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Editor: Paul L. Caron
Pepperdine University School of Law

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Wednesday, July 2, 2014

Tax Prof Puts on the Miles

PriusTen years ago, I blogged the spiffy new, exotic Prius with the "TaxProf" license plate driven by Jay Soled (Rutgers), which spawned my first TaxProf Blog meme, with several posts on other tax-centric license plates (here, here, herehere, and here).  Jay writes in that the Prius just crossed the 250,000-mile marker:

My 2004 Prius now has 250,000 miles.  Consider the following:  over the last ten years, assuming the average car achieved 25 mpg and my Prius achieved 50 mpg, then I was able to save 5,000 gallons of gas and significantly reduce my carbon footprint.  At the risk of sounding smug, this is undoubtedly a good thing for the world.

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July 2, 2014 in Legal Education, Tax | Permalink | Comments (5)

The IRS Scandal, Day 419

IRS Logo 2Wall Street Journal:  Judge Sets Hearing on Group's Push to Investigate Lost IRS Emails:

A federal judge scheduled a hearing for next week on a grass-roots conservative group's request to investigate missing emails at the Internal Revenue Service, as part of the group's lawsuit against the agency.

U.S. District Judge Reggie Walton ordered the hearing on Tuesday, after conservative group True the Vote filed a motion seeking to speed up discovery and "preserve and prevent further destruction" of documents and electronic data. Among other things, the group wants a forensic expert to figure out how the emails were lost and examine whether any of the missing data can be recovered.

The hearing is set for July 11 in U.S. District Court in Washington, D.C.

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July 2, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, July 1, 2014

Gamage: A Way Forward for Tax Law and Economics?

David Gamage (UC-Berkeley), A Way Forward for Tax Law and Economics? A Response to Osofsky's Frictions, Screening, and Tax Law Design, 61 Buff. L. Rev. 189 (2014):

This Essay responds to Leigh Osofsky's Who’s Naughty and Who’s Nice? Frictions, Screening, and Tax Law Design. Osofsky’s analysis suggests that tax rules might be designed so as to take account both of heterogeneity in taxpayers’ tax planning proclivities and of taxpayer characteristics relevant for distribution. By designing tax rules so as to create frictions that differentially impose higher costs on those taxpayers who are more successfully circumventing existing taxes we can perhaps reform our tax system so as to better achieve equitable distribution at lower efficiency costs. This Essay argues that Osofsky's analysis is generally correct and that it potentially suggests a path toward a more useful law and economics analysis of detailed tax rules.

July 1, 2014 in Scholarship, Tax | Permalink | Comments (1)

Bernstein: Why the GOP Really Wants to Defund IRS

Washington Post op-ed:  Why the GOP Really Wants to Defund IRS, by Jared Bernstein:

In one of the great D.C. key-dangles (“look over here, not over there!”), congressional conservatives have everyone looking the other way while they try to defund the Internal Revenue Service. No question, recent IRS screw-ups are feeding right into their opponents’ plans. But let’s not lose sight of what’s really going on here: This is just a different way to try to shrink government, accommodate tax evasion and even undermine the implementation of health reform. ...

To collect taxes, we need an amply funded IRS, and therein lies the real scandal. The details are in this new Center on Budget and Policy Priorities paper by Chuck Marr and Joel Friedman, who document “…significant cuts that have occurred in IRS funding, which remains well below its 2010 level…. The cuts have led the IRS to reduce its workforce, severely scale back employee training, and delay much-needed upgrades to information technology systems. These steps, in turn, have weakened the IRS’s ability to enforce the nation’s tax laws and serve taxpayers efficiently.” ...

Marr and Friedman identify these additional facts of the real case:

  • The figures below show a 14 percent fall in the agency’s inflation-adjusted budget (figure 1) along with an 11 percent decline in its staffing levels (figure 2), 2010-2014. IRS staff assigned specifically to enforcement is down 15 percent.

Bernstein_IRS_combo

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July 1, 2014 in IRS News, Tax, Think Tank Reports | Permalink | Comments (7)

Zelenak: The Almost-Restatement of Income Tax of 1954

Lawrence Zelenak (Duke), The Almost-Restatement of Income Tax of 1954: When Tax Giants Roamed the Earth, 79 Brook. L. Rev. 709 (2014):

This essay describes the ALI’s Income Tax Project of 1948–1954—its origins, goals, drafting process, final product, and influence on Congress. The essay concludes with some thoughts on what role the ALI can and should play today in the tax legislative process. Whether the fault is in the stars or in ourselves (probably both, but with the stars deserving most of the blame), the drafting of a new ALI model income tax statute for the twenty-first century would be an almost insurmountable challenge in technical terms, and probably pointless in political terms. Nevertheless, there remains room for targeted ALI tax interventions, with a Restatement-type approach to the interpretation of the recently-codified economic substance doctrine16 seeming especially promising.

July 1, 2014 in Scholarship, Tax | Permalink | Comments (0)

Yin: The Most Critical Issue Facing Tax Administration Today -- And What to Do About It

George K. Yin (Virginia), The Most Critical Issue Facing Tax Administration Today -- And What to Do About It:

This very brief paper contains the text of the keynote address delivered on June 19, 2014 to a research conference in Washington, DC on Advancing Tax Administration, co-sponsored by the IRS and the Tax Policy Center.

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

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July 1, 2014 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

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July 1, 2014 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 418

Monday, June 30, 2014

Krugman: Charlatans, Cranks, Tax Policy, and Kansas

Following up on Saturday's post, If You Cut Taxes, You Get Less Tax Revenue:  New York Times op-ed:  Charlatans, Cranks and Kansas, by Paul Krugman (Princeton):

KansasTwo years ago Kansas embarked on a remarkable fiscal experiment: It sharply slashed income taxes without any clear idea of what would replace the lost revenue. Sam Brownback, the governor, proposed the legislation — in percentage terms, the largest tax cut in one year any state has ever enacted — in close consultation with the economist Arthur Laffer. And Mr. Brownback predicted that the cuts would jump-start an economic boom — “Look out, Texas,” he proclaimed.

But Kansas isn’t booming — in fact, its economy is lagging both neighboring states and America as a whole. Meanwhile, the state’s budget has plunged deep into deficit, provoking a Moody’s downgrade of its debt.

There’s an important lesson here — but it’s not what you think. Yes, the Kansas debacle shows that tax cuts don’t have magical powers, but we already knew that. The real lesson from Kansas is the enduring power of bad ideas, as long as those ideas serve the interests of the right people.

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June 30, 2014 in Tax | Permalink | Comments (0)

Vox: What the Right Doesn't Get About Piketty

Following up on last week's post, Mankiw: How Inherited Wealth Helps the Economy:  Vox, What the Right Doesn't Get About Piketty, by Matthew Yglesias:

Greg Mankiw's column over the weekend, "How inherited wealth helps the economy" is the latest entry into a burgeoning genre of Thomas Piketty's rebuttals that appear to be written by people who aren't familiar with what proposals Piketty is advancing.

But Piketty isn't against the idea of wealth accumulation or even against the idea young of people inheriting accumulated wealth from their ancestors. ... "My point is not to increase taxation of wealth. It's actually to reduce taxation of wealth for most people, but to increase it for those who already have a lot of wealth."

June 30, 2014 in Tax | Permalink | Comments (2)

Spending by the IRS, 1970-2014

Outlays

Data here. (Hat Tip: Len Burman.)

June 30, 2014 in IRS News, Tax | Permalink | Comments (5)

Stiglitz: Inequality Is Not Inevitable

Divide 2New York Times:  Inequality Is Not Inevitable, by Joseph E. Stiglitz (Columbia):

An insidious trend has developed over this past third of a century. A country that experienced shared growth after World War II began to tear apart, so much so that when the Great Recession hit in late 2007, one could no longer ignore the fissures that had come to define the American economic landscape. How did this “shining city on a hill” become the advanced country with the greatest level of inequality?

One stream of the extraordinary discussion set in motion by Thomas Piketty’s timely, important book, Capital in the Twenty-First Century, has settled on the idea that violent extremes of wealth and income are inherent to capitalism. In this scheme, we should view the decades after World War II — a period of rapidly falling inequality — as an aberration.

This is actually a superficial reading of Mr. Piketty’s work, which provides an institutional context for understanding the deepening of inequality over time. Unfortunately, that part of his analysis received somewhat less attention than the more fatalistic-seeming aspects.

Over the past year and a half, The Great Divide, a series in The New York Times for which I have served as moderator, has also presented a wide range of examples that undermine the notion that there are any truly fundamental laws of capitalism. The dynamics of the imperial capitalism of the 19th century needn’t apply in the democracies of the 21st. We don’t need to have this much inequality in America.

Our current brand of capitalism is an ersatz capitalism. For proof of this go back to our response to the Great Recession, where we socialized losses, even as we privatized gains. Perfect competition should drive profits to zero, at least theoretically, but we have monopolies and oligopolies making persistently high profits. C.E.O.s enjoy incomes that are on average 295 times that of the typical worker, a much higher ratio than in the past, without any evidence of a proportionate increase in productivity.

If it is not the inexorable laws of economics that have led to America’s great divide, what is it? The straightforward answer: our policies and our politics. People get tired of hearing about Scandinavian success stories, but the fact of the matter is that Sweden, Finland and Norway have all succeeded in having about as much or faster growth in per capita incomes than the United States and with far greater equality.

So why has America chosen these inequality-enhancing policies? Part of the answer is that as World War II faded into memory, so too did the solidarity it had engendered. As America triumphed in the Cold War, there didn’t seem to be a viable competitor to our economic model. Without this international competition, we no longer had to show that our system could deliver for most of our citizens. ...

The American political system is overrun by money. Economic inequality translates into political inequality, and political inequality yields increasing economic inequality. In fact, as he recognizes, Mr. Piketty’s argument rests on the ability of wealth-holders to keep their after-tax rate of return high relative to economic growth. How do they do this? By designing the rules of the game to ensure this outcome; that is, through politics. ...

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June 30, 2014 in Tax | Permalink | Comments (0)

SSRN Tax Professor Rankings

SSRN LogoSSRN has updated its monthly rankings of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through June 1, 2014) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

 

 

All-Time Downloads

 

Recent Downloads

1

Reuven Avi-Yonah (Mich.)

38,995

Reuven Avi-Yonah (Mich.)

6932

2

Paul Caron (Pepperdine)

26,070

Paul Caron (Pepperdine)

2823

3

Louis Kaplow (Harvard)

22,653

D. Dharmapala (Illinois)

2533

4

D. Dharmapala (Illinois)

19,787

Richard Ainsworth (BU) 

2508

5

Vic Fleischer (San Diego)

19,782

Ed Kleinbard (USC)

2183

6

James Hines (Michigan)

19,542

Katie Pratt (Loyola-L.A.)

2030

7

Ted Seto (Loyola-L.A.)

18,915

Bridget Crawford (Pace]

1901

8

Richard Kaplan (Illinois)

18,678

Louis Kaplow (Harvard)

1846

9

Katie Pratt (Loyola-L.A.)

15,778

Richard Kaplan (Illinois)

1832

10

Dennis Ventry (UC-Davis)

15,312

Jen Kowal (Loyola-L.A.)

1766

11

Carter Bishop (Suffolk)

14,797

Brad Borden (Brooklyn)

1750

12

David Weisbach (Chicago)

14,084

Omri Marian (Florida)

1738

13

Jen Kowal (Loyola-L.A.)

14,065

Robert Sitkoff (Harvard)

1694

14

Chris Sanchirico (Penn)

14,046

James Hines (Michigan)

1583

15

David Walker (BU)

13,833

Dick Harvey (Villanova)

1554

16

Bridget Crawford (Pace)

13,592

Ted Seto (Loyola-L.A.)

1431

17

Francine Lipman (UNLV)

13,555

Jeff Kwall (Loyola-Chicago)

1425

18

Brad Borden (Brooklyn)

13,522

Dan Shaviro (NYU)

1401

19

Robert Sitkoff (Harvard)

13,399

Susan Morse (Texas)

1342

20

Richard Ainsworth (BU)

13,362

Vic Fleischer (San Diego)

1268

21

Ed Kleinbard (USC)

12,757

Francine Lipman (UNLV)

1266

22

Herwig Schlunk (Vanderbilt)

12,424

Carter Bishop (Suffolk)

1260

23

Dan Shaviro (NYU)

11,917

David Gamage (UCBerkeley)

1204

24

Ed McCaffery (USC)

11,667

David Weisbach (Chicago)

1165

25

Wendy Gerzog (Baltimore)

11,610

Dan Simmons (UC-Davis)

1162

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

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June 30, 2014 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Rosenzweig: The Article III Fiscal Power

Adam H. Rosenzweig (Washington U.), The Article III Fiscal Power, 29 Const. Comm. ___ (2014):

What should happen when Congress and the President find themselves in a fiscal policy showdown resulting in a Constitutional violation? This question has risen to the fore in light of the recent political showdowns over the so-called “debt ceiling.” But the question is one that reaches far beyond the debt ceiling debate. Rather, it implicates the broader question of the proper role of the coordinate branches to make the government work within the Constitutional framework.

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

The IRS Scandal, Day 417

IRS Logo 2Tax Analysts Blog:  Lost Lerner E-mails Latest Example of IRS Death Wish, by Jeremy Scott:

Democrats rushed to Koskinen’s defense. That is, perhaps, understandable, even though much of what the IRS has done during this scandal is indefensible. Democrats probably want to defend their president’s pick to head the IRS, and maybe they want to try to change the narrative heading into a potentially disastrous midterm election. But the reality is that the IRS isn’t doing them any favors. There’s only so much incompetence and disingenuous behavior that can be run through a political spin machine. The Democrats’ reflexive defense of Lerner (whose conduct can’t be excused) and their apparent willingness to accept any explanation from Koskinen (who didn’t even try to adequately explain why he hid information on the lost e-mails from February until late June) is baffling. Democrats weakly attempted to paint the GOP as on a witch hunt for a conspiracy, as though the IRS’s mismanagement and appearance of bias weren’t enough to justify congressional inquiry.

