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Friday, August 15, 2014

The IRS Scandal, Day 463

IRS Logo 2Bloomberg, Judge Prods IRS on Effort to Save Lois Lerner’s E-Mail:

A federal judge asked the U.S. Internal Revenue Service for more information on efforts it made to recover missing e-mail from the computer of an agency official at the heart of a quarrel between Congress and the Obama administration.

U.S. District Judge Emmet Sullivan’s order today giving the IRS until Aug. 22 to come up with further details on what it did to retrieve e-mail from the malfunctioning computer of Lois Lerner signals his dissatisfaction with the agency’s earlier explanation, contained in an Aug. 11 filing. 

The order comes in a Freedom of Information Act lawsuit filed by the activist group Judicial Watch. The complaint seeks Lerner’s e-mail and other communications concerning the processing of applications for tax-exempt status.

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August 15, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, August 14, 2014

Fleischer: Kinder Morgan Is Playing Tax Arbitrage With Itself

New York Times DealBook:  Kinder Morgan Is Playing Tax Arbitrage With Itself, by Victor Fleischer (San Diego):

NY Times Dealbook (2013)Kinder Morgan’s plan to “roll up” its affiliated master limited partnerships into a single behemoth corporation makes little sense from a tax perspective. Kinder Morgan is swapping a tax-efficient structure for an inefficient one.

Such a move can only be justified by large nontax benefits. The company projects that it will have a lower cost of capital for future acquisitions and investments. But is a projected economic benefit tomorrow worth a higher tax bill today?

Kinder Morgan is organized as a “C corporation” that pays corporate taxes, but it currently conducts most of its business through two affiliates — Kinder Morgan Energy Partners and El Paso Pipeline Partners — that are organized as master limited partnerships with separate shareholders, known as unit holders, who own about half of each company.

The master limited partnerships are publicly traded. Unlike most publicly traded businesses, however, they qualify as partnerships for tax purposes and pay no corporate tax. Instead, gains and losses are passed through to individual shareholders, who pay tax on their individual tax returns. And like other energy sector partnerships, generous depreciation and amortization allowances pass through to individual unit holders in each partnership, who can often use those tax losses to shelter income from the partnership. (The losses typically cannot be used to offset other income.) ...

[A] significant portion of the value created by the deal is merely being shifted from unit holders to KMI shareholders. Unit holders will benefit indirectly if they continue to hold the KMI stock they receive in the exchange, but they are, in effect, sharing a tax benefit that they paid for. The bottom line is that under the old structure, when an oil pipeline is depreciated, the tax benefit mostly flows to the unit holders. Under the new structure, those deductions will shelter corporate income instead. ...

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August 14, 2014 in Tax | Permalink | Comments (0)

Fall 2014 Law School Applicants Decline 8.2%

LSAC, Three-Year ABA Volume Comparison:

As of 8/08/14, there are 352,406 fall 2014 applications submitted by 54,527 applicants. Applicants are down 6.7% and applications are down 8.2% from 2013. Last year at this time, we had 100% of the preliminary final applicant count ... [and] 100% of the preliminary final application count.

A line chart titled Fall ABA Applicants by Week. The horizontal axis represents months November through August. Along its vertical axis are numbers 0 through 100,000 indicating number of applicants. The line labeled Fall 2012 steadily rises from 16,719 in November to 59,090 in March, then begins to plateau from March until August ending at 67,735. The line labeled Fall 2013 increases from 12,728 in November to 48,674 in March, then begins to plateau from March until August ending at 59,426. The line labeled Fall 2014 rises slightly from 11,340 to 54,527 at the beginning of August.

Matt Leichter, 54,527 Law School Applicants in 2014:

Here’s what this year looks like compared to previous years.

No. Applicants Over App Cycle

August 14, 2014 in Legal Education | Permalink | Comments (1)

TIGTA: IRS Puts Confidential Taxpayer Information at Risk By Giving It to Contractors Without Required Background Checks

TIGTA The Treasury Inspector General for Tax Administration today released Some Contractor Personnel Without Background Investigations Had Access to Taxpayer Data and Other Sensitive Information (2014-10-037):

IRS policy requires contractor personnel to have a background investigation if they will have or require access to Sensitive But Unclassified (SBU) information, including taxpayer information. Allowing contractor personnel access to taxpayer and other SBU information without the appropriate background investigation exposes taxpayers to increased risk of fraud and identity theft.

Taxpayer and other SBU information may be at risk due to a lack of background investigation requirements in five contracts for courier, printing, document recovery, and sign language interpreter services. For example, in one printing services contract, the IRS provided the contractor a compact disk containing 1.4 million taxpayer names, addresses, and Social Security Numbers; however, none of the contractor personnel who worked on this contract were subject to a background investigation. In addition, TIGTA found 12 contracts for which IRS program and procurement office staff correctly determined that contractor personnel required background investigations because they would have access to SBU information; however, some contractor personnel did not have interim access approval or final background investigations before they began working on the contracts. Further, TIGTA identified 20 contracts for which either some or all contractor personnel did not sign nondisclosure agreements. In June 2013, after the period covered by our audit, the IRS issued more explicit guidance requiring the execution of nondisclosure agreements.

August 14, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)

Another Tax Reform Solution: Taxing Consumption

Washington Post op-ed:  Another Tax Reform Solution: Taxing Consumption, by Charles Lane:

According to much conventional wisdom, the flap over corporate “tax inversions” is just the latest evidence that the tax code needs a comprehensive overhaul like the one agreed to by congressional leaders and President Reagan in 1986. Whether you consider it greedy and unpatriotic for U.S. companies to establish corporate headquarters in lower-tax foreign countries, or merely regrettable but rational, part of the solution is to lower that rate and recoup lost revenue by closing loopholes, it is said.

