Tax Law Commons^™

Interpreting State Tax Exemptions, Deductions, And Credits, Steve R. Johnson

Scholarly Publications

Modern tax statutes serve many purposes beyond simply raising revenue, and the contours of those statutes are shaped by many (and sometimes conflicting) economic, social, and political objectives. Legislatures choose a variety of structural mechanisms – including exemptions, deductions, and credits – to advance those policy goals. Sometimes those features are drafted with less than meticulous precision. Other times, business practices have evolved since enactment of the provisions. In either event, revenue agencies and courts are frequently required to interpret those provisions.

This installment of “Interpretation Matters” concerns one such principle of interpretation: The canon that exemptions, deductions, and credits …

Quebec's Module D'Enregistrement Des Ventes (Mev): Fighting The Zapper, Phantomware And Tax Fraud With Technology, Richard Thompson Ainsworth

Faculty Scholarship

On January 28, 2008 the Quebec Minister of Revenue, Jean-Marc Fournier, announced that by late 2009 the MRQ will begin testing a device, the module d'enregistrement des ventes (MEV) that is projected to substantially reduce tax fraud in the restaurant sector. By 2010 or 2011 MEVs will be mandatory in all Quebec restaurants, where they will assure accuracy and retention of business records within electronic cash registers (ECRs).

This paper moves beyond a discussion of the variety of sales suppression programs in use - zappers and phantom-ware. The concern here is on enforcement efforts, particularly the MEV. The intent is …

Pro-Taxpayer Interpretation Of State-Local Laws, Steve R. Johnson

Scholarly Publications

Sometimes, from a taxpayer’s perspective, it is better to be challenging a state or local tax determination than a federal tax determination. One reason for that is the canon that “[tax] statutes are to be construed most favorably for the taxpayer.” Scores, if not hundreds, of federal tax cases espoused that principle, especially during the 1890s to 1940s. However, the principle fell into disuse at the federal level in ensuing decades and, indeed, was replaced by prorevenue canons. A seeming attempt to revivify the canon at the federal level earlier this decade appears to have withered on the vine. In …

The Lds Church, Proposition 8, And The Federal Law Of Charities, Brian Galle

NULR Online

No abstract provided.

A New Era Of Tax Enforcement: From 'Big Stick' To Responsive Regulation, Sagit Leviner

Law & Economics Working Papers Archive: 2003-2009

This Article explores the economics of crime and compliance as the dominant approach to U.S. tax enforcement of the past three and a half decades. It evaluates the key advantages and disadvantages of the economic model as well as its application to tax. The Article then addresses the multiplicity of taxpayer behavior and the need and prospect of balancing the economically conceived methods of detection and punishment against other, more cooperative, means and developing a broader approach to tax enforcement more generally. The Article explores responsive regulation as a case study for an alternative method to tax enforcement that heavily …

Refund Anticipation Loans And The Tax Gap, Leslie Book

Working Paper Series

There has been a significant expansion of refundable credits over the past twenty years. This trend is likely to continue as part of federal policy to stimulate the economy and promote non-tax related social benefits. With the growing use of the tax system to deliver refundable benefits to individuals, the tax preparation industry as a whole has become, in some significant respects, a vehicle for cross-marketing of non-tax goods and services. Refund anticipation loans, or RALs, are one example of these non-tax products that paid preparers facilitate for their customers. RALS are short-term loans secured by a taxpayer's anticipated tax …

Of Coase, Calabresi, And Optimal Tax Liability, Kyle D. Logue, Joel B. Slemrod

Law & Economics Working Papers Archive: 2003-2009

The Coase Theorem and the vast literature it inspired explore two basic questions: to whom should responsibility for external harms be assigned and how will that assignment matter. Building on the Coasean insight in the torts context, Guido Calabresi observed that the assignment of tort liability can indeed matter from an efficiency perspective and should, under certain assumptions, be assigned to the “cheapest cost avoider.” This article applies a similar Coasean/Calabresian framework to a related (though not identical) set of questions in the tax context: To whom should the responsibility for remitting taxes be assigned and when and how will …

California Biometrics: A Second Proposal For California's Commission On The 21st Century Economy, Richard Thompson Ainsworth

Faculty Scholarship

This proposal takes a long view to revenue reform. It seeks to fundamentally align the sales tax with the digital foundation of the 21st Century economy.

The core policy question is whether California is willing to change the way it defines sales tax exemptions; is it willing to move from product-centric to person-centric exemptions. Certified tax determination systems can be relied upon. A key element in this proposal is the encryption of exemption certificates in IDs (smart cards with biometric identifiers that will allow the poor or handicapped to make certain purchases tax free).

