MauledAgain

Two developments entering my consciousness during the past several days have coalesced into a hopefully coherent thought about the future of legal education. One is the news in last Friday's Philadelphia Inquirer that Drexel University plans to open a law school, and a critical "we don't need more lawyers" letter to the editor in today's edition of that paper. The other is an on-going discussion on the lawprof listserv about the advantages and disadvantages of seeing one's published articles sold by Amazon and other on-line vendors, the wisdom of seeking royalties, and strategies for accomplishing one's goals in this regard.

For those who are not lawyers or law students, and even for some who are, it helps to understand how legal education is structured in terms of goals, resource allocation, competition for students, placement of graduates, rankings, and other economic factors. Although not all agree with the model, a law school can be seen as an academy of law faculty who educate those who want a legal education. Not every law student plans to be a lawyer, and many who planned to be a lawyer discover that their interests, skills, disposition, and priorities inspire a move to other careers in which a legal education serves them well. That is why I carefully distinguish between "those who want to be lawyers" and "those who want a legal education," choosing the latter rather than the former.

Of course, no matter the immediate or long-term goal, because almost all law school graduates do practice law at least for some period of time, law schools should direct their resources to the preparation of law students for law practice. Law practice includes not only the familiar law firm environment, but judicial clerkships, corporate legal departments, government agencies, and non-profit advocacy institutions. In theory, at least, law school graduates emerge after three years of education ready to sit for a bar exam and enter practice. In practice, pun intended, law graduates emerge ready to sit for a bar exam and enter into a position where they will be apprenticed, guided, and nurtured by a mentor. In recent years, as business concerns (i.e., profits) have overtaken the profession of law, fewer attorneys have the time or resources to serve as mentors. The impact of this unfortunate development is beginning to manifest itself in what I, and some others, at least, see as a decline in the quality of lawyering and lawyer work product.

Each year, approximately 35,000 to 40,000 students graduate from law schools. There are slightly more than 1,000,000 lawyers in the United States. So it is easy to understand the "why another law school?" and "we don't need more lawyers" reaction to the news that Drexel University plans to open a law school. A closer look, though, suggests that there are several reasons why more lawyers and more law schools are needed.

First, although 35,000 to 40,000 new lawyers enter the ranks each year, close to that number leave each year. Some die. Some retire. Some switch to other professions and careers. Some take extended leaves to raise families. A few are disbarred. So the total number of lawyers is not growing such that after 20 years another 1,000,000 lawyers will appear. After all, law schools have been graduating 30,000 or more lawyers for the past 35 years, and yet added to the number of lawyers in 1970, there would be almost 2,000,000 lawyers. But there aren't, for the simple reason that lawyers also are leaving the profession.

Second, the population of the country has been increasing. Even if one assumes that the per capita need for legal services remains the same, and even adjusting for the efficiencies of technology, more lawyers are needed simply for the delivery of legal services to hold steady.

Third, the need for legal services is growing at a faster pace than legal services can be delivered. Think of all the individuals and non-profit institutions that need legal services and don't get them. Even when on best behavior, the population needs help with wills, healthcare acquisition, tax planning, workplace rights enforcement, environmental cleanup efforts, business formation, business liquidations, bankruptcy, and the list goes on and on. And, of course, some folks aren't on best behavior, so there is need for criminal defense assistance and prosecutorial efforts. Accidents happen, and people who don't know their rights end up on the short side of the ledger. We live in a litigious society. It isn't because there are lawyers or too many lawyers. It's because the "me first" and "my rights are more special than yours" culture that has permeated society makes us more aware of rights, the deprivation of rights, and the assertion of rights than were our grandparents.

That's not to say that there isn't a need for a "different kind" of lawyer, or for a realignment of how lawyers presently are arrayed in the hierarchy of law practice. Lawyers with wealthy clients do well, and get much of the attention that causes the "no more lawyers" and "we hate lawyers" reactions that percolate through society. On the other hand, there are many lawyers trying to eke by on $25,000 or $30,000 a year, which may sound comfortable to some folks until one takes into account that they are trying to pay back education loans at the rate of $12,000 a year. And that, shortly, will bring us back to legal education.

Keep in mind that what adds to legal fees is the cost of taking along a first or second year associate who is doing more learning than producing, and whose presence at the firm and whose need for mentoring is salved by the fact his or her billable rate exceeds by far his or her hourly-allocated compensation. Although in recent years some clients have become resistant to paying for the services of a "bag toter" there still are many instances in which the contributions of the first, second, or even third-year associate are not what they could be had the legal education in law school been different. And with that, back we go to legal education.

From what I understand reading the news reports, Drexel intends to produce a "different kind" of law graduate. One that, I suppose, and hope, will make for a "different kind" of lawyer. Or at least a graduate who can get untracked more quickly. The plan is to take Drexel's renowned and successful co-op program, used for years in engineering, and adapt it for law students. Each year, students would be in the classroom for 26 weeks, and in law offices for the other 26 weeks. In traditional law schools, students are in the classroom for 28 weeks each year, plus 4 weeks for exams. No law school other than Northeastern University (Boston) takes this practical approach to legal education.

Years ago, a person could not be a lawyer, that is, could not sit for the bar examination, until the person served what could be called an internship with an experienced lawyer. Of course, they ended up working for very low salaries, and eventually the requirement was dropped because the number of law graduates was more than the existing bar could handle. It's unfortunate, because law schools did not rush to fill the void. Decades later, despite the objections of the traditionalists, clinics were established at law schools to provide assistance to people otherwise lacking legal assistance, and this provided at least a small handful of law students an opportunity to set aside books and theory and meet clients and reality. Providing a clinic experience to all law students is expensive. The faculty-student ratio needs to be kept at the order of 8 or 10 to 1, which would require at least 10 clinician faculty for the typical law school, assuming the experience was a one-semester experience.

If Drexel can work out in law what it has in engineering, which is lining up employers to accept a student for a 6-month internship (or externship if the law school terminology is used), it would close the gap that most practitioners assert, and a few academics admit, exists between law school and law practice. It also is possible that Drexel would enter into arrangements with practicing attorneys to mentor a certain number of students for 6 months, and to teach during the other 6 months. This sort of shift from the traditional law school faculty alignment (full-time faculty must account for most of the student contact hours, and the use of adjuncts (practitioners who teach a course) is best limited to specialty areas (e.g., patents, trial practice)). Considering that Drexel plans to keep its tuition below that at the other area law schools, how will it make this work financially? I'm not the first to ask the question. I'm certain it already has been raised, if nowhere else than at Drexel.

Aside from a few heavily endowed law schools and state-supported law schools, the principal source of law school funding is tuition. In many schools tuition provides as much as 98% of the law school budget. Law school tuition averages a bit more than does undergraduate education. Think $30,000 (aside from other costs), sometimes $25,000, sometimes $35,000, and for state-supported schools subtract roughly $10,000. For most people, that's a significant expense. Don't forget to multiply by three. Yet applications for admission to law schools continue to climb, sometimes rapidly, occasionally more slowly, every once in a while pausing for a "flattening" of the year-to-year line in the visual graph used to illustrate the growth. Deans and budget officers are very skilled at figuring out how much of an annual tuition increase can be "absorbed" without cutting back demand to the point that law schools would struggle to find qualified applicants.

What do law schools do with the tuition and other income? They spend it. There are four major areas of expenses: faculty salaries and benefits, information technology (library and computers), staff salaries and benefits, and physical plant maintenance. In most instances, the university with which the law school is affiliated takes a cut, to cover overhead for things such as utilities and security. What makes this "work" in terms of balancing the budget is the fact that the typical student contact hour load for a law school faculty member is 12 credit hours per year, with about 160 students in 4 or 5 courses during the year (so a faculty of 40, each teaching 4.5 classes of 35 students, would teach rougly 6400 "student enrollments" in those classes, which would be what a 700-student school would need with each student enrolled in 4 or 5 courses each semester). Though the credit hours vary slightly, with some as low as 9 and some as high as 16, "student enrollments" vary widely, from as few as 40 per year to as many as 450 or more. That wouldn't work well in a medical school, or a dental school, or in most graduate programs. It works well at law schools because much of the teaching is lecture hall rather than one-on-one interaction. That's why clinics pose a challenge. Although it is possible to teach a substantive area course, such as tax or decedents, to a classroom of 90 or even 165 (I've done that), there's no way a clinic could be operated with one faculty member guiding that many students. Other graduate programs generally have much lower enrollment, and make the finances work by having graduate students teach undergraduate courses (thus freeing up resources), or, in the case of medical and similar schools, being affilated with teaching hospitals to whom the faculty, with their students in tow, provide services for compensation, which is pooled as a school resource.

Law faculty, though, do more than teach. Many are involved in public service activities. These include serving on boards of non-profit institutions, providing assistance to bar associations and their committees, giving legislative testimony, serving as counsellors to the indigent, working with law reform commissions, etc. But the most substantial non-teaching activity, for most faculty, is writing. Specifically, the writing of scholarship. Originally, law faculty wrote articles that were published by their schools, but very quickly the practice became one of having articles published in another school's law review. Law reviews, unlike journals in most other disciplines, were not peer-reviewed, but were (and still are) edited by second and third year law students. More of that weird phenomenon in a moment. As a law school's reputation began to get linked to the prestige of the other law schools in whose law reviews its faculty published, law faculty became subject to the ritual of "submitting" articles to 20-something students at other schools, whose decisions could (and still do) determine the publishing success of the faculty member, influence the reputation of the faculty member's school, and make or break the tenure decision with respect to that faculty member. Why? Tenure is not granted to law faculty unless, among other things, they have established themselves as scholars, which means, have managed to get published in student-edited law school law reviews. In the meantime, the cost of publishing those law reviews has been climbing.

