Blue States Get Salty Over Trump Plan To Screw Them On SALT

Back in 2017 when Republicans eliminated the federal deduction for state and local taxes under the Tax Cuts and Jobs Act, they weren’t exactly subtle about efforts to stick it to high-tax blue states. Capping the property tax deduction at $10,000 for married couples hits wealthy Connecticut filers a lot harder than it does their cousins in Alabama. Trump even admitted to Sean Hannity that part of the purpose of the tax cut was “to say, hey, make sure that your politicians do a good job of running your state. Otherwise, you are not going to benefit.”

If this was intended to bring a red wave to New Jersey, it seems to have failed. Instead, it ushered in an era of creative tax policy-writing as states tried to protect their citizens from a heart-stopping increase on their federal returns. Because the Republican tax cut plan preserved the charitable deduction, many states sought to recharacterize state tax payments as charitable donations. This would allow residents to max out their $10,000 in deductible property taxes, and then pay the remainder of their bills to a “charity” administered by the state.

The suit filed yesterday by New Jersey, Connecticut, and New York — of course there’s a lawsuit, this is 2019! — sketches out the general scheme, theorizing an excess tax bill of $10,000:

In New Jersey, to use one example, the taxpayer would receive a tax credit worth 90 percent of the donation—in this case, a $9,000 property tax credit. (In a state where the tax credit is worth 85 percent of the donation, she would simply receive an $8,500 property tax credit.) The taxpayer would then pay the remaining $1,000 in property tax liability to the local unit in question.

This works out great for New Jersey, which nets the $10,000 “donation,” plus an additional $1,000 to cover the portion of the tax bill not offset by the tax credit. It works out less well for the Trump administration, which had hoped to blunt the budget-busting effect of its tax plan at the expense of blue-state taxpayers.

So Treasury Secretary Mnuchin and IRS Commissioner Charles Rettig put on their green eyeshades and came up with a plan to put the kibosh on all those state workarounds. They decided the state’s charitable tax credit was a quid pro quo, akin to getting tickets to the Vitamin C Ball in exchange for a donation to the Foundation for the Prevention of Rickets, and capped the allowable credit at 15 percent. So a state which offers a 15 percent credit on a $10,000 charitable donation, reducing the taxpayer’s liability by $1,500, is not offering a quid pro quo, meaning the entire amount is deductible. But at 16 percent, the extra $100 magically transforms it into a $1,600 bribe. In other words, Mr. and Mrs. New Jersey Taxpayer are sh*t outta luck.

But don’t count those coastal elites out yet! They’re suing Mnuchin, Rettig, the IRS, and the Treasury for violating the Administrative Procedures Act by exceeding their statutory authority and imposing arbitrary and capricious regulation. The charitable workaround may be an obvious wheeze to continue to give their residents a break on their federal returns, but there’s nothing in the GOP tax plan that forbids it. If Congress had wanted to close that loophole, they had a chance to do it last year. And they didn’t.

Moreover, coming up with that 15 percent cap looks an awful lot like legislating from the executive branch, despite Treasury’s claims that a seemingly arbitrary “cliff effect” is somehow necessary to equalize the disparate treatment of deductions and credits in the statute. But that’s a question for the U.S. District Court for the Southern District of New York where Attorneys General for Connecticut, New York, and New Jersey filed their suit yesterday. 

The country may be divided, but at least the Trump administration is Making Lawyers Great Again!

Complaint For Declaratory and Injunctive Relief [New Jersey v. Mnuchin, No. 1:19-cv-06642-1 (S.D.N.Y. July 17, 2019)]
IRS Final Rule: Contributions in Exchange for State or Local Tax Credits [84 FR 27513]


Elizabeth Dye lives in Baltimore where she writes about law and politics.

Remembering Justice John Paul Stevens: Copyright Edition

Justice John Paul Stevens will be remembered for many things. As the justice appointed by Republican President Ford, thought to be a centrist, who ultimately became a bastion of the liberal wing of the court. As the justice who said that he didn’t move left, the court moved right. As the third-longest-serving Supreme Court Justice in the history of the Court. For expressing regret over his vote supporting the reinstatement of the death penalty in the United States in 1976. For his fiery, 90-page dissent in Citizens United, after which he decided to resign from the bench. For calling for a repeal of the Second Amendment. With his long tenure on the Court, any number of opinions or dissents might spring to mind, but here are two notable ones on copyright.

Justice John Paul Stevens gave us one of the most significant copyright opinions of the last 35 years. In the 1984 case Sony Corp of America v. Universal City Studios, Justice Stevens wrote for a 5-4 court allowing the use of VCRs for “time shifting”—recording a program to view later. Sony Corp, also known as the “Betamax” case, involved a challenge to whether manufacturers of home video recording devices could be liable for copyright infringement.

