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Monday, June 15, 2015

U.S. PIRG Seeks To Hire A Tax & Budget National Campaign Director

PIRG 2U.S. PIRG is seeking to hire a Tax & Budget National Campaign Director:

U.S. PIRG is hiring a National Campaign Director to lead our national Tax & Budget campaigns. We’re looking for an experienced political advocate who will be directing campaign strategy, influencing stakeholders, political organizing, coalition-building, evaluating policy choices, fundraising, and developing staff. ...

Qualifications:  Candidates must have at least 8 years of relevant professional experience. Advanced degrees like a JD or a master’s degree are preferred, but not required. Qualified candidates will have a demonstrated commitment to citizen-based social change, as well as a track record of leadership. We're looking for people who are goal-driven and results-oriented, who have excellent verbal, writing and analytical skills, the ability to speak persuasively in a charged atmosphere, and enthusiasm for the work. Experience with related policy issues and how Washington, DC or statehouses work preferred. ...

Application:  Please apply using our online application @ http://jobs.uspirg.org/apply.html Direct your application to Andre Delattre, Executive Director of U.S. PIRG.

(Hat Tip: David Cay Johnston.)

June 15, 2015 in Tax, Tax Prof Jobs | Permalink | Comments (0)

Zelinsky: Preliminary Thoughts About The Enigma Of Wynne

ZelinskyTaxProf Blog op-ed:  Preliminary Thoughts About The Enigma of Wynne, by Edward Zelinsky (Cardozo):

Maryland’s county income tax does not grant a credit to Maryland residents for the out-of-state income taxes such residents pay on the income they earn outside of Maryland. In Comptroller of the Treasury of Maryland v. Wynne, the U.S. Supreme Court held that this failure causes the Maryland county income tax to violate the dormant Commerce Clause of the U.S. Constitution.

Wynne perpetuates an inherent problem of the Court’s dormant Commerce Clause doctrine: The Court declares some, ill-defined taxes such as the Maryland county income tax unconstitutionally discriminatory while other, economically equivalent taxes and government programs are apparently acceptable under the dormant Commerce Clause. A decision as enigmatic as it is important, Wynne raises as many questions as it answers. Among these are the continuing viability (or not) of external consistency and apportionment, concepts which have been central to the Court’s formulation of the dormant Commerce Clause. Wynne also undermines the Supreme Court’s traditional tolerance of the double state income taxation of dual residents.

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June 15, 2015 in New Cases, Scholarship, Tax | Permalink | Comments (5)

Bentley University Seeks To Hire A Tenure-Track Tax Prof

Bentley 2Bentley University, located in the suburbs of Boston, Massachusetts, is seeking to hire a full-time tenure-track Assistant Professor of Law and Taxation to start July 2016:

The chosen candidate will teach both undergraduate and graduate law courses with a business focus, and on occasion, as needed, graduate tax courses. The standard teaching load for the tenure-track years is 2-2 (two courses per semester). The chosen candidate will be expected to publish high quality and impactful scholarship in respected academic and/or practitioner journals. ...

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June 15, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

IRS Releases Final Estate Tax Portability Regulations

Estate Tax LogoThe IRS on Friday released T.D. 9725, Portability of a Deceased Spousal Unused Exclusion Amount:

This document contains final regulations that provide guidance under sections 2010 and 2505 of the Internal Revenue Code on the estate and gift tax applicable exclusion amount, in general, as well as on the applicable requirements for electing portability of a deceased spousal unused exclusion (DSUE) amount to the surviving spouse and on the applicable rules for the surviving spouse’s use of this DSUE amount.

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June 15, 2015 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 767

IRS Logo 2OpenSecrets.org, Rove’s ‘New’ Group Isn’t New, and That Could Be the Point:

Karl Rove and his colleagues at the dark money behemoth Crossroads GPS have a “new” 501(c)(4), and according to reports, they’re going to use it in much the same way they have used GPS itself — as a conduit for anonymous, political money in the 2016 elections.

But the group, One Nation, isn’t “new,” and that’s probably the point.

Virginia state incorporation records show that the operatives who run Crossroads simply took over an existing 501(c)(4), and they likely did so because the group had the one thing that has been elusive to Crossroads since its founding in 2010: An approved application for tax exemption from the IRS.

Grasping that fact is central to understanding why Crossroads would need to form a new 501(c)(4) to do what it — the largest of all politically active nonprofits — has done for nearly five years. Obtaining the more durable shield of IRS recognition likely has as much to do with this move by Crossroads as its reported aim of keeping the Crossroads brand relevant in a crowded field of GOP groups trying to influence the 2016 elections.

Over the last two weeks, media outlets have talked up One Nation as the “new nonprofit group” that will be spending millions on television and radio ads aimed at softening up voters in three states where Senate Republicans are vulnerable. This “new” group will work in tandem with a super PAC called Senate Leadership Fund to help the GOP hold its majority in the Senate. Essentially, Crossroads is taking a page out the playbook developed by Harry Reid and the Democratic operatives behind liberal dark money group Patriot Majority USA and its sister super PAC Senate Majority PAC.

But One Nation is as “new” as a 2010 Camry with $2 million in the trunk, a fresh coat of paint and a different driver behind the wheel. That’s because One Nation was, until recently, Alliance for America’s Future, a five-year-old 501(c)(4) social welfare organization formed by the GOP consultants that made up the “BK” in BKM Strategies — Barry Bennett and Kara Ahern, respectively. Mary Cheney was the “M” in the firm, and the Alliance for America’s Future had other ties to the Cheney network. But the group hasn’t made independent expenditures since the 2010 cycle, when it spent more than $700,000; it also spent heavily that cycle for ads promoting Nevada GOP gubernatorial candidate Brian Sandoval.

While Crossroads GPS has been waiting for the IRS to approve its application for exempt status since Miley Cyrus was Hannah Montana, Alliance for America’s Future — which is represented by the same law firm and applied for an exemption the same month as GPS — was given the IRS seal of approval within weeks, in July 2010. Now, by taking the reins at Alliance for America’s Future, the folks at Crossroads are at the controls of a group that comes pre-packaged with an IRS exemption. And there’s already a link between the organizations: Crossroads helped fund the Republican Governors Public Policy Committee in 2010, a year when the governors’ group provided more than half the money spent by the Alliance for America’s Future — which Nevada courts found out when they forced AAF to disclose three years later.

Marcus Owens, a nonprofit tax lawyer at Loeb & Loeb and former head of the IRS Tax Exempt Division, agrees that the exemption could play a role in the decision by Crossroads operatives to take over the Alliance — particularly given the level of uncertainty that surrounds the Crossroads application for exemption.

