TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Tuesday, July 8, 2014

Sloan: Inversions -- An Un-American Tax Dodge

Following up on yesterday's post on the New York Times and Wall Street Journal articles on tax-motivated corporate inversions:   Fortune, Positively Un-American Tax Dodges, by Allan Sloan:

Yes, leaving the country–a process that tax techies call inversion–is perfectly legal. A company does this by reincorporating in a place like Ireland, where the corporate tax rate is 12.5%, compared with 35% in the U.S. Inversion also makes it easier to divert what would normally be U.S. earnings to foreign, lower-tax locales. But being legal isn’t the same as being right. If a few companies invert, it’s irritating but no big deal for our society. But mass inversion is a whole other thing, and that’s where we’re heading.

We’ve also got a second, related problem, which I call the “never-heres.” They include formerly private companies like Accenture, a consulting firm that was spun off from Arthur Andersen, and disc-drive maker Seagate, which began as a U.S. company, went private in a 2000 buyout and was moved to the Cayman Islands, went public in 2002, then moved to Ireland from the Caymans in 2010. Firms like these can duck lots of U.S. taxes without being accused of having deserted our country because technically they were never here. So far, by Fortune’s count, some 60 U.S. companies have chosen the never-here or the inversion route, and others are lining up to leave.

All of this threatens to undermine our tax base, with projected losses in the billions. It also threatens to undermine the American public’s already shrinking respect for big corporations.

Inverters, of course, have a different view of things. It goes something like this: The U.S. tax rate is too high, and uncompetitive. Unlike many other countries, the U.S. taxes all profits worldwide, not just those earned here. A domicile abroad can offer a more competitive corporate tax rate. Fiduciary duty to shareholders requires that companies maximize returns.

My answer: Fight to fix the tax code, but don’t desert the country. And I define “fiduciary duty” as the obligation to produce the best long-term results for shareholders, not “get the stock price up today.” Undermining the finances of the federal government by inverting helps undermine our economy. And that’s a bad thing, in the long run, for companies that do business in America. ...

How much money are we talking about inverters sucking out of the U.S. Treasury? There’s no number available for the tax revenue losses caused by inverters and never-heres so far. But it’s clearly in the billions. Congress’s Joint Committee on Taxation projects that failing to limit inversions will cost the Treasury an additional $19.5 billion over 10 years–a number that seems way low, given the looming stampede. ...

19

Continue reading

July 8, 2014 in Tax | Permalink | Comments (4)

Law School Tuition Data (1996-2014)

TuiitonMatt Leichter, Law School Cost Data (1996-):

Here you will find analysis of the available information on law school costs, including tuition information from every juris-doctor-conferring law school going back to the 1996-1997 academic year. Also included are the percentages of full-time students paying full tuition by law school, the percentages of full-time students at private law schools receiving the median grant offered by their law school (or more), and the amount full-time students at private law schools pay if they receive the median grant—referred to as “median discounted tuition.” Tuition discounting at most public law schools and one private law school is not easy to measure because they charge their students different amounts. Also, many of the calculations carefully exclude the three ABA-accredited law schools in Puerto Rico because they behave very differently from stateside law schools. Many of the figures are inflation adjusted to 2013 dollars. ...

The sources used in this page are the American Bar Association’s Section of Legal Education and Admissions to the Bar’s statistics page and archived editions of the ABA-LSAC Official Guide to the ABA Law Schools, which going forward will only appear electronically as the Standard 509 Reports. Some of the data come from paper copies of the Official Guide I purchased, so they can’t be easily verified. ...

Click on the hyperlink to read information on the following topics:

Table 1

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

Presbyterian Church: Tax Justice -- A Christian Response to a New Gilded Age

The General Assembly of the Presbyterian Church (USA) has approved (425-170) Tax Justice: A Christian Response to a New Gilded Age, which advocates overhauling the tax code to make it:

  • GAmore progressive, taxing those with greater wealth at higher proportions of their income, wealth, and inheritance;
  • more transparent, which includes both simplicity and accountability for all tax preferences and tax expenditures;
  • more solidarity-focused, which means reducing the use of tax expenditures, shelters and havens, and supporting more adequate international standards to reduce tax competition within and among nations;
  • more sustainable for current and future generations, which means avoiding unproductive financial and ecological indebtedness; and
  • more adequate, effectively addressing broader objectives of economic and social health than efficiency alone, such as meaningful employment, improved family life, and restored public trust. The tax system must be characterized by both efficiency in tax collection and revenue sufficient for the common good.

For more, see The Layman Online, PCUSA’s Social Witness Policy Now Advocates for Comprehensive Progressive Tax Reform.

(Hat Tip: Pat Oglesby.)

July 8, 2014 in Tax | Permalink | Comments (5)

The IRS Scandal, Day 425

IRS Logo 2New York Post editorial:  Audit the IRS!:

True the Vote has an idea that is the fantasy of every taxpayer who’s ever found himself sitting opposite an imperious tax collector: Audit the IRS.

On Thursday, the IRS will have to persuade federal Judge Reggie Walton why this shouldn’t happen.

True the Vote calls itself “the nation’s largest nonpartisan, voters’ rights and election integrity organization.” It is one of the conservative outfits whose application for nonprofit status was targeted by IRS authorities. And in its motion asking for an outside specialist in data recovery to be permitted to conduct a forensic audit into the lost Lois Lerner e-mails, True the Vote makes an eminently reasonable case:

“Even if the ill-timed hard drive ‘crash’ was truly an accident, and even if the IRS genuinely believes that the e-mails are ‘unrecoverable,’ the circumstances of the spoliation at issue cry out for a second opinion,” reads the motion.

Continue reading

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

Monday, July 7, 2014

Hastings Dean Fights Dive in U.S. News Law School Rankings

UC-Hastings Logo 3The Recorder:  UC-Hastings Dean Fights Rankings Dive:

Frank Wu is ready. He's got visual aids, the assistance of a research analyst, and a laptop that's booted and flipped open. His sleeves are rolled up and he's set to talk rankings. It's a presentation the dean of UC-Hastings College of the Law has given before.

Wu is trying to pull Hastings out of a yearslong dive in the rankings. The school was ranked 19th by U.S. News and World Report in 1992, and 42nd when Wu arrived in 2010. This year, after it slipped to 54 from 48, Wu wrote to reassure students and alumni that despite getting clobbered by the bleak hiring climate, UC-Hastings remains among the top law schools in the nation. ...

Like most deans, Wu has plenty of gripes about the rankings, but says he can't afford to ignore them. "Prospective students care. Our faculty care, staff care, alumni care, I care. Our board cares. If I stood up and said, 'I don't care about U.S. News. I'm going to pay no attention to U.S. News,' if I used obscenity and other inappropriate language, I would be removed of my responsibilities," he said. "So, U.S. News is a looming presence, and to rail against it is futile." ...

[T]he school's tumble in the rankings has created an opening for critics. Wu's a talker more than a listener and his in-your-face style is not always welcome. ...

The dean is also taking heat from graduates unhappy with the school's downward trajectory in the U.S. News rankings. "There isn't a day that goes by when I don't go out and have some alum berate me," Wu said. ...

In 2012, UC-Hastings reduced its incoming class by nearly 100 students. To cover the loss of tuition revenue, Wu cut the equivalent of 23 full-time staff positions. The school also raised in-state tuition nearly 30 percent between 2010 and 2012. Since then, it has remained roughly unchanged at approximately $48,000, and Wu is pushing hard to raise revenue through fundraising, bringing in about $6 million in the 2012 fiscal year.

