TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Wednesday, August 17, 2016

Federal Taxes Are Very Progressive

Tax Vox: Federal Taxes Are Very Progressive, by Robertson Williams:

The US federal tax system is highly progressive, primarily because individual income tax rates rise sharply with income and refundable tax credits lead to negative income taxes for households with low income. Updated estimates from the Tax Policy Center project that effective federal tax rates this year will range from 3.5 percent for households in the lowest-income quintile (or fifth) to 33.0 percent for those in the top 1 percent.

The effective federal tax rate for all households—including individual and corporate income taxes, payroll taxes, excise taxes, and estate and gift taxes—will average 19.9 percent in 2016. Individual income taxes will account for half of total revenue (9.9 percent of income) and payroll taxes will provide just over a third (6.9 percent of income). Most of the rest will come from corporate income taxes (2.1 percent of income) with just 5 percent coming from excise and estate and gift taxes (a combined 1 percent of income).

Vox

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August 17, 2016 in Tax, Think Tank Reports | Permalink | Comments (6)

As J.D. Enrollment Shrivels, Widener, Other Law Schools Turn To Alternative Degrees To Fill Revenue Shortfall

Widener (2016)Marketplace, New Paper Chase: Law School for Non-Lawyers:

The law school business model used to be simple. You recruit a bunch of aspiring lawyers. Those aspiring lawyers pay a lot of money. Three years later — and after a few hundred nights in the law library — the aspiring lawyers graduate and become lawyers.

The model worked fine, until the recession hit U.S. law firms. With fewer jobs available, a lot of aspiring lawyers decided they should aspire to something else. So what does a law school do when there aren’t enough aspiring lawyers left to educate? They start to look for students in places you wouldn’t expect — places like hospitals.

Rod Smolla, dean at Delaware Law School, says close to a third of the school’s students are now in non-JD programs. “And I can easily imagine it going bigger,” said Smolla. “I can imagine it being half of what we do.”

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August 17, 2016 in Legal Education | Permalink | Comments (2)

Student Loan Derivatives:  Improving On Income-Based Approaches To Financing Law School

Benjamin M. Leff (American) & Heather Hughes (American), Student Loan Derivatives: Improving on Income-Based Approaches to Financing Law School, 61 Vill. L. Rev. 99 (2016):

Despite extensive public discussion of the high cost of legal education and student debt levels, too few critics show creativity in thinking about the optimal mechanism for funding a legal education. This Article proposes — and explores the legal and practical implications of — a new model of law-school financing called an income-based repayment swap (“IBR Swap”). The IBR Swap is a student loan derivative: a novel idea that improves upon existing income-share contracts. Under an IBR Swap, students still borrow money from a bank or the government to pay for their legal educations. But students then enter into contracts with a financial institution under which the institution agrees to make the students’ loan payments and the students agree to pay the institution a percentage of income. An IBR Swap is a student’s exchange of a fixed obligation to lenders for an income-based obligation to a financial institution. The parties exchange no money upfront, which distinguishes this form of transaction from existing income-share and “human capital” contracts that face barriers to enforcement.

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August 17, 2016 in Legal Education, Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 1196

IRS Logo 2Breitbart, ‘The Intimidation Game’: IRS Scandal Looms over Next Administration:

In June, Hillary Clinton warned that Donald Trump was a would-be dictator who could not be trusted with the powers of the presidency. “Imagine if he had not just Twitter and cable news to go after his critics and opponents, but also the IRS, or for that matter our entire military,” she said. “Given what we have seen and heard, do any of us think he’d be restrained?”

How ironic, given that she served in the Obama administration while it abused the powers of the IRS to target conservative groups. ...

Hillary can be expected to pass some version of the DISCLOSE Act, a Democratic Party initiative to flush out the political views of federal contractors, and could revive proposed IRS regulations that would effectively legalize the targeting that was done in the IRS scandal.

Trump has been combative with the press, but there is nothing to suggest that he would pursue, or sanction, the kinds of abuse that Hillary Clinton and her party have been eager to encourage in the recent past. In fact, only a Trump presidency holds out the possibility of bringing the perpetrators of the IRS scandal to justice. In contrast, a Clinton win could see a renewed effort to target conservatives for the “crime” of dissent.

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August 17, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, August 16, 2016

Rankings Of 117 Private Law Schools By Tuition Increases Since 2010

Matt Leichter, So Just How Far Off Were My Tuition Projections?:

Thanks to the ABA’s 509 information reports, I get $44,413 mean-average tuition at the [117] private law schools that were around in 2010. ... On average, tuition is 17 percent higher than 2010. ... 

Below the fold, here’s a list of [the 117] private law schools by cumulative cost increase between 2010 and 2015.

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August 16, 2016 in Law School Rankings, Legal Education | Permalink | Comments (1)

Clinton v. Trump: What Happens To Your Income Taxes?

Hillary Trump (2016)David Cay Johnston, Clinton vs. Trump: What Happens to Your Income Taxes?:

Let’s look at a few of the more curious aspects of the Clinton and Trump plans for individual income tax now that both candidates have put out reasonably comprehensive proposals they promise to take to Congress next year. The bottom line: Clinton and Trump both offer conventional, predictable and minimally significant changes, not reform. ...

The reality is that Congress, not presidents, sets tax rules and rates. The proposals by Clinton and Trump – while quite different – are just tinkering around the edges and vote-seeking, not real reform of a system that has become so complex, burdensome and capricious in how it treats taxpayers with the same income that no politicians defend the system as it exists.

