Uncle Sam as Danish Tax Collector

By: Diane Ring

Who says that real global tax cooperation is dead? During a very interesting conference on international tax held in Boston a couple of weeks ago, a recent U.S. tax case was discussed and caught my attention: Torben Dileng v. Commissioner (D.Ct. N. Ga., Jan. 15, 2016). In that case, a U.S. District Court ruled that the IRS could collect $2.5M of Danish taxes owed by a Danish citizen who was resident in the U.S.

IRS as Danish tax collector– what was this all about? Continue reading “Uncle Sam as Danish Tax Collector”

Universal Basic Income “Arithmetic”

Benjamin M. Leff

Last week, Eduardo Porter wrote a column pointing out that there is some interest currently – both internationally and in the United States – in a “universal basic income” (or “UBI”).  Under a UBI, the government provides each citizen with an annual cash payout of a certain amount.  The idea appeals to thinkers on both the left and the right, for slightly different reasons.  Porter argues that it’s a bad idea for a number of reasons, but he argues that “the first hurdle is arithmetic.”  He then goes on to argue that the cost to provide a universal basic income of $10,000 each for 300 million American citizens would be $3 trillion (pretty simple math so far), and that is “nearly all the tax revenue collected by the federal government.”  So, obviously, a nonstarter.

Daniel Hemel, a brand new assistant professor over at University of Chicago blogging at Whatever Source Derived, does a little “back-of-the envelope calculation,” in which he points out how silly Porter’s arithmetic is.  It’s ridiculous to think of instituting a universal basic income without simultaneously changing the tax code.  If the tax code stayed exactly the same, then a universal basic income would either be a tremendously expensive social program or a tremendous tax cut for everyone, depending on how you want to look at it.  But Hemel points out that we wouldn’t keep the tax code exactly the same if we instituted a universal basic income.  Instead, we could probably cut the personal exemption and the standard deduction.  Who needs a zero tax rate if the first $10,000 you earn is a gift straight from the government?  You also don’t need the earned income tax credit or child tax credit, since the universal basic income is basically a refundable credit available to everyone.  Then, Hemel suggests cutting a bunch of other deductions to pay for the UBI, like the deduction for state and local taxes, the mortgage interest deduction, and some others, and he produces $1.119 trillion dollars of savings, which would fund a UBI of $3,450 per person.  Not the $10,000 per person that would completely eliminate poverty for any family with children and almost completely eliminate poverty overall, but not a bad start.

But Hemel hasn’t gone far enough either, because he hasn’t considered a complete overhaul of the income tax.  Continue reading “Universal Basic Income “Arithmetic””

Obamacare, ACOs, and Tax-Exemption

By: Philip Hackney door-349807_1280

Sometimes, well probably every time, when I teach about hospitals qualifying as tax-exempt charitable organizations I tell the joke from the movie Airplane that goes like this:

Rumack: You’d better tell the Captain we’ve got to land as soon as we can. This woman has to be gotten to a hospital.

Elaine Dickinson: A hospital? What is it?

Rumack: It’s a big building with patients, but that’s not important right now.

The point of this joke is an important one to me. It helps to illuminate the fact that the “promotion of health” as a charitable purpose is focused heavily on a space and an activity combined. Generally for the promotion of health to qualify as a charitable purpose there must be a physical building where doctors and nurses relieve the suffering of the afflicted. Not just any promotion of health suffices. Running a cheap pharmacy just does not cut it. Providing sperm to the women of your choice for free, even though it may effect health, simply does not cut it either (don’t ask, just read the opinion). What about health insurance? Generally, because of section 501(m) of the Code, health insurance does not qualify. However, health maintenance organizations (HMOs) that sell health services in exchange for a monthly fee that also own a building where they treat patients can qualify.

That brings us to a recent IRS denial of the application for charitable status of an organization operated as an “accountable care organization” (“ACO”), a creature of Obamacare. Continue reading “Obamacare, ACOs, and Tax-Exemption”

Did John Oliver just give away some CODI income on Last Week Tonight?

