Law Commons^™

Tax Enforcement At The Intersection Of Social Welfare And Vulnerable Populations, Michelle Lyon Drumbl

Scholarly Articles

This Essay engages with Professor Bernadette Atuahene’s theory of stategraft in the context of tax administration and the role that the Internal Revenue Service (IRS) plays in implementing certain social welfare benefits, including the Earned Income Tax Credit (EITC). Specifically, it considers whether the IRS’s denials of the EITC to those who might otherwise be eligible and entitled to it constitutes a wrongful taking by the state or a violation of basic human rights. While this Essay concludes that denials of the EITC generally do not fit within Atuahene’s definition of stategraft, it highlights two particularly problematic concerns with modern …

Keep Charitable Oversight In The Irs, Philip Hackney

Articles

Critics are increasingly calling for Congress to remove charity regulation from the IRS. The critics are wrong. Congress should maintain charity regulation in the IRS. What is at stake is balancing power between the state, charity as civil society, and the economic order. In a well-balanced democracy, civil society maintains its independence from the state and the economic order. Removing charitable jurisdiction from the IRS would blind the IRS to dollars placed in the charitable sector increasing tax and political shelters and wealthy dominance of charities as civil society. A new agency without understanding of, or jurisdiction over, tax cannot …

Stay Schemin’: Tax Court’S Recent Ruling On Credit Card Rewards And The Impact This Ruling Has On Future Rewards Programs, Hunter Davis

Georgia Law Review

Beyond the utility of actual “credit,” the most important perk cardholders seek to capitalize on are the rewards that each cardholder’s particular credit card offers. Cardholders look for the most bang for their buck in terms of rewards and points. Ranging from frequent flyer miles to cash back to everything in between, rewards programs have expanded and diversified rapidly over the past several decades, and consumers cannot get enough. So much so that the question of whether, and when, consumer loyalty rewards should be taxable has arisen and persists today. The Internal Revenue Service (IRS) and the Tax Court have …

Is It Time For Federal Regulation Of The Tax Preparer Industry? New Insights From Legal And Empirical Developments, Jessica A. Magaldi, Matthew Reidenbach, Jonathan S. Sales, John S. Treu

Marquette Law Review

The tax preparer industry is unusual in that it involves the interpretation of an intricate and complicated tax code, but imposes no minimum requirements of competency because the industry is largely unregulated. A study by the Government Accountability Office (GAO) indicated that unregulated tax preparers commit significantly higher error rates and, based in part on that study’s findings, the Internal Revenue Service (IRS) attempted to regulate the tax preparer industry nationwide under the Registered Tax Return Preparer (RTRP) regime. This RTRP program was invalidated in Loving v. IRS, however, leaving the industry largely unregulated, except in the small minority …

Sovereign Immunity Tests Bankruptcy’S Least Contested Axioms, Deborah L. Thorne, Luke L. Sperduto

Emory Bankruptcy Developments Journal

Section 106 of the Bankruptcy Code expressly abrogates the sovereign immunity of governmental units with respect to fifty-nine other provisions of the Code. There are currently two distinct issues splitting circuit courts over the meaning of this provision. First, does section 106 waive the sovereign immunity of the Internal Revenue Service in avoidance actions brought against it by a bankruptcy trustee under section 544(b)? Second, are Native American Indian Tribes “governmental units” within the meaning of section 101(27), such that their sovereign immunity is abrogated to the extent set forth in section 106? Invoking conventional canons of statutory construction, this …

Taxes, Administrative Law, And Agency Expertise: Questioning The Orthodoxy, Scott Schumacher

Articles

One of the foundations of administrative law is that federal agencies and their employees are experts in their respective fields. In addition, the many judgments and decisions made by these experts are based on a thorough record after extensive factfinding. As a result, so the theory goes, courts, particularly courts of general jurisdiction like the United States District Courts, should give deference to the determinations made by these experts. But what if the facts underpinning this foundation are not true in all cases? Should courts nevertheless provide deference to decisions by agencies when it is evident that an agency's determinations …

