Law Commons^™

Constitutional Restraints On Intrastate Distribution Of Taxing Authority, Walter Hellerstein

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No abstract provided.

Is Now A(Nother) Teachable Moment Honoring The Memory Of Dr. William S. Spriggs, Francine J. Lipman

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No abstract provided.

A Critical Evaluation Of The Qualified Small Business Stock Exclusion, Gregg Polsky, Ethan Yale

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Section 1202 of the Internal Revenue Code grants a gain exclusion to certain shareholders who own "qualified small business stock." We describe the tortured history of this rule, explain how it works (and fails to work), and critically evaluate whether the rule serves any coherent policy objective. If Congress keeps the rule in place, significant revisions are necessary to align the rule with sound policy and tamp out the abusive manipulations arguably permitted by the law in its present form. We propose several improvements along these lines. We also make the case for eliminating the exclusion in its entirety.

The Internet Tax Freedom Act At 25, Walter Hellerstein, Andrew D. Appleby

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In October 1998, Congress enacted the Internet Tax Freedom Act (ITFA), a temporary three-year “moratorium” on the enactment of new state and local “taxes on Internet access” and on “multiple or discriminatory taxes on electronic commerce.” After extending the act temporarily several times, Congress, in 2016, finally and controversially struck the language temporarily extending the act, thereby making it permanent.

With its idiosyncratic legislative history and statutory language, as well as the recent attention it has received in connection with legal challenges to digital services and analogous taxes, we thought it would be appropriate to commemorate ITFA’s 25th birthday by …

Stanley Surrey's Lasting Influence, Assaf Harpaz, C. Eugene Steue

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Stanley Surrey is perhaps best known for his promotion of the concept of tax
expenditures—the characterization of various tax preferences as substitutes for
direct expenditures. That emphasis understates his lasting influence on the tax
policy process. An equally important and lasting achievement was establishing
and promoting the integrity and professionalism of the Treasury’s Office of Tax
Policy (OTP), while garnering the support of much of the wider tax policy
community for basing tax policy on the principles of fairness, simplicity, and
efficiency.

In this article, we focus mainly on historical developments in the concept and
use of tax expenditures both …

International Tax Reform: Who Gets A Seat At The Table?, Assaf Harpaz

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The international tax framework relies on early-twentieth-century principles and favors the interests of the Global North, which created it. It bases taxing rights on a corporation’s physical presence and mostly allocates profits to the country of residence. Moreover, it has been slow to adapt to modern business practices. In the digital economy, companies shift profits with relative ease and often do not require a physical presence in the location of their consumers. International taxation needs reform, but leading proposals do not reflect meaningful input from the Global South and are unlikely to serve the needs of developing countries.

In 2021, …

A Study Of Tax Lawyers Discussing Duties, Michelle M. Kwon, Michael Hatfield

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This Article reports the first qualitative empirical study of U.S. tax lawyers. We interviewed women lawyers who were tax planning specialists. Though this is the first such study of U.S. tax lawyers, this methodology has been used often to study the professional ethics of other tax practitioners around the world. We had three research questions that we sought to answer through dynamic conversations on topics such as the distinctions between good and bad tax plans and good and bad tax lawyers and also the joys and stresses of tax practice. Our first research question was as to the make-up of …

How To Design An Antiracist State And Local Tax System, Francine J. Lipman

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Since the first ship of enslaved African people landed in Virginia in 1619, racist policies in institutions, systems, structures, practices, and laws have ensured inequity for people of color. These racist policies include every imaginable variant of injustice from slavery to lynching, to segregation, and to economic injustices, including those delivered through tax systems today. Although facially color-blind, tax systems have long empowered the explosion of white wealth and undermined wealth accumulation for Black families and communities of color. State and local tax systems, especially in the South, have deeply-rooted racist fiscal policies, including Jim Crow laws that continue to …

How The State And Federal Tax Systems Operate To Deny Educational Opportunities To Minorities And Other Lower Income Students, Camilla E. Watson

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The importance of education cannot be overstated. Education is a core principle of the American Dream, and as such, it is the ticket to a better paying job, homeownership, financial security, and a better way of life. Education is the key factor in reducing poverty and inequality and promoting sustained national economic growth. But while the U.S. Supreme Court has referred to education as "perhaps the most important function of the state and local governments," it has nevertheless stopped short of declaring education a fundamental right guaranteed under the Constitution. As a consequence, because education is not considered a fundamental …

Does The Supreme Court’S Decision In Wayfair Apply Retroactively?, Walter Hellerstein, Andrew D. Appleby

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A recent decision of the Oregon Tax Court suggests that it may be premature to dismiss the challenging questions raised by the retroactive application of Wayfair as entirely hypothetical. Accordingly, after providing an overview of the case law governing retroactive application of Supreme Court state tax decisions repudiating preexisting constitutional doctrine, we examine the Oregon Tax Court’s opinion in Global Hookah Distributors Inc. v. Department of Revenue, which addressed the question whether Wayfair applied retroactively to the state’s tobacco products tax.

