Petition for Writ of Certiorari — Oakbrook Land Holdings, LLC, et al., Petitioners v. Commissioner of Internal Revenue

Supreme Court briefOct 4, 2022

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Question Presented

This petition presents a direct conflict regarding

whether the Treasury Department violated the Administrative Procedure Act (the “APA”) by failing to

respond to comments from the public when promulgating a regulation governing charitable donations.

Petitioner donated a conservation easement on

land that it owned to a qualified charity, and it

claimed the corresponding income tax deduction. The

IRS—invoking 26 C.F.R. § 1.170A-14(g)(6)(ii) (the

“Proceeds Regulation”)—denied the entire deduction.

The Proceeds Regulation requires easement deeds to

guarantee that the charity will receive a specified portion of the proceeds in the unlikely event that the

easement is judicially extinguished. The IRS determined that Petitioner’s easement did not guarantee a

sufficient portion of the proceeds to the charity.

When Treasury proposed the Proceeds Regulation,

multiple commenters identified problems with the

regulation (including the very issue on which the Tax

Court disallowed Petitioner’s deduction) and explained why those problems mattered. Treasury did

not respond to—or even acknowledge—the comments.

A divided Sixth Circuit panel held that Treasury’s

failure to respond to the comments did not violate the

APA. The Sixth Circuit acknowledged that its holding conflicts with a unanimous published Eleventh

Circuit decision that the same regulation violated the

APA.

The question presented is: Whether Treasury’s

failure to respond to comments raising concerns about

the Proceeds Regulation, 26 C.F.R. § 1.170A14(g)(6)(ii), violated the Administrative Procedure Act?

Parties to the Proceedings

Petitioner Oakbrook Land Holdings, LLC, William

Duane Horton, Tax Matters Partner, was the petitioner in the Tax Court and the appellant in the Sixth

Circuit.

Respondent Commissioner of Internal Revenue

was the respondent in the Tax Court and the appellee

in the Sixth Circuit.

iii

Rule 29.6 Disclosure Statement

Petitioner Oakbrook Land Holdings, LLC does not

have a parent corporation. There is no publicly held

company that owns 10% or more of Petitioner’s stock.

Related Proceedings

The proceedings directly related to this proceeding

are:

•

Oakbrook Land Holdings, LLC, William Duane

Horton, Tax Matters Partner v. Commissioner

of Internal Revenue, No. 20-2117 (6th Cir.

March 14, 2022)

•

Oakbrook Land Holdings, LLC, William Duane

Horton, Tax Matters Partner v. Commissioner

of Internal Revenue, No. 5444-13 (United

States Tax Court May 12, 2020)

TABLE OF CONTENTS

Page

Question Presented ..................................................... i

Parties to the Proceedings ......................................... ii

Rule 29.6 Disclosure Statement ............................... iii

Related Proceedings .................................................. iv

Table of Contents ....................................................... v

Table of Appendices ................................................. vii

Table of Authorities ................................................... x

Petition for Writ of Certiorari .................................... 1

Opinions Below .......................................................... 8

Jurisdiction................................................................. 8

Statutes and Regulation Involved ............................. 8

Statement of the Case ................................................ 9

A. Treasury’s Proposed Rulemaking ................... 9

B. The Comments Treasury Received ............... 10

C. The Statement of Basis and Purpose ........... 13

D. The Land Trust Alliance Model Deed........... 14

E. Oakbrook’s Easement Donation ................... 15

F. The Tax Court Opinions ................................ 18

G. The Sixth Circuit’s Decision.......................... 22

Reasons for Granting the Petition........................... 25

I. The Sixth Circuit’s Decision Conflicts with

the Eleventh Circuit’s Hewitt Decision. ....... 25

II. The Sixth Circuit’s Decision Conflicts with

Decisions of Other Courts of Appeals

Regarding the Significance of Comments

Outside the Tax Context ............................... 29

III. The Split Is Unlikely to Resolve on Its Own

and This Case Is an Appropriate Vehicle for

Resolution of the Split ................................... 34

Conclusion ................................................................ 36

vii

TABLE OF APPENDICES

Page(s)

APPENDIX A:

Order of the United States Court of Appeals for the Sixth Circuit Denying

Petition for En Banc Rehearing, No. 202117 (Filed July 6, 2022) .....................................1a

APPENDIX B:

Opinion and Judgment of the United

States Court of Appeals for the Sixth Circuit, No. 20-2117 (Filed March 14, 2022)............2a

APPENDIX C:

Opinion of the United States Tax Court,

154 T.C. 180 (Filed May 12, 2020) ....................61a

APPENDIX D:

Memorandum Opinion of the United

States Tax Court, T.C. Memo. 2020-54

(Filed May 12, 2020) ........................................171a

APPENDIX E:

5 U.S.C. § 553(c) ...............................................208a

26 U.S.C. § 170(h) ............................................209a

APPENDIX F:

26 C.F.R. § 1.170A-14(g)(1) .............................214a

26 C.F.R. § 1.170A-14(g)(3) .............................214a

26 C.F.R. § 1.170A-14(g)(6) .............................215a

viii

APPENDIX G:

Qualified Conservation Contribution; Proposed Rulemaking, 48 Fed. Reg. 22,940

(May 23, 1983) (excerpts) ................................217a

APPENDIX H:

Comment from New York Landmarks

Conservancy .....................................................224a

APPENDIX I:

Comment from Land Trust Exchange (excerpts) ...............................................................230a

APPENDIX J:

Comment from Maine Coast Heritage

Trust (excerpts) ................................................233a

APPENDIX K:

Comment from The Nature Conservancy

(excerpts) ..........................................................236a

APPENDIX L:

Comment from Brandywine Conservancy

(excerpts) ..........................................................238a

APPENDIX M:

Comment from Landmarks Preservation

Council of Illinois (excerpts) ............................239a

APPENDIX N:

Comment from Trust for Public Land (excerpts) ...............................................................242a

APPENDIX O:

Income Taxes, Qualified Conservation

Contributions, 51 Fed. Reg. 1496 (Jan. 14,

1986) (excerpts) ................................................243a

TABLE OF AUTHORITIES

Page(s)

CASES:

Associated Industries of New York State, Inc.

v. U.S. Department of Labor,

487 F.2d 342 (2d Cir. 1973) ......................... 32

Automotive Parts & Accessories Ass’n v. Boyd,

407 F.2d 330 (D.C. Cir. 1968) ..................... 31

Azar v. Allina Health Services,

139 S. Ct. 1804 (2019) ................................. 33

Bowman Transportation, Inc. v. ArkansasBest Freight System, Inc.,

419 U.S. 281 (1974) ..................................... 20

Carlson v. Postal Regulatory Commission,

938 F.3d 337 (D.C. Cir. 2019) ......6, 19, 24, 33

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,

467 U.S. 837 (1984) ............................... 20, 25

Commissioner v. Portland Cement Co. of

Utah,

450 U.S. 156 (1981) ..................................... 28

Encino Motorcars, LLC v. Navarro,

579 U.S. 211 (2016) ............................... 20, 21

Glade Creek Partner, LLC v. Commissioner,

No. 21-11251, 2022 WL 3582113 (11th

Cir. Aug. 22, 2022) ....................................... 34

Golsen v. Commissioner,

54 T.C. 742 (1970), aff’d on other

grounds, 445 F.2d 985 (10th Cir. 1971) ...... 28

Gray Mare Farms LLC v. Commissioner,

No. 6682-20 (T.C. July 25, 2022) ................ 29

Hewitt v. Commissioner,

21 F.4th 1336 (11th Cir. 2021) ............. passim

Home Box Office, Inc. v. FCC,

567 F.2d 9 (D.C. Cir. 1977) ......................... 31

Independent U.S. Tanker Owners Committee

v. Dole,

809 F.2d 847 (D.C. Cir. 1987) ..................... 30

Mayo Foundation for Medical Education &

Research v. United States,

562 U.S. 44 (2011) ....................................... 30

MCI WorldCom Inc. v. FCC,

209 F.3d 760 (D.C. Cir. 2000) ..........19, 24, 33

Motor Vehicle Manufacturers Ass’n of the

U.S., Inc. v. State Farm Mutual Automobile Insurance Co.,

463 U.S. 29 (1983) ................................. 21, 22

xii

Oakbrook Land Holdings, LLC, William

Duane Horton, Tax Matters Partner v.

Commissioner,

28 F.4th 700 (6th Cir. 2022) ................. passim

Oakbrook Land Holdings, LLC, William

Duane Horton, Tax Matters Partner v.

Commissioner,

154 T.C. 180 (2020)............................... passim

Oakbrook Land Holdings, LLC, William

Duane Horton, Tax Matters Partner v.

Commissioner,

T.C. Memo. 2020-54.............................. passim

Perez v. Mortgage Bankers Ass’n,

575 U.S. 92 (2015) ................................... 6, 26

Rowan Cos. v. United States,

452 U.S. 247 (1981) ..................................... 15

SEC v. Chenery Corp.,

318 U.S. 80 (1943) ....................................... 22

Sparta Pink Property, LLC v. Commissioner,

T.C. Memo. 2022-88..................................... 28

Thompson v. Commissioner,

T.C. Memo. 2022-80..................................... 28

United States v. Irvine,

511 U.S. 224 (1994) ..................................... 34

xiii

United States v. Nova Scotia Food Products

Corp.,

568 F.2d 240 (2d Cir. 1977) ............... 6, 31, 32

United States v. Pelzer,

312 U.S. 339 (1941) ..................................... 34

Washington Energy Co. v. United States,

94 F.3d 1557 (Fed. Cir. 1996)...................... 34

STATUTES AND REGULATIONS:

5 U.S.C. § 551 ........................................................... 1

5 U.S.C. § 553 ........................................................... 8

5 U.S.C. § 706 ........................................................... 8

5 U.S.C. § 706(2)(A) .................................................. 7

21 U.S.C. § 342(a)(4) .............................................. 32

26 U.S.C. § 170(h) .......................................... 1, 8, 19

26 U.S.C. § 170(h)(5)(A) ................................. 1, 9, 28

26 U.S.C. § 6110(k)(3) ............................................ 15

26 U.S.C. § 6226 (2008) .......................................... 18

28 U.S.C. § 1254(1)................................................... 8

39 U.S.C. § 3622(b)(8) ............................................ 33

xiv

39 U.S.C. § 3622(c)(6)............................................. 33

26 C.F.R. § 1.1170A-14(g)(3) .................................. 23

26 C.F.R. § 1.1170A-14(g)(6)(ii) .............. i, 3, 8, 9, 10

OTHER AUTHORITIES:

Elizabeth Byers & Karin Marchetti Ponte,

The Conservation Easement Handbook (2d

ed. 2005) ........................................................... 14, 15

Income Taxes, Qualified Conservation

Contributions, 51 Fed. Reg. 1496

(Jan. 14, 1986) .............................................. 4, 13, 26

I.R.S. P.L.R. 200836014 (dated June 3, 2008,

and released to the public on September 5,

2008) ...................................................................... 15

1 Kristin E. Hickman & Richard J. Pierce,

Jr., Administrative Law § 4.8 (6th ed. 2019) ........ 33

Kristin E. Hickman, Coloring Outside the

Lines: Examining Treasury’s (Lack of) Compliance with Administrative Procedure Act

Rulemaking Requirements, 82 Notre Dame

L. Rev. 1727 (2007)................................................. 14

Kristin E. Hickman, The Federal Tax System’s Administrative Law Woes Grow, ABA

Tax Times (May 2022) ........................................... 30

Nancy Ortmeyer Kuhn, A Split in the Circuits: Will Supreme Court Take Up Easement

Challenge?, Bloomberg Law (Apr. 5, 2022),

https://news.bloomberglaw.com/environmentand-energy/a-split-in-the-circuits-will-supreme-court-take-up-easement-challenge..... 4, 5, 29

Qualified Conservation Contribution; Proposed Rulemaking, 48 Fed. Reg. 22,940

(May 23, 1983) .................................................... 2, 27

S. Rep. No. 96-1007 (1980) ................................. 2, 10

Sup. Ct. R. 10(a) ..................................................... 25

PETITION FOR WRIT OF CERTIORARI

This case presents a clear and intractable conflict

over an important question of administrative law. The

Sixth Circuit and the Tax Court divided internally on

the question, and the Sixth Circuit acknowledged that

its decision created a conflict with the Eleventh Circuit’s unanimous decision on the same question.

Compare App. 2a-6a and 61a-170a with Hewitt v.

Commissioner, 21 F.4th 1336 (11th Cir. 2021). This

Court should grant certiorari to correct the Sixth Circuit’s and the Tax Court’s flawed application of the

Administrative Procedure Act, 5 U.S.C. § 551 et seq.,

and to restore uniformity to administrative agency obligations to respond to public comments.

Congress amended the Internal Revenue Code in

1980 to encourage land conservation by providing an

income tax deduction for the value of conservation

easements donated to a qualifying charitable organization. 26 U.S.C. § 170(h). Congress placed a number

of restrictions on this deduction, including that the

easement’s conservation purpose must be “protected

in perpetuity.” Id. § 170(h)(5)(A).

However, after the donation, an unexpected

change in the conditions surrounding the land could

occur that would make continued conservation impossible

impractical,

leading

judicial

extinguishment of the easement. (For example, the

government could condemn some or all of the land to

build a school or road.) If that happens, how is the

charitable organization compensated after extinguishment? Congress did not answer this question in the

statute.

In 1983, Treasury proposed a large package of regulations to address the conservation easement income

tax deduction. Qualified Conservation Contribution;

Proposed Rulemaking, 48 Fed. Reg. 22,940 (May 23,

1983); App. 217a. Throughout the regulations, and in

the subparagraph addressing the possibility of judicial

extinguishment, Treasury balanced at least three policy objectives:

(1) encouraging donations of

conservation easements given “that conservation easements now play an important role in preservation

efforts,” (2) satisfying “the need of potential donors to

be secure in their knowledge that a contemplated contribution will qualify for a deduction,” and (3) ensuring

that “the conservation purpose is protected in perpetuity.” S. Rep. No. 96-1007, at 9, 13 (1980).

There were many ways that Treasury could have

struck this balance with respect to the possibility of

extinguishment, such as (1) deeming the possibility

sufficiently remote so as not to implicate the perpetuity requirement, (2) clawing back the tax deduction to

the extent of any proceeds received by the donor, (3)

allowing landowners and charities to negotiate over

this point, (4) allowing state law to dictate the relative

property rights of the landowner and the charity, or (5)

requiring that the donor agree to include a formula in

the easement deed that would specify how to share

some or all of the post-extinguishment proceeds with

the charity. If it chose option (5), Treasury confronted

numerous policy choices in selecting the terms of the

formula, such as whether and how to account for any

landowner improvements made to the property after

the donation.

The regulation that Treasury proposed deferred to

state law if the state provided that the landowner

would be entitled to the full proceeds. App. 223a (“unless state law provides that the donor is entitled to the

full proceeds from the conversion without regard to

the terms of the prior perpetual conservation restriction”). Otherwise, the regulation required that

the donor agree at the time of the donation to provide

a specified portion of the proceeds to the charity. App.

222a-223a.

Treasury received more than 700 pages of comments from 90 commenters on the proposed package

of regulations, thirteen of whom specifically expressed

concern with what is now the Proceeds Regulation, 26

C.F.R. § 1.170A-14(g)(6)(ii). See App. 8a; see also App.

137a-138a (Holmes, J., dissenting). Many of the commenters were conservation organizations that raised

a variety of issues with Treasury’s policy choices reflected in the proposed rule, including two that are

relevant here: “Why did Treasury choose to require

that a donee receive a proportionate share rather than

a fixed sum if the easement is extinguished or condemned? And why did Treasury choose to require that

a donee share in the value added to the property by

later improvements to it?” App. 138a (Holmes, J., dissenting).

The New York Landmarks Conservancy identified

specific “inequities” with the proposed Proceeds Regulation and argued that it “contain[s] problems of policy

and practical application so pervasive as to cause us

to recommend strongly the deletion of these provisions.” App. 226a; 228a. It argued that “the proposed

provisions would thwart the purpose of the statute by

deterring prospective donors.” App. 226a. It included

a mathematical example highlighting the proposed

formula’s “fail[ure] to take into account that improvements may be made thereafter by the owner which

should properly alter the ratio.” App. 227a. Other

commenters identified different potential problems

with the proposed regulation and requested that

Treasury remove it altogether. See App. 230a-242a.

When it issued the final regulations, Treasury provided no response to, or acknowledgement of, these

comments. See Income Taxes, Qualified Conservation

Contributions, 51 Fed. Reg. 1496 (Jan. 14, 1986); App.

243a-252a. The statement of basis and purpose—a

mere two pages (six columns) of the Federal Register—accompanying the final regulations did not even

mention the Proceeds Regulation. And it specifically

asserted that the notice-and-comment requirements of

the APA “did not apply.” App. 251a-252a.

In the absence of any response from Treasury, or

justification for its policy choices, a leading conservation organization developed a model easement deed,

used by thousands of donors to conserve tens of millions of acres of land, that contained a provision that

allows landowners to retain any post-extinguishment

proceeds attributable to post-donation improvements

made to the land. In 2016, the IRS began denying the

entire charitable deduction for any easement donation

by taxpayers who used the model deed. As one Tax

Court opinion in this case put it, the IRS is denying

deductions based on “future hypothetical proceeds

from a future hypothetical extinguishment.” App.

172a; see also Nancy Ortmeyer Kuhn, A Split in the

Circuits: Will Supreme Court Take Up Easement Challenge?,

Bloomberg

Law

(Apr.

2022),

https://news.bloomberglaw.com/environment-and-

energy/a-split-in-the-circuits-will-supreme-courttake-up-easement-challenge (describing the “‘gotcha’

quality of the IRS’ current position” given that “[t]here

is no evidence that any proceeds have actually been

distributed utilizing the proceeds regulation’s formula

or the taxpayers’ easement deeds’ formulas”).1

In 2008, Oakbrook agreed to conserve approximately 106 acres of ridgeline property on White Oak

Mountain outside Chattanooga, Tennessee. See App.

9a. The Southeast Regional Land Conservancy used a

model deed to impose the necessary restrictions on

Oakbrook’s land. App. 176a. The IRS denied Oakbrook’s tax deduction, and just before trial the IRS

asserted that Oakbrook’s donation violated the Proceeds Regulation. Oakbrook argued that Treasury’s

failure to consider the comments that it received regarding the proposed Proceeds Regulation violated the

APA.

