United States Tax Court

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159 T.C. No. 5

GREEN VALLEY INVESTORS, LLC, ET AL., 1

BOBBY A. BRANCH, TAX MATTERS PARTNER,

Petitioner

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket Nos. 17379-19, 17380-19,

17381-19, 17382-19.

Filed November 9, 2022.

—————

P timely petitioned this Court challenging the IRS’s

adjustments in notices of final partnership administrative

adjustment regarding charitable deductions related to

syndicated conservation easement transactions listed

under I.R.S. Notice 2017-10, 2017-4 I.R.B. 544. The parties

filed Cross-Motions for Partial Summary Judgment

seeking summary adjudication as to the imposition of

penalties in these consolidated cases. P principally

contends that I.R.C. § 6662A penalties cannot be imposed

for two reasons: (1) the IRS seeks to improperly impose

such penalties retroactively and (2) the IRS failed to

comply with the notice-and-comment rulemaking

procedures of the Administrative Procedure Act (APA)

when issuing Notice 2017-10. R contends that Notice

2017-10 was properly issued without notice-and-comment

rulemaking and that he is entitled to partial summary

judgment.

1 The following cases are consolidated herewith: Vista Hill Investments, LLC,

Bobby A. Branch, Tax Matters Partner, Docket No. 17380-19; Big Hill Partners, LLC,

Bobby A. Branch, Tax Matters Partner, Docket No. 17381-19; and Tick Creek

Holdings, LLC, Bobby A. Branch, Tax Matters Partner, Docket No. 17382-19.

Served 11/09/22

Held: Notice 2017-10 is a legislative rule, improperly

issued by the IRS without notice and comment as required

under the APA.

Held, further, Notice 2017-10 will be set aside by the

Court, and P’s Cross-Motions for Summary Judgment will

be granted in part prohibiting the imposition of I.R.C.

§ 6662A penalties in these consolidated cases.

—————

Vivian D. Hoard, Kip D. Nelson, Richard A. Coughlin, Brian C.

Bernhardt, and Elizabeth K. Blickley, for petitioner.

Emily J. Giometti, Kirsten E. Brimer, Clint J. Locke, Kimberly B. Tyson,

Mary Helen Weber, Travis Vance, and Angela B. Reynolds, for

respondent.

OPINION

WEILER, Judge: On December 3, 2021, the Commissioner of

Internal Revenue (respondent) filed a third Motion for Partial Summary

Judgment, 2 seeking summary adjudication in each of these consolidated

cases (third Motions for Partial Summary Judgment) on the issue of

whether the Internal Revenue Service (IRS) complied with the

requirements of section 6751(b)(1) as applied to the gross valuation

misstatement penalty under section 6662(h), the substantial valuation

misstatement penalty under section 6662(e), the negligence penalty

under section 6662(b)(1) and (c), and the reportable transaction penalty

2 In each of these consolidated cases respondent has twice before moved for

partial summary judgment. By separate order, the court will rule on respondent’s

Motions for Partial Summary Judgment regarding the issue of whether the IRS

complied with the requirements of section 6751(b)(1). Unless otherwise indicated, all

statutory references are to the Internal Revenue Code (Code), Title 26 U.S.C., in effect

at all relevant times, all regulation references are to the Code of Federal Regulations,

Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the

Tax Court Rules of Practice and Procedure. All dollar amounts are rounded to the

nearest dollar.

under section 6662A. 3 Then on December 14, 2021, petitioner 4 in these

consolidated cases filed Motions for Summary Judgment (Cross-Motions

for Summary Judgment) regarding respondent’s assertion of two

penalties—sections 6662(h) and 6662A. 5

In the Cross-Motions for Summary Judgment petitioner makes

two arguments against the penalties asserted under section 6662A.

First, petitioner contends that penalties under section 6662A may not

be asserted in these cases since any assessment of them would be made

retroactively after the issuance of I.R.S. Notice 2017-10, 2017-4 I.R.B.

544; and second, the issuance of Notice 2017-10 failed to comply with

the notice-and-comment provisions of the Administrative Procedure Act

(APA), 5 U.S.C. §§ 551–559, 701–706.

On January 7, 2022, petitioner filed a written objection to

respondent’s third Motions for Partial Summary Judgment. Petitioner’s

principal argument is that respondent cannot assess penalties under

section 6662A as a matter of law.

On February 11, 2022, respondent filed a written objection to

petitioner’s Cross-Motions for Summary Judgment. In the objection, and

among other arguments not relevant to this report, respondent contends

petitioner has failed to show and establish that section 6662A penalties

are not applicable to the transactions at issue in these consolidated cases

pursuant to Notice 2017-10. Respondent further contends that Notice

2017-10 was properly issued without notice-and-comment rulemaking,

and that he is entitled to partial summary judgment as prayed for in his

third Motions for Partial Summary Judgment.

3 The tax year at issue for Green Valley Investors, LLC (Green Valley), Big Hill

Partners, LLC (Big Hill), and Tick Creek Holdings, LLC (Tick Creek), is 2014, while

the tax year at issue for Vista Hill Investments, LLC (Vista Hill), is 2015.

4 In these consolidated cases Bobby A. Branch is the petitioner and tax matters

partner for four entities: Green Valley, Vista Hill, Big Hill, and Tick Creek. We refer

to these entities individually as “LLC” and collectively as “the LLCs.” Since Mr. Branch

is the tax matters partner in each of these consolidated cases, we will collectively refer

to the tax matters partner for the LLCs in the singular and as “petitioner” throughout

this report.

5 This report will address only petitioner’s Motions regarding respondent’s

determination of section 6662A penalties. The Court will, by separate order, address

petitioner’s Cross-Motions for Partial Summary Judgment with respect to section

6662(h) penalties.

Background

The following facts are drawn from respondent’s third Motions for

Partial Summary Judgment, petitioner’s Cross-Motions for Summary

Judgment, declarations and exhibits thereto, and the parties’ respective

written objections. These facts are stated solely for purposes of ruling on

the parties’ Motions herein.

By deed recorded on December 31, 2014, Green Valley, Big Hill,

and Tick Creek each granted a conservation easement to Triangle Land

Conservancy (TLC). On December 3, 2015, Vista Hill did the same.

Green Valley, Big Hill, and Tick Creek each timely filed Forms 1065,

U.S. Return of Partnership Income, for tax year 2014, and Vista Hill

timely filed Form 1065 for tax year 2015. On its Form 1065 Green Valley

deducted $22,559,000 for its charitable easement contribution to TLC

for the tax year 2014. Similarly, Big Hill and Tick Creek deducted

contributions of charitable easements of $22,626,000 and $22,605,000,

respectively. Vista Hill deducted $22,498,000 on its Form 1065 for its

charitable easement contribution for tax year 2015.

On December 23, 2016, the IRS issued Notice 2017-10. Notice

2017-10 identified all syndicated conservation easement transactions

beginning January 1, 2010, including all substantially similar

transactions, as “listed transactions” for purposes of Treasury

Regulation § 1.6011-4(b)(2).

The IRS conducted examinations of Green Valley’s, Vista Hill’s,

Big Hill’s, and Tick Creek’s respective Forms 1065. By notices of final

partnership administrative adjustment (FPAA) issued to the LLCs on

June 24, 2019, the IRS disallowed the claimed deductions for noncash

charitable contributions because the LLCs (1) did not establish that the

deductions met all requirements pursuant to section 170 and (2) failed

to establish that the values of the property interests contributed

exceeded zero. In addition each FPAA asserted a gross valuation

misstatement penalty under section 6662(h), a substantial valuation

misstatement penalty under section 6662(e), a negligence penalty under

section 6662(b)(1) and (c), and a substantial understatement penalty

under section 6662(b)(2) and (d). Respondent’s Answers asserted the

additional reportable transaction penalty under section 6662A.

On September 20, 2019, petitioner timely petitioned this Court

challenging the FPAA determinations. When the Petitions were filed,

the LLCs’ principal places of business were in North Carolina.

Discussion

Summary Judgment

A party may move for summary judgment regarding all or any

part of the legal issues in controversy. See Rule 121(a); Wachter v.

Commissioner, 142 T.C. 140, 145 (2014). We may grant summary

judgment if the pleadings, stipulations and exhibits, and any other

acceptable materials show that there is no genuine dispute as to any

material fact and that a decision may be rendered as a matter of law.

See Rule 121(a) and (b); see also CGG Ams., Inc. v. Commissioner, 147

T.C. 78, 82 (2016); Elec. Arts, Inc. & Subs. v. Commissioner, 118 T.C.

226, 238 (2002). We construe the facts and draw all inferences in the

light most favorable to the nonmoving party to decide whether summary

judgment is appropriate. Sundstrand Corp. v. Commissioner, 98 T.C.

518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994). The moving party has

the burden of proving that there is no genuine issue of material fact.

Naftel v. Commissioner, 85 T.C. 527, 529 (1985). However, the

nonmoving party may not rest upon the mere allegations or denials in

its pleadings but instead must “set forth specific facts showing that

there is a genuine dispute for trial.” Rule 121(d); see Sundstrand Corp.,

98 T.C. at 520.

II.

Application of Section 6662A Penalties

Section 6662A was enacted as part of the American Jobs Creation

Act of 2004 (AJCA), Pub. L. No. 108-357, § 812(a), 118 Stat. 1418, 1577.

It is effective for tax years ending after October 22, 2004. Id. § 812(f),

118 Stat. at 1580. Section 6662A(a) provides: “If a taxpayer has a

reportable transaction understatement for any taxable year, there shall

be added to the tax an amount equal to 20 percent of the amount of such

understatement.” The penalty is increased from 20% to 30% of the

amount of the understatement if the disclosure requirements of section

6664(d)(3)(A), requiring disclosure in accordance with the regulations

prescribed under section 6011, are not met. I.R.C. § 6662A(c). Section

6662A penalties apply to any item which is attributable to any “listed

transaction.” I.R.C. § 6662A(b)(2)(A).

After the enactment of the AJCA, temporary regulations were

issued, including Temporary Treasury Regulation § 1.6011-4T(b)(2)

defining the term “listed transaction” to include those types of

transactions which the IRS has determined to be tax avoidance

transactions and identified by notice, regulation, or other form of

published guidance. See T.D. 9350, 2007-38 I.R.B. 607. This temporary

regulation was published, and the IRS requested comments. Additional

notice and request for comments was published by the IRS in Notice

2005-11, 2005-1 C.B. 493, and Notice 2005-12, 2005-1 C.B. 494, as

amended. 6 Final regulations were published, the IRS requested

comments as to Treasury Regulation § 1.6011-4, and the term “listed

transaction” continued to be defined as a transaction that is the same or

substantially similar to one of the types of transactions that the IRS has

determined to be tax avoidance transactions and identified by notice,

regulation, or other form of published guidance. Treas. Reg.

§ 1.6011-4(b)(2).

It is undisputed that Notice 2017-10 was issued after the LLCs

filed the returns at issue. It is also undisputed that Notice 2017-10

identified certain syndicated conservation easement transactions as tax

avoidance transactions classified as “listed transactions” for purposes of

Treasury Regulation § 1.6011-4 and sections 6111 and 6112. See Notice

2017-10, § 3, 2017-4 I.R.B. at 545. Petitioner does not dispute that the

transactions at issue are the same or substantially similar to the certain

syndicated conservation easement transactions described in Notice

2017-10.

Effective December 23, 2016, Notice 2017-10 identifies certain

transactions for purposes of Treasury Regulation § 1.6011-4(b)(2) and

sections 6111 and 6112. The notice includes transactions entered into on

or after January 1, 2010, that are the same as or substantially similar

to certain syndicated conservation easement transactions described in

the notice. Notice 2017-10 states that taxpayers who have entered into

a listed transaction or transactions of interest “must disclose the

transactions as described in [Treasury Regulation §] 1.6011-4 for each

taxable year in which the taxpayer participated in the transactions,

provided that the period of limitations for assessment of tax has not

ended on or before December 23, 2016.” On the basis of this text, the

Court finds that Notice 2017-10 is applicable to the 2014 and the 2015

transactions at issue.

6 These notices alerted taxpayers to the recent enactments and invited

comments from the public regarding rules and standards relating to section 6707A and

sections 6662A, 6662, and 6664, as amended.

Petitioner cites the definition section found in section 6707A(c)(2)

as an indication that the terms Congress uses are in the past tense.

