Burke: Transfers Of Zero-Basis Intangibles To A Partnership

Karen C. Burke (Florida), Transfers of Zero-Basis Intangibles to a Partnership, 174 Tax Notes Fed. 25 (Jan. 3, 2022):

In this report, Burke examines the problem of contributed zero-basis intangibles in light of the IRS’s inadvertent disclosure of a transaction structured by Bristol-Myers Squibb to shift billions of dollars of built-in gain to a related foreign partner.

Continue reading

Hellerstein & Appleby: Does The Supreme Court’s Decision In Wayfair Apply Retroactively?

Walter Hellerstein (Georgia) & Andrew D. Appleby (Stetson; Google Scholar), Does the Supreme Court’s Decision in Wayfair Apply Retroactively?, 102 Tax Notes St.  715 (2021):

A recent decision of the Oregon Tax Court suggests that it may be premature to dismiss the challenging questions raised by the retroactive application of Wayfair as entirely hypothetical. Accordingly, after providing an overview of the case law governing retroactive application of Supreme Court state tax decisions repudiating preexisting constitutional doctrine, we examine the Oregon Tax Court’s opinion in Global Hookah Distributors Inc. v. Department of Revenue, which addressed the question whether Wayfair applied retroactively to the state’s tobacco products tax.

Continue reading

Blue J Predicts: Worker Classification In The Gig Economy

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Kathrin Gardhouse (Legal Research Associate, Blue J Legal), Predicting Worker Classification in the Gig Economy, 173 Tax Notes Fed. 1733 (Dec. 20, 2021):

In this article, Alarie and Gardhouse examine the classification of workers in the gig economy and use machine-learning models to evaluate the legal factors that determine their categorization as employees or independent contractors for federal income tax purposes.

Continue reading

The Whiteness Of Tax And How To Narrow The Race Gap

Amanda Athanasiou (Tax Notes), The Whiteness of Tax and How to Narrow the Race Gap:

Tax is probably not at the top of anyone’s list of the most diverse legal professions, nor should it be.

The 2020 U.S. census revealed a more racially diverse population than was measured a decade earlier, with Black or African American individuals accounting for 12.4 percent — 14.2 percent if you include those identifying as Black or African American in combination with another racial group. But just 1.4 percent of American Bar Association Section of Taxation members identified themselves as Black or African American, according to the ABA’s "2021 Goal III Report." That’s the lowest percentage of any of the ABA’s 22 sections.

“The contrast with other areas of the law — which have become more diverse, more progressive in different ways — is just stark,” Steven Dean of Brooklyn Law School told Tax Notes. ...

The race gap in tax matters — not just for the sake of the diversity of the tax bar or the quality of legal and public services but also because the law depends on it. "Who it is that is helping to craft the law is important, and I think tax lawyers of color are underrepresented in those areas,” Alice Abreu of Temple University’s Beasley School of Law told Tax Notes. Abreu and Richard Greenstein, also a Beasley law professor, queried in their 2018 Denver Law Review article “Rebranding Tax/Increasing Diversity” whether the Tax Cuts and Jobs Act might have favored a more diverse population if the tax bar weren't so white.

“There are more people who would make excellent tax lawyers than do it,” Dean said, singling out former Georgia House Minority Leader Stacey Abrams, a classmate of his at Yale Law School who started as a tax lawyer at Sutherland, Asbill & Brennan. ...

Continue reading

Viard: Rethinking The State And Local Business Tax Deduction

Alan D. Viard (American Enterprise Institute), Rethinking the State and Local Business Tax Deduction, 173 Tax Notes Fed. 1261 (Nov. 29, 2021):

In this article, Viard examines the federal tax deduction for state and local business taxes, and he analyzes reform options that can narrow or eliminate the preferential treatment for some business taxes.

Continue reading

Warren: The Oxford Proposal For A Corporate Cash Flow Tax

Alvin C. Warren Jr. (Harvard), Evaluating the Oxford Proposal for a Corporate Cash Flow Tax, 173 Tax Notes Fed. 1223 (Nov. 29, 2021):

In this article, Warren examines the argument of the Oxford International Tax Group that its proposal for a cash flow tax on domestic sales by domestic and foreign corporations is progressive because it is equivalent to a cash flow tax on domestic shareholders of domestic and foreign corporations, wherever their sales occur.

Continue reading

Blue J: Taxpayers Face Uphill Battle In Assignment Of Income Cases

Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Kathrin Gardhouse (Legal Research Associate, Blue J Legal), Battling Uphill Against the Assignment of Income Doctrine: Ryder, 173 Tax Notes Fed. 1253 (Nov. 29, 2021):

In this article, Alarie and Gardhouse examine the Tax Court’s recent decision in Ryder [T.C. Memo. 2021-88 (July 14, 2021)] and use machine-learning models to evaluate the strength of the legal factors that determine the outcome of assignment of income cases. ...

