Taxation-Federal Commons^™

The Virginia Historic Tax Credit Funds Case And The Uncertain Federal Income Tax Treatment Of State Tax Credits, William F. Machen

William & Mary Annual Tax Conference

No abstract provided.

Recent Developments In Federal Income Taxation, Ira B. Shepard

William & Mary Annual Tax Conference

No abstract provided.

Washington Tax Legislative Update: Weathering The Gathering Storm, Jonathan Talisman

William & Mary Annual Tax Conference

No abstract provided.

The Sixth Amendment And Expert Witnesses In Criminal Tax Cases, Steve R. Johnson

Scholarly Publications

Recently, in the Baxter case, a federal district court vacated the sentence imposed as a result of a guilty plea in a criminal tax case. The court held that the failure of defense counsel to retain the services of an expert in tax crimes sentencing violated the defendant’s Sixth Amendment right to effective representation.

This installment of the Tax Crimes column explores Baxter. Part A briefly notes the civil and criminal tax contexts in which tax experts are used. Part B describes Baxter and its holding. Part C asks whether defense counsel in criminal tax cases should always retain a …

Easterday And The Erosion Of The Financial Inability Defense, Steve R. Johnson

Scholarly Publications

Several tax crimes in the code involve failure to pay known or assessed tax liabilities. For generations, there has been controversy over whether a taxpayer’s lack of funds from which to make payment should preclude conviction for those crimes. The potency of the financial inability defense1 has waned over the years. The recent decision of a divided Ninth Circuit panel in Easterday continues that trend, but the defense should still have life in some situations and some courts.

Part I of this report describes the tax crimes to which a financial inability defense may be relevant. Part II discusses Easterday. …

Misguided Relief: Unsimplifying The Standard Deduction, Alan L. Feld

Faculty Scholarship

The push to use federal money for benevolent purposes occasionally produces more cost than benefit, particularly when the outlay comes in the form of taxes forgiven. The Housing Assistance Tax Act of 2008 added a supplement to the basic standard deduction. A nonitemizing taxpayer may claim a deduction for real property taxes paid, up to $500, $1,000 in the case of a joint return. Initially, the change applied only to 2008, but subsequent legislation extended its life through 2009, and pending legislation would make it a permanent part of the Code. Although well intentioned, the real property tax provision makes …

Families For Tax Purposes: What About The Steps, Wendy G. Gerzog

All Faculty Scholarship

At least 4.4 million families in the U.S. are blended ones that include step-children and step-parents. For tax purposes, these steps receive preferential treatment for their status because they are on the one hand included as family members for many income tax benefit sections, but on the other hand excluded as family members for business entity attribution purposes and for gift and estate tax anti-abuse provisions. In the interests of fairness and uniformity, steps should be treated as family members for all tax purposes where steps have in fact voluntarily acted as their biological or adoptive counterparts, both when such …

Xilinx And The Arm's-Length Standard, Reuven S. Avi-Yonah

Articles

On May 7 the Ninth Circuit decided Xilinx v. Commissioner. By a 2-1 majority, the panel reversed the Tax Court and held that costs of employee stock options must be included in the pool of costs subject to a tax-sharing agreement. The Xilinx decision is important for three reasons. First, cost sharing is probably the key element in current transfer pricing law because it is the principal way in which profits from intangibles get shifted from the United States to low-tax jurisdictions. Moreover, informed observers agree that the allocation of income from intangibles is the most important problem in transfer …

Flying Above The Law And Below The Radar: Instilling A Taxpaying Ethos In Those Playing By Their Own Rules, Richard Lavoie

Pace Law Review

No abstract provided.

Seventy-Eight Percent Of Working Rural Families To Receive Full Making Work Pay Tax Credit, Marybeth J. Mattingly

Carsey Publications

The Making Work Pay Tax Credit provides eligible U.S. workers with additional money in each paycheck throughout the year. The fact sheet shows that 78 percent of rural working families will receive the full amount of the credit, while an additional 10 percent of families will receive a partial credit due to low earnings or high earnings. These tax credits, along with the expansion to the Child Tax Credit, are an important financial boost to families in rural America, particularly low-income working families.

Forty-Three Percent Of Eligible Rural Families Can Claim A Larger Credit With Eitc Expansion, Marybeth J. Mattingly

Carsey Publications

This policy brief on the changes to the Earned Income Tax Credit in the ARRA also shows that families with three or more children and married couples will receive an increased refund under these new EITC rules for tax years 2009 and 2010. Many families in urban and suburban communities will also see increased benefits under these new provisions.

Obama's International Tax Plan: A Major Step Forward, Reuven S. Avi-Yonah

Articles

President Barack Obama last week personally introduced a set of proposals to reform U.S. international taxation that are the most significant advance toward preserving the income tax on cross-border transactions since the enactment of the subpart F rules by the Kennedy administration in 1962. (For prior coverage, see Doc 2009-10047 or 2009 TNT 84-1.) In essence, the Obama proposals introduce a 21stcentury version of the vision begun by Thomas Adams in 1918 and continued by Stanley Surrey in 1961: a world in which source and residence taxation are coordinated so as to achieve the underlying goals of the international tax …

Negron: Circuits Now Split 2-2, Wendy G. Gerzog

All Faculty Scholarship

The article discusses Negron and the circuit split on the issue of whether to value non-assignable lottery payments in a decedent's estate by means of the actuarial tables or whether that value needs to be discounted for non-marketability.

Close The Yield Exemption Loophole Created By Childs, Brant J. Hellwig, Gregg D. Polsky

Scholarly Articles

The proposal would reverse the holding of Childs v. Commissioner, 103 T.C. 634 (1994), and clarify that a contractual payment obligation received by a service provider is subject to immediate taxation under section 83 if the obligor is a person other than the recipient of the service provider’s services. As a result, the proposal would ensure the appropriate taxation of investment income in structured payment arrangements.

The proposal is based on a more comprehensive article by the authors, forthcoming in volume 51 of the Boston College Law Review, titled ‘‘Taxing Structured Settlements,’’ a draft of which is available at http://ssrn.com/abstract=1403248. …

Child Tax Credit Expansion Increases Number Of Families Eligible For A Refund, Marybeth J. Mattingly

Carsey Publications

The analysis shows that more than 500,000 rural families, or almost 9 percent of rural families, will become newly eligible for the Child Tax Credit under the expansion included in the American Recovery and Reinvestment Act. Within these families are an estimated 900,000 rural children. The proportion of urban families benefiting from the expanded Child Tax Credit is slightly lower than in rural areas, but only 5 percent of suburban families are newly eligible for the credit.

Minnesota Mandates: County Government Fiscal Stress In An Era Of Declining State Support, Selena Krueth

Political Science Theses and Capstones

Minnesota counties are experiencing more than just financial burdens from state mandates these days. Counties and local governments currently are seeking the most effective solution of implementing state mandates; leaving behind the argument of no mandates without funding to "give us mandates that work". In my analysis I combined county budgetary and demographic data, with phone survey data gathered from Minnesota counties. I anticipate results that will show a wide variety in county administrator attitudes towards state mandates and varying local capacity to meet them. Costly state mandates, such as health services, and large county populations have proven significant in …

Who's Afraid Of Redistribution? An Analysis Of The Earned Income Tax Credit, Jennifer Bird-Pollan

Law Faculty Scholarly Articles

In the 2008 Presidential campaign, the American public was reminded time and again of the differences in the economic policies of the nominees: John McCain would cut taxes, and Barack Obama would raise them, although only on those earning over $250,000. In the final days of the campaign, the McCain camp accused Obama of proposing “redistribution,” and the Obama camp quickly denied that description. So why do presidential candidates run so quickly from the r-word? McCain’s senior policy advisor equated redistribution with socialism, but redistribution, in the form of the federal income tax system, is a central tenet of American …

Integrating Subchapters K And S — Just Do It, Walter D. Schwidetzky

All Faculty Scholarship

The Code contains two “pass-through” tax regimes for business entities. One is contained in Subchapter K, which applies to partnerships, the other in Subchapter S, which, unsurprisingly, applies to S corporations. In the main, both Subchapters tax the owners of the entities rather than the entities themselves. Having two pass-through tax regimes creates obvious administrative and other inefficiencies. There was a time when S corporations served a valuable purpose, particularly when taxpayers needed a fairly simple and foolproof pass-through entity that provided a liability shield. But limited liability companies (LLCs), which are usually taxed as partnerships, 1 in most contexts …

Reinvigorating Nonprofit Directors' Duty Of Obedience, Jeremy Benjamin

Cardozo Law Review

No abstract provided.

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 …

Am I The Only Person Paying Taxes? The Largest Tax Loophole For The Rich - Exchange Funds, David J. Herzig

Law Faculty Publications

President Obama is faced with a national debt at over $11 trillion and needs to fund projects such as National Health Care with an ever-shrinking tax base. As the economy has slowed, so have tax revenues. It would then make sense for the government to reexamine tax carve-outs that only benefit the wealthy. In fact, President Obama is on record saying he wants to eliminate tax loopholes. After almost fifty years, the time is ripe to eliminate one of the few congressionally authorized tax loopholes—the $30 billion Exchange Funds.

This Article addresses the social equity arguments and the tax and …

To Save State Residents: States' Use Of Community Property For Federal Tax Reduction, Stephanie Mcmahon

Faculty Articles and Other Publications

This essay analyzes the forces that led five common law states to adopt community property regimes between 1939 and 1947. Focusing on Oklahoma, the first state to switch, this article traces these laws from initial proposals through their repeal after Congress enacted nationalized income-splitting in 1948. Earlier studies have focused on the impact of these laws, primarily on wives as secondary earners within families, and not on their development. From the various political and social forces precipitating this trend, this study explores the actual reasons states adopted these regimes and shows that an economic goal, namely reducing married couples' federal …

The Work Product Doctrine And Tax Accrual Workpapers, Steve R. Johnson

Scholarly Publications

In its rehearing of Textron, the First Circuit has an opportunity to rectify an error and curb unwise recent expansion of work product protection for tax accrual workpapers. In August 2007, a district court denied the government’s petition for enforcement of an IRS summons on Textron Inc. and its subsidiaries for tax accrual workpapers in connection with IRS examinations of the taxpayers’ 1998 to 2001 income tax returns. A divided panel of the First Circuit affirmed in January 2009. In March 2009, the First Circuit withdrew the panel opinion and dissent, and it set the case for en banc hearing …

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 …

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 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.

It Down And Count The Cost:" A Framework For Constitutionally Enforcing The 501(C)(3) Campaign Intervention Ban, Benjamin Leff

Scholarly Articles in Law Reviews & Journals

Section 501(c)(3) of the Internal Revenue Code (Code) prohibits charities from intervening in a political campaign for or against a candidate for public office. The Internal Revenue Service (Service) currently interprets the campaign-intervention ban to absolutely prevent charities from communicating their views on candidates, even if such communications are completely financed by non-501 (c) (3) affiliates. This article argues that the current Service enforcement paradigm is unconstitutional because it exceeds the government interest in preventing tax-deductible donations to be used for campaign- intervention. A constitutional interpretation exists under the current statutory framework, but it would require the Service to shift …

Elimination Of The Deduction For Business Entertainment Expenses, Richard L. Schmalbeck, Jay A. Soled

Faculty Scholarship

The proposal is offered as a part of the Shelf Project, a collaboration by tax professionals to develop and perfect proposals to help Congress when it needs to raise revenue. Shelf Project proposals are intended to raise revenue without raising tax rates because the best systems have taxes that are unavoidable to reach the lowest feasible tax rates.

This proposal would deny deductions for all business entertainment expenses. Also, the definition of the term ‘‘entertainment’’ would be narrowed so that expenses that are incurred in a clear business setting and are deeply rooted in producing immediate income or in mining …

Cancellation-Of-Indebtedness Income And Transactional Accounting, Lawrence A. Zelenak

Faculty Scholarship

More than three-quarters of a century after the Supreme Court’s decision in United States v. Kirby Lumber established that the cancellation of a debt produces taxable income, there is still uncertainty - both in the courts and among commentators - concerning the rationale for the taxation of cancellation-of-debt (COD) income. Is the taxation of COD income based on the simple fact that the cancellation of a debt improves the taxpayer’s balance sheet, thus increasing the taxpayer’s net worth in the year of cancellation? Or is it based on a multi-year perspective, in which inclusion of the cancelled debt in income …

Closing The International Tax Gap Via Cooperations, Not Competition, Reuven S. Avi-Yonah

Book Chapters

All three major goals of the Volcker task force — reducing tax evasion and loopholes, simplifying the code, and reducing corporate welfare — can be advanced by focusing on the international aspects of the tax gap. These aspects include both enforcement of existing U.S. law on U.S. residents earning income overseas (the evasion issue) and reforming deferral for U.S.-based multinational enterprises (the avoidance issue). To best advance the task force’s three goals, I would propose a change in each of these two major international areas.