Law Commons^™

The Missing "T" In Esg, Danielle A. Chaim -- Assistant Professor, Gideon Parchomovsky -- Professor Of Law

Vanderbilt Law Review

Environmental, social, and governance (“ESG”) philosophy is the zeitgeist of our time. The rise of ESG investments came against the perceived failure of the government to adequately promote socially important goals. And so, corporations are now being praised and credited for stepping up where the government has fallen short. In this Essay, we contend that the standard narrative of ESG suffers from a major flaw. The reason for this discrepancy is taxes. The companies that are widely perceived as saviors of the ESG era are in fact the cause of some of the main deficiencies ESG seeks to redress. Astoundingly, …

The Inequity Of Informal Guidance, Joshua D. Blank, Leigh Osofsky

Vanderbilt Law Review

The coexistence of formal and informal law is a hallmark feature of the U.S. tax system. Congress and the Treasury enact formal law, such as statutes and regulations, while the Internal Revenue Service offers the public informal explanations and summaries, such as taxpayer publications, website frequently asked questions, virtual assistants, and other types of taxpayer guidance. Throughout the COVID-19 pandemic, the IRS increased its use of informal law to help taxpayers understand complex emergency relief rules implemented through the tax system.

In contrast to many other legal scholars who have examined important administrative law issues regarding informal tax guidance, in …

Private Benefits In Public Offerings: Tax Receivable Agreements In Ipos, Gladriel Shobe

Vanderbilt Law Review

Historically, an initial public offering ("IPO") was a process whereby a company sold all of its underlying assets to the public. A new tax innovation, the "tax receivable agreement" ("TRA'), creates private tax benefits in public offerings by allowing pre-IPO owners to effectively keep valuable tax assets for themselves while selling the rest of the company to the public. Prior to 2005, TRAs were almost never used in IPOs. Today they have become commonplace, changing the landscape of the IPO market in ways that are likely to become even more pronounced in the future. This Article traces the history of …

How Countries Should Share Tax Information, Arthur J. Cockfield

Vanderbilt Journal of Transnational Law

Offshore tax evasion, international money laundering, and aggressive international tax planning significantly reduce government revenues. In particular, for some low-income countries the amount of capital flight (where elites move and hide monies offshore in tax havens) exceeds foreign aid. Governments struggle to enforce their tax laws to constrain these actions, and they are inhibited by a lack of information concerning international capital flows. The main international policy response to these developments has been to promote global financial transparency through heightened cross-border exchanges of tax information. The Article examines elements of optimal cross-border tax information exchange laws and policies by focusing …

When Tech Startups Outgrow The 1099 Model: Moving Firms Out Of The Kiddie Pool, Chelsea Fitzgerald

Vanderbilt Journal of Entertainment & Technology Law

The 1099 independent contractor has become the new norm for Silicon Valley startups. In the wake of the Ninth Circuit Court of Appeals decision in Alexander v. Fed Ex, tech startups have been scrutinized for their financially savvy preference for 1099 contractors through both class action lawsuits and administrative proceedings. As these movers and shakers grow from humble beginnings to companies with multi-billion dollar valuations, the choice between classifying workers as traditional W-2 employees or 1099 contractors will have dramatic effects on the peer economy's labor force and tax status. This Note examines the startup worker classification dilemma, concludes that …

Curb Your Enthusiasm For Pigovian Taxes, Victor Fleischer

Vanderbilt Law Review

Pigovian (or "corrective") taxes have been proposed or enacted on dozens of harmful products and activities: carbon, gasoline, fat, sugar, guns, cigarettes, alcohol, traffic, zoning, executive pay, and financial transactions, among others. Academics of all political stripes are mystified by the public's inability to see the merits of using Pigovian taxes more frequently to address serious social harms, some even calling for the creation of a "Pigovian state." This academic enthusiasm for Pigovian taxes should be tempered. A Pigovian tax is easy to design-as a uniform excise tax-if one assumes that each individual causes the same amount of harm with …

