Though Judge Emin (“Eminent”) Toro concurred in result in Green Valley, 159 T. C. 5, based on his reading of Section 6707A, he still likes the majority opinion enough to grant partial summary J to Seabrook Property, LLC, Seabrook Manager, LLC, Tax Matters Partner, Docket No. 5071-21, filed 2/8/23, knocking out Section 6707A chops because IRS flunked APA 5 USC §§ 551–559, 701–706 notice-and-comment for Notice 2017-10, wherein IRS tagged the Seabrooks’ dodge as a syndicated conservation easement dodge, a Dixieland boondockery, setting up enhanced nondisclosure chops.

For the Green Valley histoire, see my blogpost “Listing Is Legislating,” 11/9/22.

Seabrook and IRS agree that the donation was qualified: it was a real estate interest given to a 501(c)(3) per Section 170(h)(1). So far summary J to Seabrook.

But IRS claims Green Valley was wrongly decided. The kerfuffle here involves IRS’ listing of pre-American Jobs Creation Act of 2004 (AJCA) dodges. Did Green Valley knock out those? If so, what about retroactivity of Section 6501(c)(10) SOL, and 6404(g)(2)(E) excluding suspension of interest that would otherwise apply under section 6404(g)?

Judge Eminent says, negatory, we never said pre-AJCA chops were out. We only held that Notice 2017-10 was legislative and therefore needed notice-and-comment.

“… the Court’s analysis in Green Valley was premised on our determination that Notice 2017-10 was a legislative rule. See Green Valley, 159 T.C. slip op. at 8–15. (Legislative rules, unlike interpretive rules, are subject to the APA’s notice and comment procedures.) This conclusion in turn relied on provisions (like section 6662A) that changed the import of designating a  transaction as reportable or listed, imposing significant consequences based on that designation. See, e.g., id. at 5 (summarizing penalties under section 6662A). Many of these provisions were enacted or modified by the AJCA and did not previously appear in the Code. See id.  at 9–10 n.8; see also id. at 36 (Toro, J., concurring in the result) (“When it adopted the AJCA in 2004, Congress established new penalties . . . .”). As a result, although the Court has not had occasion to decide this point, the notices issued to identify reportable and listed transactions before the AJCA might be viewed as interpretive rules not subject to the APA’s notice and comment procedures.” Order, at pp. 3-4.

Taishoff says I ain’t so sure about that one, Judge. And Judge Eminent eases sheets a wee bit.

“… regardless of whether pre-AJCA notices are considered legislative or interpretive, when Congress enacted section 6707A(c) (the AJCA provision that defines reportable and listed transactions), it specifically referred to determinations made ‘under regulations prescribed under section 6011,’ I.R.C. § 6707A(c)(1), and ‘transaction[s] specifically identified by the Secretary as . . . tax avoidance transaction[s] for purposes of section 6011,’ I.R.C. § 6707A(c)(2). The IRS’s pre-AJCA notices identifying reportable and listed transactions generally were issued pursuant to regulations under section 6011. See, e.g., I.R.S. Notice 2000-60, 2000-49 I.R.B. 569 (citing Temp. Treas. Reg. § 1.6011–4T(b)(2)). And so, while the Court has not had reason to rule on this issue, one could interpret the statutory references and the AJCA provisions as a whole as blessing and incorporating the notices the IRS had already issued before the effective date of the AJCA. This reading of the statute would give full effect to the effective date provisions the Commissioner cites, while still requiring the Commissioner to comply with the APA after the effective date of the AJCA, as the Court concluded in Green Valley.” Order, at p. 4.

Oh, what a jolly silt-stir that would be, to knock out every IRS dodge-tag for the last 23 (count ’em, 23) years. Every dodger and dodgeflogger would be yelling for a refund. A blogger’s dream.

Oh yeah, Seabrook wins.

Nothing like judges trying to “bring some discipline” to the wrinkled skin of tax law.