ABA Tax Times Vol. 40 No. 1 - American Bar Association

Published in ABA Tax Times, January 2022. © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. ISSN 2381-5868.

An Online Publication of the ABA Tax Section Fall • January 2022 • Vol. 41 No. 1

CONTENTS

FROM THE CHAIRFire Is the Test of Gold ............................................. 1

PEOPLE IN TAXInterview with Jacob Puhl ........................................ 6

PRACTICE POINTA Primer on Charitable Trusts (Part II) ........................ 9

AT COURTThe IRS’s Procedural Battles in Micro-Captive Litigation .............................................................. 15

PRO BONO MATTERSA Sit-Down with Andrew VanSingel ......................... 24

YOUNG LAWYERS CORNERRevisiting the 100-Year-Old Debate on the Preferential Treatment of Capital Gains ..................................... 29

The Build Back Better Energy Tax Provisions ............ 37

IN REMEMBRANCERemembering Doug Kahn ...................................... 40

SPECIAL FEATURESTax Section Creates Fellowship and Fund to Advance Diversity and Inclusion ........................................... 45

Tax Section Highlights from National Hispanic Heritage Month ................................................................. 46

TAX BITSUnallowable ......................................................... 49

IN THE STACKSTax Section Publishes The Supreme Court, Federal and State Taxation, and the Constitution ....................... 50

SECTION NEWS & ANNOUNCEMENTS ................. 52

• Midyear Tax Meeting Goes Virtual, Features William Gale and Loretta Collins Argrett

• End of Tax Connect and Next Steps for Committee Communication

• Government Submissions Boxscore

• Accepting Nominations for the 2022 Janet Spragens Pro Bono Award

• Call for Applications: Diversity and Inclusion Scholarships to Virtual 2022 Midyear Tax Meeting

• Get Social

• Each One, Reach One

• Virtual 2021 Fall Tax Meeting Materials Now Available

• The Tax Lawyer—Fall 2021 Issue Now Available

• The Practical Tax Lawyer—November 2021 Issue Now Available

• Support the Section’s Public Service Efforts with a Contribution to the TAPS Endowment

• Get Involved in ATT

SECTION EVENTS & PROMOTIONSSection Meeting & CLE Calendar ............................. 59

Section CLE Products ............................................ 59

Sponsorship Opportunities ..................................... 60

SPONSORSHIP ACKNOWLEDGEMENTSVirtual 2021 Fall Tax Meeting ................................. 61

Virtual 32nd Annual Philadelphia Tax Conference ..... 62

Thomson Reuters | Publishing Sponsor ................... 63


ABA TAX TIMESFall • January 2022 • Vol. 41 No. 1

EDITORIAL BOARD

COUNCIL DIRECTORRoberta Mann

SUPERVISING EDITORLinda M. Beale

INTERVIEW EDITORSTameka E. LesterJeremiah Coder

PODCAST EDITORJames Creech

PRO BONO MATTERS EDITORSAndrew RobersonGina Ahn

AT COURT EDITORT. Keith Fogg

PRODUCTION EDITORSGregory Peacock Todd Reitzel

ASSOCIATE EDITORSJaye CalhounAndy HowlettGuinevere MooreDavid PrattDaniel M. ReachRobert S. SteinbergRobert W. Wood

HYPERTEXT CITATIONS & LINKS

As a service to our readers, ATT authors are encouraged to include hyperlinks to publicly available content within their articles. In addition, certain articles may also contain hypertext citation linking to Westlaw created with Drafting Assistant from Thomson Reuters. Thomson Reuters Legal is the Publishing Sponsor of the ABA Tax Section, and this software usage is implemented in connection with the Section’s sponsorship and marketing agreements with Thomson Reuters. Neither the ABA nor ABA Sections endorse non-ABA products or services. Check if you have access to Drafting Assistant by contacting your Thomson Reuters representative.

EDITORIAL POLICY

ABA Tax Times (ATT) is published at least four times a year featuring articles covering a wide range of tax topics and areas of tax practice, interviews with diverse tax practitioners, Committee reports, Tax Section comment submissions to the government, and other news and information of professional interest to Tax Section members and other readers.

ATT is presented in digital-only format and is distributed by e-mail to Tax Section members as a benefit of membership. To learn more about joining the ABA and the Tax Section, visit http://www.americanbar.org/groups/taxation/membership.html.

ABA Tax Times welcomes the submission of manuscripts from Tax Section members. ATT does not accept articles that have been published previously or are scheduled for publication elsewhere. Publication decisions will be based on editorial consideration of topical timeliness, legal accuracy, quality of writing, tone, and consistency with ATT’s editorial policy. ATT reserves the right to accept or reject any manuscript and to condition acceptance upon revision to conform to its criteria. Members interested in authoring an article are encouraged to contact Professor Linda M. Beale, ATT Supervising Editor, at [email protected].

ATT articles and reports reflect the views of the individuals or committees that prepare them and do not necessarily represent the position of the Tax Section, the American Bar Association, or the editors of ATT. The articles and other content published in ATT are intended for educational and informational purposes only and are not to be considered legal advice. Readers are responsible for seeking professional advice from their own legal counsel.

Authors of accepted articles must sign a standard ABA copyright release form, which gives the ABA exclusive rights to first publication. Authors retain the rights to republish their articles elsewhere (including on the SSRN network) after their articles appear in ATT, with appropriate citation to ATT.

Further information regarding the submission guidelines, including organization, hyperlinks, and article length, is available here: http://www.americanbar.org/groups/taxation/publications/abataxtimes_home/att_editorial.html.

http://legalsolutions.thomsonreuters.com/law-products/solutions/drafting-assistant

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FROM THE CHAIR

Fire Is the Test of Gold1

By Julie Divola, Pillsbury Winthrop Shaw Pittman, LLP, San Francisco, CA

Despite the challenges of the past year putting us through that test of fire, the Tax Section continues to thrive. We have done so thanks to the incredible creativity, hard work, dedication, resilience and teamwork of Section staff, Section leadership and Section members.

Fall Meeting

The Virtual 2021 Fall Meeting offered five days of superior educational programing, along with enhanced social networking opportunities. Thomas Barthold, Chief of Staff of the Joint Committee on Taxation, was our speaker for the plenary session, providing our members with much-needed insight into the workings of the legislative process (including the sometimes-inscrutable workings of budget reconciliation). An engaging selection of committee meetings greeted our members, who also benefited from refinements to the virtual meeting processes developed by the Section staff and our committees. We’re very proud of the result.

The Section is dedicated to getting back to in-person meetings as soon as it’s feasible to do so. Many of us found “our people” through the Tax Section and have missed the sense of community that comes with meeting in person. Even those who are less sentimental have missed the chance encounters and networking opportunities that are difficult to replicate in a virtual setting. However, the Section has also recognized that the virtual platform offers certain advantages, including the ability to reach, and become relevant to, younger and more diverse members as well as established attorneys in smaller practices that may find the time and cost of travel a deterrent to participation. Accordingly, as we shift back to in-person meetings, the Section will be working hard to structure these as hybrid meetings with robust virtual content.

Pro Bono and Public Service

The Tax Section serves as a national leader and innovator in the provision of pro bono legal services. Access to representation for low-income and other vulnerable taxpayers is fundamental to the Section’s mission to support the development of a fair and equitable tax system. With the ever-increasing complexity of tax laws, the significant role tax benefits have played as a lifeline to generally underserved populations during the pandemic, and the scarcity of government resources because of staffing and logistical challenges, pro bono programs are more important than ever. Members have consistently stepped up to the task of providing tax assistance. Filing season is set to begin on January 24, making this the perfect time to volunteer!

1 Martha Graham.

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The Section has a variety of programs intended to link tax attorneys with pro bono opportunities that are right for them. Pro bono programs supported by the Section include Assisting Elderly Taxpayers, Adopt-A-Base, Tax Court Calendar Call (representing Pro Se Taxpayers), Low Income Taxpayer Clinics (LITCs), Volunteer Income Tax Assistance (VITA) and Expanded and Advance Child Tax Credit assistance. The Section also provides free educational programming and acts as a vital resource to over 1,000 tax professionals who belong to the Section’s Pro Bono and Tax Clinics Community.

Through its Adopt-A-Base program, the Tax Section partners with the Armed Forces and the IRS to train service members who provide volunteer income tax assistance, such as tax return preparation, to other service members and their families throughout the country. The Adopt-A-Base 2022 filing season is now underway. In connection with this effort, the Section is recruiting volunteers to update information for the Military State Tax Guide for a selected state. This volunteer opportunity does not require any prior experience. The Section would like to receive the updated portions of the Guide by January 18. If you would like to sign up, please complete this very short information form.

Special thanks to Sheri Dillon, our Vice Chair for Pro Bono and Outreach and Meg Newman, the Section’s Chief Counsel, for their exemplary leadership, and thanks to our many members who are passionate in their pursuit of equal access to tax justice for all.

The Tax Section is currently accepting nominations for the 2022 Janet Spragens Pro Bono Award given to an individual or law firm for sustained and outstanding achievements in tax pro bono. Nominations will be accepted through February 15, 2022.

TAPS and Christine A. Brunswick Public Interest Tax Fellows

The Section’s Tax Assistance Public Service (TAPS) endowment fund provides a source of stable, long-term funding for our tax-related public service programs. The TAPS endowment fund primarily supports the Christine A. Brunswick Public Service Fellowship program, which provides two-year fellowships for recent law school graduates to work for non-profit organizations offering tax-related legal assistance to underserved communities. In Autumn 2021, Nirali Patel started as the 2021–2023 Christine A. Brunswick Public Service Fellow, working with the Greater Boston Legal Services on a project focused on misclassified employees. The continuing 2020–2022 Christine A. Brunswick Public Service Fellows are Shailana Dunn-Wall, who works with Legal Aid of Nebraska on a project focused on educating Nebraska residents about the benefits of the Earned Income Tax Credit and Terri Morris, who works with the Community Tax Law Project of Richmond, Virginia, on their Fight Against Financial Abuse project (where Terri provides advocacy and educates and engages local domestic violence survivors on tax issues related to financial abuse).

ABA Giving Day, a fundraising event spearheaded by the ABA Fund for Justice and Education, featured TAPS this year. With the help of a matching program with Tax Section leadership, over $50,000 was raised on ABA Giving Day for TAPS. Thanks to all the Section members who made that possible!

Government Relations

The Section provides leadership in simplifying and improving the tax system through unbiased, thoughtful and timely input into regulatory and legislative processes. Under the dedicated leadership of Kurt Lawson, Vice Chair, Government Relations, and Lisa Zarlenga, Chair of the Committee on Government Submissions, the Section has recently submitted numerous comment letters to the Internal Revenue Service. These have included comments on Voluntary Disclosure Practice and the Streamlined Compliance Procedures, Proposed

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https://www.americanbar.org/groups/taxation/tax_pro_bono/pro_bono_resources/

https://www.americanbar.org/groups/taxation/tax_pro_bono/low_income_taxpayer_clinics/

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https://www.americanbar.org/groups/taxation/tax_pro_bono/vita_programs/

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Regulations with respect to the BBA Special Enforcement Matters, IRS Form 911, a proposed revenue ruling and a revenue procedure under Section 1504 regarding the ability of a professional corporation to join in the filing of a consolidated return, and Chief Counsel Memorandum 20214101F (concerning Research Credit Refund Claims). The Section also recently submitted comments to the Multistate Tax Commission on tax issues surrounding the application of sales and use taxes to digital goods and services. Please consider volunteering for a comments project. In addition to helping improve the tax system, it’s a perfect opportunity to get more involved in committee activities and to connect with like-minded practitioners. Also, I want to invite committee members to feel free to suggest comment projects to committee leaders—sometimes the people most connected to issues that are gaining momentum are committee members working on client matters who notice something others have missed.

Publications

The Section’s publications continue to provide a substantial member benefit and an important contribution to the tax bar through the committed leadership of Roberta Mann, Vice Chair, Publications. The Section’s publications include The Tax Lawyer, the ABA Tax Times and The Practical Tax Lawyer. These are a labor of love and are only possible thanks to the dedication and extraordinary contributions of the volunteer members who consistently go above and beyond, including Gilbert Rothenberg, Associate Editor-in-Chief, The Tax Lawyer; Matthew Schaefer, Associate Editor-in-Chief, State and Local Tax, The Tax Lawyer; Linda M. Beale, Supervising Editor, ABA Tax Times; and Jerald D. August, Editor-in-Chief, The Practical Tax Lawyer. Publication of The Tax Lawyer also relies on the extraordinary support of the Section’s educational affiliate, Northwestern University Pritzker School of Law Tax Program. Interested readers should consider submitting articles to one of the Section’s publications: the editors are always looking for good content.

The Section has recently published The Supreme Court, Federal and State Taxation, and the Constitution, Second Edition by Jasper L. Cummings, Jr., a comprehensive and illuminating look at the intersection of the U.S. Constitution and federal and state taxation going back to the earliest years of the nation.

Justice, Diversity, Equity and Inclusion (JDEI)

Our nation’s tax system has a meaningful impact on all of its people. In addition, the tax laws we enact, the interpretation of our tax laws, and the manner of their enforcement all reflect our nation’s values. The Tax Section is the largest national member organization of tax professionals. As such, it has an opportunity and a duty to ensure that bias in our tax laws is considered and addressed at every level. For these reasons, among many others, it’s critical that the members of the Tax Section, and the tax bar, represent our nation’s current and growing diversity.

In December, the Section launched two important JDEI initiatives: The Loretta Collins Argrett Fellowship and the Justice, Diversity, Equity, and Inclusion Fund (JDEI fund) endowment. The Loretta Collins Argrett Fellowship seeks to identify, engage, and bring historically underrepresented individuals into the Tax Section and create a more accessible, equitable, and inclusive pathway into Tax Section leadership.

The fellowship is a three-year program open to individuals with diverse backgrounds and/or who have a demonstrated commitment to promoting diversity, equity, and inclusion in the tax bar. The Section hopes to award up to five (5) three-year fellowships each fiscal year. Please help us get the word out to potential candidates. Applications for the inaugural class of Loretta Collins Argrett Fellows are due by Sunday, April 3, 2022. Thanks to Caroline Ciraolo, Vice-Chair of Membership, Diversity, and Inclusion, and Genevieve

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Borello, Director, Membership, Marketing, and Diversity, for their hard work and commitment in getting this across the finish line in 2021.

The JDEI Fund was created to provide stable, long-term funding for the Section’s JDEI initiatives and will provide financial support primarily for the new fellowship program.

Committees

The Section’s committees are its lifeblood and the vehicle through which the Section delivers high quality CLE sessions, prepares comments to the government on pending guidance, provides content for its many publications, offers targeted networking and mentorship opportunities, and much more. The Section has 36 substantive committees, covering practice areas such as Administrative Practice, Corporate Tax, Court Procedure and Practice, Employee Benefits, Foreign Activities of U.S. Taxpayers, Partnerships and LLCs, Pro Bono and Tax Clinics, Real Estate, S Corporations, Tax Accounting, Tax Policy, and U.S. Activities of Foreigners and Tax Treaties (to name a few), as well as special interest groups like Diversity, Teaching Tax and Young Lawyers. Committee involvement is the perfect vehicle for finding and networking with like-minded colleagues. If you are not an active member of one of the Section’s committees, I encourage you to consider the many areas covered and reach out to at least one committee. If you are interested in learning more about the committees in general, I encourage you to attend the Midyear Meeting’s Information and Networking Session: Connecting with Tax Section Committees for New and Veteran Members (described below).

Midyear Meeting

The Virtual 2022 Midyear Tax Meeting will be held January 31 to February 4 and will offer a full week of tax CLE, along with expanded networking opportunities on each day of the meeting. The Opening Plenary Session on Monday, January 31 at 10:30 Eastern Time will feature William G. Gale, Co-founder and Co-director, Tax Policy Center, who will focus his remarks on the lack of attention paid to race issues by mainstream public finance analysis in economics. Loretta Collins Argrett, the eponym of the Section’s new fellowship program, will also speak at the Opening Plenary Session. Her remarks will touch on her groundbreaking career and the importance of promoting diversity, equity and inclusion in the tax bar.

The Section continues to expand the networking opportunities at its virtual meetings. On January 31, the first day of the Midyear Meeting, at 4:30–5:30 p.m. Eastern Time, we’ll introduce a new Information and Networking Session: Connecting with Tax Section Committees for New and Veteran Members. During this session, Tax Section leaders will give an overview of how to get the most out of Tax Section meetings, committee membership and diversity efforts. In addition, representatives from many of the Section’s substantive committees will join participants in small breakout groups, which should allow participants to connect with the committees that interest them.

Gratitude

It’s impossible to write about the Tax Section without thanking the incredible staff and the volunteer leaders, including the Section Officers and committee leadership, who are the driving force behind it. The pandemic presents new challenges at every turn, and our amazing staff and leadership continue to rise to the occasion with energy, imagination, innovation and commitment. Toward the end of last year, we were delighted to promote Haydee Moore as the new Section Director of the Tax Section. As many of you know, Haydee did a

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wonderful job as the Section’s Director of Meetings. She’s now bringing that same extraordinary skillset to help us chart the Tax Section’s course into the future.

Thanks, too, for the loyalty and support of our members. We are fully committed to making the Section the best it can be. If you have ideas, comments, or suggestions, please feel free to reach out to me directly at [email protected]. ■

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PEOPLE IN TAX

Interview with Jacob Puhl

By Jeremiah Coder, Washington, DC

Editor’s Note: Jacob Puhl (JP) is currently the Tax Policy Manager at Meta (formerly Facebook). He has been a legal intern at Treasury, a law clerk for the U.S. Senate, and a state and local tax (SALT) intern at KPMG. ATT interviewed him in mid-November to learn something about his decision to become a tax attorney.

ATT: Hi Jacob! You’ve been pretty consistent in being grounded in tax policy from the beginning of your career, with experience at Treasury, on the Hill, accounting firms, and now in-house. What got you

interested in tax in the first place?

JP: When I started law school, I was sure I wanted to go into finance or banking law, having spent the two years after college working at Morgan Stanley. But once I was a 2L and could actually take those

courses, I quickly realized they didn’t appeal to me. Meanwhile, I took Tax 1 as a suggested course for students interested in finance and I was instantly hooked. While there was still some “it depends” in tax, it felt more tangible than other courses and those first few tax cases are just fun! I quickly changed my spring semester to include other tax classes and fortunately ended up with a summer associate position in SALT at a Big 4 accounting firm.

ATT: What, if anything, surprises you most about the tax law profession?

JP: How little math is actually involved! Not that I’m afraid of the math, but especially in a policy role, the issue is more often about the bigger picture than a specific calculation.

ATT: How did you first get involved in the Tax Section?

JP: When I was at Georgetown working on my LLM and still unsure what kind of job I wanted after school, one of the best pieces of advice I got was to join the Tax Section and to attend events. So I did! It was a

great way to meet attorneys and hear the varied ways they used their law degrees in the field. It was also an amazing way to start building a network. And considering I ended up working in policy, it’s been really helpful to know people in a variety of areas. So I would highly recommend attending events to other tax lawyers and law students interested in tax!

Jacob Puhl

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ATT: Any significant mentors/influences in the profession?

JP: I haven’t had a formal mentor, but when I was an intern at Treasury, Bob Stack was a great resource: teaching interns a lot about tax policy; explaining how he got where he was in his career; and putting me

in contact with folks working in international tax in DC. We have had the chance to work together several times since then, including some overlapping time at Deloitte. And we still keep in touch: he recently gave me a collection of books to help fill our library while he downsizes.

I would also mention my first tax law professor, Donald Tobin, who made tax law exciting and accessible.

ATT: Did you have a perception of what in-house work would be like, and what’s been the biggest surprise you’ve encountered so far?

JP: I had heard that working in-house tends to be less specialized, so I expected to cover a more varied range of issues and need to brush up on things I hadn’t studied in years. However, it has been far broader

than I imagined! In a policy role, it’s often not enough to know the tax issue. You also have to understand the underlying political or technical issues that spill into tax, so a lot of the role is learning about those non-tax factors. And when you layer in our global footprint, the role often includes meeting with folks all over, though now these are all virtual – and often very early in the morning for me. Another surprise for an American: I never thought I would need to learn so much about VAT! So grateful for my overseas colleagues taking the time to teach me.

ATT: If you could make one change in the tax policy realm, what would it be and why?

JP: I think more tax policy should be accessible to non-tax folks, including non-lawyers. Tax is a unique area of the law in that basically every person interacts with it, yet many people don’t understand why

and how rules get made.

ATT: How has “globalization” of tax changed how some companies face international tax policy?

JP: Tax is in a period of rapid change just like the global economy. Most tax rules were written a century ago when businesses operated quite differently, and governments around the world are working to update

those rules. As more and more businesses of all sectors and sizes operate across borders, they are seeking workable, globally consistent rules aligned with best practices. Growth requires certainty and stability in the international tax system, so changes must be made in an international, collaborative context.

ATT: What do you think are important trends in tax policy that taxpayers and advisers will still be dealing with in 10 years?

JP: I may be partial, but I think taxation of the digitizing economy will continue to be an important issue over the decade. Tax is difficult enough without layering in evolving technologies and global economic

trends, so as more business takes place across borders electronically, I think policymakers will still be busy. In addition, the OECD Inclusive Framework member countries have agreed to work over the next few years to implement domestic rules for taxing the digitizing economy, which I think will have knock-on effects and influence non-member countries to develop similar regimes.

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ATT: When you’re not busy thinking about tax, what do you do to unwind? How important is it to maintain balance for mental health?

JP: My husband and I recently bought a historic home in Baltimore, so I spend a lot of time working on it and our gardens. It’s a lot of work but it’s been fun and really gratifying seeing it all come together! I think

a balance between work and personal life is essential, though it can be more difficult working from home. I also enjoy a nice long walk at the end of the day to separate the work day from the evening.

ATT: Do you have a favorite depiction of a lawyer in a movie or book?

JP: Since I’m sure others have said all the classics, I’ll go with Trevor Nelsson on NBC’s “Parks & Recreation.” ■

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PRACTICE POINT

A Primer on Charitable Trusts (Part II)

By Thomas W. Bassett, VP, Tax Manager – East Region, Commerce Trust Company, St. Louis, MO

Part I of this article in the summer issue of ATT covered some of the basic terminology of charitable trusts and briefly discussed two types—the Charitable Remainder Trust

(CRT) and the Charitable Lead Trust (CLT). It also introduced readers to CRATs (charitable remainder annuity trusts) and CRUTs (charitable remainder unitrusts). As noted in that Part, CRUTs allow additional contributions to the trust after establishment and distribute a fixed percentage of the trust assets each year based on annual revaluations.

Depending on a client’s mix of assets and goals, there are some more specialized vehicles which might be relevant—including NICRUTs, NIMCRUTs (and “flip” variants of either), and Pooled Income Funds.

I. NICRUTs and NIMCRUTs

A NICRUT is a ‘net income charitable unitrust’, and a NIMCRUT is a ‘net income makeup charitable remainder unitrust’.

Each has some of the aspects of a standard CRUT as discussed in Part I. For example, each has a ‘valuation date’ and a ‘unitrust amount’ which the trustee will calculate, based on the fair market value of the trust’s assets on the valuation date.

However, that’s not the full story. A NICRUT typically distributes the lesser of (a) trust accounting income or (b) the unitrust amount. Trust accounting income, as expected, is a term of art: it’s a creature of state fiduciary statutes and may differ from one state to the next, even though all states have adopted some form of the Uniform Principal and Income Act first established by the Commission on Uniform State Laws in 1997.1

For example, if a settlor created a 5% CRAT for the benefit of a family member and contributed $1,000,000 of stock to the CRAT, the payout rate would be $50,000 per year to the income beneficiary. If the assets of the CRAT were solely stock in a non-dividend paying corporation, the trust wouldn’t have the cash to make the required $50,000 distribution.

In that case, it might be better to change the structure of the CRAT to a NICRUT. While the trustee would still need to value the assets of the trust to determine the unitrust amount (i.e., the fixed percentage to

1 See, e.g., Wikipedia Uniform Principal and Income Act. Although all 50 states have adopted some version of the act, it has not been uniformly adopted by the states. For example, one state may allocate investment fees 50% to income and 50% to corpus, while another state may have a different allocation method. Any expenses allocated to income reduce, dollar for dollar, the trust accounting income that would be distributed to an income beneficiary, so these differences matter!

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be paid to the income beneficiary), the NICRUT’s trust accounting income would be $0 (zero) in year(s) when the corporation made no dividend distributions. As a result, the required distribution amount for the NICRUT would also be $0.

A settlor would not typically fund a CRT with such non-dividend paying stock. But there are similar assets which generate little or no current income—such as forest land or undeveloped mineral resources. In those situations, a NICRUT would have no income during the development period and thus would not encounter the need to make required distributions when there was a cash shortfall.

If the settlor wants a different distribution regime, one variant is the NIMCRUT. The basic function is the same as the NICRUT: that is, there is a fixed percentage distribution of trust income (the unitrust amount), and the trust assets are valued, and the unitrust amount calculated, at least annually. But if the trust accounting income is insufficient to make the expected distribution, these unitrust amounts are tracked (using Form 5227). Amounts not paid due to lack of trust income at any point are be paid in future years when there is excess income. That is, in any future year when there is enough trust accounting income to ‘catch up’ for any of the prior periods of lower-than-expected distributions, the distributions to the beneficiary would increase.

For example, a 5% NIMCRUT with real estate worth $1 million (and assuming stable value for this example) with no sales or income for the first few years, then large income in years 4, 5 and 6, might look like this:

Year TAI Unitrust$ P/Y Short C/Y Distrib C/Y Short

1 $ – $ 50,000 $ – $ – $ 50,000

2 $ – $ 50,000 $ 50,000 $ – $ 100,000

3 $ – $ 50,000 $ 100,000 $ – $ 150,000

4 $ 80,000 $ 50,000 $ 150,000 $ 80,000 $ 120,000

5 $ 150,000 $ 50,000 $ 120,000 $ 150,000 $ 20,000

6 $ 100,000 $ 50,000 $ 20,000 $ 70,000 $ –

Where:

• TAI is Trust Accounting Income (under relevant state law)

• Unitrust$ is the annual unitrust amount (here, 5% of the $1 million value)

• P/Y Short is the balance at the end of the prior year that has not been distributed (note: this always starts at zero, then it’s the balance in the prior row, last column)

• C/Y Distrib is the current year distribution to the beneficiary (note the fluctuations!)

• C/Y Short is the balance at the end of the current year of the undistributed unitrust amount

And for the Excel fanatics:

• C/Y Distrib = min (TAI, sum (Unitrust$, P/Y Short))

A NICRUT typically dis-tributes the lesser of (a) trust accounting income or (b) the unitrust amount.

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• C/Y Short = sum (Unitrust$, P/Y Short) – C/Y Distrib

At the close of year 6, the trust’s cumulative TAI is $330,000, of which $300,000 has been distributed to the beneficiary and $30,000 remains in the trust.

Note that there are a number of valuable features of the NICRUT and NIMCRUT. One distinctive feature is that the trust principal remains intact at all times (or increases), ensuring that when the trust period ends, the principal will pass to a charity for the purpose the settlor designated. In addition, because additional contributions may be made at any time (yielding a tax deduction for a portion of the value), the settlor has more precise tax management possibilities. The trust is confidential, and the assets are generally protected from creditors. Earnings that remain in the trust, of course, increase its value with tax-deferred compounding over time. The recipient charity can be changed at any time. Finally, administrative costs are generally lower than for a variety of other tax-reducing plans.

II. FLIP Variants

Both NICRUTs and NIMCRUTs can also have “flip” characteristics—that is, the language of the document specifies that the nature of the trust changes, with a different payout calculation, upon the occurrence of a particular event.

For example, assume that the settlor contributes a (former) family home to a CRT for the local college or university. That former residence might be vacant and not an income producing property, making it not a strong candidate for either a CRUT or CRAT. Nevertheless, the settlor might want the assurance of the cash flows of a CRUT.

Enter the flip. From the start, the CRT will be a NICRUT or NIMCRUT. The settlor will contribute the asset. Trust accounting income may be zero (or a nominal amount), entitling the beneficiary (often the settlor) to little or no income. But then the CRT sells the home.

The trust contains language such as the following:

1. The “Initial Term” of the trust means the term beginning on the date the trust is created and ending on the last day of the taxable year in which the Conversion Date occurs.

2. The “Conversion Date” means the date of the sale or exchange of the real property described on Schedule A which was contributed to the trust upon its creation.

3. In each taxable year of the trust during the Initial Term, the Unitrust Amount shall be equal to the lesser of (a) the trust income for the taxable year and (b) 7 percent of the net fair market value of the assets of the trust.

4. In each taxable year of the trust after the Initial Term, the Unitrust Amount shall be 7 percent of the net fair market value of the assets of the trust.

Both NICRUTs and NIMCRUTs can also have “flip” characteristics—that is, the language of the document spec-ifies that the nature of the trust chang-es, with a different payout calculation, upon the occurrence of a particular event.

11



After the sale, the trust becomes a fairly standard CRUT, paying out 7 percent of the value of its assets to the beneficiary. In contrast, prior to that sale, the trust is a NICRUT, paying out the lesser of trust income or the 7 percent amount. That’s a “flip NICRUT” in action.

A similar example could be constructed for a flip NIMCRUT. The only difference is that the unitrust amounts prior to the Conversion Date would accumulate (similar to the accumulation in the prior NIMCRUT example in the first part, above). Those prior unpaid amounts would be taken into account for the distributions made after the Conversion Date.

Tax compliance for NICRUTs, NIMCRUTs, and the flip versions of them is similar to that for CRTs in general. Each of these trusts must file Form 5227 on a calendar-year basis and issue a Schedule K1 to the unitrust beneficiary or beneficiaries. Each accumulates income into different tranches. (See Part I of this article in the summer 2021 issue of ATT for a discussion of how those tranches fluctuate in amount during each tax year).

NICRUTs and NIMCRUTs use a few more lines on Form 5227 to reflect the calculations of trust accounting income. For the NIMCRUT, the return also tracks any amount undistributed from one year to the next.

III. Pooled Income Funds

Not every client situation warrants the creation of a full-blown independent trust, with the associated administrative costs of setting up trust accounts, finding a willing trustee, managing the trust’s investments, and the like.

Congress was sympathetic to this need and created the Pooled Income Fund.2 It’s similar to a charitable mutual fund where one or more donors contribute property (cash or marketable securities) to a common fund that is managed and administered by a qualified non-profit organization (often a college or university).

Instead of each donor having a separate annuity or unitrust calculation, the fund calculates a rate of return and that rate of return drives the annual distributions to the beneficiaries. After the death of each beneficiary, a share of the assets in the fund is then distributed to the charitable sponsor.

Pooled income fund deductions are computed using a valuation rate rather than the IRS discount rate. The applicable valuation rate depends on the age and investment history of the fund. The mandated valuation rate for gifts to ‘young’ funds originally funded in 2020 and 2021 is 2.2%.3 The valuation rate for gifts to older funds is the fund’s highest annual rate of return in the prior three years. This rate of return

must be computed as described in Treas. Regs. sections 1.642-6(c)(2)–(3). (The details for that calculation are far beyond the scope of this article.)

To illustrate, assume GreenAcres University has a long-established Pooled Income Fund. Donors Smith and Jones contribute cash to the fund: Smith donates $10,000 and Jones contributes $15,000. The fund would add

2 IRC § 642(c)(5).3 A good resource for Pooled Income Funds is the article at https://www.pgcalc.com/pooled-income-fund-valuation-rates.

The Pooled Income Fund [is] similar to a char-itable mutual fund where one or more donors contribute property (cash or marketable se-curities) to a common fund that is managed and administered by a qualified non-profit organization (often a college or university).

12

https://www.pgcalc.com/pooled-income-fund-valuation-rates



those contributions to the pooled fund. Assume that the fund has one prior member who has 5 shares in the fund and that, based on their relative contributions, Smith is credited with 2 shares and Jones is credited with 3 shares in the pooled fund.

If the fund has $50,000 and earns 2%, it will have income of $1,000—i.e., $100 per share. That means Smith will receive a K1 from the fund listing $200 of income, and Jones will receive a K1 from the fund listing $300 of income, while the earlier member’s K1 will list the remaining $500.

IV. Conclusion

Charitable giving is widespread in the United States. Americans gave over $471 billion to charities in 2020, 5.1% more than they donated in 2019. Sixty-nine percent (69%) of that amount was donated by individuals—i.e., a total amount of $324 billion. That amount has grown in 5 of the past 6 years.4

A. Interesting Statistics on Form 5227

The IRS periodically releases Statistics of Income but has not updated these releases for Form 5227 in almost a decade.5 Their most recent summary provided the following information on filings:6

The number of Forms 5227 filed with the IRS has declined in recent years.

In Filing Year 2012, the IRS received 113,688 Forms 5227, down from 117,710 in 2011.

Charitable remainder unitrusts continued to be the most common split-interest trusts, accounting for more than three-quarters (80.3 percent) of returns filed in 2012.

Total investments reported increased 1.5 percent to $8.7 billion in 2012, with corporate stock remaining the largest investment category, accounting for 88 percent of total assets.

Trustees of split-interest trusts reported approximately $4.3 billion in charitable distributions, with charities established for public or societal benefit receiving $2.5 billion in distributions, 58 percent of the total.

The number of active pooled income funds declined rapidly in the data, likely reflecting the interest rate environment (which has not improved since the study period), as lower interest rates have an impact on the rates of returns used by these funds but can positively impact the charitable deduction claimed by the donor.

B. Other Funding Concerns

Some clients may ask about a Donor Advised Fund (DAF). While a DAF is often a public charity, which brings considerable simplicity (no separate tax return, no separate trust document is needed, etc.), that simplicity comes at a cost. DAF donors do not usually have any input on how the funds are managed by the DAF sponsor, and, more relevant to this article, DAF donors retain no interest in the DAF assets—there is no income stream for their retirements or for their surviving spouses.

4 https://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/.5 Form 5227 is frequently called the “red-headed stepchild” by practitioners in the field.6 https://www.irs.gov/pub/irs-soi/12splitinteresttrustonesheet.pdf.

13

https://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/

https://www.irs.gov/pub/irs-soi/12splitinteresttrustonesheet.pdf



Other clients may wish to have a split-interest trust survive beyond their generation to provide for members of the next generation. It’s very difficult to have a CRT qualify when there are young beneficiaries.

A Pooled Income Fund may solve some of these difficulties—a payment stream for the donor and/or family members is permitted, and there’s no 10 percent remainder requirement as there is for a CRT. Also, a donation to a Pooled Income Fund (particularly one that’s been in existence for many years) may provide a significant income tax deduction. However, such a fund usually has one charitable sponsor, so the donor won’t have the ability to pick/choose other charities to receive funds at the termination of the income interest.

C. Planning Opportunity7

A flip unitrust may also help with administrative issues for CRUTs formed late in the year. For example, if a donor creates a CRUT during December, the regulations require either (a) a distribution by December 31st of a pro-rated amount for the year or (b) a complex trustee election which is deemed to generate gain.

If, instead, the document is a flip NICRUT or flip NIMCRUT and there’s no income earned in the account for December, there’s no required distribution for the month. The ‘flip’ event can be “January 1 of the year following the funding of the trust”, which automatically changes the trust from an income-only trust to a ‘regular’ unitrust. This structure avoids the need to make a short-year calculation and distribution or the need to prematurely recognize gain. ■

7 Significant thanks are due to Larry Katzenstein of Thompson Coburn who presented this idea in a recent meeting of the Estate Planning Council of St. Louis.

14



AT COURT

The IRS’s Procedural Battles in Micro-Captive Litigation

By David J. Slenn, Shumaker, Loop & Kendrick, LLP, Tampa, FL

The ABA Tax Times Spring 2021 issue addressed the recent Tax Court opinion in Caylor Land v. Commissioner.1 Caylor represented the fourth straight IRS victory over abusive micro-captive transactions. Yet although the IRS has an unblemished record in the Tax Court against micro-captives on substantive grounds, it has faced numerous procedural battles in cases related to micro-captives.

These recent procedural battles include the Supreme Court’s decision in CIC Services v. Commissioner2 and a recent Tax Court case, Puglisi v. Commissioner.3 In CIC Services, the Supreme Court held the Anti-Injunction Act did not prevent a material advisor from challenging the validity of Notice 2016-66 (requiring reportable transaction reporting), thereby remanding the case to the district court. In Puglisi v. Commissioner, the taxpayers attempted to force the IRS to trial even though the IRS conceded all tax, interest and penalties associated with the taxpayers’ micro-captive deductions. As described in more detail below, the IRS recently filed a motion for summary judgment in CIC Services and a motion for decision in Puglisi.

I. Other Micro-Captive Cases of Interest

There are other pending cases worth noting but not covered in this article. The Delaware Department of Insurance is appealing a district court order granting an IRS petition to enforce a summons seeking certain Delaware micro-captive insurance company records.4 In addition, Moore Ingram Johnson & Steele LLP, a law firm that also provides captive management services, is appealing a Georgia district court order granting an IRS summons.5 Moore Ingram’s arguments on appeal involve the appropriateness of categorical privilege logging and whether collateral estoppel applies to privileged information that was at issue in two Kentucky district court privilege rulings. Moore Ingram’s oral argument begins with an observation about the IRS’s actions in the case as being part of a larger initiative to eliminate micro-captive insurance

1 Caylor Land & Dev., Inc. v. Comm’r of Internal Revenue, T.C. Memo. 2021-30 (2021).2 CIC Servs., LLC v. Internal Revenue Serv., 141 S. Ct. 1582 (U.S. May 17, 2021).3 Order, Puglisi, et. al. v. Comm’r of Internal Revenue, 4799-20, et. al. (U.S. Tax Court, Oct. 29, 2021).4 United States of America v. Delaware Department of Insurance, No. 21-3008 (3rd Cir. Nov. 1, 2021).5 United States of America v. Moore, Ingram, Johnson & Steele, LLP, No. 21-10341 (11th Cir. Feb. 2, 2021). In its Appellant’s Brief, the United States summarized the facts leading up to the appeal.

The IRS is investigating the Firm’s ‘captive insurance program’ – a kind of business transaction particularly susceptible to abusive tax avoidance schemes. To pursue its investigation, the IRS issued a summons to the Firm seeking documents related to that program. After the Firm withheld large volumes of responsive documents, the IRS petitioned the District Court for enforcement. As explained below, the District Court correctly rejected the Firm’s objections, other than its request not to be required to produce additional copies of materials it had already provided, and ordered that the summons be enforced.

