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Editor: Paul L. Caron
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Monday, February 25, 2013

Johnston: Income Inequality: 1 Inch to 5 Miles

Tax Analysts David Cay Johnston (Syracuse), Income Inequality: 1 Inch to 5 Miles, 138 Tax Notes 1007 (Feb. 25, 2013):

The average increase in real income reported by the bottom 90% of earners in 2011, compared with 1996, if measured at one inch, would extend almost five miles for the top 1% of the top 1%.

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February 25, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (8) | TrackBack (0)

Friday, February 22, 2013

Tax Analysts Hosts Conference Today on The Federal Income Tax: Has It Run its Course?

Federal Income TaxTax Analysts hosts a roundtable discussion on The Federal Income Tax: Has It Run its Course? at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

Please join us for a roundtable discussion on whether the federal income tax, which celebrates its 100th birthday this year, can retain its role as a prime federal revenue source.
  • Christopher E. Bergin (President and Publisher, Tax Analysts) (moderator)
  • Jared Bernstein (Senior Fellow, Center on Budget and Policy Priorities)
  • Robert Goulder (Editor in Chief of International Publications, Tax Analysts)
  • Michael J. Graetz (Professor of Tax Law, Columbia Law School)
  • Joseph J. Thorndike (Director of the Tax History Project, Tax Analysts)

February 22, 2013 in Conferences, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, February 18, 2013

Sullivan: Can States Swap Sales Taxes for Income Taxes?

Tax Analysts Martin A. Sullivan (Tax Analysts), Can States Swap Sales Taxes for Income Taxes?, 138 Tax Notes 789 (Feb. 19, 2013):

Among the 44 states with significant income tax revenue, only a few could repeal their income taxes, replace the lost revenue with sales taxes, and keep sales tax rates below 8% with their current sales tax base (or, for those without sales taxes, with a tax base equal in breadth to the average of other states). They are New Hampshire, Alaska, Montana, Hawaii, and Florida. Two more states, New Mexico and Alabama, might also be able to repeal their income taxes and keep sales tax rates below 8% if they aggressively expanded their sales tax base. In general, states where a tax swap is most likely have relatively low income tax collections and relatively low sales tax rates.

If states already had broad-based consumption taxes in place, a widespread phaseout of state income taxes might be a real possibility. Concerns about regressivity could be addressed with a sales tax rebate to low-income households. But as long as states rely on sales taxes that exclude most services and include business inputs, the difficulties in most states will be insurmountable and the desirability questionable.

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February 18, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 12, 2013

Johnston: Bermuda Robs Sacramento and Albany -- Who Knew?

Tax Analysts David Cay Johnston, Bermuda Robs Sacramento and Albany -- Who Knew?, 67 State Tax Notes 423 (Feb. 11, 2013):

Johnston writes about a report released by the U.S. Public Interest Research Group Education Fund that examines the revenue that is lost by each state to offshore tax havens.

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February 12, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, February 11, 2013

Johnston: Law and Order: Tax Squad

Tax Analysts David Cay Johnston, Law and Order: Tax Squad, 138 Tax Notes 759 (Feb. 11, 2013):

Johnston discusses why it is a bad idea to cut dollars from tax enforcement, and he is skeptical that declining numbers of criminal tax prosecutions are the result of increased voluntary compliance.

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February 11, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Thursday, January 24, 2013

More on the Pepperdine/Tax Analysts Symposium: Tax Advice for the Second Obama Administration

Tax Symposium GraphicWilliam Hoffman, Globalization Poses New Challenges for Tax Reform, 2013 TNT 15-9 (Jan. 23, 2013):

The effects of globalization and international competition on the U.S. economy and the government's fiscal condition will require any tax reform effort made in the coming months to be much different from past efforts, panelists said January 18 during a conference cosponsored by Pepperdine University and Tax Analysts.

"There is no pot of gold from which to finance tax reform," Columbia Law School professor Michael Graetz said at the Malibu, Calif., conference, titled Tax Advice for the Second Obama Administration. Drafters of the 1986 reforms helped finance lower individual tax rates by repealing tax benefits for plants and equipment, limiting tax shelters, and equalizing rates for capital gains and income, Graetz said. That won't be possible this time. "Given internationalization of economic activity and increased competition from abroad, repeating the 1986 act's reliance on increased taxation of corporate income is not, in my view, possible," Graetz said. "Given the size of the national debt and projected increases in that debt for the near and long-term future, it seems essential for tax reform to be capable of producing additional revenues going forward." ...

Tax professors and professionals presented research and offered their take on business and international tax matters, estate and gift taxes, income and wealth inequality, and the balance between fairness and growth during a one-day symposium organized by Pepperdine University law professor Paul Caron, author of TaxProf blog, and Tax Analysts. Most participants agreed that if there is any big reform coming, high- and middle-income earners will likely see their taxes rise -- although the former will have more opportunities than the latter to escape the burden. ...

