Paul L. Caron
Dean




Friday, September 17, 2021

Brown: Congress Is Passing Up A Chance To Close A Tax Loophole — And The Racial Wealth Gap

Washington Post op-ed:  Congress Is Passing Up a Chance to Close a Tax Loophole — and the Racial Wealth Gap, by Dorothy Brown (Emory; Visiting at Georgetown):

The ‘step-up in basis’ rule benefits a small, mostly White, group of Americans.

The United States has a huge racial wealth gap: The median wealth of White families is almost eight times that of Black families and five times that of Hispanic families. One of the hidden drivers of this gap is tax policy, which has accelerated wealth-building by White families, while excluding most Black families. Congress recently had an opportunity to reform at least one lever of that inequality — only to reject it.

Earlier this year, as part of the American Families Plan, the Biden administration proposed closing a nearly century-old loophole called “step-up in basis,” saying it is “exacerbating inequality.” While many can take advantage of that rule, those who benefit the most are in the top 1 percent of income earners (earning more than $1 million of income). That group is disproportionately White: While 15 percent of White Americans are millionaires, only 2 percent of Black Americans are millionaires. complete repeal of the stepped-up basis rule would raise an estimated $505 billion over 10 years. This week, though, the House Ways and Means Committee released its tax package, which drops that proposed reform. ...

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September 17, 2021 in Tax, Tax News | Permalink

Thursday, September 9, 2021

WSJ: Biden’s Dream Of An IRS Strike Team

Wall Street Journal editorial, Biden’s Dream of an IRS Strike Team:

When President Biden talks of bulking up the Internal Revenue Service, he must be fantasizing about some kind of SEAL Team 6 for audits. His plan is to put another $80 billion into IRS tax enforcement over 10 years, which the White House claims will raise $700 billion of revenue that’s being left on the table.

Not even close, according to a Thursday report by the Congressional Budget Office. The extra IRS funds, the CBO says, would probably produce only $200 billion. Blame it on a classic economic culprit, diminishing returns. Last year the IRS spent $12.3 billion and employed 75,773 full-time equivalents. ...

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September 9, 2021 in Tax, Tax News | Permalink

Wednesday, September 8, 2021

WSJ: Can Congress Tax Wealth By ‘Deeming’ It Income?

Wall Street Journal op-ed:  Can Congress Tax Wealth by ‘Deeming’ It Income?, by David B. Rivkin Jr. & Andrew M. Grossman:

Charles and Kathleen Moore have done well, but they certainly aren’t billionaires. Yet the couple’s constitutional challenge stands to slam shut the door on a federal wealth tax like the one Sen. Elizabeth Warren wants to enact.

The story is complicated, though less so than the tax code. In the 1990s Mr. Moore, a software engineer, worked at Microsoft on its Office applications and grew close to a fellow programmer, Ravi Agrawal. ... Mr. Agrawal needed capital to get [his] business off the ground. He approached friends to invest in his new company, KisanKraft, and the Moores put up $40,000. ... The Moores have never received a dime from their investment. ... 

Then the tax bill came. As part of the Tax Cuts and Jobs Act of 2017, Congress reworked the way multinational corporations are taxed, limiting the amount that they had to pay on foreign income. Offsetting part of the cost was a new, one-time tax on earnings that certain foreign corporations had accumulated over the preceding 30 years but not distributed to their shareholders through dividends. The law deemed those earnings as 2017 income to the shareholders and taxed them on it. The Moores’ bill amounted to $15,000. They paid and are now suing for a refund, on grounds that the new tax is unconstitutional.

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September 8, 2021 in Tax, Tax News | Permalink

Tuesday, September 7, 2021

Senate Democrats Eye Taxes On Stock Buybacks, Excess CEO Pay

Washington Post, Senate Democrats Eye Taxes on Stock Buybacks, Excess CEO Pay:

Senate Democrats are discussing a wider range of tax proposals than President Joe Biden has proposed, including levies on stock buybacks, carbon emissions and executive compensation, as part of a package of measures to help fund a ramping up in social spending.

One idea is applying an excise tax on stock buybacks or treating them as taxable dividends to shareholders, according to two people familiar with Senate Finance Committee discussions. Corporate deductions for executive compensation could also be limited, and companies could face an excise tax if their chief executive officer’s pay exceeds that of an average company worker by a certain ratio, the people said. ...

Treating corporate buybacks and dividends similarly for tax purposes would raise $70 billion to $80 billion a year, “making it a potentially attractive add-on to future budget bills that strive for revenue neutrality or deficit reduction,” law professors Daniel Hemel and Gregg Polsky wrote in a paper earlier this year [more here]. ...

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September 7, 2021 in Tax, Tax News | Permalink

Two-Thirds Of Americans Support Biden's Plan To Beef Up IRS Enforcement

University of Maryland Program for Public Consultation, Two-Thirds Favor Bolstering IRS Tax Enforcement as Proposed for Reconciliation Budget Plan:

MarylandMore than two-thirds of American voters favor increasing the IRS Budget by $8 billion a year to fund increased tax enforcement, a proposal being considered to help fund the reconciliation budget plan.

In the innovative survey of 2,613 registered voters by the Program for Public Consultation (PPC) at the School of Public Policy at the University of Maryland, respondents were given briefings on the proposal, and evaluated arguments for and against. The content was reviewed in advance by experts for accuracy and balance and to ensure the best arguments were being presented on both sides.

The proposal presented, based on one in the American Families Plan, calls for an increase in the IRS budget by $8 billion a year to:

  • ​​increase tax enforcement on very high-income individuals (income over $400,000);
  • update the technology used to detect tax evasion; and
  • require banks and other financial companies to provide information to the IRS.

In conclusion, a majority of 68% favor the plan including 88% of Democrats, 65% of independents, and 46% of Republicans.

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September 7, 2021 in IRS News, Tax, Tax News | Permalink

Monday, September 6, 2021

Biden’s Second Surrender: Corporate Taxes

Wall Street Journal op-ed:  Biden’s Second Surrender, by Kimberley A. Strassel:

The Democrats push for a hike in corporate taxes that would be a gift to the Chinese.

Joe Biden this week completed the U.S. pullout from Afghanistan, in a humiliating military surrender to the Taliban. The president is more interested in working on a second capitulation—a wholesale economic surrender to China and other rivals.

Members of the House Ways and Means Committee were notified that markup will begin as early as next Thursday on Democratic plans for the largest tax increase in at least 50 years. House leaders have yet to provide any text for the committee work, since they continue to negotiate the details. But the White House and Democratic lawmakers have made clear the broad contours, which are best read as an exercise in U.S. self-sabotage—a gift to foreign companies and foreign workers everywhere.

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September 6, 2021 in Tax, Tax News | Permalink

Saturday, September 4, 2021

RenTec Hedge Fund Executives Agree To Pay $7 Billion To Settle IRS Tax Dispute Over Characterization Of Basket Option Income

Following up on my previous posts (links below):  New York Times, Hedge Fund’s Insiders Agree to Pay as Much as $7 Billion to I.R.S.:

RenaissanceA yearslong dispute between a pioneering hedge fund and the Internal Revenue Service ended Thursday with an enormous bill for taxes and penalties: as much as $7 billion.

James Simons, a mathematician whose algorithmic approach has been adopted by many other investment funds, and some of his former colleagues at Renaissance Technologies have settled a decade-long dispute with the government over the tax treatment of some of their investments, the firm said in a letter to investors.

The settlement, which involves 10 years’ worth of trades made by the hedge fund, could be worth as much as $7 billion, according to a person with knowledge of the agreement. It is one of the largest federal tax disputes in history.

