Rainy Saturday Tax Scholarship …

Irresponsibly Taxing Irresponsibility: The Individual Tax Penalty Under the Affordable Care Act

Georgetown Journal on Poverty Law & Policy, Vol. 23, No. 3, Spring 2016

In recent decades, Congress has used the federal income tax system increasingly to administer and deliver social benefits. This transition is consistent with the evolution of the American welfare system into workfare over the last several decades. As more and more social welfare benefits are conditioned upon work, family composition, and means-tested by income levels, the income tax system where this data is already systematically aggregated, authenticated, and processed has become the go-to administrative agency.

Continue reading “Rainy Saturday Tax Scholarship …” →

“Unofficial” Jazz Fest (and Arbitrage, and Licensing, and Taxes)

By: Shu-Yi Oei

I blogged on Wednesday about taxes and tax enforcement at Jazz Fest, a.k.a. the New Orleans Jazz and Heritage Festival. Today’s follow-on post celebrates the phenomenon that I call “unofficial” Jazz Fest.

There’s “official” Jazz Fest, which is what happens after you’ve bought your ticket, gone through security, and are within the confines of the New Orleans Fairgrounds (where the Fest is held). And then there’s “unofficial” Jazz Fest, which is what goes on in the surrounding Fairgrounds neighborhood outside the Fest. [fn.1] As I described in Wednesday’s post, “official” Jazz Fest is a big deal, well organized, and highly regulated. The music programming unfolds on a tight schedule. Only approved food and craft vendors are allowed, and those vendors need to be properly licensed and pay some sort of booth fee in order to sell at Jazz Fest. The organizers exert significant control over the food items sold—the Jazz Fest website says that “‘carnival’ food items or beverages” will be not sold and that duplication of food offerings is minimal.

“Unofficial” Jazz Fest, as I call it, is what happens in the area outside the gates of the Fairgrounds. On Fest days, the neighborhood is transformed into its own unique microclimate of festive Festy-ness. Here, street vendors hawk wares such as hats, koozies, second-line umbrellas, water, and art. no vending (There are “No Street Vending Allowed” signs posted, but those don’t seem to be given much weight.) Popup brass bands play for tips on the sidewalks. Some neighborhood residents hire bands and throw backyard parties, some of which you can attend for a fee (or, perhaps, crash unnoticed). New Orleans, like many other cities, has business licensing requirements, including mobile vendor licenses, and some of these vendors are clearly licensed, though it’s plausible that others might not be.

Many of these behaviors look like classic arbitrage: You can of course buy or enjoy most of those items or services in the official Jazz Fest, but they’re more expensive once you’re inside the Fairgrounds and committed to being there (general admission tickets allow single entry only). This creates obvious opportunities for unofficial vendors to sell products more cheaply just outside the Jazz Fest entrance gates. So, for example, it gets hot in New Orleans in April/May, and Fest rules allow you to bring in “Factory-sealed bottled water for personal consumption.” Bottled water sells for $3 in the Fest. But there are lots of people selling it out of a cooler for $1 in the surrounding streets, so it really makes sense to buy your water before you enter. From the seller’s point of view, if she buys 78 24-count cases of bottled water from Costco, it comes up to under 27 cents a bottle before tax. The incentive to make dollar-a-bottle sales outside the Fairgrounds on Fest days is obvious.

Others of these activities look like something close to agglomeration: Continue reading ““Unofficial” Jazz Fest (and Arbitrage, and Licensing, and Taxes)” →

Tulane Law is Looking for a Visiting Tax Professor

Here’s an announcement from Tulane. We’re looking for a visiting tax professor to cover tax courses for either Fall 2016 or the 2016-17 academic year. If you have questions, please feel free to contact me. I’m happy to wax lyrical about Tulane Law, our tax and other programming at the Murphy Institute, and New Orleans.

Tulane Law School is currently accepting applications for a visiting tax professor for either the Fall of 2016 or for the entire 2016-2017 Academic Year. Visitors would be expected to teach basic Income Tax and other tax related courses. Applicants at any career stage are encouraged. To apply, please submit a CV along with a statement of interest and any supporting documentation. Applications and questions may be directed to Vice Dean Ronald J. Scalise Jr. at rscalise@tulane.edu. Tulane University is an equal opportunity/affirmative action employer committed to excellence through diversity. All eligible candidates are invited to apply.

Grading the Candidates’ Tax Disclosure (Updated)

By Sam Brunson

Nearly two months ago, guesting on Prawfsblawg, I wrote about the state of the presidential candidates’ disclosure of their tax returns. Since then, they’ve gone through several more primaries, and we have a better idea of where each candidate stands in the electorate. So, as the semester winds up and my focus shifts to grading, I thought I’d warm up by grading the candidates on their level of tax disclosure.

A caveat before we begin: as tax historian Joseph Thorndike has noted (here and 150 Tax Notes 591 (2016)), while there’s a strong norm for candidates’ releasing their tax returns (consistently since 1980, and sporadically for at least a decade before that), they are under no legal obligation to do so. If we really care about seeing candidates’ tax returns, we should encourage Congress to make disclosure mandatory.

That said, my grades aren’t based on legal obligation. They’re based on some combination of the quality and quantity of the disclosure. Continue reading “Grading the Candidates’ Tax Disclosure (Updated)” →

The New Orleans Jazz and Heritage Festival (and Taxes)

By: Shu-Yi Oei

New Orleans is currently in the throes of Jazz Fest.

For those of you who don’t know what that is, Jazz Fest—or, the New Orleans Jazz and Heritage Festival—is a famous annual festival celebrating music and culture in New Orleans. It’s held at the New Orleans Fairgrounds. It spans seven days over two weekends. It draws hundreds of thousands of people.

But even that description doesn’t do the event justice. There are twelve different music stages and tents set up in the Fairgrounds and a lineup of over a hundred performance groups—this year’s headliners include Stevie Wonder, Pearl Jam, Paul Simon, Red Hot Chili Peppers, Snoop Dogg, and Van Morrison. There’s also a huge number of food and crafts vendors who set up at the Fest—over 200 food offerings sold! Some of us to go to the Fest at least as much for the food as for the music: my personal favorites include the Crawfish Monica, mango freeze, crawfish beignets, seafood stuffed mushrooms, and Chef Linda Green’s award-winning yakamein.

This past weekend, my colleague Ann Lipton and I traipsed down to the Fairgrounds to find the fun. While enjoying performances by Janelle Monáe (amazing), the Red Hot Chili Peppers (meh), Leroy Jones (so good), Herlin Riley (just, wow) and others, we chatted a bunch about vendor licensing and regulation at Fest. We even ran into an on-duty New Orleans revenue agent who was more than happy to tell us all about tax compliance at the Fest and kindly gave permission to blog about it.

After some research, some casual conversations, and some lurking around the food booths, here’s what we now know about Jazz Fest and taxes:

Continue reading “The New Orleans Jazz and Heritage Festival (and Taxes)” →

2016 Top 10 Outstanding Tax Women

By: Francine J. Lipman

Tax Analysts announced its 2016 Top Ten Outstanding Women in Tax selected from a pool of over 300 nominations. Congratulations and loud applause to this exceptional group of tax professionals. Continue reading “2016 Top 10 Outstanding Tax Women” →

A New Wave of Income Share Agreements

By: Diane Ring

Just a few years ago, Income Share Agreements, or ISAs, were garnering popular attention. ISAs are arrangements in which an individual receives upfront funding from investors, perhaps for education or a start-up business, in exchange for agreeing to pay a percentage of his or her future income for a period of time. Well-known examples included Fantex (which involved a stake in the future earnings of a professional athlete), as well as Upstart, Pave, and Lumni (which generally involved funding for education or business ventures). Although the structures and terms varied, the feature these ISAs had in common was the absence of a guaranteed return of principal and the degree to which the investor was investing in the personal, financial success of the funding recipient – a relationship some criticized as owning a piece of the funding recipient.

Ultimately, though, the market did not show tremendous interest in these instruments. Upstart and Pave shifted to traditional loan models, and Lumni reportedly has issued fewer than 30 ISAs in the United States. Fantex has remained active, but Fantex was always a little different, because it actually involved an issuance of stock in a corporation whose value effectively tracked the earnings performance of a pro athlete. Additionally, the Fantex investment had a novelty dimension, appealing to sports enthusiasts.

