The Catholic church, that is.
Category: Law
How Are You Celebrating?
No, today isn’t a national holiday. It’s not any particular religious festival. We’re more than a week away from Halloween, a month from Thanksgiving, and a couple months from Christmas. The only reason you have today off (assuming you have today off) is because today is Saturday. And yet . . . On October 22, 1986, President Ronald Reagan signed into law the Tax Reform Act of 1986, a bipartisan bill. That law, signed 25 years ago today, was the last fundamental tax reform in which the U.S. has engaged. Among other things, it broadened the tax base, reduced the number of tax brackets, and reduced the highest tax bracket from 50 percent to 28 percent. It vastly simplified the monster that the tax code had become. Since 1986, of course, the number of tax brackets has crept up, top marginal rates have crept up, and plenty of loopholes and special exceptions have been reintroduced into the tax law; we are arguable at a point where we again need to fundamentally rethink the tax law. The politics of the Tax Reform Act of 1986 are absolutely fascinating. If you want to peer into the political machinations of D.C., you could do worse than reading Birnbaum and Murray’s Showdown at Gucci Gulch, a comprehensive (and fascinating) look at the people who shepherded tax reform through the process. If you don’t have time for the book,[fn1] there are a couple great articles…
Background: Elder Oaks and the Charitable Deduction
Yesterday, as Marc pointed out, Elder Oaks testified in front of the Senate Finance Committee in favor of the deduction for charitable giving. He argued that the charitable deduction is vital to the nation’s welfare. Why, though, these hearings on the charitable deduction? Is it under attack? In case you haven’t been following the politics of tax and budgeting recently (of course, who hasn’t?), I thought I’d provide a little background to the hearing. The Deduction for Charitable Donations The charitable deduction is an itemized deduction (more on that later). It’s one of the older deductions in the tax law, though its run is not coterminous with the tax law. The modern federal income tax was enacted in 1913, but the charitable deduction didn’t manage to get enacted until 1917. And what is the relevance of a deduction? Basically, a deduction reduces your tax liability by the amount of your deduction times your marginal tax rate. So, for example, if you pay taxes at a marginal rate of 35%, and you get a charitable (or any other) deduction for $100, you will pay $35 less in taxes than you would have without the deduction. If, on the other hand, you pay taxes at a 20% marginal rate, your tax bill would be reduced by $20. Itemization And what is an “itemized” deduction? In calculating your tax liability, there are some deductions you can basically always take (these are called above-the-line…
Elder Oaks Testifying Before Congress Today
For those interested, Elder Dallin H. Oaks is testifying right now before the Senate Finance Committee on tax reform, specifically incentives for charitable giving. He is testifying at the request of Senator Hatch.
Free Your Pulpit
On Sunday, as we luxuriated in General Conference (however we followed it), we missed an annual tradition: Pulpit Freedom Sunday.[fn1] A quick background on Pulpit Freedom Sunday: on July 2, 1954, Lyndon Johnson proposed that Section 501(c)(3) (the Internal Revenue Code section that exempts, among other things, churches, universities, and the NCAA from tax) be amended to prevent exempt organizations from campaigning on behalf of or against candidates for office. [fn2] There’s no legislative history, and, in fact, no record of the voice vote on the amendment. But it passed. Note, though, that the prohibition wasn’t particularly aimed at churches; in fact, most people seem to think Sen. Johnson was worried that (non-religious) nonprofits were trying to unseat him. Since 2008, the Alliance Defense Fund has sponsored Pulpit Freedom Sunday. The basic idea is that pastors flout the prohibition, deliberately supporting or opposing a candidate for office in their sermons. Which they record. And send to the I.R.S. The idea seems to be to “bait” the I.R.S. into attempting to revoke at least one church’s tax exemption, then challenge the revocation to the Supreme Court, in an effort to have the prohibition overturned as unconstitutional. Will the I.R.S. take the bait? Probably not. In 2006, the I.R.S. released a study it had done of its 2004 Political Activities Compliance Initiative. Basically, it looked at 82 cases in which it the non-profit allegedly violated the prohibition.[fn3] It determined that 18 of the…
The Church and Taxes
