The Global Minimum Tax: A Guide For Developing Countries

Allison Christians (McGill; Google Scholar) et al., A Guide for Developing Countries on How to Understand and Adapt to the Global Minimum Tax: Draft for Consultation:

Abstract
This Guide seeks to provide information helpful to countries making policy decisions with respect to the Pillar Two Global Anti-Base Erosion (GloBE) minimum tax proposal. The GloBE initiative creates a pool of potential tax revenues on in-scope corporate multinationals’ incomes to be collected by GloBE participating countries (that host an entity in the MNE group) whenever the effective tax rate of an entity (or entities) within the MNE group in the country falls below 15 percent. Some domestic tax measures intended to attract and keep foreign investment may lose their effectiveness as a result. Further, some of GloBE’s impact may be indirect, providing lawmakers with an opportunity to consider policy reforms whether or not they adopt GloBE itself. It is in the interest of each country to examine the potential applicability of GloBE to its taxpayers and the interplay of GloBE rules with its domestic tax system in order to make informed decisions about whether and in what manner to respond.

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Kristin Hickman Leaves Minnesota For Texas

Kristin Hickman (McKnight Presidential Professor in Law, Distinguished McKnight University Professor, and Harlan Albert Rogers Professor in Law at University of Minnesota Law School) has accepted a lateral offer from the University of Texas School of Law effective January 2024:

Professor Kristin E. Hickman is a leading authority in the fields of tax administration, administrative law, and statutory interpretation. Her articles on these topics have appeared in the Columbia Law Review, Virginia Law Review, Cornell Law Review, and Duke Law Journal, among other publications. She co-authors the Administrative Law Treatise on federal administrative law with Richard J. Pierce, Jr. Her scholarly work has been cited several times in opinions of the United States Supreme Court and as well as regularly in lower court judicial opinions and court briefs.

In 2018-19, Professor Hickman served as Special Adviser to the Administrator of the Office of Information and Regulatory Affairs in Washington, D.C.  She presently serves as one of forty public members and chair of the judicial review committee for the Administrative Conference of the United States. She has served as a member of the Governing Councils of the American Bar Association’s Section of Administrative Law and Regulatory Practice and the Minnesota State Bar Association Administrative Law Section. She is a Fellow of the American College of Tax Counsel.

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2022 IFA International Tax Student Writing Award; Call For Entrants In 2023 Competition

The winner of the International Fiscal Association's 2022 International Tax Student Writing Competition is: 

Neil Kelliher (Virginia), Improving Transfer Pricing Litigation by Aligning Section 482 with Litigants’ Incentives, 52 Tax Mgmt. Int’l J. __ (2023).

Faculty Sponsor: Ruth Mason

The Section 482 regulations create a comprehensive system for regulating transfer pricing. But litigation involving these regulations often leads to unsatisfactory results. This issue can be tied to the idea that the section 482 regulations are seemingly written for application by a disinterested third party, while transfer pricing litigation necessarily pits the IRS against a multinational entity. 

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Crypto Losses

Xuan-Thao Nguyen (Washington) & Jeffrey A. Maine (Maine), Crypto Losses, 2024 U. Ill. L. Rev. __ :

The crypto industry has been hit hard with various market forces and scams, leaving investors with trillion-dollar losses in recent years. The appropriate tax treatment of such losses has yet to be fully examined, as there is scant guidance and a dearth of academic literature on the subject. This Article attempts to fill this gap by applying general tax principles to crypto losses and making several recommendations to improve the clarity and consistency of tax results. 

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Lesson From The Tax Court: Exclusion Rules For Disability Payments

A tax break is just another way of saying “government subsidy.”  Most folks do not even think about that when they get a medical bill.  They are generally just upset about the size of the co-pay!  But Congress subsidizes medical care by allowing taxpayers to exclude from income everything the health insurance plans pay the medical providers above the co-pay.

The scope of that subsidy, however, depends on who pays for the insurance in the first place.  If the taxpayer pays for the insurance, the exclusion is governed by §104(a)(3).  That provision does not just exclude payments for actual medical services.  It excludes any and all amounts paid on account of physical injury or sickness.  In contrast, if the taxpayer’s employer pays for the insurance, then the exclusion is governed by §105(b) and that is a more restrictive exclusion.  The §105 exclusion is limited to actual reimbursements (or payments) for identified medical care.

