Paul L. Caron

Saturday, November 30, 2013

Tax Consequences of the Sale of a Testicle

Forbes:  This Man's Nuts: Plan To Sell Testicle For New Car Is Taxable, by Kelly Phillips Erb:

Would you sell a body part for a new car?

Mark Parisi would. He appeared on CBS’ show The Doctors to discuss with the panel his plans to sell his left testicle for $35,000. But he’s not selling his testicle for any old reason: he wants a new car. Specifically, he wants a Nissan 370Z, described on Nissan’s website as “a serious car for serious drivers.” Agreed. You have to be pretty serious to want to sell a body part in order to buy a new car. Luckily for Mr. Parisi, the sticker price for the Z cars hovers between $30,000 and $45,000. ...

Assuming his story is accurate, he is being compensated $35,000 to participate in a medical study. That amount is taxable. In a case brought before the U.S. Tax Court last year, O’Connor v. Commissioner (T.C. Memo 2012-317) the ruling emphasized that the section 61(a) of the Tax Codes defines gross income as “all income from whatever source derived unless otherwise excluded by the Internal Revenue Code.” Taxpayer made a few arguments that the payments were excludable: first, as a payment received on account of physical illness or physical sickness and alternatively, as gift. Both arguments by the taxpayer were rejected, as they would be for Parisi.... It is payment for services. And it is taxable.

November 30, 2013 in Tax | Permalink | Comments (4)

Nearly Half of All Taxpayers Are Over 45

The Tax Foundation:  Nearly Half of All Taxpayers Are Over 45:

Tax Foundation

November 30, 2013 in Tax, Think Tank Reports | Permalink | Comments (4)

American Lawyer: 'White Flight' Hits Nation's Law Schools

American Lawyer LogoAmerican Lawyer:  'White Flight' Hits Nation's Law Schools, by Matt Leichter:

As the number of applicants to law school continues to dwindle, some writers have begun pondering the demographic challenges facing law schools. Attorney Keith Lee and University of Saint Thomas School of law professor Jerry Organ recently wrote articles highlighting the decline in graduates from elite, "feeder" universities applying to law school. At the same time, recent law school applicants tend to have lower LSAT scores than their predecessors. Both of these observations fit into a developing narrative that highly intelligent and affluent college graduates are forgoing law school.

A different look at the data reveals a more profound trend: Most of the 8,651-student net decline in law school enrollments between 2010 and 2012 is attributable to white male law students going unreplaced. White women account for another big chunk of the decline


These changes in law school demographics raise an obvious question for those interested in the profession's diversity: Which law schools account for the drop in white students? Answer: Not the most popular ones. Using the most recent U.S. News & World Report rankings—not because they measure prestige precisely but because they are widely known—it's clear that the bulk of the 6,528-person decline in white 1Ls occurred at lower-ranked schools. The 101 schools with a ranking of 100 or less accounted for only 38 percent of the decrease, while the top 50 were only responsible for 17 percent, and the famed top 14 just 3 percent. The 48 remaining schools, along with the rank-not-published University of La Verne, accounted for 41 percent of the lost white 1Ls.

November 30, 2013 in Legal Education | Permalink | Comments (7)

The IRS Scandal, Day 205

Friday, November 29, 2013

Weekly Tax Roundup

November 29, 2013 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

Weekly Student Note Tax Roundup

Call for Papers: Conference on Taxation, Social Norms and Compliance

CebidThe Center for Economic Behavior and Institution Design (cebid) at Friedrich-Alexander-University (FAU) has issued a call for papers for its conference on Taxation, Social Norms and Compliance on March 6 – 8, 2014, in Nuremberg:

Prospective participants are invited to submit papers for presentation at the conference, to be received no later than December 1, 2013. Authors will be notified about acceptance by January 15, 2014. Completed papers are to be made available for posting on the conference web site no later than February 15, 2014.

The conference aims at discussing current theoretical and empirical research on the willingness and ability of taxpayers to cooperate with tax authorities. The conference welcomes submissions on all aspects of compliance of firms and individuals with laws, rules, and regulations regarding taxation and social policy, including the role of institutions, economic incentives, social and cultural norms, fairness and justice considerations, as well as the role of government objectives and performance. The organizers will also be happy to receive submissions dealing with the behavioral foundations of compliance.

Accepted papers may be submitted to a special issue of the Journal of Economic Behavior and Organization for possible publication. All accepted papers will be considered for a best paper award, which carries a prize of € 1,000. Second-class/APEX travel expenses will be refunded to presenters of accepted papers. Accommodation and meals are covered by cebid and our sponsors.

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

Manny Pacquiao's Next Fight: The Tax Man

MannyWall Street Journal editorial, Pacquiao Wins, Uncle Sam Loses: The Filipino Champ Says Tax Rates Matter:

The scorecard is in from boxing's "Clash in Cotai" this weekend in Macau. In what may have been the final fight of his career, Filipino champ Manny Pacquiao won a unanimous decision over American Brandon Rios. The other winner was Macau, which gained prestige on the global sports and entertainment scene

The biggest loser? That would be Uncle Sam, thanks to U.S. tax rates that push business overseas and hamper the economy in Las Vegas and beyond.

Mr. Pacquiao's previous 14 fights were in the U.S., but this time the former eight-division world champion specifically requested not to fight there. His stated reason: America's top federal marginal tax rate of 39.6%. "It all comes down to m-o-n-e-y," says promoter Bob Arum. "Manny can go back to Las Vegas and make $25 million, but how much of it will he end up with—$15 million?"

Since 2006 the "Pac-Man" had fought only in Nevada and Texas, where there are no state income taxes. This year new and higher federal rates made any U.S. site a "no-go," said Mr. Pacquiao's financial adviser Michael Koncz in February. ...

The "Clash in Cotai" is the latest, punchiest reminder that business can often float like a butterfly—especially when taxes sting like a bee.

November 29, 2013 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 204

IRS Logo 2Wall Street Journal editorial:  The Latest IRS Political Crackdown: An Ambiguous New Rule to Stop Americans From Influencing Elections:

The Obama Administration doesn't lack for nerve or, more to the point, disdain for the law. Even as investigations continue into the IRS targeting of conservative nonprofit groups, Treasury and the IRS are introducing a new regulation to further restrict the ability of nonprofit groups to participate in elections. ...

The IRS is soliciting comments on its draft, so here's ours: The same agency that showed it is willing to use the tax code to punish critics of the President can't be trusted to limit anyone's political speech.

