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Tuesday, February 18, 2014

Serreze: Science, Taxes, and Bonds

Tax Analysys Logo (2013)Peter H. Serreze (Ropes & Gray, Boston), As Simple as It Can Be but Not Simpler:  Science, Taxes, and Bonds, 142 Tax Notes 729 (Feb. 17, 2014):

With the recent and potential future decline in governmental funding, many nonprofit research organizations are increasingly venturing into the world of commerce. This report examines the issues raised by this trend under the tax law restrictions applicable to the use of facilities financed with tax-exempt debt.

February 18, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Tuesday, February 11, 2014

Feld: The Constitutionality of the Cash Parsonage Allowance

Tax Analysys Logo (2013)Alan L. Feld (Boston University), The Constitutionality of the Cash Parsonage Allowance, 142 Tax Notes 667 (Feb. 10, 2014):

Professor Zelinsky has made a valiant effort to defend the constitutionality of section 107(2), the provision that excludes from gross income cash housing allowances of a minister of the gospel. [The First Amendment and the Parsonage Allowance, 142 Tax Notes 413 (Jan. 27, 2014).].  A U.S. district court granted summary judgment to plaintiffs attacking the provision on First Amendment and Equal Protection grounds. Zelinsky criticizes the decision for failing to give due weight to the secular purposes of the exemption. Unfortunately, Zelinsky's argument is ultimately unpersuasive.

February 11, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (2)

Monday, February 3, 2014

WSJ: Private Equity Firms Save Millions in Taxes by Treating Dividends as 'Monitoring Fees,' Says Polsky

Wall Street Journal:  Private-Equity Firms' Fees Get a Closer Look: Industry May Be Underpaying Taxes by Misrepresenting Payments, by Mark Maremont:


ImageGregg D. Polsky, a tax-law professor, has long been a thorn in the side of the private-equity industry. Now he is at it again.

In 2009, Mr. Polsky wrote an article criticizing a strategy that allowed many fund executives to save on taxes by converting ordinary fee income into capital gains taxed at substantially lower rates. [Private Equity Management Fee Conversions, 122 Tax Notes 743 (Feb. 9, 2009).] The IRS later started examining the propriety of the practice, called a management-fee waiver, and recently said it plans to issue new guidance on it.

In a new article published over the weekend, Mr. Polsky takes aim at the tax treatment of another revenue stream for private-equity firms, called monitoring fees. [The Untold Story of Sun Capital: Disguised Dividends, 142 Tax Notes 556 (Feb. 3, 2014)]  He claims the industry may be underpaying federal corporate taxes by hundreds of millions of dollars a year by mischaracterizing these fees.

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

Thursday, January 30, 2014

Zelinsky: The First Amendment and the § 107 Parsonage Allowance

Tax Analysys Logo (2013)Edward A. Zelinsky (Cardozo),  The First Amendment and the Parsonage Allowance, 142 Tax Notes 413 (Jan. 27, 2014):

In this report, Zelinsky criticizes the recent district court decision in Freedom From Religion Foundation Inc. v. Lew, declaring section 107(2) unconstitutional on First Amendment grounds. The provision excludes from gross income cash housing allowances furnished to ministers. Zelinsky details three interrelated reasons why the district court’s opinion is unpersuasive.

Prior TaxProf Blog coverage:

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

Monday, January 27, 2014

Johnston: Give to Charity, Turn a Profit

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Give to Charity, Turn a Profit, 71 State Tax Notes 225 (Jan. 27, 2014):

Arizona lawmakers let some donors make charitable gifts in a way that makes the donors richer, a trend sure to spread unless Congress stops it.

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January 27, 2014 in Tax, Tax Analysts | Permalink | Comments (5)

Wednesday, January 22, 2014

Individual Tax Reform in a Time of Crisis

Tax ReformLuca Gattoni-Celli, Scholar Calls for 'Distributive Justice' in Charitable Tax Reform, 2014 TNT 13-7 (Jan. 21, 2014):

Tax subsidies for charitable giving need to be reformed with an eye toward "distributive justice," a tax law professor said at a conference on tax reform on January 17.

Miranda Perry Fleischer of the University of San Diego School of Law said the activities of charitable organizations should be examined to ensure they are benefiting the economically disadvantaged.

The discussion was part of a tax reform symposium in Malibu, Calif., organized by Pepperdine University School of Law and cosponsored by Tax Analysts. ...

Emory Law School professor Dorothy Brown cited research suggesting that racial minorities are adversely affected by the tax system. Pivoting from a study of her own that compared the Obamas' tax returns from 2000 through 2004 with tax return data from white taxpayers earning similar incomes, Brown focused on racial disparities in tax outcomes, saying middle-income African-Americans pay higher taxes on average than their economic peers.

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January 22, 2014 in Conferences, Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Tuesday, January 7, 2014

Wright: Short Sales as Nonrecourse Mortgages

Tax Analysys Logo (2013)Kathleen K. Wright (Golden Gate), Short Sales as Nonrecourse Mortgages, 71 State Tax Notes 27 (Jan. 6, 2014):

Short sales in states that have enacted anti-deficiency statutes can now be treated as nonrecourse mortgages if the state statute bars collection of a deficiency balance by the lender after the borrower and lender agree that the lender will accept a loan payoff for less than what is owed on the mortgage and release the lender's security interest in the property. In a letter from the IRS to U.S. Sen. Barbara Boxer, D-Calif., released to the public in November 2013, the IRS concluded that an obligation involved in a short sale would be treated as a nonrecourse obligation under California Code of Civil Procedure (CCP) section 580e for federal income tax purposes. This disclosure was followed by a letter from California Franchise Tax Board Chief Counsel Jozel Brunett to California State Board of Equalization member George Runner, dated December 4, 2013, wherein the FTB stated that they would conform to the federal guidance. This result could provide significant tax benefits to clients who engaged in a short sale of their homes.

