Educating a “Work Ready” Kentucky: A Closer Look at the Impact of Free Community College Legislation in Kentucky

Educating a “Work Ready” Kentucky: A Closer Look at the Impact of Free Community College Legislation in Kentucky

Bennett P. Greene, KLJ Staff Editor[1]

Recently, free community college programs have become a common topic of debate in our state legislatures. As of May 2016, four states had enacted free community college legislation, and at least 16 other states were considering similar legislation.[2] Lawmakers, Republicans and Democrats alike, have supported the movement.[3] Progressives see an opportunity to assist those who previously might have found college to be “financially out of reach.”[4] Conservatives see a way to stimulate the economy through meeting workforce demands, while keeping new costs to taxpayers nominal.[5]

At least twenty-seven community college programs have launched since 2015.[6] Many states, including Kentucky, have pending legislation or are in the process of presenting legislation that furthers the 2015 Obama White House initiative.[7] Programs of this nature certainly have benefits and costs, yet some can be more easily identified than others. Unfortunately, community colleges have extremely high drop-out rates.[8] “Just 20 percent of full-time students seeking a degree get one within three years.” [9] In some instances, these numbers may be even lower.[10] While community college enrollment increases, other training programs, including trade programs could see decreased enrollment as community college tuition becomes free. These vocations are essential to the functioning of the United States economy.[11] Increased demand and decreased supply leads to increased costs in these trade-based fields.[12]

Kentucky Legislation

In April 2016, the Kentucky Legislature passed HB626, as a part of the “Workready Kentucky” Initiative.[13] HB626 or the “Work Ready” bill intended to implement a priority program for free tuition for two-year associate’s degrees.[14] HB626 would have required students to apply for available student aid, and the state would pay the difference.[15] Additionally, Kentucky students would have to take 12 credit hours and maintain a 2.0-grade point average.[16]

Even though the bill passed in the Kentucky House of  Representatives with an 86-11 vote, Governor Matt Bevin vetoed the bill on April 27, 2016, but left the budget of $15.9 million to fund another version of this program.[17] On December 23, 2016, Governor Bevin signed an executive order to adopt a modified version of this program, called the “Work Ready Kentucky Scholarship.”[18] The Work Ready Kentucky Program, which will start with the 2016-2017 school year, allows students to pursue a two-year degree within specified workplace sectors.[19] The sectors are identified as “high-demand workforce sectors”, that are to be determined by the state and can change over time. [20] In the executive order Bevin stated the Commonwealth “is committed to increasing the currently low workforce participation rate by expanding the skilled, competitive workforce necessary to attract new businesses to the state.”[21]
Kentucky’s Work Ready program allows students to use the funding at the state’s four-year public institutions, Kentucky Community and Technical College System (KCTCS), or another other accredited college in the state.[22] The first round of scholarships (2016-2017) will include the following industries: health care, transportation/logistics, advances manufacturing, business services/IT and construction.[23] The program requires students to exhaust other available forms of student aid and will cover the remaining expenses.[24]

Kentucky’s Work Ready plan contrasts with other free community college initiatives across the country in several ways. Because the scholarships can be used at four-year colleges and universities within the state of Kentucky, students can have the costs of the first two years of a four-year program covered.[25] Additionally, Kentucky’s program allows the usage of the scholarship towards technical and vocational training through state approved programs.[26] These specifications could be Kentucky’s attempt at confining some of the risk of allocating funds to free college. Scholarships provided within certain sectors allow Kentucky to provide a trained workforce to particularized business sectors.[27] Furthermore, by selecting economically desired sectors for scholarship, students (and taxpayers) are more likely to get “a return on their investment.”[28] Students may be more likely to attend state schools with this program, creating economic growth through increased enrollment at Kentucky’s state colleges and universities.

Community colleges are not always known for their technical programs. Community colleges can often be described as either “transfer-focused” or “technical colleges.” [29][29] But, with scholarship programs like the one in Kentucky, technical education could be making a comeback.

While the Work Ready Program eliminates some of the major concerns with free community college legislation, its program also highlights several points of contention commonly discussed resulting from the implementation of free community college legislation and programming.  Kentucky’s career specific programming could deter students from entering career fields they previously would have entered, to enter a cost-free program. HB626 sparked debate among legislators concerning the grade point average (GPA) requirement. The governor, through executive order, set the GPA requirement at 2.0.[30]

Kentucky’s Work Ready program attempts provide its citizens with the education and training they need to successfully enter and stay competitive in the workforce. Free community college legislation, while sometimes controversial, has proven to be something both parties can get behind.[31] Kentucky must continue to consider its specific circumstances, bearing in mind economic and workforce preparation needs.

[1] J.D. Expected May 2018
[2] Thomas L. Harnisch & Kati Lebioda, The Promises and Pitfalls of State Free Community College Plans, AASCU (May 2016), http://www.aascu.org/policy/publications/policy-matters/freecommunitycollege.pdf.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] H.B. 626, 16 Reg. Sess. (Ky. 2016).
[8] Susan Dynarski, How to Improve Graduation Rates at Community CollegesN.Y. Times (Mar.11, 2015), http://www.nytimes.com/2015/03/12/upshot/ how-to-improve-graduation-rates-at-community-colleges.html?_r=0.
[9] Id.
[10] Id.
[11] Valerie Strauss, Why We Need Vocational TrainingWashington Post (Jun. 5, 2012), https://www.washingtonpost.com/blogs/answer-sheet/post/why-we-need-vocational-education/2012/06/04/gJQA8jHbEV_blog. html.
[12] Id.
[13] Tom Loftus, Bevin Delays Free Community College Plan, Courier Journal, (April 28, 2016), http://www.courier-journal.com/story/news/politics/ky-governor/2016/04/27/bevin-vetoes-30-parts-state-budget-bill/83614366/.
[14] Id.
[15] Joseph Gerth, Kentucky House Approves Free Community College, Courier Journal (March 17, 2016), http://www.courier-journal.com/story/news/politics/ky-legislature/2016/03/17/ky-house-approves-free-community-college/81915692/.
[16] Id.
[17] Loftus, supra note 13.
[18] Morgan Watkins, Bevin creates college scholarship program, Courier Journal (Dec. 23, 2016), http://www.courier-journal.com/story/news/politics/2016/12/23/bevin-creates-college-scholarship-program/95790654/.
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] Id.
[24] Id.
[25] Ashley A. Smith, Delayed Promise in Kentucky, Inside Higher Ed (April 29, 2016), https://www.insidehighered.com/news/2016/04/29/kentucky-will-delay-free-community-college-scholarship.
[26] Id.
[27] Watkins, supra note 18.
[28] Watkins, supra note 18.
[29] Alexandra Pannoni, Frequently Asked Questions: Community College, US News (Feb. 6, 2015, 8:00 AM), http://www.usnews.com/education/community-colleges/articles/2015/02/06/frequently-asked-questions-community-college.
[30] Watkins, supra note 18.
[31] Anne Kim, Tennessee Promise: Offering Free Community College to All Students, Republic 3.0 (June 2014), http://republic3-0.com/tennessee-promise-free-community-college-for-all-students/.

*Featured image provided by the Free Cooper Union, licensed under CC BY-SA 3.0

“Blue Lives Matter” Laws: The Extension of Hate Crime Statutes to Include Law Enforcement

“Blue Lives Matter” Laws: The Extension of Hate Crime Statutes to Include Law Enforcement

Spencer K. Gray, KLJ Online Content Editor[1]

Effective August 1, 2016, Louisiana’s statute regulating hate crimes was amended to include crimes that were committed against a victim “because of actual or perceived employment as a law enforcement officer, firefighter, or emergency medical services personnel.”[2]  The Louisiana hate crime statute as amended increases the penalty associated with the commission of specific underlying offenses when the victim of those offenses is selected because of their race, religion, sexual orientation, gender, nationality, age, or based upon their actual or perceived employment as law enforcement personnel or other emergency response staff.[3] Because Louisiana’s hate crime law extends protections that have been traditionally been reserved to subsets of the population based on immutable characteristics, such as race and sexual orientation, the law has met substantial opposition.[4]

House Bill No. 953 (The “Blue Lives Matter” Law) was first introduced to the Louisiana House of Representatives on March 4, 2016, and was signed into law by the Governor just over two months later on May 26, 2016.[5] The Bill moved rapidly through the state legislature and faced little opposition, passing the Senate vote by a margin of thirty-three yeas to three nays, and the House of Representatives by a margin of ninety-one yeas to zero nays.[6] While Louisiana’s amendment to the hate crime statute certainly was groundbreaking, legislators in several other states have already proposed similar legislation in their respective states.[7] It is yet to be seen exactly how pervasive the political support for such an amendment is, but Louisiana’s law and the subsequent proposed bills do raise the question: Should hate crime protections be extended to police officers and other first responders?

Although Louisiana House Bill No. 953 faced very little legislative opposition, public concern for the law and for other bills like it is widespread. Some fear that extending hate crime protections to police officers will shift too much power to law enforcement in a system where the balance may already weigh heavily in favor of the police.[8] Others warn that while these laws may have noble intentions, they do not translate well into practical application.[9] For example, Police Chief Calder Hebert has warned that the law may lead to someone who resists arrest being charged with a hate crime.[10] It is notable that 37 states, including Louisiana, already include harsher penalties for harming police officers in their criminal sentencing schemes.[11] Representatives of the American Civil Liberties Union have challenged “Blue Lives Matter” laws on a more fundamental level, claiming that their proponents merely “pay lip service to protecting the police without actually doing so.”[12] Andrew Hoover, spokesperson of the ACLU in Pennsylvania, has expressed his concern that the “Blue Lives Matter Laws” not only fail to fit within the traditional purpose of hate crime statutes, but also may shift the focus of hate crime protection away from sub-sets of the population who are more in need of protection such as the LGBT community.[13]

Some proponents of extending hate crime protections to police officers point to the increase in violence against police officers as justification for the legislation.[14] Whether violence towards police officers actually is increasing is not entirely clear.[15] Others in favor of the legislation argue that the dangerous nature of law enforcement employment and the sacrifices made by the officers in the line of duty warrant the legislation.[16] Police Chief Steven Stinsky argues that the legislation is needed because the present climate surrounding law enforcement has led to a decrease in applicants for police employment, and that increased protection will help attract the best candidates.[17] It is notable that while Louisiana is the first state to extend hate crime protection to law enforcement, other states preceded it in extending protections beyond immutable characteristics. A few examples of characteristics involving choice that are protected under hate crime statutes are: service in the U.S. Armed Forces;[18] involvement in civil rights or human rights activities;[19] matriculation;[20] and homelessness.[21]

The ultimate purpose of hate crime legislation should be to balance the injustice caused due to the “greater harm that is inflicted upon society when criminal acts are committed because of bigoted beliefs.”[22] Perpetrators of hate crimes cause perverse effects on their victims including emotional and physical distress, loss of self-esteem, and an inner turmoil that deters the victim from engaging in society.[23] Not only do hate crimes have a particularly drastic effect upon their immediate victim, but hate crimes also “may effectively intimidate other members of the victim’s community, leaving them feeling isolated, vulnerable and unprotected by the law.”[24] Thus, hate crimes carry with them the risk of damaging “the fabric of our society” and leading to fragmented communities.[25]

Should hate crime protections be extended to police officers and other first responders? Are police officers a sub-set of society that is in danger of being isolated, intimidated, or feeling vulnerable and unprotected by the law? Does the dangerous nature of a policeman’s job warrant hate crime protection, or should these protections be reserved for immutable characteristics such as race and sexual orientation? These questions and others like them deserve serious contemplation before any state decides to pass such important legislation.

