TaxProf Blog

TaxProf Blog Weekend Roundup

Saturday:

• 9th Circuit:  Lawyer Can't Keep Tax Records from IRS
• Joint Tax Committee Releases List of Expiring Federal Tax Provisions, 2013-2023
• Percentage of Tax Returns With AGI Over $500,000
• Customer Leaves Anti-Tax Note Rather Than Tip

Sunday:

• New England Law Dean's $867,000 Salary Draws Scrutiny Amidst Soaring Tuition, Bleak Job Prospects for Grads
• NY Times:  The Tax Code and the Very Rich
• NPR:  A Tale of Four Tax Returns
• Top 5 Tax Paper Downloads

New England Law Dean's $867,000 Salary Draws Scrutiny Amidst Soaring Tuition, Bleak Job Prospects for Grads

Boston Globe:  New England Law Head Draws Scrutiny For His Pay:  A Princely Paycheck For Dean of Unheralded School:

New England Law, Boston has operated in the shadows of the ­region’s more prestigious law schools for decades, trailing so far behind in some measures of excellence that US News & World ­Report does not include the downtown campus in its widely read ranking of 145 better law schools in the nation. [New England is ranked #154 in academic reputation.]

Yet the school’s longtime dean, John F. O’Brien, may be the highest paid law school dean in America, pocketing more than $867,000 a year in salary and benefits, includ­ing a [$650,000] “forgivable loan” that he used to buy a Florida condominium.

“It’s a remarkable sum to pay a dean of a law school, never mind the dean of a bottom-ranked law school,” said Brian Z. Tamanaha, a law professor and the author of Failing Law Schools, a 2012 book critical of the nation’s legal education system.

O’Brien is paid about as much as the president of Harvard University and more than three times the median salary of law school deans nationally, says a study by the College and University ­Professional Association for Human Resources. Indeed, New England Law could not name a single law school dean in the country who makes more than O’Brien.

But O’Brien’s story is more than the tale of a richly compensated school administrator. It is also the story of a professor who vaulted, just a few years into his academic career, to the top job at a lower-tier law school in large part through shrewd networking, sheer persistence, and a close relationship with the school’s board of trustees, many of whom have served on the board for most or all of O’Brien’s 25-year tenure as dean.

It is also the story of a law school that has hiked tuition by more than 80% in just a few years while doubling the percentage of applicants it accepts, generating the funds for increased student aid but also for the big salaries paid to O’Brien and other top administrators even as the demand for law school graduates dries up. ...

But, away from the glitz, O’Brien’s salary is drawing private criticism from some within the school and public barbs from outside observers who question whether the school is really worth the $40,000 ­tuition it charges students. “There’s no relationship ­between cost and benefit,” said Paul F. Campos, a University of Colorado Law School professor and the author of the blog ­“Inside the Law School Scam.” ...

[S]ome indicators suggest that O’Brien’s impact on New England Law’s performance has been limited. US News & World Report, in its listing of 199 law schools, includes New England Law among the bottom 50 or so schools that it does not publicly rank because they fall “below the US News cutoff.”

In addition, only 34 percent of students in New England Law’s 2011 graduating class were able to land jobs requiring a law degree within nine months of graduating, according to the American Bar Association, compared with 68 percent at Boston College Law School, and 90 percent at ­Harvard Law. ...

Yet, students at New ­England Law pay almost as much in tuition as students attend­ing law schools where graduates generally have more success finding meaningful employment. Boston College law students, for instance, pay only about $1,000 a year more than New England Law students.

But New England Law’s escal­ating tuition has been a boon to its bottom line. The school — a tax-exempt, charitable organization, like most other colleges and universities in the region — reported that revenues exceeded expenses by $10 million in the 2011 fiscal year, which would represent a profit of roughly 30 percent if it were a for-profit company.

O’Brien said the school’s ­robust finances have allowed New England Law to triple ­financial aid, noting that 60 percent of students receive some form of scholarship from the school. The school’s budget surplus translates into roughly $9,000 for every student at New ­England Law, suggesting that officials could significantly ­reduce tuition and still not lose money for the year. ...

A native of Staten Island, he had graduated from Manhattan College, a Catholic school in the Bronx, before graduating first in the class of 1977 at what was then New England School of Law. For the next seven years, O’Brien labored as an attorney for the IRS before returning to New England Law as a professor of constitutional law and personal income taxation and, later, associate dean. In 1988, when he was still only in his late 30s, he was handed the reins of a school known for offer­ing students of lesser means or less than sterling credentials a chance for legal training.

NY Times: The Tax Code and the Very Rich

New York Times:  Explanations and Advice for Those Hit Hardest by New Tax Increases, by Paul Sullivan:

While the affluent will pay more in taxes this year, that is probably not the case for the very wealthiest — those worth hundreds of millions or more. They may still be paying a lower tax rate than Warren Buffett’s secretary.

Many millionaires are certainly paying at least 30% of their income in taxes, a goal President Obama set out in last year’s State of the Union address. But they’re more likely to be doctors, lawyers and people working in the financial services industry who get the bulk of their earnings in the form of paychecks.

Partners in private equity firms and hedge fund managers, on the other hand, earn much of their money as a share of their funds’ earnings. And that income gets preferential tax treatment as so-called carried interest.

A similar special tax treatment still holds true for Mr. Buffett as long as the bulk of his income comes from his investments and not a paycheck. The long-term capital gains rate for incomes over $400,000 is 23.8%, including the Medicare surcharge. That’s a far cry from the top marginal tax rate on income above that amount of 40.5%, which includes a 0.9% Medicare surcharge on earned income.

How are people going to react to all of this? Here is advice and observations from some experts in wealth management.

• New York Times Bucks Blog: The Tax Code and the Very Rich

(Hat Tip: Mike Talbert.)

NPR: A Tale of Four Tax Returns

Watch 1/11/2013: A Tale of Four Tax Returns on PBS. See more from Need To Know.

(Hat Tip: Francine Lipman.)

Top 5 Tax Paper Downloads

There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new paper debuting on the list at #5.  The #1 paper is #1 in all-time downloads among 8,893 tax papers:

1.  [6265 Downloads]  Top Marginal Effective Tax Rates by State and by Source of Income, 2012 Tax Law vs. 2013 Scheduled Tax Law, by Gerald T. Prante & Austin John (both of Lynchburg College, School of Business and Economics)

2.  [338 Downloads]  Taxation in the Bible, by Geoffrey P. Miller (NYU)

3.  [282 Downloads]  The End of Taxation without End: A New Tax Regime for U.S. Expatriates, by Bernard Schneider (Queen Mary, University of London School of Law)

4.  [196 Downloads]   Important Developments in Federal Income Taxation, by Edward A. Morse (Creighton)

5.  [138 Downloads]  Taxing Market Discount on Distressed Debt, by Ethan Yale (Virginia)

9th Circuit: Lawyer Can't Keep Tax Records from IRS

The Recorder:  Ninth Circuit Says Lawyer Can't Keep Tax Records from IRS:

An Oakland lawyer facing federal tax evasion charges will have to turn over her tax records, even though they're in the possession of her lawyers. The U.S. Court of Appeals for the Ninth Circuit ruled Tuesday that divorce lawyer Mary Nolan's 2007 and 2008 tax records are not shielded by attorney-client privilege because her tax preparer can describe them with particularity, rendering their existence a foregone conclusion. ...

Tuesday's decision in U.S. v. Sideman & Bancroft is as interesting because of who's involved than for the legal principle established. Nolan was indicted in September — a week after arguments before the Ninth Circuit — both for tax evasion and for allegedly conspiring with a disgraced private investigator to eavesdrop on her clients' spouses. Nolan was represented before the Ninth Circuit by Sideman partner Jay Weill, the longtime tax chief for the U.S. attorney's office in San Francisco, though Berkeley's Cooper Arguedas & Cassman took over after the indictment was handed up.

The fight over the tax records began two years ago when the IRS issued a lengthy subpoena. It covered four banker boxes and three accordion files containing check ledgers, client billings, credit card statements and day planners, among other things, that Nolan had supplied to her accountant to prepare her tax return. The same day the IRS executed a search of Nolan's home and office, the accountant gave the documents — contained in the four banker boxes and three accordion folders — to Nolan's civil tax attorney, who in turn provided them to Sideman & Bancroft.

