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Thursday, July 9, 2015

Brown: Jeb Bush Pays Too Much In Taxes. So Do The Rest Of Us.

JebFollowing up on my previous posts:

Washington Post op-ed:  Jeb Bush Paid Too Much in Taxes. So Did the Rest of Us., by Dorothy Brown (Vice Provost, Emory):

When we think of Jeb Bush—grandson of a U.S. Senator, son and brother of former presidents—it’s pretty easy to classify him right away as a political stand-in for the one percent; a wealthy and connected former two-term governor who few us would compare to an average Joe. And based on what he makes in a year, he is, indeed, a one-percenter. But when it comes to paying taxes, Bush isn’t like a lot of his one-percent compatriots—he’s actually not unlike the rest of us. Most of his income has, over time, come from his labor, and not capital gains. Pretty much the case for most Americans. ...

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July 9, 2015 in Political News, Tax | Permalink | Comments (2)

IRS Retroactively Cracks Down On 'Basket Options' Tax Strategy Used By Renaissance, Other Hedge Funds

RenaissanceFollowing on my previous posts (links below):  Bloomberg, IRS Fights Hedge-Fund Tax Maneuver Once Used by Renaissance:

The government Wednesday labeled the “basket options” strategy of converting short-term capital gains and ordinary income into lighter-taxed long-term gains as a “listed transaction.

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July 9, 2015 in Tax | Permalink | Comments (0)

Hasen: How I Learned to Stop Worrying and Love Our Homeowner Tax Rules

David Hasen (Colorado), How I Learned to Stop Worrying and Love Our Homeowner Tax Rules:

This short essay reviews the tax benefits available from home ownership. Sample calculations are provided. Fatalism is noted.

July 9, 2015 in Scholarship, 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 July 1, 2015) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Michigan)

47,187

Reuven Avi-Yonah (Michigan)

7066

2

Paul Caron (Pepperdine)

28,903

Ed Kleinbard (USC)

5607

3

Michael Simkovic (Seton Hall)

28,133

Michael Simkovic (Seton Hall)

4511

4

Louis Kaplow (Harvard)

24,479

D. Dharmapala (Chicago)

3939

5

D. Dharmapala (Chicago)

23,936

Gregg Polsky (N. Carolina)

3289

6

Vic Fleischer (San Diego)

20,978

Paul Caron (Pepperdine)

2636

7

James Hines (Michigan)

20,834

Richard Ainsworth (BU)

2057

8

Ted Seto (Loyola-L.A.)

20,075

Omri Marian (Florida)

1958

9

Richard Kaplan (Illinois)

19,824

Robert Sitkoff (Harvard)

1851

10

Ed Kleinbard (USC)

18,453

Louis Kaplow (Harvard)

1736

11

Katie Pratt (Loyola-L.A.)

17,584

Jeff Kwall (Loyola-Chicago)

1726

12

Carter Bishop (Suffolk)

16,035

Katie Pratt (Loyola-L.A.)

1666

13

Richard Ainsworth (BU)

15.749

Brad Borden (Brooklyn)

1639

14

Dennis Ventry (UC-Davis)

15,742

David Gamage (UC-Berkeley)

1519

15

Jen Kowal (Loyola-L.A.)

15,598

William Byrnes (Texas A&M)

1492

16

Robert Sitkoff (Harvard)

15,386

Dan Shaviro (NYU)

1466

17

Chris Sanchirico (Penn)

15,344

Jen Kowal (Loyola-L.A.)

1413

18

Brad Borden (Brooklyn)

15,262

Dick Harvey (Villanova)

1372

19

David Weisbach (Chicago)

15,231

James Hines (Michigan)

1208

20

Francine Lipman (UNLV)

14,785

Chris Sanchirico (UNLV)

1208

21

Bridget Crawford (Pace)

14,558

Joe Bankman (Stanford)

1145

22

David Walker (BU)

14,358

Carter Bishop (Penn)

1137

23

Dan Shaviro (NYU)

13,413

Vic Fleischer (San Diego)

1111

24

Herwig Schlunk (Vanderbilt)

12,810

Ruth Mason (Virginia)

1086

25

Wendy Gerzog (Baltimore)

12,095

David Weisbach (Chicago)

1067

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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July 9, 2015 in Legal Education, Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Ellen Aprill Chairs Loyola-L.A. Dean Search Committee

Loyola-L.A. Logo (2013)Tax Prof Ellen Aprill is chairing Loyola-L.A.'s dean search committee. For more details, see here.

July 9, 2015 in Legal Education, Tax | Permalink | Comments (0)

Tax Foundation Seeks To Fill Several Positions

The IRS Scandal, Day 791

IRS Logo 2New York Post editorial, The IRS Scandal Just Got Even Worse:

So the Obama IRS wasn’t just persecuting right-leaning nonprofits — it was out to prosecute them, too. And with the help of the Obama Department of Justice and FBI.

Via Freedom of Information Act lawsuits, the watchdog group Judicial Watch just got evidence of the plot. A “DOJ Recap” on an Oct. 8, 2010 meeting tells how officials from the three agencies discussed “several possible theories to bring criminal charges under FEC law” against groups “posing” as tax-exempt nonprofits.

As part of the project, the IRS handed the FBI 21 computer disks with 1.23 million pages of confidential IRS returns from 113,000 nonprofit 501(c)(4) groups — nearly every 501(c)(4). This, though federal law generally bans the IRS from sharing such data.

