Tax Law Commons^™

Active Limited Partners Flunk Functional Test, Karen Burke

UF Law Faculty Publications

In 1977, Congress enacted section 1402(a)(13), which exempts limited partners "as such" from self-employment tax on their share of partnership income. A half century later, active investment management professionals have claimed limited partner status to avoid self-employment tax on investment management fees, seemingly standing this anti-abuse rule on its head. While the Treasury twice issued proposed regulations to clarify and modernize the definition of a limited partner, these attempts encountered a firestorm of protest. The Tax Court's controversial Soroban decision rejected claims that state-law limited partners are automatically exempt from self-employment tax, holding that a functional analysis is required to …

Anatomy Of A Shakedown: The Carried Interest Case, Charlene Luke

UF Law Faculty Publications

A review of Edward J. McCaffery & Darryll K. Jones, The Curiouser and Curiouser Case of Carried Interests, 66 Ariz. L. Rev. 357 (2024).

In (Tax) Hindsight: When Should The Tax System Ease Taxpayer Regrets?, Charlene Luke

UF Law Faculty Publications

A brief review of, Emily Cauble, Taxpayers’ Tax Election Regrets, 77 The Tax Law. 77 (2023), that focuses on § 754 elections.

Taxing People, Not Residents, Yariv Brauner

UF Law Faculty Publications

Essentially all states tax their residents’ worldwide income. This norm is difficult to justify beyond vague notions of state provided benefits enjoyed by residents. Recent increased mobility (particularly tax-motivated mobility of wealthy individuals) and the growing importance of remote work and digital nomadism present a serious challenge to this linking of residence and taxing rights. This article examines whether exclusive source taxation of individuals could replace the existing rules which are based on a compromise between residence and source taxation. The article concludes that exclusive source taxation of individuals is both feasible and desirable, mainly due to its fairness and …

Taxing Torts Today And Tomorrow, Steven J. Willis

UF Law Faculty Publications

This article shows how tax law has long subsidized tortfeasors, often to the detriment of victims. Changes in the 1980s reduced the tortfeasor subsidy but did not eliminate it. The article shows how various changes which purported to help victims have, in practical terms, helped tortfeasors.

The article first covers the pre-1985 tax history of making torts profitable. The resulting financial incentives triggered multiple legal changes, which the article outlines prior to covering them in depth. The statutory issues involve Internal Revenue Code sections 104 (allowing victims to exclude personal physical injury payments from income); 130 (purporting to facilitate structured …

Foreword: Moore, Loper Bright, Corner Post, And The Future Of The Federal Tax System, David Hasen

UF Law Faculty Publications

In the 2023 Term, the Supreme Court decided three cases that are likely to have significant implications for the federal tax system. Moore v. United States presages a resuscitated constitutional realization requirement for the income tax—a requirement long thought moribund, if not dead, by most commentators and policymakers. Loper Bright Enterprises v. Raimondo jettisoned the Chevron doctrine’s deferential standard of review of agency rulemaking, returning the standard to some perhaps modified version of its more searching pre-Chevron status. And Corner Post, Inc. v. Board of Governors of the Federal Reserve System held that the statute of limitations for most …

Taxation Of Information And The Data Revolution, Yariv Brauner

UF Law Faculty Publications

Existing and universal income tax rules are inherently incompatible with an economy in which information-based transactions play a significant role. This Article contends that income taxation is incapable of taxing information effectively. It goes on to argue that this incapability currently necessitates reform, and it offers three viable paths to such reform: consumption taxation, data taxes, and formulary taxation. The Article concludes that formulary taxation is currently the most desirable and plausible path to effective reform, owing to its promise to best stabilize and maintain the legitimacy of the international tax regime.

Building Resilience By Removing Barriers: Addressing Structural Impediments To Advocacy By Nonprofit Organizations On Behalf Of The Unenfranchised, Kirsten Widner, Heather Kolinsky

UF Law Faculty Publications

Charitable contributions, particularly from private foundations, are an essential source of support for many nonprofit charitable organizations. However, the ability to accept these contributions comes with significant restrictions on lobbying and advocacy. Using vulnerability theory and an original survey of nonprofit advocacy organizations, we show that current restrictions on 501(c)(3) organizations disproportionally limit advocacy on behalf of the most politically disadvantaged groups—those without the right to vote. This, in turn, reinforces existing inequalities in whose voices are heard and whose interests are considered by policymakers. This Article argues that reforming the laws that structure what organizations can take tax-deductible charitable …

How Abusive Was Tribune Media's Disguised Sale?, Karen C. Burke

UF Law Faculty Publications

In this article the proper application of the general antiabuse rule in Tribune Media is addressed.

