I have written before on this blog and in a recent article on the subject of the continuing viability of IRS interpretive regulations under the Administrative Procedure Act ("APA"). See e.g., Article on the Continued Viability of the APA Category of Interpretive Regulations (Federal Tax Procedure Blog 6/21/19), here; and see generally all blog entries on the subject sorted by relevance (but can be sorted by date), here.
In one of the blog entries I discuss the Treasury and IRS Policy Statement on the Tax Regulatory Process. See, Treasury and IRS Policy Statement on Tax Regulatory Process (Federal Tax Procedure Blog 3/17/19), here. The Policy Statement is here.
IRS Chief Counsel has issued a memorandum on the Policy Statement: CC-2019-006 (9/17/19) re Policy Statement on the Tax Regulatory Process, here. The purpose of the memorandum is to inform Chief Counsel attorneys of the general requirements of the Policy Statement.
As relevant to the issue I have spent significant time on recently--the issue of the continuing viability of IRS interpretive regulations qua the interpretive regulations category under the APA, CC-2019-006 says: "the policy statement provides that Treasury and the IRS will continue to adhere to their longstanding practice of using the notice-and-comment process for interpretative tax rules published in the Code of Federal Regulations."
JAT Comments:
1. Exactly. For those wanting my views on that subject, see the article: Townsend, John A., The Report of the Death of the Interpretive Regulation Is an Exaggeration (June 6, 2019). Available at SSRN: https://ssrn.com/abstract=3400489.
2. Also, CC-2019-006 repeats the commitment in the Policy Statement not to assert Auer deference for subregulatory advice. The Policy Statement was issued before the Supreme Court sustained Auer in limited application in Kisor v. Wilkie, ___ F.3d ___, 139 S.Ct. 2400 (2019), here. Hence, the Policy Statement apparently surrenders some Auer authority for subregulatory guidance, and CC-2019-006 confirms that. In this regard, Auer involves deferring to agency subregulatory interpretations of ambiguous regulations' text. But, the Policy Statement says that the IRS will not do assert Auer deference. Presumably, DOJ Tax will not either, but I have seen no announcement to that effect. I have written on this issue: Auer Deference and Treasury and IRS Policy Statement on the Tax Regulatory Process (7/6/19), here.
Wednesday, September 25, 2019
FTP2019 Update 03 - Minimum Payments and Voluntary Payments with OICs (9/25/19)
I have posted Update 03, here, dealing with minimum and voluntary payments required with OICs. A listing of updates (with links) through today is here.
The update deals principally with Section 7122(c) dealing with minimum payments upon submission of OICs.
The page for the book editions and updates is at the right, titled 2019 Federal Tax Procedure Book & Updates, here.
The update deals principally with Section 7122(c) dealing with minimum payments upon submission of OICs.
The page for the book editions and updates is at the right, titled 2019 Federal Tax Procedure Book & Updates, here.
Monday, September 23, 2019
Pfizer Suit for Overpayment Interest Transferred to CFC for Tucker Act Jurisdiction (9/12/19; 9/25/19)
I write today on the recent decision in Pfizer, Inc. v. United States, 939 F.3d 173 (2d Cir. 2019), here. Pfizer involves overpayment interest, normally one of the more boring issues in the tax law. It also involves some arcane rules, and finally involves taxpayer forum shopping, one of the arts of the tax litigator's trade (perhaps not exciting but certainly important).
I start with some basic background. Section 6611(a), here, says unequivocally that "Interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax." There is no question that a taxpayer with an overpayment is entitled to interest on the overpayment -- at least generally (that qualifier "generally" suggests exceptions that play prominently in this blog entry).
Other rules that come in play are:
1. § 6611(b)(2) says that interest is due from the date of the overpayment "to a date (to be determined by the Secretary) preceding the date of the refund check by not more than 30 days, whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer." This is called the "back-off" period and, as stated may be less than 30 days. Most importantly, if the refund check is not accepted by the taxpayer upon tender, overpayment interest no longer accrues beyond the back-up date. [JAT note: This back-off period did not seem to apply in Pfizer, and I include it as a step to get to the applicable section discuss in paragraph 2.]
2. § 6611(e)(1) says that no overpayment interest may be paid if the refund is made within 45 days of the due date (determined without regard to extensions), or, if later, the actual filed date of the return reporting the overpayment.
Pfizer filed a timely (on extension) 2008 return on 9/11/09 reporting a net overpayment of $499,528,499 (after application of an amount to its next year estimated tax). The IRS prepared six checks for the overpayment aggregating to that amount. The IRS apparently mailed the overpayment refund checks on or around October 19, 2009 (well within § 6611(e)(1)'s 45 day interest-free period from the date of filing, so the checks would have aggregated $499,528,499 without any overpayment interest), but the checks were never delivered to Pfizer. Pfizer started contacting the IRS about the overpayment refund in December and continued thereafter, with the IRS canceling the checks and then depositing the amount of the overpayment refund claim ($499,528,499) directly into Pfizer's account on March 19, 2010 just over one year from the original overpayment (the due date of the return without extensions).
The interest on the period from the normal due date (March 15, 2009) to Pfizer's actual receipt of the overpayment funds was substantial ($8,298,048, even with the reduced rate for corporate overpayments), so Pfizer wanted to pursue the matter. It did so by filing a claim for the overpayment interest "three years after receiving the refund." (I note in the comments below some issues about how overpayment interest claims are made, but the Pfizer Second Circuit opinions do not address that issue, so I move on here; suffice it to say that, somehow, Pfizer made the claim for overpayment interest. I will say that, at least potentially relevant to the concurring opinion, there is no explanation as to why Pfizer waited so long to present the formal claim, although the IRS apparently told Pfizer that the statute of limitations on the claim for overpayment interest was six years rather than the two year period for refund claims.) The IRS denied the claim for overpayment interest based on the issuance of the overpayment checks in October 2009, which checks were apparently lost in the mail before delivery to Pfizer. Pfizer then filed the suit for the overpayment interest.
There is no question that Pfizer could have filed the suit in the Court of Federal Claims (CFC) under Tucker Act jurisdiction. (More on this later.) Instead, Pfizer filed in the district court for SDNY. The reason for that was to obtain favorable precedent in the Second Circuit, Doolin v. United States, 918 F.2d 15 (2d Cir. 1990), here, that held that a refund check not delivered to the taxpayer had not been tendered and thus did not suspend overpayment interest under § 6611(b)(2) (which stops interest after the refund check is tendered to the taxpayer whether or not the refund check is cashed by the taxpayer). While Pfizer involved § 6611(e)(1), the same types of considerations as the Court invoked in Doolin would seemingly apply. The CFC had no such favorable precedent, but also had no unfavorable precedent. Still, if the taxpayer could find appropriate jurisdiction in the district court, then it had seemingly a winner under Doolin. Pfizer is thus a classic example of taxpayer forum shopping.
I start with some basic background. Section 6611(a), here, says unequivocally that "Interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax." There is no question that a taxpayer with an overpayment is entitled to interest on the overpayment -- at least generally (that qualifier "generally" suggests exceptions that play prominently in this blog entry).
Other rules that come in play are:
1. § 6611(b)(2) says that interest is due from the date of the overpayment "to a date (to be determined by the Secretary) preceding the date of the refund check by not more than 30 days, whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer." This is called the "back-off" period and, as stated may be less than 30 days. Most importantly, if the refund check is not accepted by the taxpayer upon tender, overpayment interest no longer accrues beyond the back-up date. [JAT note: This back-off period did not seem to apply in Pfizer, and I include it as a step to get to the applicable section discuss in paragraph 2.]
2. § 6611(e)(1) says that no overpayment interest may be paid if the refund is made within 45 days of the due date (determined without regard to extensions), or, if later, the actual filed date of the return reporting the overpayment.
Pfizer filed a timely (on extension) 2008 return on 9/11/09 reporting a net overpayment of $499,528,499 (after application of an amount to its next year estimated tax). The IRS prepared six checks for the overpayment aggregating to that amount. The IRS apparently mailed the overpayment refund checks on or around October 19, 2009 (well within § 6611(e)(1)'s 45 day interest-free period from the date of filing, so the checks would have aggregated $499,528,499 without any overpayment interest), but the checks were never delivered to Pfizer. Pfizer started contacting the IRS about the overpayment refund in December and continued thereafter, with the IRS canceling the checks and then depositing the amount of the overpayment refund claim ($499,528,499) directly into Pfizer's account on March 19, 2010 just over one year from the original overpayment (the due date of the return without extensions).
