TaxProf Blog

Tax Reform Is Hard (#TRIH)

With the looming deadline on both the debt ceiling and the tax reconciliation bill (not to be confused with the ACHA reconciliation instructions), taxes and, hopefully, tax reform are moving to the top of the legislative agenda.   The rhetoric of tax reform is heating up.  Yesterday Paul Ryan tweeted:

Speaker Ryan is not the only member of GOP leadership discussing tax reform.  News last week broke that Steve Bannon wants to raise the top bracket rate to a number that has ”a 4 in front of it”. So, the GOP continues to a least float the idea of substantive tax reform measures.  

I don't want to get too carried away about tax reform. Despite my optimism for "reform season," others does not seem to have the same zeal. First there is no "plan" to discuss.  Second, the House Appropriations Bill (which I wrote about at Surly) does not seem to be too keen on the chances of real reform measures.  For example, the Appropriations Bill addresses estate tax regulations and ACA penalties.  If the estate tax and the ACA are on the chopping block, then why worry about the measures in the Appropriations Bill?

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Woman Sues Howard Stern For Airing Her Phone Call With IRS Agent Discussing Her Taxes

Radio Ink, “Hello Howard, This Is the IRS …”:

In a fact pattern worthy of a law school exam question, an IRS employee calls the Howard Stern Show and is put on hold. The IRS employee on a different line, apparently either using fat fingers on a conference call feature, or on a speakerphone, takes a call from a taxpayer while on hold with Stern. The Howard Stern Show then picks up, hears the IRS employee talking with the taxpayer and puts the nearly hour-long conversation on the air live. The law school question is … in how many ways might the Howard Stern Show be civilly and criminally liable?

The question will likely be answered by the courts. The taxpayer has sued both the IRS for violations of the Federal Tort Claims Act and unlawful disclosure of tax returns and personal information, the Howard Stern Production Company, and Stern individually, for negligence, invasion of privacy, and the intentional infliction of emotional distress.

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2016 Outstanding Women In Tax

Tax Notes, 2016 Outstanding Women in Tax:

Several months ago, we decided to honor some of today's outstanding women in tax. We asked Tax Notes readers and other Tax Analysts stakeholders to nominate women from the public and private sectors who have had a significant impact on tax practice and policy.

We expected dozens of nominations; we received more than 300.

We should have expected such a large response. There are many noteworthy women in the tax world. We're fortunate to be working closely with some of them, including Tax Notes contributing editor Lee A. Sheppard and Tax Analysts board members Pamela Olson and Deborah Schenck (all of whom were nominated multiple times but who were ineligible because of their affiliation with Tax Analysts).

Selecting only 10 out of such a distinguished list was a daunting task. So we assembled a committee of editors, reporters, and executives who reviewed and carefully examined each of the more than 300 nominees before coming to the difficult decision.

This year's honorees include government trailblazers, rising stars, and women who have been the distinguished standard-bearers in the tax field for years. Those being recognized include the leader of a key congressional tax committee, a distinguished jurist, an IRS official, scholars from around the world, and accomplished partners in major accounting and law firms.

Individually and collectively they influence tax administration and policy globally every day. They inspire, educate, and empower people in their areas of tax.

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Tax Analysts Annual Student Writing Competition

Tax Analysts Annual Student Writing Competition:

Tax Analysts is pleased to announce the opening of its annual student writing competition for 2016. This global competition enables students who win to publish a paper in Tax Notes, State Tax Notes, or Tax Notes International and receive a 12-month online subscription to all these weekly magazines after graduation.

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Yin: Goodbye to Tax Notes?

TaxProf Blog op-ed:  Goodbye to Tax Notes?, by George K. Yin (Virginia):    

In Goodbye to Tax Notes, Michael Graetz bids adieu to one of my favorite sources of tax information because of dramatic changes in their subscription practices. He states that “there are many alternative sources of information and new outlets to publish the kinds of short articles that Tax Notes contains.” He mentions SSRN, ITPF, Paul Caron’s blog, and other possibilities. While I and my school are not happy with the subscription changes, I am not sure there are good alternatives available and would be happy to learn otherwise.

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Graetz: Goodbye to Tax Notes

TaxProf Blog op-ed:  Goodbye to Tax Notes, by Michael J. Graetz (Columbia):

Today, I received the following email from the Columbia Law librarian announcing a new policy of Tax Analysts:

Tax Analysts is in the process of eliminating their complementary professorial accounts. They have presented us with the following terms, and they will maintain your access for the rest of this work week.

In this case, the alternatives are the library paying $8,500 a year for an broad account shared by the library with individual direct access limited to three professors, or you paying $780 a year for your individual access to Tax Notes and Tax Notes International .... They will not sell access to the “Lawref” e-dress because that is a shared account.....

