By Alex Lewis

            Working remotely has become the new normal, and it may stay that way after COVID-19.[1] Although many professionals enjoy the safety, freedom, and flexibility that comes with remote work, a potential tax nightmare may be around the corner for some in 2021. If employees did not switch over their withholding once they started working remotely in a different state, those individuals could incur a higher tax bill in their resident state and possibly incur penalties.[2] Additionally, companies that now have employees working in states other than the business’s home office may unintentionally trigger income or sales tax nexus in their employees’ home states.[3] These employers may also be required to pay unemployment insurance tax in those states that employees now call home.[4] Although some state legislatures have released guidance for determining nexus and apportionment of income due to remote workers, many states have yet to address the issue.[5] Out of all the uncertainty caused by COVID-19, one thing is clear—preparing and paying income, payroll, and unemployment tax for both individuals and corporations could be complicated and expensive.

Individual Income Tax Implications 

            Typically, the state in which a taxpayer resides taxes all of their income, regardless of where it is earned.[6] Additionally, when a taxpayer works in more than one state during a year, the individual must, in most states, allocate their income to the respective state in which it was earned.[7] When this happens, the taxpayer’s resident state will give a tax credit to the taxpayer for the state income taxes paid to another state.[8]

            When employees began working remotely due to COVID-19, the taxpayer may now have less income to allocate to the state in which they normally worked (if it is located in another state).[9] Since less income will be allocated to the state in which they normally work, the amount of taxes due and the amount of credit that the taxpayer will be able to claim on their resident state income tax return will be lower.[10] The smaller credit could cause the taxpayer to have a much higher income tax liability in their resident state, which could result in tax penalties for failing to make estimated payments in their resident state.[11]

            Although some states have exempted income earned in the state because of COVID-19,[12] others have not.[13] Thus, employees should check with their employer and change their withholding requirements to their resident state to ensure that they do not incur tax penalties as a result of working remotely.[14]

Business Income/Payroll/Unemployment Tax Implications 

            Businesses that allowed their employees to work remotely due to the COVID-19 pandemic may face far more challenges. There are a variety of ways that states require businesses to apportion income.[15] Most states require businesses only to apportion income based on the sales made within the state.[16] Those states will likely be unaffected by the COVID-19 remote workforce. However, other states apportion income with a multi-factor model, which allocates income based on sales, property, and payroll.[17]

            The remote workforce will change these calculations because remote employees will change the amount of payroll allocated to each state. Some states have released guidance exempting income earned by employees in the state that were relocated due to COVID-19.[18] Under these exemptions, income earned by remote workers due to COVID-19 will not be included in the apportionment calculation.[19] Other states only allow an employer to exempt payroll from the apportionment calculation during periods when a government shelter-in-place mandate was in effect.[20] Thus, a business may need to determine the specific dates employees worked remotely and cross-check those dates with shelter-in-place mandate dates to calculate the payroll factor appropriately. In rare situations, a company may trigger nexus in a state, and an additional filing requirement, simply because they had a remote worker in the state, even though the business did not have any sales or property in the state.            

            States that do not have traditional corporate income tax regimes could cause further issues for companies. In extreme circumstances, companies may be required to register and pay certain income and other taxes.[21] For example, in Texas, a non-Texas entity does not have to pay their corporate franchise tax unless it (1) has over $500,000 of gross receipts from doing business in Texas; (2) obtains a use tax permit; or (3) has physical presence in the state.[22] Establishing physical presence includes having employees or representatives doing business in the state.[23] So, if a company normally does not have over $500,000 in gross receipts in Texas, but now has an employee working remotely in the state due to COVID-19, the entity must now pay Texas franchise tax. Washington’s business and occupation tax (“B&O”) has similar tax characteristics.[24] In Washington, a business must pay B&O tax if it (1) has physical presence nexus in Washington; (2) has more than $100,000 in combined gross receipts sourced to Washington; or (3) is organized or commercially domiciled in Washington. Thus, a remote worker could trigger nexus for a company even if they do not normally meet the $100,000 threshold.[25]

            Finally, companies that now have employees working remotely could cause the employer to pay unemployment insurance tax in the state in which the employee relocated.[26] Some states require an employer to file with the state and begin paying unemployment insurance tax once an employer has one employee working in the state.[27] In some circumstances, an employee may be exempt from triggering unemployment insurance taxes.[28]


            With so many changes happening for employers and workers, many taxpayers may not yet be worried about their next tax bill in 2021—but maybe they should be. Making sure that employers are withholding income to the correct state could alleviate future tax issues. Also, for businesses that are merely trying to stay afloat during the pandemic, the potential additional filing requirements will be an unwelcome surprise next year. Although some states have offered guidance on how to allocate payroll to the state, the nonuniformity in tax laws across states creates a hassle and could lead to a higher tax bill (or, at least, a higher tax preparation bill). States still have time to issue helpful guidance to employers regarding their payroll allocation. If corporations are lucky, some states may entirely waive the physical presence threshold that would otherwise trigger a filing requirement. Conversely, since most states are facing severe budget deficits, they may be less forgiving and will not waive any remote work performed by employees.[29] If more states follow Georgia’s guidance, employers will undoubtedly incur additional headaches trying to cross-check governmental shelter-in-place mandates with specific dates that employees worked remotely.[30] Nevertheless, with some employers now embracing remote work as a permanent solution, Americans may feel the pandemic’s tax effects for years come.[31]

[1] Why Remote Working Will Be the New Normal, Even After COVID-19, EY (Sept. 7, 2020),

[2] Katherine Loughead, In Some States, 2020 Estimated Tax Payments Are Due Before 2019 Tax Returns, Tax Found. (May 22, 2020),

[3] Daniel N. Kidney, State and Local Tax Implications of Remote Employees During the COVID-19 Pandemic, Wipfli (June 19, 2020), (stating that nexus is typically created by having “physical presence” in the state).

[4] Larry Brant, Having Employees Working Remotely May Become the New Norm—There May Be Tax and Other Traps Lurking Out There for Unwary Employers, Foster Garvey (May 26, 2020),

[5] Coronavirus Tax Relief FAQs, Ga. Dep’t of Revenue, (last visited Sept. 16, 2020).

[6] See Idaho Code § 63-3011; see also Credit for Taxes Paid to Another State, Va. Tax, (last visited Sept. 16, 2020).

[7] See Mont. Admin. R. 42.15.110(3) (requiring an employee to only allocate income that is “sourced” to the respective state); see also Or. Dep’t of Revenue, Publication OR-17 Individual Income Tax Guide 47 (2019), (requiring an employee to apportion income by taking the number of days worked in the respective state divided it by the total number of days worked everywhere in a year).

[8] Idaho Code § 63-3029(1).

[9] See Or. Dep’t of Revenue, supra note 7, at 47.

[10] Idaho Code § 63-3029(3)(a)(i).

[11] See Loughead, supra note 2 (stating that Delaware, Indiana, Montana, Nebraska, New Jersey, New York, Oklahoma, and Rhode Island require estimated state income tax payments).

[12] FAQ Articles, N.D. Tax, (last visited Sept. 16, 2020).

[13] Guidance for Individuals Temporarily Living and Working Remotely in Vermont, Vt. Dep’t of Taxes, (last visited Sept. 16, 2020).

[14] For example, assume an individual taxpayer normally lives in New York, but works in Massachusetts and has a taxable income of $100,000. In a normal year, the taxpayer will pay $5,050 (calculated using the 5.05 percent Massachusetts individual income tax rate) in tax to Massachusetts. Thus, the taxpayer will be able to claim a $5,050 credit for taxes paid to another state on their New York return, reducing the amount of taxes owed to New York. Now, assume that because of a stay-at-home order, the taxpayer works at home for 75 percent of the year, and only 25 percent of its income will be allocated to Massachusetts. Then, the taxpayer will only receive a $1,262.5 credit on their New York tax return, causing the taxpayer to underpay their taxes substantially unless a withholding change is made. If no change is made, the taxpayer may incur penalties. See 2019 Personal Income Tax Rates, Mass. Dep’t of Revenue, (last visited Sept. 16, 2020) (providing Massachusetts state income tax rates); Who Must Make Estimated Tax Payments?, N.Y. State Dep’t of Tax’n & Fin. (Aug. 5, 2020),

[15] State Apportionment of Corporate Income, Fed’n of Tax Adm’rs (Feb. 2020),

[16] Id.

[17] Id.

[18] See Frequently Asked Questions About the Income Tax Changes Due to the COVID-19 National Emergency, Neb. Dep’t of Revenue, (last visited Sept. 16, 2020).

[19] See id.

[20] See Coronavirus, supra note 5.

[21] Texas: Franchise Tax, Economic Nexus Rule is Finalized, KPMG (Dec. 20, 2019),

[22] 34 Tex. Admin. Code § 3.586(f).

[23] Id. § 3.586(d)(5).

[24] Out of State Business Reporting Thresholds and Nexus, Wash. State Dep’t of Revenue (Apr. 2020),,sourced%20or%20attributed%20to%20Washington (last visited Sept. 16, 2020).

[25] Wash. Admin. Code § 458-20-193(102)(a)(ii) (stating that even the “slightest presence” of a single employee may trigger the physical presence nexus).

[26] Stephen Miller, Out-of-State Remote Work Creates Tax Headaches for Employers, SHRM (June 16, 2020),

[27] Out-of-State Employers with Employees Living in Idaho, Idaho State & Fed. Res. for Bus. (July 30, 2020),

[28] Occupations Exempted from Unemployment Insurance Coverage, Wash. State Emp. Sec. Dep’t (last visited Sept. 16, 2020).

[29] States Grappling with Hit to Tax Collections, Ctr. on Budget and Pol’y Priorities (Aug. 24, 2020),

[30] See Coronavirus, supra note 5.

[31] Why Remote, supra note 1.