The interest on the period from the normal due date (March 15, 2009) to Pfizer's actual receipt of the overpayment funds was substantial ($8,298,048, even with the reduced rate for corporate overpayments), so Pfizer wanted to pursue the matter. It did so by filing a claim for the overpayment interest "three years after receiving the refund." (I note in the comments below some issues about how overpayment interest claims are made, but the Pfizer Second Circuit opinions do not address that issue, so I move on here; suffice it to say that, somehow, Pfizer made the claim for overpayment interest. I will say that, at least potentially relevant to the concurring opinion, there is no explanation as to why Pfizer waited so long to present the formal claim, although the IRS apparently told Pfizer that the statute of limitations on the claim for overpayment interest was six years rather than the two year period for refund claims.) The IRS denied the claim for overpayment interest based on the issuance of the overpayment checks in October 2009, which checks were apparently lost in the mail before delivery to Pfizer. Pfizer then filed the suit for the overpayment interest.
There is no question that Pfizer could have filed the suit in the Court of Federal Claims (CFC) under Tucker Act jurisdiction. (More on this later.) Instead, Pfizer filed in the district court for SDNY. The reason for that was to obtain favorable precedent in the Second Circuit, Doolin v. United States, 918 F.2d 15 (2d Cir. 1990), here, that held that a refund check not delivered to the taxpayer had not been tendered and thus did not suspend overpayment interest under § 6611(b)(2) (which stops interest after the refund check is tendered to the taxpayer whether or not the refund check is cashed by the taxpayer). While Pfizer involved § 6611(e)(1), the same types of considerations as the Court invoked in Doolin would seemingly apply. The CFC had no such favorable precedent, but also had no unfavorable precedent. Still, if the taxpayer could find appropriate jurisdiction in the district court, then it had seemingly a winner under Doolin. Pfizer is thus a classic example of taxpayer forum shopping.
Friday, September 13, 2019
Does Failure to Assert Graev 6751(b) Issue in Claim for Refund Foreclose Asserting in Refund Suit? (9/13/19)
For some reasons, although I had this case in my database, I had not reported on it. Ginsburg v. United States, 123 A.F.T.R.2d 2019-553 (M.D. Fla. 3/11/2019), here, on appeal to the Eleventh Circuit (No. 19-11836-J). The Procedurally Taxing Blog has a good write up, so I won't re-do the ground covered there. See Keith Fogg, Variance Doctrine Trumps IRS Failure to Obtain Administrative Approval of Penalty (Procedurally Taxing Blog 5/6/19). I do, however, offer some musings.
The issue relates to the requirement that the IRS meet a production burden under § 7491(c) with respect to the written manager approval under § 6751(b). The issue is sometimes referred to as the Graev issue because of the cases that first prominently raised the issue is a very public way in the first opinion in Graev v. Commissioner, 147 T.C. 460 (2016). Although the issue was rejected in that opinion, it was later reversed in Graev . Commissioner, 149 T.C. 485 (2017) (reviewed opinion), based on Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017). There has been a lot of litigation about the Graev issue, usually in the Tax Court. Sometimes, where the IRS can show the proper written approval but had not, consistent with prior Tax Court precedent, introduced the evidence at trial, the Tax Court will permit the IRS to open the record to introduce the approval, and that ends that. Sometimes the Tax Court will not open the record and, because the IRS had the production burden it did not meet, that ends that as well.