Conclusion
We have seen that R&A’s chances to shift the liability for the tax payable on the staffing and the ASIG product income was virtually nonexistent. The difficulty of this case from the perspective of the IRS certainly lay in gathering the evidence, tracing the money through the winding paths of Ryder’s paper labyrinth, and making it comprehensible for the court. Once this had been accomplished, the IRS had a more-or-less slam-dunk case regarding the applicability of the assignment of income doctrine. As mentioned at the outset, an assignment of income case will always be an uphill battle for the taxpayer because income is generally taxable to whoever earns it.

Continue reading

Johnson: The Wonderful Mark-to-Market Tax

Calvin H. Johnson (Texas), The Wonderful Mark-to-Market Tax, 173 Tax Notes Fed. 1227 (Nov. 29, 2021):

Whatever its role in the current U.S. budget decisions, the proposal for mark-to-market taxation is a wonderful idea, so good to be inevitable — at some point. Mark-to-market taxation would tax shareholders on the annual gain from publicly traded stock even when those gains have not been reduced to cash. ...

Both accounting and economics define income to include mark-to-market gains. The 16th Amendment specifically authorizes a tax on income. That alone is sufficient.

Continue reading

Nuts And Bolts Of the 2021 Advanced, Enhanced Child Tax Credit

Francine J. Lipman (UNLV; Google Scholar) & James E. Williamson (San Diego State), Nuts and Bolts of the 2021 Advanced, Enhanced Child Tax Credit, 173 Tax Notes 319 (Oct. 18, 2021):

The enhancements in the child tax credit (CTC) in the American Rescue Plan Act of 2021 (ARPA) signed by President Biden on March 11 are a targeted child-centered, economic stimulus. Economists estimate that the 2021 CTC enhancements will increase consumer spending by $27 billion to $37 billion, generate $1.9 billion in state and local sales taxes, and create 511,000 new jobs at the median wage. Similar to the economic stimulus in rural areas from Social Security benefits, the enhanced CTC doubles its pre-ARPA spending power of $14 billion for households in rural America.

Less than four months after enactment starting on July 15, Treasury, through the IRS, is delivering almost 40 million monthly installments of estimated advanced, enhanced child tax credits (AECTC) to households, including 60 million children and their families. The Urban-Brookings Tax Policy Center estimates that 92 percent of families with children will receive an average annual CTC of $4,380 in 2021. The Joint Committee on Taxation has estimated that ARPA CTC enhancements cost $110 billion, while Columbia University based Center on Poverty and Social Policy determined that the benefits should be about eight times the cost at $800 billion. CTC benefits include increases to children’s future earnings, retirement benefits, and tax payments, and decreases in child protection and criminal justice services as well as healthcare costs for children and their families because of better health and longevity.

Continue reading

Avi-Yonah: A Different Way to Tax Stock Buybacks

Reuven Avi-Yonah (Michigan), A Different Way to Tax Stock Buybacks, 173 Tax Notes Fed. 1107 (Nov. 22, 2021):

In this article, Avi-Yonah reviews the Build Back Better Act, which would impose a 1 percent excise tax on corporate stock buybacks. He argues that while the measure is an effective way to raise revenue from high-income taxpayers, it will not address the main tax problem with buybacks: the tax exemption for foreign shareholders, which Congress should reconsider.

Continue reading

Rosenbloom & Shaheen: Toulouse — No Treaty-Based Credit?

H. David Rosenbloom (Caplin & Drysdale; NYU) & Fadi Shaheen (Rutgers; Google Scholar), Toulouse: No Treaty-Based Credit?, 104 Tax Notes Int'l 417 (Oct. 25, 2021):

This article maintains that the U.S. Tax Court’s decision in Toulouse [v. Commissioner, 157 T.C. No. 4 (2021)]— that U.S. tax treaties with France and Italy do not provide a treaty-based foreign tax credit against the net investment income tax — is mistaken.

Continue reading

Call For Student Tax Papers: 2022 Chris Bergin Award For Excellence In Writing

Christopher E. Bergin Award for Excellence in Writing:

The 2022 submission period for the Christopher E. Bergin Award for Excellence in Writing is now open! This annual award recognizes superior student writing on unsettled questions in tax law or policy. Learn more about the competition guidelines:

• Eligibility: Applicants must be enrolled in an accredited undergraduate or graduate program during the academic year. Each student may submit only one paper.
• Format: Entries should be a minimum of 2,500 words and a maximum of 12,000 words, including footnotes. Citations should be formatted as footnotes in accordance with the current version of The Bluebook: A Uniform System of Citation. Bibliographies and reference lists are prohibited. Articles should be submitted as Microsoft Word documents.