[1] J.D. expected May 2018.
[2] La. Stat. Ann. § 14:102.2 (2016).
[3] Id.
[4] See, e.g., Zakiya Summers, ACLU of MS Statement on Blue Lives Matter Legislation, American Civil Liberties Union of Mississippi (Jan. 24, 2017), https://www.aclu-ms.org/news/2017/01/24/aclu-ms-statement-blue-lives-matter-legislation.
[5] Bill Info, 2016 Regular Session HB953 by Representative Lance Harris, https://www.legis.la.gov/legis/BillInfo.aspx?i=230171 (Last visited Feb. 23, 2017).
[6] Id.
[7]See, e.g., H.B. 14, 2017 Reg. Sess. (Ky. 2017); S.B. 2129, 132nd Leg., 2017 Reg. Sess. (Miss. 2017); S.B. 1383, 200th Gen. Assembly (Pa. 2016); S.B. 6, 11th Gen. Assembly (Tenn. 2017).
[8] Karen Shuey, Blue Lives Matter Bill Hardly Black and White, Reading Eagle (Feb. 23, 2017), https://www.bloomberglaw.com/p/0a553cf6a9606c5ef0d878d65392f9cd/e3108df5089ba755011016476a7c62b1/document/OLR2GWAIH8N4?headlineOnly=false.
[9] Julia Craven, Louisiana Police Chief Shows Why the State’s ‘Blue Lives Matter’ Law is So Dangerous, Huffington Post (Jan. 23, 2017), http://www.huffingtonpost.com/entry/blue-lives-matter-law-lousiana_us_588653dde4b0e3a7356ae3ae.
[10] Id.
[11]Karen Shuey, Blue Lives Matter Bill Hardly Black and White, Reading Eagle (Feb. 23, 2017), https://www.bloomberglaw.com/p/0a553cf6a9606c5ef0d878d65392f9cd/e3108df5089ba755011016476a7c62b1/document/OLR2GWAIH8N4?headlineOnly=false.
[12] Jimmie E. Gates, Miss. ‘Blue Lives Matter’ Bill: Targeting First Responders a Hate Crime, The Clarion Ledger (Jan. 24, 2017), http://www.usatoday.com/story/news/politics/2017/01/24/blue-lives-matter-bill-hate-crime/97018166/.
[13]Karen Shuey, Blue Lives Matter Bill Hardly Black and White, Reading Eagle (Feb. 23, 2017), https://www.bloomberglaw.com/p/0a553cf6a9606c5ef0d878d65392f9cd/e3108df5089ba755011016476a7c62b1/document/OLR2GWAIH8N4?headlineOnly=false (“Hate Crime laws were created in response to crimes against particular people that were not historically prosecuted like the lynching of black people. The historical record is completely absent of crimes against police officers not being prosecuted.”); see also Kevin Conlon, Louisiana Governor Signs ‘Blue Lives Matter’ Bill, CNN (May 27, 2016) http://www.cnn.com/2016/05/26/us/louisiana-blue-lives-matter-law/ (“Working in a profession is not a personal characteristic, and it is not immutable…[expanding hate crime statutes beyond immutable characteristics] weakens the impact of the Hate Crimes Act by adding more categories of people who are already better protected under other laws.”) (quoting Allison Padilla-Goodman).
[14] See Kathryn Casteel, Would Trump’s ‘Blue Lives Matter’ Effort Really Help Protect Police?, FiveThirtyEight (Feb. 22, 2017).
[15] See National Law Enforcement Officers Memorial Fund, Preliminary 2016 Law Enforcement Officer Fatalities Report, (Dec. 29, 2016), http://www.nleomf.org/assets/pdfs/reports/Preliminary-2016-EOY-Officer-Fatalities-Report.pdf; But see FBI, 2015 Law Enforcement Officers Killed & Assaulted. https://ucr.fbi.gov/leoka/2015/officers-assaulted/assaults_topic_page_-2015 (last visited Feb 23, 2017); FBI, Law Enforcement Officers Killed and Assaulted 1996 (1996), https://ucr.fbi.gov/leoka/1996.
[16] Karen Shuey, Blue Lives Matter Bill Hardly Black and White, Reading Eagle (Feb. 23, 2017), https://www.bloomberglaw.com/p/0a553cf6a9606c5ef0d878d65392f9cd/e3108df5089ba755011016476a7c62b1/document/OLR2GWAIH8N4?headlineOnly=false.
[17] Id.
[18] Vt. Stat. Ann. tit. 13, § 1455 (West 2014).
[19] Mont. Code Ann. § 45-5-221 (West 2009).
[20] D.C. Code Ann. § 22-3701 (West 2009).
[21] Fla. Stat. Ann. § 775.085 (West 2016).
[22] The Staff of the Syracuse Journal of Legislation & Policy, Crimes Motivated by Hatred: The Constituionality and Impact of Hate Crime Legislation in the United States. 1 Syracuse J. Legis. & Pol’y 29, 32 (1995).
[23]  Mari J. Matsuda, Public Response to Racist Speech: Considering the Victim’s Story, 87 Mich. L. Rev. 2320, 2336­–37 (1989).
[24]Hate Crime Laws, Anti-Defamation League (2012) http://www.adl.org/assets/pdf/combating-hate/Hate-Crimes-Law.pdf.
[25] Id.

*Featured image by Quinn Dombrowski, licensed under CC BY-SA 2.0.

The United States Estate Tax: Demonized by the Public on Behalf of the Few

The United States Estate Tax: Demonized by the Public on Behalf of the Few

Sadie R. McCorkle, KLJ Articles Editor[1]

The United States estate tax[2] is arguably a hated tax convention. Pejoratively referred to as a “death tax,” its detractors characterize it as the ultimate in government greed: capitalizing on death by harming mourning heirs by depriving them of property.[3] In reality, the estate tax is a “tax on your right to transfer property at your death.”[4] Donald Trump used the estate tax as a scapegoat during his presidential campaign, promising to repeal it upon his election.[5] “Double taxation,” he called it.[6] “[A] lot of families go through hell over the death tax.”[7] Supporters—both in the government[8] and among ordinary voters[9]—praised the possibility. “For too long, this tax has threated family owned businesses—including women and minority-owned business—from being passed down to their children and grandchildren,” wrote one.[10] But an analysis of the policies behind the estate tax, as well as the realities of its impact on taxpayers, suggest that much of the outrage over a ‘death tax’ is due to public misconception about who is even impacted, as well as the alternative being proposed by President Trump.

The estate tax is by no means a recent phenomenon.[11] The modern version of the tax was created in order to help fund World War I in 1916.[12] Since then, the tax’s form has fluctuated, experiencing both tax rate cuts and spikes, changes to the portion of the estate ultimately taxable, and even repeal and reinstatement.[13] Today, it supplies relatively little income to the government—less than one percent of federal revenue in 2014.[14] Though this percentage was small, however, the revenue raised by the estate tax in 2014 was $19.3 billion—certainly a significant amount of money.[15]

Two forces work against the estate tax in the public’s mind: belief that it impacts hard-won small businesses, and belief that a possibility exists it will apply to the average American when he or she becomes a one-percenter. Efforts to demonize the tax gained momentum in the 1990s, when advocates realized that “the working rich, not the idle rich, had to become the poster children of the movement.”[16] Carefully, those advocates garnered public support for “ordinary people who had worked hard all their lives to build a nest egg about to be smashed at their death . . . . [Advocates] worked hard to ensure that the public would see the estate tax as a small- and medium-sized business issue”[17] Negative public perception persists today, and repeal is a popular Republican political platform.[18]

Interestingly, despite widespread misconception about the amount and character of the populace affected—“the wealthiest 0.2%” of Americans who die every year[19]—some Americans also see the estate tax as a tax threatening who they could be.[20] The American dream has been, and continues to be, to become extremely wealthy. Americans “have underestimated the levels of inequality, overestimated their own wealth compared to others, and exaggerated their likelihood of moving up significantly and getting rich.”[21] Therefore, part of the American public resents the possibility of what they do not yet have being possibly taken away.

In 2017, the tax applies only to individual estates worth more than $5.49 million because of a lifetime exclusion (the Unified Credit Against Estate Tax).[22] When a taxpayer is married, that number is $10.98 million, reflecting both spouses’ lifetime exclusion put together.[23] This number represents an exemption, not a cliff: none of the estate under that number will ever be taxed by the estate tax.[24] When estates are worth more than the exempted amount, only the excess worth—above $5.49 million for individuals—will be taxed, not the entire estate.[25] Numerous other exemptions exist, testament to the complicated nature of the tax code in general.[26]

Estate assets over the threshold are taxed at 40%.[27] This percentage is ostensibly a high one, representing forty cents per every dollar over $5.49 million. However, the rate that is ultimately experienced differs from estate to estate, because of the amount of the estate initially exempted from any taxation whatsoever.[28] The closer the estate’s value to the threshold of the exemption, the lower the effective tax rate paid by the taxpayer.[29] The effective tax rate is the amount of tax paid compared to the amount of property potentially taxable. For example, an estate whose included assets total $6 million would be taxed at 40% on $0.51 million, paying a total of $204,000 in taxes. That estate’s effective tax rate is actually only 3.4%, despite the statutory tax rate of 40%. The average effective rate of the estate tax was 16.6% in 2013.[30] The greater the assets of the estate—up and away from the lifetime exclusion—the nearer the effective tax rate is to the statutory 40% rate. In the end, those who are extremely wealthy have a greater reason to worry about the tax than most average Americans.[31]

There are three final benefits related to the estate tax. First is the fact that a taxpayer can leave his or her entire estate to a spouse, tax free.[32] There is no cap to this benefit, ensuring that the surviving spouse is not impacted by the tax until his or her own death.[33] Second, the surviving spouse can elect to use the unused portion of his or her deceased spouse’s lifetime exclusion, tacking it on to the surviving spouse’s eventual lifetime exclusion.[34] For example, if A died and left an estate worth $1 million to her spouse, B, B could elect to use the entire $5.49 million of A’s lifetime exclusion when B dies, giving B a $10.98 million exclusion upon death.[35] Finally, those who inherit the estate are eligible for stepped-up basis in any property received.[36] Basis represents the tax system’s method of keeping track of net versus gross profits: it typically represents the amount someone has invested in a piece of property, and only the amount of income that he or she realizes and recognizes over that basis amount is taxed.[37] If, by contrast, that person were to die without selling the property, inheritors receive the property with a new basis: the fair market value at the time of the person’s death.[38] For example, if A had purchased a piece of property for $5 and died when that property was worth $10, B would receive the property with a new basis of $10. If B chose to sell the property immediately, he would do so without having to pay any tax—a tremendous benefit to the heir.

Finally, many laws have foundational policy elements, in that those who enact them want the laws to have some effect on society beyond mere compliance.[39] Tax law is no exception. As stated above, the estate tax is actually a tax levied on the power each person possesses to say where his or her property will (or will not) go after his or her death.[40] This power is a formidable one. Before death, people can influence the behavior of those around them who hope to inherit. After death, the power to dictate where property goes can be similarly influential: within limits, people can even transfer property subject to conditions placed upon the still living.[41] So few estates are even taxed, however, that most Americans enjoy the privilege of saying where their property goes upon death without any tax consequence except the huge benefit of stepped-up basis.

