Lesson From The Tax Court: The Eye Of The CDP Needle

If Jesus had been a tax practitioner, he might have said “I tell you it is easier for a camel to go through the eye of a needle than for a taxpayer to contest a tax liability in a CDP hearing.”  That is the lesson we learn from two recent Tax Court decisions: (1) Jason E. Shepherd v. Commissioner, T.C. Memo. 2020-45 (Apr. 13, 2020) (Judge Guy); and Patrick’s Payroll Services, Inc. v. Commissioner, T.C. Memo. 2020-47 (Apr. 14, 2020) (Judge Urda).  Mr. Shepherd wanted the Tax Court to review the merits of a Trust Fund Recovery Penalty assessed against him.  Patrick’s Payroll Services wanted the Tax Court to review assessed employment tax liabilities.  In both cases the Tax Court refused, holding that both taxpayers had had a prior “opportunity to dispute such tax liability” within the meaning of §6330(c)(2)(B).  The Court’s idea of what constitutes a prior opportunity might surprise you at first, but makes sense once you think about it, particularly for these two types of tax liabilities.  Details below the fold.

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The Top Five New Tax Papers

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

1. [918 Downloads]  The Transformation of International Tax, by Ruth Mason (Virginia)
2. [370 Downloads]  Summary of the Tax Provisions of the CARES Act, by David Miller, Muhyung Lee, Kathleen Semanski & Sean Webb (Proskauer, New York)
3. [231 Downloads]  Taxation of the Digital Economy: Preliminary Analysis of OECD Pillar 1 Impact Assessment + KPMG Transfer Pricing Study of Amounts B & C, by Allison Christians (McGill)
4. [217 Downloads]  COVID-19 and Us Tax Policy: What Needs to Change?, by Reuven Avi-Yonah (Michigan)
5. [171 Downloads]  Wealth Transfer Tax Planning After The Tax Cuts and Jobs Act, by John Miller (Idaho) & Jeffrey Maine (Maine)

The Top Five New Tax Papers

This week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list. The #1 paper is #195 among 15,026 tax papers in all-time downloads:

1. [1,443 Downloads]  Regulating In A Pandemic: Evaluating Economic And Financial Policy Responses To The Coronavirus Crisis, by Hiba Hafiz, Shu-Yi Oei, Diane Ring & Natalya Shnitser (all of Boston College)
2. [511 Downloads]  The Transformation of International Tax, by Ruth Mason (Virginia)
3. [281 Downloads]  Summary of the Tax Provisions of the CARES Act, by David Miller, Muhyung Lee, Kathleen Semanski & Sean Webb (Proskauer, New York)
4. [148 Downloads]  Why Study Tax History?, by Reuven Avi-Yonah (Michigan)
5. [146 Downloads]  Wealth Transfer Tax Planning After The Tax Cuts and Jobs Act, by John Miller (Idaho) & Jeffrey Maine (Maine)

Racialized Tax Inequity: Wealth, Racism, And The U.S. Tax System

Palma Joy Strand (Creighton) & Nicholas A. Mirkay (Hawaii), Racialized Tax Inequity: Wealth, Racism, and The U.S. System of Taxation, 15 Nw. J. L. & Soc. Pol'y. 265 (2020):

This Article describes the connection between wealth inequality and the increasing structural racism in the U.S. tax system since the 1980s. A long-term sociological view (the why) reveals the historical racialization of wealth and a shift in the tax system overall beginning around 1980 to protect and exacerbate wealth inequality, which has been fueled by racial animus and anxiety. A critical tax view (the how) highlights a shift over the same time period at both federal and state levels from taxes on wealth, to taxes on income, and then to taxes on consumption—from greater to less progressivity. Both of these shifts disproportionately benefit Whites while disproportionately burdening Blacks and other people of color.

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Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews How Not To Give People Money During a Pandemic

This week, Mirit Eyal-Cohen (Alabama) reviews Pamela Foohey (Indiana-Bloomington), Dalié Jiménez (UC-Irvine), and Christopher K. Odinet (Oklahoma), CARES Act Gimmicks: How Not To Give People Money During a Pandemic And What To Do Instead, 2020 U. Ill. L. Rev. Online 81 (2020):

This timely essay scrutinizes the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in its aim to deliver economic relief. The main aspects of the CARES act provide individuals and families direct cash payments (“recovery rebates”), unemployment benefits, paid sick leave, foreclosure and eviction moratorium, and student loan suspension. The authors focus their attention on the first two.

The CARES act provides every household with direct payments of $1,200 per adult and $500 for every child under the age of 16. These amounts phase out based on AGI figures from previously filed tax returns by $5 for every $100 of income over an applicable threshold. The act also provides additional unemployment benefits of $600 per week to assist families during the crisis without making substantial changes in their spending and consumption. While both benefits do not cover all lost pay (past years’ national average weekly benefit was $387 and varied by state), they relax the pressure of job loss and allow individuals to continue to purchase food and supplies and pay for utilities while looking for new employment. They help maintain consumption and the nation’s economic activity. The CARES act also extends the duration of unemployment insurance and lowers the standards on eligibility requirements such as including individuals with insufficient work history, independent contractors, and gig economy workers.

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Symposium: Green Tax Solutions

The Pittsburgh Tax Review has published Symposium, Green Tax Solutions, 17 Pitt. Tax Rev. 1-200 (2019):

• Roberta Mann (Oregon), Tax Policies for Clean Manufacturing: Implementing the Green
  New Deal, 17 Pitt. Tax Rev. 1 (2019)
• Tracey M. Roberts (Cumberland), Greenbacks for the Green New Deal, 17 Pitt. Tax Rev. 53 (2019)
• Janet E. Milne (Vermont), How Durable Is a Lockbox for Carbon Tax Revenue?, 17 Pitt. Tax Rev. 105 (2019)

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CARES Act Gimmicks: How Not To Give People Money During A Pandemic

Pamela Foohey (Indiana), Dalié Jiménez (UC-Irvine) & Christopher Odinet (Oklahoma), CARES Act Gimmicks: How Not To Give People Money During a Pandemic And What To Do Instead, 2020 U. Ill. L. Rev. Online 81:

The coronavirus pandemic upturned Americans’ lives. The profound financial effects caused by even a few weeks of the coronavirus’ upheaval spurred Congress to pass the CARES Act, which purported to provide economic relief to individuals and businesses. For individuals, the CARES Act includes five provisions that were effectively designed to provide people money. Chief among those provisions are a direct payment in the form of a tax rebate and enhanced employment benefits.