“Lower rates, broader base” was the cardinal principle of the 1986 reform. And it is still the mantra of tax reformers today. House Ways and Means Committee Chairman Rep. Dave Camp (R-Mich.) unveiled a 1986-style plan in March that would trim the top individual and corporate rates, while pinching popular breaks such as the mortgage interest deduction.

There’s just one problem: In 2014, the 1986 model looks like “a dead end.” Or so argues Michael J. Graetz, a former Treasury official in the first Bush administration and longtime advocate of radical tax reform who teaches at Columbia Law School. In his latest paper [The Tax Reform Road Not Taken -- Yet, 67 Nat'l Tax J. 419 (2014)], Graetz contends, plausibly, that the 1986 tax reform worked because it was then possible to pay for rate reductions by eliminating billions of dollars in individual and corporate tax shelters without tackling middle-class breaks like the mortgage interest deduction. Today, though, there’s less low-hanging fruit; a 1986-style reform would be politically difficult because it would be financially difficult, as Camp’s plan and similar attempts at “revenue-neutral” reforms suggest.

Even if our politicians did manage to push this boulder up the hill, Graetz notes, it would roll right back down. At the behest of lobbyists, Congress began fiddling with the 1986 reform almost as soon as it was enacted, giving us today’s loophole-ridden mess.

The United States’ real problem, according to Graetz, is its undue dependence on income taxes — corporate and individual — in the first place. ... Graetz would put a 12.9 percent VAT at the center of a new system — using the revenue to slash the corporate tax rate to 15 percent and eliminate income taxes for all households earning less than $100,000 ($50,000 for singles), that is, 80 percent of current filers. For those above that threshold, there would be two rates, 16 percent and 25.5 percent. Payroll tax rates would stay the same, with credits for low-income workers to offset the regressive impact of the VAT, as well as an additional child tax credit. ...

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August 14, 2014 in Tax | Permalink | Comments (0)

Ryznar: Incentivizing Parental Support for College Tuition through the Tax Code

Margaret Ryznar (Indiana-Indianapolis), Incentivizing Parental Support for College Tuition through the Tax Code, 2013 Mich. St. L. Rev. ___:

University tuition costs continue to increase, while education continues to be important. Efforts to alleviate this problem must be undertaken carefully as to not simply aggravate the problem. To this end, this Article proposes that parental contribution towards university tuition be treated more favorably by the tax code, and in particular, be treated as tax deductible. Universities already expect parental contributions as part of a child’s financial aid package, and this proposed tax deduction may help fulfill that expectation. Furthermore, this proposed deduction would spare students some reliance on the loan system, including the risk of default. This proposed deduction, finally, may be structured in a cost-neutral way. Specifically, the funds used for this deduction would be the taxpayer funds saved from the decrease in loan defaults and loan interest subsidies, which currently cost tens of billions of tax dollars.

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

Applications at New York State Law Schools

New York Law Journal, Four N.Y. Schools Buck Trend in Declining Applications:

New York StateAt least four of New York's 15 law schools are bucking a national trend in declining applications, according to preliminary figures provided by the schools.

New York University [+8%], St. John's [+14%], Syracuse [+6%] and Touro [+5%] all received more applications in the 2014 admissions cycle than they did last year. Another five saw their applicants decline [Albany (-20%), Cardozo (-14%), Fordham (-9%), Hofstra (-9%), Cornell (-2%)] while six did not provide numbers to the New York Law Journal.

Nationwide, applications are down 8.2% since last year, according to the latest figures released Wednesday by the Law School Admission Council. And they have fallen more than 34 percent since 2008.

August 14, 2014 in Legal Education | Permalink | Comments (1)

More Tax Inversion, MLP News

Rebrand: Western Michigan University Cooley Law School

Press Release, Cooley Law is now Western Michigan University Cooley Law School:

WMU Cooley logoAfter reviews by the Higher Learning Commission and the ABA, an affiliation agreement in the works for more than a year has led to a new identity for the nation's largest law school--the Western Michigan University Thomas M. Cooley Law School.

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

The IRS Scandal, Day 462

IRS Logo 2New York Observer:  Time’s Up for Lois Lerner and the IRS, by Sidney Powell:

On July 10, D.C. federal judge Emmet Sullivan gave the IRS thirty days to provide him sworn declarations in the Freedom of Information Act suit filed by Judicial Watch, seeking much of the same information the IRS has effectively kept from Congress. After an “extraordinary” hearing, Judge Sullivan ordered the IRS to tell him under oath exactly what happened to Lois Lerner’s hard drive. He demanded sworn declarations specifying what the agency had done to recover the thousands of emails missing. Time’s up.

The IRS filed its “declarations” yesterday. As an attorney who has read the filings and who has written extensively about this dedicated judge in my book Licensed To Lie, I could not in good conscience sign those filings. It’s not that they are false. Oh no, . . .each is very carefully worded to be literally true (hence, not perjurious). But, each says little, answers less, and reveals nothing that would actually lead to recovery of the emails or to anyone’s accountability for their disappearance in any form. In fact, the few pages say less than has already been revealed elsewhere. ...

[S]omeone in the IRS recommended that Lerner’s hard drive be given to an outside technician to retrieve the emails, but instead, it was destroyed. Who made that recommendation? Who over-rode it? Who authorized the destruction of a hard drive containing evidence of correspondence with the White House? How would that excuse work for a taxpayer’s records? Oooops, sorry. That’s a felony. ... The only thing these miserly declarations prove is that IRS has abdicated all responsibility and has no interest in finding the emails. But Judge Emmet Sullivan does.

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August 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Wednesday, August 13, 2014

TIGTA: Tax Exempt Tax Deadbeats -- Nonprofit Groups Owe the IRS Nearly $1 Billion in Payroll Taxes

TIGTA The Treasury Inspector General for Tax Administration today released Some Tax-Exempt Organizations Have Substantial Delinquent Payroll Taxes (2014-10-012):

IRS records indicate that the majority of tax-exempt organizations pay their Federal taxes. However, a small percentage are not paying their taxes. More than 64,200 (3.8%) tax‑exempt organizations had nearly $875 million of Federal tax debt as of June 16, 2012. While some organizations owed minor amounts, approximately 1,200 tax‑exempt organizations owed more than $100,000 each. Unpaid taxes were often associated with multiple tax periods. For example, nine organizations each had Federal tax debt spanning 10 or more years that collectively totaled more than $5.5 million.