“Having an already exempt fallback organization makes sense as a way to continue activities,” Owens said.

Lloyd Hitoshi Mayer, professor of nonprofit tax law at Notre Dame, calls the move “a well-known strategy in such situations,” going back at least to the Christian Coalition’s decision in 1999 to shift its operations to its Texas chapter, which already had exempt status, and rename it the Christian Coalition of America.

With One Nation under its wing, Crossroads GPS could engage in a similar shift. If it is denied status by the IRS — or if it decides to withdraw its application altogether — its operations can move seamlessly under the umbrella of another 501(c)(4) that already has the IRS’s seal of approval and whose legal gymnastics are already choreographed by the same law firm.

Owens and Mayer stressed that such a move doesn’t mean that the Crossroads operatives are free to engage in politics when they’re at the helm of One Nation; it just shifts oversight to the much less watchful eye of the agency’s auditors. “Such a shift doesn’t escape the possibility of IRS scrutiny,” Owens told OpenSecrets Blog, “but it moves the matter from the application context to the audit context, where the IRS capabilities are spread much more thinly.”

Thin indeed: a 2014 report by the Center for Public Integrity cited statistics showing that the IRS only audited 7 out of every 1,000 yearly returns in 2013. Compare that to the application process, which requires each 501(c) application to be approved or denied by an actual person, and it becomes clear why circumventing that process is such a boon to the operatives who run Crossroads.

The icing on the cake is that this move gives Crossroads a way to slide out from under its languishing application without being forced to pay the corporate income taxes it would have to pay if it received a denial from the IRS — a liability that already got smaller when the statute of limitations on its earliest activities ran out in April. Crossroads could withdraw its application and terminate, potentially without the repercussions of negative determination by the IRS.

This wouldn’t be a risk-free strategy on Crossroad’s part. As Owens points out, this kind of move from an active organization “has historically been an audit trigger.” Mayer says that “in theory the IRS could retroactively attempt to force the organization into 527 status for earlier years and require disclosure of contributors to the organization during those years,” but he doesn’t know of an instance where that has happened.

But while such a scenario poses uncertain risks for Crossroads GPS, those risks are not transferred to One Nation, because it is a separate organization, not technically affiliated with Crossroads.

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June 15, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

TaxProf Blog Weekend Roundup

Sunday, June 14, 2015

The Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #2:

  1. [335 Downloads]  Taxation of E-Commerce, by Orkhan Abdulkarimli (Baku State)
  2. [175 Downloads]  Trust Decanting: A Sale Without Gain Realization, by Jason Kleinman (Herrick, New York)
  3. [171 Downloads]  Reducing Inequality With A Retrospective Tax On Capital, by James Kwak (Connecticut)
  4. [152 Downloads]  Citizenship Taxation, by Ruth Mason (Virginia)
  5. [135 Downloads]  What Does Voluntary Tax Compliance Mean?: A Government Perspective, by J. T. Manhire (U.S. Treasury Department)

June 14, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 766

IRS Logo 2IRS, Response to Notice (No. 1:13-cv-1559-EGS, June 12, 2015):

In accordance with the Court's June 4, 2015, Order, the Internal Revenue Service ("Service") responds to Judicial Watch, Inc.'s Notice dated June 2, 2015:

15. On April 23, 2015, TIGTA provided approximately 6,400 forensically-recovered emails to the Service. 1 Certain of the emails forensically recovered by TIGTA were not readable, or not entirely readable, as initially provided to the Service. TIGTA subsequently provided some of these documents to the Service in readable form on May 8 and June 1, 2015. To date, TIGTA has not provided any other recovered emails to the Service.

16. Prior to providing the Service with the approximately 6,400 forensically-recovered emails, TIGTA identified and removed emails which appear to be duplicates of those which the Service has already produced to the Congressional Committees or were duplicates of other recovered emails. Such emails are also duplicates of those the Service has already retrieved in connection with responding to the FOIA requests at issue in this case. The Service is in the process of conducting further manual deduplication of the 6,400 forensically-recovered emails to supplement the automated deduplication conducted by TIGTA. TIGTA also is further reviewing the 6,400 emails to verify that they were not already produced to the Congressional Committees by the Service.

17. The Service expects to begin processing and reviewing the recovered emails immediately following its review and production of Lerner communications which were not forensically recovered. At this time, the Service is unable to estimate when it will finish processing and reviewing the forensically-recovered emails. 

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June 14, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Saturday, June 13, 2015

This Week's Ten Most Popular TaxProf Blog Posts

Preschool Tax

The IRS Scandal, Day 765

IRS Logo 2Judicial Watch Press Release, JW Beats IRS in Court (June 12, 2015):

Calling all conservative activists, citizens and groups who were silenced and harassed by the Obama Internal Revenue Service in the run-up to the 2012 elections and beyond — you should know that we have moved a few steps closer to holding the Obama administration accountable for its criminal misuse of the federal tax-collecting agency.

We are pleased to announce that Judge Emmet Sullivan of the U.S. District Court for the District of Columbia granted a Judicial Watch request to issue an order requiring the IRS to provide answers by June 12, 2015, on the status of the Lois Lerner emails the IRS had previously declared lost. Judicial Watch raised questions about the IRS’ handling of the missing emails issue in a June 2 court filing, demanding answers about Lois Lerner’s emails, which had been recovered from backup tapes. Judge Sullivan issued the court order on June 4, 2015. ...

The IRS response is due today. Typically, the Obama administration waits until late in the day, especially on Fridays, to release material that makes it look bad. I’ll report back to you next week on the IRS filing. In the meantime, you may want to ask your congressmen and senators why, for the most part, they sit on their hands on the Obama IRS abuses and cover-up while Judicial Watch does all the hard work.

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June 13, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, June 12, 2015

Weekly Tax Roundup

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

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June 12, 2015 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

IRS, Tax Preparation Firms Join Forces To Fight Tax Fraud

ID TheftIR-2015-87 (June 11, 2015), IRS, Industry, States Take New Steps Together to Fight Identity Theft, Protect Taxpayers:

The Internal Revenue Service joined today with representatives of tax preparation and software firms, payroll and tax financial product processors and state tax administrators to announce a sweeping new collaborative effort to combat identity theft refund fraud and protect the nation's taxpayers.

The agreement — reached after the project was originally announced March 19 — includes identifying new steps to validate taxpayer and tax return information at the time of filing. The effort will increase information sharing between industry and governments. There will be standardized sharing of suspected identity fraud information and analytics from the tax industry to identify fraud schemes and locate indicators of fraud patterns. And there will be continued collaborative efforts going forward.