Ultimately, this financial support will prove to be shockingly minimal. The direct payments represent a fraction of the average American households’ monthly budget. The unemployment benefits, while providing people with more money over several months, require that people be laid off and similarly are unlikely to reach people quickly enough to be effective. These corner pieces of the CARES Act are best understood as gimmicks. Through them, the federal government told people that it would take care of them in ways that were immediately salient to them as the coronavirus crisis began.

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Willbanks: Gifts In Contemplation Of Death — Why Can't Section 2035 Simply Die?

Stephanie J. Willbanks (Vermont), Gifts in Contemplation of Death: Why Can't Section 2035 Simply Die?, 45 ACTEC J. 143 (2020):

Income and wealth inequality has become a popular topic. There are a myriad of ways to reduce such inequality utilizing the tax system, either the income tax or the transfer taxes. Revitalizing the estate tax by reducing the exemption amount and adjusting the rate structure would reduce inequality. Much has been written about the viability of the estate tax and possible alternatives. This article does not revisit that analysis. Instead, it assumes that the estate tax will remain a viable component of the overall tax system. It analyzes one small segment of the estate tax — §2035 — and argues that repeal would simplify the estate tax without reducing revenues.

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Call For Papers: Indiana/Leeds Summer Zoom Tax Workshop Series

From Leandra Lederman:

This summer, the Indiana University Maurer School of Law and the University of  Leeds School of Law will run a new Summer Tax Workshop Series. Dr. Leopoldo Parada from the University of Leeds and I will host it. It will meet online via Zoom on Thursdays from 10:30 am-noon Eastern time (3:30-5:00 pm British Summer Time).

The Call for Papers opens today and will close on May 10, 2020 at midnight British Summer Time (7:00 pm Eastern Time). If you are interested in presenting in the Workshop, please send the following before then to llederma@indiana.edu and L.Parada@leeds.ac.uk:

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Avi-Yonah: COVID-19 And U.S. Tax Policy

Reuven S. Avi-Yonah (Michigan), COVID-19 and US Tax Policy: What Needs to Change?:

The COVID-19 Pandemic already feels like a historical turning point akin to Word Wars I and II and the Great Depression. It may signal the end of the second period of globalization (1980-2020) and a change in the relative positions of the US and China. It could also lead in the US to significant changes in tax policy designed to bolster the social safety net which was revealed as very porous during the pandemic.

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Colella: D.C. Circuit Affirms IRS Authority To Require Practitioner Tax Id Numbers & Impose A User Fee

Frank G. Colella (Pace), D.C. Circuit Affirms IRS Authority to Require Practitioner Tax Id Numbers & Impose a User Fee: Montrois v. United States, 20 Hous. Bus. & Tax L.J. 56 (2020):

In the last five years, the D.C. Circuit has considered multiple cases regarding the scope of the Internal Revenue Service (IRS)’s power to regulate tax return preparers. In the most recent case, Montrois v. United States, the court held that the IRS has statutory authority to require tax return preparers to obtain a “practitioner tax identification number” (PTIN) as a prerequisite to the commercial preparation of tax returns. The holding also stated that the IRS could charge a user fee for the PTIN. In essence, Montrois justifies a licensing fee for a regulatory scheme that the very same court had previously held could not be implemented by the IRS.

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Livingston: Tax And Culture

Michael A. Livingston (Rutgers), Tax and Culture: Convergence, Divergence, and the Future of Tax Law (Cambridge University Press 2020):

Tax scholars traditionally emphasize economics and assume that all tax systems can be evaluated in more or less the same way. By applying the insights of anthropology, sociology, and other social sciences, Michael A. Livingston demonstrates that tax systems frequently pursue different values and that the convergence of tax systems is frequently overstated. In Tax and Culture, he applies these insights to specific countries, such as China and India, and specific tax issues, including progressivity, tax avoidance, and the emerging area of environmental taxation. Livingston concludes that the concept of a global tax culture is, in many cases, merely a reflection of Western hegemony, and is unlikely to survive the changes implicit in the rise of non-Western nations and cultures.

Table of Contents:

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Wallace: The Troubling Case Of The Unlimited Pass-Through Deduction

Clint Wallace (South Carolina), The Troubling Case of the Unlimited Pass-Through Deduction:

The title of section 2304 of the CARES Act—“Modification of limitation on losses for taxpayers other than corporations”—perhaps suggests some sort of innocuous technical fix. It has been described in media reports as allowing greater flexibility for businesses to claim losses, which may seem to make sense at a time when many businesses are facing huge unexpected losses.

This conventional understanding is wrong: the new rule, which I refer to as the unlimited pass-through deduction, benefits individuals, and it has little to do with unexpected losses. The loss limitation at issue previously prevented investors and business owners using pass-through entities from claiming exceptionally large losses (more than $518,000 in 2020) by way of those entities. I provide examples connecting the unlimited pass-through deduction with several background tax provisions to illustrate how the deduction will provide immediate direct payments to high-income taxpayers who do not necessarily have any losses (economic or tax) in 2020, and how it will result in the government to subsidizing and encouraging the realization of what might otherwise be paper losses.

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The End Is Here For State Death Transfer Taxes

Jenny L. Juehring (J.D. 2020, Washington University), Note, Why The End Is Here For State Death Transfer Taxes and How States Should Respond, 96 Wash. U. L. Rev. 1137 (2019):

It is time for the remaining states with death transfer taxes to consider repeal. Some state death transfer taxes have rates that give preferential treatment to bequests that are likely on the decline due to changes in household structure. State death transfer taxes, as a result of interstate competition, give incentives to people to move states, underreport death transfers, and use other tactics to avoid a state death transfer tax. State death transfer taxes are failing to be a significant source of state revenue. Additionally, state death transfer taxes cannot be an effective tool to combat wealth inequality. Without any justification and serving no purpose, the state death transfer tax is at its end.

