Thursday, January 20, 2022
Jacob D. Nielsen (J.D. & LL.M. (Tax) 2021, Boston University), Note, Textualism without Tax Shelters: A Proposal for Integrating Judicial Anti-Abuse Doctrines with Textualism, 101 B.U. L. Rev. 1471 (2021):
The line between legitimate tax planning and abusive tax positions, while clear in many instances, produces a significant amount of controversy. Judicial scrutiny of close cases has led to the development of a body of loosely related anti-abuse doctrines designed to separate the wheat from the chaff. However, textualist judges have increasingly rejected or limited the use of anti-abuse doctrines out of a concern that such doctrines undermine taxpayer reliance on the law. Critics contend that by rejecting anti-abuse doctrines, these textualist judges legitimate abusive tax shelters and deprive the judiciary of essential tools for curbing abuse. This Note responds to textualists and their critics alike by arguing that textualism is not incompatible with judicial anti-abuse doctrines. After surveying major landmarks in the historical development of the legal system’s treatment of tax abuse and considering the Sixth Circuit’s approach to the issue, this Note develops an account of judicial anti-abuse doctrines as textually sensitive aids to statutory interpretation.
This Note proposes an account of judicial anti-abuse doctrines that does not give judges free rein to impose their policy judgments on a statute, but rather provides an opportunity to consider whether a taxpayer’s use of the Code respects the text—not only at the level of each individual provision but also when considering the interaction of multiple provisions. Textualist judges are not powerless to close statutory loopholes. They should employ judicial anti-abuse doctrines to prevent parties from using a combination of laws to achieve results that conflict with the provision’s “relation to the entire act of which the statute is a part.” Or in the Sixth Circuit’s words, when taxpayers combine provisions of the Code in ways that are inconsistent with related statutory provisions and with the relation of the statute to the Code as a whole, courts should use judicial anti-abuse doctrines to characterize the transaction in a manner that respects both “the written word [of the Code] and the economic realities of this transaction.”