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August 13, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)

Concordia Law Students in Limbo as ABA Delays School's Provisional Accreditation

ConcordiaNational Law Journal, ABA Delays Action on Concordia Law's Accreditation:

Members of Concordia University School of Law’s inaugural class still don’t know whether they’ll be eligible to sit for the bar examination next summer.

The ABA’s Council of the Section of Legal Education and Admissions to the Bar last week delayed action on Concordia’s application for provisional accreditation. Instead, the council appointed a fact-finder to examine the application. ...

With its inaugural class of 45 students nearing graduation, the school had asked the Idaho Supreme Court for a waiver that would allow its graduates to take the state’s bar exam next summer. The court refused in late July.

August 13, 2014 in Legal Education | Permalink | Comments (0)

Obama Donors Show No Aversion to Tax Inversions

Bloomberg, Obama Donors Altman, Effron Embrace Deals President Slams:

President Barack Obama has been bashing companies that pursue offshore mergers to reduce taxes. He hasn’t talked about the people behind the deals -- some of whom are his biggest donors.

Executives, advisers and directors involved in some of the tax-cutting transactions include Blair Effron, an investment banker who hosted Obama for a May fundraiser at his two-level, 9,000-square-foot apartment on Manhattan’s Upper East Side.

Others are Jim Rogers, co-chairman of the host committee for the 2012 Democratic National Convention; Roger Altman, a former senior Treasury Department official who raised at least $200,000 for Obama’s re-election campaign; and Shantanu Narayen, who sits on the president’s management advisory board.

The administration’s connections to more than 20 donors associated with the transactions are causing tensions for the president as he urges Congress to act against the deals and prods the Treasury Department for short-term steps to curb them.

The president’s tough talk also may become a liability as Democrats seek corporate America’s cash this year as they try to preserve their majority in the U.S. Senate.

August 13, 2014 in Tax | Permalink | Comments (0)

Colinvaux: Political Activity Limits and Tax Exemption

Roger Colinvaux (Catholic), Political Activity Limits and Tax Exemption: A Gordian's Knot, 33 Va. Tax Rev. ___ (2014):

The article considers the correct tax treatment of political activity by the tax system and discusses the problems that have arisen from political activity depending on whether the organization is a charity, a noncharitable exempt, or a political organization. The article then examines administrative and legislative options to the problems raised by political activity. Quantum-based solutions to the problem of political activity by noncharitable exempts do not provide a clear advantage over present law. Formally quantifying the “primarily” test would result in more certainty, but would also require that the Service be more, not less, involved in the regulation of political activity. If the policy goal is to curb political activity by noncharitable exempts, changing the test from “primarily” to something more restrictive like “substantially” or “exclusively” would be effective, but would create new categories of taxable nonprofits that are treated worse than political organizations for engaging in less political activity, which is irrational. Further, it is not clear, especially after the Citizens United decision, why as a matter of tax exemption the regulations decree that political activity may not further noncharitable exempt purposes. Before Citizens United, the political activity limits were not especially relevant, but at least helped to differentiate organization types. However, Citizens United largely rendered existing tax law limitations obsolete by making a new kind of multi-purpose organization possible. As a result, definitional political activity limits are no longer justified and should be eliminated, but only if the 527(f) tax on investment income remains vital and the differences in the disclosure regimes between political organizations and noncharitable exempts are erased. In addition, Congress should affirm that the gift tax does not apply with respect to political contributions, but also extend the income tax to transfers of appreciated property to noncharitable exempts. Further, Congress should acknowledge that the increase in political speech by noncharitable exempts will lead to abuse of charitable organizations, and take steps to prevent the laundering of independent expenditures through the charitable form. Congress also should recognize that Citizens United has led to a need to develop a new tax baseline for political activity conducted “for profit” or outside of section 527.

August 13, 2014 in Scholarship, Tax | Permalink | Comments (0)

Best Value Law Schools

Cover 1Prelaw, Best Value Law Schools:

To be considered for the overall list, a school must have an average debt of less than $106,000 [$115,000 for private schools]; employment greater than 69.5%; and a bar pass rate greater than 75%, and no less than 3% below the state average. ...

After we narrowed down the list based on these parameters, we then ranked the schools using this formula: percent of graduates who pass the bar exam (15%); employment rate (35%); tuition (25%); cost of living (10%); and average indebtedness upon graduation (15%).

National Jurist ranked the 53 Best Value Law Schools.  Here are the Top 20:

Page 33

August 13, 2014 in Law School Rankings, Legal Education | Permalink | Comments (6)

U.S. Expats Sue in Canada to Block FATCA

Wall Street Journal, U.S. Expats Sue Over Canadian Deal to Tell Washington About Their Accounts:

A group representing American expatriates is taking legal action against the Canadian government for its role in implementing a U.S. law designed to clamp down on tax evasion.

The lawsuit, filed Monday in the Federal Court of Canada in Vancouver, challenges the constitutionality of a Canada-U.S. intergovernmental agreement reached in February that forces domestic banks to comply with the U.S. Foreign Account Tax Compliance Act, or Fatca. The agreement requires Canadian banks to share account information about U.S. citizens with the U.S. Internal Revenue Service via Canadian tax authorities.

(Hat Tip: Allison Christians.)

August 13, 2014 in Tax | Permalink | Comments (1)

Fundraiser for Law School Transparency

FundRazr LogoRacing for Law School Transparency at 10,000 Feet:

A message from Mike Spivey . . .

