Tax Law Commons^™

The "Independent" Sector: Fee-For-Service Charity And The Limits Of Autonomy, Lloyd Hitoshi Mayer

Journal Articles

Although numerous scholars have attempted to explain and justify the benefits provided to charities, none has been completely successful. Their theories share, however, two required characteristics for charities. First, charities must be distinct from other types of entities in society, including governmental bodies, businesses, other types of nonprofit organizations, and informal entities such as families. Second, charities must provide some form of public benefit. Given these defining characteristics, the principal role for the laws governing charities is to protect charities from influences that could potentially undermine these traits. This Article is the first to recognize fully the importance of this …

The Unreasonable Case For A Reasonable Compensation Standard In The Public Company Context: Why It Is Unreasonable To Insist On Reasonableness, Stuart G. Lazar

Journal Articles

There is no question that corporate executives are well paid. But does high executive compensation mean excessive or unreasonable compensation? And if so, what is the solution to curbing the problem of excessive executive pay? More specifically, should the Internal Revenue Code be used as a means for regulating the actions of public companies?

This Article briefly explores these issues. In Part I, this Article provides a narrative of the excessive compensation debate. Without drawing a conclusion as to whether executive compensation is reasonably set or excessive in nature, Part I summarizes the history of public outrage surrounding executive pay. …

Cracks In The Cost Structure Of Agency Adoption, Andrea B. Carroll

Journal Articles

No abstract provided.

A Winn For Educational Pluralism, Nicole Stelle Garnett

Journal Articles

This short essay takes as its starting point on the Supreme Court’s recent decision in Winn v. Arizona Christian Tuition Organization, which involved an Establishment Clause challenge to Arizona’s scholarship tax program — a school-choice device that provides tax credits from state income taxes for donations to organizations granting scholarship to private K-12 schools. In Winn, a divided court ruled that taxpayers lack standing to challenge this and other tax credit programs — thereby dramatically limiting the Flast v. Cohen exception to the no-taxpayer-standing rule. The essay makes the case that the Winn will promote authentic educational pluralism by clearing …

Schooling Congress: The Current Landscape Of The Tax Treatment Of Higher Education Expenses And A Framework For Reform, Stuart G. Lazar

Journal Articles

Education may be a cornerstone of our society, but the tax treatment of higher education expenses does not appear to have resulted from an intellectual exercise that would make our nation’s educators’ proud. The Internal Revenue Code provides two separate, but equally unsatisfying, routes that allow taxpayers to offset their income with the costs of higher education. Where an individual can reduce her tax liability while receiving an education, the effect is to reduce significantly the cost of that education.

First, where amounts spent on education qualify as an “ordinary and necessary business expense,” a taxpayer will be entitled to …

Regulating Charities In The Twenty-First Century: An Institutional Choice Analysis, Lloyd Hitoshi Mayer, Brendan M. Wilson

Journal Articles

For more than fifty years scholars, practitioners, and government officials have debated whether the federal government, the state governments, or the charitable sector itself can best ensure that charity leaders fulfill their fiduciary duties. The dramatic growth of this sector, recent highly publicized governance scandals, and a push in Congress and the IRS for more federal involvement in this area have now brought this issue to a head. This article lays a foundation for resolving the dispute by developing an institutional choice framework for considering and comparing the various available options. Applying that framework, the article concludes that the best …

Measure For Measure: The Uneasy Marriage Of Tax Policy And Immigration Reform, Jacqueline Lainez

Journal Articles

The United States has deeply contradictory policies related to undocumented immigrant workers. America’s disparate immigration and tax policies include immigration directives that designate deportation proceedings for any immigrant living in the U.S. without proper authorization. Simultaneously, the government’s enforcement of its tax laws requires undocumented workers to apply for a tax identification number in order to file taxes because, as undocumented immigrants, they do not qualify for a valid Social Security Number. Additionally, undocumented workers do not qualify for Social Security benefits, but they are subject to mandatory Social Security and Medicare payroll tax withholdings on their W-2 wages. This …

Does "Proceeds" Really Mean "Net Profits"? The Supreme Court's Efforts To Diminish The Utility Of The Federal Money Laundering Statute, Jimmy Gurulé