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June 12, 2015 in IRS News, Tax | Permalink | Comments (0)

Will Congress Throw A Wrench In BEPS?

BEPSForbes:  Will U.S. Congress Throw A Wrench In BEPS?, by Joe Harpaz:

No sooner did the Organization for Economic Cooperation and Development (OECD) publish its hotly anticipated guidelines for country-by-country reporting, and the U.S. is already signaling that it may not be in a hurry to jump on the bandwagon.

The OECD guidelines, as I’ve written about before, are part of the agency’s Action Plan on Base Erosion and Profit Shifting (BEPS). BEPS lays out a series of actions designed to realign contemporary tax policy with the realities of the global economy. The most significant of these suggests that companies should file detailed tax reports in every country where they do business.

In theory, this country-by-country reporting requirement would stop companies from using aggressive transfer pricing strategies to route their profits through low-tax regimes so they can avoid heavier taxation in regions with higher corporate taxes, like the U.S. ...

Exactly one day after the OECD implementation package was released, Sen. Orrin Hatch (R-UT) and Rep. Paul Ryan (R-WI), leaders of the Senate Finance Committee and House Ways & Means Committee, respectively, requested that the Treasury Department and IRS provide a memorandum detailing the legal authority for requesting and collecting country-by-country information from U.S. multinational corporations

Setting a clear tone of Congress’ intentions to insert itself into the BEPS discussion from its opening lines, the letter states:

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June 12, 2015 in Tax | Permalink | Comments (0)

Call for Papers: University of North Carolina Tax Symposium

North Carolina Tax SymposiumThe University of North Carolina Kenan-Flagler School of Business has issued a call for papers for its Nineteenth Annual Tax Symposium to be held March 18-19, 2016. The symposium "is designed to bring together leading tax scholars from economics, accounting, finance, law, political science, and related fields." The deadline for the call for papers is December 15, 2015:

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

Republican Governors Start Learning To Like Tax Hikes

Bloomberg, Republican Governors Start Learning to Like Tax Hikes:

Republican leaders who control U.S. states are confronting the consequences of no-new-tax pledges as they face shortfalls and try to preserve education and infrastructure.

Nevada, Kansas and Alabama have enacted or are debating increases in taxes on sales, tobacco, corporate income and other items, and six others have passed higher fuel levies despite a small-government dogma. In Louisiana, Republican lawmakers and Governor Bobby Jindal are engaged in a near-theological debate about what constitutes a tax increase as they seek to close a $1.6 billion budget gap.

Across the nation, 21 states have yet to pass budgets for fiscal 2016, which begins July 1 in most states. After years of post-recession spending cuts and tepid revenue growth, states that came under Republican control with the Tea Party’s rise have reached the limits of austerity. Some Republicans are even willing to violate a pledge backed by anti-tax crusader Grover Norquist to oppose all increases. ...

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June 12, 2015 in Tax | Permalink | Comments (1)

The IRS Scandal, Day 764

IRS Logo 2World, New Details Emerge in IRS Targeting Scandal:

It’s been a little more than two years since a Treasury Department Inspector General report found the Internal Revenue Service used “inappropriate criteria” to target conservative nonprofit groups for extra scrutiny.

“It’s inexcusable, and Americans are right to be angry about it, and I’m angry about it,” said President Barack Obama in a statement issued May 15, 2013, the day after the report. “I’ll do everything in my power to make sure that nothing like this ever happens again.”

The investigation into what happened and who is responsible has unfolded slowly, but lost amid ISIS, presidential campaigns, and international crises, congressional probes continue to uncover new information. This week, during a House Oversight and Government Reform Committee hearing, Republican lawmakers honed in on an IRS official’s disclosure that the agency established a “special project team” to handle all information requests related to the targeting issue.  

Republicans were instantly suspicious because the arrangement apparently involved the IRS chief counsel and acting commissioner—the only two political appointees at the agency. Mary Howard, IRS director of privacy, governmental liaison, and disclosure, said the team included hundreds of attorneys assigned to gather information for both congressional and public inquiries. ...

Rep. Jim Jordan, R-Ohio, who has taken a lead on investigating the targeting, said it could be just as Howard said, but “obviously I’m suspicious based on the track record. “ ...  Jordan said Howard’s testimony raised many new questions the committee decided to formally ask the IRS in a letter sent today.  ...

The two-year-old controversy involves conservative groups who were singled out for extra scrutiny when they applied for 501(c)4 nonprofit status. The Government Accountability Office is currently studying whether the IRS also singled out existing conservative nonprofit groups through the auditing process. Jordan said lawmakers anticipate a report in the near future.

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June 12, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, June 11, 2015

Stiglitz: New Theoretical Perspectives On The Distribution Of Income And Wealth

Joseph E. Stiglitz (Columbia), New Theoretical Perspectives on the Distribution of Income and Wealth Among Individuals:

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

WSJ: Tech Companies Woo Investors With Unconventional Financial Metrics, Inflating Their Valuations

Wall Street Journal, Tech Startups Woo Investors With Unconventional Financial Metrics — But Do Numbers Add Up? Critics Say the Practice Is Inflating Some Companies’ Valuations:

Hortonworks Inc. Chief Executive Rob Bearden forecast in March 2014 that the software firm would have a “strong $100 million run rate” by year-end. But the number looked a lot smaller after Hortonworks went public and then reported financial results: just $46 million in revenue last year.

It turns out that Mr. Bearden wasn’t talking about revenue, though he didn’t say so at the time. The Santa Clara, Calif., company now says the $100 million target was for “billings,” a gauge of future business that isn’t part of generally accepted accounting principles. Mr. Bearden declines to comment.

As young technology companies jostle for investors who will pour money into the firms as they try to make it big and strike it rich, some companies are using unconventional financial terms.

Instead of revenue, these privately held firms tout “bookings,” “annual recurring revenue” or other numbers that often far exceed actual revenue.

WSJ

The practice is perfectly legal and doesn’t violate securities rules because the companies haven’t sold shares in an initial public offering. Public companies can use “non-GAAP” financial terms but must explain them and disclose how they differ from measurements that follow strict accounting rules. ...

