The economic substance doctrine is one tool that the IRS has for fighting abusive tax shelters. It is a judicially developed doctrine that allows the IRS and courts to disregard transactions that were made for tax-avoidance purposes and lack economic substance. In 2006, four important tax shelter cases were decided by U.S. courts of appeals. In all four cases, the economic substance of the transaction was at issue. Legislation in the 110th Congress

S. 96 (the Export Products Not Jobs Act) would codify the economic substance doctrine.
The economic substance doctrine is a judicially developed doctrine that has become one of the IRS's primary tools in fighting abusive tax shelters. The doctrine permits transactions lacking in economic substance to be disregarded for tax purposes. In 2006, four significant decisions dealing with the doctrine were issued by U.S. courts of appeals. In the 110th Congress, S. 96 (Export Products Not Jobs Act) has been introduced to codify the doctrine. This report discusses the doctrine's development and the four cases and summarizes the bill. It will be updated as events warrant.