Zelinsky: The Commerciality Of Non-Profit Hospitals Requires Them To Be Taxed

Edward A. Zelinsky (Cardozo), The Commerciality of Non-Profit Hospitals Requires Them to Be Taxed: Bringing the Debate to a Conclusion, 42 Va. Tax Rev. __ (2022):

It is now time to conclude our prolonged debate about the tax-exempt status of nonprofit hospitals. The contemporary nonprofit hospital is a commercial enterprise, materially indistinguishable for tax purposes from its profit-making, taxed competitor. The federal income tax and the states’ income, sales and property taxes should treat all hospitals alike, regardless of whether such hospitals are nonprofit or for-profit enterprises. In the interests of equity and efficiency, these similar institutions should be taxed similarly.

Continue reading

Miranda Perry Fleischer Named Richard And Kay Woltman Professor In Finance At San Diego

USD School of Law Announces Four New Professorships:

Miranda Perry Fleischer will become the Richard and Kay Woltman Professor in Finance. A renowned scholar whose research bridges tax and philosophy, Professor Fleischer heads the USD School of Law Tax Speaker Series. She was previously named a University Professor for the 2020-2021 academic year, the highest faculty honor given at USD.

Her recent publications include:

• The Architecture of a Basic Income, 87 U. Chi. L. Rev. 625 (2020) (with Daniel Hemel (NYU)) (reviewed by David Elkins (Netanya) and by Susan Morse (Texas)) 
• Atlas Nods: The Libertarian Case for a Basic Income, 2017 Wis. L. Rev. 1189 (with Daniel Hemel (NYU)) (reviewed by Ari Glogower (Northwestern))
• Divide and Conquer: Using an Accessions Tax to Combat Dynastic Wealth Transfers, 57 BC L. Rev. 913 (2016)

Continue reading

Maynard Presents Wage Enslavement, Racial Equity, And A Race-Neutral Tax Code Today At NYU

Goldburn Maynard, Jr. (Indiana-Kelley; Google Scholar) presents the following papers at NYU today as part of its Tax Policy and Public Finance Colloquium hosted by Daniel Shaviro:

Wage Enslavement: How the Tax System Holds Back Historically Disadvantaged Groups of Americans, 110 Ky. L.J. __ (2022) (with David Gamage (Indiana-Maurer; Google Scholar)): 

Despite the importance placed on equality of opportunity within United States political culture, the existing tax system inhibits historically disadvantaged groups from building wealth or catching up with historically more privileged groups. This effectively then traps many members of historically disadvantaged groups into a continued cycle of dependence on tax-disfavored wage and salary income, a phenomenon that we metaphorically label as “wage enslavement.” This Article explains this phenomenon and then calls for reform.

Biden’s Gambit: Advancing Racial Equity While Relying on a Race-Neutral Tax Code, 131 Yale L.J. F. 656 (2022): 

Continue reading

Feld, Nielsen & Sims Present Green Or Greed? The Valuation Of Conservation Easements Today At Boston College

Alan Feld (Boston University), Jacob Nielsen (Ropes & Gray) & Theodore Sims (Boston University) present Green, or Greed? A Fresh Perspective on the Valuation of Conservation Easements, 76 Tax L. Rev. __ (2022), at Boston College today as part of its Tax Policy Collaborative hosted by Jim Repetti:

Charitable contributions of "conservation easements" have since 1980 allowed high-income taxpayers to shelter income from taxation through overvalued deductions. Overvaluation has increased dramatically in the past 20 years: a 2016 study of all easement decisions since 1980 reported that while overvaluation had averaged by a factor of two before 1994, it averaged by a factor of ten for decisions between 1994 and 2016. SOI data disclose that aggregate easement contributions deducted on Schedule A grew from $2.26 billion in 2015 to $6.5 billion in 2018 (the most recent year available). A recent report by supporters of conservation easements acknowledges that "neither the [IRS] nor the courts have sufficient resources to effectively police valuation abuse."