Prior TaxProf Blog coverage:

Continue reading

November 29, 2013 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, November 28, 2013

What Tax Profs Are Thankful For

  • Jennifer Bird-Polan (Kentucky):  "I am incredibly thankful every day to have a job I love surrounded by people who make it fun for me to go to work. I am thankful for an amazing family who make it fun for me to come home at the end of the day. And antibiotics. I am very thankful for antibiotics."
  • Bryan Camp (Texas Tech):  "Like any good tax lawyer, I am thankful the the gains in my life have all been capital while the losses in my life have been ordinary.
  • Sheldon Cohen (IRS Commissioner (1965-69); Farr, Miller & Washington, Washington, D.C.):  "This retired tax prof thanks all of you for the first rate exchanges of ideas that occur every day on your wonderful blog. All best wishes fro a Wonderful Holkday and a Great New Year to everyone."
  • Bridget Crawford (Pace):  "Great students, tenure, and co-authors Joseph Dodge and Wendy Gerzog!"
  • Susan Daicoff (Arizona Summit):  "Having met, and learned tax from, Charlie Lyon (coffee time!), Jim Eustice, & Carr Ferguson. Doug Miller and Dennis Calfee making the 1983 Code irresistible. The energy & spirit of my tax students and how much fun we’ve had in class this fall, particularly with policy. Local tax lawyer-mentors for my students. The symmetry of teaching 'baby' tax for the first time, 30 years after learning it myself. And all of you!"
  • Cliff Fleming (BYU):  "I continue to be thankful for the opportunity to work with bright young people who think of ideas that would never have occurred to me but most of all, I'm grateful that my wife is responding well to chemotherapy and that we will be able to celebrate our 50th wedding anniversary in May."
  • Will Foster (Washburn):  "I am thankful for my colleague Amy Westbrook, who works tirelessly for the benefit of the law school and the students, even at great personal sacrifice. Beyond her inspired efforts in the classroom and as director of the Business and Transactional Law Center, Amy is an indefatigable scholar and a conscientious mentor to junior faculty members. She in the quintessence of what is right in legal education."
  • Andrew Hayashi (Virginia):  "As I sit in the airport on my way back from my first NTA meeting, I'm feeling thankful for that organization and especially for those more senior members of the tax community whose intellectual leadership and commitment to improving our systems of taxation are so inspiring, and whose friendliness and decency help create a sense of camaraderie among us."
  • Francine Lipman (UNLV):  "For the first time in over one hundred years, Hanukkah overlaps Thanksgiving! I am overwhelmingly thankful for a supportive family, law school faculty, administration, and staff and tax colleagues and friends across the country who support my tax justice writing, outreach, and service. I am deeply humbled, touched and enormously grateful for these gifts and the opportunity and resources to pay it forward."
  • James Maule (Villanova):  [See here.]
  • John Plecnik (Cleveland State):  "I am thankful for the love and support of my friends and colleagues at Cleveland State, my family and neighbors in Willoughby Hills, and my fellow tax profs and lawyers across the country. I am also thankful for my two-wheeled blue Bimmer and my four-legged, red-nosed Bimmer."
  • Paul Caron (Pepperdine):  "I am thankful for our first Thanksgiving here":

  Pepperdine 2

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

WKRP in Cincinnati Thanksgiving Turkey Drop

"As God is my witness, I thought turkeys could fly.

November 28, 2013 in Legal Education, Tax | Permalink | Comments (2)

Charitable Giving Makes You Healthier, Happier, and Better Looking

DonationsWall Street Journal op-ed:  Handsome Is As Handsome Gives: Donors to Charity Aren't Merely Generous Souls; They're Happier, Healthier and Better Looking Too, by Arthur Brooks (President, American Enterprise Institute):

The philanthropy monitor Giving USA estimates that U.S. nonprofits and houses of worship received an amazing $316 billion in 2012. More than 70% of those voluntary gifts were donated by individuals and families. ...

Survey data tell us about how Americans give. The University of Michigan's Panel Study of Income Dynamics shows that about two-thirds of Americans contributed to charity in 2009, even in the teeth of the recession. The average family contributed $1,239, or 1.6% of average income. We know that contributions climb as wealth and income rise, as one would expect. Giving also increases with age and education. Women give more than men, married people give more than singles, and religious Americans of all faiths give more than people with no religion.

American generosity is internationally exceptional and generally amazes foreigners, especially those from the social democracies across the Atlantic. As a European acquaintance once asked me, "What's in it for you?"

A reasonable question. Leave aside for a moment the metaphysical rewards of giving; as a social scientist would say, they are "empirically untestable." Here in this mortal coil, does giving boost our odds of living longer and healthier lives? Will it make us more attractive? If we fail to donate, will others think we were raised by wolves?

The answer to all these questions is "yes." For starters, happiness and giving are strongly correlated. ... Giving improves our health, too. ... Charitable giving is even good for our looks. ...

So, on behalf of my colleagues in America's millions of nonprofits, voluntary organizations and houses of worship, I want you to know we're here for you. We want to help you become healthier, happier and better looking. Preferably before the end of the calendar year.

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

The Time You Have (In Jelly Beans)

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

The IRS Scandal, Day 203

Wednesday, November 27, 2013

Veall Presents Tax Preferences and Inequality in Canada Today at Toronto

VeallMichael Veall (McMaster University, Department of Economics) presents Top Share Inequality in Canada: The Implications of Some Tax Preferences at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

According to Canadian taxfiler data, over the last thirty years there has been a surge in the income shares of the top 1%, top 0.1% and top 0.01% of income recipients, even with longitudinal smoothing by individual using three- or five-year moving averages. Top shares fell in 2008 and 2009, but only by a fraction of the overall surge. Alberta, British Columbia, and Ontario have much more pronounced surges than other provinces. Part of the Canadian surge is likely attributable to U.S. factors, but a comprehensive explanation remains elusive. Even so, I draw implications for policies that might achieve some support from across the political spectrum, including the elimination of tax preferences that favour those with high incomes, the promotion of shareholder democracy and, to maintain Canada’s relatively high intergenerational mobility, continued wide accessibility to healthcare and education. 

November 27, 2013 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Bartlett: Effective Corporate Tax Rates

New York Times:  Effective Corporate Tax Rates, by Bruce Bartlett:

Although the prospects for tax reform in Congress have dimmed of late, the lobbying activity has not. The corporate community continues to put pressure on Congress to reduce the statutory corporate tax rate, which, at 39.1 percent including state and local taxes, is the highest among members of the Organization for Economic Cooperation and Development.