The deal ends a standoff that led to a congressional investigation and involved two politically connected financiers: Mr. Simons, a longtime patron of Democratic candidates with an estimated net worth of $25 billion, and Robert Mercer, a former Renaissance executive whose advocacy for conservative causes included helping to found Cambridge Analytica. After Donald J. Trump won the 2016 presidential election, the now-defunct political consulting firm became embroiled in a scandal for harvesting Facebook data without users’ consent to assist his campaign.

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September 4, 2021 in IRS News, Tax, Tax News | Permalink

Friday, September 3, 2021

The Very Rich Have A Plan To Escape Biden's Tax Increase: Private Placement Life Insurance

Bloomberg, The Very Rich Already Have a Plan to Escape Biden's Tax Increase: Private Placement Life Insurance:

Wealthy Americans are scrambling for places to hide from plans by Democrats to hike their taxes. Many on Wall Street think they’ve found just the thing.

A niche strategy called private placement life insurance, or PPLI, was already gaining popularity among the very rich for its ability to shield fortunes from taxes. Now some advisers to the top 0.1% say it’s dominating conversations with their clients.

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September 3, 2021 in Tax, Tax News | Permalink

Thursday, September 2, 2021

The Tax Consequences Of College Athletes' Name, Image And Likeness Deals

Robert W. Wood (Forbes), College Athletes Cutting New Name Image Likeness Deals Could Be In For A Tax Shock:

NCAA LogoFor generations, it did not seem possible that college athletes could earn big before they went pro. Some star high school athletes skipped college for that reason. But now name image likeness deals—NIL for short—are OK, and some athletes will cash in big. Cash means taxes of course, and they can be a rude awakening. In fact, there are more than a few big tax dangers coming with those endorsement deals.

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September 2, 2021 in Tax, Tax News | Permalink

Bird-Pollan Named Associate Dean For Academic Affairs At Kentucky

Professor Jennifer Bird-Pollan Named Associate Dean for Academic Affairs:

Bird-Pollan (2021)Jennifer Bird-Pollan, a tax law professor who joined the faculty in 2010, has been named associate dean of academic affairs for the University of Kentucky J. David Rosenberg College of Law. ...

“Jennifer is committed to our academic program, our students and faculty success,” UK Rosenberg Law Dean Mary J. Davis said. “She has a wealth of leadership experience in our college and across campus, and I look forward to working with her.”

Bird-Pollan serves as the Judge William T. Lafferty Professor of Law and teaches federal income tax, estate and gift tax, international tax, partnership tax, corporate tax, and a seminar in tax policy. Her research lies at the intersection of tax law and philosophy, specifically regarding the taxation of wealth transfers and issues of sovereignty in international taxation.

In 2017, Bird-Pollan won the law school’s Duncan Teaching Award, which is presented annually to a faculty member who has excelled in the classroom, courtesy of the Robert M. and Joanne K. Duncan Faculty Improvement Fund.

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September 2, 2021 in Legal Ed News, Legal Education, Tax, Tax News, Tax Prof Moves | Permalink

Tuesday, August 24, 2021

WSJ: U.S. Malta Treaty May Permit Cross-Border Roth IRA Tax Shelters For Wealthy Americans

Wall Street Journal Tax Report, Quirks in a U.S. Treaty With Malta Turn Into a Tax Play:

Have you heard of Malta Pension Plans? They’re offshore tax shelters that are hot with some wealthy Americans.

As usual with tax shelters, the promoters promise they’ll slash tax bills by making clever use of legal quirks. That puts them in a somewhat gray area, meaning the tax savings could bring legal risks.

Malta has caught the attention of advisers due to quirks in a 2011 tax treaty between the U.S. and the small, sunny island that sits at a historic crossroads in the Mediterranean Sea.

Advocates say Malta plans can dramatically lower U.S. taxes on the sale of highly appreciated assets like cryptocurrency, stock or real estate. Instead of paying a top federal rate of 23.8% on capital gains—or 43.4% if a Biden administration proposal is enacted—U.S. investors can fund a Malta pension with such assets, sell them, and soon withdraw large chunks of the money tax-free if the saver is age 50 or older.

Predictably, Malta pensions have also caught the eye of the Internal Revenue Service. In July, the agency put them on its “Dirty Dozen” list of tax scams to avoid. However, the IRS said only that it may challenge some Maltese pensions—not that all plans are abusive, or that it will challenge them.

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August 24, 2021 in Tax, Tax News | Permalink

Monday, August 23, 2021

61% Of Americans Paid No Federal Income Tax In 2020 (Up From 44% In 2019)

Bloomberg, U.S. Households Paying No Income Tax Hit 61% of Total Last Year:

Nearly 61% of U.S households paid no federal income taxes during pandemic-stricken year of 2020, because of declines in income and boosts to government subsidies that wiped away tax liabilities, according to data from the Urban-Brookings Tax Policy Center.

The number of households owing nothing came in at 106.8 million, up from 75.9 million in 2019, the study, released Wednesday, showed. The 60.6% proportion for last year compares with 43.3% over the five years before the pandemic struck.

Bloomberg

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August 23, 2021 in Tax, Tax News | Permalink

Sunday, August 22, 2021

Thirteen GOP Senators Demand IRS Explain Why It Denied Tax-Exempt Status To Organization That Encourages Christians To 'Pray, Vote, Engage'

Following up on my previous posts:

Newsweek, Republicans Demand IRS Explain Why Christian Group Was Denied Tax-Exemption:

A group of Republican senators has written to the Internal Revenue Service (IRS) asking the agency to explain why a Christian group was initially denied tax-exempt status.

The senators ... highlighted the case of Christians Engaged, a Texas based non-profit incorporated in 2019 that seeks to "awaken, motivate, educate, and empower ordinary believers in Jesus Christ" and encourages people to pray for elected officials.

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August 22, 2021 in Tax, Tax News | Permalink

Saturday, August 21, 2021

Death Of Jon Forman (Oklahoma)

The Norman Transcript, Jonathan Forman (May 19, 1952 - August 16, 2021):

FormanJonathan Forman, 69, died Aug. 16 from complications due to a brain hemorrhage. A tax law professor at the University of Oklahoma College of Law for 36 years, Forman helped educate hundreds, if not thousands, of future attorneys. At the time of his death, he was the Kenneth E. McAfee Centennial Chair in Law.

Known for his flashy ties and vintage Hawaiian shirts, Forman always looked for ways to enliven tax law and policy. For years, he and his students ran the Volunteer Income Tax Assistance program at the Norman Public Library.

Once a long-haired anti-war protester with a fondness for the Grateful Dead, Forman grew up in Cleveland, Ohio, before cutting his teeth on tax law in Washington, D.C. It was in the nation's capital where he met his wife of 38 years. They later made Norman, Oklahoma, their permanent and cherished home. ...

He is survived by his wife, Lani Malysa; sister, Elaine Schwartz, and her husband, Jay Schwartz; two children, Carmen and Neil; his daughter-in-law, Amy, and granddaughter, Margaret.

Due to COVID-19, a celebration of life will be held at a later date. In lieu of flowers, donations can be made at his favorite charity, Food and Shelter of Norman.

30 Tax Profs remember Jon:

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August 21, 2021 in Legal Education, Obituaries, Tax, Tax News | Permalink

Friday, August 20, 2021

ProPublica: How The Trump Tax Law Created A Loophole That Lets Top Executives Net Millions By Slashing Their Own Salaries

ProPublica, How the Trump Tax Law Created a Loophole That Lets Top Executives Net Millions by Slashing Their Own Salaries:

Pro PublicaThe 2017 tax cuts made it more attractive for certain company owners to be paid in profits instead of wages. Some cut their own wages, expanding a loophole that was already costing the U.S. billions.