The Tax Court considered whether Treasury’s failure to address the comments on the proposed Proceeds

Regulation violated the APA. Following a vote by seventeen of the court’s active judges, a majority of the

Tax Court upheld the regulation in an opinion by

Judge Lauber. App. 61a. Judges Toro and Holmes

authored separate opinions explaining why the regulation violated the APA’s procedural requirements.

App. 89a (Toro, J., concurring in the result); App. 131a

(Holmes, J., dissenting).

The land use restrictions in a donated easement remain binding forever under state law whether or not the

IRS allows the federal income tax deduction that Congress

promised.

The Tax Court denied Oakbrook’s deduction and

also applied its holding to other cases presenting the

same issue, including Hewitt v. Commissioner, which

involved land conservation in Alabama. Oakbrook

and the Hewitts filed separate appeals in the Sixth

and Eleventh Circuits, respectively, arguing that the

Proceeds Regulation was invalid.

The Eleventh Circuit, in a unanimous opinion by

Judge Lagoa, held that the Proceeds Regulation “is arbitrary and capricious under the APA for failing to

comply with the APA’s procedural requirements and

is thus invalid.” Hewitt v. Commissioner, 21 F.4th

1336, 1350 (11th Cir. 2021).

But the Sixth Circuit, in an opinion by Judge

Moore, found Hewitt “unpersuasive” and concluded

that Treasury was not required to respond to the comments on the Proceeds Regulation. App. 27a. The

Sixth Circuit held that Treasury was not required to

respond to the comments that it received because the

comments “did not engage with [the] perpetuity requirement and whether the rule served this end.” App.

23a. As Judge Guy explained in his concurring opinion, this rationale conflicts with Hewitt and with

decisions from other Courts of Appeals, including

United States v. Nova Scotia Food Products Corp., 568

F.2d 240 (2d Cir. 1977) and Carlson v. Postal Regulatory Commission, 938 F.3d 337 (D.C. Cir. 2019). See

App. 43a-50a (Guy, J., concurring in the judgment).

This Court has held that the APA requires administrative agencies to “consider and respond to

significant comments received during the period for

public comment.” Perez v. Mortg. Bankers Ass’n, 575

U.S. 92, 95 (2015). Where agencies do not comply with

this requirement, a “reviewing court shall * * * hold

unlawful and set aside” the resulting regulation. 5

U.S.C. § 706(2)(A).

The question of when a comment is sufficiently significant to require an agency response affects not only

Treasury and the IRS but also all other administrative

agencies that promulgate legislative rules—and the

members of the public that they regulate. This case

thus has implications far beyond the tax context.

Absent this Court’s intervention, other administrative agencies will invoke the Sixth Circuit’s decision to

support post-hoc justifications for their failure to respond to comments and thereby unduly narrow their

obligation to interact with the regulated public. There

is no justification for reducing the accountability of administrative agencies to the public in this manner.

As matters now stand, hundreds if not thousands

of taxpayers who made charitable donations to conserve millions of acres of land, as encouraged by

Congress, find themselves in financial limbo. The Tax

Court is deferring decision in many of their cases, including those appealable to other Courts of Appeals,

pending resolution of the split in authority. Because

the various opinions from the Tax Court, Eleventh

Circuit, and Sixth Circuit have fully debated the relevant issues of administrative law, the question

presented is ripe for review by this Court. The Court

should grant certiorari to determine whether Treasury’s failure to respond to comments invalidates the

Proceeds Regulation.

OPINIONS BELOW

The opinion of the United States Court of Appeals

for the Sixth Circuit is reported at 28 F.4th 700 and

reproduced at App. 2a-60a. One opinion of the Tax

Court is reported at 154 T.C. 180 and reproduced at

App. 61a-170a. Another opinion of the Tax Court, T.C.

Memo. 2020-54, is not reported, but is reproduced at

App. 171a-207a.

JURISDICTION

The United States Court of Appeals for the Sixth

Circuit rejected Oakbrook’s challenge to 26 C.F.R.

§ 1.170A-14(g)(6)(ii) in a decision rendered on March

14, 2022. The court denied a petition for rehearing en

banc on July 6, 2022. App. 1a. This Court has jurisdiction pursuant to 28 U.S.C. § 1254(1).

STATUTES AND REGULATION INVOLVED

The statutes involved are 5 U.S.C. §§ 553 and 706

and 26 U.S.C. § 170(h).

The regulation involved is 26 C.F.R. § 1.170A14(g)(6)(ii), which provides in relevant part:

(ii) Proceeds. * * * [F]or a deduction to be allowed under this section, at the time of the gift

the donor must agree that the donation of the

perpetual conservation restriction gives rise to

a property right, immediately vested in the donee organization, with a fair market value that

is at least equal to the proportionate value that

the perpetual conservation restriction at the

time of the gift, bears to the value of the property as a whole at that time. * * * For purposes

of this paragraph (g)(6)(ii), that proportionate

value of the donee’s property rights shall

remain constant. Accordingly, when a change

in conditions give rise to the extinguishment of

a perpetual conservation restriction under paragraph (g)(6)(i) of this section, the donee

organization, on a subsequent sale, exchange,

or involuntary conversion of the subject property, must be entitled to a portion of the

proceeds at least equal to that proportionate

value of the perpetual conservation restriction,

unless state law provides that the donor is entitled to the full proceeds from the conversion

without regard to the terms of the prior perpetual conservation restriction.

STATEMENT OF THE CASE

A. Treasury’s Proposed Rulemaking

Congress revised the Internal Revenue Code in

1980 to encourage private land conservation by allowing a charitable contribution deduction for gifts of

qualified conservation contributions, i.e., donations of

conservation easements to charity. Congress imposed

a number of requirements on tax deductions for these

gifts, one of which was that the conservation purpose

of the gift be “protected in perpetuity.” 26 U.S.C.

§ 170(h)(5)(A).

In 1983, Treasury published a notice of proposed

rulemaking on the income tax deduction for conservation easements. The notice cited House and Senate

Committee reports on the 1980 legislation as having

“provided, for the first time, an in-depth statement of

congressional intent concerning the donation of partial interests for conservation purposes (H.R. Rep. No.

96-1278, S. Rep. No. 96-1007).” App. 219a. Treasury

stated that “[t]he regulations reflect the major policy

decisions made by the Congress and expressed in

these committee reports.” Id.

The Report of the Senate Committee on Finance

that Treasury cited recognized that “conservation

easements now play an important role in preservation

efforts.” S. Rep. No. 96-1007, at 9 (1980). Given “the

need of potential donors to be secure in their

knowledge that a contemplated contribution will qualify for a deduction” the report instructed that “the

committee expects that regulations under this section

will be classified among those regulation projects having the highest priority.” Id. at 13.

The proposed regulations consisted of “10 paragraphs, 23 subparagraphs, 30 subdivisions, and 21

examples” regarding this charitable contribution deduction. App. 69a. “One of these 23 subparagraphs

became” the Proceeds Regulation, 26 C.F.R. § 1.170A14(g)(6)(ii). App. 69a-70a. It mandated that landowners agree in advance to grant a portion of the proceeds

from any sale or exchange following a future judicial

extinguishment to the charity.

Treasury received more than 700 pages of public

comments from 90 commenters and held a five-hour

hearing at which thirty members of the public spoke.

App. 70a, 117a (Toro, J., concurring in the result).

B. The Comments Treasury Received

Thirteen of the 90 submitted comments addressed

the proposed Proceeds Regulation, including two key

questions that are relevant here. “Why did Treasury

choose to require that [the donee charity] receive a

proportionate share rather than a fixed sum if the

easement is extinguished or condemned? And why did

Treasury choose to require that a donee charity share

in the value added to the property by later donor landowner improvements?”

App. 138a (Holmes, J.,

dissenting).

The New York Landmarks Conservancy (“NYLC”)

raised these questions in a five-page comment letter.

See App. 224a-229a. NYLC stated that the proposed

judicial extinguishment provisions “contain problems

of policy and practical application so pervasive as to

cause us to recommend strongly the deletion of these

provisions.” App. 226a. It said that “the proposed provisions would thwart the purpose of the statute by

deterring prospective donors.” Id. NYLC identified

four specific “inequities” caused by the provisions.

App. 228a. One of those inequities was that the “formula fails to take into account that improvements

may be made thereafter by the owner which should

properly alter the ratio.” App. 227a. It demonstrated

this problem by applying values to an example Treasury had proposed regarding a different issue

elsewhere in the proposed regulations. See App. 227a228a. NYLC posited that, in Treasury’s example, the

owner of Greenacre, land whose fair market value was

$100,000, donated an easement to charity to protect

the scenic view of a nearby national park, resulting in

a 10% reduction in the value of Greenacre. Thereafter,

the owner spends $2 million on the construction of

homes as contemplated by Treasury’s example. If the

easement were subsequently extinguished, the proposed Proceeds Regulation would require the charity

to receive 10% of all of the proceeds, including any proceeds attributable to the homes. If the landowner had

borrowed money to construct the improvements, its

share of the proceeds might be insufficient to repay the

loan.

NYLC said “[t]his would obviously be

undesirable to the prospective donor and would constitute a windfall to the donee organization.” App. 228a.

The Landmarks Preservation Council of Illinois

(“LPCI”) explained that the Proceeds Regulation “create[s] a potential disincentive to the donation of

easements” because the Proceeds Regulation could

leave a building owner in a situation where the proceeds he receives from a subsequent sale are

insufficient to pay the donee and third parties, such as

lenders. App. 240a. As an alternative, the LPCI suggested that the issue of post-extinguishment proceeds

“should not be treated in the regulations, but should

be negotiated, defined, and incorporated by the donor

and donee into the conservation right document on a

property by property basis.” App. 241a.

The Land Trust Exchange’s comments identified

similar problems and observed that “[t]his section may

result in donors and donees having to pay real estate

transfer taxes.” App. 232a. As an alternative, the

Land Trust Exchange suggested “the tax benefit rule

and the remote future event rule should make this section unnecessary.”2 Id.

The remote future event rule in the proposed and

final regulations provides that “[a] deduction shall not be

disallowed * * * merely because the interest which passes

to, or is vested in, the donee organization may be defeated

by the performance of some act or the happening of some

event, if on the date of the gift it appears that the possibility

that such act or event will occur is so remote as to be negligible. * * * For example, a state’s statutory requirement

that use restrictions must be rerecorded every 30 years to

remain enforceable shall not, by itself, render an easement

nonperpetual.” App. 222a, 253a.

The Trust for Public Land stated, “[w]e have serious doubts whether the provision for the allocation of

the [sale proceeds] following extinguishment of an

easement could be enforced against anyone other than

the original donor of the easement, if that is what is

intended.” App. 242a. This commenter also suggested:

“[W]e think this provision goes further than the regulations need to go. The remote future event rule of

§1.170A-13(g)(2) should suffice.” Id.

Other commenters, including the Maine Coast

Heritage Trust and the Nature Conservancy, suggested that the rule needed more clarity and that

donee charities should be entitled to both the original

proportionate value and any subsequent increase in

value attributable to market forces. See App. 233a237a.

C. The Statement of Basis and Purpose

Treasury published the final regulations in the

Federal Register on January 14, 1986. Income Taxes,

Qualified Conservation Contributions, 51 Fed. Reg.

1496 (Jan. 14, 1986); see App. 243a-252a. It began its

two-page (six column) statement of basis and purpose

with a boilerplate statement that it was issuing the

regulations “[a]fter consideration of all comments.”

App. 244a. And then it gave no response whatsoever

to any of the comments on the Proceeds Regulation.

Indeed, it did not even mention the Proceeds Regulation.

Instead, the preamble stated that “the Internal

Revenue Service concluded when the notice was issued that the regulations are interpretative and that

the notice and public comment procedure requirement

of 5 U.S.C. 553 did not apply.”3 App. 251a-252a.

D. The Land Trust Alliance Model Deed

If Treasury had agreed with the comments, it could

have deleted the Proceeds Regulation or modified it to

address the identified inequities. If Treasury had disagreed with the comments, it could have said so and

explained why. Either way, taxpayers considering

whether to conserve their land would have adjusted

their behavior accordingly.

But Treasury remained silent.

In 2005, the Land Trust Alliance, a national land

conservation organization that represents more than

1,000 member land trusts, published the second edition of The Conservation Easement Handbook (the

“Handbook”). Elizabeth Byers & Karin Marchetti

Ponte, The Conservation Easement Handbook (2d ed.

2005). When allocating proceeds, the Handbook’s

model excludes “any increase in value after the date of

This reflects Treasury’s longstanding practice of

claiming nearly all of its regulations are interpretative. See

Kristin E. Hickman, Coloring Outside the Lines: Examining Treasury’s (Lack of) Compliance with Administrative

Procedure Act Rulemaking Requirements, 82 Notre Dame

L. Rev. 1727, 1729 (2007) (“Treasury acknowledges that

APA section 553 governs its various regulatory efforts.

Treasury also contends, however, that most Treasury regulations are interpretive in character and thus exempt

from the public notice and comment requirements by the

APA’s own terms.” (footnote omitted)).

this grant attributable to improvements not paid for

by Holder” from the value of the property. Id. at 463.

The Handbook explains that the regulations do not address “appreciation in value due to improvements,”

and that “allocation [consistent with the model deed]

* * * is certainly called for as a matter of basic fairness.”

Id. at 464.

As a result, this is a “clause commonly found in

easements, particularly in the southeastern part of

the country.” App. 172a.

Treasury’s silence even infected the IRS. Just

three months before Oakbrook donated its easement

as described below, the IRS released to the public a

private letter ruling interpreting the Proceeds Regulation to permit proceeds attributable to post-donation

improvements to be excluded from the pool of proceeds

that must be divided between the landowner and the

charity. See I.R.S. P.L.R. 200836014 (dated June 3,

2008, and released to the public on September 5,

2008).4

E. Oakbrook’s Easement Donation

Oakbrook’s founder Duane Horton grew up in the

Chattanooga, Tennessee area. After founding a successful construction business, he expanded into real

estate development. App. 173a. In 2007, he formed

Oakbrook Land Holdings, LLC to purchase and develop an overgrown 143-acre property outside

Chattanooga, Tennessee on White Oak Mountain, a

Private letter rulings are evidence of the IRS’s administrative practice on a particular issue but are not

binding authority. Rowan Cos. v. United States, 452 U.S.

247, 261 n.17 (1981); 26 U.S.C. § 6110(k)(3).

half-mile from the Tennessee/Georgia border. App.

173a-174a.

Mr. Horton intended to develop the property with

residences and a commercial service area, but he had

to overcome a number of obstacles. Mr. Horton successfully sought to have a portion of the property

rezoned, obtained permits to build (and did build) a

bridge across a creek that had rendered much of the

property inaccessible, and installed a high-pressure

sewer pump station. App. 174a.

In 2008, Mr. Horton learned about a conservation

easement placed on nearby property and started researching conservation easements.

App. 174a.

Conserving a portion of the Oakbrook property appealed to him because it would protect the ridgeline

for his nine children to enjoy. His interest piqued, he

learned more about conservation easements from the

Executive Director of the Southeast Regional Land

Conservancy (the “Conservancy”), which agreed to

draft the paperwork should Oakbrook decide to donate

an easement to the Conservancy. Id.

When Mr. Horton told his investors about his plan

to conserve a portion of the Oakbrook property, they

initially balked because they wanted to develop the

property. App. 174a. But Mr. Horton eventually persuaded them to agree to give up their right to develop

106 acres and to conserve it forever by donating a conservation easement. Id.

Mr. Horton was not an expert in the tax rules governing deductions for easement donations, so

Oakbrook relied heavily on the Conservancy to draft

the easement deed. App. 175a. The Conservancy used

its standard deed language, which likely was drawn

from other model agreements, including those produced by the Land Trust Alliance. App. 176a.

The Executive Director of the Conservancy testified that he “did not think it right for the Conservancy

to share in any condemnation award or extinguishment proceeds attributable to any improvements”

Oakbrook makes after the donation because the Conservancy “did not pay for those improvements.”

Moreover, he believed that the Conservancy’s deed,

which guaranteed it “an absolute” amount, “is

[al]ways going to exceed * * * the minimum required

by the IRS.” App. 177a (alteration and omission in

original).

Therefore, the Oakbrook deed’s extinguishment

clause provides that the Conservancy would receive a

fixed amount of the proceeds equal to the difference

between the fair market value of the property with

and without the easement, as measured on the date of

the donation, i.e., the amount of the tax deduction

claimed by Oakbrook. App. 175a-176a. The clause

also provides that the Conservancy would not be entitled to any portion of the proceeds attributable to

improvements to the property made by Oakbrook after

the donation. Id.

Oakbrook donated the easement to the Conservancy in 2008. App. 174a. Oakbrook is classified as a

partnership for federal tax purposes, and on its 2008

tax return, it claimed a deduction of $9.545 million,

which Oakbrook’s appraiser determined to be the difference between the price at which it could sell the

Oakbrook property for development and the residual

value of the property under easement. App. 177a-178a.

F. The Tax Court Opinions

The IRS opened an examination of Oakbrook’s

2008 tax return. In 2012, the IRS issued a Notice of

Final Partnership Administrative Adjustment disallowing the deduction (on grounds other than the

Proceeds Regulation). App. 178a. In 2013, Oakbrook

petitioned the Tax Court for readjustment under 26

U.S.C. § 6226 (as in effect for the 2008 tax year). App.

10a-11a.

The IRS first made the argument that Oakbrook’s

deed did not comply with the Proceeds Regulation in a

motion for partial summary judgment filed in August

2016. By that time, Oakbrook’s conservation easement had been in place for almost eight years (where

it remains today, without any suggestion of potential

judicial extinguishment).

Judge Holmes presided over the Tax Court trial of

the Oakbrook case in October 2016. App. 11a. In May

2020, the Tax Court issued two opinions in the case, a

reviewed opinion by the full Tax Court regarding the

validity of the Proceeds Regulation (with Judge

Holmes in dissent) and a memorandum opinion by

Judge Holmes containing the Court’s factual findings

and applying the reviewed opinion’s legal conclusions.

The reviewed opinion, authored by Judge Lauber,

concluded that the Proceeds Regulation is a legislative

rule and that Treasury complied with the APA in issuing it. See App. 73a-81a. The Tax Court majority

was of the view that “[t]he purpose of the ‘judicial extinguishment’ rule is plain on its face.” App. 80a.

Moreover, Treasury was not required to explain the

basis and purpose for each individual component of

such a large regulation project. Id. Treasury made

“numerous changes” to the proposed regulations and

stated that it was adopting the regulations “[a]fter

consideration of all comments.” App. 77a (quoting T.D.

8069, 1986-1 C.B. at 90).

