Why foundational tax doctrines are back on the table

Most tax cases do not change the law. They reinforce it. Courts apply familiar doctrines to familiar fact patterns and move on. That stability is not accidental. It reflects a system that values predictability over precision.

Every so often, though, courts are forced to revisit the foundations because administrative practice drifted and taxpayers adapted. When that happens, the dispute is rarely about one transaction. It is about who decides where discretion ends.

The cases likely to matter most in 2026 share that feature. They test who controls thresholds, definitions, and authority when statutes leave space for agencies to fill.

The cases

Economic substance and relevance

In Liberty Global v. United States, the question is not whether the economic substance doctrine applies; instead, it is who decides when it applies.

§7701(o) states that the two-part economic substance test applies to transactions “to which the economic substance doctrine is relevant.” The district court treated that phra…