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Sunday, April 20, 2014

President Obama's Passover and Easter Message

April 20, 2014 | Permalink | Comments (0)

The IRS Scandal, Day 346

IRS Logo 2Washington Post op-ed:  Regulatory Overkill, by George F. WIll:

This case, which comes from Cincinnati, where the regional IRS office was especially active in suppressing the political speech of conservative groups, involves the intersection of two ominous developments. One is the inevitable, and inevitably abrasive, government intrusions into sensitive moral issues that come with government's comprehensive and minute regulation of health care with taxes, mandates and other coercions. The Supreme Court will soon rule on one such controversy, the ACA requirement that employer-provided health care plans must cover the cost of abortifacients. The other development is government's growing attempts to regulate political speech, as illustrated by the Obama administration's unapologetic politicization of the IRS to target conservative groups.

These developments are not coincidental. Government's increasing reach and pretensions necessarily become increasingly indiscriminate.

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April 20, 2014 in IRS News, Tax | Permalink | Comments (0)

Saturday, April 19, 2014

NY Times: Hollywood Begs for a Tax Break in Some States, Including California

HollywoodNew York Times:  Hollywood Begs for a Tax Break in Some States, Including California:

Nationwide, about $1.5 billion in tax breaks is awarded to the film industry each year, according to a 2012 survey by The New York Times. Several tax policy groups oppose film incentives; a 2010 report by the nonprofit Tax Foundation said states justified them using “fanciful estimates of economic activity” and they largely just shift production from one sector to another without producing a net increase in economic activity or employment. ...

In California, a new law would expand the film credit program to cover not only smaller films and new TV series as it does now, but also major studio productions that cost as much as $100 million, and expensive, established television shows. ...

Supporters of the proposed increase in tax incentives for Hollywood point to a report published by the Milken Institute in February noting that California lost more than 16,000 production jobs since 2004, while other states with substantial subsidy programs, including Texas and North Carolina, together gained that many, and more.

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April 19, 2014 in Tax | Permalink | Comments (0)

IRS Uses Private Company to Track Taxpayer License Plates

Bloomberg, IRS Among Agencies Using License Plate-Tracking Vendor:

IRSThe IRS and other U.S. agencies awarded about $415,000 in contracts to a license plate-tracking company before Homeland Security leaders dropped a plan for similar work amid privacy complaints. Federal offices such as the Forest Service and the U.S. Air Force’s Air Combat Command chose Livermore, California-based Vigilant Solutions to provide access to license plate databases or tools used to collect plate information, according to government procurement records compiled by Bloomberg.  ...

“Especially with the IRS, I don’t know why these agencies are getting access to this kind of information,” said Jennifer Lynch, a senior staff attorney with the Electronic Frontier Foundation, a San Francisco-based privacy-rights group. “These systems treat every single person in an area as if they’re under investigation for a crime -- that is not the way our criminal justice system was set up or the way things work in a democratic society.”

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April 19, 2014 in IRS News, Tax | Permalink | Comments (0)

Small Colleges Battle Death Spiral as Enrollment Drops

Bloomberg:  Small U.S. Colleges Battle Death Spiral as Enrollment Drops:

Moody’s, which rates more than 500 public and private nonprofit colleges and universities, downgraded an average of 28 institutions annually in the five years through 2013, more than double the average of 12 in the prior five-year period. Dozens of schools have seen drops of more than 10 percent in enrollment, according to Moody’s. 

Moody's

April 19, 2014 in Legal Education | Permalink | Comments (2)

The IRS Scandal, Day 345

Friday, April 18, 2014

NY Times: Will The Super Rich Finally Pay More Taxes Than The Very Rich?

New York Times:  Merely Rich and Superrich: The Tax Gap Is Narrowing, by Floyd Norris:

Will this be the year that the superrich finally pay higher taxes than the very rich? ...

[I]t is an interesting fact that our current tax system assures that — year after year — the superrich, those who report adjusted gross incomes of more than $10 million, have tax rates that are significantly lower than those of the very rich, those earning more than $500,000 but less than $10 million.

Figures just released by the Internal Revenue Service show that in 2011 the difference in rates between the groups rose to 4.1 percentage points, the largest since the I.R.S. began calculating the data in 2000. The superrich paid 20.4 percent of their income in federal income taxes in 2011, while the very rich paid 24.5 percent. ... Why are the superrich treated so well? It is largely because investment income — what we used to call unearned income — has long enjoyed preferential tax treatment. ...

NYT1

Starting in 2013, the wealthy face significant tax increases. And the increases are greater for investment income. It seems likely that the gap in tax rates between the superrich and the very rich may be narrowed.

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April 18, 2014 in Tax | Permalink | Comments (2)

58,000 IRS Computers Are Still Running Windows XP; IRS Says It Is Paying Microsoft $9/Computer for Security Patches, 95% Less Than Cost to Others

Following up on my previous post, IRS Computers Are Still Running Windows XP, Confidential Taxpayer Data Is At Risk:  Computer World, IRS Misses XP deadline, Will Spend $30M to Upgrade Remaining PCs:

XPThe IRS acknowledged last week that it missed the April 8 cut-off for Windows XP support and will be paying Microsoft for an extra year of security patches. But the tax agency disputed an earlier estimate by Computerworld that put the cost of those patches in the millions, saying that it was paying Microsoft "less than $500,000" for the after-retirement support.

Microsoft terminated Windows XP support on Tuesday when it shipped the final public patches for the nearly-13-year-old operating system. Without patches for vulnerabilities discovered in the future, XP systems will be at risk from cyber criminals who hijack the machines and plant malware on them. ...

According to the IRS, it has approximately 110,000 Windows-powered desktops and notebooks. Of those, 52,000, or about 47%, have been upgraded to Windows 7. The remainder continue to run the now retired XP. ...

