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23 Fla. Tax Rev. 1 (2019-2020)
Crisis-Driven Tax Law: The Case of Section 382

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. 1

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