"The 800-pound gorilla in the room is wealth," said Edward McCaffery of the University of Southern California Gould School of Law. [Distracted from Distraction by Distraction: Reimagining Estate Tax Reform ] "I think we have to go after wealth. I don't think any major tax reform in America has gone after wealth. What we're doing is shoring up the income tax as a wage tax, or maybe making it more progressive, but we're not getting at wealth at all. And I think we have to do something." ...

Several speakers took aim at the $5 million estate tax exemption and the section 1014 rule regarding stepped-up basis on death. "The $5 million exemption for estate and gift [taxes], and especially for generation-skipping transfer taxes, makes no sense at all," said Grayson M.P. McCouch of the University of San Diego School of Law. [Who Killed the Rule Against Perpetuities?] "By opening a $5 million exemption, coupled with unlimited basis stepped up at death, we have basically just opened up a huge giveaway to not even the middle class but to more than 99% of decedents to just escape the basic income tax . . . and we've pulled away what used to be a substantial countervailing tax that offset the benefit of that step. And that, I think, is hard to defend." One possible reform would be to prospectively curtail the $5 million exemption, at least for long-term trusts, McCouch said.

McCaffery called for repeal of the stepped-up basis rule. In 2010, he said, taxpayers had the option of either no estate tax and a carryover basis or a $5-million-per-person exemption and a stepped-up basis. "The overwhelming majority of decedents chose the latter," he said. "Stepped-up basis is very big, very important, [and] it's always been linked to the estate tax."

Joseph J. Thorndike, director of Tax Analysts' Tax History Project and a contributing editor of Tax Notes, said the estate tax might be "irrelevant" for revenue and progressivity purposes (as Caron argued in a paper coauthored with James Repetti of Boston College [Occupy the Tax Code: Using the Estate Tax to Reduce Inequality]), but it's likely not yet dead politically. The estate tax addresses wealth inequality indirectly, while "efforts to address inequality head on -- as in 'these people are just too damn rich and other people are too damn poor' -- are historically not successful in the United States," he said. 

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January 24, 2013 in Conferences, Legal Education, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Tuesday, January 22, 2013

Pepperdine/Tax Analysts Symposium Wrap-Up: Tax Advice for the Second Obama Administration

Symposium Photo

Thanks to everyone who participated in Friday's Pepperdine/Tax Analysts Symposium on Tax Advice for the Second Obama Administration. By any measure, it was spectacular success. We smashed attendance records, as Pepperdine had to open two overflow rooms to handle the crowds. Over 600 people have watched the video of the event:

Each and every one of our tax academics, practitioners, journalists, and authors did a first-rate job:

  • Keynote Address:  Michael Graetz (Columbia)
  • Papers:  Reuven Avi-Yonah (Michigan), Steve Bank (UCLA), Dorothy Brown (Emory), Karen Burke (San Diego/Florida), Paul Caron (Cincinnati/Pepperdine), Allison Christians (McGill), Francine Lipman (UNLV), Ed McCaffery (USC), Grayson McCouch (San Diego/Florida), Susan Morse (UC-Hastings), Jim Repetti (Boston College), Kirk Stark (UCLA), Marty Sullivan (Tax Analysts), Eric Zolt (UCLA)
  • Commentators:  Bruce Bartlett (former Deputy Assistant Treasury Secretary for Economic Policy), Bob Goulder (Tax Analysts), David Miller (Cadwalader), Michael Schler (Cravath), Joe Thorndike (Tax Analysts)
  • Moderators:  Tom Bost (Pepperdine), David Brunori (Tax Analysts), Paul Caron (Cincinnati/Pepperdine), Khrista Johnson (Pepperdine)
  • Luncheon and Closing Addresses:  David Cay Johnston (author and journalist)

The papers will be published in the Pepperdine Law Review (Volume 40, Issue 5 (May 2013)), and I will of course post the links on TaxProf Blog as soon as they are available. In the meantime, seven of the papers are available in draft form on SSRN.

My special thanks to Deanell Tacha (Dean of Pepperdine Law School) and Chris Bergin (President of Tax Analysts) who agreed to co-sponsor the symposium. As Dean Tacha pointed out at Friday's dinner, the challenges facing legal education demand that we find creative ways to partner with other organizations. I believe that this symposium is a wonderful example of the benefits possible with such partnerships.

This is the third symposium I have organized, and I have participated in many others. I join the many speakers who began their remarks by praising the Pepperdine Law Review students for pulling off the best-run symposium that any of us have ever attended.  Many, many students provided tireless and cheerful service, but I want to give particular shout-outs to Editor in Chief Margot Parmenter and Symposium Editor Michael Wood.

It goes without saying that the gorgeous Pepperdine campus and Malibu weather provided a wonderful setting, but I knew it would be the people of this special law school who would make this a truly memorable experience for our guests. My lasting memory from the symposium will be the two "after-parties" my wife and I hosted at our home, where these leading lights of the tax world shared food, drink, conversation, and true community -- an unfortunately all too rare event in our hectic lives.