Additionally, the estate tax encourages wealth redistribution, because people naturally try to divest themselves of assets when faced with paying the government anything, even after their death. Despite popular thought, wealth redistribution usually describes “the flow of assets up from the poor to the rich.”[42] “[The] United States enjoys both growing poverty and a shrinking middle class.”[43] A common theme to upward wealth distribution is the idea of being wealthy itself: “the affluence of the few supposes the indigence of the many.”[44] This can also be seen in the idea of social trust: that contributing to a common pool (taxes) will contribute to social aid.[45] The United States has low social trust, and part of the reason is “the polarization in wealth and decline in social mobility.”[46] Lower social trust is reflected in the public’s general unwillingness to contribute to a common pool, based upon beliefs that their money is being taken to support the unworthy.[47] “When people don’t trust their governments and their fellow citizens, who would be excited to contribute to the financial commons—taxes?”[48] Therefore, part of the policy behind the estate tax is to encourage downward wealth distribution, by encouraging reallocation, before or after death, of potentially huge estates.[49]

A final note should be made about President Trump’s plan to repeal the estate tax: he plans on making a second change to the end-of-life tax system by eliminating stepped-up basis.[50] “[W]ith no estate tax, beneficiaries would instead pay capital gains taxes based on the original cost—the share price grandma and grandpa paid for their AT&T stock when they bought it decades ago . . . .”[51] An initial problem with this idea is the difficulty taxpayers and the IRS will have in ascertaining what the initial basis even was for many properties, especially ones held for generations.

During his campaign, President Trump also said that “the first $10 million” would be “tax-free,” although it is unclear what exactly this means.[52] “Without providing details, the Trump plan calls for retaining a step-up on assets roughly [equal to] the amount of the current [estate] tax exemption . . . .”[53] It is unknown whether this capital gain tax on estate assets would be owed at time of death, or later, when heirs sell the estate property. Practically speaking, the latter should be the case, or the tax would “force survivors to liquidate family businesses, farms and homesteads in haste”[54]—the same concerns many express about the consequences of the estate tax. However, if this were the case, taxpayers would have little incentive to divest themselves of any of their property. They could simply hold it forever, and very well might. Therefore, though the potential changes to the system are by no means clear or set in stone, President Trump’s plan might look a lot like the current system, simply with a better tax rate for the wealthy taxpayers impacted.

In conclusion, the estate tax is not quite the ravager of small- and medium-sized businesses its critics make it out to be. Public opinion of the tax has been manipulated repeatedly by preying on natural, American indignation at property being taxed upon death, but much of that public anger seems to be on behalf of the extremely wealthy—because nearly all Americans are not currently impacted by the tax. Policies behind the tax echo in property and economic interests, with strong encouragement to spend rather than pay the government—for example, by giving to charity, or giving gifts. Repeal has been a popular promise, but President Trump’s plan is not so far from the current system—just a different name for what ultimately may impact many people in the same way. Nevertheless, it is important to understand who exactly has a reason to really hate the estate tax right now: “mainly . . . the very wealthy who are passing on stock portfolios that have never been subject to capital gains taxes.”[55]

[1] J.D. expected May 2018.
[2] See generally I.R.C. ch. 11 (2012).
[3] See Glenn Kessler, Is the Estate Tax Killing Small Farms and Businesses?, Wash. Post (April 14, 2015), https://www.washingtonpost.com/news/fact-checker/wp/2015/04/14/the-facts-about-the-estate-tax-and-farmers/?utm_term=.cd1f17e7712e.
[4] Estate Tax, IRS (last updated Oct. 28, 2016), https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax.
[5] Jessica Dickler, Who Wins if Trump Repeals the Estate Tax?, CNBC (Nov. 21, 2016, 8:30 AM), http://www.cnbc.com/2016/11/21/who-wins-if-trump-repeals-the-estate-tax.html.
[6] Id.
[7] Id.
[8] See id.
[9] See, e.g., Scott Adams, Why I Switched My Endorsement from Clinton to Trump, Scott Adams’ Blog (Sept. 25, 2016 12:41 PM), http://blog.dilbert.com/post/150919416661/why-i-switched-my-endorsement-from-clinton-to.
[10] Dickler, supra note 5.
[11] Michael J. Graetz, “Death Tax” Politics, 57 B.C. L. Rev. 801, 801 (2016).
[12] Id.
[13] Id. at 801-11.
[14] Andrew Lundeen, The Estate Tax Provides Less than One Percent of Federal Revenue, Tax Found. (April 7, 2015), https://taxfoundation.org/estate-tax-provides-less-one-percent-federal-revenue/. Compare this to the individual income tax, providing 46.2% of federal revenue in 2014. Id.
[15] Id.
[16] Graetz, supra note 11, at 805.
[17] Id.
[18] Id. at 811.
[19] Id.
[20] See id. at 807.
[21] Id.
[22] Rev. Proc. 2016-55, 2016-45 I.R.B. 707. The Unified Credit Against Estate Tax applies to the estate at death, but also encompasses gifts made during the lifetime of the deceased. Kay Bell, Estate and Gift Tax Exemption Amounts for 2016-17, Bankrate http://www.bankrate.com/finance/taxes/estate-tax-and-gift-tax-amounts.aspx (last updated Jan. 10, 2017). The credit can be used during life to offset gift taxes, but the amount available to reduce the estate tax upon death will be reduced. Id.
[23] Ashlea Ebeling, IRS Announces 2017 Estate and Gift Tax Limits: The $11 Million Tax Break, Forbes (Oct. 25, 2016, 2:33 PM), http://www.forbes.com/sites/ashleaebeling/2016/10/25/irs-announces-2017-estate-and-gift-tax-limits-the-11-million-tax-break/#36ff156e43fa.
[24] Chye-Ching Huang & Chloe Cho, Ten Facts You Should Know About the Federal Estate Tax, Ctr. on Budget & Pol’y Priorities, http://www.cbpp.org/research/federal-tax/ten-facts-you-should-know-about-the-federal-estate-tax (last updated Sept. 8, 2016).
[25] Id.
[26] See id. It is worth noting that a major issue exists regarding the valuation of estates: wealthy taxpayers have been limited partnerships as holding mechanisms for their property, and transferring their interests in the partnership itself upon death. Brant J. Hellwig, Estate Tax Exposure of FLPs Under Section 2036, 38 Real Prop. Prob. & Tr. J. 169, 172-77 (2003). Because of the closely held nature of the partnership, no real market exists to establish a fair market value for the interest being transferred, allowing taxpayers to essentially say what their interest is worth. Id. They then have a claim that their estate is worth significantly less than it would be if the property had not been transferred to the limited partnership to begin with. Id.
[27] I.R.C. § 2001 (2012); see also Ebeling, supra note 23.
[28] Huang & Cho, supra note 24.
[29] Id.
[30] Id.
[31] See id.
[32] I.R.C. § 2056 (2012); see also Frequently Asked Questions on Estate Taxes, IRS, https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-estate-taxes#5 (last updated Jan. 6, 2017).
[33] See Frequently Asked Questions on Estate Taxes, supra note 32.
[34] I.R.C. § 2010(c) (2012).
[35] The exemption B can use can actually be higher than it was when A died, because the exemption goes up with inflation.
[36] I.R.C. §1014 (2012).
[37] Topic 703 – Basis of Assets, IRS, https://www.irs.gov/taxtopics/tc703.html (last updated Jan. 10, 2017).
[38] Publication 551 – Main Content, IRS, https://www.irs.gov/publications/p551/ar02.html#en_US_201612_publink1000257012 (last visited Feb. 17, 2017).
[39] See Public Policy, Black’s Law Dictionary (10th ed. 2014).
[40] Estate Tax, supra note 4.
[41] Mary Randolph, Conditional Gifts in Wills and Trusts, NOLO http://www.nolo.com/legal-encyclopedia/conditional-gifts-wills-trusts.html (last visited Feb. 17, 2017).
[42] Beverly Moran, Wealth Redistribution and the Income Tax, Howard L.J. 319, 320 (2010) (“As tax from truck drivers and teachers went to bail out American International Group (A.I.G.) and Goldman Sachs, twenty-five hedge fund managers received more in combined annual salary than the gross domestic product of Costa Rica, Iceland, Jordan, or Uruguay.”).
[43] Id. at 321.
[44] Id.
[45] Lixing Sun, How America Hates Socialism Without Knowing Why, Evonomics (June 16, 2016), http://evonomics.com/america-hates-socialism-without-knowing/.
[46] Id.
[47] Id. See also Tami Luhby, Why So Many People Hate Obamacare, CNN Money (Jan. 6, 2017 10:45 AM), http://money.cnn.com/2017/01/05/news/economy/why-people-hate-obamacare/ (“[Yet] another entitlement program that uses hard-working taxpayers’ money to help lazy, undeserving people.”).
[48] Sun, supra note 45.
[49] Moran, supra note 42 at 322.
[50] Allyson Versprille, Trump Plan Repeals Estate Tax, Scraps Capital Gain Benefit, Bloomberg BNA (Sept. 20, 2016), https://www.bna.com/trump-plan-repeals-n57982077269/.
[51] Dickler, supra note 5.
[52] Versprille, supra note 50.
[53] William Baldwin, Tax Strategies for the Trump/Ryan Plan, Forbes (Dec. 14, 2016, 9:57 AM), http://www.forbes.com/sites/baldwin/2016/12/14/tax-strategies-for-the-trumpryan-plan/#4fb8a4b03c84.
[54] Id.
[55] Kessler, supra note 3.

Mug Shots and the FOIA: Weighing the Public’s Interest in Disclosure Against the Individual’s Right to Privacy in the age of the Internet

Mug Shots and the FOIA: Weighing the Public’s Interest in Disclosure Against the Individual’s Right to Privacy in the age of the Internet

Emily T. Cecconi, KLJ Staff Editor[1]

On July 14, 2016, the U.S Court of Appeals for the Sixth Circuit, sitting en banc in Detroit Free Press v. United States Department of Justice (Free Press II), overturned a twenty-year old precedent and restricted the public’s access to mug shots of federal criminal defendants.[2] More specifically, the court concluded that individuals have a sufficient privacy interest in their booking photos to preclude their release under the Freedom of Information Act (FOIA).[3] Displeased with this dramatic 9-7 split decision, the Detroit Free Press has filed a petition with the Supreme Court urging the Justices to reverse the Sixth Circuit’s departure from earlier precedent.[4]

The FOIA is a federal statute that establishes the public’s right to obtain information from federal government agencies.[5] Since its enactment in 1966, the FOIA has served as a powerful tool used by professional reporters and journalists to investigate “what the government is up to.”[6] However, the FOIA is not without limitations. Under exemption 7(c), federal agencies are permitted to withhold disclosure of “information complied for law enforcement purposes” when producing such records “could reasonably be expected to constitute an unwarranted invasion of personal privacy.”[7] The core issue of the Sixth Circuit’s decision is whether booking photos constitute a privacy interest that is sufficient to fall under the 7(c) exception.