"Some credit is due for keeping tuition flat," said Kyle McEntee, executive director of the nonprofit Law School Transparency. However, McEntee notes that holding "really high" tuition stable isn't exactly a win for students. California law schools such as UC-Irvine, Pepperdine University, Santa Clara University and the University of San Diego have done a better job of controlling tuition, he said.

[T]he biggest drag on Hastings' rank is student employment rates. U.S. News weighs the percent of grads employed in full-time, permanent jobs for which a law degree is a requirement or an advantage. Only 47 percent of last year's Hastings grads could claim that distinction.

Wu has joined with other California law school deans in demanding U.S. News change its methodology, which they say penalizes schools in states with high overall unemployment.

Chapman Dean: U.S. News Rankings Methodology Penalizes Most California Law Schools:

U.S. News 2015Following up on yesterday's post, Deans Say Rankings Penalize California Law Schools for Bad Economy; U.S. News Rejects Call for State-Adjusted Employment Data:  Tom Campbell (Dean, Chapman) has asked me to post his letter to the editor of The Recorder, U.S. News Methodology Penalizes Most California Law Schools, on TaxProf Blog:

Your article Deans Say U.S. News Rankings Penalize Schools in the Golden State reported the unanimous position of the California law school deans, who agree that California’s poor employment prospects are a drag on the rankings at all 21 accredited California law schools – even though they are no fault of the California law schools or their students. Put simply, if a law school in Iowa, where unemployment is 4.2%, places 85% of its students, and a law school in California, where unemployment is 8.3%, places 84% of its students, U.S. News ranks the Iowa school ahead of the California school. That is nonsense, if the purpose is to rank the quality of the two law schools. ...

Let’s look at the top 10 ranked law schools in California, U.S. News Methodology Penalizes Most California Law Schools, over the last three years:

#4 USC, dropped 2 positions in the national rankings;
#5 UC Davis dropped 13 positions in the national rankings;
#6 UC Hastings dropped 12 positions in the national rankings;
#8 Loyola dropped 33 positions in the national rankings;
#9 UC San Diego dropped 12 positions in the national rankings; and
#10 Santa Clara dropped 23 positions in the national rankings.

The other four top-ten California schools [#1 Stanford, #2 UC-Berkeley, #3 UCLA, #7 Pepperdine] stayed the same in the national rankings.

The “California effect” on our rankings has nothing to do with the quality of education our schools provide. So we proposed to U.S. News to normalize the employment data on law schools the same way they do for differing state bar passage percentages. If a law school’s graduates pass their state bar at a 70% level, that means something different about the law school’s quality if the overall state bar passage is 80%, or if it is 60%. So, U.S. News normalizes for the bar passage rate of the state. They should do the same for employment. Otherwise, law students in entire states like California will be penalized in the rankings not because a lack of quality of their training, but instead due to economic factors beyond their control.

Below I share the full chart showing the significant U.S. News rankings downtrend in California. May I kindly ask that you share this chart and my comments here with your readers?

School

Name

2012

Rank

2013

Rank

2014

Rank

2015

Rank

1 Year

Change

3 Year

Change

Stanford

3

2

2

3

-1

0

UC- Berkeley

9

7

9

9

0

0

UCLA

16

15

17

16

+1

0

USC

18

18

18

20

-2

-2

UC-Davis

23

29

38

36

+2

-13

UC-Hastings

42

44

48

54

-6

-12

Pepperdine

54

49

61

54

+7

0

Loyola-L.A.

54

51

68

87

-19

-33

San Diego

67

65

68

79

-11

-12

Santa  Clara

84

96

96

107

-11

-23

Chapman

104

110

126

140

-14

-36

McGeorge

100

101

124

146

-22

-46

San Francisco

100

106

144

Tier 2

-2 +

-46+

Cal Western

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Golden Gate

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Southwestern

121

129

Tier 2

Tier 2

n/a

-25+

T. Jefferson

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Western State

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Whittier

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

July 7, 2014 in Legal Education | Permalink | Comments (13)

NY Times: When Taxes and Profits Are Oceans Apart

New York Times:  When Taxes and Profits Are Oceans Apart, by Gretchen Morgenson:

Here’s a question for investors in any big United States corporation with foreign operations: Do you know what the company’s tax bill would be if it had to bring its overseas earnings home?

The answer, alas, is that they probably don’t. That’s because most companies with large foreign earnings don’t disclose a potential tax liability associated with those earnings, even though inquiring shareholders want to know. Given the pile of foreign earnings amassed by large multinational companies in recent years, this has become a yawning disclosure gap.

Under the tax laws, companies with operations overseas pay no taxes on earnings generated there as long as the money stays there. When it is repatriated, though, taxes come due.

Accounting rules require that public companies disclose the amount of earnings they have generated and reinvested in foreign operations each year, even if they have no plans to bring the money home.

Last year, the nation’s top 1,000 companies reported $2.1 trillion in such earnings, a figure that has almost doubled since 2008, according to a report by Audit Analytics, a research firm in Sutton, Mass. Those foreign earnings also represented a growing percentage of the companies’ total assets, the report said: 8.7 percent last year, up from 5.8 percent in 2008.

Accounting rules also say companies should provide investors with an estimate of how much they’d have to pay in taxes if they were to bring those earnings back home. But rule makers gave companies an out, allowing them to forgo the disclosure if they concluded that it was “not practicable” to determine a potential tax bill.

It’s no surprise that most companies choose to leave investors in the dark about these potential liabilities.

Consider the 10 companies identified in the Audit Analytics report with the largest hoards of offshore earnings. Of them, seven don’t disclose the potential tax liability.

Continue reading

July 7, 2014 in Tax | Permalink | Comments (0)

Breitbart-Johnston Kerfuffle Over Republican Racism in Opposition to Tax Increases

Breitbart:  Journo: Opposition to Taxes and Spending Is Racist:

In an appearance on the Thursday broadcast of MSNBC’s The Reid Report, [David Cay Johnston] stated that Republicans oppose higher taxes and spending because “there's all sorts of areas where a fixed ideology that has no support in the empirical data gets into people's heads and that's what becomes important and there's also an element of racism in here.”

David Cay Johnston responds:

Problem is I did not say that “being against high taxes is racist.” Go listen to my carefully nuanced words, especially the words "an element" and pay attention to what it refers to in my comments about opposition to spending on infrastructure - roads, bridges, dams, water mains.

Update:  More from David Cay Johnston:

Continue reading

July 7, 2014 in Tax | Permalink | Comments (2)

10,000 Hours of Practice Does Not Guarantee Greatness

Business Insider:  New Study Destroys Malcolm Gladwell's 10,000 Hour Rule, by Drake Baer:

OutliersThe 10,000 Hour Rule — closely associated with pop psych writer Malcolm Gladwell — may not be much of a rule at all. 

The principle holds that 10,000 hours of "deliberate practice" are needed to become world-class in any field. When psychologists talk about deliberate practice, they mean practicing in a way that pushes your skill set as much as possible.

In Outliers, Gladwell contends that early access to getting 10,000 hours of practice allowed the Beatles to become the greatest band in history (thanks to playing all-night shows in Hamburg) and Bill Gates to become one of the richest dudes around (thanks to using a computer since his teen years). 

But a new Princeton study [Deliberate Practice and Performance in Music, Games, Sports, Education, and Professions: A Meta-Analysis] tears that theory down. In a meta-analysis of 88 studies on deliberate practice, the researchers found that practice accounted for just a 12% difference in performance in various domains. What's really surprising is how much it depends on the domain: 

  • In games, practice made for a 26% difference
  • In music, it was a 21% difference
  • In sports, an 18% difference
  • In education, a 4% difference
  • In professions, just a 1% difference

Click MomentThe best explanation of the domain dependency is probably found in Frans Johansson's book The Click Moment.