As Justice Stevens noted in response to the contributory infringement claim, “…in both [patent and copyright law] the contributory infringement doctrine is grounded on the recognition that adequate protection of a monopoly may require the courts to look beyond actual duplication of a device or publication to the products or activities that make such duplication possible. The stape article of commerce doctrine must strike a balance between a copyright holder’s legitimate demand for effective—not merely symbolic—protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce. Accordingly, the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses” (emphasis added). The majority found that Betamax’s use for private, noncommercial time-shifting in the home satisfied the “substantial noninfringing use” standard, upholding time-shifting as a fair use.

Interestingly, it appears that SCOTUS originally leaned in the opposite direction; had Justice Stevens lost his battle for five votes for his position, we would not have VCRs, DVD players, or DVR. While Justice Stevens was often known for his independent streak and tendency to write his own dissenting or concurring opinions, rather than joining others, in Sony Corp, he managed to sway his colleagues and pull together a single majority opinion. A loss in Sony Corp would have dramatically altered the fair use landscape as we know it today, potentially impacting other technologies, particularly in the digital era.

While Justice Stevens’s contribution to fair use jurisprudence in Sony Corp is perhaps his most notable in the intellectual property space, he clearly had strong opinions on other areas of copyright law. Sadly, Justice Stevens was on the losing end of Eldred v. Ashcroft, the case where the majority opined that the Copyright Term Extension Act was a valid exercise of Congressional authority under the Constitution. Eldred involved a challenge to CTEA, which extended copyright term from a period of life plus 50 years to life plus 70 years (I’ve previously complained about our current copyright term here). SCOTUS considered whether Congress had the power to set copyright term and extend term retroactively, and by a 7-2 margin upheld CTEA as a “rational exercise of legislative authority” because extension of copyright term did not exceed the prescription that the statutory monopoly be confined to “limited times.”

The main part of Justice Stevens’s dissent begins, as all good copyright opinions should, with the Constitution’s IP clause: “Congress shall have Power . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Wrings and Discoveries.” Justice Stevens’s dissent then methodically goes through each of the arguments in favor of copyright term extension and emphasizes that retroactive extension — which was the real issue in the question presented to the court — does not incentivize new creations.

In conclusion, Justice Stevens’s dissent notes:

The express grant of perpetual copyright would unquestionably violate the textual requirement that the authors’ exclusive rights be only “for limited Times.” Whether the extraordinary length of the grants authorized by the 1998 Act are invalid because they are the functional equivalent of perpetual copyrights is a question that need not be answered in this case because the question presented by the certiorari petition merely challenges Congress’ power to extend retroactively the terms of existing copyrights. Accordingly, there is no need to determine whether the deference that is normally given to congressional policy judgments may save from judicial review its decision respecting the appropriate length of the term. It is important to note, however, that a categorical rule prohibiting retroactive extensions would effectively preclude perpetual copyrights. More importantly, as the House of Lords recognized when it refused to amend the Statute of Anne in 1735, unless the Clause is construed to embody such a categorical rule, Congress may extend existing monopoly privileges ad infinitum under the majority’s analysis.

By failing to protect the public interest in free access to the products of inventive and artistic genius—indeed, by virtually ignoring the central purpose of the Copyright/Patent Clause—the Court has quitclaimed to Congress its principal responsibility in this area of the law. Fairly read, the Court has stated that Congress’ actions under the Copyright/Patent Clause are, for all intents and purposes, judicially unreviewable. That result cannot be squared with the basic tenets of our constitutional structure. It is not hyperbole to recall the trenchant words of Chief Justice John Marshall: “It is emphatically the province and duty of the judicial department to say what the law is.” Marbury v. Madison, 1 Cranch 137, 177 (1803).

Rest in peace, Justice Stevens. And thank you for Sony Corp’s majority opinion, which paved the way for more fair use decisions, and for your eloquent dissent in Eldred.


Krista L. Cox is a policy attorney who has spent her career working for non-profit organizations and associations. She has expertise in copyright, patent, and intellectual property enforcement law, as well as international trade. She currently works for a non-profit member association advocating for balanced copyright. You can reach her at kristay@gmail.com.

