ChatGPT on Picking Evidence in Statutory (and Constitutional) Interpretation (9/13/26)

Today, I was reworking the part of my 2027 Working Draft for my Federal Tax Procedure Editions on the problem of cherry-picking or selecting evidence used in constitutional and statutory interpretation. The issue is presented anecdotally by conservative judges trotting out Judge Leventhal’s famous remark that using legislative history is like looking over the crowd and picking your friends. There is a similar phenomenon with so-called “law office history” deployed to support arguments made by advocates and judges in their opinions. Even broader, the same phenomenon is presented for the entire body of law that advocates and judges deploy—such as cases, scholarly treatises, law review articles, etc. The risk is always present that we as lawyers (or judges) pick our friends rather than make a neutral assessment of the evidence.

Continuing my experimentation with AI, I asked ChatGPT Plus about the issue and got what I think are pretty good responses. I presented the issue in two prompts (the second asking for more than the first) noted below in red. The bold face was from the original responses. I checked the citations to the two Supreme Court cases and they are correct (i.e., no hallucinations). I will use the responses in re-working my discussion in the Federal Tax Procedure Editions (not verbatim but to inspire how I state the concepts in my own words which I hope are at least as good as ChatGPT's).

As an introduction, I use the term "law office history." That term commonly describes the phenomenon of lawyers and judges evaluating history as a process of cherry-picking to support arguments. Of course, selecting the evidence is what we all do when making arguments or taking positions; lawyers do that in briefs and oral arguments; judges do that in opinions; we all do that in our daily discourse. Even when a person--say a judge--sees his or her duty to make an objective or fair assessment of the evidence, personal prejudices or preferences may influence the evidence used. I wanted to explore what that may mean.

One caveat: The same phenomenon occurs in factfinding where a judge selects from a body of factual evidence the evidence that he or she finds persuasive to determine facts relevant to the outcome of the case. I don't think factfinding is materially different from lawfinding--selecting among the relevant evidence to reach the outcome.

Prompt #1

Please write a short discussion of the features of "law office history" and "legislative history" that permit a judge or lawyer to cherry pick (or as one judge called it to look over a crowd and pick your friends).

Response to Prompt #1

Here is a short version in a law-review style that emphasizes the structural similarity between the two problems:

Law-Office History and Legislative History

Both “law-office history” and legislative history present a similar danger: they often supply the interpreter with a large and heterogeneous body of material from which supporting evidence can be selected without any obvious neutral rule for determining what evidence should receive the greatest weight. Alfred H. Kelly coined “law-office history” to describe the lawyerly practice of selecting historical data favorable to a position while failing adequately to confront contrary evidence or evaluate its significance in historical context. The problem is partly inherent in advocacy. The historical record is usually extensive, incomplete, and capable of supporting competing narratives; choices must be made about the relevant period, the appropriate level of generality, which practices are representative, and which sources deserve weight. Those choices can permit the advocate—or judge—to begin with a desired conclusion and assemble a plausible historical narrative supporting it.

Legislative history presents much the same problem, perhaps in an even more concentrated form. A statute may generate committee reports, sponsor statements, floor debates, hearing testimony, rejected amendments, conference materials, and statements by legislators who supported or opposed the final bill. These materials may point in different directions, and statements by particular legislators do not necessarily represent the understanding of the legislative body that enacted the statute. Moreover, participants aware that courts consult legislative history may have incentives to place favorable statements in the record. The resulting abundance of potentially conflicting material makes selective quotation unusually easy. The Supreme Court has accordingly repeated Judge Harold Leventhal's famous description of using legislative history as akin to “looking over a crowd and picking out your friends.” Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546, 568 (2005).

Judge Holmes Decides on Burden of Proof (Persuasion) (9/3/26)

In Risan v. Commissioner, T.C. Memo. 2026-78, TC here at #93, TN here, and GS here [to come], Judge Holmes decided significant factual issues on burden of proof. The key reason I thought this case interesting is that Tax Court Judges often, after noising about burden of proof, will just hold that, in effect, burden of proof is irrelevant to the outcome because the Judge in the particular case has resolved those factual issues by a preponderance of the evidence. That is simply to say that, in the normal case where the preponderance of the evidence standard applies, burden of proof is relevant only if the Judge is in factual equipoise unable to determine whether or not a critical fact is more likely than not. In that state of equipoise, the party with the burden of persuasion loses.

Judge Holmes sets up the discussion at the beginning of the Opinion section (starting at *17, footnote omitted):

          We begin with a number of issues for which Mr. Risan presented no evidence or argument, or about which he included only an underdeveloped argument in his brief. Taxpayers usually bear the burden of proof in cases before us. Rule 142(a). The Code does sometimes shift this burden to the Commissioner. See § 7491(a). But when neither party presented evidence in these cases, we simply find that Mr. Risan did not comply with the Code’s recordkeeping requirements and did not cooperate with the Commissioner’s reasonable requests for information. This means that, for a great many issues, we find against Mr. Risan and for the Commissioner.

 Other JAT comments:

1. Judge Holmes also addressed the statute of limitations. Judge Holmes found (i) there was a 25% omission in the years involved invoking the six-year statute of limitations and (ii) for some of the years during the six-year period, the taxpayer timely signed consents to extend. Judge Holmes said that, although the taxpayer testified that he did not sign the forms, visual review of the forms permitted him to “find it more likely than not that he did sign them.” (*19.) Although Judge Holmes did not say it directly, that finding means that it is more like than not that the taxpayer testified untruthfully (whether or not the taxpayer intended to deceive is a different issue).

Townsend ABA Tax Lawyer Article Titled Loper Bright Flip Flops on Chevron Deference: A Tax Lawyer's Perspective (8/28/26)

I have posted to SSRN my recent article in the ABA Tax Lawyer: John A. Townsend, Loper Bright Flip Flops on Chevron Deference: A Tax Lawyer's Perspective, 79 Tax Law. 323 (2026). The SSRN citation and link is: Townsend, John A, Loper Bright Flip Flops on Chevron Deference: A Tax Lawyer's Perspective (January 01, 2026), SSRN at: https://ssrn.com/abstract=7360440 [Note: I have slightly changed the SSRN "suggested citation" to eliminate duplicating my name (don't know why that happens) and shortened the reference to SSRN.]

One of the themes I develop in the article is that Chevron was not about deferring to an agency interpretation that was not the best interpretation. Rather, Chevron was about “deferring” to an agency interpretation when the court found the statute ambiguous, meaning that the court was in equipoise as to the best interpretation. Loper Bright flogged the false notion that Chevron permitted/required courts to defer to the agency "not best" interpretation over the competing "best" interpretation. Courts, particularly judges of Federalist Society bent, also flog that false notion ad nauseum. E.g., yesterday, I read Piedra v. Blanche, ___ F.4^th ___ (4^th Cir. 8/24/26), CA4 here and GS here, which starts off (Slip Op. 3):

For decades, Chevron deference restricted courts from exercising their duty "to say what the law is." Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803). Newly freed from that restraint, courts now exercise their independent judgment about the best meaning of statutes.

To repeat, Chevron required courts to apply the best interpretation at Step One; if, after rigorous interpretation (Chevron footnote 9) the statute was still ambiguous, only then did courts “default” in equipoise to the agency interpretation. But that default was not applying the "not best" interpretation. Of course, I flog my criticism of Loper Bright in the article, pp. 339-341.

So, after Loper Bright, the problem for which Chevron applied a default rule still exists when a court, being honest with itself, cannot determine whether the agency interpretation or the (or any) competing interpretation is the best—a state of ambiguity (or equipoise). In the article, I develop this issue in a footnote (p. 346 n. 87 emphasis supplied):

CFC Adopts U.S. Interpretation of U.S.-Canada Tax Treaty Over Canadian Interpretation (8/27/26)

In The South Saskatchewan Comm. Fdn., Inc. v. United States, ___ Fed. Cl. ___  (8/25/26) (“South Saskatchewan”), CFC here, TN here, and GS here [to come], the Court rejected a Canadian charity’s attempt to apply an exemption in the United States-Canada Convention with Respect to Taxes on Income and on Capital (including a key Protocol). I found South Saskatchewan interesting because of the CFC’s application of interpretive techniques to resolve the treaty dispute between the parties in a situation where the Canadian tax authority and the U.S. did not agree on the interpretation as applied to the facts.

