Tax Law Commons^™

The Indirect Taxes, Conor Clarke, Ari Glogower

Scholarship@WashULaw

Article I of the Constitution empowers Congress to “lay and collect Taxes, Duties, Imposts and Excises.” It is arguably Congress’s most important power. A government’s first task is to fund itself, and the absence of an enforceable funding mechanism under the Articles of Confederation was a primary reason for the Constitution in the first place. Yet scholarly and judicial attention has focused mostly on the term “taxes” (and specifically what constitutes a “direct tax” that must be apportioned) while largely overlooking the three terms that follow—the duties, imposts, and excises that are collectively known as the “indirect taxes.” 

While poorly …

Comments On Reg-119882-25, Application Of The Personal Responsibility And Work Opportunity Reconciliation Act Of 1996 To The Refunded Portion Of Certain Federal Refundable Tax Credits, 91 Fed. Reg. 53,812 (Aug. 20, 2026); Irs Docket No. Irs- 2026-1057, Islame Hosny, Addison H. Brown, Andrew E. Hoppe, Nafisa Jeb, Parker W. Kinney, Shane M. Rice, Audrey Hager, Anna Russell, Cornell Law School Low-Income Taxpayer Clinic

Cornell Law School J.D. Student Research Papers

On October 5, 2026, the Cornell Law School Low-Income Taxpayer Clinic submitted this comment letter on proposed Treasury and IRS regulations (REG-119882-25, 91 Fed. Reg. 53,812). The regulations would apply the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) to the refunded portions of the adoption tax credit, child tax credit, American opportunity tax credit, and earned income tax credit. The letter argues that Treasury has not adequately reconciled PRWORA's "qualified alien" test with the Code's residency and Social Security number rules. It also argues that Treasury has not justified treating the adoption credit as a federal public …

Tax Exceptionalism After Loper Bright, Conor Clarke, Noah Hertz Marks

Faculty Publications

In this article, the authors consider what Loper Bright means for the relevance of Mayo Foundation and National Muffler as well as its broader implications for agency-specific deference, and they examine older case law that can be helpful post-Loper Bright.

Analysis Of The Impacts Of Propositions 41 And 42 On California Public Finance, David Gamage, Brian D. Galle, Darien Shanske

Faculty Publications

This memorandum discusses the possible collateral damage that Propositions 41 and 42 (on the ballot in California on November 3, 2026) might cause.  The two propositions were concocted very quickly by billionaires in order to trick voters that will vote for Proposition 40 (the billionaire tax) also to vote for these propositions that are designed to undermine the billionaire tax.

The basic trick is that these propositions have plausible seeming veneers but hide a poison pill that aims to frustrate the functioning of the billionaire tax.  The veneers are “plausible seeming” because they address problems that are not problems.  For …

Periodic Adjustments — The Dialogue Continues, Reuven S. Avi-Yonah, Jeffery M. Kadet

Articles

Michael McDonald has continued an important dialogue that requires more attention from both taxpayers and the government. In reply to our recent article, McDonald has expressed his disagreement with a number of issues that each of us has adequately covered. We'll just have to agree to disagree on those matters, some of which will eventually play out in the courts. In this article, we will cover a few issues that McDonald has raised that we believe will be useful to this ongoing dialogue.

Can A Corporate Wealth Tax Happen?, Reuven S. Avi-Yonah

Articles

Economists Emmanuel Saez and Gabriel Zucman. They argued that a wealth tax would be a key policy tool to reduce wealth inequality and effectively tax the rich, could raise significant revenue, and could be enforced effectively. Other academics, like Wojciech Kopczuk, Natasha Sarin, Jeffrey Pennell, and Robin Morgan are more skeptical. In the legal literature, there has been an extensive discussion over whether a wealth tax can be constitutional. In Moore, the majority There have been numerous proposals recently to institute a wealth tax in the United States, either in addition to existing taxes or in lieu of some of …

Coca-Cola Redux: The Problematic Absence Of Comparables, Reuven S. Avi-Yonah

Articles

On June 25 a three-judge panel of the Eleventh Circuit Court of Appeals heard oral arguments in Coca-Cola v. Commissioner. It is very hard to predict outcomes from oral arguments, but two of the judges asked questions that suggested they were open to accepting the taxpayer’s “bait and switch” argument. They also seemed receptive to the treaty argument. Interestingly, there was less focus on the taxpayer’s marketing intangibles argument, which I regard as the better one.

