Paul L. Caron
Dean




Friday, September 30, 2022

Tax Policy In The Biden Administration

Thursday, September 29, 2022

Inspector General: The IRS Uses Cloud Computing Services Without Adequate Security Controls, Putting Taxpayer Data At Risk

Treasury Inspector General for Tax Administration, Cloud Services Were Implemented Without Key Security Controls, Placing Taxpayer Data at Risk (No. 2022-20-052) (Sept. 27, 2022):

TIGTATo facilitate and guide its cloud security implementation efforts, the IRS developed its Cloud Security Reference Architecture in September 2019 and the Cybersecurity Cloud Operations Framework in November 2019. The IRS issued its updated Cloud Strategy and Cloud Security Internal Revenue Manual in March 2021 and September 2021, respectively.

By the end of Calendar Year 2020, the IRS had fully implemented 56 cloud services, 12 of which contained taxpayer data. The IRS deployed these cloud services without fully implemented security controls for protecting the data. ... [T]he IRS continued to accelerate cloud adoption without ensuring that important security controls designed to protect taxpayer data were in place in the cloud environment. ...

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September 29, 2022 in Advice for Erwin Chemerinsky, IRS News, Tax, Tax News | Permalink

Monday, September 26, 2022

University Of Toronto Hosts Premiere Of The A.I. Taxman Documentary

University of Toronto Faculty of Law News, The AI Taxman: U of T Law Prof is the Subject of an Educational Documentary:

As an expert in taxation law, University of Toronto Professor Benjamin Alarie, the Osler Chair in Business Law at U of T’s Faculty of Law, set on a path several years ago to change how legal research is done.

In 2015, he co-founded a legal tech startup with U of T Law professors Anthony Niblett and Albert Yoon. Blue J’s software draws upon artificial intelligence to provide instant and comprehensive answers in complex areas of tax, labour, and employment law.

“Artificial intelligence is not going to take your job – professionals who use artificial intelligence will replace professionals who don't use artificial intelligence,” says Alarie in the trailer to the Canadian documentary, The A.I. Taxman.

The film will have its big screen premiere at the Isabel Bader Theatre on September 29 [free registration here]. The event is co-hosted by Blue J, the filmmakers, UDocs, and the University of Toronto’s Future of Law Lab at the Faculty of Law. ...

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September 26, 2022 in Tax, Tax News | Permalink

Saturday, September 24, 2022

Death Of John Donaldson (William & Mary)

Virginia Gazette, Former W&M Law Professor Remembered as a ‘Great and Good Man’:

DonaldsonFormer William & Mary law professor John Edward Donaldson, recognized nationally and throughout Virginia for his knowledge of tax law, died Tuesday after a short illness. He was 84.

Donaldson retired after a 35-year teaching career at the college in 2001 as the Ball Professor of Law. Additionally, he worked for years in various leadership capacities with the Virginia Bar Association and served two four-year terms on the James City County Board of Supervisors.

“John Donaldson was a great and good man,” said former William & Mary president and law school dean Timothy J. Sullivan, who joined the law school faculty when Donaldson was already “a respected colleague.” ...

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September 24, 2022 in Legal Ed News, Legal Education, Obituaries, Tax, Tax News | Permalink

Chodorow: Why Trump’s Alleged Real-Estate Shenanigans Went Too Far

Slate:  Why Trump’s Alleged Real-Estate Shenanigans Went Too Far, by Adam Chodorow (Arizona State; Google Scholar):

Slate (2022)There’s an old saying that pigs get fat and hogs get slaughtered—that is, while there’s room for some playing around in the pen, the consequences could be quite severe if you go too far. Former President Donald Trump, his organization, and his three oldest children have just been accused some of some very hog-like behavior: allegedly inflating the value of his properties and overall net worth to potential lenders and insurers to get preferential interest rates. This is a civil, not criminal, suit, but New York State Attorney General Letitia James has referred the case to those responsible for enforcing federal criminal laws. Until now—with a few exceptions, like Trump University—Trump has avoided consequences for a variety of supposed wrongs. But the sheer scope of his allegedly false claims, and the documentary proof contained in James’ complaint, may finally have crossed that line. It should serve as an object lesson for all who are tempted to cheat the system.

Property values are difficult to assess absent a sale. Appraisers are notorious for valuing properties in ways that benefit their clients. Practically speaking, there’s some wiggle room. But at some point, valuations can be so high or low that no reasonable person could believe them to be accurate. ...

As I like to tell my law students, there is always a tax angle, and this case is no exception. As detailed in the complaint, some of the strongest evidence that Trump intentionally inflated the value of his properties—and hence his net worth—are found in claims he contemporaneously made for state property tax purposes. Not surprisingly, he gave low valuations to tax authorities, while giving much higher ones to his possible lenders. As the attorney general sees it, either he committed tax fraud by using unreasonably low valuations when dealing with tax authorities, or he committed fraud on his lenders and insurers by using valuations significantly higher than those he reported to the state and federal governments. ...

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September 24, 2022 in Tax, Tax News | Permalink

Thursday, September 22, 2022

Doug Shackelford Abruptly Retires As UNC Kenan-Flagler Business School Dean: ‘I’m Very Tired’

Triangle Business Journal, UNC Kenan-Flagler Business School Searching For New Leader After Shackelford Abruptly Retires:

Shackleford (2022)After nearly a decade in the role, Doug Shackelford has suddenly stepped down as the dean of the UNC Kenan-Flagler Business School.

Shackelford's abrupt retirement is effective today following the university announcing the move on Friday afternoon. A specific reason for the timing of the decision was not given. ...

Shackelford's retirement comes a few weeks after a former UNC-Chapel Hill student, Angelica Rose Brown, filed a lawsuit against three Kenan-Flagler professors and the UNC Board of Governors alleging race discrimination and retaliation. Shackelford is not mentioned in the lawsuit, which was filed Aug. 30 in the U.S. District Court for North Carolina’s Middle District.

The Daily Tar Heel reports that in a letter sent to faculty and staff Friday morning, Shackelford said, "I have run as hard as I could for as long as I could. I can’t continue at the pace this School deserves. I regret that I didn’t anticipate things better. I could tell that I was not recovering from long weeks as quickly as I had in the past and I was unduly frustrated at times, but I failed to foresee this timing." ...

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September 22, 2022 in Legal Ed News, Legal Education, Tax, Tax News, Tax Prof Moves | Permalink

NY Times Op-Ed: Can Republicans Tax the Rich?

New York Times Op-Ed:  Can Republicans Tax the Rich?, by Ross Douthat:

ConservatismThe movement known as national conservatism, which just wrapped up its latest conference in Florida, is the third major attempt to solve the Republican Party’s central 21st-century policy dilemma: How does a party that historically represented the rich and big business adapt to a world where conservatism’s constituencies are not just middle class but blue-collar, downscale and disappointed with the modern American economy?

The first attempted adaptation belonged to George W. Bush. His slogans were “compassionate conservatism” and the “ownership society,” and his policies offered new spending on education and health care, support for faith-based anti-poverty programs and easy credit for new homeowners — all theoretically designed to foster self-sufficiency rather than dependence, building a conservative alternative to the liberal welfare state.

After Bushism came to grief in the housing bubble and the financial crisis, the second adaptation had its hour: so-called reform conservatism, which imagined itself (I was one of the imaginers) as harder-headed than Bushism, offering a suite of technocratic fixes to increase economic mobility and improve middle-class life — and especially middle-class family life — without blowing out the federal budget.

This budget-conscious wonkery seemed poised to influence a Jeb Bush or Marco Rubio administration — before it was simultaneously outbid, absorbed and shattered by Donald Trump. ...

National conservatism represents the fullest version of this effort. It’s more philosophically ambitious than its compassionate-conservative and reformocon predecessors; its impresario, Yoram Hazony, claims to have rediscovered a consistent non-liberal and non-authoritarian Anglo-American conservatism, rooted in our elite’s long-discarded conservative-Protestant heritage, an argument he advances fascinatingly, if not entirely persuasively, in his recent book, “Conservatism: A Rediscovery.”

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September 22, 2022 in Tax, Tax News | Permalink

Monday, September 5, 2022

Are Contributions To Amy Wax's Legal Defense Fund Tax Deductible?

Amy WaxAs Penn Law Professor Amy Wax faces possible "major sanctions" from the Penn Faculty Senate, she has raised over $175,000 (towards her $300,000 goal) in her Amy Wax Legal Defense Fund on GoFundMe. She also is soliciting funds for her Amy Wax Defense Fund on her own website. The site claims that "Contributions to the Amy Wax Legal Defense Fund are tax deductible under the Section 501(c​)3 of the Internal Revenue Code." California tax lawyer Steven Chung says contributions to the fund are not tax deductible:

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September 5, 2022 in Legal Ed News, Legal Education, Tax, Tax News | Permalink

Saturday, September 3, 2022

The Myth Of American Income Inequality

Wall Street Journal Op-Ed:  Income Equality, Not Inequality, Is the Problem, by Phil Gramm & John Early (Co-Authors, The Myth of American Inequality: How Government Biases Policy Debate (2022)):

MythContrary to conventional wisdom, the most dramatic and consequential change in the distribution of income in America in the past half-century isn’t rising income inequality but the extraordinary growth in income equality among the bottom 60% of household earners.

Real government transfer payments to the bottom 20% of household earners surged by 269% between 1967 and 2017, while middle-income households saw their real earnings after taxes rise by only 154% during the same period. That has largely equalized the income of the bottom 60% of Americans. This government-created equality has caused the labor-force participation rate to collapse among working-age people in low-income households and unleashed a populist realignment that is unraveling the coalition that has dominated American politics since the 1930s.

On these pages, we have debunked the myth that income inequality is extreme and growing on a secular basis by showing that the Census Bureau measure of income fails to include two-thirds of all federal, state and local transfer payments as income to the recipients and fails to treat taxes paid as income lost to the taxpayer. The Census Bureau measure overstates current income inequality between the highest and lowest 20% of earners by more than 300% and claims that income inequality has risen by 21% since 1967, when in fact it has fallen by 3%. ...

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September 3, 2022 in Book Club, Scholarship, Tax, Tax News, Tax Scholarship | Permalink

Wednesday, August 31, 2022

NY Times: French Tax Collectors Use A.I. To Spot Tax Scofflaws

New York Times, French Tax Collectors Use A.I. to Spot Thousands of Undeclared Pools:

For those trying to offset France’s increasingly sweltering summers by building swimming pools, the tax authorities have a message: If you’re thinking of saving money by keeping your pool hidden from property tax collectors, we’re watching — from above.

Over 20,000 unreported swimming pools have been detected since last October in a handful of French regions by an artificial intelligence tool that scans satellite images of houses and backyards, the authorities announced this week. The discoveries will enable the French tax agency to collect nearly 10 million euros, or about $10 million, in property taxes, the authorities said. ...

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August 31, 2022 in Tax, Tax News | Permalink

ABA Tax Section Accepting Nominations for 2023-2025 Public Service Fellowships

The ABA Tax Section is accepting applications for Christine A. Brunswick Public Service Fellowships for 2023-2025:

Aba-tax-sectionThe Section of Taxation is pleased to announce that it is now accepting applications for its Christine A. Brunswick Public Service Fellowship program class of 2023-2025. Applications are due November 10, 2022.

The fellowship program was developed in 2008 to address the need for tax legal assistance and to foster an interest in tax-related public service among new attorneys. Through the fellowship, recent J.D. and LL.M. graduates or law clerks practice public service tax law at a host organization for two years.

You can register for an upcoming information to learn more the fellowship. We will take questions during the sessions and share the recordings on the fellowship page.

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August 31, 2022 in ABA Tax Section, Legal Ed News, Legal Education, Tax, Tax News | Permalink

Thursday, August 25, 2022

Inflation Reduction Act Could Boost Popularity Of Tax Insurance

Law360, Inflation Reduction Act Could Boost Tax Insurance Popularity:

Concerns that the Inflation Reduction Act's funding boost to the Internal Revenue Service could lead to more audits may spur new interest in tax insurance, an increasingly popular product for mitigating the risk of challenges by taxing authorities.

President Joe Biden signed H.R 5376, or the Inflation Reduction Act, on Aug. 16. Under the law, the IRS will receive a nearly $80 billion funding boost, with nearly $46 billion earmarked for enforcement. As a result, the IRS will not only have the budget to increase the number of audits it performs but also be able to litigate more of the tax positions it reviews, Jessica Harger, North America tax practice leader at Aon, told Law360. Even without the act, the number of IRS audits has been increasing in recent years after hitting a historic low in the last decade, Harger said.

The increased probability of an audit by a taxing authority could result in more taxpayers seeking out tax liability insurance, an insurance product that has been steadily rising in popularity in recent years. Six thousand such policies were placed in 2021, compared to 500 policies placed in 2015, said Dean Andrews, head of tax liability insurance at broker BMS Group.

The product covers a policyholder against the risk of its tax position being successfully challenged by a taxing authority. Tax insurance policies will normally cover the additional tax owed as a result of a successful challenge as well as interest and penalties. They can also cover legal and accounting fees incurred in defending a challenge as well as pay a "gross up," which is a payment made to cover any tax due on the insurance proceeds paid to the policyholder.

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August 25, 2022 in Tax, Tax News | Permalink

Wednesday, August 24, 2022

NY Times: An Unusual And Tax Savvy $1.6 Billion Donation Bolsters Conservatives

New York Times, An Unusual $1.6 Billion Donation Bolsters Conservatives:

A new conservative nonprofit group scored a $1.6 billion windfall last year via a little-known donor — an extraordinary sum that could give Republicans and their causes a huge financial boost ahead of the midterms, and for years to come.

The source of the money was Barre Seid, an electronics manufacturing mogul, and the donation is among the largest — if not the largest — single contributions ever made to a politically focused nonprofit. The beneficiary is a new political group controlled by Leonard A. Leo, an activist who has used his connections to Republican donors and politicians to help engineer the conservative dominance of the Supreme Court and to finance battles over abortion rightsvoting rules and climate change policy.

This windfall will help cement Mr. Leo’s status as a kingmaker in conservative big money politics. It could also give conservatives an advantage in a type of difficult-to-trace spending that shapes elections and political fights.

The cash infusion was arranged through an unusual series of transactions that appear to have avoided tax liabilities. It originated with Mr. Seid, a longtime conservative donor who made a fortune as the chairman and chief executive of an electrical device manufacturing company in Chicago now known as Tripp Lite.

Rather than merely giving cash, Mr. Seid donated 100 percent of the shares of Tripp Lite to Mr. Leo’s nonprofit group before the company was sold to an Irish conglomerate for $1.65 billion, according to tax records provided to The New York Times, corporate filings and a person with knowledge of the matter.

The nonprofit, called the Marble Freedom Trust, then received all of the proceeds from the sale, in a transaction that appears to have been structured to allow the nonprofit group and Mr. Seid to avoid paying taxes on the proceeds.

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August 24, 2022 in Tax, Tax News | Permalink

Wednesday, August 10, 2022

Cato: IRS Funding Hypocrisy In The Inflation Reduction Act

Chris Edwards (Cato Institute), Senate Bill: IRS Funding Hypocrisy:

The Senate’s Inflation Reduction Act includes an $80 billion increase in the Internal Revenue Service budget over a decade, which would roughly double the agency’s budget by 2031. ...

Senators supporting the bill talk about “tax cheats” and “closing tax loopholes.” But this is a huge hypocrisy. The Senate bill itself creates new loopholes and tax breaks, and complicated breaks drive noncompliance with the tax system. The Senate bill would expand a slew of special‐​interest credits and other breaks within a $370 billion orgy of green subsidies and corporate welfare.