Judge Toro authored a concurring opinion. See

App. 89a-130a. In his view, section 170(h) itself (without resort to the Proceeds Regulation) required that

the charity’s share of the proceeds be calculated based

on the fair market value as of the date of extinguishment, not the value as of the date of the gift as

provided for in Oakbrook’s deed.5 See App. 90a-97a.

Judge Toro proceeded to explain why the Proceeds

Regulation “fails to meet the procedural requirements

of the Administrative Procedure Act.” App. 90a; see

App. 109a-130a. He observed that “Treasury was

simply following its historical position that the APA’s

procedural requirements did not apply to these types

of regulations.” App. 118a. Thus, “it is not difficult to

see why that agency might think that a rather brief

explanation, offered as it were out of its own generosity, should be good enough.” App. 119a.

Judge Toro explained that “[t]he record leaves no

doubt that NYLC made comments ‘that can be thought

to challenge a fundamental premise’ underlying the

proposed agency decision.’” App. 123a (quoting Carlson v. Postal Regul. Comm’n, 938 F.3d 337, 344 (D.C.

Cir. 2019) (quoting MCI WorldCom Inc. v. FCC, 209

F.3d 760, 765 (D.C. Cir. 2000))). “But Treasury gave

The Sixth Circuit held that the IRS waived this argument (which Judge Toro raised sua sponte) by not

making it before the Tax Court. App. 12a-14a. Neither the

Tax Court majority nor the dissent addressed the argument.

App. 13a.

no explanation” for how it “addressed the concerns expressed in the NYLC Comment Letter.” App. 124a.

Thus, “Treasury’s actions did not provide ‘an explanation [that] is clear enough that its “path may

reasonably be discerned.”’” Id. (quoting Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 221 (2016)

(quoting Bowman Transp., Inc. v. Ark.-Best Freight

Sys., Inc., 419 U.S. 281, 286 (1974))).6

Judge Holmes penned a lengthy dissent, which

opened with the observation that “[o]ur holding today

will likely deny any charitable deduction to hundreds

or thousands of taxpayers who donated the conservation easements that protect perhaps millions of acres.”

App. 131a. He explained that thirteen of the 90 comments on the regulations project had “specifically

expressed concern with” the Proceeds Regulation.

App. 137a. After reviewing the comments, he concluded that “[t]hese are multiple serious comments

that identified problems with the regulation when it

was proposed and explained why those problems mattered. Comments with this level of detail and dispute

among the commenters would seem enough to conclude that Treasury had before it ‘significant’

comments. Such comments deserve responses.” App.

142a.

Judge Holmes made the practical point that “[h]ad

Treasury responded in any meaningful way to the

comments that it received, such as those from NYLC,

Judge Toro also concluded that the Proceeds Regulation is an unreasonable interpretation of the statute and

therefore invalid under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). See App.

105a-109a.

neither donors and donees, nor courts” would have to

grapple with the issues raised in the case. App. 143a

(citing the IRS’s 2008 private letter ruling). “Such

widespread industry confusion is precisely what APA

section 553 is intended to avoid.” Id.

Judge Holmes addressed each of the majority’s arguments for letting the regulation stand.

explained that the commenters raised significant issues with the proposed regulation that merited a

response. Contrary to the majority’s claim that commenters did not propose alternatives, commenters

“wrote in to propose other alternatives to achieve the

Code’s requirement that the conservation purpose of a

donated easement be preserved ‘in perpetuity.’” App.

149a. He explained that Treasury’s unsupported

statement that it had considered “all comments” was

insufficient under Motor Vehicle Manufacturers Ass’n

of the United States, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983) (decided

three years before the Treasury finalized the Proceeds

Regulation), and Encino Motorcars, LLC v. Navarro,

579 U.S. 211, 223 (2016). App. 150a-159a. Finally, he

explained that the majority’s determination that “minor changes to the proposed regulation” were a

sufficient basis on which to uphold the regulation was

incorrect because the changes to this proposed regulation did not allow a reviewing court to “infer an

agency’s reasoned response to a significant comment.”

App. 160a. Accordingly, Judge Holmes said that the

court should “hold that Treasury’s failure to respond

to significant comments in the Final Rule’s statement

of basis and purpose violated APA section 553(c).” 7

App. 161a.

Nevertheless, bound by the Tax Court’s reviewed

opinion, Judge Holmes denied Oakbrook’s deduction

in his memorandum opinion. App. 171a-207a.

G. The Sixth Circuit’s Decision

The Sixth Circuit, in an opinion by Judge Moore

and joined by Judge Gibbons, affirmed. The Sixth Circuit first held that the IRS had waived any argument

that Oakbrook’s deed did not comply with the statute

by not raising the argument before the Tax Court.

App. 12a-14a. The Sixth Circuit majority observed

that Judge Toro’s concurring opinion in the Tax Court

had “raised this issue sua sponte with neither the majority nor the dissent addressing it.” App. 13a.

Moreover, the Sixth Circuit observed that the argument depended on economic projections “not in the

record” and that instead the IRS had relied on data

pulled from the websites Zillow.com and Neighborhoodsout.com while it was preparing its appellate

brief. The Sixth Circuit stated, “we are hesitant to

rely on economic projections that have not been vetted

by the adversarial process.” App. 13a & n.4.

Turning to the Proceeds Regulation, the majority

first addressed the adequacy of Treasury’s concise

statement of basis and purpose. The majority concluded that “the statutory text and legislative history

that Treasury contemplated in promulgating [the Proceeds Regulation] illuminate the regulation’s basis

Judge Holmes also questioned whether the Proceeds

Regulation survived scrutiny under State Farm and SEC v.

Chenery Corp., 318 U.S. 80 (1943).

and purpose: to provide an administrable mechanism

that would ensure that an easement’s conservation

purpose as per I.R.C. § 170(h)(5)(A) continued to be

protected should the interest be extinguished.”8 App.

19a. Therefore, “its concise statement suffices.” Id.

The majority then held that none of the comments

regarding the Proceeds Regulation required Treasury’s response. NYLC’s comment did not require any

response because it “did not engage with I.R.C.

§ 170(h)(5)(A)’s perpetuity requirement and whether

the rule served this end.” App. 23a. A comment from

the Landmarks Preservation Council of Illinois did not

require a response because it was “wrong” and therefore “did not raise a significant issue.” App. 23a-24a.

The Land Trust Exchange and the Trust for Public

Land suggested that a different part of the regulation

package (26 C.F.R. § 1.170A-14(g)(3)) was sufficient to

protect Treasury’s concerns about perpetuity. App.

24a. That comment required no response because

“[n]either organization provided any indication of how

expanding [paragraph (g)(3)] would fulfill Congress’s

express aim in I.R.C. § 170(h)(5)(A) of limiting deductions to those instances where an easement’s

conservation purpose can be safeguarded forever.” Id.

The majority opinion acknowledged “a recent decision by the Eleventh Circuit that held the proceeds

regulation to be procedurally invalid under the APA.

See Hewitt v. Commissioner, 21 F.4th 1336, 1339 (11th

Cir. 2021).” App. 27a. It stated that “we find that decision’s reasoning to be unpersuasive.” Id. It observed

that the Eleventh Circuit had found NYLC’s comment

The Internal Revenue Code (or “I.R.C.”) is codified

in Title 26 of the United States Code.

significant because it “raised significant concerns

about possible deterrent effects that the proceeds regulation could have on donations.” Id. In the majority’s

view, “highlighting this point overlooks a crucial condition that Congress demanded be met by donors

seeking deductions: an easement’s conservation purpose must be ‘protected in perpetuity.’” Id.

Judge Guy concurred in the judgment. He would

have found that the “the regulation is procedurally invalid under the Administrative Procedure Act (APA)

for substantially the same reasons stated by the Eleventh Circuit in [Hewitt] and by the concurring and

dissenting opinions in [the Tax Court’s Oakbrook opinion].” App. 39a. (He concurred, rather than dissented,

because he credited the argument that the Sixth Circuit held the IRS had waived. App. 53a-59a.)

Judge Guy explained that NYLC’s comment was

significant for two reasons. App. 43a-44a. First, it

showed that the regulation would thwart one of the

purposes of the statute by deterring prospective donors. App. 43a. Second, the comment cast doubt on

the reasonableness of the regulation’s formula and

further showed that the proposed regulation would

“obviously” deter donors. Id. “The bottom line is there

is no doubt that NYLC’s comment ‘“can be thought to

challenge [two] fundamental premise[s]” underlying

the proposed agency decision’ and Treasury failed to

respond.” App. 45a (quoting Carlson v. Postal Regul.

Comm’n, 938 F.3d 337, 344 (D.C. Cir. 2019) (quoting

MCI WorldCom Inc. v. FCC, 209 F.3d 760, 765 (D.C.

Cir. 2000))).

Judge Guy reasoned that the majority had erred by

“treat[ing] one other statutory goal—perpetuity—as a

trump card, such that Treasury was free to ignore any

comment unless the comment showed that the regulation failed to satisfy the perpetuity requirement.” App.

48a. (cleaned up). He rejected the majority’s efforts

to discern what Treasury was thinking: “Treasury

was required to explain to the public, why post-donation improvements are not taken into account and why

it balanced the competing statutory interests in favor

of adopting a fixed-ratio formula.”9 App. 49a.

Notwithstanding his view that the Proceeds Regulation was invalid under the APA, Judge Guy would

have excused the IRS’s failure to raise its statutory argument in the Tax Court and hold that Oakbrook’s

deed did not comply with the statute’s perpetuity requirement because it fixed the amount to which the

charity was entitled at the time of grant rather than

at the time of extinguishment. App. 53a-59a.

The Sixth Circuit denied rehearing en banc on July

6, 2022. App. 1a.

REASONS FOR GRANTING THE PETITION

The Sixth Circuit’s Decision Conflicts with

the Eleventh Circuit’s Hewitt Decision.

The Sixth Circuit’s decision created a square—and

widely acknowledged—conflict with the Eleventh Circuit regarding the validity of the Proceeds Regulation.

See Sup. Ct. R. 10(a).

In Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir.

2021), the Eleventh Circuit held that “the Commissioner’s interpretation of § 1.170A-14(g)(6)(ii) is

arbitrary and capricious and violates the APA’s

Judge Guy also concluded that the Proceeds Regulation does not survive under Chevron. App. 53a.

procedural requirements.” Id. at 1339. The court began by listing the APA’s procedural requirements for

legislative rules as set forth in Perez v. Mortgage

Bankers Ass’n, 575 U.S. 92 (2015). The most important of these for present purposes is that “the

agency ‘must consider and respond to significant comments received during the period for public comment.’”

Hewitt, 21 F.4th at 1342 (quoting Perez, 575 U.S. at

96).

The court reviewed the “most extensive” comments

submitted by the New York Landmarks Conservancy,

along with comments and concerns from six other conservation

organizations

about

the Proceeds

Regulation. Id. at 1345-1346. But “Treasury did not

discuss or respond to the comments made by NYLC or

the other six commenters concerning the extinguishment proceeds regulation.” Id. at 1346 (citing 51 Fed.

Reg. at 1497-1498).

The Eleventh Circuit concluded that the comments

from NYLC “challenged a fundamental premise underlying Treasury’s proposed regulations by ‘in effect

counter[ing] that the proposed rule on future donor

improvements was contrary to those policy decisions

[mentioned in the proposed regulations], would lead to

inequitable results that were inconsistent with the

statute, and would deter future contributions.’” Id. at

1351 (quoting App. 123a (Toro, J., concurring in the

result)). Thus, “[s]imply put, NYLC’s comment was

significant and required a response by Treasury to satisfy the APA’s procedural requirements.” Id.

In rejecting the IRS’s arguments that NYLC’s comment was not significant, the Eleventh Circuit quoted

Treasury’s preamble to the proposed regulations,

which stated that the “regulations reflect the major

policy decisions made by the Congress and expressed

in the[ ] committee reports.” Id. at 1351 (alteration in

original) (quoting 48 Fed. Reg. at 22,940). The IRS argued that NYLC’s comment was not significant

because “Treasury’s ‘primary (if not exclusive) consideration in crafting the proceeds regulation was the

meaning of the statutory perpetuity requirement’ and

that, as such, NYLC was required ‘to explain why the

rule would not further the goal of ensuring that the

conservation purpose embodied in the perpetual use

restriction would be protected in perpetuity as required by the statute.’” Id. at 1352 (quoting IRS Br.

at 29-30). The Eleventh Circuit rejected the IRS argument as “inconsistent with the committee reports

Treasury purportedly relied on.” Specifically, “one of

the purported purposes set forth in the committee reports was to allow deductions for the donation of

conservation easements to encourage donation for

such easements. See S. Rep. No. 96-1007, at 9.” Id.

Thus, “NYLC’s comment was specific to, and casted

doubt on, the reasonableness of the proceeds regulation in light of one of Congress’s committee reports.”

Id.

The Eleventh Circuit rejected additional IRS arguments that Treasury’s revisions to the proposed

Proceeds Regulation in the final regulation support its

representation that it considered “all comments” in

the final regulations’ preamble. The Eleventh Circuit

held the IRS to its concession that the revisions were

“simply ‘clarifications’ in response to other comments,”

and the court therefore held that the revisions did not

“provide any indication that Treasury was responding

to NYLC’s significant comment about the post-donation improvements issue.” Id. at 1353.

In creating the circuit split, the Sixth Circuit found

Hewitt’s “reasoning to be unpersuasive.” App. 27a. It

found that Treasury was not required to respond to

the New York Landmarks Conservancy’s comment because “the comment did not engage with I.R.C.

§ 170(h)(5)(A)’s perpetuity requirement and whether

the rule served this end.” App. 23a. The Sixth Circuit

stated that “[a]lthough encouraging the donation of

conservation easements is undeniably a goal of the

statute, highlighting this point overlooks a crucial condition that Congress demanded be met by donors

seeking deductions: an easement’s conservation purpose must be ‘protected in perpetuity’.” App. 27a

(quoting 26 U.S.C. § 170(h)(5)(A)).

Hewitt and Oakbrook thus are in direct conflict regarding the validity of the Proceeds Regulation, the

significance of the comments submitted to Treasury,

and the obligations of agencies to explain their rules.

Those acknowledging the existence of the split include

the Tax Court judges tasked with deciding whether to

reaffirm their Oakbrook decision or instead to follow

Hewitt. The Tax Court is a court of nationwide jurisdiction, and it has a “rule of applying the law of the

court of appeals to which an appeal would be taken.”

Commissioner v. Portland Cement Co. of Utah, 450

U.S. 156, 164 & n.14 (1981) (citing Golsen v. Commissioner, 54 T.C. 742 (1970), aff’d on other grounds, 445

F.2d 985 (10th Cir. 1971)). Therefore, in cases appealable to the Eleventh Circuit, the Tax Court is following

Hewitt. See, e.g., Sparta Pink Prop., LLC v. Commissioner, T.C. Memo. 2022-88 (acknowledging the split

and denying IRS motion for partial summary judgment under the Proceeds Clause); Thompson v.

Commissioner, T.C. Memo. 2022-80 (same). But in

cases appealable to other courts of appeals, the Tax

Court has been deferring the choice whether to follow

Hewitt or Oakbrook. For example, in Gray Mare

Farms, LLC v. Commissioner, a case that may be appealable to the Fourth Circuit, Tax Court Judge Cohen

cited Hewitt and Oakbrook in observing that the “the

validity of [the Proceeds R]egulation is the subject of a

conflict between the Circuit Courts of Appeal” and

that “summary judgment on the disputed issue of law

is premature and unproductive.” Gray Mare Farms

LLC v. Commissioner, No. 6682-20 (T.C. July 25, 2022)

(order denying IRS motion for partial summary judgment).

In the end, “[t]he split in the circuits is undeniable,

and millions, if not billions, of tax dollars are at stake.

Also at stake are millions of acres of land and species

of birds and animals that may or may not be protected

pending the outcome of this issue.” Nancy Ortmeyer

Kuhn, A Split in the Circuits: Will Supreme Court

Take Up Easement Challenge?, Bloomberg Law (Apr.

5, 2022), https://news.bloomberglaw.com/environment-and-energy/a-split-in-the-circuits-will-supremecourt-take-up-easement-challenge. The Court should

grant certiorari to determine whether the comments

that Treasury received were significant enough to

merit a response from Treasury.

II. The Sixth Circuit’s Decision Conflicts with

Decisions of Other Courts of Appeals Regarding the Significance of Comments

Outside the Tax Context

The square split between Oakbrook and Hewitt regarding the validity of the Proceeds Regulation is a

sufficient reason for this Court to grant the petition.

But the effects of the Sixth Circuit’s decision in this

case stretch far beyond tax law. This Court held in

Mayo Foundation for Medical Education & Research v.

United States, 562 U.S. 44 (2011), that the administrative law principles that govern the tax system are

the same as those that apply to other agencies. Therefore, the Sixth Circuit’s decision in this case may be

invoked by other administrative agencies to disregard

comments they receive from the public. Professor

Kristin E. Hickman, who currently serves as Chair of

the Committee on Judicial Review of the Administrative Conference of the United States, has explained,

“[t]his split has tremendous implications not only for

Treasury but for agencies across the administrative

state that dedicate substantial effort to responding to

comments submitted in the course of notice-and-comment rulemaking.” Kristin E. Hickman, The Federal

Tax System’s Administrative Law Woes Grow, ABA

Tax Times (May 2022). This is because “the key split

between the Sixth and Eleventh Circuits over the requirement that an agency respond to significant

regulations comes down to a fundamental disagreement over what makes a comment significant.” Id.

In his dissenting opinion in the Tax Court, Judge

Holmes observed that, with respect to when a comment is significant, “there is not a precise definition in

the caselaw—rather there are themes.” App. 147a.

The themes that Judge Holmes identified included:

•

An agency should address why it rejected proffered alternatives. See Indep. U.S. Tanker

Owners Comm. v. Dole, 809 F.2d 847, 852 (D.C.

Cir. 1987) (faulting the agency for “fail[ing] to

give an adequate account” of “why alternative

measures were rejected”).

•

A reviewing court (and the public) “should be

able to ‘see what major issues of policy were

ventilated by the informal proceedings and why

the agency reacted to them as it did.’” Auto.

Parts & Accessories Ass’n v. Boyd, 407 F.2d 330,

338 (D.C. Cir. 1968).

•

Comments that are significant are those,

“which, if true, raise points relevant to the

agency’s decision and which, if adopted, would

require a change in an agency’s proposed rule.”

Home Box Off., Inc. v. FCC, 567 F.2d 9, 35 n.58

(D.C. Cir. 1977).

