Tax Law Commons^™

Reconstructing The Individual Mandate As An Escrow Account, Gregg Polsky

Scholarly Works

This short essay in Michigan Law Review First Impressions describes how the individual mandate could be reconstructed as an escrow account. Such a restructuring would ameliorate policy concerns regarding the mandate while still deterring the opportunistic behavior that would otherwise occur as a result of the nondiscrimination rules imposed on insurers.

Putting The Community Back Into The "Community Benefit" Standard, Jessica Berg

Georgia Law Review

Disputes about tax exemption for hospitals are occurring all over the country. Local tax authorities have revoked tax- exempt status for some hospitals. State governments are considering whether to require minimum amounts of charity care in exchange for tax exemption. Congress is debating whether hospitals should remain a part of the nonprofit sector at all. At the same time, uninsured individuals are suing hospitals for unfair billing and collection practices. Creative accounting and expansive definitions of "free" care have led to a variety of non ideal practices by hospitals in order to balance their bottom line, while maintaining tax-exempt status. …

Aggregate-Plus Theory Of Partnership Taxation, Bradley T. Borden

Georgia Law Review

This Article presents a theory of partnership taxation. To provide context for the presentation,the Article examines the history and status of partnerships.That examination reveals humans have a natural tendency to form partnerships and partnerships create a significant challenge for lawmakers. The challenge is determining whether partnerships are entities separate from their members or aggregates of the members. After decades of debate and consideration,many lawmakers and commentators now view partnerships as entities. Tax law has not, however, adopted that view. Partnershipsare subject to an aggregate tax regime that contains entity components. Economic theory justifies tax law deviating from the legal view …

Immortal Fame: Publicity Rights, Taxation, And The Power Of Testation, Joshua C. Tate

Georgia Law Review

Several states now recognize survivable publicity rights, allowing the heirs of a deceased celebrity to inherit the rights to her image and likeness. Under the default U.S. rule of testamentary freedom, a celebrity could also freely devise such survivable rights to persons of his or her choosing. Nevertheless, some scholars have recently proposed the adoption of state statues under which survivable publicity rights would pass automatically to specified statutory heirs regardless of the celebrity's wishes. This Article concludes that no such interference with testamentary freedom is warranted. There is admittedly some historical precedent for protecting the interests of surviving family …

The Case Against Tax Incentives For Organ Transfers, Lisa Milot

Scholarly Works

Each year some 6,700 Americans die while awaiting an organ transplant. On its face, this fact seems almost inconsequential, representing less than 3% of American deaths annually. However, for the nearly 100,000 patients on the transplant wait list (and their families), nothing could be more consequential. What is more, the demand for transplantable organs is sure to rise as (1) more diseases become subject to prevention or cure, making organ failure the first sign of medical problems; (2) the success rate for transplants increases, leading to wider use; and (3) barriers to inclusion on the wait list are removed.

In …

The Commerciality Doctrine As Applied To The Charitable Tax Exemption For Homes For The Aged: State And Local Perspectives, David A. Brennen

Scholarly Works

This essay examines the question of how state and local government officials should consider federal tax law principles, like the commerciality doctrine, when they challenge state and local property tax exemptions that rely, at least in part, on tax-exempt charitable status for federal income tax purposes. In particular, this essay uses the example of CCRCs [continuing care retirement communities] to consider tax-exempt law's commerciality doctrine in an attempt to discern distinctions between “homes for the aged” that are “charitable,” and thus entitled to exemption, and those that are too commercial, and thus not entitled to exemption. In fact, one might …

Controlling Executive Compensation Through The Tax Code, Gregg D. Polsky

Scholarly Works

This article analyzes Internal Revenue Code § 162(m), which in general denies public companies a deduction for annual non-performance-based compensation in excess of $1,000,000 paid to senior executive officers. Congress enacted § 162(m) with the intent to reduce the overall level of executive compensation and to influence the composition of executive compensation in favor of components that are more sensitive to firm performance. Notably, § 162(m) represents the most direct Congressional effort to influence executive compensation design. In light of recent events, Congress is being called upon to once again address the perceived problem of overgenerous executive pay packages. Accordingly, …

A Tax Lawyer's Perspective On Section 527 Organizations, Gregg D. Polsky

Scholarly Works

Proponents of campaign finance reform generally assume that, by definition, all section 527 organizations are partisan, election-driven organizations. They also believe that by self-identifying to the IRS, these organizations receive substantial tax benefits. Based on these presuppositions, reformers argue that strict regulation of 527organizations is both constitutional and normatively beneficial. In this Essay, I argue that once section 527 is carefully analyzed from a tax perspective, it becomes evident that these assumptions are flawed. Ultimately, I conclude that section 527 should not be used as a mechanism for regulating campaign finance

