Tax Law Commons^™

Tax Advice For The Second Obama Administration, Michael J. Graetz

Faculty Scholarship

Delivered January 18, 2013 as the keynote address at a conference cosponsored by Pepperdine Law School and Tax Analysts.

Filing Status And Today's Families, Erik Baines

University of Richmond Law Review

No abstract provided.

Section 7433'S Statute Of Limitations: How Courts Have Wrongly Turned A Taxpayer's Exclusive Sword Into The Irs's Shield Against Damages, Diana Leyden

Faculty Articles and Papers

Over twenty years ago, Congress took the extraordinary step of authorizing taxpayers to sue the Internal Revenue Service (“IRS”) for damages if the IRS engaged in “unauthorized collection action” when trying to collect a federal tax debt. For many years the IRS has generally been immune from any private action by three laws. Thus, fashioning a private cause of action against the IRS for damages was an extraordinary act. Congress expressly authorized taxpayers to bring a private cause of action against the United States for economic damages caused by “unauthorized collection.” Codified as section 7433 of the Internal Revenue Code, …

Report Of The Hearing Officer, Multistate Tax Compact Article Iv [Uditpa] Proposed Amendments, Richard Pomp

Faculty Articles and Papers

The Uniform Law Commission (ULC) promulgated its model Uniform Division of Income for Tax Purposes Act (UDITPA) in 1957. UDITPA provides a model law for dividing the income of a multistate corporation among the states in which it is doing business. UDITPA is incorporated into the Multistate Tax Compact, which is administered by the Multistate Tax Commission.

UDITPA has never been amended since its original adoption more than fifty years ago. The ULC attempted a revision in 2006 but abandoned it in response to business pressures. The MTC stepped into the vacuum and undertook its own reforms. It proposed five …

Watching The Watchers: Preventing I.R.S. Abuse Of The Tax System,, Samuel D. Brunson

Faculty Publications & Other Works

As a result of broad outcries against the incompetence and aggressiveness of the LR.S., Congress reined in its behavior, requiring it to focus on treating taxpayers as customers. Congress also created oversight bodies to ensure that the I.R.S. would comply with the new mandate. Though those oversight bodies face some difficulties - most notably, the unwillingness of Congress to adequately fund them - they nonetheless have proven effective at checking the IR.S. 's misbehavior with regard to taxpayers.

Congress has not, however been as solicitous to the tax law itself The I.R.S. can act in ways that violate both the …

Mutual Funds, Fairness, And The Income Gap, Samuel D. Brunson

Faculty Publications & Other Works

The rich, it turns out, are different from the rest of us. The wealthy, for example, can assemble a diversified portfolio of securities or can invest through hedge and private equity funds. When the rest of us invest, we do so largely through mutual funds. Nearly half of American households own mutual funds, and mutual funds represent a significant portion of the financial assets held by U.S. households.

The tax rules governing mutual funds create an investment vehicle with significantly worse tax treatment than investments available to the wealthy. In particular, the tax rules governing mutual funds force shareholders to …

When Are Damages Tax Free?: The Elusive Meaning Of “Physical Injury”, Ronald H. Jensen

Elisabeth Haub School of Law Faculty Publications

Part I of this article traces the evolution in the tax treatment of litigation damages from 1918 through the enactment of the 1996 Amendments and reviews the various rationales that have been offered for such treatment. In Part II, I set forth a number of hypothetical cases illustrating some of the issues created by the 1996 Amendments. In Parts III through Part VI, I set forth my analyses of these issues. Finally, In Part VII, I critique the 1996 Amendments and make a proposal that would eliminate much of the uncertainty and inequity that the 1996 Amendments created while satisfying …

Path Dependence In Tax Subsidies For Home Sales, Lily Kahng

Faculty Articles

At a time of looming fiscal crisis and virtual unanimity that tax expenditures must be curtailed, tax subsidies for homeownership stand out as among the most costly and unfair of these expenditures. As a result of tax subsidies for homeownership, the government foregoes billions of dollars in revenue each year, most of which benefits wealthy taxpayers. Moreover, subsidies for homeownership encourage overinvestment in housing and underinvestment in other business sectors, which impedes economic productivity, jobs creation and the ability of U.S. businesses to compete in the global marketplace.

Scholars and commentators have analyzed extensively the tax subsidy for home mortgage …

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

Law & Economics Working Papers

U.S. taxpayers are currently required to pay the greater of their liabilities under the regular income tax and their liabilities under the Alternative Minimum Tax (AMT). Despite its unpopularity, the AMT serves the function of permitting Congress to offer tax preferences for certain activities and expenditures while maintaining a progressive tax system. This paper examines this role of the AMT, and explores the possibility of adding an Alternative Maximum Tax (AMxT) that would augment the impact of the AMT. An AMxT limits a taxpayer’s liability to the minimum of the amount due under the regular income tax and the amount …

Territoriality: For And Against, Reuven S. Avi-Yonah

Law & Economics Working Papers

This article will survey the main arguments for and against territoriality and conclude that it is the wrong way to go in the short run, but can perhaps be adopted in the medium to long run in conjunction with more fundamental international tax reform. The main reason that territoriality should not be adopted now is that the OECD may be about to recommend worldwide consolidation for all its members as part of the Base Erosion and Profit Shifting (BEPS) project, and if the OECD does that, all of the standard arguments in favor of territoriality and against abolishing deferral disappear.

Unitary Taxation And International Tax Rules, Reuven S. Avi-Yonah

Law & Economics Working Papers

Any proposal to adopt Unitary Taxation (UT) of multinationals has to contend with whether such taxation is compatible with existing international tax rules and in particular with the bilateral tax treaty network. Indeed, some researchers have argued that the separate accounting (SA) method and the arm’s length standard are so embodied in the treaties that they form part of customary international law and are binding even in the absence of a treaty. In this paper we will argue that UT can be compatible with most of the existing tax treaties, and that developing countries in particular can implement it in …

And Yet It Moves: A Tax Paradigm For The 21st Century, Reuven S. Avi-Yonah

Law & Economics Working Papers

A central premise of tax scholarship of the last thirty years has been the greater mobility of capital than labor. Recently, scholars such as Edward Kleinbard have recommended that the US adopt a variant of the 'dual income tax' model used by the Scandinavian countries, under which income from capital is subject to significantly lower rates than labor income because of its supposedly greater mobility. This article argues that the premise upon which this argument is built is mistaken, because for individual US taxpayers (as opposed to corporations), there are significant limitations on their ability to avoid tax by moving …

A Proposed Replacement Of The Tax Expenditure Concept And A Different Perspective On Accelerated Depreciation, Douglas A. Kahn

Law & Economics Working Papers

The thesis of this article is that the tax expenditure concept is grounded on an erroneous vision of the structure of an income tax system. The tax expenditure concept adopts a binary view of income taxation. It posits that there is an ideal or pure income tax system whose provisions are elements of the normal structure of that system without any influence from non-tax policy considerations. Tax provisions are described either as falling within those core provisions or outside of them. There are no other categories. To the contrary, this article contends that tax provisions lie on a continuum in …

Close The Loophole: The Marketplace Fairness Act And Its Likely Passage, Bryan J. Soukup

Law Student Publications

In this stagnant economy, brick and mortar retailers (brick and mortars) are voicing increasingly strong objections to the current state of online tax collection considering they must always collect state sales tax. Due in part to this uneven playing field, brick and mortars lose thousands of dollars a day in sales to online retailers. States, too, are losing revenue in the form of unpaid use taxes and, like the brick and mortars, are proponents of legislation allowing states to require online retailers to collect sales tax from their customers. Proponents of federal legislation on this issue point to the fact …

Utopian Visions Toward A Grand Unified Global Income Tax, Henry Ordower

All Faculty Scholarship

Over the past several decades, many countries that historically relied on progressive taxes on income, wealth, and decedents’ estates for much governmental revenue have shifted to less progressive and regressive taxes on labor and consumption. Reasons for the shift are many but include international tax competition as world economies have become increasing global. This paper assumes that progressive taxes remain the best and fairest choice for providing governmental revenue, so that a fundamental change in the scope of the progressive income tax is essential to protect progressivity.

The paper argues that the rapid growth of international cooperation on economic and …

The Corporate Income Tax: United States Of America Report, Henry Ordower

All Faculty Scholarship

In the context of a European project describing variations in the structure of the corporate income tax, this paper briefly describes the United States corporation income tax and contextualizes it within the broader category of business entity taxation. The paper identifies the various tax models that the United States uses for business entities and discusses the historical delinking of limited liability protection for owners and managers from traditional double taxation.

Preserving The Corporate Tax Base Through Tax Transparency, Henry Ordower

All Faculty Scholarship

International corporate tax competition continues to exert pressure on legislatures to reduce corporate tax rates as well as the rate imposed on shareholders. To combat this pressure, this commentary recommends eliminating the corporate income tax. Instead corporations should become tax transparent so that a full taxon corporate income is imposed on corporate owners but collected initially at corporate level through a required withholding tax at the maximum rate applicable to individuals. Contemporary data processing capacity enables corporations to track share ownership and report to shareholders amounts withheld on their behalf so that they may include their shares of corporate income …

Kite: Irs Wins Qtip Battle But Loses Annuity War, Kerry A. Ryan

All Faculty Scholarship

In Kite, the Tax Court held that a 10-year deferred annuity constituted adequate and full consideration for a transfer of family partnership interests, even though the transferor died before receiving any payments. The court also held that the liquidation of a qualified terminable interest property trust and subsequent sale of its assets constituted a disposition of the qualifying income interest for life, resulting in a deemed transfer of the entire trust under section 2519. Ryan discusses those holdings and two more issues that were not raised in the Tax Court proceeding but are clearly implicated by the Kite facts.

Social Enterprise: Who Needs It?, Brian Galle

Georgetown Law Faculty Publications and Other Works

State statutes authorizing firms to pursue mixtures of profitable and socially-beneficial goals have proliferated in the past five years. In this invited response essay, I argue that for one large class of charitable goals the so-called “social enterprise” firm is often privately wasteful. While the hybrid form is a bit more sensible for firms that combine profit with simple, easily monitored social benefits, existing laws fail to protect stakeholders against opportunistic conversion of the firm to pure profit-seeking. Given these failings, I suggest that social enterprise’s legislative popularity can best be traced to a race to the bottom among states …

Carrots, Sticks, And Salience, Brian Galle

Georgetown Law Faculty Publications and Other Works

This Article considers the second-best design of Pigouvian taxes and subsidies in the presence of agents who are imperfectly aware of the instrument. Until very recently, the price instrument literature has assumed perfect rationality, and even the handful of prior attempts to account for “hidden” prices focus mainly on the income tax. I extend these efforts in several directions. First, I show that the best available instrument for correcting negative externalities is often one whose price is partially adjusted upwards -- or, in the case of subsidies, downwards -- to counter-act the neglect of irrational actors. In addition, I argue …