What tends to get lost in the debate is how much corporations actually pay in taxes once various deductions and credits are taken into account. A corporation’s total tax bill divided by its profits is its effective tax rate. It’s hard to imagine a corporation paying anywhere close to 39 percent of all its profits in taxes, as that would mean it has no deductions or credits whatsoever.

According to the IRS, corporations had gross profits of $1.8 trillion in 2007 and taxable income of $1.2 trillion. Since the Tax Reform Act of 1986, new corporate tax preferences have widened the gap between gross income and taxable income. In 1987, gross corporate profits reported on tax returns were $328 billion and taxable income was $312 billion. Thus since 1987, taxable income has fallen to 68 percent from 95 percent of gross income. ...

On Nov. 19, Senator Max Baucus, Democrat of Montana and chairman of the Senate Finance Committee, released a proposed reform of international corporate taxation. It would tax foreign profits as earned and end deferral. Previously deferred profits would be subject to a 20 percent tax rate. Writing in The New York Times, Victor Fleischer, a professor at the University of San Diego law school, saw merit in the Baucus plan but noted that it differs sharply from one previously put forward by Representative Dave Camp, Republican of Michigan and chairman of the House Ways and Means Committee.

The path to corporate tax reform is not yet clear, but it’s useful to have two substantive proposals on the table. Regardless of how the effective corporate tax rate is calculated, it’s a bad idea to encourage companies to hold their profits abroad simply because the tax code makes it lucrative to do so.

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

Katz Posts Tax Papers on bepress

Lee: Mitigating the Effects of an Economic Downturn on Charitable Contributions

Grace Soyon Lee (Alabama), Mitigating the Effects of an Economic Downturn on Charitable Contributions: Facing the Problem and Contemplating Solutions, 22 Cornell J.L. & Pub. Pol'y ___ (2013):

Charitable giving has been a foundation of American society almost since the nation began, but the issue of how such giving should be treated for tax purposes has been the subject of frequent debate. Scholars have proposed various theories explaining why the positive effects of this deduction on both donors and donees outweigh the negative impact on government coffers of this tax expenditure, although many still criticize certain features of the deduction in its current form. However, one area of this research that has previously been neglected is how the charitable sector is affected by changes to the economy at large. Contributions to charitable organizations tend to decline during an economic downturn, and such a decline may be catastrophic to the charitable sector. In particular, an economic downturn can affect charitable organizations in three different ways. First, some organizations may experience an increase in donations but simultaneously experience an increase in demand for their services. Other organizations may experience an increase in demand for their services without experiencing an accompanying increase in donations. Finally, some organizations may experience such a steep decline in donations that their very survival is put in jeopardy, regardless of whether the demand for their services increases. In order to meet the recessionary needs of all three types of organizations, the government should: 1) convert the current charitable deduction to a refundable credit that is available to all taxpayers; 2) provide a tax credit to employers who second their employers to work for charitable organizations; and 3) provide direct funding to those charities that can demonstrate dire financial need.

November 27, 2013 in Scholarship, Tax | Permalink | Comments (0)

Oei & Ring: Fantex, Upstart, and the New Human Equity Transactions

Shu-Yi Oei (Tulane) & Diane M. Ring (Boston College), Fantex, Upstart, and the New Human Equity Transactions:

In the past year, a number of new financial transactions have emerged that allow individual investors to raise funds by offering a percentage interest in their future earnings. Unlike traditional lending arrangements, these structures essentially enable the funding provider to take a percentage of the recipient’s future return on their human capital for a specified time period, effectively getting the upside if earnings are higher and the downside risk if earnings are lower than anticipated. Such transactions represent a significant departure from traditional forms of lending and pose serious questions for the legal system. In this essay, we survey some of the issues raised by these new transactions, and suggest some possible ways in which the law can approach their regulation and taxation. In particular, we think that debt-equity analysis, a concept currently employed in the corporate tax and business context to distinguish lenders from true owners, is an exceptionally powerful frame through which these arrangements may be analyzed. The debt-equity frame compels us to acknowledge the uncomfortable possibility that these arrangements are, in substance, ownership interests in human persons.

November 27, 2013 in Scholarship, Tax | Permalink | Comments (0)

TaxProf Blog Named to Blawg 100 Hall of Fame by ABA Journal

VoteI am thrilled that, for the sixth year in a row, TaxProf Blog has been named to the ABA Journal's list of "the 100 best Web sites by lawyers, for lawyers, as chosen by the editors of the ABA Journal" -- the 2013 Blawg 100, selected from more than 3,600 blawgs. TaxProf Blog is one of fifteen blogs nominated in the Niche category. Here is the ABA Journal's description of TaxProf Blog:

Paul Caron, a professor at Pepperdine University School of Law, covers tax reform in the news and scholarship related to U.S. tax law, and he notes celebrity tax disasters. But we like TaxProf at least as much for Caron's exhaustive coverage of news and debates covering legal education. He became the sole owner of the Law Professor Blogs Network and a makeover of that group of blogs soon followed.

HallofFameI am also thrilled that TaxProf Blog has been named to the ABA Blawg 100 Hall of Fame:

In 2012, we established the Blawg 100 Hall of Fame for those blogs which had consistently been outstanding throughout multiple Blawg 100 lists. The inaugural list contained 10 inductees; this year, we added 10 more.

Three other members of our Law Professor Blogs Network also were named to the Blawg 100 by the ABA Journal:

  • The Legal Whiteboard, edited by Michele DeStefano (Miami), William Henderson (Indiana), & Jeffrey Lipshaw (Suffolk), nominated in the Careers/Law Schools category
  • Legal Writing Prof Blog, edited by Judith Fischer (Louisville), Sue Liemer (Southern Illinois), Nancy Soonpaa (Texas Tech) &  Mark Wojcik (John Marshall), nominated in the Legal Research/Legal Writing category
  • Wills, Trusts & Estates Prof Blog, edited by Gerry Beyer (Texas Tech), nominated in the Niche category

To vote, go here. (Voting ends December 20.)