January 22, 2013 in Conferences, Legal Education, Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, January 14, 2013

Johnston: The Fiscal Cliff Tax Deal Makes Deficit Worse

Tax Analysts David Cay JohnstonDeficits, Schmeficits, 138 Tax Notes 237 (Jan. 14, 2013)

Johnston argues that the fiscal cliff compromise will make it harder to solve the United States’ long-term deficit and debt problems.

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January 14, 2013 in Tax, Tax Analysts | Permalink | Comments (3) | TrackBack (0)

Monday, January 7, 2013

2012 Tax Person of the Year: Tax Policy Center

Tax AnalystsPerson of the Year: Tax Policy Center, 138 Tax Notes 7 (Jan. 7, 2013):

The Urban-Brookings Tax Policy Center is the 2012 Tax Notes Person of the Year, for the indelible mark it made on the presidential campaign; nine other contenders for the title round out the feature.

  • Tanara Ashford (Deputy Assistant Attorney General, Tax Division, Justice Department)
  • Erskine Bowles (Co-chair, National Commission on Fiscal Responsibility and Reform)
  • Bryan T. Camp (Professor, Texas Tech University School of Law)
  • Elizabeth A. Copeland (Partner, Strasburger Price Oppenheimer Blend)
  • Manal Corwin (Assistant Secretary of the Treasury for International Tax Affairs)
  • Scott D. Michel (President, Caplin & Drysdale)
  • John G. Roberts Jr. (Chief Justice of the United States)
  • Mitt Romney (Republican Party Nominee for President)
  • Dean A. Zerbe (Zerbe, Fingeret, Frank & Jadav)

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January 7, 2013 in Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

Thursday, January 3, 2013

Sullivan: Double Disappointment With the Fiscal Cliff Deal

Tax Analysts Martin A. Sullivan (Tax Analysts),  Double Disappointment With the Deal, Doc 2013-46 (Jan. 3, 2013):

Martin A. Sullivan discusses the downsides of the fiscal cliff compromise.

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

Thursday, December 27, 2012

2012 Year in Review: State & Local Taxes

Tax AnalystsShonda Humphrey (Tax Analysts), A Year in Review of State and Local Tax Legal Developments, 66 State Tax Notes 991 (Dec. 24, 2012):

Well, 2012 is winding down, and what a year it was. ... In the state and local tax area, there were some noteworthy legal developments.

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December 27, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 26, 2012

Bartlett: U.S. Taxes and Government Benefits in an International Context

Tax Analysts Bruce Bartlett, U.S. Taxes and Government Benefits in an International Context, 137 Tax Notes 1429 (Dec. 24, 2012):

Bruce Bartlett reviews new international data on taxes and healthcare spending as a share of GDP in OECD countries and suggests that Americans' antipathy to taxes may be a function of the modest benefits they receive from government in contrast to those in high-tax countries.

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December 26, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, December 17, 2012

Sullivan: Why the SALT Deduction Is Always Under Attack

Tax Analysts Martin A. Sullivan (Tax Analysts), Why the SALT Deduction Is Always Under Attack, 137 Tax Notes 1267 (Dec. 17, 2012):

Martin A. Sullivan argues that policymakers shouldn't be so quick to curtail or eliminate the deduction for state and local taxes.

[T]he history of the 1986 act can still teach us about the next tax reform effort. Among the most relevant lessons is that among the big three itemized deductions—the mortgage interest deduction, the deductions for charitable contributions, and the deduction for state and local taxes — the last is by far the one Congress is most likely to cut. As shown in Figure 1, the deduction cost the government $62 billion in 2010, and a lot of that revenue is from upper-income households. That is an attractive pile of cash, especially if the mortgage interest and charitable deductions are off the table.

Figure 1. Distribution of Tax Benefits From the Deduction for State and Local Taxes in 2010 (from a total of $62.4 billion)

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December 17, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (5) | TrackBack (0)

Monday, November 26, 2012

Sullivan: Deduction Caps Can Raise Marginal Rates, Cut Economic Growth

Tax Analysts Martin A. Sullivan (Tax Analysts), Deduction Caps Can Raise Marginal Rates, Cut Economic Growth, 137 Tax Notes 939 (Nov. 26, 2012):

Long-run job creation through tax cutting is a two-step process. The first step is to lower marginal tax rates. Then those lower marginal rates increase taxpayers’ willingness to invest and seek employment. Most of the unending argument about the effect of taxes on job creation centers on step two — that is, the responsiveness of saving and labor supply to changes in marginal tax rates.

Despite all the effort, there is still enough uncertainty about the empirical research that both proand antitax partisans can cite plausible estimates to support their views. This article sidesteps the highly politicized component of the debate about the economic effects of taxes and instead focuses on step one, the oft-neglected arithmetic of the effects of tax reform on marginal rates.