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June 11, 2015 in Tax | Permalink | Comments (1)

Mintz & Venkatachalam:The Low-Tax Backlash

Jack Mintz (Calgary) & Ven Venkatachalam (Calgary), The Problem with the Low-Tax Backlash: Rethinking Corporate Tax Policies to Adjust for Uneven Reputational Risks:

When a major corporation is found to be paying little or no taxes, public backlash and media furor over the issue may ensue. Some governments may well be just fine with it, while others like U.S. may take steps to ensure companies pay more tax. Sometimes, companies being in a non-taxpaying position properly reflects appropriate tax policy. That explanation, however, does not sell lattés, which is why in 2012, after the British public grew outraged over the discovery that Starbucks was paying no corporate taxes in the U.K., the coffee retailer actually volunteered to just write a cheque to the government. The reputational damage to Starbucks’ brand, the company calculated, was not worth the money it was saving in avoiding taxes, even if it was doing so perfectly legally.The fear of this kind of reputational damage can foil the very taxation policies that governments design specifically as a means to tax corporations fairly, efficiently and competitively. It may be good tax policy to allow corporations various deductions, or the ability to carry forward or carry back losses, but it can be politically vexatious. U.S. President Barack Obama demonstrated that explicitly when he suggested certain American companies using so-called tax inversions to relocate their headquarters to low-tax jurisdictions, were failing in their “economic patriotism.”Yet more multinationals than ever are legally and quite appropriately using tax strategies to minimize their taxes in various jurisdictions to the point where they are paying little to no corporate tax. For some corporations, the risk of public backlash is greater than it is for others: Starbucks and Facebook, being consumer-facing companies with a great deal of brand goodwill, have a lot more at risk than do Pfizer and Oracle. This risk makes the playing field for taxation less level, jeopardizing the fundamental tax principle of horizontal equity — that those of similar means should pay similar taxes. If Starbucks feels pressured to pay extra taxes, then the tax system is not functioning optimally.This emerging reputational risk is a new dimension governments are going to have to take into account when designing tax policy. Understanding that there is more to consider than the financial implications of a tax policy should and will have an effect on the way policies are designed. One important approach that governments should take is to avoid the practice of targeted tax incentives, such as tax holidays or accelerated depreciation. The reputational risk will see some companies willing to take the government up on tax breaks, but others may prefer to pass. Better to focus on more general corporate tax reductions, which will be less distortive and unfair to those companies at greater risk of reputational damage.

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

CRS: Reform of U.S. International Taxation

CRS LogoCongressional Research Service:  Reform of U.S. International Taxation: Alternatives, by Jane G. Gravelle:

A striking feature of the modern U.S. economy is its growing openness—its increased integration with the rest of the world. The attention of tax policy makers has recently been focused on the growing participation of U.S. firms in the international economy and the increased pressure that engagement places on the U.S. system for taxing overseas business. Is the current U.S. system for taxing U.S. international business the appropriate one for the modern era of globalized business operations, or should its basic structure be reformed?

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June 11, 2015 in Congressional News, Tax | Permalink | Comments (0)

Why Is Obamacare Constitutional While DOMA Was Not?

John R. Dorocak (California State University, San Bernardino), Why is Obamacare Constitutional While DOMA Was Not? How Libertarian Is the Constitution?, 14 Conn. Pub. Int. L.J. 1 (2014):

Despite the Supreme Court's holding in NFIB, that the individual mandate of Obamacare was constitutional as a tax, Obamacare's tax may be unconstitutional under the Direct Tax Clause, the Uniformity Clause, and the Origination Clause of the U.S. Constitution. The conclusion, that Obamacare's tax and individual mandate are unconstitutional even as a tax, may seem far afield from the unconstitutionality of Obamacare as violating liberty rights, the focus of this article. However, the Obamacare legislation may now appear unconstitutional under various constitutional analyses, including as a denial of liberty rights, as a tax, as an exercise of the Commerce Clause, and as an exercise beyond the enumerated powers. Such a conclusion indicates that the various constitutional analyses are in harmony, or that the Constitution is holistic. And, more specifically, a conclusion, that the Obamacare legislation is unconstitutional under a liberty rights analysis as advanced by Justice Kennedy in Windsor and Lawrence, which suggests that the the Constitution is not only holistic but libertarian.

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

Hastert Faces Uphill Legal Battle

HastertFollowing up on Sunday's post, NY Times: The Tax Consequences Of Dennis Hastert's Payments To Alleged Child Abuse Victim:  NBC News, Dennis Hastert Could Face Uphill Legal Battle for Allegedly Lying About Hush Money:

Dennis Hastert spoke in a whisper in a packed federal courthouse Tuesday — his first public appearance since authorities charged him last month with illegally evading banking rules and lying about it to the FBI.

But the former House speaker from Illinois — now embroiled in a sexual misconduct scandal tied to his days as a high school wrestling coach — will have to come in loud and clear to bat away the allegations.

That's because Hastert is in the middle of a legal minefield with charges that are held up not only by an apparent paper trail, but by the 73-year-old former congressman's own mouth, legal experts told NBC News.

"The paper trail is not his biggest problem," said Paul Caron, a professor at Pepperdine University School of Law. "The biggest problem is that he ran his mouth when first questioned by the FBI (last year), which opened himself up to these charges."

"Had he just shut up when questioned, the government would have a much more difficult time proving the (evading) charge," Caron added. "And the lying charge would disappear." ...

"I think the government may see the (bank withdrawal) structuring charge as a way to punish Hastert for the crime that can no longer be prosecuted," said Stephen Gillers, a law professor at New York University.

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June 11, 2015 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 763

IRS Logo 2Wall Street Journal editorial, Return of the Speech Police:

You won’t read much about it in the Beltway press corps, but a behind-the-scenes effort is under way to lobby the Federal Election Commission and Justice Department to stifle free political speech the way the Internal Revenue Service did in 2012. Don’t be surprised if the subpoenas hit Republican candidates at crucial political moments. ...

Criticism of the FEC is part of the left’s strategy to turn the commission into its agent to intimidate conservative groups and limit their political speech. The letter writing campaigns use the same accusations about “dark money” that the groups used to lobby the IRS in the 2012 election cycle.

In September 2011, Democracy 21 and the Campaign Legal Center wrote to then IRS Commissioner Douglas Shulman and Exempt Organizations Director Lois Lerner requesting an IRS probe into whether “certain organizations are ineligible for tax exempt status under section 501(c)(4).” Around the same time, the IRS created its process that targeted conservative groups. The same outfits are back at it, filling the FEC’s docket with complaints that target Republicans or GOP-leaning organizations 75% or more of the time.

If these liberal outfits don’t like Super PACs, they should look in the mirror. Super PACs are the inevitable reaction to campaign-finance limits on candidates. Instead of unleashing another round of political targeting, this time corrupting the Justice Department, true liberals should deregulate politics.