When Tom Field started a nonprofit publisher and public interest law firm in 1969, he could not have imagined the success Tax Analysts would enjoy. It has for nearly a half century provided a unique and invaluable service to the tax community. I have long relied on it myself for timely information and have had many students use its resources for their papers and publications, even though much of its most useful content is in the public domain. And I have frequently published there and speak often with its correspondents. But with this latest turn, Tax Analysts may be losing sight of its mission. According to its Form 990 for the fiscal year ending June 30, 2013 (which is the most recent readily available) Tax Analysts had over $23 million in revenues from its publications, cash and securities on hand exceeding $40 million and more than $60 million in total assets. Its revenue exceeded its expenses by nearly $4 million. It is difficult to believe that this change in policy is prompted by financial necessity. And the timing is especially unfortunate for many law schools around the country.

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Watson: SFRs and Problems in Tax Administration and Enforcement

Camilla E. Watson (Georgia), SFRs and Problems in Tax Administration and Enforcement, 146 Tax Notes 363 (Jan. 20, 2015):

When the IRS prepares substitutes for returns (SFRs) for a married couple, it prepares separate returns for each of the parties and considers them married filing separately. It will then send separate notices of deficiency to the parties. If only one of the spouses petitions the Tax Court, this could be problematic for both, even if the court’s decision is favorable to the petitioner. The problems identified in this report, while narrow in scope, highlight broader issues in the administration of the tax system. This report proposes reforms to correct the problems in the SFR process, but these proposals apply more broadly to address general problems in the administration of the tax system.

Johnson: The Circular 230 Regulations May Be Invalid

Steve Johnson (Florida State), How Far Does Circular 230 Exceed Treasury's Statutory Authority?, 146 Tax Notes 221 (Jan. 12, 2015):

In this report, Johnson discusses the future of Circular 230 and argues that if the approach of recent cases is confirmed by litigation and if Congress chooses not to act, significant portions of the circular may be at risk of invalidation.

Kamin: How to Tax the Rich

David Kamin (NYU),  How to Tax the Rich, 146 Tax Notes 119 (Jan. 5, 2015):

In this article, Kamin reviews options for increasing tax liabilities for the richest Americans. He concludes that several options that have received considerable attention and support are not viable as a practical matter -- taking into account amounts of revenue raised and administrative considerations. Those options include taxing capital gains as ordinary income, annual wealth taxes, and broad mark-to-market accounting. Kamin identifies more viable options, including substantially expanding transfer taxes, increasing the tax rate on ordinary income, and taxing -- at least partially -- unrealized gains at death or gift, which may be the most promising.

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The Top 10 Tax Presidents

Joseph J. Thorndike (Tax Analysts), The Top 10 Tax Presidents, 145 Tax Notes 1303 (Dec. 22, 2014):

[I]n the service of inspiration -- and perhaps consternation -- I've compiled a list of influential tax presidents. It bears repeating: This is not a roster of good tax presidents. It's an assessment of presidential influence on the development of the federal tax system, whether for good or bad. Indeed, given the politicization of tax policy, it's likely that several of these presidents will be judged as both heroes and villains, depending on who's doing the judging.

1. Ronald Reagan
2. Franklin Roosevelt
3. Woodrow Wilson
4. George Washington
5. Thomans Jefferson
6. George W. Bush
7. Calvin Coolidge
8. William Howard Taft
9. John F. Kennedy
10. George H.W. Bush

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Shaviro: The Case for 1986-Style Corporate Tax Reform

Daniel N. Shaviro (NYU), Evaluating the Case for 1986-Style Corporate Tax Reform, 145 Tax Notes 1267 (Dec. 15, 2014):

Shaviro explores the relationship between taxing corporate income at the entity level and the difficulties in evaluating whether a corporate rate cut would be desirable without significant structural changes.

Driessen: Corporate Tax Fate May Hinge on Modeling Omission

Patrick Driessen (former revenue estimator, Joint Committee on Taxation and Treasury Department), Corporate Tax Fate May Hinge on Modeling Omission, 145 Tax Notes 1043 (Dec. 1, 2014):

By omitting corporate income, traditional distribution models overstate the U.S. corporate tax rate and overall tax progressivity. The prevailing capital gains realization approach could be replaced by an inclusive corporate income method that would correctly show corporate equity owners as more lightly taxed than capital gains realization models indicate. That replacement would accord with how the individual tax is modeled for distribution as well as with results from corporate tax studies conducted outside the distribution context. Augmenting corporate income in distribution models would also enable proper reflection of proposals, such as corporate integration, and provide a better perspective on how much corporate tax is borne by labor.

(Hat Tip: David Cay Johnston.)

Hoenig: What's Wrong With Trafficking in NOLs?

Mark Hoenig (Weil, Gotshal & Manges, New York), Trafficking in Net Operating Losses: What's So Bad?, 145 Tax Notes 919 (Nov. 24, 2014):

Hoenig examines the almost century-long history of Congress’s efforts to allow tax losses and limit their transfer. He explores the rationale for those efforts, assesses the system now in place, and asks whether an alternative set of rules might better serve policy and the economy.

Viard: Moving Away From the Realization Principle

Alan D. Viard (American Enterprise Institute), Moving Away From the Realization Principle, 145 Tax Notes 847 (Nov. 17, 2014):

Viard describes the realization principle’s flaws and the federal tax system’s incremental movement toward mark-to-market taxation.

