Paul L. Caron
Dean




Tuesday, October 19, 2021

WSJ Op-Ed: The Democrats’ Tax-The-Rich Ruse

Wall Street Journal op-ed:  The Democrats’ Tax-the-Rich Ruse, by Phil Gramm & Mike Solon:

President Biden’s effort to pass the largest tax increase in U.S. history is based on the verifiably false claim that Americans with high incomes don’t pay their “fair share.” In no other country do the rich bear a greater share of the income-tax burden than they do in the U.S.

Organization for Economic Cooperation and Development data show that the top 10% of American households earn about 33.5% of all earned income but pay 45.1% of all income taxes, including Social Security and Medicare payroll taxes. That progressivity ratio of 1.35 is far higher than in any other country. The ratio in France is 1.10. In Germany it’s 1.07, and in Sweden an even 1. In the last OECD study, in 2015, the top 10% of earners in the U.S. paid 45% of all income taxes. In France, the top 10% only paid 28%. In Germany they paid 31% and in Sweden 27%. Conversely, the bottom 90% of earners in the U.S. paid 55%. The bottom 90% of earners in France paid 72%. In Germany it was 69% and in Sweden 73%.

WSJ

Continue reading

October 19, 2021 in Tax, Tax News | Permalink

Beller: S Corporations As Shareholders, LLC Members, And Partners

Herbert N. Beller (Professor of Practice, Northwestern; Of Counsel, Eversheds-Sutherland), S Corporations as Shareholders, LLC Members, and Partners, Part 1, 172 Tax Notes Fed. 1713 (Sept. 13, 2021); S Corporations as Shareholders, LLC Members, and Partners, Part 2, 172 Tax Notes Fed. 1915 (Sept. 20, 2021):

Tax Notes Federal (2020)This two-part article focuses on numerous transactional scenarios involving S corporations that have sole or partial ownership interests in other entities, including C corporations, qualified S corporation subsidiaries, single- and multiple-member limited liability companiess and partnerships. Part 1 outlines the fundamentals of how subchapter S operates and examines the tax treatment of transactions through which the S corporation comes into existence, other entities become affiliated with the S corporation group, and cash or other property is transferred from an affiliate to the S corporation or to another affiliate. Part 2 examines the tax consequences of transactions in which a complete or partial interest in an affiliate is sold or otherwise disposed of by the S corporation, including through a taxable stock or assets acquisition, a tax-free reorganization under section 368 or a tax-free corporate separation under section 355.

Continue reading

October 19, 2021 in Scholarship, Tax, Tax Analysts, Tax Scholarship | Permalink

Tax Profs Oppose Proposed Charitable Conservation Easement Curing Provision

Letter To Senate Finance Committee On H.R. 5376:

We are teachers, scholars, and practitioners in the fields of tax law, property law, natural resource management, and land use law. We write today to express our deep concern about a provision recently added to the Charitable Conservation Easement Program Integrity Act, that is now part of H.R. 5376, the “Build Back Better Act” (the reconciliation bill). This provision, if enacted into law, would open the door to widespread abuse of the charitable deduction for conservation easements and lead to a massive waste of taxpayer dollars. We urge you to omit the same or comparable language from a Senate bill and to work to ensure that it is not included in the final legislation.

Continue reading

October 19, 2021 in Congressional News, Tax, Tax News | Permalink

Monday, October 18, 2021

Maag Presents The Next Stage Of The Child Tax Credit Today At Loyola-L.A.

Elaine Maag (Tax Policy Center) presents Issues In Child Benefit Administration In The United States: Imagining the Next Stage of the Child Tax Credit (with Samuel Hammond (Niskanen Center)) at Loyola-L.A. today as part of its Tax Policy Colloquium:

Maag-elaineThe American Rescue Plan Act of 2021 (ARP) expanded the Child Tax Credit (CTC) for one year and delivered it as a monthly benefit to the vast majority of recipients. Whether the credit will retain its current form, revert to its previous form, or take on a new form altogether is unclear. Even if the credit is extended, it is unlikely to be extended permanently and there remains the possibility that if will continue to evolve as discussions around providing a robust child benefit continue. A robust child benefit could provide a minimum source of support to all or most families with children which would mean that fewer children would grow up in poverty and would be harmed by temporary income drops. We compare how a tax credit such as the Child Tax Credit (CTC) administered by the Internal Revenue Service (IRS) or a universal child allowance administered by the Social Security Administration (SSA) could be structured to best meet the needs of families with children. Tax credits, in general, have been the more popular tool of choice for both Democrats and Republicans to redistribute income in recent years (Faricy 2015)–including the temporary expansion of the Child Tax Credit (CTC).

Continue reading

October 18, 2021 in Colloquia, Scholarship, Tax, Tax Workshops | Permalink

Federal Tax Revenues Soar 18%, Most In 44 Years, Primarily From Individual (+28%) And Corporate (+75%) Taxes

Congressional Budget Office, Monthly Budget Review: September 2021:

Total Receipts: Up by 18 Percent in Fiscal Year 2021 ...

CBO

Chris Edwards (Cato Institute), Federal Tax Revenues Soar:

New data from the Congressional Budget Office show that federal tax revenues are soaring. Despite the Republican tax cuts of 2017 and the ongoing pandemic, taxes are pouring into the U.S. Treasury. ...

The chart below shows the major sources of federal revenues from fiscal 2000 to fiscal 2021, which ended September 30. The GOP tax cuts were effective January 2018, which was part way through fiscal 2018. ...

Cato

Continue reading

October 18, 2021 in Congressional News, Tax, Tax News | Permalink

Lesson From The Tax Court #200: The Great Divide

Camp (2021)Today's Lesson is an appropriate one for my 200th post.  While the line separating my 199th from my 201st post is not big—not a great divide—the line does make visible a degree of effort and consistency that might otherwise be obscure.  So, yeah, I'm kinda proud about crossing this line.

The concept of Adjusted Gross Income (AGI) also creates a line, one that confuses my students enormously.  They have trouble understanding that the ability to take a deduction is affected not simply by the statute that authorizes the deduction but also by the statutes that tell you where to take the deduction in the process of calculating taxable income.  And not only does the concept of AGI create a line—dividing deductions taken above the line from those taken below the line—it sometimes creates a great divide.