John Koskinen, the commissioner of the IRS, defended the unfinished migration at the hearing, saying that his agency had $300 million worth of IT improvements on hold because of budget issues. One of those was the XP-to-7 migration. ... But he stressed that the migration had to continue. "Windows XP will no longer be serviced, so we are very concerned if we don't complete that work we're going to have an unstable environment in terms of security," Koskinen said.

Koskinen concurred with Crenshaw's $30 million figure as the cost for upgrading the IRS's remaining Windows XP systems. The money will be taken from the agency's enforcement budget. Part of that $30 million will be payment to Microsoft for what the Redmond, Wash., developer calls "Custom Support," a program that provides patches for critical vulnerabilities in a retired operating system.

Earlier this year, analysts said Microsoft had dramatically raised prices for Custom Support. ... Microsoft negotiates each contract separately, asking for an average of $200 per PC for the first year of Custom Support, those analysts said. Using that average -- and the number of PCs the IRS admitted were still running XP -- Computerworld estimated that the IRS would pay Microsoft $11.6 million for one year of Custom Support. Late Friday, however, the IRS disputed that estimate. An agency source said that the IRS was paying Microsoft less than $500,000 for Custom Support on its remaining 58,000 Windows XP PCs, or about $9 each. According to the source, the exact figure will be disclosed at a later date.

April 18, 2014 in IRS News, Tax | Permalink | Comments (1)

Weekly Tax Roundup

 Weekly Roundup

April 18, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

April 18, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

April 18, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (2)

Oregon Provost Rejects Law Faculty's Offer to Divert Money for Pay Raises to Public Interest Jobs for Students

Following up on Tuesday's post, Oregon Law Prof Objects to Shifting Funds for Faculty Raises to Public Interest Jobs for Students:  Oregon Law Blawg, Some Information:

Oregon LogoRecently the University announced across-the-board cost of living adjustments and merit pay increases to take effect later in the year. A group of law faculty came up with the idea to divert the law school’s portion of the faculty merit pay funds to a post-graduate fellowship program for new law grads, in lieu of accepting a pay increase. Last Friday, this group brought this idea as a resolution (included below) to the regularly scheduled faculty meeting.  A wide majority of those present voted to approve the resolution—in addition, a majority of the full faculty support the resolution.

We brought the matter to the Provost and although he is supportive of our goals he cannot bend the University rules to make this creative idea happen.

April 18, 2014 in Legal Education | Permalink | Comments (0)

San Francisco Launches Tax LL.M. Program

USFThe University of San Francisco School of Law is launching an LL.M. in Taxation Program beginning in August, 2014:

All classes will be held in the heart of San Francisco at USF’s downtown campus. The program is structured to provide students with a firm grounding in the major areas of taxation and prepare graduates to launch or advance careers in tax law.

Full-time faculty teaching in the USF LL.M. Program include Professor Daniel Lathrope, the E.L. Wiegand Distinguished Professor in Tax and Director of the Program; and Professor Joshua Rosenberg. Adjunct professors teaching in the Program are highly qualified, experienced practitioners in fields of tax and estate planning.

The curriculum in USF’s LL.M. in Taxation Program is wide ranging, offering both breadth as well as specialization in fields such as business taxation, international taxation, and estate planning. The program offers advanced standing for certain tax courses taken at an ABA-accredited JD institution. Merit scholarships and financial aid are also available to students applying for the inaugural class. For additional information on the Program, contact Associate Director Natascha Fastabend.

April 18, 2014 in Legal Education, Tax | Permalink | Comments (0)

ABC News: Oregon Man Claims IRS Auditor Coerced Him Into Having Sex

ABC News, U.S. Man ‘Seduced’ by IRS Agent Appeals Dismissal of His Lawsuit (click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate):

Daily Mail:  'I Feel Like a Cheap Wh***!': Man Left Owing $69K After 'IRS Agent Seduced Him' Wants to Sue the GOVERNMENT Over Sexual Coercion

April 18, 2014 in Tax | Permalink | Comments (0)

Audits as Signals

Maciej H. Kotowski (Harvard), David A. Weisbach (Chicago) & Richard J. Zeckhauser (Harvard), Audits as Signals, 81 U. Chi. L. Rev. 179 (2014):

A broad array of law enforcement strategies, from income tax to bank regulation, involve self-reporting by regulated agents and auditing of some fraction of the reports by the regulating bureau. Standard models of self-reporting strategies assume that although bureaus only have estimates of the of an agent’s type, agents know the ability of bureaus to detect their misreports. We relax this assumption, and posit that agents only have an estimate of the auditing capabilities of bureaus. Enriching the model to allow two-sided private information changes the behavior of bureaus. A bureau that is weak at auditing, may wish to mimic a bureau that is strong. Strong bureaus may be able to signal their capabilities, but at a cost. We explore the pooling, separating, and semi-separating equilibria that result, and the policy implications. Important possible outcomes are that a cap on penalties increases compliance, audit hit rates are not informative of the quality of bureau behavior, and by mimicking strong bureaus even weak bureaus can induce compliance.

April 18, 2014 in Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 344

IRS Logo 2Above the Law:  Should ‘Campaign For Liberty’ Have Called Itself ‘Campaign For Progress’ Instead?:

Campaign for Liberty, Ron Paul’s 501(c)(4) organization, announced this week that it’s actually pretty sure that its tax recent filings are incomplete, even if true and correct. (Two out of three ain’t bad?) According to C4L, the organization refused to divulge the names of its donors when it filed its IRS 990 forms. The IRS fined Campaign for Liberty just shy of $13,000, plus growing interest for each day the fine goes unpaid. ...

Megan Stiles, the communications director at Campaign for Liberty, told the Washington Examiner in an email on Tuesday:  There is no legitimate reason for the IRS to know who donates to Campaign for Liberty. The IRS technically requires donor information from 501(c)(4) organizations and is forbidden by law from releasing it to the public, yet despite this they have ‘mistakenly’ released the information repeatedly over the years. Often these leaks have been made to political opponents of the conservative groups whose information was leaked. Leaking the donor information is intended to harass and to intimidate those donors from donating to political causes. Campaign for Liberty has refused to provide donor information to the IRS to protect the privacy of our members. Now the IRS has demanded the information and fined Campaign for Liberty for protecting its members’ privacy. ...

