Has deference to administrative regulation gone too far in its impact on American corporations and consequently become to great a foe to American corporations in a global marketplace? In the wake of the widespread corporate scandals, many of the regulations enacted are aimed at combating corporate fraud. Recently, in Square D Co. v. Commissioner of the Internal Revenue Service, the Seventh Circuit Court of Appeals upheld the validity of one such regulation, requiring taxpayers to utilize the cash basis method of accounting to deduct interest payments made to tax-exempt foreign related parties. This Note examines where this regulation fits with other similarly aimed provisions;the Seventh Circuit’s rationale for upholding this regulation;arguments for a more narrow construction of the power allocated to the Secretary of the Treasury;and concludes that, based on the overarching purpose of preventing corporate fraud, the Seventh Circuit’s decision was correct in substance but was overly deferential to administrative regulation and ignored many compelling arguments that support its decision.
Erica S. Khalili,
A Domestic Disturbance: The Seventh Circuit Encroaches on Foreign Related Party Transactions,
Seventh Circuit Rev.
Available at: https://scholarship.kentlaw.iit.edu/seventhcircuitreview/vol2/iss1/16