Law Commons^™

Tax In The Cathedral: Property Rules, Liability Rules, And Tax, Andrew Blair-Stanek

Andrew Blair-Stanek

The distinction between property rules and liability rules has revolutionized our understanding of many areas of law. But scholars have long assumed that this distinction has no relevance to tax law. This assumption is flatly wrong. Tax law currently uses both property rules and liability rules, and the choice between them has real consequences. When a taxpayer violates a requirement for a favorable tax status, tax law either imposes additional tax proportionate to the harm (a liability rule) or imposes the draconian penalty of taking away the tax status entirely (a property rule). This recognition has three key implications. First, …

I Want Out – Tax Considerations In Exiting A Partnership, James B. Sowell

William & Mary Annual Tax Conference

No abstract provided.

Partnership Current Developments, Robert J. Crnkovich, Steven M. Friedman

William & Mary Annual Tax Conference

No abstract provided.

Representing Clients In Audits And Controversies In Today’S Tax Enforcement Environment, Craig D. Bell, William L.S Rowe

William & Mary Annual Tax Conference

No abstract provided.

Introduction To M&A Tax: S Corporations And Section 336(E), Robert G. Mcelroy, William M. Richardson

William & Mary Annual Tax Conference

No abstract provided.

Recent Developments In Virginia Taxation, Craig D. Bell, William L.S Rowe

William & Mary Annual Tax Conference

No abstract provided.

Taxing Citizens In A Global Economy, Michael S. Kirsch

Michael Kirsch

This Article addresses a fundamental issue underlying the U.S. tax system in the international context: the use of citizenship as a jurisdictional basis for imposing income tax. As a general matter, the United States is the only economically developed country that taxes its citizens abroad on their foreign income. Despite this broad general assertion of taxing jurisdiction, Congress allows citizens abroad to exclude a limited amount of their income earned from working outside the United States. Influential lobbying groups, including businesses that employ significant numbers of U.S. citizens abroad, argue that this exclusion is necessary in order to keep American …

The Theological Case For Progressive Taxation As Applied To Diocesan Taxes Or Assessments Under Canon Law In The United States, Matthew J. Barrett

Matthew J. Barrett

Canon 1263 of the 1983 Code of Canon Law allows the diocesan bishop to impose taxes on the parishes in his diocese for diocesan needs. Canon 1263 requires that such taxes be proportionate to [the parishes'] income. To a tax lawyer, the adjective proportionate describes a so-called flat tax, or a system that imposes the same tax rate on every taxpayer's taxable income. Canon law commentators, however, have consistently agreed that canon 1263 also authorizes a progressive tax, which in this context would impose a higher tax rate on parishes with larger incomes. This article argues that Catholic social teachings, …

Taxation Without Limitation: The Prohibited Pretext Doctrine V. The Sebelius Theory, Brett W. Hastings

Brett W Hastings

The Article posits that the Supreme Court erred in its ruling regarding the Affordable Care Act by overlooking a well established constitutional principle, dubbed the Prohibited Pretext Doctrine. This doctrine, which prohibits the exercise of a prohibited power through the pretextual use of a power granted, faded from memory due to the post Lochner era expansion of the Commerce Clause. Nevertheless, the doctrine remains valid law. In overlooking the Prohibited Pretext Doctrine, the Supreme Court established a new and contradictory doctrine, dubbed the Sebelius Theory. The Sebelius Theory turns the Prohibited Pretext Doctrine on its head by explicitly allowing the …

Unseating Privilege: Rawls, Equality Of Opportunity, And Wealth Transfer Taxation, Jennifer Bird-Pollan

Law Faculty Scholarly Articles

This Article is the second in a series that examines the estate tax from a particular philosophical position in order to demonstrate the relevance and importance of the wealth transfer taxes to that position. In this Article, I explore Rawlsian equality of opportunity, a philosophical position that is at the heart of much American thought. Equality of opportunity requires not only ensuring that sufficient opportunities are available to the least well-off members of society but also that opportunities are not available to other members merely because of their wealth or other arbitrary advantages. Therefore, an income tax alone, even one …

Taxing Indirect Transfers: Improving An Instrument For Stemming Tax And Legal Base Erosion, Wei Cui

Wei Cui

Numerous countries (e.g. Canada, Australia and Japan) tax foreigners on the gains realized on transfers of interests in foreign entities that invest directly or indirectly in real estates in these countries. In the last few years, actions taken by tax authorities in India, China, Brazil, Indonesia and other non-OECD countries have highlighted the possibility of taxing a broader range of “indirect share transfers” by foreigners. This Article argues taxing indirect transfers can have vital policy significance in countries where foreign inbound investments are actively traded in offshore markets: it not only deters tax avoidance, but may also stanch “legal base …

"Shut Up. Pay More. This Is What You Voted For." Why You Don't See Me At San Francisco's Hall Of Justice., David D. Butler

David D. Butler

This 2,285 essay combines California's often violent history with European and American high and low culture to explain my decision to leave San Francisco in the 1970's and to study and practice law in other states. At the time, I was platflorm man (operator) on the 30 Stockton electric trolley through South of Market, the Financial District, Chinatown, Pacific Heights, and the Marina. Nevertheless, at the time the Nation of Islam had at least one armed group, the Zebra killers, murdering Whites, often slowly with machetes. I joined the White, Middle-Class, Taxpaying majority in their diaspora to safer places. My …

A Market For Tax Compliance, Walter E. Afield Iii

Walter E Afield III

It is becoming increasingly clear that, due to political realities and budgetary constraints, the IRS is going to have to attempt to enforce the tax laws by doing more with less. Current enforcement efforts have yielded a tax gap (i.e., the difference between the amount of taxes that should be paid and the amount that are collected) of roughly $450 billion annually. Faced with this task, one of the steps that the IRS has recently taken is to try to improve the quality in services performed by paid tax preparers, a group that historically has been subject to little IRS …

Moving Money: International Financial Flows, Taxes, Money Laundering & Transparency, Richard Gordon, Andrew P. Morriss

Andrew P Morriss

Recent publicity over enormous estimates of “missing” wealth and the use of sophisticated tax strategies by companies like Apple, Google, and Starbucks have produced a demand that the wealthy pay a “fair” amount of tax regardless of their compliance with the letter of tax laws. In particular, the Tax Justice Network’s claim that $21-$32 trillion of “hidden” wealth remains untaxed has garnered considerable attention. In this paper we argue that these claims rest on poor data and analysis and mistakes about how financial transactions work. We further argue that the disputes are about fundamentally conflicting visions of how financial transactions …

Welcome To The Amazon: Leading Online Retail From Local Tax Avoidance Into Your Backyard, Sherry Tehrani

Sherry Tehrani

Online sales in the United States have increased by over 250 percent in the last ten years, reaching over 250 billion dollars in 2012.[1] Spearheaded by Amazon.com, Inc. (“Amazon”), online retailers have fed off their competitive advantage of avoiding local sales tax, and have grown to capture roughly 7 percent of the retail market.[2] The juxtaposition of this upsurge of untaxed online sales and our nationwide recession has prompted state governments with crushing deficits to take on the tax loophole.

Local governments across the U.S. have passed legislation to enforce online sales tax collection, referred to as “Amazon …

The Problem Of Nonprofit Executive Pay?: Evidence From U.S. Colleges And Universities, Brian D. Galle, David I. Walker

Brian D. Galle

Nonprofit organizations suffer from agency problems that are similar to or perhaps even more severe than those observed at for-profit companies. As a result, one might expect the executive pay setting process in the two sectors to reflect similar deficiencies. This Article explains why the managerial power theory that was developed to help explain for-profit executive pay is plausibly applicable to nonprofits. More importantly, this Article offers new evidence based on data from a large panel of colleges and universities collected across a nine year period that supports the idea that potential stakeholder outrage plays a role in limiting nonprofit …

Legal Mirrors Of Entrepreneurship, Mirit Eyal-Cohen

Mirit Eyal-Cohen

Small businesses are regarded the engine of the economy. But just what is a “small” business? Depending on where one looks in the law, the definitions vary and they differ from one section to another. Unfortunately, what these various size classifications fail to assess, are the policy considerations and the legislative intent for granting regulatory preferences to small concerns to begin with.

In the last century, the U.S. government has been cultivating one such policy of fiscal and economic growth. Consequently, Congress and private institutions have been acting to incentivize, support and reward entrepreneurship through the law in order to …

What's Wrong With A Federal Inheritance Tax?, Wendy Gerzog

Wendy Gerzog

Scholars have proposed a federal inheritance tax as an alternative to the current federal transfer tax system, but there are serious flaws with that idea. Those problems include: (1) different tax rates and exemptions based on the decedent’s relationship to the beneficiary; (2) the lack of a tax on lifetime gratuitous transfers, including gifts with retained interests or control; (3) the persistence of most current valuation distortion abuses; and (4) significantly decreased compliance rates and increased administrative costs inherent in a system that taxes transferees on transactions that may be largely unmonitored.

This article reviews common characteristics of existing inheritance …

What's Wrong With A Federal Inheritance Tax?, Wendy Gerzog

Wendy Gerzog

Scholars have proposed a federal inheritance tax as an alternative to the current federal transfer tax system, but there are serious flaws with that idea. Those problems include: (1) different tax rates and exemptions based on the decedent’s relationship to the beneficiary; (2) the lack of a tax on lifetime gratuitous transfers, including gifts with retained interests or control; (3) the persistence of most current valuation distortion abuses; and (4) significantly decreased compliance rates and increased administrative costs inherent in a system that taxes transferees on transactions that may be largely unmonitored.

This article reviews common characteristics of existing inheritance …

Protecting Those Who Need It Most: A Call For Change To The Tax Application Of Qualified Domestic Relations Orders When Placed Into Special Needs Trusts, Conor Francis Linehan

Conor Francis Linehan

This note calls for a change to the way the Internal Revenue Code is applied towards qualified domestic relations orders when used to fund or partially fund special needs trusts, specifically irrevocable (d)(4)(B) trusts created under § 1396p.

The current status of the law is that an individual can roll over a qualified domestic relations order into a new retirement account in a tax-free transfer. If an individual elects to not roll over into a new retirement fund, some additional exemptions to various early termination penalties and lump sum payments have already been carved out of the Code.

This note …

Cbit 2.0 -- Executive Summary, David M. Hasen

Faculty Publications

This short paper provides a summary of a Special Report on a modified version of the comprehensive business income tax, or CBIT, scheduled to appear in Tax Notes on August 26, 2013. The Special Report advocates adoption of a CBIT similar to the one Treasury proposed in 1992. The main difference is the proposed addition of a tax on distributions to high-bracket taxpayers, together with the availability of a deduction against the distribution tax for amounts promptly reinvested. The net effect is consumption tax treatment of the tax, if any, on distributions.

Retirement Security: Leveraging The Research And Development Tax Credit, Tristen J. Cohen

Tristen J Cohen

Abstract: The long-term health and stability of the social security program is currently being threatened by significant demographic shifts and petty political gamesmanship. The importance of the program combined with the significance of the chance of insolvency requires that some action be taken in the present to mitigate problems in the future. Congress can do this by decreasing benefits, raising taxes, or finding alternative ways to raise revenue. One such alternative is investing in program that will increase economic activity and productivity. This paper argues that the Startup Innovation Credit Act of 2013 leverages the research and development credit …

Is Financial Instability A Tax Problem With A Tax Solution?, Hilary Allen

Articles in Law Reviews & Other Academic Journals

Financial regulation and taxation are two fields of law that are notoriously complex and specialized. Given thiscircumstance, it is perhaps not surprising that financial regulators often pay little attention to tax, and focusinstead on their own sphere of influence. Unfortunately, financial regulators ignore tax incentives at the peril offinancial stability.

Carried Interest Reform For Hedge Fund Managers, John Ye

John Ye

Private investment managers’ compensation has been a hot topic since the 2012 presidential campaign. Candidate Romney’s tax returns were highly publicized by the media. Romney’s effective tax rate for his recent 2011 tax year was a paltry 14%.[1] Compared to the notional tax rates on ordinary income from 10% to 40%, this would seem too low for a well-off member of our society who made over $13 million in 2011.

Romney’s response was simply that it was not unfair because most of his income was derived from his investments. To discuss fully about the rationale behind why our tax …

Breaking The Glass Slipper: Reflections On The Self-Employment Tax, Patricia E. Dilley

Patricia E Dilley

Lawmakers and their staffs, in drafting tax legislation, often resemble Prince Charming looking for Cinderella with that glass slipper in hand -- rather than start from scratch and draft a completely new tax provision. It is frequently easier, faster, and more reassuring to taxpayers and tax practitioners to use an existing statute or approach and simply amend it slightly to make it fit the need of the new provision. However, problems can arise from this approach.

In the original Grimm Brothers' version of the Cinderella story, for example, the wicked stepsisters were each so anxious to be the chosen one …

Valuation Misstatement Penalties Require Valuation Misstatements, David J. Shakow

All Faculty Scholarship

In this report, I argue that the valuation misstatement penalty has been misinterpreted by the IRS to apply to tax shelter transactions that have nothing to do with valuation. The penalty applies to taxpayers who claim deductions from inflated basis only when the basis was inflated as a result of an overvaluation. Properly understood, the penalty provision rarely raises the issue for which the government successfully sought certiorari in United States v. Woods.

Tax Constitutional Questions In “Obamacare”: National Federation Of Independent Business V. Sebelius In Light Of Citizens United V. Federal Election Commission And Speiser V. Randall: Conditioning A Tax Benefit On The Nonexercise Of A Constitutional Right, John R. Dorocak

The University of New Hampshire Law Review

[Excerpt] “The phrase “Tax Constitutional Questions” may seem to be an oxymoron or at least an interesting juxtaposition somewhat akin to the phrase “passive activity” derived from Section 469 of the Internal Revenue Code, which is familiar to tax practitioners, professors, and perhaps others. It has been noted elsewhere that it is seemingly normal that tax professors (and tax practitioners) are somewhat isolated from such weighty issues as constitutional questions.

…

Despite what may be the tax bar’s seeming reluctance to engage in constitutional questions, those questions are nevertheless thrust upon tax practitioners and professors. Perhaps nowhere has the intersection …

Putting The Reign Back In Sovereign, Allison Christians

Pepperdine Law Review

In its first term, the Obama administration enacted two pieces of legislation, each designed to protect an increasingly vulnerable income tax base, and each of which had the potential to set a new and unprecedented course for no less than the regulation of the global economy by the nation-state. The first, the Foreign Account Tax Compliance Act (FATCA), sought to end global tax evasion through tax havens. The second, a little-noticed two-page addendum to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), sought to end the contribution of American multinationals to corruption in governance by codifying the transparency …

Proposal For A National Sales Tax To Incentivize The Collection Of Remote Sales Tax, Timothy Li

Timothy Li

This Essay proposes that Congress adopt a national sales tax at one national rate for interstate sales, but with a credit for each transaction in which an out-of-state vendor remits state sales tax. For states without sales taxes, remote vendors can still choose the state rate of zero percent. For states with sales taxes, the national rate should be set to exceed every state’s sales tax rate. Vendors would no longer be able to avoid sales tax by moving overseas. The proposal further provides numerous incentives for Congress to act now rather than delay, including a new source of national …

Administrative Savings From Synchronizing Social Welfare Programs And Tax Provisions, Jonathan Barry Forman

Journal of the National Association of Administrative Law Judiciary

No abstract provided.