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This study examines whether Revenue Procedure 2003-61 is an improvement over Revenue Procedure 2000-15, in the areas of taxpayers’ expectations for IRS equitable relief decisions and gender-related in-group bias. The survey instrument includes a vignette adapted from a judicial decision. The results show that Rev. Proc. 2003-61 does improve upon Rev. Proc. 2000-15. Furthermore, taxpayers perceive different expectations of what the IRS should do and what the IRS would do in equitable relief decision making. Also, gender-related in-group biases are found to be present for both genders. Tax policy implications regarding equitable relief are discussed.

Ethical issues and moral reasoning are important in the tax policy context because shared moral values create good societies (Paul et al., 2006). This study of the equitable relief subset of the innocent spouse rules is a good example of Congressional and IRS policy that has been substantially reformed twice (and continues to be reassessed) to create tax law that effectively treats innocent spouses equitably (Fleischman & Shen, 1999). The purpose of this study was to evaluate the degree to which subjects' moral reasoning, using the first two steps of Rest's (1986) ethical reasoning model, is related to perceived moral intensity (Jones, 1991) in several tax-based equitable relief situations. Integrative social contracts theory provides the study's theoretical lens.

Subjects evaluated a mailed-questionnaire containing two separate equitable relief scenarios about a spouse who was unaware of her husband's tax evasion – one scenario included verbal abuse and the other scenario contained no such abuse. The survey also contained a variety of ethics and attitudinal measures used to measure the study's focal variables. The results support the a priori hypotheses that moral intensity is positively related to recognition of an ethical issue, judgment that the ethical scenario is unethical, and judgment to grant equitable relief. In addition, the scenario containing emotional abuse was associated with increased levels of moral intensity as compared to the scenario that did not contain abuse. The paper concludes with a discussion of both professional and public policy implications.

This paper examines the decision criteria used by federal courts to adjudicate equitable innocent-spouse relief, when such relief has previously been denied by the Internal Revenue Service (IRS). Empirical logit/probit regression is used, rather than traditional legal analysis. Specifically, we determine which of the equitable-relief criteria detailed in the innocent-spouse rules did affect judicial decisions during our sample period. We also determine the relative importance of the factors. Using these data, taxpayers and their advisors can better decide whether to pursue further litigation, and how best to tailor the pertinent arguments.

Married couples receive tax benefits such as favorable tax rates, higher exclusions, higher phase-outs, and combined deductions. However, joint and several tax liability is a major issue facing these taxpayers. The term innocent spouse relief, within the Internal Revenue Code, is a direct result of one spouse failing to satisfy the joint liability for the married couple. Since both individuals are jointly and severally liable for the combined liability, the innocent spouse may be responsible for the liability in whole or in part. Our study examines this highly litigated arena of innocent spouse relief. To assist in this area of taxation, the Internal Revenue Service has provided taxpayers and tax practitioners with guidance. Revenue Procedure 2003-61 (2003-2 CB 296) outlines factors useful in determining whether innocent spouse relief should be granted. Additionally, this study creates a predictive model containing only three significant factors (economic hardship, knowledge/reason, significant benefit) capable of predicting with approximately 89% accuracy. These same three variables are significant after running multiple regression with p-values of 0.002 (economic hardship), 0.000 (knowledge/reason to know), and 0.001 (significant benefit). These factors provide valuable insight to practitioners when advising clients on challenging or accepting the Internal Revenue Service's decision. Additionally, abuse is marginally significant in the regression model. Also, judge gender and political affiliation are analyzed. However, the gender of the judge and political affiliation fail to be statistically significant using the chi-square test and regression model.

The Federal Trade Commission (FTC) has initiated policies and legal challenges that have shaped the evolution of competition in healthcare. This chapter discusses not only discusses the current matters in healthcare competition, but it also gives a history of past issues faced by the FTC and the approaches used to resolve them. These FTC actions range from challenges to hospital mergers to preventing “reverse payments” from patent holders to generic entrants in pharmaceuticals. Ultimately the healthcare industry faces many unique regulatory and competitive aspects that, while challenging, do not require special rules.

This chapter presents a seven-part case developed for use in a graduate-level tax planning class. The case is organized in a taxpayer/business “life-cycle” approach. Over the semester the case follows a married couple as they consider a number of investments, start a business, and expand the business. As the case progresses, the couple faces increasingly complex tax and business issues. The couple eventually winds down their involvement in the business and begins to plan for their retirement years. This chapter also provides a review of behavioral tax research published in the top accounting journals over the period 2004–2013. The chapter concludes with a discussion of how the case could be adapted by behavioral tax researchers in their research programs and perhaps by accounting firms in their training programs.

