Ron Rotunda and I were colleagues, I guess you could say, for a while--at least, we were both on the faculty at the University of Illinois Law School. My longest (and maybe only) conversation with him was sitting at an Order of the Coif luncheon when I raised a discussion with the students at my table of the importance of progressive taxation and redistribution. Ron was also sitting at the table, and he proceeded to lecture (rather patronizingly, which was his wont) that if we would only read what "real" conservatives--i.e., libertarians-- have to say about the matter, we'd be convinced that views on taxation such as those I'd expressed were simply misguided. Seems like there was lots about personal responsibility, autonomy, and the like. Not much about vulnerability, ability to pay or the like... (see my earlier post on Martha Fineman and the illusion of equality for more on these ideas, here.)
Well, Ron just wrote an op-ed, with J. Peter Pham, in the Washington Post on President Obama's Nobel Prize. He got himself a catchy title--An Unconstitutional Nobel, WaPo (Oct. 16, 2009). As far as I can see, there's not much merit to his "unconstitutional" argument. He claims he is concerned about the constitutionality of a President accepting such an award. But prior presidents have received similar prizes--Theodore Roosevelt and Woodrow Wilson. So he brushes that precedent off with an argument that might even have made John Yoo blush: you see, he says, Roosevelt and Wilson were honored for their past actions, whereas Obama's award "is intended to affect future action" since the Committee hopes it will encourage him to reach his nuclear disarmament goal. Id. (emphasis added).
I'm not a constitutional lawyer so let me move on to his tax claims. Ron has also apparently decided he knows enough about taxation to write about the tax consequences of the Prize and the "legal" dilemma that he claims the prize has put the President in. Here's the paragraph on this issue from the op-ed:
[T]he president has indicated that he will give the prize money to charity, but that does not solve his legal problem. Giving that $1.4 million to a charity could give him a deduction that would reduce his income taxes by $500,000--not a nominal amount. Moreover, the money is not his to give away. It belongs to the United States: A federal statute provides that if the president accepts a 'tangible or intangible present' for more than a minimal value from any foreign government, the gift 'shall become the property of the United States.'
He seems to be saying that Obama must get a benefit from the prize, one way or another, and that is what makes it unconstitutional. As I understand it, he claims that the Nobel Prize Commission is a state agent and therefore the benefit from the prize is a gift of a foreign government (Norway), simply because Norwegian legislators elect the members of the commission. Sounds like he's stretching it to me, since according to the Nobel website, Alfred Nobel left the money that established the Nobel Foundation in Stockholm that funds the prizes and he also left instructions on how they were to be awarded, including instructions that the Norwegian Parliament would elect a committee of five persons to name the recipient of the Nobel Peace Prize. That doesn't sound like the committee is an arm of the state to me; instead, it seems to me that the committee is acting as the Foundation's agent. But as I said, I don't hold myself out to be a constitutional scholar.
Now, it's true that if Obama accepts the prize money and then gives it to a charity, he would both include it in income and get a deduction for it (subject to the various limitations on the charitable contribution deduction in section 170). The op-ed seems to see the deduction as a benefit, but miss the fact that the deduction just offsets the inclusion of the prize amount itself.
(Else Rotunda is simply complaining that Obama should have to pay taxes on the full $1.4 million, making the very fact of being able to deduct the charitable gift against that income a benefit that equals a foreign state gift. Even if the Nobel were a gift from a foreign state (which I doubt--see above), that is simply a nonsensical complaint to make, given the way our tax code works. Why should the President be singled out to bear the brunt of the income inclusion, without the benefit of the tax deduction as it works in the Code? )
But beyond that, section 74(b) provides another option to recipients of Nobel prizes that Rotunda completely leaves out of his analysis--they may have the Nobel committee transfer the prize instead to a designated governmental or charitable recipient (so long as the prize winner was selected without any action on his part to enter the contest and is not required to render substantial future services as a condition of receiving the prize--both conditions that Obama surely satisfies). In that case, the prize is not included in the recipient's income at all (and there is no charitable deduction for the contribution to the charity).
Ron might enjoy sitting in on some of his colleagues' tax classes at Chapman.....
[hat tip to Tax Prof and Francine Lipman at Chapman]
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