SCOTUS will address Whirlpool v. Commissioner of Internal Revenue


On November 2, 2022, the United States Supreme Court announced that the case of Whirlpool Financial Corp., et al., Applicants v. Internal Revenue CommissionerNo. 22-9, has been circulated for consideration at its next conference on November 18, 2022. This means we should have an answer within the next few weeks as to whether the Supreme Court will hear the case.

The Supreme Court’s cast for the conference follows the government’s brief, filed October 19, 2022, opposing Whirlpool’s motion for a writ of certiorari.

In its brief, the government summarizes its position as follows:

The petitioners argue (Pet. 17) that 26 USC 954(d)(2) is “conditioned on the promulgation of regulations” by the Treasury Department and therefore cannot “be applied without regard to such regulations.” But as the Court of Appeals correctly held, the text of Section 954(d)(2) itself establishes clear “conditions” and “consequences,” Pet. App. 12a, and when applied to this case, this text “mandate[s]” that the income in question is FBCSI, id. at 18 o’clock. The phrase “‘under regulations prescribed by the Secretary'” delegates authority to the Treasury Department to “carry out the commands of the law”, but not to “deviate from them”, ibid., so that the court legitimately refused to articulate a separate rationale in this case based on the implementing regulations. The petitioners admit (p. 33) that the decision below does not conflict with that of any other appellate court. Nor is it in contradiction with the case law of the Court because the cases cited by the applicants concerned significantly different legislative regimes. And resolving the question posed lacks practical significance because the old Treasury Department regulations would dictate the same outcome as the statutory text, and the revisions that were made to the regulations in 2008 removed any potential doubt about that outcome. This Court’s scrutiny is unwarranted.

The government’s position is interesting. He appears to accept that a court is free to override regulations invoked by the public if it determines that the government’s position is supported by the wording of the statute and that the statute is not entirely conditional on the application of ‘regulations. Further, the government here submits that the US Congress has not fully conditioned the operation of Section 954(d)(2) of the Internal Tax Code (Code) on regulation.

Perhaps sensing the difficulty of prevailing over this argument, the government (as it did in rehearing proceedings before the United States Court of Appeals for the Sixth Circuit) seeks to limit Tourbillon to the specific law at issue. However, this ignores the fact that the same language or substantially the same language is used in other provisions of the Code, making it difficult to limit the government’s argument to section 954(d)(2) of the Code.

In another attempt to discourage scrutiny, the government essentially argues that the substantive issue is one of first and last impression because the regulations in question were changed for taxation years subsequent to Whirlpool’s. Again, this ignores the fact that Tourbillon raises important administrative law issues that will remain regardless of the amendment.

Finally, the government correctly argues that there is no circuit division with respect to the lower court’s decision. While this may be true with respect to Code Section 954(d)(2) and the regulations promulgated thereunder, the Sixth Circuit’s approach conflicts with the approaches of other courts. appeal (and the Supreme Court) when it comes to the ability of the public and the courts to disregard or disregard validly enacted regulations.

Whirlpool submitted its response in support of its motion for certiorari, addressing the government’s position. Whirlpool’s response goes into more detail on our observations above, characterizing the government’s response as resting “on a patently revisionist history of this case”, misinterpreting the law and downplaying the case’s significance from the point of view administrative law.

Practical point: As noted above, we will soon find out if the Supreme Court will decide to answer the questions raised by Whirlpool. We will provide another update as soon as a decision is made.

Earlier coverage of this case can be found below:


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