Saturday, April 28, 2012

U.S. Supreme Court Limits IRS Tax Shelter Challenge to Three Years

Greg Stohr at Business Week in High Court Limits IRS Time to Challenge Tax Shelters reports on the U.S. Supreme Court Decision in United States v. Home Concrete & Supply, LLC.

This is a VERY strange case in terms of the split of Justices as a 5-4 majority held in favor of the taxpayers, with Justice Breyer joining the majority and Justice Kennedy the dissenters.

Usually those two Justices are in opposite camps.

In this case Kennedy arguably took the path of reason in statutory interpretation while Breyer, the most intellectual of all the Justices, took the path of stare decisis no matter what, an intellectually understandable path, but in the instant case perhaps not optimal judging in a fact and law situation where the Court had a great deal of decision-making leeway.

Justice Scalia wrote a concurrence, shocking in parts, which raises fears that Scalia sometimes does not really understand the nature of the American federal government system of separation of powers. Congress MAKES laws. The Supreme Court is empowered to INTERPRET those laws.

SCOTUS had the power to decide this case differently.

"Obeying" Congress, as Scalia writes below, had nothing to do with it.

Scalia wrote in his concurring opinion inter alia:
"Rather  than  making  our  judicial-review  jurisprudence curiouser  and  curiouser,  the  Court  should  abandon  the  opinion  that  produces  these  contortions,  Brand  X.   I  join the judgment announced by the Court because it is indisputable that Colony resolved the construction of the statutory  language  at  issue  here,  and  that  construction  must therefore control.  And I join the Court’s opinion except for Part IV–C.
*       *       *
I  must  add  a  word  about  the  peroration  of  the  dissent, which  asserts  that  “[o]ur  legal  system  presumes  there will  be  continuing  dialogue among  the  three  branches  of Government  on  questions  of  statutory  interpretation  and application,”  and  that  the  “constructive  discourse,”  “ ‘convers[ations],’” and “instructive exchanges” would be “foreclosed  by  an  insistence  on  adhering  to  earlier  interpretations of a statute even in light of new, relevant statutory amendments.”  Post, at 7–8 (opinion of KENNEDY, J.).  This passage  is  reminiscent  of  Professor  K. C.  Davis’s  vision that administrative procedure is developed by “a partnership  between  legislators  and  judges,”  who  “working  [as] partners  produce  better  law  than legislators  alone  could possibly  produce.”2     That  romantic,  judge-empowering image  was  obliterated  by  this  Court  in  Vermont  Yankee Nuclear  Power  Corp.  v.  Natural  Resources  Defense  Coun­cil,  Inc.,  435  U. S.  519  (1978),  which  held  that  Congress prescribes  and  we  obey,  with  no  discretion  to  add  to  the administrative  procedures  that  Congress  has  created.    It seems to me that the dissent’s vision of a troika partnership  (legislative-executive-judicial)  is  a  similar  mirage. The  discourse, conversation,  and  exchange  that  the  dissent  perceives  is  peculiarly  one-sided.     Congress  prescribes;  and  where  Congress’s  prescription  is  ambiguous the  Executive  can  (within  the  scope  of  the  ambiguity) clarify  that  prescription;  and  if  the  product  is  constitutional  the  courts  obey.    I  hardly  think  it  amounts  to  a “discourse” that Congress or (as this Court would allow in its  Brand  X  decision)  the  Executive  can  change  its  prescription  so  as  to  render  our  prior  holding  irrelevant. What  is needed  for  the  system  to  work  is  that  Congress, the  Executive,  and  the  private  parties  subject  to  their dispositions, be able to predict the meaning that the courts will  give  to  their  instructions. That  goal  would  be  obstructed  if  the  judicially  established  meaning  of  a  technical  legal  term  used  in  a  very  specific  context  could  be overturned  on  the  basis  of  statutory  indications  as  feeble as those asserted here. "
We definitely agree with Scalia that the Supreme Court should be more predictable in its statutory interpretations of Congressional legislation than it has been -- something which is possible if Justices STOP deciding cases politically and stick to interpreting the law according to the letter AND spirit of the Constitution of the United States, rather than according to their own biases. 5-4 decisions should be rare exceptions, rather than the current RULE. If Supreme Court judging is merely an opinion poll, then it is a travesty of justice(s), sorry for the pun.

What concerns this observer about Scalia's above outburst is that in this case there was essentially an arguable conflict between a previous Supreme Court decision and new legislation by Congress, whereby the Justices could easily have found that a 6-year statute of limitations rather than a 3-year statute of limitations applied to the facts of the case -- based on laws passed by Congress and not by the Court.

To go into a tirade in this context about how the U.S. Supreme Court has to "obey" Congress is overstating the case, especially when the main argument of the majority is stare decisis and not Congressional obedience as the ratio decidendi for the decision!

The last thing that comes into this observer's mind when viewing the Supreme Court is that it is "an obedient servant" of Congress.

Quite the contrary, Judge Scalia, YOU and the rest of the Supreme Court are the final arbiters against legislative stupidity by that very same legislative body whose "obedience to" you tout.

The only people you have an obligation of obedience too, Judge Scalia, are the people of the United States, and, similarly, only obedience to the document that created their American nation, the Constitution of the United States of America.

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