By Agustin Martinez

Across the globe, the COVID-19 pandemic has devastated many lives,[1] including those of immigrants living in the United States.[2]  U.S. Citizenship and Immigration Services (“USCIS”) recently announced that it “will neither consider testing, treatment, nor preventative care (including vaccines, if a vaccine becomes available) related to COVID-19 as part of a public charge inadmissibility determination . . . even if such treatment is provided or paid for by one or more public benefits” as defined by the new public charge rule.[3]  USCIS’s announcement came days after several congressional leaders asked the Trump Administration to rescind the new public charge rule altogether, in light of the rule’s chilling effect on immigrants seeking COVID-19-related medical assistance.[4]

USCIS’s announcement clarified that obtaining COVID-19-related testing and treatment will not factor into a future public charge analysis, even if such testing or treatment is publicly-funded.  But what about the payments that millions of Americans will receive as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) that was recently signed into law by President Trump?[5]  Some immigrants, for example, recipients of Deferred Action for Childhood Arrivals, are expected to receive CARES Act payments.[6]  Will accepting these federally-funded payments negatively affect these immigrants’ chances of obtaining lawful permanent resident status (i.e., a green card) in the future as a result of the new public charge rule?  Although USCIS has not yet directly answered this question,[7] the answer is “no” based on existing law.  Immigrants who are eligible for CARES Act payments should rest assured that receiving this economic relief will not negatively impact any public charge determination in the future.[8]   

Under American immigration law, a person deemed likely to become a public charge is inadmissible, meaning that the person can be denied a green card, visa, or admission into the country.[9]  The new public charge rule does not change this basic principle.[10]  But it does significantly expand the types of publicly-funded programs that USCIS may take into account when assessing whether a person is likely to become a public charge in the future.[11]  Consequently, the new rule may cause immigrants who are eligible for CARES Act payments to think twice before accepting these publicly-funded payments.

The new public charge rule’s definitions[12] and USCIS’s policy manual[13] help answer whether an immigrant’s acceptance of a CARES Act payment will, in turn, be deemed acceptance of a public benefit as defined by the new rule.  Under this regulatory guidance, CARES Act payments are not public benefits, and therefore, USCIS should not consider acceptance of such payments during future public charge determinations.

The new public charge rule generally defines a public benefit as “[a]ny Federal, State, local, or tribal cash assistance for income maintenance (other than tax credits),” “Supplemental Nutrition Assistance Program (SNAP),” “Section 8 Housing Assistance under the Housing Choice Voucher Program,” “Section 8 Project-Based Rental Assistance,” “Medicaid,” or “Public Housing under section 9 of the U.S. Housing Act of 1937.”[14]  At first glance, it would seem that CARES Act payments fall within the “Federal, State, local, or tribal cash assistance for income maintenance” public benefit category.  That, however, would be an incorrect interpretation of the new rule for the simple reason that CARES Act payments are considered tax credits under the Act.[15]  Indeed, Congress specifically referred to these payments as tax credits within the CARES Act’s text.[16]  Thus, since the new public charge rule expressly excludes “tax credits” from its definition of public benefit, a CARES Act payment is not a public benefit as defined by the rule.[17]

USCIS also confirms, in its policy manual, that tax credits are not public benefits under the new rule.[18]  The agency further explains that “[c]ash emergency disaster relief – Stafford Act disaster assistance including financial assistance provided to persons and households under the Federal Emergency Management Agency’s Individuals and Households Program and any comparable disaster assistance provided by State, local, or tribal governments” does not mean “cash assistance for income maintenance”[19]  This “cash emergency disaster relief” carveout, along with USCIS’s decision to exclude COVID-19-related testing and treatment from future public charge determinations,[20] likely means that the agency will not interpret CARES Act payments as public benefits.

But even if a CARES Act payment was erroneously deemed a public benefit in an individual case, it is highly unlikely that the payment, alone, would result in the recipient being deemed a public charge.  That is because public charge determinations are, by law, forward-looking and based on the totality of the immigrant’s circumstances.[21]  It would be quite surprising—not to mention, inconsistent with both the Immigration and Nationality Act and the CARES Act—for a one-time payment, authorized by Congress to provide assistance in the midst of a global pandemic, to negatively impact a person’s green card eligibility in the future. To remove any chilling effect[22] and alleviate fear in the immigrant population, USCIS should confirm, like it did for COVID-19-related testing and treatment, that CARES Act payments are not public benefits as defined by the new public charge rule.  Even without this additional guidance, however, the law is clear that there should be no public charge repercussions when eligible immigrants receive CARES Act payments.

[1]  See Ed Yong, How the Pandemic Will End, Atlantic (Mar. 25, 2020),

[2]  See Miriam Jordan, ‘We’re Petrified’: Immigrants Afraid to Seek Medical Care for Coronavirus, N.Y. Times (Mar. 18, 2020),

[3]  Public Charge, U.S. Citizenship & Servs. [hereinafter Public Charge] (emphasis added), (last visited Apr. 4, 2020).  There are actually two new public charge rules.  One, which was promulgated by the Department of Homeland Security (“DHS”), applies to cases adjudicated by USCIS.  Public Charge, Immigrant Legal Res. Ctr. [hereinafter Immigrant Legal Res. Ctr.], (last visited Apr. 4, 2020).  The other, which was promulgated by the Department of State (“DOS”), applies to cases involving individuals who go through a process outside the United States, at a consulate or embassy, to obtain lawful permanent resident status.  Id.  This article refers to a single “new public charge rule,” since both the DHS rule and the DOS rule are virtually identical.  Id.

