Jeffrey Paravano, Managing Partner of the firm's Washington, D.C., office, and associate John Lehrer were quoted in the April 14, 2010, Bureau of National Affairs' Daily Tax Report article, "Corporate Taxes: IRS Ruling Approach to Remain Same Now Economic Substance Is Codified."
Paravano and Lehrer were quoted based on the presentation they made at the 60th Midyear Conference of the Tax Executives Institute, held April 11-14 in Washington, D.C. They were panelists, along with William Alexander, Associate Chief Counsel for the Internal Revenue Service, for the "Federal Tax" session.
According to the article, the Internal Revenue Service will take the same approach to ruling on tax transactions, in the wake of Congress codifying the economic substance doctrine, that it did before the law changed. Paravano said he believes the most significant change under the new law is that taxpayers must have economics that are significant relative to the tax benefits claimed. Even despite this change, he said, "My take is that in looking at most of the cases that have been litigated, I can't think of one where the outcome would change." In addition, he said, courts may be unwilling to apply the strict liability penalty. "Judges aren't going to want to do this," Paravano said, noting that courts can use many other doctrines to allow or disallow transactions.
Commenting on the issues raised by the five-year NOL carryback provision that Congress enacted under the Worker, Homeownership, and Business Assistance Act of 2009, Lehrer noted that under the legislation, companies that received assistance under the government's Troubled Asset Relief Program (TARP) were not eligible for the carryback. He said this in turn raises issues for consolidated groups. For example, Lehrer said, in a situation where a target corporation is a member of a consolidated group that received TARP funding, there is a question of whether the acquiring corporation still would be eligible for the NOL carryback. In cases where a target is a member of a consolidated group that already has made the NOL election, a similar issue arises of eligibility for the acquiring corporation, Lehrer said.