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Saturday, June 28, 2014

WSJ: What Taxpayers With Offshore Accounts Need to Know Before Confessing to the IRS

Wall Street Journal Tax Report:  The Hazards of Offshore-Account Disclosure: Here's What Taxpayers Need to Consider Before They Confess, by Laura Saunders:

FATCATaxpayers should think carefully before entering a new Internal Revenue Service program for offshore-account holders whose conduct wasn't "willful," experts say.

"The term 'willful' has traps for the unwary, and people are falling into them," says Barbara Kaplan, a criminal tax lawyer at Greenberg Traurig in New York.

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June 28, 2014 in IRS News, Tax | Permalink | Comments (1)

NY Times: If You Cut Taxes, You Get Less Tax Revenue

New York Times:  Yes, If You Cut Taxes, You Get Less Tax Revenue, by Josh Barro:

Kansas has a problem. In April and May, the state planned to collect $651 million from personal income tax. But instead, it received only $369 million.

In 2012, Kansas lawmakers passed a large and rather unusual income tax cut. It was expected to reduce state tax revenue by more than 10 percent, and Gov. Sam Brownback said it would create “tens of thousands of jobs.”

In part, the tax cut worked in the typical way, by cutting tax rates and increasing the standard deduction. But Kansas also eliminated tax on various kinds of income, including income described commonly — and sometimes misleadingly — as “small-business income.” Basically, if your income results in the generation of a Form 1099-MISC instead of a W-2, it’s probably not taxable anymore in Kansas. ...

While no state has gone as far as Kansas, four others — Missouri, Ohio, Oregon and South Carolina — have passed laws in the last decade that give some small-business owners lower tax rates than wage earners. By creating this preference for some types of income over others, Kansas has run into at least five problems:

  1. It’s sometimes possible to turn taxable salary income into untaxed “business” income.
  2. A lot of the beneficiaries of the tax break won’t be small businesses.
  3. It’s not clear that there’s anything special about small businesses for the purpose of job creation.
  4. Some of the revenue loss doesn’t even benefit taxpayers.
  5. The state budget is suffering.

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June 28, 2014 in Tax | Permalink | Comments (1)

Professors Read Mean Student Evaluations

Inside Higher Ed, Mean Tweets, Academic Style:

In the spirit of Jimmy Kimmel’s “Celebrities Read Mean Tweets,” a Canadian university’s student newspaper posted a video this week that features professors reading aloud unflattering reviews from the website Rate My Professors.

 

June 28, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 415

IRS Logo 2Tax Update Blog:  Why Did Lois Lerner Work at the IRS?:

This question came to mind in discussing the Lerner emails with a reader, who noted how a Politico piece about the Grassley email chain revealed this week pointed out this high-level IRS leader’s evident lack of tax skills:

Former ex-IRS tax exempt division chief Marcus Owens said the email chain shows Lerner knew very little about tax law, as there would have been nothing wrong with Grassley and his wife attending such an event, so long as the income was reported. It is nothing that rises to the level of referral for examination,” Owens said.

It is a mystery.  Her Wikipedia biography shows that she was a cum laude graduate of Northeastern University and the Western New England College of Law.  She worked as a high-level attorney at the Federal Election Commission, but moved to IRS as “Director Rulings and Agreements” in the exempt organizations branch of the IRS.  She rose to Director of Exempt Organizations in 2006.

Her resume, then, is that of a bureaucrat, rather than a tax practitioner or specialist.  She apparently never practiced tax law before moving into her important policy position — important in the tax world, anyway.

This sort of thing may be common in the federal bureaucracy.  It’s likely that she got a raise for the move, or something.  But it seems that while you could take the girl out of the FEC, you couldn’t take the FEC out of the girl.  She took it upon herself to monitor the electoral process with the tools of the tax law.

Megan McArdle explains why that was a bad idea:

This exchange suggests that Lois Lerner not only didn’t have a good, basic grasp of the tax law she was supposed to be administering, but also viewed her job as an extension of her work at the Federal Election Commission.

That’s not what the IRS is for. The IRS is not given power over nonprofit status in order to root out electoral corruption or the appearance of it. It is given power over nonprofit status in order to make sure that the Treasury gets all the revenue to which it’s entitled

Unfortunately, politicians see the tax law as the Swiss Army Knife of public policy, and it’s unsurprising that an IRS bureaucrat would see it the same way.

Moreover, Lerner’s overbroad instincts also seemed to kick into high gear when Republican politicians were involved. Of course, such reports might well be survivor bias — Republicans are complaining about Lerner, while Democrats who also had run-ins with her may be keeping quiet for fear of fueling the fire. At this point, however, the fire is burning merrily on its own. If Democrats who encountered Lerner’s overzealous use of her powers are out there, they’d do well to come forward and tell their stories to reassure Americans that even if her actions were overbroad, they weren’t broadly partisan.

They would have emerged by now.  The stats, as we noted yesterday, demonstrate one-sided enforcement.

Chart

It’s unlikely that Ms. Lerner came to the IRS with the idea of using her position to harass the opposition.  She just happened to be in a position to do so when applications from groups she didn’t like — perhaps that she even saw as dangerous and wrong — came across her desk.  It’s possible that she did it entirely on her own.  And that’s the scariest thing — a bureaucracy that moves on its own to squash ungoodthinkers is much more dangerous than a top-down conspiracy.  It may be hard to replace an administration, but it’s almost impossible to replace a bureaucracy.

New York Times:  Is The Times Ignoring a Scandal at the I.R.S.?:

Has The Times been interested enough in the politically charged events involving the Internal Revenue Service? Many readers don’t think so. ...

I asked David Joachim, the Washington-based reporter and editor who has written several of the I.R.S. stories, to respond to this reader and others who believe The Times has not pursued the story aggressively enough.

Mr. Joachim responded by email. He noted that reader comments on the stories show how polarized the feelings are:

One side sees a Nixonian abuse of power and cover-up; the other sees an effort to smear the White House for electoral gain in the midterms. That stuff brings out passions. ... We think we’ve paid copious attention to this story, and we will continue to do so. It’s an important story.>/em>

My take: The Times was somewhat late in beginning to cover the latest development about the lost emails. My office had begun to field several days’ worth of reader protests on the lack of attention when the first story finally went online. Despite that slow start and the quiet display of the subsequent stories (an analytical piece might have been a good choice for the front page), The Times has given its readers insightful coverage of a situation heavily clouded by partisan politics.

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June 28, 2014 in IRS News, IRS Scandal | Permalink | Comments (5)

Friday, June 27, 2014

CPAs: IRS's 'Voluntary' Regulation of Tax Preparers Lacks Statutory Authorization From Congress, Contravenes D.C. Circuit Decision, and Violates Administrative Procedure Act

RTRPIn February 2014, the D.C. Circuit unanimously held that the IRS lacked the statutory authority to regulate tax return preparers.  Loving v IRS, No. 13-5061 (D.C. Cir. Feb. 11, 2014).  For an extensive analysis of the decision, see this TaxProf Blog op-ed by Steve Johnson (Florida State).

The IRS yesterday announced a "voluntary" program to regulate tax return preparers.  IRS Commissioner John Koskinen stated:

[T]he IRS had started a mandatory program of education and testing for unregulated tax return preparers who did not have professional credentials. But we had to suspend that program because the courts ruled that we didn’t have the legal authority to require education and testing. So we’re launching a voluntary program as a temporary substitute. It’s called the Annual Filing Season Program.

I say “temporary” because we have been urging Congress to enact a proposal in the President’s Fiscal Year 2015 Budget that would give us the authority for mandatory oversight of return preparers. This voluntary program is not the ideal solution. But until legislation is enacted, we still have a responsibility to taxpayers and to our tax system to keep moving forward with our efforts to improve service to taxpayers.

See also the statement by National Taxpayer Advocate Nina Olson.

In a 14 page letter to Commissioner Koskinen, the American Institute of CPAs argues that the program is illegal:

We write today to express our strong concern that the IRS’s proposed program—in which tax return preparers would receive an IRS certificate for display in return for completing a continuing education program that includes a comprehension assessment (the “proposed program”)—would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.  ...

First, no statute authorizes the proposed program. The IRS’s general authority to administer the tax code under 26 U.S.C. § 7803 does not provide an adequate basis to proceed. Because federal agencies may act only pursuant to a valid delegation of authority by Congress, the IRS may not implement the proposed program. This fatal flaw cannot be overcome by the IRS. That no statutory provision expressly prohibits such a program does not legitimize an otherwise illegitimate act. 