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January 7, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, January 6, 2014

The IRS Scandal, Day 242: Lois Lerner Is 2013 Tax Person of the Year

Tax Analysys Logo (2013)The 2013 Tax Person of the Year: Lois Lerner, 142 Tax Notes 7 (Jan. 6, 2014):

Last year was a struggle for the IRS. The effects of years of frozen or cut budgets began to take their toll on tax administration. The agency had a tough tax season because of the late passage of the American Taxpayer Relief Act of 2012. Guidance for the Foreign Account Tax Compliance Act and the Affordable Care Act was slow in coming. And, of course, the IRS spent the last eight months dealing with a major controversy involving the handling of exempt organization applications.

While many of the Service's problems were not necessarily its own fault, the exempt organization scandal was an almost entirely self-inflicted wound. No one personifies that scandal more than Lois Lerner.

Lerner ignited a political and media firestorm when she confessed in May that the exempt organizations unit of the IRS Tax-Exempt and Government Entities Division inappropriately handled many Tea Party groups' exemption applications.

mThe now former exempt organizations director's admission and subsequent refusal to testify before Congress contributed to her becoming the public face of the scandal. Although Lerner does not bear sole responsibility for the IRS's missteps in processing conservative groups' exemption applications, the publicity of her role in one of the year's biggest news stories earns her the distinction of being Tax Notes' 2013 Person of the Year.

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January 6, 2014 in IRS News, IRS Scandal, Tax, Tax Analysts | Permalink | Comments (0)

Saturday, December 28, 2013

State Tax Person of the Year: Richard Pomp (UConn)

Tax Analysys Logo (2013)Person of the Year, 70 State Tax Notes 715 (Dec. 23, 2013):

State Tax Notes is pleased to announce its annual year in review edition, featuring person of the year, given to the individual or organization that had the most influence on state tax policy and practice. The editorial staff has compiled a list of the best in our profession in five categories: academics, practitioners, organizations, administrators, and lawmakers.

This year's person and academic of the year is Richard Pomp for his pro bono work as the hearing officer for the Multistate Tax Commission's proposed amendments to Article IV of the Multistate Tax Compact. The compact's apportionment formula, Article IV, incorporates nearly verbatim the Uniform Division of Income for Tax Purposes Act as drafted in 1957.

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December 28, 2013 in Legal Education, Tax, Tax Analysts | Permalink | Comments (0)

Thursday, December 26, 2013

Christians: What the Baucus International Tax Reform Plan Reveals About Tax Competition

Tax Analysys Logo (2013)Allison Christians (McGill), What the Baucus Plan Reveals About Tax Competition, 72 Tax Notes Int'l 1113 (Dec. 23, 2013):

Conventional wisdom explains tax competition as an external constraint on lawmaking: All countries compete for investment in a global capital market, and therefore each is forced, as by an incontrovertible law of nature, to lure investment into their jurisdiction with attractive tax policies. Conventional wisdom then also surmises that the only way governments can curb tax competition is by working together cooperatively to eliminate beggar-thy-neighbor tax policies. The international tax reform plan recently introduced by Sen. Max Baucus, D-Mont., squarely confronts both parts of this conventional wisdom and reveals some very disturbing observations about tax competition: that it is as much a supply-side as a demand-side problem (luring strategies require a supply of otherwise tax-favored capital), that governments have always had the power to counter this problem, and that accordingly, political will is the reason why tax competition has become the overwhelming force that it is today.

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December 26, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, December 23, 2013

Johnston: District Court Rebukes IRS Church Plan Rulings

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), District Court Rebukes IRS Church Plan Rulings, 141 Tax Notes 1349 (Dec. 23, 2013):

Johnston reports on the first court case in an expanding effort to exempt pension plans from ERISA on religious grounds. The decision implicitly criticizes the IRS Office of Chief Counsel.

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December 23, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, December 16, 2013

Bartlett: Tax Policy and the Bible

Tax Analysys Logo (2013) Bruce BartlettTax Policy and the Bible, 141 Tax Notes 1231 (Dec. 16, 2013):

In this article, Bartlett uses a recent statement by Pope Francis to examine what the Bible says about tax policy. He finds that academic opinion about biblical principles of taxation has shifted in a more progressive direction over the last 10 years.

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Prior TaxProf Blog coverage:

December 16, 2013 in Scholarship, Tax Analysts | Permalink | Comments (1)

Monday, December 9, 2013

Johnston: Billions of Tax Dollars Later, No New Jobs for New York

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Billions of Tax Dollars Later, No New Jobs for New York, 70 State Tax Notes 609 (Dec. 8, 2013):

The fast-increasing use of tax incentives by all 50 states has failed to increase jobs or investment, two respected experts on state tax policy found after reviewing more than 50 years of giveaways. [Marilyn M. Rubin & Donald J. Boyd, New York State Business Tax Credits: Analysis and Evaluation (Nov. 2013).]

This year, state government subsidies to corporations, partnerships, and other businesses in New York state alone will total $1.7 billion, triple the giveaways in 2005, according to the new study. That's $235 taken from the average Empire State household this year and redistributed to business owners on the theory that redistribution will create jobs.

