Could the District Court Invite or Appoint an Amicus to Present the U.S. Position in Trump v. IRS? (2/7/26)

Yesterday, I posted a blog on the Amici Brief filed in Trump v. IRS, (S.D. Fla. No. 26-cv-20609), CL Docket sheet here. On Amici Brief in Trump and Related Parties Suit for Damages from Unauthorized Inspections and Disclosures of Return Information by Employee of IRS Contractor (2/6/26), here. Basically,  a principal theme of the Amici Brief is that the Trump plaintiffs are suing the Government where Trump is also the Government “decider” (to echo George Bush’s claim). That presents some major issues, some of which are discussed in the Amici Brief and I address in the prior blog.

Today, I wanted to expand on an issue that I began considering after posting yesterday’s blog: 

Can the district court sua sponte or at the urging of some Amici invite or appoint an Amicus to represent the United States if the United States at Trump’s direction aligns itself with the Trump plaintiffs?

There is precedent that might permit the district court to invite or appoint an Amicus to participate in the proceeding to represent the United States’ interest where the parties are aligned (thus perhaps not creating a case or controversy). The precedent is Bob Jones University v. United States, 461 U.S. 574 (1983), GS here. In that case, the IRS denied tax-exempt status to two education organizations—Bob Jones and Goldsboro Christian Schools--which allegedly had a "sincerely held" religious belief that their God required them to racially discriminate. The Fourth Circuit sustained the IRS position. In the Supreme Court, the White House directed the SG’s office to disavow the IRS position that had prevailed in the Fourth Circuit. There is intrigue and high drama about the White House doing that, but I offer more on that below in order to stay on track for the main body of this posting.  Perceiving that, at that point, the parties were aligned and no one was arguing in support of the Fourth Circuit opinion, the Supreme Court invited William T. Coleman, a prominent D.C. lawyer, to brief and argue the case as Amicus Curiae;  the opinion in the case describes Coleman as follows: “William T. Coleman, Jr., pro se, by invitation of the Court, 456 U. S. 922, argued the cause as amicus curiae urging affirmance.” (As in many Supreme Court cases, there were other Amici briefs filed, but Coleman’s was likely the one that the Justices paid most attention to; I have sometimes expressed doubt as to the efficacy of Amici Briefs that often flood the Supreme Court in hot button issue cases where the Amici often just give the same or slight variations of the arguments made by the parties or Amici, often with slightly different wording; Coleman’s was different because the Supreme Court respected him andinvited it.) In the merits decision, the Supreme Court affirmed the Fourth Circuit, thus rejecting the White House’s forced position that put the parties in alignment.

The bottom-line, where in Trump v.  IRS the Trump-related parties and the Government (at the direction of Trump) have interests that are or may be aligned, the district court might invite or appoint an Amicus to assist the court in doing justice in the case. The court could do that sua sponte as the Supreme Court did in Bob Jones or it could do it on motion from Amici.

On Amici Brief in Trump and Related Parties Suit for Damages from Unauthorized Inspections and Disclosures of Return Information by Employee of IRS Contractor (2/6/26)

I assume that most readers of this blog will already have seen news about Trump’s suit against the IRS for “damages” arising from the disclosure of his tax return information by an employee of an IRS contractor who was subsequently criminally convicted by plea agreement and sentenced to five years’ incarceration. E.g., Trump sues IRS and Treasury for $10 billion over leaked tax information  (NPR 1/30/26), here. The suit is titled Trump v. IRS (S.D. Fla. No. 26-cv-20609), CL Docket sheet here. (Reminder: Access to the Court Listener docket sheet is free and will have links to the documents provided that some CL member has downloaded them from PACER.)

The key documents to date are

• the complaint (CL here) and
• a new Amici Curiae Motion for Leave to File Brief as Amici Curiae by Former Government Officials and Public Interest Organizations, here. The interests of the Amici are (Br 1-2, footnote omitted):

          Amici are four former government officials with combined decades of experience in federal tax law, each of whom joins this brief only in their personal capacity, and two public-interest organizations. They have sought leave to submit this brief to aid the Court in its management of this important case.

          John Koskinen served as the 48th Commissioner of the Internal Revenue Service. He was confirmed to the position by the Senate in 2013, and he served in the position until 2017. Prior to his service as IRS Commissioner, he served in a number of positions in the public and private sector, including as the non-executive chairman of the Federal Home Loan Mortgage Corporation (Freddie Mac) from 2008 to 2012.

          Kathryn Keneally served as the Assistant Attorney General for the U.S. Department of Justice’s Tax Division. She was confirmed to the position by the Senate in 2012, and she served in the position until 2014. Prior to her service in the Department of Justice, she practiced tax law in private practice for thirty years and served as chair of the American Bar Association’s Section of Taxation’s Committees on Civil and Criminal Tax Penalties and Standards of Tax Practice.

          Nina Olson served as the National Taxpayer Advocate from 2001 to 2019. In that role, she led the Taxpayer Advocate Service, an independent organization within the Internal Revenue Service. Prior to serving in that role, she had over two decades of experience representing individual taxpayers at all levels of income.

          Gilbert Rothenberg served as the Chief of the U.S. Department of Justice, Tax Division, Appellate Section. He joined the Department as a line attorney in the Appellate Section in 1975 and served in the Section until his retirement in 2019.

          Common Cause is a nonpartisan, grassroots organization dedicated to upholding the core values of American democracy by working to create open, honest, and accountable government that serves the public interest. Common Cause has over 1.5 million members nationwide and local organizations in 23 states.

          Project On Government Oversight (POGO) is a nonpartisan, independent watchdog that investigates, exposes, and champions reforms on systemic corruption, abuse of power, and waste. [*2] POGO envisions a federal government that is effective and accountable—governed by just laws, operating with integrity, and committed to serving the public. Government ethics and public trust in the federal government are at the heart of POGO’s mission.

I will not write on the merits of the Complaint. I will editorially comment that, in my opinion, this is just another Trump attempt to monetize Trump’s presidency which has already unlocked mega-millions for Trump and his family (not to mention his “friends,” such as pardon attorneys close to him). Rather, I address in this blog the Amici Brief.

The judge on the case is Kathleen M. Williams, an Obama appointee. See Wikipedia here. Pretrial responsibilities have been assigned to Magistrate Judge Enjolique A. Lett. I could find no current information on her in a quick Google search; I did find, for example, that Judge Roy K. Altman assigned her to handle pretrial non-dispositive matters in The Donald J. Trump Revocable Trust v. Capital One, N.A. (S.D. Fla. 1:25-cv-21596), here. (This suit against Capital One asserts a “de-banking” claim that appears to  be another classic Trump case to monetize his presidency; although Trump does not directly control both sides, he can control the levers of power by directing Government action, directly or indirectly, against the defendant; tongue-in-cheek, maybe Trump and the related parties will give up the suit if Capital One names its corporate headquarters the Trump Building or even the name of the organization as Trump Bank.)

Points about the Amici Brief:

Tax Court Finds Reasonable Cause to Rely Upon alliantgroup Research Credit Advice (2/4/26)

Lew Taishoff has a rather cryptic review of George v. Commissioner, T. C. Memo. 2026-10 (2/3/26), TC 27494-16, here, at # 209 and GS here [to come]. See ALWAYS CHICKENS OUT (Taishoff Law 2/3/26), here. George involves the qualified research credit in §§ 46 and 174; the credit is arcane legally and usually fact-intensive, as the George opinion (86 pages) proves. Taishoff concludes that “Judge Tag Greaves has thoroughly reviewed the Section 41 landscape. It’s a must-read for specialists, and eyeglazing for the rest of us.” I am among the eyeglazing majority who may skim the opinion without digging into the details on the substantive issue. So, I will not deal with the merits of substantive tax issue.

I focus on the discussion of the § 6662 accuracy-related penalties (Slip Op. 81-85) which is a common subject for tax procedure enthusiasts. The Georges conceded some accuracy-related penalties (Slip Op. 2 n. 2 & 38 n. 21.) The accuracy-related penalties in issue were negligence and substantial understatement, both of which have an exception for “reasonable cause." The Court finds that the Georges had reasonably cause in relying on alliantgroup a major provider for research credit advice. See alliantgroup website here. The Court describes alliantgroup (Slip Op. 83):

Petitioners sought the advice of alliantgroup to determine whether any activities performed by GOMI qualified for research credits and if so, the amounts of such credits. At the time George’s contracted for the research study, alliantgroup had over 12 years of experience in conducting tax credit and incentive studies for clients. Its ranks are filled with people who are knowledgeable on the intricacies of the tax code, including tax attorneys and those with tax policy experience. One such person was Mr. Troutman. He had a long history at alliantgroup and specialized in research credit studies for the agriculture industry. He also was an attorney who went through extensive internal training at alliantgroup to stay on top of the latest developments in the area.

            The reputation of alliantgroup was also bolstered by Frost PLLC's recommendation. As Gary testified, Frost PLLC grew alongside George's and had a tremendous amount of knowledge about George's business operations. When Frost PLLC called regarding a possible collaboration with alliantgroup, it was reasonable for Gary to conclude that alliantgroup was competent in its field. alliantgroup had the necessary expertise to competently advise petitioners.

alliantgroup diligently requested and reviewed documents and met with employees to determine GOMI's eligibility for the research credits. Although petitioners did not directly provide alliantgroup with records, George's, the entity with the relevant documents, provided alliantgroup with open access to George's books and records and the plethora of data routinely gathered throughout the standard production process. George's used these documents for business purposes, including to determine grower compensation and to perform trend monitoring, so there is no reason to doubt the accuracy of the information contained therein. alliantgroup also had access to employees from the C-suite down to the field service technicians for interviews. Finally, alliantgroup worked closely with Frost PLLC, which provided additional documents, verified facts, and answered any lingering questions.

Tax Court in Order Denying Petitioner's Hail Mary § 6751(b) Pass Cautions Counsel About Speculative Claims, Particularly Those Impugning IRS Counsel (2/3/26)

I write again on another “Hail Mary” attempt by a taxpayer to get out of penalty to avoid the consequences of their own conduct/misconduct. The setting is the ubiquitous issue in penalty cases as to whether the IRS foot-faulted in the written supervisor approval requirement in § 6751(b). Not surprisingly, the setting is a conservation easement case with what appears to have been an excessive valuation claim—$44,937,000. (It is not clear from the Order whether it is a syndicated conservation easement, but that makes no difference for excessive valuation claims.) Usually, in those cases, a fair inference is that the promoters and those reporting the claim knew the valuation was excessive and thereby intended to report fraudulently within the meaning of § 6663 civil fraud penalty.

In Palmwood Holdings, LLC v. Commissioner (T.C. No. 17489-23, here, Order at # 54 dated 2/3/26), the IRS asserted the civil fraud penalty, § 6663, in the Answer to the Petition. Judge Urda briskly goes through the relevant facts that compel rejection of the petitioner’s Hail Mary pass. Judge Urda rejects petitioner’s wild speculations about some of the proffered summary judgment record. Judge Urda concludes (Slip Op.  4-5) with this cautionary advice directed to the tax matters partner's (Investment's) Counsel):

          We have time and again rejected the argument that penalties in fact [*5] recommended by the relevant IRS official were in substance determined by someone else. See, e.g., Sand Valley Holdings, LLC v. Commissioner, T.C. Memo. 2025-74, at *7–8; Cattail Holdings, LLC v. Commissioner, T.C. Memo. 2023-17, at *9–11. The “‘initial determination’ of a penalty assessment” is a formal action directed to a particular taxpayer. See Frost v. Commissioner, 154 T.C. 23, 32 (2020) (quoting Belair Woods, 154 T.C. at 15). The word “determination” has “an established meaning in the tax context” and denotes an action “with a high degree of concreteness and formality.” Nassau River Stone, LLC v. Commissioner, T.C. Memo. 2023-36, at *6 (quoting Belair Woods, 154 T.C. at 15). The record before us conclusively establishes that Mr. Wooldridge made the “initial determination” to assert the fraud penalty set forth in that pleading. Communications three years prior, even if they involved this case, would be neither here nor there.

Appellate Lawyer Tips (1/29/26; 1/30/26)

David Lat has this offering today on tips from Paul Clement, a prominent Supreme Court advocate. David Lat, 3 Tips For Appellate Advocates—From Paul Clement (Original Jurisdiction 1/29/26), here. The first tip is: 1. Listen, listen, listen. Lat expands on that tip, quoting another prominent transactional lawyer: “a critical skill for attorneys of all types is “the ability to listen, whether to your client or to the other side, so you really understand what is going on.” Of course, that was from a transactional lawyer. The point I want to address here for appellate lawyers is listening to the court and the opposing counsel. That is what Lat describes in detail in the blog.

I have shared an anecdote previously from my DOJ Tax Appellate experience about how listening closely to the interaction of the Appellate Panel with the Appellant’s counsel during the opening argument can inform how I make the appellee argument. Second Circuit NonTax Opinion on Glitches in the Appellate Process with JAT War Story (9/11/22), here.

The key point is that both the Appellant’s lawyer and the Appellee’s lawyer have to go into oral argument with a planned argument outline. Then the lawyers need to adapt based on what happens at oral argument, even casting aside their planned presentation that they worked so hard on; the hard work is not wasted because it should help the Appellate Lawyer roll with the punches. I would say that I rarely completed an oral argument going through the outline I prepared going in. I went one time to the Ninth Circuit in San Francisco and, although I had an outline and had worked hard, it was clear from the interaction of the Appellant attorney and the Panel, that I could not add anything of real value to the Panel, so I just said that it was clear the Panel understands the parties positions, so if there were no questions, the Government rested. I did something similar in my first Appellee oral argument in the Second Circuit where it was clear to me the Panel was not really engaged in my argument and appeared to be reading something else (perhaps the briefs or the clerk's memo on the next case) at the bench. So, after about 4 minutes of  a 30-minute argument, I brought my argument to a close. I was disappointed because I want to display my oral advocacy, but I made the right decision. 

(Added 1/30/26 11:00 am): This strategy of Appellee counsel making a short or no argument based on the dynamics of the Appellant's opening argument probably will not work in the Supreme Court because Appellee's (aka Respondent's) counsel want to put on their "stuff" and, in any event, the Justices will want to perform with thrusts and parries (performing either to counsel, the spectators in the room, or larger audiences who may listen to the oral arguments or read the transcripts or read newspaper reports; by contrast, there is rarely a significant number of spectators in tax appellate cases and, in any event, the panel judges can perform by engaging Appellee counsel who might otherwise make a short or no argument.)

I speculate, however, that if I had a Supreme Court respondent's argument and, based on the dynamics of petitioner's counsel's opening argument, I was fairly certain that I had a significant majority of the court, I might do a truncated argument of my full planned argument and, if I got no questions from the Justices, I might close out pretty fast (e.g., 5 or 10 minutes), hitting only the highest of the high points and addressing some points brought out in petititioner's counsel's opening argument. Again, however, I can't imagine that ever happening because of the Justice's real or perceived need for performance for audiences beyond counsel making oral arguments (other audiences including, of course, the other Justices).

In this sense, oral argument may be analogized to battle planning in wartime: one must have the plan going one but one must always be alert to modify or divert from the plan to deal with the battle as it actually engages.

I asked Gemini AI about the war plan analogy: 

Tax Court Addresses the Requirements for Substantial Compliance Relief (1/29/26)

In Aventis, Inc. v. Commissioners, 166 T.C. 1, No. 1 (1/28/26), TC here at Dkt 178 and GS here, the Court held against the taxpayer’s claim of qualification for financial asset securitization investment trust (FASIT) status. I don’t intend to address what FASIT status actually is or why Aventis fought so hard to qualify. Digging into the underlying merits would require more time and mental energy than I can devote right now. I address solely the portion of the opinion dealing with the substantial compliance doctrine, which is the issue  of interest to most tax procedure enthusiasts.

The discussion of substantial compliance is at Slip Op. 33-35; I quote here only the portion stating a general rule that might be used in other contexts (Slip Op. 34-35, cleaned up by (i) omitting most for each sentence in the first paragraph and (ii) omittinig one case citation and shortening the next two paragraphs):

           When there is a failure to comply with the essential requirements of the governing statute, no defense of substantial compliance is available. When requirements relate “to the substance or essence of the statute,” we require “strict adherence to all statutory and regulatory requirements.” On the other hand, if requirements are “procedural or directory in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance.”

           We have held that if a taxpayer wished to take advantage of subchapter S provisions, the taxpayer must comply with all of the statutorily mandated requirements.

             In Dirks v. Commissioner, T.C. Memo. 2004-138, aff’d, 154 F. App’x 614 (9th Cir. 2005), the Court declined to apply the substantial compliance doctrine to the statutory 60-day deadline applicable to individual retirement account rollovers under section 408(d)(3)(A) because “the 60-day rule is not regulatory but is found in the statute itself.”

Fifth Circuit Claims a Pro-Taxpayer Canon When the Court Should have Interpreted the Exemption in the Statute Fairly or Applied the Anti-Taxpayer Canon (1/27/26)

I posted much of the information in this blog entry at the bottom of the immediately preceding blog: Fifth Circuit Knows a Limited Partner When Reads It (1/24/26; 1/27/26), here. I decided that the information should not be buried in the prior blog but should be lifted into it’s own blog entry. So here it is. For context, yesterday’s blog was about the Fifth Circuit’s opinions in Sirius Solutions, L.L.L.P v. Commissioner, ___ F.4th ___ (5th Cir. 2025), CA5 here and GS here, which held that the limited partner exception in § 1402(a)(13) does not apply to earnings allocated to a nominal limited partner even though providing services to a limited partnership. Please note that I bold-faced exception because that the majority and the dissenting opinions agree it is an exception to the general rule of taxation. (In view of this blog entry, I have eliminated the information from the bottom of the prior blog entry.)

I ask readers to consider seriously footnote 8 of the majority Sirius majority opinion  spanning Slip Op. 23-24):

  n8 Even if the IRS and Tax Court’s arguments had persuasive authority, they would at most establish ambiguity. But that is not enough for the Government’s passive investor rule to prevail. It is a “longstanding canon of construction that if the words of a tax statute are doubtful, the doubt must be resolved against the government and in favor of the taxpayer.” United States v. Marshall, 798 F.3d 296, 318 (5th Cir. 2015) (quotation omitted).

First, Loper Bright claims (I think nonsensically) that courts can always interpret out ambiguity in the statute. See e.g., Chevron, Loper Bright, and Statutory Ambiguity (Federal Tax Procedure Blog 1/8/26; 1/9/26), here.  If there is genuine ambiguity where the court is unable to determine the best interpretation between two or more interpretations within the zone of ambiguity, the court will need a tie-breaker which artificially resolves the ambiguity to decide the case. Chevron offered such a tie-breaker, but Loper Bright rejected Chevron without substituting any other tie-breaker. Of course, the alleged "longstanding canon of construction the majority claims in footnote 8 could supply a tie-breaker in the majority's imagination. I address here the validity of the majority's claim of this "pro-taxpayer" canon of construction.

Canons of statutory construction  are “rules of thumb that help courts determine the meaning of legislation.”  They are said to “limit judicial discretion and render statutory meaning more predictable.”  E.g., Jonathan H. Choi, The Substantive Canons of Tax Law, 72 Stan. L. Rev. 195, 228-229 (2020), here. On the other hand, they are said to be “readily manipulable and [frustrate] the policy preferences of Congress.”  Karl Llewellyn famously observed that “there are two opposing canons on almost every point.”  

A variation on the theme is that maxims, which may function like canons, might be viewed as minims because they reveal so little and are "singularly unhelpful when it comes to deciding cases." United States v. Ingredient Technology Corp., 698 F.2d 88, 94 (2d Cir. 1983)

Professor Choi notes that the opposing canon  (called an anti-taxpayer canon) is to construe exemptions from tax against the taxpayer who cannot show that the statute requires the exemption. (See Choi, pp. 251-254.) Furthermore, Choi notes that the pro-taxpayer canon is not now in vogue. (See Choi, pp. 253-254, quoting Scalia and Garner arguing for applying the fair meaning of statutes; in any event, the anti--taxpayer rule for tax exemptions, "has been sufficiently widely validated and cited that, in my view, its place among the substantive canons is secure" and "the courts have widely embraced this canon." So, the mere fact that the majority felt the need, albeit in a footnote, to use the dubiously applicable pro-taxpayer canon instead of a fair meaning of the statutory exemption or the anti-taxpayer rule, is suspect.

Fifth Circuit Knows a Limited Partner When Reads It (1/24/26; 1/20/26)

Most readers of this blog will already have heard of or even read the opinions (majority and dissenting) in Sirius Solutions, L.L.L.P v. Commissioner, ___ F.4th ___ (5th Cir. 2025), CA5 here and GS here, Basically, the majority held that the limited partner exception in § 1402(a)(13) does not apply to earnings allocated to a nominal limited partner. Bottom-line that interpretation means that partners providing services to a partnership can escape the Social Security and Medicare tax on income they allocate to their limited partner interests even though that income is really the return on their personal services. The Tax Court held otherwise in the Tax Court phase of Sirius, based on Soroban Capital Partners LP v. Commissioner, 161 T.C. 310 (2023).

I do not plan to get deeply into the merits of the majority and dissenting opinions. Two reasonable articles are Jon Endean, Reflections on the Fifth Circuit’s Ruling on Limited Partner Exception (TaxProf Blog 1/21/26), here; and Maureen Leedy, Fifth Circuit Reverses Tax Court on Limited Partner Self-Employment Tax (ThomsonReuters 1/21/26), here.

On the merits, I do say that, it seems to me, the difference between the majority and the minority is that the majority is not practical in being a faithful agent to Congress and the minority, like the Tax Court, is more practical in being the faithful agent.

JAT Comments:

1. I think it relevant, at least at the margins, that the two judges in the majority are Trump appointees and the judge in the minority is an Obama appointee.

2. The differences in statutory interpretation driven by ideologies and, for the majority, simplisms is stark. A good example is the majority’s claim “legislative history is generally of dubious value in statutory interpretation” and the follow-through that “where, as here, textual arguments yield a clear answer, judges must stop.” (Slip Op. 19; cleaned up with internal quotations marks and citations omitted.) I think originalists have beat that horse beyond its ability to persuade; why is not Congress’ view of the legislation it enacted relevant to interpreting the legislation? If one takes the view, as I do, that interpreting the law is an exercise like fact-finding (see Chevron, Loper Bright, and Statutory Ambiguity (Federal Tax Procedure Blog 1/8/26; 1/9/26), here)), then why would not relevant evidence be considered for whatever persuasive value it might have?

Tax Court Dawson Access to Simultaneous Opening Briefs in Syndicated Conservation Easement (1/12/26)

Readers of this blog may know that the Tax Court’s Dawson tool shows the docket entries for cases but has historically included for public view by link only documents prepared and filed by the Court. Dawson is now showing some documents prepared and filed by the parties. For an example, I point to the Simultaneous Opening Briefs in Capitol Places II Owner, LLC v. Commissioner (T.C. No. 16536-23 here at ## 264-265) involving a syndicated conservation easement. (Simultaneous Opening Briefs are acronymed or initialized to SIOB in the system and I use that convention here.) Readers might particularly be interested in the Petitioner’s SIOB, at #265 (note that the Dawson system does not have permanent links, so those wanting to see or download the documents must do so from the docket entries which I link above). Added 1/12/26 @ 10:00pm: I have been reminded that, on 5/5/23, the Tax Court entered Administrative Order No. 2023-02, here, that PostTrial Briefs and Amicus Briefs would be available on Dawson to view and download.

Petitioner’s SIOB is 372 pages; the IRS’s is 221 pages. I have made no attempt to read either of those briefs, but I have paged through the table of contents of both briefs and some of the briefs (as discussed below). The Petitioner's table of contents is 12 pages long and indicates that the body of the brief is 339 pages long.

Judging from Petitioner's table of contents, Petitioner offers a generous smorgasbord of all imaginable claims, many of which appear to be Hail Mary arguments.  Gemini AI says a Hail Mary argument in a legal brief is an argument “highly unlikely to succeed but is included as a last resort, in the desperate hope that a court might accept it.” I am not opining that some of the arguments are weak on merits but merely offering my gut reaction. Of course, ultimately the fatal weakness in these shelters are the bullshit valuations that often accompany the syndications to justify the return reporting positions.

Some points I noted:

 1. IRS statement (p. 11):

 55. The 2014 Form 1065 claimed a noncash charitable contribution deduction in the amount of $23,909,000 for the façade easement contribution. Ex. 32-J.

 2. IRS ultimate findings of fact (pp 92-93):

ULTIMATE FINDINGS OF FACT

1. The FMV of the Subject Property prior to the donation of the easement was $2,770,000. Entire record.

2. The FMV of the Subject Property after the donation of the easement was $2,710,000. Entire record.

3. The FMV of the easement donation was $60,000. Entire record. 4. CP II Owner is not entitled to deduct (1) the $10,000 paid for the Clark Appraisal, (2) the $70,333 paid for the LDS, or (3) the $800,000 paid to GBX for “Tax Consulting” as rental real estate expenses, and those expenses were  properly reclassified as Other Deductions at Schedule K, Line 13d in the FPAA. Entire record.

5. The FPAA was issued timely and the assessment statute expiration date has not passed. Entire record.

6. The accuracy-related penalties asserted with respect to CP II Owner received timely  supervisory approval pursuant to I.R.C. § 6751(b). Entire record.

7. Penalties under I.R.C. § 6662 for gross valuation misstatement, substantial valuation misstatement, negligence,3 and substantial understatement of income tax apply; reasonable cause defenses do not apply. Entire record.

Fn 3 As discussed in respondent’s pre-trial memorandum filed on April 11, 2025, respondent is no longer asserting the negligence or disregard of rules or regulations penalty with respect to the noncash charitable contribution deduction adjustment.

Chevron, Loper Bright, and Statutory Ambiguity (1/8/26; 1/9/26)

Added 1/9/26 9:00pm: I would really appreciate readers notifying me of any case(s) they have read where the court said that it determined the best interpretation and nevertheless deferred under Chevron to a not best agency interpretation. Please respond either by comment or by email to me at jack@tjtaxlaw.com.

I start with two opposing statements:

“Chevron requires a federal court to accept the agency's construction of the statute, even if the agency's reading differs from what the court believes is the best statutory interpretation.” National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967, 980 (2005) (Thomas, J. for the Court).

ChatGPT’s response to the following question: “Can you find me a United States case where the court determined the best interpretation of a statute but nevertheless applied Chevron to defer to a not best agency interpretation?”:

No United States case is identified in the provided search results where a court explicitly determined the best interpretation of a statute but nevertheless applied Chevron deference to a non-best agency interpretation. * * * * The results highlight Chevron's requirement for courts to defer to reasonable agency views of ambiguous statutes but provide no instance where a court labeled its own view "best" yet deferred anyway, likely because such language would contradict Step One's mandate to enforce unambiguous meanings.”

[JAT Note in support of ChatGPT’s response: I have read many Chevron cases and do not recall that a court ever said it had determined than interpretation other than the agency's was best but deferred to the agency interpretation. At an anecdotal level, I read cases identified by other scholars as Chevron cases and found that not one of the cases said the court determined the best interpretation was other than the agency interpretation and nevertheless deferred to the agency interpretation. See Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here (focus on Category 5); and  Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (Federal Tax Procedure Blog 2/9/23), here (again focus on category 5). In not of those cases did a court state or fairly imply that it had determined a best interpretation and was deferring to the agency interpretation instead. Not one.]

I propose that (i) Chevron deference, properly applied, was a tie-breaker rule when a court found statutory text ambiguous as required to get past Step One (meaning that the court could not determine the best interpretation) and (ii) that Loper Bright’s rejection of Chevron deference leaves courts without guidance to resolve ambiguous statutory text. Of course, the phenomenon of statutory interpretive ambiguity is not unique to agency interpretations of statutes they administer, but at least Chevron offered a consistent and, in a sense, principled way to resolve ambiguity to reach a decision in the case at hand.