Second, and relatedly, the proposed program will inevitably be viewed as an end-run around Loving v. IRS, which held that the IRS lacks authority to regulate tax return preparers under 31 U.S.C. § 330. To be sure, the regulations invalidated in Loving were mandatory, and the proposed program is purportedly voluntary. But in reality tax return preparers would face an overwhelming, compelled incentive to participate in the IRS’s credentialing program, meaning that the proposed program will be de facto mandatory. In the wake of Loving, that is impermissible.

Third, the IRS has evidently concluded, in developing the proposed program, that it need not comply with the notice and comment requirements of the Administrative Procedure Act (“APA”). This is incorrect. ...

Finally, the current proposal is arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers who defraud their clients, runs counter to evidence presented to the IRS, and will create market confusion. ...

We believe that the proposed program is unlawful and improper. We continue to believe that additional regulation of tax return preparers might yield significant benefits and that the IRS can achieve these objectives while remaining consistent with Loving and other statutory limitations on the IRS’s authority.

June 27, 2014 in IRS News, Tax | Permalink | Comments (11)

Weekly Tax Roundup

University of Oxford 8th Annual Academic Tax Symposium

OxfordThe Oxford University Centre for Business Taxation's 8th Annual Academic Tax Symposium concludes today with these speakers and papers:

David Gamage (UC-Berkeley), On Double-distortion Arguments, Distribution Policy, and the Optimal Choice of Tax Instruments
Discussant:  Jacob Nussim (Bar-Ilan) 

Joerg Paetzold (Salzburg), Unwilling, Unable or Uninformed to Cheat? Tax Evasion vVa Self-reporting in Austria (wth Hannes Winner (Salzburg))
Discussant:  Nirupama Rao (NYU) 

Martin Ruf (Tübingen), Tax Avoidance as a Driver of Mergers and Acquisitions (with Thomas Belz (Mannheim), Leslie Robinson (Dartmouth) & Christian Steffens (Mannheim))
Discussant:  Paul Baker (Bath)

Rosanne Altshuler (Rutgers), The Spillover Effects of Outward Foreign Direct Investment on Home Countries: Evidence from the United States (with Jitao Tang (Ernst & Young))
Discussant:  Estelle Dauchy (New Economic School, Moscow)

June 27, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Weekly SSRN Tax Roundup

 Weekly Roundup

June 27, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

 Weekly Roundup

June 27, 2014 in Legal Education, Weekly Legal Education Roundup | Permalink | Comments (0)

WSJ: Are Law Schools Heading Into a Bull Market?

Following up on yesterday's post, Slate: Things Are Looking Rosy for the Law School Class of 2018: Wall Street Journal Law Blog, Are Law Schools Heading Into a Bull Market?:

BullThe argument advanced by Mr. Weissmann [in Slate] is one that’s slowly gaining currency among legal education observers. University of Washington law professor Ryan Calo expressed similar optimism in an article for Forbes last fall. Law Blog, in an earlier post, peered into the crystal ball as well and, using slightly different assumptions, predicted that the number of graduates would fall to about 34,000 by 2017. [See also National Law Journal. Tax Prof Ted Seto (Loyola-L.A.) first made this point in 2013.]

The Slate piece concludes on a cautious note, tacking on several “to be sures.” “Some lower-ranked schools will continue to deliver miserable job prospects for their students, just as they have for years,” the piece says.

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June 27, 2014 in Legal Education | Permalink | Comments (2)

Virginia Tax Review Publishes New Issue

Virginia Tax Review 2The Virginia Tax Review has published Vol. 33, No. 2 (Fall 2013):

June 27, 2014 in Scholarship, Tax | Permalink | Comments (0)

Wealth Levels, Wealth Inequality, and the Great Recession

More on the Nation's First Hybrid J.D.

MitchellFollowing up on my previous post, ABA Approves First Hybrid Online J.D.:  U.S. News & World Report, New Partially Online Law Degree May Open Door to Similar Programs:

Half of the learning in the program takes place online, with students visiting campus only nine times in four years.  ... The new J.D. at William Mitchell College of Law in St. Paul, Minn., is the first of its type to be approved by the ABA – and may open the door to other law schools to pursue similar degrees, especially if the experiment pans out.

No fully online law schools are currently accredited by the ABA. The designation is significant because states typically allow students to sit for state bar exams only if they have degrees from ABA-accredited schools. California is an exception, allowing graduates of its online law schools to sit for the California bar exam. This has meant that graduates from online law schools are generally shut out of legal practice, except in California.

The ABA’s approval of the new half online, half on-site law program at William Mitchell, which begins in January, should smooth the path for its graduates to take bar exams in any state, says Barry Currier, ABA managing director of accreditation and legal education.

Jonathan H. Stein, an Oxford, Mississippi-based cardiologist who has enrolled in Mitchell’s program because he wants to advocate in court for universal health insurance, sees the Mitchell program as one that is bound to have a big impact on the nation’s law schools. “It’s going to put a lot of pressure on everything within the legal education process,” he says. “Once somebody starts, then everybody else is fair game.”

Most law schools could already be offering more online learning under current standards – and haven’t chosen to do so, Currier says. The ABA currently allows accredited law schools to offer up to 12 credit hours via distance learning, though that could soon be expanding to 15 credits, he says. ...

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June 27, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 414

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June 27, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, June 26, 2014

University of Oxford 8th Annual Academic Tax Symposium

OxfordThe Oxford University Centre for Business Taxation's 8th Annual Academic Tax Symposium continues today with these speakers and papers:

Li Liu (Oxford), Small Business Incorporation and Investment: The Role of Corporation Tax (with Michael Devereux (Oxford))
Discussant:  Tim Goodspeed (CUNY)

Joana Naritomi (Harvard), Consumers as Tax Auditors
Discussant:  Jon Kerr (CUNY) 

Daniel Reck (University of Michigan), Reporting What You Can't Hide: How Credit Card Information Reporting Affects Small Business Tax Compliance (with Brett Collins (IRS), Jeffrey Hoopes (Ohio State) & Joel Slemrod (Michigan))
Discussant:  Michelle Hanlon (MIT)

Alex Raskolnikov (Columbia), The Uneasy Case for Graduated Tax Penalties
Discussant:  Miranda Stewart (Melbourne)

Matthew Smith (U.S. Treasury Department), At a Loss: Corporate Elasticity of Income at the Zero Kink (with Elena Patel (U.S. Treasury Department) & Nathan Seegert (Utah))
Discussant:  Tuomas Kosonen (VATT, Helsinki)

Eric Zwick (Harvard), Do Financial Frictions Amplify Fiscal Policy? Evidence from Business Investment Stimulus
Discussant:  Dominika Langenmayr (Munich)

Mazhar Waseem (Manchester) Taxes, Informality and Income Shifting: Evidence From a Recent Pakistani Tax Reform
Discussant:  Miguel Almunia (Warwick)

June 26, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Paul Daugerdas (Jenkens & Gilchrist) Sentenced to 15 Years in Prison for Tax Shelter Fraud

The Impact of Taxes on Carmelo Anthony's Free Agency Decision

Sports Illustrated:  How Much Carmelo Can Make as an NBA Free Agent, by Michael McCann (New Hampshire):

AnthonyAnthony's financial decision-making is also affected by income tax rates, which vary widely by state and, as New York City residents know, municipality. SI.com and tax expert Robert Raiola have crunched the numbers for Anthony (whose projected contract amounts are provided by Spotrac.com). We break down how much he would likely earn, after taxes and the standard 4 percent agent commission, if he signed max deals with the Knicks, Bulls, Heat and Rockets.

Carmelo

Forbes:   How State Taxes Could Play A Role In Carmelo Anthony's Landing Spot, by Tony Nitti

(Hat Tip:  Bill Turnier.)

June 26, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Robot Doctors, Online Lawyers and Automated Architects: The Future of the Professions?

The Guardian: Robot Doctors, Online Lawyers and Automated Architects: The Future of the Professions?

Advances in technology have long been recognised as a threat to manual labour. Now highly skilled, knowledge-based jobs that were once regarded as safe could be at risk. How will they adapt to the digital age?

