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Tuesday, July 15, 2014

Ault, Schoen & Shay: Base Erosion and Profit Shifting: A Roadmap for Reform

Hugh J. Ault (Boston College), Wolfgang Schoen (Max Planck) & Stephen E. Shay (Harvard), Base Erosion and Profit Shifting: A Roadmap for Reform, 68 Bull. Int'l Tax'n 275 (2014):

In this Editorial, the authors explain the context of this special issue of the Bulletin for International Taxation. The fundamental premise of the BEPS project is that a coordination of national responses to BEPS can both eliminate double non-taxation and protect against material unrelieved double taxation. The articles in this issue further a dialogue among tax policymakers, taxpayers, advisors and academics that is critical to achieve this objective.

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

The IRS Scandal, Day 432

IRS Logo 2The Weekly Standard:  More Than a Smidgen, by Stephen F. Hayes:

The facts are simple. The IRS systematically targeted conservative and Tea Party groups after their activism proved decisive in the 2010 midterm elections—Obama’s famous “shellacking.” The effects of this targeting were widespread. Some Tea Party groups were neutered in the months before the 2012 presidential election.

Few of the explanations or justifications of this targeting provided by IRS leaders and Obama administration officials have held up. IRS officials at first denied that any targeting had taken place. That was false. They later claimed that the targeting had involved only low-level employees in the Cincinnati office. That was false. They argued that conservative groups weren’t singled out, that progressive groups were subject to the same level of scrutiny. That was false. They argued that the IRS has complied with all requests for information from Congress. That was false.

Three years ago, on June 3, 2011, Representative Dave Camp, chairman of the House Ways and Means Committee, wrote to the IRS requesting all information—including emails and other communication—related to the alleged targeting of conservative groups. Ten days later, Lois Lerner, the woman at the center of the targeting, reported to the IT team at the IRSthat her hard drive had crashed. IRS leaders, questioned repeatedly about Lerner’s emails in subsequent congressional hearings, made no mention of the hard drive crash. Earlier this summer, IRS director John Koskinen disclosed that thousands of Lerner emails—including many of those sent to executive branch agencies—were missing because of the alleged computer problems. From her first appearance before a congressional committee, back in May 2013,Lerner has exercised her right against self-incrimination and refused to testify.

Last week brought a significant new revelation: an email in which Lerner seeks advice about keeping information from Congress. ... She knew that the IRS scandal was about to explode.

At the time Lerner sent the email, IRS officials had recently learned that the Treasury inspector general would be issuing a report the following month criticizing the agency for its targeting of conservative groups. And Lerner’s email came just before she planted a question in the audience at an American Bar Association conference on May 10 in an effort to get out in front of the controversy.

These facts lead to one conclusion: Lois Lerner and other top IRS officials were desperate to keep information on the targeting of conservative groups from Congress. 

It’s crucial to understand why. And that will require a special prosecutor.

Town Hall:  Reality of the IRS Scandal, by Bruce Bialosky (Founder, Republican Jewish Coalition):

People who are not distraught about Lois Lerner and the IRS must have never actually dealt with the organization. As someone who has for 36 years, it is clear that at best we are dealing with fabrications and at worst outright lies and criminal actions. The fact that any American --let alone the national press, Congressional Democrats, and the White House – might not be agitated is dangerous for our society.

First, let us be clear: despite billions of dollars of taxpayer money being spent on improving their computer system, it is still rank. Second, the Internal Revenue has gradually over my career asserted more and more control at higher levels leaving agents and revenue officers less flexibility. That means there is less opportunity for an agent in the field to make their own decisions about any matter.

If you ever sat in an IRS office or waited endlessly on the telephone, you would know that this entire scenario of lost emails is not remotely plausible.

Las Vegas Review-Journal editorial:  Lerner Must Testify Without Immunity in IRS Scandal:

Last week, an Arizona Republic editorial stated that the only way to move this investigation forward is to get Ms. Lerner to talk — via immunity from prosecution. Ms. Lerner needs to talk, all right, but in light of the past week’s news, she cannot possibly be given immunity. The IRS regularly operates with absolute ruthlessness and no mercy in its dealings with the public, and in this case, we’ve seen nothing but complete contempt from the highest-ranking agency officials, all as the administration looks the other way and President Barack Obama himself says there’s “not even a smidgen of corruption” within the IRS.

Remember, this isn’t about partisan sniping. This is about an executive branch agency working to influence the outcome of the 2012 election in favor of the party — and the president — in power.

It’s one thing to offer reduced sentences or penalties for cooperating, but full immunity must be off the table. Ms. Lerner and the IRS are long overdue for a heavy dose of karma.

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July 15, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (8)

Monday, July 14, 2014

Grewal: Mixing Management Fee Waivers with Mayo

Florida Tax ReviewAndy Grewal (Iowa), Mixing Management Fee Waivers with Mayo, 16 Fla. Tax Rev. 1 (2014):

This Article examines whether the management fee waiver strategy used by private equity firms to convert ordinary income into long-term capital gains actually works. Scholars have almost uniformly condemned the strategy, calling it "extremely aggressive," "profoundly piggish," or illegal. However, this Article shows that the critics substantially overstate their case (the provision of law most frequently cited by the critics doesn't even exist), especially in light of the changes in the tax-administrative law landscape wrought by Mayo v. United States.

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

Lurie: The ObamaCare 3.8% Tax on Investment Income: A Second Income Tax

BenefitsLink.com: Obama's Trojan Horse: A 3.8% Medicare Surtax? No. A Free-Standing Second Income Tax? Yes. A Well-Kept Secret? You Bet, by Alvin D. Lurie:

The parties have continued to wage this war over innumerable aspects of the Affordable Care Act, most especially the technical failures that occurred during the rollout of the federal insurance exchange at the end of 2013 and into the first quarter of the current year. Doubtless this will continue to be one of the principal themes trumpeted by the Republicans during the upcoming midterm elections in November 2014. What is surprising is that they have not, even at this writing -- over four years after enactment of the ACA, two national elections held since then, and another one barely six months away -- launched any attacks against inclusion in the ACA of a tax that is misnamed (misleadingly so) as a "Medicare contribution" levy, purportedly (again misleadingly) to provide the revenues to support the government expenses associated with administering the ACA. One would have thought that tax would have provided the Republicans with their best point of attack against the Affordable Care Act.

In truth, the tax, imposed specifically on "net investment income," is a new income tax, now actually a part of the Internal Revenue Code (numbered section 1411), operating exactly the same as the long-standing regular income tax, calculated on a new form created for it and the total now reportable on a line added to Form 1040. It is, in fact, much more challenging to calculate than most of the long-time familiar ordinary, alternative minimum and capital gains components of the regular income tax, because of many new technical rules and difficult factual determinations necessary for its proper application. High rates of miscalculation by taxpayers are a certainty because of the difficulties inherent in the process, and because the rules themselves will be in flux for a lengthy period, until the Treasury, IRS and ultimately the courts put their respective stamps on the statute.

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July 14, 2014 in Tax | Permalink | Comments (1)

Fall 2014 Law Review Article Submission Guide

Nancy Levit (UMKC) & Allen Rostron (UMKC) have updated their incredibly useful document, which contains two charts for the Fall 2014 submission season covering 203 law reviews.