Continue reading

Zelinsky: Expand The Taxation Of Educational And Other Charitable Endowments

Edward A. Zelinsky (Cardozo), Expand the Taxation of Educational and Other Charitable Endowments, 173 Tax Notes Fed. 799 (Nov. 8, 2021):

In this article, Zelinsky argues that section 4968, which imposes an annual tax on the investment income of some college and university endowments, should remain in the tax code as a revenue measure and a harbinger of a world in which all charitable endowments pay annual tax on their investment incomes.

Continue reading

Avi-Yonah: The Case For Reviving The Corporate AMT

Reuven Avi-Yonah (Michigan), The Case for Reviving the Corporate AMT, 173 Tax Notes Fed. 795 (Nov. 8, 2021):

In this article, Avi-Yonah examines the bill introduced by Senate Finance Committee member Elizabeth Warren, D-Mass., to revive the corporate alternative minimum tax as a 15 percent tax on corporate book income, and he argues that it is a sensible way to address some problems of the corporate tax system.

Continue reading

Shaviro: Bittker’s Pendulum And The Taxation of Multinationals

Daniel N. Shaviro (NYU), Bittker’s Pendulum and the Taxation of Multinationals, 173 Tax Notes Fed. 621 (Nov. 1, 2021):

In this report, Shaviro examines the recent calls for increased entity-level corporate income taxation of multinationals, on both a source and a residence basis, and he details historical parallels.

Continue reading

Zelinsky: The Case For Limiting The Estate And Gift Tax Charitable Deductions

Edward A. Zelinsky (Cardozo), The Case for Limiting the Estate and Gift Tax Charitable Deductions, 173 Tax Notes Fed. 667 (Nov. 1, 2021):

In this article, Zelinsky argues that all large estates should support the federal treasury and that Congress should limit the estate and gift tax charitable deductions to ensure that they pay some tax.

Continue reading

Johnson: The Shelf Project — 82 Fair And Efficient Suggestions To Raise $3.5 Trillion

Calvin H. Johnson (Texas), The Shelf Project: 82 Fair and Efficient Suggestions to Raise $3.5 Trillion, 173 Tax Notes Fed. 63 (Oct. 4, 2021):

In this article, Johnson examines Shelf Project proposals that could raise $3.5 trillion in revenue over 10 years without increasing tax rates or the tax burden on lowor middle-income taxpayers while also improving the efficiency of the tax system. ...

Continue reading

Hasen: Three Cheers For Proposed Changes To Partnership Debt Basis Allocation Rules

David Hasen (Florida), Three Cheers for Proposed Changes to Partnership Debt Basis Allocation Rules, 173 Tax Notes Fed. 489 (Oct. 25, 2021):

In this article, Hasen explains problems with the rules regarding the allocation of basis credit among partners for the partnership’s third-party debt, and why the proposed change from Senate Finance Committee Chair Ron Wyden, D-Ore., would go a long way toward solving them.

Conclusion
Enactment of proposed section 752(e)(1) would represent a substantial improvement over existing law. The PPR aligns basis credit with economic reality; it eliminates tax-motivated manipulations of essentially meaningless risk-of-catastrophic loss allocations; and it eliminates the tax disparity between economically similar recourse and nonrecourse debt arrangements. These reasons alone would suffice to recommend the provision.

Continue reading

Blue J Predicts With 74% Confidence That 8th Circuit Will Find Customary/Usual Management Fees Are Deductible Under § 162

Benjamin Alarie & Christopher Yan (Blue J Legal), Would Management Fees by Any Other Name Still Be Deductible?, 173 Tax Notes Fed. 499 (Oct. 25, 2021):

In this article, Alarie and Yan examine Aspro [T.C. Memo. 2021-8 (Jan. 21, 2021)] and use machine-learning models to evaluate the strength of the appellant’s arguments in its appeal to the Eighth Circuit concerning the deductibility of management fees the business paid to its shareholders. ...

Conclusion
Blue J predicts with 74 percent confidence that the expenses in connection with the set of services provided to Aspro that are customary or usual will be found to be ordinary and necessary expenses. Blue J also predicts with 56 percent confidence that expenses in connection with the set of services that Aspro has failed to establish are customary or usual will be found not to be ordinary and necessary expenses.

Continue reading

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

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

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

Continue reading

Accounting Firms Are Beating Law Firms In The Tax Services Battle

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

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

Continue reading

Blue J Predicted With 95% Confidence That 7th Circuit Would Affirm Tax Court In Innocent Spouse Cases

Benjamin Alarie & Stefanie Di Giandomenico (Blue J Legal), Blue J Predicted With 95% Confidence That Seventh Circuit Would Affirm Tax Court In Innocent Spouse Cases, 172 Tax Notes Fed. 2149 (Sept. 27, 2021):

Clients often ask tax practitioners what their prospects of success are in litigation. Although the practitioner may have an opinion on the issue, the chances of success are often difficult if not impossible to quantify accurately and reliably. The question becomes even more complicated at the appellate stage because standards of review come into play, and the evidence to draw on is generally limited to what has already been considered by the lower court. New technology is bringing about change. Practitioners can now leverage machine learning systems trained on data from all other relevant decisions to assess the strength of their appeals on the merits. Consequently, tax practitioners and clients can together make data-driven decisions about whether to appeal and, if they do so, to formulate an optimal strategy.

