Law Commons^™

Optimal Tax Compliance And Penalties When The Law Is Uncertain, Kyle D. Logue

Law & Economics Working Papers Archive: 2003-2009

This Article examines the optimal level of tax compliance and the optimal penalty for noncompliance in circumstances in which the tax law is substantively uncertain – that is, when the precise application of the Internal Revenue Code to a particular situation is not clear. In such situations, two interesting questions arise: First, as a normative matter, how certain should a taxpayer be before she relies on a particular interpretation of a substantively uncertain tax rule? That is, if a particular position is not clearly prohibited, but neither is it clearly allowed, under the tax law, what is the appropriate threshold …

The De-Gentrification Of New Markets Tax Credits, Roger M. Groves

ExpressO

This article provides the most comprehensive analysis to date of the New Markets Tax Credits program established by Congress. The purpose of the NMTCs is to use tax credits as incentives for investors to provide equity funds into low income areas. The article reveals that over $2 billion of federal tax subsidies that have been allocated to gentrified projects for the wealthy, rather than the intended beneficiaries – low income residents in the urban core – as Congress intended. The article proposes amendments to the statute and regulations to close unintended loopholes.

Taxing Emotional Injury Recoveries: A Critical Analysis Of Murphy V. Internal Revenue Service, Gregory L. Germain

ExpressO

Does Congress have the power under the United States Constitution to tax compensatory personal injury awards? Several months ago, the D.C. Circuit Court of Appeals said "no" in Murphy v. Internal Revenue Service. The court theorized that Ms. Murphy’s compensatory damages award did not constitute “income,” as understood by the enactors of the 16th Amendment, because the award merely made Ms. Murphy whole rather than increasing her wealth.

This paper disputes virtually every aspect of the Murphy decision. The court made errors from the beginning in analyzing the statutory issues. While the court ultimately reached the correct preliminary conclusion – …

Bankruptcy Reform: What's Tax Got To Do With It, Michelle Arnopol Cecil

Missouri Law Review

On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), the most sweeping bankruptcy reform legislation passed by Congress in over a quarter of a century. The bill, which spanned over 600 pages, completelyoverhauled the consumer bankruptcy system and made significant changes to business bankruptcies as well. Yet despite Congress's massive effort to improve the current bankruptcy system in BAPCPA, it failed to address a number of important issues in the area of bankruptcy taxation, a critical but often overlooked area of bankruptcy law. One such issue involves the tax …

A Complete Property Right Amendment, John H. Ryskamp

ExpressO

The trend of the eminent domain reform and "Kelo plus" initiatives is toward a comprehensive Constitutional property right incorporating the elements of level of review, nature of government action, and extent of compensation. This article contains a draft amendment which reflects these concerns.

Tax Practice In A Circular Revolution: A Review Of Pli's Circular 230 Deskbook, Bridget J. Crawford

Elisabeth Haub School of Law Faculty Publications

This short review essay evaluates the Practicing Law Institute's Circular 230 Deskbook by Jonathan G. Blattmachr, Mitchell M. Gans and Damien Rios. For attorneys, accountants and others who "practice" before the IRS, the Circular 230 Deskbook is a masterful analysis and an important guide to the Internal Revenue Service's labyrinthine rules and regulations governing tax penalties, reportable transactions and the conduct of tax practitioners.

Most tax attorneys and accountants have reacted to the recent changes to Circular 230 by appending banner notices to all written communications. Without fully understanding the underlying rules, however, a practitioner cannot be sure that a …

The Impact Of Tax-Exempt Status: The Supply-Side Subsidies, Richard L. Schmalbeck

Law and Contemporary Problems

Schmalbeck provides some background and history of the tax rules governing health care institutions and assess the significance of the subsidies these tax rules create.

Of Head Taxes, Income Taxes, And Distributive Justice In American Health Care, Lawrence Zelenak

Law and Contemporary Problems

Havighurst and Richman have made an important contribution by uncovering ways in which the current system of health care financing, including the income-tax treatment of employer-provided health insurance, has disturbing distributional effects.