Is there a conspiracy or coverup? Christopher Bergin eloquently explained why it’s hard to know and why that doesn’t matter because tax administration has been damaged either way. And that’s the key point. Lerner, former acting Commissioner Steven Miller, and many other officials have engaged in conduct that might have irreparably harmed the Service’s reputation on Capitol Hill and that once again undermined the public’s trust in the nation’s tax collector. And Democrats’ desperate attempts to rush to the president’s defense to limit the damage to their party’s electoral chances will not fix that problem. Instead, the solution will take serious soul-searching at the IRS and a commitment to being genuinely open and transparent with lawmakers and taxpayers.  

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

TaxProf Blog Weekend Roundup

Sunday, June 29, 2014

NY Times Debate: Is Contemporary Capitalism Compatible with Christian Values?

NY Times Room for DebateNew York Times Room for Debate:  God and Mammon:

Jesus drove money changers out of the Temple, calling them “a den of thieves.” Of the profit-centric world view, Pope Francis warned, “We can no longer trust in the unseen forces and the invisible hand of the market,” to provide economic justice. Others call Christianity and capitalism inextricable.

Is contemporary capitalism compatible with Christian values?

June 29, 2014 in Legal Education, Tax | Permalink | Comments (4)

Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads on SSRN is the same as last week's list:

  1. [271 Downloads]  Carried Interest for the Common Man, by Richard Winchester (Thomas Jefferson)
  2. [235 Downloads]  The Real Problem with Carried Interests, by Heather Field (UC-Hastings)
  3. [199 Downloads]  A State Tax Approach to Regulating Greenhouse Gases Under the Clean Air Act, by Samuel Eisenberg (Stanford), Michael Wara (Stanford), Adele Morris (Brookings Institution), Marta Darby (Stanford) & Joel Minor (Stanford)
  4. [193 Downloads]  Sales Suppression as a Service (SSaaS) & the Apple Store Solution, by Richard Ainsworth (Boston University)
  5. [140 Downloads]  The Relationship between China's Tax Treaties and Indirect Transfer Antiavoidance Rules, by Qiguang Hardy Zhou (Baker & McKenzie, Shanghai City, China)

June 29, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 416

IRS Logo 2Tax Analysts Blog:  The IRS Has Been Set Up, by Christopher Bergin:

The IRS’s job is to collect taxes, and historically it’s been pretty darn good at that. But over the years, Congress has tasked the Service with many things that really have nothing to do with collecting revenue. ... So let’s have the IRS administer the healthcare system. Anybody want to hazard a guess about how that’ll go? ...

And that brings us back to section 501(c)(4), through which the IRS has been charged with regulating a part of the political fundraising process. This involves making precise calculations of the amount of political activity engaged in by social welfare organizations seeking tax-exempt status. How is the IRS supposed to determine that? And now added to this paradigm, apparently, is the political pressure being put on the IRS. So if a Democrat is in the White House, all conservative organizations are bad. And when a Republican is in the White House, I’m betting the heat will be on the IRS to determine that all liberal organizations are bad. Is that how this works?

I don’t know if the IRS has been politicized. Until recently that possibility would have been unthinkable. But the potential of the 501(c)(4) rules to be a setup for the politicization of the IRS is enormous. You simply can’t have the tax collector refereeing the people who provide it with its budget. It’s understandable – although, I think, shortsighted – that the Republicans want to starve the beast for its lack of transparency in the investigation of how it handled social welfare organizations. But the beast (and I don’t believe the IRS is a beast) is in real trouble now.

Section 501(c)(4) should be repealed immediately, and the IRS should be tasked with doing its job: collecting taxes. What are the odds that politicians will do that? Nil, because they’re the only ones benefiting from this mess.

But we are where we are, and I am truly worried. If this agency has been politically corrupted, it will not be able to function. And that leaves us with a question. Who's going to collect the revenue? 

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June 29, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, June 28, 2014

WSJ: What Taxpayers With Offshore Accounts Need to Know Before Confessing to the IRS

Wall Street Journal Tax Report:  The Hazards of Offshore-Account Disclosure: Here's What Taxpayers Need to Consider Before They Confess, by Laura Saunders:

FATCATaxpayers should think carefully before entering a new Internal Revenue Service program for offshore-account holders whose conduct wasn't "willful," experts say.

"The term 'willful' has traps for the unwary, and people are falling into them," says Barbara Kaplan, a criminal tax lawyer at Greenberg Traurig in New York.

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June 28, 2014 in IRS News, Tax | Permalink | Comments (1)

NY Times: If You Cut Taxes, You Get Less Tax Revenue

New York Times:  Yes, If You Cut Taxes, You Get Less Tax Revenue, by Josh Barro:

Kansas has a problem. In April and May, the state planned to collect $651 million from personal income tax. But instead, it received only $369 million.

In 2012, Kansas lawmakers passed a large and rather unusual income tax cut. It was expected to reduce state tax revenue by more than 10 percent, and Gov. Sam Brownback said it would create “tens of thousands of jobs.”

In part, the tax cut worked in the typical way, by cutting tax rates and increasing the standard deduction. But Kansas also eliminated tax on various kinds of income, including income described commonly — and sometimes misleadingly — as “small-business income.” Basically, if your income results in the generation of a Form 1099-MISC instead of a W-2, it’s probably not taxable anymore in Kansas. ...

While no state has gone as far as Kansas, four others — Missouri, Ohio, Oregon and South Carolina — have passed laws in the last decade that give some small-business owners lower tax rates than wage earners. By creating this preference for some types of income over others, Kansas has run into at least five problems:

  1. It’s sometimes possible to turn taxable salary income into untaxed “business” income.
  2. A lot of the beneficiaries of the tax break won’t be small businesses.
  3. It’s not clear that there’s anything special about small businesses for the purpose of job creation.
  4. Some of the revenue loss doesn’t even benefit taxpayers.
  5. The state budget is suffering.

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June 28, 2014 in Tax | Permalink | Comments (1)

Friday, June 27, 2014

CPAs: IRS's 'Voluntary' Regulation of Tax Preparers Lacks Statutory Authorization From Congress, Contravenes D.C. Circuit Decision, and Violates Administrative Procedure Act

RTRPIn February 2014, the D.C. Circuit unanimously held that the IRS lacked the statutory authority to regulate tax return preparers.  Loving v IRS, No. 13-5061 (D.C. Cir. Feb. 11, 2014).  For an extensive analysis of the decision, see this TaxProf Blog op-ed by Steve Johnson (Florida State).

The IRS yesterday announced a "voluntary" program to regulate tax return preparers.  IRS Commissioner John Koskinen stated:

[T]he IRS had started a mandatory program of education and testing for unregulated tax return preparers who did not have professional credentials. But we had to suspend that program because the courts ruled that we didn’t have the legal authority to require education and testing. So we’re launching a voluntary program as a temporary substitute. It’s called the Annual Filing Season Program.

I say “temporary” because we have been urging Congress to enact a proposal in the President’s Fiscal Year 2015 Budget that would give us the authority for mandatory oversight of return preparers. This voluntary program is not the ideal solution. But until legislation is enacted, we still have a responsibility to taxpayers and to our tax system to keep moving forward with our efforts to improve service to taxpayers.

