MauledAgain

The charitable contribution deduction presents more than a few snags for taxpayers. One, the restricted vehicle mileage allowance applicable to all but Hurricane Katrina relief efforts, was discussed in Sometimes Tax Law Makes No Sense. The lack of sense in that instance is directly attributable to statutory language. It's not the only problematic language in section 170. Paragraph (17) of subsection (f) deserves some attention.

Section 170(f)(17) was added by the Pension Protection Act of 2006. A preliminary question is why the charitable contribution deduction is being amended by legislation seemingly focused on pensions. The simple answer is that Congress can, and often does, stick things into legislation that have nothing to do with the original purpose of the bill. Whether Congress should do this is a different issue. It's almost always a matter of politics, a way of getting indirectly what the process won't support directly.

Section 170(f)(17) provides:

No deduction shall be allowed under subsection (a) for any contribution of a cash, check, or other monetary gift unless the donor maintains as a record of such contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.

What does this mean?

It means that the days of claiming deductions for cash contributions for which the taxpayer has no receipt are over. It means that taxpayers who fail to keep copies of cancelled checks written to charity or, alternatively, copies of the bank statement with the photocopies of the checks, cannot claim a deduction for the contribution unless the taxpayer has some other written record, such as a dated receipt showing the amount of the gift and name of the charity.

Why did Congress enact this provision? The answer is that too many taxpayers were "inventing" cash contributions that had not been made, and claiming deductions for them. How did Congress decide this was the case? It had information from the IRS summarizing the results of audits during which taxpayers were unable to substantiate claimed deductions.

When does the new rule go into effect? It applies to contributions made in taxable years beginning after August 17, 2006. Essentially, for taxpayers with calendar taxable years, and that means just about every individual, the new provision is effective for contributions made after December 31, 2006. What's the magic of August 17, 2006? That's the date the Pension Protection Act of 2006 became law.

How can taxpayers comply with the new provisions? For contributions made by check, it's fairly easy even if annoying. Save the cancelled check or bank statement. For cash contributions handed to a person representing a charity, request a written and dated receipt on the organization's stationery and make certain it shows the amount and is signed. For cash contributions dropped into collection baskets, I doubt there is much, as a practical matter, one can do to salvage the deduction.

What should a taxpayer do if a receipt is requested and refused? The choices are simple. Don't hand over the cash. Or hand over the cash with a full understanding that no deduction is available because the receipt has been refused. In most instances, it would make sense to shift the charitable dollars to a similar organization that is willing to issue receipts. What no longer is an option is claiming the deduction without the receipt.

But what should taxpayers do when given the opportunity to put cash into a collection plate or donation basket? That's one of the interesting questions. Will people continue to give, despite not having the deduction, because they give for reasons other than tax savings? I surely hope so. But I doubt it. I think some people either will refrain from giving or will reduce what they give because of the lost tax benefit. Why do I reach such a cynical conclusion? Years ago, when Congress was discussing repeal of the provision that permitted the deduction of some charitable contributions in computing adjusted gross income, a provision that permitted people who did not itemize deductions to claim both the standard deduction and some of their charitable contribution deductions, charities lobbied, unsuccessfully, against the repeal. Why? One argument was that people would curtail or stop their charitable giving because of the loss of the tax benefit. That assertion amazed me then and amazes me now. Should we assume no one gave to charity before there was an income tax deduction? Should we assume people compute what they contribute to their religious institution on the basis of tax deductions? Perhaps someone should ask religious institutions and organizations that collect cash in donation baskets to track their 2006 offering plate and donation basket cash receipts with their comparable 2007 cash receipts. I'm curious to see the effect.

There's another interesting question lurking here. I owe thanks to Alan Gunn for pointing this out. What happens to the deductions available for expenses paid, in cash or by check, on behalf of a charity? Would the receipt from the store, given to a person who buys supplies to use in fixing a charity's property, be sufficient? Or must the person get some sort of receipt from the charity? What about the mileage incurred in doing work for the charity? How does one obtain a receipt? I'm going to guess that if the taxpayer uses the standard mileage rate rather than actual expenses, that the use of the mileage rate is per se substantiated, but does the taxpayer have an obligation to obtain a receipt for the number of miles driven?

This is another one of those "in theory it works" but "in practical application it crashes" situations that increasingly afflict the law. My hypothesis is that more and more lawmakers are being advised and lobbied by people who have been educated in a theoretical sense but who have been exposed to little, if any, practical or common sense. The chief reason is that those educating them have little, if any, practice world experience. I've commented more than a few times about flaws in legal education, from whence come most legislators, lobbyists, and legislative staffers, and I'll let others, for the moment, put two and two together.

Yes, I understand why something needed to be done. But I wonder if the solution will cause the baby to be thrown out with the bath water. I wonder what impact this provision will have on charitable giving and on out-of-pocket expenses incurred on behalf of charties. I wonder if the days of people putting additional cash into a collection plate because a sermon inspired them are over. I wonder if tax advisors should tell their clients to carry their checkbooks with them when they attend services at their temple, mosque, or gospel hall. I wonder if churches will follow through with a suggestion I once made, to no avail, to put credit card swipe units at each seat in the pews. Many people leave home with checkbooks. Few who have credit cards leave home without at least one of them.

And the very deep cynical side of me wonders if this could be another step in the direction of removing cash from our economy, so that there is a record of every economic transaction. Success in such an endeavor might curtail the "underground" economy and change law enforcement and tax compliance parameters. But if that is the case, what a sly way for the idea to creep closer to fulfillment.

Tax is a strange thing. Students meeting it for the first time usually expect tax law to be nothing more than complicated, convoluted, and inconsistent principles that defy understanding. It doesn't take long, though, for students who take the time to consider the tax law to learn that much of it is complicated, but symmetrical, logical, and coherent. Eventually, it makes sense. Complicated sense, perhaps, but sense.

Yet there do remain some oddball situations in the tax law. Consider the question of how the deduction for vehicle miles is computed.

A taxpayer is entitled to a deduction for vehicle miles that are driven for any one of four purposes. First, a taxpayer is allowed to deduct the ordinary and necessary cost of vehicle miles driven in carrying on a trade or business or in a for-profit activity. Second, a taxpayer is allowed to deduct the cost of vehicle miles driven in connection with medical care that qualifies for the medical expense deduction. Third, a taxpayer is allowed to deduct the cost of vehicle miles driven in moving from one location to another if the cost of the move is allowable as a moving expense deduction. Fourth, a taxpayer is allowed to deduct the cost of vehicle miles driven in performing services for a qualified charitable organization.

I'm not going to focus on the precise requirements for the deduction. Rather, I want to examine the computation of the deduction.

The taxpayer is permitted to compute the deduction by calculating actual costs. In doing so, an allowance for depreciation is permitted with respect to the trade or business category, but not for the medical and charitable category. On the assumption that some taxpayers find it a bother to maintain actual cost records, and perhaps to alleviate the troubles faced by taxpayers whose records are lost, the IRS provides an option by which the taxpayer may deduct an amount equal to the number of miles driven for a particular purpose multiplied by a standard mileage alllowance for that particular purpose.

The mileage rate for trade or business use of a vehicle in 2006 is 44.5 cents. The mileage rate for the medical and moving expense deduction is 18 cents. The mileage rate for charitable purposes is 14 cents, but if the miles were driven for charities providing Hurricane Katrina relief, the rate is 32 cents (with a separate rate of 44.5 cents if the taxpayer is reimbursed).

Where does the IRS get these numbers? For all but the charitable contribution deduction, the IRS examines the costs of operating an automobile. Thus, the rate is increased or decreased from time to time as gasoline prices or other costs increase or decrease. The difference between the trade or busines rate and the medical and moving expense deduction rate reflects the fact that depreciation deductions are not allowed with respect to the latter.

So why is the rate for charitable mileage so low? And why is there a different rate for Hurricane Katrina charitable efforts?

The answer is simple.

It's in the statute.

Congress has provided the rate for charitable mileage in section 170(i) of the Internal Revenue Code. There is no adjustment for inflation. Why not? I don't know. As inflation causes the cost of operating an automobile to increase, the rate computed by the IRS for trade or business and medical or moving expense deduction purposes increases. Why only 14 cents? Do members of Congress not understand what it costs to operate an automobile? I don't know. Perhaps they pay as much attention to their personal bill-paying as they devote to keeping the federal budget in balance.

The significantly higher rate for Hurricane Katrina relief efforts also seems strange. What is so special about one sort of charitable relief than another? Hurricane Katrina was a devastating catastrophe, but so too have been most of the other hurricanes, tornadoes, and similar disasters to afflict citizens of the nation.

It is this sort of discrepancy that adds to complexity without adding to coherency, symmetry, or logic. If the Congress continues to do to the Internal Revenue Code what it has been doing for the past 20 years (and I spare no political party in that characterization), eventually there will be a tax law that is different for each taxpayer, or at least for each taxpayer with sufficient clout to bring about a "special rule" for his or her situation. The best analogy I can craft is the traffic signal with each driver's special color. My computer monitor is capable of handling almost 16,800,000 colors (there are that many?). Somewhere along the line, logic, common sense, and efficiency demand a rollback of these sorts of special tax rules and a wariness for their intrustion into the selection of traffic signal colors.

Kay Bell shares with us Tax Carnival #6: Decision 1040. Having done a roundup of tax information (Blawg Review #53), I can appreciate the work that went into Kay's post. My only regret is that I'm spinning so rapidly with the juggled plates that I didn't get this post up a few days ago. But don't let that stop you from visiting Kay's Tax Carnival #6 posting. There's enough tax reporting in it to get you spinning around, too.

So, many people, especially those who are not tax experts, are asking me what I think will happen now that the Democrats control Congress. My response is uncharacteristically brief. "Not much, if anything."

Of course, when asked why I say that, I get a chance to say more than four words. With me, brevity is brief.

The perspective that most Democrats take on taxation differs significantly from that taken by most Republicans. If the Democrats try to make changes unacceptable to Republicans, the legislation most certainly would be vetoed. And there are insufficient votes to override a veto. So I suppose a one-word reply to the first question could be, "Stalemate." Or perhaps "Stagnation."

So we're stuck with at least two more years of special low capital gain and dividend tax rates. The "not much" hedging in my initial reply reflects my awareness that legislation to extend some expiring tax breaks might make it through the Congress and be signed by the President. I emphasize "might" because I am not convinced it necessarily will happen.

Looming over the entire tax legislative process is the wrangling over the estate tax. Considering the history of negotiations between the parties, I doubt anyone can predict what sort of procedural mess ( think filibuster) any attempt at estate tax restoration and reform will encounter.

Someone suggested that the election outcome may reflect a more militant political center, presumably a force that would protect the tax base. I don't think the tax base is safe. The center may be "militant" or perhaps just disgruntled, but the center doesn't hold sway. If anything, the Congress is even more polarized, and the gap between the legislature and the executive is so wide that shaking hands across it isn't possible other than for photo ops.

Others have suggested that stagnation might be a good idea, for it would give the Congress time to ponder what it should do with the tax law. See, for example, Linda Beale's commentary on the election results on her A Taxing Matter blog. There's much truth in this assertion, because it makes no sense for anyone in the next Congress to dive into wholesale changes in the Code. Yet every day that things remain as they are is another day that too many dollars are added to the federal debt and shifted onto future generations. Someone else suggested things are best when Congress and the President aren't in D.C., because they cannot make things worse. My concern is that, in some respects, when Congress and the President leave town, the ball they started rolling down the hill keeps rolling.

Some contemplation about the problem solving is helpful. Waiting until 2008 or 2010, though, might be a bit too much. The ultimate price may be a bit too steep.

The Ethics column in the November issue of the American Bar Association Journal, "Lawyers Are Doctors Too," (no on-line version found) reviews the several state ethics opinions addressing the question of whether lawyers can use the "Dr." designation in front of their names. The Model Rules of Professional Conduct don't focus directly on the question, leaving it as a matter to be decided by the states when they apply the rule that lawyers must not engage in false or misleading communications about the lawyer.

The author, Kathleen Maher, correctly points out that the issue is of fairly recent vintage, with its origin in the decision by law schools in the late sixties and early seventies to replace the LL.B. degree with the J.D. degree. She describes a 1986 North Carolina ethics opinion that use of the term "Dr." by a lawyer "without explanation could be misleading and is therefore inappropriate." In contrast, a 2004 opinion from the State Bar of Texas ethics committee reversed course and concluded that "Dr." is not "inherently false or misleading," finding "no reason to prohibit lawyers from indicating their advanced level of education."

The J.D. degree is a fake doctorate. I have one, and I know full well that I did not do formal prepartory work in the discipline deserving of the prerequise bachelor and master degrees. I happened to enroll in five business law courses while doing my undergraduate work at Wharton, but that surely isn't enough to earn an LL.B. It was quite helpful, though, in preparing me for law school. In fact, after earning a J.D. degree, I proceeded to earn an LL.M. That would be backwards, except that the next degree is an S.J.D. rather than an LL.B. I don't use Dr. because I don't want people asking me for medical advice; they might not like my answers. I have a colleague who occasionally addresses me as "Dr. Maule" though I think he does so to rattle my cage a bit. The University addresses me as Dr. James Edward Maule in its communications. Maybe an "S" snuck in somewhere in front of the J.D.?

I wouldn't object to law schools awarding J.D. degrees if they required entering students to take an array of undergraduate courses that covered sufficient material so that the first-year of law school could be far more advanced than it is today. Somewhere along the way I'd like to see a master's thesis and a doctoral dissertation. If it's going to be done, let's do it correctly. Just the other day I was commenting yet again (or perhaps griping) about the challenges of covering basic tax in three credits and wills and trusts in three credits. Law school has been fixed at three years for decades, while the law has grown exponentially. If extending law school to four or five years, with externships, which I've unsuccessfully advocated, isn't going to happen, why not squeeze in the additional year or two by asking undergraduate universities (which are in the business of awarding bachelor degrees) to offer the LL.B.? I know the answer. The colleges are too busy doing remedial education because students leave the K-12 system with less than the ideal package of intellectual skills and experience.

How did this fake doctorate show up? Law students in the sixties decided that they should be awarded a doctorate because they had completed seven years of post-high school education. What's so special about seven years? Their friends in other disciplines who completed seven years of post-high school education received doctorates. What was conveniently ignored was the fact that these friends had invested seven years of study in their discipline, whereas law students invested three. Rare was, and rare is, the law student who enrolled in five or six undergraduate law courses. Perhaps if someone convinced me that in the three years of law school the students do seven years of education endeavors in the law I might retract my characterization of the J.D. degree as a fake doctorate. To the contrary, the four years that medical students invest in medical school are four years, not six 14-week semesters. Medical students, incidentally, don't receive a doctorate after seven years of post-high school education. They invest eight, and then put in long hours in their internships and residencies before hitting full stride professionally. In other words, lawyers are woefully undereducated, and I'm not even taking into account the nature of the courses in which some law students enroll.

Perhaps with all of the post J.D. formal and informal education that I have experienced I've "done enough" to consider myself a "Dr." but nonetheless I'm not inclined to stick that prefix in front of my name. After all, my highest formal degree, in terms of chronological sequence, is a master's degree. Am I Master James Edward Maule? I haven't seen that since before my twelfth birthday. So for now I'll stick with the "Prof." designation (which they relish in Europe and in some other areas of the world), and in the not so distant future hopefully I'll be permitted to attach the Emeritus tag. For the moment, though, my friends can call me Jim.

Someone asked about the tax consequences of receiving an "honorary membership" in a private club. Specifically, the person wanted to know if there would be "taxable income imputed" to the recipient. I think the person meant "gross income imputed" to the recipient. Apparently the club figures that having the person as a member will attract paying members.

I think the answer depends on what the membership permits the recipient to do. Does the recipient get access to all of the club's programs? Or does the recipient simply get one free dinner each year when the club holds its annual meeting? In other words, as so often is the case, it depends ... on the facts.

