Johnny Rex Buckles: The Sexual Integrity of Religious Schools and Tax Exemption

Johnny Rex Buckles (University of Houston Law Center) has a new paper out entitled “The Sexual Integrity of Religious Schools and Tax Exemption” looking at whether religious schools that discriminate on the basis of sexual orientation should maintain their tax exemption. The article can be found here. The abstract states:

Many private universities and other schools adhere to religiously grounded codes of conduct that embrace heterosexual monogamy as the sole moral context for sexual relationships. The federal income tax exemption of these schools has been questioned following the recent Supreme Court opinion of Obergefell v. Hodges. In Obergefell, the Supreme Court held that the right to marry is a fundamental constitutional right that same-sex couples may exercise. The relevance of this decision to the federal tax status of private religious schools arises from another Supreme Court decision, Bob Jones University v. United States. The Court in Bob Jones held that two schools with racially discriminatory policies as to students were not entitled to exemption from federal income tax because the policies violate established public policy. The issue now is whether the sexual conduct policies of private religious schools violate the established public policy of the United States following Obergefell. After reviewing Bob Jones and surveying the application of the public policy doctrine by the IRS and the courts, this article argues that, regardless of the factual context of a controversy in which the IRS seeks to invoke Bob Jones to deny or revoke federal income tax exemption, the public policy doctrine should be narrowly construed. Applying a suggested framework for limiting the public policy doctrine coherently, this Article argues that schools maintaining sexual conduct policies that prohibit sexual activity inconsistent with their religiously informed, traditional view of marriage remain tax-exempt after Obergefell. Apart from the proposed framework, this Article further explains why Obergefell’s analytical approach, language and tone are inconsistent with applying Bob Jones to the disadvantage of religious schools that maintain sexual conduct policies.

Faculty Hiring: University of Richmond School of Law

I’m passing along a hiring announcement from Jessica Erickson, who is chairing Faculty Appointments at the University of Richmond School of Law:

The University of Richmond School of Law seeks to fill two entry-level tenure-track positions for the 2017-2018 academic year, including one in tax law.  Candidates should have outstanding academic credentials and show superb promise for top-notch scholarship and teaching.  The University of Richmond, an equal opportunity employer, is committed to developing a diverse workforce and student body and to supporting an inclusive campus community.  Applications from candidates who will contribute to these goals are strongly encouraged. 

Inquiries and requests for additional information may be directed to Professor Jessica Erickson, Chair of Faculty Appointments, at

If Churches Really Want to Vindicate Their Right to Endorse a Candidate, It’s Easy for Them to Get into Court

By Benjamin Leff

Last week, attendees at the Republican National Convention applauded loudly when Donald Trump repeated his promise that if he’s elected president, he’ll work to end the ban on political-campaign activity by tax-exempt churches.  All 501(c)(3) organizations (including churches) have been prohibited from “intervening” in a campaign for public office for over half a century, and the arguments for and against the prohibition have remained remarkably consistent for decades.  Activists on one side call for an end to the ban, which they believe is an infringement on free exercise of religion or free speech.  Activists on the other side call for the IRS to actually enforce the ban, which they argue is being flouted by (mainly) churches who thereby distort the electoral process.  A long list of academics has written articles from a wide range of perspectives, proposing a wide range of solutions (including my contribution way back in 2009).  (I also spoke about this issue a few weeks ago in Australia, at a fabulous round-table at the University of Melbourne.)  As Sam Brunson pointed out on this blog in May, the IRS is “stuck in the middle.”

In his post, Sam pointed out that “Over the last eight years or so, the Alliance Defending Freedom has sponsored an annual event it calls Pulpit Freedom Sunday, in which pastors preach a sermon that expressly violates the prohibition, then send a copy of their sermon to the IRS. Of the possibly thousands of churches that have participated over the years, none have lost their exemptions.”  This is often presented as a dilemma for the churches: they want to get in to court, and are disappointed that the IRS won’t let them.

To me, this public stance on the part of the churches and Alliance Defending Freedom seems disingenuous.  If they really want to get into court, why don’t they just use the statutory procedures provided to 501(c)(3) organizations under the law?  Continue reading “If Churches Really Want to Vindicate Their Right to Endorse a Candidate, It’s Easy for Them to Get into Court”

Emmet Till and The Panama Papers

Photo AP.

By David J. Herzig

Yesterday (July 25) would have been Emmet Till’s 75th birthday.  Since high school I have been fascinated by his story and the impact he had on the Civil Rights movement. For those who don’t know, Mr. Till was born and lived in Chicago.  While visiting his relatives in Mississippi in 1955, at the age of 14, he was killed for allegedly flirting with a white women.  His killers (although an all white jury acquitted both men they both admitted to the killings in this Look Magazine article) were the husband of the woman, Roy Bryant and his half-brother J. W. Milam.

The death of Mr. Till is often credited with a mobilizing factor in the Civil Rights Movement.  For those interested, here is an excellent PBS documentary on the topic.

