Supreme Court Briefing Underway in Quality Stores

The government has filed its opening brief in the Quality Stores case, which involves the question whether severance payments made pursuant to an involuntary reduction in force are subject to FICA taxation.  See our prior coverage here. The brief is considerably shorter than the page limit, as the government has sought to take a relatively simple approach to an issue that in the past has generated complex and detailed briefs and opinions.

The government’s primary submission is that the Court needs to focus its attention on the FICA statute and not be distracted by the income tax withholding statute … Read More

Oral Argument Scheduled in Quality Stores

The Supreme Court has scheduled oral argument in the Quality Stores case for the afternoon of Tuesday, January 14.  Two other cases will be argued in the morning session, and the Court will then break for lunch and reconvene at 1:00 for the Quality Stores argument, in which each side is given 30 minutes for argument.  A decision is expected no later than the end of June.… Read More

Fifth Circuit to Address Section 965 Deduction in BMC Software Appeal

In BMC Software v. Commissioner, 141 T.C. No. 5, the Tax Court was faced with considering the effect that some legal fictions (created under a Revenue Procedure regarding transfer pricing adjustments) have on the temporary dividends-received deduction under section 965.  And while both the section 965 deduction and the legal fictions under the Revenue Procedure appear to have been designed to benefit taxpayers by facilitating tax-efficient repatriations, the Tax Court eliminated that benefit for some repatriated amounts.  The taxpayer has already appealed the decision (filed on September 18) to the Fifth Circuit (Case No. 13-60684), and success of that … Read More

Government Submits Supplemental Authority in Loving

We recently reported on the oral argument before the D.C. Circuit in Loving, in which the court considered the validity of the recently promulgated Treasury regulations addressing registration of tax return preparers.  Subsequent to that argument, former IRS Commissioner Lawrence Gibbs published an article defending the IRS’s authority to promulgate those regulations and discussing their importance to tax administration.  The government has now filed a FRAP Rule 28(j) letter bringing the article to the attention of the court and highlighting some points made in the article.  The plaintiffs have responded to that letter, arguing that the article is not … Read More

Oral Argument Scheduled in Bergmann

We have previously reported on the Ninth Circuit’s consideration of the qualified amended return regulation in the Bergmann case.  Several months after the close of the briefing, the court has now scheduled the case for oral argument on December 3 in San Francisco.  The identity of the three-judge panel will be announced at a future date.… Read More

Supreme Court Struggles to Unravel TEFRA Jurisdiction in Woods Oral Argument

The Supreme Court held oral argument in United States v. Woods on October 9.  As we have previously reported, the case presents two distinct questions:  (1) a TEFRA jurisdictional question concerning whether the court could determine the applicability of the valuation overstatement penalty in a partnership-level proceeding; and (2) the merits question whether the 40% penalty applied when the partnership was found not to have economic substance and therefore the basis claimed by the taxpayers in the partnership was not recognized.

Most of the argument time for both advocates was spent on the jurisdictional issue, as the Justices often … Read More

NPR Court Asks Parties for Additional Information on Jurisdictional Questions

It has been almost two years since the Fifth Circuit heard oral argument in the NPR Investments case, which involves a “son-of-BOSS” tax shelter and associated questions regarding penalties and jurisdiction under TEFRA.  See our previous reports on the oral argument and describing the issues.  Last week, the court issued an order directing the parties to file short “letter briefs,” answering some specific questions involving TEFRA jurisdiction over penalties.  In particular, the court asked the parties to address how NPR compares to the Petaluma (D.C. Cir.) and Jade Trading (Fed. Cir.) cases in which the courts found a lack … Read More

Supreme Court Grants Certiorari in Quality Stores

The Supreme Court, not surprisingly, granted cert this morning in the Quality Stores case.  As we have previously reported (see our prior coverage here), the Court is now poised to resolve a conflict between the Sixth Circuit and the Federal Circuit regarding whether severance payments paid to employees pursuant to an involuntary reduction in force are “wages” subject to FICA taxation.  Notably, Justice Kagan did not participate in the order granting the petition, perhaps because she had some involvement in the case during her tenure as Solicitor General.  Her recusal creates the theoretical possibility that the Court could … Read More

Government Faces Sharp Questioning from D.C. Circuit in Loving

The D.C. Circuit heard oral argument on September 24 in the government’s appeal in Loving from the district court decision enjoining the IRS from enforcing its new registration regime for paid tax return preparers.  The panel consisted of Judges Sentelle, Williams, and Kavanaugh.  The court was active, jumping in with questions in the first minute of the government’s opening presentation.  The court asked several questions of the plaintiffs’ counsel as well, but those questions seemed to evince less skepticism of the advocate’s position.  While it is always hazardous to predict the outcome based on the oral argument, the court of … Read More

Reply Brief Filed in Quality Stores

Linked below is the government’s reply brief in support of its petition for certiorari.  The reply attempts to counter the taxpayer’s argument that the conflict between the Sixth Circuit and the Federal Circuit is unimportant because all taxpayers will choose to avoid the Federal Circuit in the future.  See our previous report here.  The government criticizes this argument for seeking to preserve a “forum shopping” opportunity and also remarks that “there is no reason to assume that other courts of appeals” faced with this issue will follow the Sixth Circuit’s reasoning rather than that of the Federal Circuit.  The … Read More

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