Textualism and Tax Shelters

A substantial debate about the approaches employed by courts to interpret statutes and regulations has developed during the last decade. Some have argued that the search for a statute\u27s meaning and purpose should focus on the text, itself, and should not include consulting legislative history. In contrast, others have argued that it is difficult to determine the meaning of a statute without consulting legislative history to determine the legislature\u27s purpose for the statute. The debate about the appropriate method for interpreting statutes underlies a crisis in the administration of tax law. The recent proliferation of tax shelters has at least in part been facilitated by the ascendancy of textualism. Our conversations with practitioners indicate that tax advisors have become more aggressive in structuring transactions that comply with the form of the tax statutes even though the transactions may be highly questionable in light of the legislation\u27s history or underlying purpose. The result has been a cottage industry where investment banks and accounting firms market tax shelters that triumph in form, but not substance, at the expense of the fisc. Because most tax shelter activity is hidden, it is difficult to ascertain its revenue impact. It is estimated that tax shelters reduced tax revenues by approximately $10 to$24 billion in 1999. In addition, practitioners and government officials worry that the use of shelters is eroding confidence in the tax system. Although the majority of courts have not adopted textualism, the legal community\u27s acceptance of textualism as a plausible method of interpretation has dramatically affected the practice of tax law. Taxpayers often invest in tax shelters based upon the opinion of counsel assessing the probability that the desired tax results from the transaction, if challenged, will be sustained. These opinion letters are essential to attract investors because they protect taxpayers from various penalties that otherwise might be imposed if the Service successfully challenges the transaction. Under the textualist approach, it is much easier for an attorney to write a favorable opinion for transactions that are designed to comply with the letter of the law, but not its spirit, for at least two reasons. First, the attorney is permitted to ignore, or at least downplay, any legislative history that would argue against, or undercut, the desired tax results. Second, under a textualist approach, it is arguable that various well-accepted judicial doctrines, such as the business purpose doctrine, are suspect. At the extreme, a textualist might argue that these doctrines are the product of judicial activism and either should no longer be followed, or at a minimum should not be extended into new areas of the law. Tax shelter promoters have exploited the move towards textualism by designing transactions that comply with the letter of the law, but that generate results clearly never contemplated by Congress or the Treasury. Some promoters believe that the more detailed and complex the underlying law is, the more likely it is that a transaction complying with the letter of the law will be respected. One area in tax law that is particularly detailed and complex is Subchapter K, the partnership tax provisions. Subchapter K also has several special rules not otherwise available in the Internal Revenue Code. It is, therefore, not surprising that Subchapter K has become the vehicle of choice for a wide variety of abusive transactions. Transactions are designed so that a partnership is created or joined just to take advantage of these special rules (reverse engineered transactions). In an attempt to stem the tide, the IRS adopted a general anti-abuse rule for Subchapter K. This rule requires that the provisions of Subchapter K be interpreted consistent with the intent of subchapter K. Oversimplified, the regulations assert that there is an overall legislative intent underlying Subchapter K, and if a partnership is formed or availed of in connection with a transaction to substantially reduce federal taxes in a manner inconsistent with this intent, the transaction may be recast. The regulations make clear that for a transaction to pass muster, doctrines that originated with the judiciary, i.e., the requirements of a business purpose, economic substance, and substance over form, must be taken into account. In addition, the regulations require that the purposivist method of statutory interpretation be used to interpret Subchapter K. The anti-abuse regulations caused an unprecedented furor within the tax bar. They have been severely criticized by academics and practitioners alike on a variety of bases, the most damning of which is that Treasury lacked the authority to promulgate the rules and that therefore they are not valid. Indeed, it is fair to say that there is a general consensus that the partnership anti-abuse regulations are an extreme example of administrative overreaching. We disagree. Although we do not endorse all the policy choices in the anti-abuse regulations, we believe that they are not only valid, but suggest a way in which transactions that are the product of reverse engineering can and should be attacked, both within and without Subchapter K. Initially, it may seem inappropriate for Treasury to instruct the judiciary on how and when the courts should apply judicial doctrines and what tools they should use in interpreting statutes. After all, as every law student knows, [i]t is emphatically the province and duty of the judicial department to say what the law is. Marbury v. Madison, 5 U.S. 137, 177 (1803). Where does Treasury get the authority to instruct a court as to which method of interpretation it should use to interpret a tax statute? On reflection, however, we believe that Treasury acted well within its authority under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) and was simply filling a gap in the statute left by Congress. The judicial doctrines that are implicit in the intent of subchapter K were well-developed when Subchapter K was first enacted in 1954 and continue to be applied in a variety of contexts by the courts. At that time, however, it was not clear exactly how and when these doctrines should be applied in the context of Subchapter K. There is little doubt Congress could have clarified this issue by statute. It could have insisted that these doctrines (or variations thereof) be applied with full force, or it could have forbidden their application altogether. Congress, however, chose not to address this issue, leaving a gap in the statute. Under current administrative law principles, this silence constitutes an implied delegation of authority by Congress to Treasury to fill that gap. In addition to being valid, we also believe that, as a general proposition, it is sound tax policy to use broad standards to administer the tax law. Historically this had been accomplished by the courts through the use of these judicial doctrines. Although the ascendancy of textualism cast doubt on the continuing viability of the doctrines, Treasury eliminated that doubt by promulgating these regulations (if valid), and requiring lawyers and courts to consider the intent of subchapter K. This approach allows the IRS to use broad standards to administer the tax law in place of a collection of narrow rules that must be constantly changed in a hopeless attempt to keep pace with the latest tax gimmick. To assure proper consideration of these doctrines by tax advisors, we recommend that the IRS amend its standards for practice to require advisors opining on the validity of tax shelters to apply the doctrines to the specific facts of the tax shelter in their opinion letter

Amorphous and Polycrystalline Photoconductors for Direct Conversion Flat Panel X-Ray Image Sensors

In the last ten to fifteen years there has been much research in using amorphous and polycrystalline semiconductors as x-ray photoconductors in various x-ray image sensor applications, most notably in flat panel x-ray imagers (FPXIs). We first outline the essential requirements for an ideal large area photoconductor for use in a FPXI, and discuss how some of the current amorphous and polycrystalline semiconductors fulfill these requirements. At present, only stabilized amorphous selenium (doped and alloyed a-Se) has been commercialized, and FPXIs based on a-Se are particularly suitable for mammography, operating at the ideal limit of high detective quantum efficiency (DQE). Further, these FPXIs can also be used in real-time, and have already been used in such applications as tomosynthesis. We discuss some of the important attributes of amorphous and polycrystalline x-ray photoconductors such as their large area deposition ability, charge collection efficiency, x-ray sensitivity, DQE, modulation transfer function (MTF) and the importance of the dark current. We show the importance of charge trapping in limiting not only the sensitivity but also the resolution of these detectors. Limitations on the maximum acceptable dark current and the corresponding charge collection efficiency jointly impose a practical constraint that many photoconductors fail to satisfy. We discuss the case of a-Se in which the dark current was brought down by three orders of magnitude by the use of special blocking layers to satisfy the dark current constraint. There are also a number of polycrystalline photoconductors, HgI2 and PbO being good examples, that show potential for commercialization in the same way that multilayer stabilized a-Se x-ray photoconductors were developed for commercial applications. We highlight the unique nature of avalanche multiplication in a-Se and how it has led to the development of the commercial HARP video-tube. An all solid state version of the HARP has been recently demonstrated with excellent avalanche gains; the latter is expected to lead to a number of novel imaging device applications that would be quantum noise limited. While passive pixel sensors use one TFT (thin film transistor) as a switch at the pixel, active pixel sensors (APSs) have two or more transistors and provide gain at the pixel level. The advantages of APS based x-ray imagers are also discussed with examples

Minimally invasive surgery and cancer: controversies part 1

Perhaps there is no more important issue in the care of surgical patients than the appropriate use of minimally invasive surgery (MIS) for patients with cancer. Important advances in surgical technique have an impact on early perioperative morbidity, length of hospital stay, pain management, and quality of life issues, as clearly proved with MIS. However, for oncology patients, historically, the most important clinical questions have been answered in the context of prospective randomized trials. Important considerations for MIS and cancer have been addressed, such as what are the important immunologic consequences of MIS versus open surgery and what is the role of laparoscopy in the staging of gastrointestinal cancers? This review article discusses many of the key controversies in the minimally invasive treatment of cancer using the pro–con debate format

Heterogeneity of Microglial Activation in the Innate Immune Response in the Brain

The immune response in the brain has been widely investigated and while many studies have focused on the proinflammatory cytotoxic response, the brain’s innate immune system demonstrates significant heterogeneity. Microglia, like other tissue macrophages, participate in repair and resolution processes after infection or injury to restore normal tissue homeostasis. This review examines the mechanisms that lead to reduction of self-toxicity and to repair and restructuring of the damaged extracellular matrix in the brain. Part of the resolution process involves switching macrophage functional activation to include reduction of proinflammatory mediators, increased production and release of anti-inflammatory cytokines, and production of cytoactive factors involved in repair and reconstruction of the damaged brain. Two partially overlapping and complimentary functional macrophage states have been identified and are called alternative activation and acquired deactivation. The immunosuppressive and repair processes of each of these states and how alternative activation and acquired deactivation participate in chronic neuroinflammation in the brain are discussed

Measurement of the energy asymmetry in tt¯ j production at 13 TeV with the ATLAS experiment and interpretation in the SMEFT framework

A measurement of the energy asymmetry in jet-associated top-quark pair production is presented using 139fb-1 of data collected by the ATLAS detector at the Large Hadron Collider during pp collisions at s=13TeV. The observable measures the different probability of top and antitop quarks to have the higher energy as a function of the jet scattering angle with respect to the beam axis. The energy asymmetry is measured in the semileptonic tt¯ decay channel, and the hadronically decaying top quark must have transverse momentum above 350GeV. The results are corrected for detector effects to particle level in three bins of the scattering angle of the associated jet. The measurement agrees with the SM prediction at next-to-leading-order accuracy in quantum chromodynamics in all three bins. In the bin with the largest expected asymmetry, where the jet is emitted perpendicular to the beam, the energy asymmetry is measured to be - 0.043 ± 0.020 , in agreement with the SM prediction of - 0.037 ± 0.003. Interpreting this result in the framework of the Standard Model effective field theory (SMEFT), it is shown that the energy asymmetry is sensitive to the top-quark chirality in four-quark operators and is therefore a valuable new observable in global SMEFT fits