As you may be aware, I was recently named to Law School Transparency's (LST) board of directors. LST is a non-profit founded five years ago that helps prospective law students make informed decisions about whether and where to attend law school. LST organizes and shares real consumer information with tens of thousands of applicants each year who are looking to spend hundreds of thousands of dollars on a law degree.

LST has made an enormous impact on legal education through its tireless advocacy efforts, but it still has much to accomplish. For example, schools still hide unfavorable jobs data and the ABA still does not adequately enforce its own standards prohibiting deceptive marketing. I believe that LST will continue to be a major force for accountability. This is why I joined the board and pledged to raise $10,000.

August 13, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 461

Tuesday, August 12, 2014

Walker Reviews Hickman's Administering the Tax System We Have

JotwellChristopher Walker (Ohio State), Taking Administrative Law to Tax Exceptionalism (Jotwell), reviewing Kristin Hickman (Minnesota), Administering the Tax System We Have, 63 Duke L.J. 1717 (2014):

I’ll focus on the Duke Law Journal’s Taking Administrative Law to Tax Symposium, which was published in May. There is a lot to like about this symposium, starting with a refreshingly succinct foreword from Andy Grewal and followed by articles from Ellen Aprill, Bryan Camp, Kristin Hickman, Steve Johnson, Leandra Lederman, and Lawrence Zelenak. [Video of the symposium is available here, and the written issue is here.]

As the title suggests, the symposium focuses on tax exceptionalism, or “tax myopia” as Paul Caron coined the phenomenon two decades ago [Tax Myopia, or Mamas Don't Let Your Babies Grow Up to be Tax Lawyers, 13 Va. Tax Rev. 517 (1994)]. Tax exceptionalism is the misperception that tax law is so different from the rest of the regulatory state such that general administrative law principles do not apply. But tax exceptionalism is dying—something my tax colleague Stephanie Hoffer and I document in a forthcoming article on the Tax Court and the Administrative Procedure Act (“APA”). In Mayo Foundation v. United States, for instance, the Supreme Court refused to apply a standard less deferential than Chevron to the Treasury Department’s interpretation of the tax code, noting that it was “not inclined to carve out an approach to administrative review good for tax law only.” That same year (2011), in Cohen v. United States, the D.C. Circuit held that the judicial review provisions of the APA apply to IRS notices: “The IRS is not special in this regard; no exception exists shielding it—unlike the rest of the Federal Government—from suit under the APA.”

It is thus only fitting that Professor Hickman contributed to the symposium. After all, as a scholar at the intersection of administrative law and tax, she has spent nearly a decade calling for the reconsideration of tax exceptionalism.

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August 12, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

George Washington Seeks to Hire a Tax Prof

George Washington Law Logo (2014)The George Washington University Law School is seeking to hire a tenure-track or tenured tax professor in a variety fields, including tax:

The George Washington University Law School may make one or more full-time faculty appointments in subject areas that may include Corporate Finance, Intellectual Property, Health Law, and/or Tax, among others. In addition, it is possible that we will make one or more faculty appointments in clinical teaching. Appointments will be for either tenure-track or tenured positions.  ...

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August 12, 2014 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Kinder Morgan Abandons MLP Structure It Pioneered, Sticking Investors With Big Tax Bill

New York Times, Kinder Morgan’s Reorganization Puts Master Limited Partnerships in Question, by David Gelles:

KinderWhat happens when the pioneer of an industry abandons its own legacy?

When Kinder Morgan announced on Sunday that it was consolidating its four related pipeline companies into one, executives and bankers from Houston to New York, particularly those in the merger and energy sectors, were stunned.

With the move, Kinder Morgan, a $100 billion empire that transports much of America’s oil and natural gas, was abandoning the master limited partnership structure it helped popularize. Largely because of Kinder Morgan’s success, the partnerships have become increasingly popular for energy companies. The structure allows them to pass all profits along to their investors as dividends, and pay no corporate taxes (though the investors are subject to taxes on the distributions).

But now, with Kinder Morgan restructuring as a traditional corporation, questions have emerged about what will happen to the many other master limited partnerships. If Kinder Morgan no longer wants to be one, does the structure still make sense for other companies?

Adding to the sense of uncertainty was the Treasury Department, which said on Monday that it was examining whether the partnerships were depriving the government of needed tax revenue. Although the partnerships have mostly managed to fly under the radar, the renewed focus on the corporate tax code and its loopholes is putting the structure under new scrutiny.

Despite the move by Kinder Morgan, and saber-rattling from Washington, master limited partnerships are for the most part seen as safe for now.

August 12, 2014 in Tax | Permalink | Comments (1)

Benshalom: Mechanisms to Promote Global Wealth Redistribution

Ilan Benshalom (Hebrew University of Jerusalem, Faculty of Law), How to Redistribute? A Critical Examination of Mechanisms to Promote Global Wealth Redistribution, 64 U. Toronto L.J. 317 (2014):

The literature on global redistributive justice deals primarily with the important, yet unresolved issues of why global wealth redistribution may be morally justified or beneficial. However, philosophers and economists who address these issues often do not address the question of how such redistribution should take place. This article seeks to rectify this deficiency and argues that, if a certain level of global wealth distribution is morally justified and, more importantly, beneficial, the question of how it should be promoted is far from trivial. In this context, the analysis opens a new discussion of what form of redistributive measures should be adopted in a multistate reality.

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August 12, 2014 in Scholarship, Tax | Permalink | Comments (0)

ABA Approves Changes to Law School Accreditation Standards

National Law Journal, ABA Delegates Approve Law School Reforms:

ABA Logo 2The ABA’s governing body on Monday endorsed an extensive package of law school reforms designed to increase students’ clinical and distance-learning opportunities.

Standards for law schools would require students to take a minimum of six hours in a legal clinic or other “experiential” environment; encourage 50 hours of pro bono service; and allow students to take up to 15 credit hours of distance courses, up from 12. Students won’t be limited to 20 hours of outside work per week anymore.