In Carl L. Gregory and Leila Gregory v. Commissioner, T.C. Memo. 2021-115 (Sept. 29, 2021)(Judge Jones), the taxpayer’s lawyers had the same trouble my students have.  The case teaches a graphic lesson on the great divide that can exist between treatment of deductions taken above the line and those taken below, not to mention the great divide between the really rich and the rest of us.  There, the taxpayers were unable to deduct a penny their yacht hobby expenses.  While §183 allowed over $340,000 of deductions, this amount did not exceed 2% of the Gregorys' AGI.  Wow.  That fact at least explains why they may have thought it a good idea to pay attorneys to argue that the expenses went above the line.  It does not explain why the attorneys did not advise that such an argument was groundless, bordering on frivolous.  Details below the fold.    

Continue reading

October 18, 2021 in Bryan Camp, New Cases, Scholarship, Tax, Tax Scholarship | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, October 17, 2021

The Top Five New Tax Papers

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

  1. SSRN Logo (2018) [571 Downloads]  Federal Tax Procedure (2021 Practitioner Ed.), by John Townsend (Houston)
  2. [404 Downloads]  Mega-IRAs, Mega-401(k)s, and Other Mega-Retirement Accounts: Statement for the Record, by Daniel Hemel (Chicago; Google Scholar) & Steven Rosenthal (Tax Policy Center)
  3. [308 Downloads]  State Aid Prohibition — The New GAAR in Town, by Joachim Englisch (Muenster)
  4. [260 Downloads]  Has Cross-Border Arbitrage Met Its Match?, by Ruth Mason (Virginia; Google Scholar) & Pascal Saint-Amans (OECD) (reviewed by Young Ran (Christine) Kim (Utah; Google Scholar) here)
  5. [220 Downloads]  Closing Gaps in the Estate and Gift Tax Base, by Daniel Hemel (Chicago; Google Scholar) & Robert Lord (Americans for Tax Fairness)

October 17, 2021 in Scholarship, Tax, Tax Scholarship, Top 5 Downloads | Permalink

Saturday, October 16, 2021

This Week's Ten Most Popular TaxProf Blog Posts

Break Into Tax: Talking Tax Careers With The Tax Chick

BiT's first-ever crossover episode: Break Into Tax + Amanda Doucette, host of The Tax Chick Podcast! Like us, Amanda likes to make information and resources more accessible and tackle tax topics with humor. The BiT video contains information and extras not in the 30-minute podcast & vice versa! Find the podcast episode at https://thetaxchickpodcast.transistor... (available on all major podcast streaming sites).

Amanda Doucette is a self-proclaimed foodie, spin class and Pilates enthusiast, and a tax lawyer in Canada. She fell into the practice of tax law despite having a life-long hatred of spreadsheets, math, and numbers in general. She hosts both The Tax Chick Podcast and The Tax Chick Blog.

Continue reading

October 16, 2021 in Legal Education, Tax | Permalink

Friday, October 15, 2021

Weekly SSRN Tax Article Review And Roundup: Layser Reviews The Trouble With Targeting Tax Shelters By Blank & Glogower

This week, Michelle Layser (Illinois; Google Scholar) reviews Joshua D. Blank (UC-Irvine; Google Scholar) and Ari D. Glogower (Ohio State; Google Scholar), The Trouble with Targeting Tax Shelters, 74 Admin. L. Rev. __ (2022).

Layser (2018)

The subject of tax avoidance hit the headlines a couple weeks ago when news organizations began to publish analyses of the Pandora Papers. The leaked documents contain confidential records related to offshore accounts held by “130 Forbes billionaires, as well as celebrities, fraudsters, drug dealers, royal family members and leaders of religious groups around the world” (ICIJ). Among other things, analyses of the Pandora Papers illustrate the challenges governments face when trying to detect and deter abusive tax avoidance strategies used by the ultra-wealthy. Though the problem itself is not new, Professors Joshua Blank and Ari Glogower argue that a recent Supreme Court case, CIC Services, LLC v. Internal Revenue Service, may have made it even harder for the IRS to target tax shelters.

Continue reading

October 15, 2021 in Michelle Layser, Scholarship, Tax, Tax Scholarship, Weekly SSRN Roundup | Permalink

Tax Policy In The Biden Administration

Next Week’s Tax Workshops

Monday, October 18: Elaine Maag (Tax Policy Center) presents Issues In Child Benefit Administration In The United States: Imagining The Next Stage of The Child Tax Credit (with Samuel Hammond (Niskanen Center)) as part of the Loyola-L.A. Tax Policy Colloquium. If you would like to attend, please RSVP here.

Tuesday, October 19: Stephanie Hoffer (Indiana-Indianapolis; Google Scholar) presents Tax Legislation in Crises as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Brian Galle.

Wednesday, October 20: David Gamage (Indiana; Google Scholar) presents Tax Now or Tax Never: Political Optionality and the Case for Current-Assessment Tax Reform (with John Brooks (Georgetown; Google Scholar)) as part of the UC-Irvine Tax Policy Colloquium. If you would like to attend, please email taxpolicy@law.uci.edu

Continue reading

October 15, 2021 in Colloquia, Legal Education, Scholarship, Tax, Tax Workshops | Permalink

Michigan And Rutgers Host Virtual Symposium Today On Treaty Override

Michigan, Rutgers, and the Michigan Journal of International Law host the Treaty Override Virtual Symposium today (zoom link here): 

Michigan-rutgersThis symposium will consider the legitimacy and scope of treaty overrides, i.e., situations in which a country unilaterally changes the outcome of a bilateral treaty through its domestic law. This practice appears to be unlawful under the Vienna Convention on the Law of Treaties (which is generally accepted as customary international law) but is constitutional in certain countries, including the United States. There has been a long, ongoing debate on the advisability of such overrides and the conditions under which they are possible in the United States. These days, the debate centers on whether some parts of the Tax Cuts and Jobs Act of 2017 were an override. The symposium will focus on this debate and compare it to similar debates in other jurisdictions. 

