Weekly SSRN Tax Article Review And Roundup: Kim Reviews Taxing The Wealthy At The State Level By Galle, Gamage & Shanske

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews a recent article by Brian D. Galle (Georgetown; Google Scholar), David Gamage (Missouri; Google Scholar), & Darien Shanske (UC-Davis; Google Scholar), Money Moves: Taxing the Wealthy at the State Level, 112 California L. Rev. __ (2025). 

While there are many tax reform proposals to tax the super-rich these days, the discussion has centered on the federal or national tax level. On the other hand, Brian Galle (Georgetown), David Gamage (Missouri), and Darien Shanske (UC Davis) have been brilliantly contributing to state-level tax policies to address inequality. A notable piece is Solving the Valuation Challenge: The ULTRA Method for Taxing Extreme Wealth, 72 Duke L.J. 1257 (2023, reviewed here), where the authors developed the unliquidated tax reserve accounts (ULTRA) system as a part of drafting comprehensive annual wealth tax reform proposal for the state of California. Recently, the authors produced another excellent piece on the state-level tax proposal for taxing the super-rich—Money Moves: Taxing the Wealthy at the State Level, 112 Calif. L. Rev. ___ (2025), which is worth introducing for this week's review.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Schön's International Tax Scholarship And International Tax Activism

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews a recent article by Wolfgang Schön (Max Planck), International Tax Scholarship and International Tax Activism (August 2024).       

While writing a scholarly article, tax scholars sometimes develop an idea based on their personal experience or political stance in addition to a pure scientific, doctrinal analysis. What are the merits of inviting activism to tax scholarship? Is there any limitation? Wolfgang Schön (Max Planck)'s recent article, International Tax Scholarship and International Tax Activism, provides insightful answers to this question, focusing on recent international tax debate.  

The international tax community over the last couple of decades has experienced dynamic changes in focus. Prior to the late 20th century, legal scholars loved to discuss complex cases (like triangular cases on withholding taxation and entity classification) and treaty analysis at a high level.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Delmotte's Predistribution Against Rent-Seeking — The Benefit Principle’s Alternative To Redistributive Taxation

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews Charles Delmotte (Michigan State, Google Scholar), Predistribution Against Rent-Seeking: The Benefit Principle’s Alternative to Redistributive Taxation, 39 Soc. Phil. & Pol’y 1 (2023).

Taxation has several goals. The most obvious goal is to raise revenue for necessary government functions. A more controversial goal of taxation is a redistributive function to reduce the unequal distribution of income and wealth. Different theories of distributive justice endorse or oppose the legitimacy and/or effectiveness of the redistributive goal of taxation. In his recent article, Predistribution Against Rent-Seeking: The Benefit Principle’s Alternative to Redistributive Taxation, 39 Soc. Phil. & Pol’y 1 (2023), Charles Delmotte (Michigan State, Google Scholar) questions the redistributive goal of taxation and offers an alternative approach based on the benefit principle. The benefit principle means that “specific rules and institutions are acceptable to the extent that they create benefits for all individuals in society, or at least don’t make anyone worse off.” 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Cui’s The Mirage Of Mobile Capital

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews Wei Cui (British Columbia; Google Scholar), The Mirage of Mobile Capital (May 7, 2023).

Over two years have passed since more than 140 countries signed the OECD's global tax deal, consisting of two Pillars, in October 2021. Pillar One is focused on expanding source country taxing rights on the income of large multinational enterprises (MNEs). It targets digital companies such as Facebook or Google that can extract profits from a source jurisdiction without a physical presence. The implementation of Pillar One remains uncertain. Nonetheless, the global minimum tax in Pillar Two is expected to be implemented globally soon. A popular narrative about Pillar Two endorsed by many scholars, including myself here, is as follows: Pillar Two and its global minimum tax embrace the ideal of corporate tax harmonization to combat the tax competition that has dominated international taxation since the advent of globalization in the 1980s. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Hemel's The Low And High Stakes Of Moore

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews Daniel Hemel (NYU; Google Scholar), The Low and High Stakes of Moore, 180 Tax Notes Fed. 563 (July 24, 2023).  

Everybody in the tax community talks about, or at least pays attention to, Moore—the mandatory repatriation tax (MRT) case that the Supreme Court will hear in coming months. I think there is at least one tax event a week on Moore these days. Among the overflowing write-ups, I chose Daniel Hemel (NYU; Google Scholar)'s recent article, The Low and High Stakes of Moore, 180 Tax Notes Fed. 563 (July 24, 2023), for this week's review. It is a concise yet remarkably insightful article that contains everything you need to think about Moore. 

