Another Gross Overvaluation Conservation Easement Claim Fails (5/6/26)

In Kimberly Road Fulton 25, LLC v. Commissioner, T.C. Memo. 2026-36 (5/4/26), Case # 2026-36 here at #178 and GS here, the Court (Judge Holmes) shot down another bullshit syndicated conservation easement (“SCE”). As is common, the bullshit was in the gross overvaluation. So, not only do the partnerships (and their partners) in the consolidated cases lose, but they suffer the 40% 6662(h) gross valuation misstatement penalties. On the penalties, the Court’s analysis driven by its holding of a gross overvaluation is short (p.39, footnote omitted):

VI. Penalties

          The FPAAs determined the applicability of section 6662(h) gross-valuation misstatement penalties. This penalty applies if the value of property claimed on a return is 200% or more of the amount determined to be the correct value. It’s a 40% penalty, and there’s no reasonable cause defense. I.R.C. § 6664(c)(3). This is a math question, and it is a math question that we must find the Commissioner got right. The parties stipulated that the Commissioner complied with the supervisory-approval requirement of section 6751(b)(1) in asserting these penalties, and we therefore uphold them. 

Because its material facts are many and duplicative of patterns in earlier bullshit SCE cases, the only thing that makes this opinion worth reading is its opening (Slip Op. 1-2) which anticipates the conclusions I summarized above:

Jeffrey Grant’s grandfather taught him a saying that has stuck with him all his life: “Sometimes, a fast nickel is worth more than a slow dime.” A self-identified “land man,” Grant has [*2] made a career of buying vacant land in Georgia and quickly turning it into enough “fast nickels” to make a good living.

More on the Economic Substance Doctrine (ESD) and Relevancy in § 7701(o) (5/5/26)

In Kadau v. Commissioner, T.C. Memo. 2026-37 (5/5/26), referred to as Kadau II, TC Case # 286-21 here at #216; GS here, the Court held that the taxpayer’s microcaptive insurance arrangement failed under the Economic Substance Doctrine (“ESD”) in § 7701(o) and was subject to the 40% penalty in § 6662(b)(6) and (i). Given the facts in Kadau II and its earlier opinion in Kadau v. Commissioner, T.C. Memo. 2025-81 (referred to as Kadau I), at # 198 and GS here, the result is not surprising. The arrangement was smoke and mirrors to appear as a transaction with magic tax benefits.

Kadau II drew my attention because of its discussion of § 7701(o)’s requirement that the common law ESD be “relevant.” § 7701(o)(1) & (o)(5)(C). I have written on this issue before. See Liberty Global's Tax Scam Fails in Tenth Circuit (Federal Tax Procedure Blog 4/30/26), here; The Economic Substance Doctrine ("ESD")--the Common Law and § 7701(o) (Federal Tax Procedure Blog 3/31/26; 4/8/26), here; and Tax Court in Unanimous Reviewed Opinion Interprets and Applies the Accuracy-Related Economic Substance Penalty (Federal Tax Procedure Blog 11/12/25), here. I thought this might be a good point to offer further thoughts on § 7701(o) and the requirement that the common law ESD be “relevant.” (Actually, anticipating a theme below, my thoughts today may be a clarification of my earlier thoughts.)

Section § 7701(o), titled “Clarification,” states the general prongs of the common law ESD requirement—meaningful economic position effect and substantial nontax purpose. § 7701(o)(1). Then, in the balance of § 7701(o), some specific rules for applying the ESD are provided, such as that the nontax profit potential “be substantial in relation to the expected value of the net tax benefits that would be allowed if the transaction were respected.” § 7701(o)(2)(A). Those in the tax world for some time know precisely why that “clarification” was there—to foreclose taxpayer arguments that remote, unlikely profit potentials could still meet that prong of the common law ESD.

Kadau II addresses the term “relevant” in § 7701(o). Kadau II accepted the holding in Patel v. Commissioner, 165 T.C. ___, No. 10 (11/12/25) (reviewed unanimous) that § 7701(o) requires that the common law ESD must be “relevant” before § 7701(o) can apply. The Court in Kadau II did not need to address that predicate requirement because petitioners in briefing said (p. 4, emphasis supplied):

As the Court held in Patel III, a threshold determination must be made as to whether the economic substance doctrine is relevant. Because Petitioners formed a small captive insurance company, Petitioners acknowledge that section 7701(o) is applicable. The dispositive question is whether Petitioners’ transactions satisfy its requirements. Accordingly, we refrain from addressing any threshold determination issues and proceed directly to examination of the transaction by applying the foregoing elements outlined in section 7701(o)(1).

Judge in Trump Return Disclosure Damages Mega-Suit Appoints Amicus to Assist the Court on Jurisdictional Issue as to Party Adversity (4/30/26;5/1/26)

I recently wrote on Trump’s suit against the IRS for damages for tax return disclosures. See Could the District Court Invite or Appoint an Amicus to Present the U.S. Position in Trump v. IRS? (2/7/26; 2/12/26), here. The district court (Judge Williams) has appointed amicus curiae to “assist the Court in identifying the applicable law governing an analysis” of the issue she identifies—subject matter jurisdiction where because the parties may not be opposed there may be no case or controversy required for jurisdiction. See order of 4/29/26, CL here (document 43 on the docket sheet, CL here).

In an earlier order on the same day, Judge Williams said “it is unclear to this Court whether the Parties are sufficiently adverse to each other so as to satisfy Article III’s case or controversy  requirement.” Order dated 4/29/26, here (document 41 on the docket sheet), at p. 3. Based on that concern, the Order asks the “the Parties to address the question of subject matter jurisdiction before addressing the relief requested in the Motion.” Order at p.. 4. The Order appointing amicus curiae is apparently based on that concern as to which the response the nominal parties may give could be suspect.

The Order for Amicus assistance is more limited than I suggested in my original blog posting. However, the same concerns could prompt Judge Williams to appoint amicus (either sua sponte or on motion) for other aspects of the case where party adversity may be questionable.

Added 5/1/26 11:30am: The New York Times has this article on these events: Andrew Duehren, Judge Asks Justice Department: Will You Oppose Trump? (NYT 4/29/26), here.

Liberty Global's Tax Scam Fails in Tenth Circuit (4/30/26)

In Liberty Global, Inc. v. United States, ___ F.4th ___ (10th Cir. 2026), CA10 here, GS here, and CL here, using tax lingo and analysis, rejected Liberty Global’s tax scam. The panel majority correctly holds that Liberty Global’s farcical multiple steps did not pass economic substance doctrine (“ESD”) scrutiny.

