June 22, 2011
Hickman on D.C. Circuit's Intermountain DecisionKristin E. Hickman (Minnesota) offers her thoughts on yesterday's decision in Intermountain Insurance Service of Vail LLC v. Commissioner, No. 10-1204 (D.C. Cir. June 21, 2011):
Much like the Federal Circuit, the D.C. Circuit applied Chevron analysis to conclude that § 6501 is ambiguous and that Treasury's interpretation of that provision is reasonable. Because the statute is ambiguous, the Supreme Court's decision in Colony does not foreclose Treasury's interpretation. Whether or not the temporary regulations were procedurally flawed for APA purposes, Treasury finalized them using notice and comment. Treasury's “searching consideration” of the sole comment received in that process, as expressed in the preamble to the final regulations, demonstrated a sufficiently “open mind” to “cure” any procedural problem posed by the use of temporary regulations. (The court did not address at all whether or not the use of temporary regulations without notice and comment complies with the APA. Instead, the court only addressed the argument that the final regulations were procedurally flawed because they had been initially adopted as temporary regulations without notice and comment and the agency failed to keep an open mind in promulgating the final regulations.)
Update: For more, see Miller & Chevalier's Tax Appellate Blog.
Prior TaxProf Blog coverage:
- Johnson: Intermountain, Interpretive Regulations, and Brand X (May 20, 2010)
- Johnson: Intermountain and the Importance of Administrative Law in Tax Law (Aug. 25, 2010)
- Federal Circuit Exacerbates Split on Overstatement of Basis and 6-Year SOL (Mar. 12, 2011)
- Harvard Law Review on Intermountain (Mar. 24, 2011)
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On skimming the opinion, I would emphasize a different part of the holding. It seems that the IRS went after Intermountain using an ambiguous statute and lost in Tax Court. The IRS proceeded to write a new regulation (using notice and comment) interpreting the ambiguity in its favor. Then it appealed the case against Intermountain, and argued that its interpretation deserved Chevron deference. The appellate court has now agreed.
This seems to violate fundamental principles of justice. The Court has said that whenever the executive branch loses an ambiguous statutory interpretation case, it can pass a new regulation (following notice and comment) and win on appeal. That makes a mockery of Chevron.
Posted by: Eric Rasmusen | Jun 22, 2011 4:32:43 PM