Paul L. Caron

Tuesday, July 31, 2012

Graetz: Mitt Romney’s Financial Mysteries

New York Times op-ed:  Mitt Romney’s Financial Mysteries, by Michael J. Graetz (Columbia):

Pressure is mounting for Mitt Romney to release more of his financial records. Mr. Romney has made public only his 2010 tax returns and has said his 2011 documents will be released soon. “That’s all that’s necessary for people to understand something about my finances,” he said recently. He is “simply not enthusiastic,” he also said, about giving the Obama campaign “hundreds or thousands of more pages to pick through, distort and lie about.” ...

No one should begrudge Mr. Romney or his family the wealth they have earned. But if he has not paid the taxes that apply to transfers of such wealth, this should concern us all. After all, who do you think pays for the shortfall?

(Hat Tip: Dorothy Brown)


If none of Mitt Romney’s accounts were in offshore tax havens, would the presumptive Republican nominee be less competent to handle foreign affairs? If he didn’t have an IRA that could be worth as much as $102 million (perhaps, according to the Wall Street Journal, because of the unusual and aggressive way Bain Capital structured its employees’ personal investments in its deals) would he be less able to deal with retirement policy, Social Security and Medicare?If Romney had decided that his wife’s money losing partial ownership of Rafalka, a horse competing in the London Olympics, was really just part of a wonderful, healthful hobby, and one they could well afford to fund without trying to cut their tax bill, would that make him less qualified to be President? ...

[H]e is either ignorant of the practical functioning (and malfunctioning) of our tax system; hopes the American public is ignorant of it; or has bought into an aggressive approach to tax-compliance that contributes to the tax mess. ...

My take on this after decades of writing about tax planning, legitimate tax shelters, over-the-line tax shelters and out and out tax cheating, is this:  The attitude in some sophisticated circles that folks are chumps (or even negligent) if they don’t structure their affairs to exploit every possible provision of the tax code in ways Congress intended (and didn’t) creates a climate that allows abusive tax shelters to flourish and undermines the functioning of the tax code (which, granted, is plenty dysfunctional on its own.)

July 31, 2012 in Political News, Tax | Permalink | Comments (8) | TrackBack (0)

Olympic Athletes Get Special U.K. Tax Break

London-olympic-logoForbes:  Olympians Get a Free Pass on Taxes at the London Games, by Kelly Phillips Erb:

Olympians at the games are getting a nice tax break under an exemption passed just for the London 2012 games. If not for the exemption, those at the games might have to pony up some pounds for the Queen.

You see, the Brits, like the U.S., have a tax system that attempts to tax global income. Under British tax law, the amount of tax due is pro-rated based on the number of events that an athlete competes in inside the country; this is in addition to a 50% tax rate on appearance fees. If, for example, an athlete participates in ten athletics events in 2012 and one of those events is located in the UK, the Brits take the position that they are more or less entitled to 1/10 of that athlete’s worldwide income (some exceptions apply but you get the idea). The tax is imposed even though the athletes may not live in Britain.

The law has kept big names like Spanish golfer Sergio “El Nino” Garcia and Rafael Nadal out of the country for a number of events. Those omissions made sports news but didn’t make many waves beyond their individual sports. The Olympics, however, is on a completely different scale: you can’t have a competitive Olympics unless athletes from all over the world actually show up – and attendance was threatened by these tax laws. Last year, Jamaican über sprinter Usain Bolt famously declared “I am definitely not going to run [in London]” until the Olympics because of what he viewed as punitive tax laws. His declaration sent the country into a tizzy, worrying that other athletes might make similar proclamations – or not show up for the 2012 Olympics at all.

In order to stem any controversy, the British taxing authorities agreed to a limited exemption to the tax rule. The exemption covers those athletes who are visiting the UK in order to compete in the Olympic Games and a limited number of people who are visiting the UK to work on Games-related activity. It does not apply to those working on construction of the Olympic venues

July 31, 2012 in Celebrity Tax Lore, Tax | Permalink | Comments (2) | TrackBack (0)

Sen. Grassley Releases Hold on Treasury Nominees After Receiving Agency Responses on Whistleblower Office

Senate LogoFollowing up on my previous posts (links below):  Senate Finance Committee Ranking Member Chuck Grassley press release:

Sen. Chuck Grassley of Iowa has released his objection to proceeding to the nominations of two Treasury nominees after receiving responses to his inquiries urging action to correct slow progress on whistleblower claim processing and the issuance of awards at the IRS whistleblower office.

Prior TaxProf Blog posts:

July 31, 2012 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Townsend: Frank Lyon, Kikalos, and Conspiracy

Rankin: Strategies for Legal Education Reform

Sara K. Rankin (Seattle), Tired of Talking: A Call for Clear Strategies for Legal Education Reform: Moving Beyond the Discussion of Good Ideas to the Real Transformation of Law Schools, 10 Seattle J. for Soc. Just. 17 (2012):

Legal education reform efforts have persisted for over one hundred years, supported by substantive expertise, empirical data, cutting-edge curricula, and effective pedagogy. But today, the normative face of legal education remains essentially unchanged. If the substance behind legal education reform is valid, then what is the problem?

This article examines the stasis of legal education through the lens of historical reform efforts, political science, and contemporary organizational change theory. The author argues that legal education reform efforts are marginalized and have limited normative impact because reformers underestimate the strategic demands of systemic change. As a result, reformers have yet to build a coherent, collective strategy for the transformation of legal education. The author contends that reformers must shift from an exclusive focus on the substance of legal education reform to adopt a new focus on strategy. Finally, the author offers some starting points on how to begin a new strategic discussion on the transformation of legal education.

July 31, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Gallup: Increasing Taxes on the Wealthy Is Lowest Priority Issue, Even Among Obama Voters

CBPP: Bush Tax Cuts Have Made Tax Code Less Progressive, Delivered Windfall to Rich

CBPPCenter on Budget and Policy Priorities:  Bush Tax Cuts Have Provided Extremely Large Benefits to Wealthiest Americans Over Last Nine Years:

The tax cuts first enacted under President Bush in 2001 and 2003 have made the tax code less progressive and delivered a large windfall to the highest-income taxpayers. Tax Policy Center estimates for the years 2004 to 2012 (the years for which TPC provides data that are comparable from year to year) give us a sense of the cumulative effect of these tax cuts:

  • The average tax cut that people making over $1 million received exceeded $110,000 in each of the last nine years — for a total of more than $1 million over this period.
  • The tax cuts made the tax system less progressive. In each of the nine years from 2004 through 2012, the tax cuts increased the after-tax income of the highest-income taxpayers by a far larger percentage than they did for middle- and low-income taxpayers. For example, in 2010, the year in which all of the Bush income and estate tax cuts were fully phased in, they increased the after-tax income of people making over $1 million by more than 7.3%, but increased the after-tax income of the middle 20% of households by just 2.8%.

At a time of pressing fiscal problems and growing income inequality, continuing such large windfalls for the highest-income taxpayers is unaffordable.

