Taxation-Federal Commons^™

Third-Party Funding: Balancing Transparency, National Security, And Access To Justice, Victoria Shannon Sahani

Seattle University Law Review

Many lawmakers who have recently become aware of the multi-billion-dollar global third-party funding industry are raising new national security concerns that further complicate preexisting, longstanding debates about transparency, disclosure, access to justice, and the best way to regulate third-party funding. In response, this Article briefly asserts three main points relating to the question of how best to regulate third-party funding. First, this Article explains the third-party funding industry, including its global regulatory landscape and how it serves three distinct populations: consumers, businesses, and law firms. Second, this Article explains that third-party funding is one tool that can help expand access …

The Forgotten Income-Attribution Power, Alex Zhang

Faculty Articles

Economic inequality stands at record levels, and constitutional law haunts egalitarian reform. In 2024, the Supreme Court decided the latest contest. Moore v. United States rebuffed an attempt to sharply limit the federal taxing power, as a razor-thin majority upheld Congress’s attribution of foreign corporations’ income to domestic shareholders. But four Justices criticized the reasoning of the majority, faulting its use of a fabricated doctrine.

This Feature provides a systematic account of Congress’s income-attribution power. It excavates overlooked litigation materials and case law from the infancy of the current federal income tax. In the 1920s and 1930s, litigants attacked, on …

Congressional Power To Institute A Wealth Tax, Will Clark

Notre Dame Law Review Reflection

Over the last few years, several high-profile politicians have pushed to impose a federal “wealth tax.” For example, a recent bill introduced in the Senate would create a two percent tax on the value of assets between fifty million and one billion dollars, plus a higher percentage on wealth valued over one billion dollars. The proponents of the tax argue that it would reduce the growing wealth inequality in the United States, while opponents say that it would disincentivize investment in the American economy.

Policy arguments, however, are only relevant if the federal government has the authority to institute such …

Section 546(E) Redux—The Proper Framework For The Construction Of The Terms Financial Institution And Financial Participant Contained In The Bankruptcy Code After The U.S. Supreme Court’S Holding In Merit, Peter V. Marchetti

Cardozo Law Review

This Article discusses and analyzes the proper framework for the construction of the terms “financial institution” and “financial participant” as defined in Sections 101(22)(A) and 101(22A) of the Bankruptcy Code (the Code), as they work in tandem with Section 546(e) of the Code. In 2018, the U.S. Supreme Court issued its long awaited decision in Merit, which held that the language regarding transfers “made by or to (or for the benefit of) . . . a financial institution” contained in Section 546(e) does not insulate the ultimate transferee of a constructive fraudulent action (a CFTA) simply because the company being …

Good Intentions: Administrative Fiat And The General Welfare Exclusion, Samuel D. Brunson, Christian A. Johnson

Faculty Publications & Other Works

Since its introduction in 1913, the federal income tax has viewed income expansively, subjecting virtually all types of enrichment as gross income unless Congress explicitly exempted the income from taxation. But in the income tax’s second decade, the Bureau of Internal Revenue created an exception to the broad reach, an exception not grounded in any type of Congressional enactment. The Bureau’s practice of excluding certain benefits began innocuously in the late 1930s by excluding certain social security benefits from gross income. Over the decades, the IRS has used what it now refers to as the “general welfare exclusion” to exclude …

Is Gilti Constitutional?, Reuven S. Avi-Yonah

Articles

In this article, Avi-Yonah argues that the global intangible low-taxed income regime may be an unconstitutional attempt to tax the foreign-source income of foreign entities, and he offers an alternative.

The Impact Of Particular Provisions Of The 2017 Tax Cuts And Jobs Act On The United States Economy Amidst The Covid-19 Pandemic, Hillary Obinna Maduka

LL.M. Essays & Theses

The Tax Cuts and Jobs Act is the most significant overhaul of the U.S. federal tax system in the last two decades. This paper seeks to discuss some of its most significant provisions and examine their overall impact on the U.S. economy, especially throughout the ongoing coronavirus pandemic.

This paper begins by undertaking an overview of the legislative history of the Act and then proceeds to discuss three provisions of the Tax Cuts and Jobs Acts which have had a tremendous impact on the U.S. economy by altering some major provisions of the United States Internal Revenue Code of 1986. …

The Games They Will Play: Tax Games, Roadblocks, And Glitches Under The 2017 Tax Legislation, David Kamin, David Gamage, Ari Glogower, Rebecca Kysar, Darien Shanske, Reuven S. Avi-Yonah, Lily Batchelder, J. Clifton Fleming, Daniel Hemel, Mitchell Kane, David Miller, Daniel Shaviro, Manoj Viswanathan

Articles

The 2017 tax legislation brought sweeping changes to the rules for taxing individuals and business, the deductibility of state and local taxes, and the international tax regime. The complex legislation was drafted and passed through a rushed and secretive process intended to limit public comment on one of the most consequential pieces of domestic policy enacted in recent history. This Article is an effort to supply the analysis and deliberation that should have accompanied the bill’s consideration and passage, and describes key problem areas in the new legislation. Many of the new changes fundamentally undermine the integrity of the tax …

The Beat And Treaty Overrides: A Brief Response To Rosenbloom And Shaheen, Reuven S. Avi-Yonah, Bret Wells

Articles

In a recent article in Tax Notes International, H. David Rosenbloom and Fadi Shaheen argue that the base erosion and antiabuse tax (IRC section 59A, as enacted in 2017) is a potential violation of articles 23 and 24 of U.S. tax treaties. They say the BEAT does not override those treaties, so those agreements can be relied on to overcome the effects of the BEAT. In our opinion, that conclusion is wrong for two reasons: The BEAT is not a treaty violation, and even if were, it is a treaty override.

