Book, Fogg & Olson Present Reducing Administrative Burdens To Protect Taxpayer Rights Today At Loyola-L.A.

Leslie Book (Villanova; Google Scholar), T. Keith Fogg (Harvard), & Nina Olson (Center for Taxpayer Rights) present Reducing Administrative Burdens to Protect Taxpayer Rights virtually today at Loyola-L.A. as part of its Tax Policy Colloquium:

The tax system designed by Congress imposes significant administrative burdens on taxpayers. IRS decisions regarding how it administers tax laws can add to congressionally imposed burdens. The administrative burdens are consequential and hurt some people, especially lower- or moderate-income individual taxpayers, more than others. While the IRS strives to measure and reduce the time and money taxpayers spend to comply with their tax obligations, it does not consider the effect administrative burdens have on taxpayer rights, including the right to be informed, the right to pay no more than the correct amount of tax, and the right to a fair and just tax system.

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Lesson From The Tax Court: Failure To Understand Issue Preclusion May Trigger Sanctions

Some people just cannot take no for an answer.  That is one of the reasons §6673 permits the Tax Court to impose a penalty of up to $25,000 on taxpayers who stubbornly present either frivolous or groundless arguments.

It is sometimes difficult, however, to distinguish a “no” from a “not now.”  Karson C. Kaebel v. Commissioner, T.C. Memo. 2021-109 (Sept. 9, 2021) (Judge Halpern), teaches a good lesson about issue preclusion, which is the important legal doctrine that tells us when “no” means “no.”  The taxpayer there asked the Tax Court to make the IRS take back a certification it had sent to the State Department.  But the reasons the taxpayer offered had already been rejected by both the Tax Court and the Court of Appeals in prior cases brought by the taxpayer about different subjects.  Judge Halpern explains why those no’s were really and truly no’s.  He also considers imposing §6673 penalties for the taxpayer’s intransigence.  So this will be a good lesson to learn, if for no other reason than to avoid penalties!   Details below the fold.

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The Top Five New Tax Papers

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

1. [493 Downloads]  Federal Tax Procedure (2021 Practitioner Ed.), by John Townsend (Houston)
2. [356 Downloads]  Serenity Now! The (Not So) Inclusive Framework and the Multilateral Instrument, by Yariv Brauner (Florida; Google Scholar)
3. [304 Downloads]  Mega-IRAs, Mega-401(k)s, and Other Mega-Retirement Accounts: Statement for the Record, by Daniel Hemel (Chicago; Google Scholar) & Steven Rosenthal (Tax Policy Center)
4. [292 Downloads]  State Aid Prohibition — The New GAAR in Town, by Joachim Englisch (Muenster)
5. [166 Downloads]  New Puzzles In International Tax Agreements, by Wei Cui (British Columbia; Google Scholar)

Kim Presents A New Framework For Digital Taxation Today At Boston College

Christine Kim (Utah; Google Scholar) presents A New Framework for Digital Taxation (with Reuven Avi-Yonah (Michigan; Google Scholar) & Karen Sam)) virtually at Boston College today as part of its Tax Policy Collaborative:

The international tax regime has wide implications for business, trade, and the international political economy. Under current law, multinational enterprises do not pay their fair share of taxes to market countries where profits are generated because market countries are only allowed to tax companies with a physical presence there. Digital companies, like Google and Amazon, can operate entirely online, thereby avoiding market country taxes. Multinationals can also exploit existing tax rules by shifting their profits to low-tax jurisdictions, thereby avoiding taxes in the residence country where their headquarters are located.

Recently, a proposal to tackle these issues was announced, endorsed by more than 130 countries. This “Inclusive Framework” proposal sets forth two Pillars to reform the outdated international tax regimes by addressing digital taxation (Pillar One) and global minimum tax (Pillar Two). However, it is doubtful that the Inclusive Framework will reach a consensus, especially on Pillar One. As the details of Pillar One have become increasingly complex and degraded by political compromises and carve-outs, it risks being a framework without substance. Also, countries are unlikely to repeal an established tax instrument, Digital Services Taxes (DSTs), which is an adamant requirement of the United States in adopting Pillar One.

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Next Week's Virtual Tax Workshops

Monday, September 20: Leslie Book (Villanova; Google Scholar), T. Keith Fogg (Harvard), & Nina Olson (Center for Taxpayer Rights) will present Reducing Administrative Burdens to Protect Taxpayer Rights virtually at Loyola as part of its Tax Policy Colloquium. If you would like to attend, please RSVP here. 

Tuesday, September 21: Gabrielle Pepin (Upjohn Institute; Google Scholar) will present How Would a Permanently Refundable Child and Dependent Care Credit Affect Eligibility, Benefits, and Incentives? virtually at Georgetown as part of its Tax Law and Public Finance Workshop. If you would like to attend, please contact Brian Galle. 

Wednesday, September 22: Tessa Davis (South Carolina) will present Tax Narratives: A Critical Tax Perspective on the Biden Tax Plan virtually at Copenhagen as part of its Tax Colloquium Seminars. If you would like to attend, please register here. 

Wednesday, September 22: Ruth Mason (Virginia; Google Scholar) & Michael Knoll (Penn) will present Unbundling Undue Burdens virtually at UC-Irvine as part of its Tax Policy Colloquium. If you would like to attend, please contact gradtax@law.uci.edu. 

Thursday, September 23: Francine Lipman (UNLV; Google Scholar) will present Tax Audits, Economics, and Racism virtually at Indiana as part of its Tax Policy Colloquium. If you would like to attend, please contact Leandra Lederman. 