July 31, 2012 in Tax, Think Tank Reports | Permalink | Comments (6) | TrackBack (0)

Dispelling the Fog About Direct Taxation

James Campbell, Dispelling the Fog About Direct Taxation, 1 Br. J. Am. Leg. Studies 109 (2012):

A full interpretation of capitation taxes in their historical context is here used as the key to a fresh understanding of the nature and practice of apportioned direct taxation under the Constitution. Contrary to common misconceptions, it appears that none of the key elements of the Federal powers of direct taxation – capitations, other direct taxes, and apportionment – are of uncertain meaning, or no longer of any relevance because of the abolition of slavery. Evidence for these conclusions is drawn from historical studies of taxation, records of the Constitutional Convention, Federal and state tax statutes of the period, contemporaneous economic and reference works, and from legal arguments presented in Hylton v. United States (1796). The decision in Hylton is analyzed on the basis of new documentary evidence, and found wanting – especially in the matter of the oft-repeated dicta of its Justices. Some recent discussions of direct taxation are critiqued from the vantage point of recognizing both Hylton’s misconstruals and the historical contexts of state taxation within which the provisions governing Federal taxation emerged. A clarification of the implicit criteria of indirect taxation is derived from Adam Smith’s demonstrable influence on the Founders. It is then combined with a documented tripartite definition of capitation to critique recent tax proposals, as well as the controversial individual mandate penalty of the Patient Protection and Affordable Care Act of 2010. The body of the investigation is presented in four Parts, while the Introduction and Epilogue focus on the contemporary relevance of its insights.

July 31, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Four Facts About Dividend Payouts and the 2003 Tax Cut

Jesse Edgerton (Federal Reserve Board), Four Facts About Dividend Payouts and the 2003 Tax Cut:

Recent literature has claimed that the 2003 U.S. dividend tax cut caused a large increase in aggregate dividend payouts. I document four simple facts that call this claim into question. First, the post-tax cut increase in dividend payouts coincided with a surge in corporate profits, such that the dividend payout ratio did not rise. Second, share repurchases increased even more rapidly than dividend payouts. Third, dividend payouts by Real Estate Investment Trusts also rose sharply, even though they did not qualify for reduced taxation. Finally, the stock market was forecasting an increase in dividend initiations by mid-2002, before the tax cut had been proposed.

July 31, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Monday, July 30, 2012

WSJ: Law Schools Haggle Over Scholarship Money to Fill 1L Class

HaggleWall Street Journal:  More Law Schools Haggle on Scholarships:

Getting into law school is easier than it used to be. But while the steady, postrecession drop in applications has made life easier for prospective students, it has posed new challenges for law schools.

Some schools are having so much trouble filling their seats that they are negotiating scholarships, accepting some applications long after formal deadlines, and offering up other perks to entice the best prospective students.

"I'm calling this the 100-year flood for law schools," said William Henderson, a professor of law at Indiana University and an expert in the business of law. "People are groping for models on how to deal with this but none really exist; we're in uncharted territory." ...

Giving case-by-case scholarships affords schools flexibility with students. But it also allows schools to keep official tuition levels high, said Brian Tamanaha, a law professor at Washington University in St. Louis and an expert on the legal profession.High tuition levels are often viewed as a sign of prestige or quality by the industry, according to Mr. Tamanaha.

In the past 10 years, the amount of scholarship dollars awarded to law students has nearly tripled, according to the ABA. For the 2008-09 school year, schools gave out about $816 million in scholarships, a figure that swelled to over $1 billion for the 2011-12 year.

Bruce P. Smith, the dean of the University of Illinois College of Law, conceded that the school, "like many other law schools," had considered strategies to address the fact that the school's tuition is more than many desirable students are willing to pay.

But instead of dropping tuition in order to entice students, it decided to get aggressive with scholarships. Every member of Illinois's law-school class of 2014 received a scholarship, including those off the wait list. The grants cost the school $3.6 million, according to Mr. Smith.

Meanwhile, law-school tuition is on the rise, especially at public, state schools. Average in-state tuition for public law schools went up 9% from 2010 to 2011, to $22,116, according to the ABA. That figure represents around a 1,000% increase from the levels seen in 1985 when average tuition was $2,006.

July 30, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Coyle & Polsky: Acqui-hiring

John Coyle (North Carolina) & Gregg D. Polsky (North Carolina), Acqui-hiring:

Google, Facebook, Zynga, and other prominent technology companies in Silicon Valley are buying start-up companies at a brisk pace. In many of these transactions, the buyer has little interest in acquiring the start-up’s projects or assets. Instead, the buyer’s primary motivation is to hire some or all of the start-up’s software engineers. These so-called “acqui-hires” represent a novel -- and increasingly common -- tool by which the largest and most successful technology companies in the world satisfy their intense demand for engineering talent.

To date, the acqui-hire has attracted no attention in the academic or professional legal literature. This Article aspires to fill this gap. Drawing on interviews with Silicon Valley entrepreneurs, start-up investors, buyer representatives, and lawyers, we offer the first formal description of the acqui-hire. In so doing, we seek to enrich the understanding of those already acquainted with the acqui-hire while also providing a comprehensive account of this transaction structure to the uninitiated.

The Article also identifies -- and seeks to solve -- a significant puzzle stemming from the acqui-hire phenomenon. If a large technology company wants to hire a team of software engineers, why go to all of the trouble and expense of acquiring the company that currently employs them? Why not simply hire away the individuals that it wants? We argue that the solution to the puzzle lies primarily in the way that social norms and the threat of informal sanctions shape the behavior of Silicon Valley software engineers. Although California law strongly supports the principle of employee mobility, social norms lead many engineers to pursue acqui-hires in lieu of defecting. We buttress this norms-based account with insights from prospect theory and tax law to show that the unique structure of the acqui-hire reduces its perceived and actual costs, which in turn promotes these transactions.

The Article then considers the most significant economic issue common to all acqui-hires: how to allocate the buyer’s aggregate purchase price between the software engineers and the start-up’s outside investors. We first predict that a money-back-for-the-investors norm will eventually develop and that this norm will drive allocation determinations. We then propose several contractual innovations that could be used in an attempt to augment the investors’ allocations in acqui-hires.

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

International Tax Competition and Coordination

Michael Keen (International Monetary Fund) & Kai A. Konrad (Max Planck Institute for Tax Law and Public Finance), International Tax Competition and Coordination:

This paper aims to provide a comprehensive survey of the theory of international tax competition. Starting with the standard framework, it visits the non-cooperative equilibrium of tax competition, analyses aspects of partial and regional coordination, repeated interaction, stock-flow-effects, agglomeration effects and time consistency issues in dynamic models. We discuss profit shifting in the Keen-Kanbur model and then survey frameworks to analyze countries’ bidding for firms, tax rate differentiation and preferential tax regimes, the role of information exchange and recent work on tax havens. The paper also discusses approaches that replace the benevolent government assumption by selfish (Leviathan) governments or by political processes that determine countries' decisions on their tax policy in an international context.

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

American Lawyer: Debt Crisis Looms for Law School Grads

American Lawyer op-ed:  Debt Crisis Looms for Law School Grads, by Steven J. Harper (Northwestern):

Today's law school graduates face huge amounts of educational debt -- $100,000 on average for recent classes -- and limited prospects for employment with which to repay it. Meanwhile, the nation's law schools are turning out more than twice the number of lawyers as there are law jobs. The problem is growing, but so is denial.