The first chart (pp. 1-51) contains information gathered from the journals’ websites on:

  • Methods for submitting an article (such as by e-mail, ExpressO, regular mail, Scholastica, or Twitter)
  • Any special formatting requirements
  • How to request an expedited review
  • How to withdraw an article after it has been accepted for publication elsewhere

The second chart (pp. 52-58) contains the ranking of the law reviews and their schools under six measures:

  • U.S. News: Overall Rank
  • U.S. News: Peer Reputation Rating
  • U.S. News: Judge/Lawyer Reputation Rating
  • Washington & Lee Citation Ranking
  • Washington & Lee Impact Factor
  • Washington & Lee Combined Rating

They also have posted a list of links to the submissions information on each law journal’s website. Nancy notes:

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July 14, 2014 in Legal Education, Scholarship | Permalink | Comments (0)

Germany Loses in Philosophers' World Cup

On the heels of its stirring victory in yesterday's Soccer World Cup, Germany suffered a last-second loss in the Philosophers' World Cup:

July 14, 2014 in Legal Education | Permalink | Comments (0)

Hariton: Should Share Repurchases Be Dividends to Remaining Holders?

Tax Analysys Logo (2013)David P. Hariton (Sullivan & Cromwell, New York), Should Share Repurchases Be Dividends to Remaining Holders?, 144 Tax Notes 175 (July 14, 2014):

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

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July 14, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (3)

ABA/NYLS 2014 Skills Training for Estate Planners

EPThe five-day 2014 Skills Training for Estate Planners hosted by the ABA Section of Real Property, Trust and Estate Law and New York Law School kicks off today:

The annual Skills Training for Estate Planners CLE program is for attorneys who practice, or plan to practice, estate planning law. This popular program has two courses of study:

The Fundamentals course is perfect for young or transitioning lawyers new to the practice and provides them with a strong educational experience focused on the “how to” of estate planning.

The Advanced Topics course focuses on current areas of interest and importance to lawyers experienced in estate planning and is an excellent opportunity to further expand their knowledge and skills.

This institute-type program provides a comprehensive CLE experience with coordinated sessions that build upon one another. It’s held annually at New York Law School in the Tribeca neighborhood of downtown Manhattan.

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

The IRS Scandal, Day 431

IRS Logo 2National Review:  The ‘Independent’ Counsel Mirage: Don’t Hand the IRS Investigation Over to a Special Prosecutor, by Andrew C. McCarthy:

I confess to being amazed that President Obama and his trusty attorney general, Eric Holder, have not mollified their detractors by appointing an “independent counsel” to investigate the IRS scandal.

“Why,” you ask, “would Obama sic a prosecutor with independence from Holder’s Justice Department on a component of the Obama administration?” The real question is: Why hasn’t he?

The disconnect here lies in the public’s perception — and, perhaps, the perception of some congressional Republicans who ought to know better — of what an “independent counsel” really is. Independence is a mirage: Obama’s critics crave an evenhanded investigation of executive lawlessness and, in the Washington fashion, they have convinced themselves that wishing can make it so. As it actually exists, however, an “independent counsel” would be tailor-made for letting the administration and the IRS dodge accountability. ...

You can have political accountability for abuses of power or you can have an “independent” counsel and “the process.” Political accountability is driven by congressional investigations and court cases brought by citizens whose rights have been trampled. It is messy, combative, and political, but the malfeasance it uncovers can result in the removal of corrupt officials from power.

By contrast, “the process,” under the steady hand of “independent” counsels, is neat, silent, and somnolent. In fact, once it starts, that may be the last you hear about it until President Obama pardons everyone on his way out the door.

Time:  After “Tea Party” Scandal, IRS to Rubber Stamp Tax-Exempt Status for Most Charities:

Amid ongoing controversy over its scrutiny of non-profits, the Internal Revenue Service has decided it will no longer screen approximately 80% of the organizations seeking tax-exempt charitable status each year, a change that will ease the creation of small charities while doing away with a review intended to counter fraud and prevent political and other non-charitable groups from misusing the tax code.

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July 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

San Diego Tax Prof Dinner

Dinner 5

From left: Jordan Barry (San Diego, Francine Lipman (UNLV), Vic, Penelope and Miranda Fleischer (San Diego), Paul Caron (Pepperdine), and Richard Winchester (Thomas Jefferson).  Thanks to Francine for organizing the dinner and for surprising me with a cake celebrating TaxProf Blog's 10 Year Anniversary:

Dinner 2

July 14, 2014 in Legal Education, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, July 13, 2014

Are Law Professors (And Lawyers) Playing Baseball When We Should Be Playing Soccer?

SoccerNew York Times op-ed:  Baseball or Soccer?, by David Brooks:

Is life more like baseball, or is it more like soccer?

Baseball is a team sport, but it is basically an accumulation of individual activities. Throwing a strike, hitting a line drive or fielding a grounder is primarily an individual achievement. The team that performs the most individual tasks well will probably win the game.

Soccer is not like that. In soccer, almost no task, except the penalty kick and a few others, is intrinsically individual. Soccer, as Simon Critchley pointed out recently in The New York Review of Books, is a game about occupying and controlling space. If you get the ball and your teammates have run the right formations, and structured the space around you, you’ll have three or four options on where to distribute it. If the defenders have structured their formations to control the space, then you will have no options. Even the act of touching the ball is not primarily defined by the man who is touching it; it is defined by the context created by all the other players. As Critchley writes, “Soccer is a collective game, a team game, and everyone has to play the part which has been assigned to them, which means they have to understand it spatially, positionally and intelligently and make it effective.” ...

Most of us spend our days thinking we are playing baseball, but we are really playing soccer. We think we individually choose what career path to take, whom to socialize with, what views to hold. But, in fact, those decisions are shaped by the networks of people around us more than we dare recognize. ...

Once we acknowledge that, in life, we are playing soccer, not baseball, a few things become clear.

First, awareness of the landscape of reality is the highest form of wisdom. It’s not raw computational power that matters most; it’s having a sensitive attunement to the widest environment, feeling where the flow of events is going. Genius is in practice perceiving more than the conscious reasoning.

Second, predictive models will be less useful. Baseball is wonderful for sabermetricians. In each at bat there is a limited range of possible outcomes. Activities like soccer are not as easily renderable statistically, because the relevant spatial structures are harder to quantify. Even the estimable statistician Nate Silver of FiveThirtyEight gave Brazil a 65 percent chance of beating Germany.

Finally, Critchley notes that soccer is like a 90-minute anxiety dream — one of those frustrating dreams when you’re trying to get somewhere but something is always in the way. This is yet another way soccer is like life.

For more, see The Role of Faculty Scholarship at Faith-Based Law Schools.

July 13, 2014 | Permalink | Comments (2)

The Tax Consequences of the Potato Salad Guy's Kickstarter Campaign

Kickstarter LogoTax Foundation: $21,000 Tax Bill Just for Some Potato Salad:

As of 2:30pm on July 9, 2014, Zack Danger Brown has amassed over $70,000 in pledges from donors using Kickstarter—a website that matches donors to projects—to make potato salad.

KS

Nearly 5,000 backers from across the world have chosen Brown’s potato salad project, and tens of thousands of dollars will be dished to Brown on August 2. But once these funds are given to Brown, they will constitute income that might mean a sizeable tax bill for Brown. Kickstarter explains how pledges are taxed:

In the U.S., funds raised on Kickstarter are considered income… A creator can offset the income from their Kickstarter project with deductible expenses that are related to the project and accounted for in the same tax year. For example, if a creator receives $1,000 in funding and spends $1,000 on their project in the same tax year, then their expenses could fully offset their Kickstarter funding for federal income tax purposes.

