• Cash is not everything

      Abreu, Alice G. (2003)
    • Defining Income

      Abreu, Alice G.; Greenstein, Richard K. (2011)
      In this article we tackle a fundamental problem in tax law: the resistance of the core concept of “income” to a coherent definition. It has long been recognized that there is a substantial gap between the formal definition of income adopted in 1955 by the Supreme Court in Commissioner v. Glenshaw Glass and the IRS’s actual determinations of what constitutes income. Among various examples described in the article, the IRS has not taxed as income either valuable, record breaking home run baseballs caught by fans or expensive meals provided by lawyers to prospective clients, even though both appear to meet the Glenshaw Glass definition. Scholars have consistently failed either to explain this dissonance or to offer a theoretically and practically satisfying definition of income to replace the one announced in Glenshaw Glass. We do both and more. Specifically, we develop a new way of thinking about definitions in the law – an approach we call “aptness” – and apply this approach to understanding what “income” means in tax law. The aptness of a legal definition describes the extent to which it reflects the values that are important in the relevant field, which in turn minimizes the number of controversial applications of the definition. We conclude that the Glenshaw Glass definition is apt, but in a highly unusual way. Instead of reflecting by its own terms tax law’s defining values, its breadth gives the IRS the flexibility to navigate social opinion regarding income taxation, thereby both providing stability in the administration of the income tax and permitting the evolution of a concept of income that serves the important values – both economic and noneconomic – in taxation.
    • Embracing the TBOR

      Abreu, Alice G.; Greenstein, Richard K. (2017-11-27)
      When Congress codified the Taxpayer Bill of Rights (the “TBOR”) in 2015 the tax bar largely shrugged, but that is a mistake. Section 7803(a)(3) is not just another iteration of the phrase Congress used to christen legislation designed to reign in perceived IRS abuses in the 80’s and 90’s, when Congress enacted three different pieces of legislation that bore the name “Taxpayer Bill of Rights.” Despite their lofty titles, none of those enactments contained a single amendment to the Internal Revenue Code that used the word “right,” or employed the language of rights. By contrast, section 7803(a)(3) actually refers to “taxpayer rights” and lists ten items. Therefore, despite the claims of its promoters that the 2015 legislation simply restates rights already provided by the Code, the codification of the TBOR has the power to transform the tax practice and the relationship between taxpayers and the IRS. In this Article we explain why. Specifically, we make three arguments. First, construing the 2015 codification of the TBOR as a meaningless gesture ignores the well-established canon of statutory construction against surplusage, as well as its important corollary: when Congress amends a statute it intends to change something. Second, the TBOR significantly enhances taxpayers’ normative basis for demanding legal remedies for violations of their rights because it invokes procedural justice, using the language of rights where only government duties existed before. Third, the TBOR may have actually created taxpayer rights. We do not argue that all taxpayer rights should be enforced either all the time or to the same extent, as that could be disruptive or even catastrophic for tax administration and may not be necessary to allow the TBOR to achieve its goals. But we do maintain that the codification of the TBOR can transform the legal environment so that demands for enforcement can be weighed by the courts on a case by case basis, in light of all the facts and circumstances, which include the identity and attributes of the taxpayer. Recent events confirm the importance of the TBOR and suggest that the tide of taxpayer indifference has begun to turn. On November 8, 2017, Facebook filed a complaint against the IRS, citing the TBOR’s “right to appeal a decision of the Internal Revenue Service in an independent forum,” section 7803(a)(3)(E)), as the basis for its request that the court “[i]ssue an injunction or mandamus-like relief ordering Defendants to provide Facebook access to IRS Appeals.” We believe that Facebook is just the first of many taxpayers who will formally embrace the TBOR as a source of rights and as the basis for crafting remedies to enforce those rights.
    • Feminist Tax Judgments: Operationalizing Diversity

      Abreu, Alice G. (2019)
      In Feminist Judgments: Rewritten Tax Opinions, Bridget Crawford and Tony Infanti reveal the power of feminist theory to offer new insights on a broad range of tax cases. The collection of essays contained in the book operationalizes diversity and inclusion by showing how tax law is imbued with social values in both its statutory and judicial expressions. My reflections on the book have three distinct parts. To provide a sense for the breadth and scope of the project I begin by describing the ways in which the collection itself reflects diversity in its broadest sense. I then discuss the rewritten opinion and commentary on one of the cases, Welch v. Helvering, as an example of the type of insights the collection provides.Finally, I offer some reflections of other, often simple, ways of bringing feminist values to the teaching of tax law.
    • For Good (Foreword)

