Tax Law Commons^™

The Mechanics Of Share Repurchases Or How I Stopped Worrying And Learned To Love Stock Buybacks, Richard A. Booth

Faculty Publications

Stock repurchases by issuing corporations have always been controversial. They have become even more so recently because of the perception that the excess funds used to finance them have come from tax cuts and other sources (such as government bailouts) that were intended to stimulate reinvestment or enhanced wages and benefits for workers. As a result, critics have proposed amendments to tax law that discourage buybacks (and possibly dividends as well). The theory is that the benefits of such distributions go mostly to executives (who are compensated in large part with equity) and to already wealthy stockholders. The controversy is …

Solving The Valuation Challenge: The Ultra Method For Taxing Extreme Wealth, David Gamage, Brian Galle, Darien Shanske

Faculty Publications

Recent reporting based on leaked tax returns of the ultra-rich confirms what experts have long suspected: for the wealthiest Americans, paying taxes is mostly optional. Some of the country's richest have reported annual incomes that would be modest for a school teacher, even as the share of wealth held by the top .1% is at its highest in nearly a century.

Experts have long understood that one problem sits at the root cause of many of the tax system's failures to reach the very rich: valuation. Because it is difficult to appraise complex or unique assets, modern tax systems instead …

Crypto Assets And The Problem Of Tax Classifications, Eric D. Chason

Faculty Publications

To date, Internal Revenue Service (I.R.S.) guidance on cryptocurrencies has been thin. When the I.R.S. has issued guidance, it occasionally mishandles the technical details (such as confusing air drops and hard forks). More personnel (and personnel with greater technical expertise) would allow the I.R.S. to keep pace with the explosive growth of cryptocurrency. Nevertheless, the I.R.S. could better leverage its existing resources by focusing on select issues and seeking enabling legislation from Congress. Specifically, the I.R.S. should focus on crypto issues occurring on a system-wide basis and not requiring taxpayer-specific considerations.

For example, determining whether Bitcoin is a “security” under …

Taxation And The Constitution, Reconsidered, David Gamage, John R. Brooks

Faculty Publications

Our current income tax is unable to address growing concentrations of financial wealth and resulting economic inequality. But reforms to address these problems—such as a wealth tax or an income tax on unrealized capital gains—are stymied by fears of unconstitutionality. The basic claim is that wealth taxes and similar reforms are “direct taxes” under the Apportionment Clauses of the Constitution, and since apportionment is not feasible, these taxes are impossible. But this claim is wrong.

This Article shows that there is in fact a long history of federal taxes similar to wealth taxes—both apportioned and uniform—and a well-developed constitutional tax …

Billionaire Mark-To-Market Reforms: Response To Susswein And Brown, David Gamage, Reuven S. Avi-Yonah

Faculty Publications

In their essay, “Is It Time to Tax Disney’s Unrealized Capital Gains From 1965?” Donald B. Susswein and Kyle Brown argue that a mark-tomarket reform like the recent proposals for billionaire income tax reforms would amount to double taxation. We explain here why their arguments are incorrect. Instead, the primary impact of enacting a billionaire income tax reform would be to close the loopholes and combat the harmful political-optionality dynamics that enable many billionaire and megamillionaire taxpayers to fully and permanently escape income taxation on the majority of their true investment gains.

Reducing Administrative Burdens To Protect Taxpayer Rights, Leslie Book, T. Keith Fogg, Nina E. Olson

Faculty Publications

The tax system designed by Congress imposes significant administrative burdens on taxpayers. IRS decisions regarding how it administers tax laws can add to congressionally imposed burdens. The administrative burdens are consequential and hurt some people, especially lower- or moderate- income individual taxpayers, more than others. While the IRS strives to measure and reduce the time and money taxpayers spend to comply with their tax obligations, it does not consider the effect administrative burdens have on taxpayer rights, including the right to be informed, the right to pay no more than the correct amount of tax, and the right to a …

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 …

Tax Crushing Trusts, Thomas Simmons

Faculty Publications

No abstract provided.