South Saskatchewan starts with the goal of treaty interpretation being to effectuate the shared understanding of the parties to the treaty. This is the contract model of interpretation. But, in this case, Canada’s understanding of the treaty is not the U.S.’s understanding. I infer that, assuming Canada’s current interpretation was taken in good faith, Canada did not have a shared understanding with the U.S. What does a court do when it cannot discern a shared understanding?

South Saskatchewan says (Slip Op. 6) after citing Loper Bright:

The meaning of both U.S. and Canadian laws, as well as that of the Tax Treaty, is susceptible to being construed, interpreted, and applied using traditional methods of statutory interpretation.

I am not sure how traditional methods of statutory interpretation flange with the goal of interpreting treaties to apply the shared understanding of the parties. Since, for U.S. purposes, the treaty is the law of the land and the treaty is text, I guess it is close enough to written law (statutes) that the interpretive model for statutes can apply. Maybe.

The Court adopts the U.S. interpretation based on a textualist reading of the Treaty Protocol. The Court finds helpful “extrinsic evidence” in the “legislative history” [caveat, legislative history is my term not the Court’s] of the Senate’s ratification of the Protocol. This legislative history is (i) the Treasury Technical Explanation accompanying the submission of the Protocol to the Senate for approval and (ii) the Joint Committee on Taxation (“JCT”) Report which “reflects the contemporaneous understanding of the Senate that ratified the Fifth Protocol.” (Slip Op. 9.) Both documents informed the Senate of the meaning of the Protocol.

Recommended Article on Constitutional Interpretation Applicable to Statutory Interpretation and Loper Bright (8/22/26)

Yesterday and today, I have been thinking about an article that implicates some of the interpretive issues I have been writing on post-Loper Bright. The article is: John O. McGinnis & Mike Rappaport, Originalism’s Better Meaning (Law & Liberty 8/13/26), here. Although developed in the context of constitutional interpretation and originalism, the article makes some points that seem to me applicable to statutory interpretation more broadly than the originalism spin.

First, the authors define the difference between interpretation and construction:

Interpretation is the process of determining the meaning of a constitutional provision. Construction begins only when that meaning is deemed indeterminate—that is, when it is thought to run out—and the decision must be made on grounds other than the provision’s original meaning.

I would restate that for statutory interpretation as follows (with changes in bold):

Statutory interpretation is the process of determining the meaning of a statutory provision. Statutory construction begins only when that meaning is deemed indeterminate—that is, when it is thought to run out—and the decision must be made on grounds other than the provision’s meaning as determined by statutory interpretation.

In these constructs, Chevron deference was construction rather than interpretation because it applied only when the meaning could not be determined and applied as a default rule to resolve cases before the courts without regard to the indeterminate meaning of the statute.

One interesting construct the authors deploy in the article is the “51-49 rule” which permits the “best” interpretation to be determined by the preponderance of the evidence standard (applying fact-finding concepts to a state of statutory interpretive ambiguity). In this construct, interpretation of a constitution (or statute) requires a confidence level for an interpretation to be at least 51%. The construction zone is between 50.9999% and 49.0001% where some default rule is required to resolve cases.

(Caveat: I don’t think that is a realistic range in statutory interpretation (or fact-finding for that matter); can anyone meaningfully distinguish between an interpretation that is 49.9% and one that is 50.1%?; but let’s just accept that construct for now; for my discussion of such ranges in valuation context, see John A. Townsend, Burden of Proof in Tax Cases: Valuation and Ranges—An Update, 73 Tax Lawyer 389 (2020).)

First Circuit Holds that the Time Period to File Petition in § 6213(a) is NonJurisdictional But Mandatory, Hence No Equitable Tolling (8/19/26; 8/20/26)

In Kyick Holdings, LLC v. Commissioner, ___ F.4th ___ (1st Cir. 2026), CA1 here and GS here [to come], the Court held that

1. The IRS properly sent the notice to the taxpayer’s last known address. This is the less exciting holding, but I will address it below in my Comment #2.

2. Section 6213(a)’s timely filing requirements are not jurisdictional. (Caution on this label “jurisdictional” though, as I note below.)

3. As a matter of statutory interpretation § 6213(a)’s timely filing requirements are “mandatory,” meaning that the periods to file the petition is not subject to equitable tolling. This latter holding has the same practical effect as would have applied if the Court had agreed with the consensus holdings in the Courts of Appeals that § 6213(a)’s time periods were jurisdictional.

The key holdings for purposes of this blog are ## 2 & 3, although they are not outcome-determinative in terms of the holdings of other Circuit Courts of Appeals. That is because regardless of whether a Court bases its outcome on jurisdiction or a mandatory analysis, the result is the same in denying the availability of equitable tolling.

For that reason, I worry whether courts futzing around with “jurisdiction” in this context is meaningful. Courts could just go to the heart of the disposition that the time periods are mandatory. In many cases, courts are just writing at length about jurisdiction which has some esoterica when mandatory should do.

Added 8/20/26 3:25pm: For a different outcome see Maniktala v. Commissioner, ___ F.4th ___ (8th Cir. 8/11/26), CA8 here and GS here, allowing equitable estoppel for time deadlines in § 6213(a) based on holdings that (i) § 6213(a) is nonjurisdictional (consistent with Kyick) but (ii) the § 6213(a) deadlines are not mandatory (inconsistent with Kyick). It appears that there is a clear conflict in the Circuits on the statutory interpretation issue which is often a substantial basis for granting a petition for writ of certorari. I should note that, in effect, Maniktala seems to be based on the Eighth Circuit's application of the default rule allowing equitable estoppel in a case where the court cannot determine the statutory meaning (in interpretive equipoise), whereas Kyick is based on an interpretation of the statute where it could it could determine the statutory meaning. Although an agency interpretation that might have qualified for Chevron deference (i.e., a Treasury interpretive regulation) is not in issue, this split does highlight one of the central fanciful notions of Loper Bright that courts can always interpret statutes to reach the best interpretation without the need for default rules for decision.

Other JAT Comments:

Eleventh Circuit Affirms Judge Halpern's Rejection of Bullshit Tax Shelter--the Conservation Easement Variety (8/15/26)

In Evans v. Commissioner (11^th Cir. Nos. 24-11882 & No. 24-11884 Unpublished Opinion dated 8/13/26), CA11 here, GS here [to come], and Tax Notes here, the Court affirmed the Tax Court’s decisions based on the opinions Carter v. Commissioner, T.C. Memo. 2023-133 (T.C. Dkt. 23647-15, here, at #112 and GS here), a fine Judge Halpern opinion.

The Eleventh Circuit majority gave the appellants’ bullshit arguments the treatment they deserve (even more than they deserve). (There ought to be an appellate disposition simply by rejecting an appellant’s arguments in two lines:

Appellant’s arguments are bullshit. [No exclamation mark needed; a simple statement of fact]

Affirmed.

For that reason, I hesitated to write anything on the Eleventh Circuit’s unpublished opinions in this case that have already involved grossly disproportionate attention from all involved (including perhaps not-so-innocent readers such as me).

Fifth Circuit on Rehearing Makes the Same Mistake on the Limited Partner Gambit to Avoid Tax (8/13/26; 8/20/26)

On 8/20/26 at 12:25 am, I substantially revised this blog entry. My additions are indicated in red; but I do not show strikeouts.

In Alain, L.L.L.P. v. Commissioner, ___ F.4th ___ (5th Cir. 8/12/26), CA5 here; GS here, the Court on panel rehearing (also denying en banc rehearing), again rejected the Tax Court and IRS interpretation of the limited partner exception to the “self-employment income” in § 1402(1)(13). Readers paying attention in the tax procedure universe are surely familiar with that issue. Basically, active service participants in a business enterprise who would have had self-employment income in straight-forward characterization of their earnings have tried to avoid that tax on self-employment income by the magic of labeling their income as a distributive share for share for limited partners.