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June 11, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Wednesday, June 10, 2015

Vatican Signs On To FATCA To Help U.S. Track Down Tax Evaders

FATCA PopeWashington Post, Vatican and the U.S. Sign Historic Agreement to Go After Tax Evaders:

The United States on Wednesday signed an agreement with the Vatican to trace American taxpayers hiding assets within the walls of the city-state, the latest step in the Holy See’s push for greater financial transparency.

The U.S. ambassador to the Holy See, Kenneth F. Hackett, signed the intergovernmental agreement with Archbishop Paul Gallagher, the Vatican’s foreign minister, bringing to an end two years of negotiations.

The deal sees the Vatican become the latest of approximately 62 countries to sign on to the U.S. Foreign Account Tax Compliance Act, a 2010 law that allows financial information to be directly reported to authorities in the U.S.

It applies only to U.S. citizens and permanent residents, not organizations, and aims to identify people who are not annually declaring all of their foreign assets to the U.S. Internal Revenue Service.

The information the Holy See is due to hand over under the law should have already been sent to the IRS by individuals, some of whom have already been warned of the new agreement.

U.S. officials would not say how many American individuals hold money at the Vatican, but the number is believed to be rather small, perhaps in the dozens, according to the Vatican Insider.

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June 10, 2015 in IRS News, Tax | Permalink | Comments (1)

Republicans Chop IRS Budget Again, Setting Up Clash With Obama

IRS Logo 2Bloomberg, Republicans Chop IRS Budget Again, Setting Up Clash With Obama:

U.S. House Republicans are proposing a 7.7 percent cut to the IRS budget, setting the boundaries for a budget standoff over the next few months.

With a $10.1 billion budget for the Internal Revenue Service, Republicans rejected President Barack Obama’s call for an 18 percent increase that would allow the beleaguered agency to end a hiring freeze and answer more phone calls from taxpayers.

The parties are now $2.8 billion apart on IRS funding -- a rounding error for the federal budget but an enormous gulf on a politically sensitive topic. ...

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June 10, 2015 in IRS News, Tax | Permalink | Comments (5)

The State Tax Implications Of Paying Student Athletes

NCAAKathryn Kisska-Schulze (North Carolina A&T) & Adam Epstein (Central Michigan), "Show Me the Money!"—Analyzing the Potential State Tax Implications of Paying Student-athletes, 14 Va. Sports & Ent. L.J. 13 (2014):

On March 26, 2014, the Chicago district (Region 13) of the National Labor Relations Board (NLRB) ruled that Northwestern University football players qualify as employees and can unionize and bargain collectively, a decision which contravenes the National Collegiate Athletic Association’s (NCAA) core principle of amateurism. Shortly after, Northwestern University filed an appeal with the NLRB in Washington, D.C. to quash the prior Region 13 decision. This case has added fuel to the longstanding debate over whether student-athletes should be paid. Amidst arguments both for and against supporting the pay-for-play model from a purely compensatory stance, there has been minimal focus on the realistic implications of paying student-athletes from an income tax perspective.

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

Smith: Challenges To Tax Regulations — The APA And The Anti-Injunction Act

Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.), Challenges to Tax Regulations: The APA and the Anti-Injunction Act, 147 Tax Notes 915 (May 25, 2015):

In this report, Smith focuses on post-Mayo tax regulation challenges under the direct review provisions of the Administrative Procedure Act (APA). He examines how those cases overcame the procedural hurdle traditionally presented by the Anti-Injunction Act and argues that in light of the Supreme Court’s recent decision in Direct Marketing Association, the Anti-Injunction Act will likely pose much less of an obstacle to future direct APA challenges to tax regulations. 

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

TIGTA: IRS Can’t Verify Qualifications For Obamacare Subsidies

TIGTAThe Treasury Inspector General for Tax Administration yesterday released Affordable Care Act: Assessment of Internal Revenue Service Preparation for Processing Premium Tax Credit Claims (2015-43-043):

The Patient Protection and Affordable Care Act created a refundable tax credit, referred to as the Premium Tax Credit (PTC), to assist individuals with the cost of their health insurance premiums. Individuals may elect to receive the PTC in advance as partial payment for their monthly premiums (referred to as the Advance Premium Tax Credit (APTC)) or receive the PTC as a lump sum credit on their annual Federal income tax return. Beginning in January 2015, individuals are required to reconcile the APTC and can claim additional PTC on their annual tax return beginning with Tax Year 2014. ...

The overall objective of this review was to assess the status of the IRS’s preparations for verifying the accuracy of PTC claims during the 2015 Filing Season. ...

In response to the delays in receiving required Exchange Periodic Data submissions, the IRS developed contingency plans in an effort to improve its ability to ensure the accuracy of PTC claims.  However, without the required enrollment data from the Exchanges, the IRS will be unable to ensure that all taxpayers claiming the PTC bought insurance through an Exchange as required.

June 10, 2015 in Gov't Reports, IRS News, Tax | Permalink | Comments (2)

The IRS Scandal, Day 762

IRS Logo 2USA Today op-ed:  The IRS Can Still Silence Political Dissent, by Allison R. Hayward:

Two years ago, Lois Lerner of the IRS revealed that it unfairly targeted and delayed Tea Party applications for tax exemption. While the IRS has apologized and promised reform, the agency has not fixed the vague rules that allowed this scandal to happen. As we enter the 2016 election cycle, political activists remain in danger of selective IRS audits, penalties and approvals.

As troubling as this is, we have seen this before. The tax regulation of non-profit advocacy groups has not had a happy history. One pattern repeats: Congress passes a tax law, often to score short-term political points. The IRS then interprets the law aggressively, often against groups with controversial views. Federal courts may soften that blow case by case. Eventually, Congress passes another law and this cycle starts again. ...

We need to learn several lessons from this history. First, the IRS, while effective at collecting taxes, is a poor agency to task with regulating advocacy organizations, especially those, such as the advocacy groups covered under 501(c)(4), that cannot offer donors a tax deduction. At most, only trivial amounts of revenue are at stake from the activity. Whether a certain message, or viewpoint, or advertisement, or tone is proper should not be a concern of the revenuer.

Second, Congress must resist the temptation to even political scores through tax legislation. Not only is it poor governance, it rarely works.

Finally, the courts should remain vigilant in protecting groups from IRS overreach and congressional mischief. Courts should feel free to identify and excise laws, even tax laws, that abridge political freedom.

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June 10, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, June 9, 2015

NY Times: Obama’s Corporate Tax Blunder — BEPS Is A Loser (In Jobs, Revenue) For The United States

BEPSNew York Times op-ed:  Obama’s Corporate Tax Blunder, by Michael Mandel (Progressive Policy Institute):

You probably haven’t heard of the BEPS project — but you soon will. Short for Base Erosion and Profit Shifting, the BEPS Project is the focus of a rapidly moving effort by the Group of 20 countries to create a new set of international tax principles designed to better capture tax revenue from multinational companies like Apple, Google and Starbucks.

The Obama administration signed on to the BEPS Project in the expectation that it would strengthen the American tax base and enable Washington to hold on to more corporate tax revenues. But as the project heads for its end-of-year deadline and the basic shape of the BEPS principles becomes clear, nobody in Washington is paying attention to a simple fact: The United States lost, and lost big.

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June 9, 2015 in Tax | Permalink | Comments (3)

Why The Mortgage Interest Deduction Should Disappear, But Won't

MortgageMoney and Banking, Why the Mortgage Interest  Tax Deduction Should Disappear, But Won't:

In the run-up to the 2012 U.S. Presidential election, Planet Money asked five economists from across the political spectrum for proposals that they would like to see in the platform of the candidates. The diverse group agreed, first and foremost, on the wisdom of eliminating the tax deductibility of mortgage interest. 

The vast majority of economists probably agree. We certainly do. But it won’t happen, because politicians with aspirations for reelection find it toxic.

What inspires us to discuss this now? An important anniversary in our profession’s understanding of economic policy. Forty years ago, in his celebrated book Equality and Efficiency: The Big Tradeoff, Arthur Okun explained how many policy choices involve a tradeoff between the distribution of income and the size of the economy. That is, the more redistributional a policy, the more of a drag it is on growth.

While much of tax policy works this way, the tax deductibility of mortgage interest does not: it both raises inequality and reduces economic efficiency.

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June 9, 2015 in Tax | Permalink | Comments (6)

Borden: Rethinking The Tax-Revenue Effect Of REIT Taxation

Florida Tax ReviewBradley Borden (Brooklyn), Rethinking the Tax-Revenue Effect of REIT Taxation, 17 Fla. Tax Rev. 527 (2015):

Real estate investment trusts (REITs) have recently made headlines in major media outlets and have caught the attention of lawmakers and analysts because they erode the corporate tax base. REITs are not subject to the entity-level tax that typically applies to corporations. To avoid being taxed on real-estate income, some corporations spin off real estate into REITs. After a REIT spinoff, such corporations rent the real estate from the REIT and continue to use it in their operations. Thus, a mere change in corporate form removes taxable income from the corporation (i.e., erodes the corporate tax base) and eliminates the entity-level tax on income from the spun-off real estate. This erosion of the corporate tax base concerns lawmakers (who have proposed prohibiting tax-free REIT spinoffs), some economists, and the media. Another concern is that the IRS has extended REIT classification to entities that hold non-traditional real estate, such as telecommunications infrastructure, billboards, oil and gas pipeline systems, timber, casinos, prisons, and data centers.

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June 9, 2015 in Scholarship, Tax | Permalink | Comments (0)

Hellwig: The United States Tax Court – An Historical Analysis

HellwigPress Release, W&L Law’s Brant Hellwig Publishes Book on U.S. Tax Court:

Washington and Lee law professor and incoming dean Brant Hellwig recently completed a manuscript detailing the historical evolution and jurisdiction of the United States Tax Court.

The text, titled The United States Tax Court – An Historical Analysis, is an expanded second edition of the seminal Tax Court history published by Professor Harold Dubroff in the late 1970s. Dubroff’s edition was written shortly after Congress established the Tax Court as a court of record under Article I of the Constitution.  The Tax Court commissioned Hellwig to update Dubroff’s work in light of the considerable expansion in the Tax Court’s statutory jurisdiction in recent years.

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

Federal Taxation Of Non-resident Aliens' Wagering Gains From Slot Machines

Denis M. McDevitt, Michael D. McDevitt (Hancock & Dana, Omaha), & Drew M. BouchardMr. Park Goes to D.C.: Federal Taxation of Non-resident Aliens' Wagering Gains from Slot Machines and the Per Session Rule, 48 Creighton L. Rev. 65 (2014):

Nonresident alien individuals who visit the United States and play slot machines in a state where slots are legal have always been subject to tax at a thirty percent rate, unless exempted by treaty, on *66 their U.S. source wagering gains as defined by I.R.C. § 871(a)(1)(A). This tax is enforced by a withholding system that requires casinos to withhold thirty percent of each slot jackpot of $1,200 or more and remit those funds to the United States government. The definition of wagering gains was first addressed in Barba v. United States. The Barba case instituted the per-bet rule that defined wagering gains to be equal to gross winnings taxable under I.R.C. § 871(a). Under the per-bet rule, all wagers and wagering losses were never considered in calculating the amount of tax due. The per-bet rule ignored the fact that gambling is by nature a series of individual bets and had the practical result that no foreign slot player could ever recover any of the taxes withheld by the casino on their jackpots. Between 1983 and 2011, no taxpayer ever questioned the per-bet rule and it was not until the case of Sang Park v. Commissioner, a case recently decided by the United States Court of Appeals for the District of Columbia Circuit, that a court revisited the issue of defining wagering gains for purposes of I.R.C. § 871(a).

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June 9, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 761

IRS Logo 2Judicial Watch Press Release, Federal Court Issues Ruling Compelling IRS to Provide Answers on Lerner IRS Emails:

Judicial Watch announced that Judge Emmet Sullivan of the U.S. District Court for the District of Columbia granted a Judicial Watch request to issue an order requiring the IRS to provide answers by June 12, 2015, on the status of the Lois Lerner emails the IRS had previously declared lost.  Judicial Watch raised questions about the IRS’ handling of the missing emails issue in a court filing on June 2, 2015, demanding answers about Lois Lerner’s emails, which had been recovered from backup tapes.  Judge Sullivan issued the court order on June 4, 2015.

Judicial Watch has argued that the IRS misled the court and Judicial Watch by withholding the truth about the existence and content of the backup tapes.  In response to Judicial Watch’s litigation and pressure from Congress, some of Lerner’s emails had been recovered by the Treasury Inspector General for Tax Administration (TIGTA) despite testimony from the IRS Commissioner and representations to Judge Sullivan that Lerner’s emails had been irretrievably lost and destroyed. ...

