Paul L. Caron

Thursday, October 31, 2013

8th Annual Conference on Empirical Legal Studies at Penn

PennHere are the tax and legal education papers presented at last week's 8th Annual Conference on Empirical Legal Studies at Penn:


Legal Education:

October 31, 2013 in Legal Education, Scholarship, Tax, Tax Conferences | Permalink | Comments (0)

What Halloween Can Teach Your Kids About Taxes

October 31, 2013 in Legal Education, Tax | Permalink | Comments (0)

Cleveland State, AAUP Release Documents on Law Profs' Complaint Over 'Satanic' $666 Merit Raise

Cleveland Marshall LogoFollowing up on Tuesday's post, Cleveland State Law Profs File Unfair Labor Practice Charge: 'Satanic' $666 Merit Pay Raise Was Retaliation for Union Activities:

Cleveland State has publicly released its response to the  unfair labor practice charge, and the AAUP Chapter today issued this press release in response.

Cleveland Plain-Dealer, Cleveland State University's Law Professors Call Merit Raises of $666 "Satanic":

In what they are calling a satanic retaliation against unionizing, Cleveland-Marshall College of Law professors say their dean unlawfully gave merit raises of $666.

Cleveland State University's chapter of the American Association of University Professors has filed an unfair labor practice charge with the State Employment Relations Board, which certified the AAUP in June as the bargaining unit for about 37 law school faculty.

Professors claim that merit raises of $0 or $666 issued by Dean [and Tax Prof] Craig Boise on July 1 to eight union organizers were “a poorly veiled threat in opposition to AAUP’s organizing and concerted activities,” according to the complaint filed with SERB on Aug. 29. “In effect Dean Boise has called AAUP’s organizers and AAUP Satan,” it said.

The number 666 is universally considered evil and a symbol of the antichrist or the devil.

The $666 merit raise was a “function of mathematical calculation” and the lowest merit increase was initially supposed to be $727 but had to be recalculated based on an incorrect salary in the merit pool, according to a seven-page response by CSU’s chief human resources officer Jesse Drucker. That fact “eviscerates the claim that Dean Boise intentionally demonized union organizers through the amount of their merit pay increase,” he wrote in the Oct. 8 letter to SERB.

October 31, 2013 in Legal Education, Tax | Permalink | Comments (2)

Eyal-Cohen: The Favorable Regulatory Treatment for 'Small' Entities

Mirit Eyal-Cohen (Pittsburgh), Down-Sizing the Little Guy Myth in Legal Definitions, 98 Iowa L. Rev. 1041 (2013):

What is a “small business” in the eyes of the law? There is not one standard definition. Current legal definitions of a firm’s size are inconsistent and overinclusive. They vary from one area of the law to another and within various sections of the same law. They create a skewed picture and result in data distortion that reinforces favoritism toward small entities, as studies on the contribution of small businesses to the economy are greatly dependent on these studies’ delineation of the term “small.” In this time of huge deficits and rise in economic inequality, a lot of money is being spent based on the entrenched belief that small firms are the essence of our economy, which is not necessarily true. Therefore, this Article argues that the current focus on size in many legal definitions is a waste of both time and money.

This Article provides a comprehensive survey of legal definitions of small entities and the policy considerations that underlie these delineations. This Article concludes that the historical emphasis on magnitude no longer functions effectively. Current legal demarcations concentrated on “smallness” generate undesirable distributional effects, produce inefficient allocation of government resources, and defeat policy considerations of promoting entrepreneurship and economic growth. The recent proposal to integrate the Small Business Administration with other federal commerce and trade agencies into one super pro-business agency is yet one more step toward this proposed shift from a size-centered to a goal-driven approach.

October 31, 2013 in Scholarship, Tax | Permalink | Comments (1)

2004, 2007, 2013 ...

Red Sox

October 31, 2013 in Legal Education, Tax | Permalink | Comments (0)

Inflation Adjustments Affecting Individual Taxpayers in 2014

Tax Analysys Logo (2013)James C. Young (Northern Illinois University, College of Business), Inflation Adjustments Affecting Individual Taxpayers in 2014, 141 Tax Notes 413 (Oct. 28, 2013):

In this report, Young discusses 2014 inflation adjustments to parts of the individual tax system that are tied to a consumer price index year ending in August. Items adjusted by this index include the tax rate schedules, standard deductions and exemption and itemized deduction phaseouts, several minimum tax items, the gift and estate tax exclusions, and some computational elements related to the unearned income of minor children, the child credit, the earned income tax credit, adoption expenses, educational savings bonds, education credits, education loan interest, qualified transportation fringe benefits, medical savings accounts (Archer MSAs), health savings accounts, long-term care insurance premiums, long-term care insurance benefits, traditional and Roth IRA income phaseouts and contribution limits, and the section 179 expense election. Implications of the expiring provisions from tax legislation passed in the early 2000s also are discussed.

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

October 31, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Borden & Lawsky: Line-Drawing

Iowa Law Review LogoBradley T. Borden (Brooklyn), Quantitative Model for Measuring Line-Drawing Inequity, 98 Iowa L. Rev. 971 (2013):

The law draws lines. It draws lines between manslaughter and murder, negligence and gross negligence, speeding and driving legally, and capital gains and ordinary income. Those lines invariably cause undesirable results. In particular, lines in the law cause inequity because they impose different treatment on similarly situated persons. Despite this inequity, analysts generally embrace the quantitative comforts of inefficiency analysis. This Article introduces a quantitative model for measuring inequity. Consequently, the preference for quantitative measures no longer justifies the disdain for inequity analysis. Instead, democratic and philosophical efforts to assess laws should embrace now-quantifiable inequity analyses as the analytical tools of choice.

The quantitative model introduces a method for measuring line-drawing inequity. The quantitative information it yields illustrates that a line’s location affects the amount of inequity that results from enforcing that line. The model provides an opportunity to test and rethink the relationship between equity and efficiency. It demonstrates that the governed may reduce line-drawing inequity by altering their behavior to avoid negative linedrawing effects. The model also provides quantitative evidence that the perceived tension between equity and efficiency analyses is misinformed. In fact, the model demonstrates that efficiency and equity may correlate in the line-drawing context. Finally, this Article illustrates that the criteria used to draw a line may result in that line having an inappropriate orientation, and concludes that excessive inequity may signal a need to change a line’s orientation within a law or otherwise alter that law to reduce line-drawing inequity.

Sarah B. Lawsky (UC-Irvine), The Problem of Line-Drawing, 98 Iowa L. Rev. Bull. 42 (2013):

Borden’s Article makes a valiant attempt to attack a longstanding problem. The Article does not, however, sufficiently justify the assumptions on which the model it presents depends, including definitions of fairness and of normative tax liability, and it is hard to understand how the model could apply to other areas of law without requiring similarly problematic and contentious assumptions. The particular model Borden’s Article presents is, in short, too contingent to focus intuitions about line-drawing and fairness. Nonetheless, the quantitative approach to fairness has tremendous potential, and Borden’s ambitious article raises important and difficult questions.

October 31, 2013 in Scholarship, Tax | Permalink | Comments (0)

More Grim LSAT News

Excess of Democracy:  LSAT Takers Declining Sharply for the Fourth Straight Year, by Derek Muller (Pepperdine):


Josh Blackman's Blog, Which Undergraduate Majors Score the Highest on LSAT?:


The Faculty Lounge: Law School Applicant Pool Likely To Shrink Further, by Dan Filler (Drexel):

LSAC has now released data about the number of people who sat for the October LSAT. The total number of takers was down 10.9% from October 2012. The number of first time takers was down roughly 13% from last October. When you pair this data with attendance levels at recent LSAC Law School Forums (law school fairs, essentially) in Boston (down 47% from last year), Houston (down 15.4% from last year), Miami (down 16.3%), and New York (down 18%), law school admissions teams and law school deans are staring down some grim news.