In it, Johansson argues that deliberate practice is only a predictor of success in fields that have super stable structures. For example, in tennis, chess, and classical music, the rules never change, so you can study up to become the best. 

But in less stable fields, like entrepreneurship and rock and roll, rules can go out the window:

  • Richard Branson started in the record business but quickly branched out into fields well beyond music: Virgin Group has 400 companies and is launching people into space.
  • Then there's a band like the Sex Pistols, who took the world by storm even though Sid Vicious could barely play his bass.

So mastery is more than a matter of practice.

July 7, 2014 in Legal Education, Tax | Permalink | Comments (5)

IRS Spending: Administration v. Refundable Credits

Following up on last Monday's post, Spending by the IRS, 1970-2014:  Joe Kristan links to this additional chart from the Cato Institute, which divides IRS spending into administration and refundable credits:

IRS Budget 2

July 7, 2014 in IRS News, Tax | Permalink | Comments (0)

Sullivan: The Pros and Cons of Federal-State Corporate Tax Harmonization

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), The Pros and Cons of Federal-State Corporate Tax Harmonization, 73 State Tax Notes 11 (July 7, 2014):

Martin A. Sullivan examines the benefits and drawbacks of harmonizing federal and state corporate tax regimes.

STN

July 7, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Boston Law Schools Shrink Enrollments, Faculties

The Boston Globe:  Waning Ranks at Law Schools:

BostonYears after the end of the recession, enrollment at the nation’s law schools continues to plummet, a wrenching shift that has forced many schools to cut expenses and raised concerns about the long-term financial prospects of some. ... With a difficult job market making students increasingly hesitant to take on massive student loan debt, nearly all law schools in Massachusetts — one of the top areas in the nation for legal education — have seen enrollment suffer.

The persistent decline has forced many law schools to take drastic measures. Suffolk University, where first-year enrollment fell 15 percent last year, recently offered buyouts to all faculty with tenure or with renewable long-term contracts, and Western New England University in Springfield has pared back its faculty among a number of cost-cutting measures. ...

At New England Law School in Boston, first-year enrollment has dropped 40 percent since fall 2010, while Western New England saw a 28 percent decline. In response, New England Law School last year froze wages, offered buyouts to some faculty members, and reduced its administrative staff. The dean, John O’Brien, took a voluntary pay cut of 25 percent.

Globe 1

Globe 2

Continue reading

July 7, 2014 in Legal Education | Permalink | Comments (8)

The IRS Scandal, Day 424

IRS Logo 2New York Times editorial: The Real Internal Revenue Scandal:

There is a scandal going on at the Internal Revenue Service, but it has nothing to do with Lois Lerner or her missing emails. House Republicans have not given up on their noisy crusade to tie Ms. Lerner to what they imagine to be widespread political corruption within the Obama administration, but all they have proved is that the I.R.S. is no better at backing up its computer files than most other government agencies.

No, the real scandal is what Republicans did to cripple the agency when virtually no one was looking. Since the broad Tea Party-driven spending cuts of 2010, the agency’s budget has been cut by 14 percent after inflation is considered, leading to sharply reduced staff, less enforcement of the tax laws and poor taxpayer service.

As the economist Jared Bernstein noted recently in The Washington Post, a weakened I.R.S. enforcement staff will be unable to make a dent in the $385 billion annual gap between what taxpayers owe and what they pay — an unintended tax cut, mostly for the rich, that represents 11 percent of this year’s spending.

Continue reading

July 7, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Holiday Weekend Roundup

Sunday, July 6, 2014

WSJ: Waiting for Action on Taxes: What To Do Until Congress Deals With Expired Breaks

Wall Street Journal Tax Report:  Waiting for Action on Taxes: What To Do Until Congress Deals With Expired Breaks, by Laura Saunders:

Halfway through 2014, Congress has made no more progress on tax overhaul than it has on other big issues. Few expect any progress before the November elections. In February, House Ways & Means Committee Chairman Dave Camp (R., Mich.) took a step forward by releasing his proposal for a comprehensive revision of the code. Although experts of many political stripes praised the plan as a serious one, Mr. Camp's own party leaders lowered expectations before its release. ... 

Mr. Camp is retiring from Congress at the end of the year, but many expect his proposals will live on. "The Camp plan has many good ideas that would work better than our current system, so it gives reformers a good place to start," says Roberton Williams, an income-tax expert at the nonpartisan Tax Policy Center in Washington.

Meanwhile, the Senate and House are at loggerheads about how to treat a host of tax breaks that expired at the end of last year.

July 6, 2014 in Tax | Permalink | Comments (0)

Death of Don Schapiro

Donald Schapiro (Chadbourne Parke, New York) died on July 3 at the age of 88.  From the New York Times obituary:

Dschapiro[H]e graduated from Townsend Harris High School, Yale College '44, where he became an instructor in the department of economics, followed by Yale Law School '49, where he developed a course in legal accounting, which he continued to teach as a visiting professor for some 25 years. Joining the firm of Paul, Weiss, Goldberg, Rifkind, Wharton & Garrison, he left after two years to go to Washington, D.C., as Assistant Chief Counsel to the U.S. House of Representatives Ways and Means Subcommittee on Administration of the Internal Revenue Laws. Returning to New York, he became a partner at Barrett, Smith, Schapiro, Simon, & Armstrong. In 1988, he joined Chadbourne & Parke, where he worked as a senior tax partner until his death. ...

Donations in Don's memory may be made to Yale Law School or Memorial Sloan-Kettering Cancer Center. Funeral services will be held Tuesday, July 8, at 11am at Temple Emanu-El. The family will receive friends at their residence from 5pm to 8pm on Tuesday, July 8, Wednesday, July 9, and Thursday, July 10.

(Hat Tip: Mike Schler.)

July 6, 2014 in Obituaries, Tax | Permalink | Comments (1)

Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new #1 paper and new papers debuting on the list at #3 and #5:

  1. [206 Downloads]  Sales Suppression as a Service (SSaaS) & the Apple Store Solution, by Richard Ainsworth (Boston University)
  2. [201 Downloads]  A State Tax Approach to Regulating Greenhouse Gases Under the Clean Air Act, by Samuel Eisenberg (Stanford), Michael Wara (Stanford), Adele Morris (Brookings Institution), Marta Darby (Stanford) & Joel Minor (Stanford)
  3. [146 Downloads]  Desperate Retirees: The Perplexing Challenge of Covering Retirement Health Care Costs in a YOYO World, by Richard L. Kaplan (Illinois)
  4. [140 Downloads]  The Relationship between China's Tax Treaties and Indirect Transfer Antiavoidance Rules, by Qiguang Hardy Zhou (Baker & McKenzie, Shanghai City, China)
  5. [118 Downloads]  Reducing Inequality on the Cheap: When Legal Rule Design Should Incorporate Equity as Well as Efficiency, by Zachary Liscow (J.D. 2015, Yale)

July 6, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 423

IRS Logo 2Arizona Republic editorial:  Grant Lois Lerner Immunity in IRS Case:

Congress is facing a fork in the road in the Internal Revenue Service's tea party-harassment scandal.

It may have to take both. 

But, first, Republicans in the House must come to terms with a decision they really — really — do not wish to make.

They will have to offer immunity from prosecution to Lois Lerner, the IRS retiree who has refused to testify and whose emails so amazingly disappeared when her computer hard drive crashed.

And if they fail to get to the bottom of the IRS shenanigans through Lerner? Well, there is a Plan B. They can appoint a special prosecutor — and accept all the expense and power-wielding baggage that comes with such an appointment.

