TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, January 23, 2019

Kleiman Presents Tax Limits And Public Control Today At Pepperdine

KleimanAriel Jurow Kleiman (San Diego) presents Tax Limits and Public Control at Pepperdine today as part of our Tax Policy Workshop Series hosted by Dorothy Brown and Paul Caron:

Local governments are severely restricted in their ability to raise tax revenue, in part by state-level statutes that place caps on local tax rates and revenue. Many attribute the proliferation of these local tax limitations to entrenched antitax sentiment among U.S. taxpayers. This antitax narrative is attractive for its simplicity and explanatory power. It provides a clear mandate for those enacting tax limiting laws as well as a simple fiscal rubric for those evaluating the success of such limits—namely, lower taxes equals success. However, the explanatory power of the antitax narrative is limited. Perhaps most notably, it fails to explain why voters regularly approve tax increases, even in places with strict tax limitations. Using the lens of the 1970s Tax Revolt, this Article complicates the traditional antitax narrative surrounding tax limitations, offering evidence that voters also supported tax limits in order to increase public control and oversight of local government fiscal decisions.

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January 23, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kysar Presents Unravelling The Tax Treaty Today At Toronto

Kysar (2018)Rebecca Kysar (Fordham) presents Unravelling the Tax Treaty at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Coordination among nations over the taxation of international transactions rests on a network of some 2,000 bilateral double tax treaties. The double tax treaty is, in many ways, the roots of the international system of taxation. That system, however, is in upheaval in the face of globalization, technological advances, taxpayer abuse, and shifting political tides. In the academic literature, however, scrutiny of tax treaties is largely confined to the albeit important question of whether tax treaties are beneficial for developing countries. Surprisingly little consideration has been paid to whether developed countries, like the United States, should continue to sign tax treaties with one another, and no formal revenue or economic analyses of the treaties has been undertaken by the United States government. In fact, little evidence or theory exists to support entrance into tax treaties by the United States, and examination of investment flows indicates the treaties likely lose significant U.S. revenues. Additionally, they enable taxpayer abuse, stagnate domestic policy, and thwart reforms of the antiquated international tax system. These consequences are particularly problematic for the United States. Other nations, after all, have been able to supplement their revenues and pursue destination-based taxation through treaty-friendly VATs.

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January 23, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

2018-20 ABA Tax Section Public Service Fellows

ABA Tax Section (2017)The 2018-2020 Christine A. Brunswick Public Service Fellowship Class:

  • Anastassia Kolosova, a graduate of the University of Michigan Law School, will be working with the Accounting Aid Society, in Detroit, Michigan, to conduct outreach and education activities for specific vulnerable populations in Detroit and expand the organization’s ability to provide legal representation to low-income taxpayers.
  • Omeed Firouzi, a graduate of Villanova University Charles Widger School of Law, will be working with Philadelphia Legal Assistance to provide education and legal assistance to workers misclassified as independent contractors and conduct advocacy and awareness efforts to decrease the practice among employers in Philadelphia.

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January 23, 2019 in ABA Tax Section, Tax | Permalink | Comments (0)

Columbia Journal Of Tax Law Publishes New Tax Matters: The Tax Treatment Of A Marijuana Business

Columbia Journal of Tax Law LogoThe Columbia Journal of Tax Law has published a new issue of its Tax Matters feature, with short pieces responding to a specific cutting-edge tax law issue:

Section 59A of The Tax Cuts and Jobs Act of 2017 created the new Base Erosion and Anti-Avoidance Tax, which denies deductions for payment made to foreign related persons. The BEAT has created a number of issues with regards to its relationship with international treaties and obligations.

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January 23, 2019 in Scholarship, Tax | Permalink | Comments (0)

Saez & Zucman: Alexandria Ocasio-Cortez's 70% Top Tax Rate Would Curtail Inequality And Save Democracy

Following up on Sunday's post, Alexandria Ocasio-Cortez's Proposed 70% Top Tax Rate:  New York Times op-ed:  Alexandria Ocasio-Cortez’s Tax Hike Idea Is Not About Soaking the Rich—It’s About Curtailing Inequality and Saving Democracy, by Emmanuel Saez (UC-Berkeley) & Gabriel Zucman (UC-Berkeley):

Alexandria Ocasio-Cortez has kick-started a much-needed debate about taxes. But the debate, so far, has been misplaced. It’s obvious that the affluent — who’ve seen their earnings boom since 1980 while their taxes fell — can contribute more to the public coffers. And given the revenue needs of the country, it is necessary.

But that’s not the fundamental reason higher top marginal income tax rates are desirable. Their root justification is not about collecting revenue. It is about regulating inequality and the market economy. It is also about safeguarding democracy against oligarchy. ...