Update:  Wall Street Journal Law Blog:  Number of LSAT Test Takers Is Down 45% Since 2009:

Here’s some spooky news for law schools. The number of law school admission tests administered in October is down nearly 11% from the previous year, according to new data from the Law School Admission Council.

October 31, 2013 in Legal Education | Permalink | Comments (7)

WSJ: Applications Surge to Nation's First Online Master's at Georgia Tech; Cost Is $6,600 Online v. $44,000 Residential

Georgia Tech LogoWall Street Journal, First-of-Its-Kind Online Master's Draws Wave of Applicants:

In the past three weeks, Georgia Tech received nearly twice as many applications for a new low-cost online master's program as its comparable residential program receives in a year. The degree—which uses Massive Open Online Course technology—is the first of its kind, and its popularity suggests a growing demand for online learning.

The Georgia Tech program is the first master's degree from a top-ranked university based on the technology that drives MOOCs. The only difference is it is not "open," or free, as a MOOC is traditionally defined. Students have applied from 50 states and 80 foreign countries, according to the school. To graduate, they will never have to step foot on campus and will pay about $6,600, compared with about $44,000 for residential students.

The application period for the computer-science master's program, which ended on Sunday, marks another inflection point in the growth of MOOCs, as corporations, schools and online providers team up to create more such credentialed programs. ...

Also notable among the batch of applications for the Georgia Tech program, which starts in January, is the 14-fold increase in U.S. residents. Zvi Galil, the dean of its College of Computing, said 1,854, or 79%, of the 2,359 applicants were U.S. citizens. For the residential class that began this fall, just 128, or 9%, of the 1,371 applicants were U.S citizens. Only about 150 students enrolled in the residential program, while most of the online students are expected to matriculate.

Graduate engineering programs have been dominated by foreign nationals for decades. Nearly two-thirds of all computer-science graduate students and over 70% of all electrical-engineering graduate students studying in the U.S. are from other countries. ...

Mr. Galil said he hopes to expand the Georgia Tech model to 10,000 students. The school hires an additional teacher for every 60 or so students to facilitate online chat discussions.

Every applicant with a four-year college degree who graduated with at least a 3.0 will be accepted, but that acceptance is conditional on making at least a B in the first two courses. The residential program accepts fewer than one in five applicants and that selectivity is good for the school because it enhances prestige—but Mr. Galil said qualified applicants are turned away.

A residential student recently approached Mr. Gail and complained that the online program would devalue his degree if it grows too large because so many more people would have it.

Mr. Galil said he told the student: "You're not here because you're good, you're here because you're lucky. When we admitted you, we turned away 500 other students who were as good as you or maybe better."

Update:  Inside Higher Ed, Who Applied to Georgia Tech's New Master's Program?

October 31, 2013 in Legal Education | Permalink | Comments (6)

The IRS Scandal, Day 175

IRS Logo 2

Prior TaxProf Blog coverage:

Continue reading

October 31, 2013 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, October 30, 2013

Shaviro Presents Fixing U.S. International Taxation at Columbia

DShaviroDaniel N. Shaviro (NYU) presents Fixing U.S. International Taxation (Oxford University Press, 2014) (purchase from amazon) at Columbia tomorrow as part of its Tax Policy Colloquium Series hosted by Alex Raskolnikov, David Schizer, and Wojciech Kopczuk:

Part 1, consisting of chapters 2 and 3, first reviews the basic U.S. international tax rules, and then addresses in greater detail the design challenges that they raise, along with their main incentive effects and planning implications. Part 1 could be skimmed or even skipped by readers who either are already well-versed in the operational details, or else do not wish to delve too deeply into the U.S. international tax system’s plumbing. However, it does (chapter 3 in particular) develop some points that are important to the subsequent analysis. Part 2 then shifts to a broader policy focus. To this end, chapter 4 addresses the global welfare perspective on U.S. international tax policy. Chapter 5 addresses the unilateral national welfare perspective. Finally, chapter 6 addresses the question of what practical steps might be taken to improve U.S. international tax policy.

Update:  Dan has more details here.

October 30, 2013 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kentucky Seeks to Fill Endowed Distinguished Visiting Professorship

Kentucky Logo The University of Kentucky College of Law seeks applications and nominations for the James and Mary Lassiter Endowed Distinguished Visiting Professor for one semester of the 2014-15 academic year:

The Lassiter Distinguished Visiting Professor recognizes a faculty member who has demonstrated outstanding achievement in his or her field and is not limited by subject matter. Applicants or nominees should have a record of scholarly excellence and of strong classroom teaching. The Lassiter Distinguished Visitor will teach one or two courses and will be encouraged to present workshops on research and participate broadly in the intellectual life of the College of Law. ... Review of candidates will begin upon receipt. Expressions of interest and nominations should be submitted no later than January 20, 2014 and should be directed to Professor Chris Frost, Thomas P. Lewis Professor of Law and Chair of the Lassiter Search Committee.

Two Tax Profs have served as Lassiter Distinguished Visiting Professors:  Nina Crimm (St. John's) (Fall 2011) and Beverly Moran (Vanderbilt) (Fall 2012).

October 30, 2013 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

New England Dean Takes 25% Pay Cut (to $650,000) Amidst Faculty Buyouts, Workload Increase

New England Law Logo (2013)Following up on my previous posts:

Boston Business Journal, New England Law Offers Faculty Buyouts, Dean Takes a Pay Cut:

John O’Brien, dean of New England Law, has agreed to take a pay cut of more than 25 percent this year as the Boston law school prepares to offer buyouts to as many as 20 faculty members.

O’Brien has received national attention for his $867,000 salary, which has made him one of the highest paid law school deans in the country. With a 25 percent cut, O'Brien would make about $650,000. The buyouts would go into effect for the 2014 academic year, according to a spokesman for the school. ...

Some faculty members who remain at the school may see their workloads increase. “Some faculty members who have made lesser contributions in one or more of those areas may find that future expectations will be greater."

(Hat Tip: Above the Law.)

October 30, 2013 in Legal Education | Permalink | Comments (3)

NY Times: The Marginal Tax Rate Mess

New York Times:  The Marginal Tax Rate Mess, by Nancy Folbre (UMass):

After years of partisan debate over marginal tax rates on the rich, it seems we are now destined for even more acrimony over implicit marginal tax rates on the poor. When families receiving such means-tested benefits as food stamps or housing subsidies earn more income, their benefits are reduced. That’s what means-testing means.

The reduction in benefits is accurately described as an implicit tax. The only way to avoid such an implicit tax is either to provide universal benefits or no benefits at all. On a fundamental level, means-tested programs represent an uncomfortable compromise between those who want governments to help their citizens, those who don’t, and all those in between. ...

As a result of losing eligibility for means-tested benefits, low-income and middle-income families sometimes experience much higher marginal effective tax rates (sometimes exceeding 90 percent) than those at the top of the income distribution. Phase-outs for any one program may not be large, but participation in several programs creates a cumulative effect.

October 30, 2013 in Tax | Permalink | Comments (0)

WSJ: When Students Rate Professors, Standards Drop

CourseEvalsWall Street Journal op-ed:  When Students Rate Teachers, Standards Drop:

Why do colleges tie academic careers to winning the approval of teenagers? Something is seriously amiss.

Suppose that restaurants could evaluate health inspectors, and that an inspector's livelihood depended on what the restaurant thought of the rating it had received. Would the inspector be more or less likely to identify problems at the restaurant? Would incidents of food poisoning go up or down?

