Make Tax Procedure Great Again Caps for Sale (10/14/19)

I am offering for sale the "official" cap -- Make Tax Procedure Great Again (see image at right).

I offer them for a per unit cost that covers my costs of purchase, tax and mailing.  Here is the breakdown, with the costs depending upon the number purchased by me which I will then pass on.

Number Ordered	My Per Cap Cost	Tax	Total	Your Price
12	$25.73	$1.54	$27.27	$30.00
20	$20.23	$1.21	$21.44	$25.00

As you can see, I am not really looking to make money on the sale of caps.  I suspect that the difference between my purchase price and sales price is just a bit more than the cost to mail the caps, but not much.

Let me know if you are interested by emailing me at jack@tjtaxlaw.com. After I determine the number interested, I will set the final Purchase Price and then advise where to send the check and provide the delivery address for the caps.  Keep in mind that the caps are not yet made.  I am told that the time to make and deliver the caps to me is about 2 weeks.

On Statutory Interpretation - Textualism / Originalism (10/11/19)

Just this week, I was working on the issue of “original public meaning” to update my Federal Tax Procedure Book and earlier article that needs refreshing (soon) for posting on SSRN.  Original public meaning is a strategy for interpreting text – constitutional and statutory.  (I suppose, also, since it is text interpretation, we might apply it to religious texts, like the Bible, but that is a related but different subject.)

Just this week, the Supreme Court held oral arguments in Bostock v. Clayton County and Harris Funeral Homes v. EEOC (see SCOTUSBlog summary here).  The issue is whether Title VII of the Civil Rights Act of 1964, which bars employment discrimination “against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin,” bars sex discrimination based on sexual orientation (Bostock), or on transgender status (Harris).  The issue is one of statutory interpretation of the word sex in the statute.  What does sex mean?  (I suppose it is not like pornography, difficult to define but we know it when we see it.)  Does the statutory text mean what sex meant in the statutory context in 1964 or can its meaning evolve as the context for its application changes?  (One variant of the question involving textual interpretation, although not a Constitution or statute, is the Declaration of Independence declaring that "all men are created equal"; do we interpret that as the signers of the declaration or the public at the time would have interpreted it (it does not include blacks whether free or slave and likely not women as well) or in light of developed reason (really, all men and women are created equal).)

The general category of statutory interpretation that looks to the text and context as interpreted upon enactment (1964) for meaning is called “originalism.”  Originalism itself can break down into categories, including original public meaning.

So, I thought I would offer first my revisions to the Federal Tax Procedure discussion (keep in mind that these revisions will appear in the 2020 edition, and are likely to be further revised before formal publication).  In the text off this blog I offer just the text without the footnotes.  The text with the footnotes can be downloaded here.  I discuss originalism under the heading textualism (which I generally contrast to purposivism) because conservative textualists tend to fall in the originalist camp.

(a) Textualism. 

Textualism is an interpretive strategy that focuses principally or even exclusively on the statutory text enacted by Congress.  Justice Scalia was perhaps the most vocal advocate.  Focusing on the statutory text, the goal for textualists is to determine and apply the “original meaning” (sometimes called the “original public meaning”) at the time of adoption or enactment. subject perhaps only to the use of linguistic canons of interpretation.  With the rising prominence of Justice Scalia’s proclaimed textual brand of textualism, even Justice Kagan has proclaimed that “we’re all textualists now.”  