Oxford academics Carl Benedikt Frey and Michael A Osborne have predicted computerisation could make nearly half of jobs redundant within 10 to 20 years. Office work and service roles, they wrote, were particularly at risk. But almost nothing is impervious to automation. It has swept through shop floors and factories, transformed businesses big and small, and is beginning to revolutionise the professions.

Knowledge-based jobs were supposed to be safe career choices, the years of study it takes to become a lawyer, say, or an architect or accountant, in theory guaranteeing a lifetime of lucrative employment. That is no longer the case. Now even doctors face the looming threat of possible obsolescence. Expert radiologists are routinely outperformed by pattern-recognition software, diagnosticians by simple computer questionnaires. In 2012, Silicon Valley investor Vinod Khosla predicted that algorithms and machines would replace 80% of doctors within a generation.

In their much-debated book The Second Machine Age, Erik Brynjolfsson and Andrew McAfee argued that we now face an intense period of creative destruction. "Technological progress," they warned, "is going to leave behind some people, perhaps even a lot of people, as it races ahead … there's never been a worse time to be a worker with only 'ordinary' skills and abilities to offer, because computers, robots and other digital technologies are acquiring these skills and abilities at an extraordinary rate."

So where does that leave the professions, whose hard-won expertise is beginning to fall within the power of computers and artificial intelligence to emulate? The efficiency of computerisation seems likely to spell the end of the job security past generations sought in such careers. For many, what were once extraordinary skillsets will soon be rendered ordinary by the advance of the machines. What will it mean to be a professional then?

"We'll see what I call decomposition, the breaking down of professional work into its component parts," says leading legal futurist professor Richard Susskind. Susskind's forthcoming book Beyond the Professions, co-authored with his son Daniel Susskind, examines the transformations already underway across the sectors that once offered jobs for life. He predicts a process not unlike the division of labour that wiped out skilled artisans and craftsmen in the past: the dissolution of expertise into a dozen or more streamlined processes.

"Some of these parts will still require expert trusted advisers acting in traditional ways," he says. "But many other parts will be standardised or systematised or made available with online service." In a previous book Tomorrow's Lawyers, he predicts the creation of eight new legal roles at the intersection of software and law. Many of the job titles sound at home in IT companies: legal knowledge engineer, legal technologist, project manager, risk manager, process analyst.

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June 26, 2014 in Legal Education | Permalink | Comments (2)

Death of Former IRS Commissioner Johnnie Walters, Refused President's Request to Audit His Enemies

WaltersNew York Times, Johnnie M. Walters, Ex-IRS Chief, Dies at 94:

Johnnie M. Walters, a commissioner of the Internal Revenue Service under President Richard M. Nixon who left office after refusing to prosecute people on Nixon’s notorious “enemies list,” died on Tuesday at his home in Greenville, S.C. He was 94. ...

Nixon had fired his first IRS commissioner, Randolph W. Thrower, for resisting White House pressure to punish political opponents. Mr. Thrower, who served from 1969 to 1971, died at 100 in March. ...

Mr. Walters had not been told of Nixon’s other job requirements, as revealed in a White House conversation recorded on May 13, 1971. “I want to be sure he is a ruthless son of a bitch, that he will do what he’s told, that every income-tax return I want to see I see, that he will go after our enemies and not go after our friends,” the president said.

Mr. Walters failed to follow this script — which was unknown to him — when John W. Dean III, the White House counsel, summoned him to his office on Sept. 11, 1972. Mr. Dean handed him the “enemies list” of 200 people, most prominent Democrats, whom he wanted investigated.

"I was shocked,” Mr. Walters said in a 1997 interview with The Washington Post. “John, do you realize what you’re doing?” he remembered saying. “If I did what you asked, it’d make Watergate look like a Sunday school picnic.” ...

Several days later, Mr. Walters went to his immediate boss, Treasury Secretary George P. Shultz, showed him the list and recommended that the IRS do nothing. Mr. Shultz told him to lock the list in his safe.

By Sept. 15, Nixon had been told of Mr. Walters’s reluctance to follow instructions. “Why the hell did we promote him?” H. R. Haldeman, the White House chief of staff said, according to a tape. Nixon told Mr. Dean, “You’ve got to kick Walters’s ass out first and get a man in there.” The president added that Mr. Shultz needed to make sure that Mr. Walters left if he wanted to keep his own job.

Mr. Walters gave the list to Laurence N. Woodworth, chief of staff of Congress’s Joint Committee on Taxation. He wrote in his 2011 book, “Our Journey,” that this was the most important thing he did, “because then we could say with absolute certainty that IRS never began any audit or investigation of any name on that list because of the list.”

Mr. Walters testified to various committees investigating alleged Nixon misdeeds. He left office in April 1973.

USA Today, Former IRS Chief Recalls Defying Nixon:

At his home near Furman University, Johnnie Mac Walters remembers being pressured more than 40 years ago to do what he considered unthinkable. ... In the early 1970s, when embattled President Richard Nixon sought to use the Internal Revenue Service as a weapon to investigate his enemies, the administration turned to Walters, a Hartsville, S.C., native and head of the tax agency, to do the dirty work.

Walters, now 93, said he refused.

The IRS controversy currently dogging President Barack Obama has raised new allegations that the agency has been engaged in political meddling and bias. Obama has denounced as "outrageous" the targeting of conservative political groups by the IRS.

Walters walks with a cane now and is soft-spoken. But the recent IRS developments prompted him to sit down for an interview and resume his personal quest, not for vindication, but to validate his rejection of Nixon's tactics while he was commissioner of Internal Revenue. ...

Some Republicans have tried to link Obama to what the IRS has acknowledged was improper scrutiny of conservative groups seeking tax-exempt status. "I'm distressed at what's happening and particularly with IRS," said Walters, a lifelong Republican. "IRS must be run nonpolitical. Our tax system otherwise will fail and we can't afford that."

June 26, 2014 in IRS News, Tax | Permalink | Comments (8)

Morse: Supreme Court Clarifies Standard for Evidentiary Hearing in Enforcement of IRS Summons

Following up on Saturday's op-ed by Steve Johnson on Thursday's Supreme Court decision in United States v. Clarke, No. 13.301 (U.S. June 19, 2014):  SCOTUSBlog:  Court Clarifies Standard for Evidentiary Hearing in Enforcement of IRS Summons, by Susan C. Morse (Texas):

The Supreme Court on June 19 unanimously vacated and remanded an Eleventh Circuit per curiam decision in United States v. Clarke.  The Eleventh Circuit had reversed a district court refusal to grant a summons recipient an evidentiary hearing to challenge an IRS summons.  The Supreme Court emphasized the abuse of discretion standard applicable to the review of the district court’s decision and clarified the standard that the district court itself should apply.  It explained that “the taxpayer is entitled to examine an IRS agent when he can point to specific facts or circumstances plausibly raising an inference of bad faith.”  The decision leaves open an underlying legal question in the case:  whether improper purpose can follow from the issuance of a summons in retaliation for refusal to extend a statute of limitations and/or in anticipation of a not-yet-filed Tax Court suit.

June 26, 2014 in Scholarship, Tax | Permalink | Comments (4)

Slate: Things Are Looking Rosy for the Law School Class of 2018

Slate:  Apply to Law School Now! Things Are Looking Rosy for the Class of 2018, by Jordan Weissmann:

This might sound weird, but here goes: Now might be a pretty good time to think about law school. ...

Here is the key number to keep in mind: 36,000. That is roughly the number of new J.D.s we should expect to graduate in 2016. Getting to that figure is pretty straightforward: In the fall of 2013, 39,700 students enrolled in law school. Given that about 10 percent of each law school class generally drops out, we should expect no more than 36,000 to reach commencement. ...

In comparison, 46,776 law students graduated in 2013. So we’re talking about a potential 23 percent plunge.

With less competition it should be far easier for graduates to find decent work. Again, let’s assume the legal job market doesn’t grow at all in the next two years—that it simply stays flat. What might that look like?

We can break down last year’s class, using data from the American Bar Association. Among all graduates who reported their job status, 32,775 found full-time, long-term work, meaning the job lasted at least a year. ... Of those jobs, 26,337 required passing the bar, meaning they were typical legal jobs. An additional 4,714 were in fields that technically did not require law degrees, but where employers preferred to hire J.D.s anyway—think congressional staffers, labor organizers, or NGO workers. Finally, 1,724 were in jobs completely unrelated to law, which sounds bad, but the reality is that a certain number of graduates always do something unconnected to their degree.

