Law Commons^™

Allocating Business Profits For Tax Purposes: A Proposal To Adopt A Formulary Profit Split, Reuven S. Avi-Yonah, Kimberly A. Clausing, Michael C. Durst

Law & Economics Working Papers Archive: 2003-2009

The current system of taxing the income of multinational firms in the United States is flawed across multiple dimensions. The system provides an artificial tax incentive to earn income in low-tax countries, rewards aggressive tax planning, and is not compatible with any common metrics of efficiency. The U.S. system is also notoriously complex; observers are nearly unanimous in lamenting the heavy compliance burdens and the impracticality of coherent enforcement. Further, despite a corporate tax rate one standard deviation above that of other OECD countries, the U.S. corporate tax system raises relatively little revenue, due in part to the shifting of …

Slides: Lower Arkansas Valley Super Ditch Company, Inc.: Water Leasing Program, Peter Nichols

Evolving Regional Frameworks for Ag-to-Urban Water Transfers (December 11)

Presenter: Peter Nichols, General Counsel of the Lower Arkansas Valley “Super Ditch” Company, Trout, Raley, Montano, Witwer & Freeman PC, Colorado

33 slides

A Response To Professor Camp: The Importance Of Oversight, Leslie Book

Working Paper Series

In past writings and in an upcoming article by Professor Bryan Camp, The Problem of Adversarial Process in the Administrative State, 83 IND. L. J. ### (2008), Professor Camp criticizes the procedural protections Congress added in the tax collection process, noting the limitations of adversary proceedings in the IRS’s tax collection process. In particular, Professor Camp strongly criticizes the collection due process (CDP) rights that were part of the landmark IRS Restructuring and Reform Act of 1998. Given the size of the tax gap, and likely increasing calls for the IRS to do a better job in reducing that tax …

The Oecd Harmful Tax Competition Report: A 10th Anniversary Retrospective, Reuven S. Avi-Yonah

Law & Economics Working Papers Archive: 2003-2009

Ten years ago the OECD published its report on Harmful Tax Competition: An Emerging Global Issue. This was followed by a series of concrete measures designed to limit some forms of harmful tax competition, such as preferential regimes in OECD countries and offshore tax havens. The OECD initiative has met considerable resistance and in some ways has fallen short of its goals. Nevertheless, this paper will argue that it has been a worthwhile effort and has achieved some measure of success. The paper will then go on to outline some future directions for the project.

Back To The Future? The Potential Revival Of Territoriality, Reuven S. Avi-Yonah

Law & Economics Working Papers Archive: 2003-2009

Until 1993, the United States led the rest of the developed world in strengthening residence-based world-wide corporate and individual income taxation. However, since 1994 this trend seems to have been reversed, at least in part, and similar developments are taking place overseas (e.g., in France and the UK). Thus, there seems to be a trend to reduce the scope of residence jurisdiction, while increasing the emphasis on source jurisdiction. If this trend continues, it seems likely that both traditional territorial countries like France and traditional world-wide countries like to UK and the US would move toward territoriality and decrease emphasis …

Value In The Eye Of The Beholder: The Valuation Of Intangibles For Transfer Pricing Purposes, Yariv Brauner

UF Law Faculty Publications

This article assesses the desirability of our current, arms' length based, transfer pricing regime by analyzing its theoretical and practical effectiveness in application to transfers of intangibles. A detailed analysis of the practice of valuation of intangibles, which is the key component in the application of this regime, exposes its weaknesses that result in undesirable market incentives. These incentives create a strong bias in favor of large multinational enterprises, yet, even if one favored such bias, it is achieved using an uncontrollable, costly and wasteful legal mechanism. The article particularly criticizes the regime's disregard of the unique characteristics of intangibles …

International And Ec Tax Aspects Of Groups Of Companies (Canada), Kim Brooks

Articles, Book Chapters, & Popular Press

This short, largely descriptive piece reviews some of the history and reasons as to why the consolidation of corporate groups has not been adopted in the Canadian income tax legislation. Canada is unique becuase it is one of a very limited number of high-income countries with no formal consolidate regime. After a brief review of the history of consolidated reporting in Canada, the piece describes some of the instances where a mutuality of interest between corporations is recognized, the objectives of recognizing a group of corporations in these instances, and the measures of relatedness used to group corporations. Measures that …

The Reform Of Corporate Taxation In The European Union, Nina Winkler

Cornell Law School Inter-University Graduate Student Conference Papers

The Commission of the European Communities is currently drafting a proposal for an EU Directive to implement the first comprehensive corporate tax strategy for the Internal Market. The adoption of a common consolidated corporate tax base for EU multinational enterprises is one of today’s most highly debated issues on Brussels’ political agenda. Since the reform would affect all international companies conducting business in the Internal Market, it should also be of great interest for non-EU corporate and tax law scholars and lawyers. The paper critically evaluates the key advantages and disadvantages of the concept of an EU consolidated tax base …

Acquiring Innovation, Xuan-Thao Nguyen, Jeffrey A. Maine

Faculty Publications

This article explores whether exceptions from Asset-capitalization and rational tax depreciation rates are justified to reflect the realities of today's segmentation of the innovation market. The authors argue that the federal tax subsidy for innovation should not be limited to initial research, but should be expanded to cover desirable acquisitions in order to achieve optimal innovation outcomes and enhanced economic growth.