Continue reading

Grewal: The Solicitor General Embraces Phantom Tax Regulations

Andy Grewal (Iowa), The Solicitor General Embraces Phantom Tax Regulations:

As discussed in a prior post, the Sixth Circuit in Whirlpool v. Commissioner, 19 F.4th 944 (6th Cir. 2021), embraced phantom regulations. The court concluded that a statute that contemplated rules applying “under regulations” could operate regardless of whether regulations had been issued under the statute. Though in Whirlpool the Treasury had issued regulations relevant to the dispute, the court ignored them and decided the case based on its own beliefs of what the regulations should say (i.e., the court applied phantom regulations).

In June, Whirlpool filed a petition for certiorari. The Solicitor General recently filed her brief in opposition. Somewhat surprisingly, she has embraced phantom tax regulations. ...

Continue reading

Doran Presents The Great American Retirement Fraud Today At Loyola-L.A.

Michael Doran (Virginia; Google Scholar) presents The Great American Retirement Fraud at Loyola-L.A. today as part of its Tax Policy Colloquium hosted by Theodore Seto:

Over the past quarter century, Congress has enacted several major reforms for retirement plans and individual retirement accounts, usually with large bipartisan, bicameral majorities. Legislators have claimed each time that the reforms would improve retirement security for millions of Americans, especially rank-and-file workers. But the supposed interest in helping lower-income and middle-income earners has been a stalking horse for the real objective of expanding tax subsidies for higher-income earners. The legislation has repeatedly raised the statutory limits on contributions and benefits, delayed the start of required distributions, and weakened statutory non-discrimination rules – all to the benefit of affluent workers and the financial-services companies and retirement-plan service providers that collect fees from retirement plans and retirement savings. 

Continue reading

President Biden To Nominate Former OMB Controller Danny Werfel For IRS Commissioner

White House Statement, President Biden Announces Key Nominee:

Today, President Joe Biden announced his intent to nominate Danny Werfel [Wikipedia] to serve as Commissioner of the Internal Revenue Service.

Danny Werfel is a public and private sector leader who has served under both Democratic and Republican administrations. Across more than 15 years of government service, Werfel served President Barack Obama and President George W. Bush to lead some of the governments’ most complex management challenges as the Internal Revenue Service (IRS) Acting Commissioner and Office of Management and Budget (OMB) Controller. In the wake of an Inspector General report alleging various forms of mismanagement and bias in the determination of tax-exempt status for non-profit organizations, President Obama appointed Werfel to serve as Acting Commissioner of IRS in 2013. Werfel provided immediate stability to the IRS, effectively responding to numerous Congressional investigations, successfully launching the Affordable Care Act technology that IRS was responsible for, and navigated the IRS through a multi-week government shutdown.

Continue reading

Lesson From The Tax Court: An Object Lesson For Tax Professionals

It is not always easy to follow the advice you give others. A common question I get is "how long should I keep my tax records?" My somewhat snarky reply is “as long as you need to.” The response is not entirely snarky because even though each tax year stands alone, events that occur in one year might have tax repercussions many, many years later.

In Betty Amos v. Commissioner, T.C. Memo. 2022-109 (Nov. 10, 2022) (Judge Urda), the taxpayer failed to keep records as long as she needed to is.  It is an object lesson for all of us. Ms. Amos was a highly successful tax practitioner, a CPA, who had decades of high-level business experience.  On her 2014 and 2015 returns she reported about $100,000 of IRA income against which she claimed over $4 million of net operating losses (NOLs) that dated back to 1999. While she could produce her 1999 tax returns showing the NOLs, she could not produce the underlying records substantiating what she had then reported, causing Judge Urda to write “It beggars belief that she would be unaware...[of] her responsibility to demonstrate her entitlement to the deductions she claimed.” Op. at 11.  Details below the fold. 