[C]an you blame them for being skeptical of how the IRS will treat them and their donors? It’s been a year since the Treasury Inspector General for Tax Administration conceded that the IRS used “inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based on their names or policy positions instead of indications of potential political campaign intervention.” President Obama himself has in the past used donor lists to publicly chastise private citizens who oppose him politically.

The investigation by the House Oversight and Government Reform Committee crawls along with all the deliberate speed of a patient on Seconal. However, Judicial Watch released yesterday a new batch of internal IRS emails showing that former IRS official Lois Lerner communicated with the Department of Justice on strategies for targeting 501(c)(4) groups. Even as Lerner broke the news of the IRS scandal by blaming “low-level” employees in Cincinnati, Lerner was still consulting with the DOJ about how the targeted organizations could be prosecuted. There’s mounting evidence to support conservative concerns about the political nature of the IRS.

In November, the IRS proposed changes to the rules governing 501(c)(4) organizations. The changes would constrict the political activity of groups claiming this tax-exempt status and require them to disclose their donors. The proposal elicited a record-breaking 169,000 public comments. IRS Commissioner John Koskinen told USA Today on Monday that, given the extraordinary number of comments, “In all likelihood we will re-propose a redefined rule and ask for more public comment.” He predicted that the process would not be complete “until the end of the year and beyond.”

Conservatives like Senate Minority Leader Mitch McConnell (R-Ky.) have opposed these changes, unsurprisingly. However, even the ACLU has criticized the proposed rules as unduly burdensome on First Amendment rights. It’s not only conservatives who should be wary about not only what the IRS has done in the past, but also what it aims to do in the future.

Can you blame Campaign for Liberty for not wanting to expose its private-citizen donors to retribution, even if that means disregarding IRS demands? Perhaps we should just ask former Mozilla CEO Brendan Eichwhat the consequences of disclosure might be.

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April 18, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, April 17, 2014

National Law Journal: Is Now the Ideal Time to Enroll in Law School?

Following up on yesterday's post:  National Law Journal, Theory: The Time Was Never Better to Enroll in Law School:

Is now the ideal time to enroll in law school? Steven Freedman, assistant dean for admissions at the University of Kansas School of Law, has been making the counterintuitive case that it is. In a series of posts on the law professor blog The Faculty Lounge, he argues that the relatively small number of people set to graduate with J.D.s in 2017 will mean better job prospects for those who do. In short, the supply of new lawyers will be much more closely aligned with the demand for their services than for the Class of 2013. ... “Enroll today or you will miss out on what might be a once-in-a-lifetime opportunity,” Freedman wrote on April 10. “Namely, the chance to graduate from law school in 2017-2018, which will likely be one of the best times ever to graduate from law school.” ...

Freedman is not the first to float this idea. University of Washington School of Law professor Ryan Calo made a similar argument in Forbes in November. And Theodore Seto, a professor at Loyola Law School, Los Angeles, wrote a [TaxProf] blog post in June suggesting demand for legal services would grow along with the U.S. population. “...

Still, Freedman clearly struck a nerve with readers of The Faculty Lounge, many of whom disputed his findings in the comments section.  ...

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April 17, 2014 in Legal Education | Permalink | Comments (2)

Gamage Presents A Framework for Analyzing the Optimal Choice of Tax Instruments Today at Indiana

Gamage (2014)David Gamage (UC-Berkeley) presents A Framework for Analyzing the Optimal Choice of Tax Instruments, 68 Tax L. Rev. ___ (2014), at Indiana-Bloomington today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

What mix of policy instruments should governments employ to raise revenues or to promote distribution? The dominant answer to this question in the tax theory and public finance literatures is that (with limited exceptions) governments should rely exclusively on a progressive consumption tax. Thus, among other implications, the dominant view is that governments should not tax capital income or wealth, and that legal rules should not be designed to promote distribution.

In contrast, this Article argues that governments should make use of a number of tax and non-tax policy instruments to raise revenues and to promote distribution. Furthermore, this Article argues that governments may have much greater capacity to raise revenues and to promote distribution at lower efficiency costs than is generally recognized. Whereas the existing theoretical literature focuses on a small number of distortionary costs that result from taxation (in particular, on labor-to-leisure and saving-to-spending distortions), this Article analyzes the implications of taxpayers engaging in a diverse variety of tax-gaming responses. To the extent that taxpayers respond to different tax instruments through different forms of tax gaming, this Article demonstrates that governments can raise revenues and promote distribution more efficiently by employing a variety of different policy instruments.

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April 17, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Fleischer Presents The Inferiority of Pigouvian Taxes Today at Washington

Fleischer Vic (2013)Victor Fleischer (San Diego) presents The Inferiority of Pigouvian Taxes at the University of Washington today as part of its Graduate Tax Program Colloquium Series:

Pigouvian (or "corrective") taxes have become the favored policy instrument to address activities that cause negative externalities. There is considerable academic support for Pigouvian taxes on a wide range of products and activities, including carbon, gasoline, fat, high fructose corn syrup, financial transactions, executive pay, excessive zoning, and SUVs. Economists of all political stripes are therefore mystified by our politicians’ collective inability to see the merits of using Pigouvian taxes more frequently to address serious social harms.