10:30 - 11:00 AM: Welcome and Opening Remarks 

  • Gracy Brody (Editor in Chief, Michigan Journal of International Law) 
  • Monica Hakimi (Associate Dean for Faculty and Research, Michigan; Google Scholar)

11:00 AM - 12:30 PM: Treaty Overrides Abroad

Continue reading

October 15, 2021 in Conferences, Scholarship, Tax, Tax Conferences, Tax Scholarship | Permalink

Call For Tax Papers And Panels: Law & Society Hybrid Annual Meeting

Law & Society

Neil Buchanan (Florida) has issued his annual call for tax papers and panels for next year's hybrid  annual meeting of the Law & Society Association in Lisbon and online (July 13-16, 2022):

The Law & Society Association (LSA) will host its next annual meeting from July 13 - 16, 2022, in Lisbon, Portugal.  For the eighteenth year in a row, I will organize sessions for the "Law, Society, and Taxation" group (Collaborative Research Network 31).  For the sixth year in a row, I am pleased that Professors Jennifer Bird-Pollan and Mirit Eyal-Cohen have committed to working tirelessly to make our conference-within-a-conference a success. ...

As currently planned, the conference will be held in a hybrid format, with some sessions entirely in person and others entirely virtual.

Although there is an official call for papers, please remember that you are not bound by the official theme of the conference ("Rage, Reckoning, & Remedy").  We will give full consideration to proposals in any area of tax law, tax policy, distributive justice, interdisciplinary scholarship, and so on.

The deadline for submissions is 11:59 p.m. ET (USA) on Wednesday, November 10, 2021.

Continue reading

October 15, 2021 in Conferences, Legal Education, Scholarship, Tax, Tax Conferences, Tax Scholarship | Permalink

Thursday, October 14, 2021

Hines Presents Evaluating Tax Harmonization Today At Georgetown

James Hines (Michigan; Google Scholar) presents Evaluating Tax Harmonization at Georgetown today as part of the OMG Transatlantic Tax Talks Series (OMG = Oxford-Michigan-MIT-Munich-Georgetown):

James-HinesTax harmonization can address downward rate pressure due to tax competition, but does so by imposing a common rate that may not suit all governments.  A second-order Taylor approximation yields the simple rule that tax rate harmonization advances collective government objectives only if tax competition reduces average tax rates by more than the standard deviation of observed tax rates.  Consequently, any objective-maximizing harmonized tax rate must exceed the sum of the observed average tax rate and the standard deviation of tax rates.  In 2020 the standard deviation of world corporate tax rates weighted by GDP was 4.5%, and the mean corporate tax rate 25.9%, so if competition sufficiently depresses tax rates then governments may find it attractive to harmonize at a corporate tax rate of 30.4% or higher. The minimum tax rate that most effectively advances collective objectives equals the average effect of tax competition plus the average tax rate in affected countries.  Hence there are dominated regions: in the 2020 data, there is no degree of tax competition for which a world minimum corporate tax rate between 4% and 27% would be consistent with maximizing collective objectives.

Continue reading

October 14, 2021 in Colloquia, Scholarship, Tax, Tax Workshops | Permalink

Hoffer Presents Tax Legislation In Crises Today At Indiana

Stephanie Hoffer (Indiana-Indianapolis; Google Scholar) presents Tax Legislation in Crises at Indiana-Bloomington today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

Stpehanie-hoffer

Introduction
Congress, during crises, uses tax law as an instrument of mitigation. A legislature convened in crisis, though, faces unusual informational, political, and time constraints. Tax legislation tends toward complexity. Passing complex legislation under unusual constraints likely precludes thorough contemporaneous consideration of the distributional or other policy effects of the legislation on a diverse group of stakeholders. Perhaps as a consequence, tax legislation passed in times of crises typically builds on prior crisis legislation and contains many recurring provisions. 

This essay examines recurring provisions in crisis-motivated tax and presents preliminary observations on a study of tax legislation passed in response to national crises during the years the 2000 – 2020. The study period includes the September 11 terrorist attacks, hurricanes Katrina, Rita, and Wilma, the 2008 housing market collapse, the Great Recession, and the COVID pandemic. The study examines which kinds of provisions recur under which circumstances, for whose benefit, and at what cost.

The broader work of which this essay is a part addresses three hypotheses. First, crisis tax legislation is formulaic, generally including a number of provisions drawn from prior tax crisis bills. Second, subsequent crisis tax legislation tends to expand the scope of provisions repeated from earlier crisis tax legislation. Third, among recurring provisions, privately-directed outlays via tax expenditure will outweigh Congressionally-directed outlays.

Continue reading

October 14, 2021 in Colloquia, Scholarship, Tax, Tax Workshops | Permalink

Cardozo Seeks To Hire An Entry Level Or Lateral Tax Prof

The Benjamin N. Cardozo School of Law at Yeshiva University invites applications for a faculty position focused on Taxation:

Cardozo (2015)We are open both to lateral and entry-level candidates. Lateral candidates should have a superior publication record. Entry-level candidates should have a demonstrated commitment to scholarship.

Cardozo Law values diversity and aims to build a team with a multiplicity of backgrounds, identities, and lived experiences that inform and strengthen our work. The Benjamin N. Cardozo School of Law is an Equal Opportunity/Affirmative Action Employer. All qualified applicants will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability, age or protected veteran status.

Continue reading

October 14, 2021 in Legal Education, Tax, Tax Prof Jobs | Permalink

Kleiman: Revolutionizing Redistribution — Tax Credits And The American Rescue Plan

Ariel Jurow Kleiman (Loyola-L.A.), Revolutionizing Redistribution: Tax Credits and the American Rescue Plan, 133 Yale L.J.F. ___ (2021):

Yale Law Journal Logo (2018)The American Rescue Plan Act (ARPA) dramatically alters the federal government’s approach to redistribution in 2021. Among its boldest reforms are its temporary expansions of the Child Tax Credit and the Earned Income Tax Credit. For the first time, ARPA authorizes meaningful cash support for nonworking families and childless workers, two groups that have been historically disadvantaged by social safety net programs. This Essay considers ARPA’s effects on low-income American taxpayers, spotlighting in particular how the reforms will protect millions of households from being pushed into poverty or further into poverty as a result of paying taxes—a phenomenon called “fiscal impoverishment.” Policy makers must make ARPA’s reforms permanent in order to ensure that low-income taxpayers remain protected past 2021. As they work to do so, policy makers should be mindful of gaps in the tax credits that will undermine the reforms’ positive effects. The Essay identifies several such gaps and argues that Congress should legislate more dramatic inclusion for households with and without children.

