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.

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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.

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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.

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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.

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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.

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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:

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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.

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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.

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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.

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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.

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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.

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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.

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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. ...

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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.

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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.

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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. ...

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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.

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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.

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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.

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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.

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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:

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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

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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.

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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.

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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:

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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.

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Thuronyi: The Internal Revenue Code Should Be Be Redrafted

Victor Thuronyi (Former Lead Tax Counsel, IMF), Should the IRC Be Redrafted?, 171 Tax Notes Fed. 1429 (May 31, 2021):

Major tax changes are again being contemplated by Congress. In this context, is it possible to make the IRC easier to read and understand? While the tax code is notoriously complex, is this complexity the result of rules that are too complex or a style that is too impenetrable? As I explain below, the vast bulk of the problem is the complexity of the rules. Simplifying those rules should be a priority. That said, the drafting of the IRC can also be improved.

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Mason: State Aid Enforcement After Amazon

Ruth Mason (Virginia; Google Scholar), State Aid Enforcement After Amazon, 171 Tax Notes Fed. 1395 (May 31, 2021):

This article provides a detailed summary of the General Court of the European Union’s judgment in Amazon and analyzes what it means for the future of state aid.

For more, see:

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Liability Insurance: A Reply to Professor Utz

Jeffrey H. Kahn (Florida State), Liability Insurance: A Reply to Professor Utz, 171 Tax Notes Fed. 473 (Apr. 19, 2021):

In this article, I continue my debate with Professor Stephen Utz over the tax treatment of liability insurance, arguing that there are policy justifications for the current tax treatment of liability insurance payments. ... I previously published an article arguing that insurance proceeds payable under a policy insuring a specified tax treatment (tax insurance) are excluded from gross income [Hedging the IRS — A Policy Justification for Excluding Liability and Insurance Proceeds, 26 Yale J. Reg. 1 (2009)]. That piece led to an interesting back and forth between myself (Justifying the Exclusion of Insurance, 125 Tax Notes 1216 (Dec. 14, 2009); The Tax Treatment of Liability Insurance Coverage, 163 Tax Notes 1381 (May 27, 2019)) and Professor Utz (Designating the Tax Treatment of Litigation-Related Costs, 21 Fla. Tax Rev. 533 (2018); How Insurance Recoveries Are Taxed Under the IRC, 169 Tax Notes Fed. 941 (Nov. 9, 2020)) on the tax treatment of liability insurance proceeds.

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Johnson: A Fair Income Tax On The Trillion-Dollar Behemoths (Apple, Amazon, Microsoft, And Google)

Calvin H. Johnson (Texas), A Fair Income Tax on the Trillion-Dollar Behemoths (Apple, Amazon, Microsoft, And Google), 171 Tax Notes Fed. 1199 (May 24, 2021):

Johnson argues that $6 trillion can be raised by requiring Apple, Amazon, Microsoft, and Google to capitalize intangible investments that have value beyond the end of the tax year and by reversing into income the companies' prior deductions that are inconsistent with that value.

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Aprill: A Tax Lesson For Education Law

Ellen P. Aprill (Loyola-L.A.), A Tax Lesson for Education Law, 171 Tax Notes Fed. 1065 (May 17, 2021):

In this article, Aprill examines a recent Government Accountability Office report on the role of the Department of Education and the IRS in regulating conversions of for-profit colleges to tax-exempt nonprofit colleges [GAO, IRS and Education Could Better Address Risks Associated With Some For-Profit College Conversions (GAO-21-89) (Dec. 31, 2020)]. She argues that the tax analysis of those conversions should consider section 4958 and the special rules applicable to section 501(c)(3) organizations that are also governmental affiliates.

