Taxation-Federal Commons^™

Tax Reporting As Regulation Of Digital Financial Markets, Young Ran (Christine) Kim

Faculty Articles

FTX’s recent collapse highlights the overall instability that blockchain assets and digital financial markets face. While the use of blockchain technology and crypto assets is widely prevalent, the associated market is still largely unregulated, and the future of digital asset regulation is also unclear. The lack of clarity and regulation has led to public distrust and has called for more dedicated regulation of digital assets. Among those regulatory efforts, tax policy plays an important role. This Essay introduces comprehensive regulatory frameworks for blockchain-based assets that have been introduced globally and domestically, and it shows that tax reporting is the key …

State Digital Services Taxes: A Good And Permissible Idea (Despite What You Might Have Heard), Young Ran (Christine) Kim, Darien Shanske

Faculty Articles

Tax systems have been struggling to adapt to the digitalization of the economy. At the center of the struggles is taxing digital platforms, such as Google or Facebook. These immensely profitable firms have a business model that gives away “free” services, such as searching the web. The service is not really free; it is paid for by having the users watch ads and tender data. Traditional tax systems are not designed to tax such barter transactions, leaving a gap in taxation.

One response, pioneered in Europe, has been the creation of a wholly new tax to target digital platforms: the …

Back To The Future: Marriage And Divorce Under The 2017 Tax Act, Mark W. Cochran

Faculty Articles

The Tax Cuts and Jobs Act of 2017 (the 2017 Tax Act) significantly altered the federal tax consequences of marriage and divorce by mostly eliminating the so-called "marriage penalty" from the individual income tax rates and abolishing the deduction for alimony payments. These changes represent the latest congressional tinkering with issues that have persisted since the earliest days of the modem income tax, turning back the clock with regard to taxation for both married and divorced couples. For the first time, since the enactment of the Tax Reform Act of 1969, the rate brackets for married taxpayers filing joint returns …

Applying The First Amendment To The Internal Revenue Code: Minnesota Voters Alliance And The Tax Law’S Regulation Of Nonprofit Organizations’ Political Speech, Edward A. Zelinsky

Faculty Articles

On its face, Minnesota Voters Alliance v. Mansky is about which T-shirts, hats and buttons voters can wear at the polls. However, the U.S. Supreme Court’s First Amendment analysis in Minnesota Voters Alliance extends beyond apparel at polling places. That decision impacts the ongoing debate about the Johnson Amendment, the now controversial provision of the Internal Revenue Code which forbids Section 501(c)(3) organizations from intervening in political campaigns. Minnesota Voters Alliance also affects the proper construction of Section 501(c)(3)’s ban on lobbying by tax-exempt entities as well as other provisions of the tax law taxing and precluding campaign intervention by …

The Impact Of Law On The State Pension Crisis, Elizabeth S. Goldman, Stewart E. Sterk

Faculty Articles

While some state and municipal pension plans have funds sufficient to meet obligations to retirees without imposing onerous obligations on current and future taxpayers, underfunding of plans in other states has reached disastrous proportions, raising the possibility of default on pension obligations, cuts in public services, steep tax increases, or some combination of the three. The substantial differential in pension funding might be attributed to divergent political pressures, different responses to uncertainty about investment returns, or other factors. Our examination of pension funding law in ten states-five with the best-funded plans and five with the worst-funded plans-highlights the role of …

Section 4968 And Taxing All Charitable Endowments: A Critique And A Proposal, Edward A. Zelinsky

Faculty Articles

No abstract provided.