See App. 147a-148a. The Sixth Circuit’s treatment of

the comments Treasury received regarding the Proceeds Regulation conflicts with the D.C. Circuit’s

articulation of these themes. Contrary to the Sixth

Circuit’s opinion, the comments indeed “identified inequities with the regulation, suggested alternatives,

identified potential negative effects on the willingness

of donors to make donations, uncovered potential conflicts with state law, and simply asked for more

clarity.” App. 150a (Holmes, J. dissenting).

In his Sixth Circuit concurring opinion, Judge Guy

highlighted two specific cases in which the Courts of

Appeals invalidated regulations based on failure to respond to comments that would have been deemed not

significant under the Sixth Circuit’s decision. App.

47a-49a (Guy, J., concurring in the judgment).

First, in United States v. Nova Scotia Food Products Corp., 568 F.2d 240 (2d Cir. 1977), the Second

Circuit confronted a regulation promulgated under a

statute that deemed food to be “adulterated” “if it has

been prepared, packed, or held under insanitary conditions whereby it may have become contaminated

with filth, or whereby it may have been rendered

injurious to health.” Id. at 244 (quoting 21 U.S.C.

§ 342(a)(4)). To prevent botulism, the Food and Drug

Administration proposed regulations that required

the fish to be cooked to a certain internal temperature

and in a certain salinity. Nova Scotia Food Products

Corp. (“Nova Scotia”) commented that the proposed

temperature and salinity specifications “will completely destroy the product.” Id. at 245. The Second

Circuit, after reviewing Judge Friendly’s opinion in

Associated Industries of New York State, Inc. v. U.S.

Department of Labor, 487 F.2d 342, 352 (2d Cir. 1973),

held that “to sanction silence in the face of such vital

questions would be to make the statutory requirement

of a ‘concise general statement’ less than an adequate

safeguard against arbitrary decision-making.” Nova

Scotia, 568 F.2d at 253. Nova Scotia’s comment was

significant because it highlighted an unintended consequence of a proposed rule—unrelated to the specific

statutory purpose (preventing botulism) that the regulation was promulgated to accomplish. Under the

Sixth Circuit’s definition of “significant comments” in

this case, Nova Scotia’s comment could not have been

significant because it did not address the botulismprevention statutory purpose.10

The Sixth Circuit majority sought to distinguish

Nova Scotia on the ground that the proposed regulations

were trying to accomplish two policy goals—“to address a

spate of botulism cases” and “ensure that fish could be

safely consumed.” App. 22a. The same is true here. The

committee reports that Treasury cited as providing “an indepth statement of congressional intent,” App. 219a, described multiple goals, including both encouraging

conservation easement donations and protecting the easement’s conservation purposes in perpetuity.

Second, in Carlson v. Postal Regulatory Commission, 938 F.3d 337 (D.C. Cir. 2019), the agency decided

to increase the price of stamps by five cents in order to

achieve one statutory goal of “simplicity of structure.”

Id. at 342 (quoting 39 U.S.C. § 3622(c)(6)). Mr. Carlson commented that a five-cent increase was

“inconsistent with the statutory objective of ‘establish[ing] and maintain[ing] a just and reasonable

schedule for rates.’” Id. (alteration in original) (quoting 39 U.S.C. § 3622(b)(8)). The D.C. Circuit held that

this comment was significant “because [it] challenged

the Commission’s primary rationale by raising substantial countervailing statutory considerations.” Id.

at 347 (citing MCI WorldCom, Inc. v. FCC, 209 F.3d

760, 765 (D.C. Cir. 2000)). That is precisely what the

New York Landmarks Conservancy’s comment did in

this case.

This Court recently emphasized the important role

that the APA plays in encouraging active dialog between administrative agencies and the regulated

public. “Notice and comment gives affected parties

fair warning of potential changes in the law and an

opportunity to be heard on those changes—and it affords the agency a chance to avoid errors and make a

more informed decision.” Azar v. Allina Health Servs.,

139 S. Ct. 1804, 1816 (2019) (citing 1 Kristen E. Hickman & Richard J. Pierce, Jr., Administrative Law

§ 4.8 (6th ed. 2019)). Treasury’s decision not to respond to the comments that it received regarding the

Proceeds Regulation denied the regulated public fair

warning of the IRS’s eventual litigating position and

led to the confusion reflected in the 2008 IRS private

letter ruling that the IRS now claims are incorrect. As

a result, the IRS has denied hundreds if not thousands

of deductions with a resulting flood of litigation.

Allowing the Sixth Circuit’s cramped definition of “significant comments” to stand would serve only to

ensure that similar scenarios will play out in other administrative law contexts.

III. The Split Is Unlikely to Resolve on Its Own

and This Case Is an Appropriate Vehicle for

Resolution of the Split

This Court has long held that “[t]he revenue laws

are to be construed in the light of their general purpose to establish a nationwide scheme of taxation

uniform in its application,” United States v. Irvine, 511

U.S. 224, 238 (1994) (quoting United States v. Pelzer,

312 U.S. 399, 402-403 (1941)); see also Wash. Energy

Co. v. United States, 94 F.3d 1557, 1561 (Fed. Cir.

1996) (“[T]he need for uniformity of decision applies

with special force in tax matters.”). Absent this

Court’s intervention, the outcome in this case will turn

not on uniform nationwide application of tax law, but

on geography: If the Oakbrook property were located

just a half-mile to the south on the other side of the

Tennessee/Georgia border (and therefore in the Eleventh Circuit), Hewitt would dictate the opposite result.

It is unlikely that the circuit split will resolve on

its own. The Sixth Circuit denied rehearing en banc

in this case, and a recent Eleventh Circuit opinion concluded that “Hewitt invalidated the regulation on

which the tax court relied in disallowing Glade Creek’s

charitable contribution deduction. We must follow

Hewitt.” Glade Creek Partner, LLC v. Commissioner,

No. 21-11251, 2022 WL 3582113, at *3 (11th Cir. Aug.

22, 2022) (citation omitted). The Tax Court is deferring additional rulings regarding the validity of the

Proceeds Regulation in cases appealable to other

Courts of Appeals. In the meantime, donors who wish

to conserve their property but contemplate future improvements after the easement is granted are likely to

be chilled from conservation by the ongoing uncertainty.

This case presents an appropriate vehicle for resolution of the split. The view expressed in Judge Toro’s

concurring opinion in the Tax Court and Judge Guy’s

concurring opinion in the Sixth Circuit that Oakbrook’s easement deed is inconsistent with the

statute’s “protected in perpetuity” requirement does

not pose any obstacle to this Court’s review. The IRS

waived that argument by not raising it in the Tax

Court, and the Sixth Circuit correctly held that it

would be inappropriate to excuse that waiver given

that the argument depended on economic projections

from commercial real estate websites that the IRS had

not introduced into the record and thus that had not

been subjected to the adversarial process. It would

likewise be inappropriate to deny certiorari based on

this unpreserved argument.

Oakbrook properly challenged the validity of the

Proceeds Regulation under the APA, and the IRS did

not raise any defenses to assertion of the APA challenge. Seventeen Tax Court judges fully aired the

competing arguments in three separate opinions. The

Eleventh Circuit and the Sixth Circuit considered the

arguments and came to conflicting conclusions. The

issues are fully developed and squarely presented to

this Court. This Court should grant review to restore

nationwide uniformity to the application of the tax law

governing land conservation and charitable contribution deductions.

CONCLUSION

For the foregoing reasons, the Court should grant

the petition for a writ of certiorari.

Respectfully submitted,

Michelle Abroms Levin

Gregory P. Rhodes

Logan C. Abernathy

DENTONS US LLP

305 Church Street SW

Suite 800

Huntsville, AL 35801

Isabelle K. Farrar

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

500 Boylston Street

Boston, MA 02116

October 4, 2022

David W. Foster

Counsel of Record

Armando Gomez

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

1440 New York Ave., NW

Washington, D.C. 20005

(202) 371-7000

david.foster@skadden.com

APPENDIX

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

[Filed: July 06, 2022]

————

No. 20-2117

————

OAKBROOK LAND HOLDINGS, LLC;

WILLIAM DUANE HORTON, TAX MATTERS PARTNER,

Petitioners-Appellants,

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

————

ORDER

BEFORE: GUY, MOORE, and GIBBONS, Circuit

Judges.

The court received a petition for rehearing en banc.

The original panel has reviewed the petition for

rehearing and concludes that the issues raised in

the petition were fully considered upon the original

submission and decision of the case. The petition then

was circulated to the full court. No judge has requested

a vote on the suggestion for rehearing en banc.

Therefore, the petition is denied.

ENTERED BY ORDER OF THE COURT

/s/ Deborah S. Hunt

Deborah S. Hunt, Clerk

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

————

No. 20-2117

————

OAKBROOK LAND HOLDINGS, LLC;

WILLIAM DUANE HORTON, TAX MATTERS PARTNER,

Petitioners-Appellants,

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

————

On Appeal from the United States Tax Court.

No. 005444-13—Mark V. Holmes, Judge.

————

Argued: October 27, 2021

Decided and Filed: March 14, 2022

————

Before:

GUY, MOORE, and GIBBONS,

Circuit Judges.

————

COUNSEL

ARGUED: David William Foster, SKADDEN, ARPS,

SLATE, MEAGHER & FLOM, LLP, Washington,

D.C., for Appellants. Nathaniel S. Pollock, UNITED

STATES DEPARTMENT OF JUSTICE, Washington,

DC, for Appellee. ON BRIEF: Michelle Abroms Levin,

SIROTE & PERMUTT, P.C., Huntsville, Alabama,

Gregory P. Rhodes, SIROTE & PERMUTT, P.C.,

Birmingham, Alabama, for Appellants. Nathaniel

S. Pollock, Francesca Ugolini, Arthur T. Catterall,

UNITED STATES DEPARTMENT OF JUSTICE,

Washington, DC, for Appellee. Joseph D. Henchman,

NATIONAL TAXPAYERS UNION FOUNDATION,

Washington, D.C., Kip D. Nelson, FOX ROTHSCHILD

LLP, Greensboro, North Carolina, for Amici Curiae.

MOORE, J., delivered the opinion of the court in

which GIBBONS, J., joined. GUY, J. (pg. 28-41),

delivered a separate opinion concurring in the judgment only.

————

OPINION

————

KAREN NELSON MOORE, Circuit Judge. Under

§ 170(h) of the Internal Revenue Code, taxpayers who

donate an easement in land to a conservation

organization may be eligible to claim a charitable

deduction on their Federal income tax returns.

Crucially, the easement’s conservation purpose must

be guaranteed to extend in perpetuity to qualify for the

deduction. See 26 U.S.C. (I.R.C.) § 170(h)(5)(A). Unexpected developments, however, may make this

impossible long after the donor has deeded the

easement away. How, then, can an easement satisfy

the perpetuity requirement?

Contemplating such scenarios, the Department of

Treasury has promulgated a rule, 26 C.F.R. (Treas.

Reg.) § 1.170A-14(g)(6). This regulation addresses

situations in which unforeseen changes to the surrounding land make it “impossible or impractical”

for an easement to fulfill its conservation purpose.

Treas. Reg. § 1.170A-14(g)(6)(i). In these events, the

conservation purpose may still be protected in per-

petuity “if the restrictions are extinguished by judicial

proceeding and all of the donee’s proceeds . . . from a

subsequent sale or exchange of the property are used

by the donee” to further the original conservation

purpose. Id. Proceeds are calculated by a formula in

§ 1.170A-14(g)(6)(ii), a provision to which we refer as

the “proceeds regulation.”

On this appeal from the United States Tax Court,

the petitioners, Oakbrook Land Holdings, LLC

(Oakbrook) and William Duane Horton, challenge the

validity of the proceeds regulation. The petitioners

contend that, in promulgating this rule, Treasury

violated the notice-and-comment requirements of the

Administrative Procedure Act (APA). The petitioners

also argue that Treasury’s interpretation of § 170(h)—

the statute that the rule implements—is unreasonable. Finally, the petitioners argue that the proceeds

regulation is arbitrary or capricious. The full Tax

Court considered these arguments and found them to

be unpersuasive. See Oakbrook Land Holdings v.

Comm’r, 154 T.C. 180, 181 (T.C. 2020). We agree with

the Tax Court and AFFIRM.

I. BACKGROUND

Due to the nature of the issues, we outline the

statutory and regulatory framework that governs

charitable deductions for conservation easements

before describing the rulemaking process of the

proceeds regulation. Once that is established, we turn

to the facts of this case.

A. Statutory and Regulatory Framework

Section 170(a)(1) of the Internal Revenue Code

allows taxpayers to deduct charitable donations made

during the tax year. The Code generally disallows gifts

that consist of less than the taxpayer’s entire interest

in the property—such as an easement—from qualifying for a deduction. See I.R.C. § 170(f)(3)(A); Glass v.

Comm’r, 471 F.3d 698, 706 (6th Cir. 2006). There is an

exception if the interest is a “qualified conservation

contribution.” I.R.C. § 170(f)(3)(B)(iii). This type

of gift may qualify for a deduction if it is “of a qualified

real property interest,” “to a qualified organization,”

and is “exclusively for conservation purposes.” I.R.C.

§ 170(h)(1)(A)–(C). Easements can qualify as such

contributions. See Glass, 471 F.3d at 699-700.

Perpetuity is vital to the statutory scheme. An

easement is a qualified real property interest only if

its deed creates “a restriction (granted in perpetuity)

on the use which may be made of the real property.”

I.R.C. § 170(h)(2)(C) (emphasis added). Driving home

how important the parenthetical phrase in § 170(h)(2)(C)

is, a nearby provision explains that a contribution will

not be treated as having been made exclusively for

conservation purposes “unless the conservation purpose is protected in perpetuity.” I.R.C. § 170(h)(5)(A)

(emphasis added). In other words, the donation of an

easement will not qualify for a charitable deduction

unless the taxpayer can guarantee that both the grant

of the interest and the conservation goals which it

serves will endure for quite a long time—forever, to be

exact. See Hoffman Props. II, LP v. Comm’r, 956 F.3d

832, 835 (6th Cir. 2020).

Although I.R.C. § 170(h)(5)(A) expressly mandates

that a donated easement’s conservation purpose must

be protected in perpetuity, the section does not detail

what should happen if some external event frustrates

this purpose, such as when unforeseen changes in the

surrounding land undermine the easement’s conservation goals or when a government entity condemns the

property. See generally Nancy A. McLaughlin, Con-

servation Easements and the Proceeds Regulation,

56 REAL PROP. TR. & EST. L. J. 111, 122, 150-52 (2021)

(discussing ways in which easements’ conservation

purposes can be thwarted). For guidance in these

scenarios, taxpayers must turn from the text of

I.R.C. § 170(h)(5)(A) to the administrative regulation

implementing it.

Treasury Regulation § 1.170A-14(g)(6) governs in

the event of an “extinguishment.” When a “subsequent

unexpected change in the conditions surrounding

the property . . . . make[s] impossible or impractical

the continued use of the property for conservation

purposes,” the perpetuity requirement of I.R.C.

§ 170(h)(5)(A) can still be satisfied if two conditions are

met. First, the restriction is “extinguished by judicial

proceeding.” Treas. Reg. § 1.170A-14(g)(6)(i). Second,

“all of the donee’s proceeds (determined under paragraph (g)(6)(ii) of this section) from a subsequent sale

or exchange of the property are used by the donee

organization in a manner consistent with the conservation purposes of the original contribution.” Id.

Upon extinguishment, a donee organization must

receive as proceeds “a fair market value that is at least

equal to the proportionate value that the perpetual

conservation restriction at the time of the gift[] bears

to the value of the property as a whole at that time.”

Treas. Reg. § 1.170A-14(g)(6)(ii) (emphasis added). To

determine the “proportionate value” of an easement,

the fair market “value of the conservation easement at

the time of the gift [must be] divided by the value of

the property as a whole at that time.” PBBM-Rose Hill,

Ltd. v. Comm’r, 900 F.3d 193, 207 (5th Cir. 2018). For

example, if, at the time of the donation, the fair market

value of an easement was $25,000 and the value of the

land was $100,000, then the easement would be

assessed at twenty-five percent of the value of the

property. Next, if a judicial extinguishment occurs, the

donee must receive proceeds equal to the proportionate value from any “subsequent sale, exchange, or

involuntary conversion.” Treas. Reg. § 1.170A-14(g)(6)(ii).

The donee in the previous example would therefore

receive twenty-five percent of any proceeds of a sale,

exchange, or involuntary conversion that followed

judicial extinguishment of the easement. Finally, no

“amount, including that attributable to improvements,

may be subtracted out” of this percentage.1 PBBMRose Hill, Ltd., 900 F.3d at 208.

Although the possibility of an easement being judicially extinguished is a contingency, taxpayers still

need to address this issue in the easement’s deed. The

deed must entitle the donee “to a portion of the proceeds at least equal to that proportionate value of the

perpetual conservation restriction” should a judicial

extinguishment occur.2 Treas. Reg. § 1.170A-14(g)(6)(ii).

Failure to draft a deed that achieves this goal will

leave the taxpayer unable to claim a charitable deduction for their donation. Treas. Reg. § 1.170A-14(g)(1).

B. Promulgation of Treas. Reg. § 1.170A-14(g)(6)(ii)

On May 23, 1983, Treasury issued a notice of proposed rulemaking with “proposed regulations relating

to contributions of partial interests in property for

conservation purposes.” 48 Fed. Reg. 22940, 22940

The parties do not appear to dispute how proceeds are

calculated under the regulation.

Treasury Regulation § 1.170A-14(g)(6)(ii) also contains an

exception for when “state law provides that the donor is entitled

to the full proceeds from the conversion without regard to the

terms of the prior perpetual conservation restriction,” but the

current case does not implicate this provision.

(May 23, 1983). In that notice, Treasury detailed the

legislative history of § 170(h), describing how Congress had shifted from limiting the deductibility of

conservation easements to allowing them when the

easement was “perpetual.” Id. The preamble noted

that the proposed regulations “reflect the major policy

decisions made by the Congress and expressed in [its]

committee reports.” Id. Among the proposed rules was

the proceeds regulation.

A period of public input followed Treasury’s publication of the notice of proposed rulemaking in which the

agency received comments regarding the regulations.

Ninety organizations submitted over 700 pages of commentary that addressed various aspects of the regulations. Oakbrook Land Holdings, 154 T.C. at 186. Of

these commentators, approximately a dozen mentioned the proceeds regulation, though mostly in passing. Id. We detail several of these comments further

below. Treasury also held a public hearing on the

proposed regulations on September 15, 1983. Id. at 188.

