TaxProf Blog

Tax Policy In The Trump Administration

• Bloomberg, $630 Million Death Tax Keeps LG Heir Out of Billionaires’ Club
• Bloomberg, Banks Are Losing Fight to Spike Tax on Sales Above $285 Million
• Bloomberg, Democrats Are Going to Try to Raise the Corporate Tax Rate
• Bloomberg, U.S. Companies Flee No-Tax Caribbean Havens After EU Crackdown

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Pepperdine At Daybreak

We feel grateful and blessed to be back at our beloved Pepperdine this morning.

Northwestern Law Is Paring Back Amid Budget Woes. Are Other Elite Schools Next?

Following up on my previous post, Northwestern Law Dean Cites School's 'Difficult Time' As Reason For Faculty Cuts:  Law.com, Northwestern Law Is Paring Back Amid Budget Woes. Are Other Elite Schools Next?:

The recent decision to trim staff and lecture faculty at Northwestern University Pritzker School of Law amid a budget shortfall illustrates that even elite law schools are subject to the financial pressures of staying competitive in a soft legal education market.

But make no mistake: Name-brand law schools on the whole are faring better than their counterparts further down the legal education food chain.

That’s according to experts who have studied the changing economics of law schools and deans at several schools within U.S. News & World Report’s top 20, who say that fundraising has been strong and that the financial shortfalls that emerged in the midst of the so-called crisis in legal education have largely been addressed. Put another way, don’t expect top law schools to announce drastic cuts any time soon. ...

Former University of North Carolina law professor Bernie Burk and University of St. Thomas School of Law professor Jerome Organ examined enrollment, tuition and scholarship trends in legal education from 2010 to 2016 to conclude that the nation’s law schools are collectively losing $1.5 billion annually due to lower enrollment and lower actual cost for students.

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Harvard Braces For $40-$50 Million Annual Endowment Tax

Harvard Crimson, Bacow Met With U.S. Treasury Representative to Discuss Endowment Tax Guidance:

University President Lawrence S. Bacow recently met with a U.S. Treasury Department official as the government prepares final regulations for taxing university endowments, Bacow said in an interview last month.

Harvard’s endowment, valued at $39.2 billion, qualifies for taxation under the new tax codes Republican lawmakers passed last year. The University's endowment was previously exempt from taxes because the school is a non-profit entity.

The University’s financial report released in October estimates that the tax will cost Harvard $40 million to $50 million annually. Harvard will have to pay the endowment tax for the first time on returns from this fiscal year, which ends in June 2019. ...

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LSAC Hit With $480k Attorney Fees In LSAT Disability Litigation

National Law Journal, LSAT Maker Hit With $480K in Fees for Disability Violations:

A federal judge has ordered the Law School Admission Council to pay nearly half a million dollars in attorney fees to the California Department of Fair Employment and Housing in connection to litigation over its accommodation of Law School Admission Test takers with disabilities.

The California agency sought more than $567,000 in attorney fees after it successfully petitioned the court to hold the council in civil contempt for violating a 2014 agreement on how it would handle requests for accommodation on the LSAT. The parties met for a court hearing on Friday. U.S. Magistrate Judge Joseph Spero of the U.S. District Court for the Northern District of California on Monday largely sided with the agency in finding that the council must pay $480,000. ...

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Ruth Mason Posts Two Tax Papers On SSRN

• The Illegality of Digital Services Taxes Under EU Law: Size Matters
• A Political-Process Defense of Deutsche Bahn Deference

Barry Presents The Transition (Under-) Tax Today At Northwestern

Jordan Barry (San Diego) presents The Transition (Under-) Tax at Northwestern today as part of its Advanced Topics in Taxation Workshop Series hosted by Sarah Lawsky:

One of the most significant effects of the Tax Cuts and Jobs Act (“TCJA”) was shifting the United States from a worldwide tax system to a territorial one: Before the TCJA, U.S. corporations were subject to tax on all of the income they earned, regardless of where they earned it; after the TCJA, U.S. corporations generally will not have to pay U.S. federal income tax on profits earned outside of the United States. The TCJA coupled this permanent shift with a one-time transition tax (the “Transition Tax”). The Transition Tax taxes the trillions of dollars of income that U.S. corporations earned outside of the United States, but which had not yet been subjected to U.S. tax, at a rate of either 8% or 15.5%, depending on how the income was invested. There is much to criticize about the Transition Tax.

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Fox Presents Ironing Out The Tax Law At Michigan

Edward Fox (Michigan) presented Ironing Out the Tax Law (with Jacob Goldin (Stanford)) yesterday at Michigan today as part of its Tax Policy Workshop Series hosted by Reuven Avi-Yonah:

The law is full of sharp lines, where small changes in one’s circumstances lead to significant changes in legal treatment. In many cases, a sharp line can be smoothed out — or “ironed” — by replacing it with a sliding scale. Under a sliding scale, small changes in one’s circumstances lead to small changes in legal treatment. In this paper, we study the policy choice between sharp lines and sliding scales in the tax law, focusing particularly on concerns related to efficiency, complexity, and administration. Sliding scales are common for tax provisions that depend on income, but relatively uncommon for provisions that depend on non-income factors.