A Roadmap To Nil And Taxation, Doron Narotzki, Yariv Brauner

UF Law Faculty Publications

The landscape of college sports has dramatically changed in recent years. What was once considered a place for amateur athletes pursuing education now partially mirrors, at least for some student-athletes, the structure and financial dynamics of professional leagues such as the NFL, NBA, and MLB. However, the collegiate sports ecosystem still remains distinct, shaped by unique regulatory frameworks governed by the NCAA. This article reviews and analyses the implications of these changes, and focuses on the tax considerations surrounding Name, Image, and Likeness (NIL) rights and how the evolving nature of college sports also presents certain tax implications, some of …

The Elusive Reform Of International Tax Dispute Settlement, Yariv Brauner

UF Law Faculty Publications

This short article examines the consequences of a lack of an effective international tax dispute resolution regime. The bilateral treaties based, and OECD-dominated international tax regime is at crossroads as the illegitimacy of the OECD and the anachronism of some of the norms of the regime are being exposed and challenged, especially by developing states and the UN. The weak dispute settlement procedure in tax treaties (mutual agreement procedure) has proven to be ineffective, further contributing to the destabilization of the regime. The article argues that a stronger, multilateral and more legalized regime such as mandatory tax treaty arbitration is …

Salt Substitutes And Other Workarounds, Karen Burke

UF Law Faculty Publications

In response to the Tax Cuts and Jobs Act of 2017, many states have enacted elective entity-level passthrough taxes that allow business owners to circumvent the individual cap on deductibility of state and local taxes (SALT), reducing federal tax revenue at no cost to the states. Entity-level workarounds purport to shift state income tax liability from the owners' personal tax returns to the entity's tax return. The passthrough entity claims an uncapped ordinary business deduction for state income taxes, reducing the owners' adjusted gross income for federal tax purposes; state income tax credits roughly equal to the entity-level tax reduce …

Business-Entity Charitable Workarounds, Karen Burke

UF Law Faculty Publications

In 2017 Congress enacted a controversial $10,000 cap on individual deductions for state and local taxes. States initially responded by enacting charitable workarounds which invited individual taxpayers to convert capped § 164 deductions for state income taxes into uncapped § 170 deductions for contributions to charitable organizations in exchange for state income tax credits that reduced or eliminated state tax liability. Final regulations under § 170 shut down the tax shelter by treating state tax credits received in exchange for charitable payments as a quid pro quo, reducing or eliminating any charitable deduction. In 2020, acceding to pressure from business …

Background And Implications Of China's Central Bank Digital Currency: E-Cny, Jiaying Jiang, Karman Lucero

UF Law Faculty Publications

The People’s Republic of China is a leading experimenter in central bank digital currencies (CBDCs). This Article explores the current background, deployment, features, potential impacts, challenges, and legal concerns of China’s CBDC: the electronic yuan, or E-CNY. This Article explains the potential significance of what is known and not known about E-CNY with a particular focus on how E-CNY might fit into existing legal and economic systems, both within China and internationally. On the surface, E-CNY looks transformative. When you dig a little deeper, however, most of the potential changes or transformations turn on broader institutional, political, and legal changes …

Do Gilti + Beat + Bmt = Globe?, Mindy Herzfeld

UF Law Faculty Publications

The enactment by the United States in August 2022 of a minimum tax on the global book earnings of large corporations (the book minimum tax, or BMT) raises the question of how the US minimum taxes – including the global intangible low-taxed income (GILTI), the base erosion and anti-abuse tax (the BEAT) and the BMT – interact with the global minimum tax, or GloBE, agreed to by over 135 countries under an OECD framework. Particularly important are questions regarding the hierarchy in application of different regimes. In the context of multiple agreements for global minimum taxes, how to determine who …

