Tax Law Commons^™

Inversions And Competitiveness: Reflections In The Wake Of Pfizer-Allergan, Reuven S. Avi-Yonah, Omri Marian

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The recent announcement that Pfizer Inc. has reached a merger agreement with Allergan PLC, with the combined entity being tax resident in Ireland, is a good occasion to reconsider U.S. policy options in regard to inversions. We consider an "inversion" as any transaction in which a U.S. corporation becomes foreign for tax purposes without a meaningful change to its underlying business or management activities. This short article explains what we believe to be the true motives of inversion transactions, as well as potential policy responses, in light ofthe Pfizer inversion. Part II explains what is unique about the Pfizer inversion …

Cancellation Of Debt And Related Transactions, Douglas A. Kahn, Jeffrey H. Kahn

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If a taxpayer borrows money, the borrowed funds are not included in the taxpayer's gross income. That treatment is proper even though the taxpayer has increased his assets by the amount he borrowed because he also has created a corresponding liability to pay back the loan. The taxpayer's net: wealth has not increased. 'The more difficult and interesting questions arise when the taxpayer fails to repay the loan. At first blush, it would appear that upon cancellation of a loan, the taxpayer should have income for the amount that was cancelled. However, the current tax treatment is not that simple. …

企業の社会的責任と戦略的租税行動 [Corporate Social Responsibility And Strategic Tax Behavior], Reuven S. Avi-Yonah, Keisaku Koga Translator

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This paper addresses two questions. First, from the perspective of the corporation, should the corporation cooperate and pay the corporate tax, or should it engage in "strategic" tax behavior designed to minimize or eliminate its corporate tax burden? Second, from the perspective of the state, should the state use the corporate tax just to raise revenue, or should it also try to use it as a regulatory tool to steer corporate behavior in directions that it deems beneficial to society? The paper argues that whatever our view of the nature of the corporation and of the legitimacy of corporate social …

The Rise And Fall Of The Consumption Tax, Reuven S. Avi-Yonah

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The year 1974 was an eventful one in U.S. history. For the first time, a president resigned under threat of impeachment. Watergate and the Vietnam War shook Americans’ faith in their government. The economy was reeling from the first oil embargo, and the United States’ prospects seemed bleak. In that context, Professor William Andrews of Harvard Law School published an article that would revolutionize tax scholarship. Against the backdrop of widespread dissatisfaction with the government in general and the income tax in particular, Andrews suggested replacing the income tax with a consumption tax. That suggestion was ironic for anyone familiar …

Dark Money In Motion: Mapping Issues Along The Money Trail, Frances R. Hill

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No abstract provided.

The Case For Categorical Nonenforcement, Leigh Osofsky

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No abstract provided.

Distinguishing Deductible Repairs From Capitalized Improvements: An Expectations Approach To The New Repair Regulations, George Mundstock, Thomas J. Korge

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No abstract provided.

Taxation And Inequality: A Case For The Vat., Reuven S. Avi-Yonah

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The author shows that a progressive income tax has had little effect on after-tax income inequality. Social programs, however, do create a more equal society. He proposes a national sales tax—a value-added tax—to finance more such social programs as America's best route to a more equal society.

Codifying And Miscodifying Judicial Anti-Abuse Tax Doctrines, Linda Jellum

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No abstract provided.

Sentencing In Tax Cases After Booker: Striking The Right Balance Between Uniformity And Discretion, Scott A. Schumacher

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It has been nearly ten years since the Supreme Court’s seminal decision in United States v. Booker, in which the Court invalidated the mandatory application of the United States Sentencing Guidelines. In the cases that followed, the Court addressed subsidiary issues regarding the application of the Guidelines and the scope of appellate review. However, despite — or perhaps because of — these opinions, there is little consensus regarding the status and extent of appellate review, as well as the discretion afforded sentencing courts. More troubling, what consensus there is seems to permit judges to impose any sentence they wish, as …

A Proposed Replacement Of The Tax Expenditure Concept And A Different Perspective On Accelerated Depreciation, Douglas A. Kahn

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Over 32 years ago, I published an article on accelerated depreciation in which I concluded that some amount of acceleration was consistent with normal tax principles and should not be classified as a tax expenditure. Over the intervening years, from time to time, I have exchanged comments with authors who have questioned that conclusion. It is time to revisit that topic and renew the consideration of how tax depreciation may properly operate. This Essay’s analysis of depreciation provides one example of how the tax expenditure budgets are flawed. The treatment of some accelerated depreciation as a tax expenditure is based …

