15 W. 17th St. LLC v. Comm'r

147 T.C. No. 19

UNITED STATES TAX COURT

15 WEST 17TH STREET LLC, ISAAC MISHAN,
TAX MATTERS PARTNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 25152-11. Filed December 22, 2016.

On its 2007 partnership return LLC claimed a charitable contri-
bution deduction of $64,490,000. In order to substantiate a charitable
contribution deduction of $250 or more, a taxpayer must secure and
maintain in its files a “contemporaneous written acknowledgment”
(CWA) from the donee organization. I.R.C. sec. 170(f)(8)(A). The
CWA must state (among other things) whether the donee provided the
donor with any goods or services in exchange for the gift. I.R.C. sec.
170(f)(8)(B)(ii).

The substantiation requirements of subparagraph (A) do not
apply to a contribution “if the donee organization files a return, on
such form and in accordance with such regulations as the Secretary
may prescribe,” that includes the information specified in subpara-
graph (B). I.R.C. sec. 170(f)(8)(D). To date, the Secretary has not
issued regulations to implement the donee-reporting regime referred
to in subparagraph (D).
 -2-

R audited LLC’s 2007 return and disallowed the charitable
contribution deduction in its entirety. After the case was docketed in
this Court, the donee organization submitted an amended Form 990,
Return of Organization Exempt from Income Tax, that included the
information specified in subparagraph (B). P filed a motion for par-
tial summary judgment, contending that this action by the donee
eliminated the need for a CWA to substantiate LLC’s gift.

1. Held: I.R.C. sec. 170(f)(8)(D) sets forth a discretionary delegation
of rulemaking authority, and it is not self-executing in the absence of
the regulations to which the statute refers.

2. Held, further, the general rule set forth in subparagraph (A),
requiring a CWA meeting the requirements of subparagraph (B), is
fully applicable to the gift at issue.

Jeremy M. Klausner, Frank Agostino, and Lawrence Sannicandro, for

petitioner.

Marc L. Caine and Carina Campobasso, for respondent.

OPINION

LAUBER, Judge: This case is before the Court on petitioner’s motion for

partial summary judgment. The motion presents a question of statutory construc-

tion involving the relationship between subparagraphs (A) and (D) of section

170(f)(8), which governs substantiation requirements for certain charitable con-
 -3-

tributions.1 Section 170(f)(8)(A) provides that no deduction shall be allowed for

any charitable contribution of $250 or more unless the taxpayer substantiates the

gift by a “contemporaneous written acknowledgment” (CWA) from the donee or-

ganization. The CWA must state (among other things) whether the donee supplied

the donor with any goods or services in consideration for the gift and (if so) must

furnish a description and good-faith estimate of the value of such goods or serv-

ices. Sec. 170(f)(8)(B)(ii) and (iii).

After the petition in this case was filed, the donee organization submitted an

amended return for the year in which the gift was made. This amended return de-

scribed the gift from 15 West 17th Street LLC (LLC) and included a statement that

the donee had provided the LLC with no goods or services in consideration for

that gift. Petitioner contends that this action by the donee eliminated the need for

a CWA, relying on section 170(f)(8)(D). That section provides that “[s]ubpara-

graph (A) shall not apply to a contribution if the donee organization files a return,

on such form and in accordance with such regulations as the Secretary may pre-

scribe, which includes the information described in subparagraph (B) with respect

to the contribution.”

1
All statutory references are to the Internal Revenue Code (Code) in effect
for the year in issue, and all Rule references are to the Tax Court Rules of Practice
and Procedure. We round all monetary amounts to the nearest dollar.
 -4-

The Internal Revenue Service (IRS or respondent) advances two arguments

in opposition to petitioner’s motion for partial summary judgment. First, respond-

ent contends that section 170(f)(8)(D) is not “self-executing,” i.e., that it will be-

come operative only when the Secretary publishes the regulations to which the sta-

tute refers. Since the Secretary has not issued such regulations, respondent con-

tends that subparagraph (A) remains applicable and that a proper CWA was neces-

sary to substantiate petitioner’s contribution. Second, in the event we determine

that section 170(f)(8)(D) is operative in the absence of regulations, respondent

contends that the term “return” as used in this subparagraph means the donee or-

ganization’s original return for the period in question and cannot include an

amended return.

We conclude that the rulemaking authority delegated in subparagraph (D) is

discretionary, not mandatory, and that subparagraph (D) is not self-executing in

the absence of regulations. We accordingly hold that the general rule set forth in

subparagraph (A), requiring a CWA meeting the requirements of subparagraph

(B), is fully applicable for the gift at issue. Because we will deny petitioner’s mo-

tion for partial summary judgment on this ground, we need not address respond-

ent’s alternative argument.
 -5-

Background

There is no dispute as to the following facts, which are drawn from the par-

ties’ summary judgment papers and from the stipulations of facts and attached ex-

hibits filed previously. At the time of the filing of the petition, the LLC had its

principal place of business in New York.

In September 2005 the LLC purchased, for $10 million, a property in New

York City, Borough of Manhattan, known as block 558, lot 43. This property

comprised two parcels. The building on the northern parcel, at 126-128 East 13th

Street, is the Van Tassell & Kearney Auction Mart (VTK Building). The VTK

Building was built in 1903-04 for staging horse auctions. It was later used as a

candy factory, as a vocational school for women, and as the studio of Frank Stella,

a well-known artist.

The LLC initially planned to demolish the VTK Building. However, the

Greenwich Village Society for Historic Preservation petitioned the New York City

Landmarks Preservation Commission to designate the VTK Building an individual

landmark. The commission calendared an emergency hearing in September 2006

to consider this request. On November 29, 2007, the VTK Building was placed on

the National Register of Historic Places, and it thus became a “certified historic

structure” within the meaning of section 170(h)(4)(C)(i).
 -6-

On December 20, 2007, the LLC executed in favor of the Trust for Archi-

tectural Easements (Trust) a historic preservation deed of easement. This deed

granted the Trust a perpetual conservation easement over the north parcel of the

property, including the VTK Building. The Trust is an organization described in

section 501(c)(3) and is a “qualified organization” under section 170(h)(3).

The LLC’s contribution of the easement to the Trust was completed for

Federal tax purposes in 2007. On May 14, 2008, the Trust sent the LLC a letter

acknowledging receipt of the easement. This letter did not state whether the Trust

had provided any goods or services to the LLC, or whether the Trust had other-

wise given the LLC anything of value, in exchange for the easement.

The LLC secured an appraisal concluding that, as of February 8, 2008, the

property had a fair market value of $69,230,000 before placement of the easement.

The appraisal thus opined that the property--acquired for $10 million in September

2005--had risen in value by almost 600% in 2-1/2 years. Opining that the property

was worth only $4,740,000 after the donation, the appraisal concluded that the

easement had reduced the property’s value by $64,490,000.

The LLC filed its 2007 Form 1065, U.S. Return of Partnership Income, on

October 17, 2008. On this return, the LLC deducted $64,490,000, the alleged

value of the easement, as a charitable contribution to the Trust. The LLC included
 -7-

with its return a copy of the appraisal report, a copy of the Trust’s May 14, 2008,

letter, and Form 8283, Noncash Charitable Contributions, executed by the ap-

praiser and by a representative of the Trust.

On August 19, 2008, the Trust filed Form 990, Return of Organization Ex-

empt From Income Tax, for calendar year 2007. On that return, the Trust did not

report receipt of a charitable contribution from the LLC. Nor did it report whether

it had provided any goods or services to the LLC in exchange for the easement.

The IRS selected the LLC’s 2007 return for examination. On August 28,

2011, the IRS mailed the LLC a notice of final partnership administrative adjust-

ment (FPAA), which was followed by a supplementary FPAA on September 27,

2011. In the supplementary FPAA the IRS disallowed the charitable contribution

deduction in full because “[i]t has not been established that all the requirements of

IRC Section 170 and the corresponding Treasury Regulations * * * have been sat-

isfied for the noncash charitable contribution.” In the alternative, the IRS deter-

mined that the value of the easement was substantially less than the $64,490,000

claimed on the return. The IRS determined penalties for gross valuation misstate-

ment under section 6662(a) and (h) and (alternatively) for negligence under sec-

tion 6662(a) and (b)(1).
 -8-

On November 2, 2011, the LLC’s tax matters partner timely petitioned this

Court for review of the supplementary FPAA. On June 16, 2014, the Trust pre-

pared an amended Form 990 for 2007 and mailed it to the IRS Service Center in

Ogden, Utah. Part III of Form 990 is captioned “Statement of Program Service

Accomplishments.” On its original Form 990 filed in 2008, the Trust had de-

scribed these accomplishments in an attached statement, which summarized the

easement donations it had received during 2007. On the amended Form 990 filed

in 2014, the Trust added the following two sentences to that description: “One of

the New York donations received during 2007 included the donation by 15 West

17th Street LLC of an Historic Preservation Deed of Easement * * *. The Trust

provided no goods or services to 15 West 17 Street LLC in consideration for its

donation of the Historic Preservation Deed of Easement.”

The Ogden Service Center received the amended Form 990 on June 23,

2014. Respondent does not dispute petitioner’s assertion that the Service Center

accepted this amended return for filing. The record does not reveal whether the

Service Center personnel were aware that the LLC’s return had previously been

examined or that this case was pending in litigation.
 -9-

Discussion

The purpose of summary judgment is to expedite litigation and avoid un-

necessary and time-consuming trials. See FPL Grp., Inc. & Subs. v. Commis-

sioner, 116 T.C. 73, 74 (2001). We may grant partial summary judgment when

there is no genuine dispute of material fact and a decision may be rendered as a

matter of law. Rule 121(b); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238

(2002). The parties agree on all facts relevant to disposition of petitioner’s mo-

tion, and the issue of statutory construction it presents involves a pure question of

law. We conclude that this question is appropriate for summary adjudication.

