. This may be attributable, in part at least, to redundancy where regulatory regimes can be used to impose constraints with similar intended effects.

March 26, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

NYU Hosts Symposium on Tax and Corporate Social Responsibility

NYU Logo (2013)The NYU Journal of Law & Business and the NYU Graduate Tax Program hosted a symposium yesterday on Tax and Corporate Social Responsibility:

From the enactment of the corporate excise tax in 1909 to the present, the corporate tax in the United States has generated intense debate. Topics at the center of this debate have ranged from the fundamental purpose of the tax to moral obligations of corporations to pay tax to tax transparency and accountability. This half-day symposium will continue the discussion by addressing two questions: Should corporations pay tax? And should corporate tax returns be public?

Panel #1:  Should Corporations Pay Tax?

Panel #2:  Should Corporate Tax Returns Be Public?

  • Moderator:  David Kamin (NYU)
  • Presenter:  Joshua Blank (NYU), Reconsidering Corporate Tax Privacy
  • Discussants:  Allison Christians (McGill), Reuven Avi-Yonah (Michigan), Peter Barnes (Duke)

March 26, 2014 in Scholarship, Tax | Permalink | Comments (0)

Tax Prof Lateral Moves


Despite a decline in the number of lateral moves this year, there is a healthy number of lateral tax moves beginning in Fall 2014 (although less than last year):

I will update this list as part of my annual April compilation of tax moves.

March 26, 2014 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

Yin: Reforming (and Saving) the IRS by Respecting the Public’s Right to Know

TaxSymposiumHeaderGeorge K. Yin (Virginia), Reforming (and Saving) the IRS by Respecting the Public’s Right to Know (Symposium on Tax Reform in a Time of Crisis):

The current controversy involving possible political targeting by the IRS in administering the exempt organization (EO) tax laws is simply the latest in a long succession of similar allegations spanning at least five decades. This article proposes to address the problem through increased transparency of the IRS’s administrative actions involving EOs. Greater transparency responds directly to the public’s frustration in not being able to monitor the agency and gain confidence that the laws are being applied in an even-handed manner.

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March 26, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (1)

Marian: Bitcoin and Notice 2014-21

BitcoinTaxProf Blog op-ed:  IRS Makes Sense of Bitcoin Taxation: Initial Reaction to Notice 2014-21, by Omri Marian (Florida):

Over the past few months, the IRS has been under tremendous pressure to issue guidance on the taxation of Bitcoin transactions. The National Taxpayer Advocate, the Government Accountability Office, elected officials and taxpayers have all pressed the IRS to explain the tax consequences of transactions involving the increasingly popular virtual currency. The IRS delivered yesterday – just in time for tax season – by issuing Notice 2014-21 (the “Notice”).

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March 26, 2014 in IRS News, Tax | Permalink | Comments (2)

The IRS Scandal, Day 321