Oh, what is tenure? Yes, it's an aside, but it's important that I don't assume readers know. As a practical matter, once a faculty member has tenure, the university cannot dismiss that person, that is, cannot refuse to renew the contract, unless the person commits a grievous violation of rules or unless the university downsizes or terminates a program. Tenure is something that exists almost nowhere else, namely, a job for life. After all, until now, very few law schools have closed, and downsizing for universities generally can be accomplished through the normal course of retirement and early retirement incentives.

Well, then, you ask, "Once someone gets tenure, what's the incentive?" For years, the answer generally was professional pride. Perhaps a faculty member had a "need" to write. I'm someone like that. But it was not uncommon for a faculty member's publishing to end once tenure was obtained. There even were schools where tenure was obtained without a need for publishing, but that practice ended, at the latest, in the early 1980s. In the meantime, U.S. News and World Reports, and some others, began ranking law schools, using publication (or its reputational effect) as a significant factor. What's a Dean to do? Simple. Design a merit or incentive compensation system, that adds a small amount to a salary, or is paid as a one-time bonus for having published. Studies show that these plans did have some effect.

"But doesn't that distract the faculty member from teaching?" is a common question. It's a good question. In theory, a person's scholarship and publications would dovetail with the courses he or she is teaching, thus enriching the students. As a practical matter, the disconnect is frequent and wide. Students are learning at basic levels, and faculty are writing at very advanced levels on narrow areas. Some faculty take the understandable position that one can do much damage as a teacher by taking one's law review article into a course, using days to cover the topic in fine detail, at the expense of other topics, when other faculty teaching the same course would not allot that topic more than 5 or 10 minutes. In other words, it's not good teaching, other than in a small seminar, to take students in a general scope course onto a month-long side trip touring a narrow topic thrashed out in a law review article.

Traditionally, faculty members are not paid by law reviews for the article. If faculty get merit or incentive raises or payments, they're being paid by students' tuition dollars or, in some instances, by the income of endowed funds. Recently though, someone discovered that Amazon.com and some other on-line vendors were selling law review articles and pocketing the proceeds or perhaps sharing those proceeds with the law review that originally published the article. Is that right? Is that fair? It depends on what the author has negotiated in terms of the copyright and licensing rights. Some faculty report having little leverage to bargain, and are essentially being told that if they want to publish, they must accept the law review's terms. Others report that they have been able to get language that satisfies their concerns. There's insufficient data at the moment to determine if there is a correlation between the faculty member's tenure status and his or her negotiating leverage.

Needless to say, the idea that law review articles are being sold, and faculty are not sharing in the proceeds, has generated much discussion. Some have pointed out that having one's article made available to the widest possible audience is the best return. Others ask who's buying, considering that very few judges and practicing lawyers read law review articles, and those who do have free access to the pool of articles. My response was that a book I publish is offered on Amazon for a higher price than I charge. The free market may be free but it's also weird.

Into this mix throw in one more factor. When law faculty (or practicing lawyers) write books, they earn royalties. To date, I'm unaware of any law school that requires its faculty to turn over royalty income the way medical school faculty pool the revenues from the medical services they provide to the patients in the teaching hospital. Not that it hasn't been proposed, almost always by the faculty who haven't produced a royalty-generating book. To put this in perspective, we're not talking John Grisham book and film right royalties here. No one has ever proposed turning one of my tax books into a movie. Egads! My only chance would be to plug the thing as dealing with a three letter word ending in x, which supposedly sells, but they'd be onto me within 30 seconds.

This explains one reaction that law faculty expect royalties from books but not from law review articles. The distinction is, perhaps, more one of tradition than substance or policy.

Against this long but hopefully interesting background, I set the words I shared earlier today with law professors across the country:

Why would we write anything for free? We don't.

Generally, we are paid by publishers for writing books. Sometimes we are paid by publishers for writing articles. It happens.

We are paid salary to write whatever we write for our courses (which varies considerably from those who prepare their own unpublished materials as the sole resource, through those who prepare supplemental materials, to those who go off-the-shelf).

We are paid salary to write articles. Supposedly. Sometimes. If someone has the option to write books and chooses to do so in lieu of writing articles, an interesting question arises. Should they return some salary for failure to write articles? Does the school accept books as worthy alternatives to articles? (Usually) Are the royalties turned over to the school? (Hardly) Or, could it be that the salary is for doing things that put the school on the map (and in recent years, earn points, statistics, votes, or whatever goes into those absurd rankings)? Generally, in recent years law schools have been tossing rather minimal "merit" raises designed to encourage writing. Interesting concept. No one who is paid by a publisher to write seems to need as much encouragement as those who aren't inclined to write for the pure joy of writing.

Personally, if someone wants to pay me to write, it tells me a lot about what they think of my work. It's surely a lot more fun than peddling and begging 22-year-olds to "accept" my work product and then do things to it that may or may not be good for it (including the bane of those who write in quick-changing areas, delay). Interestingly, my blog (for which no one pays me) does at least as much to put me (and the school, to a lesser extent) on the map than any other writing (and considering that the only other blog at the moment among the law faculty here is the Dean's, that makes me wonder where "merit" is heading or at least how strenuously I should argue the point when it is more a matter of principle than dollars).

For years, the cost of publishing law reviews has been borne by law schools, or, more accurately, by law students. Aside from a few places that have law review endowments, or that otherwise are heavily endowed for scholarship, tuition dollars pay the salaries of the unpaid article writers and pay the costs of publishing the law review that aren't covered by subscription revenue. The Internet reduces the cost of publishing. Why would any journal publisher need for some other outfit (other than a contracted web page programmer) to do Internet publishing of its output? Yes, there always are "agents" looking for a cut, but what "value added" is provided by Amazon or HeinOnline that is worth what they're taking?

Ultimately, marketplace economics will dominate law authorship. The question is whether it will be a free market, a corporate-dominated market, a government-regulated market, or something else. The division in the law author world between those who write for compensation, and those who don't or can't or won't (with an acknowledgement that there are those who put a foot in each camp) will sharpen. The murmurs of "share the royalties" will begin to resound as a chorus. There are some things on the horizon that I'm going to guess are not on the radar screen of many (most?) law faculty.

And eventually law students will ask why they are paying tuition dollars to subsidize writing that they see as having little direct impact on what they think they are buying. Right or wrong, law student
perception in a competitive marketplace will have an impact. The law schools that begin the shift from the "old law school model" will gain an advantage once they learn to sell themselves based on the
accomplishments of graduates and not the computational grindings of magazine surveys and ratings. The advantage? A combination of lower tuition and increased teaching resources. The challenge? The "old law school model" law schools will use accreditation withholding as a lever to salvage the guild.

And there were those who said digital technology and the Internet would have so little impact on what we do. Right.

And this brings me back to Drexel University's proposal for a new law school that focuses on law practice internships. Because it would be following Northeastern into a different educational environment and developing a new 21st century model of law schools, would it care about the rankings of the "old law school model" law schools in U.S. News and World Reports? Will it want its faculty devoting time and resources to publishing law review articles that pretty much are read by a few dozen or sometimes a few hundred other law professors, and that unlike publications for which the market provides a recompense, are rarely read thousands or tens of thousands of times? Will Drexel prefer that its faculty put in 8 to 10 hours "in the classroom" each semester (instead of 5 to 7) so that students get a more personalized experience and individualized attention? Will Drexel succeed in its presumed public relations campaign to demonstrate that lower tuition can mean higher quality because resources are not directed to law review scholarship? If so, will Drexel manage to attract students who would otherwise attend other law schools rather than dipping into those in the applicant pool who currently don't get admitted to any law school? Will prospective students give more weight to practical experience than to U.S. News rankings? Will the idea of paying tuition used in part to finance the writing of little-read law review articles offend students to the point that they will choose Drexel over traditional law schools? Will law firms, weary of carrying the burden of closing the gap between traditional legal education and practice, turn to Drexel as a source of experienced, interned, ready-to-go law graduates? Can Drexel succeed in turning out students who bring a fresh wave of change throughout the legal profession? If time proves the answers to these questions to be yes, legal education may undergo its biggest shakeup since Christopher Columbus Langdell decided that reading cases in a classroom was a better way to prepare for the practice of law than working in a law office. Oh, that was more than 100 years ago.

When the Drexel news broke, someone who has heard my monologues on legal education over the years said to me, "They're using your model." I replied that it wasn't my model, because it isn't. My model may be different in some ways but Drexel has not released, and probably hasn't made decisions with respect to, details sufficient to determine how close its plans would come to my model. Publicly, the other area law schools have been polite and reserved in reaction to Drexel's plans, wishing the institution well, pointing out that it takes years to build a reputation, and describing the competition for students as not a zero-sum game. I wonder what is being said behind the closed doors. I wonder who, if anyone, sees writing on the wall.

Though it's not quite tax, theology, genealogy, or chocolate chip cookies, sailing across the Atlantic is something in which I not only have an interest but is something I've done. More than once. I could connect this with tax, theology, genealogy, and even chocolate chip cookies, but I'll simply let you find the one instance where the word "tax" appears in this post.

I must admit that when it comes to ships, there's something about grand size that catches my attention, even though size alone rarely impresses me. The first time my son and I saw the QE2 we looked at each other and said, "Whoa!" He then added something to the effect that it was "a little bit bigger than my Sunfish." Yeah, a little bit. Try a whole lot and then some. His Sunfish is about 12 feet long. The QE2 comes in near 1,000.

Anyhow, the news a few weeks ago about the damage done by the 70-foot wave that hit the Norwegian Dawn brought inquiries from family members and a few friends seeking my reaction. After all, I keep telling people how much fun it is to sail, trying to persuade them to try it, and here comes news that would frighten away all sorts of people.

What prompts this post is the picture accompanying this report from NBC 10 in Philadelphia. My sister wanted to know "So, is that God's finger? Was he punishing the poor passengers? Is the cruise ship story a hoax? Was it really just a toy ship? Are we all "little people" in a world of giants?"

Models of cruise ships do exist, though the one in the picture would need to be very small. That's what it appears to be. It could be a finger in front of a scaled-down photograph or screen shot, but why? Probably to show where the wave hit?

I reminded everyone that veteran passengers of the QE2 remember, and all passengers have been told about, the time a 90-foot (or 87-foot, or 92-foot, or 95-foot, depending on which report one reads) wave hit generated by the remnants of Hurricane Luis hit the ship. It is difficult to estimate wave height on the ocean, but because this wave broke at bridge level, the estimates are within the ballpark of reality.Here's the ship's log and here is a more detailed report. Several years ago, a film production company producing a documentary for the Discovery Channel about a new wave phenomenon was looking for eyewitnesses. Has the film been made?

In a September 17, 1995 article, headlined "PEOPLE SLEPT ON QE2 THROUGH 95 FEET WAVES " and reprinted partway down the page of this website, Colin Nickerson of the Boston Globe reported that then-Captain Ron Warwick, having no way to avoid the remnants of the hurricane, slowed the ship to 5 knots, ordered the passengers to stay below deck, and guided the QE2 through the rogue 95-foot wave (and a second wave that was only slightly lower) while the winds blew at 120-miles-per-hour. Ron Warwick is now Commodore, and I've met him several times. I'd go to sea in a hurricane with him or any of his Cunard captain colleagues without any hesitation. They're that good.

Of course, I'd want to be on the QM2 or the QE2, because they are built to withstand the fury of the North Atlantic. The damage to the QE2 consisted of a few bent bow railings and some scratched paint. No one was injured. Passengers awoke the next morning to find a certificate under their doors (yes, there's a print shop on board) telling them that they had sailed through a 95-foot wave. Most had been unaware of the episode because they were asleep.

The folks on the Norwegian Dawn expressed much unhappiness about their captain's decision to sail into the storm. Whether he had any other alternative or was, like Warwick, unable to find a storm-free course, hasn't been definitively answered. However, he was mastering a cruise ship, not an ocean liner. Cunard never passes up an opportunity to explain the difference between the two, and now, unfortunately, there's something more than theory and the QE2's 1995 experience to show the difference. Had the Norwegian Dawn been hit by a 95-foot wave while buffeted by 120-mile-per-hour winds, it could have been a disaster far worse than what did in fact transpire.

When I first announced I was sailing across the Atlantic on the QE2, Sandy Degler, then president of BNA Tax Management, Inc., for whom I write Tax Portfolios, expressed doubt that I would be comfortable with the slowed-down pace of life aboard ship. Considering my usual high-paced level of activity, her comment made sense. However, I figured that some sort of "enforced relaxation" would suit me well, and it did. Of course, there's so much to do on the QE2, and its trans-Atlantic successor, the QM2, that the slowdown isn't quite a switch to couch-potato status. Yet it is refreshing, relaxing, and eliminates the aggravations of jet lag (especially return jet lag).

Will I sail again? Yes. Having been through, on my very first crossing, a storm that generated Force 9 winds, and having found that experience exhilarating, I can understand, to some extent, the pleas of those passengers who beg the captains to head FOR rough weather. Of course their requests go unheeded other than as fodder for story-telling. But if I ever do meet up with a monster wave, I'll want to be on a Cunard liner and not on a cruise ship. You would, too.

Two weeks ago I shared my analysis of the tax consequences of amounts received by bloggers from their readers. One of the bloggers mentioned in the Philadelphia Inquirer article that triggered my blog post, and who was mentioned in my post, wrote to me expressing concern that I had reached my conclusions without all the relevent information. Susie Madrak, who writes the Suburban Guerilla Blog, has agreed to let me post her message. That way, my response makes far more sense than it would had I posted it alone. To make it easier to follow, I have separated her message and my response into four segments.

Ms Madrak's first point:

My readers had no reasonable expectation of saving a kitten's life because I have no kitten. I am famously allergic to them, in fact. The post was a takeoff on a famous National Lampoon cover of a dog with a gun to its head and a caption: "Buy this magazine or we kill this dog." Plus, some bloggers post doting pictures of their cats on Fridays and it was also a takeoff on that - as evidenced by the headline "Here's your Friday cat blogging, pal!"

She raises a good question: Does the analysis change if the blog readers know that the kitten's life is not in any real danger and that they are not paying money to save a kitten's life? I explained why it doesn't make a difference in the analysis:

Whatever may have been the intent in using the kitten photo, as a matter of legal analysis it shifts the situation from one of detached and disinterested generosity to one of solicitation. Legally, it is irrelevant whether a kitten existed, whether a kitten was in peril, or whether there were allergies to kittens. Donors saw a captioned photo that connected continuation of a blog with monetary transfers to the blogger. Of course, a caption "I will blog whether or not I receive money" underneath the picture would have defeated the whole purpose of the message because it would have been inconsistent with it. The fact that bloggers who do not set up payment mechanisms, ask for money, or otherwise encourage contributions do not receive "tips" or "contributions" whereas most of those who do set up payment mechanisms and solicit get a response makes the "voluntary, unsolicited gift" characterization a legal conclusion inconsistent with the facts.

Ms Madrak's second point:

As I said to the Inquirer reporter who interviewed me: If she writes a story about a single mother whose home is destroyed by fire on Christmas Eve, and readers send her money, is that money taxable income - or gifts? If I write a story about the engine going on my car, and the fact that I have no money to fix it, and I mention that I know of a more reliable car for sale and my readers send me money, is that income - or donations?

This time, she utilized a good tool of legal reasoning, namely, comparative analysis. Isn't she in the same position as the fire victim who gets help from strangers? I responded by addressing the lack of parallel in the analogy and by pointing out the uncertainty of the conclusion with respect to the fire victim's tax consequences:

You are correct, that if there was nothing more than a reader-donor choosing to send money without any suggestion other than the reader-donor's own internal mind-set or conscience, the situation would be very similar to that of the person whose home is destroyed by fire. There is a difference, though, between a reporter suggesting to readers that they assist a victim, and a person directly soliciting financial contributions. Hence the "detached" portion of the "detached and disinterested generosity" test for status as a gift excludible from gross income.

Even so, believe it or not, until a week ago, it would not have been clear-cut that the amounts received by the fire victim in your hypothetical would be excluded from gross income. If it were clear-cut, there would have been no need for the Congress to have just enacted an amendment to the Internal Revenue Code providing that disaster relief payments received by taxpayers are excluded from gross income. That settles the question for disaster victims (at least with respect to funds received from specified sources). It arguably changes prior law to that extent (for if it did not change prior law, what's the point of enacting the amendment?). However, it leaves your analogy unhelpful to you for yet another reason. Unlike the disaster or casualty loss victim, a person whose car engine dies is not within the scope of disaster or casualty as defined in the Internal Revenue Code and its regulations.

Ms Madrak's third point:

I told the reporter I objected to the use of the term "tip jar" for the very reason you mention. I blog whether readers send money or not. There is no quid pro quo, no exchange of services - and no base pay to supplement. What do you think my readers thought they'd get - cab service? My job requires me to be on the road and my readers contributed toward keeping me employed. If anything, they knew I'd do even LESS blogging with a more reliable car, because I can accept more assignments.

On this point, she brought her comment to the very core of the problem, and I responded by trying to explain the reasoning behind the somewhat counter-intuitive tax rule concerning tips:

Tips are included in gross income even though, in many instances, there is no expectation of a benefit or quid pro quo. Consider the person who leaves a tip as they depart from a place to which they will not return. At that point, they expect nothing in return. That argument has been made by tip receivers in such situations, and that argument has been rejected, consistently, even though it does have a lot of logic going for it. For example, the "find me a good seat" tip is very different, and yet the courts have held that all tips, whether made to employees or independent contractors, constitute gross income. The lack of a quid pro quo is ignored.

The overwhelming weight of opinion among tax professionals accords with the views I expressed. The case law (especially the one involving the radio preacher) also supports that view. My advice to any blogger would be to avoid anything, satirical or otherwise, that suggests any sort of solicitation. Setting up a payment mechanism (whether or not called a tip jar) is inconsistent with avoiding the appearances of solicitation. Amounts received by persons who beg for money, especially if the amounts received constitute are significant, are gross income, and are subject to self-employment taxes (Barry v. Shalala, 840 FSupp 29 (SD NY 1993)). In response to the applicable legal principles, under some circumstances, and I speak not to yours specifically nor offer advice in that regard, it might make sense for a blogger who is engaged in public service to consider the establishment of a tax-exempt organization, which would provide an array of tax and other benefits (and an array of responsibilities).