Journal Articles

The Supreme Court’s decision in United States v. Santos is severely hampers the fight against drug traffickers, terrorists, mobsters and white collar criminals. It restricts the scope of the money laundering statute, defining the term “proceeds” in it as net profits, not gross receipts from unlawful activity. This imposes an unreasonable and unwarranted burden on prosecutors to prove net criminal profits, money acquired beyond the defendant’s overhead expenses from unlawful activities. The court’s holding also restricts other provisions of the money laundering statute, such as the concealment theory of money laundering, and it creates confusion over whether the Court’s restrictive …

The Limits Of Administrative Guidance In The Interpretation Of Tax Treaties, Michael S. Kirsch

Journal Articles

This Article addresses the increasingly important role of administrative guidance in interpreting the United States' international treaty obligations. The relationship between administrative guidance and treaties raises important issues at the intersection of international law, constitutional law, and administrative law. These issues are explored in the context of the United States' extensive tax treaty network. Tax treaties play an important role in a global economy, attempting to reconcile the complex and ever-changing internal tax laws of different countries. The Treasury Department is considering the increased use of administrative guidance to interpret the meaning and application of tax treaties, particularly in response …

Bringing Clarity To Title Clearing: Tax Foreclosure And Due Process In The Internet Age, James J. Kelly Jr.

Journal Articles

The foreclosure of property tax liens performs an essential economic function by reconnecting underutilized properties to the real estate market. To clear title in an efficient and just manner, local jurisdictions foreclosing on tax liens require clear, balanced procedures for the provision of notice to affected parties. In its 2006 decision in Jones v. Flowers, the U.S. Supreme Court found that the foreclosing jurisdiction's lack of direct follow-up on returned notice mailings denied the addressee due process because the foreclosing party did not take steps that would be chosen by one desirous of actually informing the property owner. In subjecting …

Taxing Citizens In A Global Economy, Michael S. Kirsch

Journal Articles

This Article addresses a fundamental issue underlying the U.S. tax system in the international context: the use of citizenship as a jurisdictional basis for imposing income tax. As a general matter, the United States is the only economically developed country that taxes its citizens abroad on their foreign income.

Despite this broad general assertion of taxing jurisdiction, Congress allows citizens abroad to exclude a limited amount of their income earned from working outside the United States. Influential lobbying groups, including businesses that employ significant numbers of U.S. citizens abroad, argue that this exclusion is necessary in order to keep American …

Grasping Smoke: Enforcing The Ban On Political Activity By Charities, Lloyd Histoshi Mayer

Journal Articles

The rule that charities are not allowed to intervene in political campaigns has now been in place for over fifty years. Despite uncertainty about the exact reasons for Congress' enactment of it, skepticism by some about its validity for both constitutional and public policy reasons, and continued confusion about its exact parameters, this rule has survived virtually unchanged for all of those years. Yet while overall noncompliance with the income tax laws has drawn significant scholarly attention, few scholars have focused on violations of this prohibition and the IRS' attempts to enforce it.
/="/">
/="/">This Article focuses on the …

The Tax Code As Nationality Law, Michael S. Kirsch

Journal Articles

This article questions the frequently-asserted axiom that Congress's taxing power knows no bounds. It does so in the context of recently-enacted legislation that creates a special definition of citizenship that applies only for tax purposes. Historically, a person was treated as a citizen for tax purposes (and therefore taxed on her worldwide income and estate) if, and only if, she was a citizen under the nationality law. As a result of the new statute, in certain circumstances a person might be treated as a citizen for tax purposes (and therefore taxed on her worldwide income and estate) for years or …

The Congressional Response To Corporate Expatriations: The Tension Between Symbols And Substance In The Taxation Of Multinational Corporations, Michael S. Kirsch

Journal Articles

During the past few years, several high-profile U.S.-based multinational corporations have changed their tax residence from the United States to Bermuda or some other tax haven. They have accomplished these expatriations, and the resulting millions of dollars of annual tax savings, merely by changing the place of incorporation of their corporate parent, without the need to make any substantive changes to their business operations or their U.S.-based management structure. Congress and the media have focused significant attention on this phenomenon. Despite this attention, Congress initially enacted only a non-tax provision targeting corporate expatriations - a purported ban on expatriated companies …

Practicing What We Preach: A Call For Progressive Church Taxes, Matthew J. Barrett