I. Statutory and Regulatory Framework

A. Governing Statutory Provisions

Section 170(a)(1) allows a deduction for charitable contributions made dur-

ing the taxable year. Generally, the amount of the deduction is the value of the

property contributed reduced by the value of any consideration that the taxpayer

receives in exchange for the gift. Addis v. Commissioner, 118 T.C. 528, 536

(2002), aff’d, 374 F.3d 881 (9th Cir. 2004). Payments to a charity that are “made

partly as a contribution and partly in consideration for goods or services provided

to the donor by the donee” are often called “quid pro quo contributions.” Ibid.
 - 10 -

To address tax-compliance problems that had arisen in connection with quid

pro quo contributions, Congress in 1993 enacted section 170(f)(8), captioned

“Substantiation Requirement for Certain Contributions.” Section 170(f)(8)(A)

provides: “No deduction shall be allowed * * * for any contribution of $250 or

more unless the taxpayer substantiates the contribution by a contemporaneous

written acknowledgment of the contribution by the donee organization that meets

the requirements of subparagraph (B).” A CWA need not take any particular

form; it may be furnished to the donor (for example) by letter, postcard, or com-

puter-generated media. French v. Commissioner, T.C. Memo. 2016-53, at *7;

Schrimsher v. Commissioner, T.C. Memo. 2011-71, 101 T.C.M. (CCH) 1329,

1331 (citing legislative history).

The requirement that a CWA be obtained for charitable contributions of

$250 or more is a strict one. In the absence of a CWA meeting the statute’s de-

mands, “[n]o deduction shall be allowed.” Sec. 170(f)(8)(A); see French, at *8

(“If a taxpayer fails to meet the strict substantiation requirements of section

170(f)(8), the entire deduction is disallowed.”). The doctrine of substantial com-

pliance does not apply to excuse failure to obtain a CWA meeting the statutory

requirements. French, at *8; Durden v. Commissioner, T.C. Memo. 2012-140, 103

T.C.M. (CCH) 1762, 1763-1764. “The deterrence value of section 170(f)(8)’s
 - 11 -

total denial of a deduction comports with the effective administration of a self-

assessment and self-reporting system.” Addis, 374 F.3d at 887.

Section 170(f)(8)(B) provides that a CWA must include the following infor-

mation:

(i) The amount of cash and a description (but not value) of any
property other than cash contributed.

(ii) Whether the donee organization provided any goods or
services in consideration, in whole or in part, for any property
described in clause (i).

(iii) A description and good faith estimate of the value of any
goods or services referred to in clause (ii) * * *.

An acknowledgment qualifies as “contemporaneous” only if the donee provides it

to the taxpayer on or before the earlier of “the date on which the taxpayer files a

return for the taxable year in which the contribution was made” or “the due date

(including extensions) for filing such return.” Sec. 170(f)(8)(C)(i) and (ii).

Section 170(f)(8)(D) provides that “[s]ubparagraph (A) shall not apply to a

contribution if the donee organization files a return, on such form and in accord-

ance with such regulations as the Secretary may prescribe, which includes the in-

formation described in subparagraph (B) with respect to the contribution.” The

question we must decide is whether the Trust’s filing in 2014 of an amended Form
 - 12 -

990 operates, by virtue of subparagraph (D), to render the CWA requirement of

subparagraph (A) inapplicable to the LLC’s gift.

B. Legislative History

“Congress enacted the substantiation requirements of section 170(f)(8) to

require charitable organizations that receive quid pro quo contributions * * * to in-

form their donors that the deduction under section 170 is limited to the amount by

which the payment exceeds the value of goods or services provided by the char-

ity.” Addis, 118 T.C. at 536. Section 170(f)(8) is “a compliance provision de-

signed to foster disclosure of ‘dual payment’ or quid pro quo contributions.”

Viralam v. Commissioner, 136 T.C. 151, 171 (2011).

Congress enunciated two principal purposes for this compliance provision.

The first purpose was “to assist taxpayers in determining the deductible amounts

of their charitable contributions.” Durden, 103 T.C.M. (CCH) at 1763; see

DiDonato v. Commissioner, T.C. Memo. 2011-153, 101 T.C.M. (CCH) 1739,

1742 (noting purpose “to inform the donor that all or a portion of an amount con-

tributed * * * may not be deductible”). The second purpose was “to assist the In-

ternal Revenue Service in processing tax returns on which charitable contribution

deductions are claimed.” Durden, 103 T.C.M. (CCH) at 1763; see DiDonato, 101
 - 13 -

T.C.M. (CCH) at 1742 (noting purpose “to ease the administration and audit of

charitable contribution deductions”).

The substantiation requirement now codified in section 170(f)(8) originated

in the President’s Budget Proposal for 1993, sent to Congress on January 29,

1992. Office of Mgmt. & Budget, Exec. Office of the President, Budget of the

United States Government, Fiscal Year 1993 Part Two 7 (1992). That budget

proposed several revenue-losing changes in the law governing tax-exempt organi-

zations. Ibid. The President proposed that these changes “would be financed by

requiring charitable organizations to file with the Internal Revenue Service annual

information returns reporting charitable contributions in excess of $500 from any

one donor during the preceding calendar year.” Ibid. The original version of the

substantiation requirement thus took the form of mandatory donee reporting.

The Ways and Means Committee held a hearing on the President’s tax pro-

posals in early February 1992. U.S. Economy, and Proposals to Provide Middle-

Income Tax Relief, Tax Equity and Fairness, Economic Stimulus and Growth:

Hearing Before the H. Comm. on Ways and Means, 102d Cong. 939 (1992). Al-

though the donee reporting provision received little attention, Congressman

Schulze worried that it might create “a firestorm that * * * [will] come back to

haunt us.” Id. at 1034. He explained:
 - 14 -

My concern is, if you make a contribution over $500 and have to put
your taxpayer identification number in, and the charity then has to re-
port that as well, and later on that will be matched up. Are we going
to have an area where relatively small charities that are somewhat un-
sophisticated are going to be reporting this, and then it’s going to be
matched at IRS, and people are going to get in trouble if a number is
off? We’ve had some of these problems before, and they have been
major problems. I just do not want to see us get into that situation
with 501(c)(3)’s.

Treasury Secretary Brady acknowledged the validity of this concern. Ibid. He

pledged that he and Assistant Secretary Goldberg would “try very hard to make

sure that there will not be any inconveniences of the kind you talk about.” Ibid.

During another Ways and Means Committee hearing, representatives from

charitable organizations indicated their support for greater tax compliance. Per-

manent Extension of Certain Expiring Tax Provisions: Hearing Before the H.

Comm. on Ways and Means, 102d Cong. 498, 517-518 (1992). But they likewise

expressed concern about the donee reporting provision, which they thought re-

quired modification. See id. at 518 (“[B]eneficiary institutions need to accept an

equity of burden, although we believe that we need to have a conversation with the

Treasury Department so that we can work out how that is done.”).

On July 2, 1992, Senator Moynihan introduced the Charitable Contribution

Tax Act of 1992. S. 2979, 102d Cong. (1992). In this bill, the requirement that

charities file annual information returns reporting charitable contributions was
 - 15 -

eliminated. See id. sec. 5. It was replaced by a CWA requirement substantially

identical to that now in section 170(f)(8)(A), except that a CWA would have been

required “for any contribution of $100 or more.” Ibid. The President’s original

proposal for donee reporting was retained in a back-up provision resembling cur-

rent subparagraph (D), providing that a CWA would not be required “if the donee

organization files a return, on such form and in accordance with such regulations

as the Secretary may prescribe,” reporting the information specified in sub-

paragraph (B). Ibid.

Senator Danforth, a co-sponsor of S. 2979, noted that the bill “was the

product of lengthy discussion” between the charitable community and policy-

makers in Congress and the Treasury Department. 138 Cong. Rec. 18038 (1992).

He explained: “An earlier version of some of the proposals in this bill appeared in

the President’s 1993 budget. The charitable community was concerned about cer-

tain provisions in the reporting requirements area. * * * [Assistant Secretary]

Goldberg listened to the views of the charitable community and took primary re-

sponsibility for addressing their concerns.” Ibid.

This Senate bill became part of H.R. 11, which was eventually pocket-

vetoed by President George H. W. Bush. H.R. 11, 102d Cong., sec. 8003 (1992)

(as reported in the Senate, July 23, 1992); Memorandum of Disapproval for the
 - 16 -

Revenue Act of 1992, 2 Pub. Papers 2154 (Nov. 4, 1992). The charitable sub-

stantiation provision--now with a CWA requirement for gifts of $750 or more--

was brought back in H.R. 2264 as reported to the House on May 25, 1993. The

report accompanying that bill explained the Committee’s belief that

there will be increased compliance with present-law rules governing
charitable contribution deductions if a taxpayer who claims a chari-
table contribution of $750 or more is required to obtain substantiation
from the donee indicating the amount of the contribution and whether
any goods, service, or privilege was received by the donor in ex-
change for making the contribution.

H.R. Rept. No. 103-111, at 785 (1993), 1993-3 C.B. 167, 361. The report ex-

plained that the proposed amendment “does not impose an information reporting

requirement upon charities.” Id. Rather, it “places the responsibility upon tax-

payers * * * to request (and maintain in their records) substantiation from the

charity of their contribution (and any good or service received in exchange).”