Following the contempt-dripping theatrics of IRS Commissioner John Koskinen, the GOP lawmakers have no choice but to take one or both of those dramatic steps. ... Lerner, of course, has been no more willing to get to the bottom of events than Koskinen. Or, for that matter, the Justice Department, whose own half-hearted investigation is languishing ... somewhere. Or, for that matter, the White House, which simply could order agencies that may have communicated with Lerner, et al, to cooperate.

Their determined resistance is beginning to tell its own suspicious story. If Lerner dodges Congress again, despite immunity, there is always the special prosecutor route. It may be the only way to make sure this episode is never repeated, by administrations of either party.

Above the Law, Some Thoughts About the IRS Scandal and Spoilation of Evidence:

On Tuesday, U.S. District Judge Reggie Walton issued an order to hear oral arguments from lawyers representing the Internal Revenue Service and the conservative nonprofit True the Vote. True the Vote is one of the conservative groups claiming IRS improperly targeted its application for nonprofit status based on the group’s political and philosophical affiliation. True the Vote filed a motion for a preliminary injunction and expedited discovery on Monday, calling for an independent forensics examination of any IRS hard drives, servers, or other computer hardware involved in the government agency’s possible targeting of conservative nonprofits’ applications for tax-exempt status. It wants an outside computer expert to try to ascertain how and when any electronic evidence, such as former IRS Commissioner Lois Lerner’s emails, may have been lost. Also, it would be great if the government didn’t spoliate — I mean “recycle” — any more evidence….

In its motion, True the Vote argues that the law obligated the IRS to preserve potentially relevant evidence, including electronically stored information. The IRS knew that the hard drives and emails of Lerner and other officials were of significant legal interest. By the time the agency supposedly began disposing of Lois Lerner’s computer hardware, Congress was publicly investigating the IRS scandal. Pro-Israel group Z Street, Inc. filed suit in August 2010, alleging similar improper targeting as True the Vote claims. In September 2013, True the Vote itself sent a litigation hold letter to counsel for the IRS officials, including Lerner, who the group believed were involved in IRS wrongdoing. The government clearly had notice that the computer equipment and information should be preserved as potential evidence.

If the account alleged in True the Vote’s motion is accurate, opposing counsel was none too cooperative. Despite earlier attempts to confer with IRS counsel, attorneys for True the Vote did not learn of the missing emails of Lois Lerner and other IRS officials until Friday, June 13, 2014, when news reports publicized the loss. On that day, IRS finally informed Congressional investigators that the agency could not recover two years’ worth of Lerner’s emails. Apparently, Lerner’s hard drive crashed in 2011, its data was unrecoverable, and the government had no available back-ups.

Talk about bad luck — finding out on Friday the 13th that two years’ worth of emails spanning the time period when you believe the federal government committed illegal acts have been “lost.”

Of course, it is hard to believe in bad luck when federal-government malfeasance is involved. Did IRS officials violate True the Vote’s constitutional rights by improperly singling out their application for tax-exempt status as the conservative group claims? Was this politically motivated targeting the result of overzealous lower-level employees? Did members of the Obama administration orchestrate this campaign to punish the administration’s political enemies? We don’t know. That’s the kicker about the spoliation of evidence.

IRS explanations of how Lerner’s emails during the crucial time period were lost have not inspired much confidence, under the circumstances. Perhaps the only reason to believe that the IRS and Obama administration are telling the truth about the lost evidence and the IRS scandal is that their explanations look so extraordinarily — almost laughably — suspicious that someone would have to have “courage” the size of the U.S. Treasury to claim such things with a straight face.

Continue reading

July 6, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, July 5, 2014

Crawford: 7 Notable Estate & Gift Tax Articles of 2013

Tax Analysys Logo (2013)Bridget Crawford (Pace), Law Review Articles You Should've Read (But Probably Didn't) in 2013, 143 Tax Notes 1305 (June 16, 2014):

This short column is part of the annual Tax Notes issue that highlights noteworthy law review articles published during the previous year. In this piece, I identify articles relating to estate and gift taxation that practitioners likely will find of interest. The articles reviewed (in alphabetical order by author's last name) are:

  1. Ellen Aprill (Loyola-L.A.), Reforming the Charitable Contribution Substantiation Rules, 14 Fla. Tax Rev. 275 (2013)
  2. Arianne Renan Barzilay (Haifa), You're on Your Own, Baby: Reflections on Capato's Legacy, 46 Ind. L. Rev. 557 (2013)
  3. John F. Coverdale (Seton Hall), Of Red Bags and Family Limited Partnerships: Reforming the Estate and Gift Tax Valuation Rules to Achieve Horizontal Equity, 51 U. Louisville L. Rev. 239 (2013)
  4. John P. Goldberg (Harvard) & Robert H. Sitkoff (Harvard), Torts and Estates: Remedying Wrongful Inheritance, 65 Stan. L. Rev. 335 (2013)
  5. Adam Hirsch (San Diego), Incomplete Wills, 111 Mich. L. Rev. 1423 (2013)
  6. Grayson M.P. McCouch (Florida), Who Killed the Rule Against Perpetuities?, 40 Pepp. L. Rev. 1291 (2013)
  7. Carla Spivack (Oklahoma City), Killers Shouldn't Inherit From Their Victims -- Or Should They?, 48 Georgia L. Rev. 145 (2013)

July 5, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Death of Louie Zamperini

UnbrokenNew York Times, Louis Zamperini, Olympian and ‘Unbroken’ War Survivor, Dies at 97:

Louis Zamperini, an Olympic runner who as an airman during World War II crashed into the Pacific, was listed as dead and then spent 47 days adrift in a life raft before being captured by the Japanese and enduring a harsh imprisonment, died on Wednesday in Los Angeles. He was 97.

Mr. Zamperini’s remarkable story of survival during the war gained new attention in 2010 with the publication of a vivid biography by Laura Hillenbrand, Unbroken: A World War II Story of Survival, Resilience, and Redemption. It rose to No. 1 on the New York Times best-seller list.

The story is to be retold in a film adaptation of the book directed by Angelina Jolie and scheduled to be released in December. Jack O’Connell plays Mr. Zamperini. ...

Past efforts to make Mr. Zamperini’s story into a movie failed. In the 1950s, Tony Curtis wanted to play the role. In the late ’90s, Nicolas Cage expressed interest. Despite Mr. Zamperini’s two autobiographies, Ms. Hillenbrand thought more could be done with the story. In an email she wrote:

“Louie’s story was well told, but as an autobiography it was limited to Louie’s point of view. No one had approached Louie’s story as a biography, incorporating numerous points of view. “I began interviewing Louie’s fellow airmen, POWs, Japanese camp officials and home front friends and family, and went through their diaries, memoirs and letters. What I found was a fascinating untold story.”

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

July 5, 2014 in Legal Education, Tax | Permalink | Comments (0)

High-Level Departures Roil IRS's International Division

IRS Logo 2At a time of unprecedented attempts to thwart tax avoidance with FATCA and BEPS, and controversy swirling over the rush of U.S. corporations to use inversions to reduce their U.S. tax exposure, the IRS's Large Business & International Division has been stung by the sudden departures of several key people:

  • Michael Danilack (Deputy Commissioner (International)), resigned effective July 2
  • Laura Prendergast (Deputy Commissioner (Domestic)), resigned effective July 3
  • Samuel Maruca (Director, Transfer Pricing Operations), resigned effective August 1
  • Diana Wollman (Director, International Strategy), resigned July 1
  • Richard McAlonan (Director, Advance Pricing and Mutual Agreement), resigned effective June 27

Tax Analysts:  Major Shake-Up at LB&I?,  by Jaime Arora, Amy S. Elliott, & Andrew Velarde:

One practitioner told Tax Analysts that a coming reorganization may have spurred the departures. ... A former IRS official, now in private practice, said that Danilack agreed to lead the IRS's international unit on the condition that the Service would realign its Large and Midsize Business Division (LMSB) in a way that would separate international tax administration from domestic tax administration. The 2010 LMSB/LB&I realignment meant that agents working on international issues would ultimately report to Danilack, giving him greater management authority.

