104 F.4th 220
11th Cir.2024Background
- The IRS issued Notice 2017-10, identifying certain syndicated conservation-easement transactions as "listed transactions" subject to strict disclosure and penalty regimes without engaging in public notice-and-comment rulemaking.
- Green Rock, LLC, an Alabama-based material advisor for such transactions, followed Notice 2017-10 for years before challenging its validity under the Administrative Procedure Act (APA) in district court.
- The district court granted summary judgment to Green Rock, holding that Notice 2017-10 was a legislative rule improperly issued without APA notice and comment and set the rule aside with respect to Green Rock only.
- The IRS argued that Congress, through statutory cross-references, had ratified its process for identifying "listed transactions" by notice, thus exempting such actions from APA procedures.
- While this suit was pending, Congress amended the tax code to eliminate inflated deductions from syndicated conservation easements going forward, but this change was not retroactive and did not moot the present dispute.
- The Eleventh Circuit affirmed the district court, holding that Congress had not expressly exempted the IRS’s listing procedure from the APA’s notice-and-comment requirement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Notice 2017-10 is a legislative rule | Notice 2017-10 is legislative, not interpretive, as it imposes binding obligations and penalties. | The notice follows existing regulatory authority, and is not a legislative rule. | Notice 2017-10 is legislative and subject to APA notice-and-comment. |
| Whether the IRS was exempt from APA procedures | Congress did not expressly exempt the IRS from notice-and-comment procedures for listed transactions. | Statutory cross-references and ratification of procedures in 2003 regulation suffice as an exemption. | Congress did not expressly provide exemption; APA notice-and-comment required. |
| Validity of IRS’s reliance on its regulations | Cross-reference to regulations does not override APA requirements. | The statutory language authorizes the listing process used by the IRS. | Cross-reference insufficient to meet "express exemption" standard. |
| Retroactivity of congressional amendments | The 2022 law change does not apply retroactively and doesn’t moot this case. | The new law essentially eliminates the need for Notice 2017-10 going forward. | The legal question is still justiciable; ruling specific to Notice 2017-10. |
Key Cases Cited
- United States v. Bisceglia, 420 U.S. 141 (self-reporting under federal tax law)
- Chrysler Corp. v. Brown, 441 U.S. 281 (legislative rules must be promulgated through notice and comment)
- Marcello v. Bonds, 349 U.S. 302 (exemptions from APA must be expressly stated)
- Azar v. Allina Health Servs., 139 S. Ct. 1804 (purpose and requirements of notice-and-comment process)
- Dorsey v. United States, 567 U.S. 260 (Congress can expressly override APA requirements)