15 W. 17th St. LLC v. Comm'r
Opinion
An order will be issued denying petitioner's motion for partial summary judgment.
On its 2007 partnership return LLC claimed a charitable contribution deduction of $64,490,000. In order to substantiate a charitable contribution deduction of $250 or more, a taxpayer must secure and maintain in its files a "contemporaneous written acknowledgment" (CWA) from the donee organization.
The substantiation requirements of
R audited LLC's 2007 return and disallowed the charitable contribution deduction in its entirety. After the case was docketed in this Court, the donee organization submitted an amended Form 990, Return of Organization Exempt from Income Tax, that included the information specified in
1.
2.
LAUBER,
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An order will be issued denying petitioner's motion for partial summary judgment.
On its 2007 partnership return LLC claimed a charitable contribution deduction of $64,490,000. In order to substantiate a charitable contribution deduction of $250 or more, a taxpayer must secure and maintain in its files a "contemporaneous written acknowledgment" (CWA) from the donee organization.
The substantiation requirements of
R audited LLC's 2007 return and disallowed the charitable contribution deduction in its entirety. After the case was docketed in this Court, the donee organization submitted an amended Form 990, Return of Organization Exempt from Income Tax, that included the information specified in
1.
2.
LAUBER,
After the petition in*38 this case was filed, the donee organization submitted an amended return for the year in which the gift was made. This amended return described the gift from 15 West 17th Street LLC (LLC) and included a statement that the donee had provided the LLC with no goods or services in consideration for that gift. Petitioner contends that this action by the donee eliminated the need for a CWA, relying on
The Internal Revenue Service (IRS or respondent) advances two arguments in opposition to petitioner's motion for partial summary judgment. First, respondent contends that
We conclude that the rulemaking authority delegated in
There is no dispute as to the following facts, which are drawn from the parties' summary judgment papers and from the stipulations of facts and attached exhibits filed previously. At the time of the filing of the petition, the LLC had its principal place of business in New York.
In September 2005 the LLC purchased, for $10 million, a property in New York City, Borough of Manhattan, known as block 558, lot 43. This property*40 comprised two parcels. The building on the northern parcel, at 126-128 East 13th Street, is the Van Tassell & Kearney Auction Mart (VTK Building). The VTK Building was built in 1903-04 for staging horse auctions. It was later used as a candy factory, as a vocational school for women, and as the studio of Frank Stella, a well-known artist.
The LLC initially planned to demolish the VTK Building. However, the Greenwich Village Society for Historic Preservation petitioned the New York City Landmarks Preservation Commission to designate the VTK Building an individual landmark. The commission calendared an emergency hearing in September 2006 to consider this request. On November 29, 2007, the VTK Building was placed on the National Register of Historic Places, and it thus became a "certified historic structure" within the meaning of
On December 20, 2007, the LLC executed in favor of the Trust for Architectural Easements (Trust) a historic preservation deed of easement. This deed granted the Trust a perpetual conservation easement over the north parcel of the property, including the VTK Building. The Trust is an organization described in
The LLC's*41 contribution of the easement to the Trust was completed for Federal tax purposes in 2007. On May 14, 2008, the Trust sent the LLC a letter acknowledging receipt of the easement. This letter did not state whether the Trust had provided any goods or services to the LLC, or whether the Trust had otherwise given the LLC anything of value, in exchange for the easement.
The LLC secured an appraisal concluding that, as of February 8, 2008, the property had a fair market value of $69,230,000 before placement of the easement. The appraisal thus opined that the property--acquired for $10 million in September 2005--had risen in value by almost 600% in 2-1/2 years. Opining that the property was worth only $4,740,000 after the donation, the appraisal concluded that the easement had reduced the property's value by $64,490,000.
The LLC filed its 2007 Form 1065, U.S. Return of Partnership Income, on October 17, 2008. On this return, the LLC deducted $64,490,000, the alleged value of the easement, as a charitable contribution to the Trust. The LLC included with its return a copy of the appraisal report, a copy of the Trust's May 14, 2008, letter, and Form 8283, Noncash Charitable Contributions, executed*42 by the appraiser and by a representative of the Trust.
On August 19, 2008, the Trust filed Form 990, Return of Organization Exempt From Income Tax, for calendar year 2007. On that return, the Trust did not report receipt of a charitable contribution from the LLC. Nor did it report whether it had provided any goods or services to the LLC in exchange for the easement.