Similarly, petitioner cites Treasury Regulation § 1.6011-4 for the

proposition that the IRS must identify a transaction as being a

reportable transaction prospectively. However, respondent notes that

Treasury Regulation § 1.6011-4(e)(2) addresses the issue at hand—

namely, the duty on taxpayers to disclose a previous transaction within

90 calendar days from the date in which the prior transaction became a

listed transaction or transaction of interest, so long as the period of

limitations for assessment remains open.

We have previously upheld the retroactive application of

penalties, even though the taxpayers became subject to the penalties

after they had entered into the transactions or after their tax returns

had been filed. See Soni v. Commissioner, T.C. Memo. 2013-30, at *8–9;

see also Kenna Trading, LLC v. Commissioner, 143 T.C. 322, 371–72

(2014), aff’d sub nom. Sugarloaf Fund, LLC v. Commissioner, 911 F.3d

854 (7th Cir. 2008); Patin v. Commissioner, 88 T.C. 1086, 1127 n.34

(1987), aff’d without published opinion, 865 F.2d 1264 (5th Cir. 1989),

and aff’d sub nom. Gomberg v. Commissioner, 868 F.2d 865 (6th Cir.

1989), Skeen v. Commissioner, 864 F.2d 93 (9th Cir. 1989), and

Hatheway v. Commissioner, 856 F.2d 186 (4th Cir. 1988) (per curiam)

(unpublished table decision); McGehee Family Clinic, P.A. v.

Commissioner, T.C. Memo. 2010-202.

Petitioner also cites Bowen v. Georgetown University Hospital,

488 U.S. 204, 208 (1988), in which the Supreme Court struck down the

retroactive application of a newly promulgated regulation by the

Department of Health and Human Services.

On the basis of our findings infra Part III, we conclude that these

cases do not require us to decide whether section 6662A penalties can be

applied retroactively. Accordingly, we refrain from doing so.

III.

Notice-and-Comment Rulemaking Requirements

The APA provides a three-step procedure for “notice-andcomment rulemaking” whereby agencies are required to (1) issue a

general notice of proposed rulemaking, (2) allow interested persons an

opportunity to participate, and (3) include in the final rule a “concise

general statement of [its] basis and purpose.” Perez v. Mortg. Bankers

Ass’n, 575 U.S. 92, 96 (2015) (quoting 5 U.S.C. § 553(c)). However, “[n]ot

all ‘rules’ must be issued through the notice-and-comment process. . . .

[T]he notice-and-comment requirement ‘does not apply’ to

‘interpretative rules, general statements of policy, or rules of agency

organization, procedure, or practice.’” Id. (quoting 5 U.S.C. § 553(b)(A)).

“The APA also recognizes that Congress may modify these

requirements, but provides that a ‘[s]ubsequent statute may not be held

to supersede or modify this subchapter . . . except to the extent that it

does so expressly.’” Asiana Airlines v. FAA, 134 F.3d 393, 396 (D.C. Cir.

1998) (quoting 5 U.S.C. § 559).

Notably, the Supreme Court has affirmed a material advisor’s

right to challenge an IRS notice as violative of the APA. See CIC Servs.,

LLC v. IRS, 141 S. Ct. 1582 (2021). Other federal courts have recently

wrestled with the issue before this Court. In Mann Construction, Inc. v.

United States, 539 F. Supp. 3d 745 (E.D. Mich. 2021), the district court

held that Congress authorized the IRS to promulgate Notice 2007-83,

2007-2 C.B. 960, without the requirement of having to first provide

notice and comment under the APA; however, this decision was later

reversed by the U.S. Court of Appeals for the Sixth Circuit in Mann

Construction, Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022). While

in CIC Services, LLC v. IRS, No. 3:17-CV-110, 2021 WL 4481008 (E.D.

Tenn. Sept. 21, 2021), the district court granted a preliminary injunction

in favor of the taxpayer, finding the taxpayer was likely to prevail on its

challenge of Notice 2016-66, 2016-47 I.R.B. 745, on the basis of the IRS’s

failure to first comply with the APA’s notice-and-comment

requirements. 7

Respondent makes two arguments identical to those made by the

United States in Mann Construction; namely, that (1) Notice 2017-10

was an interpretative rather than legislative rule and (2) even if Notice

2017-10 were a legislative rule, Congress has authorized its issuance by

procedure other than the notice-and-comment requirements under the

APA.

Is Notice 2017-10 an Interpretative or Legislative Rule?

Legislative rules impose new rights or duties and change the legal

status of regulated parties. Chen Zhou Chai v. Carroll, 48 F.3d 1331,

1340 (4th Cir. 1995); see Tenn. Hosp. Ass’n v. Azar, 908 F.3d 1029, 1042

(6th Cir. 2018) (explaining that legislative rules impose new rights or

7 See also Liberty Glob., Inc. v. United States, No. 1:20-CV-03501, 2022 WL

1001568 (D. Col. Apr. 4, 2022) (granting partial summary judgment after finding

temporary treasury regulations related to section 245A were invalid since they were

not promulgated in compliance with the APA’s notice-and-comment requirements).

duties and change the legal status of the parties, whereas interpretative

rules articulate what an agency thinks a statute means or remind

parties of pre-existing duties). Interpretative rules merely advise the

public of an agency’s construction of the statutes it administers. Mortg.

Bankers Ass’n, 575 U.S. at 97. Unlike interpretative rules, legislative

rules have the force and effect of law. Id. at 96.

The Sixth Circuit recently addressed respondent’s first argument,

finding Notice 2007-83, entitled “Abusive Trust Arrangements Utilizing

Cash Value Life Insurance Policies Purportedly to Provide Welfare

Benefits,” to be a legislative rule requiring the IRS to comply with

notice-and-comment requirements under the APA. Mann Constr., Inc.,

27 F.4th at 1143–44. Like the Sixth Circuit, we find Notice 2017-10 to

be a legislative rule.

Congress tasked the IRS with determining “by regulations” how

taxpayers are to “make a return or statement” and the information they

must provide therein to the IRS. See I.R.C. § 6011(a). Under section

6707A, Congress likewise delegates authority to determine which

transactions are reportable transactions as having “a potential for tax

avoidance” or that are “the same as, or substantially similar to, a

transaction” deemed “a tax avoidance transaction.” I.R.C. § 6707A(c)(1).

Notice 2017-10, 2017-4 I.R.B. at 544–45, purports to carry out this

delegation of authority, and states in part:

This notice alerts taxpayers and their representatives that

the transaction described in section 2 of this notice is a tax

avoidance transaction and identifies this transaction, and

substantially similar transactions, as listed transactions

for purposes of § 1.6011-4(b)(2) of the Income Tax

Regulations (Regulations) and §§ 6111 and 6112 of the

Internal Revenue Code (Code).

The act of identifying a transaction as a listed transaction by the

IRS, by its very nature, is the creation of a substantive (i.e., legislative)

rule and not merely an interpretative rule. 8 See 5 U.S.C. § 553.

8 Many of the provisions discussed infra were enacted or substantially modified

in 2004 as part of AJCA §§ 811–822, 118 Stat. at 1575–87. These provisions

substantially changed the reporting and recordkeeping requirements for listed and

other reportable transactions. This report offers no opinion on whether identifying a

transaction as a listed transaction was substantive rulemaking before the enactment

of the AJCA or whether Congress expressed its intent to exempt from the standard

Identifying a transaction as a listed transaction does not merely provide

the IRS’s interpretation of the law or remind taxpayers of preexisting

duties. Rather, and as we will detail below, identifying a transaction as

a listed transaction imposes new duties in the form of reporting

obligations and recordkeeping requirements on both taxpayers and their

advisors. Notice 2017-10 exposes these individuals to additional

reporting obligations and penalties to which they would not otherwise

be exposed but for the notice. Creating new substantive duties and

exposing taxpayers to penalties for noncompliance “are hallmarks of a

legislative, not an interpretive, rule.” Mann Constr., Inc., 27 F.4th

at 1144.

Reporting Obligations on Taxpayers

The IRS’s act of identifying a transaction as a listed transaction

imposes a reporting obligation on any taxpayer who participated in such

a transaction. See Treas. Reg. § 1.6011-4. As part of their obligation to

file a tax return, taxpayers must disclose their participation in any

reportable transaction. Id. para. (a). A listed transaction is a type of

reportable transaction. Id. para. (b)(2). A taxpayer is considered to have

participated in a listed transaction if the taxpayer’s return reflects tax

consequences or a tax strategy described in published guidance that lists

the transaction as a listed transaction. Id. para. (c)(3)(i)(A). Without the

IRS identifying the transaction as a listed transaction, no such reporting

obligation exists.

Once a transaction is identified by the IRS as a listed transaction,

a taxpayer’s reporting obligation is significant. Listed transactions are

reported on Form 8886, Reportable Transaction Disclosure Statement.

Unlike most tax forms, which generally require information relating to

calculation of a tax liability, Form 8886 requires narrative information

unrelated to the computation of tax. For example, for the years in issue,

Form 8886 asks the taxpayer to

describe the amount and nature of the expected tax

treatment and expected tax benefits generated by the

transaction for all affected years. Include facts of each step

of the transaction that relate to the expected tax benefits

including the amount and nature of your investment.

Include in your description your participation in the

notice-and-comment procedures transactions that were already listed as of the

enactment of the AJCA.

transaction and all related transactions regardless of the

year in which they were entered into. Also, include a

description of any tax result protection with respect to the

transaction.

Form 8886 further requires the taxpayer to

[i]dentify all individuals and entities involved in the

transaction that are tax-exempt, foreign, or related. Check

the appropriate box(es) (see instructions). Include their

name(s), identifying number(s), address(es), and a brief

description of their involvement. For each foreign entity,

identify its country of incorporation or existence. For each

individual or related entity, explain how the individual or

entity is related.[9]

Taxpayers are not merely required to include Form 8886 with

their tax returns. Form 8886 must be attached to each amended return

and a copy sent to the Office of Tax Shelter Analysis at the same time

Form 8886 is first filed by the taxpayer. Treas. Reg. § 1.6011-4(e)(1). If

a transaction becomes a listed transaction after the filing of a taxpayer’s

return that reflects the taxpayer’s participation in the listed transaction,

then the taxpayer is required to file Form 8886 with the Office of Tax

Shelter Analysis within 90 days after the date in which the transaction

became a listed transaction. Id. subpara. (2)(i). This obligation continues

until the period of limitations for that filed return has lapsed. Id. 10

9 This information may not be readily known to the taxpayer; however, the IRS

expects the taxpayer to gather this information from third parties who, themselves,

are under no obligation to provide it.

10 That period of limitations may be affected by the IRS’s act of identifying a

transaction as a listed transaction. If a taxpayer does not disclose a listed transaction,

the period of limitations for assessment of tax attributable to that transaction does not

expire until one year after the transaction is disclosed. I.R.C. § 6501(c)(10). And we

have already discussed that the obligation to disclose a listed transaction applies to

previously filed returns. Treas. Reg. § 1.6011-4(e)(2). We are unaware of any cases

deciding whether the IRS’s action of identifying a transaction as a listed transaction

has the effect of holding open the period of limitations on a return that was filed before

the transaction was listed, but at a minimum, the interplay of these two provisions

creates uncertainty.

Failure to report a listed transaction to the IRS can have

significant financial consequences for a taxpayer. 11 Section 6707A

imposes a maximum penalty of 75% of the decrease in tax resulting from

a transaction, not to exceed $200,000. I.R.C. § 6707A(b)(1) and (2). This

penalty, however, still applies even if the taxpayer’s tax treatment of the

transaction ultimately proves to be correct. In other words, this penalty

does not require a tax deficiency or that the IRS’s adjustment to the

treatment of the transaction be sustained by the Court. The minimum

penalty for failing to report a listed transaction is $10,000. I.R.C.

§ 6707A(b)(3).

If a penalty is imposed on a taxpayer for failure to disclose a listed

transaction, an additional reporting obligation may arise for some

taxpayers. If the taxpayer is required to file periodic reports with the

Securities & Exchange Commission (SEC), listed or reportable

transaction penalties must be disclosed as part of certain SEC filings.

See I.R.C. § 6707A(e) (flush text). Failure to report these penalties as

part of a taxpayer’s SEC filings can result in yet another penalty under

section 6707A(e).