In the months after President Donald Trump signed the Tax Cuts and Jobs Act in December 2017, some tax professionals grew giddy as they discovered opportunities for their clients inside a law that already slashed rates for corporations and wealthy individuals.

At a May 2018 conference of financial advisers, one wealth planner told the room that a key provision of the new law “leaves a gaping hole in the tax code.” As he put it, “The goal by the end of the presentation today is to make you guys the bus drivers, or the truck drivers, to drive right through that hole with your clients.”

Among the tax-saving opportunities offered by the law: Taxes on profits from certain types of businesses were cut dramatically, while the rate on salaries those businesses paid was reduced only slightly.

That created an alluring opportunity. People who were both owners and employees of a company could make the same amount of money but change how they label it, by lowering their salaries and in turn increasing the company’s profits, which they shared in. That would reduce their tax bill by moving money from a high-tax category to a lower one: Wages are taxed at a top rate of 37% plus an additional 3.8% Medicare levy, while profits, under the new law, are taxed at a top rate of 29.6% (with no Medicare tax). Proponents of this provision claimed it would foster increased investment in American businesses (economists say it’s too early to determine whether that’s true). But even before the bill passed, prominent tax academics warned, in an article titled “The Games They Will Play,” that the tax break would be abused.

Their fears appear to have materialized. Secret IRS data shows multiple instances in which salaries for top executives and owners suddenly and inexplicably dropped in the first year after the Trump tax cut, reducing their tax bills even as their companies appeared to thrive. The mysterious pay cuts played out across industries, from logistics companies to real estate firms to makers of bathtubs, and among executives of varying degrees of prominence. The salary for one construction firm executive dropped from more than $4 million in 2017 to $105,000 in 2018. ...

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August 20, 2021 in Tax, Tax News | Permalink

Thursday, August 19, 2021

Another State Ditches Its Death Tax While Potential Backdoor Federal Estate Tax Looms

Forbes, Another State Ditches Its Death Tax While Potential Backdoor Federal Estate Tax Looms:

In a sign of the political divide over death taxes, Iowa is repealing its inheritance tax, with a phased-in reduction of the tax bite retroactive to January 1, and full repeal as of January 1, 2025. Abolishing the state inheritance tax was a key priority for Republican Governor Kim Reynolds; it was part of a larger tax cut package that speeds up income tax cuts signed into law earlier this summer.

Iowa’s inheritance tax repeal comes along while proposed federal death tax changes could mean many more estates will face federal taxes at much lower wealth levels.

Iowa’s move will leave five states with an inheritance tax, and 11 states and the District of Columbia with an estate tax (See Where Not To Die In 2021 for the full list). Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania are the other inheritance tax states. Maryland has the dubious distinction of having both an inheritance tax and an estate tax. Iowa’s repeal makes Nebraska “a clear geographic outlier,” notes Sarah Curry, policy director with the Platte Institute. ...

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August 19, 2021 in Tax, Tax News | Permalink

Friday, August 13, 2021

Dean (And Tax Prof) Nancy Staudt To Leave Wash U On Oct. 1 To Be Dean Of RAND Graduate School

Washington University Newsroom, Staudt to Conclude Deanship Oct. 1:

Staudt-Nancy-portraitNancy Staudt, dean of the School of Law and the Howard & Caroline Cayne Distinguished Professor of Law at Washington University in St. Louis, will conclude her deanship and leave the university Oct. 1.

She has accepted a position as the Frank and Marcia Carlucci Dean of the Pardee RAND Graduate School and vice president for innovation at RAND, a California-based research and public policy organization.

Staudt was appointed dean on May 15, 2014, when she returned to the School of Law after having served as a faculty member from 2000-06.

“In the past seven years under Nancy Staudt’s leadership, the Washington University School of Law has flourished,” Chancellor Andrew D. Martin said. “We have seen growth by nearly every measure and the school continues to thrive. Nancy’s commitment to excellence is unmatched and she leaves the deanship with a remarkable legacy of success. I am thankful for her many contributions.”

During Staudt’s tenure, the School of Law has become a top law school, now ranked No. 16 according to U.S. News & World Report. Staudt has successfully advanced the law school’s teaching, research and community service missions through her work with faculty, students and cross-disciplinary initiatives. ...

Staudt is a nationally renowned scholar in tax, tax policy and empirical legal studies. Prior to her return to Washington University, she served as vice dean and the inaugural holder of the Edward G. Lewis Chair in Law and Public Policy at the University of Southern California Gould School of Law.

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August 13, 2021 in Legal Ed News, Legal Education, Tax, Tax News | Permalink

Wednesday, August 11, 2021

ProPublica: Secret IRS Files Reveal How Much the Ultrawealthy Gained by Shaping Trump’s “Big, Beautiful Tax Cut”

ProPublica, Secret IRS Files Reveal How Much the Ultrawealthy Gained by Shaping Trump’s “Big, Beautiful Tax Cut”:

Billionaire business owners deployed lobbyists to make sure Trump’s 2017 tax bill was tailored to their benefit. Confidential IRS records show the windfall that followed. 

In November 2017, with the administration of President Donald Trump rushing to get a massive tax overhaul through Congress, Sen. Ron Johnson stunned his colleagues by announcing he would vote “no.”

Making the rounds on cable TV, the Wisconsin Republican became the first GOP senator to declare his opposition, spooking Senate leaders who were pushing to quickly pass the tax bill with their thin majority. “If they can pass it without me, let them,” Johnson declared.

In November 2017, with the administration of President Donald Trump rushing to get a massive tax overhaul through Congress, Sen. Ron Johnson stunned his colleagues by announcing he would vote “no.”

Making the rounds on cable TV, the Wisconsin Republican became the first GOP senator to declare his opposition, spooking Senate leaders who were pushing to quickly pass the tax bill with their thin majority. “If they can pass it without me, let them,” Johnson declared.

The Trump administration championed the pass-through provision as tax relief for “small businesses.”

Confidential tax records, however, reveal that Johnson’s last-minute maneuver benefited two families more than almost any others in the country — both worth billions and both among the senator’s biggest donors.

Dick and Liz Uihlein of packaging giant Uline, along with roofing magnate Diane Hendricks, together had contributed around $20 million to groups backing Johnson’s 2016 reelection campaign.

The expanded tax break Johnson muscled through netted them $215 million in deductions in 2018 alone, drastically reducing the income they owed taxes on. At that rate, the cut could deliver more than half a billion in tax savings for Hendricks and the Uihleins over its eight-year life.

But the tax break did more than just give a lucrative, and legal, perk to Johnson’s donors. In the first year after Trump signed the legislation, just 82 ultrawealthy households collectively walked away with more than $1 billion in total savings, an analysis of confidential tax records shows. Republican and Democratic tycoons alike saw their tax bills chopped by tens of millions, among them: media magnate and former Democratic presidential candidate Michael Bloomberg; the Bechtel family, owners of the engineering firm that bears their name; and the heirs of the late Houston pipeline billionaire Dan Duncan.