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Mark-To-Market (Or Wealth) Taxation In The U.S.: Evidence From Options

Paul Mason (Baylor) & Steven Utke (Connecticut; Google Scholar), Mark-to-Market (or Wealth) Taxation in the U.S.: Evidence from Options:

Recent U.S. tax proposals under various names (e.g., wealth taxes, estate tax reform, etc.) center on mark-to-market (MTM) taxation, which eliminates investors’ ability to defer or avoid capital gains taxes. To provide insight on potential effects of these tax proposals, we exploit a unique U.S. setting where “index” options on the S&P 500 Index (SPX) face MTM taxation whereas nearly identical “non-index” options on the exchange traded fund (ETF) tracking the S&P 500 Index (SPY) do not.

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Avi-Yonah: The International Tax Regime At 100 — Reflections On The OECD's BEPS Project

Reuven Avi-Yonah (Michigan; Google Scholar), The International Tax Regime at 100: Reflections on the OECD's BEPS Project:

This essay will consider the outcome of Pillars One and Two in light of the history of international taxation since the foundation of the international tax regime in 1923. Specifically, it will consider how Pillar One fits with efforts to redefine the source of active income in light of the digital revolution, and the ways in which Pillar Two implements the single tax principle, which can be traced back to the first model treaty from 1927. Both of those ideas were already articulated and developed in my own early writing on international taxation from the 1990s, when the Internet was in its infancy.

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How Does Removing The Tax Benefits Of Debt Affect Firms? Evidence From The 2017 U.S. Tax Reform

Ali Sanati (American; Google Scholar), How Does Removing the Tax Benefits of Debt Affect Firms? Evidence from the 2017 US Tax Reform:

Despite extensive efforts, the relation between tax incentives and corporate capital structure is an open question. The 2017 US tax reform creates an opportunity to directly estimate this relation. The reform limits the tax advantage of debt for all firms except for small businesses with average sales below $25 million. I use the exception threshold in a regression discontinuity design and show that corporate debt declines nearly dollar for dollar as the present value of the tax benefits of debt shrinks. Treated firms do not raise equity to replace debt, and they decrease investments and hiring, consistent with a rise in the cost of external financing. Confirming the tax channel, treatment effects are stronger in firms with more profits and smaller non-debt tax shields. Comparing the size of the debt tax shield across the firm size distribution suggests that the estimates likely provide a lower bound for the effects in large corporations.

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Hemel & Lord: Revitalizing The Generation-Skipping Transfer Tax

Daniel Hemel (Chicago; Google Scholar) & Robert Lord (Americans for Tax Fairness), Revitalizing the Generation-Skipping Transfer Tax:

Congress first enacted the generation-skipping transfer (GST) tax in 1976 to protect the estate and gift tax base and to ensure that extraordinary fortunes would bear their fair share of the transfer tax burden. Nearly a half-century into the life of the GST tax, those goals remain unrealized. In recent decades, high-net-worth individuals have succeeded in shifting hundreds of billions of dollars to “dynasty trusts” that—under current law—are poised to escape federal wealth transfer taxation indefinitely. The rise of dynasty trusts reduces the revenue-raising potential of the estate and gift taxes and allows a privileged class to exert vast economic and political power based solely on an accident of birth.

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Hemel: Should An Excise Tax On Stock Buybacks Also Apply To Cash M&A Deals?

Daniel Hemel (Chicago; Google Scholar), Should an Excise Tax on Stock Buybacks Also Apply to Cash M&A Deals?:

Senators Sherrod Brown (D-Ohio) and Ron Wyden (D-Oregon) introduced legislation this morning to impose a 2 percent excise tax on stock buybacks—a proposal that could serve as a significant “payfor” in the budget reconciliation bill moving through Congress now. An important decision in designing the excise tax is whether the tax should apply to transactions in which one corporation purchases another corporation’s stock (rather than repurchasing its own stock). The late William Andrews, a Harvard Law School professor and leading corporate tax scholar, considered this question in the early 1980s and concluded that the answer is “yes”—at least when the acquiring corporation ends up with majority control of the target. The current text of the legislation would not apply the tax to those transactions, though hopefully Andrews’s argument will persuade lawmakers to make a change.

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Manoj Viswanathan: The Professor Who Inspired Me To Love Tax

Philip Wolf (J.D. 2019, UC-Hastings; Tax Associate, Belcher, Smolen & Van Loo, San Francisco), Manoj Viswanathan: The Professor Who Inspired Me to Love Tax, 172 Tax Notes Fed. 1615 (Sept. 6, 2021):

Out of the thousands of different professions, how does one end up choosing tax? I can tell you exactly how it happened with me. During my second semester of law school, I was permitted to take one elective class. I selected basic income taxation. Although I knew nothing about the subject, I sensed it might somehow be helpful to my goal of starting a business one day. Little could I have imagined where the class would lead me!

In our first session, in walked the ebullient yet sincere professor, Manoj Viswanathan, or as he asked us students to call him, “Professor V.” Every lecture, Professor V. emphasized how everything we’d learn in his class would be practical and relevant in the real world. Time seemed to melt away in each Tuesday and Friday lecture, and I caught myself pondering what he’d said many hours after each class. It was Professor V.’s introductory tax class that would make me decide to change my career plans and become a tax lawyer.

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Lesson From The Tax Court: Retirement Plan Drafting Error Loses Taxpayer $51k Deduction

As tax practitioners know, to err is human, but to forgive requires a new set of regs.  Gayle Gaston v. Commissioner, T.C. Memo. 2021-107 (Sept. 2, 2021) (Judge Marvel), teaches us the lesson that if you want to get the §404(a) deduction for contributions to a profit-sharing plan, you need to be sure to properly link the plan to the taxpayer’s trade or business. In this case, the taxpayer received substantial deferred compensation payments from Mary Kay Cosmetics after her separation from that company and made substantial contributions to a retirement plan her tax advisor drafted for her.  Unfortunately, her one-participant profit sharing plan did not identify any trade or business as the source of the plan contributions.  That was error.  Both the IRS and the Tax Court were unforgiving.  Details below the fold.

