Originally published March 26, 2010
On March 25, 2010, both the U.S. House of Representatives and
the U.S. Senate passed the final piece of the health care package,
the Health Care and Education Reconciliation Act of 2010 (the Act).
Included in the bill is a statutory codification of the
"economic substance" doctrine. Various forms of
codification of the doctrine have been under consideration by
Congress since 1999 and have been on the verge of enactment on
several occasions during the last decade, but it will now be a
reality as soon as the President applies the necessary
signature.
The Act adds new Internal Revenue Code § 7701(o), which
provides that if the economic substance doctrine is relevant to a
transaction, the transaction will be considered to have economic
substance only if two tests are satisfied: (1) the transaction must
change the taxpayer's economic position in a "meaningful
way" (apart from the Federal income tax effects); and
(2) the taxpayer must
