Tag Archives: Regulatory Flexibility Act

Monte Silver’s Lawsuit Opposing The Procedural Aspect of #GILTI Regs Lives On

In summary – Monte Silver’s lawsuit against GILTI lives on!

On April 19, 2024 the U.S. Court Of Appeals released a decision which included:

Plaintiffs had objected before the district court that the Anti-Injunction Act did not apply in light of South Carolina v. Regan, 465 U.S. 367 (1984), because they had no other way to litigate their claims. The defendants argued that the Act barred the suit without exception. The district court, in its Memorandum Opinion, did not address these contentions. On appeal, plaintiffs renew their South Carolina argument. Defendants respond with an argument differing somewhat from their presentation to the district court. That South Carolina argument may require factual development.

We therefore vacate and remand the case for further proceedings consistent with this judgment, which also may encompass additional issues beyond those presented in this appeal. In so ruling, we express no opinion on whether the Anti-Injunction Act would apply regardless of South Carolina v. Regan.

In lawyer talk this means that Mr. Silver’s lawsuit against the GILTI regulations has been returned to the District Court for a reconsideration of the issues. This does NOT mean that Mr. Silver was successful in striking down the GILTI regs. It does mean that he was successful in opposing the “dismissal” of the lawsuit by the District Court.

To put it simply:

Monte lives on to fight another day!!

Summarizing in Twitter Speak:

Those who want more commentary, read on …

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Part 34 – 2019: Treasury Fails To Prevent @MonteSilver1 lawsuit against @USTransitionTax From Proceeding – Case To Be Heard On The Merits

What Happened

The judgment is here.

We win!!!!!

About The Transition Tax

As part of the 2017 TCJA, Congress imposed a retroactive tax, without any realization event, on the retained earnings of Controlled Foreign Corporations. Although intended to be the the “trade off” for lowering the Corporate Tax rate from 35% to 21%, it was interpreted to apply to the small business corporations owned by Americans abroad. (The tax compliance industry aggressively promoted this damaging interpretation of the law.) In any event, this imposed significant and life altering consequences on Americans abroad (particularly in Canada) for whom their small business corporations were really their pension plans. I documented the history, damage and madness of this in a series of posts about the transition tax. The law was interpreted (in various ways) and the regulations were drafted in an extremely punitive manner. What needs to be most understood is that a law intended for the Apples, Googles, etc. was interpreted to apply in the same way to individuals (your friends and neighbors) who owned small business corporations.

About The Regulatory Flexibility Act

Title 5 of the U.S. Code of Laws deals with how the U.S. Government works. Subtitle 5 is the Administrative Procedure Act. Subtitle 6 is the Regulatory Flexibility Act. At the risk of over-generalization, the purposes of the Regulatory Flexibility Act are to require the Government to consider the effect that certain rules/regulations have on small businesses and undertake specific procedural steps in relation to this consideration.

Learn About the Regulatory Flexibility Act

An excellent site providing education about the Regulatory Flexibility Act is here. Although written in the context of the EPA, the description offers the following introduction to the Regulatory Flexibility Act:

The Regulatory Flexibility Act (RFA), 5 U.S.C. §§ 601 et seq, was signed into law on September 19, 1980. The RFA imposes both analytical and procedural requirements on EPA and on other federal agencies. The analytical requirements call for EPA to carefully consider the economic impacts rules will have on small entities. The procedural requirements are intended to ensure that small entities have a voice when EPA makes policy determinations in shaping its rules. These analytical and procedural requirements do not require EPA to reach any particular result regarding small entities.

The key is that Government is required by law to consider the economic effect of regulations on small business entities.

And here …

Monte Silver’s Lawsuit Against the Transition Tax – Treasury Did NOT Consider The Impact Of The Transition Tax Regulations on Small Business Entities (including those run by Americans Abroad

The lawsuit was not (like other lawsuits) against the Transition Tax per se. Rather the lawsuit was about the the failure of U.S. Treasury to comply with the procedural requirements of the Regulatory Flexibility Act. Predictably, the Government argued that the lawsuit lacked standing. On December 24, 2019 a U.S. District Court Judge ruled that the plaintiff (Mr. Silver) did have standing. The reason was that his lawsuit was not against the transition tax itself. Rather the lawsuit was against U.S. Treasury causing injury resulting from the failure of Treasury to comply with the requirements mandated in the Regulatory Flexibility Act.

Congratulation to Monte Silver for an incredibly important win. The success of his lawsuit opens the door to many similar lawsuits (GILTI anyone?) down the road.

Earlier posts

In November of 2018 I first wrote about Mr. Silver’s lawsuit.

That post included the following earlier interviews.

Speaking with Monte Silver …

Interview 1 – October 16, 2018

Interview 2 – November 15, 2018

John Richardson – Follow me on Twitter @Expatriationlaw