November 27, 2013 in About This Blog, Legal Education, Tax | Permalink | Comments (1)

Gupta: The Afforable Care Act Tax Penalty

Tax Analysys Logo (2013)Ajay Gupta (Tax Analysts), ACA Penalty: Toothless? Hardly! Even Corporate Raiders Get Better Treatment, 141 Tax Notes 877 (Nov. 25, 2013):

The amount of the penalty under the Affordable Care Act (ACA), for almost all taxpayers subject to it, even in 2014, will significantly exceed $95. And, the plain language of section 5000A, coupled with the law governing assessable penalties, suggests that the ACA penalty, far from being toothless, may well turn out to be the tooth fairy’s gift to the Commissioner, left under his pillow by Congress. With nothing more than a cursory notice and demand, and without any pre- or post-assessment hearings, the Commissioner can move straight to collection by applying overpayments of prior, current, and future tax years. He may also find it easier to lift the statute of limitations for the ACA penalty than for an income tax. Certainly, any taxpayer challenge to the imposition of the ACA penalty will require payment in full and a suit for refund. While regulations may, in time, supply some procedural safeguards, a simple legislative fix will yield quicker and better results. Similar statutory language has been deployed in the past to guarantee procedural protections to corporate insiders and raiders subject to excise taxes on excessive payments. Surely, ordinary taxpayers confronting the ACA individual mandate deserve as much.

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

November 27, 2013 in Scholarship, Tax | Permalink | Comments (1)

Conference on Taxation, Transparency, Democracy and Development in São Paulo

SaoThe Center for Fiscal Studies at the Fundação Getúlio Vargas (FGV) (São Paulo, Brazil) host a two-day International Conference of the Center for Fiscal Studies on Taxation, Transparency, Democracy and Development: Building a Positive Agenda Between Treasury and Tax in São Paulo. The conference will address “the main themes of the current tax law from the perspective of building a positive agenda between Treasury and Tax.” The international keynote speakers are:

  • James Alm (Tulane), Paradigms of Tax Administration and Tax Planning
  • Joshua Blank (NYU), Tax Privacy as Tax Enforcement
  • Jeffrey Owens (WU Institute for Austrian and International Tax Law; former Director, Centre for Tax Policy and Administration, OECD), Opening Address


Left to right: Eurico Marcos Diniz de Santi (FGV), Isaias Coelho (FGV), Joshua Blank (NYU), Jeffrey Owens (Vienna).

November 27, 2013 in Tax, Tax Conferences | Permalink | Comments (1)

Nelson: Law Schools Can’t Sleep Through the Technological Revolution

Legal RebelsABA Journal Legal Rebels:  Law Schools Can’t Sleep Through the Technological Revolution, by Camille Nelson (Dean, Suffolk):

Indeed, neither the practice of law nor legal education can, or should, escape the innovative possibilities of technology. Law—its provision, accessibility, and very substance—is not immune from technology’s reach. There is now a vibrant conversation in the world of practice, in legal academia and administration, and in the legal services industry more generally. In fact, people in each of these communities are interacting with each other in unprecedented ways. It would seem that the “crisis in legal education” has provided just the kick in the pants for much-needed dialogue, exchange, and collaboration. It’s a start—the right start. For my part, I take seriously what Rev. Dr. Martin Luther King Jr. said—I want to be awake and active during this revolution. Though speaking to another movement his words seem prescient too in this hyper-innovative era, "there is nothing more tragic than to sleep through a revolution.” 

An increasing number of law school administrators are awakening to the idea that we need to transform how we educate the lawyers of tomorrow. At Suffolk Law, we have embraced technological innovation. This spring, we launched our Institute on Law Practice Technology and Innovation.

November 27, 2013 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 202

Tuesday, November 26, 2013

The Demise of Dickinson Law School?

Penn State Logo (2013)Paul Campos (Colorado) speculates that the current plan to divide Penn State Dickinson School of Law into two separate ABA-accredited law schools is doomed to fail in light of plummeting student enrollment and skyrocketing expenses:

While the faculty was fighting over the wedding china and custody of the kids, enrollment and revenue were both collapsing. The two campus model was premised on having around 700 JD students enrolled at any particular time, while jacking up tuition drastically (it went from $25,500 in 2004 to $42,000 this year). The school enrolled first year classes of between 205 and 230 students in the late aughts, but over the last three years enrollments have plunged. This fall PSU 132 students matriculated at the two campuses, with just 34 of those matriculants beginning their legal educations in Carlisle’s new $50 million digs. ...

Not surprisingly, this whole operation is currently bleeding red ink at what I’m told PSU’s central administrators consider an unacceptable rate. Student-faculty ratio has plunged from 17.3 to 1 in 2004 to 8.8 to 1 in 2013. ... The school is spending millions of dollars a year more than it’s bringing in — perhaps $10 million more this fiscal year — and apparently things are going to get worse before they get better, because PSU announced this week that it’s cutting tuition in half for Pennsylvania residents. ...

From a financial perspective this can’t and won’t work. Why then, given this ongoing collapse in law school operating revenue is, the university choosing to greatly increase operating costs, by forgoing all the economies of scale generated by being a single law school with two campuses? Now PSU will have to finance two separate law school administrations, two admissions processes, two career services operations, two development offices, etc. etc. Why would PSU’s central administration agree to this obviously untenable arrangement?

One possible answer is gross administrative negligence, which, given the current state of higher education in general, is a theory that has Occam’s Razor to recommend it. I suspect the real answer is rather more Machiavellian. On this account, the faculty divorce is providing central with an opportunity to downsize PSU’s law school operations relatively — at least from central’s perspective — painlessly. Once it has been spun off, the Carlisle version of the school will simply be allowed to die (recall that the campus can be closed in a little more than six years from now if the university declares a financial exigency), thereby permitting PSU to offload around a third of its tenured faculty all at once. The physical plant will be sold off to Dickinson College for pennies on the dollar, the university’s budget will unburden itself of about a dozen expensive faculty lines, and the Dickinson College of Law, will, after nearly two centuries, cease to exist.

It may well be that the Carlisle faculty — who are for the most part quite senior -- even recognize this, and would prefer to run out the clock in this fashion, rather than remain tied to their State College brethren. We shall see.


November 26, 2013 in Legal Education | Permalink | Comments (5)

Treasury, IRS Announce 'Crackdown' on Political Campaigning by Crossroads GPS, Other 501(c)(4) Groups

IRS Logo 2IR-2013-92:  Treasury, IRS Will Issue Proposed Guidance for Tax-Exempt Social Welfare Organizations:

The U.S. Department of the Treasury and the Internal Revenue Service today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code. This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity. The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.

