Minnesota Dogs Breathe (Woof) a Sigh of Relief: Pet Trusts Now Legal

By Diane Ring

IMG_6307Perhaps you heard a chorus of joyous barking across the state of Minnesota recently — now you know why. Until just over two weeks ago, every state in the U.S., plus Washington, D.C., recognized statutory pet trusts, except Minnesota. But on May 22, 2016, the Minnesota Governor signed legislation approving pet trusts. The legislation, which had been sponsored in the House by Rep. Dennis Smith and in the Senate by Sen. Scott Dibble, allows the creation of a legally enforceable trust that provides for the care of an animal that was alive during the grantor’s lifetime. The terms of the trust can be enforced by a person appointed in the trust, or if no one is appointed, the court may appoint someone. Moreover, anyone having an “interest in the welfare of the animal” may petition the court to appoint someone to enforce the trust or remove the person so designated in the trust document. The trust would terminate on the death of the last surviving animal (or 90 years if shorter). Any remaining proceeds would be distributed pursuant to the trust’s terms, or if the trust fails to specify, then to the “grantor’s heirs-at-law determined as if the grantor died intestate domiciled in [Minnesota] at the time of distribution.”

This all seems pretty straightforward, so why was Minnesota the last state? Continue reading “Minnesota Dogs Breathe (Woof) a Sigh of Relief: Pet Trusts Now Legal”

Teaching Tax – At Home and Abroad

by Jennifer Bird-Pollan

I’ve just finished my sixth year of teaching tax at the University of Kentucky, which is longer than I’ve done any other professional task, but I still feel like I’m a beginner.  I have started to develop strong classroom preferences (students may not use computers in my classes, I prefer lots of participation, and I prefer textbooks that elucidate concepts, rather than trying to hide the ball).  But at the same time I have many more questions about the best way to do this work (what should I cover and leave out, given the time constraints?  how can I encourage students to prepare seriously ahead of time, while still giving robust answers to student questions in class?).  I am eager to hear from others, both my co-bloggers and visitors, what they think about these issues, and I plan to devote future blog posts to some of my thoughts about these questions.  However, having just finished teaching “International Aspects of U.S. Tax Law” at the Vienna University of Economics and Business for the second time, I thought I’d focus here on some of the differences I have observed teaching U.S. income tax law abroad.   Continue reading “Teaching Tax – At Home and Abroad”

Tying the IRS’s Hands. Even Tighter

By Sam Brunson

Yesterday, the House Committee on Appropriations reported H.R. 2995 to the House of Representatives. H.R. 2995, the Financial Services and General Government Oversight Appropriations Bill  for FY 2017, if passed, would continue the trend of reducing the IRS’s budget, this time by $236 million.

It is undoubtedly worth looking at what exactly the bill does, but I’m interested in an amendment added yesterday by Rep. John Culberson (R-TX). Section 135 of the bill would make it even harder than it already is for the IRS to audit churches.  Continue reading “Tying the IRS’s Hands. Even Tighter”

Teaching Tax: On Clickers and Laptops

By Sam Brunson

I’ve used clickers in class ever since I started teaching. In fact, thanks to Paul Caron’s tireless advocacy, I’ve known I was going to use clickers since before I entered academia.

And, like Paul, both I and my students[fn1] have found clickers tremendously helpful in the classroom. In my experience, they do three main things:

  • They force all students to actively engage with the class. It’s easy enough to sit back in class and passively absorb (or not) the content. Sure, whomever I call on has to actively engage, but I can only call on a small portion of my class on any given day. But clicker questions allow students to not only listen, but actually answer, at least a handful of questions.
  • They tell me how well the students grasp what I’m teaching. If most of the students get the right answer, I know my explanation and the discussion were helpful. If a significant portion get it wrong, I know that I need to go back and address it again (and, depending on the answers they choose, I may be able to figure out where I or they went wrong).
  • They tell my students how well they grasp what I’m teaching. If most of the students get the problem right, a student who gets it wrong knows that she may need to go back and review the topic. Or ask a question. Or do something else.

But I have a problem: Continue reading “Teaching Tax: On Clickers and Laptops”

Should the IRS Penalize Trump Foundation Political Contribution?

By: Philip Hackney

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The news yesterday was focused in part on the fact that in 2013 the Florida AG Pam Bondi personally solicited a political contribution from Donald Trump. And, shortly thereafter the Donald J. Trump Foundation (“Foundation”) made a $25,000 contribution to a political organization called And Justice for All that supported the reelection effort of Pam Bondi for AG of Florida. Bondi’s office ultimately dropped any investigation into Trump University. Bondi denies the allegation that she ended an investigation in exchange for a political contribution. She says her office was never investigating Trump U in the first place. She does acknowledge, however, that her political organization should not have accepted the donation from a charitable foundation. She claims she tried to refund the contribution in March.

The claims against the AG are obviously a serious issue and should be looked at, but I of course see things through a bit of blinders. I see a nonprofit behaving badly. The level of negligence here and misuse of a private foundation frankly drives me crazy. As discussed below, the Foundation’s excuse is that it made a mistake and did not know what it had done. In this post I examine all of the tax code violations involved, and I look at the Foundation’s excuse and try to assess whether it is believable and whether it matters. Continue reading “Should the IRS Penalize Trump Foundation Political Contribution?”

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.!”