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August 16, 2016 in Political News, Tax | Permalink | Comments (4)

Kleinbard:  The Trojan Horse Of Corporate Integration

Edward D. Kleinbard (USC), The Trojan Horse of Corporate Integration, 152 Tax Notes 957 (Aug. 15, 2016):

The U.S. Senate Finance Committee has invested significant resources, including hearings and staff reports, to make the case for an unusual form of corporate dividend integration – a corporate dividends-paid deduction, combined with a universal shareholder dividend withholding tax collected from the firm. This proposal would not reduce the cash tax outlays of U.S. corporations in respect of distributed or retained earnings. It would not reduce the aggregate tax burdens imposed on most shareholders, and in many plausible circumstances would raise those tax costs. It is a poorly targeted response to design weaknesses in the U.S. international corporate tax system. Its efficiency gains are undeveloped and largely overstated.

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August 16, 2016 in Scholarship, Tax | Permalink | Comments (0)

New York Law Journal Special Report On Law Schools

NYLJ
New York Law Journal Special Report, Law Schools:

Harness the Skills of the Introverted Lawyer
Heidi K. Brown, author and associate professor of law at Brooklyn Law School, writes: Introversion in the law profession is a gift. Once quiet law students and lawyers understand that they can be powerful advocates by being their natural newly amplified selves, they will endow the profession, setting examples for colleagues struggling with similar angst or questioning their professional roles.

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August 16, 2016 in Legal Education | Permalink | Comments (1)

Taxation And The Allocation Of Talent

Benjamin B. Lockwood (Pennsylvania), Charles Nathanson (Northwestern) & E. Glen Weyl (Yale), Taxation and the Allocation of Talent (supplemental appendix):

Taxation affects the allocation of talented individuals across professions by blunting material incentives and thus magnifying non-pecuniary incentives of pursuing a “calling.” Estimates from the literature suggest high-paying professions have negative externalities, whereas low-paying professions have positive externalities. A calibrated model therefore prescribes negative marginal tax rates on middle-class incomes and positive rates on the rich. The welfare gains from implementing such a policy are small and are dwarfed by the gains from profession-specific taxes and subsidies. These results depend crucially on externality estimates and labor-substitution patterns across professions, both of which are very uncertain given existing empirical evidence.

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August 16, 2016 in Scholarship, Tax | Permalink | Comments (1)

Chodorow:  A Derivative Market For U.S. News Rankings

Chodorow (2014)TaxProf Blog op-ed:  A Derivative Market for U.S. News Rankings, by Adam Chodorow (Arizona State):

Our law and economic brethren never tire of telling us that markets are the perfect solution for just about any problem. So, what is the biggest problem facing law schools? The slowdown in the legal employment market? The steep decline in applicants? Rising tuition? If you ask law professors and administrators, many would likely say the U.S. News & World rankings, which evaluate schools on an ever changing array of factors, often leading to head scratching results. Who doesn’t know of a school that is over or underrated?

I say we unleash the market on this problem. And by that I don’t mean create competing ranking systems that focus on more relevant factors. Instead, let’s treat schools like securities or commodities, with the rankings as their value, and allow people to buy and sell derivatives. Think a school is overrated? Short it. Think it is underrated? Go long. (Yes, Brian Leiter, I’m thinking of you and USD) If there is truly wisdom in crowds, the derivative market for schools could tell us (legal academics, prospective students, and employers) a lot more about schools than a much-maligned magazine. Think of this as akin to unskewed polls. Or perhaps not. That didn’t end so well, if memory serves.

Now I know this sounds crazy—and I’m not saying it’s not—but bear with me for a moment. Significant research is being done into predictive markets in a variety of different contexts. For instance, there is now a derivative market for presidential candidates (distinct from the actual market in which large donors participate), which some believe are more accurate than polls. Some companies are using this approach with their employees to get a handle on anticipated sales and other figures. They’re finding that markets beat estimates made the traditional way. The key is that people must have some skin in the game. It turns out that it’s not only a pending execution that focuses the mind.

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August 16, 2016 in Law School Rankings, Legal Education | Permalink | Comments (2)

What Apple CEO Tim Cook Really Thinks About Corporate Taxes

Apple LogoTime, What Apple CEO Tim Cook Really Thinks About Corporate Taxes:

The Apple bulls of the world like to throw around this stat: The company has upwards of $230 billion cash on hand. It’s an impressive number, but it carries an important caveat: Most of it is sitting abroad. Apple can’t bring it home without paying approximately 40% in taxes, and CEO Tim Cook has long refused to do that.

What Apple is doing is perfectly legal, as far as the U.S. tax code is concerned. Still, that the world’s largest company by market capitalization is parking overseas a sum roughly equivalent to the GDP of Finland has invited plenty of controversy. Some critics say that Apple has a duty to bring the money home and pay up, given that most of its critical research and development work happens in the U.S. (Apple is separately facing a European investigation into its tax practices.)

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August 16, 2016 in Tax | Permalink | Comments (0)

The Slow And Painful Death Of Academic Freedom At Arkansas-Little Rock Law School

Arkansas Little RockRobert Steinbuch (Arkansas-Little Rock), The Slow and Painful Death of Academic Freedom:

A now-former university president once said to me:  “the most important title in academia is professor.”  Professors are supposed to be given appropriate deference and respect to make critical decisions regarding teaching, research, and service.  Schools are places of inquiry and experimentation.  Professors individually manage their spaces.

I have seen recurring instances of a growing problem in academia, however, wherein administrators view their roles more like kings than deans.  Under this model, administrators not only advise, but also dictate.  I’ve seen this phenomenon, and it’s not good. ...

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August 16, 2016 in Legal Education | Permalink | Comments (7)

Schumer, Norquist On Thin Ice With Olympic Tax Break

Olympic RingsFollowing up on my previous post, Schumer Decries 'Victory Tax,' Urges House To Pass Senate Bill Exempting Olympic Medals From Tax:

New York Sun: Schumer, Norquist on Thin Ice With Olympic Tax Break, by Ira Stoll:

When the senior senator from New York, Charles Schumer, and the president of Americans for Tax Reform, Grover Norquist, are on the same side of an issue in Washington, it’s worth taking a moment to figure out what is going on.

