Dagan Presents Unbundled Tax Sovereignty Today At Loyola-L.A.

Tsilly Dagan (Oxford; Google Scholar) presents Unbundled Tax Sovereignty: Refining the Challenges at Loyola-L.A. today as part of its Tax Policy Colloquium hosted by Theodore Seto:

Tax sovereignty under globalization is at risk of unraveling. This is not only–as is often argued—because international organizations or other states exert external power on sovereign states. It is also the very process of fragmentation of state sovereignty that undermines its own foundations. The main claim of this lecture is that globalization is increasingly altering the interaction between states and their constituents. The choices and flexibility it offers (some) taxpayers threaten to transform taxpayers from equal members of a political community entitled to a bundle of public goods and services into consumers of public goods and services offered à-la-carte. Such a transition, this lecture contends, undermines the basis for states’ sovereignty. It is therefore argued that, in order to ensure the continued legitimacy of their sovereignty, states should reconfigure their social contracts with their constituents.

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Lesson From The Tax Court: The Impact Of De Novo Review In Spousal Relief Cases

I don't just inflict misery on tax students.  I also teach a class in Civil Procedure to first year law students.  One recurring lesson there concerns the different standards courts of appeals use when reviewing trial court decisions.  I want my students to learn to that the applicable standard of review matters.  It not only makes a huge difference in the outcome of the current case, but it also can make a huge difference in the precedential effect of that case on later cases.

We learn today how the different standards of review affect both outcomes and precedential value of old spousal relief cases.  We also learn how the Tax Court might be induced to finesse the bastardized administrative record rule in §6015(e)(7).  In Pia O. Bacigalupi v. Commissioner, Docket No. 20480-21 (Order of Oct. 27, 2022) (Judge Holmes), the IRS Office of Appeals decided Ms. Baciglupi should be held to the joint liability she had agreed to bear when she signed the joint returns.  They were unmoved by her present circumstances and denied her request for §6015(f) equitable relief.  Despite the record review rule, Judge Holmes allowed her to testify, and on the basis of that testimony disagreed with the IRS about two crucial factors for spousal relief.  Under an abuse of discretion review, that disagreement would not have mattered but under the de novo review, it made all the difference.  The de novo review standard also allowed Judge Holmes to ignore certain precedents unfavorable to Ms. Baciglupi.  Notice, however, this is just an unpublished bench opinion, so don’t get too excited.  For more about that, I recommend Keith Fogg’s excellent post from last week on bench opinions in general and this case in particular.  Meanwhile, you will find today's lesson in more detail 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 new papers debuting on the list at #1 and #5:

1. [997 Downloads]  The Perceived (Un)Fairness of the Global Minimum Corporate Tax Rate, by Rita de la Feria (Leeds)
2. [399 Downloads]  Federal Tax Procedure (2022 Practitioner Ed.), by John Townsend (Houston)
3. [391 Downloads]  Pillar 2's Impact on Tax Competition, by John Vella (Oxford), Michael Devereux (Oxford; Google Scholar) & Heydon Wardell-Burrus (Oxford)
4. [341 Downloads]  Pillar Two and Developing Countries: The STTR and GloBE Implementation, by Heydon Wardell-Burrus (Oxford)
5. [249 Downloads]  A Wrench in the GLOBE's Diabolical Machinery, by Ruth Mason (Virginia; Google Scholar)

Weekly SSRN Tax Article Review And Roundup: Kim Reviews Kamin's Ambition, Limits, And Politics Of The Global Minimum Tax

This week, Young Ran (Christine) Kim (Cardozo; Google Scholar) reviews two new works by David Kamin (NYU), Why Book Minimum Taxes? Taking Politics Seriously, 177 Tax Notes Fed. 193 (Oct. 10, 2022), and The Ambition and Limits of the Global Minimum Tax, 177 Tax Notes Fed. 385 (Oct. 17, 2022).

The two articles I introduce today were written by David Kamin, who served as Deputy Assistant and Deputy Director of the National Economic Council under President Biden until May of 2022. Kamin’s articles focus on the corporate alternative minimum tax (AMT) and are his first publications since returning to academia. On a personal note, I was thrilled to discover that Kamin chose to write on a topic that is dear to me.

 

Kamin’s first article, Why Book Minimum Taxes? Taking Politics Seriously, presents a political argument for book minimum taxes. It explains how book minimum taxes address the challenge of coordinating political actors inside the United States and around the world. The recent enactment of a new corporate AMT in the United States has generated a mixed response. Some critics argue that Congress should fix the corporate income tax system directly by limiting subsidies, raising rates and not imposing another tax base as a backstop. 

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Next Week’s Tax Workshops

Monday, November 7: Kirk J. Stark (UCLA) will present Kneecapping Prop 13 Through The Income Tax as part of the San Diego Tax Speaker Series. 

Monday, November 7: Tsilly Dagan (Oxford; Google Scholar) will present Unbundled Tax Sovereignty: Refining the Challenges as part of the Loyola-L.A. Tax Policy Colloquium. If you would like to attend, please RSVP here.

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Mason Presents Bibb Balancing Today At Richmond

Ruth Mason (Virginia; Google Scholar) presents Bibb Balancing, 91 Geo. Wash. L. Rev. __ (2023) (with Michael S. Knoll (Penn)), at Richmond today as part of its Emanuel Emroch Colloquy Series hosted by Allison Tait:

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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Buchanan Presents The Universality Of The Murphy-Nagel Approach Today At Florida

Neil Buchanan (Florida; Google Scholar) presents The Universality of the Murphy-Nagel Approach at Florida today as part of its Tax Policy Colloquium hosted by Charlene Luke:

Few academic books that have had as much immediate influence as The Myth of Ownership: Taxes and Justice (Myth), which upon publication in 2002 became a staple of syllabi across tax academia and launched important debates among scholars around the world. This was all the more impressive because neither of the authors, Liam Murphy and Thomas Nagel (MN), is a tax scholar. Yet their insights have changed the narrative in tax scholarship and beyond.