The tax challenged is the MRT introduced by the Tax Cuts and Jobs Act (TCJA). The MRT requires the U.S. shareholders who own at least 10% of a Controlled Foreign Corporation (CFC) to pay a one-time tax on the undistributed earnings and profits of the CFC dating back to the end of 1986. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Yin’s The Supreme Court’s Misinterpretation Of The FBAR Statute

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews George K. Yin (Virginia), Of Blind Men, Elephants, and the Supreme Court's Misinterpretation of the FBAR Statute:

The United States Supreme Court recently addressed whether a non‑willful penalty under FBAR accrues on a per‑report or per‑account basis in the case of Bittner v. United States. Bittner was a dual citizen unaware of his responsibility to file a report called a Report of Foreign Bank and Financial Accounts (FBAR) under the Bank Secrecy Act from 2007 through 2011. Bittner failed to report 272 accounts in those five years—61 accounts in 2007, 51 in 2008, 53 in 2009 and 2010, and 54 in 2011. The government interpreted the language of the non‑willful penalty as per account and imposed a fine of $2.72 million. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Crypto Losses By Nguyen & Maine

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews Xuan-Thao Nguyen (Washington) and Jeffrey A. Maine (Maine), Crypto Losses 2024 U. Ill. L. Rev. __ .

Recently the crypto industry has been hit hard by various market forces and scams, leaving investors with trillion-dollar losses. In January 2023, in response to confusion surrounding abandoned and worthless cryptocurrency, the IRS weighed in on the deductibility of crypto losses (see ILM 202302011). The Chief Counsel Advice Memorandum stated the obvious—that taxpayers cannot claim an abandonment loss without an affirmative act (like sale or exchange) and cannot take a worthless deduction for the temporary decline in value. Furthermore, even if the loss was realized, the loss deduction would be disallowed because section 67(g) suspends miscellaneous itemized deductions for taxable years 2018 through 2025.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews The Internet Tax Freedom Act At 25 By Hellerstein & Appleby

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews Walter Hellerstein (Georgia) and Andrew Appleby (Stetson; Google Scholar), The Internet Tax Freedom Act at 25, 107 Tax Notes St. 7 (Jan. 2, 2023).

Policy on how to tax digital platforms, such as Google or Facebook, presents heated debate across the globe. Digital Services Taxes and Pillar One of the global tax deal are notable examples. Domestically, the debate occurs at the state and local tax level. At least ten states in recent years entertained imposing a Digital Advertising Tax, while Maryland did implement one. Maryland’s Digital Ad Tax has been challenged in courts, and the oral argument at the Maryland Supreme Court is scheduled for Friday, May 5, 2023. One of the main issues is whether the tax violates the Internet Tax Freedom Act (ITFA) by discriminating against the digital economy, as it taxes only digital advertising platforms and not traditional advertising. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Alarie's The Rise Of The Robotic Tax Analyst

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews Benjamin Alarie (Toronto; Google Scholar; CEO, Blue J Legal), The Rise of the Robotic Tax Analyst, 178 Tax Notes Fed. 57 (Jan. 2, 2023).

ChatGPT, an artificial intelligence chatbot, is generating buzz in legal academia and practice. On November 30, 2022, OpenAI made ChatGPT available for public use through an open beta. In less than one week, the system was deployed by more than 1 million registered users. Driving this extremely rapid adoption were claims — and plenty of evidence — of impressive algorithmic feats performed by ChatGPT. The capabilities of this technology reportedly include achieving passing scores on practice bar and medical board examinations. Unsurprisingly, many law schools are discussing how to cope with students' using this technology to potentially cheat in their writing and exams. On the other hand, TaxBuzz said something the tax community would be glad to hear:ChatGPT's tax advice was wrong 100% of the time.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Solving The Valuation Challenge: The ULTRA Method For Taxing Extreme Wealth By Galle, Gamage & Shanske

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews Brian D. Galle (Georgetown; Google Scholar), David Gamage (Indiana Maurer; Google Scholar), & Darien Shanske (UC Davis; Google Scholar), Solving the Valuation Challenge: The ULTRA Method for Taxing Extreme Wealth, 72 Duke L.J. __ (2023).

It is well known that our income tax system is based on a realization approach which avoids valuation problems but enables the rich to pay little in taxes. Brian Galle (Georgetown), David Gamage (Indiana), and Darien Shanske (UC Davis) address this inequality brilliantly in their article Solving the Valuation Challenge: The ULTRA Method for Taxing Extreme Wealth, 72 Duke L.J. __ (forthcoming 2023). To solve the valuation problem, they propose that governments take payments from the rich by receiving notional equity interests, called "ULTRAs." ULTRA stands for unliquidated tax reserve accounts and is similar to a government claim on a portion of the stock of a business. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Kamin's Ambition, Limits, And Politics Of The Global Minimum Tax

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews two new works by David Kamin (NYU), Why Book Minimum Taxes? Taking Politics Seriously, 177 Tax Notes Fed. 193 (Oct. 10, 2022), and The Ambition and Limits of the Global Minimum Tax, 177 Tax Notes Fed. 385 (Oct. 17, 2022).

