Law Commons^™

Constitutional Restraints On Intrastate Distribution Of Taxing Authority, Walter Hellerstein

Scholarly Works

No abstract provided.

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

Scholarly Works

No abstract provided.

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

Scholarly Works

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 …

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

Scholarly Works

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.

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

Scholarly Works

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 …

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

Scholarly Works

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.

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 …

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

Scholarly Works

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 …

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

Scholarly Works

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

Scholarly Works

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

Scholarly Works

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.

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

Scholarly Works

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 …

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

Scholarly Works

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.

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

Scholarly Works

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.

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 …

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

Scholarly Works

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

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

Scholarly Works

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.

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

Scholarly Works

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 …

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

Scholarly Works

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 …

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

Scholarly Works

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.

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

Scholarly Works

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

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

Scholarly Works

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.

The Up-C Revolution, Gregg D. Polsky, Adam H. Rosenzweig

Scholarly Works

Over the past few years, a revolutionary new tax structure, known as the Up-C, has become increasingly popular, particularly in instances where an LLC is being taken public. In such an Up-C IPO, a newly formed C corporation is placed on top of the existing LLC, which continues to operate the business. Shares of the C corporation are sold to new investors, and the proceeds are used by the C corporation to buy an interest in the LLC. Meanwhile, the legacy owners of the LLC (typically, founders and private investment funds) retain their interests in the LLC, while receiving exchange …

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

Scholarly Works

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 …

Demystifying The Qualified Payment Right: Structuring And Administering A Sec. 2701-Compliant Entity, John F. Destefano

Scholarly Works

No abstract provided.

(Anti)Poverty Measures Exposed, Francine J. Lipman

Scholarly Works

Few economic indicators have more salience and pervasive financial impact on everyday lives in the United States than poverty measures. Nevertheless, policymakers, researchers, advocates, and legislators generally do not understand the details of poverty measure mechanics. These detailed mechanics shape and reshape poverty measures and the too often uninformed responses and remedies. This Article will build a bridge from personal portraits of families living in poverty to the resource allocations that failed them by exposing the specific detailed mechanics underlying the Census Bureau’s official (OPM) and supplemental poverty measures (SPM). Too often, when we confront the problem of poverty, the …

Irresponsibly Taxing Irresponsibility: The Individual Tax Penalty Under The Affordable Care Act, Francine J. Lipman, James Owens

Scholarly Works

In recent decades, Congress has used the federal income tax system increasingly to administer and deliver social benefits. This transition is consistent with the evolution of the American welfare system into workfare over the last several decades. As more and more social welfare benefits are conditioned upon work, family composition, and means-tested by income levels, the income tax system where this data is already systematically aggregated, authenticated, and processed has become the go-to administrative agency.

Nevertheless, as the National Taxpayer Advocate Nina Olson has noted there are “substantial differences between benefits agencies and enforcement agencies in terms of culture, mindset, …

Taxing Remote Sales In The Digital Age: A Global Perspective, Walter Hellerstein

Scholarly Works

This Article addresses three fundamental questions raised by the taxation of remote sales in the digital age from a global perspective, but focuses on the implications, if any, of the answers to these questions in the global context for the U.S. subnational retail sales tax. First, should remote sales be taxed under a consumption tax? Second, if the answer to the first question is “yes,” where should such sales be taxed? Third, how can remote sales be taxed effectively under a consumption tax in the digital age?4

Reconciling The Premium Tax Credit: Painful Complications For Lower And Middle-Income Taxpayers, Francine J. Lipman, James E. Williamson

Scholarly Works

The Patient Protection and Affordable Care Act (ACA) makes available to certain middle and lower-income individuals a refundable tax credit, the Premium Tax Credit (PTC), designed to help them pay the premiums on their qualified health care plans. To achieve Congress’s goal of making health insurance affordable, the PTC is most often provided directly to an individual’s insurance provider each month in advance of actually claiming the PTC on the individual’s year-end annual tax return. Of the almost twelve million individuals who have enrolled in health insurance through the federal and state health exchanges in 2015, 85% of these individuals …

A Hitchhiker’S Guide To The Oecd’S International Vat/Gst Guidelines, Walter Hellerstein

Scholarly Works

The OECD’s International VAT/GST Guidelines, which were released in their consolidated form at the OECD’s Global Forum on VAT in Paris in late 2015, are the culmination of nearly two decades of efforts to provide internationally accepted standards for consumption taxation of cross-border trade, particularly trade in services and intangibles. This article provides a roadmap to the Guidelines, especially for readers who may be unfamiliar with consumption tax principles, in general, or VATs in particular. Part II of the article provides the background to the Guidelines, describing the basic features of a VAT, the problems with which the Guidelines are …