This surprising success raises a number of questions. Why is the book so important? Should it have even more impact than it has had — that is, is it possible that the scholars and policy analysts who have found it so interesting nonetheless failed to appreciate the full import of MN’s approach and arguments? Is it misunderstood? Is it perfect?

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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. 1093 (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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Todd: Bitner And The FBAR’s Muddy Morass—Shining A Light With Interpretive Tools

Following up on this morning's post, WSJ: The IRS And The 8th Amendment:  Timothy M. Todd (Liberty), The FBAR’s Muddy Morass: Shining a Light With Interpretive Tools, 177 Tax Notes Fed. 179 (Oct. 10, 2022):

In this report, Todd tackles the question of whether foreign bank account report penalties should apply per account or per form through unit-of-prosecution analysis and a survey of similar misstatement regimes.

Introduction
The Supreme Court has granted certiorari to resolve a circuit split over the proper interpretation of the Bank Secrecy Act’s penalty regime for foreign bank account report violations. The question presented is “whether a ‘violation’ under the Act is the failure to file an annual FBAR (no matter the number of foreign accounts), or whether there is a separate violation for each individual account that was not properly reported.” In other words, does an FBAR violation result from each failure to report a particular foreign bank account, or does a violation result from the singular failure to file an FBAR for the year, regardless of the accounts at issue?

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Wells: Foreign Tax Credit Redux

Bret Wells (Houston; Google Scholar), Foreign Tax Credit Redux, 26 Chap. L. Rev. __ (2023):

In the preamble to its 2022 final regulations, the Treasury Department provided multiple justifications for its amendments based on the historic policy goals of Section 901 and the manner that judicial case law has construed this provision. Yet, in fact, the amendments made by the 2022 final regulations deviate away from the historic policy goals of the U.S. foreign tax credit without any Congressional authorization for doing so. Moreover, these 2022 final regulations represent a strong repudiation of the Supreme Court’s own articulation of the Biddle doctrine in the PPL decision by attempting to formulate an interpretation of the Biddle doctrine that is inconsistent with the Supreme Court’s own interpretation of its own doctrine. The U.S. Treasury Department has forged a diametrically opposite policy approach in this era compared to the one that Congress chose to pursue in the circa 1918-1921 era when it enacted Section 901’s predecessor. In 1918, Congress adopted a unilateral foreign tax credit before a consensus on international taxation norms was forged, and the United States worked for a consensus on international norms in the succeeding years. 

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Hamilton vs. Jefferson In Supreme Court Direct Tax Jurisprudence

Joshua Cutler (Boise State; Google Scholar), Hamilton vs. Jefferson in Supreme Court Direct Tax Jurisprudence, 32 S. Cal. Interdisc. L.J. __ (2023):

Increasingly frequent calls for some form of a wealth tax highlight the importance of understanding whether such a tax would be considered an unconstitutional “direct tax” if not apportioned according to population. The definition of direct tax was left deliberately vague at the Constitutional Convention, and consequently its meaning has been shaped through battles between the opposing political philosophies of Alexander Hamilton and Thomas Jefferson. Hamilton and his allies prioritized an energetic national government with adequate taxing powers to support its functions and unite the states; had great respect for tradition, precedent, and practical experience; and preferred a broad mode of constitutional interpretation that showed strong deference to Congress. Jefferson and his allies prized individual liberty above all and viewed the national government as the chief threat to that liberty.

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Avi-Yonah: The Origins Of Destination-Based Income Taxation—U.S. And International Tax Perspectives

Reuven S. Avi-Yonah (Michigan; Google Scholar), The Origins of Destination-Based Income Taxation: Us and International Tax Perspectives:

Value added taxes are destination based, i.e., tax is imposed on imports and exports are zero rated (so that the exporter can receive a refund on VAT collected in previous stages of production). Income taxes, on the other hand, are typically origin based, i.e., imports are deductible and exports are taxed. However, from the very beginnings of the international tax regime, it was recognized that this treatment of income for tax purposes is unfair to destination countries which contribute to the profit created by the market. But the introduction of the permanent establishment (PE) threshold (which dates back to the Austria-Prussia tax treaty of 1889 and was included in the first League of Nations model of 1928) and the arm’s length standard (ALS) for dividing the income among related taxpayers (which dates to the 1930s) significantly limited the ability of destination countries to tax cross-border business income.

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Dean Presents For-Profit Philanthropy Today At Boston College

Steven Dean (Brooklyn, visiting Boston University) presents For-Profit Philanthropy: Elite Power and the Threat of Limited Liability Companies, Donor-Advised Funds, and Strategic Corporate Giving (Jan. 2023) (with Dana Brakman Reiser (Brooklyn; Google Scholar)) at Boston College today as part of its Tax Policy Collaborative hosted by Jim Repetti:

Introduction
This is the way the world ends
Not with a bang but a whimper.
— The Hollow Men by T.S. Eliot

The size of the US philanthropic sector hints at the pivotal role it has long played in American society. Americans gave almost $485 billion to charities in 2021 alone, a record-breaking outpouring of generosity sparked by the global pandemic but not out of step with typical annual totals. The nonprofit sector employs well over 10 percent of US private workers, and grantmaking foundations hold more than $1 trillion in assets, with billions more held by operating charities.

Disasters like the COVID-19 pandemic bring the contributions of this sector—to research, public health, job training, and community support—into sharp relief. Philanthropic institutions have the power to change lives and shape policy, fueled by a combination of private funding, government subsidies, and public goodwill. It has been a hallmark of American society since Alexis de Tocqueville identified it as unique in the 1830s. Yet, for all its power, a crisis now looms over the future of the philanthropic sector itself.