This chart illustrates the relationship between politicians and special‐​interest tax breaks:

s

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August 10, 2022 in Tax, Tax News | Permalink

Thursday, August 4, 2022

Georgia: Unborn Children Qualify For $3,000 Income Tax Dependent Exemption After Six Weeks

Update:  New York Times, Georgia Abortion Law Says a Fetus Is Tax Deductible

Georgia Department of Revenue, Guidance Related to House Bill 481, Living Infants and Fairness Equality (LIFE) Act:

Georgia DOR 4In light of the June 24, 2022, U.S. Supreme Court ruling in Dobbs v. Jackson Women’s Health Organization and the July 20, 2022, 11th Circuit Court of Appeals ruling in Sistersong v. Kemp, the Department will recognize any unborn child with a detectable human heartbeat, as defined in O.C.G.A. § 1-2-1, as eligible for the Georgia individual income tax dependent exemption. The 11th Circuit’s ruling made HB 481’s amendment to O.C.G.A § 48-7-26(a), adding an unborn child with a detectable heartbeat to the definition of dependent, effective as of the date of the court’s ruling, which was July 20, 2022.

As such, on individual income tax returns filed for Tax Year 2022 where, at any time on or after July 20, 2022, and  through December 31, 2022, a taxpayer has an unborn child (or children) with a detectable human heartbeat (which may occur as early as six weeks’ gestation), the taxpayer may claim a dependent personal exemption as provided for under O.C.G.A § 48-7-26(a) and (b)(3) in the amount of $3,000.00 for each unborn child.  For Tax Year 2022, the deduction for dependent unborn children will be a subtraction on Line 12, “Other Adjustments,” of Form 500 Schedule 1.

Similar to any other deduction claimed on an income tax return, relevant medical records or other supporting documentation shall be provided to support the dependent deduction claimed if requested by the Department.

Additional information, including return instructions to claim the personal exemption for an unborn child with a detectable heartbeat, will be issued later this year along with other tax changes impacting Tax Year 2022 Georgia individual income tax returns. 

Washington Post, Georgia Says ‘Unborn Child’ Counts as Dependent on Taxes After 6 Weeks:

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August 4, 2022 in Tax, Tax News | Permalink

Thursday, July 28, 2022

IRS: No Political Influence In Comey|McCabe Audits

Following up on my previous posts:

Bloomberg, IRS Tells Senators No Political Influence in Comey Audit:

IRS officials at a closed-door meeting on Tuesday expressed confidence that audits of two former FBI leaders were not politically motivated, senators said.

IRS Commissioner Chuck Rettig “was pretty clear that there was no political interference,” Sen. Ben Cardin (D-Md.) said following the meeting between the Senate Finance Committee and IRS officials. ...

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July 28, 2022 in IRS News, Tax, Tax News | Permalink

Tuesday, July 26, 2022

Do You Need A Tax LL.M. To Land A Great Job Right Now?

Following up on my previous post, Is Getting A Tax LL.M. A Good Idea?:  Bloomberg Tax, Do You Need a Tax LL.M. to Land a Great Job Right Now?:

LLM 2Despite worries about the economy, the job market remains relatively healthy. US payrolls gained 372,000 jobs last month, and the unemployment rate remained at 3.6%—comparable to pre-Covid-19 levels in February 2020.

Over the past month, job growth was strong in the legal and accounting fields—and that’s not expected to change. According to the Bureau of Labor Statistics, law jobs are projected to grow 9% from 2020 to 2030, about as fast as the average for all occupations, while jobs for accountants and auditors will grow 7%.

Even with the number of available jobs, candidates are looking for the extras that will make them stand out. So what does that look like? In some cases, the difference maker might be school or work performance—while other notables include languages, internships, and life experience.

Over the years, I’ve fielded questions from aspiring accountants and lawyers about career choices. One that comes up quite often is whether earning a tax LL.M. will give you an edge or make it easier to get a job. As with many things in the tax world, it depends. ...

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July 26, 2022 in Legal Education, Tax, Tax News | Permalink

Monday, July 25, 2022

WSJ: The Fine Print Cost A Widow A $464,000 Charitable Tax Deduction

Wall Street Journal Tax Report, The Fine Print Cost a Widow a $464,000 Tax Deduction:

Charitable donors, beware: A widow has lost a $464,000 tax deduction for a gift to a museum because her tax paperwork lacked a few key words.

The recent Tax Court decision in Albrecht v. Commissioner [T.C. Memo. 2022-53 (May 25, 2022)] is a fresh reminder of how rigid the standards for charitable deductions often are.

Here are the facts in the case. Over the years Martha Albrecht and her husband amassed a large collection of Native American jewelry and artifacts. In late 2014 Ms. Albrecht, by then a widow, donated about 120 items to the Wheelwright Museum of the American Indian in Santa Fe, N.M., a well-known institution.

On her 2014 tax return, Ms. Albrecht claimed a charitable-donation deduction of $463,676 for her gift. Although her income wasn’t large enough to take the entire deduction for 2014, the law allowed her to carry over and use the remainder for five more years. Attached to her return was a five-page Deed of Gift detailing the donation.

Among other things, the deed said the gift was irrevocable and unconditional. However, Ms. Albrecht didn’t have what the law calls a “contemporaneous written acknowledgment” from the museum explicitly saying whether or not she received goods or services in return for her donation.

Bryan Camp, a professor at Texas Tech University’s law school and a noted tax blogger, calls this “the magic language requirement,” although the wording can vary. Even if no goods or services were provided to Ms. Albrecht by the Wheelwright, she needed this statement in hand before filing her tax return to be eligible for a deduction. This requirement has been in the law since 1994, after Congress enacted it to crack down on padded and dubious deductions.

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July 25, 2022 in New Cases, Tax, Tax News | Permalink

Saturday, July 23, 2022

U.S. Inequality Is Much Less When You Measure Spending Power (Including Government Transfer Payments) As Well As Income And Wealth

New York Times Op-Ed:  There’s a Better Way to Measure Economic Inequality, by Peter Coy:

Differences in wealth and differences in income are the wrong ways to measure economic inequality, and going by either of them “dramatically overstates” the degree of inequality in the United States, a working paper argues.

The right measure of economic inequality is differences in spending power, says the paper U.S. Inequality and Fiscal Progressivity: An Intragenerational Accounting, which is by the economist Alan Auerbach of the University of California, Berkeley, the economist Laurence Kotlikoff of Boston University and the software developer Darryl Koehler of Economic Security Planning.

Spending power — the amount of goods and services that a person can buy — is what really matters to people because it captures the ability to satisfy their wants and needs, Auerbach, an expert on the economics of public finance, told me. He asked me to imagine bars of gold encased in a radioactive block. If wealth can’t be used, it’s of no value. The same goes for income, he said.

Study after study has shown rising inequality of income and wealth in the United States. An article by the economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman published in 2017 found that the average real income of the top 0.1 percent of the population grew by 298 percent between 1984 and 2014, while the average real income of the bottom half of the population grew just 21 percent.

But spending power gives a different picture. Still bad, but not as bad. The richest 1 percent of 40- to 49-year-olds in the United States own 29.1 percent of their age cohort’s net wealth, but account for only 11.8 percent of their group’s remaining lifetime spending power, the new paper says. The poorest fifth of the 40-somethings own just 0.4 percent of the group’s net wealth but have 6.6 percent of the remaining lifetime spending power, the paper says.

Auerbach

Difference in wealth overstates inequality because it fails to capture two of the main enablers of spending power, namely earnings from work and government benefits, the paper says. Someone who has no money in the bank can still have a relatively decent lifestyle based on salary and various transfer payments, including Social Security.