Continue reading

October 14, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Bearer-Friend: Colorblind Tax Enforcement

Jeremy Bearer-Friend (George Washington; Google Scholar), Colorblind Tax Enforcement, 97 N.Y.U. L. Rev. ___ (2022):

NYU Law ReviewThe United States Internal Revenue Service (“IRS”) has repeatedly taken the position that, because the IRS does not ask taxpayers to identify their race or ethnicity on submitted tax returns, IRS enforcement actions are not affected by taxpayers' race or ethnicity. This claim, which I call “colorblind tax enforcement,” has been made by multiple IRS Commissioners serving in multiple Administrations (both Democratic and Republican). This claim has been made to members of Congress and to members of the press.

In this article, I refute the IRS position that racial bias cannot occur under current IRS practices. I do so by identifying the conditions under which race and ethnicity could determine tax enforcement outcomes under three separate models of racial bias: racial animus, implicit bias, and transmitted bias. I then demonstrate how such conditions can be present across seven distinct tax enforcement settings regardless of whether IRS asks about race or ethnicity. The IRS enforcement settings analyzed include summonses, civil penalty assessments, collection due process hearings, innocent spouse relief, and DOJ referrals.

Continue reading

October 14, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Profit Shifting During Foreign Tax Holidays

Travis Chow (Hong Kong; Google Scholar), Jeffrey L. Hoopes (North Carolina; Google Scholar) & Edward L. Maydew (North Carolina; Google Scholar), Profit Shifting During Foreign Tax Holidays:

We undertake the first empirical analysis of profit shifting by U.S. firms during foreign tax holidays. We show that foreign tax holidays have become a prevalent and powerful tax planning strategy among U.S. firms. We find that U.S. firms significantly increase their outbound profit shifting while participating in foreign tax holidays. However, we also find that profit shifting associated with tax holidays comes at the cost of increased tax uncertainty. Our results have important implications for policy making and for understanding firm behavior.

Continue reading

October 14, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Wednesday, October 13, 2021

The Rise Of Law And The Fall Of Circular 230

Michael Hatfield (Washington), The Rise of Law and the Fall of Circular 230: Tax Lawyer Professional Standards, 1985-2015, 24 Fla. Tax Rev. 828 (2021):

Florida Tax Review (2021) (1)This third article focuses on the two issues that dominated discussions of professional responsibility standards for tax lawyers in the 1985-2015 period: return position standards and tax shelter opinions. It opens with consideration of the ABA’s 1965 opinion providing “reasonable basis” as the standard for undisclosed return positions, and then traces the response to that opinion as the response prods the development of the 1985 replacement with its “realistic possibility of success” standard. The Article documents the extensive interaction between Congress, the Treasury Department, and the tax bar over the next 30 years during which penalties are studied and revised and, eventually, § 6694, Circular 230, and the “substantial authority” standard succeed to primary importance. It chronicles the rise of the Treasury Department and Circular 230 and the idea of a single regulator of the full scope of professional tax work until Loving and Ridgely trip-up Treasury in its efforts to become that regulator.

Continue reading

October 13, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Taxing Interstate Remote Workers After New Hampshire v. Massachusetts: The Current Status Of The Debate

Edward A. Zelinsky (Cardozo), Taxing Interstate Remote Workers After New Hampshire v. Massachusetts: The Current Status of the Debate, 25 Fla. Tax Rev. __ (2022):

Florida Tax Review (2021)Under the dormant Commerce Clause, Massachusetts, New York and other states emulating them violate their constitutional duty to apportion when they tax the income nonresident telecommuters earn remotely working at their out-of-state homes. Also for Commerce Clause purposes, nonresident telecommuters lack substantial presence to their employer’s state when such nonresidents work at their out-of-state homes. New Hampshire thus argued correctly in New Hampshire v. Massachusetts that, for Due Process purposes, Massachusetts taxed extraterritorially and unconstitutionally when Massachusetts taxed income earned by nonresident telecommuters from their homes outside Massachusetts’ borders.

Continue reading

October 13, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Accounting Firms Are Beating Law Firms In The Tax Services Battle

Danielle Higgins Green (Fordham), & Stanley Veliotis (Fordham; Google Scholar), Law vs. Accounting Firms: Competing Over Three Decades of Change, 173 Tax Notes Fed. 13 (Oct. 4, 2021):

In this report, Green and Veliotis investigate how major regulatory and legislative changes over the past three decades have affected the competitive market for tax services between large U.S. law firms and accounting firms — particularly the supply side of the market for tax services provided to corporations.

Tax Notes 1

Continue reading

October 13, 2021 in Scholarship, Tax, Tax Analysts, Tax Scholarship | Permalink

New Tax Podcast: Taxes For The Masses

Taxes For The Masses

Taxes For The Masses (TFTM):

Lisa De Simone (Associate Professor of Accounting, McCombs School of Business, University of Texas at Austin) and Bridget Stomberg (Associate Professor of Accounting, Kelley School of Business, Indiana University) (friends, professors, tax nerds) discuss tax topics in simple terms.

What is TFTM?
We started this podcast because we love talking tax with each other and want to share our passion with the world. We aim to discuss hot tax topics in a way that informs non-tax and/or non-accounting experts about the issues making headlines. Our goal is to explain each issue in a way anyone can understand - even people who are not tax nerds like us! To do so, we'll provide examples and color commentary that help our audience understand each side of the issue in an objective way. Our own personal biases will inevitably poke out, but we do our best to indicate when we are stating our own opinions versus objectively explaining an issue.