Taxing Creativity, Jeffrey A. Maine

Faculty Publications

The recent sell offs of song catalogs by Bob Dylan, Stevie Nicks, Neil Young, and Mick Fleetwood for extraordinarily large sums of money raise questions about the law on creativity. While patent and copyright laws encourage a wide array of creative endeavors, tax laws governing monetization of creative works do not. The Songwriters Capital Gains Equity Act, in particular, solidifies creativity exceptionalism, exacerbates tax inequities among creators, and perpetuates racial disparities in the tax Code. This Article asserts that the law must encourage creativity from all creators. It is time to eliminate tax exceptionalism for musical compositions or expand its …

Tax Issues Affecting Marijuana Businesses, Erik M. Jensen

Faculty Publications

This article considers several issues affecting Internal Revenue Code section 280E, which denies income-tax deductions and credits to businesses trafficking in controlled substances. Even though marijuana is legal in an increasing number of states, it remains a controlled substance under federal law and section 280E therefore applies to marijuana businesses. As a result, investing in a marijuana business is much less attractive than it would otherwise be. The article discusses issues of statutory interpretation but, more important, considers whether an almost complete denial of deductions and credits converts what is in form an income tax into something else. If the …

The Inequity Of Informal Guidance, Joshua D. Blank, Leigh Z. Osofsky

Faculty Publications

The coexistence of formal and informal law is a hallmark feature of the U.S. tax system. Congress and the Treasury enact formal law, such as statutes and regulations, while the Internal Revenue Service offers the public informal explanations and summaries, such as taxpayer publications, website frequently asked questions, virtual assistants, and other types of taxpayer guidance. Throughout the COVID-19 pandemic, the IRS increased its use of informal law to help taxpayers understand complex emergency relief rules implemented through the tax system.

In contrast to many other legal scholars who have examined important administrative law issues regarding informal tax guidance, in …

The Charitable Continuum, Eric Kades

Faculty Publications

There are powerful fairness and efficiency arguments for making charitable donations to soup kitchens 100% deductible. These arguments have no purchase for donations to fund opulent church organs, yet these too are 100% deductible under the current tax code. This stark dichotomy is only the tip of the iceberg. Looking at a wider sampling of charitable gifts reveals a charitable continuum. Based on sliding scales for efficiency, multiple theories of fairness, pluralism, institutional competence and social welfare dictate that charitable deductions should in most cases be fractions between zero and one. Moreover, the Central Limit Theorem strongly suggests that combining …

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 …

Tax Administration And Racial Justice: The Illegal Denial Of Tax Based Pandemic Relief To The Nation's Incarcerated, Leslie Book

Faculty Publications

No abstract provided.

Wage Enslavement: How The Tax System Holds Back Historically Disadvantaged Groups Of Americans, David Gamage, Goldburn P. Maynard Jr.

Faculty Publications

Despite the importance placed on equality of opportunity within United States political culture, the existing tax system inhibits historically disadvantaged groups from building wealth or catching up with historically more privileged groups. This effectively then traps many members of historically disadvantaged groups into a continued cycle of dependence on tax-disfavored wage and salary income, a phenomenon that we metaphorically label as “wage enslavement.” This Article explains this phenomenon and then calls for reform.

Wealth Transfer Tax Planning After The Tax Cuts And Jobs Act, Jeffrey A. Maine, John A. Miller

Faculty Publications

On December 17, 2017, Congress passed the Tax Cuts and Jobs Act (TCJA). Among its many impacts, the TCJA increased the inflation-adjusted estate tax basic exclusion amount to $10,000,000 on a temporary basis. This has dramatic implications for many existing and future estate plans, including a major crossover impact on income tax planning. In this Article, we explain the operation of the federal wealth transfer taxes (the estate tax, the gift tax, and the generation skipping transfer tax) in the wake of the TCJA and dissect the basic tax planning techniques for wealth transmission. The overall design of this Article …

Does Tax Matter? Evidence On Executive Compensation After 162(M)'S Repeal, Andrew Lund, Brian Galle, Gregg D. Polsky

Faculty Publications

No abstract provided.

Difficulty Of Care: Alligning Tax And Health Care Policy For Family Caregiving, Christine S. Speidel

Faculty Publications

In the United States millions of people live with disabilities, many of whom require assistance with activities of daily life to remain in their homes and communities. However, financial support for this assistance is limited. Many caregivers forgo working outside the home in order to provide care to a family member. And while state and federal programs provide some compensation for caregiving, caregivers frequently face problems including poverty, lack of health insurance, lack of Social Security and Medicare credits, and lack of retirement savings. Our nation’s paltry support for caregiving threatens the practical ability of people with disabilities to choose …

Two More Plumbers Look At The Leak: Purchasing An Annuity In An Institutionalized Spouse's Ira That Is Irrevocably Payable To The Community Spouse May Work For Medicaid Purposes But Runs A Risk Of Adverse Tax Treatment, David M. English, Ron M. Landsman