Alan J. Auerbach (UC-Berkeley; Google Scholar), Laurence J. Kotlikoff (Boston University; Google Scholar) & Darryl Koehler (Economic Security Planning), U.S. Inequality and Fiscal Progressivity: An Intragenerational Accounting:

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July 23, 2022 in Legal Education, Scholarship, Tax, Tax News, Tax Scholarship | Permalink

Thursday, July 21, 2022

Scott Hodge To Step Down After 22 Years; Tax Foundation Seeks To Hire New President

Scott Hodge has to step down President and CEO of the Tax Foundation after 22 years and will transition into a new role as President Emeritus and Senior Policy Advisor. The Tax Foundation has launched a national search for a new President and CEO:

Tax Foundation logoAbout the Tax Foundation
The Tax Foundation is the nation’s leading independent tax policy 501(c)(3) nonprofit think tank. Since 1937, the Tax Foundation’s principled research, insightful analysis, and engaged experts have helped inform the development of smart tax policy at the global, federal, and state levels. For over eighty (80) years, its goal has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. Simply stated, Tax Foundation staff and leadership work toward a singular vision: a world where the tax code does not stand in the way of success. The organization and its team believe that an ideal tax code is based on four principles of sound policy: simplicity, neutrality, transparency, and stability. In pursuit of the above, the Tax Foundation focuses on:

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July 21, 2022 in Tax, Tax News | Permalink

Wednesday, July 20, 2022

NY Times: How Joe Manchin Left Global Tax Deal In Limbo

New York Times, How Joe Manchin Left a Global Tax Deal in Limbo:

Treasury Secretary Janet L. Yellen’s signature achievement is in jeopardy if the United States cannot ratify the tax agreement that she brokered.

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July 20, 2022 in Tax, Tax News | Permalink

Federal Judges Seek To Defer Capital Gains On Berkshire Hathaway Stock They Need To Sell To Avoid Conflicts Of Interest In Cases Before Them

ABA Journal, Tax Concerns Lead Judges to Hold on to Berkshire Hathaway Stock Despite 'Conflict Nightmare,' Judiciary Is Told:

Berkshire HathawayA federal appeals judge is suggesting changes to deal with a “conflict nightmare”: judges with holdings in Warren Buffett’s Berkshire Hathaway.

Judge Ralph Erickson of the 8th U.S. Circuit Court of Appeals at St. Louis outlined the problem in a letter to two judiciary committees last week. ...

The issue: Berkshire Hathaway owns companies that in turn own other companies. That makes it difficult for judges to know that they have to recuse themselves when a case involves a party that is ultimately owned by Berkshire Hathaway.

Reuters, U.S. Judges' Investments in Buffett's Berkshire a Conflicts 'Nightmare' - Letter:

As the federal judiciary braces for a new law toughening up financial disclosure rules to take effect, a prominent judge is sounding the alarm about one stock in particular that is causing a conflict-of-interest "nightmare" for too many judges: Berkshire Hathaway. ...

Those judges, he said, have accumulated "substantial" capital gains investing in Berkshire, whose stock price has jumped 60% over the last five years, exposing them to capital gains taxes if they sold the stock. ...

Erickson suggested the U.S. Judicial Conference's Codes of Conduct Committee make it easier for judges to obtain certificates that would allow them to defer capital gains taxes if they preemptively divest themselves of holdings like Berkshire.

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July 20, 2022 in Tax, Tax News | Permalink

Thursday, July 14, 2022

Institute For Policy Studies Launches Tax The Ultra-Rich Now (TURN) Campaign And Excessive Wealth Disorder Institute


The Institute for Policy Studies hosts a launch event today on the Excessive Wealth Disorder Institute and (TURN) Campaign at 2:00 p.m. EDT (registration):

EventThe nation’s 740 billionaires now control more wealth than the 65 million households that make up the bottom half of our economy. They use that wealth to buy politicians and rig the system in their favor while paying lower tax rates than firefighters, teachers, or nurses.

That’s why we’re banding together with some of the top tax fairness fighters—Americans for Tax Fairness, Excessive Wealth Disorder Institute, Health Care for America Now, The Other 98%, Working Families Party, and more—for a new campaign to Tax the Ultra-Rich Now (TURN)!

On Thursday, July 14th, join us for the launch of the TURN campaign and the Excessive Wealth Disorder Institute. We’ll hear from experts and activists alike about why now is the time to tax the ultra-rich, and how you can get involved.

Featuring:

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July 14, 2022 in Legal Education, Tax, Tax News | Permalink

Tuesday, July 12, 2022

One-Year Delay Could Sink Global Tax Deal As U.S., Other Countries May Back Out

New York Times, A Global Deal to Tax Large Corporations Is Delayed a Year:

OECD TaxThe most ambitious tax overhaul in a century faced a new setback on Monday when the Organization for Economic Cooperation and Development, which is overseeing the global negotiations, said that proposed rules for how the world’s largest companies would be taxed would not be unveiled until the middle of next year.

The delay is expected to push enactment of the agreement, which had been intended by next year, to at least 2024. That will give negotiators more time to hash out a thicket of complicated details surrounding how to rewrite international tax treaties and enact a global minimum tax of 15 percent in more than 130 countries.

But it could also give governments more time to contemplate backing out of the pact as fears over inflation and a global recession intensify and as many countries, including the United States, undergo elections. ...

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July 12, 2022 in Tax, Tax News | Permalink

WSJ: Vanguard To Pay $6 Million To Investors Hit With Big Tax Bills

Following up on my previous posts:

Wall Street Journal, Vanguard to Pay $6 Million to Investors Hit With Big Tax Bills:

A Vanguard Group subsidiary will pay about $6 million to Massachusetts investors who were whacked last year with unexpectedly painful tax bills.

Massachusetts securities regulators on Wednesday reached a $6.25 million settlement with Vanguard Marketing Corp., a subsidiary of Vanguard, following an investigation launched this year into changes the Malvern, Pa.-based financial giant made to its target-date funds.

Such funds are bundles of stocks, bonds and cash that automatically become more conservative as investors approach retirement. In January, The Wall Street Journal reported that big institutional clients abandoned some of Vanguard’s target funds in droves after the firm created an incentive for them to move their money to a different set of funds.

That forced the target funds to sell securities, generating capital gains, which by law must be distributed to the remaining holders. That didn’t affect small investors who held the target funds in retirement accounts, where gains aren’t currently taxed. But retail clients in taxable accounts were slammed with big tax bills. ...

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July 12, 2022 in Tax, Tax News | Permalink

Saturday, July 9, 2022

NY Times: Big 4 Accounting Auditors Sign Off On Dubious Tax Strategies Designed By Their Firm

New York Times, Officials Balked at a Drug Company’s Tax Shelter. Auditors Approved It Anyway.:

Big 4Court documents show the potential conflicts of interest when accounting firms simultaneously help clients avoid taxes and audit their finances.

The drug company Perrigo had a problem.

Consultants at the giant advisory firm EY had devised an elaborate arrangement that would allow Perrigo, one of the country’s leading makers of nonprescription drugs, to avoid more than $100 million in federal taxes. But the company’s outside auditors, at the accounting firm BDO, were questioning the setup’s propriety.

Perrigo soon replaced BDO with EY as its auditor. At least one EY official, too, expressed concern that the tax shelter his colleagues had designed was overly aggressive.

Even so, auditors at EY, also known as Ernst & Young, eventually blessed the transactions, which federal authorities now claim were shams, according to previously unreported documents made public in a court case last year.

Accountants have a reputation as bean counters. In reality, their audits are a linchpin of global capitalism: Investors need to be able to trust that companies’ numbers are reliable and have been reviewed by credible outsiders. Having a reputable auditing firm sign off on your financial statements is therefore a prerequisite to being listed on a major stock exchange and attracting significant investments.

To avoid suspicions that auditors are overlooking problems in order to please big clients, accounting firms are supposed to keep an arms-length relationship with the companies they oversee.

But in the two decades since a series of corporate accounting scandals spotlighted the lack of independence between auditing firms and their leading clients, the problem remains. Today, the Big 4 accounting firms all offer giant companies a wide array of consulting and tax-planning services — at the same time they are serving as ostensibly independent outside auditors.

Internal EY emails and memos — made public last year in a court case in which the I.R.S. is challenging Perrigo’s tax arrangements and accusing EY of constructing “an abusive tax dodge” — provide a rare inside look at the potential conflicts of interest that arise as a single firm constructs tax shelters and simultaneously audits its own work. ...