In this article, we examine Rogers [v. Commissioner, No. 20-2789 (7th Cir. Aug. 17, 2021)], a case about innocent spouse relief that was recently decided by the Seventh Circuit. We use this case to illustrate how Blue J’s machine learning technology could have been used by the appellant’s counsel to assess the likelihood of success on appeal and the key factors required to succeed.

Continue reading

2021 Christopher Bergin Award For Excellence In Tax Writing

Bailey Hans (J.D. 2021, Notre Dame; LL.M. (Tax) 2022, NYU), GoFundMe: The Gift That Keeps on Giving, All Tax Season Long, 172 Tax Notes Fed. 2173 (Sept. 27, 2021):

In this article, Hans examines the tax consequences of donations made through crowdfunding platforms, focusing on the Duberstein standard and tax policy principles, and she explores ways to provide certainty to donors and donees in the absence of administrative or congressional tax guidance.

This article was entered into Tax Analysts’ annual student writing contest and received the 2021 Christopher E. Bergin Award for Excellence in Writing.

Continue reading

Zelenak: The Deductibility Of Capital Losses In A Mark-to-Market Regime

Lawrence Zelenak (Duke), The Deductibility of Capital Losses in a Mark-to-Market Regime, 172 Tax Notes Fed. 1965 (Sept. 20, 2021):

In this article, Zelenak considers the extent to which capital losses should be deductible under a mark-to-market regime applicable to the tradable assets of wealthy taxpayers, as advocated by Senate Finance Committee Chair Ron Wyden, D-Ore., in a 2019 paper.

Continue reading

Aprill & Mayer: Tax Exemption Is Not A Subsidy — Except For When It Is

Ellen P. Aprill (Loyola-L.A.) & Lloyd Hitoshi Mayer (Notre Dame; Google Scholar), Tax Exemption Is Not a Subsidy — Except for When It Is, 172 Tax Notes Fed. 1887 (Sept. 20, 2021):

In this report, Aprill and Mayer argue that there is no uniform answer to the question whether a tax exemption is a subsidy, and they urge policymakers and exempt organizations to note the distinctions when changes to laws or other guidance regarding exemption are under consideration.

Continue reading

Podcast: Feminism And The Tax Code

Tax Notes Talk | Podcast, Feminism and the Tax Code (Apple, Google):

Professors Bridget J. Crawford of the Pace University School of Law and Anthony C. Infanti of the University of Pittsburgh School of Law discuss viewing the U.S. tax code through a feminist lens.

Continue reading

Manoj Viswanathan: The Professor Who Inspired Me To Love Tax

Philip Wolf (J.D. 2019, UC-Hastings; Tax Associate, Belcher, Smolen & Van Loo, San Francisco), Manoj Viswanathan: The Professor Who Inspired Me to Love Tax, 172 Tax Notes Fed. 1615 (Sept. 6, 2021):

Out of the thousands of different professions, how does one end up choosing tax? I can tell you exactly how it happened with me. During my second semester of law school, I was permitted to take one elective class. I selected basic income taxation. Although I knew nothing about the subject, I sensed it might somehow be helpful to my goal of starting a business one day. Little could I have imagined where the class would lead me!

In our first session, in walked the ebullient yet sincere professor, Manoj Viswanathan, or as he asked us students to call him, “Professor V.” Every lecture, Professor V. emphasized how everything we’d learn in his class would be practical and relevant in the real world. Time seemed to melt away in each Tuesday and Friday lecture, and I caught myself pondering what he’d said many hours after each class. It was Professor V.’s introductory tax class that would make me decide to change my career plans and become a tax lawyer.

Continue reading

Blue J Predicts With 77% Confidence That Reserve’s § 501(c)(15) Appeal Will Be Dismissed By The Tenth Circuit

Benjamin Alarie & Bettina Xue Griffin (Blue J Legal), Captive Insurance Appeal in Reserve Mechanical Will Likely Fail, 172 Tax Notes Fed. 1431 (Aug. 30, 2021):

In this article, Alarie and Griffin examine the Tax Court’s decision in Reserve Mechanical [T.C. Memo. 2018-86] and the strength of its appeal on the issue of whether the taxpayer was exempt from tax as a valid insurance company under section 501(c)(15).

Conclusion
Blue J predicts with 77 percent confidence that Reserve’s appeal will be dismissed by the Tenth Circuit.