Continue reading

October 13, 2021 in Tax | Permalink

Tuesday, October 12, 2021

Blouin Presents Does Tax Planning Affect Organizational Complexity: Evidence From Check-the-Box Today At NYU

Jennifer Blouin (Penn) presents Does Tax Planning Affect Organizational Complexity: Evidence from Check-the-Box (with Linda Krull (Oregon; Google Scholar)) at NYU today as part of its Tax Policy and Public Finance Colloquium hosted by Dan Shaviro:

Blouin (2021)This study investigates the effect of the 1997 check-the-box regulations on the current effective income tax rates of U.S. multinational firms. Following the empirical methodology developed in Dyreng and Lindsey (2009), we measure the effect that the change in tax law has on the average worldwide, U.S., and foreign taxes paid on worldwide, federal and foreign pretax book income for a large sample of U.S. multinational firms. We find that on average U.S. multinational firms’ worldwide tax rates declined by 7.5% in the post-1996 period. Further, we find that the effect of the regulations was greater on U.S. multinational firms’ average foreign tax rates as compared to their average U.S. foreign tax rates. Our results also suggest that the effect is concentrated in the U.S. multinational firms that had a greater change in their ownership structures and a greater change in the balance of their intercompany payments in the post-1996 period.  

Continue reading

October 12, 2021 in Colloquia, Scholarship, Tax, Tax Workshops | Permalink

Maag Presents Imagining The Next Stage Of The Child Tax Credit Today At Georgetown

Elaine Maag (Tax Policy Center) presents Imagining the Next Stage of the Child Tax Credit (with Samuel Hammond (Niskanen Center)) at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Brian Galle:

Maag-elaineThe American Rescue Plan Act of 2021 (ARP) expanded the Child Tax Credit (CTC) for one year and delivered it as a monthly benefit to the vast majority of recipients. Whether the credit will retain its current form, revert to its previous form, or take on a new form altogether is unclear. Even if the credit is extended, it is unlikely to be extended permanently and there remains the possibility that if will continue to evolve as discussions around providing a robust child benefit continue. A robust child benefit could provide a minimum source of support to all or most families with children which would mean that fewer children would grow up in poverty and would be harmed by temporary income drops. We compare how a tax credit such as the Child Tax Credit (CTC) administered by the Internal Revenue Service (IRS) or a universal child allowance administered by the Social Security Administration (SSA) could be structured to best meet the needs of families with children. Tax credits, in general, have been the more popular tool of choice for both Democrats and Republicans to redistribute income in recent years (Faricy 2015)–including the temporary expansion of the Child Tax Credit (CTC).

Continue reading

October 12, 2021 in Colloquia, Scholarship, Tax, Tax Workshops | Permalink

Listokin Presents Monetary Finance Today At Boston College

Yair Listokin (Yale; Google Scholar) presents Monetary Finance (with Brian Galle (Georgetown; Google Scholar)) (reviewed by David Elkins (Netanya) here) at Boston College today as part of its Tax Policy Collaborative hosted by Jim Repetti, Diane Ring, and Shu Yi Oei:

Listokin_yair_yjl6Conventional economic wisdom holds that governments cannot pay their bills by printing money. Running the printing press—or, at modern central banks, tapping a few keys to create electronic funds—causes inflation, and inflation can destroy economies. Yet as it turns out, since 2008 developed countries throughout the world have in effect printed trillions of dollars’ worth of new money without any real hint of inflation. In the United States, for example, this “monetary finance” has amounted to ⅓ of all deficit spending over the last decade.

The power of central banks to finance government at this scale should transform how we think about the fiscal state, our system of taxing and spending. Yet because this phenomenon is new, runs contrary to decades of theory, and is not yet fully understood, little scholarship yet grapples with how governments should use monetary finance. Most nations’ basic architectures for revenue and spending decisions assume that taxes and government borrowing are the primary sources of government finance. What should happen to fundamental legal rules, such as balanced-budget requirements, debt ceilings, or the tax legislative process, when central banks are also key players in financing national expenditures? And how should the structure of central banks change to reflect this new power, which could turn into a dangerous temptation?

Continue reading

October 12, 2021 in Colloquia, Scholarship, Tax, Tax Workshops | Permalink

Faulhaber: Lost In Translation — Excess Returns And The Search For Substantial Activities

Lilian V. Faulhaber (Georgetown; Google Scholar), Lost in Translation: Excess Returns and the Search for Substantial Activities:

Since 2010, international tax policymakers have proposed a variety of minimum taxes on excess returns, but every proposal has defined excess returns differently. This Article asks what excess returns are supposed to represent – and concludes that the answer is very different from what policymakers have suggested.

The trend of targeting so-called excess returns started in 2010 with a one-page idea in the Obama Treasury’s proposed budget. Over the next decade, this idea became the basis for one of the major international tax reform provisions in the 2017 U.S. tax reform and is now being considered as part of Pillar Two of the OECD’s current digital tax project. The idea in question is a minimum tax on foreign excess returns. Yet even though the general idea of a minimum tax on foreign excess returns has stayed the same across administrations and jurisdictions, the specifics of this idea have changed with every iteration, and the proponents of this idea have justified each version differently and defined its various elements differently.

Continue reading

October 12, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Blank & Glogower: The Trouble With Targeting Tax Shelters

Joshua D. Blank (UC-Irvine; Google Scholar) & Ari D. Glogower (Ohio State; Google Scholar), The Trouble with Targeting Tax Shelters, 74 Admin. L. Rev. ___ (2022):

Abusive tax shelters—complex transactions that produce tax benefits that Congress never intended, but that may resemble legitimate business deals—frequently escape IRS detection. For the past 20 years, the federal government has attempted to bolster the IRS’s ability to detect these transactions by requiring taxpayers and their advisors to disclose “reportable transactions” to the IRS Office of Tax Shelter Analysis. While mandatory disclosure rules can serve valuable tax enforcement functions, including deterrence of abusive tax planning, they are also subject to significant limitations, especially when applied against high-income and wealthy taxpayers who have access to sophisticated legal counsel. In July 2021, the U.S. Supreme Court introduced an additional potential obstacle as a result of its decision in CIC Services, LLC v. Internal Revenue Service—the reportable transaction rules may now be subject to preemptive administrative law challenges without being barred by the Anti-Injunction Act.

