TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Tuesday, September 6, 2016

The 100 Most Influential People In Tax And Accounting

Accounting Today CoverI am honored to be included on the list of Accounting Today's 100 Most Influential People in Tax and Accounting for the eleventh consecutive year:

A prolific blogger, Caron’s widely read site thoroughly covers the latest developments in the field of tax, particularly with his ongoing coverage of the scandal involving IRS employees’ extra scrutiny of tax-exempt applications from conservative groups. Caron also blogs extensively about issues related to academia.

Accounting Today also mentioned tax bloggers in its discussion of Just a Few More ...:

We need to find a way to cram more people into the Top 100, because new and interesting people keep rising up to change the profession. Until we can get 150 or so people into a 100-person list, however, we offer our annual list of Ones to Watch — men and women whose influence is waxing, and whom we’ll be keeping an eye on. ...

While we’ve long noted the influence of tax blogger Paul Caron, many others are now using the blogosphere to share tax information, analysis, insights and, occasionally, humor. This year we’re going to cite two, both of whom appear on Forbes.com: WithumSmith+Brown partner Anthony Nitti (who also writes on taxes for many other outlets, and frequently teaches well-received CPE courses), and Kelly Phillips Erb, a tax lawyer whose Tax Girl blog draws lots of eyeballs. And while we’re on the subject of taxes, you might want to keep an eye on Howard Gleckman, a fellow at the Tax Policy Center think tank, whose thoughts on tax policy are often sought after by the mainstream media.

I am honored to be on the Top 100 list with such high-powered people in the tax and accounting worlds, including:

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September 6, 2016 in About This Blog, Legal Education, Tax | Permalink | Comments (3)

Call For Papers:  Iowa-ACTEC Symposium On Wealth Transfer Law In Comparative And International Perspective

IowaACTECThe University of Iowa College of Law and American College of Trust and Estate Counsel have issued a Call for Papers for a symposium on Wealth Transfer Law in Comparative and International Perspective, to be held at the University of Iowa College of Law on Friday, September 8, 2017, with the papers to be published in the Iowa Law Review:

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September 6, 2016 in Conferences, Legal Education, Scholarship, Tax | Permalink | Comments (0)

Rumsfeld Sides With McGonagall Rather Than Snape On Taxes

MRS

Following up on this morning's TaxProf Blog op-ed:   McGonagall Replies to Snape on Taxes: 'Be Proud Of The Tax Law You Have, Rather Than The One You Wish You Had', by Alice G. Abreu (Temple):

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September 6, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Abreu:  McGonagall Replies to Snape on Taxes—'Be Proud Of The Tax Law You Have, Rather Than The One You Wish You Had'

McGonagalTaxProf Blog op-ed:  McGonagall Replies to Snape on Taxes, by Alice G. Abreu (Temple):

Because Professor Minerva McGonagall is my favorite member of the Hogwarts faculty, particularly as played by the inimitable Dame Maggie Smith, and because she and Severus Snape led rival houses, here’s how I think she would reply to Adam Chodorow’s reimagined Snape, who as a TaxProf warns his students on the first day of class that because there is “little foolish argument by analogy here, many of you will hardly believe this is law.”

Humph . . . It’s high time you learned to be proud of the tax law you’ve got, rather than the one you think you ought to have.

Our rival houses are the House of Tax Exceptionalism and the House of Tax as Everylaw. Snape as a TaxProf may wish that the tax law were exceptional, different from other fields of law in such fundamental ways that it is perhaps not law at all, but that is not the tax law we actually have.

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September 6, 2016 in Celebrity Tax Lore, Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1216

IRS Logo 2Charlotte Observer editorial, Should IRS Chief Be Impeached?:

Congress returns to work Tuesday, and at the top of several members’ to-do list is impeaching IRS Commissioner John Koskinen. ...

It’s hard, we know, to gin up much sympathy among Americans for the chief tax collector. It’s even harder when the Internal Revenue Service has made so many missteps in recent years. The extent of Koskinen’s imperfections, though, is debatable; they almost surely fall far short of the “high crimes and misdemeanors” that impeachment requires. ...

It’s possible his performance has been sporadic and his commitment to transparency inconsistent. That would, unfortunately, make him a Washington regular, but not a criminal traitor.

At a minimum, he deserves an exhaustive hearing and opportunity to defend himself in front of the House Judiciary Committee before such an extraordinary — and politically motivated — action is taken.

That’s not what Freedom Caucus members like North Carolina’s Rep. Mark Meadows envision. They are willing to take Koskinen’s fate to the House floor for an up-or-down vote with no due process. That would violate tradition and establish an ominous precedent.

Koskinen (a Duke grad and former chair of Duke’s board of trustees) took over in December 2013, charged with cleaning up the mess made by Lois Lerner. Lerner was at the center of a scandal prior to Koskinen’s arrival in which the IRS mostly targeted conservative political groups in their applications for nonprofit tax-exempt status.

Congress issued a subpoena to Koskinen seeking all of Lerner’s emails. Weeks later, IRS employees in West Virginia erased 422 backup tapes that contained as many as 24,000 of Lerner’s emails.

There is no evidence that Koskinen was personally involved in the deletion. The Republican-appointed inspector general investigating Lerner’s actions said the erasure was an accident stemming from a miscommunication.

The rest of the resolution to impeach Koskinen is flimsy. It accuses him of making “false and misleading statements” to Congress. Koskinen says he testified to what he thought was true at the time, even if some of it later turned out not to be accurate. ...

Lerner’s actions were unacceptable, and the IRS’s failure to retain vital documents in the case is disturbing. So Congress is right to continue to pursue questions. Impeachment, though, is almost certainly using a bazooka to kill a roach. At the least, Koskinen, who has offered a lifetime of public service and ethical behavior, deserves a chance to fully tell his side of the story.

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September 6, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

TaxProf Blog Holiday Weekend Roundup

Monday, September 5, 2016

IRS Issues Final Regulations Redefining Marriage For Tax Purposes To Include Same-Sex Couples

ObergefellNational Law Journal, New IRS Rules Reflect Supreme Court's Same-Sex Marriage Decisions:

If the only certainties in life are death and taxes, then two U.S. Supreme Court decisions involving same-sex marriages are now certain—effective today. The Internal Revenue Service on Friday formally put into place amendments to regulations that define who is married for tax purposes.

The Supreme Court in 2013 in United States v. Windsor struck down the definition of marriage as only between a man and a woman in the federal Defense of Marriage Act. Two years later, the high court in Obergefell v. Hodges made same-sex marriages legal throughout the nation.

The Windsor case stemmed from a tax dispute. Edie Windsor sought to claim the federal estate tax exemption for surviving spouses after her spouse, Thea Spyer, left her entire estate to Windsor. She paid nearly $400,000 in estate taxes. The IRS denied Windsor a refund.

The IRS regulations, published in the federal register and effective Sept. 2, reflect the holdings of those two high court decisions and define terms in the Internal Revenue Code describing the marital status of taxpayers.

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September 5, 2016 in IRS News, Tax | Permalink | Comments (0)

Labor Day And The Tax Burden On Labor

Kyle Pomerleau & Kevin Adams (Tax Foundation), A Comparison of the Tax Burden on Labor in the OECD, 2016:

Although the United States and most OECD countries are known for having progressive tax systems that tax high-income earners more than low- or moderate-income earners, a large portion of the tax burden still falls on the average worker. Even here in the United States, which has a lower tax burden than most other OECD countries, average workers end up paying nearly one-third of their incomes in taxes. It is true that governments in the OECD, especially European countries, provide more government programs. However, their workers end up paying a much higher price for them.

Tax Foundation 1

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September 5, 2016 in Tax, Think Tank Reports | Permalink | Comments (1)

Labor Day, The Minimum Wage, And The Earned Income Tax Credit

Labor Day 2Joe Kristan (Tax Update Blog), Labor Day and the Earned Income Tax Credit:

[Y]ou may want to ponder the hot “labor” issue of the moment — the minimum wage and its alternatives. ... Many economists argue that an increased Earned Income Tax Credit is a better way to support the working poor.   For example, in The minimum wage versus the earned income tax credit for reducing poverty, Cornell University economist Richard V. Burkhauser states:

Introducing or increasing a minimum wage is a common policy measure aimed at reducing poverty. But the minimum wage is unlikely to achieve this goal. While a minimum wage hike will increase the wage earnings of some poor families and lift them out of poverty, some workers will lose their jobs, pushing their families into poverty. In contrast, improving the earned income tax credit can provide the same income transfers to the working poor at far lower cost. Earned income tax credits effectively raise the hourly wages only of workers in low- and moderate-income families, while increasing labor force participation and employment in those families.

The argument for a perfect earned income tax credit is compelling, but the credit is far from perfect. It is estimated that around 25% of the Earned Income tax credit paid out is paid improperly, including billions in fraud. Earned income tax credit fraud is a big part of the business of corrupt preparers. Many other taxpayers who could properly claim it fail to because of its complexity.

Even if the waste and fraud problem could be solved or overlooked, a properly-functioning EITC is still a poverty trap. The credit phases out as incomes rise, creating a high effective marginal tax rate on each additional dollar earned by a low-income family. It provides help at low income levels, but it discourages improving those income levels.

Implicit 2

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September 5, 2016 in Tax | Permalink | Comments (3)

The IRS Scandal, Day 1215

IRS Logo 2The Hill, House GOP Braces For Spending, IRS Fights:

House GOP leaders are preparing their members for fights over government funding and whether to impeach the commissioner of the Internal Revenue Service when Congress returns from its long summer recess. ...

Freedom Caucus members are pushing to vote on a resolution to impeach Koskinen, who they allege wasn't forthcoming with documents regarding the IRS's scrutiny of conservative nonprofits.

Reps. John Fleming (R-La.) and Tim Huelskamp (R-Kan.) introduced a "privileged" resolution on the House's last day of session before the recess to force a vote on impeachment. It's unclear if members of the Freedom Caucus would have to re-file the resolution, given that House rules state that privileged measures must be acted on within two legislative days.

GOP leaders have been wary of staging an impeachment vote, given that the House has only voted one other time in history to impeach a Cabinet official: Secretary of War William Belknap in 1876.

House Republicans' first conference meeting upon returning the day after Labor Day is expected to focus on strategy for the spending bill, with another on the IRS the following week.

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September 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Sunday, September 4, 2016

Schiller:  Today’s Inequality Could Become Tomorrow’s Catastrophe Without Redistributive Tax Policies

Taxing the RichNew York Times: Today’s Inequality Could Easily Become Tomorrow’s Catastrophe, by Robert Schiller (Yale):

Economic inequality is already a concern, but it could become a nightmare in the decades ahead, and I fear that we are not well equipped to deal with it.

Truly extreme gaps in income and wealth could arise from many causes. Consider just a few: Innovations in robotics and artificial intelligence, which are already making many jobs uncompetitive, could lead us into a world in which basic work with decent pay becomes impossible to find. An environmental disaster like global warming, pollution or disease could sharply reduce the ability of people of ordinary means to live in specific regions or entire countries.

Future wars using ever more highly destructive technology, including chemical, biological, radiological or nuclear weapons, could devastate vast populations. And it’s not out of the question that dire political changes, like the rise of racist or otherwise exclusionary social structures, could have terribly damaging consequences for less privileged people.

Of course, I dearly hope none of these things ever happen. But even if they are unlikely, as part of our progress to a better world, we should be thinking now of how we might address them. ...

One way to judge the likely outcome is to look at what has happened in the past. In their new book Taxing the Rich: A History of Fiscal Fairness in the United States and Europe (Princeton 2016), Kenneth Scheve of Stanford and David Stasavage of New York University looked at 20 countries over two centuries to see how societies have responded to the less fortunate [more here and here]. Their primary finding may seem disheartening: Taxes on the rich generally have not gone up when inequality and economic hardship have increased.

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September 4, 2016 in Tax | Permalink | Comments (9)

The Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's, with some reshuffling of the order of the papers within the Top 5:

  1. [491 Downloads]  Dark Pools, High-Frequency Trading, and the Financial Transaction Tax: A Solution or Complication?, by Doron Narotzki (Akron)
  2. [398 Downloads]  The True Economic Effects of Corporate Inversions, by Doron Narotzki (Akron)
  3. [320 Downloads]  Property Is Another Name for Monopoly Facilitating Efficient Bargaining with Partial Common Ownership of Spectrum, Corporations, and Land, by Eric A. Posner (Chicago) & E. Glen Weyl (Yale)
  4. [306 Downloads]  Executive Pay: What Worked? , by Steven A. Bank (UCLA), Brian R. Cheffins (Cambridge) & Harwell Wells (Temple)
  5. [244 Downloads]  The Trojan Horse of Corporate Integration, by Edward D. Kleinbard (USC)

September 4, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 1214

IRS Logo 2Newsmax, IRS Chief Faces Likely Impeachment Vote in US House:

U.S. House conservatives are set to re-launch ... their effort to impeach Internal Revenue Service Commissioner John Koskinen, with or without Speaker Paul Ryan’s go-ahead.

Representative John Fleming says he and other conservatives are prepared to unilaterally force an impeachment vote within days after Congress returns to session on Sept. 6. “The only thing up in the air is whether it will be the first or second week we’re back,” the Louisiana Republican said in an interview.

Any action would be largely symbolic, because the effort would get blocked in the Senate if it passes the House. But Republicans remain angry at Koskinen, who they accuse of impeding an investigation into whether the tax agency improperly targeted conservative non-profits. Their allegations include failing to prevent the IRS from destroying evidence and providing false and misleading information to Congress.