Thankfully, it did not take long to justify a post on a tax blog about a Civil Rights hero.  The son of one of Mr. Till’s killers name seems to show up in the Panama Papers.  According to the Clarion Ledger, “Harvey T. Milam of Ocean Springs, whose father, J.W., shot Till in 1955, appears in” the Panama Papers.  Apparently, Harvey had quite a scheme involving using off-shore insurance companies.  I may actually have to do some digging around to find out more about the alleged scheme.

What’d I Miss?

I’ve been traveling for the last month or so, a significant portion of that time without any internet access.

Whatd I MissThat doesn’t mean, of course, that I’ve been totally starved of news. With a 10-, 7-, and 4-year-old, I couldn’t miss the existence of Pokémon Go, and I’ve caught up (at least slightly) on the big, general news of the day. But by and large, I haven’t opened my Lexis Daily Federal Tax Tracker in a month. I’ll naturally read what my co-bloggers have written here, but I’m curious if there’s any other important tax happenings that I might not have seen.

So tell me: What’d I miss?

Examination of Allegations Against the Clinton Foundation

By: Philip Hackney

book-863418_1280Back in June I wrote disapprovingly of some actions of the Donald J. Trump Foundation. In that piece I promised to write about the Bill, Hillary & Chelsea Clinton Foundation too. Recently, Rep. Marsha Blackburn sent a letter that was scheduled to be sent to the FBI, the FTC, and the IRS. That letter makes a number of allegations about the misuse of the Clinton Foundation, and I figured these allegations would be a good place to analyze the performance of the Foundation that I had promised.

Blackburn alleges a number of things, but I am going to focus on her first allegation in this post because it is the only one that is a pure tax exemption question. She alleges that the Foundation is illegally operating outside the scope of its initial application for tax exemption to the IRS.  For reasons explained in the post below, I conclude there is very little involved in this claim and it is a misunderstanding of the law. There could be problems with the Foundation but this is not one of them.

UPDATE: I look at the remaining two Rep. Blackburn allegations here.

Continue reading “Examination of Allegations Against the Clinton Foundation”

Emerging Trend for Uber in Europe?

By: Diane Ring

Uber, one of the most prominent faces of the sharing economy, has not always been welcome in the EU. Similarly, Airbnb has experienced legal, regulatory, and public policy resistance across European countries. However, two recent developments in the EU suggest that, on balance, Europe might be staking out a regulatory path for the sharing economy that is intended to demonstrate the region’s support for the new sector. . . . Continue reading “Emerging Trend for Uber in Europe?”

Don’t Impeach IRS Commissioner Koskinen

Rep. Jason Chaffetz (R-Utah), Chair of the House Committee on Oversight and Government Reform, has introduced H. Res. 737, which would condemn and censure IRS Commissioner John Koskinen. Efforts to impeach or censure the Commissioner are the latest skirmish between Congress and the embattled IRS stemming from the IRS’s use of “Be On the Lookout” (BOLO) lists to screen for excessive political activity by applicants for tax-exempt status under Code section 501(c)(4). The American College of Tax Counsel (ACTC) has sent several House leaders a compelling letter expressing its “view that such actions are not commensurate with the alleged conduct” and its justifiable concern that resolutions to impeach and censure Commissioner Koskinen “will damage the agency at a time when it needs strong leadership.”

Readers may recall that Steve Miller was Acting Commissioner when the Treasury Inspector General for Tax Administration (TIGTA) released its report on the BOLO issue, entitled “Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review” in May 2013. Miller resigned shortly after that, because President Obama asked Secretary of the Treasury Jack Lew to request Miller’s resignation. Daniel Werfel then became Acting Commissioner for about seven months. Mr. Koskinen did not become IRS Commissioner until Dec. 23, 2013. This was a challenging time to take on that role, given the state of the IRS’s relationship with Congress. The House Committee on Oversight and Government Reform held particularly partisan, contentious hearings. Continue reading “Don’t Impeach IRS Commissioner Koskinen”

The Tax Aspects of Pokémon Go

Adam Thimmesch
Assistant Professor, University of Nebraska-Lincoln College of Law

The new Pokémon Go app has already generated many discussions regarding the multiple ways that the game intersects with the law. I’ve previously opined on some of the broader issues, but, as a tax professor, my thoughts have naturally focused on that topic. Fortunately, the Surly Subgroup was nice enough to let me present those thoughts here in a guest post.

The tax issues that I’ve been thinking about stem largely from the fact that Pokémon Go is built on a freemium business model. That is, the app is free, but users can pay for certain “premium” features like additional Pokéballs, incense, and lure modules. (If these phrases mean nothing to you, here is a nice primer on the game.) Those purchases are all done through the purchase and use of an in-app currency called Pokécoins. The whole thing might sound silly, but the app is already generating over $1.5 million in daily revenue for its developer, Niantic, Inc. The company will also soon be selling “sponsored partnerships” that allow companies to be listed more prominently in the game. The potential revenue streams look plentiful at this point. So what are the tax issues?