Faculty Publications

A recent article in NAELA ]ournal addressed the problem of how to maximize Medicaid benefits and minimize the tax burden for an institutionalized spouse who has a substantial individual retirement account (IRA) in a state where the account is not exempt. The primary problem is that most strategies require that the IRA be cashed out, triggering income tax liability for the entire withdrawal for that tax year. Once the IRA is cashed out, the proceeds can be spent down in any number of ways; one option is for the community spouse to purchase a Medicaid qualified annuity (MQA). The proposed …

Strategic Nonconformity, State Corporate Income Taxes, And The Tcja: Part Ii, David Gamage, Darien Shanske, Adam Thimmesch

Faculty Publications

States will soon be facing dire revenue needs because of COVID-19. This article is part of Project SAFE (State Action in Fiscal Emergencies), an academic effort to help states weather the fiscal crisis by providing policy recommendations

backed by research.1 As we have explained previously,2 in the absence of sufficient federal action, states should prioritize raising revenue through targeted taxes on economic actors that are best enduring the crisis, rather than cutting services needed to protect their economies or residents suffering more from the crisis. Here we focus on how states could raise revenue by rethinking whether and how to …

Tax Policy And Our Democracy, Clint Wallace

Faculty Publications

No abstract provided.

Tax Practice Gets A Mary Kay Makeover: The Tale Of Peterson And The Danielson Rule, Joy Sabino Mullane

Faculty Publications

No abstract provided.

A Tax On The Clones: The Strange Case Of Bitcoin Cash, Eric D. Chason

Faculty Publications

No abstract provided.

Giving Taxpayer Rights A Seat At The Table, Leslie Book

Faculty Publications

How can Congress’s codification of the Taxpayer Bill of Rights (TBOR) make a meaningful difference in tax administration? This question will likely confront academics, policymakers, and judges in the coming years. In late 2015, Congress codified the rights that the Internal Revenue Service (IRS) administratively adopted in 2014, explicitly requiring that the Commissioner ensure that IRS employees receive training and act in accord with the codified rights. A recent article by Professors Alice Abreu and Richard Greenstein refers to the codification of TBOR as having the power to “transform the tax practice and the relationship between taxpayers and the IRS.” …

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 …

Cryptocurrency Hard Forks And Revenue Ruling 2019-24, Eric D. Chason

Faculty Publications

No abstract provided.

The Futility Of Walls: How Traveling Corporations Threaten State Sovereignty, Darren Rosenblum

Faculty Publications

Inversions—mergers in which one firm merges with another abroad to avoid taxes in its home country—have spread as globalization has reduced many of the transactional costs associated with relocating. As firms acquire the power to choose the laws that govern them, they challenge the sovereignty of nation-states, who find their ability to tax and regulate firms depleted. States and firms compete in a game of cat and mouse to adapt to this new global reality. The subversion of state power by these firms reveals the futility of walls, both literal and regulatory. This Essay describes the phenomenon of these “traveling …

Of Piketty And Perpetuities: Dynastic Wealth In The Twenty-First Century (And Beyond), Eric Kades

Faculty Publications

For the first time since independence, in a nation founded in large part on the rejection of a fixed nobility determined by birth and perpetuated by inheritance, America is paving the way for the creation of dynastic family wealth. Abolition of the Rule Against Perpetuities in over half the states along with sharp reductions in, and likely elimination of, the federal estate tax mean that there soon will be no obstacles to creating large pools of dynastic wealth insuring lavish incomes to heirs for generations without end. The timing of these legal changes could hardly be worse. Marshaling innovative economic …

A Human Capital Theory Of Alimony And Tax, Tessa R. Davis

Faculty Publications

The current taxation of alimony is a broken scheme. Severed from any strong theoretical mooring, it draws lines in the sand between property settlement, child support, and alimony. The lack of coherence between the substance of alimony in family law and the tax concept of alimony (“tax alimony”) could be justified on other policy grounds, however. Yet current law, which allows the payor a deduction under §215 and requires inclusion by the recipient per §71, is difficult to interpret, resulting in frequent litigation and costly noncompliance. In short, the current concept of tax alimony fails to satisfy any of the …

The Natural Property Rights Straitjacket: The Takings Clause, Taxation, And Excessive Rigidity, Eric Kades

Faculty Publications

Natural property rights theories have become the primary lens through which conservative jurists and scholars view the Constitution’s main property rights provision, the Takings Clause. One of their most striking arguments is that progressive income taxation — applying higher tax rates to higher incomes — is an unconstitutional taking of wealthy taxpayers’ property. This has become part and parcel of well-established battle lines between conservative property rights advocates and their liberal counterparts. What has gone unnoticed is that the very same argument deployed against progressive taxation also deems regressive taxation — applying lower tax rates to higher incomes — an …