De Novo: Reviewing Tax Court Redressability Incongruities In Innocent Spouse Relief Sections 66© And 6015(F), Jason Harn

Seattle University Law Review

Part One of this Note details the historical background of joint and several liability in federal income taxation. Part Two introduces, compares, and contrasts the two statutory provisions Congress has enacted to relieve “innocent spouses” from joint and several liability. Part Three discusses the incongruent standards of review applied by the Tax Court to these—§§ 66 and 6015—two substantially similar relief provisions. Finally, Part Four suggests remedies to alleviate this incongruity.

Once More, With Feeling: Tra 17 And Original Intent Of Subpart F, Reuven S. Avi-Yonah, Nir Fishbien

Articles

For the first time since 1913, Congress is considering abandoning the principle that U.S. residents should be subject to tax on all income “from whatever source derived.” Specifically, the proposed tax reform legislation, the Tax Cuts and Jobs Act, would completely exempt from U.S. taxation dividends from controlled foreign corporations. This is therefore a good occasion for considering the reasons we tax those dividends in the first place.

Problems With Destination-Based Corporate Taxes And The Ryan Blueprint, Reuven S. Avi-Yonah, Kimberly Clausing

Articles

With the election of Donald Trump and the Republican Party’s domination of Congress, House Speaker Paul Ryan’s blueprint for fundamental tax reform requires more careful analysis. The Ryan blueprint combines reduced individual rates with a destination-based cash flow type business tax applicable to all businesses. The destination-based business tax at the center of the blueprint has several major problems: It is incompatible with our WTO obligations, it is incompatible with our tax treaties, and it will not eliminate the problems of income shifting and inversions it is designed to address. In addition, these proposals generate vexing technical problems that are …

Federalism And Phantom Economic Rights In Nfib V. Sibelius, Matthew Lindsay

All Faculty Scholarship

Few predicted that the constitutional fate of the Patient Protection and Affordable Care Act would turn on Congress’ power to lay and collect taxes. Yet in NFIB v. Sebelius, the Supreme Court upheld the centerpiece of the Act — the minimum coverage provision (MCP), commonly known as the “individual mandate” — as a tax. The unexpected basis of the Court’s holding has deflected attention from what may prove to be the decision’s more constitutionally consequential feature: that a majority of the Court agreed that Congress lacked authority under the Commerce Clause to penalize people who decline to purchase health insurance. …

Understanding The Amt, And Its Unadopted Sibling, The Amxt, James R. Hines Jr., Kyle D. Logue

Articles

Four million Americans with extensive tax preferences are subject to the Alternative Minimum Tax (AMT). By taxing a broad definition of income, the AMT makes it possible to have a tax system that both encourages certain activities with generous tax preferences and maintains a semblance of distributional equity. The same rationale supports the imposition of an Alternative Maximum Tax (AMxT), which would cap tax liabilities of individuals with very few preference items and thereby afford Congress greater flexibility in designing the income tax. The original 1969 AMT proposal included an AMxT; it is difficult to justify imposing one without the …

Retirees Beware: Don't Worry About The British, 'Taxmageddon' Is Coming, Douglas A. Kahn, Lawrence W. Waggoner

Articles

"Taxmageddon" is coming. Unless Congress extends the current rates or reaches an agreement on tax reform, dividends will then be taxed as ordinary income at a marginal rate as high as 39.6 % and net capital gains will then be taxed at 20%. For high-income taxpayers, a 3.8% Medicare surtax will be added to the taxation of net capital gains, dividend income, interest, and other investment income, bringing the highest marginal rate to 43.4%.

Senator Mccain's Corporate Tax Proposals A Critical Examination, Reuven S. Avi-Yonah

Other Publications

Senator John McCain (R-AZ) has proposed two major changes to the corporate tax code: cutting the corporate tax rate from 35 percent to 25 percent and allowing corporations to deduct the full cost of investments in technology and equipment in the first year, an accounting process known as expensing. The first proposal aims to enhance U.S. economic competitiveness, create jobs, and increase wages. The second proposal aims in particular to boost capital expenditures and “reward investment in cutting-edge technologies.”1

All In The Family As A Single Shareholder Of An S Corporation, Douglas A. Kahn, Jeffrey H. Kahn, Terrence G. Perris

Articles

Subject to a few exceptions, a corporation that has elected to be taxed under subchapter S of chapter 1 of subtitle A of title 26 of the United States tax code is not taxed on its net income. Instead, the income, deductions, credits, and other tax items of an S corporation pass through to its shareholders on a pro rata basis. To qualify for subchapter S treatment, an electing corporation must satisfy the requirements that are set forth in section 1361, one of which is that the corporation can have no more than 100 shareholders. One aspect of that requirement …

Congress's Transformative Republican Revolution In 2001-2006 And The Future Of One-Party Rule, Charles Tiefer

All Faculty Scholarship

In 2001 - 2006, Republican leadership in the legislature circumvented procedural norms to implement an ideological agenda that precluded the minority party from making alternative proposals and voicing criticisms. With the Republican majority in the Senate falling to 50-50 in 2000, President Bush's assumption of office, despite having lost the popular vote, set the tone for what would become an era of illegitimate procedural reform cloaked in secrecy and deniability. Through closed-door conferences and closed-rules, Republican leadership in the House and Senate turned the clock back on civil liberties, passed unfavorable and convoluted tax cuts, and used transformed health care …

Prevention Of Double Deductions Of A Single Loss: Solutions In Search Of A Problem, Douglas A. Kahn, Jeffrey H. Kahn

Articles

In the current tax system, a corporation is treated as a separate taxable entity. This tax system is sometimes referred to as an entity tax or a double tax system. Since a corporation is a separate and distinct entity from its owners, the shareholders, the default rule is that transfers between them are treated as realization events. Without a specific Internal Revenue Code (Code) provision providing otherwise, such transactions will also require the parties to recognize the realized gain or loss. Congress has enacted several nonrecognition corporate provisions when forcing the recognition of income could prevent changes to the form …

The Pitfalls Of International Integration: A Comment On The Bush Proposal And Its Aftermath, Reuven S. Avi-Yonah

Articles

In January 2003, the Bush Administration proposed a new system for taxing corporate dividends, under which domestic shareholders in U.S. corporations would not be taxed on dividends they received, provided the corporation distributed these dividends out of after-tax earnings (the “Bush Proposal”). The Bush Proposal was introduced in Congress on February 27, 2003. Ultimately, however, Congress balked at enacting full-?edged dividend exemption. Instead, in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (“JGTRRA”) as enacted on May 28, 2003, a lower rate of 15% was adopted for dividends paid by domestic and certain foreign corporations,1 and the capital …

Taxation Of Punitive Damages Obtained In A Personal Injury Claim, Douglas A. Kahn

Articles

The author explains that in recent court opinions and commentaries concerning whether punitive damages are taxable, considerable weight has been given to a negative inference that appears to lurk in a 1989 amendment to the relevant code provision, section 104(a)(2). To the contrary, he argues, the legislative history of that amendment and the form that the bill had when it was reported out of the Conference Committee establish beyond doubt that no such inference is warranted.

Should General Utilities Be Reinstated To Provide Partial Integration Of Corporate And Personal Income—Is Half A Loaf Better Than None?, Douglas A. Kahn

Articles

The General Utilities doctrine is the name given to the now largely defunct tax rule that a corporation does not recognize a gain or a loss on making a liquidating or nonliquidating distribution of an appreciated or depreciated asset to its shareholders. The roots of the doctrine, can be traced to a regulation promulgated in 1919 that denied realization of gain or loss to a corporation when making a liquidating distribution of an asset in kind. No regulatory provision existed which specified the extent to which realization would or would not be triggered by a nonliquidating distribution such as a …

Accelerated Depreciation—Tax Expenditure Or Proper Allowance For Measuring Net Income?, Douglas A. Kahn

Articles

Since the 1950s, it has become fashionable to attack various provisions of the Internal Revenue Code by calling them "subsidies" rather than "proper" means of measuring taxable income. These "subsidies" through Code provisions have come to be referred to as "tax expenditures," a term coined by Professor Stanley Surrey in a speech he made as Assistant Secretary of the Treasury for Tax Policy on November 15, 1967. In that speech, Professor Surrey stated that our tax system often deliberately departs "from accepted concepts of net income," so that by granting exemptions, deductions, and credits that are not appropriate to an …

The Corporation Tax Decision, Ralph W. Aigler

Articles

Seldom, if ever, in the history of the country has the Supreme Court been called upon within a comparatively short period of time to decide so many questions of widespread interest and vital importance as has been the case during the last year or two. Attempts on the part of the state and national governments to regulate and control corporations, which in recent years have come to exercise such a large and not always wholesome influence upon affairs generally, have been the occasion for the consideration by the court of many of the important cases recently presented. Among these are …

The Constitutionality Of The Federal Corporation Tax, Ralph W. Aigler

Articles

During the special session of Congress held the past summer there was enacted as an amendment to the new Tariff Law what is generally known as the Federal Corporation Tax.1 At the time of its consideration in Congress and since its enactment there has been considerable discussion regarding the constitutionality of the measure, and no little doubt has been expressed as to its validity.