Continue reading

Avi-Yonah: Gucci Gulch Redux—The Problems Of The Wyden Tax Reform Proposal

Reuven S. Avi-Yonah (Michigan; Google Scholar), Gucci Gulch Redux: The Problems of the Wyden Proposal, 172 Tax Notes Fed. 1417 (Aug. 30, 2021):

In this article, Avi-Yonah critiques a recent U.S. tax reform proposal that would overhaul the global intangible low-taxed income, foreign-derived intangible income, and base erosion and anti-abuse tax regimes.

Conclusion
The Wyden proposal states that it is “a starting point for conversations in the Democratic caucus on how to reform the international tax system to meet shared goals.” I would suggest that there is a much better starting point, namely the Biden administration proposal. On every point that the Wyden proposal is different than the administration proposal, it is inferior.

Continue reading

Tax Fairness: In Search Of Justice And Representation

Alice G. Abreu (Temple), Jacqueline Laínez Flanagan (American) & Peter Mason, Tax Fairness: In Search of Justice and Representation, 172 Tax Notes Fed. 1457 (Aug. 30, 2021):

Global Roundtable is a regular series appearing in Tax Notes Federal, Tax Notes State, and Tax Notes International that brings together experts from each discipline to help advance the discussion of tax issues. In this installment, the authors examine the lack of racial diversity in the tax profession and built-in biases in tax policies and suggest ways to remedy the inequities.

Alice G. Abreu, Why Is Tax So White?:
Tax lawyers are crucial to the formulation and implementation of tax policy, and tax policy reflects the values and priorities of those who make it. But as Professor Rick Greenstein and I demonstrated in “Rebranding Tax/Increasing Diversity” (96 Denver L. Rev. 1 (2018)), the tax bar is much less diverse than the bar as a whole. This is especially disturbing because it is well known that the bar is much less diverse than the general population. And that lack of diversity may be contributing to the existence of tax law that disproportionately favors white taxpayers, directly and indirectly.

Jacqueline Laínez Flanagan, Seeking Tax Justice for Undocumented Immigrant Workers:

Continue reading

Zelenak: The American Families Plan And The Future Of The Mass Income Tax

Lawrence Zelenak (Duke), The American Families Plan and the Future of the Mass Income Tax, 172 Tax Notes Fed. 1277 (Aug. 23, 2021):

In this article, Zelenak argues that enactment of President Biden’s American Families Plan would threaten the status of the federal individual income tax as a tax imposed on most of the population, and he explores the fiscal citizenship implications of an income tax system under which almost all adults file tax returns but only about half pay tax.

Continue reading

Kaplan & Federici: The New Income Projection Rules For Defined Contribution Plans

Richard L. Kaplan (Illinois; Google Scholar) & Barry Federici, The New Income Projection Rules for Defined Contribution Plans, 172 Tax Notes Fed. 897 (Aug. 9, 2021):

The SECURE Act enacted at the end of 2019 requires that defined contribution retirement plans provide plan participants will projections of how much monthly income their accumulated balances will generate upon their retirement. This article analyzes the new Labor Department regulations that go into effect on September 18, 2021 and suggests various revisions, including an explanation of likely tax consequences.

Continue reading

The Tax Cuts And Jobs Act Delivered: Big Tech Moved $40 Billion Of Profits To The United States In 2020

Martin A. Sullivan, Big Tech Is Moving Profit to the United States, 172 Tax Notes Fed. 1209 (Aug. 23, 2021):

Several leading U.S. tech companies had a dramatic increase in the domestic share of their worldwide profits in 2020, according to the most recent annual reports available. For the 20 companies examined here, domestic profits in 2020 are estimated to be about $40 billion above what they would have been without passage of the Tax Cuts and Jobs Act. For Big Tech, it appears that the intended effects of the international provisions of the TCJA may be taking hold.

Continue reading

Some Dirty Realities About Syndicated Conservation Easements

Nancy A. McLaughlin (Utah), Stephen J. Small (Law Office, Cambridge, MA), Philip Tabas (Nature Conservancy) & Mark Weston (Valuation Advisor, Castle Rock, CO), Some Dirty Realities About Syndicated Conservation Easements, 167 Tax Notes Fed. 1729 (June 8, 2020):

Syndicated conservation easement transactions are profit-motivated tax shelters that promoters try to cloak with the feel-good nature of land conservation. This article explains the abusive nature of these transactions. ...

Conclusion
Determination of FMV depends on an objective analysis of market data that establishes what a willing buyer would pay a willing seller. Abusive syndicated conservation easement transactions depend on appraisers who are willing to assign grossly inflated values to the easements that have nothing to do with the true value of the easements or the properties to which they relate.