In 1966, in Detroit Free Press v. United States Department of Justice (Free Press I), the Sixth Circuit held that “no privacy rights are implicated” by releasing booking photographs in ongoing criminal proceedings in which the names of the defendants have already been released and the defendants have appeared in open court.[8] In 2013, after four Michigan police officers were arrested for bribery and drug conspiracy, the Detroit Free Press requested the officers’ booking photos.[9] The request was denied pursuant to exemption 7(c) of the FOIA.[10] Reversing the 1996 decision, Free Press II held that individuals have a non-trivial privacy interest in their booking photos that is sufficient to justify exemption from the FOIA.[11] Writing for the majority, Judge Cook stated that the privacy protected under exemption 7(c) encompassed “embarrassing and humiliating facts — particularly those connecting individuals to criminality.”[12] Judge Cook explained that booking photos qualified for the exception because they are “snapped in the vulnerable and embarrassing moments immediately after an individual is accused, taken into custody, and deprived of most liberties.”[13] The majority also noted that these photographs convey such a strong connotation of the defendant’s guilt that they are often excluded from criminal trials.[14]

To distinguish its decision from earlier precedent, the court also emphasized the lasting consequences that booking photos have on an individual’s life due to their publication on the internet. The majority of the court reasoned that the logic of earlier cases was no longer persuasive because, in the past, “mug shots appeared on television or in a newspaper and then, for all practical purposes, disappeared.”[15] While today, “an idle internet search reveals the same booking photo that once would have required a trip to the local library’s microfiche collection.”[16] In coming to this conclusion, the majority relied heavily on the presence of “mug-shot websites” which collect and display booking photographs from decades-old arrests and solicit payment for their removal from the internet.[17]

The dissent first concluded that there was no privacy right implicated by releasing booking photos of individuals involved in ongoing criminal proceedings. The dissent argued that booking photos do not fall within the historical notion of privacy that Congress contemplated when enacting exemption 7(c) while further noting that the FOIA was a statute “dedicated to open government.”[18] Writing for the dissent, Judge Boggs, argued that the majority failed to distinguish booking photographs from other information, such as arrests and indictments, connecting defendants to criminality that becomes public at trial.[19] Refuting the majorities reliance upon the internet, the dissent made sure to emphasize that this information may also easily turn up in an “idle internet search.”[20] Secondly, the dissent argued that the public’s interest in disclosure outweighed any privacy interest a defendant may have in a booking photo. Justice Boggs proposed several public interests such as avoiding cases of mistaken identity, revealing what populations the government prosecutes, and holding law enforcement accountable for pre-arrest uses of excessive force.[21] Allowing the department of justice to decide whether to release booking photos on a case-by-case basis would, according to Justice Boggs, allow the government to selectively shield itself from public scrutiny.[22]

The Sixth Circuit decision does not mean that federal booking photos will never be released. Instead, it leaves open the possibility that booking photos may be released on a case-by-case basis, such as when police abuse has occurred or in cases of unusual public interest.[23] However, the opinion does suggest that the conventional view in the United States that freedom of information should trump privacy concerns is not strictly the case.

[1] J.D. Expected May 2018.
[2] Josh Gerstein, Court Ends Routine Access to Federal Mugshots, Politico (July 7, 2016), http://www.politico.com/blogs/under-the-radar/2016/07/mugshots-federal-criminal-suspects-225546.
[3] Id.
[4] Petition for a Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit at 2, Detroit Free Press v. United States Department of Justice, 829 F.3d 478 (6th Cir. 2016) (No. 16-706).
[5] Erin E. Rhinehart, Sixth Circuit Overrules 20-Year-Old Precedent, Ohio State Bar Association (July 19, 2016), https://www.ohiobar.org/NewsAndPublications/News/OSBANews/Pages/Sixth-Circuit-overrules-20-year-old-precedent-Federal-booking-photos-largely-exempt-under-FOIA.aspx.
[6] Detroit Free Press v. United States Department of Justice, Harvard Law Review (Jan. 5 2017), http://harvardlawreview.org/2017/01/detroit-free-press-inc-v-united-states-department-of-justice/.
[7] 5 U.S.C. § 552 (b)(7).
[8] Detroit Free Press, Inc v. U. S. Dep’t of Justice, 73 F. 3d 93, 97 (6th Cir. 1996).
[9] Detroit Free Press, Inc v. U.S. Dep’t of Justice, 829 F.3d 478, 481 (6th Cir. 2016).
[10] Id. at 481-83.
[11] Id. at 480.
[12] Id. at 482.
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17] Id. at 482-83.
[18] Id. at 487-90.
[19] Id. at 491.
[20] Id.
[21] Id. at 492-93.
[22] Id. at 494.
[23] Gerstein, supra note 1.
*Featured image by the Taos, New Mexico Police Department

KY Nursing Home Cases Latest Battleground in Arbitration Wars

KY Nursing Home Cases Latest Battleground in Arbitration Wars

Page M. Smith, Managing Editor[1]

On February 22, 2017, the United States Supreme Court will hear Kindred Nursing Ctrs. Ltd. PShip v. Clark,[2] a case seeking to resolve whether the Federal Arbitration Act[3] (FAA) preempts a Kentucky contract rule prohibiting an agent acting under the authority of a general power of attorney from entering into an arbitration agreement on behalf of the principal in the absence of express authorization.[4]

Both the Kentucky Uniform Arbitration Act[5] and the FAA strongly favor the enforcement of arbitration agreements.[6] The validity of an arbitration agreement is a matter of state contract law.[7] But, under the FAA, if an arbitration agreement is valid, it is “irrevocable, and enforceable,”[8] unless a state law generally applicable to the “validity, revocability, and enforceability” of all contracts provides otherwise.[9]

In Extendicare Homes, Inc. v. Whisman, the families of three nursing home residents brought suits in circuit court asserting personal injury and wrongful death claims against defendant nursing home facilities.[10] But, because each patient’s agent signed an arbitration agreement contained in nursing home admission documents, the defendant nursing homes moved to compel arbitration proceedings.[11] The two power of attorney instruments at issue in Kindred Nursing Ctrs. Ltd. PShip appeared to give each resident’s agent broad authority to sign an arbitration agreement on the resident’s behalf.[12] Specifically, the instruments included language conferring the agent with authority such as: “full power for me and in my name . . . in her whole discretion, to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way;”[13] “authority to ‘draw, make, and sign . . . any and all . . . contracts, deeds or agreements;’”[14] and, the ability to “make, execute and deliver . . . contracts of every nature in relation to both real and personal property . . . .”[15] On appeal, a majority of the Kentucky Supreme Court determined that one of the three agents had authority under the express terms of the instrument to bind its principal to an arbitration agreement.[16] But, the majority ultimately held all three arbitration agreements unenforceable, emphatically explaining that an agent acting under the authority of a general power of attorney could not “bargain away”[17] his principal’s fundamental constitutional right to access courts and to trial by jury without “unambiguously expressed”[18] authority in the power of attorney instrument.[19]

The majority reasoned that its decision did not undermine the longstanding prohibition against state laws singling out arbitration agreements,[20] stating its rule “merely reflect[ed] a long-standing and well-established policy disfavoring the unknowing and involuntary relinquishment of fundamental constitutional rights regardless of the context in which they arise.”[21] Meanwhile, the strongly worded dissent and court watchers pondering why the U.S. Supreme Court decided to take up this case, assert the majority’s express-authorization requirement blatantly violated the FAA by placing heavier burdens on “agent-entered arbitration agreements” than other contracts.[22] Therefore, even with the current eight-member court, recent federal cases promoting the enforceability of arbitration agreements portend reversal of the Kentucky Supreme Court’s decision.[23]

Regardless, given the brewing distrust of arbitration agreements in nursing home contracts, which are often signed when both patients and their families are in vulnerable states of mind,[24] this case is expected to have potentially far-reaching implications on the long-term care industry and its ability to avoid the costs of litigation.[25] Furthermore, as “part of the larger arbitration war[] in American society,”[26] this case further highlights the grave misunderstanding surrounding arbitration agreements, especially when a nursing home patient is not the one signing the agreement.

[1] J.D. expected May 2018.
[2]Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2015), cert. granted, Kindred Nursing Ctrs. Ltd. P’Ship v. Clark, 137 S.Ct. 368 (2016).
[3] 9 U.S.C. § 2 (2016).
[4] Kate Howard, Petition of the Day: Kindred Nursing Centers Limited Partnership v. Clark, SCOTUSblog (Aug. 3, 2016, 11:23 pm), http://www.scotusblog.com/2016/08/petition-of-the-day-965/.
[5] Ky. Rev. Stat. Ann. § 417.050 (2017).
[6] See KPMG LLP v. Cocchi, 565 U.S. 18, 21 (2011) (“The Act [FAA] reflects an ‘emphatic federal policy in favor of arbitral dispute resolution.’”) (citations omitted); Extendicare Homes, Inc., 478 S.W.3d at 320 (Ky. 2015) (noting that public policy favors enforcement of arbitration agreements and that “doubts about the scope of issues subject to arbitration should be resolved in favor of arbitration”).
[7] Extendicare Homes, Inc., 478 S.W.3d at 320.
[8] 9 U.S.C. § 2 (2016).
[9] Extendicare Homes, Inc., 478 S.W.3d at 329-30 (quoting Perry v. Thomas, 482 U.S. 483, 493 n. 9 (1987)).
[10] Id. at 312.
[11] Id.
[12] See id. at 347-48 (Abramson, J. dissenting) (noting that the authority to contract language in both the Clark and Wellner powers of attorney fully authorized the agent’s to enter into arbitration agreements on behalf of the principal).
[13] Id. at 317.
[14] Id. at 347.
[15] Id.
[16] Id. at 327.
[17] Id. at 330.
[18] Id. at 328.
[19] Id. at 330-31.
[20] Doctor’s Assocs. v. Casarotto, 517 U.S. 681, 687 (1996).
[21] Extendicare Homes, Inc., 478 S.W.3d at 331.
[22] Id. at 349-51. See Ronald Mann, Argument Preview: Justices to Consider (Once Again) State-Court Decision Limiting Pre-Dispute Arbitration Contracts, SCOTUSblog (Feb. 15, 2017, 12:03 PM), http://www.scotusblog.com/2017/02/argument-preview-justices-consider-state-court-decision-limiting-pre-dispute-arbitration-contracts/ (discussing the similarity between Kindred Nursing Ctrs. Ltd. P’Ship and several recently decided supreme court cases involving arbitration agreements); Liz Kramer, SCOTUS Accepts Review of Kentucky Nursing Home Arbitration Case, Stinson Leonard Street LLP,  Arbitration Nation Blog (Oct. 30, 2016), http://www.lexology.com/library/detail.aspx?g=b374b933-f824-460f-8614-5e52abf04615 (expressing uncertainty regarding the U.S. Supreme Court’s decision to take this case).
[23] Mann, supra note 20.
[24] See Lisa Schencker, Nursing Homes’ Use of Binding Arbitration Comes Under Fire, Modern Healthcare (Aug. 8, 2015), http://www.modernhealthcare.com/article/20150808/MAGAZINE/308089979 (describing the challenges nursing home patients and their families face upon admitting a family member to a nursing home and the confusion surrounding the effects of signing an arbitration agreement).
[25] Matthew Loughran, Supreme Court’s Nursing Home Arbitration Case Could Have Wider Implications, Health Law Reporter, Bloomberg BNA (Feb. 10, 2017), https://www.bna.com/supreme-courts-nursing-n57982083648/.
[26] Id.
*Featured image by Ulrich Joho, licensed under CC BY-SA 2.0.

Writing on The Wall: The Enforcement of Stereotypes on the LGBTQ Community

Writing on The Wall: The Enforcement of Stereotypes on the LGBTQ Community

Kevin Spencer Pierson, KLJ Online Content Manager[1]

Title VII of the 1964 Civil Rights Act federally “prohibits employment discrimination based on race, color, religion, sex and national origin.”[2] There is a current belief among social activists that that the language of this statute, specifically the term “sex,” can and should offer protection from employment discrimination based on sexual orientation. While courts have continuously denied this interpretation of the term “sex,” a broader look at the case law surrounding Title VII and sex discrimination makes this constant denial of protection both confusing and problematic.