The key issue upon which the majority of the panel and the dissenting judge differ is over what role, if any, § 7701(o)’s requirement that whether the ESD is “relevant.” § 7701(o)(1) & (o)(5)(C). So that readers can understand the statute’s textual context, I offer it here (with key word in red):

(o) Clarification of economic substance doctrine
    (1) Application of doctrine. In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if—
        (A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position, and
        (B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.
* * * *
    (5) Definitions and special rules
    For purposes of this subsection—
    * * * *
        (C) Determination of application of doctrine not affected. The determination of whether the economic substance doctrine is relevant to a transaction shall be made in the same manner as if this subsection had never been enacted.

I have written previously on the issue of the term “relevant” in § 7701(o). The Economic Substance Doctrine ("ESD")--the Common Law and § 7701(o) (Federal Tax Procedure Blog 3/31/26; 4/8/26), here. I believe that ESD as the term is used both in the common law and in § 7701(o) means the same thing, except that § 7701(o) adds some specific rules that apply in applying certain features of the ESD. These specific rules address some taxpayer claims about how those features of the common law ESD work. For example, § 7701(o)(2) & (4) provide rules for applying the ESD requirement that a taxpayer have a non-tax profit potential. Section § 7701(o) rejects certain claims that taxpayers made in prior cases to avoid the ESD. Thus, I think that the threshold inquiry is whether the common law ESD applies (not that it is just relevant, but certainly, if ESD applies, it is relevant for purposes of § 7701(o) because the special rules of § 7701(o) may then apply).

Basically, what I am saying is that the panel majority gets it right and the dissent gets it wrong.

Further on Murrin and Allen and the Unlimited Statute of Limitations for Fraud on the Return (4/30/26)

I read earlier this week an excellent article on Murrin v. Commissioner, 158 F.4th 527 (3d Cir. 2025), here, cert petition pending (see here). Bryan Camp, The New Forever Rule for Record Retention (Tax Notes March 3/25/26), here. Professor Camp is concerned, as he was in filing an amicus brief in Murrin, with the potential application to innocent taxpayers of § 6201(c)(1)’s unlimited statute of limitations for a “false or fraudulent return with the intent to evade tax.” Murrin held that the taxpayer’s fraud is not required and that a return preparer’s fraud would suffice to apply the unlimited statute of limitations for fraud. For further on Murrin, see my post Third Circuit Holds Taxpayer Fraud is not Required for 6501(c)(1) Unlimited Statute of Limitations, Creating Conflict (Federal Tax Procedure Blog 8/18/25; 10/17/25).

In an alarmist mode, Professor Camp concludes his article by stating that, unless the problem of § 6201(c)(1) applying to innocent taxpayers is fixed, “I think we must all advise our clients to keep their records . . . forever.” (Emphasis supplied.) What does forever mean in this context? That's a quibble. Professor Camp is not just content to provide that bottom line from Murrin but repeats his arguments in his amicus brief as to error in Murrin and the predicate tax court opinion in Allen v. Commissioner, 128 T.C. 37 (2007), here.

I encourage those interested in the issue (which I call the Allen issue) to read Professor Camp’s article. I have not recently stepped through the legislative and statutory history he discusses in support of his claims, but my recollection is that I was not then sure that they support his claims. In any event, I am sure that for a long period of time since the early tax law, practitioners, including me, assumed that § 6201(c)(1) required taxpayer fraud. Allen appeared out of the blue, so to speak. But now that, in Justice Kagan's words “we are all textualists now,” if we focus on the text of § 6201(c)(1), there is no textual reading that would limit its scope to taxpayer fraud if the fraud is on the return. In other words, at best regarding Professor Camp's claims, the actual text is ambiguous as to whether the text of § 6201(c)(1) requires the taxpayer's fraud.

Further, on the purpose of § 6201(c)(1), I do not conceive it is as a punishment provision but a recognition that fraud on the return makes discovery by the IRS more difficult. After all, the consequence of the unlimited statute of limitations is that the taxpayer pays the tax the taxpayer owed ab initio. True, the taxpayer may have to pay interest, but tax and interest are not penalties. The taxpayer Professor Camp is concerned about is the truly innocent taxpayer relying on a fraudulent preparer; for such a taxpayer there will be no penalty because (i) § 6662 civil penalty which does not apply with taxpayer reasonable cause (unless, for some § 6662 civil penalties, the reasonable cause exception does not apply which is not likely in an innocent taxpayer context) and (ii) § 6663 civil fraud penalty does not apply unless taxpayer fraud is involved. So, from that perspective, the truly innocent taxpayer suffers no penalty with respect to the fraud on the return; rather, he would just pay the tax and interest that are in the helpful metaphor, his dues for a civilized society.

That’s all I have on the merits of Murrin and Allen. Just a few more comments:

Interesting points from ABA Tax Online Presentation on Loper Bright (4/29/26)

I just attended online an ABA Tax Section Program titled: “Navigating Tax Guidance in a Post-Loper Bright World.” The ABA page on the program is here. The panel participants were very knowledgeable.

Early in the program, I asked the following question via the Q&A tool:

Under Loper Bright, if, after using all the tools of statutory interpretation, a judge still cannot determine whether the IRS interpretation or the opposing interpretation is the best interpretation (a state of equipoise on the interpretation), what does the judge do? Should the judge flip a coin, consult, his ouija board, follow his own preferred outcome, etc.?

I have asked a similar question in previous ABA programs, but the question was never answered. In today’s program, the question was answered—that is, at least an answer was proffered. I am not sure it is the right answer but it certainly echoed Loper Bright’s reasoning, such as it is.

So what was the answer? Basically, the answer given by the judge on the panel was that, with good statutory interpretation, the judge will always have something to tilt the judge to the best interpretation. (That is my paraphrasing and advanced apologies if I did not get it exactly right.) Actually, as the question was answered, I think the answer was hedged saying that he did not think it would happen very often (although that is from memory, I may be misremembering, and my notes don’t confirm that).

I think the essence of the answer was an echo of Loper Bright which is just flat-out wrong on the point of continuing possibility of ambiguity (equipoise). Loper Bright claimed by fiat that a judge should always be able to reach a single best interpretation with no need for a default rule such as Chevron deference to the agency interpretation. (For this, one must remember that a condition of Chevron deference was that the statute be ambiguous, meaning that the judge could not determine whether the agency interpretation or an opposing interpretation was the single best interpretation; if the court could determine the best interpretation, Chevron required the court to stop at Step One without any deference.)

