In a speech last night before the American Academy of Arts and Sciences, the chief justice of the California Supreme Court, Ronald M. George, criticized his state’s reliance on the initiative process. His remarks focused on how that process, direct democracy taken to the extreme, has paralyzed state government, especially when it comes to fiscal matters.

Let’s push forward with our series of open threads on small law firms in different practice areas. To see what we’ve covered so far, click here and scroll down.

Today’s topic: ERISA LAW. For those of you who aren’t familiar with ERISA, we’ll quote a prior post of ours:

For all of you non-lawyers — or for those of you who sat in the back row in law school — ERISA stands for the “Employee Retirement Income Security Act.” It’s the federal law, originally passed in 1974 and subsequently amended, that governs the administration of pension and employee benefit plans. So yes, it’s pension law.

This area of law may not sound sexy, but it has some sexy practitioners. Back in 2006, we held an ERISA lawyer hotties contest. Feel free to check out the male nominees, the female nominees, and the ultimate winners.

More substantive thoughts on ERISA practice, after the jump.

We continue our series of open threads about small law firms focused on different areas of practice. In light of the turmoil being experienced by Biglaw, as well as the many laid-off lawyers and job-hunting law students looking for other opportunities, now is an excellent time to look beyond large law firms.

Today we turn our attention to TRUSTS AND ESTATES. What is it like to work at a small (or at least non-big) firm focused on T&E work? What are your hours like? Your compensation? What do you like the most — and the least — about your job?

Please discuss, in the comments.

Speaking of trusts and estates, at the recent Lavender Law conference we attended a workshop on advanced estate planning. The panelists offered advice that might be helpful to people who practice in, or aspire to practice in, trusts and estates.

Read about it, after the jump.

If the power to tax is the power to destroy, then shouldn’t we at least try taxing stupidity? They’re thinking about doing it in France. From Going Concern:

Our frog eating friends have decided that they will start taxing people for their stupidity:

“The French Foreign Ministry is proposing a very narrow law requiring citizens foolish enough to wander into international danger zones, regardless of public warnings, to pay at least part of the cost of their own rescue.”

If you wander up a silly mountain and get stuck, it is civilized to have somebody go and try to find you even it was your own damn fault. But that doesn’t mean society should have to foot the entire bill for your weekend warrior shenanigans. Right?

Click on the link below to read — and comment on — the full post.

The Solution to All Our Fiscal Problems [Going Concern]

Nothing is certain but death and taxes — and employment for tax lawyers, right?

Not necessarily. Read more at our sister site, Going Concern.

True Partners Consulting Layoffs Get Our Attention [Going Concern]

It’s legal, so it’s within our jurisdiction. But our sister sites have written it up already, so we’ll simply refer you to their coverage.

UBS is Naming Names (Finally) [Going Concern]
UBS Eagerly Pays Extortion Money [Dealbreaker]

All the attention recently showered upon Harvard celebrity professor Henry Louis Gates since his arrest earlier this month has resulted in the discovery of tax problems at a foundation he created and oversees.

Read more and comment over at Going Concern.

Henry Louis Gates Can’t Catch a Break [Going Concern]

Kirk Herbstreit, ESPN commentator and former quarterback of The Ohio State University football team, let the fire department burn down his house. As fans from Michigan know, this is classic Buckeye behavior.

Herbstreit thought he’d get a tax deduction for his charitable gift of flammable substances. “Not so fast, my friends.”

Click on the link below to read the full story.

IRS Doesn’t Care for Kirk Herbstreit Burning Down His Own House [Going Concern]

Nothing is certain but death and taxes — and jobs for tax lawyers. The latest Job of the Week, brought to you by Lateral Link, is a tax attorney position with a top i-bank.

Also, if you’re a Cadwalader, Shearman, Dewey or Skadden attorney participating in a firm-sponsored sabbatical program, Lateral Link has just added several new junior corporate positions with top media companies exclusively for deferred attorneys. Please contact Lateral Link for more information.

Position: Senior Manager/Vice President - Tax

Location: New York, NY

Description: The Tax Counsel Group of one of the world’s leading investment banks is seeking a mid-senior level (class of ‘01 - 06) tax attorney for a Senior Manager/Vice President level role. Role responsibilities include: supporting various business units of the firm by providing tax advice relating to their transactions; structuring transactions; assisting members of the Tax Department on technical tax issues; and managing external tax advisors. Candidates must have top academic qualifications and 3 to 8 years of significant transactional and technical tax experience in a law firm and/or financial industry tax experience. Experience must include significant partnership taxation experience and taxation of financial products experience. Experience with Section 409A and Executive Compensation (NQDC) and benefit related issues including 409A and 162(m) is highly preferred.

For more information about this position or to apply, please see Position # 5115 on Lateral Link, or contact Justin Flowers at jflowers@laterallink.com. Membership in Lateral Link is free, and you can apply at www.laterallink.com.

A tipster was looking over the Cadwalader, Wickersham & Taft online “resource center.” If you scroll to the “Clients & Friends Memos,” you’ll see a CWT partner taking a huge (and hilarious) bite out of … Manny Ramirez:

I am enraged! and outraged! plus morally reprehensibled (did I say I am outraged!), that Manny Ramirez has inked another huge contract—this time with the Los Angeles Dodgers. For those of you who do not follow baseball, know this: Manny Ramirez was getting paid about $20 million or so a year last season (which is nowhere near a year) by the BoSox. In the middle of a close pennant race, Manny decides to assault a team official, fake phony knee injuries in both his knees, and duck out of playing in crucial games until he forces a trade and costs the Sox the World Series.

In a memo titled: “The Manny Ramirez Tax Lightbulb; Also (2 Ideas in 1 Memo) Putting Pay in Perspective” Cadwalader’s Steven Lofchie, Co-Chairman of the Financial Services Department, decides to do something productive with his free time.

Read more highlights after the jump.

* An MSM shout-out for ATL’s very own Hope Winters. [CNN]

* Mickey Rourke’s beloved chihuahua, Loki, crossed over the Rainbow Bridge this past Monday. Here’s to hoping that Mickey’s covered. [Wall Street Journal (subscription)]

* The Tax Workshop for Strippers & Sex Workers will be “speci​fical​ly helpful to those​ who work as indep​enden​t contr​actor​s,​ wheth​er in a club or doing​ priva​te work.​” Nice try federal investigators, but they’ve already pulled this stunt on To Catch a Predator. [The Faculty Lounge via TaxProf Blog]

* If Michael Jackson songs are prohibited on American Idol, I strongly recommend canceling the show. [Popsquire]

* When I first heard the term “waterboarding,” I thought it sounded like a delightful sport. [Brad DeLong: Notes]

* Now I lay me down to sleep,
I pray the Lord my soul to keep,
And if I die before I wake,
I pray the Lord my toys to break.
So none of the other kids can use ‘em…
Amen. [Overlawyered]

Monday, the New York Supreme Court upheld a state statute requiring online retailers to collect taxes from New York residents.

The law applies to companies that don’t have offices in New York, but have at least one person in the state who works as an online agent — someone who links to a Web site and receives commissions for related sales.

It seems to me that freedom loving liberals and tax hating conservatives can agree that this decision heralds the end of the internet has we know it. What’s next, collecting taxes from porn sites? Instituting an e-stamp on emails? Government has been trying to get a taste of all that internet money for a long time. Don’t fool yourself, this decision opens the door for all kinds of government levies on the free flow of information and services on the web. Today, it’s a regressive tax on consumers. Tomorrow, it’ll be a two cent per word “sin tax” on text messages.

SCOTUS? Obama? Are there any “people’s employees” that are actually going to stand up for the people on this issue?

I keep using this term because it continues to be appropriate, but what we are seeing is Shock Doctrine decision making. Power players are using the financial crisis to force decisions through the system that people would never stand for under ordinary circumstances.

Officials estimated the state would gain nearly $50 million in the next two years from the tax. New Yorkers, like residents of many states, are currently on an honor system to report their online spending when they file state tax returns.

The power to tax is the power to destroy. And the New York Supreme Court just took down the energy shield. Beware, the AT-ATs are coming.

NY Court Clears Way for Taxing Online Sales [TaxProf Blog]
Court to Amazon: Keep Collecting Sales Tax [New York Times]
Amazon.com v. New York State Department of Taxation.pdf

* A couple is suing United Airlines for “overserving” the husband by serving him red wine every 20 minutes on the flight. They say this is what caused him to beat his wife on the way to customs. [Chicago Tribune]

* “Federal judges in some parts of the United States are delaying the swearing-in of new citizens, apparently so that courts can keep millions of dollars in naturalization fees paid by immigrants, according to a new government report.” [The Washington Post]

* A Rhode Island family sued their cable provider for hooking up the Playboy channel, which plays hardcore porn. [Courthouse News Service]

* Investors in Madoff’s ponzi scheme might be able to get back some of their money by filing for a U.S. tax refund. As if the U.S. government isn’t paying out enough money these days…[Bloomberg.com]

* The high court in Europe says a UK couple should be bound by the ruling of judge in southern Cyprus that they demolish their vacation home. The house is built on land that belongs to a Greek Cypriot who claims it was taken from him during the Turkish invasion in 1974. [BBC News]

New York City mayor Michael Bloomberg could be preparing to raise taxes:

To close budget gaps in the year that starts next July the mayor is thinking about a combination of sales tax increases and income tax hikes.

“Every city agency must push each dollar further,” Bloomberg said. “We’re going to do that and doing that means making hard choices that will not be popular with everyone or perhaps anyone.”

The mayor proposed raising the income tax by either 7.5 percent or 15 percent.

15 percent? Tastes like loss of purchasing power.

If New York associate salaries remain flat (a near certainty) then the incentive to work in NYC is … free Knicks tickets?

These new taxes could push the cost of living in New York well beyond the expenses of living on the International Space Station:

“Increasing the personal income tax would be a disaster for the city,” said Nicole Gelinas of the Manhattan Institute. “It’s hard to overestimate that fact. We’ve already got the highest local personal income tax in the nation.”

And this is of course before you take into account Obama’s planned tax increases on individuals making more that $250,000.

If you’re a mid-level NYC associate, it might be time to consider the legal market in New Hampshire.

Tax Hikes, Budget Cuts In The Works For NYC [CBS]

Obama’s tax policy is finally revealed:

President Obama and the new Democratic Congress face unprecedented fiscal policy challenges. First, they must endeavor to restore public confidence and return our economy to a period of growth. Here one can only hope that any new economic stimulus is well-targeted and genuinely temporary. Extending unemployment coverage and benefits should take priority. (And we should modernize our archaic system for funding unemployment insurance.)

When we emerge from the current recession, the president must tackle more fundamental issues. We need to put our fiscal house in order, restructure tax policy toward healthcare and health insurance, and shift away from tax expenditures as our principal policy instrument for financing higher education, implementing energy policy, addressing long-term care needs and the like.

“Ronald Reagan will raise your taxes, and so will I.”

Mwahahahahahahaha.

Tax Policy in the Obama-Biden Administration [Tax Prof Blog]

We’ve discussed that under Barack Obama’s plan, taxes on Biglaw associates are likely to go up. But a cursory glance over on Open Secrets shows that many law firm partners are contributing towards the Obama campaign.

One associate we’ve talked with has a pretty interesting idea on how to deal with Biglaw partners that support Obama’s plans to take extra money away from “greedy” associates:

So a sixth year associate, who currently makes $250k and will receive a raise to $265k in January will see a larger chunk of that extra $15k disappear to taxes (via the new 39% tax bracket and and the 6.2% FICA tax). This will probably amount to a couple of thousand dollars per associate. I know this has been a lot of information, so bear with me …

My challenge to the lawfirm partnerships who are voting for Obama: bump senior associate salaries to compensate associates for the tax hike/salary cut they favor. This will no doubt be portrayed as the greediest of greedy associate complaints, but why should I pay for their preferred social policies?

Baseball teams do this all the time. New York and Boston often bump up players’ salaries to compensate them for the high state tax rates in New York and Massachusetts (as compared to places like Florida or Texas).

Of course, there are many (many) flaws with this idea. If you are angry about having your taxes raised, the preferred outlet for redress is the polling booth (or Boston Harbor), not your boss. And (ahem) associates are probably more worried about keeping their jobs right now than making their salary “whole” depending on the presidential administration.

But we take the point. Senior associates are likely to get hit under the Obama tax plan, and some people still vote their pocketbook. But look on the bright side. At least we are not staring into the abyss of a socialist nationalization of the private banking industry.

Earlier: Calculate Your Obama Tax Cut!
Don’t Bother Earning Money

The latest analysis of Obama’s and McCain’s tax plans show that both candidates will likely raise the marginal tax rate paid by most Americans:

Senator Obama’s tax plan includes a number of proposals for new or expanded tax benefits that are generally targeted to low- and moderate-income taxpayers. Many of these additions to the “skyline” change taxpayers’ effective marginal tax rates in important ways, lowering or raising them, sometimes significantly. …

Senator McCain’s tax plan also affects marginal rates, but for very different reasons. His tax plan includes only two individual tax proposals and only his health tax credit has a material effect on effective marginal tax rates.

For those of you who slept through Tax, the marginal tax rate is the tax you pay on your last dollar of income. A high marginal tax rate (generally) represents a direct disincentive to making more money.

The marginal tax rate will increase to 50% under Obama’s plan, 40% under McCain’s plan. For the visually inclined, TaxProf Blog has charts that show the effects of both plans — thankfully based on double income homes.

Does anybody still believe anything they hear? After the jump.

Late Friday night, we reported that Sarah Palin’s tax returns failed to report the per diem reimbursements she received as governor of Alaska. Over the weekend our commenters weighed in:

This is an easy income tax question. Any 1L/2L taking an income tax class could have answered this problem. Yes, the IRS usually relies on employer’s W2 forms. That’s for administrative convenience. For the most part, the IRS doesn’t want to audit every employee’s fringe benefits, which would be an incredible waste of tax dollars. That being said, the governor, with all her qualifications and knowledge regarding the U.S. system of governance, should have known that a per diem (worth how much over the last 18 months?) should be included in her tax return. If my employer reimbursed me for tens of thousands of dollars (for what expenses?), I would at least think about whether this was income.

But ATL weekend readers concluded that Palin will likely face no criminal liability:

The answer is probably that Palin is civilly responsible for underreporting income and underpaying taxes, but is not criminally responsible.

Criminal tax violations require “willfulness”. In the criminal tax arena, the Supreme Court has interpreted that as a pretty tough standard — approaching actual intent to violate a known obligation. See Cheek v. United States (1991). But a taxpayer is civilly liable for taxes whether or not she knew or had reason to know of the liability. (You’re still liable even if you relied in good faith on your accountant; even if you thought you didn’t have to pay; even if you made just a math error). And the IRS can require payment of back-taxes for whatever years are still within the statute of limitations, which almost certainly would include Palin’s limited time as governor.

So to the extent [Roger] Olsen [Palin’s tax lawyer] is simply saying that Palin won’t be criminally prosecuted, he’s right. To the extent he’s saying that the IRS would believe Palin current on her obligations, he’s wrong — she’s going to have to file amended returns and send in a check.

Tax professors comment after the jump.

Earlier today, Governor Sarah Palin released her tax returns. It turns out she makes a little more than most “hockey moms” but she’s no Joe Biden. TaxProf Blog breaks down how she stacks up to the other Article II contenders:

Gov. Palin’s charitable contributions do not approach the 10% tithe required by her evangelical church, but they are in line with the average charitable contribution of Americans with her income and they are over ten times greater (on a percentage basis) than Joe Biden’s miserly charitable contributions.

But Paul Caron was also right on the money about another issue: Palin’s failure to report her per diem reimbursement she received as governor of Alaska. Both the New York Times and the Washington Post have mentioned these reimbursements before.

Palin tonight responded with authority to these allegations. The campaign released a letter (pdf) from D.C. tax attorney Roger M. Olsen:

Unless employees have reason to know that the W-2 is incorrect, the IRS expects employees to rely on the employer’s W-2 as prepared & filed with the IRS, as Governor Palin did. The income tax aspects of fringe benefits are complex and highly technical, and not subject to second-guessing by laymen. The State of Alaska is confident that its position is correct. Its employees were entitled to rely on that determination, So was Governor Palin.

Sounds like Olsen just called the liberal media “TTT.” Caron points out that Olsen is more qualified to speak about Palin’s tax returns than your average cable news anchor:

Mr. Olsen has a tax LL.M. from George Washington and is a former Assistant Attorney General of the Department of Justice’s Tax Division under President Reagan.

Are there any uber-qualified attorneys that would like to support the Olsen-Palin position? Or stand opposed?

Gov. Palin Releases Law Firm Opinion Letter Justifying Her Not Reporting Per Diem Expenses as Income [TaxProf Blog]
Palin Releases Tax Returns and Financial Disclosure Forms [TaxProf Blog]
Roger Olsen Letter (pdf)

We recently reported on Stanford Law School’s new grading system. Does it involve dollar bills? Or leaving book prizes on bedside tables?

Cristina Warthen (née Cristina Schultz) — aka the Stanford Law Escort, now married to David Warthen, the filthy rich co-founder of Ask Jeeves — is back in the news. From the San Jose Mercury News (via TaxProf Blog):

A Stanford law school graduate suspected of paying off her costly student loans by running a high-priced escort service has now been hit with federal tax evasion charges.

In court papers filed Tuesday in San Jose federal court, prosecutors allege that Cristina Warthen failed to pay taxes on more than $133,000 she earned as a prostitute in 2003, jetting off as a call girl for clients in Washington, D.C., Chicago, New York and other cities. The government has charged her with felony tax evasion for failing to pay about $25,000 in federal income taxes.

Warthen’s business as a reputed high-priced hooker was first revealed several years ago, when the federal government searched her then-home in Oakland and seized more than $61,000 in cash suspected to be linked to her escort business. Court papers allege that starting in 2001, Warthen, then Cristina Schultz, used the name “Brazil” and advertised her escort services on a Web site, TouchofBrazil.net.

Brazil. Great beaches. And waxing.

A little bit more, after the jump.