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Maryland's Digital Tax And The Internet Tax Freedom Act's Catch-22

Darien Shanske (UC-Davis), Chris Moran (Venable, Baltimore) & David Gamage (Indiana; Google Scholar), Maryland's Digital Tax and the ITFA's Catch-22, 100 Tax Notes State 141 (Apr. 12, 2021):

This essay analyzes whether U.S. state-level taxes on digital advertising — like Maryland’s new tax — are barred by the Internet Tax Freedom Act and argues that the Act’s prohibition against “discriminatory” taxes on electronic commerce should be construed narrowly.

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Taxpayer Deference Can Help Close The Tax Gap

Benjamin M. Willis, Taxpayer Deference Can Help Close the Tax Gap, 171 Tax Notes Fed. 1229 (May 24, 2021):

[C]losing the tax gap would be better achieved if Treasury and the IRS stopped relying on Chevron deference to create overly aggressive revenue-raising laws and appreciate why courts are favoring taxpayer interpretations. ...

The very nature of attempts to close the tax gap will dramatically increase litigation. The IRS Independent Appeals Office, created in 2019, reflects a recognition of the need to reduce the unnecessary costs of litigation resulting from a biased IRS.

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Pennell: A Wealth Tax Alternative — Taxing Extraordinary Income

Jeffrey N. Pennell (Emory), An Alternative to a Wealth Tax: Taxing Extraordinary Income, 171 Tax Notes Fed. 891 (May 10, 2021):

Asking the rich to pay more tax has been a consistent concern for politicians. Rising inequality and concentrations of wealth in the United States have caused some policymakers to question whether to reduce tax benefits that significantly lower the tax bills of high-net-worth (HNW) individuals. Suggested changes include raising the moderately low income tax rate, decreasing the federal estate tax exclusion amount, and altering or repealing the section 1014 new-basis-at-death rule. More dramatically, scholars and political candidates propose to impose a “wealth tax” on HNW Americans who often own substantial wealth but do not realize significant taxable income (as defined by the code). The most widely recognized of these proposals were advocated by Senate Finance Committee member Elizabeth Warren, D-Mass., and Sen. Bernie Sanders, I-Vt., during the 2020 presidential election season. Each advocated an annual wealth tax. Because the negative attributes of these proposals are likely to preclude their success, even if enacted, this article offers in skeletal detail an alternative, aimed at the same taxpayers but more consistent with historical taxation and less likely to fail. ...

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The Foreign Reverse Hybrid And The Estate Tax

Seth J. Entin (Holland & Knight, Miami), The Foreign Reverse Hybrid and the Estate Tax, 101 Tax Notes Int'l 1255 (Mar. 8, 2021):

In this article, the author demonstrates that the estate of a foreign individual who dies owning an interest in a foreign reverse hybrid entity is not subject to U.S. federal estate tax in connection with an interest in the entity, even if the entity owns U.S.-situs assets.

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Call For Student Tax Papers: 2021 Chris Bergin Award For Excellence In Writing

Christopher E. Bergin Award for Excellence in Writing:

The Christopher E. Bergin Award for Excellence in Writing recognizes superior student writing on unsettled questions in tax law or policy. It is named in honor of the late Christopher E. Bergin, former president and publisher of Tax Analysts and longtime editor of Tax Notes Federal. The award, given annually, epitomizes the qualities that Chris championed.

Winning papers will be published in one of Tax Notes' weekly magazines. Winners will receive one-year subscriptions to all three magazines.

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Avi-Yonah: The Ingenious Biden Tax Plan

Reuven S. Avi-Yonah (Michigan), The Ingenious Biden Tax Plan, 171 Tax Notes Fed. 235 (Apr. 12, 2021):

On March 31 the White House released an outline of its proposed infrastructure bill, which includes the Made in America Tax Plan. The plan involves a major revamping of the corporate and international tax provisions in the Tax Cuts and Jobs Act, including:

• raising the corporate tax rate from 21 percent to 28 percent;
• eliminating the participation exemption for a 10 percent return on qualified business asset investment;
• reforming the global intangible low-taxed income regime by raising the rate to 21 percent and applying it per country;
• strengthening the anti-inversion rules;
• replacing the base erosion and antiabuse tax with a stronger but conditional denial of deductions to related foreign parties; and
• repealing the foreign-derived intangible income regime and replacing it with increased research and development subsidies for domestic activities.