District Court Invalidates and Vacates Listed Transaction Reporting Regulation (4/18/26)

In Drake Plastics Ltd. Co. v. IRS, ___ F. Supp. 3d ___ (S.D. Tex. 4/15/26), CL here, and GS here [to come], the court (Judge Lee Rosenthal) considered APA claims of invalidity of the regulations determinations of “transactions of interest” and “listed transactions” for micro-captive insurance companies (from the conclusion):

          The court grants in part the plaintiffs’ motion for summary judgment and a permanent injunction, (Docket Entry No. 58), and grants in part the defendants’ cross-motion for summary judgment, (Docket Entry No. 63). The defendants (1) appropriately designated micro-captive transactions as transactions of interest through 26 C.F.R. § 1.6011-11; but (2) exceeded their statutory authority in designating micro-captive transactions as listed transactions through 26 C.F.R. § 1.6011-10. The court declares unlawful 26 C.F.R. § 1.6011-10 and vacates it. The case is remanded to the Department of the Treasury and the Internal Revenue Service for further agency action consistent with this opinion.

          The vacatur is stayed until May 1, 2026, to avoid taxpayer confusion on Tax Day. Cf. Purcell v. Gonzalez, 549 U.S. 1, 4–5 (2006) (“Court orders . . . can themselves result in . . . confusion . . . .”). Final judgment is entered separately.

I am not sure what the last paragraph stay is about, but I do understand the holdings in the first paragraph.

The court’s holding turns upon interpretation of the statutory requirement that "transactions of interest" have the “potential” for tax avoidance but that “listed transactions” that have tax avoidance, at least presumptive tax avoidance, rather than just the potential for tax avoidance. The court reasoned that the IRS did not adequately explain microcaptive arrangements identified in the "listed transaction" regulation.

Judge Rosenthal is a very good judge, so I respect her analysis, even though I am not convinced that it is correct.

Microsoft Copilot AI Hallucinates on Chevron Deference (4/12/26)

I have previously written on artificial intelligence (“AI”) related to tax procedure issues. I write today to address AI hallucinations of the type that have been incorporated into briefs and, more rarely, even court opinions. By hallucinations, I mean (from Wikipedia, here): “a response generated by AI that contains false or misleading information presented as fact.” The specific instance I address here is false readings of judicial opinions in the context of Chevron deference.

Readers will recall that I have previously discussed the issue of Chevron deference and the demise of Chevron deference in Loper Bright. One of the issues I addressed but return to today is whether courts determined the best interpretation was an interpretation other than an agency interpretation but nevertheless deferred under Chevron to the agency not-best interpretation. My claim was that Chevron required statutory ambiguity which meant that the court could not determine the best interpretation; only when ambiguity existed could the court defer to (apply) the agency interpretation. Stated otherwise, if a court could determine the best interpretation, the statute was not ambiguous and the best interpretation applied at Chevron Step One (i.e., no deference to the agency interpretation). Extended, the claim is that courts did not defer to an agency interpretation when it was not the best interpretation; rather, courts only deferred when they could not determine the best interpretation. At least that is how Chevron should have worked.

Yesterday, I returned to AI, specifically MS Copilot, to address this issue. I link here for download an pdf from an MS Word file with my prompts (4 prompts with prompts 2-4 following through on the first prompt). I provide here prompts 1-4 which refine the inquiry and provide the Copilot response only to the final prompt:

PROMPT #1: can you please identify cases decided under Chevron in which a court explicitly stated its best interpretation and said that it was nevertheless deferring to a not-best agency interpretation?

PROMPT #2 Please provide direct quotations from each case.

PROMPT #3: Please provide pinpoint citations for each case. [JAT Note: pinpoint citations are local page cites.]

PROMPT #4: Please provide cases and quotes from cases where judges criticized Chevron for forcing them to accept worse interpretations.

I will copy and paste the answer to Prompt #4, but first a big red flag was presented in the response to PROMPT #2 when I asked for direct quotes. The response started with the following:

I can absolutely give you direct quotations, but there’s one important constraint: I can only quote one or two lines verbatim from each case, because judicial opinions are copyrighted. 

That claim is patently wrong. Case opinions are not copyrighted.

The following is Copilot's response to PROMPT #4 (I add some of my analysis in CAPS and RED TYPE with links to the cases):

COPILOT RESPONSE TO PROMPT #4:

Tax Court Sustains Deficiencies Equaling Restitution with No RBA (4/4/26)

In Thody v. Commissioner, T.C. Memo. 2026-30, the Court sustained the deficiencies asserted against Thody with respect to the tax loss that had been subject to a restitution order against Thody in an earlier criminal tax prosecution. The Thody opinion can be viewed at TC No. 27415-21, here, at #50 dated 3/30/26 and GS here. Actually, the original notices of deficiency exceeded the amount in the restitution order, but the IRS conceded (pp.. 4-5) the excess deficiencies asserted in the notice of deficiency, so that with that concession, the amounts of deficiencies the IRS asserted in the case equaled the amounts in the criminal restitution order. The Court then sustained the deficiencies based on the evidence.

One unexplained apparent oddity is that the IRS did not make a restitution-based assessment (“RBA”) allowed by § 6201(a)(4). The Court offers no explanation and treats the case as a straight-forward deficiency case permitting Thody to contest the amounts. If the IRS had made the RBA in the same amounts, Thody could not have contested the amounts of the RBA. In that regard, the IRS can assert deficiencies in amounts exceeding the amounts of restitution, whether or not asserted in an RBA. I don’t know why the IRS conceded the excess amounts. The IRS may have known or believed that it could not sustain that excess, so that this would be a normal concession in a deficiency case. But, if as a straight deficiency case, the IRS could have sustained the excess deficiency amounts, there was no reason to concede them. The IRS may have conceded just to move the case to a prompt decision with less hassle. A related question is whether, once the IRS decided to concede the excess before the trial level consideration was concluded, the IRS could have made an immediate RBA which would preclude Thody from contesting the amounts. I am not sure that there is a statute of limitations on RBAs because I have not researched that issue. And I am not sure that the Court would have treated such a belated RBA as mooting the deficiencies case.

Moreover, the Court seems not to have not the distinction between a tax deficiency and restitution. Thus, at p. 3, the Court says that the Government reduced the restitution (not the RBA) to judgment. In doing so, the Court cites in fn. 4 the IRM for the purpose of suits to reduce tax claims to judgment is to extend the statute of limitations. The IRM provision, I think, relates to tax assessments rather than criminal restitution. Of course, if there is a statute of limitations on restitution (likely), the reason to reduce restitution to judgment may be for the same.

Thody made the argument that the payments he had made for restitution should reduce the amount of the deficiencies. The Court (pp. 7-8) did correctly find that Thody’s argument was incorrect. The Court notes that, although in collecting on any resulting deficiencies approved by the Tax Court, the IRS would have to credit the restitution payments against the tax liabilities.

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

Court Denies Charity's Motion to Dismiss a Suit to Judicially Extinguish a Conservation Easement Deduction Failing to Achieve a Tax Deduction (4/2/26)

Today’s entry arises from an order in a case where the Petitioner, as successor in interest to three LLCs that made so-called charitable contributions of conservation easements that failed to sustain the tax benefits the predecessors claimed on the partnership tax returns, seeks a “judicial extinguishment” of the original contribution on the notion that the parties made a critical mutual mistake regarding the easement contributions as qualifying for the federal income tax deduction. If achieved that would mean that the conservation easement goes back to the successor in interest, making its fee simple interest more valuable because not subject to the conservation easement. The nondispositive order is McLaws Bay LLC v. National Wild Turkey Federation (S.D. Ga. No. 4:25-cv-00128 (CL here and GS here) Dkt. #24 (CL here) dated 3/30/26). The Respondents filed a motion to dismiss. The order grants and denies in part the motion on the basis that the record is not sufficient to assess the merits of the defense; the case proceeds at this time.

A key paragraph in the order is (bold-face supplied by JAT):

          Petitioner claims that Grantors (Petitioner’s predecessors in interest) and NWTF intended for the conservation easements to qualify as "conservation contributions" under Section 170 of the IRS code, entitling Grantors to tax benefits. (Id. at pp. 34-35; see 26 U.S.C. §170(h)(1).) Each grant references the tax code and provides that the easements are "intended to constitute (i) a ‘qualified conservation contribution’ as that term is defined in Section 170(h)(1) of the Internal Revenue Code." (Doc. 1-2, pp. 34, 52, 89, 126.) Section 5.24 of each easement states that "Grantor represents that he has consulted with an attorney [and] an accountant . . . familiar with Section 170 of the Internal Revenue [Code] for advice related to this Conservation Easement and any potential tax benefits" and that "Grantor warrants and represents that Grantee has made no warranty or representation relating to . . . any entitlement to tax benefits. . . ." (Id. at pp. 35, 80, 117, 154.)

As best I see the case, in broad overview, the Grantors (the predecessor LLCs to the Petitioner, screwed up the contribution and thus failed to meet the tax requirements (probably including a gross overvaluation).

The opinion identifies the predecessor partnerships making the contribution and claiming the deductions as “Dasher’s Bay at Effingham, LLC, River Pointe at Ogeechee, LLC, and River’s Edge Landing, LLC.” The DAWSON information on the LLCs thus named is:

• Dasher’s Bay at Effingham, LLC: T.C. No. 4078-18, here. The decision at Dkt # 52 dated 1/11/23 denies a charitable deduction of $8,619,000
• River Pointe at Ogeechee, LLC: No case with this name found on DAWSON.
• River’s Edge Landing, LLC: No case with this name found on DAWSON.

In any event, the amounts of the disallowed deductions are relevant only, in the one case, to permit a fair inference of at least the possibility of a gross overvaluation.

My reaction—really a guess without digging into the merits—is that, in the final analysis, the court in McLaws will treat McLaws’ claims as bullshit.

Prominent Convicted Tax Shelter Lawyer Fails on Appeal in CDP Case Involving Restitution Based Assessments (4/1/26)

 I start with a caveat: although this posting is on April 1, sometimes called April Fools Day, this is intended as a serious discussion.

In Daugerdas v. Commissioner, ___ F.4th ___ (7th Cir. 2026), CA7 here and GS here, the Court held that § 6201(a)(4)(A), which authorizes the IRS  to assess and collect restitution awarded in a criminal proceeding for unpaid tax, was a stand-alone collection authority unaffected by the payment schedule the district court imposed for the restitution behind the tax assessment. The assessment is sometimes called “restitution based assessment,” and acronymed to RBA which I use here. The holding seems like a straight-forward holding. But there are some issues lurking in the case that tax procedure enthusiasts may enjoy or at least understand.

First, I offer background worthy of note:

1. Daugerdas, a lawyer, is a notorious promoter of bogus tax shelters who was convicted. The Court says (pp. 2-3, emphasis supplied by JAT):

          In 2013 a federal jury in Manhattan found Daugerdas guilty of one count of conspiracy to defraud the IRS (18 U.S.C. § 371), one count of mail fraud (18 U.S.C. § 1341), four counts of client tax evasion (26 U.S.C. § 7201), and one count of obstructing the internal revenue laws (26 U.S.C. § 7212(a)). His sentence brought with it an obligation to pay restitution of $371,006,397 jointly and severally with his co-conspirators for the tax losses resulting from the fraud perpetrated on the U.S. Treasury. The district court established a schedule of payments requiring Daugerdas to pay 10% of his gross monthly [*3] income starting 30 days after his release from prison. The Second Circuit affirmed Daugerdas’s convictions and sentence. See United States v. Daugerdas, 837 F.3d 212 (2d Cir. 2016).

I have not tried to break down the components of the restitution amount. Specifically, I have not tried to determine whether the restitution relates to Daugerdas’ tax liabilities (he did make a whopping amount of gross income that he likely attempted to shelter with similar bullshit strategies) or includes in whole or in part the liabilities of other persons reporting on the basis of bullshit tax shelters he promoted with legal opinions and related services. I don’t know that the difference makes a difference in terms of the RBA.

I have written on Daugerdas several times on my Federal Tax Crimes Blog, here (the results are initially by relevance but may be sorted by date).

The Economic Substance Doctrine ("ESD")--the Common Law and § 7701(o) (3/31/26; 4/8/26)

In Royalty Management Ins. Co., Ltd. v. Commissioner, T.C. Memo. 2026-26 (T.C. No. 3823-19, here, at #338 and GS here), Judge Lauber smacked down another bullshit tax shelter of the microcaptive insurance genre. This opinion is a follow-through from a prior opinion, Royalty Management Ins. Co. v. Commissioner, T.C. Memo. 2024-87 (GS here). I refer to the prior case as Royalty Mgmt 1 and the current case as Royalty Mgmt 2.