Alain was originally decided in Sirius Solutions, L.L.L.P. v. Commissioner, 165 F.4th 374 (5th Cir. 2026), GS here, which the Court withdrew on the rehearing. The judges on the panel rendered opinions to the same effect as before. The Sirius majority opinion was nominally authored by Judge Oldham. The panel rehearing opinion is per curiam with neither of the majority judges stepping up as the author.

I critiqued the majority in Sirius Solutions in Fifth Circuit Knows a Limited Partner When Reads It (Federal Tax Procedure Blog 1/24/26; 1/20/26), here. In my original blog on Alain, I did not pay attention to the difference between the original opinion in Sirius and the revised opinion in Alain. The panel majority states its bottom-line interpretation in the opening (Slip Op. 1): 

Today, we hold its original public meaning is a partner who plays no significant role in managing or running a business.

As stated, the panel majority’s revised formulation narrows the limited partner exception it approved in its earlier opinion. The panel majority deploys the tools of interpretation that textualists so love (such as contemporary dictionaries) to determine (divine) the original public meaning to possibly include only a smaller subclass of nominal “limited partners”—specifically those limited partners who have no significant role in managing or running the business. That narrowing is at least an improvement on the earlier opinion. 

Judge Graves engages the majority on its determination of original public meaning. (Slip Op. 21-25.)

Questions for Tax Crimes and Tax Procedure Students on Trump's "Settlement" in Trump v. IRS (8/6/26)

I have posted my Federal Tax Procedure Book to SSRN, see here. Since it is timely, although a moving target that we sure have not heard the last of yet, I thought I would post the concluding paragraphs of my discussion of Trump v. IRS that Trump and his buddies at DOJ (most notably Blanch, but not only Blanche) tried to use as a pretext to raid the Treasury.

In my opinion, Trump and his buddies new they would draw flack on that package, so they must have realized that the Anti-Weaponization Fund was just a ploy, a stalking horse. The real goal was tax audit immunity which for now has not been taken off the table. I discuss that in the Federal Tax Procedure Book (Student Edition pp.  802-805; Practitioner Edition pp. 1118-1192). I conclude that discussion with some further discussion questions for students of tax crimes and tax procedure:

Exercise for Students: Readers of Chapter Six discussing tax and tax-related crimes should be able easily to spot several tax and tax-related crimes that this conduct might implicate, particularly the ubiquitous defraud conspiracy. One possibility is that anyone participating materially in the audit immunity could be an affirmative act of evasion with respect to the taxes covered or an overt act of conspiracy (offense or defraud). In theory, if that were viable, all of the key players in this drama stand exposed to criminal prosecution. Of course, the prosecutions, if any, will have to be brought by DOJ which Trump can prevent while he is President but can then be brought in the next Administration unless Trump gives sweeping pardons to all who were involved. (I suspect and have read that those actors are counting on such pardons.) One final question worth asking is whether Trump’s control of DOJ and IRS could implicate some conduct for which the Supreme Court has given full or qualified immunity in Trump v. United States, 603 U.S. 593 (2024).

Another Exercise for Students: Tax procedure students should think about the settlement authorities discussed earlier in this text. Thus, generally, only the IRS has settlement authority for cases that it has not yet referred to DOJ. DOJ has settlement authority only for cases that the IRS referred. Facially, it appeared in Trump v. IRS that the IRS had only transferred authority to DOJ over the § 7431 wrongful disclosure suit. There is no indication that the IRS referred all of the matters sweepingly released in the Release Order to DOJ, and there is no indication that the IRS “settled” those claims.

Concluding thoughts: If nothing else, Trump v. IRS and its resulting commotions will occupy tax procedure and tax crimes enthusiasts for a long time.

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

2026 Federal Tax Procedure Book Student and Practitioner Editions (8/4/26)

I have published to SSRN my Federal Tax Procedure Book Student and Practitioner Editions. For information on the SSRN links to download see the page to the right titled “Federal Tax Procedure Book (2026 Editions) (8/4/26)” here.

FTPB 2016 Editions Discussion of Trump v. IRS and Its Resulting Machinations (8/3/26)

I am trying to wrap up the 2026 Editions of my Federal Tax Procedure Book but the ongoing drama by DOJ’s $2.77 billion Anti-Weaponization Fund and Trump and related party tax immunity does not permit an easy stopping point. But I have to stop and have just concluded all that will be in the 2026 Editions that I hope to publish later this week. I thought I would post the discussion below (the Student Edition version without footnotes by copy and paste into the blog below) and the Practitioner Edition version with footnotes that can be downloaded here.

                   2.     Examples (Including Trump v. IRS).

          A prominent example of this remedy is a suit brought by a Kenneth Griffin, a hedge fund billionaire. An employee of a third party contractor to the IRS, Booz Allen Hamilton, Inc., illegally accessed and disclosed the tax return information of Griffin and others to a news organization, ProPublica, which in turn published some of the tax return information. Griffin sued the IRS under (i) § 7431, alleging violation of § 6103, and (ii) the Privacy Act. The employee was prosecuted and pled guilty, receiving a five-year sentence. Griffin and the IRS settled the civil action resulting in a dismissal with prejudice. All of the terms of the settlement are not available, but apparently there was no monetary consideration and the IRS agreed to and did issue a public apology. Another reputed billionaire brought related action against the employee’s employer, Booz Allen Hamilton, Inc.

          A more prominent example arising from the same mass disclosures is a 2026 suit Donald J. Trump filed in his nominal personal capacity for $10 billion damages (asserting both the minimum $1,000 per disclosure with disclosures at $1,000 justifying $10 billion or actual damages of $10 billion) and for punitive damages in an amount not stated. The Plaintiffs included Trump’s sons and The Trump Organization, LLC. (referred to collectively as the Trump Plaintiffs). Before the DOJ filed an answer, the Judge asked the parties to brief whether, given President Trump’s control over the Government parties (IRS and DOJ) and personal interest as Plaintiff, the case met the required Article III case or controversy requirement. The Court also appointed amici to provide independent briefing on that issue. Before the parties presented their briefing but after the amici provided its initial brief, the Trump Plaintiffs moved to dismiss with prejudice under FRCP Rule 41(a)(1)(A)(i) which requires dismissal with prejudice. On May 18, 2026, the Court dismissed with prejudice, noting:

Senator Kennedy Questions Trump Judicial Nominee on Original Public Meaning (7/28/26)

Recently, Senator John Kennedy (yeah, the folksy speaking one) and a Trump judicial nominee discussed conservative dogma in Constitutional interpretation (dogma that also plays out in statutory interpretation because the Constitution is just a super-statute). The discussion starts here. Many originalists now genuflect to the interpretive God of “original public meaning”—in other words, they look for the meaning of the words as the meaning some imagined public audience contemporaneously with the adoption of the Constitution would have interpreted the words. Senator Kennedy wants to know why the meaning that some imagined public audience might matter more than the meaning the actual framers of the Constitution contemporaneously attributed to the words. Senator Kennedy nails the bankruptcy of this notion of the originalist adventure that has captured the conservative imagination. One of my favorite articles on this theme is Jack N. Rakove, Joe the Ploughman Reads the Constitution, or, the Poverty of Public Meaning Originalism, 48 San Diego L. Rev. 575 (2011), here.

I write on a Federal Tax Procedure Blog which rarely deals with Constitutional interpretation. This Blog deals mostly with statutory interpretation, but the screwy conservative notions that affect original public meaning play out in statutory interpretation where conservative judges deploy dictionaries more or less contemporaneous with the statute text enactment to divine meaning rather than using the legislators’ own explanations (legislative history).