Under the realigned structure, the domestic and international deputy commissioners had equal authority to resolve issues. The former official said that under the LMSB structure, international issues were ultimately resolved by the domestic territory managers, directors of field operations, and industry directors. Since the realignment, "there's not been anyone with a 51 percent vote to resolve issues for a particular taxpayer" aside from going to LB&I Commissioner Heather Maloy for a tiebreaker vote, and "that's not good management," the former official said.

With industry directors and Danilack's team having similar levels of authority under the realigned LB&I, neither could overrule the other, the former official said. "No one was in charge," he said. "It was the Achilles' heel of the organization."

The former official added that Danilack's departure indicates that he probably argued for getting tiebreaker authority, making the case that the larger assessments are often those stemming from international issues, and lost. "I knew he was frustrated," the former official said. Danilack declined to comment for this article.

Tax Analysts Blog:  What’s Behind the Brain Drain at the IRS?, by Christopher Bergin:

Continue reading

July 5, 2014 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 422

IRS Logo 2Fort Wayne Telegram:  Federal Government Email From the Inside, by Richard Greene:

Since senior federal official Lois Lerner and I served together in the Bush Administration, surely she must have received the same sort of regular briefings about using the government’s email system as I did. ...

I was told that anything I did with my computer or Blackberry device would result in a permanent record being created. Only classified communications would be encrypted, and all the rest would be discoverable in any legal proceedings. That record would be available to virtually anyone but especially useful to Congress or the Justice Department in the event of their need to examine electronic communications dealing with public affairs.

Any notion that I could just erase something after it had been sent was conclusively dashed when the hard drive inside my desktop computer in my office crashed. The tech guy came in, quickly removed the drive and told me he would try to fix it. I explained to him that my concern was that all my data, including email that I often searched through, was on that drive and could be lost.

His reply was to assure me that every stroke of my keyboard had been backed up multiple times in the local office and off site as well, and nothing would be lost. If he couldn’t fix the drive he had removed, he would simply set up a new one and transfer everything that was there from the moment it failed and it would be completely restored.

Maybe my experience is why the latest polls are finding about 75 percent of the American people believe Congress should keep investigating what happened to Lerner’s emails.

Continue reading

July 5, 2014 in IRS News, IRS Scandal | Permalink | Comments (0)

Friday, July 4, 2014

Weekly Tax Roundup

 Weekly Roundup

July 4, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

 Weekly Roundup

July 4, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

The IRS Scandal, Day 421

IRS Logo 2Wall Street Journal: House Lawmakers Press on IRS Probe:

House lawmakers are planning to step up pressure on the Justice Department to act on a contempt-of-Congress citation against former Internal Revenue Service official Lois Lerner.

Legislators view the citation—passed by the House in May—as a potential pressure point in their broader efforts to force action by the Justice Department in the controversy concerning IRS treatment of conservative tax-exempt organizations, committee aides said. ...

Federal law says the local U.S. attorney has the "duty" to present the contempt citation to a grand jury. Contempt of Congress is a misdemeanor punishable by a fine of up to $100,000 and a year in prison, under an 1850s statute. Republicans on the committee note the statute in demanding that prosecutors pursue the case.

But "it remains unclear whether the 'duty' of the U.S. Attorney…is mandatory or discretionary," a Congressional Research Service report says. Courts generally grant prosecutors wide discretion in deciding which matters to pursue.

Continue reading

July 4, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, July 3, 2014

Brauner: What the BEPS?

Yariv Brauner (Florida), What the BEPS?, 16 Fla. Tax Rev. 55 (2014):

Florida Tax ReviewUnprecedented attention to aggressive international tax planning has shaken the earth under the most powerful players in the world of international tax policy design. The media exposure of what Bloomberg’s calls “The Great Corporate Tax Dodge,” combined with the ever-growing discontent of civil society with the magnitude of contribution of the largest multinational enterprises to the society within which they operate, has recently forced the politicians to take action. Leaders of the strongest world economies demanded a revision of the rules of the international tax regime that would generate more revenues for their challenged coffers and would restore public trust in the system. In what is now commonly known as the Base Erosion and Profit Sharing (“BEPS”) project, the OECD has established three principles: (1) promotion of collaborative rather than competition based solutions; (2) take a holistic view of the challenges and their corresponding solutions rather than an ad hoc approach; and (3) permit the consideration of innovative solutions even when they conflict with the traditional premises of the current international tax regime. This Article reviews the progress of the BEPS project and its compatibility with the fundamental principles for reform set by the OECD with a view to influence the discourse and the outcome of the project. This Article focuses on the importance of the paradigm shift from the current emphasis on competitiveness and the perfection of competition to a collaborative international tax regime, demonstrating the desirability of such a shift and suggesting how the OECD should go about making that shift.”

July 3, 2014 in Scholarship, Tax | Permalink | Comments (1)

6th Circuit Affirms Dismissal of Thomas Cooley Law School's Defamation Complaint Over Statements About Its Placement and Loan Default Rates

Thomas Cooley Logo (2013)Following up on this week's posts:

Thomas M. Cooley Law School v. Kurzon Strauss, No. 13-2317 (6th Cir. July 2, 2014):

Plaintiff Thomas M. Cooley Law School claims that defendants Kurzon Strauss, LLP, David Anziska, and Jesse Strauss published defamatory statements regarding plaintiff’s institution, causing $17 million in damages. ...

On June 8, 2011, under a heading titled “Investigating the Thomas Cooley School of Law,” Anziska posted the following statement on the website “JD Underground,” hosted at http://www.qfora.com/jdu:

My firm is currently conducting a broad, wide-ranging investigation of a number of law schools for blatantly manipulating their post-graduate employment data and salary information. These schools are preying on the blithe ignorance of naive, clueless 22-year-olds who have absolutely no idea what a terrible investment obtaining a JD degree is. Perhaps one of the worst offenders is the Thomas Cooley School of Law, which grossly inflates its post-graduate employment data and salary information. More ominously, there are reports that there [sic] students are defaulting on loans at an astounding 41 percent, and that the school is currently being investigated by the DOE for failing to adequately disclose its students’ true default rates. Unfortunately, the ABA has proven to be absolutely toothless in regulating these schools and stamping out these dubious practices, and most likely schools like Thomas Cooley will continue to defraud unwitting students unless held civilly accountable. If you have any relevant information or know of anyone who has attended Thomas Cooley feel free to contact me at anziska@kurzonstrauss.com. Obviously, all correspondences will be kept strictly confidential. ...

In granting defendants’ motions for summary judgment, the district court held that plaintiff was a limited purpose public figure and that the record would not allow a reasonable jury to conclude that defendants published the challenged statements with actual malice. We agree and affirm.

National Law Journal, Cooley Law Suffers Setbacks Financially and in Court:

The U.S. Court of Appeals for the Sixth Circuit on Wednesday affirmed a trial judge’s dismissal of a defamation lawsuit brought by the Thomas M. Cooley Law School against three plaintiffs lawyers who sued the school for alleged fraud in 2011. ...

“Cooley should have known better than to bring this meritless, vindictive, vexatious, farce of a lawsuit,” attorneys David Anziska and Jesse Strauss, who were defendants in Cooley’s suit, said of the Sixth Circuit ruling. “It was a waste of Cooley’s diminishing tuition revenue. Cooley's money could have been better spent helping its graduates find jobs.”