I tried to clarify that my comments were based on what the law is, and not what on it perhaps should be:

It is an unfortunate fact of tax law life that outcomes turn on technical definitions and questionable policy decisions. After all, why are disaster victims more deserving of tax relief than those whose car engines die or whose hot water heaters give up? The fact that in my posting I analyzed existing tax law doesn't necessarily mean I would have written the law to be what it is. One of the toughest aspects of law practice is to tell someone that they don't have a case, even if their position is sympathetic.

Of course, if an income tax law were written the way I think it should be, the issue wouldn't exist because I would treat all income as gross income, permitting such a low set of rate brackets that the income tax law would get about as much attention as the one in Pennsylvania, where the rate is low enough that most taxpayers conclude it's not worth struggling with the income base question. Surely, though, there is a level of incongruity in letting assistance to certain victims go untaxed and imposing taxes on amounts sent to persons with other sorts of financial setbacks. Should the tax outcome depend on whether the car stops running because the engine dies or because a tree falls on it? Of course, most bloggers who are receiving money from their readers aren't pointing to specific instances of unfortunate episodes. Thus, I continue to wonder, as I shared in my response to Ms Madrak, what comes next:

It will be interesting to observe the reaction of the IRS to the "blogging contribution" phenomenon. I have a hunch that the IRS will not simply consider the situation to be one of excludible gifts. Assuming that it has sufficient resources to proceed, the IRS likely will audit and assess deficiencies against several high-profile, large receipt bloggers whom it selects with an eye to litigation success. Then, as it does with respect to almost every other issue, the IRS will rely on the deterrence effect it believes its audit and litigation successes have.

Finally, I addressed the concern Ms Madrak raised in the opening paragraph of her message:

As the blogger to whom you refer in your post, let me clarify your misleading remarks. I'd hope a law professor would know better than to render what you put forth as credible professional opinion without complete information:

I explained:

Thus, I do not think that my remarks were misleading. If the reporter's statements about your blog or your words were misleading, that is something else. My readers know that my analysis was based on the information provided by the reporter, and I made that clear in my post. In this instance, the additional facts (concerning the satirical nature of the captioned kitten photo) do not change the legal analysis I shared with my readers, or that I paraphrased in this email to you.

I was careful to characterize your quoted words as correct in and of themselves, and I was careful to note that I disagreed with the application of the gift conclusion to the situation that was described in the story. I see nothing misleading in how I handled the reporter's quotation of your position.

If the dollar amounts mentioned in the Philadelphia Inquirer article that triggered my post on the issue aren't exaggerations, and if the practice of sending money to bloggers is as widespread as it appears to be, this is a tax issue that isn't going to go away. Coupled with the mistaken notions floating around with respect to the tax consequences of selling items on eBay, the conclusion that monies received by bloggers from readers are excluded as gifts probably will move the IRS to act, either through issuing rulings, through audits, or both. It will be worth keeping an eye on further developments in these areas.

Analyzing how to deal with a person's emails when the person dies, on which I previously posted this original analysis, this followup, and this followup, has been made a bit more complicated by developments in the Ellsworth case. As reported by the Detroit Free Press, under a court order that it did not oppose, Yahoo delivered to the family of a marine killed in Iraq a CD containing the decedent's emails. According to the decedent's father, the CD contained incoming emaisl but no outgoing emails. It isn't clear whether there were any outgoing emails on Yahoo's server. None of the emails that the decedent was known to have sent and that had been received by his family before he died were on the CD.

According to the report, the CD contained the equivalent of 10,000 pages of email. That's a lot of email. I'm wondering exactly what it was that Yahoo provided on the CD. Apparently Yahoo also is wondering, because after being told of the puzzling status of the emails it responded that it was going to try to fix things.

The family wonders why Yahoo didn't simply provide the decedent's username and password. Is there some way for a decedent to provide his or her username and password for use after death without having a security breach while alive? Perhaps leaving the information in a sealed envelope with a third party, such as an attorney, would work, but every time the username or password is changed, the contents of the sealed envelope would need to be changed. How many people, when changing an email password for security purposes or opening an account with a new provider, would think to update the information in the envelope?

Yahoo appears to take the position that issuing the username and password to the decedent's survivors would violate its privacy agreement with its users. But perhaps Yahoo and other providers can give users an option to select when opening an account, namely, "if and when you die, do you wish for us to provide your username and password to your executor or administrator?" accompanied by instructions on the identity and contact information for that person.

Many decedents have email accounts. Eventually almost every decedent will have an email account. Something needs to be done so that the courts are not inundated with litigation with respect to every estate. Although Jennifer Granick, executive director of the Stanford Law School Center for Internet and Society, is correct when she says, "The family got a court order, and that's an appropriate process. Yahoo is allowed to disclose this stuff under the law," surely there has to be a better, more efficent way.

One possibility is the sign-up option that I described, which would leave the resolution to private party contracting. Another, perhaps less than ideal, would be legislation. These are not mutually exclusive alternatives. Legislation probably would be needed to deal with situations in which the contract approach is not taken.

Today, in the Decedents' Estates and Trusts course, we reached the topic of public policy restraints on property disposition. Specifically, we discussed destruction of property, and treatment of decedents' emails. The consensus appears to be that decedents should have a right to order their email destroyed rather than distributed to heirs, even if the email has value. So perhaps that, too, should be an option in the email provider contract. Of course, if for some reason a government agency issues a subpoena to acquire the email, that subpoena would override the decedent's directive.

The explosion in technological advances has opened up all sorts of questions for which legislatures have not provided answers and which impose on courts the obligation to apply inadequate law to challenging situations. Tomorrow, in the same class, we will be discussing a case involving attempts by a decedent's children to prevent his surviving girlfriend from using his frozen sperm to become pregnant. I guess one lesson is not to leave the instructions in an email.

It would have been far less expensive, and far less time consuming.

It amazes me when old news makes headlines as new news. Perhaps old news is new news to the folks who were unaware of the news when it was old news?

This morning's Philadelphia Inquirer brought this inner page headline:

Too many deductions, credits fill U.S. tax code, panel finds
That's news?

Taxpayers are paying for a Commission's expenses so it can reach a conclusion some of us reached years ago?

Connie Mack, the former Florida Senator who chairs the tax reform commission, said, "It wasn't until we really had the opportunity to listen to so many different people talk about so many different aspects of the code that it really sunk in about how much and how often the code is being used these days to either create incentives or disincentives for either investment or behavior."

Excuse me, Mr. Mack, but weren't you part of many Congresses that amended the Code, adding layer after layer of special interest provisions masquerading as palliatives for the nation as a whole? Didn't you pay attention to the parade of tax legislation prancing past your desk month after month, session after session, Congress after Congress?

Goodness, commission members, just read (or skim) BNA Tax Management Portfolios 501, 503, 505, and 506, where I overview (and in some instances analyze) every gross income exclusion and inclusion, every deduction, and every credit. If that's not enough, Portfolio 504 does the same for every deduction limitation, and Portfolio 560 slogs through every basis provision. Yes, I had the wonderful experience of searching through the entire Code looking for every reference to income, deduction, credit and basis. Then I sorted them into categories so that I could write the Portfolios in an organized manner. Yes, for the cost of one phone call, I could have told you that there are too many deductions, credits, and, yes, exclusions, in the tax law. Or you could have called any one of many of my professorial and practitioner colleagues. They would have said the same thing.

For example, the commission reports that two credits, one deduction, and "special savings plans" are designed to subsidize higher eduction. That list is a wee bit too short. Nonetheless, the choice should be (a) do not subsidize eduction, (b) subsidize education other than through the tax code so that its true cost can be seen, or (c) subsidize education through the tax code using ONE provision. But do we really think Congress will tolerate removal of choice (d) from the menu. Yes, choice (d) which is "subsidize education through as many different, overlapping, conflicting, confusing, and definitionally inconsistent provisions as there are members of Congress who want to jump on the 'I'm for education it's almost as American as apple pie' bandwagon in an effort to rack up a few more votes from people who complain about complicated tax laws but who shoot themselves in the foot voting for the very folks who create the mess." After all, eliminating choice (d) might just compel a reformation of American politics and the culture that spawns it. Just imagine! Well, I guess I just made a bunch of new friends in D.C.!

The commission also noted the proliferation of urban and rural empowerment zones, enterprise zones, renewal communities, and a wide array of provisions designed as incentives for investment and job creation in certain areas. Yes, indeed. There are so many that I had enough to write an entire portfolio, namely BNA Tax Management Portfolio 597, Tax Incentives for Economically Distressed Areas. At least I can't complain that the commission didn't read it, because it's "at the press." It was delayed, because just after I submitted the manuscript, Congress tinkered and fiddled with most of the provisions, so back to the drawing board I went. It's a wonderful example of how it's a challenge to write about the tax law, because Congress changes things faster than I can write. Considering how fast I do write, as readers of this blog know, it is rather frightening that Congress can change the rules of the game faster than the game is played.

So now that it's taken the commission this long to figure out what everyone in the know already knew, what's next?

Not much, I fear. Taxpayers can easily be stampeded into supporting objections to the removal or reform of just about every provision in the tax code. Lobbyists are good at that. Years ago they managed to convince Americans that withholding on interest and dividends was a "new tax" and triggered what was then the largest write-in compaign (on bank-provided pre-written postcards) asking Congress to repeal a provision designed to increase compliance with an existing tax. Yes, there are a lot of tailors in the business of making new clothes for the emperor.