The two articles I introduce today were written by David Kamin, who served as Deputy Assistant and Deputy Director of the National Economic Council under President Biden until May of 2022. Kamin’s articles focus on the corporate alternative minimum tax (AMT) and are his first publications since returning to academia. On a personal note, I was thrilled to discover that Kamin chose to write on a topic that is dear to me.

 

Kamin’s first article, Why Book Minimum Taxes? Taking Politics Seriously, presents a political argument for book minimum taxes. It explains how book minimum taxes address the challenge of coordinating political actors inside the United States and around the world. The recent enactment of a new corporate AMT in the United States has generated a mixed response. Some critics argue that Congress should fix the corporate income tax system directly by limiting subsidies, raising rates and not imposing another tax base as a backstop. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Falcão's Carbon Tax Policy And The EU Green Deal

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews a new work by Tatiana Falcão (international tax consultant), Updating Carbon Tax Policy Is Crucial to the EU Green Deal, 103 Tax Notes Int'l 485 (July 26, 2021).

The 2022 Congress of the International Fiscal Association (IFA) was held in Berlin, Germany, earlier this month after the two virtual Congresses in 2020 and 2021. In this long-awaited in-person event, the OECD's tax head Pascal Saint-Amans, who led the base erosion and profit shifting (BEPS) project and brokered the two-pillar global tax deal, announced his departure. Although the successful implementation of the global tax deal is still uncertain, it is hard to deny that Saint-Amans has been at the center of the efforts to update the international tax system. Personally, I appreciate his making the international tax a more exciting and dynamic subject, not only because he led the BEPS project and the global tax deal but also because he contributed to establishing the automatic exchange of tax information systems and building the inclusive framework on BEPS. It is indeed the end of a chapter in the international tax discourse.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Grimmelmann's Programming Languages And Law

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews a new work by James Grimmelmann (Cornell; Google Scholar), Programming Languages and Law (2nd ACM Symposium on Computer Science and Law, forthcoming 2022).

Programming language and law are conceptually and methodologically similar. They both use words. Computer science and law are both linguistic professions whose practitioners use language to create, manipulate, and interpret complex abstractions. Such similarity creates a unique opportunity for programming-language theory (PL theory) to contribute to law. But how and to what extent? A lawyer with no programming background might find it difficult to answer. I would like to introduce a recent paper, Programming Languages and Law (2nd ACM Symposium on Computer Science and Law, forthcoming 2022), by James Grimmelmann. Grimmelmann is a professor at Cornell Law School and Cornell Tech, and his interdisciplinary background makes the paper accessible to lawyers. The paper presents three case studies of the use of PL theory for law and ten promising topics for potential research. This review will introduce several examples that resonate with a tax audience. Please note that I edited some examples to make them accessible to a broader tax audience.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Dean's The Casual Racism Of The Tax Law

This week, Young Ran (Christine) Kim (Utah, moving to Cardozo; Google Scholar) reviews a new work by Steven A. Dean (Brooklyn), Filing While Black: The Casual Racism of the Tax Law, 2022 Utah L. Rev. __.

In response to a growing recognition of the absence of demographic data in federal datasets, including tax data, President Biden signed Executive Order 13985 in 2021, which, inter alia, established an Interagency Working Group on Equitable Data. The Treasury Department is also undertaking a comprehensive research initiative to study the relationship between the U.S. tax code and racial inequities. Senate Finance Committee Chair Ron Wyden (D-OR) has called for the IRS to collect and disclose more information relating to the tax code’s effect on different demographics because it makes no sense to blind lawmakers to the key data that would illuminate injustice in our tax laws. Those recent developments are the results of hard work by dedicated scholars like Alice Abreu, Jeremy Bearer-Friend, Dorothy Brown, Wei Cui, Steven Dean, Francine Lipman, and Goldburn Maynard. In this review, I would like to recognize Steven Dean's recent essay, Filing While Black: The Casual Racism of the Tax Law, 2022 Utah L. Rev. ___. Dean's essay is adapted from his testimony given before the Committee on Ways and Means of the U.S. House of Representatives on June 10, 2021, and was presented at the 2021 Utah Law Review Symposium, entitled #includetheirstories: Rethinking, Reimagining, and Reshaping Legal Education, for which I was an organizer. (Video clips are available here.)

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Sanchirico's A Game-theoretic Analysis of Global Minimum Tax Design

This week, Young Ran (Christine) Kim (Utah, moving to Cardozo; Google Scholar) reviews a new work by Chris William Sanchirico (Penn; Google Scholar), A Game-theoretic Analysis of Global Minimum Tax Design (March 2022).