The Church cares about taxes.[fn1] It doesn’t really seem to care about the details of tax policy, of course. I’ve never seen the Church weigh in on the appropriate tax rate, tax base, or even the appropriate type(s) of tax (e.g., an income or consumption tax, a retail sales tax or a VAT, or whatever) a government should impose.[fn2] But still, it makes explicit and implicit nods that indicate that, ultimately, it cares both about its tax position and that of its members. The Church and (Its) Taxes Like (essentially) every other church in the U.S., the LDS church is exempt from taxation. Not only that, certain U.S. taxpayers who donate to the Church[fn3] can deduct their donations. And the Church is careful to protect its tax exemption. It explicitly does not endorse or oppose candidates for office.[fn4] Church property cannot be used for doing things that would endanger the Church’s tax exemption. It organizes its for-profit businesses as separate, non-exempt corporations.[fn5] So the Church wants to maintain its exemption. Note, though, that the exemption benefits not only the Church, which doesn’t have to pay taxes, but its (U.S., but see below) members, who might get a deduction for their donations. Note, too, that even if the Church lost its exemption, it probably wouldn’t be taxable on donations it received; they would likely (though not unquestionably) be treated as non-taxable gifts. The Church and (Members’) Taxes (Note, here, that I don’t…
Desert and a Just Society
The 2010 poverty level in the U.S., we learned on Tuesday, is the highest it has been since 1993. In 2010, about one in six Americans lived below the poverty line.[fn1] In June, 14.6% of Americans received food stamps.[fn2] To some extent, the high poverty rate is probably related to the high unemployment rate, which was 9.1% in August. I throw out all of these numbers to suggest that, as a society, we have a problem. That problem needs to be fixed. And we, as Mormons, undoubtedly have something that we can bring to the discussion of how to fix it. As I think about how we can fix poverty, though, I’m hugely influenced by Ron Haskins and Isabel Sawhill’s book Creating an Opportunity Society.[fn3] Haskins and Sawhill point out that Americans care about desert.[fn4] That is, as Americans, we want those who have the ability to work for a living. And I’m interested in this idea of desert. Because I’m not convinced that we have a religious dispensation to withhold assistance from those don’t somehow “deserve” our help.[fn5] Still, as a practical matter, irrespective of whether we have religious dispensation or not, we care about desert. And no social program that is blind to to recipients’ refusal to work is going to go anywhere. As a pragmatist, then, I have to confront desert. But, as we consider how to provide aid to those to whom we have the political…
Mission Finances, part 3
(Note: this is the fourth part of a several-part series. You can read previous installments here, here, and here.) Quick review: prior to November 1990, missionaries and their families paid the actual cost of their missions. Moreover, parents would send money directly to their sons and daughters, with no intermediation from the Church. In May 1990, the U.S. Supreme Court ruled in Davis v. United States that such payments were not tax-deductible, notwithstanding language in the Internal Revenue Code that contributions made “to or for the use of” the Church would be deductible. In November 1990, the Church announced that, going forward, it was equalizing the costs of missions; all (U.S. and Canadian, at least) missionaries would pay a set monthly amount into the Church’s mission fund; the Church would then disperse to missionaries the amount of money they needed. While there’s no indication that the decision in Davis caused the Church to change its policy, I wouldn’t be shocked if the Davis decision at least affected the timing of the change.[fn1] The Church’s Amicus Brief: The Church was not a party to the Davis litigation. It did, however, have an interest in the outcome. As such, it filed an amicus brief with the Supreme Court.[fn2] The Church’s overall position is that “[n]on-deductibility [of the payments made by parents to their missionary children] would force the Church to choose between preserving the beneficial characteristics of its present program and sacrificing…
Mission Finances, Part 2 [edited 8/26/2011]
[Note: this is the third (yes, third) part of a many-part series. You can read Part 1 here and Part 1.5 here.] [Note #2: A friend points out that I left some information out of this post that is helpful in understanding what I’m talking about. That information is in Part 1, but it’s been a long time since I posted Part 1, so I’m adding some clarifying details in bold. Thanks, SG.] Pop quiz: when you think “Mormons” and “US Supreme Court,” what do you think? (The correct answer is, of course, Reynolds.[fn1]) For many of us, though, another less-known case impacts our lives, at least while we’re missionaries or while we’re supporting missionaries, nearly as much: Davis v. United States. Brother and Sister Davis had at least two sons, Benjamin and Cecil. In 1979, Cecil was called to the New York Mission, while in 1980, Cecil was called to the New Zealand-Cook Island Mission. In 1981, the Davis paid $4,135 for Benjamin’s mission and $1,518 for Cecil’s.[fn2] And when they filed their tax return, Brother and Sister Davis took a deduction for the $ 5,653 that they donated toward their sons’ missions. Just like today. Except. Except that, in addition to paying for the actual costs of a mission, parents and others who supported missionaries gave the money directly to the missionaries: in the case of the Davises, they transferred the money into their sons’ checking accounts. So wait:…
What If President Monson Endorsed Mitt Romney?
In his talk at the close of the April 2008 General Conference, President Monson talked about the blessing we had received, both as members of the Church and, specifically, over the course of the conference. He ended his talk with counsel: parents are to love and cherish their children, youth are to keep the commandments, those who can attend the temple should, and we should all be aware of each other’s needs. But what if, in closing his remarks,[fn1] President Monson had said, “My dear brothers and sisters, I feel strongly that Mitt Romney is the best person to lead our country. I encourage each of you to campaign on his behalf and to donate to his campaign. We have also established the Perpetual Mitt Fund, with an initial investment from tithing dollars for $1 million in order. This fund will go toward his election and, if any money is left over, it will be transferred to Harry Reid’s next campaign. If you would like to support the PMF, you can use the donation slips. In the ‘Other’ category, please write ‘PMF.’”[fn2] There was, unsurprisingly, an immediate backlash. Dozens of people sent letters to the I.R.S., demanding that it revoke the LDS church’s tax exemption. In its review, the I.R.S. determines that the Church’s actions were in flagrant violation of the anti-campaigning rules. Sick of tax-exempts pushing the envelope, the I.R.S. decides to make an example of the Church and…
The Tax Exemption and the Church’s Political Leanings
In light of the Church’s recent policy statement banning some Church authorities from endorsing candidates, and the speculation that the Church’s political neutrality derives from its desire to stay tax-exempt,[fn1] I thought I’d present a brief primer on the tax exemption.[fn2] The Revenue Act of 1894 probably represents the birth of the modern federal income tax. An inauspicious birth, to be sure–it was struck down as unconstitutional in 1895–but the birth, nonetheless. True, it was enacted 19 years before the 16th Amendment permitted direct taxation (whatever that is), but it set the stage for the income tax to come. Including, it turns out, in the world of exempting public charities from tax. It provided that the income tax would not apply to “corporations, companies, or associations organized and conducted solely for charitable, religious, or educational purposes.” [fn3] Although the list of entities that aren’t taxed has expanded (among other things, the exemption now includes groups that foster amateur sports competition–read the NCAA–and that are organized to prevent cruelty to children or animals), the current law reads almost identically to the 1894 version. Why do we exempt some groups, including religious groups, from tax? Theories range from the historical to the idea that they relieve the government from providing some services to the idea that this subsidy for public charities permits tax payers to directly control some portion of government spending to the idea that they (specifically, in this case, religions)…
The Parable of the Talented Endowment Tax
Governments impose taxes in order to raise revenue that, in turn, funds government function and services.[fn1] In designing a tax system, tax theorists generally try to create provisions that will raise revenue without significantly altering taxpayers’ economic choices. That is, ideally, taxpayers will act in approximately the same way as they would have in a world without tax.[fn2] But we can’t hit the ideal. The income tax alters people’s actions, because it alters the price calculus. One way is in our work-leisure decisions. Assume with me that I earn $10 an hour. That said, I enjoy not working, too–my leisure is worth $8/hour to me. In the absence of an income tax, if I have a choice between work and leisure, I’ll choose work. Even with a 10% tax, I’ll choose work, because I’ll bring home $9 after taxes, while my leisure is still worth only $8/hour. However, if the income tax is at a 25% rate, I’ll only bring home $7.50 after taxes. Suddenly, an hour of leisure is worth more to me than an hour of work; the income tax has caused my to substitute less-valuable leisure for more-valuable work.[fn3] One way you could eliminate this problem, according to some economists and tax theorists, would be to replace our income tax with an endowment tax.[fn4] An endowment tax is, in broad strokes, a tax on potential income, rather than on actual income. An example (though not a rigorous…
Summer 2011 Syllabus
Part of my job as a law professor is to model to students what a transactional attorney does. As part of that, I include in my syllabus a list of things media that they ought to consume in order to understand the world a business lawyer functions in. The list is not exhaustive, by any means, nor should they necessarily read or listen to all of it, but it provides a slice of intelligent commentary on the world I’m teaching them how to enter. If you were preparing people to do what you do, what resources would you recommend? [fn1] And, if you do what I prepare my students to do, what necessary resources am I tragically leaving out? [fn2] Syllabus: Wall Street Journal. Depending on your politics, you may detest or you may embrace the Opinions section, but the Journal’s business reporting is superb. (Note that it has a paywall around most of its content; you either need to subscribe or hunt down hard copies.) Financial Times. The FT is making real inroads in the U.S. Unfortunately, it, too, has an annoying paywall—I believe you can look at 10 articles a month for free, if you register. New York Times business section [and, of course, the rest of the paper, too]. Of course, it, too, just instituted its paywall Marketplace. You can listen weeknights at 6:30 pm on WBEZ or you can download the podcast. I listen to the…
Times & Seasons Welcomes Sam Brunson
Times & Seasons is excited to introduce Sam Brunson as our latest guest blogger. Sam grew up in the suburbs of San Diego and served a Brazilian mission what seems like a millennium ago. He went to BYU as an undergrad and found that a freshman saxophone performance major made his eventual English major look like a practical choice. After toying with teaching critical theory or becoming an author, he did what all good English majors do and chose law school. At Columbia, he met his wife, got a degree, and got a job as a tax associate at a New York firm. Several years later, he managed to escape the clutches of big law and landed a job teaching tax and business law at Loyola University Chicago. While Sam, sadly, does not play much saxophone these days, he and his wife do have two beautiful girls with whom he loves to spend time when he’s not pondering important questions like whether the transactional net margin method of transfer pricing constitutes an arm’s length price within the interquartile range.
Polygamy, Natural Law, and Imperialism
I have been researching Reynolds v. United States (1879), the Supreme Court’s first polygamy case, on and off for several years. For those who are interested, my paper on the topic is now available for download at SSRN. Reynolds is an important case in American constitutional history, because was the first time the U.S. Supreme Court ever passed on the meaning of the First Amendment’s protections for freedom of religion. Historians have generally situated the case within the context of the post-Civil War politics of Reconstruction. The anti-polygamy crusade kicked off by Reynolds is seen as an extension of Reconstruction into the West. I offer a new interpretation.
The Doctrine of Revelatory Justiciability
A good friend, while studying constitutional law for the bar exam this summer, emailed me some thoughts he scribbled down when he should have been hacking away at a few more MBE questions on judicial review. Instead, however, he hammered out a constitutional analysis on the justiciability of prayers. You see, in case you weren’t aware, in order to receive an answer to a prayer, one’s prayer must involve a “case or controversy” that is fit for review. So, without further adieu, allow me to present the doctrine of revelatory justiciability (a.k.a., what studying for the bar does to your brain).
The Evolution of Excommunication
I recently went through every version of the Church Handbook of Instructions, looking at what they have to say about the operation of church courts and how it has changed over time.
Explaining the Puzzle of Cross-State Differences in Bankruptcy Rates
Bankruptcy rates vary alot across states. With a fairly simple statistical model, Lars Lefgren and I explain about 70% of these differences in a paper just published in the Journal of Law and Economics. For cross sectional work using survey data, where you are looking across states at a point in time, explaining 70% is pretty darn impressive.
Are Gated Communities Moral?
When my wife and I talked with our missionary son recently, he said he was glad to be in Carson City, Nevada, instead of Las Vegas. When I asked why, he said: Gated Communities.
Bye-bye, Bybee?
A week ago, the New York Times joined the growing chorus of commenters calling for Judge Jay Bybee’s impeachment. Is impeachment really going to happen? And what should we think about the issue?