The evidence shows “that the Obama IRS scandal is also an Obama DOJ and FBI scandal,” noted Judicial Watch President Tom Fitton. “The FBI and Justice Department worked with Lois Lerner and the IRS to concoct some reason to put President Obama’s opponents in jail before his re-election. And this abuse resulted in the FBI’s illegally obtaining confidential taxpayer information.”

The IRS scandal surfaced years ago — and for all the administration talk of a full investigation, this huge news is only surfacing now, and only thanks to Judicial Watch.

The news of FBI and Justice involvement in the IRS scandal makes the need for some special prosecutor to probe this mess even more obvious.

After all, as Judicial Watch’s Fitton asks: “How can the Justice Department and the FBI investigate the very scandal in which they are implicated?”

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July 9, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Wednesday, July 8, 2015

2016 Vault Law Firm Tax Rankings

VaultVault has released its annual ranking of the Top 100 Law Firms, based on prestige as voted on by associates (methodology here). The Top Tax Practices are:

Rank

Firm

Home City

% Vote

1

Skadden

New York

42.20%

2

Davis Polk

New York

24.28%

3

Cleary Gottlieb

New York

22.83%

4

Wachtell Lipton

New York

17.63%

5

Baker & McKenzie

Chicago

16.78%

6

Cravath

New York

15.90%

7

McDermott Will & Emery

Chicago

15.32%

8

Sullivan & Cromwell

New York

12.14%

9

Caplin & Drysdale

D.C.

10.12%

10

Simpson Thacher

New York

  9.83%

11

Kirkland & Ellis

Chicago

  9.25%

11

Latham & Watkins

New York

  9.25%

13

Weil Gotscal

New York.

  7.51%

14

Miller & Chevalier

D.C.

  6.07%

15

Sidley Austin

Chicago

  5.78%

16

Mayer Brown

Chicago

  4.34%

For the sixth year in a row, Skadden is #1. The city rankings are:

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July 8, 2015 in Law Firm Tax Rankings, Tax | Permalink | Comments (1)

WSJ: The Tax Inversion Wave Keeps Rolling

Wall Street Journal, The Tax Inversion Wave Keeps Rolling:

When Horizon Pharma completed its takeover of a small, closely held Irish drug company last fall, its timing was fortuitous.

Horizon, formerly of Illinois, closed its deal with Dublin-based Vidara Therapeutics International Ltd. in September three days before U.S. regulators cracked down on these tax-beneficial corporate migrations known as inversions. Had the pair been slower to the altar, they would have been subject to tighter rules that make such overseas mergers more difficult and less lucrative.

Having squeaked through where others failed— AbbVie, for example, abandoned its $54 billion takeover of Shire in the wake of the new rules—Horizon is now pressing its tax advantages through deal making, following a well-worn path laid by other corporate inverters before it.

Their deals show that, despite Washington’s efforts last year to protect the U.S. corporate tax base, revenue keeps trickling out. Since the Treasury rules went into effect last fall, 55 U.S. companies have been sold to or targeted by foreign buyers, many of those acquirers formed by inversions themselves, according to FactSet.

WSJ

Horizon and other inverted companies are using their new, lower tax rates to turbocharge corporate takeovers. Applying those rates, often in the midteens, to profits of companies in the U.S., with a federal corporate rate of 35%, can yield extra savings on top of those traditionally wrung from mergers. Moreover, unlike the U.S., Ireland and most other countries only tax profits earned in-country, giving companies the freedom and incentive to shift income to still-lower-tax jurisdictions.

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

Senate Finance Committee Releases Reports From Bipartisan Tax Working Groups

Senate Logo The Senate Finance Committee today released reports from the committee's five bipartisan tax working groups:

The reports offer policy options and recommendations for ‎the Committee to consider as part of comprehensive tax reform.

Background
On January 15, 2015, to coincide with the kickoff of a series of tax reform hearings, the Finance Committee Chairman and Ranking Member announced the formation of bipartisan tax reform working groups. 

In March, after five tax reform hearings, the Committee announced it would ask stakeholders and the public to submit ideas to the bipartisan working groups. The Committee released those submissions on April 29, 2015.

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July 8, 2015 in Congressional News, Tax | Permalink | Comments (0)

IRS Whistleblower Office Issues Annual Report To Congress: Claims Up 37%, Awards Paid Down 17%

Estate of Former Detroit Pistons Owner Settles $2.8 Billion Gift, Estate & GST Deficiency Claim For 11 Cents On The Dollar

DavidsonFollowing up on my previous post, IRS Hits Estate of Former Detroit Pistons Owner With $2 Billion Tax Bill:  the IRS settled for $320 million of the $2.8 billion in gift, estate, and Generation-skipping taxes it sought from the estate of William Davidson, the former owner of the Detroit Pistons. Estate of Davidson v. Commissioner, No. 13748-13 (July 6, 2015).

Born in Detroit, Davidson built Auburn Hills-based Guardian Industries into one of the world’s leading makers of glass, automotive and building products. He went on to own the Detroit Pistons, the WNBA’s Detroit Shock and NHL’s Tampa Bay Lightning. He died March 13, 2009, at age 86, with a net worth estimated at more than $3 billion.

