Paul L. Caron

Saturday, July 31, 2004

Tax Prof Spotlight: Mike McIntyre

Saturday, July 31, 2004

Photo of Professor McIntyreMichael J. (“Mike”) McIntyre has been an active player in the tax reform movement in the United States and elsewhere for over three decades. He has written widely on many tax topics and is especially well known for his work on international taxation, taxation of the family, the deduction for interest payments, and taxation at the state level. Since 1975, he has been a professor of law at Wayne State University in Detroit, Michigan. He has served as a consultant to national governments on six continents and to many states of the United States. He started his career in taxation in private practice (Ivins, Phillips & Barker) and then served for four years as Director of Training, International Tax Program, Harvard Law School.

Throughout his career, Professor McIntyre has participated in the public debate on tax policy. He is quoted frequently in the national press and has provided technical advice to many staffers on Capitol Hill. He has testified many times on tax issues before various congressional committee, usually on international tax matters. He recently testified before the Ways and Means Committee in favor of a “clean” repeal of an illegal tax subsidy for U.S. exports that has caused the European Union to impose penalty tariffs on U.S. exports. He was quoted on the front page of the Washington Post in opposition to the “unclean” bills passed by both houses of Congress with the support of the Bush administration. He claimed in the story that Congress was using the money saved by repeal of the illegal export subsidy to make investment abroad even more attractive to U.S.-based multinationals than investment in the United States. (See TaxProf Blog coverage here.)

In Mike’s view, the creation of wealth has become increasingly easy in the modern world, whereas the fair distribution of wealth has become increasingly elusive. As a result, he generally favors tax policies that give primary emphasis to distributional goals, although he argues that wealth creation and tax fairness are very often complementary goals. Even in developing countries, where he has worked extensively over the years, he argues that distributional goals need to be the centerpiece of a country’s tax policy. In his view, a “growth only” approach is unfair and promotes political instability. In addition, such a policy almost always leads to special-interest legislation at odds with sound economic principles. “Countries that sacrifice fairness for economic growth almost always get neither,” McIntyre asserts.

Mike is not the only prominent tax reformer in the McIntyre family. His brother, Bob McIntyre, is the Director of Citizens for Tax Justice and appears regularly in the national media. According to Mike, “Bob is the most effective American tax reformer since Stanley Surrey.” Both brothers would agree, however, that no one has been very effective in promoting tax reform in America over the past several years. In their view, current policies have made the tax system less fair and have retarded economic growth.

As a leading tax academic, Professor McIntyre has written many books, articles, and essays on a wide range of tax topics. He was the founding editor of Tax Notes International, one of the leading international tax journals, published by Tax Analysis, a public-interest organization. In his role as editor, he wrote a series of stylish essays that often amused and occasionally enraged the international tax community. He has often been on the cutting edge of legal scholarship. Among his many important writings are:

The Use of Combined Reporting by Nation States, in The Taxation of Business Profits Under Tax Treaties (Canadian Tax Foundation, 2003) (Brian Arnold, Jacques Sasseville, & Eric Zolt, editors)

The International Income Tax Rules of the United States (LexisNexis, 2d ed. 2002) (2 volume looseleaf)

Designing a Combined Reporting Regime for a State Corporate Income Tax: A Case Study of Louisiana, 61 La. L. Rev. 699 (2001) (with Paull Mines & Richard Pomp)

Fixing the “Marriage Penalty” Problem, 33 Valp. U. L. Rev. 907 (1999) (with Robert S. McIntyre)

Taxing Electronic Commerce Fairly and Efficiently, 52 Tax L. Rev. 625 (1997)

Tracing Rules and the Deduction for Interest Payments: A Justification for Tracing and a Critique of U.S. Tracing Rules, 39 Wayne L. Rev. 67 (1992)

In recent years, Mike has been active as a consultant to the United Nation’s Ad Hoc Group of Experts on International Cooperation in Tax Matters. He has sought to improve the institutional framework for international tax cooperation by enhancing the status of the Expert Group within the United Nations, as a counter to the various international organizations that give excessive deference, in his view, to the wishes of multinational enterprises.

Like many tax academics, Mike has many interests aside from taxation. Those interests include gardening, tennis, reading unimportant books, and watching the Red Sox on TV. He grew up in southern Massachusetts and inherited the local affliction — an irrational optimism that the Red Sox would soon be winning the World Series. His wife (born in Salem, Massachusetts) and one of his two sons also are avid Red Sox fans, and the other son would favor the Red Sox if he could bring himself to have any interest in baseball. His father, now 96, took Mike to many ball games at Fenway Park. The father remembers well the last Red Sox World Series victory — he was 10 years old at the time.

Each Saturday, TaxProf Blog shines the spotlight on one of the 700+ tax professors in America's law schools. We hope to help bring the many individual stories of scholarly achievements, teaching innovations, public service, and career moves within the tax professorate to the attention of the broader tax community. Please email me suggestions for future Tax Prof Profiles. For prior Tax Prof Profiles, see here.

July 31, 2004 in Tax Prof Spotlight | Permalink | Comments (0) | TrackBack (0)

O'Connor on Tax Implications of Religious Freedom Restoration Act

Saturday, July 31, 2004

Michelle O'Connor (Quinnipiac) has published The Religious Freedom Restoration Act: Exactly What Rights Does It "Restore" in the Federal Tax Context?, 36 Ariz. St. L.J. 321 (2004). Here is part of the Conclusion:

As this article has illustrated, courts generally have not provided adequate review of tax claims under the Free Exercise Clause. Unfortunately, the enactment of RFRA has not altered the status quo. Instead, courts have continued to dismiss summarily religious challenges to the tax laws, seldom doing more than reciting RFRA's requirements. The courts have spurned serious consideration of any suggested accommodation--even where a taxpayer has suggested a reasonable accommodation--that would require the government to use alternative means to advance its interest. Under the current approach, it thus seems highly unlikely that the courts will ever require the government to accommodate a taxpayer, even in a particularly compelling case....

July 31, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, July 30, 2004

Stewart & Jogarajan on the IMF and Tax Policy

Friday, July 30, 2004

Miranda Stewart (Univ. of Melbourne ) & Sunita Jogarajan (KMPG) have posted The International Monetary Fund and Tax Reform on SSRN. Here is the abstract:

Since the early 1980s, tax reform projects in developing countries have been significantly influenced by international institutions, most importantly the International Monetary Fund (IMF). This article examines the role of the IMF in tax reform. We analyse tax conditionality in IMF structural adjustment documentation made publicly available since 1997, including nearly 500 Letters of Intent and Policy Framework Papers. We survey the tax reform goals, conditions and benchmarks in these documents and review the example of structural adjustment documentation for Ghana. We also discuss the importance of IMF technical assistance in tax reform. The article takes a critical view of the IMF "mass produced" approach to tax reform. We highlight the lack of attention paid to domestic issues of equity and politics in many of these tax reform projects and place this critique in the context of the problematic international politics of tax conditionality.

July 30, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Economic Policy Institute Releases Study of the Decline of Corporate Tax Revenues

Friday, July 30, 2004

The Economic Policy Institute has posted Falling Corporate Tax Revenues Push Budget Deficits Even Higher as part of its weekly Economics Snapshots Series. Here are the opening two paragraphs:

Since 2000, the bulk of federal tax cuts have applied to the individual income tax. The effect of these cuts on the deterioration of the federal budget outlook has been a prominent controversy in economic policy. Less noticed has been the erosion of proceeds from the corporate income tax. Tax bills pending in Congress are projected to further deplete revenues and raise budget deficits.

