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Thursday, February 12, 2015

Tax Rates and Corporate Decision Making

John Graham (Duke), Michelle Hanlon (MIT), Terry Shevlin (UC-Irvine) & Nemit Shroff (MIT), Tax Rates and Corporate Decision Making:

We provide evidence consistent with many firms exhibiting behavioral biases (heuristics, salience) when incorporating taxes into their decision processes. For example, we find that many firms employ the more salient average tax rate (i.e., the GAAP effective tax rate) to evaluate incremental decisions rather than the more theoretically correct marginal tax rate. We estimate that behavioral biases that influence firms to use the average tax rate for decision-making lead to deadweight losses that average $10 million for poor capital structure decisions and $25 million for suboptimal acquisitions, and also reduce the responsiveness of corporate investment to growth opportunities.

February 12, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 644

Wednesday, February 11, 2015

Kleinbard: Why Corporate Tax Reform Can Happen

Edward Kleinbard (USC), Why Corporate Tax Reform Can Happen:

This brief essay explains in an informal way to nonspecialists what the stakes are for corporate tax reform and why such reform is more politically feasible than most observers believe. The essay emphasizes the central importance of international tax design as the largest conceptual impediment, but demonstrates that a framework has emerged that can serve as the basis for constructive negotiations. The essay further offers a novel strategy for dealing with the problem that a large fraction of U.S. business income is earned by unincorporated businesses.

February 11, 2015 in Scholarship, Tax | Permalink | Comments (1)

Givati: A Theory of Line Drawing in Tax Law

Yehonatan Givati (Hebrew University of Jerusalem, Faculty of Law), Walking a Fine Line: A Theory of Line Drawing in Tax Law, 34 Va. Tax Rev. ___ (2015):

In many contexts, U.S. tax law grants a favorable tax treatment to transactions of one type and an adverse treatment to transactions of another type. The task of tax authorities is to draw lines in legally gray areas, distinguishing between economically similar transactions that should receive different treatment. Despite tax law’s propensity for line drawing, the manner in which tax authorities draw legal lines has received little attention. This Article aims to fill this gap by providing guidance to tax authorities on how to select the best line drawing instrument in a given situation. First, the Article demonstrates that tax authorities employ four different line drawing instruments: rulemaking, adjudication, private letter ruling and licensing. Second, the Article develops a theory of line drawing in tax law, which identifies three criteria by which tax authorities should choose line drawing instruments: the ideal policy, the effect on taxpayers, and the effect on tax authorities. Finally, the Article applies this theory of line drawing to explain line drawing instruments currently in use.

February 11, 2015 in Scholarship, Tax | Permalink | Comments (0) Obama's Loophole Logic

FactCheck, Obama's Loophole Logic:

The White House is claiming that the top 1 percent of all earners would pay 99 percent of the capital gains tax increase proposed by the president. But that claim rests on some debatable logic.

According to the Obama administration’s way of figuring, a lot of Americans would suddenly enter the top 1 percent only after they die.

An independent analysis by the Urban-Brookings Tax Policy Center estimates that the top 1 percent of earners would bear 58 percent of the increase, not 99 percent. By the TPC’s figuring, the Obama proposal would affect not only the rich, but a good many middle-income taxpayers as well. ...

Which view is right? That depends on what one considers to be “income,” as we shall explain in a moment.

Our Conclusion

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February 11, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Mormann: Beyond Tax Credits -- Smarter Tax Policy

Felix Mormann (Miami), Beyond Tax Credits – Smarter Tax Policy for a Cleaner, More Democratic Energy Future, 31 Yale J. on Reg. 303 (2014):

Solar, wind, and other renewable energy technologies have the potential to mitigate climate change, secure America’s energy independence, and create millions of green jobs. In the absence of a price on carbon emissions, however, these long-term benefits will not be realized without near-term policy support for renewables. Mounting federal debt in excess of $16 trillion, meanwhile, urges careful review of all public expenditures. This Article proposes policy reform to simultaneously promote fiscal sustainability and renewable energy through capital markets and crowdfunding.

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February 11, 2015 in Scholarship, Tax | Permalink | Comments (0)

Graetz: Goodbye to Tax Notes

Graetz (2015)TaxProf Blog op-ed:  Goodbye to Tax Notes, by Michael J. Graetz (Columbia):

Today, I received the following email from the Columbia Law librarian announcing a new policy of Tax Analysts:

Tax Analysts is in the process of eliminating their complementary professorial accounts. They have presented us with the following terms, and they will maintain your access for the rest of this work week.

In this case, the alternatives are the library paying $8,500 a year for an broad account shared by the library with individual direct access limited to three professors, or you paying $780 a year for your individual access to Tax Notes and Tax Notes International .... They will not sell access to the “Lawref” e-dress because that is a shared account.....

When Tom Field started a nonprofit publisher and public interest law firm in 1969, he could not have imagined the success Tax Analysts would enjoy. It has for nearly a half century provided a unique and invaluable service to the tax community. I have long relied on it myself for timely information and have had many students use its resources for their papers and publications, even though much of its most useful content is in the public domain. And I have frequently published there and speak often with its correspondents. But with this latest turn, Tax Analysts may be losing sight of its mission. According to its Form 990 for the fiscal year ending June 30, 2013 (which is the most recent readily available) Tax Analysts had over $23 million in revenues from its publications, cash and securities on hand exceeding $40 million and more than $60 million in total assets. Its revenue exceeded its expenses by nearly $4 million. It is difficult to believe that this change in policy is prompted by financial necessity. And the timing is especially unfortunate for many law schools around the country.

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February 11, 2015 in Legal Education, Tax, Tax Analysts | Permalink | Comments (6)

Postlewaite: The Omnipresence of Subchapter K in the International Arena?

Philip Postlewaite (Northwestern), The Omnipresence of Subchapter K in the International Arena?, 93 Taxes ___ (2015):

The purpose of Subchapter K is to provide certainty as to the appropriate focal point for making tax determinations, i.e., at the partner level or the partnership level, dictating which level is determinative for what purpose. Subchapter K generally ensures that partners are ultimately taxed similarly under the three possible methods of realization upon their investment. Whether (1) the partnership run its course and disposed of its assets for cash and liquidated thereafter, (2) the partner sells his partnership interest to another for cash, or (3) the partnership liquidates by distributing its assets to the partner for sale thereafter, the amount and character of the gain or loss is generally the same, albeit with some deferral in the liquidation context. Regardless of the method chosen, tax consequences ensue.

Subchapter N’s treatment of inbound and outbound activity reflects different overriding purposes. Regarding inbound activity, the goal is to ensure that foreign persons are subject to tax on income, whether investment or business oriented, derived with a nexus to the United States. Regarding outbound activity, the focus is on the avoidance of double taxation by United States persons on income earned abroad as well as limiting the deferral of income by United States persons investing abroad through foreign corporations.

The difficulty arises when partnerships operate internationally, i.e., where Subchapter K and Subchapter N may potentially overlap. Does Subchapter K always control; does Subchapter N? Is the entity approach determinative, the aggregate, or either depending upon the context? What is the ideal model for resolving such issues?

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February 11, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 643

IRS Logo 2The Hill, Obama Administration Won’t Release IRS Targeting Documents:

The Obama administration is refusing to publicly release more than 500 documents on the IRS’s targeting of Tea Party groups.

Twenty months after the IRS scandal broke, there are still many unanswered questions about who was spearheading the agency’s scrutiny of conservative-leaning organizations.

The Hill sought access to government documents that might provide a glimpse of the decision-making through a Freedom of Information Act (FOIA) request.

The Hill asked for 2013 emails and other correspondence between the IRS and the Treasury Inspector General for Tax Administration (TIGTA). The request specifically sought emails from former IRS official Lois Lerner and Treasury officials, including Secretary Jack Lew, while the inspector general was working on its explosive May 2013 report that the IRS used “inappropriate criteria” to review the political activities of tax-exempt groups.

TIGTA opted not to release any of the 512 documents covered by the request, citing various exemptions in the law. The Hill recently appealed the FOIA decision, but TIGTA denied the appeal. TIGTA also declined to comment for this article.

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February 11, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, February 10, 2015

Yin Presents Protecting Taxpayers from Congressional Lawbreaking Today at Georgetown

Yin (2015)George K. Yin (Virginia) presents Protecting Taxpayers from Congressional Lawbreaking at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John Brooks, Itai Grinberg, and David Schizer:

This paper describes how the U.S. House Ways & Means Committee broke the law in 2014 when it approved public release of the confidential tax return information of 51 taxpayers. Because the Speech or Debate Clause insulates the legislators and their staff from prosecution if they carry out their violation in the context of a protected legislative act, to prevent a future violation, the paper recommends a new restriction on the access of the tax committees to tax return information.

February 10, 2015 in Colloquia, Tax | Permalink | Comments (0)

Toder Presents U.S. Lessons From Other Countries' Taxation of Multinational Corporations Today at NYU

ToderEric Toder (Tax Policy Center) presents Lessons the United States Can Learn From Other Countries' Territorial Systems for Taxing Income of Multinational Corporations (with Rosanne Altshuler (Rutgers) & Stephen Shay (Harvard)) at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

The United States has a worldwide system that taxes the dividends its resident multinational corporations receive from their foreign affiliates, while most other countries have territorial systems that exempt these dividends. This report examines the experience of four countries – two with long-standing territorial systems and two that have recently eliminated taxation of repatriated dividends. We find that the reasons for maintaining or introducing dividend exemption systems varied greatly among them and do not necessarily apply to the United States. Moreover, classification of tax systems as worldwide or territorial does not adequately capture differences in how countries tax foreign-source income.  

February 10, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Number of Americans Renouncing Their U.S. Citizenship Hit All-Time High in 2014

International Tax Blog, 2014 - More Expatriations Than Ever:

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the fourth quarter of 2014. .... The [3,415] total for the year breaks last year’s record number of 2,999 published expatriates. The number of expatriates for 2014 is a 14% increase over 2013. 


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February 10, 2015 in Tax | Permalink | Comments (1)

Senate Holds Hearing Today On Lessons From The 1986 Tax Reform

Senate LogoThe Senate Finance Committee holds a hearing today on Getting to Yes on Tax Reform: What Lessons Can Congress Learn from the Tax Reform Act of 1986?:

Press and blogosphere coverage:

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February 10, 2015 in Congressional News, Tax | Permalink | Comments (1)

WSJ: Avoid These 12 Tax Traps This Filing Season

Tax TrapWall Street Journal Tax Report:  Don’t Fall Into a Tax Trap: These Hidden Hazards Can Cost Taxpayers Money—or Get Them in Trouble With the IRS, by Laura Saunders:

With taxes, what you don’t know can hurt you. ... These errors aren’t the obvious bloopers that cause trouble, such as entering income information incorrectly or misstating Social Security numbers. Instead, they are tricky issues that often confuse taxpayers who do their own returns—and even some paid preparers—and cause people either to overpay Uncle Sam or invite an IRS challenge. 

Here are issues to be aware of, starting with those that are new this year.

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February 10, 2015 in IRS News, Tax | Permalink | Comments (0)

NY Times Debate: Are Economists Overrated?

NY Times Room for DebateNew York Times Room for Debate, Are Economists Overrated?:

One in 100 articles in The New York Times over the past few years have used the term “economist,” a much greater rate than other academic professions, according to a recent article in The Upshot. Economic analysis and pronouncements are crucial to most policy decisions and debates.

But given the profession’s poor track record in forecasting and planning, and the continued struggles of many Americans, have we given economists too much authority?

  • Philip Cohen (Maryland), Exceptions Overwhelm Economic Rules:  "Exploitation, dishonesty, violence, ignorance and demagoguery set vast areas of social life apart outside of economic models."
  • Diane Coyle (Manchester), Economists Deal With the Pie on the Table, Not in the Sky:  "Government decisions balance costs and benefits, winners and losers. It is best to do this explicitly, which is what economists do."
  • Marion Fourcade (UC-Berkeley), An Ambivalent Authority:  "Much of economic science is esoteric and preoccupied with internal struggles. Ideological divisions, exploited by politicians, defy clarity."
  • Peter Henry (NYU), Analyze and Explain, Don’t Prognosticate:  "Economics succeeds when used as a forensic tool, employing history and data, not creating unrealistic expectations."
  • Orlando Patterson (Harvard) & Ethan Fosse (Harvard), Don’t Rely on Pseudo-Science:  "Implementation of mainstream economic ideas has led to massive failures after expertise of other academics were ignored."
  • Charles Plott (Cal-Tech), Failures Shouldn’t Obscure Widespread Success:  "Economic science is the foundation of sound policies and techniques in business and government."

February 10, 2015 in Legal Education, Tax | Permalink | Comments (0)

Why Do Developing Countries Tax So Little?

Timothy Besley (London School of Economics) & Torsten Persson (Stockholm University), Why Do Developing Countries Tax So Little?, 28 J. Econ. Perspectives 99 (Fall 2014):

Low-income countries typically collect taxes of between 10 to 20 percent of GDP while the average for high-income countries is more like 40 percent. In order to understand taxation, economic development, and the relationships between them, we need to think about the forces that drive the development process. Poor countries are poor for certain reasons, and these reasons can also help to explain their weakness in raising tax revenue. We begin by laying out some basic relationships regarding how tax revenue as a share of GDP varies with per capita income and with the breadth of a country's tax base. We sketch a baseline model of what determines a country's tax revenue as a share of GDP. We then turn to our primary focus: why do developing countries tax so little? We begin with factors related to the economic structure of these economies. But we argue that there is also an important role for political factors, such as weak institutions, fragmented polities, and a lack of transparency due to weak news media. Moreover, sociological and cultural factors- such as a weak sense of national identity and a poor norm for compliance- may stifle the collection of tax revenue. In each case, we suggest the need for a dynamic approach that encompasses the two-way interactions between these political, social, and cultural factors and the economy.

February 10, 2015 in Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 642

IRS Logo 2Washington Times, New Emails Show IRS Delayed Witness Interview in Criminal Probe:

Lawyers for the Internal Revenue Service attempted to stall a criminal investigation by waiting nearly a month before giving an agency employee permission to meet with investigators, despite the employee’s willingness to testify, emails showed.

The emails, obtained by Judicial Watch through a Freedom of Information Act request, revealed frustration with IRS lawyers over their reluctance to approve a meeting between federal prosecutors and an unnamed tax agency employee who was prepared to give investigators information.

“[W]e find it amazing that they didn’t immediately respond giving us the green light to meet with you,” the IRS employee’s attorney, whose name was redacted, wrote of the IRS counsel in a June 12, 2013 email to Justice Department officials. ...

Interest in the alleged IRS scandal remains high nearly two years after an inspector general report detailed the delays and excessive scrutiny some agency officials heaped on conservative groups applying for tax-exempt status. The House Oversight Committee has not let up on plans to further its probe of the charges.

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February 10, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, February 9, 2015

University of New South Wales Issues Call for 2015 Tax Research Fellows

ATaxThe School of Taxation and Business Law (TBL) at the University of New South Wales, Australia, will offer several Atax Research Fellowships  ($7,500) in taxation, business law and related disciplines in 2015. Research Fellows normally spend four weeks working at TBL on a mutually agreed area of research. The preferred timing for successful applicants to undertake the fellowship is August-October 2015, but other times of the year may also be possible. The application deadline is March 31, 2015.

February 9, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

NYU Hosts Book Discussion With Eugene Steuerle on How to Restore Fiscal Freedom and Rescue Our Future

DeadThe NYU Graduate Tax Program hosts a discussion today with C. Eugene Steuerle (Urban Institute) on his book, Dead Men Ruling: How to Restore Fiscal Freedom and Rescue Our Future (2014):

Eugene Steuerle argues that these seemingly separable economic and political problems are actually symptoms of a common disease, one unique to our time. Unless that disease and the history of how it spread over time is understood, Steuerle says, it is easy for politicians and voters alike to fall prey to believing in simple but ineffective nostrums, hoping that a cure lies merely in switching political parties or reducing the deficit or protecting and expanding our favorite program.

