A federal district court should dismiss a challenge to regulations related to a new tax for certain U.S. shareholders of foreign companies because the rules were properly issued, the federal government argued in a court filing.
The argument came in a memorandum Monday in support of a motion filed by Treasury and the IRS at the the U.S. District Court for the District of Columbia. The government said the court should grant it summary judgment if the case isn’t dismissed.
The government is defending itself against allegations that it didn’t follow proper procedures when it issued regulations implementing tax code Section 965 created in the the 2017 tax law. That law established a “transition tax” for U.S. shareholders of certain foreign corporations on untaxed foreign earnings, treating the earnings as if they were brought back to the U.S.
“Plaintiffs fail to controvert the agency’s findings and present nothing else to overcome the high degree of deference this Court owes the agency when reviewing its certification,” the government said, referring to a certification it issued concerning the regulations.
Monte Silver and his company, Monte Silver Ltd., have argued that the certification is insufficient to show compliance with the Regulatory Flexibility Act. That law requires an agency to either provide an analysis describing its effort to minimize the economic impact of its rule on small entities or factually support a certification that the rule wouldn’t have a significant economic impact on a substantial number of small businesses.
Silver and his business have also said the government failed to certify that its proposed regulations would reduce reporting compliance burdens on small businesses, as required by the Paperwork Reduction Act. In its Monday filing, the government said it met the requirements of the act and that a court can’t review that issue in any case.
Lawrence Marc Zell of Zell, Aron & Co. represents Monte Silver and Monte Silver Ltd.
The case is Silver v IRS, D.D.C., No. 1:19-cv-00247, cross-motion filed 7/20/20.