Nowhere is the tension over accounting firms’ multifaceted roles more pronounced than in the lucrative business of advising companies on how to slice their tax bills.

The Big 4 accounting firms — EY, KPMG, PwC and Deloitte — have emerged as perhaps the most powerful private-sector force in U.S. tax policy. They lobby federal officials to tweak tax rules to help their clients. A steady stream of lawyers from the firms rotate in and out of senior tax positions in the Treasury Department, where they write rules favorable to their former clients.

At the same time, the Big 4 firms help companies move profits out of the reach of the U.S. government. Then the companies’ auditors — often a different group of employees from the same firm that created the structures in the first place — have to sign off on the setups. In assessing their legitimacy and the effect on the client’s financial results, the auditors frequently consult with the colleagues who devised the tax strategies.

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July 9, 2022 in Tax, Tax News | Permalink

ProPublica: Before Moving To Florida, Citadel Billionaire Founder|CEO Spent $54M To Defeat Illinois Tax Hike That Would Have Cost Him $51M/Year

ProPublica, Ken Griffin Spent $54 Million Fighting a Tax Increase for the Rich. Secret IRS Data Shows It Paid Off for Him.:

Pro PublicaFor billionaire Ken Griffin, it was well worth spending $54 million to ensure he and other rich Illinoisans wouldn’t have to pay more tax.

By the time Illinois voters streamed into voting booths on Election Day in 2020, Griffin, then Illinois’ wealthiest resident, had made sure they’d heard plenty about why they should not vote to raise taxes on him and the state’s other rich people. His tens of millions paid for an unrelenting stream of ads and flyers against an initiative on that year’s ballot, which would have allowed Illinois lawmakers to join 32 other states in setting higher tax rates for the wealthy than for everyone else.

In the end, Griffin spent about $18 for every one of the 3.1 million votes against the initiative. After initial optimism about its prospects, the measure came up hundreds of thousands of votes short and went down to defeat.

Rarely does the public get a clear view of the payoff for wealthy Americans who put their money down to achieve a political outcome. But in this case, ProPublica’s trove of IRS data can provide crucial context for the ballot fight. For Griffin and many of his fellow ultrawealthy Illinoisans, spending even such a vast amount was well worth it when compared with what a tax hike might have cost them.

ProPublica

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July 9, 2022 in Tax, Tax News | Permalink

Friday, July 8, 2022

WSJ: Comey|McCabe IRS Audits AND ProPublica Tax Leak Should Be Investigated

Comey

New York Times, I.R.S. Asks Inspector General to Review Audits of Comey and McCabe:

The agency said its commissioner asked the Treasury Department’s inspector general for tax administration to look into the audits after The Times raised questions about them.

Wall Street Journal, Comey, McCabe and IRS Audits:

The press corps is aflutter at the New York Times report this week that former FBI officials James Comey and Andrew McCabe faced burdensome tax audits under a Trump appointee. We’re glad to see the new attention to the Internal Revenue Service, and welcome to the cause if you mean it.

Messrs. Comey and McCabe were rotten public servants, but any abuse of the IRS for political purposes has to be punished and deterred.

But some Democrats aren’t waiting to jump to Trumpian conclusions. “Trump has no respect for the rule of law,” said Senate Finance Chairman Ron Wyden in a statement. “If he tried to subject his political enemies to additional IRS scrutiny that would surprise no one.” Mr. Trump says he knew nothing about the audits.

Too bad Mr. Wyden has shown little interest in the rule of law concerning other IRS abuses. One example is last year’s leak of tax records to the progressive website ProPublica. The site published the detailed records of such billionaires as Warren Buffett and Jeff Bezos in June 2021, the same time Democrats were making the case for a wealth tax. The leak was a federal crime, and ProPublica hasn’t disclosed its source or how the files were obtained.

A year later the IRS still hasn’t offered information about the leak to Congress. Not that Mr. Wyden’s committee or Democrats on House Ways and Means seem eager to know.

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July 8, 2022 in IRS News, Tax, Tax News | Permalink

Wednesday, June 29, 2022

NY Times: 300,000 High Income Residents Fled New York City During The Pandemic

New York Times, The Flight of New York City’s Wealthy Was a Once-in-a-Century Shock:

When roughly 300,000 New York City residents left during the early part of the pandemic, officials described the exodus as a once-in-a-century shock to the city’s population.

Now, new data from the Internal Revenue Service shows that the residents who moved to other states by the time they filed their 2019 taxes collectively reported $21 billion in total income, substantially more than those who departed in any prior year on record. The IRS said the data captured filings received in 2020 and as late as July 2021.

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June 29, 2022 in Tax, Tax News | Permalink

Monday, June 27, 2022

ProPublica: Ten Ways Billionaires Avoid Taxes On An Epic Scale

ProPublica, Ten Ways Billionaires Avoid Taxes on an Epic Scale:

Pro PublicaLast June, drawing on the largest trove of confidential American tax data that’s ever been obtained, ProPublica launched a series of stories documenting the key ways the ultrawealthy avoid taxes, strategies that are largely unavailable to most taxpayers. To mark the first anniversary of the launch, we decided to assemble a quick summary of the techniques — all of which can generate tax savings on a massive scale — revealed in the series.

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June 27, 2022 in Tax, Tax News | Permalink

Saturday, June 25, 2022

WSJ: Warren Buffett’s Estate Planning Sends Charities Scrambling; $100 Billion May Go To Pro-Abortion Family Foundation

Wall Street Journal, Warren Buffett’s Estate Planning Sends Charities Scrambling:

STBFWarren Buffett has long held his cards close to the vest when it comes to his investing plans. Now, charities including the Bill & Melinda Gates Foundation are racing to adjust to possible changes in his plans for charitable giving. The results could dramatically reshape the world of philanthropy.

In 2006, the Omaha billionaire made a pledge worth tens of billions of dollars: He would earmark 85% of his stock in his company, Berkshire Hathaway, for charity, with the bulk going to the Gates Foundation, a global philanthropy run by his longtime friends. He wrote to the couple that he was “irrevocably committing to make annual gifts of Berkshire Hathaway ‘B’ shares throughout my lifetime.”

Less clearly worded was what would happen to the undistributed shares after Mr. Buffett, who will turn 92 in August, dies.

For years, the Gates Foundation made preparations for that event. Staffers scrambled to find potential homes for an anticipated flood of funding, an endeavor they nicknamed “Project Lincoln,” former employees said. In 2010 Mr. Buffett said he planned ultimately to give away 99% of his wealth.

Now, similar preparations are under way at a different charity—a little-known Buffett family foundation that supports abortion rights. Officials at the Susan Thompson Buffett Foundation have been hiring staff and making plans to spend a massive influx of money that the small organization expects to receive, according to current and former people within the foundations and documents reviewed by The Wall Street Journal.

While Mr. Buffett hasn’t revealed publicly how his estate will be divided, officials at both foundations have discussed in internal meetings that the amount left to the Buffett family foundation could be as high as $70 billion to $100 billion, some of the people said and documents show. An endowment of that size would make the Buffett foundation one of the largest private philanthropies in the world, based on publicly available data.

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June 25, 2022 in Tax, Tax News | Permalink

Wednesday, June 22, 2022

ProPublica: The Billionaire GOP Mega-Donor Who’s Gaming The Tax System

ProPublica, Meet the Billionaire and Rising GOP Mega-Donor Who’s Gaming the Tax System:

Pro PublicaSusquehanna founder and TikTok investor Jeff Yass has avoided $1 billion in taxes while largely escaping public scrutiny. He’s now pouring his money into campaigns to cut taxes and support election deniers.

One day in July 1985, three young men from Philadelphia, their lawyer and a burly Pinkerton guard arrived at a horse track outside Chicago carrying a briefcase with $250,000 in cash.

Running the numbers on a Compaq computer the size of a small refrigerator, Jeffrey Yass and his friends had found a way to outwit the track’s bookies, according to interviews, records and news accounts. A few months earlier, they’d wagered $160,000, gambling that, with tens of thousands of bets, they could nail the exact order of seven horses in three different races. It was a sophisticated theory of the racing odds, honed with help from a Ph.D. statistician who’d worked for NASA on the moon landing, and it proved right. They bagged $760,000, then the richest payoff in American racing history.