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The Next Big Innovation In Law School Teaching: Low Tech

Nikos Harris (British Columbia), The Risks of Technology in the Law Classroom: Why the Next Great Development In Legal Education Might Be Going Low-Tech, 51 U. British Colum. L. Rev. 773 (2018):

It is often assumed that technology improves every facet of our lives, including learning in the university classroom. However, there is mounting evidence that traditional lecturing and note-taking techniques may provide the optimal learning environment. Student use of laptops, and professor use of electronic course slides, may actually impair learning in a manner which has particular significance for legal education. This emerging evidence suggests that law professors can make a justifiable decision to bring about a "low tech revolution" in their classrooms.

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Krugman: The Tax Cut And The Balance Of Payments

New York Times op-ed:  The Tax Cut and the Balance of Payments (Wonkish), by Paul Krugman:

Now that Democrats have taken the House, it seems likely that the Tax Cuts and Jobs Act will turn out to have been the only major piece of legislation enacted under Donald Trump. There might conceivably be an infrastructure bill, but don’t get your hopes up: Trump’s people seem dead set against straightforward public spending, i.e., just building the damn infrastructure, and Democrats probably won’t agree to privatization disguised as public investment.

Now, the TCJA played almost no role in the midterms: Republicans dropped it as a selling point, focusing on fear of brown people instead, while Democrats hammered health care. But now that the election is past, it seems like a good idea to revisit the bill and its effects. What I want to focus on in this piece is the effects on the balance of payments.

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SCOTUS Clerk Signing Bonuses Reach $400,000; Jones Day Hires 11 Clerks, Including Pepperdine Law Grad

National Law Journal, $400K for SCOTUS Clerks: A Bonus Too Far?:

[T]he prevailing hiring bonus for Supreme Court clerks is $400,000—up from $300,000 in 2015. And that does not include salaries. If the trend continues, the clerk bonus will soon approach twice the annual salary of the justices they work for. Associate justices are paid $235,000, and the chief justice gets $267,000.

Firms such as Jones Day, which announced Tuesday that it hired 11 clerks from last term’s “class,” take the number in stride, even as in the case of Jones Day if it amounts to a $4.4 million investment. The firm has recruited 47 Supreme Court clerks since 2012. The firm declined to discuss its compensation practices.

Bloomberg Law, Jones Day Lands Almost a Third of Latest Supreme Court Clerks:

The Jones Day arrivals include five women:

• Cynthia Barmore, a Stanford Law School graduate who clerked for Justice Stephen G. Breyer, and will work in the Washington office.
• Elizabeth G. Bentley, a Harvard Law School graduate who clerked for Justice Sonia Sotomayor, and will work in the Minneapolis office.
• Carmen G. Iguina Gonzalez, a New York University School of Law graduate who clerked for Sotomayor, and will work in the Washington office.
• Brittney Lane Kubisch, a Pepperdine University School of Law graduate who clerked for Justice Clarence Thomas, and will work in the Los Angeles office.
• Mary H. Schnoor, a Harvard Law School graduate who clerked for Justice Ruth Bader Ginsburg, and will work in the Chicago office.

The other clerks Jones Day hired are:

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The Coming Global Digital Tax Showdown

Bloomberg Tax, A Global Digital Tax Showdown Looms. Here’s What Could Happen:

The world’s biggest tech companies are staring down the barrel of a new tax on their European revenue.

The EU’s divisive effort to create a special tax for Google, Facebook, and their peers is at a pivotal moment as proponents of the so-called digital tax push for a December vote. The measure would impose a 3 percent temporary turnover tax on the biggest multinational tech companies—those with 750 million euros or more in global turnover and 50 million euros in EU sales.

The tax is more than just a new levy. It could create deep fissures in the global consensus on how to tax major companies.

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The Elite Teaching The Elite: Who Gets Hired By The Top Law Schools?

Eric Segall (Georgia State) & Adam Feldman (USC), The Elite Teaching the Elite: Who Gets Hired by the Top Law Schools?:

Do you want to teach at a top 25 law school? If so, you had better excel at something you will encounter years before you will even consider applying to be a law professor. Something that has no relationship at all to the skills academics need. You better score extremely high on the Law School Admissions Test (LSAT) (or now at some schools the GRE). If you don’t score towards the very top, you will likely not be admitted to a top 10 ranked law school. And if you do not attend a top 10 ranked law school, no matter what you accomplish during the school you do attend (even a top 20 school) or afterwards, your chances of teaching at a top law school are virtually non-existent. The reality is that by far the most important credential one needs to teach at a top law school is to attend a top law school. The elite, teaching the elite, who will then teach more elites.

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Democrats Intend To Get Hold Of Trump’s Tax Returns, But Their 'Intemperate Comments' May Block Their Access

Bloomberg, Democrats ‘Intent’ on Getting Hold of Trump’s Tax Returns:

Democrats are in discussions about the best way to get the Treasury Department to hand over President Donald Trump’s tax returns, according to the incoming chairman of the House Ways and Means Committee.

“We don’t have a timetable yet, but we’ve talked about it, and we are certainly intent on doing it,” Representative Richard Neal, a Massachusetts Democrat who will lead the committee next year, told reporters Tuesday.

