Law Commons^™

Taxing Choices, Tessa R. Davis

Faculty Publications

Tax has a choice problem. At all stages of the making of tax, choice plays a role. Lawmakers consider how tax will impact the range and appeal of choices available to an individual. Scholars critique how tax may drive an individual toward or away from a given choice. Courts craft stories of how an individual had either free or deeply constrained choice, using their perception of the facts to guide their interpretation of tax law. And yet for all the seeming relevance of choice to tax, we have no clear definition of what we mean when we talk about choice …

Democracy Avoidance In Tax Lawmaking, Clint G. Wallace

Faculty Publications

The Tax Cuts and Jobs Act was the most significant tax law in more than three decades, but the strategy for getting it enacted included a variety of maneuvers to avoid public scrutiny. As a result, many taxpayers did not know how they would be affected until they filed their own tax returns more than a year later. This Article identifies this lack of transparency as part of a persistent pathology of avoiding and constraining democratic inputs and responsiveness in U.S. federal tax lawmaking. Indeed, some scholars and policy makers have sought to channel tax lawmaking away from democratically grounded …

Attacking Innovation, Jeffrey A. Maine

Faculty Publications

Economists generally agree that innovation is important to economic growth and that government support for innovation is necessary. Historically, the U.S. government has supported innovation in a variety of ways: (1) a strong legal system for patents; (2) direct support through research performed by government agencies, grants, loans, and loan guarantees; and (3) indirect support through various tax incentives for private firms. In recent years, however, we have seen a weakening of the U.S. patent system, a decline in direct funding of research, and a weakening of tax policy tools used to encourage new innovation. These disruptive changes threaten the …

Equitable Health Savings Accounts, Samuel Estreicher, Clinton G. Wallace

Faculty Publications

This Article offers the first comprehensive legal-policy critique of existing Health Savings Accounts (HSAs), arguing that the current approach is redistributively regressive, thus exacerbating inequality, and also fails to accomplish stated healthcare goals. We propose an alternative—Equitable Health Savings Accounts—which uses cash grants as a tool to address both of these problems. Equitable HSAs are a market-based social program that calibrates size and delivery of a government subsidy to help the least well off and to facilitate participation in healthcare markets. Equitable HSAs can serve as a model for using cash grants to bridge the gap between Republican social policy …

Freezing The Future: Elective Egg Freezing And The Limits Of The Medical Expense Deduction, Tessa R. Davis

Faculty Publications

Section 213 of the Internal Revenue Code (the Code) allows a deduction for unreimbursed expenses for medical care. To qualify as medical care, an individual’s outlay must meet the statutory definition of “medical care” set forth in §213. Specifically, an outlay must be for care that is either for “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Many costs raise few interpretive challenges. When an individual receives chemotherapy, for example, the costs tied to that care clearly satisfy the disease prong of §213. But as medicine …

Centralized Review Of Tax Regulations, Clinton G. Wallace

Faculty Publications

Centralized oversight of agency policymaking and spending by the President’s Office of Management and Budget is a hallmark of the modern administrative state. But tax regulations have almost never been subject to centralized review. The Trump administration recently proposed to require centralized review of tax regulations, but it is unclear what regulations would be subject to such review or how it would be conducted.

This Article examines the normative desirability of the longstanding approach of exempting tax regulations from centralized review, and the alternative of imposing such review. Scholars and policymakers have provided various incomplete justifications for excepting tax policy …

Congressional Control Of Tax Rulemaking, Clint Wallace

Faculty Publications

The notice and comment process is often touted as a mechanism for establishing political accountability, and providing a check on agency decision-making. Based on a survey of three years of recently proposed tax regulations, this Article shows that many notice-and-comment processes for tax regulations have been ineffective for these purposes. Fully one-third of the time, no one participated. The few participants there are have been heavily weighted towards private interests, which commented on approximately two-thirds of all proposed regulations from 2013 through 2015. In contrast, public interest groups commented on less than 24% of proposed regulations. If the notice and …

The Tax-Immigration Nexus, Tessa R. Davis

Faculty Publications

Tax and immigration law have a shared interest in defining community. In order to implement a tax, we must know who belongs to the taxable community. At the same time, immigration law must define and administer the requirements for membership in the national community. Despite the differing objectives of tax and immigration law—raising revenue and deciding who may enter, remain, and become a citizen in the United States, respectively—both of these regimes uses a concept of citizenship to define their respective communities. Starting from this common thread of the relevance of citizenship to both immigration and tax law, this Article …

Multinational Efforts To Limit Intellectual Property Income Shifting: The Oecd's Base Erosion And Profit Shifting (Beps) Project, Jeffrey A. Maine

Faculty Publications

Before 2017, there were two major international movements going on at the same time: (1) the Trans-Pacific Partnership (TPP) Agreement; and (2) the Organization for Economic Cooperation and Development’s (OECD’s) Base Erosion and Profit Shifting (BEPS) Project. The movements presented a unique opportunity to consider the intersection of a behemoth multinational trade agreement and ambitious multinational efforts to close international tax loopholes.