See also the statement by National Taxpayer Advocate Nina Olson.

In a 14 page letter to Commissioner Koskinen, the American Institute of CPAs argues that the program is illegal:

We write today to express our strong concern that the IRS’s proposed program—in which tax return preparers would receive an IRS certificate for display in return for completing a continuing education program that includes a comprehension assessment (the “proposed program”)—would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.  ...

First, no statute authorizes the proposed program. The IRS’s general authority to administer the tax code under 26 U.S.C. § 7803 does not provide an adequate basis to proceed. Because federal agencies may act only pursuant to a valid delegation of authority by Congress, the IRS may not implement the proposed program. This fatal flaw cannot be overcome by the IRS. That no statutory provision expressly prohibits such a program does not legitimize an otherwise illegitimate act. 

Second, and relatedly, the proposed program will inevitably be viewed as an end-run around Loving v. IRS, which held that the IRS lacks authority to regulate tax return preparers under 31 U.S.C. § 330. To be sure, the regulations invalidated in Loving were mandatory, and the proposed program is purportedly voluntary. But in reality tax return preparers would face an overwhelming, compelled incentive to participate in the IRS’s credentialing program, meaning that the proposed program will be de facto mandatory. In the wake of Loving, that is impermissible.

Third, the IRS has evidently concluded, in developing the proposed program, that it need not comply with the notice and comment requirements of the Administrative Procedure Act (“APA”). This is incorrect. ...

Finally, the current proposal is arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers who defraud their clients, runs counter to evidence presented to the IRS, and will create market confusion. ...

We believe that the proposed program is unlawful and improper. We continue to believe that additional regulation of tax return preparers might yield significant benefits and that the IRS can achieve these objectives while remaining consistent with Loving and other statutory limitations on the IRS’s authority.

June 27, 2014 in IRS News, Tax | Permalink | Comments (11)

Weekly Tax Roundup

University of Oxford 8th Annual Academic Tax Symposium

OxfordThe Oxford University Centre for Business Taxation's 8th Annual Academic Tax Symposium concludes today with these speakers and papers:

David Gamage (UC-Berkeley), On Double-distortion Arguments, Distribution Policy, and the Optimal Choice of Tax Instruments
Discussant:  Jacob Nussim (Bar-Ilan) 

Joerg Paetzold (Salzburg), Unwilling, Unable or Uninformed to Cheat? Tax Evasion vVa Self-reporting in Austria (wth Hannes Winner (Salzburg))
Discussant:  Nirupama Rao (NYU) 

Martin Ruf (Tübingen), Tax Avoidance as a Driver of Mergers and Acquisitions (with Thomas Belz (Mannheim), Leslie Robinson (Dartmouth) & Christian Steffens (Mannheim))
Discussant:  Paul Baker (Bath)

Rosanne Altshuler (Rutgers), The Spillover Effects of Outward Foreign Direct Investment on Home Countries: Evidence from the United States (with Jitao Tang (Ernst & Young))
Discussant:  Estelle Dauchy (New Economic School, Moscow)

June 27, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Weekly SSRN Tax Roundup

 Weekly Roundup

June 27, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Virginia Tax Review Publishes New Issue

Virginia Tax Review 2The Virginia Tax Review has published Vol. 33, No. 2 (Fall 2013):

June 27, 2014 in Scholarship, Tax | Permalink | Comments (0)

Wealth Levels, Wealth Inequality, and the Great Recession

The IRS Scandal, Day 414

Continue reading

June 27, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, June 26, 2014

University of Oxford 8th Annual Academic Tax Symposium

OxfordThe Oxford University Centre for Business Taxation's 8th Annual Academic Tax Symposium continues today with these speakers and papers:

Li Liu (Oxford), Small Business Incorporation and Investment: The Role of Corporation Tax (with Michael Devereux (Oxford))
Discussant:  Tim Goodspeed (CUNY)

Joana Naritomi (Harvard), Consumers as Tax Auditors
Discussant:  Jon Kerr (CUNY) 

Daniel Reck (University of Michigan), Reporting What You Can't Hide: How Credit Card Information Reporting Affects Small Business Tax Compliance (with Brett Collins (IRS), Jeffrey Hoopes (Ohio State) & Joel Slemrod (Michigan))
Discussant:  Michelle Hanlon (MIT)

Alex Raskolnikov (Columbia), The Uneasy Case for Graduated Tax Penalties
Discussant:  Miranda Stewart (Melbourne)

Matthew Smith (U.S. Treasury Department), At a Loss: Corporate Elasticity of Income at the Zero Kink (with Elena Patel (U.S. Treasury Department) & Nathan Seegert (Utah))
Discussant:  Tuomas Kosonen (VATT, Helsinki)

Eric Zwick (Harvard), Do Financial Frictions Amplify Fiscal Policy? Evidence from Business Investment Stimulus
Discussant:  Dominika Langenmayr (Munich)

Mazhar Waseem (Manchester) Taxes, Informality and Income Shifting: Evidence From a Recent Pakistani Tax Reform
Discussant:  Miguel Almunia (Warwick)

June 26, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Paul Daugerdas (Jenkens & Gilchrist) Sentenced to 15 Years in Prison for Tax Shelter Fraud

The Impact of Taxes on Carmelo Anthony's Free Agency Decision

Sports Illustrated:  How Much Carmelo Can Make as an NBA Free Agent, by Michael McCann (New Hampshire):

AnthonyAnthony's financial decision-making is also affected by income tax rates, which vary widely by state and, as New York City residents know, municipality. SI.com and tax expert Robert Raiola have crunched the numbers for Anthony (whose projected contract amounts are provided by Spotrac.com). We break down how much he would likely earn, after taxes and the standard 4 percent agent commission, if he signed max deals with the Knicks, Bulls, Heat and Rockets.

Carmelo

Forbes:   How State Taxes Could Play A Role In Carmelo Anthony's Landing Spot, by Tony Nitti

(Hat Tip:  Bill Turnier.)

June 26, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Death of Former IRS Commissioner Johnnie Walters, Refused President's Request to Audit His Enemies

WaltersNew York Times, Johnnie M. Walters, Ex-IRS Chief, Dies at 94:

Johnnie M. Walters, a commissioner of the Internal Revenue Service under President Richard M. Nixon who left office after refusing to prosecute people on Nixon’s notorious “enemies list,” died on Tuesday at his home in Greenville, S.C. He was 94. ...

Nixon had fired his first IRS commissioner, Randolph W. Thrower, for resisting White House pressure to punish political opponents. Mr. Thrower, who served from 1969 to 1971, died at 100 in March. ...

Mr. Walters had not been told of Nixon’s other job requirements, as revealed in a White House conversation recorded on May 13, 1971. “I want to be sure he is a ruthless son of a bitch, that he will do what he’s told, that every income-tax return I want to see I see, that he will go after our enemies and not go after our friends,” the president said.

Mr. Walters failed to follow this script — which was unknown to him — when John W. Dean III, the White House counsel, summoned him to his office on Sept. 11, 1972. Mr. Dean handed him the “enemies list” of 200 people, most prominent Democrats, whom he wanted investigated.