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The Top Five New Tax Papers

This week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list:

1. [414 Downloads]  Federal Tax Procedure (2021 Practitioner Ed.), by John A. Townsend (Houston)
2. [348 Downloads]  Serenity Now! The (Not So) Inclusive Framework and the Multilateral Instrument, by Yariv Brauner (Florida; Google Scholar)
3. [287 Downloads]  State Aid Prohibition — The New GAAR in Town, by Joachim Englisch (Muenster)
4. [175 Downloads]  Taxation And Law And Political Economy, by Jeremy Bearer-Friend (George Washington; Google Scholar), Ari Glogower (Ohio State; Google Scholar), Ariel Jurow Kleiman (San Diego; Google Scholar) & Clint Wallace (South Carolina, Google Scholar) (reviewed by Hayes Holderness (Richmond) here)
5. [163 Downloads]  New Puzzles In International Tax Agreements, by Wei Cui (British Columbia; Google Scholar)

Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Glogower's Comparing Capital Income And Wealth Taxes

This week, David Elkins (Netanya, visiting NYU 2021-2022) reviews a new article by Ari Glogower (Ohio State; Google Scholar), Comparing Capital Income and Wealth Taxes, 48 Pepp. L. Rev. 875 (2021):

In this week’s article, Professor Glogower examines two proposals to reform the current tax system and improve progressivity. The first is a reformed capital income tax that would tax unrealized appreciation. The second is a wealth tax, under which individuals each year would pay a percentage of their net wealth. He evaluates these two proposals by considering their economic effects, administrability and avoidance opportunities, and constitutionality.

The author notes that if all capital produced a similar rate of return, then a reformed capital income tax and a wealth tax would be functionally equivalent: given a fixed return of x%, a y% income tax would be the same as an (x*y)% wealth tax. It is only because capital does not produce a fixed rate of return that the equivalence breaks down: relative to a reformed capital tax, a wealth tax would over-burden lower-yielding assets and would under-burden higher-yielding assets. Thus, in the real world, the normative question becomes: are we seeking to mitigate inequality of wealth or inequality of income? The former would best be served by a wealth tax, while the latter would best be served by a reformed income tax.

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Symposium: Tax Policy And Practice In The United States

Symposium, Beyond the Numbers: Tax Policy and Practice in the U.S., 52 Loy. U. Chi. L.J. 329-555 (2021):

• Emily Cauble (DePaul), Unsophisticated Taxpayers, Rules Versus Standards, and Form Versus Substance, 52 Loy. U. Chi. L.J. 329 (2021)
• Karen C. Burke (Florida), The Spurious Allure of Pass-Through Parity, 52 Loy. U. Chi. L.J. 351 (2021)
• Alex Zhang (J.D. 2021, Yale), Pandemics, Paid Sick Leaves, and Tax Institutions, 52 Loy. U. Chi. L.J. 383 (2021)
• Orli Oren-Kolbinger (Villanova), Do Tax Judges Think About the Economy?, 52 Loy. U. Chi. L.J. 437 (2021)
• Adam H. Rosenzweig (Washington U.),  International Vertical Equity, 52 Loy. U. Chi. L.J. 471 (2021)

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Avi-Yonah: Gucci Gulch Redux—The Problems Of The Wyden Tax Reform Proposal

Reuven S. Avi-Yonah (Michigan; Google Scholar), Gucci Gulch Redux: The Problems of the Wyden Proposal, 172 Tax Notes Fed. 1417 (Aug. 30, 2021):

In this article, Avi-Yonah critiques a recent U.S. tax reform proposal that would overhaul the global intangible low-taxed income, foreign-derived intangible income, and base erosion and anti-abuse tax regimes.

Conclusion
The Wyden proposal states that it is “a starting point for conversations in the Democratic caucus on how to reform the international tax system to meet shared goals.” I would suggest that there is a much better starting point, namely the Biden administration proposal. On every point that the Wyden proposal is different than the administration proposal, it is inferior.

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Oei Presents World Tax Policy In The World Tax Polity Today At Copenhagen

Shu-Yi Oei (Boston College; Google Scholar) presents World Tax Policy in the World Tax Polity? An Event History Analysis of OECD/G20 BEPS Inclusive Framework Membership virtually today as part of the Copenhagen Business School Tax Colloquium hosted by Yvette Lind.

The last decade has seen the emergence of a new global tax order characterized by increased multilateral consensus and cooperation. World polity theory appears to be an obvious theoretical fit for conceptualizing this new order, which has been spearheaded by the OECD and G20. But what are the pathways by which this new “world tax polity” has emerged? Using event history regression methods, this Article investigates this question by studying the case of the OECD/G20 BEPS Inclusive Framework, a multilateral framework that currently includes 140 member countries, including 96 non-OECD, non-G20 countries.

How did these countries come to join the BEPS Inclusive Framework? World polity theory posits that the new multilateral Inclusive Framework could have been driven by normative, coercive, or mimetic processes. Of these possibilities, my Article finds that Inclusive Framework membership seems to have proliferated through a combination of normative and coercion-based pathways. Specifically, acculturation through prior involvement in certain OECD tax initiatives and inclusion in contemporaneous European Union tax haven “listing” (naming and shaming) processes was associated with a significantly higher hazard of Framework membership. By contrast, imitation of other countries did not appear to be a significant pathway.

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Nonprofit Participation In Tax-Driven Urban Development Projects

Michelle Layser (Illinois; Google Scholar), Nonprofit Participation in Tax-Driven Urban Development Projects, 48 Fordham Urb. L.J. ___ (2021):

When tax incentives are designed in ways that create opportunities for nonprofits to participate in investments, a wide variety of mission-driven investments can be supported. This Essay has analyzes nonprofit participation in the New Markets Tax Credit program in order to gain insights to the barriers to nonprofit participation in Opportunity Zones investment. It has identified several barriers, including the requirement that Opportunity Funds make equity investments, the absence of monetization structures, and uncertainty about how the investments will be treated under the Community Reinvestment Act. Together, these barriers make it more difficult for nonprofits to participate in Opportunity Zone deals.