Kickstarter also notes creators “may be able to classify certain funds” as nontaxable gifts instead of income, so long as the funds were pledged with “detached and disinterested generosity,” but one look at Brown’s Kickstarter page shows that these funds probably won’t qualify.

Brown offers donor specific handouts, such as a recipe book with potato salad recipes from every donor country for pledges of $50 (so far 83 backers), potato salad themed hats for pledges of $25 (234 backers), and even a potato salad themed haiku for pledges of $20 (4 backers).

So, given that Brown’s funds will likely be considered income instead of non-taxable gifts, how much will he have to pay in federal, state, and local income taxes? ... In total, Brown’s federal, state, and local tax burden on his income of $65,912 is $21,167.49 for an effective tax rate of 32.11 percent, leaving him with take home pay of $44,744.51 less taxes and expenses.

Update (7/11/2014): Kickstarter has updated the funding totals (currently around $48,000 at 2:25pm). According to The Business Journals, the boost in total funds resulted from some fake pledges which have now been removed. Stay tuned, and we will update the final numbers once the remaining 21 days have expired.

Other commentators have pushed back on the Tax Foundation's analysis, arguing that the payments would constitute non-traxable gifts.

(Hat Tip: Eli Bortman, Allison Christians, Leandra Lederman.)

July 13, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Top 5 Tax Paper Downloads

The IRS Scandal, Day 430

IRS Logo 2Washington Post:  More IRS Smidgens Show Up. ‘Perfect.’, by Ed Rogers:

Anyone paying attention to the Internal Revenue Service scandal has been waiting for the next smidgen to drop. Well, two more hit pretty hard this week. At the president’s next encounter with the media, I will scream collusion if no one asks him for his exact definition of a “smidgen,” and if he thinks he has seen a smidgen of corruption yet. At this point, only the most gullible or culpable can continue to claim there is no compelling evidence in this case. Given the delays, lies and stonewalling, there is no viable argument against a special prosecutor.

In a stunning revelation this week, it was disclosed that former IRS official Lois Lerner told colleagues, “we need to be cautious about what we say in emails” and then proceeded to ask the IRS IT department, in an e-mail, “if [instant messaging] conversations were also searchable.”  When she was told they were not, she e-mailed back, “Perfect.” This is a smoking gun e-mail in that it makes plain she had a cover-up in mind. There is no other plausible explanation. ...

[A]s long as Lerner stays cool and the Obama Department of Justice has her back, the administration obviously thinks it can run out the clock on this scandal. But these revelations are definitely meaningful smidgens. At what point does a flock of smidgens become irrefutable evidence that deserves an independent examination?

Judicial Watch press release:

Judicial Watch announced today that on June 17, 2014, it filed a Freedom of Information Act (FOIA) lawsuit against the Department of Justice (DOJ) seeking the number of hours DOJ Attorney Barbara Bosserman expended in the investigation of the IRS targeting of conservative organizations seeking tax exempt status during the 2010 and 2012 elections cycles (Judicial Watch v. U.S. Department of Justice (No. 1:14-cv-01024)).

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July 13, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, July 12, 2014

Piketty's Failure to Account for Tax Law Changes Makes His Wealth Inequality Claims Worthless

CapitalWall Street Journal op-ed:  Why Piketty's Wealth Data Are Worthless, by Alan Reynolds (Cato Institute):

No book on economics in recent times has received such a glowing initial reception as Thomas Piketty's Capital in the Twenty-First Century (Harvard University Press, 2014). He remains a hero on the left, but the honeymoon may be drawing to a sour close as evidence mounts that his numbers don't add up.

Mr. Piketty's headline claim is that capitalism must result in wealth becoming increasingly concentrated in fewer hands to a "potentially terrifying" degree, on the grounds that the rate of return to capital exceeds the rate of economic growth. Is there any empirical evidence to back up this sweeping assertion? The data in his book—purporting to show a growing inequality of wealth in France, the U.K., Sweden and particularly the United States—have been challenged. And that's where the story gets interesting.

In late May, Financial Times economics editor Chris Giles published an essay that found numerous errors in Mr. Piketty's data. Mr. Piketty's online Response to FT was mostly about Europe, where the errors Mr. Giles caught seem minor. But what about the U.S.?

Mr. Piketty makes a startling statement: The data in his book should now be disregarded in favor of a March 2014 Power Point presentation, available online, by Mr. Piketty's protégé, Gabriel Zucman (at the London School of Economics) and his frequent co-author Emmanuel Saez (of the University of California, Berkeley). ...

Zucman-Saez concludes that there was a "large increase in the top 0.1% wealth share" since the 1986 Tax Reform, but "no increase below the top 0.1%." In other words, all of the increase in the wealth share of the top 1% is attributed to the top one-tenth of 1%—those with estimated wealth above $20 million. This is quite different from the graph in Mr. Piketty's book, which showed the wealth share of the top 1% (which begins at about $8 million, according to the Federal Reserve's Survey of Consumer Finances) in the U.S. falling from 31.4% in 1960 to 28.2% in 1970, then rising to about 33% since 1990.

In any event, the Zucman-Saez data are so misleading as to be worthless. They attempt to estimate top U.S. wealth shares on the basis of that portion of capital income reported on individual income tax returns—interest, dividends, rent and capital gains.

This won't work because federal tax laws in 1981, 1986, 1997 and 2003 momentously changed (1) the rules about which sorts of capital income have to be reported, (2) the tax incentives to report business income on individual rather than corporate tax forms, and (3) the tax incentives for high-income taxpayers to respond to lower tax rates on capital gains and dividends by realizing more capital gains and holding more dividend-paying stocks. ...

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July 12, 2014 in Book Club, Tax | Permalink | Comments (16)

Number of LSAT Test Takers in June Falls to 14-Year Low

Wall Street Journal, Number of LSAT Test Takers in June Falls to 14-Year Low:

Back in February, a slight dip in LSAT test-takers led Law Blog to wonder if the law-school crisis had turned a corner? The latest LSAT numbers suggest law schools are still digging into a hole.

The number of law school admission tests administered in June was down 9.1% compared to a year earlier, according to figures released by the Law School Admission Council on Thursday.

The 21,802 people who sat for the test last month is the lowest June total in 14 years, suggesting that law schools may still be having difficulty convincing college graduates on the value of a J.D. degree. For schools, it’s a step backward after the glint of hope they got in February when the number of law school admission tests administered inched up 1.1% over the February 2013 total.

LSAC

Matt Leichter, LSAT Tea-Leaf Reading: June 2014 Edition:

Typically, June has the highest proportion of first-time LSATs (~70 percent between 2010 and 2012). This June low bodes ill for the number of applicants next fall. ...

Chart 1

July 12, 2014 in Legal Education | Permalink | Comments (8)

The Best Computer Monitor Setup for Lawyers

Lawyerist:  The Best Computer Monitor Setup for Lawyers:

MonitorsMost people focus on the CPU — the box that sits on or under your desk — when buying a computer. You will find regularly-updated buying guides full of specs for processor speed, memory, storage, etc., just about everywhere. But most CPUs will handle a lawyer’s basic computing needs. Specs are not what make for a good computing experience. A monitor, for example, is far more important than your computer’s processor’s clock speed.

I used to work in an outdoor store selling canoes and kayaks. Customers regularly came in planning to buy a $2,000 kevlar kayak, then went straight to the cheap paddles and PFDs (life jackets, if you prefer). But it makes much more sense to buy a $500 paddle, a high-end PDF, and a cheap kayak than it does to buy a $2,000 kayak, a $50 paddle, and a $20 PFD. The paddle will be in constant motion, and your PFD will be shifting with every movement. Cheap products mean slower progress, fatigue, sore wrists, and chafing.

Similarly, you will spend nearly all your time staring at your computer’s monitor, not pushing its CPU to the limit. You can run Microsoft Word and whatever else you use to manage your practice on a five-year-old laptop (at least). But a fuzzy picture, poor contrast, and limited adjustment will ruin your eyesight and contort your spine. Get a good monitor and cut costs on the CPU, if you have to. ...

There are good reasons to consider a second — or third or fourth — monitor. There are also some bad reasons to have extra screens.

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July 12, 2014 | Permalink | Comments (13)

The IRS Scandal, Day 429

IRS Logo 2Wall Street Journal editorial:  Judging the IRS: A Pair of Court Orders Seek Answers About the Vanishing Emails:

Congress has been working for more than a year to get to the bottom of the IRS political targeting scandal, and the Obama Administration has resisted across the board. So hurrah to the judicial branch, which this week stepped into the fray with orders that could force the IRS to start coughing up some answers.

U.S. District Judge Emmet G. Sullivan on Thursday ordered the IRS to provide for him, within a month, a sworn declaration explaining how the agency came to lose two years' worth of email belonging to former Director of Exempt Organizations Lois Lerner. Judge Sullivan also assigned a federal magistrate, John Facciola, to conduct his own query into whether Ms. Lerner's emails might be obtained by other means. The order suggested that Judge Sullivan was far from satisfied with the IRS's cursory explanations of crashed hard drives and irretrievable information.

On Friday a second federal judge, Reggie B. Walton, issued another order, demanding the IRS provide under oath an affidavit outlining what happened to Ms. Lerner's hard drive, the qualifications of anybody who attempted to retrieve her lost email, and the status of the IRS Inspector General's investigation into these issues. Judge Walton gave the IRS one week to respond.

Now we're getting somewhere. The IRS has slow-rolled document production for Congress and then it waited two months to tell its legislative overseers that Ms. Lerner's emails had vanished. The Justice Department and FBI, meanwhile, have leaked to the press that their probes have found nothing wrong.

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July 12, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, July 11, 2014

Weekly Tax Roundup

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

How to Get Students to Come to a Make Up Tax Class in the Summer

USD

July 11, 2014 in Legal Education | Permalink | Comments (2)

Law Schools Peer Into The Abyss, But The ABA Blocks Serious Change

Forbes:  Law Schools Peer Into The Abyss But The American Bar Association Blocks Serious Change, by George Leef (Director of Research, John W. Pope Center for Higher Education Policy):

GatheringNot so long ago, law school was a growth industry, with new schools being created and enrollments going ever higher. No more. There has been a dramatic turn-around over the last ten years.

Enrollments of first-year students are back where they were 40 years ago. According to the Law School Admissions Council, in 2004, more than 100,000 students applied for law school, but in 2013, just 59,000 did. Some law schools have had to lay off faculty members and administrators. Four independent law schools have recently had their bonds downgraded to “junk” status by Moody’s and Standard & Poor’s, reflecting their questionable finances. ...

Law schools are not free to make many other changes that would do a lot more good, both for law students and for the clients they will eventually serve. That is because the accreditation standards imposed by the ABA require schools to operate in costly and inefficient ways.

Arguably the most vociferous critic of the ABA’s law school mandates is Larry Velvel, dean of the Massachusetts School of Law. In the short but impassioned book he wrote with Kurt Olson, The Gathering Peasants’ Revolt in American Legal Education, he made the case that law schools could train future lawyers at much lower cost if only the ABA would allow that.

Velvel and Olson write that the ABA’s policies are “designed to ensure continued and increasing economic and professional benefits for professors and deans.”

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July 11, 2014 in Book Club, Legal Education | Permalink | Comments (7)

Ventry: State Tax Whistleblower Statutes Complement Traditional Tax Enforcement

Tax Analysys Logo (2013)Jennifer Carr (Tax Analysts), Qui Tam Troubles, Part III: A Potential Solution, 72 State Tax Notes 730 (June 30, 2014) :

In an extended interview with State Tax Notes, Professor Dennis Ventry [UC-Davis] endorses tax whistleblower statutes on the state level as a complement to traditional tax enforcement. [See Whistleblowers and Qui Tam for Tax, 61 Tax Law. 357 (2008)] In particular, he argues that knowledgeable informant insiders can provide unique information to assist state tax agencies in combatting two persistent problems in tax administration, namely the information gap and the tax gap. In addition, Ventry offers simple solutions to potential concerns that whistleblower statutes might result in nuisance suits, undue disclosure of taxpayer information, and a duplicative tax enforcement regime.

July 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

ABA Opens Nominations for the 8th Annual Blawg 100

Blawg 100The ABA Journal is soliciting nominees for its 8th Annual Blawg 100 -- "the 100 best Web sites by lawyers, for lawyers, as chosen by the editors of the ABA Journal." To nominate your favorite blawg, go here.

July 11, 2014 in Legal Education | Permalink | Comments (0)

Southern Federal Tax Institute Offers to Comp Tax Profs

49The Board of Trustees of the Southern Federal Tax Institute invites all full-time tax professors to attend the Forty-Ninth Annual Institute (program) in Atlanta on October 20-24, 2014, as guests of the Trustees (the $995 registration fee will be waived). If you would like to attend, please email here.  If you have any other questions, please contact Brant Hellwig (Washington & Lee), who serves as Special Advisor to the Institute. 

July 11, 2014 in Conferences, Tax | Permalink | Comments (0)

The IRS Scandal, Day 428

IRS Logo 2Wall Street Journal:  U.S. Judge Orders IRS to Explain How it Lost Lerner’s Emails:

A federal judge on Thursday ordered the Internal Revenue Service to explain how it lost two years’ worth of a former official’s emails, and tapped a magistrate judge to find out whether the documents can be obtained from other sources.

At a hearing in a conservative group’s lawsuit, U.S. District Judge Emmet Sullivan gave the IRS until Aug. 10 to provide a sworn declaration explaining how the email loss occurred. The IRS previously has said that the emails were lost because the top agency official’s computer crashed in 2011, and backup tapes were routinely reused after six months.

Wall Street Journal:  Lerner's 'Perfect' Plan for IRS Emails: The Tax Official Warned Colleagues About Creating Electronic Records:

Less than two weeks after the IRS inspector general had circulated a draft report on the agency's unlawful targeting of conservative groups, Ms. Lerner reached out to IT specialist Maria Hooke to inquire about IRS record-keeping of internal communications. Ms. Lerner wrote:

"I had a question today about OCS [Microsoft Office Communications Server]. I was cautioning folks about email and how we have several occasions where Congress has asked for emails and there has been an electronic search for responsive emails – so we need to be cautious about what we say in emails. Someone asked if OCS conversations were also searchable – I don't know, but told them I would get back to them. Do you know?"

Ms. Hooke responded that individual employees could choose to save their communications, but that the software was not set to automatically save any messages.

Ms. Lerner's response: "Perfect."