The setting here for the issue is a refund claim. We all know the general rule that the taxpayer must state the grounds for entitlement to a refund in the refund claim and failure to do so precludes the taxpayer from asserting the grounds in an ensuing refund suit. Ginsburg did not include the Graev issue in his claim for refund. The timing of the claim for refund with respect to the Graev issue timeline is not clear from the district court opinion, but I infer that the claim for refund was made and denied before the Chai decision which started the taxpayer wins on the Graev issue. It might be helpful to look at the time line:
The issue relates to the requirement that the IRS meet a production burden under § 7491(c) with respect to the written manager approval under § 6751(b). The issue is sometimes referred to as the Graev issue because of the cases that first prominently raised the issue is a very public way in the first opinion in Graev v. Commissioner, 147 T.C. 460 (2016). Although the issue was rejected in that opinion, it was later reversed in Graev . Commissioner, 149 T.C. 485 (2017) (reviewed opinion), based on Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017). There has been a lot of litigation about the Graev issue, usually in the Tax Court. Sometimes, where the IRS can show the proper written approval but had not, consistent with prior Tax Court precedent, introduced the evidence at trial, the Tax Court will permit the IRS to open the record to introduce the approval, and that ends that. Sometimes the Tax Court will not open the record and, because the IRS had the production burden it did not meet, that ends that as well.
The setting here for the issue is a refund claim. We all know the general rule that the taxpayer must state the grounds for entitlement to a refund in the refund claim and failure to do so precludes the taxpayer from asserting the grounds in an ensuing refund suit. Ginsburg did not include the Graev issue in his claim for refund. The timing of the claim for refund with respect to the Graev issue timeline is not clear from the district court opinion, but I infer that the claim for refund was made and denied before the Chai decision which started the taxpayer wins on the Graev issue. It might be helpful to look at the time line:
11/30/16
|
Graev v. Commissioner, 147
T.C. 460 (2016) (holding that the relevant § 6751(b) date is the assessment
date not the assertion of the penalties in the notice of deficiency or some
predicate act)
|
1/20/17
|
IRS denies Ginsburg claim for refund which did not raise the Graev issue.
|
3/20/17
|
Chai v. Commissioner, 851 F.3d 190 (2d
Cir. 2017) (holding that the Tax Court was wrong in Graev and that the
written approval must exist prior to the notice of deficiency or even some
predicate action)
|
12/20/17
|
Graev . Commissioner, 149 T.C. 485 (2017) (Supplemental Opinion, reviewed, adopting Chai).
|
Saturday, August 31, 2019
Altera Petition for Rehearing and DOJ Tax Response in opposition in Altera Case (8/31/19)
I previously discussed the decision in Altera Corp. & Subsidiaries v. Commissioner, 926 F.3d 1061 (9th Cir. 2019), here, where the reconstituted Ninth Circuit panel held that the taxpayer must include stock option costs in its qualified cost sharing arrangement ("QCSA") calculations of costs. See Ninth Circuit Reverses Unanimous Tax Court in Altera (Federal Tax Procedure Blog 6/7/19; 6/20/19; 7/2/19), here.
Altera filed a petition for rehearing en banc. See Steve Dixon, Petition for Rehearing En Banc Filed in Altera (Miller & Chevalier Tax Appellate Blog 7/24/19), here (which has a link to obtain a copy of the petition). As in the panel consideration, several amici curiae have submitted briefs. The Court ordered the Government to respond, and DOJ Tax has now filed its response opposing rehearing en banc. See DOJ Tax brief in opposition, here.
I do not link the amicus briefs which, I suppose, may not be all in yet. I have not yet read them and, if I do, and think any are significant I will add to this blog entry.
The Government's Response Brief is quite good, in my opinion. It clearly and succinctly steps through the bases touched in the majority panel opinion. (See my blog above and, of course, the opinion linked above). Basically, in summary:
1. Applying the Chevron Framework (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), here), the regulation requiring inclusion of stock option costs is a reasonable interpretation under Chevron's Step Two within the scope of the statutory ambiguity getting the issue past Step One.
2. The regulation was procedurally regular under the State Farm test. Motor Vehicle Manufacturers Association of United States, Inc. v. State Farm, 463 U.S. 29, 41-45 (1983), here. The State Farm test is based on 5 USC 706(c)(2)(A), here, which, surprisingly, DOJ Tax does not cite in its Response.