Ibid. The Senate version of the bill reduced the $750 monetary threshold, requir-

ing a CWA to substantiate all gifts of $250 or more. H.R. 2264, 103d Cong., sec.

8172 (1993) (as amended by the Senate, June 22, 1993). In this respect the confer-

ence report followed the Senate amendment. See H.R. Conf. Rept. No. 103-213,

at 565 (1993), 1993-3 C.B. 393, 443. Addressing the concerns charities had

expressed about donor privacy, the conference report emphasized that a CWA
 - 17 -

“need not contain the taxpayer’s social security number or taxpayer identification

number (TIN).” Id. n.30, 1993-3 C.B. at 443 (emphasis in original). The confer-

ence report also emphasized that CWAs must be explicit about the absence of a

quid pro quo: “If the donee organization provided no goods or services to the

taxpayer * * *, the written substantiation is required to include a statement to that

effect.” Ibid. Addressing the back-up mechanism for donee reporting, the confer-

ence report explained: “Substantiation is not required if the donee organization

files a re-turn with the IRS (in accordance with Treasury regulations) reporting

information sufficient to substantiate the amount of the deductible contribution.”

Id. at 565.

With the reduction of the monetary threshold to $250, the House provision

as set forth in H.R. 2264 was enacted as part of the Omnibus Budget Reconcilia-

tion Act of 1993 (OBRA), Pub. L. No. 103-66, sec. 13172(a), 107 Stat. at 455, and

codified as section 170(f)(8). Congress made the new substantiation requirements

effective for contributions made on or after January 1, 1994. See OBRA sec.

13172(b), 107 Stat. at 456; H.R. Conf. Rept. No. 103-213 at 567, 1993-3 C.B. at

445. Congress expressed its intention that, “following enactment of the bill, the

Secretary of the Treasury will expeditiously issue a notice or other announcement

providing guidance with respect to the substantiation and disclosure provisions.”
 - 18 -

Id. at 567 n.38, 1993-3 C.B. at 445. In March 1995 the IRS provided transitional

relief for the 1994 tax year, extending to October 16, 1995, the date by which tax-

payers were required to obtain CWAs for 1994 gifts. See Notice 95-15, 1995-15

I.R.B. 22.

C. Regulations

In August 1995 the Treasury Department issued proposed regulations pro-

viding guidance concerning the implementation of section 170(f)(8). See 60 Fed.

Reg. 39896-39903 (Aug. 4, 1995). The proposed regulations addressed in detail

the requirements of section 170(f)(8)(A), (B), and (C) but made no provision for

donee reporting by charitable organizations under subparagraph (D). See ibid.

The IRS requested public comments and scheduled a hearing for November 1,

1995. See 60 Fed. Reg. 39896.2

The IRS received several hundred pages of comments. Only one comment-

er, an Indianapolis accounting firm, addressed donee reporting. It recommended

that donee organizations be allowed to “satisfy the substantiation requirement by

reporting directly to the IRS,” but it noted that “the proposed regulations do not

2
On November 6, 2015, we directed respondent to provide any written pub-
lic comments submitted in response to the rulemaking proceedings involving sec.
170(f)(8). Respondent filed a response with about 170 pages of attachments. The
attachments include all public comments received by the Treasury Department and
a transcript of the November 1, 1995, hearing.
 - 19 -

provide any such guidance or opportunity.” It urged that “the regulations should

be drafted to provide that in certain situations substantiation can be provided di-

rectly to the IRS by the filing of a Form 990 or Form 990-PF,” suggesting that

“[t]his provision would be particularly helpful to private foundations and small

charitable organizations.” None of the speakers who appeared at the November 1,

1995, hearing mentioned donee reporting.

On December 16, 1996, the Treasury Department promulgated final regu-

lations under section 170(f)(8). See T.D. 8690, 1997-1 C.B. 68. These regulations

currently appear in substantially the same form as section 1.170A-13(f)(1) through

(8), Income Tax Regs. In the preamble, the IRS explained why the final regula-

tions did not implement donee reporting under section 170(f)(8)(D):

One commenter suggested that the regulations should allow charities
to report charitable contributions directly to the IRS on Form 990 or
990-PF. Section 170(f)(8) authorizes the Secretary to prescribe regu-
lations allowing donee organizations to satisfy the requirements of
section 170(f)(8) by filing a return that includes the information de-
scribed in section 170(f)(8)(B). The IRS and Treasury have decided
not to implement the suggestion at this time. However, in an effort to
reduce paperwork and taxpayer burdens, the IRS will examine wheth-
er any existing IRS forms can be modified to assist in their use in
substantiating charitable contributions. [T.D. 8690, 1997-1 C.B.
at 71.]

During the ensuing 16 years, the IRS received no public request for imple-

mentation of donee reporting. On August 9, 2013, the IRS nevertheless put on its
 - 20 -

Priority Guidance Plan a regulation project to address this subject. U.S. Dep’t. of

the Treasury, Office of Tax Policy and Internal Revenue Service, 2013-2014

Priority Guidance Plan (General Tax Issues, Item 30) (2013). On September 17,

2015, the IRS issued a notice of proposed rulemaking (NPRM) “to implement the

exception to the ‘contemporaneous written acknowledgment’ requirement for sub-

stantiating charitable contribution deductions of $250 or more.” 80 Fed. Reg.

55802 (Sept. 17, 2015).

The NPRM began by noting that the Treasury Department in 1997 had “spe-

cifically declined to issue regulations under section 170(f)(8)(D) to effectuate do-

nee reporting.” Id. 55803. Having thereafter encountered “few requests * * * to

implement a donee reporting system,” the IRS found that “[t]he present CWA sys-

tem works effectively, with minimal burden on donors and donees.” Ibid. How-

ever, prompted by questions (such as that raised by the instant case) as to whether

an amended Form 990 or 990-PF could be used as a vehicle for donee reporting,

the Commissioner determined to propose rules governing this subject. Ibid.

The NPRM expressed the Treasury Department’s view that implementation

of a donee reporting system would require resolution of several threshold issues

concerning the manner of such reporting. Ibid. The NPRM focused on three is-

sues in particular.
 - 21 -

The first threshold issue concerned the appropriate IRS form to be used for

such reporting. Section 170(f)(8)(D) provides that any donee reporting shall be

accomplished “on such form * * * as the Secretary may prescribe.” The NPRM

expressed the Treasury Department’s conclusion that, “[i]n order to better protect

donor privacy, * * * the Form 990 series should not be used for donee reporting.”

80 Fed. Reg. 55803. Instead, the IRS said that it would develop, before finalizing

regulations, “a specific-use information return for donee reporting.” Ibid. For that

reason, the proposed regulation addressing this subject, captioned “Donee organi-

zation reporting--Prescribed form,” was marked “Reserved.” See id. 55805.

The second threshold issue concerned the required contents of the donee’s

report. Unlike a CWA mailed to a taxpayer, “the donee reporting information re-

turn will be sent to the IRS, which must have a means to store, maintain, and read-

ily retrieve the return information for a specific taxpayer if and when substan-

tiation is required in the course of an examination.” 80 Fed. Reg. 55804. The

NPRM concluded that “[t]he donor’s taxpayer identification number * * * [would

be] necessary in order to properly associate the donation information with the cor-

rect donor.” Id. The IRS expressed concern “about the potential risk for identity

theft involved * * * given that donees will be collecting donors’ taxpayer identi-

fication numbers and maintaining those numbers for some period of time.” Id.
 - 22 -

The NPRM requested public comments as to whether “additional guidance is

necessary regarding the procedures a donee should use * * * to mitigate th[is]

risk.” Ibid.

The third threshold issue concerned the time for donee reporting. The IRS

noted that “[s]ection 170(f)(8) is premised on donors receiving timely substantia-

tion of their donations of $250 or more.” Id. The statute requires that a CWA be

issued by the earlier of “the date on which the taxpayer files * * * [his] return” or

“the due date (including extensions) for filing such return.” Sec. 170(f)(8)(C)(i)

and (ii). The NPRM concluded that “any alternative method to using a CWA for

substantiating charitable contributions through donee reporting must provide time-

ly information to both the IRS and the donor.” 80 Fed. Reg. 55804. The proposed

regulations accordingly provided that any donee information return must be filed

“on or before February 28 of the year following the calendar year in which the

contribution was made,” so that the substantiating data would be available to tax-

payers expecting to file their returns on April 15. Id. 55805. The IRS noted that

“February 28th is the date when numerous other information returns * * * must be

filed.” Id. 55804.

The NPRM requested public comments by December 16, 2015. See id.

55802. The number of comments received apparently exceeded 38,000. See
 - 23 -

Substantiation Requirement for Certain Contributions, http://www.regulations.gov

/#!docketDetail;D=IRS-2015-0049 (last visited May 17, 2016). Three weeks later,

after considering these comments, the Secretary withdrew the proposed regula-

tions in their entirety. See 81 Fed. Reg. 882 (Jan. 8, 2016).

In withdrawing the proposed regulations, the Secretary explained that the

public comments had “questioned the need for donee reporting” and had “ex-

pressed significant concerns about donee organizations collecting and maintaining

taxpayer identification numbers.” 81 Fed. Reg. 882. Respondent represents that

“[a]n overwhelming number of comments expressed significant concerns that even

a voluntary system of donee reporting could have a substantial adverse effect on

charitable giving by all potential donors.” Ibid. The Treasury Department accord-

ingly “decided against implementing the statutory exception to the CWA require-

ment,” reiterating its position that this exception “remains unavailable unless and

until final regulations are issued prescribing the method for donee reporting.”