As a share of profits, the postwar average of federal, state, and local corporate income tax revenues is 37%. In the late 1940s, it was as high as 55%. As Figure 1 shows, after some leveling off between 1969 and 1981, the corporate income tax share of profits has stayed well below 37%. After 2000, it dropped by more than a third, from 32% to 20%.

July 30, 2004 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

New Book: Paul Farmer & Richard Lyal, EC Tax Law

Friday, July 30, 2004

Paul Farmer (Pump Court Tax Chambers) & Richard Lyal (Commission of the European Communities) have published EC Tax Law (Oxford Univ. Press, 2d ed. 2004). Here is the publisher's description:

Tax law and fiscal policy are subjects close to the heart of the Single European Market, yet EC tax law is highly complex. This new edition examines in detail the rules and principles of Community law relating to taxation, and uncovers the links between policy and law-making, to provide a firm understanding of the principles of EC tax law.
For the full table of contents, see here.

July 30, 2004 in Book Club | Permalink | Comments (0) | TrackBack (0)

Thursday, July 29, 2004

Colon on Cross-Border Taxation of Stock Options

Thursday, July 29, 2004

Jeffrey Colon (Fordham) has posted Double-Dipping: The Cross-Border Taxation of Stock Options on SSRN. Here is part of the abstract:

This article examines circumstances under which the double taxation of compensatory option income arises. It focuses on conflicts that arise from the mutual exertion of residence basis tax jurisdiction and from the different characterization of option income, and explores various unilateral and bilateral measures to mitigate double taxation. For persons who become U.S. residents and have previously been taxed by a foreign country on option income, this article proposes that the U.S. amend its foreign tax credit regime to permit a credit for foreign taxes previously paid if the U.S. taxes the same income.

Unilateral measures, however, offer only a limited potential to prevent double taxation; any meaningful relief must be accomplished through the income tax treaty process. This article analyzes the option provisions of the new U.S.-U.K. tax treaty, the first treaty to address the allocation of tax jurisdiction over the option income of peripatetic employees. Because the U.S. and U.K. tax options similarly, it may not have been difficult to agree on an acceptable division of tax jurisdiction. When two countries have different timing, character, and source rules for option income, however, it may be impossible to arrive at an agreement. Recognizing the obstacle of conflicting domestic laws, the OECD has issued a report on compensatory option income that proposes amending the OECD Model Treaty commentary to provide uniform rules on the sourcing, character, and allocation of primary and secondary tax jurisdiction over option income for treaty purposes. The OECD proposals are an important step in harmonizing the disparate domestic tax rules for compensatory options and should substantially reduce the double taxation of option income of cross-border employees. This article discusses the OECD report and highlights areas that need further clarification. It is hoped that this approach can be extended to other types of deferred and equity-linked compensation.

July 29, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

New Book: Richard Joseph, The Origins of the American Income Tax

Thursday, July 29, 2004

book coverRichard Joseph (Texas - Dep't of Accounting) has published The Origins of the American Income Tax: The Revenue Act of 1894 and its Aftermath (Syracuse Univ. Press, 2004). Here is the publisher's description:

Why do critics want to pull up the income tax by its roots? Why do we have an income tax altogether especially if its principles are no longer workable and the tax no longer serves its intended purpose? Or are the roots, in fact, still viable? This compelling book seeks answers to those questions in long-forgotten archives of tax history.

Drawing on rare records from Congress, Richard J. Joseph demonstrates how the idea of relating taxes to individuals and businesses evolved during 1893-1895, leading in 1894 to enactment of the first American income tax legislation. That initial law, he notes, was intended to create a permanent and a fair "ability-to-pay" system. With an eye for detail Joseph explores ways in which it would serve as a model for future revenue. He explains how global and domestic changes have rendered it passi. And he shows how much of that early lawdespite its swift demise in the case of Pollock v. The Farmers Loan & Trust Companyinforms our current federal taxation system.

July 29, 2004 in Book Club | Permalink | Comments (2) | TrackBack (0)

Hunter on Personal Retirement Accounts

Thursday, July 29, 2004

Lawrence Hunter has posted Reducing Government Consumption, Increasing Personal Wealth: Limiting Federal Spending Growth Through Large Personal Retirement Accounts on the Institute for Policy Innovation web site. Here is the abstract:

Escalating federal spending presents a real and present danger to the fiscal health of the nation. The solution to bringing congressional budgeting back under control is personal retirement accounts. They would provide a built-in mechanism to control federal spending, pay off the national debt, eliminate the long-run unfunded liability of Social Security, keep the trust funds perpetually solvent, and boost economic growth.

July 29, 2004 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 28, 2004

Germain on Tax Court Consideration of Bankruptcy Discharge

Wednesday, July 28, 2004

Gregory Germain (Syracuse) has posted Discharging Their Duty: A Critical Assessment of the Tax Court's Refusal to Consider Bankruptcy Discharge Questions on SSRN. Here is the abstract:

The Tax Court has held for more than 20 years that it has no jurisdiction in an ordinary deficiency proceeding to determine whether the tax claim in dispute before it was previously discharged in bankruptcy. Taxpayers seeking to avoid repaying discharged tax claims have two choices: they can reopen their bankruptcy cases and move the bankruptcy court to hold the Internal Revenue Service in contempt for seeking to collect discharged taxes, or they can bring a second proceeding in the Tax Court under IRC Section 6330(d) after the deficiency is assessed, and after pursuing a lengthy administrative proceeding, to obtain a determination that the tax claims were discharged. Taxpayers with legitimate discharge defenses are forced to endure two expensive proceedings and the stress of assessment and threatened collection. Taxpayers without legitimate discharge defenses can attempt improperly to delay assessment and collection. In one notorious case, an attorney taxpayer was able to delay collection of a deficiency that was clearly excepted from discharge for ten years, through two separate appeals to the Court of Appeals for the Seventh Circuit. Cassidy v. Commissioner, 814 F.2d 477 (7th Cir. 1987). In re Cassidy, 892 F.2d 637 (7th Cir. 1990), cert. denied 498 U.S. 812 (1990).

Fairness and judicial economy would not matter if the Tax Court's "no jurisdiction" rule was a correct interpretation of the law. But the rule is not correct. The Tax Court based its initial decision on faulty reasoning and erroneous references. The Tax Court failed to review the tortuous history of bankruptcy-tax jurisdiction to see that Congress intended the Tax Court to have concurrent jurisdiction over bankruptcy discharge questions. In following its then recent "no jurisdiction" rule after the enactment of the Bankruptcy Reform Act of 1978, the Tax Court failed to consider the legislative history of the Reform Act, in which the principal proponents of the new law in both the House and Senate explained Congress' intent to provide for concurrent Tax Court jurisdiction over bankruptcy discharge questions in order to achieve an efficient judicial procedure. The Tax Court also failed to recognize that a bankruptcy discharge is a standard affirmative defense, not a jurisdictional limitation. The Tax Court's "no jurisdiction" rule is based on theory inconsistent with its own recent jurisdictional rulings on other affirmative defenses such as the statute of limitations, requests for innocent spouse relief, and equitable recoupment. Finally, there is no good reason for Congress to have intended to limit the Tax Court's jurisdiction over bankruptcy discharge questions. Tax Court judges are as qualified as Bankruptcy Court judges to determine whether a tax claim was discharged - the issue is almost always computational. The Tax Court should recognize its error by overturning the "no jurisdiction" rule and accepting the full measure of jurisdiction that Congress intended it to have.

July 28, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Advice for Aspiring Tax Profs

Wednesday, July 28, 2004

Brian Leiter describes here what folks need to crack the law teaching market: "(a) a very strong academic record from strong academic institutions; (b) at least one post-law school publication; and (c) at least two recommenders who are established legal academics."

July 28, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

New Book: Henry Aaron & Joel Slemrod, The Crisis in Tax Administration

Wednesday, July 28, 2004

book coverHenry J. Aaron (Brookings Institution) & Joel Slemrod (Michigan Business School) have published The Crisis in Tax Administration (Brookings, 2004). Here is the publisher's summary:

People pay taxes for two reasons. On the positive side, most people recognize, even if grudgingly, that payment of tax is a duty of citizenship. On the negative side, they know that the law requires payment, that evasion is a crime, and that willful failure to pay taxes is punishable by fines or imprisonment. The practical questions for tax administration are how to strengthen each of these motives to comply with the law. How much should be spent on enforcement and how should enforcement be organized to promote these objectives and achieve the best results per dollar spent?

Over the last few years, the U.S. Congress has restricted spending on tax administration, forcing the Internal Revenue Service to curtail enforcement activities, at the same time, that the number of individual filers has increased, tax rules have become more complex, and more business have become multinational operations. But if too many cases of tax evasion go undetected and unpunished, those who may have grudgingly paid their taxes may soon find it easier to join the scofflaws. These events in combination have created a genuine crisis in tax administration.

The chapters in this volume evaluate the capacity of authorities to enforce the tax laws in a modern, global economy and examine the implications of failing to do so. Specific aspects of tax law, including tax shelters, issues relating to small businesses, tax software, role of tax preparers, and the objectives of tax simplification are examined in detail.

The volume also builds a conceptual basis for future scholarship, with regard not only to tax administration, but also to such fundamental questions as whether taxpayers respond mostly to economic incentives or are influenced by their experiences with the filing process and what is the proper framework for evaluating the allocation of resources within the IRS.

Here is the the table of contents:
1. Introduction, by Henry J. Aaron & Joel Slemrod

2. The Tax Shelter Battle, by Joseph Bankman; Comments by David Cay Johnston & David Weisbach

3. Issues of International Tax Enforcement, by David Tillinghast; Comments by James Hines, Jr. & Stephen Shay

4. Small Business and the Tax System, by Joel Slemrod; Comments by William Gentry & Morton Harris

5. The Turbo Tax Revolution: Can Technoolgy Solve Tax Complexity?, by Austan Goolsbee; Comments by Gerald Goldberg & Mark Mazur

6. Issues Affecting Low-Income Filers, by Janet Holtzblatt & Janet McCubbin; Comments by Leonard Burman & Nina Olson

7. Tax Preparers, by Marsha Blumenthal & Charles Christian; Comments by Peggy Hite & Gerald Padwe

8. Carrots and Sticks in Enforcement, by Frank Cowell; Comments by John Scholz & Douglas Shakelford

9. Effects of Tax Simplification Options: A Quantitative Analysis, by William Gale & Jeffrey Rohaly; Comments by David Glickman & Deborah Schenk

10. Ultimate Objectives for the IRS: Balancing Revenue and Service, by Alan Plumley & C. Eugene Steuerle; Comments by Donald Alexander & James W. Wetzler

11. Experience and Innovations in Other Countries, by Jeffrey Owens & Stuart Hamilton; Comments by Victoria Perry & Joop van Lunteren

July 28, 2004 in Book Club | Permalink | Comments (0) | TrackBack (0)

ABA Teleconference and Webcast Today on Tenancy in Common Exchanges

Wednesday, July 28, 2004

The ABA Tax Section's "Last Wednesday of the Month" Teleconference and Webcast will be held today from 1:00 - 2:30 pm EST on Practical Planning for Tenancy in Common (TIC) Exchanges.

July 28, 2004 in ABA Tax Section, Tax Conferences | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 27, 2004

What Tax Profs Are Reading . . . Maule on The Ninety Days

Tuesday, July 27, 2004

book cover This is the seventh installment of What Tax Profs Are Reading. The goal is to share with the broader tax community reviews of both tax-related and nontax-related books recently read by tax professors. We invite tax professors to submit book reviews for publication on TaxProf Blog.

Jim Maule (Villanova) shares with us his thoughts on Thomas Carmichael’s The Ninety Days: Five Battles That Changed the World (2002):

The book has me wondering if the people alive in October 1942 through January 1943 knew that the five major battles fought during those three months made the difference that they made. Even with the limited and delayed reporting of that war, in such contrast to news flashes about late twentieth and early twenty-first century conflicts, our parents and grandparents surely learned the outcomes if not some of the operational details, perhaps not immediately but within weeks or months.

When the Second World War gets into the spotlight it’s usually the battle of Midway, the landings at Normandy, the bombings of Hiroshima and Nagasaki, the Battle of the Bulge, the escape at Dunkirk, and a few other encounters that take most of center stage. Other campaigns, successful and catastrophic from either or both sides’ perspective, have had their movies and their anniversary celebrations. The five battles in Carmichael’s book include the famous and the not-so-well-known. During this period that began 10 months after America’s formal entry into the war, conflict reached critical pace at Guadalcanal, El Alamein, Northwest Africa, Stalingrad, and in the Barents Sea. Surely Guadalcanal and Stalingrad have often been on center stage, and El Alamein occasionally. The campaign in Northwest Africa hasn’t had the attention it deserves as the precursor to the more publicized landings in Sicily and southern Italy. And I must admit, even though I’ve read dozens if not hundreds of accounts relating to the Second World War, this particular battle of the Barents Sea was one of which I had known nothing.

Carmichael’s accounts of these battles, avoiding overly detailed and technical analyses of troop and ship movements and tossing in bits of human interest information, are set against the larger picture of the war that is clearer from the present than it was at the time. There is a disadvantage in reading any World War Two history, and that is the reader’s knowledge of the basic outcome and of the basic outline of events. Carmichael does a good job of taking the reader back in time, to days when the outcomes were not known, when Allied defeat in any one of the five battles would have changed the course of the war, and when those making decisions, fighting the battles, or hearing about them did not know that their outcomes would weave together into an ultimate Axis defeat that wasn’t apparent to either side.

These were not battles with simultaneously broadcasting embedded reporters. But what if the reporters who were present (which was not the case at Stalingrad or the Barents Sea) had the ability to send their news in real time? Would the citizens of the Allied nations have been sufficiently patient to endure the distress of bad news? Or would they have given up on the first indication of things going badly? It’s easy to guess at the answer. Every one of these five battles began badly for the Allies, and in all five instances predictions by some or most military planners were stronger than the hopes for success. The battering and devastation is still difficult to fathom, even in an age of weapons of mass destruction. Tens, no, hundreds of thousands died. Twenty German divisions were annihilated at Stalingrad. These were not the quick and relatively bloodless first-round knockouts to which some in the late twentieth century have become accustomed and that have become an unrealistic standard of war battle for others. These were typical long, drawn-out, see-saw, slugging matches in which victory came on the thinnest of margins with a lot of good timing and seemingly minor, but event-shaping, miscalculations sprinkled in. Any one easily could have turned out the other way, and just one difference of that sort could have turned the war in a very different direction. The “what ifs” are waiting in yet another book sitting in the “to read” pile and that I plan to pick up later in the summer.

As a student and a teacher of federal tax, I’ve long been aware that the Second World War reshaped the income tax from an impost on the wealthy to the pervasive “touch everyone” monstrosity that it is today. The financing needs of the war are apparent in the sheer size of worldwide war. Stalingrad alone dwarfed current military efforts. And Stalingrad was one of not five but hundreds of skirmishes and battles underway during those ninety days. Collectively, tens of thousands of warplanes, thousands of warships, tens of millions of troops, and supplies measurable in trillions of cubic yards require enormous amounts of money. The Second World War has left all sorts of legacies, some just now becoming evident. The federal income tax, in its present-day form, is just one.

For prior TaxProf Blog book reviews, see here.

July 27, 2004 in Book Club | Permalink | Comments (0) | TrackBack (0)

Hamill on Tax Reform and Judeo-Christian Ethics

Tuesday, July 27, 2004

Susan Pace Hamill (Alabama) has posted An Argument For Tax Reform Based on Judeo-Christian Ethics on SSRN. Here is the abstract:

This article applies the moral principles of Judeo-Christian ethics as a basis for urging the citzens of Alabama to insist that the state and local tax structure be reformed. This article first empirically documents that Alabama's state and local tax structure harshly burdens the poorest Alabamians through regressive income and sales taxes. This article then proves that Alabama's lowest property taxes per capita in the nation leaves the state and local governments unable to fund minimum needs, such as education, thereby denying the poorest Alabamians a minimum opportunity to improve their lives. An original empirical study of the relative property tax burdens of Alabama's different classes of property proves that timber, which covers 71% of Alabama's real property accounts for less than 2% of the property taxes, averaging less than $1 per acre. Because more than 90% of Alabamains practice Christianity, the moral principles of Judeo-Christian ethics are relevant. Using Old and New Testament scripture (and numerous scholarly works) this article shows how Alabama's tax structure violates these moral principles and then argues that the profession of faith of most Alabamians compells them to use their talents and resources to support tax reform. This article imposes the highest responsibilies on those with education and wealth, political leaders and finally religious leaders.
In 2003, Professor Hamill presented her argument for tax reform at the University of Cincinnati College of Law. View the archived webcast here.

Alabama Governor Bob Riley, a conservative Republican and Southern Baptist, proposed a $1.2 billion tax package that was inspired by Professor Hamill's ethical approach to tax reform. On September 9, 2003, Alabamians overwhelming rejected the reform package. A political analysis of the failure is available here.

July 27, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Court: Tax Code "Incomprehensible" Without Assistance of Tax Expert

Tuesday, July 27, 2004

Great tax quote from the Wisconsin Court of Appeals in an unpublished decision, Donahue's Accounting & Tax Service, S.C. v. Ryno, No. 03-1891, 2004 WI App 21 (Dec. 17, 2003):

It is obvious to this court that the IRC is incomprehensible without the assistance of a qualified expert in tax law. This conclusion is best supported by a short and snappy comment from Justice Jackson, once Chief Counsel for the IRS, in a dissenting opinion in Arrowsmith v. Commissioner of Internal Revenue, 344 U.S. 6, 12 (1952), where he referred to federal taxation as "a field beset with invisible boomerangs."

One of America's most respected jurists, Judge Learned Hand, offers a more thoughtful observation on the law of taxation:

Photo of Judge Learned HandIn my own case the words of such an act as the Income Tax ... merely dance before my eyes in a meaningless procession; cross-reference to cross-reference, exception upon exception--couched in abstract terms that offer no handle to seize hold of--leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet at times I cannot help recalling a saying of William James about certain passages of Hegal: that they were no doubt written with a passion of rationality; but that one cannot help wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness. Ruth Realty Co. v. Horn, 222 Or. 290, 353 P.2d 524, 526 n. 2 (Or.1960) (citing 57 Yale L.J. 167, 169 (1947)), ov'd on other grounds by Parr v. DOR, 276 Or. 113, 553 P.2d 1051 (Or.1976).
Tip of the hat to this month's Shop Talk column in the Journal of Taxation)

July 27, 2004 in News | Permalink | Comments (2) | TrackBack (0)

Taxpayer Advocacy Panel Holds 2-Day Open Meeting in Louisville

Tuesday, July 27, 2004

The Taxpayer Advocacy Panel will hold a 2-day open meeting beginning today in Louisville, Kentucky. Its mission: "The Taxpayer Advocacy Panel listens to taxpayers, identifies taxpayers' issues, and makes suggestions for improving IRS service and customer satisfaction." For a list of its members (who serve a two-year term and spend 100-300 hours per year on member activities), see here. For the 2003 Annual Report, see here.

July 27, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Monday, July 26, 2004

Gantt on Tax Treatment of Malpractice Alternatives

Monday, July 26, 2004

Karen Gantt (Univ. of Hartford Business School) has published Federal Tax Treatment of Medical Malpractice Insurance Alternatives for Nonprofits, 52 Drake L. Rev. 495 (2004). Here is the Introduction:

As a result of the medical malpractice insurance crisis faced by physicians, hospitals, and other healthcare providers, as well as the liability insurance crisis of the mid-1980s, many nonprofits seek a means to provide consistently available and affordable insurance protection. While both for-profit and nonprofit groups seek stable insurance coverage, a question for nonprofit entities becomes how to establish an insurance alternative without being forced to become a commercial enterprise, which would jeopardize their own tax-exempt status or subject them to unrelated business income. Part II of this Article provides an overview of the medical malpractice crisis and provides a comparison to issues faced by other nonprofits during the liability insurance crisis of the mid-1980s. Part III discusses the successes and difficulties in terms of tax consequences encountered by nonprofits seeking to establish some form of self-insurance arrangement. Nonprofit reciprocal insurers' and governmental entities' avoidance of many of the tax issues faced by other alternative insurance mechanisms is discussed in Parts IV and V. Risk retention group and other group or association captive tax issues are discussed in Part VI, including a discussion of the IRS's clarification of risk-shifting and risk-distribution requirements. Finally, the Article shows a glimpse of protected cell captives as a mechanism for building financial capacity for the nonprofit alternative insurance mechanism.

July 26, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

New Children's Book Angle: Beware of the Big, Bad Tax Cut

Monday, July 26, 2004

book cover Tax Cuts are a major theme in the new children's book, The Three Little Pigs Buy the White House (St. Martin's Griffin, 2004). In a jibe aimed at the current Administration, Rummy, Dickey, and Dubya build their own houses of bricks stolen from the country while they build the rest of the country with mud and straw, which are soon threatened by the big, bad tax cuts.

The book's author, Dan Piraro, is the author and illustrator of the very popular Bizarro cartoon which runs seven days a week in over 200 markets. He won an unprecedented three consecutive Best Newspaper Panel awards from the National Cartoonists Society.

July 26, 2004 in Book Club | Permalink | Comments (0) | TrackBack (1)

Maule on Taxes and the Presidential Campaign

Monday, July 26, 2004

Jim Maule (Villanova) has harsh words to say here about both John Kerry and George Bush on the tax front. Jim's bottom line:

[W]ith the exception of a few individual members of Congress whose voices of common sense are drowned out in a sea of special interest tax pandering, both major parties and both major Presidential candidates don’t earn any points on the tax question.

July 26, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Most People Say They Haven't Received a Tax Cut

Monday, July 26, 2004

Sunday, the Washinton Post reported "a solid 71 percent [of Americans] are convinced they have received no tax cuts at all." Why? The majority of the tax cuts have been targeted to the very wealthy. But for most average Americans, if they did receive a tax cut, it was more than offset by rising state and local taxes which have been "driven by the unfunded demands of the federal government." For details, go here.

Meanwhile, according to The Hill Capitol Hill Republicans were astonished by a White House decision to demand a five-year extension of tax cuts rather than accept a two-year compromise reached by House and Senate leaders that would probably "clear Congress in a snap." Read the full account here.

July 26, 2004 in News | Permalink | Comments (0) | TrackBack (0)

$550 Million Estate Tax Bill: "Very Effective Estate Planning"

Monday, July 26, 2004

The July Trusts & Estates journal has an interesting piece on the $550 million estate tax tab faced by the children of Estee Lauder, who died at 96 in April. Trusts & Estates asks "why Lauder, who surely had access to the best legal advice, would die with so many taxable assets. Wouldn't a good advisor have helped her transfer most of the money out of her estate long ago?" After noting that rich matriarchs often resist tax-driven efforts to diminish their power and net worth, Trusts & Estates observes that Lauder actually "did some very effective estate planning" by passing on to her family a $3.5 billion stake in Estee Lauder Inc. at an estate tax cost of "just" $550 million -- 16%.

July 26, 2004 in News | Permalink | Comments (1) | TrackBack (2)

Weekend Roundup

Sunday, July 25, 2004

Top 5 Tax Paper Downloads

Sunday, July 25, 2004

There are three new papers on this week's list of the Top 5 Tax Paper Downloads on SSRN, debuting at #'s 3-5:

1. Theories of Distributive Justice and Limitations on Taxation: What Rawls Demands from Tax Systems, by Linda Sugin (Fordham)

2. Quantifying the Costs of Intertemporal Taxable Income Shifting: Theory and Evidence from the Property-Casualty Insurance Industry, by Gerald Salamon (Indiana-Bloomington, Dep't of Accounting), Jim Seida (Notre Dame, Dep't of Accounting), & David Randolph (Dayton, Dep't of Accounting)

3. The Estate Planning Implications of Goodridge v. Department of Public Health for Massachusetts Same-Sex Couples, by Jeremy Marr (Boston College)

4. Market Symmetry and the Tax Efficiency of Equity Compensation, by David Walker (Boston University)

5. E-Commerce and International Tax Planning, by Carla Carnaghan (University of Waterloo, School of Accountancy) & Kenneth J. Klassen (University of Waterloo, School of Accountancy)

July 25, 2004 in Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

Moore on French Lessons for Social Security

Sunday, July 25, 2004

Kathryn Moore (Kentucky) has published Lessons from the French Funding Debate, 65 Ohio St. L.J. 5 (2004). Here is the abstract:

The French retirement system, like the American social security system, is facing long-term funding difficulties. As a result, the French are debating whether to expand the role of pre-funded retirement plans. The economic arguments presented in this debate are virtually identical to the economic arguments presented in the American debate on whether the American social security system should be partially privatized. The French and American debates, however, diverge once history and ideology are considered. The French have a history of failed funded pensions in contrast to the United States where the failure of prominent underfunded pension led to the enactment of ERISA. And while individual choice and individual responsibility are quintessential American values, "solidarity" plays a much bigger role in the French debate.

July 25, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Quiz on U.S. Tax Treatment of Multinational Busniness Enterprises

Sunday, July 25, 2004

Can you pass George Mundstock's quiz on U.S. taxation of multinational business enterprises here, here, and here?

July 25, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Saturday, July 24, 2004

Tax Prof Spotlight: Linda Beale

Saturday, July 24, 2004

Photo of Professor Beale Linda Beale (Illinois) came to tax law late in her career, having spent much of her time in the sciences. Born in Tennessee, she’s lived in Mississippi, Florida, Massachusetts, North Carolina, Texas, Washington D.C., and, most recently before her move to Illinois, New York. She completed a B.S. degree in chemistry at Duke University, planning at that time to work in a research lab! After a two-year stint in the Peace Corps in Colombia, South America working with impoverished local farmers reignited her interest in languages, she was named a Herbert Lehman fellow by New York State and received her PhD in linguistics from Cornell.

She was a member of Matt McHugh’s congressional staff for a period during the early eighties (working in his district office in Ithaca, New York), taught Spanish and linguistics as a visiting assistant professor at Temple University, and served as a university administrator and adjunct assistant professor of linguistics at Binghamton University. It was the frequent forays into legal issues as a university administrator that enticed her to return to Cornell to earn her J.D, where she graduated summa cum laude and was a member of Order of the Coif in 1994.

After a wonderful clerkship year with Judge Dorothy Nelson on the Ninth Circuit, Linda joined Cleary, Gottlieb, Steen & Hamilton in New York as a tax associate. Her work with Cleary’s many financial institution and multinational corporate clients included a wide range of tax issues such as securitizations (including REMICs and FASITs), partnerships, and cross-border corporate mergers and acquisitions. While with Cleary, Linda completed an LLM in taxation at New York University. Linda left Cleary to join the Illinois faculty in 2001.

Linda’s developing scholarship reflects her recent practice dealing with issues of importance to financial institutions, her background in the study of language, and her fundamental interest in the ways that democratic societies can achieve greater social justice. Her work with financial institutions underlies several of her articles and commentary that explore concerns regarding the reliability of information and the relationship between financial statement income and tax income. She is interested in the roles of auditors and tax practitioners in designing, implementing or participating as accommodation parties in aggressive tax shelters, and argues for a more comprehensive approach to corporate tax shelters that acknowledges the importance of tax to corporate governance. She has also grappled with the normative and pragmatic criteria that might be used to evaluate “book-tax conformity” proposals, a research topic begun as a short paper on the seminal Bank One case regarding mark-to-market valuation of swaps and continued in a forthcoming Virginia Tax Review article. That article considers what generally applicable criteria might be used to evaluate particular conformity proposals and asks whether there are ultimately any contexts where the convenience of conformity is sufficient to override concerns about taxpayer manipulation of income. Her interest in language and social justice are the foundation for two articles currently in progress—one that looks at the role of statutory interpretation in the context of specialized securitization vehicles and another that considers how best to reinforce liberal egalitarian values while solving the alternative minimum tax problem. Here's a sample of Linda's work:

Book-Tax Conformity and the Corporate Tax Shelter Debate: a Mark-to-Market Safe Harbor? Va. Tax Rev. (forthcoming Sept. 2004).

Putting SEC Heat on Audit Firms and Corporate Tax Shelter: Responding to Tax Risk with Sunshine, Shame and Strict Liability, 29 J. Corp. L. 219 (2004).

February 15, 2004 Letter to George Yin, reprinted as Law Professor Offers Suggestions for Fighting Shelters, 103 Tax Notes 125 (April 5, 2004).

Tax Court’s Decision in Bank One Raises More Questions Than It Answers, 21 J. Tax'n Investments 3 (Autumn 2003).

Developments May Lead SEC to Ban Certain Tax Services Under Sarbanes-Oxley Independence Rules, 16 J. Tax'n Financial Institutions 5 (May 2003).

January 10, 2003 Letter to Jonathan Katz from Professor Linda Beale as Principal Drafter with Six Co-signers, reprinted as Tax Profs Urged SEC to Take Tough Stance on Auditor Independence, 98 Tax Notes 765 (Feb. 3, 2003).

An Overview of the U.S. Federal Income Tax Treatment of Collateralized Debt Obligation Transactions, 14 J. Tax'n Financial Institutions 27 (July/August 2001) (with David Miller & Paul Wysocki).

Linda has found teaching an especially rewarding experience that permits professor and students to question and consider many diverse aspects of American life while learning the intricacies of the tax code. Linda has particularly enjoyed offering her students a perspective on the many opportunities and challenges of multinational tax practice in a large law firm. She teaches the basic federal income tax course, corporate tax, international tax, and a seminar in "advanced tax practice" that is intended to offer her students both in-depth knowledge of more advanced tax topics and leadership opportunities that simulate the kinds of experiences they will have as new associates in a competitive firm environment. Several of her seminar students are working for the IRS in Chicago this summer, and others have gone to law firms where they hope to specialize in tax practice.

Linda also takes her broader responsibilities to the university community seriously, serving since 2001 as a member of the University’s faculty senate, where she is or has been a member of the Equal Opportunity Committee and the Statutes and Procedures Committee. In addition, she has participated in university-wide committees, such as the Chancellor’s Committee on the Status of Women and the University Criminal Case Review Committee.

Each Saturday, TaxProf Blog shines the spotlight on one of the 700+ tax professors in America's law schools. We hope to help bring the many individual stories of scholarly achievements, teaching innovations, public service, and career moves within the tax professorate to the attention of the broader tax community. Please email me suggestions for future Tax Prof Profiles. For prior Tax Prof Profiles, see here.

July 24, 2004 in Tax Prof Spotlight | Permalink | Comments (0) | TrackBack (1)

New Tax Prof Conway Joins Texas-Wesleyan Faculty

Saturday, July 24, 2004

New Tax Prof Meredith Conway (J.D. Rutgers; LL.M. NYU) joins the Texas-Wesleyan faculty this fall from Drinker Biddle & Reath L.L.P. (Philadelphia).

July 24, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Avi-Yonah on International Tax as International Law

Saturday, July 24, 2004

Reuven Avi-Yonah (Michigan) has posted International Tax as International Law on SSRN. Here is the abstracat:

The purpose of this article is to introduce to the international lawyer the somewhat different set of categories (e.g., residence and source rather than nationality and territoriality) employed by international tax lawyers, and explain the reasons for some of the differences. At the same time, it attempts to persuade practicing international tax lawyers and international tax academics that their field is indeed part of international law, and that it would help them to think of it this way. For example, knowledge of the Vienna Convention on the Law of Treaties would help international tax lawyers in interpreting tax treaties, and avoid some common mistakes.

July 24, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, July 23, 2004

Razin & Sadka on Worldwide Capital Income Taxation

Friday, July 23, 2004

Assaf Razin (Tel Aviv Univ. - Dep't of Economics) & Efraim Sadka (Tel Aviv Univ. - Dep't of Economics) have posted Capital Income Taxation in the Globalized World (NBER Working Paper No. w10630) on NBER. Here is the abstract:

The behavior of taxes on capital income in the recent decades points to the notion that international tax competition that follows globalization of capital markets put strong downward pressures on the taxation of capital income; a race to the bottom. This behavior has been perhaps most pronounced in the EU-15 following the single market act of 1992. The 2004 enlargement of the EU with 10 new entrants put a strong downward pressure on capital income taxation for the EU-15 countries. Tax havens, and the inadequacy of cooperation among national tax authorities in the OECD in information exchanges, put binding ceilings on how much foreign-source capital income can be taxed. What then are the implications for the taxes on domestic-source capital income? The paper demonstrates that even if some enforcement of taxation on foreign-source capital income is feasible, a poor enforcement of international taxes would generate political processes that would reduce significantly the domestic-source capital income taxation.

July 23, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

New Tax Policy Group Formed To Fight For Lower Taxes

Friday, July 23, 2004

Citizens for a Sound Economy (CSE) and Empower America today announced that they have merged to form a new grassroots advocacy organization, FreedomWorks, that will expand and broaden the national fight for lower taxes, less government, and more economic freedom. According to the press release, "three of the most respected and accomplished leaders of the conservative, free-market movement-- Dick Armey, C. Boyden Gray, and Jack Kemp-- will serve as the Co-Chairmen of FreedomWorks. Bill Bennett will focus on school choice as a Senior Fellow. Matt Kibbe is FreedomWorks’ new President and CEO."

July 23, 2004 in News | Permalink | Comments (0) | TrackBack (0)

New Columbia Dean Says Teaching Tax Is Like Making Students Eat Spinach

Friday, July 23, 2004

PopeyeThe Chronicle of Higher Education has a nice quote from new Columbia Dean (and Tax Prof) David Schizer on teaching tax:

Mr. Schizer, who won a teaching award at Columbia in 2003, says he believes that the stereotype of the dull tax lawyer has been a benefit to him. "It's like spinach -- they think they have to eat it," he says of students taking tax-law courses. "But then it turns out that there are all these legal and policy issues. In the teaching of tax we benefit from the power of low expectations."
I made a similar point in my article, Tax Myopia, or Mamas Don't Let Your Babies Grow Up To Be Tax Lawyers, 13 Va. Tax. Rev. 517, 521 (1994):
The students' initial hostility toward tax and the complexity of the Code often inure to the benefit of the professor. Most students approach tax with trepidation, and are relieved when the course is not as bad as they had feared. The students generally appreciate the tax professor who helps them through the complexity thicket. In the rare case where the tax course is every bit as bad as they had feared, the students tend to blame the subject more than the professor.
(Thanks to Eric Lustig (New England) for the tip.)

July 23, 2004 in Tax Profs | Permalink | Comments (1) | TrackBack (0)

Thursday, July 22, 2004

Politics of Bush's Rejection of 2-Year Extension of Expiring Middle Class Tax Cuts

Friday, July 23, 2004

For coverage of President Bush's decision to walk away from a deal to extend various expiring middle class tax cuts (10% bracket, marriage penalty relief, and child tax credit) for two years, and instead push for a five-year extension in September, see the New York Times, Washington Post and Wall Street Journal. Michael Froomkin calls it "one of the most cynical ploys in US politics I ever read about. And I read a lot....[T]he only reason Bush & Co. support tax cuts is to use them as a wedge issue. Give them the tax cuts they ask for bipartisanly, they not only lose interest, but scupper it."

July 22, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Tax Consequences of Microsoft's $32 Billion Dividend

Thursday, July 22, 2004

Interesting NY Times article today on the tax considerations underlying Microsoft's announcement of a $32 billion dividend. Among the tax angles noted in the story are:

• The role of Bush's reduction of the dividend tax to 15%, and Kerry's threat to restore the 35% rate. Says one economist: "There has never been an easier way to hand yourself 85% money, and that opportunity may have about a six-month half-life."

• Bill Gates saves over $600 million as a result of the lower dividend tax rate.

• By contributing the dividend to charity, Gates can use the charitable deduction to offset ordinary income taxed at 35%, compared to the 15% tax on the dividend.

• Foreign investors have an incentive to sell their Microsoft stock before the payment of the dividend because it is subject to a 30% withholding tax (unless their country has a tax treaty with the U.S. providing a 15% tax rate).

• Microsoft's stock price needs to rise by $2 per share (to $30.81) to avoid having the dividend treated as an extraordinary dividend. If it does, individual investors will be able to buy the stock to capture the dividend taxed at 15% and then sell to recognize a short term capital loss to offset short term capital gains otherwise taxed at 35%.

(Thanks to Ellen Aprill and Steven Sholk for the tip.)

July 22, 2004 in News | Permalink | Comments (1) | TrackBack (0)

Senate Hearing Today on Higher Education

Thursday, July 22, 2004

The Senate Finance Committee is holding a hearing today on The Role of Higher Education Financing in Strengthening U.S. Competitiveness in a Global Economy. The Joint Tax Committee has released, in conjunction with the hearing, a 50-page report, Present Law and Analysis Relating to Tax Benefits for Higher Education:

Part One is an executive summary of the items discussed in the document. Part Two escribes in detail the present-law tax benefits relating to education, including benefits provided o individuals and private and public providers of education. Part Three includes background ata relating to college enrollment and costs, economic analysis of tax benefits for education, and discussion of simplification concerns with respect to tax benefits for higher education.

July 22, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Ault Gives Speech in Italy on International Tax Issues

Thursday, July 22, 2004

Hugh Ault (Boston College) recently deleivered a Lecture on International Taxation in Naples, Italy. Here is a summary:

International taxation has undergone an important development in the past few years, as a result of the growing economic integration in Europe and, more in general, of international globalisation. Those issues are no longer the object of the attention of few tax experts, but have turned into an indispensable tool for anyone who may intend to deal with tax law, both among academics and practitioners.

Hugh Ault – one of the most authoritative experts of international tax law in the entire world, professor of international tax law at the Boston College Law School, and special advisor of OECD on international taxation – will be in Naples for an entire day devoted to the study of two actual topics of international tax law, with significant theoretical and practical implications:

The first topic – “Territoriality and Worldwide Taxation” – counts substantive questions, with a view to ascertain the actual extension of international criteria to exercise taxing powers.

The second topic – “Settlement of international tax disputes” – deals with procedural issues, which represent the latest frontier of international tax law and are currently object of study of OECD for a possible change to Article 25 of the Model Tax Convention on Double Taxation

July 22, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Joint Tax Committee Releases Revenue Estimates of Tax Bills

Thursday, July 22, 2004

The Joint Committee on Taxation has released revenue estimates of two tax bills:

H.R. 4840, The Tax Simplification For America's Job Creators Act Of 2004
H.R. 4841, The Tax Simplification For Americans Act Of 2004

July 22, 2004 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 21, 2004

More Tax Profs Needed Down Under

Thursday, July 22, 2004

Following up on Monday's post about Monash University of Melbourne, Australia's hunt for a tax professor to fill a newly-created position: Chris Evans, Director of the Australian Taxation Studies Program (Atax), writes of another tax position available Down Under:

The University of New South Wales in Sydney, Australia is creating up to five fully funded "cross-faculty" Professorships, made possible by a $4 million donation to the University. The objective is to develop new areas of research excellence and attract dynamic new research talent to UNSW.

One of the key areas that has been identified for a Professorship relates to taxation - more particularly "Integrity and Equity in the Tax and Welfare Systems." The Australian Taxation Studies Program (Atax), in conjunction with the School of Law, the Social Policy Research Centre, and the Centre for Applied Economic Research is commencing a national and international search for an outstanding researcher with expertise in this area. The person appointed will be based at Atax in the Faculty of Law but will, we hope, be able to work in a truly collaborative fashion and transcend the traditional boundaries between disciplines.

The position is initially for five years (commencing in 2005), with the possibility of extension for a further five years based on performance review, the availability of funds and strategic priorities. An attractive salary package is available and Sydney is a wonderful place to live.

For more information, see here, here, and here. (Thanks to Deborah Schenk (NYU) for the tip.)

July 21, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Tax Prof Joe Bankman Testifies at Senate Hearing Today on "Bridging the Tax Gap"

Wednesday, July 21, 2004

Tax Prof Joseph Bankman (Stanford) is scheduled to testify at today's Senate Finance Committee hearing on Bridging the Tax Gap. Other witnesses are:

• Raymond Wagner, Jr., Member, IRS Oversight Board, U.S. Department of the Treasury
• Mike Brostek, Director of Strategic Issues, U.S. General Accounting Office
• Pamela Gardiner, Acting Inspector General, Treasury Inspector General for Tax Administration
• Dale Brown, a taxpayer who engaged in an offshore tax shelter
• Mark Everson, IRS Commissioner
• Robert Morgenthau, New York District Attorney
• Debbie Langsea, Manager of California Franchise Tax Board
• Nina Olson, National Taxpayer Advocate
• Nick Godici, Commissioner of Patents, U.S. Department of Commerce
For pre-hearing coverage, see today's Washington Post and Wall Street Journal.

July 21, 2004 in News | Permalink | Comments (0) | TrackBack (0)

More on Challenge to Falwell's Tax Exemption

Wednesday, July 21, 2004

Friday's post about Americans United for Separation of Church and State's letter to the IRS challenging the tax-exempt status of Jerry Falwell Ministries on the ground that Falwell has violated the rules prohibiting political activity by churches by his active endoresement of President Bush's re-election sparked a spirited discussion on the TaxProf Discussion Group. Donald Tobin (Ohio State) and John Colombo (Illinois) have graciously allowed me to share their views with the larger tax community:

Donald Tobin:

I think most attorney's advise 501(c)(4)s that electioneering should be less than 50%, since its primary purpose must be social welfare, but the article cited by Paul claims that (c)(4)s cannot endorse candidates. It is my understanding that a (c)(4) can endorse a candidate. If it makes the endorsement to its membership (and issues a press release) there is no problem (unless electioneering is more that 50% of its activities). If it endorses a candidate more broadly, it may be subject to tax under 527(f). It can avoid this tax if it keeps a segregated account.

But my view is the worst case situation, absent so much electioneering that it violates the primary purpose test, is that it has to pay tax under 527(f).

I think Falwell could endorse Bush through his (c)(4) without any problem. It all ends up being a little bit of a farce. Falwell is Falwell. If he endorsed through a 527 or a (c)(4) his followers and church members will still be influenced. But the way I read the law, he can't do it through his (c)(3) but can through his (c)(4) or an independent 527.

John Colombo:

1. The statement that a 501(c)(4) cannot endorse a political candidate is simply wrong. There is nothing prohibiting a 501(c)(4) organization from endorsing a candidate. A 501(c)(4) cannot have political activity as its "primary purpose" because then it would not be a 501(c)(4) anymore, but rather a political organization under 527 (that's where the "50%" guideline comes from (e.g., not more than 50% of the organization's activities can be political), although such a rough guideline is probably not what the primary purpose test is all about. But as long as it's not the organization's primary purpose, endorsing a candidate is perfectly OK. See Rev. Rul. 81-95, or Hill & Mancino, Taxation of Exempt Organizations paragraph 13.04 (WG&L). The Branch Ministries case also implicitly assumes that this would be perfectly OK, since the court said that Branch Ministries could have avoided its problems by forming a 501(c)(4) to engage in political speech activity.

2. There is nothing wrong with individual officers of a 501(c)(3) endorsing candidates on their own, as long as they make clear that they are doing so in their individual capacity and do not use the 501(c)(3) organization's "financial resources, facilities or personnel and clearly and unambiguously indicate that the actions taken or the statements made are those of the individuals and not of the organization." See Kindell & Riley, Election Year Issues, in the 1993 IRS Exempt Organizations Continuing Professional Education Technical Instruction Text. Individuals don't have to withdraw from political activity because they run a 501(c)(3), but they DO have to be very careful to keep personal recommendations separate from the organization. Hence, Jimmy Swaggert got into trouble with the IRS in 1986 for endorsing Pat Robertson for president at an official function of Swaggert Ministries and in the Ministries newsletter, but he could have done so individually.

Obviously, an officer of a 501(c)(4) has less to worry about, since there aren't any specific prohibitions on campaign activity by a (c)(4) to begin with.

July 21, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Are You Red or Blue (or Purple)?

Wednesday, July 21, 2004

Not any tax content here, but Slate has a great test here to determine if you are "red" or "blue":

Red and blue are states of mind, not actual states. Red and blue aren't absolute predictors of political leanings, either. There are plenty of blue cities in red states, red enclaves in blue states, red-leaning governors of blue states, people who vote Republican but are of a blue state of mind, and so on. It's not as simple as liberal vs. conservative, elite vs. populist, urban vs. rural, religious vs. nonreligious, educated vs. uneducated, rich vs. poor—if it were, the terms "red" and "blue" wouldn't have taken off as the best shorthand for a divided America.

[T]here are many people who are purple—neither red nor blue, or both red and blue. Put another way—Bush once said: "To you, it's sushi. To me, it's bait." And to some people, it's just raw fish.

Our household tally among my wife and kids was 2 reds and 2 blues -- no purples! That's what makes life interesting!

July 21, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 20, 2004

Estate Planning Conference in Santa Fe

Wednesday, July 21, 2004

The three-day conference, Estate Planning Conference for the Family Business Owner, the 13th Annual Advanced ALI-ABA Course of Study, begins today in Santa Fe, New Mexico. The conference covers the life cycle of the closely held business, from choice of entity to estate administration, including getting the business ready to sell, with primary attention to tax and estate planning issues, but keeping in mind that there are significant non-tax questions that require attention.

July 20, 2004 in Tax Conferences | Permalink | Comments (0) | TrackBack (0)

IRS Tax Forum Rolls Into Orlando

Tuesday, July 20, 2004

The 3-day IRS Nationwide Tax Forum rolls into Orlando, Florida today with "an agenda full of new information, more advanced topics, hands-on workshops, and networking opportunities you’re sure to enjoy." For the full program, see here.

July 20, 2004 in News | Permalink | Comments (0) | TrackBack (0)

39th Annual Estate Planning Course in Plano, Texas

Tuesday, July 20, 2004

The 39th Annual Program on Estate Planning sponsoired by the Center for American and International Law is taking place July 19-22 in Plano Texas. Speakers include Stanley Johanson (Texas)

July 20, 2004 in Tax Conferences | Permalink | Comments (0) | TrackBack (0)

Mundstock's Maiden Post on Pending Tax Bills

Tuesday, July 20, 2004

Check out Tax Prof George Mundstock's maiden post in the blogosphere on the pending tax bills, No Corporation Left Behind.

July 20, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Tax Prof Mundstock Enters the Blogosphere

Tuesday, July 20, 2004

Photo of Professor MundstockTax Prof George Mundstock (Miami) has entered the blogosphere as a guest blogger on Michael Froomkin's Discourse.Net blog for the next three weeks. Here's Michael's introduction of George to his readers:

My colleague George Mundstock has heroically volunteered to step into the breach as a guest blogger (starting this week), which should be fun. George is a guy who knows numbers. He’s a tax lawyer, and an expert on accounting, but if you met him it would undoubtedly destroy any stereotypes you had of what tax lawyers are like. George is the antithesis of stuffy. He’s wickedly funny. He has wildly iconoclastic taste in music. He learned to program on an IBM 1130 and runs Linux (SuSE) at home. And he cares about tax policy. So I’ve created a new category Law:Tax just for him.

George joined the UM faculty long before I did, and a few years ago his achievements were recognized with the offer of a prestigious chair at the University of Minnesota. Since that’s reputed to be a good school, and since his family was from around there, George moved, leaving a very George-sized hole in our faculty. Last year, to our delight, he decided that he wanted to come back—the perfect answer to the vast George-sized hole we had yet to fill. As I was chair of the Promotion and Tenure committee last year, my share of the bureaucracy necessary to rehire him involved me assembling his weighty publications and reading through years of his teaching evaluations. The teaching evaluations were humbling: students love him and apparently love his quirky humor too.

If I had to guess, I’d bet that George’s politics are somewhere to the right of mine, but I’m not really sure. I have no idea what party if any he belongs to. He’s interesting. He’s going to have fun doing this, and I think people who read this blog will find what he has to say as stimulating as we at UM do.

July 20, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Maule Finally Finds Something More Complicated Than Tax: Cricket

Tuesday, July 20, 2004

Tax Prof Jim Maule (Villanova) offers advice for those teaching the basic income tax class next month: "[B]egin the basic tax class with a cricket rules lesson [so] the students will be thrilled to ease up with a study of the Internal Revenue Code, its regulations, and all the law associated with it."

July 20, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

OECD Releases Tax and Spending Data

Tuesday, July 20, 2004

The Organization for Economic Cooperation and Development (OECD) has released data on government tax revenues and spending as a percentage of GDP for the major industrial nations:

Gov't Revenue Gov't Spending
As % of GDP.....As % of GDP
59.3 Sweden 59.0
58.2 Norway 48.4
57.4 Denmark 56.6
53.6 Finland 51.0
50.4 France 54.4
50.4 Austria 51.6
49.9 Belgium 49.7
46.3 Luxembourg 46.6
46.2 Netherlands 48.6
46.1 Euro area 48.9
45.8 Italy 48.5
45.8 European Union 48.4
45.5 Iceland 46.5
45.3 Germany 49.4
45.1 Greece 46.7
43.9 Portugal 46.8
43.1 Hungary 48.4
42.6 Poland 46.8
42.5 Slovak Republic 47.6
42.5 New Zealand 39.8
41.2 Canada 40.1
40.5 Czech Republic 47.1
39.9 United Kingdom 42.8
39.4 Spain 39.3
37.4 Total OECD 41.2
37.0 Australia 36.2
34.2 Ireland 35.2
32.6 Korea 29.1
31.0 United States 35.9
30.9 Japan 38.3

July 20, 2004 in Think Tank Reports | Permalink | Comments (1) | TrackBack (0)

Monday, July 19, 2004

TaxProf Blog Affiliate Featured in Wall Street Journal

Monday, July 19, 2004

Kudos to the Sentencing Law and Policy blog run by Douglas Berman (Ohio State), an affiliate of TaxProf Blog in the Law Professor Blogs Network, which is featured in today's Wall Street Journal.

The goal of the network is to help other law professors start blogs patterned after TaxProf Blog and Sentencing Law and Policy in other areas of the law school curriculum. We hope to provide the web destination for faculty in various areas of law by providing a combination of both (1) regularly-updated permanent resources & links, and (2) daily news & information, of interest to law professors in their scholarship and teaching.

We are actively recruiting faculty to start blogs in other areas of law and already have these new blogs in the pipeline:

Antitrust (Shubha Ghosh (SUNY-Buffalo))
Criminal Law (Jack Chin (Arizona) & Mark Godsey (Cincinnati))
Legal Ethics (Lisa Lerman (Catholic), William Simon (Columbia), John Steele (Boalt & Santa Clara), & W. Bradley Wendel (Cornell)
Workplace Law (Rafael Gely (Cincinnati))
Please email me if you or other members of your faculty might be interested in starting a blog as part of our Law Professor Blogs Network -- Blogs By Law Professors For Law Professors. No particular web skills are necessary -- we have created a user-friendly template that requires no more technical expertise than simple typing skills. Professor Berman describes the benefits of affiliation with the Law Professor Blogs Network here.

July 19, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Avraham, Fortus & Logue on Income Redistribution

Monday, July 19, 2004

Ronen Avraham (Northwestern), David Fortus (Michigan State), and Kyle Logue (Michigan) have published Revisiting the Roles of Legal Rules and Tax Rules in Income Redistribution: A Response to Kaplow & Shavell, 89 Iowa L. Rev. 1125 (2004). Here is a taste of the Conclusion:

This Article contends that, while Kaplow and Shavell's argument that the tax-and-transfer system is always better than legal rules in redistributing income is theoretically sound, given their assumptions, their observation should not serve as a policy-making aid. Specifically, we argue that Kaplow and Shavell's Pareto-efficiency conclusion must change once some of their simplifying assumptions are relaxed. Kaplow and Shavell argue that they can design a "simple" alternative tax regime (while maintaining an income-independent legal regime) that is Pareto superior to any income-dependent (or income-redistributive) legal regime. Such a regime would be Pareto superior because it would suffer from a single distortion rather than two distortions, as the income-dependent legal regime does. Under their income-independent legal regime, the argument goes, there is only the work-leisure distortion, whereas under the income-dependent legal regime, there is not only the same work-leisure distortion but also a regulated-activity distortion....

The upshot of our argument is that with respect to the debate over income-redistributive legal rules, the focus should be on institutional comparative advantage (legal rules vs. the IRS) while taking into account the informational burden needed to make proper redistribution. The focus should also be on the haphazardness and contracting-around problems and whether, despite those problems, there may be some potential supplementary income-redistributive role for legal rules. In a previous article two of us analyzed this question in more detail.

July 19, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Australian University Seeking to Fill Newly-Created Tax Position

Monday, July 19, 2004

Monash University in Melbourne, Australia is looking to fill a newly-created tax professor position. Salary is $A106,327 per annum. Superannuation, relocation travel, and removal allowances are available. For the full advertisement, position description, background informaton, and application package, see here.

July 19, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)