The Illinois Business Law Journal

Undocumented Taxation: More Illegal Immigrants Likely to File Returns

The historic case of James v. United States held that illegal gains constitute income that must be reported, despite any legal obligation which might arise to make restitution. [1] However, a whole different tax question arises for collecting legally earned income from residents illegally in the country. While the issue may not be clear to the millions of immigrants illegally residing in the country, the issue is clear to the Internal Revenue Service. “Everybody is a citizen for tax purposes,” remarks one Baltimore tax-preparer. [2]

Will Congress Kill the “Death” Tax?

    Estate and gift taxes have been a thorn in the side of the affluent for ages, while serving as an efficient stream of revenue for the federal government. Gift and estate taxes are two different types of taxes. Gift taxes apply to lifetime transfers of assets, while assets transferred at death are subject to estate taxes. [1] The Federal estate tax is levied “on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States.” [2] The current status of the estate tax is governed by the Federal Economic Growth and Tax Reconciliation Act of 2001 (“EGTRRA”). [3] Under EGTRRA, the estate tax has a ceiling of 45% of an individual’s estate in 2007 through 2009, a ceiling of 35% in 2009 and is fully repealed by 2011. [4] However, a sunset provision means that if Congress does not reenact the relevant provisions of EGTRRA, the estate tax would continue in 2011 at a maximum rate of 55%, which was the rate before EGTRRA. [5] Currently, only estates greater than $1.5 million are subject to the estate tax. [6] Because Congress has yet to reenact the specific EGTRRA provisions, the future of the estate tax remains murky.

IRS Study Confirms the Obvious

      Tax exempt organizations, by design, do not have to answer to shareholders.  The executives of these organizations do not feel the same pressures as do executives of taxable, for-profit organizations to run the entities in the most streamlined shareholder-interest-maximizing manner.  Instead, the taxpaying public (who arguably subsidizes the activities of the tax-exempt sector) relies on detailed government regulation, the vast majority of which is found in the Internal Revenue Code, to ensure that the tax exempt arena neither becomes a black hole for this country's resources nor a playground for the very wealthy.  As part of this monitoring charge, the IRS recently completed a three-year investigation into the compensation of executives of tax-exempt corporations.[1]  This article discusses the objectives and methodology of this investigation, its findings and its minimal impact.

Can Bush’s Health Insurance Tax Proposal Help Solve American Healthcare Woes?

    Perhaps the most hot button issue in domestic politics these days is the growing healthcare problem in the United States. In 2004, nearly “46 million Americans, or 15.7 percent of the population, were without health insurance.” [1] While the majority of Americans receive healthcare insurance through their employers, the issue has been exacerbated by rising healthcare costs, limited coverage, “an increasing reliance on part-time and contract workers who are not eligible for coverage,” and “small employers [who] cannot afford to offer health benefits.” [2] Further, even the insured are being asked to make larger contributions for their coverage, forcing many to remain uninsured because they cannot afford these contributions. [3] During his State of the Union Address on January 23, 2007, President Bush sought to tackle the issue by proposing to tax healthcare benefits but to also offer a $15,000 standard deduction or $7,500 deduction for those filling single. [4] However, critics rail against the proposal suggesting it does nothing to lower healthcare costs and eliminates problems with the current system by creating others. [5]

Defeating the Purpose of the Tax Penalty -- An Exercise in Underdeterrence

      The IRS has, in the opinion of this author, a (not so) popular reputation for coming down on taxpayers hard,inconsistently and infrequently.  Given this perception and perhaps this reality of relative infrequence of consequence on taxpayers engaging in funny business, it makes sense that the Internal Revene Code be given some other teeth to guard against such shenanigans.  In general, the tooth of choice is the threat of heavy monetary penalties.  Unfortunately, a recent tax decision coming out of a Texas federal district court could mark the beginnings of a shift against the imposition of penalties on tax evaders -- a shift that could embolden an already scarily bold nation of tax-shirkers.