Courts have stated that “the ordinary and common meaning” of sex should be used when analyzing a Title VII claim.[3] Congress has continuously failed to expand the statute to include sexual orientation.[4] As a result, several opinions point to this congressional inaction as evidence that sex discrimination is not intended to encompass sexual orientation.[5] Recently this precedent has been challenged by the non-binding ruling of the Equal Employment Opportunity Commission (EEOC) in Baldwin v. Foxx.[6] While EEOC rulings are “entitled to deference only to the extent that they have power to persuade,” and courts have explicitly rejected the Baldwin analysis, the recent ruling has “created a groundswell of questions about the rationale for denying sexual orientation claims while allowing nearly indistinguishable gender non-conformity claims.”[7]

The Supreme Court has ruled that Title VII protects those who are discriminated based on not conforming to standard gender roles.[8] This sex stereotyping or gender based discrimination occurs whenever an employer assumes how a person should act based on their gender.[9] This protection extends to both sexes, regardless if it is an “effeminate” man or “masculine” woman.[10] Numerous courts have mentioned it is difficult to distinguish between claims based on sexual orientation discrimination versus those based around sex stereotyping.[11] Yet still, courts rule that Title VII claims based on sex stereotyping cannot “bootstrap” as sexual orientation discrimination claims, and while difficult, it is not impossible to separate the two.[12] Certain decisions, and the rationales justifying them, have led to “the absurd conclusion” that “the law protects effeminate men from employment discrimination, but only if they are (or are believed to be) heterosexuals.”[13] There is even a split on whether such a conclusion is insane, as courts have differed in whether the sexual orientation of the plaintiff can actually be the reason for barring a claim.[14]

Currently, those being discriminated against based on sexual orientation can only succeed with a Title VII claim by adopting a strategy similar to the plaintiff in Prowel v. Wise Bus. Forms, Inc..[15] In the case, the plaintiff had to show his harassment at his factory job was based on his feminine mannerisms, such as his love to talk “about art and interior design,” or that he “pushed the buttons on his factory equipment ‘with pizzazz.’”[16] This strategy has resulted in many successful Title VII claims of sex discrimination.[17] This sends a worrisome message: those who are gay, lesbian, or bisexual can only be protected from employment discrimination if they adhere to the common stereotypes and roles that society expects of them.[18] The LGBT community is already disproportionately stereotyped in the media, and the court system protecting only those who adhere to the status quo is problematic, to say the least.[19] In declining to accept the ruling in Baldwin, the court in Hively v. Ivy Tech Cmty. Coll., S. Bend noted the uncomfortable reality these kinds of rulings bring:

In sum, the distinction between gender non-conformity claims and sexual orientation claims has created an odd state of affairs in the law in which Title VII protects gay, lesbian, and bisexual people, but frequently only to the extent that those plaintiffs meet society’s stereotypical norms about how gay men or lesbian women look or act […]. By contrast, lesbian, gay or bisexual people who otherwise conform to gender stereotyped norms in dress and mannerisms mostly lose their claims for sex discrimination under Title VII, although why this should be true is not entirely clear.[20]

The Seventh Circuit Court pointed to the fact that they, along with the EEOC and many federal courts, did not condone discrimination “solely based on who they date, love, or marry,” but that they were limited by precedent in determining the case.[21] The court also stated that society will not be able to continue to “condone a legal structure” that allows employment discrimination based on sexual orientation, and that maybe the “writing is on the wall.”[22] However, as many courts before them, they simply added to the growing precedent of issuing judicial protections only to those LGBT citizens who adopt the roles expected of them. “Until the writing comes in the form of a Supreme Court opinion or new legislation,” courts will continue to deny non-stereotypical LGBT citizens protections from treatment that courts themselves claim to despise.[23] While the writing may be on the wall, it seems that courts will continue to ignore it, regardless of the absurd and inconsistent results.

[1] J.D. expected May 2018.
[2] 42 U.S. § 2000e-2 (West).
[3] Ulane v. E. Airlines, Inc., 742 F.2d 1081, 1085 (7th Cir. 1984).
[4] Equality Act, H.R. 3185, 114th Cong. (2015); Employment Non-Discrimination Act, H.R. 1755, 113th Cong. (2013); Employment Non-Discrimination Act, H.R. 1397, 112th Cong. (2011); Employment Non-Discrimination Act, H.R. 3017, 111th Cong. (2009).
[5] DeSantis v. Pac. Tel. & Tel. Co., 608 F.2d 327, 329 (9th Cir. 1979); Nichols v. Azteca Rest. Enterprises, Inc., 256 F.3d 864 (9th Cir. 2001); Rene v. MGM Grand Hotel, Inc., 305 F.3d 1061, 1076 (9th Cir. 2002).
[6] Baldwin v. Foxx, EEOC Appeal No. 0120133080, 2015 WL 4397641, at *5, *10 (July 16, 2015).
[7] Hinton v. Virginia Union Univ., No. 3:15CV569, 2016 WL 3922053, at *5 (E.D. Va. July 20, 2016); See Hively v. Ivy Tech Cmty. Coll., S. Bend, 830 F.3d 698 (7th Cir. 2016).
[8] Price Waterhouse v. Hopkins, 490 U.S. 228, 251 (1989) (quoting Los Angeles Dept. of Water and Power v. Manhart, 435 U.S. 702, 707, (1978)).
[9] Centola v. Potter, 183 F. Supp. 2d 403, 408 (D. Mass. 2002).
[10] Dawson v. Bumble & Bumble, 398 F.3d 211, 218 (2d Cir. 2005).
[11] See, e.g., Prowel v. Wise Bus. Forms, Inc., 579 F.3d 285, 291 (3d Cir. 2009) (“[T]he line between sexual orientation discrimination and discrimination ‘because of sex’ can be difficult to draw.”); Centola v. Potter, 183 F. Supp. 2d 403, 408 (D. Mass. 2002) (“the line between discrimination because of sexual orientation and discrimination because of sex is hardly clear.”); Hamm v. Weyauwega Milk Products, Inc., 332 F.3d 1058, 1065 (7th Cir. 2003) (“We recognize that distinguishing between failure to adhere to sex stereotypes (a sexual stereotyping claim permissible under Title VII) and discrimination based on sexual orientation (a claim not covered by Title VII) may be difficult. This is especially true in cases in which a perception of homosexuality itself may result from an impression of nonconformance with sexual stereotypes.”).
[12] Dawson v. Bumble & Bumble, 398 F.3d 211, 218 (2d Cir. 2005).
[13] Hamm, 332 F.3d at 1067 (Posner, J. concurring).
[14]  Estate of D.B. Briggs v. Thousand Islands Cent. Sch. Dist., 169 F. Supp. 3d 320, 332-33 (N.D.N.Y.2016) (“[T]he critical fact under the circumstances is the actual sexual orientation of the harassed person. If the harassment consists of homophobic slurs directed at a homosexual, then a gender-stereotyping claim by that individual is improper bootstrapping. If […] the harassment consists of homophobic slurs directed at a heterosexual, then a gender-stereotyping claim by that individual is possible.”); contra City of Belleville, 119 F.3d at 574, 575, 588 (“[W]e have never made the viability of sexual harassment claims dependent upon the sexual orientation of the harasser, and we are convinced that it would be both unwise and improper to begin doing so.”).
[15] Prowel, 579 F.3d 291-92.
[16] Id.
[17] See, e.g., Nichols v. Azteca Rest. Enter., Inc., 256 F.3d 864, 874-75 (9th Cir. 2001) (discrimination found to be based on not acting as a “man should,” which included being effeminate and not pursue female friends sexually); Reed v. S. Bend Nights, Inc., 128 F. Supp. 3d 996, 1001 (E.D. Mich. 2015) (supervisor of lesbian employee testified that employee “dressed more like a male” and her “’demeanor’ was a ‘little more mannish.’”); Heller v. Columbia Edgewater Country Club, 195 F. Supp. 2d 1212, 1217-20 (D. Or. 2002) (lesbian discriminated for dressing in male clothing and not acting like employer felt a stereotypical woman should).
[18] See generally Stereotypes, ALGBTICAL.org, (Last visited January 24, 2017), http://www.algbtical.org/2A%20STEREOTYPES.htm.
[19] See generally Ben Beaumont-Thomas, Hollywood Criticized for Negative Portrayal of LGBT Characters, The Guardian (July 23, 2014), https://www.theguardian.com/film/2014/jul/23/hollywood-criticised-lgbt-gay-characters-glaad.
[20] Hively, 830 F.3d at 711.
[21] Id. at 718.
[22] Id.
[23] Id.
*Featured image by Ludovic Bertron, licensed under CC BY 2.0

Conflicting Federal and State Laws Lead to Higher Taxes for the Legal Marijuana Market

Conflicting Federal and State Laws Lead to Higher Taxes for the Legal Marijuana Market

Lesley D. Lawson, KLJ Staff Editor[1]

State law is slowly becoming more open to not only to legalizing medical marijuana, but also to legalizing recreational marijuana.[2] Even though states are becoming increasingly liberal with regards to marijuana legalization, the federal tax code remains conservative in its ideas of taxing the businesses that sell marijuana. This makes a great barrier for sellers wanting to enter into the legal marijuana market.

The Internal Revenue Code (“IRC”), at § 280E, reduces the amount of deductions that persons trafficking in controlled substances can claim.[3] I.R.C. § 280E states that no deduction or credit is allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if the trade or business consists of trafficking in controlled substances, regardless whether if it is legal distribution under state law.[4] The Controlled Substance Act schedule I and II defines what is a controlled substance, and marijuana is included the schedule I list.[5]

I.R.C. § 280E was enacted after the tax court decision in Jeffrey Edmondson v. Commissioner in 1981. This case ruled that a taxpayer could deduct expenses relating to the taxpayers business that pertained to selling cocaine, amphetamine, and marijuana.[6] § 280E was passed in response to this tax court decision in 1982.[7] § 280E reversed the holding that was in Edmondson as it relates to the deductions for those selling illegal substances.[8] There is also an idea that § 280E was passed in relation to increase cost for those involved in illegal activity.[9] § 280E affects and applies to all business that engage in the cultivation, sale, or processing of the cannabis plant, which includes cultivators, medical dispensaries, retail stores, infused product manufactures, and oil manufacturers.[10]

A highly simplified version of the federal income tax formula is gross income minus business expenses (above-the line deductions); this equals adjusted gross income.[11] Next, if the taxpayer is an individual or partnership in which revenues flow through to the partners, the entity can make one of two choices: (1) itemize its deductions or (2) take the standard deduction. With either of these choices, the taxpayer will then subtract their personal exemptions. Lastly, the sum of this equation is taxable income, which is the amount that the taxpayer will actually pay taxes on.[12] This simple formula is sometimes referred to as the “tax ladder.”

  • 280E, in simple terms, does not allow the business to take any business deductions (above-the line deductions), which reduces their adjusted gross income.[13] § 280E does allow a deduction for cost of goods sold, however.[14] Cost of goods sold is determined by using the inventory costing regulations under § 471, unless the taxpayer is properly using non-inventory method of accounting.[15] However, this is a more complex issue that extends far beyond the ideas set forth in this blog.

Below is a simplified mathematical comparison of the tax liability of a business that sells non-controlled substances, compared to a legal business that sells marijuana.

