Have Recent Tax Acts Provided a Level Playing Field for Corporate Mergers and Acquisitions?

Prior to the Tax Reform Act of 1986 (TRA), the tax laws contained the following provisions that are cited as contributing to mergers and acquisitions (M&A): 1. the step-up basis allowed to an acquirer, 2. nonrecognition of gain afforded the target on the sale of its assets, 3. the ability to avoid the limitations on the offsetting of the target's net operating loss carryforwards against the income of the acquirer, 4. the ability to deduct interest incurred in financing acquisitions, and 5. the target's ability to defer some gain recognition. Congressional efforts in the TRA, the Revenue Act of 1987, and the Technical and Miscellaneous Revenue Act of 1988 indicate that Congress wanted to neutralize the impact of the tax system on M&A, but it appears that their actions have largely failed. A comprehensive attempt to abolish the loopholes and tax incentives for M&A is needed to attain the desired neutral effect.