In the globalized, open economy, multinational enterprises (MNEs) can easily shift their profits from high tax jurisdictions to low tax jurisdictions. Many countries, especially developing countries, were increasingly squeezed by MNEs to provide lower corporate tax rates and tax holidays as conditions for receiving foreign direct investment. Furthermore, those countries had to compete with peer countries vying to attract foreign capital to their economy. The epitome of such rivalry is “tax competition.” As tax competition has grown, global effective corporate tax rates have continued to be cut, creating a “race-to-the-bottom.” In order to curb harmful tax competition, the OECD/Inclusive Framework has proposed a global minimum tax at 15% rate and to impose a top-up tax to the extent that the effective tax rate paid by the MNE falls short of the said minimum tax rate.

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Christine Kim Leaves Utah For Cardozo

Dean Melanie Leslie Appoints Professor Christine Kim to the Faculty:

Dean Melanie Leslie is pleased to announce the appointment of Young Ran (Christine) Kim [Google Scholar] as a Professor of Law. “It is my pleasure to welcome Christine Kim to our faculty. Her expertise in international tax law, technology, and complicated investment structures will be a tremendous addition to our strong program in taxation,” said Dean Leslie.

Kim is currently an Associate Professor of Law at the University of Utah, S.J. Quinney College of Law where she teaches Federal Income Tax, Taxation of Business Entities, and International Tax (Seminar).

“I am very pleased to join Cardozo Law School. I have been a big fan of the excellent student body and highly accomplished faculty members at Cardozo, and am thrilled to be a part of a strong tax cohort. I hope to contribute to Cardozo’s diverse community as well as its extraordinary curriculum that combines practical experiences and scholarly insights. It is also exciting to be back in the Village! I look forward to joining the Cardozo community this summer,” said Kim.

Kim’s research centers on international tax, business tax, and taxation in the digital economy. Her paper (with Darien Shanske) Taxing Digital Platforms, is forthcoming in the Notre Dame Law Review in 2023. Her work has been published in the UCLA Law Review [Blockchain Initiatives for Tax Administration], UC Irvine Law Review [Insulation by Separation: When Dual-Class Stock Met Corporate Spin-offs], Alabama Law Review [Digital Services Tax: A Cross-border Variation of the Consumption Tax Debate], UC Davis Law Review [Taxing Teleworkers], Harvard International Law Journal [A New Framework for Digital Taxation], and Virginia Tax Review [Carried Interest and Beyond: The Nature of Private Equity Investment and Its International Tax Implications], among others. ...

Kim is actively involved in the Teaching Tax Committee and the American Bar Association Tax Section and has been on the Steering Committee for the Junior Tax Scholars’ Workshop. She has been a Guest Blogger for TaxProf Blog’s Weekly SSRN Tax Article Review and Roundup, and has been quoted numerous times in Law360 and Bloomberg Law.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Warren's Evaluating The Oxford Corporate Cash Flow Tax Proposal

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Alvin C. Warren Jr. (Harvard), Evaluating the Oxford Proposal for a Corporate Cash Flow Tax, 173 Tax Notes Fed. 1223 (Nov. 29, 2021).  

Many tax commentators would remember the discourse on the proposed "destination-based cash flow tax (DBCFT)" during the presidential election debate in 2016-17. Although I lamented the acronym of the proposal, DBCFT, as an unwelcome addition to the already-crowded alphabet soup in tax law, such as CFC, ECI, PE, TOB, CEN, CIN, UBIT, DRD, GILTI, and so on, I enjoyed the concept itself, which is to replace the traditional corporate income tax with taxation of a corporation's domestic cash flow. I particularly enjoyed the comments by Michael Devereux (Oxford) and Alan Auerbach (Berkeley), who are renowned experts in business cash flow taxation. The DBCFT proposal was not included in the Tax Cuts and Jobs Act (TCJA) of 2017.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Taxing Buybacks By Hemel & Polsky

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Daniel J. Hemel (Chicago; Google Scholar) and Gregg D. Polsky (Georgia; Google Scholar), Taxing Buybacks, 38 Yale J. Reg. 246 (2021).

Before the COVID-19 pandemic, one of the hottest topics in the U.S. capital market was the rise in the volume of corporate share repurchases, also known as stock buybacks. In 2018, U.S. corporation stock buybacks topped $1 trillion, a record-breaking volume. In 2019, stock buybacks remained the single biggest source of demand for U.S. public equity. Despite the pandemic in 2020, stock buybacks continued to be in high demand. This trend has attracted attention from commentators and bipartisan politicians who have raised concerns about the surge. In recent days, most recent criticisms have focused on securities law issues; however, tax scholars have been considering the problem for decades. A monumental example is Marvin A. Chirelstein's seminal article, Optional Redemptions and Optional Dividends: Taxing the Repurchase of Common Shares, published in the Yale Law Journal in 1969.    