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September 4, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, September 3, 2016

This Week's Ten Most Popular TaxProf Blog Posts

NY Times:  If Trump Gets His Way, Real Estate Will Get Even More Tax Breaks

Trump (2016-2)New York Times: If Trump Gets His Way, Real Estate Will Get Even More Tax Breaks, by James B. Stewart:

It’s hard to imagine a tax code more favorable to real estate developers than the one we already have.

Donald Trump has come up with one.

Thanks to some major loopholes in the existing tax code that treat real estate developers as a special privileged class, it’s entirely possible (even likely) that Mr. Trump pays little or no federal income tax.

But Mr. Trump’s new tax proposal doesn’t just preserve those breaks, it piles on new ones for real estate developers like Mr. Trump himself — at an estimated cost of more than $1 trillion in tax revenue over a decade.

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September 3, 2016 in Political News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1213

IRS Logo 2Government Executive, IRS Chief Affirms That Agency Ended ‘Be on the Lookout’ Lists:

In the latest wrinkle in the controversy over the Internal Revenue Service’s alleged targeting of conservative groups, the tax agency’s chief has written to Congress [letter here] to assure lawmakers that its Exempt Organization’s division long ago discontinued use of so-called “Be on the Lookout” lists to sift through applications from nonprofits.

Earlier this month, a federal appeals court handling an ongoing case from the conservative group True the Vote zeroed in on the IRS’s use of the term “suspended” to describe the practice of flagging groups based on their names, overruling a lower court and restoring the suit against the agency.

On Aug. 18, Internal Revenue Commissioner John Koskinen sought to set the record straight in a letter to the chairman and ranking member of the Senate Finance Committee harking back several years to the multiple investigations of IRS’s allegedly biased processing of applications for tax-exempt status from groups claiming to be social welfare organizations.

“I want to be clear that no matter how you say it -- whether it's suspended, eliminated or ended -- the IRS stopped this practice long ago and is committed to never using such a list or process ever again,” Koskinen wrote, citing his own repeated testimony to Congress, his speeches and the reports from the Treasury Inspector General for Tax Administration saying the BOLO lists ended three years ago.

“The IRS and its leadership team have been, and remain, absolutely committed to avoiding any selection and further review of potential political cases based on names and policy positions,” he added. “There should be no doubt on this point, or regarding the continued, ongoing commitment by the IRS to be guided by the tax law and nothing else.”

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September 3, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (11)

Friday, September 2, 2016

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new paper by Daniel Hemel (Chicago) and Kyle Rozema (Northwestern), Inequality and the Mortgage Interest Deduction, forthcoming in the Tax Law Review:

Glogower (2016)Hemel and Rozema ask a question that we thought was well settled: What are the distributional consequences of repealing the mortgage interest deduction (“MID”)? Their conclusion (spoiler alert): It depends.

The article is important in two respects. First, it introduces a more sophisticated analysis of the distributional consequences from repealing (or limiting) the MID and other tax preferences. Through this exercise, the article also adds empirical perspective to the choices for measuring progressivity in tax reforms.

Building on David Kamin’s work on progressivity in tax reforms, the article begins with a result we’ll call the “Tax Burden Paradox”: Repealing a tax preference that provides a larger benefit to high-income taxpayers in dollar terms may in fact decrease those taxpayers’ share of society’s total tax burden.  Consider the article’s example of a two-household society, one rich with pretax income of $100, and one poor with pretax income of $50, and progressive rates that tax the first $50 of income at 20%, and additional income at 40%.  The rich and poor households pay $12 and $9, respectively, in mortgage interest. With the MID, the rich household pays $25.20 in taxes, or 75.4% of the society’s total $33.40 tax burden. If the MID is repealed, the rich household pays $30 in taxes, for a reduced 75% share of the society’s total $40 tax burden.

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September 2, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Drake Seeks To Hire A Tax Prof

Drake LogoDrake University Law School invites applications from entry level and lateral candidates for a tenure-track or tenured position beginning in the 2017-18 academic year:

We are especially interested in candidates with demonstrated interest or experience in Wills and Trusts or Taxation. Qualifications include: a record of academic excellence, substantial academic or practice experience, and a passion for teaching. Appointment rank will be determined commensurate with the candidate’s qualifications and experience.

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September 2, 2016 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Mazur: Transfer Pricing Challenges In The Cloud

CloudOrly Mazur (SMU), Transfer Pricing Challenges in the Cloud, 57 B.C. L. Rev. 643 (2016):

Cloud computing — the provision of information technology resources in a virtual environment — has fundamentally changed how companies operate. Companies have quickly adapted by moving their businesses to the cloud, but international tax standards have failed to follow suit. As a result, taxpayers and tax administrations confront significant tax challenges in applying outdated tax principles to this new environment. One particular area that raises perplexing tax issues is the transfer pricing rules. The transfer pricing rules set forth the intercompany price a cloud service provider must charge an affiliate using its cloud services, which ultimately affects in which jurisdiction the company’s profits are taxed. This Article argues that the fundamental features of cloud computing exacerbate some of the more difficult transfer pricing problems that already exist.

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September 2, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1212

IRS Logo 2The Daily Caller, Real Power Behind IRS Conservative Targeting Scandal Still A Mystery:

An FBI investigation missed the IRS official who first set in motion the illegal targeting of conservative and tea party non-profit groups applying for tax exemption, documents obtained by a government watchdog group reveal.

An internal IRS document prohibited the targeted applicants from being approved automatically for tax exemption, and agency officials were told to send all such applications to the Orwellian-named Group 7822 to await additional guidance, FBI interviews obtained by Judicial Watch show.

It’s still unclear who authored the internal document that established Group 7822 and who ordered targeted applications be sent to Group 7822.

Disgraced IRS senior executive Lois Lerner has taken most of the heat since retiring from the federal tax agency, but the FBI investigation, which resulted in no prosecutions, suggested that Lerner didn’t write the internal guidance. It’s unclear if she had a role in creating Group 7822. ...

It’s unclear why the FBI did not press IRS officials on who was behind the BOLO and Group 7822. Judicial Watch did reveal, however, that a Department of Justice attorney who donated $6,750 to the Obama campaign and the Democratic National Committee spent more than 1,500 hours on the investigation.

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September 2, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, September 1, 2016

Reuven Avi-Yonah Leaves Michigan For UC-Irvine

Avi-YonahPress Release, University of California, Irvine School of Law Welcomes New Faculty, Largest First-Year Class in School's History and New LL.M. Program:

University of California, Irvine School of Law has hired four new full-time faculty members, bringing the total number of full-time professors to 48. ... All of these new faculty members are leading scholars and skilled practitioners in their respective areas of expertise. ...

Reuven S. Avi-Yonah
Professor Avi-Yonah specializes in corporate and international taxation, international law and legal history. His scholarship focuses on defining the underlying principles of an international tax regime and what consequences follow from these principles for the allocation of tax revenues among countries and for the taxation of multinational enterprises. He will join UCI Law in fall 2017 from University of Michigan Law School, where he has been the Irwin I. Cohn Professor of Law and Director of the International Tax LL.M. program.

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September 1, 2016 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (3)

More On The EU-Apple $14.5 Billion Tax Dispute

Hellerstein:  A Hitchhiker’s Guide To The OECD’s International VAT/GST Guidelines

Florida Tax Review  (2015)Walter Hellerstein (Georgia), A Hitchhiker’s Guide to the OECD’s International VAT/GST Guidelines, 18 Fla. Tax Rev. 589 (2016):

The OECD’s International VAT/GST Guidelines, which were released in their consolidated form at the OECD’s Global Forum on VAT in Paris in late 2015, are the culmination of nearly two decades of efforts to provide internationally accepted standards for consumption taxation of cross-border trade, particularly trade in services and intangibles. This article provides a roadmap to the Guidelines, especially for readers who may be unfamiliar with consumption tax principles, in general, or VATs in particular.

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September 1, 2016 in Scholarship, Tax | Permalink | Comments (0)

Chodorow:  Snape On Taxes

SnapeTaxProf Blog op-ed:  Snape on Taxes, by Adam Chodorow (Arizona State):

Every fall, as I prepare to teach again after a 3-month hiatus, I am reminded of a scene from the first Harry Potter book. The students, some bright-eyed, others fearful, file into Professor Snape’s dungeon classroom for their first Potions class. Glaring out at his students, he introduces them to the subject he loves, but which he fears they will barely comprehend. The passage reads as follows:

You are here to learn the subtle science and exact art of potion-making,” he began. He spoke in barely more than a whisper, but they caught every word – like Professor McGonagall, Snape had the gift of keeping a class silent without effort. “As there is little foolish wand-waving here, many of you will hardly believe this is magic. I don’t expect you will really understand the beauty of the softly simmering cauldron with its shimmering fumes, the delicate power of liquids that creep through human veins, bewitching the mind, ensnaring the senses…I can teach you how to bottle fame, brew glory, even stopper death – if you aren’t as big a bunch of dunderheads as I usually have to teach.

What if Snape taught tax? Many of our students would likely equate the two subjects. Regardless, with apologies to J.K. Rowling, here’s what I imagine he would say:

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September 1, 2016 in Celebrity Tax Lore, Legal Education, Tax, Teaching | Permalink | Comments (1)

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September 1, 2016 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

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September 1, 2016 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1211

IRS Logo 2Forbes: More Than 100 Law Professors To Congress: Impeaching The IRS Commissioner Is A Bad Idea, by Kelly Phillips Erb:

More than 100 tax law professors have sent a letter to House leaders in opposition to a resolution to impeach or censure Internal Revenue Service (IRS) Commissioner John Koskinen.

The letter was addressed to Speaker of the House Paul Ryan (R-WI); House Ways and Means Committee Chair Kevin Brady (R-TX); Minority Leader of the House Nancy Pelosi (D-CA); and House Ways and Means Committee Ranking Member Sander Levin (D-MI). The letter urged those Congressional leaders to “oppose any resolution to impeach or censure John Koskinen, the Commissioner of Internal Revenue.” ...

Censure is, of course, not as drastic as impeachment: it’s a public condemnation and requires a simple majority vote in the House and no action in the Senate. Impeaching an official requires a vote in the full House and, after a formal trial, a 2/3 vote of the Senate to remove the official from office. If that sounds like a high bar, it is: no agency official has been impeached in more than 140 years.

Tax Update Blog:  Profs For Koskinen, by Joe Kristan:

I favor censure because it’s clear that Koskinen has been, if you want to be charitable, tone-deaf to the implications of the IRS targeting of political opposition. He repeatedly has made statements on the investigation that have proven untrue, meaning he is either inept or a liar.

I oppose impeachment because it is a waste of time. The Senate would never convict.

I don’t like the letter because it completely ignores how Koskinen has completely lost the confidence of GOP Congressional appropriators. Nothing he has done provides them any reassurance that funding the IRS doesn’t mean funding their own opposition. If they really are concerned about the institutional integrity of the IRS, the professors should also call on Koskinen to resign in favor of somebody who can merit the respect of both parties.

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September 1, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, August 31, 2016

The Implications Of Apple's $14.5 Billion EU Tax Bill

Apple EUFollowing up on yesterday's post, EU Orders Apple To Repay $14.5 Billion In Irish Tax Breaks:

New York Times editorial, Apple, Congress and the Missing Taxes:

Apple and the United States are crying foul over the ruling in Europe that Apple received illegal tax breaks from Ireland and must hand over 13 billion euros ($14.5 billion), a record tax penalty in Europe. But Apple and the United States have only themselves to blame for the situation.

Apple has engaged in increasingly aggressive tax avoidance for at least a decade, including stashing some $100 billion in Ireland without paying taxes on much of it anywhere in the world, according to a Senate investigation in 2013. In a display of arrogance, the company seemed to believe that its arrangements in a known tax haven like Ireland would never be deemed illegal — even as European regulators cracked down in similar cases against such multinational corporations as Starbucks, Amazon, Fiat and the German chemical giant BASF.

Congress, for its part, has sat idly by as American corporations have indulged in increasingly intricate forms of tax avoidance made possible by the interplay of an outmoded corporate tax code and modern globalized finance. The biggest tax dodge in need of reform involves deferral, in which American companies can defer paying taxes on foreign-held profits until those sums are repatriated. Initially, deferral was a convenience for multinationals, as they sought investment opportunities abroad. Today, it is the taproot of global tax avoidance.

Bloomberg View editorial, The EU's Apple Ruling Is a Victory for Tax Confusion:

The European Commission’s decision to impose a tax bill of 13 billion euros ($14.5 billion) on Apple is unjust and unnecessary. And the harm is not confined to a single company: The ruling has cast a cloud of uncertainty over Europe’s corporate-tax rules, potentially affecting all multinational investors.

Wall Street Journal editorial, Europe’s Apple Tax Ambush:

Even by the usual Brussels standards of economic malpractice, Tuesday’s €13 billion ($14.5 billion) tax assault on Apple is something to behold. The European Commission decided that Dublin’s application of Irish tax law to an American company violated European antitrust rules. Orwell would understand.

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August 31, 2016 in Tax | Permalink | Comments (0)

Smith:  The PACT Act And The Constitutionality Of The Marketplace Fairness Act

Florida Tax Review  (2015)Eric Smith (Weber State), The PACT Act as Indicium of the Due Process Validity of the Marketplace Fairness Act, 19 Fla. Tax Rev. 1 (2016):

If passed into law, the Marketplace Fairness Act would impose a federal duty on out-of-state sellers to collect a state-defined and state-benefitting use tax. This unique exercise of federal power implicates due process. The PACT Act represents the only other instance in which Congress has similarly compelled state law compliance. Two circuit courts of appeals have found the PACT Act vulnerable on concerns of due process. This Article relies on the PACT Act analogue to simulate how the Marketplace Fairness Act would fare under similar scrutiny. To this end and in this uncommon context, two novel constitutional questions are considered: 1) with which sovereign, the federal government or the state, are minimum contacts measured; and 2) if measured with the state, is a single sale sufficient to meet due process thresholds?

