Tax Law Commons^™

Reforming The Branch Profits Tax To Advance Neutrality, Fred B. Brown

All Faculty Scholarship

Congress enacted the branch profits tax in order to reduce the disparity between the taxation of U.S. subsidiaries and U.S. branches of foreign corporations. The branch profits tax attempts to promote neutrality by subjecting the U.S. branch earnings of a foreign corporation to a second level of U.S. tax upon the deemed remittance of the earnings outside of the U.S. branch. This is to approximate the second-level tax that occurs in the subsidiary setting when a U.S. subsidiary pays dividends to its foreign parent. Unlike the dividend tax in the subsidiary setting, however, the branch profits tax can apply even …

Debunking The Basis Myth Under The Income Tax, Joseph M. Dodge, Jay A. Soled

Indiana Law Journal

Tax basis is one of the most important, yet least studied, aspects of the income tax. This analysis calls attention to its importance and argues that taxpayers have the motivation, opportunity, and means to inflate the tax basis they have in their assets and, in some cases, to avoid the reporting of gains. We discuss the likely causes of these phenomena, estimate the probable revenue loss, and propose appropriate reforms.

Lipstick, Light Beer, And Backloaded Savings Accounts, Karen C. Burke, Grayson M.P. Mccouch

UF Law Faculty Publications

The article addresses current proposals for expanding tax-preferred individual savings accounts and their implications for retirement security and tax policy. The authors argue that the yield-exempt approach embraced by the Bush Administration in its proposals is likely to generate enormous long-term revenue losses, exacerbate inequalities in income and wealth, and erode broad-based coverage under employer-sponsored retirement plans. In addition to these fiscal and distributional concerns, they conclude that the proposals pose a serious obstacle to fundamental tax reform.

A Minimalist Approach To Corporate Income Taxation, Herwig J. Schlunk

Vanderbilt Law School Faculty Publications

An ever-shrinking hallmark of our federal income tax system is the apparent double taxation of some, but not all, business income. That is, some business income ultimately flows to the human shareholders of C corporations. These corporations pay corporate income tax on the taxable income they generate. Then, as and when such corporations distribute their after-corporate-income-tax income to their human shareholders (or equivalently, as and when their human shareholders sell their shares in such corporations), the human shareholders pay individual income tax on the amounts so distributed (or equivalently, on their capital gains).

A Lifetime Income Tax, Herwig J. Schlunk

Vanderbilt Law School Faculty Publications

Under current tax law, there can be considerable period-by-period divergence between a taxpayer's after-tax income and her desired or actual consumption. This divergence will cause the taxpayer to borrow. One can view such borrowing either as being incurred to fund consumption, or as being incurred to fund the taxpayer's income tax payments. If one takes the latter view, one can ask whether a good income tax law should force a taxpayer to borrow to pay her taxes. I answer the question in the negative, and propose a lifetime income tax that would eliminate the need for typical taxpayers to borrow …

Constitutional Limits On State Taxation Of Nonresident Trusts: Gavin Misinterprets And Misapplies Both Quill And Mcculloch, Joseph W. Blackburn

ExpressO

No abstract provided.

Halos, Billboards, And The Taxation Of Charitable Sponsorships, Ethan G. Stone

ExpressO

This article reexamines the controversy in the 1990s over the tax treatment of revenues charities earn by selling sponsor acknowledgements. The controversy erupted when the IRS tried to tax Mobil Cotton Bowl and John Hancock Bowl on their sponsorship revenues, claiming that it represented payment for advertising. It ended when Congress amended to tax code to grant sponsorship revenues an effective exemption from tax. Traditionally, this has been understood as a simple and sordid story of raw lobbying power supplanting good tax policy. I argue that the controversy reflects the overriding importance of political symbolism in understanding the charitable tax …

Working For Free: A New Tax Dodge For The Wealthy Magnifies Employment Tax Defects, Richard Winchester