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November 26, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, November 5, 2012

Johnson: Tax Reform and the Presidential Election

Tax Analysts Calvin H. Johnson (Texas), Tax Reform and the Presidential Election, 137 Tax Notes 676 (Nov. 5, 2012):

Johnson describes the tax plan of Republican presidential nominee Mitt Romney as aggressively promising tax cuts for the richest taxpayers. Although Romney promises no increase in the deficit or tax increases for middle-income earners, it is impossible for him to keep all three promises. Johnson argues that the wealthy will need to share in the closing of the deficit because that is where the money is. Wealth is distributed unevenly in this country: One-third is held by the top 1%, and 58% is held by the richest 5%. Taking a needed dollar from the rich does less harm to the sum of human happiness than taking it from the poor.

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November 5, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, October 29, 2012

Sullivan: The Employer Healthcare Exclusion's Role in Tax Reform

Tax Analysts Martin A. Sullivan (Tax Analysts), The Employer Healthcare Exclusion's Role in Tax Reform, 137 Tax Notes 462 (Oct. 29, 2012):

Martin A. Sullivan discusses how the exclusion for employer-provided health insurance might be affected by proposals for tax reform.

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October 29, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

Monday, October 22, 2012

Sullivan: How Much Deficit Reduction for a Grand Bargain?

Tax Analysts Martin A. Sullivan (Tax Analysts), How Much Deficit Reduction for a Grand Bargain?, 137 Tax Notes 339 (Oct. 22, 2012):

Martin A. Sullivan writes about $3.4 trillion of deficit reduction that will be needed over the next 10 years to put the federal budget on a sustainable course.

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October 22, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Friday, October 12, 2012

Tax Analysts Hosts Conference Today on Taxes and the Poor

TaxesTax Analysts hosts a roundtable discussion today on Taxes and the Poor at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

  • Christopher E. Bergin (President and Publisher, Tax Analysts)
  • David Brunori (Executive Vice President, Tax Analysts)
  • Scott A. Hodge (President, Tax Foundation)
  • Chuck Marr (Director of Federal Tax Policy, Center on Budget and Policy Priorities)
  • C. Eugene Steuerle (Institute Fellow, Urban Institute)

October 12, 2012 in Conferences, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, October 8, 2012

Sullivan: The Hypocrisy of Tax Reform

Tax Analysts Martin A. Sullivan (Tax Analysts), The Hypocrisy of Tax Reform, 137 Tax Notes 119 (Oct. 8, 2012):

Martin A. Sullivan argues that despite their saying that tax reform is needed, lawmakers often let politics muck up the tax code.

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October 8, 2012 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 2, 2012

Christians: Measuring a Fair Share

Tax AnalystsAllison Christians (McGill), Measuring a Fair Share, 68 Tax Notes Int'l 95 (Oct. 1, 2012):

Allison Christians discusses the difficult policy considerations that go into defining what constitutes an individual's fair share when it comes to paying taxes.

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October 2, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, October 1, 2012

Jackel: Tax Aggressiveness and Tax Meekness

Tax AnalystsMonte A. Jackel (Monte A. Jackel Federal Tax Advisory Services, Washington, D.C.), The Aggressive and the Meek, 137 Tax Notes 1365 (Sept. 18, 2012):

In this now-monthly column on current tax policy and issues, Jackel examines the state of the tax practice in taking either aggressive or conservative positions on a tax matter. He also discusses the conundrum facing those who comment on government-proposed guidance and are forced to choose between client interests and sound tax policy.

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October 1, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, September 24, 2012

Solomon: Corporate Inversions: A Symptom of Larger Tax System Problems

Tax Analysts Eric Solomon (Ernst & Young, Washington, D.C.), Corporate Inversions: A Symptom of Larger Tax System Problems 67 Tax Notes Int'l 1203 (Sept. 23, 2012):

The enactment of § 7874 in 2004 substantially curtailed inversion activity by U.S. corporations. Nevertheless, some U.S. corporations have inverted and other corporations have considered inverting, although recent temporary regulations have made avoiding the application of § 7874 more difficult. This article examines why U.S. corporations engage in inversions and continue to consider them. Inversion activity is a symptom of problems in the U.S. international tax system that need to be addressed.

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September 24, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 18, 2012

Johnson: The 'No Surplusage' Canon in State and Local Tax Cases

Tax AnalystsSteve R. Johnson (Florida State), The 'No Surplusage' Canon in State and Local Tax Cases, 65 State Tax Notes 793 (Sept. 17, 2012):

Previous installments of this column have examined numerous canons or conventions of statutory interpretation in their application to state and local tax controversies. This installment considers another canon: the precept that courts should prefer interpretations that render no part of a statute superfluous. ... The first part below describes the canon generally. The second part identifies the reasons advanced for the precept, the objections lodged against it, and the limitations on it. The third part gives examples of the canon in state and local tax cases, both cases in which its assertion was successful and cases in which its use failed.

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September 18, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, September 17, 2012

Sullivan: President Romney's Tax Reform

Tax Analysts Martin A. Sullivan (Tax Analysts), President Romney's Tax Reform, 136 Tax Notes 1365 (Sept. 18, 2012):

In economic analysis, Martin A. Sullivan discusses the options available to Mitt Romney if the Republican presidential nominee is determined to propose revenue-neutral tax reform.