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Let’s say those numbers hold. In that case, we can expect that about 91 percent of the class of 2016 will find long-term, full-time work, compared with about 72 percent last year. About 73 percent would be in full-time, long-term legal jobs, compared with 58 percent last year. Essentially, employment rates would look similar to those in 2007, when the mid-2000s legal hiring wave crested. That year, about 92 percent of graduates were employed, and 76.9 percent obtained legal jobs. (Both those figures included part-time and short-term positions).

(Hat Tip: Jordan Barry.)

Update:  Above the Law, The ATL Markup Of Slate’s ‘Apply To Law School Now!’ Article

June 26, 2014 in Legal Education | Permalink | Comments (3)

Mulligan: The Massive Tax Increase Hidden Inside Obamacare

Real Clear Politics:  The Massive Tax Increase Hidden Inside Obamacare, by Casey Mulligan (Chicago):

The ACA ... is full of implicit taxes. Many of them have remained hidden in the "fog of controversy" surrounding the law and their effects excluded from economic analyses of it. The chart below puts the ACA's new taxes in perspective of federal tax increases over the past seventy years. The taxes include federal personal income taxes (Form 1040, shown in pink), social insurance payroll taxes (gray), and various employment and implicit taxes (red).

Let's not be surprised that, as we implement a new law that taxes jobs and incomes, we are ending up with fewer jobs and less income.

N. Gregory Mankiw (Harvard), How Much Has the Affordable Care Act Reduced Potential GDP?

June 26, 2014 in Tax | Permalink | Comments (0)

Papers from the 2013 IRS-TPC Research Conference: Administration at the Centennial

TPC-IRSThe IRS has released the papers from the 2013 IRS-TPC Research Conference: Administration at the Centennial (abstracts of papers here):

Session #1  Individual Income Tax Dynamics

Session #2:  Business Compliance Behavior

Session #3:  Corporation Income Tax Enforcement

Session #4:  Lessons From Other Tax Administrations

June 26, 2014 in IRS News, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 413

Fox News Poll:  Voters Think IRS Emails Were Deliberately Destroyed:

The consensus is: it’s no accident. More than three-quarters of voters -- 76 percent -- think the emails missing from the account of Lois Lerner, the ex-IRS official at the center of the scandal over targeting of conservative groups, were deliberately destroyed. ... That suspicion is shared across party lines, albeit to varying degrees. An overwhelming 90 percent of Republicans think the emails were intentionally destroyed, as do 74 percent of independents and 63 percent of Democrats. Overall, just 12 percent of voters believe the emails were destroyed accidentally. Another 12 percent are unsure.

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Wall Street Journal:  No Confidence: Hardly Anybody Believes the IRS's Story About Lois Lerner's "Lost" Emails, by James Taranto:

The proportion of respondents who believe the IRS's claim to have destroyed the emails accidentally: 12%. That's congressional-approval-rating territory. Seventy-six percent disbelieve the IRS story, and the remaining 12% say they're "unsure." Asked whether Congress should continue to investigate, the ayes had it, 74% to 21%. ...

Each of these developments refutes Obama's claim that there was "not even a smidgen of corruption." And if the public is right that the destruction of emails was a deliberate coverup--and keep in mind that not just Lois Lerner but six other IRS employees are said to have suffered contemporaneous hard-drive crashes--that surely qualifies as "mass corruption," even irrespective of the facts of the underlying scandal.

The Fox poll is a stunning vote of no confidence not just in the Obama administration but in the government itself. Public skepticism of government is a healthy impulse, and in this case it seems fully warranted. A government that cannot inspire even a minimal degree of public confidence is a danger to itself and to the country.

Red State:  An Intellectually Honest Media Would Ask This Question:

Ignore, for a minute, the IRS targeting of conservative groups and the erasure of seven hard drives at the IRS. Yes, ignore all that for a moment.

While the media is doing its best to avoid that subject, with difficulty, it is absolutely and willfully ignoring another IRS scandal that, had it happened in the Bush Administration, would be the lead story of every nightly newscast and above the fold on the front page of every newspaper in America.

We now know that some person or persons at the IRS intentionally and maliciously leaked confidential tax records of a non-profit organization so that gay rights activists could target the donors of the organization for harassment. We know this from the emails of the gay rights activist who obtained the records through, what he described, as “a conduit” from the IRS. He then sent the data to the gay rights group Human Rights Campaign, which then put the records online. The records contained the names and addresses of donors to the National Organization for Marriage. The IRS is not only seemingly targeting conservative groups, but is now admitting to leaking information about a conservative group so others can target their donors.

Yes, the IRS is admitting someone at the IRS did this and is paying the legal fees of the National Organization for Marriage as a result.

The gay rights activist who received and disseminated the information, Matthew Meisel, “invoked his fifth amendment right not to incriminate himself” and he would not identify his conduit.

This all raises a question an honest media would ask: why has Eric Holder refused to investigate and prosecute this?

The American media will not ask this question because the National Organization for Marriage opposes gay marriage. The donors to the group, in the media’s mind, are bigots. To the American media they deserve no protection. They are oppressors.

But an honest media that believed in equal justice under the law would have to ask the question — why will the Justice Department not investigate and prosecute those within the IRS who leaked confidential tax records to political opponents of the group.

Must we wait until a Republican administration does this?

It seems we need more than one special prosecutor to investigate the IRS and Darryl Issa should be holding hearings on this matter. The IRS is not only seemingly targeting conservative groups, but is leaking information about conservative groups so others can target their donors.

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June 26, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, June 25, 2014

Osgood Presents Reform of [the Tax Treatment of] Nonprofit Institutions Today at Washington University

OsgoodRussell K. Osgood (Washington University) presents Reform of [the Tax Treatment of] Nonprofit Institutions at Washington University today as part of its Faculty Workshop Series:

The paper: 1) reviews the growth in many dimensions of the nonprofit sector, 2) discusses the history from 1969 onward of the 1969 Act and the subsequent lack of statutory reform due to Congressional inaction and the reasons for it, and 3) makes six significant proposals, including imposition of 1% excise tax on the endowments of all nonprofits, redrafting and narrowing the definitions of allowable 501(c)(3) purposes and regulating more heavily changes in purposes, expanding the taxation of quasi business income by taxing all income “not closely” related to the exempt purpose(s), eliminating much of the private foundation regime but requiring private foundations to liquidate after ten years and disqualifying them for any violation of core fiduciary duties, and revising the 170 deduction rules by limiting the deductibility (to the higher of adjusted basis or 50% of fair market value) of appreciated property, reducing the estate and gift tax charitable deduction limit to 50% (vs. 100%) of the gifted property, and reducing the regular contribution limits for all property and all taxpayers to a uniform 25% of adjusted gross income with only a one year carry forward.

June 25, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

WSJ: New Law School Courses at Columbia, Georgetown, Harvard, Pepperdine, and Yale

Wall Street Journal Law Blog, New Law School Courses Take on Robots, Videogames and Piketty-mania:

Schedule[Here] are among the more unconventional course offerings making their debut this fall semester, as law schools continue to expand their curricula beyond the world of torts, contracts and criminal procedure. It’s a trend that has drawn criticism from traditionalists like Justice Antonin Scalia, who thinks schools should stick to core subjects, while legal educators say students appreciate the chance to delve into more contemporary or quirky areas. At the very least, the new courses offer an interesting snapshot of faculty interests and research trends.

June 25, 2014 | Permalink | Comments (1)

University of Oxford 8th Annual Academic Tax Symposium

OxfordThe Oxford University Centre for Business Taxation's 8th Annual Academic Tax Symposium continues today with these speakers and papers:

David Weisbach (Chicago), International Capital Taxation
Discussant:  Alan Auerbach (UC-Berkeley)

Chris Sanchirico (Pennsylvania), As American as Apple Inc.: Tax and Ownership Nationality
Discussant:  Ilan Benshalom (Hebrew University of Jerusalem) 

Johannes Becker (University of Muenster), A Negotiation-based Model of Tax-induced Transfer Pricing (with Ron Davies (University College Dublin))
Discussant:  Michael Stimmelmayer (KOF, ETH Zurich) 

Mitchell Kane (NYU), Transfer Pricing, Integration, and Novel Intangibles: A Consensus Approach to the Arm’s Length Standard
Discussant:  John Vella (Oxford University)

Alfons Weichenrieder (Goethe University Frankfurt), Does Exchange of Information Between Tax Authorities Influence Foreign Direct Investment Into Tax Havens? (with Julia Braun (WU Vienna University of Economics and Business))
Discussant:  Celine Azemar (Glasgow University) 

Jeffrey Hoopes (Ohio State), Real Costs of Disclosure: Evidence From an Exogenous Shock to Subsidiary Disclosure in the UK (with Jaron Wilde (Iowa))
Discussant:  Travis Chow (Singapore Management University)

David Agrawal (Georgia), The Internet as a Tax Haven? The Effect of the Internet on Tax Competition
Discussant:  Giorgia Maffini (Oxford University) 

June 25, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Mankiw: How Inherited Wealth Helps the Economy

New York Times op-ed:  How Inherited Wealth Helps the Economy, by N. Gregory Mankiw (Harvard):

Is inherited wealth making a comeback?