The differences between the §104(a)(3) exclusion and the §105(b) exclusion are most apparent when a taxpayer receives disability payments, as we learn in Cynthia L. Hailstone and John Linford v. Commissioner, T.C. Summ. Op. 2023-17 (Apr. 24, 2023) (Judge Leyden).  There, the taxpayer received disability payments and attempted to exclude those from income.  That might have worked under §104(a)(3) if the taxpayers had paid for the insurance, but since the payments at issue came from an employer-paid plan, the exclusion was not permitted, per §105(b).  Details below the fold.

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The Top Five New Tax Papers

There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #3:

1. [644 Downloads]  Carried Too Far? A Challenge to the Tax Treatment of Carried Interest in the Private Equity Industry, by Dan Neidle (Tax Policy Associates)
2. [440 Downloads]  GILTI and the GloBE, by Heydon Wardell-Burrus (Oxford)
3. [377 Downloads]  Does the 'Initial Phase Relief' Make the EU’s Pillar Two Directive Invalid?, by Georg Kofler (Vienna University of Economics and Business; Google Scholar) & Arne Schnitger (Free University of Berlin)
4. [254 Downloads]  Taxation of Information and the Data Revolution, by Yariv Brauner (Florida; Google Scholar)
5. [229 Downloads]  Admin Law And The Crisis Of Tax Administration, by Brian Galle (Georgetown; Google Scholar) & Stephen Shay (Boston College; Google Scholar)

This Week's Ten Most Popular TaxProf Blog Posts

Legal Education:

1. Paul Caron (Dean, Pepperdine), An Early Preview Of The 2025 U.S. News Law School Rankings: Employment
2. Josh Blackman (South Texas; ABA Journal Op-Ed), Law Schools Face An Inflection Point With Diversity, Equity And Inclusion
3. Paul Caron (Dean, Pepperdine), U.S. News Releases Preview Of 2024 Law School Rankings: Top 14 And New Methodology
4. Derek Muller (Iowa), Law Schools With The Best And Worst Student Debt-To-Income Ratios
5. Paul Caron (Dean, Pepperdine), What Is Causing The 3+ Week Delay In The U.S. News Law School Rankings?
6. Mike Spivey, Projected 2024 U.S. News Rankings For All 191 Law Schools
7. Paul Caron (Dean, Pepperdine), Preview Of The 2024 U.S. News Law School Rankings: Admissions
8. New York Times, How Scalia Law School Became A Key Friend Of The Court
9. Reuters, The Top Law Schools For Placing The Class Of 2022 In BigLaw Jobs
10. Law.com, University Of Arizona Law School Shifts Classes And Final Exams Online Due To Alleged Threat

Tax:

1. Bryan Camp (Texas Tech), Lesson From The Tax Court: Better Deals With Appeals
2. NYU, Tax Law Review Publishes New Issue
3. Bryan Camp (Texas Tech), Lesson From The Tax Court: Attend Carefully To Your Entity Baskets
4. Wall Street Journal, The Problem With The IRS Pledge Not To Audit More Earners Under $400,000
5. Bloomberg Businessweek, Inside the IRS’s Shrinking Band of Wealth Hunters
6. BYU News, ChatGPT Bombs Accounting And Tax Exams: 47% v. 77% For Students
7. Reuven Avi-Yonah (Michigan), Three New Tax Papers On SSRN
8. SSRN, The Top Five New Tax Papers
9. Tracey Roberts (Cumberland), Review Of Capital Taxation And Market Power, By Kimberly Clausing (UCLA)
10. Roundup, Tax Policy In The Biden Administration

Faith: 

1. Press Release, Pepperdine Caruso Law's New Religious Clinic Engages Its First Direct Representation Of Clients: Two New Jersey Churches Denied County Historic Preservation Funds

The Impact Of State Tax Policy On Infant Mortality

Jean Junior (Pediatric Emergency Medicine Fellow, Boston Children's Hospital) et al., Association of State-Level Tax Policy and Infant Mortality in the United States, 1996-2019:

This cross-sectional study examines the association between state-level tax policy and state-level infant mortality in the US overall and by race and ethnicity. ...