The heads of the House and Senate tax-writing committees have the authority to request any individual tax return from the Treasury secretary, including the president’s. Trump departed from roughly 40 years of tradition for presidential candidates by refusing to release his tax returns during the 2016 campaign. The forms, or some of the information they contain, could effectively become public if the committee votes to release them.

In practice, however, the process could turn into a protracted legal battle if Treasury Secretary Steven Mnuchin decides to delay sending the tax documents to Congress.

Law & Crime, Dems May Have Already Screwed Themselves Out of Getting Trump’s Tax Returns:

Congress has the power to call for Trump’s tax returns, but according to University of Iowa Law Professor Andy Grewal, it has to be for a legitimate legislative purpose. That means you can’t just do things out of spite or because you want to embarrass the president. As the Supreme Court said in Watkins v. United States, “there is no congressional power to expose for the sake of exposure.”

In a February 2017 post for Yale’s Notice & Comment blog, Grewal noted that while Section 6103(f) of the U.S. tax code makes it clear that committees can get someone’s tax return information, “any congressional action, including requests for information, must come within the scope of legislative powers granted by Article I of the Constitution.” That means, Grewal said, that “a request for President Trump’s tax returns, if made for purely political purposes, may exceed legislative powers.” ...

One thing that often came up during this year’s election season was that if Democrats took control of the House of Representatives, they could theoretically impeach the president. After the election, when they secured a majority, Democratic leadership made it clear that impeachment was not on the agenda—barring a bombshell report from Robert Mueller—but that they could use other powers to investigate the president. One specific power that they’re looking to exercise is the power to force the release of President Donald Trump‘s tax returns for Congress to review them.

Unfortunately, they may have already blown their chance before they even tried.

Yes, technically Congress has the power to call for Trump’s tax returns, but according to University of Iowa Law Professor Andy Grewal, it has to be for a legitimate legislative purpose. That means you can’t just do things out of spite or because you want to embarrass the president. As the Supreme Court said in Watkins v. United States, “there is no congressional power to expose for the sake of exposure.”

In a February 2017 post for Yale’s Notice & Comment blog, Grewal noted that while Section 6103(f) of the U.S. tax code makes it clear that committees can get someone’s tax return information, “any congressional action, including requests for information, must come within the scope of legislative powers granted by Article I of the Constitution.” That means, Grewal said, that “a request for President Trump’s tax returns, if made for purely political purposes, may exceed legislative powers.”

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Rosenbloom Presents The BEAT And The Treaties Today At Pennsylvania

David Rosenbloom (NYU)  presents The BEAT and the Treaties, 92 Tax Notes Int'l 53 (Oct. 1, 2018) with Fadi Shaheen (Rutgers)), at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

In this article, the authors discuss the base erosion and antiabuse tax [BEAT] implemented under the U.S. Tax Cuts and Jobs Act, focusing on its relationship with U.S. tax treaties currently in force. The first relevant provision in the U.S. Model Income Tax Convention is the commitment in article 23 (relief from double taxation), paragraph 2, of an FTC for income tax of the treaty partner “in accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof).” It is possible to ponder the precise meaning of the quoted words, but there is no need to do that for the BEAT.

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Amazon Could Win Big Under Trump's New Opportunity Zone Tax Break

Bloomberg Tax, Amazon NY Could Win Big Under Tax Break Meant for Distressed Zones:

Amazon could benefit from federal tax breaks designed to revitalize struggling communities if it builds all or part of its second headquarters in Long Island City.

The company’s eligibility comes down to whether the IRS would view a new headquarters as a new entity or as a part of Amazon’s larger umbrella. ...

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HELP NEEDED FROM VOLUNTEER LAWYERS: The Pepperdine Disaster Relief Clinic And The Woolsey Fire

Dear Lawyers, Law Professors, Legal Clinics:

We need your help. Today, I am officially launching the Disaster Relief Clinic to serve Malibu, the Santa Monica Mountains, and the Conejo Valley here in Southern California where the Woolsey Fire is still burning.

Pepperdine students are displaced and scattered, and we are closed through Thanksgiving, when we are embarking on a massively ambitious, dense final week of school and finals, all while we try to be compassionate to the students. I do not want to put volunteering on their plate until we can launch the clinic course in January.

So now, we need volunteer lawyers and clinical law profs. We're going to run an emergency, triaged VLP. I need lawyers and law profs to take cases by referral.

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2019 National Tax Moot Court Competition Registration Is Open

Registration is open for the 2019 National Tax Moot Court Competition, being held March 7-9, 2019, on the University of Florida campus in Gainesville, Florida. This year, the competition is co-sponsored by the Florida Bar Tax Section and UF Levin College of Law. The problem release date is November 19, 2018, with a submission deadline of January 19, 2019.

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July 2018 New York Bar Exam Results: NYU #1

The July 2018 New York bar passage rates by law school are out. Here are the results for first time test takers for the 15 New York ABA-approved law schools, along with each school's U.S. News ranking (New York and overall).