Graetz & Warren: Unlocking Business Tax Reform

Michael J. Graetz (Columbia) & Alvin C. Warren Jr. (Harvard), Unlocking Business Tax Reform, 145 Tax Notes 707 (Nov. 10, 2014):

In this article, Graetz and Warren explain why integration should be on today’s tax reform agenda and discuss how that change could be structured.

In conjunction with this article, Tax Analysts is republishing as an eBook, now available on Amazon, the 1998 volume of Integration of the U.S. Corporate and Individual Income Taxes: The Treasury Department and American Law Institute Reports:

Business tax reform now seems stymied despite important proposals from prominent political leaders in both parties, including the president and the chairs of the House and Senate tax writing committees. Each represents a serious effort to reform business taxation. But those proposals have failed to advance in either the House or Senate.

Integration of corporate and shareholder taxes offers a straightforward approach that could help resolve many of the most difficult issues and provide the key to unlocking business tax reform. The general idea is to convert at least part of the corporate tax into a withholding tax that would be credited against individual shareholder taxes due on dividends.

The United States has long had what is called a classical income tax system, under which income is taxed to corporations and shareholders as distinct taxpayers. As a result, taxable income earned by a corporation and then distributed as a dividend may be taxed twice, once to the corporation and once to the shareholder on receipt of a dividend. In contrast, earnings on corporate debt are not taxed at the corporate level because, unlike dividends, interest is deductible. And businesses taxed as partnerships can benefit from lower total taxes than those taxed as corporations. This incoherent combination of results creates undesirable distortions in corporate and investor behavior.

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Sullivan: The Tax Aspects of Immigration Reform

Martin A. Sullivan (Tax Analysts), The Tax Aspects of Immigration Reform, 145 Tax Notes 463 (Nov. 3, 2014):

Against all odds, Obama, who would love to include immigration reform as part of his legacy, and Republican leaders in Congress, who want their party to be competitive in the 2016 presidential election and to show they can get things done, are likely to make a serious attempt at putting together a bipartisan, bicameral deal on immigration in 2015. The estimates presented in this article are based on numerous assumptions about which there is considerable uncertainty, so they can hardly be taken as gospel. But the central finding, concerning the large difference in the revenue effects between legal and unauthorized immigration, is difficult to dispute given the differences in average income levels and the fact that many currently unauthorized immigrants already pay tax. As Congress struggles to fix our broken immigration system, it is likely to consider many variations of S.744 and its components. Those proposals that allow a large influx of new legal immigrants — particularly immigrants with high skills—will significantly increase tax revenue. Providing new legal status for current unauthorized immigrants will not.

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Rosenzweig: Revisiting the Law of Moses' Rod -- The Case of Inversions

Adam Rosenzweig (Washington University), Revisiting the Law of Moses' Rod: The Case of Inversions, 145 Tax Notes 429 (Oct. 27, 2014):

This article revisits Marty Ginsburg’s law of Moses’ rod in the context of inversions, in particular how proposed revisions to the antiinversion rules could be used to justify new, or even more aggressive, expatriation strategies. While not advocating that any taxpayer or other party pursue specific strategies or that they are ‘‘good’’ from a tax policy standpoint, the goal in examining potential inversion strategies even in the face of anti-inversion rules is to help find ways to incorporate antiabuse provisions into the larger structural goals of the income tax.

Gupta: Will eBay's Spinoff of PayPal Result in an Inversion?

Ajay Gupta (Tax Analysts), Will PayPal's Spinoff End in an Inversion -- or Two?, 76 Tax Notes Int'l 188 (Oct. 20, 2014):

Ajay Gupta discusses how Treasury's anti-inversion guidance [Notice 2014-52] could affect PayPal's announced spinoff from parent company eBay.

Thimmesch: The Tax Hangover -- Trailing Nexus

Adam B. Thimmesch (Nebraska), Evaluating the Tax Hangover: Trailing Nexus, 74 State Tax Notes 83 (Oct. 13, 2014):

In this article, which is adapted from a longer law review article [The Tax Hangover: Trailing Nexus, 33 Va. Tax Rev. 497 (2014)], Thimmesch examines the concept of trailing nexus. He argues that the concept is consistent with the physical presence standard and proposes an economic latency approach, which he asserts is consistent with both constitutional principles and economic reality.

Christians: It's Time to Fix FBAR

Allison Christians (McGill), Paperwork and Punishment: It's Time to Fix FBAR, 76 Tax Notes Int'l 147 (Oct. 13, 2014):

Allison Christians argues that the U.S. Foreign Bank Account Report regime is excessive and offers suggestions to narrow its scope and ease compliance burdens.

Ryan: Valuation Lessons From Estate of Adell

Kerry A. Ryan (St. Louis), Valuation Lessons From Estate of Adell, 144 Tax Notes 1455 (Sept. 22, 2014):

In Estate of Adell [T.C. Memo. 2014-155], the Tax Court determined that the correct value of a decedent’s interest in a closely held corporation was the figure reported on the original estate tax return. The court rejected alternative values as either using the incorrect valuation method or failing to account for the significant value of a key employee’s personal goodwill. 