REG-134417-13,  Guidance for Tax-Exempt Social Welf are Organizations on Candidate-Related Political Activities

This document contains proposed regulations that provide guidance to tax-exempt social welfare organizations on political activities related to candidates that will not be considered to promote social welfare. These regulations will affect tax-exempt social welfare organizations and organizations seeking such status. This document requests comments from the public regarding these proposed regulations. This document also requests comments from the public regarding the standard under current regulations that considers a tax-exempt social welfare organization to be operated exclusively for the promotion of social welfare if it is “primarily” engaged in activities that promote the common good and general welfare of the people of the community, including how this standard should be measured and whether this standard should be changed.

Wall Street Journal, Obama Administration Proposes New Curbs on Campaigning by Tax-Exempt Groups:

The Obama administration Tuesday proposed a crackdown on the widespread use of tax-exempt organizations for political campaigning, seeking to reduce the influential role that the secretive groups have played in recent elections. The new "guidance" issued Tuesday by the Treasury Department and the Internal Revenue Service would curtail a broad array of these tax-exempt entities' activities, including campaign advertising, voter registration, get-out-the-vote efforts, and distribution of voter guides and campaign material.

The process of completing the new regulations could take months, and officials said they expected a lot of feedback, acknowledging the political battles ahead.

The involvement in politics of tax-exempt groups organized under section 501(c)(4) of the tax code has been viewed by many as the biggest abuse of modern campaign finance rules, which aim to limit the influence of wealthy donors in elections.

The use of these organizations became a prominent issue in recent campaigns when groups such as the conservative Crossroads GPS and liberal Priorities USA raised millions of dollars from donors who could remain anonymous under tax rules. Critics say the groups have been too lightly regulated by the IRS, due in part to confusing regulations. ...

A string of major court decisions in 2010, including the landmark Citizens United decision, provided a major boost to 501(c)(4) entities by making it easier for companies and labor unions to contribute money to them. That led to a flood of donations.

The largest such organization, Crossroads GPS, which is run in part by GOP strategist Karl Rove, raised $180 million for the 2012 campaign from about 1,500 donors. The biggest single contribution to Mr. Rove's group was $22.5 million. By contrast, the Republican and Democratic parties were prohibited from accepting donations larger than $30,800. Donors to individual candidates were capped at $2,500 per election.

President Barack Obama criticized the existence of outside political entities, though a group of his supporters created Priorities USA to support his re-election.

A total of 10 of these 501(c)(4) entities raised more than $10 million each to spend on the 2012 election, according to data from the Center for Responsive Politics.


(Hat Tip: Rick Hasen, Donald Tobin.)

November 26, 2013 in IRS News, Tax | Permalink | Comments (2)

Pagan Group Wins Property Tax Exemption for Religious Organizations

MotherNew York Law Journal:  Pagan Group Wins Tax Exemption for Catskill Property:

A former 19th century inn housing a pagan group whose beliefs hold that the divine female is the source of all earthly life is entitled to a religious exemption from property taxes, a state appeals court has ruled.

The Appellate Division, Third Department, overturned an August 2012 ruling by Acting Albany Supreme Court Justice Richard Platkin in finding in favor of the Maetreum of Cybele in its tax dispute with the town of Catskill, Greene County.

The congregation has demonstrated the key element in the test for property tax exemptions on religious grounds, namely that "the property in question must be used primarily for the furtherance" of religious or charitable purposes, Justice William McCarthy wrote for the 4-0 panel in Matter of Maetreum of Cybele, 515596.

November 26, 2013 in Tax | Permalink | Comments (0)

Lipman & Smith: The Social Security Benefits Formula

Francine J. Lipman (UNLV) & Alan Smith (UNLV), The Social Security Benefits Formula and the Windfall Elimination Provision: An Equitable Approach to Addressing 'Windfall' Benefits, 39 J. Legis. 182 (2013):

Certain federal, state, and local government employees do not pay into the Social Security system, but rather pay into alternative government pension plans. For purposes of the Social Security Act, where a worker pays into an alternative government pension plan, the worker’s employment constitutes noncovered employment. Even if a worker’s employment record reflects significant periods of noncovered employment, the worker may still qualify for Social Security coverage because she satisfies the minimum requirement of 10 years (40 quarters) of earnings in Social Security covered employment. However, an employment record which reflects both covered and noncovered employment presents a challenge to equitable application of the Social Security Act. To determine the benefits to which a worker is entitled, the Social Security Act first employs an averaging provision that considers 35 years of covered employment. Where an individual’s employment record does not reflect 35 years of covered employment, the averaging provision compresses the worker’s average earnings. Effectively, a life-time high-income worker who held both covered and noncovered employment appears to be a life-time low-income worker by operation of the averaging provision. The second step in determining a worker’s Social Security benefits entails application of a progressive benefits formula to the workers average earnings. By operation of the averaging provision and the progressive benefit formula, a high-income worker who held both covered and non covered employment received a higher than statutorily intended replacement rate (the ratio of benefits to average earnings) prior to 1983. In an effort to downward-adjust Social Security benefits for worker who held both covered and noncovered employment, Congress enacted the Windfall Elimination Provision in 1983. This article presents and examines the Windfall Elimination Provision highlighting inherent problems in its design, which include structural and administrative issues that disproportionately impact low-income workers. The article also describes and examines public misperception and resentment of the Windfall Elimination Provision, and deficiencies in the Social Security Administration’s communication efforts. The article also describes considerable legislative efforts since its enactment to modify, replace, or repeal the Windfall Elimination Provision, providing an explanation and analysis of each bill. Finally, the article presents an alternative approach to eliminating the ‘windfall’ benefits that accrue to noncovered workers. The alternative approach balances the fundamental tenants of the Social Security system – a progressive benefits structure and the earned right nature of benefits. As such, the proposed legislative amendment (included in the appendix of the article) ensures equitable benefits to noncovered workers.

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

Rosenzweig Reviews Marian's Jurisdiction to Tax Corporations

JotwellAdam Rosenzweig (Washington University), Once a U.S. Corporation, Always a U.S. Corporation (Jotwell), reviewing Omri Marian (Florida), Jurisdiction to Tax Corporations, 54 B.C. L. Rev. 1613 (2013).

Prof. Marian rejects the bright-line, all-or-nothing rules leading to the “once a U.S. corporation always a U.S. corporation” result. Instead, he proposes replacing the regime with an instrumentalist one. This involves a two-step approach: (1) determine the underlying normative goal of the corporate tax, and (2) implement whatever residency rule accomplishes that underlying goal. ...

Ultimately, however, this is a theoretical article and on that front it succeeds. I am in agreement with the conclusion, which states “Obviously, the model developed is not exhaustive, in the sense that it cannot possibly consider all possible purposes for which different countries choose to tax corporations. But its strength is in its flexibility to consider new purposes and interactions of various purposes in the specific contexts of each jurisdiction. As such, the model can provide guidance even with respect to purposes of corporate taxation not explicitly considered herein.”