Of course, for statutes–and for the Constitution– allegiance to the text is required, so in that sense no reasonable judge could claim not to be a textualist.  The question is how much freedom for interpretation does the text reasonably allow?  Is the text so crystal clear that it allows only one meaning with no interpretation required?  Currently, those, like Justice Scalia, branding themselves true textualists (true textualists would not include Justice Kagan among their ranks) will focus on the meaning at the time the statute was enacted (or for constitutional interpretation, when the constitution or amendment was ratified).  This falls under the broad umbrella of “originalism” both in statutory and constitutional interpretation.  But, even with that focus, problems of interpretation inhere.  Back in grade school, our teachers taught that an utterance can have at least three meanings:  the meaning that the person speaking intended, the meaning that the words by themselves would convey, and the meaning the person hearing the words ascribed to the words.  So, in statutory interpretation, does the textualist judge try to determine (i) what the legislature “intended” the words to mean, (ii) what the words say without consideration of what the legislature intended or even what a reasonable reader might thought the words to mean at the time, or (iii) what a reasonable person at the time would have interpreted the text to mean (and further who exactly is the mythical reasonable person, because it will matter whether it is a legislator, a lawyer trained in reading statutes, a pastor or seminarian (trained in interpreting text), a person of average education (say, high school) in the United States, a lexicographer (or just a dictionary), or the result of algorithms searching big data from the time)?  The latter textualist interpretive strategy (iii) now goes by the rubric “original public meaning,” which seems to have some currency today among the true textualists. 

Since all interpretive strategies must all focus on the text, that really does not help us understand what the strategy currently called textualism really means.  I think it means that textualist judges will more readily find that texts have some plain or ordinary meaning, with minimum interpretation (other than the focus on originalism discussed above).  As Justice Scalia noted in the Chevron deference context which arises only if the statutory language is ambiguous, the textualist is much more likely to find statutory text plain and unambiguous. 

Moreover, even textualists reject textualism in some cases.  The plain text in statutes that are unconstitutional cannot govern.  Similarly, the absurdity canon (also called anti-absurdity canon) avoids a plain text meaning  if it produces an absurd result.  So we know there are limits to the textualist interpretive strategy.  And perhaps in recognition now, although there are some claims the judges are all textualists now, a recent survey of forty-two federal appellate judges found few of the judges that were full bore textualists. 

The role, if any, of legislative history has been a particular flashpoint for textualists.  The textualist concept is that only the text of the statute was enacted by Congress.  The legislative history was not enacted by Congress and thus, at most, represents only the views of the subset of members of Congress who produced the legislative history.  For textualists, materials extraneous to the statutory text (including, most prominently, legislative history) “greatly increases the scope of manipulated interpretation, making possible some interpretations that the traditional rules of constructions could never possibly support.”  However, even textualists sometimes cite legislative history but claim to avoid the use of legislative history to “muddy the meaning of the clear statutory language.”  In other words, textualists–at least true textualists–may use legislative history when it confirms their determination of the text’s plain or ordinary meaning but claim not to use legislative history when the legislative history is inconsistent with their determination of the plain or ordinary meaning. 

Some have noted that the textualists’ claims about legislative history are at some tension with their claims about the “originalism” interpretive strategies noted above.  Legislative history would at least be some evidence as to what the legislature thought the enacted text meant.  And legislative history would be some evidence even of what the original public meaning was.  

(b) Purposivism. 

Other jurists find that broader legislative context, including legislative history, assists in interpreting text and are willing to look to that broader context to determine how the enacted text should be interpreted to honor and apply the meaning Congress had or should be deemed to have had for the text.  This is not the same as a search for Congress’ collective “intent,” but, in order to honor the primacy of Congress’ role, it considers all factors even if beyond the statutory text  that bear on Congress’ will in enacting the statute.  This approach to interpretation has different iterations that go by terms such as purposivism, intentionalism, and the practical reason (or dynamic) method.  I use the term purposivism because it appears to be the broad umbrella term to contrast with the rival statutory theory of textualism.  

(c) Common Goal; Different Approaches; Different Outcomes. 

The proponents of each of these two rival broad categories of statutory interpretation claim that they are faithful agents of Congress. They just approach the goal in different ways that they, respectively, feel better assures that Congress and not the courts make the law.  In many, I suspect most, cases, the two inquiries reach the same results in resolving the cases at hand.  But, the two approaches–depending upon how they are applied–could reach different outcomes.

Now, for some good discussions of the issue of originalism in the context of the Title VII sex discrimination cases, I recommend a blog and a WAPO column, because they frame the issue (even when I do not personally agree with the resoluitions):

• Dale Carpenter, Of loose cannons and loose canons in Title VII (The Volokh Conspiracy 10/9/19), here.
• George Will, It’s not the Supreme Court’s job to say whether ‘sex’ includes sexual orientation (WAPO 10/4/19), here.

Chief Counsel Advice to IRS Attorneys on Treasury and IRS Policy Statement on Tax Regulatory Process (9/25/19)

I have written before on this blog and in a recent article on the subject of the continuing viability of IRS interpretive regulations under the Administrative Procedure Act ("APA").  See e.g., Article on the Continued Viability of the APA Category of Interpretive Regulations (Federal Tax Procedure Blog 6/21/19), here; and see generally all blog entries on the subject sorted by relevance (but can be sorted by date), here.

In one of the blog entries I discuss the Treasury and IRS Policy Statement on the Tax Regulatory Process.  See, Treasury and IRS Policy Statement on Tax Regulatory Process (Federal Tax Procedure Blog 3/17/19), here.  The Policy Statement is here.

IRS Chief Counsel has issued a memorandum on the Policy Statement:  CC-2019-006 (9/17/19) re Policy Statement on the Tax Regulatory Process, here.  The purpose of the memorandum is to inform Chief Counsel attorneys of the general requirements of the Policy Statement.

As relevant to the issue I have spent significant time on recently--the issue of the continuing viability of IRS interpretive regulations qua the interpretive regulations category under the APA, CC-2019-006 says:  "the policy statement provides that Treasury and the IRS will continue to adhere to their longstanding practice of using the notice-and-comment process for interpretative tax rules published in the Code of Federal Regulations."

JAT Comments:

1.  Exactly.  For those wanting my views on that subject, see the article:  Townsend, John A., The Report of the Death of the Interpretive Regulation Is an Exaggeration (June 6, 2019). Available at SSRN: https://ssrn.com/abstract=3400489.

2.  Also, CC-2019-006 repeats the commitment in the Policy Statement not to assert Auer deference for subregulatory advice.  The Policy Statement was issued before the Supreme Court sustained Auer in limited application in Kisor v. Willkie, ___ F.3d ___, 139 S.Ct. 2400 (2019), here.  Hence, the Policy Statement apparently surrenders some Auer authority for subregulatory guidance, and CC-2019-006 confirms that.   In this regard, Auer involves deferring to agency subregulatory interpretations of ambiguous regulations' text.  But, the Policy Statement says that the IRS will not do assert Auer deference.  Presumably, DOJ Tax will not either, but I have seen no announcement to that effect.  I  have written on this issue:  Auer Deference and Treasury and IRS Policy Statement on the Tax Regulatory Process (7/6/19), here.

FTP2019 Update 03 - Minimum Payments and Voluntary Payments with OICs (9/25/19)

I have posted Update 03, here, dealing with minimum and voluntary payments required with OICs.  A listing of updates (with links) through today is here.

The update deals principally with Section 7122(c) dealing with minimum payments upon submission of OICs.

The page for the book editions and updates is at the right, titled 2019 Federal Tax Procedure Book & Updates, here.

Pfizer Suit for Overpayment Interest Transferred to CFC for Tucker Act Jurisdiction (9/12/19; 9/25/19)

I write today on the recent decision in Pfizer, Inc. v. United States, ___ F.3d ___ ,2019 U.S. App. LEXIS 27843 (2d Cir. 2019), here.  Pfizer involves overpayment interest, normally one of the more boring issues in the tax law.  It also involves some arcane rules, and finally involves taxpayer forum shopping, one of the arts of the tax litigator's trade (perhaps not exciting but certainly important).

I start with some basic background.  Section 6611(a), here, says unequivocally that "Interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax."  There is no question that a taxpayer with an overpayment is entitled to interest on the overpayment -- at least generally (that qualifier "generally" suggests exceptions that play prominently in this blog entry).

Other rules that come in play are:

1.  § 6611(b)(2) says that interest is due from the date of the overpayment "to a date (to be determined by the Secretary) preceding the date of the refund check by not more than 30 days, whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer."  This is called the "back-off" period and, as stated may be less than 30 days.  Most importantly, if the refund check is not accepted by the taxpayer upon tender, overpayment interest no longer accrues beyond the back-up date.  [JAT note:  This back-off period did not seem to apply in Pfizer, and I include it as a step to get to the applicable section discuss in paragraph 2.]

2.  § 6611(e)(1) says that no overpayment interest may be paid if the refund is made within 45 days of the due date (determined without regard to extensions), or, if later, the actual filed date of the return reporting the overpayment.

Pfizer filed a timely (on extension) 2008 return on 9/11/09 reporting a net overpayment of $499,528,499 (after application of an amount to its next year estimated tax).  The IRS prepared six checks for the overpayment aggregating to that amount.  The IRS apparently mailed the overpayment refund checks on or around October 19, 2009 (well within § 6611(e)(1)'s 45 day interest-free period from the date of filing, so the checks would have aggregated $499,528,499 without any overpayment interest), but the checks were never delivered to Pfizer.  Pfizer started contacting the IRS about the overpayment refund in December and continued thereafter, with the IRS canceling the checks and then depositing the amount of the overpayment refund claim ($499,528,499) directly into Pfizer's account on March 19, 2010 just over one year from the original overpayment (the due date of the return without extensions).

The interest on the period from the normal due date (March 15, 2009) to Pfizer's actual receipt of the overpayment funds was substantial ($8,298,048, even with the reduced rate for corporate overpayments), so Pfizer wanted to pursue the matter.  It did so by filing a claim for the overpayment interest "three years after receiving the refund."  (I note in the comments below some issues about how overpayment interest claims are made, but the Pfizer Second Circuit opinions do not address that issue, so I move on here; suffice it to say that, somehow, Pfizer made the claim for overpayment interest.  I will say that, at least potentially relevant to the concurring opinion, there is no explanation as to why Pfizer waited so long to present the formal claim, although the IRS apparently told Pfizer that the statute of limitations on the claim for overpayment interest was six years rather than the two year period for refund claims.)  The IRS denied the claim for overpayment interest based on the issuance of the overpayment checks in October 2009, which checks were apparently lost in the mail before delivery to Pfizer.  Pfizer then filed the suit for the overpayment interest.

There is no question that Pfizer could have filed the suit in the Court of Federal Claims (CFC) under Tucker Act jurisdiction.  (More on this later.)  Instead, Pfizer filed in the district court for SDNY.  The reason for that was to obtain favorable precedent in the Second Circuit, Doolin v. United States, 918 F.2d 15 (2d Cir. 1990), here, that held that a refund check not delivered to the taxpayer had not been tendered and thus did not suspend overpayment interest under § 6611(b)(2) (which stops interest after the refund check is tendered to the taxpayer whether or not the refund check is cashed by the taxpayer).  While Pfizer involved § 6611(e)(1), the same types of considerations as the Court invoked in Doolin would seemingly apply.  The CFC had no such favorable precedent, but also had no unfavorable precedent.  Still, if the taxpayer could find appropriate jurisdiction in the district court, then it had seemingly a winner under Doolin.  Pfizer is thus a classic example of taxpayer forum shopping.

Does Failure to Assert Graev 6751(b) Issue in Claim for Refund Foreclose Asserting in Refund Suit? (9/13/19)

For some reasons, although I had this case in my database, I had not reported on it.  Ginsburg v. United States, 123 A.F.T.R.2d 2019-553 (M.D. Fla. 3/11/2019), here, on appeal to the Eleventh Circuit (No. 19-11836-J).  The Procedurally Taxing Blog has a good write up, so I won't re-do the ground covered there.  See Keith Fogg, Variance Doctrine Trumps IRS Failure to Obtain Administrative Approval of Penalty (Procedurally Taxing Blog 5/6/19).  I do, however, offer some musings.

The issue relates to the requirement that the IRS meet a production burden under § 7491(c) with respect to the written manager approval under § 6751(b).  The issue is sometimes referred to as the Graev issue because of the cases that first prominently raised the issue is a very public way in the first opinion in Graev v. Commissioner, 147 T.C. 460 (2016).  Although the issue was rejected in that opinion, it was later reversed in Graev . Commissioner, 149 T.C. 485 (2017) (reviewed opinion), based on Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017). There has been a lot of litigation about the Graev issue, usually in the Tax Court.  Sometimes, where the IRS can show the proper written approval but had not, consistent with prior Tax Court precedent, introduced the evidence at trial, the Tax Court will permit the IRS to open the record to introduce the approval, and that ends that.  Sometimes the Tax Court will not open the record and, because the IRS had the production burden it did not meet, that ends that as well.

The setting here for the issue is a refund claim.  We all know the general rule that the taxpayer must state the grounds for entitlement to a refund in the refund claim and failure to do so precludes the taxpayer from asserting the grounds in an ensuing refund suit.  Ginsburg did not include the Graev issue in his claim for refund.  The timing of the claim for refund with respect to the Graev issue timeline is not clear from the district court opinion, but I infer that the claim for refund was made and denied before the Chai decision which started the taxpayer wins on the Graev issue.  It might be helpful to look at the time line:

11/30/16	Graev v. Commissioner, 147 T.C. 460 (2016) (holding that the relevant § 6751(b) date is the assessment date not the assertion of the penalties in the notice of deficiency or some predicate act)
1/20/17	IRS denies Ginsburg claim for refund which did not raise the Graev issue.
3/20/17	Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017) (holding that the Tax Court was wrong in Graev and that the written approval must exist prior to the notice of deficiency or even some predicate action)
12/20/17	Graev . Commissioner, 149 T.C. 485 (2017) (Supplemental Opinion, reviewed, adopting Chai).

Altera Petition for Rehearing and DOJ Tax Response in opposition in Altera Case (8/31/19)

I previously discussed the decision in Altera Corp. & Subsidiaries v. Commissioner, 926 F.3d 1061 (9th Cir. 2019), here, where the reconstituted Ninth Circuit panel held that the taxpayer must include stock option costs in its qualified cost sharing arrangement ("QCSA") calculations of costs.  See Ninth Circuit Reverses Unanimous Tax Court in Altera (Federal Tax Procedure Blog 6/7/19; 6/20/19; 7/2/19), here.

Altera filed a petition for rehearing en banc.  See Steve Dixon, Petition for Rehearing En Banc Filed in Altera (Miller & Chevalier Tax Appellate Blog 7/24/19), here (which has a link to obtain a copy of the petition).  As in the panel consideration, several amici curiae have submitted briefs.  The Court ordered the Government to respond, and DOJ Tax has now filed its response opposing rehearing en banc.  See DOJ Tax brief in opposition, here.

I do not link the amicus briefs which, I suppose, may not be all in yet.  I have not yet read them and, if I do, and think any are significant I will add to this blog entry.

The Government's Response Brief is quite good, in my opinion.  It clearly and succinctly steps through the bases touched in the majority panel opinion.  (See my blog above and, of course, the opinion linked above).  Basically, in summary:

1.  Applying the Chevron Framework (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), here), the regulation requiring inclusion of stock option costs is a reasonable interpretation under Chevron's Step Two within the scope of the statutory ambiguity getting the issue past Step One.

2.  The regulation was procedurally regular under the State Farm test.  Motor Vehicle Manufacturers Association of United States, Inc. v. State Farm, 463 U.S. 29, 41-45 (1983), here. The State Farm test is based on 5 USC 706(c)(2)(A), here, which, surprisingly, DOJ Tax does not cite in its Response.

That's it folks.  Except for the commotion in the case (prominent corporate taxpayer with lots of money at stake and other nonparty corporate taxpayers with lots of money at stake), lots of heat with some light (I think particularly in the majority panel opinion and the DOJ Response linked above, and the fact that the Tax Court in a unanimous reviewed opinion slipped off the rails), there does not appear to me to be enough real substance to the petition to warrant rehearing en banc or petition for certiorari in the case as it stands now.  Just my opinion (and nobody has paid me or would pay me to render it or cares that I have rendered it.)