Blanchard: Notice 2014-52 and the New Anti-Inversion Rules

Kimberly S. Blanchard (Weil, Gotshal & Manges, New York), Extensive New Anti-Inversion Rules Issued, 145 Tax Notes 89 (Oct. 6, 2014):

Blanchard summarizes the provisions of anti-inversion guidance Notice 2014-52 and suggests some practical tips for what it might mean in the future.

Blanchard Takes Issue With Kleinbard's Call for Anti-Inversion Legislation

Kimberly S. Blanchard (Weil, Gotshal & Manges, New York), Blanchard Argues Against More Anti-Inversion Rules, 144 Tax Notes 1335 (Sept. 15, 2014):

I write to comment on Edward D. Kleinbard's recent article ['Competitiveness' Has Nothing to Do With It, 144 Tax Notes 1055 (Sept. 1, 2014)] on the subject of "inversions." Kleinbard is, as usual, erudite and funny, but all the erudition and humor in the universe cannot hide the hole in his argument.

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State Tax Haven Laws

Daniel M. Dixon, Michael A. Jacobs, Michael I. Lurie & Jack Trachtenberg (all of Reed Smith), To Blacklist or Not to Blacklist -- The Trend Toward State Tax Haven Laws, 73 State Tax Notes 635 (Sept. 8, 2014):

In this article, the authors discuss tax havens and how states are cracking down on multinational corporations that are perceived as abusing the tax laws of tax haven nations. The authors argue that both of the tax haven tests used by states -- the factor test and tax haven blacklist -- have constitutional issues.

ABA Tax Section Releases 2014-15 Law Student Tax Challenge Problem

The ABA Tax Section has released the J.D. Problem (rules; entry form) and LL.M. Problem (rules; entry form) for the 14th Annual Law Student Tax Challenge (2014-2015):

An alternative to traditional moot court competitions, the Law Student Tax Challenge asks two-person teams of students to solve a cutting-edge and complex business problem that might arise in everyday tax practice. Teams are initially evaluated on two criteria: a memorandum to a senior partner and a letter to a client explaining the result. Based on the written work product, six teams from the J.D. Division and four teams from the LL.M. Division receive a free trip (including airfare and accommodations for two nights) to the Section of Taxation 2015 Midyear Meeting, January 29-31 in Houston, TX, where each team will defend its submission before a panel of judges consisting of the country’s top tax practitioners and government officials, including tax court judges. The competition is a great way for law students to showcase their knowledge in a real-world setting and gain valuable exposure to the tax law community. On average, more than 60 teams compete in the J.D. Division and more than 40 teams compete in the LL .M. Division. For examples of the "Best Written" winners from past competitions, please click here.

IMPORTANT DATES

1. Submission Deadline: November 7, 2014
2. Notification of Semifinalists and Finalists: December 19, 2014
3. Semifinal and Final Oral Defense Rounds: January 30, 2015 in Houston, TX

COD Income and Student Loan Debt Forgiveness

Kiran Sheffrin, Trapped by Forgiveness: Taxing COD Income, 144 Tax Notes 1191 (Sept. 8, 2014):

In this article, Sheffrin discusses the student loan debt crisis and problems with the current proposals for reform. She identifies two ways that the tax treatment of forgiven student loans can be used to achieve policy goals: partial recognition of cancellation of indebtedness income based on a household’s ability to pay, and spreading the payment of amounts owed over a fixed number of years.

Yin: Stopping Corporate Inversions Sensibly and Legally

George K. Yin (Virginia), Stopping Corporate Inversions Sensibly and Legally, 144 Tax Notes 1087 (Sept. 1, 2014):

A recent article by Mindy Herzfeld, What Can Treasury Do About Inversions?, 144 Tax Notes 895 (Aug. 25, 2014), overlooks a simple and sensible alternative available to the Treasury Department that is not of questionable legality. Treasury could submit a proposal to Congress to redefine a corporation's "residence" for tax purposes -- which determines whether the entire panoply of U.S. tax rules applies to it -- based on the location of the enterprise's principal customer base.

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Kennedy: DOMA Implications for Employee Benefit Plans

Kathryn J. Kennedy (John Marshall), DOMA Implications for Employee Benefit Plans: Round 2, 144 Tax Notes 947 (Aug. 25, 2014):

This report updates Kennedy’s earlier Tax Notes article on employee benefits guidance issued by the IRS and the Department of Labor soon after the Supreme Court’s 2013 decisions in Hollingsworth v. Perry and United States v. Windsor on the constitutionality of the Defense of Marriage Act. The IRS has since issued additional helpful guidance, and there has been a groundswell of federal and state litigation contesting states’ same-sex marriage bans. In this report, Kennedy discusses the current state of affairs and highlights many of the questions not addressed by the IRS and Labor Department guidance. She argues that without additional regulatory guidance, which appears unlikely, those questions will have to be resolved through future litigation.

Johnston: Kinder Morgan’s Evolving Tax Strategy

David Cay Johnston (Syracuse), Kinder Morgan’s Evolving Tax Strategy, 144 Tax Notes 881 (Aug. 18, 2014):

Johnston looks at Kinder Morgan’s recent announcement that it would be folding two master limited partnerships into a C corporation holding company.