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January 23, 2019 in Tax | Permalink | Comments (0)

Tuesday, January 22, 2019

Stantcheva Presents Taxation And Innovation In The 20th Century Today At NYU

StanchevaStefanie Stantcheva (Harvard) presents Taxation and Innovation in the 20th Century (with Ufuk Akcigit (Chicago), John Grigsby (Chicago) & Tom Nicholas (Harvard)) at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:

This paper studies the effect of corporate and personal taxes on innovation in the United States over the twentieth century. We use three new datasets: a panel of the universe of inventors who patent since 1920; a dataset of the employment, location and patents of firms active in R&D since 1921; and a historical state-level corporate tax database since 1900, which we link to an existing database on state-level personal income taxes. Our analysis focuses on the impact of taxes on individual inventors and firms (the micro level) and on states over time (the macro level).

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January 22, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Denying Tax-Exempt Status To Discriminatory Private Adoption Agencies

Allison M. Whelan (Covington & Burling, Washington D.C), Denying Tax-Exempt Status to Discriminatory Private Adoption Agencies, 8 UC Irvine L. Rev. 711 (2018):

This Article ... and argues that the established public policy at issue here is the best interests of the child, which includes the importance of ensuring that children have safe, permanent homes. In light of this established public policy, which all three branches of the federal government have recognized and support, this Article ultimately argues that, consistent with the holding in Bob Jones, private adoption agencies that refuse to facilitate adoptions by same-sex parents, thereby narrowing the pool of qualified prospective parents and reducing the number of children who are adopted, act contrary to the established public policy of acting in the best interests of the child.

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January 22, 2019 in Scholarship, Tax | Permalink | Comments (1)

TaxProf Blog Holiday Weekend Roundup

Monday, January 21, 2019

Columbia Journal Of Tax Law Publishes New Issue

Columbia Journal of Tax Law LogoThe Columbia Journal of Tax Law has published Vol. 10, No. 1:

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January 21, 2019 in Scholarship, Tax | Permalink | Comments (0)

Sunday, January 20, 2019

Alexandria Ocasio-Cortez's Proposed 70% Top Tax Rate

FiveThirtyEight, Alexandria Ocasio-Cortez Wants To Raise Taxes On The Rich — And Americans Agree:

new poll from The Hill and Harris X found that 59 percent of registered voters supported imposing a 70 percent tax rate on every dollar over the 10 millionth a person earns in a year. (Tax rates that apply only to income over a certain threshold are called marginal tax rates.) The idea even received bipartisan support: 71 percent of Democrats, 60 percent of independents and 45 percent of Republicans said they were in favor. 

Wall Street Journal, How Wealthy Americans Like Jack Benny Avoided Paying a 70% Tax Rate:

Many top earners during the high-rate era, such as politicians Dwight Eisenhower and Ronald Reagan, entertainer Jack Benny and librettist Alan Jay Lerner, didn’t pay the top rates. In 1952, for example, when the top rate was 92%, the highest-earning 1% of taxpayers had an average rate of 32%, according to Elliot Brownlee, a tax historian and emeritus professor at the University of California, Santa Barbara. “When top tax rates were high, there was always a large gap between the stated rates and what the highest earners actually paid as a percentage of their income,” says Joel Slemrod, an economics professor at the University of Michigan.

WSJ

The Atlantic, Alexandria Ocasio-Cortez Has the Better Tax Argument:

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January 20, 2019 in Tax | Permalink | Comments (5)

The Top Five New Tax Papers

SSRN Logo (2018)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 lit at #4 and #5:

  1. [370 Downloads]  Profit Shifting Before and After the Tax Cuts and Jobs Act, by Kimberly Clausing (Reed)
  2. [353 Downloads]  How Data Should (Not) Be Taxed, by Johannes Becker (University of Muenster), Joachim Englisch (University of Muenster) & Deborah Schanz (Ludwig Maximilian University of Munich)
  3. [230 Downloads]  The Proposed Section 163(j) Regulations, by David S, Miller, Sejin Park, Mani Kakkar & Sean Webb (Proskauer)
  4. [221 Downloads]  The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects, by Stephen Seiler (Stanford), Anna Tuchman (Northwestern) & Song Yao (Minnesota)
  5. [115 Downloads]  Cloudy with a Chance of Taxation, by Rifat Azam (Radzyner) & Orly Mazur (SMU) (review by Hayes Holderness (Richmond))

January 20, 2019 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, January 19, 2019

This Week's Ten Most Popular TaxProf Blog Posts

IRS Releases Final Regs On New 20% Business Tax Deduction

IR-2019-04 (Jan. 18, 2019), Treasury, IRS Issue Final Regulations, Other Guidance on New Qualified Business Income Deduction; Safe Harbor Enables Many Rental Real Estate Owners to Claim Deduction:

Today the Treasury Department and the Internal Revenue Service issued final regulations and three related pieces of guidance, implementing the new qualified business income (QBI) deduction (section 199A deduction).

The new QBI deduction, created by the 2017 Tax Cuts and Jobs Act (TCJA) allows many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of their qualified business income.  Eligible taxpayers can also deduct up to 20 percent of their qualified real estate investment trust (REIT) dividends and publicly traded partnership income.

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January 19, 2019 in IRS News, Tax | Permalink | Comments (0)

Ten Reasons To Prefer Tax Partnerships Over S-Corporations

Bradley T. Borden (Brooklyn), Ten Reasons to Prefer Tax Partnerships Over S-Corporations, N.Y. Bus. L.J. Vol. 22, No. 2, p 47, Winter 2018:

A fundamental choice for every business owner is the type of legal and tax entity the owner will use for the business. Because C-corporations are subject to an entity-level tax, owners of small businesses often face the choice of operating as an S-corporation or a tax partnership. To the uninitiated, the choice may appear to be trivial because both tax partnerships and S-corporations provide passthrough tax treatment (i.e., no entity-level tax). In fact, however, despite the passthrough nature of both tax partnerships and S-corporations, tax law treats them differently in many respects. This article identifies ten ways in which tax law treats the two types of tax entities differently, showing that in many situations, business owners will be better served by forming as tax partnerships. The article also identifies situations under which S-corporations provide the better tax alternative.

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January 19, 2019 in Scholarship, Tax | Permalink | Comments (0)

Friday, January 18, 2019

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Hemel's The State-Charity Disparity Under The 2017 Tax Law

This week, Mirit Eyal-Cohen (Alabama) reviews Daniel Hemel (Chicago), The State-Charity Disparity Under the 2017 Tax Law, 58 Wash. U. J.L. & Pol'y ___ (2019).

Mirit-Cohen (2018)This Article is especially timely in light of continuous efforts by states (recently by Connecticut, New Jersey, New York, and Oregon) to create state tax credits for charitable contributions to public education or public health. These tax credits reduce the state tax liability for Federal purposes and might be helpful in alleviating the effect of the new cap on individual state and local tax (“SALT”) deductions imposed by the Tax Cuts and Jobs Act of 2017 (and was also part of the 2016 Clinton tax proposal). While the IRS has allowed in the past such charitable contributions as deductible for Federal purposes, Treasury recently proposed regulation to reverse this trend requiring taxpayers to decrease their charitable contribution deduction by the value of SALT benefits received for their contribution, with a “de minimis” rule ignoring state tax benefits worth less than 15% of the donation.

Hemel makes a case against the disparity in the limitations on charitable contributions (up to 60% of AGI) compared to those placed on SALT payments ($10,000 cap a year).  He provides several justifications for removing such differential tax treatment. First, he points out to the fact that both public charities and state and local governments are primarily in the business of providing education, health, and social services. But more so, in Hemel’s eyes, the fundamental reasons for supporting charities such as promoting pluralism, creating positive externalities, and delivering specified knowledge, are equally if not more present in the case of state and local government organizations. SALT can be seen as simply the price of goods and services that state and local governments provide. Accordingly, from a measurement-of-income perspective, Hemel suggests that SALT should represent costs of services only up to a point, after which they constitute a reduction in consumption plus savings. Indeed, today this is encompassed somewhat in the Standard Deduction and will continue to do so with its exponential recent increase in 2018. Taking Hemel’s implicit analogy a step forward could be providing a differentiated Standard Deduction at the Federal level, adjusted for each state for its value worth of services. Ignoring issues of valuation and political brawl, this could be an efficient way to coordinate more equitably the services (measured via local taxes) of each state to their Federal deductibility. 

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January 18, 2019 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Chodorow Presents The Parsonage Exemption Today At Florida

ChodorowAdam Chodorow (Arizona State) presents The Parsonage Exemption, 51 U.C. Davis L. Rev. 849 (2018), at Florida today as part of its Tax Colloquium Series:

The parsonage exemption allows “ministers of the gospel” to exclude the value of housing benefits from income, whether received in-kind or as a cash allowance. Critics argue that the provision violates the First Amendment’s Establishment Clause, while supporters contend that it does not single religion out for a cognizable benefit. Alternately, supporters claim that it is a permissible accommodation for religion under the First Amendment’s Free Exercise Clause. This Article fills an important gap in the debate by offering a nuanced explanation of how the parsonage exemption and other housing provisions function within the tax code.

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January 18, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Conservative Groups Targeted In Lois Lerner’s IRS Scandal Receive Settlement Checks

IRS Logo 2The Daily Signal, Conservative Groups Targeted in Lois Lerner’s IRS Scandal Receive Settlement Checks:

Dozens of conservative organizations are receiving late Christmas presents years after the IRS handed them a lump of coal.

The federal government in recent days has been issuing settlement checks to 100 right-of-center groups wrongfully targeted for their political beliefs under the Obama administration’s Internal Revenue Service, according to an attorney for the firm that represented plaintiffs in NorCal v. United States.