Continue reading

TaxProf Blog Weekend Roundup

Saturday:

• This Week's Ten Most Popular TaxProf Blog Posts
• Leiter: The End Of The LSAT Is Coming — What Will U.S. News Do?
• New State Business Tax Climate Index: Blue States Are Worst, Red States Are Best
• Lawyers Who Had to Pay Off Their Student Debt Think You Should, Too

Sunday:

• Inazu: The Incomprehensible Witness Of Forgiveness
• WaPo: A $100 Million Campaign Aims To Fix Jesus’ Brand From Followers’ Damage
• Yeshiva University Announces New LGBTQ Club While Continuing Its Legal Battle With The Existing One
• The Top Five New Tax Papers

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, with some reshuffling of the order within the Top 5. The #1 paper is #409 among 17,125 tax papers in all-time downloads:

1. [1,113 Downloads]  The Perceived (Un)Fairness of the Global Minimum Corporate Tax Rate, by Rita de la Feria (Leeds)
2. [445 Downloads]  Pillar 2's Impact on Tax Competition, by John Vella (Oxford), Michael Devereux (Oxford; Google Scholar) & Heydon Wardell-Burrus (Oxford)
3. [420 Downloads]  Federal Tax Procedure (2022 Practitioner Ed.), by John Townsend (Houston)
4. [383 Downloads]  Pillar Two and Developing Countries: The STTR and GloBE Implementation, by Heydon Wardell-Burrus (Oxford)
5. [271 Downloads]  A Wrench in the GLOBE's Diabolical Machinery, by Ruth Mason (Virginia; Google Scholar)

This Week's Ten Most Popular TaxProf Blog Posts

1. Bryan Camp (Texas Tech), Lesson From The Tax Court: The Impact Of De Novo Review In Spousal Relief Cases
2. New York Post, Law Student Claims Professor Named HIV-Positive Character On Exam After Her Because She’s Conservative
3. Paul Caron (Dean, Pepperdine), 25% Through The Fall 2023 Law School Admissions Season: Applicants Are Down -11%, With Biggest Decline (-21%) In The 165-169 LSAT Band
4. Scott Devito (Ave Maria), Kelsey Hample (Furman) & Erin Lain (Drake), An Empirical Analysis Of Racial Bias In The UBE: A Law School’s First-Time Bar Pass Rate Decreases As Its Percentage Of Students Of Color Increases
5. Reuters, ABA Moves Closer To Ending LSAT Requirement For Law Schools
6. Vox Recode, Stanford Law Profs' Son Is A 'Vegan Crypto Billionaire'
7. Houston Chronicle, Court Filings Reveal Contradictory Accounts Of Dean's Exit At Texas Southern Law School
8. SSRN, The Top Five New Tax Papers
9. Law.com, The Enrollment Cliff of 2025—What Will It Do to Law Schools?
10. Paul Caron (Dean, Pepperdine), Veterans Day At Pepperdine

New State Business Tax Climate Index: Blue States Are Worst, Red States Are Best

Tax Foundation, 2023 State Business Tax Climate Index (interactive map tool):

The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems and provides a road map for improvement.

9 of the 10 states with the worst business tax climates voted for Joe Biden in 2020, and 8 of the 10 states with the best business tax climates voted for Donald Trump.

Continue reading

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Helman's Innovation Funding And The Valley Of Death

This week, Mirit Eyal-Cohen (Alabama; Google Scholar) reviews reviews Lital Helman (Ono Academic College) Innovation Funding and the Valley of Death, 76 SMU L. Rev. ___ (2023).

Economic theorists have long held that innovation is the key to economic development and many positive spillovers. Alas, as a public good with high risk, non-rivalry, non-exclusive characteristics, it may suffer underinvestment and underproduction in the free private market. Accordingly, almost every legal system in the world has long incorporated an array of innovation incentives that overcome this inherent market inefficiency. Some of those stimuli mechanisms include intellectual property rights (IP), cash transfers (mostly grants and prizes), and various tax incentives. In their recent article Innovation Policy Pluralism, Daniel Hemel & Lisa Quellette discuss ways to combine, complement, and alternate between such innovation policy mechanisms based on the overall government purpose (allocation or incentive) in each case.