ProPublica

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August 11, 2021 in Tax, Tax News | Permalink

Call for Applications: Melbourne PhD Scholarship — Tax, Wealth, And Justice

Call for Applications: PhD Scholarship: — Tax, Wealth, And Justice:

Melbourne Logo (2021)Applications are invited from suitably qualified scholars for a PhD scholarship to undertake a higher degree by research, funded by an Australian Research Council Discovery Project Sharing the Wealth: Tax and Justice in a Slow Growth Era. The PhD candidate will be located at the Melbourne Law School under the primary supervision of Professor Miranda Stewart. Other research leads in the project are Associate Professor Dan Halliday (University of Melbourne, Philosophy), Professor Geoffrey Brennan (Australian National University, Political Economy), and U.S. partners Professor Liam Murphy (NYU School of Law) and Professor Miranda Fleischer (University of San Diego Law School).

Applications close Friday 27 August 2021.

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August 11, 2021 in Legal Ed News, Legal Education, Tax, Tax News | Permalink

Tuesday, August 10, 2021

Tax Prof Challenges Constitutionality Of New York's Remote Worker Tax

Bloomberg, New York’s Remote Work Tax Rule Faces ‘Unconstitutional’ Test:

A New York rule that allows the state to tax nonresident personal income while working from home is facing a fresh constitutional challenge by a tax law professor given the rise in remote work due to the Covid-19 pandemic.

In the petition, Edward A. Zelinksy, a professor at Yeshiva University’s Cardozo Law School in New York City and resident of New Haven, Conn., requested the Tax Appeals Tribunal to revisit and reverse a 2003 decision in Zelinksy v. Tax Appeals Tribunal, New York’s Department of Taxation and Finance has used the case to claim tax dollars on days worked outside of state.

Zelinsky filed an amended New York state nonresident income tax return in 2019, claiming a tax refund of $10,615 for levies paid to the state while working remotely at home in Connecticut. The state tax department has not responded to the amended return or to the requested refund, according to the petition.

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August 10, 2021 in Legal Ed News, Legal Education, New Cases, Tax, Tax News | Permalink

Monday, August 9, 2021

Marian: The Crypto Tax Reporting Plan In The Infrastructure Bill Is Good Policy

Omri Marian (UC-Irvine), The Crypto Tax Reporting Plan in the Infrastructure Bill is Good Policy:

In a move that caught the cryptocurrency industry off-guard, negotiators involved in the infrastructure deal added a bipartisan tax provision aimed at cryptocurrency exchanges. The new provisions significantly expand the definition of “brokers” who are subject to tax reporting requirements and would help pay for the infrastructure deal’s $1 trillion price tag.

If the crypto industry is to be believed, the end is nigh. “This is not a drill,” one prominent crypto lawyer warned, concluding that the new legislation “will do far more harm than good to US interests.” CoinDesk, a leading crypto publication, described crypto allies’ mission to “roll back the most dangerous provisions” of the infrastructure bill.

In reality, this is the sound of an industry rushing to try and save an unwarranted, accidental tax preference that it had gotten used to enjoying. This tax preference also enables tax cheats to, well, cheat. ...

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August 9, 2021 in Tax, Tax News | Permalink

Olympic Taxes: Katie Ledecky Faces $44,000 U.S. Tax Bill, Katie Nageotte $0

Bloomberg, Ledecky May Owe U.S. $44,000 in Taxes for Olympics Glory:

As the Olympic flame goes out in Tokyo on Sunday, marking the end of the 2020 Games, swimming phenom Katie Ledecky and pole vaulting sensation Katie Nageotte will both be leaving with gold.

A hefty tax bill awaits back in the U.S., but only for one of them.

Ledecky, now the most decorated female swimmer of all time, likely owes the U.S. government about $44,000 from her two gold and two silver medal wins. That estimate is based on her lucrative corporate sponsorships and the prize money attached to her medals.

Nageotte, who won gold in women’s pole vaulting, likely won’t pay any taxes on her winnings, thanks to a special exemption for those with more modest financial success.

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August 9, 2021 in Celebrity Tax Lore, Tax, Tax News | Permalink

Saturday, August 7, 2021

Hemel: The Biden Administration’s Strange Stance On Crypto, Tax, And Climate

Following up on Wednesday's post, Hemel: Decrypting The Crypto Reporting Proposal In The Bipartisan Infrastructure Bill:  Daniel Hemel (Chicago; Google Scholar), The Biden Administration’s Strange Stance on Crypto and the Climate:

The debate on Capitol Hill over a cryptocurrency tax reporting provision in the bipartisan infrastructure bill got really weird Thursday night when Senator Mark Warner (D-Virginia) proposed an amendment that would favor one energy-inefficient mechanism of blockchain validation over a more environmentally friendly alternative … and then the White House backed Warner’s amendment (with Treasury Secretary Janet Yellen personally lobbying senators to support it).

What on earth is going on?

I don’t have a theory as to why Senator Warner—or Secretary Yellen—would do this. But the Warner amendment would impose potentially significant environmental costs for approximately zero tax-enforcement gains. ...

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August 7, 2021 in Tax, Tax News | Permalink

Wednesday, August 4, 2021

Hemel: Decrypting The Crypto Reporting Proposal In The Bipartisan Infrastructure Bill

Daniel Hemel (Chicago; Google Scholar), Decrypting the Crypto Reporting Proposal in the Bipartisan Infrastructure Bill:

The bipartisan amendment to the infrastructure bill now working its way through Congress includes a new information reporting requirement for some cryptocurrency market actors—one of the few payfors in the package that is not purely an accounting trick. The current legislative language is quite broad, but a spokesperson for Senator Rob Portman (R-Ohio)—one of the amendment’s co-sponsors—has suggested that the drafters’ intent was much narrower. If the provision that ultimately passes is as narrow as Portman’s office suggests, then it will probably have a modest but positive effect on cryptocurrency tax compliance. The limited benefits still will be worth the cost, but the hard problem of cryptocurrency tax compliance won’t have been solved. ...

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August 4, 2021 in Tax, Tax News | Permalink

NY Times: Trump Plans To Fight The Release Of His Tax Returns To Congress

Following up on Saturday's post:  DOJ Says Treasury Must Give Trump’s Tax Returns To Congress:  New York Times, Trump Plans to Fight The Release Of His Tax Returns to Congress:

Former President Donald J. Trump plans to fight the release of his tax returns to Congress, a lawyer for Mr. Trump said on Monday.

The comments from the lawyer, Ronald P. Fischetti, came days after a legal opinion was issued by the Justice Department that said that the Treasury Department must turn over six years of the former president’s tax returns to congressional investigators.

Mr. Fischetti on Monday called the opinion “absolutely ridiculous” and said that he expected the legal battle over the release of the returns to go on for months. “We’re going to fight this tooth and nail,” he said.

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August 4, 2021 in Tax, Tax News | Permalink

Monday, August 2, 2021

Illinois Property Tax Board Votes 5-0 To Give Trump $1 Million Refund Due To Overvaluation Of Chicago Skyscraper; Democratic Attorney General Sues To Block It

Chicago Sun-Times, State Orders $1 Million Tax Refund For Trump, County Moves to Block It:

Trump ChicagoThe Illinois Property Tax Appeal Board has decided former President Donald Trump is due a $1 million refund on his skyscraper’s 2011 tax bill, ruling last month that the Cook County Board of Review overestimated the value of the building’s hotel rooms and retail space.

But the Cook County State’s Attorney has filed suit with the Illinois Appellate Court, seeking to block the tax refund, which has yet to be issued. ... It’s the latest twist in the case originally filed by Ald. Edward M. Burke, whose law firm argued Cook County officials had over-assessed Trump’s skyscraper. Burke’s former law firm Klafter & Burke had won more than $14 million in tax breaks for Trump over a dozen years, but the alderman ended the relationship in 2018, citing “irreconcilable differences” between the Chicago Democrat who represents a predominantly Hispanic 14th Ward, where residents objected to many of the Republican president’s policies.