The IRS selected the LLC's 2007 return for examination. On August 28, 2011, the IRS mailed the LLC a notice of final partnership administrative adjustment (FPAA), which was followed by a supplementary FPAA on September 27, 2011. In the supplementary FPAA the IRS disallowed the charitable contribution deduction in full because "[i]t has not been established that all the requirements of
On November 2, 2011, the LLC's tax matters partner timely petitioned this Court*43 for review of the supplementary FPAA. On June 16, 2014, the Trust prepared an amended Form 990 for 2007 and mailed it to the IRS Service Center in Ogden, Utah. Part III of Form 990 is captioned "Statement of Program Service Accomplishments." On its original Form 990 filed in 2008, the Trust had described these accomplishments in an attached statement, which summarized the easement donations it had received during 2007. On the amended Form 990 filed in 2014, the Trust added the following two sentences to that description: "One of the New York donations received during 2007 included the donation by 15 West 17th Street LLC of an Historic Preservation Deed of Easement * * *. The Trust provided no goods or services to 15 West 17 Street LLC in consideration for its donation of the Historic Preservation Deed of Easement."
The Ogden Service Center received the amended Form 990 on June 23, 2014. Respondent does not dispute petitioner's assertion that the Service Center accepted this amended return for filing. The record does not reveal whether the Service Center personnel were aware that the LLC's return had previously been examined or that this case was pending in litigation.
The purpose*44 of summary judgment is to expedite litigation and avoid un necessary and time-consuming trials.
To address tax-compliance problems that had arisen in connection with quid pro quo contributions, Congress in 1993 enacted
The requirement that a CWA be obtained for charitable contributions of $250 or more is a strict one. In the absence of a CWA meeting the statute's demands, "[n]o deduction shall be allowed."
(i) The amount of cash and a description (but not value) of any property*46 other than cash contributed. (ii) Whether the donee organization provided any goods or services in consideration, in whole or in part, for any property described in clause (i). (iii) A description and good faith estimate of the value of any goods or services referred to in clause (ii) * * *.
"Congress enacted the substantiation requirements of
Congress enunciated two principal purposes for this compliance provision. The first purpose was "to assist taxpayers in determining the deductible amounts of their charitable contributions."
The substantiation requirement now codified in
The Ways and Means Committee held a hearing on the President's tax proposals in early February 1992. U.S. Economy, and Proposals to Provide Middle-Income Tax Relief, Tax Equity and Fairness, Economic Stimulus and Growth: Hearing Before the H. Comm. on Ways and Means, 102d Cong. 939 (1992). Although the donee reporting provision received little attention, Congressman Schulze worried that it might create "a firestorm that * * * [will] come back to haunt us." My concern is, if you make a contribution over $500 and have to put your taxpayer identification number in, and the charity then has to report that as well, and later on that will be matched up. Are we going to have an area where relatively small charities that are somewhat unsophisticated are going*49 to be reporting this, and then it's going to be matched at IRS, and people are going to get in trouble if a number is off? We've had some of these problems before, and they have been major problems. I just do not want to see us get into that situation with
During another Ways and Means Committee hearing, representatives from charitable organizations indicated their support for greater tax compliance. Permanent Extension of Certain Expiring Tax Provisions: Hearing Before the H. Comm. on Ways and Means, 102d Cong. 498, 517-518 (1992). But they likewise expressed concern about the donee reporting provision, which they thought required modification.
On July 2, 1992, Senator Moynihan introduced the Charitable Contribution Tax Act of 1992. S. 2979, 102d Cong. (1992).*50 In this bill, the requirement that charities file annual information returns reporting charitable contributions was eliminated.
Senator Danforth, a co-sponsor of S. 2979, noted that the bill "was the product of lengthy discussion" between the charitable community and policymakers in Congress and the Treasury Department. 138 Cong. Rec. 18038 (1992). He explained: "An earlier version of some of the proposals in this bill appeared in the President's 1993 budget. The charitable community was concerned about certain provisions in the reporting requirements area. * * * [Assistant Secretary] Goldberg listened to the views of the charitable community and took primary*51 responsibility for addressing their concerns."
This Senate bill became part of there will be increased compliance with present-law rules governing charitable contribution deductions if a taxpayer who claims a charitable contribution of $750 or more is required to obtain substantiation from the donee indicating the amount of the contribution and whether any goods, service, or privilege was received by the donor in exchange for making the contribution.
With the reduction of the monetary threshold to $250, the House provision as set forth in
In August 1995 the Treasury Department issued proposed regulations providing guidance concerning the implementation of
The IRS received several hundred pages of comments. Only one commenter, an Indianapolis accounting firm, addressed donee reporting. It recommended that donee organizations be allowed to "satisfy the substantiation requirement by reporting directly to the IRS," but it noted that "the proposed regulations do not provide any such guidance or opportunity." It urged that "the regulations should be drafted to provide that in certain situations substantiation can be provided directly to the IRS by the filing of a Form 990 or Form 990-PF," suggesting that "[t]his provision would be particularly helpful to private foundations and small charitable organizations." None of the speakers who appeared at the November 1, 1995, hearing mentioned donee reporting.
On December 16, 1996, the Treasury Department promulgated final regulations under One commenter suggested that the regulations should allow charities to report charitable contributions directly to the IRS on Form 990 or*55 990-PF.
During the ensuing 16 years, the IRS received no public request for implementation of donee reporting. On August 9, 2013, the IRS nevertheless put on its Priority Guidance Plan a regulation project to address this subject. U.S. Dep't. of the Treasury, Office of Tax Policy and Internal Revenue Service, 2013-2014 Priority Guidance Plan (General Tax Issues, Item 30) (2013). On September 17, 2015, the IRS issued a notice of proposed rulemaking (NPRM) "to implement the exception to the 'contemporaneous written acknowledgment' requirement for substantiating charitable contribution deductions of $250 or more."
The NPRM began by noting that the Treasury Department in 1997 had "specifically declined to issue regulations under
The NPRM expressed the Treasury Department's view that implementation of a donee reporting system would require resolution of several threshold issues concerning the manner of such reporting.
The first threshold issue concerned the appropriate IRS form to be used for such reporting.
The second threshold issue concerned the required contents of the donee's report. Unlike a CWA mailed to a taxpayer, "the donee reporting information return will be sent to the IRS, which must have a means to store, maintain, and readily retrieve the return information for a specific taxpayer if and when substantiation is required in the course of an examination."
The third threshold issue concerned the time for donee reporting. The IRS noted that "
The NPRM requested public comments by December 16, 2015.
In withdrawing the proposed regulations, the Secretary explained that the public comments had "questioned the need for donee reporting" and had "ex pressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers."
This argument is unpersuasive for at least two reasons. The statutory requirement that charities file annual information returns, currently codified in
More fundamentally, the Code contains hundreds of sections authorizing the Secretary to issue regulations.
The same reasoning applies here. When Congress in
This case thus requires us to address a question that has arisen with some frequency: How should a court respond when a taxpayer or the IRS desires to have a particular tax treatment apply in the absence of the regulations to which the statute refers? In some cases, the Secretary may have affirmatively declined to issue regulations, having concluded that they are unnecessary or inappropriate. In other cases, the Secretary may intend to issue regulations but may have encountered delays because of subject matter complexity or the press of other business. Courts have described the question presented here as whether the statute is "self-executing" in the absence of regulations.
The courts have struggled to define the proper judicial response in these scenarios. In each case, Congress has delegated to an executive branch agency the*63 task of using its expertise to craft appropriate regulations. Under the
In approaching these cases, the courts have focused principally, as they must, on the text of the delegating provision. "[O]ur inquiry begins with the statutory text, and ends there as well if the text is unambiguous."
Most of our cases have dealt with delegations of mandatory rulemaking authority (mandatory delegations), where the statute is "framed in terms of commanding the Secretary to prescribe regulations."
Most of the mandatory-delegation cases have involved "taxpayer friendly" provisions, that is, Code sections in which Congress has made available a credit, deduction, or other tax benefit.
In
Three years later in
The next wave of cases addressed
Reviewing the legislative history, we discerned that "Congress did not want the estate of a stockholder of a family corporation to be deprived of the benefits of
When addressing "taxpayer unfriendly" statutes, courts have often approached the problem by considering whether*68 Congress directed the Secretary to determine "whether" a particular tax treatment shall apply, or simply to decide "how" a legislatively ordained tax treatment is to be implemented. In
Judge Tannenwald framed the relevant question as follows: "Are the regulations a necessary condition to determining 'whether' the GST tax applies, as petitioner contends, or do they constitute only a means of arriving at 'how' that tax, otherwise imposed by the statute, should be determined, as respondent contends."
On at least one occasion, an appellate court has held a Code provision for a mandatory delegation to be non-self-executing. In
The U.S. Court of Appeals for the Fourth Circuit reversed. It held that neither the statute nor the legislative history "clearly express[ed] the congressional intent*70 the * * * [petitioners] need in order to prevail."
In sum, this Court and other courts have frequently, but not always, held to be self-executing taxpayer-friendly Code provisions that include a mandatory delegation to the Secretary. One commentator has described this as "the equity approach," on the theory that "treating*71 such delegations otherwise would inequitably deprive taxpayers of legislatively intended benefits."
The Code contains hundreds, if not thousands, of sections that authorize the Secretary to issue regulations, without directing or mandating that he do so. Commentators have described these provisions as "discretionary" or "policy" delegations, reasoning that Congress "has not framed the delegation in 'mandatory' terms, * * * but has instead left the implementation of the policy objective to the Secretary's discretion."
Delegations of permissive*72 or discretionary authority (discretionary delegations) appear in many verbal forms. Often Congress expresses an intention to confer discretionary authority by use of the word "may," providing that "the Secretary may prescribe regulations" or that something may happen "under such regulations as the Secretary may prescribe."
Discretionary delegations often arise in Code sections that set forth a definite requirement but allow for the possibility of exemptions. For example,
Another common type of discretionary delegation authorizes the Secretary to implement elections. For example,
Discretionary delegations also arise where Congress has enacted a default rule in the Code but authorized the Secretary to issue regulations providing for an alternative rule, such as a "safe harbor" or a rule of convenience. For example,
Although many discretionary delegations include the words "may prescribe" or "may be prescribed," other verbal formulas exist. For example,
This Court appears to have addressed on only one occasion whether a statute*75 including a discretionary delegation is self-executing in the absence of regulations. That case, which generated a unanimous reviewed Opinion by this Court, was
The Commissioner argued in
We noted in
Under
We begin as we must with the statute's text.
The discretionary nature of this delegated authority is underscored by comparing the text of
The legislative history shows that Congress, by phrasing this delegation of rulemaking authority in discretionary terms, intended that
After many months of study and negotiations, Congress replaced the donee reporting regime proposed by the President with the CWA regime now codified in
In structural terms,
Because Congress intended that the Secretary exercise his discretion in resolving these questions,
The Secretary received in response 38,000 (mostly negative) comments. He thereupon withdrew the proposed regulations in their entirety, noting that com-menters had "expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers" for reporting purposes.
Petitioner has cited, and our own research has discovered,*81 no case in which a court has held to be self-executing a Code provision containing a discretionary delegation that refers to regulations that the Secretary "may prescribe." Conversely, every judicial decision that has held a Code provision to be self-executing in the absence of regulations has involved a mandatory delegation that included the word "shall." In many of these cases we emphasized the mandatory nature of the delegation as evidenced by Congress' use of the word "shall."
Adopting what he calls a "plain meaning" approach,
When construing a statute, "[i]t is our duty 'to give effect, if possible, to every clause and word'" so as to avoid rendering any part of the statute meaningless surplusage.
As noted earlier, there are hundreds of Code provisions that employ phrases or clauses similar to those in
The approach in Judge Foley's dissenting opinion would also produce results plainly at odds with Congress' intent. The dissent's conclusion would allow the Trust to satisfy its obligations under
In sum, we conclude that
In the exercise of his discretion, the Secretary determined in 1997, and again in 2016, that a system of donee*85 reporting is neither necessary nor desirable, and he accordingly declined to issue the regulations that the statute says he "may prescribe." We hold that
To reflect the foregoing,
GALE, THORNTON, GOEKE, HOLMES, KERRIGAN, BUCH, NEGA, and ASHFORD,
MARVEL and PUGH,
HOLMES,
Courts frequently face the problem of what to do with an agency that has ignored Congress's invitation or command to write regulations. Should a court remedy the agency's refusal to exercise*86 the power delegated to it, and if so, how? This is a practical question that some academics have actually given some considered thought to; and Professor Grewal has concluded, after a thorough review I won't cut and paste here, that to hold a statute self-executing and invoke "phantom regulations"--a court's best guess at what regulations an agency might have issued--is never an appropriate response.
But I also recognize that this isn't a position that we need to reexamine today. As the Court correctly concludes,
But delegations from Congress can also be mandatory. Mandatory delegations are usually indicated by a command that the agency "
But we've built up this body of tax law in apparently blissful disregard for the APA, which provides a generally applicable procedure to "compel agency action unlawfully withheld or unreasonably delayed."
The Supreme Court has warned that "we are not inclined to carve out an approach to administrative review good for tax law only".
FOLEY,
The language "files a return, on such form and in accordance with such regulations as the Secretary may prescribe" is found in only one place in
The majority acknowledges that "the donee reporting provision received little attention". [s]ubstantiation is not required if the donee organization files a return with the IRS (in accordance with Treasury regulations) reporting information sufficient to substantiate the amount of the deductible contribution.
COLVIN, VASQUEZ, GUSTAFSON, PARIS, and MORRISON,
GUSTAFSON, (D)
Rather, the statute provides that
For tax-exempt charitable organizations,2 the regulations already did (and still do) prescribe a "return"--i.e., Form 990, "Return of Organization Exempt from Income Tax": (a) In general.--(1) * * * [E]very organization exempt from taxation under (2)(i) * * * [E]very organization exempt from taxation under (ii) The information generally required to be furnished by an organization exempt under (f) The total of the contributions, gifts, grants and similar amounts*95 received by it during the taxable year, and
As in effect in 1992--i.e., Attach a schedule listing contributors who gave the organization, directly or indirectly, money, securities,*96 or other property worth $5,000 or more during the year. If no one contributed the reportable minimum, the organization does not need to attach a schedule. Show each contributor's name and address, the total amount received, and the date received. Contributors include individuals, fiduciaries, partnerships, corporations, associations, trusts, or exempt organizations. * * *
When
By 2007, the IRS had prescribed a Schedule B, "Schedule of Contributors". However, Schedule A, part III, line 3c asked-- Did the organization receive or hold an easement for conservation purposes, including easements to preserve * * * historic structures? If "Yes," attach a detailed statement
When it applies,
Admittedly,
Nor*99 does the legislative history suggest such a de facto veto power. That history, as described by the majority,
The Tax Court should not give to Treasury the power to veto
COLVIN, FOLEY, VASQUEZ, PARIS, and MORRISON,
Footnotes
1. All statutory references are to the Internal Revenue Code (Code) in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. We round all monetary amounts to the nearest dollar.↩
2. On November 6, 2015, we directed respondent to provide any written public comments submitted in response to the rulemaking proceedings involving
sec. 170(f)(8)↩ . Respondent filed a response with about 170 pages of attachments. The attachments include all public comments received by the Treasury Department and a transcript of the November 1, 1995, hearing.3. The fact that charities are required to report some donor information on Form 990 does not support the dissent's position. Charities that file Form 990 have long been required to identify contributors who make annual gifts in excess of $5,000.
See sec. 1.6033-2(a)(2)(ii)( , Income Tax Regs. But this information is reported to assist the IRS, not in auditing the donors' contributions, but in auditing the charity's compliance with "public charity" rules and the bar against private inurement. A charity may have a handful of donors who make gifts in excess of $5,000 but many thousands of donors who make gifts in excess of $250; there is simply no place on the Form 990 to report such a volume of information. The Form 990, moreover, requires the reporting only of donors' "names and addresses," without any taxpayer identification numbers (TINs). Without TINs, the IRS would have no practical way of associating the information reported on the Form 990 with the individual returns of the donors who made the gifts. Finally, many organizations that receive tax-deductible contributions, such as churches and Federal and State governmental entities, do not file Forms 990.f )See sec. 6033(a) ,(c) . For all these reasons, the reference to "regulations" insubparagraph (D)↩ cannot plausibly be read to mean the regulations requiring charities to file returns on Form 990.4. Subsequent cases finding to be self-executing Code sections providing that the Secretary "shall prescribe regulations" have stressed the provisions' taxpayer-friendly character. In
Francisco we addressedsection 931(d)(2) , which provided that the determination as to whether certain income is possessions-source income "shall be made under regulations prescribed by the Secretary."119 T.C. at 322 . We held the statute to be self-executing despite the absence of regulations, noting the principle "that the Secretary's failure to issue regulations does not bar application of a beneficial tax statute."Id. at 324see also Hillman , 114 T.C. at 103, 113 (2000)rev'd on this issue ,263 F.3d 338↩ (4th Cir. 2001) .5. Other courts have employed the "whether/how" approach when considering taxpayer-unfriendly statutes.
