The Limitations of Tax Law Interpretation in the United States

Abstract

This paper has been prepared in response to the 2013 International Tax Law Conference: The Internal and External Limitations of Tax Law Interpretation, Comparative Legal Approaches from Different Countries in Korea. That Conference was held to consider a case under Korean law where the Korean Supreme Court and the Korean Constitutional Court found that where a certain revenue statute was replaced, both the statute and its addendum (or supplemental provisions) are nullified unless special circumstances exist. The impetus of the conflict in the case that stimulated this conference is the divergent findings of whether there were special circumstances where a certain revenue statute was replaced which would have allowed for the continued use of the relevant portion of the prior statute’s addendum; while the Supreme Court of Korea found such special circumstances, the Constitutional Court could not. Further, the Constitutional Court found limited unconstitutionality, which determinations the Constitutional Court contends that it has the authority to make and that such findings are binding on other courts and government agencies. The Supreme Court disagreed, declaring that such findings of limited unconstitutionality were beyond the scope of the Constitutional Court and thereby not binding on courts or government agencies. United States federal tax law is prescribed through federal statute enacted by Congress, administrative regulations issued by the Internal Revenue Service, a bureau within the Executive Branch’s Department of Treasury, and case law advanced by federal courts at all levels including the specialized United States Tax Court. However, each of these sources derives its authority from the federal Constitution. The primary principle when interpreting revenue legislation requires an application of a plain meaning approach to the statute. However, that plain meaning approach must examine the law holistically, giving due meaning to each word, affording proper consideration to the law as a whole, and finally, with consideration of the surrounding body of law in which that statute is situated. This integrated approach to plain meaning itself will often produce disparate interpretations, and in the many instances when plain meaning is absent the varied auxiliary interpretative methods result in still more inconsistent perceptions. The United States’ lack of a specialized court for determining solely constitutional matters lends that such a conflict on point would not arise under U.S. law and given the U.S. Constitution’s provision in Article III, § 1 that “[t]he judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish,” makes clear the federal judicial hierarchy in the American court system. Additionally, given the Ramseyer and Cordon Rules which require that any bill reported by Committee to the House or the Senate must include in the Committee Report or an accompanying document both the text of the statute or part thereof which is proposed to be repealed and a comparative print showing by appropriate typographical devices the omissions and insertions proposed, it would be difficult for a court to find a lack of legislative intent if such a document reflected the expected textual strikethroughs. With regard to statutory interpretation, however, U.S. law may prove to be more useful. In the Korean case, the Supreme Court based its finding of specials circumstances and “saving” of the earlier addendum on both legislative intent and lack of burden on affected taxpayers. While this evidence may fall flat when presented to Scalia, Thomas, or another textualist judge, it is clear that this “unexpressed legislative intent” has a secure place in U.S. jurisprudence. Indeed, the Korean case merely seeks to fill blatant gaps, a far more conservative objective than what several of the U.S. cases succeeded in achieving.