Tax Law Commons^™

Equality Before Tax Law, Charles Delmotte

Washington and Lee Law Review

The income tax code is riddled with exceptions—exclusions, rate preferences, and deductions—that reduce tax burdens for dominant majorities and powerful interest groups. These carveouts now amount to an astonishing $1.9 trillion, equivalent to 75 percent of all federal income tax revenue. By granting policymakers discretion to allocate tax exceptions, the tax system not only invites capture but also the weaponization of taxation against disfavored economic and political groups. Yet despite the central role of these exceptions, tax scholars have not articulated a principle requiring taxation according to general rules.

This Article bridges philosophy with insights from political economy to reveal …

Poverty, Fresh Starts, And The Social Safety Net, Michelle Lyon Drumbl

Scholarly Articles

For decades low-income families have relied on the filing of individual income tax returns to claim critical social welfare benefits in the form of refundable tax credits, most notably the Earned Income Tax Credit and the Child Tax Credit. But what happens to those families when the social safety net is not enough to meet their financial obligations, and they must seek a fresh start by filing for bankruptcy?

This Article, at the intersection of tax law, bankruptcy law, and the social safety net, examines the ways in which state bankruptcy laws treat refundable tax credits when an individual debtor …

Refundable Tax Credit Design: Cohabitating Parents And Gender Presumptions, Michelle Lyon Drumbl

Scholarly Articles

This Essay is meant to encourage further thinking to improve upon design options for unmarried cohabitating parents. Are there better ways to recognize the needs of unmarried co-parents (whether living together or not) and to provide support for shared parenting? The policy considerations for providing support to unmarried cohabitating parents are different than those for supporting married couples, given that these individuals lack the financial protections of a formal partnership.

One solution is to have a default rule whereby the CTC is awarded to the primary caregiver. Canada’s gender presumption provides a degree of administrative simplicity, but the IRS could …

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 …

Tax Reporting As Regulation Of Digital Financial Markets, Young Ran (Christine) Kim

Washington and Lee Law Review

FTX’s recent collapse highlights the overall instability that blockchain assets and digital financial markets face. While the use of blockchain technology and crypto assets is widely prevalent, the associated market is still largely unregulated, and the future of digital asset regulation is also unclear. The lack of clarity and regulation has led to public distrust and has called for more dedicated regulation of digital assets. Among those regulatory efforts, tax policy plays an important role. This Essay introduces comprehensive regulatory frameworks for blockchain-based assets that have been introduced globally and domestically, and it shows that tax reporting is the key …

Fake News And The Tax Law, Kathleen Delaney Thomas, Erin Scharff

Washington and Lee Law Review

The public misunderstands many aspects of the tax system. For example, people frequently misunderstand how marginal tax rates work, misperceive their own average tax rates, and believe they benefit from tax deductions for which they are ineligible. Such confusion is understandable given the complexity of our tax laws. Unfortunately, research suggests these misconceptions shape voter preferences about tax policy which, in turn, impact the policies themselves.

That people are easily confused by taxes is nothing new. With the rise of social media platforms, however, the speed at which misinformation campaigns can now move to shape public opinion is far faster. …

Public Education: Engaging With Secondary Education In Schools, In International Handbook On Clinical Tax Education (Amy Lawton Ed., 2023), Michelle Lyon Drumbl

Books and Chapters

This chapter will consider the benefits of public education by considering educational outreach projects in secondary schools. Chapter 8 discussed the importance of tax education for young people. Forging relationships with local schools (and, indeed, wider community organisations) is a worthwhile endeavour for any clinical tax education project. In addition to the benefits to university students (covered in more detail in Part III), the community benefits include stronger ties to the local community as well as a contribution to the financial literacy (and tax literacy) of taxpayers.

Is A Duty To Pay Tax Inherent In Affirmations Of Human Rights?, Jonathan M. Barrett

Washington and Lee Journal of Civil Rights and Social Justice

The United Nations’ Universal Declaration of Human Rights 1948 (the Universal Declaration), as the preeminent statement of human rights, informs numerous cognate covenants and declarations of rights, and charters of rights included in national constitutions. Unlike the rights declarations of the Enlightenment, the Universal Declaration affirms broad welfare rights, in addition to civil and political rights. No right or set of rights is superior to another; they are indivisible, interdependent and interrelated.

Declarations of rights may also include duties. The Organization of American States’ American Declaration of the Rights and Duties of Man 1948 (“the American Declaration”), for example, includes …

Opportunity Zones Providing Opportunity For Whom?: How The Current Regulations Are Failing And A Solution To Uplift Communities, Ruta R. Trivedi

Washington and Lee Journal of Civil Rights and Social Justice

In 2017, the newly enacted Tax Cuts and Jobs Act created an incentive for taxpayers to invest in Qualified Opportunity Zones— census tracts that consist of low-income communities. These investments, which are incentivized via lucrative tax deferral benefits, are intended to uplift communities and leave them in a better position than they were pre-investment. However, the initiative lacks regulation requiring investments to actually benefit low-income areas, resulting in money going to places that do not need help, while communities that are in need may face displacement. This is a result of many wealthy investors finding that luxury projects are the …

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 …

#Audited: Social Media And Tax Enforcement, Michelle Lyon Drumbl

Scholarly Articles

With limited resources and a diminished budget, it is not surprising that the Internal Revenue Service would seek new tools to maximize its enforcement efficiency. Automation and technology provide new opportunities for the IRS, and in turn, present new concerns for taxpayers. In December 2018, the IRS signaled its interest in a tool to access publicly available social media profiles of individuals in order to “expedite IRS case resolution for existing compliance cases.” This has important implications for taxpayer privacy.

Moreover, the use of social media in tax enforcement may pose a particular harm to an especially vulnerable population: low-income …

Bankruptcy, Taxes, And The Primacy Of Irs Refund Offsets: Copley V. United States, Michelle Lyon Drumbl

Scholarly Articles

The Bankruptcy Code and the Internal Revenue Code (I.R.C.) are statutory labyrinths of federal law. Copley v. United States called on the Fourth Circuit to resolve a question that arose when respective provisions of each collided. At the heart of Copley was a married couple seeking a fresh start with an expected $3,208 income tax refund. The Copleys wished to resolve their outstanding debts in bankruptcy and maximize the relief afforded to them under the Virginia homestead exemption provision, as permitted by the Bankruptcy Code. On the other side of the proverbial table was the Internal Revenue Service (IRS) armed …

Taxation Of Electronic Gaming, Bryan T. Camp

Washington and Lee Law Review

At a doctrinal level, the subject of this Article is timely. During this time of the coronavirus pandemic, casinos have been closed and large populations have been subject to stay-home orders from local and state authorities. One can reasonably expect a large increase in electronic gaming and thus an increased need for proper consideration of its taxation. This Article argues for a cash-out rule of taxation.

At a deeper level, the subject of this Article is timeless. Tax law is wickedly complex for a reason. This Article explores that complexity using the example of electronic gaming. It grapples with the …

Foreword, In From The Texas Cotton Fields To The United States Tax Court: The Life Journey Of Juan F. Vasquez (Mary Theresa Vasquez & Anthony Head, 2020), Brant J. Hellwig

Books and Chapters

The story of the life of the first Hispanic American appointed to serve as a judge on the United States Tax Court. An educational and inspirational story of a professional career, the book is accessible to lawyers and laypersons of all ages.

A Peruvian Tax Lawyer In A U.S. Corporate Tax Class: What Can Be Explained And What Cannot Be Explained, Fernando J. Loayza Jordán

Scholarly Articles

This paper is more of an ethnographic comparison, inspired by classroom experiences, between U.S. and Peruvian tax law education than what Garbarino calls “hard-nose comparative work” that requires an underlying theory and a clear methodology. It is also different from most comparative works because it is not actually about an area of law itself but about how it is taught and why, visiting some of the most critical variables in legal education. Nevertheless, I have tried to keep in mind the main critiques of comparative tax studies that could also become errors in the comparisons that I intend to draw.

