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Thursday, November 6, 2014

The IRS Scandal, Day 546

IRS Logo 2Forbes, IRS Memo Claims Forbes Story Influenced Tax Exempt Decision Involving Billionaire, by Janet Novack:

A newly uncovered Internal Revenue Service memo lends support to billionaire investor Peter R. Kellogg’s claim that the IRS tax exempt division may have improperly taken press coverage –and specifically a Forbes cover story–into account before making a decision that cost him a bundle.

Kellogg K +0.22% and IAT Reinsurance Co. Ltd, the Bermuda-based insurance company his family owns, are suing the IRS for refunds of $186 million in taxes and interest they paid after the IRS revoked IAT’s qualification as a tax exempt 501(c)(15) insurance company retroactively. The lead of a March 2001 Forbes cover story on the proliferation of edgy tax shelters exposed Kellogg’s use of IAT to shield hundreds of millions in capital gains from tax. At that time, promoters were pushing the 501(c)(15) ploy to small business owners, particularly car dealers, as a tax shelter. After the Forbes story appeared, the IRS listed the Producer Owned Reinsurance Company (PORC) as a potentially abusive tax shelter and began an enforcement project.

The surprising IRS memo is disclosed in filings in the U.S. Court of Federal Claims where Kellogg and the government are battling over whether internal IRS documents and IRS officials’ thought processes and motivations are subject to discovery and can be used as evidence in his refund suits. The memo, a January 2010 Appeals Case Memorandum (ACM) from three IRS appeals officers, argues the IRS should reconsider the Technical Advice Memoranda (TAMs) that retroactively revoked IAT’s tax exemption and that of another Kellogg owned insurance company.

The ACM asserts that originally the TAMs were favorable to Kellogg and that then Tax Exempt Commissioner Steven Miller was persuaded “to go adverse because of the ramifications” to the PORC project “to no-change the very taxpayer (Kellogg) that started this project because of the Forbes article.” The memo adds: “We believe a `fresh-look’ is needed as to the facts of these cases in applying the laws as is without regard to the outside publicity.’’

Miller went on to become Acting IRS Commissioner and resigned from the agency in May 2013 amid the ongoing controversy over IRS targeting of Tea Party and certain other groups for extra scrutiny in the tax exemption process. Internal IRS documents suggest that Tea Party groups were first flagged because of media attention to political groups’ use of the 501(c)(4) exemption. Lois Lerner, a central figure in the exempt scandal who has been held in contempt of Congress by the Republican controlled House, was particularly sensitive to criticism that the IRS was letting 501(c)(4) organizations get away with too much political activity.

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November 6, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, November 5, 2014

Tax Reform After the Midterm Election

Brookings Institution:  Tax Reform: One Shining Moment or “Blah, Blah, Blah”, by William G. Gale:

Given that prospects for tax reform were virtually nil before the election, the Republican recapture of the Senate has to have made prospects for tax reform better. But I still have the strong sense that tax reform will be a tough slog in the next Congress. ...

Rather than actually enacting tax reform, it seems much more likely that the sides will fight about whether to use dynamic scoring methods that account for macro economic feedback in response to tax changes. While it may seem obvious that the Republicans can implement such changes, given they will control both houses of Congress, it is nowhere near a slam dunk, as there appear to be a number of procedural obstacles that have to be dealt with. And dynamic scoring raises as many economic issues as it resolves.

It is a good bet that the new Republican Congress will continue to talk about tax reform. That is safe ground for Republicans generally. And, of course, seemingly impossible things do sometimes happen. But I wouldn’t bet on tax reform. 

November 5, 2014 in Tax | Permalink | Comments (0)

WSJ: Ireland to Ramp Up Corporate Tax Avoidance by Replacing 'Double Irish' With 100% Amortization of IP on Way to 'Knowledge-Development Box'

DOuble IrishWall Street Journal, Ireland Moves to Close One Tax Break and Opens Another; Bill to End “Double Irish” Also Offers Corporate Tax Cuts on Intellectual Property:

As the Irish government moves to close one door to corporate tax avoidance, it is opening another.

Tucked into legislation to eliminate a much criticized tax structure known as the “Double Irish” is a separate provision that would allow companies to pay no corporate tax on profits earned from patents, licenses and other intellectual property.

The legislation, which would expand a current tax break that allows companies to shield 80% of that income, also proposes to add customer lists to the types of intellectual property that can be covered.

The expanded tax provision proposed in the Irish budget would give companies an incentive to make Ireland the home for their intellectual property—some of it now tied up in Double Irish structures—as well as give them a simpler means to shield some of the same income from taxes. ...

Last month, Ireland touted how the legislation would eliminate the Double Irish, a tax avoidance measure that uses a twist in Irish law to send royalty payments for intellectual property from one Irish-registered subsidiary to another that resides for tax purposes in a country with no corporate income taxes. While the total number of companies that use the structure isn’t publicly disclosed, hundreds have funneled tens of billions of dollars a year in profit to tax havens via Ireland, including many practitioners in the technology and pharmaceutical sectors, tax experts say.

The tax break could in theory benefit technology companies like Google Inc. or pharmaceutical firms like Gilead Sciences Inc., which have moved intellectual property into Irish corporate structures.

At least 249 companies used the provision in 2012, according to figures from Ireland’s tax office, the Revenue Commissioners, providing tax relief valued at €108 million ($135 million). But that total may understate the expanded provision’s potential scope. Companies have had little need to reduce the bite from Irish taxes for their intellectual property income when they could use structures like the Double Irish to escape such taxes altogether. ...

The expanded tax break is seen by proponents as a way to keep Ireland competitive as a destination for intellectual property as it prepares a longer-term package of regulations governing how such assets would be taxed. That package, referred to as the “knowledge development box,” has yet to be formalized.