The plan is a long-overdue recognition that U.S.-based multinationals have not been paying their fair share of taxes, given their levels of profitability, most of which are economic rents not subject to competition because of their monopolistic or oligopolistic positions in their respective markets. Also, the BEAT replacement will be a major incentive for other countries to enact similar legislation under the auspices of pillar 2 of the OECD’s base erosion and profit-shifting initiative due to be completed by June.

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Brunson, Johnson & Ryznar: Reforming The Home Office Deduction

Samuel D. Brunson (Loyola-Chicago) & Christian A. Johnson (Widener), An Employee Home Office Expense Deduction for the New Normal, 171 Tax Notes Fed. 41 (Apr. 5, 2021):

Brunson and Johnson argue for a limited above-the-line deduction to cover the costs of working from home and suggest that if Congress expands the deduction for unreimbursed home office expenses, it reconsider the requirements.

Margaret Ryznar (Indiana-McKinney), The Design of a Home Office Deduction, 171 Tax Notes Fed. 49 (Apr. 5, 2021):

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Halperin: No Basis Step-Up For Marketable Securities With No Tax At Death

Daniel I. Halperin (Harvard), No Basis Step-Up for Marketable Securities With No Tax at Death, 170 Tax Notes Fed. 1709 (Mar. 15, 2021):

In this article, Halperin proposes an innovative way to achieve realization, without any added tax burden at gift, death, or sale: collecting an equivalent tax in present value during the period the asset is held.

The Biden administration has indicated that it would end the egregious step-up in basis at death under section 1014. The step-up, combined with lack of gain recognition on property transferred to charities, allows wealthy households to escape taxation on a substantial percentage of their income. Importantly, measuring effective tax rates, without adding unrealized gains to the denominator, significantly understates the actual effective tax burden on those who hold appreciated assets until death or transfer them to charity to avoid tax on gains. In fact, those who have great wealth may have little or no reason to sell appreciated property. Risk can be mitigated by a charitable gift, a like-kind exchange for real estate, or the creation of an offsetting position that falls short of triggering a constructive sale. It is long past time to eliminate this enormous tax loophole.

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Gender Equality, Taxation, And The COVID-19 Recovery

Yvette Lind (Copenhagen Business School; Google Scholar) & Åsa Gunnarsson (University of Umea), Gender Equality, Taxation, and the COVID-19 Recovery: A Study of Sweden and Denmark, 101 Tax Notes Int'l 581 (Feb. 1, 2021):

The impact of COVID-19 is at the moment undeniably extensive as the world faces the most severe recession in nearly a century. Economic emergency programs, the design and implementation of COVID-19 tax policies and subsequent state aid actions have been launched in many countries to mitigate the impact of the pandemic. Women have, in comparison to men, also reduced their hours of work to care for, and home school, children. Aggregating already existing problems associated to both the loss of paid work hours and to the gender-segregated allocation of unpaid hours for household work and caring. The sudden closure of childcare programs and schools in many countries has had a crucial impact for women whose labour force participation depends on these institutions. The possibility of several waves of the virus that could trigger additional childcare closures make it extremely likely that married women (in general when considering the current norm of heterosexual couples) in particular may be slower to re-enter the work force in the hope of protecting the (single-breadwinner) family income.

The ambition with this paper is to tackle the complexity of both new and old societal challenges for the realization of gender equality obligations through tax provisions and tax policies at the national level.

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AI For Tax Analogies And Code Renumbering

Andrew Blair-Stanek (Maryland; Google Scholar) & Benjamin Van Durme (Johns Hopkins; Google Scholar), AI for Tax Analogies and Code Renumbering, 170 Tax Notes Fed. 1997 (Mar. 29, 2021):

Blair-Stanek and Van Durme present an artificial intelligence tool that can complete analogies in tax law and provide evidence-based guidance on how Congress can renumber IRC sections in future tax reform efforts.