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September 17, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 4, 2012

Sullivan: The Effects of Interest Allocation Rules in a Territorial System

Tax Analysts Martin A. Sullivan (Tax Analysts), The Effects of Interest Allocation Rules in a Territorial System, 136 Tax Notes 1098 (Sept. 4, 2012):

In economic analysis, Martin A. Sullivan discusses why interest allocations rules are important if the United States moves to a territorial tax system.

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September 4, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 29, 2012

Cummings: Reorganization Business Purpose

Tax Analysts Jasper L. Cummings, Jr. (Alston & Bird, Durham, NC), Reorganization Business Purpose, 136 Tax Notes 1069 (Aug. 27, 2012):

In this article, Cummings explains how corporate taxpayers can avoid having to conjure up a business purpose for an acquisitive reorganization, other than the acquisition.

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August 29, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 21, 2012

State Taxation of Cloud Computing

Tax Analysts Timothy P. Noonan (Hodgson Russ, Buffalo), Nuts-and-Bolts Answers on Cloud Computing, 65 State Tax Notes 527 (Aug. 20, 2012):

In Noonan's Notes on Tax Practice, Timothy P. Noonan of Hodgson Russ LLP, Buffalo and New York City, discusses various states' guidance on taxation of cloud computing.

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August 21, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, August 20, 2012

Willens: IRS Moves to Curtail Tax-Free Repatriation of Foreign Earnings

Tax Analysts Robert Willens (Robert Willens LLC, New York), IRS Moves to Curtail Tax-Free Repatriation of Foreign Earnings, 136 Tax Notes 847 (Aug. 20, 2012):

The IRS continues to police schemes that are designed to enable U.S. shareholders of foreign corporations to extract undistributed earnings without U.S. tax consequences. The latest strategy was implemented through an outbound all-cash "D" reorganization in which the transferred property consisted primarily of intangible assets. As was the case with the strategy's predecessor, the "Killer B" transaction, the IRS eliminated the viability of the technique [Notice 2012-39].

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August 20, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Thursday, August 16, 2012

Soled & Crawford: Gift Taxes, Valuation, and the Need for Quarterly Information Returns

Tax AnalystsJay A. Soled (Rutgers Business School) & Bridget J. Crawford (Pace), Gift Taxes, Valuation, and the Need for Quarterly Information Returns, 136 Tax Notes 843 (Aug. 13, 2012):

Gifts of tangible personal property and closely held business interests typically are made without a paper trail. Because gift tax returns aren’t due until April 15 of the calendar year following the transfer, a noncompliant taxpayer can game the system by taking a wait-and-see approach. For example, if a taxpayer makes a gift of a valuable gold ring on January 1 and by December 31 the value of gold declines to an all-time low, the taxpayer might choose to report the gift as being made on a later date. Similarly, if a taxpayer makes a gift of privately held stock to a grantor retained annuity trust on January 1 and the value of that stock declines to an all-time low by December 31, the taxpayer might claim that the gift was never made.

Soled and Crawford propose reviving a quarterly gift tax return filing system applicable to all taxpayers whose aggregate taxable gifts equal or exceed $100,000 during a calendar quarter. That system would increase both compliance and revenue. 

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August 16, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 14, 2012

A Comparison of Tax Benefits for New and High-Tech Companies in the U.S. and China

Tax AnalystsYinan Zhang (J.D. 2013, Cincinnati), A Comparison of Tax Benefits for New and High-Tech Companies in the U.S. and China, 67 Tax Notes Int'l 655 (Aug. 13, 2012):

The presence of U.S. companies in China is no longer a secret. While China still serves as the "world's factory," a continued expansion of research and development activities in China draws more attention from the rest of the world. By the end of 2009, more than 400 Fortune 500 companies have conducted R&D activities in China. Many reasons account for this trend -- for example, the relatively cheaper R&D investment environment, including cheaper human resources, and China's foreign exchange control policies, which make it hard for international companies to withdraw capital from China.

This article analyzes this trend from a tax perspective. Section I focuses on R&D tax benefits in the U.S. and explains how they work. Section II discusses the benefits provided in China and compares a company's R&D treatment in China with its treatment in the U.S. This article also tries to predict the future of this tax benefit in China, as Chinese tax law underwent a significant change in 2008 and some implementing rules have not yet been promulgated. The conclusions will be summarized in the last section, with some practical suggestions for U.S. companies conducting R&D activities in China.

This article is written primarily for U.S. companies with divisions or subsidiaries in China3; therefore, it introduces the rules in both countries briefly and focuses more on a comparison of the benefits of locating research activities in either of the two countries. The ultimate purpose of this article is to help companies analyze whether to have R&D activities in China.

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August 14, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Thursday, August 9, 2012

Singapore Tax Incentives for Wealthy Individuals

Tax AnalystsLinda L. Ng, Steve Towers & Li Mei Liew (all of Deloitte & Touche), Singapore: Home for Billionaires and Superstars, 67 Tax Notes Int'l 557 (Aug. 5, 2012):

Linda L. Ng, Li Mei Liew, and Steve Towers look at the tax incentives Singapore offers to wealthy individuals.

