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SUPREME COURT DOCKET REPORT

Mayer Brown's Supreme Court and Appellate Practice Group distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community. We also email the Docket Report to our subscribed members and if you don't already subscribe to the Docket Report and would like to, please click here.

October Term 2011 - September 27, 2011

September 27, 2011

Today the Supreme Court granted certiorari in two cases of interest to the business community:


Taxation—Statute of Limitations

Internal Revenue Service (“IRS”) Notice 2000-44 prohibits a form of tax transaction, known as “Son-of-BOSS,” that uses a short-sale mechanism to inflate a taxpayer’s basis in a partnership interest shortly before selling the interest. The effect of the transaction is to limit the capital-gains tax on the sale. When the government believes that a taxpayer has understated the amount of tax owed, the IRS ordinarily has three years to assess additional taxes. 26 U.S.C. § 6501(a). But when a taxpayer “omits from gross income an amount . . . in excess of 25 percent,” the statute of limitations extends to six years. Id. § 6501(e)(1)(A). The Supreme Court granted certiorari today in United States v. Home Concrete & Supply, LLC, No. 11-139, to decide whether an overstatement of basis in ownership interest is an “omi[ssion] from gross income” that triggers the six-year limitations period. The Court will also consider whether a Treasury Department regulation providing that the six-year period applies, issued during the course of the litigation, is entitled to judicial deference.

The Court’s decision will be important to all businesses and other taxpayers seeking to determine the limitation on their liability for potentially erroneous tax filings. The case may also have broader implications for when the government may overcome adverse judicial decisions by promulgating regulations that reinforce its litigating position.

Respondents used a Son-of-BOSS transaction to reduce their tax liability on federal income-tax returns filed in April 2000. An IRS investigation in 2003 tolled the limitations period for five months, and in September 2006 the IRS notified respondents that they owed approximately $1.4 million in additional taxes. Respondents disputed the assessment in court, arguing that their transaction was not an “omi[ssion] from gross income” and thus could not be challenged outside the three-year limitations period.

The district court held that the transaction triggered the six-year limitations period and upheld the assessment. While respondents’ appeal was pending, the United States Tax Court and several appellate courts held that Son-of-BOSS transactions are subject to the three-year limitations period. In response to those decisions, the Secretary of the Treasury promulgated a regulation declaring that an understatement of gross income resulting from a Son-of-BOSS transaction is an omission from gross income that triggers the six-year limitations period. Nevertheless, the US Court of Appeals for the Fourth Circuit sided with respondents, holding that the transaction was not an “omission” from gross revenue under Supreme Court precedent, that the regulation should not be applied retroactively to pending litigation, and that the regulation is not otherwise entitled to deference. Other circuits have reached differing conclusions about the meaning of the statute and the deference owed to the regulation.

Absent extensions, amicus briefs in support of the petitioner (or neither party) will be due on November 18, 2011, and amicus briefs in support of the respondents will be due on December 19, 2011. Any questions about this case should be directed to Dan Himmelfarb (+1 202 263 3035) in our Washington, DC office.


Longshore and Harbor Workers’ Compensation Act—Rate of Compensation

The Longshore and Harbor Workers’ Compensation Act (“Longshore Act”), which establishes a federal workers’ compensation system for certain maritime employees, imposes an upper limit on the rate of compensation for disabled workers. Section 6(b) provides that the compensation rate cannot be more than twice “the applicable national average weekly wage,” as determined for each fiscal year. 33 U.S.C. § 906(b). Section 6(c) provides that the determination of the national average weekly wage for a particular fiscal year “shall apply to employees or survivors currently receiving compensation for permanent total disability or death benefits during such period, as well as those newly awarded compensation during such period.” 33 U.S.C. § 906(c). Today the Supreme Court granted certiorari in Roberts v. Sea-Land Services, Inc., No. 10-1399, to decide whether an employee is “newly awarded compensation” when the employee suffers a disabling injury or, instead, when a formal compensation order is issued.

The case is important to the maritime industry, because it will affect the maximum rate of workers’ compensation payments under the Longshore Act. The Court’s decision could also affect businesses in other industries for which a federal workers' compensation system has been established.

Petitioner was injured in 2002 while working for respondent Sea-Land Services, Inc. and sought compensation under the Longshore Act. Sea-Land’s insurer paid petitioner disability compensation until May 2005, at which point it disputed petitioner’s claim and ceased payments. The matter was referred to an administrative law judge (“ALJ”), who found that petitioner was entitled to benefits. In determining his compensation rate, the ALJ capped his payment at the maximum rate in effect for 2002, the year in which petitioner was injured. Petitioner sought reconsideration, arguing that he was “newly awarded compensation” in 2007, when the ALJ’s award was issued, and thus that he was entitled to the maximum rate in effect for 2007. The Department of Labor’s Benefits Review Board affirmed the ALJ’s decision, and petitioner appealed.

The Ninth Circuit affirmed in relevant part, holding that an employee is “newly awarded” compensation when he first becomes disabled. Reading Section 906(c) “with a view to [its] place in the overall statutory scheme,” the court concluded that its interpretation “accords with the structure of the [Longshore Act], which identifies the time of injury as the appropriate marker for other calculations relating to compensation.” 625 F.3d at 1207. The court rejected petitioner’s argument that an employee is “newly awarded compensation” at the time of a formal compensation order, observing that the Longshore Act “uses the terms ‘award’ and ‘awarded’ to refer to an employee’s entitlement to compensation under the Act, even in the absence of a formal order.” Id. at 1206. The Ninth Circuit disagreed with the holding of the Fifth Circuit in another case that an employee is “newly awarded compensation” when a formal compensation order is issued.

Absent extensions, amicus briefs in support of the petitioner (or neither party) will be due on November 18, 2011, and amicus briefs in support of the respondents will be due on December 19, 2011. Any questions about this case should be directed to Dan Himmelfarb (+1 202 263 3035) in our Washington, DC office.


Today the Supreme Court also granted certiorari in two cases in which Mayer Brown LLP represents the respondent:

Taniguchi v. Kan Pacific Saipan, Ltd., No. 10-1472: The question presented is whether “compensation of interpreters,” a taxable cost under 28 U.S.C. § 1920(6), includes compensation of those who translate written as well as spoken words.

Holder v. Sawyers, No. 10-1543: The question presented is whether a parent’s years of residence after lawful admission to the United States may be imputed to an unemancipated minor child who resided with that parent during the period for which he seeks imputation, for purposes of satisfying 8 U.S.C. § 1229b(a)(2)’s requirement that aliens seeking discretionary cancelation of removal have “resided in the United States continuously for 7 years after having been admitted in any status.”


Mayer Brown's Supreme Court & Appellate practice distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community and distributes a Docket Report-Decision Alert whenever the Court decides such a case. We hope you find the Docket Reports and Decision Alerts useful, and welcome feedback on them (which should be addressed to Andrew Tauber, their general editor, at atauber@mayerbrown.com or +1 202 263 3324).

Feel free to forward this message to anyone who you believe might be interested in the Docket Report.

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Mayer Brown's Supreme Court & Appellate practice distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community and distributes a Docket Report-Decision Alert whenever the Court decides such a case. We hope you find the Docket Reports and Decision Alerts useful, and welcome feedback on them (which should be addressed to Andrew Tauber, their general editor, at atauber@mayerbrown.com or +1 202 263 3324).

Mayer Brown Supreme Court Docket Reports provide information and comments on legal issues and developments of interest to our clients and friends. They are not a comprehensive treatment of the subject matter covered and are not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed. 



 
 
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