Law Commons^™

Reforming The State Corporate Income Tax: A Market State Approach To The Sourcing Of Services, John A. Swain

John A Swain

The state corporate income tax is about to undergo its most serious re-examination in over 50 years. The National Conference of Commissioners on Uniform State Laws has initiated a review of the Uniform Division of Income for Tax Purposes Act (UDITPA), which either has been adopted by most states or has been used as a model for similar statutes. UDIPTA employs a three-factor formula to apportion the income of multistate businesses. The property and payroll factors reflect the contribution of the production states, while the sales factor is intended to reflect the contribution of the market states. A weakness of …

Does The Constitutional Norm Of Separation Of Church And State Justify The Denial Of Tax Exemption To Churches That Engage In Partisan Political Speech?, Johnny Buckles

Johnny Buckles

The Internal Revenue Service is aggressively investigating churches for their alleged political endorsements of candidates in the 2008 presidential election. At issue is whether these churches have violated section 501(c)(3) of the Internal Revenue Code, which imposes a ban on electioneering by churches and other charities as a condition of maintaining federal income tax exemption. The ban has been justified as necessary to ensure the proper separation of church and state. This article critically analyzes this rationale for the ban. Four major variants of the separationist argument are articulated and thoroughly analyzed in the context of relevant Supreme Court case …

Taxation The Consumption Of Capital Gain, Calvin H. Johnson

Calvin H. Johnson

"Taxing the Consumption of Capital Gain" argues that the lower tax rate on capital gain should be available only for capital gains that are reinvested. The article traces the history of the capital gain concept in American and British law and in the policy literature and finds that there is an unstated assumption that capital gains will remain part of capital and not be consumed. The assumption needs to be turned into a requirement.

Provena Covenant Medical Center And Its Unresolved Tax-Exempt Status - It's Time For The Illinois Supreme Court To Revise The Methodist Old People's Home Test, Joseph J. Hylak-Reinholtz

Joseph J. Hylak-Reinholtz

Not-for-profit hospitals tax exemptions have been challenged by government officials for providing insufficient charity care to needy patients. In Illinois, not-for-profit tax exemptions are analyzed under a test developed by the state Supreme Court in Methodist Old Peoples Home v. Korzen. This comment argues, in light of the Provena litigation and subsequent appeal, that the court must revise its outdated test to reflect the realities of providing health care today in a not-for-profit system.

Economic Substance And The Standard Of Review, Christopher M. Pietruszkiewicz

Christopher M. Pietruszkiewicz

Traditionally, appellate review hinged on the distinction between law and fact, producing a simplistic exercise – appellate courts review legal conclusions de novo while factual findings are reviewed under a clearly erroneous standard of review. The systemic difficulty with the fact/law distinction is defining fact and defining law. While appellate courts often create sound bites and offer elaborate musings on the definition of each, they maintain the misguided illusion that a trial court determination is either a question of law or a question of fact. In essence, an appellate court uses the fact/law distinction and the attendant standard of review …

"Can Tax Policy Stop Human Trafficking?", Diane Fahey

Diane L. Fahey

ABSTRACT

Can Tax Policy Stop Human Trafficking?

The total number of victims who are held in captivity to perform forced labor at any one time is estimated to be as high as twenty-seven million. That would be equivalent to every man, woman, and child in the states of New Hampshire, Vermont, Massachusetts, and New York being held in captivity and forced twelve to fourteen hours each day to labor in sweatshops, or toil as agricultural workers, or service sexually many customers every day with no hope that it will ever end except by death. They would live in crowded, dirty …

Ability-To-Pay And The Taxation Of Virtual Income, Adam S. Chodorow

Adam S Chodorow

Whether to tax virtual income raises a vexing question. Most people’s intuition suggests that virtual income should be exempt from tax, but the real-world economic value inherent in such income suggests otherwise. Those who have considered the question to date have attempted to justify non-taxation using either an intent-based or imputed-income approach. In this Article, I argue that neither of these approaches nor the proposals they produce are fully satisfactory. Using the ability-to-pay principle, I offer a new approach to this question, which better conforms to existing tax policy and doctrine and produces a more administrable proposal than those made …