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August 16, 2016 in Tax | Permalink | Comments (3)

Should Law Students Call Professors By Their First Names?

Shima Baradaran Baughman (Utah), What Should Students Call Professors?:

A decision that many of us make early on (or sometimes change later) in teaching is what to have students call us: “Professor X,” or our first name, or by some sort of nickname. Or this may organically evolve. I’ve gone from being called Professor Baradaran to most often, “Shima” in the last 6 years, but not by choice. I introduce myself every year in class as “Professor Baughman” pronounce it and sign all of my emails “Prof. B”, but still somehow, I am referred to as “Shima” by a large number of students. I understand that I went from one hard to pronounce last name (Baradaran) to another (Baughman) when I got married, but I don’t think that’s the problem here. I’ve spoken to several colleagues and they have experienced frustration with this nonconsensual first-name calling as well. I believe that students call me by my first name because there is a growing movement by professors to allow students to call them by their first name, both in undergrad and in law school.

I wonder what percentage of law professors encourage or allow students to call them by their first name and whether this is a good move. I tend to think that it is not a good development. Here are a couple reasons why: ...

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August 16, 2016 in Legal Education | Permalink | Comments (10)

The IRS Scandal, Day 1195

IRS Logo 2WCPO (Cincinnati), Tea Party Federal Lawsuit Against IRS Set for 2017:

A tea party lawsuit brought by a group in California against the Internal Revenue Service over alleged targeting won't go to trial in Cincinnati until late 2017.

U.S. District Judge Michael Barrett recently set out a schedule for evidence preparation and disclosures in the case, with a final pretrial conference set for September 2017, and a trial scheduled for November 2017.

The 2013 class-action lawsuit filed by NorCal Tea Party Patriots of California alleges violations of privacy laws and constitutional rights.

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August 16, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, August 15, 2016

The Top U.S. Legal Markets By BigLaw Head Count

American Lawyer LogoAmerican Lawyer, Where the Lawyers Are: Top US Legal Markets by Head Count:

The following U.S. cities have the largest counts of big-firm lawyers. Plus, we list the most dominant firms in those markets.

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August 15, 2016 in Legal Education | Permalink | Comments (0)

Law School Tax Clinic Wins Big Case For Students Seeking To Deduct MBA Expenses

MBATCWall Street Journal: Good News for M.B.A. Students: Tuition Is Now More Deductible, by Laura Saunders:

A specialized court’s decision should embolden more students enrolled in M.B.A. programs across the country to deduct their tuition—especially if they are getting an executive M.B.A.

In the case [Kopaigora v. Commissioner, T.C. Summ. Op. 2016-35 (Aug. 2, 2016)], ... [Alex Kopaigora] was employed at a hotel in Los Angeles and commuted to Brigham Young University in Salt Lake City, for its executive M.B.A. program. Mr. Kopaigora and his wife, Elizabeth, deducted $18,879 for tuition, commuting and other expenses on their 2011 tax return that the IRS disallowed, in part because he was unemployed for several months of the year. But the judge disagreed with the IRS, saving the Kopaigoras $2,111 in taxes—and providing more ammunition to M.B.A. students who want to deduct education expenses in the future.

“This case is a big win for all M.B.A. students,” says Robert Willens, a tax expert who teaches at Columbia University’s business school and has advised hundreds of M.B.A. students on the ins and outs of deducting tuition. ...

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August 15, 2016 in Legal Education, Tax | Permalink | Comments (1)

Arizona State Law School Opens New $129 Million Building Today In Downtown Phoenix

Mason:  Citizenship Taxation

Ruth Mason (Virginia), Citizenship Taxation, 89 S. Cal. L. Rev. 169 (2016):

The United States is the only country that taxes its citizens’ worldwide income, even when those citizens live indefinitely abroad. This Article critically evaluates the traditional equity, efficiency, and administrability arguments for taxing nonresident citizens. It also raises new arguments against citizenship taxation, including that it puts the United States at a disadvantage when competing with other countries for highly skilled migrant.

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August 15, 2016 in Scholarship, Tax | Permalink | Comments (0)

William Caudill Named Chair of ABA Tax Section

ABA Tax Section Logo (2012)ABA Tax Section Press Release:

William H. Caudill, a partner in the Houston, TX, office of Norton Rose Fulbright, has been selected to chair the American Bar Association’s Section of Taxation, the nation’s largest organization of tax lawyers. Mr. Caudill will serve a one-year term, to be succeeded by Karen L. Hawkins, of Yachats, OR, who will serve as chair-elect.

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August 15, 2016 in ABA Tax Section, Tax | Permalink | Comments (0)

Welcome, Pepperdine Law School Class Of 2019

Launch Week 4

Welcome to the members of the Pepperdine Law School Class of 2019 who begin their legal education today in a week-long introduction to law school and professional formation.  Law students today face a very difficult challenge, with tuition at record highs and the legal profession in turmoil.  Yet you are part of a very strong class — kudos to Dean Shannon Phillips and her team for putting together such a gifted class in such tough circumstances.  Although this is only my fourth year at Pepperdine, I have experienced first hand what a very special place this is.  As you have already seen, you will be spending the next three years in a spectacularly beautiful campus and city.  You will begin to experience this week the faculty and staff's faith-fueled commitment to you and to your success that manifests itself in various ways, large and small, in daily life here.  You will hear a lot of advice and goal-setting this week in the wonderful program put together by Dean Danny DeWalt and his team.  My wish is that you will love your time at Peppperdine and that you will leave here in three years with a deep sense of your professional and personal calling in law and in life. I look forward to seeing many of you in my tax classes in your second and third year.