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Has Cross-Border Arbitrage Met Its Match? By Mason & Saint-Amans

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Ruth Mason (Virginia; Google Scholar) and Pascal Saint-Amans (OECD), Has Cross-Border Arbitrage Met Its Match?, in Thinker, Teacher, Traveler: Reimagining International Tax. Essays in Honor of H. David Rosenbloom (Georg Kofler, Ruth Mason & Alexander Rust, eds., IBFD 2021), reprinted in the 41 Va. Tax Rev. 1 (2021).

Earlier this month, a group of international tax lawyers and policymakers got together to celebrate H. David Rosenbloom (Caplin & Drysdale, NYU)'s 80th birthday. The group spent two years secretly creating a Festschrift honoring Rosenbloom. The Festschrift is titled " Thinker, Teacher, Traveler: Reimagining International Tax. Essays in Honor of H. David Rosenbloom," edited by Georg Kofler (WU), Ruth Mason (Virginia), and Alexander Rust (WU) (IBFD 2021). Mason and Pascal Saint-Amans (OECD) contributed a chapter to the Festschrift titled, Has Cross-Border Arbitrage Met Its Match?, reprinted in the 41 Va. Tax Rev. 1 (2021). In their essay, Mason and Saint-Amans reviewed Rosenbloom’s criticisms of regulatory responses to international tax arbitrage, the academic response to those criticisms, and subsequent international cooperative efforts to curb international tax arbitrage. This review introduces their essay.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Zelenak’s Taxes Of The Ultra Rich And Mark-To-Market Reforms (1924, 2021)

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Lawrence A. Zelenak (Duke), 1924, 2021: Taxes of the Ultrarich, and Mark-to-Market Reforms, 172 Tax Note Fed. 583 (2021).

Larry Zelenak is an amazing tax storyteller, not to mention a highly-respected tax scholar. He seems to have a treasure box full of fascinating tax stories. I enjoyed going to the annual Tax Movie Night event held every Tax Day at NYU School of Law, where Larry was always a special guest speaker. It was a lot of fun to watch classic television episodes featuring various tax matters in everyday life, mostly from the "Mad Men" era, and then listen to Larry's comments afterwards. Larry recently published another fascinating tax story, 1924, 2021: Taxes of the Ultrarich, and Mark-to-Market Reforms, 172 Tax Note Fed. 583 (2021) that covers the billionaires' tax story, ranging from contemporary billionaires, like Jeff Bezos, Elon Musk, Michael Bloomberg, and Warren Buffet, to the “billionaires” from the past century, such as Rockefeller, Ford, and J.P. Morgan. Embedded in the story, he presents an important lesson on how to reform the taxation of unrealized capital gains.

 

 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews 'Slack' In The Data Age By Oei And Ring

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Diane Ring (Boston College; Google Scholar) and Shu-yi Oei (Boston College; Google Scholar), "Slack" in the Data Age, 73 Ala. Law Rev. ___  (2021).

Legal systems tolerate "informal" spaces where law is not enforced and where those who violate the law are not sanctioned. We, tax lawyers, are familiar with this situation. In their new article, "Slack" in the Data Age, forthcoming in the Alabama Law Review, Diane Ring (Boston College) and Shu-yi Oei (Boston College) refer to this phenomenon as "slack." The authors discuss how slack relates to the formal flexibility and leniency of legal systems, and how the influx of ubiquitous data and information affects slack. While they give examples of slack in other areas of law, such as criminal law, this review will focus on slack in tax law.

Slack arises when enforcers have scarce resources and must prioritize, as Leigh Osofsky (North Carolina) demonstrated in The Case for Categorial Nonenforcement. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Shanske's Agglomeration and State Personal Income Taxes

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Darien Shanske (UC-Davis), Agglomeration and State Personal Income Taxes: Time to Apportion (With Critical Commentary on New Hampshire’s Complaint Against Massachusetts), 48 Fordham Urb. L.J. ___ (2021). 

Many people have been working from home since COVID-19 swept the country in early 2020. If the pre-pandemic workplace and the remote workplace are located in different states, many potential tax problems for employees (individuals) and employers (businesses) arise. To address individuals’ tax issues, the Supreme Court is considering granting certiorari in the New Hampshire v. Massachusetts case. Massachusetts would only tax nonresident employees' income before the pandemic if such employee physically worked in Massachusetts. On the other hand, if the employee worked remotely from a different state, their income was sourced in their residence state—e.g., New Hampshire—and thus, Massachusetts had not taxed such income. However, when the pandemic hit, those employees stopped commuting to Massachusetts. Massachusetts then announced a temporary emergency regulation to treat nonresident employees who commuted to Massachusetts but now work from home as Massachusetts source. In other words, nonresident remote workers' income is now subject to Massachusetts state income tax. As a residence state of those remote workers, New Hampshire has submitted a claim that Massachusetts’ emergency regulation violates the dormant Commerce Clause and the Due Process Clause.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews The IRS's Decisive Transfer Pricing Victory In Coca Cola By Avi-Yonah & Mazzoni

This week, Young Ran (Christine) Kim (Utah; Google Scholar) reviews a new work by Reuven Avi-Yonah (Michigan; Google Scholar) & Gianluca Mazzoni (Michigan SJD), Coca Cola: A Decisive IRS Transfer Pricing Victory, at Last, 169 Tax Notes Fed. 1739 (2020).