"I was shocked,” Mr. Walters said in a 1997 interview with The Washington Post. “John, do you realize what you’re doing?” he remembered saying. “If I did what you asked, it’d make Watergate look like a Sunday school picnic.” ...

Several days later, Mr. Walters went to his immediate boss, Treasury Secretary George P. Shultz, showed him the list and recommended that the IRS do nothing. Mr. Shultz told him to lock the list in his safe.

By Sept. 15, Nixon had been told of Mr. Walters’s reluctance to follow instructions. “Why the hell did we promote him?” H. R. Haldeman, the White House chief of staff said, according to a tape. Nixon told Mr. Dean, “You’ve got to kick Walters’s ass out first and get a man in there.” The president added that Mr. Shultz needed to make sure that Mr. Walters left if he wanted to keep his own job.

Mr. Walters gave the list to Laurence N. Woodworth, chief of staff of Congress’s Joint Committee on Taxation. He wrote in his 2011 book, “Our Journey,” that this was the most important thing he did, “because then we could say with absolute certainty that IRS never began any audit or investigation of any name on that list because of the list.”

Mr. Walters testified to various committees investigating alleged Nixon misdeeds. He left office in April 1973.

USA Today, Former IRS Chief Recalls Defying Nixon:

At his home near Furman University, Johnnie Mac Walters remembers being pressured more than 40 years ago to do what he considered unthinkable. ... In the early 1970s, when embattled President Richard Nixon sought to use the Internal Revenue Service as a weapon to investigate his enemies, the administration turned to Walters, a Hartsville, S.C., native and head of the tax agency, to do the dirty work.

Walters, now 93, said he refused.

The IRS controversy currently dogging President Barack Obama has raised new allegations that the agency has been engaged in political meddling and bias. Obama has denounced as "outrageous" the targeting of conservative political groups by the IRS.

Walters walks with a cane now and is soft-spoken. But the recent IRS developments prompted him to sit down for an interview and resume his personal quest, not for vindication, but to validate his rejection of Nixon's tactics while he was commissioner of Internal Revenue. ...

Some Republicans have tried to link Obama to what the IRS has acknowledged was improper scrutiny of conservative groups seeking tax-exempt status. "I'm distressed at what's happening and particularly with IRS," said Walters, a lifelong Republican. "IRS must be run nonpolitical. Our tax system otherwise will fail and we can't afford that."

June 26, 2014 in IRS News, Tax | Permalink | Comments (8)

Morse: Supreme Court Clarifies Standard for Evidentiary Hearing in Enforcement of IRS Summons

Following up on Saturday's op-ed by Steve Johnson on Thursday's Supreme Court decision in United States v. Clarke, No. 13.301 (U.S. June 19, 2014):  SCOTUSBlog:  Court Clarifies Standard for Evidentiary Hearing in Enforcement of IRS Summons, by Susan C. Morse (Texas):

The Supreme Court on June 19 unanimously vacated and remanded an Eleventh Circuit per curiam decision in United States v. Clarke.  The Eleventh Circuit had reversed a district court refusal to grant a summons recipient an evidentiary hearing to challenge an IRS summons.  The Supreme Court emphasized the abuse of discretion standard applicable to the review of the district court’s decision and clarified the standard that the district court itself should apply.  It explained that “the taxpayer is entitled to examine an IRS agent when he can point to specific facts or circumstances plausibly raising an inference of bad faith.”  The decision leaves open an underlying legal question in the case:  whether improper purpose can follow from the issuance of a summons in retaliation for refusal to extend a statute of limitations and/or in anticipation of a not-yet-filed Tax Court suit.

June 26, 2014 in Scholarship, Tax | Permalink | Comments (4)

Mulligan: The Massive Tax Increase Hidden Inside Obamacare

Real Clear Politics:  The Massive Tax Increase Hidden Inside Obamacare, by Casey Mulligan (Chicago):

The ACA ... is full of implicit taxes. Many of them have remained hidden in the "fog of controversy" surrounding the law and their effects excluded from economic analyses of it. The chart below puts the ACA's new taxes in perspective of federal tax increases over the past seventy years. The taxes include federal personal income taxes (Form 1040, shown in pink), social insurance payroll taxes (gray), and various employment and implicit taxes (red).

Let's not be surprised that, as we implement a new law that taxes jobs and incomes, we are ending up with fewer jobs and less income.

N. Gregory Mankiw (Harvard), How Much Has the Affordable Care Act Reduced Potential GDP?

June 26, 2014 in Tax | Permalink | Comments (0)

Papers from the 2013 IRS-TPC Research Conference: Administration at the Centennial

TPC-IRSThe IRS has released the papers from the 2013 IRS-TPC Research Conference: Administration at the Centennial (abstracts of papers here):

Session #1  Individual Income Tax Dynamics

Session #2:  Business Compliance Behavior

Session #3:  Corporation Income Tax Enforcement

Session #4:  Lessons From Other Tax Administrations

June 26, 2014 in IRS News, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 413

Fox News Poll:  Voters Think IRS Emails Were Deliberately Destroyed:

The consensus is: it’s no accident. More than three-quarters of voters -- 76 percent -- think the emails missing from the account of Lois Lerner, the ex-IRS official at the center of the scandal over targeting of conservative groups, were deliberately destroyed. ... That suspicion is shared across party lines, albeit to varying degrees. An overwhelming 90 percent of Republicans think the emails were intentionally destroyed, as do 74 percent of independents and 63 percent of Democrats. Overall, just 12 percent of voters believe the emails were destroyed accidentally. Another 12 percent are unsure.

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Wall Street Journal:  No Confidence: Hardly Anybody Believes the IRS's Story About Lois Lerner's "Lost" Emails, by James Taranto:

The proportion of respondents who believe the IRS's claim to have destroyed the emails accidentally: 12%. That's congressional-approval-rating territory. Seventy-six percent disbelieve the IRS story, and the remaining 12% say they're "unsure." Asked whether Congress should continue to investigate, the ayes had it, 74% to 21%. ...

Each of these developments refutes Obama's claim that there was "not even a smidgen of corruption." And if the public is right that the destruction of emails was a deliberate coverup--and keep in mind that not just Lois Lerner but six other IRS employees are said to have suffered contemporaneous hard-drive crashes--that surely qualifies as "mass corruption," even irrespective of the facts of the underlying scandal.

The Fox poll is a stunning vote of no confidence not just in the Obama administration but in the government itself. Public skepticism of government is a healthy impulse, and in this case it seems fully warranted. A government that cannot inspire even a minimal degree of public confidence is a danger to itself and to the country.

Red State:  An Intellectually Honest Media Would Ask This Question:

Ignore, for a minute, the IRS targeting of conservative groups and the erasure of seven hard drives at the IRS. Yes, ignore all that for a moment.

While the media is doing its best to avoid that subject, with difficulty, it is absolutely and willfully ignoring another IRS scandal that, had it happened in the Bush Administration, would be the lead story of every nightly newscast and above the fold on the front page of every newspaper in America.

