Tax Law Commons^™

Private And Public Construction In Modern China, Gregory M. Stein

San Diego International Law Journal

During the past three decades, real estate development in China has proceeded at an astonishing pace, with much development occurring before China's 2007 adoption of its first modern law of property. Investors thus spent hundreds of billions of dollars in the real estate market of a nation that, during most of this period, had not formal property law. How can a huge nation modernize so rapidly and dramatically when its legal system furnishes such uncertainty? And how can this happen in a nation that still purports to subscribe to socialist ideology? I set out to answer these questions by interviewing …

Pro & Con: Should Congress Adopt A New Tax Credit For Buying A Home? Yes: No Recovery Is Possible If Homeowners Lose Their Homes, Jessica D. Gabel

Faculty Publications By Year

No abstract provided.

The Case For Dividend Deduction, Reuven S. Avi-Yonah, Amir C. Chenchinski

Law & Economics Working Papers

There have been various proposals made in the past two decades to integrate the corporate and shareholder tax, including dividend exemption, imputation, and the Comprehensive Business Income Tax (CBIT). In our view, the problem with all of these proposals is that they omit to ask the crucial question of why we should tax business entities in the first place. Taxes, the economists tell us, are always borne by human beings, not by legal entities. Why should legal entities, be they corporations or other forms of business entity, be subject to tax at all? Would it not be easier to just …

Tax Relief In The American Recovery And Reinvestment Act Of 2009, Steven Gassert

Legislation and Policy Brief

On February 17, 2009, less than thirty days after his inauguration, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA). This new law was one of many measures from the new administration designed to quickly stimulate the ailing American economy. The $789 billion package was divided between direct government spending, tax reductions and financial relief to states and individuals. The bill contains $285.6 billion in tax reductions, which is about 36.3% of the legislation. In this article, I will analyze some of the tax provisions that were written into ARRA, and attempt to assess their …

Taxing Punitive Damages, Gregg D. Polsky, Dan Markel

Scholarly Works

There is a curious anomaly in the law of punitive damages. Jurors assess punitive damages in the amount that they believe will best “punish” the defendant. But, in fact, defendants are not always punished to the degree that the jury intends. Under the Internal Revenue Code, punitive damages paid by business defendants are tax deductible and, as a result, these defendants often pay (in real dollars) far less than the jury believes they deserve to pay.

To solve this problem of under-punishment, many scholars and policymakers, including President Obama, have proposed making punitive damages nondeductible in all cases. In our …

Vat Fraud - Technological Solutions, Richard Thompson Ainsworth

Faculty Scholarship

Every VAT/GST allows missing trader fraud. The fraud is simple, and can be simply prevented (with technology). The fraud arises when a business makes a purchase without paying VAT, collects VAT on an onward sale, and then “disappears” without remitting the tax. Missing trader fraud is common in high-value/low-volume goods sold across borders – computer chips and cell phones are the classic examples. But the fraud easily migrates when pursued. It operates well with goods as wide ranging as xenon bulbs, automobiles, and earth moving equipment.

The recent appearance of MTIC fraud in tradable CO2 permits and VoIP is a …

State Fiscal Policies And Transitory Income Fluctuations, James R. Hines Jr.

Articles

State and local expenditure and tax revenue respond less to the business cycle than do federal spending and revenue, thereby reducing the countercyclicality of total government expenditure and revenue. This paper considers forces responsible for the cyclical pattern of state expenditure and revenue. Annual fluctuations in state personal income are associated with small changes in state spending and significant changes in tax receipts; receipt of federal grants is associated with greater state spending. Tax collections, and to a lesser degree expenditure, of larger states are more closely associated with annual income fluctuations than are the tax collections and expenditure of …

The Power Of Warm Glow, Usha Rodrigues

Scholarly Works

Professor Brian Galle’s Keep Charity Charitable is a thoughtful contribution to the ongoing conversation about the proper tax treatment of charitable organizations. I largely agree with Galle’s arguments, but I would like to offer two criticisms of his positions: first, Galle overstates the problem posed by for-profit firms offering charitable services; and second, he understates the power of “warm glow” in the nonprofit organization.