Burke has since been indicted by a federal grand jury on charges that he blocked businesses from getting city permits unless they hired his law firm. He has left the firm, but remains on the City Council while awaiting trial. ...

[T]he state agency’s board voted 5-0 on June 2 to reduce the assessments on the building’s commercial property, which would trigger a refund of $1.03 million for Trump. ...

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August 2, 2021 in Tax, Tax News | Permalink

Sunday, August 1, 2021

Rabbi Hurt In 2019 Synagogue Shooting Pleads Guilty To Widespread Tax Fraud

San Diego Union-Tribune, Rabbi Injured in Poway Synagogue Shooting Pleads Guilty to Tax Fraud Charge:

ChabadRabbi Yisroel Goldstein, who one year ago had part of his hand shot off in a lethal attack by a gunman at the Poway synagogue he founded and received an outpouring of support that included meeting President Donald Trump, pleaded guilty to federal charges of tax fraud and wire fraud Tuesday.

Goldstein, 58, pleaded guilty to his role in several long-running, multimillion-dollar schemes involving tax, real estate, insurance and grant frauds, some of which stretched back to the 1980s. Omer Meisel, the acting head of the FBI in San Diego, said the investigation uncovered $18 million in “complex financial schemes” by Goldstein and co-defendants, with the rabbi “at the center of illegal activity” that went on for years.

One such scheme, known as the “90-10" fraud, had donors make large contributions to Chabad of Poway but then secretly get most of the money back. Typically, Goldstein would keep 10 percent — then funnel the remaining 90 percent back to the donor, according to a charging document unsealed in San Diego federal court Tuesday.

90 10

With a charitable giving receipt on Chabad letterhead, the donor could then claim a large charitable contribution on their taxes, though he or she had only put out a fraction of the claimed amount. The conspiracy netted at least $6.2 million in fraudulent donations from 12 taxpayers, resulting in tax losses to the IRS of at least $1.5 million, according to prosecutors.

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August 1, 2021 in Legal Education, Tax, Tax News | Permalink

Saturday, July 31, 2021

DOJ Says Treasury Must Give Trump’s Tax Returns To Congress

Office of Legal Counsel

Memorandum Opinion For the Acting General Counsel, Department of the Treasury, Ways and Means Committee’s Request for the Former President’s Tax Returns and Related Tax Information Pursuant to 26 U.S.C. § 6103(f )(1), 45 Op. O.L.C. __ (July 30, 2021):

Section 6103(f)(1) of title 26, U.S. Code, vests the congressional tax committees with a broad right to receive tax information from the Department of the Treasury. It embodies a long-standing judgment of the political branches that the tax committees are uniquely suited to receive such information. The committees, however, cannot compel the Executive Branch to disclose such information without satisfying the constitutional requirement that the information could serve a legitimate legislative purpose.

In assessing whether requested information could serve a legitimate legislative purpose, the Executive Branch must give due weight to Congress’s status as a co-equal branch of government. Like courts, therefore, Executive Branch officials must apply a presumption that Legislative Branch officials act in good faith and in furtherance of legitimate objectives.

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July 31, 2021 in Tax, Tax News | Permalink

Friday, July 30, 2021

WSJ: Finance Chiefs Try To Wean Employees From Excel Without Much Success

Following up on my previous posts (links below):  Wall Street Journal, Finance Chiefs Are Still Trying to Replace Excel With New Tools:

ExcelFinance chiefs are still trying to get employees to move away from Microsoft Excel, the ubiquitous spreadsheet program loved and loathed by accounting professionals.

While many still see it as a helpful tool, some CFOs say finance teams rely on it too much, often for tasks that Excel isn’t well-suited to handle. That can lead to mistakes and wasted time.

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July 30, 2021 in Legal Education, Tax, Tax News | Permalink

Thursday, July 29, 2021

ProPublica: The Number Of People With IRAs Worth $5 Million Or More Has Tripled, Congress Says

Following up on my previous posts (links below):  ProPublica, The Number of People With IRAs Worth $5 Million or More Has Tripled, Congress Says:

Pro PublicaThe number of multimillion-dollar individual retirement accounts has soared in the past decade, as more wealthy Americans use the tax-advantaged vehicles to shield fortunes from income taxes, according to new data released by Congress today.

The data reveals for the first time the staggering amount of money socked away in tax-free mega Roth accounts: more than $15 billion held by just 156 Americans.

The new data also shows that the number of Americans with traditional and Roth IRAs worth over $5 million tripled, to more than 28,000, between 2011 and 2019.

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July 29, 2021 in Tax, Tax News | Permalink

Wednesday, July 28, 2021

Tax Trailblazers: Tax Careers On Capitol Hill

U.S. Tax Court's Diversity & Inclusion Series, Tax Careers on Capitol Hill:

Please join the United States Tax Court for the next in its series of monthly programs celebrating diversity and inclusion in tax law. Moderated by Judge Cary Douglas Pugh, July’s webinar [today at 7:00 PM ET] looks at tax careers on Capitol Hill [registration]

SmithTiffany P. Smith is Chief Tax Counsel for Senator Ron Wyden’s staff of the United States Senate Committee on Finance. She has handled tax issues relating to international and corporate tax, tax exempt organizations and estate and gift taxes. Ms. Smith has also worked on small business/pass-throughs and individual issues, including the alternative minimum tax, and education tax incentives. Prior to working with the Senate Finance Committee, Ms. Smith worked with the Office of Chief Counsel for the Internal Revenue Service. Ms. Smith was also an Assistant Chief Counsel for the City of Chicago’s Office of Chief Counsel. She handled local tax issues in the Regulatory and Aviation Litigation Division. Ms. Smith received her undergraduate and law degrees from the University of Illinois in Champaign-Urbana, and her LL.M in Taxation from Georgetown University.

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July 28, 2021 in Legal Ed News, Legal Education, Tax, Tax News | Permalink

Tuesday, July 27, 2021

Brown: How Race Plays Into Tax Policing

The Atlantic:  The IRS Is Targeting the Poorest Americans, by Dorothy Brown (Emory):

AtlanticSenate Republicans recently killed a proposed increase in funding for the IRS that would have helped pay for the Biden administration’s infrastructure bill. The beneficiaries of that omission will be wealthy taxpayers, who regularly manage to stay just beyond the law’s reach with their tax-avoidance strategies. This is all too familiar. As my research shows, rich white Americans tend to get tax rules designed for their benefit. Quashing the funding that could have helped the IRS more aggressively pursue elite tax fraud is yet another example.

Without increased funding, the IRS will continue targeting low-income taxpayers for audits, particularly those claiming the earned-income tax credit.

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July 27, 2021 in Tax, Tax News | Permalink

Wednesday, July 21, 2021

Will Foster Named Arkansas Bar Foundation Professor Of Law

Will Foster has been named Arkansas Bar Foundation Professor of Law at the University of Arkansas School of Law:

Foster (2021)School of Law faculty members are selected as the Arkansas Bar Foundation Professor of Law based on outstanding teaching and excellence in scholarship in Arkansas law. During their one-year appointments, they are expected to contribute to the legal profession in Arkansas by building strong relationships between the faculty and state's bench and bar. The professorship was created through a gift from the Arkansas Bar Foundation.

"I am deeply grateful for the support of the Arkansas Bar Foundation for both our students and the work of the faculty," Will Foster said. "It's always a treat to work with the outstanding and generous lawyers of the Arkansas bar, and I'm honored to serve in this role again."