We now know that some person or persons at the IRS intentionally and maliciously leaked confidential tax records of a non-profit organization so that gay rights activists could target the donors of the organization for harassment. We know this from the emails of the gay rights activist who obtained the records through, what he described, as “a conduit” from the IRS. He then sent the data to the gay rights group Human Rights Campaign, which then put the records online. The records contained the names and addresses of donors to the National Organization for Marriage. The IRS is not only seemingly targeting conservative groups, but is now admitting to leaking information about a conservative group so others can target their donors.

Yes, the IRS is admitting someone at the IRS did this and is paying the legal fees of the National Organization for Marriage as a result.

The gay rights activist who received and disseminated the information, Matthew Meisel, “invoked his fifth amendment right not to incriminate himself” and he would not identify his conduit.

This all raises a question an honest media would ask: why has Eric Holder refused to investigate and prosecute this?

The American media will not ask this question because the National Organization for Marriage opposes gay marriage. The donors to the group, in the media’s mind, are bigots. To the American media they deserve no protection. They are oppressors.

But an honest media that believed in equal justice under the law would have to ask the question — why will the Justice Department not investigate and prosecute those within the IRS who leaked confidential tax records to political opponents of the group.

Must we wait until a Republican administration does this?

It seems we need more than one special prosecutor to investigate the IRS and Darryl Issa should be holding hearings on this matter. The IRS is not only seemingly targeting conservative groups, but is leaking information about conservative groups so others can target their donors.

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June 26, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, June 25, 2014

Osgood Presents Reform of [the Tax Treatment of] Nonprofit Institutions Today at Washington University

OsgoodRussell K. Osgood (Washington University) presents Reform of [the Tax Treatment of] Nonprofit Institutions at Washington University today as part of its Faculty Workshop Series:

The paper: 1) reviews the growth in many dimensions of the nonprofit sector, 2) discusses the history from 1969 onward of the 1969 Act and the subsequent lack of statutory reform due to Congressional inaction and the reasons for it, and 3) makes six significant proposals, including imposition of 1% excise tax on the endowments of all nonprofits, redrafting and narrowing the definitions of allowable 501(c)(3) purposes and regulating more heavily changes in purposes, expanding the taxation of quasi business income by taxing all income “not closely” related to the exempt purpose(s), eliminating much of the private foundation regime but requiring private foundations to liquidate after ten years and disqualifying them for any violation of core fiduciary duties, and revising the 170 deduction rules by limiting the deductibility (to the higher of adjusted basis or 50% of fair market value) of appreciated property, reducing the estate and gift tax charitable deduction limit to 50% (vs. 100%) of the gifted property, and reducing the regular contribution limits for all property and all taxpayers to a uniform 25% of adjusted gross income with only a one year carry forward.

June 25, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

University of Oxford 8th Annual Academic Tax Symposium

OxfordThe Oxford University Centre for Business Taxation's 8th Annual Academic Tax Symposium continues today with these speakers and papers:

David Weisbach (Chicago), International Capital Taxation
Discussant:  Alan Auerbach (UC-Berkeley)

Chris Sanchirico (Pennsylvania), As American as Apple Inc.: Tax and Ownership Nationality
Discussant:  Ilan Benshalom (Hebrew University of Jerusalem) 

Johannes Becker (University of Muenster), A Negotiation-based Model of Tax-induced Transfer Pricing (with Ron Davies (University College Dublin))
Discussant:  Michael Stimmelmayer (KOF, ETH Zurich) 

Mitchell Kane (NYU), Transfer Pricing, Integration, and Novel Intangibles: A Consensus Approach to the Arm’s Length Standard
Discussant:  John Vella (Oxford University)

Alfons Weichenrieder (Goethe University Frankfurt), Does Exchange of Information Between Tax Authorities Influence Foreign Direct Investment Into Tax Havens? (with Julia Braun (WU Vienna University of Economics and Business))
Discussant:  Celine Azemar (Glasgow University) 

Jeffrey Hoopes (Ohio State), Real Costs of Disclosure: Evidence From an Exogenous Shock to Subsidiary Disclosure in the UK (with Jaron Wilde (Iowa))
Discussant:  Travis Chow (Singapore Management University)

David Agrawal (Georgia), The Internet as a Tax Haven? The Effect of the Internet on Tax Competition
Discussant:  Giorgia Maffini (Oxford University) 

June 25, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Mankiw: How Inherited Wealth Helps the Economy

New York Times op-ed:  How Inherited Wealth Helps the Economy, by N. Gregory Mankiw (Harvard):

Is inherited wealth making a comeback?

Yes, says Thomas Piketty, author of the best seller “Capital in the Twenty-First Century.” Inherited wealth has always been with us, of course, but Mr. Piketty believes that its importance is increasing. He sees a future that combines slow economic growth with high returns to capital. He reasons that if capital owners save much of their income, their wealth will accumulate and be passed on to their heirs. He concludes that individuals’ living standards will be determined less by their skill and effort and more by bequests they receive.

To be sure, one can poke holes in Mr. Piketty’s story. Since the book came out, numerous economists have been doing exactly that in book reviews, blog posts and academic analyses.

Moreover, given economists’ abysmal track record in forecasting, especially over long time horizons, any such prognostication should be taken with a shaker or two of salt. The Piketty scenario is best viewed not as a solid prediction but as a provocative speculation.

But it raises the question: So what? What’s wrong with inherited wealth?

First, let’s consider why parents leave bequests to their children. I believe that this decision is based on three principles:

  1. Intergenerational Altruism
  2. Consumption Smoothing
  3. Regression Toward the Mean

Together, these ideas explain why top earners often leave sizable bequests to their families. Because of intergenerational altruism, they make their consumption and saving decisions based not only on their own needs but also on those of their descendants. Because of regression toward the mean, they expect their descendants to be less financially successful than they are. Hence, to smooth consumption across generations, they need to save some of their income so future generations can consume out of inherited wealth. This logic also explains why many people aren’t inclined to reduce their current spending so they will have money saved for bequests. ...

The bottom line is that inherited wealth is not an economic threat. Those who have earned extraordinary incomes naturally want to share their good fortune with their descendants. Those of us not lucky enough to be born into one of these families benefit as well, as their accumulation of capital raises our productivity, wages and living standards.

June 25, 2014 in Tax | Permalink | Comments (4)

Wells: Corporate Inversions and Whack-a-Mole Tax Policy

Tax Analysys Logo (2013)Bret Wells (Houston), Corporate Inversions and Whack-a-Mole Tax Policy, 143 Tax Notes 1429 (June 23, 2014):

In this article, Wells argues that until policymakers address the fundamental tax disparity that creates corporate inversions, ever changing forms of the transaction will continue to pop up like moles in a whack-a-mole game.

June 25, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Kaplan: Covering Retirement Health Care Costs

Richard L. Kaplan (Illinois), Desperate Retirees: The Perplexing Challenge of Covering Retirement Health Care Costs in a YOYO World, 20 Conn. Ins. L.J. 433 (2014):

A retiree’s single largest and most unpredictable expense is paying for health care, and this article explains the various choices and options that a retiree confronts regarding that expense. The article examines the traditional components of Medicare (Parts A and B), prescription drug plans (Medicare Part D), Medigap coverage, and managed care alternatives, as well as long-term care insurance. Each section addresses the financial trade-offs and time-sensitive decisions that are involved.

June 25, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 412

New York Post editorial:  The IRS Smirks:IRS Logo 2

That was quick. During a congressional hearing Monday night, IRS Commissioner John Koskinen — an attorney — asserted the IRS had done nothing criminal.

Rep. Trey Gowdy (R-SC), then asked what criminal statutes he relied on to reach that judgment. Koskinen admitted he hadn’t looked at any.

Less than 24 hours later, America’s top official for archiving federal records, David Ferriero, appeared before Congress. He said the IRS “did not follow the law.”

Not that this will have much effect on Commissioner Koskinen, as smug and imperious as any bureaucrat you will met.

Throughout these hearings, he’s come across less as a professional determined to restore the good name of the IRS than a Democratic Party hack who thinks the IRS is the victim here.

Wall Street Journal editorial:  IRS Email Jeopardy: The Agency Had a Legal Obligation to Retain the Records It Lost:

The IRS is spinning a tale of bureaucratic incompetence to explain the vanishing emails from former Tax Exempt Organizations doyenne Lois Lerner and six other IRS employees. We have less faith by the minute that there is an innocent explanation for this failure to cooperate with Congress, but even if true it doesn't matter. The IRS was under a legal obligation to retain the information because of a litigation hold.

In 2009 a pro-Israel group called Z Street applied to the IRS for tax-exempt status. When the process was delayed, an IRS agent told the group that its application was undergoing special review because "these cases are being sent to a special unit in the D.C. office to determine whether the organization's activities contradict the Administration's public policies." In August 2010 Z Street sued the IRS on grounds that this selective processing of its application amounted to viewpoint discrimination.

Under the Federal Rules of Civil Procedure and legal precedent, once the suit was filed the IRS was required to preserve all evidence relevant to the viewpoint-discrimination charge. That means that no matter what dog ate Lois Lerner's hard drive or what the IRS habit was of recycling the tapes used to back up its email records of taxpayer information, it had a legal duty not to destroy the evidence in ongoing litigation. ...

Attorney General Eric Holder won't name a special prosecutor, but there's still plenty of room for the judge in the Z Street case to force the IRS to explain and answer for its "willful spoliation" of email evidence.

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June 25, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, June 24, 2014

University of Oxford 8th Annual Academic Tax Symposium

OxfordThe Oxford University Centre for Business Taxation's 8th Annual Academic Tax Symposium kicks off today with these speakers and papers:

Joel Slemrod (Michigan), Do the Laws of Tax Incidence Hold? Point of Collection and the Pass-through of State Diesel Taxes (with Wojciech Kopczuk (Columbia), Justin Marion (UC-Santa Cruz) & Erich Muehlegger (Harvard))
Discussant:  Stephen Bond (Oxford)

Owen Zidar (UC-Berkeley), Who Benefits From State Corporate Tax Cuts? A Local Labor Markets Approach With Heterogeneous Firms (with Juan Carlos Suárez Serrato (Stanford))
Discussant:  Martin Simmler (DIW, Berlin)

Jing Xing (Oxford Corporate Tax Incentives and Capital Structure: Empirical Evidence From the UK Tax Returns (with Michael Devereux (Oxford) & Giorgia Maffini (Oxford))
Discussant:  Dhammika Dharmapala (Illinois)

Jacob Nussim (Bar-Ilan), A Theory of Tax Losses Mechanisms (with Avraham Tabbach (Tel Aviv))
Discussant:  Norman Gemmell (Victoria)

June 24, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Senate Holds Hearing Today on Student Loans and Tax Policy

Senate LogoThe Senate Finance Committee holds a hearing today on Less Student Debt from the Start: What Role Should the Tax System Play?:

  • Mark J. Mazur (Assistant Secretary for Tax Policy, U.S.Treasury Department)
  • Jayne Caflin Fonash (Director of School Counseling, Loudoun Academy of Science, Sterling, VA)
  • Scott A. Hodge (President, Tax Foundation, Washington, D.C.)
  • Amber Lee (Graduate, Willamette High School, Eugene, OR)
  • Dean Zerbe (National Managing Director, alliantgroup, Washington, D.C.) 

In connection with the hearing, the Joint Committee on Taxation has released Background And Present Law Related To Tax Benefits For Education (JCX-70-14) (June 20, 2014):

This document ... includes a description of present law and analysis relating to tax benefits for education.

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June 24, 2014 in Congressional News, Tax | Permalink | Comments (0)

Hoffer & Walker: Kuretski, the Tax Court, and the Administrative Procedure Act

HWResponding to Sunday’s op-ed by Patrick Smith and Monday's op-ed by Kristin Hickman on Friday’s D.C. Circuit opinion in Kuretski v. Commissioner, No. 13-1090 (D.C. Cir. June 20, 2014):  TaxProf Blog op-ed:  Kuretski, the Tax Court, and the Administrative Procedure Act, by Stephanie Hoffer (Ohio State) & Christopher J. Walker (Ohio State):

Friday’s decision in Kuretski v. Commissioner is perhaps the first major opinion penned by Judge Sri Srinivasan—a recent Obama appointee considered by many to be on the short list for the Supreme Court.  In a well-written opinion, the D.C. Circuit rejects a constitutional challenge to the President’s removal power of judges on the United States Tax Court.  To reach this conclusion, the court has to grapple with the Tax Court’s puzzling position in the modern administrative state, concluding that the Tax Court is not an Article III (judicial branch) court but a court established under Article I (legislative branch) that actually exercises Article II (executive branch) powers.  Or as Judge Srinivasan writes (at 20) for the court:

We have explained that Tax Court judges do not exercise the ‘judicial power of the United States’ pursuant to Article III.  We have also explained that Congress’s establishment of the Tax Court as an Article I legislative court did not transfer the Tax Court to the Legislative Branch.  It follows that the Tax Court exercises its authority as part of the Executive Branch.

No doubt many tax and administrative law professors will weigh in on the constitutional issues (early coverage here, here, and here).  Here, however, we focus on Kuretski’s impact on the relationship between the Tax Court and the Administrative Procedure Act (“APA”).  Patrick Smith, for instance, worries that Kuretski could open the door for the argument that “APA judicial review provisions simply do not apply in Tax Court proceedings.”  But we agree with the contrary position reached by Kristin Hickman (Minnesota) and write separately to show our math for this conclusion. 

At the outset, it is important to underscore that Smith’s worry is already a reality.  As we explain in a forthcoming paper, The Death of Tax Court Exceptionalism, 99 Minn. L. Rev. ___ (2014), the Tax Court has declared that “[t]he APA has never governed proceedings in the Court (or in the Board of Tax Appeals).”  In other words, the Tax Court refuses to apply the APA’s default standard (abuse of discretion) and scope (administrative record) of review.  Instead, it considers the default in both contexts to be de novo, and only departs from de novo review when it determines that the Internal Revenue Code suggests more deferential review.