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Monroe: Making Tax Law Work—Improvisation And Forgotten Taxpayers In Partnership Tax

Andrea Monroe (Temple), Making Tax Law Work: Improvisation and Forgotten Taxpayers in Partnership Tax, 55 U. Mich. J. L. Reform 549 (2022) (reviewed by Charlene D. Luke (Florida; Google Scholar) here): 

There is a growing awareness that federal tax law caters to a small number of wealthy and well-advised taxpayers without regard for the rest of the taxpaying public, and partnership tax is a prime example. This Article explains how complexity and indeterminacy have transformed partnership tax, harming millions of forgotten taxpayers who struggle to comply with their annual filing obligations. A root cause of this phenomenon is the professional culture among elite practitioners, policymakers, and scholars at the heart of the partnership tax system.

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Call For Papers: Stetson Tax Law Symposium

The Stetson Business Law Review has issued a call for papers for its Tax Law Symposium:

Stetson Business Law Review (SBLR) is seeking articles and presenters for the 2023 edition of its Tax Law Symposium. The SBLR was founded in the 2019-20 academic year by ambitious students with strong interests in business law following the establishment of the Stetson Business Law Concentration. Earlier this year, SBLR successfully hosted its inaugural Symposium focused on white collar crime. The second annual Symposium will take place virtually on Friday, February 24, 2023, with an opportunity for hybrid in-person presentations. Following the virtual event, SBLR will be hosting a networking reception at the Tampa Law Center.

We invite you to submit an article for publication in the next edition of the Symposium paired with a presentation, or to join as a presenter without an article submission. We are hopeful that you take advantage of this unique opportunity to share your specialized knowledge for the benefit of the profession, while showcasing your expertise nationally. Each submission should be related to tax law, and satisfy the following:

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Love Presents Who Benefits From Partnership Flexibility? Today At UC-Irvine

Michael Love (Berkeley) presents Who Benefits from Partnership Flexibility? at UC-Irvine today as part of its Tax Policy Colloquium:

artnerships, unlike corporations, offer business owners and investors great flexibility to divide up income and losses. Although this flexibility can reduce agency and transaction costs, it also presents opportunities to avoid taxes. Regulations limit such behavior, but the question remains: how much tax reduction occurs in practice on account of this flexibility, and who benefits? Using US federal tax records from 2019, I estimate that taxes on partnership income are substantially lower (by 13%, roughly $14 billion) compared to a counterfactual where the same income is allocated according to a less flexible set of rules, similar to S-corporations. I also reconstruct partnership ownership networks to understand who benefits from flexibility. I find that both the use of flexible allocations and the tax benefits therefrom are highly concentrated in a small number of larger, more complex partnership networks, with the largest benefits accruing to very high-income earners and to networks involving tax havens, trusts, foreign entities, and circular structures.

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Wilking Presents Tax Incidence With Heterogeneous Firm Evasion: Evidence From Airbnb Remittance Agreements Today At Loyola-L.A.

Eleanor Wilking (Cornell) presents Tax Incidence with Heterogeneous Firm Evasion: Evidence from Airbnb Remittance Agreements at Loyola-L.A. today as part of its Tax Policy Colloquium hosted by Theodore Seto:

How does assignment of the remittance obligation affect consumption tax incidence? In classical tax theory, the responsibility of transferring tax revenue has no effect on which party bears the economic burden of a consumption tax. I explore this prediction in the context of agreements between city governments and a large digital platform firm that shifted the obligation to remit hotel taxes from independent rentors to the platform firm itself. Using variation in the location and timing of such agreements, I estimate their effect on rental prices. My results indicate that shifting the remittance obligation to the platform increases after-tax prices, suggesting that consumers bear a greater share of the tax burden when the remittance obligation is shifted to a party with fewer evasion opportunities.

Commentator: Rita de la Feria (Leeds; Google Scholar)

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Tax Policy Center Hosts Virtual Event Today On The Future Of Business Taxes Post-Inflation Reduction Act

The Tax Policy Center hosts a virtual event on The Future Of Business Taxes Post-Inflation Reduction Act today at 12:30 PM ET (registration):

The recently enacted Inflation Reduction Act (IRA) put in place some significant changes to business taxation, including incentives for clean energy and a minimum tax on large corporations’ book incomes. But how effective will those measures be in achieving their goals? And what should Congress do next, with so many unanswered questions about the future of corporate taxation and climate change?

Join the Urban-Brookings Tax Policy Center for an event examining the IRA and the short-term future of corporate taxation. The event will feature keynote remarks by Treasury Assistant Secretary for Tax Policy Lily Batchelder and two expert panels. The first panel will examine the new corporate tax provisions, and the second panel will examine expanded green-energy incentives.

Keynote Speaker: 

• Lily Batchelder (Assistant Secretary for Tax Policy, U.S. Treasury)

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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 #1 paper and a new paper debuting on the list at #5:

1. [380 Downloads]  Federal Tax Procedure (2022 Practitioner Ed.), by John Townsend (Houston)
2. [376 Downloads]  Pillar 2's Impact on Tax Competition, by John Vella (Oxford), Michael Devereux (Oxford; Google Scholar) & Heydon Wardell-Burrus (Oxford)
3. [331 Downloads]  Pillar Two and Developing Countries: The STTR and GloBE Implementation, by Heydon Wardell-Burrus (Oxford)
4. [230 Downloads]  International Tax Reform: Challenges to Multilateral Cooperation, by Assaf Harpaz (Drexel; Google Scholar)
5. [172 Downloads]  VAT Goes Virtual: Security Tokens, by Joachim Englisch (Muenster)

Call For Papers: Fordham Journal Of Corporate & Financial Law

The Fordham Journal of Corporate & Financial Law has issued a call for papers: 

The Fordham Journal of Corporate & Financial Law is now accepting submissions for the Spring 2023 Issue of Volume XXVIII.  As one of the premier student-edited business law journals in the country, the Journal ranks among the top-five specialty journals in banking and financial law, and among the top-ten specialty journals in corporate and securities law.

The Journal welcomes articles and essays addressing important issues in banking, bankruptcy, corporate governance, capital markets, finance, mergers and acquisitions, securities, and tax law and practice.

Please send all submissions to either our Scholastica page or our email at jcfl@fordham.edu. For consideration in our Spring 2023 Issue, kindly send in your submissions by Friday, December 14th, 2022.

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Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Dagan's Tax Justice In The Era Of Mobility And Fragmentation

This week, Tracey Roberts (Cumberland; Google Scholar) reviews Tsilly Dagan (Oxford; Google Scholar), Tax Justice in the Era of Mobility and Fragmentation, 4 Revue européenne du droit, Paris: Groupe d’études géopolitiques (Summer 2022).

At a recent Oxford University Philosophy, Law, and Politics Colloquium at All Souls College, Dr. Liam Murphy (NYU) presented his paper, “Why Tax Wealth?” to a large assembly of students and scholars hailing from countries all over the globe and bringing insights from an array of disciplinary fields. He acknowledged that taxing wealth may be an effective and efficient means to tax income from capital (which largely escapes taxation in the United States), but noted that his focus in this article was on the role wealth taxation plays in securing economic justice; he asked whether wealth, itself, contributes to welfare. As some of the colloquium participants noted, Murphy’s fellow political philosopher, Professor Martha Fineman (Emory), would argue that human beings experience an array of vulnerabilities in this material world, that we have differing levels of resilience, that wealth provides an important form of resilience, and that the state has an important role in ensuring our resilience. 

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Next Week’s Tax Workshops

Monday, October 31: Michael Love (UC-Berkeley) will present Who Benefits from Partnership Flexibility? as part of the UC-Irvine Tax Policy Colloquium. If you would like to attend, please RSVP here.

Monday, October 31: Eleanor Wilking (Cornell) will present Tax Incidence with Heterogeneous Firm Evasion: Evidence from Airbnb Remittance Agreements as part of the Loyola-L.A. Tax Policy Colloquium. If you would like to attend, please RSVP here.

Tuesday, November 1: Steven Dean (Brooklyn, visiting Boston University) will present For-Profit Philanthropy: Elite Power and the Threat of Limited Liability Companies, Donor-Advised Funds, and Strategic Corporate Giving as part of the Boston College Tax Policy Collaborative. If you would like to attend, please contact Jim Repetti.

Friday, November 4: Ruth Mason (Virginia; Google Scholar) will present Bibb Balancing, 91 Geo. Wash. L. Rev. __ (2023) (with Michael S. Knoll (Penn)) as part of the Richmond Emanuel Emroch Colloquy Series. If you would like to attend, please contact Allison Tait.

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Eliminating Wealthy Investors’ Tax Benefit From Police Brutality Bonds

Likhitha Butchireddygari (J.D. 2023, Columbia), Note, Eliminating Wealthy Investors’ Tax Benefit from Police Brutality Bonds, 123 Colum. L. Rev. __ (2023):

In the backdrop of calls to reform policing after decades of devastating police violence, particularly against people of color, this Note points to two concurrent phenomena that result in the federal tax code sanctioning benefits to the wealthiest taxpayers who lend to municipalities for police brutality settlements or judgments. The first phenomenon is cities electing to issue bonds to satisfy these costly payouts. These bonds have been coined “police brutality bonds.” The second is the opportunity for those in the top tax brackets to receive a tax benefit from collecting interest on municipal debt because municipal bond interest is tax-exempt. This Note argues that the federal tax code should not allow wealthy taxpayers to receive tax benefits from funding police brutality bonds.

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Weathering State And Local Budget Storms: Fiscal Federalism With An Uncooperative Congress

David Gamage (Indiana-Maurer; Google Scholar), Darien Shanske (UC-Davis; Google Scholar), Gladriel Shobe (BYU; Google Scholar) & Adam Thimmesch (Nebraska), Weathering State and Local Budget Storms: Fiscal Federalism with an Uncooperative Congress, 55 U. Mich. J.L. Reform 309 (2022):

Throughout most of 2020, state and local governments faced severe budget crises as a result of the COVID-19 pandemic. Increased demand for state welfare services and rising state expenses related to controlling the spread of COVID-19 stretched state and local budgets to their breaking points. At the same time, layoffs, business closures, and social distancing measures reduced states’ primary sources of tax revenues. The traditional practice of American fiscal federalism is for the federal government to step in to provide aid during a national emergency of this magnitude, because state and local governments lack the federal government’s monetary and fiscal powers. But during the 2020 national emergency, the majority coalition in control of Congress was skeptical of thistraditional practice, leaving federal aid limited and insufficient. 

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Infanti & Crawford: Critical Tax Theory—Insights From The US And Opportunities For All

Anthony C. Infanti (Pittsburgh; Google Scholar) & Bridget J. Crawford (Pace; Google Scholar), Critical Tax Theory: Insights from the US and Opportunities for All, 51 Australian Tax Rev. 81 (2022):

At a moment when Australia -- and the world -- finds itself at a 'critical juncture' as it reckons with a global pandemic as well as the inequalities that COVID-19 has laid bare, voicing -- and listening to -- critical tax perspectives has become more vital than ever. The economic impact of COVID-19 has precipitated talk of tax reform as nations consider how to pay for aid distributed during the pandemic and how to restart their economies. But more than just a time of crisis, the pandemic can be seen as an unexpected opportunity to break with a past plagued by social and economic inequalities, to rethink our relationships with each other, and to begin the work of building better and more just societies. 

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Stanford Hosts Forum Today On Tax Policies For A Freer And Fairer Country

The Stanford Institute for Economic Policy Research (SIEPR) hosts a forum today from 11:30 AM - 7:00 PM PT (register here). 