ExpressO

Employment taxes account for an enormous share of federal tax receipts. And it is widely acknowledged that taxes on the self-employed are collected under a dysfunctional set of laws that is long overdue for repair. Yet, there is surprisingly little legal scholarship in the field. This article fills a portion of that gap. It examines some fundamental flaws that plague our nation’s employment tax laws, focusing on how President Bush’s dividend tax cut created an incentive for wealthy individuals to exploit those flaws at the government’s expense when they work for a corporation that they also own and control. Specifically, …

Discarded Deference: Judicial Independence In Informal Agency Guidance, Christopher M. Pietruszkiewicz

ExpressO

In the past few years, the Supreme Court has resurrected an intermediate deference standard from the 1940s to be applied by courts in considering informal guidance issued by administrative agencies. The decision upon which the deference standard is based is a product of a political solution and not a comprehensive evaluation of how the New Deal agencies fit within traditional role of the courts as sole interpreters of the law.

This 1940s decision has evolved such that deference to the views of administrative agencies has become a matter of judicial discretion, finding deference when the views of an agency parallel …

The Option Conundrum In Tax Law: After All These Years, What Exactly Is An Option?, Kevin J. Liss

ExpressO

Some of the latest financial products that have become prevalent on Wall Street defy easy categorization for tax purposes. Certain products, such as economic derivatives or weather derivatives, bear the trappings of options, but lack an underlying property component. Other products, such as credit default swaps, have option-type payouts, but are cast in the form of financial swaps. Which of these products are truly options and why? When and how to tax these instruments depends on proper resolution of this fundamental classification issue. With respect to credit default swaps, arguably the single most important product innovation on Wall Street in …

Getting Into The Act: Enticing The Consumer To Become “Green” Through Tax Incentives, Roberta F. Mann, Mona L. Hymel

ExpressO

Energy tax incentives have historically focused on the supply of energy sources. The U.S. government spends billions of dollars each year propping up the petroleum industry through tax incentives. For example, oil and gas incentives encourage production and enhanced oil recovery strategies. Furthermore, most of the tax incentives directed towards “environmentally friendly” technologies focus on creating new technology or increasing alternative fuel supplies. Meanwhile, federal policy makers have largely neglected the demand side of the energy equation. Properly designed tax incentives can effectively encourage energy consumers to conserve energy and use different energy sources. On the federal level, the clean …

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

ExpressO

Our federal government annually donates more than $75 billion in potential revenue to the States under section 164 of the Tax Code, the provision allowing itemizing taxpayers to deduct the cost of the state and local income, property, and sales taxes they paid during the tax year. This Article argues that expenditure may be a massive mistake. The deduction is, in theory, supposed to further federalism, by shifting revenues -- and therefore regulation -- downwards from the federal government to states and their local subsidiaries. What few commentators seem yet to have recognized, though, is that using the deduction for …

Tax Terrorism: Nasty Truths About Investor Control Theory And The Accommodation Of Social Security Privatization, Bobby Lewis Dexter

Mercer Law Review

While American taxpayers spend the vast majority of their tax lives shouldering the monetary burden of the prevailing progressive tax scheme, Congress will, periodically, lighten the load and extend the warm hand of legislative grace. New deductions, creative tax credits, and outright reductions in income tax rates are not uncommon, and in fact, political motivations have long fueled an aggressive interest in the modification of federal tax rules to curry favor with large segments of the population. The protection of retirement savings from the burden of immediate taxation is a special congressional favorite.6 In addition to easing the tax burden …

Political Silence At Church: The Empty Threat Of Removing Tax-Exempt Status For Insubstantial Attempts To Influence Legislation, David M. Andersen

BYU Law Review

No abstract provided.

The Different Tax Treatment Of Investment Advisory Fees And Brokerage Fees; The Lower The Fiduciary Duty The Better The Tax Consequences, Barry W. Rickert

ExpressO

The current tax laws favor brokerage fees as compared to investment advisory fees, even though investment advisors are held to a higher standard of fiduciary duty. My article examines the different tax treatment of investment advisory fees and brokerage fees, analyzes the policy considerations of such treatment and proposes alternatives to the current system. Considering the large number of American investing in the securities markets, it is important that our tax laws be written in a way that encourages taxpayers to seek investment professionals who are held to higher standards of conduct. The policy implications of brokerage fees receiving preferable …

Taxpayer Standing And Daimlerchrysler V. Cuno: Where Do We Go From Here?, Kristin E. Hickman, Donald B. Tobin

Faculty Scholarship

In granting certiorari in the case of Daimler-Chrysler Corp. v. Cuno, the Supreme Court asked the parties to brief "whether respondents have standing to challenge Ohio's investment tax credit." This report applies modern standing doctrine to the Cuno case and concludes that the Cuno plaintiffs do no have standing to raise their claims in federal court. Moreover, the authors write, allowing the Cuno plaintiffs' case to be resolved in federal court would open the federal court system to a wide range of taxpayer challenges better left to the political branches of government. Nevertheless, they recognize that there may be …

Wheir’S The Beef?: Buffalo Law And Taxation, Erik M. Jensen

Faculty Publications

The intersection of buffalo law and taxation hasn't been a busy one, but accidents still happen: not everyone understands that buffalo have the right of way. This article critically analyzes the recent Tax Court summary opinion in Wheir v. Commissioner, which involved a bodybuilder who sought to deduct the cost of an incredible amount of buffalo meat. Along the way, the article brings buffalo law learning up-to-date; revisits some classic, nineteenth-century buffalo law cases; and, most important, considers whether there are important differences between the American bison and American beef cattle - differences that might have relevance to American tax …

Interpreting The Sixteenth Amendment (By Way Of The Direct-Tax Clauses), Erik M. Jensen

Faculty Publications

The Sixteenth Amendment and the direct-tax clauses have become subjects of interest in the legal academy and, as proposals for new forms of national taxation emerge on a seemingly daily basis, they could become subjects of more general interest as well. Under the direct-tax clauses, a direct tax must be apportioned among the states on the basis of population, making such a tax difficult, although not impossible, to implement. Following the Supreme Court decisions in the 1895 Income Tax Cases, which held that an 1894 income tax was a direct tax that had not been properly apportioned, the Sixteenth Amendment, …

Taxation Of Beards, Erik M. Jensen

Faculty Publications

This article makes a compelling case that the United States could learn from the imaginative tax policy-maker Peter the Great and institute a tax on beards. Such a tax could raise a little revenue, decrease scruffiness, and provide a new subject for cutting-edge law review notes.

Note: This a description of the paper and not the actual abstract.

The Taxing Power, The Sixteenth Amendment, And The Meaning Of ‘Incomes,’, Erik M. Jensen

Faculty Publications

This article examines the debates leading to the enactment of the 1894 income tax, which the Supreme Court struck down in 1895, and the Sixteenth Amendment, ratified in 1913, and concludes that an income tax and a tax on consumption were understood to be fundamentally different types of taxes. The author argues that the term “taxes on incomes” in the Sixteenth Amendment should be interpreted with that distinction in mind. The Amendment was intended to make a “tax on incomes,” and only a tax on incomes, possible without the apportionment that would otherwise be required for a direct tax. For …

Unapportioned Direct-Consumption Taxes And The Sixteenth Amendment, Erik M. Jensen

Faculty Publications

The point of this essay is simple: a direct-consumption tax like the Forbes-Armey-Hall-Rabushka flat tax or the Nunn-Domenici USA tax is not a "tax on incomes" within the meaning of the Sixteenth Amendment. As a result, such a tax would be constitutional only if it were apportioned among the states on the basis of population. And since these taxes would not be apportioned-how could they be and work as they are intended to work?-they would be unconstitutional.

"Expense" Deductions On "Personal" Gross Income, Deborah A. Geier

Law Faculty Articles and Essays

Prof. Deborah A. Geier responds to Tom Daley's letter on the taxation of contingent attorney fees.

Taxation And The Constitution: How To Read The Direct-Tax Clauses, Erik M. Jensen

Faculty Publications

This essay responds to Professor Bruce Ackerman, who had challenged the author's understanding of the Direct-Tax Clauses of the Constitution and the Sixteenth Amendment to that Constitution.

