Thursday, February 11, 2021

Taxpayer First Act Report to Congress (2/11/21)

The IRS released the Taxpayer First Act Report to Congress (January 2021), here.  The Report covers considerable ground and, I confess, I have not studied the Report in detail.  Much of it seems on quick overview to be aspirational generalities, sprinkled with some specific recommendations.  I don’t know if I will really give it a detailed study in the future. 

I was pointed to the Report by this practitioner summary of the report:  Steve Toscher and Robert S. Horwitz, Time for Another IRS Reorganization (Tax Litigator Blog 1/24/21), here.  Here is an excerpt from that article that caught my attention (bold face supplied by JAT):

The Compliance Division will be reorganized.  LB&I, SB/SE, Wage & Investment, Exempt Organization will all be gone.  Instead, there will be Criminal Investigation, Whistleblower, Exam and Collection.   Exam will consolidate all exam operations that are currently spread among several units and Collection will be responsible for collection activities from all types of taxpayers (or as the report puts it, “all taxpayer segments”).  This is a similar structure to the one that existed for over 40 years before the 1998 restructuring act, i.e., an Examination Division, a Collection Division and a Criminal Investigation Division. 

The new “org chart” is here.

I suppose this is like “déjà vu all over again.”  (Attributed to Yogi Berra per Wikipedia, here.)

So, one might fairly ask why did the IRS restructure 20 years ago?  The answer is politics.  Readers wanting that history (or at least my version of that history) can see it in my book, Federal Tax Procedure 2020 (Practitioner Ed.), beginning on p. 34, here.

Monday, February 8, 2021

Supreme Court Opinion Syllabus as Persuasive Authority? (2/8/21)

I was working on an article Sunday on the APA and interpretive regulations (on which I have posted before).  In the article, I refer to the "Traditional Understanding" under the APA.  I used the term in   this and an earlier version to describe the understanding of the difference between legislative and interpretive regulations.  One facet of that Traditional Understanding is that legislative regulations and only legislative regulations are said in APA discourse to have the “force of law” or “force and effect of law.”  Interpretive regulations do not have the force of law; the statute is the law, not the interpretation. I was fairly certain that my use of the concept of a “Traditional Understanding” in this respect was appropriate.

Today, I was reviewing the opinion in Chrysler Corp. v. Brown, 441 U.S. 281 (1979).  The opinion uses the term “traditional understanding” but states the traditional understanding most clearly in the Syllabus to the opinion.  So, of course, I had to footnote something on the use of Supreme Court Syllabi because most lawyers of my generation would say that’s a no-no.  (Sort of like lawyers, scholars and courts used to look down on the use of Wikipedia.)  Here is what I say about that (from a footnote):

The Supreme Court called a key component of the Traditional Understanding as I call it–that legislative regulations have force and effect of law–as the “traditional understanding.” Chrysler Corp. v. Brown, 441 U.S. 281, 295-296 (1979) (this may not be as to persons who are not experts in reading Supreme Court opinions, but I think that the clarity is supplied by the Syllabus to the opinion which states the “traditional understanding” (p.  285)): 

properly promulgated, substantive [legislative] agency regulations have the “force and effect of law.” In order for a regulation to have the “force and effect of law,” it must be a “substantive” or “legislative-type" rule affecting individual rights and obligations (as do the regulations in the case at bar), and it must be the product of a congressional grant of legislative authority, promulgated in conformity with any procedural requirements imposed by Congress.

The part of the Chrysler opinion this portion of the Syllabus refers to (pp. 295-303) is not as crisp, but I think it incorporates the same concept.  I recognize that the Supreme Court Syllabi caveat that the Syllabus is not part of the opinion (see also United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337 (1906)) but it is reported that, in modern Supreme practice, the author of the majority opinion or his or her law clerk reads the Syllabus for accuracy.  Carolyn Shapiro, Coding Complexity: Bringing Law to the Empirical Analysis of the Supreme Court, 60 Hastings L.J. 477, 498 (2009).  For an argument that the Syllabus stands for something if not the holding in the case, see Gil Grantmore, The Headnote, 5 Green Bag 2d 157, 161 (2002) noting (emphasis supplied):

As Justice Ginsburg explains, “the justice who wrote the opinion may edit [the syllabus] and sometimes rewrite passages, as I more than occasionally do, mindful that busy lawyers and judges may not read more.” Thus, the syllabus of Detroit Timber days is not the syllabus of today - today's is more widely available and more reliable. The argument for giving the syllabus at least persuasive effect - which is not foreclosed by Detroit Timber anyway - is even stronger today.

Sunday, February 7, 2021

Lenity and Chevron Deference - Some Thoughts in a Tax Context (2/7/21)

 I am now working on a larger article that incorporates a discussion of the interface of lenity and Chevron deference, both of which supply rules of interpretation to ambiguous statutory text at least where Chevron can apply (i.e., where the agency has adopted a Chevron-entitled reasonable interpretation that is different than the interpretation the court thinks is the best interpretation).  Basically, I think the law is as of now ambiguous as to how Chevron interfaces with lenity where both may be truly applicable.  I emphasize truly applicable for Chevron because I think much of the commotion about Chevron really does not involve situations where Chevron is truly applicable.  In my analysis earlier in the paper I say Chevron is truly applicable only in what I call Category 5 – where the court believes its own interpretation (after perhaps giving Skidmore deference to the agency interpretation) is still better than the agency reasonable interpretation.

I post below the text (but not the footnotes) to my discussion in the hope that readers may (i) be interested and (ii) can offer constructive comment.  Thanks in advance.

I discussed above the claim that an interpretation which affects penalties is transformed into a legislative rule.  The underlying concern is that Congress alone can enact criminal penalties and the text of criminal statutes (at least as interpreted by the courts) must clearly set the standard of conduct being penalized.  Further, there is the rule of lenity, often described as a canon of construction, that requires that courts interpret ambiguity in criminal statutes in favor of the defendant. The rule of lenity and true Chevron deference (the Category 5 deference) would thus conflict if both were to apply to a criminal statute.  One author has described the conflict as between a “government always loses” standard (lenity) and a “government always wins” standard (Chevron deference).  The answer is less than clear (at least to me) because of the distractive rhetoric that attends discussion of the issue.

Rather than trying to resolve all that rhetoric to some form of black letter law (I think an impossible task on the state of the discussion), I will just try to analyze how the discussion might play out in my area of expertise–tax with a subspecialty in criminal tax. 

Many criminal statutes impose an express element that the defendant have acted “willfully.”  The criminal statutes do not define “willfully,” As authoritatively interpreted by courts, willfully can mean different things in different criminal statutes.  In Bryan v. United States, 524 U.S. 184, 191 (1998), the Court famously noted that noting that the word is a chameleon, “a word of many meanings whose construction is often dependent on the context in which it appears.”  I think that, in Chevron analysis, this is simply to say that when, in a criminal statute, Congress makes willfully an element, there is interpretive space that must be filled to give meaning to the statute as to which of the possible meanings of willfully applies.  Traditionally, that interpretive space in a criminal statute is filled by the courts.  Key Title 26 tax crimes have the requirement that the defendant act “willfully,” interpreted as the highest level of mens rea–that the defendant intended to violate a known legal duty, a standard that is not met just by reckless conduct.  Cheek v. United States, 498 U.S. 192, 196 (1991).  In other criminal contexts where the statute imposes a willfully element, the courts impose, through interpretation, a lesser mens rea standard.  The lower level of mens rea is said to be the general rule for interpreting a statutory willfully element.  The higher level of mens rea applies only to a small subset of crimes where willfully is a statutory element and is said to be an exception to that general rule.  Determining whether the general rule or the exception applies can be a bit esoteric but that need not concern us here.  Suffice it to say for present purposes, Treasury could not, by regulation, authoritatively and binding on the courts interpret the term “willfully” in the elements of tax crimes such as tax evasion to include, for example, a general intent to do some unlawful or reckless conduct without specific intent to violate a known legal duty. I think that is a fair statement of the law.