Continue reading

Shay: Addressing An Opaque Foreign Income Subsidy With Expense Disallowance

Stephen E. Shay (Boston College; Google Scholar), Addressing an Opaque Foreign Income Subsidy With Expense Disallowance, 172 Tax Notes Fed. 699 (Aug. 2, 2021):

Allowing U.S. shareholder deductions for expenses allocable to exempt foreign dividends and the portion of GILTI exempted by deduction is an opaque subsidy for foreign investment. This article’s analysis concludes that gross income offset by deductions whose object is to exempt foreign income from U.S. tax (exemptive deductions) is a class of income wholly exempt from taxes for purposes of applying the deduction disallowance rule of Section 265(a)(1) to such deductions. The amounts potentially subject to disallowance are substantial. This analysis raises questions for taxpayers who have taken deductions for these expenses and have not established a financial statement reserve or reported the position.

Based on the analysis in this article, a notice and comment regulation confirming the application of Section 265 to income offset by an exemptive deduction would reasonably interpret the statute.

Continue reading

Blue J’s Algorithm Predicts With 68% Confidence That IRS's Economic Substance Challenge Will Fail In District Court Perrigo Case

Benjamin Alarie & Christopher Yan (Blue J Legal), Economic Substance Doctrine: Still Giving Perrigo Heartburn?, 172 Tax Notes Fed. 599 (July 26, 2021):

Tax practitioners frequently struggle when providing advice on some cases in areas of tax law that have limited statutory guidance and a sizable body of case law. The reason is that the case law is often internally inconsistent; the courts can generate obfuscating noise. Sometimes the signal in the accumulated case law is relatively faint. For those studying hundreds of cases, the noisiness of a complex web of interacting considerations makes it difficult to assess the importance of any given factor in a case. Fortunately, advances in computing power and machine learning offer an opportunity to amplify the signal and diminish the noise to better understand the law.

In last month’s inaugural installment of Blue J Predicts, we examined whether an appeal of a Tax Court decision to the D.C. Circuit would be dismissed on the issue of whether a partnership exists [An Unprofitable Pretax Venture Can Still Be a Partnership, 171 Tax Notes Fed. 1951 (June 17, 2021)]  This month’s installment evaluates the strength of the commissioner’s economic substance arguments in the pending Perrigo case, which was heard before the U.S. District Court for the Western District of Michigan in a nine-day bench trial that concluded on June 7 [Perrigo Co. v. United States, No. 1:17-cv-00737 (W.D. Mich. 2021)]. Post-trial submissions have not yet been filed by the parties, and proposed findings of fact and conclusions of law were unavailable at the time of writing.

Although there are multiple issues at play in Perrigo, here we focus primarily on the economic substance arguments advanced by the government and the taxpayer.

Continue reading

Mason: The 2021 BEPS Compromise

Ruth Mason (Virginia; Google Scholar), The 2021 Compromise, 172 Tax Notes Fed. 569 (July 26, 2021): 

A year ago, I published an article arguing that the OECD/G-20 base erosion and profit-shifting project left international tax at a crossroads with a few obvious alternative courses — more multilateral cooperation, increased unilateralism that would threaten the gains of BEPS, or a reversion to a predominantly bilateral regime [The Transformation of International Tax, 114 Am. J. Int’l L. 353 (2020); see also Symposium On Ruth Mason's The Transformation Of International Tax]. The agreement in principle on pillars 1 and 2, announced July 1 in a statement by 130 of the inclusive framework countries, suggests that countries overwhelmingly prefer multilateralism over the other options.

This article offers initial reactions to the agreement and seeks to contextualize it into larger debates. ...

Continue reading

Zelenak: 1924, 2021 — Taxes Of The Ultrarich, And Mark-To-Market Reforms

Lawrence Zelenak (Duke), 1924, 2021: Taxes of the Ultrarich, and Mark-to-Market Reforms, 172 Tax Notes Fed. 583 (July 26, 2021):

In this article, Zelenak tells the story of Treasury’s disclosures of the income tax payments of plutocrats almost a century ago, which mirror the recent ProPublica revelations of the income tax payments of the 25 richest Americans, and he explores why those earlier disclosures — unlike the recent ones — didn’t spark interest in mark-to-market taxation of the ultrarich.

Continue reading

Hellerstein & Appleby: State Marketplace Platforms — The Postscript

Walter Hellerstein (Georgia) & Andrew D. Appleby (Stetson), Platforms: The Postscript, 100 Tax Notes State 1365 (June 28, 2021):

With Missouri’s adoption of platform legislation in May 2021, every state with a sales tax has now adopted marketplace platform legislation. This article provides an updated and, for the moment at least, complete description of state marketplace platform legislation.

Continue reading

Gale & Haldeman: Taxing Business — The TCJA And What Comes Next

William G. Gale (Tax Policy Center; Google Scholar) & Claire Haldeman (Tax Policy Center), Taxing Business: The TCJA and What Comes Next, 102 Tax Notes Int'l 1759 (June 28, 2021): 

In this article, the authors propose reforms that would repeal and amend various business tax provisions of the Tax Cuts and Jobs Act and would raise revenue while making business taxation more efficient, equitable, and resistant to profit shifting. ...

