Law Commons^™

Standing On The Shoulders Of Llcs: The Tax Entity Status And Decentralized Autonomous Organizations, Samuel D. Brunson

Faculty Publications & Other Works

Since the formation of the first decentralized autonomous organization (DAO) in 2016, their use has exploded. Thousands of DAOs now try to take advantage of smart contracts to solve a problem that plagues business entities: the gulf between ownership and management. Armed with smart contracts and requiring token-holders to vote on any change in strategy, DAOs dispense with the management layer so necessary in traditional business entities. DAOs owe their existence to technology. Without blockchain, without cryptocurrency, and without smart contracts, there would be no DAOs. But they owe their explosiveness to something much more unexpected: Treasury regulations. In the …

Bargain Basement Progressivity? Constitutional Flat Taxes, Demogrants, And Progressive Income Taxation, Samuel D. Brunson

Faculty Publications & Other Works

State and local governments raise revenue in three primary ways: property, sales, and income taxes. Property and sales taxes tend to impose a higher burden on low-income households. To ensure the fairness and progressivity of their overall revenue system, states need their in-come tax to be sufficiently progressive.

Four states face an apparently insurmountable barrier to progressive income taxation: their state constitutions mandate that any income tax must have a flat rate, applicable to all taxpayers. Without a constitutional amendment, a difficult process, they cannot adopt marginal rates that increase as income increases.

While the impediment appears insurmountable, however, it …

Pandemics, Paid Sick Leaves, And Tax Institutions, Alex Zhang

Loyola University Chicago Law Journal

The COVID-19 pandemic is currently ravaging the world, and the United States has been largely unsuccessful at containing the coronavirus. One long-standing policy failure stands out as having exacerbated the pandemic in our country: the lack of a national mandate of paid sick leaves, without which workers face financial and workplace-cultural pressures to attend work while sick, thus spreading the virus to their fellow employees and the public at large.

This Article provides the blueprint for a national, subsidized mandate of paid sick leaves and two additional insights about our tax institutions as mechanisms of effectuating broader societal goals. It …

International Vertical Equity, Adam H. Rosenzweig

Loyola University Chicago Law Journal

This Essay considers the role of equity in the international tax context. While much has been written about the importance of equity in the domestic context, the conversation around international tax has failed to recognize the importance of the concept of equity. While tax policy in the domestic context has historically prioritized equity over efficiency, tax policy in the international context has not equally prioritized equity, at least not in the same way. In particular, this Essay addresses this question by revisiting the classic and dominant theory of equity in international tax policy, inter-nation equity, and its traditional roots in …

God Is My Roommate? Tax Exemptions For Parsonages Yesterday, Today, And (If Constitutional) Tomorrow, Samuel D. Brunson

Faculty Publications & Other Works

In 2019, the Seventh Circuit decided an Establishment Clause question that had been percolating through the courts for two decades. It held that the parsonage allowance, which permits “ministers of the gospel” to receive an untaxed housing allowance, does not violate the Establishment Clause of the Constitution. It grounded its conclusion in part on the “historical significance” test the Supreme Court established in its Town of Greece v. Galloway decision.

In coming to that conclusion, the Seventh Circuit cited a 200-year unbroken history of property tax exemptions for religious property. According to the Seventh Circuit, that history demonstrated that both …

Addressing Hate: Georgia, The Irs, And The Ku Klux Klan, Samuel D. Brunson

Faculty Publications & Other Works

In 1944, the Ku Klux Klan officially suspended its operations. Two years later, it had entirely ended. In part this was the inevitable result of a decade of declining influence and membership. In part, though, it was the result of actions by the federal government and the state of Georgia. In 1916 the Ku Klux Klan incorporated as a Georgia fraternal organization, following a model of the Masons and other fraternal organizations. It also claimed to be a tax-exempt fraternal beneficiary society under the new federal income tax. These legal statuses provided the Klan with legal rights and benefits and …

The Spurious Allure Of Pass-Through Parity, Karen C. Burke

Loyola University Chicago Law Journal

In 2017, Congress reduced tax rates on both corporate and noncorporate income. The drafters invoked the concept of pass-through parity to justify lower rates on noncorporate business income, resulting in a new and highly controversial deduction for pass-through owners under § 199A. The concept of pass-through parity conflates equitable treatment of different entity forms with equitable distribution of the ultimate tax burden among labor and capital. The flawed rationale for § 199A may be viewed as an attempt to preserve the pre-2017 preference for pass-through income; conceptually, the advantage of lower corporate rates is limited to the availability of a …

Do Tax Judges Think About The Economy?, Orli Oren-Kolbinger

Loyola University Chicago Law Journal

Does the macroeconomic environment affect judicial decisions and thereby shape the law? Even though the normative significance of understanding judicial decision-making is undeniable, empirical research into how judges make decisions is woefully incomplete. This is the first Article to empirically examine the stabilizing fiscal potential of judicial decisions in tax disputes. In this Article, I use empirical methods to test whether macroeconomic conditions—namely, the business cycle—affect the outcomes of judicial decisions in tax cases. Economic theory prescribes either an anti-cyclical response to the business cycle or no response at all. I test this hypothesis with a novel dataset constructed of …