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April 17, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Solomon Presents Tax Policymaking in the United States Today at Temple

SolomonEric Solomon (Director of National Tax Practice, Ernst & Young, Washington, D.C.) presents The Process for Making Tax Policy in the United States: A System Full of Friction, 67 Tax Law. ___ (2014), at Temple today as part of its Tax Policy & Administration Colloquium Series hosted by Alice Abreu and Andrea Monroe:

The paper, first presented to the Canadian Tax Foundation Roundtable ..., acknowledges the roles of multiple participants in the formation of tax policy, including the Treasury, IRS, and courts, but focuses on the legislative process and describes both the roles of the various players in it. It emphasizes the operation of the checks and balances in the system and the ways in which they influence tax legislation and tax policy. The Colloquium will also include a discussion of the tax gap drawn from testimony presented to the Senate Finance Committee on April 18, 2007 by Eric Solomon and Henry Paulsen.

April 17, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Mazur Presents Tax Policy and the Economy Today at Florida

Mazur 2Mark Mazur (Assistant Secretary for Tax Policy, U.S. Treasury Department) presents Tax Policy and the Economy at Florida today as the Fourth Annual Ellen Bellet Gelberg Tax Policy Lecture in the Graduate Tax Program.  Prior lectures:

April 17, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Recent Tax Prof Tax Notes Articles

April 17, 2014 in Scholarship, Structuring a Tax Workshop Series, Tax | Permalink | Comments (0)

Mirkay: State Tax Law in a Post-Windsor World

Nicholas A. Mirkay III (Creighton), Equality or Dysfunction? State Tax Law in a Post-Windsor World, 47 Creighton L. Rev. ___ (2014):

Depending on one’s religious and political proclivities, the United States Supreme Court’s decision in United States v. Windsor can either been seen as a progressive step towards equality or a troublesome departure from traditional marriage norms. Notwithstanding, from a federal tax perspective, the Windsor decision clearly raised a myriad of issues that spanned virtually the entire Internal Revenue Code (the “Code”), including but not limited to income taxes (including filing status), estate and gift taxes, payroll taxes, and the tax treatment of retirement account contributions and social security benefits. In the aftermath of Windsor, the IRS was left with a quandary in administering marital-status-dependent Code provisions: should it base its administration of the Code on the taxpayer’s valid marriage in the state in which it was performed (commonly referred to as the “state of celebration” test) or the taxpayer’s state of residence or domicile (commonly referred to as the “state of residence” test)? The IRS resolved most of the federal tax issues raised by Windsor in its issuance of Revenue Ruling 2013-17, which chiefly adopted a state of celebration test for income and other tax purposes. However, the ruling did not extend to quasi-marital statuses, such as domestic partnerships and civil unions, resulting in federal tax non-recognition and complexities for couples in those legally recognized relationships.

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April 17, 2014 in Scholarship, Tax | Permalink | Comments (1)

Wealth Strategies Journal Publishes New Issue

Taxing Luck

Peter Prescott (Butler University, College of Business), Taxing Luck, 83 Miss. L.J. 117 (2014):

Luck, income, wealth, and taxation have always been, and still are, inexorably intertwined. The connection between the latter three is obvious and driven by practical necessity—one cannot collect a tax from someone who has nothing to pay it with. Taxing previously-acquired wealth or current income solves the collectability problem. Luck enters the picture as one of a handful of important factors contributing to acquiring wealth and to earning income. Like just about everything else in life, that luck-generated economic success has federal income tax consequences for the lucky recipient. But does the current income tax treatment of that success hold up under scrutiny? If not, then how should the federal government tax “lucky” income? And, how should Congress and the IRS decide which income is “lucky” and which is not? This Article wrestles with those thorny questions using the traditional tax policy considerations of economic efficiency, equity and distributive justice concerns, and practical administrative issues related to increasing legal complexity before concluding that taxable income attributable to luck should be segregated from other types of income and subjected to a fixed tax rate that exceeds the top marginal tax rates on ordinary income earned by individuals.

April 17, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 343

IRS Logo 2U.S. News & World Report: The IRS Scandal's Smoking Gun?:

The so-called “smoking gun” proving the Internal Revenue Service played politics with conservative groups seeking official non-profit, social welfare status over the last several years may finally have been found.

In a rash of documents provided under the Freedom of Information Act to Judicial Watch, a non-partisan public interest law group, is an April 2013 email written by David Fish, acting manager of IRS Exempt Organizations Technical Guidance and Quality Assurance and sent to, among others, former IRS Director of Exempt Organizations Lois Lerner. It was part of a thread discussing a recent U.S. Senate hearing on the potential for the abuse of the 501(c)(4) tax status by organizations intervening inappropriately or improperly in candidate elections.

Responding to a message “What can I say?” from Lerner, Fish responds, “Tell Ruth she needs to get on the stick and that the next election cycle is around the corner. This is obviously a wonderful idea (that’s why we suggested it). I think you told Greg all you can tell him, unless you want to tell him that we’re taking guidance plan suggestions.”

The email is dated April 15, 2013 – well after initial allegations that the IRS had “slow-walked” the applications of conservative groups had been made and, by the agency, denied.

The “Ruth” mentioned in the message refers to Ruth Madrigal, an official at the U.S. Treasury Department. The “Greg” mentioned in Fish’s message is apparently a San Francisco-based attorney named Gregory Colvin, who started this chain with an e-mail to Lerner and Madrigal letting them know he has just testified before the Senate Judiciary Subcommittee on Crime and Terrorism on the issue of whether officers of (c)(4) organizations who made false statements under penalty of perjury on tax returns “could be criminally prosecuted.”

The Obama administration has insisted from the beginning that conservative groups were not singled out and that electoral considerations did not factor into what clearly went on. They prefer to adhere to the fiction that anything untoward that occurred generated spontaneously in branch offices among low level staff and not at the direction of anyone in Washington.

The particular mention by Fish of the idea that “the next election cycle is around the corner” seems to any reasonable person to confirm or at least suggest higher-ups at the IRS including Lerner knew exactly what they were doing, had used their positions for partisan political purposes, and were continuing to do so even though the word about what they were doing had leaked out....

[C]ongressional investigators need to refocus, to cast a wider net and make sure all the documents they asked for were actually turned over. If they weren’t, then it would seem reasonable to conclude a cover-up had in fact occurred and may be a bigger thing than the underlying crime.