But that summer day, when they presented their strikingly long list of bets at the track window, they were turned away. Their appeal to the track owner got them ejected. Yass, just 27, then sued for the right to place the bets. The track’s lawyer fumed to a federal judge that the men were trying to corner the betting market “through the use of their statistics and numbers.”

Yass lost, but that year he and his friends repeated variations of the strategy at horse and greyhound tracks around the country. Then they decided to turn their focus from a world of hundreds of thousands of dollars to a world of billions: Wall Street.

Four decades later, the firm he and his friends founded, Susquehanna International Group, is a sprawling global company that makes billions of dollars. Yass and his team used their numerical expertise to make rapid-fire computer-driven trades in options and other securities, eventually becoming a giant middleman in the markets for stocks and other securities. If you have bought stock or options on an app like Robinhood or E-Trade, there’s a good chance you traded with Susquehanna without knowing it. Today, Yass, 63, is one of the richest and most powerful financiers in the country.

But one crucial aspect of his ascent to stratospheric wealth has transpired out of public view. Using the same prowess that he’s applied to race tracks and options markets, Yass has taken aim at another target: his tax bill.

There, too, the winnings have been immense: at least $1 billion in tax savings over six recent years, according to ProPublica’s analysis of a trove of IRS data. During that time, Yass paid an average federal income tax rate of just 19%, far below that of comparable Wall Street traders.

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June 22, 2022 in Tax, Tax News | Permalink

ProPublica: The Tax Scam That Won’t Die

ProPublica, The Tax Scam That Won’t Die:

Pro PublicaFor the past six years, government officials have tried ever harder to kill a type of tax avoidance scheme that the Internal Revenue Service has branded “abusive” and among “the worst of the worst tax scams.” The IRS has pursued tens of thousands of audits and warned of hefty penalties facing anyone who exploits it. The Justice Department has targeted top promoters of what it calls “fraudulent” deals with criminal charges and civil lawsuits, yielding several guilty pleas and a civil settlement. In Congress, Democrats and Republicans have united to sponsor legislation to abolish the practice.

But the industry has fought back with a coterie of lobbyists, including a onetime member of Congress long viewed as a liberal lion, Henry Waxman. The battle shows how even on those rare occasions when both parties agree to take action, well-funded interests can frustrate a solution.

The result: The use of the scheme continues unabated. Along the way it has cost the U.S. Treasury billions in lost taxes, according to the IRS. ...

The government is targeting a tax deduction that goes by the cumbersome name “syndicated conservation easement,” which exploits a charitable tax break that Congress established to encourage preservation of open land. Under standard conservation easements, landowners who give up development rights for their acreage, usually by donating those rights to a nonprofit land trust, get a charitable deduction in return. When conservation easements are used as intended, both the public and the owner of the property benefit. A piece of pristine land is preserved, sometimes as a park that the public can use, and the donor gets a tax break.

The syndicated versions are different. Instead of seeking to protect a bucolic reserve for wildlife or humans, profit-seeking intermediaries have turned the likes of abandoned golf courses or remote scrubland into high-return investment vehicles. These promoters snatch up vacant land that till then was worth little. Then they hire an appraiser willing to declare that it has huge, previously unrecognized development value — perhaps for luxury vacation homes or a solar farm — and thus is really worth many times its purchase price. The promoters sell stakes in the donation to individuals, who claim charitable deductions that are four or five times their investment. The promoters reap millions in fees. ...

Today, the fight has taken on a grinding quality. By the IRS’ most recent reckoning, the use of syndicated easements grew from 249 deals in 2016, generating $6 billion in charitable deductions, to 296 deals in 2018, producing $9.2 billion in deductions. (By contrast, more than 2,000 nonsyndicated easement deductions have resulted in about $1 billion in annual deductions.)

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June 22, 2022 in Tax, Tax News | Permalink

Wednesday, June 15, 2022

GOP Eyes Tax Changes As Roe v. Wade Hangs In The Balance

Law360, GOP Eyes Tax Changes As Roe Hangs In Balance:

Republicans could push to implement changes in the tax code that would restrict access to abortion and incentivize childbirth if the U.S. Supreme Court overturns Roe v. Wade and the GOP regains control of Congress and the White House.

Carliss Chatman, an associate professor at the Washington and Lee University School of Law, told Law360 that Republicans will likely try to codify anti-abortion language in the tax code in a post-Roe world. They've signified their intent to do so in several proposals introduced during the current legislative session, despite Democratic majorities in the House and Senate and Democratic President Joe Biden in the White House.

However, if the balance of power changes, Republican proposals introduced this session could provide a blueprint for policy changes to come.

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June 15, 2022 in Tax, Tax News | Permalink

Saturday, June 11, 2022

For 1st Time Since 2011, IRS Makes Mid-Year Adjustment In Standard Mileage Rate Due To Spike In Gas Prices; 62.5¢/Mile Is Up 11.6% From 2021

IR-2022-124, IRS Increases Mileage Rate For Remainder of 2022:

The Internal Revenue Service today announced an increase in the optional standard mileage rate for the final 6 months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.

For the final 6 months of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates become effective July 1, 2022. The IRS provided legal guidance on the new rates in Announcement 2022-13, issued today.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2022. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. For travel from Jan. 1 through June 30, 2022, taxpayers should use the rates set forth in Notice 2022-03.

IRS Mileage

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June 11, 2022 in IRS News, Tax, Tax News | Permalink

Wednesday, June 8, 2022

NY Times: The Global Minimum Tax Deal Is In Trouble

New York Times, The Global Minimum Tax Deal Is In Trouble:

What economists hailed as the most ambitious tax overhaul in a century is now mired in a toxic mix of fine print and political paralysis.

It was only last fall that more than 130 nations signed on to an agreement to eliminate the world’s tax havens and enact a global minimum tax. The agreement was designed to increase taxes substantially on many large corporations and to end an international fight over how technology companies are taxed. Its architects said it would end the global “race to the bottom” for corporate tax rates.

But legislators in both the U.S. and Europe are now struggling to pass the laws needed to make good on the promises embedded in the deal. And no tax changes are likely to pass on their own, without the more politically popular spending programs also passing.

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June 8, 2022 in Tax, Tax News | Permalink

Thursday, June 2, 2022

Kim Clausing Leaves Treasury Department To Return To UCLA

Bloomberg, Treasury Tax Official Leaving Biden Administration:

Clausing (2021)The Treasury Department’s deputy assistant secretary of tax analysis, Kimberly Clausing, is leaving the Biden administration.

Clausing, an expert on corporate profit shifting, was part of the administration’s team that sought to recoup money the government was owed but didn’t collect. She pushed to increase taxes on corporations and wealthy Americans, including upping the domestic corporate rate to 28%.

Tuesday was her last day, according to people familiar with the matter. Clausing is returning to academia, a Treasury spokeswoman said. Clausing was an economics professor at Reed College in Oregon before she took a post at UCLA School of Law. ...

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June 2, 2022 in Legal Education, Tax, Tax News, Tax Prof Moves | Permalink

WSJ: Is The Income Tax Rate On The Rich 8% (Biden), Or 23% (Saez & Zucman)?

Joe BidenWall Street Journal, Is the Income-Tax Rate on the Rich 8%, or 23%? Depends on Whose Math You Use:

WSJWhat do the wealthy pay in federal taxes? On paper, the top marginal income-tax rate is 37% on ordinary income and 23.8% on capital gains. Government estimates put high-income filers’ average rates in the mid-20s.

A new Biden administration analysis, however, pegs the average tax rate for the 400 wealthiest households at 8.2% from 2010 to 2018 [Greg Leiserson (Senior Economist, CEA) & Danny Yagan (Chief Economist, OMB), What Is the Average Federal Individual Income Tax Rate on the Wealthiest Americans?]. If that is right, the administration has a firmer case to raise taxes on the ultrarich.

But it isn’t so simple. ...

In writing the White House study, administration economists Greg Leiserson and Danny Yagan chose a numerator and denominator reflecting their approach to analyzing tax policy.

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June 2, 2022 in Tax, Tax News | Permalink

Wednesday, June 1, 2022

Kathleen Kerrigan Begins Her Two-Year Term As Tax Court Chief Judge Today

U.S. Tax Court Press Release:

Judge Kathleen Kerrigan has been elected Chief Judge to serve a two-year term beginning June 1, 2022. The election of the Chief Judge by the Judges of the Tax Court is undertaken biennially in accordance with statutory requirements.

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June 1, 2022 in Tax, Tax News | Permalink

Saturday, May 28, 2022

Trusts & Estates: The Next Big Thing In Big Law

Law.com, Big Law Trusts & Estates Work Risky But Rising:

Trusts and estates work in Big Law is back in a big way. Large law firms are recognizing the demand associated with baby boomers passing along their wealth to the next generation, and the COVID-19 pandemic has also been a boon for estate planning efforts.

But the practice can also come with a hefty insurance price tag, as brokers say underwriters are skittish about the high-value claims that mistakes can generate. As a result, for this work to succeed within big firms, lawyers must be active producers, rather than simply stepping in to help other revenue generators.

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May 28, 2022 in Tax, Tax News | Permalink

Sunday, May 22, 2022

Tax Experts Say Section 107 Housing Allowance For Clergy Remains Safe Despite Recent Cases And Greedy Abuses

Christianity Today, Churches Still Depend on Clergy Housing Allowance:

Despite recent legal cases and reports of greedy abuses, experts say the longstanding benefit remains safe.

Wth the federal tax filing deadline looming, a Virginia court case may have some ministers wondering whether their ministerial housing allowance is secure.

The case isn’t about the housing allowance. But to some, including Supreme Court Justice Neil Gorsuch, it suggests courts may be willing to meddle increasingly in clergy affairs, including housing.

At issue was denial of a property tax exemption for a church parsonage in Fredericksburg, Virginia. New Life in Christ Church sought the tax exemption for a church-owned home inhabited by two youth ministers, married couple Josh and Anacari Storms. The city denied the exemption because it claimed the church’s denomination, the Presbyterian Church in America (PCA), does not allow women to be considered ministers.

New Life in Christ said the city misunderstood its doctrine. Ordination and certain duties, like preaching, are limited to men in the PCA, according to the church, but the denomination’s governing documents permit congregations latitude in hiring nonordained persons like the Stormses for various ministry jobs. Yet a trial court sided with Fredericksburg, as did the Virginia Supreme Court.

The US Supreme Court declined to hear the church’s appeal in January. Now the church must continue paying the annual property tax bill of $4,589.15. The Supreme Court’s action provoked a dissent from Gorsuch.

“The City continues to insist that a church’s religious rules are ‘subject to verification’ by government officials,” Gorsuch wrote. “I would grant the [church’s] petition and summarily reverse. The First Amendment does not permit bureaucrats or judges to ‘subject’ religious beliefs ‘to verification.’”

Is the case a harbinger of increased willingness to scrutinize ministerial housing in court? Pastors across America hope not. While fewer churches own traditional parsonages, the majority take advantage of the federal clergy housing allowance and say it benefits both their families and their churches. ...

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May 22, 2022 in Faith, New Cases, Tax, Tax News | Permalink

Saturday, May 21, 2022

GAO: IRS Audit Rates Plummet For The Rich

GAO, Tax Compliance: IRS Audit Trends for Individual Taxpayers Vary by Income:

From tax years 2010 to 2019, audit rates of individual tax returns decreased for all income levels. On average, individual tax returns were audited over three times more often for tax year 2010 (about 0.9 percent) than for tax year 2019 (0.25 percent). Audit rates for taxpayers with incomes of $200,000 and above decreased the most, largely because higher-income audits tend to be more complicated and require auditors to manually review multiple issues, according to IRS officials. Because audit staffing has decreased, IRS cannot conduct as many of these audits, compared to lower-income audits, which are generally less complex and involve more automated processes. In addition, IRS officials stated that the number of returns filed by higher-income populations is growing, meaning more audits are needed to achieve the same audit rate.

Although audit rates decreased the most for higher-income taxpayers during this time period, IRS continued to audit higher-income taxpayers at higher rates than lower-income taxpayers, in general. However, IRS audited taxpayers claiming the Earned Income Tax Credit (EITC) at a higher rate than average (see fig. 1, using tax year 2019 as an example). IRS officials explained that EITC audits are limited in scope and historically have high rates of improper payments and therefore require a greater enforcement presence.

GAO 2

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May 21, 2022 in Tax, Tax News | Permalink

Thursday, May 5, 2022

WSJ Op-Ed: A Global Tax System Is Good For The U.S.

Wall Street Journal op-ed:  A Global Tax System Is Good for the U.S., by Jason Furman (Harvard):

The U.S. system for taxing international corporate income has long been dysfunctional. It is needlessly complex and distorts business decisions while failing to raise much revenue, thus forcing higher taxes elsewhere to make up the difference. Policy makers have the best chance in generations to reform and improve this system while bringing the rest of the world along. Treasury Secretary Janet Yellen has already helped craft an international agreement signed by more than 130 countries. Congress now needs to do its part and lock it in.

The two approaches to international taxation are worldwide taxation, in which a corporation’s home country taxes its entire global income, and territorial taxation, in which income is taxed only by the country where it is earned. Neither system is perfect, and both inevitably create some distortions.

A worldwide system can impede the competitiveness of American companies by raising their costs relative to those of competitors legally domiciled in other countries. A territorial system, on the other hand, creates an incentive to locate production and shift reported profits overseas.

Before 2017 the U.S. followed a third approach that that combined some of the worst features of both, which I call a “stupid territorial” tax system. It pretended to tax U.S. corporations on their worldwide foreign earnings but in practice afforded them tremendous opportunity to defer those taxes permanently, in effect allowing them to create a territorial system for themselves while leading to massive buildups of overseas income.

President Trump and the Republican Congress reformed this system, replacing it with a hybrid system that included a minimum tax called Global Intangible Low-Taxed Income, or Gilti, for companies that earned a high rate of return and also paid low taxes overseas. This plan took some steps toward a more rational system, recognizing the necessity of a compromise between worldwide and territorial. But it also took some steps backward on rates and in technical details, like allowing companies to apply the minimum tax based on their worldwide average rate instead of on a country-by-country basis. ...

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May 5, 2022 in Tax, Tax News | Permalink

Wednesday, May 4, 2022

New York Law Firms Open Miami Offices To Service Clients Audited By New York Tax Authorities After Moving To Florida

Law.com, Tax Controversy and Church Insolvency Brought Another New York Law Firm to Miami:

Miami (City) (2022)The 21-lawyer, full-service law firm Capell Barnett Matalon & Schoenfeld became among the latest New York law firms to expand to South Florida after firm leaders watched as client needs increasingly spanned the two regions.

This month, the firm announced a Miami office led by counsel David Zandi, a real estate attorney who launched the Capell Barnett’s one-lawyer location at 201 South Biscayne Blvd. in December.

In a recent interview, Zandi said the firm expanded to South Florida to serve two client categories: High-income New Yorkers who have been increasingly audited after moving to Florida full-time or becoming part-time residents, and churches with dwindling congregations and valuable land to spare.

“New York has been losing high-income New Yorkers who are going to Florida to pay zero [state income] tax,” Zandi said. “New York State has been auditing former and part-time residents to recoup the money. A lot of these clients who straddle the divide between New York and Florida also straddle the divide of tax controversy. If we can provide that service, that’s a big value-add for clients down here.”