August 15, 2016 in Legal Education | Permalink | Comments (0)

Twelve Tables Press And Carolina Academic Press Announce Publishing Alliance

12CAPPress Release,  Twelve Tables Press and Carolina Academic Press Announce Publishing Alliance

Twelve Tables Press today announced a publishing alliance with Carolina Academic Press. The new joint venture will provide all back-office fulfillment, editorial, sales, and marketing support to enable Twelve Tables Press to focus on its vision to chronicle the individuals behind the landmark decisions, capture the craft, scholarship and often sheer will needed to change and redefine American Law, jurisprudence and society..

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August 15, 2016 in Book Club, Legal Education | Permalink | Comments (0)

American Absurd

American 2The bad news:  the Internet was down on my six hour New York to Los Angeles flight yesterday.  The good news:  it gave me the chance to read Colorado Law Prof Pierre Schlag's new novel (American Absurd: A Work of Fiction) and article (The Law Review Article), brought to my attention by Jeff Lipshaw of our The Legal Whiteboard:

Mr. David Madden lives in L.A. He's an ordinary man. Every day, he gets up and drives to work. Only he never gets there. Instead, he drives from here to there, from Westwood to Santa Monica, Santa Monica to Venice . . . and so on. It seems he's always just going from point A to point B. Of course, driving from point A to point B--that's pretty much what people do in L.A.

But then one day a mishap occurs, a breakdown of sorts, on Santa Monica Boulevard. Soon the media takes notice, and overnight Mr. Madden is transformed into a pioneering cultural figure as his "A-to-B thing" goes viral and becomes the defining issue of our time. Questions are asked, solutions offered, and blame assigned as therapists, academics, police, and lawyers all get involved. Safe to say, no one escapes unscathed in this caustic, irreverent, and hilarious social satire.

Jeff writes:

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August 15, 2016 in Book Club, Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 1194

IRS Logo 2Daily Caller, IRS Bench Slapped Over Targeting Practices:

D.C. Circuit Scolds IRS For Unfair Targeting Practices
The U.S. Court of Appeals for the D.C. Circuit found that the IRS systematically targeted conservative groups for additional scrutiny by delaying their applications for tax-exempt status and submitting the groups to invasive probes, like forfeiting internet usernames and passwords or reviewing the political and charitable activities of family members. The three-judge panel characterized the agency’s arguments in its defense as “puzzling,” rejecting their claim that the agency could not process the tax-exempt applications of groups party to the litigation. Since the D.C. Circuit was not convinced IRS targeting had ceased, it reversed a lower court ruling denying the conservative groups an injunction and remanded the case for further proceedings.

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August 15, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

TaxProf Blog Weekend Roundup

Sunday, August 14, 2016

UNT-Dallas Wants to Make Law School Less Elitist — And That Could Be Its Downfall

UNT 2Following up on yesterday's post, ABA Must Give Dallas Law School Time To Achieve Audacious, Vital Mission: (1) De-emphasize LSAT To Increase Diversity, (2) Focus Faculty On Teaching Rather Than Research, (3) Charge Low $15k Tuition: Dallas Morning News, UNT-Dallas Wants to Make Law School Less Elitist — And That Could Be Its Downfall:

Officials at the UNT-Dallas College of Law tried something different. They welcomed a diverse group of students, many with grit but not the grades or test scores to get into top law schools. They kept tuition low to avoid six-figure debt.

But that plan will succeed only if students graduate, pass the bar exam and find jobs.  A key group with the ABA doubts UNT-Dallas can pull it off, and has recommended that the school not be accredited.

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August 14, 2016 in Legal Education | Permalink | Comments (8)

The Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5:

  1. [414 Downloads]  Dark Pools, High-Frequency Trading, and the Financial Transaction Tax: A Solution or Complication?, by Doron Narotzki (Akron)
  2. [290 Downloads]  Fiduciary Financial Advice to Retirement Savers: Don't Overlook the Prudent Investor Rule , by Max M. Schanzenbach (Northwestern) & Robert H. Sitkoff (Harvard)
  3. [284 Downloads]  The True Economic Effects of Corporate Inversions, by Doron Narotzki (Akron)
  4. [237 Downloads]  The U.S. Response to OECD-BEPS and the EU State Aid Cases, by Daniel Shaviro (NYU)
  5. [206 Downloads]  Property Is Another Name for Monopoly Facilitating Efficient Bargaining with Partial Common Ownership of Spectrum, Corporations, and Land, by Eric A. Posner (Chicago) & E. Glen Weyl (Yale)

August 14, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Bainbridge:  The Parable Of The Talents

ParableStephen M. Bainbridge (UCLA), The Parable of the Talents:

On its surface, Jesus’ Parable of the Talents is a simple story with four key plot elements: (1) A master is leaving on a long trip and entrusts substantial assets to three servants to manage during his absence. (2) Two of the servants invested the assets profitably, earning substantial returns, but a third servant — frightened of his master’s reputation as a hard taskmaster — put the money away for safekeeping and failed even to earn interest on it. (3) The master returns and demands an accounting from the servants. (4) The two servants who invested wisely were rewarded, but the servant who failed to do so is punished.

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August 14, 2016 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1193

IRS Logo 2USA Today, Conservatives Want to Force House Vote to Impeach IRS Chief:

When Congress returns next month from its seven-week recess, conservative rebels in the House vow to force a vote on whether to impeach IRS Commissioner John Koskinen, effectively making an end-run around reluctant House leaders to achieve their goal.

Republicans allege that Koskinen obstructed an investigation into whether the IRS improperly scrutinized conservative Tea Party groups seeking tax-exempt status, although they do not agree on whether the IRS chief should be impeached. Democrats have denounced impeachment efforts against Koskinen as a politically motivated "travesty" that defames an honorable public servant who has done nothing wrong.

"John Koskinen needs to go, and we are committed to that," Rep. Jim Jordan, R-Ohio, chairman of the ultraconservative House Freedom Caucus, said in an interview with USA TODAY.

Although House leaders usually set the agenda, Jordan and other Freedom Caucus members are using a procedural tactic called a "privileged resolution" to force an impeachment vote. They can force the vote two days after they file the resolution.

A resolution filed by caucus members before the congressional recess has expired, but Jordan said they are poised to file it again when Congress reconvenes. Lawmakers are set to return on Sept. 6. ...

Jordan said the caucus has been buoyed by an Aug. 5 decision by a federal appeals court that said the IRS has not proven that it has ended discriminatory practices against conservative groups. The U.S. Court of Appeals for the District of Columbia Circuit reinstated a lawsuit against the agency. "The court just said that the IRS may not have cleaned up its act at all," Jordan said.

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August 14, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, August 13, 2016

This Week's Ten Most Popular TaxProf Blog Posts

Clinton, Trump Tax Return News

ABA Must Give Dallas Law School Time To Achieve Audacious, Vital Mission: (1) De-emphasize LSAT To Increase Diversity, (2) Focus Faculty On Teaching Rather Than Research, (3) Charge Low $15k Tuition

UNT 2Following up on Wednesday's post, New Dallas Law School In Peril After ABA Denial Of Provisional Accreditation:  Dallas Morning News editorial, The ABA Must Give UNT Dallas Law School Time to Achieve its Audacious, But Absolutely Vital, Mission:

It's a time for candor at the UNT Dallas College of Law, and a time for courage.

As the new law school prepares to welcome its third class later this month, anxiety is running high. Earlier this week, the school disclosed that a committee of ABA evaluators has recommended against accreditation for the school.

Without eventual accreditation, the school cannot survive. Students set to become its first graduates next May could find themselves barred from even taking the bar exams in Texas or most any other state.

We write today, however, to urge the students, their faculty, and the school's many backers to not despair. Courage and hope, and a bit of patience, are in order.

The school has a strong case to make to the ABA, and it has time to make it. A decision on accreditation will not be made until October. Even a negative decision is not permanent, and can be revisited.

But the main reason to not lose hope is because the school is on track to deliver on what everyone involved always knew was a tremendously ambitious — and equally vital — mission.

Dallas, to say nothing of Texas, desperately needs this new law school because it needs the kind of lawyers it has promised to produce.

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August 13, 2016 in Legal Education | Permalink | Comments (7)

The IRS Scandal, Day 1192

IRS Logo 2Daily Signal, Accountability for IRS? What’s Next After New Court Decision:

The IRS has not stopped targeting conservative groups seeking nonprofit status, a federal appeals court has ruled in deciding to reinstate a lawsuit against the agency.

The U.S. Court of Appeals for the District of Columbia Circuit overturned a decision by a lower court that threw out the lawsuit because the Internal Revenue Service had promised voluntarily to end discriminatory practices.

The IRS insisted “there is no reasonable expectation” that discrimination will reoccur, the ruling noted, because the tax agency has “suspended until further notice” tactics it used to target the applications of tea party and other conservative groups for nonprofit status.

That reassurance was unsatisfactory to the appeals court because it appeared temporary. “There is a difference between the controversy having gone away and simply being in a restive stage,” Senior Judge David B. Sentelle, who was appointed by President Ronald Reagan, wrote in a unanimous decision by a three-judge panel. As a result, Sentelle wrote in the opinion released Friday, citing case law, the IRS “is free to return to [its] old ways—thereby subjecting the plaintiff to the same harm, but, at the same time, avoiding judicial review.”

Conservatives greeted the decision as proof that the tax agency isn’t serious about cleaning up its act. “They only stopped the targeting while people were paying attention. They had no intention of stopping the illegal conduct altogether,” lawyer John Eastman told The Daily Signal. ...

While the federal appeals court declined to hold individuals inside the IRS personally responsible for damages, it did agree with Eastman’s argument that political discrimination inside the agency was an ongoing problem. Any suggestion that the IRS no longer targets conservative groups, Sentelle wrote, “is absurd” in light of the fact that “two of the appellant-plaintiff’s applications remain pending.” ...

Conservatives celebrated the decision, which remanded the lawsuit to a lower court for trial and makes possible further discovery, a pretrial procedure that allows plaintiffs to search for additional pertinent information. ... In his interview with The Daily Signal, Eastman, former dean of Chapman University School of Law in Orange, California, predicted the discovery will unearth new facts about the IRS that are “going to be even more explosive than anything we’ve seen so far.”

Plaintiffs would look for evidence of collusion among government agencies, Eastman explained. It would be illegal, for example, if the IRS shared information about conservative nonprofits with the FBI for additional review.

That’s within the realm of possibility, Eastman said, considering the experience of Catherine Engelbrecht, founder and president of True the Vote. After her organization, which aims to curb voter fraud, applied for nonprofit status in 2010, Engelbrecht told The Daily Signal, she came under investigation by three government agencies all at once. As first reported by National Review in 2013, the IRS requested she turn over every social media post she’d ever written, lists of political organizations she has addressed, and information on any family members interested in running for public office.

Engelbrecht and her family’s business became the target of probes by the Bureau of Alcohol, Tobacco, Firearms, and Explosives and the Occupational Safety and Health Administration as well as the FBI. If any evidence of collusion exists among these agencies, Eastman told The Daily Signal, government employees involved could face “serious, five-years-in-prison types of felonies.”

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August 13, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Friday, August 12, 2016

Black Lives Matter Tax Reform Plan

BLM

The Movement for Black Lives Platform: Economic Justice:

What is the problem?

  • There is a desperate need to replace  the current practice of collecting revenue in regressive ways with a more just system for collecting taxes.
  • Across the United States, there are major political obstacles to raising any kind of revenue.
  • As with most faults in our economic and political systems, regressive taxation has hit Black people, low-income people, and people of color the hardest.
  • Many municipalities have resorted to privatization and new taxes and fees in order to save money and generate more revenue. As a result, residents are being forced to pay more for services like trash collection, sewage, public property maintenance, parking meters, and to pay new taxes on a variety of everyday goods.
  • A recent study conducted by the Institute on Taxation and Economic Policy found that when one combines all the state and local income, property, sales and excise taxes that Americans pay, the nationwide average of effective state and local tax rates are 10.9 percent for the poorest fifth of taxpayers, and 5.4 percent for the wealthiest 1 percent.
  • In the ten states with the most regressive tax structures, the poorest fifth pay up to seven times as much in taxes and fees as the wealthiest residents, as a percentage of their income.
  • While states sometimes shift the cost of some services onto poorer residents, at other times they simply cut services all together. Many municipalities have had to increase public school class sizes, shorten school days, close vital city offices, and eliminate a huge number of public sector jobs.
  • As the wealthiest Americans and most powerful corporations continue to evade their fair share of taxes, many programs and initiatives that could contribute to racial and economic justice go underfunded or unfunded.

What does this solution do?

  • Taxing income:
  • Raise marginal tax rates for high earners, specifically the top percentile (for equity and revenue generation reasons —they pay more than 40 percent of federal income tax revenue, yet their average rate has been reduced to around 20 percent) and begin by gradually raising the top marginal rate first to 50 percent and then up to 80 percent.
  • Remove income caps on payroll taxes that fund social security and unemployment insurance.
  • Raise corporate income taxes, especially on large corporations and end tax deferral for foreign income of multinational corporations.
  • Taxing wealth:
  • Increase taxes on capital to the point where they are higher than taxes on labor, as wealth inequality is greater than income inequality. Specifically:
  • Increase capital gains tax
  • Create anti-speculation tax on property transfers
  • Increase estate tax
  • Have states shift to an income-sensitized property tax that focuses on homes above a certain threshold and second homes
  • Impose a wealth tax (on tangible and financial assets)

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August 12, 2016 in Political News, Tax | Permalink | Comments (9)

Law Prof's Last Lecture: Unsolicited Advice For Future And Current Lawyers

Last LectureJohn Lande (Missouri), My Last Lecture: More Unsolicited Advice for Future and Current Lawyers, 2015 J. Disp. Resol. 317:

I was invited to write this essay on the occasion of my retirement, following in the footsteps of my former colleague, Steve Easton, who wrote a wonderful article, My Last Lecture: Unsolicited Advice for Future and Current Lawyers. My essay supplements Steve’s article with additional advice about law school and legal practice. This article is suitable for students in many different courses, orientations, and professional development programs.

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August 12, 2016 in Legal Education, Scholarship | Permalink | Comments (0)

Weekly Legal Education Roundup

13th International And European Tax Moot Court Competition

KI13th International and European Tax Moot Court Competition 2016-2017:

KU Leuven (Brussels) and IBFD will organize in academic year 2016-2017 the 13th edition of the International and European Tax Moot Court Competition. ... 

Students will work intensively on a case drafted by IBFD researchers specifically for purposes of this competition. They will draft memoranda and present their case to a panel of renowned judges selected from academia and private practice. The Academic Chairman of the IBFD, Professor Pasquale Pistone, will serve as Arbitrator.

The 13th edition contains two parts. A first, written, phase runs from October till December 2016. The second, oral, phase will be held in Leuven from 26 March till 1 April 2016. There is no pre-selection based on the written phase, hence, all participating teams will defend their case during the oral pleadings.

The 2016-2017 Competition is open to sixteen universities. Universities are invited to send in their application by the specific deadline depending on the start of the academic year:

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August 12, 2016 in Legal Education, Tax, Teaching | Permalink | Comments (0)

Ave Maria's Admissions Policies Violate ABA Standards, Law School Required To Take Immediate Remedial Action

Ave Maria LogoABA Section of Legal Education and Admission to the Bar, Council Decision:  Public Notice of Specific Remedial Action—Ave Maria School of Law (Aug. 2016):

Background

At its June 3-4, 2016 meeting, the Council conducted a hearing pursuant to Rules of Procedure 2, 3, 16-18, 21(c), 22, 24, and 25 with respect to the compliance of the Ave Maria School of Law (the “Law School”) with ABA Standard 501(a) and 501(b). This proceeding followed a hearing by and recommendation of the Accreditation Committee (the “Committee”), which hearing resulted from interim monitoring of the Law School, a process which began in the Spring of 2013, pursuant to ABA Rule of Procedure 6.

Following the hearing and based on the record, the Council affirmed the Committee’s conclusions that the Law School is not in compliance with Standard 501(a) ["A law school shall maintain sound admission policies and practices consistent with the Standards, its mission, and the objectives of its program of legal education"] and 501(b) ["A law school shall not admit an applicant who does not appear capable of satisfactorily completing its program of legal education and being admitted to the bar."]. The Council has directed the Law School to take the following specific remedial actions, including, but not limited to, this public notice.

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August 12, 2016 in Legal Education | Permalink | Comments (8)

Aug. 15 Deadline For AALS Annual Meeting Call For Papers:  Sex, Death, And Taxes

AALSCall for PapersAALS Trusts & Estates Section Program, 2007 AALS Annual Meeting (Jan. 3-7, 2017):

Sex, Death, and Taxes: The Unruly Nature of the Laws of Trusts and Estates

Trusts & Estates is a far-reaching and broad-based discipline of law that impacts private citizens’ decisions about sex, death, and taxes.  This legal discipline is based on speculation about donors and their intentions that, by their very nature, create unintended consequences because the laws exist largely unseen until they come into play.  Moreover, ascertaining these preferences prove difficult because individuals are entrenched with idiosyncratic preconceptions about death, family, property rights, personal legacies, paternalism, altruism, investment strategies, taxes, and many other effective interests.  In addition, the field sits at the crossroads of other legal disciplines such as family law, property law, elder law, and tax law. 

