The NAM filed amicus briefs on Jan. 12, 2007, in a pair of cases on appeal to the Supreme Court involving the economic substance doctrine. In order to claim tax deductions or credits for business transactions, companies must meet the technical requirements of the tax code provision and also show that the transaction serves a real economic purpose and is not entered into solely for the tax benefits.
In this case, the NAM joined with the American Chemistry Council and the U.S. Chamber of Commerce in a brief urging the Court to review a Sixth Circuit decision that overturned a judge's ruling that Dow's long-term plan to fund corporate-owned life insurance policies satisfied the economic substance doctrine. The appeals court used a de novo standard of review, meaning that they ignored the findings of the trial court and drew their own conclusions from the evidence. Our brief argued that appeals courts should review trial decisions using a "clearly erroneous" standard of review.
In addition, we argued that a transaction must be considered in its entirety, even if it depends on optional future capital infusions that "seriously depart" from the taxpayer's past conduct. There are a variety of widely used, well accepted and economically sound corporate finance structures that rely precisely on discretionary future capital infusions by the taxpayer, many of which are described in the brief.
On February 20, 2007, the Court declined to hear this appeal.