Side Note: Senator Kennedy (Wikipedia here) received his J.D. (basic law degree) from UVA Law School in 1977 (where he was executive editor of the Virginia Law Review) and thereafter a Bachelor of Civil Law (B.C.L.) from Magdalen College, Oxford, in 1979. He is plenty smart, sometimes masked by his folksy way of presenting himself. But that folksy way can often result in good discussions as above where he bests the judicial nominee spouting conservative dogma.

Eleventh Circuit Rejects Bullshit Conservation Easement Shelter (7/20/26; 7/27/26)

In Savannah Shoals, LLC v. Commissioner, ___ F.4th ___ (11th Cir. 2026), CA11 here and GS here, the Eleventh Circuit rejects the appeal of a bullshit conservation easement shelter. The result is foretold in the first paragraph of the opinion, noting that the shelter claimed a “$23 million” deduction for an easement found by the Tax Court to be worth $480,000. See Judge Goeke’s opinion Savannah Shoals LLC v. Commissioner, T.C. Memo. 2024-35, here.

I won’t discuss the opinion further because, although it is 34 pages long and is designated “FOR PUBLICATION,” I don’t think it adds anything material to previously developed law, factual conclusions, and appellate review. The bottom-line is for taxpayers and promoters to avoid bullshit claims, including bullshit claims on the Tax Court’s valuations. The Court does not say that or even, for most readers, fairly imply that. Still, that is my inference. And, of course, plenty of other opinions, including from this Court, can be read for that proposition.

One interesting point is that oral argument was 12/10/25 and the unanimous opinion was 7/16/26, for 218 days gestation period for a 34 page opinion of little precedential value. (See CL docket entries here).

However, I will make some comments which are even more picky.

JAT Comments:

 1. The Court discusses the shelter’s attack on the IRS expert. (See Slip Op. 10-16.) The Court spends some time discussing FRE 702 and the Daubert Standard. As it turns out, immediately before I read Savannah Shoals, I had just revised my Federal Tax Procedure Practitioner Edition to add a footnote on the text reference to FRE 702. I just copy and paste that footnote discussion because I don’t think the Court in Savannah Shoals picked up the nuance even though I don’t think the nuance would have changed the outcome.

Federal Circuit Holds that Timely Filed Claim Can be Rectified by Untimely Filed Formal Refund Claim Before the IRS Acts (7/17/26)

In Dougherty Electric, Inc. v. United States, ___ F.4th ___ (Fed. Cir. 2026), FC here and GS here [to come], the taxpayer timely filed a letter to the IRS titled “PROTECTIVE CLAIM FOR REFUND.” the letter was processed as a claim for refund for the issue identified in the letter. The taxpayer later filed another letter outside the refund claim period called a “MODIFIED PROTECTIVE CLAIM FOR REFUND,” which stated a new issue not asserted in the original letter. The IRS requested more information and that the taxpayer file Forms 843 for each claim. The taxpayer filed Forms 843 for the two claims. The IRS denied both claims. The taxpayer sued for refund in the Court of Federal Claims. Applying § 7422(a) prohibition of a refund suit where a formal claim for refund has not been filed, the Court (i) sustained the first timely filed protective claim as an informal claim that had been “rectified” by filing the Form 843 before the IRS denied the claim; and (ii) rejected the second untimely filed protective claim, since it was a different claim that was untimely.

In the course of the decision, the Court clarified (Slip Op. 14-17) it’s precedent in Computervision Corp. v. United States, 445 F.3d 1355 (Fed. Cir. 2006) that the timely filed claim may be an informal claim that is not formal claim for refund on the required form, such as Form 843; rather it can be a timely filed informal written claim (e.g., by letter) that can then be “rectified” by filing the formal claim before the IRS denies the claim.

Another Bullshit SCE Case Fails for the Usual Reasons, but Court also Rejects the Jarkesy Claim (7/16/26)

In Piton Holdings, LLC v. Commissioner, 167 T.C. ___, No. 4 (2026), TC Dkt 637-23, here, at # 237 and GS here [to come], the Court (Judge Kerrigan) gave the IRS the victory in yet another syndicated conservation easement (“SCE”) case. The Court

• rejected the usual bullshit about the before contribution valuation from which the after valuation is deducted. The before contribution value claimed was $42,200,000; the Court found the before contribution value was $1,440,000. Since the parties stipulated that the after contribution value of the property subject to the easement was $640,000, the contribution value was reduced from $41,635,000 to $800,000. Hence, the value of the “contribution” was greatly, should I say grossly, reduced based on a gross overvaluation of the value of the easement. I address this in my comments below.
• found that the partnership improperly allocated the resulting deductions among the partners. This holding applies in the “varying interests” rule in partnership tax law. The allocation made by the partnership failed the requirements of that rule. It is a bit esoteric, so I do not discuss it further. (See Slip Op. 36-44.)
• found, applying simple math (and as usual with SCE bullshit valuation claims that are litigated), the gross valuation misstatement penalty in § 6662(h) applies (Slip Op. 44-45.)
• rejected the claim that § 6662 penalties are not assessable as a matter of law because of the application of U.S. Const. amend. VII, raising the Jarkesy case. (Slip Op. 45-I briefly discuss this in my comments below.

JAT Comments:

1. At the outset, I am amazed that the Tax Court has not found some way to better manage these SCE cases where, it seems on the anecdotal cases I have read, the partnership proffers grossly excessive valuations and requires enormous judicial and other resources to call the partnerships out on the bullshit valuation claims. I thought Judge Buch was trying to do that in a case about which I blogged earlier. Tax Court Rejects a Bullshit Tax Shelter False Valuation Claim with Warning of Sanctions for Taxpayers, their Counsel, and Expert Witness Proffering the Bullshit (Federal Tax Procedure Blog 7/16/25; 9/10/25), here. Perhaps Judge Buch’s warnings have been effective in some cases which have settled. But Piton Holdings illustrates that the message has not been respected by some. So, for example, why did Judge Kerrigan not consider the penalties Judge Buch indicated were possible?

2. The Court’s findings of fact and conclusions regarding the valuation issue are standard for SCE cases. The key valuation always in dispute is the “before contribution” value of the property for which an easement was contributed. Remember that the valuation of the easement because there is no market for such easements, is derived by the “before contribution” value less the after contribution value of the property subject to the easement contributed. (That simple subtraction produces the contribution value, but I suggest (without further explanation) that even that method may overvalue the easement for contribution purposes.

District Court for SD Florida Calls Out Trump's Weaponization Fund and Get-Out-Of-Audit Free Release Order (7/13/26; 7/15//26)

The big tax-related news today is the Order issued by Southern District of Florida judge, Kathleen Williams, today effectively holding the purported settlement between Trump and related plaintiffs and the Government (through DOJ) was effectively a sham. The Court also cast doubt upon the purported get out-of-tax audit-free benefit conferred in a separate document one day after the settlement agreement (the Court calls this separate document the “Release Order,” and I will use that term in this blog).

Today’s Court Order may be viewed CL here and GS here [to come]; the docket entries may be viewed here, with the order at docket # 106.

Since the Court Order has been adequately covered in the news, I will just make some points that may resonate with tax lawyers. 

1. The Release Order conferring get out-of-tax audit-free benefit was to me the biggest deal because it benefited Trump personally, as well as persons and entities close to him. By contrast, the Weaponization Fund would have helped a category of Trump supporters prone to violence in his name and other at least antisocial acts. When I first heard about the Weaponization Fund I believed it was strange on its face. But then a day later I the Release Order surfaced, making the whole gambit understandable. The Weaponization Fund was not the real object of Trump’s gambit; rather, the Weaponization Fund was a stalking horse to draw attention from the brazen Release Order that would more directly benefit Trump. I suspected that they (being his co-conspirators) planned all along that there would be so much public angst about the Weaponization Fund that they could give it up, with the Release Order sliding under the public radar screen/attention span.

