Thursday, January 19, 2012

Tax Update: U.S. Supreme Court Hears Oral Arguments on Statute of Limitations Circuit Court Split

Much of the discussion during oral arguments on United States v. Home Concrete & Supply LLC before the U.S. Supreme Court Jan. 17 centered on the controversial Treasury Department regulations through which the Internal Revenue Service sought to negate the impact of several recent court rulings (United States v. Home Concrete & Supply LLC, U.S., No. 11-139, argued 1/17/12).
The regulations at issue provide that the extended six-year assessment period for omissions from gross income applies to tax shelter transactions involving overstatements of basis.  The regulations, promulgated after the Internal Revenue Service lost several U.S. Tax Court cases on the issue, have been unpopular among many tax practitioners and attacked by taxpayers as unconstitutionally retroactive because Treasury applied it to all tax years for which the assessment period was still open.
However, at some points during the oral arguments, the justices seemed dismissive of many of the concerns raised by the taxpayers in challenging the regulation.  For example, Justice Antonin Scalia said he was not sure the presumption against retroactivity applied to the regulation.
Home Concrete is an appeal of a U.S. Court of Appeals for the Fourth Circuit finding that the use of a tax shelter transaction that operated by overstating the taxpayer's basis in goods sold did not constitute an omission from gross income triggering the extended limitations period.  The ruling deepened an existing circuit split on the issue.  Continue to check back to our blog for coverage on this issue.