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 …

Foreword, Michelle Lyon Drumbl

Washington and Lee Journal of Civil Rights and Social Justice

Michelle L. Drumbl, Clinical Professor of Law and Director of the Tax Clinic at W&L Law, introduces this issue of the Journal of Civil Rights and Social Justice, which includes material presented at and inspired by the Journal's 2018 symposium, Always with Us? Poverty, Taxes, and Social Policy.

A Typology Of Place-Based Investment Tax Incentives, Michelle D. Layser

Washington and Lee Journal of Civil Rights and Social Justice

This Article makes several contributions to tax, poverty, and empirical legal literature. First, it defines the category of place-based investment tax incentives and identifies key elements of variation across the category. Despite their prevalence at all levels of government, place-based investment tax incentives remain undertheorized and largely undefined in the literature. The typology presented here reflects an analysis of three federal tax incentives (the New Markets Tax Credit, the Low-Income Housing Tax Credit, and the new Opportunity Zones law) and a detailed survey of tax incentives included in state enterprise zone laws. By defining this category of tax laws and …

Converging Welfare States: Symposium Keynote, Susannah Camic Tahk

Washington and Lee Journal of Civil Rights and Social Justice

Susannah Camic Tahk, Associate Dean for Research and Faculty Development and Associate Professor of Law at the University of Wisconsin Law School, speaks to the Journal of Civil Rights and Social Justice 2018 symposium, Always with Us? Poverty, Taxes, and Social Policy. She addresses the following questions: To what extent do the particular advantages of the tax antipoverty programs persist as the tax antipoverty programs take center stage? Can tax programs, once distinguished from their direct-spending counterparts on the grounds of relative popularity and legal and administrative ease of access maintain those hallmarks as the tax-based welfare state grows …

Collaboration Theory And Corporate Tax Avoidance, Eric C. Chaffee

Washington and Lee Law Review

This Article argues that aggressive corporate tax avoidance is legally impermissible based upon the essential nature of the corporate form. The history of the debate over the essential nature of the corporation is substantial. This debate has been reinvigorated by the Supreme Court’s recent opinions, Citizens United v. Federal Election Commission and Burwell v. Hobby Lobby Stores, Inc., which explore the scope of corporate rights.

The Practice And Tax Consequences Of Nonqualified Deferred Compensation, David I. Walker

Washington and Lee Law Review

Although nonqualified deferred compensation plans lack explicit tax preferences afforded to qualified plans, it is well understood that nonqualified deferred compensation results in a joint tax advantage when employers earn a higher after-tax return on deferred sums than employees could achieve on their own. But the joint tax advantage depends critically on how plans are operated; chiefly how plan sponsors use or invest deferred compensation dollars. This is the first Article to systematically investigate nonqualified deferred compensation practices. It shows that joint tax minimization historically has taken a backseat to accounting priorities and participant diversification concerns. In recent years, the …

El Control De Convencionalidad En Sede Administrativa: Un Mecanismo Para La Defensa De Los Contribuyentes, Fernando Loayza Jordán, Julio César Casma Rocha

Scholarly Articles

A través de la sentencia recaída en el expediente 04293-2012-PA/TC, el Tribunal Constitucional dejó sin efecto el precedente vinculante que validaba la aplicación del control difuso en sede administrativa. Esto supuso para los contribuyentes una situación de indefensión frente a la potencial aplicación de normas tributarias inconstitucionales. Si bien existen vías alternativas para que estos puedan defenderse ante estas normas, estas no resultan igualmente idóneas para tutelar sus intereses y carecen de la rapidez que caracterizaba al control difuso en sede administrativa.

En este artículo, los autores proponen la aplicación del control de convencionalidad en sede administrativa como una solución …

#Metoo & Tax, Margaret Ryznar

Washington and Lee Law Review Online

Recently, legislative efforts have taken aim at sexual harassment in the workplace. Among these may be a surprising but effective approach—disallowing tax deductions for sexual harassment settlements subject to non-disclosure agreements. This Essay analyzes such a 2017 tax reform provision.