Non- Marijuana Business Marijuana Business
Gross Revenue $1,000,000 $1,000,000
LESS: Cost of Goods Sold $300,000 $300,000
EQUALS: Gross Income $700,000 $700,000
LESS: Business Expenses $200,000 $0
EQUALS: Taxable Income $500,000 $700,000
Assuming 30% Flat Tax

Tax Liability

$150,000 $210,000
Effective Tax Rate:

(Tax Liability/ Gross Income)

21.42% 30%

From the table above, it is clear that businesses that legally sell marijuana are taxed as though they make more money than businesses that do not sell marijuana. In reality, the non-marijuana business and the marijuana business are identical in all other aspects besides what they are selling. § 280E creates an issue in the federal income tax law because it is taxing people suited similarly in different ways. This is a failure of what is referred to as horizontal equity.

  • 280E eliminates the possibility of businesses taking business expenses.[16] Examples of business expenses are employee salaries, utility costs, health insurance premiums, marketing and advertising costs, repairs and maintenance, rental fees for facilities, and payments to contractors.[17]

The tax court has somehow tried to ease this harsh rule by separating a business into a marijuana selling division and a division that does not sell marijuana.[18] In the CHAMP case, the business Californians Helping to Alleviate Medical Problems (“CHAMP”) provided multiple types of help to those in need of medical help including marijuana distributions and counseling.[19] The tax court allowed for an allocation for each different division of the business and allowed the counseling services to take business expense deductions.[20] This allocation of income and expenses helped the business by reducing their overall tax liability.

In conclusion, some may view § 280E as a good policy to increase taxes on those performing federal illegal activities, while others may view this as a conflict between what is “illegal” for state and federal law. Some people view § 280E as disincentivizing people from filing tax returns, and it penalizes people who are trying to operate within the law.[21] Despite our views of marijuana, it has been legalized for various uses in many states. The conflict between how the IRS views taxing these legal business entities and how states have legalized these businesses is something that needs to be reconsidered.

One way to resolve this issue is for businesses that cultivate medical marijuana to organize as a non-profit § 503(c)(3) organization. This would allow the business to avoid paying tax in its totality. Another way to fix this problem is for marijuana to be removed from the Controlled Substances Act or for the IRS to state that § 280E does not apply to state legal marijuana businesses. Another conservative fix would be for federal law to apply this harsh tax rule to all drugs, whether legal or not, to eliminate discrimination among sellers. It will be interesting to see how these conflicting laws will be evaluated by the new administration, and how the current law will effect new businesses as more states begin to legalize the selling and distributing of marijuana.

[1] J.D. expected May 2018.
[2] Tony Nitti, Ninth Circuit: Legal Or Not, Marijuana Facility Cannot Deduct Its Expenses, Forbes (July 10, 2015), http://www.forbes.com/sites/anthonynitti/2015/07/10/ninth-circuit-legal-or-not-marijuana-facility-cannot-deduct-its-expenses/#495e3b684303.
[3] I.R.C § 280E (1998).
[4] Id.
[5] Controlled Substances Act, 21 U.S.C. §§ 801-904 (2012).
[6] Edmondson v. Commissioner, T.C. Memo. 1981-623 (1981).
[7] Memorandum from W. Thomas McElroy, Jr. Senior Technician Reviewer to Matthew A. Houtsma (Jan. 23, 2015), https://www.irs.gov/pub/irs-wd/201504011.pdf; Tiffany Wu, The Trouble with § 280E and Marijuana Businesses, Canna Law Group (Jan. 20, 2016), http://www.cannalawblog.com/the-trouble-with-§-280e-and-marijuana-businesses/.
[8] S. REP. NO. 97-494 (Vol. I), at 309 (1982). The Senate bill was adopted in conference. CONF. REP. NO. 97-760, at 598 (1982), 1982-2 C.B. 661; Memorandum from W. Thomas McElroy, Jr. Senior Technician Reviewer to Matthew A. Houtsma (Jan. 23, 2015), https://www.irs.gov/pub/irs-wd/201504011.pdf.
[9] Tiffany Wu, The Trouble with § 280E and Marijuana Businesses, Canna Law Group (Jan. 20, 2016), http://www.cannalawblog.com/the-trouble-with-§-280e-and-marijuana-businesses/.
[10] Internal Revenue Code § 280E: Creating an Impossible Situation for Legitimate Businesses, National Cannabis Industry Association (April 2015), https://thecannabisindustry.org/uploads/2015-280E-White-Paper.pdf.
[11] I.R.C. § 162(a) (2012), (“There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. . . .”).
[12] IRC § 61 (1984); I.R.C. § 62 (2015); I.R.C. § 63 (2014).
[13] I.R.C. § 280E (1998).
[14] Tony Nitti, Ninth Circuit: Legal or Not, Marijuana Facility Cannot Deduct Its Expenses, Forbes (July 10, 2015), http://www.forbes.com/sites/anthonynitti/2015/07/10/ninth-circuit-legal-or-not-marijuana-facility-cannot-deduct-its-expenses/#495e3b684303.
[15] Memorandum from W. Thomas McElroy, Jr. Senior Technician Reviewer to Matthew A. Houtsma (Jan. 23, 2015), https://www.irs.gov/pub/irs-wd/201504011.pdf.
[16] I.R.C. § 280E (1998).
[17] Internal Revenue Code § 280E: Creating an Impossible Situation for Legitimate Businesses, National Cannabis Industry Association (April 2015), https://thecannabisindustry.org/uploads/2015-280E-White-Paper.pdf.
[18] Californians Helping to Alleviate Medical Problems Inc. v. Commissioner, 128 T.C. 173 (2007).
[19] Id.
[20] Id.
[21] Internal Revenue Code § 280E: Creating an Impossible Situation for Legitimate Businesses, National Cannabis Industry Association (April 2015), https://thecannabisindustry.org/uploads/2015-280E-White-Paper.pdf.
*Featured image by Thomas Cizauskas, licensed under CC BY-NC-ND 2.0.

Joint and Several Liability Among Co–Conspirators in Drug Conspiracies: A Sweet Forfeiture Deal for the United States Could Turn Bitter in Honeycutt v. United States

Joint and Several Liability Among Co–Conspirators in Drug Conspiracies: A Sweet Forfeiture Deal for the United States Could Turn Bitter in Honeycutt v. United States

 Jordan T. Shewmaker, KLJ Editor-in-Chief[1]

In the coming months, the United States Supreme Court will determine whether 21 U.S.C. § 853(a)(1) mandates joint and several liability among co–conspirators of the reasonably foreseeable proceeds from a drug conspiracy.[2]

Terry Honeycutt worked as a salaried employee at Brainerd Army Store owned by his brother.[3] Honeycutt, responsible for sales and inventory at the store, became concerned about “edgy looking folks” who were buying large amounts of Polar Pure, an iodine–based, water purification product.[4] Honeycutt called the Chattanooga Police Department to address his concerns and was informed that iodine is used in the production of methamphetamine and was instructed to refuse to sell iodine[5] if he felt uneasy about a transaction.[6]

However, adopting a “don’t ask, don’t tell” policy, Honeycutt and his brother continued to sell large amounts of iodine from behind the counter.[7] In fact, Brainerd Army Store sold as many as twelve bottles of Polar Pure[8] in a single transaction, enough product to purify six–thousand gallons of water.[9] In sum, Brainerd sold over 20,000 bottles of Polar Pure, generating around $269,000 in profit in a three–year period.[10] The Honeycutt brothers were the only employees that sold Polar Pure to customers.[11]

After an investigation by state and federal authorities, Honeycutt was charged with various offenses for distributing iodine when he knew or reasonably should have known the iodine was being used to manufacture methamphetamine.[12] Subsequently, Honeycutt was convicted on eleven charges for conspiring to and knowingly distributing iodine in violation of 21 U.S.C. §§ 841(c)(2), 843(a)(6), and 846.[13] Honeycutt was sentenced to concurrent terms of 60 months of imprisonment for each count but the District Court did not order any forfeiture, “reasoning in particular that, as a salaried employee, Honeycutt did not reap the proceeds of the conspiracy.”[14]

On appeal, the government argued that forfeiture should have been ordered pursuant to 28 U.S.C. § 2461(c), which states that forfeiture shall be ordered by the district court if the government includes notice of the forfeiture when charging an offense for which forfeiture is authorized.[15] However, the point of contention in Honeycutt was the statutory language of 21 U.S.C. § 853(a)(1), which states any person convicted of a violation of a federal drug offense shall forfeit to the United States “any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of such [drug conspiracy] violation.”[16]

Ultimately, the Sixth Circuit held that forfeiture should have been ordered and ruled that joint and several liability can be used to hold co–conspirators responsible for the reasonably foreseeable proceeds from a drug conspiracy.[17] The Sixth Circuit interpreted § 853(a)(1) to mandate joint and several liability among co–conspirators in a drug conspiracy based on previous interpretation of the Racketeer Influenced and Corrupt Organizations Act (RICO)[18] statute which contains forfeiture language that is virtually identical to § 853(a)(1).[19] In Honeycutt, the court reasoned that it was bound by the previous interpretation in United States v. Corrado which found that the nearly identical statutory language in RICO mandated joint and several liability among co–conspirators.[20]

However, the Sixth Circuit’s statutory interpretation in Honeycutt is contrary to the plain text of § 853(a)(1) and has been scrutinized.[21] Initially, the text of § 853(a)(1) neither directly mentions nor indirectly suggests that joint and several liability is mandated between co–conspirators in a drug conspiracy.[22][22] Furthermore, Judge Amul Thapar[23] analyzed the statutory text, logical purpose, and statutory history behind § 853(a)(1) in United States v. Solomon and determined “[t]ext, logic, and background law thus all agree: § 853 is not a joint-and-several-liability statute.”[24]Additionally, after an in–depth analysis, the D.C. Circuit held that § 853(a)(1) “appears, on its face, to embrace only property that a defendant has ‘obtained,’” and the government’s reliance on the term “indirectly” in § 853(a)(1) “reads the word obtained out of the statute.”[25]

Even so, the circuit split is lopsided, with most federal circuits holding that § 853(a)(1) does mandate joint and several liability among co–conspirators.[26] The D.C. Circuit is the only federal circuit to hold that § 853(a)(1) does not impose joint and several liability.[27]

Regardless, Honeycutt provides a ripe opportunity for the U.S. Supreme Court to resolve the circuit split on joint and several liability among co–conspirators in drug conspiracies. Persuasively, most circuits hold that § 853 mandates joint and several liability.[28] Conversely, joint and several liability is a tort law concept and is not directly authorized the text of § 853.[29]

In summation, the Supreme Court’s ruling in Honeycutt will likely affect other federal criminal forfeiture statutes that contain nearly identical statutory language, such as RICO.[30] An affirmation of joint and several liability in § 853 will force defendants that obtained little, if any, financial benefit from a conspiracy to be liable for amounts of money disproportionate to their culpability in the crime which may violate the Eighth Amendment’s prohibition against excessive fines.[31] Alternatively, overruling Honeycutt may hamper the government’s ability to seize property gained from criminal conspiracies and burden courts by requiring forfeiture calculations based on culpability in drug conspiracy cases.[32] Ironically, the result in Honeycutt v. United States is likely to be unsavory with one scenario resulting in excessive penalties for some minor co–conspirators, like Terry Honeycutt, and another scenario making it more difficult for government to demand forfeiture of property gained as a result of drug conspiracies. 

