Paul L. Caron

Thursday, June 30, 2011

Arbitrator: University Can't Fire Professor Convicted of Exposing Himself

Tax Policy Encourages Home Ownership

R. Wayne SaubertLynn SaubertDan Davidson (all of Radford University College of Business and Economics) have posted Tax Policy Encourages Home Ownership on SSRN. Here is the abstract:

This paper examines the tax code provisions that encourage home ownership, including a discussion of some new legislation that also falls within the current administration’s economic stimulus package. It reviews tax provisions dealing with buying a home, owning a home, and selling a home, as well as tax credits and special treatment of some expenses.

June 30, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Majority of Americans Support Higher Taxes to Reduce Deficit

Bruce Bartlett (Capital Gains and Games), Americans Support Higher Taxes. Really:

Contrary to Republican dogma, polls show that the American people strongly support higher taxes to reduce the deficit and improve income inequality. Following are 18 different polls since the first of the year that say so.

  1. Washington Post/ABC News (June 9)
  2. Pew (June 7)
  3. Lake Research (May 26)
  4. Bloomberg (May 13)
  5. Ipsos/Reuters (May 12)
  6. Gallup (April 29)
  7. USC/L.A. Times (April 25)
  8. New York Times/CBS News (April 22)
  9. Washington Post/ABC News (April 20)
  10. Public Religion Research Institute (April 20)
  11. McClatchy-Marist (April 18)
  12. Gallup (April 18)
  13. Tulchin Research (April 1)
  14. ABC News/Washington Post (March 15)
  15. NBC News/Wall Street Journal (March 2)
  16. CBS News (Feb. 15)
  17. CBS News/New York Times (Jan. 20)
  18. 60 Minutes/Vanity Fair (Jan. 3)

June 30, 2011 in Tax | Permalink | Comments (10) | TrackBack (0)

Death of a 32-Year Old Skadden Associate

The local San Diego paper reported the very sad story about Lisa M. Johnstone (J.D. 2004, Northwestern; B.A. 2000, UCLA), a 32-year old corporate associate at Skadden's Los Angeles office who died on June 19 (obituary; guest book). From Above the Law:

She died of an apparent heart attack, though we understand that her autopsy has not yet been completed. She ... died while doing legal work from her home office on a Sunday. We’re talking about Lisa Johnstone because for over a week, Skadden associates have been talking about just how many hours Johnstone had been working. We’re talking about Johnstone because while the root cause of her death my never be known, many Skadden associates and others who know the story are taking this as an opportunity to assess their lives and their mental and physical well being. ...

If you talk to Skadden associates in Los Angeles right now, they are understandably angry. The people we’ve spoken to in that office say that in the weeks prior to her death, Johnstone was pulling 100-hour weeks and was under intense pressure. Multiple sources tell us that she had her vacation cut short after being called back to work.

Sources also report that Johnstone had shown some disturbing signs of overwork. Multiple people told us that she was suffering from hair loss. Again, we don’t have the autopsy report, but multiple sources speculate that under these conditions, Johnstone had turned to “the lawyer version of performance enhancers,” just to stay awake. ...

I don’t know Lisa Johnstone’s story. We don’t know what kind of pressures she was feeling. We don’t know if she was being pushed, or if she would have naturally found a way to work as much as she possibly could. We don’t know if her heart could have given out sitting on a beach sipping a cocktail, just like it apparently did sitting in her home office trying to get work done. She’s gone now, and we can just hope and pray for her family and friends.

But we, the living, are not gone. We still have choices to make. If in Johnstone’s death somebody else out there can find a moment to recalibrate his or her life, that can be a good thing.

June 30, 2011 in Legal Education | Permalink | Comments (9) | TrackBack (0)

Kysar: Lasting Legislation

Rebecca Kysar (Brooklyn) has published Lasting Legislation, 159 U. Pa. L. Rev. 1007 (2011). Here is the abstract:

This Article argues that, due to certain pathologies of the legislative process, legislation enacted with sunset provisions lacks benefits hailed in recent scholarship while also harming the political process and its output. Proponents have argued that such “temporary legislation” enhances fiscal responsibility because official-cost estimates reflect the full cost of the legislation. The cost estimates, in other words, relay the entirety of expenses to Congress upon each sunset date. In contrast, when enacting nontemporary legislation, the theory goes, Congress receives official costs only for the duration of the budget window, or the length of time set forth in the annual budget resolution, as the relevant period within which Congress makes spending and revenue decisions.

This theory is flawed. Many factors—shifting baselines, exceptions to the revenue offset or “pay as you go” rules, costs that temporary legislation engenders beyond the budget window, and the ability of lawmakers to consider the full cost of legislation—thwart the theoretical fiscal restraint of temporary legislation. Nor do sunset provisions tend to provide lawmakers with enhanced information or flexibility, as proponents of temporary legislation have argued; instead, lawmakers likely will be unable to determine the appropriateness of the sunset, or its most effective scope and length. Furthermore, “pro-temporary legislation” scholars understate the costs of such legislation because temporary legislation increases rents from interest groups, entrenches current majoritarian preferences, and produces planning conundrums for public and private actors alike. Accordingly, this Article recommends a policy presumption against temporary legislation and in favor of legislation that does not expire by its own terms, or “lasting legislation.” This presumption should be stronger in the context of provisions made temporary due to budgetary constraints, where the identified concerns are more likely to arise, and weaker in emergency or experimental situations, where the identified concerns are less likely to exist.

June 30, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Obama Excoriates Republicans for Corporate Jet 'Tax Loophole'

Two years ago, President Obama's stimulus package extended the 2008 bonus depreciation rules, which allowed for more accelerated depreciation for capital goods, including corporate jets. (Jet-makers Cessna and Gulfstream have manufacturing facilties in 12 American cities.) At yesterday's press conference, the President excoriated Republicans six times for opposing the elimination of this "tax loophole" (which press reports say would raise a relatively insignificant $3 billion over ten years).

The tax cuts I’m proposing we get rid of are tax breaks for millionaires and billionaires; tax breaks for oil companies and hedge fund managers and corporate jet owners. ...

It would be nice if we could keep every tax break there is, but we’ve got to make some tough choices here if we want to reduce our deficit.  And if we choose to keep those tax breaks for millionaires and billionaires, if we choose to keep a tax break for corporate jet owners, if we choose to keep tax breaks for oil and gas companies that are making hundreds of billions of dollars, then that means we’ve got to cut some kids off from getting a college scholarship. ...

And before we ask our seniors to pay more for health care, before we cut our children’s education, before we sacrifice our commitment to the research and innovation that will help create more jobs in the economy, I think it’s only fair to ask an oil company or a corporate jet owner that has done so well to give up a tax break that no other business enjoys. ...

So the question is, if everybody else is willing to take on their sacred cows and do tough things in order to achieve the goal of real deficit reduction, then I think it would be hard for the Republicans to stand there and say that the tax break for corporate jets is sufficiently important that we’re not willing to come to the table and get a deal done. ...

 If you are a wealthy CEO or a health -- hedge fund manager in America right now, your taxes are lower than they have ever been.  They’re lower than they’ve been since the 1950s.  And you can afford it.  You’ll still be able to ride on your corporate jet; you’re just going to have to pay a little more. ...

I’ve said to some of the Republican leaders, you go talk to your constituents, the Republican constituents, and ask them are they willing to compromise their kids’ safety so that some corporate jet owner continues to get a tax break.  And I’m pretty sure what the answer would be.

As one commentator put it, "President Obama Was For Tax Breaks on Corporate Jets Before He Was Against Them."

Update: Think Progress reports that President Obama was not referring to the inclusion of corporate jets in the bonus depreciation rules, but instead to the 1987 shortening of the depreciation period for corporate jets from seven years to five years:

[S]ome folks are putting out a new myth that the tax subsidy in question was created by the American Recovery and Reinvestment Act.

The truth is that, much as you would expect, the White House negotiating team isn’t nearly that stupid. The source of the confusion is that congress passed a “bonus depreciation” law in 2008 as an economic stimulus measure, and ARRA continued it. This depreciation is a broad (albeit temporary) provision that includes to a wide range of capital goods including both commercial and corporate aircraft. By contrast, the tax break at issue in the negotiations is a 1987 provision of the tax code that allows corporate jets to be depreciated over a five-year period rather than the seven-year period required for commercial aviation. This is not something Barack Obama created, not something Barack Obama has ever supported, and not anything that has anything to do with the stimulus bill. It is, instead, a small but real subsidy that distorts the economy at the margin by encouraging large firms to invest in corporate jets rather than paying for commercial airfare.