Continue reading

Tax Policy In The Biden Administration

• Barron's, Market Losses Can Reduce Your Tax Bill for Years. Here’s How.
• Bloomberg, Inflation Reduction Act May Transform the Corporate Income Tax
• Bloomberg, Private Equity Billionaire Smith to Testify Against Lawyer in Tax Case
• Bloomberg, State Taxes on Student-Debt Relief Would Hit Black Borrowers Hardest
• Bloomberg, Tax-the-Rich Measures Pass in Massachusetts, Fail in California

Continue reading

Next Week’s Tax Workshops

Monday, November 14: Michael Doran (Virginia; Google Scholar) will present The Great American Retirement Fraud as part of the Loyola-L.A. Tax Policy Colloquium. If you would like to attend, please RSVP here.

Tuesday, November 15: Alan Feld (Boston University), Jacob Nielsen (Ropes & Gray), & Theodore Sims (Boston University) will present Green, or Greed? A Fresh Perspective on the Valuation of Conservation Easements, 76 Tax L. Rev. __ (2022), as part of the Boston College Tax Policy Collaborative. If you would like to attend, please contact Jim Repetti.

Tuesday, November 15: Goldburn Maynard (Indiana-Kelley Business School; Google Scholar) will present the following papers as part of the NYU Tax Policy and Public Finance Colloquium:

Continue reading

Blank & Glogower: The Trouble With Targeting Tax Shelters

Joshua D. Blank (UC-Irvine; Google Scholar) & Ari D. Glogower (Northwestern; Google Scholar), The Trouble with Targeting Tax Shelters, 74 Admin. L. Rev. 69 (2022) (reviewed by Michelle Layser (San Diego; Google Scholar) here): 

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

Colella: Incorporation By Reference Nixed A Charitable Deduction For Art

Frank G. Colella (Pace), Incorporation by Reference Nixed a Charitable Deduction for Art, 177 Tax Notes Fed. 35 (Oct. 3, 2022):

In Albrecht, the Tax Court held the taxpayer failed to meet the statutory requirements to claim a charitable deduction for her donation of various Native American artifacts to the Wheelwright Museum of the American Indian. The court upheld the IRS’s determination that taxpayer had failed to satisfy the section 170 charitable contribution substantiation requirements, viz., the required content of that documentation. Although the decision did not include the dollar amount disallowed, The Wall Street Journal later reported that the value of the donated artifacts was $464,000.

Continue reading

The Case Against Tax Subsidies In Innovation Policy

Charles Delmotte (NYU; Google Scholar), The Case Against Tax Subsidies in Innovation Policy, 48 Fla. St. U. L. Rev. 285 (2022):

Until recently, intellectual property (IP) scholars agreed that patents were the prime innovation tool to aggregate decentralized information. This case for the property approach, which argues patents are appropriate when information about possible inventions and the social value of inventions are hidden, is now also under pressure in the literature. IP scholars argue that tax subsidies for firms that invest in research and development (R&D) replicate many of the merits of the patent system under conditions of asymmetric information.

Based on developments in institutional economics, this Article shows that tax subsidies are not market-set incentives and are not optimal tools for aggregating decentralized information. 

Continue reading

Blank & Osofsky: The Inequity Of Informal Guidance

Joshua D. Blank (UC-Irvine; Google Scholar) & Leigh Osofsky (North Carolina; Google Scholar), The Inequity of Informal Guidance, 75 Vand. L. Rev. 1093 (2022) (reviewed by Sloan Speck (Colorado; Google Scholar) here):

The coexistence of formal and informal law is a hallmark feature of the U.S. tax system. Congress and the Treasury enact formal law, such as statutes and regulations, while the Internal Revenue Service offers the public informal explanations and summaries, such as taxpayer publications, website frequently asked questions, virtual assistants, and other types of taxpayer guidance. Throughout the COVID-19 pandemic, the IRS increased its use of informal law to help taxpayers understand complex emergency relief rules implemented through the tax system.

In contrast to many other legal scholars who have examined important administrative law issues regarding informal tax guidance, in this Article, we reframe the topic as a social justice issue. 

