Loper Bright’s Motivated Mistreatment of Statutory Ambiguity and Best Interpretations (8/28/25)

On August 26, 2025, I gave a talk to a Houston tax group, the Wednesday Tax Forum. The paper I circulated was a high-level summary of a longer article that I have submitted for publication in the ABA Tax Lawyer in Spring 2024; the submitted article addresses the tax implications of Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 377-378 (2024), see Preliminary Print here. I link that summary here so that readers may download if they wish. Note that the linked summary is redlined to show changes that I made shortly after giving the talk. I will not attempt to further summarize the arguments.

I address in this blog entry the overarching claim that I make. The domain of Chevron was a state of ambiguity where the court was not able to determine whether the agency interpretation or an opposing interpretation was the best interpretation. I call that state interpretive equipoise to relate it to the more familiar concept of factual equipoise where a factfinder is unable to determine whether a critical fact exists or not. In a state of factual equipoise, the factfinder resolves the issue by holding against the party bearing the burden of persuasion on that fact. In a state of interpretive equipoise, the court cannot find that either the agency interpretation or the opposing interpretation is the best interpretation. Chevron resolved the case in that state of interpretive equipoise, effectively placing on the opponent of the agency interpretation a burden to persuade the court that its opposing interpretation was “best.”

Why did Chevron tilt in favor of the agency interpretation in a state of interpretive equipoise? First consider the alternatives. Would it be acceptable for courts to decide in equipoise by flipping a coin, consulting a ouija board or soothsayer, or some other unprincipled way of resolving the ambiguity? Of course, that would not be acceptable. Still, courts must resolve interpretive issues in equipoise in some way. Chevron offered that way. I will address below why that is a principled resolution based on the APA, but I ask first what Loper Bright offered in lieu of Chevron to resolve cases of interpretive equipoise?

Loper Bright offers nothing for interpretive equipoise other than the ill-considered notion that courts can always interpret out all ambiguity to derive the single best interpretation. That would be nice if it made logical sense or experiential sense. Courts have the same interpretive skills after Loper Bright that they had under Chevron where they were admonished by Chevron’s famous footnote 9 to use those skills to avoid ambiguity where possible. Nevertheless, in some cases, ambiguity remained. I submit that cases of ambiguity—interpretive equipoise—will remain under Loper Bright. Loper Bright offers no guidance on what a court does where, using its best interpretive skills in de novo review, ambiguity exists.

Traditional Skidmore will not solve the problem of interpretive equipoise. Traditional Skidmore simply requires courts to respect agency interpretations in determining the best interpretations. The phenomenon I address here is where, after using all of those tools of interpretation (including Skidmore), the court cannot determine, as between the agency interpretation and the opposing interpretation, which is the best interpretation. Both interpretations must be in play—that is reasonable within the scope of the statutory ambiguity—but neither is the best interpretation. In that state of play, Loper Bright offers no way to resolve the case.

Of course, I say traditional Skidmore. Skidmore has traditionally been called Skidmore deference even though it was not deference but simply a consideration in reaching the best interpretation. See Really, Skidmore "Deference?" (Federal Tax Procedure Blog 5/31/20; 2/14/21), here. It is possible that, post-Loper Bright, courts may reimagine Skidmore to fill some of the conceptual space on the spectrum between respect and deference, sort of more than respect but less than deference, if that is a possible thing, say deference “light.” I can’t offer anything meaningful on that possibility.

6th Circuit Joins 2nd and 3rd Circuits in Holding § 6213(a)’s 90--day Petition-Filing Deadline is Not Jurisdictional (8/25/25)

In Oquendo v. Commissioner, ___ F.4th ___ (6th Cir. 8/25/25) (CA6 here, TN here, and GS here [to come]), the panel held unanimously that § 6213(a)’s 90-day petition-filing deadline was not jurisdictional and is thus subject to equitable tolling; so finding the panel remanded to the Tax Court to consider Oquendo’s entitlement to equitable tolling. The holding is consistent with prior decisions by the Second Circuit and the Third Circuit. Buller v. Commissioner, ___ F.4th ___ (2d Cir. 8/13/25); and Culp v. Commissioner,  75 F.4th 196 (3rd Cir. 2023), cert. den. ___ U.S. ___, ___ S.Ct. ___, 2024 U.S. LEXIS 2725 (Federal Tax Procedure Blog 2024). See Second Circuit Allows Possible Equitable Tolling for 90-day Petition for Redetermination of Deficiency (Federal Tax Procedure Blog 8/14/25), here (discussing Buller and Culp). The Supreme Court denied the Commissioner’s petition for cert in Culp; as I said in the blog on Buller, I doubt that the Government would file a petition for cert with two losses and no wins in the Courts of Appeals; now there is three losses and no wins.

JAT Comments: 

1. I suspect that the issue will not go to the Supreme Court before an actual conflict develops in the Courts of Appeals and then, of course, it would be the taxpayer petitioning for cert.

2. More likely, now with three losses, I suspect that the Tax Court will reconsider its position that § 6213(a)’s 90-day petition-filing deadline is jurisdictional. There should be cases in the pipeline that will permit the Tax Court to do that expeditiously if it wants to act expeditiously.

3. Moreover, I suspect that the Tax Court may relax its sparing approach to finding a taxpayer can satisfy the requirements for equitable tolling; if the Tax Court does not, the Courts of Appeals may intervene as these cases are appealed. On the Tax Court’s sparing approach to finding equitable tolling, see the blog cited above, quoting from the Federal Tax Procedure Book Editions.

Correction to Federal Tax Procedure Editions on the Late/Former Commissioner Billy Long's Credible Experience--Actually None (8/22/25)

A friend pointed out that, in my Federal Tax Procedure Book Editions, I misdescribed Billy Long, the recently departed Commissioner of Internal Revenue, as having “credible experience in either tax or management experience.” (See Student Ed., pp. 26-27; Practitioner Ed. p. 45.) I left out “no” before “credible.” So, with apologies to the readers of the editions, I have revised the paragraph in the 2026 Working Draft as follows (with changes in redline; text only).

          On June 12, 2025, the Senate confirmed Billy Long, President Trump’s choice, for Commissioner of Internal Revenue. The nomination and confirmation were controversial because (i) the confirmation was preceded by chaos among the acting IRS leadership, and (ii) more importantly, Long had no credible experience in either tax or management experience. Apparently, for that reason and probably also other disqualifying factors, President Trump removed Commissioner Long, dressing up that removal as a move to permit him to serve as Ambassador to Iceland (rather than a mistake in the first place). Treasury Secretary Scott Bessent is now Acting Commissioner.

 I also note that I did get it right in a footnote which ends as follows:

JAT Editorial Comment: Long appears to have no relevant qualifications to be Commissioner of Internal Revenue other than sycophancy to President Trump which is the only credential he needed to be approved by the Senate on a party-line vote.

Tax Court Rejects SCE’s Hail Mary Jarkesy Pass (8/21/25)

In Silver Moss Properties, LLC v. Commissioner, 165 T.C. ___, 1No. 3 (2025) (T.C. Dkt. No. 10646-21, here, at Entry # 109, GS [here])), the Court acting as referee called out that Taxpayer’s Hail Mary pass* to avoid the civil fraud penalty. Since the Tax Court (or someone for it) has already stated the essence of the case in a Headnote, I just copy and paste it here:

           A partnership subject to the audit and litigation procedures of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248, 96 Stat. 324, donated a conservation easement and claimed a charitable contribution deduction under I.R.C. § 170. P, the tax matters partner, timely petitioned this Court challenging the IRS’s Notice of Final Partnership Administrative Adjustment. R later amended his Answer to assert a civil fraud penalty against the partnership under I.R.C. § 6663(a).

