The Status Of The Pending Appeal In Silver v. Treasury Department

Published date14 July 2022
Subject MatterGovernment, Public Sector, Litigation, Mediation & Arbitration, Tax, Compliance, Constitutional & Administrative Law, Trials & Appeals & Compensation, Income Tax, Tax Authorities
Law FirmMiller, Canfield, Paddock and Stone P.L.C.
AuthorLoren M. Opper, Christie R. Galinski and Samuel L. Parks

Key Takeaways

  • The pending case, Silver v. Internal Revenue Service,1 will provide insight, when decided, of the view of the Court of Appeals for the District of Columbia Circuit on the scope of judicial review of administrative regulations that apply to small business.
  • Small businesses should be vigilant in demanding that administrative agencies observe the requirements of the Regulatory Flexibility Act ("RFA").2

Introduction: The Treasury Department is using arguments based on standing - Constitutional Article III standing3 and statutory standing4 - to persuade the D.C. Circuit that it should not decide the merits of Monte Silver's challenge to the validity of a federal income tax regulation ("Transition Tax Regulation" or "Regulation") interpreting the transition tax. The transition tax, enacted in 2017, generally requires U.S. shareholders who control foreign corporations to include in their 2017 tax returns the accumulated earnings of their foreign corporations.5 Treasury's argument is that neither Silver, a United States citizen, nor his Israeli corporation through which he practices United States tax law in Israel, has Article III standing to bring the action. Moreover, Treasury argues that even if Silver has Article III standing, he does not have statutory standing under the RFA to compel Treasury to consider the validity of the Regulation.

Article III Standing: A plaintiff who brings an action in federal court must have standing under Article III of the Constitution, which has three elements: (i) the plaintiff must have suffered an injury in fact that is concrete, particularized, actual, and imminent; (ii) the injury must be fairly traceable to the conduct complained of; and (iii) it must be likely that the injury will be redressed by a favorable decision.6 When the plaintiff alleges a violation of a procedural right, as is Silver's case, the plaintiff must show that (i) its right was violated and that the violation invaded its own particularized interest, and (ii) a favorable decision could - rather than would - better redress plaintiff's interests.7

Statutory Standing under the Regulatory Flexibility Act ("RFA"): A federal administrative agency, including Treasury, must prepare a regulatory flexibility analysis when it publishes a notice of proposed rulemaking. The analysis must describe the impact on small business8 and permit public comment.9 When the agency finalizes the rule, it must, among other findings, evaluate and discuss the public comments of small businesses.10 An agency...

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