This article establishes itself as part of a promising trend in international tax scholarship, one I hope more scholars pursue going forward. 

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

Clarifying the Meaning of 'Beneficial Owner' in Tax Treaties

Tax Analysys Logo (2013)Koichiro Yoshimura (LL.M. (Tax) 2014, NYU),  Clarifying the Meaning of 'Beneficial Owner' in Tax Treaties, 72 Tax Notes Int'l 761 (Nov. 25, 2013):

Koichiro Yoshimura looks at the meaning of the term "beneficial owner" in the OECD model income tax treaty, and through a functional analysis, attempts to set reasonable and more acceptable beneficial ownership criteria.

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

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

Legal Employer Focus Groups: Law Grads Need People, Research Skills

Susan Wawrose (Dayton), What Do Legal Employers Want to See in New Graduates?: Using Focus Groups to Find Out, 39 Ohio N.U. L. Rev. 505 (2013):

What do legal employers expect from new law school graduates? What skills and competencies do employers value most? With the slow legal hiring market and the pressure on law schools to produce graduates with adequate skills to enter law practice, these are burning questions at law schools today. We went directly to typical employers of our law school’s graduates to find the answers. This Article describes the original research of a Bar Outreach Project formed by three legal research and writing professors at the University of Dayton School of Law. We conducted formal focus groups with legal employers and used that data to support updates and revisions to our legal writing courses. This Article describes the methodology of using focus groups for research, discusses the results of our conversations with employers, and offers recommendations for updating legal writing instruction to reflect employer preferences.

(Hat Tip: Greg McNeal.)

November 26, 2013 in Legal Education | Permalink | Comments (0)

Shaheen: On Shaviro's Fixing U.S. International Taxation

FixingFadi Shaheen (Rutgers-Newark), On Fixing U.S. International Taxation, 8 Jerusalem Rev. Legal Stud. ___ (2013):

This paper was prepared for a book symposium at Hebrew University Law School in June 2013 on Daniel N. Shaviro’s forthcoming book, Fixing U.S. International Taxation (Oxford University Press, 2014). The paper adds a few thoughts to those discussed in the book regarding the international tax neutrality analysis and certain interrelated notions concerning deferral, foreign tax credits, foreign tax deductions, and the tax rate on foreign source income. 

November 26, 2013 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Videos: Transforming Legal Education in Six Minutes

ETLEducating Tomorrow’s Lawyers: Transforming Legal Education in Six Minutes, Twenty Slides:

This year, we tried something new at the Educating Tomorrow’s Lawyers Conference. During the reception, we opened the floor to four [six-minute, 20-slide] presentations by participants who wanted to share an idea with our audience of legal educators, practitioners, and judges. It was, by all counts, a resounding success and we plan to expand it next year. Until then, we wanted to share the presentations with anyone who couldn’t be at the conference. They were a conference highlight and certainly worth six minutes. 

Video #1:  Wes Porter (Golden Gate): Find Your VOICe Project
Video #2:  Jay Finkelstein (Partner, DLA Piper; Adjunct Professor, American, Georgetown, Stanford, UC-Berkeley): Getting the Practitioner into the Classroom
Video #3:  Anahid Gharakhanian (Southwestern) & Patty Powell (Denver): Mindfulness in Legal Education
Video #4:  Sarah Glassmeyer (CALI): Open Law & Law School Innovations

November 26, 2013 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 201

Monday, November 25, 2013

Ring Presents The Gap Between International Tax Cooperation and Domestic Politics Today at McGill

Ring DianeDiane Ring (Boston College) presents Sovereign Harmony, Domestic Discord: Democracy and the Gap Between International Tax Cooperation and Domestic Politics at McGill today as part of its Fourth Annual Tax Policy Colloquium hosted by Allison Christians:

The challenges of the international tax system have become ubiquitous. Newspapers recount the tax exploits of multinational corporations that are household names and announce the jail sentences of the latest Swiss bankers and U.S. taxpayers to fall in the ongoing attack on tax evasion. The twin pressures on effective income taxation captured by these stories are those of tax evasion (typically engaged in by individual taxpayers) and tax avoidance (typically characterized by the planning and structuring undertaken by multinational corporations). In both cases cooperation between and among states plays a pivotal policy and enforcement role. That is not to say that cooperation (in its various iterations) is a universal or achieved objective. Rather, the question of whether states can identify a shared goal and move cooperatively toward that goal is an important focus of international tax policy discussions. With respect to the problem of tax evasion there have been some notable steps of cooperation through information sharing measures (including Tax Information Exchange Agreements) as well as domestic changes designed to increase transparency. Less agreement and coordination has been evident for the problem of tax avoidance. The current context in which these questions are being explored communally is the Organization for Economic Cooperation and Development (OECD) project on “Base Erosion and Profit Shifting” (the “BEPS” project).

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November 25, 2013 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Salon: The Real Reason Law Schools Are Raking in Cash

Kennedy 4Salon:  The Real Reason Law Schools Are Raking in Cash, by Benjamin Winterhalter:

The profession's in crisis, but the schools don't care. They're steeped in a toxic, hyper-capitalist worldview.

As a straight value proposition, it seems, it is no longer clear that going to law school makes any sense. So, law schools, one might reasonably expect, surely must be feeling the pressure. College students, one could not be blamed for thinking, surely must be considering other careers. But it has not been thus.

Why? How, in other words, can we explain the fact that young people are still going to law school in droves? How are we to make sense of the fact that so many intelligent college graduates are, to all appearances, deciding to commit financial suicide? The accounting just does not add up.

A couple of answers suggest themselves. First, there is the fact that law school is uniquely positioned to exploit the ambitions of students whose majors do not lead obviously to a particular career. ... Next, there is the fact that the sorts of people who want to go to law school tend to be exactly the sorts of people who think they can beat the odds. ...

That question, the one that is so obvious that even thinking about it is deeply painful, is this: Why aren’t law schools ashamed of themselves? Where is their sense of pity, of remorse, of human decency? After all, aren’t the very ideals that law schools purport to teach about – justice, fairness, equality – fundamentally and exactly opposed to this sort of naked capitalist exploitation? ... [L]aw school’s indifference to student suffering results not from an inexplicable love of torturous methods of instruction, nor from the inevitability of natural human selfishness, but from a profound ideological commitment to a particular version of neoliberal capitalism. ...