Ibid.

II. Analysis

Section 170(f)(8)(D) provides that a CWA is not needed to substantiate a

charitable contribution “if the donee organization files a return, on such form and

in accordance with such regulations as the Secretary may prescribe, which in-
 - 24 -

cludes the information” that a CWA is supposed to include. We confront at the

outset a question that requires us to identify the “regulations” to which sub-

paragraph (D) refers. Petitioner contends that the “regulations” in question are the

regulations governing the filing of charities’ annual information returns, see sec.

1.6033-2, Income Tax Regs., and that the “form” referenced in subparagraph (D)

is Form 990. Judge Gustafson embraces this argument in his dissenting opinion.

See Gustafson op. p. 62. Here, the Trust filed an amended return on Form 990 that

included the information that a CWA was supposed to include. Petitioner argues

that the Trust thereby satisfied subparagraph (D) because it “file[d] a return on

such form and in accordance with such regulations as the Secretary [has]

prescribe[d].”

This argument is unpersuasive for at least two reasons. The statutory re-

quirement that charities file annual information returns, currently codified in sec-

tion 6033(b), has been on the books since 1943. See Revenue Act of 1943, ch. 63,

sec. 117, 58 Stat. at 36. The current regulations governing the contents of these

information returns were promulgated in June 1971. T.D. 7122, 1971-2 C.B. 393.

In 1993, when Congress enacted section 170(f)(8), the requirement that charities

file annual information returns on Form 990 was well established and familiar to

all concerned. If Congress had intended in subparagraph (D) to refer to these pre-
 - 25 -

existing regulations, it is unlikely to have used the formula, “in accordance with

such regulations as the Secretary may prescribe.”

More fundamentally, the Code contains hundreds of sections authorizing the

Secretary to issue regulations. See infra pp. 29-31, 36-40. Apart from general

authorizations for rulemaking such as section 7805, these provisions clearly refer

to regulations, yet to be issued, that will interpret the Code section in which the

authorization for rulemaking is contained. Section 169(b), for example, provides

that an election to amortize pollution control facilities “shall be made by filing

with the Secretary, in such manner, in such form, and within such time, as the Sec-

retary may by regulations prescribe, a statement of such election.” It seems obvi-

ous that the “regulations” to which this statute refers are not the regulations requir-

ing individuals to file their tax returns on Forms 1040, U.S. Individual Income Tax

Return. Rather, Congress was referring to regulations that it expected the Secre-

tary to issue under section 169, which he did issue, governing “the time and man-

ner of making elections” under section 169(b). See sec. 1.169-4, Income Tax

Regs.

The same reasoning applies here. When Congress in subparagraph (D) re-

ferred to the filing of a return “on such form and in accordance with such regula-

tions as the Secretary may prescribe,” it was referring to regulations that the Secre-
 - 26 -

tary might in future promulgate, under section 170(f)(8), that would specify the

appropriate procedure for reporting by donee organizations. The Secretary has not

yet promulgated--indeed, he has declined to promulgate--such regulations.3

This case thus requires us to address a question that has arisen with some

frequency: How should a court respond when a taxpayer or the IRS desires to

have a particular tax treatment apply in the absence of the regulations to which the

statute refers? In some cases, the Secretary may have affirmatively declined to

issue regulations, having concluded that they are unnecessary or inappropriate. In

other cases, the Secretary may intend to issue regulations but may have encoun-

tered delays because of subject matter complexity or the press of other business.
3
The fact that charities are required to report some donor information on
Form 990 does not support the dissent’s position. Charities that file Form 990
have long been required to identify contributors who make annual gifts in excess
of $5,000. See sec. 1.6033-2(a)(2)(ii)(f), Income Tax Regs. But this information
is reported to assist the IRS, not in auditing the donors’ contributions, but in audit-
ing the charity’s compliance with “public charity” rules and the bar against private
inurement. A charity may have a handful of donors who make gifts in excess of
$5,000 but many thousands of donors who make gifts in excess of $250; there is
simply no place on the Form 990 to report such a volume of information. The
Form 990, moreover, requires the reporting only of donors’ “names and addres-
ses,” without any taxpayer identification numbers (TINs). Without TINs, the IRS
would have no practical way of associating the information reported on the Form
990 with the individual returns of the donors who made the gifts. Finally, many
organizations that receive tax-deductible contributions, such as churches and
Federal and State governmental entities, do not file Forms 990. See sec. 6033(a),
(c). For all these reasons, the reference to “regulations” in subparagraph (D) can-
not plausibly be read to mean the regulations requiring charities to file returns on
Form 990.
 - 27 -

Courts have described the question presented here as whether the statute is “self-

executing” in the absence of regulations. Parker-Hannifin Corp. v. Commissioner,

139 F.3d 1090, 1099 (6th Cir. 1998), aff’g in part, rev’g in part T.C. Memo. 1996-

337; United States v. Mustari, 109 F.2d 438, 440 (7th Cir. 1940); Hillman v. Com-

missioner, 114 T.C. 103, 111 (2000), rev’d on this issue, 263 F.3d 338 (4th Cir.

2001).

The courts have struggled to define the proper judicial response in these

scenarios. In each case, Congress has delegated to an executive branch agency the

task of using its expertise to craft appropriate regulations. Under the Administra-

tive Procedure Act and familiar separation-of-powers principles, a court’s usual

role is to review the regulations an agency has issued, not to conjure what regula-

tions might look like had they been promulgated. On the other hand, if it is abso-

lutely clear that Congress intended that a particular tax benefit or tax treatment

should be available, a legitimate question arises as to whether the IRS may prevent

that outcome by declining to engage in rulemaking. Commentators have described

this scenario as one of “spurned delegations” and the resulting judicial dilemma as

one of crafting “phantom regulations.” See Phillip Gall, “Phantom Tax Regu-

lations: The Curse of Spurned Delegations,” 56 Tax Law. 413 (2003); Amandeep
 - 28 -

Grewal, “Substance Over Form? Phantom Regulations and the Internal Revenue

Code,” 7 Houston Bus. & Tax J. 42 (2006).

In approaching these cases, the courts have focused principally, as they

must, on the text of the delegating provision. “[O]ur inquiry begins with the stat-

utory text, and ends there as well if the text is unambiguous.” BedRoc Ltd. v.

United States, 541 U.S. 176, 183 (2004). In conjunction with the text, we have

examined the statute’s legislative history and considered whether it “can be ap-

plied without further explication in a regulation.” Temsco Helicopters, Inc. v.

United States, 409 F. App’x 64, 67 (9th Cir. 2010) (citing Francisco v. Com-

missioner, 119 T.C. 317, 322-323 (2002), aff’d on other grounds, 370 F.3d 1228

(D.C. Cir. 2004)). In examining the statutory text, it is useful to begin by consid-

ering whether Congress couched its delegation of rulemaking authority in manda-

tory or permissive terms.

A. Delegations for Mandatory Rulemaking

Most of our cases have dealt with delegations of mandatory rulemaking

authority (mandatory delegations), where the statute is “framed in terms of com-

manding the Secretary to prescribe regulations.” First Chicago Corp. v. Commis-

sioner, 88 T.C. 663, 676 (1987), aff’d, 842 F.2d 180 (7th Cir. 1988); Grewal,

supra, at 47 (“The major cases deal largely with mandatory delegations, which the
 - 29 -

courts usually deem self-executing.”). A mandatory delegation “requires the

Secretary to issue regulations that achieve a particular result or that apply a par-

ticular rule,” Gall, supra, at 415, and commonly takes the form of “the Secretary

shall prescribe regulations” or states that something shall happen “under

regulations prescribed by the Secretary,” ibid.

Most of the mandatory-delegation cases have involved “taxpayer friendly”

provisions, that is, Code sections in which Congress has made available a credit,

deduction, or other tax benefit. See Grewal, supra, at 46. Our first opinions on

this subject addressed section 58(h) as enacted in 1976. See Tax Reform Act of

1976 (TRA ‘76), Pub. L. No. 94-455, sec. 301(g), 90 Stat. at 1553. Former section

58(h) provided: “The Secretary shall prescribe regulations under which items of

tax preference shall be properly adjusted where the tax treatment giving rise to

such items will not result in the reduction of the taxpayer’s tax under this subtitle

for any taxable years.”

In Occidental Petroleum Corp. v. Commissioner, 82 T.C. 819 (1984), we

held section 58(h) self-executing in the absence of regulations. Reviewing the

legislative history, we concluded that Congress clearly intended that the minimum

tax should not apply where (as was true in that case) the taxpayer had derived no

tax benefit from the tax-preference items. Noting that eight years had passed since
 - 30 -

section 58(h) became effective, Judge Raum ruled that “the failure to promulgate

the required regulations can hardly render the new provisions * * * inoperative.”

Id. at 829. We held that “we must give effect to these provisions in the absence of

regulations,” reasoning that “Congress could hardly have intended to give the

Treasury the power to defeat the [statute’s] legislatively contemplated operative

effect * * * merely by failing to discharge the statutorily imposed duty to promul-

gate the required regulations.” Ibid.

