Tax Law Commons^™

The Tax Exempt Innovation Cycle, University Of Washington School Of Law

Rule of Law Initiative

Executive Summary:

The U.S. innovation ecosystem thrives on a complex interrelationship between tax policy, philanthropic foundations, and entrepreneurial ventures. The tax code, particularly provisions related to private foundations and Program-Related Investments (PRIs), play a critical role in funding high-risk, high-impact innovations that address societal challenges. Wealth funds the foundation, the foundation funds innovation, and innovation enhances the founder’s lasting impact on society.

Key Findings:

1. Tax-Exempt Foundation Structure: Private foundations, established by wealthy individuals and corporations, serve as powerful vehicles for channeling substantial capital into innovation while providing tax benefits to donors.
2. The Innovation Funding Cycle: Private foundations and …

Reaganomics: History Repeats Itself, But Louder, University Of Washington School Of Law

Rule of Law Initiative

Executive Summary

Ronald Reagan’s presidency (1981–1989) dramatically reshaped the American economic and institutional landscape. He championed “supply-side” economics, dubbed “Reaganomics.” Through sweeping tax cuts, deregulation, and a reallocation of federal funding priorities, Reagan shifted the burden of public services, especially in education and research, from government to individuals and private markets. Public universities saw deep cuts in federal support and increasingly turned to industry partnerships and commercialization to survive. Simultaneously, Reagan expanded defense research funding, fostering a close relationship between the government and elite research institutions. Innovation policy was formalized through the Bayh-Dole Act and the creation of …

Tax Exempt Research Guide, University Of Washington School Of Law

Rule of Law Initiative

For over a hundred years, organizations have harnessed and relied on tax exempt status to serve the public. Tax exemption is a powerful tool for social, environmental, and community well-being. This Legal Research Guide on Tax Exemption serves as a navigational compass for the public seeking to learn about tax exemption.

Why The Rule Of Law Matters For Nonprofits, University Of Washington School Of Law

Rule of Law Initiative

The Rule of Law is what keeps tax exemption from being a political weapon and allows for nonprofit organizations to provide services the government is not providing our communities.

Rule Of Law – Public Q&A, University Of Washington School Of Law

Rule of Law Initiative

Below are common questions the public may have about the Rule of Law, tax exemption status, the revocation of tax exempt status, and key cases like Bob Jones University. To understand these in more detail, browse the Tax Exempt research guide (History, Rule of Law, Revoking Tax Exemption, Secondary Materials, and Current Awareness).

Bob Jones University And The Rule Of Law, University Of Washington School Of Law

Rule of Law Initiative

The Rule of Law is what keeps tax exemption from being a political weapon.

Bob Jones University shows the Rule of law in action: clear public policy, cross-branch consensus, balanced against constitutional rights, and enforced through transparent procedures and court review.

The case is influential because it lays the foundations for analyzing The Public Policy Doctrine, a key element when courts review tax exempt revocation cases.

The revocation of tax-exempt status is law-driven, not headline-driven; the Bob Jones University v. United States case set an important precedent by creating a narrow and cautious framework that the IRS must follow to …

A Brief History Of Tax Exemption, University Of Washington School Of Law

Rule of Law Initiative

Below is a condensed history of tax exemption. It contains an analysis of tax exemption before statutory codification in 1894. It explains how the law evolved to provide predictability and fairness in the application of an organization’s tax-exempt status.

How Does A Court Determine The Tax-Exempt Purposes Of An Organization?, University Of Washington School Of Law

Rule of Law Initiative

To determine the tax-exempt purposes of an organization, courts and tax authorities primarily examine whether the organization is both "organized" and "operated" exclusively for exempt purposes, as required under 26 U.S.C § 501.

This involves a two-part test: the "organizational test" and the "operational test." The organizational test assesses whether the organization's foundational documents, such as its charter or articles of incorporation, limit its purposes to one or more exempt purposes and do not authorize substantial non-exempt activities.

Case Law On American Indians: September 2023 - August 2024, Thomas P. Schlosser

American Indian Law Journal

No abstract provided.

The Deterrence Effects Of Tax Whistleblower Laws: Evidence From New York’S False Claims Acts, Yoojin Lee, Shaphan Ng, Terry Shevlin, Aruhn Venkat

Research Collection School Of Accountancy

In this study, we provide evidence on the effects of state tax whistleblower laws. We exploit a novel 2010 amendment to New York’s False Claims Acts (FCA) that explicitly extended whistleblower incentives to corporate income tax whistleblowers. We identify treated firms (firms exposed to New York’s FCA) using establishment-level data and descriptive analyses. Using a sample of firms exposed to New York and neighboring states, we find evidence that New York’s FCA reduced state tax avoidance. In cross-sectional tests, we find that effects are increasing in firms that grant fewer employee stock options and industry regulation, consistent with deterrence increasing …

The Tax Redistribution Gap, Eric Baudry

Fellow, Adjunct, Lecturer, and Research Scholar Works

The tax revenue gap—the difference between how much the IRS collects in tax revenue and how much it should collect based on the text of the Internal Revenue Code—is both well-defined and well-studied. But raising revenue is just one purpose of taxation; the tax code also operates to redistribute wealth. Drawing from the tax revenue gap and redistribution literatures, this article coins a parallel concept, the tax redistribution gap, to map the extent to which the tax system falls short of its redistributive goals.

Introducing a tax redistribution gap measure challenges background assumptions in current tax discourse: first, it would …

Why Did The Irs Restart Transfer Pricing Litigation?, Reuven S. Avi-Yonah

Articles

In his excellent recent article on Coca-Cola’s appeal of its transfer pricing defeat in the Tax Court, Tax Notes contributing editor Ryan Finley explains that Coca-Cola’s main argument is based on the idea that “the IRS led the company into an ambush.” In 1996 the IRS entered into a closing agreement with Coca-Cola that provided that for the 1987 through 1995 tax years, the division of profits between Coca-Cola and its foreign “supply points” (the subsidiaries responsible for mixing the secret formula) would be based on a 10 percent return to the subsidiary and that any profit above that would …

Inclusive Prosperity, Deanna S. Newton

Texas A&M Law Review

Gentrification affects almost every American city to varying degrees, involving different parties with different interests. While positive changes are associated with gentrification, low-income individuals are often displaced from their communities due to increased rent costs and property values. Throughout our nation’s history, the federal government has offered tax incentives to those who invest in low-income areas that have historically suffered disinvestment. These tax incentives encourage investment by providing tax benefits and minimal investment constraints. However, because investors are not required to tailor their investments to meet the needs of communities, the unintended consequence of these programs is that residents do …

Canada's New Gaar Preamble: Pivoting Toward Fairness And Parliamentary Contemplation, Jinyan Li, Michael Conroy, Sebastien Tuli, Kitty Wang, Patrick White

Articles & Book Chapters

This paper examines the role of the new preamble in the GAAR provision and argues that fairness is a legal concept that can be applied in GAAR cases.

Bridging The Gap: Local Tax Regulations And The Future Of Green Tax In Indonesia, Daffa Zulfa Yudhanto, Murwendah Murwendah

BISNIS & BIROKRASI: Jurnal Ilmu Administrasi dan Organisasi

Indonesia again ranks among the top three countries vulnerable to the impacts of climate shocks. The intensity of the risk from this phenomenon is expected to continue increasing if a change in societal behavior does not accompany it. Referring to the Environmental Protection Management Law, one of the steps that can be taken to regulate such behavior is through economic instruments, such as a green tax. The green tax will be ineffective without a coherent regulatory framework and stakeholder political will. This study analyzes the alignment of green tax regulations at the regional level and the gaps in their implementation …

Assessing The Tax Communications Of E-Commerce Vendors, Part I, David Gamage

Faculty Publications

This article reports research results from a study analyzing the tax communication practices of top e-commerce retailers and marketplaces. The research found a spectrum of tax communication practices. Notably, many (but not all) e-commerce businesses that did not collect sales tax did still inform customers about potential use tax obligations, though the transparency of this information varied.

Should The States Return To Worldwide Combined Reporting?, Reuven S. Avi-Yonah

Articles

On February 20 the Institute on Taxation and Economic Policy (ITEP) released a report on the revenue implications of states adopting worldwide combined reporting (WWCR). WWCR refers to a method of taxation that several states (for example, California) applied from the 1970s to the 1990s. Under WWCR, the state takes the entire worldwide profit of a multinational operating in the state and multiplies it by a formula that traditionally combines payroll, tangible assets, and sales in the state divided by worldwide payroll, assets, and sales. The result is the amount of profit taxable in that state.

It’S Not So Simple: An Examination Of How The Internal Revenue Code Fails To Contemplate The Economic Realities Of Individuals With Disabilities And Their Families, Garret Hoff

Duke Law & Technology Review

Families with disabled students face extra costs associated with providing their child with the same education that other students get for free. Even though these costs are spent with the explicit purpose of supporting their child’s disability-informed care and are not incurred but for their disability (“but-for costs”), some of these costs are not deductible and others are subject to unnecessary ambiguity when it comes to their deductibility. Families with disabled students are forced to reckon with arbitrary distinctions if they want to receive any favorable tax treatment on but-for costs. This is because the relevant provision in the Internal …

Retaliatory Taxation, Reuven S. Avi-Yonah

Law & Economics Working Papers

This paper discusses the Trump administration's potential use of section 891 and pending legislation to apply retaliatory taxes to foreign countries that impose "discriminatory or extraterritorial" taxation on US multinationals.

Federal Tax Immunity And The Legal Incidence Of The Maine Sales Tax: Gamage V. Halperin, Maine Law Review

Maine Law Review

Established constitutional doctrine grants the federal government immunity from state taxation. Application of this doctrine ordinarily depends upon the "legal incidence" of the state tax. A state tax imposed directly on the United States or on one of its instrumentalities violates the immunity of the federal government. Gamage v. Halperin raised the issue of whether a sale partly subsidized by the federal government is entitled to constitutional immunity from a state sales tax, at least to the extent of the government's share of the tax. Taxation of a federally subsidized sale presents difficult problems of federal tax immunity. The threshold …