[4]  Press Release, Torres: As USCIS Ends Public Charge Rule for Coronavirus Cases, Every American is Safer, Congresswoman Norma Torres (Mar. 16, 2020),

[5]  See Tara Siegel Bernard & Ron Lieber, F.A.Q. on Stimulus Checks, Unemployment and the Coronavirus Plan, N.Y. Times (Apr. 3, 2020),  These cash payments are known by different names, including “economic impact payments,” “recovery rebates,” and “stimulus checks.”  Libby Kane & Tanza Loudenback, Everything We Know About the Coronavirus Stimulus Checks that Will Pay Many Americans Up to $1,200 Each, Bus. Insider (Apr. 3, 2020),

[6]  See Understanding the Impact of Key Provisions of COVID-19 Relief Bills on Immigrant Communities, Nat’l Immigration Law Ctr. 12 (Apr. 1, 2020) [hereinafter Understanding the Impact of Key Provisions], (explaining the eligibility requirements for CARES Act payments, which include having a valid social security number); see also Monique O. Madan, Millions of Immigrant Families Won’t Get Coronavirus Stimulus Checks, Experts Say, Miami Herald (Mar. 26, 2020), (“Deferred Action for Childhood Arrivals (DACA) and Temporary Protected Status (TPS) holders would be able to qualify for the money because they are issued Social Security numbers.”).

[7]  See Public Charge, supra note 3 (explaining USCIS’s position as to COVID-19-related testing and treatment, but not CARES Act payments).

[8]  The question of which immigrants are eligible for CARES Act payments is beyond the scope of this article, but the sources cited supra note 6 provide some guidance on this question.

[9]  See 8 U.S.C. § 1182(a)(4)(A) (2018) (“Any alien who, in the opinion of the consular officer at the time of application for a visa, or in the opinion of the Attorney General at the time of application for admission or adjustment of status, is likely at any time to become a public charge is inadmissible.”); 8 C.F.R. § 212.21(a) (2019) (“Public charge means an alien who receives one or more public benefits, as defined in paragraph (b) of this section, for more than 12 months in the aggregate within any 36-month period (such that, for instance, receipt of two benefits in one month counts as two months).”); Immigrant Legal Res. Ctr., supra note 3 (“[Immigration] law says that those who are viewed as likely to become dependent on the government in the future as a ‘public charge’ are inadmissible.”).

[10]  See Immigrant Legal Res. Ctr., supra note 3 (providing basic background of public charge law before the new rule was implemented).

[11]  See 8 C.F.R. § 212.21(b) (listing the benefits that are considered “public benefits” for purposes of the new public charge rule); Immigrant Legal Res. Ctr., supra note 3 (“The rules expand the list of publicly-funded programs that immigration officers may consider when deciding whether someone is likely to become a public charge. Under the new rules, federally-funded Medicaid, the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), Section 8 housing assistance and federally subsidized housing will be used as evidence that a green card or visa applicant is inadmissible under the public charge ground.”).

[12]  8 C.F.R. § 212.21.

[13]  Chapter 10 – Public Benefits, U.S. Citizenship and Servs. [hereinafter Chapter 10 – Public Benefits], (last visited Apr. 4, 2020).

[14]  8 C.F.R. § 212.21(b)(1)–(6) (emphasis added).

[15]  See Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, 116th Con. § 2201 (2020) (providing that the Internal Revenue Code will be amended to state that “[i]n the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2020 an amount equal to the sum of—(1) $1,200 ($2,400 in the case of eligible individuals filing a joint return), plus (2) an amount equal to the product of $500 multiplied by the number of qualifying children (within the meaning of section 24(c)) of the taxpayer”) (emphasis added); see also Kane & Loudenback, supra note 5 (“The payment . . . is technically an advance tax credit meant to offset your 2020 federal income taxes.”) (emphasis added).

[16]  See H.R. 748 § 2201.

[17]  8 C.F.R. § 212.21(b)(1).

[18]  Chapter 10 – Public Benefits, supra note 13 (“Other benefits not considered public benefits in the public charge inadmissibility determination include, but are not limited to . . . Tax Credits . . . .”) (emphasis added).

[19]  Id. (footnote omitted).

[20]  Public Charge, supra note 3.

[21]  See 8 C.F.R. § 212.22(a) (“The determination of an alien’s likelihood of becoming a public charge at any time in the future must be based on the totality of the alien’s circumstances by weighing all factors that are relevant to whether the alien is more likely than not at any time in the future to receive one or more public benefits, as defined in 8 CFR 212.21(b), for more than 12 months in the aggregate within any 36–month period (such that, for instance, receipt of two benefits in one month counts as two months).”).

[22]  See Jordan, supra note 2.

8 Wake Forest L. Rev. Online 57

Rebecca Morrow*

I. Introduction

In early January 2018, I emailed my incoming Federal Income Tax students to welcome them to the course and tell them how to buy the outdated textbook. “What an exciting time to be taking Tax!” I wrote. I was excited, too—if you count being nauseous.

The spring 2018 class started just three weeks after President Trump signed the Tax Cuts and Jobs Act (“TCJA”) in to law. Prior to the TCJA, we had called the Tax Code “the Internal Revenue Code of 1986, as amended.” This reference made sense because the Reagan-led tax reform of 1986—a reform that followed years of deliberation and expert input, was partially bi-partisan, and centered on a guiding principle of broadening the tax base while lowering tax rates[1]—was so extensive that later changes to tax law were seen as mere amendments to the 1986 reform. After the TCJA, it wasn’t even clear whether we would still refer to the Code that way.

II. Rush Shipping of an Unwanted Christmas Present

Like the 1986 reform, the TCJA was sweeping. Unlike the 1986 reform, it followed a rushed and often closed process, passed via a party-line vote in the House[2] and Senate,[3] and was not anchored to a guiding principle.[4] At one point, Paul Ryan argued that the TCJA aimed to promote “traditional” families and increase the birth rate.[5] Where’d that come from? A goal of lowering taxes certainly motivated the TCJA.[6] But then a slew of apparently competing goals led to a slew of unrelated and sometimes competing changes.[7] Many opponents have levied substantive criticisms at the TCJA because of its rushed process, partisanship, and lack of a guiding principle.[8] For purposes of this reflection, these features simply made it more difficult to make sense of the new law quickly. Law professors had little time to learn the new law in advance of it being passed. Legislative history explaining the new provisions was sparse. And the lack of a guiding principle meant that we had to read the new law without a frame for interpretation. Lawyers and accountants of course faced the same challenges, as did taxpayers. The TCJA was a radical change, and we were missing some tools (lead time, legislative history, and guiding principles) that had helped make sense of the 1986 reform.[9]

However, now that several months, and even a summer, has passed, I can see that teaching tax in a semester that began less than a month after the TCJA passed had some huge advantages from a pedagogical perspective. The main purpose of this article is to reflect on those advantages.

III. It Was Just Us and the Statute

First, my primary objective in Federal Income Tax is to teach students to read the Code. In my syllabus, I ask students to “make friends with the Tax Code,” explaining that “while treatises, textbooks, cases, and other sources can be helpful . . . [t]o understand federal income tax and keep up with changes in tax law, students must become comfortable reading the Tax Code.” The Tax Code is popularly viewed as incomprehensible gobbledygook. However, as I assert to students, “while the Tax Code can be dense and detailed, it is also precise and often logical.” Teaching students to rely on the Tax Code as a primary authority is difficult for the same reason that it is important. Second and third year law students—the students who are eligible to take Federal Income Tax—are often quite good at making sense of case law, making sense of textbooks, and applying both to factual scenarios. Their first-year classes taught them these skills. However, first year classes—and law school generally—teaches too little about how to read statutes. Criminal lawyers, immigration lawyers, family law lawyers and others primarily work in statutes. Thus, the most important job of my class is to teach students how to read, interpret, and apply the complicated statute that is the Tax Code.

Reading statutes is different. Statutes cannot be skimmed. When a statute says, “for purposes of this Title,” it means something very different from “for purposes of this section.” Statutes require attention to cross references that are often as sparse as “for purposes of paragraphs (1) and (2) of subsection (a).” Statutes require attention to structure. Paragraphs are parts of subsections. Thus, a student reading paragraph (2) needs to realize that she is reading (h)(2), meaning that any limiting language in (h) will also apply to (2). And most importantly, statutes require that readers follow the first rule of statutory interpretation, “keep reading.”

Since I have always viewed Federal Income Tax as a unique opportunity to teach students statutory interpretation skills, and since I aim to test what I teach, in past semesters I have told students in advance that the final exam may require them to interpret a Code provision that they have never encountered before. They must apply their statutory interpretation skills in a new context. I consider this approach fair game—transfer of learning, in pedagogical terms—but the timed nature of an exam limits how extensively I can use it. Post TCJA, the approach of using unfamiliar Code provisions was unnecessary. Students had no choice but to develop and repeatedly practice statutory interpretation skills and to demonstrate those skills on the final. There was no E&E, no model answers, no Nutshell—in other words, no legal Cliff’s Notes for tax that incorporated the TCJA. Indeed, students knew that the TCJA had changed tax so extensively that secondary sources and already-written outlines would be of little help. Their only choice (and mine) was to rely primarily, and overwhelmingly, on the Code itself.

IV. The First Rule of Statutory Interpretation is Keep Reading

As for the first rule of statutory interpretation, “keep reading,” the TCJA hit this home. In prior semesters, I would use an example like section 165 to show that the Tax Code often states a general rule like the rule of 165(a) that losses are deductible as though it is absolute, but then includes a later provision to turn that general rule nearly on its head. Section 165(c), for example, provides that for an individual, losses are deductible only if they are trade or business losses, investment losses, or casualty or theft losses. Losses in value on the cars taxpayers use to commute, homes taxpayers live in, and jewelry taxpayers wear are nondeductible despite the broad language of 165(a). As I explain, the Code often states a general rule as though it is absolute and has a later provision that nearly turns the general rule on its head because many Code provisions apply to many types of taxpayers. Section 165(c)’s loss disallowance nearly reverses 165(a)’s loss allowance “for an individual.” For a corporation, which also uses section 165, section 165(c) does not apply and the 165(a) general loss allowance rule does more work.

The TCJA is written into the Code in a way that hits home the necessity that students “keep reading.” As a general matter, the TCJA’s provisions are not subsection (a) of their relevant sections. They are 1(j) (imposing new rates that cap at 37%) and 67(g) (eliminating miscellaneous itemized deductions) and 68(f) (providing that section 68’s limitation on itemized deductions, the so-called Pease limitation, is eliminated) and 151(d)(5) (noting that the personal exemptions detailed in 151 do not, in fact, exist). The TCJA hides out in subsections like (j), (g), (f), and (d)(5) for a very important reason. The TCJA is not a new, permanent law with respect to individual taxpayers. Instead, the overwhelming majority of the TCJA’s provisions for individual taxpayers apply “[i]n the case of a taxable year beginning after December 31, 2017, and before January 1, 2026.” The pre-TCJA provisions still live in the Code because they will, by operation of law, automatically apply again in tax years beginning 2026. Now, to be fair, it is unlikely that the pre-TCJA Code will spring back in full force and effect in 2026. There are many years between now and 2026 for those provisions-in-waiting to be amended. Taxpayers will grow accustomed to the benefits that they have received under the TCJA and demand that many of those benefits be made permanent. The more accurate reason that the pre-TCJA provisions live in the Code is that the proponents of the TCJA had to pretend that those provisions would spring back into full force and effect in tax years beginning 2026[10] in order to achieve the budget numbers they needed to make the TCJA an act that could be passed with only 51 Senate votes.[11] Because the TCJA does not add to the federal deficit outside of a ten-year budget window, it complies with the Byrd Rule[12] and qualifies as a reconciliation bill. Thus, passing the TCJA “require[d] only a simple majority to pass, debate time in the Senate [was] limited, amendments [were restricted], the bill [could] not be filibustered, and final passage require[d] a simple majority.”[13]

V. The Best Teacher is a Student

Finally, teaching Federal Income Tax weeks after the TCJA passed was humbling. I spent hours trying to distinguish between drafting errors and simply unfortunate or frustrating features of the new Code.[14] It is good to be reminded of the difficulty of a subject while teaching it. This reminder encourages a desirable and a deserved empathy with students. It improves the ability to identify which concepts are difficult and require slow, clear coverage and opportunities for repetition. While teaching Federal Income Tax post-TCJA, I was simultaneously learning a great deal.

VI. Marketability High and Increasing

In addition to offering pedagogical advantages, the TCJA made my class even more valuable for students anticipating the job market. Tax professors like it when our students decide to pursue careers in tax law. We know that tax lawyers tend to be in demand, protected from economic downturns, highly regarded, and often professionally content.[15] The TCJA only increased the advantages of becoming a tax lawyer, particularly for new lawyers. As corporate tax lawyer, David Miller explains,

It’s really the best time to be a young tax lawyer. . . . First, the new law will create tremendous demand for a young lawyer’s services, and it’s always nice to be appreciated. Second, although I’ve practiced for more than 25 years, I know no more about the new tax law than a first-year associate who has been following it closely. In an instant, they can catch up to my career’s worth of knowledge.[16]

In sum, my first semester teaching Federal Income Tax post-TCJA, revealed considerable pedagogical advantages of the post-TCJA tax law teaching world.

VII. But Pedagogy is not Everything

Unfortunately, pedagogy is not everything. Although I can see the TCJA’s impacts within my classroom as positive, its external impacts are overwhelmingly negative. Tax professors may feel the harms of the TCJA personally. As Parker Palmer describes in The Courage to Teach, we professors “were drawn to a body of knowledge because it shed light on our identity as well as on the world.”[17] Tax law shed light on my identity and my view of the world. Unlike some of my peers in other legal fields, I’ve never been a perfectionist. I admire vast regimes that do a lot of work.[18] I like detail, rigidity, and complex systems. I think of tax, as Sam Donaldson so beautifully described it, as like the human body:

The Code is a carefully crafted work of political compromise. Like all of us, it contains some fat that could be trimmed, an organ or two that could be severed without damage to the body, and maybe some features that are less appealing to look at than others. It also has an inner beauty and an intricate structure that generally works to raise revenues for the many programs that benefit the taxpayers from whom it collects. While there are many exceptions to the basic themes, the Code is generally predictable to one who understands the themes and the political pressures that shape the exceptions.[19]

I lament that the words of the Internal Revenue Code—complicated and imperfect though they may have been—were treated so recklessly by the TCJA. The TCJA seems an ill-considered, prominent, and regrettable tattoo.[20]

And worse than a self-imposed harm to a carefully crafted statute, the TCJA will do real, irreparable damage. It will take one of America’s greatest failings—income inequality—and dramatically exacerbate it.[21] Under the TCJA, owners won and laborers lost;[22] high earners won and low earners lost;[23] and perhaps most significantly, the currently affluent won while the future needy lost.[24] As President Trump declared, the TCJA was not a reform, it was a “cut, cut, cut.”[25] In the end, Spring 2018 was a semester in which the subject that chose me let me down, but the students who chose my class buoyed my optimism for the future.

* Professor of Law, Wake Forest University. I would like to thank Mike Garrigan for encouraging me to write this reflection and for improving its content, Sara Kathryn Mayson for assisting me with research, and my Spring 2018 tax students for making teaching a joy.