The question, though, caused me to wonder about the tax consequences of receiving an honorary degree. No, I'm not expecting one anytime soon, or ever. It was just one of those tax thoughts that crossed my mind, thanks to the original question. Does an honorary degree have economic value? Perhaps. What is that economic value? I presume it is the increased chances of engaging in future activities that generate income. It probably is possible to compute a present value of the future income possibilities. But is that value something that must be included in gross income?

Consider an earned degree. Degree recipients usually pay for earned degrees, or receive scholarships, which is the equivalent of paying for the degree with dollars that have been received in a tax-free transaction. Suppose that the present value of the future income made possible from the degree exceeds the amount paid for the degree. I will avoid any attempt to identify the disciplines in which that is likely and those in which it is not. It has never been contended that current tax law requires an earned degree recipient to include in gross income the present value of future income possibilities. One reason is that such a computation would be more of a guess than a measurable determination. Another reason is that the degree recipient has not done anything to realize the income possibilities.

If the economic value of an honorary or earned degree were to be included in gross income, then why not include in gross income the future potential earnings of every individual as soon as that person is born? Why not include in the gross income of a talented youngster the present value of the future possible income stream that might be generated by the youngster's ball playing, piano playing, or chess playing? The ramifications of including in gross income the present value of theoretical future income streams arising from an honorary, or earned, degree are far-reaching, administratively unworkable, bad from a policy perspective, and almost silly.

I suppose I should have kept this as an examination question. No matter. Perhaps in a year or two it will find its way into a semester exercise or examination. There's a reason for college students to be reading this blog, ha ha.

The Treasury Department has released its PRELIMINARY STATEMENT OF BUDGET RESULTS FOR FISCAL YEAR 2006. Individual income taxes collected during the fiscal year ended September 30, 2006 total $1,043,900,000,000. Corporate income taxes collected during the fiscal year total $353,900,000,000. Total receipts of $2,406,000,000,000 were split between the $608,400,000,000 in social security tax receipts that are "off budget" and $1,798,300,000,000 in "on budget" receipts. There is no information disclosing what portion of the social security taxes are paid by individual employees and individual employers in contrast to corporate employers. At least $304,200,000,000 of the taxes came from employees, and probably another $150,000,000,000 came from self-employed individuals and employers who are individuals. Individuals coughed up the $27,900,000,000 in estate and gift taxes, and some portion of the social insurance, excise taxes, customs duties, and miscellaneous receipts that account for the rest of the government's intake.

So, of the $2,406,000,000,000 that flowed into the federal treasury, a huge portion came from individuals. That ought not be a surprise, for the only other source of taxes, fees, customs duties, and other income would be entities, chiefly corporations. Defenders of the present system will point to the $354 billion collected from corporations. Some will argue that those taxes are borne by shareholders and customers because some of the taxes are passed through in the form of higher prices and some of the taxes are paid by reducing dividends. Advocates of corporate-shareholder tax integration argue that any corporate tax is a "double tax" because amounts distributed by corporations to their shareholders are subject to tax in the hands of the shareholders.

Savvy tax planners will cause some portion of corporate earnings, perhaps all in some instances, to be paid out in deductible salaries to the owner-shareholders. Because these payments are deductible, the corporation's taxes are less than they otherwise would be. Is it any wonder that many corporate officers are hauling in salaries in eight and nine digits? Are CEOs contributing hundreds of thousands of times as much value to society and the economy as are the folks raking in $10 an hour? I doubt it.

The tax law has a provision that disallows a deduction for compensation to the extent it exceeds what is reasonable. It also has a provision denying a deduction for compensation exceeding $1 million if the employer is a public traded corporation. The first provision rarely sees the light of a judicial day, and when it does it often involves a dispute over the reasonableness of a relatively smaller salary. The second provision is so riddled with exceptions that it is a limitation in name only.

What would happen if the tax law flat out denied deductions for salaries and other compensation exceeding $5 million? Would corporations be less willing to dish out huge salaries to a select few while downsizing, outsourcing, and nickel-and-diming the rank and file into economic oblivion? Would the amounts showered on celebrities and professional athletes decrease? Would economic power be less concentrated in the self-selected few who control American politics and the national economy through tax-favored private foundations, political campaign contributions and concentrated ownership of national wealth?

The galling thing about the use of corporations to leverage exceedingly high salaries with tax breaks is that most of the recipients of those high salaries are not providing a concomitant benefit to society. Too often, when the conglomerate buys out the industrious entrepreneur, the quality of the product or service goes downhill, as faceless and nameless corporate cogs, hiding behind voice mail prompts consuming the customers' time with holds, replace the individual whose personal contact with clients and customers contributed to a valuable, reliable, and sensible output.

It is time to end the taxpayer subsidization of the high salaries that encourage and reflect the deterioration of goods and services. It is time to rebalance the tax burden. Perhaps if the existing tax system had narrowed the gap between haves and have-nots, while enlarging and improving the economic condition of the population generally, it might be a waste of time to consider a serious reformation of the tax burden allocation. If the present trend continues, the world will end up being owned by one giant corporation. That is not good.

Six months ago, Paul Caron's TaxProf Blog reported on a statement made by John Cox, a radio talk show host who is running for President in 2008. The statement was an email sent by Cox to Mary Mitchell, of the Chicago Sun-Times, in response to a story she had written about a young fellow who has been seeking advice from successful individuals. In the email reprinted in Advice for wise young man: Work hard, study hard, Cox suggests the fellow "learn everything you can as early as you can" and explains that he took a law clerk job after graduating from college "just to learn tax law and get the most experience I could." After explaining the long hours he worked and the various tasks he undertook, he says, in a matter of fact tone, "I read the entire Internal Revenue Code, the regulations and something called the BNA portfolios on taxes -- all cover to cover. All this while going to law school at night." Paul's post noted that a Journal of Taxation "Shop Talk" column about John Cox asserted that if he were to be elected, he would be the first tax lawyer to serve as President.

Last week, Paul posted a clarification from "Shop Talk" that acknowledged the status of William McKinley, a President who was not only a tax lawyer but also Chair of the House Ways and Means Committee and an author of a tax book. John Nance Garner, Vice-President under Franklin D. Roosevelt, also was a tax lawyer.

Although one might think the prospect of a tax lawyer as President would cause a commotion among tax law professors, what raised a bigger fuss was the claim by Cox that he had read the entire Internal Revenue Code, the regulations, and the BNA portfolios. Yes, when Cox was young, the Code was shorter, the regulations were less voluminous, and the BNA Tax Management portfolios were nowhere as extensive as they are today, but that's still a gargantuan reading list. Wilbur Mills, a tax lawyer who served for many years as chair of the House Ways and Means Committee "reportedly bragged" that he had "memorized the entire Internal Revenue Code." Memorized? Whew.

Then the fun began.

One tax law professor reacted to the claim by Cox with this quip: "But, not the first liar elected to the office." Of course not. Isn't it a prerequisite?

Another national tax colleague responded, "I hope he's a liar, or else I'm one. I tell my students that no one has ever read all of the code and regulations."

That brought a response by a senior and prominent member of the tax bar who explained that in the year following my birth, he "read the entire code and regs several times." Why? He was part of a team which did the first full revision of the regulations during the early 1950s, and in those days of walking barefoot uphill to school in the snow, when neither spell checker or word processor was to be seen, they had to read the regulations to each other in order to proof read them. They should have hired themselves out to parents trying to get their infants to fall asleep!

Rejoined another to this fascinating history, "I can't believe you lived to tell the tale." But he did, and he is a much better tax lawyer for it (and those are my words, not his, for I hold him in high regard). But he explained, "Hey, I was 25 and when the Director told me to read the Code."

The one who was worried he was a liar responded with "Impressive" and pointed out that replicating the feat today would be more difficult. He admitted to having read the 1913 Revenue Act, which, by the way, was about as short as a 20th century federal income tax law could be. He asked if anyone had read all of the 2004 tax act or the 2006 tax act? Or, aside from the drafters, the OID regs?

It was time for yours truly to step in. I was in trouble. The truth would come out.

Confession number one: Yes, I read the entire Internal Revenue Code, years ago. It's amazing what we will do in our youth that our better judgment years later tells us to avoid. The entire Internal Revenue Code? Yes. Once. Hopefully never again.