Obesity And Unhealthy Consumption: The Public-Policy Case For Placing A Federal Sin Tax On Sugary Beverages, Jonathan Cummings

Seattle University Law Review

A growing body of research has established an empirical link between consumption of sugary beverages and numerous health problems. Yet, while few people disagree that reduced consumption of sugary beverages is a desirable goal for American society, many people disagree about how to reduce it. This Comment argues that a proposed sin tax on sugary beverages is sound policy, and Congress should implement the tax in order to combat and address the obesity epidemic because (1) consumers are subject to cognitive and informational defects that affect consumers’ abilities to make the best welfare-generating decisions, and (2) sugary-beverage consumption causes healthcare-related …

The Judicial Instinct To Harmonize Statutes, Steve R. Johnson

Scholarly Publications

Judges like to reach results that harmonize statutory meanings, both meanings within given statutes and meanings among statutes. That inclination applies as fully in tax cases as in nontax cases, and in state and local tax cases as well as in federal tax cases. Effective advocates in state-local tax controversies recognize that judicial tropism and use it, whenever possible, in their clients’ interests.

Part I discusses the harmonization instinct generally. Part II illustrates application of the harmonization approach in state and local cases. Part III notes some limitations on and unsettled questions regarding the harmonization.

Intermountain And The Growing Importance Of Administrative Law In Tax Law, Steve R. Johnson

Scholarly Publications

On September 29, 2009, Treasury issued regulations retroactively extending the six-year limitations period for income tax deficiencies resulting from basis overstatements. In its May 6 Intermountain decision, the Tax Court unanimously invalidated those regulations, but on divided rationales. The government has appealed.

lntermountain is a must-read for tax academics and practitioners. It is among the richest decisions on the procedural and substantive validity of tax regulations. Moreover, the opinions in the case, subsequent cases on the issue, .and commentary on these opinions and cases present genuine opportunity for improvement of the law.

This report has five sections. Section I sketches …

The Redemption Puzzle, Reuven S. Avi-Yonah

Articles

After the adoption of partial integration in 2003, there has been only a modest rise in dividends, but a sixfold increase in redemptions. This article argues that the explanation for that lies in the different treatment of dividends and capital gains to foreign shareholders and that Congress should respond by making sections 302 and 304 inapplicable to foreign shareholders.

Taxation As Regulation: Carbon Tax, Health Care Tax, Bank Tax And Other Regulatory Taxes, Reuven S. Avi-Yonah

Law & Economics Working Papers

This paper addresses three questions: 1. Is regulation a legitimate goal for taxation? 2. Which tax is best suited for regulation? 3. Would it be better to allocate just one goal per tax among the major taxes (individual and corporate income tax and VAT)? It then analyzes the proposed bank tax and the enacted health care tax as regulatory taxes, and concludes that the first is desirable (as is a carbon tax) but the second is not.

Morgens: More Qtip Mischief, Wendy G. Gerzog

All Faculty Scholarship

In Morgens, the court ruled in favor of the government that section 2035(b) applied to the gift taxes paid by the qualified terminable interest property (QTIP) trust beneficiaries to gross up the widow’s estate by that amount. Because the surviving (or donee) spouse must be taxed on the underlying property over which she has no ownership rights, Congress enacted section 2207A to allow the second spouse to recover from the beneficiaries of the property the transfer taxes relating to her gift or estate inclusion. However, the court held that section 2207A did not shift the gift tax liability to those …

Transfer Pricing In Business Restructurings – Reasoning From Implausible Assumptions Issue Note 2 – (Oecd, Discussion Draft), Richard Thompson Ainsworth, Andrew Shact

Faculty Scholarship

The OECD’s Center for Tax Policy and Administration roundtable on business restructurings in January 2005 led to a Joint Working Group project later that year on permanent establishments and business restructurings. One of the results was the Discussion Draft on Transfer Pricing Aspects of Business Restructurings that was available for public comment between September 19, 2008 and February 19, 2009.

This paper concerns Issue Note No. 2 in the Discussion Draft – Arm’s Length Compensation for the Restructuring Itself.