No one has been reckless enough to institute such a system in the food-service industry. But a version does exist in American higher education. At the end of every semester, students fill out questionnaires about what they thought of a course. Was the course paced appropriately? Was the professor concerned that the students learn the material? Would you recommend the course to others? What overall rating would you give the professor?

These are reasonable questions, and professors often benefit from what their students say. Professors don't simply inspect. They teach, and it's helpful to know how things might have gone better from the students' point of view. The problem is that, for the vast majority of colleges and universities, student opinion is the only means by which administrators evaluate teaching. How demanding the course was—how hard it pushed students to develop their minds, expand their imaginations, and refine their understanding of complexity and beauty—is largely invisible to the one mechanism that is supposed to measure quality.

It would be one thing if student evaluations did no harm: then they'd be the equivalent of a thermometer on the fritz —a nuisance, but incapable of making things worse. Evaluations do make things worse, though, by encouraging professors to be less rigorous in grading and less demanding in their requirements. That's because for any given course, easing up on demands and raising grades will get you better reviews at the end.

October 30, 2013 in Legal Education | Permalink | Comments (5)

WSJ: J.P. Morgan's $5.1 Billion Settlement Is Tax Deductible

JP Morgan Chase LogoWall Street Journal, J.P. Morgan's $5.1 Billion Settlement Is Tax Deductible: Bank Could Save Nearly $1.5 Billion in Taxes:

J.P. Morgan Chase & Co.'s $5.1 billion settlement with Fannie Mae and Freddie Mac will be entirely tax deductible for the bank, according to a person familiar with the situation—effectively lessening the bank's true payout and shifting part of the settlement's cost to taxpayers.

The ability to deduct the cost of the settlement could save J.P. Morgan nearly $1.5 billion in taxes, based on the bank's 29.1% effective tax rate for the first half of 2013. It isn't known whether J.P. Morgan will actually go ahead and take the deduction. ...

Tax experts say it isn't surprising that a big chunk of the settlement would be deductible. "This is exactly the kind of thing everybody deducts. That's the way the tax system works," said Robert W. Wood, a tax attorney with Wood LLP in San Francisco.

October 30, 2013 in Tax | Permalink | Comments (0)

Tipping the Scales Law School Rankings

TippingTipping the Scales, Our Debut Ranking Of Law Schools — Stanford Comes Out On Top:

In our ranking, the scores for schools’ acceptance rates and median LSAT results are weighted 25% each. We reward schools that can be choosy about the students they accept.  Another 25% depends on the percentage of graduates that don their caps knowing they have jobs lined up. Along with the fact that this figure says a lot about schools’ career services, states release bar exam results at different times., and we didn’t want to give certain schools geography-based advantages. Finally, median private sector salaries and median public interest salaries count for 12.5% each. Money isn’t everything, but it’s undeniably important for the many lawyers saddled with student loans.

We left out information that’s harder to quantify and far more likely to be suspect if not downright flawed. For example, in U.S. News’ ranking, input from deans and other faculty members accounts for 25% of schools’ index scores. Those opinion surveys are little more than popularity contests because deans and faculty have only limited knowledge of what is going on at schools other than their own. And they can be deeply flawed anyway due to possible sampling errors.

For similar reasons, we also don’t believe that the opinions of legal professionals count for all that much. Most of them would only vote for their alma maters, anyway. Yet, U.S. News annually polls law firm partners, state attorneys general and federal and state judges and their opinions count for 15% of that magazine’s methodology. And we certainly don’t include a fuzzy category used by U.S. News called “faculty resources”—expenditures per student, student-faculty ratio, and library resources. Frankly, that’s all well and good but only gets in the way of the more important criteria to determine the true quality of a law school.

Here are the Tipping the Scales Top 25, along with their 2014 U.S. News rank:

  1. Stanford (#2 in U.S. News)
  2. Yale (#1)
  3. Harvard (#2)
  4. Pennsylvania (#7)
  5. Columbia (#4)
  6. Duke (#11)
  7. Northwestern (#12)
  8. UC-Berkeley (#9)
  9. Virginia (#7)
  10. Michigan (#9)
  11. Chicago (#4)
  12. NYU (#6)
  13. George Washington (#21)
  14. Cornell (#13)
  15. Georgetown (#14)
  16. Alabama (#21)
  17. Texas (#15)
  18. Minnesota (#19)
  19.  USC (#18)
  20. Vanderbilt (#15)
  21. UCLA (##17)
  22. Washington U. (#19)
  23. U. Washington (#28)
  24. Georgia State (#54)
  25. George Mason (#41)

(Hat Tip: Francine Lipman.)

Update: Brian Leiter (Chicago), Another Random Website Cooks Up Another Off-Kilter Ranking...

October 30, 2013 in Law School Rankings, Legal Education | Permalink | Comments (2)

If Your Parents Drove a Ford, Do You?

FordSoren T. Anderson (Michigan State), Ryan Kellogg (Michigan), Ashley Langer (Arizona) & James M. Sallee (Chicago), The Intergenerational Transmission of Automobile Brand Preferences: Empirical Evidence and Implications for Firm Strategy:

We document a strong correlation in the brand of automobile chosen by parents and their adult children, using data from the Panel Study of Income Dynamics. In our preferred estimates, children are 46% more likely to choose an automobile brand if their parents also chose that brand. Correlation in intrafamily brand choice could represent a causal transmission of brand preference, or it could be due to correlated family characteristics that determine brand choice. We present a variety of empirical specifications that lend support to the causal interpretation. We then discuss implications of intergenerational brand preference transmission for automakers and market outcomes, focusing on a model of Bertrand competition in the presence of brand loyalty that is transmitted across generations. We find that intergenerational transmission of brand preferences should lower equilibrium prices for vehicles targeted at parents and raise equilibrium prices for vehicles targeted at children. We further show that firms have a unilateral incentive to instill a sense of brand loyalty in their consumers, even though equilibrium pro fits may decrease when all firms do so.

October 30, 2013 in Tax | Permalink | Comments (2)

NY Times: Should Medical School Last Just 3 Years?

Medical degreeNew York Times:  Should Medical School Last Just 3 Years?:

Sandwiched between three mind-numbing years of basic science courses and hospital rotations and the lockdown years of residency training, the fourth year of medical school has long been a welcome respite for future doctors. It is the only time in their medical education when students have few requirements and a plethora of elective course offerings – and the time to go on vacation and spend time with friends and family.

I read two perspective pieces in The New England Journal of Medicine on eliminating the fourth year of medical school.

For several years, medical educators have been engaged in an increasingly heated, and occasionally cantankerous, debate about streamlining medical education and training. Many experts have suggested lopping years off the residency training process, but surprisingly few have argued for similarly dramatic changes in the medical school curriculum.

Established over a century ago as part of a sweeping change to a chaotic collection of schools, apprenticeships and fly-by-night training programs, the four-year medical school curriculum is the sacred cow of medical education. Like soldiers in lockstep, nearly all medical students over the last 100 years have spent their first two years in lecture halls learning the theory and basic science of medicine and their third and fourth years on the wards learning the practical clinical applications. Apart from a few short-lived experiments during World War II and in the 1970s to shorten the curriculum to three years, not even the most radical of educational reformers have dared stray from the norm, carefully integrating their changes well within the venerated four-year framework.

But now it appears that the convergence of physician shortages, rising health care costs and student debt has begun to tip this hallowed heifer. In 2010, responding to the physician shortage, Texas Tech University Health Sciences Center School of Medicine began offering a three-year medical school track for select students interested in primary care. Soon thereafter Mercer University School of Medicine’s campus in Savannah, Ga., followed suit; and this fall, New York University School of Medicine welcomed, in addition to its traditional four-year students, its first group of students to pursue a three-year option.

