Mason Presents Bibb Balancing Today At The OMG Transatlantic Tax Talks

Ruth Mason (Virginia; Google Scholar) presents Bibb Balancing, 91 Geo. Wash. L. Rev. __ (2023) (with Michael S. Knoll (Penn)) today as part of the OMG Transatlantic Tax Talks Series (OMG = Oxford-Michigan-MIT-Munich-Georgetown):

Courts and commentators have long understood dormant Commerce Clause doctrine to contain two types of cases: discrimination and undue burdens. This Article argues for a more nuanced understanding that divides undue burdens into single-state burdens—which arise from the application of a single state’s law alone—and mismatch burdens, which arise from legal diversity. Although the Supreme Court purports to apply Pike balancing in all undue-burden cases, we show that the Court’s approach in mismatch cases differs substantially. Specifically, unlike in single-state cases, balancing in mismatch cases involves an implicit and potentially problematic comparison by the Court between the challenged state’s regulation and those of other states. We label analysis in mismatch cases “Bibb balancing,” after the famous mudflaps case, and we show that mismatch cases present the Court with a more challenging set of issues than do other types of dormant Commerce Clause cases.

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Brauner Presents Taxation Of Information And The Data Revolution Today At Florida

Yariv Brauner (Florida; Google Scholar) presents Taxation of Information and the Data Revolution at Florida today as part of a celebration of his academic contribution and appointment to the Hugh Culverhouse Eminent Scholar Chair in Taxation hosted by Charlene Luke:

The digital revolution has put enormous demands on the law due to the huge, quick-moving social changes it has created. The reason tax law hasn't advanced as much as other legal fields in responding to these demands is likely because it combines the problem of taxing information with the more general issue of taxing intangibles. This essay makes the case that information is distinct and necessitates a distinctive policy and analysis. It initially argues that information cannot be taxed under the current international tax rules. Therefore, reform is required, and the paper demonstrates why it is vital right now. Finally, the article makes the case that reform is also feasible by outlining three potential reform routes and contrasting their benefits and drawbacks.

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Christians & Shay: The Consistency Of Pillar 2 UTPR With U.S. Bilateral Tax Treaties

Allison Christians (McGill; Google Scholar) & Stephen E. Shay (Boston College; Google Scholar), The Consistency of Pillar 2 UTPR With U.S. Bilateral Tax Treaties, 178 Tax Notes Fed. 499 (Jan. 23, 2023):

In this report, Christians and Shay explain why the pillar 2 undertaxed profits rule would be consistent with U.S. bilateral income tax treaties, and they explore some of the reasons underlying claims that the UTPR is incompatible with those treaties.

Conclusion
The UTPR is not a tax on income, nor is it likely to be characterized as in lieu of a tax on income. Instead, it is a cash tax expense that can be collected in any manner and most probably is in the nature of an excise tax. Contrary to the claims of GOP lawmakers and other commentators, the better view is that the UTPR is not covered by existing tax treaties at all, so it cannot be said to conflict with their terms.

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U.S. Treasury Department: Disparities In The Benefits Of Tax Expenditures By Race And Ethnicity

Lily Batchelder (Assistant Secretary for Tax Policy) & Greg Leiserson (Deputy Assistant Secretary for Tax Analysis), Disparities in the Benefits of Tax Expenditures by Race and Ethnicity:

This analysis, the subject of a new Office of Tax Analysis (OTA) working paper [Tax Expenditures by Race and Hispanic
Ethnicity: An Application of the U.S. Treasury Department's Race and Hispanic Ethnicity Imputation], finds disparities in the benefits of some tax expenditures among White, Black, and Hispanic families. Tax expenditures are provisions of federal law that allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability for certain activities. Examples include the preferential rates for capital gains, the home mortgage interest deduction, and the Earned Income Tax Credit. OTA working papers are works in progress intended to generate discussion and critical comment.

Researchers frequently analyze the distributional effects of tax policies across an array of demographic information, including income, family structure, age, and geography. However, it is challenging to perform such analysis by race and ethnicity because there is no single data source with both tax and race/ethnicity information. Tax liability does not depend on race or ethnicity, and this information is not collected on tax returns.

To overcome this challenge, Treasury researchers have developed a method to impute race and ethnicity in tax data. Under this method, researchers estimate the probability that the primary filer—the person listed first on the tax return—is Asian, Black, Hispanic, Native American, White, or multiple race based on other information available in the tax data. These probabilities are then used as weights to construct estimates for different groups. ...

The new working paper on the distribution of tax expenditures, by Julie-Anne Cronin, Portia DeFilippes, and Robin Fisher of OTA, examines eight of the largest individual income tax expenditures. It estimates the distribution of benefits for certain racial and ethnic groups first on an overall per capita basis, and then within income deciles (tenths of the income distribution).

On an overall per capita basis, the paper finds that the preferential rates for capital gains and dividends, deduction for pass-through income, charitable deduction, home mortgage interest deduction, and deduction for employer-provided health insurance disproportionately benefit White families. In contrast, Black and Hispanic families, who make up a disproportionate share of low-wage workers, disproportionately benefit from the Earned Income Tax Credit, which is designed to help low- to moderate-income workers and their families. Hispanic families, who have comparatively low rates of employer-sponsored health insurance, also disproportionately benefit from the Premium Tax Credit, which provides assistance for the purchase of health insurance through the Marketplaces. Finally, Hispanic families disproportionately benefit from the Child Tax Credit. The current analysis focuses on Black, White, and Hispanic people due to high levels of uncertainty in estimates for other groups.

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The 50 Most Downloaded U.S. Tax Law Professors Of 2022

Rank	Name	School	Downloads
1	Reuven Avi-Yonah	Michigan	11,679
2	Daniel Hemel	NYU	4,980
3	Bridget Crawford	Pace	4,235
4	Robert Sitkoff	Harvard	3,074
5	Zachary Liscow	Yale	2,780
6	Dhammika Dharmapala	Chicago	2,745
7	Ruth Mason	Virginia	2,693
8	Richard Ainsworth	Boston University	2,674
9	Darien Shanske	UC-Davis	2,617
10	David Gamage	Indiana	2,595
11	Louis Kaplow	Harvard	2,535
12	Kyle Rozema	Washington University	2,498
13	Kimberley Clausing	UCLA	2,270
14	Michael Doran	Virginia	2,154
15	Lily Batchelder	NYU	2,069
16	Brad Borden	Brooklyn	1,991
17	Young Ran (Christine) Kim	Cardozo	1,917
18	Dan Shaviro	NYU	1,849
19	David Kamin	NYU	1,726
20	Victoria Haneman	Creighton	1,687
21	Margaret Ryznar	Indiana-Indianapolis	1,557
22	Edward McCaffery	USC	1,454
23	Chris Sanchirico	Penn	1,432
24	Francine Lipman	UNLV	1,369
25	Michael Simkovic	USC	1,364
26	Paul Caron	Pepperdine	1,312
27	Victor Fleischer	UC-Irvine	1,305
28	Jeremy Bearer-Friend	George Washington	1,304
29	Omri Marian	UC-Irvine	1,296
30	Ari Glogower	Ohio State	1,291
31	Brian Galle	Georgetown	1,230
32	Hugh Ault	Boston College	1,227
33	David Weisbach	Chicago	1,194
34	Kristin Hickman	Minnesota	1,146
35	Nancy McLaughlin	Utah	1,130

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Parsons Presents The Shifting Economic Allegiance Of Capital Gains Today At Columbia

Amanda Parsons (Colorado; Google Scholar) presents The Shifting Economic Allegiance Of Capital Gains, 26 Fla. Tax Rev. ___ (2023), at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by Wojciech Kopczuk, Michael Love,  Alex Raskolnikov, and David Schizer:

Technological advances and the digitalization of the global economy have created an economic environment beyond the imagination of the original designers of the international tax system. Much scholarly attention has been paid to the question of how these economic transformations should affect which country is able to tax a multinational company’s income. But which country should be able to tax capital gains income from the sale of that company’s shares is an important and overlooked question.