Three years later in First Chicago Corp., 88 T.C. at 676, we reached the

same result for the same reasons, emphasizing the statute’s mandatory wording:

“[S]ection 58(h) is framed in terms of commanding the Secretary to prescribe

regulations. It states that ‘The Secretary shall prescribe regulations.’” Because

the Secretary had “failed to carry out the mandate imposed upon him by the Con-

gress,” the Court found itself obligated “to act in his place,” while noting that

“[w]e do not relish doing the Secretary’s work for him.” Id. at 676, 677. In a

footnote we observed that “[t]he Tax Reform Act of 1986 has changed this lan-

guage to: ‘The Secretary may prescribe regulations.’” Id. at 676 n.11 (emphasis

in original). We concluded that “[t]he effect of that change in language can be of

no concern to this Court * * * since the change d[id] not apply” to the 1980-1981

tax years at issue. Ibid.
 - 31 -

The next wave of cases addressed section 2032A, enacted in 1976, which

provided beneficial estate tax treatment for certain farm property. See TRA ‘76

sec. 2003, 90 Stat. at 1856. Section 2032A(g) provided (and still provides): “The

Secretary shall prescribe regulations setting forth the application of this section

* * * in the case of an interest in a partnership, corporation, or trust which, with

respect to the decedent, is an interest in a closely held business.” After the lapse

of 13 years without issuance of regulations, we held the statute self-executing in

their absence. See Estate of Hoover v. Commissioner, 102 T.C. 777 (1994), rev’d

on other grounds, 69 F.3d 1044 (10th Cir. 1995); Estate of Maddox v. Commis-

sioner, 93 T.C. 228 (1989).

Reviewing the legislative history, we discerned that “Congress did not want

the estate of a stockholder of a family corporation to be deprived of the benefits of

section 2032A.” Estate of Maddox, 93 T.C at 233. However, in order “to deal

with the myriad problems and situations that could arise in that connection,” Con-

gress “directed (not merely authorized) the Secretary to prescribe regulations.”

Ibid. Citing Occidental Petroleum and First Chicago Corp., we concluded: “[W]e

must do the best we can * * * in the absence of the pertinent regulations, since, in

our view, the Secretary cannot deprive a taxpayer of rights which the Congress

plainly intended to confer.” Id. at 233, 234. In both Estate of Maddox and Estate
 - 32 -

of Hoover, we emphasized the mandatory nature of the authority Congress had

delegated. See Estate of Hoover, 102 T.C. at 782 (noting that the Secretary had

failed to issue “the regulations that Congress ordered he ‘shall’ prescribe”); Estate

of Maddox, 93 T.C. at 233 (“Congress provided that the Secretary ‘shall’ prescribe

the regulations.”).4

When addressing “taxpayer unfriendly” statutes, courts have often ap-

proached the problem by considering whether Congress directed the Secretary to

determine “whether” a particular tax treatment shall apply, or simply to decide

“how” a legislatively ordained tax treatment is to be implemented. In Estate of

Neumann v. Commissioner, 106 T.C. 216 (1996), we addressed the application of

the generation-skipping transfer (GST) tax to “direct skip” transfers by non-

resident aliens. Section 2663(2), enacted in the Tax Reform Act of 1986, Pub. L.

No. 99-514, sec. 1431(a), 100 Stat. at 2729, provided: “The Secretary shall pre-

4
Subsequent cases finding to be self-executing Code sections providing that
the Secretary “shall prescribe regulations” have stressed the provisions’ taxpayer-
friendly character. In Francisco we addressed section 931(d)(2), which provided
that the determination as to whether certain income is possessions-source income
“shall be made under regulations prescribed by the Secretary.” 119 T.C. at 322.
We held the statute to be self-executing despite the absence of regulations, noting
the principle “that the Secretary’s failure to issue regulations does not bar applica-
tion of a beneficial tax statute.” Id. at 324; see also Hillman, 114 T.C. at 103, 113
(2000) (rejecting position that “congressionally intended benefits can be withheld
simply by the refusal * * * to issue regulations”), rev’d on this issue, 263 F.3d 338
(4th Cir. 2001).
 - 33 -

scribe such regulations as may be necessary or appropriate to carry out the pur-

poses of this chapter,” including regulations providing for its application “in the

case of transferors who are nonresidents not citizens of the United States.”

Judge Tannenwald framed the relevant question as follows: “Are the regu-

lations a necessary condition to determining ‘whether’ the GST tax applies, as pe-

titioner contends, or do they constitute only a means of arriving at ‘how’ that tax,

otherwise imposed by the statute, should be determined, as respondent contends.”

Estate of Neumann, 106 T.C. at 219. We held for the Commissioner, concluding

that Congress had clearly imposed the GST tax on “direct skip” transfers by non

resident aliens, thus resolving the “whether” question. Congress had authorized

the issuance of regulations, we concluded, simply to address a “how” question,

namely, how to fill possible gaps flowing from the fact that “not all the property of

nonresident aliens is subject to U.S. estate tax.” Id. at 221. Because none of those

gaps complicated the GST calculation in Estate of Neumann, we held section

2663(2) to be self-executing in the absence of regulations. Id. at 222.5
5
Other courts have employed the “whether/how” approach when considering
taxpayer-unfriendly statutes. See, e.g., Sundance Helicopters, Inc. v. United
States, 104 Fed. Cl. 1, 11 (2012) (holding section 4263(c), which imposes a trans-
portation excise tax, to be self-executing in the absence of regulations). In this
and other “whether/how” cases, the courts often reached their results chiefly on
the basis of statutory construction, concluding that the statute by its terms made
the taxpayer liable for the tax, so that the taxpayer could not wriggle out of the tax
(continued...)
 - 34 -

On at least one occasion, an appellate court has held a Code provision for a

mandatory delegation to be non-self-executing. In Hillman, 114 T.C. at 111, we

considered section 469(l)(2), which provided: “The Secretary shall prescribe such

regulations as may be necessary or appropriate to carry out the provisions of this

section, including regulations” addressing the treatment of expenses allocable to

passive or nonpassive income. Noting the statute’s taxpayer-friendly nature and

describing it as a “command provision” given its use of the verb “shall prescribe,”

we held the statute to be self-executing, rejecting the notion that “congressionally

intended benefits can be withheld simply by the refusal of the Secretary to issue

regulations.” Id. at 113.

The U.S. Court of Appeals for the Fourth Circuit reversed. It held that

neither the statute nor the legislative history “clearly express[ed] the congressional

intent the * * * [petitioners] need in order to prevail.” Hillman, 263 F.3d at 343.

5
(...continued)
by seizing on the Secretary’s failure to issue regulations. See, e.g., Temsco Heli-
copters, 409 F. App’x at 67 (addressing section 4263(c)); Pittway Corp. v. United
States, 102 F.3d 932, 935-936 (7th Cir. 1996) (holding section 4662(b)(1), which
imposes an excise tax on chemicals, to be self-executing in the absence of regula-
tions). The “whether/how” approach has also appeared in a few cases involving
taxpayer-neutral statutes. See, e.g., Int’l Multifoods Corp. v. Commissioner, 108
T.C. 579, 586-588 (1997) (holding section 865(j)(1), which provided that “[t]he
Secretary shall prescribe such regulations as may be necessary or appropriate to
carry out the purpose of this section, including regulations * * * relating to the
treatment of losses,” to be self-executing in the absence of regulations).
 - 35 -

Congress had expressed its intention that the Secretary issue regulations address-

ing netting of self-charged interest expenses, while adding that “[s]uch regulations

may also, to the extent appropriate, identify other situations in which netting * * *

[of expenses] is appropriate.” H.R. Conf. Rept. No. 99-841 (Vol. II), at 147

(1986), 1986-3 C.B. (Vol. 4) 1, 147. In the Court of Appeals’ view, Congress

thereby indicated, “without qualification, that the Secretary has discretion to iden-

tify other situations in which offsetting * * * will be allowed,” such as the situ-

ation in that case, which involved expenses for management fees. The Court of

Appeals acknowledged that inability to net expenses of the sort before it might be

inequitable, but concluded that “this is an inequity * * * that only Congress or the

Secretary (as the holder of the delegated authority from Congress) has the author-

ity to ameliorate.” Hillman, 263 F.3d at 343.

In sum, this Court and other courts have frequently, but not always, held to

be self-executing taxpayer-friendly Code provisions that include a mandatory

delegation to the Secretary. One commentator has described this as “the equity ap-

proach,” on the theory that “treating such delegations otherwise would inequitably

deprive taxpayers of legislatively intended benefits.” Grewal, supra, at 53. In sev-

eral of these cases, the IRS conceded (or did not seriously dispute) that the statute

was self-executing in the absence of regulations. See First Chicago Corp., 842
 - 36 -

F.2d at 182 (noting Government’s concession that section 58(h) “[was] effective

ex proprio vigore”); Francisco, 119 T.C. at 322 (not reaching “self-executing”

issue because neither party raised it on appeal); Gall, supra, at 422-423 (discussing

Estate of Maddox and Estate of Hoover). The “whether/how” approach has been

employed mainly “with respect to taxpayer-unfriendly delegations.” Grewal,

supra, at 53. In many of those cases, the central question was whether the statute

by its terms made the taxpayer liable for the tax.

B. Delegations for Permissive Rulemaking

The Code contains hundreds, if not thousands, of sections that authorize the

Secretary to issue regulations, without directing or mandating that he do so. Com-

mentators have described these provisions as “discretionary” or “policy” delega-

tions, reasoning that Congress “has not framed the delegation in ‘mandatory’

terms, * * * but has instead left the implementation of the policy objective to the

Secretary’s discretion.” Gall, supra, at 415, 426, 439 (discussing “policy dele-

gations”); Grewal, supra, at 44.