To protect accreditation, law schools would have to shift toward assessments that focus on student outcomes—including bar-exam results and employment—rather than qualifications of incoming students or other factors.

“J.D. programs will remain a rigorous study of the law,” former Arizona Supreme Court Justice Ruth McGregor assured the ABA House of Delegates, which voted on the reforms during the ABA's annual meeting in Boston. “It will basically remain a three-year program.”  ...

While most of the changes were unanimously approved by voice vote, disagreement arose over two aspects of the reform package.

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August 12, 2014 in Legal Education | Permalink | Comments (1)

Zelinsky: Wynne and the Double Taxation of Dual Residents

Tax Analysys Logo (2013)Edward A. Zelinsky (Cardozo), Wynne and the Double Taxation of Dual Residents, 73 State Tax Notes 259 (July 28, 2014):

Zelinsky discusses Maryland State Comptroller of the Treasury v. Wynne [431 Md. 147 (2013), cert. granted (May 27, 2014)]. He writes that the U.S. Supreme Court should decide the case narrowly and in a way that does not prevent it from ruling later that the dormant commerce clause requires tax credits to abate the double taxation of individuals who are residents of two or more states but lack the ability to vote in a state that taxes them as residents on their worldwide income.

August 12, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Olson: Rat Out Your Employer On Taxes. Win Cash Rewards!

Reason:  Rat Out Your Employer On Taxes. Win Cash Rewards!, by Walter Olson (Cato Institute):

VanguardA former employee has filed a lawsuit charging that Vanguard Group, the gigantic ($2 trillion under management) and very successful mutual fund company, provides services to the funds it manages at "artificially low," "at-cost" prices, which may be beneficial to investors in those funds but (the suit argues) results in lowering the federal and state income taxes it pays. 

New York's False Claims Act, under which the employee is suing, entitles him to a generous share of any tax proceeds as well as attorneys’ fees if successful.

The Philadelphia Inquirer and Wall Street Journal have more; the complaint is here courtesy of TaxProf. The company denies wrongdoing, and the general question of transfer pricing on which the claim hinges is very well aired in the tax and accounting literature, which makes it seem unlikely that auditors would have neglected the issue.

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August 12, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 460

IRS Logo 2Biz Pac Review:  Sharyll Attkisson’s Impressive Account of How Watergate Would Play Out in Obama Era:

Sharyl Attkisson, the former CBS News reporter who left the network complaining because of liberal bias, offered a sobering account of Sunday how she thinks Watergate would play out today in the Age of Obama.

And it sounds awfully familiar.

Appearing on ABC’s “This Week,” Attkisson described what has basically been the pattern for every scandal of the Obama years – dubbed “phony scandals” by all the president’s men.

“I think that we’ve gone backwards since that time when we really felt empowered as journalists,” Attkisson said. “And all I can think is: What would happen today during a Nixon-type scandal?”

“Nixon would basically refuse to turn over tapes to Congress,” she said, in an apparent allusion to the IRS simply “losing” emails key to investigations of its targeting conservative groups.

“His aides would refuse to testify to Congress, or would take the Fifth, or would like to Congress with a fair amount of immunity,” Attkisson continued, describing the refusal of former IRS official Lois Lerner to testify before Congress and the stonewalling other administration officials have engaged in.

The Hill op-ed:  More Lost Emails — When Will Democrats Have Enough?, by Rick Manning (Citizens for Limited Government):

Twenty different Obama administration officials have lost or destroyed a portion of their email traffic. Email traffic that was, in some cases, under subpoena or in others requested as part of a larger inquiry into the conduct of the executive branch. ...

The brazenly contemptuous stonewall-and-erase-evidence approach to congressional inquiries preferred by the Obama administration is perhaps this president's greatest affront to our constitutional system of government.

When you have records going missing across an administration, it is impossible to conclude anything other than it is a coordinated and condoned cover-up, and not just a series of incompetent, coincidental keystrokes wiping out information.

The conclusions get even uglier when you realize that the IRS dismissed the government contractor responsible for maintaining back-up files of their emails concurrent with Lois Lerner and her band mysteriously having their computers flatline.

The question is, where are the Democrats in the face of this obvious malfeasance?

During the Watergate scandal that brought down the presidency of Richard Nixon, a few Republicans came forward and urged the president to come clean. Yet, the silence is deafening from Democrats in both the House and Senate in the wake of this obvious obstruction of the congressional oversight function.

Where are the patriots on the Democratic side, who are willing to stand up to an executive branch that has declared them inconsequential?

National Review op-ed:  Stonewaller-in-Chief: We’re Transparent, but Don’t Ask For Any Documents, Says the Obama White House, by John Fund:

The most valuable lesson I’ve learned in reporting about Washington is a simple one: watch what politicians do, not what they say. There can be no better illustration of this than Obama’s summit meeting with African leaders last week. He used the meeting as an opportunity to tout the positive role inspectors general can play in fighting corruption in government agencies; at the same time that he was speechifying about this, some two-thirds of President Obama’s own inspectors general wrote a scathing letter to Congress complaining that his administration was placing “serious limitations” on their ability to do their jobs.

Wall Street Journal editorial:  Justice's IRS Connection: The Lawyer Who Had Tax-exempt Cases Coming and Going:

It was fishy enough when Democratic donor Barbara Bosserman was appointed to lead the Justice Department investigation of IRS targeting of conservative groups. Now there are new questions about Justice's staffing choice on one of the private lawsuits brought against the IRS.

We've been telling you about the pro-Israel group Z Street, which sued the IRS in 2010 on grounds that the agency engaged in viewpoint discrimination when it singled out 501(c) groups with Israel-related missions for additional scrutiny. The case has been handled by Justice Department trial attorney Andrew Strelka, who previously worked in the IRS office run by Lois Lerner that handled tax-exempt applications. ...