Continue reading

Gale & Haldeman: The TCJA — Searching For Supply-Side Effects

William G. Gale (Tax Policy Center; Google Scholar) & Claire Haldeman (Tax Policy Center), The Tax Cuts and Jobs Act: Searching For Supply-Side Effects:

The Tax Cuts and Jobs Act of 2017 (TCJA) instituted the most substantial changes in taxation in decades and was designed to boost the economy via supply-side incentives. This paper reviews these changes and examines the impacts on economic aggregates through 2019. The Act clearly reduced revenue. The effect on GDP is difficult to tease out of the data. Investment growth rose after TCJA was enacted but was driven by trends in aggregate demand, oil prices, and intellectual capital that were unrelated to TCJA’s supplyside incentives. Growth in business formation, employment, and median wages slowed after TCJA was enacted. International profit shifting fell only slightly, and the boost in repatriated profits primarily led to increased share repurchases rather than new investment.

Continue reading

Cui: What Does China Want From International Tax Reform?

Wei Cui (British Columbia; Google Scholar), What Does China Want From International Tax Reform?, 103 Tax Notes Int'l 141 (July 12, 2021):

The G-7 countries’ June 5 accord to implement a global minimum corporate tax rate promises to set off frenzied negotiations among nations regarding coordinated international tax reform. Finance ministers from the G-20 countries met in Venice on July 9-10, after this magazine went to press. Whether members of the G-7 club can persuade the larger group to endorse their minimum tax proposal will determine what mandate the OECD receives to continue the (re-)negotiations under pillars 1 and 2 of its program of work to develop a consensus solution. How will China respond to the G-7 proposal at the G-20 meeting? That question is especially intriguing, given the growing political antagonisms between China and some G-7 countries.

Continue reading

Ryznar: A Tax Credit For Wills

Margaret Ryznar (Indiana-Indianapolis), A Tax Credit for Wills, 172 Tax Notes Fed. 211 (July 12, 2021):

In this article, Ryznar suggests using tax law to encourage people to execute wills, arguing that the coronavirus pandemic revealed the importance of estate planning.

Conclusion
When the pandemic eases, many resulting issues will need to be addressed. One of these is preparation for the next pandemic, which should include encouraging people to create an estate plan.

Continue reading

A Fair Income Tax On The Trillion-Dollar Behemoths

Calvin H. Johnson (Texas), A Fair Income Tax on the Trillion-dollar Behemoths, 171 Tax Notes Fed. 1199 (May 24, 2021):

Our trillion-dollar market capitalization behemoths, Apple, Amazon, Google and Microsoft, pay effective tax rates of between 0.65 percent and 2.9 percent because they deduct immediately ("expense") their intangible investments that have value beyond the end of the year. Current regulations allow expensing of investments that cannot be sold or seized apart from the business as a whole, but they also permit mandatory capitalization of expenditures with value beyond the tax year upon publication in the Federal Register. Treating the investments as creating basis, not expensing, and correcting prior year's error of allowing expensing of costs with continuing value would raise $6 trillion revenue, under income tax norms, without the participation of Congress.

Continue reading

2003-2020 Tax Journal Rankings: Tax Law Review Is #1, Virginia Tax Review Is #2

Following up on yesterday's post, 2020 Tax Journal Rankings: Florida Tax Review Is #1, Virginia Tax Review Is #2:  here are the Washington & Lee 2003-2020 tax law review combined rankings of eight major tax journals:

• Columbia Journal of Tax Law ("Columbia")
• Florida Tax Review ("Florida")
• Houston Business & Tax Review ("Houston")
• Pittsburgh Tax Review ("Pittsburgh")
• Tax Law Review ("NYU")
• Tax Lawyer ("ABA")
• Tax Notes Federal ("Tax Notes")
• Virginia Tax Review ("Virginia")

The rankings are based on the annual combined rankings in 2003-2020 among these eight journals by:

• Impact Factor (citations/number of articles published)
• Citations in Law Reviews
• Citations in Cases (federal and state courts)
• Currency (how rapidly articles are cited)

Ave	Journal	20	19	18	17	16	15	14	13	12	11	10	09	08	07	06	05	04	03
1.7	1. NYU	3	2	3	3	2	2	2	2	2	1	1	1	1	1	1	1	1	1
2.5	2. Virginia	2	4	4	1	1	1	1	1	1	2	2	2	3	4	4	4	4	4
2.7	3. Florida	1	1	1	2	3	4	3	3	3	4	4	4	4	3	2	2	3	2
3.1	4. Tax Notes	4	3	2	4	4	3	4	4	4	3	3	3	2	2	3	3	2	3
5.4	5. ABA	NR	6	NR	5	5	5	5	5	6	5	6	6	6	6	5	5	5	5
7.9	6. Houston	NR	NR	NR	10	9	7	6	6	7	7	7	8	8	9	8	8	9	9
7.9	7. Pittsburgh	NR	NR	NR	8	8	8	7	8	5	6	5	5	5	22	NR	NR	NR	NR
11.3	8. Columbia	5	5	NR	6	6	10	10	13	14	33	NR	NR	NR	NR	NR	NR	NR	NR

Tax Notes Federal fares poorly in the Impact Factor category (citations/number of articles published) because W&L apparently counts as "articles" all of the advance sheet material in Tax Notes Federal.

