Paul L. Caron

Saturday, April 23, 2011

Bassin & Larkin: Mayo and Retroactive Regs

Tax Analysts Stuart J. Bassin (Baker & Hostetler, Washington, D.C.) & Beatrice Larkin (Tax LL.M. 2011, Georgetown) have published The Limits of Mayo Foundation v. United States: Retroactive Regs, 131 Tax Notes 293 (Apr. 18, 2011):

Many practitioners have commented on the impact of the Supreme Court’s Mayo decision on the susceptibility of IRS regulations to validity challenges. This article focuses on Mayo’s effect on challenges to the retroactive application of IRS regulations — an area of frequent litigation. The authors show that while Mayo will eliminate several arguments previously advanced by taxpayers, it leaves retroactive regulations vulnerable to validity challenges in important ways.

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Look at the post Chevron cases the Supremes have issued:

Cleaveland Indians, Mead, Brand X, Mayo. Lets just forget the composition of the Court, what you see in this line of cases is the Supremes extending Chevron deference to any and all regulations (or equivalent guidance by other Agencies) and a willingness to extend Chevron deference to much lower forms of guidance.

I cannot read the minds of the Supremes, but the writing seems to be on the wall that Agencies are going to receive deference to their guidance so long as it fits into the post Chevron line of cases rather than relegating them to Skidmore. National Muffler is gone, and never should have existed--it should have been Chevron or Skidmore not some middle of the road special rule for tax regulations.

Thus, petitioners will be arguing that the statute is clear on its face and means what petitioner says and thus there was no room to be filled (i.e., the regulation is irrelevant) whereas respondent will argue that the statute is ambiguous or leave a gap to be filled if it wants to rely on the Regs or it can argue that the statute is clear on its face and means what respondent says (or both). So if a court finds that a statute is clear on its face and finds for petitioner, the regulations are irrelevant and petitioners will not have to argue that the Regs. are invalid. As petitioner, I would not want to put myself in the position of having to win a Chevron argument as it is a difficult row to hoe.

Posted by: tax guy | Apr 23, 2011 5:07:50 PM