During those years, the number of jobs in New York declined, the state's official jobs data website shows. The total number of New Yorkers employed in 2012 was down 175,000, or 2 percent, compared with 2005. Think of it this way: Over nine years, the state of New York gave businesses roughly $10 billion, or almost $1,400 from each household, in a jobs program that eliminated 175,000 jobs at an average cost of $57,000.

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December 9, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Monday, December 2, 2013

Lobel: Eliminate the Corporate Income Tax and Level the Playing Field

Tax Analysys Logo (2013)Martin Lobel (Lobel Novins & Lamont, Washington, D.C.), Eliminate the Corporate Income Tax and Level the Playing Field, 141 Tax Notes 967 (Dec. 2, 2013):

Lobel offers a proposal that would level the playing field between traditional C corporations and passthrough business entities, while achieving the goals of simplicity and fairness.

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December 2, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Tuesday, November 26, 2013

Clarifying the Meaning of 'Beneficial Owner' in Tax Treaties

Tax Analysys Logo (2013)Koichiro Yoshimura (LL.M. (Tax) 2014, NYU),  Clarifying the Meaning of 'Beneficial Owner' in Tax Treaties, 72 Tax Notes Int'l 761 (Nov. 25, 2013):

Koichiro Yoshimura looks at the meaning of the term "beneficial owner" in the OECD model income tax treaty, and through a functional analysis, attempts to set reasonable and more acceptable beneficial ownership criteria.

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November 26, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Friday, November 22, 2013

Johnson: Ordinary Medical Expenses

Tax Analysys Logo (2013)Calvin H. Johnson (Texas), Ordinary Medical Expenses, 141 Tax Notes 773 (Nov. 18, 2013):

Calvin H. Johnson argues that taxpayers should bear ordinary medical expenses out of their post-tax income with no further allowance beyond personal exemptions, the standard deduction, and low tax brackets.

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November 22, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, November 18, 2013

An Interview With Darien Shanske

Tax Analysys Logo (2013)Jennifer Carr, An Interview With Darien Shanske, 70 State Tax Notes 447 (Nov. 18, 2013):

State Tax Notes legal editor Jennifer Carr interviews professor Darien Shanske about his new theory of state taxation, under which the corporate income tax, which is increasingly apportioned using a single-salesfactor formula and destination-based sourcing, can act as a complement to the retail sales tax.

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November 18, 2013 in Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, November 13, 2013

Cummings: Tax Decisions of the Supreme Court's 2012 Term

Tax Analysys Logo (2013)Jasper L. Cummings, Jr. (Alston & Bird, Raleigh, N.C.), Tax Decisions of the Supreme Court's 2012 Term, 141 Tax Notes 635 (Nov. 11, 2013):

In its just completed 2012 term, the Supreme Court decided only three federal tax cases. The most politically important decision was Windsor, which held the Defense of Marriage Act unconstitutional. One criminal case, Davila, marked the long, slow decline of the Warren Court’s limited view of harmless error. PPL ... was the only real tax decision of the term. Finally, a nontax decision, Horne, raises questions about state tax procedures that preclude consideration of constitutional issues in administrative hearings.

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November 13, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Tuesday, November 5, 2013

Hyans & Nogid: A Mutiny Against Tax Bounty Hunters Is Long Overdue

Tax Analysys Logo (2013)Hollis L. Hyans & Amy F. Nogid (both of Morrison & Foerster, New York), A Mutiny Against the Bounty Hunters Is Long Overdue, 70 State Tax Notes 299 (Nov. 4, 2013):

Hollis L. Hyans and Amy F. Nogid examine the use of contingent fee auditors for revenue collection, arguing that those arrangements taint the process, raise confidentiality issues, and may result in decreased accountability and increased costs to the government.

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Dog

November 5, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, November 4, 2013

Sullivan: Will International Tax Reform Slow U.S. Technology Development?

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), Will International Tax Reform Slow U.S. Technology Development?, 141 Tax Notes 459 (Nov. 4, 2013):

Martin A. Sullivan looks at how various tax rules interact to subsidize research and development and how U.S. tax reform could affect those provisions.

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November 4, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Friday, November 1, 2013

The Foreign Tax Credit After PPL

Tax Analysys Logo (2013)Courtney Gesualdi (Ropes & Gray, Boston),  After PPL: How to Bring Congressional Intent Back to the Foreign Tax Credit Applicability Decision, 72 Tax Notes Int'l 355 (Oct. 28, 2013):

Courtney Gesualdi argues that the development of cases involving the foreign tax credit has caused a separation between the intent of section 901 and how it has come to be applied by the courts; Gesualdi offers suggestions to help guide the courts in cases similar to PPL v. Commissioner.

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November 1, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Thursday, October 31, 2013

Inflation Adjustments Affecting Individual Taxpayers in 2014

Tax Analysys Logo (2013)James C. Young (Northern Illinois University, College of Business), Inflation Adjustments Affecting Individual Taxpayers in 2014, 141 Tax Notes 413 (Oct. 28, 2013):

In this report, Young discusses 2014 inflation adjustments to parts of the individual tax system that are tied to a consumer price index year ending in August. Items adjusted by this index include the tax rate schedules, standard deductions and exemption and itemized deduction phaseouts, several minimum tax items, the gift and estate tax exclusions, and some computational elements related to the unearned income of minor children, the child credit, the earned income tax credit, adoption expenses, educational savings bonds, education credits, education loan interest, qualified transportation fringe benefits, medical savings accounts (Archer MSAs), health savings accounts, long-term care insurance premiums, long-term care insurance benefits, traditional and Roth IRA income phaseouts and contribution limits, and the section 179 expense election. Implications of the expiring provisions from tax legislation passed in the early 2000s also are discussed.