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November 5, 2014 in Tax | Permalink | Comments (0)

The IRS and The Case of the Cockamamie Killer

CaseDavid M. Brown, The Case of the Cockamamie Killer (2011):

You can't avoid death and taxes. Or is that murder and taxes? That would depend on who is doing the collecting.

When a colleague is slain in cold blood, tough-guy word processor and private detective Chak Charon investigates—and soon finds himself out of a job, abducted from his apartment, and audited within an inch of his life. He takes refuge in a lower-Manhattan boarding house and proceeds to discover a dirty little secret: that the Internal Revenue Service is developing a computer virus designed to scavenge the private financial data of unsuspecting citizens. (Scratch that. Let's say that a "rogue IRS agent" is developing the virus. As we keep hearing in the news, it is extremely difficult for the IRS to know anything about what is happening inside the IRS.)

Meet the sullen fast-food clerk who has trouble filling special orders...the department supervisor whose every gesture is by-the-book...the socially-conscious housemates of Grubgeous Street...the sulky, seductive hustler...the other sulky, seductive hustler...the power-lusting bureaucrat...the software-slinging private eye who won't take "Get lost!" for an answer.

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November 5, 2014 in Book Club, Tax | Permalink | Comments (1)

Acquittal of Ex-UBS Executive Deals Blow to DOJ in Tax Crackdown

The IRS Scandal, Day 545

IRS Logo 2Breitbart:  Read: Jeanne Shaheen-IRS Memos on Conservative Group Targeting:

The IRS memos to and from incumbent Democratic Sen. Jeanne Shaheen (D-NH) indicate she was involved in the actual investigative activities targeting Tea Partiers.

The memos, obtained by Breitbart News and published here, show a series of letters Shaheen and other Democratic Senators exchanged with then IRS commissioner Doug Shulman and then IRS deputy commissioner for services and enforcement Steven Miller—not just the one memo published by The Daily Caller’s Patrick Howley late Monday evening right before the election.

The memos are responses to two different letters Shaheen and a whole group of Democrats such as Sen. Chuck Schumer (D-NY), Al Franken (D-MN), Michael Bennet (D-CO), and Tom Udall (D-NM), among others. The responses are directed specifically to Shaheen, seemingly indicating that she was the point person for the Senate Democrats’ efforts to leverage the IRS into targeting conservative and Tea Party groups. ...

The letters Shaheen and her Democratic colleagues sent to the IRS have long been public, but the detailed responses from the IRS to her are brand new—and came out just before the election. They seem to indicate that Shaheen was kept apprised of, and was involved in, the intricate layers of the IRS targeting of Tea Partiers—which has since been widely panned in the wake of several congressional investigations. Basically, the fact that Democratic senators – especially Shaheen – were deeply involved in the targeting scandal has always been suspected but never confirmed—until now.

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November 5, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, November 4, 2014

Blank Presents Reconsidering Corporate Tax Privacy Today at Minnesota

BlankJoshua D. Blank (NYU) presents Reconsidering Corporate Tax Privacy, 11 N.Y.U. J. L. & Bus. ___ (2014), at Minnesota today as part of its Perspectives on Taxation Lecture Series hosted by Kristin Hickman:

For over a century, politicians, government officials and scholars in the United States have debated whether corporate tax returns, which are currently subject to broad tax privacy protections, should be publicly accessible. The ongoing global discussion of base erosion and profit shifting by multinational corporations has generated calls for greater tax transparency. Throughout this debate, participants have focused exclusively on the potential reactions of a corporation’s managers, shareholders and consumers to a corporation’s disclosure of its own tax return information. There is, however, another perspective: how would the ability of a corporation’s stakeholders and agents to observe other corporations’ tax return information affect the corporation’s compliance with the tax law?

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November 4, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Aggressive Planning Saves John Malone Billions in Taxes

Bloomberg:  Malone Gained Double Tax Break in Liberty Address Shift,  by Jesse Drucker:

MaloneShifting the address of his Liberty Global Inc. from Colorado to London last year didn’t just put billionaire John C. Malone in a position to reduce his company’s tax bill.

He also took precautions to avoid the capital-gains hit that the so-called inversion would trigger for him and other investors. The day before the deal was announced, Malone -- the company’s chairman and controlling shareholder -- transferred $600 million of his shares into a tax-exempt charitable trust. He avoided paying taxes on his remaining stake, worth about $260 million, by exploiting IRS regulations meant to block a different loophole.

All told, Malone escaped about $200 million in personal taxes, and Liberty Global’s U.S. shareholders together likely saved more than a billion dollars, according to data compiled by Bloomberg.

“He’s congenitally averse to paying taxes,” said Robert Willens, an independent tax accounting analyst in New York City.  

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November 4, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

The Unicap Regs and Trademark Royalties

Florida Tax ReviewGlenn Walberg (Vermont), Wrestling Control from the Unicap Regulations: The Irrelevance of Quality Control in Determining Capitalizable Trademark Royalties, 16 Fla. Tax Rev. 223 (2014):

Taxpayers generally must capitalize direct and indirect costs attributable to their production of inventory. Due to uncertainty about whether this requirement applies to sales-based trademark royalties, the regulations now clarify that these royalties are indeed capitalizable as indirect production costs. However, the regulations also let taxpayers allocate these sales-based costs entirely to cost of goods sold. So, to the relief of taxpayers, the regulations have the practical effect of permitting immediate cost recovery — similar to a business expense deduction — for sales-based royalties.

This Article questions the rationale for treating trademark royalties as capitalizable indirect costs. It argues that the regulations inappropriately rely on a licensor’s retention of control over product quality to link a licensed mark with inventory production and hence treat the associated royalties as production costs. The Article finds such reliance inappropriate because every valid trademark license involves a retention of control and the significance of control has diminished in modern trademark law and licensing practices. The Article further explains how this focus on control inadvertently makes all trademark royalties (including minimum and upfront royalties) capitalizable as indirect costs and therefore potentially allocable to ending inventory.