July 3, 2014 in Legal Education | Permalink | Comments (0)

Fleischer & Staudt: The Supercharged IPO

Victor Fleischer (San Diego) & Nancy Staudt (Dean, Washington University), The Supercharged IPO, 66 Vand. L. Rev. 303 (2013):

A new innovation on the IPO landscape has emerged in the last two decades, allowing owner-founders to extract billions of dollars from newly-public companies. These IPOs — labeled supercharged IPOs — have been the subject of widespread debate and controversy: lawyers, financial experts, journalists, and Members of Congress have all weighed in on the topic. Some have argued that supercharged IPOs are a “brilliant, just brilliant,” while others have argued they are “underhanded” and “bizarre.”

In this article, we explore the supercharged IPO and explain how and why this new deal structure differs from the more traditional IPO. We then outline various theories of financial innovation and note that the extant literature provides useful explanations for why supercharged IPOs emerged and spread so quickly across industries and geographic areas. The literature also provides support for both legitimate and opportunistic uses of the supercharged IPO.

Continue reading

July 3, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 420

IRS Logo 2Forbes:  The Time Has Come: Defund The IRS, by Steve Forbes:

The current IRS scandals are now bigger than those of Watergate in the 1970s and Teapot Dome in the 1920s. The most powerful and feared government agency was turned loose on groups of citizens who the White House and congressional Democrats felt threatened their power. President Franklin Roosevelt used the IRS against opponents, as did Presidents John Kennedy, Lyndon Johnson and Richard Nixon. Conservative think tanks were rightfully suspicious they were being singled out for tax audits during the Clinton Administration. But none of those abuses was of the sweeping nature of the ones that began in 2010 and have taken place against ordinary citizens who have spontaneously come together in countless organizations to fight the current regime’s egregious policies and threats to liberty.

[Defenders of liberty, especially Republicans, should seek to defund] almost all of the IRS after the midterm elections, which the Democrats will lose badly. There can be no more continuing resolutions that allow the tax-collection agency to operate business as usual, even though Congress hasn’t passed an appropriations bill. If a continuing resolution is necessary to avoid a government shutdown, then by all means pass one–but specifically do a near-zeroing-out of the IRS (the only exception would be a handful of clerks to process refunds) until these scandals are fully and credibly investigated. If the President vetoes such a budget resolution, the onus is on him, not Congress.

Continue reading

July 3, 2014 in IRS News, IRS Scandal | Permalink | Comments (1)

Wednesday, July 2, 2014

Thomas Cooley Law School Won’t Enroll New 1Ls at Ann Arbor Campus, Plans Faculty Layoffs

Thomas Cooley Logo (2013)ABA Journal, Cooley Law School Won’t Enroll New 1Ls at Ann Arbor Campus, Plans Faculty Layoffs:

According to an internal announcement obtained by Above the Law, Cooley “will hold off enrolling incoming first-term students at the Ann Arbor campus for fall 2014.” The Ann Arbor location is one of four Cooley campuses in Michigan; a fifth campus is in Tampa, Florida.

Thomas M. Cooley Law School Statement (July 1, 2014):

As with most law schools across the country, Cooley Law School’s enrollment and revenue have continued to decline while health care and legacy costs continue to rise. Despite ongoing cost control efforts, the school can no longer avoid the financial imbalance between the revenue and expenses it faces. As a result, the Cooley board of directors and administration are instituting a financial management plan to reduce expenses significantly and right size the organization.

The plan will help the school remain at the forefront of innovative approaches to legal education and continue to deliver the broad, high-quality access to legal instruction students have come to expect from Cooley. It demonstrates the school’s commitment to maintaining its high level of academic excellence and support for current and future students.

The plan includes:

      1. Faculty and staff reductions
      2. A system wide review of each program for capacity and quality
      3. A review of all campuses and facilities to reduce and rebalance costs
      4. A review of all purchases, travel and other expenses

Continue reading

July 2, 2014 in Legal Education | Permalink | Comments (0)

GOP Nominee for Illinois Governor Comes Under Fire for Converting Millions in Ordinary Income Into Capital Gains Through Private Equity Management Fee Waivers

Following up on my previous post, WSJ: Private Equity Firms Save Millions in Taxes by Treating Dividends as 'Monitoring Fees,' Says Polsky:  Chicago Tribune, Rauner Used Strategy Now Under IRS Scrutiny to Slash Income Taxes:

Rauner AdIRS data show Bruce Rauner to be one of the 11,000 richest tax filers in the nation, but most of the millions he made in recent years was taxed at 15 percent — less than half the top federal rate for the wealthy, a review of tax documents released by the GOP governor hopeful shows.

One reason behind that sharp discount is that Rauner took advantage of a strategy that yielded big tax savings on his share of investment fees paid to his private equity firm, GTCR. That strategy is allowed under tax rules but has come under IRS scrutiny.

An analysis of the limited records Rauner has released, conducted by the Tribune in consultation with tax experts, gives the fullest picture yet of the steps he took to trim his tax bill. In ways both big and small, the Republican businessman's financial profile is one driven by tax-reducing strategies often out of reach for those of more modest means:

Rauner's campaign is built around his resounding success at the helm of GTCR, through which he earned millions of dollars a year. But a major portion of that money was reported to the IRS as capital gains taxed at a preferential 15 percent, including money from so-called management fee waivers used by many private equity firms to reduce tax bills for key partners. ...

Continue reading

July 2, 2014 in Tax | Permalink | Comments (6)

WSJ: Improve Your Productivity and Your Life by Getting Rid of Internet Service at Home

Wall Street Journal, Say No to the Distraction-Industrial Complex:

No InternetOf all the potentially embarrassing things I confess to friends and acquaintances, perhaps the one most guaranteed to get a reaction is this: I don't have broadband Internet at home. And here's something I've never said aloud: I don't think you should, either, because it is ruining your productivity, if not your life. ...

Barring emergency, work is confined to work hours. This forces me to be more efficient at the office even as it allows me to be more emotionally present when I'm not there. It also has led me to notice that the times I am most productive while working are when I have no Internet connection at all—on planes, buses and trains.

Continue reading

July 2, 2014 in Legal Education, Tax | Permalink | Comments (0)

Smith: Charitable Deductions for Live-Burn Donations

Eric Smith (Weber State), A Deduction Properly Extinguished? The Live-Burn Donation: A Proposed Sequence of Analysis and Policy Evaluation, 33 Va. Tax. Rev. 459 (2014):

This article updates the literature analyzing the charitable deduction associated with live-burn donations. This deduction has been the subject of multiple recent Tax and appellate Court rulings, all of which have disallowed the deduction. The article examines and reconciles the resulting live-burn donation line of cases. It agrees with prior scholarship finding that the courts’ treatment of the deduction has rendered it ineffective as a tax planning tool, but proposes a theoretical sequence of analysis to gauge the state of the law and determine whether any avenue remains which leads to deduction. Scholarly response to the disallowance of the live-burn donation has been generally negative. In contrast to these positions in the literature, this article finds that denial of a deduction for live-burn donations is consistent with and reconcilable on grounds of traditional tax policy notions of equity and fairness. Despite the live-burn donation’s initial acceptance on the basis of public benefit, the doctrine is fundamentally vulnerable on multiple fronts: it pushes the bounds of vertical equity, it disproportionately favors the wealthy, it undermines traditional concepts of charitable intent, and it provides an excessive private benefit in exchange for a public benefit which is too difficult to measure or quantify.

