TaxProf Blog

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

Wednesday, November 14, 2018

Oei & Osofsky: Beyond Notice-and-Comment — The Making Of The § 199A Regulations

Shu-Yi Oei (Boston College) & Leigh Osofsky (North Carolina), Beyond Notice-and-Comment: The Making of the § 199A Regulations:

Congress passes a highly transformative but hastily drafted legal reform. Who comments in the regulatory process, when, and what are the implications? In this Article, we study these questions by examining how the regulatory process has unfolded in the case of § 199A, one of the central provisions from the monumental 2017 tax reform.

We document the comments that went into making the § 199A regulations from the time of legislative enactment through the hearing on the proposed regulations. We show that many comments were made before the proposed regulations were issued and the official administrative law notice-and-comment period had even opened. We examine how Treasury explicitly considered these comments in the proposed regulations. And we explore how these comments and other engagements—which were not wholly transparent to the public—shaped the proposed regulations and the subsequent conversation in the actual notice-and-comment period. We also investigate the role of indirect public dialogue and comments received after the official close of the notice-and-comment period.

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November 14, 2018 in Scholarship, Tax | Permalink | Comments (0)

Scharff: The Challenge Of Pricing Externalities Under State Law

Erin Scharff (Arizona State), Green Fees: The Challenge of Pricing Externalities Under State Law, 97 Neb. L. Rev. 168 (2018):

Policymakers at the state and local level are increasingly interested in using market-based pricing mechanisms as regulatory tools. For example, at the state level, several states have recently considered state-level carbon pricing, while at the local level, municipal governments are increasingly turning to stormwater remediation fees to pay for the treatment of municipal runoff required by the Clean Water Act.

These regulatory programs are inspired by the insight of English economist Arthur Pigou, who suggested governments could price social costs into market transactions by imposing a tax. Such policies, however, are frequently subject to state court litigation challenging them as unlawful taxes. State law restricts both state and local governments’ ability to enact taxes, but similar restrictions are often not in place to limit the enactment of regulatory actions or user fees. Unfortunately, state courts have struggled to appropriately classify these fees under existing state law doctrines.

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November 14, 2018 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, November 13, 2018

Fleming Presents Real Worldwide v. Territorial Taxation After The TCJA Today At Boston College

FlemingJ. Clifton Fleming, Jr. (BYU) presents An Early Look at Real Worldwide v. Territorial Taxation After the TCJA (with Robert Peroni (Texas) & Stephen Shay (Harvard) today at Boston College today as part of its Tax Policy Workshop Series hosted by Jim Repetti, Diane Ring, and Shu-Yi Oei:

In the run up to enactment of the 2017 Tax Cuts and Jobs Act (TCJA) one of the principal U.S. tax policy issues was how foreign source active business income of U.S. multinational enterprises (MNEs) should be taxed by the United States if the system of deferring U.S. tax on active income of a foreign subsidiary was ended. Should active foreign income be taxed under a territorial or exemption system—i.e. bear no residual U.S. tax—or should it be subjected to real worldwide taxation—i.e. current taxation at regular U.S. rates coupled with a credit for foreign income tax paid limited to the U.S. tax on the foreign-source income as measured for U.S. tax purposes.

The opposing sides were not without common ground. Both agreed that the existing U.S. system for taxing the foreign-source active-business income of U.S. MNEs was bad because it generally did not impose U.S. tax until the active income of foreign subsidiaries was repatriated, either through dividends or by sale of subsidiary stock at a price reflecting accumulated foreign-source income.

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November 13, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Elkins Presents The Case Against Income Taxation Of Multinational Enterprises Today At Hebrew University

Elkins (2018)David Elkins (Netanya) presents The Case Against Income Taxation of Multinational Enterprises, 36 Va. Tax Rev. 143 (2017), today at the Hebrew University of Jerusalem Faculty of Law:

Probably the most uncontroversial thing that one can say about international taxation is that it is a mess. Sophisticated planning techniques, which seem beyond the power of taxing authorities to control, enable highly profitable multinational enterprises (MNEs) to pay little or no tax on their income. Efforts by transnational organizations to coordinate action in an attempt to rescue the international tax regime from collapse have hitherto proven ineffective. Some commentators have speculated that any attempt to impose tax on MNEs in a globalized economy is doomed to failure.

The focus of this article is in the taxation of foreign MNEs by the countries in which they operate, and its thesis is that the choice of income as a base for taxing foreign MNEs is inappropriate both normatively and practically.

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November 13, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

NY Times: Trump’s Tax Cut Was Supposed To Change Corporate Behavior. Here’s What Happened.

New York Times, Trump’s Tax Cut Was Supposed to Change Corporate Behavior. Here’s What Happened.:

Nearly a year after the tax cut, economic growth has accelerated. Wage growth has not. Companies are buying back stock and business investment is a mixed bag.

The $1.5 trillion tax overhaul that President Trump signed into law late last year has already given the American economy a jolt, at least temporarily. It has fattened the paychecks of most American workers, padded the profits of large corporations and sped economic growth.

Those results weren’t a surprise. Economists across the ideological spectrum predicted the new law would fuel consumer spending, in classic fashion: When the government borrows money and dumps it into the economy, growth tends to accelerate. But Republicans did not sell the law as a sugar-high stimulus. They sold it as a refashioning of the incentives in the American economy — one that would unleash more investment, better efficiency and higher wages, along with enough growth to offset any revenue lost to the government from lower tax rates.

Ten months after the law took effect, that promised “supply-side” bump is harder to find than the sugar-high stimulus. It’s still early, but here’s what the numbers tell us so far:

NYT

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November 13, 2018 in Tax | Permalink | Comments (0)

Ordower: Abandoning Realization And The TCJA Transition Tax

Henry Ordower (Saint Louis), Abandoning Realization and the Transition Tax: Toward a Comprehensive Tax Base:

The Tax Cuts and Jobs Act of 2017 imposed a tax, the “transition tax,” on as much as 31 years of undistributed, accumulated corporate income. This article focus on that transition tax as it evaluates the function and constitutionality of the tax and considers whether the transition tax might serve as a model for addressing the broader problem of deferred income in the United States. The article views the transition tax as joining the expatriation tax and other mark to market inclusion provisions in abandoning any pretext that there is continued vitality in the realization principle as something more compelling than any other longstanding and obsolescing tax principle. Recommending that Congress seize the Tax Cuts and Jobs Act moment and discard the general rule deferring the inclusion of gain in income through a realization requirement in favor of the annual marking to market of all the taxpayer’s property, the article models a general mark to market transition tax after the new transition tax on deferred foreign income.

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November 13, 2018 in Scholarship, Tax | Permalink | Comments (0)

Borden: S-Corporation Cash-Out Break-Ups And § 1031 Exchanges

Bradley T. Borden (Brooklyn), S-Corporation Cash-Out Break-Ups and Code Sec. 1031 Exchanges, 21 J. Passthrough Entities 21 (2018):

Many legacy S-Corporations (those with real property purchased before the advent of LLCs) still own real property with the prospect of selling or transferring it as part of a generational change in ownership. With such dispositions, the owners may have different objectives for the use of the property’s sale proceeds and may wish to part ways. Many tax advisors are familiar with techniques that apply to similar types of break-ups of partnerships and LLCs, which allow some parties to exchange property tax free under Code Sec. 1031 while others cash out. S-Corporation break-ups are taxed differently from partnership and LLC break-ups, so the same types of transactions that are tax-free in the partnership or LLC context could trigger gain recognition for members of S-Corporations.

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November 13, 2018 in Scholarship, Tax | Permalink | Comments (0)

Monday, November 12, 2018

Marron Presents Designing A Carbon Tax Dividend Today At Loyola-L.A.

MarronDonald Marron (Urban Institute) presents Designing a Carbon Tax Dividend at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katie Pratt: 

A robust carbon tax would generate considerable revenue. Some carbon tax advocates have suggested returning those revenues to Americans through direct payments, often called carbon dividends. We examine how to design these dividends considering two, sometimes conflicting principles. Carbon dividends can be viewed as shared income from a communal property right, much as Alaskans share in income from the state’s oil resources. Dividends can also be viewed as rebating the carbon tax back to consumers. These views often have different implications for designing carbon dividends.

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November 12, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (4)

Lesson From The Tax Court: The Hotel California Rule

Tax Court (2017)I love classic rock from the 70’s. Not just for all the great music, but for the way that the bands help me teach tax. For example, Fleetwood Mac teaches a lesson about §162 deductions for uniforms. I know, I know, you would think that lesson would come from the Village People, but it was Stevie Nicks who filed a petition in Tax Court after the IRS disallowed her deduction for stage clothing.

The Eagles’ classic “Hotel California” provides an excellent way to think about Tax Court procedure, as we can learn from the recent case of Daniel Sadek v. Commissioner, T.C. Memo. 2018-174 (Oct. 16, 2018).  In that case, the Tax Court dismissed as untimely Mr. Sadek’s 2017 petition contesting a 2011 NOD that the IRS had sent Mr. Sadek. The NOD was for $25 million and Mr. Sadek has not yet had a day in court to contest that amount. Oh, sure, he can sue for a refund but only if he fully pays the deficiency.  Flora v. United States, 362 U.S. 145 (1960). He could also file bankruptcy and ask the bankruptcy court to determine his tax liability under its powers in 11 U.S.C. §505. But Mr. Sadek’s best hope might come in a CDP hearing. That is what I want to explore in this post.

I think this case teaches a lesson about the relationship between the Tax Court’s deficiency jurisdiction and its CDP jurisdiction. The question is whether Mr. Sadek, who has now lost in Tax Court, will be able to contest the merits of the $25 million in a CDP hearing.  To answer that question, we need to understand the Hotel California rule and how it affects a taxpayer’s ability to turn what is ostensibly a hearing about collection into a hearing about tax liability.

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November 12, 2018 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure | Permalink | Comments (2)

Paulson Eyes Tax-Free Puerto Rico Residency Once Kids Head To College

Bloomberg, Paulson Eyes Puerto Rico Residency Once Kids Head to College:

Maybe it takes an empty nest to fill up a tax haven.

Billionaire hedge-fund manager John Paulson is considering becoming a resident of Puerto Rico in the next few years once his children head off to college.

