The New Orleans Jazz and Heritage Festival (and Taxes)

By: Shu-Yi Oei

New Orleans is currently in the throes of Jazz Fest.

For those of you who don’t know what that is, Jazz Fest—or, the New Orleans Jazz and Heritage Festival—is a famous annual festival celebrating music and culture in New Orleans. It’s held at the New Orleans Fairgrounds. It spans seven days over two weekends. It draws hundreds of thousands of people.

But even that description doesn’t do the event justice. There are twelve different music stages and tents set up in the Fairgrounds and a lineup of over a hundred performance groups—this year’s headliners include Stevie Wonder, Pearl Jam, Paul Simon, Red Hot Chili Peppers, Snoop Dogg, and Van Morrison. There’s also a huge number of food and crafts vendors who set up at the Fest—over 200 food offerings sold! Some of us to go to the Fest at least as much for the food as for the music: my personal favorites include the Crawfish Monica, mango freeze, crawfish beignets, seafood stuffed mushrooms, and Chef Linda Green’s award-winning yakamein.

This past weekend, my colleague Ann Lipton and I traipsed down to the Fairgrounds to find the fun. While enjoying performances by Janelle Monáe (amazing), the Red Hot Chili Peppers (meh), Leroy Jones (so good), Herlin Riley (just, wow) and others, we chatted a bunch about vendor licensing and regulation at Fest. We even ran into an on-duty New Orleans revenue agent who was more than happy to tell us all about tax compliance at the Fest and kindly gave permission to blog about it.

After some research, some casual conversations, and some lurking around the food booths, here’s what we now know about Jazz Fest and taxes:

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2016 Top 10 Outstanding Tax Women

By: Francine J. Lipman

Tax Analysts announced its 2016 Top Ten Outstanding Women in Tax selected from a pool of over 300 nominations. Congratulations and loud applause to this exceptional group of tax professionals. Continue reading “2016 Top 10 Outstanding Tax Women” →

John Kasich’s Tax Plan: 2008 Was Great!

Last week I wrote about Donald Trump’s dumbfounding decision, as the Republican frontrunner, to advocate for increasing taxes on the wealthy. I left for today commentary on the amazing interview Ohio Governor John Kasich did with the Washington Post Editorial Board. Essentially Gov. Kasich believes that we can obtain economic growth through spending cuts. (Just to be clear why this is on a tax blog: spending and taxes go together like peanut butter and jelly).

It seems most pundits are speculating that there will be a contested Republic convention in Cleveland. It has also been speculated that in that environment, a wildcard like, Gov. Kasich or Rep. Ryan, might end up the nomination. Both Gov. Kasich and Rep. Ryan appear to hold the same position that spending cuts are good. They believe that spending cuts plus tax cuts (I will address the tax cuts issue in a later post) will actually increase overall tax revenues through overall economic growth. It is not surprising that the two Republican establishment figures would hold such a belief. This principle is alignment with popular thinking: polls show many Americans think spending cuts will have an economic benefit by a 55 to 18 percent margin.

I think, therefore, it is worth exploring why spending cuts as related to growth (economic and job) is not at all mainstream economic thinking. But like all issues, here we have a complicated discussion. It may be true that spending cuts help balance the budget which may grow the economy in other dimensions. But spending in a recession, as most economic data seems to show, is the main way forward for job growth and to exit the recession. Most mainstream economists believe: (1) that spending increases job growth on a temporary basis; (2) a reduction in spending will unwind the growth back to the baseline without spending; and (3) job growth will grow the economy. However, in no way is there permanency attached to spending as related to job growth. (This is the reason that Bernie Sander’s forecasts are of job growth in his plan are incorrect. See this study.)

Continue reading “John Kasich’s Tax Plan: 2008 Was Great!” →

Prince and the Estate Tax

As radio stations play Prince songs all day long and Purple Rain makes a return to the theatre, I was struck by the vast amount of content Prince not only produced but owned. Sadly, immediately, I thought of the potential estate tax value of Prince’s estate. This unique situation is playing out right now with the Michael Jackson estate but here Prince owned more of his own work.

Currently, conservative estimates have his estate at $300 million. But these estimates may be way off as Prince actually owned his recording and publishing copyrights. According to the LA Times, music industry insiders say they “can’t imagine a catalog that would have a higher value.”

There is much speculation on who will receive his estate. Because, probate has not been opened, we do not know if Prince had a will yet or not. There has been speculation that he had no will since he was unmarried and had no children. But this seems rather silly (and kind of offensive) to me given his concern for protecting the value of his catalog during life. I would expect to see a pour-over will to a trust.

What will be interesting is what type of estate planning he engaged in during life. Normally, estate tax returns are private and only the estate, the beneficiaries and the IRS know what is on them. However, in the case with a hard to value asset (e.g., a massive music library), there is often a difference of opinion between the estate and the IRS as to the value of the asset. Since the resolution of the difference is in court, we will get a glimpse into the planning done by Prince. One point to make here is that if the beneficiary of the estate is Jehovah’s Witnesses as has been reported (speculated), then this might not end up in court because there would be no tax due because of the estate charitable deduction.

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Prince v. the IRS. Also, v. the French Government

Probably the apex of my listening to Prince was my freshman year of college, where I thrilled to his virtuosity, to his funk, and to the way it flummoxed other music majors when I told them that I’d spent the morning listening to Prince. (I also got into at least one BBS argument about whether Prince could play jazz if he wanted to; I argued, naturally, that he could.) Though I’ve only listened to him occasionally since, he holds a special place in my heart and in my ears.

Yesterday, when I read that he’d died, my first thoughts were memories of my freshman year. Like any right-thinking American, my next were whether he’d ever had any significant interaction with the tax law.

A quick search answered that: he did! Continue reading “Prince v. the IRS. Also, v. the French Government” →

Introduction Post: Leandra Lederman

Hi! I’m @Leandra2848, AKA Leandra Lederman, the William W. Oliver Professor of Tax Law at Indiana University Maurer School of Law in Bloomington. I have blogged occasionally before but never as a regular contributor—much less as a member of a Surly Subgroup—so this is a real privilege!

I’ve been a tax professor for 22 years, 12 of them at Maurer (minus last semester at U. Chicago). I teach Income Tax, Corporate Tax, Tax Procedure, and I run a Tax Policy Colloquium that brings 6 or 7 tax professors to Bloomington over the course of the spring semester. I’ve also taught a short course in Pamplona, Spain each of the last five years.

I write both on the individual and corporate federal income tax (including a 2016 edition of Understanding Corporate Taxation, co-authored with Michelle Kwon) and on tax procedure, which includes tax administration and tax litigation. Most recently, I wrote two articles about problems facing the IRS. Much of my work relates to tax compliance/ Continue reading “Introduction Post: Leandra Lederman” →

Charitable Organizations and Marijuana?

In Denial 201615018 (released April 8, 2016 and for which I can only find a Tax Notes link) the IRS denied the charitable organization application of a nonprofit organization organized “to provide a way for your members to collectively and cooperatively cultivate and distribute medical marijuana for medical purposes to qualified patients and primary caregivers who come together to collectively and cooperatively cultivate physician-recommended marijuana.” The IRS denied the organization’s applications on two bases: (1) a charitable organization cannot engage in illegal activities and the distribution of marijuana is illegal under federal law; and (2) it provided too much private benefit. I will focus only on the first basis.

Ben Leff and I have previously debated the issue of marijuana distribution and tax exemption. Ben contended that under certain circumstances a social welfare organization under 501(c)(4) could form to distribute marijuana and operate in a tax-exempt vehicle. The reason to try to do this instead of operating in a taxable vehicle is that under section 280E federal tax law prohibits marijuana distributors from deducting trade or business expenses. While I disagreed with Ben, neither of us argued that a charitable organization could engage in the distribution of marijuana. Both of us, and Ben should absolutely chime in, believed that the public policy/illegality limitation on charitable organizations is absolutely clear on this front: engaging in an illegal activity as a substantial purpose just does not cut it under charitable tax rules. Continue reading “Charitable Organizations and Marijuana?” →

A New Republican Idea: Raising Taxes on the Rich

What a crazy day for Republican Presidential candidates as related to their tax positions!! Donald Trump wants to raise taxes on the wealthy and Kasich (the supposed mainstream candidate) still thinks that you can grow the economy through spending cuts!

For now, I will just discuss Donald Trump truly anti-establishment position. He appeared in a town hall meeting on the Today show this morning. During the segment Savannah Guthrie asked Mr. Trump if he believes that taxes should be raised on the wealthy (see about 16:52 of the clip). He said he does, including on himself. That must have been a shock to the Republican base!

Mr. Trump’s bombshell is a window into the main idea I discussed in my introductory post. There is a “huuuuge” difference between the absolute rates and effective rates. This problem is very evident in the corporate tax world. However, Mr. Trump’s statement shows it is just as prevalent with individual taxes.

Almost everyone (other than tax professors), especially the candidates (including Trump here), discuss taxes as related to absolute rates and not effective rates. For example, we can make the stated tax rate 75% or 90%. This stated rate means very little because that rate is applied to an adjusted gross income number. What really matters is how adjusted gross income is determined. Rates do matter, but only if gross income and adjusted gross income are fairly similar (I’m look at you middle America).

To explain this let’s use an example. Assume Mr. Trump’s gross income is $100, we do not take a rate (let’s use 40%) and multiply that by the $100 for $40 in tax due. We first allow a series of above-the-line (non-phased out) deductions to that gross income. In Mr. Trump’s case, this allows him to reduce his income to zero. Richard Rubin of the Wall Street Journal has done a great job writing about how Mr. Trump has reduced his taxes (to what number we don’t know since he will not release his returns). From Rubin’s research, Mr. Trump uses from the usual, depreciation deductions, to the unusual, goat herds. Even if Mr. Trump wanted to raising his stated rate to 100%, it would not matter; his effective tax rate might still be zero. 100% of zero is zero (for those math geeks, the formula is: 100% * 0 =0)

Continue reading “A New Republican Idea: Raising Taxes on the Rich” →

Hello from David

First, I am very excited to be part of this ambitious tax blog platform. Thanks Sam and Shu-Yi for organizing this!

Since we do not know each other, I will put up my blog version of a tinder profile. Hopefully, according to tinder protocol, I get some “right-swipes.”

As a way of introduction, I am a tenured law professor at Valparaiso School of Law with a visiting position for the next two summers a Loyola Law School in Los Angeles. You can find my opinions in 120 characters on twitter @professortax.

I am an employed as a full time law professor. Therefore, it goes without saying that I write law review scholarship. But, based on citations, I assume only 5 or 6 of you read it. Rather than talk to this select few, last year, I made a conscious decision to be more involved with the public. I hoped to impart to the general public better understanding of taxes and how taxes relate to one’s everyday life. I accomplished this through writing articles and serving as background for reporters (with an occasional quote).

Continue reading “Hello from David” →