Conclusion
We have described two limited applications of AI in tax law, but we and other researchers are pursuing many others. New models with millions of mathematical neurons approximating the neurons in the human brain promise much more power than the model we used here. Moreover, all AI models rely on data; having more data and higher-quality data is always better. The full Tax Analysts Federal Research Library, just released under an agreement between Tax Analysts and Deloitte Tax LLP, contains extensive, very high-quality tax law text. This combination of more powerful models with more and better data is reason for optimism that AI will result in many more tools to aid tax practitioners and policymakers.

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Sullivan: Measuring Disparate Racial Tax Outcomes Before And After The TCJA

Martin Sullivan (Tax Analysts), Measuring Disparate Racial Tax Outcomes Before and After the TCJA, 170 Tax Notes Fed. 1666 (Mar. 15, 2021):

Our preliminary analysis of 2017 and 2018 tax return data indicates that, on average, effective tax rates were lower for ZIP codes where most of the population identified as white than for ZIP codes with more racial diversity.

Also, the analysis indicates that after passage of the Tax Cuts and Jobs Act, larger percentage point reductions are seen in ZIP codes with predominantly white populations.

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Ordower: New York’s Proposed Mark-To-Market Tax Decouples From Federal Tax

Following up on my previous post, New York's Proposed Mark-to-Market Wealth Tax Would Raise $23 Billion From <200 Billionaires:  Henry Ordower (Saint Louis), New York’s Proposed Mark-to-Market Tax Decouples From Federal Tax, 170 Tax Notes Fed. 1243 (Feb. 22, 2021):

In this article, Ordower examines proposed legislation in New York that would tax the unrealized gain and other deferred income of billionaires in the state, and the complexities that the legislation’s enactment is likely to generate. ...

This article addresses the structure of state income taxes and credits for taxes paid by residents to other states and the confusion that nonuniform decoupling generates across state borders. Separation from federal rules may help to stanch the loss of state revenue from federal tax amendments and enhance state tax revenue — especially revenue that the state otherwise might never capture but to which it may have a claim.

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Utz: How Insurance Recoveries Are Taxed Under The IRC

Stephen Utz (Connecticut), How Insurance Recoveries are Taxed under the IRC, 98 Tax Notes State 607 (Nov. 9, 2020):

Jeffrey H. Kahn, the Harry W. Walborsky Professor of Law at the Florida State University College of Law, has criticized my account of the tax treatment of insurance coverage in an article I published with Sachin S. Pandya concerning the tax treatment of litigation expenses. Sachin S. Pandya (Connecticut) & Stephen Utz (Connecticut), Designing the Tax Treatment of Litigation-Related Costs, 21 Fla. Tax Rev. 533 (2018). Kahn argues that the article was wrong to assert that the insurance payment of a claim against the insured “is not excludable [from gross income] unless the expense involved would have been deductible if paid by the insured and not reimbursed.” Jeffrey H. Kahn (Florida State), The Tax Treatment of Liability Insurance Coverage, 163 Tax Notes 1381, 1381 (May 27, 2019). ... This article defends the premise that the exclusion of insurance proceeds from the income of the insured depends on the deductibility by the insured of the covered obligation. ...

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From 'Boy Tax' And 'Girl Tax' To Diverse And Inclusive Tax

Larissa Neumann (Fenwick & West, Mountain View, CA; Lecturer, UC-Berkeley), A Virtuous Cycle: Investing in Diversity and Inclusion, 99 Tax Notes State 995 (Mar. 8, 2021):

The call for more equal representation of women in positions of power in the tax law profession has never been louder than it is today. Companies, professional organizations, law schools, and society at large are initiating a concerted push for greater gender diversity within law firms. According to the American Bar Association’s “ABA Profile of the Profession 2020 Report,” the percentage of female lawyers has increased very slowly in the last 10 years; it stood at 31 percent in 2010 and is now at 37 percent. Male attorneys still greatly outnumber female attorneys, especially in management and equity partner positions. Although women generally have made up half of graduating law school classes for the last 20 years, there continues to be a disparity in the legal profession.