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July 8, 2015 in New Cases, Tax | Permalink | Comments (0)

Tax Non-Compliance Detection Using Co-Evolution Of Tax Evasion Risk And Audit Likelihood

Erik Hemberg (MIT), Jacob Rosen (MIT), Geoff Warner (MITRE Corp.), Sanith Wijesinghe (MITRE Corp.) & Una-May O’Reilly (MIT), Tax Non-Compliance Detection Using Co-Evolution of Tax Evasion Risk and Audit Likelihood:

We detect tax law abuse by simulating the co-evolution of tax evasion schemes and their discovery through audits. Tax evasion accounts for billions of dollars of lost income each year. When the IRS pursues a tax evasion scheme and changes the tax law or audit procedures, the tax evasion schemes evolve and change into undetectable forms. The arms race between tax evasion schemes and tax authorities presents a serious compliance challenge. Tax evasion schemes are sequences of transactions where each transaction is individually compliant. However, when all transactions are combined they have no other purpose than to evade tax and are thus non-compliant. Our method consists of an ownership network and a sequence of transactions, which outputs the likelihood of conducting an audit, and requires no prior tax return or audit data. We adjust audit procedures for a new generation of evolved tax evasion schemes by simulating the gradual change of tax evasion schemes and audit points, i.e. methods used for detecting non-compliance. Additionally, we identify, for a given audit scoring procedure, which tax evasion schemes will likely escape auditing. The approach is demonstrated in the context of partnership tax law and the Installment Bogus Optional Basis tax evasion scheme. The experiments show the oscillatory behavior of a co-adapting system and that it can model the co-evolution of tax evasion schemes and their detection.

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

The IRS Scandal, Day 790

IRS Logo 2Judicial Watch Press Release, New Documents Reveal DOJ, IRS, and FBI Plan to Seek Criminal Charges of Obama Opponents:

Judicial Watch today released new Department of Justice (DOJ) and Internal Revenue Service (IRS) documents that include an official “DOJ Recap” report detailing an October 2010 meeting between Lois Lerner, DOJ officials and the FBI to plan for the possible criminal prosecution of targeted nonprofit organizations for alleged illegal political activity.

The newly obtained records also reveal that the Obama DOJ wanted IRS employees who were going to testify to Congress to turn over documents to the DOJ before giving them to Congress. Records also detail how the Obama IRS gave the FBI 21 computer disks, containing 1.25 million pages of confidential IRS returns from 113,000 nonprofit social 501(c)(4) welfare groups  – or nearly every 501(c)(4) in the United States – as part of its prosecution effort. According to a letter from then-House Oversight Committee Chairman Darrell Issa (R-CA) to IRS Commissioner John Koskinen, “This revelation likely means that the IRS – including possibly Lois Lerner – violated federal tax law by transmitting this information to the Justice Department.”

The documents were produced subsequent to court orders in two Judicial Watch Freedom of Information Act (FOIA) lawsuits: Judicial Watch v. Internal Revenue Service (No. 1:14-cv-1956) and Judicial Watch v. Department of Justice (No. 1:14-cv-1239).

The new IRS documents include a October 11, 2010 “DOJ Recap” memo sent by IRS Exempt Organizations Tax Law Specialist Siri Buller to Lerner and other top IRS officials explaining an October 8 meeting with representatives from the Department of Justice Criminal Division’s Public Integrity Section and “one representative from the FBI” to discuss the possible criminal prosecution of nonprofit organizations for alleged political activity. ...

“These new documents show that the Obama IRS scandal is also an Obama DOJ and FBI scandal,” said Judicial Watch President Tom Fitton. “The FBI and Justice Department worked with Lois Lerner and the IRS to concoct some reason to put President Obama’s opponents in jail before his reelection. And this abuse resulted in the FBI’s illegally obtaining confidential taxpayer information. How can the Justice Department and FBI investigate the very scandal in which they are implicated?”

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July 8, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Tuesday, July 7, 2015

Hayashi Reviews Liscow's Critique Of Kaplow & Shavell: When Legal Rule Design Should Incorporate Equity As Well As Efficiency

JotwellAndrew Hayashi (Virginia),  Equity and Efficiency in Rule Design (Jotwell) (reviewing Zachary D. Liscow (J.D. 2015, Yale), Note, Reducing Inequality on the Cheap: When Legal Rule Design Should Incorporate Equity as Well as Efficiency, 127 Yale L.J. 2478 (2014)):

Great arguments aren’t always right, but they should be bold, persuasive, and force the scholarly community to respond by testing the arguments’ logic and limitations. In recent years, there are few arguments that have been more generative of thoughtful scholarship than Kaplow and Shavell’s claim that income redistribution should be done solely through the system of taxes and transfers and that legal rules should be chosen solely for their efficiency properties [Why The Legal System Is Less Efficient Than The Income Tax In Redistributing Income, 23 J. Legal Stud. 667 (1994)]. This conclusion is instinctively repugnant to many scholars outside of the law and economics tradition, and surprising to many within it. Yet, first rank economists that they are, Kaplow and Shavell’s logic, at least under the assumptions of the model they use to make their argument, is unassailable.

But, what Kaplow and Shavell’s logic proves and what it has often been taken to prove are two very different things. Although many excellent scholars have offered incisive critiques of the Kaplow and Shavell result, Zach Liscow’s recent note in the Yale Law Journal does as fine a job as I’ve seen of both identifying the reason for this difference and arguing from within a welfarist framework that equitable considerations should apply to legal rules too. The note is admirable in its accessibility, clarity, and rigor. I would include it on the reading list for any law and economics or tax policy seminar that addressed the merits of redistribution through the tax and transfer system.