Coca-Cola has offshore manufacturing facilities that produce beverage concentrate in low tax countries, such as Brazil, Ireland, and Egypt. Because the beverage concentrate is a Coca-Cola product, though it is not a final product, the US Parent co. licenses its intangibles, such as trademarks and secret formulas, and the manufacturing facilities pay royalties and dividends. But the role of offshore manufacturing facilities stops there. The final products are made by third party entities, called “Bottlers,” and the marketing activities of the Coca-Cola brand and the final products are conducted by another foreign subsidiary (ServCos). Given such a limited role of offshore manufacturing facilities, called "Supply Points," what portion of profits under the transfer pricing rules should be allocated to those Supply Points compared to the US Parent co.? Probably not much.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Holderness' Tax Relief for Commuters

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Hayes Holderness (Richmond), Changing Lanes: Tax Relief for Commuters, 40 Va. Tax Rev. ___ (2021).

Commuting has mixed motives: one must travel to get to work (business motive), but the extent and burden of the travel is the result of the personal choice about where to live (personal motive). However, there is no middle ground under the tax law; an expense is classified as either personal or business. Under current law, it is well established that commuting expenses are personal, and thus, nondeductible expenses under the tax law (e.g., Comm'r v. Flowers, 326 U.S. 465 (1946)). However, in the wake of COVID-19, working from home has become the new normal. Many people who used to commute to work no longer have the same amount of expenditure for commuting, such as gas and metro passes. What are the normative implications of such changed behavior? Hayes Holderness offers his views in his recent essay, Changing Lanes: Tax Relief for Commuters (forthcoming in Va. Tax Rev.).

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Kim Presents Blockchain Initiatives For Tax Administration Virtually Today At Oregon

Young Ran (Christine) Kim (Utah) presents Blockchain Initiatives for Tax Administration virtually at Oregon today as part of its Tax Policy Colloquium Series hosted by Roberta Mann:

Blockchain has become an attractive topic not only among techies, but also entrepreneurs, policymakers, and even laymen. A thriving body of literature discusses various legal issues related to blockchain, but it often mixes the discussion of blockchain with Bitcoin and other cryptocurrencies. However, cryptocurrencies and blockchain are not synonymous. Blockchain is a decentralized, immutable, peer-to-leer ledger technology, whereas cryptocurrencies are built on a blockchain. In other words, blockchain is the original, underlying technology of cryptocurrencies. Recently, not only the private sector—e.g., financial services, smart contracts, medical records, property records, supply chain—but also the public sector—e.g., defense, budget allocation, government approval chain, voting—have gone beyond the cryptocurrencies and have begun to utilize blockchain technology itself as a newly emerged data management system, appreciating its resilient and immutable features. Considering that more data is processed remotely and thus digitally in post COVID-19 era, the data management system built upon blockchain will gain stronger momentum.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Is Unilateral Formulary Apportionment Better Than the Status Quo? By Fleming, Peroni & Shay

This week, Young Ran (Christine) Kim (Utah) reviews a new work by J. Clifton Fleming, Jr. (BYU), Robert J. Peroni (Texas), and Stephen E. Shay (Boston College), Is Unilateral Formulary Apportionment Better than the Status Quo?, in The Allocation of Multinational Business Income: Reassessing the Formulary Apportionment Option (Wolters Kluwer 2020).

It is always exciting to find a new international tax paper written by the famous cohort of authors—our learned Professors J. Clifton Fleming, Jr. (BYU), Robert J. Peroni (Texas), and Stephen E. Shay (Boston College). These authors can be trusted to provide insight into carefully selected topics relevant to current issues in international tax. In each paper, they demonstrate profound knowledge and experience in the chosen topic, and share thoughtful policy suggestions. The new book chapter, Is Unilateral Formulary Apportionment Better than the Status Quo?, in The Allocation of Multinational Business Income: Reassessing the Formulary Apportionment Option (Wolters Kluwer 2020), is not an exception. It provides a condensed analysis of the arm's length standard and the rise of formulary apportionment as an alternative. Additionally, the paper suggests criteria for the cost/benefit analysis of unilaterally adopted formulary apportionment in both territorial and worldwide system paradigms. Readers with advanced knowledge of international tax will find this chapter to be interesting, and, thanks to the authors’ mastery of the topic, the paper is also accessible to readers with only a basic knowledge of international tax. I highly recommend this paper to professors who are looking for reading material on transfer pricing.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Zelinsky's Coronavirus, Telecommuting, And The 'Employer Convenience' Rule

