Law Commons^™

The Income Tax, The Constitution, And The Unrealized Importance Of Helvering V. Griffiths, Lawrence Zelenak

Faculty Scholarship

The Supreme Court recently granted certiorari in Moore v. United States, for the purpose of deciding whether the realization doctrine remains a constitutional limitation on Congress's ability to impose an unapportioned income tax, as the Court held in its famous 1920 decision in Eisner v. Macomber. Although it is natural to look to 1920 and Macomber as the cause of today's uncertain scope of the congressional power to tax income, what did not happen in the Court's 1943 decision in Helvering v. Griffiths is as significant as what did happen in 1920. the presence of Moore on the Court's docket …

Taxing Buybacks, Gregg Polsky, Daniel J. Hemel

Scholarly Works

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 …

The Spurious Allure Of Pass-Through Parity, Karen C. Burke

UF Law Faculty Publications

In 2017, Congress reduced tax rates on both corporate and noncorporate income. The drafters invoked the concept of pass-through parity to justify lower rates on noncorporate business income, resulting in a new and highly controversial deduction for pass-through owners under § 199A. The concept of pass-through parity conflates equitable treatment of different entity forms with equitable distribution of the ultimate tax burden among labor and capital. The flawed rationale for § 199A may be viewed as an attempt to preserve the pre-2017 preference for pass-through income; conceptually, the advantage of lower corporate rates is limited to the availability of a …

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

Scholarly Works

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 …

Taxing Utopia, Samuel Brunson

Faculty Publications & Other Works

Nineteenth-century American religious movements challenged many aspects of American society. Although their challenges to mainstream America's vision of sex and marriage remain the best-known aspects of many of these groups, their challenges to traditional American economics are just as important. Eschewing individual ownership of property, many of these new Christian movements followed the New Testament model of a body of believers that held all property in common.

In the early twentieth century, these religious communal groups had to contend with something new: an income tax. Communalism did not fit into the individualistic economic system envisioned b-y the drafters of the …

Integration Of Corporate And Shareholder Taxes, Michael J. Graetz, Alvin C. Warren

Faculty Scholarship

Integration of the corporate and individual income taxes can be achieved by providing shareholders a credit for corporate taxes paid with respect to corporate earnings distributed as dividends. When such integration was previously considered in the U.S., proponents emphasized that it could reduce or eliminate many of the familiar distortions of a classical corporate income tax. Integration would also provide a framework for addressing current concerns for tax incentives for U.S. companies to shift income to foreign affiliates in lower-taxed countries or to expatriate in "inversion" transactions. A recent Congressional proposal for a corporate dividend deduction coupled with withholding on …

Passthrough Entities: The Missing Element In Business Tax Reform, Karen C. Burke

UF Law Faculty Publications

Reform of the U.S. corporate tax system is again on the agenda. Despite important differences, many current proposals share two common goals: (1) reducing the statutory corporate tax rate to improve U.S. “international competitiveness” and (2) broadening the corporate tax base by reducing or eliminating business expenditures to offset revenue losses. Given the significance of the passthrough sector and the relationship between individual and corporate taxes, however, such reforms need to be considered within a broader context. Part I of this article discusses the growing significance of the passthrough sector, which now accounts for roughly half of net business income. …

The Case For Dividend Deduction, Reuven S. Avi-Yonah, Amir C. Chenchinski

Articles

The December 2010 compromise between President Barack Obama and the Republicans extended the 15% tax rate on dividends through the end of 2012. At that point, however, the rate may revert to the Clinton administration rate-39.6%-or be raised to 20%-as proposed by the Obama Administration. Thus, the United States may either abandon corporate-shareholder integration, maintain partial integration, or perhaps even adopt the George W Bush administration's 2003 proposal to exempt dividends altogether-as advocated by some Republicans in Congress. Given this uncertainty and the likelihood of additional Congressional action, now may be a good time to revisit the integration issue. Another …

The Redemption Puzzle, Reuven S. Avi-Yonah

Articles

After the adoption of partial integration in 2003, there has been only a modest rise in dividends, but a sixfold increase in redemptions. This article argues that the explanation for that lies in the different treatment of dividends and capital gains to foreign shareholders and that Congress should respond by making sections 302 and 304 inapplicable to foreign shareholders.

Enforcing Dividend Withholding On Derivatives, Reuven S. Avi-Yonah

Articles

The United States imposes a 30 percent withholding tax on dividends paid to nonresident aliens. However, this tax is rarely paid by portfolio investors because they can swap into U.S. securities, receiving payments to match both capital gain and dividends. Treasury has ruled that swap payments have an origin in the taxpayer’s residence so there is no withholding obligation on payments that match dividends. The proposal would impose withholding tax on dividend equivalents on the ground that there is no policy justification for a distinction between dividends, substitute dividends under securities lending transaction (which are treated as dividends and are …

Is The Corporate Tax System "Broken"?, Karen C. Burke

UF Law Faculty Publications

The slated expiration of the Bush Administration's tax cuts in 2010 highlights the instability of the current 15% rate on dividends and capital gains. Meanwhile, pressure has mounted to reduce U.S. corporate tax rates to improve competitiveness in an increasingly global economy. Much of the 1986 Act reform of the corporate tax-base-broadening combined with lower rates - has unraveled, leaving the U.S. with a high statutory corporate tax rate and narrow corporate tax base. Despite renewed interest in base-broadening and loophole-closing, the goal of corporate tax reform remains elusive. Thus far, proponents of corporate tax reform have largely sidestepped the …

Turning Slogans Into Tax Policy, Karen C. Burke, Grayson M.P. Mccouch

UF Law Faculty Publications

The article examines the Bush Administration's tax cutting agenda, focusing on recent attempts to repeal the estate tax and to eliminate the shareholder-level income tax on corporate dividends. In each of these two seemingly disparate episodes, the Administration used dubious economic claims and populist rhetoric to promote tax cuts without considering revenue costs or distributional effects. The legislative outcomes, however, were driven largely by budget constraints and interest group politics. In conclusion, the article suggests that the Administration's tax cutting agenda is best understood in terms of politics and ideology rather than conventional tax policy.

Comment On Yin, Reforming The Taxation Of Foreign Direct Investment By Us Taxpayers, Reuven S. Avi-Yonah

Articles

In this excellent article, George Yin addresses an important proposal by the President's Advisory Panel on Federal Tax Reform. The Advisory Panel proposed that the United States should permanently switch from taxing the parent corporation of U.S. multinationals on worldwide income to a modified territorial regime under which dividends paid out of active business income would be exempt from U.S. tax.' The Joint Committee on Taxation made a similar recommendation.2

Dividend Taxation In Europe: When The Ecj Makes Tax Policy, Alvin C. Warren, Michael J. Graetz

Faculty Scholarship

This article analyzes a complex line of recent decisions in which the European Court of Justice has set forth its vision of a nondiscriminatory system for taxing corporate income distributed as dividends within the European Union. We begin by identifying the principal tax policy issues that arise in constructing a system for taxing cross-border dividends and then review the standard solutions found in national legislation and international tax treaties. Against that background, we examine in detail a dozen of the Court's decisions, half of which have been handed down since 2006. Our conclusion is that the ECJ is applying a …

Ifa Branch Report: United States (Trends In Company / Shareholder Taxation: Single Or Double Taxation?), Reuven S. Avi-Yonah

Other Publications

United States IFA Branch Report on Trends in Company / Shareholder Taxation: Single or Double Taxation?

Back To The 1930s? The Shaky Case For Exempting Dividends, Reuven S. Avi-Yonah

Articles

This article is based in part on the author’s U.S. Branch Report for Subject I of the 2003 Annual Congress of the International Fiscal Association, to be held next year in Sydney, Australia (forthcoming in Cahiers de droit fiscal international, 2003). He would like to thank Emil Sunley for his helpful comments on that earlier version, and Steve Bank, Michael Barr, David Bradford, Michael Graetz, and David Hasen for comments on this version. Special thanks are due to Yoram Keinan for his meticulous work on the EU regimes (see Appendix). All errors are the author’s. In this report, Prof. Avi-Yonah …

Section 902 Is Too Generous, George Mundstock

Articles

No abstract provided.

Should General Utilities Be Reinstated To Provide Partial Integration Of Corporate And Personal Income—Is Half A Loaf Better Than None?, Douglas A. Kahn

Articles

The General Utilities doctrine is the name given to the now largely defunct tax rule that a corporation does not recognize a gain or a loss on making a liquidating or nonliquidating distribution of an appreciated or depreciated asset to its shareholders. The roots of the doctrine, can be traced to a regulation promulgated in 1919 that denied realization of gain or loss to a corporation when making a liquidating distribution of an asset in kind. No regulatory provision existed which specified the extent to which realization would or would not be triggered by a nonliquidating distribution such as a …

Corporate Tax Changes In The 1986 Tax Reform Act, Richard E. May

William & Mary Annual Tax Conference

No abstract provided.

Stock Redemptions: The Standards For Qualifying As A Purchase Under Section 302(B)., Douglas A. Kahn

Articles

This Article discusses the requirements of section 302(b) for characterizing a stock redemption as a purchase rather than as a dividend equivalent. The focus is primarily on two issues: (1) whether the election authorized by section 302(c)(2) to waive family attribution rules should be available to an entity such as a trust or estate; and (2) the determination of the standards to be applied in resolving whether a redemption is "not essentially equivalent to a dividend" so that section 302(b)(1) is applicable.

Eliminating The Capital Gains Preference. Part Ii: The Problem Of Corporate Taxation, Michael J. Waggoner

Publications

No abstract provided.

Election Of Tax Free Intercorporate Dividends Under The Revenue Act Of 1964, Sheldon S. Cohen

William & Mary Annual Tax Conference

No abstract provided.