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August 9, 2012 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 8, 2012

Should Taxpayer Privacy Be Violated to Encourage Tax Policy Discussion?

Tax AnalystsCara Griffith (Tax Analysts), Should Taxpayer Privacy Be Violated to Encourage Tax Policy Discussion?, 65 State Tax Notes 403 (Aug. 6, 2012):

In Practice Notes, State Tax Notes legal editor Cara Griffith examines a California bill that would require the state to publish a list of the largest 1,500 corporate taxpayers, including the taxpayer's name, tax liability, and apportionment information.

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August 8, 2012 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, August 6, 2012

Sullivan: Treat Corporate Interest Deductions Like Any Tax Expenditure

Tax Analysts Martin A. Sullivan (Tax Analysts), Treat Corporate Interest Deductions Like Any Tax Expenditure, 136 Tax Notes 631 (Aug. 6, 2012):

Martin A. Sullivan discusses why corporate interest deductions should be scaled back if the corporate tax rate is lowered.

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August 6, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Thursday, August 2, 2012

Kahn: Contribution of a Built-in Loss to a Partnership

Tax AnalystsDouglas A. Kahn (Michigan), Contribution of a Built-in Loss to a Partnership, 136 Tax Notes 571 (July 30, 2012):

In 2004 Congress amended the code to prevent the use of a partnership contribution as a means of transferring a deduction for a built-in loss from one person to another. That amendment has undermined the application of the remedial method (and the traditional method with curative allocations) that the regulations provide for the allocation of a contributed built-in gain or loss, Kahn argues. He also asserts that the 2004 amendment distorts income reporting.

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August 2, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, July 30, 2012

Tax Transparency in Kentucky

Tax Analysts Jennifer Carr (Tax Analysts), Informal and Invisible Guidance in Kentucky Creates Transparency Issues, 65 State Tax Notes 303 (July 30, 2012):

The Kentucky Department of Revenue's refusal to release documents such as final rulings and other written guidance, combined with its informal approach to issuing written guidance, has created significant transparency problems within the state, practitioners say.

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July 30, 2012 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Thursday, July 26, 2012

Wells: Section 7874 Has Not Stopped Corporate Inversions

Tax AnalystsBret Wells (Houston), Cant and the Inconvenient Truth About Corporate Inversions, 136 Tax Notes 429 (July 23, 2012):

Wells writes that inversion transactions and inversion benefits are still available and are being pursued even with the enactment of § 7874. That section obscures the fundamental design flaws of the tax system without solving the underlying defects. The inversion transactions that have occurred since the enactment of § 7874 prove that Congress should reform the U.S. international tax regime.

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July 26, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (3) | TrackBack (0)

Monday, July 23, 2012

How Hedge, Private Equity, and Venture Capital Funds Escape IRS Scrutiny

Tax Analysts Amy S. Elliott (Tax Analysts), Audit Proof? How Hedge Funds, PE Funds, and PTPs Escape the IRS, 136 Tax Notes 351 (July 23, 2012):

True or false: The largest U.S. businesses are under continuous audit by the IRS.

False. Some are effectively immune from audit. Whether a business is audited every year depends in part on its form of organization.

While the tax planning strategies and low effective rates of household-name, publicly traded corporations have made newspaper headlines, those companies are regularly and thoroughly examined by the IRS.

But large, widely held partnerships, including publicly traded partnerships (PTPs) -- which generally have thousands of direct and indirect partners -- seem largely to escape the scrutiny that the Service gives to their C corporation counterparts.

PTPs (such as oil and gas and real estate funds and investment funds like the Blackstone Group LP, the Carlyle Group LP, and KKR & Co. LP) aren't the only lucky ones. While private hedge, private equity, and venture capital funds might not be widely held in terms of the number of direct partners, if one of their investors is a fund of funds, the number of indirect partners balloons.

Through an investigation based on interviews with dozens of practitioners who have direct knowledge of the IRS's large partnership audit practices, including many with government experience, Tax Analysts has learned that this growing class of business entities poses serious problems for tax examiners.

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July 23, 2012 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Thursday, July 19, 2012

Tax Transparency in North Carolina

Tax Analysts Amy Hamilton (Tax Analysts), Transparency in North Carolina: Portrait of a State in Flux, 65 State Tax Notes 149 (July 16, 2012):

The issue of forced combination of separate entity returns began as a dispute between taxpayers and the North Carolina Department of Revenue, but has mushroomed into a public debate over how the DOR provides guidance to taxpayers -- or the lack thereof.