Proponents believe that the three-year programs will help address several pressing issues. By producing doctors faster, three-year M.D. degree programs help to address the critical doctor deficits projected over the next 15 years. And with almost two-thirds of medical students graduating with $150,000 or more of educational debt and more students entering medical school at an older age, the three-year option allows students to begin practicing sooner and with as much as 25 percent less debt. ...

But critics are quick to point out the failures of past attempts to do the same. In the 1970s, for example, with support from the federal government, as many as 33 medical schools began offering a three-year M.D. option to address the impending physician shortages of the time. While the three-year students did as well or better on tests as their four-year counterparts, the vast majority, if offered a choice, would have chosen the traditional four-year route instead. Many who completed their work in three years were exhausted by the pace of accelerated study; and as many as a quarter asked to extend their studies by a year or two anyway.

The most vocal critics were the faculty who, under enormous constraints themselves to compress their lessons, found their students under too much pressure to understand fully all the requisite materials or to make thoughtful career decisions.

The three-year experiments were quickly abandoned.

(Hat Tip: Ralph Brill.)

October 30, 2013 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 174

Tuesday, October 29, 2013

Osofsky Reviews Thomas' Presumptive Collection

JotwellLeigh Osofsky (Miami), Presumptive Collection: An Innovative Proposal for a Notoriously Difficult Problem (Jotwell), reviewing Kathleen DeLaney Thomas (North Carolina), Presumptive Collection: A Prospect Theory Approach to Increasing Small Business Tax Compliance, 67 Tax L. Rev. __ (2013):

In Presumptive Collection: A Prospect Theory Approach to Increasing Small Business Tax Compliance, Kathleen DeLaney Thomas tackles the extensive, and notoriously difficult to address, problem of small business tax evasion. She does so by proposing a novel solution to the problem: presumptive collection of tax liability. Her solution is elegant, balanced, and a great example of how tax law professors can integrate scholarship from other disciplines with their detailed knowledge about tax law and compliance, in order to produce valuable real-world proposals.

October 29, 2013 in Scholarship, Tax | Permalink | Comments (1)

TIGTA: IRS Cannot Account for 23% of its IT Assets

TIGTA The Treasury Inspector General for Tax Administration today released Weaknesses in Asset Management Controls Leave Information Technology Assets Vulnerable to Loss (2013-20-089):

The IRS Information Technology organization controls more than 306,000 information technology assets worth almost $720 million using the Knowledge, Incident/Problem, Service Asset Management (KISAM) system. Our review determined that weaknesses in controls over asset management create an environment in which information technology assets are vulnerable to loss. The risk of loss, theft, or the inadvertent release of sensitive information can decrease the public’s confidence in the IRS’s ability to monitor and use its resources effectively.

TIGTA found that information technology asset data successfully migrated from the legacy inventory system to the KISAM–Asset Manager. However, the audit log used to capture events was not being reviewed to ensure that only appropriate accesses were made. In addition, information technology asset data within the KISAM–Asset Manager are inaccurate and incomplete because the IRS is not following its procedures to ensure that all assets are accurately recorded and timely updated in the KISAM–Asset Manager.

TIGTA also found that ineffective inventory controls created an environment where information technology assets are vulnerable to loss. TIGTA selected 146 information technology assets to physically verify and could not locate and verify or find proper supporting documentation for 34 information technology assets worth more than $948,000. In addition, IRS offices improperly completed the annual inventory reconciliation process.

October 29, 2013 in IRS News, Tax | Permalink | Comments (7)

Bartlett: A New View of the Corporate Income Tax

New York Times:  A New View of the Corporate Income Tax, by Bruce Bartlett:

Calculating the distribution of the federal income tax is relatively straightforward, with the raw data coming directly from federal tax returns. But calculating the distribution of the corporate income tax is much more difficult. That is because corporations are artificial entities and all taxes must ultimately be paid by people. The question is who?

For many years, economists assumed that the corporate tax is paid almost entirely by shareholders. This is unquestionably true when a corporate income tax is first introduced. But over time, corporations adjust their affairs so as to minimize the tax, causing the burden to be shifted. For example, companies may try to raise prices to compensate for the corporate income tax, thus shifting some of the burden onto consumers.

Most economists don’t believe that much, if any, of the corporate tax is shifted onto consumers this way. ... While economists still believe that the bulk of corporate income taxes is paid by the owners of capital, in recent years they have come to believe that workers ultimately pay much of the tax in the form of lower wages. This results from lower capital investment due to a higher cost of capital, which reduces productivity and hence wages, and because capital investment moves to other countries where corporate income taxes are lower.

Economists have known about these effects for a long time; the trick has been estimating the effect precisely enough to incorporate the burden of the corporate tax into distribution tables. The Joint Committee on Taxation now believes that it understands the incidence of the corporate income tax well enough to do so and issued a study explaining its new methodology on Oct. 16.

ChartThe table shows the impact on the distribution of aggregate taxes, including the payroll and other taxes, by including the corporate tax, which was previously excluded from the calculation. The new methodology increases the overall tax burden by $216 billion, the revenue raised by the corporate income tax — an increase of 10.4 percent overall.

This is an important development, because cutting the corporate income tax is a bipartisan goal for tax reform. According to the Organization for Economic Cooperation and Development, the United States has the highest statutory corporate tax rate among advanced economies. This is widely believed to reduce investment in the United States, costing jobs and income for Americans.

Politically, it is now easier to show that a cut in the corporate tax rate will have benefits that are broadly shared, especially by those with incomes below $30,000. Conversely, it means that the Obama administration’s plan to raise new revenue by closing corporate tax loopholes will have a harder time gaining traction, because much of the burden will fall on those with low incomes.

October 29, 2013 in Tax | Permalink | Comments (0)

TIGTA: 51% Error Rate in Correspondence Audits of Taxpayers

TIGTA The Treasury Inspector General for Tax Administration today released Actions Are Needed to Strengthen the National Quality Review System for Correspondence Audits (2013-30-099):

This audit was initiated to determine the accuracy of the results from the National Quality Review System (NQRS) and how management uses the feedback to enhance the quality of correspondence audits. ... TIGTA evaluated a statistical sample of 127 of 2,913 correspondence audits that had been reviewed by the NQRS during an 18‑month period and found errors with penalty determinations in 65 of the audits (51 percent) that had not been detected and reported by NQRS quality reviewers.

IRS executives and stakeholders should be provided with a more comprehensive snapshot of audit quality so that needed corrective actions can be timely recognized and taken. Only one overall measure of audit quality is currently reported quarterly by the NQRS to IRS executives and other key stakeholders even though as many as 71 items are reviewed. Finally, the random selection of audits for NQRS review could not be verified. As such, TIGTA was not able to confirm the statistical validity of the NQRS results.

October 29, 2013 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)

NY Times: Greece’s Aggressive Pursuit of Tax Evaders Collects More Anger Than Money

Greek Flag (2013)New York Times:  Greece’s Aggressive Pursuit of Tax Evaders Appears to Collect More Anger Than Money:

If Greece is ever going to get its public finances in order and escape grinding budget austerity, it will have to do a better job collecting taxes. For years, economists have pointed to rampant tax evasion as one of the country’s most serious problems, depriving the government of money it badly needs.

But as the confrontation in Archanes shows, the effort to collect taxes has not gone well; having inspectors run out of town is hardly evidence that the rule of law is taking root in the Greek economy. Rather than instilling a sense of fairness, the more aggressive tax collection program in some ways appears to have aggravated the problem. In particular, attempts to cast a broad net have only fueled public anger at the wealthy, who are often seen as the main culprits.