Difficulty Of Care: Aligning Tax And Health Care Policy For Family Caregiving, Christine S. Speidel

Loyola University Chicago Law Journal

In the United States millions of people live with disabilities, many of whom require assistance with activities of daily life to remain in their homes and communities. However, financial support for this assistance is limited. Many caregivers forgo working outside the home in order to provide care to a family member. And while state and federal programs provide some compensation for caregiving, caregivers frequently face problems including poverty, lack of health insurance, lack of Social Security and Medicare credits, and lack of retirement savings. Our nation’s paltry support for caregiving threatens the practical ability of people with disabilities to choose …

Unsophisticated Taxpayers, Rules Versus Standards, And Form Versus Substance, Emily Cauble

Loyola University Chicago Law Journal

Many features of tax law can simplify the law in some senses for some taxpayers but make it more complex in other ways and for other taxpayers. This Essay focuses, in particular, on design choices that make the form of a transaction more determinative of tax consequences than its substance or that make tax law more rule like and less standard based. While such measures may simplify matters for taxpayers who contemplate tax law prior to acting (by making tax consequences more predictable), they can make the law more complex for taxpayers who do not attempt to ascertain the content …

"I'D Gladly Pay You Tuesday For A [Tax Deduction] Today": Donor-Advised Funds And The Deferral Of Charity, Samuel D. Brunson

Faculty Publications & Other Works

In recent years, donor-advised funds have become an increasingly popular vehicle for charitable giving. In part, their popularity can be traced to a disconnect in the law: donor-advised funds look in many ways like private foundations, but the tax law treats them as public charities. This disconnect is advantageous to donors. Because Congress was worried about wealthy individuals' ability to take advantage of the control they can exercise over private foundations, it imposed a series of additional tax rules on private foundations. These rules, among other things, limit the deductibility of donations to private foundations, require that private foundations make …

Paying For Gun Violence, Samuel D. Brunson

Faculty Publications & Other Works

Gun violence is an outsized problem in the United States. Between a culture that allows for relatively unconstrained firearm ownership and a constitutional provision that ensures that ownership will continue to be relatively unchecked, it has proven virtually impossible for politicians to address the problem of gun violence. And yet, gun violence costs the United States tens of billions of dollars or more annually. These tens of billions of dollars are negative externalities — costs that gun owners do not bear themselves, and thus that are imposed on the victims of violence and on taxpayers generally.

What can we do …

Afterlife Of The Death Tax, Samuel D. Brunson

Faculty Publications & Other Works

More than a century ago, Congress enacted the modern estate tax to help pay for World War I. Unlike previous iterations of the estate tax, though, this one outlived the war and accumulated additional goals beyond merely raising revenue. The estate tax helped ensure the progressivity of the tax system as a whole, and it limited the hereditary ability to accumulate wealth.

This modern estate tax almost instantly met with opposition, though. The opposition has never been sufficient to entirely eliminate the estate tax, but it has severely weakened its ability to raise revenue and to prevent the accumulation of …

Mormon Profit: Brigham Young, Tithing, And The Bureau Of Internal Revenue, Samuel D. Brunson

Faculty Publications & Other Works

Since the enactment of the modern federal income tax, churches have been exempt from taxation. But that exemption is neither necessary nor inevitable. In fact, at the end of the 1860s, the Bureau of Internal Revenue decided that tithing received by the Mormon church was taxable under the Civil War income tax. At the time, Mormons distrusted the federal government and the federal government, in turn, distrusted the Mormons. The question of taxation was a small part of a larger legal and existential battle between the Mormons and the government. This Article situates the question of the taxability of tithing …

Dear I.R.S., It Is Time To Enforce The Campaigning Prohibition. Even Against Churches, Samuel Brunson

Faculty Publications & Other Works

In 1954, Congress prohibited tax-exempt public charities, including churches, from endorsing or opposing candidates for office. To the extent a tax-exempt public charity violated this prohibition, it would no longer qualify as tax-exempt, and the IRS was to revoke its exemption.

While simple in theory, in practice, the IRS rarely penalizes churches that violate the campaigning prohibition and virtually never revokes a church's tax exemption. And, because no taxpayer has standing to challenge the IRS's inaction, the IRS has no external imperative to revoke the exemptions of churches that do campaign on behalf of or against candidates for office.

This …

Taxing Utopia, Samuel Brunson

Faculty Publications & Other Works

Nineteenth-century American religious movements challenged many aspects of American society. Although their challenges to mainstream America's vision of sex and marriage remain the best-known aspects of many of these groups, their challenges to traditional American economics are just as important. Eschewing individual ownership of property, many of these new Christian movements followed the New Testament model of a body of believers that held all property in common.

In the early twentieth century, these religious communal groups had to contend with something new: an income tax. Communalism did not fit into the individualistic economic system envisioned b-y the drafters of the …

Oil And Water: Mixing Taxable And Tax-Exempt Shareholders In Mutual Funds, Jeffrey M. Colon

Loyola University Chicago Law Journal

As of 2012, roughly 23% of U.S. households’ assets and 50% of retirement assets are invested in mutual funds, thus making mutual funds one of the most important investment vehicles for U.S. households. The federal taxation of mutual funds and mutual fund shareholders has played a vital role in the development of mutual funds and their appeal to U.S. investors.

Despite the significant amount of mutual fund assets held in retirement accounts, there has been very little analysis of the issues that arise when taxable and tax-exempt shareholders invest together in the same mutual fund. A substantial body of research …

Cook County Prevents Source Of Income Discrimination From Begetting Unlawful Race Discrimination And So Should Illinois, Jonathan Sheffield

Public Interest Law Reporter

No abstract provided.

The U.S. As Tax Haven? Aiding Developing Countries By Revoking The Revenue Rule, Samuel D. Brunson

Faculty Publications & Other Works

Over the years, many OECD countries, including the United States, have identified tax havens as a significant problem, and have acted to limit the ability of their taxpayers to use tax havens to reduce their taxes. The United States has implemented tax regimes, including subpart F and the passive foreign investment company rules, and disclosure regimes, such as the recently-enacted FATCA rules, to prevent U.S. taxpayers from taking advantage of tax haven jurisdictions.

But the intersection of a number of U.S. tax rules, it turns out, makes the United States an attractive place for foreigners to invest—and hide …

Am I My Brother's Keeper? A Tax Law Perspective On The Challenge Of Balancing Gatekeeping Obligations And Zealous Advocacy In The Legal Profession, Richard Lavoie

Loyola University Chicago Law Journal

Recently the question of whether lawyers have a general ethical obligation to serve a gatekeeping function has been raised in a number of legal contexts. The reaction of the practicing bar has generally been unenthusiastic. While the assertion that a gatekeeping function should be applicable to all attorneys is a relatively modern stance, such an obligation has historically been acknowledged to various degrees in several practice areas, including federal income taxation. This Article examines the gatekeeping question—and how the practicing bar should react to it—through an examination of the gatekeeping role historically asserted as applicable to tax lawyers, including how …

Watching The Watchers: Preventing I.R.S. Abuse Of The Tax System,, Samuel D. Brunson

Faculty Publications & Other Works

As a result of broad outcries against the incompetence and aggressiveness of the LR.S., Congress reined in its behavior, requiring it to focus on treating taxpayers as customers. Congress also created oversight bodies to ensure that the I.R.S. would comply with the new mandate. Though those oversight bodies face some difficulties - most notably, the unwillingness of Congress to adequately fund them - they nonetheless have proven effective at checking the IR.S. 's misbehavior with regard to taxpayers.

Congress has not, however been as solicitous to the tax law itself The I.R.S. can act in ways that violate both the …

Mutual Funds, Fairness, And The Income Gap, Samuel D. Brunson

Faculty Publications & Other Works

The rich, it turns out, are different from the rest of us. The wealthy, for example, can assemble a diversified portfolio of securities or can invest through hedge and private equity funds. When the rest of us invest, we do so largely through mutual funds. Nearly half of American households own mutual funds, and mutual funds represent a significant portion of the financial assets held by U.S. households.

The tax rules governing mutual funds create an investment vehicle with significantly worse tax treatment than investments available to the wealthy. In particular, the tax rules governing mutual funds force shareholders to …

Repatriating Tax-Exempt Investments: Tax Havens, Blocker Corporations, And Unrelated Debt-Financed Income., Samuel D. Brunson

Faculty Publications & Other Works

When a tax-exempt entity is both able and willing to lend its exemption to other taxpayers, tax-averse parties line up to take advantage of its largesse (and, in the process, reduce their own tax bill). Congress, eager to prevent such abuse of the exemption, decided that, in some circumstances, it would tax entities that would otherwise be exempt from taxation. In this Article, I show that Congress's response to such "lending" has failed to solve the problem and, in fact, is harmful to the tax system and to tax-exempt entities. To address this problem, this Article proposes a new way …

Grown-Up Income Shifting: Yesterday's Kiddie Tax Is Not Enough., Samuel Brunson

Faculty Publications & Other Works

No abstract provided.

Reigning In Charities: Using An Intermediate Penalty To Enforce The Campaigning Prohibition., Samuel Brunson

Faculty Publications & Other Works

No abstract provided.

When Should Asset Appreciation Be Taxed?: The Case For A Disposition Standard Of Realization., Jeffrey L. Kwall

Faculty Publications & Other Works

No abstract provided.

Taxing Investment Fund Managers Using A Simplified Mark-To-Market Approach., Samuel Brunson

Faculty Publications & Other Works

No abstract provided.

The Ideology Of Tax Avoidance, William B. Barker

Loyola University Chicago Law Journal

No abstract provided.

Tax Policy, Rational Actors, And Other Myths, Leo P. Martinez

Loyola University Chicago Law Journal

No abstract provided.

The Conscientious Legislator And Public Opinion On Taxes, Lawrence Zelenak

Loyola University Chicago Law Journal

No abstract provided.