 2. Some reasons that I think the Release Order was the real motive for Trump are:

FTPB Working Draft 2026 Revisions on § 6501(c) Unlimited Civil Statute of Limitation for Fraud (7/12/26)

In working on my working draft for the Federal Tax Procedure 2026 editions (due for publication on SSRN in early August), I have substantially revised the discussion of § 6501(c)(1). Readers will recall that one hot issue in tax litigation is whether § 6501(c)(1) requires taxpayer fraud or may apply when nontaxpayer fraud is on the return without the taxpayer having committed the fraud.

The working draft revisions with footnotes may be downloaded here. The following is the text for the Student Edition without Footnotes (same as Practitioner Edition without footnotes).

          C.     Exceptions to the General Three-year Statute.

          The exceptions to assessment statutes of limitations are in the statute. The key exceptions to the general 3-year rule are: 

                   1.     False Return or Attempted Evasion.

                             a.      General Rule-Fraud on Return and Unlimited Statute.

          Section 6501(c)(1) and (c)(2) provide exceptions to the normal 3- or 6-year statutes of limitation in certain instances involving tax fraud:

          (1) False return. 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.

          (2) Willful attempt to evade tax. In case of a willful attempt in any manner to defeat or evade tax imposed by this title (other than tax imposed by subtitle A or B), the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

We encountered the (c)(1) Exception in Badaracco (p. 161) where the Supreme Court held that a subsequently filed nonfraudulent amended return does not avoid the unlimited statute of limitations for an original fraudulent return. Fraud for this purpose is the same as the definition for fraud for purposes of the civil fraud penalty under § 6663. I often refer to these two civil consequences of fraud as “civil fraud.”

          Badaracco addressed a potential anomaly between failure to file a return and filing a fraudulent return. The anomaly is this: A person who fails to file a timely return with the intent to evade tax can get the benefit of the three-year statute of limitations by simply filing a delinquent nonfraudulent original return. Yet, a person who files a fraudulent original return but then files an amended nonfraudulent return cannot achieve the benefit of the statute of limitations. That is the holding of Badaracco. Consider the following examples:

           Example 1. Assume the taxpayer files a Year 01 original fraudulent return on April 1 of Year 02 and then files a nonfraudulent amended return on January 1 of Year 03. Under Badaracco's holding, there is no statute of limitations because his original return was fraudulent. 

Two Highly Recommend Articles (One a Draft) on Law Text Interpretation (7/10/26)

I write today to recommend two articles on interpretations of law text—Constitution or statute. Text interpretation is text interpretation. However, text interpretation by originalist/textualist leaning judges considers extra-text “history” leading to ratification of constitutional text in interpreting Constitutional text but reject such history (commonly called legislative history) for interpreting statutory text. (Why that difference I hope you ask?) For originalists in interpretation (often but not always textualists) the permissible tools are those that focus on the original public meaning or some variant of that to some imagined audience including as some fear “Joe the Ploughman” with arguably marginal reading skills generally or for law text. See Jack N. Rakove, Joe the Ploughman Reads the Constitution, or The Poverty of Public Meaning Originalism, 48 San Diego L. Rev. 575 (2011), here.

The first article addresses the effects of Loper Bright. Lindsay L. Clayton,  Defending Agency Actions After Loper Bright: Sea Change or the Same Old Beach? 74 DOJ J. Fed. Law. & Prac. no. 2, 49 (July 2026), here. An Appendix for the article is here. Ms. Clayton is Assistant Director in the Civil Division’s Tax Litigation Branch. The article is quite good in assessing the effects of Loper Bright on DOJ’s civil litigation. One would have to assume that, prior to publication in the DOJ’s house organ, the contents were vetted and approved by at least some of the attorneys in DOJ responsible for positions before the courts.

Some comments on Ms. Clayton’s articles:

The article repeats (pp. 50-51) the Loper Bright claim:

The decision criticized Chevron for requiring courts “to ignore, not follow, ‘the reading the court would have reached’ had it exercised its independent judgment” and for “demand[ing] that courts mechanically afford binding deference to agency interpretations.”

I believe that Loper Bright claim was false or, in any event, overstated what Chevron actually did. My claim is that Chevron allowed judges to apply (not defer to) an agency interpretation only where they were interpretive equipoise (same as ambiguity) where they could not decide whether the agency interpretation or the opposing interpretation was best or not best. In that zone of equipoise, courts were simply applying the agency interpretation as a default rule, like the rule of lenity; there were not deferring to an agency not best interpretation. I develop my claim further in an article for publication in the ABA Tax Lawyer sometime in the near future. But consider:

• For a succinct statement addressing Chevron’s meaning of reasonable interpretation and the latitude it gave courts to apply their own best meaning. See Jon Newman (respected 2d Circuit Judge), On Reasonableness: The Many Meanings of Law’s Most Ubiquitous Concept, 21 J. App. Prac. & Process 1, 83 (2021), here (“It would probably be too cynical to suggest that [under Chevron] the courts are just accepting agency interpretations with which they agree and rejecting those they disfavor, but in some cases that almost seems to be what is happening. Clearly there is no one meaning of “reasonable” in the context of Chevron deference.”)
• Judge Newman’s insight is consistent with empirical research of large data sets of cases that commoted about Chevron but none said or reasonably implied that the court deferred to a not best agency interpretation. Rather, Judge Newman was saying that the court determined a best interpretation and applied that interpretation or were in  interpretive equipoise. For my research, see Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here; and Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (Federal Tax Procedure Blog 2/9/23), here. 
• Following through on my claim, the question is what courts do after Loper Bright do when they face ambiguous statutory text where they cannot honestly say that the agency interpretation or the opposing interpretation is the best? I cover that issue in my article addressing interpretive equipoise in percentage ranges, but just think about that. Keep in mind that Loper Bright cannot responsibly command or be interpreted to command that there cannot be ambiguity after applying all the tools of statutory interpretation.

FTP Book Clean Up - Restitution-Based Assessments (RBAs) (7/8/26; 7/10/26)

In working on my 2026 editions of my Federal Tax Procedure Book for publication on SSRN in early August, I am trying to eliminate bloat accreted over the years from the text and the footnotes (particularly the footnotes). I conceive the text (as opposed to footnotes) to be directed to students of tax procedure for whom I provide the Student Edition without footnotes. I hope to shorten the text, but the major changes will be in footnotes. I feel that some of the eliminations I make in the footnotes have good discussions, so I will be posting on the Federal Tax Procedure Blog some of the eliminations (doing some clean-up).

I start today with a footnote on “restitution-based assessments” (“RBAs) under §§ 6201(a)(4) & 6213(b)(5). The discussion of RBAs is in the text discussing exceptions to the prohibitions on assessment arising from the general requirement in income and estate and gift tax cases that the IRS first issue a notice of deficiency. One of the exceptions is “restitution for tax in a criminal tax case which may be assessed despite the  prohibition (“restitution-based assessment, or “RBA”).” I eliminate from the footnote the discussion after citing the statute sections for the RBA, §§ 6201(a)(4) & 6213(b)(5). The eliminations are (as I have cleaned them):

Certain points about RBAs:

1. First, normally, tax restitution is not available for Title 26 offenses. However, courts may impose tax restitution for Title 18 convictions, such as the ubiquitous Klein / defraud conspiracy under 18 U.S.C. §  371(a). See Daugerdas v. Commissioner, 171 F. 4th 924 (7th Cir. 2026) (holding that §  6201(a)(4)(A) authorizes the IRS to assess and collect tax restitution ordered in Title 18 convictions and the IRS collection measures do not have to be consistent with the restitution order for deferred payment of restitution).

2. In tax cases, in pleading guilty to a Title 26 offense, a defendant often agrees to “contractual” restitution in the plea agreement that the sentencing court then incorporates as a restitution order in the criminal judgment. Or, in imposing sentence for Title 26 offenses, a court may impose restitution as a condition for some benefit (such as supervised release for some period rather than incarceration).