When Treasury issued the final regulations, the

accompanying preamble stated that the agency had

promulgated the regulations “[a]fter consideration of

all comments regarding the proposed amendments.”

51 Fed. Reg. 1496, 1496 (Jan. 14, 1986). Some comments that Treasury received during the rulemaking

process did cause the agency to alter parts of the

regulations, leading the agency to summarize these

comments and the changes that they prompted. Id. at

1497-98. Treasury also revised the proceeds regulation, but these changes were editorial in nature and

aimed at clarifying the rule, not altering its meaning.3

lnstead of providing that the donor agree at the time of the

gift that the donee receive on a subsequent sale, exchange, or

involuntary conversion of the property “a minimum ascertainable

Treasury did not specifically address any comments

that it received about the proceeds regulation.

C. Oakbrook’s Easement

Oakbrook is a Tennessee Limited Liability Company with its principal place of business in Chattanooga. Joint Appendix (J.A.) at 98-99 (Stipulation of

Facts at ¶ 1). William Duane Horton and a group of

investors formed the company to purchase and develop

a 143-acre parcel of land on White Oak Mountain, an

outcropping of the Appalachians near Chattanooga.

Id. at 1179-80 (Tax Ct. Mem. Op. at 3-4). In 2007,

Oakbrook bought the land for $1,700,000. Id. at 1180

(Tax Ct. Mem. Op. at 4).

Originally Horton and his wife found the property in

their search for a place to build a home. Id. at 1179

(Tax Ct. Mem. Op. at 3). The property’s proximity

to Chattanooga led Horton to believe that residential

units could be developed there, and this is what

Oakbrook set about to achieve after purchasing the

land. Id. at 1180 (Tax Ct. Mem. Op. at 4). After

learning about conservation easements, Horton convinced his fellow investors in 2008 to have Oakbrook

donate a conservation easement on 106 acres of the

land to the Southeast Regional Land Conservancy

(SRLC), reserving the remaining acreage for development. Id. at 1181 (Tax Ct. Mem. Op. at 5).

The deed that conveyed the easement provided for

allocation of proceeds upon extinguishment or conproportion of the fair market value to the entire property,”

48 Fed. Reg. at 22946, the final rule ensured that the donee

receive “a fair market value that is at least equal to the proportionate value that the perpetual conservation restriction at

the time of the gift[] bears to the value of the property as a whole

at that time.” 51 Fed. Reg. at 1505.

10a

demnation, and the parties do not dispute how this

calculation works. Id. at 121-22 (Deed at Article VI,

§ B(2)–(3)). Under the deed, the fair market value of

the easement is determined by calculating the fair

market value of the land without the encumbrance of

the easement, and then subtracting from this number

the fair market value of the land with the easement.

Id. at 121 (Deed at Art. VI, § B(2)). The fair market

value of each is determined at the time of the gift,

creating a fixed value. Id. The deed then requires one

more subtraction: the fixed value of the easement

must be reduced by the value of any post-donation

improvements made by Oakbrook to the land as

specified by any subsequent condemnation award. Id.

at 121-22 (Deed at Art. VI, § B(2)).

While negotiating these terms, Oakbrook arranged

for an appraisal of the conservation easement to determine the amount to claim as a charitable deduction.

Id. at 1184 (Tax Ct. Mem. Op. at 8). Initially, the

appraiser valued the easement at $19,500,000, but

Horton expressed unease about setting the value so

high, likely because Oakbrook had bought all 143

acres the year before for $1,700,000. Id. The appraiser

then reassessed the easement at $9,545,000. Id. Oakbrook claimed this amount as a charitable deduction

for the 2008 tax year. Id. at 1184-85 (Tax Ct. Mem. Op.

at 8-9).

D. Procedural History

After Oakbrook filed its 2008 tax return, the Internal Revenue Service (IRS) examined the claimed

charitable contribution deduction. Id. at 1185 (Tax Ct.

Mem. Op. at 9). Because the easement’s deed did not

comply with Treas. Reg. § 1.170A-14(g)(6)(ii), the IRS

disallowed Oakbrook’s deduction in full. Id. at 17-29,

213-22 (Disallowances). Oakbrook timely petitioned

11a

the Tax Court for a readjustment. Id. at 8-16 (Pet. for

Readjustment). Tax Court Judge Holmes held a bench

trial in October 2016 to resolve the matter. Id. at 4

(Tax Ct. Dkt. at 4).

In the Tax Court, the petitioners argued both that

the easement deed satisfied Treas. Reg. § 1.170A14(g)(6)(ii) and, alternatively, that the regulation was

invalid. Id. at 1179 (Tax Ct. Mem. Op. at 3). The full

Tax Court heard argument concerning the validity of

Treas. Reg. § 1.170A-14(g)(6)(ii), see Oakbrook Land

Holdings, 154 T.C. at 180-81, while Judge Holmes

heard arguments about whether Oakbrook’s deed

violated the regulation, J.A. at 1179 (Tax Ct. Mem. Op.

at 3). The full Tax Court upheld the regulation. See

Oakbrook Land Holdings, 154 T.C. at 180-81, 198-200,

230. At the same time, Judge Holmes held that

Oakbrook’s deed violated the proceeds regulation in

two ways: first by ascribing a fixed rather than

proportionate value that would go to SRLC upon

judicial extinguishment, and second by subtracting

from this amount any post-donation improvements

that Oakbrook made to the land. J.A. at 1212-17 (Tax

Ct. Mem. Op. at 36-41).

The petitioners timely appealed. Id. at 1226-27

(Notice of Appeal). See 26 U.S.C. § 7483. We have

jurisdiction over the case under 26 U.S.C. § 7482(a).

II. ANALYSIS

On appeal, the petitioners take aim directly at

the proceeds regulation, arguing that the Tax Court

erred in upholding the regulation. We review the

Tax Court’s findings of fact for clear error and its

application of law de novo. Glass, 471 F.3d at 706. Our

“function in reviewing final agency action following

informal rulemaking [such as Treasury’s promulga-

12a

tion of the proceeds regulation] is prescribed by the

APA.” Simms v. Nat’l Highway Traffic Safety Admin.,

45 F.3d 999, 1003 (6th Cir. 1995). Under § 706(2)(A)

of the APA, we must set aside agency action that is

“arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.”

A. Enforceability of Oakbrook’s Deed Under I.R.C.

§ 170(h)

Before addressing the proceeds regulation’s validity,

we must address a preliminary matter. To count as a

qualified real property interest under I.R.C. § 170(h)(1)(A),

the Commissioner argues that a conservation easement’s deed must guarantee that the donee will

receive the fair market value of the interest upon

judicial extinguishment. Pointing to the provisions in

the deed that fix the easement’s value at the time of

the gift and then subtract the worth of post-donation

improvements, the Commissioner concludes that Oakbrook’s deed would fail to compensate SRLC at fair

market value should the easement be extinguished.

Under this reading of I.R.C. § 170(h)(1)(A), the Commissioner argues, we need not determine whether

Treas. Reg. § 1.170A-14(g)(6)(ii) is a valid regulation

because Oakbrook’s deed violates the statute.

Regardless of whether this interpretation of I.R.C.

§ 170(h)(1)(A) is correct, the Commissioner introduces

it for the first time on appeal. The only issue that the

Commissioner raised below about Oakbrook’s deed

satisfying § 170(h) was the argument in his pretrial

memorandum that the deed inadequately defined the

physical area intended for conservation purposes,

leaving it impossible to determine what was being

conserved and what was not. J.A. at 40, 47-49 (Resp’t

Pretrial Mem. at 3, 10-12). Nowhere did the Commissioner argue that the deed would fail to compensate

13a

SRLC at fair market value should the easement be

extinguished. Instead, Judge Toro’s concurrence in the

Tax Court’s opinion raised this issue sua sponte with

neither the majority nor the dissent addressing it.

Oakbrook Land Holdings, 154 T.C. at 203-07.

“[A]ppellate courts ordinarily abstain from entertaining issues that have not been raised and preserved

in the court of first instance.” Wood v. Milyard, 566

U.S. 463, 473 (2012). This case demonstrates the wisdom of this approach. For Oakbrook’s deed to violate

the Commissioner’s interpretation of the statute, it

must fail to provide whatever the fair market value of

the easement will be upon extinguishment. But this

conclusion relies on an assessment of the projected

economic worth of the property interest, which is not

in the record.4 Should the fair market value of the

interest have increased by the time of extinguishment,

then the Commissioner will be proven right. Should

the value decline, then the Commissioner will be

proven wrong. Either way, future events, not statutory

text, hold the answer. Cf. United States v. Ellison, 462

lnstead of citing to the record, the Commissioner cites to data

pulled from Zillow.com and Neighborhoodscout.com to support

the proposition that under the terms of the deed, judicial

extinguishment “20, 50, or 100 years from now” would lead to

SRLC receiving less than the easement’s fair market value.

Resp’t Br. at 36. Likewise, the Commissioner asserts, without any

citations, that the value of fixed structures that Oakbrook may

add to the property will likely increase over time, which, because

of the mechanism in the deed that allows Oakbrook to recoup this

value, would further cut into the amount SRLC would receive

in the event of judicial extinguishment. Id. at 38. Although the

concurrence appears confident in these assessments, we are

hesitant to rely on economic projections that have not been vetted

by the adversarial process, provide no supporting evidence, and

are based on commercial real estate websites.

14a

F.3d 557, 560-61 (6th Cir. 2006) (addressing argument

not raised below where issue turned on pure question

of law). For this reason, we decline to address the

Commissioner’s newly raised argument.

B. Procedural Issues with Treas. Reg. § 1.170A14(g)(6)(ii)

This leaves us to examine the validity of Treas. Reg.

§ 1.170A-14(g)(6)(ii). Under the APA, whenever agencies promulgate “a rule that ‘intends to create new law,

rights or duties’ such as this regulation does, they

must engage in a process known as notice-and-comment rulemaking. Tennessee Hosp. Ass’n v. Azar, 908

F.3d 1029, 1042 (6th Cir. 2018) (quoting Michigan v.

Thomas, 805 F.2d 176, 182-83 (6th Cir. 1986)). See also

5 U.S.C. § 553(b). There are three steps involved

in this process. First, the agency must publish a “notice

of proposed rule making” in the Federal Register.

5 U.S.C. § 553(b). Next, the agency must afford

“interested persons an opportunity to participate in

the rule making through submission of written data,

views, or arguments.” § 553(c). Finally, “[a]fter consideration of the relevant matter presented, the

agency shall incorporate in the rules adopted a concise

general statement of their basis and purpose.” Id.

The petitioners contend that the agency deviated

from the APA’s notice and comment requirements in

two ways. First, the petitioners argue that Treasury

inadequately explained the rationale for the proceeds

regulation in its concise general statement of basis and

purpose. Second, the petitioners argue that the agency

failed to respond to certain comments about the

regulation, which, according to the petitioners, raised

significant issues. We consider each argument in turn.

15a

1. Adequacy of Treasury’s Concise Statement

of Basis and Purpose

After the comment period closed, Treasury issued a

concise statement of basis and purpose for Treas. Reg.

§ 1.170A-14 that explained the regulations’ goals and

addressed various comments made about the rules.

See 51 Fed. Reg. at 1497-98. This statement lacked

an explanation for the policy rationale behind Treas.

Reg. § 1.170A-14(g)(6)(ii) specifically. Instead, Treasury

explained that the regulations contained in Treas.

Reg. § 1.170A-14 “provide necessary guidance to the

public for compliance with the law and affect donors

and donees of qualified conservation contributions.”

51 Fed. Reg. at 1496. To the petitioners, this explanation is far too succinct to provide adequate insight into

the proceeds regulation’s rationale. Placing this explanation within the context of the rulemaking leads us

to the opposite conclusion.

What an agency must include in a concise general

statement of basis and purpose is dictated by competing considerations. Courts, on the one hand, must be

able “to see what major issues of policy were ventilated

by the informal proceedings and why the agency

reacted to them as it did.” Simms, 45 F.3d at 1005

(quoting Auto. Parts & Accessories Ass’n, Inc. v Boyd,

407 F.2d 330, 338 (D.C. Cir. 1968)). Judicial scrutiny

does not “contemplate that the court itself will, by a

laborious examination of the record, formulate in the

first instance the significant issues faced by the agency

and articulate the rationale of their resolution.” Auto.

Parts & Accessories Ass’n, Inc., 407 F.2d at 338.

Agencies, on the other hand, operate with scarce time

and limited resources. See Vermont Yankee Nuclear

Power Corp. v. Nat. Res. Defense Council, Inc., 435

U.S. 519, 551 (1978). These limitations mean that an

16a

agency cannot “discuss every item of fact or opinion

included in the submissions made to it in informal rule

making.” Simms, 45 F.3d at 1005 (quoting Auto. Parts

& Accessories Ass’n, Inc., 407 F.2d at 338).

Balancing these considerations, the APA’s concisegeneral-statement requirement “is not meant to be

particularly onerous.” Nat’l Mining Ass’n v. Mine

Safety & Health Admin., 512 F.3d 696, 700 (D.C. Cir.

2008). Absent an ideal statement, courts may still conduct judicial review and uphold a regulation “where

the basis and purpose [are] considered obvious.” CalAlmond, Inc. v. U.S. Dep’t of Agric., 14 F.3d 429, 443

(9th Cir. 1993); see also Schiller v. Tower Semiconductor Ltd., 449 F.3d 286, 303 (2d Cir. 2006); Citizens to

Save Spencer Cnty. v. U.S. EPA, 600 F.2d 844, 884

(D.C. Cir. 1979). If a statement is truly concise, then

“[a] careful reading of the agency’s published notices,

from its original grant of the petition for rulemaking

to its final rule, [may still] disclose[] a ‘reasoned path’”

that the agency followed to reach its ultimate rule.

Simms, 45 F.3d at 1006 (quoting Neighborhood TV Co.

v. FCC, 742 F.2d 629, 639 (D.C. Cir. 1984)).

Juxtaposing the final version of Treas. Reg. § 1.170A14(g)(6)(ii) with the notice of proposed rulemaking

reveals that the basis and purpose of the rule are

apparent. In the background section of the proposed

version of the proceeds regulation, Treasury provided

a brief history of how the Code had treated the charitable deductions of conservation easements. 48 Fed. Reg.

at 22940. This history traced how contributions of

partial interests went from being disfavored under the

Tax Reform Act of 1969, to being allowed under the

Tax Reduction and Simplification Act of 1977. Id. This

allowance came with a caveat: conservation easements

had to “be perpetual in order to qualify for a deduction

17a

under section 170.” Id. After Congress again amended

the Code with the Tax Treatment Extension Act of

1980, Treasury proposed the proceeds regulation to

implement I.R.C. § 170(h). 48 Fed. Reg. at 22940.

Notably, although I.R.C. § 170(h)(5)(A) required that

easements’ conservation purposes be protected in perpetuity, the provision was silent about how to guarantee this requirement in the event of extinguishment.

Facing this lacuna, it was obvious that Treasury would

need to craft a regulation that spoke to the issue of

protecting an easement’s conservation purpose should

unforeseen circumstances stymie this end.5

As it contemplated promulgating the regulations

of which Treas. Reg. § 1.170A-14(g)(6)(ii) was a part,

Treasury noted its animating concerns. Foremost

among these was the “problem” of “how to provide a

workable framework for donors, donees, and the Internal Revenue Service to judge the deductibility of open

space easements.” 48 Fed. Reg. at 22940. Treasury’s

explicit reliance on the committee reports that accompanied the 1980 reforms to the Code make clear the

contours of this problem. See id. (detailing how the

proposed regulations “reflect the major policy decisions . . . expressed” in H.R. REP. No. 96-1278 (1980)

and S. REP. No. 96-1007 (1980)).

Both the House Ways and Means Committee and

the Senate Finance Committee noted that conservation easements threatened to incentivize “tax-avoidance transactions in which the taxpayer could obtain

Although Congress was aware that extinguishment could

pose difficulties for ensuring that a conservation easement’s

purpose was protected in perpetuity, a coalition of land trusts

convinced it to leave the creation of rules to govern these circumstances to Treasury. See McLaughlin, supra, at 122-23 (detailing

legislative history).

18a

a deduction for a gift to a charity of the use of part of

his property.” H.R. REP. No. 96-1278, at 14; S. REP. No.

96-1007, at 8. To avoid such abuse, the committees

emphasized that the “bill would restrict the qualifying

contributions where there is no assurance that the

public benefit, if any, furthered by the contribution

would be substantial enough to justify the allowance

of a deduction.” H.R. REP. No. 96-1278, at 15; S. REP.

No. 96-1007, at 10. Key among these restrictions was

the addition of a requirement not previously in the

Code: that an easement’s conservation purpose be

protected in perpetuity to qualify for a charitable deduction. See H.R. REP. No. 96-1278, at 18 (“Moreover,

the bill explicitly provides that [the] requirement [that

a contribution is made exclusively for conservation

purposes] is not satisfied unless the conservation

purpose is protected in perpetuity.”); S. REP. No. 961007, at 13 (same). An easement’s deed needed to

“prevent uses of the retained interest inconsistent

with the conservation purposes” for an eternity. H.R.

REP. No. 96-1278, at 18; S. REP. No. 96-1007, at 13.

Along with stressing the need for restrictions in the

deed to ensure that an easement served its conservation purpose in perpetuity, the congressional committees were concerned about how the burdens and benefits associated with fulfilling this requirement might

be allotted. For instance, when the Senate Committee

on Finance reported the bill out of committee, it noted

that the perpetuity requirement of I.R.C. § 170(h)(5)(A)

aimed “to limit the deduction only to those cases where

the conservation purposes will in practice be carried

out.” S. REP. No. 961007, at 14. With this goal in mind,

the Committee noted that contributions must “be

made to organizations which have the commitment

and the resources to enforce the perpetual restrictions

and to protect the conservation purposes.” Id. Yet

19a

whereas the Committee was concerned about the

welfare of the donee, it sought to bar the donor from

receiving any benefit from the donation above and

beyond the deduction. See id. at 15 (“[T]here may be

instances in which the grant of an easement may serve

to enhance, rather than reduce, the value of property,

and in such instances no deduction would be allowable

. . . .”). Solely in circumstances where these high bars

could be cleared would an easement qualify for a charitable deduction under § 170(h). See id. at 14, 15; see

also H.R. REP. No. 96-1278, at 19, 20 (same discussion).

Taken together, then, the statutory text and the

legislative history that Treasury contemplated in

promulgating Treas. Reg. § 1.170A-14(g)(6)(ii) illuminate the regulation’s basis and purpose: to provide

an administrable mechanism that would ensure that

an easement’s conservation purpose as per I.R.C.