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May 4, 2022 in Tax, Tax News | Permalink

Tuesday, May 3, 2022

WSJ: To Get Your Tax Records From The IRS, Taxpayers Still Have To Turn Over Sensitive Personal Info To Outside Vendor

Following up on my previous posts (linked below):  Wall Street Journal Tax Report, They’re Your IRS Records. Getting Them Means Giving Up Privacy.:

IRS Logo 2Tax Day 2022 has come and gone, but this year’s filing season brought an unpleasant surprise for many Americans that’s still here: People who want online access to their tax records at the Internal Revenue Service have to turn over sensitive personal information to an outside company to get them. ...

Over the last decade, the IRS has had severe problems with its own systems that limited access for many taxpayers, so last year it turned to an outside vendor, ID.me, to verify identities. ID.me, which originated to help military families access benefits, is based in McLean, Va. It now provides online ID verification services to 10 federal agencies and 30 states. Its contract with the IRS is for up to $86.8 million.

Now, taxpayers who want to view their IRS records online must submit copies of driver’s licenses, Social Security cards and other documents to ID.me as proof of identity.

ID.me says that due to federal requirements, applicants must also provide a certain type of facial “selfie” or else have an online video interview with a representative for comparison with photo IDs.

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May 3, 2022 in IRS News, Tax, Tax News | Permalink

Call For Volunteers: State Tax Administration Survey

Seeking Volunteers: State Tax Administration Survey:

Center for Taxpayer RightsUnder a grant from the Rockefeller Foundation, the Center for Taxpayer Rights has developed a questionnaire of state tax administration practices and procedures to better understand how taxpayer rights are protected under state law. The questionnaire gathers information relating to income tax (where applicable), property tax, sales tax, and any other statewide taxes. The questions involve laws related to Assessment, Appeals, Collection, and Litigation. Volunteers are asked to provide an explanation of applicable state law as well as a citation when possible. Once the information is collected, the Center will make recommendations for the adoption of practices shown to work well and will identify areas of deficiency in taxpayer protections and advocate for change where taxpayer rights are in jeopardy.  The Center plans to hold a Reimagining Tax Administration workshop in the fall of 2022 to discuss the survey findings and recommendations. More information can be found here.

The Center is seeking volunteers for the following states:

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May 3, 2022 in Tax, Tax News | Permalink

Tuesday, April 26, 2022

Freakonomics: Should We Have To Pay Taxes For Our Sins?

Freakonomics, Should We Have to Pay for Our Sins?:

Freakonomics 2In this world, nothing is certain, except for death and taxes — and those are both hot topics, especially lately, on this podcast. Last week, we talked about Tax Day itself — which is normally April 15 or thereabouts — and how the stress or incentives surrounding that day can make us change our behavior, consciously and unconsciously. Sometimes, changing behavior is the point of a tax. For centuries, so-called “sin taxes” have been put on products like alcohol and tobacco, which are bad for us as individuals, and also as a society.

When the government wants us to stop doing something, it can ban that thing altogether —like we do with assault rifles and copyright infringement. Lots of recreational drugs are banned, and we tried to ban alcohol in the 1920s, but banning products has its downsides. For one thing, it can create a black market, which causes all sorts of other problems. Another approach is to tax the behavior: Whatever it is, you can still do it, but it’ll cost you more. The purpose of sin taxes is to get us to use less of those things that are bad for us. To change our behavior in ways that will eventually improve our own health, and sometimes the health of others.

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April 26, 2022 in Tax, Tax News | Permalink

Monday, April 25, 2022

Hemel: The American Retirement System Is Built For The Rich

Washington Post Op-Ed:  The American Retirement System Is Built For the Rich, by Daniel Hemel (Chicago; Google Scholar):

Democrats and Republicans in Congress don’t typically agree on tax policy. But late last month, 216 House Democrats joined with 198 of their GOP colleagues to pass legislation advancing a cause that both parties have championed in recent years: ensuring that high-income individuals can stuff even more money into their tax-advantaged retirement accounts. Only five House members — all Republicans — voted no.

Overwhelming Republican support for the bill — known as the Securing a Strong Retirement Act of 2022, or Secure 2.0 — comes as no shock: Tax-cutting has long been a central plank of the GOP platform. What’s more surprising is that every Democrat in attendance backed the measure, too. Even Rep. Alexandria Ocasio-Cortez (D-N.Y.) — a pillar of the party’s left wing who at a gala last September sported a gown with the slogan “TAX THE RICH” — voted to bestow billions of dollars in benefits on the very taxpayers whom she says should pay more.

Bipartisan support for Secure 2.0 is part of a decades-long pattern: While loudly and proudly proclaiming that their goal is to nurture nest eggs for the working class, lawmakers have constructed a complex of tax shelters for the well-to-do. The lopsided result is that as of 2019, nearly 29,000 taxpayers had amassed “mega-IRAs” — individual retirement accounts with balances of $5 million or more — while half of American households had no retirement accounts at all. Overall, according to the Congressional Budget Office, the top 10th of households reap a larger share of the income tax subsidy for retirement savings than the bottom 80 percent.

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April 25, 2022 in Tax, Tax News | Permalink

Tuesday, April 19, 2022

ProPublica: If You’re Getting A W-2, You’re A Sucker

ProPublica, “If You’re Getting a W-2, You’re a Sucker”:

Pro PublicaThere are many differences between the rich and the rest of us, but one of the most consequential for your taxes is whether most of your income comes from wages.

Nikki Spretnak loved being an IRS agent. Being able to examine the books of different businesses gave her an intimate view of the economy. But over the years, she became more and more conscious of a chasm between the business owners she was auditing and herself. It wasn't so much that they were rich and she, a revenue agent in the IRS office in Columbus, Ohio, was not. It was that, when it came to taxes, they lived a privileged existence, one that she, a mere W-2 recipient, did not share.

Over the past year, along with a team of my colleagues at ProPublica, I’ve spent countless hours scrutinizing the tax information of thousands of the wealthiest Americans. Like Spretnak, I’ve seen behind the veil and witnessed the same chasm. Doing my own taxes in the past was never a thrill, but only this spring did I fully realize what a colorless and confined tax world I inhabit.

For me, and for most people, filing taxes is little more than data entry. I hold in my hand my W-2 form from my employer and dutifully peck in my wages. Next come the 1099 forms that list my earnings from dividends or interest, and again my finger gets to work. The IRS has a copy of these forms, too, of course, making this drudgery somewhat pointless. By the end of it, there, in black and white, is my income.

The financial reality of the ultrawealthy is not so easily defined. For one, wages make up only a small part of their earnings. And they have broad latitude in how they account for their businesses and investments. Their incomes aren’t defined by a tax form. Instead, they represent the triumph of careful planning by skilled professionals who strive to deliver the most-advantageous-yet-still-plausible answers to their clients. For them, a tax return is an opening bid to the IRS. It’s a kind of theory. ...

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April 19, 2022 in Tax, Tax News | Permalink

Monday, April 18, 2022

Freakonomics: What Do A Full Moon, The Super Bowl, And Tax Day Have In Common?

Freakonomics, What Do A Full Moon, The Super Bowl, And Tax Day Have In Common?:

Freakonomics 2[The episode] explores the health implications of Tax Day, from increased car crash fatalities to the timing of babies being born. Host Dr. Bapu Jena explores two recent studies:

University of Toronto doctor and researcher Donald Redelmeier explains why fatalities from car crashes increase on Tax Day [The Full Moon and Motorcycle Related Mortality: Population Based Double Control Study]:

The increased risk on Tax Day extended all over the United States. It was mostly explained by working-age adults exactly as you would expect. And it also extended to pedestrians. So even if you yourself have filed your taxes early, it doesn't mean that all of those surrounding motorists have.

Williams College economist Sara LaLumia examines a small group of parents choosing when to have their babies based on tax deadlines [New Evidence on Taxes and the Timing of Birth]:

Late-December moms are going to have more cash on hand in the early months of their child's life, because they got the child-related tax benefits right away. January moms have to wait a whole year before they can get those tax benefits… December moms are a little bit less likely to work, particularly in the third month after giving birth, than the January mothers. Maybe having a little extra cash on hand is allowing people to buy a little bit more time before they returned to work.

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April 18, 2022 in Tax, Tax News | Permalink