Tax360 - DC Court Urged To Reconsider Tossing Transition Tax Lawsuit
By David Hansen · April 23, 2021, 7:10 PM EDT
A federal court should reconsider its ruling that an expatriate attorney lacked standing to challenge the Internal Revenue Service's implementation of the transition tax passed in the 2017 tax overhaul, the attorney argued in a motion to reconsider filed Friday. The attorney, Monte Silver, said the D.C. federal court incorrectly concluded that he needed to show he was injured — or would be — by what he alleged was the improper implementation of the tax. If evidence of injury is required, he said, the time and resources spent in recordkeeping to comply with the law satisfies it. Silver had asked the court to send the final regulations for the transition tax back to the U.S. Treasury Department until it performed a regulatory flexibility analysis of the proposed changes to Internal Revenue Code Section 965 made by the 2017 Tax Cuts and Jobs Act . The final regulations, issued in 2019, lacked the analysis, as required by the Regulatory Flexibility Act , Silver said. The court rejected Silver's claim. He failed to show that granting the relief requested would redress a past injury, the court ruled. He has already borne the costs of compliance in determining his liability and, in fact, owed no tax. Performing a regulatory flexibility analysis now would do nothing to undo those costs, the court said. Silver, however, argued a recent Supreme Court case validates his arguments. In Uzuebgunam v. Preczewski, he noted, the high court held that a requirement for redress will be met in cases where a procedural right has been harmed. The D.C. federal court also said in its March ruling that Silver did not present facts showing that he would be harmed in the future. While the attorney said that he could end up paying costs to comply with the regulations, he didn't present actual facts showing that he would suffer an imminent injury, the opinion said. According to Silver, the court's ruling ignores that businesses do not have to show harm to obtain judicial relief from an onerous regulation. He cited a part of the RFA, Section 611, Title 5 of the U.S. code, which empowers judges to grant relief to small entities aggrieved by burdensome agency actions. Nothing in the statute suggests requiring businesses to allege and prove future injury, he said. Doing so would set up procedural hurdles for small businesses the law was meant to help, he said. Even if future harm had to be shown, Silver's onerous recordkeeping burdens created by the regulation satisfy it, he added. Silver told Law360 he was determined to litigate the dispute. The court dismissed his case over technicalities, thwarting justice, he said. The Treasury Department has historically shown disregard for administrative procedures such as the RFA, he added. Legal representatives of the U.S. government declined to comment. Monte Silver is represented by Lawrence Marc Zell and Noam Schreiber of Zell & Associates International Advocates LLC. The U.S. government is represented by Nishant Kumar and Joseph A. Sergi of the U.S. Department of Justice, Tax Division. The case is Monte Silver and Monte Silver Ltd. v. the Internal Revenue Service, et al., case number 1:19-cv-00247, in the U.S. District Court for the District of Columbia.