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July 11, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, July 10, 2014

How The $1 Billion Kennedy Family Fortune Defies Death And Taxes

Forbes:  How The $1 Billion Kennedy Family Fortune Defies Death And Taxes, by Carl O'Donnell:

KennedyIf America had an aristocracy, the most titled bloodline would certainly be the Kennedys. In the past half century, one Kennedy after another has occupied nearly every political position America has to offer, including the roles of congressman, senator, ambassador, mayor, SEC chairman, state representative, city councilman, and, of course, President.

The sustaining force behind the Kennedys reign is hardly a secret. Thanks to Joseph P. Kennedy, who made a fortune from insider trading only to later chair the SEC, the family is fabulously rich. But exactly how much is America’s first family worth? Forbes pegs the extended family’s fortune at $1 billion.

Protected by a labyrinth of trusts, as well as tax strategies that would make Joseph P. Kennedy proud, the Kennedy fortune now spans approximately 30 family members, and includes the surnames Shriver, Lawford and the Smith. At nearly $175 million as of 2013, Caroline Kennedy is the richest descendant by far, but more modestly endowed relatives, such as Robert Shriver, who is running for Los Angeles County Supervisor, still possess assets in the tens of millions, according to public financial disclosures required of government officials. ...

Like politics, tax savvy seems to run in the Kennedy family. The most recent example is the 1998 sale of the family’s most valuable asset: the iconic Merchandise Mart, a towering retail space on the Chicago River that was once thought to be the largest building in the world. Thanks to a carefully crafted deal with Vornado Realty, the Kennedy family deferred – or possibly avoided completely – capital gains tax on nearly half the value of the sale.

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July 10, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

John ('The Duke') Wayne v. Duke University

Duke v DukeInteresting lawsuit between the heirs of John "The Duke" Wayne and Duke University over the rights to use the Duke name:

The case concerns the Wayne family's right to market Duke Bourbon:

Duke Bourbon

July 10, 2014 in Legal Education | Permalink | Comments (2)

FATCA: American Expats' Tax Nightmare

Wall Street Journal op-ed:  American Expats' Tax Nightmare, by David Kuenzi (Thun Financial Advisors, Madison, WI): 

FATCAU.S. Treasury officials are trumpeting the fact that more than 77,000 financial institutions have registered with the Internal Revenue Service, as required by the Foreign Account Tax Compliance Act (Fatca), ahead of a July 1 deadline. Fatca requires these institutions to report on the financial holdings of their U.S. clients with the aim of reducing the incidence of off-shore tax evasion by wealthy Americans. Yet officials are less willing to discuss how Fatca worsens the already profoundly unjust tax treatment of millions of middle-class Americans living abroad.

The vast majority of U.S. expatriates living abroad harbor a strong sense of patriotism that includes a willingness shoulder their fair share of the nation's tax burden. Deep resentment arises, however, when they confront the byzantine complexity of preparing a tax return that includes non-U.S. income and non-U.S. financial accounts. Fatca demands rigorous compliance with arcane rules that the IRS has until now never even attempted to enforced on a widespread basis. For Americans abroad, desperately trying to comply, the outcome to family finances is often disastrous. ...

One of the many ironies embedded in this Orwellian tax nightmare is that the complex foreign asset and foreign income reporting rules were not written with Americans abroad in mind. Their original purpose was to discouraging Americans living in the U.S. from using off-shore tax shelters. As originally intended, the rules were a reasonable legislative response to a gaping tax loophole. Applied to Americans living abroad, however, they are absurd.

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July 10, 2014 in Tax | Permalink | Comments (4)

Johnston: Americans Have Missed Out on $6.6 Trillion of Income Since 2000 Due to the Bush Tax Cuts

Al Jazeera:  Americans Have Lost Out on $6.6 Trillion, by David Cay Johnston:

I calculated that enormous figure by comparing the average income Americans reported on their 2000 tax returns with what they reported each year for 2001 through 2012, adjusting for inflation and the growing population. Add up the income for 12 years and it turns out to be $6.6 trillion less than if we had maintained the prosperity of 2000 for a growing population.

Why use 2000 as a benchmark? Well, first off, it marks the end of one era and the start of another. More important, that very good year economically was when George W. Bush, running for president, said American prosperity would get even better if he was elected and his tax cuts — key aspects of which he kept secret until after the election — would ensure American prosperity.

The results: The prosperity of the prior decade was lost. Job growth fell far behind population growth. The median wage (half make more, half less) has been mired since 1998 at a bit more than $500 per week. 

In 10 of the 12 years when the Bush tax cuts were in effect, the average income shown on tax returns was lower than in 2000. In the two upside years, average income rose modestly, up $504 for 2006 and $1,744 for 2007. Total those 12 years and the net shortfall per taxpayer comes to $48,010. ...

DCJ

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July 10, 2014 in Tax | Permalink | Comments (11)

Law Prof Blog Traffic Rankings

Below are the updated quarterly traffic rankings by page views of the Top 50 blogs edited by law professors for the July 1, 2013 - June 30, 2014 period, as well as the percentage change in traffic from the prior 12-month period.  As I previously announced, in response to several requests and in light of the continued degrading of Site Meter, I am now including the more accurate, stable Google Analytics data in these quarterly traffic rankings (marked with an asterisk).

Rank

Blog

Page Views

Change

1

InstaPundit*

147,883,140

n/a

2

Volokh Conspiracy*a

15,429,923

+42.7%

3

Legal Insurrection*

15,367,741

+6.2%

4

TaxProf Blog*

14,915,193

+347.9%

5

Althouse

14,248,540

-26.1%

6

Leiter Reports: Philosophy

5,721,050

-0.4%

7

Hugh Hewitt

3,455,156

-43.9%

8

Patently-O

3,223,956

-14.1%

9

PrawfsBlawg

2,231,847

+13.4%

10

The Incidental Economist*

1,854,619

+38.6%

11

Lawfare*

1,794,468

+33.5%

12

Faculty Lounge

1,407,739

+2.9%

13

Leiter's Law School Reports

1,364,938

+35.1%

14

Wills, Tr. & Est. Prof Blog

1,302,188

+119.2%

15

Sentencing Law & Policy

1,267,974

-2.0%

16

Gregory S. McNeal*a

1,147,520

n/a

17

Liberty Law Blog*

1,133,967

n/a

18

Harvard Law Corp Gov

1,051,456

-18.2%

19

Opinio Juris*

989,473

-6.9%

20

Concurring Opinions

943,259

-4.0%

21

College Insurrection*

883,371

+24.6%

22

Constitutional Law Prof Blog

737,649

+57.3%

23

Conglomerate

735,986

+89.1%

24

Antitrust & Comp. Policy Blog

709,997

+178.2%

25

ImmigrationProf Blog

709,952

+157.6%

26

Election Law Blog*

699,839

-25.2%

27

Legal Skills

611,962

+256.0%

28

Balkinization

609,672

-20.9%

29

Workplace Prof Blog

531,472

+110.0%

30

Legal Whiteboard

438,677

+168.9%

31

EvidenceProf Blog

406,067

+239.7%

32

ContractsProf Blog

386,565

+192.6%

33

Legal Profession Blog

377,364

+101.5%

34

Turtle Talk* (incomplete data)

375,475

-43.9%

35

Josh Blackman Blog*

366,243

+31.2%

36

White Collar Crime Prof Blog

346,038

+120.3%

37

Jack Bog's Blog

340,277

-89.8%

38

CrimProf Blog

303,227

+129.2%

39

Mirror of Justice

288,055

-32.9%

40

M&A Prof Blog

285,357

+128.1%

41

Nonprofit Law Prof Blog

277,974

+282.5%

42

Religion Clause

274,171

-13.7%

43

PropertyProf Blog

238,468

+118.4%

44

Legal Writing Prof Blog

235,252

+63.1%

45

Civil Procedure Prof Blog

231,820

+203.4%

46

Law School Academic Support

222,256

+210.7%

47

Legal Ethics Forum

215,372

+10.3%

48

Dorf on Law*

214,614

+22.2%

49

Adjunct Law Prof Blog

197,914

+129.2%

50

Legal History Blog

184,979

-40.6%

a Proprietary data based in part on Google Analytics.