Paulson, who gained fame from his bets against the U.S. housing market about a decade ago, may move to the bankrupt island after his children, who are 13 and 16, finish their high-school education, he said.

“It’s difficult to move with them,” Paulson said about his children at a Beryl Elites conference in midtown Manhattan Monday evening. “But once, I think, our children go to college, I think it’s likely that we’ll establish residence in Puerto Rico.”

Paulson owns several hotels and office space on the island. He’s contemplated moving to Puerto Rico in recent years to take advantage of the commonwealth’s tax advantages. New residents are exempt from the federal income tax and Puerto Rico taxes on passive income. The beautiful beaches, sunshine and great restaurants are also a motivating factor, Paulson said.

“It’s the only place a U.S. citizen can go and literally avoid, legally, all their taxes,” Paulson said.

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November 12, 2018 in Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, November 11, 2018

Michigan Hosts 13th Annual Empirical Legal Studies Conference

Michigan Law Logo (2015)Tax papers at the 13th Annual Empirical Legal Studies Conference at Michigan:

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November 11, 2018 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Florida Hosts 14th Annual International Tax Symposium

Florida Logo (2017)The University of Florida Graduate Tax Program hosted its Fourteenth International Taxation Symposium on Friday:

  • Andrés Báez (Universidad Carlos III, Madrid) & Yariv Brauner (Florida), Taxing the Digital Economy.... Seriously, 46 Intertax 462 (2018)
  • Patricia A. Brown (Miami), Can Anyone be Trusted to Enforce National Treatment Disciplines with Respect to Tax Matters?

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November 11, 2018 in Conferences, Scholarship, Tax | Permalink | Comments (0)

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 list at #4 and #5:

  1. [249 Downloads]  The International Provisions of the TCJA: Six Results after Six Months, by Reuven Avi-Yonah (Michigan)
  2. [156 Downloads]  Tax Competition and the Ethics of Burden Sharing, by Ivan Ozai (McGill)
  3. [133 Downloads]  The Mandatory Repatriation Tax Is Unconstitutional, by Sean McElroy (Stanford)
  4. [130 Downloads]  Double Non-Taxation and the Use of Hybrid Entities: An Alternative Approach in the New Era of BEPS, by Leopoldo Parada (University of Turin)
  5. [124 Downloads]  The Proposed SALT Regulations May Be Doomed, by Andy Grewal (Iowa)

November 11, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, November 10, 2018

Fires Cause Massive Destruction In Malibu, But Pepperdine Is Safe

Malibu awakens to massive devastation this morning. As the map below shows, the fires came within feet of Pepperdine (the blue oval on the map) on three sides, but not a single permanent structure on campus was lost thanks to the heroic efforts of firefighters on the ground and in the air. In every talk I give, I say I am the luckiest law school dean in America to have the privilege of serving with the most amazing collection of people I have ever been associated with. Our hearts are broken by the loss around us.

Fire Map Malibu

Firefighters stopped the fire just a few feet from our home (at the northwestern most point of campus):

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November 10, 2018 in Legal Education, Tax | Permalink | Comments (8)

This Week's Ten Most Popular TaxProf Blog Posts

Universal Basic Incomes v. Targeted Transfers: Anti-Poverty Programs In Developing Countries

Rema Hanna (Harvard) & Benjamin A. Olken (MIT), Universal Basic Incomes versus Targeted Transfers: Anti-Poverty Programs in Developing Countries, 32 J. Econ. Perspectives 73 (Fall 2018):

Of the 17 Sustainable Development Goals articulated by the United Nations, number one is the elimination of extreme poverty by 2030. While future economic growth should continue to reduce poverty, it will not solve the problem by itself; thus, there is a potentially important role for national-level transfer programs that assist poor families in developing countries. Such programs are often run by developing country governments. Many countries have implemented transfer programs that seek to target beneficiaries: that is, to identify who is poor and then to restrict transfers to those individuals. Some people have begun to advocate for "universal basic income" programs, which dispense with trying to identify the poor and instead provide transfers to everyone. We begin by considering the universal basic income as part of the solution to an optimal income-taxation problem, focusing on the case of developing countries, where there is limited income data and inclusion in the formal tax system is low. We examine how the targeting of transfer programs is conducted in these settings, and provide empirical evidence on the tradeoffs involved between universal basic income and targeted transfer schemes using data from Indonesia and Peru—two countries that run nationwide transfer programs that are targeted to the poor.

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November 10, 2018 in Scholarship, Tax | Permalink | Comments (0)

Friday, November 9, 2018

Malibu Burning

Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Kahn's GoTaxMe — Crowdfunding And Gifts

This week, Hayes Holderness (Richmond) reviews Jeffrey H. Kahn (Florida State), GoTaxMe: Crowdfunding and Gifts, 22 Fla. Tax Rev. ___ (2019).

Holderness (2017)What is a “gift”? Webster’s Dictionary defines “gift” as “something voluntarily transferred by one person to another without compensation” (I kid, I kid). In GoTaxMe: Crowdfunding and Gifts, Professor Jeffrey Kahn challenges the reader to define “gift” for federal income tax purposes in a more robust fashion than simply as transfers made with detached and disinterested generosity. Anyone who has taken a basic federal income tax class knows that § 102 excludes gifts from gross income but fails to define what gifts are. The Supreme Court filled this gap with the Duberstein “detached and disinterested generosity” standard, noting that in determining whether any particular transfer is a gift, “the most critical consideration . . . is the transferor’s ‘intention.’” Professor Kahn uses the example of the (currently) $448,162 donated by 11,709 people to former FBI agent Peter Strzok through the crowdfunding site GoFundMe.com to argue that the Duberstein standard’s focus on the transferor’s intention fails at the edges.