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November 25, 2013 in Legal Education | Permalink | Comments (1)

Why Young People Are Rejecting Law School

National Law Journal op-ed:  Why Young People Are Rejecting Law School, by Jeremy Paul (Dean, Northeastern):

Let's just come right out and say it. Although our profession will rise again, right now being a lawyer just isn't quite as cool as it used to be. ...

Why are so many college graduates deciding to pursue other careers? The familiar explanation is an easy one. Job prospects for law school graduates have dwindled as economic conditions have pummeled private law firms and government-funded legal services. Clients have balked at paying firms to train junior associates, while governments have slashed funding. Who wouldn't pause before applying to law school when anticipated incomes may prove insufficient to enable graduates to repay their education loans? Blaming the recent collapse in demand for a legal education solely on economics, however, is too easy. ...

As long as law deans accept the conventional wisdom that our struggles are solely about money, legal education will never recover the national standing it deserves. Instead, legal educators and professional leaders must tackle directly public perceptions of the value lawyers add to everyday life. Twenty-first-century lawyers will write rules that enable people to work together to grow the economy, allocate resources more fairly, battle environmental threats and preserve notions of privacy in an Internet age. If we communicate clearly a vision of lawyers as the architects of a just society, plenty of aspiring lawyers will sign up for the ride.

November 25, 2013 in Legal Education | Permalink | Comments (2)

New York Law School Rankings by July 2013 Bar Exam Results

New York Law Journal, Most N.Y. Law Schools Report Higher Pass Rates in Bar Exam:

Twelve of New York state's 15 law schools have reported higher bar pass rates for first-time candidates who took the bar exam in July. The schools largely bounced back from an overall dip in scores last year, when eight schools posted lower pass rates from a year prior.

Most of the changes since last year were small, but four schools—Brooklyn Law, New York Law, St. John's Law and Syracuse Law—recorded increases greater than that of the statewide pass rate, which rose three percentage points to 88 percent. New York Law and Brooklyn Law saw the most dramatic increases, with New York Law rising by 13 percentage points and Brooklyn Law by almost 9 percentage points.


November 25, 2013 in Law School Rankings, Legal Education | Permalink | Comments (0)

University President's Plan: Just Say No to Tenure

Tenure 2Chronicle of Higher Education: New Refrain at Kean U.: Just Saying No to Tenure:

Kean University's president will ask the institution's board next month to reject two-thirds of the professors up for tenure this year, further antagonizing a faculty that has been at odds with the administration for years. Kean's faculty union said this was the first time the president, Dawood Y. Farahi, had recommended that a majority of those seeking tenure—six of nine faculty members—be denied. All but one of those professors had received positive votes from their academic departments, the union said.

"A lifetime job in the state university system is not an entitlement, it has to be earned," Mr. Farahi wrote in an email to The Chronicle. ...

In October the university's provost recommended that the university turn down all but one of the nine professors who made tenure bids this year. ... In the recommendation the president is expected to make to the board, ... Mr. Farahi will reverse two of those negative decisions.

November 25, 2013 in Legal Education | Permalink | Comments (0)

Why Now Is A Good Time To Apply To Law School

Forbes:  Why Now Is A Good Time To Apply To Law School, by Ryan Calo (University of Washington):

These comments are addressed to a specific audience: those who think they want to be lawyers some day and are simply not pulling the trigger on applying because of all the bad news. Here’s why I think that’s a mistake.

  1. Fewer applicants means schools compete fiercely for decent students. ...
  2. A lot of law jobs will be opening up over the next five to ten years. ...
  3. Reports of the death of the legal market are greatly exaggerated. ...

Time will tell if the naysayers are right. I am a law professor, I may well be biased. I do not purport to be an expert in macroeconomics. But I do know a specious argument when I see one. Again, law school is not for everyone. Many are right to look elsewhere. For those who do want to be lawyers though, you may be closing your eyes to an opportunity.

(Hat Tip:  Greg McNeal.)

November 25, 2013 in Legal Education | Permalink | Comments (4)

Organ: Understanding Trends in Demographics of Law Students

The Legal Whiteboard:  Understanding Trends in Demographics of Law Students – Part Three, by Jerry Organ (University of St. Thomas):

In Part One, I analyzed how analysis of changes in applicants from LSAC’s Top 240 Feeder Schools demonstrates that graduates of more elite colleges and universities have abandoned legal education at a rate greater than graduates of less elite colleges and universities.

In Part Two, I analyzed how the pool of applicants to law school has shifted with a greater decrease among applicants with high LSATs than among applicants with low LSATs resulting in a corresponding increase in the number and percentage of matriculants with LSATs of <150.

What might explain why applicants to law school are down more significantly among graduates of more elite colleges and universities than among graduates of less elite colleges and universities? What might explain why applicants to law school are down more significantly among those with LSATs of 165+ than among those with LSATs of <150? Is there some relationship between these data points? ... [I]t is very likely that these two data points are related – that the greater decline among applicants from more elite colleges and universities is correlated directly with the greater decline among applicants with LSAT scores of 165+.

I want to offer three possible explanations for this differential response to market signals among different populations of prospective law students. The first two focus on the possibility that market signals are communicated differently to different populations. The third focuses on how different populations of prospective law students simply might respond to the same market signals in markedly different ways.

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November 25, 2013 in Legal Education | Permalink | Comments (1)

Brilliant People Are Still Applying to Law School

Matt Leichter, Brilliant People Still Applying to Law School:

. . . Or at least “people who can crush standardized tests” are still applying to law school.

I’m not going to go out of my way to cite them, but I’ve seen it asserted that the “wrong people” are choosing not to apply to law school. By “wrong people” they mean those with high GPAs and LSAT scores, aka those who keep civilization from fragmenting into warring states. Focusing only on LSAT scores—as they’re most comparable—the story is a little more complicated. Sure, the collapse in applicants has skewed towards the high end of the LSAT spectrum, but for the most part, the decline has been in the middle.

Here’s 2012 compared to 2010.

Percent Change Number of Applicants by LSAT Score Bracket

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November 25, 2013 in Legal Education | Permalink | Comments (2)

The IRS Scandal, Day 200

JIRS Logo 2

USA Today:  Scant Evidence of Fixes at IRS After Scandal:

More than six months after a top Internal Revenue Service official acknowledged the agency inappropriately scrutinized the applications for tax exemption by tea party and other conservative groups, the scandal has faded from the headlines and moved to Congress' back burner.