  • The rankings include all blogs edited by law professors -- both law-related and non law-related.
  • The rankings include all blogs that have publicly available Site Meters or that have emailed me a screenshot of their Google Analytics data (or granted me read-only access to their data).
  • Please email me the names of any Law Prof Blogs with traffic for the July 1, 2013 - June 30, 2014 period that would qualify for inclusion on the list (184,980 page views). If necessary, I will re-publish the list to include all qualifying blogs.
  • Several popular Law Prof Blogs do not have publicly available Site Meters and have not sent me Google Analytics data and thus are not included on the list:  e.g., California Appellate Report, Credit Slips, The Deal Professor, Feminist Law Professors, Legal Theory, Point of Law, ProfessorBainbridge.com.
  • These rankings cover only those blogs edited by law professors. Other law-related blogs edited by practitioners, librarians, non-law school academics, and journalists are not included on this list:  e.g., Above the Law, How Appealing, Wall Street Journal Law Blog.
  • Members of my Law Professor Blogs Network comprise 7 of the Top 25 blogs and 22 of the Top 50 blogs.

July 10, 2014 in Blog Rankings, Legal Education, Tax | Permalink | Comments (0)

2015 AALS Annual Meeting: Legal Education at the Crossroads

AALSIn the parable of the Delta blues player, the musician considers carefully his choice: to make his pact with the Devil and preserve his guitar greatness or to take the other path. He considers this fateful decision at the crossroads. We are at the crossroads. Our law schools face critical choices: Are we going to continue on the path which, while suitable to the previous world in which we pursued glory and economic progress and our graduates took their rightful place in the generally remunerative legal economy, now has significant pitfalls and predicaments. Or are we going to take the path toward a more promising, albeit risky and uncertain, destination for our students, our faculty, our profession?

As faculty members and law school leaders, we are engaged deeply with questions concerning the efficacy of our current educational and economic model. Some prophesize the demise of this model and, with it, doom and gloom for (many? most? all?) or our member schools; others, for sure, remain ever optimistic. Moreover, we are engaged with complex questions of pedagogical strategy and educational performance. In our teaching, in our scholarship, and in our external engagement with the bench, bar, and business sector, we ask: Are we doing all we can and should to prepare our students for this dynamic new world? Ideally, these questions should be omnipresent parts of our strategies. But, realistically, they have garnered our focused attention in this era in which law schools are under pressure and, in a meaningful way, under siege.

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July 10, 2014 in Conferences, Legal Education | Permalink | Comments (4)

TIGTA: IRS's 17% Error Rate in Processing Amended Tax Returns Caused $2.1 Billion of Erroneous Tax Refunds

TIGTA The Treasury Inspector General for Tax Administration yesterday released Amended Tax Return Filing and Processing Needs to Be Modernized to Reduce Erroneous Refunds, Processing Costs, and Taxpayer Burden (2014-40-028):

The IRS received more than 4 million amended tax returns in Fiscal Year 2012. This audit was initiated because previous TIGTA audits have identified problems with IRS processes for verifying claims on amended tax returns. The objective of this review was to determine whether the IRS has controls in place to ensure that claims for refunds on amended tax returns are appropriate. ...

TIGTA’s review of a statistical sample of 259 amended tax returns claiming tax refunds of $500 or more in Fiscal Year 2012 identified 44 (17 percent) tax returns for which the IRS issued potentially erroneous tax refunds totaling $103,270. Based on the sample results, TIGTA estimates the IRS may have issued more than $439 million in potentially erroneous tax refunds claimed on 187,421 amended returns in Fiscal Year 2012. As such, the IRS could issue more than $2.1 billion in potentially erroneous tax refunds claimed on amended tax returns over the next five years.

To reduce erroneous refunds, processing costs, and taxpayer burden, the IRS could revise Form 1040, U.S. Individual Income Tax Return, to allow for corrections to original tax return filings and expand e-filing to include amended tax returns. TIGTA estimates that the IRS could have potentially saved more than $17 million in processing costs during Fiscal Year 2012 if it had allowed taxpayers to e-file their amended tax return.

July 10, 2014 in IRS News, Tax | Permalink | Comments (0)

I Don't Live in Cincinnati Anymore ... Marijuana Farmers Market Opens in LA

The IRS Scandal, Day 427

IRS Logo 2New York Times, Republicans Say Ex-I.R.S. Official May Have Circumvented Email:

Lois Lerner, the former Internal Revenue Service official at the center of an investigation into the agency’s treatment of conservative political groups, may have used an internal instant-messaging system instead of email so that her communications could not be retrieved by investigators, Republican lawmakers said Wednesday.

The accusation against Ms. Lerner, the former head of the agency’s division on tax exemption, came nearly a week after the I.R.S. gave investigators thousands of her emails, including some that were destroyed when her hard drive crashed in 2011 but were recovered from the accounts of people with whom she had corresponded.

The Republican lawmakers said that in one of those email exchanges — which took place in the spring of 2013, just days after the Treasury Department’s inspector general concluded in a report that agency officials had treated conservative groups improperly — Ms. Lerner asked another official whether messages sent over the instant-messaging system were recorded. When she was told that they were not, she responded, “Perfect.”

Republican lawmakers interpreted that response as an expression of relief.

“Ms. Lerner says, ‘Wow, I know I’ve gotten rid of the emails when the computer crashed two years earlier, but I’d better double check on this intraoffice instant-messaging capability we have at the Internal Revenue Service,’ and she says ‘perfect’ when she learns that it’s not traceable, not trackable, not stored,” Representative Jim Jordan of Ohio said during a hearing of a House oversight subcommittee.

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July 10, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, July 9, 2014

NY Times: Medtronic Shareholders Will Pay the Tax Price for Inversion

NY Times Dealbook (2013)New York Times Deal Book:  In Deal to Cut Corporate Taxes, Shareholders Pay the Price, by Steven Davidoff Solomon (UC-Berkeley):

Medtronic is pursuing a deal to move abroad and save taxes. But few have noticed that the company’s shareholders will be the ones left with a big tax bill as a result. ...

The IRS will treat the acquisition as if Medtronic shareholders had sold their shares. Under IRS rules, when a company moves abroad in a tax inversion, the buyer’s shareholders must pay capital gains if they will hold 50 percent or more of the shares.

That is the case for Medtronic, and so its shareholders will be stuck with that big tax bill — up to 33 percent in California after you include the state tax. ... Let’s pause and reflect that Medtronic is pushing a transaction that from Day 1 may cost some of its shareholders as much as 33 cents on the dollar.

The sand in the eye for the shareholders is that Congress tried to halt the tide of inversions about a decade ago. Lawmakers amended the tax code to provide that executives of companies like Medtronic that went abroad would have to pay a tax on their stock compensation. The tax is at the same capital gains tax that Medtronic’s shareholders will have to pay in connection with the transaction.

But unlike its shareholders, Medtronic’s executives will be “grossed up” by the company. Medtronic will spend millions to pay the tax obligations of its executives in connection with the transaction. At least seven other companies undertaking inversions have indemnified their executives to the tune of tens of millions of dollars, according to Bloomberg News. But shareholders will receive nothing from Medtronic.

The gross-up highlights the absurdities of some Washington tax policies. Congress initially acted to halt inversions, but succeeded only in costing shareholders more as their companies just pay the tax for executives.

The real question is why shareholders at Medtronic and other companies haven’t protested. After all, Medtronic’s shareholders will get to vote on this deal. One reason may be that inversions do have benefits for shareholders. By lowering the company’s tax rate, its stock price will readjust to reflect these additional earnings.

Still, giving up a third of their value to endorse this transaction and reap benefits down the road seems like quite a sacrifice to ask of shareholders.

July 9, 2014 in Tax | Permalink | Comments (2)

NY Law Students to Take Bar Exam in February of Their 3L Year

New York Law Journal:  Courts, Law Schools Gear Up for Pro Bono Scholar Program:

NYNew York's 15 law schools and the state court system are laying the groundwork for a new Pro Bono Scholars program, where students can dedicate their final semester to pro bono work on behalf of low-income clients in exchange for early bar admission.

Starting next spring, about 150 students will spend 12 weeks working full-time for a law school clinic, legal services nonprofit, government agency or law firm. Placements will begin March 2, after participants take the February bar exam.

Though their work will be unpaid, students will receive at least 12 academic credits and participate in a weekly, on-campus seminar to complement what they're learning on the job. Licensed attorneys will supervise them.

Early bar admission is a top selling point for potential Pro Bono Scholars. Participants will be admitted by June 2015, up to a year before their classmates who take the July bar exam.

July 9, 2014 in Legal Education | Permalink | Comments (2)

Seinfeld's 10 Enduring Tax Lessons

SeinfeldForbes:  Seinfeld's 10 Enduring Lessons---About The IRS, by Robert W. Wood:

On Seinfeld’s 25th anniversary–it debuted July 5th, 1989–it is being discussed again around today’s version of the water cooler. Yes, Seinfeld at 25: There’s Still Nothing Else Like It. Turns out even a show about nothing can teach us something, including tax lessons like these...

I realize that Seinfeld is not mostly about taxes. But actually, taxes come up a lot in daily life, and yada, yada, yada.

July 9, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

CTJ: Addressing the Need for More Federal Revenue

Citizens for Tax Justice, Addressing the Need for More Federal Revenue:

CTJAmerica is undertaxed, and the result is underfunding of public investments that would improve our economy and the overall welfare of Americans. Fortunately, Congress has several straightforward policy options to raise revenue, mostly by closing or limiting loopholes and special subsidies imbedded in the tax code that benefit wealthy individuals and profitable businesses.

Part I of this report explains why Congress needs to raise the overall amount of federal revenue collected. Contrary to many politicians’ claims, the United States is much less taxed than other countries, and wealthy individuals and corporations are particularly undertaxed. This means that lawmakers should eschew enacting laws that reduce revenue (including the temporary tax breaks that Congress extends every couple of years), and they should proactively enact new legislation that increases revenue available for public investments. Parts II, III, and IV of this report describe several policy options that would accomplish this. This information is summarized in the table to the right.

Even when lawmakers agree that the tax code should be changed, they often disagree about how much change is necessary. Some lawmakers oppose altering one or two provisions in the tax code, advocating instead for Congress to enact such changes as part of a sweeping reform that overhauls the entire tax system. Others regard sweeping reform as too politically difficult and want Congress to instead look for small reforms that raise whatever revenue is necessary to fund given initiatives.

The table to the right illustrates options that are compatible with both approaches. Under each of the three categories of reforms, some provisions are significant, meaning they are likely to happen only as part of a comprehensive tax reform or another major piece of legislation. Others are less significant, would raise a relatively small amount of revenue, and could be enacted in isolation to offset the costs of increased investment in (for example) infrastructure, nutrition, health or education.

For example, in the category of reforms affecting high-income individuals, Congress could raise $613 billion over 10 years by eliminating an enormous break in the personal income tax for capital gains income. This tax break allows wealthy investors like Warren Buffett to pay taxes at lower effective rates than many middle-class people. Or Congress could raise just $17 billion by addressing a loophole that allows wealthy fund managers like Mitt Romney to characterize the “carried interest” they earn as “capital gains.” Or Congress could raise $25 billion over ten years by closing a loophole used by Newt Gingrich and John Edwards to characterize some of their earned income as unearned income to avoid payroll taxes.  

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July 9, 2014 in Tax, Think Tank Reports | Permalink | Comments (15)

NY Times: GoDaddy IPO Generates Extra Tax Spoils Via Up-C Structure

New York Times Deal Book:  In Dividing Up Extra Tax Spoils, Risks for New Investors, by Robert Cyran:

GoDaddyInitial public offerings that generate extra tax spoils are in the spotlight. Two private equity firms, Kohlberg Kravis Roberts and Silver Lake, are listing the web-hosting company GoDaddy three years after buying it for $2.25 billion. The use of what’s called an Up-C structure means the company will go public with big potential tax deductions on its books. In GoDaddy’s case, investors and sponsors will both benefit. But other I.P.O.s with Up-Cs have more dubious arrangements.

The basic idea of Up-C structures, which bankers say are slowly proliferating, is that a partnership like the one used to control GoDaddy sells assets to a new company that the partner-sponsors and I.P.O. investors own — call it PubCo. Because the assets are sold at a higher price than their cost, the difference becomes a combination of goodwill and intangible assets on PubCo’s books. These items can be amortized over time, a deduction from profit that reduces taxable income.

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July 9, 2014 | Permalink | Comments (0)

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

Tax Analysys Logo (2013)Erik M. Jensen (Case Western), The Constitutionality of a Mark-to-Market Taxing System, 143 Tax Notes 1299 (June 16, 2014):

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

July 9, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Finding Meaning After Academe

Chronicle of Higher Education: Finding Meaning After Academe, by Elizabeth Segran:

BooksThe "do what you love" mantra pervades academe, engendering seemingly rational people to forsake lucrative careers for the study of Mediterranean archaeology or, in my case, classical Tamil love poetry.

During my years in graduate school, that philosophy toward work was rarely challenged. On the contrary, in subtle and overt ways, my colleagues and professors reinforced the belief that it is more noble to pursue a love of literature, history, or science than to pursue financial stability. It was a seductive fantasy, especially since, for a time, my work—the teaching, the research, and the digging through archives in far-flung corners of the world—made me very happy.:

The problem, however, is that for the vast majority of newly minted Ph.D.’s, it is now close to impossible to find financially viable academic work. Toward the end of my doctoral program, that grim economic reality eventually set in, forcing me to make difficult decisions about my future. I applied to hundreds of positions and went on dozens of interviews over the course of two years, only to find myself with no good options at the end of that grueling process. My choices came down to taking adjunct work or leaving the academy altogether. Reluctantly, I chose the latter: I filed my dissertation, started an internship at a public-relations agency, and put academe behind me. ...

When confronted with the instability and poverty that accompany adjunct employment, many Ph.D.’s are compelled to consider alternative careers, and a significant number will cross over into the nonacademic realm. According to recent studies from the American Historical Association and Modern Language Association, 24.2 percent of history Ph.D.’s and 21 percent of English and foreign-language Ph.D.’s have, over the last decade, pursued nonacademic careers. 

In my experience, the transition out of academe can be painful. Apart from the stresses of job hunting, one of the most challenging parts of the process for me was confronting the possibility that I might no longer be one of the lucky people able to do what I love. ...

It took me years—and several paradigm shifts—to arrive at the conclusion that it is possible for a former academic to have a meaningful career outside of academe. Here are a few things I wish I had known earlier in my journey. ...

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July 9, 2014 in Legal Education | Permalink | Comments (1)

Cunningham: Truth, Candor, and Crisis at Yeshiva University

Yeshiva LogoFollowing up on my previous post, Yeshiva University's Bonds Downgraded to 'Junk': Lawrence Cunningham (George Washington), Truth, Candor, and Crisis at Yeshiva University:

Among universities in trouble, the darkest cloud hangs over Yeshiva University, a venerable Jewish institution founded in New York in 1886. The University acknowledges huge economic losses and failed investment policies and is taking extraordinary steps to balance its books, including ceding control over its one-time crown jewel, Albert Einstein College of Medicine, which has close friends of its law school, Benjamin N. Cardozo School of Law, very concerned.  Critics, moreover, see a death spiral and question the leadership’s candor.

Amid calls for the resignation or dismissal of Yeshiva’s president, Mr. Richard M. Joel, he says the University will no longer engage with the media on fiscal questions. The Wall Street Journal reports that the University has hired the crisis-management communications firm, Kekst & Co., but any benefits from that hiring are not yet obvious. ...

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July 9, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 426

Tuesday, July 8, 2014

Thoughts on Law Prof Work-Life Imbalance From Those Left Behind

Patricia Sun, the widow of Law Prof Andy Taslitz (American) who died of cancer on February 9 at age 57, wrote a gripping Facebook post on Thoughts on Work-Life ImBalance From Those Left Behind (excerpted here with a photo of Andy and Patricia, with Patricia's permission):

Patricia SunI'll post this on Andy's FB page because I'm not sure anyone reads mine anymore, and while this can apply to anyone, it's really addressed to law professors.

In the past 4 months I have kept seeing accolades to Andy's amazing productivity - the 100+ articles, the zillions of case books, etc., and I have always told people that yes, he led a normal life, yes, he got plenty of sleep and yes, he even took plenty of naps. 

But that's not really true. His life was not normal, at least not to me, and it certainly wasn't balanced. Yes, I know he genuinely loved his work and yes, I know he had a brilliant and unusual mind, and yes, I know he was cut down in his prime when he still had so much more to give. But all of that came with a price. Not the teaching or the mentoring, but all that scholarship. ...

So what was the price in the end? In the entire time we were married we only took a two-week vacation once, and just about every vacation we did take was wrapped around one of his conferences or presentations. The furthest he went on each of his two sabbaticals was his front bedroom, because he spent every single day on his manuscripts. He turned down trips to China, to South Africa, to Japan, and most impressively to me, he twice turned down a chance to be an observer at Guantanamo. Of course he always had different reasons -- S. Africa wasn't safe, the timing of the China trip was bad, etc., but I knew the real reason was he didn't want to take time away from work. ...

So in the end how do I feel about his productivity? Yes, he enjoyed it, but he also killed himself trying not to disappoint people or to break deadlines. 

And as I sit here with the dogs on July 4th, I think was it really that important to add one more book review to his CV or to do one more tenure letter as a favor for someone he never met? I'm glad his peers all loved him for the reliable genius that he was, and I don't know how he feels wherever he is now, but I am very, very bitter. 

Yes, he was a great academic mentor and collaborator, but the price for all that frenzied output was me, and there's a part of me that will never forgive him for it, because he died right after he promised to slow down and enjoy life itself more.

So think about it, members of the "academy." All that talk about US News rankings and SSRN citations. Do you REALLY think stuff like that is life and death to your loved ones? I think most of them would sacrifice one more line on your resume for one more day of quality time with you. I know I would. But it's a bargain I can't make any more.

Food for thought, especially for someone who last spent an entire 24-hour period not working exactly nine years ago to the day.

Update:  ABA Journal, Was Law Prof’s ‘Frenzied Output’ Worth It? His Widow Says Work Devotion Came at a Price

July 8, 2014 in Legal Education | Permalink | Comments (13)

U.S. Companies Land Federal Government Contracts as They Avoid U.S. Taxes

Bloomberg:  How to Win Billions in Federal Contracts on a Permanent Tax Holiday, by Zachary R. Mider:

IR LogoAmerican manufacturer Ingersoll-Rand forged the tools that carved the Panama Canal and shaped Mount Rushmore. When it shifted its legal address to Bermuda in 2001 to reduce taxes, the maneuver sparked bipartisan outrage in Congress. ...

Over the next dozen years, Congress passed law after law to prohibit American companies that reincorporate overseas from doing business with the federal government.

Those laws haven’t worked. Benefiting from loopholes and a cooperative Obama administration, the companies avoid the ban on federal contracts as effectively as they avoid U.S. taxes.

Ingersoll-Rand is one of more than a dozen large U.S. companies that have shifted their tax addresses offshore yet still earn federal business, a Bloomberg News investigation has found.

IR

In all, these companies are collecting more than $1 billion a year from the government, even as their tax-avoidance techniques have deprived the Treasury of untold billions of dollars in revenue.

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July 8, 2014 in Tax | Permalink | Comments (0)

Case Western and Former Dean Settle Retaliation Claim by Law Prof Over Reporting of Alleged Sexual Harassment of Students and Staff

SettlementFollowing up on my prior posts (links below):  the parties have reached a settlement in the lawsuit by Case Western Law Prof Raymond Ku alleging retaliation for reporting alleged sexual harassment of students and staff by former dean Lawrence Mitchell.

Prior TaxProf Blog coverage:

July 8, 2014 in Legal Education | Permalink | Comments (0)

Henderson: Supercharging Lawyer Development Through Feedback

William D. Henderson (Indiana), Supercharging Lawyer Development Through Feedback:

FeedbackI am a law professor. My job is to educate future lawyers. Experience has shown me that the best way to accelerate the development of legal skills is to provide more and better feedback to my students.

But feedback is expensive. It takes time to deliver intensive feedback. Moreover, feedback can be difficult emotional labor, as it is unpleasant to deliver bad news. Further, defensiveness is a relatively common reaction, so one has to be prepared to marshal facts and examples to show that the feedback is objective, fair, and accurate.

To compound matters, there are few if any institutional rewards for giving developmentally rich feedback,1 partially because it is difficult to measure the quality of feedback and its impact on lawyer development, and partially because scholarship remains the primary coin of the realm among university educators.

For all of these reasons, the majority of law school coursework involves very little feedback beyond a letter grade derived from a single end-of-the-term exam. Because high-quality feedback can accelerate lawyer professional development and is likely a winning strategy for any law school or law firm seeking to take market share, we are likely to see more of it in the years to come.

Drawing upon my experience as an educator who works closely with law firms and studies the legal profession, I am willing to wager on two predictions that others might find fanciful or utopian.

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July 8, 2014 in Legal Education | Permalink | Comments (2)