12:00 PM: Welcome Remarks

• Mark Duggan (Stanford; Google Scholar), the Trione Director of SIEPR, the Wayne and Jodi Cooperman Professor of Economics

12:15 PM: Tax on Individuals—Equity and Efficiency

• Kimberly Clausing (UCLA; Google Scholar)
• Kevin Hassett (Hoover Institution; Google Scholar)
• Scott Hodge (Tax Foundation)
• Mark Wolfson (Stanford) (moderator)

 

 

 

 

 

1:30 PM: Corporate Tax—Tax-induced Distortions, Profit Shifting, and Location and Investment Decisions

• Alan Auerbach (UC-Berkeley; Google Scholar)
• Michelle Hanlon (MIT; Google Scholar)
• Marcus Heyland (KPMG)
• Juan Carlos Suarez Serrato (Duke; Google Scholar)
• Rebecca Lester (Stanford; Google Scholar) (moderator)

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Brooklyn Hosts Discussion Today On A Global UN Tax Convention And Human Rights

Brooklyn hosts a Discussion on a Global UN Tax Convention and Human Rights today from 5:00 PM - 6:30 PM EST. 

Objectives
On the margins of the UN General Assembly, the UN Independent Expert on foreign debt and human rights is convening a side event with the general aim of deepening discussions around the content of her thematic report, including the recommendations therein. More specifically, this side event will focus on:

• Further discussing the current issues plaguing the international tax architecture;
• Examining in detail the recommendations of creating a global UN led tax convention and a global tax body using a human rights lens.

Moderator: 

• Attiya Waris (UN Independent Expert; Google Scholar)

Speakers: 

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Morse: Emergency Money—Lessons From The Paycheck Protection Program

Susan C. Morse (Texas; Google Scholar), Emergency Money: Lessons from the Paycheck Protection Program, 55 U. Mich. J.L. Reform 175 (2021):

The Paycheck Protection Program, or PPP, was huge. Between April 2020 and May 2021, it provided almost $800 billion to more than 11 million businesses—about a third of all U.S. businesses with 500 employees or fewer. The PPP was also flawed. Treasury and the Small Business Administration faced incomplete statutory instructions and a challenging tradeoff between speed and accuracy in distributing PPP funds.

These flaws make the PPP a realistic and valuable case study; the PPP reveals tools that can be applied to similar distributions of emergency funds. One tool is back-end adjustments, meaning that funds are first distributed and then later it is decided whether recipients may keep the money. Another tool is distribution in descending order of necessity, meaning that the first recipients to receive funds are applicants that most clearly meet the criteria of the program. 

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Scharff & Shanske: The Case For Local Income Taxes In The Era Of Increased Remote Work

Erin Adele Scharff (Arizona State) & Darien Shanske (UC-Davis; Google Scholar), The Surprisingly Strong Case for Local Income Taxes in the Era of Increased Remote Work, 74 Hastings L.J. __ (2022):

The traditional theoretical literature on fiscal federalism urges cities to finance themselves with taxes on immobile sources. Thus, the literature sees real property taxes as the best source of local revenue; real property, after all, cannot be easily moved. This same literature eschews local income taxes because it is easy for a taxpayer to move, thus allowing exit from local income tax obligations.

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Kamin: The Ambition, Limits, And Politics Of The Global Minimum Tax

David Kamin (NYU), Why Book Minimum Taxes? Taking Politics Seriously, 177 Tax Notes Fed. 193 (Oct. 10, 2022):

In this article, Kamin explores the political and institutional challenges that the book minimum tax seeks to address, and he concludes that the case for it in the international context is strongest even though it has been used to overcome detrimental interest-group politics in the domestic context. ...

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Dean Presents For-Profit Philanthropy Today At UC-Hastings

Steven Dean (Brooklyn) presents a chapter from For-Profit Philanthropy: Elite Power & the Threat of Limited Liability Companies, Donor-Advised Funds, & Strategic Corporate Giving (Jan. 2023) (with Dana Brakman Reiser (Brooklyn; Google Scholar)) at UC-Hastings today as part of its Tax Speaker Series hosted by Heather Field and Manoj Viswanathan:

Introduction
This is the way the world ends
Not with a bang but a whimper.
— The Hollow Men by T.S. Eliot

The size of the US philanthropic sector hints at the pivotal role it has long played in American society. Americans gave almost $485 billion to charities in 2021 alone, a record-breaking outpouring of generosity sparked by the global pandemic but not out of step with typical annual totals. The nonprofit sector employs well over 10 percent of US private workers, and grantmaking foundations hold more than $1 trillion in assets, with billions more held by operating charities.

Disasters like the COVID-19 pandemic bring the contributions of this sector—to research, public health, job training, and community support—into sharp relief. Philanthropic institutions have the power to change lives and shape policy, fueled by a combination of private funding, government subsidies, and public goodwill. It has been a hallmark of American society since Alexis de Tocqueville identified it as unique in the 1830s. Yet, for all its power, a crisis now looms over the future of the philanthropic sector itself.

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Raskolnikov Presents Should Only the Richest Pay More? Today At NYU

Alex Raskolnikov (Columbia) presents Should Only the Richest Pay More? (reviewed by David Elkins (Netanya, visiting NYU 2021-2023; Google Scholar) here) at NYU today as part of its Tax Policy and Public Finance Colloquium hosted by Daniel Shaviro:

This paper challenges the leading academic, political, and cultural narrative supporting greater redistribution. The narrative holds that redistribution should come at the expense of a very restricted group of the highest earners: the one percent, the super-rich, the billionaire class. I argue that many reasons offered in support of this view call for redistribution from a much broader group that includes the affluent—those with incomes in the ninetieth to ninety-ninth percentiles of the distribution. Whether one looks at the recent trends in income concentration, wealth concentration, social mobility, political representation, or the rise of populism, the affluent are as great—and sometimes greater—contributors to these problems as those in the top one percent. Remarkably, contemporary legal scholarship has ignored the affluent almost completely, greatly limiting the magnitude of possible economic transfers as well the forms that these transfers may take.

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2022 Tax Notes Student Writing Competition Winner: The Intersection Of Tax And The Art Market

Arielle Zhivko (J.D. 2024, Osgoode Hall), Concealed Masterpieces: The Intersection of Taxation and the Art Market, 176 Tax Notes Fed. 2075 (Sept. 26, 2022) (1st Place: Tax Notes Student Writing Competition):

In this article, Zhivko explores how the collection of art has morphed into a highly appealing outlet for tax evasion and avoidance and examines the evolution of art-related tax reforms and their adverse effects. She also weighs the global justice aspects of taxation and subsidies against the need for access to educational and cultural materials provided by art and museums.

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Gondwe Presents The Tax Invisible Labor Problem Today At Loyola-L.A.

Nyamagaga Gondwe (Wisconsin; Google Scholar) presents The Tax-Invisible Labor Problem: Care, Work, Kinship, and Income Security Programs in the IRC, 102 B.U. L. Rev. __ (2022) (reviewed by Shayak Sarkar (UC-Davis; Google Scholar) here), at Loyola-L.A. today as part of its Tax Policy Colloquium hosted by Theodore Seto:

Since the mid-1990s, American financial assistance programs have increasingly shifted to require evidence of labor market participation as a criteria for eligibility. This shift signals a change from previous welfare programs that were distributed principally based on unmet material need. The shift from need-based to income-tested income security programs has been lauded for increasing labor force participation. But in this shift, income security programs have failed to account for the labor of non-market care workers. These care workers, whose household production is a fundamental component of market life, experience both economic insolvency and tax-invisibility in the face of assistance systems that do not recognize care work as eligible labor. Because care work disproportionately falls to women in American homes, income-tested financial assistance programs place an outsized strain women's economic lives. 

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Lederman Presents How Did Luxembourg Become A Tax Rulings Haven? Today At UC-Irvine

Leandra Lederman (Indiana-Maurer; Google Scholar) presents How Did Luxembourg Become a Tax Rulings Haven? at UC-Irvine today as part of its Tax Policy Colloquium:

In November 2014, the International Consortium of Investigative Journalists (ICIJ) broke the “LuxLeaks” scandal, revealing hundreds of billions of dollars of “sweetheart deals” given by the small country of Luxembourg to large multinational enterprises, including many name-brand U.S. companies. Although others have written about this headline-news international scandal, which revealed hundreds of previously confidential tax rulings, this Article is the first to explain where Luxembourg’s opaque rulings process came from and the elements that allowed it to be so prolific. This Article is also the first to fully explain the timing of Luxembourg’s reform of its rulings process in relation to the ICIJ’s investigation. The heart of this Article is an original theory regarding the conditions that allow this kind of special tax arrangement to flourish. Using Luxembourg as a case study, the Article argues that three elements were critical: (1) amenability of the tax administration, (2) trust in that administration by tax advisers and (3) secrecy.

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Lesson From The Tax Court: Fake It Till You Make It

Today’s lesson is how to win a valuation dispute with the IRS.  I don’t teach much about valuation in my basic tax course. When we work problems involving property, the problems generally tell students to assume a certain fair market value (FMV) for the property.  For example, when I teach the deductions allowed by §170 for contributions of property to a charity, what I want students to learn is the reduce-to-basis rule.  To work that particular rule, those problems just assert an FMV because I’m trying to get them to focus on what kind of property is being donated and to what kind of charity.  See e.g. last week’s lesson “The Reduce-To-Basis Rule For §170 Deductions,” TaxProf Blog (Oct. 17, 2022).

I tell students that in real life, valuation is often open to dispute.  That is because facts matter.  And facts may often be disputed.  Moreover, assumptions matter as well.  And assumptions may often be questioned.

This week, we learn a great lesson from the Tax Court on how to win a valuation dispute against the IRS: have a better expert.  While that is easy to say, the 43-page opinion in Champions Retreat Golf Founders LLC et al. v. Commissioner, T.C. Memo. 2022-106 (Oct. 17, 2022) (Judge Pugh), teaches how it is not always easy to do. Today’s case involves the valuation of a conservation easement.  The taxpayer’s expert was not the best, but the IRS’s expert was worse.  So the taxpayer won.  The lesson is kind of like the old joke that you don’t have to outrun the bear: a taxpayer’s valuation does not have to be the best possible; it just has to be better than the IRS’ valuation.  Details below the fold.

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Hamill: Moral Reflections On 21st Century Tax Policy Trends

Susan Pace Hamill (Alabama), Moral Reflections on 21st Century Tax Policy Trends, 52 Cumb. L. Rev. 1 (2022):

Focusing on individual taxpayers, this article offers moral reflections on state and local and federal tax policy trends during the first two decades of the twenty-first century. Although tax policy decisions are made by politicians (who often rely on economists), determining the best tax policy is ultimately an ethical issue and serves as a barometer revealing the true moral compass of any community.

I started thinking about ethical tax policy while studying theology at the Beeson Divinity School, a conservative evangelical seminary that is part of Samford University. At Beeson, I noticed for the first time the gap between “walk and talk” in my home state of Alabama—although more than 90% of Alabamians claimed to be Christians, its regressive state and local taxes and paltry K-12 funding harshly impacted the most vulnerable and powerless Alabamians. In 2002, I published my thesis that condemned this as biblically immoral and urged all Christians in Alabama, especially political and religious leaders, to support reforms [An Argument for Tax Reform Based on Judeo-Christian Ethics, 54 Ala. L. Rev. 1 (2002)].

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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  new papers debuting on the list at #3 and #4:

1. [363 Downloads]  The Passthrough Entity Tax Scandal, by Daniel Hemel (NYU; Google Scholar) (reviewed by David Elkins (Netanya; visiting NYU 2021-23; Google Scholar) here)
2. [358 Downloads]  Federal Tax Procedure (2022 Practitioner Ed.), by John Townsend (Houston)
3. [348 Downloads]  Pillar 2's Impact on Tax Competition, by John Vella (Oxford), Michael Devereux (Oxford; Google Scholar) & Heydon Wardell-Burrus (Oxford)
4. [311 Downloads]  Pillar Two and Developing Countries: The STTR and GloBE Implementation, by Heydon Wardell-Burrus (Oxford)
5. [219 Downloads]  International Tax Reform: Challenges to Multilateral Cooperation, by Assaf Harpaz (Drexel; Google Scholar)

Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Raskolnikov's Should Only The Richest Pay More?

This week, David Elkins (Netanya, visiting NYU 2021-2023; Google Scholar) reviews a new paper by Alex Raskolnikov (Columbia), Should Only the Richest Pay More? (2022).

Reportedly, F. Scott Fitzgerald once remarked to Ernest Hemingway that “the rich are different from you and me,” to which the latter replied, “Yes, they have more money.”

Taxing the rich has a strong intuitive and political appeal. However, the call to do so means little unless we identify whom we mean by “the rich.” In 2011, the Occupy Wall Street movement demanded in the name of the “99%” that the “1%” pay more. Under this conception, a person who is wealthier than 98.99% of the population is a member of the downtrodden “99%,” and has a place in the front line of protesters calling for increased taxes on the rich. Since then, proposals to tax the rich have tended to raise the threshold even higher. The Biden administration’s proposal to include unrealized gain in the income tax base would have applied only to those with assets of over $1 billion or income of over $100 million per year for three consecutive years. 

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Next Week’s Tax Workshops

Monday, October 24: Leandra Lederman (Indiana-Maurer; Google Scholar) will present How Did Luxembourg Become a Tax Rulings Haven? as part of the UC-Irvine Tax Policy Colloquium. If you would like to attend, please RSVP here. 

Monday, October 24: Nyamagaga Gondwe (Wisconsin; Google Scholar) will present The Tax-Invisible Labor Problem: Care, Work, Kinship, and Income Security Programs in the IRC (reviewed by Shayak Sarkar (UC-Davis; Google Scholar) here) as part of the Loyola-L.A. Tax Policy Colloquium. If you would like to attend, please RSVP here. 

Tuesday, October 25: Steven Dean (Brooklyn) will present a chapter from For-Profit Philanthropy: Elite Power & the Threat of Limited Liability Companies, Donor-Advised Funds, & Strategic Corporate Giving (Jan. 2023)(with Dana Brakman Reiser (Brooklyn; Google Scholar)) as part of the UC-Hastings Tax Speaker Series. If you would like to attend, please contact Heather Field.

Tuesday, October 25: Alex Raskolnikov (Columbia) will present Should Only the Richest Pay More? as part of the NYU Tax Policy and Public Finance Colloquium. If you would like to attend, please contact Daniel Shaviro.

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Pittsburgh Hosts Symposium Today On Protecting Dynastic Wealth

Pittsburgh hosts a symposium on Protecting Dynastic Wealth: Perspectives on the Role of Estate and Gift Tax in Perpetuating Inequality today at 8:00 AM -2:00 PM ET (live stream here): 

Opening Keynote:  Jonathan Blattmachr, The 200-Year Life and the Future of Wealth Transfer Taxation

Panel #1: Protecting Dynastic Wealth

The estate and gift tax law has been critiqued as ineffective in curbing the growth of dynastic wealth. What goals are well served by the current law of wealth transfer taxation? Who benefits the most from the current tax structure? How might estate and gift tax laws be more effective as a backstop for the income tax? What role do lawyers play in the tax system, and how does that uniquely manifest in the wealth transfer tax context?

• Bridget Crawford (Pace; Google Scholar)
• Mitchell Gans (Hofstra) 
• David Herzig (Ernst & Young) (moderator)
• Carlyn McCaffrey (McDermott Will & Emery, New York)

Panel #2: Critical Perspectives on Wealth

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Endicott Presents The Value of Vagueness Today At The Oxford-Virginia Legal Dialogs

Timothy Endicott (Oxford; Google Scholar) presents The Value of Vagueness in Vagueness in Normative Terms (Bhatia, et al., eds 2005) today at the Oxford-Virginia Legal Dialogs hosted by Tsilly Dagan and Ruth Mason:

How can it be valuable to use vagueness in a normative text? The effect is to make a vague norm, and vagueness seems repugnant to the very idea of making a norm. It leaves conduct (to some extent) unregulated, when the very idea of making a norm is to regulate conduct. A vague norm leaves the persons for whom the norm is valid with no guide to their conduct in some cases — and the point of a norm is to guide conduct. A vague norm in a system of norms does not control the officers or officials responsible for applying the norms or resolving disputes — and part of the value of a system of norms is to control the conduct of the persons to whom the system gives normative power.

In this essay I will seek to resolve these puzzles, and to show that vagueness can be valuable to lawmakers (and valuable to them, because their use of it is valuable to the people to whom the law is addressed). 

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Wells: Revisiting the Interest Expense Deduction and the Foreign Tax Credit

Bret Wells (Houston; Google Scholar), Revisiting the Interest Expense Deduction and the Foreign Tax Credit, 26 Fla. Tax Review ___ (2022):

When the deduction allowance rules and the foreign tax credit limitation rules work appropriately, these two regimes work in combination to avoid a double benefit: the benefit of a U.S. deduction to reduce U.S. taxation of gross foreign income and then a foreign tax credit benefit on the very same gross foreign income. To prevent the allowance of both a deduction benefit and a foreign tax credit benefit on the generation of the same item of gross foreign income, appropriate matching is required of the U.S. interest expense disallowance/allowance regime with the foreign tax credit limitation regime. The design challenge for the tax system is to coordinate the interest deduction allowance/disallowance regime with the foreign tax credit limitation regime so that the two regimes create harmonized and appropriate results. Unfortunately, the current interaction of these two regimes fails to achieve appropriate outcomes.

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Wells: Reform Of Section 367(a) And Section 367(b) For A Post-TCJA Era

Bret Wells (Houston; Google Scholar), Reform of Section 367(a) and Section 367(b) for a Post-TCJA Era, 22 Hous. Bus. & Tax L.J. __ (2022):

Section 367 grants regulatory authority for the Treasury Department to divine whether and to what extent the normal Subchapter C rules should be modified in order to prevent tax avoidance when nonrecognition transactions involve a foreign corporation. But even though these policy goals are left for the Treasury Department to divine, it is still incumbent upon the Treasury Department to divine these goals in light of the design parameters that Congress has set forth in existing law. The Treasury Department has been diligent in its usage of Section 367(a) and Section 367(b) to protect the U.S. tax base from inappropriate tax avoidance transactions. Throughout that effort, the Treasury Department has rightly recognized that the normal Subchapter C rules might not adequately address tax avoidance concerns when nonrecognition transactions involve foreign corporations. So, when those nonrecognition provisions of Subchapter C intersect with a foreign corporation, Section 367 provides broad authority to the Treasury to turn off the nonrecognition provisions when appropriate.

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Walker: Donor-Advised Funds In The Wake Of The Tax Cuts And Jobs Act

David I. Walker (Boston University; Google Scholar), Donor-Advised Funds in the Wake of the Tax Cuts and Jobs Act:

Donor-advised funds (DAFs) are conduits for charitable giving that support immediate tax deductions while creating a reservoir of assets for subsequent disposition to end-use charities. The number of new DAF accounts has skyrocketed in the wake of the 2017 Tax Cuts and Jobs Act (TCJA). This Article presents evidence suggesting that bunching charitable contributions to game the TCJA-enhanced standard deduction likely motivates much of the onslaught of new DAF accounts established since 2016 and argues that the typical buncher is likely to differ from other DAF account holders in ways that matter from a policy perspective. Thus, while DAF critics have generally focused on the unproductive accumulation of assets in DAF accounts and have advanced reforms aimed at speeding up DAF payouts, this Article argues that in the context of bunchers, unproductive accumulation of assets in DAF accounts is unlikely to be a major problem.

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Gamage & Shanske: Phased Mark-To-Market For Billionaire Income Tax Reforms

David Gamage (Indiana; Google Scholar) & Darien Shanske (UC-Davis; Google Scholar), Phased Mark-to-Market for Billionaire Income Tax Reforms, 176 Tax Notes Fed. 1875 (Sept. 19, 2022):

In this installment of Academic Perspectives on SALT, Gamage and Shanske advocate for phased mark-to-market as a mechanism for reforming the taxation of investment gains of billionaires and megamillionaires. ...

Conclusion
As the recent passage of the federal Inflation Reduction Act (H.R. 5376) demonstrates, one never knows when the stars might align for a policy proposal.

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Tax Law Review Publishes New Issue

The Tax Law Review has published a new issue (Vol. 75, No. 1 (Fall 2022)):

• Jordan Barry (USC; Google Scholar) & Ariel Jurow Kleiman (Loyola-L.A.; Google Scholar), Rationalizing the Arbitrary Foreign Tax Credit, 75 Tax L. Rev. 1 (2022) (reviewed by Shayak Sarkar (UC-Davis; Google Scholar) here)
• Theodore P. Seto (Loyola-L.A.; Google Scholar), Modeling the Welfare Effects of Advertising: Preference-Shifting Deadweight Loss, 75 Tax L. Rev. 55 (reviewed by Blaine Saito (Northeastern; Google Scholar) here)

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An In-Depth Analysis Of The PGA's Controversial Nonprofit Status

Laurel C. Montag (J.D. 2022, Marquette), Comment, It's (Not) All Par for the Course: An in-Depth Analysis of the PGA's Controversial Nonprofit Status, 32 Marq. Sports L. Rev. 569 (2022):

Conclusion
In the context of Carnegie’s prescription for millionaires to act as trustees for the poor, the PGA Tour has met this challenge in some ways (such as giving over $3 billion to charity). However, on a larger scale, some members of the public criticize the organization for not being a trustee for the rest of society, specifically by enjoying a seemingly unnecessary tax break. 

The PGA has given billions of dollars to charity over its existence, yet nonprofit watchdogs and some taxpayers are not satisfied. Although, overall, most of the PGA Tour’s funds do not go directly to charity, as they are used to compensate employees, fund tournaments, and furnish prizes, its practices are still within the confines of §501(c)(6).

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Hickman: The Federal Tax System's Administrative Law Woes Grow

Kristin E. Hickman (Minnesota; Google Scholar), The Federal Tax System's Administrative Law Woes Grow, 41 A.B.A. Tax Times __ (2022):

Recent court decisions have substantial implications for litigation over past tax regulatory actions and for future tax administrative practices. This article describes a circuit split between the Eleventh Circuit in Hewitt v. Comm'r and the Sixth Circuit in Oakbrook Land Holdings, LLC v. Comm'r over whether longstanding conservation easement regulations under section 170A were procedurally flawed under the Administrative Procedure Act (APA) because the IRS failed to respond adequately to taxpayer comments. The article also discusses Sixth Circuit and federal district court decisions in Mann Construction, Inc. v. United States and CIC Services, LLC v. IRS invalidating IRS Notices that imposed information reporting requirements on private parties under section 6707A because the IRS did not use APA notice-and-comment rulemaking procedures in issuing them.

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Kane & Kern Present The Use And Abuse Of Location-Specific Rent Today At Loyola-L.A.

Mitchell Kane (NYU) & Adam Kern (Law Clerk, Judge Jed Rakoff, Southern District of New York) present The Use and Abuse of Location-Specific Rents at Loyola-L.A. today as part of its Tax Policy Colloquium hosted by Theodore Seto:

Many tax scholars believe the concept of location-specific rent (LSR) is a guide to an ideal allocation of taxing rights. We show that it is not. We provide the first rigorous definition of LSR to appear in the legal or economic literature. Drawing on this definition, we show that LSR does not have the features it is claimed to have. LSR often is not measurable, and it is not made possible by one particular society. More positively, we identify a modest role for using LSR in certain contexts of tax policy.

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