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January 18, 2019 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Issues Taxing Cryptocurrency And The Policy Behind A Safe Harbor For Exchanges And Users

Stan Sater (Tulane), Issues Taxing Cryptocurrency and the Policy Behind a Safe Harbor for Exchanges and Users

The U.S. federal tax framework for virtual currency remains ambiguous. In the face of emerging technology, the IRS has taken a cautious approach using a “best guess” tax treatment until the technology is sufficiently mature. In particular, for this rapidly evolving ecosystem, a careful regulatory approach is prudent. Regulations that are hastily written have the chance of stifling innovation or force companies to seek jurisdiction elsewhere. However, legal ambiguity and uncertainty in this wait and see approach may have a negative impact on startup investment and impact individuals honestly using the technology.

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January 18, 2019 in Scholarship, Tax | Permalink | Comments (0)

Thursday, January 17, 2019

Lawsky Presents Form As Formalization Today At Duke

Lawsky (2017)Sarah Lawsky (Northwestern) presents Form as Formalization at Duke today as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:

There are, roughly speaking, two approaches to applying computing to law, which can be thought of as a bottom up approach and a top down approach. The bottom up approach uses large amounts of data in some way—to make predictions, for example. Machine learning is one such approach; neural nets are another. This is generally seen to be the approach with the most potential, the one that leads to the “data driven future” of legal practice. The “top down” approach would derive conclusions from the law itself, after making the law legible to the computer in some way, perhaps through hand-encoding, perhaps through natural language processing or some similar approach to read the actual text of a statute or regulation.

The top-down approach, also sometimes called computational law, is generally considered to have much less potential. But even those whose dismiss computational law point to one example of success in encoding the law: TurboTax and similar tax compliance programs. Thus one finds enthusiastic references to creating “TurboTax for police complaints,”“TurboTax for copyright,” “TurboTax for immigration,” and so forth.

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January 17, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Hayashi Presents Countercyclical Tax Bases Today At Indiana

Hayashi (2019)Andrew Hayashi (Virginia) presents Countercyclical Tax Bases at Indiana today as part of its Tax Policy Colloquium Series hosted by David Gamage:

Tax scholarship has tended to focus on the efficiency properties of different tax bases under assumptions about the macroeconomy that only sometimes hold, and has paid relatively little attention to how those bases operate in recessions. I show how different tax bases interact with household credit constraints and adjustment costs to either stabilize or aggravate economic shocks.

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January 17, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Holderness: Whither Substantial Nexus?

Hayes Holderness (Richmond), Whither Substantial Nexus?:

Hailed as a massive victory for coherence in defining the state tax jurisdiction standard of “substantial nexus,” the 2018 South Dakota v. Wayfair case fundamentally altered the state and local tax jurisprudence. However, the vagueness of the decision left the substantial nexus doctrine at a crossroads: it may wither away into meaningless platitudes or solidify into a coherent standard that meaningfully protects interstate commerce from undue state tax burdens. This Article guides the substantial nexus doctrine down the latter path by developing a robust theory of substantial nexus that focuses on the potential burden of tax compliance costs and explaining the substantial nexus standard that follows from that theory.

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January 17, 2019 in Scholarship, Tax | Permalink | Comments (0)

ABA Tax Section Midyear Meeting

ABA 3The ABA Tax Section Midyear Meeting kicks off today in New Orleans. Two highlights are:

Teaching Taxation: Tax Advice in the Age of the 24-Hour News Cycle
Recent instances of exposure by the press of aggressive tax planning and tax avoidance by prominent businesses, individuals or families raise unique substantive, ethical, and other legal issues for the tax community. Practitioners advising famous clients may need to assess not only the likelihood of future examinations, but also public disclosure due to whistleblowers, cooperators, and data leaks. Reporters investigating past tax compliance may recruit tax professionals for technical assistance and expertise to uncover suspect transactions, unreported income, or improper deductions or credits. The release of such information, and related commentary from various media outlets, may pressure Federal and state tax authorities, law enforcement officials, or regulators to open audits or investigations that could result in substantial tax adjustments and/or various civil and criminal penalties. This panel will explore these issues from a variety of perspectives.

  • Caroline Ciraolo (Kostelanetz & Fink, Washington, D.C.)
  • David Cay Johnston (DCReport.org)
  • Michael Lang (Chapman) 
  • Michael Plowgian (KPMG, Washington, D.C.)
  • Kerry Ryan (St. Louis) (Chair)
  • Lee-Ford Tritt (Florida) (moderator)

Teaching Taxation: Current Developments in Individual, Corporate, Partnership, and Estate & Gift Taxation
This session will review the most significant statutory enactments, judicial decisions, IRS rulings,
and Treasury regulations promulgated during the last twelve months that affect general income
taxation, corporate taxation, partnership taxation, wealth transfer taxation, and tax procedure.

  • Elaine Gagliardi (Montana)
  • Philip Hackney (Pittsburgh)
  • Bruce McGovern (South Texas) (moderator)

Other Tax Prof speakers include:

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January 17, 2019 in ABA Tax Section, Conferences, Tax | Permalink | Comments (0)

Is Texas v. U.S. Taxing for Obamacare?

Andrew L. Oringer (Hofstra), Is Texas v. U.S. Taxing for Obamacare?

We return to the land of the Fifth Circuit for a ruling by a Texas district court in Texas v. United States that the entirety of the Patient Protection and Affordable Care Act was rendered unconstitutional in its entirety by the Tax Cuts and Jobs Act of 2017. The ACA has survived two trips to the U.S. Supreme Court. Will it survive what looks to be a third?

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January 17, 2019 in Scholarship, Tax | Permalink | Comments (0)

Wednesday, January 16, 2019

Mann Presents How Corporate Tax Rates Affect Corporate Environmental Social Responsibility Today In Australia

Mann (2018)Roberta Mann (Oregon) presents How Corporate Tax Rates Affect Corporate Environmental Social Responsibility at the Australasian Tax Teachers Association's 31st Annual Conference Tax on Innovation and Education: Tax in a Changing World (with Bill Butcher and Fiona Martin (University of New South Wales) (full conference program) today in Perth, Australia:

A growing literature has developed on the topic of enforcement crowding out altruism. This literature may apply to the idea of corporate social responsibility. If the government requires social responsibility, by imposing a carbon price or by otherwise increasing tax liabilities to pay for social goods, does that reduce the corporate social response? Similarly, would reducing regulations and corporate tax liability increase the social response?

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January 16, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The Impact Of Soda Taxes: Pass-through, Tax Avoidance, And Nutritional Effects

Stephen Seiler (Stanford), Anna Tuchman (Northwestern) & Song Yao (Minnesota), The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects

We analyze the impact of a tax on sweetened beverages, often referred to as a “soda tax,” using a unique data-set of prices, quantities sold and nutritional information across several thousand taxed and untaxed beverages for a large set of stores in Philadelphia and its surrounding area. We find that the tax is passed through at a rate of 75-115%, leading to a 30-40% price increase. Demand in the taxed area decreases dramatically by 42% in response to the tax.

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January 16, 2019 in Scholarship, Tax | Permalink | Comments (1)

IRS Recalls 46,000 Workers To Handle Tax Returns And Process Refunds During Government Shutdown

IRS Logo 2The IRS yesterday released a plan to have 46,000 of its 80,000 employees on the job for tax-filing season, up from 10,000 employees.

January 16, 2019 in IRS News, Tax | Permalink | Comments (4)

Tax Court Operations During The Federal Government Shutdown

Tax Court

January 16, 2019 in Tax | Permalink | Comments (0)

Johnson: Uniform Internet Sales Tax After Wayfair

Calvin H. Johnson (Texas), Don't Mess with Texas: Uniform Internet Sales Tax after Wayfair?, 90 State Tax Notes 625 (Nov. 12, 2018):

Johnson urges the Texas legislature, following the Supreme Court's Wayfair decision, to make internet sales into Texas subject to Texas sales tax, without adopting a multi-state uniform sales tax or otherwise modifying its sales tax.

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January 16, 2019 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, January 15, 2019

7th Annual NYU/UCLA Tax Policy Symposium: New Approaches To The International Tax Base

NYUUCLANYU/UCLA Tax Policy Symposium, New Approaches to Calculation and Allocation of the International Tax Base,  71 Tax L. Rev. 471-623 (2018)

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January 15, 2019 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Nicholas Mirkay Named Carlsmith Ball Scholar At Hawaii

Mirkay (2019)Nicholas A. Mirkay has been named a Carlsmith Ball Scholar at the University of Hawaii William S. Richardson School of Law:

Professor Nicholas A. Mirkay is a relatively new member of the Richardson Law School faculty, bringing a wealth of expertise in tax law and governance issues as well as a detailed research agenda that includes a dissection of the new federal tax law — the Tax Reform Act of 2017 — and its implications. Those implications include the new law’s contributions to the growing wealth disparity in this country.

“The Gini index, which measures the difference between actual income distribution and perfectly equitable distribution, indicates that the U.S. is a far more unequal society than most other advanced, developed countries,” writes Mirkay, describing a major research paper underway. “This article focuses on the increasing wealth disparity, particularly the opportunity to create wealth, and the impact that the federal and state tax systems contribute to that growing disparity and declining opportunity.”

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January 15, 2019 in Law School Rankings, Tax | Permalink | Comments (0)

The Making Of International Tax Law: Empirical Evidence From Natural Language Processing

Elliott Ash (ETH Zurich) & Omri Y. Marian (UC-Irvine), The Making of International Tax Law: Empirical Evidence from Natural Language Processing:

We offer the first attempt at empirically testing the level of transnational consensus on the legal language controlling international tax matters. We also investigate the institutional framework of such consensus-building. We build a dataset of 4,052 bilateral income tax treaties, as well as 16 model tax treaties published by the United Nations (UN), Organisation for Economic Co-operation and Development (OECD) and the United States. We use natural language processing to perform pair-wise comparison of all treaties in effect at any given year. We identify clear trends of convergence of legal language in bilateral tax treaties since the 1960s, particularly on the taxation of cross-border business income.