Tax Notes Federal is #1 by a wide margin in the number of citations in law reviews:

Continue reading

2020 Tax Journal Rankings: Florida Tax Review Is #1, Virginia Tax Review Is #2

Washington & Lee has just released the 2020 tax law review rankings of six major tax journals:

• Columbia Journal of Tax Law ("Columbia")
• Florida Tax Review ("Florida")
• Tax Law Review ("NYU")
• Tax Lawyer ("ABA")
• Tax Notes Federal ("Tax Notes")
• Virginia Tax Review ("Virginia")

The rankings are based on citations to articles published in 2016-2020 (methodology):

• Impact Factor (citations/number of articles published)
• Citations in Law Reviews
• Citations in Cases (federal and state courts)
• Combined (weighted combination of the above rankings)
• Currency (how rapidly articles are cited)

	Combined	Impact	Journals	Cases	Currency
1. Florida	11.12	0.69	161	1	1.43
2. Virginia	10.90	0.75	135	1	1.19
3. NYU	10.64	0.62	166	0	1.11
4. Tax Notes	8.92	0.01	290	1	0.02
5. Columbia	8.10	0.58	93	0	1.18
ABA	NR	NR	NR	NR	NR

Continue reading

Narotzki: A Progressive Tax Plan For A Progressive America

Doron Narotzki (Akron), A Progressive Tax Plan for A Progressive America, 171 Tax Notes Fed. 1225 (May 4, 2021):

In this article, Narotzki highlights the historic nature of the tax proposals outlined by President Biden in his recent speech before Congress. ...

The United States tried the trickle-down theory. It failed. We know it failed because the tax plans that adopted this theory resulted in huge national debt, poor infrastructure (because of federal expenditure cuts to mitigate the national debt), and the worst income inequality in decades.

Continue reading

Blue J Predicts: An Unprofitable Pretax Venture Can Still Be A Partnership

Benjamin Alarie, Bettina Xue Griffin & Christopher Yan (Blue J Legal), An Unprofitable Pretax Venture Can Still Be a Partnership, 171 Tax Notes Fed. 1951 (June 17, 2021):

In this inaugural installment of Blue J Predicts, the authors use machine-learning models to anticipate and analyze the possible outcome of the IRS’s appeal in Cross Refined Coal. Future installments will focus on other pending tax cases.

Continue reading

Taxing The Moon

Kevin Brown (Morrison & Foerster, Boston), Tax the Moon That the Earth May Prosper: How to Tax Lunar Occupation, 102 Tax Notes Int'l 877 (May 17, 2021):

This author believes that humankind’s exploitation of outer space, beginning with the moon, should be subject to a minimal tax at the global level. This tax should be collected by a nongovernmental organization with the resulting revenue used to fund solutions to global problems, such as supporting the WHO’s effort to guarantee that everyone has access to basic healthcare. If outer space is the shared heritage of humankind, then its economic development should ensure the welfare of all people. Notably, Tedros Adhanom Ghebreyesus, the WHO’s director-general, recently released a letter signed by several world leaders calling for global coordination to “build a more robust international health architecture that will protect future generations” from threats like COVID-19. As Tedros’s initiative moves ahead, many will ask how to pay for it, and this article offers a novel, practical solution.

While the spirit of this proposal has been voiced by tax scholars for years, this article is the first to articulate the need for and mechanics of a moon tax — that is, a workable approach to taxing lunar activity based on an international agreement, with the revenue used to address global-scale problems. A thorough search of online resources and legal secondary sources yields some discussion of the implications of taxing outer space activity on a nation-by-nation basis, including summaries of the various treaties that govern outer space activity, but the author is unaware of any article presenting a proposal like the one articulated here for organizing and taxing activities that take place on the moon.

After summarizing the law governing extranational areas, this article develops the above proposal by addressing six issues:

Continue reading

Kane & Kern: Progressive Formulary Apportionment — The Case For ‘Amount D’

Mitchell Kane (NYU) & Adam Kern (Covington & Burling, Washington, D.C.), Progressive Formulary Apportionment: The Case for ‘Amount D’, 171 Tax Notes Fed. 1713 (June 14, 2021):

In this report, Kane and Kern demonstrate the advantages of progressive formulary apportionment over other possible international tax reforms, and they show how it could be implemented seamlessly within the architecture of pillar 1.

Continue reading