“The Obama IRS obstructed and lied to a federal judge and Judicial Watch in an effort to hide the truth about Lois Lerner’s emails,” said Judicial Watch President Tom Fitton. “The IRS, including its top political appointees IRS Commissioner John Koskinen and General Counsel William J. Wilkins, has much to answer for over its contempt of court and of Congress.  And the Department of Justice officials enabling this cover-up in court need to be held accountable, as well.  The IRS is out of control and Judicial Watch is happy that Judge Sullivan has taken this key step to remind the agency that it is accountable to the rule of law and the American people.”

 

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

Monday, June 8, 2015

Morse: Safe Harbors, Sure Shipwrecks

Safe HarborSusan C. Morse (Texas), Safe Harbors, Sure Shipwrecks, 49 UC Davis L. Rev. ___ (2016):

In law, a safe harbor describes behavior that will not be penalized, and leaves other facts that fall outside the safe harbor to be judged case-by-case. A sure shipwreck, as I call it, is the mirror image. It describes behavior that violates the law as a matter of rule, and leaves other conduct to be judged by a standard. Prior literature analyzes rules and standards at length. But it has largely missed safe harbors and sure shipwrecks, even though these hybrids are everywhere in statutory, regulatory and case law.

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June 8, 2015 in Scholarship, Tax | Permalink | Comments (0)

NY Times: As FIFA Scandal Grows, Focus Turns To Auditor KPMG

FifakpmgNew York Times, As FIFA Scandal Grows, Focus Turns to Its Auditors:

Despite longstanding suspicion of corruption, world soccer’s governing body has received a clean bill of financial health for 16 consecutive years from KPMG, one of the world’s top auditing, accounting and consulting firms.

No one has challenged the accuracy of the annual reports of the body, FIFA, which are prepared according to international accounting standards by KPMG’s office in Zurich, where FIFA is based. But that only heightens the puzzling disconnect between the different pictures that are emerging of FIFA as an organization: riddled with bribes and kickbacks in the view of prosecutors, yet spotless according to the outsider most privy to its internal financial dealings.

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June 8, 2015 in Tax | Permalink | Comments (2)

WSJ: The New Rules Of Offshore Accounts

WSJWall Street Journal:  The New Rules of Offshore Accounts, by Laura Saunders:

Crucial deadlines are approaching for millions of U.S. taxpayers who live abroad or have offshore financial ties.

For expatriates, the annual income-tax filing deadline is normally June 15, instead of April 15. In addition, all U.S. taxpayers with offshore accounts totaling more than $10,000 in 2014—regardless of where they live—have until June 30 to file FinCen Form 114, known as Fbar, a report giving details of the accounts.

Despite the prospect of stiff penalties for nonfiling that can claim 50% or more of an offshore-account balance, many people who probably should be filing the necessary forms aren’t doing so. The U.S. State Department recently raised its estimate of the number of U.S. citizens living abroad to 8.7 million from 7.6 million, not including military personnel—yet fewer than one million people a year file forms that are often required for routine foreign accounts. ...

Taxpayers confronting these issues often face tough decisions, such as how or whether to come clean about past missteps and comply with especially onerous rules in the future. Some of them are even considering whether to retain their U.S. citizenship.

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June 8, 2015 in Tax | Permalink | Comments (0)

Joint Tax Committee Releases IRS Disclosures of Tax Return Information, 2014

Joint Tax CommitteeThe Joint Committee on Taxation has released Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 2014 (JCX-89-15):

Section 6103(p)(3)(C) provides that the Secretary of the Treasury shall, within 90 days after the close of each calendar year, furnish to the Joint Committee on Taxation for disclosure to the public a report which provides, with respect to each Federal agency and certain other entities, the number of: (1) requests for disclosure of returns and return information (as such terms are defined in § 6103(b)); (2) instances in which returns and return information were disclosed pursuant to such requests or otherwise; and (3) taxpayers whose returns, or return information with respect to whom, were disclosed pursuant to such requests. In addition, the report must describe the general purposes for which such requests were made.

Pursuant to § 6103(p)(3)(C), the IRS prepared a disclosure report for public inspection covering calendar year 2014. ... This document sets forth the report of the IRS, verbatim.

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June 8, 2015 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

Fleischer: How A Carried Interest Tax Could Raise $180 Billion

NY Times Dealbook (2013)New York Times Deal Book:  How a Carried Interest Tax Could Raise $180 Billion, by Victor Fleischer (San Diego):

When Hillary Rodham Clinton opened her campaign for the Democratic presidential nomination in Iowa, the first substantive issue she raised was a safe one: carried interest. “There’s something wrong when hedge fund managers pay lower tax rates than nurses or the truckers that I saw on I-80 as I was driving here,” she said.

President Obama also raised the issue at a recent forum on inequality, calling fund managers our society’s “lottery winners.” Taxing carried interest at a low rate is, for many of us, a simple issue of fairness. The richest among us should not pay tax at a low rate on labor income.

Private equity moguls and other defenders of the status quo object to the characterization of carried interest as labor income. But they also argue that there just isn’t that much money at stake.

Taxing carried interest at ordinary income rates would raise about $18 billion over 10 years, according to a Treasury estimate of President Obama’s recent budget proposal. The Joint Committee on Taxation, which scores congressional legislation, has made similar estimates in the past.

One or two billion dollars a year is more than most of us can find in between the seat cushions. It would roughly double what Congress gives the I.R.S. to spend on information technology. Still, the number is small enough that it makes raising the issue seem petty and vindictive. Referring to carried interest has become a badge of solidarity, a touchstone for measuring class allegiances.

We should not overlook the substance of the issue. By my calculations, the government’s estimate is low by an order of magnitude. Taxing carried interest at ordinary rates would generate about $180 billion in revenue over 10 years. ...

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June 8, 2015 in Tax | Permalink | Comments (2)

Death Of Len Terr

TerrLeonard B. Terr, a tax partner at Baker & McKenzie (Washington, D.C.), died last Tuesday at the age of 69.  Here part of the obituary in the Washington Post:

Len is survived by his wonderful family of which he was tremendously proud: his wife, Linda, his children, Jessica, Jeremy, Amanda and Ashley, and his two beautiful grandsons, Evan and Nate.

Len was born in Atlantic City, NJ, and grew up in Philadelphia where he graduated from LaSalle College in 1967. He went on to obtain his A.M. and Ph.D. from Brown University in 1968 and 1971 respectively. Before taking up law, he was an instructor in English at Brown University, and an assistant professor of English at Wayne State University and Elmira College. ... His poetry was published in numerous literary publications. Len consistently reflected in his daily life this diverse and deep background in the arts, and shared it with friends and colleagues through his charming wit and eloquence.

