1:22-cv-00401
N.D. OhioNov 14, 2022Background
- GBX Associates, LLC is a real-estate developer/material advisor that uses historic-preservation easements and alleged listed-transaction reporting obligations under IRS Notice 2017-10.
- Notice 2017-10 (Dec. 2016) identified certain syndicated conservation-easement transactions as "listed transactions," triggering Form 8886/Form 8918 filing, recordkeeping, and civil/criminal penalties for noncompliance.
- GBX asserts it spends substantial time and resources complying with the Notice and sued under the Administrative Procedure Act (APA), arguing the IRS issued Notice 2017-10 without required notice-and-comment rulemaking.
- The parties cross-moved for summary judgment; Defendants conceded Mann Construction (6th Cir.) controls the legal question of unlawfulness but disputed the proper scope of relief.
- The sole remedial question was whether the court must vacate the Notice universally or may set it aside only as to GBX; the court held the Notice unlawful under Mann but exercised equitable discretion to vacate it as to GBX only.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to seek universal vacatur | GBX: vacatur operates in rem on the agency action; GBX has concrete injury so may obtain universal vacatur. | Gov: GBX lacks standing to obtain relief for non-parties; remedy must redress GBX's particular injury. | Court: GBX has Article III standing to seek §706(2) relief; the breadth of relief is a merits/statutory question, not jurisdictional. |
| Whether §706(2) authorizes universal vacatur | GBX: §706(2)’s command to “set aside” targets the agency action itself and routinely results in vacatur of rules generally. | Gov: Law unsettled; Sixth Circuit hasn’t adopted universal-vacatur rule; relief should be limited. | Court: §706(2) is ambiguous on scope; circuit law varies; court need not decide a circuitwide rule. |
| Appropriate remedy (universal vs. party-limited vacatur) | GBX: universal vacatur required to fully relieve GBX because material-advisor reporting produces reportable transaction numbers that affect participants. | Gov: Equitable discretion and standing limits counsel in favor of party-limited vacatur; participants would not be obligated if no reportable number issued. | Court: Exercising equitable discretion, court declined universal vacatur and set aside Notice 2017-10 as to GBX only; GBX abandoned the "unworkable" argument by failing to respond to Gov's regulatory-point. |
| Policy/percolation and judicial restraint | GBX: precedents favor whole-rule vacatur; national relief appropriate. | Gov: Nationwide vacatur hampers other courts and impedes percolation; narrow relief promotes uniform development. | Court: Percolation and comity weigh against universal relief; limited vacatur appropriate here. |
Key Cases Cited
- Mann Construction, Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022) (held a similar IRS listing notice was a legislative rule subject to notice-and-comment)
- National Mining Ass'n v. U.S. Army Corps of Eng'rs, 145 F.3d 1399 (D.C. Cir. 1998) (vacatur of unlawful agency regulations is the ordinary result)
- East Bay Sanctuary Covenant v. Garland, 994 F.3d 640 (9th Cir. 2021) (vacatur prevents a rule's application to all those subject to it; courts have discretion in scope)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (standing requirements: injury-in-fact, causation, redressability)
- Summers v. Earth Island Inst., 555 U.S. 488 (2009) (limits on organizational/associational standing and abstract rule challenges)
- Allied-Signal, Inc. v. U.S. Nuclear Regul. Comm'n, 988 F.2d 146 (D.C. Cir. 1993) (vacatur is discretionary; consider seriousness of deficiencies and disruptive consequences)
- Skyworks Ltd. v. Ctrs. for Disease Control & Prevention, 542 F. Supp. 3d 719 (N.D. Ohio 2021) (declined to order universal vacatur/nationwide relief pending clearer authority)