Trends in Tax Exceptionalism and Tax Litigation
On 14 July 2016, JOTA and the Centre for Tax Law, University of Cambridge, held a workshop titled "Trends in Tax Exceptionalism and Tax Litigation" at Broadway House, Tothill Street, London, SW1H 9NQ.
In the United States, the Supreme Court's 2011 decision in the Mayo Foundation case has fundamentally changed tax litigation and tax administration. Previously, tax administration functioned with a mindset of "tax exceptionalism" from the administrative statutory requirements, legal doctrines, and norms that applied to other federal government agencies. The legal veracity of tax exceptionalism had not been tested; it was an unchallenged assumption, but one that persisted for some decades. In Mayo Foundation, the Supreme Court expressly rejected tax exceptionalism from general administrative law requirements, doctrines, and norms absent "good reason" - which is generally thought to mean unless the Internal Revenue Code provides an express exception.
Since the Supreme Court decided Mayo Foundation, cases have slowly emerged in which lower courts have applied other administrative law requirements in the tax context. The US Department of Justice fights these cases hard, and the IRS is very slowly starting to adjust its practices, but there is now a backlog of IRS actions that are susceptible to legal challenge on administrative law grounds. Tax litigators now have a whole new range of arguments they can and ought to be making that are based on administrative law procedural and process requirements.
In the UK meanwhile a type of tax exceptionalism for many years persisted in relation to statutory interpretation. The “cardinal principle” that there is “no equity about a tax…Nothing is to be read in, nothing is to be implied”, however, came to be irrevocably modified by the case of Ramsay and subsequent developments. The development of administrative law doctrines, on the other hand, has been highly influenced by tax law cases, yet in recent times HMRC appears to be given more benevolent treatment than other public authorities before the courts in the application of these doctrines.
- Donald Korb is Of Counsel at Sullivan & Cromwell, a former IRS Chief Counsel, and an active tax controversy specialist
- Kristin Hickman is a Distinguished McKnight University Professor and the Harlan Albert Rogers Professor of Law at the University of Minnesota, and has written extensively about tax exceptionalism from administrative law requirements in the United States
- Stephen Daly is a Tax PhD candidate at the University of Oxford and a postdoctoral researcher at King's College London
- Lynne Oats, Managing Editor, JOTA, University of Exeter
- Dominic de Cogan, Deputy Director, Centre for Tax Law, University of Cambridge