Law Commons^™

The Missing "T" In Esg, Danielle A. Chaim -- Assistant Professor, Gideon Parchomovsky -- Professor Of Law

Vanderbilt Law Review

Environmental, social, and governance (“ESG”) philosophy is the zeitgeist of our time. The rise of ESG investments came against the perceived failure of the government to adequately promote socially important goals. And so, corporations are now being praised and credited for stepping up where the government has fallen short. In this Essay, we contend that the standard narrative of ESG suffers from a major flaw. The reason for this discrepancy is taxes. The companies that are widely perceived as saviors of the ESG era are in fact the cause of some of the main deficiencies ESG seeks to redress. Astoundingly, …

The Inequity Of Informal Guidance, Joshua D. Blank, Leigh Osofsky

Vanderbilt Law Review

The coexistence of formal and informal law is a hallmark feature of the U.S. tax system. Congress and the Treasury enact formal law, such as statutes and regulations, while the Internal Revenue Service offers the public informal explanations and summaries, such as taxpayer publications, website frequently asked questions, virtual assistants, and other types of taxpayer guidance. Throughout the COVID-19 pandemic, the IRS increased its use of informal law to help taxpayers understand complex emergency relief rules implemented through the tax system.

In contrast to many other legal scholars who have examined important administrative law issues regarding informal tax guidance, in …

Private Benefits In Public Offerings: Tax Receivable Agreements In Ipos, Gladriel Shobe

Vanderbilt Law Review

Historically, an initial public offering ("IPO") was a process whereby a company sold all of its underlying assets to the public. A new tax innovation, the "tax receivable agreement" ("TRA'), creates private tax benefits in public offerings by allowing pre-IPO owners to effectively keep valuable tax assets for themselves while selling the rest of the company to the public. Prior to 2005, TRAs were almost never used in IPOs. Today they have become commonplace, changing the landscape of the IPO market in ways that are likely to become even more pronounced in the future. This Article traces the history of …

Curb Your Enthusiasm For Pigovian Taxes, Victor Fleischer

Vanderbilt Law Review

Pigovian (or "corrective") taxes have been proposed or enacted on dozens of harmful products and activities: carbon, gasoline, fat, sugar, guns, cigarettes, alcohol, traffic, zoning, executive pay, and financial transactions, among others. Academics of all political stripes are mystified by the public's inability to see the merits of using Pigovian taxes more frequently to address serious social harms, some even calling for the creation of a "Pigovian state." This academic enthusiasm for Pigovian taxes should be tempered. A Pigovian tax is easy to design-as a uniform excise tax-if one assumes that each individual causes the same amount of harm with …

Strange Bedfellows: The Federal Constitution, Out-Of-State Nongrantor Accumulation Trusts, And The Complete Avoidance Of State Income Taxation, Jeffrey Schoenblum

Vanderbilt Law Review

With the maximum rate of federal income tax at 39.6 percent, the Medicare surtax on investment income of 3.8 percent, and some state income tax rates exceeding 9 percent, taxpayers in the highest brackets have been seeking to develop strategies to lessen the tax burden. One strategy that has been receiving increased attention is the use of a highly specialized trust known as the NING, a Nevada incomplete gift nongrantor trust, which eliminates state income taxation of investment income altogether without generating additional federal income or transfer taxes. A major obstacle standing in the way of accomplishing this objective, however, …

The Supercharged Ipo, Victor Fleischer, Nancy Staudt

Vanderbilt Law Review

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 "brilliant, just brilliant," while others have labeled them "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 …

Unpacking The Force Of Law, Kristin E. Hickman

Vanderbilt Law Review

In its 2011 decision in Mayo Foundation for Education and Research v. United States,' the Supreme Court rejected tax exceptionalism, holding that the general administrative law standards articulated in United States v. Mead Corp. and Chevron USA Inc. v. Natural Resources Defense Council, Inc. govern judicial review of U.S. Department of the Treasury ("Treasury") regulations. In so doing, the Court admonished, "[W]e are not inclined to carve out an approach to administrative review good for tax law only." A few months later, the D.C. Circuit, sitting en banc in Cohen v. United States, reinforced the policy of administrative law uniformity …

How To Kill The Scapegoat: Addressing Offshore Tax Evasion With A Special View To Switzerland, Niels Jensen

Vanderbilt Law Review

It began with headlines of nearly $20 billion in hidden assets, 52,000 secret bank accounts, confidential informants, court proceedings, and a $780 million fine.' The Union Bank of Switzerland ("UBS") controversy, with all its dramatic appeal, attracted international attention and brought taxation issues to the forefront of public debate. As the scope of tax evasion activities involving UBS began to unfold, U.S. authorities on numerous fronts mobilized against international tax haven abuse-a problem much broader in scope than the scandal at hand.