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October 31, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, October 28, 2013

Washington Post Profile of Marty Sullivan

SullivanWashington Post, Marty Sullivan Figured Out How the World’s Biggest Companies Avoided Billions in Taxes. Here’s How He Wants to Stop Them:

It was a humbling experience for the chief executive of the world’s most valuable company. Hauled before a Senate panel, Apple’s Tim Cook had to explain how an American company whose American engineers had created the iPhone and the iPad was able to avoid paying any taxes on billions of dollars in profits generated by those products — not to United States, not to any country. The only defense the Cook could conjure up for Apple “stateless” income was that it was all perfectly legal.

A few miles away in Arlington, a 55-year-old economist named Marty Sullivan sat on a folding metal chair at a card table in the garage of his modest brick home and watched the hearing unfold on his laptop computer. Sullivan is one of those unheralded members of the permanent Washington establishment who make things work, at least when the politicians let them. And for two decades, from the same home office, Sullivan has been exposing the tax-dodging schemes of multinational corporations in the columns of Tax Notes, a must-read publication for tax lawyers, accountants and policy wonks.

It was Sullivan who shined an early light on how companies had finagled “transfer prices” — the price one division charges another for parts or services — to shift profits to low-tax jurisdictions.

It was Sullivan who had called out the big drug and tech companies for transferring ownership of their patents and trademarks — the source of much of their profits — to subsidiaries in Ireland and other low-tax jurisdictions.

It was Sullivan who highlighted the absurdity of tax havens in which just a handful of multinationals claimed to earn annual profits that were several times the country’s entire GDP.

And it was Sullivan who in 2010 pieced together from public filings that Apple had understated its reported profits to hide the fact that it was paying a tax rate of less than 2 percent on its overseas profits, shining the spotlight on Apple’s tax avoidance schemes.

(Hat Tip: Joseph Burke, Bob Kamman.)

October 28, 2013 in Tax, Tax Analysts | Permalink | Comments (1)

Wednesday, October 23, 2013

Pepperdine/Tax Analysts Symposium: Tax Reform in a Time of Crisis

2014TaxSaveTheDatePlease consider joining us for the Pepperdine/Tax Analysts Symposium on Tax Reform in a Time of Crisis on Friday, January 17, 2014 in Malibu, California:

Keynote Address:  Joseph Bankman (Stanford)
Introduction:  Paul Caron (Pepperdine)
Commentary:  Edward Kleinbard (USC)

Panel #1:  Individual/Estate and Gift Tax Reform
Moderator:  Tom Bost (Pepperdine)
Papers:  Dorothy Brown (Emory), Miranda Fleischer (San Diego), James Repetti (Boston College)
Commentary:  Nancy Staudt (USC)

Luncheon Address:  Bruce Bartlett (Former Deputy Assistant Secretary of the Treasury)

Panel #2:  Business/International Tax Reform
Moderator:  Khrista Johnson (Pepperdine)
Papers:  Karen Brown (George Washington), Ruth Mason (Virginia), Richard Winchester (Thomas Jefferson)
Commentary:  Eric Zolt (UCLA)

Panel #3:  Tax Reform in a Time of Crisis: Institutional Perspectives
Moderator:  Joe Thorndike (Tax Analysts)
Papers:  Ellen Aprill (Loyola-L.A.), Donald Tobin (Ohio State), George Yin (Virginia; former Chief of Staff, Joint Committee on Taxation)
Commentary:  Donald Korb (Partner, Sullivan & Cromwell; former IRS Chief Counsel)

Closing Remarks:  What Have We Learned Today?:  Robert Popovich (Pepperdine)

October 23, 2013 in Conferences, Legal Education, Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, October 21, 2013

Gibbs: Loving and the Treasury's Authority to Regulate Tax Return Preparers

Tax Analysys Logo (2013)Lawrence B. Gibbs (Miller & Chevalier, Washington, D.C.;  former IRS Commissioner (1986-89)),   Loving v. IRS: Treasury's Authority to Regulate Tax Return Preparers, 141 Tax Notes 331 (Oct. 21, 2013):

Earlier this year a federal district court held that Treasury lacked the authority to issue regulations in 2011 enabling the IRS to regulate the tax return preparation conduct of unregulated, commercial preparers who process more than 42 million individual federal income tax returns each year [Loving v. United States, No. 12-385 (D.C. D.C. Jan. 18, 2013)]. Gibbs explains why Treasury has the authority to issue the regulations and why the district court decision should be reversed.

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October 21, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, October 16, 2013

McMillan: Transferee Shareholders and the Long Arm of the IRS

Tax Analysys Logo (2013) Lori McMillan (Washburn), Transferee Shareholders and the Long Arm of the IRS, 141 Tax Notes 223 (Oct. 14, 2013):

McMillan discusses United States v. Holmes [Nos. 12–1164, 12–1220 (10th Cir. Aug. 23, 2013)] and concludes that it has made liability management more challenging for the nonresident shareholder and has created problems for the unwary.