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July 7, 2015 in Scholarship, Tax | Permalink | Comments (0)

50-State Fiscal Condition Ranking

Mercatus Center (George Mason University), Ranking the States by Fiscal Condition:

In new research for the Mercatus Center at George Mason University, Senior Research Fellow Eileen Norcross ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, including unfunded pensions and health care benefits. The study, which builds on previous Mercatus research about state fiscal conditions, provides information from the states’ audited financial reports in an easily accessible format, presenting an accurate snapshot of each state’s fiscal health.

Mercatus

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July 7, 2015 in Tax, Think Tank Reports | Permalink | Comments (1)

Property Tax Is The Most Efficient Tax

Property TaxNew York Times:  The Inevitable, Indispensable Property Tax, by Josh Barro:

If you’re a homeowner, you probably don’t like paying property taxes. But economists like property taxes for the same reason taxpayers hate them: They’re hard to avoid.

A 2008 study by researchers at the Organization for Economic Cooperation and Development looked at a number of countries and found that taxes on real property caused the least drag on gross domestic product per dollar of revenue raised. Next came sales taxes, personal income taxes and corporate income taxes. In other words, property taxes were the best way to collect revenue without hurting the economy too much.

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July 7, 2015 in Tax | Permalink | Comments (2)

Haneman: The Collision Of Student Loan Debt And Joint Marital Taxation

Student LoansVictoria J. Haneman (Concordia), The Collision of Student Loan Debt and Joint Marital Taxation:

Students presently graduating from college represent perhaps the most indebted generation of young adults in the history of the United States, which may be attributed to the fact that interest-bearing debt plays a primary role in ensuring that our children pursue higher education. The long-term consequences of student loan borrowing, and its impact on this generation of borrowers, both remain to be seen. To assist borrowers with the burden of loan repayment, the federal government has developed two income based repayment programs. This Article focuses upon one important detail of the program that has largely escaped the focus of the media and scholars: the ability of a borrower to file separate tax returns and qualify for income based repayment on the basis of his or her income alone.

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July 7, 2015 in Legal Education, Scholarship, Tax | Permalink | Comments (1)

Taxation And Tax Policy Roundtable Today At Netanya College School Of Law (Israel)

  • NetanyaYariv Brauner (Florida): Arm's Length Transfer Pricing
  • David Elkins (Netanya), Allocative Efficiency, Transactional Fairness, and Distributive Justice in International Taxation: A (Not So) Radical Proposal For Reform
  • Mirit Eyal-Cohen (Alabama), Through the Lens of Innovation
  • Assaf Lichovsky (Tel Aviv), Tax Law and Social Norms in Mandatory Palestine and Israel
  • Tamir Shanan (College of Management) & Chen Avidov, Tax Appeal Procedure - How Courts Consider Tax Appeals

July 7, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Obama Administration Refuses To Follow Law Banning Government Contracts To Companies Who Engaged In Tax Inversions

Bloomberg:   U.S. Sided With Tax-Avoiding Companies Over Contracting Ban, by Zachary Mider:

The Obama administration quietly handed a victory to U.S. companies that avoid taxes by claiming a foreign address, suggesting that virtually all of them are still eligible for government contracts.

The Department of Homeland Security last year endorsed a legal memorandum that argued in part that a 2002 law banning such companies from federal contracts was invalid, according to a copy of the memo obtained by Bloomberg News. Although President Barack Obama later began publicly criticizing the tax maneuvers known as inversions, there’s no sign that he has reversed the department’s decision.

The March 2013 memo was submitted to Homeland Security by one of the country’s largest inverted companies, the manufacturer Ingersoll-Rand Plc. The company argued in part that U.S. trade agreements with foreign governments invalidated the law that would prohibit it from winning federal contracts.

July 7, 2015 in Tax | Permalink | Comments (1)

The IRS Scandal, Day 789

IRS Logo 2New York Times, I.R.S. Expected to Stand Aside as Nonprofits Increase Role in 2016 Race:

As presidential candidates find new ways to exploit secret donations from tax-exempt groups, hobbled regulators at the Internal Revenue Service appear certain to delay trying to curb widespread abuses at nonprofits until after the 2016 election.

In a shift from past elections, at least eight Republican presidential candidates, including leading contenders like Jeb Bush and Senator Marco Rubio of Florida, have aligned with nonprofit groups set up to raise hundreds of millions of dollars. Hillary Rodham Clinton’s supporters are considering a similar tactic.

Some of these so-called social welfare nonprofit groups are already planning political initiatives, including a $1 million advertising campaign about Iran by a tax-exempt group supporting Mr. Rubio.

The groups are able to carry out many of the same political activities as candidates and their affiliated “super PACs” but do not have to disclose where they get their money, allowing total anonymity for donors.

While the nonprofit groups are supposed to limit their political activity, the I.R.S. appears powerless to stop the onslaught of money coursing through them.

The tax agency remains deeply wounded by the scandal that began two years ago over its scrutiny of nonprofits tied to the Tea Party and other political causes, both conservative and liberal.

“It’s anything goes for the next couple of years,” said Paul Streckfus, a former nonprofit specialist at the I.R.S. who now edits a newsletter on tax-exempt groups. “The whole system has really collapsed.”

Under an exemption established more than a century ago, the nonprofit groups — known as 501(c)(4) organizations for the section of the tax code that created them — are supposed to be devoted to “social welfare,” with an aim “to further the common good and general welfare of the people of the community.” But there is disagreement over just how much politicking the nonprofits can do.