That's it folks. Except for the commotion in the case (prominent corporate taxpayer with lots of money at stake and other nonparty corporate taxpayers with lots of money at stake), lots of heat with some light (I think particularly in the majority panel opinion and the DOJ Response linked above, and the fact that the Tax Court in a unanimous reviewed opinion slipped off the rails), there does not appear to me to be enough real substance to the petition to warrant rehearing en banc or petition for certiorari in the case as it stands now. Just my opinion (and nobody has paid me or would pay me to render it or cares that I have rendered it.)
Altera filed a petition for rehearing en banc. See Steve Dixon, Petition for Rehearing En Banc Filed in Altera (Miller & Chevalier Tax Appellate Blog 7/24/19), here (which has a link to obtain a copy of the petition). As in the panel consideration, several amici curiae have submitted briefs. The Court ordered the Government to respond, and DOJ Tax has now filed its response opposing rehearing en banc. See DOJ Tax brief in opposition, here.
I do not link the amicus briefs which, I suppose, may not be all in yet. I have not yet read them and, if I do, and think any are significant I will add to this blog entry.
The Government's Response Brief is quite good, in my opinion. It clearly and succinctly steps through the bases touched in the majority panel opinion. (See my blog above and, of course, the opinion linked above). Basically, in summary:
1. Applying the Chevron Framework (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), here), the regulation requiring inclusion of stock option costs is a reasonable interpretation under Chevron's Step Two within the scope of the statutory ambiguity getting the issue past Step One.
2. The regulation was procedurally regular under the State Farm test. Motor Vehicle Manufacturers Association of United States, Inc. v. State Farm, 463 U.S. 29, 41-45 (1983), here. The State Farm test is based on 5 USC 706(c)(2)(A), here, which, surprisingly, DOJ Tax does not cite in its Response.
That's it folks. Except for the commotion in the case (prominent corporate taxpayer with lots of money at stake and other nonparty corporate taxpayers with lots of money at stake), lots of heat with some light (I think particularly in the majority panel opinion and the DOJ Response linked above, and the fact that the Tax Court in a unanimous reviewed opinion slipped off the rails), there does not appear to me to be enough real substance to the petition to warrant rehearing en banc or petition for certiorari in the case as it stands now. Just my opinion (and nobody has paid me or would pay me to render it or cares that I have rendered it.)
Thursday, August 29, 2019
CIC Servs Petition for Rehearing En Banc Petition Denied with Hyperbolic Concurring and Dissenting Opinions (8/29/19; 8/31/19)
I have written earlier about the constricted pre-enforcement litigation opportunities for IRS guidance. See Pre-Enforcement Litigation of IRS Guidance (Federal Tax Crimes Blog 8/6/19), here. In that posting, I cite CIC Services LLC v. IRS, 925 F.3d 247 (6th Cir. 2019), here, (holding pre-enforcement procedural challenge to an IRS Notice was barred).
In CIC Servs. v. IRS, ___ F.3d ___, 2019 U.S. App. LEXIS 26007 (6th Cir. 2019), here, the Sixth Circuit denied petition for rehearing en banc. Denials for petitions for rehearing en banc are frequent and usually unexceptional, but, in my judgment, this denial is exceptional because of the concurring and dissenting opinions on the denial. The principal concurring and dissenting opinions (by Judges Clay, concurring, and Thapar, dissenting) are noteworthy, not because they are particularly enlightening to those who have followed the issue but because they are populated with so much hyperbole. I will leave it to readers to parse the opinions if they choose.
I am trying to imagine what exactly caused this burst of hyperbole. I gather that Judge Thapar, who was on President Trump's list of possible Supreme Court nominees, started the ball rolling by writing a dissenting opinion using the narrow legal issue as an attack on the administrative state. Hyperbole in attacks on the administrative state are much used by judges with strong conservative/libertarian bents. Readers of Judge Thapar's dissent who have followed this area of the law will recognize his overture to Justice Gorsuch, in an equally hyperbolic opinion, citing an "elephant in the room" in Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1149 (10th Cir. 2016), here (which was a concurring opinion to the panel opinion Justice Gorsuch wrote because he could not get another judge to agree with the hyperbole in the concurring opinion). Sixth Circuit Judge Nalbandian had already stated the case in his panel dissent with less hyperbole. So, why did Judge Thapar enter the fray on a denial for petition for rehearing en banc? Maybe he saw the denial as an opportunity to rail against the administrative state for his own personal satisfaction. Maybe. But, maybe also, he saw the dissent as an opportunity to further endear himself with the audience that could elevate him to the Supreme Court (most prominently, the Federalist Society through whom President Trump vets judicial nominations and those in sway of the Federalist Society, including President Trump and those who help him select judicial nominees). See Fred Barnes, See Reshaping the Judiciary (Washington Examiner 5/31/19), here. The opinion will certainly resonate with that audience. And, assuming President Trump fails to obtain re-election, Thapar's only hope for a Supreme Court position will be an opening in the next year or so. (Senate Leader McConnell has already said that, for a Trump nominee, he will reject the rule he created whole cloth to deny Merrick Garland a seat on the Supreme Court because nominated in the election cycle; and, of course, McConnell is a big supporter of Thapar.) After next year, I suspect, there is no hope for Thapar to be a Supreme Court Justice. So, its now or never, and he must remind that audience that he is their man (as if they did not already know that).
Judge Thapar's opinion drew the concurring opinion of Judge Clay, who opens with this zinger by calling Judge Thapar's dissent the "latest attempt to inflict death by distorted originalism on the modern administrative state."
Finally the concurring opinion by Judge Sutton, seems to be merely a plea or suggestion, without hyperbole, to the Supreme Court to take cert and smooth the rough edges in the law.
Addendum 8/31/19 11:45 am:
In CIC Servs. v. IRS, ___ F.3d ___, 2019 U.S. App. LEXIS 26007 (6th Cir. 2019), here, the Sixth Circuit denied petition for rehearing en banc. Denials for petitions for rehearing en banc are frequent and usually unexceptional, but, in my judgment, this denial is exceptional because of the concurring and dissenting opinions on the denial. The principal concurring and dissenting opinions (by Judges Clay, concurring, and Thapar, dissenting) are noteworthy, not because they are particularly enlightening to those who have followed the issue but because they are populated with so much hyperbole. I will leave it to readers to parse the opinions if they choose.
I am trying to imagine what exactly caused this burst of hyperbole. I gather that Judge Thapar, who was on President Trump's list of possible Supreme Court nominees, started the ball rolling by writing a dissenting opinion using the narrow legal issue as an attack on the administrative state. Hyperbole in attacks on the administrative state are much used by judges with strong conservative/libertarian bents. Readers of Judge Thapar's dissent who have followed this area of the law will recognize his overture to Justice Gorsuch, in an equally hyperbolic opinion, citing an "elephant in the room" in Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1149 (10th Cir. 2016), here (which was a concurring opinion to the panel opinion Justice Gorsuch wrote because he could not get another judge to agree with the hyperbole in the concurring opinion). Sixth Circuit Judge Nalbandian had already stated the case in his panel dissent with less hyperbole. So, why did Judge Thapar enter the fray on a denial for petition for rehearing en banc? Maybe he saw the denial as an opportunity to rail against the administrative state for his own personal satisfaction. Maybe. But, maybe also, he saw the dissent as an opportunity to further endear himself with the audience that could elevate him to the Supreme Court (most prominently, the Federalist Society through whom President Trump vets judicial nominations and those in sway of the Federalist Society, including President Trump and those who help him select judicial nominees). See Fred Barnes, See Reshaping the Judiciary (Washington Examiner 5/31/19), here. The opinion will certainly resonate with that audience. And, assuming President Trump fails to obtain re-election, Thapar's only hope for a Supreme Court position will be an opening in the next year or so. (Senate Leader McConnell has already said that, for a Trump nominee, he will reject the rule he created whole cloth to deny Merrick Garland a seat on the Supreme Court because nominated in the election cycle; and, of course, McConnell is a big supporter of Thapar.) After next year, I suspect, there is no hope for Thapar to be a Supreme Court Justice. So, its now or never, and he must remind that audience that he is their man (as if they did not already know that).
Judge Thapar's opinion drew the concurring opinion of Judge Clay, who opens with this zinger by calling Judge Thapar's dissent the "latest attempt to inflict death by distorted originalism on the modern administrative state."
