The compliance cost of taxing foreign-source income: Its magnitude, determinants, and policy implications

This paper uses survey evidence to estimate the compliance cost of the U.S. system of taxing foreign-source income. The evidence suggests that this cost is about 40 percent of the total tax-compliance cost of large U.S. corporations, which is disproportionately higher than the aggregate share of assets, sales, and employment that is abroad. It is also very high compared to the revenue raised by the United States from taxing foreign-source income, although this comparison must be qualified because arguably a principal purpose of this system is to protect U.S. revenues collected on domestic-source income. The disproportionate compliance cost of foreign-source income is not apparent in a survey of European-based multinational corporations.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/46104/1/10797_2004_Article_BF00873106.pd

The Determinants of Income Tax Compliance: Evidence from a Controlled Experiment in Minnesota

This paper reports on the results of a controlled experiment in Minnesota in which a random sample of taxpayers was informed that their income tax returns would certainly be closely examined. We analyze reported income of this sample of taxpayers, reported income on their previous year's returns, and reported income from the two corresponding years' returns of a control group of taxpayers that did not receive the letter. We find that the treatment effect varies depending on the level of income. Low and middle income taxpayers increased reported income and tax liability relative to the control group, which we interpret as indicating the presence of noncompliance. The effect was much stronger for those with more opportunity' to evade, as measured by their source of income. However, the reported income of the high-income treatment group fell sharply relative to the control group. We suggest a model based on tax audits as a negotiation that can explain this apparently perverse result.

The Income Tax Compliance Cost of Big Business

A survey of 1,329 of the largest corporations m the United States reveals that the average annual cost of compliance with federal and subfederal corporation income taxes is approximately $1.565 million, implying an aggregate annual compliance cost of over$2 billion. As a fraction of revenue raised, these compliance costs are lower than estimates that have been made for the individual income tax. The cost-to-revenue ratio is higher for state corporate tax systems than it is for the federal tax system, presumably reflecting the nonuniformity of state tax systems There is near unanimity among senior corporate tax officers that the Tax Reform Act of 1986 added complexity to the tax system, resulting in a combination of higher compliance costs and less accurate information transmission. They point to, in particular, the alternative minimum tax, inventory capitalization rules, and the taxation of foreign-source income as growing sources of complexity.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/69154/2/10.1177_109114219602400401.pd

PrEP (HIV pre-exposure prophylaxis) and its possibilities for clinical practice

In this article, we reflect on the possibilities that PrEP (HIV pre-exposure prophylaxis) raises for HIV specialist clinicians. Often neglected, yet a direct participant at the intersection of a complex tension within public health debates on how to reduce HIV transmission and the sexual sociability of individuals, we reflect on current thinking of health practitioners involved in the day-to-day practice of prescribing PrEP. Drawing on interviews with practitioners in the context of UK sexual health and HIV specialist medicine, while bearing in mind neoliberal critiques and process studies of medical science, we propose that PrEP invites the possibility for reconstituting approaches to sex and risk

A wager on the future: a practicable response to HIV pre-exposure prophylaxis (PrEP) and the stubborn fact of process

In this article we focus on public health’s wager on the social implications of a daily antiretroviral pill to prevent HIV, referred to as PrEP (pre-exposure prophylaxis). The wager is shown to rely on modes of inquiry overly tied to what is known of the present in order to predict the future. Although such inquiry is not unusual when social research is called upon to assist health policy, predictive methodologies are unable to appreciate the dynamic and thus indeterminate nature of process. We ask: what mode of inquiry might practicably appreciate that what happens in the present will have a bearing on the future, without foreclosing on unknown possibles? Drawing on speculative and pragmatic philosophy, we reflect on our own qualitative research on PrEP to suggest that conventional methodological approaches can contribute to the future without seeking to determine what it will become

The Effect of the Earned Income Tax Credit in the District of Columbia on Poverty and Income Dynamics

Using unique longitudinal administrative tax panel data for the District of Columbia (DC), we assess the combined effect of the DC supplemental earned income tax credit (EITC) and the federal EITC on poverty and income dynamics within Washington, DC, from 2001 to 2011. The EITC in DC merits investigation, as the DC supplement to the federal credit is the largest in the nation. The supplemental DC EITC was enacted in 2000, and has been expanded from 10 percent of the federal credit in 2001 to 40 percent as of 2009. To implement the study, we estimate least squares models with 0/1 dependent variables to estimate the likelihood of net-EITC income above poverty and near-poverty thresholds. We also estimate the likelihood of earnings growth and income stabilization from the EITC. To identify the effect of the EITC, we exploit variation in the EITC subsidy rate from 2008 to 2009, when an additional EITC bracket of 45 percent was added for workers with three or more dependent children, up from 40 percent in the previous year for workers with two or more children. We also estimate a model examining the impact of city-level changes to the EITC. The structure and richness of our data enable us to control for tax filer fixed effects, an important innovation from many previous EITC studies. Overall, we find that the combined EITC raises the likelihood of net-EITC income above poverty and near poverty by as much as 9 percent, with the largest consistent effects accruing to single-parent families