Journal Articles

Many Catholics do not know that canon law allows their bishop to impose taxes on the parishes in his diocese for diocesan needs. Under canon law, these diocesan taxes, sometimes called diocesan assessments, parish assessments, or quotas, must be proportionate to [the parishes'] income. To a tax lawyer, the adjective proportionate describes a so-called flat tax, or a system that imposes the same tax rate on every taxpayer's taxable income. Canon law commentators, however, have consistently agreed that diocesan bishops can use a progressive tax, which in this context would impose a higher tax rate on parishes with larger incomes. …

"Tax Services" As A Trojan Horse In The Auditor Independence Provisions Of Sarbanes-Oxley, Matthew J. Barrett

Journal Articles

This article argues that the failure of the Sarbanes-Oxley Act of 2002 (SOx) to prohibit auditors for public companies from also providing tax services to audit clients or their executives and selling tax shelters to anyone remains a Trojan horse that threatens both the investing public and the auditing profession. Although SOx enacted several reforms designed to enhance auditor independence, the legislation and implementing regulations that the Securities and Exchange Commission (SEC) subsequently promulgated allow an auditor for a publicly traded company to provide tax services to the company as long as the audit committee preapproves the engagement.

As the …

Alternative Sanctions And The Federal Tax Law: Symbols, Shaming, And Social Norm Management As A Substitute For Effective Tax Policy, Michael S. Kirsch

Journal Articles

On several occasions in the past decade, when confronted with taxpayers taking advantage of the Internal Revenue Code in ways that Congress considered objectionable, Congress responded in an unusual way. Rather than merely modifying the Internal Revenue Code to alter the tax consequences of the taxpayer's actions, or imposing traditional civil or criminal penalties on the taxpayer, Congress turned to alternative sanctions. For example, in response to United States citizens who renounce citizenship to avoid taxes, Congress enacted public shaming provisions that require publication of the individuals' names in the Federal Register and modified the federal immigration laws to banish …

The Theological Case For Progressive Taxation As Applied To Diocesan Taxes Or Assessments Under Canon Law In The United States, Matthew J. Barrett

Journal Articles

Canon 1263 of the 1983 Code of Canon Law allows the diocesan bishop to impose taxes on the parishes in his diocese for diocesan needs. Canon 1263 requires that such taxes be proportionate to [the parishes'] income. To a tax lawyer, the adjective proportionate describes a so-called flat tax, or a system that imposes the same tax rate on every taxpayer's taxable income. Canon law commentators, however, have consistently agreed that canon 1263 also authorizes a progressive tax, which in this context would impose a higher tax rate on parishes with larger incomes. This article argues that Catholic social teachings, …

Enron, Accounting, And Lawyers, Matthew J. Barrett

Journal Articles

Enron's collapse painfully illustrates the importance of financial accounting to all lawyers. Accounting is often referred to as "the language of business." Virtually every lawyer represents businesses, their owners, or clients with adverse legal interests, such as creditors and customers. Especially after Enron, lawyers cannot competently represent clients if they do not grasp certain basic principles about accounting. This article lists the top ten accounting lessons that any lawyer could learn from the scandal. These lessons include the components of a complete set of financial statements, the choices inherent in generally accepted accounting principles, the distortions possible in pro forma …

The Use And Misuse Of Antiabuse Rules: Lessons From The Partnership Antiabuse Regulations, Alan Gunn

Journal Articles

Subchapter K of the U.S. Internal Revenue Code was designed to achieve simplicity and flexibility in taxing partners. To limit this flexibility the regulations under subchapter K contain "antiabuse rules", aimed at insuring that subchapter K rules are applied consistently, with the "intent" of those rules in mind and allowing the Commissioner to treat a partnership as an aggregate of its partners in applying any Internal Revenue Code provision. Though antiabuse rules have received harsh criticism for being badly written, they are valuable in many ways. Such rules define abuse as something distinct in principle from substance-over-form and business purpose …

The Definition Of Voting Stock And The Computation Of Voting Power Under Sections 368(C) And 1504(A): Recent Developments And Tax Lore, Stuart G. Lazar

Journal Articles

Although the concepts of "voting stock" and "voting power" are pervasive throughout the Code, until recently, courts, commentators and the Service have devoted minimal energy to demystifying the confusion surrounding the definition of voting stock and even less to expanding upon the methodology of computing voting power. Recent developments, however, may prompt practitioners to take a second look at these terms. While a 1995 decision by the Tax Court adds little to the existing body of authority with respect to the determination of the owner of voting stock, the Service's analysis of the voting power requirement in a 1994 private …

