Tax Shelters, Tax Law, and Morality: Codifying Judicial Doctrines

29 Pages Posted: 30 Aug 2006


The premise of this article is that theoretical examinations of the working and interpretation of rules, such as Professor Frederick Schauer's Playing by the Rules, can illuminate and perhaps advance the debate about corporate tax shelters. In his book Schauer posits a close relationship between rules and their justifications. He further argues that rules not only foster predictability, reliance, and certainty, but also serve as devices for the allocation of power. This paper uses Schauer's work to suggest that the recent corporate tax debate has conflated concerns about the appropriate level of generality for tax shelter anti-avoidance rules with concerns about separation of power, failing to sort out the relationship between these different aspects of rules. Taking these concerns as separate parts of any analysis clarifies the issues at stake and their possible resolution. In particular, such an analysis underscores the extent to which parties to the debate disagree about the impact of such codified rules on judges, administrative agents, and tax professionals.

This paper uses the occasion of the current tax shelter debate to consider the perennial, recurring issues about rules versus standards and their codifications. This approach is necessarily incomplete. Part I of the paper summarizes Schauer's approach to rules and their justifications. Part II applies his concepts to the tax shelter debate. Part III explains that codification of broad standards raises important concerns about excessive exercise of administrative discretion, but that the administrative process in general and the tax administrative process in particular tend to operate to limit administrative discretion. The last section observes that private parties are concerned about the errors of administrative officials, while administrative officials are concerned about the errors of private parties. In the absence of empirical data about the size of the problem, resolution of this disagreement must be a matter of informed judgment, a best guess. Professor Schauer's analytical framework will enable us to ask more precise questions in making this judgment.

Suggested Citation

Aprill, Ellen P., Tax Shelters, Tax Law, and Morality: Codifying Judicial Doctrines. Southern Methodist University Law Review, Vol. 54, 2001; Loyola-LA Legal Studies Paper No. 2006-26. Available at SSRN:

Ellen P. Aprill (Contact Author)

Loyola Law School Los Angeles ( email )

919 Albany Street
Los Angeles, CA 90015-1211
United States
213-736-1157 (Phone)
213-380-3769 (Fax)

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