Income Averaging After Twenty Years: A Failed Experiment in Horizontal Equity

After describing the current provisions of the Internal Revenue Code relating to income averaging, Professor Schmalbeck analyzes those provisions from a policy perspective. He concludes that the conventional horizontal equity arguments advanced in defense of income averaging are insubstantial, and that no other policy justification is of sufficient strength to justify the large revenue loss associated with income averaging. Although outright repeal of the averaging provisions may be the best solution, Professor Schmalbeck also explores several more modest amendments to the averaging provisions

The NCAA and the IRS: Life at the Intersection of College Sports and the Federal Income Tax

Few organizational acronyms are more familiar to Americans than those of the National Collegiate Athletic Association (NCAA) and the Internal Revenue Service (IRS). Although neither organization is particularly popular, both loom large in American life and popular culture. Because there is a tax aspect to just about everything, it should come as no surprise that the domains of the NCAA and the IRS overlap in a number of ways. For many decades, the strong tendency in those areas has been for college athletics to enjoy unreasonably generous tax treatment-sometimes because of the failure of the IRS to enforce the tax laws enacted by Congress, sometimes because Congress itself has conferred dubious tax benefits on college sports. In just the past year, however, there have been signs of what may be a major attitudinal shift on the part of Congress-although so far there have been no signs of a corresponding change at the IRS. This article offers an in-depth look at the history and current status of four areas of intersection between the federal tax laws and college sports. Part I considers the possible application of the tax on unrelated business income (UBI) to big-time college sports. It concludes that, even in the absence of any change in the statute, there is a strong argument that revenues from the televising of college sports should be subject to the UBI tax. Part II examines the tax status of athletic scholarships. It explains that athletic scholarships as currently structured are taxable under the terms of the Internal Revenue Code, and that the IRS seems to have made a conscious decision not to enforce the law. While the first two parts of the article address areas where the traditional sweetheart arrangement between the IRS and the NCAA remains in effect, the final two parts of the article consider areas where Congress has very recently intervened to increase the tax burden on college athletics. Part III describes how Congress, three decades ago, explicitly permitted taxpayers to claim charitable deductions for most of the cost of season tickets to college football and basketball games, and how Congress in 2017 to the surprise of many observers, including the authors of this article-repealed that special tax benefit. Finally, Part IV addresses issues of both statutory interpretation and policy raised by Congress\u27s creation, in 2017, of a 21 percent excise tax on at least some universities paying seven-figure salaries to their football and basketball coaches. The article\u27s conclusion suggests the IRS should follow the lead of Congress, and reconsider the administrative favoritism toward college sports described in Parts I and II

Determining an Asset\u27s Tax Basis in the Absence of A Meaningful Transfer Tax Regime

Until recently, in those circumstances where there was a valuation range with respect to a particular asset, executors faced a choice: among estates subject to the estate tax, declaring a high value would increase the estate tax liability; however, due to the Internal Revenue Code\u27s basis equal to fair market value rule applicable at death, declaring a low value would expose heirs to a greater capital gains tax on subsequent asset disposition. Because the estate tax rates were higher and that tax was immediate (as opposed to deferred until a later sale by the heir), executors typically minimized asset values, with the corresponding effect of tax basis diminishment. This commonplace strategy thus negated the possibility that taxpayers might exploit the basis equal to fair market rule. But this is often no longer the case. Through a series of exemption level increases, tax rate reductions, and other reforms, Congress has gutted the nation\u27s transfer tax system. What remains is a teetering transfer tax system that applies only to a handful of the wealthiest taxpayers. For the rest, the transfer tax system provides no disincentive to executors from assigning the highest defensible valuations to a decedent\u27s assets, opening the opportunity to capitalize upon the basis equal to fair market value rule. Unfortunately, the I.R.S. lacks the tools and resources to combat this practice. To preserve the integrity of the capital gains tax and the revenue that it produces, Congress must therefore intercede

A Policy Analysis of Fee-Shifting Rules Under the Internal Revenue Code

Until recently, the costs of litigating federal tax cases were borne exclusively by the parties who incurred them, regardless of whether the government or the taxpayer prevailed in the litigation. This practice reflects the application to tax disputes of the ‘American rule’ against fee shifting. Although the American rule continues to be predominant in the tax area, it has been modified in important respects. An explicit fee-reimbursement rule, benefiting prevailing taxpayers in cases in which the government is found to have acted unreasonably, was added to the Internal Revenue Code (IRC) by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). TEFRA also increased substantially the penalties that could be imposed on taxpayers who are found to have instituted tax litigation on frivolous grounds, or primarily for delay. The provisions are not precise counterparts of each other: one is a true fee-reimbursement rule, while the other is a penalty provision that is not directly tied to litigation costs. Nevertheless, the rules are similar in their effects on incentives to litigate tax cases. This article begins with a brief description and history of these provisions, followed by an analysis of their impact on litigation decisionmaking in the tax area. We argue that the present mix of fee-shifting rules in tax cases represents an attractive hybrid of the American rule and the ‘English rule,’ which normally allows recovery of costs by the prevailing party. The hybrid rule seems likely to deter parties from bringing poorly grounded cases to court without discouraging litigants with sounder positions. It thus combines the best features of each of the more traditional rules. After analyzing the hybrid rule, we discuss the recent changes to the rule made by the Tax Reform Act of 1986 and argue that those changes, on balance, do not represent improvements over the original TEFRA rules, and may indeed prove troublesome in the coming years

Rethinking the Penalty for the Failure to File Gift Tax Returns

In this article, the authors argue that Congress must reform the penalty structure associated with the failure to file gift tax returns if it wants to maintain the integrity of the transfer tax system

Post-Disaster Tax Legislation: A Series of Unfortunate Events

When a disaster strikes the United States, Congress typically feels heavy pressure to enact legislation, including tax legislation, to provide relief. This Article discusses features of two tax legislative initiatives, which responded to two quite different disasters: first, the response to the devastation of the fall 2005 hurricane season and, then, the response to the earlier terrorist attacks on the World Trade Center and Pentagon of September 11, 2001. The Article first raises the possibility that some of the provisions of these acts may be vulnerable to indirect constitutional challenge under the Uniformity Clause. In examining some of the problems inherent in post-disaster tax legislation, it discusses the role, usually unfortunate, of sympathy in tax legislation. It goes on to consider how, despite the fact that the targets of relief legislation are generally thought to be people in need, it nevertheless seems to be the case that a good deal of the benefits of disaster legislation in the tax area goes to relatively high-income and high-wealth taxpayers. It asks whether a better approach can be institutionalized. It suggests that Congress identify those provisions enacted in response to the recent disasters that make sense generally, such as five-year carryback of net operating losses, and amend the tax code to adopt these rules generally. It further recommends that Congress identify those provisions needed in particular when a whole area is devastated—a five-year period for replacing destroyed property, credit for wages to pre-disaster employees, and routine extensions of filing deadlines—and make them available to any declared disaster area. It urges as well two kinds of longer-term approaches. One is to consider and evaluate disaster tax relief provisions as a kind of national insurance against disasters that the private market does not supply. The other is to develop off-the-shelf provisions to be activated when a disaster strikes

Does the Death Tax Deserve the Death Penalty - an Overview of the Major Arguments for Repeal of Federal Wealth-Transfer Taxes

Precision Medicine: the future of data-driven healthcare is an interaction design master’s thesis project aimed at presenting a vision of how genomic and quantified data might be integrated into the Swedish public healthcare system. This thesis focuses on a user-centered design process, examining patient health needs and desires. It also looks at the rise of genomic data and precision medicine. Ethnographic research has been conducted with people in the different Scandinavian countries, hearing their health stories first hand, both in relation to genomic data, quantified self data and overall health. Commonly used service design methods such as customer journey mappings, blueprinting and business model mapping have played a large role in shaping the experience of the concep