Already, several deductions have been declared too sacred to be repealed or limited. The idea of a sacred deduction is a rather interesting theology. No deduction is sacred. No tax is sacred. What is sacred is doing the right thing, and the current tax law is far from the right thing.

It's time for change. It probably won't happen. So, what is the outcome when change that is overdue doesn't happen? History tells us the answer. I'll leave that for the historians to explain.

A few days ago I commented, somewhat sarcastically, on Tom DeLay's puzzling reaction to Justice Kennedy's use of the Internet to do legal research. Though most of the comments I've since seen or heard are consistent with my reaction, including a quip that the next criticism will be directed toward abandonment of quill pens for ballpoints, I've heard a few speculative explanations that are bothersome if they are true.

Someone suggested that DeLay does not realize that legal research can be done on the Internet. Well, if that is true, it's incredibly outrageous. Tom DeLay is a member of Congress. Congress enacts and amends law. Some of those laws affect use of the Internet. DeLay ought to know something as basic as where legal research can be done.

Someone else suggested that DeLay simply may be casting the situation in a light that will appeal to those persons who think activist judges should be curtailed and that wandering into the broad scope of legal resources available on the Internet, including laws of other countries, is a characteristic of activist judges. As I pointed out in my original post, though there is room to debate the extent to which law in another country should inform decision making by a U.S. judge, it is a quality trait to be active in educating one's self. Gee, that's a trait that wouold be helpful to each and every individual, with members of Congress at the head of the parade.

Another guess was that DeLay may have been voicing a concern that judges use the Internet to discover facts that are not in the record before them. Without getting into an extensive discussion of judicial notice, it doesn't seem as though the concern was a Justice's attempt to ascertain additional facts, considering that the records in Supreme Court cases are almost always thoroughly developed.

Note that the folks who were trying to explain DeLay's comments weren't so much agreeing with the speculation as they were trying to make sense of what is, to me, a totally bizarre episode.

It gets better. Unless Westlaw made a mistake, it appears that Justice Breyer also uses the Internet. In this instance, it was indeed an attempt to clarify a fact in the record. When the Court was hearing the Van Order (Ten Commandments case), Justice Breyer asked:

I've got to get one question before you leave because you're the one who knows the record. And what I've had a hard time finding in the record is what I think there must be some material that the State or somebody in a tourist office or a guide or somebody tells people what the 17 different monuments are. And all I've found is the general brochure which doesn't tell them what they are. And I found something on the Internet. Well, which is in the record. But aside from this page from the Internet in the record and that, is there anything else in this record that if somebody wanders around, they're on the State grounds, they say, what is this, what are these things anyway? There must be something to tells them. And where is it?

It seems that what Justice Breyer found was the same Internet page that already was in the record. That certainly reinforces the proposition that the record is in good shape when the case reaches the Supreme Court. Is it so wrong for a Supreme Court Justice, or any federal or state judge, to do some factual research to get an idea of whether the record has been developed properly?

Here's an even more incredibly outrageous thought: Could it be that DeLay was referring to the question by Justice Breyer when he made the comment about Justice Kennedy? Goodness, it would be nice if someone as high ranking in the House as is Tom DeLay would step up and either clarify or retract his statement. But perhaps the one commentator is correct. Perhaps political purposes aren't well served by a clarification or retraction in this instance. That's too bad. For everyone.

Of course, the analysis of MauledAgain readability brought a swift reaction from my sister. She's an educator with a specialty in teaching reading to students who need remedial and other assistance, and she has spent many of her teaching years in a dual role, serving as an administrator of reading programs. Her response is worth reading in full:

Very interesting.

I will have to compare this with my readability charts at school.

Of course, as a reading specialist, I would have to add that readability is not merely about the number of words in a sentence and the number of syllables in a word. This is the presumption that was made with the old "basal reader" that failed many a child in elementary school.

Readability also includes the overall layout of the text on the page, the font size and color, the effect of diagrams, photos, illustrations, etc. and the way in which the author organizes the materials and includes support for the reader, such as embedded definitions, introductory and summarizing sentences, etc.

The reader, of course, remains the unknown quantity. What is the reader's intent or purpose for reading? What background knowledge does the reader bring to the task? Can interest and focus be maintained? Does the reader actively clarify during the reading? Is the reader attentive enough to be able to effectively retell and summarize portions or all of the material?

Just a few things to think about.

She's quite correct, of course. Anyone who has tried to slog through IRS regulations learns that page layout, white spacing, footers, and other features makes a huge difference in comprehending the message imbedded in the regulations. I've yet to figure out how to adapt MauledAgain to those sorts of features.

Half an hour later, her husband sent me an email. True to form, he tried to be practical and entertaining at the same time:

Interesting. When I put in various chapters of the Bible it turns out that the old testament is much harder to read than the new testament. Obviously some parts of the Bible are much different than the whole - Psalm 23 being simple compared to select chapters of Genesis or Revelations which can reach US government standards in coverup.

The US Constitution is much harder to read than TV Guide, most novels, and the Wall Street Journal - which reconfirms it is beyond the understanding of most politicians.

My first thought was that my sister thought my posting was "very interesting" whereas Michael though it was "interesting." Oh well, maybe there's some sort of sibling premium at work.

Now I'm going to go distract myself and start pumping all sorts of materials into the readability tester!

Sometimes, as in this instance, I abandon my resistance to being a mere imitator. When I saw that Paul Caron had subjected the TaxProf Blog to a readability evaluation, I knew that I had to do the same for mine. After all, I told I speak in long-winded convoluted sentences. Do I write that way? The folks at Juicy Studios have set up a web page that analyzes web sites, single HTML documents, and a few other things.

So.... here we go, and you can draw your own conclusions:

Readability Results for http://mauledagain.blogspot.com

Summary	Value
Total sentences	559
Total words	8,957
Average words per Sentence	16.02
Words with 1 Syllable	5,889
Words with 2 Syllables	1,803
Words with 3 Syllables	855
Words with 4 or more Syllables	410
Percentage of word with three or more syllables	14.12%
Average Syllables per Word	1.53
Gunning Fog Index	12.06
Flesch Reading Ease	61.17
Flesch-Kincaid Grade	8.71

Interpreting the Results
Philip Chalmers of Benefit from IT provided the following typical Fog Index scores, to help ascertain the readability of documents.

Typical Fog Index Scores

Fog Index	Resources
6	TV guides, The Bible, Mark Twain
8	Reader's Digest
8 - 10	Most popular novels
10	Time, Newsweek
11	Wall Street Journal
14	The Times, The Guardian
15 - 20	Academic papers
Over 20	Only government sites can get away with this, because you can't ignore them.
Over 30	The government is covering something up

The following section describes the Gunning-Fog, Flesch Reading Ease, and Flesch-Kincaid algorithms for readability.
Gunning-Fog Index
The result is your Gunning-Fog index, which is a rough measure of how many years of schooling it would take someone to understand the content. The lower the number, the more understandable the content will be to your visitors. Results over seventeen are reported as seventeen, where seventeen is considered post-graduate level.
Flesch Reading Ease
The result is an index number that rates the text on a 100-point scale. The higher the score, the easier it is to understand the document. Authors are encouraged to aim for a score of approximately 60 to 70.
Flesch-Kincaid grade level
The result is the Flesch-Kincaid grade level. Like the Gunning-Fog index, it is a rough measure of how many years of schooling it would take someone to understand the content. Negative results are reported as zero, and numbers over twelve are reported as twelve.

A colleague drew my attention this morning to a story on the Chronicle of Higher Education web site about the disadvantages of information technology. The under-headling, "Wired campuses may be causing 'information overload'" caught my eye and inspired my comment to my colleague, "That's been a problem long before technology evolved. Every day I acquire more information and my brain is getting full." He agreed, and described the challenges of dealing with the fall-out of the Supreme Court's recent sentencing decision, which leaves in its wake a wide array of lower court opinions reacting to the decision. I pointed out that the glut of court cases on sentencing, which is one of his areas of expertise, would have arisen regardless of technology, and that technology made it much easier to search through, sort, arrange, and analyze the cases than would have been the situation in the days of paper, pencil, and photocopies. He agreed.

The primary concern of the computer scientist featured in the first part of the article, David Levy of the University of Washington, is that scholars are losing touch with the reflective and contemplative aspects of scholarship. That need not be the case, though, if scholars are conscious about budgeting contemplation time in their lives. I'm not a scholar in the traditional university mold, though I occasionally play the role to placate some folks, but I allow myself time to ponder. The distractions of e-mail, listservs, blogs, and all the other hallmarks of digital technology are simply an enrichment of the distractions afflicted on students by television during the past half-century. Good budgeting, which for children means good parenting, shoves the television aside for study time. So it was for me. Today, there's more to shove aside, but unlike television, a passive brain-numbing zombie machine, e-mail, blogs, listservs and the like provide opportunities for students and scholars to engage their brain. Of course moderation is in order. Perhaps I was taking that for granted, and Prof. Levy done me a service by reminding me that some folks get so immersed in the acquisition of information, or the generation of information, that they don't take enough time to exercise their "thinking muscles." Prof. Levy says he uses his Sabbath observation as part of his moderating balance, and I can relate. When I go to church, there's no cell phone, no e-mail, no television. But unlike Eric Brende, who advocates giving up all modern devices, I see no point in returning to the candle-lit days of horse-manure-filled muddy roads, its attendant disease, and other disadvantages.

