Tax Law Commons^™

Intergenerational Equity In Fiscal Policy Reform, Michael Doran

Georgetown Law Faculty Publications and Other Works

This article argues that the idea of evaluating government fiscal policy along the dimension of intergenerational equity is largely misguided. In sharp contrast to the intragenerational distribution of wealth--where government policy plays an active and commanding role in transferring resources between and among different groups--the intergenerational distribution of wealth is determined mainly by decisions of private actors that fall outside government policy and that may blunt or even reverse the distributional effects of government policy. Unless a far greater share of intergenerational transfers is brought within the scope of government fiscal policy through such unlikely measures as the confiscatory taxation …

A Republic Of The Mind: Cognitive Biases, Fiscal Federalism, And Section 164 Of The Tax Code, Brian Galle

Georgetown Law Faculty Publications and Other Works

In its efforts to guide money to the states, our federal government annually passes up more than $75 billion in potential revenue under a single provision of the Tax Code. That provision, section 164 of the Code, allows itemizing taxpayers to deduct the cost of the state and local income, property, and (to a limited extent) sales taxes they paid during the tax year. The eye-popping size of that number makes section 164 a perennial issue in tax policy circles, and as one of the deductions omitted from the Alternative Minimum Tax's (AMT) parallel tax universe, the section is also …

Designing Interstate Institutions: The Example Of The Streamlined Sales And Use Tax Agreement, Brian Galle

Georgetown Law Faculty Publications and Other Works

This Article presents a case study in designing cooperative interstate institutions. It takes as its subject the Streamlined Sales and Use Tax Agreement ("SSUTA"), a recently-developed compact among the States now awaiting congressional ratification. The SSUTA's primary goal is to bring uniformity to the field of state and local sales taxation, a regime in which multi-jurisdictional sellers now confront thousands of different sets of rules. I predict here that the SSUTA as currently designed is unlikely to accomplish that goal, and attempt to suggest possible amendments that could improve its expected performance. From these efforts I extract larger lessons about …

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

Georgetown Law Faculty Publications and Other Works

Executive pay is currently a topic of significant interest for policymakers, academics, and the popular press. On August 14, 2006, 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 shareholders. 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 overhauled. These rules are flawed because they often create a significant incentive for companies and …

Legislative Compromise And Tax Transition Policy, Michael Doran

Georgetown Law Faculty Publications and Other Works

The extensive literature on legal transitions has formed a general position in favor of establishing a governmental transition policy; the primary debate concerns whether the policy should be one of systematically mitigating or not mitigating transition losses. Arguments on both sides generally have assumed a sharp dichotomy between a substantive legal change and the transition treatment associated with the substantive change. Focusing on federal tax legislation, this article challenges that assumption and the normative conclusions that it supports.

Specifically, this article identifies compromise as an important component of the tax legislative process and argues that the ability to provide or …

Implementing A Progressive Consumption Tax: Advantages Of Adopting The Vat Credit-Method System, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

A credit–method value–added tax, a payroll tax, and a business–level wage subsidy can approximate the economic and distributional consequences of a subtraction–method X–tax. Such a credit–method progressive consumption tax has administrative advantages as compared to a subtraction–method progressive consumption tax, once certain political factors are taken into account. Further, unlike a subtraction–method system, a credit– method progressive consumption tax could easily interact with other tax systems around the world and comply with World Trade Organization rules without sacrifi cing best practice VAT design features that allow for effective enforcement.

Interpretative Theory And Tax Shelter Regulation, Brian Galle

Georgetown Law Faculty Publications and Other Works

This Article responds to an important recent essay in the Columbia Law Review by Marvin Chirelstein and Larry Zelenak. Chirelstein and Zelenak propose a dramatic change in tactics in the way that the government attempts to combat tax shelters - that is, efforts by corporations and high-earning individuals to avoid tax by clever manipulations of the technical terms of the Tax Code. For the past seventy years or so, the IRS has responded to these manipulations by urging courts to read the tax statutes purposively, rather than literally, and thus to deny favorable tax treatment to business transactions entered into …

Misassigning Income: The Supreme Court And Attorneys' Fees, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

This past term's Supreme Court decision in Commissioner v. Banks and Commissioner v. Banaitis distorts foundational principles, known as assignment of income law, which help identify the person who must report income for federal tax purposes. The Court holds that assignment of income principles require a plaintiff to report as income the portion of a recovery paid to the plaintiffs attorney as a contingent fee. As a result, the plaintiff is taxed at excessively high rates, which may in some cases equal or exceed a confiscatory 100%. Taxing the plaintiff on the attorney-fee portion of a recovery also undermines the …

Executive Compensation Reform And The Limits Of Tax Policy, Michael Doran

Georgetown Law Faculty Publications and Other Works

The American Jobs Creation Act of 2004 includes a major attempt to reform the tax rules for deferred compensation arrangements covering corporate managers. This paper examines the tax policy and corporate-governance policy objectives of the reform effort, explores the shortcomings of the legislation, and outlines a different approach for future executive compensation reform.

Even Before Enron: Banking Regulators, The Income Tax, The S&L Crisis, And Deceptive Accounting At The Supreme Court, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

Years before the ENRON debacle, the Supreme Court heard a pair of cases involving dishonest financial accounting, Frank Lyon Co. v. U.S. and Cottage Savings Ass'n. v. Commissioner. In both cases, federal bank regulators had encouraged deceptive financial accounting, and the deceptive accounting became the basis for taxpayer claims. The Supreme Court, however, did not comment in either opinion on the deceptive character of the financial accounting that gave rise to tax litigation.