Rather than slow down its efforts and wind them up, congressional committees investigating what the IRS actually did and finding what other federal agencies – if any – it worked with to subvert the constitutionally protected rights to freedom of speech and association need to go into high gear. The upcoming summer recess would be the perfect time to focus on it since there will be nothing else going on in town.

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April 17, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

Wednesday, April 16, 2014

Roin Presents Planning Past Pensions Today at Duke

RoinJulie Roin (Chicago) presents Planning Past Pensions at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Evidence of state and local government dysfunction surfaces in many areas. One is the operation of their employee pension plans. Free from the strictures of ERISA, some governments failed to fund their pension promises and with the imminent retirement of the baby boom generation, are facing what appear to be insurmountable pension debts. The state of Illinois is one of the worst-hit states, with grossly underfunded pension plans, a state constitutional prohibition on reducing pension benefits, and a sizeable non-pension related budget deficit. Recently passed pension “reforms” likely will be struck down by its courts. There are no easy solutions to its pension woes, but this article seeks to lay out a few steps that Illinois can take now, under current law, and suggests more long-term policy and legal changes that it should consider for the future. Ultimately, though, the same dysfunctions that led to the current crisis might make these suggestions impractical.

April 16, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The Fluctuating Math Errors in Americans’ Tax Returns

538FiveThirtyEight:  The Fluctuating Math Errors in Americans’ Tax Returns:

Seeing as Tuesday night is the deadline for filing tax returns, and seeing as data is FiveThirtyEight’s raison d’être, I was excited to find a set of statistics titled “Math Errors on Individual Income Tax Returns, by Type of Error.” Even better, that data has been published for tax years from 2001 to 2012.

It’s unsurprising that some Americans make mistakes on their taxes; the 1040 form (the primary tax form) has 77 line items, as well as a 189-page appendix of instructions. But Internal Revenue Service data shows that math mistakes — potentially an indication of how confusing that form is — have changed a lot over time.

chalabi-math-errors

Why does the number of errors fluctuate so much? ...

Moving from facts to theory, the decrease in errors since 2009 might also partly be explained by the increase in use of TaxACT, TaxSlayer, TurboTax and other online filing services. That assumes that such providers are less prone to mistakes than alternative solutions, such as Americans calculating their own taxes or using traditional accountants. The National Taxpayers Union has claimed that is not a safe assumption.

(Hat Tip: David Herzig.)

April 16, 2014 in IRS News, Tax | Permalink | Comments (4)

Sugin: Payroll Taxes, Mythology, and Fairness

Linda Sugin (Fordham), Payroll Taxes, Mythology, and Fairness, 51 Harv. J. on Legis.___ (2014):

As the 2012 fiscal cliff approached, Congress and President Obama bickered over the top marginal income tax rate that would apply to a tiny sliver of the population, while allowing payroll taxes to quietly rise for all working Americans. Though most Americans pay more payroll tax than income tax, academic and public debates rarely mention it. The combined effect of the payroll tax and the income tax produce dramatically heavier tax liabilities on labor compared to capital, producing substantial horizontal and vertical inequity in the tax system. This article argues that a fair tax system demands just overall burdens, and that the current combination of income taxes and payroll taxes imposes too heavy a relative burden on wage earners. It scrutinizes the payroll tax to debunk myths that artificially link payroll taxes to retirement security, and argues that these myths have lulled workers into accepting substantial and regressive tax burdens. Freed from the analytical limitations of an insurance label and a private-savings paradigm, policymakers can be better guided by fundamental principles of fairness. By refuting justifications for taxing capital income more lightly than labor income, and offering fairness arguments for taxing work less than investment, the article makes a case for equalizing the tax burdens on labor and capital income. Social Security’s outlays constitute one-fifth of total federal spending, and this article maintains that it should be financed by a fair tax.

April 16, 2014 in Scholarship, Tax | Permalink | Comments (0)

IRS Considers Taxing Silicon Valley Work Perks

Following up on my previous posts (links below):  Fox News,  IRS Considers Taxing Work Perks Like Food, Gym Memberships:

PerksIn competitive job markets like Silicon Valley, companies are doing everything they can to entice the best and brightest -- offering freebies that have become the stuff of legend. Employee perks like free food at lavish cafeterias, laundry and even yoga are not unheard of.

But the taxman could soon crack down. The IRS reportedly is looking at these perks and seeing if these companies need to start paying up for the free stuff they offer employees.

David Gamage, a tax expert and professor at the University of California, Berkeley, said it would really boil down to who benefits from these perks. "To what extent is this intended as a perk, a form of compensation, for the benefit of the employee, or to what extent is this just another way the employer gets the employee to work harder and longer and do things for the benefit of the employer?" he said.

If it's the latter, then it's harder for the IRS to tax it.

Prior TaxProf Blog coverage:

April 16, 2014 in Tax | Permalink | Comments (0)

Malcolm Morris Named Dean at John Marshall (Atlanta)

Morris-malcolmTax Prof Malcolm Morris (John Marshall (Chicago)) has been named Dean at John Marshall (Atlanta):

A former attorney with the Internal Revenue Service's estate and gift tax division in Chicago, Morris' teaching interests include federal tax, trusts and estates and property. He is an expert on notarial law.

Morris is the director of graduate estate planning programs and associate director of graduate tax law programs at John Marshall in Chicago. He is a member of the Law School Admissions Council's board of directors and has served as an accreditation site visitor for the American Bar Association.

April 16, 2014 in Legal Education | Permalink | Comments (0)

The Right Coast Joins the Law Professor Blogs Network

LPBN LogoI am delighted to announce that The Right Coast, edited by Thomas A. Smith (San Diego), has joined the Law Professor Blogs Network.  

With the support of our sponsor Wolters Kluwer Law & Business/Aspen Publishers, the Network is seeking to expand in two ways.