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June 24, 2014 in Scholarship, Tax | Permalink | Comments (0)

Kuretskis' Counsel Responds to Smith and Hickman Op-eds on Treating the Tax Court as Part of the Executive Branch

SamahonResponding to Sunday’s op-ed by Patrick Smith and Monday's op-ed by Kristin Hickman on Friday’s D.C. Circuit opinion in Kuretski v. Commissioner, No. 13-1090 (D.C. Cir. June 20, 2014):  TaxProf Blog op-ed:  Kuretskis' Counsel Responds to Smith and Hickman Op-eds on Treating the Tax Court as Part of the Executive Branch, by Tuan Samahon (Villanova; Counsel for Peter and Kathleen Kuretski):

I am one of the professors who serve as counsel for the taxpayers, the Kuretskis.  I wanted to comment on the op-eds by Patrick Smith and Kristin Hickman on the possible consequences of the D.C. Circuit’s opinion from last Friday.

First, Patrick Smith expresses concern that the Tax Court may not be able to conduct Administrative Procedure Act court review of the IRS if the Tax Court, now according to the Kuretski opinion, exercises executive power.  Professor Hickman is skeptical of this effect of the opinion. She notes that congressional statutory definitions may not always jibe with constitutional ones. 

Neither of their op-eds, though, included the following passage from the opinion showing what the panel thought about potential collateral consequences on other laws.  Judge Srinivasan wrote:

And while we have no need to reach the issue here, Congress, in establishing those entities [i.e., the Article I Tax Court and the Article I Court of Appeals for the Armed Forces] as a “court” rather than an “agency,” perhaps also exempted them from statutes that apply solely to executive “agencies.” Cf. Megibow v. Clerk of the U.S. Tax Court, No. 04- 3321, 2004 U.S. Dist. LEXIS 17698, at *13-22 (S.D.N.Y. Aug. 31, 2004) (Tax Court is a “court of the United States” and not an “agency” under the Administrative Procedure Act, 5 U.S.C. § 551(1)), aff’d, 432 F.3d 387 (2d Cir. 2005) (per curiam).  [slip op. at 26]

This dictum seems to lean toward Professor Hickman’s view.

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June 24, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 411

IRS Logo 2Real Clear Politics:  Halperin on IRS Scandal: If This Was A GOP Admin, "This Story Would Be A National Obsession":

Mark Halperin:  Because when any government agency, particularly one as powerful as the IRS, engages in something that even people sympathetic to the admission says looks weird and suspicious, it's incumbent on all of the national media to aggressively ask more questions. The Republicans in Congress are asking questions. I think with a different administration, one that was a Republican administration, this story would be a national obsession, and, instead, it's getting coverage here and a few other places. But it deserves a lot more questions.

Washington Post op-ed by Jonathan Turley (George Washington):

As federal agencies have grown in size and scope, they have increasingly viewed their regulatory functions as powers to reward or punish citizens and groups. The Internal Revenue Service offers another good example. Like the patent office, it was created for a relatively narrow function: tax collection. Yet the agency also determines which groups don’t have to pay taxes. Historically, the IRS adopted a neutral rule that avoided not-for-profit determinations based on the content of organizations’ beliefs and practices. Then, in 1970, came the Bob Jones University case. The IRS withdrew the tax-exempt status from the religious institution because of its rule against interracial dating on campus. The Supreme Court affirmed in 1983 that the IRS could yank tax exemption whenever it decided that an organization is behaving “contrary to established public policy” — whatever that public policy may be. Bob Jones had to choose between financial ruin and conforming its religious practices. It did the latter.

There is an obvious problem when the sanctioning of free exercise of religion or speech becomes a matter of discretionary agency action. And it goes beyond trademarks and taxes. ... When agencies engage in content-based speech regulation, it’s more than the usual issue of “mission creep.” As I’ve written before in these pages, agencies now represent something like a fourth branch in our government — an array of departments and offices that exercise responsibilities once dedicated exclusively to the judicial and legislative branches. Insulated from participatory politics and accountability, these agencies can shape political and social decision-making. To paraphrase Clausewitz, water, taxes and even trademarks appear to have become the continuation of politics by other means.

Real Clear Politics op-ed:  An Arrogant and Lawless IRS, by Michael Gerson:

Noted management expert and IRS Commissioner John Koskinen was apparently called out of retirement -- like the Ted Williams of evasive, unapologetic bureaucrats -- to destroy what is left of his agency's credibility. ...

In recent congressional testimony, Koskinen admitted that the emails were irretrievably gone; that the "backup tapes" had been erased; and that Lerner's hard drive was apparently destroyed in an aggressive act of recycling. With that settled, Koskinen expressed his "hope that the investigations ... can be concluded in the very near future."

It is a mix of arrogance and delusion that seems designed to incense Republicans. Koskinen had delayed informing Congress of the lost emails for months, even while assuring members they would be provided. "It was my decision that we complete the investigation," he said, "so we could fully advise you as to what the situation was." Translation from management-speak: We wanted to get our story straight before we advised you of anything. Koskinen complained about the breadth of subpoenas and the "piecemealing out" of information.

Translation: We will provide you what we want when we want. "Every email," Koskinen assured the House Ways and Means Committee, "has been preserved that we have." Except the ones they don't have -- and somehow snuffed out, tied to an anvil and thrown into the ocean. ...

[T]he IRS has managed to feed anti-government sentiments by inhabiting anti-government stereotypes. It has undermined respect for authority. And it doesn't seem even to understand the damage it has done.

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June 24, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Monday, June 23, 2014

Tamara Ashford, Awaiting Senate Confirmation as Tax Court Judge, Named Acting Assistant Attorney General for the Tax Division

AshfordOn June 6, Eric Holder named Tamara W. Ashford Acting Assistant Attorney General for the Tax Division.  Ms. Ashford was the Deputy Assistant Attorney General for Appellate and Review in the Tax Division.  She was nominated by President Obama in September 2013 to be a a Judge on the U.S. Tax Court and is awaiting confirmation by the Senate following her unanimous approval by the Senate Finance Committee

June 23, 2014 in Tax | Permalink | Comments (0)

WSJ: Offshore Accounts: What to Do Now Before FATCA Kicks in on July 1?

Wall Street Journal Tax Report:  Offshore Accounts: What to Do Now, by Laura Saunders:

The federal government's campaign to track down money held by U.S. taxpayers in foreign countries shifts into high gear July 1.

That is when the main provisions of the Foreign Account Tax Compliance Act, known as Fatca, come into force.

The law, which Congress passed in 2010, is pushing tens of thousands of foreign banks and other financial institutions to disclose information about U.S. customers. It will make life more complex and expensive for many U.S. taxpayers with financial ties abroad, affecting everything from retirement savings to investments to divorce settlements.

WSJ

"Fatca is an ambitious effort to root out wealthy U.S. taxpayers hiding money offshore and put an end to tax evasion as a profitable line of business for banks," says Michael Graetz, a Columbia University law professor and former top U.S. Treasury Department official. "But U.S. authorities need to make an effort to avoid catching innocent middle-class citizens in its net." ...

[M]ore than 77,000 banks and other financial firms abroad have agreed, effective July 1, to report data on U.S. accounts, including 784 in Singapore, 13 in Albania and four in Chad.

WSJ 2

Until then, here is a rundown of issues you need to know about—whether you are a U.S. citizen living or working abroad, a foreign citizen working in the U.S., a U.S. resident with assets abroad or a green-card holder living abroad.

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June 23, 2014 in Tax | Permalink | Comments (0)