3. The net effect of these statutory changes to the Code is that (i) the IRS can immediately assess the tax restitution as if it were a tax (the assessment acronymed RBA) and (ii) deploy the IRS collection tools for tax assessments. Carpenter v. Commissioner, 152 T.C. 202 (2020), aff’d 788 F. App’x 187 (4th Cir. 2019); and Reynolds v. Commissioner, T.C. Memo. 2021-10 (also holding that the IRS can collect on the RBA even if the person has an agreement with DOJ for installment payment of the restitution). However, if the sentencing judge sets the terms of installment payment of the restitution, the Tax Court can consider those terms in a CDP proceeding contesting an IRS levy and the IRS should consider that as well. White v. Commissioner, T.C. Memo. 2026-56 (remanding to IRS Appeals to consider).

CFC Invalidates GILTI Gap-Filling Regulation That Avoided Textual Statute Inconsistency (7/7/26)

In Keysight Technologies, Inc. v. United States, ___ Fed.Cl. ___ (7/2/26), the Court held invalid a Treasury Regulation designed to plug a gap in the statutory text. The opinion may be found: CFC here, TN here, GS here.

The Court opens with this sentence projecting the outcome (Slip Op. 1):

When Chevron fell, so too did the presumption that statutory ambiguity favors the agency. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), overruled by Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).

If that were not clear enough as to where it is going, the Court opens the next paragraph (bold face supplied by JAT):

This controversy relates to the Treasury’s self-inflicted fix of a mismatch between foreign subsidiaries with fiscal- or calendar-year tax filing requirements that Congress quietly built into the global intangible low-taxed income ("GILTI") statutory scheme.

And the next paragraph (bold face supplied by JAT):

The Treasury’s antipathy for this inconsistency resulted in the Secretary promulgating Regulation 1.951A-2(c)(5) ("the Regulation").

I won’t parse the quoted text any further (although my bold face may imply something).

The technical issue was whether Treasury could, by interpretive regulation, fix what appears textually to be a timing glitch producing materially different tax result based on differences in tax years between calendar year taxpayers and fiscal year taxpayers. As the Court says (Slip Op. 2): “Enactment of the TCJA created an inconsistency between treatment of certain taxpayers depending on whether they were fiscal-year or calendar-year filers.”

Basically, the taxpayer argued that it, as a fiscal year taxpayer, was entitled to a benefit that a calendar year taxpayer could not achieve. Without wallowing around in the details, it appears to me that an intuitive view of how Congress enacts tax legislation, one can fairly infer that Congress did not intend the result that the regulation sought to forbid and the Court blesses. Congress appears to have had no specifically articulated intent on the precise issue, but Congress generally does not make such distinctions to permit disparities between otherwise similarly situated taxpayers.

Second Circuit Says § 6751(b) Means What It Says-Appeals Officer in CDP Appeal Must Verify the Supervisor Approval Requirement (6/30/26)

In Besicorp Group, Inc. v. Commissioner, ___ F.4th ___ (2d Cir. 2026), 2Cir here and GS here, the Court held that, in a CDP Appeals Office Conference, the Appeals Officer must verify the IRS’s compliance with § 6751(b)’s written supervisor approval requirement for penalties. The Court says that in 29 pages cogently, if not succinctly, traversing the applicable statute and other authority. Those 29 pages are not all fluff without lessons for students and practitioners, so I address certain key points.

1. I open with a comment I make in a soon to be published article. Section 6751(b) is nonsensical and a textual mess. That comment was focused on the courts’ flailing around to make sense of the mess and was an argument for courts to approve the regulations adopted in December 2024 to make sense of key components of § 6751(b). However, as to the text in § 6751(b) that Besicorp interprets and applies, the text is clear, so Besicorp is correct that CDP Appeals Office proceedings require verification of the written supervisor approval requirement. (I except from that the possible application of res judicata discussed below in ¶ 5.) That is a textualist reading of the text; I don’t see any reasonable mode of interpretation that would reach a different conclusion.

2. Of course, in making that verification, the Appeals Officer must wade into the mess of the other components of § 6751(b) which are a mess with differing interpretations by the courts. I suppose, the Appeals Officer might rely upon the § 6751(b) regulations, either proposed or permanent, although the Besicorp Appeals Office hearing likely occurred before the regulations were proposed or adopted. (In this regard, the Second Circuit argument in Besicorp was 2/5/24; and Besicorp (and consolidated cases) were filed in the Tax Court in 2017. See T.C. dkt. Entries here, before the 2024 regulations were even a twinkle in the Commissioner’s eye.

3. The income tax liabilities in Besicorp and consolidated cases arose from bullshit tax shelters. The Court says the tax and interest (Slip Op. 3) reporting and tax savings from “tax shelter transactions designed to avoid the payment of taxes,” as determined by the IRS. The tax shelter transactions were of the “intermediary tax shelter” aka Midco ilk. (Slip Op. 10.) Besicorp’s deficiency was $50 million. (Slip Op. 5.) And, being a category of bullshit tax shelters, the IRS also asserted the 40% penalty which for Besicorp was “roughly $20 million penalty on a $50 million deficiency for its accuracy-related gross valuation misstatements,” citing § 6662(h). (Slip Op. 5.)

4. The taxpayers involved in Besicorp and consolidated cases may have been affiliated with the promoters who promoted the bullshit tax shelters. Indeed, from my work in this area, I found it was not uncommon for the promoters who “earned” very large amounts from promoting the fake tax savings (a price taxpayers were willing to pay for fraud insurance) to themselves then “shelter” their income with their own bullshit tax shelters (always permitting some variance in the smoke and mirrors game). I note in this regard that one of the attorneys for the taxpayers was also an attorney for at least one promoter and related corporation.

Wherefore Art Thou Tax Court? (6/29/26; 7/1/26)

In two cases today, the Court held that

• The general rule is that (i) the President can fire executive agency personnel at will even if the statute says that they can only be removed for cause or for some other similarly worded reason  Trump v. Slaughter, 609 U. S. ___ (2026) (stating the general rule); but
• An exception to the general rule in the case  of members of the Board of Governors of the Federal Reserve where the statute requires “for cause” removal. Trump v. Cook, 609 U. S. ____ (2026) (stating the exception).

The opinions may be viewed and downloaded here: Trump v. Slaughter, SC Slip Op. here and GS here; and Trump v. Cook, SC Slip Op. here and GS here. 

Of course, the general rule (concocted under the “unitary executive” theory) and the exception require a definition of an executive agency subject to the respective rule and exception. In other words, it is not clear that Cook states a single exception applicable to the Federal Reserve. 

In the tax world, the Tax Court is potentially implicated in this brouhaha. Consider the following statutory text:

26 U.S. Code § 7441 – Status
There is hereby established, under article I of the Constitution of the United States, a court of record to be known as the United States Tax Court. The members of the Tax Court shall be the chief judge and the judges of the Tax Court. The Tax Court is not an agency of, and shall be independent of, the executive branch of the Government.

26 U.S. Code § 7443 - Membership
* * * *
(f)Removal from office
Judges of the Tax Court may be removed by the President, after notice and opportunity for public hearing, for inefficiency, neglect of duty, or malfeasance in office, but for no other cause.

A strict textual reading of § 7441 specifically states that the Tax Court is not an executive body (agency in administrative law lingo). The President has the power to appoint Tax Court Judges, “by and with the advice and consent of the Senate, solely on the grounds of fitness to perform the duties of the office.”  § 7443(b). (That may suggest that politics should not be involved, but babies come in baskets (although politics is involved some of the Tax Court Judges are exceptional on the metric of “fitness to perform”).) Then, once the Senate has advised and consented, the President alone has the power to remove Tax Court Judges but only, to repeat, “after notice and opportunity for public hearing, for inefficiency, neglect of duty, or malfeasance in office, but for no other cause.”

Supreme Court Denies Cert in Murrin on Issue of Whether Taxpayer's Fraud is Required for § 6501(c)(1) Unlimited Statute of Limitations (6/22/26)

Today, the Supreme Court denied the petition for certiorari in Murrin v. Commissioner (Sup. Ct. No. 25-988), docket here. See Order List dated 6/22/26, here at p.3, The Third Circuit opinion from which Murrin sought cert was Murrin v. Commissioner, 158 F.4th 527 (3rd Cir. 2025), here.