Issue Note No. 2 is deeply flawed. It relies on an unproved correlation between structure and performance (profit/loss potential). The Discussion …

Maine's General Sales Tax: An Exploration Of Policy Issues And Options, Sarah Rawlings

Muskie School Capstones and Dissertations

Introduction The role of sales taxation in states’ economies has been a topic of much discussion and controversy since its inception in some states more than 70 years ago. The sales tax has been a critical component of revenue generation for some 98% of states over the last 50 years, but policy-makers and economists have become concerned in recent years about the dwindling revenues being generated by sales taxation in most states.

When General Statutes And Specific Statutes Conflict, Steve R. Johnson

Scholarly Publications

It’s no secret that the pace of lawmaking in the United States has accelerated dramatically in recent decades. So much so that one may be forgiven for thinking that the best law reform would be a moratorium on further law reform – - to give citizens, their legal representatives, and government officials the opportunity to catch up with the laws we already have made.

Legislatures, agencies, and courts all have made their contributions to the torrent of lawmaking. The phenomenon has been attributed to various causes, including growing populations, greater population densities as a result of urbanization, rapid technological changes, …

Tax Court Invalidates New Section 6501(E) Regulations, Steve R. Johnson

Scholarly Publications

The title of an article of mine in the Fall 2009 issue of the NewsQuarterly asked “What’s Next in the Section 6501(e) Overstated Basis Controversy?” The Tax Court answered that question on May 6, 2010, in its decision Intermountain Insurance Service of Vail, LLC v. Commissioner, 134 T.C. No. 11. In that decision, the court invalidated two temporary regulations that had been issued on September 24, 2009: sections 301.6229(c)(2)-IT and 301.6501(e)-IT.

Financial Options In The Real World: An Economic And Tax Analysis, David M. Hasen

Faculty Publications

Many of the consequences of issuing and purchasing options on publicly traded property have been well understood since Black and Scholes developed a model for option pricing. No model of options, however, provides an accurate economic analysis of the actual transactions that issuers and purchasers engage in when options are bought and sold. One consequenceof this gap in understanding is that the rules for taxing options remain poorly developed. This Article provides a transactional analysis of option sales for the first time. The focus is on covered options, but the analysis also has implications for options in which the underlying …

The Redemption Puzzle, Reuven S. Avi-Yonah

Law & Economics Working Papers

Following the adoption of partial integration in 2003, there was only a modest increase in dividends during the period 2004-7, from about 300 to about 500 (if 1987 levels are set at 100). Redemptions, however, showed a remarkable increase, jumping from about the same as dividends (300) to 1,800. This, therefore, leads to a new puzzle: Why the sudden sharp increase in redemptions following 2003?

Like the dividend puzzle, the redemption puzzle is susceptible to several explanations. For example, Bratton and Wachter note that managers who hold stock options tend to favor redemptions over dividends. But in this case, I …

What Are We-Laborers, Factories, Or Spare Parts? The Tax Treatment Of Transfers Of Human Body Materials, Lisa Milot

Washington and Lee Law Review

Transfers of human body materials are ubiquitous. From surrogacy arrangements, to sales of eggs, sperm and plasma to clinics, to black markets for kidneys, to pleas for donations of body materials, these transfers are covered and debated daily in popular and academic discourse. The associated philosophical and legal issues have been explored by a wide range of commentators. The appropriate tax treatment of these transactions, however, is mostly unexamined. Current Law is unclear about what the tax consequences of these transfers are. There are no statutory provisions directly on point, Internal Revenue Service guidance is outdated and conflicting, and the …

The Italian Job — Voice Over Internet Protocol Mtic Fraud In Italy, Richard Thompson Ainsworth

Faculty Scholarship

On February 8, 2010 a speculative paper on the likelihood that fraudsters proficient in missing trader intra-community (MTIC) fraud might move into voice over internet protocol (VoIP) was submitted to the Boston University School of Law Working Paper Series.