This proposal suggests that (for example) …

Increasing Preparer Responsibility, Visibility And Competence, Leslie Book

Working Paper Series

The insights from the responsive regulation literature present an intriguing model for IRS interaction with preparers, and provide a theoretical context for a more nuanced approach that the IRS could adopt when considering its return preparer strategies. To some extent, the IRS’s current emphasis on preparer education, including the significant resources expended on tax forums and other general outreach programs, reflects IRS awareness that its interaction with preparers must take a varied approach. In this paper, I propose a more personal contact paradigm with preparers, with those contacts facilitated by heightened identification requirements and a more dedicated IRS effort to …

Transfer Pricing In Vat/Gst Vs. Direct Taxation: A Paper On The Topic Of Relations Between Associated Companies, Richard Thompson Ainsworth

Faculty Scholarship

This paper considers transfer pricing in VAT/GST and direct taxes, one of a range of tax relationships that flow between associated companies. The topic necessarily proposes an inquiry into vertical harmonization of transfer pricing norms alongside an assessment of present efforts to horizontally harmonize transaction values.

Stated differently, the vertical inquiry is: should the same transaction between the same associated enterprises be valued in the same manner by a single country in VAT/GST and direct taxes? The horizontal effort is: should two jurisdictions treat transactions between associated enterprises within their respective jurisdictions in the same manner in VAT/GST and direct …

California Zappers: A Proposal For The Commission For The 21st Century Economy, Richard Thompson Ainsworth

Faculty Scholarship

California has not uncovered a single instance of technology-assisted cash skimming - there are no zappers, and no phantomware in California. Is this because Californians are not skimming cash sales with technology, or is this because the California technology works so well that the fraud cannot be detected?

The record in foreign jurisdictions is reasonable clear. Automated sales suppression technology is widely used to skim cash sales, denying the state revenues from consumption taxes that have been paid by the consumer, reducing taxable business profits, and funding a cash hoard out of which unreported employee wages are paid. Government studies …

Honorary Board Membership, Real Tax Liability: Limits To Tax-Exempt Organization Honorary Board Member Immunity Under Internal Revenue Code 6672, Kenneth H. Ryesky

Akron Tax Journal

This article will discuss the implications of the various governmental trends and initiatives upon the potential trust fund liability of tax-exempt organizations' honorary board members.

Hedging The Irs -- A Policy Justification For Excluding Liability And Insurance Proceeds, Jeffrey H. Kahn

Scholarly Publications

Uncertainty about tax results is an ever-present obstacle to business transactions despite the extensive number of Internal Revenue Code sections and Treasury Regulations. Some insurance companies now provide an insurance product to protect taxpayers against adverse tax consequences from proposed transactions. Ironically, this new insurance product, labeled “tax insurance,” poses uncertain tax consequences itself This Article argues that if the adverse tax consequences arise (that is, the taxpayer has additional tax liability) and the insurance company is contractually required to cover that liability, the tax insurance proceeds are not includable in the insured’s gross income. As part of the reasoning …

"Render Unto Caesar…": Religious/Ethics, Expertise, And The Historical Underpinnings Of The Modern American Tax System, Ajay K. Mehrotra

Loyola University Chicago Law Journal

No abstract provided.

Law With A Life Of Its Own: The Development Of The Federal Income Tax Statutes Through World War I, Stephanie H. Mcmahon

Faculty Articles and Other Publications

This manuscript examines the development of the federal income tax within the United States fiscal system from the founding of the nation through World War I. The study reveals that, although the tax had become a permanent feature of the tax system by World War I, congressional debates had focused primarily on whether there should be an income tax as opposed to how it should or would operate in practice. This paper argues that the technical aspects of this tax received surprisingly little congressional attention because when the tax was originally passed it was a marginal revenue measure. Laden with …

Tax Policy, Rational Actors, And Other Myths, Leo P. Martinez

Loyola University Chicago Law Journal

No abstract provided.

The New Poor At Our Gates: Global Justice Implications For International Trade And Tax Law, Ilan Benshalom

Faculty Working Papers

The Article explains why international trade and tax arrangements should advance global wealth redistribution in a world of enhanced economic integration. Despite the indisputable importance of global poverty and inequality, contemporary political philosophy stagnates over the controversy of whether distributive justice obligations should extend beyond the political framework of the nation state. This stagnation results from the difficulty of reconciling liberal impartiality with notions of state sovereignty and accountability. The Article offers an alternative approach that bypasses the controversy of the current debate. It argues that international trade results in relational distributive duties when domestic parties engage in transactions with …

Built-In Gain Discounts For Transfer Tax Valuation: A Resolution For The Big Debate, Scott Andrew Bowman

Akron Tax Journal

This article considers whether and to what extent courts should permit a built-in gain discount. It begins by presenting the challenges of valuing assets for transfer tax purposes, discussing the general principles of transfer tax valuation, and highlighting the particular methodologies used to value closely-held entities. The article then examines how, during the era of the General Utilities doctrine, a prospective liquidation test, which considered the prospect and affect of liquidation, led courts to repeatedly disallow the built-in gain discount. However, since the repeal of the General Utilities doctrine, the prospective liquidation test has been discarded, at least in part, …

Surviving A Heart Attack: Expatriation And The Tax Policy Implications Of The New Exit Tax, Steven J. Arsenault

Akron Tax Journal

Part II of this article provides an overview of the U.S. tax system applicable to citizens, permanent residents, and nonresidents. Part III discusses the prior law applicable to expatriates and the history behind that law. Part IV discusses the provisions of the HEART Act and the changes the new system makes to the exit tax regime. Finally, Part V considers the policy implications of the new exit tax system.

Whistleblowers And Tax Enforcement: Using Inside Information To Close The "Tax Gap", Edward A. Morse

Akron Tax Journal

This article provides a critical look at the current scheme for rewarding tax informants, and in particular on the relatively new program for so-called "whistleblower awards." Despite enhanced incentives for informants to come forward, tax award programs continue to operate in an environment based on discretion and uncertainty. Additional legislation is needed to clarify uncertainties and to limit eligibility for rewards, including protection of private tax return information from disclosure and preventing the government from incentivizing the breach of confidential obligations through offering rewards.

Part II provides an overview of the IRS examination function and examines data involving the utility …

Opinions On The Ethics Of Tax Evasion: A Comparative Study Of The Usa And Six Latin American Countries, Robert W. Mcgee, Wendy Gelman

Akron Tax Journal

This study does not take either of these approaches. It does not analyze tax evasion from the perspective of economics or public finance, and it does not apply ethical theory to determine under what circumstances tax evasion might be considered ethical, although ethics is discussed. It focuses on the attitude toward tax evasion of a wide range of individuals in six Latin American countries as well as the United States. The main goals of this study are to determine general attitudes on the ethics of tax evasion and to determine whether certain demographic variables, including gender, age, level of education, …

The Tax Debts Of Small Business Owners In Bankruptcy, Rafael Efrat

Akron Tax Journal

Tax burden on small business owners in the United States is significant and regressive in nature. Some studies have linked the tax burden on small business owners to lower profitability, lower rate of entrepreneurial growth, and business closures. The tax burden also appears to cause some small business owners to resort to bankruptcy protection. The objective of this study is to investigate the burden tax obligations impose on small business owners at the time of their bankruptcy filing. Specifically, using a national sample, this study ascertains the pervasiveness of tax debts among small business owner bankruptcy petitioners.

The findings from …

Adding Insult To Injury: The Federal Income Tax Consequences Of The Clawback Of Executive Compensation, Matthew A. Melone

Akron Tax Journal

Part I of this article discusses and analyzes clawbacks in general, including clawbacks that are part of common-law remedial schemes, federally legislated clawbacks, and those triggered by contractual clawback provisions. Part II of this article analyzes the tax consequences to the executives that result from the repayment or forfeiture of compensation. This part provides an analysis of the annual accounting concept and the claim-of-right doctrine which will generally result in the payment and return of compensation to be accounted for in separate tax years and, concomitantly, will generally result in incongruent tax consequences. The exceptions to the annual accounting concept …

Carried Interest: Can They Effectively Be Taxed?, David J. Herzig

Law Faculty Publications

During the April 2008 Democratic Debate, former Senator Obama with former Senator Clinton almost referred to the subject matter of this article verbatim at page three of the transcript. ("We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year-- $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair. ") (http://abcnews.go.com/Politics/DemocraticDebate/story?id= 46702 71&page= 1). As stated by both candidates, the …

The Conscientious Legislator And Public Opinion On Taxes, Lawrence Zelenak

Loyola University Chicago Law Journal

No abstract provided.

The American Recovery And Reinvestment Act And A New Role For Government In Clean Technology Project Financing, James Hunter

Sustainable Development Law & Policy

No abstract provided.

Indirect Taxation Of Cross-Border Services In China: (Partial) Switch To Destination-Based Taxation, Wei Cui

All Faculty Publications

In early November 2008, China's State Council approved a major overhaul of the country's VAT: starting in 2009, registered VAT payers are allowed to claim input credit for VAT paid on purchases of equipment and other non-real-property fixed assets. The change marks a decisive abandonment of China's previous esoteric "production-type" VAT (which disallowed input tax credit for fixed asset purchases) in favour of the conventional consumption-type VAT, and a giant step in the rationalization of the coun­try's tax structure. It also promises to accelerate the pace of VAT reform, the next major stage of which is widely regarded as expanding …

The Largest Loophole In Federal Tax Law: Preferential Capital Gain Treatment For Private Equity And Hedge Fund Managers' Carried Interests, 42 J. Marshall L. Rev. 529 (2009), Michael R. Pieczonka

UIC Law Review

No abstract provided.

The Irs's Flawed Solution To The Controversy Over Deductible Claims Against The Estate And The Necessity For A Date-Of-Death Standard, 42 J. Marshall L. Rev. 789 (2009), Lisa K. Johnson

UIC Law Review

No abstract provided.

Chasing Profits - Disregarding Values: Legal Persona Of Elite Schools And Their Destructive Tax-Exempt Status, 42 J. Marshall L. Rev. 1073 (2009), Oksana Koltko

UIC Law Review

No abstract provided.