Post-Disaster Tax Legislation: A Series Of Unfortunate Events, Ellen P. Aprill, Richard Schmalbeck

Duke Law Journal

When a disaster strikes the United States, Congress typically feels heavy pressure to enact legislation, including tax legislation, to provide relief. This Article discusses features of two tax legislative initiatives, which responded to two quite different disasters: first, the response to the devastation of the fall 2005 hurricane season and, then, the response to the earlier terrorist attacks on the World Trade Center and Pentagon of September 11, 2001. The Article first raises the possibility that some of the provisions of these acts may be vulnerable to indirect constitutional challenge under the Uniformity Clause. In examining some of the problems …

The Tax Subsidy To Employment-Based Health Insurance And The Distribution Of Well-Being, Mark Pauly

Law and Contemporary Problems

Pauly considers some recent contrasting views on the distributional effects of the tax subsidy within employment groups. He shows that the correct answer depends on what one assumes to be the within-group incidence of the reduction in money wages that occurs when group insurance is part of a competitive compensation package.

Bankruptcy Reform: What's Tax Got To Do With It?, Michelle A. Cecil

Faculty Publications

The article takes a two-pronged approach to the issue. First, it argues that all post-petition appreciation should be taxed to the debtor rather than to the debtor's bankruptcy estate because the debtor enjoys the benefits of the asset's appreciation in value and because, from a tax perspective, the results will be identical irrespective of whether the debtor or the bankruptcy estate is taxed on the asset's post-petition appreciation. Second, the article proposes that the gain accruing before the termination of the bankruptcy proceeding be treated as discharge of indebtedness income so that the debtor can defer recognition of the gain …

Fiction, Form And Substance In Subchapter K -- Approaching Partnership Mergers, Divisions And Incorporations, Heather M. Field

ExpressO

The tax consequences of substantively equivalent partnership mergers, divisions and incorporations can vary dramatically depending on the form of the transaction. This disparate treatment arises because the tax analysis of these partnership transactions inconsistently adheres to the “form” of the transaction and limits the use of legal “fictions”. This part-form, part-fiction approach distorts parties’ incentives about whether and how to undertake such transactions and can make the transactions less efficient, all without materially advancing other policy goals. This result is exacerbated by non-tax business exigencies that restrict parties’ abilities to implement certain transaction forms and by the increase in “formless” …

Tribal-State Gaming Compacts And Revenue Sharing Provisions: Are The States Upping The Ante? , Richard L. Skeen

ExpressO

In the ten years following, the Supreme Court’s ruling in the Seminole Tribe v. Florida, Indian Gaming has grown to over a $19 billion a year industry, in 26 States, involving over 241 Approved Class III Tribal Gaming Ordinances. States have been eager to get a piece of this ever-increasing pie. Some commentators have predicted that States will be reluctant to enter into new compacts or renew existing compacts, however, other’s have indicated that States will continue to demand a percentages of Gaming revenues.

This comment addresses the central issue of whether the Tribal-State compacts entered into subsequent to the …

Tribal Bondage: Statutory Shackles And Regulatory Restraints On Tribal Economic Development, Gavin Clarkson

ExpressO

Upwards of $50 billion in capital needs go unmet each year in Indian Country in such vital sectors as infrastructure, community facilities, housing, and enterprise development, in part due to the restrictions imposed on tribal access to the capital markets, specifically the ability of tribal governments to issue tax-exempt debt. Section 7871 of the Internal Revenue Code requires tribal tax-free bond proceeds to be used only for “essential governmental functions,” a restriction not applicable to state and municipal bonds, and Section 7871(e) further limits the scope of available tax-exempt bonding to activities “customarily performed by State and local governments with …

Family Limited Partnerships: The Beat Goes On, Walter D. Schwidetzky

ExpressO

Family limited partnerships ("FLP's") are commonly used for estate planning and estate tax savings. They have come under attack by the IRS. Of late, courts have often held that the assets of an FLP are included in the decedent's estate under section 2036 of the Internal Revenue Code. The article discusses a number of recent, highly important cases in this area and makes a proposal for reform.

Section 7525’S Last Gasps: The Tax Practitioner Privilege And The Selective Waiver Doctrine, Amandeep S. Grewal

ExpressO

Congress blundered badly by defining the Federally Authorized Tax Practitioner privilege by cross-reference to the attorney-client privilege. The relationship between a client and a FATP is wholly different from that between a client and an attorney, and the application of attorney-client principles to the FATP privilege has given rise to confused (and sometimes contradictory) judicial opinions.