§ 170(h)(5)(A) continued to be protected should the

interest be extinguished. That the regulation allots

proceeds in a manner more favorable to donees than

to donors merely demonstrates Treasury’s acute

awareness of Congress’s decision to concern itself with

the welfare of one entity over the other once the

donation was made. Because we can discern this from

the information that Treasury provided during the

rulemaking, its concise statement suffices.6

Unlike Dominion Resources, Inc. v. United States, on which

the concurrence relies to reach the opposite conclusion, the proceeds regulation does not “directly contradict[]” Congress’s intent, as is clear from the legislative history that Treasury

provided in its notice of proposed rulemaking. 681 F.3d 1313,

1317 (Fed. Cir. 2012). The fact that Treasury provided citations

to the congressional reports that informed its thinking provides

another contrast to the agency’s actions in Dominion, where

20a

2. Failure to Respond to Comments

In the concise general statement of basis and purpose that accompanied the final rule, Treasury also

did not address any comments that touched on Treas.

Reg. § 1.170A-14(g)(6)(ii). For the petitioners, this

oversight is the main procedural deficiency with the

rule. To this end, they list a series of comments that

mentioned the proceeds regulation, argue that at least

some of these required Treasury’s attention, and

conclude that the agency’s failure to do so is fatal to

the regulations. Having thoroughly examined these

comments, we disagree.

The APA’s requirement of soliciting comments serves

several ends. “In addition to increasing the quality of

rules, the required public participation helps ‘ensure

fair treatment for persons to be affected by’ regulation.” United States v. Cain, 583 F.3d 408, 420 (6th Cir.

2009) (quoting Dismas Charities, Inc. v. US. Dep’t of

Justice, 401 F.3d 666, 678 (6th Cir. 2005)). From these

principles follows an agency’s duty to respond to “significant points raised by the public.” Sherley v.

Sebelius, 689 F.3d 776, 784 (D.C. Cir. 2012) (quoting

Home Box Office, Inc. v. FCC, 567 F.2d 9, 35-36 (D.C.

Cir. 1977)). After all, if an agency could ignore every

comment regardless of its content, then the process of

soliciting public input would be pointless. See id.

Yet the inverse is true, too. Requiring an agency to

respond to every comment regardless of its content

would transform rulemaking into

Treasury provided no indication of its rationale for the proposed

rule. Id. at 1319. These citations allow us to discern what the

Federal Circuit could not: the “reasoned path” that Treasury

followed in arriving at the regulation. Simms, 45 F.3d at 1006

(quoting Neighborhood TV, 742 F.2d at 639).

21a

a game or a forum to engage in unjustified

obstructionism by making cryptic and obscure reference to matters that “ought to be”

considered and then, after failing to do more

to bring the matter to the agency’s attention,

seeking to have that agency determination

vacated on the ground that the agency failed

to consider matters “forcefully presented.”

Vermont Yankee, 435 U.S. at 553-54. Recognizing that

notice-and-comment rulemaking is not an administrative sport, we have repeatedly concluded that an

agency must “give reasoned responses to all significant comments in a rulemaking proceeding,” not that

an agency must respond to all comments. United

States v. Utesch, 596 F.3d 302, 310 (6th Cir. 2010)

(quoting PPG Indus., Inc. v. Costle, 630 F.2d 462, 466

(6th Cir. 1980)) (emphasis added); see also Navistar

Intl Transp. Corp. v. US. EPA, 941 F.2d 1339, 1359

(6th Cir. 1991).

Significance is difficult to measure in the abstract.

The petitioners catalog cases that they argue use

different “tests” for determining whether a comment

requires an agency’s response. See, e.g., Indep. U.S.

Tanker Owners Comm. v. Dole, 809 F.2d 847, 852 (D.C.

Cir. 1987); Home Box Office, Inc., 567 F.2d at 35 n.58;

United States v. Nova Scotia Food Prods. Corp., 568

F.2d 240, 253 (2d Cir. 1977). Rather than provide

discrete tests, however, these cases demonstrate that

assessing significance is context dependent and requires reading the comment in light of both the rulemaking of which it was part and the statutory ends

that the proposed rule is meant to serve.

“Accordingly, an agency must respond to comments

‘that can be thought to challenge a fundamental

premise’ underlying the proposed agency decision.”

22a

Carlson v. Postal Regul. Comm’n, 938 F.3d 337, 344

(D.C. Cir. 2019) (quoting MCI WorldCom, Inc. v. FCC,

209 F.3d 760, 765 (D.C. Cir. 2000)). A comment must

provide enough facts and reasoning to show the agency

what the issue is and how it is relevant to the agency’s

aims. See Vermont Yankee, 435 U.S. at 553; Home Box

Office, Inc., 567 F.2d at 35 n.58. Comments that do

so are “significant enough to step over a threshold

requirement of materiality” needed for an agency to

address them. Vermont Yankee, 435 U.S. at 553 (quoting Portland Cement Ass ‘n v. Ruckelshaus, 486 F.2d

375, 394 (D.C. Cir. 1973)).

To make this concrete, consider one of the cases

upon which petitioners rely. In United States v. Nova

Scotia Food Products Corp., the Second Circuit considered a rule issued by the Food and Drug Administration (FDA) to address a spate of botulism cases within

the inland fish market and ensure that fish could be

safely consumed. 568 F.2d at 243. While promulgating

the rule, which required all fish to be cooked or brined

according to its specifications, the FDA ignored a comment by Nova Scotia Food Products Corp., a company

that sold smoked whitefish. Id. at 245. Nova Scotia

had recommended that the agency adopt a rule

tailored to the heat tolerance of each species so that

their product would not be “completely destroy[ed],”

due to whitefish being unable to withstand the rigors

of the proposed rule. Id. The Second Circuit held that

the FDA’s failure to respond to Nova Scotia’s and

similar comments rendered the rule arbitrary or

capricious. Id. at 253. It was unclear how making a

fish product inedible would further the FDA’s goal of

rendering fish safe for human consumption. Id.

After examining the comments that petitioners have

identified, we hold that none required Treasury’s re-

23a

sponse as Nova Scotia’s did the FDA’s. Of the comments to which Treasury did not respond, the petitioners focus their attention on four: those made by the

New York Landmarks Conservancy, the Landmarks

Preservation Council of Illinois, the Land Trust

Exchange, and the Trust for Public Land. Situating

these comments in the context of the problem that

Treasury sought to solve—providing a method for

I.R.C. § 170(h)(5)(A)’s perpetuity requirement to be

met upon judicial extinguishment—shows why they do

not qualify as significant.

The New York Landmarks Conservancy’s comment

noted three issues with the proceeds regulation: that,

based on undisclosed anecdotal evidence, the rule

would deter donors from donating easements; that

providing the donee with the value of post-donation

improvements made by the donor was inequitable; and

that it was “possible” that the regulation’s allocation

of proceeds would conflict with some states’ condemnation laws, though the organization did not identify

the laws or states. J.A. at 671-72 (N.Y. Landmarks

Conservancy Cmt. at 3-4). Although these remarks

registered the New York Landmarks Conservancy’s

dissatisfactions with the proceeds regulation, the comment did not engage with I.R.C. § 170(h)(5)(A)’s perpetuity requirement and whether the rule served this

end. Instead, it left Treasury to guess at the connection, if any, between the organization’s problems and

the proceeds regulation’s basis and purpose. Treasury

was not required to respond to the comment.

Next, the Landmarks Preservation Council of Illinois

commented that how Treas. Reg. § 1.170A-14(g)(6)(ii)

calculated proceeds would put a donor at risk of having

to pay the donee additional funds if a condemnation

award did not cover the amount of money calculated

24a

by the rule. J.A. at 778 (Landmarks Pres. Council

of Ill. Cmt. at 5). The organization’s concern, however,

was not only “purely speculative.” Home Box Office,

Inc., 567 F.2d at 35 n.58. It was also wrong. Because

Treas. Reg. § 1.170A-14(g)(6)(ii) calculates proceeds by

using a formula based on the proportionate value, not

the fixed value, of the easement, the donor could never

owe to the donee more than what the extinguishment

proceeds are. So, if an easement was worth fifty percent of the value of the donor’s entire property at the

time of the grant, then the donee would be entitled to

fifty percent of any extinguishment proceeds, whatever the amount of those proceeds is. Given that the

comment did not raise a significant issue, Treasury

was not obliged to respond it.

Both the Land Trust Exchange and the Trust for

Public Land suggested that Treasury adopt the remote

future event rule in lieu of the proceeds regulation.

J.A. at 685 (Land Tr. Exchange Cmt. at 7); id. at 795

(Tr. for Pub. Land Cmt. at 7). The organizations’

proposals refer to the provision of the regulations that

bears the same name, Treas. Reg. § 1.170A-14(g)(3).

The remote future event rule provides a “narrow

exception to the perpetuity requirement” of I.R.C.

§ 170(h)(5)(A), Hoffman Props., 956 F.3d at 837, allowing deductions when the conservation purpose of an

easement may be defeated by an “act or event” whose

occurrence is “so remote as to be negligible.” Treas.

Reg. § 1.170A-14(g)(3). Neither organization provided

any indication of how expanding this rule—which

permits deductions in the face of uncertainty—would

fulfill Congress’s express aim in I.R.C. § 170(h)(5)(A)

of limiting deductions to those instances where an

easement’s conservation purpose can be safeguarded

forever. Because Treasury could not ignore this goal,

25a

the agency was not required to respond to comments

that would have led it to do so.

The Land Trust Exchange asserted that the tax

benefit rule rendered the proceeds regulation unnecessary as well. J.A. at 685 (Land Tr. Exchange Cmt.

at 7). Again, how so is unclear from the comment. The

tax benefit rule allows a taxpayer to exclude “income

attributable to the recovery during the taxable year of

any amount deducted in any prior taxable year to the

extent such amount did not reduce the amount of tax

imposed by this chapter.” I.R.C. § 111(a). This rule—

which benefits the donor—bears no relation to the

requirement under I.R.C. § 170(h)(5)(A) that an easement’s conservation purpose be protected in perpetuity. Nor did the Land Trust Exchange Treasury provide an explanation that would have made it necessary

for Treasury to consider the tax benefit rule in this

context.

Finally, the other comments that the petitioners

reference in passing did not raise significant concerns.

Pet’r Br. at 33. Most comments provided only cursory

commentary on Treas. Reg. § 1.170A-14(g)(6)(ii), often

with either no discussion of the facts on which they

were basing their criticisms, or only vague indications

of the sources of these facts. See Home Box Office, Inc.,

567 F.2d at 35 n.58. Comments that provided alternatives to the proceeds regulation failed to discuss how

these alternatives would satisfy I.R.C. § 170(h)(5)(A).

See J.A. at 721 (Brandywine Conservancy Cmt. at 3);

id. at 723 (Wash. Tr. for Hist. Pres. Cmt. at 1); id. at

801 (Ginsberg Cmt. at 5). Indeed, no comment that

addressed the regulation raised a concern about it

failing to satisfy that provision’s perpetuity requirement. The APA thus did not require that Treasury

provide a response to these comments either.

26a

The petitioners’ attempt to reach a different conclusion based on the facts of two of our cases—Simms

v. National Highway Traffic Safety Administration

and PPG Industries, Inc. v. Costle—falls short. Simms

provides little guidance here. In that case, the

National Highway Traffic Safety Administration

(NHTSA) of the Department of Transportation promulgated a rule regarding how wheelchairs were to be

secured on school buses based on “static” rather than

“dynamic” testing of securements. 45 F.3d at 1005.

Addressing challenges on the adequacy of NHTSA’s

response to comments that advocated for dynamic

testing, we upheld the rule, pointing to the fact that,

although NHTSA acknowledged in its concise general

statement that “dynamic testing was the preferred

approach among commentators,” the agency had also

“explained the benefits of using static testing and

discussed its rationale for rejecting dynamic testing.”

Id. Besides the fact that in the present case there was

no well-developed, “preferred approach” among the

commentators that Treasury ignored, Simms illustrates only what an adequate response to significant

comments looks like. But such comments were not

before Treasury here.

PPG Industries is unhelpful as well. In that case, the

Environmental Protection Agency (EPA) designated

Summit County, Ohio as needing to take special air

pollution abatement measures. PPG Industries, 630

F.2d at 464. The EPA had previously relied on faulty

computer modelling in making its designation. Id. at

465. When the plaintiffs challenged the new designation, the EPA responded that it had “reanalyzed” the

previously faulty data that it computed. Id. at 466. The

EPA, however, was unable to point to anywhere in the

administrative record to support this reanalysis. Id.

We remanded to the agency so that an administrative

27a

record could be developed. Id. at 468. Although the

petitioners in the present case rely on the fact that we

criticized “EPA’s perfunctory treatment” of comments

that made it “impossible to determine whether the

agency’s Summit County designation was arbitrary

[or] capricious,” this misses the forest for the trees.

Id. at 466. Unlike in PPG Industries, Inc., there is

no indication here that Treasury relied on faulty or

impermissible premises in promulgating the proceeds

regulation.

The petitioners also direct us to a recent decision by

the Eleventh Circuit that held the proceeds regulation

to be procedurally invalid under the APA. See Hewitt

v. Comm’r, 21 F.4th 1336, 1339 (11th Cir. 2021).

Unlike the concurrence, we find that decision’s reasoning to be unpersuasive. In concluding that the New

York Landmarks Conservancy’s comment raised significant concerns about possible deterrent effects that

the proceeds regulation could have on donations, the

Eleventh Circuit stressed that one of I.R.C. § 170’s

aims is “to allow deductions for the donation of conservation easements to encourage donation for such

easements.” Id. at 1352. Although encouraging the

donation of conservation easements is undeniably a

goal of the statute, highlighting this point overlooks a

crucial condition that Congress demanded be met by

donors seeking deductions: an easement’s conservation purpose must be “protected in perpetuity.”7 I.R.C.

§ 170(h)(5)(A).

That the proceeds regulation interprets I.R.C.

§ 170(h)(5)(A) and is meant to enforce Congress’s goal

As noted supra, the committee reports emphasized this restriction, too. See H.R. REP. No. 96-1278, at 18; S. REP. No. 961007, at 13.

28a

of limiting deductions to those instances in which the

perpetuity requirement can be satisfied is evident

from the regulations. Not only does the plain language

of the proceeds regulation address this end, see Treas.

Reg. § 1.170A-14(g)(6)(i) (“the conservation purpose

can nonetheless be treated as protected in perpetuity”

if the proceeds regulation is followed upon judicial

extinguishment), but the rule is also part of a section

in the regulations titled

“Enforceable in perpetuity,” Treas. Reg. § 1.170A14(g), that contemplates various scenarios in which

the perpetuity requirement of I.R.C. § 170(h)(5)(A)

would not be met, see, e.g., Treas. Reg. § 1.170A14(g)(2), id. § 1.170A-14(g)(4). Other than missing

§ 1.170A-14(g)(2), which regulates how mortgages

impact the perpetuity requirement and was added in

response to other comments, the proposed rule contained the same relevant language. See 48 Fed. Reg.

at 22945–47. Put differently, I.R.C. § 170(h)(5)(A)

embodies a particular policy that restricts deductions

to where an easement’s conservation purpose can be

protected forever, and Treas. Reg. § 1.170A-14(g)(6)(ii)

interprets how to implement that policy. The Eleventh

Circuit’s decision thus does not alter our conclusion

that Oakbrook has failed to cite comments that raised

valid concerns about how the regulation served this

policy.

At this point, the concurrence interjects to accuse

us of treating the perpetuity requirement of I.R.C.

§ 170(h)(5)(A) as a trump card. But we did not decide

that perpetuity should play a vital role in the statutory

scheme. Congress did. Even aside from the legislative

history on which Treasury expressly relied in crafting

the proceeds regulation, the statute’s text makes it

apparent that what Congress sought to encourage is

29a

not simply the donation of conservation easements as

the concurrence believes. Rather, Congress intended

to incentivize the donations of only those easements

that met a highly circumscribed set of prerequisites.

These easements must be “of a qualified real property

interest,” which includes the requirement that the

interest contain a perpetual restriction on its use.

I.R.C. § 170(h)(1)(A), (2)(C). Donations must be “to

a qualified organization.” I.R.C. § 170(h)(1)(B). And,

of course, they must be “exclusively for conservation

purposes”—purposes that must be ensured to endure

forever. I.R.C. § 170(h)(1)(C), (5)(A). Cf. Carlson, 938

F.3d at 342, 345-46 (noting that “simplicity of structure” was one of the “fourteen [statutory] factors” that

Congress explicitly deemed it necessary for the Postal

Service to contemplate in rulemaking).

Congress has long understood that any deductions

it crafts are to be “strictly construed.” Indopco, Inc. v.

Comm’r, 503 U.S. 79, 84 (1992) (citing New Colonial

Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Deputy

v. Du Pont, 308 U.S. 488, 493 (1940)). If there ever was

an instance in which this canon of statutory interpretation lined up with congressional intent, it is one

in which Congress created a deduction predicated on

eternal, unending, ceaseless vigilance.

Such a requirement is strict indeed. We thus cannot

do as the comments identified by petitioners did and

overlook Congress’s decision to emphasize that a conservation easement’s purpose be protected in perpetuity. Instead, we agree with the Tax Court. Treasury’s

lack of a response to these comments does not jeopardize the validity of Treas. Reg. § 1.170A-14(g)(6)(ii).

30a

C. Chevron Deference

The petitioners also challenge Treas. Reg. § 1.170A14(g)(6)(ii) as violating Chevron USA Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984).

As background, the proceeds regulation implements

I.R.C. § 170(h)(5)(A), which provides: “A contribution

shall not be treated as exclusively for conservation

purposes unless the conservation purpose is protected

in perpetuity.” Because the regulation does not allow

donors to be compensated for post-donation improvements, the petitioners maintain that the proceeds

regulation is not a permissible construction of I.R.C.

§ 170(h). We are unpersuaded.

“In Chevron, the Supreme Court observed that, pursuant to the principle of deference to administrative

interpretations, ‘considerable weight should be accorded

to an executive department’s construction of a statutory scheme it is entrusted to administer.”’ Alliance for

Cmty. Media v. FCC, 529 F.3d 763, 776 (6th Cir. 2008)

(quoting Chevron, 467 U.S. at 844). To determine

whether deference to Treasury’s statutory interpretation is warranted, we employ the familiar, two-step

Chevron analysis. See Mayo Found. for Med. Educ. &

Rsch. v. United States, 562 U.S. 44, 53-58 (2011). “The

initial question under step one of the Chevron framework is `whether Congress has directly spoken to

the precise question at issue’ by employing precise,

unambiguous statutory language.” Alliance for Cmty.