Johnson: Repealing the Tax Subsidies to Qualified Retirement Plans

Calvin H. Johnson (Texas),  Amazing Waste: Tax Subsidies To Qualified Retirement Plans, 144 Tax Notes 727 (Aug. 11, 2014):

The proposal would repeal the tax advantages given to qualified retirement plans. Qualified plans are ineffective or counterproductive for their given rationales, which makes them a rich source of revenue when the United States needs money. Johnson argues that qualified plans provide a safety net where there is little need for it and provide no safety net where it is needed. Qualified plans are said to improve the value of a dollar by moving it from high-income working years to low-income retirement years. However, the tax advantages are distributed under a reverse-Robin Hood pattern to high income groups (many with soaring salaries) and by negating the tax brackets. That distribution of benefits can be expected to reduce the utility of a dollar. Qualified plans are said to be an incentive for savings, but when government cost and deficits are considered, the plans reduce net national savings. It would be cost free and effective to increase retirement savings by mandating savings for retirement or by imposing default rules without a tax subsidy.

Zelinsky: Wynne and the Double Taxation of Dual Residents

Edward A. Zelinsky (Cardozo), Wynne and the Double Taxation of Dual Residents, 73 State Tax Notes 259 (July 28, 2014):

Zelinsky discusses Maryland State Comptroller of the Treasury v. Wynne [431 Md. 147 (2013), cert. granted (May 27, 2014)]. He writes that the U.S. Supreme Court should decide the case narrowly and in a way that does not prevent it from ruling later that the dormant commerce clause requires tax credits to abate the double taxation of individuals who are residents of two or more states but lack the ability to vote in a state that taxes them as residents on their worldwide income.

Schler: International Mismatches on Hybrid Instruments

Michael L. Schler (Cravath, New York), OECD vs. D/NI: International Mismatches on Hybrid Instruments, 75 Tax Notes Int'l 485 (Aug. 11, 2014):

Michael L. Schler discusses technical and policy issues, as well as unexpected results, that arise under the OECD's proposals to eliminate mismatches of income and deduction resulting from hybrid instruments.

Taylor: Closing the Gap Between Private Letter Rulings and Regulations

Willard Taylor (Sullivan & Cromwell & NYU), Closing the Gap Between Private Letter Rulings and Regulations, 144 Tax Notes 597 (Aug. 4, 2014):

In this article, Taylor summarizes and comments on proposed regulations that would redefine real property for real estate investment trusts, and he argues that there should be more (and earlier) guidance on these and similar issues to close the gap between private letter rulings and published guidance affecting REITs and publicly traded partnerships in the natural resources sector.

Christians: Regulating Return Preparers -- A Global Problem for the IRS

Allison Christians (McGill), Regulating Return Preparers: A Global Problem for the IRS, 75 Tax Notes Int'l 391 (Aug. 4, 2014):

The IRS is in charge of a juggernaut of a tax system, the likes of which there truly is no equal in the world. And as all too often appears to be the case, in the enthusiasm to improve the functioning of this regime, its authors and enforcers appear to have forgotten that this unique system is perfectly global in reach, thanks to its unique inclusion of citizens and others with legal residence status no matter where in the world they live.

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Shay: Take the Tax Juice Out of Corporate Expatriations

Stephen E. Shay (Harvard), Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations, 144 Tax Notes 473 (July 28, 2014):

Shay describes the principal tax benefits companies seek from expatriating, and he outlines regulatory actions that can be taken without legislative action to materially reduce the tax incentive to expatriate.

Bloomberg, Lew Can Use Tax Rule to Slow Inversions, Ex-Official Says:

The U.S. Treasury Department should use immediate stopgap regulations to make offshore transactions known as corporate inversions less lucrative, said the department’s former top international tax lawyer.

The administration can unilaterally limit inverted companies from taking interest deductions in the U.S. or from accessing their foreign cash without paying U.S. taxes, Stephen Shay said in an interview and in an article published today in Tax Notes.

Blair-Stanek: Intellectual Property Law Solutions to Transfer Pricing Abuse

Andrew Blair-Stanek (Maryland), IP Law Solutions to Transfer Pricing Abuse, 143 Tax Notes 175 (June 30, 2014):

The article discusses a new way to attack transfer-pricing abuse: change intellectual property (IP) law.

Hariton: Should Share Repurchases Be Dividends to Remaining Holders?

David P. Hariton (Sullivan & Cromwell, New York), Should Share Repurchases Be Dividends to Remaining Holders?, 144 Tax Notes 175 (July 14, 2014):

Under current law, holders of common stock pay less tax than holders of debt, and arguably less tax than might be deemed desirable from a utilitarian perspective. The most frequently proposed solution is to require investors to mark publicly traded stocks to market and pay current tax on their associated gains. But there is a more modest alternative that might present fewer problems and better target the simple objective of ensuring that most shareholders pay at least some amount of tax.