This Article argues that in the wake of CIC Services, policymakers should look beyond simply reforming the IRS’s process of issuing tax shelter notices to avoid potential administrative law challenges. Instead, they should reconsider more generally the government’s primary reliance on “activity-based rules” to combat abusive tax planning. This Article brings new perspective to the challenges of targeting tax shelters and explains how they result from the government’s activity-based approach.

Continue reading

October 12, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Monday, October 11, 2021

Devereux Presents Taxing Profit In The Market Country Today At Loyola-L.A.

Michael Devereux (Oxford; Google Scholar) presents Taxing Profit in a Global Economy and Comparing Proposals to Tax Some Profit in the Market Country (with Richard Collier (Oxford) & John Vella (Oxford)) at Loyola-L.A. today as part of its Tax Policy Colloquium:

Michael-devereuxTaxing Profit in a Global Economy
This book undertakes a fundamental review of the existing international system of taxing business profit. It steps back from the current political debates on how to combat profit shifting and how taxing rights over the profits of the digitalized economy should be allocated. Instead, it starts from first principles to ask how we should evaluate a tax on business profit—and whether there is any good rationale for such a tax in the first place. It then goes on to evaluate the existing system and a number of alternatives that have been proposed. It argues that the existing system is fundamentally flawed, and that there is a need for radical reform. The key conclusion from the analysis is that there would be significant gains from a reform that moved the system towards taxing profit in the country in which a business made its sales to third parties. That conclusion informs two proposals that are put forward in detail and evaluated: the Residual Profit Allocation by Income (RPAI) and the Destination-based Cash Flow Tax (DBCFT). 

Continue reading

October 11, 2021 in Colloquia, Scholarship, Tax, Tax Scholarship, Tax Workshops | Permalink

Manhattan Institute Charts: Spending, Taxes, And Deficits

Brian Riedl (Manhattan Institute), 2021 Chart Book Examines Spending, Taxes, and Deficits:

The Manhattan Institute’s Brian Riedl has released the 2021 edition of his book of charts examining the federal budget, spending, taxes, and deficits. The 118-page chart book begins by broadly examining the rising budget deficits and national debt – well beyond the temporary recession deficits – and then gradually dives deeper to show the policies driving the $112 trillion in new deficits projected over the next three decades. Next, it tallies the cost of common spending increase and tax relief proposals, and determines whether those costs can be offset by the proposed tax increases and defense cuts – including a full accounting of the long-term cost of President Biden’s proposals. Finally, the report examines trends in tax revenues and tax progressivity, common budget myths, and offers a full accounting of the fiscal records of Presidents Bush and Obama.

These charts — most of which rely on publicly-available data from the Congressional Budget Office, Office of Management and Budget, Census Bureau, and U.S. Treasury — nevertheless defy conventional wisdom about spending, taxes, and deficits.

MI 3

Continue reading

October 11, 2021 in Tax, Think Tank Reports | Permalink

Northwestern Seeks To Fill Two Non-Tenure-Track Tax Faculty Positions

In addition to seeking to hire a tenured or tenure-track tax professor, Northwestern is seeking to hire two non-tenure-eligible tax positions in its graduate tax program:

Northwestern (2018)Associate Director:

Northwestern Pritzker School of Law invites applications for a full-time faculty position to serve as Associate Director of its Tax Program. Candidates will be considered for appointment at the rank of lecturer, senior lecturer, or professor of practice (non-tenure-eligible).

The duties of the position include teaching tax courses during each academic year, serving as Faculty Editor of The Tax Lawyer, assisting the Director of the Tax program with administration and strategic planning, and advising students. Northwestern seeks applicants with a record of or potential for excellence in teaching, the ability to successfully mentor students on career goals and advancement, strong organizational skills, and the ability to work collaboratively and constructively with others. ...

Preferred qualifications include an LL.M. in Tax and teaching experience at the J.D. or LL.M. level. Candidates should submit a C.V. and a cover letter explaining their interest in the position through Northwestern’s online application system. Candidates are highly encouraged to apply by November 5, 2021.

Lecturer:

Northwestern Pritzker School of Law invites applications for a full-time faculty position in its Tax Program. Candidates will be considered for appointment at the rank of lecturer, senior lecturer, or professor of practice (non-tenure-eligible).

Continue reading

October 11, 2021 in Legal Education, Tax, Tax Prof Jobs | Permalink

Classic Lesson From The Tax Court: Sex And Deductions

Camp (2021)I was going to title this week’s blog “The Concept of Inherently Personal.”  But I could not resist trying to put some clickbait in the title.  Today I want to discuss two classic cases from Tax Court.  They explore the never-ending balancing act needed to decide when an expense is deductible when it has both a personal and business aspect.  Between them, the two cases teach us a lesson about life in all its fullness.  That they both involve sex makes the lesson perhaps more memorable, but no less appropriate to any type of mixed business/personal deduction.  And while both cases involve sex, they do so from interestingly different perspectives.

In Vitale v. Commissioner, T.C. Memo. 1999-131 (Judge Fay), the Court denied deduction of certain expenses (payments to prostitutes), finding that the concededly business purpose of the expense was overcome by its inherently personal nature.  Yet in Hess v. Commissioner, T.C. Summary Opinion 1994-79 (Judge Joan Seitz Pate), the Court permitted a depreciation deduction for certain expenses (breast implants), finding that the inherently personal nature of the expense was overcome by its obvious business purpose.

You will find the surprisingly non-salacious details below the fold. 

Continue reading

October 11, 2021 in Bryan Camp, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (2)

Break Into Tax: Friday The 15th

Tax day is coming soon. ... For tax professionals, every day is a KILLER! Friday the 15th. ... A 2-week nightmare of taxes. You don't even have until Monday!

 Break Into Tax thanks Nickolas Cole for help with the thumbnail image.