First, I am actively recruiting law professors to launch blogs in other areas of the law school curriculum not currently covered by the Network, including Administrative Law, Bankruptcy, Intellectual Property, National Security, Native American Law, Race and the Law, and Trial Advocacy.

Second, I am actively recruiting law professors to affiliate their existing blogs with the Network, like Tom Smith's The Right Coast, Brian Leiter's Law School Reports, Brian Leiter's Law School Rankings, and Doug Berman's Sentencing Law and Policy.

The Network offers law professors the premier blogging platform and the opportunity to share in growing sponsorship and advertising revenues. For more information about these opportunities, see here.

April 16, 2014 in About This Blog, Legal Education | Permalink | Comments (3)

Peroni Presents Formulary Apportionment in the U.S. at UNLV

PeroniRobert J. Peroni (Texas) presented Formulary Apportionment in the U.S. International Income Tax System: Putting Lipstick on a Pig? (with J. Clifton Fleming (BYU) & Stephen E. Shay (Harvard)) at UNLV yesterday as part of its Faculty Enrichment Series:

[T]he authors argue that formulary apportionment and the current standard, arm's length transfer pricing, are just two shades of lipstick on the pig that is the US international tax system, with its twin features of deferral and cross-crediting. They conclude that formulary apportionment might be the less offensive shade, but in effect the whole discussion is a diversion from a broad reform that is sorely needed on the pig itself.

April 16, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Legal Education Roundup

April 16, 2014 in Legal Education | Permalink | Comments (3)

Donald Rumsfeld's Letter to the IRS: My Taxes Are a Known Unknown

The IRS Scandal, Day 342

Tuesday, April 15, 2014

A Day in the Life of a Pepperdine Faculty Member

Haugen SkeelOne of the joys of being a faculty member at Pepperdine is the opportunity to spend time with wonderful visitors who come to the law school because of its unique mission.  Today is a great illustration, as we welcomed Gary Haugen (President & CEO, International Justice Mission) and David Skeel (S. Samuel Arsht Professor of Corporate Law, University of Pennsylvania Law School):

Gary Haugen is here again this week teaching a short course and graciously hosted a breakfast this morning with faculty and students.  He talked about how he came to found International Justice Mission and the incredible work the organization is doing to protect the poor in the developing world from violence.  He also discussed his new book, The Locust Effect: Why the End of Poverty Requires the End of Violence (2014):

Haugen BookBeneath the surface of the world’s poorest communities, common violence — including rape, forced labor, illegal detention, land theft, police abuse and other brutality — has become routine and relentless. And like a horde of locusts devouring everything in their path, the unchecked plague of violence ruins lives, blocks the road out of poverty, and undercuts development.

How has this plague of violence grown so ferocious? The answer is terrifying and startlingly simple: There’s nothing shielding the poor from violent people. In one of the most remarkable — and unremarked upon — social disasters of the last half century, basic public justice systems in the developing world have descended into a state of utter collapse.

Gary Haugen and Victor Boutros offer a searing account of how we got here and what it will take to end the plague. Filled with vivid, real-life stories and startling new data, The Locust Effect is a gripping journey into the streets and slums where fear is a daily reality for billions of the world’s poorest, where safety is secured only for those with money, and where much of our well-intended aid is lost in the daily chaos of violence.

While their call to action is urgent, Haugen and Boutros provide hope, a real solution, and an ambitious way forward. The Locust Effect is a wake-up call: Its massive implications will forever change the way we understand global poverty and will help secure a safe path to prosperity for the global poor in the 21st century.

Throughout my life I’ve seen firsthand that while talent, ambition, and hard work are distributed equally among all people around the world, many face challenges each day simply surviving. The Locust Effect is a compelling reminder that if we are to create a 21st Century of shared prosperity, we cannot turn a blind eye to the violence that threatens our common humanity. Bill Clinton Former U.S. President

This crucial study carefully documents the fundamental truth that the end of poverty demands the end of violence. Both fascinating and important, Gary Haugen's book is a moving demonstration that is at once fact-filled and highly readable — a truly unusual combination. Laurence H. Tribe Carl M. Loeb University Professor and Professor of Constitutional Law, Harvard Law School

Gary Haugen and IJM are waking up the social consciences of the worldwide Church, even as they have shown the international human rights community why the end of poverty requires the end of violence caused by the widespread failure of justice systems in the developing world. In this important book, Haugen continues to do both. Tim Keller Redeemer Presbyterian Church of New York Cit

David Skeel delivered the annual Brandeis Lecture this afternoon for faculty and students on The Justice Paradox, in True Paradox: How Christianity Makes Sense of a Complex World (2014):

True ParadoxEvery system of thought gives rise to ideas about justice and the kind of legal code that can foster a just social order. As different as they are, these legal codes have one very odd thing in common: their advocates insist they will ensure a just social order, yet the legal codes always fail. Whether it is the Mosaic law, the Napoleonic Code or the Soviet Union, legal codes are rolled out with great optimism about their capacity to ensure justice, but they never succeed. This is the justice paradox.

Unlike any other religion or system of thought, Christianity rests on a story whose hero is murdered by legal process. In the narrative of his arrest, trial and execution, Jesus encounters two of the finest legal systems the world has ever known, the Old Testament legal system and Roman law. Both fail. A clearer picture of the limits of law’s capacity would be hard to imagine.

Christians do not believe that we should take no interest in justice. Quite to the contrary, the Christian teaching that each of us is made in the image of God inspired William Wilberforce’s campaign to end England’s slave trade and served as the foundation for the modern movement for international human rights. But Christianity explains why the belief that we can be saved by the right legal system is both persistent and deeply mistaken

I am delighted to join a group of faculty this evening for dinner with David.

Of course, it is not quite paradise at Pepperdine today:  we have two faculty meetings, and it is an unusually warm day (by Malibu standards).