Prior TaxProf Blog coverage:

July 2, 2014 in Scholarship, Tax | Permalink | Comments (1)

Borden: 11 Notable Partnership Tax Articles of 2013

Tax Analysys Logo (2013)Bradley T. Borden (Brooklyn), Notable Partnership Articles From 2013, 143 Tax Notes 1513 (June 30, 2014):

July 2, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

NY Times: The Self-Promotion Backlash

New York Times:  The Self-Promotion Backlash, by Anna North:

InvisiblesFrom “building your personal brand” to “stepping up your social media presence,” we’re constantly inundated with advice about how to promote ourselves. But some are saying that the pressure to self-promote could, ultimately, be hurting us.

In his recent book Invisibles: The Power of Anonymous Work in an Age of Relentless Self-Promotion, David Zweig profiles a group of people whose jobs are behind the scenes in some way (a guitar technician and a United Nations interpreter, for instance), and who derive satisfaction not from public recognition, but from the internal sense of a job well done. These “Invisibles,” as he calls them, are often extremely fulfilled in their careers, and they may have something to teach those of us who feel we have to constantly promote ourselves to succeed. He writes:

“We’ve been taught that the squeaky wheel gets the grease, that to not just get ahead, but to matter, to exist even, we must make ourselves seen and heard. But what if this is a vast myth?” ...

The Invisibles offer “an alternate path to success” — they got where they were not by courting attention, but by working quietly and extremely carefully toward something bigger than themselves. “The work they do is always in service of a larger endeavor,” he explained. And they show that at least for some people, “when you focus on excellence and good work, that actually does get recognized in the end.”

July 2, 2014 in Book Club, Legal Education, Tax | Permalink | Comments (2)

Tax Prof Puts on the Miles

PriusTen years ago, I blogged the spiffy new, exotic Prius with the "TaxProf" license plate driven by Jay Soled (Rutgers), which spawned my first TaxProf Blog meme, with several posts on other tax-centric license plates (here, here, herehere, and here).  Jay writes in that the Prius just crossed the 250,000-mile marker:

My 2004 Prius now has 250,000 miles.  Consider the following:  over the last ten years, assuming the average car achieved 25 mpg and my Prius achieved 50 mpg, then I was able to save 5,000 gallons of gas and significantly reduce my carbon footprint.  At the risk of sounding smug, this is undoubtedly a good thing for the world.

Continue reading

July 2, 2014 in Legal Education, Tax | Permalink | Comments (5)

The IRS Scandal, Day 419

IRS Logo 2Wall Street Journal:  Judge Sets Hearing on Group's Push to Investigate Lost IRS Emails:

A federal judge scheduled a hearing for next week on a grass-roots conservative group's request to investigate missing emails at the Internal Revenue Service, as part of the group's lawsuit against the agency.

U.S. District Judge Reggie Walton ordered the hearing on Tuesday, after conservative group True the Vote filed a motion seeking to speed up discovery and "preserve and prevent further destruction" of documents and electronic data. Among other things, the group wants a forensic expert to figure out how the emails were lost and examine whether any of the missing data can be recovered.

The hearing is set for July 11 in U.S. District Court in Washington, D.C.

Continue reading

July 2, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, July 1, 2014

Gamage: A Way Forward for Tax Law and Economics?

David Gamage (UC-Berkeley), A Way Forward for Tax Law and Economics? A Response to Osofsky's Frictions, Screening, and Tax Law Design, 61 Buff. L. Rev. 189 (2014):

This Essay responds to Leigh Osofsky's Who’s Naughty and Who’s Nice? Frictions, Screening, and Tax Law Design. Osofsky’s analysis suggests that tax rules might be designed so as to take account both of heterogeneity in taxpayers’ tax planning proclivities and of taxpayer characteristics relevant for distribution. By designing tax rules so as to create frictions that differentially impose higher costs on those taxpayers who are more successfully circumventing existing taxes we can perhaps reform our tax system so as to better achieve equitable distribution at lower efficiency costs. This Essay argues that Osofsky's analysis is generally correct and that it potentially suggests a path toward a more useful law and economics analysis of detailed tax rules.

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

Bernstein: Why the GOP Really Wants to Defund IRS

Washington Post op-ed:  Why the GOP Really Wants to Defund IRS, by Jared Bernstein:

In one of the great D.C. key-dangles (“look over here, not over there!”), congressional conservatives have everyone looking the other way while they try to defund the Internal Revenue Service. No question, recent IRS screw-ups are feeding right into their opponents’ plans. But let’s not lose sight of what’s really going on here: This is just a different way to try to shrink government, accommodate tax evasion and even undermine the implementation of health reform. ...

To collect taxes, we need an amply funded IRS, and therein lies the real scandal. The details are in this new Center on Budget and Policy Priorities paper by Chuck Marr and Joel Friedman, who document “…significant cuts that have occurred in IRS funding, which remains well below its 2010 level…. The cuts have led the IRS to reduce its workforce, severely scale back employee training, and delay much-needed upgrades to information technology systems. These steps, in turn, have weakened the IRS’s ability to enforce the nation’s tax laws and serve taxpayers efficiently.” ...

Marr and Friedman identify these additional facts of the real case:

  • The figures below show a 14 percent fall in the agency’s inflation-adjusted budget (figure 1) along with an 11 percent decline in its staffing levels (figure 2), 2010-2014. IRS staff assigned specifically to enforcement is down 15 percent.

Bernstein_IRS_combo

Continue reading

July 1, 2014 in IRS News, Tax, Think Tank Reports | Permalink | Comments (7)

Brooks: Fiscal Federalism as Risk-Sharing -- The Insurance Role of Redistributive Taxation

John R. Brooks II (Georgetown), Fiscal Federalism as Risk-Sharing: The Insurance Role of Redistributive Taxation, 68 Tax L. Rev. ___ (2014):

In addition to funding government and redistributing income, a redistributive tax-and-transfer system, and a progressive income tax in particular, provides insurance against the risk of uncertain future income. By providing for high taxes for high incomes, and low taxes, exemptions, and transfers for low incomes, a progressive income tax lowers the volatility of potential after-tax income relative to a lump-sum tax. This insurance function is distinct from the redistributive function of the system, since it provides a direct risk-mitigation benefit to the taxpayer himself, rather than simply redistributing income from one taxpayer to another.

This article analyzes the question of at what level of government to assign the income tax role in a federal system, given both its redistributive and insurance functions. The standard view in the literature is that redistribution is best done centrally, and thus that an income tax is best used by the federal government, rather than by state governments. Yet recent work suggests that states can effectively have some role in redistribution. Income insurance, however, can be more effectively done by the federal government, because of its larger risk pool and better ability to handle revenue volatility.

Continue reading

July 1, 2014 | Permalink | Comments (0)

Judge Dismisses Defamation Lawsuit Against Thomas Cooley Law School

Thomas Cooley Logo (2013)National Law Journal, Judge Tosses Defamation Suit Against Cooley Law:

A federal judge in New York has dismissed a defamation lawsuit brought against Thomas M. Cooley Law School by a plaintiffs attorney who helped spearhead a series of fraud class actions against law schools in 2011.

Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York ruled on June 24 that her court lacked jurisdiction over the Michigan law school, despite plaintiff firm Kurzon LLP’s claims that Cooley advertises, raises money and recruits students in the Empire State.

