Dodging the Taxman: Why the Treasury's Anti-Abuse Regulation Is Unconstitutional

50 Pages Posted: 16 Jan 2016

See all articles by Linda Jellum

Linda Jellum

Mercer University - Walter F. George School of Law

Date Written: 2015

Abstract

To combat abusive tax shelters, the Department of the Treasury promulgated a general anti-abuse regulation applicable to all of subchapter K of the Internal Revenue Code of 1986. The Treasury targeted subchapter K because unique aspects of the partnership tax laws - including its aggregate-entity dichotomy - foster creative tax manipulation. In the anti-abuse regulation, the Treasury attempted to “codify” existing judicially-created anti-abuse doctrines, such as the business-purpose and economic-substance doctrines. Also, and more surprisingly, the Treasury directed those applying subchapter K to use a purposivist approach to interpretation and to reject textualism. In this article, I demonstrate that the Treasury exceeded both its constitutional and statutory authority. Congress neither expressly nor implicitly delegated to the Treasury the power either to direct a method of statutory interpretation or to codify the judicially developed anti-abuse doctrines. Hence, the regulation is unconstitutional. Alternatively, even if Congress validly delegated either power to the Treasury, the anti-abuse regulation exceeded the scope of any delegated power and is, thus, ultra vires.

Keywords: Federal Income Tax, Anti-abuse Regulation, Chevron, Administrative Law, textualism, Ultra Vires, Tax Shelter, Partnership Tax, Business Purpose, Economic Substance, Delegation, statutory interpretation, purposivism

JEL Classification: K23, K34

Suggested Citation

Jellum, Linda, Dodging the Taxman: Why the Treasury's Anti-Abuse Regulation Is Unconstitutional (2015). University of Miami Law Review, Vol. 70, p. 152, 2015. Available at SSRN: https://ssrn.com/abstract=2715736

Linda Jellum (Contact Author)

Mercer University - Walter F. George School of Law ( email )

1021 Georgia Ave
Macon, GA 31207-0001
United States

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