The Market For Deadbeats, Margaret F. Brinig, F. H. Buckley

Journal Articles

This article outlines three explanations for why states seek migrants and tests them by references to 1985-90 interstate migration flows. On race-for-the-top theories, states compete for value-increasing migrants by offering them healthy economies and efficient laws. On vote-seeking theories, states compete for clienteles of voters, with some states seeking to attract and some to deter welfare- or tax-loving migrants. On deadbeat theories, states compete for high human capital debtors by offering them a fresh start from out-of-state creditors. Our findings support vote-seeking and deadbeat theories.

Can A Deficiency Notice To A Non-Filing Taxpayer Shorten The Time To Claim A Refund In The Tax Court?, Matthew J. Barrett

Journal Articles

Each year, about three million people overpay their federal income taxes but don't file returns. Taxpayers usually have three years to claim a refund. When a non-filer waits more than two years before seeking a refund, the IRS often seeks more tax because the taxpayer has not filed. If the taxpayer appeals to the Tax Court to avoid paying the additional tax, the IRS says the refund period is only two years. Now the Supreme Court decides if a deficiency notice can shorten the time to claim a refund in the Tax Court.

Determining An Individual's Federal Income Tax Liability When The Tax Benefit Rule Applies: A Fifty-Year Checkup Brings A New Prescription For Calculating Gross, Adjusted Gross, And Taxable Incomes, Matthew J. Barrett

Journal Articles

The tax benefit rule should be described to indicate that it applies to credits and exclusions besides deductions, and deduction recoveries should be reported in the same location as was affected initially. The recovery should not affect gross income, for the purpose of tax equity. The recovery should rather affect either taxable income or adjusted gross income. The IRS and the courts should adopt this new description and principles.

Can The Government Change Tax Laws Retroactively?, Matthew J. Barrett

Journal Articles

This case presents an issue regarding the constitutionality of retroactive taxes. In December 1987, to correct a drafting oversight, Congress retroactively amended the requirements of a federal estate tax deduction enacted in October 1986. The Ninth Circuit, using a lenient test, invalidated the amendment’s retroactive application to a December 1986 transaction. Now the case is before the Supreme Court whose decision should indicate whether the Court will relax the almost overwhelming barriers to a successful attack on retroactive taxation established by its earlier cases.

Some Observations On The Interpretation Of The Internal Revenue Code, Alan Gunn

Journal Articles

According to the author, a minor problem in partnership taxation provides a useful illustration of the problem of following the language of the Internal Revenue Code slavishly, without regard to context and history, even if a literal reading leads to absurd results.

Double Benefits And Transactional Consistency Under The Tax Benefit Rule, Kenneth F. Joyce, Louis A. Del Cotto

Journal Articles

No abstract provided.

Matching Of Costs And Revenues As A Goal Of Tax Accounting, Alan Gunn

Journal Articles

A central principle in accounting is that accounting methods must “clearly reflect income”. They must match a taxpayer’s revenues with the expenses of producing these revenues to determine their income. The article argues against this principle with an examination of accrual accounting methods. It looks at the role of matching in connection with two fundamental concerns of accrual accounting, the “all events” test and the principle of “clear reflection” of income. Through this examination the article notes that matching is generally irrelevant in principle, since the goal of tax accounting is to produce administratively feasible and economically sensible rules for …

Interest-Free Loans: The Odyssey Of A Misnomer, Kenneth F. Joyce, Louis A. Del Cotto

Journal Articles

No abstract provided.

Is An Interest Deduction For Personal Debt A Tax Expenditure?, Alan Gunn

Journal Articles

In the United States, generally all interest payments are deductible. In Canada, by contrast, only interest that is incurred for a business purpose is deductible. In both countries, however, the deduction for interest paid on debts connected with the acquisition of a personal asset is commonly analyzed and defended as if it were a tax expenditure. Thus, in the United States the "Deductibility of Mortgage Interest on Owner-Occupied Homes" (which constitutes about 60 per cent of all deductions for interest paid) and the "Deductibility of Interest on Consumer Credit" are included in all published tax expenditure lists. In Canada, the …