Prior to that paper there was very little (if any) public discussion of VoIP MTIC. There were no assessments, no arrests, and not a hint of litigation. Fifteen days later, and before final publication the financial press exploded with coverage of a massive VoIP MTIC fraud (the Operazione “phuncards-broker” investigation). The Wall Street Journal reported: An [Italian] judge…ordered the arrest of …

The Taxation Of Cause-Related Marketing, Terri Lynn Helge

Faculty Scholarship

With the economy in turmoil, charitable organizations are looking to nontraditional sources of financing to supplement contributions and fee-based revenues. One potentially lucrative source of revenue stems from cause-related marketing. Cause-related marketing is the public association of a for-profit company with a charitable organization to promote the company’s product or service in order to raise money for the charitable organization. Introduced almost twenty-five years ago, cause-related marketing has now become a $1 billion a year industry. Cause-related marketing has evolved beyond mere use of a charitable organization’s name to an apparent union for the purpose of promoting products that carry …

Taxing Structured Settlements, Gregg D. Polsky, Brant J. Hellwig

Scholarly Works

Congress has granted a tax subsidy to physically injured tort plaintiffs who enter into structured settlements. The subsidy allows these plaintiffs to exempt from the tax the investment yield imbedded within the structured settlement. The apparent purpose of the subsidy is to encourage physically injured plaintiffs to invest, rather than presently consume, their litigation recoveries. While the statutory subsidy by its terms is available only to physically injured tort plaintiffs, a growing structured settlement industry now contends that the same tax benefit of yield exemption is available to plaintiffs’ lawyers and non-physically injured tort plaintiffs under general, common-law tax principles. …

Is Lost Tax Revenue Property Under Rico?, Steve R. Johnson

Scholarly Publications

The last installment of this column began an examination of the use of the federal civil RICO Act in state and local tax administration controversies. This installment closes the loop by answering questions posed, but not resolved, last time. This column explores whether uncollected tax revenue - or loss of the opportunity to collect tax revenue - constitutes “business or property” under the civil RICO statute. This exploration also takes up the related question whether tax authorities will be able to overcome judicial reluctance to turning RICO into a tax collection statute.

Part I of this column reprises how RICO …

Flp In The Black, Wendy G. Gerzog

All Faculty Scholarship

In Estate of Black, because the Tax Court held the Blacks' transfers fell within the bona fide sales exception of section 2036, they were successful at avoiding the application of the provision. Thus, they were able to obtain valuation discounts for their transfers of property (mostly marketable securities) to their son and grandchildren. The court also decided the marital trust funding valuation date issue in the executor's favor and allowed almost half of the claimed administrative expense deductions.

Comparing The Treatment Of Charities Under Vat And Rst, Walter Hellerstein

Presentations and Speeches

Good VAT = Good RST

Desire to assist charities should be addressed outside the RST to avoid revenue losses and administrative complexity and to maintain fiscal neutrality

Assistance should be provided by other means such as direct subsidies

An Irs Duty Of Consistency: The Failure Of Common Law Making And A Proposed Statutory Solution, Steve R. Johnson

Scholarly Publications

The IRS should endeavor to treat similarly-situated taxpayers similarly, but does this aspiration rise to the level of a judicially enforceable duty? If the IRS takes a position on Taxpayer B that is correct under the law but is inconsistent with a position the IRS took on similarly-situated Taxpayer A, should the IRS’s position on Taxpayer B fail simply because of the inconsistency? These questions implicate important themes, such as fairness, the rule of law, separation of powers, administrative exigencies, the role of common law making in a highly positivistic system, and the sustainability of legal regimes.

A constitutional standard …

The Key To Closing The Tax Gap: Understanding, Susan Striz

West Virginia Law Review

No abstract provided.

Through The Doughnut Hole: Reimagining The Social Security Contribution And Benefit Base Limit, Patricia E. Dilley

UF Law Faculty Publications

The Obama campaign proposal to address Social Security's future financing shortfalls by increasing the Social Security tax base limit only for those making more than $250,000 per year raises the broader question of the function of the base limit from a Social Security program perspective. The public supports increasing the wage base above all other possible avenues for solving long term financing issues, but the problems with the Obama "doughnut hole" proposal are substantial from several perspectives. In this article, the author suggests that the function of the base limit be reconsidered, and the benefit accrual function of the earnings …