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November 4, 2014 in Scholarship, Tax | Permalink | Comments (0)

Avi-Yonah: What We Can Learn from the Tax Reform Act of 1986

Reuven Avi-Yonah (Michigan), Reinventing the Wheel: What We Can Learn from the Tax Reform Act of 1986:

This paper has suggested that as we consider tax reform in 2014 and thereafter, we should revert to some of the positive features of TRA 86, updated to reflect increasing globalization. Specifically:

  • The top individual rate, the KG rate and the dividend rate should be set at 28%;
  • The corporate rate should also be set at 28%;
  • Corporations should be taxed on global income with no deferral or exemption.

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November 4, 2014 in Scholarship, Tax | Permalink | Comments (0)

Corporate Inversions Could Mean Big Tax Bills For Shareholders

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

November 4, 2014 in Tax | Permalink | Comments (0)

Bankman & Caron: Tax Scholarship in a Time of Fiscal Crisis

Joseph Bankman (Stanford) & Paul L. Caron (Pepperdine), California Dreamin': Tax Scholarship in a Time of Fiscal Crisis, 48 U.C. Davis L. Rev. ___ (2014):

This essay makes three claims about the current state of tax law and academic tax scholarship in America: (1) the federal budget imbalance, caused by the failure of both political parties to raise the tax revenues needed to fund the nation’s spending priorities, is unsustainable and threatens our nation’s future; (2) tax scholars need to shift our focus from technocratic work to systemic solutions to the existential threat posed by this fiscal gap; and (3) California’s response to its seemingly intractable budget problems provides a template for resolving the federal budget stalemate in Washington, D.C.

Two years ago, both California and the nation were imperiled by long-term, structural, budget imbalances. California has reduced that peril by raising (already high) personal tax rates on the wealthy. The political success of that approach suggests that at the national level, Americans might be willing to support higher rates to maintain government services and move toward fiscal solvency.

The fiscal crisis highlights a problem with the dominant conception of legal tax scholarship. Under that conception, scholarship is (or should be) apolitical and confined to subjects about which the writer can demonstrate mastery. Unfortunately, the most pressing problem in the field is inescapably political and requires the scholar to address some issues about which no one can master. If we hew to a restrictive definition of scholarship, we limit our voice on a subject about which we have much to say.

November 4, 2014 in Scholarship, Tax | Permalink | Comments (1)

2015 U.S. News Law Firm Tax Rankings: Skadden Is #1

Best Law FirmsU.S. News and Best Lawyers have released their fifth annual ranking of over 12,000 law firms in 120 practice areas, in both a national ranking and separate rankings of firms in 174 metropolitan areas (methodology). The rankings are based in part on 5.5 million evaluations of 52,488 lawyers collected by Best Lawyers in its most recent annual survey.

One law firm in each of the 120 practice areas was named the 2015 Law Firm of the Year. Skadden is the 2015 Law Firm of the Year in Tax.

The rankings group law firm practice areas in three tiers. Here are the 244 law firms ranked in tax:

Tier 1:

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November 4, 2014 in Tax | Permalink | Comments (1)

Pittsburgh IRS Agent Tried to Bribe Police After Being Arrested at Steelers Game

CBS Pittsburgh,  Police: Man Arrested For Kicking Heinz Field Barriers, Trying To Bribe Officers:

A man was arrested after injuring a woman by kicking a steel barrier at Heinz Field Sunday evening. According to police, 29-year-old Stephen Sapp was intoxicated at the time of the incident. ...

Sapp sustained some cuts in the struggle [with police] and was transported to UPMC Mercy Hospital for treatment. While at the hospital, Sapp allegedly tried to bribe officers to let him go. According to the criminal complaint, Sapp stated, “Listen, I know how this works. How much money will it take to make this go away and to let me go home today?”

The officers informed Sapp that he could not attempt to bribe them, but Sapp continued. “Look, I am an IRS agent and I can help you in other ways if you let me go home and make this go away.”

WTAE, IRS Confirms Worker Arrested at Heinz Field; Police: Stephan Sapp Kicked Out of Steelers Game, Gets Violent, Offers Bribe

November 4, 2014 in IRS News, Tax | Permalink | Comments (3)

The IRS Scandal, Day 544

IRS Logo 2Recent filings in the U.S. District Court for the District of Columbia in Judicial Watch v. IRS, No. 13-1559-EGS:

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November 4, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, November 3, 2014

Bankman & Shaviro: Piketty in America: A Tale of Two Literatures

PikettyJoseph Bankman (Stanford) & Daniel N. Shaviro (NYU), Piketty in America: A Tale of Two Literatures, 68 Tax L. Rev. ___ (2014):

Thomas Piketty’s widely-noted and bestselling book, Capital in the Twenty-First Century, does much to advance our empirical understanding of rising high-end wealth concentration, which is one of the central issues of our time. But its theoretical approach and policy recommendations differ sharply from those that have been prevalent in recent decades in the Anglo-American academic tax policy literature. We adjudicate this “confrontation” (insofar as it is one), and find that each approach in some respects both undermines and enriches the other. We find that the optimal tax response to wealth concentration is significantly more complicated than Piketty’s analysis recognizes. This is particularly true in the United States, where rising high-end wealth concentration has been driven by heterogeneous human capital, and where Piketty’s proposed wealth tax would face a substantial risk of being held unconstitutional.

November 3, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Weinzierl Presents The Promise of Positive Optimal Taxation Today at Loyola-L.A.

