Opinion
14433-17
03-22-2022
Habitat Green Investments, LLC, MM Bulldawg Manager, LLC, Tax Matters Partner Petitioner v. Commissioner of Internal Revenue Respondent
ORDER
David Gustafson, Judge
Now before us in each of these consolidated cases--Nos. 14433-17, 14434-17, and 14435-17--is petitioner's motion for reconsideration, which we will grant in part, and its motion for appointment of a mediator, which we will deny.
Motions for reconsideration
In January 2019 the Commissioner filed motions for partial summary judgment in each of these consolidated cases, which motions were founded on 26 C.F.R. sec. 1.170A-14(g)(6). We granted the motions by our orders dated June 30, 2020. Both the motions and our orders cited our opinions in Oakbrook Land Holdings, LLC v. Commissioner, 154 T.C. 180 (2020), and Hewitt v. Commissioner, T.C. Memo. 2020-89, upholding and applying the regulation.
On December 29, 2021, the U.S. Court of Appeals for the Eleventh Circuit--in which venue would lie for an appeal in these consolidated cases--reversed Hewitt and held that "the Commissioner's interpretation of § 1.170A-14(g)(6)(ii), to disallow the subtraction of the value of post-donation improvements … is arbitrary and capricious and therefore invalid under the APA's procedural requirements." Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. Dec. 29, 2021), rev'g and remanding T.C. Memo. 2020-89.
In light of the reversal of Hewitt, petitioners filed (with our leave) motions for reconsideration. We ordered the Commissioner to file responses to the motions for reconsideration. His responses filed March 11, 2022, correctly observe that "[p]etitioner's cross-motions for partial summary judgment raised numerous arguments with respect to the interpretation of the proceeds regulation and the validity of the proceeds regulation as a whole that are unaffected by Hewitt"; and the responses state:
[I]nsofar as petitioner's motions for reconsideration relate to the improvements-subtraction interpretation of the proceeds regulation, respondent does not object to granting petitioner's Motions for Reconsideration in the consolidated cases. But with respect to all other issues addressed in petitioner's Cross-Motions for Partial Summary Judgment, petitioner's Motions for Reconsideration should be denied.Thereafter, on March 14, 2022, the Court of Appeals for the Sixth Circuit disagreed with the Eleventh Circuit's Hewitt opinion, and affirmed the Tax Court's view of the regulation in Oakbrook Land Holdings, LLC v. Commissioner, 2022 U.S. App. Lexis 6512 at *43 (6th Cir. Mar. 14, 2022), affirming 154 T.C. 180, 189-200 (2020). There is now a split in the Circuits.
We will vacate our previous grants of partial summary judgment in favor of the Commissioner, but we will not grant partial summary judgment in favor of petitioners.
Motion for appointment of a mediator
In each of these three cases, the petitioners filed a motion for the appointment of a mediator. Our Rule 124(b) explicitly authorizes "voluntary non-binding mediation"; but the motions reported that the Commissioner "believes mediation will not be productive and therefore objects to the granting of this Motion"; so the motions request that we "compel mediation"--i.e., that we order involuntary non-binding mediation. That is indeed a method of "alternative dispute resolution". It is not explicitly authorized in our Rule 124(b), but petitioners are correct in observing that it is not "foreclose[d]", and we agree that it potentially falls within Rule 124(c) ("Other Methods of Dispute Resolution"). which provides: "Nothing contained in this Rule shall be construed to exclude use by the parties of other forms of voluntary disposition of cases."
We ordered the Commissioner to file responses to the motions, which he did, and the responses state that he continues to object. We can lead a party to water but we cannot make him drink. We think that we should not compel mediation in these cases, not even non-binding mediation, without a shared belief among the parties' that there is some prospect of settlement.
It is
ORDERED that petitioners' motions for reconsideration filed February 14, 2022, are granted in part; and that our orders of June 30, 2020, are vacated insofar as they granted the Commissioner's motions for partial summary judgment, which motions are now denied; but that those orders otherwise remain in effect, so that petitioners' motions for partial summary judgment remain denied. It is further
ORDERED that petitioners' motions for appointment of a mediator are denied.