Delegations of permissive or discretionary authority (discretionary delega-

tions) appear in many verbal forms. Often Congress expresses an intention to con-

fer discretionary authority by use of the word “may,” providing that “the Secretary

may prescribe regulations” or that something may happen “under such regulations
 - 37 -

as the Secretary may prescribe.” See Grewal, supra, at 64. Occasionally these are

blanket authorizations for rulemaking that seem to add little to the Secretary’s

existing authority under section 7805(a). More commonly, Congress authorizes

the Secretary to prescribe regulations governing the availability of a particular tax

treatment.

Discretionary delegations often arise in Code sections that set forth a def-

inite requirement but allow for the possibility of exemptions. For example, section

5051 imposes an excise tax on beer, but section 5053 authorizes various exemp-

tions “under such regulations * * * as the Secretary may * * * prescribe.”6 Section

6111 requires the disclosure of certain reportable transactions, but section

6111(c)(2) provides that “[t]he Secretary may prescribe regulations which provide

* * * exemptions from the requirements of this section.” Section 3402(n) provides

that withholding shall not be required “if there is in effect * * * a withholding

6
See sec. 5053(a) (providing for exemption for export “under such regula-
tions, and on the giving of such notices, entries, and bonds and other security, as
the Secretary may by regulations prescribe”); sec. 5053(c) (providing for ex-
emption for removal for laboratory analysis “subject to such limitations and under
such regulations as the Secretary may prescribe”); sec. 5053(f), (g), and (h) (pro-
viding for other exemptions “[s]ubject to such regulations as the Secretary may
prescribe”); cf. sec. 5852(f) (providing that no firearm may be exempt from tax
except “pursuant to an application in such form and manner as the Secretary may
by regulations prescribe”).
 - 38 -

exemption certificate (in such form and containing such other information as the

Secretary may prescribe).”

Another common type of discretionary delegation authorizes the Secretary

to implement elections. For example, section 1033(g)(3)(A) provides that a tax-

payer may elect, “at such time and in such manner as the Secretary may prescribe,”

to treat certain property as real property for involuntary-conversion purposes. Sec-

tion 169(b), mentioned supra p. 25, provides that a taxpayer may elect to amortize

pollution control facilities by filing a statement of election “in such manner, in

such form, and within such time, as the Secretary may by regulations prescribe.”

Most recently, when enacting repeal of the TEFRA partnership regime for years

after 2017, Congress provided that “[a] partnership may elect (at such time and in

such form and manner as the Secretary of the Treasury may prescribe),” to have

the amendments apply to pre-2018 tax years. Bipartisan Budget Act of 2015, Pub.

L. No. 114-74, sec. 1101(g)(4), 129 Stat. at 638.7
7
Numerous other election provisions include similar permissive wording.
See, e.g., sec. 167(g)(8)(D) (election concerning depreciation on musical works
“shall be made at such time and in such form as the Secretary may prescribe”); sec.
456(c)(1) (election to include prepaid dues income “shall be made in such manner
as the Secretary may by regulations prescribe”); sec. 307(b)(2) (election concern-
ing basis in stock rights “shall be made in such manner as the Secretary may by
regulations prescribe”); sec. 953(c)(3)(C) (captive insurer may make certain elec-
tion “at such time and in such manner as the Secretary may prescribe”); sec. 472(a)
(providing that taxpayer may elect to use LIFO accounting by filing an application
(continued...)
 - 39 -

Discretionary delegations also arise where Congress has enacted a default

rule in the Code but authorized the Secretary to issue regulations providing for an

alternative rule, such as a “safe harbor” or a rule of convenience. For example,

section 1256(d)(4)(B) defines a “mixed straddle” for certain purposes as one in

which each position in the straddle is clearly identified by a certain time “or such

earlier time as the Secretary may prescribe by regulations.” Section 2642(a)(3)(B)

defines a “qualified severance” for GST tax purposes, but subparagraph (B)(iii)

provides that this term also “includes any other severance permitted under

regulations prescribed by the Secretary.” See also sec. 453(d)(2) (providing that

election out of the installment method shall be made at a specified time, “[e]xcept

as otherwise provided by regulations”).

Although many discretionary delegations include the words “may prescribe”

or “may be prescribed,” other verbal formulas exist. For example, section

6042(b)(2), governing reporting by dividend payors, provides that “dividends” do

not include certain payments “to the extent provided in regulations prescribed by

the Secretary.” Section 6049(b)(1)(G), governing reporting by interest payors,

7
(...continued)
“at such time and in such manner as the Secretary may prescribe”); sec. 473(d)(5)
(election concerning qualified liquidation of LIFO inventories “shall be made
subject to such conditions, and in such manner and form and at such time, as the
Secretary may prescribe by regulation”).
 - 40 -

provides that “interest” includes certain interest not specified in the statute “to the

extent provided in regulations prescribed by the Secretary.” And section

465(c)(3)(D) provides that certain at-risk treatment “shall apply only to the extent

provided in regulations prescribed by the Secretary.”

This Court appears to have addressed on only one occasion whether a

statute including a discretionary delegation is self-executing in the absence of

regulations. That case, which generated a unanimous reviewed Opinion by this

Court, was Alexander v. Commissioner, 95 T.C. 467 (1990), aff’d sub nom. Stell

v. Commissioner, 999 F.2d 544 (9th Cir. 1993). It involved section 465(c)(3)(D),

mentioned supra, which provides that certain at-risk treatment “shall apply only to

the extent provided in regulations prescribed by the Secretary.”

The Commissioner argued in Alexander, 95 T.C. at 471-472, adversely to

his interest, that section 465(c)(3)(D) was not self-executing in the absence of

regulations, which at the time had been proposed but not issued in final form. The

Commissioner accordingly urged that the section 465(b)(3) at-risk rules did not

apply to limit deductions of the sort petitioners claimed. Ruling on a motion for

reconsideration, we agreed with the Commissioner:

Section 465(c)(3)(D) unambiguously provides that section 465(b)(3)
“shall apply only to the extent provided in regulations prescribed by
the Secretary” * * * . Regulations have not been prescribed by the
 - 41 -

Secretary. Accordingly, we hold that section 465(b)(3) does not
apply to the activities of the limited partnerships. [Id. at 473; fn. ref.
omitted.]

We noted in Alexander that this conclusion was supported both by the stat-

ute’s text and by its legislative history. Describing the future operation of section

465(b)(3), Congress stated that forthcoming regulations “may make this provision

applicable” to certain types of activities. See id. at 473 n.7 (citing H.R. Rept. No.

95-1445, at 71 (1978), 1978-3 C.B. (Vol. 1) 181, 245). We have consistently dis-

tinguished Alexander in subsequent opinions dealing with mandatory delegation.

See Francisco, 119 T.C. at 324 (finding Alexander “fully reconcilable with the

principle that the Secretary’s failure to issue regulations does not bar application

of a beneficial tax statute”); Estate of Neumann, 106 T.C. at 219-220.

C. The Statute at Hand

Under section 170(f)(8)(A), “[n]o deduction shall be allowed * * * for any

contribution of $250 or more unless the taxpayer substantiates the contribution”

with a CWA meeting the statutory requirements. Section 170(f)(8)(D) provides

that subparagraph (A) shall not apply to a contribution “if the donee organization

files a return, on such form and in accordance with such regulations as the Secre-

tary may prescribe, which includes the information” that a CWA is supposed to in-
 - 42 -

clude. The question we must decide is whether subparagraph (D) is self-executing

in the absence of implementing regulations.8

We begin as we must with the statute’s text. Greyhound Corp. v. Mount

Hood Stages, Inc., 437 U.S. 322, 330 (1978). Subparagraph (D) provides that a

donee organization may report information specified in subparagraph (B) “on such

form and in accordance with such regulations as the Secretary may prescribe.”

The word “may” is used “to express possibility or likelihood,” “to express per-

mission,” or “to express contingency.” Webster’s New World Collegiate Diction-

ary 889 (4th ed. 2010). By its terms, the delegated rulemaking authority is per-

missive: It grants the Secretary discretion to prescribe regulations governing this

matter, but it does not mandate that he do so.

The discretionary nature of this delegated authority is underscored by com-

paring the text of subparagraph (D) with the text of subparagraph (E). The latter

provides that “[t]he Secretary shall prescribe regulations” specifying that “some or

8
Petitioner errs in asserting that our cases “have repeatedly recognized” that
subparagraph (D) is self-executing in the absence of regulations. In the cases peti-
tioner cites, we noted the existence of this provision, while explaining that the par-
ties before us had not placed in issue any question regarding its possible applica-
tion. See Longino v. Commissioner, T.C. Memo. 2013-80, at *26 n.16; Averyt v.
Commissioner, T.C. Memo. 2012-198, 104 T.C.M. (CCH) 65, 67; Schrimsher, 101
T.C.M. (CCH) at 1331; DiDonato, 101 T.C.M. (CCH) at 1743; Hill v. Commis-
sioner, T.C. Memo. 2004-156, 87 T.C.M. (CCH) 1451, 1452.
 - 43 -

all of the requirements of this paragraph do not apply in appropriate cases.”9 The

delegation of rulemaking authority in subparagraph (E), including the words “shall

prescribe,” is phrased in mandatory terms. We necessarily presume that Congress

intended a different meaning in subparagraph (D) when it used the word “may”

rather than “shall.” Compare United States v. Monsanto, 491 U.S. 600, 607

(1989), with American Ass’n of Retired Persons v. EEOC, 823 F.2d 600, 604

(D.C. Cir. 1987).10

9
Subparagraph (E) appears to have been designed chiefly to implement Con-
gress’ intent, clearly expressed in the legislative history, that regulations be issued
clarifying the application of the CWA requirement for contributions made by pay-
roll deduction and to donors’ receipt from charities of token goods and services
having de minimis value. See H.R. Conf. Rept. No. 103-213, at 564, 566- 567
(1993), 1993-3 C.B. 393, 442, 444-445. The Treasury Department issued tempo-
rary regulations and an NPRM addressing these topics on May 27, 1994, and is-
sued final regulations on October 12, 1995, and December 16, 1996. T.D. 8544,
1994-2 C.B. 28, 873 (temporary regulations and NPRM); T.D. 8623, 1995-2 C.B.
28 (final regulations for contributions made by payroll deductions); T.D. 8690,
1997-1 C.B. 68 (final regulations regarding goods and services with insubstantial
value).
10
Other paragraphs of section 170(f) indicate that Congress used the words
“shall” and “may” advisedly. Compare sec. 170(f)(2)(B), (10)(I), (12)(F) (pro-
viding that “[t]he Secretary shall prescribe such regulations” as necessary or ap-
propriate), with sec. 170(f)(11)(H) (providing that “[t]he Secretary may prescribe
such regulations” as necessary or appropriate), sec. 170(f)(12)(F) (providing that
“[t]he Secretary may prescribe such regulations or other guidance which exempts”
certain transactions from substantiation requirements), and sec. 170(f)(4) (provid-
ing that a remainder interest shall be valued using a 6% discount rate, “except that
the Secretary may prescribe a different rate”).
 - 44 -