This Article answers this question. It concludes that taxing authority over capital gains income must be reallocated to the countries in which companies conduct business. In our modern, digitalized economy, this reallocation is necessary to align international sourcing rules with international tax law’s underlying principles.

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Sarkar Presents Capital Migration Today At UC-San Francisco

Shayak Sarkar (UC-Davis; Google Scholar) presents Capital Migration at UC-San Francisco today as part of its Center on Tax Law' Tax Policy Colloquium hosted by Heather Field and Manoj Viswanathan:

Money moves, while migrants linger. If humans face borders, capital and corporations are purportedly “borderless.” Yet what precisely renders capital and reliant businesses foreign, the designation underlying migration?

This Article unpacks capital migration and the responses it elicits. It does so by parsing capital and corporate migration’s intersection with human migration as well as identifying conceptual parallels. As a first parallel, the citizenship binary is insufficient to understand both human and capital migration, as international tax law illustrates. Second, on the recurrent question of federalism, states, alongside the federal government, possess tax authority over foreign capital and corporations. As I argue, just as immigration tax federalism permits nonuniformity, so might capital and corporate tax federalism under the Foreign Commerce Clause.

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Weisbach Posts Three Tax Papers On SSRN

David A. Weisbach (Chicago; Google Scholar) has posted three tax papers on SSRN:

Against Anti-Tax Exceptionalism:

This paper examines the arguments found in what has become known as the anti-tax exceptionalism literature. That literature seeks to apply the rules of administrative law to tax procedures. The core claim is that the procedures used by the Internal Revenue Service and the Treasury routinely violate the requirements of administrative law. Secondarily, that literature argues that this is normatively bad: the Treasury and Internal Revenue Service should not be treated differently from other administrative agencies because the tax system is not exceptional. Promoting the goals of administrative law, that literature argues, requires that the tax system conform to standard procedures.

This paper addresses both claims. First, it shows that the procedures used by tax administrators substantially comply with administrative law requirements. The central doctrinal claim of the anti-tax exceptionalism literature is incorrect. Second, the paper considers normative concerns of the anti-tax exceptionalism literature, focusing on three: (i) uniformity versus exceptionalism, (ii) information flows, and (iii) accountability. Regarding uniformity, even assuming that current tax procedures do not comply with administrative law requirements, uniformity would not be a desirable goal. Administrative law is, and should remain, flexible, adapting to the needs of widely varying agencies. Moreover, the goal of reforms to tax procedures should be to improve the operation of the system, not conform it to procedures used by agencies that operate in different contexts. The framing of uniformity versus exceptionalism misstates the issue. Regarding information flows and accountability, the remedies suggested by the anti-tax exceptionalism literature, notably greater use of notice and comment procedures and more supervision of tax administration by courts, are not good ways of meeting those goals. The paper offers alternative, better methods of improving information flows and accountability. The paper concludes that we should reject the claims of the anti-tax exceptionalism literature on both positive and normative grounds. 

Constrained Income Redistribution and Inequality: Legal Rules Compared to Taxes and Transfers:

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Choi Presents Subjective Costs Of Taxation Today At Florida

Jonathan H. Choi (Minnesota; Google Scholar) presents Subjective Costs of Taxation at Florida today as part of its Marshall M. Criser Distinguished Faculty Workshop:

This Article introduces and estimates “subjective costs” of tax compliance, which are costs of tax compliance that people experience directly and individually. To measure these costs, we conducted a survey experiment assessing how much taxpayers would pay to reduce the unpleasantness associated with filing a tax return. The experiment revealed that taxpayers are more concerned about inadvertent mistakes in their tax filings than by the time spent on compliance. Respondents also only ascribed meaningful value to eliminating all tax compliance work; they ascribed essentially no value to marginal time savings. Additionally, eliminating tax compliance time for high-income taxpayers and taxpayers with complex returns is not worth much more than eliminating tax compliance time for low-income taxpayers with simple returns.

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Nam Presents Just Taxation Of Crime: Should The Commission Of Crime Change One's Tax Liability? At Indiana

Jeesoo Nam (USC; Google Scholar) presented Just Taxation of Crime: Should the Commission of Crime Change One's Tax Liability? at Indiana-Maurer last Friday as part of its Tax Policy Colloquium hosted by Leandra Lederman:

The tax law treats criminals differently from non-criminals. Should it? Under the public policy doctrine, for example, various tax deductions are disallowed if they are closely tied to criminal activity. Criminal activity is, in multiple ways, tax disadvantaged compared to non-criminal activity.

This Article considers a variety of possible justifications. (1) The tax disadvantage provides an incentive not to commit crime. (2) The tax disadvantage helps to bring deserved punishment to the criminal. (3) Criminals have given up their right not to be taxed. (4) Criminals have taken an unfair advantage and so must be stripped of that unfair advantage. (5) Criminals deserve to bear the costs that they culpably and wrongfully created.

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Lesson From The Tax Court: The Meaning Of 'Business Premises' In §119

It’s a new year.  And what better way to start than with the fundamental lesson I teach my students in our first few classes:  “Everything is income.  Everything including all your non-cash receipts.”  Yeah, I actually sing that to the class, to the tune of Everything is Awesome from the Lego movie.  It scans.  Treas. Reg. 1.61-1(a) emphasizes that point when it tells us that “Gross income includes income realized in any form, whether in money, property, or services.”

So employer-provided housing is income to an employee, just as if the employer paid the employee cash and the employee spends that cash to rent a house.  But we all know that Congress also permits taxpayers to exclude certain types of income from taxation.  Part of the art of tax practice is to try and find applicable exclusions to reduce the gross income that must be reported.  One such exclusion is §119 which sometimes permits an exclusion for the value of housing provided by an employer to an employee.