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January 15, 2019 in Scholarship, Tax | Permalink | Comments (0)

Ray Madoff Makes Sure Money Maneuvers To The Right Pockets

Madoff (2018)Boston College: The Heights, Ray Madoff Makes Sure Money Maneuvers to the Right Pockets:

Like most interesting people in the world, Madoff’s professional journey has been a tumultuous one—marked by a transition from being a big-time corporate lawyer to a blossoming law professor to, finally, the brainy philanthropy expert she is today. After obtaining her undergraduate degree in philosophy from Brown University, Madoff became a tax lawyer, a career path she found predictable given her educational background.

“A friend of mine has a theory that all philosophy majors that go to law school become tax lawyers,” Madoff said.

analytical philosophy undergraduate background trained her to ask big questions—pondering the nature of goodness as a philosophy undergrad naturally led her to debate classic tax dilemmas, such as the nature of borrowing money as opposed to investing money. For nine years, Madoff exercised her analytical philosophy skills as a tax attorney before moving on to a job she was not nearly as prepared for: teaching at BC Law.

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January 15, 2019 in Legal Education, Tax | Permalink | Comments (0)

Ring: Section 199A’s Workplace Shift

Diane Ring (Boston College), Section 199A’s Workplace Shift:

As we mark the one year anniversary of tax reform, the aftermath continues to dominate tax policy analysis. New § 199A, which my co-author, Shu-Yi Oei, and I initially explored here and here and here, continues to attract significant attention, both in terms of the provision’s likely substantive effects, and the legislative, regulatory, and political issues it raises.

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January 15, 2019 in Tax | Permalink | Comments (3)

Monday, January 14, 2019

Leviner Presents Public Opinion And Tax Justice Today At Hebrew University

Leviner (2018)Sagit Leviner (Ono Academic College, Israel) presents In the Eye of the Beholder: Public Opinion on Tax Justice at the Hebrew University Faculty of Law today as part of its Tax Law Colloquium Series:

The tax system is one of the most influential of civic institutions of our time. Taxes often detract at least one third of our income and they present an immediate and consequential effect with respect to a broad array of actions we make daily, when we choose to get married, have kids, go to college, or buy a loaf of bread. And, even though tax cuts and reforms are accordingly appealing to many people, it is worth taking time to ponder over the consequences of such cuts and reforms.

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January 14, 2019 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Lesson From The District Court: OIC Rejection Is No Basis For Wrongful Collection Suit Under §7433

NJCourthousesAlas!  A closed Tax Court issued no opinions last week.  Curse that federal shutdown!  But the federal district courts did issue opinions.  The Administrative Office of the U.S. Courts website says they have enough money (from fees) to run through January 18th.  And their opinions teach lessons as well.

Today’s lesson comes from a lawsuit filed against the United States by Mr. Nicholas Morales, Jr. in 2017.  He sued under §7433, a statute that gives taxpayers a cause of action against the government when any IRS employee negligently, recklessly, or willfully "disregards" any statute or associated regulation in title 26 “in connection with any collection of Federal tax.”  His Complaint alleged that IRS employees had disregarded §7122 in refusing his Offer In Compromise.     

The Federal District Court for the District of New Jersey has issued two opinions in the case: Morales v. United States (Morales I) on March 26, 2018 and Morales v. United States (Morales II) on January 2, 2019.  Both opinions are marked “Not for Publication.”  They are not, however, marked “Not for Blogging”!  That’s a good thing because they actually make for a good basic lesson about the scope and limits of §7433.  You will find the lesson below the fold.

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January 14, 2019 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure | Permalink | Comments (0)

Public Debt And Low Interest Rates

Olivier Blanchard (MIT), Public Debt and Low Interest Rates (Video of American Economic Association Presidential Lecture (Jan. 4, 2019)):

The lecture focuses on the costs of public debt when safe interest rates are low. I develop four main arguments.

First, I show that the current situation in which, in the United States, safe interest rates are expected to remain below growth rates for a long time, is more the historical norm than the exception. If the future is like the past, this implies that debt rollovers, that is the issuance of debt without a later increase in taxes may well be feasible. Put bluntly, public debt may have no fiscal cost.

Figure 1

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January 14, 2019 in Scholarship, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, January 13, 2019

The Top Five New Tax Papers

SSRN Logo (2018)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 a new paper debuting on the lit at #5:

  1. [397 Downloads]  Digital Battlefront in the Tax Wars, by Ruth Mason (Virginia) & Leopoldo Parada (Turin)
  2. [351 Downloads]  Profit Shifting Before and After the Tax Cuts and Jobs Act, by Kimberly Clausing (Reed)
  3. [326 Downloads]  How Data Should (Not) Be Taxed, by Johannes Becker (University of Muenster), Joachim Englisch (University of Muenster) & Deborah Schanz (Ludwig Maximilian University of Munich)
  4. [269 Downloads]  Beyond Notice-and-Comment: The Making of the § 199A Regulations, by Shu-Yi Oei (Boston College) & Leigh Osofsky (North Carolina)
  5. [213 Downloads]  The Proposed Section 163(j) Regulations, by David S, Miller, Sejin Park, Mani Kakkar & Sean Webb (Proskauer)

January 13, 2019 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, January 12, 2019

This Week's Ten Most Popular TaxProf Blog Posts

The Impact Of Tax Reform On Home Ownership And Children

Margaret Ryznar (Indiana-Indianapolis) & Ryan Shouse, Tax Reform on Homeownership and the Impact on Children, 161 Tax Notes 211 (Oct. 8, 2018):

This article discusses several homeownership provisions modified by the Tax Cuts and Jobs Act, and how they affect children.