[1] J.D. Expected May 2018.
[2] United States v. Honeycutt, 816 F.3d 362 (6th Cir. 2016), reh’g en banc denied (6th Cir. May 31, 2016) and cert. granted, 85 U.S.L.W. 3287 (U.S. Dec. 9, 2016) (No. 16–142).
[3] Id. at 369.
[4] Id.
[5] Iodine is defined by the Controlled Substances Act as a “list II chemical.” 21 U.S.C. § 802(35)(I) (2012). See 21 U.S.C. § 841(c)(2) (2012).
[6] Honeycutt, 816 F.3d at 369.
[7] Id.
[8] Interestingly, Polar Pure can be purchased online easily and lists the United States Environmental Protection Agency, United States Department of Justice Drug Enforcement Administration, and National Recreation and Park Association as “partners” on its website. See Polar Pure Partners, Polar Pure, http://www.polarpurewater.com/polar-pure-challenge/ (last visited Jan. 23, 2017); see also Polar Pure Iodine Water Filter Purifier Sterilizes 2,000 Quarts, Amazon, https://www.amazon.com/Polar-Pure-Iodine-Purifier-Sterilizes/dp/B00N5AGT1Q (selling Polar Pure, crystalline iodine tablets for $19.99 per bottle) (last visited Jan. 23, 2017).
[9] Honeycutt, 816 F.3d at 369.
[10] Id.
[11] Id.
[12] Id. at 370.
[13] Id.
[14] Id.
[15] 28 U.S.C. § 2461(c) (2012); United States v. Hampton, 732 F.3d 687, 690 (6th Cir. 2013). See 21 U.S.C. § 841(c)(2) (2012).
[16] See Honeycutt, 816 F.3d at 378–82.
[17] Id. at 380–81.
[18] Compare 18 U.S.C. § 1963(a)(3) (2012) (requiring that a person violating the statute shall forfeit, “any property constituting, or derived from, any proceeds which the person obtained, directly or indirectly, from racketeering activity or unlawful debt collection in violation of § 1962.”), with 21 U.S.C. § 853(a)(1) (2012) (compelling forfeiture of “any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of such violation.”).
[19] Honeycutt, 816 F.3d at 380. See also United States v. Corrado, 227 F.3d 543, 553–55 (6th Cir. 2000) (interpreting 18 U.S.C. § 1963(a)(3) to apply joint and several liability to forfeiture proceeds arising out of a RICO conspiracy).
[20] See Corrado, 227 F.3d at 553–55.
[21] See 21 U.S.C. § 853(a)(1) (2012); Honeycutt, 816 F.3d at 381–83 (Moore, J., concurring in the judgment but advocating for en banc review of Sixth Circuit interpretation of joint and several liability in RICO and § 853(a)(1)); United States v. Solomon, Nos. 13–40–ART–(5),(7),(8), 2016 WL 6435138, at *1, *4–12 (E.D. Ky. Oct. 31, 2016) (arguing that text, logic, and background law support the finding that § 853(a)(1) does not mandate joint and several liability).
[22] 21 U.S.C. § 853(a)(1). See text supra ¶ 5 for statutory language.
[23] The Honorable Amul R. Thapar is a District Judge serving on the United States District Court for the Eastern District of Kentucky. Amul R. Thapar, District Judge, U.S. District Ct. for Eastern District of Ky., http://www.kyed.uscourts.gov/?q=judge-art (last visited Jan. 25, 2016). Judge Thapar was one of four judges interviewed by President Donald Trump for nomination to the United States Supreme Court. Jordyn Phelps, Inside the Selection Process for Trump’s Supreme Court Pick, ABC News (Feb. 1, 2017, 12:32 AM), http://abcnews.go.com/US/inside-selection-process-trumps-supreme-court-pick/story?id=45181457. See Donald J. Trump Finalizes List of Potential Supreme Court Justice Picks, Donald J. Trump for President (Sept. 23, 2016), https://www.donaldjtrump.com/press-releases/donald-j.-trump-adds-to-list-of-potential-supreme-court-justice-picks.
[24] See Solomon, 2016 WL 6435138 at *4–12.
[25] United States v. Cano–Flores, 796 F.3d 83, 91 (D.C. Cir. 2015).
[26] See, e.g., Honeycutt, 816 F.3d at 378–81 (6th Cir. 2016); United States v. Roberts, 660 F.3d 149, 165 (2d Cir. 2011); United States v. Van Nguyen, 602 F.3d 886, 904 (8th Cir. 2010); United States v. Pitt, 193 F.3d 751, 765 (3d Cir. 1999); United States v. McHan, 101 F.3d 1027, 1043 (4th Cir. 1996).
[27] Cano–Flores, 796 F.3d at 91.
[28] See, e.g., Honeycutt, 816 F.3d at 379–80 (compiling cases on joint and several liability under § 853).
[29] See 21 U.S.C. § 853(a)(1) (2012); Solomon, 2016 WL 6435138 at *4 (citing Restatement (Third) of Torts: Apportionment of Liab. § 25 (Am. Law Inst. 2000)).
[30] See 28 U.S.C. § 2461(c) (2012).
[31] See U.S. Const. amend. VIII; Solomon, 2016 WL 6435138 at *11 (Arguing that interpretation of joint and several liability in § 853 may violate the doctrine of constitutional avoidance by raising concerns about excessive fines in violation of the Eighth Amendment).
[32] See, e.g., United States v. Simmons, 154 F.3d 765, 769–70 (8th Cir. 1998) (quoting United States v. Caporale, 806 F.2d 1487, 1508 (11th Cir. 1986) (“The government is not required to prove the specific portion of proceeds for which each defendant is responsible. Such a requirement would allow defendants ‘to mask the allocation of the proceeds to avoid forfeiting them altogether.’”)

Who Stands with Standing Rock?

Who Stands with Standing Rock?

Sarah A. Quarles, KLJ Staff Editor[1]

         In recent months, the contentious Dakota Access Pipeline (“DAPL”) has captured great media attention. At the center of this controversy are The Army Corps of Engineers (“ACE”) and the Standing Rock Sioux Tribe of North and South Dakota.[2] The Dakota Access Pipeline is intended to transport crude oil from the North Dakota Bakken region to a terminus in Illinois.[3] Along its 1,172 mile-long route,[4] DAPL was until recently slated to cross the Missouri River underneath North Dakota’s Lake Oahe, which is located a half mile downstream from the Standing Rock Indian Reservation,[5] and serves as a sight of cultural and religious significance.[6] While ACE  recently denied an easement for the pipeline pending environmental impact research,[7] the issues raised by the protests remain relevant in light of reality television star Donald Trump’s issuance of an executive order to advance approval of the pipeline.[8]

For many, the graphic images of violence perpetrated against protesters alone have elicited a showing of solidarity on social media in the forms of “#NoDAPL” and “#IStandWithStandingRock”.[9] Although these scenes are horrific in their own right, it should be noted that they are born of very real legal and social tensions. By exploring the various interests at play for those who oppose DAPL, this blog post seeks to edify not only its readers, but its author as well.  I ask you to join me in examining what it means to stand with Standing Rock.

You might stand with Standing Rock because you believe that federal policy should show greater deference to tribal sovereignty. The land that is being fought for by DAPL protesters is government property by way of an imbalanced “renegotiation” of an 1868 land treaty with the Sioux tribe.[10] American history is riddled with tales of displacement of indigenous peoples from areas of cultural and spiritual significance.[11] In recognition of this unfortunate reality, the American Council on Historic Preservation, the committee that oversees historic preservation on the behalf of congress,[12] requires that federal agencies consult with Native American tribes when they attach cultural significance to a historic property, regardless of its location.[13]

ACE alleges that their duty to consult was fulfilled by requesting that Sioux leaders verify in writing a historical survey completed by ACE.[14] The Sioux assert the Army Corps’ failure to include them in the historical surveying process served to infringe their right to consultation.[15] As a result of this failure in communication, an independent historical survey conducted by leaders of the Sioux tribe revealed a burial monument that was destroyed by construction efforts the very next day.[16]

You might stand with Standing Rock because you are passionate about environmental law. The Pipeline and Hazardous Materials Safety Administration (“PHMSA”) has reported more than 3,300 incidents of leaks and ruptures at oil and gas pipelines since 2010.[17] In light of the high potential for pollution, the Standing Rock Sioux’s complaint alleges that the authorization of the pipeline was made in violation of the Clean Waters Act and the Rivers and Harbors Act.[18]

Beyond the cultural, economic, and environmental disenfranchisement of the Sioux, you might stand with Standing Rock because your concerns lie with private land ownership. The Fifth Amendment allows for the government to appropriate private land for public use and mandates the payment of just compensation.[19] Fifteen Iowan landowners plan to bring suit on the grounds that the pipeline does not constitute public use, thereby making the exercise of eminent domain illegitimate.[20]

For the reasons above, it is understandable why so many wish to stand with Standing Rock. However, as evidenced by the protracted litigation surrounding DAPL construction, it is not necessarily a court of law that will put a halt to DAPL.  Rather, it is the court of public opinion that must be swayed.[21] It is a familiar refrain that lawmakers work for the people, but the impetus to effect meaningful change is diminished when the polity accepts misinformation and apathy. So stand with Standing Rock; type “#NODAPL” until your fingers are raw; call federal and state agencies to decry the systematic disenfranchisement of indigenous peoples, the degradation of our environment, or the infringement of private property rights. But whatever you do, do so consistently and understand that you are contributing to the social climate in the hopes of effecting legal change.

[1] J.D. expected May 2018.
[2] Indian Entities Recognized and Eligible to Receive Services from the United States Bureau of Indian Affairs, 80 Fed. Reg. 1942, 1947 (Jan. 14, 2015).
[3] Energy Transfer, Overview, daplpipelinefacts.com, http://daplpipelinefacts.com/about/overview.html (last visited Nov. 27, 2016).
[4] Energy Transfer, Resources, daplpipelinefacts.com, http://www.daplpipelinefacts.com/resources/faq.html (last visited Nov. 27, 2016).
[5] Standing Rock Sioux Tribe v. Army Corps of Engineers, No. 16-1534, 2016 WL 4734356, at *6 (D.D.C. Sept. 9, 2016).
[6] Complaint for Declaratory and Injunctive Relief at 143, Standing Rock Sioux Tribe v. Army Corps of Engineers, No. 16-1534, 2016 WL 4734356, at *6 (D.D.C. Sept. 9, 2016) (No. 1:16-cv-01534).
[7] Caroline Kenny, Dakota Access Pipeline to be rerouted, CNN (Dec. 5, 2016), http://www.cnn.com/2016/12/04/politics/dakota-access-pipeline/.
[8] Athena Jones, et al, Trump Advances Controversial Oil Pipelines with Executive Action, CNN, (Jan. 24, 2017 5:57 pm), http://www.cnn.com/2017/01/24/politics/trump-keystone-xl-dakota-access-pipelines-executive-actions/.
[9] See, e.g., Alan Taylor, Water Canons and Tear Gas Used Against Dakota Access Pipeline Protestors, The Atlantic, (Nov. 21, 2016),  http://www.theatlantic.com/photo/2016/11/water-cannons-and-tear-gas-used-against-dakota-access-pipeline-protesters/508370/; Tom Cahill, Graphic photos show the shocking brutality unleashed on Standing Rock protesters, US Uncut, (Nov. 21, 2016), http://usuncut.com/resistance/standing-rock-protesters-violently-assaulted-police-graphic-photos/#IStandWithStandingRock, Twitter (Nov. 26, 2016), https://twitter.com/search?q=%23IStandWithStandingRock&src=tyah; #NoDAPL, Instagram (Nov. 26, 2016), https://www.instagram.com/explore/tags/nodapl/.
[10]  The Treaty of Fort Laramie art II, Apr. 29, 1868, 15 Stat. 635; The Manypenny Agreement ch. 72, Feb. 28, 1877, 19 Stat. 254.
[11] See generally, The Indian Removal Act, May 28, 1830, 4 Stat. 411.
[12] Advisory Council on Historic Preservation, About, http://www.achp.gov/aboutachp.html (last visited Nov. 26, 2016).
[13] National Historic Preservation Act, 54 U.S.C. § 302706 (2014).
[14] Standing Rock Sioux Tribe Oral Argument before D.C. Circuit Court of Appeals, Soundbutt (Oct. 5, 2016), https://soundbutt.com/indianz/sets/standing-rock-sioux-tribe-dc.
[15] Id.
[16] Id.
[17] See All Incidents, U.S. Dept. of Transportation Pipeline and Hazardous Materials Safety Administration, https://hip.phmsa.dot.gov/analyticsSOAP/saw.dll?Portalpages.
[18] Complaint for Declaratory and Injunctive Relief §2, 143, Standing Rock Sioux Tribe v. U.S. Army Corps of Eng’rs, No. 1:16-cv-01534 (D.D.C. July 27, 2016).
[19] U.S. Const. amend. V.
[20]Eminent Domain? Iowans Sue to Stop Dakota Access Pipeline, Say It Provides No Public Service, Democracy Now, (Sept. 7, 2016), https://www.democracynow.org/2016/9/7/iowa_landowners_sue_to_stop_dakota.
[21]See Nives Dolak and Aseem Prekash, The Dakota Pipeline Protests Should Think Big, Slate (Nov. 3, 2016, 1:34 PM), http://www.slate.com/articles/health_and_science/science/2016/11/how_the_dakota_pipeline_protesters_can_capitalize_on_their_momentum.html.
*Featured image by Joe Plette, licensed under CC BY-NC 2.0.