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Satterthwaite: Entrepreneurs’ Legal Status Choices And The C Corporation Survival Penalty

Emily A. Satterthwaite (Toronto), Entrepreneurs' Legal Status Choices and the C Corporation Survival Penalty, 16 J. Empirical Legal Stud. 542 (2019) (reviewed by Ariel Jurow Kleiman (San Diego) here):

Foundational to the American Dream is the ability to easily and rapidly start a new business. Over the past quarter century, the introduction of the limited liability company (LLC) dramatically shifted and complicated the choice-of-legal-status calculus for entrepreneurs, and in its wake a consensus against the use of traditional C corporations by closely-held firms emerged. The C corporation, scholars argued, had fatal drawbacks despite its simplicity: tax disadvantages as well as governance inflexibility. Due to historically limited sources of data, there has been little empirical research on choice-of-entity generally and none that explores the anti-C corporation thesis in particular. Have C corporations underperformed as compared to similarly situated businesses with alternative legal statuses? This paper exploits a large panel dataset that contains legal status, owner, business, financing, and other firm-specific information collected from an eight-year survey of nearly 5,000 enterprises that were formed in 2004. It presents four main results.

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Lesson From The Tax Court: Using Legislative History To Clarify Ambiguous Text

Tax statutes are difficult to read.  Usually that is because they make precise use of complex terms of art.  But sometimes the text is hard to follow because of poor drafting.  Last week’s case of Dale W. Laue and Alicia Laue v. Commissioner, T.C. Sum. Op. 2020-14 (April 20, 2020) (Judge Panuthos) shows us the classic approach to resolving textual ambiguities: look to legislative history.  There Judge Panuthos examines a drafting ambiguity in §72(t), the statute governing qualified retirement plans and penalties for early withdrawals.  He relies on an explanation given in a committee report to resolve the ambiguity against the taxpayer.  Details below the fold.

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The Religious Roots Of The Progressive Income Tax In America

Joshua Cutler (Houston), The Religious Roots of the Progressive Income Tax in America, 68 Cath. U. L. Rev. 473 (2019):

I examine the debate over the first peacetime income tax in the United States in 1894 to investigate the role of religion in enacting the tax and providing moral legitimacy. I find that congressional proponents repeatedly and explicitly argued that a progressive income tax was a biblical tax that best conformed to Judeo-Christian teachings on economics and fundraising. I discuss the history of American religious fundraising practices, including the trend leading up to 1894 that advocated for proportionate giving of income as the best method of giving, as well as the related tithing movement. I document that congressional income tax supporters drew on the language and ideas of these religious fundraising movements, in addition to direct recourse to biblical authority. Income tax supporters also used religiously-rooted ideas to argue for progression in tax rates, especially the idea that income earned through labor and used to supply basic needs has special moral value, while higher levels of “unearned” income were devalued and viewed with suspicion. For their part, income tax opponents used biblical injunctions against covetousness and theft, as well as biblical ideas about thrift and industry, to argue against progressive income taxes.

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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 paper returning to the list at #5:

1. [1,274 Downloads]  Regulating In A Pandemic: Evaluating Economic And Financial Policy Responses To The Coronavirus Crisis, by Hiba Hafiz, Shu-Yi Oei, Diane Ring & Natalya Shnitser (all of Boston College)
2. [419 Downloads]  The Transformation of International Tax, by Ruth Mason (Virginia)
3. [252 Downloads]  Summary of the Tax Provisions of the CARES Act, by David Miller, Muhyung Lee, Kathleen Semanski & Sean Webb (Proskauer, New York)
4. [141 Downloads]  Why Study Tax History?, by Reuven Avi-Yonah (Michigan)
5. [137 Downloads]  Wealth Transfer Tax Planning After The Tax Cuts and Jobs Act, by John Miller (Idaho) & Jeffrey Maine (Maine)

Brooks: An Intellectual History Of Comparative Tax Law

Kim Brooks (Dalhousie University, Schulich School of Law), An Intellectual History of Comparative Tax Law, 57 Alberta L. Rev. 849 (2020):

In this article, the author argues that comparative tax law has an intellectual history. More specifically, the author claims that history reveals there is a distinguishable comparative tax law scholarship where tax scholars engage in common debates. The author then offers a description of method, highlighting the difficulty of identifying the work that might be considered “comparative tax law.” Next, the author conceptualizes and clusters contributions from scholars who have framed the comparative tax law field. The author argues that our national boundedness, combined with the lack of an explicit network of scholars, has masked the rich intellectual history in the field of comparative tax law.

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Illusions Of Justice In International Taxation

Adam Kern (Princeton), Illusions of Justice in International Taxation, 48 Philosophy & Pub. Aff. ___ (2020):

International tax law determines which states may tax what. Despite its significance, its normative foundations are poorly understood—cursorily treated by tax experts, and almost entirely neglected by philosophers.

In this essay, I criticize a common way of thinking about justice in international taxation, and I propose an alternative. My critical target is a claim I call the Capture Principle. Common ground among many government officials, leading tax scholars, and several of the few philosophers who have thought about international taxation, the Capture Principle asserts that each state should have rights to tax income generated from economic activities within its territory. The Capture Principle appears to embody an ideal of reciprocity. I argue that this appearance is illusory. I examine three arguments that connect those two ideas, and I argue that each fails on its own terms.

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Call For Student Tax Papers: 2020 Chris Bergin Award for Excellence In Writing

Christopher E. Bergin Award for Excellence in Writing:

The Christopher E. Bergin Award for Excellence in Writing recognizes superior student writing on unsettled questions in tax law or policy. It is named in honor of the late Christopher E. Bergin, former president and publisher of Tax Analysts and longtime editor of Tax Notes Federal. The award, given annually, epitomizes the qualities that Chris championed.

No one cared more than he did about clear, precise writing about taxation, and he instilled that passion in our whole staff.
Cara Griffith, Tax Analysts President and CEO

To learn more about Christopher E. Bergin, click here.

Eligibility: Must be enrolled in an accredited undergraduate or graduate program during the academic year.
Topic: Submissions should focus on an unsettled question in federal, state, or international tax law or policy.
Evaluation: Our editorial staff blindly evaluates entries on originality, readability, organization, reasoning, and overall quality of content.
Due Date: June 30, 2020

Click here for competition guidelines.