Data Centers As Engines Of Corporate Tax Base Restructuring, Reuven S. Avi-Yonah, Domenico Imparato, Karen Sam

Articles

Globalization has eroded the corporate income tax by undermining both source-and residence-based taxation. Before the 1980s, large capital-exporting countries could impose relatively high tax rates on multinationals and extend taxation to low-taxed foreign income earned through controlled foreign corporations, as exemplified by the U.S. adoption of subpart F in the Revenue Act of 1962. That regime supported corporate tax revenues that reached roughly 25 percent of total U.S. receipts in the mid-20th century.

Globalization changed that equilibrium. Multinational corporations gained the ability to arbitrage national tax systems by relocating and reporting profits in low-tax jurisdictions. Active income largely escaped source …

Implicit Support And The Arm’S-Length Standard, Reuven S. Avi-Yonah

Articles

The ongoing U.S. Tax Court litigation Eaton Corp. v. Commissioner raises significant questions regarding the application of the arm’s-length standard to intra group financing. Eaton concerns interest deductions claimed by Eaton US, the U.S. subsidiary of Eaton PLC, on intercompany loans from Eaton Rest of World (Eaton RoW), a foreign affiliate owned by Eaton PLC, and deductions for fees paid to Eaton RoW by Eaton US for guaranteeing Eaton US’s third-party debt. The IRS disallowed approximately $296 million in interest deductions and $237 million of guarantee fee deductions.

The principal issue is whether the arm’s-length standard requires consideration of implicit …

Taxing Ai In The Wake Of The Emergence Of Agentic Ai, Reuven S. Avi-Yonah, Herbert Snitz

Articles

This article addresses taxation measures to regulate AI agents (i.e., AI that is not fully under the control of humans, including both ANI and AGI). In each case, the focus is on what the agent’s capabilities would be, not on how it becomes capable of successfully performing its tasks (though the latter would likely be relevant to important philosophical questions, e.g., might robots achieve sentience or consciousness, and if so, would they have rights?). Regarding mirroring what we human beings can do, the hallmark of AGI is that it will not be task-specific (like ANI), but will possess broad capabilities, …

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 …

Periodic Adjustments — Treaties And Other Issues, Reuven S. Avi-Yonah, Jeffery M. Kadet

Articles

In his May article, Michael McDonald, a former managing director at Ernst & Young and current adjunct professor at the University of Virginia School of Law, criticized the IRS’s recently announced method for applying the commensurate with income (CWI) requirement that addresses the widespread underpricing of intangibles.1 His analysis questioned the IRS’s interpretation of section 482. McDonald argues that, until 2025, Treasury and the IRS applied CWI in a manner consistent with the arm’s-length principle despite congressional misgivings about the arm’s-length principle that were not only expressed in the legislative history of the Tax Reform Act of 1986 but were …

Taxation And Birthright Citizenship, Reuven S. Avi-Yonah

Articles

Under the 14th Amendment, individuals who are born in the United States are U.S. citizens and citizens of the state where they reside if they are “subject to the jurisdiction” of the United States. The debate surrounding birthright citizenship focuses on the meaning of jurisdiction in this context. The majority view is that it just means territoriality jurisdiction, so that anyone born within the United States is automatically a citizen regardless of the immigration status of their parents. The minority view is that jurisdiction is related to political allegiance (nationality jurisdiction), which is why children born to diplomats, members of …

Algorithmic Tax Ownership, Young Ran (Christine) Kim, Dmitry Erokhin

Articles

Tax ownership is a crucial concept for determining tax liabilities, compliance, and enforcement. However, neither the courts nor the IRS has provided clear guidance on how to analyze it. Since the Supreme Court first outlined a twenty-six-factor test for determining tax ownership in Frank Lyon Co. v. United States in 1978, this multifactor test has remained largely unchanged, and there has been no further guidance from the courts or the IRS to this day. Even tests with shorter lists of factors only add to the confusion regarding compliance and enforcement, as there is no clarity on which factors are most …

Evolving Networks: Information Exchanges Reshaping Of Global Finance, Andrew P. Morriss, Charlotte Ku

Faculty Scholarship

This article challenges the characterization of international financial centers (IFCs), often called "tax havens," as enablers of tax evasion and money laundering. Drawing on an extensive analysis of tax treaties, regulatory statutes, and historical literature, we explore the evolution of the global information exchange network, its impact on integrating IFCs into the global financial system, and the resulting curtailment of their use for illicit purposes. The expansion of treaties, from Mutual Legal Assistance Treaties (MLATs) to Tax Information Exchange Agreements (TIEAs) and multilateral frameworks like the OECD's Common Reporting Standard (CRS), has significantly limited the potential for secrecy-driven financial activities …

National Report Of United States (2025), Christine Speidel

Research Reports & White Papers

The Observatory on the Protection of Taxpayers’ Rights (OPTR) identifies principles, minimum standards and best practices for the effective protection of taxpayers’ rights. It allows for the permanent monitoring of global compliance with such minimum standards and their amendment and development in different regions of the world.

Nevada Health And Bioscience Asset Corporation V. State Of Nevada Ex Rel. Department Of Taxation And Nevada Tax Commission, 142 Nev. Adv. Op. (May 28, 2026), Collin Faught

Nevada Supreme Court Summaries

The court held that contracting with a government entity does not prevent an otherwise qualifying charitable organization from receiving a sales and use tax exemption.

Liberty Global And The Revival Of Economic Substance, Reuven S. Avi-Yonah

Articles

On April 21 the Tenth Circuit issued its long-awaited opinion in Liberty Global. By a 2-1 majority, the panel upheld the decision of the district court that a tax shelter used by Liberty Global had to be disregarded under the economic substance doctrine (ESD). This decision is the third victory of the government in ESD cases, following Patel and Otay. But it is the most significant because it strikes a decisive blow against tax shelters built on a literal application of the statutory text but ignore Congress’s purpose in enacting that text. Patel established that the ESD can be relevant …

A Gdpr-Compliant Fatca Structure?, Michael Hatfield

Articles

A 2025 Belgian Data Protection Authority (DPA) decision and ensuing preliminary questions referred by the Belgian Market Court to the Court of Justice of the European Union (CJEU) highlights the tension between the General Data Protection Regulation (GDPR) and the US Foreign Account Tax Compliance Act (FATCA) structure in Europe. The FATCA structure relies on intergovernmental agreements (FATCA IGAs) between the US and EU Member States. Under these agreements, Member State tax authorities transfer personal data of their citizens and residents to the US Internal Revenue Service (IRS). It may be determined that these transfers violate some or all of …

Tiger Global And Treaty Interpretation, Reuven S. Avi-Yonah, Poonam K. Sidhu

Articles

The Indian Supreme Court’s Tiger Global decision has prompted extensive commentary, which has been generally critical. In particular, critics have noted that the decision marks a retreat from the permissive attitude toward treaty shopping adopted by the Indian Supreme Court in 2004. And critics have argued that the decision creates uncertainty because it applies the Indian general anti avoidance rule to an existing treaty in a fashion that amounts to a treaty override. Similar arguments were made against India’s application of the primary purpose test (PPT) to the Mauritius treaty. In our opinion, these critiques are exaggerated.

Can The Corporate Tax Be Delegated?, Reuven S. Avi-Yonah

Articles

In Learning Resources Inc., the Supreme Court held by a 6-3 majority that President Trump lacked the authority under the International Emergency Economic Powers Act (IEEPA) to impose tariffs. The main rationale was that tariffs are taxes and that IEEPA only authorized the president to “regulate” imports, not to tax them. In his majority opinion, Chief Justice John Roberts wrote: But the facial breadth of “regulate” places in stark relief what the term is not usually thought to include: taxation. The U.S.

Code is replete with statutes granting the Executive the authority to “regulate” someone or something. Yet the Government …

Is Tax “Law”?, Luís C. Calderón Gómez

Articles

Although taxation remains a hotly contested issue in debates by both politicians and political theorists—over the optimal size of government, distributive (and sometimes corrective) justice, or even the legitimacy of current private property arrangements—taxation has been largely ignored by legal theorists, to the detriment of both tax law and legal theory.  This Article argues that tax law, driven by its battle against tax evasion, is in deep conflict with widely accepted conceptions of “legality”—that is, the qualities that make a rule distinctively and normatively “law.”  This matters because legality is a key buttress in jurisprudential and political theory accounts that …

Should The Ordinary Income Rate Apply To Carried Interest?, Reuven S. Avi-Yonah

Articles

In 2008 professor Victor Fleischer published a famous article entitled “Two and Twenty: Taxing Partnership Profits in Private Equity Funds.” The article explained that: Private equity fund managers take a share of the profits of the partnership as the equity portion of their compensation. The tax rules for compensating general partners create a planning opportunity for managers who receive the industry standard “two and twenty” (a two percent management fee and twenty percent profits interest). By taking a portion of their pay in the form of partnership profits, fund managers defer income derived from their labor efforts and convert it …