Why, though, was the market not that interested in ISAs? There are a few likely reasons:

Continue reading “A New Wave of Income Share Agreements” →

Call for Papers: AALS 2017

At the 2017 AALS annual meeting (San Francisco, Jan. 3-17, 2017), the Section on Agency, Partnerships LLCs, and Unincorporated Associations and the Section on Nonprofit and Philanthropy Law are co-hosting a a joint program entitled “LLCs, New Charitable Forms, and and the Rise of Philanthrocapitalism.” The session will look at the tax, governance, and other policy implications of using for-profit LLCs as vehicles for philanthropy. I’ll paste the full call for papers after the break, but if you’re interested in participating, send a 1-2 page proposal to Mohsen Manesh or Garry W. Jenkins by July 1, 2016. Continue reading “Call for Papers: AALS 2017” →

John Kasich’s Tax Plan: 2008 Was Great!

Last week I wrote about Donald Trump’s dumbfounding decision, as the Republican frontrunner, to advocate for increasing taxes on the wealthy. I left for today commentary on the amazing interview Ohio Governor John Kasich did with the Washington Post Editorial Board. Essentially Gov. Kasich believes that we can obtain economic growth through spending cuts. (Just to be clear why this is on a tax blog: spending and taxes go together like peanut butter and jelly).

It seems most pundits are speculating that there will be a contested Republic convention in Cleveland. It has also been speculated that in that environment, a wildcard like, Gov. Kasich or Rep. Ryan, might end up the nomination. Both Gov. Kasich and Rep. Ryan appear to hold the same position that spending cuts are good. They believe that spending cuts plus tax cuts (I will address the tax cuts issue in a later post) will actually increase overall tax revenues through overall economic growth. It is not surprising that the two Republican establishment figures would hold such a belief. This principle is alignment with popular thinking: polls show many Americans think spending cuts will have an economic benefit by a 55 to 18 percent margin.

I think, therefore, it is worth exploring why spending cuts as related to growth (economic and job) is not at all mainstream economic thinking. But like all issues, here we have a complicated discussion. It may be true that spending cuts help balance the budget which may grow the economy in other dimensions. But spending in a recession, as most economic data seems to show, is the main way forward for job growth and to exit the recession. Most mainstream economists believe: (1) that spending increases job growth on a temporary basis; (2) a reduction in spending will unwind the growth back to the baseline without spending; and (3) job growth will grow the economy. However, in no way is there permanency attached to spending as related to job growth. (This is the reason that Bernie Sander’s forecasts are of job growth in his plan are incorrect. See this study.)

Continue reading “John Kasich’s Tax Plan: 2008 Was Great!” →

Hello from Francine Lipman

“Dearly Beloved we are gathered here today to get through this thing we call ‘Life.'” Prince 1958 – 2016. I am delighted to join this exceptional tribe of talented law professors presently known as The Surly Subgroup. My day job is at the William S. Boyd School of Law at the University of Nevada, Las Vegas as a William S. Boyd Professor of Law teaching tax law, accounting and finance courses. I also get to research, write and publish about and advocate for “access to tax justice.”

Continue reading “Hello from Francine Lipman” →

Prince and the Estate Tax

As radio stations play Prince songs all day long and Purple Rain makes a return to the theatre, I was struck by the vast amount of content Prince not only produced but owned. Sadly, immediately, I thought of the potential estate tax value of Prince’s estate. This unique situation is playing out right now with the Michael Jackson estate but here Prince owned more of his own work.

Currently, conservative estimates have his estate at $300 million. But these estimates may be way off as Prince actually owned his recording and publishing copyrights. According to the LA Times, music industry insiders say they “can’t imagine a catalog that would have a higher value.”

There is much speculation on who will receive his estate. Because, probate has not been opened, we do not know if Prince had a will yet or not. There has been speculation that he had no will since he was unmarried and had no children. But this seems rather silly (and kind of offensive) to me given his concern for protecting the value of his catalog during life. I would expect to see a pour-over will to a trust.

What will be interesting is what type of estate planning he engaged in during life. Normally, estate tax returns are private and only the estate, the beneficiaries and the IRS know what is on them. However, in the case with a hard to value asset (e.g., a massive music library), there is often a difference of opinion between the estate and the IRS as to the value of the asset. Since the resolution of the difference is in court, we will get a glimpse into the planning done by Prince. One point to make here is that if the beneficiary of the estate is Jehovah’s Witnesses as has been reported (speculated), then this might not end up in court because there would be no tax due because of the estate charitable deduction.

Continue reading “Prince and the Estate Tax” →

SRLY, SRSLY: A Tale of Loss and Longing to Belong

By: Shu-Yi Oei

Over the past few days, we here at Surly Subgroup have received several requests for a post explaining our blog name. So, here’s a Very General primer for non-tax readers, and for our tax readers who maybe don’t spend all of their waking hours staring at the consolidated return rules.

Old lawyerly disclaimer habits die hard, so I’ll just say that the following discussion is Very General and mostly for fun. Others have written about this far more exhaustively. See, e.g., Martin J. McMahon, Jr., Understanding Consolidated Returns, 12 Fla. Tax Rev. 125 (2012) and four whole BNA Tax Management Portfolios.

Here are the key points:

Everybody Wants to Belong…

The general idea behind the consolidated return is that where there’s an affiliated group of corporations, a rule that requires each corporation in the group to file its own separate tax return may create frictions and transaction costs and may give rise to weird incentives and disincentives in the case of transactions between corporations in the group.

Enter the consolidated income tax return.

Continue reading “SRLY, SRSLY: A Tale of Loss and Longing to Belong” →

Prince v. the IRS. Also, v. the French Government

Probably the apex of my listening to Prince was my freshman year of college, where I thrilled to his virtuosity, to his funk, and to the way it flummoxed other music majors when I told them that I’d spent the morning listening to Prince. (I also got into at least one BBS argument about whether Prince could play jazz if he wanted to; I argued, naturally, that he could.) Though I’ve only listened to him occasionally since, he holds a special place in my heart and in my ears.

Yesterday, when I read that he’d died, my first thoughts were memories of my freshman year. Like any right-thinking American, my next were whether he’d ever had any significant interaction with the tax law.

A quick search answered that: he did! Continue reading “Prince v. the IRS. Also, v. the French Government” →

Introduction Post: Leandra Lederman

Hi! I’m @Leandra2848, AKA Leandra Lederman, the William W. Oliver Professor of Tax Law at Indiana University Maurer School of Law in Bloomington. I have blogged occasionally before but never as a regular contributor—much less as a member of a Surly Subgroup—so this is a real privilege!

I’ve been a tax professor for 22 years, 12 of them at Maurer (minus last semester at U. Chicago). I teach Income Tax, Corporate Tax, Tax Procedure, and I run a Tax Policy Colloquium that brings 6 or 7 tax professors to Bloomington over the course of the spring semester. I’ve also taught a short course in Pamplona, Spain each of the last five years.

I write both on the individual and corporate federal income tax (including a 2016 edition of Understanding Corporate Taxation, co-authored with Michelle Kwon) and on tax procedure, which includes tax administration and tax litigation. Most recently, I wrote two articles about problems facing the IRS. Much of my work relates to tax compliance/ Continue reading “Introduction Post: Leandra Lederman” →

Charitable Organizations and Marijuana?

In Denial 201615018 (released April 8, 2016 and for which I can only find a Tax Notes link) the IRS denied the charitable organization application of a nonprofit organization organized “to provide a way for your members to collectively and cooperatively cultivate and distribute medical marijuana for medical purposes to qualified patients and primary caregivers who come together to collectively and cooperatively cultivate physician-recommended marijuana.” The IRS denied the organization’s applications on two bases: (1) a charitable organization cannot engage in illegal activities and the distribution of marijuana is illegal under federal law; and (2) it provided too much private benefit. I will focus only on the first basis.

Ben Leff and I have previously debated the issue of marijuana distribution and tax exemption. Ben contended that under certain circumstances a social welfare organization under 501(c)(4) could form to distribute marijuana and operate in a tax-exempt vehicle. The reason to try to do this instead of operating in a taxable vehicle is that under section 280E federal tax law prohibits marijuana distributors from deducting trade or business expenses. While I disagreed with Ben, neither of us argued that a charitable organization could engage in the distribution of marijuana. Both of us, and Ben should absolutely chime in, believed that the public policy/illegality limitation on charitable organizations is absolutely clear on this front: engaging in an illegal activity as a substantial purpose just does not cut it under charitable tax rules. Continue reading “Charitable Organizations and Marijuana?” →