In Cory H. Smith v. Commissioner, T.C. Memo. 2023-12 (Jan. 12, 2023) (Judge Toro), we learn a useful lesson about the scope of the business premises requirement in §119: housing that is not within the physical boundaries of the employer’s facilities is highly unlikely to qualify for the §119 exclusion.  Mr. Smith’s employer hired him to work in Pine Gap, Australia.  It provided a house for him to live in about 11 miles away from his office, in a small city outside of Pine Gap.  While Mr. Smith initially properly reported the provided housing as income, he later got mixed up with some super aggressive tax advisors who convinced him to amend his returns to exclude the housing.  His tax advisors told him he could do that under §911, even though that reneged a Closing Agreement he had signed.  That bum advice gave us Lesson From The Tax Court: The Finality Of Closing Agreements, TaxProf Blog (Sept. 12, 2022).  Today, Judge Toro examines and rejects Mr. Smith’s alternative loser argument that he could exclude housing allowance payments under §119.  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 #5:

1. [325 Downloads]  State Strategic Responses to the GloBE Rules, by Heydon Wardell-Burrus (Oxford) (reviewed by David Elkins (Netanya; (Google Scholar) here)
2. [185 Downloads]  Textualism, The Role And Authoritativeness Of Tax Legislative History, And Stanley Surrey, by George Yin (Virginia) (reviewed by Sloan Speck (Colorado; Google Scholar) here)
3. [98 Downloads]  Multistate Business Entities, by Andrew Appleby (Stetson; Google Scholar) & Tomer Stein (Stetson)
4. [84 Downloads]  The (Uncertain) Future of Corporate Tax Shelters, by Joshua Blank (UC-Irvine; Google Scholar) & Ari Glogower (Northwestern; Google Scholar) (reviewed by Michelle Layser (San Diego; Google Scholar) here)
5. [81 Downloads]  Is the U.S. Already Compliant with Pillar 2?, by Reuven Avi-Yonah (Michigan; Google Scholar)

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

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

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

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McCaffery Presents The Paradox Of Taxing The Rich Today At Florida

Edward McCaffery (USC; Google Scholar) presents The Paradox of Taxation the Rich at Florida today as part of its Tax Colloquium Series hosted by Charlene Luke:

In the Summer of 2021, stories broke across the mainstream American media that the wealthiest Americans, such as Jeff Bezos and Elon Musk, were paying no income taxes, perfectly legally, under the simple tax-planning advice to Buy, Borrow, Die. By the Fall, politicians were running out proposals to address the embarrassment, such as Senator Ron Wyden’s “Billionaire’s Tax.” Yet just a year later, in the Summer of 2022, as President Joe Biden and his fellow Democrats were trying to salvage some semblance of Biden’s once-ambitious “Build Back Better” agenda prior to the Congressional midterm elections, came word that little would be done to reverse course on recent and longstanding American tax policy: There would be only modest and largely symbolic tax increases on the rich, and no change at all to any of the planks of Buy, Borrow, Die.

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Next Week’s Tax Workshops

Monday, January 23: Jonathan H. Choi (Minnesota; Google Scholar) will present Subjective Costs of Taxation as part of the Florida Marshall M. Criser Distinguished Faculty Workshop. If you would like to attend, please RSVP here. 

Tuesday, January 24: Shayak Sarkar (UC-Davis; Google Scholar) will present Capital Migration as part of the UC-San Francisco Tax Policy Colloquium. If you would like to attend, please contact Manoj Viswanathan.

Tuesday, January 24: Amanda Parsons (Colorado; Google Scholar) will present The Shifting Economic Allegiance Of Capital Gains as part of the Columbia Davis Polk & Wardwell Tax Policy Colloquium. If you would like to attend, please contact David Schizer.

Wednesday, January 25: Susie Morse (Texas; Google Scholar) will present Out of Time: APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period as part of the Northwestern Advanced Topics in Taxation Colloquium. If you would like to attend, please contact Gregg Polsky. 

Thursday, January 26: Jan Brueckner (UC-Irvine; Google Scholar) will present Taxes and Telework: The Impacts of State Income Taxes in a Work-from-Home Economy (with David R. Agrawal (Kentucky; Google Scholar)) as part of the UCLA Colloquium on Tax Policy and Public Finance. If you would like to attend, please contact Kirk Stark or Jason Oh. 

Thursday, January 26: Ruth Mason (Virginia; Google Scholar) will present Bibb Balancing, 91 Geo. Wash. L. Rev. __ (2023) (with Michael S. Knoll (Penn)) as part of the OMG Transatlantic Tax Talks. No RSVP is required for this event. 

Thursday, January 26: Yariv Brauner (Florida; Google Scholar) will present Taxation of Information and the Data Revolution as part of a celebration of his academic contributions and appointment to Hugh Culverhouse Eminent Scholar Chair in Taxation. If you would like to attend, please contact Charlene Luke.

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Zhang: Antidiscrimination And Tax Exemption

Alex Zhang (Law Clerk, U.S. States Court of Appeals for the Ninth Circuit; J.D. 2021, Yale), Antidiscrimination and Tax Exemption, 107 Cornell L. Rev. 1381 (2022):

The Supreme Court held, in Bob Jones University v. United States, that violations of fundamental public policy—including race discrimination in education—disqualify an entity for tax exemption. The holding of the case was broad, and its results cohered with the ideals of progressive society: the government ought not to subsidize discrimination, in particular of marginalized groups. But almost four decades later, the decision has never realized its liberal, antidiscriminatory potential. The IRS has limited implementation to the narrowest facts of the case. The scholarly literature has not formulated a systematic account of how to enforce the Bob Jones regime, in light of the expansion of antidiscrimination protections and the Court’s reasoning that is deeply rooted in common-law charity. At the same time, tax-exempt entities engage in a smattering of discriminatory activities, often with impunity.

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Dooling & Hickman: Applying The Regulatory Report Card To Tax Regulations

Bridget C.E. Dooling (George Washington; Google Scholar) & Kristin E. Hickman (Minnesota; Google Scholar), Applying the Regulatory Report Card to Tax Regulations:

An invited contribution to an issue of the Journal of Benefit-Cost Analysis honoring the work of the late Dr. Jerry Ellig, this essay recognizes and draws upon the Regulatory Report Card methodology developed by Ellig and Patrick McLaughlin to evaluate the quality of regulatory impact analysis published by federal government agencies in conjunction with notice-and-comment rulemaking. The essay anticipates a forthcoming study of changes to tax regulatory practices as a result of a 2018 Memorandum of Agreement between the Treasury Department and the Office of Information and Regulatory Affairs--a study the authors discussed and hoped to conduct with Ellig before he passed away. 

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Raghavan: The Case Against The Debt Tax

Vijay Raghavan (Brooklyn), The Case Against the Debt Tax, 91 Fordham L. Rev. __ (2023):

Americans are increasingly agitating for debt relief. In the last decade, there have been national campaigns to cancel student debt, credit card debt, and mortgage debt. These national campaigns have paralleled local efforts to cancel taxi medallion debt, carceral debt, and lunch debt. But as the public increasingly pursues broad-scale debt relief outside bankruptcy, they face an important institutional obstacle: cancelled debt is generally taxable.

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Eyal-Cohen: The (Tax) Policy Entrepreneur

Mirit Eyal-Cohen (Alabama; Google Scholar), The (Tax) Policy Entrepreneur, 86 Law & Contemp. Probs. __ (2023):

The construct of entrepreneurship represents a mindset and strategy for utilizing uncertainties to create change in the marketplace. This essay, however, considers entrepreneurship in the context of government policy apparatus. Termed “policy entrepreneurship,” the phenomenon is not concerned with recruiting lawmakers to pass legislation or develop a political economic strategy, but is practiced by advocating for optimal policy outcomes via the legislative process. It entails crafting rules and shaping public programs while maintaining flexibility and harnessing political, administrative, and legal forces to advance public-benefit agendas.

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Soled & Alm: Is A Tax-Motivated Bonanza Of Electric Vehicle Gifts On The Horizon?

Jay A. Soled (Rutgers; Google Scholar) & James Alm (Tulane; Google Scholar), Is a Bonanza of Electric Vehicle Gifts on the Horizon?, 178 Tax Notes Fed. 257 (Jan. 9, 2023):

In this article, Soled and Alm argue that some provisions of the Inflation Reduction Act could encourage taxpayers to make automobile-related gifts, not out of generosity but as part of a strategy designed to achieve significant income tax savings. ...

Conclusion
In light of taxpayers’ tendencies to make the most of available tax-saving opportunities, automobile gift-giving may soon become a trend. This phenomenon would subvert the IRA’s legislative intent of having the clean vehicle credit accrue to taxpayers of moderate economic means, and it would cost the treasury lost revenue and undermine taxpayer confidence in the tax system.

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Morse Reviews Wilking's Independent Contractors In Law And In Fact

Susan Morse (Texas; Google Scholar), Terms of Employment (JOTWELL) (reviewing Eleanor Wilking (Cornell), Independent Contractors in Law and in Fact: Evidence from U.S. Tax Returns, 117 Nw. U. L. Rev. 731 (2022):

Under tort and agency common law, the more control a firm exerts over its workers, the more likely that workers will be classified as employees rather than independent contractors. The need to determine control prompts a line-drawing exercise and offers opportunities for firms and/or workers to manipulate the result, rather than choosing the best abstract analysis on the facts. In Independent Contractors in Law and in Fact: Evidence from U.S. Tax Returns, Eleanor Wilking constructs a huge tax-return-based dataset and uses it to show that firms appear to game the employee/independent contractor distinction, that evidence of manipulation is stronger when lower-income workers are involved, and that the tendency to classify workers as independent contractors has likely increased over time.

A lot turns on whether a worker is an “employee.” Access to retirement plans, health insurance, certain government benefits and antidiscrimination protections follow from employee status. Tax, tort, contract, intellectual property and other legal results often differ based on whether a worker is an employee. Most, although not all, legal features require firms to offer more protections and benefits for employees, as opposed to independent contractors. Thus a firm’s incentive to manipulate generally tilts towards independent contractor classification, holding all else equal, particularly for lower-income workers.

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Blue J Predicts: Conflicting Duties And The Trust Fund Recovery Penalty

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Ann Velez (Senior Legal Research Associate, Blue J Legal), Cashaw: Conflicting Duties and the Trust Fund Recovery Penalty, 177 Tax Notes Fed. 1257 (Nov. 28, 2022):

Employers in the U.S. are required to help the federal government in its tax administration endeavors by periodically withholding and remitting employees’ payments for income taxes, Social Security, and Medicare. That duty is special: Under section 7501(a), employers hold employee payroll tax withholdings in trust for the United States. For this reason, payroll withholdings are sometimes referred to as “trust fund taxes.” One of the tools the IRS uses to collect withholdings when employers fail to remit them on time (or at all) is the trust fund recovery penalty (TFRP).

A person can be found responsible and willful for failure to remit even if they were neither a director nor an officer of the employer. And a person can be saddled with TFRP liability even if they experienced a conflict between the duty to remit taxes and other duties, such as obedience to their employer, obligations under state law, their professional code of conduct, or their moral convictions. Litigated TFRP cases frequently reflect these kinds of challenging circumstances. Cashaw [v. Commissioner, T.C. Memo. 2021-123 (Oct. 27, 2021)], is no exception. In October 2021 the Tax Court, while expressing sympathy for Pamela Cashaw’s situation as an administrator of a cash-strapped hospital, noted that it was a court of law, not equity, and ruled that she must be held personally liable for the TFRP in the approximate amount of $173,000. The case has been appealed to the Fifth Circuit.

We assess Cashaw’s prospects on appeal.

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Invitation: ABA Virtual Tax Book Club On Tax Law And The Environment

The next virtual meeting ABA Tax Policy and Simplification Committee Book Club will have its next meeting on Thursday, January 26, 2023 from 3:00 - 4:00 p.m. ET (registration). The book to be discussed is Tax Law and the Environment: A Multidisciplinary and Worldwide Perspective (Roberta F. Mann (Oregon) & Tracey M. Roberts (Samford) eds. 2020):

Tax Law and the Environment: A Multidisciplinary and Worldwide Perspective takes a multidisciplinary approach to explore the ways how tax policy can is used solve environmental problems throughout the world, using a multi-jurisdictional and multidisciplinary approach. Environmental taxation involves using taxes to impose a cost on environmentally harmful activities or tax subsidies to provide preferred tax treatment to more sustainable alternatives to those harmful activities. This book provides a detailed analysis of environmental taxation, with examples from around the world. As the extraction, processing and use of energy use resources is has been a major cause of environmental harm, this book explores the taxation and subsidization of both fossil fuels and renewable energy. Its analysis of the past, present, and future potential of environmental taxation will help policymakers move economies toward sustainability, as well as and informing students, academics, and citizens about tax solutions for pressing environmental issues.

Reviews:

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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 #1:

1. [301 Downloads]  State Strategic Responses to the GloBE Rules, by Heydon Wardell-Burrus (Oxford) (reviewed by David Elkins (Netanya; (Google Scholar) here)
2. [254 Downloads]  Legal Structuring of Web Based Trading and Tax Complexities in Pakistan A Comparative Study, by Shan Ali (Bahria University Islamabad), Asadullah Muhmand (Bahria University Islamabad; Google Scholar); Faheem Raza Khuhro (Boston University)
3. [167 Downloads]  Textualism, The Role And Authoritativeness Of Tax Legislative History, And Stanley Surrey, by George Yin (Virginia) (reviewed by Sloan Speck (Colorado; Google Scholar) here)
4. [108 Downloads]  The Commerciality Of Non-Profit Hospitals Requires Them To Be Taxed, by Edward Zelinsky (Cardozo)
5. [87 Downloads]  Multistate Business Entities, by Andrew Appleby (Stetson; Google Scholar) & Tomer Stein (Stetson)

Stronger Reporting Requirements Are Needed For Opportunity Zones

Blake Stocke (J.D. 2022, St. Louis), Note, Turning over Stones: Advocating for Stronger Reporting Requirements for Opportunity Zones, 66 St. Louis U. L.J. 387 (2022):

In 2017, Congress passed Sections 1400Z-1 and 1400Z-2 into the Internal Revenue Code, effectively codifying new tax legislation dubbed ‘Opportunity Zones.’ This legislation, which received bipartisan support, was meant to provide investors with a tax break to incentivize investment in low-income communities. The Opportunity Zone program is a substantial tax  expenditure for Congress, and one that proponents believe can attract investment into parts of the United States suffering from diminutive economic growth. However, critics doubt this program will benefit those living in distressed communities, and fear that Opportunity Zones will instead promote gentrification while giving wealthy investors unnecessary tax breaks.

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews The Long Tax Reach Of Stanley Surrey By Avi-Yonah & Fishbien

This week, Mirit Eyal-Cohen (Alabama; Google Scholar) reviews Reuven S. Avi-Yonah (Michigan, Google Scholar) & Nir Fishbien (Caplin & Drysdale, New York), What Would Surrey Say? The Long Reach of Stanley S. Surrey (2023).