If You Can't Beat Them, Join Them: The U.S. Solution To The Issue Of Corporate Inversions, Scott Deangelis

Vanderbilt Journal of Transnational Law

There is an old proverb, "If you can't beat them, join them, "that suggests that those who cannot win against some group should stop fighting and instead band together with them. It seems clear that when it comes to corporate inversions, the United States cannot win. Instead, countries overseas have taken advantage of tax break schemes to lure multinational companies away from the United States. This Note suggests that to prevent further foreign inversions, the United States should join these foreign countries in two ways. First, the United States should put its support behind the OECD's plan of a multilateral …

Strange Bedfellows: The Federal Constitution, Out-Of-State Nongrantor Accumulation Trusts, And The Complete Avoidance Of State Income Taxation, Jeffrey Schoenblum

Vanderbilt Law Review

With the maximum rate of federal income tax at 39.6 percent, the Medicare surtax on investment income of 3.8 percent, and some state income tax rates exceeding 9 percent, taxpayers in the highest brackets have been seeking to develop strategies to lessen the tax burden. One strategy that has been receiving increased attention is the use of a highly specialized trust known as the NING, a Nevada incomplete gift nongrantor trust, which eliminates state income taxation of investment income altogether without generating additional federal income or transfer taxes. A major obstacle standing in the way of accomplishing this objective, however, …

The Supercharged Ipo, Victor Fleischer, Nancy Staudt

Vanderbilt Law Review

A new innovation on the IPO landscape has emerged in the last two decades, allowing owner-founders to extract billions of dollars from newly public companies. These IPOs-labeled supercharged IPOs-have been the subject of widespread debate and controversy: lawyers, financial experts, journalists, and members of Congress have all weighed in on the topic. Some have argued that supercharged IPOs are "brilliant, just brilliant," while others have labeled them "underhanded" and "bizarre."

In this Article, we explore the supercharged IPO and explain how and why this new deal structure differs from the more traditional IPO. We then outline various theories of financial …

The Oecd's Flawed And Dated Approach To Computer Servers Creating Permanent Establishments, Monica Gianni

Vanderbilt Journal of Entertainment & Technology Law

As the digital economy changes the way that we do business, tax laws have been challenged to adapt appropriately to this nontraditional business method. International tax rules were developed in a different technological era. To accommodate electronic commerce, existing tax rules either have to be applied to electronic-commerce transactions, or new rules have to be developed. The Organisation for Economic Co-operation and Development (OECD) has taken the lead in studying and recommending appropriate international taxation rules for electronic commerce. This Article focuses on the original central tax issue that the OECD considered--jurisdiction to tax income from electronic commerce based on …

Unpacking The Force Of Law, Kristin E. Hickman

Vanderbilt Law Review

In its 2011 decision in Mayo Foundation for Education and Research v. United States,' the Supreme Court rejected tax exceptionalism, holding that the general administrative law standards articulated in United States v. Mead Corp. and Chevron USA Inc. v. Natural Resources Defense Council, Inc. govern judicial review of U.S. Department of the Treasury ("Treasury") regulations. In so doing, the Court admonished, "[W]e are not inclined to carve out an approach to administrative review good for tax law only." A few months later, the D.C. Circuit, sitting en banc in Cohen v. United States, reinforced the policy of administrative law uniformity …

Tax Incentives For Innovation In A Modern Ip Ecosystem, Joshua Chao

Vanderbilt Journal of Entertainment & Technology Law

Technological innovation is a long-recognized catalyst for economic growth in the United States, and its promotion is an important feature of national economic policy, as evidenced by the presence of various tax incentives for innovation in the US Internal Revenue Code. Tax incentives are an important means by which governments can deliver subsidies to promote such innovation. To be effective, however, any system of tax incentives must be tailored for current economic conditions and competitive landscapes. In the current ecosystem of innovation in the United States, this means that, at the very least, the incentives for innovation in the US …

Piercing The Veil Of Secrecy: Securing Effective Exchange Of Information To Remedy The Harmful Effects Of Tax Havens, Hedda Leikvang