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November 9, 2018 in Hayes Holderness, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Estreicher & Wallace: Equitable Health Savings Accounts

Samuel Estreicher (NYU) & Clint Wallace (South Carolina), Equitable Health Savings Accounts, 55 Harv. J. on Legis. ___ (2019):

This Article offers the first comprehensive legal critique of existing Health Savings Accounts (HSAs), arguing that current policy is redistributively regressive, thus exacerbating inequality, and also fails to accomplish stated health care goals. We propose an alternative—Equitable Health Savings Accounts—which uses cash grants as a tool to address both of these problems. The Equitable HSA is a market-based social policy that calibrates size and delivery of a government subsidy to help the least well-off and to facilitate development of and participation in healthcare markets. Equitable HSAs can serve as a model for using cash grants to bridge the gap between Republican social policy proposals that generally carry a market libertarian flavor, and Democratic proposals that are focused on redistribution and social safety nets. Contrary to conventional political wisdom and academic commentary on the tradeoff between equity and efficiency, we make the case that in healthcare delivery, these goals need not be mutually exclusive.

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November 9, 2018 in Scholarship, Tax | Permalink | Comments (0)

Cauble: Itemized Deductions In A High Standard Deduction World

Emily Cauble (DePaul), Itemized Deductions in a High Standard Deduction World, 70 Stan. L. Rev. Online 146 (2018):

New tax legislation enacted in December 2017 exacerbates the extent to which various itemized deductions, such as the charitable contribution deduction and the home mortgage interest deduction, disproportionately benefit high income individuals.

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November 9, 2018 in Scholarship, Tax | Permalink | Comments (0)

Thursday, November 8, 2018

Shaheen: Income Tax Treaty Aspects Of Nonincome Taxes

Fadi Shaheen (Rutgers), Income Tax Treaty Aspects of Nonincome Taxes: The Importance of Residence, 71 Tax L. Rev. 583 (2018):

This article considers the residence-related income tax treaty aspects of nonincome taxes such as the retail sales tax, the value added tax, the flat tax, the X tax, the destination-based cash flow tax, and certain turnover taxes, and discusses the related treaty aspects of the concepts of tax, tax on income, comprehensive taxation, and nondiscrimination. The focus here is on the underappreciated conceptual and technical importance of tax residence in thinking about and applying tax treaties in the context of nonincome taxes. The article makes two main residence-related points. First, that the question of residence is a critical treaty gateway issue—that is, if the United States were to replace the existing income tax with a noncovered, nonincome tax, the affected U.S. taxpayers would cease to be U.S. residents for treaty purposes and as such would no longer be entitled to claim benefits under existing income tax treaties. This residence problem could become even more consequential if the nonincome tax in question was a tax covered by the treaty. Second, the article emphasizes the residence-relevance criterion for evaluating the identity or substantial similarity of new taxes to existing taxes for determining whether a new tax was covered by a treaty.

November 8, 2018 in Scholarship, Tax | Permalink | Comments (0)

Jensen: Recent Law Review Articles On Taxation And The Constitution

Erik M. Jensen (Case Western), Taxation and the Constitution: Recent Articles, 159 Tax Notes 1155 (May 21, 2018):

This article is the latest installment in a series of reviews of significant articles dealing with taxation and the Constitution. It covers articles that were published or otherwise made generally available in 2017 [2016 articles here].

November 8, 2018 in Scholarship, Tax | Permalink | Comments (0)

The Economics Of Law School: Employment Prospects And Market Inefficiencies

Samuel P. Engel, The Economics of Law School: Employment Prospects and Market Inefficiencies, 87 Miss. L.J. 501 (2018):

Using recent data from the American Bar Association and the National Association for Law Placement, as well as proprietary data and modeling, this Article constructs an economic model that indicates that, in many situations, there is remarkably a negative correlation between law school prestige and economic outcome, after controlling for LSAT scores. The Article utilizes six main variables in the construction of the model: (1) cost of tuition; (2) financial aid packages; (3) cost of living; (4) LSAT scores; (5) type of legal employment secured; and (6) the relationship between LSAT score and law school performance. The resulting data provides a detailed breakdown regarding the economic outcomes of attending a specific law school, after adjusting for important factors such as the quality of competition, the cost of living in nearby markets, and the cost of attendance. The Article also briefly discusses the secondary effects and characteristics of this market inefficiency, including its tendency to: (1) resist natural correction by the legal market; (2) accelerate grade inflation; (3) constrain upward mobility, thereby limiting diversity; and (4) reduce the number and quality of law students.