Yes, says Thomas Piketty, author of the best seller “Capital in the Twenty-First Century.” Inherited wealth has always been with us, of course, but Mr. Piketty believes that its importance is increasing. He sees a future that combines slow economic growth with high returns to capital. He reasons that if capital owners save much of their income, their wealth will accumulate and be passed on to their heirs. He concludes that individuals’ living standards will be determined less by their skill and effort and more by bequests they receive.

To be sure, one can poke holes in Mr. Piketty’s story. Since the book came out, numerous economists have been doing exactly that in book reviews, blog posts and academic analyses.

Moreover, given economists’ abysmal track record in forecasting, especially over long time horizons, any such prognostication should be taken with a shaker or two of salt. The Piketty scenario is best viewed not as a solid prediction but as a provocative speculation.

But it raises the question: So what? What’s wrong with inherited wealth?

First, let’s consider why parents leave bequests to their children. I believe that this decision is based on three principles:

  1. Intergenerational Altruism
  2. Consumption Smoothing
  3. Regression Toward the Mean

Together, these ideas explain why top earners often leave sizable bequests to their families. Because of intergenerational altruism, they make their consumption and saving decisions based not only on their own needs but also on those of their descendants. Because of regression toward the mean, they expect their descendants to be less financially successful than they are. Hence, to smooth consumption across generations, they need to save some of their income so future generations can consume out of inherited wealth. This logic also explains why many people aren’t inclined to reduce their current spending so they will have money saved for bequests. ...

The bottom line is that inherited wealth is not an economic threat. Those who have earned extraordinary incomes naturally want to share their good fortune with their descendants. Those of us not lucky enough to be born into one of these families benefit as well, as their accumulation of capital raises our productivity, wages and living standards.

June 25, 2014 in Tax | Permalink | Comments (4)

A Contrarian Perspective on the Student Debt 'Crisis'

New York Times:  The Reality of Student Debt Is Different From the Clichés, by David Leonhardt:

The deeply indebted college graduate has become a stock character in the national conversation: the art history major with $50,000 in debt, the underemployed barista with $75,000, the struggling poet with $100,000.

The anecdotes have created the impression that such high levels of student debt are typical. But they’re not. They are outliers, and they’re warping our understanding of bigger economic problems.

In fact, the share of income that young adults are devoting to loan repayment has remained fairly steady over the last two decades, according to [Brookings Institution data]

Brookings Institution:  Is a Student Loan Crisis on the Horizon?, by Beth Akers & Matthew M. Chingos:

BrookingsCollege tuition and student debt levels have been increasing at a fast pace for at least two decades. These well-documented trends, coupled with an economy weakened by a major recession, have raised serious questions about whether the market for student debt is headed for a crisis, with many borrowers unable to repay their loans and taxpayers being forced to foot the bill.

In this report, Beth Akers and Matthew Chingos analyze more than two decades of data on the financial well-being of American households and find that in reality, the impact of student loans may not be as dire as many commentators fear. 

The authors draw on data from the Survey of Consumer Finances (SCF) administered by the Federal Reserve Board to track how the education debt levels and incomes of young households evolved between 1989 and 2010. Their analysis produces three particularly noteworthy and new findings:

  1. Roughly one-quarter of the increase in student debt since 1989 can be directly attributed to Americans obtaining more education, especially graduate degrees.  The average debt levels of borrowers with a graduate degree more than quadrupled, from just under $10,000 to more than $40,000.  By comparison, the debt loads of those with only a bachelor’s degree increased by a smaller margin, from $6,000 to $16,000.
  2. Increases in the average lifetime incomes of college-educated Americans have more than kept pace with increases in debt loads.  Between 1992 and 2010, the average household with student debt saw an increase of about $7,400 in annual income and $18,000 in total debt.  In other words, the increase in earnings received over the course of 2.4 years would pay for the increase in debt incurred.
  3. The monthly payment burden faced by student loan borrowers has stayed about the same or even lessened over the past two decades.  The median borrower has consistently spent three to four percent of their monthly income on student loan payments since 1992, and the mean payment-to-income ratio has fallen significantly, from 15 to 7 percent.  The average repayment term for student loans increased over this period, allowing borrowers to shoulder increased debt loads without larger monthly payments.

Figure. Monthly Student Loan Payment-to-Income Ratios, 1992-2010

Ratio of Loan Payments to Income

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June 25, 2014 in Legal Education | Permalink | Comments (6)

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

Tax Analysys Logo (2013)Bret Wells (Houston), Corporate Inversions and Whack-a-Mole Tax Policy, 143 Tax Notes 1429 (June 23, 2014):

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

June 25, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Former Law Student Brings Federal Lawsuit Over D Grade in Contracts

Kaplan: Covering Retirement Health Care Costs

Richard L. Kaplan (Illinois), Desperate Retirees: The Perplexing Challenge of Covering Retirement Health Care Costs in a YOYO World, 20 Conn. Ins. L.J. 433 (2014):

A retiree’s single largest and most unpredictable expense is paying for health care, and this article explains the various choices and options that a retiree confronts regarding that expense. The article examines the traditional components of Medicare (Parts A and B), prescription drug plans (Medicare Part D), Medigap coverage, and managed care alternatives, as well as long-term care insurance. Each section addresses the financial trade-offs and time-sensitive decisions that are involved.

June 25, 2014 in Scholarship, Tax | Permalink | Comments (0)

Brooklyn Law School Dean: 15% Tuition Cut Benefits Everyone, Not Just Students

Chronicle of Higher Education op-ed:  Lowering Law-School Tuition Benefits Everyone, Not Just the Students, by Nicholas W. Allard (Dean, Brooklyn):

Brooklyn LogoBrooklyn Law School will cut tuition by 15 percent beginning in the 2015-16 academic year, a decision that has received sustained national attention and helped prompt a much-needed public discussion about skyrocketing tuitions at law schools. ...

The fact is that the financial model of law schools is broken. Unless the schools do what they can to make legal education more affordable, they will price themselves out of business, contribute to the high cost of legal services that most people need, and widen the gap in access to justice. ...

We are hardly the only law school that can offer impressive reasons for students to attend our institution, so why would we—or any law school—throw money at propping up artificial rankings when we could be giving back to our students? As we continue to prudently manage our overall costs, strengthen our balance sheet, and benefit from the generosity of our alumni, we are going to invest even more in our students. Law schools feel pressure to cut back, do less, and charge more. We’re taking a different approach: doing more and charging less.

Matt Leichter, Lowering Law School Tuition Mainly Benefits Students, Taxpayers

June 25, 2014 in Legal Education | Permalink | Comments (2)

The IRS Scandal, Day 412

New York Post editorial:  The IRS Smirks:IRS Logo 2

That was quick. During a congressional hearing Monday night, IRS Commissioner John Koskinen — an attorney — asserted the IRS had done nothing criminal.

Rep. Trey Gowdy (R-SC), then asked what criminal statutes he relied on to reach that judgment. Koskinen admitted he hadn’t looked at any.

Less than 24 hours later, America’s top official for archiving federal records, David Ferriero, appeared before Congress. He said the IRS “did not follow the law.”

Not that this will have much effect on Commissioner Koskinen, as smug and imperious as any bureaucrat you will met.

Throughout these hearings, he’s come across less as a professional determined to restore the good name of the IRS than a Democratic Party hack who thinks the IRS is the victim here.