WeinzierlMatthew Weinzierl (Harvard Business School) presents The Promise of Positive Optimal Taxation at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

A prominent assumption in modern optimal tax research is that the objective of taxation is Utilitarian. I present new survey evidence that most people reject this assumption’s implications for several prominent features of tax policy, instead preferring tax policies based at least in part on a classic alternative objective: the principle of Equal Sacri…fice. I generalize the standard model to accommodate this preference for a mixed objective, proposing a method by which to make disparate criteria commensurable while respecting Pareto efficiency. Then, I show that optimal policy in this generalized model, calibrated to the survey evidence and U.S. microdata, is capable of quantitatively matching several features of existing tax policy that are incompatible in the conventional model but widely endorsed in the survey and reality, including the coexistence of substantial redistribution and limited tagging. Together, these fi…ndings demonstrate the potential of a positive theory of optimal taxation.

David Gamage (UC-Berkeley) is the commentator.

November 3, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Moretti & Wilson Present Taxation, Migration, and Innovation: The Effect of Taxes on the Location of Star Scientists Today at UC-Berkeley

MorettiWilsonEnrico Moretti (UC-Berkeley, Department of Economics) & Daniel Wilson (Federal Reserve Bank of San Francisco) present Taxation, Migration, and Innovation: The Effect of Taxes on the Location of Star Scientists at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

This paper estimates tax-induced mobility of star scientists. Surprisingly there is  little research on tax-induced mobility of “economically valuable” individuals.

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November 3, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

District Court Refuses to Dismiss Suspended Practitioner's Lawsuit Against IRS Office of Professional Responsibility

IRS Logo 2In press reports last month, Karen Hawkins, Director of the IRS Office of Professional Responsibility ("OPR"), was quoted as saying that although she first "laughed" at the argument in Sexton v. Hawkins that OPR lacked jurisdiction over a suspended practitioner (a tax lawyer with a tax LL.M.), after  Ridgely v. Lew (more here) "there are some judges out there that would buy that now."  Last Thursday, the Federal District Court in Nevada rejected the Government's motion to dismiss Sexton's complaint againt the OPR.   Sexton v. Hawkins, No. 2:13-cv-00893 (D NV Oct. 30, 2014).

November 3, 2014 in IRS News, New Cases, Tax | Permalink | Comments (0)

Law Firms Join Lobbyists to Defend Inversions

National Law Journal, 'Inversion' Finding Its Defenders; Lobbyists Line Up Behind Controversial Tax Tactic:

Law firms have joined a growing army of lobbying shops on Capitol Hill to ensure that AbbVie Inc., Walgreen Co. and other U.S. companies are part of the conversation about a controversial tax-lowering tactic.

Inversions

November 3, 2014 in Tax | Permalink | Comments (0)

Sullivan: The Tax Aspects of Immigration Reform

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), The Tax Aspects of Immigration Reform, 145 Tax Notes 463 (Nov. 3, 2014):

Against all odds, Obama, who would love to include immigration reform as part of his legacy, and Republican leaders in Congress, who want their party to be competitive in the 2016 presidential election and to show they can get things done, are likely to make a serious attempt at putting together a bipartisan, bicameral deal on immigration in 2015. The estimates presented in this article are based on numerous assumptions about which there is considerable uncertainty, so they can hardly be taken as gospel. But the central finding, concerning the large difference in the revenue effects between legal and unauthorized immigration, is difficult to dispute given the differences in average income levels and the fact that many currently unauthorized immigrants already pay tax. As Congress struggles to fix our broken immigration system, it is likely to consider many variations of S.744 and its components. Those proposals that allow a large influx of new legal immigrants — particularly immigrants with high skills—will significantly increase tax revenue. Providing new legal status for current unauthorized immigrants will not.

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November 3, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Tax Section Programs at 2015 AALS Annual Meeting

AALS (2016)From AALS Tax Section Chair Miranda Fleischer (San Diego):

The AALS Tax Section is sponsoring two programs at this year’s AALS annual meeting, which will be held January 2 to 5, 2015 at the Marriott Wardman Park in Washington, D.C. We are also arranging an off-site dinner Friday night the 2nd; details to follow.

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November 3, 2014 in Conferences, Legal Education, Tax | Permalink | Comments (0)

Tax Profs' Brief in Direct Marketing Association v. Brohl

Brief of Interested Law Professors as Amici Curiae Supporting Respondent in Direct Marketing Association v. Brohl (Joseph Bankman (Stanford), Jordan Barry (San Diego), Barbara Fried (Stanford), David Gamage (UC-Berkeley), Andrew Haile (Elon), Alan Morrison (George Washington), Darien Shanske (UC-Davis), Kirk Stark (UCLA), John Swain (Arizona) & Dennis Ventry (UC-Davis)):

The petitioner in this case has framed the question presented as follows: “Whether the Tax Injunction Act bars federal court jurisdiction over a suit brought by non-taxpayers to enjoin the informational notice and reporting requirements of a state law that neither imposes a tax, nor requires the collection of a tax, but serves only as a secondary aspect of state tax administration.”

Amici agree with the respondent, the State of Colorado, that the Tax Injunction Act bars federal courts from enjoining the operation of the Colorado Statute at issue in this case because this lawsuit is intended to create the very kind of premature federal court interference with the operation of the Colorado use tax collection system that the TIA was designed to prevent. To assist the Court in understanding the application of the TIA to this case, amici (i) place the reporting requirements mandated by the Colorado Statute in the broader context of tax administration and (ii) explain the potential interaction between a decision on the TIA issue in this case and the underlying dispute concerning the dormant Commerce Clause.

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November 3, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 543

TaxProf Blog Weekend Roundup

Sunday, November 2, 2014

NY Times: State Tax Cuts on Trial on Tuesday, Especially in Kansas

New York Times editorial, Tax Cuts on Trial in Governors’ Races:

There is only so long a governor can do great damage to a state before voters start to demand a change. In Kansas, Gov. Sam Brownback, a Republican who has driven down his state’s credit rating and cratered its budget with ill-advised tax cuts, is paying a huge price in popularity for his actions. ...