I.R.S. officials concede that the rules are vague and difficult to enforce. Audits for excessive campaign work are extremely rare, even for groups spending huge chunks of their budgets to support candidates. Complaints about abuses can languish for years, records show.

The Treasury Department recently squashed speculation that new rules would soon be put into effect to limit the political activity of nonprofits. The I.R.S. commissioner, John Koskinen, drew criticism this year when he said nonprofits could spend up to 49 percent of their money on political activities. Watchdog groups have said Congress meant for those groups to work “exclusively” on social welfare and not politics.

The I.R.S. put out its first proposal for regulating nonprofits’ political work in 2013, just as the controversy was building over the targeting of Tea Party groups. Both liberals and conservatives attacked the move as chilling political speech, and the agency shelved the proposed rules.

“Because of the way the I.R.S. has been attacked, they’ve become extremely hesitant to act,” said Miriam Galston, a campaign finance specialist at George Washington University who believes tougher restrictions are needed.

Bloomberg View:  Why Nonprofits Get Away With Campaigning, by Noah Feldman (Harvard):

Nonprofit groups are supposed to exist to promote the public welfare, not to run political campaigns. IRS rules say that tax-exempt 501(c)(4) organizations, which are allowed to campaign consistent with their welfare-promoting missions, can’t have politicking as their primary activity. But because those rules aren’t being enforced, presidential campaigns now feature such nonprofits.

Why is this happening? And what -- if anything -- can be done to stop it?

The source of the problem isn’t IRS laziness. It’s a deeper difficulty in defining the interaction between money and free speech in the logic of the First Amendment, one that’s gotten much worse in the era of Citizens United and the U.S. Supreme Court’s gradual subversion of campaign-finance laws. The solution, if there is one, is going to have to come from the courts.

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July 7, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Monday, July 6, 2015

The Tax Underpinnings Of The Greek Financial Crisis

Greek Flag (2013)Washington Post, Why Greece and Germany Just Don’t Get Along, in 15 Charts:

Despite a crisis that has sometimes threatened the global economy — and maybe today, still does — Greece and Germany have just not been able to get along. Both certainly understand the ramifications: for Greece, years more of what has already become a Great Depression; and for Germany, its reputation as the linchpin of Europe. ...

The Germans insist on a tough austerity program in order to continue aiding Greece. Syriza says it understands the need to get the country's financial house in order, but demands the flexibility to do so in a way that it feels is right. Whether Greece's voters have truly had enough of Germany's mandates will be revealed Sunday. Here's a guide to the data on why Germany and Greece are such different countries, among the factors that have made it difficult for them to see eye-to-eye on the most important questions facing Europe. ...

Greece

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July 6, 2015 in Tax | Permalink | Comments (2)

Congratulations, Team USA!

July 6, 2015 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 788

TIGTATreasury Inspector General for Tax Administration Report of Investigation, Exempt Organization Data Loss and Potential Obstruction of Justice:

The investigation determined that there were six possible sources to examine in order to potentially recover the missing e-mails. These sources were LERNER's crashed hard drive, the backup or disaster recovery tapes, a decommissioned Microsoft (MS) Exchange 2003 e-mail server, the backup tapes for the decommissioned e-mail server, LERNER's BlackBerry, and loaner laptop computers that may have been assigned to her while her laptop was being repaired. An examination of four of these sources, the backup or disaster recovery tapes, the decommissioned Exchange 2003 e-mail server, LERNER's BlackBerry, and the loaner laptops produced e-mail that the IRS had not previously produced to Congress, DOJ or TIGTA. The investigation also determined that once it was discovered that there was a gap in the IRS' production of LERNER's e-mail, the IRS did not fully identify as a source or perform recovery attempts for e-mail on the following electronic media, all of which the IRS had in their possession: backup or disaster recovery tapes, the decommissioned Exchange 2003 e-mail server, the backup tapes for the decommissioned e-mail server or the loaner laptop computers.  ...

The investigation also revealed that on or about March 4, 2014, one month after the IRS realized it was missing some of LERNER's e-mails, IRS employees in the IRS Enterprise Computing Center in Martinsburg, West Virginia (Martinsburg), magnetically erased 422 backup tapes that are believed to have contained LERNER's e-mails that were responsive to Congressional demands and subpoenas. However, the investigation did not uncover evidence that the IRS and its employees purposely erased the tapes in order to conceal responsive e-mails from the Congress, the DOJ and TIGTA. 

The investigation revealed that the backup tapes were destroyed as a result of IRS management failing to ensure that a May 22, 2013, e-mail directive from the IRS Chief Technology Officer (CTO) concerning the preservation of electronic e-mail media was fully understood and followed by all of the IRS employees responsible for handling and disposing of e-mail bStephen MANNING, former IRS Deputy Chief Information Officer, Strategy and Modernization.ackup media.  ...

When interviewed, [Terence MILHOLLAND, IRS Chief Technology Office] was asked if he knew that e-mail backup tapes from a decommissioned e-mail server had been degaussed in March 2014, MILHOLLAND stated that he was not aware of this, and he advised that he was "blown away" at the revelation. He further stated that IRS IT senior management was ultimately responsible. MILHOLLAND also stated that his May 2013 e-mail directive would have applied to preserving the NCFB backup tapes and that the organization that sent them to be destroyed would also be responsible for their destruction.