      Abreu, Alice G. (2015)
    • Foreword: Taxpayer Rights: All the Angles

      Abreu, Alice G. (2019)
      On Friday, October 26, 2019, nearly twenty tax scholars, practitioners, and government officials representing federal, state, and municipal authorities gathered at Temple University Beasley School of Law in Philadelphia to discuss taxpayer rights before an audience of nearly one hundred scholars, practitioners, and students. The occasion was the Temple Law Review Symposium, which aimed to shine a spotlight on the U.S. Taxpayer Bill of Rights (TBOR) and provoke an examination of its content and import from a variety of perspectives.
    • It's Not a Rule: A Better Way to Understand the Definition of Income

      Abreu, Alice G.; Greenstein, Richard K. (2012)
      In a recent article Professor Douglas Kahn explores a particular dissonance between the positive and very broad definition of income that includes all realized accessions to wealth, and what the government can and does actually attempt to tax. He then offers two limiting principles, which he posits operate as exclusions and thus eradicate the gap. Treating income as a standard effectively addresses the puzzling gap between what the broad positive definition of income would seem to include and what is actually taxed. The commercial/noncommercial distinction that shapes Professor Kahn's proposed principles functions as a rule. This article proposes a thought experiment: What if you were to think about the problems Professor Kahn poses from the perspective of income-as-standard? This article considers the precise issues Professor Kahn discusses, but uses an income-as-standard approach. Having contrasted the two approaches, the authors return to the conclusion that standards have important virtues that make them superior to rules for resolving some fundamental questions in federal income tax law.
    • Listen to Peter: Embrace the TBORs

      Abreu, Alice G.; Greenstein, Richard K. (2018-01-29)
      A TBOR is a Taxpayer Bill of Rights and 43 states, and the federal government all have one. Unfortunately, most practitioners either don’t know that TBORs exist, or, if they do, they think TBORs are of little, if any, practical importance—toothless tonics designed to make taxpayers feel better about the unpleasantness of paying taxes but offering no enforceable rights. Nevertheless, as no less an authority than Peter Faber urged in an “In the Trenches” article published in State Tax Notes on September 4, 2017, for tax advisors to ignore the “more general taxpayer protection rules of the sort that are embodied in bill of rights legislation . . . [is] a mistake. There are times when these rules may be helpful in controversy situations.” We think that not only is Peter correct, but that TBORs can do even more. TBORs can transform both tax practice and the relationship between taxpayers and taxing authorities, and their provisions can be enforced by courts even in the absence of legislative language providing for such enforcement. There are at least three arguments in support of that proposition, and we developed them in a Special Report we wrote on the Federal TBOR, and recently published in Tax Notes: Embracing the TBOR. We think each of those arguments could also be made with respect to state TBORs. As we explain in that Article, the first argument is that construing the codification of the TBOR as a meaningless gesture ignores the well-established canon of statutory construction against surplusage. The second is that the TBOR significantly enhances the taxpayer’s normative basis for demanding legal remedies for violations of taxpayer rights because it invokes procedural justice, using the language of rights where only government duties existed before. And the third is that the TBOR may have actually created taxpayer rights. Our Article on the Federal TBOR does not argue that all taxpayer rights should be enforced either all the time or to the same extent, as that could be disruptive or even catastrophic for tax administration and may not be necessary to fulfill the objectives of the TBOR. But it does maintain that the adoption and particularly the codification of the TBOR can transform the legal environment so that demands for enforcement can be weighed by the courts on a case by case basis, in light of all the facts and circumstances, which include the identity and attributes of the taxpayer. Language in many of the state TBORs to the effect that failure to comply with the provisions of the TBOR will not invalidate particular government actions should not preclude redress that takes other forms.
    • Paradise Kept: A Rule-Based Approach to the Analysis of Transactions Involving Disregarded Entities

      Abreu, Alice G. (2006)
      Disregarded entities, single member limited liability companies whose separate legal existence is ignored for all purposes under the Internal Revenue Code, were created by the Check-the-Box regulations. Their creation was a logical consequence of the objective of those regulations, which was to provide certainty in entity classification. Nevertheless, following the promulgation of the regulations the Service has issued letter rulings that look to substance to determine whether an LLC will be treated as having a single member and has otherwise retreated from the mandate of the regulations to disregard the separate existence of such entities. By looking to substance the Service has departed from the rule-based approach that produced the regulations and risks unraveling the structure created by the regulations. To look to substance is to apply a standard: substantively similar transactions ought to be taxed similarly. While that is often an unassailable goal, in this case, its costs are too great. When deciding whether to disregard an entity to determine the tax consequences of business transactions, the Service should abandon the goal of substantive accuracy. Substantive accuracy is unachievable in a system of elective classification, because elective classification necessarily produces a system in which substantively identical organizations are treated differently for tax purposes. Having abandoned all attempts at classifying entities by reference to substance in the Check-the-Box regulations the government should resist the temptation to reintroduce substantive analysis. Instead, the Service should focus on achieving the primary objective of the regulations: administrability. Administrability is the god that the Treasury and the Service purport to have been worshiping by issuing the Check-the-Box regulations, and administrability should therefore drive the application of those regulations. Instead of the ad hoc, sometimes-rule, sometimes-standard approach the Service is currently taking, or an always-rule, or always-standard, approach that has the beauty of consistency, this article proposes a bifurcated analysis. The proposed analysis distinguishes between situations in which the characterization of an entity is important ex-ante, where knowing whether the entity will be disregarded would allow both taxpayers and the Service to predict accurately the tax consequences of particular transactions, and situations where the characterization is relevant only ex-post, where an event that is not susceptible of planning has already occurred. In developing the proposed analysis, I draw on scholarship that examines the application of rules and standards in a variety of legal contexts. I do that because many of the insights developed in that literature apply in tax and because I want to make that literature more prominent in tax scholarship generally. The increasing difficulty of administering the tax system suggests that policymakers should think more deeply about the tradeoff between equity and administrability. Disregarded entities can help to explore that tradeoff because they are the culmination of more than half a century of struggle with entity classification and represent one resolution of it.
    • Rules vs. Standards

      Abreu, Alice G.; Greenstein, Richard K. (2018-06-07)
    • Tax 2018: Requiem for Ability to Pay

      Abreu, Alice G. (2019)
      Enactment of the TCJA was followed by a mad dash to understand its effects. The speed and process of enactment left no time for serious attempts to analyze whether the TCJA transforms the income tax system in any fundamental way. This Essay is a first step in that analysis. Although some of the most important changes I discuss are set to expire or phase out after 2025, understanding their policy implications is important, not only because they are the law now but also because Congress may extend them, perhaps indefinitely. The TCJA has changed the way the tax system operationalizes the principles of horizontal equity and ability to pay, has brought the base of the regular tax closer to the base of the AMT, and has increased the number of tax provisions that have been promulgated in the form of standards, which will require the deployment of significant administrative and judicial resources before they can be implemented effectively. By removing consideration of taxpayers’ support obligations from the tax base (except as relevant to the determination of filing status in the case of taxpayers who might qualify for the statuses of head of household or surviving spouse), the TCJA has jettisoned the value of ability to pay. It has unmoored the tax base zero bracket from the poverty level and created a system in which two taxpayers with very different ability to pay as a result of support obligations will be taxed the same, and in which two taxpayers with the same ability to pay will be taxed differently. The TCJA has turned the concept of horizontal equity on its head. In some cases the tax base will even be the taxpayer’s gross income in its entirety, subjecting to taxation even the amount needed for minimal subsistence. Under the TCJA the income tax will tax income from labor differently depending on the form in which the labor is performed. Labor income earned in the form of wages—by the performance of services as an employee—will be fully taxed at ordinary income rates. But some income earned by the performance of labor in any other way—as an independent contractor, for example—will be taxed at only 80 percent of the rate that would otherwise apply. Ability to pay is irrelevant. Although the foregoing fundamental changes to the tax system were not clearly identified and debated by scholars and tax professionals prior to enactment, the idea of shifting to a territorial system was. The TCJA rejects the principle of capital export neutrality, thereby creating a dramatic difference in the tax burden placed on income as a result of its source: henceforth, much foreign source income received by some U.S. persons, in the U.S., will not be subject to U.S. income tax, ever. But the shift to territorial is incomplete. The TCJA distinguishes between the taxation of foreign and domestic source income only for some taxpayers. It lacks a comprehensive policy foundation either domestically, or internationally.
    • Tax as Everylaw: Interpretation, Enforcement, and the Legitimacy of the IRS