Mr. Brownback is not the only Republican governor who is struggling this year because extreme policies have failed. Some of the country’s most damaging governors are caught in tossup races with Democrats, fighting for re-election even while President Obama’s unpopularity has hurt his party’s chances of retaining the Senate.

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November 2, 2014 in Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

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

  1. [301 Downloads]  Obama Care Fails the Origination Clause: Why Sissel and Hotze Should Be Reversed, by Steven J. WIllis (Florida) & Hans G. Tanzler (Florida)
  2. [297 Downloads]  Trying Times 2014: Important Lessons to Be Learned from Recent Federal Tax Cases, by Nancy A. McLaughlin (Utah) & Steven J. Small (Law Office of Stephen J. Small, Newton, MA)
  3. [165 Downloads]  Home-Country Effects of Corporate Inversions, by Omri Y. Marian (Florida)
  4. [156 Downloads]  Rights Without Remedies, by Matthew L. M. Fletcher (Michigan State)
  5. [146 Downloads]  A World Turned Upside Down: Reflections on the 'New Wave' Inversions and Notice 2014-52, by Reuven S. Avi-Yonah (Michigan)

November 2, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 542

IRS Logo 2Press Release:  Wetumpka TEA Party Continues Call for Accountability After Unacceptable IRS Court Ruling:

AL-Becky Gerritson, President of the Wetumpka TEA Party, called Thursday's US District Court’s ruling to dismiss two lawsuits against the IRS by dozens of TEA Parties and other conservative groups , “outrageous” .

The IRS’s targeting of conservatives first came to the public’s attention in May of 2013, when Lois Lerner, then head of the IRS’s Tax Exempt Office, tried to minimize the seriousness of their despicable action when she answered a planted question from the audience while speaking to the American Bar Association. The targeting of conservatives began in 2009 and reached its height during the 2012 election cycle. Some conservative groups have still not received their well-deserved tax exempt status even to this day. In 2013 the Wetumpka TEA Party along with 40 other conservative groups filed a law suit with the American Center for Law and Justice, (ACLJ) against the IRS for its illegal targeting of conservatives.

“When you look at the allegations in our lawsuit along with evidence uncovered by Congressional committees and Judicial Watch, it is undeniable that the IRS is guilty of wrongdoing. However, Judge Walton basically said that since we finally received our tax status (after almost 2 years of waiting) that we now have no case. That’s like a judge telling a burglary victim, that even though she was robbed 2 years ago; since she does not currently have the thieves in her house, she has no case. This ruling is unbelievable! It’s so much more than just a delay of a tax exempt status; it’s about the IRS, a government agency, being used as a weapon against its citizens, i.e. violating our constitutional rights, invading our privacy, bullying and intimidating us, mishandling and leaking our confidential taxpayer information etc., not to mention the ensuing cover-up; and we cannot fight back…we have no recourse.”

Gerritson continued, “The judge did not base his decision on the merits of the case. In fact, he did not deny wrong doing by the IRS but dismissed the case on procedural grounds. He wrote in a footnote: "The court's opinion should not be interpreted as an assessment of the propriety of the alleged conduct by the defendants." It’s unfathomable that the IRS, one of the most feared government agencies in America, was able to engage in a massive, years-long illegal targeting scheme against everyday American’s and get away with it scot-free. This is a huge blow to Americans’ liberty. If the IRS was allowed to target and harass Americans on such a large scale with no repercussions then what will stop them in the future?”

Gerritson concluded by saying, “This isn’t over for us. We will not be silent. We commend and support the ACLJ‘s plan to appeal the ruling. We will continue to do everything we can to stand up for citizens’ rights, expose government’s abuse of power and hold them accountable for their actions.”

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

Saturday, November 1, 2014

WSJ: How to Use a 401k to Pump Up a Roth IRA

Roth IRAWall Street Journal, How to Pump Up a Roth IRA: After-Tax Contributions to a 401(k) Plan Can Be Shifted Into a Tax-Free Roth, the IRS Says:

High-income earners have a new incentive to make after-tax contributions to a 401(k) plan: They can later shift those contributions into a Roth individual retirement account, tax-free.

Thanks to a recent Internal Revenue Service ruling [Notice 2014-54], eligible employees can now move after-tax contributions directly from their employer-sponsored retirement plan to a Roth account.

The potential tax savings are huge, depending on an investor’s tax rate in retirement. ... The latest decision gives people an easier way to distinguish pre- and after-tax contributions and maximize their potential tax savings. That could make it much easier for investors to move tens or hundreds of thousands of dollars they have had accumulating in their 401(k)s into a Roth IRA.

November 1, 2014 in IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 541

IRS Logo 2Press Release:  ACLJ Files Suit Against IRS For Failing To Release Records Between IRS And U.S. Senator Jeanne Shaheen Of New Hampshire Who Demanded IRS Probe Conservative Organizations:

The American Center for Law & Justice (ACLJ) today filed a federal lawsuit in New Hampshire against the Internal Revenue Service (IRS) on behalf of the group, Citizens for a Strong New Hampshire, claiming the IRS is unlawfully delaying the release of records between the IRS and U.S. Senator Jeanne Shaheen (D-NH) who demanded the IRS investigate conservative organizations for engaging in "political activities."

Citizens for a Strong New Hampshire filed a request under the Freedom of Information Act (FOIA) demanding the IRS release the correspondence between the tax agency and Sen. Shaheen and Congresswoman Carol Shea-Porter (NH-01). The lawsuit was filed today in U.S. District Court for the District of New Hampshire, in Concord, NH. The lawsuit contends the IRS is unlawfully delaying the release of information until after next week's mid-term elections – a move that the complaint argues "has deprived Strong NH of the opportunity to obtain and effectively convey to the voting public vital information about those seeking re-election."

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November 1, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, October 31, 2014

Weekly Tax Roundup

October 31, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (1)

Weekly SSRN Tax Roundup

October 31, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

Weekly RoundupConor Clarke (J.D. 2015, Yale) & Edward Fox (J.D. 2015, Yale), Note, Perceptions of Tax Expenditures and Direct Spending: A Survey Experiment, 124 Yale L.J. ___ (2015):

This paper presents the results of an original survey experiment on whether the public prefers “tax expenditures” to “direct outlays” — that is, whether members of the public are more likely to support government spending that takes the form of a tax credit rather than a check or cash. Using a survey that spans a wide variety of policy areas — and with important variations in wording and information — we show that the public strongly prefers tax expenditures even when the “economic substance” of the proposed policies is identical. We also show that the public views tax expenditures as less costly than equivalent direct outlays. These results support a longstanding but largely unstudied hypothesis that tax expenditures “hide” the costs of government spending, and have implications for why tax expenditures have continued to grow in size and complexity.

October 31, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Kyl & Moore: Obama's Soak the Rich 60% Tax Hike on Investment Income Is Drowning the Middle Class

Wall Street Journal op-ed:  Obama Soaks the Rich, Drowns the Middle Class; The Ripple Effect of the President’s Tax Hikes Is Swamping Take-Home Pay, by Jon Kyl (American Enterprise Institute) & Stephen Moore (Heritage Foundation):

The curse of the U.S. economy today is the downward trend in “take-home pay.” This is the most crucial economic indicator for most Americans. ... Most workers’ pay has not kept up with inflation for at least six years. ...

Why aren’t wages rising? There are several reasons, including that many jobs today don’t pay as well as the ones lost during the recession. ObamaCare has made health insurance more expensive for businesses—as the nation’s biggest employer, Wal-Mart , recently reported—and that takes a bite out of take-home pay. Yet one factor is often overlooked: the tax increase on “the rich” at the beginning of 2013.

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October 31, 2014 in Tax | Permalink | Comments (1)

Florida Hosts 10th Annual International Tax Symposium Today

Florida Logo (GIF)The University of Florida Graduate Tax Program hosts its  Tenth Annual International Taxation Symposium today (live webcast here):

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

Gerzog: A Simplified Verifiable Gift Tax

Wendy Gerzog (Baltimore), A Simplified Verifiable Gift Tax:

The purpose of this article is to create a simpler and more accountable federal gift tax. The proposed tax would simplify gift completion rules, adopt a hard-to-complete rule of transfer taxation, reduce the annual exclusion while expanding the consumption exclusion, and, by replicating the portability reporting rules, employ gift tax preference inducements to increase gift tax compliance. The proposed gift tax reaffirms basic principles of transfer taxes, encourages simple, outright gifts, and eliminates some of the major valuation abuses in the current gift tax regime.

October 31, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 540

IRS Logo 2Legal Times:  IRS Official Fights Video Depo, Citing Fear of Harassment:

An Internal Revenue Service employee caught up in the controversy over tax-exempt groups wants a federal judge to block a subpoena for her videotaped testimony. The official, Holly Paz, cites privacy and safety fears.

A group that applied for tax-exempt status in 2012, Citizen Awareness Project Inc., sued the agency in Colorado federal district court, claiming officials wrongfully released its application to the media. Federal officials admitted there was an “unauthorized disclosure,” but they disagreed it was willful or that the group was entitled to damages.

In a 2013 report, the Treasury Inspector General for Tax Administration found that IRS officials had improperly flagged organizations perceived to have conservative or Tea Party ties for additional scrutiny when they applied for tax-exempt status. The Colorado lawsuit is focused on the disclosure issue, not the broader scandal. However, the plaintiff claimed that because of a media report about its application, the group may have been subjected to additional scrutiny by the IRS—an allegation the government denied.

Paz served as the agency’s director of exempt organizations rulings and agreements. She isn’t a defendant in the Colorado case, but lawyers for Citizen Awareness Project subpoenaed her to provide videotaped deposition testimony on Oct. 28.

In court papers filed on Oct. 23 in the U.S. District Court for the District of Columbia, Paz’s lawyers at Steptoe & Johnson LLP asked for an order barring the deposition from being videotaped. Alternatively, they've asked for an order that would keep any videotaped deposition confidential.

Steptoe partner Brigida Benitez wrote that after Paz’s name became publicly associated with the larger IRS scandal, she faced “continued harassment, oppression and intimidation, including threats of bodily harm to her and her family, including her young children.”

Paz didn’t object to testifying, Benitez wrote, but she feared that a video of her speaking, if publicly disclosed, could be used “as another means of harassment and intimidation.”

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October 31, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Thursday, October 30, 2014

Cornell's Free Online Tax Code Now Offers Links to IRS Letter Rulings

LIIThe wonderful, free online Internal Revenue Code from Cornell's Legal Information Institute ("LII") now contains links to private letter rulings for each Code section (just click on the "IRS Rulings" tab above the statutory language (e.g., here)). Over 58,000 rulings are linked to across the Code's 850 section. From LII Director Tom Bruce:

A few caveats:  the feature is still in beta test, and we're going to need a month or so to be completely sure that updates are running smoothly. According to the IRS, updates run "every Friday morning" at their end, so we're running ours early on Saturday morning (it appears from this week's events that they don't actually appear on the site until late Friday night). They take about an hour to process once they're available.  As you will see in the explanatory text that comes along with the listing inside the tab,  there are some problems in the data as we receive it, mostly in the date fields.

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October 30, 2014 in Legal Education, Tax | Permalink | Comments (0)

Pomp Receives Excellence in State Taxation Award

PompRichard D. Pomp (Connecticut) is the recipient of the 6th Annual Council on State Taxation/Paul Frankel Excellence in State Taxation Award:

Richard Pomp, a graduate of Harvard Law School, has dedicated his academic career to the teaching and study of tax law. An internationally known expert on state and local taxation, he is the author of State and Local Taxation, a casebook used in more than 100 law schools and translated into several languages. Pomp has also taught tax law at Harvard, New York University, the University of Texas and Boston College. As author of more than 100 articles, his views on tax law are regularly solicited by local, state and national and international media. He has been described by State Tax Notes as “the most knowledgeable person on state corporate income taxation in the country.”

"Professor Pomp has earned the respect and admiration of both the business community and state tax administrators,” said Doug Lindholm, President & Executive Director of COST. “That is quite an accomplishment in an area often defined by continuing and often contentious litigation. We are pleased to present the Award to such a deserving recipient.”

October 30, 2014 in Legal Education, Tax | Permalink | Comments (0)

Does Credit-Card Information Reporting Improve Small-Business Tax Compliance?

Joel Slemrod (Michigan), Brett Collins (IRS), Jeffrey Hoopes (Ohio State), Daniel Reck (Michigan) & Michael Sebastiani (IRS), Does Credit-Card Information Reporting Improve Small-Business Tax Compliance?:

1099-KThird-party information has greatly decreased tax underreporting, but substantial underreporting persists where third-party information is not present. We investigate the preliminary response of businesses filing a Schedule C to the introduction in 2011 of Form 1099-K, which provides the Internal Revenue Service (IRS) and taxpayers with information about small businesses’ sales done by payment card and other electronic means. We find evidence that taxpayers with high prior noncompliance and/or sufficient use of electronic payment methods did adjust their behavior in response to the new information returns. Theory and distributional analysis isolate a subset of taxpayers who respond to information reporting by reporting receipts equal to or slightly exceeding the amount of receipts reported on 1099-K. Information reporting made these taxpayers much more likely to file Schedule C and, conditional on filing a Schedule C, increased their reported receipts by up to 24 percent. However, firms largely offset this change with increased reported expenses (an area not subject to information reporting), so that the overall effect on reported net taxable income was significantly smaller than would otherwise be expected without the increase in expenses.

October 30, 2014 in Scholarship, Tax | Permalink | Comments (0)

IRS Releases 2015 Inflation Adjustments

IRS Logo 2The IRS has released various inflation-adjustments for 2015 (IR 2014-104 & Rev. Proc. 2014-61; IR 2014-99), including:

  • Gift Tax Exemption:  $14,000 (same as 2014)
  • Unified Credit:  $5,430,000 (up $90,000 from 2014)
  • Top 39.6% Income Tax Rate:  $413,200 single/$464,850 joint (up $6,450/$7,250 from 2014)
  • Standard Deduction:  $6,300 single/$12,600 joint (up $100/$200  from 2014)
  • Personal Exemption:  $4,000 (up $50 from 2014)
  • AMT Exemption:  $53,600 single/$83,400 joint (up $800/$1,300 from 2014)
  • Contribution Limit for 401(k)/403(b)/457 Plans:  $18,000 (up $500 from 2014)
  • Catch-Up Contribution Limit (Age 50+) for 401(k)/403(b)/457 Plans:  $6,000 (up $500 from 2014)
  • Income Limit for Full IRA Deduction:  $61,000 single/$98,000 joint (up $1,000/$2,000 from 2014)
  • Income Limit for Full Roth IRA Contribution:  $116,000 single/$183,000 joint (up $2,000 from 2014)
  • Defined Benefit Plan Annual Benefit Limit:  $215,000 (up $5,000 from 2014)

October 30, 2014 in IRS News, Tax | Permalink | Comments (0)

Iowa Is Seeking One-Week Visitors in 2015-16 Academic Year

Iowa LogoThe University of Iowa College of Law Library welcomes applications for its newly-created Bonfield Fellowship for a visiting researcher:

The aim of the Bonfield Fellowship is to bring a faculty member at another institution to the University of Iowa, to spend a brief time in residence conducting research in the Law Library’s world-class collections. The fellowship is named in honor of Professor Arthur Bonfield, who directed the Law Library from 1985 to 2014. The University of Iowa Law Library is among the three largest law school libraries in the United States. ... 

The Bonfield Fellowship will provide:

  • Round-trip economy airfare for the Fellow between the Fellow’s home city and the Cedar Rapids/Iowa City airport;
  • Hotel accommodation for the Fellow in Iowa City for up to one week;
  • A student research assistant during the Fellow’s period of residence; and
  • A lockable faculty carrel in the Law Library equipped with a desktop computer.

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October 30, 2014 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (3)

Mirkay: State Tax Law in a Post-Windsor World

Nicholas A. Mirkay III (Creighton), Equality or Dysfunction? State Tax Law in a Post-Windsor World, 47 Creighton L. Rev. ___ (2014):

Depending on one’s religious and political proclivities, the United States Supreme Court’s decision in United States v. Windsor can either been seen as a progressive step towards equality or a troublesome departure from traditional marriage norms. Notwithstanding, from a federal tax perspective, the Windsor decision clearly raised a myriad of issues that spanned virtually the entire Internal Revenue Code (the “Code”), including but not limited to income taxes (including filing status), estate and gift taxes, payroll taxes, and the tax treatment of retirement account contributions and social security benefits. In the aftermath of Windsor, the IRS was left with a quandary in administering marital-status-dependent Code provisions: should it base its administration of the Code on the taxpayer’s valid marriage in the state in which it was performed (commonly referred to as the “state of celebration” test) or the taxpayer’s state of residence or domicile (commonly referred to as the “state of residence” test)? The IRS resolved most of the federal tax issues raised by Windsor in its issuance of Revenue Ruling 2013-17, which chiefly adopted a state of celebration test for income and other tax purposes. However, the ruling did not extend to quasi-marital statuses, such as domestic partnerships and civil unions, resulting in federal tax non-recognition and complexities for couples in those legally recognized relationships.

