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Tuesday, May 5, 2015

The IRS Scandal, Day 726

IRS Logo 2Press Release, Judicial Watch Files FOIA Lawsuit on Behalf of Alliance Defending Freedom on IRS Investigations into Churches and Religious Groups:

Alleges Internal Revenue Service is “unlawfully withholding records”

Judicial Watch announced it has filed a lawsuit in the U.S. District Court for the District of Columbia on behalf of the Alliance Defending Freedom (ADF) to obtain the release of documents regarding the Internal Revenue Service’s (IRS) recent decision, following a lawsuit by the Freedom from Religion Foundation, to reevaluate criteria for determining whether churches and other nonprofit organizations can claim tax-exempt status. The IRS also suggested that it may initiate investigations into church activities (Alliance Defending Freedom v. Internal Revenue Service (No. 1:15-cv-00525)). Alliance Defending Freedom is an alliance-building legal organization that advocates for the right of people to freely live out their faith.

Judicial Watch filed the lawsuit after the IRS failed to comply with ADF’s July 22, 2014, Freedom of Information Act (FOIA) request seeking release of the following documents:

  1. All documents related to any existing, proposed, new, or adopted procedures for church tax inquiries or examinations from January 2009 to the present.
  2. All documents related to proposed or adopted changes to Treasury Regulations §301.7611-1 from January 2009 to the present.
  3. All documents related to new IRS policies or procedures referenced in FFRF’s July 17, 2014 press release.

ADF filed the FOIA request after an announcement by the Freedom from Religion Foundation (FFRF) that, in settling a FFRF lawsuit, the IRS had promised to begin looking into specific churches and other groups for potential violations of tax law, and to reevaluate IRS’ criteria for when such evaluations should be executed.

The IRS stalled the release of records for months, most recently promising to produce records by March 31, 2015.

Judicial Watch’s filing states:

As of the date of this complaint, Defendant has failed to: (i) determine whether to comply with the request; (ii) notify Plaintiff of any such determination or the reasons therefor; (iii) advise Plaintiff of the right to appeal any adverse determination; and/or (iv) produce the requested records or otherwise demonstrate that the requested records are exempt from production.

Judicial Watch separately sued for documents about this alleged IRS abuse last year.

In 2012, the FFRF filed a lawsuit alleging that the IRS had routinely ignored its complaints about churches promoting political candidates, issues or proposed legislation. In its complaint, FFRF alleged that 1,500 clergy members violated electioneering restrictions on Sunday, October 7, 2012. The atheist group has specifically cited church teachings against abortion and same-sex marriage as being in violation of the law. It also cited what it termed “blatantly political” full-page ads running in the three Sundays leading up to the presidential elections by the Billy Graham Evangelical Association. But the FFRF abruptly dismissed its IRS lawsuit after a church, represented by the Becket Fund for Religious Liberty, intervened in the lawsuit to challenge the IRS’s alleged authority to “revoke a house of worship’s tax-exempt status, and levy fines against churches and individual leaders, when religious leaders are deemed to say things that the IRS does not allow.” Alliance Defending Freedom and other religious rights organizations have challenged directly the notion that the federal government can restrict the speech of pastors.

In July 2014, the IRS announced that, according to the terms of an agreement reached with the FFRF, it had been monitoring churches and other houses of worship for electioneering and other political activity. According to June 27, 2014, IRS letter to the Justice Department, the IRS has targeted 99 churches it said merited “high priority examination” for allegedly illegal electioneering activities. This church-targeting was determined by an IRS “Political Activities Referral Committee.”

The Wisconsin-based FFRF, which describes itself as “an effective state/church watchdog and voice for … atheism, agnosticism, skepticism,” trumpets the IRS agreement at issue as an “IRS Victory!” on its website homepage. Another victory touted on the atheist group’s homepage is a purported success entitled, “FFRF erases bible quotes from Mo. school’s whiteboard.”

“The IRS has no business threatening churches on behalf of the anti-religious crusaders at Freedom from Religion Foundation,” said ADF Litigation Counsel Christiana Holcomb. “The IRS must come clean, be accountable to the American people, and reveal the details of the secret deal it cut with the atheist group. The IRS pattern of unlawfully using its power to target and punish ideological opponents and hiding information that Americans have a right to know must end immediately.”

“It is an honor for Judicial Watch to represent Alliance Defending Freedom, which is so effective as a protector of the First Amendment, which recognizes the truth of God-given rights of Americans to both freely exercise their religion and participate in politics,” said Judicial Watch President Tom Fitton. “The IRS is using a lot of energy to cover-up details of its illicit targeting of churches. Violating FOIA law comes at great taxpayer expense.”

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May 5, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, May 4, 2015

Thomas Reviews Avi-Yonah's Corporate Taxation and Corporate Social Responsibility

Jotwell Kathleen DeLaney Thomas (North Carolina), Do Corporate Managers Have a Duty to Avoid Taxes? (Jotwell) (reviewing Reuven S. Avi-Yonah (Michigan), Just Say No: Corporate Taxation and Corporate Social Responsibility, 12 NYU J. L. & Bus. __ (2015):

The recent wave of corporate inversion transactions, in which domestic companies essentially move their headquarters abroad to lower their U.S. tax bill, is just the latest in a decades-long trend of aggressive tax avoidance behavior by corporations. From the government’s perspective, inversions and other tax avoidance strategies erode the U.S. tax base and impose a costly enforcement challenge on Treasury and the IRS. But from the perspective of corporate managers, aggressive tax planning may simply be part of the corporation’s duty to maximize shareholder value. Reuven Avi-Yonah questions this latter proposition in Just Say No: Corporate Taxation and Corporation Social Responsibility. He offers a compelling argument that corporate managerial duties are not hopelessly at odds with the goal of promoting better corporate tax compliance.