Bar Pass Rank (Rate)	School	US News Rank NY (Overall)
1 (98.4%)	NYU	2 (6)
2 (98.3%)	Columbia	1 (5)
3 (94.1%)	Cornell	3 (13)
4 (89.1%)	Fordham	4 (37)
5 (86.7%)	St. John's	6 (83)
6 (83.5%)	Syracuse	8 (88)
83.0%	Statewide Average
7 (80.5%)	Cardozo	5 (56)
8 (75.9%)	Albany	9 (106)
9 (73.8%)	CUNY	13 (125)
10 (72.3%)	Brooklyn	6 (83)
11 (70.2%)	SUNY-Buffalo	9 (106)
12 (65.9%)	Pace	13 (125)
13 (64.1%)	New York Law School	11 (110)
14 (62.0%)	Hofstra	11 (110)
15 (48.6%)	Touro	15 (Tier 2)

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Oei & Osofsky: Beyond Notice-and-Comment — The Making Of The § 199A Regulations

Shu-Yi Oei (Boston College) & Leigh Osofsky (North Carolina), Beyond Notice-and-Comment: The Making of the § 199A Regulations:

Congress passes a highly transformative but hastily drafted legal reform. Who comments in the regulatory process, when, and what are the implications? In this Article, we study these questions by examining how the regulatory process has unfolded in the case of § 199A, one of the central provisions from the monumental 2017 tax reform.

We document the comments that went into making the § 199A regulations from the time of legislative enactment through the hearing on the proposed regulations. We show that many comments were made before the proposed regulations were issued and the official administrative law notice-and-comment period had even opened. We examine how Treasury explicitly considered these comments in the proposed regulations. And we explore how these comments and other engagements—which were not wholly transparent to the public—shaped the proposed regulations and the subsequent conversation in the actual notice-and-comment period. We also investigate the role of indirect public dialogue and comments received after the official close of the notice-and-comment period.

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Dean Chemerinsky Recommends Removing Boalt Name From UC-Berkeley Law School

• Letter From Erwin Chemerinsky To Berkeley Law Community (Nov. 13, 2018)
• ABA Journal, Dean Chemerinsky Recommends Removing Boalt Name From Use at Berkeley Law
• Daily Californian, UC Berkeley School of Law Dean Recommends Removal of ‘Boalt’ Name
• Law.com, UC Berkeley Law to Ditch Boalt Name Over Namesake's Racist Legacy

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Scharff: The Challenge Of Pricing Externalities Under State Law

Erin Scharff (Arizona State), Green Fees: The Challenge of Pricing Externalities Under State Law, 97 Neb. L. Rev. 168 (2018):

Policymakers at the state and local level are increasingly interested in using market-based pricing mechanisms as regulatory tools. For example, at the state level, several states have recently considered state-level carbon pricing, while at the local level, municipal governments are increasingly turning to stormwater remediation fees to pay for the treatment of municipal runoff required by the Clean Water Act.

These regulatory programs are inspired by the insight of English economist Arthur Pigou, who suggested governments could price social costs into market transactions by imposing a tax. Such policies, however, are frequently subject to state court litigation challenging them as unlawful taxes. State law restricts both state and local governments’ ability to enact taxes, but similar restrictions are often not in place to limit the enactment of regulatory actions or user fees. Unfortunately, state courts have struggled to appropriately classify these fees under existing state law doctrines.

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Fleming Presents Real Worldwide v. Territorial Taxation After The TCJA Today At Boston College

J. Clifton Fleming, Jr. (BYU) presents An Early Look at Real Worldwide v. Territorial Taxation After the TCJA (with Robert Peroni (Texas) & Stephen Shay (Harvard) today at Boston College today as part of its Tax Policy Workshop Series hosted by Jim Repetti, Diane Ring, and Shu-Yi Oei:

In the run up to enactment of the 2017 Tax Cuts and Jobs Act (TCJA) one of the principal U.S. tax policy issues was how foreign source active business income of U.S. multinational enterprises (MNEs) should be taxed by the United States if the system of deferring U.S. tax on active income of a foreign subsidiary was ended. Should active foreign income be taxed under a territorial or exemption system—i.e. bear no residual U.S. tax—or should it be subjected to real worldwide taxation—i.e. current taxation at regular U.S. rates coupled with a credit for foreign income tax paid limited to the U.S. tax on the foreign-source income as measured for U.S. tax purposes.

The opposing sides were not without common ground. Both agreed that the existing U.S. system for taxing the foreign-source active-business income of U.S. MNEs was bad because it generally did not impose U.S. tax until the active income of foreign subsidiaries was repatriated, either through dividends or by sale of subsidiary stock at a price reflecting accumulated foreign-source income.

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Elkins Presents The Case Against Income Taxation Of Multinational Enterprises Today At Hebrew University

David Elkins (Netanya) presents The Case Against Income Taxation of Multinational Enterprises, 36 Va. Tax Rev. 143 (2017), today at the Hebrew University of Jerusalem Faculty of Law:

Probably the most uncontroversial thing that one can say about international taxation is that it is a mess. Sophisticated planning techniques, which seem beyond the power of taxing authorities to control, enable highly profitable multinational enterprises (MNEs) to pay little or no tax on their income. Efforts by transnational organizations to coordinate action in an attempt to rescue the international tax regime from collapse have hitherto proven ineffective. Some commentators have speculated that any attempt to impose tax on MNEs in a globalized economy is doomed to failure.

The focus of this article is in the taxation of foreign MNEs by the countries in which they operate, and its thesis is that the choice of income as a base for taxing foreign MNEs is inappropriate both normatively and practically.