In addition to the section 6707A reporting penalty, identifying a

transaction as a listed transaction results in enhanced penalties if the

taxpayer’s treatment of the transaction is not upheld. Section 6662(a)

generally imposes an accuracy-related penalty when there is an

underpayment of tax required to be shown on a return. However, if a

transaction is identified as a listed transaction by the IRS, and the

taxpayer’s treatment of that transaction is not upheld by a court, a

penalty can be imposed whether or not there is a tax deficiency. See

I.R.C. § 6662A. The starting point for the calculation of a section 6662A

penalty is not the amount of tax owed; instead, it is the “reportable

transaction understatement” amount. See I.R.C. § 6662A(b)(1)(A)(i). A

11 Notably, the IRS’s identification of a transaction as a listed transaction has

no bearing on the merits of the transaction itself, and the IRS has previously listed,

and subsequently delisted, a transaction that was upheld by courts. In Notice 98-5,

1998-1 C.B. 334, 334, the IRS characterized certain transactions as “abusive taxmotivated transactions with a purpose of acquiring or generating foreign tax credits

that can be used to shelter low-taxed foreign-source income from residual U.S. tax.”

When the first group of listed transactions was announced, the IRS included

transactions described in Part II of Notice 98-5. Notice 2000-15, 2000-1 C.B. 826. But

the Courts of Appeals for the Eighth and Fifth Circuits upheld the taxpayers’

treatment of transactions described in Notice 98-5. See Compaq Comput. Corp. & Subs.

v. Commissioner, 277 F.3d 778 (5th Cir. 2001); IES Indus., Inc. v. United States, 253

F.3d 350 (8th Cir. 2001). Ultimately, the IRS withdrew Notice 98-5. Notice 2004-19,

2004-1 C.B. 606.

section 6662A penalty is not determined on the basis of the taxpayer’s

actual tax rate but at the highest rate of tax imposed. I.R.C.

§ 6662A(b)(1)(A)(ii). To calculate the penalty, this hypothetical

understatement is multiplied by 20%; if the transaction was not

disclosed to the IRS, the penalty rate increases to 30%. 12 This section

6662A penalty is separate from, and in addition to, the penalty for

failure to disclose under section 6707A. It is the IRS’s act of identifying

a transaction as a listed transaction (as it did in Notice 2017-10) that

makes section 6662A and 6707A penalties applicable.

Reporting Obligations on Advisors

The identification of a transaction as a listed transaction does not

merely impose new reporting obligations on taxpayers who participate

in the transaction; it also imposes new reporting obligations on tax

advisors. A material advisor 13 with respect to a reportable transaction 14

is required to make a return setting forth detailed information.

12 To explain this calculation using a hypothetical, assume a taxpayer’s return

shows a net loss of $1 million and a tax liability of zero. Assume that a transaction that

generated a $600,000 loss is disallowed. The result of the disallowance of that loss is

that the taxpayer’s return will show a net loss of $400,000 and a tax liability of zero.

Because the taxpayer’s bottomline tax liability is unchanged, there would be no penalty

under the general accuracy-related penalty rules of section 6662. If this is a listed

transaction, however, a penalty would apply. The starting point for calculating the

penalty is the amount of the disallowed loss, or hypothetically here $600,000. The

amount of the reportable transaction understatement is calculated by multiplying that

amount by the highest marginal tax rate. If the taxpayer is an individual, the highest

marginal tax rate is 39.6%, resulting in a reportable transaction understatement of

$237,600. I.R.C. § 1. To calculate the penalty, that amount is multiplied by either 20%

(if the transaction was disclosed) or 30% (if it was not disclosed), yielding a penalty of

up to $71,280 for a transaction that resulted in no understatement of tax. If the IRS

had not listed that transaction, the amount of the penalty would be zero.

13 A material advisor, defined in section 6111(b)(1)(A), is any person—

(i) who provides any material aid, assistance, or advice with

respect to organizing, managing, promoting, selling, implementing,

insuring, or carrying out any reportable transaction, and

(ii) who directly or indirectly derives gross income in excess of

the threshold amount (or such other amount as may be prescribed by

the Secretary) for such aid, assistance, or advice.

The threshold amount is $50,000 in the case of a reportable transaction. See I.R.C.

§ 6111(b)(1)(B)(i).

14 As previously mentioned, when the IRS identifies a new listed transaction,

it is deemed to be a reportable transaction subject to additional reporting obligations.

I.R.C. §§ 6111(b)(2), 6707A(c)(2); Treas. Reg. § 1.6011-4(b)(1) and (2).

I.R.C. § 6111(a). Simply described, this rule applies to anyone who

advises with respect to a reportable transaction and receives fees in

excess of a threshold amount. See I.R.C. § 6111(b).

The reporting requirement imposed on a material advisor is

significant. The IRS has adopted Form 8918, Material Advisor

Disclosure Statement, as the form on which material advisor reporting

must be made. Treas. Reg. § 301.6111-3(d). In addition to specific items

of information, Form 8918 also requires several narrative responses.

Some responses require brief descriptions; however, Form 8918 also

requires a rather substantial narrative, as follows:

Describe the reportable transaction for which you provided

material aid, assistance or advice, including but not limited

to the following: the nature of the expected tax treatment

and expected tax benefits generated by the transaction for

all affected years, the years the tax benefits are expected

to be claimed, the role of the entities or individuals

mentioned in [Form 8918] lines 7a or 8a (if any) and the

role of the financial instruments mentioned in [Form 8918]

line 9 (if any). Explain how the Internal Revenue Code

sections listed in [Form 8918] line 12 are applied and how

they allow the taxpayer to obtain the desired tax

treatment. Also, include a description of any tax result

protection with respect to the transaction.

The IRS’s identifying a listed transaction essentially obligates the

taxpayer’s advisor to become an unwilling advisor to the IRS. This

obligation arises only because the IRS has identified the transaction as

a listed transaction.

In addition to the obligation to disclose a listed transaction to the

IRS, material advisors also become records repositories for the IRS.

Material advisors are required to maintain lists identifying each person

they advised. I.R.C. § 6112(a). As with the disclosure under section 6111,

the information required to be maintained as part of these lists under

section 6112 is substantial. Some of the information required to be

maintained is brief and straightforward, see Treas. Reg.

§ 301.6112-1(b)(3)(i), while other items of information are broad and

include a “detailed description of each reportable transaction that

describes both the tax structure of the transaction and the purported tax

treatment of the transaction,” see id. subdiv. (ii). The IRS also requires

material advisors to retain documents such as

[c]opies of any additional written materials, including tax

analyses or opinions, relating to each reportable

transaction that are material to an understanding of the

purported tax treatment or tax structure of the transaction

that have been shown or provided to any person who

acquired or may acquire an interest in the transactions, or

to their representatives, tax advisors, or agents, by the

material advisor or any related party or agent of the

material advisor.

Id. subdiv. (iii)(B). The obligation on the part of material advisors to

prepare this list and retain these documents arises solely because the

IRS has identified a transaction as a listed transaction.

A material advisor’s failure to disclose a transaction under section

6111 or to provide a list upon demand can expose the individual to

significant penalties. Like the section 6707A penalty for a taxpayer’s

failure to report a listed transaction, a similar penalty under section

6707 can be imposed on a material advisor. See Treas. Reg. § 301.6707-1.

Failure to furnish the list of information required to be maintained

under section 6112(a) within 20 business days after the date of request

can result in a penalty of $10,000 per day until the list is provided. I.R.C.

§ 6708. Again, it is the IRS’s act of identifying a transaction as a listed

transaction (as it did in Notice 2017-10) that makes section 6707 and

6708 penalties applicable.

In sum, by its issuance, Notice 2017-10 creates new substantive

reporting obligations for taxpayers and material advisors, including

petitioner and the LLCs, the violation of which prompts exposure to

financial penalties and sanctions—the prototype of a legislative rule. See

Mann Constr., Inc., 27 F.4th at 1144. We cannot see how Notice 2017-10

could be considered an interpretative rule; consequently, we find it to be

a legislative rule. See Schwalbach v. Commissioner, 111 T.C. 215,

220–21 (1998).

Is Notice 2017-10 Otherwise Exempt from the Notice-andComment Requirements Found Under the APA?

Legal Background

Having determined that Notice 2017-10 is a legislative rule, we

are to assume that this IRS action—having the force and effect of law—

must go through notice-and-comment rulemaking under the APA

regime. See 5 U.S.C. § 553. Respondent contends, however, that

Congress clearly exempted the IRS from following the APA’s normal

procedures when it enacted section 6707A and that Notice 2017-10 thus

was properly issued without notice-and-comment rulemaking.

Therefore, the remaining question before us is whether Congress has

established procedures so different from those required by the APA that

it intended to displace the norm. For the reasons discussed below, we

reject respondent’s position.

We note how the APA also provides that an agency may depart

from normal notice-and-comment procedures for good cause. See 5

U.S.C. § 553(b)(B). In this instance the IRS elected not to invoke the

good cause exception when issuing Notice 2017-10; consequently, we

have no reason to analyze whether and when the exception may be used.

In other instances the government has invoked the good cause exception

when promulgating temporary Treasury regulations.

As previously stated, the APA limits the ability of a subsequent

statute to modify or supersede its procedures “except to the extent that

it does so expressly.” 5 U.S.C. § 559. Consistent with this limiting text,

appellate courts have held that 5 U.S.C. § 559 “forbids amendment of

the APA by implication.” Lane v. USDA, 120 F.3d 106, 110 (8th Cir.

1997); see Five Points Rd. Joint Venture v. Johanns, 542 F.3d 1121, 1127

(7th Cir. 2008) (“[Title 5 U.S.C. §] 559 therefore prevents a statute from

amending the APA by implication.”). The Supreme Court has likewise

emphasized that “[e]xemptions from the terms of the Administrative

Procedure Act are not lightly to be presumed in view of the statement in

[5 U.S.C. § 559] that modifications must be express.” Marcello v. Bonds,

349 U.S. 302, 310 (1955). 15

Our view on the APA’s express-statement requirement is also

consistent with the Supreme Court’s “already-powerful presumption

against implied repeals.” Lockhart v. United States, 546 U.S. 142, 149

(2005) (Scalia, J., concurring). The Supreme Court has also stated that,

absent a clearly expressed congressional intention, repeals by

implication are disfavored, id. (citing Branch v. Smith, 538 U.S. 254, 273

(2003) (plurality opinion)), and implied repeals will be found only where

provisions in two statutes are in “irreconcilable conflict” or where the

latter act covers the whole subject of the earlier one and “is clearly

15 See also Dickinson v. Zurko, 527 U.S. 150, 155 (1999); Citizens for Resp. &

Ethics in Wash. v. FEC, 993 F.3d 880, 889 (D.C. Cir. 2021) (“The APA imposes a high

bar, met only if ‘Congress has established procedures so clearly different from those

required by the APA that it must have intended to displace the norm.’” (quoting Asiana

Airlines, 134 F.3d at 397)).

intended as a substitute,” Posadas v. Nat’l City Bank of N.Y., 296 U.S.

497, 503 (1936).

In Marcello the Supreme Court relied upon statutory text and

legislative history to hold that the 1952 Immigration and Nationality

Act displaced the hearing requirements of the APA. Marcello, 349 U.S.

at 310. In reaching this conclusion, the Supreme Court explained:

[W]e cannot ignore the background of the 1952

immigration legislation, its laborious adaptation of the

Administrative Procedure Act to the deportation process,

the specific points at which deviations from the

Administrative Procedure Act were made, the recognition

in the legislative history of this adaptive technique and of

the particular deviations, and the direction in the statute

that the methods therein prescribed shall be the sole and

exclusive procedure for deportation proceedings.

Id. That is not to say that Congress must “employ magical passwords in

order to effectuate an exemption from the Administrative Procedure

Act.” Id. However, what is needed is an “express[]” indication of

congressional intent. Id. Accordingly, mere differences between a

statutory scheme and the APA are insufficient to establish Congress’

intent to dispense with the standard APA procedures. For example, the

U.S. Court of Appeals for the District of Columbia Circuit has concluded

that the Federal Election Campaign Act and the APA could “readily

coexist,” despite various distinct procedures and requirements in the

former statutory scheme. See Citizens for Resp. & Ethics in Wash., 993

F.3d at 892.

The Supreme Court has further described the necessary indicia

of congressional intent by the terms “necessary implication,” “clear

implication,” and “fair implication.” See Dorsey v. United States, 567

U.S. 260, 274–75 (2012). The Supreme Court has used these terms

interchangeably. Id. at 274. 16

16 In the dissent Justice Scalia agreed that express-statement requirements of

the sort presented in Dorsey are ineffective and noted how congressional repeal can be

by clear implication. Dorsey, 567 U.S. at 289 (Scalia, J., dissenting). Justice Scalia

further agrees that the standard for overcoming the strong presumption against

implicit repeal is accurately described as “necessary implication” or “clear implication”

but took issue with the “fair implication” formulation. Id. at 289–90.