April 15, 2014 in Legal Education | Permalink | Comments (0)

Rao Presents The Tax Policy Implications of State Facilitated Collusion in the Alcohol Market Today at NYU

RaoNirupama Rao (NYU) presents The Price of Liquor is Too Damn High: State Facilitated Collusion and the Implications for Taxes (with Christopher T. Conlon (Columbia) at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

Alcohol markets are subject to both heavy regulation as well as excise taxes at the federal and state level. We examine the impact of particular state regulations on the structure of the alcohol market and the consequences for tax eciency. We show that post and hold and meet but not beat pricing regulations at the wholesale level facilitate non-competitive pricing by wholesalers. Wholesalers will tend to mark up premium brands relative to call or well products. The distortion of premium brands generally exceeds the distortions resulting from optimally set taxes, particularly when states attempt to address any negative externality of alcohol consumption. Regression results and tabulations indicate that that states featuring post and hold regulations consume 4% to 10% less alcohol than other states, that premium products comprise a smaller share of consumption and that wholesaler pricing is consistent with non-competitive behavior. We use new monthly data describing prices and quantity for hundreds of products to estimate alcoholic beverage demand and use these estimates to assess the impact of replacing these regulations with higher taxes. Our ndings suggest that the state of Connecticut could raise three to six times their current alcohol tax revenue by eliminating these regulations and increasing taxes such that total alcohol consumption was unchanged. In addition to redirecting surplus from wholesalers to the taxing authority, these alternative policies increase consumer surplus by reducing distortions in consumer product choices. The state can e ectively raise much more revenue and improve consumer welfare by replacing alcohol regulations with taxation

April 15, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kahng Presents The Taxation of Intellectual Capital Today at Washington

KahngLily Kahng (Seattle) presents The Taxation of Intellectual Capital, 66 Fla. L. Rev. ___ (2014), at The University of Washington today as part of its Graduate Tax Program Colloquium Series:

Intellectual capital — broadly defined to include nonphysical sources of value such as patents and copyrights, computer software, organizational processes and know-how — has a long history of being undervalued and excluded from measures of economic productivity and wealth. In recent years, however, intellectual capital has finally gained wide recognition as a central driver of economic productivity and growth. Scholars in fields such as knowledge management, financial accounting and national accounting have produced a wealth of research that significantly advances our conceptual understanding of intellectual capital and introduces new methodologies for identifying and measuring its economic value.

This Article is the first to analyze and assess the taxation of intellectual capital within this broader interdisciplinary landscape. Informed by the recent research and reform efforts in knowledge management, financial accounting and national accounting, the Article finds that the tax law, which allows most investments in intellectual capital to be deducted, is fundamentally flawed. This results in the loss of hundreds of billions of dollars in tax revenues, costly misallocations of resources and a grave deviation from the accurate measure of income. The Article argues that, consistent with the prevailing view in other fields, investments in intellectual capital ought to be capitalized under the tax law. Drawing upon the work of reform proponents in other fields as well as their critics, the Article considers whether and to what extent the advances in other disciplines can be adapted to the tax system. Based on this analysis, it proposes the tax law be reformed to require businesses to capitalize and amortize over five years a broad array of intellectual capital investments including research and development, advertising, worker training and strategic planning.

April 15, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Oregon Law Prof Objects to Shifting Funds for Faculty Raises to Public Interest Jobs for Students

UO Matters:  UO Law School Prof Angry About Plan to Use His Raise for Student Fellowships:

Oregon LogoSeveral members of the law school email lists (which included staff, secretaries etc.) have forwarded these two emails from professor Rob Illig (Law) about a plan apparently floated by Law Dean Michael Moffitt (paid $292,800 after a recent raise) to deal with the law school’s enrollment problems and US News ranking, which has fallen from #80 to #100 since Moffitt took over in 2011.

The plan? Cancel raises for the faculty, and use the money to increase student scholarships create a program to give non-profits money to hire law school graduates, boosting the employment numbers that go into the US News rank. ...

Prof. Illig's emails are reprinted below the fold, along with his follow up comments:

Continue reading

April 15, 2014 in Legal Education | Permalink | Comments (7)

Happy (Tax Day Edition)

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

April 15, 2014 in Tax | Permalink | Comments (0)

Ten-Year Anniversary of TaxProf Blog

Happy 10Today marks the ten-year anniversary of TaxProf Blog (and the nineteen-year anniversary of the TaxProf Email Discussion Group).  I hope the blog has at least partially succeeded in its mission (announced in my very first post) to provide daily news and information of interest to law school tax professors and students; tax lawyers in private practice, government, nonprofits, for-profit corporations, and think tanks; accountants; and others in the tax community. 

Since acquiring 100% control of the Law Professor Blogs Network in May 2013 and undertaking a top-to-bottom re-design in July (details here), the network's traffic and advertising revenues are up nearly 100%. The network now consists of over 50 blogs, with over a over a dozen new blogs launched and existing blogs like Brian Leiter's Law School Reports and Law School Rankings joining the network.

April 15, 2014 in Legal Education, Tax | Permalink | Comments (5)

Nova Offers Buyouts to Law Faculty With Age + Experience > 60

NovaDaily Business Review:  Nova's Law School Offering Professors Voluntary Buyouts:

After 40 years as a law professor at Nova Southeastern University, Bruce Rogow—who has taught at the school since it first opened—delivered his final lecture last week. Rogow is one of dozens of tenured law professors to be offered buyouts by the school. ...

Nova’s NSU Shepard Broad Law Center is not the only law school to offer buyouts to professors. Several law schools around the country, including Albany Law School, Vermont Law School and University at Buffalo Law School, have offered faculty members buyouts to shore up finances as enrollment continues to drop.

At Nova, letters were sent to all 60 full-time law professors in March notifying them of the buyouts. To become eligible, professors must achieve a “point” rating of 60, which combines age and years of service. For example, Rogow is 74 and has taught at Nova for 40 years, so his score is 114.