Vanderbilt Journal of Transnational Law

The enforcement of tax laws abroad has long posed problems for authorities. However, that enforcement becomes increasingly more problematic when the information necessary for proper enforcement is located within an impenetrable system whose sole purpose is to protect that information from tax authorities in other countries. Although much effort has been expended to remedy the harmful effects of tax havens, few strategies have succeeded. But with the prospects of a record federal deficit and an ever-increasing tax gap, U.S. authorities have begun to look for new ways to strengthen the enforcement of U.S. tax laws abroad. The most prominent of …

How To Kill The Scapegoat: Addressing Offshore Tax Evasion With A Special View To Switzerland, Niels Jensen

Vanderbilt Law Review

It began with headlines of nearly $20 billion in hidden assets, 52,000 secret bank accounts, confidential informants, court proceedings, and a $780 million fine.' The Union Bank of Switzerland ("UBS") controversy, with all its dramatic appeal, attracted international attention and brought taxation issues to the forefront of public debate. As the scope of tax evasion activities involving UBS began to unfold, U.S. authorities on numerous fronts mobilized against international tax haven abuse-a problem much broader in scope than the scandal at hand.

In order to attract foreign capital to their respective markets, many countries have enacted favorable tax laws with …

Hand-Holding, Brow-Beating, And Shaming Into Compliance, Craig A. Max Iv

Vanderbilt Journal of Transnational Law

Tax authorities and policy planners have a variety of tools at their disposal to create mechanisms to encourage and enforce compliance with revenue collection systems. Traditionally, these mechanisms include the possibility of criminal prosecution as well as civil pecuniary sanctions. Despite the dominate role that prosecution and pecuniary sanctions hold internationally, there exists a range of alternative enforcement mechanisms utilized. The United States has recently started to implement nonpecuniary enforcement devices to achieve policy goals, namely the encouragement of participating with the federal taxing system. This Note attempts to take an initial step into exploring the range of international enforcement …

Perpetuation Of The Foreign Earned Income Exclusion, Hale E. Sheppard

Vanderbilt Journal of Transnational Law

This Article discusses Section 911 of the Internal Revenue Code, also known as the Foreign Earned Income Exclusion (FEIE), as an example of a provision that has been sustained, not on the basis of sound economic analysis and compliance with established U.S. international tax policy, but rather because of effective lobbying and political circumstance. First providing an overview of the U.S. system of worldwide taxation, and the place of the FEIE within that framework, Mr. Sheppard explores the forces underlying the perpetuation of the FEIE. He demonstrates that FEIE is inconsistent with each of the primary components of U.S. international …

Spontaneous Tax Coordination: On Adopting A Comparative Approach To Reforming The U.S. International Tax Regime, Anthony C. Infanti

Vanderbilt Journal of Transnational Law

The excessive complexity of the U.S. international tax regime is well documented. Although many commentators have cited the need for simplification, their proposals often maximize other policy goals at the expense of simplicity. Even reform proposals aimed principally at clarifying the tax code are ordinarily focused on the "internal" complexity of the code, seeking improvements only for U.S. taxpayers struggling with a single complex provision of the code or the baffling interaction, of two U.S. rules. This Article focuses on the interaction between U.S. tax law and the rules of other nations, and is intended to illustrate the benefits that …

U.K. Charity Law: Is It Creating A True Democracy Of Giving?, James R. Michels

Vanderbilt Journal of Transnational Law

In November 1999, the British government announced important legislative reforms affecting the various methods of providing charitable contributions. The government expressed its desire to create a "democracy of giving" by expanding tax relief for charitable donations. These changes took effect in April 2000.