In this cross-sectional study, an increase in tax revenue and the Suits index of tax progressivity were both associated with decreased infant mortality. These associations varied by race and ethnicity. Tax policy is an important, modifiable social determinant of health that may influence state-level infant mortality.

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Clausing’s Capital Taxation And Market Power

This week, Tracey Roberts (Cumberland; Google Scholar) reviews a new work by Kimberly Clausing (UCLA; Google Scholar), Capital Taxation and Market Power.

On Tuesday the Wall Street Journal reported that Americans are facing continued price increases, not because of pandemic-related supply-chain disruptions or because of rising energy costs following the Russian invasion of Ukraine, but because corporations are simply padding their profits. How is this possible in a free market? Well, the market is not exactly free. Mergers and consolidations have given large corporations the ability to exercise market power. Because so few companies compete with one another for customers, they can set monopolistic prices. Likewise, when there are fewer companies competing for workers or resources, they can engage in monopsony, paying lower wages and lower prices than they would be able to claim in a competitive market. Scholars and journalists have reported that employers are forcing employees across many sectors to work longer, for less pay, and in more difficult conditions, and are effectively reducing employment opportunities.

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Tax Policy In The Biden Administration

• Bloomberg, Crypto Traders Avoiding Billions in Tax by ‘Loss Harvesting’
• Bloomberg, Judge Dismisses Trump’s Lawsuit Against NY Times Over Report on His Taxes
• Bloomberg, The IRS Needs a Tech Overhaul. Even the GOP Is Rooting for Them
• Bloomberg, New York’s Remote Work Tax Rule Needs Revisiting, Judge Hears
• Bloomberg, Taxing Wealthy Dynasties Seen Backfiring in States Like New York

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WSJ Op-Ed: Congress Gave $80 Billion To A Lawless IRS

Wall Street Journal Op-Ed:  Congress Gave $80 Billion to a Lawless IRS, by Travis Nix (J.D. 2023, Georgetown):

After nearly eight months of deliberation, the Internal Revenue Service has finally released a lightly detailed plan for how to spend the additional $80 billion Congress allotted in 2022. Taxpayers should be dubious of IRS promises to use this funding to ensure fairer and more lawful tax-code enforcement. The few details in the report’s vague language indicate that the IRS wants to use its newfound money to enforce sections of the tax code that courts struck down twice as unlawful last year. Congress should stop funding the illegal purposes at the IRS.

One of the few definite action items the IRS included in its 150-page report was an enforcement objective to levy tax penalties against taxpayers engaging in “listed transactions”: practices the service has labeled as prone to tax abuse. These currently consist of a series of 36 transactions that the IRS has simply published on its website and in taxpayer notices over the last two decades. The IRS enforces and cites these notices as having the force of law even though taxpayers had no opportunity to voice concerns about these rules. Because the notices didn’t undergo the proper review process to become regulations, they can’t legally be enforced and should be nonbinding. ...

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Mazur & Thimmesch: Cooperative Federalism And The Digital Tax Impasse

Orly Mazur (SMU; Google Scholar) & Adam B. Thimmesch (Nebraska; Google Scholar), Cooperative Federalism and the Digital Tax Impasse, 51 Fla. St. U. L. Rev. __ (2023):

The digital economy is changing faster than the law can respond and has challenged legal systems worldwide. In the tax space, the digital economy has undermined traditional tax systems in ways that have created significant tax compliance and enforcement challenges, substantial tax revenue losses, and unwarranted distortions in the market between digital and traditional transactions. These problems are well recognized both in the legal literature and in the public sphere. Unfortunately, the legal reforms that are needed in this space have been slowed by a combination of technical, conceptual, and political impediments. This Article focuses on the digital tax landscape at the U.S. subnational level to demonstrate how those factors are preventing meaningful legal reform and why a novel approach to tax reform may be successful in breaking the current impasse.