See also National Journal: Obama’s Taxing Corporate Jet Policy:

While critics charge the president with flip-flopping, the story is more complicated. Obama included the tax break, called “accelerated depreciation,” in the 2009 economic-stimulus law to lower the cost of capital investments—including aircraft purchases—for millions of companies. Today, the administration is targeting a tax disparity dating back to 1987 that specifically favors business planes over commercial airliners.

“Nine months ago, this president extolled the virtues of shortening depreciation schedules to stimulate jobs,” National Business Aviation Association President and CEO Ed Bolen said in a statement. “Now he seems to want to reverse course and push ahead with punitive treatment for general aviation, an industry that creates jobs, helps companies succeed, and serves communities all around America."

June 30, 2011 in Tax | Permalink | Comments (21) | TrackBack (0)

Death of Elias Clark

Clark Charles Elias (“Eli”) Clark, Lafayette S. Foster Professor Emeritus of Law at Yale Law School, died on June 11 at the age of 87. From Yale Law School and Yale Daily News:

“Eli Clark was an inspirational teacher and an invaluable mentor to generations of Yale students,” said Justus S. Hotchkiss Professor Emeritus of Law Michael Graetz, a longtime friend and colleague of Professor Clark at Yale Law School. “He was an indefatigable, and often indispensible, citizen of the law school and the university. His work on trusts and estates and their taxation educated students across the nation. Eli was a great storyteller, a raconteur—always with a smile on his face and a twinkle in his eye. Most importantly, he was a kind and gentle man and a loyal friend, a man who reveled in his family.” ...

Professor Clark was an expert on property and family law as well as estate taxation. His major works consist of two casebooks of which he is co-author: Gratuitous Transfers (West 5th ed. 2007) (with Mark Ascher (Texas), Grayson McCouch (San Diego) & Arthur Murphy (Columbia) and Federal Estate and Gift Taxation (West, 10th ed. 2011) (with the late Boris Bittker (Yale) & Grayson McCouch (San Diego). ...

Contributions may be made in Professor Clark’s memory to the Annie and Elias Clark Scholarship Fund, Yale University Office of Development, P.O. Box 2038, New Haven, CT 06521-2038.

(Hat Tip: Vincent Teahan.)

June 30, 2011 in Legal Education, Obituaries, Tax | Permalink | Comments (1) | TrackBack (0)

Kwall: The Repeal of Graduated Corporate Tax Rates

Tax Analysts Jeffrey L. Kwall (Loyola-Chicago) has published The Repeal of Graduated Corporate Tax Rates, 131 Tax Notes 1395 (June 27, 2011). Here is the abstract:

Section 11 applies a bracket system to corporations, imposing lower tax rates on lower amounts of income. Similarly, § 1 applies a bracket system to individuals, which is intended to adjust the tax rate to the taxpayer’s standard of living. Modest and subsistence incomes bear little or no income tax. Higher incomes bear tax rates as high as 35%. By contrast, the bracket system of § 11 bears no relation to standards of living. Corporations are artificial entities that do not have variable standards of living. Moreover, the income level of a corporation bears no relation to the shareholders’ standards of living. The § 11 bracket system may induce privately held businesses to incorporate because it effectively provides corporations with high-income shareholders in the top individual tax bracket access to two sets of low tax brackets, one under § 1 and a second under § 11.

This proposal would repeal the lower tax brackets in § 11 and apply the top corporate rate, currently 35%, to all corporations. This change would eliminate the incentive for business owners to incorporate to receive the lower corporate tax rates. More significantly, repealing the lower corporate marginal rates could increase annual tax revenue by an estimated $3 billion.

All Tax Analysts content is available through the LexisNexis® services.

June 30, 2011 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tax and Development Author Workshop Concludes Today in Portugal

Lisbon The Tax and Development Author Workshop sponsored by the University of Florida College of Law and Melbourne Law School concludes today at the University of Lisbon, Portugal, with these presentations:
  • Yariv Brauner (Florida), The Future of Tax Incentives in Developing Countries
  • Allison Christians (Wisconsin), The Role of Developing Countries in Global Tax Policymaking
  • Tsilly Dagan (Bar Ilan University), The Tragic Choices of Tax Policy in a Globalized Economy
  • Anthony C. Infanti (Pittsburgh), International Equity and Human Development

June 30, 2011 in Scholarship, Tax, Tax Conferences | Permalink | Comments (0) | TrackBack (0)

Orentlicher: The Constitutionality of ObamaCare Under the Taxing Power

David Orentlicher (Indiana-Indianapolis) has posted Constitutional Challenges to the Health Care Mandate: Based in Politics, Not Law, 159 U. Pa. L. Rev. PENNumbra ___ (2011), on SSRN. Here is the abstract:

While critics of the individual mandate to purchase health care have mounted a vigorous attack on its constitutionality, Prof. Mark Hall skillfully dismantles their claims in his article in the University of Pennsylvania Law Review [Commerce Clause Challenges to Health Care Reform, 159 U. PA. L. REV. 1825 (2011).]

Mandate opponents have erected a Potemkin village of logic that has a facade of credibility but ultimately is deeply flawed. As Hall observes, one might reject the mandate on the basis of plausible readings of the constitutional text or in terms of 19th Century and early 20th Century Supreme Court opinions. However, critics cannot square their view with the Court’s understanding of constitutional doctrine and theory over the past 70 years.

In this response, I highlight important points in Hall’s analysis and extend his argument with additional considerations. For example, the individual mandate should be upheld not only on the basis of the Commerce Clause power, as Hall argues, but also on the basis of the taxing power. If the constitutional arguments against the mandate are weak, how can we explain the unexpectedly high level of uncertainty about the mandate’s validity? The answer to this question lies in politics, not law.

In particular, there is good reason to think that public anger about the economy is being vented in the form of opposition to the healthcare legislation. In effect, the public may be saying that Congress should have been using its Commerce Clause power to improve the economy, not to reform the health care system. In this view, the decision by Congress to divert the Commerce Clause power to pass an individual mandate is a metaphor for Congress diverting its attention away from the economy. Once the economy recovers, public opposition to the health care law may well dissipate.

June 30, 2011 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Wednesday, June 29, 2011

Tax Reform to Facilitate Islamic Finance

Brett Freudenberg & Mahmood Nathie (both of Griffith Business School) have published The Constitution and Islam: Are Tax Reforms Possible to Facilitate Islamic Finance?, 20 Revenue L.J. 1 (2011). Here is the abstract:

Islamic banking and finance is emerging in global financial markets and governments seek to facilitate it. This article focuses on whether it is constitutionally possible for Australia to implement reforms to facilitate faithbased financial transactions.

There have been calls for Australia to become a financial hub – particularly in South East Asia. One aspect of this is the recognition of Islamic finance as an alternative in the marketplace. This would include ensuring that tax laws are synchronised with Islamic tenets on financial transactions and do not hinder such alternatives.

Being different to conventional finance, Islamic finance has attracted interest and scepticism, partially because of the lack of understanding and the paucity of academic research on the subject. While the idea of facilitating faith-based finance may seem economically rational, a fundamental question needs to be addressed: is it appropriate for Australia’s tax laws to be amended to facilitate what may be construed to be the furtherance of any religion? This article considers the theoretical considerations of tax and religion and assesses the implications of Islamic finance in light of Australian constitutional law.

June 29, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

'Gay Marriage Is Not Tax Policy. This Is Important Stuff.'

Buffalo News, Grisanti Taken to Task by GOP, Conservatives; Blasted on Vote to Legalize Gay Marriage:

Three days after his historic vote to legalize same-sex marriage in New York, State Sen. Mark J. Grisanti defended his action on the home front Monday while absorbing a series of political body blows from furious Republican and Conservative leaders. ...

While Grisanti has drawn praise from gay rights advocates and others in his largely Democratic district, he began to feel the political ramifications Monday. [Erie County Republican Chairman Nicholas] Langworthy and Erie County Conservative Chairman Ralph Lorigo were especially critical of his reneging on a promise to vote against the measure while campaigning last year.

"He informed me by text while he was on the floor," Langworthy said of Grisanti's Friday vote. "I urged him to stick by his word he had given. The people elected him on what he ran on. This is not tax policy or something. This is important stuff."

(Hat Tip: Angry Bear.)

June 29, 2011 in Tax | Permalink | Comments (2) | TrackBack (0)

Kleinbard: Machiavelli, Tax Policy, and Deduction Phase-Outs

Edward Kleinbard (USC), Machiavelli on Tax Policy:

Niccolò Machiavelli, that sublime analyst of all political instincts, understood contemporary America perfectly. In his greatest work, The Discourses on the First Ten Books of Titus Livy, Machiavelli wrote that truly admirable men remained constant in temperament through good fortune and bad. By contrast, "Not so do weak men behave; for by good fortune they are buoyed up and intoxicated, and ascribe such success as they meet with, to a virtue they never possessed..."