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July 19, 2012 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 4, 2012

The Role of Tax Havens in the Global Economy

Tax AnalystsRobert T. Kudrle (University of Minnesota, Hubert H. Humphrey School of Public Affairs), Whose ‘Treasure Islands’? The Role of Tax Havens in the Global Economy, 67 Tax Notes Int'l 69 (July 2, 2012):

Two recent works with the same title suggest radically different views of the role of tax havens in the global economy. In late 2010, James R. Hines Jr. [24 J. Econ. 103] (2010) made the case for a largely beneficial role. According to Hines, the tax havens improve markets: they facilitate direct investment by improving the attraction of high-corporate-tax states for real investment, and they may shore up rather than degrade corporate tax collections by high-corporate-income states such as the U.S. They also seem to improve the competitiveness of national financial institutions and hence facilitate portfolio capital provision in both rich and poor countries. A book by Nicholas Shaxson (2011), which appeared shortly after Hines's article, presents an utterly different assessment. In Shaxson's account, tax havens permit the superrich in high-income countries to evade their tax responsibilities, place a huge additional burden on rich-country taxpayers by allowing vast corporate profits to go untaxed, and facilitate the drain of capital from poor countries.

The works differ in four main areas:

  • the jurisdictions considered
  • the practices examined
  • the evidence employed
  • the implications for policy

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See also New York Times:  Tax Havens and Treasure Hunts, by Nancy Folbre (University of Massachusetts-Amherst).

July 4, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Tuesday, July 3, 2012

Do State Corporate Tax Incentives Violate the Equal Protection Clause

Tax AnalystsJustin T. Golart (J.D. 2012, George Washington), Corporate Tax Incentives And the Equal Protection Clause, 65 State Tax Notes 33 (July 2, 2012):

The argument that targeted tax incentives are unconstitutional under the equal protection clause of the 14th Amendment is admittedly an aggressive one. Although it’s unlikely to succeed in the near future, strong arguments do exist that could form the basis for a challenge in the future. If the composition of the Supreme Court changes over time to a lineup that is more likely to extend the borders of suspect classifications, small business owners have a strong case that these discriminatory laws should be subject to heightened scrutiny.

In the short term, the more logical approach is to conduct studies and collect data demonstrating that there is no rational basis for states to offer tax breaks to select corporations. A skeptic would likely conclude that tax incentives are more related to continued financial support of elected leaders than they are to job growth and economic development. Although both arguments, in their current forms, are not slam-dunk cases, the Supreme Court’s decision in Citizens United is an excellent starting point for holding corporations to the same standard as natural persons and saying that corporations cannot pick and choose when they wish to be treated as natural persons. To ignore that argument is to accept the consequences of Citizens United that empower corporations without demanding the consequences that hold them accountable.

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July 3, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

Monday, July 2, 2012

Sullivan: The Economic Case for Unlocking Foreign Profits

Tax Analysts Martin A. Sullivan (Tax Analysts), The Economic Case for Unlocking Foreign Profits, 136 Tax Notes 7 (July 2, 2012):

Martin A. Sullivan argues that the failure of Congress to pass a second repatriation holiday should not stop policymakers from considering ways to end the lockout effect on overseas profits.

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July 2, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Friday, June 29, 2012

Jensen: Does the Taxing Clause Give Congress Unlimited Power?

Tax Analysts Erik M. Jensen (Case Western), Does the Taxing Clause Give Congress Unlimited Power?, 135 Tax Notes 1515 (June 18, 2012):

The idea has gained currency that the Taxing Clause in the Constitution gives Congress the power to do anything, or almost anything, that would be funded by taxation. Most recently, that argument has been advanced in connection with the litigation about the individual mandate in the Obamacare legislation — by, among others, legal philosopher Ronald Dworkin. If the penalty for failure to acquire suitable insurance will be a tax, then, it is argued, the requirement to acquire insurance, the mandate, will itself be a valid exercise of the taxing power. If that’s right, it certainly isn’t obviously so. Since almost everything the national government does is funded through taxation, that understanding would lead to a conception of congressional power that is effectively unlimited, and the Taxing Clause would trump almost all other grants of congressional power in Article I, section 8.

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June 29, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (49) | TrackBack (0)

Wednesday, June 27, 2012

FATCA and the New International Tax Order

Tax AnalystsJeff N. Mukadi (JP&MF Consulting, Peterborough, Ontario), FATCA and the Shaping of a New International Tax Order, 66 Tax Notes Int'l 1227 (June 25, 2012):

Jeff N. Mukadi gives his views on the future of FATCA enforcement around the globe, positing that there may come a time when nations work together so seamlessly that they will substantially constitute a virtual international tax coordination body.

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June 27, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 26, 2012

Johnson: The Clear Legislative Evidence Canon in Tax Cases

Tax AnalystsSteve R. Johnson (Florida State), Elephants, Mouse Holes, Non-Barking Dogs, and Statutory Interpretations, 64 State Tax Notes 911 (June 25, 2012):

This installment of Interpretation Matters examines a canon of statutory construction that has been applied in state and federal cases, both tax and nontax. Under the canon, a court will require clear legislative evidence before it holds that a statute was intended to effect a major substantive change. Inferences from wisps of textual or other evidence will not suffice. As the title of this installment suggests, and as will become clear below, the jurisprudence regarding this canon has been particularly rich in metaphors.

