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23 Fla. Tax Rev. 1 (2019-2020)

handle is hein.journals/ftaxr23 and id is 1 raw text is: 





     FLORIDA TAX REVIEW
 Volume 23                     2019                     Number  1


       CRISIS-DRIVEN  TAX  LAW:  THE  CASE OF  SECTION  382

                                by

       Albert H. Choi, Quinn Curtis, and Andrew T Hayashi*

ABSTRACT

At the peak of the 2008 financial crisis, the Internal Revenue Service
(IRS) issued Notice 2008-83 (the Notice), administrative guidance that
limited Internal Revenue Code (the Code) section 382, an important tax
rule designed to discourage tax-motivated acquisitions. Although styled
as a mere  interpretation of existing law, the Notice has been widely
viewed as an improper exercise of the IRS's authority that undermined
its legitimacy. But did the Notice work? There were many extraordinary
interventions during the financial crisis that raised questions about
eroding the rule of law and the long-term destabilizing effects of bail-
outs. In a financial crisis, regulators must weigh these real, but distant
and uncertain, costs against the immediate benefits of the intervention.
Toward  that end, we report the first evidence of the effects of limiting
Code  section 382 during the 2008 financial crisis. Although we find lit-
tle evidence that the Notice affected bank merger activity, those merg-
ers that occurred  while the Notice was  in effect produced lower
post-merger income growth. The results suggest that Code section 382


        *  The authors are Professor of Law at University of Michigan Law
School and Albert Clark Tate, Jr., Professor of Law and Class of 1948 Profes-
sor of Scholarly Research in Law at the University of Virginia School of Law,
respectively. We are grateful to Brian Galle, Rich Hynes, Kate Judge, Jim
Hines, Reed Shuldiner, conference participants at the 2017 annual meeting of
the National Tax Association, 2017 American Law and Economics Associa-
tion Conference at Yale Law School, and 2017 Conference on Empirical Legal
Studies at Cornell Law School, and to seminar participants at the UVA Darden
School of Business and Fordham University School of Law.


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