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October 16, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, October 14, 2013

Shay, Fleming & Peroni: Territoriality in Search of Principles and Revenue

Tax Analysys Logo (2013)Stephen E. Shay (Harvard), J. Clifton Fleming Jr. (BYU) &  Robert J. Peroni (Texas), Territoriality in Search of Principles and Revenue: Camp and Enzi, 72 Tax Notes Int'l 155 (Oct. 15, 2013):

Stephen E. Shay, J. Clifton Fleming Jr., and Robert J. Peroni argue that unless a shift to an exemption system for taxing foreign income would constitute a material improvement over current law, the transition costs of such a change would outweigh the benefits.

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October 14, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, October 9, 2013

Herzig: The Estate and Gift Tax Implications of Windsor

Tax Analysys Logo (2013)David J. Herzig (Valparaiso), Same-Sex Marriage and Estate Taxes: Why Windsor Is Still at Issue, 141 Tax Notes 79 (Oct. 7, 2013):

David J. Herzig discusses the estate and gift tax implications of United States v. Windsor.

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October 9, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, October 7, 2013

Johnston: The Importance of State Tax Tribunals

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), The Importance of Tax Tribunals, 70 State Tax Notes 35 (Oct. 7, 2013):

David Cay Johnston discusses the importance of state tax tribunals and fair administration of justice in tax disputes.

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October 7, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Wednesday, October 2, 2013

Kennedy: DOMA Implications for Employee Benefit Plans

Tax Analysys Logo (2013)Kathryn J. Kennedy (John Marshall), DOMA Implications for Employee Benefit Plans, 140 Tax Notes 1571 (Sept. 30, 2013):

Kathryn J. Kennedy highlights the effect Windsor will have on employee benefit plans and federal laws relying on Defense of Marriage Act section 3.

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October 2, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, September 25, 2013

The IRS Scandal: Rearranging the Deck Chairs on the Titanic

Tax Analysys Logo (2013)Alan J. Wilensky (Attorney, Minneapolis), Scandal at the IRS: Rearranging the Deck Chairs on the Titanic, 140 Tax Notes 1449 (Sept. 23, 2013):

This article discusses the IRS’s recent problems in the exempt organizations area. It recommends that these and other problems the agency has had since the enactment of the IRS Restructuring and Reform Act of 1998 be studied in detail by a bipartisan panel. It also suggests that the notion of having professional managers head the agency, rather than tax professionals, decreased the sense of duty to the tax system that has been critical to the organization’s historically high ethical and cultural standards.

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September 25, 2013 in IRS News, IRS Scandal, Tax, Tax Analysts | Permalink | Comments (2)

Tuesday, September 24, 2013

Morse: Public Talk About Taxes in Australia and the U.S.

Tax Analysys Logo (2013) Susan C. Morse (Texas),  Public Talk About Public Finance In Australia and the United States, 71 Tax Notes Int'l 1213 (Sept. 23, 2013):

Susan C. Morse explains the differences in the public discourse about taxes in Australia and the United States.

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September 24, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, September 23, 2013

Don't Die in Maryland or New Jersey

Tax Analysys Logo (2013) Diana Furchtgott-Roth (Director of Economics21 and Senior Fellow, Manhattan Institute),  Where Not to Die, 69 State Tax Notes 775 (Sept. 23, 2013):

Diana Furchtgott-Roth discusses prospects for estate tax reform at the federal and state levels and concludes the worst places to die are New Jersey and Maryland.

Table 2
Table 3

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September 23, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (3)

Saturday, September 21, 2013

The Tax Analysts Story

September 21, 2013 in Tax, Tax Analysts | Permalink | Comments (0)

Friday, September 13, 2013

Ordower: Preserving the Corporate Tax Base Through Tax Transparency

Tax Analysys Logo (2013)Henry Ordower (St. Louis), Preserving the Corporate Tax Base Through Tax Transparency, 71 Tax Notes Int'l 993 (Sept. 9, 2013):

Henry Ordower contends that the adoption of a wholly transparent corporate income tax could improve existing corporate tax systems worldwide and establish tax neutrality between entities that are subject to corporate income tax and those that are not.

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September 13, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, September 9, 2013

Sullivan: Political Reality Blocks Radical Tax Reform in North Carolina

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), Political Reality Blocks Radical Reform in North Carolina, 69 State Tax Notes 639 (Sept. 9, 2013):

Martin A. Sullivan writes that while politics may have changed the landscape of tax reform in North Carolina, the original, radical plan would never have survived.

Table 1

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September 9, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Saturday, September 7, 2013

The Tax Analysts Story

Tax Analysts Blog:  The Story of Tax Analysts, by Christopher Bergin

(Hat Tip: Joe Kristan.)

September 7, 2013 in Tax, Tax Analysts | Permalink | Comments (1)

Thursday, September 5, 2013

The Transfer Tax Trap -- It's Real

Tax Analysys Logo (2013)Maria P. Eberle & Hayes R. Holderness (both of McDermott Will & Emery, New York), The Transfer Tax Trap -- It's Real, 69 State Tax Notes 605 (Sept. 2, 2013):

Most states (and many localities) have some form of real property transfer tax (RPTT), which is generally imposed when the ownership of a piece of real property changes hands. However, not all RPTTs are created equally, and many taxpayers may find themselves with an unexpected tax bill if they don't pay close attention to each jurisdiction's rules. In our practice, we most often see RPTT issues arise in the context of corporate acquisitions, dispositions, mergers, and reorganizations -- including transactions that are generally regarded as "tax- free" because gains are exempt from income tax. This article provides an overview of the applicability of RPTTs to the most common types of transactions, and variations on those transactions, and offers insights into the numerous traps or opportunities that may exist. 