Continue reading

October 11, 2021 in Legal Ed News, Legal Education, Tax, Tax News | Permalink

TaxProf Blog Weekend Roundup

Sunday, October 10, 2021

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. SSRN Logo (2018) [558 Downloads]  Federal Tax Procedure (2021 Practitioner Ed.), by John Townsend (Houston)
  2. [393 Downloads]  Mega-IRAs, Mega-401(k)s, and Other Mega-Retirement Accounts: Statement for the Record, by Daniel Hemel (Chicago; Google Scholar) & Steven Rosenthal (Tax Policy Center)
  3. [379 Downloads]  Serenity Now! The (Not So) Inclusive Framework and the Multilateral Instrument, by Yariv Brauner (Florida; Google Scholar)
  4. [305 Downloads]  State Aid Prohibition — The New GAAR in Town, by Joachim Englisch (Muenster)
  5. [245 Downloads]  Has Cross-Border Arbitrage Met Its Match?, by Ruth Mason (Virginia; Google Scholar) & Pascal Saint-Amans (OECD) (reviewed by Young Ran (Christine) Kim (Utah; Google Scholar) here)

October 10, 2021 in Scholarship, Tax, Tax Scholarship, Top 5 Downloads | Permalink

Saturday, October 9, 2021

This Week's Ten Most Popular TaxProf Blog Posts

136 Countries Agree To 15% Global Minimum Corporate Tax Rate

OECD, International Community Strikes a Ground-Breaking Tax Deal For the Digital Age:

OECD TaxMajor reform of the international tax system finalised today at the OECD will ensure that Multinational Enterprises (MNEs) will be subject to a minimum 15% tax rate from 2023.

The landmark deal, agreed by 136 countries and jurisdictions representing more than 90% of global GDP, will also reallocate more than USD 125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits.

Following years of intensive negotiations to bring the international tax system into the 21st century, 136 jurisdictions (out of the 140 members of the OECD/G20 Inclusive Framework on BEPS) joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. It updates and finalises a July political agreement by members of the Inclusive Framework to fundamentally reform international tax rules.

Continue reading

October 9, 2021 in Tax, Tax News | Permalink

Friday, October 8, 2021

Weekly SSRN Tax Article Review And Roundup: Saito Reviews Seto’s Modeling The Welfare Effects Of Advertising

This week, Blaine Saito (Northeastern; Google Scholar) reviews a new work by Theodore P. Seto (Loyola-L.A.; Google Scholar), Modeling the Welfare Effects of Advertising: Preference-Shifting Deadweight Loss, 75 Tax L. Rev. ___ (2022).

Saito-blaine-800x800-1

Advertising is ubiquitous. Ads appear in almost every form of media from newspapers to television. Today, advertising is more powerful, with large tech companies using data collected on their users to create and sell targeted ads. The question for economics, and by extension tax policy, is do these advertisements influence our consumption patterns and how does that affect optimal tax theory. Ted Seto’s new piece, forthcoming in the Tax Law Review, Modeling the Welfare Effects of Advertising: Preference-Shifting Deadweight Loss reveals how the preference-shifting forces us to change our thinking about optimal tax theory.

Continue reading

October 8, 2021 in Blaine Saito, Scholarship, Tax, Tax Scholarship, Weekly SSRN Roundup, Weekly Tax Roundup | Permalink

Tax Policy In The Biden Administration

Next Week’s Tax Workshops

Monday, October 11: Michael Devereux (Oxford; Google Scholar) presents Taxing Profit in the Market Country (with Richard Collier & John Vella (Oxford)) virtually as part of the Loyola-L.A. Tax Policy Colloquium. If you would like to attend, please RSVP here

Tuesday, October 12: Elaine Maag (Tax Policy Center) presents Imagining the Next Stage of the Child Tax Credit (with Samuel Hammond (Niskanen Center)) virtually as part of the Georgetown Tax Law and Public Finance Workshop. If you would like to attend, please contact Brian Galle.

Tuesday, October 12: Jennifer Blouin (Penn) presents Does Tax Planning Affect Organizational Complexity: Evidence from Check-the-Box (with Linda Krull (Oregon; Google Scholar)) as part of the NYU Tax Policy and Public Finance Colloquium. If you would like to attend, please contact Dan Shaviro

Tuesday, October 12: Yair Listokin (Yale; Google Scholar) presents Monetary Finance (with Brian Galle (Georgetown; Google Scholar)) virtually as part of the Boston College Tax Policy Collaborative. If you would like to attend, please contact James RepettiDiane Ring, or Shu Yi Oei.

Thursday, October 14: Stephanie Hoffer (Indiana-McKinney; Google Scholar) presents Tax Legislation in Crises virtually as part of the Indiana-Maurer Tax Policy Colloquium. If you would like to attend, please register here

Continue reading

October 8, 2021 in Colloquia, Legal Education, Scholarship, Tax, Tax Workshops | Permalink

Hemel: South Dakota’s Tax Avoidance Schemes Represent Federalism At Its Worst

Washington Post op-ed:  South Dakota’s Tax Avoidance Schemes Represent Federalism At Its Worst, by Daniel Hemel (Chicago; Google Scholar): 

States should be free to experiment with policy — but not to create tax dodges.

The Pandora Papers — the trove of more than 11.9 million confidential documents shared with The Washington Post and partner news organizations — shine a light on South Dakota’s role as an offshore financial center.

The Pandora Papers — the trove of more than 11.9 million confidential documents shared with The Washington Post and partner news organizations — shine a light on South Dakota’s role as an offshore financial center.

For the most part, the South Dakota revelations in the Pandora Papers relate to the Mount Rushmore State’s status as a magnet for foreign wealth, including that derived from international drug smuggling and exploitative labor practices. But it’s not just foreigners who are moving money to the “little tax haven on the prairie”: High-net-worth Americans also are shifting billions to South Dakota and a handful of other domestic havens, shortchanging federal and home state tax collectors in the process.

The rise of domestic tax havens marks a troubling new chapter in the history of American federalism. Justice Louis Brandeis hailed states as “laboratories of democracy,” but increasingly U.S. states are becoming laboratories of sophisticated tax avoidance. So far, Congress and the states whose tax bases are being cannibalized by the domestic havens have done little to fight back. Hopefully, the Pandora Papers will catalyze a reaction that’s long past due.