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August 31, 2016 in Scholarship, Tax | Permalink | Comments (1)

Pittsburgh Tax Review Publishes New Issue

The IRS Scandal, Day 1210

IRS Logo 2The Morning Call, Here's a Job for Lois Lerner:

There is no need for the taxpayers to bear the expense of a special prosecutor to investigate the Clinton Foundation. Lois Lerner can be asked to resume her position with respect to approval and oversight of nonprofits and foundations that have qualified under one of the IRS 501(c) classifications.

Lerner honed those skills when she copiously and intrusively examined the applications for recognition of tax-exempt status filed by conservative organizations. She might apply the same degree of intrusion and assertiveness toward the Clinton Foundation. Heck, she is drawing a taxpayer-financed pension so allow her skills to be applied with no additional expense to the taxpaying public. But then if questioned, will Lerner's emails (produced on taxpayer funded time) be lost or will the emails be forthcoming?

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August 31, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Tuesday, August 30, 2016

Herzig:  Walmart, Puerto Rico And Taxes

WalmartFollowing up on Thursday's post, First Circuit: Puerto Rico's Special 100% Tax Imposed Only On Wal-Mart Is Unconstitutional:  David J. Herzig (Valparaiso), Walmart and Puerto Rico:

In order to generate liquidity to pay debt and run government operations, Puerto Rico began to look to the deepest pockets for help. If you are looking for a deep pocket, look no further than Walmart. The question facing Puerto Rico was how to get more money out of Walmart without actually targeting the corporation (that would be unconstitutional.)

The territory, instead, tinkered with an old law to created a tax hikes which on the face seemed neutral. However, the law, according to Walmart, targeted primarily the large retail corporation. The after-tax effect of the corporate alternative minimum tax change was to raise Walmart’s Puerto Rican tax liability to over 90% of its income. ...

In March of 2016, the District Court agreed with Walmart and in a 109 page opinion stated, “Puerto Rico’s AMT, on its face, clearly discriminates against interstate commerce.” ... Late last week, the 1st Circuit agreed with the District Court. The 1st Circuit concluded, “As to the merits of the Commerce Clause challenge, the AMT is a facially discriminatory statute that does not meet the heightened level of scrutiny required to survive under the dormant Commerce Clause.” ...

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August 30, 2016 in Tax | Permalink | Comments (0)

EU Orders Apple To Repay $14.5 Billion In Irish Tax Breaks

SSRN Tax Professor Rankings

SSRN LogoSSRN has updated its monthly rankings of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through August 1, 2016) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Mich.)

58,337

Reuven Avi-Yonah (Mich.)

10,512

2

Michael Simkovic (S. Hall)

33,181

Michael Simkovic (S. Hall)

4781

3

Paul Caron (Pepperdine)

31,836

D. Dharmapala (Chicago)

3362

4

D. Dharmapala (Chicago)

27,496

Paul Caron (Pepperdine)

2789

5

Louis Kaplow (Harvard)

26,337

Richard Ainsworth (BU)

2416

6

Vic Fleischer (San Diego)

22,711

Robert Sitkoff (Harvard)

2040

7

James Hines (Michigan)

21,995

Nancy McLaughlin (Utah)

1946

8

Ted Seto (Loyola-L.A.)

21,222

William Byrnes (Texas A&M)

1921

9

Richard Kaplan (Illinois)

21,195

Jeff Kwall (Loyola-Chicago)

1902

10

Ed Kleinbard (USC)

20,370

Dan Shaviro (NYU)

1883

11

Katie Pratt (Loyola-L.A.)

19,104

Chris Hoyt (UMKC)

1836

12

Richard Ainsworth (BU)

18,379

Ed Kleinbard (USC)

1821

13

Robert Sitkoff (Harvard)

17,566

Omri Marian (UC-Irvine)

1779

14

Carter Bishop (Suffolk)

17,150

David Weisbach (Chicago)

1771

15

Brad Borden (Brooklyn)

17,107

Louis Kaplow (Harvard)

1741

16

David Weisbach (Chicago)

17,057

Vic Fleischer (San Diego)

1676

17

Jen Kowal (Loyola-L.A.)

16,756

Yariv Brauner (Florida)

1472

18

Chris Sanchirico (Penn)

16,614

Brad Borden (Brooklyn)

1414

19

Francine Lipman (UNLV)

16,260

Katie Pratt (Loyola-L.A.)

1413

20

Dennis Ventry (UC-Davis)

16,136

Jack Manhire (Texas A&M)

1403

21

Bridget Crawford (Pace)

15,819

Francine Lipman (UNLV)

1378

22

Dan Shaviro (NYU)

15,455

Steven Bank (UCLA)

1362

23

David Walker (Boston Univ.)

15,093

Richard Kaplan (Illinos)

1327

24

Steven Bank (UCLA)

13,544

Jordan Barry (San Diego)

1208

25

Herwig Schlunk (Vanderbilt)

13,217

Stephen Shay (Harvard)

1204

Note that this ranking includes full-time tax professors with at least one tax paper on SSRN, and all papers (including non-tax papers) by these tax professors are included in the SSRN data.

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August 30, 2016 in Legal Education, Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Kleinbard:  Treasury Publishes White Paper Defending Brazen Tax Avoidance By Apple, Other U.S. Multinational Corporations

Apple TreasuryThe Hill op-ed: U.S. Treasury Publishes White Paper in Support of Tax Avoiders, by Edward Kleinbard (USC):

The U.S. Treasury Department has just published a tax policy white paper which amounts to a lawyer’s brief defending the brazen abuses of tax administrative processes clandestinely orchestrated by U.S. firms in cahoots with a handful of European countries. It’s August, and nearly the end of the Administration’s term to boot, so in the ordinary course even tax professionals could be forgiven for ignoring the white paper. But this is not simply another tedious tax policy exercise.

Simply put, “business friendly” jurisdictions (like Luxembourg) in substance offered through secret private deals to provide U.S. multinationals with tax shields in the form of their laws and European tax treaties, in return for what in substance were modest fees from the multinationals. All of this was revealed principally by the LuxLeaks scandal. I have worked in the area for 30 years, and I was awestruck by the sleaziness of the operations that came to light.