Another featured academic, Prof. Buzz Alexander of the University of Michigan, directs his students to meet with him in person rather than communicate by e-mail. Sometimes e-mail is insufficient. Some things are more easily discussed in person. But if I tried to shift all my e-mail correspondence to in-person visits, I'd be back in the early 80s with lines forming at the door, with repetitious conversations, and with huge inefficiencies. Some questions are meant for e-mail. Perhaps Prof. Alexander doesn't have the 150 students or more per semester that have been a salient feature of my teaching career.

Prof. Bill McKibben of Middlebury College worries that there are so many trees that finding the forest will become impossible. Interestingly, one of the emphases in my teaching is making certain students know how to find the forest.

Michael Gorman, dean of library sciences at California State University at Fresno, suggests that using google to find information is not scholarly research. Of course. Scholarly research requires doing something with the information. It needs to be analyzed, processed, compared, turned inside out, corroborated, explained, challenged, tested, and absorbed when worthy. Again, it is incumbent on those of us who teach to push students out of the "information in during semester, regurgitate on exam" approach that has become way too common in education. A word of warning to those who push students to answer "Why?" rather than "Who, what, when?" or who demand students identify errors in argument, questions that need to be asked, or assertions irrelevant to an objective. Students are comfortable with "information in, information out," often squirm and complain when moved into what I call the puzzle-solving and puzzle-planning mode, and then, fortunately, generally come to appreciate and enjoy the deeper use of information in the context of contemplation. It's that transition period that is so tough.

When David Landers, director of the student resource center at Saint Michael's College expresses concern that technology deprives students of the face-to-face interaction needed in a work environment, my reaction is to ask, "Have you seen most work environments lately?" Face-to-face interaction, though it still exists, has faded. He's right, though, that students need to do other things. After all, a brain in an unexercised body isn't getting the appropriate nutrients. A brain that doesn't encounter the world in community service is starved for context. Yes, it's a matter of moderating balance, something that we who are older usually grasp more easily than those who are younger, just as we, when younger, generally lacked the ability to be moderate and balanced.

Technology is a tool, or better, a collection of tools. How we use those tools is up to us. If we use them improperly, we ought not blame the tool. A hammer is not good or bad. A hammer is a hammer. When used for a good purpose, like fixing a fence, it remains a hammer. When used for a bad purpose, like bashing in an ice skater's knee (wait, that was a crowbar, right? Sorry), it remains a hammer. If we can teach people how to use hammers in good ways, we can teach people how to use technology in good ways. And we can teach people to think about what it is they are planning to do with the hammer, and why, and to use the hammer appropriately. It's the same mindset that needs to be instilled in people who think they can carry on intense cell-phone conversations (hands-free or otherwise) while driving.

But it's good that some in the academic world are thinking about this issue, and sharing their thoughts. Then the rest of us can think about it. Which is, of course, their very point.

How would you like to have $200,000 or more of income and pay no income taxes to any country? Sound too good to be true? Guess again.

A recent IRS report on high-income taxpayers, based on the last year (2001) for which information is available explains that there were 2,567,220 individual income tax returns with adjusted gross income of $200,000 or more. Of these returns, 3,385 showed no U.S. income tax liability, and 2,875 showed no income tax liability to the U.S. or any other country. In 2000, there were 2,328 and 2,022 such returns, respectively.

Using expanded income of $200,000 or more as the base (which takes into account tax-exempt income), there were 2,605,021 individual income tax returns withexpanded income of $200,000 or more. Of these returns, 4,910 showed no U.S. income tax liability, and 4,119 showed no income tax liability to the U.S. or any other country. For 2000, the comparable numbers were 2,766, and 2,320.

Considering that in 1997 there were only 1,562 returns showing adjusted gross income of $200,000 but no income tax liability to the U.S. or any other country, it is safe to conclude that a trend is developing. I imagine that when the data turns up several years from now we'll discover that the 2004 numbers are much closer to 10,000. Many articles have been written about, and criticizing, the ways taxpayers eliminate their income tax liability, including this brief but informative column by Tom Herman.

A no less important issue is the impact that this news has on the taxpaying citizenry. It's tough to get enthused about paying one's taxes, or even to be accepting of one's civic duties, when thousands are essentially doing the equivalent of going straight from the left turn lane (or, perhaps better yet, making a left turn from the right turn lane as I saw a person do this morning!). I suppose these folks think they're special, better than the rest of us, and entitled to be treated by the world in the same pampered manner to which they've become accustomed.

Here's a clue as to the impact. The Tax Foundation's annual survey of U.S. Attitudes on Tax and Wealth, well worth reading in its entirety, revealed that 59% of respondents thought that they paid more in federal income taxes each year as a percentage of income than has Donald Trump. (Poor Donald, he gets picked on so much, and there's no reason to suggest he is in the zero tax liability crowd). Whether or not the respondents are wrong, it's the perception that matters.

No wonder 77% of the survey respondents think the tax system needs a major overhaul. They're right. Any tax system that lets folks with more than $200,000 of expanded income pay zero income tax on a worldwide basis is a tax system that has written its own death warrant.

This morning's Philadelphia Inquirer story about Tom DeLay's criticism of Justice Kennedy contained a quotation that thoroughly confused me. According to the story, DeLay was interviewed by Fox News Radio, and after describing Kennedy as an activist and isolated Republican-appointed member of the Supreme Court, he said

Absolutely. We've got Justice Kennedy writing decisions based upon international law, not the Constitution of the United States? That's just outrageous. And not only that, but he said in session that he does his own research on the Internet? That is just incredibly outrageous.

Although the issue of whether international law should inform Supreme Court decisions is a real one with respect to which there are conflicting views, it startled me that someone would think it "incredibly outrageous" that a Supreme Court justice would do research and would use the Internet to do so.

Perhaps something was taken out of context or misunderstood. Yes, I used the Internet (horror) to check, and the story had been picked up by newspapers across the country. I dug further and discovered that DeLay had made the comments during an interview on the Tony Snow Show on Fox News Radio. At the moment, there is a link on that website permitting people to listen to the interview.

DeLay's comment is, well, sorry, incredibly outrageous. Is it unconstitutional or illegal for a Supreme Court justice to do his or her own research? Is it unconstitutional or illegal to use the Internet for legal research? Using the Internet, one can reach BNA, BNA Tax Management, Lexis, Westlaw, CCH (Commerce Clearing House), documents issued on the websites of countless federal agencies and 51 states, including their departments and agencies, and a huge inventory of other reliable sources of primary and secondary legal information. Yes, there is a lot of "junk" on the Internet, but Supreme Court justices do happen to know enough about legal research to know the difference between the IRS web site and the internet pages of a tax protester. (Yes, had to sneak tax in here, but I can write with confidence about tax research on the internet.)

Perhaps, considering my continual criticism of a Congress that cannot enact efficient, and fair tax laws and that continuously whacks and hacks at what little was left of sensible tax law, I should not have been surprised to have had this opportunity to see into the mind of someone who is a leader of that Congress. That's not to say the other side of the aisle deserves praise; there surely are enough gaffes coming from that direction. But if Tom DeLay has not used the Internet for legal research, it simply adds a few more feet to the depths to which Congressional operations have sunk. This incongruity between reality and Congress matches well with the unwillingness and inability of members of Congress to do their own tax returns. Each time the phrase "out of touch" is used in criticism of the Congress, its reach widens.

Should we watch for a retraction? Or should we stop using the Internet for legal research?

Someone posed a very interesting question. "Why is there no revolt over state tax complexity?" I don't know. As I pondered the question, I fished for explanations, and came up with a few. Then I started arguing with myself. Here's a snapshot of what went through my mind:

---

1. There's no revolt over state tax complexity because state taxation is not complex.

This suggestion has to fall flat on its face. State taxation not complex? HA! The person who asked the question was describing her child's encounter with the Massachusetts income tax and called it a nightmare. In fact, she described it as worse than the New York returns that her daughter had to file in previous years.

My experience researching topics such as the effect of federal corporate-shareholder income tax integration on state tax systems (LL.M. thesis, article) and with the state income taxation of S corporations (treatise, BNA Tax Management portfolio, numerous journal columns), and in doing state corporate returns, persuades beyond any doubt that state income taxation is complex. In many instances, it is so complicated that the federal income tax begins to look like an oasis of simplicity. Add in the high likelihood that the tax laws of more than one state will apply to an individual or corporation, and the complexities multiply by orders of magnitude. At least once, and usually several times during each of my tax courses, I make it a point to share this reality with the students.

2. There's no revolt over state tax complexity because state taxation involves such low dollar amounts it isn't worth expending energy on the question.

This might be the answer in a few states, with relatively low income tax rates. But many states have high rates, or rate structures that reach people who escape federal income tax liability, that this explanation doesn't hold across the nation.

The Pennsylvania experience is indicative. The personal income tax is pretty much a flat percentage of income, with very few deductions and no offsetting of income in one category with losses in another category. The complaints are about fairness rather than complexity. On the other hand, Pennsylvania taxation of corporations and LLCs is a labyrinth of confusion, with forms sometimes insisting that an S corporation disclose the names of its partners or a partnership provide the names of it officers. I shared one of my state tax reporting experiences a year ago, and I am sure that others have had similar or worse experiences.

3. The media doesn't put the spotlight on state taxation.

There's some truth to this assertion. The news stories on April 15 about the impending midnight deadline of doom refer to the IRS, show federal tax returns, and provide stock footage of the local IRS office building or the U.S. Capitol. Tax debates in Congress get coverage. The press gobbles up all sort of stories about federal income tax reform. Perhaps local media in New York, California, and other high income tax states pay more attention to state income taxation. State and local property tax policies and relief get attention in the Philadelphia area local press, but those issues aren't ones of complexity but inquiries into fairness and politics.

4. A successful attack on federal income tax complexity will compel states to simplify whereas the opposite is not necessarily the case.

There's also some truth to this assertion. If the federal income tax is truly simplified, or replaced by a VAT or consumption tax, it will leave many states "out in the cold" because their income tax statutes start the computation of state taxable income with a reference to federal taxable income, or adjusted gross income, or some other variant. Many state legislatures would choose to follow the federal example than to draft and enact state statutes that mimic the repealed federal income tax law. I don't think that's true of all states, though. A few states (four at last count) do not rely on federal income tax law (Pennsylvania is one of them). A few other states are big enough to create replacement statutes. Would they? That's a political question that will require some interesting state legislature watching if the day ever arrives.

In contrast, if tax reforms favoring simplification persuade a state to simplify its income tax law, so what? Other states would most likely not follow. And surely members of Congress will not jump up and replace the Internal Revenue Code with an adapted version of the new state income tax.

5. People don't realize that state income taxes are complicated.

Maybe they do. I'm not sure. I know there's a maxim that a person can feel only one physical pain, the one that hurts the most. I'm not certain that's absolutely true, but I've been told a migraine headache masks the pain of a paper cut. If our minds are so caught up reeling from the complexity of the federal income tax, is there anything left to be stunned by the state tax complexity?

---

These are serious issues. As the nation's economy becomes less regional, and as the world's economy becomes less national, the attractiveness of uniformity as a factor in legislative policy making strengthens. Even though there is much to be said about local control over revenue, spending, and regulation, the cost of complying with thousands of different tax laws is staggering. And that assumes full compliance is possible. It's not an issue restricted to tax law. Retailers who sell over-the-counter medicines that can be used to process meth are pulling them from their shelves rather than try to deal with the huge matrix of state and local rules regulating their sale. During the next 10 years, as the debates over tax revenue and spending decisions at the federal level get louder, there's no guarantee that similar debates over state revenue policies will be drowned out. The cacophony may shatter the national eardrum.

I laugh at both. What other choice is there?

Now that this year's April 15 is behind us (though August 15 has risen above the horizon), it's worth a look at the collection of tax cartoons assembled at the Tax Guru page by Kerry M. Kerstetter. Be sure to scroll down the entire page, because the appearance of text does not mean you've seen the last of the cartoons. Because my local paper carries only a few of these comics, many of these were new to me. May that be the same for you, too.

My favorite? Probably this one though some of the other death and taxes, or taxes in eternity cartoons run a close second.

So, it seems, the Internet has obsoleted my 25-year tradition of posting tax cartoons on the wall outside my office door. I had already run out of room, so this development spares me the agony of selecting cartoons for removal to make room for new ones. And I'm going to wager that the dean will declare wall posting off limits in the new building (if one ever gets built).

It's what people now call Tax Day. Hah, every day is tax day. Think about it. Don't for a moment succumb to the nonsensical idea that there is one tax day and the other 364 are tax-free. And today is tax day only for those who didn't bother to make their tax day earlier. Why not just get it out of the way, as one tries to do with other annoying or inconvenient tasks. Leave the best to last. Like reading this blog. Ha ha.

Anyhow, to celebrate tax day I've decided to keep one of my "I'll get into this in a future post" assurances. I promised in a recent post that I would explain in more detail the tax law principles that are implicated when law students find themselves caught between the employer who classifies them as independent contractors and the IRS which almost always will take the position that they are employees.

Several decades ago, some creative person decided that attorneys who hired law students could save themselves a lot of aggravation and money by classifying those students as independent contractors. Perhaps the person who came up with the idea was an attorney. Perhaps it was an accountant, financial advisor, or some other guru. Strange that the person's name didn't attach to the scheme. Nonetheless, attorneys jumped on the idea the way ants show up at a picnic. And perhaps other employers, professional or otherwise, jumped onto the idea. The situations that came to my ears, however, involved attorneys. That's not surprising, because for most of the day I'm surrounded by law students and attorneys.

What made the idea attractive? If the attorney hires the law student for $10 an hour (which was the going rate back then), and classified the student as an employee, the attorney was subject to a parade of obligations: withhold federal income tax, withhold state income tax, perhaps withhold local income tax, perhaps remit a per capita or other employment occupation tax, pay the employer share of FICA (including both OASDI ("social security") and medicare), withhold the employee's share of those taxes, probably pay unemployment compensation premiums or taxes, probably pay worker compensation premiums, perhaps include the student-employee in fringe benefit coverages such as life insurance, deferred compensation, education assistance programs, etc., and file a W-2 early in the following year. If the attorney treats the student as an independent contractor, the attorney's only obligation (if the amounts paid are sufficient) is to file a 1099 form early in the following year. It was a no-brainer decision, at least for those who erroneously thought that they simply could decree the classification of the student as an independent contractor.

The surprise for many of these students popped up when they sat down to do their tax returns. That's why I'm discussing this on "Tax Day." I had two more such questions today, so it's quite fitting. To use a typical example, a law student who worked for 14 weeks during the summer, 50 hours a week, $10 an hour, picked up $7,000 of income. Say hello to roughly $1,000 of self-employment tax. Back in the early 80s, they'd also face at least a few hundred dollars of federal income tax liability, and depending on the state, a few hundred dollars, more or less, of state income tax liability. Some had to toss in $70 or $140 of local income tax liability. Worse, because they owed as much as $1,500 of federal income tax, if they didn't fall within an exception to the estimated tax payment failure penalty, they'd be looking at another $60 or $70 of taxes. Ouch.

They were in a bind. What to do? A fortunate few at least had the good luck of being employed by attorneys who "split" the presumed savings and paid the students $11 an hour. Most of them didn't catch that break, nor did they know enough to negotiate for it.

In addition to this financial crunch, there was the reporting problem. Should the student go along with the attorney's characterization, even if it was wrong? If the student did so, what would happen if the IRS audited the attorney? As it turned out, the IRS did audit attorneys, but never bothered to tell the student-employee. So excess monies flowed into the Treasury, and the student was not alerted to the facts that would trigger an amended return generating a refund.

If the student decided to file and report the income as wages, which would eliminate the self-employment tax, the red flags would be all over the return. After all, there was no W-2 to attach. And the IRS probably had received a 1099. Taking this position, even though correct, was tantamount to sending a letter to the IRS alerting it to what the attorney had done. Keep in mind that these students would be back in the job market the following year. What a dilemma. Baptism by fire into the legal profession, no?

Yes, the IRS did audit attorneys, and just as the "here's a great tax savings scheme" news rocketed throughout the attorney networks, so too did the news of the audits. The audited attorneys fared badly. When the IRS sat down to go over the factors that indicate employment status and those indicating independent contractor status, the scales weighed heavily in favor of employment status. One doesn't need to be a tax wizard or a mathematical gymnast to consider the two ends of the spectrum, the classic factory employee and the person who comes to service the home heating system to recognize that the hired student is much more like the former than the latter.

What factors did the IRS use to conclude that the student was an employee? The attorney set deadlines (whereas independent contractors tend to show up and finish jobs as they determine). The attorney provided work space. The attorney provided tools such as books, computer resources, telephones, etc. (think again about the person who shows up to fix the heater). The attorney often set limits on how much time to be spent on a project. The attorney controlled the specifics of what was to be done, simply because the law student was not admitted to the bar (unlike the homeowner who tells the independent contractor heating expert that the heater does not work, fix it, please, the attorney cannot hand a file to the law student and simply ask that it be fixed). The attorney supervised the student (and if the attorney did not do so, the attorney was putting reputation and malpractice insurance premium increases on the line). The attorney or law firm was the only person for whom the student worked (and although an independent contractor can have, in theory, one customer, as a practical matter they have at least several and usually many more than that). The student did not operate a business. The student did not have a separate office, business letterhead, or business phone. The student did not advertise for customers.

Where were the factors showing independent contractor? Perhaps the student could set his or her own hours, but flextime is a characteristic of employment almost as much as it is of independent contracting. Perhaps the student worked at home. Employees can do that.

The IRS put such strong cases before the attorneys that they acquiesced with the IRS determinations. Attorneys were one of the first four industry groups that the IRS put on its industry-focused program. The others were undertakers, car dealers, and commercial fishermen. Interesting combination. I'll refrain from the quips about commercial fishermen finding dead attorneys in the trunks of cars buried at sea by undertakers. No, I don't think that was the connection. Now, of course, there is a audit program and audit guides for just about all industries so the honor of being in the targeted four was short-lived.

The IRS got the results it wanted from its efforts. With failure to file tax returns and tax fraud high on the list of things for which attorneys are subject to professional discipline, the IRS knew it had what today gets called, euphemistically, "leverage." As the news of its activities and successes raced from attorney to attorney, and as lawyers realized the risks to their professional reputation and licensing weren't worth the money in question, the legal profession buckled.