Understanding The Amt, And Its Unadopted Sibling, The Amxt, James R. Hines Jr., Kyle D. Logue

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Four million Americans with extensive tax preferences are subject to the Alternative Minimum Tax (AMT). By taxing a broad definition of income, the AMT makes it possible to have a tax system that both encourages certain activities with generous tax preferences and maintains a semblance of distributional equity. The same rationale supports the imposition of an Alternative Maximum Tax (AMxT), which would cap tax liabilities of individuals with very few preference items and thereby afford Congress greater flexibility in designing the income tax. The original 1969 AMT proposal included an AMxT; it is difficult to justify imposing one without the …

Why The Buffett-Gates Giving Pledge Requires Limitation Of The Estate Tax Charitable Deduction, Edward A. Zelinsky

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The Buffett-Gates Giving Pledge, under which wealthy individuals promise to leave a majority of their assets to charity, is an admirable effort to encourage philanthropy. However, the Pledge requires us to confront the paradox that the federal estate tax charitable deduction is unlimited while the federal income tax charitable deduction is capped. If a Giving Pledger leaves his wealth to charity, the federal fisc loses significant revenue since the Pledger thereby avoids federal estate taxation as charitable bequests are deductible without limit for federal estate tax purposes. Despite its laudable qualities, the Giving Pledge is a systematic (albeit inadvertent) threat …

Corporate Taxation And Corporate Social Responsibility, Reuven S. Avi-Yonah

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This Article will address the question of whether publicly traded U.S. corporations owe a duty to their shareholders to minimize their corporate tax burden through any legal means, or if instead, strategic behaviors like aggressive tax-motivated transactions are inconsistent with corporate social responsibility (“CSR”). I believe the latter holds true, regardless of one’s view of the corporation. Under the “artificial entity” view, such behavior undermines the constitutive relationship between the corporation and the state. Under the “real view,” such behavior runs contrary to the normal obligation of citizens to comply with the law (even absent effective enforcement). And under the …

Why Wynne Worries Me, Edward A. Zelinsky

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No abstract provided.

Apportioning State Personal Income Taxes To Eliminate The Double Taxation Of Dual Residents: Thoughts Provoked By The Proposed Minnesota Snowbird Tax, Edward A. Zelinsky

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As a matter of both tax policy and constitutional law, it is time to apportion state personal income taxes to eliminate the double taxation of dual residents. Individuals who, for income tax purposes, are residents are two or more states should be taxed along the lines recently proposed by Minnesota Governor Mark Dayton for “snowbirds”: As to income with respect to which a state has source jurisdiction, that state should tax such income. As to income which two or more states tax only on the basis of residence, such states should apportion, based on the dual resident’s relative presence in …

Magnifying Deterrence By Prosecuting Professionals, Scott A. Schumacher

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This article examines the recent series of criminal prosecutions against tax professionals and offshore bankers. These criminal cases, brought against the largest Swiss bank (UBS), the oldest Swiss bank (Wegelin), one of the largest accounting firms in the world (KPMG), as well as numerous lawyers and accountants, was a dramatic shift for the U.S. Department of Justice. After decades of tolerating abusive tax shelters and tax haven banks, the Government changed its policy. However, rather than indicting the individuals and corporations who invested in tax shelters or hid money in offshore accounts, the Justice Department indicted the lawyers, accountants, and …

The Aftermath Of Hobby Lobby: Hsas And Hras As The Least Restrictive Means, Edward A. Zelinsky

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In Burwell v. Hobby Lobby Stores, Inc., the United States Supreme Court held that the Religious Freedom Restoration Act of 1993 (RFRA) does not require closely-held corporations’ employer-sponsored medical plans to provide forms of contraception that shareholders of such corporations object to on religious grounds. The question now raised is how the President, Congress, and the departments of Health and Human Services (HHS), Treasury and Labor, ought to respond to the Hobby Lobby decision.

Citizens United And Social Welfare Organizations: The Tangled Relationships Among Guidance, Compliance, And Enforcement, Frances R. Hill

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No abstract provided.

