Citizenship and Worldwide Taxation: Citizenship as an Administrable Proxy for Domicile

The United States\u27 worldwide taxation of its citizens is less different from international, residence-based norms than is widely believed and is sensible as a matter of tax policy. An individual\u27s citizenship is an administrable, if sometimes overly broad, proxy for his domicile, his permanent home. Both citizenship and domicile measure an individual\u27s permanent allegiance rather than his immediate physical presence. Because citizenship and domicile resemble each other, and because other nations often define residence for tax purposes as domicile, the U.S. system of citizenship-based taxation typically reaches the same results as the residence-based systems of these other nations, but reaches these results more efficiently by avoiding factually complex inquiries about domicile. In contrast, the traditional justification of U.S. citizenship-based taxation, the putative benefits of such citizenship, is not persuasive. In this context, three models of U.S. citizenship are relevant, namely, the minimalist model, the psychological model, and the Tiebout/purchase model. None of these models justifies the worldwide taxation of U.S. citizens on a benefits basis. Rather, such taxation is persuasive because of administrative considerations, i.e., the close resemblance of domicile and citizenship that makes the latter an administrable proxy for the former

ETI, Phone the Department of Labor: Economically Targeted Investments, IB 94-1 and the Reincarnation of Industrial Policy

In Interpretive Bulletin 94-1 (B 94-1), the Department of Labor defines economically targeted investments (ETIs) as investments which bear risk-adjusted, market rates of return and which also generate collateral economic benefits. lB 94-1 declares ETIs, so defined, to be consistent with the fiduciary provisions of the Employee Retirement Income Security Act of 1974 (ERISA). In his critique of lB 94-1, Professor Edward Zelinsky finds the ET1 concept unsound as a matter of policy and logic and incompatible with ERISA\u27s statutory standards governing pension trustees\u27 investment decisions. Professor Zelinsky views 1B 94-1 as resurrecting the discredited notion of industrial policy. He concludes that the DOL should withdraw IB 94-1 or that Congress should repeal it

The Once and Future Property Tax: A Dialogue with My Younger Self

As I look back on my youth (expansively defined as the first 40 years of my life), everywhere I went, the local real property tax was perceived as both bad and doomed. If I could speak with the brash young law student/graduate student/alderman I once was, he would undoubtedly tell me, with great confidence, that by the beginning of the next century (which then seemed very far away) the property tax would no longer play a role in the system of local public finance. Alas, he was wrong. This essay explains why the young man I once was, confident of the imminent demise of the property tax, was wrong. This is thus a dialogue with my younger self for, as I look back, it is clear that much of the critique of the local property tax to which I (and others) adhered was overstated. As we enter the new century, the local property tax survives for many reasons; chief among these is that the tax has distinct theoretical and practical advantages. This is not to say that the standard local property tax is perfect or incapable of practical improvement; not everything I believed in my youth was wrong. But reality is indeed more complex than I and others thought: We overestimated the problems of the local property tax and underestimated the tax\u27s virtues. We did not foresee the extent to which modifications of the tax and alternative revenue sources for localities would prove to be, not initial steps toward the abolition of the local property tax, but, rather, ameliorative reforms which would enable the real property tax to survive. We similarly underappreciated the need for robust local government to possess its own tax base and how well-adapted the local property tax is for financing genuinely local expenditures. We subscribed to overly-idealized notions of sales and income tax bases, forcing (in our minds, at least) the realities of the property tax into an inherently unwinnable competition with theoretically perfect alternatives for financing public services. The choices in the real world proved more difficult

Brief of Professor Edward A. Zelinsky as \u3ci\u3eAmicus Curiae\u3c/i\u3e in Support of Plaintiff’s Motion for Leave to File Bill of Complaint

Professor Edward Zelinsky submitted an amicus brief with the U.S. Supreme Court in New Hampshire’s constitutional challenge against Massachusetts’s recently promulgated regulation imposing its income tax on nonresident remote workers, arguing that the Court should grant New Hampshire’s motion for leave because a state cannot source nonresidents’ income earned beyond the state’s borders; taxpayers have “no practical remedy” for relief from unconstitutional taxation under the Tax Injunction Act; and only the Court can make rulings over the boundaries of state authority

Applying the First Amendment to the Internal Revenue Code: Minnesota Voters Alliance and the Tax Law’s Regulation of Nonprofit Organizations’ Political Speech

On its face, Minnesota Voters Alliance v. Mansky is about which T-shirts, hats and buttons voters can wear at the polls. However, the U.S. Supreme Court’s First Amendment analysis in Minnesota Voters Alliance extends beyond apparel at polling places. That decision impacts the ongoing debate about the Johnson Amendment, the now controversial provision of the Internal Revenue Code which forbids Section 501(c)(3) organizations from intervening in political campaigns. Minnesota Voters Alliance also affects the proper construction of Section 501(c)(3)’s ban on lobbying by tax-exempt entities as well as other provisions of the tax law taxing and precluding campaign intervention by tax-exempt organizations. In contrast to current law, Minnesota Voters Alliance requires that these provisions of the tax law be construed to comply with the First Amendment mandate that restrictions on speech be reasonable, objective, workable and determinate. After Minnesota Voters Alliance, the Johnson Amendment should be interpreted as only proscribing 501(c)(3) entities from expressly endorsing or opposing particular candidates, political parties or ballot questions or from engaging in the “functional equivalent” of such express advocacy. Under this test, tax-exempt entities would not be precluded from engaging in more general issue advocacy. The other provisions of the tax law preventing tax-exempt entities from participating in political campaigns and taxing such participation should be construed in the same say. These other features of the tax law should now be understood as precluding and taxing only express advocacy of or opposition to particular candidates, parties or ballot questions, or as prohibiting and taxing the “functional equivalent” of such explicit expression. For purposes of applying Minnesota Voters Alliance to the Johnson Amendment and these other provisions of the Internal Revenue Code, the applicable test should be the standard articulated by Chief Justice Roberts in FEC v. Wisconsin Right to Life, Inc. Under this standard, the functional equivalence of express advocacy would be defined restrictively as a statement “susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.” The Internal Revenue Code need not be amended to fashion these statutory provisions to comply with Minnesota Voters Alliance, though modifying the language of the Code is one way that the Code’s current restrictions on the political speech of tax-exempt entities could be brought into compliance with the First Amendment. Alternatively, such compliance could be achieved administratively by revoking the portions of Rev. Rul. 2007-41 pertaining to issue advocacy under the Johnson Amendment and by amending the regulations under Section 501(c)(3) to clarify that forbidden lobbying occurs only when the a tax-exempt entity explicitly supports or calls for defeat of a particular legislative proposal pending before a public lawmaking body or before the electorate. Similarly, the IRS can modify Rev. Rul. 2004-06 to bring it into compliance with the First Amendment standard of determinacy announced in Minnesota Voters Alliance. Likewise, the Treasury can by regulation clarify that, for purposes of Internal Revenue Code Sections 527 and 501(c)(4), campaign intervention means explicit endorsement of or opposition to a candidate, not more generalized discussion of issues and legislation. The Treasury would thereby interpret those Code-based restrictions on political activity in a manner which satisfies the First Amendment signposts of reasonability and determinacy articulated in Minnesota Voters Alliance