Fun With The Tax Code: Changes Abound in 2006 Tax Year

They say that death and taxes are the two sure things in life. That may very well be the case, but taxes and tax law are ever changing. Rates are regularly moved up or down new taxes are added and certain taxes are eliminated. For the 2006 tax year, Congress made several changes that will have an impact on people as they get their financial records together and start preparing their taxes for the April deadline. Some of the changes that Congress made include; The Pension Protection Act, The Energy Tax Incentives Act and The Tax Increase Prevention and Reconciliation Act.[1]. The article focuses on whether changes to tax law will actually be beneficial to individual taxpayers.

Will Long-Needed Tax Reform Begin With Democrats Now in Control of Congress?

The night after the midterm election resulting in a switch in party leadership in Congress from the Republicans to the Democrats, the focus was on the probable change in policy on the Iraq War. However, there are several domestic issues that will be on the table with the change in leadership. One of the most prominent issues is tax reform. Several Republican tax cuts and bills have sunset provisions including notably an estate tax provision which is due to expired in the next couple of years. In addition, President Bush and some Republican Party candidates told voters on the campaign trail that the Democratic Party would raise taxes if they became the majority party in Congress. [1] Now several commentators and key Democrats have commented on what tax issues will be on the table when the Democrat-controlled Congress convenes in January. [2] This article presents a brief look at some of the tax issues on the table in the new year.

The IRS Private Debt Collection Program's Early Trials and Tribulations

      Empowered by the American Jobs Act of 2004, the IRS recently implemented a private debt collection program designed to "reduce the growing number of uncollected tax liabilities while allowing the Service to better focus on more complex tax cases and issues."[1]  The plan was criticized early on for paying the private collectors as much as 24% of the recovered liabilities in return for their collection efforts, which amount was thought could result in improper collection practices on the part of the private collectors.[2]  While the plan hasn't been in action long enough to render judgment on whether these concerns are warranted, another problem has reared its head: the program isn't making money.  It may not so much as break even.[3]  This article addresses concerns of abuse and well as profitability in the short and long term.

The Unlawful Internet Gambling Act and the Tax Revenue the United States Government Could Have Had

Many people who gamble on-line will tell you that October 13, 2006 truly was an unlucky day. On that Friday, President Bush signed into law the Unlawful Internet Gambling act.[1]. The bill makes it illegal for banks and credit card companies to transact with online gambling companies.[2] By preventing banks from allowing deposits into gambling sites, the bill hopes to prevent people from partaking in on-line gambling. The question many people have is why the United States would outlaw internet gambling when it could have regulated the industry and benefited from the tax revenue it would have received?

Non-Profit Hospitals' Tax-Exempt Status Under Fire From IRS, Local Governments

When Provena-Covenant Hospital was stripped of its tax-exempt status and ordered to pay property taxes, non-profit hospitals around the country took notice because of the decision’s potentially far-reaching consequences. [1] Non-profit hospitals are also under fire from the Internal Revenue Service, House Ways and Means Committees and are the target of 400 lawsuits from uninsured patients suing over the hospitals’ heavy- handed billing tactics. [2] In June, the Internal Revenue Service sent surveys to more than 550 tax-exempt hospitals, seeking detailed information about their operations and billing practices and the compensation of top hospital executives.[3]   The House Ways and Means Committee is also conducting a congressional inquiry into the practices of tax-exempt hospitals by sending letters asking for details about their charitable activities, their billing practices and their profits.[4] In order for  hospitals to maintain tax-exempt status, they must meet federal, state and local rules, which often require that they provide charity care or community benefit programs, although laws are vague on what are the standards and the quantity of such programs they must provide. [5] The IRS is hoping that the current scrutiny on hospitals will lead to clarification in the definitions of “community benefit” and “charity care” standards for the tax-exemption of non-profit hospitals.