Unwinding The Ceiling Rule, Leigh Osofsky

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This article closely examines the unwinding of the ceiling rule. Congress and partnership tax experts historically have assumed perfect unwinding of the ceiling rule on liquidation or sale of a partnership interest. However, this assumption glosses over a significantly more complicated reality. This article closely examines the history of section 704(c) and the interaction between the ceiling rule and the rules regarding sales and liquidations of partnership interests to reveal the extent to which the assumption does not hold. By debunking long-held assumptions about the perfect unwinding of the ceiling rule, this article displays that there is no reasonable justification …

What Makes A Dutch Company Dutch? The Evolution Of Us Limitation-On-Benefits Provisions, Patricia A. Brown

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U.S. Tax Reform: Full-Inclusion Over Territorial System Compelling, Jeffrey M. Kadet

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The territorial system strongly lobbied for by U.S. multinational corporations that stand to benefit from that system is not what’s best for our country or our society. It is bad tax policy for many reasons, including the strong motivation it provides our multinational corporations to continue moving operations, jobs, risks, and assets outside the United States to achieve double non-taxation. A worldwide full-inclusion system would severely curtail or completely eliminate that strong motivation because double nontaxation would no longer be possible because of a current federal tax on all earnings that cannot be eliminated through any tax schemes or creative …

Worldwide Tax Reform: Reversing The Race To The Bottom, Jeffrey M. Kadet

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The OECD Base Erosion and Profit Shifting Project is now under way, its mission being to suggest ways that countries can work together and amend their domestic laws to combat the corporate profit shifting that has so affected the tax bases of many countries.

The only way to truly eliminate corporate profit shifting is to eliminate the strong motivation multinational enterprises have to achieve "double nontaxation" by engaging in profit shifting. By being subject to current home-country taxation on its worldwide earnings, a multinational cannot achieve double nontaxation. That will eliminate or significantly reduce its motivation to engage in complicated …

Wealth Transfer Tax Planning For 2013 And Beyond, John A. Miller

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China's Golden Tax Project: A Technological Strategy For Reducing Vat Fraud, Jane K. Winn, Angela Zhang

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Unlike the United States, where sales tax is a common form of indirect tax, almost all countries around the world-both developed and developing alike-now impose a value added tax (VAT). In the early 1990s, as part of its comprehensive economic reform program initiated over 30 years ago, the People's Republic of China implemented a VAT. Monitoring compliance with VAT is a serious challenge in developing countries, and China is no exception in that regard.

To address this challenge, China launched a major fiscal reform project called the "Golden Tax Project" (GTP) which mandates the use of specific sophisticated information technologies …

Taxing The Platypygous, James J. White

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This Article maintains that obesity in the United States is an enormous public health issue that causes the health care costs of the obese Americans greatly to exceed those of citizens of normal weight. Recognizing that that much of that cost will be born by publicly financed programs and that the taxes supporting those programs will constitute an externality that the fat impose on the thin, the Article proposes a tax on high calorie food-but only when that food is purchased by the obese. The Article addresses many of the administrative, moral and other objections to a tax aimed at …

Tax Abuse According To Whom, Shannon Weeks Mccormack

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In 1996, Congress banned the Treasury Department from enacting retroactive regulations but provided an important exception, allowing tax regulations to apply retroactively “to prevent abuse.” Congress did not, however, explicitly define abuse; nor did it designate to any specific actor the power to do so. This Article provides the first comprehensive look at the level of deference owed a Treasury regulation’s interpretation of the Internal Revenue Code’s abuse exception. Generally, a reviewing court owes some level of deference to an agency’s interpretation of the statute it is entrusted to administer. Some statutory interpretations are entitled to receive the strong standard …

Exempt Entities As Government Contractors: Regulation Through Cooperative Federalism, Frances R. Hill

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No abstract provided.

Who's Naughty And Who's Nice? Frictions, Screening, And Tax Law Design, Leigh Osofsky

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No abstract provided.

Putting State Courts In The Constitutional Driver's Seat: State Taxpayer Standing After Cuno And Winn, Edward A. Zelinsky

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This article explores the implications of the U.S. Supreme Court’s decisions in DaimlerChrysler Corp. v. Cuno and Arizona Christian School Tuition Organization v. Winn. In Cuno and Winn, the Court held that state taxpayers lacked standing in the federal courts. Because the states have more liberal taxpayer standing rules than do the federal courts, Cuno and Winn will not terminate taxpayers’ constitutional challenges to state taxes and expenditures, but will instead channel such challenges from the federal courts (where taxpayers do not have standing) to the state courts (where they do). Moreover, municipal taxpayer standing in the federal courts, which …