Tax Law Commons^™

The Effective Tax Rate Of The Largest Us And Eu Multinationals, Reuven S. Avi-Yonah, Yaron Lahav

Law & Economics Working Papers

This paper compares the effective tax rates of the 100 largest US multinationals to the 100 largest EU multinationals for the period 2001-2010, based on financial disclosures. The paper finds that despite the higher US statutory rate the effective tax rates are comparable and that EU multinationals tend to have a higher effective tax rate. The likely explanation is that EU corporate taxes have a broader base. The paper concludes that current US tax law does not subject US based multinationals to a competitive disadvantage against their EU based competitors.

Taxes, Free Expression, And Adult Entertainment, Steve R. Johnson

Scholarly Publications

The interaction of morality and money produces interesting results. One manifestation is legislation in some states and proposals in others to impose higher taxes on “gentlemen’s show lounges” (OK, I mean strip clubs) and other venues of adult entertainment.

In 2010 and 2011 two state supreme courts passed on the legality of different forms of those taxes, upholding them against challenges that they infringed on free speech/free expression rights protected by the First Amendment of the U.S. Constitution. This installment of the column considers those two decisions: the February 2010 Utah decision in Bushco v. Utah State Tax Commi …

Should The States Piggyback On Federal Schedule Utp?, J. Richard Harvey

Working Paper Series

There has been much written about Schedule UTP since its announcement by IRS commissioner Shulman in January 2010. However, little has been written about issues other tax administrators may need to consider if they plan on adopting some version of Schedule UTP for their own purposes. State tax administrators are definitely thinking about Schedule UTP. In addition, the Australian Taxation Office has published a draft form for 2012 that is based, in large part, on the IRS Schedule UTP. Although corporations are hoping that most other tax administrators do not adopt some version of Schedule UTP, corporations will likely be …

Exclusion From Income Of Compensation For Services And Pooling Of Labor Occurring In A Noncommercial Setting, Douglas A. Kahn

Law & Economics Working Papers

Compensation for services, regardless of the form, constitutes income to the recipient. Consequently, the exchange of services by two individuals is treated as income to each. However, there are numerous examples of an exchange of services that the IRS has never sought to tax. The most common example is an exchange of services by a married couple who divide the household chores between them. The focus of this article is to propose a principled reason for not taxing those exchanges and to explore the limits of that exclusion. The author contends that the income tax operates exclusively on commercial transactions, …

Real Time Audit – It Is The Time To Act?, Reuven S. Avi-Yonah, Oz Halabi

Law & Economics Working Papers

The U.S. is facing one of its hardest economic crises. Its economy has not recovered from the 2008 downturn, and the light at the end of the tunnel is far, far away. The government and the Internal Revenue Service (“IRS”) are seeking revenue sources in order to reduce its budget deficit. However, raising the income tax rates is politically difficult and may lead to further loss of jobs. In this political situation, it is important to try to find ways to raise more revenue without raising tax rates. One possibility of doing so is “real time audit”: Auditing transactions when …

Money On The Table: Why The U.S. Should Tax Inbound Capital Gains, Reuven S. Avi-Yonah

Law & Economics Working Papers

In 1992, Chairman Rostenkowski introduced legislation that imposed US capital gains tax on foreign sellers of large blocks of shares (10 percent or more) in US corporations. The legislation was not a treaty override, although it added an anti-treaty shopping provision similar to those adopted for the branch profit tax in 1986. It also had anti-abuse provisions that addressed holding company structures. Today, the US faces a large budget deficit and seeks to impose higher burdens on its own multinationals. While that is also justified, there is no reason to let foreigners off the hook, especially since there is much …

Schedule Utp: An Insider's Summary Of The Background, Key Concepts, And Major Issues, J. Richard Harvey

Working Paper Series

A former IRS Commissioner has called Schedule UTP “the biggest change in tax administration in the last 50 years”. Others have made less flattering comments, but most everyone working in the corporate tax community would admit it has been a big deal.

Based upon the author’s perception as a senior IRS official, this article is intended to be a comprehensive discussion of three topics. First, it will summarize the author’s perception of what led the IRS to require the filing of Schedule UTP. Second, it will discuss the key concepts, including why certain provisions were adopted (e.g., the much misunderstood …

Has The Time For Large Gaming Property Involved Reits Finally Arrived?: A Review Of The Potential For Reit Investment In Destination Gaming Resort Properties, Simon Johnson

UNLV Gaming Law Journal

Destination gaming resorts demand massive amounts of capital in order to fund their investment in real property, much of which comprises areas where they realize predominantly passive business, including the hotel tower. Consequently, they generate substantial income from passive business, such as fees for hotel occupancy, even as most of their income is attributable to active business, such as gaming and personal services. Because they blend separable passive and active real property, a REIT can theoretically acquire all or some of the real property, realizing income under an operator lease with a substantially unrelated gaming or hotel lessee. Alternatively, a …

Schedule Utp - Two Major Issues, J. Richard Harvey

Working Paper Series

Although Corporate America is not happy about Schedule UTP, most corporations seem resigned to the schedule’s existence and are now attempting to comply. In the process, Corporations have been addressing many technical questions, but two seem to be receiving the most attention: the definition of a “tax reserve”, and the application of the transition rule to pre-2010 NOL carryforwards.

The current definition of tax reserve is circular and it is not clear whether it includes certain scenarios (e.g., deferred tax reserves). The application of the transition rule is of significant importance to corporations that incurred NOL carryforwards during the recession …

The Unequal Tax Treatment Of Intellectual Property, Xuan-Thao Nguyen, Jeffrey A. Maine

Faculty Publications

The tax treatment of intellectual property receives surprisingly little attention despite intellectual property's important role in the economy. In this article, Maine and Nguyen evaluate the fairness of the intellectual property tax system, identifying differences in the tax treatment of what appear to be similar transactions.

How Public Is Private Philanthropy? Separating Reality From Myth (Philanthropy Roundtable, 2d Ed. 2012) (With J. Tyler), Evelyn Brody

All Faculty Scholarship

No abstract provided.

Taxation Of Financial Products: Options For Fundamental Reform, Alex Raskolnikov

Faculty Scholarship

The following is testimony to the joint hearing of the House of Representatives Committee on Ways and Means and the Senate Committee on Finance. The testimony discusses three benchmarks for evaluating the taxation of capital income in general and financial instruments in particular, summarizes three broad-based approaches to reforming the tax treatment of financial products, evaluates the impact of other fundamental reforms on the urgency of reforming the taxation of derivatives, and urges Congress to encourage the IRS to make detailed tax return data available for empirical research of revenue costs and other losses arising from derivatives-based tax planning.

When Should Asset Appreciation Be Taxed?: The Case For A Disposition Standard Of Realization, Jeffrey L. Kwall

Indiana Law Journal

The realization requirement is one of the most basic elements of the United States income tax. Due to this requirement, any increase in the value of a person’s property is not taxed when it occurs. Rather, the tax on asset appreciation is deferred until the occurrence of a realization event; that is, until the property is transferred in exchange for money or other consideration. By contrast, all other forms of income (e.g., salary, rents) are taxed immediately.

The realization requirement is one of the most basic elements of the United States income tax. Due to this requirement, any increase in …

The Post-Tarp Movement To Regulate Banker Pay, Eric D. Chason

Faculty Publications

No abstract provided.

The History Of Intellectual Property Taxation: Promoting Innovation And Other Intellectual Property Goals?, Xuan-Thao Nguyen, Jeffrey A. Maine

Faculty Publications

An important issue deserving scholarly attention concerns the proper role of the federal tax system in achieving intellectual property law's innovation objectives. The article traces the historic development of the specific tax rules governing intellectual property, identifies present areas of policy dissonance in the intersection of intellectual property and taxation, and calls for an appropriate legal framework for future intellectual property tax legislation.

An Equity-Based, Multilateral Approach For Sourcing Income Among Nations, Fred B. Brown

All Faculty Scholarship

The source of income rules used in the United States and elsewhere in large part establish the contours of tax jurisdiction exercised by countries. The source rules play a vital role in the foreign tax credit system applicable to U.S. persons with foreign investment or business activities. The source rules also play a central role in the United States’ exercise of source taxation over foreign persons with U.S. businesses or investments. Other countries likewise use source rules or their equivalent in applying foreign tax credit or territorial systems to their residents and exercising source taxation over nonresidents.

The current approach …

Three Essays On Tax Salience: Market Salience And Political Salience, David Gamage, Darien Shanske

Articles by Maurer Faculty

This Article analyzes the literatures on how individuals understand taxation (i.e., tax salience). We evaluate how taxpayers respond to different presentations of tax prices both in their roles as market participants and as voters. We aim to combat naïve notions about tax salience that currently exert a pernicious influence on tax lawmaking. In particular, we argue that it is normatively desirable for governments to reduce tax salience with respect to market decision making, and that there is nothing objectionable about governments reducing tax salience with respect to political decision making.

Preglimony, Shari Motro

Law Faculty Publications

Unmarried lovers who conceive are strangers in the eyes of the law. If the woman terminates the pregnancy, the man owes her nothing. If she takes the pregnancy to term, the man's obligation to support her is limited. The law reflects this lovers-as-strangers presumption by making a man's obligation towards a woman with whom he conceives derivative of his paternity-related obligations; his duty is towards his child, not towards the woman in her own right. Thus, a pregnant woman's lost wages and other personal costs are her private problem, and if there is no child at the end of the …

Brief Of Constitutional Law Professors As Amici Curiae In Support Of Petitioner, Ernest A. Young

Faculty Scholarship

No abstract provided.

Déjà Vu All Over Again? Reflections On Auerbach's 'Modern Corporate Tax', Reuven S. Avi-Yonah

Law & Economics Working Papers

This paper comments on Alan Auerbach's "A Modern Corporate Tax" (Hamilton Project/CAP, December 2010) and argues that it is not a significant improvement over previous proposals to replace the corporate tax with a cash flow tax.

Equity And Efficiency In Intellectual Property Taxation, Xuan-Thao Nguyen, Jeffrey A. Maine

Faculty Publications

This article evaluates the Current US income tax regime governing intellectual property by focusing on the traditional principles of tax policy - tax fairness and efficiency. It highlights the shortcomings of the current tax system in fulfilling both of these tenets.

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 …

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 …

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.

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 Key To Closing The Tax Gap: Understanding, Susan Striz

West Virginia Law Review

No abstract provided.

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

Scholarly Works

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 Case Against Taxing Citizens, Reuven S. Avi-Yonah

Law & Economics Working Papers

The US is the only developed country to tax citizens living permanently overseas on their worldwide income. This rule was created at a time when the income tax applied only to the rich and when some of the rich moved overseas to avoid the draft. We do not have a draft any more, the income tax applies to the middle class, and many more US citizens live permanently overseas for non-tax reasons. In a globalized world, citizenship-based taxation is an anachronism which should be abandoned.