More on the College Admissions Scandal

By Sam Brunson

On Wednesday, I posted about how tax law played a central role in the college admissions scandal. As I’ve read through a little more of the affidavit, I decided to highlight two additional detail in this whole scandal, details that suggest that, for at least some of the participants, the tax consequences were very important.

Bruce Isackson and Facebook Stock

Bruce Isackson is the president of WP Investments, a real estate investment and development fund.[fn1] According to the affidavit, he used the fake athlete thing (soccer for the older daughter, rowing for the younger) to get two daughters into USC. He seems to have also paid for his younger daughter to get a better ACT score.

What’s interesting for purposes of this post is how he paid. Continue reading “More on the College Admissions Scandal”

Key Worldwide Foundation and College Admissions Scams

By Sam Brunson

When I first read about the massive college admissions scam, I read it for roughly the same schadenfreude as everybody else. It was an interesting—and frankly, kind of pathetic—story of wealth and entitlement.

And then I read the affidavit supporting the criminal indictment. And I learned that, as much as this is a story of wealth and entitlement, it’s more than that: this is a story that revolves around taxes. And specifically, the abuse of a tax-exempt organization.

There seem to have been two main schemes to get participants’ kids into schools they wouldn’t have otherwise qualified for. The first involved cheating on entrance exams. The second involved bribing athletic directors and others to designate their kids as athletic recruits (often in sports the kids didn’t play), and , each of which had its own fee structure. But each scheme had something in common. The recipient of the payments was Key Worldwide Foundation. Continue reading “Key Worldwide Foundation and College Admissions Scams”

The Trump Foundation and the Private Foundation Termination Tax

By Ellen P. Aprill

Michael Cohen’s accusations against President Trump in his statement before the House Committee on Oversight and Reform yesterday include arranging for a straw bidder to purchase a portrait of President Trump at an auction, using Trump Foundation funds to repay the fake bidder, and keeping the art for himself.  As part of the New York Attorney General’s  stipulation agreement with The Trump Foundation, the foundation must sell two other Trump portraits it currently owns. 

This stipulation agreement with the New York Attorney General has saved the Trump Foundation from a burdensome penalty tax in connection with the involuntary termination.  As had been widely reported at the end of last year, the New York Attorney General announced on December 18 that its investigation had found “a shocking pattern of illegality involving the Trump Foundation – including unlawful coordination with the Trump presidential campaign, repeated and willful self-dealing, and much more.”  Under the stipulation agreement, the Trump Foundation will dissolve and submit to the court a list of non-for-profit organizations to receive the Foundation’s remaining assets.  The Attorney General and the state court will need to approve the organizations that receive the Trump Foundation’s funds. Continue reading “The Trump Foundation and the Private Foundation Termination Tax”

NonBelief Relief and Form 990

By Sam Brunson

Speaking of the Freedom From Religion Foundation, last Thursday it filed suit challenging the constitutionality of section 6033(a)(3)(A) of the Code.

What does that first sentence mean? Broken down roughly: the tax law requires most entities exempt under section 501 to file an annual information return. That information return—currently Form 990—is filed with the IRS, but must also be made available to the public. It allows both the IRS and the general public a window into the financial workings of tax-exempt organizations, and provides a basis for administrative and public oversight of tax-exempt organizations. (For purposes of this lawsuit, it’s also worth noting that if a tax-exempt organization that is required to file a Form 990 doesn’t for three consecutive years, it automatically loses its exemption.)

Section 6033(a)(3)(A) provides a mandatory exception to the filing requirement, though. Under the Code, churches, their integrated auxiliaries, and conventions of churches don’t have to file a Form 990. While the IRS can still get access to them through an audit (though note that the steps the IRS must take to audit a church are really stringent), the general public has no way to see financial information about a U.S. church unless the church voluntarily discloses that information (which some do). Continue reading “NonBelief Relief and Form 990”

Call for Papers: New Voices in Tax Policy and Public Finance (2019 AALS Annual Meeting, New Orleans, LA)

The AALS Tax Section committee is pleased to announce the following Call for Papers:

CALL FOR PAPERS
AALS SECTION ON TAXATION WORKS-IN-PROGRESS SESSION
2019 ANNUAL MEETING, JANUARY 2-6, 2019, NEW ORLEANS, LA
NEW VOICES IN TAX POLICY AND PUBLIC FINANCE
(co-sponsored by the Section on Nonprofit and Philanthropy Law and Section on Employee Benefits and Executive Compensation)

The AALS Section on Taxation is pleased to announce the following Call for Papers. Selected papers will be presented at a works-in-progress session at the 2019 AALS Annual Meeting in New Orleans, LA from January 2-6, 2019. The works-in-progress session is tentatively scheduled for Saturday, January 5.

Eligibility: Scholars teaching at AALS member schools or non-member fee-paid schools with seven or fewer years of full-time teaching experience as of the submission deadline are eligible to submit papers. For co-authored papers, both authors must satisfy the eligibility criteria.

Due Date: 5 pm, Wednesday, August 8, 2018.

Form and Content of submission: We welcome drafts of academic articles in the areas of taxation, tax policy, public finance, and related fields. We will consider drafts that have not yet been submitted for publication consideration as well as drafts that have been submitted for publication consideration or that have secured publication offers. However, drafts may not have been published at the time of the 2019 AALS Annual Meeting (January 2019). We welcome legal scholarship across a wide variety of methodological approaches, including empirical, doctrinal, socio-legal, critical, comparative, economic, and other approaches.

Submission method: Papers should be submitted electronically as Microsoft Word documents to the following email address: tax.section.cfp@gmail.com by 5 pm on Wednesday, August 8, 2018. The subject line should read “AALS Tax Section CFP Submission.” By submitting a paper for consideration, you agree to attend the 2019 AALS Annual Meeting Works-in-Progress Session should your paper be selected for presentation.

Submission review: Papers will be selected after review by the AALS Tax Section Committee and representatives from co-sponsoring committees. Authors whose papers are selected for presentation will be notified by Thursday, September 28, 2018.

Additional information: Call-for-Papers presenters will be responsible for paying their own AALS registration fee, hotel, and travel expenses. Inquiries about the Call for Papers should be submitted to: AALS Tax Section Chair, Professor Shu-Yi Oei, Boston College Law School, oeis@bc.edu.

GOP 2017 Tax Act Forces Nonprofits to Pay UBIT on Some Fringe Benefits

By: Philip Hackneyroad-3036620_1280

In the new tax act of 2017, Congress imposed an unrelated business income tax on transportation, parking, and athletic facility fringe benefits that a nonprofit provides to its employees. I write because I suspect there are universities or hospitals or other large nonprofits out there (pension funds maybe) that offer these types of fringe benefits that are unaware that they must pay UBIT on the total value of these benefits at the end of the year. The law went into effect for taxable years starting January 1, 2018.

In Section 13703 of the bill, Congress promulgated the following new rule: UBIT “shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section 132(f)), any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)), or any on-premises
athletic facility (as defined in section 132(j)(4)(B)).” Continue reading “GOP 2017 Tax Act Forces Nonprofits to Pay UBIT on Some Fringe Benefits”

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”

GOP Raises Taxes on Graduate Students … Or Does It?

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

We’ve all been poring over the GOP tax bill, released last week. On my initial read, I mainly looked at those provisions that affect my own practice in a Low Income Taxpayer Clinic: the expansion/restriction of the Child Tax Credit; the elimination of the dependency exemption; and the lack of any expansion in the Earned Income Tax Credit (paging Paul Ryan…). Selfishly, I also calculated the bill’s effect on my own taxes: a nearly 3% tax cut that I do not need!

Or so I thought. You see, my wife is a Ph.D. student in computer science who, like most students at the University of Notre Dame, receives a full tuition waiver, in addition to a stipend from the university. As I returned home on Friday, ready to put the tax bill out of mind for a couple hours, I saw a tweet from Claus Wilke, professor of integrative biology at the University of Texas:

Uh oh. Back to tax policy on a Friday night, it seems. And, perhaps, so long to that tax cut. Continue reading “GOP Raises Taxes on Graduate Students … Or Does It?”

The Johnson Amendment Under GOP Plan

By: David Herzig

Back in May, I continued to track President Trump’s promise to end the Johnson Amendment.  At that time he promised during a National Prayer Breakfast that he would “get rid of and totally destroy” the Johnson Amendment and promised to issue an executive order (which he signed May 4).

But, a significant problem with legislating via Executive Order is that executives change and with the change so goes the Executive Orders.  What works much better is legislation. Enter, the Tax Cuts and Job Act, where there is a proposal to end the Johnson Amendment.

What is the Johnson Amendment? In 1954, without explanation, Lyndon Johnson  Continue reading “The Johnson Amendment Under GOP Plan”

Parsonage Allowance Update 1: Briefing Remedies

By Sam Brunson

So #TaxWeek isn’t going quite the way we expected;[fn1] the House is now expecting to release its tax bill tomorrow. (Or maybe not.) Which means we’re not bringing any coverage of the tax bill today.

But that’s okay! It gives me room to slot it some follow-up to last month’s decision that section 107(2) violated the Establishment Clause. Remember, Judge Crabb found it unconstitutional, but ordered the parties to provide supplementary briefing about the appropriate remedies. Should she enjoin the IRS from providing benefits under section 107(2)? Or should she expand the set of taxpayers who could benefit from section 107(2)? Or something else entirely?

The initial briefs were due (and were filed) Monday. And, unsurprisingly, they all agreed on a lot: Continue reading “Parsonage Allowance Update 1: Briefing Remedies”