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

President Obama Nominates Elizabeth Ann Copeland To Be U.S. Tax Court Judge

CopelandWhite House Press Release (May 1, 2015):

Today, President Barack Obama announced his intent to nominate Elizabeth Ann Copeland as a Judge to the United States Tax Court. ...

Elizabeth Ann Copeland, Nominee for Judge, United States Tax Court
Elizabeth Ann Copeland is a Partner in the Tax Practice Group of Strasburger & Price, LLP in San Antonio, Texas, where she has practiced law since 2012.  She practiced with Oppenheimer, Blend, Harrison & Tate, Inc. from 1993 to 2012 and was named as Shareholder in 2000.  Ms. Copeland handles all matters pertaining to Federal income taxation, including planning and tax controversies, and she is also experienced in dealing with the Internal Revenue Service at the administrative appeals level and in litigation.  Ms. Copeland has been Board Certified in Tax Law by the Texas Board of Legal Specialization since 2002. 

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May 4, 2015 in Tax | Permalink | Comments (1)

Covey Receives Inaugural RPTE Award

CoveyPress Release, ‘Legend’ Richard Covey Recipient of First RPTE Award at Spring Symposia:

“I thank you very much,” a humble Richard B. Covey said upon receiving the inaugural 2015 American Bar Association Section of Real Property, Trust and Estate Award. Covey was presented with the award during the RPTE Spring Symposia, April 30 in Washington, D.C.

“It’s been an absolute joy,” Covey said of his long and distinguished career advising clients on trusts and estate planning matters. “Now at age 85, almost 86 … (working) keeps me happy.”

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

Taxpayer Standing In International Tax Disputes

Limor Riza (Carmel Academic Center, Haifa, Israel), Taxpayers’ Lack of Standing in International Tax Dispute Resolutions: An Analysis Based on the Hybrid Norms of International Taxation, 34 Pace L. Rev. 1064 (2014):

This paper examines whether a taxpayer should have “standing” in international dispute resolutions. To answer this question the primary task is to identify the nature of international taxation. In other words, this paper discusses how to classify the field of international taxation. Is it part of public international law, private international law (i.e., conflict of laws), national (domestic) law, or is it a hybrid field that requires specific attention? Making this distinction is vital for resolving disputes when a taxpayer is taxed twice for cross-border transactions in cases where the double tax convention is unclear and both contracting states claim full or partial tax on accrued income.

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

IRS Seeks Grant Applications for Funding for Low Income Taxpayer Clinics

IRS Logo 2The IRS announced on Friday (IR-2015-75) that it is accepting grant applications for Low Income Taxpayer Clinics for the 2016 grant cycle (Jan. 1 - Dec. 31, 2016). Applications will be accepted through June 1, 2015. The LITC program awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand, or maintain a low income taxpayer clinic. 

The LITC program funds organizations to represent low income taxpayers who have a tax controversy with the IRS and to educate individuals who speak English as a second language (ESL) about their rights and responsibilities as U.S. taxpayers. An LITC must provide services for free or for no more than a nominal fee.

Beginning in grant year 2016, the LITC Program will no longer award discrete funding amounts to organizations to operate separate Controversy and ESL programs. Instead, all LITC grant recipients will be required to operate unified programs that provide direct representation in tax controversies with the IRS on behalf of low income taxpayers and use education and outreach efforts to make representation and consultation services available to ESL taxpayers.

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

Tax Policy And The Invisible Hand Of God

We Are Better Than This (2014)Huffington Post:  The Invisible Hand of God, by Jim Burklo (Associate Dean of Religious Life, USC):

The United States has the highest poverty rate, the greatest income inequality, and the greatest wealth inequality of any major developed economy in the world. Edward Kleinbard, We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014) (p 98).

America ought to be better than these statistics imply. It's time for us to live up to the moral values espoused so long ago by Adam Smith. The real Adam Smith, that is.

I've just finished a dense but important and surprisingly readable book by a University of Southern California professor of tax law, Ed Kleinbard. I had the privilege of enjoying a vegetarian lunch with him last week at USC's Good Karma Cafe. He was eager for me to do what I could in the faith community to spread the message of his recent book. And I'm eager to do so, because there is good theology lurking amid the wonky details of tax and spending policy in We Are Better Than This.

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May 4, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (3)

The IRS Scandal, Day 725

IRS Logo 2Robert W. Wood (Forbes), IRS Approved Clinton Foundation And Scientology, But Targeted Tea Party:

Will there be an IRS investigation of the Clinton Foundation? Even suggesting it sounds laughable, for few can stand up to the Clintons, let alone to a Democratic administration. Besides, the IRS Exempt Organizations Division used to be run by Lois Lerner, and it isn’t clear how much has changed. In fact, we may never get to the bottom of the Tea Party targeting scandal. It almost looks as though the IRS will attack conservative groups but is silent on the Clinton Foundation. Heck, even Scientology got its IRS church status.

When it was revealed in 2013 that the IRS targeted conservative groups, the IRS Commissioner had to resign, but that was about it. Lois Lerner was at the center of the scandal but didn’t suffer any consequences. In fact, she got $129,000 in cash bonuses and retired with a full government pension. She evidently did a good job targeting at the Federal Election Commission, and then she moved over seamlessly to the IRS to do the same. Ms. Lerner is now out of the prosecutor’s eye with no criminal charges, nice bonuses, and a nice retirement. When she broke her silence to Politico, she said she did nothing wrong, claiming that she was the victim.