This note argues that the recent legislation reforms, while a step in the right direction, do not create a true "democracy of giving." In arriving at this conclusion, the note will outline the evolution of British tax law related to individual charitable donations. The note will also explore the problems experienced by the charitable sector that prompted …

Learning To Live With The New Foreign Nongrantor Trust Rules, Carlyn S. Mccaffrey, Elyse G. Kirschner

Vanderbilt Journal of Transnational Law

The Small Business Job Protection Act of 1996 (the 1996 Act) was intended to deal a heavy blow to the appeal of foreign trusts to U.S. persons. The results were mixed. On the one hand, the 1996 Act imposes an array of reporting requirements, imposes harsh penalties on failures to comply with these requirements, increases the interest charge imposed on taxes paid on distributions of accumulated income from foreign trusts, treats loans of cash from foreign trusts as distributions, and expands the kinds of gifts that can be treated as indirect transfers from foreign trusts. On the other hand, curiously, …

Respect For "Form" As "Substance" In U.S. Taxation Of International Trusts, Donald D. Kozusko, Stephen K. Vetter

Vanderbilt Journal of Transnational Law

...we might decide that the attribution rule should not be applied so broadly, or so automatically. But how would such a system be devised by regulation? The attribution rule could be applied to trusts in which the discretion of the trustee is very limited and the beneficial interests so clearly ascertainable that the trust is, for all practicable purposes, transparent. That is, however, only a small universe of cases. This leads to the further conclusion that the attribution rule has to be applied based on a facts and circumstances determination of the beneficial interest in each case. Yet that seems …

A Comparison Of New Zealand Taxpayers' Rights With Selected Civil Law And Common Law Countries, Adrian J. Sawyer

Vanderbilt Journal of Transnational Law

This article seeks to ascertain the breadth of rights that taxpayers enjoy in New Zealand in comparison with their counterparts in a number of common law and civil law jurisdictions. Such a comparison enables the wealth of experience that codification of rights in civil law countries can provide in comparison to the traditionally lower reliance on statutory protection in common law jurisdictions. From this comparative analysis common themes are distilled, as well as differences between New Zealand and various civil law and common law nations with respect to the legal position and state of taxpayers' rights. The author mounts a …

Emerging Leader Of The Tax Avant-Garde, Andrzej J. Burba

Vanderbilt Journal of Transnational Law

In 1998, Poland's Minister of Finance Leszek Balcerowicz unveiled a plan to restructure the tax system. His fiat tax proposal promises numerous benefits to individual and corporate taxpayers with significant reduction in tax rates for both groups. The new plan offers to further strengthen Poland's growing economy--a consequence that is especially significant in light of the country's aspiration to join the European Union. It provides a remedy for virtually every ailment plaguing the current tax system and, most importantly, the reform offers to finance itself This Note argues that the plan should be adopted immediately for the following reasons: (1) …

Behavioral Economics Analysis Of Redistributive Legal Rules, Christine Jolls

Vanderbilt Law Review

This Essay offers a behavioral economic analysis of redistributive legal rules. Redistributive legal rules are rules chosen for their effects in shifting wealth from high-income to low-income individuals(progressive redistribution). The desirability of such rules has been the subject of intense debate within the legal community. Many law and economics scholars have urged that legal rules be chosen solely with an eye towards Kaldor-Hicks efficiency (which I will call simply "efficiency" for the remainder of this Essay); these scholars often urge that distributional considerations be addressed (if they are to be addressed at all) exclusively through the tax and welfare systems. …

The Hidden Costs Of The Progressivity Debate, Nancy C. Staudt

Vanderbilt Law Review

Progressive taxation-taxing high income individuals at a proportionally higher level than low income individuals-has sparked more than a century of controversy. Those who support progressive taxation have heralded it as a policy that promotes the greatest good for the greatest number in society protects traditional democratic values, reflects the communitarian world-view of women who see themselves as responsible for the well-being of all individuals, and reveals the "aesthetic judgment" that income inequality is "distinctly evil or unlovely." At the same time, critics have condemned progressive income taxation as social policy that amounts to theft and involuntary servitude, reflects the democratic …

A Comparative Proposal To Reform The United States Gift Tax Annual Exclusion, Jeffrey S. Kinsler