While most law firms have explicitly professed a desire for more women in leadership, implicit biases and structural impediments within the profession have kept women significantly underrepresented within the upper reaches of the tax law hierarchy. To display commitment to the firm, women who are parents have felt the pressure to submit to a work environment and time schedule at tension with their obligations as mothers and domestic partners. The recent ABA report “Walking Out the Door,” which includes results from a survey of more than 1,200 senior lawyers at the nation’s biggest private law firms, reported that 58 percent of women viewed caretaking commitments as the most important reason that female lawyers leave their jobs. To fit the mold of a dedicated professional, women have felt pressure to delay or alter the timing of significant life events such as marriage and pregnancy. Over time, the frictions of these structural impediments wear against female attorneys’ psyches, often causing them to compromise their careers for the sake of family and personal commitments.

Throughout my career I have worked in tandem with my firm, Fenwick & West LLP, to dismantle these subtle and not-so-subtle structures of male power that have stood in the way of female professional empowerment. By advocating for my own interests and having a progressive law firm that took those interests to heart, I have been able to advance in my career without disregarding my unique experiences and challenges as a wife and a mother. By seeing me and hearing me as a woman, Fenwick has demonstrated a commitment to diversity in its highest levels of power and laid the institutional foundations for many more female attorneys to follow in my footsteps.

I remember staring at the little pink lines indicating that I was pregnant with mixed emotions. I was filled with guarded joy that was also clouded with a faint concern when I thought of my career. In 2006 pregnancy announcements were not expected from first-year associates at a law firm — at least not from associates who were at all serious about becoming partners. “Wait until you are a partner until you have kids” was standard advice, and doing otherwise would sabotage your ability as a woman to prove your dedication to the firm and credibility in the profession. But my life path had taken a drastic detour from the career trajectory mapped out by conventional wisdom.

After having my first child, I returned to work eager to add value to every project I was assigned and grow in my practice as a tax attorney. Thankfully, at Fenwick, I was not spared difficult assignments and challenging projects in my days after returning from maternity. One of my mentors, Jim Fuller, recounted how when he started tax law there was “Girl Tax,” which was estates and trusts, and “Boy Tax,” which was international tax. He expressed how he thought that was inappropriate and supported my taking on challenging international tax projects, including inversion transaction, transfer pricing, and controversy.

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Avi-Yonah, Gamage, Shanske & Stark: Is New York's Mark-to-Market Act Unconstitutionally Retroactive?

Following up on my previous post, New York's Proposed Mark-to-Market Wealth Tax Would Raise $23 Billion From <200 Billionaires:  Reuven S. Avi-Yonah (Michigan), David Gamage (Indiana), Darien Shanske (UC-Davis) & Kirk J. Stark (UCLA), Is New York's Mark-to-Market Act Unconstitutionally Retroactive?, 99 Tax Notes State 541 (Feb. 8, 2021):

It is well known in tax literature that rudimentary tax planning strategies enable wealthy individuals to avoid state and federal income tax on much of their true economic income. Indeed, the existing income tax has been described as being effectively optional for those who derive their income chiefly from the ownership of assets rather than the provision of services. The reason is — except for a few relatively narrowly tailored deemed-realization rules — both state and federal income taxes rely on the realization principle. Under realization accounting, taxpayers generally do not owe tax on economic gains until they sell their appreciated assets. Moreover, this is so even when taxpayers fund lavish lifestyles by borrowing against their appreciated assets.

Legislation under consideration in New York would limit the ability of the state’s wealthiest taxpayers to escape tax in this manner. The Billionaire Mark-to-Market (MTM) Tax Act (S. 8277B/A. 10414) would require these taxpayers to reports gains and losses as they accrue, rather than upon sale or exchange as under current law.