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July 6, 2015 in Congressional News, Gov't Reports, IRS News, IRS Scandal, Tax | Permalink | Comments (4)

TaxProf Blog Holiday Weekend Roundup

Sunday, July 5, 2015

Fleischer: Jeb Bush Tax Returns Recall Old Days Of Shelters

NY Times Dealbook (2013)New York Times Deal Book:  Jeb Bush Tax Returns Recall Old Days of Shelters, by Victor Fleischer (San Diego):

Jeb Bush’s tax returns take us back to the time when it was a point of pride for high-income earners to buy a piece of a Panamanian gold mine, a Hollywood movie, a Texas oil well or a California alpaca farm. The point was not to make money but to use the artificial tax losses from a partnership to shelter one’s true salary from tax.

Mr. Bush released 33 years of returns on Tuesday, and his effective tax rate of 40 percent in 2013 contrasts notably with that of the last Republican presidential nominee, Mitt Romney, who disclosed an effective rate of 13.9 percent in 2010. After releasing his returns, Mr. Bush joked that he “apparently didn’t take full advantage” of deductions.

Mr. Bush should be careful when throwing stones; he did not always pay tax at such a high rate. In the 1980s, before the Tax Reform Act of 1986 changed many of the rules related to tax shelters, Mr. Bush’s dealings in real estate allowed him to pay almost no income tax, even when he earned considerable wages and had little to no risk of economic loss on his investments.

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July 5, 2015 in Political News, Tax | Permalink | Comments (1)

The Top 5 Tax Paper Downloads

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

  1. [385 Downloads]  Taxation of E-Commerce, by Orkhan Abdulkarimli (Baku State)
  2. [317 Downloads]  Trust Decanting: A Sale Without Gain Realization, by Jason Kleinman (Herrick, New York)
  3. [189 Downloads]  Reducing Inequality With A Retrospective Tax On Capital, by James Kwak (Connecticut)
  4. [181 Downloads]  Citizenship Taxation, by Ruth Mason (Virginia)
  5. [167 Downloads]  What Does Voluntary Tax Compliance Mean?: A Government Perspective, by J. T. Manhire (U.S. Treasury Department)

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

The IRS Scandal, Day 787

Saturday, July 4, 2015

This Week's Ten Most Popular TaxProf Blog Posts

Tax Like It Is July 4, 1776

1776Wall Street Journal op-ed:  What Life Was Like in 1776, by Thomas Fleming (Former President, Society of American Historians; Author, What America Was Really Like in 1776 (2012)):

Americans [in 1776] had the highest per capita income in the civilized world, paid the lowest taxes—and were determined to keep it that way. ...

In the northern colonies, according to historical research, the top 10% of the population owned about 45% of the wealth. In some parts of the South, 10% owned 75% of the wealth. But unlike most other countries, America in 1776 had a thriving middle class.

Tax Foundation:  Tax Facts for Independence Day 2013:

Taxpayers across the country will celebrate the 237th anniversary of American independence on July 4th this year. As students of history will remember, one of the chief complaints of the American colonists against the British government in 1776 was unfair and burdensome taxation (including 18th century tax breaks for big business). With that in mind, the Tax Foundation presents a few facts for Independence Day that highlight the changing American tax system.

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July 4, 2015 in Book Club, Tax | Permalink | Comments (7)

Lima Declaration On Tax Justice And Human Rights

OxfamOver 100 organizations have signed the Lima Declaration on Tax Justice and Human Rights:

We come together as a broad-­based community of experienced advocates, practitioners, activists, scholars, jurists, litigators and others committed to advancing tax justice through human rights, and to realizing human rights through just tax policy.

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

The IRS Scandal, Day 786

IRS Logo 2Wall Street Journal, Lois Lerner for President:

[G]et a load of this report from CNSNews.com:

Catherine Duval, the attorney in charge of the Internal Revenue Service’s email production to Congress, has changed jobs: She now manages the State Department’s email production to Congress, Rep. Trey Gowdy (R-S.C.) told a hearing of the House Oversight and Government Reform Committee on Thursday, June 25.

Meanwhile, members of the Oversight Committee last week accused the IRS of destroying some of Lois Lerner’s emails despite a subpoena and an order to preserve them.

“There was a preservation order in place, there’s a subpoena in place, they’ve never complied with it; we’ve had testimony from the IRS commissioner that we would get all this only to find out they’ve been degaussing these tapes and they destroyed evidence,” said Rep. Jason Chaffetz (R-Utah) at the June 25 hearing.

Which gives us an idea: Why doesn’t Lois Lerner jump into the race for the Democratic presidential nomination? At least she believes in something.

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July 4, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Friday, July 3, 2015

Weekly Tax Roundup

Weekly SSRN Tax Roundup

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July 3, 2015 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Genevieve Tokic (McDermott Will & Emery) Joins Northern Illinois Law School Faculty

TokicNorthern Illinois College of Law Press Release:

Genevieve Tokic, an associate from the tax group at McDermott Will & Emery, will teach courses in the areas of tax and international business, where her expertise in international tax planning and cross-border business transactions will well-complement the school's global reach and credentials. Previously, Professor Tokic served as an associate in the U.S. Corporate Finance Group of Norton Rose Fulbright in London, where she focused her practice on securities regulation and mergers and acquisitions. She has taught at the Texas Tech University School of Law and served as a visiting professor at NIU Law in 2011. She holds a masters of law and undergraduate degrees from Northwestern University and a J.D. from the New York University School of Law.