Vanderbilt Journal of Transnational Law

The U.S. tax system receives much criticism. Recurrent themes in criticizing tax laws concern their complexity and the many loopholes relieving the wealthy from large amounts of taxation. This Article demonstrates how very wealthy U.S. taxpayers often do not pay gift and estate taxes. In fact the tax laws do not require these taxes to be paid. The Internal Revenue Code provides mechanisms through which taxpayers can evade estate and gift taxes in the United States. Furthermore, U.S. gift tax laws are extremely generous to taxpayers relative to tax laws of other industrialized countries. This Article analyzes the U.S. gift …

The United States Policy Of Stringent Anti-Treaty-Shopping Provisions: A Comparative Analysis, Simone M. Haug

Vanderbilt Journal of Transnational Law

Tax avoidance through international treaty shopping has become a subject of intense controversy in the international community. By shrewdly structuring businesses, corporations are currently able to take advantage of tax exemptions contained in tax treaties, though the countries that have joined the treaties never intended for them to benefit from such provisions. Many nations, including the United States, view this practice as tax treaty abuse. In response to such abuses, many countries are now incorporating strict anti-treaty-shopping provisions in their bilateral tax treaties.

Ms. Haug begins the Article by describing the practice of treaty shopping and, specifically, the various methods …

Department Of Revenue Of Montana V. Kurth Ranch: The Demise Of Civil Tax Fraud Consequences?, Theresa M. Elliott

Vanderbilt Law Review

In Department of Revenue of Montana v. Kurth Ranch' the United States Supreme Court held, for the first time, that a state tax statute violated the Double Jeopardy Clause of the Federal Constitution. The future impact of this decision has been the subject of much recent speculation. In particular, commentators have debated Kurth's effect on the civil consequences labeled "additions to tax' found in the Internal Revenue Code which are assessed and collected in connection with criminal taxpayer fraud. These additions were examined in Helvering v. Mitchell over fifty years ago, and up-held against a double jeopardy challenge. However, the …

United States Tax Rules For Nonresident Authors, Artists, Musicians, And Other Creative Professionals, Don R. Spellmann

Vanderbilt Journal of Transnational Law

Although the United States rules for taxation of non-resident creative professionals may seem straight forward, the Internal Revenue Code contains significant traps for the unwary nonresident. However, it also offers significant opportunities for nonresidents to protect themselves from United States taxation. Discovering these traps and loopholes requires close attention to the Code and to income tax treaties which further complicate the system. This Note examines the Code's rules on taxation of nonresidents and discusses the effect that tax treaties have on those rules. The Note, intended to be a practical guide for nonresident authors, artists, musicians, and other creative professionals, …

Taxing Gains At Death: A Further Comment, Charles O. Galvin

Vanderbilt Law Review

Professor Lawrence Zelenak's recent Article provides an excellent analysis of the relevant issues and their treatment in a tax regime in which gains and losses are recognized at gifttime and deathtime transfers.' I have argued for the same policy change, suggesting further the repeal of the wealth transfer tax system altogether and possibly the repeal of Section 1022 to require the inclusion in recipients' gross income of gifts, bequests, devises, and inheritances.' Still further, in agreement with Professor Zelenak, I would retain the present concepts of the marital deduction, unlimited charitable deduction for deathtime transfers, and some minimum exemption that …

Unfunded Mandates, Hidden Taxation, And The Tenth Amendment: On Public Choice, Public Interest, And Public Services, Edward A. Zelinsky

Vanderbilt Law Review

Few contemporary issues concern state and local policymakers as intensely as unfunded mandates.' Mayors, county executives, city councilmen, and the professional associations representing them routinely argue that the federal and state governments have, in recent years, imposed at an accelerating rate expensive requirements on municipalities without granting corresponding funds for compliance, thereby irresponsibly straining the fiscal capacity of municipalities, hampering their ability to provide essential services, and improperly infringing upon the scope of local control. The complaints of municipal policymakers have provoked a variety of proposals for restraining unfunded mandates: obligatory disclosure of the projected costs of proposed mandates, requirements …