Tax Policy And Covid-19: An Argument For Targeted Crisis Relief, Assaf Harpaz

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The COVID-19 pandemic caused a sharp global economic decline. By the end of 2021, the U.S. government responded to the downturn with record fiscal legislation totaling over $5 trillion, which includes considerable tax relief. Most notably, the U.S. government distributed over $800 billion in three rounds of advanced refundable tax credits (known as recovery rebates, or stimulus checks) to most households. Tax relief has been unprecedented in scale but has often been the product of political circumstances rather than principled policy design. Tax relief thus remains largely undertheorized and politically motivated.

This Article examines the U.S. tax policy response to …

Taxation Of The Digital Economy: Adapting A Twentieth-Century Tax System To A Twenty-First-Century Economy, Assaf Harpaz

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This Article analyzes the tax challenges of digitalization and the potential solutions to address them. This Article argues in favor of a multilateral approach and proposes applying a new tax nexus based on market thresholds subject to a global de minimis amount. As more companies conduct business online, current international tax law and its principles have failed to adapt to global commercial practices. Digital-tech giants such as Facebook, Google and Amazon have been able to exploit the international tax framework by avoiding a physical presence in the jurisdiction of their consumers. As a result, profits of highly digitalized enterprises can …

Taxing Buybacks, Gregg Polsky, Daniel J. Hemel

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A recent rise in the volume of corporate share repurchases has prompted calls for changes to the rules governing stock buybacks. These calls for reform are animated by concerns that buybacks enrich corporate executives at the expense of productive investment. This emerging antibuyback movement includes prominent politicians as well as academics and Republicans as well as Democrats. The primary focus of buyback critics has been on securities-law changes to deter repurchases, with only passing mention of potential tax-law solutions. This Article critically examines the policy arguments against buybacks and arrives at a mixed verdict. On the one hand, claims that …

Pulling The Wrong Lever Opens A Trap Door: Using Taxes To Fight The Opioid Epidemic, Michelle M. Kwon

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By the late 1990s, a cultural shift that helped to normalize prescription opioid use was underway in the United States. Pharmaceutical companies, regulators, and prescribers were among the intentional or unwitting change agents in this cultural revolution. Between 1999 and 2010, the number of opioid prescriptions written in the United States increased by 300%. 1 Between 1999 and 2015, the number of opioid-related deaths quadrupled2 Like a prescribed wildland burn that grows out of control, America's dependence on prescription opioids has become overpowering and uncontainable. The opioid epidemic has taken an obvious human toll. It has also exacted a charge …

Distortion Of Income In A Single-Factor Sales Formula World, Walter Hellerstein

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In this article, Hellerstein describes the framework governing constitutional challenges to state income tax apportionment formulas in light of the widespread adoption of single-factor sales formulas and speculates as to whether a recent Michigan court decision invalidating the application of such a formula on constitutional grounds might be a harbinger of things to come.

Humanizing The Tax System: What National Taxpayer Advocate Nina E. Olson Did For America's Kids And Their Families, Francine J. Lipman

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At their core, taxpayer rights are human rights. They are about our inherent
humanity.—Nina E. Olson

The federal income tax system does not exist for statutes, regulations, codes, enforcement, assessments, collection, redistribution, procedures, publications, liens, levies, refunds, liabilities, litigation, compliance, or even revenue. At its core, the federal income tax system exists for people. People like you, me, and all our loved ones including spouses, partners, parents, kids, brothers, sisters, nieces, nephews, grandparents, grandkids, friends, and neighbors. The people who eat at our tables and sleep under our roofs. The tax system is about current and future generations who live …

The Impact Of The 2017 Tax Act On Certain Personal Injury Plaintiffs, Gregg Polsky

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The 2017 Tax Act was the most sweeping federal tax legislation in over a generation. While many of its reforms, from dramatically lowering the corporate tax rate to altering the international tax rules, have already received significant attention, little attention has been paid to the 2017 Tax Act’s effects on personal injury plaintiffs. This Article explores these impacts.

The 2017 Tax Act added a new provision that indirectly affects plaintiffs who allege sexual harassment or abuse. The new provision disallows the defendants’ deductions in these cases if the parties enter into a nondisclosure agreement. While targeted at defendants, the provision …

The Rapidly Evolving Universe Of Us State Taxation Of Cross-Border Online Sales After South Dakota V Wayfair, Inc., And Its Implications For Australian Businesses, Walter Hellerstein

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The US Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc. dramatically expanded the subnational states’ power to require remote suppliers to collect taxes on in-bound sales to local consumers by repudiating the pre-existing, judicially created constitutional rule limiting the states’ authority to enforce such collection obligations to those suppliers with an in-state physical presence and replacing it with a ‘nexus’ rule based on ‘economic and virtual contacts’. The state legislatures reacted quickly and almost unanimously to the Wayfair decision by adopting rules imposing sales tax collection obligations on remote suppliers whose sales exceeded specified dollar or transaction thresholds. …

Taxing Residential Solar, Gregg Polsky, Ethan Yale

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Residential solar systems are becoming commonplace in many regions of the United States. Use of such systems raises issues in tax doctrine and policy that are not well appreciated and have not yet been systematically analyzed. The goals of this article are threefold: (1) to identify the main issues and to organize them into a coherent framework, (2) to analyze the doctrinal and policy ramifications of present law, and (3) to suggest improvements to present law.

Should States Embrace Gilti?: A Cost-Benefit Approach, Walter Hellerstein

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Congress inserted several provisions into the Tax Cuts and Jobs Act, arguably intended to address corporate arrangements when federal taxable income on which the states rely is disconnected from profitability, perhaps most significantly a tax on global intangible low-taxed income. In this installment of Board Briefs, I asked State Tax Notes board members to weigh in on whether states should embrace GILTI.

Platforms: The Sequel, Walter Hellerstein, John A. Swain, Jonathan E. Maddison

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In this article, the authors discuss recent developments on sales and use tax reporting and collection obligations imposed on platforms that facilitate taxable sales of tangible personal property or services.

Digital Taxation Lessons From Wayfair And The U.S. States’ Responses, Walter Hellerstein, Jeffrey Owens, Christina Dimitropoulou

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This article provides a detailed and structured synthesis of the discussion that took place in the context of the "fireside chat" event held by the WU Global Tax Policy Center at the Institute of Austrian and International Tax Law on December 17, 2018, at which Hellerstein was the guest speaker. The event was one of the initiatives of the Digital Economy Tax Network, a multi-stakeholder forum, which organized a workshop on the VAT/goods and services tax and the digital economy December 17-18, 2018, in Vienna. In this article, the authors examine the lessons that the U.S. Supreme Court's Wayfair decision …

Reflections On The Cross-Border Tax Challenges Of The Digital Economy, Walter Hellerstein

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In this article, Hellerstein discusses common problems confronting national and subnational jurisdictions in addressing the cross-border tax challenges of the digital economy. This article is based on the author's November 21 inaugural lecture as a visiting professor at the Vienna University of Economics and Business.

The Oecd Unified Approach: Nexus, Scope, And Coexisting With Dsts, Assaf Harpaz

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This article comments on the OECD Secretariat Proposal for a “Unified Approach” under Pillar One, released October 9, 2019. The article focuses on the proposal’s scope, nexus, administration and compliance, proposed “Amount C” and compatibility with unilateral digital service taxes. The article suggests a nexus that does not consider size-limiting worldwide revenue thresholds and offers an alternative de minimis country-specific sale-based proposal. Comments on the OECD proposal were submitted by the author as part of the OECD’s public consultation process in November 2019.

There's A Problem With Buybacks, But It's Not What Senators Think, Daniel J. Hemel, Gregg D. Polsky

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In a deeply divided Washington, one of the few issues on which leading lawmakers on both sides of the aisle appear to agree is that corporations should be discouraged from buying back their stock from shareholders. This short article argues that, while this anti-buyback sentiment is misguided, there nevertheless are good tax policy arguments for reforming the tax treatment of buybacks. The article recommends adoption of a 1969 proposal made by Professor Marvin Chirelstein that would recharacterize (for tax purposes) buybacks as a pro rata cash dividend, followed by sales of shares from the shareholders who participate in the buyback …

How Not To Read International Harvester: A Response, Walter Hellerstein

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In this article, Hellerstein examines a recent article by Alysse McLoughlin and Kathleen Quinn and seeks to clear up the confusion surrounding International Harvester.

Explaining Choice-Of-Entity Decisions By Silicon Valley Start-Ups, Gregg Polsky

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Perhaps the most fundamental role of a business tax advisor is to recommend the optimal entity choice for nascent business enterprises. Nevertheless, even in 2018, the choice-of-entity analysis remains highly muddled. Most tax practitioners across the United States consistently recommend flow-through entities, such as LLCs and S corporations, to their clients. In contrast, a discrete group of highly sophisticated tax professionals, those who advise start-ups in Silicon Valley and other hotbeds of start-up activity, prefer C corporations.

Prior commentary has described and tried to explain this paradox without finding an adequate explanation. These commentators have noted a host of superficially …

Taxes Falling Disproportionately On Nonresidents: Reflections On Saban, Walter Hellerstein

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In this article, Hellerstein discusses the constitutionality of taxes that fall disproportionately on nonresidents.

The Transformation Of The State Corporate Income Tax Into A Market-Based Levy, Walter Hellerstein

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This article traces the developments which have transformed the state corporate income tax into a market-based levy and provides an overview of the current “state of play” regarding the apportionment of income for state corporate income tax purposes.

Taxing Litigation: Federal Tax Concerns Of Personal Injury Plaintiffs And Their Lawyers, Gregg Polsky

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This Article addresses the federal tax concerns ofpersonal injury plaintiffs and the lawyers who represent them, typically on a contingencyfee basis. It explains when plaintiffs' recoveries are taxable for income and employment tax purposes and whether and how those recoveries are required to be reported by defendants to the IRS. It also discusses whether attorney's fees and costs are deductible by plaintiffs.

In addition to these tax planning and compliance issues, the Article also considers when tax evidence might be admissible. Plaintiffs and defendants often try to introduce tax evidence in an effort to increase or decrease, respectively, the amount …