See, e.g., Sundance Helicopters, Inc. v. United States , 104 Fed. Cl. 1, 11 (2012)section 4263(c) , which imposes a transportation excise tax, to be self-executing in the absence of regulations). In this and other "whether/how" cases, the courts often reached their results chiefly on the basis of statutory construction, concluding that the statute by its terms made the taxpayer liable for the tax, so that the taxpayer could not wriggle out of the tax by seizing on the Secretary's failure to issue regulations.See, e.g., Temsco Helicopters , 409 F. App'x. at 67section 4263(c) );Pittway Corp. v. United States , 102 F.3d 932, 935-936 (7th Cir. 1996)section 4662(b)(1) , which imposes an excise tax on chemicals, to be self-executing in the absence of regulations). The "whether/how" approach has also appeared in a few cases involving taxpayer-neutral statutes.See, e.g., Int'l Multifoods Corp. v. Commissioner , 108 T.C. 579, 586-588 (1997)section 865(j)(1)↩ , which provided that "[t]he Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purpose of this section, including regulations * * * relating to the treatment of losses," to be self-executing in the absence of regulations).6.
See sec. 5053(a) (providing for exemption for export "under such regulations, and on the giving of such notices, entries, and bonds and other security, as the Secretary may by regulations prescribe");sec. 5053(c) (providing for exemption for removal for laboratory analysis "subject to such limitations and under such regulations as the Secretary may prescribe");sec. 5053(f) ,(g) , and(h) (providing for other exemptions "[s]ubject to such regulations as the Secretary may prescribe");cf. sec. 5852(f)↩ (providing that no firearm may be exempt from tax except "pursuant to an application in such form and manner as the Secretary may by regulations prescribe").7. Numerous other election provisions include similar permissive wording.
See, e.g. ,sec. 167(g)(8)(D) (election concerning depreciation on musical works "shall be made at such time and in such form as the Secretary may prescribe");sec. 456(c)(1) (election to include prepaid dues income "shall be made in such manner as the Secretary may by regulations prescribe");sec. 307(b)(2) (election concerning basis in stock rights "shall be made in such manner as the Secretary may by regulations prescribe");sec. 953(c)(3)(C) (captive insurer may make certain election "at such time and in such manner as the Secretary may prescribe");sec. 472(a) (providing that taxpayer may elect to use LIFO accounting by filing an application "at such time and in such manner as the Secretary may prescribe");sec. 473(d)(5)↩ (election concerning qualified liquidation of LIFO inventories "shall be made subject to such conditions, and in such manner and form and at such time, as the Secretary may prescribe by regulation").8. Petitioner errs in asserting that our cases "have repeatedly recognized" that
subparagraph (D) is self-executing in the absence of regulations. In the cases petitioner cites, we noted the existence of this provision, while explaining that the parties before us had not placed in issue any question regarding its possible application.See Longino v. Commissioner , T.C. Memo. 2013-80, at P34 n.16Averyt v. Commissioner , T.C. Memo 2012-198, 104 T.C.M. (CCH) 65, 67Schrimsher , 101 T.C.M. (CCH) at 1331DiDonato , 101 T.C.M. (CCH) at 1743Hill v. Commissioner , T.C. Memo 2004-156, 87 T.C.M. (CCH) 1451↩, 14529.