Continue reading

Cain: Taxation Of Unmarried Partners

Patricia A. Cain (Santa Clara), Taxation of Unmarried Partners, 99 Wash. U. L. Rev. 1931 (2022):

The number of unmarried couples in the United States has been steadily increasing. While living together these partners often make property transfers between each other. And, when the relationship ends, either during their joint lifetimes or at the death of one partner, even more property transfers are likely to occur. Yet, there are no clear tax rules that apply to these transfers. Traditional tax rules typically characterize most of these transfers either as taxable gifts or as taxable income. This article argues that it is time to rethink those rules. Since federal tax law follows state property law to determine tax consequences of property divisions and transfers, the growing body of property law rules that apply to unmarried couples needs to be examined more closely to determine how they might affect certain tax consequences.

Continue reading

Death Of Mitchell Engler (Cardozo)

Campus News, Cardozo Mourns the Loss of Professor Mitchell Engler:

With deep sadness, I write to inform you of the death of Professor Mitchell L. Engler. Professor Engler was a highly regarded tax scholar and Professor at Cardozo for 23 years. He loved teaching and influenced generations of Cardozo students, who will remember him as passionate, extraordinarily kind and dedicated to them. He spent hours refining new approaches to teaching, and was relentlessly encouraging to students who were struggling.

Professor Engler was a quintessential tax academic. He combined his extraordinary skills as a tax lawyer with a serious interest in policy issues to create a substantial body of work. He wrote important and interesting articles on major subjects that speak to the core of how the federal government should fairly and effectively tax the public. He explored how we could change from an income tax to a consumption tax, and how that tax could be made progressive. He also considered ways of fundamentally reforming our corporate income tax. These are all big picture issues that are extremely complex, and Professor Engler leant his deep understanding of current law and his creative mind to advance proposals for reform.

Professor Engler will be deeply missed by the entire Cardozo community. In lieu of flowers, the family asks that donations be made in Professor Engler’s name to the JDRF (Juvenile Diabetes Research Foundation). ...

With sorrow,
Dean Melanie Leslie

Mitchell Lawrence Engler, age 58, of Hackensack, New Jersey passed away on Friday, November 4, 2022:

A graveside service for Mitchell will be held Wednesday, November 9, 2022 at 1:00 PM at Gates of Zion Cemetery, 670 Saddle River Road, Airmont, NY 10952.

Calvin Engler, age 92, of Spring Valley, New York passed away on Tuesday, November 8, 2022. Calvin was born in Brooklyn, NY:

Continue reading

Thomas & Scharff: Fake News And The Tax Law

Kathleen DeLaney Thomas (North Carolina; Google Scholar) & Erin Adele Scharff (Arizona State), Fake News and the Tax Law, 80 Wash. Lee. L. Rev. __ (2023):

The public misunderstands many aspects of the tax system. For example, people frequently misunderstand how marginal tax rates work, misperceive their own average tax rates, and believe they benefit from tax deductions for which they are ineligible. Such confusion is understandable given the complexity of our tax laws. Unfortunately, research suggests these misconceptions shape voter preferences about tax policy which, in turn, impact the policies themselves.

That people are easily confused by taxes is nothing new. However, with the rise of social media platforms, the speed at which misinformation campaigns can move to shape public opinion is far faster now. The past five years have seen a dramatic shift in the landscape of false information, and scholars in a variety of disciplines, from law to psychology to journalism, have explored the increasing influence of fake news.

Building on this burgeoning literature, this Article is the first to examine the incidence and impact of fake news on the tax law. We analyze a unique dataset of tax stories flagged as “false” or “untrue” by reputable, third-party news sources.