United States of America v. Moore, Ingram, Johnson & Steele, LLP, 2021 WL 1526573 (11th Cir. Apr. 14, 2021).

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companies.6 Finally, in Celia R. Clark v. USA,7 an attorney who also provided captive management services in the first-decided micro-captive case, Avrahami v. Commissioner, is suing for a refund of section 6700 penalties and for improper disclosure of her return information under section 7431. The complaint also contains an allegation accusing the IRS of wrongful actions.

[It] has sought to destroy the microcaptive insurance industry. It has not done so by promulgating regulations, issuing revenue rulings, or providing affirmative guidance that taxpayers and tax practitioners could follow. Rather, the IRS has engaged in the unlawful “administrative repeal” of IRC Section 831(b), thwarting Congress’s intent by wrongfully penalizing taxpayers and practitioners in the microcaptive space, in a concerted effort to drive them out of that business.

The complaint further alleges that the IRS engaged in abusive tactics by allowing section 6700 penalties to accumulate against the plaintiff for years, “rather than provid[ing] clarity.”8

II. CIC Services v. Commissioner

A. Notice 2016-66 & the Administrative Procedures Act

In CIC Services, the IRS argued that CIC (a company that provides captive management services) was prohibited from challenging Notice 2016-66 under the Anti-Injunction Act. The Supreme Court ruled the Anti-Injunction Act did not bar the taxpayer’s challenge, thereby setting the stage for CIC and the IRS to battle once again in federal district court, this time over whether Notice 2016-66 was invalid due to, inter alia, the IRS’s failure to engage in the Administrative Procedures Act (APA) notice and comment rulemaking requirements.

The broader implication in this case is whether the IRS may issue notices requiring reporting obligations for reportable transactions (or a particular category of reportable transactions) without first engaging in the APA requirements. The IRS issued Notice 2016-66 describing a micro-captive transaction as a “transaction of interest” because the IRS and Treasury Department believe certain micro-captive transactions “have a potential for tax avoidance or evasion, but for which the IRS and Treasury lack enough information to determine whether the transaction should be identified specifically as a tax avoidance transaction.”9

On remand, CIC sought and obtained a preliminary injunction on September 21, 2021 enjoining the IRS from enforcing the Notice against CIC.10 Although the court granted the injunction, it was limited to CIC, as opposed to a national, outright injunction as to Notice 2016-66. On October 8, 2021, CIC requested that the court reconsider the scope of the injunction and issue a national, outright injunction as initially requested. While reconsideration of the national injunction matter is

6 Oral argument, Nov. 19, 2021 (audio recording).7 Celia R. Clark v. United States of America; The Internal Revenue Service, 9:21-cv-82056 (S.D. Fl. Nov. 11, 2021).8 Complaint and Demand for Jury Trial at 12.9 Preamble to the final section 1.6011-4 Regulations, 2007-38 I.R.B. 607, 72 F.R. 43146-01.10 CIC Servs., LLC v. Internal Revenue Serv., Dep’t of Treasury, No. 3:17-CV-110, 2021 WL 4481008 (E.D. Tenn. Sept. 21, 2021).

The broader implication in this case is whether the IRS may issue notices re-quiring reporting obligations for report-able transactions (or a particular cate-gory of reportable transactions) without first engaging in the APA requirements.

16

https://www.ca11.uscourts.gov/system/files_force/oral_argument_recordings/21-10341.mp3?download=1



pending, the IRS moved to dispose of the case on its merits through a motion for summary judgment (MSJ) on November 1, 2021.

B. IRS Motion for Summary Judgment

In its MSJ, the IRS acknowledged that the Court found CIC’s argument persuasive at first glance, but it suggested that a fuller examination of the issues should result in an IRS victory.

The MSJ addresses CIC’s three main arguments that the IRS violated the APA by not engaging in required notice and rulemaking requirements, engaged in arbitrary and capricious conduct by issuing Notice 2016-66, and did not comply with the Congressional Review Act.11 In its MSJ, the IRS argued that the Court focused on the wrong authorities for purposes of issuing its preliminary injunction. The IRS then argued that the notice and rulemaking requirements do not apply to Notice 2016-66 due to the scope of section 6707A and referencing Congressional enactments supporting the argument that notice and rulemaking were not required. The IRS also cited a recent Sixth Circuit opinion that found that IRS issuance of a notice regarding a listed transaction did not violate the APA. These arguments are discussed in more detail below.

1. Code Sections 6011 and 6707A & Treas. Reg. Section 1.6011-4

Section 6111 of the Code imposes reporting obligations on “material advisors.” When the court granted the injunction, it focused on section 6111(c), which authorizes the Secretary to “prescribe regulations which … provide such rules as may be necessary to carry out the purpose of this section.”12 Section 6111(c), however, is not the appropriate authority for issuing Notice 2016-66; instead, the relevant authorities for that notice’s issuance are section 6011 and Treas. Reg. section 1.6011-4. One only turns to section 6111 after a reportable transaction has been identified.

Section 6011 requires the filing of a return or statement when required by regulations.13 Treasury regulations promulgated under section 6011 provide the authority for the IRS to identify certain micro-captive transactions as “transactions of interest” through issuance of notices, as was done with certain micro-captive transactions through Notice 2016-66.14

11 CIC voluntarily dismissed its third cause of action alleging violation of the Congressional Review Act. See CIC Services, LLC’s Motion for Summary Judgment on its First Cause of Action, Partial Summary Judgment on its Second Cause of Action, and Voluntarily Dismissal of its Third Cause of Action (Dkt 97, Nov. 1, 2021) at 8.12 Memorandum Opinion and Order (Dkt 82, Sept. 21, 2021) at 10 n. 6. (emphasis added). The IRS notes in a footnote that it had mistakenly drawn the Court’s attention to section 6011 as the relevant source of authority in its response to the motion for preliminary injunction.13 I.R.C. § 6011(a) (stating that “[w]hen required by regulations prescribed by the Secretary any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and regulations prescribed by the Secretary”).14 Treas. Reg. §1.6011-4(b)(6) (defining a transaction of interest as “a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest”) (emphasis added).

The MSJ addresses CIC’s three main argu-ments that the IRS violated the APA by not en-gaging in required notice and rulemaking re-quirements, engaged in arbitrary and capricious conduct by issuing Notice 2016-66, and did not comply with the Congressional Review Act.

17



In its MSJ, the IRS argues that the court should have considered the interplay between section 6707A and Treas. Reg. section 1.6011-4, which the Court did not focus on when it issued the injunction. Although section 6111 imposes reporting obligations on material advisors, one cannot be a material advisor unless an underlying reportable transaction has first been identified pursuant to section 6011 and the regulation promulgated under that section. The potential for penalties for failure to include reportable transaction information with a return is found in section 6707A. The IRS then described the exceptions under the APA and turned to the history of these Code and Regulation sections as support for its argument that it did not violate the APA when it issued Notice 2016-66.

2. Administrative Procedures Act

Generally, federal agencies must go through notice and comment rulemaking before promulgating a rule. This means the agency must notify the public of the proposed new rule, give the public an opportunity to comment on the new rule, and then address the comments received. The IRS argues it does not need to engage in notice and comment rulemaking when Congress expressed a clear intent that an agency may use another procedure or when issuing “interpretive” rules. The IRS argues that Notice 2016-66 falls under both exceptions to notice and comment rulemaking.

3. Notice 2016-16 & Congressional Intent

The IRS notes that notice and rulemaking was conducted in 2003 when the IRS finalized a regulation under section 6011 allowing it to identify potentially abusive transactions, including six categories of reportable transactions. Congress enacted section 6707A in 2004, which required reporting of transactions identified under section 6011, with the potential for penalties due to non-compliance. At that time, regulations were already in existence that authorized the IRS to identify listed transactions by “notice, regulation, or other form of published guidance.”15

The IRS notes that CIC did not challenge the section 6011 Treasury regulations identifying listed transactions and transactions of interest as reportable transactions. In its complaint, CIC challenged the IRS’s failure to engage in notice and rulemaking only as to Notice 2016-66. The IRS argues that a finding that Notice 2016-66 violated the APA would not make sense given the legislative history behind sections 6011 and 6707A, which in turn authorizes the Treasury Department to define a listed transaction and a reportable transaction.

The IRS also points to an amendment to the section 6011 regulations in 2007, where “transactions of interest” were added as a category of reportable transactions.16 The Treasury Decision publishing these regulations notes that “several commentators requested that the IRS and Treasury Department provide notice to taxpayers that the IRS and Treasury Department are considering designating a particular transaction as a transaction of interest and requesting comments prior to publishing guidance identifying a transaction as a transaction of interest.”17 As to this request for comments, the amendment provides “[t]he IRS and Treasury Department do not believe that the regulations should be amended to include language requiring the IRS and Treasury Department to provide advance notice for transactions of interest as suggested by the commentators. However, the IRS and Treasury Department may choose to publish advance notice and

15 Tax Shelter Regulations, 68 F.R. 10161-01 (March 4, 2003.)16 AJCA Modifications to the Section 6011 Regulations, 72 F.R. 43146-01 (Aug. 3, 2007).17 Treas. Dec. 9350.

18

https://www.irs.gov/irb/2007-38_IRB#TD-9350



request comments in certain circumstances. The determination of whether to provide advance notice and a request for comments will be made on a transaction by transaction basis.”18

The IRS points to another amendment to section 6707A in 2010. By this time, it states, the IRS had already started to identify transactions of interest under the 2007 regulation, without notice and comment. Congress, the IRS notes, would have been aware of this since it expressly described how “listed transactions” and “transactions of interest” were identified by “publications issued by the Treasury Department.” The IRS cites the Technical Explanation of Tax Provisions in Senate Amendment 4594 to H.R. 5297. The Joint Committee on Taxation provided a summary of then-current law (i.e., as of 2010) which included statements indicating that transactions of interest were described in publications issued by the Treasury Department.

There are five categories of reportable transactions: listed transactions, confidential transactions, transactions with contractual protection, certain loss transactions and transactions of interest.

Transactions falling under the first and last categories of reportable transactions are transactions that are described in publications issued by the Treasury Department and identified as one of these types of transaction. A listed transaction is defined as a reportable transaction which is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction for purposes of the reporting disclosure requirements. A “transaction of interest” is one that is the same or substantially similar to a transaction identified by the Secretary as one about which the Secretary is concerned but does not yet have sufficient knowledge to determine that the transaction is abusive.19

4. Mann Construction, Inc. v. United States

The IRS then points to a recent decision in the Eastern District of Michigan involving a challenge to a notice20 issued with respect to a listed transaction. In Mann Construction, Inc. v. United States,21 the court was faced with “whether an IRS notice requiring disclosure of a potentially abusive transaction was issued without notice and comment in violation of the APA.”

The Mann court recounted the IRS’s struggle with a “new generation of tax shelters” during the 1990s, when Treasury developed a reporting regime but lacked the authority to penalize taxpayers for failure to disclose. The court noted the resolution of the issue.

18 Id.19 Technical Explanation of the Tax Provisions in Senate Amendment 4594 to H.R. 5297, the “Small Business Jobs Act of 2010,” Scheduled for Consideration by the Senate on September 16, 2010, 2010 WL 3712659, at *12 (emphasis added, internal references deleted).20 Notice 2007-83, 2007-45, I.R.B. 960, 2007 WL 3015114 (“Abusive Trust Arrangements Utilizing Cash Value Life Insurance Policies Purportedly to Provide Welfare Benefits”).21 Mann Constr., Inc. v. United States, No. 1:20-CV-11307, 2021 WL 1923412 (E.D. Mich. May 13, 2021).

The IRS argues that a finding that Notice 2016-66 violated the APA would not make sense given the legislative history behind sec-tions 6011 and 6707A, which in turn autho-rizes the Treasury Department to define a list-ed transaction and a reportable transaction.

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Congress addressed this problem in 2004 by passing the American Jobs Creation Act of 2004, Pub. L. 108-357, 118 Stat. 1418 (2004), which created I.R.C. § 6707A. Section 6707A laid the statutory foundation for the new reporting regime by establishing penalties for nondisclosure and defining “reportable transaction” and “listed transaction” by reference to Treasury regulations. See U.S.C. § 6707A. Since then, the IRS has identified many listed transactions by notice, in effect requiring taxpayers to disclose their participation or face substantial penalties under I.R.C. S 6707A. One of these revenue notices is IRS Revenue Notice 2007-83, the subject of controversy here.22

The Mann court ruled in favor of the IRS, dismissing the taxpayers’ complaint. Its holding noted the reference to section 6707A and identification of applicable transactions through various means.

Congress responded with section 6707A, which not only added penalties for the failure to disclose reportable transactions, but [also] defined “listed transaction” by reference to Treasury regulations that allow the IRS to identify listed transactions by “notice, regulation, or other form of published guidance.” 26 U.S.C. § 6707A; 26 C.F.R. § 1.6011-4. This reference is significant because revenue notices, like revenue rulings and procedures, are normally issued without the notice and comment required by the APA.23

5. Interpretive Rule Exception

Agencies are required to use notice and comment rulemaking to issue “legislative” rules, but not “interpretive” ones. In granting CIC Services’ request for a preliminary injunction, the court found Notice 2016-66 to be a legislative rule because CIC would not have to report micro-captive transactions without that notice. In its MSJ, the IRS argued that a legal effect (here, the filing requirement) is not the test for determining whether a rule is legislative or interpretive. Instead, the IRS asserted that the notice merely identifies a transaction of interest: the reporting requirement was not imposed by Notice 2016-66 but rather by the regulation that defines reportable transactions (i.e., Treas. Reg. section 1.6011-4) and the statutes that require material advisors to provide information on them or face penalties (i.e., sections 6011, 6111 and 6707A).

Although Notice 2016-66 identifies a transaction of interest, CIC did not challenge the regulatory concept of a transaction of interest as set forth in the defining regulation (Treas. Reg. section 1.6011-4(b)). In granting CIC’s injunction, the court homed in on the unlimited discretion the IRS has in identifying transactions of interest, “in contrast to the more clearly defined types of reportable transactions identified by the Secretary in 26 C.F.R. § 1.6011-4(b)(1)-(5).” It is worth noting that a “listed transaction” is defined in the regulations as “a transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service (IRS) has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction.”24 Similarly, a “transaction of interest” is defined in the regulations as “a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest.”25 It is not clear how a listed transaction, which results in heavier penalties, can be considered a “more clearly defined” type of reportable transaction than a transaction of interest, given these quite similar definitions in the regulations.

22 Id. at *1–2.23 Id. at *12 (emphasis added).24 Treas. Reg. § 1.6011-4(b)(2).25 Treas. Reg. § 1.6011-4(b)(5).

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6. Arbitrary and Capricious

CIC claimed that Notice 2016-66 was irrational and thus violated the APA. This was so, it said, because the IRS already had access to most of the information needed to assess the validity of captive insurance transactions and the scope of the Notice encompasses both legitimate and non-legitimate captive insurance transactions. The IRS countered that CIC’s position is inconsistent with its prior statements in which CIC conceded that captive insurance transactions have “a potential for tax avoidance or evasion.” Consequently, the IRS argues that it did not act arbitrarily or capriciously by taking the position that certain micro-captive transactions have the potential for tax avoidance or evasion.

C. IRS Notices as Prophylactic Measures

The IRS argues in its MSJ appeal not only on the legal basis but also from a public policy perspective.26 The IRS must be nimble enough to respect taxpayer rights but also identify transactions as potentially abusive at an early stage (and not “in the rear-view mirror”) to prevent widespread damage to taxpayers and the government alike.27 Once an abusive transaction takes hold, it can persist for years and cause extraordinary losses in tax revenue. For example, the IRS gave notice of syndicated conservation easements as a listed transaction in 2017,28 but by then the transaction had spread to the point where the number of transactions continued to rise after the 2017 listing.29

Identifying potentially abusive transactions at an early stage can help taxpayers seek counsel as to whether a proposed transaction ultimately results in more harm than good. To the extent a transaction is designated as a reportable transaction, it can be expected that advisers, including tax preparers, will exercise more care to ensure tax compliance.30 Consequently, an IRS announcement can act as a prophylactic measure, thereby preventing an abusive transaction from spreading like a harmful virus.

For taxpayers who unwittingly participate in abusive transactions, the financial loss can be devastating, as years of denied deductions subject to interest and penalties can mount. Further, the cost of retaining independent counsel to review and extract clients from abusive transactions can be high. All of this can be mitigated by prompt issuance of guidance that can help protect taxpayers from potentially disastrous

26 Memorandum Opinion and Order (Sept. 21, 2021). In issuing its injunction, the CIC court acknowledged that the “public interest in identifying transactions potentially aimed at tax avoidance or evasion” must be weighed against the “public interest in agencies promulgating rules that have the effect of law through procedures mandated by Congress through the APA.”27 Tax Shelters: Who’s Buying, Who’s Selling, and What’s the Government Doing About It?: Hearing before the U.S. Senate Committee on Finance, 108th Cong. (2003) (testimony of IRS Commissioner Mark W. Everson) (noting that “[o]ne of the problems here is that … we are looking in the rear-view mirror here. We need to get on these things as the products are created and developed, because everybody is trying to stay one step ahead of the IRS”).28 Notice 2017-10, Listing Notice--Syndicated Conservation Easement Transactions.29 See Alexis Gravely, Conservation Easement Deals Increase Despite IRS Notice, 168 Tax NoTes 2514 (Sept. 22, 2020).

The number and deduction value of syndicated conservation easement transactions continued to rise despite their designation as a listed transaction, according to new data from the IRS. An estimated $9.2 billion in tax benefits were claimed for 2018 as a result of the deals, up from $6.8 billion for 2017. The agency also received an increased number of statements disclosing the transactions—17,182 for 2018, compared with 15,499 for 2017. The data—provided to the Senate Finance Committee in a September 17 letter from IRS Commissioner Charles Rettig—show that more people were investing in the transactions, and that many investors were involved in multiple transactions. Although there were 32,465 investors in 2018, only about 16,900 were unique. In 2017 there were 21,000 investors, of which 14,000 were unique.

Id. See also ABA Webinar, Practitioners Guide to High Income/High Wealth Audits (Sept. 15, 2021).30 Section 6694 provides that if a tax preparer prepares any tax return with respect to which any part of an understatement of liability is due to an unreasonable position, the tax preparer shall pay a penalty with respect to each return in an amount equal to or greater than $1,000 or 50% of the income derived by the tax return preparer with respect to the return. Notably, section 6694(a)(2)(C) provides that a reportable transaction is unreasonable unless it is “reasonable to believe that the position would more likely than not be sustained on its merits.”

21



consequences.31 Information gathered from Form 8886 (filed in response to Notice 2016-66) assists the IRS with sending so-called “soft letters” that can provide taxpayers with an opportunity to obtain independent counsel and amend tax returns prior to being picked for audit and subjected to penalties.32 In contrast, those who profit from the sale of certain products will generally be opposed to IRS publications suggesting the products might be abusive.33

III. Puglisi v. Commissioner

In Puglisi v. Commissioner,34 the IRS disallowed deductions for premiums paid to a micro-captive domiciled in Delaware. After engaging in initial discovery, the IRS decided to concede the micro-captive deductions and the associated interest and penalties. Importantly, in the IRS’s response to the petitioner’s first request for admissions, the IRS denied that the micro-captive structure reflected insurance for federal tax purposes.35 Instead of accepting the IRS concession, the petitioner pushed for a trial on the merits. In response, the IRS filed a Motion for Entry of Decision requesting that the Tax Court deny the petitioner’s request for a trial. The petitioner objected to this motion, setting the stage for the Tax Court (Judge Gustafson) to decide whether to hear the case on the merits.

A. The Tax Court Order

On November 5, 2021, the Tax Court issued an order granting the IRS’s motion for entry of decision. In so holding, the court provided an overview of the nature of deficiency cases and decisions.

[T]he point in a deficiency case is to ‘redetermine the amount’ of the deficiency determined in the [statutory notice of deficiency] as to a particular taxpayer for a particular year, not to publish commentary on the law or to offer assistance on matters other than the deficiency before the Court. … In the statutory language applicable to the Tax Court, the ‘decision’ in a deficiency case is an ‘order specifying the amount of the deficiency’, sec. 7459(c); and a ‘report’, see sec. 7459(a), is the Court’s opinion that may explain its decision.

Given there was no longer any dispute over the amount of the deficiency, Judge Gustafson believed it was proper to enter a decision. He noted, however, that this was not what the taxpayers wanted. They objected, he said, not because they wanted a different decision as to amount but because they wanted an opinion

31 Early detection may help taxpayers avoid penalties. See, e.g., IR-2019-182 (Nov. 12, 2019) (“Taxpayers may avoid the imposition of penalties relating to improper contribution deductions if they fully remove the improper contribution and related tax benefits from their returns by timely filing a qualified amended return or timely administrative adjustment request.”).32 See IRS Letter 6336, Rev. 8/2021 (stating that the inquiry “doesn’t constitute an examination under Internal Revenue Code Section 7605(b) or a contact regarding an examination under Treasury Regulation 1.6664-2(c)(3)(i)(A) for purposes of defining a qualified amended return”); but see Protecting the Rights of Taxpayers Who Receive “Soft Letters” That Require Them to Provide Support for Their Return Positions and Sworn Statements Outside an Examination. The National Taxpayer Advocate has questioned whether some IRS soft letters have gone too far. “Over the years, the IRS has issued taxpayers “soft letters” for a variety of issues and purposes, including informing, educating, and encouraging voluntary compliance. However, the IRS has recently begun using some soft letters as a means to bypass the rights and protections of the examination procedures.” National Taxpayer Advocate, 2021 Systemic Advocacy Objectives Report to Congress.33 See Endeavor Partners Fund, LLC v. Comm’r of Internal Revenue, 115 T.C.M. (CCH) 1540 (T.C. 2018), aff’d, 943 F.3d 464 (D.C. Cir. 2019) (“Recognizing that the IRS notices accurately described POPS and PICO, Bricolage advised its clients that the notices were only a statement of the IRS’ position, not a change in law. But the notices effectively eliminated demand for Bricolage products, forcing it to abandon many planned transactions. Bricolage accordingly began to wind down its activities.”).34 Paul Puglisi & Ann Marie Puglisi, et al., v. Comm’r of Internal Revenue, Dkt No. 4796-20.35 Puglisi, Resp’t Resp. to First Req. for Admis. (June 11, 2021), ¶ 1, footnote 1 (stating that “Respondent’s position is that the payments at issue do not qualify as insurance premiums”); ¶ 7 (denying “that Series A of Oxford Insurance Company LLC issued insurance policies to Puglisi Egg Farms of Delaware, LLC for federal income tax purposes during tax years 2015 through 2018”).

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prior to entry of the same decision as to amount. The court was “persuaded that the Commissioner’s position is correct.”

In holding for the IRS, Judge Gustafson found that going to trial would amount to rendering an advisory opinion, which the Tax Court will generally not do. Although Judge Gustafson could have rejected the IRS’s concession, he decided not to as the limited case law36 supporting the rejection of an IRS concession was the exception, not the general rule. Judge Gustafson noted that the IRS disclosed its intention to concede less than five months after the first status reports were filed. Further, he noted that the case involved “factual disputes that, as suggested by petitioners’ own projections, would likely require discovery, motions to compel, and a lengthy trial involving fact and expert witnesses.”

The petitioners also suggested the IRS had conceded the case for abusive tactical reasons. Judge Gustafson said the decision to accept the IRS concession now would not prejudice the Tax Court’s discretion in the management of future cases involving this particular captive structure (utilizing “Series A” of the captive program). He went on to note that if many petitioners with similar micro-captives had coordinated their efforts because they felt the issues were ideal litigation vehicles for their position, that would not be subject to criticism. Similarly, there is no reason to “criticize the Commissioner for conceding cases in which his position is weaker in order to devote his resources to litigating cases that are more promising for his position.”

B. Micro-Captive Industry Victory?

Micro-captive arrangements are often sponsored and managed by companies that promote certain structural characteristics that distinguish themselves from other captive management companies as potentially “safer” for federal tax purposes. So far, the IRS has pursued trial with certain taxpayers in the first four micro-captive cases involving different management companies, with all four cases resulting in IRS victories. The impact of this approach is obvious. Once the first taxpayer utilizing a certain structure (e.g., a management company-sponsored “risk pool” or a pooling variant) loses, it calls into question the viability of the program for all others who participated in the sponsored structure. Of course, these cases are highly fact-sensitive and require looking at all the facts and circumstances when gauging the strength of a transaction.

While some may suggest Puglisi is a victory (since, undoubtedly, it is for the taxpayer), the IRS technically “won” on its Motion for Entry of Decision to avoid a trial. Further, the IRS denied that the structure was insurance for federal income tax purposes. It may well be strategically coordinating its inventory of other cases involving this particular captive manager as it has for others. ■

36 The court noted one such case, McGowan v. Commissioner, 67 T.C. 599 (1976).

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PRO BONO MATTERS

A Sit-Down with Andrew VanSingel

By Andrew R. Roberson, McDermott Will & Emery, Chicago, IL

Editor’s Note: One of Andy Roberson’s first columns for Pro Bono Matters back in 2016 was an interview with Professor Keith Fogg. Five years later, we thought it would be appropriate to interview Andrew VanSingel, another individual who has dedicated his career to providing pro bono and public services to low-income taxpayers. After graduating law school, Andrew started as a Volunteer Income Tax Assistance (VITA) trainer at Ladder Up before becoming the Director of the Low-Income Taxpayer Clinic (LITC) at Prairie State Legal Services (PSLS) for Cook County, Illinois. In 2017, Andrew became the Local Taxpayer Advocate (LTA) for the Taxpayer Advocate Service (TAS) in Chicago. He has been involved with the Tax Section and American Bar Association (ABA) at large for several years, holding numerous positions with the Pro Bono & Tax Clinics Committee, Young Lawyers Division, and Disaster Legal Services Program. In this interview, Andrew discusses how he got into tax law and his experiences assisting taxpayers both in the LITC community and while working at TAS.

Q: Your career so far has been focused on tax law and public service. What was it that got you into tax and public service?

A: I came from a working-class background, and to be candid, I saw the legal profession as a path to financial security. That was quite ironic given that upon graduation, this expectation was in stark contrast

with reality—I was unemployed, my net worth depended on how much gas I had in my rusted-out car, and I lived in my girlfriend’s parent’s basement! Furthering the irony was that my first legal job at PSLS paid a starting salary of $40,000, which was not that much more than I made before making the quarter-million dollar investment in law school. But I really was excited to be where I was at that time. While attending law school, I had the opportunity to volunteer with the school’s VITA Program. During the filing season, I spent a few hours each week preparing tax returns for low-to moderate-income taxpayers. I vividly remember one client—who was going through a difficult time in her life—giving me a hug while holding back tears as her refund was going to ease some of her financial troubles. In that moment I thought about how the simplest of efforts could have a profound impact on the lives of others. It may sound like a cliché or overly dramatic, but I can point to that soggy mid-winter evening in 2009 as the point in time that I ditched my ambitions of being a rainmaker and instead put the pieces in place to embark on a career in public service.

Andrew VanSingel

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Q: What was your experience like at PSLS and what are you most proud of during your tenure there?

A: Working at PSLS was an incredibly rewarding but challenging experience. On day one, with little controversy experience, I inherited 90 cases and also found myself in a position of being tax counsel

for the organization’s 75+ attorneys on various legal matters. Thankfully, I was plugged into the network of other clinicians through the ABA Tax Section Pro Bono & Tax Clinics Committee, and had access to LITC Hall of Famers Susan Morgenstern, Keith Fogg, Les Book, and Carlton Smith. So, even though I was the only tax attorney at PSLS in the first year (before bringing on another attorney), I never felt alone and for that reason I don’t think there is a better way to demonstrate the value of being an ABA member.

I represented hundreds of taxpayers while at PSLS, with some very memorable cases. These cases involved: (1) high-stakes victories, where the consequence could result in years of economic hardships; (2) low-chance-of-success cases, where we obtained results when the odds were not in the taxpayer’s favor; and (3) life-changing cases, where advocacy efforts made a lasting impact on taxpayers.

Two specific cases serve as bookends for my time at PSLS. The first was in my first year at PSLS, when I represented a taxpayer who spent most of his life financially independent until a rare bone disease forced him from his high-salaried career to being on disability. His wife divorced him months later. By the time he found me, he was living in a van on several hundred dollars per month. His disability claim was pending. Due to a tax debt caused by his employer switching him from a wage earner to an independent contractor (arguably part of the employer’s plan to push him out of the company), his retroactive award was at risk of an offset from the IRS. I succeeded in protecting his retroactive award but was saddened to learn only a few weeks after I resolved his case that he had late-stage pancreatic cancer and only months to live. He was at terms with his fate, expressed his gratitude to me, and stated that my efforts were not for nothing; had this happened a few months earlier, he would have died penniless. With my help, he said, “at least now I can die with dignity.”

A more uplifting example is a matter I settled at the end of my time at PSLS. The taxpayer’s debt was based on a quarter-million dollar assessment of trust fund penalties after her ex-husband created a corporation in her name and failed to remit employment tax payments. I prepared an Offer in Compromise through a CDP hearing, but we reached an impasse on her ability to pay based on a disagreement of whether a Parent PLUS Loan was considered an allowable expense. I stressed to the IRS representatives that not only was their analysis incorrect, but also the amount of the disallowance resulted in a change in the offer payment from around $7,500 to $8,600. I advised the Service that the $7,500 was really at the top end of what she could afford, and that it did not make sense to delay this resolution for $1,100. I also stated that her financial situation fluctuated, and that it was possible that if the matter were appealed, her ability to pay would go down. We could not reach a settlement, so I challenged the determination in the U.S. Tax Court, which remanded the case back for another determination. The IRS then took into account the Parent PLUS Loan. Nonetheless, while we were challenging this matter the client’s financial situation worsened so I revised the offer to around $2,000. This offer was ultimately accepted, ending five years and hundreds of hours of work. The client was relieved: “I can live my life now.”

Q: You’ve been very involved with the Tax Section and the ABA at large over the years, particularly on the disaster relief side. What led you to become so involved?

A: Timing is everything. When I started at PSLS, I inherited the outgoing LITC Director and former Christine Brunswick Public Service Fellow Vijay Raghavan’s mentor, Susan Morgenstern (formerly of

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Cleveland Legal Aid and now my co-worker at TAS). Susan tapped me into the Tax Section, and as I stated earlier, the connections made there often served as a lifeline for me. My involvement with the ABA began as a source of personal and professional development. In the beginning, I certainly took more from that relationship than I gave. Contrast that with my involvement with the ABA Young Lawyers Division (YLD). In 2011, I applied for a leadership position with the YLD for which I would join The Affiliate, which was then a print publication distributed to the YLD’s 300+ affiliates across the country. The following year I was appointed as Editor of the Publication. During a leadership meeting in Annapolis, I bumped into David Nguyen, then Director of the YLD’s Disaster Legal Services (DLS) program. He stated that my background in legal aid would make me a good fit for the DLS team. I started in 2014 as a DLS team member and then was appointed DLS Director in 2015. From 2015 to 2018, I led the DLS program through some of the nation’s most significant disaster events – the historic flooding in Baton Rouge in 2016, Hurricanes Harvey, Marie, and Irma in 2017, and then Hurricane Michael and the California Wildfires in 2018. Peppered in with those major events were other major but less publicized events – an earthquake in Alaska, flooding across the plains, and typhoons in Guam, to name a few. For all that I took from the Tax Section in the early days of my career, I hope I gave back more in my contributions to these programs. These experiences also enriched my life in ways that are difficult to explain. I can’t imagine what my career would look like without this involvement.

Q: Tell us some more about your work in the disaster relief area.

A: The DLS program is the longest running public service YLD program. It began in 1972, several years after attorneys in Mississippi created a mobile legal clinic for survivors of Hurricane Camille, which at

the time was only the second Category 5 hurricane to hit the United States. From there, a national program was created and adopted by the YLD. The program provides free legal assistance to disaster survivors with insufficient means to hire an attorney. My role as Director is to be a project manager and work with my team to be a connector and accelerator between the local volunteer efforts and the national resources. You can learn more about the 50-year history of the program in an article I wrote in the Touro Law Review a few years back. There are some great first-hand accounts from program volunteers, and you will notice a common theme among the lawyers mentioned in the article, as they all stated that their pro bono work in this program was some of the most important work of their legal career.

Although my work was mostly limited to oversight of the program, the frontline volunteers handle a variety of legal issues, such as resolving issues with insurance companies, landlords, contractors, the Federal Emergency Management Agency (FEMA), and other agencies, as well as helping survivors clear title to their homes, replace vital documents, and create important documents such as wills, trusts, and powers of attorney.

My work in the program is by far the highlight of my career. It’s provided me with opportunities to engage with and address challenges in the field of disaster law. Although we are sometimes adversarial to FEMA, we have a good working relationship with the agency and there is a lot of mutual respect when it comes to our own respective missions. I had the opportunity to engage with lawyers across the country, even in the territories such as Guam, American Samoa, and the U.S. Virgin Islands. I’ve written extensively about the program and ways to be more resilient, most recently in two ABA publications: Meeting the Needs of Disaster Survivors: Third Responders and the Community Resilience Handbook. Although I aged out of the YLD this year, I am still a special advisor to the program, and I currently chair the ABA Committee on Disaster Response and Preparedness. We’re always looking for pro bono volunteers to take cases, young

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lawyer or not, and if this is something of interest to any of the readers, I would encourage you to reach out to my friend and colleague Linda Anderson Stanley, who currently runs the program.

Q: What advice would you give young lawyers in the private sector who are looking to become more involved in pro bono?

A: As attorneys, we should all resolve to provide pro bono assistance to those with limited means, and we can look to ABA Model Rule 6.1 for a similar charge: “[a] lawyer should aspire to render at least (50)

hours of pro bono publico legal services per year.” When talking about pro bono to my peers, I sometimes get the response “I just don’t have time to help” as if the people who are doing pro bono work are sitting around with nothing better to do with their time. I would encourage attorneys to resist the easy excuse that you are “too busy” and suggest that “pro bono” does not necessarily mean extended representation of a client. For example, I have friends who work in a very specialized area of law that has limited applicability to pro bono work. Instead of taking on unfamiliar areas and risking harm to the potential client, they make a financial contribution. Others provide technical assistance to non-profits and legal aid organizations, or help in other ways that differ from the traditional way of taking on individual cases.

However, for those who are looking to take on individual cases pro bono, a good place to start is within your own professional associations, such as the ABA Tax Section, state and local bar associations, or your local legal aid providers. If you are going to commit to doing pro bono work, be realistic with your ability to volunteer. While working in the disaster field, I often saw people who felt compelled to volunteer immediately after a large disaster but did not follow through when the rubber met the road. Organizations spend lots of time recruiting pro bono volunteers and providing oversight. The best thing you can do in return is to stay on top of the cases and treat it no differently than having a paying client.

Q: Tell us a little bit about your work at TAS and what you do on a day-to-day basis.

A: I think the audience is familiar with TAS, but for those who don’t know, TAS was established as part of the Restructuring and Reform Act of 1998 as an independent agency within the IRS. Simply stated,

we get involved when the normal process breaks down, or when there is an emergency that requires quick action. Each day can be very different when it comes to running the Chicago office. Most of my duties are directly related to the oversight of casework, which means working with my staff and other functions within the IRS to resolve cases. However, outreach plays a role in my job as well. I frequently work with our area LITCs and have ongoing dialogue with our congressional offices. I also am engaged with our practitioner community to discuss matters of interest and identify systemic issues.

The past few years have been especially challenging given the continuing funding and staffing shortages across the entire agency. COVID-19 only worsened the issues we saw pertaining to staffing and funding, and I think it will be a long time before we get back to “normal.” Not to sound cynical, but I would say that normal is a very subjective term, because things were not really “normal” even before COVID. It will be interesting to see what the IRS looks like as we come out of COVID and usher in IRS Next, formerly known as the Taxpayer First Act, formerly known as something else, probably. Regardless, I will say that I am grateful for the team I have in the Chicago office, who have risen to the plentiful challenges of just getting the work done despite the ongoing challenges that existed before COVID-19 and the new ones during the pandemic. I am very proud of their commitment and resilience.

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Q: You’ve been at TAS for a few year now. How was the transition from serving low-income taxpayers at PSLS to serving all taxpayers at TAS?

A: When I worked for PSLS, it was a relatively small program (myself, another attorney, and a pro rata support staff). Aside from the normal oversight from the organization, I was in s driver’s seat and

made many decisions that impacted the clinic. Further, I spent most of my time providing direct services to taxpayers. Contrast this with my time in government, where I am now in more of a managerial role. My direct casework is somewhat limited, although the cases I take on usually involve Taxpayer Assistance Orders (TAOs). I am now a small fish in a very large pond. I believe the LTA position is the best job in TAS, and I enjoy the challenge it brings. And if any readers are interested in a career at TAS, we are hiring, and I would be happy to share my experience with anyone who wants to learn more about the organization.

Q: You and I have worked on several matters, both when you were at PSLS and during your current post at TAS, including a situation where you were able to assist me and my large corporate client on a

potentially disastrous issue that arose a couple of days before Christmas. A common misconception about TAS is that it is only for low-income taxpayers. What has been your experience working on larger matters?

A: There is no case too large or too small for TAS. Whether you are a single parent needing assistance with an earned income tax credit exam or a global firm with complicated and intertwined account

issues, TAS can help (provided the issue in the matter meets acceptance criteria). We treat each taxpayer the same, and work cases very similarly in terms of how and when we communicate. I have heard of, but never understood, the sentiment from the practitioner community that going to TAS was an admission of one’s own professional limitation or that TAS is a place for poor people to get help. I have worked on cases that would have never gotten resolved had they not gone to TAS. My advice to practitioners is not to think of TAS as a place for poor or unrepresented taxpayers, but rather as another tool in the toolbelt to get your client’s issues resolved.

Q: What kinds of activities do you enjoy when you are not assisting taxpayers?

A: I’m an outdoorsy person. I’m trying to visit all 63 (and counting) National Parks and I’m probably two thirds of the way through. I spend time locally volunteering with the Chicago English Bulldog Rescue,

and I’m getting back into a saltwater aquarium hobby. I recently got into collecting Funko Pops. My favorites are my Hulk and Bruce Banner figures—I place one of them on my desk, depending on how my day is going. By the time this is in print, you will certainly see a grin on my face, as my student loans will have recently been discharged. In December, I completed my 10 years of public service under the Public Service Loan Forgiveness program and my student loan balance—which is large (whatever number you think it is, its higher)—was forgiven. That’s another benefit of doing pro bono and working in public service. Maybe I should have opened with that? ■

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YOUNG LAWYERS CORNER

Revisiting the 100-Year-Old Debate on the Preferential Treatment of Capital Gains

By Sue (Suyoung) Moon, LL.M. Student, Georgetown University Law Center

This year marks the 100th year since the Revenue Act of 1921 introduced the first preferential rate for capital gains into the U.S. federal income tax system. In recent years, no single tax issue has been as contentious and divisive as the capital gains preference. Just four years after the enactment of the 2017 Tax Cuts and Job Act, the federal tax system may be on the cusp of yet another major overhaul. The capital gains rate increase has been one of the most scrutinized tax proposals in President Biden’s Build Back Better plan, which has been continuously slimmed down in ongoing negotiations from the initial $3.5 trillion price tag over a decade (which, though high, is far less than would be the ten-year cost of the annual military budget just passed by the House and Senate).1 While the federal tax code has undergone numerous reforms, however, the capital gains preference has weathered the shifting political winds with remarkable durability, perhaps reflecting the fact that it is most readily available to the nation’s wealthiest and most powerful individuals.

This article addresses notable aspects of the 100-year-old history and policy debate about the preferential treatment of capital gains. Part I provides the general contours of the Build Back Better Act as proposed by President Biden and the significance of President Biden’s capital gains proposals as compared to those in the Tax Reform Act of 1986 (the 1986 Act), under which capital gains and ordinary income were subject to the same rate for the first time in the U.S. income tax history. Part II provides historical background on the origins of the capital gains preference. Part III explores the policy arguments, repeated throughout the 100-year period, for and against the capital gains tax preference.

I. The Build Back Better Act and the Tax Reform Act of 1986

In late fall 2021, the Build Back Better Act2 was considered under congressional budget reconciliation rules which would allow the bill to pass in the Senate with a simple majority, though that majority is in serious question given W.Va. Senator Joe Manchin’s recent “stuck on coal” positions against various provisions in the bill, including its support for renewable energy sources.3 Known to be the centerpiece of President Biden’s

1 Jonathan Curry, Democrats Try to Unify Around Biden’s $1.75 Trillion Plan, Tax NoTes (Oct. 29, 2021), https://www.taxnotes.com/tax-notes-today-federal/tax-policy/democrats-try-unify-around-bidens-175-trillion-plan/2021/10/29/7ck1t.2 Build Back Better Act, H.R. 5376, 117th Cong. (1st. Sess. 2021) (hereinafter, Original House BBB). See also William J. Sanders et al., The Proposed Build Back Better Act Moves Forward After the House Passes a Revised Version of the Bill, XI The NaTioNal law Review 356 (Dec. 1, 2021) (discussing the bill as passed in the House on November 19 that “excluded many of the tax provisions included in the version introduced in September” including the increase in capital gain rates, increase in the corporate tax rate, further limitations on the like-kind exchange rules, and changes to carried interest taxation).3 See David Blackmon, The Energy Transition Narrative Founders on The Shoals of Reality As 2021 End, FoRbes (Dec. 22, 2021).

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https://www.taxnotes.com/tax-notes-today-federal/tax-policy/democrats-try-unify-around-bidens-175-trillion-plan/2021/10/29/7ck1t

https://www.congress.gov/117/bills/hr5376/BILLS-117hr5376rh.pdf

https://www.natlawreview.com/article/proposed-build-back-better-act-moves-forward-after-house-passes-revised-version-bill

https://www.forbes.com/sites/davidblackmon/2021/12/22/the-energy-transition-narrative-founders-on-the-shoals-of-reality-as-2021-ends/



domestic agenda, the initial $3.5 trillion reconciliation package included a paid-family leave program, free universal preschool services, an extended child tax credit, and renewable energy tax breaks, among others.4 To pay for these social programs, the House reconciliation bill originally proposed higher taxes, tax enforcement,5 and other major tax law changes, such as further limitations on section 1031 like-kind exchanges and carried interest, introduction of graduated corporate rates, a country-by-country application of the global intangible low-taxed income (GILTI) rules, and limitations on the 20 percent deduction under section 199A.6 The House reconciliation bill prior to passage included an increase in the top tax rate on long-term capital gains to 25 percent. That rate fell well short of President Biden’s previous ambitious goal to tax capital gains at the maximum ordinary income rate of 39.6 percent for wealthy taxpayers earning more than $1 million annually.7 The capital gains rate increase was ultimately withdrawn from the bill as passed in the House, however, and is unlikely to be added back if and when the Senate passes the bill.

Eliminating the capital gains preference has been politically popular among Democrats and progressives for some time. All three of the 2020 democratic presidential front-runners—then former-Vice President Biden, Senator Elizabeth Warren, and Senator Bernie Sanders—campaigned on taxing capital gains as ordinary income to certain wealthy taxpayers.8 In contrast, Republican lawmakers have steadfastly resisted the idea of raising capital gains rates; in fact, former President Donald Trump floated the idea of further reducing the top capital gains rate to 15 percent.9

The only time in the U.S. income tax history when the statute provided for capital gains to be taxed at the same rate as ordinary income was for the brief period after Republican Senator Bob Packwood, chair of the Senate Finance Committee, and Democratic Representative Dan Rostenkowski, chair of the House Ways and Means Committee, joined to become a dynamic tax-writing team pushing through the most significant tax reform bill in history.10 The Tax Reform Act of 1986 increased the highest rate on capital gains from 20 percent to the ordinary income rate. At the same time, it reduced the top marginal individual income tax rate from 50 percent to 28 percent. As a result, both ordinary income and capital gains were to be taxed at a 28 percent rate. In 1986, as in the case of the Biden proposal, fairness seems to have been the central goal. President Reagan called the 1986 Act “a sweeping victory for fairness.”11 The Treasury Department Report to the President further explained:

4 Original House BBB, supra note 2. See also, The Build Back Better Agenda, Whitehouse.gov, https://www.whitehouse.gov/build-back-better/ (last visited Oct. 11, 2021).5 See, e.g., Joseph Thorndike, The Bank Reporting Plan and Fear of an ‘Inquisitorial’ IRS, Tax NoTes (Oct. 25, 2021).6 Tracking the 2021 Tax Overhaul Proposals, Tax NoTes (Sep. 28, 2021).7 See Joseph Thorndike, Biden Wants to Limit The Capital Gains Tax Preference. History Shows It Will be Hard, FoRbes (Feb. 16, 2021).8 See Taylor LaJoie, Comparing Capital Gains Tax Proposals by 2020 Presidential Candidates, Tax FouNdaTioN (Dec. 4, 2019).9 See Richard Rubin, Capital-Gains Tax Rate Chasm Separates Trump, Biden, wsJ (Aug. 14, 2020).10 See, e.g., Bill Bradly, When Congress Made Taxes Fairer, N.Y. Times (Apr. 29, 2017).11 David Welna, Times Have Changed Since Reagan’s 1986 Tax Reform, NPR (Oct. 17, 2011).

The capital gains rate increase was ultimately withdrawn from the bill as passed in the House, however, and is unlikely to be added back if and when the Senate passes the bill.

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https://www.whitehouse.gov/build-back-better/

https://www.taxnotes.com/tax-notes-state/information-reporting/bank-reporting-plan-and-fear-inquisitorial-irs/2021/10/25/7bcyp

https://www.taxnotes.com/tax-notes-today-federal/legislation-and-lawmaking/tracking-2021-tax-overhaul-proposals/2021/09/28/79g96

https://www.forbes.com/sites/taxnotes/2021/02/16/biden-wants-to-reform-the-capital-gains-preference---it-will-be-hard/

https://taxfoundation.org/2020-capital-gains-proposals/

https://www.wsj.com/articles/capital-gains-tax-rate-chasm-separates-trump-biden-11597409062

https://www.nytimes.com/2017/04/29/opinion/sunday/when-congress-made-taxes-fairer.html

https://www.npr.org/2011/10/17/141407285/times-have-changed-since-reagans-1986-tax-reform



A tax that places significantly different burdens on taxpayers in similar economic circumstances is not fair. For example, if two similar families have the same income, they should ordinarily pay roughly the same amount of income tax, regardless of the sources or uses of that income.12

Critics, however, viewed the 40 percent increase in the capital gains rate as a “detrimental fallout from tax reform.”13 The change was short-lived, lasting only from 1988 to 1990, when ordinary rates were increased without parallel increases in capital gains rates. Nevertheless, today’s ever widening economic inequality, exacerbated by the COVID-19 pandemic and public outcry against the wealthy who pay little or no federal income taxes,14 has given some new political momentum to the elimination of one of the most expensive tax expenditures in the Code that has played a key role in exacerbating that inequality through its preferential taxation of a significant source of income for an elite group of carried interest recipients, corporate founders, and dynastic families with inherited capital.

II. The Origin of the Capital Gains Preference

Capital gains are gains from the sale or exchange of capital assets such as stocks and bonds, real estate, and artworks. Under the current tax law, long-term capital gains, which are gains from capital assets held for more than one year, are taxed at 20 percent.15 Short-term capital gains, which are gains from capital assets held for less than one year, are taxed at ordinary income rates. Special categories of capital gains enjoy even lower rates, such as gains on certain small business stock under section 1202. Gains on collectibles such as antiques and art, however, are taxed at a slightly higher 28% rate.

Neither the first income tax adopted during the Civil War nor the income tax adopted after the ratification of the Sixteenth Amendment in 1913 “took [] notice of capital gains.”16 As academic commentators noted, although the idea of progressive rates and different classifications of income had existed well before these income taxes were introduced in the United States, the 1913 income tax was designed to be simple, for taxpayers to “become acquainted with the proposed law and for it to become adjusted to the country.”17 With the initial high exemption and low rates topping out at 7 percent, about 2 percent of the households paid income tax at the marginal rate of only 1 percent.18

The first preferential rate for capital gains was introduced in the Revenue Act of 1921. Under the 1921 Act, capital gains on assets held for at least two years were taxed at 12.5 percent, while ordinary income

12 See Floyd Norris, Tax Reform Might Start With a Look Back to ’96, N.Y. Times (Nov. 22, 2012), citing u.s. deP’T oF TReasuRY, Tax Reform for Fairness, Simplicity, and Economic Growth: The Treasury Department Report to the President 14 (1984) (emphasis added).13 Stephen Moore & John Silvia, The ABCs of the Capital Gains Tax, CaTo iNsTiTuTe (Oct. 4, 1995).14 See e.g., Jesse Eisinger et al, The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax, PRoPubliCa (June 8, 2021).15 I.R.C. § 1221.16 Thorndike, supra note 7.17 Ajay K. Mehrotra & Julia C. Ott, The Curious Beginning of the Capital Gains Tax Preference, 84 FoRdham l. Rev., 2517, 2523 (2016), citing 50 Cong. Rec. 449, 508 (1913) (statement of Rep. Hull).18 See Joseph J. Thorndike, Tax History: Original Intent and the Revenue Act of 1913, Tax aNalYsTs (Sep. 26, 2013).

As the country now emerges from a glob-al pandemic—which many have analo-gized to a war—it is faced with similar questions about vastly unequal wealth, opportunity and economic growth that it faced in the aftermath of World War I.

31

https://www.nytimes.com/2012/11/23/business/a-starting-point-for-tax-reform-what-reagan-did.html

https://home.treasury.gov/system/files/131/Report-Tax-Reform-v1-1984.pdf

https://home.treasury.gov/system/files/131/Report-Tax-Reform-v1-1984.pdf

https://www.cato.org/sites/cato.org/files/pubs/pdf/pa242.pdf

https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax

http://www.taxhistory.org/thp/readings.nsf/ArtWeb/C82515A4B6B7A24C85257D1B0041C86E?OpenDocument



was subject to the top marginal rate of 65 percent.19 By that time, the Code had become more complex, largely due to the growing need for revenue to finance the country’s World War I efforts. The Revenue Act of 1916 and the War Revenue Act of 1917 greatly increased income tax rates while simultaneously lowering exemptions.20 The top marginal rate on individuals had climbed from 7 percent to 77 percent by 1918,21 and nearly 20 percent of American households were then subject to income taxes.22 At the same time, more Americans started participating in financial markets, with ownership of stocks and bonds becoming more common. Almost one-third of the American population owned some form of federal war bond during World War I, compared to less than 1 percent before the war.23

After World War I, the country’s need for revenue remained high, but it also faced an economic recession, unemployment, and “growing labor and racial unrest.”24 The income tax system developed in wartime was viewed by commentators as “a prime cause of the depression.”25 Pressure mounted on Congress to cut taxes to stimulate the economy.26 This set the stage for the policy debate on preferential treatment of capital gains—a debate repeated through the next hundred years. As the country now emerges from a global pandemic—which many have analogized to a war27—it is faced with similar questions about vastly unequal wealth, opportunity and economic growth that it faced in the aftermath of World War I.

III. Policy Debate Then and Now

Preferential rates for capital gains are thus the U.S. historical norm, as well as in many developed countries around the world.28 This norm has been challenged, especially in times of significant social, political, and economic turmoil. The capital gains debate is part of the larger debate about how to best organize (or reorganize) our social, political, and economic lives. Yet, “[t]here is hardly anything natural, neutral, or necessary about the capital gains tax preference.”29 The main arguments can be cast in terms of the familiar tax policy goalposts of efficiency, fairness, and simplicity.

The dominant rationale, expressed by various lawmakers and business leaders in the 1921 tax act debates in favor of the capital gains preference, is the claim that it removes barriers to economic growth and entrepreneurship by encouraging savings and unlocking the free flow of capital. Because capital gains are generally taxed only when realized through a sale or other disposition of capital assets, economists see a “lock-in” effect, whereby taxation discourages investors from realizing accumulated capital gains and thus from allocating capital to more productive uses. For instance, a congressman noted that a taxpayer “would refrain from making a sale of land or other property constituting capital assets because he would have to pay so large a proportion to the Government.”30 Then-Treasury Secretary Andrew Mellon argued that high

19 Mehrotra & Ott, supra note 17, at 2526.20 Id.21 See Joel slemRod, does aTlas shRug? The eCoNomiC CoNsequeNCes oF TaxiNg The RiCh (2001) (providing a historical survey of tax rates facing wealthy taxpayers since 1913).22 Mehrotra & Ott, supra note 17, at 2524.23 Julia C. oTT, wheN wall sTReeT meT maiN sTReeT: The quesT FoR aN iNvesToRs’ demoCRaCY 2 (2011).24 Mehrotra & Ott, supra note 17, at 2524.25 Marjorie E. Kornhauser, The Origins of Capital Gains Taxation: What’s Law Got to Do With It?, 39 sw. l. J. 869, 871–72 (1985).26 Mehrotra & Ott, supra note 17, at 2525.27 See e.g., Joseph J. Thorndike, Tax History: If the Pandemic Is a War, Should We Consider a War Profits Tax?, Tax NoTes (Mar. 30, 2020).28 leoNaRd e. buRmaN, The labYRiNTh oF CaPiTal gaiNs Tax PoliCY 4 (1999).29 Mehrotra & Ott, supra note 17, at 2535.30 Mehrotra & Ott, supra note 17, at 2525.

32

https://www.taxnotes.com/tax-notes-today-federal/profits-taxation/tax-history-if-pandemic-war-should-we-consider-war-profits-tax/2020/03/30/2cb83



tax rates cause investment to move from private enterprises into tax-exempt municipal and state bonds, which “allowed subnational governments to indulge in extravagant public projects,” resulting in economic inefficiency.31

These arguments are echoed by those political and business leaders today who oppose the proposed capital gains rate increase in the Build Back Better bill. For example, Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) raised similar concerns about the capital gains rate increase, quoting a recent Wall Street Journal article on the subject.32

The most important reason to tax capital investment at low rates is to encourage saving and investment. Consumption—buying a car or yacht—faces a sales tax but not a federal tax. But if someone saves income and invests in the family business or in stock, he is smacked with another round of tax. Tax something more and you get less of it. Tax capital income more, and you get less investment, which means less investment to improve worker productivity and thus smaller income gains over time.33

Similarly, the U.S. Chamber of Commerce emphasized that capital gains “are a critical element as businesses seek to form and expand operations,” and the proposed capital gains rate increase would “deliberately harm U.S. economic competitiveness and job creation.”34

Critics of the capital gains preference have questioned whether empirical data support that purported efficiency argument. Scholars have pointed out that the arguments made during the 1921 debate in favor of the capital gains preference were based on minimal “objective, empirical evidence to support the theory that the lower tax rate on capital gains led to greater tax revenue from the increased sale of capital assets.”35 Recent Congressional Research Service and economist studies have confirmed that there is “essentially no correlation between economic growth and capital gains tax rates.”36 Armed with these findings, organizations opposing the capital gains preference, such as the Center for American Progress, have actively challenged the idea that cutting capital gains taxation helps the economy.37

31 Id. at 2525.32 CRaPo.seNaTe.gov, Crapo on Capital Gains Tax.33 The Editorial Board, The Dumbest Tax Increase, wsJ (Apr. 25, 2021), https://www.wsj.com/articles/the-dumbest-tax-increase-11619384611.34 U.S. Chamber of Commerce, Capital Gains Proposals Will Harm U.S. Competitiveness and Job Creation (Sept. 16, 2021); see also Chris Edwards, Biden’s Foolish Capital Gains Tax Increase, CaTo iNsTiTuTe (Oct. 28, 2020) (arguing that “[a] capital gains tax increase would harm investment in start-up and growth companies” and “if Biden hikes the federal rate then both the federal and state tax bases would shrink”).35 Mehrotra & Ott, supra note 17, at 2529–30.36 See Thomas L. Hungerford, The Economic Effects of Capital Gains Taxation, CoNgRessioNal ReseaRCh seRviCe 12 (June 18, 2010) (“capital gains tax rate reductions are unlikely to have much effect on the long-term level of output or the path to the long-run level of output (i.e., economic growth)”); Capital Gains Taxes: An Overview, CoNgRessioNal ReseaRCh seRviCe 5 (Updated Mar. 16, 2018) (“evidence on the effect of tax cuts on savings rates and, thus, economic growth is difficult to obtain, most evidence does not indicate a large response of savings to an increase in the rate of return”). See also Joel Slemrod, The Truth About Taxes and Economic Growth, 46 ChalleNge 5, 5–14 (2003); Burman, supra note 28.37 Galen Hendricks & Seth Hanlon, Capital Gains Tax Preference Should Be Ended, Not Expanded, CeNTeR FoR ameRiCaN PRogRess (Sep. 28, 2020).

Recent Congressional Research Service and economist studies have confirmed that there is “essentially no correlation between economic growth and capital gains tax rates.”

33

https://www.crapo.senate.gov/news/videos/watch/crapo-on-capital-gains-tax

https://www.uschamber.com/taxes/capital-gains-proposals-will-harm-us-competitiveness-and-job-creation

https://www.cato.org/commentary/bidens-foolish-capital-gains-tax-increase

https://sgp.fas.org/crs/misc/R40411.pdf

https://crsreports.congress.gov/product/pdf/RS/96-769

https://www.jstor.org/stable/40722179

https://www.americanprogress.org/issues/economy/reports/2020/09/28/490816/capital-gains-tax-preference-ended-not-expanded/



Another argument of opponents of capital gains taxation is that taxing capital gains is unfair. The first claim is that preferential treatment of income from capital is a necessary remedy for the bunching of income. If taxed under ordinary income’s progressive rates only upon realization, income from capital gains would be “bunched” into one year and therefore taxed substantially more than would the same total income earned incrementally over twenty or thirty years: the one-time sale pushes the taxpayer into a higher income tax bracket. An increase in tax rates on capital gains would therefore lead rational taxpayers to hold onto assets longer rather than selling.38 At the 1921 hearing, Frederick R. Kellogg, an established corporate lawyer of the day, shared stories of this presumed “injustice” manifest across classes: an inventor who could not

sell his invention because he could not afford the tax liability; a farmer who could not sell his land despite an increase in the land’s value; and a homeowner who had to suffer a loss from selling his appreciated home before relocating to a different city.39 Echoing Kellogg’s point in July 2021, the entire Senate Republican Caucus came out in opposition to a capital gains tax increase, arguing that it would “hit family-owned businesses, farms, and ranches hard, particularly in rural communities” whose businesses “consist largely of illiquid assets.”40

A second fairness claim of proponents of the preference is that it relieves taxpayers from multiple levels of taxation on the same income. If an individual taxpayer uses her income to buy shares in a corporation, the corporation is taxed on its profits and the taxpayer is also taxed on dividends paid out of those profits (currently, at the preferential capital gains rate). If and when the taxpayer eventually sells her stock at a gain, she is also taxed on that increased value. The claim is that the taxpayer pays more total tax than another who had the same amount of income in the form of wages.41 Worse, according to this argument, capital gains and capital losses are treated asymmetrically, with net capital losses allowed to offset only up to $3,000 of ordinary income per year.42

Critics of the capital gains preference also argue fairness, but from a different angle. The capital gains preference functions as an unnecessary giveaway to uber-wealthy taxpayers whose wealth disproportionately consists of capital assets as compared to middle- and lower-class taxpayers. For instance, before the Tax Cuts and Job Act was enacted, “the top 10 percent of earners reported 82.6 percent of taxable interest, dividends, capital gains,

38 J. Comm. on Tax’n, Estimating Taxpayer Bunching Responses To The Preferential Capital Gains Tax Rate Threshold, JCX-42-19 (Sept. 10, 2019).39 Mehrotra & Ott, supra note 17, at 2526 (citing Internal-Revenue Hearings Before the S. Comm. on Finance on the Proposed Revenue Act of 1921 67th Cong. 534–36 (1921) (statement of Frederick R. Kellogg)).40 S. Comm. on Finance, Crapo, Thune, Daines, McConnell Lead Entire Senate Republican Caucus in Urging Biden Administration to Drop Step-Up In Basis Tax-Hike Proposal (July 21, 2021).41 See, e.g., Martin Feldstein, Why Capital-Gains Taxes Are Unfair, wsJ (Nov. 21, 1994). This is of course true only if the incidence of the corporate tax falls entirely on the shareholders and not on employees, customers, managers or others.42 I.R.C. § 1211.

The entire Senate Republican Caucus came out in opposition to a capital gains tax in-crease, arguing that it would “hit family-owned businesses, farms, and ranches hard, par-ticularly in rural communities” whose busi-nesses “consist largely of illiquid assets.”

The capital gains preference func-tions as an unnecessary giveaway to uber-wealthy taxpayers whose wealth disproportionately consists of capital assets as compared to middle- and lower-class taxpayers.

34

https://www.jct.gov/CMSPages/GetFile.aspx?guid=68c7ff1f-f935-468a-a38c-0555e9a68dd3

https://www.finance.senate.gov/ranking-members-news/crapo-thune-daines-mcconnell-lead-entire-senate-republican-caucus-in-urging-biden-administration-to-drop-step-up-in-basis-tax-hike-proposal

https://www.finance.senate.gov/ranking-members-news/crapo-thune-daines-mcconnell-lead-entire-senate-republican-caucus-in-urging-biden-administration-to-drop-step-up-in-basis-tax-hike-proposal

http://marshallinside.usc.edu/joines/544/articles_pdf/wsj941121.txt.pdf



schedules C and F income, and flow-through business income.”43 In justifying its proposal to raise the capital gains rate in September 2021, the Biden administration released an analysis showing that the “400 wealthiest American families paid an average federal income tax rate of only 8.2 percent on $1.8 trillion of income from 2010 to 2018.”44 Based on these statistics, there would clearly be no significant increased tax cost because of bunching income for high-wealth taxpayers.45 Furthermore, critics note that preference proponents overlook the substantial tax benefits conferred by deferral (potentially indefinitely) of capital gains on top of the preferential rate. If a taxpayer holds a capital asset that appreciates in value over time, the taxpayer effectively receives “an interest-free loan from the Treasury” equal to the amount of tax she would owe on the appreciation until she sells the asset.46 Even the eventual sting of deferred income recognition from bunching is hardly felt, since it can be avoided if the taxpayer borrows against her wealth rather than selling assets (leaving the intact wealth to an heir, who can sell to pay off the debt with no taxable gain because of the step-up in basis). The gains may, using borrowing and deferral until death, escape taxation altogether. On balance, the benefit of deferral may well outweigh any higher future taxes. If this sounds theoretical, look no farther than to billionaire Warren Buffett, who pays a lower effective income tax rate than his secretary.47

The final arguments against a capital gains preference relate to tax simplicity. A tax preference for capital gains necessarily opens the door for tax planning opportunities to reduce tax liability by recasting what would be ordinary income as a capital gain. If a taxpayer in the 37 percent income tax bracket can recharacterize ordinary income as capital gains—e.g., recharacterizing cancellation of debt income as a section 1231 gain in a debt discharge situation—then she would lower her tax rate on that income to 20 percent. Many sophisticated tax shelters have successfully combined this capital gains alchemy with tax deferral and taxpayer-friendly depreciation schedules to produce gold-plated tax results. Even worse, such tax shelter strategies encourage wasteful investments and may “actually retard economic growth.”48 For instance, during the surge in real estate tax shelters in the early 1980s, the capital gains tax preference encouraged “churning of residential rental real estate”—the selling and buying of depreciable assets for no other purpose than to save taxes.49 Resources that could otherwise have been put to more productive purposes are wasted on designing and managing such tax shelters. In response to the proliferation of abusive tax shelters, the IRS keeps and regularly updates a “bad boy” list of transactions that taxpayers are required to disclose.50 The endless game

43 See, e.g., Eric R. Horne et al., Labor and Capital: a TCJA Update, Tax NoTes (May 13, 2020) (“[I]n the year before the [Tax Cuts and Job Act] was enacted the top 10 percent of earners reported 82.6 percent of taxable interest, dividends, capital gains, schedules C and F income, and flow-through business income.”); Joe Hughes & Emma Sifre, Investment Income and Racial Inequality Institute on Taxation and Economic Policy, iNsT. oN Tax’N aNd eCoN. Pol. (Oct. 14, 2021) (“Wealth in the United States is disproportionately held by white Americans, who, therefore, receive the greatest benefit from the tax breaks for this type of income”).44 Greg Leiserson & Danny Yagan, What Is the Average Federal Individual Income Tax Rate on the Wealthiest American?, Whitehouse.gov (Sep. 23, 2021).45 Michael J. Waggoner, Eliminating the Capital Gains Preference. Part I: The Problems of Inflation, Bunching and Lock-In, 48 u. Colo. l. Rev. 313, 322 (1977).46 Id.47 See, e.g., Chris Isidore, Buffett Says He’s Still Paying Lower Tax Rate Than His Secretary, CNNmoNeY (Aug. 14, 2011).48 See buRmaN, supra note 28, at 77–80.49 Id.50 See Treas. Reg. § 1.6011-4(b); IRS, Abusive Tax Shelters and Transactions.

The endless game of tax shelter “Whack-a-Mole” between the IRS and clever tax advisers (mostly for ultra-wealthy taxpayers) has resulted in more rules and regulations and less tax simplic-ity in the federal income tax system.

35

https://www.taxnotes.com/tax-notes-federal/tax-cuts-and-jobs-act/labor-and-capital-tcja-update/2020/04/27/2cf93

https://itep.org/investment-income-and-racial-inequality

https://itep.org/investment-income-and-racial-inequality

https://www.whitehouse.gov/cea/blog/2021/09/23/what-is-the-average-federal-individual-income-tax-rate-on-the-wealthiest-americans/

https://scholar.law.colorado.edu/articles/1103

https://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html

https://www.irs.gov/businesses/corporations/abusive-tax-shelters-and-transactions



of tax shelter “Whack-a-Mole” between the IRS and clever tax advisers (mostly for ultra-wealthy taxpayers) has resulted in more rules and regulations and less tax simplicity in the federal income tax system.

Conclusion

Capital gains rates have fluctuated up and down with shifting political winds and very briefly merged with ordinary rates under the 1986 Act. The low rates of the capital gains preference are only one part of what makes capital gains a powerful tax planning tool—the realization requirement and related opportunity for significant deferral, combined with the step up in basis at death, go a long way in the continuation of wealthy dynasties. A number of amendments to the Build Back Better bill have been introduced over the short period of writing this article, but the capital gains preference is highly unlikely to be eliminated. The Republicans are unwilling to tax the ultra-wealthy, and even some Democrats find changing the rules on likely campaign donors hard to do. ■

36



YOUNG LAWYERS CORNER

Hope for Build Back Better Energy Tax Provisions in 2022

By Simon Moskovitz, LL.M. Student, Georgetown University Law Center

To mix gustatory metaphors, those following the attempted passage of President Biden’s Build Back Better agenda got a front row seat to DC sausage-making and yet left hungry, at the end of the day, with a big nothing-burger. For now, the Biden administration’s signature legislation—a $1.7 trillion (over ten years) social, economic, and climate bill—is shelved after suffering a major setback in the Senate from West Virginia Senator Joe Machin at the end of the legislative session.

At stake in the House version of the bill (embedded within Title XIII, Subchapter F) are approximately $500B of green energy incentives, most in the form of tax credits.1 Many of these credits are familiar, having been renewed many times since 1986 but now at risk.2 Section 45 investment tax credits (ITCs) and section 48 production tax credits (PTCs) may fully sunset by 2022 and 2023, respectively.3 Economists argue that this uncertain future can stymie utility-scale greene energy projects and disincentivize developers and tax equity investors from investing projects. Without renewal, both familiar and novel credits, including the 45Q carbon capture utilization and sequestration (CCUS) and hydrogen credits, may never be meaningfully utilized. Other completely new incentive structures tied to apprenticeship, wage, domestic sourcing, and energy community requirements would die altogether within the House Bill.

Nonetheless, there is reason for hope. Although in legislative limbo, many of the credits are likely to be renewed, or newly implemented. The first reason is historical. The section 45 ITC and section 48 PTCs have been renewed and extended no fewer than twelve times, dating back to 1986,4 under both Republican and Democratic presidents and congresses. Further, Senator Manchin has voted to extend such incentives in the past. The Senator’s primary qualms with the bill appear to be related to the Child Tax Credit. He generally supports green energy tax incentives—so long as he doesn’t view them as penalizing fossil fuel-and coal-heavy West Virginia.5

1 Tax Foundation, Build Back Better Plan Reconciliation Bill: Timeline. It’s always interesting to note that tax credits, as a form of revenue the government forgoes from collecting, go toward the total cost of any given piece of legislation, in addition to government spending. Many Republicans, politicos, and news-followers balk at the Build Back Better bill’s $1.7T “price tag” whereas the Republicans supported the 2017 tax legislation (often referred to as the TCJA), which “cost” about the same at $1.8T since the effects of direct spending and tax credits are often identical. See Urban Institute, Tax Cuts or Spending: Does It Make a Difference.2 Federal Energy Regulatory Commission, Office of Energy Projects, Renewable Energy Production Tax Credit.3 JD Supra, Congress Extends Renewable Energy Tax Credits in 2021 Omnibus Spending Bill.4 Novogradac, Internal Revenue Code Section 45 Orphaned Technologies: Is 2020 the End of the Line? Will They Be Orphaned Once Again?5 The Hill, Bipartisan senators want ‘highest possible’ funding for carbon capture technology; New York Times, Behind Machin’s Opposition, a Long History of Fighting Climate Measures.

37

https://www.urban.org/sites/default/files/publication/63871/410261-Tax-Cuts-or-Spending-Does-it-Make-a-Difference-.pdf

https://www.ferc.gov/sites/default/files/2020-04/credit-cert.pdf

https://www.jdsupra.com/legalnews/congress-extends-renewable-energy-tax-98223/

https://www.novoco.com/periodicals/articles/internal-revenue-code-section-45-orphaned-technologies-2020-end-line-will-they-be-orphaned-once

https://thehill.com/policy/energy-environment/437618-bipartisan-group-of-senators-request-highest-possible-funding-for

https://www.nytimes.com/2021/12/20/us/politics/manchin-climate-change-coal.html

https://www.nytimes.com/2021/12/20/us/politics/manchin-climate-change-coal.html



With passage of Subchapter F within reach in 2022, it’s worth analyzing some of its primary features, assuming the bill ultimately sent to President Biden’s desk will closely mirror the House bill. If passed, the section 48 ITC can reach 30% and the PTCs to 100% of value until 2026. The current proposal creates, for both sections 45 and 48, a base rate and a bonus rate. The bonus rate is 6 times the base rate so long as new prevailing wage and apprenticeship requirements are met. For example, the section 48 ITC for wind starts at 6% and is increased to 30% if prevailing wage and apprenticeship requirements are met.

In general, the prevailing wage and apprenticeship requirements are the same across both section 45 and section 48. The prevailing wage requirements needed to achieve the bonus rate require that a project ensure that any laborers and mechanics employed by contractors and subcontractors are paid prevailing wages during the construction of the project and, in some cases, after the project is placed in service if repairs are needed. Apprenticeship requirements demand that a project ensure a minimum percentage of total labor hours are performed by qualified apprentices. Starting in 2022, 10% of applicable labor hours must be performed by apprentices, 12.5% in 2023, and 15% in subsequent years.

Other incentives are also available for developers and tax equity investors. A 10% domestic sourcing credit is available if a qualifying facility is domestically sourced—i.e., using steel, iron, or products manufactured in the United States. This credit is phased out, eventually being reduced to 0% in 2026.

Perhaps one of the biggest opportunities for a new credit is satisfaction of the energy community requirement. This allows a ten percent credit for any qualified facility placed in an energy community, where an energy community is defined as a census tract (or an area directly adjoining a census tract) where a coal mine has closed since December 31, 1999 or has been retired since December 31 2009. This extra credit appears easier to satisfy than the ten percent domestic sourcing requirement since a developer need only properly site a facility in a particular location. Between 2010 and 2025, 546 coal power plants will be retired.6

Between 2011-2015 alone, approximately 200 census tracts in the US have either retired coal plants or lost more than fifty coal mining jobs.7 The vast majority of these plants are located on separate census tracts and each census tract directly adjoins, on average, about 3-5 other tracts. In total, out of approximately 75,000 census tracts in the US, it’s safe to assume that at least 1,000 are considered energy communities as defined in the Build Back Better legislation. In practice, this extra 10% credit will be available based on a one-time siting decision made with advanced information at the beginning of a project.

A further benefit of these credits is that they are not mutually exclusive. Rather, it appears that developers and tax equity investors can layer these credits on top of one another. For example, a facility can reach a 50% ITC by simultaneously satisfying the wage, apprenticeship, domestic sourcing, and energy community requirements.

The past few years have been favorable to utility-scale renewable energy developers and investors. Revenue Ruling 2021-13 provided significantly more flexibility to taxpayers and investors by allowing a taxpayer to claim a 45Q tax credit for owning one component of carbon capture equipment within a single process train used to capture carbon. Notice 2021-41 generously extended the placed-in-service safe harbor to six years for any facility qualifying for Sections 45 and 48 ITCs and PTCs that began construction from 2016 to 2019. The safe harbor was extended to five years for projects that began construction in 2020. This notice also eased requirements for continuity by consolidating continuity requirements available to facilities regardless of how they initially began start of construction.

6 Energy Information Administration, More U.S. coal-fired power plants are decommissioning as retirements continue.7 U.S. Economic Development Administration, Impacted Coal Counties.

38

https://www.eia.gov/todayinenergy/detail.php?id=40212

https://www.eda.gov/files/power/POWER-Impacted-Coal-Counties.pdf



Now, although stalled, it’s not unreasonable to expect that these section 45 and 48 energy tax credits will be renewed and extended. With new tax credits available, utility-scale renewable energy projects and facilities could retain momentum in coming years, much as fossil fuel projects and facilities have been supported with favorable tax laws for more than a century, so long as it remains palatable for Congress. ■

39



IN REMEMBRANCE

Remembering Doug Kahn

By Steve Johnson, Dunbar Family Professor of Law, Florida State University College of Law

We remember the great ones among us because they have helped make us what we are now. And we remember them because they are signposts on the road to what we hope to become.

On October 22, 2021, Douglas Kahn passed away peacefully at his home in Tallahassee, Florida. I had the privilege of knowing Doug and of learning from his example. At first this happened indirectly, through his son, Jeffrey, who has been my friend and tax colleague here at Florida State for a dozen years; then directly but briefly at tax conferences in which we both participated; then, crowningly, as colleagues for several years at Florida State where he graced our classrooms and halls as a Visiting Professor after his retirement from the University of Michigan Law School at which he had taught tax law for over half a century.

Doug was widely, and rightly, known as a giant in the field of tax law. Dean Paul Caron of Pepperdine University School of Law described Doug as “one of the true tax legends of our time.”1 Professor Calvin Johnson of the University of Texas School of Law described his feelings on Doug’s passing: “One of the good pillars of our network of tax law has left us, and I am very sad today.”2

Wherein did Doug’s greatness lie? Let us see and let us grow by the recollection.

I. Achievements and Contributions

First, some facts.3 Doug grew up in Charlotte, North Carolina. He received his B.A. from the University of North Carolina and his J.D. from the George Washington University College of Law. While still a student, he worked at the Covington & Burling law firm. It was at the firm that Doug’s career path took the turn that so enriched the tax community. Doug wrote:

I discovered at Covington that I thoroughly enjoyed my tax assignments and that led to my eventually specializing in it. The enjoyment I found in analyzing statutes and regulations and

1 “Tax Profile, Father’s Day Edition: Douglas A. Kahn,” TaxProf Blog, June 18, 2005, available at https://taxprof.typepad.com/taxprof_blog/2005/06/on_this_fathers.html (hereafter “Doug Kahn Tax Prof Profile”).2 Calvin Johnson, TaxProf email posting, Nov. 2, 2021 (on file with author).3 Much of the history recounted below, when not credited to a different source, was gleaned from Jeffrey Kahn, “Death of Doug Kahn,” TaxProf Blog (Nov. 2, 2021).

Doug Kahn

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https://taxprof.typepad.com/taxprof_blog/2021/11/death-of-doug-kahn-michigan.html



applying them to specific circumstances led me to adopt a problem method for teaching tax when I became a professor.4

After graduating from law school, Doug was first employed by the U.S. Department of Justice, where he served in the appellate sections first of the Civil Division, later of the Tax Division. After four years at the Justice Department, Doug worked for two and a half years in private practice, specializing in taxation and estate planning.

Doug’s greatest contributions to the tax sorority/fraternity were rendered in his long, happy, productive, and influential career as a tax academic. He joined the Michigan faculty in 1964 and served there (sometimes visiting at other outstanding law schools) until 2016. Doug was a prolific scholar and wrote books and articles on a wide range of tax topics, including some co-authored with Jeffrey, collaboration which Doug deemed “one of the great thrills of my life.”5 Yet, as we shall see, despite the extent and significance of Doug’s research, “it [was] the teaching of students that [was his] primary love.”6

II. Wellsprings of Achievements and Contributions

Each observer sees in and takes from the life of a remarkable person what that observer most needs or wants. Change the observer and one changes what is observed. Nonetheless, at least parts of the following may be familiar enough, personally true enough to bring a smile of recollection, a feeling of “yes, that was the man I knew and treasured” to each who received the great gift of knowing Doug.

To me, the wellsprings of Doug’s greatness and goodness included his (1) intellectual rigor and passion, (2) courage to steer by his own lights, (3) joy in and zest for life, (4) gratitude, and (5) love. We see qualities in others only if we possess them ourselves. Thus, one is not surprised that Doug observed and valued the above traits in those around him. For instance, Doug wrote of his colleague and close friend Professor Yale Kamisar: “As impressive as his academic credentials are, they pale in comparison to Yale as an individual with a distinctive personality. ... What is amazing is that Yale’s stature is not the product of any affectation; rather it stems from the core personality and passion of the man.”7 Were one to substitute “Doug” for “Yale,” this encomium would remain equally true.

We also see the above qualities displayed in various combinations in how Doug’s peers, friends, family, and former students remember Doug. These categories were highly permeable. Many of his colleagues and former students became his lifelong friends. Whether he would have put it in these terms, I do not know, but it seemed to me that Doug gained much satisfaction in thinking of himself as one peak in a range rather than as a mountain standing sole and separate on an otherwise flat horizon. His recollections were peppered with references to those who had mentored him in government and private practice, to his faculty colleagues, and to his former students who had risen to positions of prominence in law firms, corporations, government, and academia. His gratitude to them all and his almost familial embrace of them touched one deeply. Let us hear from a few of Doug’s legion of associates and admirers.

4 Douglas Kahn, supra n. 1.5 Id. The fruits of this collaboration were numerous, including Douglas A. Kahn & Jeffrey H. Kahn, federal Income Tax (8th ed. 2019); Douglas A. Kahn & Jeffrey H. Kahn, “Tax and Cross-Collateralized Nonrecourse Liability,” 24 fla. Tax rev. 626 (2021); Douglas A. Kahn & Jeffrey H. Kahn, “Preservation of Double Deductions of a Single Loss: Solutions in Search of a Problem,” 26 va. Tax rev. 1 (2006).6 Douglas Kahn, supra n. 1.7 Douglas A. Kahn, “Yale Kamisar: A Principled Man for All Seasons,” 102 mIch. l. rev. 1722, 1724 (2004).

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III. Reminiscences of Peers (and Friends)

Professor Calvin Johnson of the University of Texas School of Law recalled that Doug

was a frequent adversary—on accelerated depreciation,8 on carried interests,9 on capital gain eligibility10—but he was an engineer of thoughtful well-crafted arguments. First time I met him, we were both at a lunch attached to some conference, and we started to talk—on opposite sides of both the table and some tax issues—and nobody else in the room mattered for the next hour or so, long after everyone else at the table had left.11

Additional examples are not wanting of Doug’s intellectual independence and penchant for maintaining—passionately but always professionally—his views on appropriate tax policy in oral or written debates. Doug’s reservations about the usefulness of the “tax expenditures” concept—a widely used but controversial tool of tax policy analysis12—is a case in point.13

Doug’s zeal for discussing tax and his zest for life were recalled as well by Professor Deborah Geier of the Cleveland Marshall College of Law at Cleveland State University:

I actually got to play Doug Kahn as a visitor to Michigan when he visited at Cambridge. Our semesters did not overlap perfectly, so he was there to welcome me (and entertain me at dinner), where we dissected the horizontal double dummy technique. (You know what happens when two tax nerds have dinner…) I still remember diagramming the transaction for him, which I turned into slides that I use even today. His enjoyment of life was so obvious that it taught me a good lesson: never take yourself so seriously that you forget to enjoy what you’re doing! He shall be missed.14

Dean Erin O’Connor of the Florida State University College of Law similarly observed Doug’s deep thoughts conveyed in his charming, distinctive manner. She wrote: “We will dearly miss his incredible brilliance and his quick, slightly quirky, yet always warm-hearted wit. Doug’s career was impressive, and his life was very well lived.”15

For my own part, “like… countless others, I too fell under the spell of Doug’s unique blend of intellectual passion, curiosity, ‘down to the core’ goodness, and bonhomie, I am deeply grateful that I had the chance to work with Doug and to get to know him. I treasure my memories of Doug Kahn.”16

8 Compare Douglas A. Kahn, “Accelerated Depreciation Revisited—A Reply to Professor Blum,” 78 mIch. l. rev. 1185 (1980), and Douglas A. Kahn, “Accelerated Depreciation—Tax Expenditure or Proper Allowance for Measuring Net Income?,” 78 mIch. l. rev. 1 (1979) to Calvin H. Johnson, “Tax Shelter Gain: The Mismatch of Debt and Supply Side Depreciation,” 61 Tex. l. rev. 1013 (1983).9 Compare Douglas A. Kahn & Jeffrey H. Kahn, “A Response to the Defense of Eliminating Capital Gains Treatment of Carried Interest,” 157 Tax noTes 1606 (2017), and Douglas A. Kahn & Jeffrey H. Kahn, “The Fallacious Objections to the Tax Treatment of Carried Interest,” 20 fla. Tax rev. 319 (2017), to Calvin H. Johnson, “A Conceptual Framework for Capital Gain,” 20 fla. Tax rev. 664 (2012).10 Compare Douglas A. Kahn, “The Proper Tax Treatment of the Transfer of a Compensatory Partnership Interest,” 62 Tax law. 1, 39–49 (2008), to Calvin H. Johnson, supra n. 9, 20 fla. Tax rev. at 686–87.11 Calvin Johnson, supra n. 2.12 See, e.g., Edward A. Zelinsky, “The Counterproductive Nature of Tax Expenditure Budgets,” 137 Tax noTes 1317 (2012).13 Compare Douglas A. Kahn, “A Proposed Replacement of the Tax Expenditure Concept and a Different Perspective on Accelerated Depreciation,” 41 fla. sT. U.l. rev. 143 (2013), and Douglas A. Kahn & Jeffrey S. Lehman, “Tax Expenditure Budgets: A Critical View,” 54 Tax noTes 1661 (1992), to Calvin H. Johnson, “Measure Tax Expenditures by Internal Rate of Return,” 137 Tax noTes 272 (2013).14 Deborah A. Geier, TaxProf email posting Nov. 2, 2021 (on file with author).15 Erin O’Hara O’Connor, email to Florida State University College of Law faculty, and staff, Oct. 23, 2021 (on file with author).16 Steve R. Johnson, TaxProf email posting Nov. 2, 2021 (on file with author).

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Jeffrey Kahn noted similar qualities Doug displayed in other contexts:

[Doug] was happy to discuss any topic, be it law, politics, the works of Noel Coward, the tax consequences of a triangular reorganization, or Michigan athletics, just to name a few. ... Doug was a true renaissance man. He was an avid patron of the theater, loved to travel, studied history and literature, and mastered the games of both chess (where he once earned a draw against Bobby Fischer) and bridge (where he earned the ranking of Ruby Life Master). His laugh was booming and infectious, and he loved to tell a good story.17

It was the same blend of intellect and spirit that led Doug to tax law. Although he humorously offered that “[t]axation must be in my family’s blood; my brother, my wife, my son, and my daughter-in-law were all tax lawyers,”18 kismet and genetics perhaps were not the main causes of Doug’s choice of career. Instead, these words of his may hit closer to the mark:

I especially enjoy the analytical aspect of law, and that aspect is prominent in the tax field. It is the joy of analysis and of solving puzzles that makes tax such a fascinating topic to me. My principal hobby is chess, and I think that the same type of thinking that chess involves is at the core of tax practice too.19

IV. Reminiscences of Former Students (and Peers and Friends)

We have seen that teaching students was Doug’s “primary love.” Doug repeatedly returned to this theme. In 2005, Doug wrote: “I look back at my life now and realize how extraordinarily fortunate I have been. I have loved my career and still find a thrill from the classroom… . I not only enjoy the teaching of classes but also the friendships that I formed with some of my students. I take pride and pleasure in their achievements and whatever little role I may have had in helping them. All in all, it has been a great life.”20

I had the privilege of seeing Doug teach and interact with students taking his tax courses at Florida State. It was apparent that the flame of Doug’s enthusiasm for working with students burned as brightly in 2021 as it had in 2005. His performance in the classroom was exemplary throughout. He imparted to students his commitment to “thoughtful well-crafted arguments,” to borrow Professor Calvin Johnson’s well-chosen phrase. Yet his Florida State students, as his Michigan students, always knew that Doug’s intellectual rigor went hand-in-hand with his affection for them and his desire to contribute to their bright futures.

Professor Emily Cauble of DePaul University College of Law recalled:

Doug Kahn’s individual income tax class was what sparked my interest in tax law, and I know he inspired so many others in a similar way. Every time I teach the class myself, I remember and call upon so many helpful aspects of his teaching. I will remain forever grateful for the help that he provided when I was starting a career in academia and for his continued support over the years. Most of all, I will remember his kindness and generosity.21

17 Jeffrey Kahn, supra n. 3.18 Doug Kahn, supra n. 1.19 Id.20 Id.21 Emily Cauble, TaxProf email posting Nov. 2, 2021 (on file with author).

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Professor Andrea Monroe of Temple University School of Law echoed Professor Cauble’s sentiment, noting:

Doug was the best teacher I ever had, and he’s still the person I think about every time I stand in front of a classroom. There was nothing like Doug’s joyful teaching, his formidable intellect, and his warm (and quite distinctive) laughter. As a student, a young lawyer, and a new law professor, knowing that someone like Doug believed in you made all the difference in the world. It certainly did for me, and I will be forever grateful for his faith, support, and endless kindness.22

Whether in academia or in practice, we all are teachers. What higher praise could there be for a teacher than Professor Cauble’s and Professor Monroe’s words about Doug? And, as we work with our own students or young lawyers, what greater motivation could there be than the hope that someday we may inspire in them the sentiments that Doug inspired in Professor Cauble, Professor Monroe, and numerous others?

In recognition and appreciation of Doug’s love of students, Florida State is in the process of creating a fund to help our students aspiring to practice tax law to meet expenses that will facilitate their entry into the profession, including costs of participating in bar association tax section events. The fund will bear Doug’s name.

V. Conclusion

Samuel Johnson remarked: “It matters not how one dies, but how one lives.”23 Doug requested that no formal memorial services be held for him. I understand Doug’s wish in this regard through the perspective offered to us by Rumi: “Goodbyes are only for those who love with their eyes—because for those who love with heart and soul there is no thing as separation.”24

From how Doug lived, we may learn much. If we avail ourselves of this opportunity, and if we become links in a chain of transmission of knowledge, skills, and values within the tax community, we will find that we have not, after all, been separated from Doug. ■

22 Andrea Monroe, TaxProf email posting Nov. 2, 2021 (on file with author).23 Quoted by James Boswell, The lIfe of samUel Johnson (1791).24 “Rumiquotes.” Quotes.net. STANDS4LLC, 2021. Web 18 Nov. 2021 https://www.quotes.net/quote/79705.

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SPECIAL FEATURE

Tax Section Creates Fellowship and Fund to Advance Diversity and Inclusion

The Tax Section has launched two initiatives to advance diversity and inclusion in the tax bar and the Section. The Loretta Collins Argrett Fellowship will provide historically underrepresented individuals more equitable and inclusive pathways for participation in the Section. The Justice, Diversity, Equity, and Inclusion (JDEI) Fund seeks to provide long-term funding for the Section’s diversity, equity, and inclusion initiatives, including the Argrett Fellowship.

Loretta Collins Argrett was the first Black staff member of the Joint Committee on Taxation, and was the first Black woman to hold a Justice Department position requiring Senate confirmation, serving as the Assistant Attorney General of the department’s Tax Division for six years. A longtime member of the Tax Section, Argrett was active in Section activities, including on committees and as a Council member. A more detailed biography is available on the Section website.

The Loretta Collins Argrett Fellowship is a three-year program open to any individual with a diverse background and/or a demonstrated commitment to promoting diversity, equity, and inclusion in the tax bar. The Section aspires to award up to five Fellowships each fiscal year. Applications for the inaugural class of Fellows are due by Sunday, April 3, 2022. Please help us by sharing information about the Fellowship with your networks and colleagues. Further details, including the application, are available on the Section website.

The JDEI Fund seeks to provide stable, long-term funding for diversity, equity, and inclusion initiatives within the Tax Section. Donations to the fund will provide financial support primarily for the new Fellowship program and will allow the Tax Section to provide more equitable access to the Tax Section and the tax profession. Donations are tax-deductible within the limits of the law. Further information is available on the Section website, and donations may be made at ambar.org/donatejdei.

“I am delighted to announce the launch of the Loretta Collins Argrett Fellowship and the creation of the JDEI Fund,” said Section chair Julie Divola. “I hope you will consider becoming one of the founding contributors of the fund, to help us fulfill our mission of creating a more diverse, accessible, and inclusive Tax Section and tax bar. And I hope you will spread the word about this initiative.” ■

Loretta Collins Argrett

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http://ambar.org/donatejdei



SPECIAL FEATURE

Tax Section Highlights from National Hispanic Heritage Month

From September 15 to October 15, the Tax Section highlighted contributions from Hispanic/Latino/a/x members and featured testimonials of the power of being involved with the Section.

Alice Abreu, Temple University

Section membership has given me an eclectic group of friends who share my love of the tax law and many other things.

My peripatetic upbringing, after I emigrated from Cuba, makes me especially appreciative of the stability and continuity that membership in the Tax Section and regular attendance at Section meetings has provided. The Tax Section is not only a source of great CLE but also of source of great friendships and professional contacts. Thanks to the Section, I’ve had the good fortune to get to know Judge Juan Vasquez, the first Latinx person to serve on the U.S. Tax Court, and to celebrate the publication of his biography!

Hon. Juan F. Vasquez, U.S. Tax Court

People in Tax Podcast: Juan Vasquez, Parts 1 & 2

In Season 3, Episode 1, James Creech and Judge Juan Vasquez discuss his road to the Tax Court, the value tax lawyers bring to their clients, and the role of tax law in social justice. Listen to Part 1 here. Listen to Part 2 here.

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https://peopleintaxpodcasts.libsyn.com/s03e02-juan-vasquez-part-2



Luz Arevalo, Greater Boston Legal Services

For the first time in my lifetime, I’m giving people good news about tax credits with the rebates and the enhanced child tax credit.

I recall admiring my father who was always good with numbers and could figure out the calculations on the 1040. The preparer was a good guy, but always in a hurry. My father would make him slow and explain the numbers. I would do VITA work when I was in law school, and now I am the explaining those forms with people like my father. In Massachusetts, we have a bill for undocumented taxpayers, who are considered residents and pay the same tax rate as any resident, to qualify for the EITC. We’re fighting to see this injustice corrected before I retire.

Hon. Juan F. Vasquez, U.S. Tax Court

Biography: From the Texas Cotton Fields to the United States Tax Court: The Life Journey of Juan F. Vasquez

The inspirational biography of Juan F. Vasquez, the first Hispanic American appointed to the United States Tax Court. The book depicts his journey surmounting numerous challenges such as poverty, manual labor, and discrimination. It explores his pursuit of education to build—with the support of family, friends, and mentors—a professional career serving family, community, taxpayers, and the tax system.

Judge Vasquez’s story demonstrates that one can excel in the practice of tax law and serve the community and taxpayers while doing so, regardless of ethnicity, socioeconomic status, school pedigree, or geographic location. The overall message—that hard work, perseverance, and persistence in the face of adversity can lead to unimaginable opportunities—should resonate with all readers. Learn more here.

Armando Gomez, Skadden

What I appreciate most about the Tax Section are the deep friendships that I have developed with tax lawyers around the country.

I first came to know the ABA Tax Section when I served as a student editor of The Tax Lawyer at Georgetown University Law Center. While working in government after law school, I had the opportunity to engage with Tax Section leaders and started to attend Tax Section meetings, and I’ve been hooked ever since. It was a great honor to be selected as the first Hispanic American to serve as Section Chair in 2014–2015.

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Jorge Castro, Miller & Chevalier Chartered

What I especially enjoy about Section meetings is the opportunity to see and catch up with government friends and colleagues.

I first began attending ABA Tax Section events when I was in law school, and I recall that the Section’s programming really piqued my interest in pursuing a career in tax law. Now, more than 20 years later, that programming remains excellent and relevant. I have been very fortunate to have had great tax jobs in Congress and at the IRS. Attending Section meetings is a great way to not only see tax friends socially, but also engage in fascinating discussions on the most pressing tax policy and regulatory topics of the day.

Pedro Corona, Procopio

People in Tax Podcast: Pedro Corona

In Season 2, Episode 29, James Creech and Pedro Corona discuss working in both the U.S. and Mexico, the differences between the two legal systems, and the challenges and opportunities of working in both countries. Listen here.

Hon. Elizabeth A. Copeland, U.S. Tax Court

[My mother] made sure I had a better foundation and drilled into me the importance of education and hard work.

During National Hispanic Heritage Month, I look back with pride at the inspiration I received from my mother. Her family spoke only Spanish in the home, and she had to repeat first grade for not having the English language skills to move on to second grade. If it were not for her, I never would have gone to college—certainly not law school—and I would not be a Federal Judge at this point in my career.

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https://peopleintaxpodcasts.libsyn.com/s02e29-pedro-corona



TAX

Unallowable (or A Lament to the TCJA)

By Robert S. Steinberg, Law Offices of Robert S. Steinberg, Palmetto Bay, FL

(To the tune of Unforgettable by Irving Gordon as recorded by Nat King Cole and by Natalie Cole in a mix with Nat King Cole.)

Unallowable, I swear out loud. My investment fees Now disallowed.

And employees who had union dues They could deduct, now all sing the blues. They’re paying more Than they did before.

Unallowable, With rage I burn. Tax preparer fees For my return.

All those receipts, no use saving them When a Congress bent on shaving them Has made most things unallowable now.

Unallowable, That car so tired Driven for the sales Or you’d get fired. Corporate big wigs can still get the fluff While employees can’t deduct the stuff. Most everything is unallowable now.

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IN THE STACKS

Tax Section Publishes The Supreme Court, Federal and State Taxation, and the Constitution

This fall, the ABA Tax Section published The Supreme Court, Federal and State Taxation, and the Constitution, an updated edition of the 2013 book by Jasper L. Cummings, Jr. The book is a comprehensive review of the intersection of the Constitution and taxation going back to the earliest years of the United States.

Citing Supreme Court cases, Cummings organizes and categorizes the opinions for accessibility by practitioners and others involved in law practice, law making, and legal scholarship. The decisions cited include, for example, a detailed analysis of the 25 Court cases that ruled a federal tax provision unconstitutional. Another chapter discusses the 121 decisions related to the intergovernmental immunity doctrine. And a thoroughly researched chapter explores the Court’s 2012 decision in National Federation of Independent Business v. Sebelius. The new edition is updated to account for more recent rulings such as United States v. Windsor, Dawson v. Steager, Bond v. United States, and United States v. Davila.

The new edition also includes a large new chapter on the Court’s state tax decisions under the Constitution, including the remarkable number of them in just the last decade. Cummings makes this manageable by synthesizing the current principles applied by the Court, with appropriate citations, rather than debating the wisdom of various rulings.

“I was specifically motivated to revise and expand the book by the seeming morass of Supreme Court state tax opinions,” notes Cummings. “I won a Supreme Court state tax case that involved obsoleting an early authority that appeared to support the tax, which in fact violated the Commerce Clause. The problem of obsolete decisions, plus the facts that the Supreme Court basically made up the constitutional law of state taxation from the scantiest constitutional provisions, leads most commentators to build each subject from the ground up, working through all the stages of the Court’s development. While fascinating, that approach does not make for knowing what the law currently is, which I have tried to do in this revision.”

The contents are made accessible by a detailed table of contents that includes more than 200 entries making it easy for readers to find topics and subtopics, plus a table of cases that indexes nearly 2,000 decisions cited in the book. Written for appellate litigators, tax litigators, general tax practitioners, and constitutional law experts, this new edition will be be invaluable to understanding the Court’s rulings on federal and state taxation.

The Supreme Court,Federal and State Taxation,and the ConstitutionSecond Edition

By Jasper L. Cummings, Jr.

StudieS in taxation

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“We are happy to publish the update to this unique resource book,” said Roberta Mann, Vice Chair, Publications. “While other texts and treatises cover selected Supreme Court tax cases, Jack Cummings’ comprehensive analysis can be found nowhere else.”

The Supreme Court, Federal and State Taxation, and the Constitution is available for purchase in the ABA Store in paperback and ebook formats. ■

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SECTION NEWS & ANNOUNCEMENTS

Midyear Tax Meeting Goes Virtual, Features William Gale and Loretta Collins Argrett

The 2022 Midyear Tax Meeting will be held virtually January 31 through February 4. The Tax Section had sought to offer an in-person option for attendees but ultimately determined that a virtual meeting was necessary to ensure the safety of all attendees.

The meeting will offer numerous CLE and networking opportunities, convenient to attend without leaving home or office. More than 30 substantive committees will present over 100 programs featuring recognized tax professionals, academics, and government officials. There will also be several networking events by substantive committees, as well as the Women in Tax Forum and also a new event wherein attendees can learn more about the Section and connect directly with committee leadership. The preliminary program contains further details.

The meeting will feature William G. Gale, co-founder and co-director of The Tax Policy Center. Gale will speak at the opening plenary session, on Monday, January 31, from 10:30 am to 12:00 noon ET. His remarks will focus on the lack of attention paid to race issues by mainstream public finance analysis in economics for decades.

The Monday plenary session will also include Loretta Collins Argrett, who will talk about her trailblazing tax law career and the importance of promoting diversity, equity, and inclusion in the tax bar. The Tax Section’s recently launched fellowship program, which seeks to create a more accessible and equitable pipeline into the Tax Section and the tax profession, is named after Argrett.

“Although we all miss seeing our friends and the wonderful chance encounters that happen at in-person meetings,” noted Tax Section chair Julie Divola, “the staff has done a wonderful job recreating our meeting experience through a virtual format. Please join us for unparalleled substantive content and enhanced virtual networking events.”

The Virtual 2022 Midyear Tax Meeting will be offered on the same platform as recent virtual tax meetings. That platform provides livestreaming sessions, meeting presentations and materials, a chat feature, and on-demand replay of sessions for up to 90 days. The registration site offers discounts for Section members, academics, government attorneys, and nonprofit staff, as well as early registration savings before January 6. Additional discounts are available for groups of five or more from the same office; contact [email protected] for further details. ■

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https://www.taxpolicycenter.org/

https://web.cvent.com/event/2b86ed0e-d841-4de0-838d-d955f14a915c/summary

mailto:[email protected]





End of Tax Connect and Next Steps for Committee Communication

Tax Section members who have joined one or more of our 36 substantive committees may be familiar with the platform called Tax Connect that committees have used over the last three years to communicate with their members.

Tax Connect was discontinued on Friday, December 3 and committee leadership and members now use email listserves as the primary means to communicate announcements and share resources.

If you have not joined a committee, we encourage you to join one now to make the most of your Tax Section membership. Simply visit your My ABA page by following these instructions to add a new committee or contact us if you need assistance. Committee memberships are free and unlimited for Tax Section members.

If your My ABA account indicates you have joined a committee and/or you have received messages from Tax Connect in the past, you should automatically be added to the email listserve for that committee and receive a welcome message at some point. If you have not received a welcome message, please check your spam folder, or visit your My ABA account to see which committees you have indicated. To learn about how to use Listserve visit our How to and FAQ page here.

Additionally, the ABA is replacing Tax Connect’s other features with a new platform called Hivebrite. The Section will host information sessions and share more tools and resources about how to use Hivebrite in the coming weeks. In the meantime, we have several helpful Hivebrite tutorials and a FAQ. Reach out to staff below with any additional questions.

With Hivebrite, committee members will be able to:

• Search posts that went through Tax Connect in the last three years

• Access useful materials and share them with the community

• Receive announcements and reminders from the leadership of the committee

• Add events directly to your calendar

To find a committee’s listserve email address or Hivebrite community, simply visit the page for the specific committee.

If you have questions, please contact:

• Dan Swenson, Technology Manager, [email protected]

• DeMarcus Freeman, Program Associate, [email protected]

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http://maestro.abanet.org/trk/click?ref=z11aidwdq5_0-tuienb-0-45fb2x319d0bex0814&

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https://communities.americanbar.org/page/tutorials

https://communities.americanbar.org/page/faq



mailto:Daniel.Swenson%40americanbar.org?subject=

mailto:DeMarcus.Freeman%40americanbar.org?subject=




Government Submissions Boxscore

Government submissions are a key component of the Section’s government relations activities. Since June 26, 2021, the Section has coordinated the following government submissions. The full archive is available to the public on the website: https://www.americanbar.org/groups/taxation/policy/.

TO DATE CODE SECTION

TITLE COMMITTEE CONTACT

Department of Treasury & Internal Revenue Service

1/6/2022 n/a Chief Counsel Memorandum 20214101F

Various Robert J. Kovacev


11/18/2021 Section 1504

Proposed Guidance under Section 1504

Various Bryan Collins, Maury Passman, and Jeffrey Vogel


11/2/2021 n/a Taxation of Digital Products Various Edward J. Bernert


10/25/2021 n/a IRS Form 911 Pro Bono & Tax Clinics

Caleb Smith


10/8/2021 n/a BBA Special Enforcement Matters Administrative Practice

Rochelle Hodes and Ossie Borosh


9/24/2021 n/a Voluntary Disclosure Practice and the Streamlined Filing Compliance Procedures

Civil and Criminal Tax Penalties

Laura L. Gavioli and John Nail

The technical comments and blanket authority submissions listed in this index represent the views of the ABA Section of Taxation. They have not been approved by the ABA Board of Governors or the ABA House of Delegates and should not be construed as representing the policy of the ABA. ■

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Accepting Nominations for the 2022 Janet Spragens Pro Bono Award

The Section of Taxation Pro Bono Award Committee is seeking nominations for the 2022 Janet Spragens Pro Bono Award.

This award was established in 2002 to recognize one or more individuals or law firms for outstanding and sustained achievements in pro bono activities in tax law. In 2007 the award was renamed in honor of the late Janet Spragens, who received the award in 2006 in recognition of her dedication to the development of low income taxpayer clinics throughout the United States.

The Janet Spragens Pro Bono award is given to an individual or law firm for sustained and outstanding achievements in pro bono activities in the tax law.

The criteria for selection of an individual recipient of the award are that (i) the individual be a tax lawyer, whether living or deceased; (ii) the individual is or was a member of the Section of Taxation; and (iii) the individual has, through years of service, demonstrated an ongoing commitment to pro bono activities, particularly in the areas of federal and state taxation.

The criteria for selection of a law firm recipient are that (i) the law firm includes members of the Section of Taxation; and (ii) the law firm has, through years of service of its attorneys, demonstrated an ongoing commitment to pro bono activities, particularly in the areas of federal and state taxation.

The nomination form can be found here. The due date is Tuesday, February 15, 2022, to [email protected], but please contact Meg Newman, at [email protected] if you would like to submit a nomination after the deadline. All nominations will be maintained in confidence by the Pro Bono Award Committee.

Call for Applications: Diversity and Inclusion Scholarships to Virtual 2022 Midyear Tax Meeting

The Tax Section is now accepting applications for the Diversity and Inclusion Scholarships, designed to encourage members of diverse backgrounds or with a recognized commitment to diversity and inclusion to attend and participate in the Virtual 2022 Midyear Tax Meeting, on January 31 – February 4, 2021.

The Section embraces diversity and inclusion in every aspect of its activities, including its meetings. These scholarships defray the cost of meeting attendance, including waiver of the registration fee (and when in person meetings return will also include up to three nights stay at the host hotel, airfare, and attendance at the Plenary Session Luncheon). Applicants must meet eligibility requirements, including Section membership and understanding of the Section’s Diversity and Inclusion Plan.

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Scholarship recipients will be required to fulfill several duties during and after the meeting, including attendance at certain panels and events, and subsequent reports to the Section’s Diversity and Inclusion Scholarship Selection Committee.

Full eligibility requirements, selection criteria, and recipient duties can be found on the Section’s website, along with an example scholarship application.

Applications and questions should be directed to the Section’s counsel, Meg Newman, at [email protected].

Get Social

Stay up-to-date on the latest tax news and Section updates and events. Follow us on Twitter, LinkedIn, or Facebook. Share our recent posts with your networks and tag us in your updates!

Facebook: https://www.facebook.com/ABATaxSection/

LinkedIn: https://www.linkedin.com/company/american-bar-association-tax-section/

Twitter: https://twitter.com/abataxsection

Each One, Reach One

ABA President Turner is asking for your help to engage other lawyers in tax. If each member of the Tax Section reached one other person within their network, we could double our community in the profession. We’ve posted his video on our social media channels and would love for you to share it along with a testimonial of WHY you belong to the Tax Section. Ask someone in your network to join ABA and the Tax Section today using ambar.org/EachOneABA.

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https://www.facebook.com/ABATaxSection/

https://www.linkedin.com/company/american-bar-association-tax-section/

https://twitter.com/abataxsection

https://twitter.com/ABATAXSECTION/status/1460720781479100422?s=20

http://ambar.org/EachOneABA



Virtual 2021 Fall Tax Meeting Materials Now Available

Materials from our Virtual 2021 Fall Tax Meeting are now available on the TaxIQ homepage. Materials include cutting-edge committee program materials, and contain analysis of the latest federal tax policy, initiatives, regulations, legislative forecasts, and planning ideas developed by the country’s leading tax attorneys and government officials. For our Fall Section meeting, we have included video of the virtual panels.

The Tax Lawyer—Fall 2021 Issue Now Available

The Fall 2021 issue of The Tax Lawyer, the nation’s premier, peer-reviewed tax law journal, is now available. The Tax Lawyer is published quarterly as a service to members of the Tax Section.

Fall 2021 Issue (Click here to read or download the complete issue.)

Articles

Karen C. Burke, Sorting Out Partner Payments

Amandeep S. Grewal, Section 265 Disallowance and the PPP Expense Allowance Nightmare

Mindy Herzfeld, The Role of Professional Organizations in Practice and Policy: How Lawyers Overtook Accountants and Economists in the Early 20th Century Tax Field

Steve Johnson, Federal Tax Ethics Rules and State Malpractice Litigation

Stephanie Hunter McMahon, Employment Taxes in Crisis: In Practice, Enforcement, and Insolvency

The Practical Tax Lawyer—November 2021 Issue Now Available

Produced in cooperation with the Tax Section and published by ALI-CLE, The Practical Tax Lawyer offers concise, practice-oriented articles to assist lawyers with all aspects of tax practice. The articles are written by practitioners and are reviewed by an expert board of editorial advisors who are members of the ABA Tax Section and are appointed by the Section. Published four times yearly, each issue of The Practical Tax Lawyer brings you pragmatic, nuts-and-bolts advice on how to solve your clients’ tax problems.

David J. Bartoletti, A Primer on Qualified Opportunity Zones

Steve R. Akers, Transfer Planning in 2021, Including Transfers in Anticipation of Possible Retroactive Transfer Tax Legislation

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https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21fall/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21fall/burke/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21fall/grewal/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21fall/grewal/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21fall/herzfeld/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21fall/herzfeld/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21fall/johnson/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21fall/mcmahon/

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Daniel Pilarski, Tax Authorities Provide Clarification of US-UK Tax Treaty after Brexit and USMCA

Index to Volumes 35 and 36 (2020-21)

For more information, visit PTL’s webpage: https://www.ali-cle.org/legal-periodicals/PTL.

Support the Section’s Public Service Efforts with a Contribution to the TAPS Endowment

Through the Tax Assistance Public Service (TAPS) endowment fund, the Section of Taxation provides stable, long-term funding for its tax-related public service programs. The TAPS endowment fund primarily supports the Christine A. Brunswick Public Service Fellowship program, which provides two-year fellowships for recent law school graduates to work for non-profit organizations offering tax-related legal assistance to underserved communities.

In its four-year existence, the TAPS endowment fund has supported 20 fellows. Not only have the fellows produced impressive results, but many have secured positions in the field of low-income tax assistance and continue to serve low-income communities and train a new generation of law students to provide these services. Other fellows have clerked for judges of the U.S. Tax Court who value their experiences working with underserved taxpayers and their perspectives gained from their first-hand involvement in low-income tax issues. Fellows who practice tax law in other settings such as major law firms and the government, continue to contribute to the Tax Section by remaining active in pro bono initiatives, speaking on panels, leading committees, drafting comments, and mentoring fellows and other new lawyers. This program has been incredibly successful both in serving taxpayers who otherwise might not have representation, making systemic change in local communities and in providing a springboard to careers in low-income tax services.

Consider giving to the TAPS endowment fund today. Your generous support will help ensure that the Section can continue its mission to provide legal assistance to those in need.

For more information on how to get involved in tax pro bono assistance, please see our website or contact Meg Newman at [email protected].

Get Involved in ATT

ABA Tax Times (ATT) is looking for volunteers to join its ranks as associate editors to assist in writing and acquiring articles for publication. This opportunity is open to Section members with significant writing or publication experience, a genuine interest in helping ATT attract great content, and a willingness to commit to at least one article a year. You can find more information about our submission guidelines here. If you are interested in a regular writing and editing opportunity with ATT, contact Linda M. Beale, Supervising Editor, at [email protected]. ■

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https://www.ali-cle.org/legal-periodicals/PTL

http://www.americanbar.org/groups/taxation/taps_endowment.html

http://www.americanbar.org/groups/taxation/awards/psfellowship.html

https://www.americanbar.org/groups/taxation/tax_pro_bono/

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http://www.americanbar.org/groups/taxation/publications/abataxtimes_home/att-editorial.html

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SECTION EVENTS & PROMOTIONS

Section Meeting & CLE Calendar

ABA Tax Section meetings and webinars are a great way to get connected, get educated and get the most from your membership! Join us for high-level CLE programming and the latest news and updates from Capitol Hill, the IRS, Treasury and other federal agencies.

https://www.americanbar.org/groups/taxation/events_cle/

ABA Section of Taxation CLE Products

Listen at your convenience to high-quality tax law CLE on a variety of topics. ABA CLE downloads are generally accepted in the following MCLE jurisdictions: AK, AR, CA, CO, GA, HI, IL, MS, MO, MT, NV, NM, NY, NC, ND, OK, OR, SC, TX, UT, VT, WA, WV and WI. Recordings and course materials from the following recent Tax Section webinars and more are available through the ABA Web Store.

Recent Webinars

The Future of the Expanded and Advance Child Tax Credit [Free]

Compliance Initiatives and Voluntary Disclosure Practice: Perspectives and Updates from Puerto Rico’s Hacienda and the IRS

BEPS Amount A: Measurement and Tax Impacts

The Arm’s Length Principle, Tax Treaties, and the Multilateral Instrument

The U.N. Digital Tax Article 12B

Final Regulations and the Current Landscape Under Section 1031: A Panel Discussion with a Practical Approach

Tax Policy for a World of Mobile Income

Taxing Profit in a Global Economy

Final Section 162(f) Regulations on Fines, Penalties and Other Amounts Have Broad Application

State Tax and Economic Policy Responses to the Ongoing COVID Pandemic

Getting Facts from Third Parties: FOIA and Other Avenues [Free]

Getting Facts in the Administrative Record in Collection Due Process [Free]

Getting Facts Into a Remote Proceeding Tax Court Case [Free]

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SECTION EVENTS & PROMOTIONS

Sponsorship Opportunities

ENHANCE YOUR VISIBILITY. GROW YOUR NETWORK. EXPAND YOUR REACH.

ABA Section of Taxation Sponsorship Provides Invaluable Returns.

ABA Section of Taxation Meetings are the premier venues for tax practitioners and government guests to connect on the latest developments in tax law and practice. Section Meetings draw up to 2,000 tax practitioners from across the U.S. and internationally. With over 150 panel discussions presented over two days by the country’s leading tax attorneys, government officials, and policy makers, Section Meetings are your opportunity to maximize your organization’s visibility and build relationships with key figures in the world of tax law.

The Section of Taxation is the largest, most prestigious group of tax lawyers in the country, serving nearly 16,000 members and the public at large.

• Over 10,000 Section members are in private practice

• 1,100 members are in-house counsel

• 32% of meeting attendees represent government

• 25% come from firms of over 100 attorneys

• 23% come from firms of 1-20 attorneys

Due to on-going COVID-19 pandemic we are offering various opportunities to sponsor upcoming virtual and hybrid meetings. For additional information, please visit https://www.americanbar.org/groups/taxation/sponsorship.html or contact our Sponsorship Team at [email protected] or at 202/662-8680.

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Thank You To Our Virtual 2021 Fall Tax Meeting Sponsors

FOR INFORMATION ON SPONSORSHIP OPPORTUNITIES CLICK HERE

The Educational Affiliate of The Tax Lawyer

EMERALD SPONSORS

EXCLUSIVE DIAMOND SPONSOR

PUBLISHING PARTNER

RUBY SPONSOR

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https://www.bakermckenzie.com/en

https://www.bluejlegal.com/

http://www.capdale.com/

https://www.cov.com/

https://www2.deloitte.com/us/en/pages/tax/solutions/deloitte-tax-services.html

https://www.hklaw.com/en

http://www.kflaw.com/

https://www.morganlewis.com/

http://www.law.northwestern.edu/

https://www.taxnotes.com/

https://www.eversheds-sutherland.com/global/en/index.page

https://www.nelsonmullins.com/

Thank You To Our Virtual 32nd Annual Philadelphia Tax Conference Sponsors

FOR INFORMATION ON SPONSORSHIP OPPORTUNITIES CLICK HERE

The Educational Affiliate of The Tax Lawyer

EMERALD SPONSORS

DIAMOND SPONSOR

RUBY SPONSOR

PUBLISHING PARTNER

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http://www.capdale.com/

http://www.law.northwestern.edu/

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https://www.troutman.com/

https://www.gibsondunn.com/

https://gtmtax.com/

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