The Halloween Parent Tax

halloween-candy1By Sam Brunson

I was asked on Twitter about the Halloween Parent Tax. And with Halloween coming up, it seemed like it needed a post. So here you are:

Design Considerations

You’ve got a couple options here. Are you going to create an income tax? A consumption tax? A head tax? Each is slightly different, in certain relevant ways:

Income Tax: This is probably what you think of when you think of the Halloween Parent Tax. Essentially, children are required to give their parents some percentage of the candy they get. (My wife’s parents imposed a 15-percent Halloween Parent Tax when she was growing up.) There are some design complications here—for example, are you taking a percentage of the number of pieces of candy the kids get? Or do different kinds of candy have different values? And do you take size into account in calculating candy value?[fn1] Continue reading “The Halloween Parent Tax”

Outraged Yet? A Tax Reason the Pentagon’s Clawback Sucks — Updated

By: Sam Brunson

cngYesterday, both my Facebook and WBEZ told me about how the Pentagon is clawing back bonuses it paid—a decade ago!—to members of the California National Guard as reenlistment bonuses. [Update, 10/26/16: today, Defense Secretary Ash Carter ordered the Pentagon to suspend its efforts to claw back the bonuses. Note, though, that there’s no indication that it will return any portion of bonuses that have already been clawed back, so the tax issues still stand, afaik.] 

The whole story is pretty enraging, but, so that I don’t bury my particular lede too far: though the stories don’t discuss the tax consequences to the soldiers, the soldiers are likely to miss out on significant deductions that they deserve.

To understand why, you need to know about the clawbacks. I’ll let the LA Times do the hard explanatory work, but in brief: in the mid-2000s, the military was facing recruitment shortfalls, so it started offering super-generous incentives to the military to get them to reenlist, and it paid those incentives (often $15,000 or more) upfront, essentially replicating private sector signing bonuses.  Continue reading “Outraged Yet? A Tax Reason the Pentagon’s Clawback Sucks — Updated”

Congratulations to the Newly Elected Members of the American Law Institute!

By: Francine J. Lipman

The American Law Institute (ALI) has just announced its newly elected members. The members who join ALI from across the country will bring their diverse backgrounds and areas of legal expertise to ALI’s work. Fifteen of the 45 new members are professors, sixteen are partners (or the equivalent) in law firms, seven are judges, six are in private industry, and one is a government legal advisor.

“One of the most exciting aspects of being President of the ALI is meeting some of today’s most important and inspiring legal minds as they are elected into The American Law Institute. I look forward to having the opportunity to work alongside these new members in continuing the ALI’s efforts in clarifying the law,” said ALI President Roberta Cooper Ramo. Continue reading “Congratulations to the Newly Elected Members of the American Law Institute!”

Will the Supreme Court Hear a Retroactive Taxation Case This Term?

By: David J. Herzig

Earlier this year, the Washington Supreme Court held that the retroactive application of the legislature’s amendment to a Business & Occupation (B&O) tax exemption revising the definition of “direct seller’s representative” to conform to the Washington Department of Revenue’s interpretation of the exemption did not violate a taxpayer’s rights under due process, collateral estoppel, or separation of powers principle.

Like most states, Washington had a B&O tax for “the act or privilege of engaging in business activities.”  Under the original law, out-of-state sellers were exempt if they acted through a representative.  DOT Foods shows up in Washington and sells through a wholly owned subsidiary to avoid the B&O tax.

In 1999, the Washington Department of Revenue changed its interpretation of the statute to subject DOT and others to the B&O tax.  Dot challenged that change (215 P.3d 185 (Wash. 2009) “DOT I”)) and won.  DOT I applied for the tax periods 2000-2006.

DOT then sought a refund for the period Jan. 2005 – Aug. 2009 (not the time period of DOT I).  In the meantime, in 2010 the Washington State Legislature changed Wash. Rev. Code Sec. 82.04.423(2) in response to the DOT I ruling.  The statute both retroactively and prospectively changed the statute. Based on the statutory change, the Washington Department of Revenue rejected the refund claim.

For the period covered by DOT I, DOT and Washington agreed on a settlement for a 97% refund for B&O taxes paid.  For the May 2006 to December 2007 period (after DOT I), the refund request was denied.  DOT challenged the retroactive application under the theories of collateral estoppel, separation of powers, and due process.  DOT lost in the Washington Supreme Court and now has appealed to the US Supreme Court.

The test for whether or not retroactive tax legislation satisfies Due Process is United States v. Carlton, 512 U.S. 26 (1994).  Carlton  applied a rational basis test.  The Court stated retroactive tax legislation would not violate due process if, “legitimate legislative purpose furthered by rational means.”  According to the ACTC brief,   “The Washington Supreme Court ignored the unique circumstances of the Carlton case, which involved the correction of an obvious legislative error that was identified very soon after the statute was enacted and which the taxpayer was admittedly exploiting for its own benefit.”

Continue reading “Will the Supreme Court Hear a Retroactive Taxation Case This Term?”

ClassCrits IX: The New Corporatocracy and Election 2016

Surly bloggers Sam Brunson, David Herzig and I (and Leslie Book over at Procedurally Taxing) are attending the ClassCrits IX conference hosted by Loyola University Chicago School of Law today and tomorrow. From the call for papers back in March:

As the U.S. presidential election approaches, our 2016 conference will explore the role of corporate power in a political and economic system challenged by inequality and distrust as well as by new energy for transformative reform.

There are some notable tax-related panels happening at the conference, along with other interesting panels relating to corporations and democracy:

Taxation, Social Justice and Development (Friday 10/21/16)

Doron Narotzki, University of Akron Business Administration
Corporate Social Responsibility and Taxation: The Next Step of the Evolution

Rohan Grey, Binzagr Institute for Sustainable Prosperity & Nathan Tankus, Modern Money Network
Corporate Taxation in a Modern Monetary Economy: Legal History, Theory, Prospects

Karl Botchway, CUNY Technology & Jamee Moudud, Sarah Lawrence Economics
Capacity Building, Taxation and Corporate power in Africa

Martha T. McCluskey, SUNY Buffalo Law, Corporatocracy and Class in State and Local “Job-Creation” Subsidies

Distributing Wealth, Law and Power (Friday 10/21/16)

Goldburn P. Maynard, Jr., University of Louisville Law
A Plea for Courts to Abolish the Judicially Created Right of the Wealthy to Avoid Estate Taxes

Victoria J. Haneman, Concordia University Law
The Collision of Holographic Wills and the 120-Hour Rule

Doron Narotzki, University of Akron Business Administration
Dark Pools, High-Frequency Trading and the Financial Transaction Tax: A Solution or Complication?

Robert Ashford, Syracuse University Law
Why Working But Poor?

Critical Perspectives on Tax Law (Saturday 10/22/16)

Shu-Yi Oei, Tulane University Law
The Troubling Case of Offshore Tax Enforcement

Les Book, Villanova University Law
Bureaucratic Oppression and the Tax System

Samuel Brunson, Loyola University Chicago Law
Avoiding Progressivity: RICs, Pease, and the AMT

David Herzig, Valparaiso University Law
Let Prophets Be (Non) Profits

Talking Tax on Twitter

twitterbird_rgbBy Sam Brunson

I was reminded yesterday both why I love Twitter and why Twitter is such a valuable tool for tax academics (and others).

See, yesterday I participated in two (or, actually, three) conversations about different tax topics. And, notwithstanding the inherent limitations of the medium (especially the 140-character limit), the discussions were both substantive and informative.  Continue reading “Talking Tax on Twitter”

Make Way for Ducklings?

Shu-Yi Oei 

Professor Charlotte Crane (Northwestern) presented Integrating a Fragmented Corporate Income Tax at BC Law School’s Tax Policy Workshop yesterday. Briefly, the paper is focused on recent proposals to integrate the corporate income tax, in particular, the yet-to-be-released Orrin Hatch proposal from the Senate Finance Committee. I’m no corporate tax expert, but the workshop afforded me the excuse to wade like a duckling through the recent literature…a nice break from other projects.

The corporate integration debate refers to the question of whether to eliminate the corporate double tax (i.e., the tax on both the corporation and its shareholders on the same underlying income) and replace it with a single layer of tax. Many have argued that this would reduce tax burdens, minimize economic distortions, and bring us closer to tax neutrality in investment decisions. Others have argued that corporate integration achieved through shifting the corporate tax to the shareholder level will enhance progressivity and fairness.

The integration debate has raged for decades, with important Treasury and ALI studies in 1992 and 1993, and a surge of recent academic and policy interest. There are various design possibilities, including: integration via a shareholder credit (a.k.a. imputation), integration via a dividend deduction paired with a shareholder withholding tax, integration via a shareholder dividend exclusion, flow-through taxation, and others. A couple of recent proposals: Toder and Viard have suggested eliminating the corporate tax and replacing it with taxation of shareholder dividends and gains at ordinary rates, with gains taxed on a mark-to-market (accrual) basis. And Gruber and Altshuler even more recently proposed pairing a lowered (15%) corporate tax rate with ordinary income taxation of shareholder dividends and capital gains (including an interest charge on deferred shareholder liabilities designed to minimize behavioral distortions).

Continue reading “Make Way for Ducklings?”

Pro Bono Week Free ABA Tax Justice CLE

By: Francine J. Lipman

There are many wonderful reasons to be a member of the ABA – Section of Taxation, including the Tax Section’s commitment to pro bono and outreach especially its education efforts with its people and its purse to work on the front lines with less fortunate and vulnerable neighbors across America. I can say without hesitation the ABA not only talks the talk, but it walks the walk. Indeed we are partnering with the ABA Civil Rights and Social Justice Section to present a free webinar on October 24 during pro bono week 2016. Tax justice at its best. I am a proud ABA tax justice passion warrior, join us in our efforts to help others as it is the gift that keeps on giving … We can, do, and will make a difference in the lives of countless American families.


images-2 Continue reading “Pro Bono Week Free ABA Tax Justice CLE”

Why the Constitution Protects Churches’ Right to Endorse Candidates

By Benjamin Leff

Last Sunday was Pulpit Freedom Sunday. With all of the speculation over Donald Trump’s tax strategies (personal and charitable), and then the publishing of the video showing Donald Trump saying terrible things, my Twitter feed had very little to say about pastors endorsing candidates from their pulpits. In fact, the news coverage has been surprisingly slim. But, all that notwithstanding, I thought I’d take the opportunity to finally explain why I think that the law does not prohibit pastors of tax-exempt churches (or leaders of any other 501(c)(3) organization) from communicating an express endorsement of a candidate in a regular meeting of the organization. I’ve mentioned this position in a number of previous posts here and here (and annoyingly to them I’m sure, on my friends’ Facebook feeds) and keep linking to a 2009 article I wrote on the topic. But who wants to read that?  The dominant argument against me appears to be that churches are free to endorse candidates or be tax-exempt, but not both, and forcing that choice is not a Constitutional problem.  But that argument is not an accurate description of the law, as I understand it (although, of course, I have to caveat that I’m a tax guy, not a Constitutional law scholar). Continue reading “Why the Constitution Protects Churches’ Right to Endorse Candidates”

Trump’s Abuse of Trump Foundation — Criminal Tax Implications?


By: Philip Hackney, Oct. 3, 2016


Much attention is being paid to how Donald Trump could have amassed a $900 million NOL in the mid 90s. I remain laser-focused on the Donald J. Trump Foundation.  For this blog post I ask the question: could Mr. Trump’s misuse of the private foundation that he leads result in criminal sanctions under tax law?

I think there is enough evidence to open a criminal investigation into his activities. Nevertheless, a criminal prosecution is highly unlikely for both political reasons and issues of proof (ignorance of the law is a defense). Still, I think the IRS has a duty to open an investigation under the egregious set of facts I lay out.

Here is the important thing to keep in mind as you consider the arguments I lay out in this post: Donald Trump does not own the Foundation and its property does not belong to him. It does not matter from whom the money came. He is the president of a nonprofit organization that is entrusted with money to be used for charitable purposes that benefit the public. Continue reading “Trump’s Abuse of Trump Foundation — Criminal Tax Implications?”