Throughout his career, which veered between academia and government service, Stanley S. Surrey never wavered in his dedication to advancing policy. In 1950, he spent three years at the University of California, Berkeley School of Law, before making the transfer to Harvard Law School, where he stayed for more than three decades. During his time in office, he served two significant terms in the Department of the Treasury: first, as a temporary adviser and tax legislative counsel from 1937 to 1947, and then as the head of the executive branch’s tax policy division as the first Assistant Secretary of the Treasury for Tax Policy from 1961 to 1969. While working at the Treasury, Surrey was a major player in shaping federal tax policy. There has never been an assistant secretary for tax policy with as much of a public and legislative profile as Surrey; his “Selected Speeches and Testimony” during his tenure in office fill more than 700 pages (and that’s just the ones he decided to include in this annotated collection).

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Sacrificing Sovereignty: How Tribal-State Tax Compacts Impact Economic Development in Indian Country

Pippa Browde (Montana), Sacrificing Sovereignty: How Tribal-State Tax Compacts Impact Economic Development in Indian Country, 74 Hastings L.J. 1 (2022):

Economic development is a critical component of tribal sovereignty. When a state asserts taxing authority within Indian Country, there is potential for overlapping, or juridical, taxation over the same transaction. Actual or even potential juridical taxation threatens economic development opportunities for tribes. For many years, tribes and states have entered into intergovernmental agreements called tax compacts to reduce or eliminate juridical taxation. Existing literature has done little more than mention tax compacts with cursory cost-benefit analyses of the agreements. This is the first Article to critically examine the role tax compacts serve in promoting tribes’ economic development.

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The 10 Most Downloaded Tax Articles Of 2022

1. ss3,350 Downloads: Michael Devereux (Oxford), John Vella (Oxford) & Heydon Wardell-Burrus (Oxford), Pillar 2: Rule Order, Incentives, and Tax Competition
2. 3,163 Downloads: Lily Batchelder (NYU) & David Kamin (NYU), Taxing the Rich — Issues and Options
3. 2,808 Downloads: Farok Contractor (Rutgers), Tax Avoidance by Multinational Companies: Methods, Policies, and Ethics
4. 2,778 Downloads: Edward McCaffery (USC), The Death of the Income Tax (or, the Rise of America's Universal Wage Tax)
5. 2,401 Downloads: Hugh Ault (Boston College), Some Reflections on the OECD and the Sources of International Tax Principles
6. 2,380 Downloads: Rita de la Feria (Leeds) & Michael Walpole (University of New South Wales), The Impact of Public Perceptions on General Consumption Taxes
7. 1,915 Downloads: John Paul (CUNY-Brooklyn), Exploring Virtual Currencies: How Do You Tax the Clones in the Clouds?
8. 1,857 Downloads: Dov Fischer (CUNY-Brooklyn), Michael Kraten (Houston Christian) & John Paul (CUNY-Brooklyn), For The Public Benefit: Why Purpose-Driven Companies Should Adopt, Pursue and Disclose Locally Supportive Tax Strategies
9. 1,855 Downloads: John Paul (CUNY-Brooklyn), Global Tax Governance or National Tax Discrimination: The Case of the EU vs. Apple
10. 1,854 Downloads: John Paul (CUNY-Brooklyn), Democracies in Danger: The High Cost of Global Tax Liberalization

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Toronto Workshop Today On The Tax Policy Implications Of Collins Family Trust

Jeffrey Trossman (Blakes), Amanda Heale (Osler), Michael Lubetsky (Davies), Timothy Fitzsimmons (PwC) present Perspectives On Tax Law & Policy: The Collins Family Trust at Toronto today as part of the James Hausman Tax Law and Policy Workshop:

This issue of Perspectives is devoted to a discussion of the policy implications of the recent SCC decision in Attorney General of Canada v. Collins Family Trust (2022 SCC 26).

Collins involved two taxpayers who each implemented a plan in 2008 and 2009 that aimed to protect corporate assets from future creditors without creating any income tax liability. The plan was based on the CRA’s longstanding and widely accepted administrative policy on the attribution rule in subsection 75(2) of the ITA. This policy was undermined in 2011 when the TCC decided Sommerer (2011 TCC 212; aff’d 2012 FCA 207) on a basis contrary to the longstanding policy. The CRA then proposed to reassess the taxpayers in Collins on the basis of the new interpretation, even while simultaneously arguing at the FCA that the new interpretation was incorrect. The FCA confirmed the TCC decision, however, and the CRA reassessed the taxpayers’ 2008 and 2009 taxation years in accordance with the new interpretation of subsection 75(2).

The taxpayers petitioned the BC Supreme Court for orders rescinding the transactions involved in the plan, under the doctrine of equitable rescission. The orders were granted and subsequently upheld by the BC Court of Appeal. By an 8-1 majority, however, the SCC reversed the BC Court of Appeal and set aside the orders. 

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The Racial Wealth Gap And The Tax Benefits Of Homeownership

Ann F. Thomas (New York Law School), The Racial Wealth Gap and the Tax Benefits of Homeownership, 66 N.Y. L. Sch. L. Rev. 247 (2021-2022): 

Conclusion: Can Tax Reform Make A Difference?
Racial discrimination was not introduced into American life by the federal income tax. Nor did it create the institutional racism that one can see at work in the racial homeownership gap. But it is essential to recognize that through tax benefits for homeowners, for generations the federal income tax has contributed to the racial wealth gap. If this is so, what is to be done?

Some of the tax subsidies for homeownership are much criticized, and rightly so, for favoring the wealthy, driving up residential real estate prices, encouraging overinvestment in owner-occupied housing, and contributing to overall economic and racial inequality. Proposals for reform range from turning the HMID and real property tax deduction into a tax credit, or even a refundable tax credit, to allowing deductions when homes sell at a loss, to outright repeal of all the tax preferences for homeownership. Although still political hot buttons, proposals to repeal the HMID and real property tax deduction are not as improbable as they once were, now that taxpayers are being weaned away from claiming itemized deductions by the 2017 TCJA’s near doubling of the standard deduction.

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Avi-Yonah Posts Four Tax Papers on SSRN

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

A Response to Professor Choi’s Beyond Purposivism in Tax Law:

This response to Professor Choi’s excellent article [Beyond Purposivism in Tax Law, 107 Iowa L. Rev. 1439 (2022)] questions whether the proposals made by the article can solve the tax shelter problem, and argues that a better response is to bolster purposivism with a statutory general anti-abuse rule (GAAR).

What Would Surrey Say? The Long Reach of Stanley S. Surrey (with Nir Fishbien (Caplin & Drysdale, New York):

This essay examines the extent of Surrey’s influence on developments in tax law after his death. It argues that his ideas clearly impacted the tax reform of 1986, but can even be seen in later enactments like the Tax Cuts and Jobs Act of 2017 and contemporary developments in international taxation. This in turn enables us to get a clearer perspective on what Surrey aimed to achieve and what the goals of these later developments are.