Media, 529 F.3d at 776-77 (quoting Chevron, 467 U.S.

at 842). It is undisputed that I.R.C. § 170(h)(5)(A), the

provision requiring that the conservation purpose of a

donation be “protected in perpetuity,” does not speak

to the precise question at issue: how judicial extinguishment affects the perpetuity requirement.

31a

Our analysis thus proceeds to the second step of

Chevron, which asks whether Treasury’s interpretation was “based on a permissible construction of the

statute.” Tennessee Hosp. Ass’n, 908 F.3d at 1037-38

(quoting Chevron, 467 U.S. at 843). “If a statute is

ambiguous, and if the implementing agency’s construction is reasonable, Chevron requires a federal

court to accept the agency’s construction of the statute,

even if the agency’s reading differs from what the

court believes is the best statutory interpretation.”

Nat’l Cable & Telecomms. Ass’n v. Brand X Internet

Servs., 545 U.S. 967, 980 (2005). “Whether an agency’s

construction is reasonable depends, in part, ‘on the

construction’s “fit” with the statutory language, as

well as its conformity to statutory purposes.’” Good

Fortune Shipping SA v. Comm’r, 897 F.3d 256, 262

(D.C. Cir. 2018) (quoting Goldstein v. SEC, 451 F.3d

873, 881 (D.C. Cir. 2006)).

At its core, the petitioners’ position centers on

the fact that “[n]othing in § 170(h) suggests that a

qualified organization must be compensated above the

value of its qualified real property interest in the event

the easement is extinguished.” Pet’r Br. at 55. This

statement is true, but incomplete: nothing in that

section suggests that donors must be compensated for

their post-donation improvements upon extinguishment either. Instead, the section is silent on what

should happen if an easement is extinguished by

judicial proceedings, including about what should

happen with the value added by any post-donation

improvements made by a donor.

Although it does not answer this exact question, the

text of I.R.C. § 170(h)(5)(A) still provides direction.

Section 170(h)(5)(A) requires that easements’ conservation purposes be protected in perpetuity after the

32a

donation. This leaves donees responsible for stewarding the interest through eternity, a task that consumes

not only time but resources, too.8 A rule that, in the

event of extinguishment, allowed donors to retain

the value of post-donation improvements such as the

petitioners propose would “likely enrich property

owners at the public’s expense, and leave donees with

fewer proceeds with which to advance similar conservation purposes elsewhere.” McLaughlin, supra at

139. Erring on the side of providing the donee with

higher rather than lower proceeds, moreover, buoys

the donee’s ability to ensure that the conservation

purpose of the easement continues upon extinguishment. With additional funds at its disposal, the conservation organization will likely have more options

available to further the original conservation purpose

in line with § 170(h)(5)(A). See id. at 136. Treasury

Regulation § 1.170A-14(g)(6)(ii) does just that and is

thus a reasonable interpretation of the section.

Bolstering the reasonableness of the proceeds

regulation is the fact that Congress has amended

I.R.C. § 170 over thirty times during the past thirtyfour years but has not voided Treas. Reg. § 1.170A14(g)(6)(ii). See Oakbrook Land Holdings, 154 T.C. at

199-200, 199 n.5 (cataloguing amendments to § 170).

“Treasury regulations and interpretations long continued without substantial change, applying to unamended

or substantially reenacted statutes, are deemed to

have received congressional approval and have the

effect of law.” Cottage Sav. Ass’n v. Comm’r, 499 U.S.

As also noted supra, the legislative history that Treasury

cited in its notice of proposed rulemaking confirms that Congress

was concerned about donees having sufficient resources to ensure

that an easement’s conservation purpose be protected in perpetuity. See H.R. REP. No. 96-1278, at 19; S. REP. No. 96-1007, at 14.

33a

554, 561 (1991) (quoting United States v. Correll, 389

U.S. 299, 305-06 (1967)). Over three decades of congressional acquiescence to the proceeds regulation

leaves us confident that the regulation is owed our

deference under Chevron.

Against this conclusion, the petitioners point to the

other provision of I.R.C. § 170(h) that contains a

perpetuity requirement, § 170(h)(2)(C). This subsection provides the definition of “qualified real property

interest,” which is “a restriction (granted in perpetuity) on the use which may be made of the real

property.” I.R.C. § 170(h)(2)(C). According to the petitioners, a donee has no interest in donor improvements under this subsection, and therefore it is unreasonable to give a donee the proceeds after judicial

extinguishment that result from a donor’s postdonation improvements.

Whatever else I.R.C. § 170(h)(2)(C) requires, the

petitioners have not established that it requires

donors to receive the value of their post-donation

improvements. The subsection’s text does not dictate

this outcome, for all that it provides is that a qualified

real property interest both be a restriction on the use

of real property, and that the restriction be “granted

in perpetuity.” Id. Subsection 170(h)(2)(C) simply does

not encompass post-donation improvements or suggest to whom their value should accrue upon judicial

extinguishment. That gap was left for Treasury to fill,

as it reasonably did with the proceeds regulation.

D. Arbitrary or Capricious Review

Coupled with their Chevron argument, the petitioners argue that Treasury acted arbitrarily or capriciously in promulgating Treas. Reg. § 1.170A-14(g)(6)(ii)

for two distinct reasons: because Treasury provided no

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explanation for why it adopted the rule, and because

Treasury failed to consider a variety of alternatives.9

Neither argument is convincing.

When determining whether a final agency action is

arbitrary or capricious, the scope of our review is “an

extremely narrow one.” Navistar Int’l Transp. Corp.,

941 F.2d at 1352. A court may not “substitute its

judgment for that of the agency.” Greenbaum v. U.S.

EPA, 370 F.3d 527, 542 (6th Cir. 2004) (quoting

Bowman Transp., Inc. v. Arkansas-Best Freight Sys.,

Inc., 419 U.S. 281, 285 (1974)). Instead, we consider

whether “the agency has relied on factors which

Congress has not intended it to consider, entirely

failed to consider an important aspect of the problem,

offered an explanation for its decision that runs

counter to the evidence before the agency, or is so

implausible that it could not be ascribed to a difference

in view or the product of agency expertise.” Ne. Ohio

Reg’l Sewer Dist. v. U.S. EPA, 411 F.3d 726, 731 (6th

Cir. 2005) (quoting Motor Vehicle Mfrs. Ass’n of U.S.,

Inc. v. State Farm Mut. Auto. Ins. Co. (State Farm),

463 U.S. 29, 43 (1983)). “Even when an agency explains its decision with less than ideal clarity, a

reviewing court will not upset the decision on that

account if the agency’s path may reasonably be discerned.” Id. (quoting Alaska Dep’t of Env’t Conservation v. U.S. EPA, 540 U.S. 461, 497 (2004)).

The petitioners’ first argument for why Treas. Reg.

§ 1.170A-14(g)(6)(ii) is arbitrary or capricious duplicates their argument for why the rule’s concise general

The petitioners insist that their arbitrary-or-capricious

arguments are part of the Chevron analysis. Because we have

previously analyzed these issues separately, see Atrium Med. Cir.

v. U.S. Dep’t of HHS, 766 F.3d 560, 567 (6th Cir. 2014), we do so

here.

35a

statement of basis and purpose is deficient. In essence,

the petitioners argue that the proceeds regulation

could not be the product of reasoned decision-making

because Treasury provided no explanation for why the

agency settled on that formula for calculating proceeds. Yet given the context of the rulemaking and the

statutory issue that the agency confronted, we reiterate that the concise statement of basis and purpose

that accompanied the proceeds regulation adequately

explained Treasury’s rationale: to create an administrable mechanism for enforcing I.R.C. § 170(h)(5)(A)’s

perpetuity requirement.

Insofar as the petitioners try to bolster their

arbitrary-or-capricious argument by relying on SEC v.

Chenery Corp., 318 U.S. 80, 88 (1943), this, too, fails.

In Chenery, the Supreme Court limited the grounds on

which an agency’s action could be upheld to those on

which the agency relied at the time. 318 U.S. at 88.

Under this rule, an agency must defend its actions

based on the reasons that animated the act at issue,

not for reasons that it formulated during litigation.

State Farm, 463 U.S. at 50. Chenery does not, however,

narrow our inquiry into an agency’s contemporaneous

rationale solely to the concise general statement. See

State Farm, 463 U.S. at 43. As the Supreme Court has

held in the context of determining whether a particular statutory interpretation guided an agency’s

actions, courts may accept the explanation provided by

an agency during litigation for its conduct when this is

“the only plausible explanation” of the course taken in

the rulemaking. Nat’l R.R. Passenger Corp. v. Boston

& Maine Corp., 503 U.S. 407, 420 (1992); see also Nat’l

Elec. Mfrs. Ass’n v. U.S. Dept. of Energy, 654 F.3d 496,

513 (4th Cir. 2011).

36a

Such is the case here. Contrary to what the petitioners maintain, the Commissioner’s rationale for the

proceeds regulation—namely, that it was promulgated

to create an administrable rule which ensured that a

donee would receive sufficient funds upon extinguishment to continue the conservation purpose—aligns

with the obvious concern evinced by Treasury during

the rulemaking process that I.R.C. § 170(h)(5)(A)’s

perpetuity requirement be satisfied in the event of

judicial extinguishment. This rationale both tethered

the regulation to its statutory source and left us a clear

thread to trace how Treasury navigated between these

two points. Treasury’s citations to the committee

reports provided further guidance into its decision to

craft a rule that stood to benefit donees over donors

upon extinguishment, an aim which coincided with

Congress’s “major policy decisions” concerning which

entity should be favored post-donation.10 48 Fed. Reg.

at 22940.

Moving to the petitioners’ second rationale, none of

the alternatives to which they point required Treasury’s consideration. Two sources of possible alternatives—the RESTATEMENT (THIRD) OF PROPERTY § 7.11

(Am. Law. Inst. 2000) and the testimony of SLRC’s

Executive Director, James Wright, at the trial before

Judge Holmes in 2016, see J.A. 405-08 (Wright Test.

Tr. at 205-08); Pet’r Br. at 51—did not exist when

Treasury was promulgating the proceeds regulation in

the 1980s. “[A] rulemaking ‘cannot be found wanting

The concurrence would have us ignore the Supreme Court

because of its reading of National Railroad. Passenger Corp. as

a “dead letter in legal history.” Concur. op. at 37. We must,

however, decline to conclude that “more recent cases have, by

implication, overruled an earlier precedent” of the Court. Agostini

v. Felton, 521 U.S. 203, 237 (1997).

37a

simply because the agency failed to include every

alternative device and thought conceivable by the

mind of man . . . regardless of how uncommon or

unknown that alternative may have been”—or, in this

case, regardless of how distant in the future that

alternative was from existing. State Farm, 463 U.S. at

51 (quoting Vermont Yankee, 435 U.S. at 551); see also

Simms, 45 F.3d at 1006.

The petitioners also flag a Maryland statute that

governed condemnation awards and which the

Maryland Agricultural Land Preservation Foundation

attached to its comment. See J.A. at 742 (Md. Agric.

Land Pres. Found. Cmt. attach.). According to the

petitioners, this statute provided an alternative

approach to how Treas. Reg. § 1.170A-14(g)(6)(ii)

allocates proceeds. If it did, however, the Maryland

Agricultural Land Preservation Foundation apparently did not think so. The organization’s comment

neither drew attention to this statute, nor put it

forward as an alternative to the proceeds regulation.

Instead, the Maryland Agricultural Land Preservation

Foundation lumped this statute in with a series of

laws from which the organization derived its legislative mandate. Id. at 725 (Md. Agric. Land Pres. Found.

Cmt. at 1). Because even the organization that cited

the statute did not consider it to be an alternative to

the proceeds regulation, Treasury did not have to

assess whether it was one.

Finally, the petitioners’ heavy reliance on State

Farm and Judulang v. Holder, 565 U.S. 42 (2011), to

support their arbitrary-or-capricious arguments is

misplaced. In State Farm, the alternative that the

agency failed to consider—airbags—was well-known

at the time, including to the agency itself. See 463 U.S.

at 48. In Judulang, the agency had applied diverse

38a

statutory factors in an arbitrary manner. See 565 U.S.

at 58-59. The petitioners have not pointed to an

alternative to the proceeds regulation that was both

well established and that Treasury ignored. Additionally, the regulation is a reasonable way to ensure that

the perpetuity requirement of I.R.C. § 170(h)(5)(A) is

protected in the event of a judicial extinguishment of

a conservation easement. Therefore, Treasury acted

neither arbitrarily nor capriciously in promulgating

Treas. Reg. § 1.170A-14(g)(6)(ii).

III. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the Tax Court upholding the procedural

and substantive validity of Treas. Reg. § 1.170A14(g)(6)(ii).

39a

CONCURRING IN THE JUDGMENT

RALPH B. GUY, JR., Circuit Judge, concurring in

the judgment only. The Department of the Treasury

must play by the same rules as other federal agencies.

The Supreme Court made that clear when it refused

to “carve out an approach to administrative review

good for tax law only” and “expressly ‘recognized the

importance of maintaining a uniform approach to

judicial review of administrative action.’” Mayo

Found. for Med. Educ. & Rsch. v. United States, 562

U.S. 44, 55 (2011) (cleaned up) (quoting Dickinson v.

Zurko, 527 U.S. 150, 154 (1999)). But it seems the

majority opinion has done the opposite for Treasury’s

proceeds regulation (Treas. Reg. § 1.170A-14(g)(6)(ii)).

In my view, the regulation is procedurally invalid

under the Administrative Procedure Act (APA) for

substantially the same reasons stated by the Eleventh

Circuit in Hewitt v. Commissioner of IRS, 21 F.4th

1336 (11th Cir. 2021), and by the concurring and

dissenting opinions in Oakbrook Land Holdings, LLC

v. Commissioner of IRS, 154 T.C. 180, 200-30 (2020)

(Toro, J., concurring in the judgment, joined in full by

Urda, J., and joined in part by Gustafson and Jones,

JJ.); id. at 230-259 (Holmes, J., dissenting). But I

would conclude that the Commissioner’s statutory

argument is not forfeited and affirm on that basis.

The proceeds regulation at issue is procedurally

invalid under 5 U.S.C. §§ 553(c), and 706(2)(A), of the

APA. Hewitt, 21 F.4th at 1350-53; Oakbrook, 154 T.C.

at 216-30 (Toro, J., concurring in the judgment); id. at

230-53 (Holmes, J., dissenting).1

Insofar as it concerns the validity of the proceeds regulation,

this case is materially identical to Hewitt because, there, the tax

40a

“One of the basic procedural requirements of administrative rulemaking is that an agency must give

adequate reasons for its decisions.” Encino Motorcars,

LLC v. Navarro, 579 U.S. 211, 221 (2016). Further,

lain agency must consider and respond to significant

comments received during the period for public comment.” Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 96

(2015) (emphasis added) (collecting cases). Treasury

cannot get by without any explanation for the regulation and without responding to the significant comment submitted by the New York Land Conservancy

(NYLC). See 51 Fed. Reg. 1496, 1496 (Jan. 14, 1986).

(Contra Maj. Op. 6, 10, 16).

As the Eleventh Circuit held, NYLC’s comment “was

significant and required a response by Treasury to

satisfy the APA’s procedural requirements.” Hewitt,

21 F.4th at 1351. Because Treasury “failed to respond

to NYLC’s significant comment concerning the postdonation improvements issue as to proceeds, it violated the APA’s procedural requirements.” Id. at 1353.

The majority opinion makes NYLC’s four-page

comment seem insignificant by condensing it to

one sentence and omitting the most important part.

Compare (Maj. Op. 16), with Hewitt, 21 F.4th at 1345

(quoting extensively from NYLC’s comment). In part,

NYLC’s comment made the following points:

1. Most importantly, NYLC stated that the

proceeds regulation “contemplates that a

ratio of value of the conservation restriction

to value of the fee will be fixed at the time

of the donation and will remain in effect

court decided the case based upon its Oakbrook decision. Hewitt,

21 F.4th at 1339. But the Eleventh Circuit reversed—and rightly

so. Id. at 1353.

41a

forever thereafter. This formula fails to

take into account that improvements may be

made thereafter by the owner which should

properly alter the ratio.” J.A. 671 (emphasis

added). NYLC drove the point home with

a specific example. Suppose the owner of

property worth $100,000 grants a “scenic

easement” worth 10% of the value of the

entire parcel, guaranteeing that the owner

of Parkacre and his successors will never

build high-rise buildings in order to ensure

Parkacre is a place to enjoy nature and

sunlight. See J.A. 670-71; see also 48 Fed.

Reg. 22940, 22944-55 (May 23, 1983). The

parcel owner then spends $2 million to

build rental housing units on the parcel. Id.

If the easement is later extinguished in

eminent domain proceedings for the parcel,

“the donee organization would be entitled

. . . to 10% of the sale price of the entire

parcel including the improvements,” i.e.,

10% of $2.1 million. J.A. 671. “This would

obviously be undesirable to the prospective

donor and would constitute a windfall

to the donee organization.” Id. (emphasis

added).

2. NYLC thus contended that the proceeds

regulation “contain[s] problems of policy

and practical application so pervasive as to

cause [NYLC] to recommend strongly the

deletion of these provisions. The statute

was enacted by Congress to encourage the

protection of our significant natural and

built environment through the donation of

conservation restrictions and yet, the proposed provisions would thwart the purpose

42a

of the statute by deterring prospective

donors.” J.A. 670 (emphasis added).

3. NYLC spoke from first-hand experience,

recounting that “it is our experience that

prospective donors frequently raise the

question that ‘perpetuity’ is a long time and

may impose unforeseeably heavy burdens

on themselves or future owners under unforeseeable future circumstances. We find

ordinarily that these concerns are mollified

upon the donor’s recognition that common

law permits extinguishment of restrictions

. . . . Obviously, the prospect of extinguishment would no longer mollify these fears if

a split of proceeds under unknown circumstances would be required.” J.A. 670-71.

4. NYLC—a donee organization—emphasized

that “[t]he value of a conservation restriction to the donee organization is not a

monetary value but a philanthropic value

as a device for achieving the charitable

objectives of the organization,” such that

“the extinguishment of a conservation

restriction cannot be compensated by the

payment of money.” J.A. 671. To that end,

NYLC stated that it “would prefer to eliminate” the proceeds regulation rather than

“trade on the prospect of future windfalls

when restrictions are extinguished.” Id.

5. “In light of the potential inequities described,” NYLC concluded by “recommend[ing]

that the proposed proceeds formula be

revised to prevent such inequities,” but

“strongly recommend[ed] deletion of the

43a

entire extinguishment provision.” J.A. 672

(emphasis added).