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ABA Tax Section May Meeting Kicks Off Today In Washington, D.C.

This week's ABA Tax Section 2023 May Tax Meeting (program) kicks off today. A highlight is the Teaching Taxation program on Friday on Taxing the Metaverse:

The buzz surrounding the Metaverse—a digital space featuring virtual reality, augmented reality, and other advanced internet technology—has been growing steadily for the past couple of years, but the tax implications of this novel ecosystem remain fuzzy to most tax scholars. Such uncertainty is concerning, given the potential and momentum of this emerging technology. Although the Metaverse evolved from online video games focused only on user consumption, it now allows users to produce income and accumulate wealth entirely within the Metaverse. Current law seems to defer taxation of such until a realization or cash-out event. This panel will examine the tax implications of various economic activity in the Metaverse, such as self-created virtual assets (like NFTs), loot drops, intra-Metaverse exchanges, inter-Metaverse exchanges, and cash-for-virtual goods exchanges. Furthermore, this panel will discuss whether Metaverse taxation should be deferred until cash-out or immediate taxation, such as mark-to market, is possible. Finally, the panel will explore potential compliance issues posed by Metaverse activity.

• Young Ran (Christine) Kim (Cardozo; Google Scholar) (moderator)
• Eric Chason (William & Mary) 
• David Gamage (Indiana-Maurer; Google Scholar) 
• Omri Marian (UC-Irvine; Google Scholar)
• Caitlin Tharp (Steptoe & Johnson, Washington, D.C.) 

Other Tax Profs with speaking roles include:

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Clausing: Capital Taxation And Market Power

Kimberly A. Clausing (UCLA; Google Scholar), Capital Taxation and Market Power:

In recent decades, market power has increased substantially, according to multiple measures that describe industry concentration, mark-ups, and business profitability. While market power can generate benefits, it also raises vexing policy concerns, including the potential for adverse effects on labor markets, income inequality, and the dynamism of market competition. The concept of market power also has implications for how we conceptualize capital income, making it important to distinguish between normal and above-normal returns to capital. The tax system taxes both types of returns to capital, but often imperfectly and incompletely. Full consideration of the relationship between market power and capital income suggests important implications for optimal capital taxation design, including the role of entity taxation, the use of graduated business tax rates, and international tax reform.

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Saving The Nonessential With Radical Tax Policy

Rodney P. Mock (Cal Poly) & Kathryn Kisska-Schulze (Clemson; Google Scholar), Saving the Nonessential With Radical Tax Policy, 90 U. Cin. L. Rev. 197 (2021):

Under the Internal Revenue Code of 1986, as amended, for-profit entities are distinguishable from tax-exempt entities in that they, among other factors, pursue profits, and enjoy unrestricted commercial activities. The COVID-19 lockdowns prevented commercial activity for numerous for-profit small businesses. For the first time in United States history, a distinction was made between "essential" and "nonessential" businesses. Such distinction is historically absent in both legal scholarship and tax law; instead, it is a product of governmental reaction to the COVID-19 pandemic. Via executive order, nonessential businesses were characterized as being trivial to the fabric of society, and thus shuttered, while essential businesses were permitted to remain operational with little, if any, interruption. Essential business’ profits have since amassed from such consolidation.

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Creating A Pro-Tax Story For Racial Equity

Nicholas A. Mirkay (Hawaii; Google Scholar) & Palma Joy Strand (Creighton), Creating a Pro-Tax Story for Racial Equity, 108 Tax Notes St. 343 (Apr. 24, 2023):

In this installment of "The Search for Tax Justice" in Tax Notes State, Mirkay and Strand highlight the deep history of contemporary racialized framing of the “taxpayer” identity as white; examine the racist roots of the neoliberal attack on taxation; and introduce a human-dignity-based response to the tax system’s racialized status quo. ...