July 30, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Mundstock: The Borders of E.U. Tax Policy and U.S. Competitiveness

George Mundstock (Miami), The Borders of E.U. Tax Policy and U.S. Competitiveness, 66 U. Miami L. Rev. 737 (2012):

In March of 2011, the European Commission proposed that the member states of the European Union allow corporations to elect a harmonized corporate income tax. A particularly interesting feature of the proposal is that income would be allocated among the member states using a mathematical apportionment formula rather than, as currently is the law, by determining the source of income on a case-by-case basis. The E.C. proposal presents a number of interesting and important issues. One of the most interesting is how the apportionment feature of the proposal would impact business risk taking within the European Union. The European Commission believes that its proposal would provide for more efficient risk taking. This article agrees and goes further to note that, by making the E.U. a more attractive location for investment, the E.C. proposal would put the U.S. at a competitive disadvantage.

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

Tax Transparency in Kentucky

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

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

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

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

Keeping Up With the Kardashians' Taxes

PhotpHuffington Post:  Kim Kardashian and Kris Humphries: Trouble at Tax Time?, by Julian Block:

Picture a cozy household of three -- Brad Pitt, Angelina Jolie and the friendly tax man. Fact is, whether Brad, Angelina, Jennifer, Bristol, Levi, Snooki, or anyone else is hooking up, breaking up, or something in between, the odds and ends of their relationships are grist for the Internal Revenue Service mill.

Consider, for example, the splashy wedding of reality TV personality Kim Kardashian (her second marriage) to basketball player Kris Humphries (his first). They wed on August 20, 2011. Seventy two days later, Kim filed for divorce. Kris countered by seeking an annulment on the grounds of fraud (the case is still pending).

The difference between a divorce and an annulment isn't a difference without a distinction. The courts grant a divorce to mark the end of a marriage that was valid when entered into, whereas they grant an annulment to end a marriage that was void or voidable. A marriage is void when it legally couldn't have taken place -- like when one of the parties was under the age of consent at the time of the marriage or already married. Voidable is legalese for incapable of consenting -- for example, one of the parties was intoxicated or the victim of behavior like duress, coercion or force.

To a couple interested only in the fastest way to untie the knot, the question may seem to be an unimportant technicality. Those watchful souls at the IRS, however, think that there's an important difference when Form 1040 time rolls around. According to an IRS ruling, if an annulment is retroactive, the couple was never married. As a result, they had no right to file joint returns [Rev Rul. 76-255, 1976-2 CB 40].

(Hat Tip: Francine Lipman.)

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

Schlunk: Is a Law Degree a Good Investment Today?

Tax Prof Herwig Schlunk (Vanderbilt), Mamas 2011: Is a Law Degree a Good Investment Today?, 36 J. Legal Prof. 301 (2012):

There continues to be an active debate on the question of whether or not law school is a good investment. I prefer to think of the question not in terms of “whether,” but in terms of “when.” In this essay, I conduct an analysis for three current undergraduates who are considering attending private law schools. I demonstrate how such individuals should take all known costs and all expected benefits into account in making their “investment” decision. As the calculation necessarily differs dramatically from one potential law student to another, my conclusions are far less important than my methodology.

[I]n terms of lost salary, the opportunity cost of law school attendees will vary greatly from one potential attendee to another. To reflect this variation, I will undertake an analysis for each of three very different but hopefully somewhat typical potential attendees. My first such potential law student is a college graduate whom I will name Also Ran. Also Ran achieves above average grades in a relatively nonmarketable major from a middle-of-the-pack undergraduate institution; he could have earned a mere $35,000 in a non-legal job. Also Ran manages to claw his way into a third-tier private law school (with a blended US News and World Report rank of 88th) and has only a poor prospect, which I will set equal to 5% in the current market, of landing an NLJ 250 job (i.e., a “Biglaw” job). My second potential law student is a college graduate whom I will name Solid Performer. Solid Performer achieves relatively good grades in a somewhat more marketable major from a better institution; he could have earned $42,500 in a non-legal job. Solid Performer makes his way into a second tier law school (with a blended US News and World Report rank of 50th) and has a better prospect than Also Ran, but still a relatively small prospect, of landing an NLJ 250 job. Specifically, I will assume that there is an 8% chance that Solid Performer ends up starting at Biglaw. My third potential law student is a college graduate whom I will name Hot Prospect. Hot Prospect earns strong grades in a relatively marketable major from a highly-ranked undergraduate institution; she could have earned $50,000 in a non-legal job. Hot Prospect attends a first tier law school (with a blended US News and World Report rank of 19th) and has a relatively strong chance, which I will set equal to 25% for purposes of my analysis, of ending up in an NLJ 250 entry-level position.

Chart G

Chart J

Chart K

These numbers are bleak. What they say, in plain English, is that with the benefit of twenty-twenty hindsight, two-thirds of the graduates from Also Ran’s institution, four-fifths of the graduates from Solid Performer’s institution, and two-thirds of the graduates from Hot Prospect’s institution will know, as they are receiving their diplomas, that they made what has turned out ex post to be a bad investment!

Finally, it is interesting to turn the mode of calculation on its head, and thus directly confront the question of how much a legal education is worth. ...

Chart Z

[L]aw school is a very risky (and expensive) investment; it should not be entered into lightly. However, as I have already mentioned, and worth repeating again, each potential student’s calculus will be based on a host of factors unique to him or her. For some, like an English major (relatively low opportunity costs) who gets some scholarship assistance (somewhat lower out-of-pocket costs) to attend Harvard Law School (relatively high pay-off), the investment in a legal education is almost surely a no-brainer. Moreover, even for individuals facing a more challenging calculus, it may be the case that a legal education confers benefits beyond the incremental compensation that I have used to analyze the pure investment decision. For example, a law degree opens up many more avenues of potential employment, including importantly self-employment, than does a typical undergraduate degree; lawyers are found in all parts of the workforce performing all manner of jobs. Does this imply, perhaps, that some option value should be added to a law degree’s payoffs? If so, how would one measure such option value? And lastly, of course, a law degree is a professional degree; it confers considerable prestige. But alas, as I first pointed out two years ago, you cannot eat prestige.

For the 2009 numbers, see here. (The title, of course, brought to mind my article, Tax Myopia, or Mamas Don't Let Your Babies Grow Up to be Tax Lawyers, 13 Va. Tax Rev. 517 (1994).)

July 30, 2012 in Legal Education | Permalink | Comments (14) | TrackBack (0)

Alarie & Green: Policy Preferences and Expertise in Canadian Tax Adjudication

Benjamin Alarie & Andrew James Green (both of the University of Toronto, Faculty of Law), Policy Preferences and Expertise in Canadian Tax Adjudication:

Both taxpayers and governments struggle to stay on top of the various complex sources of tax law and to apply them in a myriad of different contexts. Given the potential for confusion and disagreement (not to mention the sometimes very large financial stakes involved) it would make sense to have a process for taxpayers to appeal government decisions to an expert body that can provide authoritative, reasoned and rational solutions to tax disputes. For this reason Canada, like the United States, has a specialized tax court dedicated to hearing appeals from decisions of the tax administration. Yet there is some evidence in both Canada and the US that judges in tax cases may be influenced by their own personal policy preferences or other factors extraneous to the “true” legal merits in deciding appeals from decisions of the tax administration. This paper examines in more detail appeals from tax assessments in Canada to understand the relative influence of judicial tax expertise and the policy preferences of judges on appeals to the Tax Court of Canada and the Federal Court of Appeal.

Our analysis reveals three main results: (1) policy preferences of judges matter, but not that much; (2) resources matter — a lot; and (3) there are dynamics relating to affirmation of appeals that are difficult to explain, although a desire to avoid the apprehension of bias is possible. First, there is robust evidence that policy preferences matter in the sense that there are measurable and statistically significant differences, but that they do not matter very much. Liberal appointees are only slightly more likely to favour the government than are Conservative appointees. This result is consistent with the findings in the literature where it is frequently found that there is no effect or only weak effect of party affiliations with voting patterns.