          P filed a Motion for Partial Summary Judgment, citing SEC v. Jarkesy, 144 S. Ct. 2117 (2024), and contending that this Court is barred from adjudicating the civil fraud penalty because U.S. Const. amend. VII guarantees a right to trial by jury in such actions, which is not an option in this Court.

          Held: U.S. Const. amend. VII does not apply to suits against the sovereign, and Congress has not otherwise consented to trial by jury in TEFRA partnership-level actions.

          Held, further, the “public rights” exception to U.S. Const. amend. VII applies to a civil fraud penalty under I.R.C. § 6663(a).

          Held, further, this Court may adjudicate an I.R.C. § 6663(a) civil fraud penalty.

This plaintiff in the case appears to be a Tax Matters Partner for an LLC taxed as a partnership, which appears to be the favored format for the flurry of bullshit Syndication Conservation Easement ("SCE") tax shelter cases plaguing the Tax Court now with wholly inappropriate drains on the Tax Court's , the IRS’s and the public fisc resources. I don't know if this particular case involves an abusive tax shelter, but it seems to have the same earmarks, including the same lawyers involved in some of the abusive shelter cases. 

 JAT Comments:

1. (Warning, this is a multi-paragraph comment #1): In this case, the IRS did not originally assert the civil fraud penalty, §6663, in its FPAA. The Court granted the IRS motion for leave to file the amended answer asserting the fraud penalty based on discovery from the petitioner. (See Docket entry # 37.) I presume that the FPAA originally asserted the 40%  gross overvaluation penalty. §6662(h), a penalty that is almost always finally applied by the Tax Court in these  SCE cases, if properly asserted, because well simple mathematics shows a gross overvaluation. So, the difference is 25% (which, like civil penalties, generally accrues interest from the date the return was due). Which means that the cost of playing the audit lottery can be more than the taxpayers (encouraged by the promoters who promoted bogus valuations and bogus legal opinions) counted on.

Third Circuit Holds Tax Taxpayer Fraud is not Required for 6501(c)(1) Unlimited Statute of Limitations, Creating Conflict (8/18/25)

In Murrin v. Commissioner, ___ F.4th ___ (3rd Cir. 8/18/25), CA3 here and TN here, the Court held that the §6501(c)(1), here, unlimited statute of limitations applying "In the case of a false or fraudulent return with the intent to evade tax" applies even without the taxpayer's personal fraud. The opinion is a straightforward textualist interpretation of the governing statute. Since the opinion is relatively short, I am not sure my nitpicking (aka pontificating) over the reasoning and specific text would be helpful to readers of this Blog, most of whom are already familiar with the issue.

In the event my thoughts may be helpful, I link here first my prior blogs generated by the search terms "allen fraud limitations" which picks up the blogs that discussed the issue. (If you click that link, the returns are first in some relevance scoring of the content order for the terms but there is a link to put them in reverse date order.) The more recent blog discussions that I think may be most helpful to readers wanting more than offered in Murrin are:

• On the Tax Court decision in Murrin: Tax Court Again Declines to Reconsider Its Holding that the Preparer's Fraud without the Taxpayer's Fraud Invokes Unlimited Statute of Limitations (Federal Tax Procedure Blog 1/25/24; 2/5/24), here (where I discuss and link Professor Bryan Camp's discussion of the Tax Court opinion in Murrin) (those reading the Third Circuit opinion in Murrin will see that Professor Camp filed an amicus in favor of the taxpayer's position).
• On BASR P’ship v. United States, 795 F.3d 1338 (Fed. Cir. 2015), which Murrin conflicts (Murrin substantially adopts the dissenting opinion in BASR), I did not write a separate blog on the BASR opinion, but I wrote one on the court awarding attorneys fees under § 7430: Major Attorneys Fee Award for BASR Partnership Prevailing on the Allen Issue in Federal Circuit (Federal Tax Procedure Blog 2/11/17), here. This conflict certainly insures a petition for cert by Murrin. I suspect that there may be a flurry of amicus briefs on the petition and, if cert is granted, on the merits briefing because a lot of wealthy taxpayers investing in fraudulent taxpayers have a dog in the hunt, so to speak.
• On City Wide Transit, Inc. v. Commissioner,  709 F.3d 102 (2d Cir. 2013) discussed in Murrin: Second Circuit Holds That Fraud on the Return -- Even If Not the Taxpayer's -- Causes an Unlimited Civil Assessment Statute of Limitations to Apply (Federal Tax Procedure Blog 2/4/13), here.
• My early venture into the subject discussing an important extension of a holding that the taxpayer's fraud is not required if the return is fraudulent: Civil Tax Statute of Limitations for Fraudulent Tax Shelters (Federal Tax Procedure Blog 12/19/09), here.

 This blog entry is cross-posted on the Federal Tax Crimes Blog, here.

Second Circuit Applies Loper Bright to Approve a Best Interpretation in Treasury Regulation (8/15/25)

In New Jersey v. Bessent, ___ F.4th ___ (2d Cir. 8/13/25), CA2 here and TN here, the Court sustained the Treasury Regulation denying a federal tax deduction for "charitable" donations where the "donor" received a state or local property tax credit in the amount of 85% to 95% of the amount "donated." The net effect of the credit is that the "donation" was largely a payment of local property tax and, if the federal donation were allowed, would skirt the SALT limitation on the federal deduction of property taxes.

The key part of the opinion for present purposes is the discussion of the merits of the Regulation, referred to in the opinion in administrative law parlance as the Final Rule. The district court sustained the Regulation (Slip Op. 5) "relying on Chevron deference to conclude that the IRS's interpretation of ambiguous statutory language in I.R.C. § 170 is a permissible construction of the statute." (See also Slip Op. 27).

As I discuss below in comments (see JAT Comments ¶ 3) that there is confusion about what Chevron deference did, but for present I simply assume that the district court applied Chevron in some way.

So, New Jersey v. Bessent Court reads its duty under Loper Bright to determine whether the Regulation was the "best" interpretation of the governing statute, without any deference. The Court cites Skidmore once (Slip Op. 29), but only for the generality of Skidmore without relating that generality to its reasoning sustaining the Regulation interpretation. The reasoning of the opinion is the determination that the agency interpretation is, under Loper Bright, the best interpretation.

The Court addresses the issue by deciding that, rather than focus on the elusive subjective donor expectation of benefit (which might make the donation not really charitable in a general sense), an objective test labeled as a "quid pro quo' test, will applies under the statute. (See Slip Op 31-46). Under that objective test, for example, the expectation of a tax deduction from a party other than the donee (e.g., the IRS) is not a quid pro quo that denies the charitable deduction; however, a substantial credit from the party receiving the donation can be a quid pro quo that denies the deduction. Under this test, the state or local tax credit denies the charitable deduction.

I will not discuss the merits of the Court's analysis in getting to the holding that the "donations" in question are not charitable and thus the Regulation states the best interpretation. (I will address that issue in JAT Comments  ¶ 2 below.) Bottom line, the Court holds (Slip Op. 46):

    We conclude that the Final Rule correctly interprets I.R.C. § 170 as applied to Appellants' tax-credit programs and that the IRS did not exceed its statutory authority.n17
   n17 We do not decide today whether the Final Rule's preclusion of a § 170 deduction in instances where the tax credit comes not from the recipient of a gift but from a third-party government exceeds the scope of I.R.C. § 170. See 26 C.F.R. § 1.170A-1(h)(4)(i). Appellants do not argue here that the rule's application to all tax-credit-for-contribution programs (exempting those where the tax credit does not exceed 15% of a contribution) renders the regulation unlawful. "In our adversarial system of adjudication, we follow the principle of party presentation" under which we do not "sally forth each day looking for wrongs to right" but instead "decide only questions presented by the parties." In re TransCare Corp., 81 F.4th 37, 58 (2d Cir. 2023).

JAT Comments:

Second Circuit Allows Possible Equitable Tolling for 90-day Petition for Redetermination of Deficiency (8/14/25)

Tax procedure enthusiasts already know that, starting with Boechler P.C. v. Commissioner, 596 U. S. 199 (2022), courts have steadily eroded time limits for procedural relief in tax matters as jurisdictional, a category that required compliance without equitable relief (tolling) for late filing, and moved them to the category of nonjurisdictional, claims processing rules, which allow for equitable relief (tolling). Even as that process of erosion continued to involve other time requirements, the Tax Court held fast to its historic view that petitions for redeterminations of deficiencies in § 6213(a) were jurisdictional, thus not permitting equitable relief for out-of-time filing of the petitions. Hallmark Research Collective v. Commissioner, 159 T.C. 126 (2022) (unanimous reviewed opinion); See Tax Court Holds that § 6213(a) Time Deadline for Petitions for Redetermination Is Jurisdictional, Thus Not Subject to Equitable Relief (Federal Tax Procedure Blog 12/13/22), here.

Yesterday, in Buller v. Commissioner, ___ F.4th ___ (2d Cir. 8/13/25), CA2 here and TN here, the Court held that the § 6213(a) petition 90-day period is not jurisdictional and therefore is subject to equitable tolling. The Court remanded to the Tax Court to determine whether the requirements for equitable tolling were met. In Culp v. Commissioner,  75 F.4th 196 (3rd Cir. 2023), cert. den. ___ U.S. ___, ___ S.Ct. ___, 2024 U.S. LEXIS 2725 (2024), the Court held that the § 6213(a) time period is not jurisdictional and thus subject to equitable tolling. The Government petitioned for writ of certiorari but the Supreme Court denied the petition. See Government Files Petition for Cert on Issue of Whether 90-day Period for Tax Court Petitions is Jurisdictional (Federal Tax Procedure Blog 3/26/24) (discussing issues presented in the petition), here.

I have no special insight into whether the Government will petition for writ of certiorari in Buller, but since there is no conflict among the Circuits, I suspect that the Court would not grant the petition. Moreover, with the Circuit breakdown is now 2-0, perhaps the Tax Court will at the next opportunity reconsider its prior holdings and get in line with the trend in the cases.

Federal Tax Procedure Book 2025 Editions on SSRN (8/9/25)

The 2025 versions of the Federal Tax Procedure Book are now posted on SSRN. SSRN still has to approve them, but those interested can view or download them in the interim. The SSRN editions can be linked on the page in the column to the right titled “Federal Tax Procedure Book (2025 Editions),  here.

Those using the 2025 versions should consult the Update page in the column to the right here.

Loper Bright’s Effects on the § 6751(b) Regulations (Herein Difference Between Regulations and Interpretations) (8/7/25)

I am today considering the wonders and discontinuities of Loper Bright Ent. v. Raimondo, 603 U.S. 369 (2024)(“Loper Bright”). I do this in the context of updating my Federal Tax Procedure Book editions. For this blog, I zero in on one facet related to Loper Bright’s perceived command that courts apply de novo the best statutory interpretation (whether or not it is the agency interpretation). The general rule is that judicial interpretations apply retroactively to the effective date of the statute. Harper v. Va. Dep't of Taxation, 509 U.S. 86 (1993). 

The context is the § 6751(b) regulations. 26 C.F.R. § 301.6751(b)-1, with an effective date of December 23, 2024. Those regulations were promulgated to resolve the inconsistent interpretations of § 6751(b) as courts flailed around, often inconsistently, to apply the textually nonsensical statute. Loper Bright denied Chevron deference from the fiction of statutory ambiguity, but said nothing about a statute that is ambiguous and textually nonsense. That requires that either (i) § 6751(b)  is facially invalid with no application or (ii) susceptible to interpretation which will require that lines be drawn similar to the way a line was drawn in United States v. Correll, 389 U.S. 299 (1967) (adopting the agency sleep and rest interpretive line for the statutory “away from home” requirement). In other words, a best interpretation could not be made until some authority draws the line.

At least in theory, in order to pass Loper Bright muster, the § 6751(b) interpretive regulations must state the best interpretation. For purposes of this discussion, I distinguish between the interpretation and the regulation which adopts the interpretation. The best interpretation should apply from the effective date of the statute. That means, for example, that the § 7805(b) limitations on retroactive effective dates for interpretive regulations may still apply to the regulation but are meaningless if the regulations state the best interpretation.

This phenomenon was always true but perhaps was not true for agency interpretations of ambiguous text that had no best interpretation from the effective date of the statute, but with a best interpretation discernible only by some action, such as a regulation interpretation, that permitted a best interpretation to be applied. E.g., United States v. Correll, 389 U.S. 299 (1967) (once the line drawing was approved in Correll, it applied to all pending and future cases).

Thus, the conundrum of effective dates for the § 6751(b) regulations is presented. If the interpretations in the § 6751(b) regulations are best interpretations, they apply from the effective date of the statute and should apply to pending Tax Court cases for periods prior to the regulations’ effective date of December 2024. If that is right, should not the courts in pending cases for periods prior to the December 2024 effective date be considering whether the regulations interpretation (not the regulation) applies. If the § 6751(b)  regulations are best interpretations for validity, why should courts for those pre-effective date periods not apply the best interpretations. In other words, why are Tax Court judges applying the mish-mash of interpretations preceding the effective date of the § 6751(b) regulations without considering the § 6751(b) interpretations? See e.g., Hancock County Land Acquisitions LLC v. Commissioner, T.C. Memo. 2025-50.

Tax Court Rejects a Bullshit Tax Shelter False Valuation Claim with Warning of Sanctions for Taxpayers, their Counsel, and Expert Witness Proffering the Bullshit (7/16/25; 7/18/25)

I write today on a “dictated” oral decision at the conclusion of trial in Veribest Vesta, LLC, True North Resources, LLC, v. Commissioner (T.C. Dkt # 9158-23; docket entries here at docket # 199). Bottom line, the taxpayer’s (only because they got caught) claim went “True South.”

Note on Tax Court Orders: Orders can be relatively short dealing with routine procedural matters or may be longer when they serve the same function as T.C.M. opinions. Juge Buch’s opinion is the latter sort where he enters as an a one-page order attaching his lengthy findings of fact and conclusions dictated into the record at the close of the lengthy trial. This Order serves as the report (same as T.C. and T.C.M. opinions) required by § 7459(a), here. One difference between an Order and the other Tax Court opinions is that the Order does not list counsel. Readers can identify counsel for the parties by clicking the docket entries link above and clicking at the box on upper right for a printed docket sheet.

Veribest involved a standard plain vanilla bullshit Syndicated Conservation Easement shelter, with many Tax Court opinions and Circuit Court affirmances in other similar cases preceding Veribest in essence calling out the bullshit. Some cases have been decided on other grounds, but there was always a common problem of false hyper-inflated valuations of the easements; often (I can’t say always) the valuations claimed were many, many times the real cost of the whole property (including the easement) reasonably close to the date the easement was carved out and “donated” to a willing “charity.” There could be several procedural footfaults for claiming deductions, but false overvaluations have been a common feature of many bullshit tax shelters since the days of Jackie Fine Arts and Barrister. Old timers will remember those shelters from the 1970s and 1980s.

In the SCE cases that have barraged the Tax Court dockets with much wasted resources involving many lawyers making lots of money, one feature has been the taxpayers (through their lawyers making lots of money) proffering expert witnesses who lack credibility. I include at the end of this blog some earlier blog offerings in bullshit tax shelters (including one-off rather than syndicated) with valuations that were not credible.

Today, I want to note Judge Buch’s warning of the potential for Section 6673 penalties. Section 6673, here, is titled “Sanctions and costs awarded by courts.” The Section permits the Tax Court to award costs:

Is Consistency the Hobgoblin of Small Minds for Chief Justice Roberts? Herein of Loper Bright and Chevron (7/10/25)

I was just today pointed to Perttu v. Richards, 605 U.S. ___ (6/18/25), SC here, I was interested because, although not a case about Chevron or Loper Bright (citing neither Chevron or Loper Bright or using the word deference in either Chief Justice Roberts’ Opinion of the Court or Justice Barrett’s dissent), Chief Justice Roberts says this (Slip Op. 6, of the Opinion and p. 10 of the pdf (because the Syllabus precedes the Opinion, here):

That usual practice matters for interpreting the statute because “Congress is understood to legislate against a background of common-law adjudicatory principles . . . with an expectation that the principle[s] will apply except ‘when a statutory purpose to the contrary is evident.’”

I am interested in the quote because I am authoring an article on Loper Bright also authored by Chief Justice Roberts. I think it is commonly understood that Chevron deference had achieved the status of a common law adjudicatory principle by the time Loper Bright was decided. So, how could Chief Justice Roberts say with a straight face (or maybe a straight computer keyboard) that the Court should honor common law adjudicatory principles in Richards but not in Loper Bright? Congress was certainly legislating with Chevron as a background common law principle (as Justice Kagan notes in her Loper Bright dissent at pp. 463-464 here and Chief Justice Roberts ignores in his Opinion of the Court in Loper Bright)? (This is my reason for referring to the "small minds" aphorism in the title to this blog.)

If anyone has thoughts on this conundrum, please let me know either by comment to this article or by email to jack@tjtaxlaw.com. If appropriate and the commenter gives permission, I will acknowledge the credit in the article.

* Note that the Loper Bright page numbers and links are to the Preliminary Print (as opposed to the Slip Op.) which has “preliminary” page numbers that may change before the final U.S. volume. And, of course, the Richards quote is from the Slip Opinion not yet incorporated in a Preliminary Print. 

Tax Court Applies Statutory Stare Decisis for Chevron Cases (7/3/25)

In Moxon Corporation v. Commissioner, 165 T.C. ___, No. 2 (2025), TC here dkt # 59 and GS [to come], the Court held that (from the headnote):

          Held: The I.R.C. § 6662(h) penalties at issue are not subject to deficiency procedures pursuant to I.R.C. § 6230(a)(2)(A)(i).

          Held, further, the fact that the relevant deficiencies were improperly assessed does not affect R’s assessments regarding, and ability to collect, the I.R.C. § 6662(h) penalties.

 (I use the headnote because I think it fairly summarizes the opinion and introduces the subject I want to discuss—statutory stare decisis.)

In respect to the second holding above, the Tax Court invoked statutory stare decisis to apply a prior precedent relying on Chevron deference, saying rather cryptically (see Slip Op. 12-13):

          In addition the Supreme Court cautioned that by overruling Chevron it did not “call into question prior cases that relied on the Chevron framework. The holdings of those cases . . . are still subject to statutory stare decisis despite [the Supreme Court’s] change in interpretive methodology.” Loper Bright, 144 S. Ct. at 2273. Regardless  of the extent to which the holding in Thompson [Thompson v. Commissioner, 137 T.C. 220, 239  (2011)] relies on the standard of review set forth in Chevron, that holding is entitled to stare decisis.

          We again hold that penalties determined in a partnership-level proceeding are not subject to deficiency procedures pursuant to section 6230(a)(2)(A)(i). Rather, such penalties are assessable by the Commissioner. Taxpayers may raise any partner-level defenses to the penalties in a refund action or in a CDP case. § 6230(c)(1)(C), (4); McNeill, 148 T.C. at 489.

           Moxon arrived after I had already made substantial changes to the statutory stare decisis discussion in working draft for the 2025 Federal Tax Procedure (Practitioner and Student Editions). I have further revised that discussion to include Moxon. For readers who may have an interest in the issue, I include below a copy and paste of the text of the revisions without footnotes as of today and link here the revisions (red-lined) with footnotes (note that the footnotes, page numbers and cross-references will change in the final, although as I note below the final will be significantly shortened).

Tax Court Invalidates Regulation on CPAR/BBA Partnership FPA Limitations Period and Holds Partnership Adequately Disclosed to Avoid Limitations Extension (7/3/24)

In JM Assets, LP v. Commissioner, 165 T.C. ___ No. 1 (7/2/25) (reviewed opinion with no dissents), TC here dkt #46 and GS here [to come], the Court invalidated a regulation that, if valid, would have extended the period for a final partnership adjustment under the CPAR/BBA beyond the statutory period of 330 days. The FPA is the final action imposing the imputed tax at the partnership level under CPAR/BBA.

 The Court offers the following “latest possible dates” for a valid FPA (Slip Op. 12-13):

(1) three years after the date on which the partnership return was filed, I.R.C. § 6235(a)(1)(A); (2) three years after the due date of the return, I.R.C. § 6235(a)(1)(B); (3) three years after the date on which the partnership filed an administrative adjustment request under section 6227, I.R.C. § 6235(a)(1)(C); (4) in the case of a proposed partnership adjustment under section 6231(a)(2), the date that is 330 days (plus any extension under 6225(c)(7)) after the date of such a notice, I.R.C. § 6235(a)(3); or (5) in the case of a modification request made pursuant to section 6225(c), 270 days (plus any extension under 6225(c)(7)) after the date on which everything required to be submitted to the Secretary pursuant to such section is so submitted, I.R.C. § 6235(a)(2).

JM Assets involved (5) relating to modification requests.

I don’t think there is anything surprising in that interpretation of the statutory text under Loper Bright’s de novo interpretation standard. I should note that the IRS argued unsuccessfully for delegated interpretive authority for the regulation of the type Loper Bright approved.

I think the more interesting part of JM Assets is its conclusion that the FPA period was not extended by § 6235(c)(2) which provides that for an extension for the FPA if there is a substantial omission of income as defined by § 6501(e)(1)(A). That part of opinion deals with the general tax extension in the latter section. I discuss the general tax extension in my Federal Tax Procedure (Practitioner Edition pp. 198-199; Student Edition pp. 138-139).

Update on IRS Form 11457 for Voluntary Disclosure in IRS VDP (6/30/25)

 The National Taxpayer Advocate announced that, at her urging, the IRS has agreed:

1. to eliminate the Part II (complete upon acceptance into the VDP) checkbox

2. to establish a “working group to comprehensively review the current VDP, provide recommendations for reforming the program, narrow the definition of illegal source income to encourage greater participation in the VDP, and clarify other terms.”

See Criminal VDP: TAS Reports a Win For Taxpayers – IRS Agrees to Remove Willfulness Checkbox on VDP Application Form (NTA Blog 6/24/25), here.

I revised the working draft of the Federal Tax Procedure 2025 Editions (to be published at least by early August 2025) to include this information. Perhaps the key issues I mention in the working draft are:

• As of the date of this publication, the Form available on the IRS website is dated 11/12/24 and thus does not yet implement that decision. Can a taxpayer in the meantime omit checking the box in the currently available Form?;

Billy Long Confirmed as IRS Commissioner of Internal Revenue (6/15/25)

On June 12, 2025, the Senate confirmed President’s Trump’s nomination of Billy Long as Commissioner of Internal Revenue. See Wikipedia, Billy Long, https://en.wikipedia.org/wiki/Billy_Long (Last edited 6/15/25 and viewed 6/15/25). I just updated the working draft for the 2025 editions of my Federal Tax Procedure Book. I copy and paste the relevant portion as of 6/15/25 with footnotes (note that the footnote numbers in the working draft, but in the final will certainly be different): 

                   3.     Commissioner of Internal Revenue.

           The Commissioner of Internal Revenue is a Presidential appointee confirmed by the Senate. The Commissioner heads the vast IRS bureaucracy. n216 Historically, the Commissioner has been a leading tax practitioner, most often a tax lawyer. Because of the perception that tax practitioners may not be the best managers, the statute now requires that the Commissioner have “demonstrated ability in management.”n217 Tax practitioners are not necessarily excluded, but the field is much broader now.
   n216 § 7803.
   n217 § 7803(a)(1)(A).

          On June 12, 2025, the Senate confirmed President Trump’s choice for Commissioner of Internal Revenue. The nomination and confirmation were controversial because (i) the confirmation was preceded by chaos among the acting IRS leadership,n218 and (ii), more importantly, Long has no or no credible experience in either tax or management experience.n219 Nevertheless, he is the Commissioner now. n220
   n218  Political Thrashing Around Acting Commissioners and Commissioner of Internal Revenue (Federal Tax Procedure Blog 4/18/25; 4/19/25).
   n219 Professionally (if that is the right word), Long was a realtor and auctioneer until serving in the House of Representatives from 2011-2023. Long attended college but did not graduate, subsequently graduating from the Missouri Auction School. In 2023, Long became a “tax consultant” promoting dubious tax claims related to Employee Retention Credits. In that role, he promoted himself as a “Certified Tax & Business Consultant,” a title he earned by attending a three-day course offered by a tax promoter. See Wikipedia, Billy Long, https://en.wikipedia.org/wiki/Billy_Long (Last edited 6/15/25 and viewed 6/15/25). JAT Editorial Comment: Long appears to have no relevant qualifications to be Commissioner of Internal Revenue other than sycophancy to President Trump which is the only credential he needed to be approved by the Senate on a party line vote. While awaiting his Senate confirmation, Long served as Senior Advisor in OPM (Office of Management and Budget). It is unclear to me what role he served as Senior Advisor, but I suppose one salient benefit was that, receiving a Government salary, he would have been foreclosed from abusing the tax system as he did before taking the Senior Advisor role. (That is, if he honored conflicts of interest policies, although Trump and his minions appear to have only passing acquaintance, if any, with conflicts of interest policies.)
   n220 Perhaps someone will litigate the issue of whether Long is statutorily disqualified for the position.

Supreme Court Holds that Tax Court Levy CDP Jurisdiction is Mooted by Satisfaction of Underlying Assessment (6/13/25)

I previously blogged on the

• Third Circuit's opinion in Zuch v. Commissioner, 97 F.4th 81 (3rd Cir. 2024). 3rd Circuit Holds Tax Court Has Jurisdiction to Determine Overpayments in CDP Proceedings (Federal Tax Procedure Blog 3/29/24; 3/30/24), here; and
• The Supreme Court's granting of the Government's petition for writ of certiorari. Supreme Court Accepts Cert in Zuch as to Mootness in CDP where IRS Collected by Offset the Tax Subject to Levy (Federal Tax Procedure Blog 1/13/25), here.

Yesterday, the Supreme Court decided Zuch, holding that the Tax Court loses jurisdiction over a CDP case when the assessment supporting the original proposed levy has been paid so that there is nothing behind the levy. See Opinion of the Court by Justice Barrett, joined by all other Justices except Gorsuch who dissented (SC here and GS here [to come]). The Opinion of the Court is a short (at least for Opinions of the Court) and relatively straightforward opinion. I therefore will not belabor readers with a scholarly (perhaps pseudo-scholarly) discussion of the opinion. My off-hand summary is that what is in issue in a levy CDP case is the levy and once the proposed levy is mooted by satisfaction of the underlying assessment, there is nothing left for the Tax Court to do.

So, I get back to the questions I considered in the blog entry reporting the granting of cert. The relevant ones are:

A Primer on Judicial Review of Tax Regulations after Loper Bright (6/4/25; 6/6/25)

Loper Bright held that courts review interpretive regulations de novo rather than with possible deference under the prior Chevron regime. Here are my bullet points focusing primarily on notice and comment Treasury regulations (the type subject to possible deference under the Chevron regime):

• Loper Bright de novo review means that the court will determine and apply the best interpretation (whether or not the regulation interpretation is the best interpretation).
• The sole exception to de novo review is that courts will apply some type of deference (I call it Loper Bright deference) if the statute explicitly or fairly implies the agency is to have discretion in the interpretation.
• Under Skidmore, courts may use the agency interpretation to help reach the best interpretation, (Skidmore is often called deference, but it is not deference because the court must still determine and apply the best interpretation and only uses the persuasiveness of the agency interpretation to determine the best interpretation; Skidmore is better described as “respect” rather than deference; deference means the court applies the agency “not best” interpretation rather than its own best interpretation.)
• Interpretive regulations may also be reviewed for procedural regularity under the APA § 706(2)(A)'s “arbitrary and capricious” standard (also called “hard look” review), a deferential standard that is, theoretically, much more agency-forgiving standard than de novo review standard.

I think it may be helpful to elaborate on the last bullet point. A prominent instance in tax of such arbitrary and capricious review is Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021), here, holding that Treasury failed in the notice and comment process to address material comments; the court did not hold (see p. 1339 n. 1) that if Treasury had not committed that procedural footfault, the interpretation would have been invalid under the Chevon regime (now replaced by the Loper Bright de novo regime for testing interpretations). For a recent statement of how this works, the Supreme Court said in Seven County Infrastructure Coalition v. Eagle County, Colorado, 605 U.S. ___,  ___ S.Ct. ___ [to come], 2025 WL 1520964 (2025), SC here and GS here (quote is from Supreme Court Slip Op. 8-9):

    As a general matter, when an agency interprets a statute, judicial review of the agency's interpretation is de novo. See Loper Bright Enterprises v. Raimondo, 603 U. S. 369, 391-392 (2024). But when an agency exercises discretion granted by a statute, judicial review is typically conducted under the Administrative Procedure Act's deferential arbitrary-and-capricious standard. Under that standard, a court asks not whether it agrees with the agency decision, but rather only whether the agency action was reasonable and reasonably explained. See Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29, 43 (1983); FCC v. Prometheus Radio Project, 592 U. S. 414, 423 (2021). 

More on Whether Treasury/IRS Interpretations under § 7805(a) Are Entitled to Loper Bright Deference? (5/29/25; 5/30/25)

I write today to address the issue of whether  § 7805(a) is the type of provision that Loper Bright would treat as a delegation to the Treasury/IRS that qualifies for what I call “Loper Bright deference” (for lack of a better word). By Loper Bright deference, I mean some authoritative gravitas for agency interpretations beyond Skidmore respect (Skidmore requires the Court to be persuaded that the agency interpretation is the best and is not deference, despite some claims otherwise). Some readers of this blog may recall that I have addressed the § 7805(a) issue in two prior blogs:

• Do General Authority Congressional Delegations of Authority to Prescribe Regulations to Carry Out the Provisions of the Statute Qualify for Loper Bright Deference? (Federal Tax Procedure Blog 11/12/24), here.

• Can § 7805(a) & (b) Be Read as Delegating to Treasury/IRS Interpretive Authority with Deference (Federal Tax Procedure Blog 7/14/24), here.

I am prompted to return to the issue by a recent article By Professor Mitchell M. Gans [bio here], Has the Supreme Court Already Resolved How Loper Bright Applies to Section 7805 Regulations?, 187 Tax Notes Fed. 1069 (May 12, 2025), here. Professor Gans argues that, sub silentio, the Supreme Court in Bondi v. VanDerStok, ___ U.S. ___, 145 S. Ct. 857 (2025) effectively decided that § 7805(a) is not entitled to Loper Bright deference by applying the Skidmore factors to a statute under the Gun Control Act that is functionally the same as § 7805(a). For those wishing to read VanDerStok, the Supreme Court slip opinion is here and the GS opinion (paginated to 145 S.Ct.) is here. (Caveat: some refer to the respondent in the case as Vanderstok; the proper name is VanDerStok. See the petition here and the slip opinion where most but not all references are to VanDerStok.)

I do not agree with Professor Gans’ reading of VanDerStok. I don’t read VanDerStok as a Skidmore case where the court gives the agency interpretation some oomph beyond what the statutory text and context would allow. None of the opinions in VanDerStok mention Skidmore or deference. VanDerStok involved the propriety of a facial challenge to the agency interpretation. A facial challenge requires that there is no realistic set of circumstances in which the interpretation could be valid. (By contrast, an as applied challenge claims only that as applied to the plaintiff, the interpretation is not valid.) The Court spends most of its time analyzing the consistency of the interpretation with the statute and its context, a type of classic de novo interpretation. 

Most instructively, the VanDerStok opinion for the Court, in closing, dismisses a lenity argument. Lenity is an interpretive rule for interpretations in a criminal or penalty context that resolves ambiguity in favor of the person subject to the criminal law or penalty. (Something like the now rejected Chevron deference requiring ambiguity.) The Court says (145 S.Ct. at 876; bold face supplied by me):

Tax Court Rejects Too Good to be True Tax Shelter Defense Based on Tax Opinion Purchased to Support a Reasonable Cause Defense (5/17/25)

In Stevens v. Commissioner, T.C. Memo. 2025-45, TCM here * & GS here [to come] the court rejected the taxpayer’s arguments for the merits of the bullshit, “too good to be true,” tax shelter. Most of the findings of facts and opinion relate to the merits. As usual, the shelter was effected through a shroud of complex financial documents that, in the end, signified nothing that was cognizable for tax purposes. 

* Readers wishing to access the opinion through the docket entries may do so here at docket # 199.]

I find the penalties interesting because the taxpayers recognized that the shelter might be subject to penalties and, for that reason, “purchased” a tax opinion that, they hoped, would protect them against penalties if the IRS saw through the smoke and mirrors in the documents and disallowed the tax benefits of the shelter. Here are some quotes from the opinion (boldface supplied by JAT):

In July 2014 Shannon Stevens [the wife-taxpayer] became concerned with the risk of tax penalties if SLS engaged in the Dermody transaction and claimed interest deductions related to it. Shannon Stevens was the longtime owner and operator of her own accounting firm. She had substantial experience preparing tax returns for individuals and small businesses. She discussed with both Dermody and Witten her concern about tax penalties.

 On July 29, 2014, Dermody sent Shannon Stevens a sample tax opinion letter relating to a transaction of a different type from the Dermody transaction. Dermody recommended that she obtain a tax opinion letter about the Dermody transaction.

 On July 30, 2014, Gopman spoke to Witten and recommended to Witten that petitioners obtain a tax opinion letter from Jeffrey Rubinger, a tax attorney. On July 30, 2014, Witten emailed Shannon Stevens with a copy to Kirk Stevens and Gopman. Witten recommended that petitioners obtain a tax opinion letter for their “protection.” Witten stated that a tax opinion letter could be obtained from Rubinger “for a reasonable price.” In a separate communication with Shannon Stevens, Witten specifically suggested that a tax opinion letter could be obtained from Rubinger for $10,000.

The estimated cost of the opinion letter was too low; the opinion letter ultimately cost $40,000.

Tax Court Discovery Subpoenas to Third Parties Returnable Before Trial Calendaring (5/13/25)

I have just revised the working draft discussion relating to third-party subpoenas. (Practitioner Ed. p. 572; Student Ed. p. 394. As revised, the text and footnotes (not in Student Ed.) are (with redline for changes and one strikeout; note footnote numbers are for this posting but will change in the 2025 Practitioner Ed.):