      Abreu, Alice G.; Greenstein, Richard K. (2016)
      Although legitimacy is vital to any legal institution, in the case of the IRS legitimacy has been discussed and analyzed only in the face of catastrophic assaults. These include attempts by a President to use the IRS to persecute political enemies; allegations of serious abuse of taxpayers by IRS agents; and most recently allegations that conservative organizations seeking section 501(c)(4) status were disproportionately singled out for intrusive scrutiny and delay. While these instances have posed significant threats to the agency’s legitimacy, what we explore here is more subtle, more pervasive, and hence, more invidious and threatening. It is the way in which the unexamined assumption of tax exceptionalism – the idea that tax is different – has produced a situation in which the tax law and its administrators are viewed by tax professionals, and eventually by the taxpaying public, as interpreting and enforcing tax law in ways that are not understood, are therefore misperceived, and are ultimately judged illegitimate. Tax exceptionalism is not a specific idea. Rather, it is a way of conceiving of tax or, still more loosely, an attitude toward tax. At its simplest, tax exceptionalism is “the notion that tax law is somehow deeply different from other law, with the result that many of the rules that apply trans-substantively across the rest of the legal landscape do not, or should not, apply to tax.” We believe that the stubborn persistence of tax exceptionalism is due to an important but previously unidentified and unexplored feature – namely, that tax exceptionalism has two distinct aspects: a visceral aspect and an objective aspect. Taxpayers experience the tax law as different from other areas of law. No other field of law is thought to be so complex or to compel so many so regularly to bare their financial souls to the government just to be in compliance with the law. This is the visceral aspect of tax exceptionalism and we do not challenge the reality or the intensity of that experience. But we believe that the experience of difference has been reified, so that tax law is thought to be really different – objectively different in kind from other fields of law or perhaps not even law at all. It is this second aspect of tax exceptionalism – the objective aspect – which we want to challenge, for its powerful influence on tax scholarship, administration, and adjudication threatens the legitimacy of the tax law and of the agency that administers it. Our central claim is that when tax is viewed as objectively exceptional – that is, when tax is thought to be fundamentally different in kind from other fields of law – it is deprived of the analytical tools and vocabulary commonplace in other fields of law. This, in turn, imposes unnatural and unrealistic constraints on the IRS’s interpretive authority and enforcement discretion. The consequence is that what would for ordinary agencies count as legitimate interpretations and enforcement decisions appear inscrutable when performed by the IRS, contributing to taxpayers’ visceral experience of tax as exceptional and thereby perpetuating the cycle. Unmasking and then abandoning that objective aspect of tax exceptionalism has significant implications for tax law, tax administration, and the legitimacy of the IRS.
    • Tax: Different, Not Exceptional

      Abreu, Alice G.; Greenstein, Richard K. (2019)
      Tax is different from other fields of law, just as any field of law is different from others. But tax scholarship, judicial opinions in tax litigation, and public attitudes toward taxation have long claimed more than difference in doctrinal details. They have claimed that tax is different in kind from other fields of law—that it is unique. Some scholars have gone so far as to distinguish between “the legal system” and “the tax system.” Even though the Supreme Court seemed to kill tax exceptionalism in its 2011 decision in Mayo Foundation for Medical Education & Research v. United States, claims of tax exceptionalism have hardly abated. In this article we take on the concept of tax exceptionalism directly. We begin by accepting that scholars, judges, and taxpayers experience tax as different from other fields of law, but we then tackle the question whether these differences add up to tax exceptionalism. Our view is that they do not, and we believe that pragmatism provides a useful framework for identifying just what is mistaken about claims of tax exceptionalism.
    • Taxes, Power, and Personal Autonomy

      Abreu, Alice G. (1996)
      This Article explores the ways in which tax systems confer and distribute power. All tax systems impose burdens. Even more importantly, some tax systems empower. The extent to which a tax system empowers reflects and implements important values. The concepts of avoidance power and burden power are examined and applied to the federal income tax system and the federal employment tax system. The Author argues that the analysis of the ways in which tax systems empower and a determination of who the systems empower should become a standard part of tax policy analysis. The analysis of choice developed in this Article could be applied to the ongoing debate regarding alternatives to the federal income tax system.