But it's unclear how much has changed inside the IRS to fix the underlying problems that led to the targeting. Some argue the agency has taken significant steps to revamp a flawed review process that left certain groups waiting years for approval and subjected others to intrusive, burdensome questioning. ...

But where some see progress, others see superficial tweaks and a still-festering problem. "I'm quite sure they're not going to go after tea party groups again," said Paul Streckfus, editor of a trade journal focused on tax-exempt issues. "The larger question is, is the system working better than it did? And the answer, as far as I can tell, is it's not." He said IRS screeners are still overloaded and the tax-exempt unit has been paralyzed by the scandal.

Here's a rundown of what's changed — and what hasn't:

  • The IRS' top ranks have been purged
  • A ban on BOLOs
  • New review process with more neutral instructions for front-line workers
  • Murky decades-old rule still in place
  • Wait times for applicants still long
  • Cincinnati office still facing big workload without adequate resources

Prior TaxProf Blog coverage:

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November 25, 2013 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

TaxProf Blog Weekend Roundup

Sunday, November 24, 2013

District Court: § 107 Housing Allowance for 'Ministers of the Gospel' Violates the Establishment Clause

Freedom From Religion Foundation v. Lew (W.D. Wisc. Nov. 22, 2013):

§ 107(2) ["In the case of a minister of the gospel, gross income does not include ... the rental allowance paid to him as part of his compensation."] violates the establishment clause under the holding in Texas Monthly, Inc. v. Bullock, 489 U.S. 1 (1989), because the exemption provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise. ... Because a primary function of a “minister of the gospel” is to disseminate a religious message, a tax exemption provided only to ministers results in preferential treatment for religious messages over secular ones. ... [I]f Congress believes that there are important secular reasons for granting the exemption in § 107(2), it is free to rewrite the provision in accordance with the principles laid down in Texas Monthly and Walz so that it includes ministers as part of a larger group of beneficiaries. ... As it stands now, however, § 107(2) is unconstitutional.

(Hat Tip:  Howard Friedman, Lori McMillan, Steven Sholk.) Prior TaxProf Blog coverage:

November 24, 2013 in Tax | Permalink | Comments (1)

Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list. The #1 paper is now #256 in all-time downloads among 9,660 tax papers:

  1. [714 Downloads]  Financial Planning for the Non-Retiree, by Richard L. Kaplan (Illinois)
  2. [328 Downloads]  Trying Times: Important Lessons to Be Learned from Recent Federal Tax Cases, by Nancy A. McLaughlin & Stephen J. Small (Law Office of Stephen J. Small)
  3. [304 Downloads]  Creating Cayman as an Offshore Financial Center: Structure & Strategy Since 1960, by Tony A. Freyer (Alabama) & Andrew P. Morriss (Alabama)
  4. [273 Downloads]  Transparent Predictions, by Tal Zarsky (University of Haifa)
  5. [235 Downloads]  Revisiting the Tax Treatment of Citizens Abroad: Reconciling Principle and Practice, by Michael S. Kirsch (Notre Dame)

November 24, 2013 in Scholarship, Tax | Permalink | Comments (0)

Greater Love Hath No Man . . .

Malibu 72  Madison 2. . . than to leave Malibu (72 degrees) to visit his son in Madison (2 degrees) -- for you non-math majors, that's a 70-degree differential.  On the plus side, the cheese curds are much better here.


November 24, 2013 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 199

Saturday, November 23, 2013

Deborah Jones Merritt: Number of Full-Time Jobs Will Not Exceed Number of Law School Grads Until 2021

Following up on yesterday's post, Number of Full-Time Jobs Will Exceed Number of Law School Grads by 2016:  Deborah Jones Merritt (Ohio State), When Will Graduates = Jobs?:

Professor Paula Young, of the Appalachian School of Law, predicts that the number of full-time jobs for law graduates will exceed the number of graduates by 2016. Excluding nonprofessional jobs from the tally, she calculates that sufficient full-time jobs will be available for JD grads by 2017. Are the calculations correct?

Unfortunately, no. ...

If current trends in law school applications and admissions continue, the number of JDs will fall–but not quite as quickly as Professor Young predicts. ...

Class of 2010: 49,082 students entered; 44,258 graduated.
Class of 2011: 49,414 students entered; 44,495 graduated.
Class of 2012: 51,646 students entered; 46,478 graduated.
Class of 2013: 52,488 students entered; predict 47,239 graduates.
Class of 2014: 48,697 students entered; predict 43,827 graduates.
Class of 2015: 44,481 students entered; predict 40,033 graduates.
Class of 2016: 40,923 students entered; predict 36,264 graduates.
Class of 2017: predict 37,649 students will enter; predict 33,884 will graduate.
Class of 2018: predict 34,637 students will enter; predict 31,173 will graduate.
Class of 2019: predict 31,866 students will enter; predict 28,679 will graduate.
Class of 2020: predict 29,317 students will enter; predict 26,385 will graduate.
Class of 2021: predict 26,972 students will enter; predict 24,275 will graduate.

How will the number of graduates compare to the number of available jobs? Let’s take a look, using Professor Young’s assumption that future jobs will parallel the ones available to the Class of 2012. ...

The Class of 2012 found only 30,453 full-time, long-term jobs that drew upon their law degrees (either by requiring bar admission or offering a JD advantage). That number of jobs won’t satisfy even a very slimmed-down Class of 2018. Even if law school enrollment continues to drop 8% per year, a daunting prospect for law school budgets, we won’t be able to celebrate a match between graduates and jobs until the spring of 2020, when the Class of 2019 registers its employment results. ...

All of the above calculations assume that future JDs will be satisfied with JD Advantage jobs. That seems like a dubious assumption. We know that recent graduates have not been satisfied with those jobs. Among 2011 graduates, 46.8% of those with JD Advantage jobs reported that they were seeking other work. Graduates have been taking JD Advantage jobs to survive, but they are not satisfied with those positions.

In the future, this is even more likely to be true. As the cost of law school has mounted and the job market has tightened, pre-law advisers, the media, and even legal educators have advised students: “Go to law school only if you know you want to be a lawyer or have another well formulated plan for using a law degree.” That advice makes sense in the current climate–and it means that future graduates are even more likely than current ones to expect full-time, long-term positions that require bar admission.

The Class of 2012 found only 26,066 of those jobs. Assuming that law school enrollment continues to drop 8% a year, while jobs remain steady, when will all law school graduates be able to find full-time, long-term jobs that require bar admission?


November 23, 2013 in Legal Education | Permalink | Comments (4)