Tax My Ride: Taxing Commuters In Our National Economy, Morgan Holcomb

Faculty Scholarship

States constitutionally impose individual income taxes on two bases: (1) Residency: a state of residence can tax its residents and domiciliaries and (2) Source: the state in which income is earned can tax the individual earner. At present, there is no articulated constitutional barrier to "double taxation" of individual income. That is, there is no requirement that the source state and residence state collaborate to tax no more than 100% of an individual's income, and there is no requirement that only one state consider itself the "source" of a particular item of income. In the realm of corporate income taxation …

If Major Wars Affect (Judicial) Fiscal Policy, How & Why?, Nancy Staudt

Faculty Working Papers

This paper seeks to identify and explain the effects of major wars on U.S. Supreme Court decision-making in the context of taxation. At first cut, one might ask why we should even expect to observe a correlation between military activities and judicial fiscal policy. After all, the justices have no authority whatsoever to adopt funding laws intended to relieve the budgetary pressures that tend to emerge in times international crisis. The Court, however, is able to contribute to the wartime revenueraising efforts indirectly by adopting a pro-government stance in the cases it decides in wartime periods. As the probability of …

The Quest To Tax Interest Income: Stages In The Development Of International Taxation, Ilan Benshalom

Faculty Working Papers

The Article offers a new perspective on the way international income tax has developed from its nascency, 85 years ago, to the present day. Its main claim is that, due to the lack of a clear normative tax agenda, trade considerations unduly eroded the income tax base. Such trade considerations highlight the importance of reducing tax obstacles on trade and investment to liberalize and integrate international markets. These considerations penetrated international income tax discourse during the Cold War period, when liberalizing trade was part of a broader western agenda to establish dominance through the liberalization of international markets. The Article …

A Comprehensive Solution For A Targeted Problem: A Critique Of The Eu’S Home State Taxation And Ccctb Initiatives, Ilan Benshalom

Faculty Working Papers

This Article examines the European Commission's Home State Taxation and CCCTB initiatives. It argues that both proposals undermine the long-term objective of attaining a consolidated European corporate tax regime. It suggests an alternative strategy, which offers a comprehensive formulary-tax-allocation-solution in one of the hard to tax sectors, such as the financial sector. This strategy requires more efforts and political risk-taking, but would better promote the long-term objective of a consolidated EU corporate tax regime.

An edited version of this article is scheduled to be published in a future issue of European Taxation (an IBFD publication).

Fifteen And Thirty Five--Class Warfare In Subchapter K Of The Internal Revenue Code: The Taxation Of Human Capital Upon The Receipt Of A Proprietary Interest In A Business Enterprise, Philip F. Postlewaite

Faculty Working Papers

Service providers (aka executives) to partnerships and to corporations confront a number of choices as to how their compensatory arrangement may be structured and the tax consequences thereof. In the simplest case, an individual may render services to an enterprise in return for cash payments over the period of service. In this non-equity setting, the issue is straightforward and non-controversial. The service provider is treated as receiving ordinary income for services rendered. The return on his or her expenditure of human capital is taxed at progressive rates.

Once the relationship between the service provider and the enterprise becomes more complicated …

The Quest To Tax Financial Income In A Global Economy: Emerging To An Allocation Phase, Ilan Benshalom

Faculty Working Papers

The taxation of the income derived from financial assets and transactions was always a daunting black hole in the income tax regime. In an integrated global market, tax authorities find it hard to tax financial income because of the high demand for financial investments and the mobility, fungibility, and tax-sensitivity of financial assets. Many of the current approaches to solving international tax allocation problems fail to see that financial transactions present special challenges and therefore their allocation treatment requires a special solution. The Article focuses on the most conceptually intriguing and significant problem associated with the allocation of financial income: …

The Tax Treatment Of Advance Receipts, David Hasen

Publications

Under the present income tax, some advance receipts are neither taxable on receipt nor deductible on repayment, while others are taxable when received and deductible when repaid or paid for. From a purely theoretical perspective, it remains unclear why different sets of rules apply in different cases. For example, if the fact of unrestricted control over the payment compels the conclusion that it is income, then most advance receipts, including loan proceeds, should be included in income immediately. Conversely, if the presence of an offsetting liability compels the conclusion that the payment is not (yet) income, then most advance receipts, …

Unwinding Unwinding, David Hasen

Publications

"Unwinding" is a common, if not ubiquitous, feature of tax practice. In a successful unwind, parties to a prior transaction or arrangement back out of it by means of a later transaction and are treated for tax purposes as having engaged in no transactions at all. In a failed unwind, the parties undertake the later transaction, but it is not treated as nullifying the effects of the first transaction; rather, two separate transactions are deemed to have taken place, each with its own tax consequences.

This Article develops the first unified theoretical framework for analyzing tax unwinding. It also provides …

Quantifying The Tax Advantage Of Deferred Compensation, Eric D. Chason

Faculty Publications

No abstract provided.

Taxation And Doing Business In Indian Country, Erik M. Jensen

Faculty Publications

Furthering investment in Indian country (a term that includes, but is not limited to, reservations) is an important goal, but potential investors are hesitant - and with reason. One disincentive to invest is uncertainty about tax liability. Understanding taxation in Indian country requires knowledge not only of traditional tax law, but also of American Indian law principles dating from the early nineteenth century, and not many practitioners are up to that task. This article tries to make sense, as much as is possible, of the doctrines that have developed over the centuries.

The article first discusses some basics: the concept …

Tax As Urban Legend, Anthony C. Infanti

Articles

In this essay, I review UC-Berkeley history professor Robin Einhorn's book, American Taxation, American Slavery. In this provocatively-titled book, Einhorn traces the relationship between democracy, taxation, and slavery from colonial times through the antebellum period. By re-telling some of the most familiar set piece stories of American history through the lens of slavery, Einhorn reveals how the stories that we tell ourselves over and over again about taxation and politics in America are little more than the stuff of urban legend.

In the review, I provide a brief summary of Einhorn's discussion of the relationship between slavery and colonial taxation, …

Acquiring Innovation, Xuan-Thao Nguyen, Jeffrey A. Maine

Articles

In recent years, the innovation market has witnessed a new business model involving companies that are mere patent holding shells and not operating entities. They have no customers or products to offer, but they do have an aggressive tactic of using patent portfolios to threaten other operating companies with potential infringement litigation. The strategy is executed with the end goal of extracting handsome settlements. Acquisitions of patents for offensive use have become a major concern to operating companies because such acquisitions pose the threats of patent injunction, interrupting the business and crippling further innovation.

While many operating companies today know …

Access Assured: Restoring Progressivity In The Tax And Spending Programs For Higher Education, Kerry A. Ryan

All Faculty Scholarship

Presently, the federal government subsidizes the higher education expenses of individual college students through two distribution channels: the tax system and the transfer system. Under each subsystem, there are a multitude of programs available to assist students in meeting their postsecondary educational expenses. The proliferation of so many forms of federal student aid raises issues of intra- and inter-program effectiveness. In their current form, the tax benefits for higher education do not get the right amount to the right people at the right time. The federal college spending programs, on the other hand, get the right amount to the right …

Silent Partners: The Role Of Unpaid Market Labor In Families, Lisa Philipps

Articles & Book Chapters

The term 'unpaid market labor' refers to the direct contributions of unpaid family members to market work that officially belongs to another member of the household. Thus one individual may be construed legally as an owner or entrepreneur, but relatives may help out informally with business operations. Likewise, in corporate or public-service settings, certain employees rely on the unpaid help of an executive spouse or political wife. This paper argues that unpaid market labor is conceptually distinct from both paid work and unpaid domestic labor. Legal cases from Canada are used to illustrate the policy implications of this insight and …

Time To Start Over On Deferred Compensation, Michael Doran

Georgetown Law Faculty Publications and Other Works

Writing good regulations--"good" in the sense of promoting the public interest--always presents challenges. Regulators must hit a small but important target where private conduct is brought within appropriate government control, but unnecessary compliance burdens and other deadweight costs are minimized. Even if they see the government's objectives clearly, regulators often have only a limited understanding of the underlying private activities. Moreover, regulators may be unaware of how their rules disrupt or distort those activities in socially harmful ways.

Regulators occasionally hit the target exactly. More often, they miss--though not by an intolerably wide margin (good enough for government work, as …

Helping Out In The Family Firm: The Legal Treatment Of Unpaid Market Labor, Lisa Philipps

Articles & Book Chapters

This article investigates the work of individuals who help out informally with a family member's job, often without pay. Examples include the relative who works in the back room of the family business, the executive spouse who hosts corporate functions, the political wife who campaigns with her husband, or the child who does chores on the family farm. The term "unpaid market labor" (UML) is used here to describe the ways that family members collaborate directly in paid activities that are legally and socially attributed to others. The practical legal problems that can arise in relation to UML are illustrated …

Book Review. Einhorn, Robin L., American Taxation, American Slavery, Ajay K. Mehrotra

Articles by Maurer Faculty

No abstract provided.

A Multilateral Solution For The Income Tax Treatment Of Interest Expenses, Michael J. Graetz

Faculty Scholarship

Recent developments – including greater taxpayer sophistication in structuring and locating international financing arrangements, increased government concerns with the role of debt in sophisticated tax avoidance techniques, and disruption by decisions of the European Court of Justice of member states' regimes limiting interest deductions – have stimulated new laws and policy controversies concerning the international tax treatment of interest expenses. National rules are in flux regarding the financing of both inbound and outbound transactions.

Heretofore, the question of the proper treatment of interest expense has generally been looked at from the perspective of either inbound or outbound investment. As a …