Churches, Politics, and the Charitable Contribution Deduction

Churches often bear the burden of the Internal Revenue Code\u27s electioneering prohibition without their contributors enjoying the benefit of a tax deduction. Although contributions to religious congregations may be deducted, many, perhaps most of them, are not because many of those who give to churches do not itemize their income tax deductions. In the past two years, Congress has had before it several bills that would permit nonitenizing taxpayers to deduct their charitable contributions. This Article argues that, extending the deduction to nonitemizers raises important issues of tax policy that should concern religious organizations. The author contends that religious congregations will benefit from considering some of the difficult questions about the relationship of the charitable contribution deduction to the standard principles of tax policy. If they do, they might support either a deduction only above a floor or a charitable contribution credit rather than a 100% deduction for nonitemizers

King v. Burwell and Tax Court Review of Regulations

In King v. Burwell, the Supreme Court did not rely on Chevron to hold valid tax regulations allowing tax credits for taxpayers who enroll in an insurance plan through a federal rather than a state exchange. It instead concluded, relying in good measure on Brown and Williamson, that Congress had not delegated the question at issue to the IRS. It thus introduced a so-called Chevron Step 0. This essay reviews the Tax Court’s use of Chevron and Brown & Williamson to conclude that the Tax Court may well make use of King v. Burwell to review and reject tax regulations under this Chevron Step 0

Revisiting Federal Tax Treatment of States, Political Subdivisions, and Their Affiliates

Several provisions of the 2017 tax legislation, known as the Tax Cuts and Jobs Act (TCJA), focused attention on federal taxation of states, their political subdivisions, and their affiliates. Most prominently, the TCJA limited the federal income tax deduction for state and local taxes to $10,000. States have sued and attempted workarounds. Another provision, which imposes an excise tax of 21% on “excessive compensation” paid by certain entities not subject to income tax, inadvertently failed to subject to tax entities that are integral parts of states or political subdivisions or are themselves political subdivisions. Calls for a technical correction have so far gone unheeded. More than 20 years ago, I wrote two articles about federal taxation of state governments, political subdivisions, and their affiliates. The Teacher’s Manual to a leading casebook on nonprofit organizations describes these two articles as “as much as anyone knows about this confusing patchwork and its ramifications.” The passage of time, changes in my own thinking, and new developments call for my returning to this topic. I do so here. Moreover, far more than in my earlier work, I examine the applicable rules regarding charitable contribution deductions to these entities as well as discuss the special rules applicable to governmental charities and the category of charities that lessen the burdens of government. In light of the 2017 tax legislation, I not only renew recommendations made long ago, but also extend them to the criteria for exempting entities that lessen the burdens of government, a category that has received little scholarly attention. I also call for establishing a system by which states, political subdivisions, and their affiliates could receive determination letters, like those issued to section 501(c) organizations and thus familiar to potential donors. Such an approach would avoid the distortion of the rules applicable to section 501(c)(3) that arises from the current special treatment of governmental charities. Treating governmental entities as a distinct category under the Internal Revenue Code, with their own criteria and their own determination letter, would also acknowledge and honor their role in our federalist system

Brief of Amicus Curiae Tax Professors in Support of Respondent in Moore v. United States

Petitioners in Moore v. United States have argued to the Supreme Court that the word “incomes” in the Sixteenth Amendment authorizes only the taxation of “realized” income. Thus, they assert, a repatriation tax (referred to as MRT) in the Tax Cuts and Jobs Act is invalid because it taxes unrealized gains. While other briefs in the case explain that, as properly understood, the tax at issue taxes only realized gains, this brief counters the petitioners’ Sixteenth Amendment argument. It explains that economists, accountants, and lawyers in the early twentieth century all defined income in broad terms, embracing the definition of income as more than money income and including unrealized gain. Similarly, the legislators who passed the Sixteenth Amendment also envisioned a broad definition of income and clearly understood the word income to include unrealized income. Those legislators were familiar with the income tax statutes that existed before and directly after ratification that taxed unrealized gain. During the period near the enactment of the Sixteenth Amendment, prominent critiques of a particular tax act or statutory provision, including the extent to which a tax act did or should tax unrealized gain, were arguments about legislative policy decisions, not the reach of the power granted Congress. The powers granted by Article I and the Sixteenth Amendment provide Congress with broad taxing authority. In this case, where the Constitution grants such authority to Congress, the Court should not substitute its judgment regarding tax policy for that of the Congress