Reforming The Taxation Of Deferred Compensation, Gregg D. Polsky, Ethan Yale

Scholarly Works

Executive pay is currently a topic of significant interest for policymakers, academics, and the popular press. Just weeks ago, in reaction to widespread press reports and academic criticism of extravagant executive perquisites, the SEC proposed new regulations designed to change fundamentally the manner in which executive compensation is reported to share-holders. Despite all of this attention, one significant aspect of executive deferred compensation has gone virtually unnoticed - the federal tax rules governing this form of compensation are fundamentally flawed and must be extensively over-hauled. These rules are flawed because they often create a significant incentive for companies and their …

Is "Internal Consistency" Dead?: Reflections On An Evolving Commerce Clause Restraint On State Taxation, Walter Hellerstein

Scholarly Works

Under the "internal consistency" doctrine articulated by the U.S. Supreme Court under the dormant Commerce Clause, a state tax must be structured so that if every state were to impose an identical tax, interstate commerce would fare no worse than intrastate commerce. Although a relatively recent addition to the Court's Commerce Clause jurisprudence, the doctrine has played a significant role as the basis for the judicial invalidation of a wide array of state and local taxes. In American Trucking Associations, Inc., v. Michigan Public Service Commission, 545 U.S. 429 (2005), however, the Court sustained an admittedly "internally inconsistent" $100 per …

Deficits And The Dividend Tax Cut: Tax Policy As The Handmaiden Of Budget Policy, Katherine Pratt

Georgia Law Review

Tax policy has dominated President Bush's domestic policy agenda. The centerpiece of that agenda is the dividend tax cut enacted in 2003. The dividend tax cut is scheduled to expire in 2010, but President Bush continues to urge Congress to make it permanent. President Bush argues that the dividend tax cut promotes long-term economic growth, stimulates the economy, makes the tax system fairer,provides a steady source of income for needy senior citizens, and pays for itself. This Article evaluates the various rationales President Bush offered to justify the dividend tax cut, with an emphasis on the long-term growth rationale. The …

Foreword: Introducing The Law Of Nonprofit Organizations And Philanthropy, David A. Brennen

Georgia Law Review

On January 5, 2007, the Nonprofit and Philanthropy Law Section of AALS held its first program at the AALS Annual Meeting in Washington, D.C. The program, entitled "State-Level Legal Reform of the Law of Nonprofit Organizations,"was a fitting way to launch what should prove to be a valuable contribution to the study of law relating to nonprofit organizations and philanthropy. This burgeoning area of academic legal study is well poised to grow by leaps and bounds in the coming years due to its impact on many traditional areas of legal study, including tax law, corporate law, estate law, trust law, …

A Diversity Theory Of Charitable Tax Exemption -- Beyond Efficiency, Through Critical Race Theory, Toward Diversity, David A. Brennen

Scholarly Works

Part I of the article presents Robin Paul Malloy's Law and Market Economy Theory (“LMT”) as an example of the basis for a normative explanation of the charitable tax exemption. LMT addresses the relationship among law, markets, and culture. Thus, using LMT, this part demonstrates how traditional law and economic analysis, premised on self-interest and wealth maximization, simply does not capture the essence of the many values that impact the marketplace and the market exchange process. Instead, LMT approaches legal analysis in a broader market context and is premised on the need to promote a process of sustainable wealth formation …

Drawing The Line: One Taxpayer's Economic Development Incentive Is Often Another's Discriminatory Tax, Walter Hellerstein

Popular Media

Shackelford Professor Walter Hellerstein shares his opinions regarding Congress' need to define more clearly what types of state and local tax incentives are legal. Prof. Hellerstein was asked to provide testimony on these issues at a U.S. Senate hearing before the Subcommittee on International Trade of the Committee on Finance. He also testified on this topic before a U.S. House of Representatives subcommittee and provided an overview of the American debate to the United Kingdom’s Treasury Department, which faces similar issues in relation to Member States of the European Union seeking to encourage economic growth and productivity in their respective …

Cuno And Congress: An Analysis Of Proposed Federal Legislation Authorizing State Economic Development Incentives, Walter Hellerstein

Scholarly Works

If anything is clear about Cuno and the controversy the opinion has spawned, it is that Congress has the last word on the matter. Whether Congress will speak to the issues Cuno has raised is currently an open question, although in one narrow respect Congress already has. Broader legislation, however, has been introduced into Congress as the "Economic Development Act of 2005," and debate over the efficacy and wisdom of this proposal is as intense as the debate over the defensibility of Cuno itself. My purpose here is not to join that debate, although I am already on record as …

Federal Constitutional Restraints On Tax Competition Among The American States, Walter Hellerstein

Scholarly Works

This article examines the judicially developed rules limiting interstate tax competition in the United States and the constitutional framework out of which they arise.

The Sun Also Rises: The Political Economy Of Sunset Provisions In The Tax Code, Rebecca M. Kysar

Georgia Law Review

This Article provides an overview and critical analysis of sunset provisions in the tax code and, through examination of the political pressures that led to their striking transformation, also reveals disturbing points of vulnerability in the legislative process. It concludes that, contrary to one of the primary justifications for the enactment of sunset provisions-that these provisions reduce the influence exerted on lawmakers by interest groups-sunsets may instead further politicize the legislative process and, due to their mechanics, increase the likelihood of inefficient social outcomes. The history of sunset provisions in tax legislation also illuminates the complex, multidirectional,and often dramatic interaction …

Regulating Section 527 Organizations, Gregg D. Polsky, Guy-Uriel E. Charles

Scholarly Works

In this Essay, we consider whether the Federal Election Commission (FEC) has the authority to regulate independent 527 organizations (e.g., Swiftboat Veterans for Truth, Moveon.org, etc.) as political committees under the Federal Election Campaign Act. This issue, which was hotly debated during the last election cycle when it was considered and ultimately tabled by the FEC, is an extremely complex one that requires a deep understanding of election, tax, administrative, and constitutional law. After considering how these areas of law intersect, we conclude that the FEC lacks the authority to regulate independent 527 organizations as political committees.

International Income Allocation In The Twenty-First Century: The Case For Formulary Apportionment, Walter Hellerstein

Scholarly Works

From an international perspective, formulary apportionment has traditionally been viewed as little more than transfer pricing’s “poor relation” as a division-of-income methodology. It receives only grudging recognition as a method of attributing the profits to a permanent establishment under Article 7 of the OECD Model Tax Convention; it receives no mention at all in Article 9 as a method for distributing the profits of associated enterprises among the contracting states in which they conduct their activities; and it was assailed by the international business community and by the EU Member States as out of step with internationally excepted norms in …

Taxing The Promise To Pay, Gregg D. Polsky, Brant J. Hellwig

Scholarly Works

The IRS recently disclosed that it has identified more than 100 executives at 42 leading public corporations that participated in a tax shelter designed to defer the recognition of income from the exercise of stock options. While the agency thus far has identified approximately $700 million in unreported gains from these shelters, it predicts that the revenue loss to the government will ultimately exceed $1 billion. Compared to most tax shelters, this particular transaction (commonly known as the "Executive Compensation Strategy" or "ECS") is remarkably simple. Rather than exercise the options individually, a participating executive instead transfers the options to …

Employment Discrimination Remedies And Tax Gross Ups, Gregg D. Polsky, Stephen F. Befort

Scholarly Works

This article considers whether a successful employment discrimination plaintiff may be entitled, under current law, to receive an augmented award (a gross up) to neutralize certain adverse federal income tax consequences. The question of whether such a gross up is allowed, the resolution of which can have drastic effects on litigants, has received almost no attention from practitioners, judges, and academics. Because of the potentially enormous impact of the alternative minimum tax (AMT) on discrimination lawsuit recoveries, however, the gross up issue is now beginning to appear in reported cases.

The three principal federal anti-discrimination statutes - Title VII, the …

Race And Equality Across The Law School Curriculum: The Law Of Tax Exemption, David A. Brennen

Scholarly Works

What is the relevance of race to tax law? The race issues are apparent when one studies a subject like constitutional law. The Constitution concerns itself explicitly with such matters as defining rights of citizenship, allocating powers of government, and determining rights with respect to property. Given the history of our country -- with slavery followed by periods of de jure and de facto racial discrimination -- these constitutional law matters obviously must have racial dimensions.

Tax law, however, does not generally concern itself explicitly with matters of race. Tax law is often thought of as completely race neutral in …

The European Commission’S Report On Company Income Taxation: What The Eu Can Learn From The Experience Of The Us States, Walter Hellerstein

Scholarly Works

The European Union Commission has proposed using consolidated base taxation and formulary apportionment to tax the EU-source income of multinational companies. This paper examines US state experience with a similar approach. Despite some positive lessons, especially the need to consolidate income of affiliated companies, lessons are mostly negative, especially regarding the choice of apportionment formula, the use of economic criteria to define the group whose income is to be consolidated, and complexity caused by lack of uniformity. US experience says nothing about using value added to apportion income—an approach that is conceptually attractive, but subject to transfer pricing problems.

The Contingent Attorney's Fee Tax Trap: Ethical, Fiduciary Duty, And Malpractice Implications, Gregg D. Polsky

Scholarly Works

In employment and civil rights lawsuits, the alternative minimum tax may cause a plaintiff's net recovery to be taxed at rates significantly higher than the current maximum rate of 35 percent. This Essay discusses the ethical, fiduciary duty and malpractice implications for lawyers representing plaintiffs who may be affected by this tax trap.

Litigation Expenses And The Alternative Minimum Tax, Gregg D. Polsky, Brant J. Hellwig

Scholarly Works

One of the chief features of the alternative minimum tax (the "AMT") is a broadened tax base, accomplished in part through the disallowance of deductions that are not central to measuring an individual's net income. Yet in achieving its objective of limiting deductions, the AMT casts a wide net. Thus, in certain instances, an individual can be robbed of the tax benefit of expenses that were critical to the production of the income being taxed. An extreme example of this problem is the treatment of certain litigation expenses under the AMT. If an individual incurs attorney fees and other associated …

Legislating Morality: The Duty To The Tax System Reconsidered, Watson

Scholarly Works

Four years ago, I presented a paper at a symposium on professionalism jointly sponsored by the University of Kansas Law School and the Kansas Bar Association. That paper espoused the view (contrary to what appears to be the popular view among tax scholars) that tax lawyers owe no special duty to the "tax system" other than to abide by the law and the applicable standards of professional conduct. During the four-year interim since my last visit to Kansas, however, we have witnessed the deleterious effect of the IRS Restructuring and Reform Act of 1998 (RRA '98) on IRS enforcement and …

Jurisdiction To Tax Income And Consumption In The New Economy: A Theoretical And Comparative Perspective, Walter Hellerstein

Scholarly Works

The collection of rules that falls under the rubric of "jurisdiction to tax" has aptly been described as "a body of law in search of a theory." Although this Article lays no claim to advancing such a theory, it does seek to provide a broad theoretical perspective on jurisdiction-to-tax issues raised by income and consumption taxation in the new economy. It is designed to suggest ways of thinking about the fundamental questions involved, questions that are often obscured by a preoccupation with the application of specific jurisdiction-to-tax rules to individualized fact patterns in particularized contexts. In short, this Article is …

Federal Taxation (2002 Eleventh Circuit Survey), David A. Brennen

Scholarly Works

During 2002 federal courts in the United States decided nineteen cases that directly impact federal tax law in the Eleventh Circuit. These cases involve a variety of tax law matters including Federal Insurance Contributions Act ("FICA") payroll tax, estate and gift tax, IRS authority to levy and assess tax, and discharges in bankruptcy. Other tax-related matters addressed by courts in 2002 that impact tax law in the Eleventh Circuit include inventory recapture in an S-corporation conversion, attorney fees for the prevailing party in a tax dispute, and injunctions against tax preparers. By far the most important tax case decided in …

Current Problems Of International Taxation Of Electronic Commerce, Nuran G. Kerimov

LLM Theses and Essays

This thesis discusses the main problems that face tax authorities of many countries in the process of taxation of electronic commerce. It analyzes examples of problems posed by the growth of e-commerce in the context international direct and indirect taxation. Current international policy issues are the subject of discussion of the thesis. The thesis also analyzes some of the proposals regarding taxation of electronic commerce.

A Correct Analysis Of The Tax Treatment Of Contingent Attorney's Fee Arrangements: Enough With The Fruits And The Trees, Gregg D. Polsky

Scholarly Works

The tax treatment of contingent attorney's fee arrangements has been the subject of much recent debate and litigation. Some courts and commentators conclude that a plaintiff must include the entire settlement amount, including attorney's fees, in her gross income, while other courts and commentators conclude that a plaintiff must include only her recovery net of attorney's fees. Because of the alternative minimum tax, the resolution of this issue may have a significant effect on the plaintiff's tax liability. In analyzing the issue, courts and commentators have focused on the assignment of income doctrine by inquiring whether, upon execution of a …