  1. See infra note 4. However, at least one important change that reflected the base-broadening approach of the 1986 reform—the elimination of a preferential rate for capital gains—was short lived. By 1990, capital gains were again taxed at preferential rates.
  2. 163 Cong. Rec. H10214 (daily ed. Dec. 19, 2017). Every member of the House of Representatives who voted for the TCJA (227 yea voters) was Republican. Every Democratic member of the House of Representatives voted against the TCJA, as did 12 Republican representatives (typically from blue states) for a total of 203 nay voters.
  3. 163 Cong. Rec. S8141–42 (daily ed. Dec. 19, 2017); Jasmine C. Lee & Sara Simon, How Every Senator Voted on the Tax Bill, N.Y. Times (Dec. 19, 2017), All 51 Republican Senators voted for the TCJA, except for Senator John McCain, who was undergoing cancer treatment. All 48 Democratic Senators voted against the TCJA.
  4. Angela Morris, Brew a Pot of Coffee, This Big Law Tax Attorney is Burning the Midnight Oil, (Dec. 20, 2017) (“The biggest difference between the 1986 act and the current tax bills is that the 1986 act was preceded by two years of detailed proposals; the tax policies behind the 1986 proposals were relatively clear; the tax community had the opportunity to comment on the proposals; and Congress was responsive to the comments. The current [TCJA] bills have been drafted in a matter of months; there is no evident tax policy underlying some of the proposals; and Congress has not asked for comments or been responsive to them. As a result of these differences, the current bills will give rise to unexpected consequences—some of which taxpayers will exploit and others of which will create unintended tax liability.”).
  5. Paul Ryan, House Speaker Weekly Briefing, C-Span (Dec. 14, 2017), (“This is going to be the new economic challenge for America: people. Baby boomers are retiring—I did my part, but we need to have higher birth rates in this country.”); see also PBS NewsHour, What You Need to Know Now That the GOP Tax Bill Is Law, YouTube (Dec. 20, 2017), (observing that the TCJA “actually does a great deal for traditional families” following Speaker Paul Ryan’s position that child birth rates need to increase in the U.S.).
  6. See Tara Palmeri, ‘The Cut Cut Cut Act’: Trump, Hill Leaders Differ on Tax Overhaul Bill’s Name, ABC News (Nov. 2, 2017, 9:48 AM) (“President Donald Trump had told senior congressional leaders that he wants to name the bill “the Cut Cut Cut Act . . . .”).
  7. For example, the TCJA introduced a new and complicated deduction to incentivize certain forms of income-seeking, section 199A, while simultaneously eliminating a long-standing and simple deduction that previously incentivized taxpayers to move for higher paying jobs, section 217. See 26 U.S.C.A. § 217(k) (West 2017) (suspending the deduction for moving expenses through 2025). In an apparent effort to simplify tax law, the TCJA eliminated personal exemptions including for taxpayer’s dependents, but then expanded and added complexity to the child tax credits that taxpayers receive for many of the same dependents. See id. § 151(d)(5); id. §24(h). And while the TJCA aimed to dramatically cut taxes across the board, it increased taxes for certain taxpayers by capping the deduction for state and local taxes and changing the rules for the treatment of alimony payments. See id. § 164; id. § 215.
  8. See, e.g., Brian Faler, ‘Holy Crap’: Experts Find Tax Plan Riddled with Glitches, Politico (Dec. 6, 2017, 5:04 AM) (“‘The more you read, the more you go, “Holy crap, what’s this?”’ said Greg Jenner, a former top tax official in George W. Bush’s Treasury Department. ‘We will be dealing with unintended consequences for months to come because the bill is moving too fast.’ . . . What is unusual is the sheer scope of the legislation now before lawmakers, and the speed with which it’s moving through Congress. . . . That breakneck pace means there hasn’t been much time for feedback from experts outside the Capitol. . . . Some of the fixes could be expensive, potentially throwing lawmakers’ budget numbers out of whack.”).
  9. This is not to say that the 1986 reform was a model tax reform. Many economists fault the 1986 tax reform for increasing income inequality, forcing damaging cuts to government programs, and expanding the deficit.
  10. See Bob Bryan, Here’s Why Senate Republicans are Making Tax Cuts for Average Americans Temporary, Business Insider (Nov. 15, 2017, 12:08 PM) (“Sen. Orrin Hatch, chair of the Senate Finance Committee and author of the bill, has admitted that the original version of the Senate’s TCJA did not meet such a requirement. Making the individual cuts temporary could allow the bill to meet those requirements.”).
  11. Jeff Stein, Republicans explain why their tax cuts are temporary, but not really temporary, Wash. Post: Wonkblog (Nov. 30, 2017), (explaining that Republican lawmakers made individual tax cuts temporary so that the TCJA would not “drive up the deficit 10 years after passage,” would therefore comply with the Byrd rule, and could therefore be passed with a simple majority. However even before the temporary cuts were passed, Republican lawmakers expressed their collective intent that these cuts would later be extended, noting that “it would be extremely difficult not to continue” tax cuts for individuals).
  12. 2 U.S.C. § 644 (2012).
  13. Tori Gorman, S. Comm. on the Budget, 114th Cong., Bulletin on Reconciliation Debate, Byrd Rule, 2016 Budget Process (2015),[1].pdf.
  14. One unfortunate feature of the TCJA involves the brackets for various preferred rates applicable to long-term capital gains and qualified dividends. Under prior law, the 0% preferred rate applied whenever ordinary income was taxed at 10% or 15%; the 15% preferred rate applied whenever ordinary income was taxed at 25%, 28%, 33%, or 35%; and the 20% preferred rate applied whenever ordinary income was taxed at 39.6%. Pursuant to the TCJA, the preferred rates now break at points that are $100 or $200 off the breaking points for ordinary income rates. So, for example, an unmarried individual goes from the 0% to 15% preferred rate at $38,600 of taxable income but goes from the 12% to 22% ordinary income rate at $38,700. Compare 26 U.S.C.A. § 1(j)(5)(B)(i)(III) (West 2017) (beginning the 15% preferred rate at over $38,600) with 26 U.S.C.A. § 1(j)(2)(C) (West 2017) (beginning the 22% ordinary income rate at over $38,700). Similar $100 or $200 mismatches appear on the tax rates for all filing statuses and are certainly an unfortunate feature of the new Code that makes teaching it, and understanding it, more difficult without much justification. Another unfortunate feature of the new Code is section 199A, which NYU Tax Law Professor Daniel Shaviro described prior to its passage as the “worst provision ever even to be seriously proposed in the history of the federal income tax.” Daniel Shaviro, Apparently income isn’t just income any more, Start Making Sense (Dec. 16, 2017, 10:30 AM),
  15. Linda Galler, Why Do Law Students Want to Become Tax Lawyers?, 68 Tax Law. 305, 309 (2015) (“Given the substantive difficulty of tax law, expertise matters. Therefore, time invested in learning new concepts or techniques can pay dividends over the course of a career. . . . Moreover, tax law is relevant in both good economic times and bad; there are tax issues in mergers and acquisitions, and there are tax issues in bankruptcy and foreclosures. So it is likely that one can make a living over the long haul.”); id. (“[Tax lawyers’] expertise is invaluable to clients and colleagues, when we talk, people listen.”); id. at 310 (“Recent studies of the relative levels of contentment of lawyers in many areas of practice confirm . . . that tax lawyers are likely to be at the top.”).
  16. Morris, supra note 4.
  17. Parker J. Palmer, The Courage To Teach: Exploring the Inner Landscape of a Teacher’s Life 26 (10th Anniversary ed. 2007).
  18. Organizations like federal, state, and local governments and broad exempt organizations like the Bill & Melinda Gates Foundation and the United Way that do the hard work of balancing competing demands rather than the easier work of advancing single policy goals. See What We Do, Bill & Melinda Gates Found., (last visited Oct. 17, 2018) (advancing causes in five diverse program areas spanning six continents); Our Focus, United Way Worldwide, (last visited Oct. 17, 2018) (focusing philanthropic efforts in three areas: education, income and health).
  19. Samuel A. Donaldson, The Easy Case Against Tax Simplification, 22 Va. Tax Rev. 645, 745–46 (2003).
  20. As wise people often say, nothing good happens after midnight. See, e.g., Phil Mattingly, et al., Senate Approves GOP Tax Plan, House to Revote Wednesday, CNN (Dec. 20, 2017), (“In a vote in the early Wednesday morning hours, the Senate approved the final version of the first overhaul of the US tax code….”); See also Tim Scott (@SenatorTimScott), Twitter (Dec. 19, 2017, 12:48 AM), (“Great news! The Senate just passed the Tax Cuts and Jobs Act.”).
  21. Cong. Budget Office, The Distribution of Household Income, 2014, at 31 (2018), (“The increase in income inequality over the 36-year period examined here largely stems from the significant increase in inequality in market income—labor income, business income, capital income (including realized capital gains), and other nongovernmental sources of income—which has been driven primarily by substantial income growth at the top of the distribution.”).
  22. Annie Nova, New tax law takes a hatchet to these worker expenses, CNBC (Feb. 1, 2018, 2:49 PM) (quoting Seth Harris, a deputy labor secretary under President Barack Obama) (“The really big story of the tax bill is that it favors capital over labor . . . . It’s heavily skewed to benefit people who get money without working, as opposed to those who labor for a living.”).
  23. Tax Policy Center, Distributional Analysis of the Conference Agreement for the Tax Cuts and Jobs Act, at 1 (2017), (“In general, higher income households receive larger average cuts as a percentage of after-tax income, with the largest cuts as a share of income going to taxpayers in the 95th and 99th percentiles of the income distribution. On average, in 2027 taxes would change little for lower- and middle-income groups and decrease for higher-income groups.”).
  24. Joint Comm. on Tax’n, JCX-69-17, Macroeconomic Analysis of the Conference Agreement for H.R. 1, The “Tax Cuts and Jobs Act” at 9 Table 1 (2017) (initially projecting that the TCJA would cause $1.071 trillion less revenue to be collected from 2018-2027). More recent projections are worse. See, e.g., Letter from Keith Hall, Director, Congressional Budget Office to Kevin Brady, Chairman, Committee on Ways and Means, U.S. House of Representatives (Dec. 15, 2017) ( (“According to CBO’s and JCT’s estimates, enacting H.R. 1 [the TCJA] would reduce revenues by about $1,649 billion and decrease outlays by about $194 billion over the period from 2018 to 2027, leading to an increase in the deficit of $1,455 billion over the next 10 years.”). To cover the resulting deficits, future generations will face cuts in government programs, tax increases, or both.
  25. See supra note 6.