The Federal Law Of Property: The Case Of Inheritance Disclaimers And Tenancy By The Entireties, David G. Carlson

Faculty Articles

The Supreme Court has issued two disturbing tax opinions which disrupt the notion that “property” (when used in federal statutes) refers to state-law notions. In Drye v. United States, the Supreme Court pierced the Arkansas fiction that inheritance disclaimers are retrospective in effect. Thus the Internal Revenue could claim that a tax lien attached to the pre-disclaimer inheritance. Disclaimer could not defeat this lien. In United States v. Craft, the Supreme Court pierced the Michigan fiction that a tenancy by the entireties does not belong to the individual spouses but, rather, the a corporate “marital” entity that is a separate …

Churches' Lobbying And Campaigning: A Proposed Statutory Safe Harbor For Internal Church Communications, Edward A. Zelinsky

Faculty Articles

President Trump, reiterating the position he took during the presidential campaign, has recently reaffirmed his pledge to “get rid of and totally destroy the Johnson Amendment,” the provision of the Internal Revenue Code which prohibits tax-exempt institutions from participating in political campaigns. The Code also bars tax-exempt institutions, including churches, from substantial lobbying activities.

Rather than the blanket repeal of the Johnson Amendment proposed by President Trump, I argue for a statutory safe harbor for the internal communications of churches. This limited safe harbor would protect in-house church discussions from both Section 501(c)(3)’s ban on substantial lobbying and from that …

Is Federalization Of Charity Law All Bad? What States Can Learn From The Internal Revenue Code, Melanie B. Leslie

Faculty Articles

No abstract provided.

Costly Mistakes: Undertaxed Business Owners And Overtaxed Workers, Lily Kahng, Mary Louise Fellows

Faculty Articles

This Article advocates fundamental changes in the federal income tax base by systematically challenging conventional understandings of consumption and investment. As signaled by its title, "Costly Mistakes," this Article's thesis has to do with the disparate treatment of expenditures incurred by business owners and workers. Where the current tax law treats a business owner's expenditure as investment, the Article sometimes finds consumption and questions why the law should allow the expenditure to be deducted. Where the tax law treats a worker's expenditure as consumption, the Article sometimes finds investment and questions why the law does not allow at least a …

Putting State Courts In The Constitutional Driver's Seat: State Taxpayer Standing After Cuno And Winn, Edward A. Zelinsky

Faculty Articles

This article explores the implications of the U.S. Supreme Court’s decisions in DaimlerChrysler Corp. v. Cuno and Arizona Christian School Tuition Organization v. Winn. In Cuno and Winn, the Court held that state taxpayers lacked standing in the federal courts. Because the states have more liberal taxpayer standing rules than do the federal courts, Cuno and Winn will not terminate taxpayers’ constitutional challenges to state taxes and expenditures, but will instead channel such challenges from the federal courts (where taxpayers do not have standing) to the state courts (where they do). Moreover, municipal taxpayer standing in the federal courts, which …

Location, Location, Location: Using Cost Of Living To Achieve Tax Equity, James Puckett

Faculty Articles

All other things being equal, the federal income tax ignores whether the taxpayer lives in a relatively affordable or expensive location. This approach can lead to unfairness; moreover, special deductions for the taxpayer's actual living expenses, such as home mortgage interest and state and local taxes, do not solve the problem. Tax law scholars have generally been quick to dismiss the equity issues based on assumptions about taxpayer mobility. The existing literature would tax comparable workers equally, regardless of salary and living costs. This approach would unfairly equate differently situated workers. This article questions the assumption of taxpayer mobility, considers …

One Is The Loneliest Number: The Single Taxpayer In A Joint Return World, Lily Kahng

Faculty Articles

The United States is one of the few developed countries to retain the joint income tax return, available for heterosexual married couples only. Since its adoption in 1948, its underlying assumptions have been challenged on many valid grounds, and yet it remains firmly embedded in mainstream political and policy discourse. In recent years, most of the debate surrounding the joint return has focused on reducing marriage penalties, bonuses, and determining who among the universe of couples ought to be extended the benefit of the marriage bonuses. The treatment of single people has received almost no attention. The scant attention paid …

Cuno: The Property Tax Issue, Edward A. Zelinsky

Faculty Articles

The author criticizes the decision of the U.S. Court of Appeals for the Sixth Circuit in Cuno v. Daimler Chrysler Inc., in which the court ruled that Ohio's investment tax credit violated the U.S. Constitution's Commerce Clause. Zelinsky says the dormant Commerce Clause concept of nondiscrimination is overbroad and undefinable and should be abandoned. He hopes this decision will give the U.S. Supreme Court an opportunity to reassess the concept.

Do Tax Expenditures Create Framing Effects? Volunteer Firefighters, Property Tax Exemptions, And The Paradox Of Tax Expenditure Analysis, Edward A. Zelinsky

Faculty Articles

No abstract provided.

The Once And Future Property Tax: A Dialogue With My Younger Self, Edward A. Zelinsky

Faculty Articles

As I look back on my youth (expansively defined as the first 40 years of my life), everywhere I went, the local real property tax was perceived as both bad and doomed. If I could speak with the brash young law student/graduate student/alderman I once was, he would undoubtedly tell me, with great confidence, that by the beginning of the next century (which then seemed very far away) the property tax would no longer play a role in the system of local public finance.

Alas, he was wrong.

This essay explains why the young man I once was, confident of …

Tax Policy V. Revenue Policy: Qualified Plans, Tax Expenditures, And The Flat, Plan Level Tax, Edward A. Zelinsky

Faculty Articles

No abstract provided.

James Madison And Public Choice At Gucci Gulch: A Procedural Defense Of Tax Expenditures And Tax Institutions, Edward A. Zelinsky

Faculty Articles

Few academic doctrines can claim the intellectual and political success of tax expenditure analysis. In roughly a generation's time, Professor Surrey's procedural and substantive critique of tax subsidies has become entrenched in the law school curriculum and in legal scholarship. More impressively, the tax expenditure concept has been enshrined in federal law and become part of the daily discourse of the national budget process.

Efficiency And Income Taxes: The Rehabilitation Of Tax Incentives, Edward A. Zelinsky

Faculty Articles

This Article explores two prominent issues in current legal literature: the propriety of tax incentives in the federal income tax and the use of economic analysis to examine questions of concern to academic lawyers. One premise of this Article is that there is a connection between these two topics.

Tax Policy For Post-Liberal Society: A Flat Tax Inspired Redefinition Of The Purpose And Ideal Structure Of A Progressive Income Tax, Charles O'Kelley

Faculty Articles

A flat rate comprehensive federal income tax could be achieved by replacing graduated rates with a single rate that applies to all taxpayers, eliminating many currently available deductions and credits, and treating as taxable income types of economic gain presently excluded from the tax base. The fact that Congress is seriously considering such radical changes makes it appropriate for tax scholars to reconsider longheld beliefs about the ideal structure of an income tax. This article analyzes the characteristics and underlying rationale of a progressive flat rate comprehensive income tax and reconsiders the nature and purpose of a progressive income tax. …

Corporate Distributions And The Income Tax: A Consideration Of The Inconsistency Between Subchapter C And Its Underlying Policy, Charles O'Kelley

Faculty Articles

The issue of whether the sale of shares to an issuer shall be treated as a dividend or as received in exchange for a capital asset has troubled Congress, courts, and commentators since the Revenue Act of 1913. If a corporation redeems some of its shares or distributes all of its assets in complete liquidation, the transaction is generally described as having the characteristics of a divided to the extent the distribution is ‘out of earnings and profits' and the characteristics of a sale to the extent that it terminates the equity interest of the redeemed party. In light of …

Rawls, Justice, And The Income Tax, Charles O'Kelley

Faculty Articles

To the extent the primacy of justice is acknowledged in tax policy debate, such acknowledgment is coupled with the assertion that, of course, questions of justice cannot be meaningfully debated. The discussants then attempt to resolve the issue in question by use of ad hoc arguments of fairness and efficiency. The major purpose of this article is to show that not only is justice the primary issue, but that questions of justice can be meaningfully addressed. First, Professor O’Kelley examines some of the ad hoc arguments of fairness and efficiency which have been made by proponents of a consumption base …