Continue reading

Kim Presents Tax Harmony: The Promise And Pitfalls Of The Global Minimum Tax At Oxford

Christine Kim (Cardozo; Google Scholar) presented Tax Harmony: The Promise and Pitfalls of the Global Minimum Tax, 43 Mich. J. Int'l L.  (2022) (with Reuven S. Avi-Yonah (Michigan; Google Scholar)) at Oxford yesterday as part of its International Tax Governance and Justice Series hosted by Tsilly Dagan, Ana Paula Dourado, and Cees Peters:

The rise of globalization has become a double-edged sword for countries seeking to implement a beneficial tax policy. On one hand, there are increased opportunities for attracting foreign capital and the benefits that increased jobs and tax revenue brings to a society. However, there is also much more tax competition among countries to attract foreign capital and investment. As tax competition has grown, effective corporate tax rates have continued to be cut, creating a “race-to-the-bottom” issue.

In 2021, 137 countries forming the OECD/G20 Inclusive Framework on BEPS passed a major milestone in reforming international tax by successfully introducing the framework of a global minimum corporate tax, known as Pillar Two. It aims to set a floor for corporate tax rates with various corrective measures so that multinational enterprises’ income will be taxed once in either source country or residence country at a substantive tax rate. 

Continue reading

Cummings: Tax Exceptionalism Is Overblown

Jasper L. Cummings, Jr., Tax Exceptionalism Overblown, 177 Tax Notes Fed. 225 (Oct. 10, 2022):

In this article, Cummings argues that the concept of tax exceptionalism has been wildly overstated and used mostly by tax avoiders, and he contends that, unlike some good ideas, the concept isn’t worth overstating. ...

A large crop of professors, brief authors, and article writers have gleefully claimed that some amorphous malady they call “tax exceptionalism” is dead, citing Mayo’s statements about National Muffler. The claim serves as an all-purpose ground for winning most any argument with the IRS. The flaws in their scholarship might be overlooked if they weren’t so darn happy about it. They all seem delighted to assert that the IRS and Treasury were taken down a peg by the Mayo opinion, often without noticing that Mayo held for the IRS and applied Chevron deference to a Treasury regulation. So if you want to take the IRS down a peg, Mayo isn’t your best cite.

The professorial criticism of a claimed insularity of tax professionals didn’t begin with National Muffler or Mayo or even professor Kristin Hickman. It dates to at least the early 1990s, when Paul Caron penned “Tax Myopia, or Mamas Don’t Let Your Babies Grow Up to Be Tax Lawyers [13 Va. Tax Rev. 517 (1994).] ” Again, a catchy title coupled with amusing criticism of the sometimes-self-important group known as tax lawyers kicked off a season of derision for pastimes such as trying to discover the meaning of the code by reading legislative history. Caron was able to enlist professor Boris I. Bittker in his cause.

Continue reading

Stark Presents Kneecapping Prop 13 Through The Income Tax Today At San Diego

Kirk J. Stark (UCLA) presents Kneecapping Prop 13 Through The Income Tax at San Diego today as part of its Tax Speaker Series hosted by Miranda Fleischer:

Under constitutional limitations on California’s local property tax introduced via Proposition 13 in June 1978, homeowners are generally taxed not on the fair market value of their homes but rather the property’s historic cost. As home prices rise over time, this “acquisition value” feature has two predictable effects: (1) it results in significant property tax disparities, favoring longtime homeowners relative to more recent purchasers, and (2) it discourages homeowners from moving because of the increased property tax burdens associated with purchasing a new home. Less widely recognized is the offsetting effect of a longstanding feature of California’s income tax: the deduction for local property taxes. By directing a larger subsidy to those with higher property taxes, this provision favors recent homebuyers facing market-value property taxes relative to longtime owners with constitutionally limited assessed valuations. It also mitigates to some degree Prop 13’s lock-in effect by reducing the effective property tax rate for those who purchase new homes.