The North American Free Trade Agreement and Its Fate

The North American Free Trade Agreement and Its Fate

Alexander H. Risman, KLJ Staff Editor[1]

“A party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.”[2]

Throughout President Donald Trump’s campaign in the last year, he stated that he believed that the North American Free Trade Agreement (NAFTA) was “probably the worst trade deal ever agreed to, signed, in the history of the world.”[3] The President was very harsh on the trade agreement among the United States, Mexico, and Canada, and campaigned on the position that the deal needed to be renegotiated, or the United States would step away from NAFTA and start from scratch.[4] The intent of this piece is not to determine whether President Trump is correct in his beliefs over the North American Free Trade Agreement (“NAFTA”), but to determine whether he truly has the power as President to unilaterally terminate the agreement that has been in effect since 1994, and has virtually eliminated tariffs between the United States and Mexico.[5]

A person threatening to withdraw from an agreement has no leverage if the person making the threat doesn’t have the power to make that decision. The issue of exiting a trade agreement is very much an issue concerning the balance of constitutional authority. The question is whether exiting the agreement requires Congressional approval, or whether the President has the ability to enact executive action unilaterally. The question has gone unanswered. It is my belief that President Trump will be able to withdraw from NAFTA without issue due to the Republican-controlled House of Representatives and Senate, but that does not necessarily make the action permissible. Through this article, the process by which NAFTA was enacted, and the process by which a party may withdraw, will be explored.  It will also be determined who has the authority to make the decision to withdraw from the North American Free Trade Agreement.

The North American Free Trade Agreement is a comprehensive trade agreement among Canada, Mexico, and the United States.[6] The agreement sets the rules of trade and investment among the countries, and has systematically eliminated most tariff and non-tariff barriers to free trade and investment.[7] President George H. W. Bush signed the agreement on December 17, 1992, and Congress approved it on November 20, 1993.[8] In Canada and Mexico, the head of state can commit his country to negotiate a trade agreement; but in the United States, the President is required to obtain permission from Congress to negotiate.[9] President Bush was granted fast-track negotiating status in 1991.[10] Fast-track authority expedites the negotiation of trade agreements by permitting the President to negotiate the international trade treaties and submit them to Congress without congressional amendments.[11] Congress then approved NAFTA through a re-election that saw President Bill Clinton come into office, and led to much debate from interest groups and within the Democratic Party.[12] After an extreme eleven and a half hour debate, the House of Representatives approved NAFTA by a vote of 234-200, and the Senate approved the treaty by a vote of 61-38.[13]

The quote seen at the beginning of this post is Article 2205 of NAFTA, and it lays out the process by which a party to the agreement could withdraw from the agreement. The document is one-and-a-half inches thick, consisting of more than one thousand pages of text; thirty-four words are all that is required to end an agreement that has been in place for over twenty years.[14] A thirty-four-word statement to describe leaving an incredibly complex agreement leaves extreme uncertainty about who has the authority to withdraw.

To determine whether the President will have the ability to unilaterally withdraw from NAFTA, it must be explored how international law-making came to be in the United States. There are two separate methods in the United States for making international law.[15] The first is the Treaty Clause, which states that “[T]he President ‘shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two-thirds of the Senators present concur.’”[16] One of the goals of creating the Treaty Clause was that it would be expected that the Senate would be directly involved in negotiating treaties and would serve as the President’s “council of advisors.”[17] The other method of making international law is the Congressional-Executive Agreement, which requires approval by Congress, but only after the agreement has already been negotiated (“ex-post congressional-executive agreements”).[18] NAFTA is one of the most important agreements implemented under a Congressional-Executive Agreement.[19]

The area of withdrawal from treaties and Congressional-Executive Agreements is unsettled.[20] The Constitution is silent on the issue of withdrawal,[21] and the Supreme Court has decided not to answer the issue. Congress can attach conditions to an agreement’s approval, including conditions under which the President may withdraw.[22] Though Congress can place limitations on the agreement, Congress cannot prevent the President from communicating with foreign governments about the termination, as long as the termination is consistent with the terms of the agreement.[23] It is important to note here that the agreement only states that a notice of withdrawal be given to the other parties when terminating NAFTA.[24] Therefore, the President has the ability to unilaterally withdraw the United States from a Congressional-Executive Agreement, through his role of representing the United States, by communicating the withdrawal to the foreign parties (Mexico and Canada).[25] The withdrawal from an international agreement does not undo the statute on which the agreement rests, which cannot be undone without the cooperation of Congress.[26] Because of the inter-branch cooperation that is required to create the Congressional-Executive Agreement, the President is more likely to find it difficult to withdraw from the agreement unilaterally.[27] The difficulty is because Congress, as part of the legislation authorizing the agreement, commits the country to a certain course of action, even without a formalized international commitment.[28]

It is my belief that it was Congress’ intention to have a hand in the decision-making process in which NAFTA was created. The Omnibus Trade and Competiveness Act of 1988 (“OTCA”) provided the President with the authority to negotiate and enter into tariff and non-tariff trade barrier agreements.[29] OTCA also stated that the agreements negotiated under the statute could not enter into force for the United States, unless, among other things, the agreements were submitted along with an implementing bill, and the bill was enacted into law.[30] Congress made it clear that they were granting the President negotiating power on condition of their approval of the agreement. By this reading of the statute, I believe that Congress strongly intended to be part of the implementation of agreements formed under this statute, and would also want to be a part of the decision making process for withdrawal. Because the agreement acts as law and the President does not have the unilateral ability to “eliminate” a law that has been passed by Congress,[31] it is unlikely that the agreement could be withdrawn from completely by the unilateral decision of the President.

President Trump will likely be able to, as the representative in foreign matters for the United States, withdraw from NAFTA without upsetting the majority in Congress because he has a Republican-backed Congress; but constitutionally, he may not have the unilateral authority to withdraw from NAFTA. It would take an undoing of the underlying statute that grants the President negotiating power and the backing of Congress to fully withdraw from the agreement. If withdrawal were to occur, and if Congress chose to fight to remain in the agreement, it would “create the appearance that the U.S. was incapable of pursuing coherent political objective.”[32] The withdrawal from NAFTA goes well beyond just ending the long-standing trade agreement, and has deeper implications. If President Trump chooses to withdraw from NAFTA, it is important that he have the support of Congress, and a plan in place for the future of the United States’ trade policy.

[1] J.D. expected May, 2018.
[2] North American Free Trade Agreement, NAFTA Secretariat, https://www.nafta-sec-alena.org/Home/Legal-Texts/North-American-Free-Trade-Agreement?mvid=1&secid=d5a8ba07-1fb2-4f28-88d0-a8eac08611a2.
[3] Erik Sherman, NAFTA Is Here To Stay, Even Under Trump, Forbes.com (Dec. 6, 2016, 5:00 AM), http://www.forbes.com/sites/eriksherman/2016/12/06/nafta-is-here-to-stay-even-under-trump/#6e272abe560f.
[4] Id.
[5] Tami Luhby, Yes, ‘President Trump’ really could kill NAFTA – but it wouldn’t be pretty, CNN Money (July 6, 2016, 8:42 AM), http://money.cnn.com/2016/07/06/news/economy/trump-nafta/.
[6] Frequently Asked Questions, NAFTAnow.org, http://www.naftanow.org/faq_en.asp#faq-1.
[7] Id.
[8] M. Angeles Villarreal & Ian F. Fergusson, The North American Free Trade Agreement (NAFTA), Congressional Research Service (Apr. 16, 2015), at 2, https://fas.org/sgp/crs/row/R42965.pdf.
[9] Lt. Col. Chris D. McMenomy, Clinton and the Process to Pass NAFTA: Making Sausage, National War College (2002), at 2, www.dtic.mil/get-tr-doc/pdf?AD=ADA442950.
[10] Id.
[11] Id.
[12] Id. at 2-11.
[13] Id. at 11.
[14] Id. at 1.
[15] Oona A. Hathaway, Treaties’ End: The Past, Present, and Future of International Lawmaking in the United States, 117 Yale L.J. 1236, 1274 (2008) (discussing the creation and withdraw of treaties and congressional-executive agreements).
[16] Id. at 1276.
[17] Id. at 1278.
[18] Id. at 1256.
[19] Id. at 1305.
[20] Id. at 1323.
[21] Id.
[22] Id. at 1332.
[23] Id. at 1334.
[24] North American Free Trade Agreement, NAFTA Secretariat, https://www.nafta-sec-alena.org/Home/Legal-Texts/North-American-Free-Trade-Agreement?mvid=1&secid=d5a8ba07-1fb2-4f28-88d0-a8eac08611a2.
[25] Oona A. Hathawat, Treaties’ End, 117 Yale L.J. 1236, at 1334 (2008).
[26] Id. at 1334
[27] Id. at 1336.
[28] Id. at 1336.
[29] Jane M. Smith & Daniel T. Shedd & Brandon J. Murrill, Why Certain Trade Agreements Are Approved as Congressional-Executive Agreements Rather Than Treaties, Congressional Research Service (Apr. 15, 2013), at 4, https://fas.org/sgp/crs/misc/97-896.pdf.
[30] Id.
[31] Lyle Denniston, Constitution Check: Does a president have the power to repeal a federal law?, Constitution Daily (July 12, 2012), http://blog.constitutioncenter.org/2012/07/constitution-check-does-a-president-have-the-power-to-repeal-a-federal-law/.
[32] Jacob L. Shapiro, The American President’s Power over NAFTA, Geopolitical Futures (Sept. 9, 2016), https://geopoliticalfutures.com/the-american-presidents-power-over-nafta/.
*Featured Image by Jim Winstead, licensed under CC BY 2.0.