The Historical Origins of the Multilateral Tax Convention (with Eran Lempert (Erdinast, Ben Nathan & Toledano, Tel Aviv, Israel)):

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Virginia Tax Review Publishes New Issue

The Virginia Tax Review has published Vol. 41, No. 3 (Spring 2022): 

• Julien Chaisse (City University of Hong Kong; Google Scholar), Toward a Big Bang for the Taxation of the Digitalized Economy: A Business Retrospective, Perspective, and Prospective, 41 Va. Tax Rev. 345 (2022)

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Call For Papers: Cambridge Tax Policy Conference On Tax, Public Finance And The Rule of Law

Call For Papers: 

The Centre for Tax Law at the University of Cambridge is delighted to invite proposals for papers to be presented at our sixth Tax Policy Conference on Monday 3 and Tuesday 4 July 2023.

The topic of the conference is ‘Tax, public finance and the rule of law’. We have prepared a brief paper explaining this theme and setting out possible areas in which proposals could be made.

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2023 Tax Prof Rankings By H-Index Since 2018 (Google Scholar)

Last year, Brian Leiter ranked the Top 75 law professors by citations as measured by Google Scholar H-Index All. Only two tax professors ranked in the Top 75:  Alan Auerbach (UC-Berkeley) and James Hines (Michigan). I then ranked the Top 100 tax professors by Google Scholar H-Index All and Google Scholar H-Index Since 2017.

As Brian notes, many law professors do not have Google Scholar pages and citation counts vary by field. For more on the use of Google Scholar to measure law professor scholarly influence, see Gary Lucas (Texas A&M), Measuring Scholarly Impact: A Guide for Law School Administrators and Legal Scholars, 165 U. Pa. L. Rev. Online 165 (2017).

Yesterday I posted Google Scholar H-Index All rankings of the Top 100 tax professors with Google Scholar pages (data collected on January 5). Here are the Google Scholar H-Index Since 2018 rankings of the Top 100 tax professors with Google Scholar pages. If you are a full-time law school tax professor with a Google Scholar page and we missed including you, please contact me.

Rank	Name	School	Google Scholar H-index (Since 2018)
1	Joel Slemrod	Michigan	54
2	Alan Auerbach	UC-Berkeley	40
3	James Hines	Michigan	32
4	Reuven Avi-Yonah	Michigan	24
5	Dhammika Dharmapala	Chicago	23
6	David Weisbach	Chicago	21
7	Kimberly Clausing	UCLA	20
8	Jacob Goldin	Chicago	19
9	Daniel Hemel	NYU	17
9	Kristin Hickman	Minnesota	17
9	Edward McCaffery	USC	17
9	Dan Shaviro	NYU	17
9	Robert Sitkoff	Harvard	17
14	Brian Galle	Georgetown	16
14	Eric Zolt	UCLA	16
16	Leandra Lederman	Indiana (Maurer)	15
16	Kyle Logue	Michigan	15
18	Yariv Brauner	Florida	14
19	Bridget Crawford	Pace	13
19	Nancy Knauer	Temple	13
19	Zachary Liscow	Yale	13
19	Diane Ring	Boston College	13
23	Ruth Mason	Virginia	12
23	Kyle Rozema	Washington Univ.	12
23	Chris Sanchirico	Penn	12
23	Michael Simkovic	USC	12
27	Joshua Blank	UC-Irvine	11
27	Dorothy Brown	Georgetown	11
27	David Gamage	Indiana (Maurer)	11
27	Rebecca Kysar	Fordham	11
27	Omri Marian	UC-Irvine	11
27	Lloyd Hitoshi Mayer	Notre Dame	11
33	Victor Fleischer	UC-Irvine	10
33	Clifton Fleming	BYU	10
33	Sarah Lawsky	Northwestern	10
33	Nancy McLaughlin	Utah	10
33	Ajay Mehrotra	Northwestern	10
33	Shu-Yi Oei	Duke	10
33	Darien Shanske	UC-Davis	10
33	Stephen Shay	Boston College	10
41	Hugh Ault	Boston College	9
41	Steven Bank	UCLA	9
41	Leslie Book	Villanova	9
41	John Brooks	Fordham	9
41	Kathleen Delaney Thomas	North Carolina	9
41	Andrew Hayashi	Virginia	9
41	Susan Morse	Texas	9
41	Leigh Osofsky	North Carolina	9
41	James Repetti	Boston College	9
41	Jay Soled	Rutgers	9
41	Linda Sugin	Fordham	9
41	David Walker	Boston Univ.	9
53	Ellen Aprill	Loyola-L.A.	8
53	Samuel Brunson	Loyola-Chicago	8
53	Heather Field	UC-San Francisco	8
53	Anthony Infanti	Pittsburgh	8
53	Linda Jellum	Idaho	8

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The Tax Lawyer Publishes New Issue

The Tax Lawyer has published Vol. 76, No. 1 (Fall 2022):

• Karen C. Burke (Florida), Bristol-Myers’ Disappearing Gain, 76 Tax Law. 1 (2022)
• Monica Gianni (Cal State Northridge; Google Scholar), Supervisory Approval of Penalties: The Opening of a Graev Pandora’s Box, 76 Tax Law. 41 (2022)
• Michael Hatfield (University of Washington) & Michelle Kwon (Tennessee), A Study of Tax Lawyers Discussing Duties, 76 Tax Law. 73 (2022)

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Simmons: An Estate Plan For Kanye West

Thomas E. Simmons (South Dakota; Google Scholar), An Estate Plan for Kanye West, 39 Cardozo Arts & Ent. L.J. 195 (2021):

One inventory item in megastar Kanye West’s vast portfolio merits particular care – his right of publicity. The right of publicity, a property interest, represents the commercial value of a celebrity’s name, image, and likeness. In some states, the right survives the celebrity’s death and is freely alienable. Postmortem use and transferability restrictions on property with particular importance to the testator are often pursued by means of a trust. 

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2023 Tax Prof Rankings By H-Index All (Google Scholar)

Last year, Brian Leiter ranked the Top 75 law professors by citations as measured by Google Scholar H-Index All. Only two tax professors ranked in the Top 75: Alan Auerbach (UC-Berkeley) and James Hines (Michigan). I then ranked the Top 100 tax professors by Google Scholar H-Index All. As Brian noted, many law professors do not have Google Scholar pages and citation counts vary by field. For more on the use of Google Scholar to measure law professor scholarly influence, see Gary Lucas (Texas A&M), Measuring Scholarly Impact: A Guide for Law School Administrators and Legal Scholars, 165 U. Pa. L. Rev. Online 165 (2017).

Here are the updated Google Scholar H-Index All rankings of the Top 100 U.S. tax professors with Google Scholar pages (data collected on January 5). If you are a full-time law school tax professor with a Google Scholar page and we missed including you, please contact me. 