The question presented in the petition here was:

Whether, under 26 U.S.C. § 6501(c)(1), the IRS may assess tax beyond the Code’s three-year limitations period based solely on the fraudulent intent of a third-party, even when the taxpayer herself neither intended to evade tax nor knew of any wrongdoing.

The question as framed by the SG in the Commissioner’s Brief in Opposition here was:

Whether the indefinite limitations period in 26 U.S.C. 6501(c)(1) applies to a false or fraudulent return prepared by a tax return preparer who acted with the intent to evade tax.

Tax Court Sustains IRS Interpretation for the Research Credit as Best Interpretation or, Possibly, with Loper Bright Deference from § 7805(a) (6/19/26)

In Smith v. Commissioner, T.C. Memo. 2026-50, TC No, 13382-17 here at #286 dated 6/16/26 and GS here, the Court sustained a regulations interpretation of the research credit over the taxpayers’ Loper Bright objections. Readers will recall that Loper Bright rejected Chevron deference for agency interpretations, exhorting courts to determine and apply the “best” interpretation. “Best interpretation” was not an inflexible command; Loper Bright permitted deference to agency interpretations when delegation was expressly or impliedly granted by Congress and courts might still find the agency interpretation persuasive under Skidmore.

A number of pre-Loper Bright cases sustained the applicable agency regulation by applying Chevron deference. In Smith, the taxpayers argued that (*30) “under the Supreme Court's landmark decision in Loper Bright, Treasury Regulation § 1.41-4A(d) is no longer the single best reading of section 41(d)(4)(H).”

One problem with the taxpayers’ argument was that prior cases had sustained the interpretation under Chevron. The Smith opinion mentions (*31) “statutory stare decisis” which Loper Bright expressly approved for pre-Loper Bright cases applying (or appearing to apply) Chevron deference. Smith concludes that discussion (*33):

           Thus, we find that the holdings in our prior cases and the aforementioned decisions of the Federal Circuit and Federal Claims continue to remain in effect. See Diversified Grp. Inc. v. Commissioner, Nos. 17038-18L, et al., 166 T.C., slip op. at 21–22 (2026); see also, e.g., Garcia Pinach v. Bondi, 147 F.4th 117, 121, 131–33 (2d Cir. 2025) (analyzing Loper Bright and the doctrine of statutory stare decisis and leaving undisturbed the holding of a prior panel opinion).

More importantly, Smith reasons (*33-*34, emphasis supplied by JAT):

          Moreover, we find respondent’s power to persuade argument compelling. In reaching a conclusion on the validity of a regulation we may give “[c]areful attention to the judgment of the Executive Branch.” Loper Bright, 144 S. Ct. at 2273. For the views of Treasury in this context “constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.” Id. at 2262 [*34] (quoting Skidmore, 323 U.S. at 140). “The weight of such a judgment in a particular case,” of course, “depend[s] upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Id. at 2259 (quoting Skidmore, 323 U.S. at 140); see also Varian Med. Sys., 163 T.C. at 106. Congress has delegated authority to Treasury under section 7805(a) to define criteria for Congress’s funded research exclusion found in section 41(d)(4)(H). Here, Treasury has exercised that authority and issued longstanding and favorable administrative guidance that offers both clarity and certainty for taxpayers.

Considering the foregoing, we conclude the regulatory requirements found in Treasury Regulation § 1.41-4A(d) used to determine whether research is funded are reasonably related to and otherwise consistent with the intent of section 41(d)(4)(H). Accordingly, we reject petitioners’ contention that the Supreme Court’s decision in Loper Bright undermines the prior decisions that relied on Treasury Regulation § 1.41-4A(d) and their effects as precedent in these cases. Further, we reject petitioners’ reading of the phrase “to the extent funded by any grant, contract, or otherwise” found in section 41(d)(4)(H) to mean only “a sum of money set apart for a specific objective” and likewise determine our reading of this phrase would not be as beneficial as the Treasury regulation requirements. In other words, we find no benefit to petitioners’ argument, should we be inclined to reject respondent’s reading of the Code for our own.

          On the basis of the foregoing, we decline to invalidate Treasury Regulation § 1.41-4A(d) and the requirements for determining funded research under section 41(d)(4)(H) incorporating both “contingent on success” and “substantial rights” elements.

As I read this, Smith is saying that, although the prior cases may have noised about Chevron deference and in some cases even appeared to apply Chevron deference, in truth and might pass muster under statutory stare decisis, the IRS interpretation was the “best” interpretation, passing muster under Loper Bright’s de novo interpretation imperative.

Smith muddles on the point of best interpretation by citing § 7805(a) as a Congressional delegation of interpretive authority for the substantive Code provision. Is Smith suggesting in citing § 7805(a) that the interpretive regulation was a delegation qualifying for Loper Bright deference? If so, since Smith seems to have determined the agency interpretation was the best, was the citation of § 7805(a) necessary or even appropriate?

One side note on § 7805(a): Throughout its history, § 7805(a) has been authority for interpretive regulations. That authority was muddled by those claiming that interpretive regulations when applied by courts using Chevron deference meant that the interpretive regulation was transformed into a legislative regulation. That claim was always nonsense (even when made by Justice Scalia); with the demise of Chevron deference, courts are free to get past the nonsense. 

D.C. District Court Vacates IRS Notice Limiting Test for Clean Energy Credit (6/18/26)

In Oregon Env. Council v. IRS, ___ F.Supp.3d ___ (D. D.C. 6/6/26), CL here and GS here, the Court rejected the IRS attempt to eliminate one of the tests the IRS had used to satisfy the “beginning of construction” dates for clean energy tax credits. For a long time, the IRS had Notices permitting “beginning of construction” to be tested under the “Physical Work Test” and the ”Five Percent Test” (or “Safe Harbor”). By Notice 2025-42, 2025-36, IRB 351 (2025), the IRS eliminated the Five Percent Test.

The Notice was based on the President’s Executive Order No. 14,315, titled  "Ending Market Distorting Subsidies for Unreliable, Foreign Controlled Energy Sources," directing the IRS to "take all action as the [Secretary] deems necessary and appropriate to strictly enforce the termination of the clean electricity production and investment tax credits under sections 45Y and 48E of the Internal Revenue Code for wind and solar facilities." Soon after the Executive Order but before Notice 2025-42, reacting to the Executive Order, “multiple interested parties,” filed comments. Some commenters urged the IRS to retain the existing tests, called the “Physical Work Test” and the ”Five Percent Test” (or “Safe Harbor”) or make any new test only prospective. Prominent Congressmen offered comments, some supporting the existing Tests. The IRS then issued Notice 2025-42, 2025-36, IRB 351 (2025) providing that the “beginning of construction” requirement will be based only on the Physical Work Test, thus eliminating the “Five Percent Test.”

The Plaintiffs (“a collection of governmental and private organizations”) sued alleging “that the Notice is harming them” in specific ways outlined in the opinion (but not relevant to this blog entry). Among the claims made was that the Notice violated the APA reasoned decisionmaking requirement for valid agency rules. See Motor Vehicle Manufacturers Ass'n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 52 (1983).

After extensive analysis, the Court held (Slip Op. 49):

Notice 2025-42 falls short of these standards. The Notice’s elimination of the Five Percent Safe Harbor is a significant change in the IRS’s position on what it means to “begin construction” for purposes of clean energy tax credits. This changed position implicates “serious reliance interests,” which the agency actively invited by repeatedly restating its prior approach. See Encino Motorcars, 579 U.S. at 221–22. Although the record shows that the Defendants received clear warnings about those reliance interests before adopting the Notice, the agency failed to justify its decision to change course. Because neither the Notice nor the administrative record provides an explanation from which “the agency’s path may reasonably be discerned” in light of all the facts and circumstances, the Notice is arbitrary and capricious. See State Farm, 463 U.S. at 43.