In Asiana Airlines the D.C. Circuit looked to the statutory text in

question and found an express exception granted by Congress justifying

the agency’s departure from standard notice and comment under the

APA. Asiana Airlines, 134 F.3d at 397–98. In interpreting this

exemption from the APA, the D.C. Circuit found irreconcilable

differences between the procedures under the law in question and those

of the APA. Id. at 398. However, the D.C. Circuit also stated generally

that “[w]e have looked askance at agencies’ attempts to avoid the

standard notice and comment procedures, holding that exceptions under

[5 U.S.C.] § 553 must be ‘narrowly construed and only reluctantly

countenanced.’” Id. at 396 (quoting New Jersey Dep’t of Env’t Prot. v.

EPA, 626 F.2d 1038, 1045 (D.C. Cir. 1980)).

Previously, the D.C. Circuit rejected the argument that terms in

the Clean Water Act requiring states to create procedures for “public

notice” and “public hearings” established congressional intent to

displace the APA’s notice-and-comment requirements. See Lake

Carriers’ Ass’n v. EPA, 652 F.3d 1, 6 (D.C. Cir. 2011) (per curiam). For

its part, the U.S. Court of Appeals for the Ninth Circuit found

unconvincing an agency’s argument that Congress’ authorization of

“interim final rules” in the Affordable Care Act context displayed an

intention to displace the APA’s presumed notice-and-comment

rulemaking. See California v. Azar, 911 F.3d 558, 579–80 (9th Cir.

2018).

In the light of the foregoing jurisprudence and in determining

whether Congress expressly intended to exempt the IRS from the

presumed APA procedures when issuing Notice 2017-10, an analysis of

the “listed transaction regime” as created under the AJCA and its

potential departure from the APA takes center stage.

Application

Respondent contends that Congress authorized the IRS to

identify listed transactions without notice-and-comment rulemaking.

Respondent points to the text of section 6707A, Treasury Regulation

§ 1.6011-4, and other AJCA provisions, along with the context and

legislative history of the AJCA. 17

17 Some of these arguments were also made by the Commissioner in Green

Rock, LLC v. IRS, No. 2:21-cv-01320 (N.D. Ala. filed Oct. 2, 2021), which is currently

pending before the U.S. District Court for the Northern District of Alabama.

We begin with the observation that section 6707A offers no

express indication from Congress exempting the IRS from the standard

notice-and-comment rulemaking of the APA. See 5 U.S.C. § 559.

Likewise, section 6011 (which is referenced by section 6707A) is also

silent on any express congressional intent, and provides: “When

required by regulations prescribed by the Secretary any person made

liable for any tax imposed by this title, or with respect to the collection

thereof, shall make a return or statement according to the forms and

regulations prescribed by the Secretary.” I.R.C. § 6011(a). As the Sixth

Circuit observed, “[t]he statutes do not say anything, expressly or

otherwise, that modifies the baseline procedure for rulemaking

established by the APA.” Mann Constr., Inc., 27 F.4th at 1146. Unlike

Asiana Airlines, where the D.C. Circuit found sufficient evidence of

congressional intent within the statutory text, there is no comparable

text found in the statute before us. Asiana Airlines, 134 F.3d at 399.

Neither section 6011 nor 6707A says anything that would lead us to

conclude that the IRS is exempt from the baseline procedures for

rulemaking under the APA.

Respondent also attempts to fill the void left by Congress in the

foregoing statutory text with the IRS’s own regulations. Specifically,

respondent notes that, before the enactment of section 6707A, Treasury

regulations were issued defining a listed transaction as one “identified

by notice, regulation, or other form of published guidance.” See Treas.

Reg. § 1.6011-4(b)(2). Respondent contends that this regulation apprised

Congress that it would operate outside of the APA by issuing future

notices (such as Notice 2017-10) without notice and comment.

Respondent further maintains that when Congress later defined

reportable transaction in section 6707A(c)(1), it incorporated this

procedure set forth in Treasury Regulation § 1.6011-4. We are not

persuaded. As an initial matter, we are less confident that Congress

understood that the IRS’s reference to the term “notice” within Treasury

Regulation § 1.6011-4 was a clearly defined procedure for identifying

listed transactions separate from traditional APA procedures,

particularly since Congress’ statutory text in no way authorizes such a

course. To the contrary, we believe that Congress operates under the

expectation that administrative agencies respect their APA obligations

except when Congress expressly chooses different procedures. 5 U.S.C.

§ 559.

Furthermore, Congress’ descriptive reference in section

6707A(c)(1) to “regulations prescribed under section 6011” does not

suggest otherwise. To provide the full context, section 6707A(c)(1)

defines a reportable transaction as “any transaction with respect to

which information is required to be included with a return or statement

because, as determined under regulations prescribed under section

6011, such transaction is of a type which the Secretary determines as

having a potential for tax avoidance or evasion.” This definitional text

of section 6707A(c) only links the penalty for reportable and listed

transactions to the five different types of reportable transactions

(including listed transactions) specifically designated in Treasury

Regulation § 1.6011-4(b)(2)–(7). In other words, we conclude that section

6707A(c) “addresses a ‘which transactions’ question, not a ‘what process’

question.” See Mann Constr., Inc., 27 F.4th at 1146.

Respondent also emphasizes the phrase “as determined under

regulations prescribed under section 6011,” contending that it refers

solely to the manner of determination under Treasury Regulation

§ 1.6011-4 and implicitly blesses all processes contained therein,

including the IRS’s noncompliance with notice-and-comment

rulemaking. As an initial matter, the general reference to “regulations

prescribed under section 6011” does not establish an express

congressional intention to displace fundamental APA principles for

future reportable transactions. As noted previously, the D.C. Circuit

concluded that statutory text in the Clean Water Act providing for

alternative notice and hearing procedures did not satisfy an express

congressional intent sufficient to deviate from the APA. Lake Carriers’

Ass’n, 652 F.3d at 6. In these cases, the text of section 6707A does not

reference any procedures whatsoever; and accordingly, we cannot

conclude it establishes Congress’ express intention to disregard APA

procedures.

Considering the statutory text before us, we are unable to

reasonably conclude that Congress demonstrated its express intention

to deviate from normal APA procedures by implementing a reticulated

scheme of the sort described in Marcello. To the contrary, we find

respondent has failed to establish that Congress expressed any

alternative procedures “so clearly different from those required by the

APA that it must have intended to displace the norm.” See Asiana

Airlines, 134 F.3d at 397; see also Mann Constr., Inc., 27 F.4th at 1146.

Rather, the “listed transaction regime” procedures as created by

Congress can be reconciled with the APA since the statutes merely

establish a disclosure and penalty regime to be administered by the IRS.

See Mann Constr., Inc., 27 F.4th at 1146; see also Citizens for Resp. &

Ethics in Wash., 993 F.3d at 892. Furthermore, the so-called fair

implication standard of an express congressional intent to replace the

APA—as argued by respondent—understates the burden imposed by

Congress and contravenes the Supreme Court’s interchangeable use of

the relevant formulations. Dorsey, 567 U.S. at 274; see supra p. 17. We

therefore reject this argument.

Even if we were to look to the congressional text “regulations

prescribed under section 6011” in conjunction with Treasury Regulation

§ 1.6011-4, respondent’s argument fares no better. Like the statutory

text, Treasury Regulation § 1.6011-4 does not seem very concerned with

setting up processes but rather is directed to naming categories of

transactions subject to IRS reporting requirements. While Treasury

Regulation § 1.6011-4 does include those transactions as determined by

the IRS to be tax avoidance transactions and identified “by notice,

regulation, or other form of published guidance,” we remain convinced

this regulatory text can also be read to demonstrate that the “as

determined” clause was intended to co-exist with the requirements of

the APA and for the IRS to identify future reportable transactions under

the APA’s ordinary regime of notice and comment. See Citizens for Resp.

& Ethics in Wash., 993 F.3d at 892. In any event, our task is to

determine whether Congress, not the IRS, amended the APA’s

presumed application.

We acknowledge that Congress understood that the IRS had

identified listed transactions before the enactment of the AJCA. We also

recognize that Congress, through its enactment of the AJCA, was

acknowledging the IRS’s disclosure framework already in place, with

the goal of strengthening its efficacy. See S. Rep. No. 108-192, at 90

(2003); see also H.R. Rep. No. 108-548, pt. 1, at 261 (2004). 18 But, we

cannot accept the enactment of the AJCA as Congress’ blanket approval

of the IRS’s method of identifying a syndicated conservation easement

as a listed transaction in Notice 2017-10 without notice and comment.

Next, respondent contends that Congress is “presumed to [have

been] aware” of the IRS’s actions when it amended section 6707A to

enhance the monetary penalties for taxpayers through subsequent

enactment; however, Congress is likewise equally aware of the normal

APA rulemaking requirements, which it must “expressly” override. See

18 Respondent also points to repealed text found in section 6707A, which

required the IRS to submit an annual report to Congress’ two tax writing committees,

as congressional oversight and evidence sufficient to supplant the standard APA

procedures. It is true that at one point in recent history there was an annual

mandatory reporting requirement; however, we do not see how the IRS’s prior

reporting obligation establishes Congress’ clear intent to override the APA.

5 U.S.C. § 559; see also Mayo Found. for Med. Educ. & Rsch. v. United

States, 562 U.S. 44, 55 (2011) (rejecting the concept of carving out unique

treatment for tax law under the APA). Like the Sixth Circuit, we

disagree with respondent’s contention that Congress’ subsequent

inaction means that it was “endorsing and ratifying” the IRS’s practice

to bypass the notice-and-comment requirements for future reportable

transactions. As well stated by the Sixth Circuit, “[i]naction may, but

does not always, mean ratification” and “rarely suffices to show express

modification of the APA’s bedrock procedural guarantees given the raft

of potential explanations for inaction on Capitol Hill.” Mann Constr.,

Inc., 27 F.4th at 1147.

We similarly find it inappropriate to assume Congress expected

that any subsequent amendment or addition to the listed transaction

regime by the IRS would be made without notice and comment under

the APA. In these cases, Notice 2017-10 was not issued until 2016. 19

Accordingly, we cannot subscribe to any alternative theory that prior

notice and comment made at the time of promulgation of Treasury

Regulation § 1.6011-4 satisfies the IRS’s ongoing obligation to comply

with the APA when issuing Notice 2017-10. To the contrary, we find

Congress has made it clear that each substantive rule of general

applicability, including amendment or revision thereto, must comply

with the APA. See 5 U.S.C. § 552.

Finally, we do not find a committee print from 2020 relating to

continued congressional oversight of syndicated conservation easement

transactions to be persuasive evidence that Congress intended to

override the APA’s applicability to the IRS’s listing of transactions. See

Staff of S. Comm. on Finance, 116th Cong., Syndicated ConservationEasement Transactions Exhibits 1–133, S. Prt. 116-44 (Comm. Print

2020). 20

We do not dispute the significance of congressional oversight of

so-called “Syndicated Conservation-Easement Transactions” and the

efforts to curtail these transactions. However, we do dispute a

19 We find the matter before us to be limited to the IRS’s actions with respect

to Notice 2017-10, and we do not reach any conclusion as to those listed transactions

the IRS identified when Treasury promulgated Treasury Regulation § 1.6011-4(b)(2).

20 The exhibits included letters from both IRS Acting Commissioner, David J.

Kautter, dated July 12, 2018, and IRS Commissioner Charles P. Rettig, dated

February 12, 2020, regarding congressional requests for information and analyses

related to Notice 2017-10.

conclusion that congressional oversight hearings, written statements by

the respective chairs of the Senate Finance Committee at the oversight

hearings, and testimony related to these transactions from executive

branch members can serve as express congressional intent sufficient to

override the requirements of the APA with respect to Notice 2017-10. 21

The foregoing congressional actions alone are insufficient to supplant

the APA, since the Supreme Court has told us exemptions from the

terms of the APA are not presumed and must be expressed by Congress.

See Marcello, 349 U.S. at 310 (considering legislative history in

conjunction with the final operative statutory text to find Congress’

express intent to override the APA).

After considering these additional arguments, we remain

unconvinced that Congress expressly authorized the IRS to identify a

syndicated conservation easement transaction as a listed transaction

without the APA’s notice-and-comment procedures, as it did in Notice

2017-10.

IV.

Conclusion

We determine summary adjudication to be appropriate in

petitioner’s favor as to prohibiting the imposition of section 6662A

penalties against the LLCs in these cases since Notice 2017-10 was

issued without notice and comment as required under the APA.