Royalty Mgmt 2 was required because Judge Lauber deferred resolving in Royalty Mgmt 1 the economic substance doctrine (“ESD”) issues (including the codified ESD in § 7701(o) and the accuracy-related penalty for shelters running afoul of the codified ESD in § 6662(b)(6), (i)). In the meantime, the Tax Court had decided Patel v. Commissioner, 165 T.C. ___, No. 10 (11/12/25), GS here, which I discussed Tax Court in Unanimous Reviewed Opinion Interprets and Applies the Accuracy-Related Economic Substance Penalty (11/12/25), here. In material part, Patel held that the codified ESD doctrine in § 7701(o) has a predicate “relevance” requirement. So, Judge Lauber in Royalty Mgmt 2 applied that requirement as a predicate for finding the petitioner liable for the accuracy-related penalty for lack of economic substance. The kerfuffle over whether § 7701(o) has a predicate requirement and precisely what the requirement is and how it may be applied is not relevant to the main body of this blog, so I will defer here and discuss that alleged predicate requirement in my comments below. I do point persons interested in the issue at Royalty Mgmt 2 at pp. 3-4.

Judge Lauber goes through (pp. 5-9) the standard ESD requirements—objective and subjective tests, both of which on the facts found, the petitioner flunked.

Having flunked the ESD test, petitioner drew the increased accuracy-related penalty in § 6662(b)(6), (i). (See pp. 9-11.)

JAT Comments:

Tax Court (Judge Lauber) Strikes Down Another Bullshit Tax Shelter Not Defending It's Return Reporting Valuation (3/30/26; 4/2/26)

In Hancock County Land Acquisitions, LLC v. Commissioner, T.C. Memo. 2026-28, TC here at # 232 and GS here, Judge Lauber shot down another bullshit SCE shelter. Judge Lauber explains in summary in the introduction (pp. 1-3 of the opinion) in a straight-forward way, so I will just cut and paste that portion of the opinion (providing my own bold-face of key parts, with one footnote omitted) and will thereafter make some comments:

LAUBER, Judge: This is a syndicated conservation easement (SCE) case with a familiar fact pattern. In August 2016 Hancock County Land Acquisitions, LLC (HCLA), granted a conservation easement over a 236-acre parcel of land in rural Mississippi. This parcel was part of a 1,698-acre tract that had changed hands three times during the previous 13 years for prices as low as $895 and $2,356 per acre.1 On its 2016 Form 1065, U.S. Return of Partnership Income, HCLA claimed a charitable contribution deduction for the easement on the theory that the [*2] “before value” of the 236-acre parcel—that is, its value before being encumbered by the easement—was $180,177,000, or $763,462 per acre. That figure was calculated as the discounted cashflow (DCF) that supposedly could be derived from constructing and operating a hypothetical sand and gravel (S&G) mining business on the property.

          To its credit, Southeastern Argive Investments, LLC (Argive), petitioner in this case, did not seek to defend that outlandish valuation at trial. Rather, petitioner sought to derive a “before value” for the 236-acre parcel from the amount investors paid to acquire a 97% interest in Argive, or from the amount Argive paid to acquire a 97% interest in HCLA, which owned the land. The “total capital raise” from the investor offering was $23,374,575, and roughly 78% of that amount, or $18,247,575, was paid to the owner of the 236-acre parcel. Petitioner contends that the offering was an arm’s-length transaction close in time to—indeed, just six weeks before—the date the easement was granted (valuation date), and that this transaction constitutes the best evidence of the fair market value (FMV) of the land. While not disclaiming a higher value, petitioner contends that the “before value” of the land (making adjustments for minority interests) was at least $18,634,933, or $78,962 per acre.

          We reject this argument. The investors were not purchasing land; in substance, they were purchasing tax deductions. Each investor was promised a charitable contribution tax deduction of $7,477 for every $1,000 invested. As a result, the amount they paid for their partnership interests was (roughly speaking) the aggregate amount of the promised tax deduction divided by 7.477. Neither the investors nor Argive negotiated at arm’s length over the value of the land; the offering was not priced by reference to the value of the land; and the amount the investors paid had nothing to do with the value of the land. Petitioner produced no credible evidence that the investors expressed any view about what percentage of the offering proceeds should be paid to the land-owner under arm’s-length standards. We find that the sole focus of their concern was the magnitude of the tax deduction. That number would be the same regardless of how much the landowner was paid for the land.

Déjà vu All Over Again-Non SCE Tax Shelter with Alleged Bullshit SCE Features (3/23/26)

Bloomberg has this article: Michael J. Bologna, Whistleblower Targets Tax Shelter Promoting Do-Good Technology (Bloomberg Tax 3/23/26), here. The only thing I know about the strategy is from the article. I therefore cannot speak to whether it is in fact a bullshit tax shelter. However, if the article accurately describes the strategy, it has the earmarks of bullshit tax shelters—likely gross overvaluation of charitable noncash donations—from  Jackie Fine Arts in the 1970s and early 1980s, through a cousin, Barrister, then going through the Syndicated Conservation Easements.

The article appears to be well researched and has some comments by prominent attorneys in this area. Some excerpts:

          Working off a playbook refined over several years, Solidaris and its partners in 2025 proposed four separate plans, each investing in 45 shell companies, and each looking to raise $90 million from wealthy investors.

          In one plan, the investors could vote to donate license rights to a technology designed to help blind people navigate in urban environments. In the second, they could vote to distribute digital coloring books to pediatric cancer patients. And in the two others, they could choose to donate crime-fighting artificial intelligence technology to local police departments. All four plans were described in private placement documents as Regulation D private offerings, allowing the promoters and sponsors to raise capital without registering the investments with the Securities and Exchange Commission.

          Elements of the strategy including outsized charitable deductions, complex procedures, and unusually high fees, warrant government scrutiny, according to former Internal Revenue Service, SEC, and Department of Justice officials who reviewed the documents for Bloomberg Tax.

          “It undermines fundamental economics and human behavior,” said Miles Fuller, a former senior counsel at the IRS Office of Chief Counsel. “One dollar does not turn into five dollars overnight. And if it did, it is unlikely the beneficial party would then donate the five dollars to charity rather than sell and pocket the profit.”

          The Solidaris-led strategy to collect $360 million total from investors last year could generate charitable deductions of $1.8 billion this tax season, assuming high-wealth investors vote to donate the technology and then claim a deduction worth five times their investments. That would cut an estimated $667 million from their federal returns and $90 million from state returns for tax year 2025.

          Solidaris says its investments “multiply good on a local, state, and national scale.” It also said it plays no role in whether investors vote to donate the technology. The company has not been charged with any wrongdoing.

