Volume 2015, No. 3


Detrimental Reliance on IRS Guidance

Emily Cauble

The IRS issues different types of guidance to taxpayers, and the extent to which taxpayers can rely on IRS guidance depends on the form in which it was offered. For instance, taxpayers generally cannot rely on oral advice provided over the phone but can rely on more formal types of advice. The current state of the law harms unsophisticated taxpayers who disproportionately obtain informal advice—the least reliable type of IRS guidance.
Existing literature lacks a thorough discussion of why, as a policy matter, we allow taxpayers to rely on some forms of IRS guidance more than others. This Article fills that gap by suggesting and critically evaluating potential justifications for this practice.

As the analysis in this Article reveals, while a number of potential justifications are ultimately unconvincing, others are persuasive. Given the existence of several satisfactory justifications, the practice of disallowing reliance on informal guidance ought to be continued with some critical modifications. In particular, this Article proposes specific reform options that would assist unsophisticated taxpayers without undermining any compelling justifications for generally forbidding reliance on informal advice.


The Business Judgment Rule in Wisconsin

Kenneth B. Davis, Jr.

The business judgment rule (BJR)—the proposition that corporate directors should not be faulted for an honest error of business judgment—has been a mainstay of Wisconsin corporate law for more than a century. Though denominated a rule, the BJR is in practice much more. By limiting shareholders’ ability to call upon courts to review good-faith action by the board of directors, the BJR functions as corporate law’s equivalent of the separation-of-powers doctrine. This function is especially powerful in Wisconsin, whose statutes grant the board greater autonomy than in many other states.

It is in this latter, procedural context that the Wisconsin Supreme Court recently considered the effects of the BJR in Data Key Partners v. Permira Advisers LLC. Although the issue before the court involved the Wisconsin statute immunizing directors from monetary liability, both the majority and dissent, along with the court of appeals below, framed the discussion in terms of the BJR. While the Data Key decision provides important insight into both the statute and the BJR, the judges’ conflation of the two may be misinterpreted and lead to confusion over the separate roles played by each. This Article therefore takes the opportunity to take a deeper look at both the statute and the BJR—what each of them does and does not do, and why. The discussion is organized as follows. Part I traces how Wisconsin courts have formulated the BJR over the years. Part II considers the separate functions of the BJR and the immunity statute. Parts III and IV discuss the procedural dimensions of the BJR and their application to the supreme court’s decision in Data Key. Part V considers the important and evolving area of minority-shareholder protection in close corporations, where the BJR may come into conflict with other doctrines, and where the risk of misapplying Data Key is perhaps greatest.


Comment
Stress Is [Not] Part of the Job: Finding the Appropriate Balance Between Fairness and Efficiency to Compensate Posttraumatic Stress Disorder Under Workers’ Compensation Statutes

Ashley R. Bailey

The time has come for workers’ compensation systems to provide coverage for mental-mental injuries, such as Posttraumatic Stress Disorder (PTSD). Unfortunately, tragic workplace events continue to occur and trigger PTSD, even in occupations that are traditionally nontraumatic. Yet, despite the guiding philosophy of workers’ compensation and current scientific understanding surrounding mental injuries, many state workers’ compensation systems continue to deny coverage for such injuries. This Comment argues that state workers’ compensation systems should cover PTSD as a mental-mental injury. It also provides model “accidental injury” and causal nexus statutes to accomplish this purpose and defend against common inadequacies in existing statutes.


Note
Is a Private Equity Fund a “Trade or Business”? Alternatives to the First Circuit’s Approach

Joseph Calavenna

What exactly a private equity firm does can often seem confusing and inaccessible. The private equity industry and the firms within it use capital invested by individuals and institutions to purchase companies that are then held as investments. The companies purchased as investments range in strength from distressed companies to companies with strong operations. In both cases, private equity firms provide services to strengthen portfolio companies with the goal of either selling the company in the future or selling stock in the company in an initial public offering.

In Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund, the First Circuit classified a private equity fund as a “trade or business.” But the term “trade or business” is undefined in relevant regulations. Regardless, the First Circuit classified the private equity fund in question as a “trade or business” by relying heavily on an administrative letter and loosely interpreted case law. This Note will explore how the First Circuit made its decision and ultimately conclude that the First Circuit erred in its application of the “trade or business” term as applied to private equity funds.