10th Circuit Cites Work by UH Law Professor Bret Wells in Landmark Ruling

April 28, 2026 — A recent ruling by the 10th U.S. Circuit Court of Appeals turned on interpretation of the economic substance doctrine, which holds that a company’s business dealings must have a legitimate business purpose to qualify for tax benefits. In Liberty Global Inc. v. the United States, the court held the IRS was correct in determining that Liberty Global could not claim a $2.4 billion deduction as the result of a series of transactions designed to take advantage of a mismatch in international tax provisions enacted as part of a 2017 tax reform law.

Bret Wells, John Mixon Chair at the University of Houston Law Center, followed the case closely. The court, it turns out, was also following Wells’ work.

Wells, an internationally recognized expert in tax law, has studied the economic substance doctrine, and the justices favorably cited his 2010 law review article, “Economic Substance Doctrine: How Codification Changes Decided Cases,” published in Florida Tax Review, multiple times in explaining their decision.

“If this court gave its imprimatur to the rule advocated for by (Liberty Global), taxpayers, tax professionals, and attorneys would quickly find ways to inoculate their complex transactions” from applications of the codified doctrine, they wrote, referencing Wells’ article. In the article, Wells argued that the enactment of section 7710 (o) codified the judicially created doctrine, which “has been used to prevent taxpayers from subverting the purpose of the tax code by engaging in transactions that are fictitious or lack economic reality simply to reap a tax benefit.” The 10th Circuit also incorporated Wells’ assertion that outcomes which literally comply with a mechanical reading of the tax laws but in the end create mistaken outcomes Congress could not have intended are exactly the situations the economic substance doctrine was designed to address. The highly structured transactions entered into by Liberty Global represent just such a situation.

In reviewing the opinion, Wells said he was gratified to see the court’s effort to consider the normative implications of its decision and to consider the impact of scholarly articles written on complex areas of the law, including tax law.

The Liberty Global case involved a series of transactions involving foreign affiliates, which the company designed specifically to create a tax advantage. Liberty Global argued it was entitled to the tax deduction because it mechanically complied with the tax code’s terms and that section 7701(o) could not override tax statutes.

A panel from the 10th Circuit disagreed with a 2-1 decision, rejecting the company’s assertion that the economic substance doctrine is merely an interpretive tool that cannot be used to override the literal terms of the tax code. In doing so, the court upheld a Colorado federal court ruling and ruled that even if a transaction complies with the literal language of the tax code, it can be disregarded if it has little or no economic effect outside tax benefits.

The full opinion is available here.