Joint Tax Committee Releases List of Expiring Federal Tax Provisions, 2013-2023

The Joint Committee on Taxation has released List of Expiring Federal Tax Provisions 2013-2023 (JCX-3-13):

This document ... provides a listing of Federal tax provisions (other than those providing time-limited transition relief after the repeal of an underlying rule) that are currently scheduled to expire in 2013-2023 (with references to the applicable section of the Internal Revenue Code of 1986 or other applicable law). Expiring Federal tax provisions providing temporary disaster relief are separately listed in Part II of the document. 

For purposes of compiling this list, the staff of the Joint Committee on Taxation considers a provision to be expiring if, at a statutorily specified date, the provision expires completely or reverts to the law in effect before the present-law version of the provision. Certain provisions terminate on dates that refer to a taxpayer’s taxable year and not a calendar year. For these provisions, the expiration dates listed in this document apply with respect to calendar year taxpayers. The expiration dates of such provisions may differ, however, with respect to fiscal year taxpayers or taxpayers with short taxable years. Years in which there are no expiring provisions are not listed in the document.

Because of the fiscal cliff tax act, this year's document is only 21 pages, compared to last year's 32-page document.

Percentage of Tax Returns With AGI Over $500,000

Customer Leaves Anti-Tax Note Rather Than Tip

Huffington Post: Tax Protester Leaves Ridiculous Note Instead of Tip; Waiter Would Have Preferred Cash:

Now presenting, the world's worst excuse for not tipping.

This week, Redditor nickshambo posted a picture of the note he said a customer left his friend instead of a tip. Printed on paper and clearly pre-planned, the note claims that President Obama's tax rates have made him unable to tip

(Hat Tip: Francine Lipman.)

IRS Releases 2013 Inflation-Adjusted Tax Tables

The IRS today released various inflation-adjusted 2013 tax brackets, tables, exemptions, thresholds, and other items (IR-2013-4; Rev. Proc. 2013-15, 2013-5 I.R.B. ___ (Jan. 28, 2013):

• Tax Tables:  New 39.6% added for income in excess of $400,000 single/$450,000 joint
• Standard Deduction:  $6,100 single/$12,200 joint (up $150/$200 from 2012)
• Itemized Deductions:  Phase out for income in excess of $250,000 single/$300,000 joint
• Personal Exemption:  $3,900 (up $100 from 2012), phasing out for income in excess of $250,000 single/$300,000 joint (complete phase out at $372,500/$422,500)
• Alternative Minimum Tax Exemption:  $51,900 single/$80,800 joint (up $1,300/$2,050 from 2012)
• Maximum Earned Income Credit:  $6,044 for taxpayers filing jointly with 3 or more qualifying children (up $153 from 2012)
• Estate Tax Exemption:  $5,250,000 (up $130,000 from 2012)
• Gift Tax Annual Exclusion:  $14,000 (up $1,000 from 2012)

Call for Tax Papers: Harvard/Stanford/Yale Junior Faculty Forum

Harvard, Stanford, and Yale Law Schools have issued a call for tax papers for the fourteenth annual Harvard/Stanford/Yale Junior Faculty Forum to be held at Yale Law School on June 14-15, 2013:

The Forum’s objective is to encourage the work of young scholars by providing experience in the pursuit of scholarship and the nature of the scholarly exchange. Meetings are held each spring, rotating at Yale, Stanford, and Harvard. Ten to twelve scholars (with one to seven years in teaching) will be chosen on a blind basis from among those submitting papers to present. One or more senior scholars, not necessarily from Yale, Stanford, or Harvard, will comment on each paper. The audience will include the invited young scholars, faculty from the host institutions, and invited guests. The goal is discourse on both the merits of particular papers and on appropriate methodologies for doing work in that genre. We hope that comment and discussion will communicate what counts as good work among successful senior scholars and will also challenge and improve the standards that now obtain. The Forum also hopes to increase the sense of community among American legal scholars generally, particularly among new and veteran professors.

Each year the Forum invites submissions on selected topics in public and private law, legal philosophy, and gender and race theory, alternating loosely between public law and humanities subjects in one year, and private and dispute resolution law in the next. For the upcoming 2013 meeting, the topics will cover these areas of the law [including tax]. ...

A jury of accomplished scholars, again not necessarily from Yale, Stanford or Harvard, with expertise in the particular topic, will choose the papers to be presented. There is no publication commitment, nor is published work eligible. Yale, Stanford, or Harvard will pay presenters’ and commentators’ travel expenses.

There is no limit on the number of submissions by any individual author. To be eligible, an author must be teaching at a U.S. law school in a tenured or tenure-track position and must not have been teaching at either of those ranks for a total of more than 7 years. We accept co-authored submissions, but each of the coauthors must be individually eligible to participate in the JFF.

Electronic submissions should be sent to Marguerite Camera. The deadline for submissions is Friday, March 15, 2013. ... Inquiries concerning the Forum should be sent to Ian Ayres at Yale Law School, Joseph Bankman at Stanford Law School, or Adriaan Lani at Harvard law School.

Ex-IRS Commissioner's New Gig

GovExec.com, Ex-IRS Chief’s New Gig:

Doug Shulman, thewho completed his term as Internal Revenue Service commissioner in November, has new digs.

In a year where Congress may take up historic tax reform, Shulman is becoming a guest scholar at the Brookings Institution, Government Executive learned after a reporter bumped into him Thursday on Washington’s 19th Street Northwest.

Before being named by President George W. Bush in 2007 to be the 47th IRS commissioner, Shulman ran consulting firms and was vice chairman of the private-sector Financial Industry Regulatory Authority. In the 1990s, he was chief of staff at the National Commission on Restructuring the Internal Revenue Service, and later a private-equity investor at Darby Investments.

With degrees from Williams College, Harvard University's John F. Kennedy School of Government and Georgetown University Law Center, Shulman also co-founded Teach for America.

The Onion: Man Has Alarming Level of Pride in Institution (Miami) That Left Him $50,000 in Debt, Inadequately Prepared For Job Market

Man Has Alarming Level Of Pride In Institution That Left Him $50,000 In Debt, Inadequately Prepared For Job Market

IFA Seeks Nominations for Prizes and Poster Presentations

The International Fiscal Association invites nominations by April 1, 2013 for:

• The Mitchell B. Carroll Prize:  In order to encourage scientific work, the IFA has instituted a Prize as a tribute to its first Honorary President, Mitchell B. Carroll. This Prize is awarded for a work dealing with international fiscal questions, comparative fiscal law or local fiscal law with the emphasis on the relationships with the fiscal law of foreign jurisdictions. Competition for the Prize is open to lawyers, accountants and economists. There is an age limit of 35.
• Maurice Lauré Prize:  The IFA has instituted a Prize in order to encourage scientific work on international indirect taxation. The Prize is named in honour of Maurice Lauré, who was instrumental in the first implementation of the Value Added Tax system, now applied in more than 160 jurisdictions.
• Poster Programme:  In 1993 IFA initiated a so-called "Poster Programme" to promote young students to study and discuss international taxation. The programme is open to a maximum of ten students graduating in international taxation who are writing a thesis on a theoretical or practical subject.

Registration Closes Today for Pepperdine/Tax Analysts Symposium: Tax Advice for the Second Obama Administration

Today is the final day to register to attend our symposium next Friday (Jan. 18) on Tax Advice for the Second Obama Administration in Malibu. (So far, over 100 folks have registered for the symposium.)