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August 12, 2016 in Legal Education, Tax | Permalink | Comments (0)

Jayne Caron (M.D. 2020, NYU)

My beloved, brilliant, and beautiful daughter Jayne launched her medical career today:

Jayne 1

Jayne is named after my sister, who died shortly after birth. My late mother, a secretary at a nursing school, absolutely loved the medical profession.  Shortly before my mother died in 1992, my pregnant wife and I told her we were going to name our daughter Jayne.  My mother would be bursting with pride and gratitude today, as Jayne's parents and brother are.  For more on my journey with my amazing daughter, see:

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August 12, 2016 in About This Blog, Legal Education, Tax | Permalink | Comments (7)

The IRS Scandal, Day 1191

IRS Logo 2Investor's Business Daily editorial, Will Predatory IRS Finally Be Brought To Justice?:

The Law: Two months ago, it looked as if the IRS scandal over targeting conservative groups had reached a legal dead end. But an appeals court, in a stunning reversal, revived it this week. Will justice finally be done?

We hope so.

The Washington, D.C., Circuit Court, overturning a June lower-court decision, let the suit go forward because, as LSU law professor Philip Hackney noted in the Surly Subgroup blog, "it found that the IRS had not voluntarily ceased its unlawful actions."

In other words, the IRS is still doing what it was accused of in the first place and was supposed to halt.

In particular, the court reinstated two specific complaints made by True The Vote and other Tea Party groups that claimed the IRS had acted in a biased way toward conservative organizations that applied for tax-exempt status.

The two complaints were that the IRS had violated the group's First Amendment rights, and that it had also violated the Administrative Procedures Act — both serious complaints that could land people in jail.

Senior Judge David B. Sentelle was particularly scathing in writing the unanimous decision by a three-judge panel, calling the IRS' contention that it was no longer violating the conservative groups' rights "absurd." ...

The egregious use of a powerful arm of the federal government for explicitly political purposes should never be tolerated. It's the stuff of petty dictatorships, more suitable to a government run by Turkey's Erdogan or Venezuela's Maduro than to a great republic such as the U.S.

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August 12, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Thursday, August 11, 2016

Tax Court Denies Deduction For Professor's DirecTV, Internet & Cell Phone As Part Of His 'Lifelong Burden Of Developing Knowledge'

Tax Court Logo 2Tanzi v. Commissioner, T.C. Memo. 2016-148 (Aug. 9, 2016):

During the first half of 2011 the Tanzis were employed by Seminole State College. Dr. Tanzi taught math and communications classes as an adjunct professor, and Mrs. Tanzi was employed as a campus librarian.  

Dr. Tanzi is highly educated—he holds a doctorate in communication. As he explained at trial, individuals holding such terminal degrees bear a lifelong burden of “developing knowledge, finding knowledge, exploring, [and] essentially selfeducating”. Dr. Tanzi therefore insists that all expenses paid in adding to his “general knowledge” should be deductible as unreimbursed employee business expenses. ...

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August 11, 2016 in Legal Education, New Cases, Tax | Permalink | Comments (1)

McArdle:  ABA Should Shut Down 'Avaricious' Law Schools That Make 'Morally Abhorrent' Decision To Admit Students With Little Chance Of Paying Off Their Loans, Despite Adverse Effects On Diversity

Bloomberg View:  Crack Down on Law Schools That Don’t Pass the Bar, by Megan McArdle:

The American Bar Association is considering a plan that would endanger the accreditation of any law school where fewer than three-quarters of the students pass the bar within two years.

That is setting up a battle within the organization, pitting critics of two very different problems against each other. Those who are worried about the glut of law graduates who can’t get jobs want to crack down on law schools that have shored up their finances by admitting students who may not be able to pass the bar exam. But those who are worried about a lack of diversity in the profession fear that any crackdown on accreditation could disproportionately hurt schools that strive to bring more minorities into the field. ...

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August 11, 2016 in Legal Education | Permalink | Comments (5)

Barton Responds To Simkovic And Diamond:  IRS And Census Data Not That Far Apart Upon Closer Inspection

BartonFollowing up on my previous posts (here and here):  TaxProf Blog op-ed:  Barton Responds to Professors Simkovic and Diamond: IRS and Census Data Not that Far Apart Upon Closer Inspection, by Benjamin Barton (Tennessee):

On July 25th Professor Stephen Diamond criticized my use of IRS income statistics to discuss the earnings of solo practitioners on his blog.  I responded to Professor Diamond in the comments.  On July 26, 2016 Professor Michael Simkovic published a number of critiques here.  Two days later Professor Simkovic followed up with a second post asking me a series of questions and challenging me to respond to both of his posts.  Here I accept Professor Simkovic’s invitation.

Below I explain more about the IRS data and how I use it, but I will not bury the lede.  The data that Professors Simkovic and Diamond use to criticize my work, ACS data for lawyers who are in the category of “self-employed, not incorporated,” is not appropriate data for defining the earnings of solo practitioners.  That Census category likely includes two very different types of self-employed lawyers – solo practitioners (the lowest paid lawyers in private practice) and law firm partners (the highest paid lawyers in private practice).  The Census Department does not make it easy to figure out exactly which lawyers are counted in the category of “self-employed, not incorporated,” but combining this definition with this one and looking at the ACS form itself it seems pretty clear that partners in law firms are included in this category.[i]

Because the ACS data includes an indeterminate number of partners and solos, the average earnings in that category ($165-200,000) are a misleading proxy for the earnings of American solo practitioners.  If there was a data category of “professional baseball players” that included minor league (low paid) and major league (highly paid) baseball players, and there was no way to tell how many of each were in the sample, you could not use the average earnings of “all professional baseball players” as a proxy for minor league salaries, since some members of the sample earn much, much more than other members of the sample.