Morning Docket: 07.18.19

Stormy Daniels

* The Stormy Daniels documents are about to be released and that should be a big political story for about 5 minutes before Trump sends ICE to deport Nancy Pelosi or something. [Reuters]

* Because Europe isn’t America and still understands antitrust law, the EU has opened an investigation into Amazon for allegedly using market data it collects from sellers to then go out and undercut them. It’s a practice Elizabeth Warren recently broke down in baseball terms as, “you can be the umpire or you can own a team, but you can’t do both.” [Law.com]

* Alex Acosta tried to save his job by touting that he got Jeffrey Epstein jail time. Lawyers now claim that Epstein was having sex with underaged girls during his sentence. [ABC News]

* Can virtual law firms close the gender pay gap? Probably not a good sign when pay equity can only come from a knockoff brand. [American Lawyer]

* Neal Katyal is giving young associates real opportunities to better train the next generation of Supreme Court advocates. [National Law Journal]

* In moving tribute to Justice Stevens, the courts prepare to dismantle his landmark decision. [Law360]

* With all the problems in the world, state legislatures want you to know they’re all over that the Sharia law problem that literally no one has. [USA Today]

Zimbabwe’s economic woes worsen as manufacturing sector grows by just 1% – The Zimbabwean

The dismal outlook has been attributed to drought, power outages and shortage of foreign currency.

Zimbabwe used to boast a well-integrated and diversified industrial sector, but over the past two decades, suffered massive de-industrialisation and rapid informalisation.

Zimbabwe’s industrial capacity utilisation, which stood at 48% in 2018, is projected to drop to 34% in 2019.

President of the Confederation of Zimbabwe, Henry Rudzvido, says that the situation in Zimbabwe is not ideal.

“Industry at the moment is going through a number of challenges; foreign currency, power shortages, consumers not being able to afford products because of the changes that have happened. The high inflation, which has seen the capacity utilisation in industry going down, projected to go down to as low as between 34% to 40%. The situation is obviously not ideal.”

Earlier in 2019, government had projected annual growth to reach at least 2.5%, but now says there were many stumbling blocks along the way.

The Minister of Industry and Commerce, Mangaliso Ndhlovu, believes that there will be improvement however over the next five years.

“We have also encountered a number of challenges on the currency front and more specifically from accessing the foreign currency, which we so much need for our raw materials and for retooling purposes. So because of that, we have had to revise our growth projections to just about 1%. This is why I have defended our 2% annual growth rate for the next five years of the sector when others feel we are not ambitious enough. 2017- 2018 when I believe we did fairly well; we grew by just over 1.2%.”

Despite the bleak projections, the Confederations of Zimbabwe are hoping that if the country’s new currency intervention is successful, it will lead to the sector being more competitive on the export front.

It says they are aware of the current severe load shedding is putting a dent on the efforts and has appealed to both government and business to act fast.

Ruzvidzo says generators should be repaired at Hwange.

“On the energy front, we have a crisis and I think we need to take serious actions to address that; which include repairing the generators at Hwange, investment perhaps speeding up the projects Hwange seven and eight that are scheduled to come in two to three years; if there was a way of bringing them forward so that we can start generating power sooner it will help.”

President Emmerson Mnangagwa’s bid to revitalise an economy seems to be taking a nose dive, with the latest inflation figures showing that Zimbabwe might returned back to hyper-inflation.

The year-on-year inflation rate for the month of June 2019 rose sharply to 175% from 97% in May.

For the consumers, the continued increase in prices of basic commodities and the shortages in the energy sector are quickly eroding the hope for a better economy.

Zimbabwe public worker strike on the cards after pay offer rejected – The Zimbabwean

Official figures published on Monday showed annual inflation almost doubled to 175.66% in June, piling pressure on a population struggling with shortages and stirring memories of the economic chaos of a decade ago.

Hope that the economy would quickly rebound under President Emmerson Mnangagwa, who replaced the long-ruling Robert Mugabe after a November 2017 coup, has turned to frustration as the country struggles with shortages of dollars, fuel and medicines.

Leaders of government workers’ unions marched on the ministries of finance and labour in Harare on Tuesday to present their wage demands.

“Civil servants are not asking for a salary increment, but rather restoration of the value of their earnings, which fell from at least US$475 to a mere US$47 currently for the lowest paid civil servant,” read part of the workers’ petition.

The government on Tuesday offered a 50% increase to July’s pay as a cushioning allowance that will then be replaced by a monthly cost-of-living adjustment that would amount to $116,50 (US$13.20) per person per month, said the Apex Council of unions representing government workers.

Public sector workers had wanted a wage increase of at least $475 a month for the lowest paid.

The Apex Council “totally rejected” the offer and declared to government that civil servants are now severely incapacitated, it said, intimating that workers would be unable to go to work.

Leaders of the unions on Tuesday’s march stopped short of declaring a full-on strike while negotiations are continuing.

The lowest-paid government worker earns 430 Zimbabwe dollars a month, enough to buy a vehicle tyre, and faces increasing inflationary pressures. The government increased the price of fuel at the weekend and is looking to raise electricity prices in the coming weeks.

Apex Council chairwoman Cecilia Alexander earlier said the government’s austerity plans had left workers mired in poverty.

“As workers, we refuse to be sacrificed … if our petition is not received favourably, we will bring the entire civil service out to protest,” Alexander said, addressing a group of workers outside the building housing the Ministry of Finance.