The Largest Tax Fraud?, Reuven S. Avi-Yonah

Articles

On October 1, 2020, the Department of Justice indicted Robert T. Brockman on 39 counts of federal tax evasion and related charges.1 The department’s press release explains: The charges stem from an alleged decades-long scheme to conceal approximately $2 billion in income from the IRS as well as a scheme to defraud investors in the software company’s debt securities. . . . According to the indictment, Brockman, a resident of Houston, Texas, and Pitkin County, Colorado, used a web of offshore entities based in Bermuda and Nevis to hide from the IRS income earned on his investments in private equity …

Should Single-Sales-Factor Formulas Be Constitutional?, Reuven S. Avi-Yonah

Articles

On October 28, 2025, Florida sued California in the Supreme Court over its application of a single-sales-factor (SSF) formula to exclude large out-of-state asset sales. But Florida couched its critique in much broader terms, seemingly attacking the validity of the SSF altogether. Florida Attorney General James Uthmeier (R) stated that: California has created a tax system that punishes economic freedom. We will not tolerate California over-taxing revenue earned in Florida. The Newsom regime is obviously attempting to punish business owners who have fled California due to its disastrous policies. Given that multitudes of California businesses and residents are moving to …

Three Bites Of The Apple, Jeffery M. Kadet, Philip L. Jezzi, Brian J. Visalli, David G. Chamerlain, Stephen L. Curtis, Reuven S. Avi-Yonah

Articles

In her latest letter, “A Second Bite at the Apple,” Kimberly Blanchard repeats her recent criticisms of the September 2024 EU Court of Justice decision concerning two Irish-incorporated Apple subsidiaries. Her letter title, which of course inspired the title of this article, and her explanations recall the 1967 MGM comedy Three Bites of the Apple, in which a helpful stranger offers elaborate explanations for why taxes need not be paid. In the film, and perhaps in this exchange as well, the relevant question is who ultimately benefits from the arrangement.

This exchange began with professor Philip Laroma Jezzi article reassessing …

Frankenstein’S Drugs: Did Gilead Sciences’ Bahamas Tax Caper Create A Multibillion-Dollar Periodic Adjustment?, Stephen L. Curtis, Reuven S. Avi-Yonah

Articles

With about 182 million infections worldwide at the time, the potential value of a cure for the hepatitis C virus (HCV) was staggering.2 The company behind this drug, Pharmasset Inc., was a startup in Princeton, New Jersey, with 42 researchers and $127 million in the bank, churning through $66 million per year with no commercialized products and no codevelopment or commercialization partners. The “Pharmasset combo” was an extremely effective nucleotide analog that could treat HCV-infected individuals across genotypes, known as PSI-7977 (later renamed GS-7977), also called sofosbuvir, the active pharmaceutical ingredient (API) found in multiple current drugs used to treat …

Digital Services Taxes And The Wto, Reuven S. Avi-Yonah, Doron Narotzki

Articles

In an excellent Tax Notes article, Claudio Cipollini argues that the United States has adopted a paradoxical stance regarding digital services taxes. On one hand, the United States has repeatedly characterized DSTs as discriminatory trade barriers that unfairly target U.S. technology firms. On the other, it has systematically obstructed appointments to the Appellate Body of the WTO, leaving the dispute settlement mechanism effectively inoperative and ineffective. Cipollini presents this as a “missed WTO route,” suggesting that a functioning WTO system would primarily serve U.S. interests by disciplining European DSTs under the General Agreement on Trade in Services (GATS).

This article …

Transformative Technology And Shortening The Statute Of Limitations Applicable To Taxpayers, Jay A. Soled, Leslie Book

Faculty Publications

When it comes to submitting tax returns and paying taxes, most taxpayers understand the nature of their civic duties and do so dutifully, if not willingly. However, many taxpayers fail to grasp why the IRS has such an elongated time period—namely, three years— to audit their tax returns and propose an assessment. Indeed, when the IRS exercises its oversight authority, records may no longer be available, and memories may be dulled.

Since the original institution of the three-year tax assessment limitations period nearly a century ago, tremendous technological strides have been made. Indeed, over ninety percent of income tax returns …

Can The Eu’S Foreign Subsidy Regulation ‘Discipline’ U.S. Subsidies?, Reuven S. Avi-Yonah, Jennifer Farrell, Domenico Imparato

Articles

Stress Test for Anti-Subsidy Rules Recently, globalization has taken a markedly different turn in the form of renewed prominence of state intervention in the economy and a resurgence of industrial policy favoring domestic firms. Even the emergency measures deployed during the COVID-19 pandemic cannot serve as a reliable benchmark: These were primarily aimed at keeping businesses afloat or preventing foreign acquisitions through financial assistance (for example, domestic handouts) or “golden power” regulations.