Remedies and the Parsonage Allowance

By Sam Brunson

On Friday, the Western District of Wisconsin ruled (again) on the constitutionality of the section 107(2) rental allowance for “ministers of the gospel.”[fn1] The litigation between the Freedom From Religion Foundation and the IRS has been going on for a long time—I first blogged about it in 2013—so I’m not going to spend a lot of space here discussing the specifics of the case. If you want to look at what’s been going on, you can check out this post and the posts I’ve linked to in it.[fn2] Long story short, this is the second time the court has ruled the rental allowance is unconstitutional. The first time, the Seventh Circuit reversed on the grounds that the plaintiffs had never tried to claim a tax-free rental allowance, so they had no standing. This time, they did claim a refund, which the IRS refused, the court found standing, and, in a well-written and extremely persuasive opinion, it again found section 107(2) unconstitutional.

Although the court declared that section 107(2) violated the Establishment Clause, it didn’t order a remedy. The opinion explains that in the first round, all of the parties assumed that the only relief available was to declare the provision unconstitutional and enjoin its enforcement. This time, though, the Freedom From Religion Foundation suggests that there may be two other remedies available. The first is to refund a portion of plaintiffs’ taxes and order the IRS to “extend benefits under the statute to those excluded.” The second is to declare section 107(1) (that is, the in-kind provision of tax-free housing to “ministers of the gospel”) also unconstitutional. Continue reading “Remedies and the Parsonage Allowance”

Tax Leaks: The New Normal?

By: Diane Ring

Today, the Guardian is reporting that big-four accounting firm Deloitte suffered a hack back in March, 2017. The underlying attack may have originated in the fall of 2016 and may have allowed access to Deloitte systems for several months.

Deloitte itself is not unfamiliar with cybersecurity. As stated on its website, among the services that Deloitte offers clients is Cyber Risk. However, being a victim of a hack provides a new perspective. At this point, details are scarce on exactly which clients have been affected and what specific information may have been accessed, but it has been reported that “confidential emails and plans of some of its blue-chip clients” may have been compromised. This doesn’t sound good. But it is also no surprise.

Leaks and hacks can target a wide variety of data including business plans, mergers and acquisitions, scientific developments, business forecasts, individual identities, and government records. In recent years, tax-related information has proven especially attractive to leakers and hackers. As my co-author, Shu-Yi Oei and I explored in our recent article, Leak-Drive Law studying tax leaks that have occurred over the past 10 years, tax information can be valuable and their release by leakers can have powerful impacts. Moreover, as the tax community has embraced increased reporting and transparency to the government, the number of caches of well-organized data held by corporations, tax advisers and governments increases. Such caches may be magnets for those seeking to hack into it or leak it.

As we continue to move forward in this new world, what do we know? Continue reading “Tax Leaks: The New Normal?”

European Commission Prods OECD, EU, and Members States on Digital Taxation: An Analysis

By: Diane Ring

Complaints regarding the international tax system’s ability to handle the digital economy (think Google, Amazon, and a myriad of online service providers) are now ubiquitous. The heart of the problem is two-fold: (1) technology allows these corporations to effectively conduct business in a country without a physical presence there, and (2) much of these businesses’ value derives from intangibles whose value can be difficult to document.

The first reality limits a host country’s ability, under current law, to assert jurisdiction to tax the businesses. The second means that for core transactions by these businesses, such as licensing intangibles to related parties, it can be very difficult for the tax authorities to guarantee that the transactions are at arm’s length prices (and not shifting profit into low tax jurisdictions). The topic is pervasive enough to have merited its own Action Item in the ongoing OECD BEPS Project (Base Erosion and Profit Shifting).

However, a real, coordinated global response has been much harder to secure.  This week, the European Commission (EC) made its most recent foray into the debate with a Communication from the Commission to the European Parliament and the Council. But the EC was not just talking to European Union (EU) bodies; it was directly speaking to the OECD and EU member states. What exactly is the EC’s goal with this Communication?

Bottom line the EC seems to have several intersecting objectives: (1) clarify the problem, (2) identify and prod global actors, (3) delineate proper approaches, and (4) warn about the implications of nonaction. Continue reading “European Commission Prods OECD, EU, and Members States on Digital Taxation: An Analysis”

Saule Omarova (Cornell) presents “Private Wealth and Public Goods: A Case for a National Investment Authority” At Boston College Law School

Shu Yi Oei

UPDATE 9/19/17: I blogged more about Omarova & Hockett’s National Investment Authority suggestion over on Taxprof Blog. You can read the post here.


Today, Boston College Law School welcomes Professor Saule Omarova (Cornell) as the first presenter in our inaugural Regulation and Markets Workshop Series. The paper (with Robert Hockett, also of Cornell) is entitled “Private Wealth and Public Goods: A Case for a National Investment Authority.” It’s available on SSRN.

Here’s the abstract:

The American Presidential election of 2016 was won under the rhetorical banner of returning America to its past productive glory. Any such undertaking presents an extraordinary challenge, demanding a correspondingly extraordinary institutional response. This Article proposes precisely such a response. It designs and advocates a new public instrumentality – a National Investment Authority (“NIA”) – charged with the critical task of devising and implementing a comprehensive long-term development strategy for the United States.

Patterned in part after the New Deal-era Reconstruction Finance Corporation, in part after modern sovereign wealth funds, and in part after private equity and venture capital firms, the NIA is an inherently hybrid, public-private entity that combines the unique strengths of public instrumentalities – their vast scale, lengthy investment horizons, and explicit backing by the public’s full faith and credit – with the micro-informational advantages of private market actors. By creatively adapting familiar tools of financial and legal engineering, the NIA overcomes obstacles that ordinarily impede or discourage private investment in critically necessary and even transformative public infrastructure goods. By channeling presently speculative private capital back into the real-economy, moreover, the NIA plays an important role in enhancing the resilience and stability of the U.S. and global financial systems.

The Article makes original contributions not only to contemporary policy debates over how to revive America’s productive prowess and bring its financial system back into the service of the real economy, but also to current theoretical understandings of “public goods” and how to provide them. It offers a more complete and coherent account of such goods as solutions to collective action problems that pervade decentralized markets, hence as goods that can be supplied only through exercises of collective agency. The NIA proposal advanced in the Article operationalizes this theoretical insight by elaborating a specific institutional form that such collective agency can take.

The paper is really interesting and I have many swirling thoughts. I’ll say more after the workshop.

 

Winning by Losing? Getting the Supreme Court to review Quill.

By Adam Thimmesch

The Supreme Court of South Dakota heard sdsc_1_smalloral arguments in South Dakota v. Wayfair, Inc. earlier this week. That case involves a challenge to a South Dakota statute that requires vendors to collect the state’s use tax based solely on their economic connections with the state—a requirement that seems to directly contradict the rule embraced by the Supreme Court in Quill Corporation v. North Dakota. What was unusual about the case is that the state argued that it should lose. You don’t run into that every day.

Continue reading “Winning by Losing? Getting the Supreme Court to review Quill.”

The Zelda Tax

Yesterday, the House Republicans posted “What Do the The Legend of Zelda and the American Tax Code Have In Common?”

Sadly, by the time I read about it on Twitter, the post had been taken down.

Why did the post come down? Probably because it was instantly and ruthlessly scorned, mostly because it claimed Nintendo had been founded in 1985 (it was founded in 1889). It has now been reposted with the dates corrected.

Unfortunately, the GOP didn’t correct the bigger flaw in the post: it promised something awesome and failed to deliver. See, what do Zelda an the Internal Revenue Code have in common? Zelda was released in 1986 and the last fundamental tax reform happened in 1986. Continue reading “The Zelda Tax”

Something Old, Something New: Two Workshop Series @ Boston College Law School this Fall

Shu Yi Oei

I’m happy to announce that we have a couple of workshop series happening at BC Law School this academic year. I’m really quite excited about these. Because what’s life without a workshop?

Tax Policy Workshops & Roundtable…

Boston College Law School has run a Tax Policy Workshop Series since 2007. This fall, we continue in that tradition, with speakers Daniel Hemel (Chicago), Ruth Mason (UVA), Zachary Liscow (Yale), and Lily Batchelder (NYU) presenting papers.

BC Law and Tulane Law are also hosting a joint BC-Tulane Tax Roundtable on March 23, 2018. More info about that coming soon.

…and a New Regulation and Markets Workshop Series!

In addition, here’s something a bit fun: Some BC Law colleagues and I have started a new workshop series, focusing on Regulation, Markets, and Business. This multidisciplinary workshop series focuses on the study of regulatory approaches to markets and business. It investigates how such economic regulation should be designed in order to balance the interests of various constituencies. It also explores how traditional approaches to regulation compare, contrast, and intersect with emerging methodologies.

We’ll feature presentations by invited legal scholars of their works-in-progress. The hope is to create opportunities for scholars working on issues of economic regulation to discuss and present their research in a forum of academics working in related intellectual spaces. The workshop is offered to Boston College JD and LLM students as a 1-credit seminar.

Here’s the 2017-18 slate:

FALL 2017

September 12, 2017 – Saule Omarova (Cornell): “Private Wealth and Public Goods: A Case for a National Investment Authority”

September 26, 2017 – Rory Van Loo (Boston University): “Consumer Law as Tax Alternative”

Tuesday, October 17, 2017 – William Birdthistle (Chicago-Kent):  “Free Funds: Retirement Saving as Public Infrastructure”

Tuesday, November 14, 2017 – Cary Martin Shelby (DePaul): “The Role of Competition in the Regulation of Investment Funds”

Tuesday, November 28, 2017, 12:15 pm – Lily Batchelder (NYU), co-sponsored with Tax Policy Workshop: “The Shaky Case for a Business Cash-Flow Tax”

Continue reading “Something Old, Something New: Two Workshop Series @ Boston College Law School this Fall”

So about that Robot Tax…

Shu-Yi Oei

I came across a couple of news stories recently about how South Korea is introducing the world’s first robot tax. But based on the press reports, it sounds like the so-called robot tax is actually just a reduction of the tax deductions available to businesses that invest in productivity-boosting automation. The news sources themselves concede that this “robot tax” not exactly a tax on robots but rather a tax benefit reduction for automation investment.

Talk of a “robot tax” has landed at the forefront of tax news since Bill Gates mentioned it in a Quartz interview back in February of 2017. But of course, scholarship about robots (not to mention robots themselves) has been around for quite a bit longer. There’s even a “We-Robot” robotics law and policy conference that’s been going on since 2012, which I keep meaning to crash, but then there’s always something else going on.

A lot of what seems to be driving the tax conversation is the fear that robots are taking over jobs, though there’s some uncertainty about the extent to which robots are to blame.

Personally, I’ve been having a hard time squaring the newly ascendant tax conversation about the robot tax with the broader legal scholarship on robots. In some of the news and other commentary discussing Robotaxation, my reaction has been something to the effect of “I’m not sure that word means what you think it means.” Turns out, there is something of an existing conversation about what constitutes a robot in the first place—see, for example, Richards and Smart (2013) for a nice discussion of some of the definitional issues. See also this “What is a Robot?” piece in The Atlantic. In defining “robot,” it might matter how a robot moves in the physical world, what kind of quasi-independent agency it seems to exercise (autonomous vs. semi-autonomous), how humans interact with it, and even what sorts of emotions it triggers in us mere humans. We might understand some automated machines to be robots but others to just be automated equipment. And these distinctions make sense, from the viewpoint of areas like tort law, privacy law, the law of principals and agents, and the more general regulation of robots (and of artificial intelligence as a subcategory of robots).

But in some of the tax discussions about robots that I’ve seen on the interwebs, it’s quite clear that the authors don’t necessarily mean Robot when they say Robot. Continue reading “So about that Robot Tax…”

The Front Lines of Sharing Economy Legal Debates

By: Diane Ring

Last month I blogged about new proposed legislation in Congress that sought to provide a safe harbor for gig worker classification for tax purposes. However, as I noted, the proposal implicitly favored one side of the debate by making the safe harbor one that would ensure the “easy” ability to classify a worker as an independent contractor (rather than an employee). In that post, I suggested that having tax lead the charge in this sharing economy worker classification debate perhaps allowed the tax “tail” to lead the employment relations “dog”. There are pressing nontax issues in the sharing economy that are driving litigation and dominating worker concerns – particularly employment law issues. Just last week, we saw further evidence of serious tensions in the landscape of sharing economy labor law.

On Tuesday, July 31, 207, in Chamber of Commerce of the United States, et al.,  v. The City of Seattle, a U.S. federal judge dismissed a challenge to legislation approved by the Seattle City Council in fall 2015. Pursuant to the Seattle law, businesses that hire or contract with taxi-drivers, for-hire transportation companies and “transportation network companies” must bargain with drivers if a majority want to be represented. That is, Seattle effectively allows Uber and Lyft drivers to unionize. Not surprisingly, Uber and Lyft objected to the law . . . Continue reading “The Front Lines of Sharing Economy Legal Debates”

The Tail, the Dog, and Gig Workers

By: Diane Ring

tail.dog

New legislation has just been introduced in the Senate that creates a “safe harbor” for independent contractor status. The proposed legislation provides that if a worker relationship satisfies certain criteria, then that worker can bypass the sometimes messy, multi-factor test for distinguishing between employees and independent contractors, and will be classified as an independent contractor for tax purposes. What prompted action now to address what has been a decades-old classification challenge for workers, businesses and the IRS alike? The gig economy. (Hence, the not-so-catchy title for the legislation: The New Economy Works to Guarantee Independence and Growth (NEW GIG) Act of 2017 (S. 1549).)

The legislation’s sponsor, Senate Finance Committee member John Thune, (R-S.D), described the impetus for the legislation as follows: “My legislation would provide clear rules so that these freelance style workers can work as independent contractors with the peace of mind that their tax status will be respected by the IRS.”

Is this really what gig workers are worrying about? . . . Continue reading “The Tail, the Dog, and Gig Workers”