Continue reading

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

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

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

Continue reading

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

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

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

Continue reading

Subscribing To TaxProf Blog

We offer three ways to have TaxProf Blog content automatically delivered to your computer, tablet, or smart phone:

Follow @SoCalTaxProf

RSS Feeds:  You can subscribe to one of three different feeds to receive TaxProf Blog posts via your RSS reader:

• All Posts will send you all blog posts
• Tax Posts will send you only tax-related blog posts
• Legal Education will send you only law school-related blog posts

Email:  You can subscribe to receive TaxProf Blog posts via email through one of four approaches:

• FeedBlitz:  Enter your email address here to receive TaxProf Blog posts via email, delivered to you either daily, every 12 hours, every 8 hours, every 4 hours, or hourly (at your option).
• TaxProf Blog Email Service:  Email me to be added to my daily email with titles and links to all TaxProf Blog posts.
• TaxProf Blog Legal Education Email Service:  Email me to be added to my daily email with titles and links to TaxProf Blog posts on legal education topics.
• TaxProf Blog Faith Email Service:  Email me to be added to my Sunday email with titles and links to TaxProf Blog posts on faith topics.

Support TaxProf Blog By Shopping On Amazon

TaxProf Blog participates in the amazon.com affiliate program. You can help support TaxProf Blog at no cost to you by making purchases through Amazon links on the blog and through the search box in the right column of the blog:

TaxProf Blog Weekend Roundup

Saturday:

• This Week's Ten Most Popular TaxProf Blog Posts
• Law Schools Expand Fundraising Ambitions As Tuitions Swell
• Oxford Seeks To Hire Two Business Tax Research Fellows
• Court Filings Reveal Contradictory Accounts Of Dean's Exit At Texas Southern Law School

Sunday:

• Inazu: Pandemic Forgiveness
• NY Times Op-Ed: Black, Christian and Transcending the Political Binary
• FiveThirtyEight: How Much Power Do Christians Really Have In The U.S.?
• The Top Five New Tax Papers

The Top Five New Tax Papers

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

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

This Week's Ten Most Popular TaxProf Blog Posts

1. News4JAX, Leaders Were Warned In 2014 Dean Candidate Job Talk That Law School Would Fail. 7 Years Later, It Did.
2. Wall Street Journal, The IRS And The Eighth Amendment
3. Josh Blackman (South Texas), Steven Lubet (Northwestern) & Robert Steinbach (Arkansas), Judge Ho's Boycott Of Yale Law School Grads For Judicial Clerkships
4. James Allen (University of Queensland), University Of San Diego: A Law School Lacked and Lost
5. Press Release, Winston & Strawn Launches Free, Online Course To Help First-Gen And Diverse Students Succeed In Law School
6. Lee Bollinger (President, Columbia), David French (The Dispatch) & Geoffrey Stone (Chicago), Perspectives On The Harvard And UNC Affirmative Action Cases
7. LSSSE Survey, Students Are Very Satisfied With Online Legal Education
8. Law.com, Samford University Refuses to Recognize Cumberland Law School's LGBTQ+ Group as Official Organization
9. Emily Grant (Washburn) & Elisabeth Wilder (Washburn), I Quit: Lessons for Educators from The Great Resignation
10. Ohio Supreme Court, July 2022 Ohio Bar Exam Results: Ohio State #1

Oxford Seeks To Hire Two Business Tax Research Fellows

Oxford Centre For Business Taxation seeks to hire two business tax research fellows:

The Centre for Business Taxation at the Saïd Business School, Oxford University, is seeking outstanding researchers: one in in law, and one in economics or a related field, such as accounting or finance. The Research Fellows will be expected to undertake and lead independent, high quality academic research into business taxation under the guidance of the Centre’s Director and other senior staff; to contribute to generating research income; to teach at graduate level on the MSc Taxation; and to engage in policy debate with government, business representatives and the media. Research output should primarily be aimed at leading peer-reviewed academic journals; however, all researchers in the Centre should also be prepared to contribute to policy-related output.

Continue reading

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

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

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

 

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

Continue reading

Tax Policy In The Biden Administration

• Bloomberg, Opportunity Zone Tracking Difficult Amid Federal, State Overlap
• Bloomberg, Super-Rich Americans Paid 97% More Estate Tax During Pandemic
• Bloomberg, Wall Street Landlords Squeezed by a Surge in Tax Bills
• Bloomberg, Windfall Tax on Big Oil Is More Politics Than Real Threat

Continue reading

Next Week’s Tax Workshops

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

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

Continue reading

Mason Presents Bibb Balancing Today At Richmond

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

Courts and commentators have long understood dormant Commerce Clause doctrine to contain two types of cases: discrimination and undue burdens. This Article argues for a more nuanced understanding that divides undue burdens into single-state burdens—which arise from the application of a single state’s law alone—and mismatch burdens, which arise from legal diversity. Although the Supreme Court purports to apply Pike balancing in all undue-burden cases, we show that the Court’s approach in mismatch cases differs substantially. Specifically, unlike in single-state cases, balancing in mismatch cases involves an implicit and potentially problematic comparison by the Court between the challenged state’s regulation and those of other states. We label analysis in mismatch cases “Bibb balancing,” after the famous mudflaps case, and we show that mismatch cases present the Court with a more challenging set of issues than do other types of dormant Commerce Clause cases. 

Continue reading

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

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

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

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

Continue reading

Blank & Osofsky: The Inequity Of Informal Guidance

Joshua D. Blank (UC-Irvine; Google Scholar) & Leigh Osofsky (North Carolina; Google Scholar), The Inequity of Informal Guidance, 75 Vand. L. Rev. 1093 (2022):

The co-existence of formal and informal law is a hallmark feature of the U.S. tax system. Congress and the Treasury enact formal law, such as statutes and regulations, while the Internal Revenue Service offers the public informal explanations and summaries, such as taxpayer publications, website frequently asked questions, virtual assistants, and other types of taxpayer guidance. Throughout the COVID-19 pandemic, the IRS increased its use of informal law to help taxpayers understand complex emergency relief rules implemented through the tax system.

Continue reading

Northwestern Seeks To Hire A Tax Prof

Northwestern Pritzker School of Law invites applications for a tax law lecturer, senior lecturer, or professor of practice (non-tenure-eligible):

The duties of the position include teaching a full load of tax courses during each academic year and advising students. Northwestern seeks applicants with a record of or potential for excellence in teaching and the ability to successfully mentor students on career goals and advancement.

Candidates must hold a J.D. degree from an ABA-accredited school and have a minimum of five years of experience as a tax professional in law or accounting firms, government experience involving either the formulation of tax policy or the administration and enforcement of the tax law, or academic experience. 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 interest in the position through Northwestern’s online application system: Apply for Job. Candidates are highly encouraged to apply by November 21, 2022.

Continue reading

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

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

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

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

Continue reading

WSJ: The IRS And The 8th Amendment

Update:  The FBAR’s Muddy Morass

Wall Street Journal, The IRS and the Eighth Amendment:

Navigating the labyrinth that is the U.S. tax code can already feel like punishment for ordinary taxpayers. But the real punishment comes when Americans face oppressive penalties from the Internal Revenue Service for innocent filing mistakes. That may be about to change. The Supreme Court hear[d] oral arguments Wednesday in Bittner v. U.S., a case that could ease excessive punitive measures from the IRS.

Alexandru Bittner, a Romanian-American dual citizen, nonwillfully failed to file five foreign bank account reports, or FBARs, with the IRS while living in Romania between 2007 and 2011. Taxpayers fill out annual FBAR forms if they have “foreign financial accounts exceeding $10,000.” When Mr. Bittner moved back to the U.S., he discovered this responsibility and had his certified public accountant file these forms to the IRS. The IRS responded by imposing a $2.72 million penalty even though there were no allegations of tax fraud or any additional taxes owed.

In Bittner, the court will have to determine how much in penalties Mr. Bittner must pay.

Continue reading

Wells: Foreign Tax Credit Redux

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

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

Continue reading

Hamilton vs. Jefferson In Supreme Court Direct Tax Jurisprudence

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

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

Continue reading

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

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

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

Continue reading

Dean Presents For-Profit Philanthropy Today At Boston College

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

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

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

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

Continue reading

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

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

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

Continue reading

Call For Papers: Stetson Tax Law Symposium

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

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

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

Continue reading

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

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

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

Continue reading

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

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

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

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

Continue reading