The guidance issued from the IRS caught even some of the closest followers of tax law off guard because it seemed to come out of the blue when Treasury's work seemed focused almost exclusively on the bailout.

"It was a shock to most of the tax law community. It was one of those things where it pops up on your screen and your jaw drops," said Candace A. Ridgway, a partner at Jones Day, a law firm that represents banks that could benefit from the notice. "I've been in tax law for 20 years, and I've never seen anything like this."

More than a dozen tax lawyers interviewed for this story -- including several representing banks that stand to reap billions from the change -- said the Treasury had no authority to issue the notice.

Several other tax lawyers, all of whom represent banks, said the change was legal. Like DeSouza, they said the legal authority came from Section 382 itself, which says the secretary can write regulations to "carry out the purposes of this section."

Section 382 of the tax code was created by Congress in 1986 to end what it considered an abuse of the tax system: companies sheltering their profits from taxation by acquiring shell companies whose only real value was the losses on their books. The firms would then use the acquired company's losses to offset their gains and avoid paying taxes.

Lawmakers decried the tax shelters as a scam and created a formula to strictly limit the use of those purchased losses for tax purposes.

But from the beginning, some conservative economists and Republican administration officials criticized the new law as unwieldy and unnecessary meddling by the government in the business world.

"This has never been a good economic policy," said Kenneth W. Gideon, an assistant Treasury secretary for tax policy under President George H.W. Bush and now a partner at Skadden, Arps, Slate, Meagher & Flom, a law firm that represents banks.

The opposition to Section 382 is part of a broader ideological battle over how the tax code deals with a company's losses. Some conservative economists argue that not only should a firm be able to use losses to offset gains, but that in a year when a company only loses money, it should be entitled to a cash refund from the government.

During the current Bush administration, senior officials considered ways to implement some version of the policy. A Treasury paper in December 2007 -- issued under the names of Eric Solomon, the top tax policy official in the department, and his deputy, Robert Carroll -- criticized limits on the use of losses and suggested that they be relaxed. A logical extension of that argument would be an overhaul of 382, according to Carroll, who left his position as deputy assistant secretary in the Treasury's office of tax policy earlier this year.

Yet lobbyists trying to modify the obscure section found that they could get no traction in Congress or with the Treasury.

"It's really been the third rail of tax policy to touch 382," said Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute.

Monkeyboy wrote:A Quiet Windfall For U.S. Banks

pacino wrote:does he mean the rate caps?

Marion wrote:Ah, Tivo...where McCain/Palins dreams live on

Catching up on some Tivo backlog and am none too happy to relive campaigning all over again

drsmooth wrote:

Monkeyboy wrote:A Quiet Windfall For U.S. Banks

numerous people will insist if you ask them that capitalism has to do with striving for profits from doing or making things

tut tut, I say - tut tut

Philly the Kid wrote:

Marion wrote:Ah, Tivo...where McCain/Palins dreams live on

Catching up on some Tivo backlog and am none too happy to relive campaigning all over again

is it comedy or drama ?

Bakestar wrote:

Philly the Kid wrote:

Marion wrote:Ah, Tivo...where McCain/Palins dreams live on

Catching up on some Tivo backlog and am none too happy to relive campaigning all over again

is it comedy or drama ?

pr0n

Werthless wrote:

drsmooth wrote:

Monkeyboy wrote:A Quiet Windfall For U.S. Banks

numerous people will insist if you ask them that capitalism has to do with striving for profits from doing or making things

tut tut, I say - tut tut

The article linked has nothing to do with capitalism, my friend.

TenuredVulture wrote:Barack and Michelle have like the coolest Secret Service names ever.

According to Wikipedia, W's code name was Tumbler. I'd be so pissed if I were him. I guess they like all the code names for the first family to start with the same letter, but it isn't as if there aren't lots of words that start with the letter T.

Jimmy Carter was Lock Master. WTF?

Wizlah wrote:wow. some pretty arresting photos Arkady Babchenko's photo-essay from the war in ossetia and georgia earlier this year. It's worth a look, but fair warning - some of these pictures may be hard to stomach.
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