Second, the analysis consistently shows that resources matter in (1) representation; (2) the resources of taxpayers; and (3) on appeal. With respect to representation, self-represented litigants fare worse than taxpayers who are represented by tax agents, and taxpayers who are represented by agents fare worse than taxpayers who are represented by counsel. With respect to the resources of taxpayers, individual taxpayers are less successful than private corporations, and private corporations are less successful than public corporations. On appeal, the government is more selective about the cases that it appeals and is generally more successful than taxpayers, with the exception of public corporations.

Finally, we find that where Tax Court judges were appointed by Prime Ministers of different political parties the Federal Court of Appeal judge was 8% more likely to vote to affirm the Tax Court decision than where the Federal Court of Appeal judge and the Tax Court judge were appointed by a Prime Minister from the same party. It is not clear what is driving this result. One possibility is that judges may be sensitive to not wanting to appear to be politicized or partisan, and so may be more cautious about voting to reverse a judgment of a Tax Court judge with different political ties. If this is correct, it would be a striking illustration of the weak politicization of Canadian courts.

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

Sunday, July 29, 2012

TaxProf Blog Weekend Roundup

A Tax Lesson From Chief Justice Roberts

Forbes:  A Tax Lesson From Chief Justice Roberts, by Donald B. Susswein (McGladrey, Washingto, D.C.):

Chief Justice Roberts has been lambasted from both sides for his conclusion that the health care individual mandate is a tax. The left has welcomed the result but rejected the dreaded label – as though it were a scarlet “T”. The right not only detests the result but fears an unprecedented new Federal power to regulate private conduct through the tax code. As a former Majority Tax Counsel to the U.S. Senate Committee of Finance, I can readily explain why both criticisms are unfounded.

July 29, 2012 in Tax | Permalink | Comments (6) | TrackBack (0)

The New Lawyer Infographic

Gamage Participates in Health Care Reform Panel Discussion Today at SEALS

SEALs LogoDavid Gamage (UC-Berkeley) is participating in a panel discussion on Implementing Health Care Reform—What the Headlines Missed at the Southeastern Association of Law Schools 2012 Annual Conference in Amelia Island, Florida:

The 2010 Patient Protection and Affordable Care Act is important, comprehensive, and controversial. It has been called the most important piece of federal social legislation in nearly 50 years. Certain provisions—the individual mandate in particular—have garnered more attention in the press and in the courts. But there is much more to health care reform, including provisions focusing on expanding coverage, controlling costs, and improving the quality of the health care delivery system. This workshop provides an opportunity to shed light on a diverse array of issues, provisions, and populations related to or impacted by health care reform. Participants will highlight, update, or reframe a particular aspect of health care reform.

July 29, 2012 in Tax, Tax Conferences | Permalink | Comments (0) | TrackBack (0)

Saturday, July 28, 2012

Top 5 Tax Paper Downloads

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

1.  [1105 Downloads]  Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA, by Jonathan H. Adler (Case Western) & Michael F. Cannon (Cato Institute)

2.  [319 Downloads]  Making Voluntary Disclosures to the IRS, by John A. Townsend (Houston)

3.  [312 Downloads]  How the Affordable Care Act Will Create Perverse Incentives Harming Low and Moderate Income Workers, by David Gamage (UC-Berkeley)

4.  [279 Downloads]  Does the Taxing Clause Give Congress Unlimited Power?, by Erik M. Jensen (Case Western)
5.  [234 Downloads]  Top Ten Myths of Medicare, by Richard L. Kaplan (Illinois)

July 28, 2012 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

California Court Allows Fraud Cases Against Golden Gate, USF Law Schools to Proceed

Paul Campos (Colorado), Paul Horwitz (Alabama), and Law School Transparency report that the Superior Court of California has rejected demurrers by Golden Gate University and University of San Francisco law schools to consumer fraud actions filed against each of those schools, allowing the cases to proceed to the discovery phase.

On July 26, Rachel Van Cleave was named Interim Dean at Golden Gate.

July 28, 2012 in Legal Education | Permalink | Comments (2) | TrackBack (0)

Romneys Have Tax Deduction With Olympic Hopes Riding on Rafalca

DressageFollowing up on my previous posts (links below):  Bloomberg, Romneys Have Tax Deduction With Olympic Hopes on Rafalca:

Rafalca, a 15-year-old mare competing in dressage at the Olympics opening today in London, will be trying to add to the U.S. medal count and Republican presidential candidate Mitt Romney’s bottom line. Romney’s wife, Ann, who calls horses her “passion in life,” has an investment in them, including Rafalca, valued at as much as $500,000.

The couple’s tax returns classify Ann Romney’s pastime as a business that lost $77,731 in 2010, rather than a hobby, and as a passive investment instead of one they actively manage. Each of those decisions has tax consequences.

July 28, 2012 in Political News, Tax | Permalink | Comments (0) | TrackBack (0)

Brown: Law Faculty Blogs and Disruptive Innovation -- The Data

Jay Brown (Denver), Law Faculty Blogs and Disruptive Innovation: The Data:

Blogging by law faculty has been going on for more than a decade. During that period, law faculty blogs have become widespread. They have also been increasing used as authority in law review articles and court decisions. The attached paper sets out the empirical data that shows who, as of May/June 2012, is actually blogging at various law schools. This is a notoriously difficult data set to create since there is no single list of law faculty blogs. Moreover, some faculty blog at non-faculty blogs.

The data in this document includes a breakdown of the number of law faculty bloggers by law school. Interestingly, most law faculty bloggers are at law schools outside the top 50 as ranked by US News. In addition, the data includes the number of citations for law blogs in both law reviews and court opinions. One law faculty blog has over 700 citations in law reviews. Another has over 40 citations in cases.

Finally, the data includes a list of US law faculty in the top 200 of SSRN downloads for May 2012. The list includes any blogging affiliation of these faculty. The data shows that for faculty in the list but outside the top 10 law schools (based upon the ranking created by US News) many of them blog, suggesting that there is a correlation between blogging and SSRN downloads.

Update: Al Brophy (North Carolina), Brown on Law Faculty Blogs and Disruptive Innovation

July 28, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Social Businesses and Tax-Exempt Status

Gautam Jagannath (J.D. 2012, Northeastern), Comment, Using Nonprofits to Serve Charitable Goals of Social Businesses in the United States: Circumventing the Lack of Recognition of the Social Business Model in the Federal Tax Code, 32 Pace L. Rev. 239 (2012):

This Article considers the possibility of reincorporating a social business as a tax-exempt nonprofit. An analysis of the costs and benefits is performed with an eye toward federal tax law. First, I discuss the potential problems with running a social business as an exempt nonprofit. There are federal regulations that get in the way of making this a savvy decision. Second, I posit that a social business can benefit from devising a parallel exempt organization with similar or identical charitable goals. There are a few ways to do this and I consider the pros and cons. Finally, I consider the practical hurdles that social businesses face by maintaining and operating tax-exempt organizations within the context of how social businesses have positive consequences for global development.

July 28, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Friday, July 27, 2012

Should the IRS Adopt ReadyReturn?