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June 8, 2015 in Obituaries, Tax | Permalink | Comments (0)

Crespi: The 'Tax Bomb' Facing Lawyers Who Enroll In Income-Based Student Loan Repayment Plans

IBRGregory Scott Crespi (SMU), Should We Defuse the "Tax Bomb" Facing Lawyers Who are Enrolled in Income-Based Student Loan Repayment Plans?:

Starting in the early-2030's each year thousands of mid-career lawyers who have previously incurred large student loan debts, and who unfortunately have been able to earn only relatively modest annual incomes in the 20 or 25 years following their law school graduation, will be subject to large cancellation of indebtedness-based federal and sometimes also state income tax obligations. These tax bills will often be in the neighborhood of $50,000 to $100,000 and in some instances even larger. Many of these lawyers will likely have failed to adequately provide for this large tax obligation and will find that it will impair or even devastate their retirement plans.

The phrase “tax bomb” is an apt one to describe this large tax obligation that will be imposed on income that is attributed to but not actually received by a relatively small group of taxpayers. It will result because a large portion of the student loan debts that have been incurred by many law school graduates will eventually be forgiven under one or another variant of the increasingly popular federal Income-Based Repayment Plan, and those forgiven debts will then be treated under the Internal Revenue Code as taxable income.

This article explains how this tax bomb was created and how the various statutes and regulations that define its scope and size have evolved over time, and how much but not all of its impact will be substantially reduced by the Department of Education’s proposed new Revised Pay as You Earn rules that will be in force as of December of 2015.

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June 8, 2015 in Legal Education, Scholarship, Tax | Permalink | Comments (14)

The IRS Scandal, Day 760

IRS Logo 2Forbes, IRS' Lois Lerner Got Pension, $129K Bonus, New Call For Criminal Charges, by Robert W. Wood:

 Many Republicans are still upset that Lois Lerner of the IRS got a pass from the Obama Justice Department. As the IRS scandal hit day 750, 24 Republicans sent a letter to Attorney General Loretta Lynch, who recently replaced Eric Holder as the nation’s top law enforcement officer. It seems unlikely that the new AG will upset the apple cart. Still, the 24 House members want the new AG to criminally prosecute Lois Lerner, the IRS official at the center–if not the top–if the agency’s targeting scandal. ...

Ms. Lerner will probably not face any further action. Yet while she presided over alleged discrimination against conservative nonprofits, Ms. Lois Lerner received $129,000 in bonuses. Some people have asked but for what.

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

TaxProf Blog Weekend Roundup

Sunday, June 7, 2015

NY Times: The Tax Consequences Of Dennis Hastert's Payments To Alleged Child Abuse Victim

HastertNew York Times:  When It’s a Crime to Withdraw Money From Your Bank, by Josh Barro:

Dennis Hastert has not been indicted on a charge of sexual abuse, nor has he been indicted on a charge of paying money he was not legally allowed to pay. The indictment of Mr. Hastert, a former House speaker, released last week, lays out two counts: taking money out of the bank the wrong way, and then lying to the F.B.I. about what he did with the money. ...

Paul Caron, a tax law professor at Pepperdine University, noted that the person who was paid money by Mr. Hastert may have owed income tax on the payments, whether they constituted a settlement, extortion or something else. Yes, even proceeds from extortion are taxable income; there was a Supreme Court case about the matter in 1952.

New York Times:  If Hastert Was Extorted, He Could Deduct Some Losses From His Taxes, by Josh Barro:

When I was researching my article about Dennis Hastert’s indictment on charges that he improperly withdrew large sums of money from a bank, one question I had was whether any tax was owed on the payments Mr. Hastert was said to have made.

For tax purposes, were the payments gifts? Fees? A settlement? Hush money? Any of these options would have tax implications — implications that could provide additional justification for the prosecution, since one of the key motivations of anti-money laundering laws is to prevent people from evading taxation by making large payments in cash.

Tax experts I spoke with agreed that the payments would constitute a settlement or extortion. In either case, the responsibility for reporting the payments would lie not with Mr. Hastert but with the payments’ recipient, identified in the indictment as “Individual A.”

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

The Top 5 Tax Paper Downloads

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

  1. [287 Downloads]  Taxation of E-Commerce, by Orkhan Abdulkarimli (Baku State)
  2. [206 Downloads]  Tax Compliance as a Wicked System, by J. T. Manhire (U.S. Treasury Department)
  3. [166 Downloads]  Reducing Inequality With A Retrospective Tax On Capital, by James Kwak (Connecticut)
  4. [144 Downloads]  Citizenship Taxation, by Ruth Mason (Virginia)
  5. [123 Downloads]  What Does Voluntary Tax Compliance Mean?: A Government Perspective, by J. T. Manhire (U.S. Treasury Department)

June 7, 2015 in Legal Education, Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 759

IRS Logo 2Fox News op-ed:  More IRS Outrage: Agency Used 'Hundreds of Lawyers' to Hide Information from Congress, by Jay Sekulow:

It’s been a very bad week for the Internal Revenue Service (IRS) – which translates into a very bad week for the American people. ...

Now, we learn that as Congress began its investigation into the unlawful scheme targeting conservative and Tea Party groups the IRS used “hundreds of attorneys” to hide critical information from Congress.

According to new bombshell testimony, the IRS set up a previously unknown “special project team” comprised of “hundreds of attorneys,” including the IRS Chief Counsel (one of only two politically appointed positions at the IRS).

The “special project” this team was given?  Concealing information from Congress.

The IRS’s director of privacy, governmental liaison, and disclosure division, Mary Howard, testified that soon after the IRS targeting scandal was revealed, the IRS “amassed hundreds of attorneys to go through the documents [requested by Congress] and redact them.” She told Congress that once the “special project team” was created and operational, she never saw requests for information.

Her testimony is clear: As soon as the IRS targeting scandal broke, the IRS set up a special team of hundreds of attorneys, including President Obama’s political head of the Chief Counsel’s office, to keep requests for publicly available information away from the person who would normally review those documents and turn them over to Congress and the public.  That “special” team then overly redacted, delayed, and determined which documents it wanted Congress to see.

After setting up a special “group” to target and delay applications by Tea Party groups for tax-exempt status, the IRS set up a new “special project team” to delay and redact information from Congress about that targeting.  Talk about a cover-up.

When asked about these revelations and the ongoing investigation by Congress into the IRS and former top IRS official Lois Lerner’s involvement, Howard testified, “I think that Lois Lerner was the tip of the iceberg.”

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