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Tax Law Review Publishes New Issue

The Tax Law Review has published a new issue (Vol. 75, No. 2 (Spring 2022)):

• Brian Galle (Georgetown; Google Scholar) & Yair Listokin (Yale; Google Scholar), Monetary Finance, 75 Tax L. Rev. 137 (2022) (reviewed by David Elkins (Netanya, visiting NYU) here) 
• Wei Cui (British Columbia; Google Scholar), New Puzzles in International Tax Agreements, 75 Tax L. Rev. 201 (2022)

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Galle: Incentive-Compatible Inflation Policy

Brian D. Galle (Georgetown; Google Scholar), Incentive-Compatible Inflation Policy, 108 Cornell L. Rev. Online ___ (2023):

In most highly-developed economies, governments have handed management of inflation entirely over to their central banks, and for good reason. With inflation largely beaten by central bankers for nearly five decades, there has been little effort to design, let alone implement, other legal institutions that could help slow sharp increases in the prices facing consumers. This dearth of good ideas is unfortunate, because it turns out that relying exclusively on central banks may not be ideal. While central banks today say that they are aiming for a "soft landing" in which inflation slows but major economies avoid significant additional damage, leading bankers also predict a significant likelihood of recession and widespread unemployment. There is reason to think that many central bankers will be prone to "overshoot" or fight inflation more aggressively than might be optimal for their economy. Central banks also deploy inflation-fighting tools that can damage government budgets, drive up taxes, or both.

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SSRN Tax Professor Rankings

SSRN has updated its monthly ranking of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through April 1, 2023) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

		All-Time			Recent
1	Reuven Avi-Yonah (Michigan)	219,412	1	Reuven Avi-Yonah (Michigan)	12,089
2	Daniel Hemel (NYU)	129,397	2	Kristin Hickman (Minnesota)	9,546
3	Dan Shaviro (NYU)	126,346	3	Jonathan Choi (Minnesota)	9,127
4	Lily Batchelder (NYU)	126,202	4	Daniel Hemel (NYU)	4,572
5	David Gamage (Indiana-Bloom.)	123,849	5	Bridget Crawford (Pace)	4,070
6	Darien Shanske (UC-Davis)	116,971	6	Ruth Mason (Virginia)	3,164
7	David Kamin (NYU)	113,436	7	Robert Sitkoff (Harvard)	3,016
8	Cliff Fleming (BYU)	107,868	8	Margaret Ryznar (Indiana-Indy)	2,976
9	Manoj Viswanathan (UC-Hastings)	104,450	9	Louis Kaplow (Harvard)	2,924
10	Ari Glogower (Northwestern)	103,709	10	D. Dharmapala (Chicago)	2,896
11	Rebecca Kysar (Fordham)	103,553	11	Kyle Rozema (Washington University)	2,750
12	D. Dharmapala (Chicago)	49,869	12	Richard Ainsworth (Boston Univ.)	2,634
13	Michael Simkovic (USC)	48,174	13	Darien Shanske (UC-Davis)	2,489
14	Paul Caron (Pepperdine)	40,819	14	David Gamage (Indiana-Bloom.)	2,453
15	Louis Kaplow (Harvard)	39,563	15	Zachary Liscow (Yale)	2,378
16	Richard Ainsworth (Boston Univ.)	37,307	16	Kim Clausing (UCLA)	2,290
17	Bridget Crawford (Pace)	35,545	17	Young Ran (Christine) Kim (Cardozo)	2,290
18	Robert Sitkoff (Harvard)	31,684	18	Brad Borden (Brooklyn)	2,231
19	Brad Borden (Brooklyn)	30,030	19	Lily Batchelder (NYU)	2,053
20	Vic Fleischer (UC-Irvine)	29,652	20	Dan Shaviro (NYU)	1,998
21	Ed Kleinbard (USC)	29,293	21	Richard Kaplan (Illinois)	1,828
22	Ruth Mason (Virginia)	29,239	22	Victoria Haneman (Creighton)	1,773
23	Jim Hines (Michigan)	27,721	23	Brian Galle (Georgetown)	1,722
24	Richard Kaplan (Illinois)	26,935	24	David Kamin (NYU)	1,686
25	Katie Pratt (Loyola-L.A.)	26,139	25	Chris Sanchirico (Penn)	1,653

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Tax Prof Twitter Problems: Suspension, Hack

Andy Grewal (Iowa) and Daniel Hemel (NYU) are two of the more active Tax Profs on twitter. Both have lost access to their accounts for different reasons.

