Document Type


Publication Title

Tennessee Law Review

Publication Date

Summer 2013


Over a half-century ago, the Fourth Circuit in Commissioner v. Procter fashioned out of whole cloth what has become known as the public policy doctrine. This doctrine declares void certain tax-savings clauses -- those clauses that taxpayers strategically use to negate the risk of additional taxes, interest, and penalties -- that simultaneously undermine the ability of the Internal Revenue Service (IRS) to enforce the tax laws and thwart the judiciary's ability to render justice.

As taxpayers have tested the boundaries of the public policy doctrine via their continued use of select tax-savings clauses, the public policy doctrine has evolved. In this analysis, the authors first explore taxpayers' use of such tax-savings clauses. Next, they review the courts' responses to taxpayers' actions and critique these responses. Finally, they lay the groundwork for the institution of important reform measures in this area of the law.

We acknowledge that, in some instances, taxpayers have legitimate reasons to use tax-savings clauses. In may instances, however, reliance upon such clauses poses either a serious public policy threat whereby the very administration of the tax system is at stake or a less serious, but nevertheless important, policy concern whereby taxpayers can readily circumvent their bona-fide tax obligations. A line therefore needs to be drawn between permissible and impermissible tax-savings clauses; this line must strike the appropriate balance between taxpayers' quest for certainty and the IRS's mission to secure tax compliance.



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