Given Mrs. Clinton’s email proclivities,Mrs. Clinton’s emails are even harder to find than Lois Lerner’s. And the Treasury Inspector General has just found 6,400 missing Lois Lerner emails. We surely will not see the IRS looking at the enormously wealthy Clinton Foundation, even though several watchdog groups suggest there’s something fishy there. First is the politics, since the tracking of who gives money and who needs something from Hillary’s State Department tracks closely.

In fact, a whopping 181 donors lobbied the State Department while Mrs. Clinton was there. Coincidence? Even apart from the political pay-for-play fears we may have, just look at the numbers. Charity Navigator says that the Clinton Foundation took in nearly $140 million in donations from individuals and groups. Boy, that must do a lot of good works, right?

Not so fast. It turns out that only approximately $9 million was paid out in direct aid. More than $130 million went to so-called ‘administrative and other expenses.’ Even if that is entirely on the up and up, it sure looks bad. If Clinton family members or friends end up with much of it, there could be a private inurement problem. Charities are supposed to benefit charitable goals, not line private pockets. ...

Perhaps there are undeleted emails about this on that private email server. The Foundation downplays the errors, noting that the money was included in the overall revenue figures reported to the IRS. Maybe, but the amendments are awkward, highlighting the Foundation’s continued receipt of foreign money while Hillary Clinton was Secretary of State. Besides, sometimes the IRS views amended tax returns as too little, too late. Lucky for Mrs. Clinton, as President Obama told Fox News, there is ’not even a smidgen of corruption’ at the IRS.

Even thinking the best of all of this, the Clinton Foundation’s administrative costs seem awfully high. Of course, we now know that the Bill, Hillary and Chelsea Clinton Foundation will be amending multiple years of tax returns. Upon becoming Secretary of State, Mrs. Clinton promised that the Foundation would stop accepting donations from foreign governments. It turns out there were exceptions, and that the Foundation’s tax filings with the IRS were less than transparent.

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

TaxProf Blog Weekend Roundup

Sunday, May 3, 2015

The Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and new papers debuting on the list at #4 and #5:

  1. [247 Downloads]  Can Sharing Be Taxed?, by Shu-Yi Oei (Tulane) & Diane M. Ring (Boston College)
  2. [199 Downloads]  Using the 'Smart Return' to Reduce Tax Evasion, by Joseph Bankman (Stanford), Clifford Nass (Stanford) & Joel Slemrod (Michigan)
  3. [188 Downloads]  The Historical Origins of the Debt-Equity Distinction, by Camden Hutchison (Wisconsin)
  4. [171 Downloads]  Scholarship Against Desire, by Shari Motro (Richmond)
  5. [126 Downloads]  Fairness and Taxation in a Globalized World, by Sigrid Hemels (Eramus)

May 3, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 724

IRS Logo 2Robert W. Wood (Forbes), IRS $20 Million Response To Latest Pile of Lois Lerner Emails Is Worrisome:

Lois Lerner’s latest lost and found hoard of 6,400 newly discovered emails may end up not showing much. The IRS didn’t find them. A watchdog did. Maybe they will underscore the targeting and Ms. Lerner’s political chops honed at the Federal Election Commission. But at least the Treasury Inspector General found the 6,400 additional emails. A little more than 10% (650) are tied to 2010 and 2011. The rest date to 2012.

But the IRS statement in response to this latest revelation is, well, a little disturbing:

We welcome the Inspector General’s recovery of these Lois Lerner emails. This is an encouraging development that will help resolve remaining questions and dispel uncertainty surrounding the emails.

The IRS has been committed to cooperating fully with the investigations. We understand that, during the course of the past 10 months, the Inspector General found about 650 emails from the period affected by the hard-drive crash. It’s important to note that last summer, the IRS produced 24,000 emails from that period.

The IRS will continue to cooperate with the Inspector General and the congressional committees to complete work in this area, and we look forward to the results to determine what additional steps the IRS can take to ensure that we continue to improve our processes.

It’s important to note that the IRS has produced to Congress more than 1.3 million pages of documents related to the investigation, including more than 147,000 emails. Total estimated cost of just the IRS portion is at least $20 million.

The IRS has not exactly seamlessly cooperated, and Mr. Koskinen who runs the IRS has had a prickly relationship with investigators and with Congress. He has sometimes appeared to be annoyed that he is being asked any questions at all. Of course, the IRS said in 2014 (a little late?) that Ms. Lerner’s computer crashed in 2011.

Oops, no one’s fault that we lost a few years worth of emails. We kept being reminded how hard the IRS looked and how terribly expensive it was that the IRS had to do this. Yet the inspector general found about 35,000 emails from recycled back-up tapes. It then turned out that the key IRS IT people weren’t even asked to look at back up tapes. Isn’t this a little insulting? ...

A spokesman for Senate Finance Committee Chairman Orrin Hatch (R-Utah) said the committee hopes the new emails will bring the panel closer to releasing the findings of its IRS investigation. Wouldn’t some answers be nice?

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

Saturday, May 2, 2015

The IRS Scandal, Day 723

Friday, May 1, 2015

Barry Presents Tax Regulation, Transportation Innovation, and the Sharing Economy Today at Georgia

BarryJordan M. Barry (San Diego) presents Tax Regulation, Transportation Innovation, and the Sharing Economy, 82 U. Chi. L. Rev. Dialogue 69 (2015) (with Paul L. Caron (Pepperdine)) at the 6th Annual Meeting of the Association for Law, Property & Society (ALPS) today at the University of Georgia School of Law:

Many emerging companies’ business models center on helping consumers to share assets in new ways. This “sharing economy” has already experienced tremendous growth and attracted considerable investment capital and talent. Yet, as is often the case with economic innovations, existing regulatory structures have hindered the growth of the sharing economy, reducing its popularity and slowing its development.

This Article explores the tension between innovation and regulation, both in general and in a specific context: the intersection of the transportation sector of the sharing economy and the qualified transportation fringe benefit rules of Internal Revenue Code Section 132.

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

Weekly Tax Roundup

Weekly SSRN Tax Roundup

Weekly Student Tax Notes Roundup

May 1, 2015 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Ohio Supreme Court Strikes Down Cleveland’s ‘Jock Tax’

Jock TaxWall Street Journal, Ohio High Court Strikes Down Cleveland’s ‘Jock Tax’:

Ohio’s highest court on Thursday struck down Cleveland’s so-called “jock tax,” ruling that the city was excessively taxing visiting professional athletes using an illegal method to calculate their bills. ...

Mr. Hillenmeyer, a former Chicago Bears linebacker who retired in 2010, played one game a year in Cleveland — over a 20-game season — between 2004 and 2006. Cleveland applied its income tax to 5% (1/20) of his earnings.

The city taxed Mr. Saturday, a former center for the Indianapolis Colts, for a single game in Cleveland in 2008. In his case, he never stepped foot in the city but missed that game due to an injury. He owed money anyway because the city’s regulation applied the tax to any game in Cleveland “in which the athlete was excused from playing because of injury or illness.”

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May 1, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (4)

Former NFL Star Plaxico Burress Shoots Himself In Foot, Drops Tax Payment Ball

BurressFormer NFL star receiver, Plaxico Burress, who famously served time in prison after accidentally shooting himself in the leg in a nightclub in 2008, has been indicted in New Jersey on one count of issuing a bad check or electronic funds transfer and one count of willful failure to pay state tax in the amount of $47,903. The charges carry maximum sentences of five years in prison and a $15,000 fine. 

May 1, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

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May 1, 2015 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

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May 1, 2015 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 722

IRS Logo 2Treasury Inspector General for Tax Administration, Status of Actions Taken to Improve the Processing of Tax‑Exempt Applications Involving Political Campaign Intervention:

In a prior audit, TIGTA found that ineffective management resulted in 1) inappropriate criteria being used to identify for review organizations applying for tax-exempt status based on names and policy positions instead of indications of political campaign intervention, 2) substantially delayed processing of certain applications, and 3) unnecessary information requests being issued.  Recommendations from the prior audit were made to help ensure that applications for tax-exempt status are processed in a fair, impartial, and timely manner.

The overall objective of this audit was to assess the IRS’s actions in response to TIGTA’s recommendations to improve the identification and processing of applications for tax-exempt status involving political campaign intervention.

The IRS has taken significant actions to eliminate the selection of potential political cases based on names and policy positions, expedite processing of Internal Revenue Code (I.R.C.) Section (§) 501(c)(4) social welfare organization applications, and eliminate unnecessary information requests. 

First, the IRS eliminated the use of Be On the Look Out (BOLO) listings, which TIGTA determined had contained inappropriate criteria regarding political advocacy cases.  TIGTA conducted interviews with a random sample of employees, who confirmed that BOLOs or similar listings were no longer being used.

Second, the Exempt Organizations function completed processing for 149 of the 160 applications for tax-exempt status that, as of December 2012, had been open for lengthy periods.  To expedite processing of I.R.C. § 501(c)(4) social welfare applications, the IRS developed an optional expedited self-certification process.  This expedited process is not available to other types of organizations, e.g., labor organizations and business leagues, with similar political campaign intervention limitations. 

Third, the IRS has developed preapproved questions and has instituted a quality review process to provide better assurance that unnecessary information requests are not sent to applicants. 

The Department of the Treasury is revising draft guidance to address how to measure the “primary activity” of social welfare organizations.  Until this guidance is finalized, the IRS does not have a clearly defined test for determining whether an organization’s request for exemption as a social welfare organization should be approved.  As a result, for those applicants not choosing the optional expedited process, the IRS continues to use a subjective facts and circumstances process.

Bloomberg, IRS May Be Trying to Stop Tax Exemption of Karl Rove’s Crossroads GPS:

The IRS may be trying to block the tax exemption of one of the largest politically active nonprofit groups, Crossroads Grassroots Policy Strategies, an organization founded by Republican strategist Karl Rove.

The oblique disclosure can be found between the lines of an inspector general’s report released on Thursday, which said that 149 of 160 cases that had been stalled have been resolved. Of the other 11, six are in litigation with the IRS -- which Crossroads isn’t -- and the other five have received proposed denial letters or are appealing.

That suggests that the Internal Revenue Service has sent Crossroads a denial letter. Crossroads is one of the most politically involved nonprofit groups, and its bid for tax exemption is being closely watched by campaign-finance lawyers. ...

Crossroads applied for its tax exemption in September 2010.

Documents previously released by the House Ways and Means Committee showed that the IRS was drafting a denial letter to Crossroads in 2013, just before news broke of the controversy of the agency’s treatment of conservative groups.

Those documents list Crossroads among Tea Party groups that were being held up by the IRS and show that Lerner, the former IRS director of exempt organizations, was directly involved in asking about the group’s application.

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

Thursday, April 30, 2015

Brown Discusses Tax Fairness and the Racial Wealth Gap Today in Washington, D.C.

BannerDorothy Brown (Vice Provost, Emory) speaks on a panel on What's the Code Got to Do with It? Tax Fairness and the Racial Wealth Gap at the Color of Wealth Summit: The United States of Opportunity today at the Congressional Auditorium in the U.S. Capitol Visitor Center in Washington, D.C. (Program):

Out of the world’s top 22 industrialized countries, the United States has the highest level of wealth inequality after accounting for taxes and transfers. Despite redistributive measures such as the Earned Income Tax Credit, the U.S. tax code and other transfers do less to address wealth inequality than has been commonly understood.

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

Davis: Mapping the Families of the Internal Revenue Code

Tessa R. Davis (South Carolina), Mapping the Families of the Internal Revenue Code, 22 Va. J. Soc. Pol'y & L. 179 (2015):

The Tax Code contains not one, but two conceptions of family. Existing scholarship does not address this puzzle but instead takes one of two views on the family—either the family is a tool for avoiding taxes or it is a source of discrimination. Current scholars, motivated by the discrimination concern, reject the relevance of kinship to tax and argue for an increased focus on the individual. This Article takes a different approach. Utilizing the “status” and “contract” distinctions familiar to family law scholars, it explains the puzzle of the multiple families in the Code, identifying the two families of the Code and their respective functions.

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

George Soros May Face a Monster $6.7 Billion U.S. Tax Bill

Soros 2Bloomberg, George Soros May Face a Monster Tax Bill:

George Soros likes to say the rich should pay more taxes. A substantial part of his wealth, though, comes from delaying them. While building a record as one of the world’s greatest investors, the 84-year-old billionaire used a loophole that allowed him to defer taxes on fees paid by clients and reinvest them in his fund, where they continued to grow tax-free. At the end of 2013, Soros—through Soros Fund Management—had amassed $13.3 billion through the use of deferrals, according to Irish regulatory filings by Soros.

Congress closed the loophole in 2008 and ordered hedge fund managers who used it to pay the accumulated taxes by 2017. A New York-based money manager such as Soros would be subject to a federal rate of 39.6 percent, combined state and city levies totaling 12 percent, and an additional 3.8 percent tax on investment income to pay for Obamacare, according to Andrew Needham, a tax partner at Cravath, Swaine & Moore. Applying those rates to Soros’s deferred income would create a tax bill of $6.7 billion. That calculation is based on publicly available information such as the Irish regulatory filings, which provide only a partial glimpse into Soros’s finances. ....

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April 30, 2015 in Tax | Permalink | Comments (3)

Nussim & Tabbach: Tax-Loss Mechanisms

Jacob Nussim (Bar-Ilan University) & Avraham Tabbach (Tel-Aviv University), Tax-Loss Mechanisms, 81 U. Chi. L. Rev. 1509 (2014):

Business losses are a persistent reality and far from an insignificant economic phenomenon. They are disruptive for businesses and burdensome for tax authorities. This Article builds a theory of tax-loss-mechanism design and discusses its normative implications. Although income-tax laws in the United States and else-where conclusively adopt a loss-offset mechanism, economists often advocate that losses be governed by a tax-refundability regime. Tax scholars, on the other hand, largely ignore the question of the desirable tax-loss mechanism.

This Article constructs and applies an economic framework for analyzing three prominent tax mechanisms for the treatment of losses: offset, refundability, and transferability. The economic theory that we develop yields several new insights and results. We show that all three tax mechanisms diverge primarily by legal design choices rather than by any inherent feature, and therefore, contrary to the common understanding in the literature, any normative choice can be imple-mented through any of the three, setting aside implementation costs. The commonly perceived differences among these tax mechanisms are erroneously grounded in observations of existing tax rules; this has prevented scholars from envisioning a redesign according to policy preferences.

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

Blum: Migrants With Retirement Plans

Florida Tax ReviewCynthia A. Blum (Rutgers-Newark), Migrants with Retirement Plans: The Challenge of Harmonizing Tax Rules, 17 Fla. Tax Rev. 1 (2015):

Many countries seek to encourage retirement savings for their residents by offering tax preferences for privately-operated "qualified retirement plans." These tax preferences generally take the form of delaying taxation of contributions made to the plan and of the earnings thereon until funds are withdrawn by the participant during retirement. In a few cases, countries instead tax contributions immediately but forgo further tax. Because these rules encompass the tax treatment to be accorded throughout an individual’s lifetime, the individual is able to plan for retirement with some assurance of the eventual tax consequences. However, in recent years, it has become increasingly likely that an individual who has accumulated qualified retirement savings in one country will later migrate and retire in another country and, as a result, face unexpected tax consequences.

This Article examines (1) the tax rules commonly applied by the country of emigration in order to maintain its ability to tax a departing participant in a qualified plan, and (2) the tax rules commonly applied by the country of immigration when its new resident has accumulated savings in another country’s qualified plan. The Article then analyzes how the interaction of the two countries’ rules may lead to inappropriate tax consequences and administrative burdens. In addition, it considers the various ways that bilateral treaties and model tax treaties seek to ameliorate these concerns.

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

Fleming, Peroni & Shay: Formulary Apportionment in the U.S.

J. Clifton Fleming (BYU), Robert J. Peroni (Texas) & Stephen E. Shay (Harvard), Formulary Apportionment in the U.S. International Income Tax System: Putting Lipstick on a Pig?, 36 Mich. J. Int'l L. 1 (2015):

Perhaps surprisingly, this Article has shown that the debate over formulary apportionment is little more than an alternative path to the larger debate over worldwide taxation versus territorial taxation. The present U.S. international income tax regime for U.S. MNEs is an implicit, overly-generous, and incoherent quasi-territorial system that relies on residence rules, source rules, and the arm’s-length approach to apportion international business profits between domestic income that is currently taxable by the United States and foreign income that is effectively exempt, or nearly so, from U.S. taxation because of deferral and cross-crediting. This version of territoriality is quite ugly because it is highly complex and it imposes only modest restraints on the ability of U.S. MNEs to shift income out of the U.S. tax base to low-tax foreign countries.