How To Think About How The Us Congress Thinks About International Tax Reforms, Mindy Herzfeld

UF Law Faculty Publications

The US Treasury has negotiated a multilateral tax deal under the framework of the OECD that includes Pillar 1, a plan to reallocate global profits of multinationals to market jurisdictions, and Pillar 2, a proposal for a global minimum tax. Global adoption of Pillar 1 directly hinges on US legislative action, and wide take-up of Pillar 2 may also depend on US modification of existing laws to conform to the OECD agreement. But while widespread implementation of the OECD agreement depends on US legislative action, uncertainty remains as to whether a deal negotiated by the Biden administration will be accepted …

Thinking Like A Source State In A Digital Economy, Yariv Brauner

UF Law Faculty Publications

This Article proceeds as follows: Part I reviews the traditional U.S. international tax policy, followed by Part II that highlights the impact of the Tax Cuts and Jobs Creation Act of 2017 on such policy. Part III provides context to the proposals made by this Article with a discussion of the international discourse over the challenges that the digital economy presents to the international tax regime, while Part IV exposes and explains the role of the United States in this discourse. Finally, the Article concludes with modest proposals for U.S. action in response to the challenges presented by digital economy …

Debt And Taxes, David Hasen

UF Law Faculty Publications

The federal income tax conceptualizes the standard loan transaction as an exchange of cash for promises to pay interest and to repay the amount borrowed by the term. This formulation is subtly wrong in ways that have led to a weaker foundation for existing tax rules than they merit. Conceptualizing loans instead as closely akin to leases places most of the tax rules for debt on sounder footing because it clarifies that the consideration paid for the use of the loan proceeds is interest. If interest is the cost of the use of money, then simple borrowing is a fully-paid-for …

Taxing Book Profits: New Proposals And 40 Years Of Critiques, Mindy Herzfeld

UF Law Faculty Publications

This paper considers recent domestic and international proposals to use financial statement earnings as the basis for imposing additional or minimum taxes on corporate income and to reallocate corporate profits among jurisdictions. It reviews prior research undertaken in the context of previous proposals to partially substitute financial accounts for taxable income and considers how valid critiques of prior proposals are with respect to current initiatives. It concludes by noting that the concerns raised about earlier proposals have neither been fully considered nor addressed in the recent initiatives.

Sustainable Tax Policy Through The Lens Of Intergenerational Justice, Neil H. Buchanan

UF Law Faculty Publications

As the papers in this issue demonstrate, the tax system, both domestically and internationally, can be used to help undo generations of damage to all aspects of society, allowing our children and grandchildren to inherit a society that is more just and prosperous than what we are living with today. This is what sustainable policy design requires.

The Spurious Allure Of Pass-Through Parity, Karen C. Burke

UF Law Faculty Publications

In 2017, Congress reduced tax rates on both corporate and noncorporate income. The drafters invoked the concept of pass-through parity to justify lower rates on noncorporate business income, resulting in a new and highly controversial deduction for pass-through owners under § 199A. The concept of pass-through parity conflates equitable treatment of different entity forms with equitable distribution of the ultimate tax burden among labor and capital. The flawed rationale for § 199A may be viewed as an attempt to preserve the pre-2017 preference for pass-through income; conceptually, the advantage of lower corporate rates is limited to the availability of a …

Continuity As The Key To Reform Of Section 355, Charlene Luke

UF Law Faculty Publications

There can be little doubt that Internal Revenue Code (Code) section 355 is overly complex; the piecemeal adjustments spanning multiple decades could serve as exemplars of the potential pitfalls of incremental reform. Revisions to section 355 have tended to be under- or over-inclusive because they are reactive to particular deals, yet they leave largely intact older structures that dealt with different deals. The result is a jumble of provisions that fail to implement a coherent, principled approach to the tax treatment of corporate divisions. In Reform of Section 355, Bret Wells urges changing Code section 355 to focus on the …

Can Gilti + Beat = Globe?, Mindy Herzfeld

UF Law Faculty Publications

The OECD is moving forward with consideration of a minimum tax as part of its solution to taxation of the digital economy. Part of a template for such a minimum tax may be the version enacted by the United States (US) in 2017 as an expansion of its Controlled Foreign Corporation (CFC) regime, known as Global Intangible Low Taxed Income (GILTI). But the OECD version will undoubtedly be different from the US iteration. It’s likely that it would also include some aspects of a minimum tax being proposed by other OECD members such as Germany and France, namely a tax …

Book Review: International Tax Policy: Between Competition And Cooperation, Yariv Brauner

UF Law Faculty Publications

The author reviews International Tax Policy: Between Competition and Cooperation. By Tsilly Dagan. Cambridge Tax Law Series, 2018.