Although the TPP is essentially dead, as newly elected U.S. President Donald Trump unsigned the TPP as a matter of unilateral Executive power, the OECD’s BEPS Project is not. Indeed, many nations have been adopting BEPS Project proposals …

The Problem Of Appropriations Riders: The Bipartisan Budget Bill Of 2013 As A Case Study, Irene Scharf

Faculty Publications

This article tells the story of the enactment of the bill containing Section 2013. It also provides context for Congress's widespread practice of inserting substantive provisions into appropriations bills, and argues that this practice is inappropriate and counterproductive. Enacted in haste, at the end of a lengthy and historically contentious legislative session plagued by threats of an unfunded government, Section 203 was slipped into a bill about a wholly different topic - "keeping the government open and functioning" - without input from key legislators or stakeholders. Hence, its difficulties were foreseeable.

Part II of this piece offers background about the …

Branding Taxation, Jeffrey A. Maine, Xuan-Thao Nguyen

Faculty Publications

Branding is important not only to businesses,but also to the economy. The intellectual property laws and tax laws should thus further the legitimate goals of encouraging and protecting brand investments while maintaining a sound tax base. Intellectual property protections for branding depend on advertisement and enforcement, both of which demand significant amounts of private investment by firms. Although one would expect similar tax treatments of both categories of investment, the categories are actually treated as vastly different for federal income tax purposes. Additionally, tax distinctions also exist within each category. The result is that some branding investments are expensed and …

Counting Casualties In Communities Hit Hardest By The Foreclosure Crisis, Matthew Rossman

Faculty Publications

Recent statistics suggest that the U.S. housing market has largely recovered from the Foreclosure Crisis. A closer look reveals that the country is composed not of one market, but of thousands of smaller, local housing markets that have experienced dramatically uneven levels of recovery. Repeated waves of home mortgage foreclosures inundated certain communities (the “Hardest Hit Communities”), causing their housing markets to break rather than bend and resulting in what amounts to a permanent transition to a lower value plateau. Homeowners in these predominantly low and middle income and/or minority communities who endured the Foreclosure Crisis lost significant equity in …

Jurisdictional Question In Hobby Lobby, The, Erin Morrow Hawley

Faculty Publications

Burwell v. Hobby Lobby Stores may well be the biggest case of the term. And by its own rules, the Supreme Court lacked jurisdiction. An obscure statute, the Anti-Injunction Act of 1867 (“the AIA”), imposes a pay-first requirement for federal tax challenges. The deeply held conventional wisdom is that the AIA is a jurisdictional statute, and there is a good argument that the AIA applies to the contraception mandate. As we learned from National Federation of Independent Business v. Sebelius, 132 S.Ct. 2566 (2012), the best evidence of whether Congress intended the AIA to apply is the text. The mandate …

Recovery Of Interest On A Tax Underpayment Caused By A Tax Advisor 'S Negligence, Jacob L. Todres

Faculty Publications

(Excerpt)

When a tax advisor renders incorrect advice due to negligence and a plaintiff establishes all the requisite elements of a malpractice cause of action, the most frequently encountered direct damages consist of four elements: additional taxes caused by the negligence, interest on underpaid taxes, penalties, and corrective costs incurred in attempting to eliminate or mitigate all or some of the foregoing damages. This article will focus on the recoverability of interest incurred by a plaintiff on a tax underpayment caused by the tax advisor's negligence. Such interest payment is present in many, if not most, tax malpractice situations because …

The Fundamentals Of Wealth Transfer Tax Planning: 2011 And Beyond, John A. Miller, Jeffrey A. Maine

Faculty Publications

This article discusses basic aspects of all three transfer taxes, with particular emphasis on the estate tax. This article then outlines fundamental estate planning techniques in light of the impact of these taxes. In addition, references are provided in the footnotes to more detailed treatments of the planning techniques described here.

Legal Transitions And The Problem Of Reliance, David M. Hasen

Faculty Publications

This Article analyzes the literature on legal transitions. The principal focus is taxation, but the analysis generalizes to other areas. I argue that the theoretical apparatus developed by scholars active in the legal transitions area suffers from significant conceptual shortcomings. These shortcomings include the unwarranted assimilation of legal to factual change, the naturalization of conventional arrangements, and the disregard of the distinction between making law and finding it. As a consequence, the recent literature offers an analysis that is unable either to explain actual transitions or to provide an adequate theory of how legal change should take place. In the …