Generous To A Fault? Fair Shares And Charitable Giving, Miranda P. Fleischer

Miranda P. Fleischer

Given the vital role that charities play in our society, it is not surprising that the tax Code encourages philanthropy by allowing a deduction for charitable gifts. What is surprising is that it treats the most generous among us less favorably than those of average generosity. This stems from one of the most puzzling limits in the Code: the cap preventing someone from claiming a charitable deduction greater than 50% of her income, even if she gives more than half her income to charity. As a result, someone generous enough to donate all her income must still pay income tax. …

Improvement Of Korean Fund Taxation System, Sung-Soo Han

Sung-Soo Han

In the past, international trades were normally classified into two different types of transactions which are commodity transaction and service transition (incl. intangible transactions). With liberalization of foreign exchange trade across the world, however, the capital transaction including fund and stock trade, which was rare in the past, is greatly increasing in the international market.

The number of the private equity funds (“PEF”) over the world has been greatly increased from 57 funds in 1991 to 686 funds in 2006. Currently, the amount of capital invested in the PEF market is approximately US$ 430 billion and M&A by the PEF …

Tax Incentives: A Solution To Economic Uncertainty, Jared A. Hermann

Jared A Hermann

The article compares current economic conditions within the United States to those conditions present in the quarters preceding the 2001 recession. The article also discusses the interrelationship between consumer confidence levels and economic activity. The purpose of this article is to address the current economic uncertainty within the United States and recommend as a solution the temporary extension of the capital gains and dividend tax cuts of the Jobs and Growth Tax Relief Reconciliation Act of 2003. Such an extension will restore confidence in the economy by incentivizing investment activity and enhancing economic growth. In light of recent developments concerning …

Tax My Ride: Taxing Commuters In Our National Economy, Morgan Holcomb

Faculty Scholarship

States constitutionally impose individual income taxes on two bases: (1) Residency: a state of residence can tax its residents and domiciliaries and (2) Source: the state in which income is earned can tax the individual earner. At present, there is no articulated constitutional barrier to "double taxation" of individual income. That is, there is no requirement that the source state and residence state collaborate to tax no more than 100% of an individual's income, and there is no requirement that only one state consider itself the "source" of a particular item of income. In the realm of corporate income taxation …

If Major Wars Affect (Judicial) Fiscal Policy, How & Why?, Nancy Staudt

Faculty Working Papers

This paper seeks to identify and explain the effects of major wars on U.S. Supreme Court decision-making in the context of taxation. At first cut, one might ask why we should even expect to observe a correlation between military activities and judicial fiscal policy. After all, the justices have no authority whatsoever to adopt funding laws intended to relieve the budgetary pressures that tend to emerge in times international crisis. The Court, however, is able to contribute to the wartime revenueraising efforts indirectly by adopting a pro-government stance in the cases it decides in wartime periods. As the probability of …

Partnership Tax Allocation And The Internalization Of Tax-Item Transactions, Bradley T. Borden

South Carolina Law Review

No abstract provided.

Tax As Urban Legend, Anthony C. Infanti

Anthony C. Infanti

In this essay, I review UC-Berkeley history professor Robin Einhorn’s book, "American Taxation, American Slavery." In this provocatively-titled book, Einhorn traces the relationship between democracy, taxation, and slavery from colonial times through the antebellum period. By re-telling some of the most familiar set piece stories of American history through the lens of slavery, Einhorn reveals how the stories that we tell ourselves over and over again about taxation and politics in America are little more than the stuff of urban legend.