Rank	Name	School	Google Scholar H-index (All)
1	Joel Slemrod	Michigan	93
2	Alan Auerbach	UC-Berkeley	91
3	James Hines	Michigan	64
4	Reuven Avi-Yonah	Michigan	35
4	Dan Shaviro	NYU	35
4	David Weisbach	Chicago	35
7	Dhammika Dharmapala	Chicago	31
8	Edward McCaffery	USC	30
9	Kimberly Clausing	UCLA	27
9	Brian Galle	Georgetown	27
11	Kyle Logue	Michigan	26
11	Chris Sanchirico	Penn	26
11	Eric Zolt	UCLA	26
14	Nancy Knauer	Temple	24
14	Robert Sitkoff	Harvard	24
16	Leandra Lederman	Indiana (Maurer)	23
17	Steven Bank	UCLA	22
17	Kristin Hickman	Minnesota	22
19	Jacob Goldin	Chicago	21
20	Dorothy Brown	Georgetown	20
20	Diane Ring	Boston College	20
22	Daniel Hemel	NYU	19
22	Richard Kaplan	Illinois	19
24	Nancy McLaughlin	Utah	18
25	Ellen Aprill	Loyola-L.A.	17
25	Yariv Brauner	Florida	17
25	Bridget Crawford	Pace	17
25	Ruth Mason	Virginia	17
25	Jay Soled	Rutgers	17
30	Hugh Ault	Boston College	16
30	Paul Caron	Pepperdine	16
30	John Coverdale	Seton Hall	16
30	Victor Fleischer	UC-Irvine	16
30	Clifton Fleming	BYU	16
30	Anthony Infanti	Pittsburgh	16
30	Lloyd Hitoshi Mayer	Notre Dame	16
30	Richard Pomp	Connecticut	16
30	David Walker	Boston Univ.	16
39	David Gamage	Indiana (Maurer)	15
39	Ajay Mehrotra	Northwestern	15
39	Gregg Polsky	Georgia	15
39	James Repetti	Boston College	15
39	Darien Shanske	UC-Davis	15
39	Linda Sugin	Fordham	15
45	Shu-Yi Oei	Duke	14
45	Stephen Shay	Boston College	14
47	Joshua Blank	UC-Irvine	13
47	Bradley Borden	Brooklyn	13
47	Sarah Lawsky	Northwestern	13
47	Zachary Liscow	Yale	13
47	Omri Marian	UC-Irvine	13
47	Michael Simkovic	USC	13
53	Samuel Brunson	Loyola-Chicago	12
53	Terrence Chorvat	George Mason	12
53	Linda Jellum	Idaho	12
53	Rebecca Kysar	Fordham	12
53	Francine Lipman	UNLV	12
53	Susan Morse	Texas	12
53	Kyle Rozema	Washington Univ.	12
53	Theodore Seto	Loyola-L.A.	12
53	Peter Wiedenbeck	Washington Univ.	12

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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 #5:

1. [254 Downloads]  Legal Structuring of Web Based Trading and Tax Complexities in Pakistan A Comparative Study, by Shan Ali (Bahria University Islamabad), Asadullah Muhmand (Bahria University Islamabad; Google Scholar) & Faheem Raza Khuhro (Boston University)
2. [147 Downloads]  Textualism, The Role And Authoritativeness Of Tax Legislative History, And Stanley Surrey, by George Yin (Virginia) (reviewed by Sloan Speck (Colorado; Google Scholar) here)
3. [103 Downloads]  The Commerciality Of Non-Profit Hospitals Requires Them To Be Taxed, by Edward Zelinsky (Cardozo)
4. [77 Downloads]  The (Uncertain) Future of Corporate Tax Shelters, by Joshua Blank (UC-Irvine) & Ari Glogower (Northwestern; Google Scholar) (reviewed by Michelle Layser (San Diego; Google Scholar) here)
5. [73 Downloads]  Multistate Business Entities, by Andrew Appleby (Stetson; Google Scholar) & Tomer Stein (Stetson)

How The IRS’s Misinterpretation Of The ACA Precludes Millions Of Families From Accessing Affordable Health Coverage

Patrick D. O'Neil (J.D. 2022, Georgetown), Note, What’s in a Contribution?: How the IRS’s Misinterpretation of the ACA Precludes Millions of Families from Accessing Affordable Health Coverage, 110 Geo. L.J. 953 (2022): 

This Note is about the “family glitch” in the Affordable Care Act (ACA), focusing on the regulatory interpretation of the statutory afford-ability requirements. Under the ACA, individuals are not eligible for premium tax credits to purchase health insurance coverage if they receive an offer of affordable health insurance coverage from an employer. However, the Internal Revenue Service (IRS) determined that an offer of employer-sponsored insurance that includes dependent coverage should preclude dependents from receiving premium tax credits if the employee’s self-only coverage is affordable. This makes entire families ineligible to buy subsidized insurance on the ACA Marketplace if any individual in the family is eligible for affordable self-only coverage, even if the premiums for family coverage are prohibitively expensive.

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Wardell-Burrus's State Strategic Responses To The GloBE Rules

This week, David Elkins (Netanya, visiting NYU 2021-2023; Google Scholar) reviews a new paper by Heydon Wardell-Burrus (Oxford), State Strategic Responses to the GloBE Rules (2022).

The ability of multinational enterprises (MNEs) to reduce their tax liability by exploiting fissures in the international tax regime prompted the OCED to launch its BEPS (Base Erosion and Profit Shifting) initiative. The most recent iteration of that initiative, known as BEPS 2.0, rests upon two pillars. Pillar 1 is designed to allocate taxing rights to countries in which the consumers of digital services are located. Pillar 2 (also referred by the rather inelegant acronym GloBE, for Global Anti-Base Erosion) is intended to guarantee that MNEs are subject to a global minimum tax rate of at least 15%. As Wardell-Burrus points out, one of the novelties of Pillar 2 is that that it treats states as strategic actors, competing with each other to attract investment. Accordingly, many of the rules are designed to limit the capacity of states to engage in certain types of tax competition.

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Using AI To Find Tax Minimization Strategies

Andrew Blair-Stanek (Maryland; Google Scholar), Nils Holzenberger (Institut Polytechnique de Paris) & Benjamin Van Durme (Johns Hopkins; Google Scholar), Shelter Check: Proactively Finding Tax Minimization Strategies via AI, 177 Tax Notes Fed. 1515 (Dec. 12, 2022):

In this article, the authors explore how artificial intelligence could be used to automatically find tax minimization strategies in the tax law. Congress or Treasury could then proactively shut down such strategies. But, if large accounting or law firms develop the technology first, the result could be a huge, silent hit to the treasury.

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Tax Base Diversification As An Enforcement Tool

Brian D. Galle (Georgetown; Google Scholar), David Gamage (Indiana-Maurer; Google Scholar) & Yulia Kuchumova (National Research University; Google Scholar), Tax Base Diversification as an Enforcement Tool:

We examine when it is optimal to employ sales or VAT-type taxes as complements to a labor income tax. We find a Ramsey-type result in which each tax instrument should be imposed in inverse proportion to the combined elasticity of real and avoidance responses to the respective tax. Contrary to some prior results, we find that sales-type taxes are optimally non-zero across a variety of settings, and in particular when the (weighted) elasticity of taxable income with respect to the wage tax is greater than the cross-elasticity of taxable income with respect to the sales tax. We argue this parameter should be of key interest for empirical research, and conduct some exploratory studies in which we estimate it using changes in California local sales taxes and EU VAT rates. Our estimates generally suggest non-zero consumption taxes would be efficient.