In Or Out: How To Treat Foreign Taxes Under The Economic Substance Doctrine, Roland Hartung

Washington and Lee Law Review

No abstract provided.

¿Debemos Exigirle Seguridad Jurídica A Una Cláusula Antielusiva General? Reflexiones Sobre Las Líneas Discursivas Contrarias A La Cag, Fernando Loayza Jordán

Scholarly Articles

Las CAG generan tensiones entre la certidumbre que desean los contribuyentes y la flexibilidad que requiere su naturaleza. Esta tensión se refleja en las líneas discursivas críticas contra la Norma XVI. Hemos resumido estas en tres ideas fuerza: (i) “una CAG vulnera el principio de seguridad jurídica”, (ii) “una CAG solo podría ser aceptable si se enuncia con un lenguaje muy preciso y definido” y (iii) “una CAG interrumpiría la dinámica regular de los negocios y detendría la inversión”. A partir de la experiencia comparada y el análisis de la función de las CAG y la naturaleza del fenómeno de …

The Federal Law Of Property: The Case Of Inheritance Disclaimers And Tenancy By The Entireties, David Gray Carlson

Washington and Lee Law Review

No abstract provided.

La Aplicación De Otros Métodos De Valoración En El Régimen De Precios De Transferencia, Fernando Loayza Jordán, Martín La Rosa Almenara

Scholarly Articles

Previamente a la última reforma del régimen peruano de precios de transferencia, solo se permitía la aplicación de métodos específicos de valoración, lo que generó una serie de problemas de índole práctica y constitucional. Estos se resolvieron parcialmente con la reciente inclusión de una disposición que permite la aplicación de “otros métodos”. El presente trabajo analiza la problemática de la situación previa, así como las soluciones que presenta la reforma y sus límites. Por último, se propone una serie de precisiones que, a juicio de los autores, deberían incluirse en la reglamentación de los “otros métodos”.

Prior to the last …

Análisis Crítico Del Requisito Del Perjuicio Fiscal En El Régimen Peruano De Precios De Transferencia, Fernando Javier Loayza Jordán

Scholarly Articles

Tesis para optar el Título de Abogado, Pontificia Universidad Católica del Perú

El régimen peruano de precios de transferencia limita la aplicación de ajustes que afecten negativamente a la recaudación tributaria, de modo tal que solo se permiten ajustes cuando estos corrijan el perjuicio fiscal que se generaría por la aplicación del IR sobre un valor distinto al de mercado.

Por lo tanto, la importancia del perjuicio fiscal como requisito para realizar ajustes reside en constituirse como la condición que determinará si la asignación del valor de una transacción será (i) el valor de mercado según el ALP o (ii) …

Beyond Polemics: Poverty, Taxes, And Noncompliance, Michelle Lyon Drumbl

Scholarly Articles

The earned income tax credit (EITC) is perhaps the most significant refundable credit in the U.S. tax system. Designed as an anti-poverty program, it is a social benefit administered by the Internal Revenue Service (IRS). Studies show it has a positive impact upon the children whose families receive it. Despite its many positives, however, the EITC is a program that for years has been plagued by taxpayer noncompliance. Though it is believed that the majority of EITC noncompliance may be unintentional, public reports of misconduct and fraud hurt the program’s image and fuel political rhetoric.

This article unpacks the rhetoric. …

The Constitutional Nature Of The United States Tax Court, Brant J. Hellwig

Scholarly Articles

Is the United States Tax Court part of the Executive Branch of government? One would expect that question would be capable of being definitively answered without considerable difficulty. And as recently expressed by the Court of Appeals for the District of Columbia Circuit, that indeed is the case. In the course of addressing a challenge to the President's ability to remove a judge of the Tax Court for cause on separation of powers grounds, the D.C. Circuit rejected the premise that the removal power implicates two branches of government: "the Tax Court exercises Executive authority as part of the Executive …