Opponents claim that the MTM Act is unconstitutional. In a separate essay, we will explain why and how the New York Constitution authorizes accrual taxation through deemed realizations as in the MTM Act (and also as in a number of existing provisions of state income tax law). Here, we evaluate the retroactivity concerns that the legislation’s opponents have raised.

On its face, the MTM Act is not retroactive.

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COVID-19: The Year Of The Great Tax Migration

Timothy P. Noonan & Emma M. Savino (Hodgson Russ, New York), COVID-19: The Year of the Great Migration, 99 Tax Notes State 897 (Mar. 1, 2021):

We have seen all sorts of changes in behavior over the past 12 months as a result of the COVID-19 pandemic. Remote working. No live music. Limited (or no) family gatherings. And, for some, an extra 15 pounds. But in the state and local tax world, we’ve seen another striking change in people’s behavior.

People. Are. Moving.

They are moving to Florida. They are moving to the Hamptons. They are moving home to live with their parents. They are moving in with their kids. They are leaving California, Illinois, New Jersey, and New York, and they are landing in places with lower taxes and, usually, better weather. And many need tax advice!

Here at Noonan’s Notes World Headquarters, we’ve generated more residency-change checklists and playbooks in the past 12 months than we’ve probably sent out in the last 10 years. And the types of situations we’ve seen are so much more varied and different from the typical retirees shuffling off to their shuffleboards in Florida. Hedge-fund millennials are moving. Parents with young kids are moving. Taxpayers in their working prime are moving. And with these moves come a whole host of interesting tax issues.

So this month, we thought we’d dive into these residency issues a bit more and give you a glimpse into the world of a tax residency practitioner during 2020 and 2021. ...

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Thimmesch: States And The PPP — The Tax Policy Case For State Nondeductibility

Adam B. Thimmesch (Nebraska), States and the PPP: The Tax Policy Case for State Nondeductibility, 99 Tax Notes State 129 (Jan. 11, 2021):

This article is the second in a series evaluating the state tax aspects of the federal Paycheck Protection Program. The first article introduced the program and explained the potential effect on states if Congress were to change the law to allow taxpayers to deduct their PPP-funded expenses. This article continues that analysis and explores the tax policy reasons why states should prepare to deviate from federal law now that Congress has provided for PPP deductibility in its year-end COVID relief bill.

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McLaughlin: Amendment Clauses In Easements — Ensuring Protection In Perpetuity

Nancy A. McLaughlin (Utah), Amendment Clauses in Easements: Ensuring Protection in Perpetuity, 168 Tax Notes Fed. 819 (Aug. 3, 2020):

Internal Revenue Code § 170(h)(5)(A) requires that the conservation purpose of a deductible conservation easement be “protected in perpetuity.” This article explains how the protected-in-perpetuity requirement should limit the parties’ ability to reserve the right to make post-donation changes to the terms of a deductible easement.

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Johnson: Taxing Meals And Civic Virtue

Calvin H. Johnson (Texas), Return to Civic Virtue: Tax Meals, 170 Tax Notes Fed. 1105 (Aug. 15, 2021):

Excluding meals from taxation, when other forms of compensation are taxed, inevitably causes a loss of value — a waste — that economists call deadweight loss. The exclusion for meals causes a shift from cash to meals, until in equilibrium, the loss of value from the meals is just short of the tax avoided. In equilibrium, the loss is a tax-caused destruction of resources — not physically, but by value. The recent Consolidated Appropriations Act decreased the tax on meals by allowing a 100 percent deduction for some business meals, repealing the prior law’s 50 percent deduction, which is the wrong direction to go. The end of the limited deduction was instigated by former President Trump himself and was a high priority for the Trump Treasury in its negotiations with Congress over the appropriations bill. Trump personally takes advantage of tax-exempt meals and has interests in restaurants selling meals. Thus, the change in law was narcissistic and a betrayal of civic virtue.

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