Those of us who have achieved material success have been fortunate in ways great and small, visible and forgotten. ... The tax system is a window into the soul of our society, because we use tax law as our principal tool of industrial policy, wage support and income redistribution. Our tax structure tells more about what we as a society believe to be fundamentally fair than does any other aspect of government.

If we believe that our material success is ours alone -- a reflection of our personal virtues, or perhaps the special benevolence of some Higher Power -- and not in part the outcome of the unpredictable caprices of fortune, then we intuitively find repugnant the idea that we should be willing to share those gains through the intermediation of the tax system with those to whom fortune's wheel has been less kind. We reflect this in our tax policy by demanding still lower marginal tax rates on high-income taxpayers ...

It is not surprising that the affluent have always slipped into the convenient habit of mistaking good fortune for great virtue, and therefore into believing that higher marginal tax rates were a confiscation of the rewards that come naturally to those imbued with virtue. What is new is that the rich seem to have convinced the poor and middle class to believe this as well. ...

If we could learn to acknowledge the role that the whims of fortune play in all of our lives, then we might perhaps not grasp quite so tightly onto our material success as if it were ours alone. We might be more willing instead to share at least a little bit of our good fortune, not out of pity, but out of gratitude. ...

As I described in a previous contribution, simply allowing the Bush tax cuts to lapse, and weaning ourselves off personal itemized deductions, like the home mortgage interest deduction, would by themselves basically resolve the current budget crisis for the next decade or more, giving us time to develop and phase in better-targeted entitlement programs. Together with some judicious trimming of current spending, these moves would give us the budget headroom to invest collectively in America's future, through public education and infrastructure investment.

Moreover, the elimination of personal itemized deductions follows economic logic. Doing so raises revenues without raising the top marginal tax rates; doing so does not penalize business (small or large), because (with the minor exception of unreimbursed employee expenses, which do not properly belong on the list) the itemized deductions are not expenses of earning an income; and the itemized deductions are the paradigmatic examples of "upside down subsidies" -- they are more valuable the greater your income. These tax subsidies are the perquisites of the affluent, not the genuine middle class.

These two recommendations are not soul-crushing burdens to ask us to bear, nor are they exercises in spiteful class warfare. Instead, they are simple, easily implemented, and sane policies that we know will work. What stands between us and their implementation is not simply political fractiousness, but the pernicious myth that we all deserve everything that happens to us.

Wall Street Journal editorial, A Stealth Tax Hike: The Return of the Deduction Phase-out Gambit:

The White House wants Republicans to agree to tax increases that no one wants to call tax increases, and for an insight into this political method let's focus on one proposal in particular—the phase-out of itemized deductions for upper-income taxpayers. We hope the tea party is paying attention, because this kind of maneuver is why people hate Washington. ...

The political point of this exercise is to raise marginal tax rates without appearing to do so. The top statutory individual rate would remain at 35%, so the politicians could claim they hadn't raised rates. ...

The phase-out gambit is an attempt to shoe-horn more progressivity into the tax code without admitting it, and to do so in such a way that only tax experts will know what's going on.

One goal of the tax reform that Republicans and Mr. Obama keep talking about is to simplify the tax code, but deduction phase-outs make the code far more complicated. Phase-outs make it impossible for taxpayers to add up their income, look at the tax tables, and know what they owe. The IRS taxpayer advocate service and even the head of the ABA tax section urged their repeal in the 1990s.

Democrats keep telling us Americans support raising taxes. If that's true, the least they can do is try to raise them honestly.

June 29, 2011 in Tax | Permalink | Comments (4) | TrackBack (0)

National Taxpayer Advocate Releases Report to Congress

Taxpayer Advocate National Taxpayer Advocate Nina E. Olson today released (IR-2011-71) her mid-year report to Congress, Fiscal Year 2012 Objectives:

The report expresses particular concern about the impact of IRS budget cuts on taxpayer service and tax compliance and about IRS lien filing practices. ...

Impact of Possible Budget Cuts on Taxpayer Service and Compliance.  ...  “In recent years, the IRS has been given more and more tasks, but it is not receiving the resources it needs to fulfill these tasks without cutting corners,” the report says.  “And when the IRS cuts corners, taxpayers can be harmed and revenue collection may suffer.” The National Taxpayer Advocate has previously suggested that the IRS generally be exempt from budget caps or reductions.  She has noted that the “tax gap” (i.e., the amount of tax due but not paid voluntarily and timely) is estimated to be about $345 billion a year.  ... On a budget of about $12.1 billion, the IRS collected $2.35 trillion in FY 2010, or about $194 in federal revenue for each dollar it spent. ...

IRS Collection Practices.  The National Taxpayer Advocate has expressed concern about IRS collection practices in prior reports and has, in particular, made recommendations to reduce the harm that unproductive liens can inflict on taxpayers.  This report praises several recent changes the IRS has announced, including making lien withdrawals available to taxpayers in a wider range of cases.  However, the report expresses continuing concern about the IRS’s practice of automatically filing tax liens based on a dollar threshold instead of basing lien-filing decisions on an analysis of the taxpayer’s financial situation.  The National Taxpayer Advocate believes that such an analysis “should balance the need to protect the government’s interests in the taxpayer’s assets with a corresponding concern for the financial harm the lien will create for that taxpayer.”

In cases where the IRS has determined a taxpayer is suffering an economic hardship or possesses no significant assets, the filing of a lien is unlikely to further tax collection but will further damage a taxpayer’s credit rating, thus harming the taxpayer, increasing the taxpayer’s cost of living, and reducing the chance the taxpayer will be able to obtain a job and pay off the tax debt. ...

Other Areas of Focus.  Additional areas on which the National Taxpayer Advocate intends to focus in the coming year include the following:

  • Taxpayer Impact of Possible Government Shutdown
  • Tax Reform and Tax Complexity
  • Earned Income Tax Credit (EITC) Improvements
  • Tax-Related Identity Theft
  • Innocent Spouse Relief

Media and blogosphere coverage:

June 29, 2011 in Gov't Reports, IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Tamanaha: The Coming Crunch for Law Schools

Following up on yesterday's post, NY Times -- The Lawyer Surplus, State by StateThe Coming Crunch for Law Schools, by Brian Tamanaha (Washington U.):

The New York Times released a chart yesterday showing that law schools are churning out far more lawyers than the number of available legal positions. ... Law schools now pump out about 45,000 graduates annually at a time when the Bureau of Labor Statistics projects about 28,000 new lawyer positions per year.

Why are law schools enrolling so many students when employment prospects for graduates are so poor? Because they must. In the past two decades law faculties have gotten bigger. AALS tallied 7,421 full time faculty in 1990, and 10,965 in 2008. Some of this overall increase comes from newly accredited schools, but most of it is faculty expansion: student-faculty ratios have been cut almost by half during this period.

Bigger faculties must be paid for through some combination of more bodies (J.D. and LL.M) and higher tuition. Tuition already goes up every year as it is, so the number of revenue paying students cannot be reduced substantially. It's that basic. ...

Law schools will soon suffer the consequences of this expansion. The chart below tracks the number of applicants against the number of first year students from 1990 to the present. As it shows, law schools exhibit a one-way ratchet: when applications drop, enrollment remains steady; when applications rise, enrollment goes up.

This pattern--explained by our need for revenue to fund our operation--portends tough times ahead for law schools. ... If the drop in applicants continues, while enrollment stays up, schools will reach deeper in the pool to fill their classes, bringing in students with lower qualifications. ... Law schools have enjoyed flush times for more than a decade. Tough times are ahead.

Update #1: Stephen Bainbridge (UCLA), Consolidation in the Law School Industry:

Unless law schools voluntarily start consolidating and downsizing, which seems about as likely as yours truly winning the Miss America pageant, we face a long-term prospect of ever increasing competition for fewer and fewer applicants. Long before the day comes that there are fewer applicants than available seats, we will be in very big trouble. Budgets will have to be slashed to pay financial aid to attract students. Admission standards will have to go down. Relations between deans, faculty, and students will be increasingly fraught. What we have here is a classic collective action problem. Unfortunately, what we don't have is a market in which to develop solutions to that problem.

Update #2: Reader Loren R. Thacker provided this chart, using the NY Times data to rank the states by the number of law jobs available per law grad passing the bar:


Annual Jobs


Annual Pass Bar


Annual Surplus
Jobs Per Grad


Wash D.C.


















































































































New Hampshire




























































North Dakota






W. Virginia






S Carolina












Nation Ave
























Rhode Island






North Carolina






South Dakota












New Mexico






















































New Jersey






New York






June 29, 2011 in Legal Education | Permalink | Comments (6) | TrackBack (0)

Tax Reform and Tax Expenditures

National Affairs National Affairs. Sepnding in Disguise, by Donald P. Marron (Tax Policy Center):

The argument over how to close that gap is often dominated — sometimes debilitated — by sharp disagreements about how much should come from spending cuts and how much from tax increases. But that division can be misleading. A great deal of government spending is hidden in the federal tax code in the form of deductions, credits, and other preferences — preferences that seem like they let taxpayers keep their own money, but are actually spending in disguise. Those preferences complicate the code and often needlessly distort the decisions of businesses and families. The magnitude of these preferences raises the possibility of a dramatic reform of the tax code — making it simpler, fairer, and more pro-growth — that would amount to simultaneously cutting spending and increasing government revenue, without raising tax rates.

Such a reform would not eliminate the need for serious spending cuts, of course, nor would it take tax increases off the table. But it could dramatically improve the government's fiscal outlook and make the task of budget negotiators far easier. It will only be possible, however, if we clearly understand how spending is hidden in the tax code and what reformers might do about it — if we see that tax policy and spending policy are not always as distinct as we might think.

June 29, 2011 in Tax, Think Tank Reports | Permalink | Comments (3) | TrackBack (0)

Why Is the DOJ Tax Division Still Without a Leader?

DOJ Logo With yesterday's Senate confirmation of Deputy Attorney General James Cole, Assistant Attorney General of the Office of Legal Counsel Virginia Seitz, and Assistant Attorney General for National Security Lisa Monaco, only one top Department of Justice position remains unfilled:  Assistant Attorney General for the Tax Division.  President Obama has not nominated anyone for the position since his initial choice for the position, Mary L. Smith, was forced to withdraw over nine months ago in the face of Republican opposition over her lack of any tax experience.

June 29, 2011 in Tax | Permalink | Comments (4) | TrackBack (0)

Grover Norquist Sticks to His No Tax Guns on Colbert

Tax and Development Workshop Begins Today in Portugal

Lisbon The Tax and Development Author Workshop sponsored by the University of Florida College of Law and Melbourne Law School kicks off today at the Unversity of Lisbon, Portugal, with these presentations:
  • Kim Brooks (Dean, Dalhousie University, Schulich School of Law,), TBA
  • Wei Cui (China University of Political Science and Law), Choosing or Declining the Rule of Law in Taxation
  • Ana Paula Dourado (University of Lisbon), TBA
  • Tracy Gutuza (University of Capetown, South Africa), TBA
  • Charlene Luke (University of Florida, College of Law), A Role for Tax in Supporting Microfinance?
  • Lisa Philipps (Osgoode Hall Law School), Tax Expenditure Analysis in the Global South: Transplanting Fiscal Policy
  • Pasquale Pistone (University of Salerno, Vienna), Geographical Boundaries of Tax Jurisdiction, Exclusive Allocation of Taxing Powers in Tax Treaties and Good Tax Governance
  • Luís Eduardo Schoueri (São Paulo University law School), Tax Sparing: A Reconsideration of the Reconsideration
  • Miranda Stewart (Melbourne Law School), Information and Tax Handles:Towards a Global Administrative Tax State?

June 29, 2011 in Scholarship, Tax, Tax Conferences | Permalink | Comments (1) | TrackBack (0)

Tuesday, June 28, 2011

Browne: Canal and Reasonableness of TP Reliance on Tax Advisor-Planner

Tax Analysts James R. Browne (Strasburger & Price, Dallas) has published Canal: Casting Stones, 131 Tax Notes 1363 (June 27, 2011):

In this report, Browne argues that the Tax Court in Canal [135 T.C. 199 (2010)] erred in holding that reliance on a tax adviser is per se unreasonable when the adviser was involved in planning the transaction and had a financial interest in its outcome. He argues that the Tax Court should have applied a facts and circumstances test and more carefully evaluated whether the evidence supported a finding that the taxpayer did not reasonably rely on the adviser’s legal opinion.

All Tax Analysts content is available through the LexisNexis® services. Prior TaxProf Blog coverage:

June 28, 2011 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

6th Annual Junior Tax Scholars Workshop Concludes Today at UC-Irvine

Tax Eater The Sixth Annual Junior Tax Scholars Workshop concludes today at UC-Irvine with these papers:

Panel #5: Distributive Justice

  • Ilan Benshalom (Hebrew University), How To Redistribute
  • Commenters: Phyllis Smith (Florida A&M), Adam Rosenzweig (Washington U.)
  • Sarah Lawsky (UC-Irvine), Modeling
  • Commenters: Shannon McCormack (UC-Hastings), Rebecca Kysar (Brooklyn)

Panel #6: International Tax

  • Rebecca Kysar (Brooklyn), On the Constitutionality of Tax Treaties
  • Commenters: Ilan Benshalom (Hebrew University), Ben Leff (American)
  • Adam Rosenzweig (Washington U.), Taking Sovereignty Seriously
  • Commenters: Lilian Faulhaber (Miami), David Gamage (UC-Berkeley)
  • Susan Morse, Tax Imperialism
  • Commenters: Rachelle Holmes (George Mason), Brian Galle (Boston College)

Panel 7: Tax Policy

  • Phyllis Smith (Florida A&M), Change We Can’t Believe In…Or Afford: Why the Timing Is Wrong To Reduce the Estate Tax for the Wealthiest Americans
  • Commenter: Leigh Osofsky (Miami)
  • Rachelle Holmes (George Mason), The New Shaming Taxes: No Sin Left Behind
  • Commenters: Joshua Blank (NYU), Anders Christiansen (Loyola-L.A.)
  • Ben Leff (American), Advanced Tax Policy Seminar Course Description
  • Commenters: Phyllis Smith (Florida A&M), Susan Morse (UC-Hastings)

June 28, 2011 in Scholarship, Tax, Tax Conferences | Permalink | Comments (0) | TrackBack (0)

Cheyenne, Wyoming: The New Cayman Islands?

Wyoming Reuters, A Little House of Secrets on the Great Plains:

The secretive business havens of Cyprus and the Cayman Islands face a potent rival: Cheyenne, Wyoming.

At a single address in this sleepy city of 60,000 people, more than 2,000 companies are registered. The building, 2710 Thomes Avenue, isn't a shimmering skyscraper filled with A-list corporations. It's a 1,700-square-foot brick house with a manicured lawn, a few blocks from the State Capitol. ...

A Reuters investigation has found the house at 2710 Thomes Avenue serves as a little Cayman Island on the Great Plains. It is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as "shell" companies, paper entities able to hide assets.

Wyoming Corporate Services will help clients create a company, and more: set up a bank account for it; add a lawyer as a corporate director to invoke attorney-client privilege; even appoint stand-in directors and officers as high as CEO. Among its offerings is a variety of shell known as a "shelf" company, which comes with years of regulatory filings behind it, lending a greater feeling of solidity. ...

All the activity at 2710 Thomes is part of a little-noticed industry in the U.S.: the mass production of paper businesses. Scores of mass incorporators like Wyoming Corporate Services have set up shop. The hotbeds of the industry are three states with a light regulatory touch--Delaware, Wyoming and Nevada.

The pervasiveness of corporate secrecy on America's shores stands in stark contrast to Washington's message to the rest of the world. Since the September 11 attacks in 2001, the U.S. has been calling forcefully for greater transparency in global transactions, to lift the veil on shadowy money flows. ... Yet on U.S. soil, similar activity is perfectly legal. The incorporation industry, overseen by officials in the 50 states, has few rules. ...

An estimated 2 million corporations and limited liability companies are created each year in the U.S., according to Senate investigators. The Treasury Department has singled out LLCs as particularly vulnerable to being used as shell companies, as they can be owned by anyone and managed anonymously. Delaware, Nevada and Wyoming had 688,000 LLCs on file in 2009, up from 624,000 in 2007. ...

On its website, Wyoming Corporate Services currently lists more than 700 shelf companies for sale in 37 states. The older they are, the more expensive, like Scotch whisky. Brookside Management Inc., formed in December 2004, sells for $5,995, while Knotty Management LLC, formed in May, costs just $645. ...

Companies registered at 2710 Thomes Avenue have been named in a dozen civil lawsuits alleging unpaid taxes, securities fraud and trademark infringement since 2007, a review of Westlaw data shows. State and federal tax authorities have filed liens against companies registered at the address seeking to collect more than $300,000 in unpaid taxes, according to Westlaw. ...

Some lawmakers want tighter rules. Senator Carl Levin (D-Mich.), chairman of the Senate Homeland Security Committee's Permanent Subcommittee for Investigations, has introduced the Incorporation Transparency and Law Enforcement Assistance Act each year since 2008. The bill would require states to obtain and update information about the real owners of companies, and impose civil and criminal sanctions for filing false information. The bill has been beaten back by a coalition of state officials and business groups, citing concerns about the cost of implementing the new law and federal government infringement on state incorporation rights.

June 28, 2011 in Tax | Permalink | Comments (4) | TrackBack (0)

NY Times: Who Doesn't Pay Federal Income Taxes (Legally)?

New York Times op-ed, Who Doesn’t Pay Federal Income Taxes (Legally), by Bruce Bartlett:

According to new data from the Tax Policy Center, this year 46.4% of tax filers will have no federal income tax liability. The following table presents the data.

As one can see, almost all of those in the bottom income quintile — those with incomes below $16,812 — will have no federal income tax liability this year. About three-fifths of those in the second income quintile will also have no liability, 30% of those in the middle quintile, and 7.3% of those in the fourth quintile. It is not only the poor who are exempt from federal income taxation; substantial numbers of households in the middle class are also exempted.

Surprisingly, a not insignificant number of those who are clearly well off are also among the “lucky duckies.” There are 78,000 tax filers with incomes of $211,000 to $533,000 who will pay no federal income taxes this year. Even more amazingly, there are 24,000 households with incomes of $533,000 to $2.2 million with zero income tax liability, and 3,000 tax filers with incomes above $2.2 million with the same federal income tax liability as most of those with incomes barely above the poverty level. ...

The phenomenon of large numbers of non-federal income tax payers has long been a subject of debate. Those on the left emphasize that other taxes, such as payroll taxes, are paid by those with no income tax liability, a point I discussed last week. Those on the right often complain that it is fundamentally undemocratic for such a large percentage of the population to pay nothing to offset the federal government’s general operations. After all, everyone benefits from national military spending and other federal programs.

Perhaps the right and left can at least agree that it is unseemly for those in the top 1 percent of income distribution, with incomes at least 10 times the median income, to pay no federal income taxes. It’s not socialism to ask them to pay something.

June 28, 2011 in Tax | Permalink | Comments (7) | TrackBack (0)

Academic Subsidies of Athletic Departments at NCAA Division I Schools

NCAA USA Today and Indiana University's National Sports Journalism Center have calculated how much the athletic departments at 219 NCAA Division I schools are subsidized from general university funds and student fees.  Only seven athletic departments (LSU, Nebraska, Ohio State, Oklahoma, Purdue, Texas, and Texas A&M) do not receive such subsidies.  Here are the schools with the largest subsidies of their athletic departments in 2010, from schools both in the BCS conferences and not in the BCS conferences.



% Subsidy

$ Subsidy

1. Rutgers

Big East 



2. UConn

Big East



3. S. Florida

Big East



4. Maryland




5. Tennessee




6. Cincinnati

Big East



7. Virginia




8. California




9. Oregon State




10. Arizona St.









Mountain West



2. Delaware    




3. J. Madison    




4. O. Dominion




5. E. Michigan




6. UC-Davis       

Big West



7. Cent. Florida




8. UMass




9. Buffalo




10. Ohio




June 28, 2011 in Legal Education | Permalink | Comments (3) | TrackBack (0)

Biggest Tax Avoiders Would Win With Repatriation Tax Holiday

Cisco Bloomberg, Biggest Tax Avoiders Would Win on U.S. Tax Break, by Jesse Drucker:

Cisco has cut its income taxes by $7 billion since 2005 by booking roughly half its worldwide profits at a subsidiary at the foot of the Swiss Alps that employs about 100 people. Now Cisco, the largest maker of networking equipment, wants to save even more -- by asking Congress to waive most federal taxes due when multinationals bring such offshore earnings home. Chief Executive Officer John T. Chambers has led the charge for the tax holiday, which would be the second since 2004. He says it would encourage companies to “repatriate” as much as $1 trillion held abroad, spur domestic investment and create jobs.

Cisco’s techniques cut the effective tax rate on its reported international income to about 5% since 2008 by moving profits from roughly $20 billion in annual global sales through the Netherlands, Switzerland and Bermuda, according to its records in four countries. The maneuvers, permitted by tax law, show how companies that use such strategies most aggressively would get the biggest benefit from the holiday, said Edward D. Kleinbard, a law professor at USC. “Why should we reward firms for successfully gaming the tax system when we in turn are called on to make up the missing tax revenues?” said Kleinbard, a former corporate tax attorney at Cleary Gottlieb Steen & Hamilton LLP. “Much of these earnings overseas are reaped from an enormous shell game: Firms move their taxable income from the U.S. and other major economies -- where their customers and key employees are in reality located -- to tax havens.” ...

Companies including Google, Apple, and Pfizer are also pushing the proposed tax holiday, which would allow profits to return to the U.S. at a discounted 5.25% rate. Under current law, American companies can defer federal income taxes on most overseas earnings indefinitely. When they do return to the U.S., they’re taxed at the corporate rate of 35% -- with credits for foreign income taxes paid. Thus, companies paying little overseas face higher U.S. tax bills upon repatriation, and would get more benefit from the discount. ... One way multinationals avoid taxes is through “transfer pricing,” transactions among subsidiaries that allow for allocating expenses to high-tax countries and profits to tax havens. ...

All told, Cisco has accumulated $31.6 billion in overseas earnings on which it has paid no U.S. income taxes yet, records show -- part of more than $1 trillion in U.S. companies’ offshore profits, according to data compiled by Bloomberg. In total, almost 90% of Cisco’s cash sits overseas.

June 28, 2011 in Tax | Permalink | Comments (3) | TrackBack (0)

NY Times: The Lawyer Surplus, State by State

New York Times, The Lawyer Surplus, State by State:

We’ve written before about the tough job market for recent law-school graduates. The climate is hard partly because of the weak economy, but also partly because the nation’s law schools are churning out many more lawyers than the economy needs even in the long run.

Now a few researchers have tried to quantify exactly how big that surplus is.

The numbers were crunched by Economic Modeling Specialists Inc. (also known as EMSI), a consulting company that focuses on employment data and economic analysis. The company’s calculations were based on the number of people who passed the bar exam in each state in 2009, versus an estimate of annual job openings for lawyers in those states. Estimates for the number of openings is based on data from the Bureau of Labor Statistics and the Census Bureau.

According to this model, every state but Wisconsin and Nebraska (plus Washington, D.C.) is producing many more lawyers than it needs. ...  In fact, across the country, there were twice as many people who passed the bar in 2009 (53,508) as there were openings (26,239)



2010-15 Annual

Lawyer Jobs

2009 Bar Passers


Supply Lawyers

1. NY




2. CA




3. NJ




4. IL




5. MA




6. PA




7. TX




8. FL




9. MD




10. MO








42. OK




43. SD




44. ND




45. ID




46. AK




47. DE




48. VT




49. NE




50. WI




51. DC





June 28, 2011 in Legal Education | Permalink | Comments (18) | TrackBack (1)

Borden: Three Cheers for Passthrough Taxation

Bradley T. Borden (Brooklyn) has posted Three Cheers for Passthrough Taxation, 131 Tax Notes 1353 (June 27, 2011), on SSRN. Here is the abstract:

This report addresses recent suggestions by the Obama administration, lawmakers, and others that some passthrough entities should be taxed as corporations. It argues that passthrough taxation is the correct regime, from a technical standpoint, for many business arrangements. Applying an entity tax to those structures would be inappropriate. The report argues that an entity tax would violate notions of equity by treating members of passthrough entities differently from individuals. Next it demonstrates that a tax on passthrough entities would shift a greater share of the tax burden to middle-income individuals. Finally, the report encourages the administration and lawmakers to increase the tax burden of the super wealthy before making changes that increase the tax burden of those in the middle.

Upate: Tax Lawyer's Blog, A Defense of Pass Through Entities

June 28, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Senate Holds Hearing Today on Complexity and the Tax Gap

Senate Logo The Senate Finance Committee holds a hearing today on Complexity and the Tax Gap: Making Tax Compliance Easier and Collecting What’s Due with these witnesses (and links to their testimony):
  • Michael Brostek (Director, Tax Policy and Administration, U.S. Government Accountability Office)
  • Nina E. Olson (National Taxpayer Advocate, IRS)
  • David Kirkham (President, Kirkham Motor Sports, Provo, UT)
  • Kris Carpenter (Founder/CEO, Sanctuary Spa and Salon, Billings, MT) 

June 28, 2011 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Monday, June 27, 2011

Repatriation Holidays: A Charlie Brown Tax Policy

Politico op-ed, Don't Fall for Corporate Repatriation, by William G. GaleBenjamin H. Harris (both of the Tax Policy Center):

Some observers are calling for a "repatriation holiday" on profits held by foreign subsidiaries. Some members of Congress, eager to stimulate our fragile economy, are listening.

They shouldn’t. A tax holiday on repatriated funds is a proven failure — expensive in both direct and indirect ways. It was already tried in 2004 and didn’t work.

The Treasury shouldn’t become the Charlie Brown of the tax world — repeatedly being tricked into trying to kick a football that isn’t there. We do need to stimulate a wavering economy and reform our tax system. But periodic tax holidays on repatriated funds are not the way to achieve either goal.

June 27, 2011 in Tax | Permalink | Comments (0) | TrackBack (0)

6th Annual Junior Tax Scholars Workshop Begins Today at UC-Irvine

Tax Eater The Sixth Annual Junior Tax Scholars Workshop kicks off today at UC-Irvine with these papers:

Panel #1: Tax Compliance

  • Shannon McCormack (UC-Davis), Determining the Transactions to be Judged Under the Newly Codified Economic Substance Doctrine
  • Commenters: Brian Galle (Boston College), Darien Shanske (UC-Hastings)
  • Joshua Blank (NYU), Against Corporate Tax Privacy
  • Commenters: Shannon McCormack (UC-Davis), Lilian Faulhaber (Boston University)
  • Leigh Osofsky (Miami), Beyond the CAP Consensus
  • Commenters: Susan Morse (UC-Hastings), Ben Leff (American)

Panel 2: Families

  • Anders Christiansen (Loyola-L.A.), Undocumented Workers and the Earned Income Tax Credit: A Proposal for Reform
  • Commenters: Joshua Blank (NYU), Rebecca Kysar (Brooklyn)
  • Stephanie McMahon (Cincinnati), An Empirical Study of Innocent Spouse Relief: I Do Not Think That Statute Means What You Think It Means:: "Under existing law, spouses are jointly and severally liable for joint tax returns and, as a result, the IRS may pursue either spouse for any tax due but not paid. In 1998, Congress expanded the relief available to filers of joint returns to include innocent spouse relief, separation of liability, and equitable relief. Many critics of these three avenues of relief complain that the statute is too complicated and offers too little relief to spouses, generally wives, who sign returns under duress, while being deceived by their husbands, or while subject to some other marital compulsion. This paper first evaluates what Congress intended to provide to “innocent spouses” when it expanded relief. The paper then examines 445 cases decided on appeals from IRS denials of relief in order to evaluate whether the law is accomplishing that congressional objective. This paper’s aim is to judge the success and failure of the innocent spouse provision from Congress’s perspective."
  • Commenters: Shu-Yi Oei (Tulane), Rachelle Holmes (George Mason)

Panel 3: Designing Tax Systems

  • Lilian Faulhaber (Boston University), The Other Side of the Salience Debate: Hypersalience, Third-Party Marketing, and the Charitable Deduction
  • Commenters: David Gamage (UC-Berkeley), Stephanie McMahon (Cincinnati)
  • Brian Galle (Boston College), The Stick or the Carrot?
  • Commenters: Ilan Benshalom (Hebrew University), Darien Shanske (UC-Berkeley)
  • Shu-Yi Oei, The Functions of the Fiction: Envisioning a Debt-Equity Distinction for Natural Persons
  • Commenters: Sarah Lawsky (UC-Irvine), Anders Christiansen (Loyola-L.A.)

Panel 4: Public Finance

  • David Gamage (UC-Berkeley), The New Fiscal Politics, Government Shutdowns, and the Case for Default Budgets: "The threat of government shutdowns is becoming an increasingly severe problem at both the U.S. federal and state levels. In most areas of domestic policy, failure to pass a new law or other reform means that prior year law remains in effect. Not so with budgeting, where failure to regularly pass a new budget currently results in the government shutting down. We argue for making budgeting more like other areas of domestic policy by proposing that default budgets come into effect if Congress or a state legislature fails to pass a new budget by the specified deadline."
  • Commenter: Adam Rosenzweig (Washington U.)
  • Darien Shanske, A Vigorous, but Tentative, Defense of the New State Corporate Income Tax
  • Commenters: Stephanie McMahon (Cincinnati), Leigh Osofsky (Miami)

June 27, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Harvard Law Review Tribute: Bill Stuntz


Following up on my prior post on the death of Bill Stuntz, the current issue of the Harvard Law Review contains a wonderful series of remembrances, byIn Memoriam: William J. Stuntz by:

June 27, 2011 in Legal Education | Permalink | Comments (0) | TrackBack (0)

TIGTA: IRS Still Does Not Comply With 1996 Federal Financial Management Law

TIGTA The Treasury Inspector General for Tax Administration today released Challenges Continue With Reporting Complete and Accurate Information in the Federal Financial Management Improvement Act Remediation Plan (2011-10-041):

The IRS's financial management systems are unlikely to comply with Federal law before 2014. ... The Federal Financial Management Improvement Act of 1996 (FFMIA) requires that Federal financial management systems provide accurate, reliable, and timely financial management information to Government managers. In November 2010, the GAO reported that the IRS's financial management systems do not comply with FFMIA requirements. Specifically, the IRS does not post tax-related transactions in conformance with Federal Government requirements and its records lack adequate traceability for taxes receivable. The IRS also has material weaknesses in its internal controls over both information security and unpaid assessments. The information security material weakness compromises the accuracy and availability of the IRS's financial information and places sensitive information regarding taxpayers and IRS operations at risk. The unpaid assessments material weakness impacts the IRS's ability to effectively manage unpaid taxes, penalties, and interest.

As required by FFMIA, TIGTA assessed the status of the IRS's efforts to meet its target dates for remediating its noncompliance. "The IRS's continued noncompliance with FFMIA will need to be closely monitored," said J. Russell George, the Treasury Inspector General for Tax Administration. "Complete and reliable financial information is critical to the IRS's ability to accurately report on the results of its operations to both internal and external stakeholders, including taxpayers."

June 27, 2011 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

The Impact of Anti-Law School Scam Blogging on the Legal Profession

Lucille A. Jewel (John Marshall (Atlanta)) has published You're Doing It Wrong: How the Anti-Law School Scam Blogging Movement Can Shape the Legal Profession, 12 Minn. J. L. Sci. & Tech. 239 (2011). Here is the Conclusion:

With the Scam Blogging movement, a small set of underemployed or unemployed attorneys—not the type of lawyers who would normally be listened to with respect to ideas for reforming an aspect of the profession—harness the power of the Internet to argue for changes in the way that law schools market themselves. As the legal community has seen, the Scam Blogger movement has unleashed several Internet cultural phenomena into the legal profession: viral Internet memes, emergent communities, and the use of shaming and griping techniques, sometimes vulgar and insulting, as a norm enforcement mechanism. However, the legal profession should not dismiss alternative lawyer voices coming out of the blogosphere because, despite a subversive approach to rhetoric and argument, these lawyers are contributing valuable ideas about specific problems facing the profession. Moreover, there is an important community function at work: providing some attorneys, operating at the margins of the profession, a community space for fellowship and exchange. In the interest of enriching attorneys’ professional identity, the legal profession should embrace the participatory culture of the Internet and the emergence of new legal communities and the alternative viewpoints they bring.

June 27, 2011 in Legal Education, Scholarship | Permalink | Comments (2) | TrackBack (0)

Pittsburgh Tax Review Publishes New Issue

Pittsburgh Tax Review The Pittsburgh Tax Review has published Vol. 8, No. 1 (Fall 2010):

June 27, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Sullivan: ‘Stateless Income’ Is Key to International Tax Reform

Tax Analysts Martin A. Sullivan (Tax Analysts) has published "Stateless Income" Is Key to International Reform, 131 Tax Notes 1315 (June 27, 2011):

Next time you hear multinationals talk about international tax reform -- which they equate to an exemption system that does not deny deductions for expenses allocable to foreign income -- notice that there is no mention of profit shifting. They routinely present a picture of a simple world in which there is no confusion about where income should be sourced. Income from French business is taxed by France. Income from Singaporean business is taxed by Singapore. In this sterilized characterization, because the United States taxes on a worldwide basis, U.S. companies cannot compete with Singaporean companies in Singapore. Moreover, because France has a territorial system, U.S. companies cannot compete with French companies in Singapore. In this world, the only tax advantages companies get are those from the movement of actual capital. This puts U.S. multinational corporations at a disadvantage in competing for investment.

Recent draft law review articles by Edward Kleinbard and Tax Notes columns by Michael Durst challenge this view. The authors observe that profit shifting from high- to low-tax countries is rampant, and rather than assuming it away, they put the phenomenon front and center in their analyses. Kleinbard calls profits shifted to tax havens where little or no business is conducted "stateless income." In the real world with stateless income, firms get tax advantages from the movement of actual capital and from widespread artificial profit shifting.

All Tax Analysts content is available through the LexisNexis® services.

June 27, 2011 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Must the Amish e-File?

Amish Watertown Daily News, N.Y. to Amish: Power Up; Digital Requirements Conflict with Christian Sect:

Enos Yoder fiddles with a metal gear and won't make eye contact with a stranger who is asking him about his troubles with the state Department of Taxation and Finance. Instead, he looks out onto his field, where a two-horse sleigh is carrying a stack of hay on a cart, ridden by a young man probably in his teens. Mr. Yoder, who owns a machine shop business, explains his problems politely, although with few syllables.

The department, he says, wants him to file his sales taxes electronically rather than mailing them in as he has done for years. Also, the state wants to know his phone and Social Security numbers.

There's only one problem: he's Amish. He doesn't use electricity, doesn't own a computer or a phone, and doesn't have a Social Security card.

Technological advances in the outside world are making life more complicated for this Christian sect, which holds fast to the traditions of its forefathers and shuns modern conveniences. But those traditions are increasingly clashing with 21st-century government mandates. ...

This year, the Department of Taxation and Finance has made electronic filing of sales-tax returns mandatory. While those without access to Internet can request an exemption, something got lost in translation. According to interviews with members of the community and those who interact with them, a handful of Amish — furniture builders and shopkeepers, mostly — have received letters warning them that they face a $50 penalty for every return not electronically filed.

Department spokeswoman Susan Burns said in an email that the department is mandating the electronic filing to cut down on bank processing costs and to reduce errors in sales tax returns. She said the department would be "judicious" in levying fines against the Amish.

June 27, 2011 in Tax | Permalink | Comments (4) | TrackBack (0)

Sunday, June 26, 2011

TaxProf Blog Weekend Roundup

WSJ: Commodity ETFs: Extreme Tax Frustration

Wall Street Journal, Extreme Tax Frustration: Commodity ETFs Can Wreak Havoc on Your Tax Bill:

Commodities are hot, but exchange-traded funds and other vehicles that hold them are causing massive tax headaches for investors. ... This is the dark side of investors' current rush into the trendiest investment strategy around: exchange-traded funds and other hot "alternative investments" such as exchange-traded notes and master limited partnerships, specializing in commodities like oil, currencies and gold. ...

[ETFs] carry potential tax traps. Among them: soaring tax preparation bills, odd tax rates, unexpected filings and tax on some assets in tax-sheltered individual retirement accounts. ... Even though ETFs trade like stocks and provide diversification like a fund, they often are structured very differently from the stocks and mutual funds many investors grew up with. Mutual funds generally aren't allowed to hold commodities directly, so the firms offering ETFs have turned to less familiar vehicles, such as partnerships, trusts or corporations. ... ETF tax complications have become so notorious, says Chief Investment Officer William Koehler of ETF Portfolio Partners Inc. in Leawood, Kan., that some investors are insisting on selling funds generating K-1 forms even if they made money and want to hold the same underlying assets. Instead they are asking for ETFs that don't generate tax headaches. Mr. Koehler and his partners have a nickname for these clients: "K-1 and done."

June 26, 2011 in Tax | Permalink | Comments (0) | TrackBack (0)

Top 5 Tax Paper Downloads

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

1.  [265 Downloads]  Series LLCs in Real Estate Transactions, by Bradley T. Borden (Brooklyn) & Mathews Vattamala (J.D. 2012, Brooklyn)

2.  [131 Downloads]  Supreme Court CIGNA Ruling Allows Workers to Reverse Harmful Pension Changes, by Richard L. Kaplan (Illinois)

3.  [118 Downloads]  Common Control and the Delineation of the Taxable Entity, by Michael Aikins (J.D. 2012, Yale)

4.  [117 Downloads]  Planning for Same-Sex Couples in 2011, by Patricia A. Cain (Santa Clara)

5.  [112 Downloads]  The New Super-Charged PAT (Power of Appointment Trust), by Wendy C. Gerzog (Baltimore)

June 26, 2011 in Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

§ 501(c)(3) Organizations That Discriminate Against LGBT Employees

Austin Caster (J.D. 2011, University of St. Thomas) has posted 'Charitable' Discrimination: Why Taxpayers Should Not Have to Fund 501(c)(3) Organizations that Discriminate Against LGBT Employees on SSRN. Here is the abstract:

Until now, the first amendment protection of religious liberty has allowed -- and even publicly funded -- discrimination against LGBT employees, but this article argues that Christian Legal Society v. Martinez changes that analysis. According to Bob Jones University v. United States, organizations that base admissions decisions on racial discrimination violate public policy and cannot receive taxpayer funding. Similarly, Christian Legal Society v. Martinez shows us that universities do not have to fund student organizations that discriminate on the basis of sexual orientation. Therefore, because discrimination based on an immutable minority trait bars taxpayer funding in one instance, this article argues it should also in the other. Private organizations will continue to be allowed to discriminate, but if they do, they should no longer receive public funding through tax-exempt status, taxpayer-funded federal loans, and tax-deductible donations.

The first section of this article explains how and why the tax-exempt status for charitable organizations came about in the United States. Section two applies the original intent of charitable tax-exempt status to LGBT employment discrimination. The third section offers a public policy analysis regarding why equal protection should at least be balanced equally with religious liberty when interests conflict. The fourth section analyzes the case law regarding discrimination and tax-exempt status and shows how Christian Legal Society in particular evolves the debate. The fifth and final section offers analogies of how other countries handle constitutional conflicts regarding equal protection and religious freedom.

June 26, 2011 in Scholarship, Tax | Permalink | Comments (4) | TrackBack (0)

NYSBA Releases Tax Reports

Saturday, June 25, 2011

Gale, Lawsky Present Today at Stanford/Yale Junior Faculty Forum

SLS The 12th Annual Stanford/Yale Junior Faculty Forum concludes today at Stanford:

The Forum's objective is to encourage the work of young scholars by providing experience in the pursuit of scholarship and the nature of the scholarly exchange. Meetings are held each spring, at Yale one year and Stanford the next.

Between twelve and twenty scholars (with one to seven years in teaching and who are not yet tenured) are chosen on a blind basis from among those submitting papers to present. Two senior scholars, not necessarily from Stanford or Yale, comment on each paper. The audience will include the invited young scholars, faculty from the host institutions, and invited guests. The goal is discourse on both the merits of particular papers and on appropriate methodologies for doing work in that genre. We hope that comment and discussion will communicate what counts as good work among successful senior scholars and will also challenge and improve the standards that now exist. The Forum also hopes to increase the sense of community among American legal scholars generally, particularly among new and veteran professors.

Here are the tax papers (with commentary by Joseph Bankman and Dan Kessler (both of Stanford)):

Prevailing accounts of the efficiency of subsidies for the nonprofit sector presume that the only alternative source of public goods is a single sovereign, controlled by a single median voter. Tiebout sorting, however, also provides citizens with alternative bundles of public goods. When these two systems are in place simultaneously, they may interact. We present a model in which subsidies may affect not only the choice between nonprofit and government, but also the choice among governments. Because nonprofits allow citizens to obtain alternative bundles of public goods without relocation, subsidies for the nonprofit sector alter incentives to relocate. We show that this distortion in the market for local government may either increase or decrease welfare, depending on the nature and geographical scope of the good provided. As a result, for some goods it is ambiguous whether subsidies for charity on net increase social welfare. We also consider extensions involving simultaneous provision of similar goods of differing quality.

This article presents a formal model of tax compliance that, unlike other models of tax compliance, takes into account that the decision of whether to comply with the tax law is a decision under uncertainty. That is, a taxpayer deciding whether to comply faces a series of unknown probabilities: he does not know, for example, the probability that he will be selected for audit, the probability that the government will identify a particular questionable tax position, or the probability that this position will ultimately be struck down. The model presented incorporates both the extent of a taxpayer’s uncertainty and the taxpayer’s attitude toward uncertainty, and thus casts new light on controversial questions in tax compliance, such as how to structure penalties and whether to penalize tax advisors.

June 25, 2011 in Scholarship, Tax, Tax Conferences | Permalink | Comments (0) | TrackBack (0)

Activists Disrupt U2 Concert, Tell Bono: 'U Pay Your Tax 2'

Bono Daily Mail, Violence Breaks Out as Protesters Seek to Shame Bono Over Failure to Pay Tax in Ireland as He Headlines Glastonbury:

Violent scenes broke out in the crowd at U2's long-awaited Glastonbury debut last night as a protest against the Irish band's tax status was foiled by security guards.

As Bono and his bandmates took to the Pyramid Stage, activists from direct action group Art Uncut inflated a 20ft balloon emblazoned with the message 'U Pay Your Tax 2'.

But as the campaigners tried to release the balloon over the 50,000-strong crowd, a team of ten security guards wrestled them to the ground before deflating the balloon and taking it away. ...

Art Uncut had been hoping to spark debate around big-earning stars' duty to pay taxes in their native country. Campaigner Charlie Dewar said: "U2's multi million-euro tax dodge is depriving the Irish people at a time when they desperately need income to offset the Irish government's savage austerity programme. ... Bono is well-known for his anti-poverty campaigning but Art Uncut is accusing him of hypocrisy."

(Hat Tip: Eric Robinson.)  Prior TaxProf Blog coverage:

June 25, 2011 in Celebrity Tax Lore, Tax | Permalink | Comments (5) | TrackBack (0)

A Look into the Economic Substance Doctrine

Amanda L. Yoder (J.D. 2011, Missouri-Columbia) has published Note, One Prong, Two Prong, Many Prongs: A Look into the Economic Substance Doctrine, 75 Mo. L. Rev. 1409 (2010). Here is the Conclusion:

The Supreme Court has articulated several factors to assess when determining whether a transaction should be recognized for federal income tax purposes. Several circuits have interpreted the Supreme Court’s language to require a finding of both prongs before a transaction is considered to have economic substance, whereas other circuits have held that the prongs are merely a list of factors to be considered in looking at a transaction. Congress has taken it one step further by codifying the conjunctive two-prong test in a very restrictive way. Although Supreme Court precedent could support either approach, what is more important is the reasoning behind the Supreme Court’s holding. The Supreme Court has articulated that it is important for a transaction to have a purpose other than tax avoidance, but also that a transaction should imbue those characteristics that were intended by Congress in enacting that particular code section. It is these two objectives that are most important in applying the economic substance test to any transaction. Therefore, it is critical to find a test that can best effectuate these two objectives.

Although the majority claims that the minority view is a “rigid” approach to this test, in fact, the approach used by the majority, and now codified by Congress, may at times contradict the two objectives that the Supreme Court has specifically articulated as critical to a finding of economic substance. Instead, the disjunctive approach used by the minority, an approach that will allow flexibility in structuring transactions, is the better approach. This flexibility will allow the reasonable businessperson to structure transactions in ways that are best for his or her business and yet also capitalize on the benefits intended by Congress through the Code. At times, the businessperson may find that a transaction is structured in a way that has a legitimate business purpose but may not change his or her economic position, and vice versa. By following the disjunctive two-prong test of the minority circuits, courts could still analyze such transactions for legitimate economic substance but have more flexibility in upholding a transaction.

June 25, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

The Main Street Fairness Act and the Internet Sales Tax Problem

Michael J. Payne (J.D. 2012, Arizona State) has posted Note, Selling the Main Street Fairness Act: A Viable Solution to the Internet Sales Tax Problem, 43 Ariz. St. L.J. ___ (2011), on the National Law Review. Here is the Conclusion:

Regardless of which political party is in the majority, the Main Street Fairness Act should be given consideration as a viable solution to the problems discussed above. Its passage would comport with the constitutional grant of authority over interstate commerce to Congress, while allowing states the freedom to choose whether to voluntarily join the Agreement. This system is ideal because states can preserve their independence by joining or leaving the Agreement at any time, while providing substantial benefits to out-of-state retailers by simplifying and unifying their reporting requirements. The Main Street Fairness Act is the bandwagon heading toward uniformity and fairness in sales tax collection. States just need to jump on.

June 25, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Friday, June 24, 2011

Soled: No Taxes, No Driver's License

Tax AnalystsJay A. Soled (Rutgers Business School) has published Using Driving Privilege to Solve States’ Fiscal Crises, 60 State Tax Notes 841 (June 13, 2011):

Most people place a high premium on driving, and all states place a high premium on taxpayers paying their fair share of taxes. State lawmakers should connect the privilege of driving to payment of one’s income taxes. That connection is equitable and would apply universally, regardless of a taxpayer’s socioeconomic class or outstanding tax debt.

How would the proposal tying driving privileges to being current with one’s income taxes operate in practice? Once an income tax assessment had been made against a taxpayer, the state would add the taxpayer’s name to a ‘‘No-Drive List.’’ When that taxpayer’s license was to be renewed, that state’s motor vehicles agency would deny his renewal application. Only when the tax in question was paid in full or, alternatively, when the taxpayer entered into an installment payment plan with the state, would his name be removed from the list, at which time he could then reapply for renewal of his driver’s license.

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June 24, 2011 in Scholarship, Tax, Tax Analysts | Permalink | Comments (11) | TrackBack (0)

Green Bay Packers Super Bowl Ring to be Sold to Pay $1.7m Tax Debt

Ring Green Bay Press Gazette, Former Green Bay Packers G Fuzzy Thurston's Super Bowl II Ring Being Sold to Settle $1.7M Tax Debt:

Fuzzy Thurston’s Super Bowl II ring will be sold at auction in August as part of the government’s 28-year battle over taxes with the former Green Bay Packers lineman.

U.S. marshals seized Thurston’s ring, awarded at the end of the 1967 season, and plan to sell it to recover some of the $1.7 million the government claims Thurston owes in back taxes.

The sale comes just weeks after the Packers received Super Bowl XLV rings for their victory at the end of the 2010 season.

June 24, 2011 in Celebrity Tax Lore, Tax | Permalink | Comments (2) | TrackBack (0)

Accounting Association: Audit Thyself

Accounting Today, American Accounting Association Defends Its Legal Status:

The American Accounting Association reassured its members last week about its legal standing after a professor raised questions about several errors in the series of entities set up by the group of accounting educators and researchers.

The dustup started with an academic paper by William Dennis Huber, a professor at Capella University in Minneapolis, which was published in the Journal of Forensic & Investigative Accounting, entitled, Does the American Accounting Association Exist? An Example of Public Document Research. In the paper, he noted that the organization, which dates back to 1916, had been re-incorporated in 1935 and administratively dissolved by the Illinois Secretary of State for failure to file an annual report. In 1995. ...

Huber circulated a link to his paper via email to the press in recent weeks after writing to AAA members over the past year. The AAA, in a communication with its members last week, criticized Huber’s email-writing campaign, but essentially admitted to many of the findings. ... An AAA official who asked not to be identified said the organization was puzzled by Huber’s stance and characterized the problems as “an administrative hiccup common in the nonprofit world.” ...

Huber feels that the organization has a responsibility to clear up the mess. “They’re saying these are just innocent mistakes,” he said. “OK, but these are mostly accounting professors. They’re supposed to be teaching accounting ethics to their students. If they were auditing a company that had these kinds of errors, they would not overlook it, but yet they want the errors to be overlooked by their own corporation, and I just can’t agree with that. If it’s wrong, it’s wrong.”

June 24, 2011 in Tax | Permalink | Comments (0) | TrackBack (0)

IRS Prisoner Re-entry Education Program

Prison The IRS has launched a Prisoner Re-entry Education Program, a package of information to help prisoners getting released from prison manage their tax responsibilities: (Hat Tip: Francine Lipman.)

June 24, 2011 in IRS News, Tax | Permalink | Comments (3) | TrackBack (0)

Call for Papers: International Conference of Tax Administration

ATax Atax (Australian School of Taxation and Business Law), University of New South Wales, has issued a call for papers for the 10th International Conference of Tax Administration to be held in Sydney, Australia, on April 2-3, 2012:

If you are interested in presenting a paper ... please submit an abstract of the proposed paper and a brief biographical sketch of the author(s) and relevant contact details to Prof. Binh Tran-Nam by September 12, 2011.

The theme of the 2012 conference will be Tax Administration: Risky Business. Authors are encouraged to submit proposals that match this theme (for example: managing tax risks from the perspective of the tax administrator, the taxpayer and/or the tax practitioner; strategies to address tax evasion and enhance voluntary compliance; the impact of compliance costs on business; the impact of legal reform on tax administrators and business etc).

A Steering Committee will select papers for the conference and will advise you of its decision by mid October 2011. The abstract should be between 200 and 500 words and should clearly indicate the title of the paper, its author(s), the status of the paper (for example, whether it is part of ongoing research, whether it has been previously published, etc.) and an overview of its contents. Selected papers will be published as chapters in the ongoing Tax Administration series. 

(Hat Tip: Jon Forman.)

June 24, 2011 in Scholarship, Tax, Tax Conferences | Permalink | Comments (0) | TrackBack (0)