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Jensen: The Constitutionality of a Mark-to-Market Taxing System

Erik M. Jensen (Case Western), The Constitutionality of a Mark-to-Market Taxing System, 143 Tax Notes 1299 (June 16, 2014):

This article comments on Is a Broadly Based Mark-to-Market Tax Unconstitutional, 143 Tax Notes 952 (May 26, 2014), by Gene Magidenko. Magidenko gets all the big points right in questioning the constitutionality of a mark-to-market system of taxation, but this article suggests he did not emphasize one point enough: the Supreme Court’s 1920 decision in Eisner v. Macomber, which concluded that realization is a requirement for a tax to be on income within the meaning of the Sixteenth Amendment, continues to reflect the Court’s understanding. Although the Court cut back on Macomber’s scope over the years, it has not repudiated the case. And in National Federation of Independent Business v. Sebelius, decided in 2012, Chief Justice Roberts, in an opinion joined in relevant part by four other justices, cited Macomber favorably on an issue of constitutional law.

Sullivan: The Pros and Cons of Federal-State Corporate Tax Harmonization

Martin A. Sullivan (Tax Analysts), The Pros and Cons of Federal-State Corporate Tax Harmonization, 73 State Tax Notes 11 (July 7, 2014):

Martin A. Sullivan examines the benefits and drawbacks of harmonizing federal and state corporate tax regimes.

Crawford: 7 Notable Estate & Gift Tax Articles of 2013

Bridget Crawford (Pace), Law Review Articles You Should've Read (But Probably Didn't) in 2013, 143 Tax Notes 1305 (June 16, 2014):

This short column is part of the annual Tax Notes issue that highlights noteworthy law review articles published during the previous year. In this piece, I identify articles relating to estate and gift taxation that practitioners likely will find of interest. The articles reviewed (in alphabetical order by author's last name) are:

1. Ellen Aprill (Loyola-L.A.), Reforming the Charitable Contribution Substantiation Rules, 14 Fla. Tax Rev. 275 (2013)
2. Arianne Renan Barzilay (Haifa), You're on Your Own, Baby: Reflections on Capato's Legacy, 46 Ind. L. Rev. 557 (2013)
3. John F. Coverdale (Seton Hall), Of Red Bags and Family Limited Partnerships: Reforming the Estate and Gift Tax Valuation Rules to Achieve Horizontal Equity, 51 U. Louisville L. Rev. 239 (2013)
4. John P. Goldberg (Harvard) & Robert H. Sitkoff (Harvard), Torts and Estates: Remedying Wrongful Inheritance, 65 Stan. L. Rev. 335 (2013)
5. Adam Hirsch (San Diego), Incomplete Wills, 111 Mich. L. Rev. 1423 (2013)
6. Grayson M.P. McCouch (Florida), Who Killed the Rule Against Perpetuities?, 40 Pepp. L. Rev. 1291 (2013)
7. Carla Spivack (Oklahoma City), Killers Shouldn't Inherit From Their Victims -- Or Should They?, 48 Georgia L. Rev. 145 (2013)

Borden: 11 Notable Partnership Tax Articles of 2013

Bradley T. Borden (Brooklyn), Notable Partnership Articles From 2013, 143 Tax Notes 1513 (June 30, 2014):

• Bradley T. Borden, Joseph Binder, Ethan Blinder & Louis Incatasciato (all of Brooklyn), Model for Measuring the Expected Value of Assuming a Tax-Partnership Liability, 7 Brook. J. Corp. Fin. & Com. L. 361 (2013)
• Karen C. Burke (Florida), Passthrough Entities: The Missing Element in Business Tax Reform, 40 Pepp. L. Rev. 1329 (2013).
• Emily Cauble (DePaul), Was Blackstone’s Initial Public Offering Too Good to Be True?: A Case Study in Closing Loopholes in the Partnership Tax Allocation Rules, 14 Fla. Tax Rev. 153 (2013)
• John F. Coverdale (Seton Hall), Of Red Bags and Family Limited Partnerships: Reforming the Estate and Gift Tax Valuation Rules to Achieve Horizontal Equity, 51 U. Louisville L. Rev. 239 (2013)
• Kevin A. Lucid (J.D. 2014, Quinnipiac), Note, It’s a Tax Thing: The Misnamed ‘Heightened Scrutiny’ Standard for Evaluating Family Limited Partnerships, 26 Quinnipiac Prob. L. J. 403 (2013)
• David W. Mayo & Rebecca C. Freeland (both of Paul Weiss, New York), Delimiting Limited Partners: Self-Employment Tax of Limited Partners, 66 Tax Law. 391 (2013); and Laura E. Erdman (J.D. 2014, Washington & Lee), Note, Reinterpreting the Limited Partner Exclusion to Maximize Labor Income in the Self-Employment Tax Base, 70 Wash. & Lee L. Rev. 2389 (2013)
• Andrea Monroe (Temple), Taxing Reality: Rethinking Partnership Distributions, 47 Loy. L.A. L. Rev. ____ (Winter 2013)
• Susan C. Morse (Texas), Startup Ltd.: Tax Planning and Initial Incorporation Location, 14 Fla. Tax Rev. 319 (2013)
• Daniel L. Simmons (UC-Davis), The Tax Consequences of Partnership Break-Ups: A Primer on Partnership Sales and Liquidations, 66 Tax L. 653 (2013)
• Nick Zemil (J.D. 2013, Virginia), Note, Testing a Partnership’s Contribution of Appreciated Real Property to Determine Developer or Investor Status, 32 Va. Tax. Rev. 841 (2013)

Wells: Corporate Inversions and Whack-a-Mole Tax Policy

Bret Wells (Houston), Corporate Inversions and Whack-a-Mole Tax Policy, 143 Tax Notes 1429 (June 23, 2014):

In this article, Wells argues that until policymakers address the fundamental tax disparity that creates corporate inversions, ever changing forms of the transaction will continue to pop up like moles in a whack-a-mole game.