Twitter suspended Andy's account (@AndyGrewal) as a result of a twitter conversation with a friend (Andrew Dhuey) over the proper response to the alleged controversy around Justice Thomas. Andrew argued that serious ethical violations had occurred and he sought a monetary penalty. I thought this was a grave overreaction. To illustrate my position, I sarcastically said that I would "prefer the guillotine" for Justice Thomas.

Twitter concluded that the tweet was an attempt to "threaten, incite, glorify, or express a desire for harm or violence:"

Many people, including Andrew, tried to explain that Andy's silly tweet did no such thing. But Twitter has rejected his appeals. Andy engaged in some self-help and is now tweeting on a new account (@ProfGrewal) but has lost thousands of followers.

Daniel (@DanielJHemel) took to Slate to announce My Twitter’s Been Hacked. But Hasn’t Everyone’s?:

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Luke Reviews Marian's Taxing Data

Charlene Luke (Florida; Google Scholar), Tax Design for a Data-Rich World (JOTWELL) (reviewing Omri Marian (UC-Irvine; Google Scholar), Taxing Data, 47 BYU L. Rev. 511 (2022)):

In Taxing Data, Omri Marian argues that taxing data-rich markets requires rejecting income taxation—not only as implemented but also “in its optimal theoretical form”—as the best proxy for ability to pay. Instead, Marian makes the radical suggestion that data itself “may be a better proxy” for ability to pay, and he offers three fundamental features that should guide “a reimagined tax on data.”

The article is rich in detail and is at its most persuasive in discussing the income taxation of business entities. Drawing on the work of tax historians and scholars, Marian summarizes two dominant narratives explaining the origins of the corporate income tax: the corporate income tax as a proxy for shareholder income, and the corporate income tax as a means to rein in management. Marian points out that if corporate ownership and management is largely local and traceable, which it was “at the dawn of corporate taxation,” then “whether the attempt was to target shareholders’ ability to pay, or managerial interest, the taxation of corporate income made sense.”

On the horizon, however, was a perfect storm of globalization, dispersion, and “intangible-ization,” which, Marian asserts, “our data-rich economy amplifies by orders of magnitude.” These forces have now so completely swamped the corporate income tax’s ability to identify source or ownership and to measure value that it is time to “revisit our conceptual tax design.” ...

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Avi-Yonah Posts Three Tax Papers On SSRN

Reuven S. Avi-Yonah (Michigan; Google Scholar) has posted three tax papers on SSRN:

Follow the Money: Why Is International Tax Bilateral?:

International tax law has traditionally been built upon bilateral treaties and unilateral actions, while trade law has traditionally been multilateral and international investment law has been bilateral but with Most Favored Nation (MFN) clauses that render it effectively multilateral. This paper explores the reasons and asks whether they are still valid.

Why 15%? Justifying the Global Corporate Minimum Tax:

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Lesson From The Tax Court: Better Deals With Appeals

One recurring lesson I teach in Tax Practice and Procedure is that you generally serve your client better by resolving their issues at the lowest level.  That requires helping them be realistic in understanding the range of potential outcomes.  It requires an understanding that IRS offices, such as the Office of Appeals, generally have more discretion than does the Tax Court to resolve problems.  It also requires understanding that when the Tax Court reviews an IRS discretionary action, it will only change that action when it is convinced the IRS decision was bonkers or, in the dry technical terms of the law, the decision was an “abuse of discretion.”  And, no, the Tax Court will not make a taxpayer’s argument for them, as we recently learned in Lesson From The Tax Court: The Tax Court Is Not Your Advocate, TaxProf Blog (Feb. 6, 2023).

Today I present a case where pro se taxpayers learned that lesson the hard way.  In Ronald Powell and Cynthia Powell, T.C. Memo. 2023-48 (Apr. 17, 2023) (Judge Lauber), the taxpayers did not like the Installment Agreement offered them by Appeals.  They thought they could do better in Tax Court.  They thought wrong.  Details below the fold.

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