Or so it seemed. Each year, when I teach the section of the basic tax course that focuses on the deduction for state and local taxes, I use one of the problems to illustrate which taxes are deductible (state and local income) and which are not (self-employment, FICA, federal income tax). That permits me to illustrate, with numbers, the difference between being paid $10 an hour as an employee and $10 an hour as an independent contractor. In the early 80s, students raised the questions before I even reached the illustration. As the 80s closed, I would ask the class. I suppose the decline in student questions on the matter was more a reflection of the trend toward classroom passivity than a reduction in the frequency of the problem, because at least half the class would indicate they were being paid a flat amount per hour as independent contractors. By the mid to late 90s, the same independent contractor question brough fewer and fewer raised hands, until a few years ago, when one hand was raised. I condensed the topic coverage, because so many other topics had been jammed into the tax law, and thus into the course, that could be better served with the saved time.

Two years ago, however, I was startled to see several hands raised. Last year, more than one hand was raised, and several students came to see me in my office to ask about the matter. This year, even more students have stopped by. And the dollar amounts are much more than they were 20 years ago. What's happening?

From what I can tell, a new group of attorneys, not in those networks back when the news of IRS audit successes was making the rounds, has succumbed to the revival of this "independent contractor tax savings scheme" nonsense and its proliferation on the internet. Forgetting, or not having had, law school advice about checking things when one is not an expert in an area, they have embraced the technique without reservation. One, arguing with me through the student who was caught in the middle, suggested that I was a typical academic who didn't understand tax law or tax practice. That attorney, incidentally, was NOT a tax attorney. I laugh when people think that the professorial title I carry means that I am a detached academic hiding behind ivy-covered walls. The world who knows me knows better.

In fact, none of the attorneys who are getting primed for a fun IRS visit are tax attorneys. I'm willing to speculate that most did not take a tax course. Without intending to hurl pejoratives, it's not the tax or business lawyers, it's not the bankruptcy attorneys, and it's not the securities regulation bar that's doing this. It's principally personal injury lawyers and a few domestic relations attorneys. Of course, it's a very small, tiny fraction of those who practice in those areas. But it only takes a few to cast a dark shadow over the entire bunch.

The domestic relations bar put forth a fine effort, some years ago, with the help of the tax bar, when changes in the tax law left many of their colleagues at the mercy of other domestic relations lawyers who had picked up enough understanding of the tax law affecting divorce to pull some rather creative but questionable moves that dumped phantom income on unsuspecting ex-spouses-to-be and their advisors. A few seminars here, a few articles there, and that game was shut down. Perhaps it is time for a similar effort by attorneys practicing in areas seemingly "removed" from taxation to organize seminars and similar presentations for their colleagues at which tax lawyers can show up and explain the unacceptable risks being taken by attorneys who fall for the deceptive seduction of the "independent contractor tax savings" scheme.

And perhaps that would unsnag those law students who get blindsided and sandwiched by the maneuver. And perhaps it would mean that on Tax Day next year I could report that the practice had been fully eradicted. Well, I'd rather that Tax Day hype be eradicated but that's not going to happen in the near future. So I'll go with the more reasonable, more sensible, more likely dream: an end to the manipulation of law student employees by those who misclassify them and mess up their tax situation.

For those who celebrate it: Happy Tax Day, one and all! Have some chocolate, it's medicinal.

What can get me to post more frequently than the habitual Monday, Wednesday, Friday pattern? Among other things, it includes reading an article about the tax treatment of cybertips and noting that some tax misinformation is being delivered by someone quoted in the article. The article about bloggers relying on cybertips in this morning's Philadelphia Inquirer had a dual effect. It brought back memories of a discussion of this topic a few months ago among tax law professors, and it caused me to think that perhaps there is some truth to my theory that the closer we get to April 15 the more tax myths circulate among the citizenry. I'd have been on here sooner with this, but I was detoured for a few hours by an emergency dentist visit to get initial treatment for a broken tooth. No, I was not in a fight. It just broke. Well, what was left of it broke. Maybe it's age. Seriously, I think it is a leftover from the incident that caused the first broken tooth. Anyhow, be happy I spare you the gory details as I'm sure you don't want to hear about the ROOT cause (or effect). And be happy I'm not asking for tips.

Back in February, Paul Caron raised the question on the TaxProfBlog, and also brought it directly to the attention of the tax law professor community. When we had finished sharing our thoughts, Paul compiled the comments in a follow-up post, that, surprise, quoted, among others, yours truly. I'll return to those comments in a moment, but first, the facts.

What triggered Paul's initial post was an inquiry from a law professor who set up a tip jar on his blog. He had the good sense to ask about the tax consequences. Today's Philadelphia Inquirer article not only mentioned Eugene Volokh, who made the tax inquiry, but also introduced me to a few of the many other bloggers who have set up cybertip jars.

There is Susie Madrak, a fraud investigator and former journalist, who picked up $1,500 from her readers when her car died. She begged for the money. She posted a photo of a kitten and threatened to kill it if people didn't send money. Brad DeLong, a professor at the University of California, intends to use his tip proceeds to hire research assistants. John Aravosis, a writer and political consultant, has seen tip proceeds generated at least in part by requests made by his friend Duncan Black, an economist, on Black's blog. Black urges blog readers to send money to their favorite bloggers and asserts that wealthy readers should send amounts in the thousands. Black, though, has turned from seeking tips himself to selling ad space on his blog, and generates about $6,000 a month in revenue. Andrew Sullivan gave up soliciting for tips because when he did his third "beg-a-thon" after raising $79,000 and $120,000 on the first two, and claimed that he had bandwidth expenses, people began to raise questions, considering that bandwidth costs far less than tens of thousands of dollars. So, instead, he is trying to get readers to subscribe for $20 a year.

Now to the law. There is no question that employee tips constitute gross income, and thus are taxable. Some bloggers, though, think that cybertips are not taxable because they claim the tips are gifts. Gifts, of course, are excluded from gross income and thus are not subject to income taxation (though large gifts are subject to federal gift tax). Madrak states, "A gift is not taxable. You don't pay taxes on your birthday presents."

Madrak's statement, taken alone, is correct. In context, it is incorrect. It is relevant only if cybertips are gifts. Are they?

A gift is a transfer for which the donor has no expectation of receiving something in return. There needs to be, to borrow words of the Supreme Court that it warned was not the test but that courts have used as the test ever since, "detached and disinterested generosity." A cynic, of course, can point out that rarely is there detached and disinterested generosity, other than perhaps, when it comes to parents making gifts to children. Is there a gift when transferors think they are buying the survival of a kitten? Is there a gift when transferors think they are ensuring the continuation of a blog? Some tax commentators suggest that if the transferor isn't looking for something in return that there is a gift, and that this approach requires analyzing the motives of each individual transferor. Some of the cybertips could be gifts, and some might not. With the burden of proof on the taxpayer, how does a blogger prove the "detached and disinterested generosity" of transferors? Surely when a kitten's life is seemingly at stake, or the continuation of the blog is said to be at risk, the taxpayer's burden is near impossible.

Some of the difficulty arises from the fact that these contributions are called tips. There is an ironclad rule for "tips." Tips must be included in gross income. The IRS regulation in question (Regs. section 1.61-2(a)(1)) sets forth that interpretation of section 61 very clearly. Section 61 provides that gross income includes all income, unless an exclusion applies. Tips are income. There is no denying that conclusion. Tips make the recipient economically wealthier. So unless an exclusion applies (and the exclusion for gifts is the only one with any chance of being in play), tips are included in gross income, and thus end up in taxable income. When the question has been posed to the courts, the decisions are unanimous. The courts have held that gross income includes tokes left with casino dealers, and side money left for dealers. Gross income includes tips by bridegrooms to city marriage license clerks. Offerings and fees left for clergy members are treated as tips. One case involved money sent to a clergyman by listeners of his radio program. It's very difficult to find a tax-significant distinction between the cybertip jar and the radiotip jar. Different medium, same process, same result.

Here's what I said when Paul Caron first circulated Eugene Volokh's question, in response to an argument that cybertips are similar to amounts spontaneously handed to preachers after an inspiring sermon: "The blogger puts 'if you like this and want more, drop me a few bucks' tag on the web site. Most preachers, I think, do not end sermons with 'if you liked it and want more, drop a twenty in the collection plate when it comes around.' Does the 'fishing' for the money make a difference?" [Ignore the fact that money transferred directly to the church (rather than to the minister) would be non-taxable to the church because it is a tax-exempt entity, because most, if not all, bloggers are NOT tax-exempt entities.]

I think the "fishing" makes a difference. It takes away the spontaneity that characterizes a gift. It gives the transaction overtones of business activity. Surely, considering that the transfers are called tips and have the same characteristics as do gifts, it's quite a stretch to call them gifts.

Ultimately, when the issue is litigated (and it will be considering the amounts involved), the IRS will rely on the case involving the radio preacher. I doubt any taxpayer or taxpayer advocate will find a plausible, reasonable, successful factual distinction that will persuade the court to reach a different conclusion. To think otherwise not only puts the blogger who fails to report this income at risk for an audit, it also puts that blogger at risk for interest and penalties. Perhaps readers will follow-up with cybertips for the "I'm in tax trouble" cybertip jar. Let's just hope no more innocent kittens are put at risk.

And, please, worry not about the cost of the tooth repair. The temporary repair has made it possible for me to talk without scraping my tongue on the exposed razor-sharp filling. With pain-free talking having been restored to yours truly, perhaps the temptation will be to send money to shut me up. DON'T. It's been tried. It doesn't work.