Etsy was an online craft bazaar founded in 2005 in a loft in Brooklyn, New York. The company was known for its emphasis on social responsibility, transparency, authenticity, and its somewhat nontraditional approach to business. In January 2015, Etsy converted its Irish subsidiary to an unlimited liability company, a move it described as implementation of an "updated global corporate structure." In a subsequent U.S. Securities and Exchange Commission (SEC) filing, it stated that this changed structure might "result in a reduction in our overall effective tax rate." In August 2015, the company came under fire for this move. Bloomberg ran an article headlined "Etsy Taps Secret Irish Tax Haven and Brags About Transparency at Home." Americans for Tax Fairness charged that Etsy had "changed its behavior and [was] now using unethical business practices." John Montgomery of Startworks declared, "Etsy sold its soul for a lower corporate tax rate." The Wall Street Journal summarized the reaction with the headline "Etsy Faces Pressure to Abandon Irish Tax Strategy." This case explores Etsy's initial decision, the critical public response to it, and Etsy' choice to ignore the fallout and stay the course.

An increasing number of global corporations have experienced negative publicity over complicated tax structures established to minimize their tax burdens. In the case of U.S. companies, there has been a growing outcry over "inversions," a means of restructuring the business so that the U.S. parent was replaced by a foreign parent entity in a nation with lower corporate tax rates. Apple CEO Tim Cook was called to testify regarding Apple's tax strategies by the U.S. Senate Permanent Subcommittee on Investigations in April 2013, and executives from Apple, Google, and Microsoft faced an Australian senate inquiry into their alleged tax avoidance in April 2015. Criticism of corporate tax planning-also called tax avoidance-was dubbed "tax shaming," and even prompted consumer boycotts. Some analysts have suggested that companies begin considering tax policy as an aspect of corporate social responsibility, rather than simply a fiscal decision. Even though many companies are affected by this "tax shaming," a 2014 Ernst & Young survey of 830 tax and finance executives in 25 jurisdictions revealed that most had "little appetite" for directly engaging the media, with 65 percent agreeing (or strongly agreeing) that "engaging with the press on tax issues is a no-win proposition for business" and only 13 percent disagreeing. Results of the study notwithstanding, some companies did indeed respond to public pressure regarding their tax planning; this case describes some of these responses.

In 2004, Congress passed the American Jobs Creation Act of 2004 (AJCA). Several corporate benefits were included in this sweeping legislation, including the introduction of tax credits to encourage the development and use of alcohol and biodiesel fuels. Specifically, the Alternative Fuel Mixture Credit (AFMC) was structured as a refundable excise tax credit equal to 50 cents per gallon of alternative fuel produced. In 2008, paper manufacturers recognized an opportunity. If they added diesel fuel-which is not considered an alternative or clean fuel source-to black liquor, a natural byproduct of paper pulp processing, the resulting substance would be classified as an alternative fuel mixture that could potentially qualify for the AFMC. By mid-2009, every public company in the U.S. paper processing industry was receiving these credits. Because the credits were "refundable," and firms in the struggling paper industry did not have taxable income, the AFMCs generated tax savings from the U.S. Treasury totaling $6.4 billion, some of which was received in cash. This case examines the arguments around whether the refundable credits are taxable and discusses Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). The case highlights International Paper as an example and presents analysis by the faculty authors on the three ways in which paper companies approached the AFMC.