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October 30, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 539

IRS Logo 2Investor's Business Daily editorial:  IRS Is A Unique Troublemaker Among Federal Agencies:

It's also been used as a political weapon. President Obama may owe his 2012 re-election to the IRS, which blocked the formation of groups that opposed him.

The IRS-Tea Party scandal entered Day 536 on Monday by the TaxProf blog's count, and it appears that the scandal will go on much longer without resolution.

Bob Woodward suggests that the media investigate it as it did Watergate. We laud his bravery. He's opened himself up to attacks from two vicious and unaccountable adversaries: the IRS and the mainstream media.

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October 30, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, October 29, 2014

Mawani Presents Payout Policies of Canadian REITs Today at Toronto

MawaniAmin Mawani (York University) presents Payout Policies of Canadian REITs at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

This study examines whether Canadian REITs that distribute relatively more of the tax-favoured returns (i.e., return of capital) do so by offering lower pre-tax returns in an efficient securities market. In other words, do Canadian REITs that offer significant amounts of tax-favoured return of capital bear an implicit tax in the form of lower pre-tax return? The study also examines whether higher proportions of returns of capital are statistically associated with more volatile distributions, higher growth opportunities, lower agency costs, stronger trust governance and / or higher management ownership of trust units.

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

IRS: Ebola Is a Qualified Disaster

EbolaIR-2014-102, IRS Announces Tax Guidance Related to Ebola Outbreak in Guinea, Liberia and Sierra Leone:

The Internal Revenue Service today issued two items of guidance in response to the need for charitable and other relief due to the Ebola outbreak in Guinea, Liberia and Sierra Leone. One provides special relief intended to support leave-based donation programs to aid victims who have suffered from the Ebola outbreak in those countries. The other designates the Ebola outbreak in those countries as a qualified disaster for federal tax purposes.

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October 29, 2014 in IRS News, Tax | Permalink | Comments (0)

Big-Money Untaxed Gifts Quadrupled in 2012

Bloomberg:  Big-Money Untaxed Gifts Quadrupled as Rich Raced Congress, by Richard Rubin & Margaret Collins:

The wealthiest Americans poured $335 billion into tax-free gifts amid worries in 2012 that Congress would clamp down on the practice, according to data released today by the Internal Revenue Service.

The data cover tax returns filed in 2013 and thus mostly include gifts made in 2012. That’s more than four times the amount reported on returns filed in 2012.

The gifts were made when the U.S. Congress was approaching the so-called fiscal cliff and debating whether to extend rules that let married couples pass about $10 million onto their heirs without paying estate or gift taxes.

Congress eventually extended the rules indefinitely, though that didn’t happen until January 2013. In the meantime, wealth advisers were urging their clients to take advantage of what they portrayed as a once-in-a-lifetime opportunity to move assets to children without giving the IRS a cut. ...

The money moved in response to incentives dangled by Congress. In 2010, the estate tax was temporarily repealed and the gift tax exemption was set at $1 million per person.

After Democrats lost the majority in the House of Representatives in the 2010 election, Republicans and President Barack Obama reached a deal that put the combined estate and gift tax exemption at $5 million per person and set it to expire at the end of 2012.

October 29, 2014 in Tax | Permalink | Comments (0)

Rosenzweig: Revisiting the Law of Moses' Rod -- The Case of Inversions

Tax Analysys Logo (2013)Adam Rosenzweig (Washington University), Revisiting the Law of Moses' Rod: The Case of Inversions, 145 Tax Notes 429 (Oct. 27, 2014):

This article revisits Marty Ginsburg’s law of Moses’ rod in the context of inversions, in particular how proposed revisions to the antiinversion rules could be used to justify new, or even more aggressive, expatriation strategies. While not advocating that any taxpayer or other party pursue specific strategies or that they are ‘‘good’’ from a tax policy standpoint, the goal in examining potential inversion strategies even in the face of anti-inversion rules is to help find ways to incorporate antiabuse provisions into the larger structural goals of the income tax.

October 29, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

2015 Business Tax Climate: Chilliest in Blue States

Tax Foundation logoThe Tax Foundation yesterday released the 2015 State Business Tax Climate Index, which ranks the fifty states according to five indices: corporate tax, individual income tax, sales tax, unemployment insurance tax, and property tax. Here are the ten states with the best and worst business tax climates:

1

Wyoming

41

Iowa

2

South Dakota

42

Connecticut

3

Nevada

43

Wisconsin

4

Alaska

44

Ohio

5

Florida

45

Rhode Island

6

Montana

46

Vermont

7

New Hampshire

47

Minnesota

8

Indiana

48

California

9

Utah

49

New York

10

Texas

50

New Jersey

Interestingly, all ten of the states with the worst business tax climates voted for Barack Obama in the 2012 presidential election, and seven of the ten states with the best business tax climates voted for Mitt Romney.

Tax Foundation

October 29, 2014 in Tax, Think Tank Reports | Permalink | Comments (6)

Ohio Northern Seeks to Hire Tax Prof and Estate Planning Prof

ONU LawOhio Northern University College of Law is seeking to hire five new faculty this year, including a tenure-track position with a focus on tax and a tenure-track position with a focus on estate planning.  For more information or to apply, go to the Ohio Northern University Human Resources website.

October 29, 2014 in Tax, Tax Prof Jobs | Permalink | Comments (0)