Despite the despairing claims of many, Steuerle points out that we no more live in an age of austerity than did Americans at the turn into the twentieth century with the demise of the frontier. Conditions are ripe to advance opportunity in ways never before possible, including doing for children and the young in this century what the twentieth did for senior citizens, yet without abandoning those earlier gains. Recognizing this extraordinary but checked potential is also the secret to breaking the political logjam that —as Steuerle points out —was created largely by now dead (or retired) men.

February 9, 2015 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

Johnston: Obama and Congress Offer Bogus Rhetoric on Tax Reform

Al Jazeera:  Obama and Congress Offer Bogus Rhetoric on Tax Reform: Tax Proposals Favor Political Donor Class at the Expense of Ordinary Americans , by David Cay Johnston (Syracuse):

Considering all the talk in Washington about “tax reform,” you might think serious work is underway to adapt our century-old federal tax system to the 21st century digital economy.

It’s not.

The only matters under discussion are more tax favors that will shift even more of the burden off those with speed-dial access to lawmakers and White House staff and onto ordinary tax payers.

We have a tax code designed for the middle of last century, when we had a national economy with cash incomes that could be levied efficiently and hard assets, like factories, which could be taxed easily because they were immovable.

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February 9, 2015 in Tax | Permalink | Comments (0)

Fleischer: Obama’s International Tax Plan May Not Work as Intended

NY Times Dealbook (2013)New York Times Deal Book:  How Obama’s Tax Plan May Not Work as Intended, by Victor Fleischer (San Diego):

Companies’ offshore cash holdings are a tempting target for American tax writers, as President Obama’s proposal this week to tax deferred offshore earnings proves. Those same offshore earnings may attract foreign buyers as well.

A Bloomberg article on Wednesday by David Kocieniewski rightly identifies an unintended consequence of the president’s proposal: It provides companies with an additional incentive to hurry up and move their headquarters overseas before the rules change.

I think the more formidable concern is an increase in foreign acquisitions of companies in the United States. Unlike a corporate inversion, where a larger American company is “acquired” by a smaller foreign one, I am speaking here of acquisitions by foreign companies that are the same size or larger than their American targets. ...

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February 9, 2015 in Tax | Permalink | Comments (0)

TurboTax Temporarily Suspends State E-Filings on Fraud Concerns

Turbo Tax (2015)Wall Street Journal, TurboTax Temporarily Suspends E-Filings on Fraud Concerns:

The largest online tax-software company in the U.S. temporarily halted electronic filing of all state returns after more than a dozen states spotted criminal attempts to obtain refunds through its systems.

Intuit Inc., based in Mountain View, Calif., said Friday that its TurboTax unit stopped transmitting state e-filing tax returns Thursday after seeing attempts to use stolen personal information to file fraudulent returns for tax refunds.

The company said later Friday that it resumed state tax filings after bolstering its “security measures to combat the type of fraudulent tax activity that it is seeing.” The shutdown lasted about 24 hours, according to the company.

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February 9, 2015 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 641

IRS Logo 2Judicial Watch, IRS Obstructs Justice?:

We have just obtained new internal documents from the Department of Justice (DOJ) that show how the IRS Office of the Chief Counsel worked to delay a meeting between an IRS employee and DOJ and FBI investigators about the Obama IRS abuse and harassment of Tea Party and conservative groups and individuals who were in the way of Barack Obama’s reelection effort.

To help you with a timeline, it was in May 2013 that the Treasury Inspector for Tax Administration (TIGTA) released an audit report confirming that the IRS used “inappropriate” criteria to identify, hamstring, and handcuff conservative organizations that stand in opposition to Team Obama. Put simply, the agency violated the First Amendment rights of countless Americans just as Obama sought reelection.  As further confirmation of the criminality of Obama’s IRS abuse, in 2014, Lois Lerner, the former Director of the IRS Exempt Organizations Unit that was “suppression central” for the tax agency, was held in contempt of Congress after refusing to testify at a congressional hearing about the agency’s witch hunts. (The Holder Justice Department has yet to prosecute this contempt charges.)

This latest batch of emails, which were released in response to just one of our several FOIA lawsuits against the DOJ, provide the first window into the criminal investigation of the alleged IRS abuses.  The emails detail the involvement of the DOJ’s Public Integrity Section, which JW was first to expose as being part of a scheme to work with the IRS to prosecute groups and individuals critical of the Obama administration. The documents show the IRS scandal is only getting worse and that the IRS Counsel’s office, which is operated by an Obama appointee, has been, once again, stonewalling any serious investigation.

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February 9, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, February 8, 2015

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. [282 Downloads]  Important Developments in Federal Income Taxation (2014), by Edward A. Morse (Creighton)
  2. [178 Downloads]  Thomas Piketty and Inequality: Legal Causes and Tax Solutions, by Paul L. Caron (Pepperdine)
  3. [137 Downloads]  David Foster Wallace on Tax Policy, How to Be an Adult, and Other Mysteries of the Universe, by Arthur J. Cockfield (Queen's University)
  4. [129 Downloads]  Return on Political Investment in the American Jobs Creation Act of 2004, by Hui Chen (Zurich), Katherine Gunny (Colorado) & Karthik Ramanna (Harvard)
  5. [108 Downloads]  Taxation and Surveillance -- An Agenda, by Michael Hatfield (University of Washington)

February 8, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 640

IRS Logo 2Wall Street Journal editorial, End of the IRS Investigation?:

Republicans are rightly furious about the IRS targeting of conservative political groups—and the agency’s lack of cooperation in finding out what happened. They’ve even cut the IRS budget to get the agency’s attention. So it was odd to learn that the new head of the House Oversight Committee thinks these government employees deserve a pay raise. ...

Meanwhile, we’ve learned that key staff in the targeting probe have left the Oversight committee. Does this mean there’s a kinder, gentler new Congressional overseer for the IRS?

Mr. Chaffetz tells us he is “absolutely not” letting up on the targeting inquiry and that the IRS scandal is still “top of the list, number one.” He says he recently met with the IRS inspector general and was “stunned at what I heard.” The Oversight Chairman said that we’ll have to wait for an upcoming hearing to learn about new revelations that he said made his “jaw hit the ground.”

We’re delighted to hear it. But talk of raises should wait until the IRS provides a full accounting of who ordered the harassment of President Obama ’s critics.

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February 8, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, February 7, 2015

Malcolm Butler, Not Tom Brady, to Pay Income Tax on Super Bowl MVP Truck

BradyFollowing up on Thursday's post, The Tax Consequences of Tom Brady's Gift of His Super Bowl MVP Truck to Malcolm Butler:  ESPN, Malcolm Butler to Pay Taxes on Prize:

The truck that Chevrolet presented to New England Patriots quarterback Tom Brady as Super Bowl MVP will be given directly by the company to teammate Malcolm Butler instead.

Chevy spokesman Michael Albano said the truck, a loaded Colorado, will be given to the cornerback, who intercepted Russell Wilson's pass on the goal line to seal the Patriots' win in Super Bowl XLIX last Sunday. The event will take place in the Boston area Tuesday, Albano said.

If Brady received the truck himself and gave it to Butler, he would have to count its value -- which Albano said was worth roughly $35,000 -- as income and he would be taxed on it, said Robert Raiola, a CPA who specializes in sports tax management with O'Connor Davies in New Jersey. Brady also might have had to pay a gift tax. U.S. residents can give $5,430,000 worth of gifts in their lifetime before having to pay tax on what they give. It is not known how close Brady might be to that limit.

Now instead of Brady paying income taxes, Butler will have to, according to Raiola. The approximately $35,000 value will now count as income to Butler, and he will pay taxes on that.

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February 7, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

The IRS Scandal, Day 639

IRS Logo 2The Hill, GOP Gives Thumbs Down to IRS Chief:

More than a year into his tenure, some GOP lawmakers say the commissioner has lost his chance to win them over. And while other Republicans, especially in the Senate, give Koskinen higher marks, frustration with the IRS remains at a high boil.

“The IRS has less credibility now than when he took over,” said Rep. Kevin Brady (Texas), a senior Republican on the House Ways and Means Committee. “And I think we will need a new commissioner before that credibility is regained.”

“He’s not up for this job, which is unfortunate because I thought at the beginning he just might be,” Brady added. ...

Koskinen, known as a turnaround artist in government and the corporate world, took over the IRS in December 2013, during the fallout from the Tea Party controversy and the agency’s excessive spending on conferences and video spoofs of “Star Trek” and “Gilligan’s Island.”

The IRS ran into more trouble last June when it said it couldn’t find a number of emails from Lois Lerner, the former IRS official at the center of the Tea Party flap. Federal investigators have since worked to retrieve the missing documents.

“We take the issue seriously. It shouldn’t have ever happened, and it shouldn’t happen again,” Koskinen said.

But he added, “To continue to say we can cut a few hundred million dollars because you had a silly conference and used some inappropriate criteria gets you to a point where you’re failing to recognize the real ramifications.”

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February 7, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, February 6, 2015

Weekly Tax Roundup

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

Call for Papers: Citizenship and Taxation Symposium at Michigan

Michigan Law Logo (2015)Call for Papers:

We invite paper proposals for a Citizenship and Taxation Symposium, to be held at the University of Michigan Law School, Ann Arbor, Michigan, on Friday, October 9, 2015. This symposium will focus on ongoing developments regarding the unique US practice of taxing citizens who live permanently overseas. With the adoption of regimes such as the expatriation tax added by IRC § 877A and the Foreign Account Tax Compliance Act (FATCA), the taxation of non-residents with US person status now has serious and tangible implications. ...

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February 6, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Brian Williams, Helicopters, and Tax

Brian WIlliamsFor those following the revelation that NBC News anchor Brian Williams has been wrongly claiming for over a decade that a helicopter he was riding in was struck by enemy fire in Iraq:  The New Yorker, The Fact-Checked Adventures of Brian Williams, by Andy Borowitz:

The fact-checking department at NBC News has verified that the following anecdotes told by Brian Williams actually happened. ...

4. In May of 2011, the elevator in my building suffered an equipment malfunction en route to my penthouse. I was stuck talking to a tax attorney for seven minutes before I was rescued.

(Hat Tip: Erik Jensen.)