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September 5, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, September 4, 2013

Sullivan: Brennan Study on Repatriation Tax Holiday Is Not a Game Changer

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), New Insight on Repatriation Holiday Not a Game Changer, 140 Tax Notes 969 (Sept. 2, 2013):

The most common use of the $312 billion of funds repatriated under the provisions of the American Jobs Creation Act of 2004 was for cash acquisitions and not, as widely believed, distributions to shareholders. That is the finding of a new study by professor Thomas J. Brennan of Northwestern University Law School (Where the Money Really Went: A New Understanding of the AJCA Tax Holiday). [See also New York Times DealBook: A Holiday From Taxes, and Often From the Strings Attached, by Vic Fleischer (San Diego)] ...

For years it has been the accepted wisdom that most of the funds unlocked by the provisions of the Jobs Act were used for share repurchases and dividends. That conclusion is largely based on the research of economists Dhammika Dharmapala, Fritz Foley, and Kristin Forbes (Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act, Journal of Finance, 2011, p. 753). In their 2009 study, they estimated that between 60 and 92 percent of repatriated funds were used to make distributions to shareholders in 2005, mostly in the form of share repurchases. ... The main reason why their findings are important is that in most economic models, distributions to shareholders have little of the job-creating macroeconomic stimulus. Therefore, the results strongly suggest that the repatriation holiday failed to achieve its objective. To convince most economists that the funds had a significant effect on employment, the repatriated cash would have had to have been spent on direct hiring, worker training, capital spending, or research and development.

In his study, the first thing Brennan does is prove that the estimated 60 to 92 percent range is too high. ... Next, Brennan develops his own method of estimating the use of repatriated funds. ... Brennan estimates eight categories of uses of funds: cash acquisitions, share repurchases, dividends, research spending, capital expenditures, debt reduction, pension funding, and unexplained spending. (Brennan did not have data for spending on hiring or worker training.) As shown in Table 1, the leading use of repatriated funds was cash acquisitions (39 percent). Share repurchases were a distant second (27 percent). Research spending and capital spending account for only 4 percent and 3 percent, respectively. ...

Table 1

Under the Jobs Act, share repurchases and dividends were not permitted uses of funds. Acquisitions of firms, as long as their assets were primarily in the United States, were. Brennan's research shows that repatriating companies behaved more in the spirit of the law than previously thought. That may provide consolation in some quarters.  ... [N]either the Dharmapala nor the Brennan study indicates any significant increase in domestic capital spending or research. And that is not surprising given that we would expect to see this happen only if firms were cash- or credit-constrained. Most of the repatriated funds were brought home by large, financially secure U.S. firms that would have no trouble financing profitable domestic opportunities.

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September 4, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Tuesday, August 27, 2013

Dolan: The Foreign Tax Credit Diaries -- Litigation Run Amok

Tax Analysys Logo (2013)Kevin Dolan (Shearman & Sterling, Washington, D.C.; Former Associate Chief Counsel (International), IRS), The Foreign Tax Credit Diaries -- Litigation Run Amok, 71 Tax Notes Int'l 831 (Aug. 26, 2013):

In a pretend brief, Kevin Dolan explains to a pretend judge why the government's arguments regarding whether foreign taxes must be deducted in determining profit motive in Compaq Computer Corp. [277 F.3d 778 (5th Cir. 2001)] and IES Industries Inc. [253 F.3d 350 (8th Cir. 2001)] are incorrect.

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August 27, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, August 26, 2013

Yin: Let's Get the Facts of the Couzens Investigation Right!

Tax Analysys Logo (2013)George K. Yin (Virginia), Let's Get the Facts of the Couzens Investigation Right!, 140 Tax Notes 950 (Aug. 26, 2013):

I am sympathetic to Jay Starkman's criticism of the practice since 1998 of appointing persons without tax experience to be IRS Commissioner [Practitioner Sees Need for Restructuring the IRS, 140 Tax Notes 837 (Aug. 19, 2013)]. Given the principal mission of the agency, it is plausible that an outstanding tax professional would be better situated to energize the workforce, instill the importance of integrity and professionalism, and provide more meaningful scrutiny of the agency's activities. We have had many examples of past Commissioners with tax backgrounds who have had those qualities. Such a person would also likely have longstanding relationships with wise colleagues familiar with the tax system that could be drawn upon when the inevitable challenging situations arise in the Commissioner's office. Arguably, the change carried out since 1998 has been exactly backwards. Rather than filling the Commissioner's slot and Oversight Board with business/"management" experts (and others with unclear qualifications), it may have been better to place Commissioner-quality tax professionals in all of those positions. Unfortunately, as Starkman notes, it appears that the shift away from tax experience in the management of the agency is going to continue.

Starkman errs, however, in repeating stale charges that the 1924-1926 Couzens investigation showed the agency to be "corrupt" and exposed a large scandal involving "plain graft." On completion of the long investigation, the chief counsel of the investigative committee testified before the Senate Finance Committee and Senator Couzens that the investigation had not uncovered corruption at the agency. To be sure, the investigation questioned many of the agency's decisions and administrative practices. There were also isolated instances of fraud which the agency had uncovered and revealed to the investigative committee at the start of its work. But the widespread allegations of corrupt practices, including favorable treatment of companies associated with Treasury Secretary Mellon, were not established.

