Judge Pugh is not describing her yachting holiday where the Trade Winds blow and the Anegada Passage beckons. Rather, this is the story of David W. Tice, 160 T. C. 8, filed 4/10/23, who runs aground among the shoal waters of Section 932, as Congress both dredges and silts the filing requirements for USVI residents who are, or are not, bona fide residents of Our Insolvent Islands in the Sun at the magic date or dates. If bona fide, their filing with VIBIR starts 3SOL for VI and USA; if not, they need to double-file, if have both USVI-connected and US-connected income, at least for years at issue.

Dave is non-bona fide, but claims the cover-over regime adopted for years long post-years-at-issue should apply retroactively to the two (count ’em, two) years at issue.

Judge Pugh trudges through the convoluted history of Tax Court’s Laocöon-like struggles with Section 932(a) and its regulations (or non-regulations). I’ve blogged all this stuff for the last twelve (count ’em, twelve) years, starting with Appleton (“Statute of Limitations – Maybe Not,” 12/28/10), Cooper (“A Virgin State of Mind,” 4/8/15), Sanders, (“How to Be a Virgin,” 7/5/18), and Hulett (“Another Non-Virgin,” 1/30/18).  And I’m not even counting la famille Vento.

If by now your head isn’t spinning enough, Dave argues that the regulation that would save him if made retroactive violates both the APA and the Fifth Amendment.

“And were we to find Treasury’s election parameters arbitrary and capricious, the consequence would be to’hold [that part of the regulation] unlawful and set [it] aside,’ 5 U.S.C. § 706(2), not make it applicable for the years in issue. Although petitioner contends that the consequence of the regulation’s invalidity is that “the[r]egulation applies to [p]etitioner’s taxable years 2002 and 2003, thus making the  [n]otice of [d]eficiency untimely,’ petitioner does not explain how invalidating a regulation not applicable for the years in issue could make it applicable for the years in issue. Nor could we identify any legal basis for in effect rewriting a regulation in this way.” 160 T. C. 8, at p. 12.

Dave loses.

If you’re cruising the Virgins and have income, jump overboard.