Supreme Court Denies Certiorari in Oakbrook Land Holdings (1/17/23)

I have previously discussed the Circuit arguable split between the Eleventh and Sixth Circuits over the procedural validity of the so-called Treas. Reg. 26 C.F.R. 1.170A-14(g)(6) (the Proceeds Regulation). See Sixth Circuit Creates Circuit Conflict with Eleventh Circuit on Conservation Easement Regulations (Federal Tax Procedure Blog 3/15/22), here, discussing Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021) (held regulation procedurally arbitrary and capricious and thus invalid for failure of regulation to address a significant comment); and Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022) (Proceeds Regulation interpretation valid). On 1/9/23, the Supreme Court denied Oakbrook's petition for writ of certiorari. (See Sup. Ct. Case 22-323 Docket Entries here.)

Denials of certiorari usually do not state or hint the reasons for the denial of certiorari. Certain inferences can be drawn if one or more Justices make a statement or dissent from denial of certiorari, but there was none here.

The Government’s brief in opposition to the petition for writ of certiorari, here, perhaps was influential in the denial. The broad claims the Government made (Br. 18-24, with numbering same as in brief) were:

1. “The decision below does not implicate any conflict with a decision of another court of appeals that warrants this Court’s review.” (Br. 18.)

a. regarding a possible conflict with Hewitt, the Government argued (Br. 18) that both courts applied the correct standard but just reached different conclusions as to the Proceeds Regulation. In perhaps inartful language, the Government claims that:

Hewitt did not purport to vacate or otherwise invalidate the proceeds regulation  as such; instead, it held only that “the Commissioner’s interpretation of § 1.170A-14(g)(6)(ii), to disallow the subtraction of the value of post-donation improvements to the easement property in the extinguishment proceeds allocated to the donee, is arbitrary and capricious and therefore invalid.” 21 F.4th at 1353 (emphasis added).

I think, however, that the Hewitt court did not declare the interpretation invalid; rather, it declared invalid the regulation that contained the interpretation. The difference is important. In any event, the Government closes this section with the following (Br. 19):

Third, petitioners do not identify any other court of appeals that has addressed whether the agency adequately responded to comments when promulgating the proceeds regulation nearly 40 years ago, and the government is not aware of any. Indeed, it appears that this case was the first in which the Tax Court itself opined on the issue. The issue would therefore benefit from further percolation in the regional courts of appeals, counseling against this Court’s review in this case at this time.

 [b not discussed]

c The Government argues (Br. 21-24) that, in any event, apart from the validity of the regulation, the deed violated the statutory language which, if true, would temper any perceived conflict between Oakbrook and Hewitt.

Of course, the Government’s arguments for denying certiorari may or may not have moved the Court to deny cert, but the Government’s arguments sound right. 

There will undoubtedly be more percolation in the Circuits, perhaps with even the Eleventh or Sixth Circuits changing views after percolation so as to obviate the need for cert.

JAT Comments:

1 In its order denying the petition for writ of certiorari, the Court said (Order List here, p. 14, bold face supplied by JAT)

22-323 OAKBROOK LAND HOLDINGS, ET AL. V. CIR

 The motion of National Taxpayers Union Foundation for leave to file a brief as amicus curiae is granted. The petition for a  writ of certiorari is denied.

Actually, three amicus briefs were filed. (See docket entries linked above.)  For those interested in some of my musings about amicus briefs, see paragraph 4 On Supreme Court Oral Argument in In Re Grand Jury On Issue of Principal or Significant Purpose for Attorney-Client Privilege (Federal Tax Crimes Blog 1/10/23; 1/11/23), here.