February 6, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

TIGTA: IRS Rehired Hundreds of Former Employees With Performance Issues, Including Failing to File Tax Returns

TIGTA The Treasury Inspector General for Tax Administration yesterday released  Additional Consideration of Prior Conduct and Performance Issues Is Needed When Hiring Former Employees (2015-10-006):

Between January 2010 and September 2013, IRS records show that the IRS hired more than 7,000 former employees (78 percent were temporary or seasonal positions). Most rehired employees do not have performance or conduct issues associated with prior IRS employment. However, TIGTA found that the IRS did hire hundreds of former employees with these types of issues. TIGTA reviewed a random sample from more than 300 employees with significant prior performance or conduct issues who were hired between January 2010 and July 2013 and determined that the IRS appropriately applied OPM suitability standards (e.g., determining whether applicants had prior criminal activity, material false statements, or illegal drug use).  

However, TIGTA identified hundreds of former employees who were hired with prior substantiated conduct or performance issues.  For example, 141 former employees with prior substantiated tax issues, including five who the IRS found had willfully failed to file their Federal tax returns, were hired.  Other substantiated issues from previous IRS employment included unauthorized access to taxpayer information, leave abuse, falsification of official forms, unacceptable performance, misuse of IRS property, and off-duty misconduct.

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February 6, 2015 in Gov't Reports, IRS News, Tax | Permalink | Comments (2)

The IRS Scandal, Day 638

IRS Logo 2The Blaze, GOP, Dems: Let’s Make It Easier to Fire IRS Officials:

Dozens of House members, including three Democrats, have put forward a new bill that would require the IRS to fire anyone who targets people or groups based on their political beliefs.

The Prevent Targeting at the IRS Act is a response to the scandal that broke last year in which IRS officials applied extra scrutiny to conservative groups that were seeking tax-exempt status. That scandal forced President Barack Obama to fire IRS Acting Commissioner Steven Miller in 2013, but Congress has grown increasingly frustrated with the lack of further accountability at the IRS since then.

One big example of this frustration has been the loss of key emails from former IRS employee Lois Lerner, who played a key role in overseeing tax exempt applications. Republicans have said it’s too hard to believe that these emails were conveniently lost, when they might have shown more details about the effort to target conservative groups.

The bill from Rep. Jim Renacci (R-Ohio) would add political targeting to a list of reasons for immediately firing IRS workers. That list, created by a 1998 law, says IRS workers should be fired for reasons such as lying under oath and other actions against taxpayers.

Renacci’s bill would add a new reason to fire IRS workers: “performing, delaying, or failing to perform (or threatening to perform, delay, or fail to perform) any official action (including any audit) with respect to a taxpayer for purpose of extracting personal gain or benefit or for a political purpose.”

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February 6, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, February 5, 2015

Raskolnikov Presents Rational Decisions Under Legal Uncertainty Today at Virginia

Raskolnikov (2015)Alex Raskolnikov (Columbia) presents Rational Decisions Under Legal Uncertainty at Virginia today as part of its Law & Economics Workshop Series:

Law is full of rules that are neither clear nor socially optimal. How do rational actors respond to these rules? What are the implications of these responses? These deceptively simple questions have no answers in law and economics. This paper offers a model of rational decisionmaking under legal uncertainty and explores its implications by combining formal economic analysis with a practical understanding of the market for legal advice. The model produces a number of intuitive, realistic results. It demonstrates why rational actors take uncertain positions even if these positions are highly likely to be detected. It suggests that most of these positions will have a better than a fifty-fifty chance of being sustained. And it allows us to investigate a popular but controversial view that greater legal certainty does not necessarily lead to greater compliance. The model’s analysis both refutes the obvious explanation for this view and offers an alternative one. When detection uncertainty is taken into account, the model confirms that the standard damages multiplier works when legal rules are ambiguous. At the same time, the model raises difficult questions about the meaning of compliance when rules are uncertain, the normative significance of various types of uncertainty, and the challenges of assessing private responses to legal uncertainty outside of the familiar confines of the optimal deterrence theory. ;

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

Morse Presents Safe Harbors, Sure Shipwrecks Today at UCLA

Morse (2015)Susan C. Morse (Texas) presents Safe Harbors, Sure Shipwrecks at UCLA today as part of its Colloquium on Tax Policy and Public Finance hosted by Jason Oh and Alexander Wu:

Safe harbors and sure shipwrecks are rule-standard hybrids that appear throughout statutory, regulatory and case law. Safe harbors guarantee compliance, and also leave open the question of compliance for fact situations not described by the safe harbor. Sure shipwrecks provide a conclusive noncompliance result and also leave open the question of compliance outside the sure shipwreck. Safe harbors and sure shipwrecks produce asymmetric behavioral incentives for persons subject to them. Like bright-line rules, safe harbors encourage behavior to converge from both sides of the line drawn by the safe harbor. This is because of the advantage of a zero chance of liability within the safe harbor. Sure shipwrecks generally encourage convergence only from the noncompliant side of the line. Ex ante versus ex post policy making, overinclusion and underinclusion, interest group influence, and other factors also affect safe harbor and sure shipwreck policy making.

February 5, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Stark Presents Tax Policy in the Super Zips Today at Northwestern

Stark (2014)Kirk Stark (UCLA) presents Tax Policy in the Super Zips at Northwestern today as part of its Tax Colloquium Series hosted by Lawrence Zelenak:

As the distribution of income and wealth has grown more skewed, households have increasingly sorted into income homogenous neighborhoods. The rise of income segregation entails increased fiscal segregation as well, as the operation of federal tax law becomes more differentiated across space. This paper concerns one dimension of the tax law’s disparate geographical impact—i.e., the operation of the federal income tax in the nation’s wealthiest communities, or “Super ZIPs.” Using IRS zip code level data for tax year 2012, the paper examines several key federal income tax characteristics for these zip codes (e.g., AGI, income composition, itemized deductions), comparing these figures to the same data for the nation as a whole as well as select neighboring zip codes on the opposite end of the income distribution. The resulting analysis reveals a stark perspective on income segregation in the United States through the lens of the federal tax system.

February 5, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tax Court: How to Deduct Expenses That Others Paid

Tax Court Logo 2Wall Street Journal, Strange but True: Deduct Expenses That Others Paid:

In a 2010 decision that is worth reviewing this tax season, the U.S. Tax Court concluded that a daughter could deduct medical expenses and real-estate taxes on her Form 1040 even though they were covered by gifts from her mother. The gifts were in the form of direct payments by the mother to the medical service providers and local government entities.

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February 5, 2015 in Legal Education, Tax | Permalink | Comments (1)

NY Times Debate: Can Tax Policy Distinguish the Rich from the Middle Class?

NY Times Room for DebateNew York Times Room for Debate, Can Tax Policy Distinguish the Rich from the Middle Class?:

President Obama’s plan to eliminate the tax breaks for college savings accounts known as 529s, which primarily benefit the 5 percent of households earning more than $200,000, was swiftly shot down as an affront to the middle class. His new budget calls for increased taxes on the wealthy to explicitly address income inequality with benefits for lower- and middle-income families.

How can federal tax policy differentiate between “rich” and the “middle class”?

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

The Tax Consequences of Tom Brady's Gift of His Super Bowl MVP Truck to Malcolm Butler

BradyForbes, IRS Is Coming After Tom Brady's Super Bowl MVP Truck, by Ryan Ellis:

The world champion New England Patriots will celebrate with the city of Boston today in the now customary duck boat parade downtown.  It would be fitting if an IRS agent was waiting for quarterback Tom Brady at the end of the route.

Specifically, he might want to talk about Brady’s new truck.  You know, the 2015 Chevy Colorado he won as Super Bowl MVP. The same truck Brady wants to hand over to Patriots rookie cornerback Malcolm Butler, who won the Super Bowl on a last second interception.

The truck is considered a taxable prize under the Internal Revenue Code, section 74.  It’s taxed at Tom Brady’s marginal income tax rate of 39.6 percent. ... Tom Brady will pay ($34,000 x 39.6 percent) in taxes, or $13,500 in income tax on this prize. ...

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February 5, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (6)

The IRS Scandal, Day 637

IRS Logo 2Bloomberg, IRS Chief: I Don't Want to Be Seen As Influencing 2016:

Rules from the Internal Revenue Service that would limit nonprofit groups' involvement in politics may not be enforced before the 2016 election, IRS Commissioner John Koskinen said Tuesday.

The tax agency's first attempt at those rules—released in November 2013—flopped amid criticism from groups across the political spectrum, which complained that limits on pre-election ads and voter guides would constrain free speech. The IRS withdrew that plan in May 2014 and hasn't offered a new version.

"It's not clear when we're going to be able to get to it," Koskinen told reporters after testifying at the Senate Finance Committee. "My only focus on 2016 is to make sure that whatever we do, it doesn't look like we're trying to influence the 2016 election."

Watching closely are groups organized under section 501(c)(4) of the tax code, such as Republican-leaning Americans for Prosperity and Crossroads Grassroots Policy Strategies. For now, those groups can get involved in politics as long as it isn't their primary activity—and they can do so without disclosing their donors and with relatively little threat of punitive action from the IRS.

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February 5, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, February 4, 2015

Blanchard Presents The Tax Significance of Legal Personality at NYU

BlanchardKimberly Blanchard (Weil, Gotshal & Manges, New York) presented The Tax Significance of Legal Personality: A U.S. View at NYU yesterday as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

Whereas the fiction of legal personality is often used outside the United States to distinguish partnerships from corporations, U.S. tax rules have never made the distinction on that basis. Although the factors employed by the now-withdrawn Kintner regulations to make that distinction were derived from the same legal tradition, those factors were applied only after it was determined that a legal entity, assumed to have legal personality, existed. The eventual abandonment of those factors and their replacement with the check-the-box regime finally eliminated any vestige of this legal fiction from relevance to the U.S. tax classification of entities.

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

Graetz Delivers Delivers Pugh Lecture Today at San Diego on Tax Reform Beyond the Headlines

Graetz (2015)Michael J. Graetz (Columbia) delivers the annual Richard Crawford Pugh Lecture on Tax Law & Policy at San Diego today on Tax Reform Beyond the Headlines:

The United States has traveled a unique tax policy path, avoiding value added taxes (VATs), which have now been adopted by every OECD country and 160 countries worldwide. Moreover, many U.S. consumption tax advocates have insisted on direct personalized taxes that are unlike taxes used anywhere in the world. This article details a tax reform plan that uses revenues from a VAT to substantially reduce and reform our nation’s tax system. The plan would (1) enact a destination-based VAT; (2) use the revenue produced by this VAT to finance an income tax exemption of $100,000 of family income and to lower income tax rates on income above that amount; (3) lower the corporate income tax rate to 15 percent; and (4) protect low and-moderate-income workers from a tax increase through payroll tax credits and expanded refundable child tax credits. This revenue and distributionally neutral plan would stimulate economic growth, free more than 150 million Americans from having to file income tax returns, solve the difficult problems of international income taxation, and remove the temptation for Congress to use tax benefits as if they are solutions to the nation’s pressing social and economic problems.

