William A. Goddard v. Commissioner of Internal Revenue

26 USC § 6231(a)(1)(B)(ii) of the Internal Revenue Code allowed “any” partnership to make an election to have TEFRA apply.1 The Internal Revenue Code did not require all partners to sign the election. An IRS regulation set out the manner in which a “small partnership” (a defined term) could make the election. The regulation required all partners to sign the election. The regulation, however, by its own unambiguous terms, applied only to small partnerships, not to all partnerships. Nevertheless, the IRS interpreted the regulation to apply to all partnerships. The Tax Court deferred to the IRS’ interpretation and invalidated an election by a partnership, which was not a small partnership, on grounds that the partnership failed to adhere to the regulatory requirement that all partners sign the election. The Ninth Circuit affirmed. The Ninth Circuit did not consider the limitations of agency deference set out in Kisor v. Wilkie, 588 U.S. , 139 S.Ct. 2400, 204 L.Ed.2d 841 (2019). The question presented is: Whether a court can give deference to an agency’s regulatory interpretation without considering the 1. During the ta xable years at issue, 1997 through 2001, partnership audits and litigation were governed by the provisions of the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), Pub. L. No. 97-248, 96 Stat. 324, which were formerly found in I.R.C. §§ 6221 through 6234 and the Treasury Regulations promulgated thereunder. Unless otherwise indicated, all Internal Revenue Code provisions and Treasury Regulations cited to in this petition refer to those in effect during the relevant time period. The TEFRA provisions were prospectively repealed