On Legislative History—Supreme Court Faceoff Between Conservative and Liberal Justices with Comments (6/16/26)

In FS Credit Opportunities Corp.v. Saba Capital Master Fund, Ltd., 608 U. S. ____ (2026), decided June 22, 2026, SC here* and GS here**, the conservative and liberal Justices fussed about the proper role of legislative history in statutory interpretation. That fussing interested me because I had recently made substantial revisions to that fuss in my 2026 Working Draft of my Federal Tax Procedure book (Student and Practitioner Editions). I don’t think the fussing in FS Credit adds anything meaningful to the discussion, but it does offer a handy opportunity for those interested in the issue to be up to date on the Supreme Court’s views. So, I thought that, in addition to notifying readers and providing links to the Opinions, I would offer the current treatment of the issue from the Working Draft (due for publication on the SSRN platform in early August 2026). The Practitioner Working Draft (with text and footnotes) may be viewed or downloaded here. The Student edition is the Practitioner Edition text without the footnotes, so for readers generally I just copy and paste here the text only:

(5)    Legislative History in Statutory Interpretation.

           The pre-enactment history of enacted statutory text may be important in interpreting the enacted text (just as, for example, the history of the drafting and ratification of the Constitution may guide its interpretation). Relevant history is often discussed in two broad categories: Statutory History and Legislative History. (Actually, statutory history (defined below) is a subset of legislative history, but it is not uncommon to treat the two as separate categories.) Both types of history stop upon enactment of the statutory text being interpreted; at least conceptually, since the focus is on the meaning of the text upon enactment, there is no such concept as subsequent legislative history which at best would be comments on the meaning of the previously enacted text. (I return to subsequent legislative history below, beginning on p. 34.)

           Statutory history can include two broad categories: (i) enacted text only, including enacted text that has been revised by enacted text over time (call this category “enacted statutory history”); and (ii) the changes in the text of bills as they move through the legislative process to enactment (“drafting history”). Enacted statutory history considers only enacted text and any interpretive inferences that may be drawn from enacted text; drafting history also considers drafts of the text as it moved and changed through the legislative process. Textualists use enacted statutory history to draw inferences of enacted text meaning. Sometimes, textualists resort to drafting history treating it somewhat like enacted statutory history in drawing interpretive inferences.

           Legislative History includes all documents the legislature may have generated or considered in enacting the statutory text that might permit inferences as to the meaning of the enacted statutory text. Legislative history is the course of congressional consideration in identifying the need for legislation, drafting or revising the bills (the “drafting history” and statutory 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.

Tax Court Holds that IRS Must Prove Return Fraud After a Convicted Spouse is Convicted for Tax Evasion (5/30/26)

In Li v. Commissioner, T.C. Memo. 2026-42 (T.C. Case 12133-23 at #35, here, at #35, and GS here, the Court addressed proof issues for applying the unlimited statute of limitations for a joint return spouse (“unconvicted spouse”) after the other spouse was convicted of tax evasion (“the convicted spouse”). Of course, as to the convicted spouse, collateral estoppel will apply to establish fraud for the unlimited statute of limitations (§ 6501(c)(1)) and the civil fraud penalty (§ 6663). Li addresses the issue of the effect of the convicted spouse’s conviction on the unconvicted spouse’s statute of limitations (§ 6501(c)(1)),

The background is the Allen issue. In Allen v. Commissioner, 128 T.C. 37 (2007), the Court held that fraud on a return by a return preparer without the taxpayer’s personal fraud invoked the unlimited statute of limitations in § 6501(c)(1). The issues Allen raises are discussed in several blog entries over the years, but I think they are presented in my most recent blogs: Update on Murrin Petition for Cert re Unlimited Civil Statute of Limitations for Non-Taxpayer Fraud Reported on Tax Return (Federal Tax Procedure Blog 5/19/26), here; and Further on Murrin and Allen and the Unlimited Statute of Limitations for Fraud on the Return (Federal Tax Procedure Blog 4/30/26), here.

Stripped down to basics, the current status of the Allen issue is as follows:

• for courts applying the Allen holding (that the preparer’s fraud alone will suffice to the unlimited statute of limitations; the taxpayer’s fraud is not required). This includes all courts addressing the issue except the Federal Circuit.
• the Federal Circuit held that the taxpayer’s fraud is required, at least in a context where the fraud on the return was not the preparer’s fraud (although the Federal Circuit did not intimate that preparer fraud would suffice).

Li dealt with the unlimited statute of limitations for the unconvicted spouse after the convicted spouse’s tax evasion conviction. The holding was that, as to the unconvicted spouse, the IRS must prove fraud on the return by clear and convincing evidence of fraud on the return (which need not necessarily be the unconvicted spouse’s personal fraud). In the Li facts, that means that the unconvicted spouse is not subject to collateral estoppel for the convicted spouse's conviction. Li does not address the issue I discuss in the first blog above as to whether fraud on the return committed by others than the tax return preparer (e.g., tax shelter promoters) will suffice.

I have synthesized the Li Opinion in my working draft for the Federal Tax Procedure Editions for 2026 (to be published in early August). I offer that synthesis here in the paragraph after discussing the Allen issue (note that the footnotes are presented after the text; the numbering on the footnotes will not be the same in the working draft or the final 2026 Practitioner Edition):

Interesting Concurring Opinion on Canons (or Maxims) of Statutory Interpretation (5/29/26; 8/21/26)

In Flight Options LLC v. United States, 177 F.4th 709 (6th Cir. 2026), CA6 here and GS here, the Court reversed a district court holding that Flight Options, a fractional-share jet company, was liable for withholding tax in the amount of $39 million on fixed fees it charged to pay for the overhead and management of its clients' private jets. The tax involved was the

7.5% excise tax on the “amount paid for” domestic “transportation by air,” 26 U.S.C. §§4261(a), 4262(a)(1), what the statute called a “ticket tax” at all relevant times of this dispute, id. §4261(e)(1)(C), (e)(5) (2012).

Although I do not plan to deal with the substantive merits of the withholding tax in issue, basically a high-level overview is that the tax is easily calculated, collected, and paid over for the travel that most of us experience on commercial airlines where the price of the ticket is all in for cover all associated costs to the airline of providing the air transportation (included quite indirect costs of management and even paying lawyers). Private-jet companies operate differently, not including all costs in a single fare but separately calculating and charging for its costs and profit. So, Flight Options, calculated, collected, and paid over only that ticket tax related to “usage charges for each flight a client takes, not to fixed fees it charges its clients for overhead and management of its fractional jet business.” The latter charges are the types of charges that commercial airliners build into the ticket fare and thus are, for commercial travel, subject to the ticket tax. In effect, the IRS attempted to require private-jet providers to include some of those charges in the base to which the ticket tax, and thus withholding obligation, applied, thus making the ticket tax more comparable in impact between commercial providers and private-jet providers. (Added 4:50 pm: To put that another way, for a pro rata tax, private-jet flyers pay less than commercial-jet flyers. Think about that.)

The Court of Appeals (Judge Sutton for a unanimous panel) rejects the IRS position the district court sustained. Of course, the issue is to apply the ticket tax designed with the commercial-jet model where all-in costs are included in the ticket price subject to the tax. As noted above, the private-jet providers separately state their costs (with separately stated costs including profit). The effect of the Court’s holding is that private-jet providers get a competitive advantage relative to commercial-jet providers. The Court confers that competitive advantage by deploying the favorite interpretive tool of literalist textualists—Dictionaries. Using those vaunted tools, the Court’s parsing of the tax indicated to the Court that the text was uncertain as to the liability—ambiguous, if you will—and thus it is improper to hold a third-party withholder for a liability that is uncertain. In the process the Court deployed two canons, called “relevant taxpayer canons”: (i) the Pro-Taxpayer Canon, called a general canon, that interprets uncertainty in tax liability in favor of the taxpayer and against the IRS; and (ii) a related canon, called a "specific canon," that to hold a party charged with collecting the tax for the IRS must have “precise and not speculative” instructions in the statute (meaning in his telling that ambiguity is resolved in favor of the putative withholder).