Although most U.S. corporations do not pay federal income taxes, over the last several years some corporations have been willing to report, and shell out to the Treasury, hundreds of millions of dollars in taxes that they did not owe. They did so to conceal the fact that they were playing with Monopoly money—fabricating profits as phony as the pastel-colored money used in the classic Parker Brothers board game. Of course, once the game was up, these corporations wanted to raid the community chest to get their tax money back. But is it appropriate to refund taxes in such circumstances? This Article traces the history of tax-refund suits and concludes that such suits are in essence claims in equity. This means that claimants are subject to well-established equitable defenses like the doctrine of unclean hands and equitable estoppel. This Article argues that given the potentially corrosive effects of tax fraud on the U.S. tax system, the assertion by the Internal Revenue Service of equitable defenses to earnings-inflation-related refund claims would provide a more effective penalty regime than the current statutory system. In making this argument, this Article necessarily traverses several areas of law, including corporate fraud, the history and development of equity, the rules versus standards debate, law and economics, risk management, optimal penalty theory and even a bit of tax policy.
Case Comment: Bhogaita v. Altamonte
EVERY DOG CAN HAVE HIS DAY IN COURT: THE USE OF ANIMALS AS DEMONSTRATIVE EXHIBITS Kyle R. Kroll, Volume 100, Online Managing Editor In Bhogaita v. Altamonte, the Eleventh Circuit recently decided whether to allow a dog in the courtroom as a demonstrative exhibit. Although the case presented many serious [...]
Revisiting Water Bankruptcy
REVISITING WATER BANKRUPTCY IN CALIFORNIA’S FOURTH YEAR OF DROUGHT Olivia Moe, Volume 100, Managing Editor This spring, as “extreme” to “exceptional” drought stretched across most of California—indicating that a four-year streak of drought was not about to resolve itself—Governor Jerry Brown issued an unprecedented order to reduce potable urban water [...]
Defying Auer Deference
DEFYING AUER DEFERENCE: SKIDMORE AS A SOLUTION TO CONSERVATIVE CONCERNS IN PEREZ v. MORTGAGE BANKERS ASSOCIATION Nicholas R. Bednar, Volume 100, Lead Articles Editor* On March 9, 2015, the Supreme Court of the United States handed down its decision in Perez v. Mortgage Bankers Association.F The Court overturned the D.C. [...]