Respect For Statutory Text Versus ‘Blithe Unconcern’: A Reply To Professor Coverdale, Erik M. Jensen

Faculty Publications

In Tufts v. Commissioner, the Supreme Court in 1983 had concluded that relief from a nonrecourse liability on disposition of property should be reflected in the seller's amount realized, even if the value of the property had dropped below the principal amount of the obligation. Professor Coverdale quite reasonably complained that the statutory definition of amount realized makes no mention of liabilities and that, not quite so reasonably, commentators had shown blithe unconcern about statutory language. A great fan of adhering to statutory language, the author nevertheless argues that interpreters must take into account judicial developments, in this case beginning …

The Control Of Avoidance: The United States Alternative, John Tiley, Erik M. Jensen

Faculty Publications

This article, jointly written by a British and an American academic, describes the American experience in identifying and attacking tax avoidance. The article was part of a symposium issue of the British Tax Review, published by Sweet and Maxwell, devoted to tax avoidance issues around the globe.

Critical Theory And The Loneliness Of The Tax Prof, Erik M. Jensen

Faculty Publications

This essay, prepared for a symposium on critical theory and tax law, has two goals: to suggest why feminist theory and critical race theory are spreading in taxation and to discuss some dangers of that criticism. The author evaluates three examples of the new criticism: an article on critical race theory by Professors Moran and Whitford; an article on feminist statutory interpretation by Professor Handelman; and a book, Taxing Women, by Professor McCaffery.

The Apportionment Of ‘Direct Taxes’: Are Consumption Taxes Constitutional?, Erik M. Jensen

Faculty Publications

In debates about reorienting the American revenue system, nearly everyone assumes the Constitution is irrelevant. With few exceptions, the tax provisions in the original Constitution - particularly the direct-tax apportionment rule and the uniformity rule - have been interpreted to be paper tigers. And in only one major case has the Sixteenth Amendment, which excepts "taxes on incomes" from apportionment, been held to limit congressional power.

S Rejecting conventional wisdom, this Article argues that some consumption taxes would violate constitutional norms. The Article focuses on the requirement that “direct taxes” be apportioned among the states on the basis of population. …

Should We Adopt William Vickrey’S Cumulative Averaging Income Tax System? Progressivity And Simplicity In Tax Reform, Neil H. Buchanan

ExpressO

This paper focuses on William Vickrey’s proposal to replace our current annual system of tax assessment with a new tax system that bases assessments on lifetime cumulative average income. After reviewing two key arguments in favor of the social goal of progressivity in taxation (a goal that Vickrey shared), I have examined whether adopting Vickrey’s cumulative averaging system would achieve a compelling change in the fairness of the tax system. While the current system undeniably creates a problem of horizontal inequity in that people with similar lifetime incomes can pay different tax rates based on the timing of those incomes, …

Commentary: Food For Thought And Thoughts About Food: Can Meals And Lodging Provided To Domestic Servants Be For The Convenience Of The Employer?, Erik M. Jensen

Faculty Publications

This commentary considers one of the least important issues in tax law: whether the value of meals and lodging provided to domestic servants is excludable from the servants' gross income under section 119 of the Internal Revenue Code. Trivial though the issue is, the author goes on and on-and on, arguing that an example in the regulations under section 119, which concludes that the "business premises of the employer" requirement would be satisfied in such a situation, is misleading in its implications. It's not enough that the meals and lodging be provided on the business premises of the employer to …

The Supreme Court And The Timing Of Deductions For Accrual-Basis Taxpayers, Erik M. Jensen

Faculty Publications

This article examines the Supreme Court's two decisions in the late 1980s dealing with the timing of deductions, United States v. Hughes Properties (1986) and United States v. General Dynamics Corp. (1987), and finds those decisions wanting. Indeed, it is hard to understand why the Court exercised its discretionary jurisdiction twice in such a short period when the cases involved technicalities that seemed to overwhelm the generalist justices and when subsequent disputes with similar factual situations would be affected by statutory changes.