In the early days of the economic crisis here, Greek officials optimistically predicted that tax collection would soon improve. They bragged of using aerial photographs to get tax evaders who failed to declare their swimming pools on tax returns as required. They zeroed in on doctors who reported low incomes but who somehow paid high rents in affluent neighborhoods.

But despite such headline-grabbing efforts and an astonishing number of new tax laws (22 in the last two years), some question whether the authorities are actually making progress. At the end of 2011, tax arrears totaled 45 billion euros, or about $62.1 billion. At the end of 2012, €56 billion, or about $77.3 billion. At the end of July, with the most active tax period to come, the arrears had risen to €60 billion, or almost $83 billion, equivalent to nearly a fifth of the government’s public debt.

Experts say many of the tax collection measures are not effective, especially those aimed at the rich. Taxing yacht owners, for instance, only encouraged them to moor their boats elsewhere, emptying Greek marinas.

Efforts to overhaul the tax system, many accountants say, have created such a confusing jumble of laws that it will take months, if not years, to understand them. Consolidating and reorganizing the tax bureaus, intended to save money in the long run, has created an administrative nightmare in the short run, with files arriving months after a move, if at all, union officials say.

But perhaps as troublesome, some experts say, is the growing grass-roots anger that led the customers to turn against the four tax inspectors recently in Archanes. Tax collectors have been threatened or chased out of many towns, union officials say, though only a few cases, like the one here, get much attention. ...

Next year, Greek officials will also have to give up on one tax collection system that has worked well so far: attaching property tax bills to electric bills. The courts have ruled that the threat of losing electricity is illegal.

(Hat Tip: Mike Talbert.)

October 29, 2013 in Tax | Permalink | Comments (0)

Cleveland State Law Profs File Unfair Labor Practice Charge: 'Satanic' $666 Merit Pay Raise Was Retaliation for Union Activities

Cleveland Marshall LogoThe AAUP Chapter at Cleveland-Marshall College of Law has filed an unfair labor practice charge with the State of Ohio alleging that the law school retaliated against certain faculty in the award of merit raises in 2013 and 2014 because of their union activities. Faculty were placed in four merit raise bands -- $5,000, $3,000, $666, and $0 -- based on scholarship and scholarly influence (40%), teaching as measured by student evaluations (40%), and service (20%). The complaint alleges that eight AAUP organizers received raises of $0 or $666, despite "exemplary scholarship and teaching scores." The complaint charges that the $666 raise in effect calls "AAUP's organizers and AAUP Satan." In a memo distributed to the central administration and copied to the entire faculty, one of the eight AAUP organizers alleges that:

[The $666 figure] is a universally understood symbol of the Antichrist or Devil -- one of our culture's most violent religious images. Implicitly, but unmistakably and obviously intentionally, [the Dean] used his powers to set faculty salaries as an occasion to brand his perceived opponents as the Antichrist.

In its response to the unfair labor practice charge , the university argues:

[T]he Charging Party cannot point to a single directive, or even a reference, from the Dean to a "666" or satanic merit pay amount for certain allegedly union-active faculty members. The $666 merit award was the result of mathematical division, not anti-union animus.


October 29, 2013 in Legal Education | Permalink | Comments (5)

Leff & Hackney: Tax Planning for Marijuana Dealers

Iowa Law Review LogoBenjamin M. Leff (American), Tax Planning for Marijuana Dealers, 99 Iowa L. Rev. ___ (2014):

In recent years, many states have legalized marijuana while the federal government continues to consider all marijuana sales and use illegal. But marijuana industry insiders consider not federal criminal law but federal tax law to be the biggest impediment to the development of a legitimate marijuana industry. State-sanctioned marijuana sellers are required to pay federal income taxes pursuant to § 280E, a formerly largely symbolic provision that Congress enacted to punish drug dealers, but which now could potentially drive legitimate marijuana sellers underground.

This paper proposes a tax strategy that enables state-sanctioned marijuana sellers to avoid the impact of § 280E by qualifying as a tax-exempt organization. The IRS has already stated that a marijuana seller cannot be exempt under § 501(c)(3) because the so-called “public policy doctrine” does not permit a charity to have purposes that are contrary to law. This paper proposes that a state-sanctioned marijuana seller could qualify as tax-exempt under § 501(c)(4), since the public policy doctrine only applies to charities, and § 501(c)(4) organizations are not charities. The organization would have to be operated to improve the social and economic conditions of a neighborhood blighted by crime or poverty, by providing job training, employment opportunities, and improved business conditions for commercial development in the neighborhood, just like many existing community economic development corporations that run businesses.

This novel argument is more than just a clever strategy – a “tax loophole” so to speak – to avoid the impact of § 280E. Rather, IRS recognition of tax-exempt status for marijuana sellers could actually provide a mechanism to resolve the federalism issues raised by the conflict between state and federal marijuana laws. A federal policy that incentivizes marijuana sellers to be non-profit, neighborhood-based organizations whose primary purpose is improving the neighborhood in effect ties federal approval to local support. By following this policy, the IRS would promote state and local policy harmonization by permitting community-based nonprofits to sell marijuana, but only when local community groups favored it. This would surely be better for the IRS than its current role as a lightning rod of the conflict between state and federal policy objectives.

Philip T. Hackney (LSU), No 'Fagin' School of Pickpockets Allowed -- A Response to Professor Leff on Tax Planning for Marijuana Dealers, 99 Iowa L. Rev. Bull. ___ (2014):

Professor Benjamin Leff argues in a forthcoming article entitled Tax Planning for Marijuana Dealers that a tax-exempt social welfare organization described in § 501(c)(4) may sell medical marijuana without putting its exempt status in jeopardy. He argues that (1) the “public policy” doctrine applicable to charitable organizations under § 501(c)(3) does not apply to social welfare organizations, and (2) a social welfare organization may consider “community” law and ignore federal law in considering whether its activity meets the idea of social welfare. I argue that Leff is wrong and that the public policy doctrine applicable to charitable organizations applies to social welfare organizations equally. Tax-exempt organizations derive exempt status primarily by supplying significant public benefits. Violating federal, state or local law causes public harm; thus, any tax-exempt organization, including a social welfare organization, may not violate established public policy as a substantial purpose. Additionally, the “community” requirement for social welfare organizations is to ensure the organization is dedicated to a public purpose rather than a private one. Violating any law, including federal, is more likely to ensure an organization is operating for a private rather than public purpose. Contrary to Leff’s claim therefore, this article argues that a social welfare organization may not sell medical marijuana and maintain its exempt status.

October 29, 2013 in Scholarship, Tax | Permalink | Comments (0)

FBA Tax Law Student Writing Competition


The Federal Bar Association Section on Taxation invites J.D. and LL.M. students to participate in the 2014 Donald C. Alexander Tax Law Writing Competition:

Any original paper concerning federal taxation between 20-50 double spaced pages is welcome. Seminar papers and articles submitted (but not yet selected for publication) to law reviews, journals, or other competitions are eligible.

Winning authors receive $2000 (first place) or $1000 (second place) and a trip to the FBA’s Annual Tax Law Conference in Washington, D.C. The winning entries may be published in the Tax Section newsletter The Report or in The Federal Lawyer.

The deadline is January 6, 2014. Entries may be submitted by email to Sherwin Valerio.