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

The IRS Scandal, Day 721

Wednesday, April 29, 2015

Ajay Mehrotra Named Director of American Bar Foundation

MehrotraAmerican Bar Foundation Names New Director:

The American Bar Foundation has announced that Ajay K. Mehrotra, Associate Dean for Research and Professor of Law at Indiana University’s Maurer School of Law, has been appointed Director of the American Bar Foundation, effective September 1, 2015. He is also appointed a full Research Professor at the ABF and will become a professor of law at Northwestern University School of Law. Mehrotra succeeds Robert L. Nelson, Director and MacCrate Chair in the Legal Profession and Professor of Sociology and Law at Northwestern University, who will return to full-time research and teaching.

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April 29, 2015 in Legal Education, Tax, Tax Prof Moves, Tax Profs | Permalink | Comments (1)

Tax Compliance As A Wicked System

WickedJ. T. Manhire (U.S. Treasury Department), Tax Compliance as a Wicked System:

This paper proposes a new typology and framework for tax compliance systems. Traditionally-competing approaches such as deterrence theory, behaviorist theory, and game theoretic models taken together suggest that tax compliance is perhaps a new type of system — a “wicked system” — that is only partially comprehensible by understanding the traditional theories alone. If correct, previously competing theories become simply different limiting cases of the same underlying “wicked system.” The paper concludes with a discussion of the framework’s limitations and presents initial solutions and challenges for future work.

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

Why the NFL Gave Up Its Nonprofit Status: To Escape Scrutiny

NFLVox, Why the NFL Just Gave Up Its Nonprofit Status: To Escape Scrutiny:

For years, the NFL's tax-exempt status has been the subject of scrutiny and ridicule. To many people, the fact that a league headed by a commissioner making $44 million a year was categorized as a nonprofit was absurd.

On Tuesday, Richard Rubin at Bloomberg reports, the NFL has finally decided to shed its tax-exempt status. As a result, it will pay an estimated $10 million or so per year in taxes.

But it's important to put this number in the proper context: the league's teams pull in about $9.5 billion per year, nearly a thousand times as much. And since 2000, US taxpayers have spent an estimated $3.9 billion on stadiums for these teams.

The NFL's decision to give up its tax-exempt status isn't some noble recognition of the tax burden it's unfairly been shirking. It's a calculated move to pay a relatively small fee to avoid scrutiny and preempt possible Congressional action.

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April 29, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

Call for Papers: Global Conference on Environmental Taxation

16th

The 16th Global Conference on Environmental Taxation to be held in Sydney, Australia  on September 23-26, 2015 has issued a Call for Papers:

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April 29, 2015 in Conferences, Scholarship, Tax, Tax Faculty Metro Area Rankings | Permalink | Comments (0)

The IRS Scandal, Day 720

IRS Logo 2Press Release, Statement By Senator John McCain on False Reports on IRS Targeting:

A recent press release by Judicial Watch sparked a series of online reports falsely claiming that my office was somehow involved in the IRS’s targeting of conservative groups – reports that are demonstrably untrue and totally contradicted by my all of my actions over the past several years on this issue.

“These reports ignore the fact that I released a 37-page dissenting report last September refuting the Democrats’ Majority Permanent Subcommittee on Investigations (PSI) report claiming the IRS showed no bias against conservative groups. Media coverage at the time noted that I was in total disagreement with Senate Democrats on the issue of whether the IRS targeted conservative groups. ...

Like so many Americans, I was shocked and appalled by revelations that the IRS inappropriately singled out conservative groups for scrutiny, and that our tax system was used to target political opponents. “As Ranking Member of the Senate’s Permanent Subcommittee on Investigations, I devoted significant time and resources to help get to the bottom of this disturbing abuse of power by the IRS. Any article suggesting otherwise is simply wrong, and ignores the facts of my actions over the last several years.

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April 29, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, April 28, 2015

Tom Brennan Leaves Northwestern For Harvard

BrennanThomas Brennan (Northwestern) has accepted a tenured lateral offer from Harvard, effective July 2015:

Also trained as a mathematician, Brennan focuses his research on the use of finance and economics to analyze and inform tax policy, as well as the use of empirical methods to investigate the effects of tax laws and the strategic behavior of taxpayers. In addition, he analyzes how finance and economics can inform other areas of the law, with a recent focus on regulations designed to limit risk, and he applies mathematical methods to gain insight into the theory of finance.

“Tom is a triple-threat: his detailed knowledge of contemporary finance and tax, his talent for integrating doctrinal and empirical studies, and his teaching each reveal meticulous and rigorous work and imagination,” said Martha Minow, dean of Harvard Law School. “His rigorous, empirical study of a wide range of subjects – from tax law to judicial decisions – yields important analyses of policy effectiveness and powerful lessons for law students, practitioners, policymakers, and scholars. Plus his generosity and kindness pervade his teaching and his collegiality. We are thrilled to welcome this wonderful alum to our faculty.”

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April 28, 2015 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

Schizer Presents Energy Tax Expenditures Today at NYU

Schizer (2016)David M. Schizer (Columbia) presents Energy Tax Expenditures: Worthy Goals, Competing Priorities, and Flawed Institutional Design at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

Part I outlines the environmental, national security, and economic goals of energy tax expenditures.  Part II discusses how empirical uncertainty and heterogeneity complicate efforts to pursue these objectives.  Part III considers challenges that arise because of conflicts in our goals.  Part IV canvasses the political economy advantages of subsidies over Pigouvian taxes, and offers suggestions about how to make Pigouvian taxes more politically palatable.  Part V surveys five institutional design challenges that arise under currently law – most of which are more acute with subsidies than with Pigouvian taxes – and offers suggestions about how to mitigate them.  Part VI is the conclusion.

April 28, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Symposium: The 100th Anniversary of the Income Tax

NYLSSymposium, The 100th Anniversary of the Revenue Act of 1913: Marking a Century of Income Tax Law in the United States, 59 N.Y.L. Sch. L. Rev. 261-420 (2014):

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April 28, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Are PILOTs Property Taxes for Nonprofits?

Fan Fei (Michigan), James R. Hines Jr. (Michigan) & Jill R. Horwitz (UCLA), Are PILOTs Property Taxes for Nonprofits?:

Nonprofit charitable organizations are exempt from most taxes, including local property taxes, but U.S. cities and towns increasingly request that nonprofits make payments in lieu of taxes (known as PILOTs). Strictly speaking, PILOTs are voluntary, though nonprofits may feel pressure to make them, particularly in high-tax communities. Evidence from Massachusetts indicates that PILOT rates, measured as ratios of PILOTs to the value of local tax-exempt property, are higher in towns with higher property tax rates: a one percent higher property tax rate is associated with a 0.2 percent higher PILOT rate. PILOTs appear to discourage nonprofit activity: a one percent higher PILOT rate is associated with 0.8 percent reduced real property ownership by local nonprofits, 0.2 percent reduced total assets, and 0.2 percent lower revenues of local nonprofits. These patterns are consistent with voluntary PILOTs acting in a manner similar to low-rate, compulsory real estate taxes.

April 28, 2015 in Scholarship, Tax | Permalink | Comments (2)

IRS Seeks To Tax $50k Raised From GoFundMe For Cancer Treatment For Car Crash Victim

Go Fund MeKETV, IRS: Cancer Survivor Owes $19,000 in Taxes From Donations:

Two years after surviving a terrible car crash and battling cancer, Casey Charf never imagined she’d be fighting a new battle with the IRS.

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April 28, 2015 in IRS News, Tax | Permalink | Comments (2)

Johnston: What Would Jesus Do About Tax Policy?

CaptureAl Jazeera:  What Would Jesus Do About Tax Policy?, by David Cay Johnston (Syracuse):

After years of study and debate, the ninth-largest Protestant denomination, the Presbyterian Church USA, has come out with a detailed report that ties the religious duty of believers and government tax policy [Tax Justice: A Christian Response to a Second Gilded Age].

[W]ho can organize people to push for changes in government policy that will reduce poverty and extreme inequality?

The University of Chicago Divinity School’s Myriam Renaud provided an answer recently:

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April 28, 2015 in Tax | Permalink | Comments (1)

The IRS Scandal, Day 719

IRS Logo 2Examiner, IRS Attacks Conservative Groups But Silent on Clinton Foundation:

In the midst of the news media coverage of the Hillary Clinton emails, her private Internet server, her thumbing her nose at government regulations and allegations that her and her husband's "charity" was involved in shady deals, no one except for public-interest groups is asking about an IRS investigation. There are several allegations that the Clinton Foundation is nothing more than a sophisticated and elaborate political slush fund, according to news stories on Monday.

More than one group that was targeted by the IRS for daring to be conservative believes that if there ever was an organization that should be investigated and audited by the IRS it's the Clinton Foundation. The Clintons possess a talent for making incriminating documents disappear and Americans are warned to not hold their breath waiting for the IRS or the Justice Department investigate the Clintons and their arguably corrupt foundation.

However, the Clintons' home state of Arkansas has a young attorney general who does possesses the authority to launch a criminal investigation because the foundation claims the state of Arkansas as its headquarters. Attorney General Leslie Rutledge will likely be trashed by the Clinton machine

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April 28, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Monday, April 27, 2015

NY Times: Inversion Schadenfreude -- By Moving Overseas To Save Taxes, Mylan And Perrigo Lost Protections They Could Deploy To Fend Off Teva's Hostile Takeover

NY Times Dealbook (2013)New York Times Deal Book:  The Unintended Twist of Tax Inversions, by Steven Davidoff Solomon (UC-Berkeley):

Teva’s unsolicited $40 billion bid for the drug maker Mylan and Mylan’s own unsolicited offer for the rival Perrigo are sweet revenge for the United States taxpayer.

The reason is their flight from the United States in tax inversions has made both more exposed to hostile takeovers. Their executives may now rue the day they left the United States simply to save a few dollars in taxes.

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April 27, 2015 in Tax | Permalink | Comments (3)

Ryan Receives St. Louis Faculty Scholarship Award

RyanCongratulations to Kerry Ryan (St. Louis), who received the St. Louis Law School Faculty Award For Exceptional Legal Scholarship today for her article, EITC as Income (In)Stability?, 14 Fla Tax Rev. 583 (2014):

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April 27, 2015 in Legal Education, Scholarship, Tax | Permalink | Comments (0)

NY Times: Investors Race To Do Like-Kind Exchanges Of Art As Obama Proposes Closing Section 1031 Loophole

SunNew York Times, Tax Break Used by Investors in Flipping Art Faces Scrutiny:

Introduced in the 1920s to ease the tax burden of farmers who wanted to swap property, it soon became a tool for real estate investors flipping, say, office buildings for shopping malls.

Now, this little-known provision in the tax code, known as a like-kind exchange, has become a popular tactic for a new niche of investors: buyers of high-end art who want to put off — and sometimes completely avoid — federal taxes when upgrading their Diebenkorns for Rothkos. ..

The exchanges have become prevalent enough, and the cost to the government significant enough, that the Obama administration is seeking to eliminate them, a prospect causing no shortage of alarm in sectors of the art world. ...

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April 27, 2015 in Tax | Permalink | Comments (3)

NY Times: Finland Imposes Progressive Fines Based On Income; Millionaire Receives $58,000 Speeding Ticket

FinlandNew York Times, Speeding in Finland Can Cost a Fortune, If You Already Have One:

Reima Kuisla, a Finnish businessman, ... was recently fined 54,024 euros (about $58,000) for traveling a modest, if illegal, 64 miles per hour in a 50 m.p.h. zone. And no, the 54,024 euros did not turn out to be a typo, or a mistake of any kind. Mr. Kuisla is a millionaire, and in Finland the fines for more serious speeding infractions are calculated according to income. The thinking here is that if it stings for the little guy, it should sting for the big guy, too. ...

[T]he Finnish “day fine” system, also in use in some other Scandinavian countries, dates to the 1920s, when fines based on income were instituted for all manner of lesser crimes, such as petty theft and assault, and helped greatly reduce the prison population.

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April 27, 2015 in Tax | Permalink | Comments (1)

Carter: A Critique of Charitable Bequests

Elizabeth R. Carter (LSU), Tipping the Scales in Favor of Charitable Bequests: A Critique, 34 Pace L. Rev. 983 (2014):

This paper considers the public policy favoring testamentary bequests to charity and offers a critique of that policy.

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April 27, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 718

IRS Logo 2Breitbart, GOP Sen. Presses Obama Administration On Criminal Probe Of IRS Targeting of Conservatives:

On Tax Day, Senate Judiciary Committee Chairman Chuck Grassley (R-IA) pressed the Obama administration for an update on the criminal investigation into the alleged misconduct of IRS personnel in the handling of conservative organizations’ tax exempt status.

“It’s unclear whether all of these cases are open or closed,” Grassley said Wednesday. “The investigative agencies should account for their work. The scandal damaged the public trust in the IRS. Building back any of that trust requires investigation and accountability for any misconduct.”

In a letter to the Acting Deputy Attorney General Sally Quillian Yates and the Treasury Inspector General for Tax Administration J. Russell George, the Iowa lawmaker requested more information about the investigation — or lack thereof.

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April 27, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

TaxProf Blog Weekend Roundup

Sunday, April 26, 2015

The Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and new papers debuting on the list at #4 and #5:

  1. [271 Downloads]  The U.S. Foreign Account Tax Compliance Act: American Legal Imperialism?, by Bruce W. Bean (Michigan State) & Abbey Wright Farnsworth
  2. [252 Downloads]  Recent Developments in Federal Income Taxation: The Year 2014, by Martin J. McMahon Jr. (Florida), Bruce A. McGovern (South Texas) & Ira B. Shepard (Houston)
  3. [217 Downloads]  Can Sharing Be Taxed?, by Shu-Yi Oei (Tulane) & Diane M. Ring (Boston College)
  4. [176 Downloads]  Using the 'Smart Return' to Reduce Tax Evasion, by Joseph Bankman (Stanford), Clifford Nass (Stanford) & Joel Slemrod (Michigan)
  5. [169 Downloads]  The Historical Origins of the Debt-Equity Distinction, by Camden Hutchison (Wisconsin)

April 26, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 717

IRS Logo 2Pittsburgh Tribune-Review, The Gathering Storm: An IRS Defeat:

Attempting to obscure the extent of its alleged targeting of conservative groups, the Internal Revenue Service has been smacked with a serious setback in its court fight in Ohio.

A federal judge granted a motion compelling the IRS to list the 298 targeted organizations, which the IRS had identified for the Treasury Department inspector general. In a lawsuit filed in 2013, 10 conservative groups, through discovery, have been trying to pry free the list of all groups targeted by the IRS. This, in order to seek class certification and expand the lawsuit to "all the organizations on (ex-IRS official) Lois Lerner's hit list," writes Hans von Spakovsky of The Heritage Foundation. ...

The discernible rumbling of distant thunder portends the gathering storm that is going to rain down on the IRS.

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April 26, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, April 25, 2015

Ring Presents Can Sharing Be Taxed? Today at Fordham

FordhamDiane M. Ring (Boston College) presents Can Sharing Be Taxed?, 93 Wash. U. L. Rev. ___ (2016) (with Shu-Yi Oei (Tulane)), at Fordham today as part of its conference on Sharing Economy, Sharing City: Urban Law and the New Economy:

The past few years have seen the rise of a new model of production and consumption of goods and services, often referred to as the “sharing economy.” Fueled by startups such as Uber and Airbnb, sharing enables individuals to obtain rides, accommodations, and other goods and services from peers via the Internet or mobile application in exchange for payment. The rise of sharing has raised questions about how it should be regulated, including whether existing laws and regulations can and should be enforced in this new sector or whether new ones are needed.

In this Article, we explore those questions in the context of taxation. We argue that, contrary to the claims of some commentators, the application of substantive tax law to sharing is mostly (though not completely) clear, because current law generally contains the concepts and categories necessary to tax sharing. However, tax enforcement and compliance may present challenges, as a result of two distinctive features of sharing. First, some sharing businesses tend to opportunistically pick the more favorable regulatory interpretation if there is ambiguity regarding which rule applies or whether a rule applies. This leads to compliance and enforcement gaps. Second, the “microbusiness” nature of sharing raises unique compliance and enforcement concerns. We suggest strategies for addressing these dual challenges, including lower information reporting thresholds, safe harbors and advance rulings to simplify tax reporting, and targeted enforcement efforts.

April 25, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)