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SSRN Tax Professor Rankings

SSRN has updated its monthly ranking of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through April 1, 2020) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

		All-Time		Recent
1	Reuven Avi-Yonah (Michigan)	189,283	Reuven Avi-Yonah (Michigan)	6,687
2	Dan Shaviro (NYU)	120,309	Lily Batchelder (NYU)	5,044
3	David Gamage (Indiana-Bloom.)	116,324	David Kamin (NYU)	4,963
4	Lily Batchelder (NYU)	116,191	Daniel Hemel (Chicago)	3,871
5	Daniel Hemel (Chicago)	115,360	Bridget Crawford (Pace)	3,159
6	Darien Shanske (UC-Davis)	109,664	David Gamage (Indiana-Bloom.)	2,882
7	David Kamin (NYU)	104,710	Dan Shaviro (NYU)	2,426
8	Cliff Fleming (BYU)	104,501	Richard Ainsworth (BU)	2,204
9	Manoj Viswanathan (UC-Hastings)	101,799	Darien Shanske (UC-Davis)	2,134
10	Rebecca Kysar (Fordham)	100,652	Manoj Viswanathan (UC-Hastings)	2,031
11	Ari Glogower (Ohio State)	99,411	Robert Sitkoff (Harvard)	1,937
12	Michael Simkovic (USC)	44,192	Ruth Mason (Virginia)	1,936
13	D. Dharmapala (Chicago)	38,444	D. Dharmapala (Chicago)	1,935
14	Paul Caron (Pepperdine)	36,574	Hugh Ault (Boston College)	1,917
15	Louis Kaplow (Harvard)	32,924	Brad Borden (Brooklyn)	1,814
16	Richard Ainsworth (BU)	29,448	Louis Kaplow (Harvard)	1,796
17	Ed Kleinbard (USC)	26,645	Ari Glogower (Ohio State)	1,788
18	Vic Fleischer (UC-Irvine)	26,034	Rebecca Kysar (Fordham)	1,738
19	Jim Hines (Michigan)	24,976	Yariv Brauner (Florida)	1,641
20	Brad Borden (Brooklyn)	24,195	Cliff Fleming (BYU)	1,608
21	Ted Seto (Loyola-L.A.)	24,159	Michael Simkovic (USC)	1,460
22	Gladriel Shobe (BYU)	24,143	Paul Caron (Pepperdine)	1,314
23	Robert Sitkoff (Harvard)	23,944	Diane Ring (Boston College)	1,235
24	Richard Kaplan (Illinois)	23,677	Katie Pratt (Loyola-L.A.)	1,213
25	Bridget Crawford (Pace)	23,226	Shu-Yi Oei (Boston College)	1,190

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Field Presents Allocating Tax Transition Risk Online Today At Georgetown

Heather M. Field (UC-Hastings) presents Allocating Tax Transition Risk, 73 Tax L. Rev. ___ (2020), online at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John Brooks and Brian Galle:

The enactment of sweeping tax changes in late 2017 by Republicans without any bipartisan support and the calls by Democrats to reverse those changes (and make more) when they regain political power create an unstable tax landscape that is challenging for taxpayers who are trying to make economic decisions that are affected by tax law. One strategy for grappling with this instability and uncertainty is for taxpayers to use contracts to allocate the economic benefits and burdens of a possible future tax law change among themselves. The literature says almost nothing about this contract-based strategy for managing tax transition risk. This gap is surprising because (a) the leading view on tax transition policy argues that taxpayers should account for the risk of tax law changes the same way they take other market risks into account when making decisions, and (b) private contracting is a well-accepted method for addressing market risks.To fill this gap, this Article uses four case studies—involving derivatives, credit agreements, municipal bonds, and merger agreements—to demonstrate that taxpayers are using tax transition risk-shifting contracts and to illustrate how this risk-management strategy varies.

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McMahon: The Tax Law System Is Only Incomprehensible To Some

Stephanie Hunter McMahon (Cincinnati), The Tax Law System is Only Incomprehensible to Some (reviewing Wendy Wagner (Texas) & Will Walker, Incomprehensible!: A Study of How Our Legal System Encourages Incomprehensibility, Why It Matters, and What We Can Do About It (Cambridge University Press 2019):

Journalists often remark that income tax rules are incomprehensible and that taxpayers cannot understand the law or the explanatory guidance created by the Internal Revenue Service (IRS). In her recent book with Will Walker, Incomprehensible!, Wendy Wagner develops a rubric to evaluate the process by which the law and agency action become incomprehensible.

Unfortunately, applying that rubric to the federal tax system is difficult because of the system’s multiple speakers and audiences. Attempting to fit this system within the rubric, however, highlights how federal tax rules’ incomprehensibility depends upon how one defines the relevant audience, a task the government has yet to undertake. ...

Given what appear to be everyone’s weak incentives to provide comprehensibility, Wagner’s analysis helps show how the federal tax system has important lessons to learn. This system is not inherently incomprehensible. Taxpayers need to be encouraged to convey information to the IRS in a comprehensible form, and the IRS needs to figure out how to differentiate guidance for sophisticated and unsophisticated taxpayers. For both speakers and audience members, cooperative communication may be collectively valued, but the tax system’s perceived gamesmanship and everyone’s pursuit of their individual interests will make comprehensibility hard to develop.

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Ed Zelinsky Publishes Two Tax Articles

Defining Who Is An Employee After A.B.5: Trading Uniformity and Simplicity for Expanded Coverage, 70  Cath. U. L. Rev. 473 (2020):

My assessment of California’s A.B.5 differs from the evaluation advanced by the advocates and opponents of that legislation: I conclude that A.B.5 made a significant but limited expansion of the coverage of California labor law but at a notable cost. Even as A.B.5 broadened the reach of the Golden State’s labor protections, A.B.5 also made the definition of "employee” more complex and less uniform. Those seeking federal or state legislation like A.B.5 confront the same trade-off under which greater coverage is achieved at the expense of more complexity and less uniformity in the definition of who is an employee. The same political forces and policy considerations which molded A.B.5 in California will have similar effects in other states and in the halls of Congress.

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Mason: The Transformation Of International Tax

Ruth Mason (Virginia), The Transformation of International Tax, 114 Am. J. Int'l L. ___ (2020):

The recession of 2008 precipitated a political crisis that motivated an unprecedented international project to curb corporate tax dodging. This Article argues, contrary to dominant scholarly views, that this effort transformed international tax — changing its participants, agenda and institutions, norms, and even its legal forms. Perhaps most important, efforts to close corporate tax loopholes opened a rift over the resulting revenues that threatens a hundred-year-old tax treaty framework.

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Lesson From The Tax Court: Distinguishing Child Support From Alimony

The recent case of Timothy Clinton Biddle v. Commissioner, T.C. Memo. 2020-39 (April 6, 2020) (Judge Vasquez) teaches that payments labeled as alimony may be treated as child support even when the divorce decree has other provisions explicitly labeled as child support.  Some may think that a lesson about the difference between alimony and child support is not worth learning because Congress eliminated the §215 deduction for alimony payments in December 2017.  See §11051(a) of P.L. 115-97, 131 Stat. 2054 at 2089.  Once Congress did that, both alimony and child support payments are treated the same for income and deduction purposes: not deductible by the payor spouse and not includable by the payee spouse.

I think the lesson is still important, however, for three reasons.  First, the repeal generally does not apply to divorce or separation instruments entered into before December 31, 2018.  Thus, there are lots of potential situations where this exact issue may yet arise.  Second, the lesson may be important for ongoing §152(d)(1)(C) issues, where taxpayers need to figure out who meets the support test to claim someone as a qualifying relative.  Third, this is a lesson about the limits of state court decrees to shape the federal tax consequences of divorce.  That is always a lesson worth remembering.  Details, as usual, 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 #2 and #3

1. [1,111 Downloads]  Regulating In A Pandemic: Evaluating Economic And Financial Policy Responses To The Coronavirus Crisis, by Hiba Hafiz, Shu-Yi Oei, Diane Ring & Natalya Shnitser (all of Boston College)
2. [233 Downloads]  The Transformation of International Tax, by Ruth Mason (Virginia)
3. [219 Downloads]  Summary of the Tax Provisions of the CARES Act, by David Miller, Muhyung Lee, Kathleen Semanski & Sean Webb (Proskauer, New York)
4. [179 Downloads]  Important Developments in Federal Income Taxation, by Edward Morse (Creighton)
5. [135 Downloads]  Why Study Tax History?, by Reuven Avi-Yonah (Michigan)

Tax Papers At 6th Annual Michigan Junior Scholars Conference

6th Annual Michigan Junior Scholars Conference:

Rory Gillis (Toronto), Dividing the Public Fisc: Rethinking the Division of Tax Room in Fiscal Federalism

Michelle Layser (Illinois), How Place-Based Tax Incentives Can Reduce Geographic Inequality, 74 Tax L. Rev. ___ (2020):

Place-based tax incentives are frequently used by governments to encourage investment in low-income areas. But no standard exists to describe the ideal place-based tax incentive, making evaluation of these programs nearly impossible. This Article provides the necessary baseline by explaining when, where, and how to design place-based tax incentives that can benefit low-income communities by reducing geographic inequality. Using Geospatial Information System (GIS) mapping methods, this Article demonstrates how lawmakers can use public data to map spatial disadvantage. It then draws on tax theory to show how to design place-based tax incentives to reduce geographic inequality in targeted areas. The result is not a one-size-fits-all prescription, but a place-specific approach that can help place-based tax incentives become an effective vehicle for reducing underlying, geographic causes of neighborhood disadvantage. Comparing current place-based tax incentives to this baseline reveals that a significant weakness of current approaches is their failure to target places with geographic inequality or promote activities that could reduce it.

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Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Cauble's Time For A Tax Return Filing Fee

This week, David Elkins (Netanya, visiting Cornell spring 2020) reviews a recently posted work by Emily Cauble (DePaul), Time for a Tax Return Filing Fee, 57 Harv. J. on Legis. ___ (2020):

Not all tax returns are created equal. They vary with regard to their complexity and, consequently, with regard to the amount of time that the IRS needs to devote to them on audit. In this week’s article, Professor Emily Cauble proposes imposing upon filers a fee that would reflect the complexity of the transactions reported. She argues that such a fee would make the system fairer, would raise revenue to cover the cost of auditing the return, and would improve efficiency by encouraging taxpayers to take into account the cost imposed on the tax administration by their complex transactions. Her proposal includes a carve-out for difficult-to-audit items, such as the EITC, that are disproportionately claimed by lower-income individual.

The proposal is intriguing and I freely admit that despite having gone over it several times, I am little closer to forming a definitive position. In this review, I will take the liberty of expressing some of my reservations. I will state at the outset that they are nothing other than starting points for a discussion about it.

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Kleiman: Tax Limits And The Future of Local Democracy

Ariel Jurow Kleiman (San Diego), Tax Limits and the Future of Local Democracy, 133 Harv. L. Rev. 1884 (2020):

Property tax limits are state-level laws that place caps on local governments’ tax rates and revenue. These statutory limits, which put pressure on already strapped cities and counties in forty-six states, present an inexorable dilemma for local policymakers. On the one hand, they may cause cuts to vital services, bankruptcy, and reliance on regressive revenue sources. At the same time, however, tax limits may reflect genuine concerns about government profligacy and nonresponsiveness. While much research has focused on the first side of the dilemma — examining the laws’ fiscal consequences — this Article explores the second, probing how tax limits affect the distribution of political power between local voters and policymakers.

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Bird-Pollan And Ehrke-Rabel Present Tax Papers Online Today At Indiana

Jennifer Bird-Pollan (University of Kentucky, United States) and Tina Ehrke-Rabel (University of Graz, Austria) present tax papers online at Indiana today as part of the concluding session of the Tax Policy Colloquium Series hosted by Leandra Lederman:

Jennifer Bird-Pollan, Taxing the Ivory Tower: Against the Income Tax Exemption for Universities:

Non-profit organizations in the United States are eligible to apply for exemption from the federal income tax. This tax benefit is distinct from the charitable contribution deduction, which is often the focus of tax policy work on non-profit tax law. However, the exemption from the income tax is actually a broader provision, providing a tax benefit to a wider group of entities than are eligible to receive tax deductible contributions. Halperin’s work on the income tax exemption for non-profit entities raises important considerations that are particularly relevant today, as the investment portfolios of certain non-profits dramatically expand. In this essay, I consider the particular situation of colleges and universities and the accumulation of income in the endowments of those institutions. I argue that, allowing unlimited accumulation of income without the imposition of tax creates the wrong incentives for universities, motivating universities to hoard their income for investment purposes, rather than using income to pursues additional educational activities. This essay proceeds as follows: Part I explains the current operation of the income tax exemption for non-profit entities, as well as the rationale for that exemption; Part II identifies objections to that exemption model; Part III focuses on the problems particular to institutes of higher education; Part IV concludes.