This paper attempts to stem the confusion with respect to one aspect of the FATP privilege. The proper application of the selective waiver doctrine to the FATP privilege remains an open question, though courts seem poised to reject it. They have rejected it numerous …

Selective Waiver And The Tax Practitioner Privilege, Amandeep S. Grewal

Andy Grewal

Congress blundered badly by defining the federally authorized tax practitioner privilege by cross-reference to the attorney-client privilege. The relationship between a client and a FATP is wholly different from that between a client and an attorney, and the application of attorney-client principles to the FATP privilege has given rise to confused judicial opinions.

This report attempts to stem the confusion with respect to one aspect of the FATP privilege. The proper application of the selective waiver doctrine to the FATP privilege remains an open question, though courts seem poised to reject it. They have rejected it numerous times in the …

Jumping On The Mommy Track: A Tax For Working Mothers, Jessica C. Kornberg

ExpressO

“Jumping on the Mommy Track: a Tax for Working Mothers,” was written in response to recent data suggesting that mothers experience a wage penalty unrelated to diminished work productivity or commitment. This Article starts from the assumption that a wage penalty, in combination with already existing disadvantages to working mothers embedded in the tax code, drives women out of the workforce and into less economically efficient activity. The Article proposes remedying this distortion by implementing a targeted regressive tax on working mothers.

Learning To Writing In Code: The Value Of Using Legal Writing Exercises To Teach Tax Law, Scott A. Schumacher

ExpressO

Traditionally, law school tax courses have been taught using a mix of problems, class discussion, the Socratic method, and one end-of-term exam. The goal of these courses is to introduce students to key concepts of tax law and to teach them the essential skill of reading and interpreting the Internal Revenue Code and Treasury Regulations. This traditional method of instruction is an efficient and cost-effective way of transmitting a great deal of complex information to a large number of students. It is also a good vehicle to teach the essential skill of reading and interpreting the Code. However, the time …

Revitalizing Our Urban Core Without Marginalizing Our Core People: Closing Tax Credit Loopholes For The Wealthy While Generating Ethnic Entrepreneurial Self Help Alternatives To Subsidized Gentrification, Roger M. Groves

ExpressO

This article provides the most comprehensive analysis to date of the New Markets Tax Credits program established by Congress. The purpose of the NMTCs is to use tax credits as incentives for investors to provide equity funds into low income areas. The article reveals that over $2 billion of federal tax subsidies that have been allocated to gentrified projects for the wealthy, rather than the intended beneficiaries – low income residents in the urban core – as Congress intended. The article proposes amendments to the statute and regulations to close unintended loopholes.

The article also creates a model for a …

Recent Defined Benefit Pension Reform: Reasons And Results, Daniel B. Klaff

ExpressO

In the face of corporate bankruptcies, the Pension Benefit Guaranty Corporation (“PBGC”) assures workers that their defined benefit pensions will be protected. It is this fact which has motivated recent reform of the PBGC and the overarching defined benefit plan system by Congress. This paper explores those reforms by addressing the reasons for and results of the most recent reform which had as its primary aim restoring the fiscal solvency of the PBGC. The paper challenges popular accounts of the reform process while examining the results of such reform for important stakeholders without resorting to an overly technical discussion of …

Harnessing The Costs Of International Tax Arbitrage, Adam H. Rosenzweig

ExpressO

The issue of international tax arbitrage has proven a difficult and at times intractable one. Rather than try to minimize costs of the arbitrage or prevent “abuse” of the laws of a particular regime, the United States should also consider affirmatively bearing some of the costs of international tax arbitrage to further the policy of international vertical equity and transform the incentives that led to the current worldwide non-cooperative equilibrium, and thus the rise of international tax arbitrage, in the first place.

Harnessing the costs of international tax arbitrage transactions will not always be the appropriate response to each particular …

Revitalizing Our Urban Core Without Marginalizing Our Core People: Closing Tax Credit Loopholes For The Wealthy While Generating Ethnic Entrepreneurial Self Help Alternatives To Subsidized Gentrification, Roger M. Groves

ExpressO

This article provides the most comprehensive analysis to date of the New Markets Tax Credits program established by Congress. The purpose of the NMTCs is to use tax credits as incentives for investors to provide equity funds into low income areas. The article reveals that over $2 billion of federal tax subsidies that have been allocated to gentrified projects for the wealthy, rather than the intended beneficiaries – low income residents in the urban core – as Congress intended. The article proposes amendments to the statute and regulations to close unintended loopholes.