February 4, 2015 in Colloquia, Tax | Permalink | Comments (0)

Sanchirico Presents International Tax and Ownership Nationality Today at Penn

SanchiricoChris William Sanchirico (Pennsylvania) presents As American as Apple Inc.: International Tax and Ownership Nationality, 68 Tax L. Rev. ___ (2014), at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Chris William Sanchirico and Reed Shuldiner:

The ownership nationality of large US multinational companies plays an implicit but important role in the current debate over how such companies should be taxed. This paper identifies that role and investigates what is actually known about where these companies’ shareholders reside.

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

Fleischer: Obama’s Budget Seeks International Minimum Tax for Corporations

NY Times Dealbook (2013)New York Times Deal Book:  Obama’s Budget Seeks International Minimum Tax for Corporations, by Victor Fleischer (San Diego):

Sometimes, a tax increase saves jobs.

President Obama’s fiscal year 2016 budget introduces a one-time 14 percent tax on approximately $2 trillion of so-called unrepatriated foreign earnings. The tax would raise about $248 billion over the next five years, which would be used to help pay for infrastructure projects and replenish the Highway Trust Fund.

The proposal would also impose a 19 percent tax on future foreign earnings (with an 85 percent credit for any foreign taxes paid), allowing such earnings to then be brought back to the United States with no additional tax due.

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February 4, 2015 in Tax | Permalink | Comments (0)

ABA Tax Section Publishes Winter 2015 Issue of News Quarterly

ABA News QuarterlyThe ABA Tax Section has published 34 News Quarterly No. 2 (Winter 2015):

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February 4, 2015 in ABA Tax Section, Tax | Permalink | Comments (0)

Call for Speakers: CALI Conference at Denver Law School

CALI (2015)CALI has issued a Call for Speakers to law faculty, librarians, and IT staff (April 3 deadline) for its 25th Annual CALI Conference for Law School Computing on  June 18-20, 2015 at the University of Denver Sturm College of Law.  The conference registration fee is reduced to $95 for speakers.

For the 25th Annual Conference for Law School Computing® (aka CALIcon), we wanted a theme that embraced the changes and opportunities in Legal Education. Yes, we are in a crisis, but we are also in the middle of one of the most innovative and experimental periods in legal education history. The freedom and encouragement to change our pedagogies and curricula has been given like never before. Flipped classrooms, experiential learning, incubators, formative assessment - the list goes on and on.

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February 4, 2015 in About This Blog, Conferences, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 636

IRS Logo 2Breitbart, IRS Cover-Up Expands to Justice Department:

In an interview with Bill O’Reilly of Fox News about a year ago, President Obama said that President Richard Nixon was actually more liberal in his policies than Obama is.

But, while comparing their policies, Obama conveniently left out one chilling similarity:  Both presidents used the virtually unbridled power and authority of the Internal Revenue Service (IRS) to target their political opponents. In fact, in many respects Obama’s IRS abuses actually have been much worse than Nixon’s. ...

If the Senate is to confirm Ms. Lynch (and that is a big “if” – see below), it should require the appointment of a special counsel that can begin, finally, to investigate seriously the worst abuse of the IRS by a president in memory.  This is the least the Senate should do because, as I noted with Nixon, a president has resigned for less.

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February 4, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, February 3, 2015

Cohen Presents 'Seg Academies,' Taxes, and Judge Ginsburg Today at Georgetown

Cohen (2015)Stephen Cohen (Georgetown) presents 'Seg Academies,' Taxes, and Judge Ginsburg at Georgetown today as part of its Tax Law and Public Finance Workshop Series:

On the U.S. Court of Appeals for the District of Columbia then-Judge Ruth Bader Ginsburg authored an opinion with profound implications not only for the law of taxation but also for the role of courts in ending racial discrimination in education. The case, Wright v. Regan, involved the intersection of the income tax law and equal protection obligations of federal authorities under the Constitution’s Fifth and Fourteenth Amendments. The issue was whether parents of black schoolchildren had standing to challenge the grant of federal tax-exempt status to racially segregated private schools. In affirming that standing existed, Judge Ginsburg opined that the tax benefits of exempt status constituted significant financial assistance and that the provision of such assistance to racially segregated private schools violated equal protection obligations of the Constitution. Although her decision was unfortunately reversed on appeal by a divided Supreme Court, she provided a persuasive defense of the right of victims of racial discrimination in education to seek redress in the courts and created a benchmark that future Supreme Courts may use to revise a Supreme Court majority decision that appears, at least to this observer, as fundamentally wrong and fundamentally flawed. [The paper is copyrighted by Cambridge University Press and is a chapter in The Legacy of Ruth Bader Ginsburg (Jan. 26, 2015) (Scott Dodson, editor)].

February 3, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)