Tina Ehrke-Rabel (University of Graz), Big Tax Brother Watching You?–Defining the Lines Between Efficiency and Personal Autonomy:

Our modern societies are founded on the idea of individuals being free and of the state intervening only where it is necessary for the functioning of our society. This freedom has been acquired in hard struggles, wars, revolutions. And in this concept of individual freedom society and the State have accepted that people have secrecies that nobody knows, under the assumption of freedom we even accepted that people cheat the laws. As long as information is analog and local, the laws of the physics create an automatic zone of privacy.

Data analytics allow to combine the huge mass of data on a human being available out there and “stored”/ “held” by different places/institutions in a way a single human being would not be able of. Everyone needs to accept that people watch him when he acts in public. Every trace we leave on the internet is a public footprint. We need accept that this footprint is being watched.

But there is a difference between watching and processing. At the moment these footprints get combined with each other, combined with other sources of information and feed then into a decision based on evaluations, it is not pure observation anymore, it becomes surveillance. Since the State is only allowed to intervene, when provided by law, there need to be clear rules! In a digital world, privacy requires explicitly designed institutions, laws and technologies, or norms about which information flows are permitted or prevented and which are encouraged or discouraged.

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Hey Presents Global Minimum Taxation, Tax Competition, And National Sovereignty Online At Florida

Johanna Hey (Professor and Director of the Institute of Tax Law, University of Cologne, Germany) presented Global Minimum Taxation (GLoBE) – A New Stance of the OECD on Tax Competition and National Sovereignty? online at Florida as part of its Tax Colloquium Series:

[S]ince early 2019 the OECD has been presenting new, much more far-reaching proposals under Pillar 1 and Pillar 2. Pillar 1, introducing new nexus and allocation rules, was to be expected after the work on adapting the international tax system to the challenges of the digitalization of the economy (Action 1) could not be completed by 2015. However, the proposal for a global minimum taxation (Global Anti-Base Erosion – "GloBE") under Pillar 2 deviates from the previous roadmap without prior thorough discussion. How fundamental this realignment of the international tax scene will be, depends, of course, on the results of the debate on Pillar 1 and Pillar 2 in 2020. This debate, one would expect, would need to be held on the policy level at first by defining the targets. After the policy objectives have been set, a discussion on expert level should focus on the design most suitable to accomplish these objectives. . . .

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Shareholder Wealth Effects Of Border Adjustment Taxation

Fabio Gaertner (Wisconsin), Jeffrey Hoopes (North Carolina) & Edward Maydew (North Carolina), Shareholder Wealth Effects of Border Adjustment Taxation, 62 J.L. & Econ. 215 (2019) (reviewed by Daniel Hemel (Chicago) here):

Following two decades of discussion, the border adjustment tax briefly emerged as part of proposed U.S. corporate tax reform in early 2017. While heavily debated, little empirical evidence exists regarding the border adjustment tax. We take advantage of the period during which the border adjustment tax was under strong consideration to examine its effects on shareholder value. We find that high-importing firms (measured using industry, aggregate government industry data, and firm-level shipping container data) suffer negative returns on days the tax had a greater likelihood of adoption.

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Viswanathan Presents Retheorizing Progressive Taxation Online Today At UC-Irvine

Manoj Viswanathan (UC-Hastings) presents Retheorizing Progressive Taxation online at UC-Irvine today as part of its Tax Policy Colloquium Series hosted by Joshua Blank, Victor Fleischer, and Omri Marian:

Tax progressivity is undeniably central to both the detailed analytics of tax policy and the rhetorical arguments commonly used in public discourse. Yet there are surprisingly inconsistent and inaccurate uses of this seemingly objective term. By theorizing progressivity’s constitutive elements and identifying its shortcomings, this Article offers a novel taxonomy of how progressivity is assessed and why contradictory assessments are common.

This Article argues that, as a theoretical matter, accurately characterizing tax provisions as progressive (or regressive) requires assessing their burdens beyond simply the tax payments remitted. By failing to account for effects such as economic incidence and inefficiency costs, traditional progressivity analyses are incomplete. Relatedly, since the spending side of the budget process is functionally indistinguishable from taxation, accurate progressivity analyses must also consider where tax revenues are spent.

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McCarden: Offshore Tax Enforcement And Divorce

Khrista McCarden (Tulane), Offshore Tax Enforcement and Divorce, 80 Ohio St. L.J. 521 (2019):

High-net-worth taxpayers continue to hide assets offshore, and offshore tax enforcement remains an immense problem for the United States. In 2016, the Panama Papers revealed another previously unnoticed reason that high-net-worth tax cheats place assets offshore: to hide them from their spouses during divorce proceedings. Typically, these offshore tax evaders also will refuse to disclose their offshore accounts during divorce proceedings even though required to do so. The individuals hiding offshore assets in this manner are predominantly males. Ultimately, their wives are forced to hire forensic accountants to trace an extensive maze of offshore ownership during the divorce.

This Article proposes a novel solution to the problem of offshore tax enforcement by using high-net-worth divorces. Currently, an offshore tax evader may frustrate his wife’s attempts to discover family assets held offshore during divorce proceedings and still remain eligible for tax amnesty programs. Moreover, he can later claim that he did not “willfully” hide assets from tax authorities and thereby escape criminal prosecution. This Article solves these two problems in a manner that will strengthen offshore tax enforcement while truncating prolonged divorce proceedings.

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Bearer-Friend Presents In-Kind Taxpaying: Lessons And Risks Online Today At Georgetown

Jeremy Bearer-Friend (George Washington) presents In-Kind Taxpaying: Lessons and Risks online at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John Brooks and Brian Galle:

This Article examines non-cash remittance of tax obligations (ie; paying taxes "in-kind"). It begins by defining in-kind taxpaying, describing the early roots of in-kind taxpaying, and documenting the broad variety of inkind taxpaying in the US. It then discusses the lessons and risks of in-kind taxpaying. In doing so, this Article makes three contributions. First, it improves our definition of taxpaying by identifying the wide variety of inkind remittances that already occur in our current tax system, offering a taxonomy for how to understand in-kind remittances within a modern economy that relies primarily on cash taxes. Second, it refutes the presumption that in-kind remittance of tax obligations is not viable, thus expanding the tax tools available to local, state, and federal governments and demonstrating how narrow presumptions about tax remittance have predetermined core tax policy choices. Third, it confronts the substantial dangers of in-kind taxpaying, using these risks to propose new principles for limiting the design and administration of in-kind taxpaying.

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Lind Presents Aviation Taxes And EU State Aid Law Online Today At Florida

Yvette Lind (Assistant Professor, Copenhagen Business School) presents The Prospect of Designing Aviation Taxes Compatible to EU State Aid Law – Some Comparative Examples online at Florida today as part of its Tax Colloquium Series:

This article focuses on environmental taxes, specifically aviation taxes, and the challenges and limitations EU law imposes on individual EU Member States when these enforce both national and international environmental policy goals. The former Irish and the recently implemented Swedish aviation taxes are used as comparative examples when chartering and discussing what obstacles are posed by specifically EU state aid rules and, subsequently, the options available to individual Member States when attempting to currently design environmental taxes. A holistic approach, resulting in the inclusion of not only tax law but also free movement law and state aid law in parallel legal systems (at domestic, EU, and international levels) is applied in order to provide a more coherent and transparent outline of the studied matter.

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Leff: What is Lost When Philanthropy Avoids Philanthropy Law

Benjamin Leff (American), What is Lost When Philanthropy Avoids Philanthropy Law, 70 Fla. L. Rev. F. 155 (2019) (reviewing Dana Brakman Reiser (Brooklyn), Disruptive Philanthropy: Chan-Zuckerberg, the Limited Liability Company, and the Millionaire Next Door, 70 Fla. L. Rev. 921 (2018)):

Professor Dana Brakman Reiser's Disruptive Philanthropy: Chan-Zuckerberg, the Limited Liability Company, and the Millionaire Next Door provides "the definitive explanation" for the "seemingly bizarre choice" by some philanthropists to pursue their charitable goals using a for-profit vehicle (like an LLC) rather than a traditional charitable entity (like a private foundation). This review essay explains that as long as there is a federal estate tax, that decision is likely to represent only a one-generation delay in the use of traditional charitable entities for those philanthropists whose estates are subject to the federal estate tax.

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Lawsky Presents Teaching Algorithms And Algorithms For Teaching Online At Florida

Sarah Lawsky (Northwestern) presented Teaching Algorithms and Algorithms for Teaching online at Florida as part of its Tax Colloquium Series sponsored by the Marshall M. Criser Distinguished Lecture Series:

This article focuses on what it calls the “algorithm method,” a common method used to teach tax classes that presents students with unambiguous problems that guide students through complex statutes and regulations. The article describes and situates within current pedagogies a novel teaching tool: a website that randomly generates tax problems with objectively correct answers; multiple choice answers that reflect common errors that students make; and explanations for each answer that either respond to the underlying error or give a full explanation of the correct answer. The article explains the purpose and use of the website, highlights advantages of and potential issues with the website, and proposes approaches to make using the website, and indeed the algorithm method, more effective.

Lesson From The Tax Court: Penalty Approval Form Invalid When Penalty Not Properly Identified

To the uninitiated, §6662 seems to impose a single accuracy-related penalty that varies in amount depending on just how badly the taxpayer screwed up.  For example, here’s the Wikipedia description: “This penalty of 20% or 40% of the increase in tax is due in the case of substantial understatement of tax, substantial valuation misstatements, transfer pricing adjustments, or negligence or disregard of rules or regulations.”  Note the singular “this penalty.” 

Today’s post will initiate you.  In Roderick M. Campbell and C. Sandra Campbell v. Commissioner, T.C. Memo. 2020-41 (April 7, 2020) (Judge Ashford) an IRS Supervisor’s approval of a accuracy-related penalty was insufficient to comply with §6751 because the approval form did not specify whether the approval was for the 20% or 40% penalty amount.  Despite the technical win here, however, this may not be a strong case for taxpayers.  Details below the fold.

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The Top Five New Tax Papers

There is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and new papers debuting on the list as #1, #3, #4, and #5:

1. [907 Downloads]  Regulating In A Pandemic: Evaluating Economic And Financial Policy Responses To The Coronavirus Crisis, by Hiba Hafiz, Shu-Yi Oei, Diane Ring & Natalya Shnitser (all of Boston College)
2. [158 Downloads]  Important Developments in Federal Income Taxation, by Edward Morse (Creighton)
3. [122 Downloads]  What Is Caesar's, What Is God's: Fundamental Public Policy for Churches, by Lloyd Mayer (Notre Dame) & Zachary Pohlman (J.D. 2021, Notre Dame)
4. [121 Downloads]  Why Study Tax History?, by Reuven Avi-Yonah (Michigan)
5. [193 Downloads]  Wealth Transfer Tax Planning After The Tax Cuts and Jobs Act, by John Miller (Idaho) & Jeffrey Maine (Maine)

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Hayashi's Countercyclical Property Taxes

This week, Sloan Speck (Colorado) reviews a new work by Andrew T. Hayashi (Virginia), Countercyclical Property Taxes, Va. L. & Econ. Res. Paper No. 2020-04.

In Countercyclical Property Taxes, Andrew Hayashi argues that residential real property taxes have important—and counterintuitive—macroeconomic implications during recessions and subsequent recoveries. Although policymakers often tout property taxes as stable revenue sources when the economy stalls, Hayashi lucidly outlines how these tax instruments amplify both household risk and community risk by pressuring homeowners’ discretionary spending. As Hayashi highlights, the design features of property taxes that generate revenue stability are the very same elements that shift risk from government units to households and communities. For this reason, Hayashi suggests taking a fresh and more nuanced look at property tax relief during downturns, with an eye towards fairness and equity in addition to revenue.

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23rd Annual Critical Tax Theory Conference At Florida

Florida hosts the 23rd annual (and first virtual)  Critical Tax Theory Conference today and tomorrow:

The Critical Tax Theory Conference has a long history of fostering the work of both established and emerging scholars whose research challenges and enriches the tax law and policy literature. Critical tax scholars question assumptions of objectivity in tax, as their work explores how tax law and policy impact historically marginalized groups. At a time when tax policy is once again at the forefront of politics and public discourse, the work of these and other critical tax scholars supports a more robust discussion of the role for tax law in current and future social and economic policy.

Friday

• Yariv Brauner (Florida), Tax Treaty Negotiation
• Kim Brooks (Dalhousie), A Hitchhiker’s Guide to Comparative Tax Scholarship
• David Elkins (Netanya), The Right and the Good: The Rhetoric of International Taxation
• Jonathan Choi (NYU), An Empirical Study of Statutory Interpretation in Tax Law, 95 N.Y.U. L. Rev. ___ (2020)
• Tessa Davis (South Carolina), Taxing the Cyborg
• Victoria Haneman (Creighton), Green Burial, Funeral Poverty, and Tax Incentives
• Darryll Jones (Florida A&M), Subsidizing Hate? Does the Constitution Require Tax Exempt Status for the Alt-Right?
• Henry Ordower (St. Louis), Capital, an Elusive Tax Object and Impediment to Sustainable Taxation
• Orli Oren-Kolbinger (Villanova), The Error Cost of Marriage
• Leandra Lederman (Indiana), The Fraud Triangle and Tax Evasion
• Fernando Loayza (LL.M. 2020, Yale), A Peruvian Tax Lawyer in a US Corporate Tax Class: What Can Be Explained and What Cannot Be Explained
• Kerry Ryan (St. Louis), Employment Taxation of Prison Labor
• Morenike Saula (George Washington), Why Nigeria Needs a FATCA
• Dan Shaviro (NYU), What Are Minimum Taxes, and Why Might One Favor or Disfavor Them?
• Phyllis Taite (Florida A&M), Making Tax Policy Great Again: America, You’ve Been Trumped
• Cristina Trenta (Örebro), Tax Measures in Support of the Circular Economy and Sustainable Development: The Experience of the Nordic Countries

Saturday

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Summary Of The Tax Provisions Of The CARES Act

David S. Miller, Muhyung (Aaron) Lee, Kathleen Semanski & Sean Webb (Proskauer, New York), Summary of the Tax Provisions of the CARES Act:

This paper summarizes the tax provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

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Borden: COVID-19 And Section 1031: Anticipating IRS Extension Relief For Like-Kind Exchanges

Bradley T. Borden (Brooklyn), COVID-19 and Section 1031: Anticipating IRS Extension Relief:

Anyone who is in a section 1031 exchange, could have trouble finishing such exchange due to the current situation caused by COVID-19. The IRS appears to have authority to extend the section 1031 45-day and 180-day time periods, but they haven’t done so yet. This short piece considers what exchangers might do while they wait for hoped-for extensions from the IRS.

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Shaviro Presents Minimum Taxes Online Today At Indiana

Daniel Shaviro (NYU) presents What Are Minimum Taxes, and Why Might One Favor or Disfavor Them? online at Indiana today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

The alternative minimum tax (AMT), a key and at the time widely lauded feature of the Tax Reform Act of 1986, soon fell into disrepute and was subsequently scaled back, to general approbation and relief. Yet in recent years minimum taxes have come back into vogue. For example, two key international tax provisions in the 2017 tax act (GILTI and the BEAT) had minimum tax structures, and the OECD has recently issued proposed guidelines for the design of a global minimum tax, meant for multilateral adoption.

In light of minimum taxes’ surprising return to center stage, this paper explores such issues as the following:

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Oglesby Presents Marijuana Tax Design Online Today At Duke

Pat Oglesby (Center for New Revenue) presents Marijuana Tax Design online at Duke today as part of its Tax Policy Workshop Series hosted by Richard Schmalbeck and Lawrence Zelenak:

Any scheme to legalize marijuana that has a chance of enactment will tax the stuff. But how? Like tobacco, based on weight? Like alcohol, by measuring the intoxicating chemical? Like shoes or hotel rooms, as a percentage of price? Or, as one city in California taxes medical marijuana, by counting plants or square footage of cultivated area? What about license fees, or a state monopoly? This article looks at those questions.

And it looks more deeply: How high should the tax rate be, and how might governments adjust it to win the inevitable price war against bootleggers? How might a state allocate revenue when localities opt into or out of legalization? Where in the supply chain should governments collect tax? How could they fight non-tax-paid contraband? Should there be tax breaks for hemp, home grown, small growers, environmentally friendly operations, or medical marijuana?

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Oh Presents Wealth Tax Design: Lessons From Estate Tax Avoidance Online Today At UC-Irvine

Jason Oh (UCLA) presents Wealth Tax Design: Lessons from Estate Tax Avoidance (with Eric Zolt (UCLA)) online at UC-Irvine today as part of its Tax Policy Colloquium Series hosted by Joshua Blank, Victor Fleischer, and Omri Marian:

Presidential candidates Elizabeth Warren and Bernie Sanders have both proposed ambitious new annual wealth taxes based on academic work by Emmanuel Saez and Gabriel Zucman. They project these proposals to raise trillions of dollars over the next ten years. Some critics challenge the Saez-Zucman approach to measuring wealth concentration. Other critics including Larry Summers and Natasha Sarin have used data from estate tax returns and the relatively small amount of revenue the estate tax raises to question the revenue projections of these proposals. This comparison can be useful only if one thinks carefully about specific estate tax strategies and how these strategies translate to an annual wealth tax. This article engages in that exercise. When one takes a closer look at estate tax avoidance and how it maps onto an annual wealth tax, a much more complex narrative emerges.

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Taxing The Poor Through Real Estate Transfers

David A. Simon (Kansas), Taxing the Poor Through Real Estate Transfers, 2020 U. Ill.  Rev. Online 29 (2020):

This Article collects data on real estate transfer taxes in Illinois. It shows that municipal transfer taxes are more likely to affect poor communities than affluent communities.

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