Accordingly, we will grant petitioner’s Cross-Motions for Summary

Judgment, in part, and set aside 22 Notice 2017-10, including the

imposition of section 6662A penalties with respect to reportable

transactions.

21 Generally speaking, legislative history related to the Code includes

congressional members’ statements made in markup sessions, congressional tax

writing committees, committee reports, conference committee reports, and

postenactment tax committee reports.

Although this decision and subsequent order are applicable only to

petitioner, the Court intends to apply this decision setting aside Notice 2017-10 to the

benefit of all similarly situated taxpayers who come before us.

To reflect the foregoing,

An appropriate order will be issued.

Reviewed by the Court.

FOLEY, GUSTAFSON, MORRISON, BUCH, ASHFORD, URDA,

COPELAND, JONES, GREAVES, and MARSHALL, JJ., agree with

this opinion of the Court.

KERRIGAN, PARIS, PUGH, and TORO, JJ., concur in the result,

and TORO, J., agrees with Part III.A.

GALE and NEGA, JJ., dissent.

PUGH, J., concurring in the result: I write separately to explain

why, after careful consideration of the history of the statute at issue

alongside the tools of statutory construction and precedent, set forth

below, I reach the same conclusion as the majority.

Section 6707A was enacted in the American Jobs Creation Act of

2004 (AJCA), § 811(a), Pub. L. No. 108-357, 118 Stat. 1418, 1575–76. It

did two things. First, it imposed penalties for failure to disclose

information with respect to a “reportable transaction.” § 6707A(a)

and (b). Second, it defined “reportable transaction” and “listed

transaction” (a subcategory of reportable transaction) by reference to the

IRS’s process for identifying those transactions in the already-existing

regulations under section 6011. Section 6707A(c)(1) confirmed the IRS’s

authority to “determine[] under regulations prescribed under section

6011” whether a transaction is “of a type which the [IRS] determines as

having a potential for tax avoidance or evasion,” thereby making it a

“reportable transaction.” A reportable transaction that is “the same as,

or substantially similar to, a transaction specifically identified by the

[IRS] as a tax avoidance transaction for purposes of section 6011” is a

“listed transaction.” § 6707A(c)(2).

Pursuant to this authority, the IRS identified syndicated

conservation easement transactions as listed transactions in I.R.S.

Notice 2017-10, 2017-4 I.R.B. 544. 1 They joined a list first issued in 2000

that originally included 7 transactions, added 23 more transactions by

the time the AJCA was enacted, and added 5 more by the time Notice

2017-10 was issued (making syndicated conservation easement

transactions the 36th). See Recognized Abusive and Listed Transactions,

IRS,

https://www.irs.gov/businesses/corporations/listed-transactions

(last visited Aug. 1, 2022). 2

I agree with the opinion of the Court that Notice 2017-10 is a

legislative rule. “[A] substantive or legislative rule, pursuant to properly

delegated authority, has the force of law, and creates new law or imposes

new rights or duties.” Jerri’s Ceramic Arts, Inc. v. Consumer Prod. Safety

Comm’n, 874 F.2d 205, 207 (4th Cir. 1989). By identifying syndicated

conservation easement transactions as listed transactions, Notice

2017-10 exposed taxpayers and representatives required to disclose

these transactions under Treasury Regulation § 1.6011-4 to stiff

1 The opinion of the Court and my concurrence address the validity of Notice

2017-10 only, not the tax treatment of the underlying transaction.

2 No transactions have been added to the list since Notice 2017-10.

penalties under section 6707A for failure to disclose. Notice 2017-10, § 3,

2017-4 I.R.B. at 546; see also op. Ct. pp. 8–15 (discussing obligations

imposed by Notice 2017-10 on taxpayers and material advisors).

And the IRS used authority delegated to it under sections 6011

and 6707A to do so. See CIC Servs., LLC v. IRS, 141 S. Ct. 1582, 1587

(2021) (noting that “the Code [through sections 6011 and 6707A]

delegates to the Secretary of the Treasury, acting through the IRS, the

task of identifying particular transactions with the requisite risk of tax

abuse” and stating the IRS “[u]se[d] that authority” to determine “that

so-called micro-captive transactions must be reported because of their

potential for tax evasion”); see also Mann Constr., Inc. v. United States,

27 F.4th 1138, 1144 (6th Cir. 2022) (stating that “the reality” is “that

the relevant statutory terms [section 6707A(c)] are not self-defining,

which explains why Congress delegated to the IRS authority to

‘determine[]’ and ‘identif[y]’ which transactions need to be reported”).

“When an agency relies on expressly delegated authority to establish

policy . . . courts generally treat the agency action as legislative, rather

than interpretive, rulemaking.” Children’s Hosp. of the King’s

Daughters, Inc. v. Azar, 896 F.3d 615, 622 (4th Cir. 2018) (citations

omitted) (holding that a U.S. Department of Health & Human Services

policy for calculating the amount of financial assistance available to

certain hospitals set forth in a Frequently Asked Questions document is

a legislative rule in part because the agency relied on statutorily

delegated authority to “determine[]” what constitutes “costs incurred”).

In general a legislative rule is subject to the notice-and-comment

requirements of the Administrative Procedure Act (APA) under 5 U.S.C.

§ 553(b). SIH Partners LLLP v. Commissioner, 150 T.C. 28, 41 (2018),

aff’d, 923 F.3d 296 (3d Cir. 2019). The parties agree that issuance of

Notice 2017-10 did not comply with these notice-and-comment

requirements.

The APA enumerates exceptions to its general rule of notice-andcomment rulemaking, including “when the agency for good cause finds

(and incorporates the finding and a brief statement of reasons therefore

in the rules issued) that notice and public procedure thereon are

impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C.

§ 553(b)(B). The IRS did not invoke the good cause exception when it

issued Notice 2017-10. See op. Ct. p. 16.

Another exception to the notice-and-comment requirement is a

necessary consequence of courts’ applying a basic precept of statutory

construction: “[O]ne legislature cannot abridge the powers of a

succeeding legislature.” Fletcher v. Peck, 10 U.S. (6 Cranch) 87, 135

(1810). A succeeding legislature can alter a prior legislative act “when

the legislature shall please to alter it.” Marbury v. Madison, 5 U.S.

(1 Cranch) 137, 177 (1803). As Justice Scalia wrote in his concurrence in

Lockhart v. United States, 546 U.S. 142, 148 (2005):

Among the powers of a legislature that a prior

legislature cannot abridge is, of course, the power to make

its will known in whatever fashion it deems appropriate—

including the repeal of pre-existing provisions by simply

and clearly contradicting them. Thus, in Marcello v. Bonds,

349 U.S. 302 (1955), we interpreted the Immigration and

Nationality Act [(INA), ch. 477, 66 Stat. 163 (1952),] as

impliedly exempting deportation hearings from the

procedures of the [APA], despite the requirement in § 12 of

the APA that “[n]o subsequent legislation shall be held to

supersede or modify the provisions of this Act except to the

extent that such legislation shall do so expressly,” 60 Stat.

244. The Court refused “to require the Congress to employ

magical passwords in order to effectuate an exemption

from the Administrative Procedure Act.” 349 U.S., at 310.

We have made clear in other cases as well, that an expressreference or express-statement provision cannot nullify the

unambiguous import of a subsequent statute. In Great

Northern R. Co. v. United States, 208 U.S. 452, 465 (1908),

we said of an express-statement requirement that “[a]s the

section . . . in question has only the force of a statute, its

provisions cannot justify a disregard of the will of Congress

as manifested either expressly or by necessary implication

in a subsequent enactment.” (Emphasis added.) A

subsequent Congress, we have said, may exempt itself from

such requirements by “fair implication”—that is, without

an express statement. Warden v. Marrero, 417 U.S. 653,

659–660, n. 10 (1974). See also Hertz v. Woodman, 218 U.S.

205, 218 (1910).

The opinion of the Court cites Justice Scalia’s concurrence in

Lockhart for the proposition that the APA’s express-statement

requirement is consistent with the presumption against implied repeals.

See op. Ct. p. 16. And Justice Scalia acknowledges the Supreme Court’s

admonition in Marcello that exemptions from the APA are “not lightly

to be presumed” in the light of the APA’s express-statement

requirement. 5 U.S.C. § 559; Lockhart, 546 U.S. at 148–49; see Marcello,

349 U.S. at 310. But he then states that this assertion “may add little or

nothing to our already-powerful presumption against implied repeals.”

Lockhart, 546 U.S. at 149 (“An implied repeal will only be found where

provisions in two statutes are in irreconcilable conflict, or where the

latter Act covers the whole subject of the earlier one and is clearly

intended as a substitute.” (quoting Branch v. Smith, 538 U.S. 254, 273

(2003))). Justice Scalia’s stated reason for writing separately was to

emphasize that express-statement requirements are not binding and

that “[w]hen the plain import of a later statute directly conflicts with an

earlier statute, the later enactment governs, regardless of its compliance

with any earlier-enacted requirement of an express reference or other

‘magical password.’” Id. at 147, 149; see also Dorsey v. United States, 567

U.S. 260, 274–75 (2012) (quoting this statement when describing the

requisite inquiry as not a search for a magical password but rather for

assurance that “ordinary interpretive considerations point clearly in

th[e] direction” of superseding an express-statement requirement). I

understand Justice Scalia (and the Supreme Court) to be cautioning us

not to elevate express-statement requirements to exalted status or to

gloss over the text of the later enacted statute in the name of

“fundamental APA principles.” See op. Ct. p. 20.

Our task, then, is to read the later statute (section 6707A) and

determine whether its plain import directly conflicts with an earlier

statute (5 U.S.C. § 553(b)). Stated differently, we must decide “whether

Congress has established procedures so clearly different from those

required by the APA that it must have intended to displace the norm.”

Asiana Airlines v. FAA, 134 F.3d 393, 397 (D.C. Cir. 1998) (analyzing a

non-APA statutory scheme for potential conflict with the APA’s baseline

rule of notice and comment).

This analysis will produce a range of results. Some procedures

will fall on the “irreconcilable-with-the-APA” side of the line. See, e.g.,

Marcello, 349 U.S. at 309 (holding that INA procedures superseded the

APA’s notice-and-comment requirement because, among other reasons,

Congress mandated that the INA procedures “shall be the sole and

exclusive procedure for determining the deportability of an alien under

this section” (quoting INA § 242(b), 66 Stat. at 210)); Asiana Airlines,

134 F.3d at 398 (holding statute mandating that the FAA “publish in

the Federal Register an initial fee schedule and associated collection

process as an interim final rule, pursuant to which public comment will

be sought and a final rule issued” superseded the APA’s notice-andcomment requirement because it required the FAA to follow procedures

that could not be reconciled with the APA (quoting 49 U.S.C.

§ 45301(b)(2))). Other procedures will fall on the “coexistence-with-theAPA” side of the line. See, e.g., Coal. for Parity, Inc. v. Sebelius, 709 F.

Supp. 2d 10, 17, 19 (D.D.C. 2010) (holding statute providing that an

agency “may promulgate any interim final rules as the Secretary

determines are appropriate to carry out this [part]” did not supersede

the APA because the enabling provision was “permissive,” “wideranging,” and “d[id] not contain any specific deadlines for agency

action”).

There is little doubt that in enacting section 6707A Congress

knew about and endorsed the existing administrative procedure for

determining reportable transactions and identifying listed ones. The

statute defines the terms by reference to the procedure by which the IRS

determines or identifies them. See § 6707A(c)(1) (defining a “reportable

transaction” by reference to the IRS’s “determin[ation] under

regulations prescribed under section 6011” that the transaction has a

potential for tax avoidance or evasion); § 6707A(c)(2) (defining “listed

transaction” by reference to “a transaction specifically identified by the

Secretary as a tax avoidance transaction for purposes of section 6011”).

Specifically, the procedure invoked by section 6707A is

“identifi[cation] by notice,[3] regulation, or other form of published

3 Here, “notice” refers to an IRS notice—“a public pronouncement by the

[Internal Revenue] Service that may contain guidance that involves substantive

interpretations of the Internal Revenue Code or other provisions of the law” and is

published in the Internal Revenue Bulletin, Internal Revenue Manual 32.2.2.3.3 (Aug.

11, 2004); it should be distinguished from a “notice of proposed rulemaking” published

in the Federal Register pursuant to the APA, 5 U.S.C. § 553(b); see, e.g., Treas. Reg.

§ 1.6662-3(b)(2) (“The term ‘rules or regulations’ includes the provisions of the Internal

Revenue Code, temporary or final Treasury regulations issued under the Code, and

revenue rulings or notices (other than notices of proposed rulemaking) issued by the

Internal Revenue Service and published in the Internal Revenue Bulletin.” (Emphasis

added.)).

