Wednesday, August 16, 2023
Jon Endean (NYU), 'For Tax Purposes': The Vital Role Tax Incongruities Play in Shaping the Tax Law, 78 Tax L. Rev. __ (2023):
To the outside observer, the tax law often appears as an impenetrable morass of technical jargon. One aspect of this tax jargon are the many terms that have a tax-specific meaning that differ from how the terms are used outside of the tax law, or what this Article calls “tax incongruities.”
But rather than being merely a source of confusion for the taxpayer, this Article argues that tax incongruities actually play an important role in maintaining the benefits that come with the adoption of a pre-existing term by the tax law while also addressing specific challenges associated with simply using the non-tax definition of such a term. Namely, while the use of terms with non-tax analogs in the tax law is both efficient and reduces administrative complexity, how such terms are defined for non-tax purposes can present opportunities for abuse and lead to consequences inconsistent with the goals and functions of the tax system. Injecting incongruity into these terms, however, preserves the benefit of using terms with non-tax analogs while also ensuring that any given tax policy goals are satisfied. Using this framework for understanding tax incongruities, this Article then proposes a set of guiding principles for how policymakers can best use tax incongruities in the process of drafting statutes and regulations. This Article concludes by applying these guiding principles to several case studies: how the term “partnership” is defined for tax purposes, how the tax law should approach the term “employee” amidst non-tax policy discussions regarding the distinction between employees and independent contractors, and how statutes and regulations should be drafted to address emerging phenomena such as cryptocurrency.