The last union strike over a sharp rise in fuel prices in January turned deadly after an army crackdown on protesters left more than a dozen people dead.

($1 = 8.82 Zimbabwe dollars)

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Post published in: Featured

Forced To Wait: District Courts Grapple With Supreme Court’s Copyright Registration Ruling

Only a scant four months has passed since the Supreme Court dropped the neutron bomb known as Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC. In its immediate wake, a multitude of pending copyright actions were thrown into a state of flux and uncertainty. And accused infringers wasted no time in seizing on the holding as a basis to ask the court to throw out otherwise meritorious copyright infringement claims. The courts tasked with reviewing the requests had no choice but to comply, delaying justice and resolution each time.

Affected artists and copyright holders (remember not to conflate copyright with copyright registration, a copyright exists upon fixation and is unaffected by registration) have been forced to sit on their hands and anxiously await the Copyright Office taking action on their applications. The Copyright Office, swaying under the burden of an application onslaught, has done well to decrease response time, but the wait is still months and months. And those artists who do not have the luxury of time, due to statute of limitation issues or other concerns, have been forced to pony up $800 on top of the normal application fee, which for many artists is no small feat. In exchange for this hefty sum, the Copyright Office will stamp and return their one-page copyright form in a few weeks instead of many months.

And even when the Copyright Office has acted and approved the registration for the work at issue in a particular case, accused infringers are still attempting to exploit Fourth Estate — or as the copyright litigators in our office call it, “Forced To Wait” — in an attempt to delay, or increase the expense of, the litigation.

For example, when Fourth Estate dropped, a number of cases were pending in which the copyright holder had filed the case while their copyright registration applications were pending. At some point during the litigation, the applications matured into registrations. But, certain infringers argued, such a registration is still insufficient to support a copyright infringement action because Fourth Estate held that a registration is required before the infringement action is filed in the first place.

Courts have dealt with this in varying ways, depending on the circuit and the weight of authority therein at the time Fourth Estate was decided. In one recent decision, issued by the Central District of California in Lang Van, Inc. v. VNG Corporation, the court acknowledged the fragility of the assertion that cases should be dismissed under Fourth Estate if the registration at issue issued after the filing of the complaint. The Lang Van case involved thousands of copyrights covered by registrations that issued at various times, including after the date of the complaint’s filing.

The court noted that the leading appellate authority at the time of the filing of the case was Cosmetic Ideas, Inc. v. IAC/Interactivecorp, which embraced the much saner approach of allowing a copyright owner to file her infringement claim once she submits her registration application, materials, and fee to the Copyright Office. This decision was abrogated by Fourth Estate, but the court resisted the alleged infringer’s push to narrowly delimit the action and allowed the plaintiff to amend to add allegations detailing the obtainment of additional registrations. The court noted that it was particularly appropriate to allow an amendment in that case because the case was filed in 2014 and disallowing the requested amendment would “implicate[] potential statute of limitations and equitable tolling issues.”

The court also rejected the alleged infringer’s hollow cries of “prejudice” because it was obvious that the date the Copyright Office stamped a form did not have any impact on anything. Indeed, the copyright registration process is a simple formality and the date and other indicia in the form never have much of an impact on anything, yet much time and money is wasted ventilating the various technical registration requirements. This is one of many reasons why the call to obviate the registration requirement in its entirety is reaching a fever pitch.

In Lang Van, the court noted that the registration-before-filing “requirement wasn’t the law at the time of filing,” and rejected the opposition to the amendment request. In doing so, Judge Guilford acknowledges that “the pertinent inquiry is not how the Court would have viewed Plaintiff’s complaint in 2014 if Fourth Estate had been in effect then. Rather, it is how to impose the requirements of Fourth Estate now on a copyright claim that was properly pled when filed, when the facts supporting that claim have continued to evolve.” Given this inquiry, and the axiom that leave to amend should be freely and liberally granted, the court concludes that “[a]mendment is the clearest and fairest way to bring this case in line with new Supreme Court law.” This astute and well-written decision will provide a roadmap for the various other courts who will receive similar challenges in the weeks and months to come.


Scott Alan Burroughs, Esq. practices with Doniger / Burroughs, an art law firm based in Venice, California. He represents artists and content creators of all stripes and writes and speaks regularly on copyright issues. He can be reached at scott@copyrightLA.com, and you can follow his law firm on Instagram: @veniceartlaw.

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Jeffrey Epstein’s Legal Aftermath

Jeffrey Epstein

Joe and Elie discuss Alex Acosta’s resignation, Alan Dershowitz’s underwear, and more while covering the lawyers whose careers could end up demolished by their proximity to Jeffrey Epstein. At every step, lawyers enabled Epstein and as the SDNY brings new charges against him, a lot of lawyers are starting to face the music.

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