The paper reviews both Starbucks’ recent U.K. tax controversy (including a parliamentary inquiry), which revolved around the intersection of its consistent unprofitability in the United Kingdom with large deductible intragroup payments to Dutch, Swiss and U.S. affiliates, and its more recent submission to the U.S. House Ways and Means Committee. The paper draws from this review two lessons.

First, if Starbucks can organize itself as a successful stateless income generator, any multinational firm can. Starbucks follows a classic bricks and mortar retail business model, with direct customer interactions in thousands of “high street” locations in high-tax countries around the world. Moreover, Starbucks is not a firm driven by hugely valuable identifiable intangibles that are separate from its business model, which it employs whenever it deals with those retail customers. Nonetheless, it appears that Starbucks enjoys a much lower effective tax rate on its non-U.S. income than would be predicted by looking at a weighted average of the tax rates in the countries in which it does business.

Second, The Starbucks story – in particular, its U.K. experience – demonstrates the fundamental opacity of international tax planning, in which neither investors in a public firm nor the tax authorities in any particular jurisdiction have a clear picture of what the firm is up to. It is not appropriate to expect source country tax authorities to engage in elaborate games of Twenty Tax Questions, in turn requiring detailed knowledge of the tax laws and financial accounting rules of many other jurisdictions, in order simply to evaluate the probative value of a taxpayer’s claim that its intragroup dealings necessarily are at arm’s-length by virtue of alleged symmetries in tax treatment for expense and income across the group’s affiliates. U.S.-based multinational firms owe a similar duty of candor and transparency when dealing with the Congress of the United States.

The remedy begins with transparency towards tax authorities and policymakers, through which those institutions have a clear and complete picture of the global tax planning structures of multinational firms, and the implications of those structures for generating stateless income. National governments should recognize their common interest in this regard and promptly require their tax and securities agencies to promulgate rules providing a uniform world-wide disclosure matrix for actual tax burdens by jurisdiction. As a first step the United States should enforce the current rule requiring U.S. firms to quantify the U.S. tax cost of repatriating their offshore “permanently reinvested earnings.”

In this article, we explore the supercharged IPO and explain how and why this new deal structure differs from the more traditional IPO. We then outline various theories of financial innovation and note that the extant literature provides useful explanations for why supercharged IPOs emerged and spread so quickly across industries and geographic areas. The literature also provides support for both legitimate and opportunistic uses of the supercharged IPO.

With the help of a large-N quantitative study—the first of its kind—we investigate the adoption and diffusion of this new innovation. We find that the reason parties have begun to supercharge their IPO is not linked to a desire to steal from naïve investors, but rather for tax planning purposes. Supercharged IPOs enable both owner-founders and public investors to save substantial amounts of money in federal and state taxes. With respect to the spread of the innovation, we find that elite lawyers, especially those located in New York City, are largely responsible for the changes that we observe on the IPO landscape. We conclude our study by demonstrating how our empirical findings can be used to 1) advance the literature on innovation, 2) assist firms going public in the future, and 3) shape legal reform down the road.

This paper assumes that corporate headline rates in fact are lowered, and analyzes an individual’s incentives in that new tax rate environment to retain corporate earnings not strictly needed to support business operations (or to inject new investment capital into the corporation), rather than to extract that capital and earn the same income through direct investment (“capital stuffing”), and to understate the labor income of corporate owner-managers, so as to treat a disproportionate amount of their income as capital income, in the form of corporate retained earnings (“labor stuffing”). To aid in that analysis, the paper offers a new mode of conceptualizing the time value of deferring a tax liability. Finally, the paper analyzes current law’s tools to combat capital and labor income stuffing, and finds them wholly inadequate to the task.

Corrective justice theory thus articulates a powerful critique of the economic theory of tort. That critique, however, spawns its own misconception of tort law. Corrective justice theory puts the cart before the horse and misconceives tort as an essentially remedial institution. Tort is a law of wrongs, not just a law of redress for wrongs. Logically and normatively, obligations of repair are dependent on primary obligations not to wrong others in the first instance. Logically, remedial responsibilities are conditioned on and arise out of failures to discharge primary responsibilities. Normatively, primary responsibilities provide the reason for honoring remedial responsibilities and largely determine the shape of remedial responsibilities. Repairing harm wrongly done is the next best way of complying with an obligation not to do harm wrongly in the first place. Primary and remedial responsibilities form a unity in which primary responsibilities have priority. Corrective justice is thus an essential, but subordinate, aspect of tort. The heart of tort law is constituted by primary obligations to avoid committing various wrongs.

Part 1 of this report, available at Tax Notes, Sept. 5, 2011, p. 1021, Doc 2011-14206, 2011 TNT 172-5, showed that the U.S. tax rules governing income from foreign direct investments often are misapprehended: In practice they do not operate as a worldwide system of taxation, but as an ersatz variant on territorial systems, with hidden benefits and costs when compared with standard territorial regimes. That claim holds whether one analyzes these rules as a cash tax matter or through the lens of financial accounting standards. Part 1 of this report rejected as inconsistent with the data any suggestion that current U.S. law renders U.S. multinational firms less competitive when compared with their territorial-based competitors.

Stateless income privileges multinational corporations over domestic ones by offering the former the prospect of capturing ‘‘tax rents’’ — low-risk inframarginal returns derived by moving income from high-tax foreign countries to low-tax ones. Other important implications of stateless income include reduced coherence in the concept of geographic source; the systematic bias toward offshore rather than domestic investment; the more surprising bias in favor of investment in high-tax foreign countries to provide the feedstock for the generation of low-tax foreign income in other countries; erosion of the U.S. domestic tax base through debt-financed tax arbitrage; many instances of deadweight loss; and, essentially uniquely to the United States, the exacerbation of the lockout phenomenon, under which the price that U.S. corporations pay to enjoy the benefits of dramatically low foreign tax rates is the accumulation of extraordinary amounts of earnings ($1.4 trillion or more, by the most recent estimates) and cash outside the United States.

Part 2 of this report picks up at this point. It is adapted and condensed from Edward D. Kleinbard, ‘‘The Lessons of Stateless Income,’’ 65 Tax L. Rev. 99 (2011).

Part 2 demonstrates that policy conclusions that are useful in a world without stateless income do not follow once its presence is considered. The report identifies and develops the significance of implicit taxation as an underappreciated assumption in the capital ownership neutrality model that has been advanced as an argument for why the United States should adopt a territorial tax system, and it shows how stateless income tax planning undermines this critical assumption.

The report concludes that policymakers face a Hobson’s choice between the highly implausible (a territorial tax system with teeth) and the manifestly imperfect (worldwide tax consolidation). Because the former is so unrealistic, while the latter’s imperfections can be reduced through the choice of tax rate, the report ultimately recommends a worldwide tax consolidation solution.

This report explains how the Roadmap, like Herman Cain’s 9-9-9 Plan, would operate in practice like a large new payroll tax. The Roadmap would directly immunize the highest labor income earners from this tax through a large reduction in the top rate of the Roadmap’s labor earnings tax, compared with current law or policy. Unlike the 9-9-9 Plan the Roadmap further would largely immunize “old” capital from the efficient (if arguably unfair) imposition of consumption tax when that capital was consumed, by providing a write-off of existing depreciable basis. And finally the Roadmap would reduce the tax burdens on the most affluent capital owners further by eliminating the gift and estate tax.

For these reasons, it is not surprising that the Roadmap contemplates an extraordinarily large redistribution of tax burdens from the affluent to middle-class and lower income Americans. For middle-class families, tax burdens would increase on the order of 50 percent. At the same time, the Roadmap’s reprioritization of government spending also would be regressive in its impact. Proponents of the Roadmap or plans like it must explain how any projected increase in economic growth will compensate the majority of Americans for shouldering more tax burdens while receiving smaller government benefits.

In this Article, we focus on the government challenges to corporate financial plans -- often labeled corporate shams -- in an effort to understand how and why courts draw the line between legal and fraudulent behavior. Quite a few scholars and commentators have investigated this question and nearly all agree: judicial decision making in this area of the law is erratic and unpredictable. We build on the extant literature with the help of a large dataset -- the first of its kind -- and uncover important and heretofore unobserved trends. Indeed, courts have not produced a confusing morass of outcomes as some have argued, but have generated more than a century of opinions that collectively highlight the point at which ostensibly legal planning shades into abuse and fraud. After discussing our empirical results, we show how they can be exploited by both government and corporate attorneys and explore how they bolster many of the normative views set forth by the scholarly and policymaking communities.