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Harvard Law Students Launch Campaign To #DumpKirkland Over Mandatory Arbitration Agreements For Associates

Bloomberg Law, Law Students Plan to #DumpKirkland Over Arbitration Agreements:

Students at Harvard Law School have launched a campaign urging their peers to boycott Kirkland & Ellis until the firm removes mandatory arbitration agreements from its employee contracts.

On Monday morning, a student-led organization called the Pipeline Parity Project published a copy of a 2018 Kirkland arbitration agreement. In it, associates waived their right to sue the firm in court over a range of employment concerns, including sexual harassment and wage theft.

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NY Times: Trump’s Tax Cut Was Supposed To Change Corporate Behavior. Here’s What Happened.

New York Times, Trump’s Tax Cut Was Supposed to Change Corporate Behavior. Here’s What Happened.:

Nearly a year after the tax cut, economic growth has accelerated. Wage growth has not. Companies are buying back stock and business investment is a mixed bag.

The $1.5 trillion tax overhaul that President Trump signed into law late last year has already given the American economy a jolt, at least temporarily. It has fattened the paychecks of most American workers, padded the profits of large corporations and sped economic growth.

Those results weren’t a surprise. Economists across the ideological spectrum predicted the new law would fuel consumer spending, in classic fashion: When the government borrows money and dumps it into the economy, growth tends to accelerate. But Republicans did not sell the law as a sugar-high stimulus. They sold it as a refashioning of the incentives in the American economy — one that would unleash more investment, better efficiency and higher wages, along with enough growth to offset any revenue lost to the government from lower tax rates.

Ten months after the law took effect, that promised “supply-side” bump is harder to find than the sugar-high stimulus. It’s still early, but here’s what the numbers tell us so far:

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'Big Law Killed My Husband': An Open Letter From A Sidley Partner's Widow

American Lawyer, 'Big Law Killed My Husband': An Open Letter From a Sidley Partner's Widow:

Joanna Litt’s husband, Gabe MacConaill, a 42-year-old partner at Sidley Austin, committed suicide in the parking garage of the firm’s downtown Los Angeles office last month.

My husband took his life—our life—on Sunday, Oct. 14, one month to the day before our 10-year wedding anniversary. We had been planning a trip for over a year in anticipation of celebrating.

I’m beyond lost and I don’t know how I’m going to get through the rest of my life. Gabe was my best friend, my partner, my lover, and my constant. I turned to him for everything, and he was always there with the most perfect advice and words. He was my world, and after losing him, I can absolutely say, my better half. Gabe and I did not have children (except for our dog Ivy) and we made that deliberate choice so we could focus solely on our life together, because we were happy. And now he’s gone. He saw no other choice or path.

I never thought in a million years that he could or would do that. And I keep going back to one thought: “Big Law” killed my husband. ...

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Ordower: Abandoning Realization And The TCJA Transition Tax

Henry Ordower (Saint Louis), Abandoning Realization and the Transition Tax: Toward a Comprehensive Tax Base:

The Tax Cuts and Jobs Act of 2017 imposed a tax, the “transition tax,” on as much as 31 years of undistributed, accumulated corporate income. This article focus on that transition tax as it evaluates the function and constitutionality of the tax and considers whether the transition tax might serve as a model for addressing the broader problem of deferred income in the United States. The article views the transition tax as joining the expatriation tax and other mark to market inclusion provisions in abandoning any pretext that there is continued vitality in the realization principle as something more compelling than any other longstanding and obsolescing tax principle. Recommending that Congress seize the Tax Cuts and Jobs Act moment and discard the general rule deferring the inclusion of gain in income through a realization requirement in favor of the annual marking to market of all the taxpayer’s property, the article models a general mark to market transition tax after the new transition tax on deferred foreign income.

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Tenured Emory Law Prof Suspended After Allegedly Again Using N-Bomb

Following up on my previous posts (links below):  Emory Wheel, Law Professor on Leave After Allegedly Repeating Racial Slur:

Emory Law Professor Paul J. Zwier II, who was briefly suspended from teaching after he said the N-word in class in August, has been placed on paid administrative leave after the University received multiple reports that he recently repeated the same racial slur, according to School of Law Interim Dean James B. Hughes Jr.

Hughes announced Zwier’s leave on Monday following a Friday statement that he was investigating allegations against the tenured professor.

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Borden: S-Corporation Cash-Out Break-Ups And § 1031 Exchanges

Bradley T. Borden (Brooklyn), S-Corporation Cash-Out Break-Ups and Code Sec. 1031 Exchanges, 21 J. Passthrough Entities 21 (2018):

Many legacy S-Corporations (those with real property purchased before the advent of LLCs) still own real property with the prospect of selling or transferring it as part of a generational change in ownership. With such dispositions, the owners may have different objectives for the use of the property’s sale proceeds and may wish to part ways. Many tax advisors are familiar with techniques that apply to similar types of break-ups of partnerships and LLCs, which allow some parties to exchange property tax free under Code Sec. 1031 while others cash out. S-Corporation break-ups are taxed differently from partnership and LLC break-ups, so the same types of transactions that are tax-free in the partnership or LLC context could trigger gain recognition for members of S-Corporations.

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Marron Presents Designing A Carbon Tax Dividend Today At Loyola-L.A.