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August 30, 2016 in IRS News, Tax | Permalink | Comments (6)

The IRS Scandal, Day 1209:  123 Tax Profs Oppose Impeachment/Censure Of John Koskinen

IRS Logo 2Letter From 123 Tax Professors in Opposition to Impeachment or Censure of IRS Commissioner (Aug. 28, 2016):

We the undersigned 123 tax law professors teach in law schools across America. We teach tax law and respect for the process of law in Utah, Montana, Texas, Georgia, Louisiana, Nevada, Florida, Pennsylvania and Ohio as well as in Massachusetts and Washington, D.C. and places in between.
We urge you to oppose any resolution to impeach or censure John Koskinen, the Commissioner of Internal Revenue.

We teach our students how to represent clients in positions adverse to the Internal Revenue Service, but we also teach our students respect for the law and for the IRS. The IRS carries out a vitally important mission for our country. Respect for the IRS fosters the voluntary compliance that is essential for our revenue system to work.

Impeachment or censure will harm the country by weakening our revenue system. Impeachment or censure would disrupt the functioning of the IRS—which has had four Commissioners in as many years—leading to increased tax evasion, reduced revenue collection, and a higher national debt. Impeachment or censure would also set a dangerous precedent and deter talented people from working to improve the country’s struggling revenue system.

We also fear that targeting Commissioner Koskinen will distract the Congress from the vital work of enacting meaningful tax reform. Academics, practitioners, and businesses agree that we must revise our revenue system to rationalize and simplify the rules, and to minimize the collateral costs of raising the necessary revenue.

We believe that nothing that has been reported provides any basis for impeachment or censure. Commissioner Koskinen was called out of retirement when the IRS needed help, and responded for the simple reason that it was the time for all good citizens to come to the aid of their country.

We respectfully request that the House reject misguided efforts to impeach or censure Commissioner Koskinen, and focus instead on enacting meaningful reforms to our revenue system.

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August 30, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (14)

Monday, August 29, 2016

NY Times Op-Ed By Venture Capitalist:  Close My Carried Interest Tax Loophole

New York Times op-ed:  Close My Tax Loophole, by Alan J. Patricof (Co-founder & Managing Director, Greycroft):

My fellow venture capitalists and private equity investors are paying close attention to the heated election-year rhetoric about the future of “carried interest,” which is the performance fee we charge to manage other people’s money. Carried interest is the fund manager’s share of the earnings from a profitable investment, normally paid on top of a much smaller management fee. ...

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August 29, 2016 in Tax | Permalink | Comments (0)

Kleinbard:  Searching For Our Fiscal Soul

Edward D. Kleinbard (USC), Searching for Our Fiscal Soul (Presentation Slides):

This is an extended version of a presentation made at TEDx Livermore 2016, the theme of which was The Economics of Empathy. Searching for Our Fiscal Soul argues that democracy is an exercise in empathy towards fellow citizens we do not know, and, if we did, might not like. We express that empathy through government spending, because that is how we actualize values that are important enough that we are willing to pay for them. This is our fiscal soul in action. Whether measured against the values we all routinely recite, or against the social environments achieved by peer countries, the fiscal soul of the United States is in peril. The remedy lies in understanding the value of a complementary economy, in which government spending is properly reframed as purchasing investments and insurance that private markets do not, and cannot, reach.

(Click on YouTube button on bottom right to view video to avoid interruption caused by blog's refresh rate.)

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August 29, 2016 in Scholarship, Tax | Permalink | Comments (2)

Chodorow:  Olympians Don’t Need A Tax Break

Olympic RingsFollowing up on my previous posts (links below):  Adam Chodorow (Arizona State), Olympians Don’t Need a Tax Break:

The Rio Olympics are over, and the Paralympics are less than two weeks away. Nonetheless, America’s athletic finest face one adversary at home: the taxman. As has been widely reported, the U.S. Olympic Committee awards $25,000 to gold medal winners, $15,000 for silver medalists, and $10,000 for bronze medalists. Under current law, they must pay taxes not only on those awards but also on the value of the medals themselves. Sen. Chuck Schumer, the presumptive majority leader should the Democrats win back the U.S. Senate, wants to change that, and the Republicans couldn’t be happier about it. ...

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August 29, 2016 in Tax | Permalink | Comments (3)

Quantum Physics And The IRS Scandal, Day 1208

IRS Logo 2Fox News, Congress Faces Physicists' 'Multiverse' of Issues Including IRS, Zika Upon Impending Return:

Quantum physicists sometimes discuss the possibility of a “multiverse.” A multiverse is where the cosmos is like a layered quilt, populated with alternate realities, different dimensions and unique timelines. As a result, an infinite number of possibilities or scenarios pass along each temporal continuum.

Capitol Hill is now seemingly moored in a legislative multiverse. The House and Senate return to Washington in early September, following an epic, seven-week summer recess. There are only a handful of policy issues lawmakers must tackle when Congress reconvenes, but an almost incalculable string of outcomes loom ahead when they return.

In other words, almost anything can happen.

House Republican leaders conducted a half-hour conference call with rank-and-file GOPers late Thursday. According to sources familiar with the call, the Republican brass offered few specifics as to their approaches on big issues like funding the government, Zika and even an effort by House conservatives to impeach IRS Commissioner John Koskinen. ...

Just before the break in July, Huelskamp and Rep. John Fleming, R-La., filed a special resolution demanding that the House impeach IRS Commissioner John Koskinen. That resolution dissolved over the break.

Now, members of the House Freedom Caucus want to bring it back. Fox has learned the House won’t wrestle with the issue immediately as Freedom Caucus members will wait to see how the GOP leadership intends to handle the matter.

House Republican leaders aren’t fans of Koskinen. But they are lukewarm on impeaching the IRS chief. Congress hasn’t impeached a cabinet official since it sanctioned Secretary of War William Belknap in 1876.

As IRS commissioner, Koskinen isn’t even a cabinet official. There’s concern about setting a precedent if Congress begins impeaching various administration officials.

House Republicans will hold a separate conference meeting on Koskinen in mid-September. A source familiar with the thinking of the Freedom Caucus tells Fox its members aren’t in a hurry to refile the Koskinen resolution right away.

They don’t want to pressure leadership right off the bat. A House GOP leadership source told Fox that the public isn’t attuned to impeaching Koskinen. Still, the GOP leadership could further draw the ire of the Freedom Caucus if there isn’t a try to impeach Koskinen.

This is the Capitol Hill multiverse. No one is quite sure how lawmakers will resolve these issues in the end. But as lawmakers return to Washington, there are almost an infinite number of scenarios and possibilities -- because virtually no one’s decided anything yet.

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August 29, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

TaxProf Blog Weekend Roundup

Sunday, August 28, 2016

ABA Tax Section Publishes Fall 2016 Issue Of Tax Times

ABA Tax Times (2016)The ABA Tax Section has published 35 Tax Times No. 4 (Fall 2016):

FROM THE CHAIR
Hail and Farewell
By George C. Howell, III, Hunton & Williams LLP, Richmond, VA
It has been an honor and a privilege to serve as Chair of the Tax Section over the past year. With the devotion of our volunteer members and the help of our dedicated staff, much has been accomplished.