Introduction and Welcome

• Deanell Tacha (Dean, Pepperdine)
• Chris Bergin (President, Tax Analysts)

Keynote Address:  Michael Graetz (Columbia)

Occupy the Tax Code:  The Buffett Rule, the 1%, and the Fairness/Growth Divide

Moderator:       David Brunori (Tax Analysts)

Papers:            Dorothy Brown (Emory), Francine Lipman (UNLV), Kirk Stark (UCLA) (with Eric Zolt (UCLA))

Commentary:  Bruce Bartlett (New York Times), David Miller (Cadwalader, New York)

Estate and Gift Tax

Moderator:       Paul Caron (Pepperdine)

Papers:            Ed McCaffery (USC), Grayson McCouch (San Diego), Jim Repetti (BC) (with Paul Caron (Pepperdine))

Commentary:  Joe Thorndike (Tax Analysts)

Luncheon Address:   David Cay Johnston (author/journalist)

Business/International Tax #1

Moderator:       Tom Bost (Pepperdine)

Papers:            Steve Bank (UCLA), Karen Burke (San Diego), Martin Sullivan (Tax Analysts)

Commentary:  Michael Schler (Cravath, New York)

Business/International Tax #2

Moderator:       Khrista McCarden (Pepperdine)

Papers:            Reuven Avi-Yonah (Michigan), Allison Christians (McGill), Susan Morse (UC-Hastings)

Commentary:  Robert Goulder (Tax Analysts)

Closing Remarks:  What Have We Learned Today?:   David Cay Johnston (author/journalist)

IFA International Tax Student Writing Competition

The International Fiscal Association is sponsoring the 2013 International Tax Student Writing Competition (rules here):

• Subject:  Any topic relating to U.S. taxation of income from international activities, including taxation under U.S. tax treaties.
• Open to:  All students during the 2012-13 academic year pursuing a graduate degree with a tax specialty.
• Submission Deadline:  September 30, 2013.
• Prize:  $2,000 cash, plus expenses-paid invitation to IFA USA Branch Annual Meeting

Here are the recent winners:

• 2012:  Assaf Prussak (S.J.D. Candidate, Michigan), The Income of the 21st Century: Online Advertsing as a Case Study for The Implications of Technology for Source-Based Taxation.
• 2011:  Bradford Craig (J.D. 2012, Temple), Congress, Have a Heart: Practical Solutions to Punitive Measures Plaguing the Heart Act’s Expatriate Inheritance Tax, 26 Temp. Int'l & Comp. L.J. 69 (2012)
• 2010:  Kevin L. Preslan (J.D. 2011, Cleveland State), Turnabout is Fair Play: The U.S. Response to Mexico’s Request for Bank Account Information, 1 Global Bus. L. Rev. 203 (2011)
• 2009:  Samuel J. Lee (LL.M. 2009, Boston University), A Recommendation, in Light of the Current Economy, for Revising the Way § 304 Applies to International Transactions, 38 Tax Mgmt. Int'l J. 500 (Aug. 2009) 
• 2008:  Jason Sullivan (LL.M. 2008, Florida), Debt-Equity Hybrid Instruments in a Cross-Border Setting: A Focus on the U.S. Foreign Tax Credit, 53 Tax Notes Int'l 817 (Mar. 2, 2009)
• 2007:  David Pozen, Tax Expenditures as Foreign Aid, 116 Yale L.J. 869 (2007)

Entires may be emailed to Allison Christians (McGill), Brigitte W. Muehlmann (Suffolk), Brainard Patton (Boston University), Philip Postlewaite (Northwestern), and William Streng (Houston).

TPC: Tax Provisions in the American Taxpayer Relief Act of 2012

Tax Policy Center:  Tax Provisions in the American Taxpayer Relief Act of 2012 (ATRA), by Jim Nunns & Jeff Rohaly:

The fiscal cliff debate culminated in the passage of the American Taxpayer Relief Act of 2012 (ATRA). ATRA makes permanent most of the tax cuts enacted in 2001 and 2003, permanently patches the alternative minimum tax, extends for five years the enhancements to individual income tax credits originally enacted in the 2009 stimulus legislation, and temporarily extends certain other tax provisions. This paper provides a detailed description of the individual, corporate, and estate tax provisions in ATRA. 

Diamond: Law School Is Not a 'Scam'

Following up on Tuesday's post, Stephen Diamond and the Law School Crisis:  Stephen Diamond (Santa Clara), Law School Is Not a “Scam” but You Don’t Want to End Up Like Liz Wurtzel:

The law school is a “scam” argument depends, in my view, on some tendentious ideas. A “scam” implies that law schools take people’s money and leave them with nothing. It is a serious charge. It is in my view unsustainable. It appears to depend on the idea that law schools bore some responsibility for the sudden and unpredictable collapse in the job market in post-08 period. But there is no disclosure language or data I am aware of that could have been provided to law students in, let’s say, 2006 that would have allowed students to plan for the waterfall towards which they were headed. ...

My own view is that college graduates need to take a page out of The Social Network when considering an application to law school: as simplistic as it may sound, imagine you personally are a potential startup and you have a chance to invest a significant amount of time and money in adding to its human capital. Are you ready to drop everything and move to Palo Alto? There are risks and rewards. The law school, its faculty, and its alums may all be able to add useful information to your analysis. In the end, though, it is your decision. Will you be better off than you would be without a JD? In many cases, perhaps most, I think you will be. A JD is a powerful degree to have in our kind of society and despite the current mismatch in the job market a relatively rare one. ...

There was nothing I can think of that law schools could have done in 2006 to warn aspiring lawyers about the crash of 2008. An argument that law schools “should have known” the good times would not last forever reminds me of the old saying that a broken clock is right, twice a day. There is zero chance that a large complicated bureaucracy, which the modern university has become, can turn on a dime in response to vague fears of a future calamity.

But if law schools are worth their salt as academic institutions, and I believe their place in the university setting must remain secure, they should be able to learn about the nature of their profession and implement change as needed to respond to the demands of that profession. ...

In my view the secure place of the law school as an academic field is, to borrow now E.P. Thompson’s comment on the rule of law, an “unqualified human good.” The twin pillars of tenure and academic freedom secure that place for our field. ...

There are two macro trends impacting law schools today that schools must confront. First is the one that I have focused on in the recent debate, the deep financial and economic crisis. A second longer term but less visible trend, however, is the technological and institutional change underway in legal practice. Firms seem finally to be getting smarter about hiring, after suffering traumatic downturns twice in the last decade. The era when BigLaw firms could generate huge leverage hiring lots of first year associates, most of whom would quickly be burned out or turned off by the drudgery of some aspects of corporate practice, may finally be over. ...

The university has entered into a social contract of sorts with society as a whole: academics accept lower salaries than can typically be found in the private sector in return for a commitment to train the next generation of our society while attempting, as well, to generate ideas about, and solutions to, important and even not so important problems.

It is true that this endeavor, at least the attempt to find useful ideas and solutions, is a hit and miss affair. It is true that only a handful of academics will ever produce work that secures a MacArthur fellowship or a Nobel prize. But there is a reason that American universities are the envy of the world. And there is a reason American law schools have assumed a leading role in spreading concepts like democracy, human rights and the rule of law in the post Cold War era.

While there are certain aspects of Tamanaha’s critique of this effort that ring true (see his “Dark Side” article, for example), it is also the case that the United States has long protected and nurtured, in ways that other countries deeply envy, what we call “intellectual capital.” Our universities are a vital part of an ecosystem that allows thousands of smart creative people the time and space to come up with new ideas, new solutions, and new problems. The legal culture as well as academic culture is a vital source of support for this effort.

Thus, when I hear the kinds of reactions among law students that I have heard in the last few days as I entered into discussion and debate about the law school environment, I become concerned that a new form of “anti-intellectualism” is taking hold.

I can understand the anger and anxiety induced by the ongoing economic meltdown but it is precisely at this point that we must resist the pressure to sacrifice the place of the university in our culture and as well the place of the law school in the university.

Tax Foundation: Effects of Marriage on Tax Burden Vary Greatly with Income Level, Equality

Tax Foundation  Effects of Marriage on Tax Burden Vary Greatly with Income Level, Equality, by Nick Kasprak:

Joint filing has been a source of confusion ever since the filing status was created in 1949. Marriage has the potential to create a significant tax penalty, but it can also lead to a tax bonus in other situations, and for most taxpayers, determining the effect is anything but simple.

To illustrate how filing status affects tax liability, we’ve created a chart (above) that plots the two most important variables against each other—on the Y axis, equality of incomes between the two spouses, and on the X axis, total household wage income. The color represents the theoretical marriage penalty or bonus for a household with only wage income, no children, and no itemized deductions.

In general, there tends to be a marriage tax bonus when the two partners have widely disparate incomes and a marriage tax penalty when they have similar or equal incomes. There are two countervailing forces at work—on the one hand, the higher tax rate brackets kick in at greater income levels for joint filers than for single filers, but on the other hand, adding two incomes together can more than compensate for this effect. The need to balance these two effects is inherent in any tax system with a joint filing status—efforts to reduce the marriage bonus for certain filers will necessarily lead to a marriage penalty for others and vice versa.

Continue reading "Tax Foundation: Effects of Marriage on Tax Burden Vary Greatly with Income Level, Equality"

Tax Teachers of the Year

At last week's annual meeting in New Orleans, the AALS recognized law faculty who were named Teachers of the Year for 2011-12 at their respective law schools. Here are the Tax Prof Teachers of the Year:

• Bridget J. Crawford (Pace)
• Leandra Lederman (Indiana-Bloomington)
• Jeffrey A. Maine (Maine)
• John T. Plecnik (Cleveland State)
• Stephanie J. Willbanks (Vermont)

Continue reading "Tax Teachers of the Year"

Estate Tax Portability FAQs

Forbes:  A Married Couple's Guide To Estate Planning, by Deborah L. Jacobs:

The New Year’s Day fiscal cliff bill, which ended an 11-year period of uncertainty about estate tax exemptions and rates, also made permanent a  wonderful break for widows and widowers that was set to expire after a two-year introductory period. Starting for deaths in 2011, and now going forward, widows and widowers can add any unused exclusion of the spouse who died most recently to their own $5.12 million tax-free amount. This enables them together to transfer up to $10.24 million tax-free. It also eliminates the need in many cases for the tax-planning gyrations that lawyers routinely recommended to preserve each spouse’s estate tax exemption amount. ...

As with any new process there is a shakeout period, though. Here are answers to some frequently asked questions:

• Does this provision help me if my spouse died years ago?
• Does portability apply to lifetime gifts as well as assets that pass through an estate plan?
• Does portability apply to same-sex married couples?
• Does portability apply if the surviving spouse is not a U.S. citizen?
• Is portability automatic?
• Is the amount that’s portable adjusted for inflation?
• What happens if you remarry?
• Can I use my exclusion instead to provide for children from a previous marriage?
• Does portability also apply to the exemption from generation-skipping transfer tax?
• Do I still need a bypass trust?
• Is this a subject that should be covered in prenuptial agreements?

The Continuing Free-Fall in LSAT Takers and Law School Applicants

Matt Leichter, LSAT Tea-Leaf Reading: December 2012 Edition:

79 Year-Old Florida Women Pleads Guilty in UBS Tax Evasion Case, Faces Prison, $21M Penalty

• Bloomberg, UBS Client Pleads Guilty in U.S. Tax Case in Florida
• Forbes, Florida Widow Guilty + $21M Penalty For Inherited Swiss + Liechtenstein Accounts
• Huffington Post, Mary Estelle Curran, 79-Year-Old Ex-UBS Client, Facing 6 Years In Prison Over Tax Evasion
• Reuters, Former UBS Client In Florida Pleads Guilty to Tax Evasion

Religious Giving as a Guide to the Principles of Good Taxation

Robert Wolf (Wisconsin - La Crosse), Religious Giving as a Guide to the Principles of Good Taxation, 13 J. Accounting, Ethics & Pub. Pol'y, 1 (2012):

The principles of good taxation are a set of guiding values necessary for any responsible state to consider in constructing their tax policy. The principles are derived from various philosophical and economic discussions including but not limited to the role of the state, ownership of natural resources, the optimal size of the state, the emphasis on individual versus community rights, and what is reasonable. Adam Smith (1776) initiated the discussion on the principles of good taxation including equality, certainty, convenience and economy. Others have expanded and articulated the principles to include reasonable and neutral. Curran (2001), Hamill (2006), and others have considered the principles of good taxation from a religious viewpoint. Along different lines, Croteau (2005) develops the principles of giving for a religious institution. As religious institutions rely on giving in a similar manner that states rely on taxes, it is useful to review the principles of good taxation in comparison to the principles of giving. This research finds strong consistency between the principles of good taxation and the principles of giving. Additionally, the principles of giving make a strong argument for elevating the importance of effective allocation of tax revenues as a principle of tax collections.

Kleinbard: The Debt Ceiling’s Escape Hatch

New York Times op-ed:  The Debt Ceiling’s Escape Hatch, by Edward Kleinbard (USC):

The gist of the idea is to issue scrip ("registered warrants," technically, or IOUs, colloquially) to holders of money claims against the US government, other than owners of Treasury securities; the latter would continue to be paid in cash. The scrip would be freely assignable, so claims holders that get scrip would be able to sell it at a modest discount in private markets to financial institutions, because rational institutions will be comfortable that the crisis will not go on for long. As a result, claims holders will be able to "monetize" their claims through private sector sales, even while the government is precluded from borrowing money to pay them directly.

Unlike other ideas, the scrip proposal is plainly constitutional. The scrip does not run afoul of the debt ceiling, because the debt ceiling simply precludes the Treasury from raising new cash by issuing Treasury bills, notes, bonds and other debt instruments. Unlike debt, the scrip would pay no interest and have no fixed maturity date; instead, it would be payable in cash only when the Treasury announced that it had the cash available in its general fund (presumably through a resolution of the debt ceiling crisis and new borrowings by the Treasury). Moreover, the scrip would not be a cash raising mechanism for the government, but instead would simply evidence the existence of claim holders' preexisting claims. Whatever cash they receive would come from other private sector actors who were willing to buy the scrip in secondary market transactions.

TaxProf Blog Named Best Law Professor Blog of 2012

I am delighted that TaxProf Blog has been named the Best Law Professor Blog by Dennis Kennedy in his ninth annual Best of Law-related Blogging Awards (the “Blawggies”):

Best Law Professor Blog – Paul Caron’s The TaxProf Blog

The Blawggies have always had a spot for the best law professor blog. In part, it’s my little effort to bridge the great divide between practicing lawyers and law professors.

I have a repeat winner here and it’s a great blog to read as we approach the fiscal cliff. As I said last year, the test of a great blog is how it keeps me returning to it time after time because of its great posts when it’s outside my subject matter. The topic here is U.S. tax, but Paul ventures into the real word with regular, thoughtful posts. It’s a blog with an academic focus and a a real world impact. My greatest compliment: reading this blog makes me want to take a class from Paul. I hope he’s thinking about doing some online courses.

I am also pleased that our sister Legal Skills Prof Blog was the runner up:

Yes, I know, I’m involved in this one, but I don’t post very often, so I can pretend to be objective. This blog has great coverage of the current debate about what needs to be done with the current approach to legal education and what law schools are doing in the area of skills education.

Northeastern Seeks to Hire Tax Teaching Assistants

Northeastern University's College of Business Administration, in partnership with Embanet ULC, is seeking to hire assistants to help Lead Faculty teach two tax courses in Spring 2013 in its online Masters of Science in Taxation Program:

• Income Taxation of Trusts and Estates
• Tax Research, Practice, Ethics

These are 5 week long courses. Main duties include: responding back to student inquiries, grading all student submissions, managing discussion and announcement boards, and holding weekly online office hours. Payment is $2,100 per section (each with 15-20 students). Interested applicants should send their resume to: educationspecialist@embanetcompass.com.

ABA Task Force on the Future of Legal Education Solicits Comments

The ABA Task Force on the Future of Legal Education (charge) has asked me to remind readers to submit comments or request to speak at its public hearing at the Hilton Anatole in Dallas on Saturday, February 9, 2013 from noon to 5 p.m. during the ABA’s mid-year meeting. For more details, see this solicitation of comments:

The ABA has been concerned with the impact on law schools of persistent weaknesses in the economy, rapid and substantial changes in the legal profession, and shortcomings in the delivery of legal education.

To address these issues, the leadership of the ABA has commissioned a Task Force on the Future of Legal Education. This nineteen-member body, which includes practitioners, judges, and working academics, is charged with making recommendations to the American Bar Association on how law schools, the ABA, and other groups and organizations can take concrete steps to address compelling issues concerning the economics of legal education and its delivery.m

The Task Force is working through two subcommittees. One subcommittee is examining the potential for innovation and improvement in how law schools deliver education. The other subcommittee is examining the economics of legal education and its impact on individual graduates and the profession. The specific questions addressed by these subcommittees can be found on the Task Force web site.

Recognizing the gravity of the issues and compelling need for action, the Task Force has accelerated the timetable for completing its work. It aims to produce a report for the ABA to consider in mid- to late fall of 2013 (rather than in spring 2014 as original contemplated).

The Task Force will focus primarily on concrete proposals, rather than on a review of the current situation, since there already exists an abundance of useful analysis that can inform the search for solutions.

The Task Force invites persons and groups interested in its work to submit written comments and suggestions to Art Garwin, Deputy Director, ABA Center for Professional Responsibility.

City-by-City Rankings: Buying Power of Starting Associate Salaries

NALP, Buying Power Index Class of 2011:

City	Median  Salary	Salary Required to Yield NYC Buying Power	Buying Power Index
Dallas, TX	$135,000	$70,350	1.919
Wilmington, DE	145,000	79,710	1.819
Houston, TX	115,000	65,670	1.751
Charlotte, NC	115,000	68,230	1.686
Los Angeles, CA	160,000	97,110	1.648
Boston, MA	160,000	100,400	1.594
Costa Mesa, CA	160,000	104,350	1.533
Washington, DC	160,000	104,790	1.527
Nashville, TN	100,000	65,960	1.516
Grand Rapids, MI	97,500	65,375	1.484
Detroit, MI	100,000	68,520	1.459
Menlo Park, CA	160,000	109,910	1.456
Mountain View, CA	160,000	109,910	1.456
Palo Alto, CA	160,000	109,910	1.456
Pittsburgh, PA	100,000	69,320	1.443
Austin, TX	97,500	67,790	1.438
Newark, NJ	135,000	95,940	1.407
Cleveland, OH	104,000	74,150	1.403
Salt Lake City, UT	97,000	69,180	1.402
Birmingham, AL	90,000	64,790	1.389
Irvine, CA	140,000	104,350	1.342
New Orleans	93,000	69,910	1.330
Denver, CO	100,000	76,780	1.302
Phoenix, AZ	91,250	70,570	1.293
Seattle, WA	110,000	85,630	1.285
Atlanta, GA	90,000	71,150	1.265
Minneapolis, MN	102,000	80,880	1.261
Philadelphia, PA	115,000	91,410	1.258
Ft. Worth, TX	85,000	68,080	1.249
Milwaukee, WI	89,000	72,610	1.226
San Francisco, CA	145,000	118,980	1.219
Chicago, IL	100,000	83,880	1.192
Kansas City, MO	85,000	72,690	1.169
Tampa, FL	76,500	67,130	1.140
St. Louis, MO	75,000	66,620	1.126
Louisville, KY	75,000	67,060	1.119
Cincinnati, OH	75,000	68,230	1.099
Hartford, CT	98,500	90,530	1.088
Des Moines, IA	72,000	66,690	1.080
Charleston, WV	73,500	68,885	1.060
Richmond, VA	77,500	73,200	1.059
Alexandria, VA	110,000	104,790	1.050
San Antonio, TX	71,000	68,080	1.043
Memphis, TN	65,000	62,815	1.035
Las Vegas, NV	75,000	73,200	1.025
Raleigh, NC	70,000	68,590	1.021
New York, NY	160,000	160,000	1.000
Wichita, KS	63,000	67,420	0.934
Jacksonville, FL	64,000	68,665	0.932
Omaha, NE	60,000	65,375	0.918
Miami, FL	70,000	78,320	0.894
San Diego, CA	85,000	95,500	0.890
Madison, WI	69,000	79,050	0.873
Albuquerque, NM	60,000	69,180	0.867
W. Palm Beach, FL	70,500	81,170	0.862
Columbia, SC	60,000	69,835	0.859
Baltimore, MD	74,000	87,090	0.850
Okla. City, OK	56,250	66,180	0.850
Oakland, CA	84,000	99,450	0.845
Baton Rouge, LA	57,500	68,450	0.840
Tulsa, OK	55,000	65,810	0.836
Knoxville, TN	54,250	65,300	0.831
Southfield, MI	56,000	68,520	0.817
Lexington, KY	52,500	67,200	0.781
Newport, CA	80,000	104,350	0.767
Boca Raton, FL	60,000	81,170	0.739
Ft. Lauderdale, FL	60,000	81,170	0.739
Orlando, FL	52,000	71,520	0.727
Little Rock, AR	50,000	69,980	0.714
Montgomery, AL	47,500	71,150	0.668
Albany, NY	54,000	81,390	0.660
Long Beach, CA	63,700	97,110	0.649
Beverly Hills, CA	60,000	97,110	0.618
Charleston, SC	45,000	72,910	0.617
Fairfax, VA	62,500	104,790	0.592
Honolulu, HI	70,000	122,710	0.571

• Class of 2010 Rankings
• ABA Journal
• Above the Law
• American Lawyer

Osofsky Presents Frictions as Screening Mechanisms Today at Toronto

Leigh Osofsky (Miami) presents Frictions as Screening Mechanisms at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:

Tax planning can be highly problematic. It can reduce revenue, produce inefficiency, and allocate tax burdens in an inequitable fashion. As a result, scholars have examined how the tax code often incorporates costs designed to deter tax planning. An influential line of tax scholarship has dubbed these costs “frictions.” In examining and judging frictions, scholars have focused on the central question: When do frictions do a better job at deterring tax planning than causing it to continue in a more costly fashion? However, as I display in this Article, this question is necessary, but not sufficient, to analyze whether frictions are functioning well in the tax system. Just as important is a preliminary set of questions: Does the friction systematically track characteristics of taxpayers engaging in tax planning relative to groups that are not? Does the friction systematically track characteristics other than likelihood of tax planning and how, if at all, does this affect the friction’s desirability? These preliminary questions provide new, analytically important tools for evaluating and designing a whole host of tax provisions. Specifically, I argue that frictions serve as screening mechanisms, meaning that they screen between different groups of taxpayers and impose different costs on different groups. Understanding how frictions are screening between taxpayers and imposing different costs on different groups of taxpayers across the tax system is essential to evaluate both if frictions are deterring tax planning as intended and if they are doing so in an equitable fashion.

Continue reading "Osofsky Presents Frictions as Screening Mechanisms Today at Toronto "

Catholic University Launches Business School to Mix Faith and Finance

Wall Street Journal:  B-School Mixes Faith and Finance: Catholic University's New Program Will Infuse Courses With Instruction in Virtues:

Confident that aspiring corporate leaders want to worship more than just the almighty dollar, Catholic University of America is creating a new business school. The Washington, D.C., university will announce the launch of its new School of Business and Economics on Tuesday, infusing an education in strategy, accounting and marketing with instruction in morals, character and religious values. ...

Catholic currently enrolls 421 undergraduates and 36 graduate students in its existing business program—just a fraction of the size of similar institutions, such as Georgetown University or University of Notre Dame, whose business schools also mix faith with finance. ... It is hard to measure whether any business school, secular or religious, successfully instills a moral compass in its students. While institutions can count the CEOs or millionaires in their alumni ranks, there are few metrics for determining graduates' ethical acumen.

Bartlett: Tax Increases Often Lead to Bull Markets

New York Times:  Tax Increases and Bull Markets, by  Bruce Bartlett:

[T]he stock market rose sharply after the passage of the tax deal,  which raised the top income tax rate and the rate on capital gains and dividends. This is the opposite of what should have happened according to Republican doctrine, which holds that the tiniest increase in tax rates, especially on the rich, is economically devastating. That got me thinking about the impact of other tax increases in history.

A little research showed that sharp increases in the stock market have often followed big tax increases. ... I have long suspected that when tax rates are low they make it too easy for investors to get an adequate after-tax return. When rates rise, they must work harder for a higher before-tax return to compensate for the higher taxes. This pushes money into growth sectors.

I’m not prepared to predict that the great bull market of the 2010s began on Jan. 2. But I do know that anyone who thinks tax increases never precede a bull market is wrong. History proves that.

National Taxpayer Advocate Releases Annual Report to Congress

National Taxpayer Advocate Nina E. Olson today released (IR-2013-3) her 2012 Annual Report to Congress, identifying the need for tax reform as the overriding priority in tax administration.:

The Advocate also expressed concern that the Internal Revenue Service is not adequately funded to serve taxpayers and collect tax, and identified ways in which this chronic underfunding harms taxpayers and the public fisc. She also found that the IRS is not doing enough to assist victims of tax-related identity theft and return preparer fraud.

• Bloomberg:  4-Million-Word U.S. Tax Code Tops Problem List, Report Says
• The Hill:  IRS Watchdog: 6 Billion Hours Spent Dealing with the Tax Code Each Year
• New York Times:  I.R.S.’s Taxpayer Advocate Calls for a Tax Code Overhaul
• Reuters:  IRS Watchdog Urges Simpler Tax Code to Cut Costs, Confusion
• Slate:  Majority of Americans Will Pay Someone Else To Fill Out Tax Returns This Year
• USA Today:  Advocate: IRS Does Poor Job on Identity Theft
• Wall Street Journal:  Report Highlights Costs of Tax Code’s Complexity
• Washington Post:  6 Billion Hours Working on Taxes: National Taxpayer Advocate Says They’re Just Too Complicated
• Washington Post:  IRS Watchdog: Tax Code Hurts Revenue, Need for Reform an ‘Overriding Priority’

California Raises Bar Passage Standard to 40% for State-Accredited Law Schools

The California State Bar has raised the bar passage standard to 40% for California-accredited law schools:

Last month, the State Bar’s Committee of Bar Examiners voted to adopt changes to its guidelines for accredited law schools to specify that they must maintain a cumulative bar examination rate of at least 40% in order to keep their status. ...

Sean McCoy, chair of the committee, said the change was necessary to help clarify some of the standards used to judge law schools’ curriculum. “Prior to this change, the version of the accreditation rules and guidelines stated that the cumulative success on the bar exam by graduates from a California accredited law school was a factor the committee considered in evaluating the quality of a school's legal education program,” McCoy wrote in an email. “However, the guidelines did not establish a quantitative percentage or other definition of ‘cumulative success,’ or specify a time period that would be used to measure that ‘cumulative success.’ ” ...

In the July 2012 exam, the California-accredited law schools had a 19.0% pass rate among first-time and repeat test-takers (133 of 699). Although none of the California ABA-accredited law schools fell below the 40% threshold, 12 out-of-state schools did:

• Florida Coastal:  14%
• Thomas Cooley: 16%
• Detroit, UNLV:  18%
• Gonzaga, Loyola-New Orleans:  20%
• Seattle:  21%
• Suffolk:  27%
• Phoenix:  31%
• Howard:  32%
• Connecticut:  33%
• Syracuse:  35%

(Hat Tip: Faculty Lounge.)

Yale: Taxing Market Discount on Distressed Debt

Ethan Yale (Virginia), Taxing Market Discount on Distressed Debt, 138 Tax Notes 85 (Jan. 7, 2013):

The statutory rules regarding the timing and character of income and losses on debt instruments overtax distressed debt investors. Investors that make profitable investments in distressed debt are likely to have some or all of their income tainted as market discount and hence ordinary income, whereas investments that turn out badly are highly likely to generate capital losses. Taxable income is also sometimes accelerated relative to economic income. Despite widespread agreement on the nature and extent of the problems, there is lack of consensus on whether the inappropriate outcomes that are generated by the statutory rules are tempered by common law doctrines. There is also disagreement regarding how policymakers should address the problem. I first summarize how the statutory rules generate inappropriate outcomes, then offer a new perspective on how the statutory and common law rules governing distressed debt interrelate, and finally explain and evaluate the options for reform.

All Tax Analysts content is available through the LexisNexis services.

Tax Foundation Gives F Grade to CRS Report on Tax Rates and Economic Growth

Tax Foundation:  CRS Study on Tax Rates and Growth Still Flunks the Test, by Stephen J. Entin:

Studies issued by the Congressional Research Service are intended to inform the Congress as it develops public policy and enacts legislation. A recent CRS publication on the effect of the top statutory tax rates on economic activity [Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945] may have influenced the debate over taxing the rich during the election and may have influenced the tax changes just enacted in the fiscal cliff legislation.

It is critical that such studies reflect the best guidance that the economics and tax professions can provide. The CRS study on the top tax rates did not meet that high standard. Its original release in the fall was met with widespread and justified disbelief, and it was withdrawn for review and examination of its methodology. It has now been reissued in an updated form. However, the re-issued CRS study does not contain any changes of note that would redeem the original report. 

The paper purports to determine the link (or lack thereof) between changes in the top marginal tax rates on income and capital gains and the growth rate of the economy. Unfortunately, the method used to determine the relationship depends mainly on timing, looking to see if a change in the growth rate of the economy coincides with or follows soon after a rise or fall in the tax rates. The study makes no effort to determine the channels through which the tax changes ought to work to affect the economy, looks at the wrong measure of progress over the wrong time frame, and takes inadequate account of what other tax or economic events are occurring at the same time that might mask the results. ...

The CRS study omits important variables and poisons its results by not holding other factors constant. The variables it does examine are indirectly related to the relationship one should be studying, but the study does not follow them for long enough to get the whole picture. The study is as weak now as it was when it was first issued. Grade: F.

Prior TaxProf Blog posts:

• CRS: An Economic Analysis of the Top Tax Rates Since 1945 (Sept. 17, 2012)
• Dems, GOP Trade Barbs After CRS Pulls Report on Tax Rates and Economic Growth (Nov. 2, 2012)
• Republican Staff Study: CRS Report on Tax Rates Is Flawed (Nov. 14, 2012)
• CRS Re-issues Report: Tax Rates on Rich Have 'Negligible' Effect on Economic Growth (Dec. 14, 2012)

GAO: Evaluating Tax Expenditures

The Government Accountability Office has released Tax Expenditures: Background and Evaluation Criteria and Questions (GAO-13-167SP):

Tax expenditures are reductions in a taxpayer's tax liability that are the result of special exemptions and exclusions from taxation, deductions, credits, deferrals of tax liability, or preferential tax rates. Similar to spending programs, tax expenditures represent a substantial federal commitment to a wide range of mission areas. If the Department of the Treasury (Treasury) estimates are summed, an estimated $1 trillion in revenue was forgone from the 173 tax expenditures reported for fiscal year 2011. Tax expenditures are often aimed at policy goals similar to those of federal spending programs. Existing tax expenditures, for example, are intended to encourage economic development in disadvantaged areas, finance postsecondary education, and stimulate research and development. For some tax expenditures, forgone revenue can be of the same magnitude or larger than related federal spending for some mission areas. The revenue the federal government forgoes from a tax expenditure reduces revenue available to fund other federal activities, requires higher tax rates to raise any given amount of revenue, increases the budget deficit, or reduces any budget surplus.

Given the interest in tax expenditures' effectiveness, Congress asked GAO to develop a framework that could be used to evaluate their performance. In response, this guide describes criteria for assessing tax expenditures and develops questions Congress can ask about a tax expenditure's performance.

CBO: Options for Taxing U.S. Multinational Corporations

Congressional Budget Office, Options for Taxing U.S. Multinational Corporations:

In 2008, 12% of all federal revenues came from corporate income taxes; about half was paid by multinational corporations reporting income from foreign countries. How the federal government taxes U.S. multinational corporations has consequences for the U.S. economy overall as well as for the federal budget.

Tax polices influence businesses’ choices about how and where to invest, particularly the profitability of locating in the United States or abroad. The tax laws also can create opportunities for tax avoidance by allowing multinational corporations to use accounting or other legal strategies to report income and expenses for their U.S. and foreign operations in ways that reduce their overall tax liability. U.S tax revenues decline when firms move investments abroad or when they strategically allocate income and expenses to avoid paying taxes here.

This study examines options for changing the way the United States taxes multinational corporations or addressing particular concerns with the current system of taxation. All of those options would affect multinational corporations’ investment strategies and reporting of income, as well as U.S. revenues from corporate income taxes.

(Hat Tip: Ed Kleinbard.)

WSJ: Law Firm Partners Face Layoffs in 2013

Wall Street Journal:  Law-Firm Partners Face Layoffs:

It used to be that once a lawyer grabbed the brass ring of partnership at a major firm, lifetime employment was virtually assured. But more partners are discovering that those days are over. As firms grapple with continued lackluster demand for legal services, some are handing out pink slips to partners who don't boost the firm's bottom line enough. "You're only as secure as the amount of money you bring in," says a partner who during the recession was asked to leave a large national law firm. He was let go from his subsequent firm last year. It isn't enough to be a good lawyer, he says. "The job is to make money for the firm."

Having trimmed junior lawyers and staff in the years after the economic downturn, some big firms now are fixing a stern eye on partner performance. The firms are keeping close track of how much business lawyers bring in and how many hours they bill. Those with disappointing numbers can have their pay cut or be stripped of their ownership stakes. Others are simply shown the door. ...

Most law firms don't care to publicize partner exits. But big U.S. firms do plan to cut partners this year, according to two recent surveys of law-firm leaders. About 15% of roughly 120 firms surveyed by Wells Fargo Private Bank's Legal Specialty Group intend to cut partners in the first quarter, continuing a three-year trend. And 55% of the 113 managing partners and firm chairmen who responded to an American Lawyer magazine poll said they planned to ask between one and five partners to leave in the coming year. Though that proportion was roughly steady with the previous year, 5% intended to cut between 11 and 20 partners this year, up from 1.2%.