Finally the concurring opinion by Judge Sutton, seems to be merely a plea or suggestion, without hyperbole, to the Supreme Court to take cert and smooth the rough edges in the law.
Addendum 8/31/19 11:45 am:
Monday, August 26, 2019
FTP2019 Update - Innocent Spouse Relief Judicial Review (8/26/19)
I offer the Second Federal Tax Procedure Editions Update. The Second Update is here. A separate pdf with a table of contents showing cumulative updates is here. (The cumulative update as of the date of the blog is linked here. For the most recent version of the cumulative update (including updates after the date of this blog), see the link on the page to the right, titled "2019 Federal Tax Procedure Book & Updates," here.)
For a blog search that picks up all Updates through the tag FTP 2019 Updates, click here. This search will first be sorted by relevance, but a reverse chronological presentation can be linked at the top. The results will show all Update blogs. (As of today's posting, there will be only one, but as others are added, the search will pick them all up.)
This Update replaces the following section with discussion of the litigation forums for innocent spouse relief.
Ch. 14. Collection Procedures.
XVI. Innocent Spouse Relief.
B. Joint Liability Relief.
7. Judicial Review.
Practitioner Ed., pp 796-797
Student Ed., p. 543
For a blog search that picks up all Updates through the tag FTP 2019 Updates, click here. This search will first be sorted by relevance, but a reverse chronological presentation can be linked at the top. The results will show all Update blogs. (As of today's posting, there will be only one, but as others are added, the search will pick them all up.)
This Update replaces the following section with discussion of the litigation forums for innocent spouse relief.
Ch. 14. Collection Procedures.
XVI. Innocent Spouse Relief.
B. Joint Liability Relief.
7. Judicial Review.
Practitioner Ed., pp 796-797
Student Ed., p. 543
FTP2019 Update - On Funds Movement Reports (CTR, CMIR and SAR) (8/26/19)
As I explain on the page (at the right) titled 2019 Federal Tax Procedure Book & Updates, here, I will post updates, corrections, changes to the FTP Book Editions by blog entry rather than via a cumulative supplement.
The first Update is linked here. A separate pdf with a table of contents showing all updates is here. (Please note that, since this posting is the first Update, the only Update on the pdf is this one; I will generate a new cumulative update pdf as new postings are made; the most recent pdf with cumulative updates will be posted on the page to the right, titled "2019 Federal Tax Procedure Book & Updates," here.)
For a blog search that picks up all Updates through the tag FTP 2019 Updates, click here. This search will first be sorted by relevance, but a reverse chronological presentation can be linked at the top. The results will show all Update blogs. (As of today's posting, there will be only one, but as others are added, the search will pick them all up.)
This update replaces the following section with discussion of Currency Transaction Report ("CTR"), Currency or Monetary Instrument Report ("CMIR") and "Suspicious Activity Report ("SAR").
Ch. 5. Returns
II. The Return.
A. Return Filing Requirement
2. Information Returns or Reports.
b. Commonly Encountered Information Returns.
(4) Currency Transaction Reports.
Practitioner Ed., pp. 157-158
Student Ed., pp. 107--108
The first Update is linked here. A separate pdf with a table of contents showing all updates is here. (Please note that, since this posting is the first Update, the only Update on the pdf is this one; I will generate a new cumulative update pdf as new postings are made; the most recent pdf with cumulative updates will be posted on the page to the right, titled "2019 Federal Tax Procedure Book & Updates," here.)
For a blog search that picks up all Updates through the tag FTP 2019 Updates, click here. This search will first be sorted by relevance, but a reverse chronological presentation can be linked at the top. The results will show all Update blogs. (As of today's posting, there will be only one, but as others are added, the search will pick them all up.)
This update replaces the following section with discussion of Currency Transaction Report ("CTR"), Currency or Monetary Instrument Report ("CMIR") and "Suspicious Activity Report ("SAR").
Ch. 5. Returns
II. The Return.
A. Return Filing Requirement
2. Information Returns or Reports.
b. Commonly Encountered Information Returns.
(4) Currency Transaction Reports.