Confession number two: I've not read the regulations cover to cover. I've read substantial chunks. I've even written a few.

Confession number three: When I was in college, and was hired by an accounting firm where I ended up reviewing tax returns, I decided I had best get up to speed on as much tax law as I could. So I read the U.S. Master Tax Guide cover to cover. It's not quite the Cliff Notes of tax law, measuring in at the time with an inch of thickness, but it worked. Confession number three-a: I had to read the part on depreciation recapture several times before I figured out what it meant. Think my students will believe that? Probably not, but it's true.

Confession number four: Though I've not read all of the BNA Tax Management Portfolios, not even all in the U.S. Income Tax series, I have read a substantial portion, if for no reason other than to identify the scope of coverage as I outlined and then wrote the nine overview portfolios. I've also written six other portfolios, no, wait, there's a state income tax portfolio and the one on income averaging that had to be retired as obsolete when income averaging was repealed. And while writing the overview portfolios I ended up reading almost all of the Internal Revenue Code other than the portions dealing with excise taxes, procedure, administration, and a few other odds and ends. There was no escaping it, not when writing about all gross income provisions, all deduction provisions, all credit provisions, all tax computation provisions, all basis provisions, yes, you get the picture. Add to that cases, rulings, committee reports, and other items related to topics for which the overview portfolios also serve as the detailed analysis.

So do I believe John Cox? I have no reason not to believe him. It's not impossible to read the entire Internal Revenue Code and the regulations and the BNA Tax Management portfolios. It's not something I recommend that everyone do. But I do recommend it to those who want to become immersed in federal tax law. I know there were members of the staff of the Joint Committee on Taxation who "knew" the Code so well that when, during the second week of my tenure in the former Legislation and Regulations Division of Chief Counsel, I presented a draft of a new stay provision, one of the staffers replied that it was fine, but he preferred to track the language in a similar but unrelated provision hundreds of sections away in the Code. Those experts are long since departed from the Committee staff; one is a retired Tax Court judge and another, unfortunately, is also long since departed from this planet. I don't know if any of the current members of the staff have this comprehensive familiarity with the income tax law. Surely as the Code grows, and the regulations increase, and the number of BNA Tax Management portfolios increments, the chances of anyone having a comprehensive familiarity with the tax law will decrease.

Perhaps people convicted of tax fraud should be required to read the entire Code, the entire regulations, and even the BNA Tax Management portfolios while they reside at taxpayer expense in one of the nation's federal prisons. Especially the ones who claimed to be tax experts.

Better yet, perhaps every candidate for Congress should be required to read the Code, and then given a test. If elected, he or she should be required to read the regulations. If re-elected, it's time for the BNA Tax Management Portfolios. Any member who proposes or co-sponsors a tax bill should be required to read all of, yes indeed, MauledAgain. Wonders might not cease. Perhaps they'll think twice before adding more clutter to the tax law.

Better still, for the person on your holiday giving list who has everything, consider purchasing a copy of the Internal Revenue Code. This would be a fine present, especially for those who claim to be avid readers. Every librarian should have his or her own personal copy, too.

There is one disadvantage to reading all of this tax law stuff, even if one is not a member of Congress and has not been convicted of tax fraud. As I told my national tax faculty colleagues: "The bad part is when the words begin repeating themselves in your dreams. Or nightmares. Depending on your perspective......" Halloween was last night, wasn't it?

Very soon it will be time to answer the door and hand out packs of Reese's Peanut Butter Cups. I couldn't find the 4-pack version this year. Oh, there are going to be some disappointed children (and their parents). Somehow, 2 2-packs is not the same thing as a 4-pack. Forget arithmetic. These children have minds that will serve them well with the tax law of the 21st century, when 2 plus 2 is not quite the same as 4.

Now to the frightening stuff: I had my annual physical today. My physician said, barring accident, I'm good to go for a long time. Now, that's a scary thought, isn't it?

Every once in a while, Paul Caron enlightens the readers of the TaxProf Blog with something not really tax but too much fun to pass by. Such was the case with I Am 1 in a 100 (Literally)!, where he reports that in using How Many of Me, he determined that he was one of 100 Paul Carons.

Of course, I had to check out myself. "There are 27 people in the U.S. named James Maule." I know many of them, thanks to my family history and genealogy pursuits. Yes, a few of the other men named James Maule are lawyers. They have different middle names, which helps minimize the confusion, and to those who wonder why I use my middle name in formal matters I simply tell them that one of the other James Maule lawyers has had a few rough times in practice. My friends not named James Maule who live in the same area see to it that I know about it, and are a wee bit too happy doing so.

We are a formal bunch. "There is 1 person in the U.S. named Jim Maule." I do have a cousin whose name is Jim, not James, so perhaps that's him.

Unfortunately, How Many of Me does not permit a search for other people named James Edward Maule. I know that at least five of us existed, the other four are long gone (and were in distant branches of the family, i.e., England, except a closer cousin of several generations ago, in Texas, who was an ordained minister. Yes, the Rev. James Edward Maule was a real person, and I've met and corresponded with many of his descendants. Go peek at the Thomas Maule of Salem, Massachusetts, descendants chart.

The tax angle? At first, I simply thought it was a matter of Paul being able to say "You must really mean to audit the OTHER Paul Caron (or one of them), not me." But after several tax professors on the listserve noted that How Many of Me claimed that there were ZERO people with their name, I saw an even stranger tax twist. How can a person who does not exist have an obligation to file tax returns and pay taxes? Trees that fall in a forest bereft of people DO make sound, but non-existing people surely need not file tax returns. Of course, they also don't get to vote, earn money, or party.

I checked a few family members. My mother, apparently, is unique, but we knew that before running her name through How Many of Me. There are half a dozen people with the same name as my brother and nephew, five with the same name as one sister, five sharing the name of one niece, and more than four dozen sharing her husband's name. Yes, one of my nephews is a James Maule, so he's accounted for, as is his wife, who is the only of her name. However, it may come as a shock to learn that my other sister, her husband, and several of my nieces do not exist.

If for no other reason than to learn how many people there are who the Social Security Administration or the IRS might confuse with you, pronouncing you dead before your time or hitting you up for the taxes owed by your billionaire namesake, visit How Many of Me.

As to the theological aspect, the conclusion from How Many of Me that "There are 6 people in the U.S. named Jesus Christ" leaves me almost speechless. No one, however, has the first or last name of God. Nor is there anyone named Peter Rabbit or Santa Claus.

Oh, by the way, a few of those other James Maules? Yes, they're my clones. I was hoping no one would discover this.

ADDENDUM: A reader suggested a close read of the information on a separate How Many of Me page that deals with "accuracy." Apparently the results generated by How Many of Me are based on a theoretical construct reflecting the relative incidence of first and last names and not on an actual identification of real individuals. Sites like Google or Infobel are far more likely to provide a much more useful output, even if individuals lacking listed telephone numbers in the non-cellular phone world are taken into account. Once again, theory meets reality, and it's as frightening as ever. If How Many of Me ever becomes a pay site, perhaps they'll accept theoretical dollars. In other words, what's the point of How Many of Me? A toy? A game? Yes, "For entertainment purposes only" shows up at the bottom of the web page.

Early this month, in Ready It Was Not: The Demise of California's Government-Prepared Tax Return Experiment, I commented on the apparent demise of the California Ready Return Project, which I had criticized in "Hi, I'm from the Government and I'm Here to Help You ..... Do Your Tax Return" and in ReadyReturn Not a Ready Answer.

Despite the seeming termination of the project, some of its opponents continue to lobby against it. Perhaps they've seen too many of those horror flicks where the monster, the alien, the bad guy, or whomever it is that should be dead appears to be dead but isn't, usually because there's another forty minutes to go before the credits roll. It seems, according to stories in the Sacramento Bee and the Los Angeles Times, Intuit has contributed a million dollars to the Alliance for California's Tomorrow, which then spent $66,000 on a television spot for a candidate running for state controller. Intuit, whose opposition to ReadyReturn is no secret, appears to be concerned that the project is not terminated and is trying to ensure that it does not get revived. Apparently the candidate benefitting from Intuit's dollars does not favor ReadyReturn and apparently the other candidate does, though I have not found anything that specifically links either candidate to a position on the issue. Perhaps most folks think, as I do, that the ReadyReturn experiment is over. But perhaps that sort of thinking is too close to the premature sense of relief that shows up too early in the movie.