Continue reading “The Tax Aspects of Pokémon Go”

IRS Announces More 2016 LITC Grants

By:  Francine Lipman

There has not been a great deal of good news lately about underserved communities or the IRS. But today America received some great news about nine new Low-Income Taxpayer Clinics (LITCs) in underserved areas across America. Five of the nine are in law schools. Continue reading “IRS Announces More 2016 LITC Grants”

An Amicus Brief on Behalf of the Commissioner in Altera

Susie Morse (Texas) and Steve Shay (Harvard) recently blogged on Procedurally Taxing about the amicus brief they spearheaded and in which I joined, along with Dick Harvey, Ruth Mason, and Bret Wells. The brief, which is available on SSRN, is one of two amicus briefs arguing in favor of the Commissioner’s position before the Ninth Circuit in Altera Corp. v. Commissioner.

In Altera, the U.S. Tax Court invalidated under section 706(2)(A) of the Administrative Procedure Act (APA) a transfer-pricing regulation–Treas. Reg.  § 1.482-7(d)(2)(2003)–on the ground that the regulation was arbitrary and capricious. The regulation required commonly controlled taxpayers wishing to benefit from a safe harbor applicable to cost-sharing agreements to include stock-based compensation as an expense. The Tax Court found that requirement arbitrary and capricious because of evidence Treasury received in the notice-and-comment process that parties not under common control did not share stock-based compensation costs.

Our brief argues in part that, as Treasury stated in the Preamble to the regulation, cost-sharing agreements between uncontrolled parties are not sufficiently comparable to controlled-party transactions to constitute reliable evidence under the standards of Code section 482. In a nutshell, that is because (1) stock-based compensation is an economic cost, (2) transacting parties can adjust another provision of their agreement to achieve the same result, and (3) unrelated parties might prefer not to take on the risk of a counterparty’s stock–a concern that doesn’t arise in controlled-party transactions. The brief argues that Treasury’s actions, including its explanation in the Preamble, were sufficient as a matter of administrative law. Susie and Steve’s excellent blog post on Procedurally Taxing provides more detail.

Flying, an Alpaca Farm and Baseball Cards – What do they have in common?

By: Diane Ring

In teaching Basic Income Tax, I have found that teaching students about the lines between engaging in a trade or business, profit seeking, and hobbies helps them become comfortable using facts in tax analysis and argument. It confirms for students that tax law is a type of law demanding factual and legal analysis – facts do matter and they are not self-evident. Thus, in anticipation of my next class, I have been collecting (thanks to Tax Notes and the BNA Daily Tax Report) new examples of taxpayer failures to convince a court that their activity was, in fact, for profit. It turns out the pool is quite large, but some personal favorites have risen to the top . . . Continue reading “Flying, an Alpaca Farm and Baseball Cards – What do they have in common?”


Early in the Alcatraz Cellhouse Audio Tour, my wife pointed out one of the pictures in D-Block: right next to people imprisoned for narcotics offenses, conspiracy to kidnap, and murder was Mickey Cohen, in Alcatraz for tax evasion. IMG_4029

Tax evasion! Alcatraz was a pretty harsh punishment for not paying your taxes. Unless, of course, you weren’t really sent to Alcatraz for not paying taxes, Which, of course, Cohen wasn’t. Neither was the inmate at the other side of the picture: Al Capone.   Continue reading “Alcatraz!”

Tax Analysts’ 2016 Student Writing Competition

By:  Francine J. Lipman

Tax Analysts’ announces 2016 student writing competition winners as follows:

Continue reading “Tax Analysts’ 2016 Student Writing Competition”

Messi Sentenced To Jail for Tax Fraud

By David J. Herzig

In a statement today, the court (the decision is in Spanish) in the tax fraud trial of Lionel Messi and his father found them guilty with a sentence of 21 months.  Although, under the Spanish system Messi and his father will serve probation and not jail time.

The court rejected Messi’s side of the story.  He had been claiming that he did not know what he signed.  The court did not believe Messi and decided that he (my translations) “decided to remain in ignorance over time” in a situation that benefited him, “because he received returns of the funds”.

Because the strategy that they court thought Messi knew about and used was to a scheme to “create the appearance of assignment” of these rights to “companies located in countries whose tax legislation allowed opacity”.

Thus, the court added over 3.5 in Euros of fines (2 million for Messi and 1.5 for his father) for the scheme to conceal earnings from image rights.  Prior to the trial, Messi claimed to have paid the 5 million Euro tax deficiency.  Messi does retain appeal rights.

F.C. Barcelona issued this statement in support of Messi and his father.  As Shu-Yi pointed out to me, F.C. Barcelona might have it’s own agenda on tax schemes.  As the E.U. is about set to give a verdict against the Spanish clubs for violating the public spending provisions via tax breaks.  The opening of the inquiry stated, “Professional football clubs should finance their running costs and investments with sound financial management rather than at the expense of the taxpayer. Member states and public authorities must comply with EU rules on state aid in this sector as in all economic sectors.”

As a final thought, I do wonder, however, if that open probation affects his ability to travel via Visa to various countries, e.g., will Brexit matter for Messi?