The faculty has until May 25 to decide whether to take the buyouts, which have been capped at 20 percent of the faculty, according to Bob Jarvis, another longtime law professor. ... Gail Richmond, who has been teaching at Nova law school for 35 years, is another professor who is considering a buyout. “I might be taking it,” she said. “I’m certainly interested in it.” Because the number of professors eligible is capped at 20 percent, Richmond said she doesn’t feel the program will weed out all the experienced, senior faculty.

(Hat Tip:  Above the Law.)

April 15, 2014 in Legal Education | Permalink | Comments (3)

TurboTax Maker Linked to ‘Grassroots’ Campaign Against Free, Simple Tax Filing

Pro PublicaPro Publica: TurboTax Maker Linked to ‘Grassroots’ Campaign Against Free, Simple Tax Filing:

Over the last year, a rabbi, a state NAACP official, a small town mayor and other community leaders wrote op-eds and letters to Congress with remarkably similar language on a remarkably obscure topic.

Each railed against a long-standing proposal that would give taxpayers the option to use pre-filled tax returns. They warned that the program would be a conflict of interest for the IRS and would especially hurt low-income people, who wouldn't have the resources to fight inaccurate returns. Rabbi Elliot Dorff wrote in a Jewish Journal op-ed that he "shudder[s] at the impact this program will have on the most vulnerable people in American society."

"It's alarming and offensive" that the IRS would target the "the most vulnerable Americans," two other letters said. The concept, known as return-free filing, is a government "experiment" that would mean higher taxes for the poor, two op-eds argued.

The letters and op-eds don't mention that, as ProPublica laid out last year, return-free filing might allow tens of millions of Americans to file their taxes for free and in minutes. Or that, under proposals authored by several federal lawmakers, it would be voluntary, using information the government already receives from banks and employers and that taxpayers could adjust. Or that the concept has been endorsed by Presidents Obama and Reagan and is already a reality in some parts of Europe.

So, where did the letters and op-eds come from?

April 15, 2014 in Tax | Permalink | Comments (0)

Lawyer for Bin Laden's Son-in-Law Pleads Guilty to Tax Charges

The IRS Scandal, Day 341

Monday, April 14, 2014

Donald Tobin Named Dean at Maryland

Tax Prof Donald P. Tobin (Ohio State) has been named Dean at Maryland:

Tobin (2014)Tobin comes to UMB from Ohio State University where he was the John C. Elam/Vorys Sater Professor of Law at the Michael E. Moritz College of Law. During his 13 years at the Moritz College of Law, Tobin held numerous academic appointments that include: Founding Co-Director of the Program on Law and Leadership, Associate Dean for Faculty, and Associate Dean for Academic Affairs.

Professor Tobin’s' scholarly work has earned him national recognition as a leading expert on the intersection of tax and campaign finance laws. His publications include law texts on federal income taxation and tax ethics, along with articles on campaign finance disclosure and taxation of political organizations [including, most recently, The 2013 IRS Crisis: Where Do We Go From Here?, 142 Tax Notes 1120 (Mar. 10, 2014)]. ...

Tobin has strong Maryland ties. A native of Columbia, Md., and a graduate of Oakland Mills High School, Tobin received his JD degree from the Georgetown University Law Center. He served as a legislative aide for U.S. Senator Paul Sarbanes (D-Md.), and was a staff member of the Senate Committee on the Budget specializing in tax and budget issues. He also served as an appellate staff attorney for the U.S. Department of Justice Tax Division. Tobin is a member of the Maryland Bar, as well as the bars of the Maryland Court of Appeals, U.S. District Court for Maryland, and the U.S. Supreme Court.

(Hat Tip: Francine Lipman.)

April 14, 2014 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

NYU Tax Law Review Publishes Symposium Issue: The Income Tax at 100


NYU 100The Tax Law Review has published a new issue (Vol. 66, No. 4 (Summer 2013)), NYU/UCLA Tax Policy Symposium: The Income Tax at 100, 66 Tax L. Rev. 357-879 (2013):

Deborah H. Schenk (NYU), Foreword: The Income Tax at 100, 66 Tax L. Rev. 357 (2013)

Panel #1:  The Role of the Corporate Tax:

Panel #2:  International Taxation:

Panel #3:  Taxes and Inequality:

Panel #4:  Taxes and Politics:

April 14, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

WSJ: Three Issues on Most Taxpayers' Minds

Wall Street Journal:  As Tax Day Nears, Where Does Your Money Go?, by Laura Saunders:

Where do your tax dollars go? What are the most popular deductions? And how long must people work each year to pay Uncle Sam his due?

Those issues may be on the minds of many taxpayers as they make their contributions to the common purse.

The answers, provided by three nonprofit, nonpartisan groups based in Washington, underscore how much the government relies on the income tax on individuals, which supplies nearly half of total federal revenue.

1. Where does your money go?

Check out the "tax receipt" accompanying this column. It was prepared by Loren Adler, research director at the Committee for a Responsible Federal Budget, and it shows how $100 of revenue was allocated among spending programs in fiscal year 2013.

WSJ

2. What's behind Form 1040?

The Tax Policy Center has posted a fascinating interactive tax form online. The link brings up both pages of the 1040 form as well as Schedule A, which is where taxpayers can claim itemized deductions for write-offs such as charitable donations and mortgage interest.

Click on any line of the form, and information about it pops up. What is the purpose of the line item? How many people are affected by it, and how much do they earn? How much revenue is raised or lost as a result? ...

3. How long does it take to pay Uncle Sam?

For decades the Tax Foundation has publicized Tax Freedom Day, a date that reflects the group's estimate of how long it takes the nation collectively to pay its tax bill for the year. The group arrives at the figure by dividing the combined amount of federal, state and local taxes paid by total income. This year's Tax Freedom Day is April 2

April 14, 2014 | Permalink | Comments (1)

Papers From the American Taxation Association's 2014 Midyear Meeting

ATA LogoThe American Taxation Association has posted on SSRN the 21 papers from its 2014 Midyear Meeting.

April 14, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)