We have concluded in other contexts that IRS notices are mere statements of

the Commissioner’s position and lack the force of law. Phillips Petroleum Co. v.

Commissioner, 101 T.C. 78, 99 n.17 (1993), aff’d, 70 F.3d 1282 (10th Cir. 1995). Here,

by contrast, we have concluded that Notice 2017-10 is a legislative rule because it

imposes substantive obligations on taxpayers by operation of section 6707A.

Because we are to presume Congress is aware of existing law, including

existing regulations, I am more confident than the majority, see op. Ct. p. 19, that

Congress understood that the IRS had already identified and would continue to

identify transactions as listed, perhaps even by issuing notices. But, as I explain below,

guidance.” Treas. Reg. § 1.6011-4. This existing procedure “under

regulations prescribed under section 6011” of determining reportable

transactions and identifying listed ones was introduced in temporary

regulations in 2000 that were finalized in 2003. T.D. 9046, 2003-1 C.B.

614, 616, 68 Fed. Reg. 10,161, 10,163 (Mar. 4, 2003).

“Congress is presumed to be aware of an administrative or

judicial interpretation of a statute and to adopt that interpretation when

it re-enacts a statute without change.” Lorillard v. Pons, 434 U.S. 575,

580–81 (1978) (citations omitted). “So too, where . . . Congress adopts a

new law incorporating sections of a prior law, Congress normally can be

presumed to have had knowledge of the interpretation given to the

incorporated law, at least insofar as it affects the new statute.” Id. at

581. We thus presume that Congress knew of Treasury’s (and the IRS’s)

interpretation of section 6011 in the reportable and listed transaction

disclosure regulations when Congress enacted section 6707A in 2004.

Therefore, section 6707A is a “[s]ubsequent statute” that adopts a

procedure that could potentially “supersede or modify” the general APA

requirement in 5 U.S.C. § 553 that legislative rules must go through

notice and comment. 5 U.S.C. § 559.

The opinion of the Court discounts these principles of statutory

construction and the history of section 6707A. It begins its analysis with

its conclusion that “section 6707A offers no express indication from

Congress exempting the IRS from the standard notice-and-comment

rulemaking.” See op. Ct. p. 19. It is difficult to conjure up what would

satisfy this requirement short of a magical password, to wit, “the APA

is displaced.” And I respectfully disagree with its dismissal of section

6707A(c) as mere “definitional text” that “only links” the statutory

penalties to the regulatory scheme, and its summary adoption of the

U.S. Court of Appeals for the Sixth Circuit’s conclusion that section

6707A(c) “addresses a ‘which transactions’ question, not a ‘what process’

question.” See op. Ct. p. 20 (quoting Mann Constr., 27 F.4th at 1146). 4

I do not believe that this presumption that Congress knew about the IRS procedure for

listing transactions by notice wins the day for the IRS. And on this point, the majority

and I do agree.

4 Our decision in this case is appealable to the U.S. Court of Appeals for the

Fourth Circuit. See § 7482(b)(1); Golsen v. Commissioner, 54 T.C. 742, 756–57 (1970),

aff’d, 445 F.2d 985 (10th Cir. 1971). As a court of nationwide jurisdiction, we should

not simply adopt the opinion of another circuit, but rather are obliged to perform the

necessary analysis of section 6707A ourselves, situating it among the range of

Two additional points also respond to this conclusion in the

opinion of the Court. First, whereas the opinion of the Court starts (and

apparently ends) with the heading of section 6707A(c), see op. Ct. p. 20

(“This definitional text . . . .”), I would begin with the text of section

6707A. See Yates v. United States, 574 U.S. 528, 553 (2015) (Kagan, J.,

dissenting). Second, despite (or in contradiction of) its conclusion that

section 6707A addresses a “which transactions” question, the Sixth

Circuit also recognized “the reality that the relevant statutory terms

[section 6707A(c)(1) and (2)] are not self-defining, which explains why

Congress delegated to the IRS authority to ‘determine[]’ and ‘identif[y]’

which transactions need to be reported.” Mann Constr., 27 F.4th at 1144.

That is, the statute points elsewhere: to the “regulations prescribed

under section 6011” and their method for determining reportable

transactions and identifying listed transactions. By failing to follow

where the statute leads, the opinion of the Court implies that Congress

cannot adopt procedures by referencing them in a statute. This abridges

“the power [of Congress] to make its will known in whatever fashion it

deems appropriate.” Lockhart, 546 U.S. at 148 (Scalia, J., concurring).

The remaining question then is whether, in adopting this

procedure by reference, Congress “must have intended to displace the

norm” of APA notice and comment because the adopted procedure is “so

clearly different from” it. Asiana Airlines, 134 F.3d at 397.

The procedures at issue in Marcello and Asiana Airlines set a high

bar for “displacing the norm” of APA notice and comment. In both

Congress mandated that the agency use a procedure different from or in

direct conflict with the one in the APA. The statute in Marcello provided

an alternate procedure and stated that it “shall be the sole and exclusive

procedure.” 349 U.S. at 309 (quoting INA § 242(b)). The statute in

Asiana Airlines required the use of a procedure that, by its terms,

“cannot be reconciled with the notice and comment requirements of [the

APA].” 134 F.3d at 398 (“[T]he agency was to issue not a proposed rule,

but an ‘interim final rule,’ and comment was to be sought ‘pursuant to,’

not in anticipation of, that rule.” (quoting 49 U.S.C. § 45301(b)(2))).

Here, Congress did not mandate a specific alternative rulemaking

procedure different from or in direct conflict with the APA. Rather,

section 6707A authorized the IRS to identify listed transactions “by

notice, regulation, or other form of published guidance,” Treas. Reg.

statutory provisions that may or may not have displaced APA notice-and-comment

rulemaking.

§ 1.6011-4(b)(2), permissive text more similar to that in Coalition for

Parity, Inc., 709 F. Supp. 2d at 19. And the procedure “by notice,

regulation, or other form of published guidance” can, by its terms, be

reconciled with the APA; nothing in it directly conflicts with the APA

like the “sole and exclusive” or “interim final rule, pursuant to which

public comment will be sought” procedures at issue in Marcello and

Asiana Airlines.

Any argument to the contrary puts a great deal of weight on the

contention that identification “by notice” is irreconcilable with the APA.

And the weight that the phrase “by notice” can bear is circumscribed by

the adoption of penalties in section 6707A to give force to the listed

transaction regime. To conclude that Congress was ratifying the IRS’s

pre-AJCA practice of listing transactions without notice and comment

we must explain why, after section 6707A added penalties, notice and

comment could not be required for future notices. 5 The imposition of

penalties is, after all, a critical reason we conclude that the listing of a

transaction is a legislative rule subject to APA notice and comment.

I would be loath to supplant the APA requirements even if I could

come up with my own policy justification for their nonapplication; that

is not our place, but Congress’. Congress also is presumed to be aware

that to supersede APA notice and comment, it must do so “expressly,”

see 5 U.S.C. § 559, or by “necessary implication,” “clear implication,” or

“fair implication,” see Dorsey, 567 U.S. at 274–75. And a policy

justification for skipping notice and comment does not necessarily

render a statutory scheme irreconcilable with the APA.

Finally, it is worth noting that if notice-and-comment rulemaking

impedes the IRS’s ability to identify transactions with the potential for

tax avoidance or evasion, the APA and the Internal Revenue Code

already provide options. Under the APA, the IRS could invoke the good

cause exception, as it did when issuing regulations targeting another

listed transaction, the so-called Son-of-Boss transaction, for example.

See T.D. 9062, 2003-2 C.B. 46, 48 (“These temporary regulations are

necessary to prevent abusive transactions of the type described in the

Notice 2000-44. Accordingly, good cause is found for dispensing with

notice and public procedure pursuant to 5 U.S.C. 553(b)(B) and for

5 Our holding does not invalidate notices that had been issued before Congress

enacted penalties. Those notices are not before us today and the circumstances

surrounding their issuance are distinguishable. And Congress would be presumed to

know about and adopt pre-existing notices when it adopted pre-existing procedures for

identifying listed transactions.

dispensing with a delayed effective date pursuant to 5 U.S.C. 553(d)(1)

and (3).”). And under section 7805(b)(3), the IRS “may provide that any

regulation may take effect or apply retroactively to prevent abuse.”

In sum, I concur in the result because the procedure referenced

by section 6707A—“identifi[cation] by notice, regulation, or other form

of published guidance” by the IRS, Treas. Reg. § 1.6011-4(b)(2)—is not a

“procedure[] so clearly different from [that] required by the APA that it

must have intended to displace the norm,” Asiana Airlines, 134 F.3d

at 397.

KERRIGAN, PARIS, ASHFORD, and COPELAND, JJ., agree

with this opinion concurring in the result.

TORO, J., concurring in the result: As the opinion of the Court

and Judge Pugh correctly conclude, I.R.S. Notice 2017-10, 2017-4 I.R.B.

544, which identified the type of transaction at issue in this case as a

listed transaction, is a legislative rule under the Administrative

Procedure Act (APA). See 5 U.S.C. §§ 551, 553. But the Internal

Revenue Service (IRS) did not follow the APA’s notice-and-comment

procedures when adopting the rule. See 5 U.S.C. § 553(b) and (c).

Therefore, to resolve this case, we must decide whether the American

Jobs Creation Act of 2004 (AJCA), Pub. L. No. 108-357, 118 Stat. 1418,

exempted the Secretary of the Treasury from following the APA’s

requirements for purposes of identifying listed transactions after the

enactment of the AJCA. See 5 U.S.C. § 559. If not, then the

section 6662A penalty determined by the Commissioner here cannot

apply.

The parties’ dispute focuses on section 6707A(c), and in

particular, whether that provision adopted by reference Treasury

Regulation § 1.6011-4, T.D. 9046, 2003-1 C.B. 614, 616, 68 Fed. Reg.

10,163 (Mar. 4, 2003) (2003 regulation). 1 In my view, it is unnecessary

to decide whether Congress did or did not incorporate the 2003

regulation in section 6707A(c). Even if (for the sake of analysis) I were

to agree with the Commissioner that (1) the 2003 regulation established

procedures for identifying listed transactions and (2) Congress adopted

those procedures by reference when enacting section 6707A(c), the

Commissioner still would not prevail because the procedures reflected

in the 2003 regulation are not, by their terms, inconsistent with the

APA. Put another way, the Commissioner could have followed both the

procedures set out in the 2003 regulation and the APA when issuing

Notice 2017-10.

Specifically, contrary to the Commissioner’s position, the

statement in the 2003 regulation that the IRS may identify listed

transactions “by notice,” see Treas. Reg. § 1.6011-4(b)(2), is fully

compatible with the APA. For example, the IRS could comply with the

APA by issuing a notice that establishes good cause for proceeding

without a prior opportunity for comment. See 5 U.S.C. § 553(b)(B).

Moreover, as Judge Pugh observes, see Pugh concurring op. p. 32, “the

weight that the [pre-AJCA regulatory] phrase ‘by notice’ can bear is

1 The regulation has since been amended, but for purposes of this discussion I

focus on the version that was in effect before the adoption of the AJCA. One pre-AJCA

amendment, see T.D. 9108, 2004-1 C.B. 429, 68 Fed. Reg. 75,128 (Dec. 30, 2003), had

no effect on the provisions discussed.

circumscribed by [Congress’s] adoption of” a new and significant

enforcement mechanism. “The imposition of penalties is, after all, a

critical reason we conclude that the listing of a transaction is a

legislative rule subject to APA notice and comment.” See Pugh

concurring op. p. 32. I am not persuaded that Congress, when

instituting this penalty regime, intended to strip away the protections

of the APA for future listed transactions, see, e.g., Azar v. Allina Health

Servs., 139 S. Ct. 1804, 1816 (2019) (explaining that the purpose of

notice-and-comment rulemaking is to “give[] affected parties fair

warning of potential changes in the law and an opportunity to be heard

on those changes” while “afford[ing] the agency a chance to avoid errors

and make a more informed decision”); Dep’t of Homeland Sec. v. Regents

of the Univ. of Cal., 140 S. Ct. 1891, 1929 n.13 (2020) (Thomas, J.,

concurring in the judgment in part, dissenting in part) (“[T]he notice and

comment process at least attempts to provide a ‘surrogate political

process’ that takes some of the sting out of the inherently undemocratic

and unaccountable rulemaking process.” (quoting Michael Asimow,

Interim-Final Rules: Making Haste Slowly, 51 Admin. L. Rev. 703, 708

(1999))), or to ratify a practice developed for a fundamentally different

context, i.e., the IRS’s pre-AJCA practice of listing transactions without

notice and comment and without a showing of good cause for not

providing notice and comment.

Absent conflict in the instructions Congress provided in the AJCA

and the instructions Congress provided in the APA, the Commissioner

had an obligation to follow both. See Posadas v. Nat’l City Bank, 296

U.S. 497, 503 (1936) (“Where there are two acts upon the same subject,

effect should be given to both if possible.”); see also Dorsey v. United

States, 567 U.S. 260, 274 (2012) (discussing the standard for departures

from the APA); Nat’l City Bank, 296 U.S. at 503 (discussing the standard

for implied repeals); Lockhart v. United States, 546 U.S. 142, 149 (2005)

(Scalia, J., concurring) (discussing the standard for implied repeals). As

all agree, this the Commissioner did not do. Accordingly, the section 6662A

penalty may not be sustained, as the opinion of the Court properly

concludes.

I write separately to offer a few observations on the extent to

which section 6707A(c) might be viewed as incorporating the 2003

regulation, given the focus on this issue by the parties and my

colleagues.

AJCA Background

To begin with, I agree with Judge Pugh and the Commissioner

that the context in which Congress enacted section 6707A and the other

provisions of the AJCA is important. See Marcello v. Bonds, 349 U.S.

302, 310 (1955) (noting that the Court could not “ignore the background

of the . . . legislation”). To summarize the context here, in 2000, in an

effort to address tax shelters, the U.S. Department of the Treasury and

the IRS issued temporary and proposed regulations under section 6011.

See Temp. Treas. Reg. § 1.6011-4T, 65 Fed. Reg. 11,205 (Mar. 2, 2000);

Prop. Treas. Reg. § 1.6011-4, 65 Fed. Reg. 11,271 (Mar. 2, 2000). The

regulations, which were finalized in 2003 after several rounds of

revision, 2 required taxpayers to provide information with respect to

“reportable transactions,” see Treas. Reg. § 1.6011-4(a), a category that

was defined to include “listed transactions,” see id. para. (b)(1) and (2).

Thus, the statutory terms we are focused on in this case were first

defined by temporary and proposed regulations culminating in the 2003

regulation.

When it adopted the AJCA in 2004, Congress established new

penalties and other rules that hinged on the terms “reportable

transaction” and “listed transaction.” See, e.g., AJCA §§ 811 and 812,

814–816, 118 Stat. at 1575–84. 3 Congress appears to have drawn on the

regulatory definitions of those terms to craft the statutory definitions.

See I.R.C. § 6707A(c); Treas. Reg. § 1.6011-4(b)(1) and (2). Additionally,

the statutory definitions refer to “determin[ations] under regulations

prescribed under section 6011,” see I.R.C. § 6707A(c)(1), and to

“identif[ications] . . . for purposes of section 6011,” see I.R.C.

§ 6707A(c)(2). So, in my view, there is no doubt that Congress

“legislated against the backdrop of [the 2003 regulation]” when it

enacted the AJCA, as the Commissioner contends, see Resp’t’s Mem. in

Supp. of Obj. to Mot. for Partial Summ. J. 35, and that Congress sought,

2 The revisions included changes made later in 2000, see Temp. Treas. Reg.

§ 1.6011-4T, 65 Fed. Reg. 49,909 (Aug. 16, 2000); Prop. Treas. Reg. § 1.6011-4, 65 Fed.

Reg. 49,955 (Aug. 16, 2000), one set of changes in 2001, see Temp. Treas. Reg. § 1.60114T, 66 Fed. Reg. 41,133 (Aug. 7, 2001); Prop. Treas. Reg. § 1.6011-4, 66 Fed. Reg. 41,169

(Aug. 7, 2001), and two sets of changes in 2002, see Temp. Treas. Reg. § 1.6011-4T, 67

Fed. Reg. 41,324 (June 18, 2002); Prop. Treas. Reg. § 1.6011-4, 67 Fed. Reg. 41,362

(June 18, 2002); Temp. Treas. Reg. § 1.6011-4T, 67 Fed. Reg. 64,799 (Oct. 22, 2002);

Prop. Treas. Reg. § 1.6011-4, 67 Fed. Reg. 64,840 (Oct. 22, 2002).

3 These penalties and rules appear in sections 6111, 6112, 6501, 6662A, 6664,

6707, and 6707A, among others.

at least to some extent, to incorporate the structure Treasury and the

IRS had established there into the new penalty regime.

But this general observation is insufficient to determine with

precision what Congress incorporated when it enacted section 6707A(c).

To answer that question, I turn to the text of the provisions at issue. See

Nat’l Fed’n of Indep. Bus. v. Sebelius (NFIB), 567 U.S. 519, 544 (2012)

(“[T]he best evidence of Congress’s intent is the statutory text.”); United

States v. Am. Trucking Ass’ns, 310 U.S. 534, 543 (1940) (“There is . . . no

more persuasive evidence of the purpose of a statute than the words by

which the legislature undertook to give expression to its wishes.”);

Grajales v. Commissioner, 156 T.C. 55, 61 (2021) (“NFIB, 567 U.S. 544,

directs us to look to the statutory text as ‘the best evidence of Congress’s

intent.’ ”), aff’d, 47 F.4th 58 (2d Cir. 2022).

Section 6662A Penalty and Section 6707A(c) Definitions

The question ultimately before the Court is whether petitioner

may be held liable for the penalty imposed by section 6662A. That

penalty applies if a taxpayer’s return reflects a “reportable transaction

understatement,” which includes, among others, items attributable to

“any listed transaction.” I.R.C. § 6662A(a) and (b). Section 6662A(d)

defines the terms “listed transaction” and “reportable transaction” by

reference to “the respective meanings given to such terms by section

6707A(c).”

Section 6707A(c)(2) tells us that “[t]he term ‘listed transaction’

means a reportable transaction which is the same as, or substantially

similar to, a transaction specifically identified by the Secretary as a tax

avoidance transaction for purposes of section 6011.” In other words, a

listed transaction is a reportable transaction with certain characteristics.

The term “reportable transaction” is also a defined term. It

means “any transaction with respect to which information is required to

be included with a return or statement because, as determined under

regulations prescribed under section 6011, such transaction is of a type

which the Secretary determines as having a potential for tax avoidance

or evasion.” I.R.C. § 6707A(c)(1).

Analysis

Several observations relevant to the APA analysis follow from the

statutory text. First, neither section 6662A nor section 6707A (or, for

that matter, section 6011) refers to the APA. Second, although

section 6707A(c)(2), which defines listed transactions, contemplates

that the Secretary must “specifically identif[y]” certain types of

transactions as having the characteristics required to be listed

transactions, the statute is silent on how that identification should be

made. Third, section 6707A(c)(1), which defines reportable transactions,

is more explicit about the Secretary’s procedural responsibilities. It

provides that the authority contemplated by it—that is, the authority to

require certain information to be included with a return or statement

for a specific reason—will be exercised “as determined under regulations

prescribed under section 6011.”

Nothing in the statutory text thus expressly turns off the APA

requirements that would otherwise govern the Secretary’s designation of

a listed transaction under section 6707A(c)(2). See 5 U.S.C. § 559.

Moreover, I see nothing in the text of section 6707A(c)(2) that gives rise

to a “fair” implication of a departure from the APA requirements, let

alone a “necessary” or “clear” one. See Dorsey, 567 U.S. at 274.

The Commissioner, however, contends that Congress’s use of the

clause “as determined under regulations prescribed under section 6011”

in defining reportable transactions, I.R.C. § 6707A(c)(1), signals its wish

to supplant the APA’s procedures in favor of the 2003 regulatory

provision. That regulation defines listed transactions to include

transactions that the IRS “identified by notice, regulation, or other form

of published guidance as a listed transaction.” Treas. Reg. § 1.60114(b)(2). I am skeptical that the “as determined” clause bears the weight

the Commissioner places on it, for a few reasons.

To begin, it is worth noting that the “as determined” clause (with

its reference to regulations under section 6011) appears in the definition

of the term “reportable transaction” in section 6707A(c)(1), but is absent

from the definition of the term “listed transaction” in section 6707A(c)(2).

The term that matters most in deciding this case is “listed transaction,”

not “reportable transaction.” 4 And courts assume that when Congress

includes specific language in one provision and excludes it from a

neighboring provision, it does so intentionally. See, e.g., Loughrin v.

United States, 573 U.S. 351, 358 (2014) (“We have often noted that when

‘Congress includes particular language in one section of a statute but

4 The Commissioner asserts that the returns in this case improperly reported

a listed transaction. See I.R.C. § 6662A(a) and (b)(1) and (2)(A). He does not assert

that the returns reported a reportable transaction other than a listed transaction with

a significant purpose of avoiding or evading federal income tax. See I.R.C.

§ 6662A(b)(2)(B).

omits it in another’—let alone in the very next provision—this Court

‘presume[s]’ that Congress intended a difference in meaning.” (quoting

Russello v. United States, 464 U.S. 16, 23 (1983))); Grajales v.

Commissioner, 47 F.4th at 62 (2d Cir. 2022) (“When Congress uses

certain language in one section of the statute yet omits it in another

section of the same Act, ‘it is generally presumed that Congress acts

intentionally and purposefully in the disparate inclusion or exclusion’ of

that language.” (quoting Homaidan v. Sallie Mae, Inc., 3 F.4th 595, 602

(2d Cir. 2021))), aff’g 156 T.C. 55. Thus, whatever meaning one is

intended to glean from the “as determined” clause for purposes of section

6707A(c)(1), it does not shed much light on the procedural steps the

Secretary must take in making the specific identification called for by

section 6707A(c)(2). And it would be curious for Congress to signify its

decision to depart from APA procedures with respect to listed

transactions by adding the “as determined” clause to section 6707A(c)(1)

(which defines a reportable transaction), rather than section 6707A(c)(2)

(which defines a listed transaction). Put differently, one would have

expected instructions about how the Secretary must “specifically

identif[y]” the transactions that should be listed in the definition of that

term, rather than in the definition of the more general “reportable

transaction.”

Furthermore, the 2003 regulation was focused on the

characteristics of reportable transactions and not on processes for

identifying them. Indeed, it did not contain any overall provisions

prescribing any process the Secretary would follow in identifying

reportable transactions. Rather, it simply provided that “[a] reportable

transaction is a transaction described in any of the paragraphs (b)(2)

through (7) of this section.” Treas. Reg. § 1.6011-4(b)(1). It went on to

explain that “[t]here are six categories of reportable transactions: listed

transactions, confidential transactions, transactions with contractual

protection, loss transactions, transactions with a significant book-tax

difference, and transactions involving a brief asset holding period.” Id.

The only text that may be fairly viewed as process focused in the entire

2003 regulation is a phrase of nine words in the definition of a listed

transaction, as described below. In the absence of any overall direction

in the 2003 regulation about process, it seems difficult to agree with the

Commissioner’s view that the “as determined” clause was intended to

signify a congressional decision to depart from the APA-mandated

process for administrative rulemaking.

Of course, as the Commissioner would surely point out, we are

concerned specifically with listed transactions in this case. And in

defining listed transactions, the 2003 regulation did specify a process,

as follows:

A listed transaction is a transaction that is the same as or

substantially similar to one of the types of transactions

that the Internal Revenue Service (IRS) has determined to

be a tax avoidance transaction and identified by notice,

regulation, or other form of published guidance as a listed

transaction.

Treas. Reg. § 1.6011-4(b)(2) (emphasis added). In the Commissioner’s

view, the “as determined” clause in section 6707A(c)(1) incorporated this

regulatory definition, including the nine procedural words highlighted

above.

This argument, however, overlooks a critical fact: When it

enacted the AJCA, Congress adopted its own statutory definition of

“listed transaction” at section 6707A(c)(2):

The term “listed transaction” means a reportable [ 5]

transaction which is the same as, or substantially similar

to, a transaction specifically identified by the Secretary as

a tax avoidance transaction for purposes of section 6011.

Comparing the two definitions, one can see that the statute essentially

paraphrases the regulatory definition with one key difference: It omits

the nine procedural words italicized above. The Commissioner’s entire

case rests on those nine words, and their omission in the statute is

notable in light of the otherwise parallel definitions.

To put this point in another way, if Congress had intended to

adopt a specific process for the Secretary to use in identifying listed

transactions, Treasury Regulation § 1.6011-4(b)(2) provided a ready

model. Yet, despite apparently incorporating other words from the

regulation into the statutory definition, Congress did not incorporate the

nine procedural words. Instead, it chose to modify them, omitting any

mention of process from section 6707A(c)(2).

Faced with that

Congressional choice, I would be disinclined to read section 6707A(c)(1)

5 The regulatory definition begins by stating that a listed transaction is “a

transaction” instead of “a reportable transaction.” But the inclusion of the word

“reportable” in the statutory definition is consistent with the structure of the 2003

regulation, which defined listed transactions as a subset of reportable transactions.

See Treas. Reg. § 1.6011-4(b)(1) and (2).

and the “as determined” clause as a back-door way of establishing a

process for identifying listed transactions under section 6707A(c)(2) (as

the Commissioner urges). See Knight v. Commissioner, 552 U.S. 181,

188 (2008) (“The fact that [Congress] did not adopt [a] readily available

and apparent alternative strongly supports rejecting [a] reading . . .

[that relies on the rejected alternative text].”).

To summarize then, the Commissioner argues that

section 6707A(c)(1) overrides the APA by cross-referencing the 2003

regulation. But he overlooks that (1) the regulation is barely concerned

with process, mentioning it in just nine words in the definition of listed

transaction; (2) Congress adopted a statutory definition of listed

transaction that paraphrases the regulation but excludes the nine

procedural words; and (3) unlike the definition of reportable transaction

in section 6707A(c)(1), the definition of listed transaction in

section 6707A(c)(2), which is what we are primarily concerned with

here, does not include a cross-reference to regulations under

section 6011.

All of this suggests that the “as determined” clause in

section 6707A(c)(1) is an awfully thin reed to support an express or

implied departure from the APA. See 5 U.S.C. § 559. Although I do not

think we need to decide the issue to dispose of this case, it seems to me

difficult to conclude that Congress incorporated in section 6707A(c) the

process set in the 2003 regulation when Congress seems to have gone

out of its way to exclude the process-related words of the regulation from

the text that it used.

With these observations, I agree with the opinion of the Court’s

disposition of the section 6662A penalty issue.

COPELAND, J., agrees with this opinion concurring in the result.

GALE, J., dissenting: In my view, in enacting section 6707A, with

its express reference to the regulations under section 6011, Congress

intended to except the identification of “listed transactions” from the

notice-and-comment requirements of the Administrative Procedure Act

(APA). See 5 U.S.C. § 553(b). I would first note that I agree with the

lion’s share of the analysis in Judge Pugh’s concurring opinion,

including the conclusion that the Internal Revenue Service’s

identification of syndicated conservation easement transactions as

listed transactions is a legislative rule. Importantly, I agree with its

critique of the opinion of the Court’s and the Court of Appeals for the

Sixth Circuit’s conclusion that the reference in section 6707A to the

section 6011 regulations “addresses a ‘which transactions’ question, not

a ‘what process’ question.” See op. Ct. p. 20 (quoting Mann Constr., Inc.

v. United States, 27 F.4th 1138, 1146 (6th Cir. 2022)). Instead, I

conclude that the reference to the section 6011 regulations goes to the

heart of the process question.

And, as Judge Pugh notes, the procedure in the section 6011

regulations for making a transaction a “listed” one, subject to disclosure

requirements, that is referenced in section 6707A for penalty purposes,

is “identifi[cation] by notice, regulation, or other form of published

guidance.” Treas. Reg. § 1.6011-4(b)(2) (2003) (emphasis added). The

reference to identification “by notice” is significant. A “notice” is a long

recognized species of written guidance published by the Internal

Revenue Service “when the Service determines that a public concern

requires a speedy response” and is correspondingly “[i]ssued without

public notice and comment.” Stephanie Hunter McMahon, Classifying

Tax Guidance According to End Users, 73 Tax Law. 245, 256–58 (2020).

This type of “notice” is to be distinguished from the notice entailed in

notice-and-comment rulemaking enumerated in the APA. See 5 U.S.C.

§ 553(b).

Regulations under section 6011 permitting the identification of

listed transactions “by notice” were first promulgated as temporary and

proposed regulations in 2000. See T.D. 8877, 2000-1 C.B. 747; Prop.

Treas. Reg. § 1.6011-4, 65 Fed. Reg. 11,269 (Mar. 2, 2000). The

regulations (Treas. Reg. § 1.6011-4) were made final in 2003. T.D. 9046,

2003-1 C.B. 614. By the time section 6707A was enacted in 2004, the

Service had identified 30 “listed transactions” pursuant to the section

6011 regulations, all without adherence to the notice-and-comment

requirements of the APA. “Congress is presumed to be aware of an

administrative or judicial interpretation of a statute and to adopt that

interpretation when it re-enacts a statute without change.” Lorillard v.

Pons, 434 U.S. 575, 580–81 (1978). “So too, where . . . Congress adopts

a new law incorporating sections of a prior law, Congress normally can

be presumed to have had knowledge of the interpretation given to the

incorporated law, at least insofar as it affects the new statute.” Id.

at 581. In this instance, Congress was not only presumptively aware

when cross-referencing the section 6011 regulations of the Service’s

interpretation of its authority under section 6011 to identify a listed

transaction without adhering to the notice-and-comment requirements

of the APA. See 5 U.S.C. § 553(b). Congress was actually aware, having

cited the temporary and final regulations permitting identification “by

notice” in all accompanying committee reports. See H.R. Rep. No.

108-755, at 595 (2004) (Conf. Rep.), as reprinted in 2004 U.S.C.C.A.N.

1341, 1649; S. Rep. No. 108-192, at 89 (2003), 2003 WL 22668223, at

*89; H.R. Rep. No. 108-548, pt. 1, at 260 (2004), 2004 WL 1380512, at

*260. Consistent with the foregoing, Judge Pugh’s concurring opinion

finds “little doubt that in enacting section 6707A Congress knew about

and endorsed the existing administrative procedure for determining

reportable transactions and identifying listed ones.” Pugh concurring

op. p. 29.

Since this existing administrative procedure is

“identifi[cation] by notice, regulation or other form of published

guidance,” Judge Pugh acknowledges that it could potentially supersede

or modify the APA’s general requirement that legislative rules must go

through notice and comment. See 5 U.S.C. § 553; Pugh concurring op.

p. 30. Whether the APA has been superseded or modified depends,

Judge Pugh reasons, upon the application of a caselaw test best

summarized as “whether Congress has established procedures so clearly

different from those required by the APA that it must have intended to

displace the norm.” See 5 U.S.C. § 553; Pugh concurring op. p. 28

(quoting Asiana Airlines v. FAA, 134 F.3d 393, 397 (D.C. Cir. 1998)).

I agree with Judge Pugh that this is the appropriate test in the

circumstances. I part ways, however, with her application of the test.

Plainly put, identification of a listed transaction “by notice” cannot be

reconciled with APA notice-and-comment procedures. See 5 U.S.C.

§ 553. The latter requires prior notice to and opportunity for comment

from the public for an identification to become effective—a significant

and time-consuming set of procedural steps—while the former does not.

Congress cross-referenced and thereby incorporated the former

procedure, well-established at the time, into section 6707A. I find it very

unlikely that, in cross-referencing the extant identification procedures

in the section 6011 regulations, Congress intended as significant a

modification to them as APA notice and comment would require without

any mention of that modification in the accompanying committee

reports. The “necessary,” “clear,” or “fair implication,” see Dorsey v.

United States, 567 U.S. 260, 274–75 (2012), of Congress’ action in

incorporating the section 6011 regulations into the statute is that

Congress intended to displace the otherwise applicable notice-andcomment requirements of the APA. See 5 U.S.C. § 553.

I find further support for this interpretation of section 6707A in

Congress’ subsequent enactment of section 4965 two years later. Section

4965 imposes excise taxes on tax-exempt entities and their managers for

participation in listed transactions. See Tax Increase Prevention and

Reconciliation Act of 2005, Pub. L. No. 109-222, § 516, 120 Stat. 345, 368

(2006). At that time, in its description of then-present law, the

conference report on this legislation described a listed transaction as

follows:

A listed transaction means a reportable transaction which

is the same as, or substantially similar to, a transaction

specifically identified by the Secretary as a tax avoidance

transaction for purposes of section 6011 . . . and identified

by notice, regulation, or other form of published guidance

as a listed transaction.

H.R. Rep. No. 109-455, at 125 (2006) (Conf. Rep.), as reprinted in 2006

U.S.C.C.A.N. 234, 321 (emphasis added). Thus, a subsequent Congress

understood and reconfirmed the authority of the Secretary (and the

Service as his or her designee) to identify a transaction as “listed” merely

“by notice.” The views of a subsequent Congress in a committee report

concerning the interpretation of a prior enactment are entitled to

significant weight. Seatrain Shipbuilding Corp. v. Shell Oil Co., 444

U.S. 572, 596 (1980); Sykes v. Columbus & Greenville Ry., 117 F.3d 287,

293–94 (5th Cir. 1997); United States v. Wilson, 884 F.2d 174, 178 n.7

(5th Cir. 1989); Sorrell v. Commissioner, 882 F.2d 484, 489–90 (11th Cir.

1989), rev’g T.C. Memo. 1987-351; Johnsen v. Commissioner, 794 F.2d

1157, 1163 (6th Cir. 1986), rev’g 83 T.C. 103 (1984).

Because I conclude that Congress intended in section 6707A to

displace the APA requirement of notice and comment for the

identification of listed transactions, I dissent from the opinion of the

Court.

NEGA, J., dissenting: The American Jobs Creation Act of 2004

(AJCA), Pub. L. No. 108-357, 118 Stat. 1418, and its legislative history

are consistent with the Congress’ decades-long effort to respond to the

kind of transactions addressed by the AJCA. Such transactions

historically have been viewed as a threat to the voluntary compliance

tax system measured in terms greater than any direct loss in revenue

from the transactions themselves. This long history set the stage for the

AJCA.

Further, I am not aware of any debate over whether the AJCA

was intended to allow the Internal Revenue Service (IRS) to improve the

administration of the tax law and enhance general compliance. In my

view, the legislation does exactly that by limiting the application of the

Administrative Procedure Act (APA), 5 U.S.C. §§ 551–559, 701–706. I

cannot agree that Congress enacted legislation so obviously in

contradiction of the APA as the majority does.

Under one basic rule of statutory interpretation, “Congress is

presumed to be aware of an administrative or judicial interpretation of

a statute and to adopt that interpretation when it re-enacts a statute

without change.” Lorillard v. Pons, 434 U.S. 575, 580–81 (1978). We can

also take judicial notice that Congress would be aware of the inherent

delays were the APA fully applicable. Congress could easily have

decided that the delays inherent in the APA were outweighed by faster

application of the AJCA to tax returns reflecting such transactions. I

believe this to be true.

The issue is whether, in adopting the IRS’s existing regulations

into the statutory scheme, Congress “must have intended to displace the

norm” of APA notice and comment because the adopted procedure is “so

clearly different from” it. Asiana Airlines v. FAA, 134 F.3d 393, 397 (D.C.

Cir. 1998). I find that to be the case.

I believe that the majority’s holding is worryingly close to a

standard requiring “magical passwords in order to effectuate an

exemption from the Administrative Procedure Act.” Marcello v. Bonds,

349 U.S 302, 310 (1955). In that case, after exhaustive analysis, the

Supreme Court found that there was enough evidence to find that the

1952 Immigration and Nationality Act did not violate the APA.

Congress was aware of the IRS’s rulemaking in this area when it

enacted the AJCA to bolster the IRS’s efforts by adding a penalty to the

existing regime. Congress ratified the existing procedures for identifying

these transactions even in the absence of strict adherence to the APA’s

notice-and-comment requirements in those procedures. Section

6707A(c)(1) and (2) confirm my understanding. The cross-reference to

the regulations under section 6011 constitutes strong textual evidence

of Congress’ intent to replace the ritual application of the APA in this

area.

I disagree that Congress failed to “expressly” override the

application of the APA to the IRS process incorporated into law by the

AJCA. The nature of the legislation as well as the legislative history

associated with it that the opinion of the Court finds unpersuasive leads

me to the conclusion that Congress did not intend to enact the AJCA

penalty regime subject to the time-consuming notice-and-comment

procedures of the APA. In the light of congressional knowledge of the

existence of the APA when enacting the AJCA, I cannot agree that

Congress added a penalty regime to enforce the existing IRS rulemaking

without addressing an obvious APA vulnerability, at least, to the thenlisted transactions.

For these reasons, I dissent.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.