Bankruptcy Reform: What's Tax Got To Do With It?, Michelle A. Cecil

Faculty Publications

The article takes a two-pronged approach to the issue. First, it argues that all post-petition appreciation should be taxed to the debtor rather than to the debtor's bankruptcy estate because the debtor enjoys the benefits of the asset's appreciation in value and because, from a tax perspective, the results will be identical irrespective of whether the debtor or the bankruptcy estate is taxed on the asset's post-petition appreciation. Second, the article proposes that the gain accruing before the termination of the bankruptcy proceeding be treated as discharge of indebtedness income so that the debtor can defer recognition of the gain …

Interpreting The Sixteenth Amendment (By Way Of The Direct-Tax Clauses), Erik M. Jensen

Faculty Publications

The Sixteenth Amendment and the direct-tax clauses have become subjects of interest in the legal academy and, as proposals for new forms of national taxation emerge on a seemingly daily basis, they could become subjects of more general interest as well. Under the direct-tax clauses, a direct tax must be apportioned among the states on the basis of population, making such a tax difficult, although not impossible, to implement. Following the Supreme Court decisions in the 1895 Income Tax Cases, which held that an 1894 income tax was a direct tax that had not been properly apportioned, the Sixteenth Amendment, …

Abandonments In Bankruptcy: Unifying Competing Tax And Bankruptcy Policies, Michelle A. Cecil

Faculty Publications

This Article attempts to resolve one such issue: the tax consequences of property abandonments by the bankruptcy trustee.

Crumbs For Oliver Twist: Resolving The Conflict Between Tax And Support Claims In Bankruptcy, Michelle A. Cecil

Faculty Publications

This article is premised on the assumption that the congressional goal of preferring support claims over federal income tax claims is indeed a laudable one, based on three interrelated policy justifications. First, support claimants are unable to spread their risk of loss like the government is able to do by raising tax rates or increasing tax revenue from other sources. As three prominent bankruptcy scholars noted in their recent study of consumer bankruptcy entitled The Fragile Middle Class: Americans in Debt:

Implications Of The Tax Reform Proposals For Fraud – Or – How To Shift To A Consumption Tax Without Helping The Cheaters, Kalyani Robbins

Faculty Publications

The vast majority of the proposals on the table today are simply different implementation mechanisms of the same basic idea: a change in the tax base from income to consumption. The purpose of this article is to consider the implications some of these proposals have for the enforcement of tax compliance (prevention of cheating). For this reason, it will only briefly address the impetus for a consumption tax and the policy considerations behind it. The first part will also give short descriptions of the proposals that will be considered in this article: the National Retail Sales Tax, the Savings-Exempt Income …

Bastardy And The Statute Of Wills: Interpreting A Sixteenth-Century Statute With Cases And Readings, M C. Mirow

Faculty Publications

The Statute of Wills of 1540 created a tax loophole for transfers of property to illegitimate children. Assessments for wardships that would normally be imposed on certain transfers of land to children could be effectively avoided by establishing that the donee was illegitimate, and therefore a stranger to the donor for the purposes of the statute. English lawyers in the sixteenth and seventeenth centuries educated their colleagues about this newly available loophole. In the inns of court, lawyers discussed the statutory provisions and recent revenue cases from the Court of Wards. This article sets out the loophole, examines how the …

Toward Adding Further Complexity To The Internal Revenue Code: A New Paradigm For The Deductibility Of Capital Losses, Michelle A. Cecil

Faculty Publications

This article examines problems inherent in the current loss limitation system, arguing that it is ill-equipped to meet parallelism concerns and that cherrypicking is not a problem that a loss limitation scheme should address. The article also argues that the current system is both fundamentally unfair to taxpayers and promotes economic inefficiency in the marketplace. It proposes an alternative system for the tax treatment of capital losses that would allow such losses to offset all types of income, but only up to the tax rate that would have been imposed had the losses instead been capital gains. The article concludes …

Comments On A Revised Filing System, R. Wilson Freyermuth

Faculty Publications

Professor Edward Adams's article, both in terms of its basic structure and the myriad of options it offers, neatly highlights the basic dilemma facing the Drafting Committee as it addresses the future Article 9 filing system. As he correctly notes, the filing system's shortcomings are largely due to its continued dependence on paper records, despite the increasing sophistication and availability of computerized information technology for both filing and searching. Should the Drafting Committee maintain the basics of the current system (a public, paper-based filing system) and merely attempt to identify and correct the existing shortcomings in that system, with some …

A Policy Analysis Of Fee-Shifting Rules Under The Internal Revenue Code, Gary Myers, Richard L. Schmalbeck

Faculty Publications

Until recently, the costs of litigating federal tax cases were borne exclusively by the parties who incurred them, regardless of whether the government or the taxpayer prevailed in the litigation. This practice reflects the application to tax disputes of the ‘American rule’ against fee shifting. Although the American rule continues to be predominant in the tax area, it has been modified in important respects. An explicit fee-reimbursement rule, benefiting prevailing taxpayers in cases in which the government is found to have acted unreasonably, was added to the Internal Revenue Code (IRC) by the Tax Equity and Fiscal Responsibility Act of …