The ACS data is inappropriate, but is the IRS data better?  I use the IRS data in my book, Glass Half Full – The Decline and Rebirth of the Legal Profession (Oxford 2015) and in later work to talk about several trends in the market for legal services.  Here is an updated version of a chart I first created for the book:

Barton Chart (081116)

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August 11, 2016 in Legal Education | Permalink | Comments (5)

Ending The Pass-Through Tax Loophole For Big Business

CAPCenter for American Progress, Ending the Pass-Through Tax Loophole for Big Business:

In 2012, more than 100,000 big U.S. businesses managed to shelter billions of dollars of income in a single tax haven and pay no corporate income tax on it.

This tax haven is not Panama, Switzerland, or the Cayman Islands. In fact, it cannot even be found on a map—rather, it exists in the pages of the U.S. tax code. These businesses—with revenue of more than $10 million each—managed to pay no U.S. corporate income tax by pretending to be small businesses and thus saved their wealthy owners billions of dollars.

Most people think of big businesses as traditional corporations, which are organized under Subchapter C of the tax code and are supposed to pay the corporate income tax on their profits. But today many big businesses are organized as partnerships or S corporations, which are business forms that were originally designed for simpler or smaller businesses. The vast majority of partnerships and S corporations do not pay the corporate income tax. Instead, all of their income is passed through to their individual owners, who pay taxes on their individual income tax returns, thus avoiding the corporate income tax altogether.

The share of income going to businesses that use the pass-through form of organization—and therefore pay no corporate income tax—has exploded over the last 30 years, growing from less than 25 percent of net business income in 1980 to more than half in 2012. In fact, the United States is unique in this regard: No other country comes close to having such a large portion of business income that is not subject to the corporate income tax.

Small Business Tax Rate

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August 11, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (4)

Death Of Bernie Aidinoff

AidinoffM. Bernard Aidinoff (Sullivan & Cromell, New York) died on August 8 at the age of 87.  From the New York Times obituary (guest book):

He graduated from the University of Michigan (Phi Beta Kappa) and the Harvard Law School (Magna Cum Laude) where he was an editor of the Harvard Law Review. A first lieutenant in the Army Judge Advocate General Corps, he then became a law clerk to Judge Learned Hand. Bernie joined the law firm of Sullivan & Cromwell in 1956.

An internationally respected tax expert, he loved the practice of law and took great pleasure in mentoring younger lawyers, before mentoring was a term. As chairman of the American Bar Association Section of Taxation, he testified multiple times before the Senate Finance Committee advocating for a progressive tax code. Bernie also served as chairman of the American Law Institute Tax Program Committee, as editor-in-chief of The Tax Lawyer, as chairman of the Executive Committee of the Association of the Bar of the City of New York and on the Commissioner's Advisory Committee of the Internal Revenue Service.

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August 11, 2016 in Obituaries, Tax | Permalink | Comments (0)

Kamin:  Taxing Capital—Paths To A Fairer And Broader U.S. Tax System

Washington Center for Equitable Growth logoDavid Kamin (NYU), Taxing Capital: Paths to a Fairer and Broader U.S. Tax System:

Taxing capital is a key way to maintain and increase the progressivity in the U.S. tax system and raise the revenue needed to support government activities and investments that in turn will help ensure strong and sustainable economic growth. Why turn to capital as a source of government revenue? Taxing capital is a highly progressive form of taxation that research suggests does not seriously affect the rate of savings among high-income Americans—an important consideration in terms of encouraging future economic growth—and is a key part of optimal taxation in the United States.

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August 11, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Three Views Of The Academy: Legal Education And The Legal Profession In Transition

BooksBarbara Glesner Fines (UMKC), Three Views of the Academy: Legal Education and the Legal Profession in Transition, 51 Tulsa L. Rev. 487 (2016) (reviewing James E. Moliterno, The American Legal Profession in Crisis: Resistance and Responses to Change (Oxford University Press 2013), Deborah L. Rhode, Lawyers as Leaders (Oxford University Press 2013) & Robin L. West, Teaching Law: Justice, Politics, and the Demands of Professionalism (Cambridge University Press 2013)):

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August 11, 2016 in Book Club, Legal Education, Scholarship | Permalink | Comments (0)

The IRS Scandal, Day 1190

IRS Logo 2American Center for Law and Justice, President Obama’s IRS Scandal: Seven Years & Counting:

As we continue to bring you analysis this week of our recent win in the IRS case, we are reminded of how much this issue has developed since it was first discovered.

To be clear – the Obama Administration’s IRS targeting of Tea Party and other grassroots conservative groups is one of the longest running scandals in President Obama’s nearly eight-year administration – and it is still ongoing. After nearly seven years this December, one of our clients has still not received a determination on their submitted tax-exempt application.

In full disclosure, a proper and thorough timeline of this scandal would take thousands of pages to fully discuss everything that has occurred to date. For example, one law professor, in particular, has kept a daily blog for years now following the scandal and he just published “The IRS Scandal, Day 1188” earlier this week.

While we cannot cover every development of this scandal, the following timeline provides a clear and concise review of the major developments along the way:

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August 11, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, August 10, 2016

Inside OCI:  The Scoop On This Year's Law School On-Campus Interviews

InterviewNational Law Journal, Inside OCI: The Scoop on This Year's Law School On-Campus Interviews:

On-campus interviews are underway at law schools across the country, as students and partners engage in the summer-associate hiring equivalent of speed-dating. We’re covering the annual ritual with on-scene reaction from students coming out of the interviews and war stories from partners who’ve been in the hiring trenches for years. As the competition among firms tightens for top talent amid smaller class sizes, we’ve got news about recruitment trends. We’ve covered the law school angle, too, with a story about the impact that newly increased associate salaries are having on student expectations and the hiring process.

Competition Between Law Firms Conducting On Campus Interviews Heats Up
When Mintz, Levin, Cohn, Ferris, Glovsky and Popeo’s director of legal recruiting Shannon Davis gave a presentation to the firm’s lawyers who were preparing to interview law school students this summer, she started with a slide that had some ominous facts.

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August 10, 2016 in Legal Education | Permalink | Comments (0)