TaxProf Blog

Today's eighth Law, Society, and Taxation panel at the Law & Society Association Annual Meeting in Denver is on The Thrills and Chills of Business Taxation:

Like all acquired tastes, scholarship in the area of business taxation is all the more satisfying as we learn to savor the nuances. Scholars on this panel will look at issues of business taxation from a broad perspective (e.g., whether U.S. corporate tax rates are "high" or "low") and will investigate several persistent issues in the taxation of businesses, including doctrines in partnership taxation, the taxation of intangibles, and the debt/equity morass. We will sell no doctrine before its time.

Kristin E. Hickman (Minnesota) (Chair/Discussant)

• Brad Borden (Washburn), Taxation of Economies of Scale:

This paper will examine the proper tax treament and classification of arrangements that create economies of scale. 

• Meredith R Conway (Suffolk), The Fiction of Continuing Interests:

There is no need for the continuity of interest requirement in tax free reorganizations because the idea that holders maintain a continuing interest, whether the interest is debt or equity is a fiction. There is no longer a clear distinction between debt and equity. Therefore requiring a specific ownership requirement in stock is a fallacy because it does not represent the actual ownership in a corporation. I propose eliminating the continuity of interest requirement and allowing anyone who exchanges a like instrument for a like instrument in connection with a tax-dree reorganization tax-free treatment, provided the remaining tax-free reorganization requirements are met.

• Calvin H. Johnson (Texas), The Effective Tax Ratio and the Undertaxation of Intangible Investments:

The article argues that corporate tax rate is very modest for products like Google, Grand Theft Auto IV, Doom III and Guitar Hero, but very high, e.g., for Macy's. The articles calls for either fixing the problem of intangibles either by capitalizing investments in intangibles or by abandoning accounting based definitions of income as a tax base. The article also proves an "effective tax rate ratio" that is, that the firm-wide effective tax rate is its adjusted basis for its assets divided by fmv of its assets in absence of tax. Effective tax rate is a measure of how much pretax internal rate of return is reduced by tax.

• Andrew G Oh-Willeke (Akerman Senterfitt, Denver), This Financial Crisis Was Brought to You by the Internal Revenue Code:

  Tax incentives that favor personal debt, favor corporate debt over equity, and favor executive compensation modes such as stock options have shaped American attitudes towards risk and debt among both elites and ordinary people that helped create the Financial Crisis that began in 2007, spread in 2008 and continues to play out in 2009. These choices flow, in part, from societal values formed in prior panics. In contrast, tax incentives in Continental Europe have been important in driving a societal distaste for debt and risk that has reduced systemic risk there.

Today's seventh Law, Society, and Taxation panel at the Law & Society Association Annual Meeting in Denver is on Normative Analyses of Tax Doctrines:

What constitutes an unacceptable tax position? Scholars on this panel will discuss the general problem of tax shelters, some doctrines to fix it, and some specific issues of personal taxation that may actually not be "abusive" if viewed in the appropriate light.

Linda McKissack Beale (Wayne State) (Chair/Discussant)

• Lilian Faulhaber (Harvard), Wholly Artificial Arrangements: The Anti-Avoidance Doctrine of the European Court of Justice:

Although direct taxation in the European Union is reserved for Member States, the European Court of Justice has recently developed its own anti-avoidance doctrine. This doctrine, which this paper introduces and defines as the “wholly artificial arrangements doctrine,” is a judicial creation that sets the outer limits of permissible tax avoidance within the European Union. Unlike anti-avoidance doctrines in other jurisdictions, however, the wholly artificial arrangements doctrine has been created and applied by a supranational court and serves to constrain domestic measures meant to police tax avoidance. Although taxpayers attempting to avoid taxation may support the creation of this doctrine, since it makes avoidance less likely to be policed, the doctrine poses significant problems to law-abiding taxpayers and Member States alike. From the point of view of taxpayers, this doctrine is likely to lead to less respect for the tax system, lower tax revenues in Member States, and unpredictability as to the level of avoidance permitted within the European Union. From the point of view of Member States, this doctrine raises even greater concerns, in that the European Court of Justice is creating a legislative vacuum in the area of anti-avoidance law. Since no European Union institution is empowered to police tax avoidance without unanimous support of the Member States, European taxpayers and Member States alike are thus left in a world of greater tax avoidance, lower tax revenues, and no ability to overcome these problems.

• Kristin E. Hickman (Minnesota) & Claire Hill (Minnesota), Is a Coherent Definition of Tax Shelter Impossible?:

This project considers the tax shelter problem by (1) highlighting a lack of consensus surrounding the Internal Revenue Code’s relevant core principles and (2) arguing that, in light of this lack of consensus, the Internal Revenue Code’s method of combating tax shelters through specific rules/prohibitions and residual anti-abuse rules undermines the theoretical legitimacy and coherence of tax shelter regulation.

• Reginald Mombrun (North Carolina Central), Should Congress Follow through on Codifying the Substance over Form Doctrine?:

The most complicated provisions of the Code apply to all taxpayers, including those of low and moderate incomes. Among those provisions are the credit provisions, some of which provide refundable credits. Taxpayers of low or moderate incomes are the least likely of taxpayers to obtain good advice and help in completing their returns. Yet, after receiving their refunds, they are also the most likely to be audited and to have to return their refunds plus penalties and interest. For many, this begins a process of ever increasing liabilities that can only be settled with the help of tax professionals who can aid in obtaining an offer in compromise or an installment agreement.

• Toni Robinson (Quinnipiac), Give Credit Where Credit Is Due: How the Tax Credit System Confounds Many Taxpayers and What We Can Do About It:

The most complicated provisions of the Code apply to all taxpayers, including those of low and moderate incomes. Among those provisions are the credit provisions, some of which provide refundable credits. Taxpayers of low or moderate incomes are the least likely of taxpayers to obtain good advice and help in completing their returns. Yet, after receiving their refunds, they are also the most likely to be audited and to have to return their refunds plus penalties and interest. For many, this begins a process of ever increasing liabilities that can only be settled with the help of tax professionals who can aid in obtaining an offer in compromise or an installment agreement.

Today's sixth Law, Society, and Taxation panel at the Law & Society Association Annual Meeting in Denver is on Tax Rules and Social Outcomes:

Several classic doctrines in tax law respond to recurring problems in the lives of taxpayers. Interactions between accidents, insurance, unexpected reversals, and tax consequences have created uniquely difficult questions of tax law. Scholars on this panel will discuss several proposed changes to the way the tax system treats unexpected and extreme events in the lives of individuals and communities.

Reginald Mombrun (North Carolina Central) (Chair/Discussant)

• Aviva Abramovsky (Syracuse) & Charlene Luke (Florida), Managing the Deluge: Insurance and Taxes:

Our project will focus on casualty losses arising from floods and will recommend insurance and tax reforms with the goal of developing a better integrated and more comprehensive approach to managing this risk.

• Bobby Lewis Dexter (Chapman), Rethinking "Insurance" and Reserves after AIG, and Lehman, and Merrill, and [Insert Others]:

The paper discusses the evolution and status of the classic definition of “insurance” for federal income tax purposes (i.e., an arrangement in which risk shifting and risk distributing are present) and the Service’s aggressive efforts to prevent companies from taking “premium” deductions for what the Service views as mere contributions to the company’s own contingency reserves. I question whether the current standard has served us well over time, whether a limited contingency reserve system would, in fact, reflect better tax/economic policy, and the potential forms such a contingency reserve framework might take.

• Francine Lipman (Chapman), Taxing Private Ryan:

This paper will present and analyze tax provisions that are targeted to assist members of the armed forces. The paper will critically review these provisions to determine if they are serving their purpose and if not propose improvements.

Today's fifth Law, Society, and Taxation panel at the Law & Society Association Annual Meeting in Denver is on Comparative Analyses of National Tax Systems:

Participants in this session will offer comparative analyses of a number of national tax systems, including Germany, Brazil, the United States, and others. The focus will be on both equity and behavioral matters, including the usefulness of the ability-to-pay principal in guiding tax law-making.

Allison Christians (Wisconsin) (Chair/Discussant)

• Leonel Cesarino Pessôa (Universidade Nove de Julho), The "Ability to Pay" Principle in the Decisions of the Brazilian Supreme Court:

The 'ability to pay' principle first appeared in the Brazilian legal order in the 1946 Constitution. It was excluded from the texts of 1967/69 and reappeared in paragraph 1 of article 145 of the 1988 constitution, which is now 20 years old. The objective of this paper is to analyze the application of this principle to decisions of the Brazilian Supreme Court. In research carried out on the court website, the term “ability to pay” appeared 70 times in court decisions. In order to analyze the decisions, I began with texts from Italian jurists, especially Pietro Boria, who sought to demonstrate that the ability to pay principle in Italy is applied both in the protection of taxpayer interests as well as the protection of the state. I concluded that, also in Brazil, the ability to pay principle has been applied in the protection of both these interests and the paper analyzed the central characteristics of this application. Decisions were divided into five groups, according to the interest protected and the subject involved. The final part of the paper points out limits to the use of the principle from a philosophical perspective.

• Walter Schwidetzky (Baltimore), A Comparison of Income Taxation in the United States and Germany:

Particularly in the United States, we tend to be a bit inbred about tax policy decisions, rarely looking outside of our own universe for answers. Yet other countries may have looked at a given issue and come up with intelligent answers that could helpfully inform our own decisions. One of the striking things about doing comparative tax analysis is how differently, but legitimately, different countries can answer the same question. This paper will compare German and US Income Taxation, with particular emphasis on those areas where the two countries approach the same question differently.

• Dennis Ventry (UC-Davis), An Ownership Theory of Family Taxation:

This paper establishes the principle of ownership as the basis of family taxation in the United States. The first half of the paper traces the development of the ownership principle between 1913 and 1930; that is, from ratification of the 16th Amendment to the Supreme Court’s decision in Poe v. Seaborn, the landmark family tax case establishing legal ownership rather than (non-legal) incidents of ownership as the bedrock of family taxability. The second half of the paper affirms the continued vitality of the ownership-equals-taxability principle by examining all federal and state court cases citing Seaborn from 1930 to the present (i.e., over 500 cases). With the ownership principle firmly established as good law, the paper then articulates an argument for taxing members of state-recognized civil partnerships–married, single, opposite-sex, same-sex–according to ownership interests as determined by state property law. In the end, the paper removes marriage between a man and a woman as the basis of family taxation under the federal income tax, and replaces it with ownership principles grounded in longstanding Supreme Court jurisprudence.

Today's fourth Law, Society, and Taxation panel at the Law & Society Association Annual Meeting in Denver is on International Taxation:

Nation states must interact — and ideally cooperate — in their treatment for tax purposes of persons and organizations whose activities cross national borders. The scholars on this panel will discuss the effects on tax systems and taxpayers of multilateral treaties, norms, and international organizations.

Darien Shanske (UC-Hastings) (Chair/Discussant)

• Kim Brooks (McGill University), Multilateral Tax Treaties:

A number of regional blocks have negotiated and/or entered into multilateral tax treaties. A few of those treaties have been the subject of academic review. This paper seeks to add to that literature by reviewing the world's multilateral treaties with a view to assessing whether they achieve the potential ascribed to them.

• Allison Christians (Wisconsin), Global Tax Governance:

Who decides who should pay tax, how much, where, and when? The answer increasingly depends on transnational networks where global policies take shape. Tax policy norms about who and how to tax emerge and spread from country to country through these networks, yet the mechanism and processes of this contribution to rulemaking in taxation are not widely examined in the tax literature. This project analyzes the evolution and transfer of law as a means of understanding how the process of norm development animates the substance of national tax law and how chosen norms and rules frame the scope of economic globalization.

• Diane M. Ring (Boston College), The Role of International Organizations in Shaping Tax Policy:

  This paper explores the ways in which international organizations use their expertise and influence to affect the broader agreements and trends we see with international tax. Relevant questions here include – how do these organizations or groups determine their own agenda (relationship to membership, organizational structure, history); how do they develop positions; and how are those positions made influential?

Today's third Law, Society, and Taxation panel at the Law & Society Association Annual Meeting in Denver is on Improving the Administration of the Tax System:

Taxpayers face an array of choices in determining their tax liabilities. Some of these choices exist by design, while others exist by implication. Determining how to limit and guide choices is essential to improve the collection of legitimate taxes, to deter fraud, and to enhance tax revenue. The scholars on this panel will discuss a number of innovative proposals in this area of tax law.

Brad Borden (Washburn) (Chair/Discussant)

• Linda McKissack Beale (Wayne State), Tax Elections: A Normative Analysis: 

This paper considers the many tax elections offered in the Internal Revenue Code and regulations and their impact on fairness and efficiency in the tax system.

• Heather Field (UC-Hastings), Taxpayer Choice in Legal Transitions:

This paper will examine the extent to which taxpayers can, and should be able to, choose what tax law applies to them when the tax law changes. In addition to exploring other opportunities for the expression of choice in the face of a law change, this paper will analyze the use of explicit elections as part of the transitional relief provided upon a change in the tax law.

• Leandra Lederman (Indiana-Bloomington), Reducing Information Gaps to Reduce the Tax Gap: When Is Information Reporting Warranted?:

This essay develops a framework for evaluating the efficiency of information reporting proposals, then evaluates how several current proposals fare under it. Accordingly, it makes recommendations on which proposals warrant serious consideration as revenue raisers that would help narrow the federal tax gap.

• Grace Soyon Lee (Alabama), The Role of Danielson in the Taxation of Credit Card Securitizations:

Credit card issuers often raise money by using their receivables as collateral to borrow money from outside investors; this process is known as “securitization”. Credit card securitizations are vulnerable to attack from the Internal Revenue Service because investors in these transactions always face some risk that the receivables will not be sufficient to protect them from loss. If the risk of loss is too great, then investors have arguably bought the receivables rather than simply looked to the receivables as collateral. Such a result could have negative tax consequences, since a credit card issuer whose securitization is treated as a sale rather than a loan would no longer be able to deduct the interest payments made on the transaction. This risk is greater for credit card issuers that characterize their securitization instruments as certificates in order to comply with certain accounting standards, since the term “certificate” implies a sale rather than a loan. The discrepancy caused by calling a transaction a sale while treating it as a loan appears to violate the Danielson rule, which states that a taxpayer cannot argue that the form of a transaction differs from its substance. However, I will show in this paper that the Danielson rule should not be applied to credit card securitizations at all, since a difference between treatment for tax purposes and for accounting purposes does not in fact constitute a difference between form and substance.

Today's second Law, Society, and Taxation panel at the Law & Society Association Annual Meeting in Denver is on Gender, Families, and Sexuality in Tax Law:

How to treat incomes that are shared within households, how to account for the biological differences between women and men, and the treatment of unpaid work are all timeless issues in tax and family law. In this panel, scholars will discuss various problems that arise in the tax system when issues of gender, family, and sexuality become salient.

Meredith R. Conway (Suffolk) (Chair/Discussant)

• Stephanie McMahon (Cincinnati), To Have and to Hold and to Shift between Us: Rethinking Marital Property for Federal Income Tax Return Purposes:

This paper uses the history of nationalized income-splitting to highlight the cost of individual tax filing. While lessening the psychological and economic impact of family taxation on wives as secondary earners, will likely increase tax avoidance among the wealthy which imposes a real cost on our progressive income tax system.

• Shari Motro (Richmond), The Price of Pleasure:

Sexual intercourse makes women pregnant, and pregnancy makes women vulnerable. Being pregnant radically alters a woman’s body, mind, and public identity. It puts her, as the old euphemism goes, in a “delicate condition.” In the best case, where the pregnancy is wanted by both parents and it progresses normally, the discomforts and inconveniences it typically entails—nausea, back pain, memory loss, swollen feet, dietary restrictions, lost wages, and the inability to travel—are not insignificant. In the worst case, pregnancy can be debilitating, even life threatening. The same is true of a miscarriage—it can cause a woman to bleed and cramp for several days, and it can kill. Where a pregnancy is unintended and a woman chooses to abort, the difficulties she faces also range in severity. Under any scenario, being pregnant is no walk in the park. Some men recognize this reality and take care of the women they impregnate. Others do not, and the law gives them a free pass. Thus, society reinforces a fundamental gender inequality: pregnancy is a woman’s problem. The biological inequality between men and women’s reproductive burdens cannot be changed, but the law can mitigate its harmful effects. These effects extend to men as well as women because the asymmetry in the risks associated with sex creates a fundamental power imbalance, an imbalance that sows tension and mistrust in relations between heterosexual lovers at both conscious and unconscious levels. This asymmetry in risk also translates into asymmetrical incentives to prevent an unwanted pregnancy where partners assume that the woman would abort. This Article argues that unless a man has been raped or deceived, the law should require him to participate in the price of pleasure by making a monetary contribution to the woman he impregnates.

• Ann Mumford (University of London), Putting into the System: Gender, Markets, and Taxation:

This paper will analyze the extent to which unpaid work is valued, or should be valued, by the paid marketplace. It also will address the impact of the commodification debate on assumptions in law underpinning the taxation of women.

• Nancy E. Shurtz (Oregon), Singapore, Sweden, and the States: A Comparative Approach to the Tax Treatment of Working Mothers:

My paper will exam the income tax rules of Singapore, Sweden and the States and compare the "state support" system of Sweden to the "personal responsibility" structure in the States to the "class based" structure in Singapore. The paper will particularly focus on working mothers and how that impacts their ability to compete in the market.