[Reposted from TaxProfBlog]:
John Prebble (Victoria University of Wellington, Faculty of Law) has written An American GAAR for TaxProf Blog. Here is the abstract:
"The President signed § 7701(o) of the Internal Revenue Code, the first U.S. statutory general anti-avoidance rule, or “GAAR”, into effect on 30 March 2010. The birth of the American GAAR was buried in § 1409 (a) of the Health Care and Education Reconciliation Act of 2010 (H.R. 4872). With § 7701(o) the muster of common law jurisdictions without GAARs is dwindling. India and the UK remain prominent hold-outs.
Section 7701(o) applies to “any transaction to which the economic substance doctrine is relevant”. A standard GAAR says that an avoidance transaction is void for tax purposes and authorizes the Commissioner to reconstruct the transaction and to tax that notional reconstruction. The economic substance doctrine operates similarly. It tells the Commissioner to disregard legal transactions and instead to tax the economic substance beneath.
The Obama GAAR has extra bite. It strikes down a transaction where the economic profit is not “substantial” in relation to its net tax benefits.
This relative benefits rule was presumably intended to reverse the result in cases like Compaq Computer Corp v. Commissioner, but the drafting of § 7701(o) betrays all sorts of compromises. Paragraph (5)(C) says: “The determination of whether the economic substance doctrine is relevant to a transaction shall be made in the same manner as if this subsection had never been enacted.” Congress seems to be saying, “We may appear to have armed the Commissioner with a GAAR. But we don’t really mean it. Everyone carry on as before”. But that interpretation is too bizarre to be tenable. On the contrary, § 7701(o) is a true GAAR that will prove a powerful weapon in the hands of the Commissioner. Notwithstanding its novel drafting, it will operate much as GAARs do in other common law jurisdictions. Like GAARs elsewhere it will become a focus of scholarly writing."
[More]
John Prebble (Victoria University of Wellington, Faculty of Law) has written An American GAAR for TaxProf Blog. Here is the abstract:
"The President signed § 7701(o) of the Internal Revenue Code, the first U.S. statutory general anti-avoidance rule, or “GAAR”, into effect on 30 March 2010. The birth of the American GAAR was buried in § 1409 (a) of the Health Care and Education Reconciliation Act of 2010 (H.R. 4872). With § 7701(o) the muster of common law jurisdictions without GAARs is dwindling. India and the UK remain prominent hold-outs.
Section 7701(o) applies to “any transaction to which the economic substance doctrine is relevant”. A standard GAAR says that an avoidance transaction is void for tax purposes and authorizes the Commissioner to reconstruct the transaction and to tax that notional reconstruction. The economic substance doctrine operates similarly. It tells the Commissioner to disregard legal transactions and instead to tax the economic substance beneath.
The Obama GAAR has extra bite. It strikes down a transaction where the economic profit is not “substantial” in relation to its net tax benefits.
This relative benefits rule was presumably intended to reverse the result in cases like Compaq Computer Corp v. Commissioner, but the drafting of § 7701(o) betrays all sorts of compromises. Paragraph (5)(C) says: “The determination of whether the economic substance doctrine is relevant to a transaction shall be made in the same manner as if this subsection had never been enacted.” Congress seems to be saying, “We may appear to have armed the Commissioner with a GAAR. But we don’t really mean it. Everyone carry on as before”. But that interpretation is too bizarre to be tenable. On the contrary, § 7701(o) is a true GAAR that will prove a powerful weapon in the hands of the Commissioner. Notwithstanding its novel drafting, it will operate much as GAARs do in other common law jurisdictions. Like GAARs elsewhere it will become a focus of scholarly writing."
Actually, the new Supreme Court nominee is probably pretty predictable – and that's OK.
Everyone thinks Elena Kagan’s appointment to the United States Supreme Court is a bit of a wild card because there’s little evidence available about her judicial philosophy, if she has one. In truth, however, Kagan is most likely utterly predictable. And that’s not a bad thing.
