This paper examines the recent shift toward an anti-tax shelter federal income tax compliance norm at public corporations, as evidenced by practitioner and government comments and survey results.  The paper focuses on the organizational behavior of tax decisionmakers within public corporations as they respond to Sarbanes-Oxley, enforcement and publicity initiatives, and tax shelter regulation.
The paper identifies three elements that have contributed to the development of a stronger tax compliance norm. First, Sarbanes-Oxley has resulted in the expansion and increased transparency of public corporation tax decisionmaking groups. Organizational behavior insights suggest that this may produce more considered decisions. Second, civil and criminal enforcement and accompanying publicity have resulted in real concerns about personal and firm liability among organization leaders. This causes organization hierarchies to encourage and reward compliance. Third, the government has clearly identified objectionable tax shelter transactions and plainly labeled them unacceptable and even fraudulent. In the tax shelter area, this substantially reduces the ethical or legal uncertainty that otherwise presents an obstacle to the development of compliance norms in organizations.
The paper identifies elements of this story that do not fit neatly under the classic economic analysis of tax avoidance or evasion, including the importance of enforcement outside the tax context and the particular power of clear government rules.  The paper argues that this norm development story could provide a blueprint for regulatory attacks on deviant transactions but contends that it offers different lessons for regulatory challenges in greyer areas, pointing to a more cooperative approach.  It also sketches the challenges of a cost-benefit analysis of such culturally sensitive regulatory strategies