Continue reading

July 1, 2014 in Legal Education | Permalink | Comments (0)

Zelenak: The Almost-Restatement of Income Tax of 1954

Lawrence Zelenak (Duke), The Almost-Restatement of Income Tax of 1954: When Tax Giants Roamed the Earth, 79 Brook. L. Rev. 709 (2014):

This essay describes the ALI’s Income Tax Project of 1948–1954—its origins, goals, drafting process, final product, and influence on Congress. The essay concludes with some thoughts on what role the ALI can and should play today in the tax legislative process. Whether the fault is in the stars or in ourselves (probably both, but with the stars deserving most of the blame), the drafting of a new ALI model income tax statute for the twenty-first century would be an almost insurmountable challenge in technical terms, and probably pointless in political terms. Nevertheless, there remains room for targeted ALI tax interventions, with a Restatement-type approach to the interpretation of the recently-codified economic substance doctrine16 seeming especially promising.

July 1, 2014 in Scholarship, Tax | Permalink | Comments (0)

Yin: The Most Critical Issue Facing Tax Administration Today -- And What to Do About It

George K. Yin (Virginia), The Most Critical Issue Facing Tax Administration Today -- And What to Do About It:

This very brief paper contains the text of the keynote address delivered on June 19, 2014 to a research conference in Washington, DC on Advancing Tax Administration, co-sponsored by the IRS and the Tax Policy Center.

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

Subscribing to TaxProf Blog

SubscribeWe offer three ways to have TaxProf Blog content automatically delivered to your computer, tablet, or smart phone:

RSS Feeds:  You can subscribe to one of three different feeds to receive TaxProf Blog posts via your RSS reader:

Email:  You can subscribe to receive TaxProf Blog posts via email through one of three approaches:

  • FeedBlitz:  Enter your email address here to receive TaxProf Blog posts via email, delivered to you either daily, every 12 hours, every 8 hours, every 4 hours, or hourly (at your option).
  • TaxProf Blog Tax Email Service:  Email me to be added to my twice daily (during the week) and once daily (on the weekend) emails to the TaxProf Discussion Group with titles and links to recent TaxProf Blog posts on tax topics.
  • TaxProf Blog Legal Education Email Service:  Email me to be added to my email distribution list with titles and links to recent TaxProf Blog posts on legal education topics.

July 1, 2014 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

Support TaxProf Blog by Shopping on Amazon

Amazon-associatesTaxProf Blog participates in the amazon.com affiliate program. You can help support TaxProf Blog at no cost to you by making purchases through Amazon links on the blog and through the "Shop Amazon" tab on the header at the top of the blog:

Header

and the search box in the right column of the blog:

Amazon Search

July 1, 2014 in Legal Education, Tax | Permalink | Comments (0)

NY Times: Americans Think We Have the World’s Best Colleges. We Don’t.

New York Times:  Americans Think We Have the World’s Best Colleges. We Don’t.:

Americans have a split vision of education. Conventional wisdom has long held that our K-12 schools are mediocre or worse, while our colleges and universities are world class. While policy wonks hotly debate K-12 reform ideas like vouchers and the Common Core state standards, higher education is largely left to its own devices. Many families are worried about how to get into and pay for increasingly expensive colleges. But the stellar quality of those institutions is assumed.

Yet a recent multinational study of adult literacy and numeracy skills suggests that this view is wrong. America’s schools and colleges are actually far more alike than people believe — and not in a good way. The nation’s deep education problems, the data suggest, don’t magically disappear once students disappear behind ivy-covered walls. ...

America’s perceived international dominance of higher education, by contrast, rests largely on global rankings of top universities. According to a recent ranking by the London-based Times Higher Education, 18 of the world’s top 25 universities are American. Similarly, the Academic Ranking of World Universities, published annually by Shanghai Jiao Tong University, gives us 19 of 25.

But there is a problem with this way of thinking. When President Obama has said, “We have the best universities,” he has not meant: “Our universities are, on average, the best” — even though that’s what many people hear. He means, “Of the best universities, most are ours.” The distinction is important. ...

Math

Update:  New York Times, More on American Colleges’ Standing in the World

July 1, 2014 in Legal Education | Permalink | Comments (5)

The IRS Scandal, Day 418

Monday, June 30, 2014

Slate: Now Is a Great Time to Apply to Law School. Really.

Following up on last week's posts:

Slate:  Now Is a Great Time to Apply to Law School; We Aren’t Joking—Promise, by Jordan Weissmann:

After several wretched post-recession years, the job market for new law school graduates may be on the verge of a recovery. So I recently published a post titled Apply to Law School Now! We’re Serious.

A few writers, including the delightfully acidic folks of Above the Law, think I’m disastrously off base—that I have overestimated the strength of tomorrow’s legal labor market and misleadingly ignored the staggering cost of a law school education. So today, I want to explore in a little more depth the reasons why—despite the horrors of the past few years and the sky-high tuition rates that schools charge—now really is a good time to pick up an LSAT guide. ...

As the economy healed and horror stories about jobless and indebted young law grads proliferated, however, something crucial happened: Applications tumbled to their lowest level in at least 30 years. In the fall of 2013, just 39,700 students entered their first year of law school. Given the typical dropout rate, that means we should expect no more than 36,000 to graduate, down about 23 percent from last year’s overstuffed total.

At the same time, it seems the legal job market has begun to stabilize. Last year, 32,775 graduates found full-time jobs lasting at least a year, including positions like judicial clerkships, up slightly from 2012. For such an enormous class of students, that total was woefully insufficient. But here’s the key bit: If the market produces the same number of jobs in 2016, when around 36,000 students are set to graduate, job hunting is going to become a relative cinch. Theoretically, 91 percent of the class could land long-term, full-time work—on par, if not better, than some of the legal industry’s best years.

That’s my basic reason for optimism. Right now, law school looks like a stock that crashed too far after a panic, and is suddenly a bit undervalued. It’s a good time to buy. But of course, not everyone agrees. So let’s go through some of the objections.

Continue reading

June 30, 2014 in Legal Education | Permalink | Comments (7)

Krugman: Charlatans, Cranks, Tax Policy, and Kansas

Following up on Saturday's post, If You Cut Taxes, You Get Less Tax Revenue:  New York Times op-ed:  Charlatans, Cranks and Kansas, by Paul Krugman (Princeton):

KansasTwo years ago Kansas embarked on a remarkable fiscal experiment: It sharply slashed income taxes without any clear idea of what would replace the lost revenue. Sam Brownback, the governor, proposed the legislation — in percentage terms, the largest tax cut in one year any state has ever enacted — in close consultation with the economist Arthur Laffer. And Mr. Brownback predicted that the cuts would jump-start an economic boom — “Look out, Texas,” he proclaimed.

But Kansas isn’t booming — in fact, its economy is lagging both neighboring states and America as a whole. Meanwhile, the state’s budget has plunged deep into deficit, provoking a Moody’s downgrade of its debt.

There’s an important lesson here — but it’s not what you think. Yes, the Kansas debacle shows that tax cuts don’t have magical powers, but we already knew that. The real lesson from Kansas is the enduring power of bad ideas, as long as those ideas serve the interests of the right people.

Continue reading

June 30, 2014 in Tax | Permalink | Comments (0)

Vox: What the Right Doesn't Get About Piketty

Following up on last week's post, Mankiw: How Inherited Wealth Helps the Economy:  Vox, What the Right Doesn't Get About Piketty, by Matthew Yglesias:

Greg Mankiw's column over the weekend, "How inherited wealth helps the economy" is the latest entry into a burgeoning genre of Thomas Piketty's rebuttals that appear to be written by people who aren't familiar with what proposals Piketty is advancing.

But Piketty isn't against the idea of wealth accumulation or even against the idea young of people inheriting accumulated wealth from their ancestors. ... "My point is not to increase taxation of wealth. It's actually to reduce taxation of wealth for most people, but to increase it for those who already have a lot of wealth."

June 30, 2014 in Tax | Permalink | Comments (2)