          Under the Internal Revenue Code, whether a tax shelter is allowed or not can be an open question until the government weighs in. And that can take years, especially when the shelter is novel or complicated.

Just a few comments:

Update on FTPB Discussion of Legislative History (3/18/26)

I have substantially revised the legislative history discussion in my Federal Tax Procedure Working Draft for the 2026 editions (Student and Practitioner) to be published on SSRN in early August 2026. As currently revised, the text (without footnotes as it will appear in the Student Edition, although those wanting the draft with footnotes in the Practitioner Edition may view it here):

                                      (5)    On Legislative History.

          I noted above the controversy between textualists and purposivists over the role that legislative history should play in statutory interpretation. Legislative history is the course of congressional consideration in identifying the need for legislation, drafting or revising the bills (the “drafting history” for enacted statutory text), expressions by persons involved in the process as to how they understood the text of the bills, and the final statutory text. The principal sources of legislative history for statutes are the drafting history and the committee reports which I discuss below. (For tax legislation, the legislative history may also include proposals from Treasury (analogous to drafting history) and Treasury’s explanation of the proposals, most commonly along with Treasury’s annual budget request with tax proposals referred to as the Green Book.) Other sources include committee hearings, statements made on the floor of Congress in debating the legislation, and submissions to Congress by the executive branch. There is a long and substantial history of judicial use of legislative history in statutory interpretation, particularly in the tax area.

          Legislative history is a broad term, with some legislative history more persuasive than others (at least for those willing to consider legislative history). In terms of the legislative process and reliable indicators of the meaning of statutory text, the committee reports accompanying legislation are generally viewed as a reliable form of legislative history (eclipsed only by conference committee reports discussed below). In both houses, proposed legislation is generally first considered substantively in committees which generally give the most detailed consideration of proposed statutory text; those committees often hold hearings to discuss legislative proposals and then prepare reports explaining the proposed statutory text that they send to the floors of their respective Houses. The meaning of particular statutory text that is then enacted may be discussed in those hearings or in the committee reports.

          For tax legislation, because of the historic influence of the tax writing committees and their staffs and the assistance of the Joint Committee on Taxation (“JCT”), the committee reports of the House Ways and Means Committee and the Senate Finance Committee have been the most frequently used legislative history guide to interpreting the statutory text. Often said to rank even higher than committee reports in authoritativeness is the particular form of legislative history accompanying and explaining statutory text produced in a Conference Committee to work out differences in legislation between the two Houses of Congress. In considering legislative history in a particular case, it is important to understand the legislative processes that produced the legislative history and whether those processes make the legislative history a reliable indicator of the actual or deemed meaning of the statutory text.

Comments on Highly Recommended Article Extending Skidmore "Deference" Approved in Loper Bright (3/7/26; 3/8/26)

I have just read a great article: Mitchell Zaic, Note: The Skidmore Compromise: Interpreting Skidmore as a Tiebreaker to Preserve Judicial Wisdom in the Era of Loper Bright, 110 Minn. L. Rev. 1535 (2026), here, and post some thoughts on the article and on Skidmore (Skidmore v. Swift & Co., 323 US 134 (1944), here).

First, I acknowledge Mr. Zaic has published an exceptional work with substantial research and creative thought after Loper Bright Ent. v. Raimondo, 603 U.S. 369 (2024), SC here (Preliminary Print), which overruled so-called Chevron deference. Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), GS here. Mr. Zaic says in the asterisk for his name: “Writing this piece has been one of the great privileges of my life.” He has also privileged readers of the article.

Mr. Zaic states his thesis in these two excerpts (pp. 1356 and 1569):

This interpretation of Skidmore would only be used by interpreters when judges are faced with interpretive ties that have no other method of resolution. Only then can judges resort to applying the agency's interpretation. This method of interpreting Skidmore ensures that agency interpretations never overrule the best meaning of the statute, instead facilitating the judge in his or her interpretive quest. In addition, the tiebreaker continues the long tradition of respect for agency interpretations beyond that of the typical litigant.

* * * *

Where competing interpretations are at equipoise to an interpreter, courts should resolve conflicts in the agency's favor so long as the agency's reasoning is valid, thorough and its interpretation arises from experience and informed judgment.

Bottom line, Mr. Zaic argues that, in a state of statutory interpretive equipoise, a court needs—indeed, must—apply a default rule to decide the case. The default rule in a case where a regulated party opposes an agency interpretation is that the court should default to the agency interpretation. Mr. Zaic gets to his conclusion through a process of reasoning.

My previous Chevron research indicates that Chevron worked in equipoise (without necessarily the qualifiers at the end of Mr. Zic's last sentence). Chevron was supposed to apply only where, after vigorous statutory interpretation (Chevron fn. 9), the statutory text was still ambiguous—in equipoise—where the court could not determine which of two or more interpretations within the zone of ambiguity was the best interpretation.

Second Circuit Rejects Tax Court's Fahry Holding That IRS Can't Assess and Collect the § 6038(b) Penalty (2/27/26)

I have written on the issue of whether the § 6038(b) penalty can be assessed (with the assessment collection tools available) or must be collected by a collection suit in the district court. See posts here. The Tax Court held in  Farhy v. Commissioner, 160 T.C. 399 (2023), GS here, that the IRS could not assess and collect but rather must sue and collect. The D.C. Circuit reversed. Farhy v. Commissioner, 100 F.4th 223 (D.C. Cir. 2024), CADC here**, and GS here. The Tax Court stuck to its Farhy holding in cases appealable to Circuits other than the D.C. Circuit under its Golsen rule, feeling that its original Farhy holding was correct.

Today, the Second Circuit has now aligned with the D.C. Circuit, saying that the IRS can assess and collect the § 6038(b) penalty.  Safdieh v. Commissioner, ___ F.4th ___ (2d Cir. 2/27/26), CA 2 here, TN here, and GS here. Other than to say that I think the D.C. Circuit and the Second Circuit are correct, I can’t add any discussion not evident from my earlier posts linked above. Thus, this is a notice-only blog.

This post is cross-posted in my Federal Tax Crimes Blog, here.

Tax Court Calls Out Yet Another Bullshit Tax Shelter But Relieves Taxpayer of 6662 Penalties (2/24/26 as corrected; 2/27/26)

Major Correction: I made an error in the original blog post, by misreading the court's application of the 40% Substantial Valuation Misstatement and Gross Valuation Misstatement Penalties in § 6662(e)(1)(A) and I.R.C. § 6662(h) but not picking up that the reasonable cause defense it sustained effectively wiped out all 6662 penalties.