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World Tax Policy In The World Tax Polity? The OECD|G20 BEPS Inclusive Framework

Shu-Yi Oei (Boston College; Google Scholar), World Tax Policy in the World Tax Polity? An Event History Analysis of OECD/G20 BEPS Inclusive Framework Membership, 47 Yale J. Int'l L. 199 (2022):

The last decade has seen the emergence of a new global tax order spearheaded by the OECD and G20 and characterized by increased multilateral consensus and cooperation. This new order appears to reflect the emergence of a new "world tax polity" with shared structures, practices, and norms, all of which have been shaped through the work of the OECD, G20, and other global actors. 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 membership in the OECD/G20 BEPS Inclusive Framework, a multilateral tax agreement among 141 member countries that is a centerpiece of the new tax order. Sociological scholarship regarding world polity emergence posits that membership in this Inclusive Framework could have been driven by normative, coercive, or mimetic processes. Of these possibilities, this Article finds that Inclusive Framework membership seems to have proliferated through a combination of normative and coercion-based pathways.

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Soled: Unauthorized Tax Elections

Jay A. Soled (Rutgers; Google Scholar), Unauthorized Tax Elections, 70 Buff. L. Rev. 985 (2022):

Unauthorized tax elections are those devices and techniques that taxpayers employ to achieve sought-after objectives but that are not specifically endorsed under the Internal Revenue Code. Often evolving over time, they are a common feature of the nation’s tax system. While unauthorized tax elections can prove subversive, in many instances, if properly and timely addressed, their existence can produce salutary benefits vis-à-vis their eradication or formal institutionalization.

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Joondeph: Remote Work And State Taxation Of Nonresident Employees

Bradley W. Joondeph (Santa Clara), Remote Work and the State Taxation of Nonresident Employees, 2023 Wis. L. Rev. ___ :

The onset of the COVID-19 pandemic caused millions of Americans to telecommute across state lines. In response, several states deemed the salaries of employees who had previously worked at workplaces in the state to be “sourced” temporarily to that state. Some rival states contended this was unconstitutionally extraterritorial and sought to file an original complaint at the Supreme Court. Ultimately, the justices declined to hear New Hampshire v. Massachusetts, leaving the issue to be litigated by individual taxpayers.

This article explains why such sourcing rules are constitutional.

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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 new papers debuting on the list at #2 and #5:

1. [253 Downloads]  Legal Structuring of Web Based Trading and Tax Complexities in Pakistan A Comparative Study, by Shan Ali (Bahria University Islamabad), Asadullah Muhmand (Bahria University Islamabad; Google Scholar) & Faheem Raza Khuhro (Boston University)
2. [124 Downloads]  Textualism, The Role And Authoritativeness Of Tax Legislative History, And Stanley Surrey, by George Yin (Virginia) (reviewed by Sloan Speck (Colorado; Google Scholar) here)
3. [102 Downloads]  The Commerciality Of Non-Profit Hospitals Requires Them To Be Taxed, by Edward Zelinsky (Cardozo)
4. [86 Downloads]  The Interaction Between Unilateralism and Multilateralism in International Tax, by Reuven Avi-Yonah (Michigan; Google Scholar)
5. [72 Downloads]  The (Uncertain) Future of Corporate Tax Shelters, by Joshua Blank (UC-Irvine) & Ari Glogower (Northwestern; Google Scholar) (reviewed by Michelle Layser (San Diego; Google Scholar) here)

The Myth Of American Income Inequality

Wall Street Journal Book Review:  Believe Your Eyes, Not the Statistics, by Charles W. Calomiris (Columbia; Google Scholar) (reviewing Phil Gramm, Robert Ekelund & John Early, The Myth of American Inequality: How Government Biases Policy Debate (2022)):

According to Mark Twain, “It ain’t what you don’t know that gets you into trouble. It’s what you know that ain’t so.” “The Myth of American Inequality,” by Phil Gramm, Robert Ekelund and John Early, quotes that wisdom, then offers 250 pages of analysis proving it. ...

Media commentators and politicians seem to believe that little progress has been made in raising average American living standards since the 1960s; that poverty has not been substantially reduced over the period; that the median household’s standard of living has not increased in recent years and inequality is currently high and rising (“a truth universally acknowledged,” according to the Economist magazine in 2020).

The authors—a former chairman of the Senate banking committee, a professor of economics at Auburn University and a former economist at the Bureau for Labor Statistics—show that these beliefs are false. Average living standards have improved dramatically. Real income of the bottom quintile, the authors write, grew more than 681% from 1967 to 2017. The percentage of people living in poverty fell from 32% in 1947 to 15% in 1967 to only 1.1% in 2017. Opportunities created by economic growth, and government-sponsored social programs funded by that growth, produced broadly shared prosperity: 94% of households in 2017 would have been at least as well off as the top quintile in 1967. Bottom-quintile households enjoy the same living standards as middle-quintile households, and on a per capita basis the bottom quintile has a 3% higher income. Top-quintile households receive income equal to roughly four times the bottom (and only 2.2 times the lowest on a per capita basis), not the 16.7 proportion popularly reported.

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MIT: Should We Tax Robots?

MIT News, Should We Tax Robots?:

What if the U.S. placed a tax on robots? The concept has been publicly discussed by policy analysts, scholars, and Bill Gates (who favors the notion). Because robots can replace jobs, the idea goes, a stiff tax on them would give firms incentive to help retain workers, while also compensating for a dropoff in payroll taxes when robots are used. Thus far, South Korea has reduced incentives for firms to deploy robots; European Union policymakers, on the other hand, considered a robot tax but did not enact it. 

Now a study by MIT economists scrutinizes the existing evidence and suggests the optimal policy in this situation would indeed include a tax on robots, but only a modest one. The same applies to taxes on foreign trade that would also reduce U.S. jobs, the research finds.

“Our finding suggests that taxes on either robots or imported goods should be pretty small,” says Arnaud Costinot, an MIT economist, and co-author of a published paper detailing the findings. “Although robots have an effect on income inequality … they still lead to optimal taxes that are modest.”

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Fleming, Peroni & Shay: Viewing GILTI Tax Rates Through A Tax Expenditure Lens

J. Clifton Fleming Jr. (BYU; Google Scholar), Robert J. Peroni (Texas) & Stephen E. Shay (Boston College; Google Scholar), Viewing the GILTI Tax Rates Through a Tax Expenditure Lens, 177 Tax Notes Fed. 1525 (Dec. 12, 2022):

In this article, the authors explain that for U.S. corporations earning foreign-source active business income through controlled foreign corporations, pre-Tax Cuts and Jobs Act tax deferral planning is now largely obsolete and has been replaced with planning that centers on avoiding subpart F income and maximizing global intangible low-taxed income. They also explain that the low GILTI tax rates are a tax expenditure that fares poorly under cost-benefit analysis, even when taking into account the new U.S. corporate minimum tax and the possibility of modifications that would make the GILTI regime pillar 2 compliant.

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Dharmapala: The TCJA’s International Provisions — Conceptual Framework And Survey Of Evidence

Dhammika Dharmapala (Chicago; Google Scholar), The Consequences of the TCJA’s International Provisions: A Conceptual Framework and Survey of the Evidence:

The 2017 US tax legislation — widely referred to as the Tax Cut and Jobs Act (TCJA) — fundamentally transformed the US system of international taxation, introducing for instance a new tax on “Global Intangible Low-Taxed Income” (GILTI). This paper develops a simple conceptual framework that synthesizes and extends the theory of multinational corporations’ (MNCs’) responses to taxation. It also surveys the emerging empirical evidence on the consequences of the TCJA’s international provisions.

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