Wednesday, November 6, 2013
Emily Cauble (DePaul) presents Safe Harbors in Tax Law at Boston College today as part of its Tax Policy Workshop Series hosted by James Repetti and Diane Ring and funded by the Paulus Endowment for Tax Programs:
harbors pervade tax law. This Article begins to fashion an account of
why they exist by discussing the functional purposes that safe harbors
might serve. Studying the reasons for adopting safe harbors has
important practical implications. For instance, analyzing the functions
of safe harbors can shed light on the use of other rule-standard hybrids
such as rebuttable or irrebuttable presumptions. In addition, this
Article provides direction to lawmakers considering the enactment or
redesign of a particular safe harbor.
safe harbor is a provision assuring certain taxpayers that they will
receive favorable tax treatment when they comply with the safe harbor’s
generally clear requirements. Thus, a safe harbor has rule-like
qualities. At the same time, a safe harbor does not necessarily deprive
taxpayers of favorable treatment merely because they fail to comply. An
underlying standard will determine the treatment of such taxpayers.
Thus, a safe harbor has standard-like qualities. Given its rule-like and
standard-like features, a safe harbor is a rule-standard hybrid. Thus,
in order to analyze the functional purposes served by safe harbors, this
Article compares and contrasts safe harbors with standards and rules.
First, this Article discusses whether tax law should contain safe
harbors as opposed to standards. Briefly, the answer to this first
question is that safe harbors provide additional certainty so tax law
should contain safe harbors to the extent that certainty is desirable.
Next, this Article discusses whether safe harbors have any advantages
over rules and suggests three potential advantages. First, safe harbors
may be fairer than rules because they are less arbitrary. Second, safe
harbors are more forgiving than rules, less likely than rules to trap
unwary taxpayers, and, consequently, better suited than rules to serve
the goal of fairness. Third, compared to rules or, for that matter, to
standards, safe harbors may sometimes be less likely to distort
taxpayers’ decision making. Thus, in some cases, a safe harbor, a hybrid
of a rule and a standard, can possess the best characteristics of each.