It is unfortunate, though, that the issue is affected far more by campaign dollars than it is by an open and thorough discussion of the merits. It's not as though the merits have been ignored, but there's too big of a disconnect between the choices California voters perceive and the analyses of ReadyReturn that can be found in blogs such as MauledAgain. In other words, I doubt California voters see this particular race for state controller as a referendum on ReadyReturn, but at least one of the campaign donors does. Tax and politics remains a strange and scary mix. Halloween and Mischief Night are right around the corner. Ever wonder why election day follows so closely on their heels?

Recently I commented on the tax fraud indictment brought against Wesley Snipes. In The Tax Fraud Environment: Sniping at the Congress, I noted that Congress could do a better job of reducing the motivation and opportunities for people to commit tax fraud. I also took note of the fact that he could not be found. It turns out, according to stories such as this one from CNN, that he is in Namibia. He's in the middle of filming a movie called Gallowwalker.

The movie's producer reports that Snipes has no intention of interrupting the production and that he'll be ther at least until near the end of December. She claims that Snipes went to Namibia to do the film work and not to avoid the arrest warrant that has been issued. The United States does not have an extradition treaty with Namibia. Perhaps that is why fugitive Jacob Alexander is living there. So will Snipes decide to linger after the director says "cut" for the last time?

So is anyone in the government trying to negotiate an extradition treaty with Namibia? Is anyone taking steps to make certain that if Snipes is found liable for the alleged tax deficiency, even if he's not convicted of tax fraud, that he would not already have moved out of the country his assets that would otherwise be in the United States for the IRS to seize to satisfy any judgments for the back taxes?

Jim Chen has posted on MoneyLaw, a blog to which he is one of several contributors, a thought-provoking response, "Wisdom from whatever source derived," to my half-in-jest but serious proposal that Harvard could accomplish its curricular reform goals much more easily by putting the basic tax course in the first-year curriculum. Jim concludes that my proposal will not accomplish the stated goal.

Jim explains that first-year students consistently try to compile rules of law or substantive doctrines rather than abstract principles such as legal process, canons of interpretation, and the role of common sense. He's absolutely correct. If he's not, it's only in the perhaps unintended implication that second-year and third-year students don't make that mistake. Many, perhaps most, of them do. Fortunately, some law students evolve in this regard during their very short stay in law school.

For this reason, Jim concludes, using any substantive subject as an avenue to focus students' thoughts on legal process, administrative regulation, or statutory interpretation will not succeed. I agree, at least to the extent we're talking about substantive courses as taught in most instances throughout American legal education. It's easy to elevate doctrine above process, to succumb to student demands for information acquisition, and to surrender to student passivity. In response, it may be helpful to point out that I use my courses no less to help students become familiar with substantive doctrine as to help them analyze their own thinking process while they try to sharpen and modify their intellectual toolkit. An explanation is in order, one that requires me to write delicately and diplomatically.

Early in my law teaching career I noticed that student errors on law examinations fell into several categories. Surely I was not the first or only law professor to identify these "thinking process" flaws. And perhaps I was not the only one to make a deliberate decision to find ways to identify these flaws on an individual basis and to encourage the student to make corrections before taking another examination or test. As I met with students individually to do examination post-mortems, it became apparent to me that students equated information acquisition with high achievement. The erroneousness of this perception contributes to the disappointment experienced by law students whose grades do not meet their expectations. It also became apparent to me that changing the focus to other perspectives, including not only those mentioned by Jim in his post, such as legal process and internalization of statutory construction canons, but also others such as problem solving, fact acquisition, critical analysis, and policy development, would improve student learning and, incidentally, student examination performance.

Getting students to shift their efforts from acquisition of substantive doctrine is challenging. Jim concludes that it cannot be done. I disagree. I know it can be done because I've succeeded, at least with respect to many of the students who have enrolled in my courses. The initial resistance is strong and widespread. By the end of the semester the unhappiness has diminished for some, and has evolved into those wonderful "aha's" that are at the core of teaching satisfaction. The key to pushing students away from mere substantive doctrine acquisition, without removing it from their toolkit, is to reduce the reward for information acquisition. I do this by evaluating students on multiple levels. The first level is, indeed, one of basic knowledge. There are a few questions, on the examinations and semester exercises, to permit a student who does nothing more than acquire substantive doctrine to pass a course, though with a grade that, if also earned in the student's other courses, does not permit graduation. The other levels focus on a student's ability to demonstrate an understanding of the process that is involved. Sometimes, for example, I give the students a statute they've never seen (because I invented it), and put them to work making sense of it, explaining why and how they reach their conclusions. Again, I didn't invent this approach and I'm far from the only person who uses it.

Most importantly, I try to get students to think about their thinking. Some of this can be accomplished in the classroom. The other day, for example, after presenting a question to the class and asking them to respond using clickers, I discovered that only one student had the correct answer. The other choices would be selected by those who pursued analytical processes that had one or more wrong turns in the intellectual route. Thus, I was able to discuss with the students how they had processed the issue and the facts, and where their thinking had gone astray. They understand that they won't see the same question again in a graded experience, but they will see something that requires the same sort of thinking process. Much of the time, of course, the task of getting a student to contemplate how his or her mind works and how it should be working comes in one-on-one, or occasionally small group, sessions, often triggered by their during-semester reaction to less-than-ideal graded exercise results. It's time consuming. It is, to paraphrase my current dean, "an awful lot of work." Yes, it is.

In their rush to demonstrate their knowledge of legal doctrine, thinking that it will earn them high grades, students run roughshod over good legal analysis skills. They ignore facts. They presume facts. They answer the question they wanted to see and not the one asked. They begin their analysis in the middle of the process because they focus on the issue or fact that grabs their attention. Breaking students of these "bad intellectual habits" requires more than getting rid of the habit. It requires development of a substitute, just as one does in trying to break any bad habit. The substitutes, I have found, are those things that Harvard (and I suppose every other law school and law professor) wants to instill in its and their first-year (and upper-year) law students. Coming at problems with a toolkit larger than an acquisition shovels and an information bucket makes the student aware of how rich and wide a lawyer's mind needs to be. One of the additional reasons tax is ideal for this approach is that its information has the shortest shelf life of any doctrinal category in the law school curriculum. Students are told, more than once, that half of the information they learn will be obsolete within five years, but the processes they learn to apply will last their professional lifetimes and longer.

Does it work? For many students, yes. For those who hold out their resistance to a change in how they think, other than by avoiding my courses, perhaps not, or perhaps it does, a year or two or three after they graduate. How do I know that it works for many of them? They tell me. More than once, more than a hundred times, I've been told, "I wish I had been through this last year." or "Now I understand how bad my earlier exams really were and I wish I could do them again." My favorite experience was that of a student, ranked very very high in the class, who did not do well on the first few semester exercises. She visited my office and argued well, making the point that if she was not doing well then what I was asking of her and her classmates was off the mark. One day, on her third or fourth visit, she came into my office and said, in so many words, "I get it. Wow. You're not asking for an answer to a set of facts. You're asking us to figure out what the facts must be and why they must be so in order to get an answer." She had articulated in a way that I never had what it was that I was doing in this respect. So, yes, it works.

In his post, Jim Chen wonders why students are so intent on merely acquiring substantive doctrine. He suggests it might be the nature of American undergraduate education, some "debilitating facet of legal education," or something "even worse," namely, ourselves. I think it is all three, plus a fourth. Students somehow think that passing the bar examination is made more likely by the acquisition of vast stores of legal information. Fortunately, an increasing number of states are modifying their bar examinations to move away from information regurgitation and memorization skill exposition to the processing of practice-like client matters. Dispossessing first-year students of their misimpressions, misunderstandings, bad intellectual habits, and implanting in their minds the appreciation of legal process, statutory construction canons, problem solving approaches, and critical analysis, while nurturing and preserving the good academic discipline they have brought with them, is essential. Perhaps Harvard's plan will do this, or do this more effectively. I cannot say it won't work. I do wonder though, if it wouldn't be far easier to adapt a course such as tax (or something not so different in this respect, such as environmental law) to accomplish the same goals in a context that isn't as divorced from legal practice as are courses so imbued with theory as some of the Harvard courses appear to be.

Before closing, it's worth noting that reaction from other law schools to Harvard's plan is mixed. According to this National Law Journal story, some schools approve, noting that they already have implemented what Harvard is now discovering. As one law school dean put it, "When Harvard does it, it becomes news." I'd be in agreement with that observation even if my son wasn't among his students, and giving me a special perspective on law school's first year. But I disagree with what another law school dean opined, "The first year is the one year that works." I'm not convinced of that assertion. My disagreement might rest on my having a different sense of what law school should be doing, or it might rest on my conclusion that too many first-year students emerge into the second-year carrying too many intellectual bad habits and too little appreciation for law beyond appellate cases and Restatements. If it is true, as a group of students once insisted, that I was the first law professor they had encountered who made significant use of the word "client" then something is amiss.

In closing, it's encouraging to read Jim Chen's ode to tax: "It has everything a law school course should have, plus the added bonus of being relevant to the future professional interests of virtually every law school graduate." Jim also notes that "As an inveterate generalist, I've always been fascinated by the idea of adding tax to my teaching repertoire. It covers the full range of business law issues and provides the perfect platform for considering, at the highest manageable levels of abstraction, the very purposes of government." To quote my colleague Michael Mulroney, in his last academic year as Director of Villanova's Graduate Tax Program, "tax lawyers are the last vestige of the general practitioner." I was delighted to see that Jim Chen very nicely demonstrated the pervasive reach of taxation when he asserted, "In teaching law students, we should happily accept wisdom from whatever source derived." The tax folks will recognize the reference and understand its cleverness.

As reported in the Harvard Law Bulletin, the Harvard Law School faculty unanimously approved revisions to the first-year curriculum. The news isn't new. As I discussed in The Law School Curriculum: Ready for a Change?, early reports indicated that Harvard's curriculum reform study was seeking "a more practical, problem-solving approach" to the teaching of law.

I'm not so sure that what has been adopted aligns with the "more practical, problem-solving approach" that I try to bring to my courses. As I explained in my earlier post:

I have used the problem method to educate law students. I blend into that approach awareness of overarching jurisprudence, policy considerations, and ethical concerns. In other words, I try to replicate the intellectual challenges that students will encounter when they graduate and enter law practice. Whether they begin or end up in a law firm, a corporation's legal department, a government agency's counsel office, or a judge's chambers, or even in some non-law field, law graduates will be doing two primary tasks: solving problems and preventing problems.

I try to "synchronize legal education with law practice."

Harvard plans to add three courses to the first-year curriculum. The first, Legislation and Regulation, is intended to "introduce students to the world of legislation, regulation and administration that creates and defines so much of our legal order" and will "teach students to think about processes and structures of government and how they influence and affect legal outcomes." A closer look at the first course suggests it is a mixture of constitutional and administrative law: "The course will introduce students to, and include materials on, most or all of the following topics: the separation of powers; the legislative process; statutory interpretation; delegation and administrative agency practice; and regulatory tools and strategies."

The second course is a buffet of three courses, public international law, international economic law, and comparative law. These courses already exist in most law schools.

The third course, Problems and Theories, will be offered in a special January term for first-year students. It "will allow students to reflect on what they have learned through systematic treatment of methods of statutory and case analysis, discussion of different theories of law and work on a complex problem (or problems) beyond the bounds of any single doctrinal subject, explored through simulation and team work. The course’s focus will be on complex problem solving. The basic materials used will be case studies of complicated situations involving facts and diverse bodies of law and demanding both creativity and analytic rigor in generating and assessing solutions."

I'm impressed with the stated goals of the changes. The chair of the reform study stated, "We believe these changes will better prepare our students to think about and practice in a legal world in which regulations and statutes play an equal or more important role in the creation and elaboration of law as do court decisions; in which transactions and interactions among parties are increasingly global in nature; and in which economic, cultural and technological changes call upon the best lawyers to become skilled in system design, problem solving and creative approaches to issues." Of course. It took this long to figure this out?

But I'm not impressed with the implementation. What I see here is some reshuffling of courses, bringing into the first year courses that are upper-year courses in almost all law schools. The words theory and theories show up too often, and the word client doesn't appear.

Much time and effort could be saved, and the same worthwhile goals accomplished, by moving Introduction to Federal Taxation, as many of us teach it, into the first year. What's in the package? Constitutional law analysis? Yes. Administrative law principles? Yes. Statutory and regulatory analysis? Yes. Application of law to facts? Yes. Problem solving? Yes. Planning to avoid problems? Yes. Discussion of ethical considerations? Yes. Awareness of client needs? Yes. Development of interviewing and counselling techniques? Yes. Attention to international issues? Yes. Incorporation of business, social, economic, and political facets of the topics? Yes.

Does all of that seem overwhelming? It can be, for the unprepared student.

Does all of that resemble the practice world into which almost all law graduates go? Most definitely.

Isn't that what law school is supposed to be?

Maybe, someday, somewhere.

Thanks to Paul Caron and his TaxProf Blog for alerting me to this most recent saga in the world of celebrity tax crimes. On the heels of the Snipes indictment on which I commented less than an hour ago comes news of another celebrity with serious tax issues.

According to the Associated Press report, Sunny Garcia has been sentenced to three months in prison for failing to pay taxes on more than $400,000 in winnings. Who is Sunny Garcia? If you're asking that question, welcome to my world. I now know who he is because the headlines are putting "surfing king" in the middle of his name. I know very little about surfing, unless it's surfing the web, and I don't think there's prize money available for doing that.

Garcia was straight-forward about his tax woes. "I didn't surf because I thought I was going to make money at it. But coming from a poor family, you want to buy everything you never had. I spent my money foolishly."

Well, at least he didn't cite the section 861 argument or try to pay his taxes with fake certificates. But how did he not know that he owed tax? And how did he not know the consequences of failing to pay? Yes, folks, here's yet another example of why high school students need a mandatory tax course.

Most of the time, when someone is indicted for tax fraud the news doesn't travel far beyond the accused, the prosecutors, and friends and family of the taxpayer. Sometimes neighbors or former classmates hear of the indictment. But when it's a celebrity, even the mainstream media pays attention. Perhaps it's because people take subconscious delight in watching a celebrity tumble down, or perhaps it's because American culture has a deep obsession with information about celebrities that means nothing when it involves "ordinary" folks.

So it was no surprise when the federal government's indictment of Wesley Snipes for tax fraud was released, it made headlines throughout the mainstream media, from the Associated Press to USA Today. One of my students alerted me to the news within minutes after the announcement. I'm pleased that he now scans the news with a tax gleam in his eye. I passed the news along to Paul Caron, as did several others, and Paul compiled a summary of the story, along with links to some of the mainstream media and blog reports.

What did Snipes allegedly do? He's accused of failing to pay almost $12 million in federal income taxes, failing to file tax returns for six years, and claiming fraudulent refunds on taxes already paid for earlier years when he was filing returns. Snipes did not do this by himself. It is alleged that Snipes contracted with several companies that were in the business of marketing tax evasion schemes. Among the schemes marketed by the individuals behind these companies was a so-called "section 861 argument" and the "Bills of Exchange" ploy. The former is a long-rejected argument based on a deliberate misinterpretation of an Internal Revenue Code provision applicable to a narrow group of taxpayers, and the latter is a fraudulent arrangement by which so-called "Bills of Exchange" are sent to the U.S. Treasury in payment of taxes. The marketers of these schemes received a fee equal to 20 percent of whatever taxes they could prevent their clients from having to pay.

Snipes attended seminars conducted by the tax shelter marketers. He failed to persuade his former tax advisor to file returns that relied on the section 861 argument. Several years ago, one of the tax shelter marketers was sued by the government on account of fraudulent tax refund claims that were filed, including one for Snipes.

So how does a person get pulled into this sort of criminal behavior? Snipes is not an attorney, nor a tax practitioner. Surely he shares the desire most people have to reduce their tax liabilities. What he heard sounded good. What we don't know is if he did any research or had anyone do research for him, other than his former tax preparer who told Snipes it was a plan long rejected by the courts. Had Snipes approached any worthwhile tax attorney or tax accountant, he would have been given the same opinion. Perhaps he didn't want to hear the bad news about what he thought was good news.

I'm not going to defend Snipes. He has serious problems. If convicted, he faces years in jail and tens of thousands of dollars in fines. Even if he isn't convicted, he owes tens of millions of dollars in back taxes, interest, and civil penalties. At the moment he cannot be found, which is why he has not been arrested. Last year, he was refused entry into Sout Africa because he was using a forged passport. Though the passport issue is separate from the tax indictment, one begins to wonder what Snipes is thinking. Or if he is thinking. Why would he need a forged passport?

Snipes is not alone. He is one of tens of thousands of Americans who each year fall for these fraudulent tax evasion schemes. Most of these people are not celebrities, so their troubles don't end up in the national limelight. The dollar amounts that are involved often are far less than tens of millions of dollars. The government must divert resources into finding these taxpayers, auditing their returns, building a case, and prosecuting those who are indicted. There must be a better way.

Surely the United States Congress can do some things to reduce the motivation of taxpayers to cheat. Not that I have any false hopes that the United States Congress would do what needs to be done, nonetheless I share some ideas.

Because Wesley Snipes and the other folks buying into these fraudulent schemes probably would reject a proposal from some smooth operator to zoom through a toll booth on the basis of an argument that their vehicle is invisible, so too, the number of people ready to accept arguments such as the "section 861" joke would significantly decline if the tax law were not so convoluted as to make the nonsense offered by the tax fraud marketers seem plausible.

Because the United States Congress continues to tax wages at rates higher than those applicable to the earnings of investors, almost all of the people who fall for these tax evasion gimmicks surely are thinking that this is the only way they can eliminate the tax disadvantage facing them because their income is not as sacred to the Congress as are the earnings of those who own capital. People who are disaffected by the inequities, perceived or real, in tax policy are much more likely to pay attention when the Pied Pipers of Tax Fraud show up at their door.

Because an educated citizenry is less likely to believe the twisted logic of those trying to sell tax fraud plans, it makes sense to require high school students to take a course in basic rules of taxation. If we're willing to fund programs that teach children why illegal pharmaceuticals are best avoided, we ought to be just as willing to fund programs that teach the nation's future voters and taxpayers why section 861 doesn't mean what the tax fraud purveyors claim it does. Of course, teaching basic tax rules to high school students would be much easier if the Congress would clean up the tax code and adopt a sensible tax policy.

What will happen to Snipes? Perhaps he will plead guilty in exchange for reduced punishment. Perhaps he will go to trial and persuade one juror not to convict because he, Snipes, reasonably believed he owed no federal income tax. Perhaps he will go to trial, be convicted, and be sentenced to prison.

I'm not concerned about Snipes. He created the mess he is in, and he's in a mess even if he finds a way out. His mess is his problem. What is the nation's problem is the fact that Snipes, and thousands of others, are in a similar mess. The indictment may get Snipes' attention, but it ought to be a wake-up call to the entire country that the time for talking and writing about tax reform is over, and the time for fixing the problem is upon us. How big of a Justice Department will the nation need if instead of thousands, millions of taxpayers decide to imitate a celebrity?

Ten months ago, a house fire supposedly started by a burning mouse triggered four posts:

Why Tax Law Can Fire Us Up
Follow-Up Report Extinguishes Blazing Mouse Tale (but not the tax issues)
Tax Law and Rodents Afire
The Flaming Rodent Tax Trilogy Gets a Sequel

Not only were there some interesting casualty loss deduction issues to examine, the story was perplexing because the reported facts changed several times. In the third post I pointed out that animals afire doing damage to human property is not a new phenomenon, with a history reaching back thousands of years. Flaming rats and fox tails afire shared the spotlight with the burning mouse. I quipped, "For the moment, though, I'm content with warning folks not to let their pets play with matches."

I spoke too soon.

Donna Byrne, who teaches at William Mitchell School of Law, passed along a report of a house fire started when a pet cat knocked a candle onto a chair. This time, the damage was not limited to property. The homeowner, who is disabled, suffered burns, and both her cat and her specially-trained care dog, who had brought her a phone so she could call for help, perished in the fire.

The same sort of questions that I raised with respect to the burning mouse incident will be asked at some point in this latest catastrophe. For example, is it gross negligent to have lit candles when there is a cat prowling the premises? Perhaps. Perhaps the homeowner was trying to cut back on electricity costs and was using candles for lighting. Had the cat previously knocked over items? Should the candle have been placed so that if it was knocked over it would fall onto a surface more resistant to rapid incineration than a chair?

In a smart-aleck moment, I had asked, "What's next, a blazing canary?" Now, in hindsight, I realize that when it comes to blazing, it's a different species of which some might need to be alert. Hopefully the next story won't be about horses in the barn breaking loose with blazing saddles. Apologies to Mel Brooks.

The government has filed its Petition for Rehearing En Banc in the D.C. Circuit's Murphy decision, the one in which the D.C. Circuit held, among other things, that section 104(a)(2) was unconstitutional. On one of my commentaries on the opinion, Why Hold Section 104(a)(2) Unconstitutional When There's No Need to Do So?, I pointed out one of the Court's many flaws in its decision, namely, holding section 104(a)(2) unconstitutional for requiring inclusion in gross income of the damages in question, when it is section 61 that requires the inclusion in gross income. In its petition, the government merely alludes to this particular problem:

The panel compounded its error by concluding that damages for nonphysical personal injuries were not considered income at the time the Sixteenth Amendment was ratified. (Op. 17- 23.) That analysis is incorrect, but in any event focuses on the wrong question. The critical question is whether § 104(a)(2), or more accurately § 61, involves any direct tax that would have been subject to the apportionment requirement, but for the Sixteenth Amendment. [emphasis added]

Perhaps the reason the government does not dwell on this issue is because it has so many other serious errors in the three-judge panel's opinion with which to grapple. Now, in addition to concerns over the chances of the petition being granted and the en banc outcome being decided correctly, there is another worry, namely, that the inability to understand how Internal Revenue Code inclusion and exclusion provisions work will become a problem not just for three judges but for many more. Perhaps this matter can be clarified at oral argument. That, of course, assumes a favorable reaction to the petition. It's tough to imagine the full court letting the three-judge panel's horrific opinion stand without comment.

I should not have been surprised when I read the story in Wednesday's Philadelphia Inquirer about the tent city that pops up in State College the week before Penn State has a home football game. Called Paternoville, a strange compliment to the team's long-time head coach, the area outside the student entrance to the football stadium fills up with students camping out so that they can get a good seat at the game.

Apparently, for unexplained reasons, student seats at the football games cannot be reserved. It's first-come, first-served, an approach to event handling that made sense in the pre-Internet world but that offers far more disadvantages than advantages in almost all venues. So, Penn State officials, having rejected or perhaps never having considered the twenty-first century idea of letting students reserve seats through an on-line system, have now recoiled in horror at what their policy, or lack of policy, had created.

The phrase "tent cities" usually triggers visions of refugee camps or protesting World War One veterans, but in this instance such a vision is far from reality. The students bring their computers, laptops, and televisions. They power this array of electronic devices by running extension cords to some unidentified power source. They also stock up on beer. They invite their boyfriends and girlfriends to share the tent. Do they bring books? Do they study? The article doesn't mention books. Or studying.

In reaction to the situation, Penn State officials have decreed that tents cannot be pitched before 6 a.m. on Thursdays. It took moments before some clever college-graduates-in-the-making decided to camp out on the Thursday ten days before the Michigan game, because the decree did not specify that the Thursday to which it referred was the one before the game. Sounds to me as though this group is headed to law school. Except that on their applications they will need to disclose what then happened. Campus police showed up, and removed them. Officials also banned appliances, extension cords, and alcohol.