Why Examples? Towards More Behaviorally-Intelligent Regulation, Yariv Brauner

UF Law Faculty Publications

Tax regulation authors habitually infuse regulations with explanatory examples. These examples are viewed favorably by both the government that encourages their drafting and the taxpayers who regularly rely on such examples to assist them in dealing with the notoriously complex tax rules. Despite the ubiquity of these examples, there is no published guidance for their drafting, their use, or their interpretation. The first original contribution of this article is the exposition and classification of the advantages and deficiencies in the current use of examples in tax regulations. This article is the first to question the rationale behind the ubiquitous use …

2018 Erwin N. Griswold Lecture Before The American College Of Tax Counsel: Tax Policy Elegy, Martin J. Mcmahon Jr.

UF Law Faculty Publications

For over four decades there have been unrelenting calls to make the tax code “fair, simple, and efficient.” But despite nine major tax acts between 1969 and 2003, along with many less extensive tax acts, the refrain for a “fair, simple, and efficient” tax code has continued to be heard. This continuing plea is not surprising, because over the decades the tax system has evolved to ask the highest income earners to pay less in taxes, become ever more complex, and eschewed “efficiency” in favor of the allowance of an ever-increasing number of tax preferences. Tax act after tax act …

Recent Developments In Federal Income Taxation: The Year 2016, Martin J. Mcmahon Jr., Bruce A. Mcgovern

UF Law Faculty Publications

This recent developments outline discusses, and provides context to understand the significance of, the most important judicial decisions and administrative rulings and regulations promulgated by the Internal Revenue Service and Treasury Department during the most recent twelve months—and sometimes a little farther back in time if we find the item particularly humorous or outrageous. Most Treasury Regulations, however, are so complex that they cannot be discussed in detail, and, anyway, only a devout masochist would read them all the way through; just the basic topic and fundamental principles are highlighted—unless one of us decides to go nuts and spend several …

Codifying Castle Harbour, Karen C. Burke, Grayson M.P. Mccouch

UF Law Faculty Publications

In this article, Burke and McCouch discuss the 2015 statutory amendment, enacted as part of the last-minute budget deal, that revised and renumbered the family partnership provision of section 704(e)(1). They question whether the change will accomplish its stated purposes of clarifying existing law and raising $1.9 billion in revenue, and they conclude that the 2014 proposals by former House Ways and Means Committee Chair Dave Camp offer a politically expedient source of selective pay-fors for future government spending without actually raising taxes.

Treaties In The Aftermath Of Beps, Yariv Brauner

UF Law Faculty Publications

The article argues that, despite the fanfare around it, the outcome of the BEPS project is unlikely to be dramatic, at least in the short term. Beyond a period of increased legal uncertainty and aggressive enforcement by some countries, it expects little substantive change in tax treaties. The challenges to the dominance of the OECD and the richest countries would likely be assuaged with marginal concessions, most or all of which not be affecting tax treaties. Yet, the article sees a silver lining in the non-substantive, structural, and instrumental outcomes of the BEPS project. It argues that even if unintended, …

Unilateral Responses To Tax Treaty Abuse: A Functional Approach, Omri Y. Marian

UF Law Faculty Publications

Recent years have seen a dramatic increase in the attention given to abusive tax schemes that take advantage of bilateral tax treaties. The ensuing discourse tends to view potential responses to treaty abuses as a hierarchical set of options, gradually escalating, in which treaty termination is a last resort option. This article argues that the hierarchical view of unilateral responses to treaty abuse is misguided. Unilateral responses to treaty-based abuse are not hierarchically ordered. Rather, the approach to treaty abuse is (and should be) functional, adopting specific types of unilateral responses based on the type of treaty abuse at issue. …