Section of Taxation Publications
  VOL. 59
NO. 4
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Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.

The State of Integration in a Partial Integration State
Joshua Mishkin

Consultant, IBI Group, Washington, DC; University of Rochester, B.A., 1999; Ner Israel Rabbinical College, M.A., 2003; University of Maryland School of Law, J.D., 2005. The author wishes to thank Professors Robert Keller and Richard Booth of the University of Maryland School of Law for their assistance and guidance and Professor Reuven Avi-Yonah of the University of Michigan School of Law for his encouragement and advice in bringing this article to press.


Questions as to choice of entity, capital structure, and investor preference often revolve around tax consequences. Stockholders’ derivative actions have been brought against the management of public companies for failure to maximize tax benefits. 1 In the words of Professor Avi-Yonah: “Many of the best educated and most talented tax lawyers in this country devote their careers to the intricacies of Subchapter C.” 2 Professor Avi-Yonah also says, “[S]ome of America’s best minds scour the Code for ways to reduce corporate tax liabilities by various transactions and then sell these transactions for high fees to corporate clients.” 3 So focused is corporate America on taxation that the question whether the tax tail is wagging the dog has itself become a field of enormous academic study.

This Article discusses the relationship of the corporate tax regime and corporate finance. Part II reviews integration: it surveys the economic effects of dividend taxation under a two tiered system and discusses the integration of corporate and personal income taxation into a single regime. Part III considers recent moves towards integration in the United States under President Bush’s Fiscal Year 2004 Proposals (“2004 Proposals”) 4 and the legislation it developed into: the Jobs and Growth Tax Relief Reconciliation Act of 2003 (“Jobs Act”). 5 It distinguishes the integration components found in the 2004 Proposals and the Jobs Act from their tax cut context, presents the models put forth in the 2004 Proposals and the Jobs Act, and discusses separately their theoretical and economic applications. Finally, the Article concludes by noting that both corporations and individuals seem to have acted in consonance with integrationist predictions following the Jobs Act, evidenced by a marked increase in dividend distributions. The Article refrains from passing premature judgment on the soundness of the 2004 Proposals or their long run impact on the economy, and notes that further scholarship is needed.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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