In order to attract foreign capital to their respective markets, many countries have enacted favorable tax laws with …

Behavioral Economics Analysis Of Redistributive Legal Rules, Christine Jolls

Vanderbilt Law Review

This Essay offers a behavioral economic analysis of redistributive legal rules. Redistributive legal rules are rules chosen for their effects in shifting wealth from high-income to low-income individuals(progressive redistribution). The desirability of such rules has been the subject of intense debate within the legal community. Many law and economics scholars have urged that legal rules be chosen solely with an eye towards Kaldor-Hicks efficiency (which I will call simply "efficiency" for the remainder of this Essay); these scholars often urge that distributional considerations be addressed (if they are to be addressed at all) exclusively through the tax and welfare systems. …

The Hidden Costs Of The Progressivity Debate, Nancy C. Staudt

Vanderbilt Law Review

Progressive taxation-taxing high income individuals at a proportionally higher level than low income individuals-has sparked more than a century of controversy. Those who support progressive taxation have heralded it as a policy that promotes the greatest good for the greatest number in society protects traditional democratic values, reflects the communitarian world-view of women who see themselves as responsible for the well-being of all individuals, and reveals the "aesthetic judgment" that income inequality is "distinctly evil or unlovely." At the same time, critics have condemned progressive income taxation as social policy that amounts to theft and involuntary servitude, reflects the democratic …

Department Of Revenue Of Montana V. Kurth Ranch: The Demise Of Civil Tax Fraud Consequences?, Theresa M. Elliott

Vanderbilt Law Review

In Department of Revenue of Montana v. Kurth Ranch' the United States Supreme Court held, for the first time, that a state tax statute violated the Double Jeopardy Clause of the Federal Constitution. The future impact of this decision has been the subject of much recent speculation. In particular, commentators have debated Kurth's effect on the civil consequences labeled "additions to tax' found in the Internal Revenue Code which are assessed and collected in connection with criminal taxpayer fraud. These additions were examined in Helvering v. Mitchell over fifty years ago, and up-held against a double jeopardy challenge. However, the …

Taxing Gains At Death: A Further Comment, Charles O. Galvin

Vanderbilt Law Review

Professor Lawrence Zelenak's recent Article provides an excellent analysis of the relevant issues and their treatment in a tax regime in which gains and losses are recognized at gifttime and deathtime transfers.' I have argued for the same policy change, suggesting further the repeal of the wealth transfer tax system altogether and possibly the repeal of Section 1022 to require the inclusion in recipients' gross income of gifts, bequests, devises, and inheritances.' Still further, in agreement with Professor Zelenak, I would retain the present concepts of the marital deduction, unlimited charitable deduction for deathtime transfers, and some minimum exemption that …

Unfunded Mandates, Hidden Taxation, And The Tenth Amendment: On Public Choice, Public Interest, And Public Services, Edward A. Zelinsky

Vanderbilt Law Review

Few contemporary issues concern state and local policymakers as intensely as unfunded mandates.' Mayors, county executives, city councilmen, and the professional associations representing them routinely argue that the federal and state governments have, in recent years, imposed at an accelerating rate expensive requirements on municipalities without granting corresponding funds for compliance, thereby irresponsibly straining the fiscal capacity of municipalities, hampering their ability to provide essential services, and improperly infringing upon the scope of local control. The complaints of municipal policymakers have provoked a variety of proposals for restraining unfunded mandates: obligatory disclosure of the projected costs of proposed mandates, requirements …

Third Party Assignment, Statutes Of Limitation, And The Tax Refund Offset Program: Breathe A Little Easier Student Deadbeats, The Fifth Circuit Is On Your Side, Michael S. Smith

Vanderbilt Law Review

The economic downturn of the early 1990s has brought with it a dramatic increase in the number of defaults on student loans.' Legislators have thrashed about trying to plug the collection leaks with a myriad of legislative proposals. Despite this congressional movement, the United States Court of Appeals for the Fifth Circuit recently removed another rock from the dike of federal regulations that prevents the student loan program from completely drowning in unpaid debt. In Grider v. Cavazos, the Fifth Circuit held that Department of the Treasury (Treasury Department) regulations prohibit the Internal Revenue Service (IRS) from offsetting a delinquent …

The Taxation Of Nonshareholder Contributions To Capital: An Economic Analysis, Thomas L. Evans

Vanderbilt Law Review

Every year, billions of dollars are contributed to corporations by persons who are neither owners nor shareholders of those corporations. These contributions, categorized under the income tax laws as "non- shareholder contributions to capital," play an important economic role in subsidizing the construction of new factories and other improvements to the nation's infrastructure.

This Article concerns the federal income tax treatment of the two principal categories of nonshareholder contributions to capital, which together encompass the great majority of these transactions. The first category consists of contributions made for the purpose of obtaining economic development. Typically, this occurs when governments and …

The Innocent Spouse Problem: Joint And Several Liability For Income Taxes Should Be Repealed, Richard C.E. Beck

Vanderbilt Law Review

Husbands and wives who elect to file joint federal income tax returns are jointly and severally liable for the entire tax due. Ninety-nine percent of married couples who file income tax returns make the election to file jointly, and each spouse thereby incurs personal liability for the other spouse's income taxes.' This Article argues that the rule is unfair and unjustified and should be repealed.

Part II of the Article describes the nature and scope of the problems caused by joint and several liability of spouses filing joint re-turns (hereinafter "joint return liability"). When separation or divorce is involved, the …

1988 Amendment To 26 U.S.C. Section 7430: Expanding Taxpayers' Rights To Recover Costs In Tax Controversies, Debra A. Chini

Vanderbilt Law Review

Bureaucratic mistakes at the Internal Revenue Service (IRS) forced Barbara and David Kaufman to seek a court-ordered injunction prohibiting the IRS from collecting a 14,380 dollar tax assessment for 1980. Even though the Kaufmans had notified the IRS office in Chicago of their new Maine address, the IRS mistakenly mailed the preliminary notice of deficiency to the Kaufmans' prior Illinois address. In addition, the Service mailed the statutory notice of deficiency to another couple also named Barbara and David Kaufman.' Because the Kaufmans never received notice of the proposed deficiency, they did not have an opportunity to contest the tax …

State And Local Taxation Of Financial Institutions:An Opportunity For Reform, C. James Judson, Susan G. Duffy

Vanderbilt Law Review

Forces at work in both public and private sectors may soon change the way state and local political subdivisions tax financial institutions. The market for financial services is changing dramatically. Governments have expanded substantially the scope of activities in which financial depositories may engage. The competitive environment for financial activities also is changing as general business corporations enter the financial services field, an area previously considered the exclusive domain of financial institutions. Financial institutions have increasing opportunities for interstate activity, which offers both risks and challenges. These changes have occurred during a period in which the extensive framework of state …

Discriminatory Demands And Divided Decisions: State And Local Taxation Of Rail, Motor,And Air Carrier Property, Scott M. Schoenwald

Vanderbilt Law Review

To prevent the unreasonable burdening of interstate commerce that results from discriminatory state and local taxation of rail, motor, and air carrier property, Congress enacted section 306 of the Railroad Revitalization and Regulatory Reform Act of 1976 (4R Act), 1 section 31 of the Motor Carrier Act of 1980, and section 532(b) of the Airport and Airway Improvement Act of 1982.' These statutes represent the result of two decades of congressional deliberation over property tax discrimination against interstate carriers. Because Congress enacted the 4R Act first and because tax discrimination against rail carriers has been the most egregious,the overwhelming majority …

Significant Sales And Use Tax Developments During The Past Half Century, Jerome R. Hellerstein

Vanderbilt Law Review

Sales and use taxes have been the great growth taxes of state and local governments during the past half century. The general sales tax, along with selected levies on gasoline, tobacco, and liquor, has had phenomenal growth during the past fifty years. In 1932 only Mississippi imposed a general sales tax. It produced seven million dollars, less than one percent of Mississippi's total tax revenues. Taxes once introduced, however, tend to grow at least until widespread dissatisfaction leads to a taxpayers' revolt,such as California's Proposition 13' or the election of President Ronald Reagan and the ascendancy of political conservatism and …

Collection Of The Use Tax On Out-Of-State Mail-Order Sales, Paul J. Hartman

Vanderbilt Law Review

The states' inability to collect taxes on out-of-state mail-order sales constitutes a major fiscal problem. The federal government's Advisory Commission on Intergovernmental Relations estimates that states are losing as much as 1.5 billion dollars each year in unpaid out-of-state mail-order purchase taxes.'

In addition to raising revenue, the compensating use tax serves two purposes: (1) The use tax helps local sellers to compete with retail dealers in other states who are subject to a lesser tax burden;and (2) the use tax avoids the likelihood of draining the taxing state's revenue by removing buyers' incentive or temptation to go bargain hunting …

The Personal Income Tax As A Component Of State Tax Structure, William F. Fox

Vanderbilt Law Review

This Article evaluates the pros and cons of a state individual income tax from the perspective of an economist. The Article examines the income tax as one component of a tax structure that is best suited for raising a given level of revenues. The important assumption in the analysis is that the level of state public expenditures is determined by residents' demand for public services. This assumption does not preclude the tax structure from allowing greater or lesser expenditures than are demanded during any single year; rather, the assumption is that over time tax levels provide revenues that are in …

The Computer's Role In Simplifying Compliance With State And Local Taxation, Ray Westphal

Vanderbilt Law Review

I recently polled several tax managers of large corporations that engage in a multi-state business and asked them whether their companies could stay in reasonable compliance with state and local tax law without using the computer. All said that it would be impossible to meet the compliance requirements of the states and localities without heavy dependence on computers. This reliance on the computer is not surprising given the amount of data that firms must reference to keep up with the thousands of taxing jurisdictions throughout the United States. The many different types of taxes that governmental bodies impose further complicate …

Tax Expenditures And Tax Reform, Allaire U. Karzon

Vanderbilt Law Review

This Review will focus primarily on the conceptual issues affecting the composition of the tax expenditure list and their relevance to current proposals for new tax legislation. In this context,the tax expenditure theory has been preeminently successful in shaping tax reform. The Review will not delve into the other aspect of Surrey's thesis, which calls for executive and congressional action to alter the budget procedure by integrating direct spending programs with the indirect tax expenditure programs and by adopting one amalgamated budget for the purpose of controlling overall federal spending. This facet of the Surrey thesis has not yet gained …

United States Taxation Of Its Citizens Abroad: Incentive Or Equity, Renee J. Sobel

Vanderbilt Law Review

The United States, unlike many sovereignties, has exercised worldwide income tax jurisdiction over its individual citizens since the inception of the income tax. Since 1926, however, United States citizens working abroad have received special treatment in the taxation of their foreign earned income. By the use of a tax credit, direct double taxation has been avoided. In addition, various exclusions and deductions have been permitted. Such tax preferences have been justified on the grounds that they promote tax equity and that they serve as incentives to encourage Americans to work overseas.

This Article considers whether the special treatment of United …

The Tax Benefit Rule -- A Judicially Broadened Tool For Transactional Tax Equity, Jerry N. Smith

Vanderbilt Law Review

In light of the recent Supreme Court holding in United States v. Bliss Dairy, Inc.10 that the tax benefit rule requires income recognition by a corporation when it distributes previously expensed assets in complete liquidation, this Note assesses the dubious continued vitality of the tax benefit rule's single taxpayer construct-that is, the requirement that the same individual or entity serve as both the deducting and the recovering taxpayer. As the following analysis indicates, expansion of the tax benefit rule into a multiple taxpayer construct potentially requires some form of "recapture" in numerous factual settings previously considered non-taxable under existing nonrecognition …

The Taxation Of Defamation Recoveries: Toward Establishing Its Reputation, David D. Willoughby

Vanderbilt Law Review

This Recent Development advocates that courts adopt the Ninth Circuit's Roemer approach to determine the nature of dam-ages for injury to reputation by focusing on the attack rather than the effects of the injury, but suggests that courts replace the Ninth Circuit's reliance on state law with a uniform standard. Part II of this Recent Development traces the evolution of the personal in-jury exemption and the confusing judicial treatment that courts have accorded economic damages which result from personal injuries. Part III of this Recent Development discusses the most recent treatment of economic damages by examining the Tax Court's decisions …

A Tax Policy Analysis Of Bob Jones University V. United States, Charles O. Galvin, Neal Devins

Vanderbilt Law Review

This Article questions the tax policy model that the Court articulated in Bob Jones University. The authors believe that the Court's recognition of the primacy of IRS rule making is undesirable because the IRS, as an executive agency, is susceptible to the influence of the incumbent administration's policy objectives. Further, even though the life-tenured status of judges insulates the courts from external political pressures, significant problems a real so present in a model in which the courts occupy a primary role in formulating tax policy. In sum, Congress is better suited than either the courts or the IRS to determine …

The Deductibility Of Daily Transportation Expenses To And From Distant Temporary Work Sites, Michael D. Rose

Vanderbilt Law Review

In the Article Professor Rose addresses the uncertainty that has characterized judicial application of Internal Revenue Code provisions to daily transportation expenses to and from distant temporary work sites. Although the Internal Revenue Code disallows deductions for commuting expenses to and from work, transportation expenses between work sites are deductible. The courts have had some difficulty applying these principles to distant temporary work sites. Professor Rose argues that the United States Tax Court in Turner v. Commissioner has fomented much of this confusion. Although the court reached the correct determination on the facts, its rationale is flawed. According to Professor …

Federal Limitations On State And Local Taxation, William R. Anderson

Vanderbilt Law Review

Federal Limitations on State and Local Taxation presents a central question about how usefully and how legitimately courts have dealt with the issues of state taxing powers. The United States Supreme Court has assumed a role as the principal architect of this component of federalism. State legislatures and tax officials have, of course, played roles, but they have always operated under the shadow of judicial doctrine. While Congress has not been wholly inactive, its role has been derivative, interstitial, and hesitant. Perhaps Congress' fact-finding role has been larger than its legislative role.'