Ready ReturnRebecca Valencia (J.D. 2010, Rutgers), Note, Get Ready for the Return! How to Make Filing Tax Returns More Efficient: Applying the State of California Franchise Tax Board's ReadyReturn to the Federal Tax System, 37 Rutgers Computer & Tech. L.J. 130 (2011):

This Note posits that the federal government, via the IRS, should offer an equivalent of ReadyReturn to federal income tax filers. It begins by reviewing ReadyReturn's development in California and explaining its operation within the state. It continues by examining whether ReadyReturn can be applied at the federal level and analyzing the legal implications of such a government-run tax-filing scheme. In evaluating ReadyReturn's pros and cons, the Note concludes that a national implementation of ReadyReturn would benefit both taxpayers and government in improved efficiency and compliance.

For criticism of the application of the California ReadyReturn to the IRS, see Jim Maule (Villanova):

July 27, 2012 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Wels: 'Territorial' Tax Reform: Homeless Income is the Achilles Heel

Bret Wells (Houston), 'Territorial' Tax Reform: Homeless Income is the Achilles Heel, 12 Hous. Bus. & Tax L.J. 1 (2012):

The article discusses the draft legislation released by the House Ways & Means Committee that would reform the US international tax regime by adopting a foreign dividends received deduction as the means to effectively adopt a territorial tax regime for the United States. The debate over international tax reform, neutrality, competitiveness, and Homeless Income has continued for more than fifty years. However, the draft legislation continues and expands the existing Subpart F regime as the primary means of protecting the U.S. territorial tax base from inappropriate tax base erosion strategies, and so it trods the same ground as existing law in that it accepts the notion that the Subpart F regime represents Congress’ answer to the Homeless Income problem. Yet, even though the Subpart F regime has attempted to represent a “backstop” to protect against inappropriate transfer pricing results, the reality is that the Subpart F regime has never been an effective “backstop” for the U.S. transfer pricing rules. Notwithstanding repeated efforts to reform the Subpart F regime, the Homeless Income problem has not been thwarted. The paper critiques the draft legislation with the objective of providing comments that will allow the proposed legislation to achieve its policy goals while policing the Homeless Income problem through the adoption of a base protecting surtax along the lines advocated in the article.

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

Foreign Tax Credit v. Foreign Earned Income Exclusion

James G. S. Yang (Montclair State University, Department of Accounting, Law and Taxation), Foreign Tax Credit versus Foreign Earned Income Exclusion Under the New Law:

This paper deals with the recent new law concerning foreign earned income exclusion and foreign housing cost allowance exclusion. It points out that the former is $95,100 in 2012, while the latter has a certain limit depending on the location in the world. Nevertheless, both exclusions do not give rise to the reduction of marginal tax rate. Instead, a taxpayer’s tax bracket is determined as if no exclusions were taken. This new tax rule has far-reaching consequences on a U.S. expatriate’s foreign tax credit and tax liability. This paper demonstrates many examples. It also investigates the problem of foreign qualified dividend in determining foreign tax credit. This paper further develops many tax planning strategies for foreign tax credit. The decision depends on whether a foreign country has high or low income and tax rate.

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

Davis: How Tax Law Differentially Values Fertility, Sexuality & Marriage

Tessa Davis (Tulane), Reproducing Value: How Tax Law Differentially Values Fertility, Sexuality & Marriage, 2 Cardozo J.L. & Gender ___ (2012):

Section 213 of the Internal Revenue Code permits a deduction for an individual’s fertility expenses, but it does not do so evenhandedly. This paper focuses on the current discriminatory effects of § 213 doctrine as it is applied to the deductibility of fertility treatments for single persons and/or homosexual couples, as compared to heterosexual, married couples. Traditional economic analysis of the Code fails to explain such discrimination, thus a new approach is required. Utilizing tools from anthropological theory, this paper recognizes and analyzes our tax code (and specifically § 213) as a cultural artifact and therein challenges the presumed objectivity of our conception of what is “medical,” “natural/normal” reproduction, and “fertility/infertility.” By revealing and reforming the normative consistencies underlying the seemingly inconsistent pre- and post-Magdalin v. Commissioner § 213 doctrine, I propose that we can embrace new forms of parenthood enabled by reproductive technologies and remedy the current discriminatory application of § 213 as applied to fertility treatment expenses.

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

Farewell, San Diego!

Usd_photoAfter seven glorious weeks in San Diego, my wife and I are hitting the road today with our dog for the 2,200-mile drive back to Cincinnati (what a way to spend my birthday!). This was my ninth summer teaching at the University of San Diego School of Law, and I am grateful to Dean Stephen Ferruolo and the kind folks at USD for having me back again. My 82 Tax I students were a joy, as they worked diligently in teams to answer 300 clicker questions over the 21 class sessions. It gets harder and harder each year to leave "America's Finest City" and our many friends there. We especially enjoyed breaking bread several times with USD's great tax faculty -- Jordan BarryKaren Burke, Mark Hoose, and Grayson McCouch.  We are looking forward to getting back to the Queen City (and the first place Cincinnati Reds).

July 27, 2012 in Legal Education, Tax | Permalink | Comments (0) | TrackBack (0)

San Jose Seeks to Hire Tax Prof

San JoseSan José State University College of Business seeks to hire a tax professor to teach undergraduate and graduate (MST) tax courses:

Qualifications: Applicants should have awareness of and sensitivity to the educational goals of a multicultural population as might have been gained in cross-cultural study, training, teaching and other comparable experience.

All applicants should have the following qualifications:

  • Possess a Ph.D., or a combination of JD/CPA or JD/MST or JD/LLM-tax and be academically qualified under AACSB standards. If ABD, completion of the doctorate will be required by the time of the appointment.
  • Demonstrate a commitment to continuous improvement in the classroom and success in teaching in an accelerated format at the Graduate level.
  • Demonstrate an ability to work in a collegial atmosphere as part of a team.
  • Possess excellent communication and interpersonal skills.
  • Experience in a large CPA firm.
  • Experience with the design and delivery of online courses and programs is highly valued.

Responsibilities: Candidate must address the needs of a student population of great diversity -- in age, cultural background, ethnicity, primary language and academic preparation -- through course materials, teaching strategies and advisement.

July 27, 2012 in Tax, Tax Prof Jobs | Permalink | Comments (0) | TrackBack (0)

Halperin: A Better Way to Encourage Gifts of Conservation Easements

Tax AnalystsDaniel Halperin (Harvard), A Better Way to Encourage Gifts of Conservation Easements, 136 Tax Notes 307 (July 16, 2012):

The author’s proposal would repeal the deduction for the appraised value of a conservation easement that is allowed by current law. Congress should consider replacing the subsidy with a program of direct grants or limited-budget tax credits administered by an expert agency. If the deduction is continued, eligible donees should be only large institutions with a large portfolio of easements and resources and motives to enforce the easement, there should be an excise tax on nonenforcement of the easement, and there should be another government agency other than the IRS involved in enforcement. The special higher allowances for the deduction of appreciated property allowed by current law should be repealed.