Wall Street Journal editorial:  IRS Email Jeopardy: The Agency Had a Legal Obligation to Retain the Records It Lost:

The IRS is spinning a tale of bureaucratic incompetence to explain the vanishing emails from former Tax Exempt Organizations doyenne Lois Lerner and six other IRS employees. We have less faith by the minute that there is an innocent explanation for this failure to cooperate with Congress, but even if true it doesn't matter. The IRS was under a legal obligation to retain the information because of a litigation hold.

In 2009 a pro-Israel group called Z Street applied to the IRS for tax-exempt status. When the process was delayed, an IRS agent told the group that its application was undergoing special review because "these cases are being sent to a special unit in the D.C. office to determine whether the organization's activities contradict the Administration's public policies." In August 2010 Z Street sued the IRS on grounds that this selective processing of its application amounted to viewpoint discrimination.

Under the Federal Rules of Civil Procedure and legal precedent, once the suit was filed the IRS was required to preserve all evidence relevant to the viewpoint-discrimination charge. That means that no matter what dog ate Lois Lerner's hard drive or what the IRS habit was of recycling the tapes used to back up its email records of taxpayer information, it had a legal duty not to destroy the evidence in ongoing litigation. ...

Attorney General Eric Holder won't name a special prosecutor, but there's still plenty of room for the judge in the Z Street case to force the IRS to explain and answer for its "willful spoliation" of email evidence.

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June 25, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, June 24, 2014

University of Oxford 8th Annual Academic Tax Symposium

OxfordThe Oxford University Centre for Business Taxation's 8th Annual Academic Tax Symposium kicks off today with these speakers and papers:

Joel Slemrod (Michigan), Do the Laws of Tax Incidence Hold? Point of Collection and the Pass-through of State Diesel Taxes (with Wojciech Kopczuk (Columbia), Justin Marion (UC-Santa Cruz) & Erich Muehlegger (Harvard))
Discussant:  Stephen Bond (Oxford)

Owen Zidar (UC-Berkeley), Who Benefits From State Corporate Tax Cuts? A Local Labor Markets Approach With Heterogeneous Firms (with Juan Carlos Suárez Serrato (Stanford))
Discussant:  Martin Simmler (DIW, Berlin)

Jing Xing (Oxford Corporate Tax Incentives and Capital Structure: Empirical Evidence From the UK Tax Returns (with Michael Devereux (Oxford) & Giorgia Maffini (Oxford))
Discussant:  Dhammika Dharmapala (Illinois)

Jacob Nussim (Bar-Ilan), A Theory of Tax Losses Mechanisms (with Avraham Tabbach (Tel Aviv))
Discussant:  Norman Gemmell (Victoria)

June 24, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

NY Times Debate: Are College Presidents Overpaid?

NY Times Room for DebateNew York Times Room for Debate:  Are College Presidents Overpaid?:

Despite continued talk in academia of austerity – resulting in program cuts, loss of tenure-track jobs and increasing reliance on part-time adjuncts – the salaries of university presidents have reached record levels. Recently, at the University of Alberta, 56 Canadian academics applied for the $400,000-a-year job of the departing president in groups of four to highlight the pay disparity.

Are university presidents overpaid, or does the compensation appropriately reflect their wide range of management, recruitment and fund-raising duties?

  • Dorothy A. Brown (Emory University), Salary Gaps Affect Even Those on Top:  "In one study of private universities, white presidents outearn their black peers by about $37,000 on average, and male presidents outearn their female peers by over $100,000."
  • Kathleen Cawsey (Dalhousie University), End the Era of the C.E.O. College President:  "The increasing costs of highly paid college presidents and administrators come on the backs of adjuncts professors and students."
  • Raymond D. Cotton (Mintz Levin, Washington, D.C.), Colleges Must Compete to Attract the Best Leadership:  "By and large, college presidents are not overpaid in relationship to their responsibilities and the compensation market place."
  • Cary Nelson (University of Illinois), A Lesson in Disparity:  "If students learn that adjunct faculty are earning less than the minimum wage while the university president earns a million dollars, that practical lesson may trump the other values the institution promotes."

June 24, 2014 in Legal Education | Permalink | Comments (1)

Male/Female Faculty Salary Differentials

Huffington Post, Male Faculty Are Making A Lot More Than Female Faculty At Some Of The Best Colleges:

Several of the most prestigious colleges and universities in the country pay male faculty on average about $40,000 more than their female colleagues, according to a new analysis by data website FindTheBest.

Four Ivy League institutions -- the University of Pennsylvania, Columbia, Princeton and Harvard -- were among the 10 schools with 50 or more faculty members that had the greatest wage gap between men and women. Duke, the University of Chicago and Northwestern ranked in the top 10 as well.

The biggest wage gap among those larger schools was found at Rockefeller University, which paid male faculty nearly $48,000 more than female faculty. New York Law School came in second with a $44,000 male-female salary difference.

Above the Law, This Law School Pays Male Faculty $44K More Than Female Profs:

New York Law School pays its male professors on average $246,312, while its female professors take home on average $186,480.

June 24, 2014 in Legal Education | Permalink | Comments (4)

Senate Holds Hearing Today on Student Loans and Tax Policy

Senate LogoThe Senate Finance Committee holds a hearing today on Less Student Debt from the Start: What Role Should the Tax System Play?:

  • Mark J. Mazur (Assistant Secretary for Tax Policy, U.S.Treasury Department)
  • Jayne Caflin Fonash (Director of School Counseling, Loudoun Academy of Science, Sterling, VA)
  • Scott A. Hodge (President, Tax Foundation, Washington, D.C.)
  • Amber Lee (Graduate, Willamette High School, Eugene, OR)
  • Dean Zerbe (National Managing Director, alliantgroup, Washington, D.C.) 

In connection with the hearing, the Joint Committee on Taxation has released Background And Present Law Related To Tax Benefits For Education (JCX-70-14) (June 20, 2014):

This document ... includes a description of present law and analysis relating to tax benefits for education.

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June 24, 2014 in Congressional News, Tax | Permalink | Comments (0)

Hoffer & Walker: Kuretski, the Tax Court, and the Administrative Procedure Act

HWResponding to Sunday’s op-ed by Patrick Smith and Monday's op-ed by Kristin Hickman on Friday’s D.C. Circuit opinion in Kuretski v. Commissioner, No. 13-1090 (D.C. Cir. June 20, 2014):  TaxProf Blog op-ed:  Kuretski, the Tax Court, and the Administrative Procedure Act, by Stephanie Hoffer (Ohio State) & Christopher J. Walker (Ohio State):

Friday’s decision in Kuretski v. Commissioner is perhaps the first major opinion penned by Judge Sri Srinivasan—a recent Obama appointee considered by many to be on the short list for the Supreme Court.  In a well-written opinion, the D.C. Circuit rejects a constitutional challenge to the President’s removal power of judges on the United States Tax Court.  To reach this conclusion, the court has to grapple with the Tax Court’s puzzling position in the modern administrative state, concluding that the Tax Court is not an Article III (judicial branch) court but a court established under Article I (legislative branch) that actually exercises Article II (executive branch) powers.  Or as Judge Srinivasan writes (at 20) for the court:

We have explained that Tax Court judges do not exercise the ‘judicial power of the United States’ pursuant to Article III.  We have also explained that Congress’s establishment of the Tax Court as an Article I legislative court did not transfer the Tax Court to the Legislative Branch.  It follows that the Tax Court exercises its authority as part of the Executive Branch.

No doubt many tax and administrative law professors will weigh in on the constitutional issues (early coverage here, here, and here).  Here, however, we focus on Kuretski’s impact on the relationship between the Tax Court and the Administrative Procedure Act (“APA”).  Patrick Smith, for instance, worries that Kuretski could open the door for the argument that “APA judicial review provisions simply do not apply in Tax Court proceedings.”  But we agree with the contrary position reached by Kristin Hickman (Minnesota) and write separately to show our math for this conclusion. 

At the outset, it is important to underscore that Smith’s worry is already a reality.  As we explain in a forthcoming paper, The Death of Tax Court Exceptionalism, 99 Minn. L. Rev. ___ (2014), the Tax Court has declared that “[t]he APA has never governed proceedings in the Court (or in the Board of Tax Appeals).”  In other words, the Tax Court refuses to apply the APA’s default standard (abuse of discretion) and scope (administrative record) of review.  Instead, it considers the default in both contexts to be de novo, and only departs from de novo review when it determines that the Internal Revenue Code suggests more deferential review.