Yesterday, the Tax Court (Judge Weiler) decided Otay Project LP v. Commissioner, T.C. Memo. 2026-21, TC Dkt here at # 349, TN here, and GS here, tanking another bullshit tax shelter. There is no indication that this is a syndicated shelter creating basis and thus deductions out of thin air in complex structures taxed as partnership; as presented it seems like “one-off” imagined by creative minds and blessed by firms that have played prominently in tax sheltering—E&Y and McKee Nelson LLP; moreover, I suspect (suspicion only) that variations on the shelter were promoted on and opined upon on other occasions.

I find it a bit odd that, although Judge Weiler says he read the those firms’ opinions (Slip Op. 45), but he does not identify the persons signing the opinions. Oh well, let’s move on to the main points for tax procedure enthusiasts.

On the Merits of the Complex Machinations:

The actual bottom-line tax costs of the shelter failing must await the Rule 155 computation, but the Court concludes on the merits (other than penalties) (Slip Op. 31):

In sum, we determine petitioner has not met its burden here and has failed to correctly establish the Basis Deduction under section 743(b), as claimed on OPLP’s 2012 Form 1065. Accordingly, we will sustain respondent’s disallowance of $713,759,615 of a more than $743 million claimed Basis Deduction reported on OPLP’s 2012 Form 1065 for the 2012 tax period. 

I believe it would not be helpful to most tax procedure enthusiasts to wade into the complex facts and partnership tax law discussed in the opinion. Although this appeared not to be one of the abusive shelters of the late 1990s and early 2000s (e.g., BLIPS or variants used by different accounting and law firms), I suspect that some of the fanciful notions asserted in those earlier versions were deployed here in a more complex and “engineered” (Slip Op. 30-32) journey through esoteric partnership tax provisions.

Suffice it to say that the Court rejected that “engineered” journey on the merits of the partnership tax law and also based on economic substance doctrine. In this regard, because it preceded the effective date, the transaction was not subject to the codified economic substance doctrine in § 7771(o) or the penalty in § 6662(b)(6). (See Slip Op 2 n. 2.)

 The Penalties:

On Supreme Court U.S. (or is it U. S.) Citations and the Supreme Court's Tariff Opinions (2/22/26; 2/23/26)

This blog entry is a bit of a detour from the domain of federal tax procedure. Specifically, this blog presents two more or less fringe disparate subjects. I divide the blog into two sections. The first is mundane: whether to space or not to space between U. and S. in Supreme Court citations? The second is a disjointed foray into the Supreme Court’s tariff opinions handed down Friday:  Learning Resources, Inc. v. Trump, 607 U. S. ___ (2026), here (Slip Op.).

To Space or Not  to Space in U.S. (or it is U. S.) Citations, that is the Question

For those who review Supreme Court opinions in all official formats (Slip Opinion, Preliminary Print, and Final), the opinions format the citation to the official reports with a blank between U. and S.—e.g., Loper Bright Enter. v. Raimondo,  603 U. S. 369 (2024), here (Preliminary Print). I had not learned to cite without the space and had not paid attention to the Supreme Court's format (with space) until today as I was reading the slip opinion in Learning Resources, Inc. v. Trump, 607 U. S. ___ (2026), here (Slip Op.). So, I asked ChatGPT and received the following answer (with my prompt, with citations omitted):

Prompt: Please cite me authorities (judicial and otherwise) that discuss the difference between the Supreme Court's citation of its decisions as "U. S." (with a blank between U. and S. and other authorities (mostly commentary but also Courts of Appeals and case reporters) foregoing the blank between U. and S.

Chat GPT Response: 

The U.S. Supreme Court officially cites its own decisions using "U. S." with a space between "U." and "S." in the United States Reports (e.g., 5 U. S. 137), while The Bluebook, Courts of Appeals, most legal commentary, and case reporters standardize "U.S." without the space. This distinction arises from the Court's unique style conventions versus modern citation guides like The Bluebook, which enforce no space between adjacent single capital letters per Rule 6.1(a).

Supreme Court Practice ("U. S." with space)

The Supreme Court itself uses spaced citations in its bound volumes of the United States Reports, reflecting historical typography from early volumes like Marbury v. Madison, 5 U. S. (1 Cranch) 137 (1803).8 This format appears consistently in official reporter headings and the Court's published opinions.

Other Authorities ("U.S." without space)

The Bluebook: Prohibits "U.S." with a space, mandating "U.S." for United States Reports (e.g., Roe v. Wade, 410 U.S. 113 (1973)); spaces are reserved for abbreviations like "S. Ct." (Rule 6.1(a) and Table T1).

Courts of Appeals and State Appellate Guidance: U.S. Courts of Appeals briefs require "U.S." without parallels or spaces (e.g., Roe v. Wade, 410 U.S. 113 (1973)). California Courts of Appeal cite as "450 U.S. 544." Washington Supreme Court style sheet specifies "__ U.S. __" without space in examples.

Tax Court (Lauber) Rejects Bullshit Syndicated Conservation Easement (BSSCE) Valuation Claim (2/19/26; 4/14/26)

Today, Judge Lauber called out yet another bullshit syndicated conservation easement (“BSSCE”). North Donald LA Property, LLC v. Commissioner, T.C. Memo. 2026-19 T.C. No. 24703-21, here, at # 476; TN here; and GS here.The BSSCE claimed a charitable contribution of $115,391,000. The flaw that swung the case against BSSCE was, as Judge Lauber held in the opening (Slip Op. p. 3):

We conclude here, as we did in J L Minerals, LLC v. Commissioner, T.C. Memo. 2024-93, at *3, that the valuation of the conservation easement “was an outrageous overstatement,” wholly untethered from reality. Employing the comparable sales method, as backstopped by the price actually paid to acquire the property in March 2016, we find that its “before value” was $2,975 per acre and that its “after value” was $2,300 per acre. The delta between these figures—the reduction in value attributable to the easement—is $675 per acre. The value of the easement—and hence the allowable charitable contribution deduction—is thus $175,824 ($675 × 260.48 = $175,824).

For those who are valuation enthusiasts, I suppose there is a lot to chew on. 

There are some interesting snippets in the opinion. I will list them in my numbered further comments below. The main things I want to write on are (i) the bottom-line valuation and (ii) the rejection of the civil fraud penalty for bullshit valuations. At trial, despite claiming a $115,391,000 value on the return, North Donald’s simultaneous opening brief (pp. 6, 124 & 202) described the valuation as:

5. Whether the value of the Easement Donation, as determined by Petitioner’s expert (Mr. Catlett), is $61,235,000?

* * * * 

824. The value of the Easement Donation is as determined by Petitioner’s expert, Mr. Catlett, $61,235,000. Entire Record.