FROM THE CHAIR-ELECT
Providing a Valuable Benefit
By William H. Caudill, Norton Rose Fulbright LLP, Houston TX
It is both exciting and humbling to be presented with the opportunity to serve as Chair of the Tax Section for 2016-2017. I have three objectives for the coming year: (1) focusing on the high quality output of our Committees in the areas of CLE programming and government submissions: (2) continuing the promotion of the Section’s pro bono and public service efforts—a longstanding priority for the Section; and (3) attracting new members, particularly younger and diverse tax lawyers, to the Section, and identifying new opportunities to meet their needs.

POINT & COUNTERPOINT
Perspectives on Two Proposals for Tax Filing Simplification
By Joseph Bankman, Ralph Parsons Professor of Law and Business, Stanford Law School, Stanford, CA, and James E. Maule, Professor of Law, Villanova University Charles Widger School of Law, Villanova, PA
In this Point and Counterpoint, Stanford Professor Joseph Bankman and Villanova Professor James Edward Maule debate two related tax-filing simplification proposals: data-retrieval system and pro forma return system.

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August 28, 2016 in ABA Tax Section, Tax | Permalink | Comments (0)

The Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list, with some minor reshuffling of the order within the Top 5:

  1. [470 Downloads]  Dark Pools, High-Frequency Trading, and the Financial Transaction Tax: A Solution or Complication?, by Doron Narotzki (Akron)
  2. [346 Downloads]  The True Economic Effects of Corporate Inversions, by Doron Narotzki (Akron)
  3. [281 Downloads]  Property Is Another Name for Monopoly Facilitating Efficient Bargaining with Partial Common Ownership of Spectrum, Corporations, and Land, by Eric A. Posner (Chicago) & E. Glen Weyl (Yale)
  4. [277 Downloads]  Executive Pay: What Worked? , by Steven A. Bank (UCLA), Brian R. Cheffins (Cambridge) & Harwell Wells (Temple)
  5. [237 Downloads]  The Trojan Horse of Corporate Integration, by Edward D. Kleinbard (USC)

August 28, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1207

IRS Logo 2Neil Buchanan (George Washington), How to Make a Dead IRS Conspiracy Theory Look Not Completely Dead:

How does a right-wing conspiracy theory work?  Why do Republicans insist on pursuing even obvious dead ends?  One answer to those questions is that they have a virtual army of people who are willing to push these stories relentlessly in many directions, and they know that they can sometimes get useful headlines even from misleading underlying stories.

Thus on Monday of this week we saw this headline on a tax blog: "The IRS Scandal, Day 1201: Larry Tribe Says 'IRS Is Engaged In Unconstitutional Discrimination Against Conservative Groups And Must Be Halted'—'Inexcusable Abuse'."

How did a liberal lion like Harvard law professor Laurence Tribe get pulled into this mess, seeming to back up a right-wing talking point? He did so by being intellectually open-minded and generous, but apparently without being aware of the underlying conspiracy theory that his words seemed to confirm. ...

More than three years on, conservatives are still trying to claim that there was a political conspiracy. Republicans in Congress have spent millions of dollars investigating these claims, while also diverting millions of dollars worth of IRS resources to answering repetitive requests for evidence.

Despite all of this, there continues to be no evidence to support any of the conspiracy theories.

So why is the story still alive, and how did Larry Tribe end up playing a starring role for a day in this never-ending saga?

Apparently, Tribe recently (correctly) dismissed the idea of an IRS scandal as a non-scandal that has been debunked. Because Tribe is among the most well-known liberal legal scholars in the country, as well as a former advisor to President Obama, he is regularly trolled by right-wingers. Apparently, one or more of them took to Twitter to tell Tribe that there really is an IRS scandal.

One such response pointed Tribe to a recent decision from the U.S. Court of Appeals for the D.C. Circuit. Because Tribe is intellectually honest and open to being corrected, he said that he would look at the evidence. What he found, upon reading the court's opinion, was that there had really been IRS activities that needed to be stopped. Like the IRS lawyers who had stopped the vetting program when they found out about it, Tribe was rightly shocked.

Which, of course, does not at all support the conspiracy theories that conservatives have been pushing. No one has ever claimed that the IRS employees did nothing wrong. That was all covered in the TIGTA report, and the IRS's leadership had already ended the practice before the report was issued.

But why would Tribe's tweet be in the present tense: "IRS Is Engaged In Unconstitutional Discrimination ..."? Is engaged, not was. Why did he say that the IRS "must be stopped," given that it has already stopped?

Tribe might simply have erred by not using the past tense, or he might not have realized that the activity had been stopped a long time ago.  Another explanation, however, is intriguing (though equally exculpating of Professor Tribe). ...

At this point, therefore, all the IRS has to do to make this case go away is to process the last two applications and issue a new directive putting a bureaucratic stake through the heart of the long-abandoned procedures.

This is, therefore, yet another example of how legal concepts can be misleading. Professor Tribe (assuming that he meant to use the present tense) correctly said that the IRS "is" still doing something wrong, but only in the procedural sense that the last of the effects of the wrongdoing have not been completely cleaned up and tied off.

In the broader political context, of course, the misunderstanding of this legal nuance is more than a bit unfortunate. An important public intellectual was directed toward one tiny bit of the public record on the IRS non-scandal, and he responded to that evidence appropriately. But his words are being misused by people who want to keep the anti-Obama scandal claims alive.

To repeat: Some IRS employees did something that they should not have done. Their superiors made them stop. An inspector general reported what happened to Congress. Republicans have no evidence to show that the Obama people were involved. And Laurence Tribe is rightly dismayed that it ever happened, as are we all.

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August 28, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

Saturday, August 27, 2016

This Week's Ten Most Popular TaxProf Blog Posts

Treasury Department Backs Apple In $19 Billion EU Tax Dispute

TAFollowing up on Wednesday's post, Treasury Department White Paper: The European Commission And Transfer Pricing:  Wall Street Journal editorial, The EU’s Tax Attack on U.S. Business:

As diplomatic broadsides go, the shot the Obama Administration fired at Europe over tax policy this week is impressive. The U.S. Treasury released a 25-page white paper explaining why the European Commission’s attempts to extract more revenue from American companies violate international tax standards and European legal principles. Too bad the Obama Administration has set such a bad tax example that other nations are now following.

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August 27, 2016 in IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 1206

IRS Logo 2Vox, How President Donald Trump Could Ruin His Enemies’ Lives:

Indulge for a minute in the worst-case scenario.

A Trump Force One flight to Mar-a-Lago in early January 2017. Donald J. Trump — the pettiest, most vicious version of Trump — is preparing for the ecstasies of his inauguration. He sits by the window, scrolling through Twitter and preparing for a well-deserved weekend at home.

Incoming White House Chief of Staff Corey Lewandowski and Chris Christie — yet to be named attorney general — burst into the cabin with a sheaf of notepaper and a couple of silent young attorneys in tow. "Well, boss," Lewandowski says, "we have a little bit of bad news and a whole lot of good news."

Trump raises an eyebrow. "There are some people we can’t figure out how to get back at yet, but there are a lot of people we can," Lewandowski says. ...

"Now on IRS — we’re doing Kasich and Cruz first, right?" (A nod from the president.) "We figure we just take the memo they sent out about targeting Tea Party groups and make some changes. Every group that’s ever done a fundraiser with those guys, or put up ads for them, or sent them an email, those are going to be audited first," Lewandowski says. "Bezos, we figure, probably next, maybe if the antitrust thing goes too slow. And we’re not allowing any new groups to get registered as 501(c)3s or (c)4s until we figure out who the rest of our targets are." ...

Because there are so many violations, the question of how investigators choose whom to target becomes the most important one. And the specter of politically motivated investigations is always there. This is most obvious when it comes to the IRS.

In 2013, the Treasury inspector general for tax administration found that the IRS had evaluated applications for new tax-exempt 501(c)3 groups, which can’t engage in "political activity," in part based on inappropriate things like whether a group had "Tea Party" in the name.

Conservatives felt this was evidence that the Obama administration was using the IRS to target conservative groups. Moulton of the Project on Government Oversight doesn’t think it quite reached the level of persecution — but still thinks the politically motivated use of the IRS, especially when it comes to tax audits, is a genuine cause for concern.

The government doesn’t even have to use all of these powers to change people’s behavior. Just the very possibility of an investigation is likely to make people tread carefully. Reporters sniffing around might worry about finding themselves snared in a costly audit. ...

In December, NBC and MSNBC correspondent Katy Tur live-tweeted a Trump rally that had been repeatedly disrupted by protesters. She received a note from Trump’s press secretary calling her coverage "disgraceful" and "not nice!" — followed by a tweet from Trump himself, calling for her and a colleague to be fired.

Then Trump singled her out at a rally in South Carolina, pointing to the press pen and saying, "She’s back there. Little Katy. … What a lie. Katy Tur. What a lie it was. Third. Rate. Reporter. Remember that."

Imagine that in 2017, Tur gets an audit request from the IRS for the past seven years of her tax information. She served as a foreign correspondent for NBC before covering the election, and the IRS sends her a letter every few weeks asking for more documentation about how she reported her income while on reporting trips abroad. ...

A vindictive president would need sympathetic political appointees in key positions: attorney general, DHS secretary, head of the IRS, maybe the director of National Intelligence. (The head of the FBI is a 10-year appointment, so James Comey — if he wants to — will be in charge until September 2023.)

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August 27, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, August 26, 2016

Weekly SSRN Tax Roundup 2.0

SSRN LogoNote from Paul Caron:  As I explained on August 1, due to my growing other commitments, I have taken steps to reduce the amount of time I devote to TaxProf Blog. Six weeks ago, I stopped doing the weekly tax, legal education, SSRN, and student tax note roundups. I previously announced that Scott Fruehwald of our sister Legal Skills Prof Blog has agreed to take over the weekly legal education roundup. Today, I am pleased to announce that David Gamage (UC-Berkeley), Ari Glogower (Ohio State), and Daniel Hemel (Chicago) have agreed to share responsibility for the weekly SSRN tax roundup:

In addition to a list of newly posted papers, we’ll also include a write-up about at least one of the week’s additions. A quick administrative note: The best way to make sure we see your paper is to use the JEL code K34 (Tax Law) when you upload to SSRN. (If your reaction is “what’s a JEL code?”, check out  Lea-Rachel Kosnik’s overview. And for a fascinating read on the tangled history of JEL codes, see Beatrice Cherrier’s article.)

If you would like to take over the weekly tax roundup as a service to the tax community, either alone or as part of a group of co-editors, please let me know.

This week, Daniel Hemel highlights a new paper by David Hasen (Colorado), Accretion-Based Progressive Wealth Taxation, which is forthcoming in the Florida Tax Review:

HemelDavid Hasen's excellent article emphasizes the distinction between an “excise tax,” which “applies to or is triggered by a transfer or other event,” and an “accretion tax,” which “appl[ies] to the ‘same’ item over time.” Examples of “excise taxes” include consumption taxes, realization-based income taxes, and estate and gift taxes. Examples of “accretion taxes” include real property taxes, mark-to-market income taxes, and periodic wealth taxes. Hasen argues that “a federal accretion-type, progressive wealth tax would appropriately supplement either an income tax or a consumption tax and would do so more effectively than our existing excise wealth tax regime, the federal estate and gift tax.” In the following post, I'll walk through (parts of) Hasen's argument and then explain why I'm not entirely persuaded that an accretion-type wealth tax is the way to go.

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August 26, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

What Is The Authority Of A Tax Opinion Written By A Judge Under IRS Audit Who Later Was Indicted For Tax Fraud?

TCGFollowing up on my previous post, Retired U.S. Tax Court Judge Indicted For Tax Evasion While She Sat On The Court:  Tax Controversy 360, Taxpayer Argues First Circuit Should Not Follow Tax Court Decision by Judge Indicted for Tax Fraud:

On August 15, 2016, the taxpayer in Santander Holdings USA filed its brief to the US Court of Appeals for the First Circuit in its case involving what the Internal Revenue Service (IRS) has labeled a “foreign tax credit generator” transaction. The taxpayer prevailed at the district court level and the IRS appealed that decision, arguing that the lower court’s opinion was contrary to existing precedent in the Tax Court and other appellate courts. Much has been written about these cases and the issue presented, but this post focuses on an interesting argument raised by the taxpayer regarding the weight to be afforded to a prior Tax Court opinion.

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August 26, 2016 in IRS News, New Cases, Tax | Permalink | Comments (1)

Ayres & McGuire:  Using The False Claims Act To Remedy Tax Expenditure Fraud

Ian Ayres (Yale) & Robert A. McGuire III, Using the False Claims Act to Remedy Tax Expenditure Fraud:

The federal False Claims Act (FCA) might be used to combat fraudulent claims regarding tax expenditures. The FCA has been used to protect the public fisc by imposing liability upon anyone who makes a false or fraudulent claim relating to an expenditure of federal funds. A substantial share of government spending is implemented through tax credits and deductions granted to individuals and entities for taking particular actions promoted through the Tax Code. Government funds dedicated to such tax incentives — so-called “tax expenditures” — are themselves potentially subject to false claims — for example, when a borrower makes a false representation that a mortgage relates to a principle or second residence in order to claim a home mortgage interest deduction. This article explores how the FCA as currently enacted might be invoked to combat fraud that targets tax expenditures, as well as doctrinal counter-arguments to such application.

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August 26, 2016 in Scholarship, Tax | Permalink | Comments (2)