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November 8, 2018 in Scholarship, Tax | Permalink | Comments (3)

Grinberg: International Taxation In An Era Of Digital Disruption

Itai Grinberg (Georgetown), International Taxation in an Era of Digital Disruption: Analyzing the Current Debate:

The “taxation of the digital economy” is currently at the top of the global international tax policymaking agenda. A core claim some European governments are advancing is that user data or user participation in the digital economy justifies a gross tax on digital receipts, new profit attribution criteria, or a special formulary apportionment factor in a future formulary regime targeted specifically at the “digital economy.” Just a couple years ago the OECD undertook an evaluation of whether the digital economy can (or should) be “ring-fenced” as part of the BEPS project, and concluded that it neither can be nor should be.

Importantly, concluding that there should be no special rules for the digital economy does not resolve the broader question of whether the international tax system requires reform. The practical reality appears to be that all the largest economies have come to agree either that a) there is something wrong with the taxation of the “digital economy,” or b) there is something more fundamentally wrong with the structure of the current international tax system given globalization and technological trends.

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November 8, 2018 in Scholarship, Tax | Permalink | Comments (0)

Kahn: GoTaxMe — Crowdfunding And Gifts (Why Peter Strzok Should Be Taxed On The $450k He Raised On GoFundMe)

GofundmeJeffrey H. Kahn (Florida State), GoTaxMe: Crowdfunding and Gifts, 22 Fla. Tax Rev. ___ (2019):

In 2018, Peter Strzok was fired from the FBI, based on text messages that he sent degenerating President Trump. A week later, a group set up a GoFundMe page soliciting funds to help with his “legal costs” and to replace his “lost income.” As of early September, that fund had raised over $450,000. GoFundMe states on its website that donations made are usually considered to be “private gifts” and not taxable to the recipient. Using Mr. Strzok’s campaign as an example, this article will discuss the current standards for determining whether a transfer qualifies as a nontaxable gift and the policy rationale for the exclusion of gifts.

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November 8, 2018 in Celebrity Tax Lore, Scholarship, Tax | Permalink | Comments (2)

Wednesday, November 7, 2018

Bakija Presents Would A Bigger Government Hurt The Economy? Today At Pennsylvania

HowJon Bakija (Williams College) presents Would a Bigger Government Hurt the Economy?, in How Big Should Our Government Be? (University of California Press 2016) (with Lane Kenworthy (UC-San Diego), Peter Lindert (UC-Davis) & Jeff Madrick (Bernard L. Schwartz Rediscovering Government Initiative, Century Foundation)) at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

If the United States is going to meet the rising costs of promised government retirement benefits and health care for the elderly while doing more to promote economic security, equality of opportunity, and shared prosperity, it will eventually need to increase taxes. Is this the best solution, or should we scale back government and cut taxes, thereby improving incentives for productive economic activity? This is the fundamental political dilemma of our times. A thoughtful answer ought to depend on many different considerations, but one of the most critical is the long-run economic costs and benefits of larger government and the taxes that go with it. I begin by briefly reviewing some theory that helps to put the debate into perspective. Then I consider evidence on three key empirical questions:

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November 7, 2018 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kysar Presents Unravelling The Tax Treaty Today At Michigan

Kysar (2018)Rebecca Kysar (Fordham) presents Unravelling the Tax Treaty at Michigan today as part of its Tax Policy Workshop Series hosted by Reuven Avi-Yonah:

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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November 7, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Crawford Presents Tax Talk And Reproductive Technology Today At Chicago

Crawford (2018)Bridget J. Crawford (Pace) presents Tax Talk and Reproductive Technology, 98 B.U. L. Rev. ___ (2018), at Chicago as part of its Regulation of Family, Sex, and Gender Workshop Series:

The tax system both reacts to and helps create attitudes about the value of certain behaviors and choices. This Article makes three principal claims — one empirical, one normative, and one interpretative.

The Article demonstrates empirically that a representative sample of fertility clinics in the United States do not make publicly available information about the tax consequences of compensated human egg transfers — commonly called egg “donation.” The United States Tax Court recently decided in a case of first impression, Perez v. Commissioner, that a compensated egg transferor must report as income any amount she receives for her eggs. Although the Tax Court missed an opportunity to clarify further complex questions about the tax consequences of transfers of human bodily materials, the basic holding of Perez was clear.

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November 7, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Taxation, Inequality, And Life: An Interview With Ed Kleinbard

KleinbardBYU Law School Magazine, On Taxation, Inequality, and the Citizen’s Role: An Interview With USC’s Professor Kleinbard:

FlemingYou had a lengthy career at a high level of law practice followed by a period of high-level government service. How would you compare the satisfactions of those two parts of your professional life?

Kleinbard:  I enjoyed law practice very much. In contrast, from 2007 to 2009 my service as chief of staff of Congress’s Joint Committee on Taxation (jct) required me to be the principal non-partisan tax adviser to the most partisan collection of men and women on the planet. I was surprised at how little interest there was in improving our tax laws unless the improvement would advance a partisan agenda. Working as a staff member at jct is an interesting way of observing bare-knuckle politics, but the chief of staff is a job I wouldn’t wish on anyone. But the Treasury Department’s Office of Tax Policy and the irs’s Office of Chief Counsel are excellent places for young lawyers to both contribute to the public good and gain important skills and experience—usually without quite as much day-today political drama as one faces on the Hill. I highly recommend that kind of service.

FlemingWhat advice would you have for an undergraduate who is considering law school?

