Taxation-Federal Commons^™

Does Tax Matter? Evidence On Executive Compensation After 162(M)'S Repeal, Gregg Polsky, Brian Galle, Andrew Lund

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As part of the most sweeping federal tax reform in a generation, the Tax Cuts and Jobs Act (“TCJA”) radically altered the tax treatment of compensation paid to senior executives of public companies. Prior to the TCJA, payment of such compensation in excess of one million dollars was non-deductible except to the extent the compensation was performance-based. The TCJA eliminated the exception so that all senior executive compensation above one million dollars is now non-deductible regardless of whether it is performance-based or not.

This reform provides a natural experiment to study the role of tax law in influencing managerial pay …

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

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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 …

Tax Policy And Covid-19: An Argument For Targeted Crisis Relief, Assaf Harpaz

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The COVID-19 pandemic caused a sharp global economic decline. By the end of 2021, the U.S. government responded to the downturn with record fiscal legislation totaling over $5 trillion, which includes considerable tax relief. Most notably, the U.S. government distributed over $800 billion in three rounds of advanced refundable tax credits (known as recovery rebates, or stimulus checks) to most households. Tax relief has been unprecedented in scale but has often been the product of political circumstances rather than principled policy design. Tax relief thus remains largely undertheorized and politically motivated.

This Article examines the U.S. tax policy response to …

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

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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 …

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

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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 …

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

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

Reforming The Tax Incentives For Higher Education, Camilla E. Watson

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Federal spending on higher education has long been controversial, primarily because it has grown exponentially since the 1950s but it has produced a system which many regard as too expensive and grossly inefficient. The soaring costs are placing higher education beyond the reach of many Americans, and of those who enter college, less than half complete their degrees. Particular criticism has been directed toward the education tax incentives, enacted mostly in the late 1990s, which shifted federalfunding for higher education from direct benefits to students in the form of grants, loans and work-study programs to indirect benefits through the tax …

(Anti)Poverty Measures Exposed, Francine J. Lipman

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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

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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, …

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

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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 …

Deciphering The Supreme Court's Opinion In Wynne, Walter Hellerstein

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In Wynne, the Supreme Court held that Maryland's personal income tax regime violated the dormant Commerce Clause because It taxed income on a residence and source basis without giving a credit to residents for in· come taxed on a source basis by other states. The Court suggested, how· ever, that a state may tax residents on all their Income without providing a credit for taxes paid by other states if the state did not tax nonresidents on income from sources within the state, even though such a taxing regime might result in double taxation of interstate commerce.

Taxing Compensatory Stock Rights Transferred In Divorce, Gregg Polsky, Kathleen Delaney Thomas

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Stock-based compensation has become increasingly prevalent in recent years. As a result, many high net worth divorces now result in the transfer of compensatory stock rights from the employee spouse to the nonemployee spouse as part of the marital settlement. Despite this growing trend, the tax consequences of these transfers have not yet been explored fully. This Article endeavors to fill this void and explain both the planning opportunities and potential pitfalls in transferring compensatory stock rights in divorce. These transfers can shift ordinary income from a high-bracket spouse to a lower-bracket spouse, creating a tax surplus that enlarges the …

Complicity And Collection: Religious Freedom And Tax, Jennifer Carr

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This Article focuses on how the Religious Freedom Peace Tax Fund Bill might be improved so that members of Congress enact it. The bill would allow war tax resisters who qualify as pacifists to direct their tax money to a separate fund not to be used for military spending. At present, the IRS is expending time and resources trying to track down tax resisters, which results in loss of revenue for the government. This Article argues that passage of an amended version of the Religious Freedom Peace Tax Fund Bill would eliminate the tension between the IRS and war tax …

Heal The Suffering Children: Fifty Years After The Declaration Of War On Poverty, Francine J. Lipman, Dawn Davis

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Fifty years ago, President Lyndon B. Johnson declared the War on Poverty. Since then, the federal tax code has been a fundamental tool in providing financial assistance to poor working families. Even today, however, thirty-two million children live in families that cannot support basic living expenses, and sixteen million of those live in extreme poverty. This Article navigates the confusing requirements of an array of child-related tax benefits including the dependency exemption deduction, head of household filing status, the Earned Income Tax Credit, and the Child Tax Credit. Specifically, this Article explores how altering the definition of a qualifying child …

The End Of Cash, The Income Tax, And The Next 100 Years, Gregg D. Polsky, Jeffery H. Kahn

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The income tax is technologically very similar to the way it was in its early years, and technological developments have been at the margins of the income tax and have not affected its core elements. Still, technological improvements have made third-party reporting and withholding more efficient, which has allowed these mechanisms to become more pervasively used. Technology has also made it easier for taxpayers to substantiate their activities. These changes have facilitated the evolution of the incometax from its original class tax to the mass tax it is today.

While further technological advances might improve the federal income tax, it …

Access To Tax Injustice, Francine J. Lipman

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No abstract provided.

Rationally Cutting Tax Expenditures, Gregg D, Polsky

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This article illustrates the differences between the two types of tax expenditures by examining the child tax credit (a distributional expenditure), the charitable deduction (an allocative expenditure), and taxfree saving accounts and the mortgage deduction (both of which are-usually defended on allocative grounds but probably have mainly distributional impacts). These differences should be well understood by policymakers as they consider tax expenditure reform as part of a deficit reduction plan.