Demystifying Disclosure: First Steps, Ronald A. Pearlman

Georgetown Law Faculty Publications and Other Works

I have chosen to discuss tax shelter disclosure for two reasons. First, I think much of the tax shelter problem is attributable to the historic lack of effective tax enforcement. Second, unlike Weisbach, I think enhanced disclosure - that is, some level of disclosure over and above that required by current law and administrative practice would contribute to improved enforcement and increase voluntary compliance. After some preliminary comments, I discuss three functions of a mandatory tax return disclosure regime. I then address some important implementation issues. I identify potentially relevant tax compliance literature, although my review of the literature has …

Hester Prynne, Lydia Bennet, And Section 306 Stock: The Concept Of Tainting In The American Novel, The British Novel, And The Internal Revenue Code, Stephen B. Cohen, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

Did Nathaniel Hawthorne's novel, The Scarlet Letter, inspire Section 306 of the Internal Revenue Code? This code provision adopts a peculiarly Hawthorne-like solution to a tax avoidance scheme known as the "preferred stock bailout." Section 306 taints the stock used in the scheme as "Section 306 stock." Special rules then govern all subsequent dispositions of the tainted stock. With its concept of a taint that can dog a stock from acquisition to disposition, Section 306 might have been designed by a novelist rather than a tax technician.

The Tax Of Physics, The Physics Of Tax, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

Sometimes ideas from science illuminate muddled legal thinking. Physics teaches that, for every particle of matter, there exists a corresponding particle of anti-matter. A particle of matter and its corresponding particle of anti-matter are identical except that they have opposite electrical charges. A proton's charge is positive, an anti-proton's negative. When matter and anti-matter meet, they produce the most powerful explosion in nature, totally annihilating each other.

With these laws of physics in mind, consider that a donor can make a gift in one of two ways: either by assuming a debt or by transferring as asset. In an instance …

Tax Metamorphosis, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

My favorite course ever, fourth-year high school Latin, was also the most demanding. We translated all twelve books of Virgils epic poem, The _Eneid, line by dactylic hexameter line, and large chunks of Ovids Metamorphoses besides. The course was valuable in many ways, not least of which was that only my youthful reading of Ovid's Metamorphoses later enabled me to make sense of the U.S. Tax Court's otherwise inscrutable decision in Edwards v. Commissioner.

Apportioning Basis: Partial Sales, Bargain Sales And The Realization Principle, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

The Internal Revenue Code generally taxes appreciation in the value of property only on realization, defined to mean when property is sold or exchanged. In measuring gain on a sale or exchange, an allowance must be made for the return of capital, referred to as basis. Basis offsets the amount realized-that is, the price received for property-in order to calculate taxable gain.

Health Policy Below The Waterline: Medical Care And The Charitable Exemption, Maxwell Gregg Bloche

Georgetown Law Faculty Publications and Other Works

For almost one hundred years, America's nonprofit hospitals have enjoyed nearly automatic exemption from federal income taxation. During this time, nonprofit hospitals transformed themselves from resting places of last resort for the sick poor into centers of high-technology intervention for all income groups. The financing of their services evolved in parallel, from primary dependence on the generosity of religious orders and charitable donors, to almost exclusive reliance on payments for services rendered. Meanwhile, the exemption's doctrinal underpinnings were repeatedly reinvented to accommodate change in the hospital industry's financial structure and social role. When Congress first enacted a charitable exemption to …

Thurgood Marshall: Tax Lawyer, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

During his twenty-four years on the Supreme Court, Justice Thurgood Marshall wrote better opinions on the law of federal income taxation than any of his fellow Justices. This is, of course, a subjective appraisal which others may dispute. Nevertheless, from two decades of teaching federal income taxation, I am convinced of the quality of Marshall's work.

Child Care, Work, And The Federal Income Tax, Brian Wolfman

Georgetown Law Faculty Publications and Other Works

This article explores the federal income tax treatment of employment-related child care expenses. It takes both a theoretical and historical approach, examining the various ways in which the Code has dealt with child care in relation to conventional tax notions and values at play in the community at large.

Part II outlines the history of the Code's various childcare provisions. It is a critical analysis whose purpose is to decide whether any of the provisions, which have existed, can be explained by a particular tax theory.

Part III asks whether employment-related childcare expenses can be characterized as "business" or "personal" …

Reconciling Business Purpose With Bail-Out Prevention: Federal Tax Policy And Corporate Divisions, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

Corporate divisions-spin-offs, split-offs, and split-ups-unfortunately pose a more complex problem than Senator Humphrey's childlike vision would lead one to believe: the reconciliation of competing goals of maximizing business flexibility and minimizing tax avoidance. It is widely believed that divisions are essential to business planning; thus, tax-free treatment promotes business flexibility. Yet, an untaxed division may allow tax avoidance through "bail-out" of corporate earnings and profits at capital gain rates.

Taxing Stock Dividends And Economic Theory, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

Since 1936, the Internal Revenue Code has treated elective stock dividends on common stock, which are taxed on receipt as shareholder ordinary income gain, differently from pro rata stock dividends on common, which are received tax-free. This difference in treatment was reenacted in Section 305 of the 1954 Code; and while the Tax Reform Act of 1969 changed many details of stock dividend taxation, the basic distinction between elective and pro rata stock dividends was, if anything, reinforced. The major purpose of the 1969 amendments to Section 305 was to impose a shareholder ordinary income tax on transactions with the …

The Suitability Rule And Economic Theory, Stephen B. Cohen

Georgetown Law Faculty Publications and Other Works

The published rules of both the National Association of Securities Dealers (NASD) and the Securities and Exchange Commission (SEC) provide that a broker or dealer in the securities market may recommend the purchase of a security only when there is a reasonable basis for believing that the security is "suitable" for the customer.