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November 7, 2018 in Legal Education, Tax | Permalink | Comments (0)

Auerbach: Measuring The Effects of Corporate Tax Cuts

Alan J. Auerbach (UC-Berkeley), Measuring the Effects of Corporate Tax Cuts, 32 J. Econ. Perspectives 97 (Fall 2018):

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), the most sweeping revision of US tax law since the Tax Reform Act of 1986. The law introduced many significant changes. However, perhaps none was as important as the changes in the treatment of traditional "C" corporations—those corporations subject to a separate corporate income tax. Beginning in 2018, the federal corporate tax rate fell from 35 percent to 21 percent, some investment qualified for immediate deduction as an expense, and multinational corporations faced a substantially modified treatment of their activities. This paper seeks to evaluate the impact of the Tax Cuts and Jobs Act to understand its effects on resource allocation and distribution. It compares US corporate tax rates to other countries before the 2017 tax law, and describes ways in which the US corporate sector has evolved that are especially relevant to tax policy. The discussion then turns the main changes of the Tax Cuts and Jobs Act of 2017 for the corporate income tax. A range of estimates suggests that the law is likely to contribute to increased US capital investment and, through that, an increase in US wages. The magnitude of these increases is extremely difficult to predict.

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November 7, 2018 in Scholarship, Tax | Permalink | Comments (0)

Bird-Pollan: Sovereignty, Tax, And Bilateral Investment Treaties

Jennifer Bird-Pollan (Kentucky), The Sovereign Right to Tax: How Bilateral Investment Treaties Threaten Sovereignty, 32 Notre Dame J.L. Ethics & Pub. Pol'y 107 (2018):

Bilateral Investment Treaties, or “BITs,” are both a response to and likely at least partly responsible for the significant increase in international investments in the last fifty years. BITs provide potential private investors government assurances regarding a variety of factors relevant to their investments. Among these assurances, BITs regularly address the tax authority that the host government has with regard to the foreign investor, often protecting that foreign private investor against changes to the host country’s tax system. If an investor believes the host country has violated the terms of the BIT, that investor can bring a claim against the country in front of an independent arbitration panel, whose decision will be final and binding. Because the power to tax is at the heart of what makes a sovereign authority a sovereign, restrictions on a sovereign’s ability to tax foreign investors, which can be enforced by an external body, threaten that sovereign’s very essence. As a result, tax provisions in BITs and the adjudication of those provisions by arbitration bodies must be carefully examined and potentially reconsidered, to protect the sovereign rights of governments to assess tax, to evolve their tax policies, and administer the laws of their countries in the best interests of their people.

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November 7, 2018 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, November 6, 2018

Goldin Presents Ironing Out The Tax Law Today At San Diego

Goldin (2017)Jacob Goldin (Stanford) presents Ironing Out the Tax Law (with Edward Fox (Michigan)) at San Diego today as part of its Tax Law Speaker Series hosted by Jordan Barry and Miranda Perry Fleischer: 

The law is full of sharp lines, where small changes in one’s circumstances lead to significant changes in legal treatment. In many cases, a sharp line can be smoothed out — or “ironed” — by replacing it with a sliding scale. Under a sliding scale, small changes in one’s circumstances lead to small changes in legal treatment. In this paper, we study the policy choice between sharp lines and sliding scales in the tax law, focusing particularly on concerns related to efficiency, complexity, and administration. Sliding scales are common for tax provisions that depend on income, but relatively uncommon for provisions that depend on non-income factors.

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November 6, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Hayashi Presents Countercyclical Tax Bases Today At Boston College

HayashiAndrew Hayashi (Virginia) presents Countercyclical Tax Bases at Boston College today as part of its Tax Policy Workshop Series hosted by Jim Repetti, Diane Ring, and Shu-Yi Oei:

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. I argue that the choice of the local tax base should consider the effect that the base has on the resilience of the economy by stabilizing government spending and household consumption expenditures.

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November 6, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Slemrod: Is This Tax Reform, Or Just Confusion?

Joel Slemrod (Michigan), Is This Tax Reform, or Just Confusion?, 32 J. Econ. Perspectives 73 (Fall 2018):

Based on the experience of recent decades, the United States apparently musters the political will to change its tax system comprehensively about every 30 years, so it seems especially important to get it right when the chance arises. Based on the strong public statements of economists opposing and supporting the Tax Cuts and Jobs Act of 2017, a causal observer might wonder whether this law was tax reform or mere confusion. In this paper, I address that question and, more importantly, offer an assessment of the Tax Cuts and Jobs Act. The law is clearly not "tax reform" as economists usually use that term: that is, it does not seek to broaden the tax base and reduce marginal rates in a roughly revenue-neutral manner.

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November 6, 2018 in Scholarship, Tax | Permalink | Comments (0)

NY Times: Tax Prep Companies Use FOIA Requests To Thwart Dennis Ventry's Criticism Of Free File Program

New York Times, Industries Turn Freedom of Information Requests on Their Critics:

Dennis J. Ventry Jr., a law professor at the University of California, Davis, drew the ire of tax preparation companies like Intuit and H&R Block this summer by criticizing a deal they have to provide a free tax filing service through the Internal Revenue Service.

The companies promptly hit back with a tactic that corporations, lobbyists and interest groups are increasingly using against academic researchers: Their trade coalition filed a public records request with the university in July seeking everything Mr. Ventry had written or said about the companies this year, including emails, text messages, voice mail messages and hand-jotted notes.

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November 6, 2018 in Legal Education, Tax | Permalink | Comments (2)

Tax Court: Foreign Lawyer Cannot Deduct Cost Of NYU LL.M. Because It Qualified Him To Sit For The New York Bar

Tax Court (2017) Valle v. Commissioner, T.C. Summ. Op. 2018-51 (Nov. 5, 2018):

The sole issue presented for decision is whether petitioner is entitled to deductions for education expenses incurred in 2014 while pursuing a master of laws (LL.M.) degree from New York University (NYU). ...

Petitioner earned his law degree (Licenciatura en Derecho) from Carlos III University in Spain in September 2006. That same month he began working as a full-time associate at the Madrid, Spain, office of PricewaterhouseCoopers Tax & Legal Services, S.L. (PwC). Petitioner continued his foreign legal education while working at PwC, earning an LL.M. degree with a major in corporate law from Instituto de Empresa Law School in Spain in July 2008. In November 2009 petitioner began work as an associate at Bird & Bird LLP’s office in Madrid. On January 8, 2010, petitioner was admitted to the bar association of Madrid; he has since maintained a license to practice law in Spain. In September 2010 petitioner commenced work at the Madrid offices of Olswang LLP, an international law firm. From September to December 2011 petitioner was stationed at the London, England, office of Olswang LLP. Petitioner describes his tasks at each of PwC, Bird & Bird LLP, and Olswang LLP as “among others, drafting specialized legal documents, such as contracts and memoranda, researching and analyzing legal and business requirements for clients and providing advice on legal matters.”

After practicing law for several years in Madrid and London, petitioner moved to New York City to pursue an additional LL.M. degree at NYU. Petitioner enrolled at NYU in September 2013 and earned his LL.M. in May 2014. ...  Petitioner paid tuition expenses of $27,435 to attend NYU’s LL.M. program during tax year 2014. 

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November 6, 2018 in Legal Education, Tax | Permalink | Comments (2)

Monday, November 5, 2018

Kleven Presents The EITC And The Extensive Margin Today At UC-Berkeley

KlevinHenrik J. Kleven (Princeton) presents The EITC and the Extensive Margin: A Reappraisal at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

This paper reconsiders the impact of the EITC on the extensive margin of labor supply, combining evidence from all EITC reforms at the federal and state level in the United States. Starting from long-run evidence, I show that the labor supply of women who are eligible and ineligible for the EITC have evolved in a strikingly similar fashion over half a century, except for a unique period in the late 1990s. During this period, single women with children dramatically increased labor supply at the extensive margin, closing the entire gap between women with and without children. These patterns suggest that the only place for finding potential EITC effects is the 1993-expansion of the program. However, studying the 1993-reform is complicated due to the confounding effects of the strong economy, welfare reform and — potentially — changing social norms in the 1990s. Based on an event study analysis of the 1993-reform, it is argued that the data is consistent with no effect of the EITC. 

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November 5, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kleiman Presents Tax Limits And Public Control Today At Loyola-L.A.

KleimanAriel Jurow Kleiman (San Diego) presents Tax Limits and Public Control at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katie Pratt: 

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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November 5, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Shaviro Presents The New Non-Territorial U.S. International Tax System Today At Copenhagen Business School

Shaviro (2018)Daniel N. Shaviro (NYU) presents The New Non-Territorial U.S. International Tax System, Part 1, 160 Tax Notes 57 (July 2, 2018), and Part 2, 160 Tax Notes 171 (July 9, 2018) (reviewed by David Elkins (Netanya) here), at today's Copenhagen Business School Annual Tax Conference.

These papers, published in Tax Notes, examine and analyze the three main international provisions in the 2017 tax act. Part 1 of this report discusses how one could more crisply, comprehensively, and accurately conceptualize international tax policy than through the outdated and unhelpful language of “worldwide versus territorial.” It also explores the reasons for several key margins’ normative ambiguity, which include the tension between what I call unilateral and strategic approaches to international tax policymaking. Only the latter involves considering how a given country’s international tax policy choices might subsequently affect other countries’ behavior. Thus, for example, engaging in tax competition is not inherently strategic in my sense of the term. Indeed, tax competition fails to be strategic if it involves overlooking how one’s own tax law changes might affect what other countries later do. Unfortunately, although all sophisticated actors in international tax policy should consider the strategic aspect, it tends to make the underlying policy choices even harder to parse confidently. Strategic interactions are often unpredictable, and even more so when they involve government actors who are subject to the vagaries of domestic politics.

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November 5, 2018 in Conferences, Scholarship, Tax | Permalink | Comments (0)

McGill Law Journal Symposium: Regulatory Challenges On The Edge Of Technology

NY Times: Democrats Eye Trump’s Tax Returns, With Mnuchin In The Middle

Trump Tax ReturnsNew York Times, Democrats Eye Trump’s Tax Returns, With Mnuchin in the Middle:

Democrats are preparing to use an obscure law to try to obtain a copy of President Trump’s tax returns if they win control of the House or Senate — a scenario that could force one of the president’s most trusted aides to reveal his most closely guarded secret.

Steven Mnuchin, the Treasury secretary, said in an interview that he would honor any legal requests from Congress to release the president’s tax returns, which are stored in a vault at the Internal Revenue Service. But the demand would undoubtedly thrust Mr. Mnuchin into the fraught position of balancing his loyalty to Mr. Trump with a legal requirement to deliver the returns.

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November 5, 2018 in IRS News, Tax | Permalink | Comments (2)

TaxProf Blog Weekend Roundup

Sunday, November 4, 2018

Call for Papers: Cambridge Tax Policy Conference On Tax Justice And Tax Law

Cambridge LogoUniversity of Cambridge Centre for Tax Law, Call for Papers: Tax Policy Conference 2019:

The Centre for Tax Law at the University of Cambridge is delighted to invite proposals for papers to be presented at our fourth Tax Policy Conference on Monday 8 and Tuesday 9 July 2019.

The topic of the conference is Tax Justice and Tax Law. Possible areas of interest include, but are not restricted to, the following:

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November 4, 2018 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN Logo (2018)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. [235 Downloads]  The Death of the Income Tax (or, the Rise of America's Universal Wage Tax), by Edward McCaffery (USC)
  2. [234 Downloads]  The International Provisions of the TCJA: Six Results after Six Months, by Reuven Avi-Yonah (Michigan)
  3. [226 Downloads]  Rolling Real Estate Gain into a Qualified Opportunity Fund: Comparison with § 1031, by Brad Borden (Brooklyn) & Alan Lederman (Akerman, Miami)
  4. [156 Downloads]  Tax Competition and the Ethics of Burden Sharing, by Ivan Ozai (McGill)
  5. [128 Downloads]  The Mandatory Repatriation Tax Is Unconstitutional, by Sean McElroy (Stanford)

November 4, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, November 3, 2018

This Week's Ten Most Popular TaxProf Blog Posts

NY Times: Happy ‘National Jealousy Day’! Finland Bares Its Citizens’ Taxes

New York Times, Happy ‘National Jealousy Day’! Finland Bares Its Citizens’ Taxes:

Shortly after 6 a.m. on Thursday, people began lining up outside the central office of the Finnish tax administration. It was chilly and dark, but they claimed their places, eager to be the first to tap into a mother lode of data.

Pamplona can boast of the running of the bulls, Rio de Janeiro has Carnival, but Helsinki is alone in observing “National Jealousy Day,” when every Finnish citizen’s taxable income is made public at 8 a.m. sharp.

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November 3, 2018 in Tax | Permalink | Comments (3)

ABA Administrative Law Conference

ABA Logo (2016)Tax Profs with speaking roles at the ABA Administrative Law Conference (Nov. 1-2):

Kristin Hickman (Minnesota), Is Agency Guidance Reviewable (And If So, When)?:

This panel will look at what the federal courts have said about the reviewability of agency guidance, including the rescission of guidance, both in facial challenges and in the enforcement context. All conference attendees should be interested in this program given the important role of agency guidance and the inconsistent case law on the central question presented. Key issues that will be address will include: (i) the treatment of "guidance" within the Administrative Procedure Act (e.g., statements of policy and interpretative rules); (ii) how the courts have grappled with statements of policy and interpretative rules, including application of the APA's "final agency action" requirement; (iii) when "guidance" may be regarded as de facto "legislative rulemaking" for purposes of judicial review; and (iv) whether the form of publication (e.g., "demand letter" or enforcement v. generally applicable "policy bulletin" or "letter of interpretation") and means of publication (e.g., Federal Register, web posting, blast email) affects the question of reviewability, including the subsidiary question of administrative exhaustion. The practical skill attendees will take back to their respective practices after attending this session will be, among other things, a better understanding of the importance to judicial review of how guidance is drafted, i.e., how language is used to communicate the agency's message and the potential legal consequences of that language.

Shu-Yi Oei (Boston College) & Leigh Osofsky (North Carolina), The Role of Agencies in Legislative Drafting and Legislative Cleanup:

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November 3, 2018 in ABA Tax Section, Tax | Permalink | Comments (0)

Friday, November 2, 2018

Weekly SSRN Tax Article Review And Roundup: Layser Reviews Medical Necessity — A Higher Hurdle for Marginalized Taxpayers?

This week, Michelle Layser (Illinois) reviews Julie Furr Youngman (Washington & Lee) & Courtney D. Hauck (J.D. 2021, Columbia), Medical Necessity: A Higher Hurdle for Marginalized Taxpayers?, 51 Loy. L.A. L. Rev. ___ (2018).

Layser (2018)Many recent advancements in transgender rights have been followed by setbacks. Obama era rules that protected transgender patients from discrimination have been rolled back, and just last week the Trump administration announced plans to define gender for federal civil rights laws as biological, immutable and determined at birth. Now a new article by Julie Furr Youngman and Courtney Hauck warns that a 2010 U.S. Tax Court case that upheld the medical expense deduction for gender affirmation surgery may come back to haunt the transgender community if its dicta is interpreted as requiring proof of medical necessity. (Note: For definitions and terms preferred by the transgender community, please see the National Center for Transgender Equality.)

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November 2, 2018 in Michelle Layser, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (1)