YA Global Investments, LP f.k.a. Cornell Capital Partners, LP, et al., Docket No. 14546-15, filed 8/27/24, claim the Supremes’ blockbuster opinion is a change in law, entitling them to reconsideration. But Judge James S. (“Big Jim”) Halpern won’t have it.

The issue is Section 1446 withholding for offshore partners in effectively connected US businesses. The YAs claim Judge Big Jim was wrong when he disregarded the YAs nonpartnership deductions in computing the withholding liabilities. For a quick refresh of this, see my blogpost “On the Button,” 11/15/23.

Reg. Section § 1.1446-3(e)(2) allows the expenses offset only if it reduces the amount of tax to zero. The YAs claim there’s no statutory basis for this, Chevron deference is toast, so toss the Reg.

“That our prior Opinion did not cite Chevron does not mean that Chevron was not implicit controlling law. But Chevron would have been implicit controlling law only if, in reaching the conclusion in question, we relied on a construction of a relevant Code provision adopted by the Treasury Department that, while permissible, was not the interpretation we would have adopted in the absence of the agency’s interpretation.” Order, at p. 5. (Footnote omitted, but it says that just because the YAs didn’t ask to toss the Reg back in November, it gave up the argument.)

Judge Big Jim gets positively waspish at YAs suggestion that he slavishly followed Treasury’s take on Section 1464. He gives us another entry in the “We Don’t Need No” stakes.

“We did not rely on any interpretation of section 1464 adopted by the Treasury Department in concluding that that provision did not allow any ‘adjustment’ of YA Global’s section 1446 withholding tax liability … to take into account YA Offshore’s nonpartnership expenses. Instead, we rejected petitioners’ argument because it was circular. We do not need help from the Treasury Department to judge tautological arguments as unavailing.” Order, at p. 5.

Anyway, YA didn’t put in evidence that any offshore gave YA a Reg. Section 1.1446-6 certification of expenses.

And YA didn’t show that the only reason they didn’t attack Reg. Section § 1.1446-3(e)(2) was Chevron.

Oh, what a lovely silt-stir!