Part I below describes the U.S. Supreme Court cases that are the foundation of the canon, including a recent tax case. Part II surveys the canon's use in state and local cases, including tax cases. Part III analyzes the justification for the canon and its relations to other canons. Part IV sets out practical suggestions on how to use, and how to oppose the use of, the canon in actual cases.

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June 26, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, June 25, 2012

Barry & Camp: Is the Individual Mandate Really Mandatory?

Tax AnalystsJordan M. Barry (San Diego) & Bryan T. Camp (Texas Tech), Is the Individual Mandate Really Mandatory?, 135 Tax Notes 1633 (June 25, 2012):

This article examines the tax collection process to see how the IRS might enforce the individual mandate under the healthcare reform law. It concludes that resistant taxpayers can generally be forced to pay the tax penalty only if they are entitled to receive refundable tax credits that exceed their net federal tax liability.

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June 25, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, June 18, 2012

Denning: Due Process and Personal Jurisdiction: Implications for State Taxes

Tax AnalystsBrannon P. Denning (Cumberland), Due Process and Personal Jurisdiction: Implications for State Taxes, 64 State Tax Notes 837 (June 18, 2012):

Brannon P. Denning ... examines the implications of a recent U.S. Supreme Court decision [J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011)] and asks whether restricting states' personal jurisdiction would affect their taxing jurisdiction.

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June 18, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Friday, June 15, 2012

Tax Analysts Hosts Conference Today on Taxes and the Rich

Taxes and the RichTax Analysts hosts a roundtable discussion today on Taxes and the Rich at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST (available live on C-SPAN2):

Please join us for a roundtable discussion on taxes and the rich when we will ask what the rich should pay, and why.

  • Christopher E. Bergin (President and Publisher, Tax Analysts)
  • Leonard E. Burman (Professor, Maxwell School of Syracuse University)
  • Robert Carroll (Principal, National Tax Department, Ernst & Young) 
  • Joseph Thorndike (Director of the Tax History Project and Contributing Editor, Tax Analysts)

Update:  CNN op-ed, Taxing the Rich: What's Fair?, by Joseph Thorndike (Director of the Tax History Project and Contributing Editor, Tax Analysts).

June 15, 2012 in Conferences, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Thursday, June 14, 2012

From the Tax Notes Vault: Mamas Don’t Let Your Babies Grow Up to Be Tax Lawyers

Tax Analysts In celebration of the 40th anniversary of the publication of its inaugural issue, Tax Notes is re-publishing memorable articles from its archives. I am delighted that Tax Notes this week re-published one of my articles, Mamas Don’t Let Your Babies Grow Up to Be Tax Lawyers, 135 Tax Notes 1358 (June 11. 2012):

This article, originally published July 18, 1994, was excerpted from Caron’s article, Tax Myopia, or Mamas Don’t Let Your Babies Grow Up to Be Tax Lawyers, which was published in 13 Va. Tax Rev. 517 (1994).  The article discussed two related myths that have a strong currency among law students, lawyers, and the public.

The first myth is that tax lawyers are somehow different from other lawyers.  Part I of the article chronicled the disparagement of tax lawyers in a light-hearted fashion and set the stage for the discussion of the second myth that tax law is somehow different from other areas of the law.

As suggested by the abstract reference to ‘‘tax myopia’’ in the title, the article contended that tax law too often is mistakenly viewed as a self-contained body of law.  Part II explained how that misperception has impaired the development of tax law by shielding it from other areas of law that should inform the tax debate. It also explained how other areas of law have been impoverished by the failure to consider how tax law can enrich their development.  The article advocated a synergistic relationship between tax and nontax law through which each benefits from the insights of the other.

The full article is available here.

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June 14, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 13, 2012

Resolving Tax Disputes in Canada

Tax AnalystsPatrick Lindsay & Salvatore Mirandola (both of Borden Ladner Gervais, Calgary and Toronto), Resolving Tax Disputes in Canada, 66 Tax Notes Int'l 1043 (June 11, 2012):

Many tax authorities have become more organized, more aggressive, and more results-oriented. The Canada Revenue Agency is no exception. This article describes the process for tax dispute resolution in Canada, focusing on common procedural and substantive issues relevant to multinational enterprises. This article provides a basic understanding of the steps involved in resolving a typical tax dispute in Canada. A chart of the main steps involved in a tax dispute, and brief comments on each step, is also included.

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June 13, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 12, 2012

Johnson: ALJs in State & Local Tax Cases: To Whom Is Deference Due?

Tax AnalystsSteve R. Johnson (Florida State), ALJs in State-Local Tax Cases: To Whom Is Deference Due?, 64 State Tax Notes 785 (June 11, 2012):

Steve R. Johnson writes about a Nevada sales tax case in which the state supreme court had to determine whether the tax department gave deference to an administrative law judge's conclusions and whether equitable tolling applied to the refund claims.

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June 12, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)