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August 26, 2013 in Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Tuesday, August 13, 2013

Christians: The Influence of Public Opinion on the Tax Practices of Starbucks and Other Multinational Companies

Tax Analysys Logo (2013)Allison Christians (McGill),  How Starbucks Lost Its Social License -- and Paid £20 Million to Get It Back, 71 Tax Notes Int'l 637 (Aug. 12, 2013):

Allison Christians examines how public opinion has come to bear on the tax practices of Starbucks and other multinational companies.

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August 13, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, August 12, 2013

McMillan: Tax Treaty Issues in Sun Capital 'Trade or Business' Ruling

Tax Analysys Logo (2013)Lori McMillan (Washburn),  Potential Treaty Issues Arise in the 'Trade or Business' Landscape, 140 Tax Notes 721 (Aug. 12, 2013):

Sun Capital [1st Cir. July 24, 2013] has added a new layer in the determination of what is a trade or business, when activity performed by members of the same group was attributed to a private equity fund. Funds can no longer be sure that merely because their income is passive, they will not be considered engaged in a trade or business.

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August 12, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, August 5, 2013

Johnston: Manufacturing Tax Break Gone Wild

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Manufacturing Tax Break Gone Wild, 140 Tax Notes 621 (Aug. 5, 2013):

A federal judge [United States v. Dean, No. 11-01977 (C.D. Cal. May 7, 2013).] has held that putting wrapped candy bars and wine bottles into gift baskets qualifies for a 2004 tax break for manufacturing. Johnston argues that the decision is too broad an interpretation of manufacturing for the purposes of the section 199 deduction.

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August 5, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (3) | TrackBack (0)

Wednesday, July 31, 2013

Bergin: Saving Private IRS

Tax Analysts Christopher E. Bergin (President and Publisher, Tax Analysts), Saving Private IRS, 140 Tax Notes 503 (July 29, 2013):

Bergin uses Mortimer Caplin's 97th birthday as an occasion to highlight the former IRS commissioner as an example of the hardworking and dedicated people who work at the nation's tax collection agency, and he calls on congressional critics of the IRS to take a more reasonable approach to funding and supporting tax administration.

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July 31, 2013 in Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, July 22, 2013

Faber: 'Ivory Tower' Economists Are Wrong: Taxes Play Major Role in Wealthy Fleeing High-Tax States

Tax Analysts Peter L. Faber (McDermott Will & Emery, New York), Taxes Play Major Role in Moving Out of State, 69 State Tax Notes 243 (July 22, 2013):

Amy Hanauer and Tim Krueger argue that taxes play no role in taxpayer decisions to move from one state to another (The Tax Flight Myth: People Move for Jobs and Family, Not Taxes, State Tax Notes, July 8, 2013, p. 97 ... ). Their conclusions are apparently based on empirical studies and computer models. They are wrong. Based on my experience as a practitioner who works with wealthy individuals and corporations every day, I can assure you that taxes often play a major role in these decisions and that in many cases, they are the sole reason for the move.  ...

The authors claim that they have been able to show the effect of taxes "while holding other conditions constant." How did they do that? Get real, folks. There are limits on what economists' computers can do. It is impossible to do this, no matter how many computer simulations one does. ...

My experience, and that of my SALT colleagues, is that taxes often play an important and decisive role in decisions to move from one state to another. Moreover, that is particularly the case for very wealthy individuals whose loss can be significant for a state. I am currently working with three wealthy individuals who have come to my firm for advice on how they can change their domicile from New York state to a low-tax state. When they do so, New York will lose between $70 million and $225 million in estate taxes (the variance will depend on which spouse survives the other). New York will also lose income taxes on their very substantial incomes. I assume that people in Ohio and other high-tax states are going through the same analysis. The issue with my clients is not whether to move, it is how to move so as to establish the change in legal domicile. We are going through the usual list of factors that the courts have considered in determining domicile (driver's license, club memberships, religious affiliations, civic activities, etc.). These people will move, and their moves will cost New York millions of dollars in taxes....

The economists can play all the number games they want to with their computers, their calculus, and their fancy equations, but they are still living in their ivory towers. The reality that my colleagues and I deal with every day is very different.

For a particularly timely example, consider yesterday's British Open champion Phil Mickelson:  Forbes: Phil Mickelson Wins British Open---And California Taxes It:

Prior TaxProf Blog coverage:

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July 22, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (13) | TrackBack (0)

Monday, July 15, 2013

Sullivan: Behind the GAO's 12.6% Effective Corporate Tax Rate

Tax Analysts Martin A. Sullivan (Tax Analysts), Behind the GAO's 12.6 Percent Effective Corporate Rate, 140 Tax Notes 197 (July 15, 2013):

On July 1 the Government Accountability Office made a lot of headlines when it released a study reporting that the average effective corporate tax rate in 2010 was only 12.6%. ... Although it is common knowledge that many U.S. multinationals have used tax planning to substantially reduce their tax bills, the GAO figure is surprisingly low. Other studies typically report average rates in the mid-20s. For example, 40 leading U.S. firms that recently formed a tax reform coalition had an average effective tax rate of 24% over the 2010-2012 period. The GAO itself (p. 28) cites eight prior studies using a variety of data, methods, and time periods, and the average rate of these studies was 28.4%, with a minimum of 22% and a maximum of 31.3%.