Will Foster's teaching and research focus primarily on business law, tax and transactional matters. His current courses include Business Organizations, Mergers and Acquisitions, Corporate Counsel Colloquium, Tax Policy, and Federal Income Taxation of Business Entities. Prior to joining the U of A, Will Foster was an associate professor at Washburn University School of Law and an attorney at Friday, Eldredge & Clark LLP in Fayetteville.

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July 21, 2021 in Legal Ed News, Legal Education, Tax, Tax News | Permalink

Good Riddance, TurboTax. Americans Need A Real ‘Free File’ Program.

New York Times:  Good Riddance, TurboTax. Americans Need a Real ‘Free File’ Program., by Binyamin Appelbaum:

TurboTax 3Intuit, the tax preparation giant, performed a public service last week by announcing its exit from a federal program that let some Americans use a free version of its TurboTax software.

With this move, the company is making clear what has always been true. Intuit and the rest of the tax prep industry want Americans to pay to file their taxes.

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July 21, 2021 in Tax, Tax News | Permalink

Tuesday, July 20, 2021

Former Dean And Tax Prof Martin Dickinson: 48 Years Of Dedicated Service To Kansas Law School

Stephen W. Mazza (Dean, Kansas), Martin Dickinson: 48 Years of Dedicated Service to KU Law, 69 U. Kan. L. Rev. 1 (2020):

DickinsonThe University of Kansas School of Law has a 142-year history.1 During that time, several KU Law faculty have devoted forty-plus years of service to the institution and its students. But only one holds the record for the longest period of service: former dean and Robert Schroeder Distinguished Professor of Law, Martin B. Dickinson (1938–2020). From the time he was hired in 1967 to his retirement from the Law School in 2015, an estimated four thousand KU Law students witnessed his skills as a classroom instructor and they, along with thousands more, benefitted from his leadership of and dedication to KU Law. This brief Article includes facts known to many. It also includes anecdotes and occurrences less well-known, particularly to those who met Martin later in his career and after he stepped down as dean. It is a tribute to an individual who spent his professional life in service to his students and colleagues. ...

At this retirement party, Martin’s former students, his friends, and his admirers generously donated to a fund in his honor. After chatting with him about how the Law School might use that funding, we eventually settled on a teaching award for faculty. Martin made it clear that the students should be given the honor of selecting the award recipient. He carefully crafted the criteria and insisted on procedures that would encourage students to participate in the selection process. At the same time, he wanted to reward those faculty who challenged students to think critically, who set clear learning outcomes, and who were available to students outside of class.

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July 20, 2021 in Legal Ed News, Legal Education, Obituaries, Tax, Tax News | Permalink

Monday, July 19, 2021

As IRS Audits Waned, Big Businesses Racked Up Unapproved Tax Breaks

Washington Post, As IRS Audits Waned, Big Businesses Racked Up Unapproved Tax Breaks:

Federal audits of corporate tax returns have plunged in recent years, letting big companies claim elaborate tax breaks with less government scrutiny, according to a Washington Post analysis of company filings.

Accounting rules permit businesses to claim tax breaks even if they are likely to be overturned by tax authorities, legal experts said. In the past, the Internal Revenue Service audited virtually every tax return filed by large corporations and rejected tax breaks it deemed inappropriate, data show.

But during the Obama administration, congressional Republicans moved to slash the IRS budget, shrinking the agency’s staff and straining its ability to conduct audits. As a result, the federal government now examines just half of all large company tax returns, despite businesses claiming increasing tax benefits over this period that they say could be overturned by authorities, according to regulatory filings, interviews with tax policy experts and data from the IRS and financial researcher Calcbench.

Companies currently in the S&P 500 index had $235 billion in tax breaks awaiting audit at the end of last year, up 43 percent from a decade earlier, data show. These tax breaks, defined by companies as “unrecognized” or “uncertain” tax benefits, include deductions that companies see as unlikely to be approved by authorities because they rely on disputable interpretations of the tax code, experts said.

WaPo

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July 19, 2021 in Tax, Tax News | Permalink

Explosive Interview Directly Implicates Trump In Tax Scheme

Following up on my previous posts (links below):  Daily Beast, Explosive Interview Directly Implicates Trump in Tax Scheme:

A witness in the New York investigation against the Trump Organization has told prosecutors that Donald Trump personally guaranteed he would cover school costs for the family members of two employees in lieu of a raise—directly implicating the former president in an ongoing criminal tax fraud case.

The explosive claims come from Jennifer Weisselberg, the ex-wife of a longtime company employee, during a teleconference call with investigators on Friday, June 25, according to two sources who agreed to speak on the condition of anonymity.

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July 19, 2021 in Tax, Tax News | Permalink

Sunday, July 18, 2021

The IRS Reads The Bible And Reveals Its Bias: A Bureaucrat Examined Our Religion And Declared It Republican

Following up on my previous posts (links below):  Wall Street Journal Letter to the Editor:  Bunni Pounds (President, Christians Engaged), The IRS Reads the Bible and Reveals Its Bias: A Bureaucrat Examined Our Religion and Declared it Republican:

Christians EngagedWilliam McGurn (“Defund Joe Biden’s IRS,” Main Street, July 6) and Holman W. Jenkins, Jr. (“The IRS is ProPublica’s Accessory,” Business World, July 7) articulate theoretical dangers from the IRS that my organization experienced in reality.

Christians Engaged was founded to help civically minded Christians think through their responsibility in voting. All the pieces were in place—staff, a board, resources—but we had to apply for recognition by the IRS as a 501(c)(3). It took more than 18 months to get a response. When the IRS’s response letter came in May, it seemed to examine in great detail the faith that informs the organization. It felt strange to have a bureaucrat examine our religion, belief in the Bible and how we believe our faith impacts the world.

Then came this sentence: “The bible teachings are typically affiliated with the [Republican] party and candidates. This disqualifies you from exemption under the IRC Section 501(c)(3).”

Because we believed in and taught the Bible, the IRS disqualified us from charitable recognition. The IRS determined that biblical values and Republican politics were so intertwined as to make us partisan.

Thankfully, we appealed and this month secured a quick reversal of the IRS decision. Still, the danger remains as long as the IRS views religious institutions with such political cynicism.

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July 18, 2021 in IRS News, Tax, Tax News | Permalink

Saturday, July 17, 2021

A Majority Of Donor-Advised Funds Send Little/No Money To Charity Every Year

Following up on my previous posts (links below):  Chronicle of Philanthropy, New Study Shows That Majority of Donor-Advised Funds Are Sending Little or No Money to Charity Every Year:

InitiativeOne of the first studies ever to look at donor-advised funds on a micro level has found that every year, 37 percent on average don’t distribute any money and over half give less than 5 percent of their assets. The findings are fueling demands for passage of a Senate bill that would spur donors to do more to channel their money out of the funds faster.

The study of donor-advised funds at Michigan community foundations found that in 2020, 35 percent of those funds distributed no money, 22 percent distributed less than 5 percent of their assets, and 43 percent distributed more than 5 percent. Across the entire four-year period covered in the study — 2017 through 2020 — 86 percent of the advised-fund accounts gave money to working charities.

The findings come amid a growing debate over legislation proposed by Sen. Angus King, a Maine independent, and Sen. Charles Grassley, Republican of Iowa, that would add new incentives to encourage donors to give fast. For instance, donors would get an immediate tax break if they distributed their funds within 15 years, while delaying tax benefits for funds distributed beyond that span and requiring all funds to be spent within 50 years.