October 29, 2013 in Legal Education, Tax | Permalink | Comments (0)

NYLJ Special Report: Law Schools

NYLJNew York Law Journal, Special Report: Law Schools:

October 29, 2013 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 173

Monday, October 28, 2013

IRS: Bike Share Programs Are Not Tax-Free

CitibikeForbes:  Bike Share Programs Are Not Tax-Free, Says The IRS, by Robert W. Wood:

Along with other unpopular things the IRS has done recently, you can add treating bike share benefits as taxable. Bike share programs are primarily for short-term use in urban areas as alternatives to private vehicles, taxis or mass transit. Bikes are rented at one docking station and may be returned there or at any other docking station. The stated goals are reducing traffic congestion, noise and air pollution.

And are they tax-free? Nope, not according to the IRS. The IRS was asked to approve bike share as qualifying for the Transportation (Commuting) Benefits Program under Fringe Benefit Rules for transit. I’ll explain what this means, but the short answer is that the IRS says no. The IRS concluded that expenses an employee bears participating in a bike share program do not qualify for the favorable tax treatment provided for qualified transportation fringe benefits. [IRS Information Letter 2013-0032]

October 28, 2013 in Tax | Permalink | Comments (1)

De Geest Presents The Legal System Is Better Than Tax at Reducing Income Inequality Today at Loyola-L.A.

DeGeestGerrit De Geest (Washington University) presents Removing Rents: Why the Legal System is Superior to the Income Tax at Reducing Income Inequality at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

Reducing income inequality is, in the eyes of many, one of the major political issues of this time. The conventional political approach to reduce income inequality is to raise taxes for the wealthy and redistribute the proceeds to the poor. This approach finds support in the economic literature, which postulates that redistribution through the tax system is more efficient than through the legal system.

I argue instead that the legal system is intrinsically superior at reducing income inequality — at least to the extent that inequality is not caused by effort or talent differences but by rents (profits that would not have been earned in a perfectly competitive and transparent economy). The legal system is superior because it can address the specific market failures that make rents possible. This way, it can prevent income inequalities from occurring in the first place — an ex ante approach. The income tax system, by contrast, tries to correct a problem ex post — after it has already occurred.

Rents can be seen as implicit commodity taxes, the proceeds of which go to private individuals or companies rather than to the government; just like explicit commodity taxes, they cause labor and price distortion. Legal rules that prevent rents therefore reduce labor and price distortion. Income taxes, by contrast, increase labor distortion and leave the price distortion unaffected. They are less efficient at redistributing income because they are an overly broad instrument, treating income from rents and hard work alike.

This finding has major implications. The first is that trade-offs between equity and efficiency should be made in the legal system whenever legal rules generate or reduce rents. The second is that rents (and ‘windfalls’) should be considered as costs, rather than as zero-sum effects, in law and economics models.

Theodore Seto (Loyola-L.A.) is the commentator.

October 28, 2013 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Leviner Presents The Three Goals of Taxation Today at McGill

Leviner (2013)Sagit Leviner (Ono Academic College, Israel) presents Contemplating on the Meaning & Attainment of the Three Goals of Taxation in Honoring Arie Lapidot (Hebrew University Press, 2014) (with Tali Nirat (Israel Civil Rights Association)) at McGill today as part of its Fourth Annual Tax Policy Colloquium hosted by Allison Christians:

Why do we need a tax system? Do we want the tax system to only finance public goods and services or do we also intend it to redistribute wealth and regulate human behavior? What are the different means available to advance each goal and the likely (as well as unlikely) tension that might built up when utilizing these means and pursuing the different goals? This chapter seeks to address these questions in order to present the building-blocks for a clear and accessible analysis of the goals of taxation. Specifically, the chapter addresses these goals in the context of the Israeli tax system while placing the analysis in a broader theoretical and empirical setting.

October 28, 2013 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

NY Times: The Case for Higher Taxes on the Ultrawealthy

MonopolyNew York Times:  Plan to Tax the Rich Could Aim Higher, by James Stewart:

Mr. de Blasio has proposed raising taxes on the wealthy, whom he defines as those making more than $500,000, to pay for prekindergarten and after-school care. This may be a laudable goal, but people making $500,000 who are actually living and working in the city already pay high federal, state and local income taxes as well as property taxes. They’re not the ones buying apartments in places like One57. ... Mr. de Blasio’s proposal would have little, if any, effect on them. They pay no city income tax and comparatively low property taxes even as the city’s services prop up the value of their trophy real estate.

Tax law in New York City is determined by New York State, not the city, so the mayor has only the power of persuasion. But the mayor can be a strong advocate. A tacit goal of the Bloomberg administration seems to have been to woo the world’s superrich with generous tax treatment, in what seems to be a continuing global competition with London, Hong Kong and Singapore. That’s not all that surprising, considering that Mr. Bloomberg is a billionaire himself, with a primary residence in New York City, a $20 million apartment on London’s Cadogan Square and a getaway in Bermuda. Attracting the superrich may well bolster some tax revenue and confer benefits on the city and its more ordinary residents, but the question remains, can and should they be asked to pay more?

“It certainly might be more palatable for a new mayor, subject to the approval of the Legislature, to inflict pain on those whose resident status is purely a fiction of the law, rather than on real residents, meaning those who are domiciled in New York and vote there as well,” said Robert Willens, the president of a tax and accounting service in New York City and adjunct professor at Columbia Business School. “I can see this sort of a change as one that a new mayor would seriously consider.”

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October 28, 2013 in Tax | Permalink | Comments (0)

Tax Policy Isn't the Purview of Preachers

Wall Street Journal op-ed:  Tax Policy Isn't the Purview of Preachers, by Nicholas G. Hahn III (Editor,

When Congress ended the government shutdown last week and arranged to resume the debt-ceiling fight in February, no doubt many Americans prayed that next time around there would be less partisan behavior from lawmakers on both sides of the aisle. A similar request should be made of religious leaders, many of whom have lately sounded more like politicians than pastors.

When ... the government closed its doors, the conference of bishops issued an "action alert" urging Catholics to contact their representatives about supporting a plan to raise the debt ceiling and "replace sequestration with a balanced plan that includes revenues as well as responsible spending cuts," among other demands. ...

The bishops and other clergy in the Circle of Protection go well beyond their competencies when they make such policy prescriptions. Speaking about the moral issues of the day is certainly within their pastoral purview, but the bishops' calls to raise revenues (aka taxes), for instance, or eliminate "unnecessary" military spending are not. ...

The Bible offers some perspective on the intersection of politics and religion. In the Gospel of Mark, Jesus was asked by the Pharisees: "Is it lawful to pay the census tax to Caesar or not? Should we pay or should we not pay?" He responded, "Repay to Caesar what belongs to Caesar and to God what belongs to God."

In his answer, Jesus didn't simply endorse political authority, as is commonly supposed. Instead, he designated roles in public life. Politicians do politics. People pay taxes. And the faithful are to properly form and follow their consciences. Jesus didn't offer a specific amount that he thought would be right for the census tax or suggest how the government should spend it. Today's politicking preachers might want to consider that the next time someone proposes a Faithful Filibuster.

October 28, 2013 in Tax | Permalink | Comments (5)

Leiter's Law School Reports and Leiter's Law School Rankings Join Law Professor Blogs Network

LPBN LogoI am delighted to announce that Brian Leiter's Law School Reports and Brian Leiter's Law School Rankings have rejoined the Law Professors Blogs Network.  Brian was part of the network in 2005-09, and we had a chance to reconnect over dinner when he came to Pepperdine ten days ago to deliver a lecture sponsored by the Glazer Institute for Jewish Studies on his book Why Tolerate Religion? (Princeton University Press, 2012).

With the support of our sponsor Wolters Kluwer Law & Business/Aspen Publishers, the Network is aggressively expanding by (1) recruiting law professors to launch new blogs in other areas of the law school curriculum not currently covered by the Network; and (2) affiliating with existing blogs edited by law professors. We offer bloggers the premier blogging platform and the opportunity to share in the surging revenues generated by re-design of the Network.  For more information, see here.