22 Notable Corporate Tax Articles of 2013

Jordan M. Barry (San Diego), Karen C. Burke (Florida) & Monica Gianni (Florida), A Brief Review of Corporate Tax Articles of 2013, 143 Tax Notes 1314 (June 16, 2014):

• Reuven S. Avi-Yonah (Michigan), Corporate and International Tax Reform: Proposals for the Second Obama Administration (and Beyond), 40 Pepp. L. Rev. 1365 (2013)
• Steven A. Bank (UCLA), The Globalization of Corporate Tax Reform, 40 Pepp. L. Rev. 1307 (2013)
• Steven A. Bank (UCLA), Taxing Bigness, 66 Tax L. Rev. 379 (2013)
• Herbert Beller & William R. Pauls (both of Sutherland Asbill & Brennan, Washington, D.C.), The Aftermath of a Section 355 Transaction (Part I), 40 Corp. Tax. 3 (2013)
• John A. Bogdanski (Lewis & Clark), Section 336(e) Elections Finally Arrive, 40 Corp. Tax. 3 (2013)
• Kimberly A. Clausing (Reed College), The Future of the Corporate Tax, 66 Tax L. Rev. 419 (2013)
• Kimberly A. Clausing (Reed College), Who Pays the Corporate Tax in a Global Economy?, 66 Nat’l Tax J. 151 (2013)
• Julie A. Cronin et al., Distributing the Corporate Income Tax: Revised U.S. Treasury Methodology, 66 Nat’l Tax J. 239 (2013)
• Noël B. Cunningham (NYU) & Mitchell L. Engler (Cardozo), Prescription for Corporate Income Tax Reform: A Corporate Consumption Tax, 66 Tax L. Rev. 445 (2013)
• Malcolm Gammie (One Essex Court, London), Taxing Corporate Profits in a Global Economy, 42 British Tax Rev. (2013)
• Jennifer Gravelle (Congressional Research Service), Corporate Tax Incidence: A Review of General Equilibrium Estimates and Analysis, 66 Nat’l Tax J. 185 (2013)
• Richard M. Hynes (Virginia), Taxing Control, 38 J. Corp. L. 567 (2013)
• Don Leatherman (Tennessee), The Scope of the General Utilities Repeal, 91 Taxes 235 (2013)
• Li Liu (Stanford) & Rosanne Altshuler (Rutgers), Measuring the Burden of the Corporate Income Tax Under Imperfect Competition, 66 Nat’l Tax J. 215 (2013)
• Susan C. Morse (Texas), A Corporate Offshore Profits Transition Tax, 91 N.C. L. Rev. 549 (2013)
• Susan C. Morse (Texas), Startup Ltd.: Tax Planning and Initial Incorporation Location, 14 Fla. Tax Rev. 319 (2013)
• Deborah L. Paul (Wachtell, New York), Spin-offs, Leverage and Value Extraction — A Spin by Any Other Name . . ., 91 Taxes 99 (2013)
• W. Eugene Seago (Virginia Tech) & Edward J. Schnee (Alabama), Section 338 Transactions: Why ADSP and AGUB Can Differ, 119 J. Tax. 158 (2013)
• Darien Shanske (UC-Davis), A New Theory of the State Corporate Income Tax: The State Corporate Income Tax as Retail Sales Complement, 66 Tax L. Rev. 305 (2013)
• Jeffrey T. Sheffield (Northwestern), Spin-offs, Corporate Capital Structure and Disguised Sales, 91 Taxes 119 (2013)
• Staff of the Joint Committee on Taxation, Modeling the Distribution of Taxes on Business Income (JCX-14-13) (2013)
• David I. Walker (Boston University), A Tax Response to the Executive Pay Problem, 93 B.U. L. Rev. 325 (2013)

Tax Analysts Hosts Conference Today on U.S. State Tax Considerations for International Tax Reform

Tax Analysts hosts a roundtable discussion on U.S. State Tax Considerations for International Tax Reform at the Ronald Reagan Building (1300 Pennsylvania Ave.) today at 9:00 - 11:00 a.m. EST in Washington, D.C.:

OECD officials leading the international tax reform project can learn much from the experience of state tax practitioners. The panel, comprising both state and international tax experts, will examine how the lessons learned by U.S. states can help shape the debate on international tax reform. Practitioners will also share their insight into how international tax rules may affect state tax positions.

• Peter A. Barnes (Of Counsel, Caplin & Drysdale)
• Christopher E. Bergin (President and Publisher, Tax Analysts) (moderator)
• Joe Huddleston (Executive Director, Multistate Tax Commission)
• Stephen P. Kranz (Partner, McDermott, Will & Emery)

Shaviro: Capital Levies: A Solution for the Sovereign Debt Problem?