July 3, 2015 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

Avi-Yonah: Constructive Unilateralism — U.S. Leadership And International Taxation

Reuven S. Avi-Yonah (Michigan), Constructive Unilateralism: US Leadership and International Taxation:

In recent years, various US international tax proposals have been advanced on the basis that we should follow the lead of our major trading partners. For example, it has been argued that we should adopt a “territorial” tax system (really, an exemption for dividends from controlled subsidiaries of US multinationals) because most of our trading partners have done so, or that we should adopt a “patent box” because some EU countries have one. But is this an adequate policy argument? Historically, most of the advances in international taxation occurred because the US led, not because it has followed. This paper reviews the history of instances in which other countries followed US international tax reforms, and then argues that positive results can be expected if the US maintains its leadership by “constructive unilateralism”.

July 3, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 785

IRS Logo 2Politico, Double Trouble? IRS Lawyer Now Heads Clinton Email Production:

A year ago, Catherine Duval was embroiled in the scandal over former IRS official Lois Lerner’s lost emails.

Now the top government attorney is heading up another document project in the cross hairs of Congress: the State Department’s release of Hillary Clinton’s emails and Libya documents to the House Select Committee on Benghazi.

And Republican GOP investigators are raising red flags, accusing her and the State Department of stonewalling Congress by narrowly interpreting document requests and failing to disclose important information.

“The person in charge of document production at two different places on two different scandals has not been completely straightforward with us,” said Rep. Jim Jordan (R-Ohio), a top IRS and Benghazi investigator, in an interview. “She was at the IRS when there was a preservation order and subpoena — and documents were destroyed. She is now at the State Department, where we were supposed to get [certain] information, and we know that some of the emails were not given.”

Duval, a former attorney for the powerhouse Washington law firm Williams & Connolly who left the IRS and joined the State Department last August, declined to comment for this story. But she told House Oversight investigators last year that she didn’t know such backup tapes of the lost Lerner emails — recently found destroyed — even existed. And while she was leading the document production effort, she also gave a preservation order to all employees. ...But now, with an IRS watchdog announcing last Thursday that tax agency employees under Duval’s watch had erased more than 400 backup tapes central to Congress’ IRS probe of the tea party targeting, Republicans are even more suspicious.

“Who is Kate Duval — because I think I’ve heard that name before,” Gowdy asked during last week’s IRS hearing on the news. “I know where she is now: She’s at the Department of State in charge of their email productions. Wow.” ...

Benghazi panel Democrats say the IRS problems were out of Duval’s control, noting that the Oversight Committee turned up nothing when it questioned her last year about her role. And they add that Duval was the one who raised the alarm about Lerner’s missing emails in the first place.

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July 3, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, July 2, 2015

Shaviro: Taxing Potential Community Members' Foreign Source Income

Daniel Shaviro (NYU), Taxing Potential Community Members' Foreign Source Income:

Recent years have witnessed rising debate, on both sides of the Atlantic, regarding how to define the category of individuals whom a given country classifies as domestic taxpayers, and who thus may be taxable on their foreign source income (FSI) even if they live abroad. While the United States rules focus distinctively on citizenship, the broader issue is better viewed as pertaining to the taxation of “potential community members” (PCMs) – that is, all those who plausibly might be viewed as members of the home community.

This paper makes two main points regarding the taxation of PCMs on their FSI. First, the issues turn in large part on drawing a distinction between “us” and “them” – that is, between people whom we classify as members of the home community, and thus whose welfare we care about, and those whom we classify as normatively irrelevant (or less relevant) outsiders. While such a distinction is inevitable in a world with separate national governments, conventional tax policy and public economics tools shed little direct light on how one might operationalize it.

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July 2, 2015 in Scholarship, Tax | Permalink | Comments (0)

Morriss: BEPS, FATCA & EU Tax Harmonization: Seeing The Taxman

Andrew P. Morriss (Dean, Texas A&M), Seeing Like A Taxman:

The world of international financial regulation and taxation is in turmoil. New initiatives from the United States, the OECD and the European Union seek to reign in tax avoidance and evasion through a wide array of measures. These include the US FATCA, the OECD's base erosion and profit shifting (BEPS) initiative, and EU tax harmonization measures. As Richard Gordon and I have argued elsewhere, these measures were generally adopted without regard to whether the benefits they might yield in revenue collection are worth the costs they impose [Moving Money: International Financial Flows, Taxes, & Money Laundering, 35 Hastings Int'l & Comp. L. Rev. (2014)]. Why then do they continue to appear?

Scott 3One advantage academics have in such circumstances is to bring to bear ideas from outside a narrow field that can help make sense of events by providing a framework for analysis. Two books by James C. Scott, a political scientist and anthropologist at Yale, offer a perspective on anti-avoidance and anti-evasion measures that can suggest where things might be headed. In Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (Yale 1998), Scott drew on his work in Southeast Asia to analyze why many ambitious development projects failed. In The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia (Yale 2009), he looked at the history of upland people who avoided incorporation into pre-colonial and colonial states by running away. We can use Scott's analysis as an opportunity to re- think how governments are approaching tax avoidance and tax evasion. In doing so, I am stretching Scott's analysis well beyond where he deployed it. Nonetheless, the analogy between Southeast Asian societies and modern tax avoidance and evasion is a powerful one.

