Tax lawyers were the topic of the weekly ethics column in The New York Times Magazine. An unnamed New York tax lawyer wrote the ethicist asking, “Is advising wealthy companies of ways to reduce their tax bills through sophisticated legal structures ethically permissible?” The ethicist responded, “You need to do your job to the best of your abilities, within the existing rules. You should, however, voice your moral apprehension about the use of such loopholes to the company you represent.” The column is available here.
One advantage to a practice focused on the tax aspects of renewable energy is that such ethical questions do not really arise. Using one’s tax expertise to maximize tax credits funding renewable energy that leads to lower carbon emissions is, generally, a worthy endeavor by any measure.1
However, the Third Circuit’s recent opinion in Historic Boardwalk Hall demonstrated that the federal courts do not give tax planning for a good cause a free pass on legal issues like the risk and rewards that a purported partner must bear in order to be respected as a partner by the tax law (and accordingly entitled to the resulting tax benefits).2
In Historic Boardwalk Hall, an affiliate of Pitney Bowes invested in a partnership that owned a refurbished historic building on the Atlantic City Boardwalk. The court held that the Pitney Bowes affiliate was not a true partner, because arrangements like puts and calls, protection provided by broad contractual indemnities and security from a guaranteed investment contract insulated it from exposure to any of the economics of the historic building.
Thus, tax lawyers who practice in the area of investment and production tax credits may not have ethical qualms about the use to which they put their skills, but they still must exercise independent professional judgment with respect to challenging technical issues.
1 One may question whether the tax law is the most efficient means to support renewable. However, that is a question for Congress; for the moment Congress, has decided that the tax law is the means to support renewables in the United States.
2 Historic Boardwalk Hall, LLC v. Comm’r, 694 F.3d 425 (3d Cir. 2012).