Foster: Reckoning With Tax Risk

William E. Foster (Arkansas; Google Scholar), Reckoning with Tax Risk, 42 Va. Tax Rev. 473 (2023):

Whether a business is engaging in a major transaction or simply conducting day-to-day operations, it must address tax questions and take positions based on available authority and its appetite for risk. With enough research, most tax questions are answerable at a high level of comfort, but many are not. This article looks at how businesses deal with the latter scenario. 

It examines how businesses manage tax risks, big and small, remote and imminent, and it reviews the evolving toolbox for those seeking to contain the downside potential when making judgment calls in the absence of direct authority. This article describes the traditional toolkit for addressing tax risk before examining the emerging market for tax insurance. It considers the benefits of growth in the tax insurance market while questioning whether the proliferation of private solutions like tax insurance could exacerbate uncertainty caused by a relative dearth of publicly available guidance and potentially undermine certain constraints on tax practitioners.