In the review, I provide a brief summary of Einhorn’s discussion of the relationship between slavery and (1) colonial …

What Is This “Lobbying” That We Are So Worried About?, Lloyd Hitoshi Mayer

Lloyd Hitoshi Mayer

Lobbying is both an essential part of our democratic process and a source of some of our greatest fears about dangers to that process. Yet when Congress, the public, and scholars consider loosening or, as is more often the case, tightening the restrictions on lobbying, they usually assume that everyone knows what activities are in fact “lobbying.” They therefore overlook the fact that multiple definitions of lobbying currently exist in the various federal laws addressing lobbying. This Article seeks to fill this gap by answering the question of how lobbying should be defined for purposes of the existing federal laws …

Two Horwitzian Journeys, Assaf Likhovski

Assaf Likhovski

No abstract provided.

State’S Failed Attempt To Tax A Nonresident Limited Partner: Lanzi V. Alabama Department Of Revenue, Joseph W. Blackburn

Joseph W Blackburn

Study of Lanzi v. Alabama Dept. of Revenue in which a Georgia resident limited partner of an Alabama limited partnership was held to not be taxable by Alabama on his distributive share of partnership income.

Who’S At Risk? Abbott And Costello Take On Section 465, Ajay Gupta

Ajay Gupta

Hello again, everybody. It's a "bee-yooo-tiful" day for baseball. The setting is the unlikely state of Wyoming. Taking the field is a local outfit- Leasing Co. LLC (LCL). LCL’s corporate sponsor, Hubert Enterprises, has not been overly generous- contributing a mere $10,000. Regardless, in a display of loyalty, the sponsor’s distinctive logo- “Hu”- is emblazoned on the caps and jerseys of every member of the LCL team. The stands are filling in, the peanut vendors are doing brisk business and there is excitement in the air. But what is this? The manager of LCL in a heated exchange with a …

The Quest To Tax Interest Income: Stages In The Development Of International Taxation, Ilan Benshalom

Faculty Working Papers

The Article offers a new perspective on the way international income tax has developed from its nascency, 85 years ago, to the present day. Its main claim is that, due to the lack of a clear normative tax agenda, trade considerations unduly eroded the income tax base. Such trade considerations highlight the importance of reducing tax obstacles on trade and investment to liberalize and integrate international markets. These considerations penetrated international income tax discourse during the Cold War period, when liberalizing trade was part of a broader western agenda to establish dominance through the liberalization of international markets. The Article …

A Comprehensive Solution For A Targeted Problem: A Critique Of The Eu’S Home State Taxation And Ccctb Initiatives, Ilan Benshalom

Faculty Working Papers

This Article examines the European Commission's Home State Taxation and CCCTB initiatives. It argues that both proposals undermine the long-term objective of attaining a consolidated European corporate tax regime. It suggests an alternative strategy, which offers a comprehensive formulary-tax-allocation-solution in one of the hard to tax sectors, such as the financial sector. This strategy requires more efforts and political risk-taking, but would better promote the long-term objective of a consolidated EU corporate tax regime.

An edited version of this article is scheduled to be published in a future issue of European Taxation (an IBFD publication).

Fifteen And Thirty Five--Class Warfare In Subchapter K Of The Internal Revenue Code: The Taxation Of Human Capital Upon The Receipt Of A Proprietary Interest In A Business Enterprise, Philip F. Postlewaite

Faculty Working Papers

Service providers (aka executives) to partnerships and to corporations confront a number of choices as to how their compensatory arrangement may be structured and the tax consequences thereof. In the simplest case, an individual may render services to an enterprise in return for cash payments over the period of service. In this non-equity setting, the issue is straightforward and non-controversial. The service provider is treated as receiving ordinary income for services rendered. The return on his or her expenditure of human capital is taxed at progressive rates.

Once the relationship between the service provider and the enterprise becomes more complicated …

The Quest To Tax Financial Income In A Global Economy: Emerging To An Allocation Phase, Ilan Benshalom

Faculty Working Papers

The taxation of the income derived from financial assets and transactions was always a daunting black hole in the income tax regime. In an integrated global market, tax authorities find it hard to tax financial income because of the high demand for financial investments and the mobility, fungibility, and tax-sensitivity of financial assets. Many of the current approaches to solving international tax allocation problems fail to see that financial transactions present special challenges and therefore their allocation treatment requires a special solution. The Article focuses on the most conceptually intriguing and significant problem associated with the allocation of financial income: …

A Coherent Policy Proposal For U.S. Residence-Based Taxation Of Individuals, Cynthia Blum, Paula N. Singer

Vanderbilt Journal of Transnational Law

Taxation of the worldwide income of U.S. citizens has been a feature of the U.S. income tax since the Revenue Act of 1913. This Article proposes that the United States abandon its imposition of income tax based on citizenship and institute a new system for taxing individuals based solely on residence. This includes (1) a revised definition of "residency status" that would be based on physical presence and be monitored through an entry-exit system, (2) a proposal for an exit tax imposed on termination of residence with respect to unrealized appreciation accrued during the period of residence, and (3) new …

The Tax Treatment Of Advance Receipts, David Hasen

Publications

Under the present income tax, some advance receipts are neither taxable on receipt nor deductible on repayment, while others are taxable when received and deductible when repaid or paid for. From a purely theoretical perspective, it remains unclear why different sets of rules apply in different cases. For example, if the fact of unrestricted control over the payment compels the conclusion that it is income, then most advance receipts, including loan proceeds, should be included in income immediately. Conversely, if the presence of an offsetting liability compels the conclusion that the payment is not (yet) income, then most advance receipts, …

Unwinding Unwinding, David Hasen

Publications

"Unwinding" is a common, if not ubiquitous, feature of tax practice. In a successful unwind, parties to a prior transaction or arrangement back out of it by means of a later transaction and are treated for tax purposes as having engaged in no transactions at all. In a failed unwind, the parties undertake the later transaction, but it is not treated as nullifying the effects of the first transaction; rather, two separate transactions are deemed to have taken place, each with its own tax consequences.

This Article develops the first unified theoretical framework for analyzing tax unwinding. It also provides …

Quantifying The Tax Advantage Of Deferred Compensation, Eric D. Chason

Faculty Publications

No abstract provided.

The Vast Injustice Perpetuated By State And Local Tax Policy, Susan Pace Hamill

Hofstra Law Review

State and local tax policy is one of the most important areas of public policy affecting the lives of the most powerless and vulnerable segments of the population - children from low income families. Focusing on the funding of primary and secondary education, especially in high poverty school districts, and the scheme for allocating the tax burden, this article empirically proves that all fifty states have unjust state and local tax policy, with thirty-one states inflicting an extreme level of injustice on poor children and their families. This article argues that the people in most states, as well as their …

Taxation And Doing Business In Indian Country, Erik M. Jensen

Faculty Publications

Furthering investment in Indian country (a term that includes, but is not limited to, reservations) is an important goal, but potential investors are hesitant - and with reason. One disincentive to invest is uncertainty about tax liability. Understanding taxation in Indian country requires knowledge not only of traditional tax law, but also of American Indian law principles dating from the early nineteenth century, and not many practitioners are up to that task. This article tries to make sense, as much as is possible, of the doctrines that have developed over the centuries.

The article first discusses some basics: the concept …

Note Of The Year: The Tax Ramifications Of Catching Home Run Baseballs, Michael Halper

Case Western Reserve Law Review

No abstract provided.

Tax As Urban Legend, Anthony C. Infanti

Articles

In this essay, I review UC-Berkeley history professor Robin Einhorn's book, American Taxation, American Slavery. In this provocatively-titled book, Einhorn traces the relationship between democracy, taxation, and slavery from colonial times through the antebellum period. By re-telling some of the most familiar set piece stories of American history through the lens of slavery, Einhorn reveals how the stories that we tell ourselves over and over again about taxation and politics in America are little more than the stuff of urban legend.

In the review, I provide a brief summary of Einhorn's discussion of the relationship between slavery and colonial taxation, …