By: Shu-Yi Oei

So John Oliver just forgave $15 million of debt on his talk show.

See video @ around 17:15.

Specifically, Oliver apparently set up a debt-buying company (CARP), which bought $15 million worth of incurred medical debt of nearly 9,000 people for $60,000, less than half a cent on the dollar. And then he forgave the $15 million of debt on television. The Washington Post reports that “this is the largest one-time giveaway ever on television, beating out Oprah Winfrey’s famous “you get a car! You get a car!” episode, which cost that show $8 million.” (Smart talk show economics, to top Oprah’s giveaway while only paying $60,000 for the debt.)

Of course, because tax professors love talking about the tax consequences of Oprah’s free car giveaway, I wondered whether this $15 million debt forgiveness event was going to result in cancellation of indebtedness income to some of the debtors whose debt was forgiven. As tax people know, IRC Section 61(a)(12) provides that income from the cancellation of indebtedness is includible in gross income. But IRC Section 108 provides that there is no gross income in certain circumstances–for example, if the debtor is in Title 11 bankruptcy, or is insolvent, or if the debt is certain types of real property related indebtedness.

Would CARP have to send these folks a Form 1099-C?  And would some of them then have CODI income due to the debt forgiveness?

Continue reading “Did John Oliver just give away some CODI income on Last Week Tonight?”

The #PanamaPapers Come to the U.S.!

Today’s New York Times has a story about U.S. citizens and residents who have shown up in the Panama Papers. The ICIJ has shared its documents with the Times, which has found at least 2,400 U.S.-based clients over the last decade.[fn1]

The story (which you need to read) details some of the services Mossack Fonesca provided for four wealthy U.S. clients: entrepreneur William R. Ponsoldt, former CEO and chair of Citigroup Sanford I. Weill, Boston Capital Partners managing parter Harald Joachim von der Goltz, and financial author and life coach Marianna Olszewski.

Clearly, at least some of the services Mossack Fonesca provided were legal; some, however, were remarkably shady (for example, it looks like some clients used the offshore structuring to evade gift taxes, and some clients explicitly wanted to set up offshore structures to hide money from potential judgment creditors). Continue reading “The #PanamaPapers Come to the U.S.!”

Ohio is First in Country to Make § 529A ABLE Accounts Available to Residents of All 50 States

2016-06-01 STABLE Account Launch 2By: Stephanie Hoffer

The ABLE Act is finally a reality for residents with qualifying disabilities in all 50 states, who now may open tax-preferred savings accounts through Ohio’s Stable Account program.  The ABLE law, which I’ve previously covered  on this blog and for TaxProf, allows individuals with disabilities to save money in tax-preferred savings accounts without jeopardizing their eligibility for Medicaid and other programs that make life in the community possible.  As I have previously written, with the ABLE account, Congress has provided not only a tax advantage that may offset some of the cost imposed by society on individuals with disabilities, it also has taken a first step toward treating them like adults whose dignity and autonomy matter.   Congratulations to the State of Ohio and to Treasurer Josh Mandel’s  team for making the law a reality.

“The Federation Does Not Have a Tax Policy …”

trekonomicsBook review: Manu Saadia, Trekonomics: The Economics of Star Trek (2016).

About a year ago, I heard Felix Salmon talking about a project he was shepherding; Trekonomics was going to be a crowdfunded book about the post-scarcity economics of Star Trek. Intrigued, I put the $10 on my credit card. And waited.

Confession: I’m not a Trekkie. Or a Trekker. (I don’t honestly know the difference between the two.) I mean, I grew up watching the original series with my dad, who’d watched it in its initial run. And when The Next Generation aired, my middle school heart was thrilled, and I think I watched the first season or so before stopping. And that (plus a couple movies and the reboots) is about the extent of my Star Trek knowledge.  Continue reading ““The Federation Does Not Have a Tax Policy …””