Constitutional Challenges To The Health Care Mandate: Based In Politics, Not Law, David Orentlicher

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No abstract provided.

Using Payroll Deduction To Shelter Individual Health Insurance From Income Tax, David Orentlicher

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In this article, Professor Orentlicher and his colleagues assess the impact of state laws requiring or encouraging employers to establish ‘‘section 125’’ cafeteria plans that shelter employees’ premium contributions from tax.

What Are We - Laborers, Factories, Or Spare Parts? The Tax Treatment Of Transfers Of Human Body Materials, Lisa Milot

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Transfers of human body materials are ubiquitous. From surrogacy arrangements, to sales of eggs, sperm and plasma to clinics, to black markets for kidneys, to pleas for donations of body materials, these transfers are covered and debated daily in popular and academic discourse. The associated philosophical and legal issues have been explored by a wide range of commentators. The appropriate tax treatment of these transactions, however, is mostly unexamined.

Current law is unclear about what the tax consequences of these transfers are. There are no statutory provisions directly on point, Internal Revenue Service guidance is outdated and conflicting, and the …

Anatomy Of A Disaster Under The Internal Revenue Code, Francine J. Lipman

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No abstract provided.

Can Treasury Overrule The Supreme Court?, Gregg D. Polsky

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This article considers whether the Treasury's check-the-box regulations, which have been widely praised by tax practitioners, are valid. These regulations generally allow any unincorporated entity to elect whether it will be treated as a corporation or a partnership for tax purposes. When these regulations were first proposed, there was some debate as to whether such an elective regime was foreclosed by the statutory scheme, which requires that "associations" be taxed as corporations. This article argues that the focus of this debate was misplaced because, even assuming that the statutory scheme itself was sufficiently ambiguous as to permit an elective regime, …

Legislating Morality: The Duty To The Tax System Reconsidered, Watson

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Four years ago, I presented a paper at a symposium on professionalism jointly sponsored by the University of Kansas Law School and the Kansas Bar Association. That paper espoused the view (contrary to what appears to be the popular view among tax scholars) that tax lawyers owe no special duty to the "tax system" other than to abide by the law and the applicable standards of professional conduct. During the four-year interim since my last visit to Kansas, however, we have witnessed the deleterious effect of the IRS Restructuring and Reform Act of 1998 (RRA '98) on IRS enforcement and …

Race-Conscious Affirmative Action By Tax Exempt 501(C)(3) Corporations After Grutter And Gratz, David A. Brennen

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Part I of this Article examines how the Equal Protection Clause limits the government's ability to engage in race-based affirmative action. Part I focuses on how constitutional law analysis has evolved in light of the Supreme Court's recent decisions in Grutter v. Bollinger and Gratz v. Bollinger. Part II provides a brief description of tax law's public policy limitation. This part shows how the IRS, though not required to do so, has generally followed Equal Protection Clause jurisprudence when applying the public policy limitation to race-based activity by private tax exempt 501(c)(3) institutions. Part III discusses how the Supreme …

No More Parking Lots: How The Tax Code Keeps Trees Out Of A Tree Museum And Paradise Unpaved, Francine J. Lipman

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No abstract provided.

The Working Poor Are Paying For Government Benefits: Fixing The Hole In The Anti-Poverty Purse, Francine J. Lipman

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No abstract provided.

Tax Lawyers, Ethical Obligations, And The Duty To The System, Watson

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Perhaps the most elusive area of law is that of legal ethics. While the term itself is easy to define,' the subject all but defies codification because ethics, or morals (the terms are interchangeable), cannot be encapsulated by or in law. This is because law, in general, contains its own standard of validity on which there is usually clear societal consensus. For example, murder, rape, and theft are morally repugnant universally. Hence, punishment for any of these offenses does not impinge upon religious or individual autonomy because there is no ethical freedom to choose whether or not to engage in …

Taxation Of Telecommunications And Electronic Commerce, Walter Hellerstein

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No abstract provided.

Administrative Procedure And The Internal Revenue Service: Delimiting The Substantial Understatement Penalty, Peter A. Appel

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In the early 1980's, Congress faced the mounting problems of tax shelters and other forms of tax avoidance. It responded by passing a series of laws.1 One of these provisions, section 6661 of the Internal Revenue Code, penalizes "substantial understatement" of tax liability.2 While section 6661 may appear to be a typical, innocuous tax code provision, close examination reveals that the substantial understatement penalty threatens to expand quietly the power of the Internal Revenue Service (IRS) over taxpayers, violating the spirit of the Administrative Procedure Act (APA) in the process.

Section I of this Note explores the background of section …

State Taxation Of Federally Deferred Income: The Interstate Dimension, James C. Smith, Walter Hellerstein

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Most states that impose income taxes conform their levies to the federal model. Consequently, when income is realized but not recognized at the federal level-for example, when a taxpayer reinvests the gain from the sale of her former residence in a new residence or when a taxpayer realizes gain from the exchange of like-kind property -- states typically follow the federal rule in deferring recognition of that income. On the assumption that state conformity to the federal nonrecognition rules reflects an implicit endorsement of the policies underlying those rules, state deferral ordinarily raises no issue independent of those raised by …