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July 2, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (3)

Weidner: Capital Accounts In LLCs And Partnerships

Donald J. Weidner (Dean, Florida State), Capital Accounts in LLCs and in Partnerships: Powerful Default Rules and Potential Tax Significance, 14 Fla. St. U. Bus. Rev. 1 (2015):

Balance sheets for limited liability companies and for partnerships differ from corporate balance sheets in one important respect. Accounting for these alternative forms traditionally includes a separate equity account, or “capital account,” for each owner. Accounting practice and case law suggest that, at least as a default rule or norm, these accounts guide distributions on liquidation or buyout, and, if negative, may also reflect debts to the firm. Indeed, the statutory default rule of partnership law in most states requires that individual capital accounts be maintained and given economic significance on liquidation or buyout. Although the statutory law of LLCs does not contain these default rules, partnership law provides analogy. Furthermore, the federal income tax rules that apply both to partnerships and to most multi-member LLCs closely examine the maintenance and significance of capital accounts to determine the validity of special allocations of tax benefits. Finally, capital accounts analysis also sharpens the understanding of the economic arrangement of the owners, particularly with respect to how and to what extent they have agreed to share different items of loss.

July 2, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 784

IRS Logo 2World, Investigators Find Proof IRS Destroyed Evidence in Targeting Scandal:

Two Treasury Department inspectors general revealed last week someone erased computer evidence during the investigation into the IRS targeting scandal—months after the agency was ordered to preserve the documents.

Timothy Camus and J. Russell George made the disclosure during a Thursday hearing of the House Oversight and Government Reform Committee. They said 422 backup tapes were destroyed and about 24,000 emails were lost in March 2014, the same month IRS Commissioner John Koskinen told Congress the agency was fully complying with the investigation.

The controversy revolves around Lois Lerner, former head of the IRS tax-exempt division, who acknowledged in 2013 her department improperly singled out conservative groups for extra scrutiny. Investigators discovered her computer crashed in 2011, and government IT specialists were unable to detect why. Camus and George said Lerner borrowed multiple computers on loan and deleted thousands of emails. ...

Despite a subpoena order to provide documents, IRS employees working night shifts demagnetized the contents of Lerner’s’ computers, according to the inspectors general. They said Koskinen failed to inform the employees about the May 2013 subpoena order to preserve the documents.

Rep. Jody Hice, R-Ga., suggested Koskinen committed a crime by lying to Congress about the availability of the emails. He said Americans are “sick and tired of being snookered” by the government.

“I urge you to hold these people accountable,” said Rep. Jason Chaffetz, R-Utah, chairman of the committee. He and other Republicans called the ongoing IRS scandal worse than Watergate.

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July 2, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Wednesday, July 1, 2015

Pittsburgh Tax Review Publishes New Issue

Pittsburgh Tax Review The Pittsburgh Tax Review has published Vol. 12, No. 1 (Fall 2014):

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

Jeb Bush Releases 33 Years Of Tax Returns

Bush

Jeb Bush yesterday released 33 years of tax returns, more than any presidential candidate in history. 

Jeb 2
According to a letter from former IRS Chief Counsel Hap Shashy, the head of King & Spalding's Tax Practice Group, Governor Bush paid an effective tax rate of 36% over those years (summary).

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July 1, 2015 in Political News, Tax | Permalink | Comments (1)

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

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

The IRS Scandal, Day 783

Tuesday, June 30, 2015

NYU Tax Law Review Publishes New Issue

NYU Law (2014)The Tax Law Review has published a new issue (Vol. 68, No. 1 (Fall 2014)):

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

Call For Estate Planning Papers: ACTEC Law Journal

ACTECCall For Papers:  ACTEC Law Journal:

Estate Planning In the 21st Century:  Seismic Shifts and Predictions for the Future

The American College of Trust and Estate Counsel announces a Call For Papers on the following topics:

Estate planning has radically changed in the last several decades.   Statutes such as the Uniform Probate Code and the Uniform Parentage Act altered the presumptive definitions of such terms as "children" and "descendants" to include a much broader range of beneficiaries, including adoptees, out-of-wedlock children, and in some cases foster children and stepchildren.  Some children may now inherit from more than two parents.  Very recent changes have broadened those allowed to marry and thus inherit in intestacy from each other.  The assets dealt with by estate planners have transformed dramatically, with the rise in the acceptance of non-probate forms of title, digital assets, etc.  Perpetual trusts, once allowed only for charities, now exist for families, with attendant issues such as decanting, virtual representation, and non-judicial trust modification.  Advance health care directives have become a common tool in the estate planner's box, and in a few states estate planners may deal with clients opting for physician aid in dying.  Papers will address ways in which estate planning has transformed in the last 20, 30 or 40 years, and how it may continue to change over a comparable time in the future. 

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June 30, 2015 in Legal Education, Scholarship, Tax | Permalink | Comments (0)

Avi-Yonah: The International Tax Regime — A Centennial Reconsideration

Reuven S. Avi-Yonah (Michigan), The International Tax Regime: A Centennial Reconsideration:

The international tax regime is almost a hundred years old. The two principles it is based on (the benefits principle and the single tax principle) were developed in the 1920s and 1930s. The regime functioned reasonable well until the 1980s, where globalization led to tax competition that undermined its principles. As the OECD is reconsidering the regime in the context of the BEPS and MAATM projects, now is a good time to rethink the fundamentals. Upon reconsideration, it is clear that the regime cannot function without multilateral consensus, and that such consensus is easier to achieve among source countries in the case of passive income and residence countries in the case of active income. This, in turn, suggests that the priorities underlying the benefits principle need to be reversed.

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

The Tax Lawyer Publishes New Issue

The Tax Lawyer (2013)The Tax Lawyer has published Vol. 68, No. 3 (Spring 2015):

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June 30, 2015 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (0)