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Edward A. Zelinsky (Cardozo), Coronavirus, Telecommuting, And the 'Employer Convenience' Rule 95 State Tax Notes 1101 (Mar. 30, 2020):

I hope everyone who reads this review stays well and healthy. Many non-essential workers have been working from home as nearly all states have issued stay-at-home orders and closed businesses in an effort to stem the tide of the virus. This raises a new question for out-of-state commuters: which state can tax the income that cross-border workers have earned at home under the COVID-19 situation? I personally have been curious about this issue because I taught two classes, Federal Income Tax class and Taxation of Business Entities, remotely from another state since spring break of this semester. Edward Zelinsky's short article, Coronavirus, Telecommuting, And the 'Employer Convenience' Rule, brings an interesting perspective to this question. He criticizes New York's policy of taxing the income earned by out-of-state telecommuters, arguing that it was bad policy in good times and even worse policy in times like today.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Shakow's Taxing Bitcoin And Blockchains

This week, Young Ran (Christine) Kim (Utah) reviews a new work by David J. Shakow (Pennsylavania), Taxing Bitcoin and Blockchains—What the IRS Told Us (and Didn't), 166 Tax Notes Fed. 241 (Jan. 13, 2020).

The IRS has issued two new guidance on tax issues related to Bitcoin and other cryptocurrencies–Notice 2014-21 and Rev. Rul. 2019-24. However, by no means, has the guidance answered all questions surrounding the tax treatment of cryptocurrencies. David Shakow's new work, Taxing Bitcoin and Blockchains—What the IRS Told Us (and Didn't), offers an excellent roadmap for those who would like to understand the tax issues of cryptocurrencies along with the recent IRS guidance.

To offer basic knowledge of the blockchain structure, Shakow starts with comparing a "Proof of Work" (PoW) structure with a "Proof of Stake" (PoS) structure. These two structures are used to confirm transactions of cryptocurrencies. Bitcoin uses a PoW consensus process, recording transactions in a "block," which is verified by miners through their work. That work requires the use of substantial computer and electric power. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Chason's Cryptocurrency Hard Forks And Rev. Rul. 2019-24

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Eric D. Chason (William & Mary), Cryptocurrency Hard Forks and Revenue Ruling 2019-24, 39 Va. Tax Rev. 277 (2019).

When the IRS issued Revenue Ruling 2019-24 (the "Ruling") on the tax treatment of hard forks and airdrops of cryptocurrencies, many people believed that the Ruling would offer guidance on the tax issues of both hard forks and airdrops that the community of cryptocurrency users generally understand. Is that so? Many commentators and investors in cryptocurrencies say no (see e.g., Mathew Beedham, The IRS' Latest Cryptocurrency Tax Guidance Shows It Still Doesn't Get It). Eric Chason's new work, Cryptocurrency Hard Forks and Revenue Ruling 2019-24, 39 Va. Tax Rev. 277 (2019), is soundly in line with such criticism.

As an introduction, the Ruling is understood as the IRS’s response to tax issues arising from the hard fork of the Bitcoin blockchain that resulted in the creation of Bitcoin Cash, a new cryptocurrency. The hard fork resulted in a windfall to owners of Bitcoin, who, at the time of the hard fork, received one unit of Bitcoin Cash for each unit of Bitcoin owned. This hard fork resulted in many unanswered tax issues relating to such newly created cryptocurrency.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Sutherland's Cryptocurrency Economics And The Taxation Of Block Rewards

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Abraham Sutherland (Virginia), Cryptocurrency Economics and the Taxation of Block Rewards, Part 1 in 165 Tax Notes 749 (Nov. 4, 2019), Part 2 in 165 Tax Notes 953 (Nov. 11, 2019).

Blockchain, which is the technology behind cryptocurrency, is gradually achieving mainstream adoption. On October 28, 2019, the Securities and Exchange Commission authorized a blockchain startup's pilot project where blockchain will be used to settle trades in stock such as GE and AT&T. This project may challenge the securities trading system for clearing and settlement that has been monopolized by the U.S. Central Depository Agency (DTCC). However, the tax community still has a long way to go in the realm of cryptocurrency, not to mention the underlying blockchain technology, because there are many unresolved issues related to the tax consequences of cryptocurrency. IRS Notice 2014-21 provides that cryptocurrency is not currency—rather, it would be taxed as intangible property and should be included in gross income when received. Recently, IRS Rev. Rul. 2019-24 and FAQ on virtual currency transactions clarify the tax treatment of hard forks and airdrops. To be specific, the splitting of a cryptocurrency under a "hard fork" does not create taxable income if no new cryptocurrency is received, but taxable income is generated by "airdrops" that deliver new cryptocurrency. Nonetheless, the IRS has again punted other long-awaited issues, such as the valuation of cryptocurrency and the foreign reporting requirement.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Shaviro's Digital Services Taxes

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Daniel Shaviro (NYU), Digital Service Taxes and the Broader Shift from Determining the Source of Income to Taxing Location-Specific Rents.