Last week, President Obama ended weeks of speculation by announcing that he was nominating Kagan, the administration’s solicitor general, to fill the latest vacancy on the Supreme Court. Commentators immediately shifted gears, spinning new speculation about Kagan’s judicial politics and how she might cast her “vote” on the usual legal and constitutional controversies like abortion, campaign finance reform, equal protection, and the president’s executive powers.
But it soon became clear that the problem, at least for critics and pundits, was not that Kagan had a liberal or conservative track record, but that she did not have very much of a track record at all. Her academic writing is limited, she has no popular writing or commentary, and never having served on the bench, she has no judgments to dissect.
Thus, some liberals like Paul Campos at The New Republic or Glenn Greenwald at Salon.com lament that Kagan is a ”blank slate” with meagre liberal credentials , who may be a closet conservative on key legal questions. Other liberals, like Huffington Post’s Linda Monk, however, celebrate the thin record, proclaiming Kagan may turn out to be a strong progressive once on the court. Conservatives, for their part, like National Review’s Ed Whalen or the Washington Post’s Michael Gerson, warn that Kagan is an unknown quantity who may very well be a “committed progressive” who has “carefully hidden her views.”
Despite disagreements, what all of these discussions assume is that Supreme Court nominations are often unpredictable. That is, you can never truly know who you are appointing until they are on the bench, especially if nominees lack a judicial record. Often cited to support this assumption is the case of former chief justice Earl Warren, a liberal icon in the 1960s, who was appointed by a Republican president, Dwight Eisenhower, who would famously regret his choice. Despite being a Republican, it is argued, Warren’s judicial philosophy was unpredictable given his lack of writing and judicial track record.
But is this assumption sound? Not really. In their 2005 work Advice and Consent, political scientists Jeffrey Segal and Lee Epstein conclude that while no predictor is perfect, most appointees generally mirror the ideology of the presidents who appoint them. Thus, presidents Reagan and Nixon elevated conservative justices such as Antonin Scalia, William Rehnquist, and Warren Burger, and presidents Clinton and Kennedy appointed more liberal judges, such as Stephen Breyer, Ruth Bader Ginsburg, and Byron White.
The outliers like Earl Warren can usually be explained by unique circumstances. Eisenhower may have been looking for conservatives; he was just really bad at picking them. Warren’s own track record – such as his stance on segregation laws in California – disclosed a more moderate figure. Eisenhower likewise misread William Brennan, who turned out to be another important liberal on the Warren Court.
In fact, Eisenhower’s missteps may have served as a warning to future presidents. Stanford political scientists Charles Cameron and Jee-Kwang Park recently found that pre-nomination ideological indicators were even better guides for appointments after 1957. The reason for this, they suggest, is that presidents likely changed their approach to appointments at this time, paying more attention to details to ensure their choices matched their preferences. Interestingly, by 1957, the Warren Court had already passed down several of its most progressive decisions, such as Brown v. Board of Education and Bolling v. Sharpe.
What all this means is that Elena Kagan’s judicial philosophy will probably reflect the moderation and pragmatism that Obama himself espouses and that Kagan’s own past suggests – fair-minded, highly intelligent, but also, as David Brooks has less amicably put it, strategic and ideologically risk-adverse. Yet, this isn’t bad for a judge, either.
So, is Elena Kagan a judicial wild card? The more exciting answer might be that she’s a liberal scion in waiting, a closet strong progressive, or, to conservatives, an ideological wolf in sheep’s clothing. But the reality is likely much more predictable and banal.
Jonathon Penney
Internet NZ Senior Research Fellow in CyberLaw and Lecturer, Victoria University of Wellington; and Fulbright Scholar, Columbia Law School
[reposted from The Mark]
[More]
Everyone thinks Elena Kagan’s appointment to the United States Supreme Court is a bit of a wild card because there’s little evidence available about her judicial philosophy, if she has one. In truth, however, Kagan is most likely utterly predictable. And that’s not a bad thing.