* * * * 

Because the Catlett Appraisal is the only appraisal before the Court that considered the relevant, available data regarding the quantity and quality of the clay reserves on the NDLA Property, the Court should adopt Mr. Catlett’s determination that the value of the Conservation Easement is at least $61,235,000.

So, after trial, North Donald conceded $54,156,000 of the amount it claimed on the return. More importantly, after trial, North Donald still claimed a value of $61,235,000. Judge Lauber found that the actual value was $175,824, which is 0.29% of the value North Donald claimed at trial. North Donald presented a gross overvaluation at trial by presenting, I guess with a straight trial face on, a valuation methology—described by Judge Lauber as the “Income Approach”—that has repeatedly been rejected by the Tax Court, as Judge Lauder notes (Slip Op. 54-59.)  Some interesting points of Judge Lauber’s analysis of petitioner’s claimed valuation:

Tax Court Memo Decision Warns Practitioners About Misuse of Artificial Intelligence Hallucinations (2/10/26)

 I have written before on Tax Court Orders addressing AI use and hallucinations. Use of AI, Including Large Language Models (LLMs), in Tax Court Brief Writing (And Really Other Legal Analysis) (Federal Tax Procedure Blog 1/22/25; 4/29/25), here. In Clinco v. Commissioner, T.C. Memo. 2026-16 (2/9/26 T.C. No. 8077-23, here, at # 37 and GS here [to come]), Judge Holmes finally puts the issue in a decision (as opposed to an order). The relevant discussion is here (Slip Op. 5 & 6-8, yellow-highlighting supplied by JAT):

I. Notice of Deficiency

          Clinco’s challenge to the validity of the notice of deficiency serves up one apparently serious question: Must one of the Commissioner’s employees manually sign a notice of deficiency? But it is accompanied by a garnish we’ve reviewed in orders but not in an opinion: What should we do when lawyers cite hallucinated authorities likely generated through artificial intelligence (AI)?

* * * *

B. Fabricated Case Citations

          The persuasiveness of Clinco’s argument collapses like an overmixed soufflé when one looks at the citations used to prop it up. Mr. Wagner, Clinco’s attorney, cites four cases in support. Three appear to be hallucinations generated by a large language model AI. He cites “Cacchillo v. Commissioner, 130 T.C. 132 (2008),” as a case where a taxpayer challenged the validity of the notice of deficiency because it lacked an official signature. He claims we held that the IRS’s failure to issue a valid signed notice of deficiency ousted us of jurisdiction. “Cacchillo v. Commissioner” does not, however, exist. Page 132 in volume 130 of the Tax Court Reports is within Porter v. Commissioner, 130 T.C. 115 (2008), and that page discusses the standard of review for section 6015(f) claims for relief—completely unrelated to the case before us.

          Mr. Wagner claims “Cacchillo v. Commissioner” overturned “Miller v. Commissioner, 57 T.C. 440 (1971),” and “Tefel v. Commissioner, 118 T.C. 324 (2002).” He elaborated:

In Tefel the Tax Court did note that the case clarified that while substantial compliance may be sufficient, the IRS [*7] must still meet the signature and other formal requirements in issuing the [statutory notice of deficiency]. While some cases allowed for minor errors in the issuance process, critical requirements like a signature must be followed for a Notice of Deficiency to be valid.

Neither of these cases exist as cited. Miller v. Commissioner, T.C. Memo. 1984-448 (not the citation provided by Mr. Wagner) mentions a notice of deficiency in passing in the findings of fact, but only to state that one was sent. There is no discussion of the formal requirements of such a notice. Page 440 in volume 57 of the Tax Court Reports is within Winfield Manufacturing Co. v. Renegotiation Board, 57 T.C. 439 (1971)—a case in which there is no mention of a notice of deficiency whatsoever.

NTA Annual Report to Congress, with Purple Book Recommendations for Legislation (1/8/26)

This post is a little late in coming, but the National Taxpayer Advocate issued the Annual Report to Congress-2025, here. The key portion of the report for tax procedure enthusiasts is the “Purple Book,” here, described as:

a concise summary of 71 legislative re1commendations that the National Taxpayer Advocate believes will strengthen taxpayer rights and improve tax administration. Most of the recommendations have been made in detail in prior reports, but others are presented in this book for the first time. The National Taxpayer Advocate believes that most of the recommendations presented in this volume are non-controversial, common-sense reforms that the tax-writing committees, other committees, and other members of Congress may find useful.

 There are many proposals in the Purple Book that could affect tax procedure. The discussions of current law and problems, with the proposed legislative solutions are quite good. Given that Congress has not acted on the proposals yet, I thought this would be just a “notice” blog offering the descriptions in the listing (like a table of contents): 

STRENGTHEN TAXPAYER RIGHTS
1. Elevate the Importance of the Taxpayer Bill of Rights by Redesignating It as Section 1 of the Internal Revenue Code
2. Require the IRS to Timely Process Claims for Credit or Refund
3. Require Notices of Claim Disallowance to Clearly State the Reasons for Disallowance, Explain Administrative and Judicial Appeal Options, and  Specify Applicable Timeframes

IMPROVE THE FILING PROCESS
4. Treat Electronically Submitted Tax Payments and Documents as Timely If Submitted on or Before the Applicable Deadline
5. Authorize the IRS to Establish Minimum Standards for Federal Tax Return Preparers and to Revoke the Identification Numbers of Sanctioned Preparers
6. Extend the Time for Small Businesses to Make Subchapter S Elections
7. Adjust Individual Estimated Tax Payment Deadlines to Occur Quarterly
8. Eliminate Duplicative Reporting Requirements Imposed by the Bank Secrecy Act and the Foreign Account Tax Compliance Act
9. Authorize the Use of Volunteer Income Tax Assistance Grant Funding to Assist Taxpayers With Applications for Individual Taxpayer Identification Numbers

Could the District Court Invite or Appoint an Amicus to Present the U.S. Position in Trump v. IRS? (2/7/26; 2/12/26)

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

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

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

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

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

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

On 2/20/26 at 12:30am, an update has been added to the bottom of this blog entry to note another Amici Curiae Brief filing by public interest organizations.

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

The key documents to date are

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

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

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

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

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

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

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

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

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

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

Points about the Amici Brief:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I asked Gemini AI about the war plan analogy: