February 11, 2013
[Note: Miller & Chevalier filed an amicus brief in the Third Circuit in this case on behalf of National Trust for Historic Preservation]
We have previously reported extensively (see previous reports here) on the Third Circuit’s decision in Historic Boardwalk denying a claim for historic rehabilitation tax credits by the private partner in a public/private partnership that rehabilitated a historic property on the Atlantic City boardwalk. Although the Third Circuit declined to rehear the case, the taxpayer has now filed a petition for certiorari seeking Supreme Court review (docketed as No. 12-901).
With no conflict in the circuits on the issue presented, the petition argues that Supreme Court review is needed because of the issue is new and has potentially broad ramifications, stating: “This is the first litigated case in the country where the Internal Revenue Service has made a broad based challenge to the allocation of Congressionally-sanctioned federal historic rehabilitation tax credits by a partnership to a partner.”
The petition elaborates by proffering three reasons why the case should be viewed as presenting tax law issues of exceptional national importance. First, the Third Circuit’s ruling that the taxpayer was not a bona fide partner is asserted to squarely conflict with Commissioner v. Culbertson, 337 U.S. 733 (1949). Second, the petition criticizes the court of appeals’ holding that the allocation of tax credits “should be considered a ‘sale’ or ‘repayment’ of ‘property’” as “utterly baseless” and at odds with Supreme Court precedent. Third, the petition criticizes the Third Circuit for considering the credits themselves as a component of the substance over form analysis.
The petition urges the Court to hear the case because of its importance, stating that it undermines Congress’s intent “to encourage private investment in the restoration of historic properties” and that the issues “bear broadly on . . . thousands of [historic rehabilitation tax credit] partnership investment transactions across the nation involving billions of dollars.” The breadth of the impact of a decision is an important factor in the Court’s consideration of whether to grant review, but the petition still faces an uphill battle, as the Court rarely grants certiorari in technical tax cases in the absence of a circuit conflict – unless the government urges it to do so. Here, there is every reason to expect that the government will oppose the petition.
The government’s brief in response is currently due, after one 30-day extension, on March 25.