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June 24, 2014 in Scholarship, Tax | Permalink | Comments (0)

Kuretskis' Counsel Responds to Smith and Hickman Op-eds on Treating the Tax Court as Part of the Executive Branch

SamahonResponding to Sunday’s op-ed by Patrick Smith and Monday's op-ed by Kristin Hickman on Friday’s D.C. Circuit opinion in Kuretski v. Commissioner, No. 13-1090 (D.C. Cir. June 20, 2014):  TaxProf Blog op-ed:  Kuretskis' Counsel Responds to Smith and Hickman Op-eds on Treating the Tax Court as Part of the Executive Branch, by Tuan Samahon (Villanova; Counsel for Peter and Kathleen Kuretski):

I am one of the professors who serve as counsel for the taxpayers, the Kuretskis.  I wanted to comment on the op-eds by Patrick Smith and Kristin Hickman on the possible consequences of the D.C. Circuit’s opinion from last Friday.

First, Patrick Smith expresses concern that the Tax Court may not be able to conduct Administrative Procedure Act court review of the IRS if the Tax Court, now according to the Kuretski opinion, exercises executive power.  Professor Hickman is skeptical of this effect of the opinion. She notes that congressional statutory definitions may not always jibe with constitutional ones. 

Neither of their op-eds, though, included the following passage from the opinion showing what the panel thought about potential collateral consequences on other laws.  Judge Srinivasan wrote:

And while we have no need to reach the issue here, Congress, in establishing those entities [i.e., the Article I Tax Court and the Article I Court of Appeals for the Armed Forces] as a “court” rather than an “agency,” perhaps also exempted them from statutes that apply solely to executive “agencies.” Cf. Megibow v. Clerk of the U.S. Tax Court, No. 04- 3321, 2004 U.S. Dist. LEXIS 17698, at *13-22 (S.D.N.Y. Aug. 31, 2004) (Tax Court is a “court of the United States” and not an “agency” under the Administrative Procedure Act, 5 U.S.C. § 551(1)), aff’d, 432 F.3d 387 (2d Cir. 2005) (per curiam).  [slip op. at 26]

This dictum seems to lean toward Professor Hickman’s view.

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June 24, 2014 in Scholarship, Tax | Permalink | Comments (0)

Law Profs React to Steve Bainbridge: 'Law Teaching Is Walking Off a Cliff and Nobody Seems to Give a Damn'

These law profs react to yesterday's post, Bainbridge: 'The Profession I Love--Law Teaching--Is Walking Off a Cliff and Nobody Seems to Give a Damn'

  • Steve Bainbridge (UCLA)
  • Andy Grewal (Iowa)
  • Jeff Harrison (Florida)
  • Doug Kahn (Michigan)
  • Michael Livingston (Rutgers)
  • Henry Manne (George Mason)
  • Jim Maule (Villanova)
  • Ted Seto (Loyola-L.A.)
  • Tom Smith (San Diego)
  • Daniel Sokol (Florida)

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June 24, 2014 in Legal Education | Permalink | Comments (5)

The IRS Scandal, Day 411

IRS Logo 2Real Clear Politics:  Halperin on IRS Scandal: If This Was A GOP Admin, "This Story Would Be A National Obsession":

Mark Halperin:  Because when any government agency, particularly one as powerful as the IRS, engages in something that even people sympathetic to the admission says looks weird and suspicious, it's incumbent on all of the national media to aggressively ask more questions. The Republicans in Congress are asking questions. I think with a different administration, one that was a Republican administration, this story would be a national obsession, and, instead, it's getting coverage here and a few other places. But it deserves a lot more questions.

Washington Post op-ed by Jonathan Turley (George Washington):

As federal agencies have grown in size and scope, they have increasingly viewed their regulatory functions as powers to reward or punish citizens and groups. The Internal Revenue Service offers another good example. Like the patent office, it was created for a relatively narrow function: tax collection. Yet the agency also determines which groups don’t have to pay taxes. Historically, the IRS adopted a neutral rule that avoided not-for-profit determinations based on the content of organizations’ beliefs and practices. Then, in 1970, came the Bob Jones University case. The IRS withdrew the tax-exempt status from the religious institution because of its rule against interracial dating on campus. The Supreme Court affirmed in 1983 that the IRS could yank tax exemption whenever it decided that an organization is behaving “contrary to established public policy” — whatever that public policy may be. Bob Jones had to choose between financial ruin and conforming its religious practices. It did the latter.

There is an obvious problem when the sanctioning of free exercise of religion or speech becomes a matter of discretionary agency action. And it goes beyond trademarks and taxes. ... When agencies engage in content-based speech regulation, it’s more than the usual issue of “mission creep.” As I’ve written before in these pages, agencies now represent something like a fourth branch in our government — an array of departments and offices that exercise responsibilities once dedicated exclusively to the judicial and legislative branches. Insulated from participatory politics and accountability, these agencies can shape political and social decision-making. To paraphrase Clausewitz, water, taxes and even trademarks appear to have become the continuation of politics by other means.

Real Clear Politics op-ed:  An Arrogant and Lawless IRS, by Michael Gerson:

Noted management expert and IRS Commissioner John Koskinen was apparently called out of retirement -- like the Ted Williams of evasive, unapologetic bureaucrats -- to destroy what is left of his agency's credibility. ...

In recent congressional testimony, Koskinen admitted that the emails were irretrievably gone; that the "backup tapes" had been erased; and that Lerner's hard drive was apparently destroyed in an aggressive act of recycling. With that settled, Koskinen expressed his "hope that the investigations ... can be concluded in the very near future."

It is a mix of arrogance and delusion that seems designed to incense Republicans. Koskinen had delayed informing Congress of the lost emails for months, even while assuring members they would be provided. "It was my decision that we complete the investigation," he said, "so we could fully advise you as to what the situation was." Translation from management-speak: We wanted to get our story straight before we advised you of anything. Koskinen complained about the breadth of subpoenas and the "piecemealing out" of information.

Translation: We will provide you what we want when we want. "Every email," Koskinen assured the House Ways and Means Committee, "has been preserved that we have." Except the ones they don't have -- and somehow snuffed out, tied to an anvil and thrown into the ocean. ...

[T]he IRS has managed to feed anti-government sentiments by inhabiting anti-government stereotypes. It has undermined respect for authority. And it doesn't seem even to understand the damage it has done.

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June 24, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Monday, June 23, 2014

WSJ: Odds Improve for New Law Grads

Following up on Friday's post, NALP: Law Grads Continue to Struggle to Find Jobs:  Wall Street Journal, Big Law Firms Resume Hiring; Odds Improve for New Graduates, Though Levels Remain Soft, by Jennifer Smith:

Entry-level hiring at major law firms is ramping back up from the recession-era doldrums. But students with their hearts set on a job at a big firm still face plenty of competition. The class of 2013 was the largest crop yet, releasing 46,776 graduates into a job market already awash with unemployed lawyers.

The chances of landing a job at a large law firm have improved from the hiring nadir a few years back, when sputtering demand for legal services triggered layoffs and cutbacks. Of class-of-2013 law graduates working in private practice about nine months after graduation, 20.6% landed a job at a firm with more than 500 lawyers, according to the National Association for Law Placement. Such positions accounted for 16.2% of law-firm jobs held by 2011 graduates. But the total number of such jobs taken by the class of 2013 remains far lower than for the class of 2009: 3,980 positions compared with 5,156.

The employment outlook for new lawyers is expected to brighten some over the next few years, as plunging law-school enrollments will ease the glut of new graduates—"the pig working its way through the snake," in the words of one law-firm manager. Of 2013 graduates, 64.4% had jobs for which bar passage was required, according to the NALP, and 51.1% of employed graduates were working in private practice.

For now, the hiring picture at major firms varies widely. This fall, the group of first-year associates joining New York's elite Cravath, Swaine & Moore LLP will be about the same size as the starting class from 2009. "I would say we're back," said William Fogg, managing partner of the firm's corporate department.

Roughly 20 big law firms, including WilmerHale, have boosted the size of their first-year class since 2009, according to Chambers Associate, a legal publication aimed at law students. "The trend indicates recovery, but we are very unlikely to see hiring at prerecession levels any day soon," said Antony Cooke, the guide's editor. Indeed, other firms have ratcheted back their starting and summer classes as much as 50% over the same time period.