[R]ecently Mr. Strelka was withdrawn as the Justice Department's counsel of record on the Z Street case. A review of court dockets showed that he has also withdrawn from two other cases involving tax-exempt groups, including Judicial Watch's suit against the IRS. ...

If Mr. Strelka had personal knowledge of the processing of tax-exempt applications for groups like Z Street while he was assigned to the IRS, he should have recused himself from handling the case at Justice.

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August 12, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, August 11, 2014

Virginia Tax Review Publishes New Issue

Virginia Tax Review 2The Virginia Tax Review has published Vol. 33, No. 3 (Winter 2014):

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

ABA Task Force Debates Financing of Legal Education at its First Meeting

ABA Journal, Task Force on Legal-ed Financing Mulls Causes of Rising Tuition at its First-ever Public Hearing:

ABA Logo 2At its first public hearing, the ABA's new Task Force on the Financing of Legal Education spent much of its time trying to determine exactly what is leading to increases in law school tuition, and debilitating debt loads being carried by so many law students.

The task force, chaired by former Detroit mayor and onetime ABA President Dennis Archer, met over a day and a half Saturday and Sunday during the ABA's Annual Meeting in Boston. Its aim is to examine the cost of legal education for students, and to explore student lending and how law schools are being financed. Beginning with the public hearing, the task force is delving into how law schools use merit scholarships, tuition discounts and need-based financial aid.

Witnesses sought to frame core issues and problems, each from their own perspectives. And task force members pushed each of them to back up their statements with data or anything besides anecdotes. ...

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August 11, 2014 in Legal Education | Permalink | Comments (1)

GiveWell Considers Funding Tax Reform

Give WellGiveWell is considering selecting tax reform as one of the causes to fund:

Tax policy, like macroeconomic policy, has theoretically huge economic stakes and a good deal of attention from intellectuals. We see it as having substantially more attention from funders and nonprofits, and (likely as a consequence) fewer gaps in the work done by intellectuals (particularly with regard to developing workable policy proposals). We also see less room for impact from new academic research on related matters, as the main bottleneck to improved policy seems to be politics (in particular, resistance from groups like Americans for Tax Reform to changes that would involve new taxes or reduced tax expenditures) rather than knowledge. We have done a shallow investigation of this area and will be writing it up in the future.

As part of its due diligence, GiveWell has interviewed two experts:

August 11, 2014 in Tax | Permalink | Comments (0)

Task Force of Mayors Assails Growing Income Inequality

The United States Conference of Mayors, Income and Wage Gaps Across the U.S.:

Report coverThe Wage Gap in the US:

  • The US has regained the 8.7 million jobs that were lost during the Great Recession, and employment has surpassed its pre-­‐recession peak of 138.4 million jobs in 2008.
  • Average annual wage of jobs lost in 2008-­‐09 was $61,637, and average wage of job gains through the second quarter of 2014 equaled $47,171. This wage gap of 23% is significantly larger than that of the earlier recession and recovery (2000-­‐2006), and implies $93 billion in lower wage income.
  • In comparison, the wage gap following the 2000-­‐2003 recession was 12%. Wages earned in advancing sectors fell $27 billion short of the annual wages lost in the declining sectors over 2000-­‐2003.
  • Extensive job losses in high-­‐wage manufacturing ($63K) and construction ($58K) sectors were replaced by jobs in the lower wage sectors of hospitality ($21K), health care ($47K), and administrative support ($37K). 

The Income Distribution in the US:

  • The 2012 household median income of $51,017 was, in real terms, the lowest since 1995. The median was greater in the West ($55,157), and Northeast ($54,627), than in the South ($48,033) and Midwest ($50,479).
  • The highest-­‐earning 20% of households saw their share of income rise from 43.6% in 1975 to 51.0% in 2012. Most of this gain was among those in the highest 5% of income, which rose from 16.5% in 1975 to 22.3% in 2012, a gain of $490 billion in 2012.
  • Each of the lower quintiles experienced a declining share of income since 1975. The lowest two quintiles, or 40% of households, received just 6.6% of all US income gains since 2005, and 9.5% of gains since 1995.
  • The highest 20% of households captured 60.6% of total income gains from 2005 to 2012, and the top 5% received 27.6% of total gains.
  • In 2012 the 80th percentile (the lowest income in the top 20%) income of $104,906 was more than double (2.04x) the median. That ratio has increased from 1.73 in 1975.

August 11, 2014 in Tax | Permalink | Comments (0)

Schler: International Mismatches on Hybrid Instruments

Tax Analysys Logo (2013)Michael L. Schler (Cravath, New York), OECD vs. D/NI: International Mismatches on Hybrid Instruments, 75 Tax Notes Int'l 485 (Aug. 11, 2014):

Michael L. Schler discusses technical and policy issues, as well as unexpected results, that arise under the OECD's proposals to eliminate mismatches of income and deduction resulting from hybrid instruments.

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

A Moment of Simple Justice: Law School

August 11, 2014 in Legal Education | Permalink | Comments (3)

The IRS Scandal, Day 459

TaxProf Blog Weekend Roundup

Sunday, August 10, 2014

NY Times: A Corporate Tax Break That’s Closer to Home

New York Times:  A Corporate Tax Break That’s Closer to Home, by Gretchen Morgenson:

Rage is rising over American corporations that chop their tax bills by acquiring entities in lower-tax countries. Medtronic, AbbVie and Mylan have all announced such plans — known as inversions — in recent months. And Walgreen was poised to relocate to Switzerland after it completes its purchase of Alliance Boots, but did an about-face last week in the face of widespread denunciation.

Some in Congress have proposed legislation to shut the door on this tax-savings tactic. But across town at the Internal Revenue Service, officials have recently opened the window to another. They did so in a ruling disclosed late last month by Windstream Holdings, a telecommunications company based in Little Rock, Ark.

The ruling allows Windstream to spin off its copper and fiber network into a real estate investment trust, or REIT. That sounds pretty ho-hum until you realize it means that Windstream won’t have to pay hundreds of millions of dollars in taxes. ...

How did the I.R.S. conclude that a telecom network is a real estate asset? As with all things tax-related, the details are somewhat complicated. ...

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August 10, 2014 in Tax | Permalink | Comments (0)

Byrnes: Charity and the Jurisprudential Lessons from History

William Byrnes IV (Thomas Jefferson), The Development of Charity: Jurisprudential Lessons from History:

This article describes the ancient legal practices, codified in Biblical law and later rabbinical commentary, to protect the needy. The ancient Hebrews were the first civilization to establish a charitable framework for the caretaking of the populace. The Hebrews developed a complex and comprehensive system of charity to protect the needy and vulnerable. These anti-poverty measures, including regulation of agriculture, loans, working conditions, and customs for sharing at feasts, were a significant development in the jurisprudence of charity.

The article begins with a brief history of ancient civilizations, providing context for the development of charity by exploring the living conditions of the poor. The second half of the article provides a searching analysis of the rabbinic jurisprudence that established the jurisprudence of charity. This ancient jurisprudence is the root of the American modern philanthropic idea of charitable giving exemplified by modern equivalent provisions in the United States Tax Code.

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August 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

The IRS Scandal, Day 458

Saturday, August 9, 2014

Princeton and Wellesley May Re-inflate Grades

P-WPrinceton and Wellesley are considering reversing actions they took a decade ago to curb grade inflation:  Princeton capped A-range grades at 35%, and Wellesley imposed a mandatory B+ median in introductory (100) level and intermediate (200) level courses with at least 10 students:

Princeton, Report from the Ad Hoc Committee to Review Policies Regarding Assessment and Grading:

Princeton

Wellesley, The Effects of an Anti-Grade-Inflation Policy at Wellesley College:

Wellesley

 Wellesley

Update:  The Economist, What the Ivies Can Learn From Wellesley

August 9, 2014 in Legal Education | Permalink | Comments (6)

Retirement of John Dean, First African-American Tax Court Judge

John F. Dean has retired after twenty years as a Special Trial judge on the U.S. Tax Court.  He was the first African-American Judge on the Tax Court.

Tax Court Logo 2b. Washington, District of Columbia. Graduated, B.S., Michigan State University, 1970; Columbus School of Law; J.D., Catholic University of America, 1975; M.L.T., Georgetown University Law Center, 1985. Admitted to District of Columbia Bar, 1975, Supreme Court of the United States, Federal District Courts, Northern District of Texas, District of Maryland, and United States Tax Court. Employed by the Office of Chief Counsel for the Internal Revenue Service, Dallas District Counsel, 1975-78; Baltimore District Counsel, 1978-86; Office of Associate Chief Counsel, International, 1986-94. Adjunct Professor of Law, Howard University, 1999 to present; Vice Chair, Judicial Counsel of the Washington Bar Association, 2002-03. Appointed Special Trial Judge, United States Tax Court, on August 7, 1994.

August 9, 2014 in Tax | Permalink | Comments (0)

Robert Redford Sues New York Over $1.6 Million Tax Bill; Can State Tax Nonresident on Sale of Interest in Nonresident LLC?

The IRS Scandal, Day 457

IRS Logo 2George Will, The Reason for Watergate:

June 17, 1971, was four days after The New York Times began publishing the leaked "Pentagon Papers," the classified Defense Department history of U.S. involvement in Vietnam. Nixon worried that further leaks would reveal his role in sabotaging negotiations that might have shortened the war. This fear caused Nixon to create the "the plumbers" and to direct an aide to devise other proposals such as the one concerning Brookings. This aide suggested using the IRS against political adversaries, but added:"The truth is we don't have any reliable political friends at IRS. ... We won't be ... in a position of effective leverage until such time as we have complete and total control of the top three slots at IRS." Forty years later, the IRS has punished conservative groups, and evidence that might prove its criminality has been destroyed. Happy anniversary.

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August 9, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, August 8, 2014

Weekly Tax Roundup

Weekly Roundup

August 8, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

August 8, 2014 in Legal Education, Weekly Legal Education Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

August 8, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

August 8, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

NY Times, WSJ Disagree Over Obama's Authority to Stop Corporate Inversions

New York Times Dealbook:  How Obama Can Stop Corporate Expatriations, for Now, by Victor Fleischer (San Diego):

The Obama administration has broad legal authority to stop corporate inversions.

Professor Stephen E. Shay recently published an article in the trade journal Tax Notes, calling on the Obama administration to take unilateral action to impede the surge of tax-motivated corporate expatriations without waiting for Congress to pass new legislation. Professor Shay, a professor of practice at Harvard Law School and former deputy assistant secretary for international tax affairs at the Treasury Department, argued that the Treasury Department has the legal authority to reduce the incentives to give up United States citizenship. This could be done, he said, by limiting the deductions for interest payments that an American subsidiary pays its foreign parent company, and by ensuring that profits of overseas subsidiaries will continue to be subject to American taxes. ...

Robert Willens, an influential tax commentator, dismissed Professor Shay’s article in a bulletin to clients as merely “interesting reading with little, if any, practical significance.” Mr. Willens noted that Treasury has never been able to set workable regulations under Section 385 of the tax code, one of the key sections Professor Shay suggested as legal authority. Mr. Willens also explained that rules limiting interest deductions may cause some consternation among the nation’s trading partners. “If these weapons were so readily available,” he concluded, “it stands to reason that they would have already been utilized.”

The dispute boils down to law versus politics. There is no question that Professor Shay gets the law right. To be sure, there are limits on what the Treasury Department can do. It is limited in its ability to define who is, and who is not, a United States corporation; those rules are fixed by statutory language. But Professor Shay has nudged the Treasury to focus on related legal questions — what constitutes debt versus equity, and what is the definition of United States property under Section 956 — where the law is unclear and the Treasury Department has broad authority to interpret those rules in a manner consistent with the legislative framework of the tax code. ...

Of course, it is possible that Mr. Willens has the politics right. The fact that the Obama administration has the legal authority to change the incentives of inversions does not necessarily mean that it will. It must consider the reaction of Britain and our other trading partners. It should think about whether investors have settled expectations about deals that have already been announced. But I see no obvious reason that the Treasury Department should feel constrained by these political issues.

Wall Street Journal editorial, Obama's Tax Law Rewrite: Where's the Law That Gives Jack Lew the Power to Raise Taxes?:

Let's focus today on tax inversions, which allow corporations to relocate overseas in a way that reduces their tax liability. Mr. Obama has conceded these are legal, and as recently as July 16 Mr. Lew told CNBC that "we have looked at the tax code. There are a lot of obscure provisions that we do not believe we have the authority to address this inversion question through administrative action. If we did, we would be doing more."

But lo, on Tuesday a spokeswoman announced that Treasury "is reviewing a broad range of authorities for possible administrative actions" to limit inversions "as well as approaches that could meaningfully reduce the tax benefits after inversions take place."

Hello? That sure sounds like rewriting tax law by executive fiat, which violates the Constitution's separation of powers. The rewrite is all the more legally suspicious since no one at Treasury or the Justice Department seems to have been aware of this power before Mr. Obama began denouncing the "unpatriotic tax loophole." From where does Mr. Lew derive this power to act like a one-man Ways and Means Committee? ...

[A]n [Office of Legal Counsel] precedent is directly relevant to tax policy. President George H.W. Bush campaigned in 1988 on cutting the capital-gains tax, but Democratic Majority Leader George Mitchell used a filibuster to block it in the Senate as the economy stumbled.

As Mr. Bush sought re-election in 1992, these columns urged him to use what we believed was his unilateral authority to index the capital gains tax for inflation—a way to boost the economy by other means. Our legal argument was that the term "cost" as written by Congress in the tax code is ambiguous and doesn't mean the "purchase price" of a stock as interpreted in Treasury regulations.

The White House counsel's office wrote a lengthy memo explaining Mr. Bush's legal power to do this. But the Treasury's legal department disagreed, the Justice Department was asked for its opinion, and the OLC lawyers sided with Treasury. Mr. Bush declined to act, the economy took longer to recover, and Bill Clinton won the 1992 election.

So now we have a President in an election year looking for a way to raise taxes on corporations after he couldn't get Congress to agree. Has anyone asked Treasury's career lawyers or the Office of Legal Counsel? Someone should. And when the next President arrives in 2017, one of his first acts should be to release publicly all of the OLC memos making the legal case for Mr. Obama's many illegal acts, assuming there are any.

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

Council of the ABA Section on Legal Education Meets Today

ABA Logo 2The Council of the ABA Section on Legal Education and Admission to the Bar meets today in Boston:

Open Session Agenda

A. June 2014 Open Session Minutes

B. Review and Approve Revised Internal Operating Practices (IOPs)
1.  Revised IOPs
2.  Explanation of Revisions

C. Report on Standards Transition Plan

D.  Budget
1.  Consider revised budget, based on ABA budget outcome, hiring, revision to travel budget, technology and set school fees

E. Affiliate Reports
1.  AALL
2.  ALWD
3.  CLEA
4.  LSAC
5.  NALP Update
6.  NALP Class of 2013 Selected Findings
7.  NCBE
8.  SALT

F. Data Policy Committee Report (Strickman)
1. Minor adjustments to AQ
2. Beta testing of employment outcomes protocol

G. Rport on Student Loans Forgiveness Work Group

H. Committee Reports
1.  BOG Liaison
2.  Law Student Division
3.  Young Lawyers
4.  House of Delegates
5.  Managing Director
6.  Chairperson

August 8, 2014 in ABA Tax Section, Legal Education | Permalink | Comments (0)

1911 College Rankings (U.S. Government Edition)

Chronicle of Higher Education, How Did the Federal Government Rate Your College a Century Ago?:

1911As Vox’s Libby Nelson notes in a chronicle of the 1911 ratings, the Association of American Universities actually asked the government to devise them. Kendric Charles Babcock, the top higher-education official in the U.S. Bureau of Education, itself a division of the Interior Department, undertook the task. Few were happy with the result. (Anyone surprised?) President William Howard Taft later killed it.

So how did your college stack up more than a century ago? A few things to keep in mind: The four tiers of colleges were based on how prepared their graduates were for graduate school. Also, the asterisks in Class II were used to distinguish its stronger colleges, the equivalent of a “plus” in a paper grade.

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August 8, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

94% of Academic Economists Admit to Unacceptable Research Practices, Including Sex for Co-authorship and Promotion

Inside Higher Ed, Sex, Lies, Economists:

SLVA small proportion of European economists have confessed to “acceptance or offering of sex” in exchange for co-authorship or promotion, as well as owning up to fabricating or manipulating data.

A survey of about 400 economists, conducted among members of the European Economic Association on an anonymous basis, is analyzed in the article Scientific Misbehavior in Economics, currently in press for the journal Research Policy.

Ninety-four percent of respondents reported having engaged in at least one “unaccepted research practice,” the paper says.

London School of Economics, Scientific Misbehavior in Economics: Unacceptable Research Practice Linked to Perceived Pressure to Publish:

Almost every economist reports having engaged in at least one practice considered unacceptable by peers. For example, one third of the participants admit to having cherry-picked results – the selective presentation of empirical results that confirm one’s argument is rejected by 84%. Even though 64% consider it unacceptable to divide one’s work into small units to maximize the number of publications, 20% confess salami slicing. Strategic behavior in the publication process is considered unjustifiable by two thirds. However, 39% admit that they have taken into account suggestions of referees or editors even though they thought that they were wrong. Even 60% report that they have cited strategically to raise publication prospects.

research practice

August 8, 2014 in Legal Education, Scholarship | Permalink | Comments (1)