Subparagraph (E) appears to have been designed chiefly to implement Congress' intent, clearly expressed in the legislative history, that regulations be issued clarifying the application of the CWA requirement for contributions made by payroll deduction and to donors' receipt from charities of token goods and services having de minimis value.See H.R. Conf. Rept. No. 103-213, at 564, 566-567 (1993),1993-3 C.B. 393, 442, 444-445 . The Treasury Department issued temporary regulations and an NPRM addressing these topics on May 27, 1994, and issued final regulations on October 12, 1995, and December 16, 1996.T.D. 8544, 1994-2 C.B. 28, 873 (temporary regulations and NPRM);T.D. 8623, 1995-2 C.B. 28 (final regulations for contributions made by payroll deductions);T.D. 8690, 1997-1 C.B. 68↩ (final regulations regarding goods and services with insubstantial value).10. Other paragraphs of
section 170(f) indicate that Congress used the words "shall" and "may" advisedly.Compare sec. 170(f)(2)(B) ,(10)(I) ,(12)(F) (providing that "[t]he Secretary shall prescribe such regulations" as necessary or appropriate),with sec. 170(f)(11)(H) (providing that "[t]he Secretary may prescribe such regulations" as necessary or appropriate),sec. 170(f)(12)(F) (providing that "[t]he Secretary may prescribe such regulations or other guidance which exempts" certain transactions from substantiation requirements),and sec. 170(f)(4)↩ (providing that a remainder interest shall be valued using a 6% discount rate, "except that the Secretary may prescribe a different rate").11. Scholars who have studied this subject have urged that statutes embodying discretionary delegations should never be regarded as self-executing.
See Gall, ("[P]olicy delegations can never be self-executing; otherwise, courts could usurp the discretionary authority that was delegated to the Secretary.") (citingsupra , at 426Alexander , 95 T.C. at 473-474Grewal, . We need not decide this broader proposition; we hold thatsupra , at 84-85section 170(f)(8)(D)↩ is not self-executing in light of the language, structure, and legislative history of this statute.12. Because
section 170(f)(8)(D) embodies a discretionary delegation, we need not address questions that would arise under our case law if we were considering a statute that embodied a mandatory delegation. Reasonable minds can differ, for example, as to whether the statute before us is "taxpayer friendly" or "Government friendly." On the one hand, implementation ofsubparagraph (D) would relieve the taxpayer of a substantiation obligation otherwise required. On the other hand,subparagraph (D) is part of "a compliance provision,"Gundanna , 136 T.C. at 171Subparagraph (D)↩ arguably displays aspects of both. By authorizing the Secretary to specify the form and manner of donee reporting, the statute addresses "how" questions. But it also delegates the Secretary authority to address difficult policy questions, the resolution of which may affect (and did affect) his decision as to whether donee reporting should be implemented at all. In view of our disposition, it is unnecessary to tread further into these waters.1.
See Norton v. S. Utah Wilderness All. , 542 U.S. 55, 64, 124 S. Ct. 2373, 159 L. Ed. 2d 137 (2004)discrete agency action that it isrequired to take ");Benzman v. Whitman , 523 F.3d 119, 131 (2d Cir. 2008)see op. Ct. note 10, withinsection 170(f)↩ itself. All of this shows that Congress knows how to tell an agency exactly what it wants it to do--and how.2. Though even in a case like this, I would note that a taxpayer who disagrees with Treasury's inaction could try to seek relief under the APA, which requires agencies to "give an interested person the right to petition for the issuance, amendment, or repeal of a rule."
5 U.S.C. sec. 553(e) ;see Grewal, . Denial of a taxpayer's petition is then appealable to the courts.supra at 84-855 U.S.C. secs. 702 ,706 (2012) ;see Auer v. Robbins , 519 U.S. 452, 459, 117 S. Ct. 905, 137 L. Ed. 2d 79↩ (1997)3.
See e.g., Prometheus Radio Project v. FCC , 824 F.3d 33, 49-50 (3d Cir. 2016)5 U.S.C. section 706(1) to order the Federal Communications Commissioner to update regulations defining an eligible entity);Kingsbrook Jewish Med. Ctr. v. Richardson , 486 F.2d 663, 670 (2d Cir. 1973)5 U.S.C. section 706(1)↩ to compel the Secretary of Health, Education, and Welfare to issue regulations about Medicare retroactive corrective rate adjustments).1. The heading of the subparagraph in question, "[s]ubstantiation not required for contributions reported by the donee organization", further indicates that
sec. 170(f)(8)(D) is effective regardless of whether regulations are promulgated.See Almendarez-Torres v. United States , 523 U.S. 224, 234, 118 S. Ct. 1219, 140 L. Ed. 2d 350 (1998)Trainmen v. Balt. & Ohio R.R. Co. , 331 U.S. 519, 528-529, 67 S. Ct. 1387, 91 L. Ed. 1646↩ (1947)))2. Curiously, the majority contends that my reading of
sec. 170(f)(8)(D) renders the phrase "on such form and in accordance with such regulations as the Secretary may prescribe" surplusage.See op. Ct. p. 48. That contention should not, however, override the plain meaning ofsec. 170(f)(8)(D) .See Moskal v. United States , 498 U.S. 103, 120, 111 S. Ct. 461, 112 L. Ed. 2d 449 (1990)sec. 7805(a) and its predecessors have granted the Secretary the general authority to promulgate regulations since 1916, yet Congress has regularly included the Secretary's authority to promulgate regulations in various other Code sections.See, e.g. ,secs. 338(i) ,472(a) ,1256(d)(2) ,1502 ,5053 . Certainly, each of these specific grants of regulatory authority has an independent effect beyondsec. 7805(a)↩ and is not dismissed as surplusage.1. Had Congress conceived the rule that the opinion assumes, the phrase "which includes" might have been moved and the statute might have read--
Subparagraph (A) shall not apply to a contribution if the donee organization files a return whichincludes, on such form and in accordance with such regulations as the Secretary may prescribe, the information described insubparagraph (B)↩ with respect to the contribution2. Not all organizations that may be the donees of deductible charitable contributions must file returns.
See, e.g. ,sec. 170(c)(1) ("A State, a possession of the United States, * * * or the United States or the District of Columbia"). However, at least some tax-exempt organizations not required to file Form 990 may file it voluntarily.See Rev. Rul. 71-55, 1971-1 C.B. 403↩ .3. A deduction will be disallowed if the receipt is issued after the donee's tax return is filed or is due,
sec. 170(f)(8)(C) , of if the receipt fails to state an amount of a cash contribution or a description (butnot a value) of a non-cash contribution,sec. 170(f)(8)(B)(i) , or lacks a statement whether the donee provided goods or services and a statement of the value of those goods or services,sec. 170(f)(8)(B)(iii)↩ .4. The majority suggests,
see op. Ct. p. 49, that this interpretation "would makesubparagraph (A) elective with charities," but in fact the alternative insection 170(f)(8)(D) is significantly more demanding than the contemporaneous receipt that satisfiessubsection (f)(8)(A) . This alternative substantiation must be made on the Form 990 return (not a mere receipt) and thus is potentially subject to civil penalties undersection 6701 and, since the return is signed "[u]nder penalties of perjury", the criminal penalties ofsection 7206(1) as well. In addition, an organization that decided not to issue receipts would surely disappoint and confuse its donors--not a good thing for an organization that depends on donations. It would therefore seem unlikely that an organization would electnot↩ to issue receipts but instead to report its contributions on its return.5.
See↩ "Respondent's Response to Petitioner's Motion for Partial Summary Judgment", at 13-16 (Aug. 15, 2014). Neither the Commissioner nor the majority suggests that this Court is bound to defer to this agency position (which has never been promulgated in a regulation). We therefore construe the statute by normal principles.6.
Cf. Francisco v. Commissioner , 119 T.C. 317, 323-324 (2002)Section 931(d)(2) * * * is silent as to whether those regulations may be issued undersection 931 or another section of the Code, such as sections governing the determination of sources of income (sections 861-865 ). In the absence of regulations undersection 931(d)(2) , we believe it is appropriate to considersections 861-865 and related regulations"),aff'd ,370 F.3d 1228, 361 U.S. App. D.C. 504↩ (D.C. Cir. 2004) .7. The information that
section 170(f)(8)(D) requires a donee's return to report is "the information described insubparagraph (B) " ofsection 170(f)(8) ; and that "information" doesnot include the donor's social security number nor even his address. The majority,see op. Ct. p. 22 (citing80 Fed. Reg. 55804 ), shows that the Department of the Treasury once envisioned a more ambitious regime that would have required not only information required in the statute but more--i.e., "[t]he donor's taxpayer identification number * * * in order to properly associate the donation information with the correct donor." However, since Treasury declined to set up such a system (because of "the potential risk for identity theft"), we need not speculate about the validity of such extra-statutory requirements if Treasury were ever to promulgate such regulations. At present it is sufficient to note that a donee organization filing Form 990 is currently able to comply withsection 170(f)(8)(D) by providing "the information described insubparagraph (B)↩ with respect to the contribution".
147 T.C. No. 19 (15 W. 17th St. LLC v. Comm'r) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.