Trial Subpoenas (both for testimony or for documents or things) may be used for discovery. Section 7456(a)(1) permits Tax Court judges and some officers to issue subpoenas compelling “the attendance and testimony of witnesses, and the production of all necessary returns, books, papers, documents, correspondence, and other evidence, from any place in the United States at any designated place of hearing.” As interpreted in orders, subpoenas may have a return date in advance of the trial calendar in which the case is to be tried.n1 Indeed, discovery subpoenas for a return date at the calendar session for trial may irritate the judge if the discovery should have occurred before the trial calendar, which may cause the judge to quash the subpoena.n2 These discovery subpoenas are used to compel third-party testimony or production of documents; discovery from the taxpayer-petitioner is pursued through the informal and formal discovery procedures (such as request for production, interrogatories, etc.), preceded by a Branerton request. The depositions or documents may be used at trial with the proper predicate (which may be by stipulation); either party may still desire to issue a trial subpoena in order to ensure that the documents can be admitted.
   n1 Production in advance of the trial setting may be more efficient to manage the documents and trial. The Tax Court may issue an order for return on the subpoena in advance of the trail session, permitting subpoenaed testimony. Ubiquiti, Inc. v. Commissioner (T.C. Case No. 22581-22 Dkt. # 54 Order dtd. 5/12/25) (Judge Lauber, citing North Donald LA Property LLC v. Commissioner (Order T.C. Dkt. 24703-21 #52 10/14/22), said: “For more than four years this Court has been conducting regularly-scheduled document subpoena hearings on virtually every Wednesday during the calendar year. The purpose of this well-established procedure is to set a hearing date in advance of trial at which document subpoenas may be returnable under Rule 147(a). Neither section 7456(a) nor Rule 147(c) requires that a case be  calendared for trial as a precondition to the convening of a document subpoena hearing.”).
            Section 301 of The Taxpayer Assistance Act (“TAS”), a bipartisan bill in the Senate in 2025, would eliminate the “at any designated place of hearing,” that was read by some to require the return date at the trial setting (a reading that, as noted in the preceding paragraph is rejected). The Section-by-Section discussion of the proposal explains that, under present law, the Tax Court does not have “express authority to issue a third-party subpoena for the production of documents before or in the absence of a hearing date”; the discussion indicates that the wording of § 301 grants the express authority presumably by eliminating the language that had been misread by some.
   n2 See YA Global Investments, LP v. Commissioner (Docket Nos. 14546-15, 28751-15 Order dtd. 10/1/20) (holding that trial subpoenas for documents were used for improper discovery). See Samantha Galvin, A Tax Court Procedural Anomaly: the Trial Subpoena Duces Tecum, Designated Orders July 29 – August 2 (Procedurally Taxing Blog 9/24/19) (discussing unpublished order in Cross Refined Coal, LLC,  v. Commissioner (Dkt 19502-17 Order Dtd. 8/1/19)).

 A pdf of the changes is here (note that the footnote numbers are not final).

On Win-Loss Records on Appeal (with War Stories) (5/5/25; 5/6/25)

Note, some of my statistics reported below have been corrected on 5/6/25 11:00am.

I have sprinkled some of my blog entries with war stories from my time with DOJ Tax (1969-1977, with just over 4 years in Appellate and just over 3 years in a refund trial section, called Refund 2, which covered roughly Virginia through Texas. In the Refund 2 trial section, I handled cases in South Carolina, the Northern and Middle Districts of Georgia, Eastern District of North Carolina, and 2 life insurance company cases in Florida and Texas (I forget which districts, but I think Middle District of Florida and Northern District of Texas (because Vester Hughes was opposing counsel) although those cases were not resolved by the time I left DOJ Tax. Today, inspired by the article I quote below, I offer some more war stories through statistics.

The inspiration is a recent article, Stephen K. Cooper, DOJ Tax Chief Touts Winning Court Record On Appeals, 2025 Law360 16-164 (1/16/25) [free link unavailable]. The article covers a talk by Francesca Ugolini, the acting chief of the DOJ Tax Division—there has been no Presidentially appointed and Senate-approved Assistant Attorney General for some time. The article includes the following: 

          The U.S. Department of Justice's Tax Division won an overwhelming majority of appeals in tax cases last year by prioritizing strong legal arguments in disputes that had the potential to significantly affect federal tax administration, the head of the division said Thursday.

          Francesca Ugolini, chief of the DOJ's Tax Division, said in the last fiscal year, the government prevailed in 94% of appeals brought by taxpayers and had an unexpected success rate of 75% for its own appeals.

          "We usually do prevail in over 90% of the taxpayer appeals," Ugolini said at the D.C. Bar Tax Conference, held in Washington, D.C., and online. Regarding the government's appeals, "it's usually over 50%," she said.

          "It's not always as high as 75%, but we have some pretty, pretty good success in the appellate courts," she said.

          Ugolini attributed the higher-than-normal success rate to the division's thorough review process that was used to decide whether to appeal a case the government has lost at the trial level. This includes assessing the strength of the legal arguments, the potential impact on federal tax administration and whether the case presents the best vehicle to address the issue.

          "We don't like to lose on appeal, so we're looking at the strength of the case," she said. "That includes … the strength of our legal argument, what the standard of review is [and] what the precedent is in the circuit.

          "We're more likely to appeal cases that involve legal questions, because those are reviewed de novo on appeal, whereas adverse fact findings are reviewed for clear error, and they're really hard to reverse on appeal."

          The administrative implications of the case are also important to the DOJ in its decision-making process, Ugolini said.

          "We're also looking at what is the broader effect on the federal tax system," she said. "Is this issue important to the IRS administratively? What's the impact on federal tax administration? And then we're also looking at, is this the best case to present the issue?"

Sixth Circuit Opines on Types of Deference after Loper Bright (4/28/25)

In United States v. Bricker, 135 F.4th 427 (6th Cir. 2/22/25), CA6 here and GS here the majority held that 18 U.S.C. § 3582(c)(1)(A) allowing a court to reduce a final prison sentence for “extraordinary and compelling reasons” was sufficiently plain in meaning that Congress did not delegate to the Sentencing Commission the authority to interpret the phrase to include consideration of a nonretroactive sentencing law change it as it had in U.S.S.G. § 1B1.13(b)(6). The majority reached that conclusion based on its holding of plain meaning or nonambiguity.

Query would the majority holding have been different if the Court found an express delegation of interpretive authority which still requires ambiguity but cannot be based on ambiguity alone? I get into that issue below.

The dissenting judge (Jane Stranch) argues that “extraordinary and compelling reasons” is ambiguous, without a plain meaning (at least with regard to the factor under consideration), and that Congress delegated the authority to the Commission to interpret “extraordinary and compelling reasons” within the bounds of its ambiguity. The dissent did not argue that ambiguity alone warranted the conclusion of congressional delegation of interpretive authority (that is prohibited by Loper Bright’s rejection of Chevron deference), but that the structure and context of the provision made it clear that Congress intended the Commission to interpret the ambiguous phrase. Under this argument, the delegation would pass muster under Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024).

The interesting part of Judge Stranch’s dissent is her conclusion that Congress delegated interpretive authority to the Commission. She argues that delegated interpretive authority (again based on factors other than ambiguity alone) is governed by the same deference as under Chevron—reasonable within the scope of ambiguity. (All iterations of deference have required statutory ambiguity; Chevron alone treated ambiguity as the basis for a fictional congressional delegation.) Of course, delegated interpretive authority requires some ambiguity, otherwise there is no interpretive authority to delegate or apply. But once there is ambiguity and a delegation of interpretive authority not based on ambiguity, the agency reasonable interpretation should control. And, the elements for Loper Bright qualified deference are present--congressional delegation and reasonable interpretation within the scope of the statutory ambiguity.

A key issue in the difference between the majority and the dissent was a Sixth Circuit precedent, United States v. McCall, 56 F.4th 1048 (6th Cir. 2022) (en banc). McCall’s en banc decision had treated the phrase “extraordinary and compelling reasons” before the Commission’s later guidance in question in Bricker to have a plain meaning not to include a nonretroactive factor such as a reduction in authorized sentences. Of course, under the Chevron regime, agency interpretations could overrule prior court precedents in some cases. Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005). With the demise of Chevron via Loper Bright, Brand X was no longer controlling for agency interpretations given deference based on ambiguity alone. In Bricker, the majority held that McCall was controlling on the issue of whether the phrase “extraordinary and compelling reasons” was ambiguous; McCall held the phrase was not on the retroactive factor issue. The majority thought McCall’s holding of nonambiguity was binding precedent on the issue of consideration of a nonretroactive sentencing factor. 

Conflicting Statutes of Limitations for Regular Tax Assessments and Restitution-Based Assessments (4/27/25)

 In United States v. Brown (W.D. WA Case No. 24-cv-05021 Dkt. No. 38 Order dated 4/21/25), GS here and CL here, the Court upheld the validity of a restitution-based assessment (“RBA”) against Brown that was for the same tax that had been previously assessed against Brown. (For prior Blogs on RBAs on the Federal Tax Crimes Blog, see here, and on the Federal Tax Procedure Blog, here.) For clarity, I will differentiate the two assessments by calling the first-in-time assessment, the regular assessment and the second-in-time assessment the RBA. The reason that was even an issue was because Brown never fully paid the regular assessment and the 10-year statute of limitations to collect any balance on the regular assessment (by reducing to judgment) had expired. Brown claimed that, since the statute of limitations on the regular assessment had expired, thus preventing the IRS from claiming on that regular assessment, the IRS could not end-run the regular assessment statute of limitations based on the RBA assessment. At least that is how I understand Brown’s claim that the court rejected, thus permitting the government to reduce the RBA to judgment and use the RBA extended statute of limitations to collect (including further extending the statute of limitations).

I think the court properly gives a good textual reading of the applicable statutory provisions. I am concerned that the decision may not be consistent with the purpose or intent of the statute. (For a textualist, purpose or intent may not matter.) Although I have not filtered back through the legislative history, my understanding of the purpose of the RBA was to avoid requiring the IRS to jump through assessment hoops for tax ordered as restitution. In other words, it was to permit the IRS to make an immediate assessment where it had not assessed before. (Stated otherwise, it was not to give the IRS two independent assessments to collect. The Code provisions do not say that, but that is my understanding of the need for an RBA. If the tax later subject to restitution had already been assessed, there would be no need for an RBA. And the IRS could deal with an expiring statute of limitations on the regular assessment by simply reducing the regular assessment to judgment, thereby refreshing the statute of limitations.

It is true that § 6501 says that § 6501(c)(1) says: “In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.” But, at a minimum, that would only apply where there was no regular assessment and presumably no RBA. Where there is a regular assessment, one might argue through inference that the regular assessment statute and its limitation period should apply.

Court Dismisses Bivens Claim Against IRS Agents for Asserting Accuracy-Related Penalties (4/21/25)

In Ray v. Priver, et al., 2025 U.S. Dist. LEXIS 71600, 2025 WL 1113406 (D. D.C. 4/15/25), CL here and GS here, The Court dismissed Ray’s Bivens actions against IRS agents that, he claimed, violated his constitutional rights in the IRS’s assertion of the accuracy-related penalty under § 6662(b)(1) and (2) and then in improperly influencing the Tax Court’s sustaining of the penalties in Ames v. Commissioner, T.C. Memo. 2019-36, GS here, aff’d in part and reversed in part with respect to a portion of the penalties, Ray v. Commissioner. 13 F.4th 467 (5th Cir. 2021), after remand motion to Reopen the Record denied in Tax Court (10/28/22), aff’d on appeal Ray v. Commissioner, 2023 U.S. App. LEXIS 21799, 2023 WL 5346067 (5th Cir. 8/18/23), GS here*, and petition for rehearing denied Ray v. Commissioner, 2023 U.S. App. LEXIS 27464 (5th Cir. 10/16/23). At the end of all that commotion from the main Tax Court case in 2019, Ray was liable for some of the accuracy-related penalty but not for a portion for which the Court of Appeals reversed the Tax Court on its denial of the “reasonable cause” defense.

I asked Gemini, Google’s AI Tool, to summarize the case. The following is the result which I have massaged somewhat (reminder these AI Tools, while good, need to be carefully reviewed and revised as appropriate).

Background:

• In 2014, the IRS audited Ray and issued a notice of deficiency, including a penalty under 26 U.S.C. § 6662(a) & (b)(1) (negligence or disregard) (b)(2) (substantial understatement).
• Ray claims this penalty was unwarranted, alleging that two other IRS agents found insufficient evidence for it. He asserts that Lawson and Priver knew this but still pursued the penalty and falsified evidence in his administrative file.
• Ray initially challenged the penalty in Tax Court, where he alleges Priver and Lawson repeatedly lied and falsified evidence. The Tax Court upheld the penalty, but the Fifth Circuit reversed finding Ray not liable for some of the penalty based on reasonable cause. On remand, the Tax Court entered decision sustaining the deficiency and the portion of the penalty approved by the Fifth Circuit.
• Ray later obtained files through a FOIA request, which he claims revealed that Priver and Lawson maliciously prosecuted the penalty claim and concealed exculpatory evidence.

Claims:

• Ray sued Priver and Lawson in their individual and official capacities, alleging what he called a Bivens action:
• Count I: Malicious prosecution in violation of the Fourth Amendment.
• Count II: Denial of a fair trial under the Fifth Amendment's Due Process Clause.

Defendants' Motion to Dismiss:

• Defendants moved to dismiss, arguing:
• Improper service (later moot due to government acceptance of service).
• Sovereign immunity bars official-capacity claims (conceded by Ray).
• Failure to state a claim against individual defendants under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics.

Court's Ruling:

• The Court GRANTED the Defendants' motion to dismiss.
• The Court agreed that Ray's claims against Priver and Lawson in their official capacities are barred by sovereign immunity.
• Regarding the individual-capacity claims, the Court applied the two-step Bivens analysis:
• New Context: The Court found that Ray's claims arise in a "new context" because they involve IRS employees, a different statutory mandate (Internal Revenue Code), and do not align with the specific constitutional violations in the three previously recognized Bivens cases (Fourth Amendment unreasonable search and seizure, Fifth Amendment sex discrimination, and Eighth Amendment cruel and unusual punishment).
• Special Factors: The Court found "special factors" counseling against a new Bivens remedy, primarily the existence of a comprehensive alternative remedial scheme within the Internal Revenue Code. This scheme includes administrative review, the ability to sue for a refund, challenging assessments in Tax Court, and the Treasury Inspector General for Tax Administration (TIGTA) for investigating employee misconduct. The Court emphasized that even if these remedies don't provide complete relief (like monetary damages), their existence is sufficient to preclude a new Bivens action. 

• JAT Addition: The Court relied significantly on the Supreme Court’s admonition that expansions from past Bivens applications is “now a ‘disfavored’ judicial activity.” Hernandez v. Mesa, 589 U.S. 93, 102 (2020); and Ziglar v. Abbasi, 582 U.S. 120, 135 (2017) (citing Ashcroft v. Iqbal, 556 U. S. 662, 675 (2009)). 

Conclusion:

The Court concluded that Ray's case presents a new Bivens context, and the presence of an existing remedial scheme within the Internal Revenue Code constitutes a "special factor" that makes it inappropriate for the judiciary to imply a new damages remedy against individual IRS employees. Therefore, the Court dismissed Ray's amended complaint.

JAT Comments: