Tax Lawyers as Tax Insurance

By Field, Heather M. | William and Mary Law Review, May 2019 | Go to article overview

Tax Lawyers as Tax Insurance


Field, Heather M., William and Mary Law Review


TABLE OF CONTENTS  INTRODUCTION                                                        2114   I. TAX ADVICE, TAX OPINIONS, AND THIRD-PARTY TAX INSURANCE        2120      A. Transactional Tax Advising                                  2120         1. In General                                               2120         2. Tax Opinion Practice                                     2122      B. Third-Party Tax Insurance                                   2126  II. THE SUBSTITUTABILITY OF TAX OPINIONS AND THIRD-PARTY TAX       2129      INSURANCE III. INDICIA OF INSURANCE INHERENT IN TAX OPINIONS                  2135      A. Insurable Risk                                              2136         1. "Risk"                                                   2136         2. "Insurable Interest"                                     2137      B. Transfer of Risk                                            2138         1. The Risk Transfer Is Implicit                            2139         2. The Extent of the Risk Transferred Is Limited by         2140            Requirements for Malpractice Recovery            a. Indemnification Is Conditional on Breach of           2141               Standard of Care            b. Indemnification Is Limited in Amount to "Damages"     2149         3. Risk Transfer Is Not the "Principle Object and Purpose"  2153      C. Distribution of Risk                                        2155      D. Conclusion About the Applicability of the Insurance         2158         Construct to Tax Opinions  IV. THE INDEMNITY FUNCTION OF TAX OPINIONS AND THE REALITY OF      2160      TAX PRACTICE      A. Tax Malpractice Payouts as Evidence of the Indemnity        2161         Function      B. Tax Lawyers' Perceptions About the Indemnity Function       2166         of Tax Opinions   V. IMPLICATIONS OF THE INSURANCE ANALYSIS FOR TAX OPINIONS        2169      A. Tax Lawyers' Billing Practices                              2169         1. Illustrations of the Relevance of Premium-Style Fees     2170         2. Questions Raised by Premium-Style Fees                   2173            a. Are Premium-Style Fees for Tax Opinions Allowed?      2173            b. Other Concerns About Premium-Style Fees               2177      B. Terms of Client Engagements                                 2178      C. The Design of Tax Opinions                                  2179      D. The Market for Tax Advice                                   2181      E. Conclusion About the Consequences of the Insurance          2183         Construct for Tax Opinions CONCLUSION                                                          2183 

INTRODUCTION

Transactional tax lawyers, by rendering tax opinions, provide an element of insurance to clients. This insurance is clearly incomplete, but by providing a tax opinion, a lawyer conditionally agrees to indemnify the client for part of the potential loss the client incurs if the favorable tax treatment described in the opinion is successfully challenged. Thus, tax lawyers serve, at least partly, as tax insurers.

This insurance function is missing from the literature about the transactional tax lawyer's role. Ronald J. Gilson's seminal work, Value Creation by Business Lawyers: Legal Skills and Asset Pricing, explains that transactional lawyers add value for clients by being "transaction cost engineers." (1) The voluminous literature that followed Gilson's article provided various other explanations, conceiving transactional lawyers as reputational intermediaries, (2) regulatory cost reducers, (3) enterprise designers, (4) transaction quarterbacks, (5) "risk managers," (6) aggregators of information about market terms, (7) and more. (8) Considering transactional tax lawyers specifically, Victor Fleischer added the role of a "regulatory arbitrageur," (9) who "tweak[s] a deal structure to achieve better regulatory treatment [for example, better tax treatment, thereby shifting value from the government to the deal parties] without unduly altering the underlying business arrangements. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Tax Lawyers as Tax Insurance
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.