The article also creates a model for a …

Financial Accounting And Corporate Behavior, David I. Walker

ExpressO

The power of financial accounting to shape corporate behavior is underappreciated. Positive accounting theory teaches that even cosmetic changes in reported earnings can affect share value, not because market participants are unable to see through such changes to the underlying fundamentals, but because of implicit or explicit contracts that are based on reported earnings and transaction costs. However, agency theory suggests that accounting choices and corporate responses to accounting standard changes will not necessarily be those that maximize share value. For a number of reasons, including the fact that executive compensation often is tied to reported earnings, managerial preferences for …

Five Recommendations To Law Schools Offering Legal Instruction Over The Internet, Daniel C. Powell

ExpressO

This article addresses the emerging market for legal distance education. The market is being driven by recent changes in ABA regulations, as well as specialization in the curriculum, and expanding costs of traditional education. We are seeing the emergence of legal distance education consortiums, which offer a platform for the trading or selling of courses and programs.

However, much skepticism remains about the ability of distance education technology to offer law schools and law students a sufficiently interactive pedagogy. In the words of Supreme Court Justice Ruth Bader Ginsburg legal education is a “shared enterprise, a genuine interactive endeavor” that …

Designing Interstate Institutions: The Example Of The Ssuta, Brian D. Galle

ExpressO

This Article presents a case study in designing cooperative interstate institutions. It takes as its subject the Streamlined Sales and Use Tax Agreement (“SSUTA”), a recently-developed compact among the States now awaiting congressional ratification. The SSUTA’s primary goal is to bring uniformity to the field of state and local sales taxation, a regime in which multi-jurisdictional sellers now confront literally thousands of different sets of rules. I predict here that the SSUTA as currently designed is unlikely to accomplish that goal, and attempt to suggest possible amendments that could improve its expected performance. From these efforts I extract larger lessons …

Substance Over Form? Phantom Regulations And The Internal Revenue Code, Amandeep S. Grewal

ExpressO

This paper addresses the appropriate response to tax statutes that call for the issuance of regulations, but that have been ignored by the Secretary. The courts and the IRS have taken the unusual step of treating these statutes as self-executing, notwithstanding the absence of regulations, and have invoked phantom regulations to enforce the statutes. Several commentators have analyzed the Tax Court's and the IRS's approaches, but have focused mostly on cases interpreting delegations found in the Internal Revenue Code. Because those cases themselves are inconsistent, it is not possible to extract a clear rule from analysis of those cases alone. …

Substance Over Form? Phantom Regulations And The Internal Revenue Code, Amandeep Grewal

Andy Grewal

This paper addresses the appropriate response to tax statutes that call for the issuance of regulations, but that have been ignored by the Secretary. The courts and the IRS have taken the unusual step of treating these statutes as self-executing, notwithstanding the absence of regulations, and have invoked phantom regulations to enforce the statutes. Several commentators have analyzed the Tax Court's and the IRS's approaches, but have focused mostly on cases interpreting delegations found in the Internal Revenue Code. Because those cases themselves are inconsistent, it is not possible to extract a clear rule from analysis of those cases alone. …

Preventing The Hybrid From Backfiring: Delivery Of Benefits To The Working Poor Through The Tax System, Leslie Book

Working Paper Series

This article analyzes the government’s increased use of the tax system to deliver benefits to the working poor. The hybrid in this article is the earned income tax credit (EITC), one of the country’s largest anti-poverty programs. The EITC is hybrid in that it is administered in the tax system but is increasingly redistributive, like traditional welfare programs. It reveals that the hybrid tax and welfare nature of the delivery of benefits to the working poor through the tax system results in some significant benefits, such as higher participation and lower administrative costs, but also a weakness in the form …

The Partnership: Preserving Capital Gains On Real Estate Investments, Charles E. Mcwilliams

ExpressO

This paper considers the use of partnerships as an effective tool for preserving capital gains on real estate investments. For tax purposes, the Internal Revenue Service generally treats a limited liability company as a partnership. This form of organization is widely used for real estate investments, and by taking a few simple precautions an LLC may ensure that any gain on its investments in undeveloped real property will be treated as capital gains. Such treatment may reduce the LLC’s tax costs substantially.

The Fifth Circuit developed a framework that has proven invaluable for analyzing the activity of the LLC to …