October 28, 2013 in Legal Education | Permalink | Comments (0)

Red Sox Nation Extends to Uganda

My wife and I were delighted to host a dinner last night for six judges from Uganda who are visiting Pepperdine this week, along with my faculty colleagues Bob Cochran, Jim Gash, and Chris Goodman. It was great to introduce the judges to American baseball and Red Sox Nation -- they had never heard of Bucky Dent or Bill Buckner (not to mention Cowboy Up, the Bloody Sock, or Big Papi).

Red Sox

TaxProf Blog obsession with coverage of the Red Sox:

October 28, 2013 in Legal Education, Tax | Permalink | Comments (1)

Washington Post Profile of Marty Sullivan

SullivanWashington Post, Marty Sullivan Figured Out How the World’s Biggest Companies Avoided Billions in Taxes. Here’s How He Wants to Stop Them:

It was a humbling experience for the chief executive of the world’s most valuable company. Hauled before a Senate panel, Apple’s Tim Cook had to explain how an American company whose American engineers had created the iPhone and the iPad was able to avoid paying any taxes on billions of dollars in profits generated by those products — not to United States, not to any country. The only defense the Cook could conjure up for Apple “stateless” income was that it was all perfectly legal.

A few miles away in Arlington, a 55-year-old economist named Marty Sullivan sat on a folding metal chair at a card table in the garage of his modest brick home and watched the hearing unfold on his laptop computer. Sullivan is one of those unheralded members of the permanent Washington establishment who make things work, at least when the politicians let them. And for two decades, from the same home office, Sullivan has been exposing the tax-dodging schemes of multinational corporations in the columns of Tax Notes, a must-read publication for tax lawyers, accountants and policy wonks.

It was Sullivan who shined an early light on how companies had finagled “transfer prices” — the price one division charges another for parts or services — to shift profits to low-tax jurisdictions.

It was Sullivan who had called out the big drug and tech companies for transferring ownership of their patents and trademarks — the source of much of their profits — to subsidiaries in Ireland and other low-tax jurisdictions.

It was Sullivan who highlighted the absurdity of tax havens in which just a handful of multinationals claimed to earn annual profits that were several times the country’s entire GDP.

And it was Sullivan who in 2010 pieced together from public filings that Apple had understated its reported profits to hide the fact that it was paying a tax rate of less than 2 percent on its overseas profits, shining the spotlight on Apple’s tax avoidance schemes.

(Hat Tip: Joseph Burke, Bob Kamman.)

October 28, 2013 in Tax, Tax Analysts | Permalink | Comments (1)

The IRS Scandal, Day 172

IRS Logo 2

Wall St. Cheat Sheet:  Here’s Why the GOP Still Hate the IRS:

Last week we discussed just how much American’s don’t trust their government post-shutdown. Still, there was a happy aside noting how much they do like their government agencies — especially the Centers for Disease Control (at 75% positive), NASA (at 73%), the Department of Defense (at 72%), the Veterans Administration (at 68%), and the Department of Homeland Security (at 66%) — according to the Pew Research Center.

The IRS was the lone recipient of majority holding reproach with only 44% positive ratings and 51% critical. Of those that held the IRS in good regards, very few of them were Republicans — a mere 23%. The positive views remaining were taken up by a much larger 65% of Democrats and 40% of independents.

But why the angry Republican tilt to these findings? A likely explanation lies in a Scandal earlier this month that centered around accusations that the IRS had been targeting conservative Republican groups. On October 9, the Judicial Watch — a conservative lobbying group — filed a suit against the agency with Watch president, Tom Fitton, quoted as saying they intended to “cut through the Obama administration cover-up of its IRS scandal,” according to the Washington Times.

“One of the most pressing questions, of course, is, ‘What did the president know and when did he know it?’ We know that former IRS commissioner Douglas Shulman and his political aide, Jonathan Davis, visited the White House hundreds of times during the Obama IRS witch hunt. This may help explain why the IRS is now stonewalling our FOIA requests and forced us to go to federal court,” said Fitton.

Prior TaxProf Blog coverage:

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October 28, 2013 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, October 27, 2013

WSJ: States You Shouldn't Be Caught Dead In

Wall Street Journal Tax Report:  States You Shouldn't Be Caught Dead In: Investors Need to Contend With Growing State Estate and Inheritance Taxes, by Laura Saunders:

Nineteen states and the District of Columbia, home to just over one-third of the U.S. population, levy an estate tax on the assets of people who die or an inheritance tax on heirs receiving assets. Maryland and New Jersey have both, although each allows offsets to prevent double taxation. ...


In January, Congress voted to keep Uncle Sam's inflation-adjusted estate exemption above $5 million per individual ($10 million per married couple). The change excluded almost all Americans from the federal levy, so state-level taxes loom larger by contrast. (This year, the federal exemption is $5.25 million.)

Many states also have far smaller exemptions than Uncle Sam's. The threshold is $1 million for estate taxes in Massachusetts, New York, Oregon and Minnesota, and just $675,000 in New Jersey. Pennsylvania's and Iowa's inheritance taxes have no exemption in some cases. However, all states allow surviving spouses to inherit tax-free from their partners. ... Only Delaware and Hawaii track the U.S.'s $5 million-plus exemption. ... Rates can be high as well. The top rate often is double digits, with Washington state's the highest: 20%. Most state exemptions aren't indexed for inflation, extending the tax's reach over time. ...

Are these taxes effective—that is, do they raise more revenue than they lose when residents ... decide [to] go elsewhere? Economists are divided, and so are the states.

October 27, 2013 in Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper returning to the list at #5:

October 27, 2013 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 171

IRS Logo 2

The Western Center for Journalism, As IRS Scandal Heats Up, Media Look the Other Way:

The American Center for Law and Justice recently filed its second amended complaint against the U.S., the IRS, and a number of IRS officials. But this is another “phony” scandal, so don’t expect to hear about it in the mainstream media.

This is the scandal in which the IRS asked organizations to report donor lists, direct and indirect communication with legislative bodies, Internet passwords and usernames, social media postings, and even the political and charitable activities of family members. “Some of these organizations, even after receiving tax-exempt status, have been subjected to continued monitoring by the IRS based on the same unlawful purposes for which their applications were originally targeted,” states the ACLJ complaint, filed October 18. ...

Some Democrats may not be taking this scandal seriously, and the news media are certainly giving them a pass. “During her appearance before the House Oversight Committee a week ago, Democratic Rep. Gerry Connolly (Va.) tried to dismiss the investigation by treating the whole thing as a joke, asking [Sarah Hall] Ingram if she had ‘been consorting with the Devil,’” noted the New York Post editorial board on October 16. “When Ingram answered no, Connolly went on to ask about reports she could fly. ‘Greatly exaggerated, sir,’ she replied.”

“Getting the idea that Democrats in Congress, the White House and the IRS aren’t taking this investigation seriously?” the editorial asks.

“Looks like the joke is on us,” they conclude.

Prior TaxProf Blog coverage:

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October 27, 2013 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Rush Limbaugh’s Guide to Dodging ObamaCare Tax Penalty

Politico, Rush Limbaugh’s Guide to Dodging Obamacare Tax Penalty:

Conservative commentator Rush Limbaugh says he’s discovered a sure-fire way to skirt Obamacare’s penalties for failing to obtain health coverage next year – but you’d have to give up a fat tax refund.