Proponents of the legislation have seized on the results as evidence that the measure is needed. At issue is the lack of a requirement for donor-advised funds to give money to charities similar to laws requiring private foundations to distribute at least 5 percent of their assets to charity every year.

“If society is going to subsidize through the tax code the creation of donor-advised funds and private foundations, then there is a responsibility that those vehicles transmit resources into the community in a timely manner,” John Arnold, a prominent philanthropist pushing for Congress to change regulations for donor-advised funds, told the Chronicle. Arnold is a founder of the Initiative to Accelerate Charitable Giving, a group of donors, scholars, and foundation leaders who drafted many of the ideas included in the King-Grassley measure.

“Opponents have said the bill is a solution in search of a problem, and this report explicitly describes the problem,” said Arnold. “There are too many DAF accounts that have received a tax benefit and are not distributing resources into the community.”

Not everybody agrees with that analysis.

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July 17, 2021 in Tax, Tax News | Permalink

Tuesday, July 13, 2021

WSJ: Buy, Borrow, Die: How Rich Americans Live Off Their Paper Wealth

Wall Street Journal, Buy, Borrow, Die: How Rich Americans Live Off Their Paper Wealth:

WSJ 0713Rising stocks and rock-bottom interest rates have delivered a big perk to rich Americans: cheap loans that they can use to fund their lifestyles while minimizing their tax bills.

Banks say their wealthy clients are borrowing more than ever before, often using loans backed by their portfolios of stocks and bonds. Morgan Stanley wealth-management clients have $68.1 billion worth of securities-based and other nonmortgage loans outstanding, more than double five years earlier. Bank of America Corp. said it has $62.4 billion in securities-based loans, dwarfing its book of home-equity lines of credit.

The loans have special benefits beyond the flexible repayment terms and low interest rates on offer. They allow borrowers who need cash to avoid selling in a hot market. Startup founders can monetize their stakes without losing control of their companies. The very rich often use these loans as part of a “buy, borrow, die” strategy to avoid capital-gains taxes.

Many wealthy people are also borrowing against their portfolios. When Tom Anderson started at Merrill Lynch & Co. in Cedar Rapids, Iowa, in 2002, many of his fellow advisers had just one or two securities-based loans in their book of business. Over the years, he encouraged more clients to borrow and noticed peers doing the same. Now it is common for advisers at big firms to have dozens of these loans outstanding, he said. Merrill Lynch is now a part of Bank of America. “You could buy a boat, you could go to Disney World, you could buy a company,” said Mr. Anderson, who now consults with banks on how to manage the risks associated with these loans. “The tax benefits are stunning.”

For borrowers, the calculation is clear: If an asset appreciates faster than the interest rate on the loan, they come out ahead. And under current law, investors and their heirs don’t pay income taxes unless their shares are sold. The assets may be subject to estate taxes, but heirs pay capital-gains taxes only when they sell and only on gains since the prior owner’s death. The more they can borrow, the longer they can hold appreciating assets. And the longer they hold, the bigger the tax savings.

“Ordinary people don’t think about debt the way billionaires think about debt,” said Edward McCaffery, a University of Southern California law professor who says he coined the buy-borrow-die phrase. “Once you’re already rich, it’s simple, it’s easy. It’s just buy, borrow, die. These are planks of the law that have been in place for 100 years.”

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July 13, 2021 in Scholarship, Tax, Tax News, Tax Scholarship | Permalink

Ted Turner To Give Land To Nonprofit Research Institute But Keep Paying Property Taxes

Washington Post, Ted Turner to Give Land to Nonprofit But Keep Paying Taxes:

Media mogul and billionaire bison rancher Ted Turner is donating an 80,000-acre ranch he owns in western Nebraska to his own nonprofit agriculture ecosystem research institute and says he might do the same with four other ranches in Nebraska’s Sand Hills.

But he’ll continue to pay taxes on the land, much to the relief of local officials and Nebraska leaders, the Omaha World-Herald reported Thursday.

“I believe that local property taxes provide essential support for services on which our ranches and communities depend,” Turner, 82, said in a news release last week announcing the new institute. “The Institute will continue to pay its share of taxes to support the local communities.”

State officials had feared Turner — Nebraska’s largest landowner with nearly 500,000 acres of western Nebraska ranchland — might turn over the land to a nonprofit and remove vast tracts of land from property tax rolls.

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July 13, 2021 in Tax, Tax News | Permalink

Monday, July 12, 2021

ProPublica: The Billionaire Playbook — How Sports Owners Use Their Teams To Avoid Millions In Taxes

ProPublica, The Billionaire Playbook: How Sports Owners Use Their Teams to Avoid Millions in Taxes:

Owners like Steve Ballmer can take the kinds of deductions on team assets — everything from media deals to player contracts — that industrialists take on factory equipment. That helps them pay lower tax rates than players and even stadium workers.

At a concession stand at Staples Center in Los Angeles, Adelaide Avila was pingponging between pouring beers, wiping down counters and taking out the trash. ... When she filed taxes for her previous year’s labors at the arena and her second job driving for Uber, the 50-year-old Avila reported making $44,810. The federal government took a 14.1% cut. ...

On the court that night, the players were also hard at work. None more so than LeBron James. ... In his tax return, James reported making $124 million in 2018. He paid a federal income tax rate of 35.9%. Not surprisingly, it was more than double the rate paid by Avila.

The wealthiest person in the building that night, in all likelihood, was Steve Ballmer, owner of the Clippers. ... For the prior year, Ballmer reported making $656 million. The dollar figure he paid in taxes was large, $78 million; but as a percentage of what he made, it was tiny. Records reviewed by ProPublica show his federal income tax rate was just 12%.

That’s a third of the rate James paid, even though Ballmer made five times as much as the superstar player. Ballmer’s rate was also lower than Avila’s — even though Ballmer’s income was almost 15,000 times greater than the concession worker’s.

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July 12, 2021 in Tax, Tax News | Permalink

More Tax Prof Commentary On The Indictment Of The Trump Organization

Following up on my previous posts (links below):

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July 12, 2021 in Tax, Tax News | Permalink

IRS Reverses Course, Grants Tax-Exempt Status To Organization That Encourages Christians To 'Pray, Vote, Engage' After Initially Saying Bible Teachings Are Associated With Republican Party

Following up on my previous post, IRS Denies Tax-Exempt Status To Organization That Encourages Christians To 'Pray, Vote, Engage' Because '[B]ible Teachings Are Typically Affiliated With The [Republican] Party':  Fred Stokeld, Christian Group That Battled IRS Receives Exemption After All, 172 Tax Notes Fed. 310 (July 10, 2021):

Cheistines Engaged 2The IRS has reversed course and granted tax exemption to a civic-minded Christian organization that it had proposed denying exemption to for engaging in partisan politics.

Christians Engaged, which encourages Christian involvement in civic affairs, has received exemption as an organization described under section 501(c)(3), according to a July 7 release from the First Liberty Institute, which represented Christians Engaged when the group appealed the proposed denial.

First Liberty Institute Press Release, After Backlash, IRS Grants Religious Group Tax Exempt Status (July 7, 2021):

Today, First Liberty Institute announced that the IRS has granted tax exempt status to Christians Engaged, a nonprofit organization that educates and empowers Christians to pray for our nation and elected officials, vote, and be civically engaged.  The reversal comes after a national backlash against the IRS’s initial rejection of Christians Engaged’s nonprofit status because, the IRS claimed, “[B]ible teachings are typically affiliated with the [Republican] party and candidates.” ...

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July 12, 2021 in Tax, Tax News | Permalink

Saturday, July 10, 2021

Buchanan: TrumpWorld v. Those Pesky, Pesky Tax Laws

Following up on my previous posts (links below):  Neil Buchanan (Florida; Google Scholar), TrumpWorld v. Those Pesky, Pesky Tax Laws:

Last week, the Manhattan DA's office (working with the New York State Attorney General's office) charged various entities in TrumpWorld with a large number of felonies, and surely there are more to come.  Some of the charged crimes involve tax fraud, which is directly in my academic remit (as the Brits say).  The contours of Donald Trump's response -- not exactly a "defense," at least in any legal sense of that word -- are now becoming clear, and they are unsurprisingly absurd.

I will begin here with an overarching nontax issue relevant to the indictments, with the remainder of the column devoted to tax matters.  Bottom line: the charged crimes are serious, the crimes themselves are in no way sophisticated or borderline cases, and pursuing these charges is essential to the rule of law.

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July 10, 2021 in Tax, Tax News | Permalink

Thursday, July 8, 2021

WSJ: Older Americans Stockpiled A Record $35 Trillion. The Time Has Come To Give It Away.

Wall Street Journal, Older Americans Stockpiled a Record $35 Trillion. The Time Has Come to Give It Away.:

The greatest wealth transfer in modern history has begun.

Baby boomers and older Americans have spent decades accumulating an enormous stockpile of money. At the end of this year’s first quarter, Americans age 70 and above had a net worth of nearly $35 trillion, according to Federal Reserve data. That amounts to 27% of all U.S. wealth, up from 20% three decades ago. Their wealth is equal to 157% of U.S. gross domestic product, more than double the proportion 30 years ago, federal data show.

Now they have started parceling it out to their heirs and others, unleashing a torrent of economic activity including buying homes, starting businesses and giving to charity. And many recipients are guided by different priorities and politics than their givers.

Older generations will hand down some $70 trillion between 2018 and 2042, according to research and consulting firm Cerulli Associates. Roughly $61 trillion will go to heirs—increasingly millennials and Generation Xers—with the balance going to philanthropy. The transfer will provide another display of the outsize economic power of baby boomers, who came of age during a wave of post-World War II prosperity and drove the economy through many stages of their lives.

WSJ

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July 8, 2021 in Tax, Tax News | Permalink

NY Times: This Is Tax Evasion, Plain And Simple

New York Times op-ed:  This Is Tax Evasion, Plain and Simple, by Gabriel Zucman (UC-Berkeley) & Gus Wezerek (Opinion):

In the decades after World War II, close to 50 percent of American companies’ earnings went to state and federal taxes. Economically, it was a golden period. Middle-class incomes grew at roughly the same rate as those of the richest Americans.

But as globalization gave companies the ability to choose where they recorded profits, Congress scrambled to keep their business by lowering corporate taxes. In 2018, American companies were taxed at an average effective rate of less than 14 percent, by our calculations.

Corporate tax breaks have helped business owners amass inconceivable amounts of money over the past few decades. Meanwhile, middle-class Americans have footed the bill, as Congress has propped up the budget by raising taxes on wages.

NY Times

President Biden should be applauded for trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15 percent global minimum corporate tax, it won’t be enough to close the growing economic gap between America’s rich and middle class. Taxing multinationals at 15 percent would still leave them facing a lower rate than the average American pays in state and federal income tax.

For the Biden administration to give working families a real leg up, it should push Congress to enact a 25 percent minimum tax, which would bring in about $200 billion in additional revenue each year. ...

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July 8, 2021 in Tax, Tax News | Permalink

Hemel: The Trump Organization Is In Big Trouble

Following up on my previous posts (links below):  Daniel Hemel (Chicago; Google Scholar), The Trump Organization Is in Big Trouble:

AtlanticIf the facts alleged in yesterday’s indictment are true, the Trump Organization and its longtime chief financial officer, Allen Weisselberg, have engaged in blatant tax evasion for more than a decade.

Early reports characterized the crime in question as involving “fringe benefits.” This gives entirely the wrong impression. The Trump Organization and Weisselberg aren’t being charged with tripping over some hyper-technical provision on the margins of the tax system. They are being charged with blatantly violating basic tax-law requirements—and bilking New York State and New York City out of hundreds of thousands of dollars along the way.

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July 8, 2021 in Tax, Tax News | Permalink

Wednesday, July 7, 2021

Chodorow: The Charges Against The Trump Organization Are A Master Class In Tax Evasion

Following up on my previous posts:

Slate:  The Charges Against the Trump Organization Are a Master Class in Tax Evasion, by Adam Chodorow (Arizona State):

Everyone knows they didn’t get Al Capone for all the heinous acts he did as a gangster; they got him on tax evasion. Tax issues may well turn out to be the Achilles’ heel for the Trump Organization and some of its top players. Capone failed to report and pay taxes on his illicitly acquired gains. The 45th president’s real estate and licensing company now stands charged with failing to report and pay taxes on a variety of fringe benefits to key employees after an investigation by the New York State attorney general and the Manhattan district attorney. Trump’s lawyers have called the charges petty and contend they are politically motivated. Others view them as designed to put pressure on the organization’s longtime chief financial officer to turn state’s witness. As a tax professor, I see them as a fantastic opportunity to talk about tax policy and the cat-and-mouse games that people play to avoid paying their fair share.

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July 7, 2021 in Tax, Tax News | Permalink

Tuesday, July 6, 2021

Shaviro: The Trump Organization Tax Indictment Is Not A 'Fringe Benefits' Case

Following up on Saturday's post, New York Times: Trump Organization Is Charged With Running 15-Year Employee Tax Scheme:  Daniel Shaviro (NYU), The Weisselberg Indictment Is Not A “Fringe Benefits” Case:

In the days before the July 1, 2021 issuance of the Manhattan District Attorney’s Weisselberg-Trump Organization indictment, public anticipation was positively underwhelming. It would just be a fringe benefits case, we were told – meaning, a dispute, of a picayune sort that almost never yields criminal charges, regarding whether or not an employee’s use of, say, a company car or apartment yielded taxable income, in the face of admitted personal benefit but also with plausible claims of business purpose other than the purely compensatory. Everyone does it, we heard, and it shouldn’t be the basis for a criminal fraud charge. What’s more, this ostensibly would just be a New York State or City income tax issue, not federal, thus limiting the scale and monetary significance of the claimed wrongdoing.

Then the indictment dropped, and it turns out that public expectations could scarcely have fallen further short than they were of the magnitude of what was actually being charged. Let me spell out the particulars under several headings:

1. This is no mere fringe benefits case. It is a straight-out fraud case, claiming that the defendants kept double books: phony ones to show the tax authorities, and accurate ones to be hidden from view. The question of whether a given company apartment or car might in theory (with appropriate supporting facts) have been an excludable fringe benefit turns out to be almost completely irrelevant. A better analogy to what is being charged here is the following: Suppose that your employer pays you monthly, through automatically deposited paychecks that end up being included on your annual W-2. But suppose that each month you could stop by the front office, request an envelope full of cash in unmarked bills, and have your W-2 reduced accordingly. So your true income would be the same as if you hadn’t stopped by, but you’d be reporting less salary. If your employer kept careful records of all the cash it gave you, and also still deducted it all, we would basically have this case. That is far different from simple failure to pay taxes on fringe benefits, which is how the indictment has been widely misunderstood, thanks in part to Trump’s defense lawyers’ laying the groundwork before the charges were made public on Thursday. ...

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July 6, 2021 in Tax, Tax News | Permalink