Worker classification continues to be a highly litigated area of taxation. That is, the status of a worker as an employee or independent contractor remains a topic closely scrutinized by the Internal Revenue Service. This study examines factors that the judiciary deems relevant in ruling whether a worker is an employee or independent contractor. A backward stepwise logistic regression model is implemented to categorize the factors that best predict the court’s decision on whether a worker is either an employee or independent contractor pursuant to the factors in Revenue Ruling 87-41 (1987-1 CB 296), judge gender, and political affiliation. The results indicate three factors (supervision/instructions, continuing relationship, and the right to discharge) are capable of accurately predicting 93 percent of the decisions made by the US Tax Court. Other findings support notable statistical differences between male and female judges rendering decisions and reaching conclusions. Also, there is a statistically significant difference based on the type of industry. Political affiliation appears to have no significant impact on judicial rulings.

In recent years, the European Commission and various Member States, citing increasingly integrated markets and higher levels of cross-border activity within the European Union (“E.U.”), have called for the adoption of effective collective redress mechanisms for victims of violations of E.U. law. Although many Member States have already adopted collective action procedures under national law, these procedures have been ineffective in stimulating private enforcement of E.U. law and are often divergent in their approach to consolidating claims. E.U. lawmakers, after a lengthy period of investigation and study, have identified a set of guiding principles for the Member States to use in enacting new collective redress procedures within their national systems. The studies and papers solicited from the public during the Commission’s deliberations are explicit in their rejection of the U.S.-style opt-out class action mechanism. In their effort to avoid similarly calamitous results, European lawmakers propose that Member States adopt “opt-in” class actions, while rejecting many of the economic incentives that some believe lead to filing nonmeritorious claims, such as punitive damages and contingency fee arrangements. The European proposal is unlikely in the authors’ view to stimulate private enforcement of European law or increase victims’ access to compensation, given the flaws inherent in the opt-in class action device. Instead of looking to adopt a “U.S.-lite” approach to victim redress which is fundamentally incompatible with many judicial systems within the E.U., the authors propose that Europeans consider adopting a regulatory administered compensation system, modeled after such U.S. examples as the Securities and Exchange Commission Fair Funds and the September 11th Victim Compensation Fund. The authors also propose that regulatory administered funds can provide more effective and efficient restitution to victims than traditional litigation.

Moral intensity is the degree of feeling we have about the consequences of moral choices, similar, for example, to those perceived for crimes, from petty larceny to murder. Moral intensity is thought to increase moral sensitivity and judgment. Because the accounting professions require members to respond to accounting fraud with more sensitivity and intensity, we examine this response in 220 professional accountants (mostly Certified Public Accountants) under a controlled experiment using two different cases. We examine the first three parts of the Rest (1986) model including ethical evaluation, judgment, and intention to act. We measure moral intensity in the accountant’s perception of overall harm and societal pressure. As in prior research, we find that the degree of moral intensity may be contextual. We find that the ethical evaluations may become affected by perceived overall harm, and whistleblowing intentions by perceived societal pressure. However, in both cases, the professional’s judgments are most affected by moral intensity. Consistent with prior research, whistleblowing intentions may involve many other mitigating variables, such as audit reporting or non-audit reporting limited by codes of conduct. These findings relate to the increasing attention paid by the SEC to finding accounting fraud.

This manuscript makes three important contributions to the existing literature. First, there are few studies in this area and Jones (1991) identifies that moral intensity is issue contingent; therefore, replication studies using different scenarios are needed. Second, Bailey, Scott, and Thoma (2010) have suggested that accounting ethics research has focused too narrowly on Component II of Rest’s Four-Component Model. None of the previous studies looked at all three steps in Rest’s Model; therefore, our manuscript provides an important contribution over the other previous studies. Third, our sample uses professionals and not students as surrogates for professionals.

In the last decades, many of the most talented and promising young graduates in the developed economies have joined the financial industry. Simultaneously, ill-designed incentives’ schemes have favored the development of a culture in which excessive greed, free-riders’ behavior, unreasonable appetite for risk, and short-term decision making have endangered the economy and, potentially, have laid the foundations for financial, economic, social, and environmental crises.

In this chapter, we review current challenges in the financial industry from the lens of human and social capital. We examine some of the factors that allowed unethical behavior and a short-term financial focus in the financial sector, examining how compensation and an extremely competitive culture became key elements that favored greedy and manipulative behavior and ultimately generated socially harmful human and social capital in the financial sector. Finally, we discuss the emergence of a number of game-changers (namely, Brexit, FinTech, the growing relevance of ethical standards, and the increasing participation of women and millennials in the industry) that might represent potential promotors of change and help restructure and reshape the financial industry.