The legislative history shows that Congress, by phrasing this delegation of

rulemaking authority in discretionary terms, intended that subparagraph (D) not be

self-executing in the absence of regulations. The substantiation requirement now

codified in section 170(f)(8) originated in the President’s Budget Proposal for

1993, where it took the form of mandatory information reporting by donee organ-

izations. Congress understood that donee reporting could achieve its objective

only if such reports included the donors’ taxpayer identification numbers; other-

wise, the IRS could not associate the donee-supplied information with the tax-

payers whose returns were selected for examination. Members of Congress and

representatives of charitable organizations expressed concerns about this provis-

ion, on grounds of both donor privacy and the security of taxpayer information.

After many months of study and negotiations, Congress replaced the donee

reporting regime proposed by the President with the CWA regime now codified in

section 170(f)(8)(A). In subparagraph (D), Congress left open the possibility that

donee reporting might be implemented as an alternative compliance mechanism,

or as a back-up system if the CWA regime proved onerous or otherwise problem-

atic. But Congress plainly understood that donee reporting raised serious policy

questions concerning the form and manner of such reporting, which the Secretary

would need to address before any such alternative could be implemented. This is a
 - 45 -

classic example of a situation in which Congress has delegated discretionary,

policy-making authority to the Secretary.11

In structural terms, section 170(f)(8) resembles other Code provisions that

include discretionary delegations. As noted earlier, Congress often places a gen-

eral rule or definite requirement in the Code but authorizes the Secretary to pre-

scribe regulations providing for exemptions or for an alternative treatment. See

supra pp. 35-38. Section 170(f)(8) follows this pattern. Subparagraph (A), cap-

tioned “General Rule,” states that no deduction shall be allowed in the absence of

a CWA that includes specified information. Subparagraph (D) provides that this

general rule does not apply if the relevant information is supplied “on such form

and in accordance with such regulations as the Secretary may prescribe.” Con-

gress anticipated that the Secretary would implement such an exception to the gen-

eral rule only after resolving policy questions that had surfaced during the legis-

lative process.

11
Scholars who have studied this subject have urged that statutes embodying
discretionary delegations should never be regarded as self-executing. See Gall,
supra, at 426 (“[P]olicy delegations can never be self-executing; otherwise, courts
could usurp the discretionary authority that was delegated to the Secretary.”) (cit-
ing Alexander, 95 T.C. at 473-474); Grewal, supra, at 84-85. We need not decide
this broader proposition; we hold that section 170(f)(8)(D) is not self-executing in
light of the language, structure, and legislative history of this statute.
 - 46 -

Because Congress intended that the Secretary exercise his discretion in re-

solving these questions, section 170(f)(8)(D) is not a statute that “can be applied

without further explication in a regulation.” Temsco Helicopters, 409 F. App’x at

67. The difficulty and sensitivity of these questions--chiefly involving donor pri-

vacy, the confidentiality of taxpayer information, and the risk of identity theft--

have been underscored by actual experience. When proposing regulations to im-

plement donee reporting in 2015, the Secretary expressed his conclusion that, “[i]n

order to better protect donor privacy, * * * the Form 990 series should not be used

for donee reporting.” 80 Fed. Reg. 55803. He solicited comments concerning the

need for additional guidance in light of “the potential risk for identity theft.” Ibid.

The Secretary received in response 38,000 (mostly negative) comments. He

thereupon withdrew the proposed regulations in their entirety, noting that com-

menters had “expressed significant concerns about donee organizations collecting

and maintaining taxpayer identification numbers” for reporting purposes. 81 Fed.

Reg. 882. If the expert agency to which Congress has delegated the relevant rule-

making authority encountered such difficulties in implementing donee reporting, a

court trying to envision “phantom regulations” governing this subject would be

shooting in the dark.
 - 47 -

Petitioner has cited, and our own research has discovered, no case in which

a court has held to be self-executing a Code provision containing a discretionary

delegation that refers to regulations that the Secretary “may prescribe.” Converse-

ly, every judicial decision that has held a Code provision to be self-executing in

the absence of regulations has involved a mandatory delegation that included the

word “shall.” In many of these cases we emphasized the mandatory nature of the

delegation as evidenced by Congress’ use of the word “shall.” See Estate of

Hoover, 102 T.C. at 782; Estate of Maddox, 93 T.C. at 233; First Chicago Corp.,

88 T.C. at 676. On one occasion we suggested that the result might be different if

Congress had instead used the word “may.” See First Chicago Corp., 88 T.C. at

676 n.11.

Adopting what he calls a “plain meaning” approach, see Foley op. p. 57,

Judge Foley in dissent urges that we ignore, as an inconsequential series of prepo-

sitional phrases and clauses, that portion of subparagraph (D) consisting of the

words “on such form and in accordance with such regulations as the Secretary may

prescribe.” These words, in his view, do not link the operative effect of subpara-

graph (D) to the issuance of regulations, but simply authorize the Secretary to

issue regulations if he wishes to do so. All that the statute supposedly requires is

that a donee organization file “a return”--of any kind, at any time, and in the ab-
 - 48 -

sence of implementing regulations--that “includes the information described in

subparagraph (B).”

When construing a statute, “[i]t is our duty ‘to give effect, if possible, to

every clause and word’” so as to avoid rendering any part of the statute meaning-

less surplusage. United States v. Menasche, 348 U.S. 528, 538 (1955) (quoting

Montclair v. Ramsdell, 107 U.S. 147, 152 (1883)); Market Co. v. Hoffman, 101

U.S. 112, 115 (1879) (construing a statute so that “no clause, sentence, or word

shall be superfluous, void, or insignificant”); Marbury v. Madison, 5 U.S. (1

Cranch) 137, 171 (1803) (enunciating “anti-surplusage” canon of construction).

The approach of Judge Foley’s dissenting opinion violates these well-established

principles of statutory interpretation by rendering subparagraph (D)’s reference to

regulations completely meaningless.

Section 7805(a) authorizes the Secretary to “prescribe all needful rules and

regulations for the enforcement of this title.” And section 170(f)(8)(E) authorizes

the Secretary to prescribe “such regulations as may be necessary or appropriate to

carry out the purposes of this paragraph,” namely, the purposes of section

170(f)(8) generally. If the words “on such form and in accordance with such regu-

lations as the Secretary may prescribe” are to have any independent significance in

subparagraph (D), they must do more than simply authorize the Secretary to issue
 - 49 -

regulations if he deems it appropriate to do so. See Williams v. Taylor, 529 U.S.

362, 404 (2000) (describing antisurplusage canon as a “cardinal principle of

statutory construction”); Antonin Scalia & Bryan A. Garner, Reading Law: The

Interpretation of Legal Texts 174, 176 (2012) (“[I]t is no more the court’s function

to revise by subtraction than by addition.”).

As noted earlier, there are hundreds of Code provisions that employ phrases

or clauses similar to those in subparagraph (D) to effect discretionary delegations

to the Secretary. Section 5053(a), for example, dealing with the excise tax on

beer, provides an exemption for export “under such regulations, and on the giving

of such notices, entries, and bonds and other security, as the Secretary may by reg-

ulations prescribe.” We doubt that Judge Foley’s dissenting opinion would treat

these prepositional phrases and clauses, or those in many similar Code sections, as

meaningless verbiage. There is no logical reason why the result should be differ-

ent here.

The approach in Judge Foley’s dissenting opinion would also produce re-

sults plainly at odds with Congress’ intent. The dissent’s conclusion would allow

the Trust to satisfy its obligations under section 170(f)(8) by filing an amended

Form 990 six years after the LLC’s 2007 tax return was due to be filed and three

years after the IRS completed its examination of that return. See Foley op. p. 58.
 - 50 -

This action by a donee organization clearly fails to advance either of the purposes

Congress enunciated when enacting section 170(f)(8), namely, “to assist taxpayers

in determining the deductible amounts of their charitable contributions” or “to

assist the Internal Revenue Service in processing tax returns on which charitable

contribution deductions are claimed.” Durden, 103 T.C.M. (CCH) at 1763. In

effect, the dissent would make subparagraph (A) elective with charities, an

outcome that Congress can scarcely have envisioned when it enacted the CWA

regime as a tax compliance measure.