Earlier this week, the OECD released the Secretariat Proposal for a "Unified Approach" for the new tax nexus and profit allocation rules to address the tax challenges of the increasingly digitalized economy. The proposal covers highly digitalized business models, but is increased in scope to include consumer-facing businesses. The Unified Approach creates 1) a new nexus rule, not dependent on physical presence and instead largely based on sales, and 2) a new profit allocation rule using a formulaic approach to determine a share of residual, or non-routine, profit allocated to market countries. In addition, if a taxpayer has a traditional nexus in the market country, an additional amount of profit consisting of a fixed return for certain baseline marketing and distribution functions that take place in the market country may further be allocated to the market country. In exchange for this new taxing right of market countries, the countries should agree to a binding and effective dispute prevention and resolution mechanism even if there might be cases where there are more functions in the market countries—that is, more allocable profits to market countries—than the baseline marketing and distribution functions.

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Chaffee's Collaboration Theory And Corporate Tax Avoidance

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Eric C. Chaffee (Toledo), Collaboration Theory and Corporate Tax Avoidance, 76 Wash. & Lee L. Rev. 93 (2019).

Although there is a famous tax quote by Justice Oliver Wendell Holmes, "I like to pay taxes. With them I buy civilization."; there is nothing wrong with taxpayers’ efforts to minimize their tax liability in manners the legislative body deems permissible. Such “tax minimization” is legally permissible and distinguished from “tax evasion,” which is the illegal nonpayment or underpayment of taxes. Then, what about the gray area between tax minimization and tax evasion, commonly referred to as “tax avoidance?” Is it permissible to pursue tax avoidance, where taxpayers reduce their tax obligations in a manner that technically complies with the law but violates the spirit of the law?

Eric C. Chaffee's new work, Collaboration Theory and Corporate Tax Avoidance, 76 Wash. & Lee L. Rev. 91 (2019), is an effort to answer this difficult question in the corporate tax context. 

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Cui's The Digital Services Tax: A Conceptual Defense

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Wei Cui (UBC), The Digital Services Tax: A Conceptual Defense (April 2019).

There are already multiple versions of a real digital services tax (DST) that have been implemented or proposed in multiple countries. France released a bill introducing a DST retroactively to January 1, 2019, UK will introduce a DST in April 2020, and other European countries, such as Spain, Austria, and Italy, are discussing or have proposed a bill mimicking the March 2018 DST proposal from the European Council. While details of the proposed DSTs vary, in general, a DST is a 2-3% tax imposed on the gross revenues of specific digital business models where revenues are linked to the participation of users in the country exercising such taxing right. It also establishes a specified revenue threshold which triggers the DST. The goal of the DST is to capture profits earned by multinationals that reflect value contributed by users of such digital business.  

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Weekly SSRN Tax Article Review And Roundup: Kim Reviews Residual Profit Allocation By Income

This week, Young Ran (Christine) Kim (Utah) reviews a new work by Michael Devereux (Oxford), Alan Auerbach (UC-Berkeley), Michael Keen (IMF), Paul Oosterhuis (Skadden), Wolfgang Schön (Max Planck) & John Vella (Oxford), Residual Profit Allocation by Income, a paper of the Oxford International Tax Group, chaired by Michael Devereux (March 2019).

This paper is a draft chapter of a forthcoming book on the taxation of international business profit by the authors to be published by Oxford University Press. The book will study two proposals for international tax reform — one is the destination based cash flow tax, and the second, which is offered in this paper, is a new form of residual profit allocation for transfer pricing analysis.

The authors refer to the new residual profit allocation method as a "Residual Profit Allocation by Income," or RPA-I. It is a category of profit-based methodology that allocates the total profit of a multinational enterprise (MNE) into two parts — the "routine" profit, and the "residual" profit. 

"Routine" profit is the profit a third party would expect to earn for performing a particular set of functions and activities on an outsourcing basis. Such third party does not share in the overall risk of the MNEs and earns no return based on the overall success or failure of the product or business to which its activities relate. Thus, affiliates of MNEs that take limited risk are assigned such routine profit. On the other hand, "residual" profit is an excess return that is associated with the entrepreneurial success or failure of the enterprise. Thus, only entrepreneurial affiliates may participate in the residual profit of the overall enterprise.

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