Donald Marron (Urban Institute) presents Designing a Carbon Tax Dividend at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katie Pratt: 

A robust carbon tax would generate considerable revenue. Some carbon tax advocates have suggested returning those revenues to Americans through direct payments, often called carbon dividends. We examine how to design these dividends considering two, sometimes conflicting principles. Carbon dividends can be viewed as shared income from a communal property right, much as Alaskans share in income from the state’s oil resources. Dividends can also be viewed as rebating the carbon tax back to consumers. These views often have different implications for designing carbon dividends.

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Michigan State Dean: Making Law School Part Of University 'Will Stabilize Us'

Following up on my previous post, Michigan State Law School To Fully Integrate With University: Lansing State Journal, Dean: Making MSU College of Law Part of the University 'Will Stabilize Us':

By 2020, the Michigan State University College of Law will no longer be a private law school located in the heart of the East Lansing campus. It will be a part of the university.

"Everybody recognized that sooner or later this was going to happen," said Lawrence Ponoroff, dean of the law school. ...

[T]he move comes after several difficult years. Like many other schools, the MSU College of Law has seen declines in applications and enrollment.

Its expenses outran revenue to the tune of $1.74 million between July 1, 2016 and June 30, 2017, according to the school's 2016 990 tax form, the most recent available.

“This action will stabilize us," Ponoroff told the law school's Board of Trustees on Oct. 31, "but it’s not a panacea, and we will still all need to continue to work very hard to bring the law school to the next plateau, the levels that we’d like to see it achieve.”

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NY Times: Booming Economy, Tax Cuts Did Not Save Republicans In Midterms

New York Times, The Economy Didn’t Save Republicans After All:

Neither strong growth nor a $1.5 trillion tax cut helped President Trump’s party in the midterm elections — by any number of measures.

Unemployment is abnormally low. Growth has sped up. A $1.5 trillion tax cut, signed by President Trump last year, is fueling consumer spending. Faced with strong Democratic enthusiasm and fund-raising, and hindered by an unpopular president, Republicans were counting on that economic strength to lift them at the polls, or at least limit the damage.

It didn’t. Republicans lost in House districts with low unemployment rates. They lost in districts that have gained manufacturing jobs. They lost in districts that got big tax cuts. And they lost overwhelmingly in the kind of affluent, educated suburbs that have experienced the strongest overall recovery — and that were once among the most reliable Republican districts.

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UC-Berkeley Law School Confronts Racist Legacy Behind Boalt Hall

Following up on my previous posts (links below):  Los Angeles Times, UC Berkeley Law School Confronts the Racist Legacy Behind its Famed Boalt Hall:

For more than a century, UC Berkeley's elite law school has been closely tied to the name of the building that houses it, Boalt Hall.

Law school alumni have affectionately referred to themselves as “Boalties.” The Boalt name has been attached to more than 120 organizations, public forums and positions related to the law school — including its alumni and student groups, endowed chairs, school directory and Facebook page. Over time, in the California legal community, many people simply came to call the law school Boalt Hall.

But the revelation that John Henry Boalt, a 19th-century San Francisco attorney, was virulently anti-Chinese has rocked the school and plunged it into the national debate over what to do when honored historical figures turn out to have unsavory pasts. The Berkeley controversy comes as other schools, such as Stanford, the University of San Francisco and Cal State Long Beach, are reexamining California’s past and changing building names or dropping mascots associated with those who kept slaves or mistreated Native Americans and Asian Americans.

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Lesson From The Tax Court: The Hotel California Rule

I love classic rock from the 70’s. Not just for all the great music, but for the way that the bands help me teach tax. For example, Fleetwood Mac teaches a lesson about §162 deductions for uniforms. I know, I know, you would think that lesson would come from the Village People, but it was Stevie Nicks who filed a petition in Tax Court after the IRS disallowed her deduction for stage clothing.

The Eagles’ classic “Hotel California” provides an excellent way to think about Tax Court procedure, as we can learn from the recent case of Daniel Sadek v. Commissioner, T.C. Memo. 2018-174 (Oct. 16, 2018).  In that case, the Tax Court dismissed as untimely Mr. Sadek’s 2017 petition contesting a 2011 NOD that the IRS had sent Mr. Sadek. The NOD was for $25 million and Mr. Sadek has not yet had a day in court to contest that amount. Oh, sure, he can sue for a refund but only if he fully pays the deficiency.  Flora v. United States, 362 U.S. 145 (1960). He could also file bankruptcy and ask the bankruptcy court to determine his tax liability under its powers in 11 U.S.C. §505. But Mr. Sadek’s best hope might come in a CDP hearing. That is what I want to explore in this post.

I think this case teaches a lesson about the relationship between the Tax Court’s deficiency jurisdiction and its CDP jurisdiction. The question is whether Mr. Sadek, who has now lost in Tax Court, will be able to contest the merits of the $25 million in a CDP hearing.  To answer that question, we need to understand the Hotel California rule and how it affects a taxpayer’s ability to turn what is ostensibly a hearing about collection into a hearing about tax liability.

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Non-Elite Universities Launch Medical, Not Law, Schools In Search Of Future Financial Stability

Inside Higher Ed, Medium Sized Institutions Look To Medical Schools For Future Financial Stability:

As its fellow midsize, modestly endowed private colleges look nervously to the future, Marist College in New York’s Hudson Valley is making a bold, nearly $180 million bet: last month, it announced that it will partner with a regional health-care provider to build a new medical school.

Marist Health Quest School of Medicine is expected to open its doors in 2022, reaching capacity in 2032 with about 500 students.

Adding a medical school to a private college is “honestly a big leap up in scope and complexity,” said [former Loyola-Chicago Law School Dean and Marist College] President David Yellen. But it makes sense, he said. “If you have the resources, there’s room for another good medical school. And we think it will boost our status and reputation.”

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Paulson Eyes Tax-Free Puerto Rico Residency Once Kids Head To College

Bloomberg, Paulson Eyes Puerto Rico Residency Once Kids Head to College:

Maybe it takes an empty nest to fill up a tax haven.

Billionaire hedge-fund manager John Paulson is considering becoming a resident of Puerto Rico in the next few years once his children head off to college.

Paulson, who gained fame from his bets against the U.S. housing market about a decade ago, may move to the bankrupt island after his children, who are 13 and 16, finish their high-school education, he said.

“It’s difficult to move with them,” Paulson said about his children at a Beryl Elites conference in midtown Manhattan Monday evening. “But once, I think, our children go to college, I think it’s likely that we’ll establish residence in Puerto Rico.”

Paulson owns several hotels and office space on the island. He’s contemplated moving to Puerto Rico in recent years to take advantage of the commonwealth’s tax advantages. New residents are exempt from the federal income tax and Puerto Rico taxes on passive income. The beautiful beaches, sunshine and great restaurants are also a motivating factor, Paulson said.

“It’s the only place a U.S. citizen can go and literally avoid, legally, all their taxes,” Paulson said.

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TaxProf Blog Weekend Roundup

Saturday:

• Fires Cause Massive Destruction In Malibu, But Pepperdine Is Safe
• This Week's Ten Most Popular TaxProf Blog Posts
• The Contextual Problem Of Law Schools
• Universal Basic Incomes v. Targeted Transfers: Anti-Poverty Programs In Developing Countries

Sunday:

• Michigan Hosts 13th Annual Empirical Legal Studies Conference
• University of Illinois Law School Releases Additional Documents Related To Allegations Of Professor's Sexual Misconduct
• Florida Hosts 14th Annual International Tax Symposium
• The Top Five New Tax Papers

Michigan Hosts 13th Annual Empirical Legal Studies Conference

Tax papers at the 13th Annual Empirical Legal Studies Conference at Michigan:

• Kathryn Lim (U.S. Treasury Department), Alicia Miller (IRS), Max Risch (Michigan) & Eleanor Wilking (NYU), Independent Contractor or Employee? The Changing Relationship between Firms and Their Workforce and Potential Consequences for the U.S. Income Tax

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University of Illinois Law School Releases Additional Documents Related To Allegations Of Professor's Sexual Misconduct

Following up on my previous posts:

• University Of Illinois Law School Dean, Faculty Speak Out Against Colleague's Sexual Misconduct (Oct. 24, 2018)
• Continuing Fallout From Sexual Misconduct By University Of Illinois Law Professor (Oct. 25, 2018)

The University of Illinois Law School has released two additional documents relating to the sexual harassment claims involving Professor Jay Kesan:

• Letter from Dean Vikram Amar to Law School Community (Nov. 8, 2018)
• Letter from Dean Heidi Hurd to Professor Jay Kesan (Dec. 6, 2002)

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Florida Hosts 14th Annual International Tax Symposium

The University of Florida Graduate Tax Program hosted its Fourteenth International Taxation Symposium on Friday:

• Andrés Báez (Universidad Carlos III, Madrid) & Yariv Brauner (Florida), Taxing the Digital Economy.... Seriously, 46 Intertax 462 (2018)
• Patricia A. Brown (Miami), Can Anyone be Trusted to Enforce National Treatment Disciplines with Respect to Tax Matters?

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The Top Five New Tax Papers

There is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and new papers debuting on the list at #4 and #5:

1. [249 Downloads]  The International Provisions of the TCJA: Six Results after Six Months, by Reuven Avi-Yonah (Michigan)
2. [156 Downloads]  Tax Competition and the Ethics of Burden Sharing, by Ivan Ozai (McGill)
3. [133 Downloads]  The Mandatory Repatriation Tax Is Unconstitutional, by Sean McElroy (Stanford)
4. [130 Downloads]  Double Non-Taxation and the Use of Hybrid Entities: An Alternative Approach in the New Era of BEPS, by Leopoldo Parada (University of Turin)
5. [124 Downloads]  The Proposed SALT Regulations May Be Doomed, by Andy Grewal (Iowa)

Fires Cause Massive Destruction In Malibu, But Pepperdine Is Safe

Malibu awakens to massive devastation this morning. As the map below shows, the fires came within feet of Pepperdine (the blue oval on the map) on three sides, but not a single permanent structure on campus was lost thanks to the heroic efforts of firefighters on the ground and in the air. In every talk I give, I say I am the luckiest law school dean in America to have the privilege of serving with the most amazing collection of people I have ever been associated with. Our hearts are broken by the loss around us.

Firefighters stopped the fire just a few feet from our home (at the northwestern most point of campus):

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This Week's Ten Most Popular TaxProf Blog Posts

1. Fires Cause Massive Destruction In Malibu, But Pepperdine Is Safe
2. Jeff Kahn (Florida State), GoTaxMe: Crowdfunding And Gifts (Why Peter Strzok Should Be Taxed On The $450k He Raised On GoFundMe)
3. Northwestern Law Dean Cites School's 'Difficult Time' As Reason For Faculty Cuts
4. Taxation, Inequality, And Life: A BYU Interview With Ed Kleinbard (USC)
5. The Number Of 1Ls By State (2017 v. 2010)
6. NY Times: Happy ‘National Jealousy Day’! Finland Bares Its Citizens’ Taxes
7. The Economics Of Law School: Employment Prospects And Market Inefficiencies
8. Tax Court: Foreign Lawyer Cannot Deduct Cost Of NYU LL.M. Because It Qualified Him To Sit For The New York Bar
9. Law School Dean Buys 'Conference Bike' To Increase Collaboration, Fitness
10. NY Times: Tax Prep Companies Use FOIA Requests To Thwart Dennis Ventry's Criticism Of Free File Program

The Contextual Problem Of Law Schools

Eli Wald (Denver), The Contextual Problem of Law Schools, 32 Notre Dame J.L. Ethics & Pub. Pol'y 281 (2018):

Law schools have a contextual problem. They teach law universally, ignoring context. Through a traditional curriculum that has changed relatively little in over a century, law schools advance a universal approach to professionalism and professional identity preparing law students to enter a homogenous legal profession in which lawyers practice law performing similar tasks in similar practice settings representing similar clients. Except that unlike legal education, the practice of law has grown immensely complex and diverse over time. Far from universal, law practice and lawyers have become richly contextual. Context now matters in the practice of law: client identity, lawyer identity, tasks, subject matters and status inform and shape what lawyers do and their exercise of professional judgment. Law schools’ disregard of context thus constitutes a significant problem as it misleads students and fails to adequately prepare them for the practice of law.

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Universal Basic Incomes v. Targeted Transfers: Anti-Poverty Programs In Developing Countries

Rema Hanna (Harvard) & Benjamin A. Olken (MIT), Universal Basic Incomes versus Targeted Transfers: Anti-Poverty Programs in Developing Countries, 32 J. Econ. Perspectives 73 (Fall 2018):

Of the 17 Sustainable Development Goals articulated by the United Nations, number one is the elimination of extreme poverty by 2030. While future economic growth should continue to reduce poverty, it will not solve the problem by itself; thus, there is a potentially important role for national-level transfer programs that assist poor families in developing countries. Such programs are often run by developing country governments. Many countries have implemented transfer programs that seek to target beneficiaries: that is, to identify who is poor and then to restrict transfers to those individuals. Some people have begun to advocate for "universal basic income" programs, which dispense with trying to identify the poor and instead provide transfers to everyone. We begin by considering the universal basic income as part of the solution to an optimal income-taxation problem, focusing on the case of developing countries, where there is limited income data and inclusion in the formal tax system is low. We examine how the targeting of transfer programs is conducted in these settings, and provide empirical evidence on the tradeoffs involved between universal basic income and targeted transfer schemes using data from Indonesia and Peru—two countries that run nationwide transfer programs that are targeted to the poor.

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Malibu Burning

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Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Kahn's GoTaxMe — Crowdfunding And Gifts

This week, Hayes Holderness (Richmond) reviews Jeffrey H. Kahn (Florida State), GoTaxMe: Crowdfunding and Gifts, 22 Fla. Tax Rev. ___ (2019).

What is a “gift”? Webster’s Dictionary defines “gift” as “something voluntarily transferred by one person to another without compensation” (I kid, I kid). In GoTaxMe: Crowdfunding and Gifts, Professor Jeffrey Kahn challenges the reader to define “gift” for federal income tax purposes in a more robust fashion than simply as transfers made with detached and disinterested generosity. Anyone who has taken a basic federal income tax class knows that § 102 excludes gifts from gross income but fails to define what gifts are. The Supreme Court filled this gap with the Duberstein “detached and disinterested generosity” standard, noting that in determining whether any particular transfer is a gift, “the most critical consideration . . . is the transferor’s ‘intention.’” Professor Kahn uses the example of the (currently) $448,162 donated by 11,709 people to former FBI agent Peter Strzok through the crowdfunding site GoFundMe.com to argue that the Duberstein standard’s focus on the transferor’s intention fails at the edges.

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Weekly Legal Education Roundup

• Above the Law, Elite Law School To Cut Faculty Due To Its ‘Challenging Financial Position’
• Erwin Chemerinsky (Dean, UC-Berkeley), Reflections of the Future of Legal Education
• Barry Currier (Managing Director, ABA Section on Legal Education and Admissions to the Bar), A Legal Education Report Card
• Samuel P. Engel, The Economics of Law School: Employment Prospects and Market Inefficiencies

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Tax Policy In The Trump Administration

• Bloomberg, The Democrats’ Options for Repealing the Trump Tax Cut
• Bloomberg, Trump Says He's Open to Raising Taxes to Offset Middle-Class Cut
• Fiscal Times, 3 Ways Democrats Could Roll Back Trump’s Tax Cuts
• Huffington Post, How Republicans Failed To Sell Their Tax Law

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