Interpreting Tax Legislation: The Role of Purpose

Abstract

This paper was delivered in abbreviated form at the January 1995 meeting of the American Association of Law Schools, Tax Section.

Copyright © 1995 by Deborah A. Geier

"Sex Illegal in Missouri? Perhaps." (I knew that would get your attention.) That was the headline of an article in the Cleveland Plain Dealer in November 1994. The article described a Missouri statute enacted the preceding August that, if read literally, outlaws all sex in Missouri. One of the legislators is quoted in the article as saying that "[n]o one is going to be prosecuted for having normal sex," a statement I don't dare touch.
The connection that this newspaper article has with the topic I discuss here is that tax law has a rich history of nonliteral interpretation in order to avoid results that one person or another has considered to be inconsistent with the purpose of the statute as a whole. This tradition is illustrated by the common law doctrines variously named substance over form, sham transaction, step transaction, business purpose, and assignment of income. In other instances, however, we have an extremely form-conscious approach, such as the approach to bootstrap acquisitions in the Zenz v. Quinlivan context. How do we make sense of it all?
Interest in statutory interpretation has been renewed over the last decade, probably prompted-at least in part-by the confluence of two events that have nothing to do with tax law: the elevation to the Supreme Court of Antonin Scalia (whose literal textualist approach to statutory language is now embedded in the Court's opinions) and the attention paid to literature theorists, the so-called deconstructionists, who seized upon the notion that language is indeterminate. All of a sudden language and its interpretation were once again center stage after a long hiatus during which the theory behind the language dominated academic discourse.