Article 03-Blumenthal.indd

INTRODUCTION "I believe that reporting to the public is a good thing; accountability is important." "It stinks-we could donate a lot more to the community without it." "Can't you make it easier?" -Responses of three nonprofit organizations asked to comment on their tax reporting experiences. U nder Section 501(c)(3) of the United States Internal Revenue Code, organizations devoted to certain kinds of activities are eligible for exemption from the federal corporate (or trust) income tax and for permission to accept tax-deductible contributions. 1 State laws frequently also offer organizations tax benefi ts, exempting them from sales, property and income taxes. However, nonprofi ts wishing to take advantage of these benefi ts face a web of both federal and state eligibility rules and procedures that impose additional costs: lawyers and accountants must be hired, employees educated, records 1 The range of qualifying activities is broad, including producing and displaying art, culture and music; generating knowledge through education and research; protecting consumers, the environment and animals; promoting health; preventing and treating diseases; providing housing, food and clothing; promoting international understanding; providing international aid and relief; creating community, social and economic infrastructure; advocating for and against public policies; transmitting values and traditions; and providing solidarity, recreation and other services 3 Until now, very little systematic knowledge about these compliance costs has existed. This paper's contribution is to construct the fi rst estimates, separately for federal and state requirements, of the compliance costs experienced by nonprofi t organizations in order to maintain their tax-exempt status. In addition to breaking the expenditures down into four components, we include a multivariate analysis that considers the infl uences of an organization's size, type of work, its use of electronic filing and of the state Unified Registration Statement (URS, an alternative registration form that consolidates the information and data requirements of all states that require registration of charitable organizations). Finally, we place these costs in the context of several relevant measures of the nonprofit sector. Our results provide one baseline against which the costs and benefi ts of future changes in nonprofi t regulatory policy can be measured. They are also useful in informing the wider discussion about the return to society from the tax benefi ts provided to nonprofi ts. 2 The provision of tax exemptions also imposes administrative costs, as both federal and state agencies must enforce the tax provisions. Administrative costs, while important, are not explored in this study. 3 As suggested in the preceding paragraph, nonprofi t organizations also incur compliance costs in the process of obtaining tax-exempt status. In that context, one might expect regulatory attention to focus on whether granting a tax-exemption for an applicant's proposed activities enhances societal welfare. In a separate project, we will study that process in order to construct a measure of the costs of obtaining tax-exempt status. The Compliance Costs of Maintaining Tax Exempt Status 237 LITERATURE The U.S. nonprofit sector is fairly large. Adding civic leagues and the other 501(c)(4) organizations operated exclusively for the promotion of social welfare 4 to 501(c)(3) organizations, the so-called Independent Sector in 1996 produced 6.7 percent of national output, owned about fi ve percent of private sector net worth and, counting the full-time-equivalents of volunteers, employed 11.7 percent of the labor force. Contributions to Independent Sector organizations then accounted for about two percent of personal income, roughly 25 percent of government social welfare spending In the compliance cost literature, researchers have focused on the burdens of particular taxes. For example, in the United States, estimates have been calculated for the costs of complying with the individual income tax THE SURVEY Sample Selection A stratifi ed random sample of 2,000 organizations was drawn from the "Core File" of the National Center for Chari- The sample was stratifi ed along three dimensions: size, NTEE code, and home state reporting practices. Size was measured on the basis of total revenue: small ($100,000 or less), medium (between$100,000 and $500,000), and large (over 4 The Independent Sector excludes other 501(c)(4) nonprofi ts such as cemeteries, labor unions, clubs and other forms of mutual benefi t organizations. 5 Available at http://nccs.urban.org/. 6 Eliminating organizations residing in U.S. territories or possessions and records without mailing addresses, 235,792 records remained. NATIONAL TAX JOURNAL 238$500,000). The 26 major NTEE codes were grouped into three broad types to obtain comparable numbers of organizations in each. 7 Home state reporting practice was based on the registration form required by an organization's headquarter state. In 1997, the National Association of State Charities Offi cials and the National Association of Attorneys General organized an effort to consolidate state information and data requirements, drafting an alternative registration form. In 2000, 35 states and the District of Columbia accepted the Unifi ed Registration Statement (URS). In order to explore whether use of the URS impacts nonprofi t compliance costs, we wanted to increase the likelihood that the sample would include organizations that did and did not use the URS. Therefore, we stratifi ed our sample to refl ect three home state reporting practices. In one category (URS) are those states accepting the URS. 8 A second category consisted of those states requiring registration of nonprofi t organizations but not accepting the URS (NURS), 9 and the third category contained states without a registration requirement (NR). 10,11 The home state for each organization was determined by the address reported on the Form 990. Our 3×3×3 stratifi cation yielded 27 sampling strata. To ensure suffi cient sample sizes in each stratum, we varied the sampling rates, over-sampling in the NR and NURS strata, and under-sampling in the URS strata. 12 Survey Methodology The Minnesota Center for Survey Research sent each organization in our sample a survey questionnaire by U.S. mail. The instrument included questions about which federal and state reports were prepared, the size of the organization, the amount of personnel time devoted to these tasks and their expenditures on professional assistance, other reporting costs (such as training, computer software or supplies) and state fees. A copy of the instrument and the accompanying cover letter is available from the authors. 13 A week after the initial mailing (March 11, 2003), a reminder postcard was sent, followed on April 1 by another letter and a second copy of the questionnaire, to those organizations that had not yet responded. Of the initial mailings, 184 were identifi ed by the Post Offi ce as non-deliverable. For 138 of these, it was possible to locate a more current address in the Guidestar database, 14 (2001). 12 The sampling rates were 0.0179, 0.0388 and 0.0044, respectively. 13 During the summer of 2002, we conducted a pilot, in-person survey of a small sample of non-profi t organizations in the Twin Cities. The results of this test informed the development of the mailed survey. To refi ne the mailed survey instrument, we asked the Chief Financial Offi cer of a Wisconsin nonprofi t to complete a draft version of the survey, and we solicited comments on the draft from members of the Minnesota Non-profi t Accountability Collaborative (MNAC). 14 The Guidestar National Database of Nonprofi t Organizations is available at http://www.guidestar.org/