Taxation-Federal Commons^™

Preventing Tax-Exempt Propaganda: The Case For Defining The Second Prong Of The Methodology Test, Jordanne Miller

Catholic University Law Review

Under current Treasury Regulations, various propaganda groups throughout the United States are exempt from paying federal income tax. This is so because the current test used by the IRS to determine tax-exempt eligibility, the methodology test, is incapable of separating wild propaganda from viewpoints supported by facts.

The IRS created the methodology test in the late 1970s/early 1980s. Since then, groups denied tax-exempt status have repeatedly challenged its validity. The IRS has responded, and the test has evolved. However, the second prong of the test remains undefined—it is still unclear what it means for facts to be “distorted.” This Comment …

Failed Charity: Taking State Tax Benefits Into Account For Purposes Of The Charitable Deduction, Roger Colinvaux

Buffalo Law Review

The Tax Cuts and Jobs Act (TCJA) substantially limited the ability of individuals to deduct state and local taxes (SALT) on their federal income tax returns. Some states are advancing schemes to allow taxpayers a state tax credit for contributions to a charity controlled by the state. The issue is whether state tax benefits are deductible as a charitable contribution for purposes of the federal income tax. Under a general rule of prior law—the full deduction rule—state tax benefits were ignored for purposes of the charitable deduction. If the full deduction rule is applied to the state workaround schemes, then …

The Future Of Salt: A Broader Picture, David Gamage, Darien Shanske

Articles by Maurer Faculty

In this essay, we evaluate the new cap on the state and local tax (SALT) deduction. We argue that the structure of the new cap is not consistent with any theory as to what the SALT deduction is or should be. In canvassing these theories, we further evaluate how future reforms to the SALT deduction might proceed.

Caveat Irs: Problems With Abandoning The Full Deduction Rule, David Gamage, Joseph Bankman, Jacob Goldin, Daniel J. Hemel, Darien Shanske, Kirk J. Stark, Dennis J. Ventry Jr., Manoj Viswanathan

Articles by Maurer Faculty

Several states have passed — and many more are considering — new tax credits that would reduce tax liability based on donations made by a taxpayer in support of various state, local or non-profit programs. In general, taxpayer contributions to qualifying organizations — including public charities and private foundations, as well as federal, state, local, and tribal governments — are eligible for the federal charitable contribution deduction under section 170. In a previous article, we explained how current law supports the view that qualifying charitable contributions are deductible under section 170, even when the donor derives some federal or state …

Charitable Deductions For Rail-Trail Conversions: Reconciling The Partial Interest Rule And The National Trails System Act, Scott Bowman, Danaya Wright

Danaya C. Wright

This Article examines an undeveloped legal topic at the intersection of tax law and real property law: charitable deductions from income tax liability for donations of railroad corridors that are to be converted into recreational trails. The very popular rails-to-trails program assists in the conversion of abandoned railroad corridors into hiking and biking trails. However, the legal questions surrounding the property rights of these corridors have been complex and highly litigated. In 1983, Congress amended the National Trails System Act to provide a mechanism for facilitating these conversions, a process called railbanking. In essence, a railroad transfers its real property …

Graev: Conditional Facade Easement, Wendy G. Gerzog

All Faculty Scholarship

In Graev v. Commissioner, the Tax Court decided whether the taxpayers’ donations of a facade easement and cash contributions were conditional gifts and therefore disallowable as charitable deductions under the requirements of the regulations. The court reviewed the facts to determine whether the condition was allowed because it was “so remote as to be negligible.” The taxpayers argued that case law at the time of the donation allowed for a donation of between 10 and 15 percent of the value of the property, and that they had deducted a value constituting 11 percent of the property’s appraised value; that the …

Rationale And Changing The Charitable Deduction, Roger Colinvaux

Scholarly Articles

There are two principal rationales for the charitable deduction. Depending upon choice of rationale, some tax reform changes are suggested and others are not. A base measurement rationale suggests eliminating the deduction for unrealized appreciation, keeping the benefit as a deduction and not a credit, not adopting caps or a nonitemizer deduction, and protecting the tax base by narrowing the class of organizations eligible to receive deductible contributions. A subsidy rationale, depending upon which strand is emphasized, might favor a more equitable tax benefit in the form of a credit or through caps or a nonitemizer deduction, and could lead …

Not All Defined Value Clauses Are Equal, Wendy G. Gerzog

All Faculty Scholarship

Defined value clauses used to value nonmarketable family limited partnership (FLP) interests create valuation distortions and other public policy issues. This paper describes these abuses and proposes the employment of restrictions similar to those applied to pecuniary formula marital deduction clauses.

The article explains how pecuniary formula marital deduction provisions created valuation distortions by allowing for undervaluation of the marital share that were remedied by the IRS’s Rev. Proc. 64-19 and the enactment of section 2056(b)(10). The article analyzes recent case law expanding the use of defined value clauses into the FLP area and criticizes the courts for not applying …

Facade Easement: Inexpert Valuation, Wendy G. Gerzog

All Faculty Scholarship

The article discusses the recent Dunlap decision, which involved facade easement transfers to the National Architectural Trust, a qualified charity that preserves building easements across the country, although most are in New York City. Although allowing a deduction for their cash contributions to NAT to enforce the easement and not finding any penalties applicable, the Tax Court held that despite two valuation reports written by accepted valuation experts, the taxpayers had not established any value for their easement.

Increase In Standard Mileage Rate For Certain Charitable Work

The Contemporary Tax Journal

No abstract provided.

The Conservation Easement Tax Expenditure: In Search Of Conservation Value, Roger Colinvaux

Scholarly Articles

Federal tax law has long provided a tax benefit for charitable contributions of easements for conservation purposes. A fundamental problem with this conservation easement tax expenditure is that the measure for the tax benefit – lost economic development value – is erroneous. Use of such an erroneous measure obscures the conservation benefits of the program by focusing attention and resources on divining a largely extraneous and unhelpful number. Further, to a considerable extent, the easement program is reflexively justified and understood based on this false measure, as if it represented the conservation value of the program. The Article argues that, …

Excluding Expert Valuation Testimony, Wendy G. Gerzog

All Faculty Scholarship

In Boltar, a case in which the Tax Court addressed the valuation of a conservation easement, the court ruled on the admissibility of expert testimony.

The Economics Of Section 170: A Case For The Charitable Deduction Of Parochial School Tuition, Meir Katz

Meir Katz

That payments for parochial school tuition are not deductible under Section 170 of the Internal Revenue Code is a foregone conclusion in the eyes of many tax policy scholars. Tuition provides an easy case because the donor receives something of great value in return for his donation: the education of his children. This Article questions that conclusion. By taking a close look at the economics behind these tuition payments in the context of a discrete population, the religious Jewish community, I show that traditional economic assumptions are inappropriate for analysis of those payments. Rather than a traditional economic exchange for …

The Times They Are Not A-Changin': Reforming The Charitable Split-Interest Rules (Again), Wendy G. Gerzog

All Faculty Scholarship

The article reviews the history of the tax treatment of charitable split interest gifts, explains the inequities that Congress both cured and generated in its 1969 reforms, and proposes solutions that are consistent with the goals of the 1969 legislation. The article discusses variations in the 1969 definition of a charitable split interest, which, because of the enacted statutory language, applies in instances where there is no abuse potential. The inequity produced by that definition penalizes the donor and flouts the rationale behind the 1969 legislation. By contrast, the creation of some required statutory forms of charitable split interests in …

From The Greedy To The Needy, Wendy G. Gerzog

All Faculty Scholarship

In some instances when the taxpayer makes a charitable donation, the loss of revenue to the government, and the corresponding gain to the taxpayer, far exceeds the benefit to the charity. Some of these losses may be generated by government sanctioned complex transactions and even government created devices. This article proposes a new way to examine "quid pro quo" charitable gifts that reflects the rationale for the charitable deduction.The article analyzes various charitable donations in terms of the dollars gained by the taxpayer, the dollars lost by the government, and the dollars received by the charity. After considering a sliding …

Charitable Deductions For Rail-Trail Conversions: Reconciling The Partial Interest Rule And The National Trails System Act, Scott Andrew Bowman, Danaya C. Wright

UF Law Faculty Publications

This Article examines an undeveloped legal topic at the intersection of tax law and real property law: charitable deductions from income tax liability for donations of railroad corridors that are to be converted into recreational trails. The very popular rails-to-trails program assists in the conversion of abandoned railroad corridors into hiking and biking trails. However, the legal questions surrounding the property rights of these corridors have been complex and highly litigated. In 1983, Congress amended the National Trails System Act to provide a mechanism for facilitating these conversions, a process called railbanking. In essence, a railroad transfers its real property …

Personal Deductions – An "Ideal" Or Just Another "Deal"?, Jeffrey H. Kahn

Scholarly Publications

The allowance of many personal deductions, such as the deduction for medical expenses or charitable contributions, has been criticized on the contention that such deductions are not appropriate elements of an income tax system, but rather are merely devices by which Congress has expended federal funds to further some nontax program or other goal. The tax revenues that are not collected because of these provisions have been characterized as “subsidies” or as camouflaged direct expenditures of the government. This view has attained such prominence that Congress requires the federal government to publish annually a “budget” that lists those tax provisions …

Tax Expenditure Analysis And Constitutional Decisions , Linda Sugin

Faculty Scholarship

This article looks at the significance of the similarities and differences between tax benefits and direct spending for purposes of the equal protection and establishment clauses, with a particular focus on the charitable contribution deduction. Because economic equivalence is not critical under these constitutional provisions, tax expenditure analysis is not relevant to the legal analysis. While this article deals only briefly with numerous provisions of the Code and analyzes only two constitutional provisions, it provides a model for considering the constitutionality of any tax provision.

Theories Of The Corporation And The Tax Treatment Of Corporate Philanthropy Symposium: Corporate Philanthropy Law, Culture, Education, And Politics, Linda Sugin

Faculty Scholarship

This essay is organized as follows: Part I describes the entity model of the corporation as developed in corporate and ethical theory, showing how that model is embodied in the Code and how variations in that model produce different conclusions about the legitimacy of the charitable contribution deduction for corporations. It discusses some issues that arise when corporate philanthropy is considered in the context of the entity theory and how the tax law might respond to those issues. Part II explains how the nexus-of-contracts conception of the corporation, applied as an analytical tool, challenges the tax law's treatment of corporate …