Daniel Shaviro (NYU), Capital Levies: A Solution for the Sovereign Debt Problem?, 74 Tax Notes Int'l 1027 (June 16, 2014):

The following speech was delivered as the University of Luxembourg's "Distinguished Lecture" on May 15, 2014.

Sullivan: How Will Japan Pay for a Lower Corporate Rate?

Martin A. Sullivan (Tax Analysts), How Will Japan Pay for a Lower Corporate Rate?, 74 Tax Notes Int'l 788 (June 2, 2014):

Japanese Prime Minister Shinzo Abe's second term began in December 2012. In the first 12 months, prices on the previously moribund stock market soared 63 percent. In the following six months, they have dropped by 10 percent. ... The rise and fall are largely explained by Abenomics.

The prime minister's radical break from Japan's previous economic policies has three components, referred to as the three arrows. The first arrow is an enormous expansion of the money supply by the Bank of Japan. The second arrow is a big boost in government spending. By all accounts, both of these measures have been successful in providing short-term stimulus to the economy. ...

But Japan's miraculous made-in-Tokyo recovery is now stalled by a lack of progress on the third arrow of Abe's program: promised but unspecified structural, supply-side reforms like reduced regulation of the labor market, reductions in trade barriers and other protections of favored industries, and a reduction in the corporate tax rate, currently the second highest in the world after the United States. The government's fiscal and economic blueprint, due later this month, is expected to offer proposals on these issues. ...

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Jones: The IRS Should Reevaluate its Floundering ADR Program

Ken Jones (Sutherland Asbill & Brennan, Washington, D.C.), Appeals Arbitration: Not a Compelling Litigation Alternative, 143 Tax Notes 1059 (June 2, 2014):

IRS Appeals announced its initial arbitration program in 2000, and after 14 years, there apparently have been only a few cases resolved by binding arbitration. Appeals arbitration has failed to become popular in the tax controversy marketplace, and there are some likely reasons for the program's lack of success. ... I offer my observations about the arbitration program, why it has not been embraced by taxpayers as a viable alternative to litigation, and why Appeals should reevaluate the role of binding arbitration -- and, indeed, all of its alternative dispute resolution (ADR) tools -- to determine whether they are meeting the needs of the taxpayers and the IRS.

Sullivan: Lessons From the Last War on Inversions

Martin A. Sullivan (Tax Analysts), Lessons From the Last War on Inversions, 2014 WTD 101-4 (May 26, 2014):

Martin A. Sullivan looks at the history of anti-inversion legislation in Congress, starting with Democratic efforts in 2002 and culminating in the enactment of section 7874 in 2004.

Alm & Soled: Improving Tax Basis Reporting For Passthrough Entities

James Alm (Tulane) & Jay Soled (Rutgers), Improving Tax Basis Reporting For Passthrough Entities, 143 Tax Notes 809 (May 19, 2014) :

Tax basis reporting is a notoriously complex enterprise, and taxpayer compliance is lackluster at best. One area of the law in which basis reporting remains absent is for passthrough entity investments, such as partnerships and S corporations. As a result, many taxpayers do not know the basis they have in their passthrough investments. These taxpayers must therefore estimate the tax basis they have in those investments, often producing inflated basis figures and, as a byproduct, smaller taxable gains and larger taxable losses. In light of its proven track record in the area of marketable securities (where third-party tax basis reporting has recently become mandatory), Congress should make third-party tax basis reporting for passthrough entities a similar reality. Mandating passthrough entity basis reporting would greatly simplify the compliance process, alleviate the IRS's burdensome task of trying to detect basis misreporting, and produce billions of dollars in revenue without raising taxes.

Sullivan Reviews Shaviro's Fixing U.S. International Taxation

Martin A. Sullivan (Tax Analysts) Book Review, 74 Tax Notes Int'l 492 (May 12, 2014) (reviewing Daniel N. Shaviro (NYU), Fixing U.S. International Taxation (Oxford University Press, 2014)):

When it comes to international taxation, House Ways and Means Committee Chair Dave Camp, R-Mich., and professor Daniel N. Shaviro of New York University Law School have a lot in common. In the age-old debate between the two poles of worldwide and territorial taxation, they want compromise. They want to achieve a balance between promoting competitiveness and preventing excessive profit shifting to tax havens.

A pro-business conservative, Camp would have preferred his plan to lean more in the direction of multinational competitiveness. But in his three-year quest for tax reform, the chair has learned by doing, and what he has learned from the revenue estimators at the Joint Committee on Taxation is that moving to an exemption system is too expensive without tough measures to discourage profit shifting. Shaviro's path to compromise is based on his own reasoning after extensive review of the legal and economic scholarship on international tax.

The main way Camp and Shaviro seek to achieve a balanced approach is by setting the average effective rate on foreign-source income of U.S. multinationals somewhere below the statutory corporate rate and somewhere above zero. Although this conclusion would hardly be startling to a newcomer to the study of international tax -- and is the practical result under current law for many taxpayers because of deferral -- the traditional debate on international tax does not easily lend itself to compromise. ...

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