SC Not Hear IRC § 965 Transition Tax Challenge

May 2, 2023

According to Law360, an American expatriate who runs an Israeli law firm will not get a chance to challenge regulations implementing the transition tax for overseas profits after the U.S. Supreme Court in Monte Silver Ltd. v. Internal Revenue Service et al., case number 22-907, on May 1, 2023 declined to hear the case

The top court's refusal to hear the case ends the challenge by Monte Silver, who had argued the Internal Revenue Service failed to undertake the required analysis of the regulations under the Regulatory Flexibility Act. Silver sued the government in 2019 over the regulations governing the one-time mandatory transition tax on overseas income, a provision of the 2017 Tax Cuts and Jobs Act. Companies had eight years to pay the deemed tax on foreign income.

Silver had claimed that he and his firm would incur compliance costs as a result of the rules each time the firm distributed a dividend to him, the firm's sole shareholder. He also had argued the rules shouldn't be enforced until the IRS analyzed their impact on small businesses, as required by the RFA.

In December, The D.C. Circuit uled That Silver Lacked Standing To Challenge The Regulations Under Article III Of The U.S. Constitution Because He Hadn't Been Injured By Them.

The injuries he claimed could be tied to other tax laws and rules, the appeals court found.

The court ruled Silver did not show that granting the requested relief would redress a past injury because he had already borne the costs of compliance in determining his liability and he didn't owe any tax. The court also found that Silver had failed to show imminent future injury, another way to satisfy Article III standing.

The U.S. District Court for the District of Columbia dismissed Silver's claim in 2021, finding that Silver failed to show his burden to comply with the new regulations would change if the government granted the relief he requested.

Silver also did not present facts showing that he would be harmed in the future by the regulations, the district court ruled. He alleged that he could end up paying costs to comply with the regulations but did not present actual facts showing that he would suffer an imminent injury, the opinion said.

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SC Not Hear IRC § 965 Transition Tax Challenge