WSJ

June 23, 2014 in Legal Education | Permalink | Comments (1)

Tamara Ashford, Awaiting Senate Confirmation as Tax Court Judge, Named Acting Assistant Attorney General for the Tax Division

AshfordOn June 6, Eric Holder named Tamara W. Ashford Acting Assistant Attorney General for the Tax Division.  Ms. Ashford was the Deputy Assistant Attorney General for Appellate and Review in the Tax Division.  She was nominated by President Obama in September 2013 to be a a Judge on the U.S. Tax Court and is awaiting confirmation by the Senate following her unanimous approval by the Senate Finance Committee

June 23, 2014 in Tax | Permalink | Comments (0)

WSJ: Offshore Accounts: What to Do Now Before FATCA Kicks in on July 1?

Wall Street Journal Tax Report:  Offshore Accounts: What to Do Now, by Laura Saunders:

The federal government's campaign to track down money held by U.S. taxpayers in foreign countries shifts into high gear July 1.

That is when the main provisions of the Foreign Account Tax Compliance Act, known as Fatca, come into force.

The law, which Congress passed in 2010, is pushing tens of thousands of foreign banks and other financial institutions to disclose information about U.S. customers. It will make life more complex and expensive for many U.S. taxpayers with financial ties abroad, affecting everything from retirement savings to investments to divorce settlements.

WSJ

"Fatca is an ambitious effort to root out wealthy U.S. taxpayers hiding money offshore and put an end to tax evasion as a profitable line of business for banks," says Michael Graetz, a Columbia University law professor and former top U.S. Treasury Department official. "But U.S. authorities need to make an effort to avoid catching innocent middle-class citizens in its net." ...

[M]ore than 77,000 banks and other financial firms abroad have agreed, effective July 1, to report data on U.S. accounts, including 784 in Singapore, 13 in Albania and four in Chad.

WSJ 2

Until then, here is a rundown of issues you need to know about—whether you are a U.S. citizen living or working abroad, a foreign citizen working in the U.S., a U.S. resident with assets abroad or a green-card holder living abroad.

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June 23, 2014 in Tax | Permalink | Comments (0)

University of Oxford Hosts Conference Today on Tax Competition and BEPS

OxfordThe Oxford University Centre for Business Taxation hosts a conference today on Tax Competition and BEPS.  United States Tax Profs presenting papers include:

  • Alan Auerbach (UC-Berkeley), Fundamental Issues in the Allocation of Profit
  • Dhammika Dharmapala (Illinois), What is the Scale of Base Erosion and Profit Shifting?: "The issue of tax-motivated income shifting within multinational firms – or “base erosion and profit shifting” (BEPS) – has attracted increasing global attention in recent years. This paper provides a survey of the empirical literature on this topic. Its emphasis is on reviewing and elucidating what is known about the magnitude of BEPS. It begins by outlining a simple conceptual framework that helps to clarify aspects of governments’ responses to the BEPS phenomenon and the potential role of the initiative on BEPS currently being undertaken by the OECD. The paper then discusses different empirical approaches to identifying income-shifting, describes existing data sources, and summarizes the findings of the empirical literature. A major theme that emerges from this survey is that in the more recent empirical literature, which uses new and richer sources of data, the estimated magnitude of BEPS is typically much smaller than that found in earlier studies. The paper seeks to provide a framework within which to conceptualize this magnitude and its implications for policy. It concludes by highlighting the importance of existing legal and economic frictions as constraints on BEPS, and by discussing possible ways in which future research might model these frictions more precisely."
  • Michael Graetz (Columbia), Prospects for Successful Multilateral Agreements 

June 23, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Hickman: Kuretski v. Commissioner: A Fun and Fascinating Bit of Academic Folderol?

Hickman 2014 2Following up on yesterday's op-ed on Friday's D.C. Circuit opinion in Kuretski v. Commissioner, No. 13-1090 (D.C. Cir. June 20, 2014):  TaxProf Blog op-ed:  Kuretski v. Commissioner: A Fun and Fascinating Bit of Academic Folderol?, by Kristin Hickman (Minnesota):

For decades, the Supreme Court and nearly everyone else have regarded statutory for cause removal provisions as protecting government officials from presidential influence.  The D.C. Circuit was never going to turn that understanding on its head by finding Tax Court judges impermissibly influenced by the for cause removal provision of 26 U.S.C. § 7443(f).  Still, in Kuretski, the D.C. Circuit managed to turn a creative but relatively specious argument into an opportunity to say something fun and academically interesting, if ultimately not too practically consequential, about the Tax Court and separation of powers principles.

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June 23, 2014 in Tax | Permalink | Comments (0)

Bainbridge: 'The Profession I love--Law Teaching--Is Walking Off a Cliff and Nobody Seems to Give a Damn'

Stephen Bainbridge (UCLA), How Not to Win Friends and Influence People at a Law Professor Conference:

Announce that empirical legal scholarship is the dumbest idea in the legal academy in the last 20 years. And that most law & PhD. folks are only in law for the law school paychecks. As I just did. Yikes. ...

The shift towards "Law and [fill in the blank with a PhD field]" has been a problem for a long time and a major factor in the separation of the legal academy from the profession and the bench. In today's environment, that trend is unsustainable. We are, after all, in the business of training LAWYERS who will spend their time practicing law not running regressions. ...

I see the profession I love--law teaching--walking off a cliff and nobody seems to give a damn. And, yes, that makes me angry.

Usha Rodrigues (Georgia), The "Law and" Question:

I'm not singing Steve's tune, but I will hum a few bars. ...

In the comments to his post Steve laments that "the legal academy is not producing scholarship that is relevant to the bench and bar or that our graduates (especially at the T14 schools) are coming out of school better versed in theory than professional skills."  This is a problem.  Even than for the general law prof, for  "Law and"s I  think that practice is vital.

To put it bluntly, Harvard/Yale/Chicago/Columbia/Stanford can hire whoever they want, because they're in the business of pedigreeing elite students.  They can hire professors who haven't practiced law and who  write about theoretical topics.  It doesn't effect their students' job prospects.   All the other law schools have lemming-like followed their lead, accepting without question that the way up the USN&WR rankings is to look as much like possible as the T5.  That worked fine during boom times, but in this legal market, it  seems a lot like walking off a cliff.

June 23, 2014 in Legal Education | Permalink | Comments (17)

The IRS Scandal, Day 410

PolitiFact:  Donna Brazile: No Conspiracy Here, IRS Targeted Liberals, Too:

Half True 2The IRS "also investigated liberal groups, groups that had progressive in their name. ... The IRS was basically looking at everybody." Donna Brazile on Sunday, June 22nd, 2014 in comments on CNN's "State of the Union." ...

Brazile is echoing comments Democrats have made for a year. But is she right and the IRS was "basically looking at everybody"?

This question was essentially answered last year by the Treasury Inspector General for Tax Administration, who investigated the IRS’s handling of tax exempt requests between 2010 and 2012. ...

The investigation ultimately found the Cincinnati office used inappropriate criteria to single out certain cases. Over the course of two years, 298 total cases were sent to D.C. for greater scrutiny. According to the investigation, 72 of those groups had the name "tea party," 13 had "Patriot" and 11 had "9/12." The other 202 cases were listed as "other." In 160 of these cases, the application remained open between 206 and 1,138 days, while 108 were approved.

Democrats said 202 is a lot of "other." And later it came out that the word "progressive" was also used to flag applications on another IRS "Be on the Lookout" list.

George also noted that while 16 groups with "progressive" in the name showed up among the 298 cases, that represented just 30 percent of all "progressive" applications. That is in stark contrast to groups with "tea party," "patriot," or "9/12" in their name, of which 100 percent saw their applications held up. ...

So some progressive and liberal groups may have been flagged, and others may have ended up getting swept in the searches run by the Cincinnati office because their names had certain buzz words or phrases, but they didn’t get put through the ringer, at least on par with tea party groups.

Our ruling

Brazile, who did not respond to an email, said the IRS was "looking at everybody" including liberal groups and progressive groups. Yes, some progressive groups did have their tax-exempt status applications flagged as the IRS reviewed whether nonprofit groups were engaging in political activities.

But it wasn’t to the same degree as tea party and other conservative groups, nor did it result in the same actions. The list targeting tea party groups resulted in delayed processing that in some cases lasted almost three years and inquiries into their donors. Further, the inspector general found tea party groups were systematically singled out as part of an office-wide effort, while progressive groups were not.

Weighing all of this, we rate Brazile’s comments Half True.

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June 23, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup