Ideas on incorporating tax policy into a first tax course
Editor: Annette Nellen, Esq., CPA, CGMA
For many accounting students, their first tax class is where they decide whether they enjoy taxation. This course may also be the only tax course they take. Introductory tax courses often focus solely on compliance or theory, which can cause some students to lose interest in the topic. Instructors must look for ways to engage students in the subject matter as well as incorporate necessary critical-thinking and problem-solving skills into the course.
This column discusses a series of class exercises and a comprehensive project that are designed to engage students by bringing tax policy into the introductory tax course. Specifically, these activities are intended to expose students to the political and legal aspects of taxation, to introduce research skills, and to provide opportunities for students to develop professional and technical communication skills. While these activities were designed for use in an undergraduate course, they are also easily adaptable for graduate-level courses.
Short class exercises
These short class exercises are designed to introduce students to tax policy in brief ways. They can typically be completed within a single class period and can be used either as stand-alone exercises or as part of a bigger module on tax policy.
Exercise No. 1: Design your own tax regime
The majority of students enrolled in an introductory tax course have had no prior exposure to tax as a field of academic study. Furthermore, most students are likely to perceive that tax is quite different from the areas of accounting to which they have been exposed in their prior course work. As such, it is important for instructors to set a proper tone on the first day of class to help draw the students’ interest. This activity, which has been used by many professors at many institutions over the years, requires no prior tax background and is an excellent activity to administer on the first day of class.
In this activity, students are informed that they have been made the ruler of an independent nation and must design a simple tax system to raise capital to cover costs such as military and infrastructure. To aid in developing this system, they are given a description of three or four specific types of taxpayers such as small business owners, investors, or employees, with various incomes, expenses, and family situations. Students are told that their solution does not need to parallel any governmental tax system that they may know.
The tax systems that students develop are typically creative and thought-provoking, and the ensuing discussion should provide the instructor an opportunity to explain the similarities and differences of the various ideas generated to the U.S. federal tax system. During these conversations, students are challenged to defend their decisions as to who is or is not taxed as well as why the methods they have chosen are appropriate. This typically leads to discussions about the need for taxes to finance government services, fairness, and the role of tax policy in encouraging or discouraging certain types of behavior (all important high-level concepts that students will develop familiarity with as the course progresses). As such, this activity not only serves to generate student interest in the material in an interactive way but also develops an early understanding of important tax concepts that are referred to later in the semester.
Exercise No. 2: Tax article summaries
In this exercise, instructors challenge students to locate articles from reputable newspapers and periodicals that relate to tax topics. Students are asked to briefly summarize the article and to provide their opinion on the tax topic being discussed. These reflections are required to be posted to a discussion forum contained within the learning management system for the course. Posting reflections to a forum allows other students to comment on the article summaries. Alternatively, in every class meeting, a few students could be asked to present an article, leading to a brief class discussion.
Even though introductory tax courses typically focus on U.S. federal tax, students should be encouraged to select articles related to any tax topic that is of interest to them including sales tax, local taxes, and global tax topics. An important goal of the activity is to develop the student’s ability to follow current events in taxation and to think broadly about tax policy in a critical way. To encourage active discussion, instructors could require students to comment on a minimum number of summaries over the course of the semester.
Exercise No. 3: Tax research activities
While not specific to tax policy, including tax research throughout the semester is helpful to students for understanding how the tax law works. Simple exercises to familiarize students with primary sources such as the Internal Revenue Code, Treasury regulations, and court cases will add to their skills developed in the course. Tax research exercises should include walking students through tax research databases such as Checkpoint or IntelliConnect, and assignments requiring them to draft legal memos or letters to clients about simple tax situations.
For example, students can research the business versus hobby area for a specific client fact pattern. Instructors can provide examples and problems from textbooks; an excellent reference for students is the website on performing tax research created by faculty members at Georgia State University (available at www2.gsu.edu). Other examples of tax research exercises can be found through prior Campus to Clients columns such as “The Client Tax Letter Project: Client Communication for Tax Professionals,” 47 The Tax Adviser 588 (August 2016).
However, a single exercise is not enough, and research skills need to be reinforced throughout the course. As a result, instructors should consider incorporating multiple tax research activities over the semester. Furthermore, as a means of demonstrating the importance of these activities, students should be reminded that tax law is constantly changing. While memorizing the law might be sufficient for earning a passing grade on an exam, it is not sufficient for success as a tax practitioner.
Semester-long tax policy project
Assigning a semester-long tax policy project can be another useful way to gain student interest and draw together ideas learned throughout the introductory tax course. In this project, students are assigned a tax law that has recently been changed, extended, made permanent, or has expired or may expire in the future, and analyze it. Proposals for possible changes in current law are also suitable topics.
Students are asked to research and describe the law, identify the stakeholders of the policy, interview individual stakeholders, discuss different arguments about policy (keep the law, change it, or let it go), and ultimately choose and defend a course of action. The purpose of the assignment is to enhance students’ appreciation of the policy goals and political processes that result in the creation of tax laws. Even though individual students may not pursue the area of tax as a profession, skills developed in completing this project can be applied to other areas of accounting research (such as auditing and financial accounting policy).
The project is divided into three parts to help distribute work evenly throughout the semester and allow students to better engage with the course material. Ideally, the project constitutes one large paper, and instructors can decide whether they will allow resubmissions of prior parts. A brief description of each part follows.
Part 1: Description
This part of the project requires students to draft a thorough description of the tax law assigned to them. Students can be given the opportunity to choose a topic on their own, or they can choose from a list of topics provided by the instructor (see the box, “Example Topics,” below). Instructors can vary the topic assignments so that many areas can be discussed within the class. One potential source of topics is the List of Expiring Federal Tax Provisions published regularly by the staff of Congress’s Joint Committee on Taxation (available at www.jct.gov). Instructors should note that laws recently made permanent or that have expired are often still good topics for discussion. Minor topics that are specific to a very narrow group of taxpayers can bring great interest to and spur thoughtful analysis by students. Even topics that do not directly affect students currently, such as corporate credits or environmental credits, allow them to see connections between the material they are learning in class and how they are shaped by the political environment.
Once topics are assigned, students need to locate the related Code section and use authoritative resources to learn how the law works. Students should be encouraged to use not only primary tax resources, but also secondary sources provided by the IRS and elsewhere, as long as they are valid. In their own words, students should write a description that includes the following:
- The Code section identified;
- A brief description of the law;
- A discussion of who is impacted by the law;
- A discussion of any limitations of the law; and
- The current status of the law (i.e., it is about to expire; it is permanent; or it has been extended recently, etc.).
This part should be assigned early in the semester, perhaps after instructors have covered basic research techniques. Students should be encouraged to write without editorializing and simply describe the policy in their own words, as if they were explaining it to someone with no tax experience. Students should keep this section brief, and most should be able to successfully explain the topic in one to five pages. Past experience with this assignment shows that students often have difficulty writing clearly about tax topics and putting the Code into their own words. If an instructor has available class time, he or she may choose various student submissions to highlight and discuss in class, particularly by those students who performed well on this stage of the assignment.
Part 2: Stakeholders and argument
The second part of the assignment has two primary requirements. The first is for students to conduct research and interview stakeholders who are affected by their assigned tax law. The second part requires students to develop and support their own opinion about the topic.
To complete the first requirement, students identify at least two stakeholder groups and interview two individuals who represent the different stakeholders. Direct stakeholders are ideal; however, students can also choose to interview indirect stakeholders, as these topics ultimately affect everyone as stakeholders. Students also should research other resources for statistics and support to present arguments for why each stakeholder would express a particular opinion. The write-up should discuss the stakeholders and provide a summary of the interview and research. Students need to present both sides of the argument, even if they cannot find a stakeholder to represent each side. An opinion can be stronger if the student understands what the other opinion is and the basis for it.
To fulfill the second requirement, students analyze the interview and research data to present both sides of the argument, state their own opinion, and then support their opinion using information gathered from the stakeholder interviews and research. Developing their own opinion based on research that they performed helps build critical-thinking skills.
As part of their analysis, students can be required to discuss how their law follows the AICPA’s recently updated Tax Policy Concept Statement No. 1, Guiding Principles of Good Tax Policy: A Framework for Evaluating Tax Proposals (available at www.aicpa.org). (For a discussion, see Cook, Lewis, and Nellen, “Tax Principles for the Digital Age,” Journal of Accountancy (May 2017).) Examples of analysis can be seen on the following blogs: “Tax Principles for the Digital Age” at 21st Century Taxation, available at 21stcenturytaxation.blogspot.com, and “Focus on Tax Policy” at The Contemporary Tax Journal, available at www.sjsumstjournal.com. These examples present analysis in a chart format along with explanations of how the policy satisfies or does not satisfy the various criteria.
Part 2 is assigned and due during the middle of the course. Students should recognize that this part of the assignment is longer than the other two parts and requires more time to perform research and conduct interviews.
Part 3: Civic outreach, communication, and reflection
Civic outreach: Students draft a letter to a member of Congress discussing the law and their opinion. The letter should briefly describe the law and to whom it applies, and present the student’s opinion based upon support gathered in Part 2. Students should include how they want the letter’s reader to vote if the topic comes up for discussion in Congress. The instructor should require these letters to be only a page or two, emphasizing that a member of Congress and his or her staff would not have a lot of time to review a long letter. Students should also note that members of Congress are not familiar with the details of every law; therefore, the brief description is just as important as the opinion. This letter also allows students to once again briefly describe tax law in their own words. Experience with this project has shown that now, at the end of the project, students are much better informed and have greater understanding of the Code, showing progression from Part 1 of the assignment.
Communication: Students are asked to assume they have a client attempting to do tax planning based upon their rule. Students develop the issue themselves and must write a brief letter or tax memorandum to the client in response to how the client should proceed. The letter or memo should contain a brief description of the topic, discuss its current status (i.e., the provision is no longer available, about to expire, soon to be renewed, etc.), and contain recommendations for planning in the next year. This part of the assignment allows students to be creative about who their client is and what questions may be asked. This requirement also helps strengthen tax research skills learned in the beginning of the semester by having the students prepare tax communications to a client.
Instructors may also, if class time permits, require students to make brief presentations to the class about their topic and research. Another option would be to require students to post brief summaries or PowerPoint slides to a course learning management system for other classmates to critique and discuss. Allowing students to share their work will give other students exposure to the various topics covered throughout the course. Alternatively, if any of the topics are covered in class, an instructor may designate a student to give a basic presentation about the topic during that class time.
Reflection: Finally, students are required to write a one-to-three-page reflection on how their law affects their own life, and how doing the project impacts their future. They should comment on whether they learned something new and whether their research changed their initial thoughts on the topic. This reflection helps to tie the concepts together and leads the students to think about how other tax policies may impact their life and work.
How to involve practitioners and community
An instructor can recruit practitioners and community members to assist with the interviews performed in Part 2. Students are already reaching out to community members for the interview; however, they will often only reach out to family members or friends. The instructor may require them to interview at least one person from a supplied list of local practitioners or community members prepared in advance of the assignment. These interviews help them to make connections with people they could potentially work for in the future or even see as clients.
Another suggestion for involving practitioners and community members may be to require students to present their projects to a panel made up of these people. The panel can assist in grading the assignment or even create a competition where a winner is chosen for best project.
One final suggestion to involve community members is to choose selected topics and have students present them to areas that may need knowledge about the policies—for example, educating a local community center about the earned income tax credit or speaking to local schoolteachers about the deduction for educator expenses. An instructor with larger classes may choose this option, involving groups instead of individual assignments.
Feedback and assessment
The small classroom exercises and semester-long project have been used successfully for about 10 years in various formats at the undergraduate level at both a small traditional private university and a larger state university with many nontraditional and international students. Feedback from students has been overwhelmingly positive. Students say that the project opens their eyes to the legislative process and allows them to see tax in a different light. Many students report the project is their favorite part of the course. Some students reported having successful job interviews because they were able to discuss aspects of their project.
To simplify grading of the semester-long project for larger classes, group work may be required instead of individual work. The time spent grading this type of assignment can be extensive, and the use of rubrics can be helpful. Detailed rubrics are available from the author upon request; the chart “Tax Policy Project Suggested Grading Rubric (Simplified)” contains an example of a simplified grading rubric.
Benefits
Incorporating tax policy into the first tax course can build interest in taxation and show students that tax is not only about compliance. A tax course should not just be about learning the law, but should focus on developing the skills needed to understand the laws when they change, and apply them to new situations. By examining policy throughout the course, students develop their own opinions on topics and are better able to debate not only the topics in their assignments, but also others that are brought up during coursework. The short exercises and semester-long project also help students develop skills in tax research, critical thinking, and oral and written communication. Students see value in what they have completed and can use these skills in the future, regardless of whether they enter the field of taxation.
Contributors | |
| Julia M. Camp is an assistant professor of accountancy at Providence College in Providence, R.I. Annette Nellen is a professor in the Department of Accounting and Finance at San José State University in San José, Calif., and is the chair of the AICPA Tax Executive Committee. For more information about this column, please contact thetaxadviser@aicpa.org.
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