NYLC’s comment was “significant”: It “show[ed]

why [a] mistake was of possible significance in the

results.” Vt. Yankee Nuclear Power Corp. v. Nat. Res.

Def. Council, Inc., 435 U.S. 519, 553 (1978) (quoting

Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375,

394 (D.C. Cir. 1973)). The comment is significant for

two principal reasons.

First, NYLC’s comment is significant because it

showed that the regulation “would thwart” one of

“the purpose[s] of the statute by deterring prospective

donors.” J.A. 670; accord Hewitt, 21 F.4th at 1351.

That is, “[o]ne of the policy decisions reflected in th[e]

‘committee reports,’ expressly referenced by Treasury,” Hewitt, 21 F.4th at 1351 (quoting 48 Fed. Reg.

at 22940), “provided that ‘the preservation of our

country’s natural resources and cultural heritage is

important,’ that ‘conservation easements now play

an important role in preservation efforts,’ and that

‘provisions allowing deductions for conservation

easements should be directed at the preservation of

unique or otherwise significant land areas or structures.’” Id. (quoting S. REP. No. 96-1007, at 9 (1980));

see also BC Ranch II, L.P. v. Comm ‘r of IRS, 867 F.3d

547, 553-54 (5th Cir. 2017).

Second, NYLC cast doubt on the reasonableness of

the regulation’s formula and further showed that it

would “obviously” deter donors because “the regulation’s proceeds formula: (1) ‘contemplates that a ratio

of value of the conservation restriction to value of the

fee will be fixed at the time of the donation and will

remain in effect forever thereafter’; and (2) ‘fail[ed] to

take into account that improvements may be made

thereafter by the owner which should properly alter

44a

the ratio.’ Hewitt, 21 F.4th at 1351 (quoting NYLC’s

comment); see J.A. 670-71. The majority opinion does

not grapple with this second aspect of the reasoning in

Hewitt. If it was a significant comment to suggest that

an agency’s uniform cook temperature for all fish

should be altered to each species of fish so that the

product is not destroyed, United States v. Nova Scotia

Food Prods. Corp., 568 F.2d 240, 243, 252-53 (2d Cir.

1977); (Maj. Op. 15-16), then NYLC’s comment was

likewise significant because it argued that a donor’s

post-donation improvements “should properly alter

the ratio” so that Congress’s tax incentive for prospective donors is not destroyed. J.A. 671.

Treasury might have explained that post-donation

improvements might cause a slight indirect increase

in the value of an easement and that the donee should

reap the total value of the easement. But Treasury did

not. More importantly, Treasury left everyone to

wonder: Why would the easement holder be entitled to

receive a proportional percentage of the actual value

of the donor’s post-donation improvements, i.e., rental

housing units or a country club and golf course? Why

would the statutory tax deduction incentivize any

donor to grant a conservation easement if it means the

donor (and any successors) must agree to give the

donee the easement proceeds and a proportional ratio

of any future improvements in the event of judicial

extinguishment? Or why would Treasury require that

the value of separate property rights (the easement

and the property burdened) always maintain a proportional value relationship when “there is commonly

little, if any, relation.” RESTATEMENT (FIRST) OF

PROPERTY § 508 cmt. b (Am. Law. Inst. 1944). This

court should not “sanction silence in the face of such

45a

vital questions.” Nova Scotia Food Prods., 568 F.2d at

253.2

The bottom line is there is no doubt that NYLC’s

comment “‘can be thought to challenge [two]

fundamental premise[s]’ underlying the proposed

agency decision” and Treasury failed to respond.

Carlson v. Postal Regul. Comm’n, 938 F.3d 337, 344

(D.C. Cir. 2019) (quoting MCI WorldCom, Inc. v. FCC,

209 F.3d 760, 765 (D.C. Cir. 2000)); see Hewitt, 21

F.4th at 1351-52. (Contra Maj. Op. 15-16 (stating the

same test but a contrary conclusion). In other words,

Treasury’s decision is arbitrary and capricious

because it “entirely failed to consider [these]

important aspect[s] of the problem.” Nat’l Ass’n of

Home Builders v. Defs. of Wildlife, 551 U.S. 644, 658

(2007) (quoting Motor Vehicle Mfrs. Ass’n v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).

Two of the cases Oakbrook relies upon underscore

the errors in this case. Both cases invalidated agency

action because the agency’s explanation was

insufficient.

At issue in Dominion Resources, Inc. v. United

States, 681 F.3d 1313 (Fed. Cir. 2012), was a Treasury

The Restatement (Second) of Property did not address easements because the Restatement (First) of Property remained the

prevailing rules for easements at the time Congress added the

perpetuity requirements in I.R.C. § 170(h)(2)(C), and (h)(5)(A).

See RESTATEMENT (SECOND) OF PROPERTY: LANDLORD AND TENANT

intro. (Am. L. Inst. 1983), and intro RESTATEMENT (SECOND) OF

PROPERTY: DONATIVE TRANSFERS. (Am. L. Inst. 1977). The law of

easements was not revisited until 2000, but even then the

changes were intended to “simplif[y] and clarif[y] this area of the

law and were largely a matter of “form rather than of substance.”

See RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES intro. (Am.

L. Inst. 2000).

46a

regulation interpreting “the avoided-cost rule set out

in the statute at I.R.C. § 263A(f)(2)(A)(ii),” “as applied

to property temporarily withdrawn from service.” 681

F.3d at 1317. Dominion explained that the notice of

proposed rulemaking “provided no rationale other

than the general statement that the regulations are

intended to implement the avoided-cost method.” Id.

at 1319. Here, Treasury did not even do that much.

And, as in this case, the agency in Dominion “provided

no rationale in the final regulations.” Id. The Federal

Circuit reversed the trial court because it “erroneously

stretched to conclude that ‘the path that Treasury was

taking in the rulemaking proceedings can be discerned, albeit somewhat murkily.’” Id.

Treasury gave us even less to work with than in

Dominion. Here, the notice of proposed rulemaking

simply stated that the regulations relate to “contributions not in trust of partial interests in property”

under “section 6 of the Tax Treatment Extension Act

of 1980” and that “[t]he regulations reflect the major

policy decisions made by the Congress and expressed

in these committee reports.” 48 Fed. Reg. at 22940.

The final regulations merely stated that the “regulations provide necessary guidance to the public for

compliance with the law and affect donors and donees

of qualified conservation contributions.” 51 Fed. Reg.

at 1496. From these statements and the use of “protected in perpetuity” in Treas. Reg. § 1.17A-14(g)(6)(i),

the majority opinion stretches to conclude that

Treasury “tethered the regulation to its statutory

source and left us a clear thread to trace how Treasury

navigated between these two points.” (Maj. Op. 25).

We may be able to discern that Treasury was

interpreting Congress’s perpetuity requirement, but

the thread stops there. As in Dominion, the proceeds

47a

regulation is invalid because Treasury provided “no

explanation for the way that use of [a fixed ratio at

the time of the grant] implements the [protectedin-perpetuity] rule.” 681 F.3d at 1319. Treasury

compounded its error by failing to address NYLC’s

significant comment that post-donation improvements

should “properly alter the ratio,” rather than be

divvied up according to a ratio fixed at the time of the

grant.3

The reasoning in Carlson v. Postal Regulatory

Commission, 938 F.3d 337 (D.C. Cir. 2019), explains

why NYLC’s comment required a response. Carlson

considered an agency’s decision to increase the cost of

letter stamps by five cents. 938 F.3d at 341. The Postal

Service’s proposal noted that “keeping the price of

stamps ‘at round numbers divisible by five” would help

achieve one of the statutory goals, “simplicity of

structure.” Id. at 342. Carlson, a “postal customer and

watchdog,” chimed in during notice-and-comment,

arguing: (1) that “keeping the price of a stamp divisible

by five did not promote the value of ‘simplicity of

structure”; (2); that “raising the price of stamps by five

The majority opinion cites three rare cases from other circuits

for the proposition that a statement of basis and purpose is

not necessary “where the basis and purpose [are] considered

obvious.” (Maj. Op. 11 (quoting Cal-Almond, Inc. v. U.S. Dep’t of

Agric., 14 F.3d 429, 443 (9th Cir. 1993)). But the basis for

Treasury’s fixed-ratio formula is far from obvious. This is not a

case where the agency used a “mechanical application of the

statutory formula” to merely set a rate per pound of almonds to

fund its operations, as required. See Cal-Almond, 14 F.3d at 433,

439, 443. Here, Treasury created a formula for the division of

proceeds from the sale of discrete property interests based upon

the word “perpetuity,” I.R.C. § 170(h)(2)(C), and (h)(5)(A), or at

least that is what we can gather from the proceeds regulation

itself because Treasury did not provide an explanation.

48a

cents was inconsistent with the statutory objective

of ‘establish[ing] and maintain[ing] a just and reasonable schedule for rates’ (similar to NYLC’s argument

that the fixed-ratio formula is flawed and would

“thwart” the statutory goal of encouraging conservation easements); and (3) that “the detrimental ‘effect

of rate increases upon the general public’ weighed

against the Postal Service’s proposal” (analogous to

NYLC’s statement that “problems of policy and practical application” and “inequities” weighed in favor of

revising the regulation or deleting it altogether). Id. at

342, 345-47 (alterations in original). The agency did

not respond to Carlson’s comments, but it did more

than Treasury here; it at least “referenced, but did not

resolve, Carlson’s” first point. Id. at 342. The court

held that all of Carlson’s comments were significant

and “warranted [a] response” because they concerned

“several relevant statutory objectives and factors.” Id.

at 345. “By failing to consider relevant statutory

objectives and factors and declining to respond to

significant public comments, the Commission violated

the APA when it approved the stamp price hike.” Id.

at 351. The same is true here.

The majority opinion acknowledges that “encouraging the donation of conservation easements is undeniably a goal of the statute.” (Maj. Op. 19). Yet

it treats one other statutory goal—perpetuity—as a

trump card, such that Treasury was free to ignore any

comment unless the comment showed that the regulation “fail[ed] to satisfy” the “perpetuity requirement.”

(Maj. Op. 18; see id. 16-21, 23-24).

On the contrary, “[e]ven when an agency has

significant discretion in deciding how much weight to

accord each statutory factor, that does not mean it is

free to ignore any individual factor entirely.” Carlson,

49a

938 F.3d at 344 (cleaned up) (quoting Tex. Oil & Gas

Ass’n v. EPA, 161 F.3d 923, 934 (5th Cir. 1998)); see

also Intl Ladies’ Garment Workers’ Union v. Donovan,

722 F.2d 795, 818 (D.C. Cir. 1983) (holding that the

agency “must explain why a particular proposal is

inconsistent with the balance between regulation and

competition” (citation omitted)); Nova Scotia Food

Prods., 568 F.2d at 253 (“[T]he administrative process

should disclose, at least, whether the proposed regulation is considered to be commercially feasible, or

whether other considerations prevail even if commercial infeasibility is acknowledged.”). As in Carlson,

Treasury “also failed to evaluate how other statutory

objectives and factors,” such as encouraging the donation of conservation easements, “might bear on the

proposed [proceeds regulation] or outweigh [Treasury’s purported] reliance on” the perpetuity requirement. Id. at 347.

Treasury was required to explain to the public,

why post-donation improvements are not taken into

account and why it balanced the competing statutory

interests in favor of adopting a fixed-ratio formula.

“[A]n agency may justify its policy choice by explaining

why [its] policy ‘is more consistent with statutory

language’ than alternative policies,” but Treasury is

not permitted to remain silent and leave it for a court

to “supply a reasoned basis for the agency’s decision.”

Encino Motorcars, 579 U.S. at 223 (citation omitted).

(Contra Maj. Op. 13, 19-20, 22, 25).

Against this backdrop, NYLC’s comment required

a response because it was based on first-hand

experience, and common sense for that matter; it

challenged the logic of the fixed-ratio formula that

Treasury created; and it raised relevant statutory

objectives. After all, if individuals “must turn square

50a

corners when they deal with the Government,” it is

only fair that “the Government should turn square

corners in dealing with the people.” Dep’t of Homeland

Sec. v. Regents of the Univ. of Cal., 140 S. Ct. 1891,

1909 (2020) (citations omitted). Because Treasury

failed to respond to NYLC’s comment, the proceeds

regulation is procedurally invalid.

The majority opinion concedes that “if an agency

could ignore every comment regardless of its content,

then the process of soliciting public input would be

pointless.” (Maj. Op. 14 (citing Sherley v. Sebelius,

689 F.3d 776, 784 (D.C. Cir. 2012)). But in the end, the

majority has rendered that process meaningless

because Treasury provided no explanation for its

decision and Treasury ignored NYLC’s significant

comment and every other comment about the proceeds

regulation.

II.

Treasury’s decision to remain silent has consequences: We cannot rely on post hoc explanations;

nor can a court offer the reasons that might have

supported Treasury’s decision. The majority explains

why the proceeds regulation is needed to implement

the statute’s protected-in-perpetuity requirement and

why, as a matter of policy, the division of extinguishment proceeds should be “more favorable to donees

than to donors,” such that the easement holder should

receive a fixed ratio of the actual value of the donor’s

post-donation improvements. (Maj. Op. 13, 19-20, 22,

25). The problem is that Treasury did not provide

these reasons at the time it promulgated the proceeds

regulation.

“It is a ‘foundational principle of administrative law’

that judicial review of agency action is limited to ‘the

51a

grounds that the agency invoked when it took the

action.’” Dep’t of Homeland Sec., 140 S. Ct. at 1907

(quoting Michigan v. EPA, 576 U.S. 743, 758 (2015)).

“It is not the role of the courts to speculate on reasons

that might have supported an agency’s decision. [W]e

may not supply a reasoned basis for the agency’s

action that the agency itself has not given.’” Encino

Motorcars, 579 U.S. at 224 (quoting State Farm, 463

U.S. at 43). That also means “courts may not accept . . .

counsel’s post hoc rationalizations for agency action.”

State Farm, 463 U.S. at 50. This “rule serves important values”: It promotes “agency accountability”;

instills “confidence that the reasons given are not

simply ‘convenient litigating position[s]’”; and preserves “the orderly functioning of the process of

review.” Dep’t of Homeland Sec., 140 S. Ct. at 1909

(citations omitted).

The Commissioner’s brief and the majority opinion

offer a similar rationale and cite the same law review

article published in 2021. (Appellee Br. 61-63; Maj. Op.

13, 22). But “[t]he functional reasons for requiring

contemporaneous explanations apply with equal force

regardless whether post hoc justifications are raised in

court by those appearing on behalf of the agency or by

agency officials themselves.” Dep’t of Homeland Sec.,

140 S. Ct. at 1909.

Yet the claim is made that: “[T]he Supreme Court

has held in the context of determining whether a

particular statutory interpretation guided an agency’s

actions, courts may accept the explanation provided by

an agency during litigation for its conduct when this is

‘the only plausible explanation’ of the course taken in

the rulemaking.” (Maj. Op. 25 (quoting Nat’l R.R.

Passenger Corp. v. Boston & Maine Corp., 503 U.S.

407, 420 (1992)).

52a

But Boston & Maine Corp. is not relevant. There,

the Court addressed an agency’s “interpretation of the

word ‘required,” which the agency “did not in so many

words articulate” in the context of an adjudication—

not notice-and-comment rulemaking. See id. at 409-10;

United States v. Mead Corp., 533 U.S. 218, 230 n.12

(2001). Moreover, the Court deferred to the agency’s

“position before the Court” because “the only plausible

explanation” of the agency’s opinion was that the

agency’s adjudicative “decision was based on the

[same] proffered interpretation.” 503 U.S. at 418, 420.

That is a world apart from the situation here: a

proceeds regulation interpreting the statutory requirements that a deed must grant an easement “in

perpetuity” for a “conservation purpose [that] is protected in perpetuity.” I.R.C. § 170(h)(2)(C), (h)(5)(A).

It is one thing to say that it is obvious Treasury’s

regulation is interpreting the protected-in-perpetuity

requirement. But it is a stretch to say that there is only

one plausible rationale (if any) for a regulation that

divides proceeds according to a fixed ratio set at

the time of the easement grant. Otherwise, Boston &

Maine would swallow the rule that we may consider

“only contemporaneous explanations for agency action.”

Dep’t of Homeland Sec., 140 S. Ct. at 1908.

The Supreme Court has never again so much as

mentioned the statement the majority relies on from

Boston & Maine. Instead, the Court has since

repeatedly said the opposite, and that shows Boston &

Maine is a dead letter in legal history. See 503 U.S. at

425-28 (White, J., joined by Blackmun and Thomas,

JJ., dissenting) (arguing State Farm controls and “the

majority is simply wrong” to defer to “the post hoc

rationalization of Government lawyers”); cf. Trump v.

Hawaii, 138 S. Ct. 2392, 2423 (2018). There is no

reason to resurrect the statement in Boston & Maine.

53a

III.

The proceeds regulation also does not survive

Chevron. Where, as here, the rulemaking process was

“procedurally defective,” a regulation does not receive

Chevron deference. Household Credit Servs. v. Pfennig,

541 U.S. 232, 242 (2004) (quoting Mead, 533 U.S. at

227); accord Mayo Found., 562 U.S. at 53; see, e.g.,

Encino Motorcars, 579 U.S. at 220-21, 224.4

IV.

But this does not mean Oakbrook should prevail

outright. Because Oakbrook’s deed calls for the donee

to receive a fixed amount in the event of a judicial

extinguishment, the deed violates the plain language

of Congress’s requirement that the conservation

easement must be granted in perpetuity under I.R.C.

§ 170(h)(2)(C). (Appellee Br. 32-35, 37); see Oakbrook,

154 T.C. at 204-07 (Toro, J., concurring in the judgment, joined by Gustafson, Urda, and Jones, JJ.).

Congress did not require much as it relates to

“perpetuity.” The easement deed need only impose

“a restriction (granted in perpetuity) on the use

which may be made of the real property,” I.R.C.

§ 170(h)(2)(C), and ensure that “the conservation

purpose” (the restriction) is “protected in perpetuity,”

§ 170(h)(5)(A); see also Pub. L. No. 96-541, § 6, 94 Stat.

3204, 3206-07 (1980). At the time of enactment in

1980, dictionaries defined “perpetuity” as “forever.”

Hoffman Props. II, LP v. Comm’r of IRS, 956 F.3d 832,

834 (6th Cir. 2020) (citations omitted).

The Eleventh Circuit decided not to reach the claimants’

Chevron arguments because it concluded that Treas. Reg.

§ 1.170A-1

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