2013 Tax Season Opens on Jan. 30

Following the passage ofthe American Taxpayer Relief Act, the IRS announced today (IR-2013-12) it plans to open the 2013 filing season and begin processing individual income tax returns on Jan. 30:

The IRS will begin accepting tax returns on that date after updating forms and completing programming and testing of its processing systems. This will reflect the bulk of the late tax law changes enacted Jan. 2. The announcement means that the vast majority of tax filers — more than 120 million households — should be able to start filing tax returns starting Jan 30.

The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits. Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension. ...

Who Can File Starting Jan. 30?

The IRS anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper. The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax (AMT) patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

Who Can’t File Until Later?

There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.

The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on IRS.gov.

As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances.

WSJ: The M.B.A. Crisis

Wall Street Journal:  For Newly Minted M.B.A.s, a Smaller Paycheck Awaits:

Soaring tuition costs, a weak labor market and a glut of recent graduates ... are upending the notion that professional degrees like M.B.A.s are a sure ticket to financial success.

The M.B.A.'s lot is partly reflected in starting pay. While available figures vary by schools and employers, recruiters' expected median salary for newly hired M.B.A.s was essentially flat between 2008 and 2011, not adjusting for inflation, according to a survey by the Graduate Management Admission Council.

For graduates with minimal experience—three years or less—median pay was $53,900 in 2012, down 4.6% from 2007-08, according to an analysis conducted for The Wall Street Journal by PayScale.com. Pay fell at 62% of the 186 schools examined....

Another burdensome issue: a high debt load. Nearly 60% of graduating M.B.A.s said they expected to repay some loans after graduation, according to a 2012 GMAC survey. Among households headed by people with student debt who attended graduate school and are under 35, average student loan debt climbed to $81,758 in 2010 according a Wall Street Journal analysis of Federal Reserve data. That figure is up from $55,594 in 2007. ...

A weak economic climate is only partly to blame for the M.B.A.'s plight. The changing nature of B-school programs, evolving corporate needs—as well as the perceived value of the degree—have all helped dilute the M.B.A.'s allure. Formerly, the traditional M.B.A. was mainly the product of a full-time, two-year program. But beginning in the early 1990s, many schools created part-time and executive M.B.A. programs, with lower-ranked schools often following in the footsteps of academic leaders. Online degrees also gained in popularity. ...

U.S. schools granted a record 126,214 masters degrees in business and administration in the 2010-2011 academic year, a 74% jump from 2000-2001, according to the Department of Education. The M.B.A. march is part of an overall boom in advanced degrees that took on added steam as some recent college graduates and others sought refuge from the recession by pursuing advanced degrees. Tuition and fees for full-time M.B.A. programs has risen 24% over the past three years, according to the main body that accredits U.S. business schools.

Chronicle: Deans Confront a 'New Normal' as Law Schools Adjust to Job-Market Changes

Chronicle of Higher Education:  Law Deans Confront a 'New Normal' as Schools Adjust to Job-Market Changes:

With applications to law schools in free fall and many of their graduates struggling to find jobs to pay off staggering debts, about 3,000 legal educators gathered here over the weekend to discuss what a panel of law deans referred to as "the new normal." It's a world where unemployed graduates take to the courts to sue their schools and where structural changes in the job market are forcing schools to revamp their curricula and slash spending.

Participants at the annual meeting of the Association of American Law Schools described the hard choices they're making and the tough messages they're delivering as they seek to reinvent their schools.

"Whether or not it's true, there's a perception of absolute crisis and chaos in legal education," said Frank H. Wu, dean of the University of California's Hastings College of the Law. He described how the freestanding Hastings school had shrunk its class size this year, from 425 to 320; increased the teaching load of faculty members; and cut staff positions.

"I've been so candid with my faculty that I worry about faculty morale, but without that understanding, they're still going to come in with unrealistic demands," he said. "The question is, Is this a blip or is it permanent? I happen to believe we're dealing with a profound, permanent, structural change" in the legal job market, and by extension, in legal education, he said.

Joint Tax Committee Releases Overview of the Federal Tax System as in Effect for 2013

The Joint Committee on Taxation today released Overview of the Federal Tax System as in Effect for 2013 (JCX-2-13):

This document ... provides a summary of the present-law Federal tax system as in effect for 2013. The current Federal tax system has four main elements: (1) an income tax on individuals and corporations (which consists of both a “regular” income tax and an alternative minimum tax); (2) payroll taxes on wages (and corresponding taxes on self-employment income) to finance certain social insurance programs; (3) estate, gift, and generation-skipping taxes, and (4) excise taxes on selected goods and services. This document provides a broad overview of each of these elements.

A number of aspects of the Federal tax laws are subject to change over time. For example, some dollar amounts and income thresholds are indexed for inflation. The standard deduction, tax rate brackets, and the annual gift tax exclusion are examples of amounts that are indexed for inflation. In general, the IRS adjusts these numbers annually and publishes the inflation-adjusted amounts in effect for a tax year prior to the beginning of that year. Where applicable, this document generally includes dollar amounts in effect for 2013 and notes whether dollar amounts are indexed for inflation. A number of the inflation indexed 2013 values have not yet been published by the IRS. In these cases, the referenced figures were calculated by the Joint Committee Staff in accordance with the governing statute and published Consumer Price Index values.

In addition, a number of the provisions in the Federal tax laws have been enacted on a temporary basis or have parameters that vary by statute from year to year. For simplicity, this document describes the Federal tax laws in effect for 2013 and generally does not include references to provisions as they may be in effect for future years or to termination dates for expiring provisions.

Sander & Bambauer: How Status, Eliteness, and School Performance Shape Legal Careers

Richard Sander (UCLA) & Jane Bambauer (Arizona), The Secret of My Success: How Status, Eliteness, and School Performance Shape Legal Careers, 9 J. Empirical Legal Stud. 893 (2012):

Rewards are distributed more unevenly within the legal profession than in virtually any other occupation. Most of those who study the careers of lawyers would agree that law school eliteness, law school grades, and social status each play a role in determining which lawyers capture the greatest rewards. But remarkably little effort has been made to directly compare these inputs in explaining career outcomes, to see which of the three matters most, and how they interact.

In this paper, we first examine general beliefs about the importance each of these three factors has upon lawyer careers – beliefs among academics as well as beliefs among the actual participants in the sorting process. We next present some specific findings about each of the three factors. Finally, we directly compare the three factors in regression models of career outcomes. The consistent theme we find throughout this analysis is that performance in law school – as measured by law school grades – is the most important predictor of career success. It is decisively more important than law school “eliteness.” Socioeconomic factors play a critical role in shaping the pool from which law students are drawn, but little or no discernible role in shaping post-graduate careers. Since the dominant conventional wisdom says that law school prestige is all-important, and since students who “trade-up” in school prestige generally take a hit to their school performance, we think prospective students are getting the wrong message.

NY Times: The Next Round of Tax Increases

New York Times editorial:  The Next Round of Tax Increases:

When the White House announced the deal on the fiscal cliff last week, it was quick — and correct — to note that much was left undone. There was still “substantial” room, the administration said, to raise taxes on high-income Americans, to reform corporate taxes and to reform entitlements, with the aim of “balanced” deficit reduction.  

The White House seems to think the deal has established a firm foundation for building a new fiscal house. In fact, the deal could make tax reform less likely. And without reform to raise new revenue, deficit reduction would have to rely heavily on spending cuts, an outcome that can be averted only by persuasive and sustained leadership from President Obama....

Mr. Obama has pledged to demand significant tax increases as deficit reduction talks go forward. The fiscal cliff deal could leave him with less room to maneuver. But caps on deductions, higher taxes on investment income and a financial transaction tax are worth fighting for, as are broader tax reforms, like a carbon tax and a value-added tax, that could take effect as the economy recovers.

WSJ: Life, Death, and Facebook

Wall Street Journal:  Life and Death Online: Who Controls a Digital Legacy?:

The digital era adds a new complexity to the human test of dealing with death. Loved ones once may have memorialized the departed with private rituals and a notice in the newspaper. Today, as family and friends gather publicly to write and share photos online, the obituary may never be complete. 

But families ... can lose control of a process they feel is their right and obligation when the memories are stored online—encrypted, locked behind passwords, just beyond reach. One major cause is privacy law. Current laws, intended to protect the living, fail to address a separate question: Who should see or supervise our online legacy? ...

U.S. and Canadian laws, which are similar for the most part, don't treat digital assets like physical ones that can be distributed according to wills. In 1986, Congress passed a law forbidding consumer electronic-communications companies from disclosing content without its owner's consent or a government order like a police investigation. Although that law predates the rise of the commercial Internet, courts and companies have largely interpreted it to mean that the families can't force companies to let them access the deceased's data or their accounts. ...

Five states have passed legislation giving executors power over digital assets. Connecticut and Rhode Island laws cover only email, while Indiana, Idaho, and Oklahoma laws include social-networking and blogging accounts. The laws remain largely untested in court.

National action isn't expected for at least two years. The Uniform Law Commission, a group that drafts state laws for nationwide consideration, met for the first time in November to tackle a digital-asset law. Under one proposal, the law could broadly redefine the "authorized user" of an account to include an agent or a representative of his estate, says Suzanne Walsh, a Connecticut estate lawyer leading the committee. ...

Companies fear a patchwork of laws or having to adjudicate who should get a dead person's files. Handing over data too readily could undermine their users' trust. And fundamentally, leaving dead people's accounts active runs counter to a core business proposition of sites like Facebook, which is to sell advertising targeted at real living people. ...

In 2009, Facebook began allowing family members to either delete or "memorialize" the accounts of the deceased. In a memorialized account, a person's existing friends network can still leave comments and photos with the account of a dead person. But nobody has permission to log in or edit the account.

Stephen Diamond and the Law School Crisis

Stephen Diamond (Santa Clara) has sparked an extensive blogosphere discussion on the law school crisis:

• Stephen Diamond, Updated: Con Daily’s Witch Hunt, or the Dangers of Calling the Bluff of the Law School Transparency Crowd – NY Supreme Court Tosses Another “Scam” Suit
• Stephen Diamond, Tamanaha Responds to My Concerns About Tenure, Transparency and the Rule of Law
• Stephen Diamond, Professor Burk Slaps Professor Diamond’s Wrist, Ouch!
• Stephen Diamond, My Reply to the Faculty Lounge Crowd on the Scam Transparency Debate
• Stephen Diamond, A Foray into the JD Underground
• Paul Campos (Colorado), Diamonds in the Rough
• Constitutional Daily, Santa Clara Prof Just Making Up Tuition Facts
• Constitutional Daily, Santa Clara Prof Steve Diamond Approaches Escape Velocity
• Constitutional Daily, We Were Wrong About Professor Diamond and We Apologize
• JD Underground, Dean Steve Diamond Sees No Problems With Current Legal Education
• Brian Leiter, Why Most Faculty Steer Clear of Engaging the Irrationality of the "Scam" Bloggers

For more on the dismissal of the lawsuit against Albany Law School, see:

• ABA Journal, Judge Dismisses Suit Alleging Misleading Jobs Stats at Albany Law School
• JD Journal, Employment Data Suit against Albany Law School Dismissed
• New York Law Journal, Albany Alumni Suit Against Law School Is Dismissed
• Thomson Reuters, Judge Dismisses Employment Data Suit Against Albany Law School

Zelinsky: Responsible Wealth Should Oppose the GST Grandfather Exemption

Edward Zelinsky (Cardozo), Responsible Wealth Should Oppose the GST Grandfather Exemption:

In the American Taxpayer Relief Act of 2012, Congress and President Obama recently agreed that the federal estate tax will be imposed at a 40% rate on estates over $5,000,000. On 11 December 2012, a group of affluent Americans, organized under the banner of Responsible Wealth, had called for a stronger federal estate tax. In particular, Responsible Wealth urged that federal estate taxation begin at a rate of 45% on estates over $4,000,000.

Neither the American Taxpayer Relief Act nor the Responsible Wealth statement addressed a particularly egregious loophole of federal transfer taxation, namely, the grandfather exemption of the generation skipping tax (GST). Under this exemption, the GST does not apply to trusts established before 25 September 1985. By virtue of this GST exemption, older wealth is immunized from federal transfer taxation while otherwise equivalent new wealth is taxed under the estate tax.

Because Responsible Wealth includes heirs to older fortunes, such as Dr. Richard Rockefeller and Dr. Abigail Disney, Responsible Wealth is uniquely positioned to address this unfairness of the federal tax statute. As part of its self-proclaimed mission to strengthen the federal estate tax, Responsible Wealth should lead the effort to repeal the GST grandfather exemption and thereby subject old wealth to the same transfer taxation as new wealth. ...

Whatever the policy merits or political need for the GST grandfather exemption in 1986, it has outlived its usefulness. If new, i.e., post-1985, wealth is to be subject to estate taxation once every generation along the lines recently adopted by Congress and advocated by Responsible Wealth, older wealth should be subject to such taxation also. The members of Responsible Wealth who benefit from the GST grandfather exemption are uniquely positioned to call for the abolition of the exemption from which they and their families unfairly benefit. They should do so.

More on Case Western Dean: There's No Oversupply of Lawyers

Following up on last week's post, Case Western Dean: There's No Oversupply of Lawyers: Matt Leichter, Dean Lawrence Mitchell Does Not Know Why Case Western’s Tuition Has Gone Up:

Rodriguez: Faculty Must Work Harder

Over the holidays, Northwestern Dean Dan Rodriguez sparked a spirited debate with his post, Workload:

As reformists and irritants likewise insist, we are going to increase our expectations of full-time faculty members in order to realize cost savings and take our foots off the tuition pedal. ... So how ought we to think about these great(er) expectations?

(1) Teaching regularly and well and with sufficient accomodation to institutional needs, as these needs evolve in this new and difficult era.  Deans, including this one, will be reticent to enter into permanent teaching reduction agreements.  Scheduling will need to follow the imperative of student learning and sensible organizational management, not principally the convenience of full-time faculty members.  Faculty leaves, whatever the reason and whatever past practice, should be discretionary and timed around the needs of the school and its learning environment.  And teaching must be excellent -- sophisticated in content, coherent in expression, up-to-date, and connected increasingly to the essential project of making our students into first-rate young lawyers;

(2) All hands on deck.  Faculty members are the professional portals to the students' legal careers.  The work of training rests in their hands.  But, to an increasing extent now, so, too, does counseling and placement.  Developing opportunities for students to pursue remunerative, valuable careers should be part of the work of a faculty member.  This will range from active career counseling, writing effective recommendations for clerkships and, where appropriate, law firm employment, and helping students with their employment search in imaginative, tangible, and reliable ways.  This work is too important to leave solely to overworked career service offices and deans;

(3) Insofar as scholarship forms an important part of the modern faculty portfolio, expectations of excellent, impactful scholarship should be high -- indeed, in this difficult environment, especially high.  Law profs have an exceptionally enviable gig.  Let's just suppose that faculty members need to demonstrate their suitability for this gig on an annual basis, and with unimpeachable evidence that they are doing their scholarly work at a level that befits this great job.

In short, faculty workloads will grow.  They ought to grow.  The central question, to me, is how they ought to grow in a way that serves the professional objectives of our students, while also preserving what is tremendously valuable in the contributions of the law professiorate in the contemporary legal academy.

Check out the many comments from Stephen Bainbridge, Matt Bodie, Orin Kerr, Brian Tamanaha, and others, Dan's responses, and Jeff Lipshaw's follow-up post.  I especially liked Brian's comment:

"In short, faculty workloads will grow. They ought to grow."

This way of putting it tends to obscure the underlying difficulty. Some faculty members already carry a very heavy workload (working nights and weekends). Not much more can be squeezed out of them (although what they spend their time on can be changed). On the other hand, some faculty members do little beyond teach their classes and serve on a committee or two, and others work at a productive but comfortable pace. Faculties differ in the proportion of people in these respective categories.

Getting more out of the latter two groups is difficult because deans have little power to sanction slackers and limited resources to create incentives for working harder. A dean can increase faculty productivity by assigning an extra class to those who should be (or could be) doing more, but deans are reluctant to do this because it generates resentment.

The key is to raise up the internal culture of expectations within the faculty in a way that gets everyone to embrace the duty to give it their all. Any suggestions on how to do that?

See also today's earlier post, The Least Stressful Job in America: Professor.