Practitioner Ed., pp. 157-158
Student Ed., pp. 107--108
Sunday, August 18, 2019
Amazon Wins Transfer Pricing Dispute on Regulations Interpretation (8/18/19)
In Amazon.com, Inc. v. Commissioner, ___ F.3d ___ (9th Cir. 2019), here, a transfer pricing case, the Court held that, under the applicable regulations (but superseded for later years as noted in footnote 1 discussed below) did not require that residual business assets (like workforce in place, going concern value) be included in the required buy-in for a cost sharing agreement between related parties because they were not independently transferable assets.
Here is the Court's summary (not part of the opinion):
The important point on the substance of the IRS position is that the IRS changed the regulation. In footnote 1 (Slip Op. p. 6]:
Here is the Court's summary (not part of the opinion):
The panel affirmed the Tax Court’s decision on a petition for redetermination of federal income tax deficiencies, in an appeal involving the regulatory definition of intangible assets and the method of their valuation in a cost-sharing arrangement.
In the course of restructuring its European businesses in a way that would shift a substantial amount of income from U.S.-based entities to the European subsidiaries, appellee Amazon.com, Inc. entered into a cost sharing arrangement in which a holding company for the European subsidiaries made a “buy-in” payment for Amazon’s assets that met the regulatory definition of an “intangible.” See 26 U.S.C. § 482. Tax regulations required that the buy-in payment reflect the fair market value of Amazon’s pre-existing intangibles. After the Commissioner of Internal Revenue concluded that the buy-in payment had not been determined at arm’s length in accordance with the transfer pricing regulations, the Internal Revenue Service performed its own calculation, and Amazon filed a petition in the Tax Court challenging that valuation.
At issue is the correct method for valuing the pre-existing intangibles under the then-applicable transfer pricing regulations. The Commissioner sought to include all intangible assets of value, including “residual-business assets” such as Amazon’s culture of innovcation (sic), the value of workforce in place, going concern value, goodwill, and growth options. The panel concluded that the definition of “intangible” does not include residual-business assets, and that the definition is limited to independently transferrable assets.I won't get into the weeds on the opinion because it appears to be an unexceptional application of standard rules of interpretation of the regulation (a similar exercise to interpreting the text of a statute). The IRS's interpretation of its own regulation was not entitled to Auer deference, which is now substantially constrained by the decision in Kisor v. Wilkie, 588 U.S. ___, 139 S.Ct. 2400 (2019) [Sup Ct Slip Op here; Google Scholar with S.Ct. pagination here].
The important point on the substance of the IRS position is that the IRS changed the regulation. In footnote 1 (Slip Op. p. 6]:
n1 This case is governed by regulations promulgated in 1994 and 1995. In 2009, more than three years after the tax years at issue here, the Department of Treasury issued temporary regulations broadening the scope of contributions for which compensation must be made as part of the buy-in payment. See 74 Fed. Reg. 340 (Jan. 5, 2009). In 2017, Congress amended the definition of “intangible property” in 26 U.S.C. § 936(h)(3)(B) (which is incorporated by reference in 26 U.S.C. § 482). Tax Cuts and Jobs Act of 2017, Pub. L. 115-97, § 14221(a), 131 Stat. 2054, 2218 (2017). If this case were governed by the 2009 regulations or by the 2017 statutory amendment, there is no doubt the Commissioner’s position would be correct.So, except for the dollars involved (bit, as is the way with Amazon), the case would be unexceptional.
Wednesday, August 14, 2019
Procedurally Taxing Offering and Discussion of IRS Graphic on Tax Litigation (8/14/19)
Students and Practitioners reading this blog (and the Federal Tax Procedure Book) will know that I recommend the Procedurally Taxing Blog, here.
There is a new offering today that has graphics with important data on tax litigation. Keith Fogg, Statistics on Cases in Litigation from ABA Tax Section Meeting in May (ProcedurallyTaxing 8/14/19), here. The actual graphic is linked on the PT blog with Keith's brief discussion of the graphics, but here is a link to the graphic.
There is a new offering today that has graphics with important data on tax litigation. Keith Fogg, Statistics on Cases in Litigation from ABA Tax Section Meeting in May (ProcedurallyTaxing 8/14/19), here. The actual graphic is linked on the PT blog with Keith's brief discussion of the graphics, but here is a link to the graphic.
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