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

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

Colinvaux: The Conservation Easement Tax Expenditure

Roger Colinvaux (Catholic), The Conservation Easement Tax Expenditure: In Search of Conservation Value, 37 Colum. J. Envtl. L. 1 (2012):

Federal tax law has long provided a tax benefit for charitable contributions of easements for conservation purposes. A fundamental problem with this conservation easement tax expenditure is that the measure for the tax benefit – lost economic development value – is erroneous. Use of such an erroneous measure obscures the conservation benefits of the program by focusing attention and resources on divining a largely extraneous and unhelpful number. Further, to a considerable extent, the easement program is reflexively justified and understood based on this false measure, as if it represented the conservation value of the program. The Article argues that, in theory, the measure for the tax benefit should be changed to one that better approximates conservation value. This would help ensure that the program is efficient, in the sense that conservation benefits would exceed program costs. However, the theory must account for the fact that conservation value is not, at least not yet, readily susceptible to quantification for tax purposes. Accordingly, the Article also argues that a second-best approach would be to change the measure of the tax benefit to a more objective number – the fair market value of the underlying fee interest – not only to provide greater certainty but more importantly to shift administrative and legal resources and attention to where it should be: on the conservation benefits of the program. Finally, the Article argues that serious consideration should be given to converting the deduction to a credit, both to make the tax benefit more equitable and also to provide greater flexibility, by more easily allowing for different levels of tax benefit to be provided based on satisfaction of conservation criteria, which could and should evolve over time to account for society’s changing needs. In any event, irrespective of the details, the conservation easement tax expenditure should be designed to promote a concept of conservation value – an affirmative value – that represents the best use of the land. The value of the tax expenditure should no longer be defined by what is lost, but rather by what is gained.

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

Thursday, July 26, 2012

William & Mary Dean on 'Late' Law School Applications

William & MaryFollowing up on yesterday's post, 28 of the Top 50 Law Schools Are Still Accepting Applications for Entering 1L Class:  William & Mary Dean Davison M. Douglas agreed to let me share his response:

I read your blog today citing the Campos blogpost about law schools still seeking applications.

From where I sit, this story is completely overblown.

Here at William and Mary Law School, we’ve had the following statement on our website for years (we never take it down):

 “March 1: Application deadline. Applications received after the deadline will be reviewed, but your chances of being offered admission may be significantly decreased.”

Many schools have similar language.

Do we typically receive a few applications after March 1? Yes, a handful. Do those applicants gain admission? Occasionally. An example might be the spouse of an active duty member of the military who gets transferred to one of our nearby military bases in late spring. The spouse, who was set to attend another law school, applies late to our law school so that he won’t have to live apart from his wife. The person is a strong candidate and we accept him.

Do we actively seek out applicants after our March 1 deadline? No.

Are we still trying to attract applicants here at William and Mary for the incoming class of 1Ls? No. Our class is set.

What Campos missed is that the willingness of law schools to accept applications after the stated deadline is pretty standard. It says nothing about a law school’s actual enrollment needs. My guess is that he never noticed that language on law school websites before.

July 26, 2012 in Legal Education | Permalink | Comments (4) | TrackBack (0)

Did Barack Obama Underreport His Income to IRS?

American Thinker:  Did Barack Obama Underreport His Income to IRS?:

President Barack Obama released his recent personal finance records in 2008, which included his 2004 U.S. Individual Income Tax Return and Senate Annual Finance Report. President Obama's records for 2004 do not reconcile with the State of Illinois Comptroller's Office. There are inconsistencies in the total compensation received as an Illinois State Senator. The largest error likely is President Obama's omission of a "Leadership Stipend" of over $8,000. This stipend should have been recorded as income.

July 26, 2012 in Political News, Tax | Permalink | Comments (6) | TrackBack (0)

Wells: Section 7874 Has Not Stopped Corporate Inversions

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

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

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

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

Tax Foundation: CBO Data Shows Increasing Redistribution in Tax Code

Tax Foundation logoTax Foundation:  CBO Report Shows Increasing Redistribution in the Tax Code Despite No Long-term Trend in Income Inequality:

Earlier this month, President Obama renewed his pledge to raise taxes on high-income earners, premised upon the belief that they do not pay their “fair share.” However, the latest data reveals that their share, whether fair or not, has actually gone up in recent years, while the share paid by everyone else has gone down.

Figure 1

Figure 2

Figure 4


July 26, 2012 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

1% of Lawyers Still Use Dial-Up Internet Access

ABA Tech Survey, A Third of Lawyers Use Tablets, a Few Still on Dial-Up:

Compelling insights about cloud computing, data backups, e-discovery, mobile computing, security, and social media highlight the American Bar Association's 2012 Legal Technology Survey. The survey received 5,076 responses from attorneys at outfits of various sizes, from solo shops to mega-firms.

In firms with at least 500 attorneys: ... 4.2% have been retained because of blogging or social media actions. ... [A]t firms of 100-499 attorneys: 13.6% have been retained because of blogging or social media actions. ...

For smartphones, the overall breakdown by platform is Apple iPhone (49.3%), BlackBerry (30.8%), Google Android (18.4%) ... BlackBerry still leads in firms of 500 or more attorneys, with a 57% share.

Tablet computers are used by 33.1% of attorneys -- and 90.9% of those use the Apple iPad.

Regarding computer operating systems, 86% of all respondents use Microsoft products ... compared to 6% using versions of the Apple Macintosh. ...

1.9% of respondents still use dial-up internet access in firms of 100-499 attorneys. Overall, 1.1% of respondents use dial-up.

July 26, 2012 in Legal Education, Tax | Permalink | Comments (2) | TrackBack (0)

ABA Tax Section Seeks to Hire Pro Bono Staff Counsel

ABA Tax Section Logo (2012)The ABA Tax Section is seeking to fill the position of Pro Bono Staff Counsel:

Hiring range: $68,900- $76,900

Manages and oversees pro bono projects of the Section of Taxation which includes Adopt-a-Base Military VITA (Volunteer Income Taxpayer Assistance), Calendar Call program with the U.S. Tax Court and other outreach programs to low income taxpayers. Also acts as staff liaison to Committee on Low Income Taxpayers and Pro Bono. Includes legal writing, research, public policy development and public speaking.

Education:  Doctoral Degree (JD, PhD)

Experience:  JD and admission to the bar in at least one jurisdiction. At least 4 years working in relevant specialized area of law. High level of skills at legal writing and research, oral and written communications, and organizational skill. Substantial experience in policy analysis.

July 26, 2012 in ABA Tax Section, Tax, Tax Prof Jobs | Permalink | Comments (2) | TrackBack (0)

55 Year Old CPA With 169 LSAT Sues Baylor Over Admissions Denial, Says His 3.2 GPA Was Earned Before Grade Inflation

KampsFollowing up on my previous post, Baylor Law School Sends Mass Email With Personal Data on Each of its 442 Admitted Students (Apr. 6, 2012):  C. Michael Kamps, a CPA who was denied admission to Baylor Law School, has filed an age discrimination lawsuit agains the school based in part on the improperly released data, claiming that his 169 LSAT was higher than 97% of Baylor's admitted class and that the school failed to take into account the fact that his 3.2 GPA from Texas A&M (Class of 1979) was earned in the days before rampant grade inflation.

July 26, 2012 in Legal Education | Permalink | Comments (3) | TrackBack (0)

Joint Economic Committee: Cost and Consequences of the Federal Estate Tax

Joint Economic Committee Republican Staff Study, Cost and Consequences of the Federal Estate Tax: An Update (July 25, 2012):

This study confirms that the cost of the estate tax far exceeds any benefits it produces. This study updates and extends two previous Joint Economic Committee studies on the estate tax, building on these previous studies to reflect updated data and legislation.

Figure 2

Figure 4

Figure 10


July 26, 2012 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Throwing Granny Off the Tax Cliff

Dividend LogoWall Street Journal op-ed:  The Tax Cliff Endangers Seniors:

Most people know that the U.S. government is rapidly approaching the edge of a fiscal cliff that will raise taxes for millions of Americans—at every income level and age. What is less known is that seniors, many of whom depend on investment income to fund their retirement, will be hurt the most.

If Congress fails to act, tax rates for investment income will soar beginning Jan. 1, 2013. The top tax rate on capital gains will jump to 23.8% from 15% and the top rate on dividends will nearly triple to 43.4% from 15%. ...

Now is not the time to raise tax rates on investment income—even if limited to upper-income taxpayers. Raising taxes on dividends and capital gains will have a devastating, domino-like effect that would hurt the economic security of millions of Americans at every income level.

Given the low rates on interest-bearing investments such as certificates of deposit, many older investors have turned to dividend-paying stocks to supplement their income. ...

When Congress set the top tax rate on dividend income at 15% in 2003, it established a link between the top dividend rate and the top tax rate paid on long-term capital gains. Parity between dividend and capital gains tax rates is a critical issue—we cannot have our tax code picking winners and losers. Individual investment decisions should be driven by the markets and the performance of the companies themselves. ...

It is important to remember that if a company decides to pay dividends, the earnings already are taxed twice—first at the corporate level when the company pays taxes on its earnings (at a federal statutory rate of up to 35%), then later at the individual level when shareholders receive the dividends.

According to a study prepared this year by Ernst & Young for the Alliance for Savings and Investment, the top U.S. integrated dividend tax rate is currently 50.8% (when both corporate and individual taxes are factored in). If the current rates expire, this rate will rise to 68.6%—the highest level among developed nations. ...

With the economy still struggling, now is not the time to reduce dividend income through higher taxes. Our grass-roots advocacy campaign, Defend My Dividend, has a simple message for Congress: Keep tax rates on dividend income low and in line with the tax rates on capital gains. It's good for American businesses, good for the economy, and good for all investors—especially seniors.

Update: CBPP, Scaring Seniors on Capital Gains:

“Seniors . . . will be hurt the most” if policymakers let the tax rates on capital gains and dividends rise next year as scheduled, a Wall Street Journal op-ed today argues. This is simply false. The data clearly show that raising the rates would have little or no impact on most elderly households.

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

Wednesday, July 25, 2012

Penn State: Proposed Changes Won't Close Carlisle Campus, Threaten ABA Accreditation

Penn State LogoHarrisburg Following up on yesterday's post:  Harrisburg Patriot News, Penn State Plan Wouldn't Close Dickinson School of Law Campus:

The Patriot-News incorrectly reported on Wednesday that the Penn State Dickinson School of Law is taking measures that would close the campus in Carlisle. School officials say they intend to keep the Carlisle campus operating.

Also, the story incorrectly reported that the steps could cause the Carlisle campus to lose its accreditation. The law school has campuses in Carlisle and State College, and the ABA accreditation reflects the entire law school.

Penn State’s law school appears poised to make major changes to save money. Those changes could include breaking the 2005 contract that requires the university to operate a three-year law school at campuses in Carlisle and State College.

Critics fear that the dean of the Penn State Dickinson School of Law’s proposed options could lead to the closure of the law school in Carlisle.

According to Dean Philip McConnaughay, cost-cutting is necessary to confront a downturn in student applications, something law schools across the nation are experiencing.

McConnaughay insists the plan is to continue operating the Carlisle campus. While suggesting changes that would cut the number of undergraduate law students in Carlisle, McConnaughay has proposed new programs for the Carlisle campus in advanced law curriculum and Penn State’s School of International Affairs. ... Law students could no longer earn all credits needed for a law degree at the Carlisle campus. ...

Nearly all of the professors at the State College campus voted in favor of the changes, while nearly all professors in Carlisle favor the status quo. ...

Could the Carlisle law campus shut down? McConnaughay says no. He said no option being considered would alter what is a vibrant and substantial law school campus in Carlisle. In fact, he said most options call for a strengthened mix of legal education programs there, some of which would be offered to students seeking master’s degrees in law and to others seeking advanced legal studies.

But former law school officials fear the Carlisle campus is at serious risk of being closed by Penn State. Proposed changes would mean fewer students studying in Carlisle, making it hard to justify the expense of two campuses.

July 25, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Billionaires May Win as Democrats Split Over Estate Tax

Bloomberg:  Billionaires May Win as Democrats Split Over Estate Tax, by Richard Rubin:

Senate Democrats, who are united in support of higher income tax rates for millionaires and billionaires, are paralyzed by disagreements on how to tax the estates of the wealthiest Americans.

Lobbied by business owners and billionaires, Democrats including Mark Pryor of Arkansas and Mary Landrieu of Louisiana resisted a proposal from President Barack Obama to tax individual estates of more than $3.5 million -- roughly three in 1,000 -- at a top rate of 45%. The split among Democrats, who control the Senate, will give Republicans more influence on the issue after the Nov. 6 election. ...

As a result, when the Senate votes as scheduled at 2:15 p.m. in Washington today on a bill to extend income tax cuts that expire Dec. 31, the proposal will be silent on the estate tax. Democratic leaders in the Senate sidestepped the estate tax to focus on an issue on which almost all of them agree: Obama’s plan to let income tax cuts expire for the top 2%.

Democrats who balked at Obama’s proposal say they are worried about the effect of increasing the estate tax rate and lowering the per-person exemption to $3.5 million from $5.12 million for farms and small businesses. Republicans favor the $5.12 million exemption, which means a compromise on the issue would be more generous to estates than Obama’s plan.

One other reason, said Paul Caron, a law professor at the University of Cincinnati, is the “brilliant” public-relations move by estate tax opponents, who rebranded the issue as the “death tax,” making it unpopular even among those who will never have enough wealth to pay it. ...

Additionally, home-state interests such as Montana ranchers, represented by Democratic Senators Max Baucus and Jon Tester, and the billionaires of Wal-Mart Stores Inc. (WMT)’s founding Walton family in Arkansas shape lawmakers’ positions on the issue, said Michael Graetz, a law professor at Columbia University in New York who co-wrote a book on the politics of the estate tax. ...

 “For whatever reason, I think Democrats get kind of weak in the knees on the estate tax, and I don’t understand exactly why,” Caron said. “The estate tax really is millionaires and billionaires, so I don’t understand the optics and the politics.” Graetz said senators personally know successful business owners who are worried about the tax, and that segment of the population -- not the billionaires -- has become the dominant narrative about the estate tax. “It’s not small business owners that are paying the tax,” Graetz said. “It’s small business owners that are making the tax so difficult to impose.”

July 25, 2012 in Tax | Permalink | Comments (1) | TrackBack (0)

Will Penn State Law School Lose Accreditation for Carlisle Campus in Wake of Sandusky Scandal?

Penn State LogoHarrisburg Patriot News, Penn State Considering Moves that Threaten Dickinson School of Law's Accreditation:

Did Penn State University learn nothing about transparency during the last eight months during the Jerry Sandusky child sex abuse scandal and related fallout?

An internal memo obtained by The Patriot-News outlines at least one measure that would do away with the Dickinson School of Law’s two-campus operation and make other changes. Professors who voted on the proposals have been told not to publicly discuss them. And an advisory board, charged with ensuring Penn State meets terms of an agreement to maintain two law campuses, won’t comment.

The two-campus arrangement was approved in 2005 in drawn-out, heated negotiations after Penn State proposed moving the law school from Carlisle to State College. The university received a $25 million state grant on the condition it maintain two fully accredited campuses through June 2025.

The secretive approach to such a change couldn’t come at a worse time, said Jason Kutulakis, a law school alum and former member of law school board. “It’s outrageous that Penn State, after the mishandling of the Sandusky case, wants to go out on a limb and breach a contract,” Kutulakis said. It raises serious doubts about the university’s sincerity in the wake of promises for transparency, Kutulakis said.

In the memo, Law school Dean Philip McConnaughay, said that at least one money-saving proposal would require a waiver from the advisory board. That option calls for eliminating the program for first-year students in Carlisle. Instead, those students would attend classes only in State College. The memo said the option “better serves the long-term interests of the law school.” Among advantages he cites is a potential boost in rankings because the two-campus operation would “finally... make sense to academic observers.”

Another option would require all students to spend one semester or longer in State College. Students now can elect to study at either campus. McConnaughay said in the memo that such a change would not require a contract waiver.

The changes mean the Carlisle campus could lose accreditation. ...

[Kutulakis] said he suspects Penn State seeks to use money saved in law school cuts toward a $60 million fine imposed by the NCAA and other costs associated with the Sandusky child sex abuse scandal. ...

If Penn State moves forward on changes that violate its two-campus agreement, it wasn’t clear what, if any, type of sanctions the school might face.

(Hat Tip: Above the Law.)

Update:  Penn State has issued this response:

The Harrisburg Patriot News, Libby Gibson reporting, has published an article alleging that the law school is considering "doing away with its two campus operation" and that the law school's accreditation is "threatened" as a result.  These reports are false.  Here is what the Patriot News left unreported, despite asking Dean McConnaughay to respond to an anonymous report about challenges that have been discussed openly at the law school with all faculty, all staff, and the law school's alumni Board of Counselors: 

Hi Libby,
I'm [not in the office at the moment].  If you'd email your questions I'll be happy to answer. The downturn in JD applications and JD students is a national phenomenon, affecting all law schools, not just PSU and certainly not just Carlisle. We are responding responsibly by reducing the size of our JD class so that we continue to have students of superior credentials and so that our graduates have a greater probability of securing meaningful work upon graduation. At the same time, we are enlarging the scope of our high quality educational programs other than JD legal education, such as our LLM program and shorter term professional education programs for US. and foreign judges, lawyers and other professionals.  Carlisle is likely to be the principal location of many of these efforts, just as it is the location in which we currently are expanding our international affairs curriculum. So, even though Penn State's Dickinson School of Law, like many other top law schools across the nation, is reducing the size of our JD program and population in response to national trends, we are increasing the size and role of other law school educational programs, including in Carlisle. It would be false to portray this change in the mix of our activities as anything other than strengthening The Dickinson School of Law, including in Carlisle.  Phil
From: McConnaughay, Philip
Sent: Tuesday, July 24, 2012 2:40 PM
To: ''
Cc: Foreman, Ellen; ''; ''
Subject: RE: law school story
The law school is engaged in internal discussions about how best to respond to the national decline in J.D. degree applicants and to the increasingly fierce competition among the best law schools for the dwindling pool of especially talented J.D. applicants. 
Part of our response will be to decrease the size of our J.D. student population for the reasons I mentioned in my email [above]; exactly how we implement and achieve this reduction is an open question still under discussion.  Another part of our response will be to lower our operating expenses by reducing program and staffing duplication between our campuses and consolidating certain aspects of our J.D. program at one campus or the other. 
None of the options under consideration (and there are more than two, as you seem to assume) contemplate not maintaining a vibrant and substantial law school campus in Carlisle.  Most of the options, in fact, contemplate a more robust mix of legal education programs in Carlisle.
The only real “big news,” to use your phrase, in the possibility of consolidating certain aspects of our J.D. program at one campus or the other, is that a degree of consolidation would help free-up law school resources and personnel currently dedicated to duplicated aspects of our J.D. program and enable us to devote them instead to other high quality legal education programs, such as professional and international education, that would generate revenue and hopefully help save jobs at both of our campuses that otherwise would be threatened by declining J.D. tuition revenues.
Were the law school not to reduce the size of its J.D. population in response to the dramatic decline in J.D. applications nationally, the academic credentials of our incoming students would fall appreciably, our ability to find meaningful employment for all of our graduates would diminish, more law school graduates would graduate with high debt and no work, the reputation and stature of the law school would decline, and our best faculty and administrators would leave.  This would disserve our students, our alumni, the law school, the University and Carlisle.

Update: Penn State: Proposed Changes Won't Close Carlisle Campus, Threaten ABA Accreditation

July 25, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Tax Foundation: Tax Equity and the Growth in Nonpayers

Tax Foundation logoTax Foundation:  Tax Equity and the Growth in Nonpayers:

  • In 2010, 41% of all tax returns filed had no income tax liability. This represents over 58 million income tax filers.
  • Nonpayers have grown substantially over the last two decades. In 1990, only about 21 percent of returns had no tax liability, about half of what it is today.
  • The expansion of tax credits is the primary driver of the increased number of nonpayers. The budgetary cost of tax credits reached $224 billion in 2010.
  • Though most nonpayers of the income tax are generally low income, the number of nonpayers in middle income categories has grown. The median income of nonpayers has increased by 40% over the last 9 years.
  • The threshold at which a typical married couple with two children will likely be a nonpayer is now $47,000.

Figure 2

July 25, 2012 in Tax, Think Tank Reports | Permalink | Comments (16) | TrackBack (0)

28 of the Top 50 Law Schools Are Still Accepting Applications for Entering 1L Class

OpenIn a sign of just how desperate things are on the law school admissions front, Paul Campos (Colorado) reports that 28 of the Top 50 law schools are still accepting applications for the IL class beginning in August, including 10 of the Top 20 schools (even though their formal application deadlines passed several months ago):

  • Chicago (#5 in U.S. News)
  • Michigan (#10)
  • Northwestern (#12)
  • Georgetown (#13)
  • Cornell (#14)
  • UCLA (#15)
  • Texas (#16)
  • Vanderbilt (#16)
  • Minnesota (#19)
  • George Washington (#20)


July 25, 2012 in Legal Education | Permalink | Comments (3) | TrackBack (0)

You Say You Want a Repatriation . . .

Tax Analysts Pat Oglesby (Center for New Revenue), Repatriation to the Tune of 'Revolution', 136 Tax Notes 123 (July 2, 2012):

Making fun of proposals to grant a tax holiday for repatriated earnings of U.S. multinationals, four footnoted stanzas to the tune of the Beatles’ ‘Revolution’ say: (1) A 2004 tax holiday did not cause repatriating parents to add U.S. jobs. (2) Much of the money held offshore was artificially shifted there to avoid U.S. tax. (3) The argument that corporate distributions (as opposed to hiring) will boost the economy provokes the response, “So what?” (4) The proposed holiday schemes are budget busters. Taking issue with the those who oppose all new taxes, the piece concludes, “if in your fantasy our Uncle Sam should drown,/You don’t give a damn if your schemes bring the country down. We ought to make you pay/That tax.” A footnote-free version with added lines suitable for singing is also available via the author's blog.

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July 25, 2012 in Scholarship, Tax | Permalink | Comments (2) | TrackBack (0)