So what explains the difference between the GAO's 12.6 percent rate and other studies' rates? Mainly two items. First, the GAO did not include foreign taxes in the widely reported 12.6 percent figure. It did in fact provide a much more conceptually defensible measure that includes foreign taxes in the numerator and arrives at a worldwide rate of 16.9 percent as a result. The table below details the GAO calculation.

Figure 1

The second and more important reason for the GAO's low effective tax rate for 2010 compared with those found in other studies is that the effects of a recession are more dominant in 2010 than they are in other studies, which include both recession and non-recession years or no recession years at all. In 2010 the U.S. economy was still severely hobbled by the Great Recession. Figure 1 shows liability for all corporations from 1997 through 2010, as well as net and gross corporate tax receipts from 1997 through 2012. It shows that in 2010, corporate tax liabilities reported on tax returns used in the numerator of the GAO's effective tax rates were extraordinarily low in that year.

Figure 2

Putting all this together, it seems reasonable not to revise the consensus view that average worldwide effective corporate tax rates are somewhere in the mid- or upper 20s when we are not in the throes of a recession. It is important to keep in mind that these broad averages hide a lot of interesting detail. ...  It is also important to keep on the lookout for misleading effective tax rate calculations from advocacy groups. 

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July 15, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

Tuesday, July 9, 2013

Christians: The Dubious Legal Pedigree of IGAs

Tax AnalystsAllison Christians (McGill), The Dubious Legal Pedigree of IGAs (and Why it Matters), 69 Tax Notes Int'l 565 (Feb. 11, 2013):

When Congress enacted the Foreign Account Tax Compliance Act in 2010, it made no mention of any internationally-agreed alternative to its enforcement, and Congress has made no authorization since then for the president to override FATCA’s statutory provisions by international agreement. Yet due to difficulties in implementing FATCA, Treasury has entered into several ‘‘intergovernmental’’ agreements (IGAs) to essentially bypass the hurdles, even going so far as to draft model IGAs with the intent of streamlining their enactment globally. This column examines the nature of these agreements and concludes that their legal pedigree is tenuous as a constitutional matter. It argues that this pedigree implicates the rule of law in two ways: first, if the IGAs are not "good" law in the U.S., then FATCA partners incur the risk of penalties should the statute they seek to override apply in default. Second, and more fundamentally, the IGAs violate the rule of law by ignoring established procedural requirements for binding the US internationally. This undermines the legal system in the US domestically as well as hurting U.S. credibility in the international community. The column concludes by arguing that there is no benefit to be had in skirting the normal legal process for concluding international agreements in the rush to implement FATCA. Instead of jeopardizing the important and complex project of global tax compliance with such a legally dubious procedure, the obvious and straightforward approach to making FATCA work internationally is to follow the normal treaty-making procedure, time-tested through 100 years of US tax treaty-making history.

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July 9, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, July 8, 2013

Sullivan: Pfizer's Tax Picture Dominated by U.S. Losses, Repatriation

Tax Analysts Martin A. Sullivan (Tax Analysts), Pfizer's Tax Picture Dominated by U.S. Losses, Repatriation, 140 Tax Notes 103 (July 8, 2013):

Like so many of its big pharma competitors, Pfizer is having trouble replacing its blockbuster drugs of decades past. The new-product pipeline is drying up, and competition from generic drug makers is relentless. ...  Like its drug business, Pfizer's tax situation is a jumble of events and trends that eludes easy interpretation. Look, for example, at its effective tax rate, shown in Figure 1. It is a roller coaster ride of ups and downs that on its own provides little information about where the company's tax burden has been or where it is going. Is Pfizer a high-tax or low-tax company? There are no easy answers to that question, just as there is no easy answer to whether Pfizer's future is promising or whether it is a sinking ship. This article investigates the factors behind Pfizer's volatile effective tax rate, its booked tax liability ($11.4 billion over the previous five years), and its actual cash payment to tax authorities for income tax ($21.7 billion over the same period). A comprehensive collection of Pfizer's tax data from 2005 through 2009 is at the end of the article.

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July 8, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, July 1, 2013

The Impact of Same-Sex Marriage on Federal and State Budgets

Tax AnalystsDiana Furchtgott-Roth (Senior Fellow, Manhattan Institute), Same-Sex Marriage Decisions Won't Affect Uncle Sam's Bottom Line, 140 Tax Notes 75 (July 1, 2013):

Furchtgott- Roth presents data to show that the Supreme Court decisions on the Defense of Marriage Act and California’s Proposition 8 are unlikely to affect federal or state budgets. ...

The nonpartisan Congressional Budget Office last estimated the effects of same-sex marriage in 2004. It concluded that federal recognition of samesex marriage would reduce the budget deficit by $500 million to $700 million a year between 2011 and 2014, or 0.016 percent of total federal spending of $3.7 trillion. [The Potential Budgetary Impact of Recognizing Same-Sex Marriages] ...

In a December 2012 paper, University of Michigan economist Adam Stevenson estimated an annual increase of $34 million in federal revenues, or 0.001 percent of federal spending, if same-sex marriage were legalized at the federal level. He estimated a lower revenue gain than the CBO did because he assumes that many gay spouses would change their labor force participation rates in response to the marriage penalty. [The Labor Supply and Tax Revenue Consequences of Federal Same-Sex Marriage Legalization, 65 Nat’l Tax J. 783 (Dec. 2012)] ...

140TN0075_Page_2

The effects of same-sex marriage on federal and state revenues appear to be minor because of the low incidence of those marriages; the Supreme Court decision therefore will not have major fiscal consequences on a regional or national level.

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July 1, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)