New Cumulative Supplement to Federal Tax Procedure Book (10/28/17)

I provide a new cumulative supplement to the Federal Tax Procedure Book.  The cumulative supplement, dated 10/28/17, may be downloaded on the Page to the right titled Federal Tax Procedure Book & Supplements, here.

As always with my publications, I encourage readers to advise me of any matters that need corrections, additions, deletions, etc.

More on Skidmore (10/19/17)

I recently posted on Skidmore deference:  Other Views of Skidmore "Deference" (10/12/17; 10/15/17), here.  I offer more here on Skidmore, having searched through my database I keep to catalog items that I either actually read or wished I had read.  I just did a simple search on Skidmore.  I got about 525 hits indicating the sections in which Skidmore is cited (some sections had more than two references to Skidmore).  I browsed through the hits and offer the following additional excerpts about Skidmore deference.  I do caution readers than this is not a scientific or representative sampling of all the literature that is out there.

Kristin E. Hickman and Matthew D. Krueger, In Search of the Modern Skidmore Standard, 107 Colum. L. Rev. 1235, 1250, 1252-1253, 1255-1256, 1271, 1280-1281, 1291, 1310 (2007), here (footnotes omitted):

II. What Is Skidmore Deference? 

Drawing fine distinctions among deference standards may seem a purely academic exercise. Legal realists contend that such an effort is pointless, as courts only invoke deference standards to justify their preferred outcome. Although we acknowledge that this critique may be true in some instances, we nevertheless submit to the contrary that deference standards matter. We accept that courts feel constrained by deference standards and speak sincerely when they discuss the application of those standards. 

It is easy enough to recognize the consensus view that Skidmore gives judges more discretion than Chevron's command of mandatory deference. Similarly, from the Court's articulation of the two standards, one can readily discern that Chevron deference involves two binary inquiries, while Skidmore requires courts to evaluate several factors. Nevertheless, once a reviewing court finds itself in Skidmore's realm of discretionary deference, elucidating the appropriate degree of deference is not so simple as plotting a point on a line. Standards of review are not precision instruments. Rather, to paraphrase Justice Frankfurter, standards of review are more accurately described in terms of the "mood" a reviewing court should possess in evaluating the issue at bar. The question to be answered, therefore, is what sort of mood Skidmore analysis contemplates. 

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Commentators also generally agree that Skidmore is less deferential than Chevron, falling somewhere further away from the deference pole. This is all well and good, but it offers little guidance for the application of Skidmore as a stand-alone doctrine. 

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The independent judgment model of Skidmore deference thus understands the "persuasiveness" of an administrative interpretation to depend ultimately on the interpretation's merits or rightness. This conception discounts Skidmore's contextual factors and does not require courts to regard the presence or absence of those factors as particularly relevant. At most, this view understands Skidmore to require "due regard" be given to the agency's view, while "instructing courts to adopt the statutory interpretations that they themselves deem best." In effect, then, Skidmore directs courts to treat the agency's view just as it would the view of any litigant.  

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Other Views of Skidmore "Deference" (10/12/17; 10/15/17)

In my Federal Tax Procedure book (both editions), I say (footnotes omitted):

Before introducing my summary of the state of the law on IRS interpretations other than regulations, I first return to Skidmore deference which is a weaker form of interpretive deference (weaker in comparison to Chevron deference).  Skidmore v. Swift & Co., 323 U.S. 134 (1944).  Although formulations of Skidmore deference may vary, I think it is fair to say that agency interpretations not entitled to Chevron deference are entitled to some deference to the extent that they are persuasive.  Skidmore deference seems to stand somewhere between Chevron deference and no deference.  If the agency interpretation is intrinsically persuasive (including touchstones of thoroughness and consistency), does it need any deference in order to carry the day?  Presuming the Court means something in paying homage to Skidmore deference, perhaps it means that a court must give slight tilt in favor of an agency interpretation when it does not rise to the level required for Chevron deference.  So, in a case in which the court will not apply Chevron deference, it might still apply Skidmore deference.  (This, of course, raises the question I cannot answer here as to how much conceptual space there is for any given agency interpretation between Chevron deference and Skidmore deference; are there really many cases that can pass muster under Chevron but would not pass muster under Skidmore?)

I just read -- well, given its length, skimmed -- the en banc opinions in Aqua Products, Inc. v. Matal, ___ F.3d ___, 2017 U.S. App. LEXIS 19293 (Fed. Cir. 2017), here, a patent case (which may be even more onerous than a tax case).  There is a lot of discussion in the various opinions about Chevron and its progeny, but only one discussion about Skidmore.  Judge Moore says in his dissent (p. 11 of his dissent in fn. 8):

   n8 An agency interpretation not entitled to Chevron deference may nonetheless be entitled to Skidmore deference which the Supreme Court describes as follows: "Such a ruling may surely claim the merit of its writer's thoroughness, logic, and expertness, its fit with prior interpretations, and any other sources of weight." Mead, 533 U.S. at 235. Skidmore deference is a somewhat ethereal concept as it amounts to deference which the Supreme Court explains is proportional to the ruling's "power to persuade." Id. This feels a lot like saying I defer to your interpretation because I have determined that it is correct.

Still another conceptualization of Skidmore is present in Secretary U.S. Dept. of Labor v. American Future Systems, Inc., ___ F.3d ___, 2017 U.S. App. LEXIS 19991 (3rd Cir. 10/13/17), here (at slip op. 10-12, footnotes omitted):

District Court Holds that Temporary Regulations are Legislative and Thus Fail APA's Notice and Comment Requirement (10/10/16)

In Chamber of Commerce v. U.S. IRS, ________ (W.D. Tex. 10/6/17), here, the Court concluded that the so-called inversion Temporary Regulation was a legislative regulation that could not become effective until there was either the APA required notice and comment because no reasoned good cause statement had been given as required for immediate effectiveness of legislative regulations.   Caveat:  this is a revised opinion.  I have not attempted to locate the differences between the original opinion issued 9/29/17 and this revised opinion.  All of the following discussion relates to the revised opinion issued 10/6/17.

First, I offer the Court's explanation of the Temporary Regulation, which it called the Rule.

The Rule was issued pursuant to statutory authority in the Internal Revenue Code, which provides: 

The Secretary shall prescribe such regulations as may be appropriate to determine whether a corporation is a surrogate foreign corporation, including regulations (A) to treat warrants, options, contracts to acquire stock, convertible debt interests, and other similar interests as stock, and (B) to treat stock as not stock. 

26 U.S.C. § 7874(c)(6). And further, 

The Secretary shall provide such regulations as are necessary to carry out this section, including regulations providing for such adjustments  to the application of this section as are necessary to prevent the avoidance of the purposes of this section, including the avoidance of such purposes through (1) the use of related persons, pass-through or other noncorporate entities, or other intermediaries, or (2) transactions designed to have persons cease to be (or not become) members of expanded affiliated groups or related persons. 

26 U.S.C. § 7874(g). The statute uses terms granting broad authority to the Secretary of the Treasury for example: "such regulations as may be appropriate" and "such regulations as are necessary to carry out this section." The statute does not limit the broad authority granted in the first part of each subsection by identifying regulations that would not be appropriate or providing boundaries to the Secretary's authority under the statute. Instead, the statute gives examples of what the Secretary may employ by using the word "including" several times. Further, the examples given in the statute of regulations the Secretary may issue include significant authorizations, such as the authority to "treat stock as not stock," which could substantially alter a calculation under the statute based on the stock of a corporation.

Based on the broad authority granted by Congress, the court concludes the Rule does not exceed the statutory jurisdiction of the Agencies. The Rule directs that certain stock be disregarded in calculations made under the statute, which falls into the statute's allowance that regulations may "treat stock as not stock." Further, the Rule aims to "prevent the avoidance of the purposes" of the statute, which is specifically named as an authorized function of regulations issued pursuant to the statute. 

The court concludes the Rule does not exceed the statutory jurisdiction of the Agencies.

The Court then holds (pp. 8-10) that the IRS gave a reasoned explanation for the Rule consistent with the broad grant of authority. Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

JAT Note: The Court to this point has not distinguished between a legislative regulation and an interpretive regulation.

The Court then holds (pp. 10-13) that the Temporary Regulation, issued without notice and comment, violates the APA requirement for notice and comment.  In this portion of the discussion, the Court does not mention the fact that interpretive regulations are exempted from the APA notice and comment requirement.  So, the assumption must be, for purposes of that discussion, that the Temporary Regulation was a legislative regulation.

The Court then turns (pp. 13-15) to the interpretive regulation exception to the APA notice and comment requirement.  This is the nub of the reason I write this blog entry, so I quote the key part: