Alan Horowitz Comments on Mayo Foundation Supreme Court Decision in Tax Disputes Week

"Supreme Court imposes higher standard for challenging tax regulations"
Tax Disputes Week
01.19.11

Alan Horowitz discusses the Supreme Court ruling in Mayo Foundation for Medical Education & Research v US, which introduced a new standard of judicial deference for tax regulations issued by the US Department of Treasury and the IRS and may make it more difficult for taxpayers to attack tax regulations. "When the taxpayer is involved in litigation with the IRS and there is a regulation on the books that is against the taxpayer’s position, it’s going to be harder to persuade the court not to follow the regulation," said Horowitz.

Horowitz believes that Mayo Foundation may make it less likely that test cases will finally resolve tax issues for future years. "Mayo Foundation opens the door that if a test case comes out against the government, the government can just go ahead and write another regulation and get that case turned around," said Horowitz. Aside from this, Horowitz does not believe the decision will result in a significant increase in the amount of regulations issued by IRS and Treasury. "I imagine there will be some situations in which Treasury will be more inclined to issue regulations, but that will be a drop in the bucket compared to all the regulations that are issued," he said. Although the case does mark a departure from standards for review that had been in place years ago, it is not total surprise. Horowitz explained that a number of lower courts had gone as far as the Mayo Foundation court in eroding the standard of review contained in National Muffler. "Still, the Supreme Court decision eliminates the uncertainty and cements that there is a departure," said Horowitz.

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