A More Capacious Concept Of Church, Philip Hackney, Samuel D. Brunson

Articles

United States tax law provides churches with extra benefits and robust protection from IRS enforcement actions. Churches and religious organizations are automatically exempt from the income tax without needing to apply to be so recognized and without needing to file a tax return. Beyond that, churches are protected from audit by stringent procedures. There are good reasons to consider providing a distance between church and state, including the state tax authority. In many instances, Congress granted churches preferential tax treatment to try to avoid excess entanglement between church and state, though that preferential treatment often just shifts the locus of …

What Is Insurance? An Analysis Of The Tax Deductibility Of Captive Insurance Premiums, John D. Patten

Honors Capstones

What is insurance for the purposes of a tax deduction? The Internal Revenue Code does not define insurance. Without this definition, taxpayers using alternative insurance products to manage their risks must look to case law to determine whether their arrangements count as tax deductible insurance or non-deductible self-insurance. This paper dives into the four prongs of insurance: insurance risk, risk shifting, risk distributing, and commonly accepted notions of insurance. This paper looks to cases that have dealt with the deduction of captive insurance premiums to provide better insight into the practical application of this test. After discussing the evolution of …

Questions The Irs Will Not Answer, Emily L. Cauble

Indiana Law Journal

When a taxpayer plans to undertake a transaction and its tax consequences are unclear, the taxpayer can request a letter ruling from the IRS. The IRS issues numerous letter rulings each year. In 2020, for instance, the IRS issued 777 letter rulings. The IRS refrains from issuing letter rulings on certain topics. At the beginning of each year, the IRS publishes an updated list of the topics on which it will not rule. Many of the topics on which it will not rule arise in areas of tax law governed by standards where the tax outcome depends heavily on each …

Fighting The Tax Gap: A Prime And Recent Example Of The Value Of Gao Oversight & Reporting, Josh Bill

Upper Level Writing Requirement Research Papers

No abstract provided.

The Irs’S Voluntary Disclosure Program: Need For Codification, Jay A. Soled

Georgia State University Law Review

For more than a century, the Internal Revenue Service (IRS) has had a voluntary disclosure program in place. Its purpose is to coax into tax compliance those wayward taxpayers who have committed criminal acts or have been remiss in fulfilling their civic tax-filing obligations. Historically, the voluntary disclosure program has had to strike a difficult balance between being attractive enough to entice tax scofflaws to participate and not being too attractive lest ordinary taxpayers feel that their compliance efforts were for naught.

A unique feature of the voluntary disclosure program is that it is entirely administrative in origin. The commissioner …

The Surprising Significance Of De Minimis Tax Rules, Leigh Osofsky, Kathleen Delaney Thomas

Washington and Lee Law Review

De minimis tax rules—rules that eliminate tax burdens for low-income taxpayers or low-dollar transactions—abound in the tax law. Despite the prevalence of such rules, legal scholarship has treated them as—well—de minimis, or as mere rounding errors that do not merit sustained attention. This perspective is understandable. If de minimis rules address insignificant taxpayers or tax liabilities, aren’t the rules themselves likely to be insignificant?

Recent tax law developments have revealed that this conception of de minimis tax rules is deeply misguided. Major allocations of tax law liability, as well as accompanying questions about the fairness, efficiency, and administrability of the …

Fixing The Johnson Amendment Without Totally Destroying It, Benjamin Leff

Articles in Law Reviews & Other Academic Journals

The so-called Johnson Amendment is that portion of Section 501(c)(3) of the Internal Revenue Code that prohibits charities from "intervening" in electoral campaigns. The intervention has long been understood to include both contributing charitable funds to campaign coffers and communicating the charity's views about candidates' qualifications for office. The breadth of the Johnson Amendment potentially brings two important values into conflict: the government's interest in preventing tax-deductible contributions to be used for electoral purposes (called "nonsubvention") and the speech rights or interest of charities.

For many years, the IRS has taken the position that the Johnson Amendment's prohibition on electoral …

The 2017 Tax Cuts And Jobs Act: Analyzing Its Financial Impact On Division I Universities, Judge Nash Mcwithey

Honors Theses

The Tax Cuts and Jobs Act has had a substantial impact in the United States since its inception in 2017. This tax code overhaul has had a profound effect on the way Division I universities operate their athletic department operations and fundraising efforts. By creating new channels of federal tax revenues and eliminating deductions, such as the “80/20” premium seating deduction that has been used by universities, athletic programs have already begun to see a shift in how they must operate. This modification is done in order to avoid any major repercussions from the new tax code. This thesis discusses …

Tax Attorneys As Defenders Of Taxpayer Rights, Michelle Lyon Drumbl

Scholarly Articles

What is the modern role of a tax practitioner, in particular a tax attorney, in the United States? In an era in which the Internal Revenue Service (IRS) is underfunded, understaffed, and struggles to address its mission, tax attorneys play an important role as advocates for taxpayer rights.

Tax attorneys act as advocates who represent ordinary individual taxpayers in controversies with the IRS. These controversies include post-filing disputes, such as audits, as well as issues arising with the collection of assessed taxes. Many of these cases are resolved at the administrative level; those that cannot be resolved are litigated, most …

Bc Ranch Ii V. Commissioner: A Flexible Approach To Perpetual Conservation Easements, Victoria Wolfe

Indiana Law Journal

Depending on the approach used in enforcement, there is the potential to encourage or discourage charitable donations of conservation easements. In Part I, this Note explores the federal charitable income tax deduction for conservation easements and the legislative purpose in enacting the perpetuity requirements. Part II examines the Fifth Circuit’s decision in BC Ranch II and the flexible approach to perpetuity adopted by the court. Finally, Part III considers the implications of the BC Ranch II decision, specifically authority to monitor conservation easements, valuation gaming of easements in the context of perpetuity, and congressional intent in allowing the conservation easement …

This Is Our House! - The Tax Man Comes To College Sports, Kathryn Kisska-Schulze

Marquette Sports Law Review

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The Promises And Perils Of Using Big Data To Regulate Nonprofits, Lloyd Histoshi Mayer

Journal Articles

For the optimist, government use of “Big Data” involves the careful collection of information from numerous sources. The government then engages in expert analysis of those data to reveal previously undiscovered patterns. Discovering patterns revolutionizes the regulation of criminal behavior, education, health care, and many other areas. For the pessimist, government use of Big Data involves the haphazard seizure of information to generate massive databases. Those databases render privacy an illusion and result in arbitrary and discriminatory computer-generated decisions. The reality is, of course, more complicated. On one hand, government use of Big Data may lead to greater efficiency, effectiveness, …

Demystifying Irs Transcripts, Robert D. Probasco, Nikki Mccain, Ann Garza

Robert Probasco

No abstract provided.

Codification Of The Economic Substance Doctrine: Agency Response And Certain Other Unforeseen Consequences, Rebecca Rosenberg

William & Mary Business Law Review

Section 7701(o) of the Internal Revenue Code incorporates the controversial judicial doctrine of economic substance into statutory language. In other words, it “codifies” the doctrine. (The economic substance doctrine generally provides that a tax benefit that goes beyond Congressional intent can be disallowed by the courts, even if the taxpayer meets all of the literal Code and regulatory requirements for claiming the benefit.)

This codification appears to have accidentally dissuaded the relevant agency (the Internal evenue Service, or IRS) from raising economic substance issues—an effect that is contrary to Congress’s intent in enacting the doctrine into legislation. Essentially, Congress imported …

Computing Interest On Overpayments And Underpayments: How Difficult Can It Be? Very!, Mary A. Mcnulty, David H. Boucher, Joseph M. Incorvaia, Robert D. Probasco

Robert Probasco

Taxpayers often assume that the difficult part of a tax dispute is resolving the tax liability and penalties, while interest computation is fairly straightforward. In the authors' experience, however, interest determinations are as subject to controversy and prone to error as tax liability determinations. The Article explores some of the areas that taxpayers should review carefully in the process of finalizing interest computations.

- Frequent Errors. The Article reviews twelve areas in which, even though the law is settled and the facts are usually clear, the Service's interest computations frequently include mistakes. Taxpayers need to be aware of these provisions, …

Much Uncertainty About Uncertain Tax Positions, Robert D. Probasco

Robert Probasco

The Internal Revenue Service (IRS) announced in January 2010 a new initiative to require certain businesses to report “uncertain tax positions” on a new schedule filed with their annual tax returns. Draft schedules and instructions issued in April 2010 clarified some of the mechanical aspects of the new requirement but left many open issues and questions. The IRS proposal built on requirements by the Financial Accounting Standards Board (FASB) in FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). The standard requires companies, in their financial statements, to reserve some of the benefits from any position taken …

Tefra-Partnership Refunds: Five Steps To Protect A Partner’S Rights, Mary A. Mcnulty, Robert D. Probasco, Carla C. Crapster

Robert Probasco

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) established a unified procedure for determining the tax treatment of partnership items at the partnership level rather than the partner level. The TEFRA-partnership refund procedures differ from the refund claim procedures that apply to other taxpayers. For a TEFRA partnership, a refund claim is an administrative adjustment request (AAF) and a notice of deficiency is a notice of final partnership administrative adjustment (FPAA). Procedures for the assessment of additional tax attributable to partnership items have received much attention in recent years, but the procedures concerning refunds are complex and full …

Navigating Tefra Partnership Audits In Multi-Tiered Entity Structures, Mary A. Mcnulty, Robert D. Probasco, Lee S. Meyercord

Robert Probasco

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) established a unified procedure for determining the tax treatment of partnership items at the partnership level rather than the partner level. Although these rules addressed a serious and real administrative problem in the assessment of partnership level deficiencies, they also created a complex process with many new problems and potential traps. One particularly unique set of challenges arises in the context of multi-tiered entities.

Multi-tiered entities are partnerships that have a partnership or other pass-through entity as a partner. The pass-through partner is commonly referred to as a “tier,” and …

Rejecting Charity: Why The Irs Denies Tax Exemption To 501(C)(3) Applicants, Terri Lynn Helge

Terri L. Helge

New charitable organizations generally must file an application for exemption (Form 1023) and await approval from the Internal Revenue Service. Unfortunately, the criteria the Internal Revenue Service uses to evaluate applications has not always been transparent. If an application is approved, the Internal Revenue Service determination letter and the application for exemption are required to be made publicly available and can be requested from the Internal Revenue Service or the organization itself. Prior to 2004, in the case of denials, neither the application nor the Internal Revenue Service’s correspondence setting forth its rationale for the denial were made publicly available. …

Written Testimony Of Philip Hackney For The Hearing On Oversight Of Nonprofit Organizations: A Case Study On The Clinton Foundation (House Of Representatives Committee On Oversight, December 13, 2018), Philip Hackney

Testimony

This is written testimony offered to the House Committee on Oversight's Subcommittee on Government Operations on December 13, 2018: Our nation has tasked the IRS with the large and complex responsibility for regulating the nonprofit sector, but has failed to provide the IRS with resources commensurate with that task. This is important work. Nonprofits constitute a large and growing part of our economy, and they are granted a highly preferential tax status. An organization that abuses that preferential status will obtain a significant and unfair advantage over the organizations and individuals who play by the rules. If we are to …

Taking Back Bitcoin, Zachary Segal

Touro Law Review

No abstract provided.

Harmonizing Federal Tax Law And The State Legalization Of Marijuana, Daniel Rowe

Loyola of Los Angeles Law Review

No abstract provided.

Four Walls Do Not An Eating Facility Make: Arguing Against The U.S. Tax Court's Unprecedented Jacobs V. Commissioner Decision, Brendan Zwaneveld

Loyola of Los Angeles Law Review

No abstract provided.

Securing Charitable Contribution Deductions, Paul G. Schloemer

Business Administration Faculty Publications

Issues regarding charitable contributions have been a frequent source of contention between the IRS and taxpayers - the charitable contribution deduction was identified as one of the most litigated issues in the National Taxpayer Advocate’s latest report to Congress.1 Thus, a review of the key issues taxpayers encounter in claiming this deduction is warranted.