Repeal of Child Tax Credit For Taxpayers Without a Voice, Is A Great Way to Defund the Success of America’s Kids

By: Francine J. Lipman

Senate & House dueling Tax Bills are now (more or less) out. Experts have determined the regressive nature of both tax bills, that is, overall tax increases on middle, low, lower, and the lowest income working families as compared to generous tax cuts for high, higher, and the highest income taxpayers. (Pet peeve here, please media et al. stop using “middle class” in lieu of “middle income” because if there is one lesson from 2017 that is that income level and class are not correlated).

Below is one of many compelling graphs from the Center on Budget & Policy Priorities evidencing that every group with income levels below $75,000 suffers a tax increase as compared to their higher income counterparts tax decrease in 2027. Many of these lower income taxpayers, including those with incomes below $30,000, suffer tax increases much earlier and most lower and middle income groups suffer tax increases by 2025, when the individual tax cuts phase out.jct-landing_infocus Continue reading “Repeal of Child Tax Credit For Taxpayers Without a Voice, Is A Great Way to Defund the Success of America’s Kids”

Tax Reform in an Age of Sexual Harassment

Tax reform is, in many ways, a product of its time. So I guess it shouldn’t surprise anybody that the late-2017 tax reform effort would somehow intersect with the post-Weinstein revelations of rampant sexual harassment and assault by powerful men.

And yesterday it happened: Senator Ken Buck introduced an amendment to H.R. 1. Under his proposed amendment, businesses would no longer be permitted to deduct payments for legal settlements, costs, fines, and fees associated with sexual harassment or sexual assault.  Continue reading “Tax Reform in an Age of Sexual Harassment”

Update on the GOP Bill’s Tax on Graduate Tuition Waivers

Patrick W. Thomas
Professor of the Practice, Notre Dame Law School

Following up on my post on the taxation of graduate student tuition waivers in the GOP tax bill, there have been a few new developments. (By the way, my fellow Hoosier from the opposite end of the state, Michael Austin, along with Sam Brunson, have a great post on the proposed repeal of section 117(d) as it affects university employees and their dependents.)

First, it’s been confirmed that the intent of the House bill (if not necessarily the effect, per my post) is to tax graduate student tuition waivers, for those graduate students who work in a research or teaching assistant role. According to an article in The Verge, a spokesperson from the Ways and Means Committee explicitly indicated as much in an email. While Congressman Brady did release an amendment to the bill Monday (text here) and a subsequent amendment on Thursday (text here), none of the education provisions were affected. Additionally, the bill (incorporating Congressman Brady’s amendments) was reported out of Ways and Means on a party line vote on Thursday. Continue reading “Update on the GOP Bill’s Tax on Graduate Tuition Waivers”

The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs

By: Diane Ring

Shu-Yi Oei and I have been tracking the recent tax reform developments as well as a couple of proposed tax bills that deal with worker classification, information reporting, and tax withholding. Based on a description prepared by the Joint Committee on Taxation, it looks like the Senate Tax Bill is going to include a new safe harbor provision guaranteeing worker classification as an independent contractor and will make changes to independent contractor withholding and information reporting. We posted our analysis of this proposal and its potentially serious implications on TaxProf Blog: The Senate Bill and the Battles Over Worker Classification.

Our main points:

1. Not just tax: This worker classification safe harbor is not just about tax, it will likely have impacts on employment/labor law outcomes and protections as well.

2. Not just gig workers: Based on the Joint Committee description, the proposal is not limited to gig economy workers —anyone who meets the safe harbor requirements (which are pretty easy to satisfy in many cases) can be classified as an independent contractor. This may have the effect of encouraging employers to push workers into work relationships that come within the safe harbor. Or, in certain cases, it may facilitate the strategic movement of higher-income workers into independent contractor status — see point 4 below.

Continue reading “The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs”

Tax Reform, Tuition Waivers, and Economic Mobility

By Michael Austin and Sam Brunson

“Before any great things are accomplished, a memorable change must be made in the system of education and knowledge must become so general as to raise the lower ranks of society nearer to the higher. The education of a nation instead of being confined to a few schools and universities for the instruction of the few, must become the national care and expense for the formation of the many.”—John Adams

There has been much ado recently (including on Surly) about the fact that the current version of tax reform before the House of Representatives repeals Section 117(d) of the Internal Revenue Code. As a general rule, you have to pay taxes on anything of value your employer gives you. Section 117(d) is an exception to this rule; among other things, it exempts graduate students from paying taxes on tuition waivers. With that subsection excised from the Code, graduate students would be taxed on tuition waivers that they receive (usually in addition to a very modest stipend) when they worked as teaching and research assistants as part of their program.

If this repeal were to become law, students without personal or family resources would have a very difficult time pursuing graduate education. But while the plight of graduate students has gotten huge amounts of attention, it is not the worst thing about the repeal of Section 117(d). Continue reading “Tax Reform, Tuition Waivers, and Economic Mobility”

The Distortive Effects of Partially Repealing the SALT Deduction

By Adam Thimmesch

The treatment of the state and local tax deduction under the GOP’s tax bill has gotten a lot of attention since the bill’s roll out last week. All else being equal, the proposed changes would disproportionately impact high-income taxpayers in blue states, and that issue is front and center in discussions about the bill. The TCJA is also noteworthy, however, in that it does not propose completely eliminating the SALT deduction as had been previously discussed. Instead, it contains a partial repeal for some taxpayers. That creates some noteworthy distortions that might escape the attention of the average person following these discussions.

Continue reading “The Distortive Effects of Partially Repealing the SALT Deduction”

Some Initial Thoughts on the Paradise Papers Leak

Shu-Yi Oei

Another data leak broke on Sunday, November 5, while I was on a plane home from Bergen, Norway. Coincidentally, Diane Ring and I were in Bergen presenting our Leak-Driven Law paper at a tax conference organized by Max Planck Institute for Tax Law and Public Finance, Norwegian Centre for Taxation, and Notre Dame University.

This new “Paradise Papers” leak involves a set of 13.4 million records from 1950 to 2016.

From the ICIJ’s website:

“The new files come from two offshore services firms as well as from 19 corporate registries maintained by governments in jurisdictions that serve as waystations in the global shadow economy. The leaks were obtained by German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists and a network of more than 380 journalists in 67 countries.”

The two offshore services firms in question are the offshore law firm Appleby and Asiaciti Trust, an offshore specialist headquartered in Singapore. Over 7 million of the records came from Appleby and affiliates.

Diane and I argued in Leak-Driven Law that (1) the high-salience and shocking nature of tax and other leaks and (2) the interventions of the press and other actors in processing, framing, and generating publicity about these leaks are important features that can affect how legal responses and reactions occur in the aftermath of a leak. We’ll be keeping track of how events unfold in the aftermath of this latest leak and how it fits or doesn’t fit with the observations in our paper:

Some initial notes and reactions:

This was at Least in Part a Cyber Hack.

Most of the news coverage I’m seeing is focused on the content on the leak, but it’s worth noting that at least with respect to Appleby, this new leak was in part a result of a cyberattack on Appleby that happened last year. I haven’t seen anything to suggest that this was a data theft by an insider (e.g., employee) turned whistleblower. In its response to the leak, Appleby defended itself and noted the challenges of cyber-crime for individuals and businesses.

The Appleby Hack Occurred in 2016.

Continue reading “Some Initial Thoughts on the Paradise Papers Leak”

What Happened to Family Values?

By: Francine J. Lipman

The House GOP Bill is out and tax professionals across the globe are reading and re-reading the 429 pages of details. A few of the many things that jump off of the pages for me are that it doesn’t seem to support working families with kids (it REPEALS the up to $5,000 exclusion from gross income for dependent care assistance that many working parents use to subsidize the skyrocketing costs of child care while they work) or even those who (like my fantastic law students at UNLV) are pursuing and paying for higher education.

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Continue reading “What Happened to Family Values?”

Some Tax Reform Links and Tweets over at #BLPB

Ann Lipton at Business Law Profs Blog has assembled a nice collection of links to news commentary and tweets about the House tax bill.

Many of the links Ann has assembled look at the industry and deal-specific impacts of the tax bill…For example, potential effects on LBOs, sports stadium financing, future of stock options, higher education, and homebuilders.  A nice complement to the more ubiquitous analyses of revenue effects, scoring, and distributional estimates we’re seeing on the tax prof/economists side. This information about who is likely to feel what effects gives us some insights into how the politics/political economy of this tax reform is likely to unfold going forward. Well worth a click.