January 12, 2019 in Scholarship, Tax | Permalink | Comments (1)

Friday, January 11, 2019

Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Expanded Worldwide Versus Territorial Taxation After The TCJA

This week, David Elkins (Netanya) reviews a new work by J. Clifton Fleming (BYU), Robert J. Peroni (Texas) & Stephen E. Shay (Harvard), Expanded Worldwide Versus Territorial Taxation after the TCJA, 161 Tax Notes 1173 (Dec. 3, 2018).

Elkins (2018)Like individuals who are citizens or residents of the United States, domestic corporations must report and pay U.S. tax on their worldwide income. However, exposure to U.S. worldwide taxation has always been more theoretical than real. Because under the Code corporate residence is determined almost exclusively by place of incorporation, avoiding U.S. tax on foreign-source earnings usually requires nothing more than operating abroad via a subsidiary registered in a foreign jurisdiction. As a foreign corporation, the subsidiary is liable for U.S. tax only on its U.S.-source income. This arrangement does not allow domestic corporations to completely escape tax on their foreign-source earnings. When the foreign subsidiary distributes its earnings to its domestic parent or when the domestic parent sells shares in the foreign subsidiary, the gain is in principle subject to U.S. tax. Thus, prior to the enactment of the 2017 Tax Cuts and Jobs Act (TCJA), the U.S. international corporate tax regime was in practice one of deferral.

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January 11, 2019 in David Herzig, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

2019 Tax Trends

Tax Foundation logoTax Foundation, Tax Trends Heading Into 2019:

  1. State tax changes are not made in a vacuum. States often adopt policies after watching peers address similar issues. Several notable trends in tax policy have emerged across states in recent years, and policymakers can benefit from taking note of these developments.
  2. The enactment of the federal Tax Cuts and Jobs Act (TCJA) expanded many states’ tax bases and drove deliberations on tax conformity. At year’s end, only five states conform to an older version of the federal tax code, though many have yet to resolve issues raised by their tax conformity regimes.
  3. Several states experimented with mechanisms to allow their high-income taxpayers to avoid the new cap on the state and local tax (SALT) deduction, efforts cast into doubt–though not entirely ended–by draft U.S. Treasury regulations.
  4. Three states and the District of Columbia cut corporate taxes in 2018, with rate reductions pending in two other states. Reductions in other taxes on capital are ongoing as well, with Mississippi beginning the phaseout of its capital stock tax.
  5. The U.S. Supreme Court’s Wayfair v. South Dakota decision ushered in a new era of sales taxes on e-commerce and other remote sales, but many states have yet to implement the provisions the Court strongly suggested would protect such tax regimes from future legal challenges.
  6. A second state (Arizona) adopted a constitutional amendment banning the expansion of the sales tax to additional services, with similar efforts–which have the effect of locking an outdated sales tax base in place–expected to emerge in other states in 2019 and beyond.
  7. A court ruling has states scrambling to legalize and tax sports betting, while shifting public attitudes continue to render the legalization and taxation of marijuana an attractive revenue option in a growing number of states. In 2018, seven states adopted sports betting taxes, while two legalized and taxed marijuana.
  8. States continue to grapple with the appropriate taxation, if any, of e-cigarettes, with two states adopting taxes at rates reflective of vapor products’ potential for harm reduction, while the District of Columbia increased its tax to a punitive 96 percent rate.
  9. Business head taxes came out of nowhere to become a key consideration for several cities, particularly those with thriving tech sectors.
  10. Consideration of gross receipts taxes continue as corporate income tax revenues decline, though concerns about their economic effects have generally helped stave off their adoption.
  11. Two states repealed their estate taxes in 2018, continuing a decade-long trend away from taxes on estates and inheritances.
  12. Revenue triggers, a relatively modern innovation, again featured prominently in tax reform packages and will continue to do so. 

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January 11, 2019 in Tax, Think Tank Reports | Permalink | Comments (0)

North Carolina's Nonprofit Property Tax Exemption Conundrum

Thomas A. Kelley (North Carolina) & Christopher B. McLaughlin (North Carolina), North Carolina's Nonprofit Property Tax Exemption Conundrum, 96 N.C. L. Rev. 1769 (2018):

Disputes between nonprofit organizations and local governments over property tax exemptions have been on the increase in North Carolina and beyond. There are two paramount reasons. First, since the Reagan Revolution of the 1980s eliminated block grants and other sources of funding, local governments have struggled to pay their bills and have been compelled to look for new sources of revenue, including stricter application of property tax laws. Second, the nonprofit sector has been transformed by the rise of social entrepreneurship. Responding to the same financial pressures that have squeezed local governments since the 1980s, increasing numbers of nonprofit organizations have adopted feegenerating strategies that, in some cases, make them almost indistinguishable from for-profit enterprises. For local governments, the fact that some nonprofits act like for-profits makes it easier to claim that they do not deserve generous property tax exemptions.

The result is a property tax conundrum in North Carolina and beyond. Is it fair that governments’ financial books should be balanced on the backs of legitimate charities just because their operations include entrepreneurial elements? On the other hand, how are local governments supposed to fund needed services if they cannot collect taxes on property used for seemingly commercial activities?

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January 11, 2019 in Scholarship, Tax | Permalink | Comments (2)

Thursday, January 10, 2019

The Tax Lawyer Publishes New Issue

Locating Affordable Housing: The Legal System's Misallocation Of Subsidized Housing Incentives

Brandon Weiss (UMKC), Locating Affordable Housing: The Legal System's Misallocation of Subsidized Housing Incentives, 70 Hastings L.J. 215 (2018):

The primary goal of subsidized housing policy in the United States is to increase access to affordable housing for low-income households. Yet data show that states disproportionately award low-income housing tax credits to finance the development of projects in neighborhoods where there is already a relatively high number of housing units available at similar rent levels. Through a fifty-state study of state housing agency allocation rules, this Article evaluates the legal apparatus that facilitates this “misallocation problem.” I find that approximately seventy-five percent of states fail to make the provision of below-market rents a threshold requirement of receiving an award of low-income housing tax credits. As a result, locational choices often are dictated by private developers who are incentivized to develop where land is cheapest. I argue that states should revise their allocation rules to ensure that, as a default, tax credits are awarded to projects that offer at least a ten percent rent advantage as compared to the local private market.

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January 10, 2019 in Scholarship, Tax | Permalink | Comments (1)

Colinvaux: Taking State Tax Benefits Into Account For Charitable Deduction Purposes

Roger Colinvaux (Catholic), Failed Charity: Taking State Tax Benefits into Account for Purposes of the Charitable Deduction, 66 Buff. L. Rev. 779 (2018):

The Tax Cuts and Jobs Act (TCJA) substantially limited the ability of individuals to deduct state and local taxes (SALT) on their federal income tax returns. Some states are advancing schemes to allow taxpayers a state tax credit for contributions to a charity controlled by the state. The issue is whether state tax benefits are deductible as a charitable contribution for purposes of the federal income tax. Under a general rule of prior law — the full deduction rule — state tax benefits were ignored for purposes of the charitable deduction. If the full deduction rule is applied to the state workaround schemes, then the SALT limitation can successfully be avoided. This Article explains that after the TCJA, the legal basis for the full deduction rule is undermined.

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January 10, 2019 in Scholarship, Tax | Permalink | Comments (0)

How Law Schools Are Using Virtual Reality In The Classroom

Virtual RealityABA Journal, How Are Law Schools Using Virtual Reality Tools in Classrooms?:

This past summer at the University of North Texas Dallas College of Law, a small team of law students and school employees created a virtual reality crime scene. There was blood made of ketchup, a stapler, handprints and of course, a dead body. Using a 360-degree camera, the team staged an imaginative crime scene.

“It was an experiment at the request of a criminal law professor,” says Jennifer Wondracek, director of legal educational technology at the school. “We did it low-budget because we were trying it out.” The professor liked it, Wondracek says, and asked for another that could be used to supplement classroom material.

In fact, Wondracek says her department is ready to do a lot more, including re-creating actual crime scenes for the school’s criminal law classes.

And perhaps it won’t stop there.

Virtual reality technology has the potential to transform the law school experience. “We are at the beginning of what I think is going to be a revolution in the way we train our students,” Wondracek says. “We are right at the edge with virtual reality technology in both the law school setting and the legal profession.”

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January 10, 2019 in Legal Education, Tax | Permalink | Comments (0)

Tax Revenues From Legalization Of California Pot Sales Are 34% Below Projections

Los Angeles Times, One Year of Legal Pot Sales and California Doesn’t Have the Bustling Industry It Expected. Here’s Why:

LA TimesWhen Californians voted in 2016 to allow the sale of recreational marijuana, advocates of the move envisioned thousands of pot shops and cannabis farms obtaining state licenses, making the drug easily available to all adults within a short drive.

But as the first year of licensed sales comes to a close, California’s legal market hasn’t performed as state officials and the cannabis industry had hoped. Retailers and growers say they’ve been stunted by complex regulations, high taxes and decisions by most cities to ban cannabis shops. At the same time, many residents are going to city halls and courts to fight pot businesses they see as nuisances, and police chiefs are raising concerns about crime triggered by the marijuana trade.

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January 10, 2019 in Tax | Permalink | Comments (5)