Governments at all levels produce a lot of materials, many of which are excellent resources to better understand and appreciate tax law and policy.
This column describes five types of governmental documents and videos and how they can be incorporated into a classroom and tax pedagogy, making readings and class discussion more interesting and real. They can illustrate the current relevance of the course topics from both practice and policy perspectives. Some government materials will remind students of the need to understand taxation from the perspective of their roles as both accountants and as citizens. Furthermore, these resources are free, and they allow students to engage in a favored activity—searching the web.
The five resources described here include general ones available from most governments at all levels, as well as two specific ones. Certainly, more than the five types of government documents selected here can be incorporated into any tax class at any level. These documents can also enrich continuing education courses for tax practitioners and serve as wonderful resources for faculty to generate ideas for research and publication.
The five government resources addressed in this column are:
- Legislative proposals;
- Legislative hearings;
- Joint Committee on Taxation (JCT) reports;
- Tax Court summary opinions; and
- City government documents.
At the federal level, numerous legislative tax proposals can be selected from for use in a tax course. For just the first five months of the 114th Congress (January through May 2015), a search at congress.gov for the term "tax" resulted in a listing of over 750 bills and resolutions. A similar search at a state legislature's website is likely to produce far fewer items, but still likely plenty of material.
Activities for bringing legislative proposals into an undergraduate or graduate tax course can include:
Proposals to change rules that are covered in class: Have students search congress.gov using words that relate to a Code section covered in class. For an introductory tax course, proposals should be available on depreciation (Secs. 168, 179, and 280F), charitable contributions (Sec. 170), and the mortgage interest deduction (Sec. 163(h)(3)). The instructor can ask students to explain how the proposal changes the rule and why it was introduced (a visit to the sponsor's website may help) and to provide an example of a taxpayer affected by the change. Also, students can be asked what they think of the proposal and why.
This also can help students consider ways to evaluate a legislative proposal, such as by its effects on government revenues, individuals of varying income levels, different sizes and types of businesses, the national and local economies, and state governments. Students can then analyze whether the change would help the tax system to better meet key principles of good tax policy, such as equity, simplicity, and economic efficiency. A 2005 report by the U.S. Government Accountability Office, Understanding the Tax Reform Debate: Background, Criteria & Questions (GAO Rep't No. GAO-05-1009SP), as well as the AICPA's Guiding Principles of Good Tax Policy (2001), will help with this policy discussion.
Students can also perform these activities using their state's legislative website. Students can search what types of proposals were introduced, whether they pertain to rules also included in the federal tax system, and why they were proposed. The instructor can have students critique them similarly to the method above for federal tax proposals.
Tax reform proposals: Toward the end of a tax course, have students search the web for federal tax reform proposals of the past two years. They can also review the hearing topics listed on the websites for the House Ways and Means and Senate Finance committees for any that focused on major changes to the tax system. Or they can be directed to specific proposals, such as H.R. 1040 (flat tax) or H.R. 25 (fair or retail sales tax), introduced with these bill numbers in every Congress of the past several years. The students can examine how the proposals would change any topics already covered in class and their effects on tax and investment planning and on businesses in their area and the economy.
Proposals of their elected officials: Students can visit the websites of local, state, and federal elected officials who represent them or their university to determine whether they have introduced any tax proposals or if they list any tax topics among issues they discuss there. The students can then report back on the topics, rationale, and relevance to topics covered in class.
Not all legislative proposals become the subject of a hearing, and not all hearings focus on a specific tax proposal or result in a tax proposal. Yet records of hearings are valuable resources, primarily for their breadth of coverage of a topic.
A legislative hearing record is likely to include written testimony of those who testified, as well as a background report and a video. For example, a Senate Finance Committee hearing on March 3, 2015, titled "Fairness in Taxation" was part of the committee's work on tax reform. This hearing provided the following documents, all readily available on the web:
- Opening statements by Committee Chair Sen. Orrin Hatch, R-Utah, and Ranking Member Sen. Ron Wyden, D-Ore. These statements explain the purpose of the hearing and the member's views on the topic.
- Testimony of the four witnesses.
- A video of the hearing. Most congressional hearings are broadcast live on the web and are archived. The video enables viewers to see the hearing room, the elected officials and their staff, the witnesses, the process of questioning, and the general decorum of the event.
- A background report by the Joint Committee on Taxation (JCT), Fairness and Tax Policy (JCX-48-15) (Feb. 27, 2015). The JCT report is not linked or noted on the Senate Finance Committee's website, but many tax hearings include a JCT background report, which students will find are easy to follow and rich with background on the relevant law and data about the particular hearing.
Suggestions for bringing tax reform hearings into a tax course include the following activities:
- Assign students a hearing to watch, summarize, and critique. This assignment also works well in pairs so that the students can discuss the hearing and likely gain more from it. Have students summarize a key point of each witness, a member's question they found interesting, and what they think the committee gained by holding the hearing. Also ask how they might have structured the hearing to provide greater value. Also have students note where the hearing addressed a provision covered in class or a tax principle, such as equity or simplicity. Students gain deeper insight and interest into the tax law by hearing a rule or topic discussed in a new way and enjoy seeing the deliberative process and actions of the members.
- Watch a portion of a hearing in class that relates to a course topic. Critique the hearing and its lessons learned as a group.
- After watching a hearing, have students find information on the topic from other groups, members of Congress, or the White House.
- Do any of the above for a state legislative hearing on a tax topic. Many states post witness testimony and a video archive of hearings.
Joint Committee on Taxation Reports
The JCT produces between 20 and 110 reports per year that provide background on topics addressed at hearings and markup meetings of the House Ways and Means Committee and the Senate Finance Committee. The reports may include detailed background on existing tax rules as well as explanations and estimated revenue effects of proposals.
Suggestions for bringing JCT reports into a tax course include the following activities:
- Find a JCT report of the past few years that ties to a topic covered in class. Assign it as additional reading. Have students summarize a few key points of the report and what members of Congress may have gained from it. For example, the JCT issued Choice of Business Entity: Present Law and Data Relating to C Corporations, Partnerships, and S Corporations (JCX-71-15) (April 10, 2015), which explains types of entities and their differences. It also provides data on the number and sizes of the various entity types and changes in these data over time. Based on the particular report selected for reading, the instructor can create questions to help guide students' understanding of the report. Reports can be assigned to groups of students to present to the class the highlights of the report and how it ties to course topics.
- Have students review one or more JCT reports that provide revenue estimates on particular bills. Have them compare the figures to other data they can find from JCT tax expenditure reports or the IRS statistics webpages to provide context for the numbers. Students can also be asked to find out roughly how many and what type of taxpayers would benefit from the proposal.
Tax Court Summary Opinions
One of the three types of opinions issued by the U.S. Tax Court is a summary opinion (Sec. 7463). These cases cannot be cited as precedent, the liability must be $50,000 or less, and the taxpayer has no right of appeal (Sec. 7463(b)). About 100 summary opinions are issued annually. These opinions are readily available on the U.S. Tax Court website, where they can be found via a word or date search or by clicking on the "Today's Opinions" link.
Because summary opinions cannot be cited as precedent, they are not useful in tax research. However, because they tend to involve simpler areas of tax law, they can be useful for students. Because they involve real tax issues and real taxpayers, they can also help students see the practical application of what they are learning. Many of these cases involve issues students will cover in an introductory tax class, such as substantiation and allowance of business deductions, filing status, charitable contributions, capital assets, and income. These cases tend to be short, making them easier to incorporate into a class.
Suggestions for using summary opinions in a tax course include the following activities:
- Assign each student (or group of students) a week of the semester when they check the "Today's Opinions" link to find a summary opinion of interest that, ideally, ties to a course topic. Have them present the case to the class along with their analysis of why the issue came about and how it could have been avoided. Or have students write a short article about the case that would be suitable for clients of a CPA firm. This also provides an opportunity to discuss what clients need to know, the technical level they expect (e.g., whether Code sections should be cited to clients), and how to make the article interesting so they will read it.
- Select cases for students to read along with the related course topic and have them explain why the issue arose. Have students identify due-diligence questions a tax practitioner could have asked the taxpayer that may have avoided the problem that led to a tax assessment by the IRS and a trip to Tax Court. If appropriate, also have students identify possible planning ideas from the fact pattern and rules.
City Government Documents
Local government tax matters are rarely covered in any tax class. A look at tax rules and issues relevant in the local community, though, can help students see the broad relevance and impact of taxation. Websites of city councils or city revenue or finance departments may include meeting agendas, types of taxes (such as business license and transient occupancy taxes (TOTs)), data on revenue sources, and perhaps reports on current tax issues. If a local city has a ballot proposal involving a tax matter, such as a soda tax, plenty of information should be available on it.
Suggestions for using city documents in a tax course include the following activities:
- Have students visit the website of a nearby city to find out what types of taxes it assesses and collects as well as whether it shares any tax revenues with the state. Ask students to find out who pays these taxes and if the taxes likely affect tax planning, including by businesses.
- If a tax topic is on the current city council agenda, have students obtain background on the issue, identify its pros and cons, and assess the impact to the government and different types of taxpayers.
- If the city has a TOT, have students find out how it applies to someone renting property through a sharing website (such as Airbnb) and how the tax is calculated and paid. Short-term lodging may also require registration with the local government. Ask students whether tax practitioners assist clients with the TOT and registration and, if so, how.
- If a local election is coming up, have students find information on candidates' tax positions and how they might affect the city and its residents.
Not all the government tax "treasures" are described above. Others to consider incorporating into a class include statistics from the IRS website, IRS Audit Technique Guides, and reports of state tax reform commissions.
The activities suggested for the five treasures described in this column involved web searches. An additional exercise to include is helping students learn how to use advanced search tools on search engines to improve their results (a web search on advanced web search techniques will help in finding these resources). Learning advanced web searching techniques also can help students improve their skills at distinguishing reliable from unreliable resources.
While tax instructors often have too many materials to cover, using government resources suggested in this column should not pose a burden. They might be incorporated to modify or replace existing homework assignments or class discussion topics. Most of the suggested activities can be used for group work and class presentations to vary the nature of activities included in a tax course. The currency of the government resources and the fact that these are real topics and issues affecting real people and their tax advisers can help improve student engagement in learning about taxation.
Annette Nellen is a professor in the Department of Accounting and Finance at San José State University in San José, Calif. She is a member of the AICPA Tax Division Tax Executive Committee and the Tax Reform Task Force. For more information about this column, contact Prof. Nellen at email@example.com.