Last week, President Obama ended weeks of speculation by announcing that he was nominating Kagan, the administration’s solicitor general, to fill the latest vacancy on the Supreme Court. Commentators immediately shifted gears, spinning new speculation about Kagan’s judicial politics and how she might cast her “vote” on the usual legal and constitutional controversies like abortion, campaign finance reform, equal protection, and the president’s executive powers.
But it soon became clear that the problem, at least for critics and pundits, was not that Kagan had a liberal or conservative track record, but that she did not have very much of a track record at all. Her academic writing is limited, she has no popular writing or commentary, and never having served on the bench, she has no judgments to dissect.
Thus, some liberals like Paul Campos at The New Republic or Glenn Greenwald at Salon.com lament that Kagan is a ”blank slate” with meagre liberal credentials , who may be a closet conservative on key legal questions. Other liberals, like Huffington Post’s Linda Monk, however, celebrate the thin record, proclaiming Kagan may turn out to be a strong progressive once on the court. Conservatives, for their part, like National Review’s Ed Whalen or the Washington Post’s Michael Gerson, warn that Kagan is an unknown quantity who may very well be a “committed progressive” who has “carefully hidden her views.”
Despite disagreements, what all of these discussions assume is that Supreme Court nominations are often unpredictable. That is, you can never truly know who you are appointing until they are on the bench, especially if nominees lack a judicial record. Often cited to support this assumption is the case of former chief justice Earl Warren, a liberal icon in the 1960s, who was appointed by a Republican president, Dwight Eisenhower, who would famously regret his choice. Despite being a Republican, it is argued, Warren’s judicial philosophy was unpredictable given his lack of writing and judicial track record.
But is this assumption sound? Not really. In their 2005 work Advice and Consent, political scientists Jeffrey Segal and Lee Epstein conclude that while no predictor is perfect, most appointees generally mirror the ideology of the presidents who appoint them. Thus, presidents Reagan and Nixon elevated conservative justices such as Antonin Scalia, William Rehnquist, and Warren Burger, and presidents Clinton and Kennedy appointed more liberal judges, such as Stephen Breyer, Ruth Bader Ginsburg, and Byron White.
The outliers like Earl Warren can usually be explained by unique circumstances. Eisenhower may have been looking for conservatives; he was just really bad at picking them. Warren’s own track record – such as his stance on segregation laws in California – disclosed a more moderate figure. Eisenhower likewise misread William Brennan, who turned out to be another important liberal on the Warren Court.
In fact, Eisenhower’s missteps may have served as a warning to future presidents. Stanford political scientists Charles Cameron and Jee-Kwang Park recently found that pre-nomination ideological indicators were even better guides for appointments after 1957. The reason for this, they suggest, is that presidents likely changed their approach to appointments at this time, paying more attention to details to ensure their choices matched their preferences. Interestingly, by 1957, the Warren Court had already passed down several of its most progressive decisions, such as Brown v. Board of Education and Bolling v. Sharpe.
What all this means is that Elena Kagan’s judicial philosophy will probably reflect the moderation and pragmatism that Obama himself espouses and that Kagan’s own past suggests – fair-minded, highly intelligent, but also, as David Brooks has less amicably put it, strategic and ideologically risk-adverse. Yet, this isn’t bad for a judge, either.
So, is Elena Kagan a judicial wild card? The more exciting answer might be that she’s a liberal scion in waiting, a closet strong progressive, or, to conservatives, an ideological wolf in sheep’s clothing. But the reality is likely much more predictable and banal.
Jonathon Penney
Internet NZ Senior Research Fellow in CyberLaw and Lecturer, Victoria University of Wellington; and Fulbright Scholar, Columbia Law School
[reposted from The Mark]