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Tax Fairness: In Search Of Justice And Representation

Alice G. Abreu (Temple), Jacqueline Laínez Flanagan (American) & Peter Mason, Tax Fairness: In Search of Justice and Representation, 172 Tax Notes Fed. 1457 (Aug. 30, 2021):

Global Roundtable is a regular series appearing in Tax Notes Federal, Tax Notes State, and Tax Notes International that brings together experts from each discipline to help advance the discussion of tax issues. In this installment, the authors examine the lack of racial diversity in the tax profession and built-in biases in tax policies and suggest ways to remedy the inequities.

Alice G. Abreu, Why Is Tax So White?:
Tax lawyers are crucial to the formulation and implementation of tax policy, and tax policy reflects the values and priorities of those who make it. But as Professor Rick Greenstein and I demonstrated in “Rebranding Tax/Increasing Diversity” (96 Denver L. Rev. 1 (2018)), the tax bar is much less diverse than the bar as a whole. This is especially disturbing because it is well known that the bar is much less diverse than the general population. And that lack of diversity may be contributing to the existence of tax law that disproportionately favors white taxpayers, directly and indirectly.

Jacqueline Laínez Flanagan, Seeking Tax Justice for Undocumented Immigrant Workers:

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Weiss: Opportunity Zones, 1031 Exchanges, And Universal Housing Vouchers

Brandon M. Weiss (American), Opportunity Zones, 1031 Exchanges, and Universal Housing Vouchers, 110 Cal. L. Rev. __ (2022):

The Tax Cuts and Jobs Act of 2017 contained former President Trump’s signature economic development initiative: the Opportunity Zone program. Allowing a deferral of capital gains tax for certain qualifying investments in low-income areas, the Opportunity Zone program aims to spur economic development by steering capital into economically distressed neighborhoods. The program is the latest iteration of an overly simplistic market-based approach to community development—an approach that transcends political party—based on a flawed yet enduring notion that mere proximity of capital will solve deeply entrenched issues of poverty and racial inequity. In reality, the legacy of Opportunity Zones is likely to be one of accelerated neighborhood gentrification left in the wake of wealthy taxpayer windfalls.

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Lesson From The Tax Court: IRS Can Issue Multiple 'Final' Spousal Relief Determinations

Yogi Berra would have been a great tax practitioner.  In Nilda E. Vera v. Commissioner, 157 T.C. No 6 (Aug. 23, 2021), Judge Buch does his best Yogi Berra imitation by teaching us that just because the IRS issued one “final determination” about an innocent spouse claim does not prevent it from issuing a second “final determination” to the same taxpayer when the taxpayer resubmits the same claim for the same year.  That means taxpayers potentially get a second opportunity to petition the Tax Court for review of an IRS rejection even when the taxpayer missed the first opportunity.  The Tax Court thus interprets the law to encourage taxpayers to keep resubmitting equitable relief claims because one never knows when the IRS might issue a second final determination, either deliberately or, as here, because of a goof-up.  As Yogi might have said: it ain't final until it's final!  So when at first your claim's denied, file, file again.  In the context of §6015(f) relief requests, that is not actually a bad result.  Details below the fold.

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The Top Five New Tax Papers

There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper #1 paper and some reshuffling of the order within the Top 5:

1. [374 Downloads]  Federal Tax Procedure (2021 Practitioner Ed.), by John A. Townsend (Houston)
2. [338 Downloads]  Serenity Now! The (Not So) Inclusive Framework and the Multilateral Instrument, by Yariv Brauner (Florida; Google Scholar)
3. [282 Downloads]  State Aid Prohibition — The New GAAR in Town, by Joachim Englisch (Muenster)
4. [164 Downloads]  Taxation And Law And Political Economy, by Jeremy Bearer-Friend (George Washington; Google Scholar), Ari Glogower (Ohio State; Google Scholar), Ariel Jurow Kleiman (San Diego; Google Scholar) & Clint Wallace (South Carolina, Google Scholar) (reviewed by Hayes Holderness (Richmond) here)
5. [157 Downloads]  New Puzzles In International Tax Agreements, by Wei Cui (British Columbia; Google Scholar)

Weekly SSRN Tax Article Review And Roundup: Speck Reviews The Inequity Of Informal Guidance By Blank & Osofsky

This week, Sloan Speck (Colorado; Google Scholar) reviews a new work by Joshua Blank (UC-Irvine; Google Scholar) and Leigh Osofsky (North Carolina; Google Scholar), The Inequity of Informal Guidance, 75 Vand. L. Rev. __ (2022).

In The Inequity of Informal Guidance, Josh Blank and Leigh Osofsky recontextualize the IRS’s use of informal guidance as a social justice issue. Adding to the substantial literature on subregulatory guidance in tax law—as well as their own deeply researched work on simplexity, automated legal guidance, and the tax legislative process—Blank and Osofsky highlight the systemic inequities and access to justice issues created by what they describe as a “two-tiered system of [tax] law.” Through agents such as tax attorneys and other advisors, certain groups benefit from planning and structuring mediated by traditional bodies of formal authorities, which offer robust protections should any controversy arise. Others are left with informal guidance: IRS publications, FAQs, and online widgets that often provide a misleading gloss of the real stuff and always give limited support in audit or litigation. To remedy this systemic inequity, Blank and Osofsky propose a slate of reforms addressing the treatment of both formal and informal law.

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Benshalom: Recalibrating Moral Feasibility Boundaries Of Taxation

Ilan Benshalom (Hebrew University), Recalibrating Moral Feasibility Boundaries of Taxation, 74 Tax L. Rev. __ (2021):

Tax theorists have recognized the importance of linking policy proposals to different ideal theories of distributive justice such as equality of resources and welfarism. However, they have invested considerably less efforts in engaging the tax-distributive debate with a moral analysis that deals with non-ideal settings. This essay offers a new framework that enables more effective integration of normative considerations into the academic analysis of distributive dilemmas associated with existing tax systems.

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Mason & Saint-Amans: Has Cross-Border Arbitrage Met Its Match?

Ruth Mason (Virginia; Google Scholar) & Pascal Saint-Amans (OECD), Has Cross-Border Arbitrage Met Its Match?, 41 Va. Tax Rev. 1 (2021):

In this essay, we review David Rosenbloom’s criticisms of both the concept of international tax arbitrage and regulatory responses meant to reduce such arbitrage. With the help of two decades of scholarly responses to Rosenbloom’s arguments, we conclude that although Rosenbloom’s objections to curbing arbitrage have merit, they are not so fundamental that they should stand in the way of reforms.

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Thinking Like A Source State In A Digital Economy

Yariv Brauner (Florida; Google Scholar), Thinking Like a Source State in a Digital Economy, 18 Pitt. Tax Rev. 225 (2021):

This Article proceeds as follows: Part I reviews the traditional U.S. international tax policy, followed by Part II that highlights the impact of the Tax Cuts and Jobs Creation Act of 2017 on such policy. Part III provides context to the proposals made by this Article with a discussion of the international discourse over the challenges that the digital economy presents to the international tax regime, while Part IV exposes and explains the role of the United States in this discourse.

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Adediran: Disclosures For Equity

Atinuke Adediran (Fordham; Google Scholar), Disclosures for Equity, 122 Colum. L. Rev. __ (2021):

While one might expect that the nonprofit sector is an equitable space where generosity and social justice are the norms, the sector suffers from funding inequalities. Despite corporations’ and private foundations’ pledges to fund nonprofit organizations that are led by members of, or that serve, communities of color, there are racial disparities in nonprofit funding. Research reveals that in comparison to White-led nonprofit organizations, organizations led by or serving communities of color are chronically underfunded. These disparities in funding mean that organizations that serve communities of color are more likely to go defunct or lack resources. Increased funding for minority-led or serving organizations can have a profound positive impact on the criminal justice system, healthcare, environmental justice, housing, labor, and employment. Indeed, it would be difficult to fight mass incarceration without the work of nonprofit charities like Bryan Stevenson’s preeminent organization, Equal Justice Initiative.

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Tax Policy And COVID-19: An Argument For Targeted Crisis Relief

Assaf Harpaz (Duke), Tax Policy and COVID-19: An Argument for Targeted Crisis Relief, 31 Cornell J.L. & Pub. Pol'y __ (2021):

The COVID-19 pandemic caused a sharp global economic decline. The U.S. government responded to the downturn with record fiscal legislation totaling over $5 trillion, which includes considerable tax relief. Most notably, the U.S. government distributed over $800 billion in three rounds of advanced refundable tax credits (known as recovery rebates, or stimulus checks) to most households. Tax relief has been unprecedented in scale but has often been the product of political circumstances rather than theorized conception. Tax relief thus remains largely undertheorized and politically motivated.

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The Widow Tax Hit: Much Ado About Nothing?

Edward F. McQuarrie (Santa Clara; Google Scholar), The Widow Tax Hit: Much Ado About Nothing?:

The widow tax hit ranks high among the fear appeals used by financial advisors to motivate client behavior. The pitch exploits the fact that tax brackets for singles may be only half as large as for married filing joint. Cognitive errors catalogued in behavioral finance, such as the availability heuristic, explain why retired couples can be made to worry about the tax rate the widowed survivor will have to pay, leading to the fear that it may be significantly higher and require a cutback in living standards.

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Choi: The Price of Deference — An Empirical Study Of Mayo And Chevron

Jonathan Choi (Minnesota; Google Scholar), Legal Analysis, Policy Analysis, and the Price of Deference: An Empirical Study of Mayo and Chevron, 38 Yale J. on Reg. 818 (2021):

A huge literature contemplates the theoretical relationship between judicial deference and agency rulemaking. But relatively little empirical work has studied the actual effect of deference on how agencies draft regulations. As a result, some of the most important questions surrounding deference—whether it encourages agencies to focus on policy analysis instead of legal analysis, its relationship to procedures like notice and comment—have so far been dominated by conjecture and anecdote.

Because Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. applied simultaneously across agencies, it has been difficult to separate its specific causal effect from other contemporaneous events in the 1980s, like the rise of cost-benefit analysis and the new textualism. This Article contends with this problem by exploiting a unique event in administrative law: the Supreme Court’s 2011 decision in Mayo Foundation v. United States, which required that courts apply Chevron deference to interpretative tax regulations. By altering the deference regime applicable to one specific category of regulation, Mayo created a natural experiment with a treatment group (interpretative tax regulations) and a control group (all other regulations).

This Article uses natural language processing and various statistical methods to evaluate the causal effect of Chevron deference.

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Choi: A Survey Of Law Professors On Tax Reform

Jonathan Choi (Minnesota; Google Scholar), A Survey of Law Professors on Tax Reform, 38 Yale J. on Reg.: Notice & Comment (Aug. 25, 2021):

As the Biden administration’s inaugural budget reaches the crucial final steps of the legislative process, a number of significant tax reforms are under consideration for the first time in years. The administration has appointed several tax law professors to help advise the effort. But what does the tax academy in general think? What Biden administration reforms do the most tax law professors support, and which reforms would professors like to see which the administration has not yet proposed? To answer these questions, I surveyed American tax law professors on their opinions of fundamental tax law reforms. ...

The survey was sent to all American tax law professors listed in the Directory of Law Teachers published by the Association of American Law Schools. 486 surveys were distributed, and 167 responses were received, giving a 34.4% response rate. The survey opened on July 7, 2021 and closed on July 16, 2021.

The format of the survey was simple: a single page with a series of potential federal tax reforms. The respondent was asked whether she supported the reforms, and for each could indicate “Yes,” “No,” or “Neutral / No Opinion.” ...

The following graph shows “Yes if Opinion” percentages, again in descending order.

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Zelenak: The American Families Plan And The Future Of The Mass Income Tax

Lawrence Zelenak (Duke), The American Families Plan and the Future of the Mass Income Tax, 172 Tax Notes Fed. 1277 (Aug. 23, 2021):

In this article, Zelenak argues that enactment of President Biden’s American Families Plan would threaten the status of the federal individual income tax as a tax imposed on most of the population, and he explores the fiscal citizenship implications of an income tax system under which almost all adults file tax returns but only about half pay tax.

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Federal Tax Procedure (2021 Practitioner Edition)

John A. Townsend (Houston), Federal Tax Procedure (2021 Practitioner Ed.) (1,060 pages):

Federal Tax Procedure is a book originally prepared for a course on Tax Procedure taught by Adjunct Professor Townsend at the University of Houston School of Law (through the Fall of 2015). The book is updated annually in August. This is the 2021 edition. The book and related materials contain text discussion, relevant Code Section citations, and certain cases designed to encourage students to think about the Tax Procedure process. The book is in electronic format (Adobe Acrobat PDF format) and is in two versions: (1) a Student Edition (no footnotes); and (2) a Practitioner Edition (same as Student Edition but including footnotes). This is the Practitioner Edition. Both versions are available on Mr. Townsend's SSRN web page.

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The 10 Most-Cited Tax Faculty

Following up on last week's post, The Most-Cited Tax Faculty At The 68 Most-Cited Law Schools:  Brian Leiter (Chicago) has updated his ranking of the Ten Most-Cited Tax Faculty to now cover the 2016-2020 period (see prior most-cited tax faculty rankings: 2000-2007, 2005-2010, 2009-2013, 2010-2014, 2013-2017):

Rank	Name	School	Citations	Age
1	Reuven Avi-Yonah	Michigan	420	64
2	Michael Graetz	Columbia	380	77
3	David Weisbach	Chicago	310	58
4	Daniel Shaviro	NYU	300	64
5	Victor Fleischer	UC-Irvine	270	50
	Lawrence Zelenak	Duke	270	63
7	Alan Auerbach	UC-Berkeley	210	70
	Joseph Bankman	Stanford	210	66
9	David Gamage	Indiana	200	43
10	Leandra Lederman	Indiana	190	55

Leiter also lists five highly-cited scholars who work partly in tax:

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Kaplan & Federici: The New Income Projection Rules For Defined Contribution Plans

Richard L. Kaplan (Illinois; Google Scholar) & Barry Federici, The New Income Projection Rules for Defined Contribution Plans, 172 Tax Notes Fed. 897 (Aug. 9, 2021):

The SECURE Act enacted at the end of 2019 requires that defined contribution retirement plans provide plan participants will projections of how much monthly income their accumulated balances will generate upon their retirement. This article analyzes the new Labor Department regulations that go into effect on September 18, 2021 and suggests various revisions, including an explanation of likely tax consequences.

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Lesson From The Tax Court: The 411 On Section 911

The pullout from Afghanistan has dominated the news, and many of our lives.  While it is natural to think of the war as fought by U.S. soldiers, we cannot forget the considerable number of defense contractor personnel who provided significant support.  According to this report, there were over 88,000 contractor personnel in Afghanistan nine years ago.  Many were U.S. citizens.  While the number has dropped significantly in recent years, it appears multiple thousands of non-military U.S. citizens needed to be evacuated back to the United States this year.

Today's lesson involves one such contractor and the proper application of the §911 exclusion to her.  Whatever you may think about the tax issue, I know you join me in hoping this taxpayer has made a safe return to the U.S.

Section 911 allows certain taxpayers—called “qualified individuals”—to exclude from their gross income certain amounts of income earned from outside the United States.  The case of Deborah C. Wood v. Commissioner, T.C. Memo. 2021-103 (Aug. 18, 2021) (Judge Lauber), looks at whether a civilian defense contract worker in Afghanistan could use §911 to exclude her wage income.  It teaches a short but complete lesson on what it takes to be a qualified individual for the §911 exclusion.  It is worth your time to read and think about.  Details below the fold. 

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The Top Five New Tax Papers

There is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper #1 paper and new papers debuting on the list at #2 and #5:

1. [316 Downloads]  Serenity Now! The (Not So) Inclusive Framework and the Multilateral Instrument, by Yariv Brauner (Florida; Google Scholar)
2. [272 Downloads]  Federal Tax Procedure (2021 Practitioner Ed.), by John A. Townsend (Houston)
3. [261 Downloads]  State Aid Prohibition — The New GAAR in Town, by Joachim Englisch (Muenster)
4. [155 Downloads]  Taxation And Law And Political Economy, by Jeremy Bearer-Friend (George Washington; Google Scholar), Ari Glogower (Ohio State; Google Scholar), Ariel Jurow Kleiman (San Diego; Google Scholar) & Clint Wallace (South Carolina, Google Scholar) (reviewed by Hayes Holderness (Richmond) here)
5. [141 Downloads]  New Puzzles In International Tax Agreements, by Wei Cui (British Columbia; Google Scholar)

Galle: The Agency Costs Of Forever Philanthropy

Brian D. Galle (Georgetown), The Quick (Spending) and the Dead: The Agency Costs of Forever Philanthropy, 74 Vand. L. Rev. 757 (2021) (reviewed by Michelle Layser (Illinois) here):

American philanthropic institutions control upwards of a trillion dollars of wealth. Because contributions to these entities are deductible from both income and estate taxes, and the entities’ earnings are tax-free, that trillion dollars is heavily underwritten by contemporary taxpayers. Law offers little assurance that those who pay will be those who benefit, however. To the contrary, since these subsidies become more valuable the longer charitable assets are left unspent, law strongly encourages philanthropies to save rather than spend, even in situations of great current need. Other legal rules further encourage grant-making institutions to strive to exist “in perpetuity.”

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Weekly SSRN Tax Article Review And Roundup: Saito Reviews Administering Taxes Democratically By Wallace And Blaylock

This week, Blaine Saito (Northeastern) reviews a new work by Clint Wallace (South Carolina; Google Scholar) & Jeff Blaylock (J.D. 2019, South Carolina), Administering Taxes Democratically?, 94 Temp. L. Rev. __ (2022).

Taxes are both the lifeblood of the state and a major power of the state. Thus, the issue of democratic values intersecting with taxation is one of cardinal import. Administering Taxes Democratically, a forthcoming piece in the Temple Law Review by Clinton Wallace and Jeff Blaylock, looks at a key aspect of that issue, the development of guidance from the Treasury and the IRS. The article adds an important contribution to the conversation regarding the unification of tax law and administrative law. In many ways, the piece is a bit of a cautionary tale of being careful what one wishes for.

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The Tax Cuts And Jobs Act Delivered: Big Tech Moved $40 Billion Of Profits To The United States In 2020

Martin A. Sullivan, Big Tech Is Moving Profit to the United States, 172 Tax Notes Fed. 1209 (Aug. 23, 2021):

Several leading U.S. tech companies had a dramatic increase in the domestic share of their worldwide profits in 2020, according to the most recent annual reports available. For the 20 companies examined here, domestic profits in 2020 are estimated to be about $40 billion above what they would have been without passage of the Tax Cuts and Jobs Act. For Big Tech, it appears that the intended effects of the international provisions of the TCJA may be taking hold.

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SSRN Tax Professor Rankings

SSRN has updated its monthly ranking of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through August 1, 2021) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

		All-Time		Recent
1	Reuven Avi-Yonah (Michigan)	201,749	Reuven Avi-Yonah (Michigan)	7,952
2	Dan Shaviro (NYU)	123,166	Lily Batchelder (NYU)	4,431
3	Lily Batchelder (NYU)	122,065	Kim Clausing (UCLA)	4,046
4	Daniel Hemel (Chicago)	120,167	Bridget Crawford (Pace)	4,012
5	David Gamage (Indiana-Bloom.)	119,309	David Kamin (NYU)	3,911
6	Darien Shanske (UC-Davis)	112,380	D. Dharmapala (Chicago)	3,455
7	David Kamin (NYU)	109,814	Ruth Mason (Virginia)	3,346
8	Cliff Fleming (BYU)	106,078	Daniel Hemel (Chicago)	3,262
9	Manoj Viswanathan (UC-Hastings)	102,977	Richard Ainsworth (Boston Univ.)	2,622
10	Rebecca Kysar (Fordham)	102,058	Margaret Ryznar (Indiana-Indy)	2,539
11	Ari Glogower (Ohio State)	101,102	Zachary Liscow (Yale)	2,436
12	Michael Simkovic (USC)	45,782	Robert Sitkoff (Harvard)	2,310
13	D. Dharmapala (Chicago)	45,011	David Gamage (Indiana-Bloom.)	2,256
14	Paul Caron (Pepperdine)	38,541	Hugh Ault (Boston College)	2,079
15	Louis Kaplow (Harvard)	35,490	Darien Shanske (UC-Davis)	2,024
16	Richard Ainsworth (Boston Univ.)	33,016	Dan Shaviro (NYU)	2,001
17	Bridget Crawford (Pace)	28,524	Louis Kaplow (Harvard)	1,988
18	Ed Kleinbard (USC)	27,865	Brad Borden (Brooklyn)	1,724
19	Vic Fleischer (UC-Irvine)	27,673	Yariv Brauner (Florida)	1,682
20	Robert Sitkoff (Harvard)	26,857	Diane Ring (Boston College)	1,665
21	Brad Borden (Brooklyn)	26,644	Francine Lipman (UNLV)	1,550
22	Jim Hines (Michigan)	26,066	Shu-Yi Oei (Boston College)	1,507
23	Ted Seto (Loyola-L.A.)	25,136	Vic Fleischer (UC-Irvine)	1,409
24	Katie Pratt (Loyola-L.A.)	24,639	Michael Simkovic (USC)	1,395
25	Richard Kaplan (Illinois)	24,568	Paul Caron (Pepperdine)	1,379

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Oei Presents 'Slack' In The Data Age Today At Yale

Shu-Yi Oei (Boston College; Google Scholar) presents "Slack" in the Data Age (with Diane M. Ring (Boston College; Google Scholar)) virtually today as part of the Yale Information Society Project hosted by Nikolas Guggenberger. 

This Article examines how increasingly ubiquitous data and information affect the role of “slack” in the law. Slack is the informal latitude to break the law without sanction. Pockets of slack exist for various reasons, including information imperfections, enforcement resource constraints, deliberate nonenforcement of problematic laws, politics, biases, and luck. Slack is important in allowing flexibility and forbearance in the legal system, but it also risks enabling selective and uneven enforcement. Increasingly available data is now upending slack, causing it to contract and exacerbating the risks of unfair enforcement.

This Article delineates the various contexts in which slack arises and presents a bounded defense of slack, despite its risks and notwithstanding the parallel existence of formal leniency provisions in the law. It explains how increasingly available data is reshaping slack and highlights the risk of disparate contraction of slack for different populations along lines of race, political power, and sophistication. Ultimately, this Article proposes a framework for managing the complex relationship between slack and data and suggests policy solutions to address data-driven contraction of slack while minimizing slack’s risks.

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Blank & Osofsky: The Inequity Of Informal Guidance

Joshua D. Blank (UC-Irvine; Google Scholar) & Leigh Osofsky (North Carolina; Google Scholar), The Inequity of Informal Guidance, 75 Vand. L. Rev. ___ (2022):

The co-existence of formal and informal law is a hallmark feature of the U.S. tax system. Congress and the Treasury enact formal law, such as statutes and regulations, while the Internal Revenue Service offers the public informal explanations and summaries, such as taxpayer publications, website frequently asked questions, virtual assistants, and other types of taxpayer guidance. Throughout the COVID-19 pandemic, the IRS increased its use of informal law to help taxpayers understand complex emergency relief rules implemented through the tax system.

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David Hasen Succeeds Charlene Luke As Editor-In-Chief Of The Florida Tax Review

David Hasen has been named Editor in Chief of the Florida Tax Review, succeeding Charlene D. Luke, who served as editor from 2016 to 2021. Prof. Luke and the other tax faculty at the University of Florida Levin College of Law will continue as members of the editorial board, and the Florida Tax Review will continue to draw on the talent of several graduate tax student editors. A board of advisors consisting of tax faculty at other institutions provides additional support and guidance. The Florida Tax Review accepts submissions exclusively through Scholastica.

McCaffery: The Conflicting Masters of Tax—Revenue-raising And Redistribution

Edward J. McCaffery (USC; Google Scholar), The Conflicting Masters of Tax:

America does not redistribute wealth from its richest citizens. This Article sketches out the conflict between revenue-raising and redistribution that has shaped American tax policy and practice for at least a century and resulted in the sacrifice of redistributive taxes on the altar of the state’s revenue-raising needs. In theory and in practice, the tax system is not a direct generator of redistribution but rather serves as the efficient means to redistributive acts left offstage. Flattened wage taxes emerge as the main source of revenue. The wealthiest pay no tax. This Article examines the tension between the two masters of tax, revenue-raising and redistribution; illustrates with a case study of Senator Bernie Sanders’ wealth tax proposal; and concludes with hopes for using tax systems to better serve redistributive ends, in both theory and practice.

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Deterrence Theory: Key Findings And Challenges

Alex Raskolnikov (Columbia), "Deterrence Theory: Key Findings and Challenges" in Benjamin van Rooij (UC-Irvine; Google Scholar) and D. Daniel Sokol (Florida; Google Scholar) (eds), The Cambridge Handbook of Compliance (Cambridge University Press 2021):

This chapter reviews the key findings of the optimal deterrence theory and discusses the remaining challenges. Some of these challenges reflect current modeling choices and limitations. These include the treatment of the offender’s gains in the social welfare function; the design of the damages multiplier in a realistic, multi-period framework; the effects of different types of uncertainty on behavior; and the study of optional, imperfectly enforced, threshold-based regimes – that is, regimes that reflect the most common real-world regulatory setting. Other challenges arise because several key regulatory features and enforcement outcomes are inconsistent with the deterrence theory’s predictions and prescriptions.

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Thomas: Taxing Nudges

Kathleen DeLaney Thomas (North Carolina; Google Scholar), Taxing Nudges, 107 Va. L. Rev. 571 (2021): 

Governments are increasingly turning to behavioral economics to inform policy design in areas like health care, the environment, and financial decision-making. Research shows that small behavioral interventions, referred to as “nudges,” often produce significant responses at a low cost. The theory behind nudges is that, rather than mandating certain behaviors or providing costly economic subsidies, modest initiatives may “nudge” individuals to choose desirable outcomes by appealing to their behavioral preferences. For example, automatically enrolling workers into savings plans as a default rather than requiring them to actively sign up has dramatically increased enrollment in such plans. Similarly, allowing individuals to earn “wellness points” from attendance at a gym, redeemable at various retail establishments, may improve exercise habits.

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Criminal Deterrence: A Review Of The Missing Literature

Alex Raskolnikov (Columbia), Criminal Deterrence: A Review of the Missing Literature, 28 Sup. Ct. Econ. Rev. 1 (2020):

This review of the criminal deterrence literature focuses on the questions that are largely missing from many recent excellent and comprehensive reviews of that literature and even from the literature itself. By “missing” I mean, first, questions that criminal deterrence scholars have ignored either completely or to a large extent. These questions range from fundamental (the distributional analysis of the criminal justice system) to those hidden in plain sight (economic analysis of misdemeanors), to those that are well-known yet mostly overlooked (the role of positive incentives, offender’s mental state, and celerity of punishment). Second, I use “missing” to refer to the areas where substantial relevant knowledge exists but is largely disregarded within the criminal deterrence research program. The empirical analysis of environmental and tax compliance is a stark example. Finally, I stretch “missing” to describe topics that have been both studied and reviewed but where substantial challenges remain. These include the theoretical explanation for the role of offense history, the proper accounting for the offender’s gains, the estimation of the costs of various crimes, and the cost-benefit analysis of crime-reduction policies.

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Dari-Mattiacci & Raskolnikov: Unexpected Effects Of Expected Sanctions

Giuseppe Dari-Mattiacci (Amsterdam; Google Scholar) & Alex Raskolnikov (Columbia), Unexpected Effects of Expected Sanctions, 50 J. Legal Stud. 35 (2021):

The economic analysis of law enforcement holds that greater expected sanctions lead to greater compliance. The literature on positive and negative incentives holds that rewards and sanctions—or carrots and sticks—have identical first-order incentive effects. We extend the basic model of law enforcement in three ways. We allow agents to opt out of the regulatory regime, we allow for enforcement errors, and we model agents who vary in at least one trait in addition to their cost of compliance. 

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Lesson From The Tax Court: The Refund Lookback Period Trap

Collection Due Process (CDP) hearings are generally all about collection.  Thus, if a taxpayer says that the IRS failed to apply an available credit to the tax at issue, that is a proper issue to bring up in a CDP hearing.  In Amr M. Mohsen v. Commissioner, T.C. Memo. 2021-99 (Aug. 11, 2021) (Judge Kerrigan), the taxpayer said the IRS should have applied an overpayment credit from a previous year to the tax sought to be collected.  The reason that the claimed credit was not available to be used is the lesson for today: there were no payments within the refund lookback period.  Oh, snap!  The trap!  Details below the fold. 

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