The fine for failing to obtain insurance under the so-called “individual mandate,” which starts at $95 or one percent of taxable income next year, will automatically be collected by the IRS from tax refunds. But if you make sure you don’t get a refund, the agency won’t be able to collect the penalty, Limbaugh told listeners. ...

Experts say Limbaugh is correct on one point: The IRS lacks teeth in enforcing the individual mandate. The Affordable Care Act prohibits it from using liens or levies to collect the penalties, tools the agency regularly employs to collect other unpaid taxes. Nor can it criminally prosecute anyone for failing to pay up.

“One would need to make sure that he/she is not due a refund … [T]he point Limbaugh makes about refund filers, while a bit coarse, is true,” said Robert Kerr, senior director of government relations at the National Association of Enrolled Agents.

October 27, 2013 in Tax | Permalink | Comments (2)

Saturday, October 26, 2013

Polsky & Crawford: Must Contingent Fee Lawyers Capitalize Litigation Costs?

Tax Analysys Logo (2013) Gregg D. Polsky (North Carolina) & R. Kader Crawford (Robinson Bradshaw & Hinson, Charlotte, NC), Must Contingent Fee Lawyers Capitalize Litigation Costs?, 141 Tax Notes 295 (Oct. 21, 2013):

Lawyers who represent personal injury claimants are typically compensated on a contingent fee basis. In addition, it is becoming increasingly common for plaintiffs’ lawyers involved in other types of litigation, such as patent enforcement, to also use contingent fee arrangements. During the pendency of the litigation, contingent fee lawyers often pay the litigation costs necessary to prosecute the claim. For instance, contingent fee lawyers usually pay court fees, expert witness and consultant fees, deposition and court reporters’ fees, travel costs, and copying costs.

Surprisingly, the tax treatment of these payments remains stubbornly controversial. The issue is whether contingent fee lawyers can immediately deduct litigation costs in the year in which they are incurred or instead must capitalize them. If the costs are capitalized, cost recovery would be accomplished upon conclusion of the case, either through a basis offset against the lawyer’s amount realized or as a bad debt or loss deduction.

The IRS has consistently taken the position that all litigation costs paid by contingent fee lawyers are capitalized, regardless of the technical particularities of the contingent fee agreement. The IRS has thus far prevailed in all of the reported cases on the issue with one notable exception. The exception is a Ninth Circuit case, which concluded that a relatively unusual type of contingent fee agreement—called a “gross fee” contract—allowed the lawyer to immediately deduct costs. After that decision, the IRS stated that it will continue to assert that litigation costs must be capitalized in gross fee contract situations except in the Ninth Circuit.

Despite the IRS’s well-known position on litigation costs and its near-universal success in the courts, a prominent commentator on litigation-related tax issues recently wrote that he believed that “[t]he vast majority of plaintiffs’ law firms (either unwittingly or aggressively) probably do deduct client costs as they pay them, rather than waiting until the case settles.” In addition to the controversy over what current law requires, there is controversy over what the law ought to be. Recent legislative proposals would allow all contingent fee litigators to immediately deduct their costs. As might be expected, lobbyists for trial lawyers strongly support these proposals, while lobbyists aligned with common personal injury defendants have announced their opposition.

In this article, we contend that the INDOPCO regulations, promulgated in 2004, now control the issue of whether litigation costs must be capitalized. The INDOPCO regulations establish that, while lawyers who use conventional contingent fee arrangements must capitalize their costs, lawyers who use gross fee contracts can immediately deduct their costs.

We also argue that, while litigation costs incurred under gross fee contracts are immediately deductible under current doctrine, as a policy matter these costs should be capitalized. Thus, we conclude that (i) the Treasury or the IRS should issue prospective-only guidance, as contemplated by the INDOPCO regulations, to require litigation costs incurred under gross fee contracts to be capitalized, and (ii) legislative proposals that allow immediate deductions for litigation costs incurred under contingent fee agreements should be rejected.

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

October 26, 2013 in Scholarship, Tax | Permalink | Comments (0)

Dexter Presents Tax Transparency Today at HEC Paris

Dexter (2013)Bobby Dexter (Chapman) presents Tax Transparency at Hautes Études Commerciales de Paris today:

Both codified and non-codified tax provisions of highly limited applicability achieve enactment for any number of different reasons. Focusing on legislation incorporating contours not addressed by existing literature, this Article discusses the transparency issues presented by both non-codified tax law and technically opaque codified law and argues that non-codification, in particular, presents a host of problems. Wholly aside from minimizing transparency generally and stifling the necessary provision of notice to all deserving taxpayers, routine acceptance of the practice of placing some tax laws outside the Internal Revenue Code substantially enhances the likelihood that non-codified provisions can evade detection/suspicion and thus routinely serve as an avenue for the unduly favorable treatment of specific taxpayers. Moreover, non-codification of a provision which rightfully restricts its benefits to a limited number of taxpayers risks the augmentation of apparent impropriety, thwarts the pursuit of horizontal equity, and challenges the research efforts of tax professionals. Prolixity objections notwithstanding, a codification mandate in the tax arena would enhance transparency, promise the minimization of inequity, facilitate notice to all deserving taxpayers, and serve as a gravitational, centralizing force with respect to regulatory guidance and doctrinal development.

October 26, 2013 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Medical School Applicants, Enrollment Hit All-Time Highs

Association of American Medical Colleges, Medical School Applicants, Enrollment Reach All-time Highs:

Med SchoolA record number of students applied to and enrolled in the nation’s medical schools in 2013, according to data released today by the AAMC (Association of American Medical Colleges).

The total number of applicants to medical school grew by 6.1 percent to 48,014, surpassing the previous record set in 1996 by 1,049 students. First-time applicants, another important indicator of interest in medicine, increased by 5.8 percent to 35,727. The number of students enrolled in their first year of medical school exceeded 20,000 for the first time (20,055), a 2.8 percent increase over 2012.

“At a time when the nation faces a shortage of more than 90,000 doctors by the end of the decade and millions are gaining access to health insurance, we are very glad that more students than ever want to become physicians. However, unless Congress lifts the 16-year-old cap on federal support for residency training, we will still face a shortfall of physicians across dozens of specialties,” said AAMC President and CEO Darrell G. Kirch, M.D. ...

This year’s applicants reported an average undergraduate GPA of 3.54 and a combined median MCAT® score of 29.

(Hat Tip:  Inside Higher Ed.)

October 26, 2013 in Legal Education | Permalink | Comments (8)

The IRS Scandal, Day 170

Friday, October 25, 2013

New England Law Faculty Face 8-Course Teaching Loads, Mandatory Office Presence (M-F, 9-5) Unless 35% Accept Buyouts

New England Law Logo (2013)Following up on my previous post, Boston Globe: New England Law Dean's $867,000 Salary Draws Scrutiny Amidst Soaring Tuition, Bleak Job Prospects for Grads:  a source close to New England Law | Boston reports:

New England Law | Boston plans to eliminate 14 fulltime faculty positions by August 1, 2014. Depending on how one counts, this is about 35-40% of the regular faculty. The School's entering class was up in 2012, but was down in 2013 and by some accounts the School has an endowment of $80,000,000. Faculty have been told by Dean John O'Brien that these 14 positions will be eliminated according to the School's needs, regardless of tenure or seniority. An incentive plan has been offered to senior faculty and certain clinical faculty, but those who don't take it have been threatened with termination. Their decisions must be final by the end of the Fall term. Those who still do not comply or were not offered the plan, were told that if they remain, their workload during the next academic year will move from 2 to as much as 4 courses per semester and that they will be required to be at their desks from 9 to 5 each day of the work week or an equivalent time period if they are teaching evening classes.


October 25, 2013 in Legal Education | Permalink | Comments (15)

Weekly Tax Roundup