Continue reading

October 8, 2021 in Tax, Tax News | Permalink

Thursday, October 7, 2021

Shanske: Agglomeration And State Personal Income Taxes

Darien Shanske (UC-Davis; Google Scholar), Agglomeration and State Personal Income Taxes: Time to Apportion (With Critical Commentary on New Hampshire's Complaint Against Massachusetts), 48 Fordham Urb. L.J. 948 (2021): 

Sometimes easy cases make bad law — or at least might make bad law. The Supreme Court is currently considering granting certiorari in New Hampshire v. Massachusetts. At issue is the State of New Hampshire’s (and its amici’s) claim that Massachusetts’s insistence on applying its income tax to residents of New Hampshire, who once commuted to work for businesses in Massachusetts but now remotely work for those businesses in New Hampshire because of the COVID19 pandemic, violates the Due Process Clause and dormant Commerce Clause. The claim is simple and seductive: if these New Hampshire residents barely leave their own homes, much less their state, how can it accord with due process for Massachusetts to tax them?

Continue reading

October 7, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Haneman: Prepaid Death

Victoria J. Haneman (Creighton; Google Scholar), Prepaid Death,  59 Harv. J. on Legis. ___ (2022):

The cost of an adult funeral exceeds $9,000. Funerals are expensive and death is not considered an appropriate time to bargain shop. The consumer is generally inexpert and vulnerable due to bereavement. Decisions are often time-pressured and perceived as irreversibly final. Accordingly, the death care industry benefits both from information asymmetry and etiquette uncertainty. Protecting the bereaved consumer calls for reversing the current norm of at-need (after death) purchasing in favor of pre-need (before death) planning and prepayment. Due to excessive influence of the industry over its state regulators, referred to as regulatory capture, current pre-need prepayment instruments are so deeply flawed that conventional wisdom recommends against prepayment. 

Continue reading

October 7, 2021 in Scholarship, Tax, Tax Scholarship | Permalink

Northwestern Offers 4-6 Graduate Tax Program Tuition Scholarships ($69k) To Serve As Student Editors Of The Tax Lawyer

From Philip Postlewaite (Harry R. Horrow Professor in International Law and Director, Northwestern's Graduate Tax Program):

Northwestern Tax Lawyer (2021)As you know, the Tax Program at Northwestern is the educational affiliate of the ABA’s Tax Section. Each year, four to six LLM-Tax students are selected to serve as editors of The Tax Lawyer, the Tax Section’s flagship journal. In order to encourage highly qualified applicants to apply to, and matriculate at, Northwestern, each student editor receives a Dean’s Scholarship, which is equal to the cost of tuition [$69,350].

We are seeking your assistance in identifying top candidates for these positions. Please inform interested students of this excellent opportunity.

The application deadline for students who are interested in being considered for a position on the editorial board is January 15, 2022.

Continue reading

October 7, 2021 in ABA Tax Section, Legal Education, Tax | Permalink

Charlene Luke And Grayson McCouch Awarded Chair, Professorship At Florida

Charlene Luke (Google Scholar) has been named Hubert C. Hurst Eminent Scholar Chair in Law. Her recent publications include:

Grayson McCouch has been named Clarence TeSelle Professor of Law. His recent publications include:

Continue reading

October 7, 2021 in Legal Education, Tax | Permalink

Northwestern Seeks To Hire An Entry Level Or Lateral Tax Prof

Northwestern Pritzker School of Law invites applications for tenured or tenure-track faculty positions with an expected start date of September 1, 2022:

Northwestern (2018)This is part of a multi-year strategic hiring plan, and we will consider entry-level, junior, and senior lateral candidates.

Northwestern seeks applicants with distinguished academic credentials and a record of or potential for high scholarly achievement and excellence in teaching. Specialties of particular interest include: tax, anti-discrimination law, international law (joint search with the Buffett Institute for Global Affairs), health law (joint search with the Feinberg School of Medicine), and business law. Northwestern welcomes applications from candidates who would contribute to the diversity of our faculty and community. Positions are full-time appointments with tenure or on a tenure-track.

Continue reading

October 7, 2021 in Legal Education, Tax, Tax Prof Jobs | Permalink

Democrats’ Tax Plan Upends Estate Planning Using Trusts With Life Insurance

Lynnley Browning (Financial Planning), Democrats’ Tax Plan Upends Estate Planning Using Trusts With Life Insurance:

The tax plan taking shape in Congress would strangle a strategy widely used by the wealthy to shield their estates from taxes and pass on major wealth to heirs. Specifically, it would erase the long-standing benefit of keeping life insurance in certain trusts, by making its value subject to the 40% estate tax when the policy owner dies. That’s a huge change: Currently, the trusts and their assets aren’t subject to the levy.

With that prospect, why pour money into a policy now? Because, the thinking goes, pre-paying a lifetime’s worth of annual premiums by Jan. 1, before the new curb would go into effect if approved, could preserve the trust’s lucrative tax benefits. ...

Continue reading

October 7, 2021 in Tax, Tax News | Permalink

Wednesday, October 6, 2021

The Tax Gap, Shades Of Gray, And The Manchin Memo

Daniel J. Hemel (Chicago; Google Scholar), Janet Holtzblatt (Tax Policy Center) & Steve Rosenthal (Tax Policy Center), The Tax Gap's Many Shades of Gray:

The “tax gap”—the difference between the amount of “true tax” and the amount of tax actually paid—has garnered widespread attention in recent months. Much of the commentary on the subject equates the tax gap with “tax evasion,” a term broadly understood to connote intentional (and potentially criminal) underreporting. This paper cautions against conflating the tax gap with tax evasion. The tax gap includes substantial gray areas where the law is ambiguous and the IRS’s determination of “true tax” is debatable. On top of that, the IRS’s methodology for measuring the tax gap includes upward adjustments that are recommended by front-line examiners but reversed on administrative appeal or judicial review. Moreover, a substantial portion of the estimated tax gap is derived from a statistical technique called “detection controlled estimation” that potentially magnifies the impact of later-reversed recommendations on the ultimate tax gap measure. Weighing in the opposite direction, the IRS’s approach to measuring the tax gap excludes some amounts that clearly constitute tax evasion (most significantly, underreporting of tax on illegal-source income).

Continue reading

October 6, 2021 in Scholarship, Tax, Tax Scholarship | Permalink