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IRS Asks Tax Court To Reconsider Green Valley v Commissioner

Posted on Dec. 19, 2022

Not dead yet. That is what the IRS’s latest filing in Green Valley v Commissioner indicates, as the IRS is not throwing in the towel in its efforts to defend the validity of its listing notices despite its loss in Green Valley.

Last week in IRS Announces It Will Start Following the Law (With Respect to Identifying Some Listed Transactions) Jonathan Black discussed how following its loss in Green Valley, the IRS issued an announcement identifying certain syndicated conservation easement (“SCE”) transactions as listed transactions. It simultaneously filed for publication with the Federal Register a Notice of Proposed Rulemaking (“NPRM”) – REG-106134-22, Syndicated Conservation Easement Transactions as Listed Transactions – formally designating SCEs as listed transactions in proposed regulations.

In its announcement the IRS stated  that “Treasury and the IRS disagree with the Tax Court’s decision in Green Valley and the Sixth Circuit’s decision in Mann Construction, and are continuing to defend the validity of existing listing notices in circuits other than the Sixth Circuit.”

And as part of the IRS’s disagreement with the Tax Court (and Sixth Circuit), last week IRS filed a motion in Tax Court asking that the Tax Court reconsider its Green Valley opinion. Its motion highlights arguments the government made in a supplement to its earlier motion in opposition to summary judgment. The motion also questions whether Tax Court judges actually read its argument, given that none of the multiple Green Valley opinions addressed or cited it, and the summary of the procedural history fails to identify the government’s supplemental filing.

As to the merits, in its motion the IRS does not challenge the Tax Court’s conclusion that guidance would generally subject to the APA’s notice and comment requirements; instead, it argued that the Tax Court failed to “consider statutory text evidencing Congress’s clear intent that such notices need not follow notice-and-comment procedures….” in this particular context.

All of this brings into question the APA, at 5 USC § 559, which provides that a subsequent statute is not to displace the APA “except to the extent that it does so expressly.”

According to the motion, the Tax Court failed “to appreciate the existence and implications of the dozens of listed-transaction notices that had already been issued without notice-and-comment when the American Jobs Creation Act [ACJA] of 2004.”

This is not the first time that the government has highlighted this legislative context. It raised them below in its supplemental objection for partial summary judgment. In its supplement, the IRS focused on legislative context that in its view demonstrated that Congress expressly intended to displace the APA’s notice and comment requirements when it came to identifying listed transactions:

As previously explained in Respondent’s Objection, Section 6662A, which imposes an accuracy-related penalty on understatements attributable to reportable transactions, was enacted as part of the AJCA, which was passed in part to “provide the Treasury Department with additional tools to assist its efforts to curtail abusive transactions.” S. Rep. No. 108-192, at 90. To this end, the AJCA also included other provisions, such as Section 6707A (penalizing failure to disclose a reportable transaction), Section 6501(c)(10) (extending the assessment statute of limitations for listed transactions), and Section 6404(g)(2)(E) (creating an exception from underpayment interest suspension for listed transactions). See AJCA, § 811(a), Pub. L. 108-357, 118 Stat. 1418, 1575, 1580, 1581, 1652. Section 6662A, as well as other AJCA provisions, incorporated by reference Section 6707A’s definitions of “reportable transaction” and “listed transaction,” terms that originated from the Treasury regulation. I.R.C. § 6662A(d); 65 Fed. Reg. 11207 (Mar. 2, 2000).

In its motion for reconsideration, IRS also took a shot at the Sixth Circuit’s Mann opinion, and its similar failure to address the broader legislative context:

The Mann court focused exclusively on Section 6707A, but that provision was not the only part of the AJCA enacted to combat abusive tax shelters, nor the only one to endorse the IRS’s identification of listed transactions by notice. Other provisions in the statute make clear that Congress viewed the listing notices that existed at the time the AJCA was passed — none of which had gone through notice-and-comment — as validly issued. If those notices were invalid, Congress passed dead letters.

The motion highlights Section 6501(c)(10), which “holds the statute of limitations for assessing a tax deficiency open until one year after the taxpayer’s participation in a listed transaction was disclosed.” As the motion notes,

Congress lengthened the assessment period for taxpayers who had failed to comply with the IRS’s listed transaction disclosure requirements before October 22, 2004. If Congress believed the existing notices identifying listed transactions were invalid, then there would have been no listed transaction to which Section 6501(c)(10) could apply when AJCA was enacted.

The motion also discusses how the AJCA created a new exception to the suspension of the accrual of interest on a liability if the IRS fails to notify the taxpayer of the liability within a certain time. In ACJA, Congress provided that

[i]nterest now continues to accrue on a tax liability relating to a listed transaction regardless of how long it takes for the IRS to notify the taxpayer of that liability, and regardless of whether the taxpayer complies with the IRS’s disclosure requirements. AJCA § 903(c), 118 Stat. at 1652 (codified at 26 U.S.C. § 6404(g)(2)(E)). This new exception applied with respect to interest accruing after October 3, 2004. AJCA § 903(d)(2). This effective date shows that Congress’s target included taxpayers who had already participated in listed transactions identified by notice.


Requests to reconsider face a high hurdle, requiring that the opinion contain substantial errors in fact or law. Perhaps the Tax Court’s earlier failure to address these points was deliberate; if it was an oversight it might be enough to get the Tax Court to reconsider. And even if the Tax Court does not reconsider its opinion, the motion spells out what is likely to be the government’s primary argument on appeal.

Stay tuned.

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