So along comes Paterno, the head coach who takes pride in his players' graduation rate. His take on the situation? "I think it's a great thing for a kid to be able to get that involved in something on the campus. What are the consequences if you bring a bunch of kids up here on a Tuesday as opposed to a Thursday? I don't know. I hope we don't get to the point where every time there is a lot of enthusiasm for something, regardless of whether it's for that or for something else, that we have to worry about the consequences. Sure, there are consequences. There's always going to be consequences. You get a bunch of kids together and they're out there to have a little fun and share an experience, there's going to be some consequences."

Whoa, Joe. What about class? What about studying? What am I missing here? Let's face it. For years, Penn State has had a reputation as a party school. Stories I've heard from friends and acquaintances who went there, tales from some of the law students who have graduated from the school, and concerns expressed by parents of Penn Staters, have reinforced that reputation, at least as far as I'm concerned. I do know that the trustees and senior administration officials have been working relentlessly trying to change the school's reputation. I'm not convinced, though, that acquiring a top-flight medical center and absorbing a fine law school is enough. Perhaps a serious conversation with the athletic department and its iconic head football coach would send a message that camping out for football game seats ought not be a higher priority than academic pursuits? Perhaps putting the wizards in charge of football game seating in touch with folks in the computer science department would be a productive first step in moving the seating procedures out of the twentieth, wait, nineteenth century?

Students are no different from other groups of Americans who report that they are short of time. There's so much to do. How efficient is it to invest 48 hours, or more, in effect standing in line waiting to get seats at a football game? What sort of message does Penn State University send to its students when it refuses to do away with the practice, and instead countenances student behavior that surely has an impact on attendance at Thursday and Friday classes? Who deals with the fallout when Penn State alums show up in their graduate program courses without the information or understanding they would have acquired had they not missed so many classes?

Lest it appear I'm picking on Penn State, I have the same low regard for this nonsense wherever it takes place. I'll guess Penn State isn't the only university where this happens, but it made the news. The others haven't. At least not yet. I also will guess that there are universities who handle student demand for athletic contest seats in a manner that eliminates the need for students to waste time, missing class while camping out.

I suppose my opinion on this matter contributes to my reputation as a demanding teacher. I'm no more demanding, and probably am less demanding, than are the clients, partners, judges, supervisors, and other employers for whom my students will work. Perhaps the folks running America's undergraduate education systems ought to be no less demanding than their students' future graduate school faculties, future employers, and future clients and customers will be. Considering what students, parents, and taxpayers are being charged to fund the nation's colleges, it isn't unreasonable to expect that somewhere on campus is someone capable of implementing a student football seating procedure that eliminates the need for students to cut classes.

Not much competes with the job search to increase law student anxiety. Exams? Grades? Those surely would be much less worrisome if they didn't mean so much. And they mean so much because most employers look at grades, or more specifically, class rank, as a significant factor in their hiring decisions. Yes, personality exhibited during an interview matters, but the interview is much easier to arrange when the grades are outstanding. Add to the mix the high debt burden many graduates have accumulated and are accumulating, and it's easy to see why Directors of Career Services need counseling skills to go along with their savvy about employer preferences and job-hunting tips.

With one major concern among law students the belief that there are more law graduates than available entry-level positions, recent news from the IRS ought to be encouraging. As reported by the Wall Street Journal and explored in its law blog, the IRS intends to pursue the same law students that the large law firms have been recruiting. How can the IRS, which offers starting salaries roughly half of what the large firms pay, attract students to practice in an area almost all consider too challenging, too boring, and too intimidating? The Chief Counsel to the IRS points to the roughly 40-hour work week, the opportunity to make court appearances within a month or two of being hired, and a long list of available locations. Will that be enough?

For law students who are not looking forward to the billable hours race of large law firms, where law graduates find themselves putting in 60, 70, or even 90 hours a week, the prospect of a "normal" job with IRS Chief Counsel must be very appealing. Based on my experience, though, I hesitate to confirm that 40-hour work weeks can be guaranteed. One thing is certain. The fewer tax courses a law student takes in law school, the more time he or she will need to get up to speed so that the assigned case, ruling, or regulation drafting project can be undertaken competently. So hopefully the IRS will bring the message about its effort to hire more "top of the class" law graduates to first-year law students. I've had enough conversations with third-year law students who avoided tax, only to discover the doors that their decision had closed, to know how unwise some law students' course elections are.

The IRS needs to revamp its hiring process if it's going to succeed in this new endeavor. Reportedly, applications gather dust while candidates turn their attention to favorable responses from law firms that somehow manage to communicate their decisions within weeks, if not days. Three decades ago, I waited for several months while the Chief Counsel's hiring system did whatever it was doing. Changing the hiring process at a government agency requires more than drawing a new flowchart. It requires serious changes in the institution's culture. Urgency, which permeates law firm practice, doesn't seem to afflict most government bureaucracies.

According to the Wall Street Journal article, another problem faced by IRS Chief Counsel is that "for decades ... [i]t recruited in the spring, instead of the preceding fall when the private firms did." That was not my experience. I applied in the summer before my third year, and had a response before the spring semester started. After I started with what was then the Legislation and Regulations Division of Chief Counsel, new attorneys arrived throughout the year. Perhaps the "for decades" doesn't reach back more than two?

What might be driving the new emphasis by IRS Chief Counsel on competing with large law firms is the perception that the IRS is at a disadvantage when dealing with tax shelters and other tax-savings arrangements because the taxpayers have access to sharp private practice tax lawyers and the IRS does not. I doubt that this is a significant reason for the problems faced by the IRS when dealing with tax avoidance and tax evasion. But if it is, hiring law graduates who have had one, two, perhaps even four tax courses and who have not practiced law is not going to put Chief Counsel into a position to lock horns with taxpayers' representatives. At least not in the short-term. Consider that someone earning an LL.M. in Taxation must enroll in twelve, yes, twelve tax courses. That's a number reflecting the decision back in the 1950s by New York University's law school when it instituted the nation's first such program. It probably made sense then. Today, with the tax law having grown by leaps and bounds, twelve courses is inadequate. When I make that assertion I'm not told I'm wrong. I'm told it isn't expedient, or efficient, to require 18 or 24 courses in an LL.M. program. So LL.M. graduates must learn on the job. So, too, must J.D. graduates who have at most one-third, and usually have one-sixth or one-twelfth, of the formal tax education LL.M. graduates bring to their employers. So long as tax practitioners with 10, 15, or 30 years of practice experience are representing taxpayers, the Chief Counsel to the IRS will continue to be at the disadvantage some say is the reason for its tax shelter repression problems.

What Chief Counsel needs to do is to find ways of hiring tax practitioners who are ready to leave the 70-hour work weeks, pressures of law firm management, and the other aspects of practice that wear people down. Rather than emphasizing the Office of Chief Counsel as a good place to get started, Chief Counsel ought to emphasize the agency as a good place to begin a second career. The drawback? Money. Tax attorneys who are 30 years out of law school are unlikely to settle for the salaries offered by the IRS to J.D. graduates. To the surprise of no one who reads this blog, I think the problem lies with Congress. It must understand that the sustained effectiveness of the tax system requires the investment in human intellectual capital that demands the going price for experienced tax experts. Congress needs to abandon its annual ritual of cutting the IRS budget, or grudgingly giving it increases that barely match inflation, while holding the IRS out to the public as some sort of unwelcome enemy of American values. Whether this will happen depends on whether Americans are finally so sick and tired of the incompetence, arrogance, corruption, misbehavior, and other inadequacies of the Congress that they clean house and demand genuine reform.

In the meantime, IRS Chief Counsel will move along with its new marketing campaign. It is distributing a CD that includes, among other things, a list of "notable IRS alumni." Would you have guessed Ronald Pearlman, who now teaches at Georgetown? Perhaps. I knew that one. Pam Olson, now at Skadden Arps? Sure. How about Jerry Reinsdorf, owner of the Chicago White Sox? I didn't know that. My oh my, I made a mistake somewhere. Well, I've made many, but this one is annoying. After all, I am a Chief Counsel alum, perhaps even notable, and I don't own the Philadelphia Phillies, or the Eagles, or, oh, never mind. If I can't figure out how my tax skills should get me to professional sports franchise ownership, I guess I don't deserve to have one.