In sum, we conclude that section 170(f)(8)(D) sets forth a delegation of dis-

cretionary rulemaking authority. The statute authorizes, but does not command,

the Secretary to implement a donee reporting regime as an alternative compliance

mechanism to the CWA regime embodied in subparagraph (A). The statute thus

commits to the Secretary’s discretion whether a regime for donee reporting should

be implemented and (if so) how.

In the exercise of his discretion, the Secretary determined in 1997, and again

in 2016, that a system of donee reporting is neither necessary nor desirable, and he

accordingly declined to issue the regulations that the statute says he “may pre-

scribe.” We hold that subparagraph (D) is not self-executing and that it has no op-

erative effect in the absence of the regulations to which the statute refers. The re-
 - 51 -

quirements of subparagraph (A) therefore remain fully applicable to petitioner’s

2007 gift, notwithstanding the Trust’s filing in 2014 of an amended return in-

cluding the information described in subparagraph (B).12

To reflect the foregoing,

An order will be issued denying

petitioner’s motion for partial summary

judgment.

GALE, THORNTON, GOEKE, HOLMES, KERRIGAN, BUCH, NEGA,
and ASHFORD, JJ., agree with this opinion of the Court.

MARVEL and PUGH, JJ., concur in the result only.

12
Because section 170(f)(8)(D) embodies a discretionary delegation, we
need not address questions that would arise under our case law if we were con-
sidering a statute that embodied a mandatory delegation. Reasonable minds can
differ, for example, as to whether the statute before us is “taxpayer friendly” or
“Government friendly.” On the one hand, implementation of subparagraph (D)
would relieve the taxpayer of a substantiation obligation otherwise required. On
the other hand, subparagraph (D) is part of “a compliance provision,” Viralam,
136 T.C. at 171, that Congress expected to raise substantial revenue by deterring
taxpayers from claiming inflated charitable contribution deductions. Reasonable
minds can also differ as to where this statute would fall on the “whether/how” con-
tinuum. Subparagraph (D) arguably displays aspects of both. By authorizing the
Secretary to specify the form and manner of donee reporting, the statute addresses
“how” questions. But it also delegates the Secretary authority to address difficult
policy questions, the resolution of which may affect (and did affect) his decision
as to whether donee reporting should be implemented at all. In view of our dis-
position, it is unnecessary to tread further into these waters.
 - 52 -

HOLMES, J., concurring: I fully agree with the opinion of the Court, but

write separately to highlight an interesting aspect of this case--yet another instance

of tax law’s wandering away from general principles of administrative law.

Courts frequently face the problem of what to do with an agency that has

ignored Congress’s invitation or command to write regulations. Should a court

remedy the agency’s refusal to exercise the power delegated to it, and if so, how?

This is a practical question that some academics have actually given some

considered thought to; and Professor Grewal has concluded, after a thorough

review I won’t cut and paste here, that to hold a statute self-executing and invoke

“phantom regulations”--a court’s best guess at what regulations an agency might

have issued--is never an appropriate response. See Amandeep S. Grewal,

“Substance Over Form? Phantom Regulations and the Internal Revenue Code,” 7

Hous. Bus. & Tax L.J. 42, 45-46 (2006). I recognize that this is likely a minority

position, but some pioneering dissenters preceded the professoriate: The role of

the courts “is to interpret, not make, the law,” and “this Court cannot divine what

rules the Secretary would promulgate.” Francisco v. Commissioner, 119 T.C. 317,

336 (2002) (Foley, J., dissenting), aff’d, 370 F.3d 1228 (D.C. Cir 2004).

But I also recognize that this isn’t a position that we need to reexamine

today. As the Court correctly concludes, section 170(f)(8)(D) is a discretionary
 - 53 -

delegation to the Secretary and has no operative effect without the suggested

regulations. See op. Ct. p. 50. When delegated authority is discretionary, it’s

within the agency’s discretion, not the Court’s, to draft regulations or to decide

whether to issue regulations at all.1 Once we decide that the text of the Code

requires such regulations, that’s enough to decide this case.2

But delegations from Congress can also be mandatory. Mandatory

delegations are usually indicated by a command that the agency “shall issue

regulations.” Grewal, supra at 43-44. Our current caselaw has created a series of

imprecise tests for how to apply the Code when the Secretary fails to heed

Congress’s mandate to issue regulations. We have the legislative-history

approach, where we “delve[] into extra-statutory sources to determine legislative
1
See Norton v. S. Utah Wilderness All., 542 U.S. 55, 64 (2004) (holding that
a court can only compel an agency to act if the agency “failed to take a discrete
agency action that it is required to take”); Benzman v. Whitman, 523 F.3d 119,
131 (2d Cir. 2008) (refusing to compel the EPA to act because the regulations
governing the EPA actions at issue were discretionary). And sometimes Congress
gives an agency even greater latitude by saying, for example, that it may act “by
regulation or other guidance.” The majority carefully notes a couple instances of
this, see op. Ct. note 10, within section 170(f) itself. All of this shows that
Congress knows how to tell an agency exactly what it wants it to do--and how.
2
Though even in a case like this, I would note that a taxpayer who disagrees
with Treasury’s inaction could try to seek relief under the APA, which requires
agencies to “give an interested person the right to petition for the issuance,
amendment, or repeal of a rule.” 5 U.S.C. sec. 553(e); see Grewal, supra at 84-85.
Denial of a taxpayer’s petition is then appealable to the courts. 5 U.S.C. secs. 702,
706 (2012); see Auer v. Robbins, 519 U.S. 452, 459 (1997).
 - 54 -

intent.” Grewal, supra, at 49-50; see Int’l Multifoods Corp. v. Commissioner, 108

T.C. 579, 586 (1997). If we find in the entrails of committee reports, floor

statements, and Blue Books what sort of regulations Congress wanted, then we say

that the statute is self-executing. See, e.g., Hillman v. Commissioner, 114 T.C.

103, 108-12 (2000), rev’d, 263 F.3d 338 (4th Cir. 2001). We have the “equity”

approach, where we declare that a taxpayer-friendly statute must be self-executing

in the name of fairness because the Secretary shouldn’t be allowed to subvert the

will of Congress by not issuing regulations. See Francisco, 119 T.C. at 324;

Grewal, supra, at 47, 53. And we have the whether-how approach, where we try to

figure out if Congress gave the Secretary the power to decide whether a result

should occur or merely how that result should occur. See Grewal, supra, at 47, 55.

Only if the answer is how will we deem the Code section at issue to self-execute

(or, more precisely, come up with regulation-like rules ourselves). See, e.g.,

Estate of Neumann v. Commissioner, 106 T.C. 216, 221 (1996).

But we’ve built up this body of tax law in apparently blissful disregard for

the APA, which provides a generally applicable procedure to “compel agency

action unlawfully withheld or unreasonably delayed.” 5 U.S.C. sec. 706(1)

(2012). Outside the tax realm, courts frequently entertain section 706(1)
 - 55 -

arguments against agency inaction.3 When Congress tells an agency that it shall

issue regulations, it is a command to the agency, and not a court, to issue

regulations. It is also a command to the agency to act by “regulation”--a term with

a fixed meaning in administrative law and one that usually means that a regulation

has to run through the normal APA rulemaking gauntlet. That procedure includes

providing public notice of a proposed regulation, giving interested people the

opportunity to comment, and explaining the basis and purpose of the regulation.

See id. sec 553; Kristin E. Hickman, “Coloring Outside the Lines: Examining

Treasury’s (Lack of) Compliance with Administrative Procedure Act Rulemaking

Requirements,” 82 Notre Dame L. Rev. 1727, 1732 (2007). When we hold a Code

section that tells the Secretary to issue regulations to be self-executing, we

arrogate to ourselves what belongs to the Secretary. It is simply not up to us to act

as an agency.

The Supreme Court has warned that “we are not inclined to carve out an

approach to administrative review good for tax law only”. Mayo Found. for Med.

Educ. & Research v. United States, 562 U.S. 44, 55 (2011). We have not been
3
See e.g., Prometheus Radio Project v. FCC, 824 F.3d 33, 49-50 (3d Cir.
2016) (using 5 U.S.C. section 706(1) to order the Federal Communications
Commissioner to update regulations defining an eligible entity); Kingsbrook
Jewish Med. Ctr. v. Richardson, 486 F.2d 663, 670 (2d Cir. 1973) (using 5 U.S.C.
section 706(1) to compel the Secretary of Health, Education, and Welfare to issue
regulations about Medicare retroactive corrective rate adjustments).
 - 56 -

asked to reconsider our caselaw on phantom regulations here. But when we are, I

will be receptive to doing so.
 - 57 -

FOLEY, J., dissenting: This case should be decided on the plain and

unambiguous language of the statute. See Harris Trust & Sav. Bank v. Salomon

Smith Barney, Inc., 530 U.S. 238, 254 (2000) (“[A]s in any case of statutory

construction, our analysis begins with the language of the statute . . . . And where

the statutory language provides a clear answer, it ends there as well.” (quoting

Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999))). The majority,

however, without establishing or even asserting that section 170(f)(8)(D) is

ambiguous, focuses on legislative history, regulatory history, and caselaw relating

to mandatory and permissive delegations of regulatory authority.

Section 170(f)(8)(D) provides that “[s]ubparagraph (A) shall not apply to a

contribution if the donee organization files a return, on such form and in

accordance with such regulations as the Secretary may prescribe, which includes

the information described in subparagraph (B) with respect to the contribution.”

(Emphasis added.) The first clause establishes whether section 170(f)(8)(A)

applies when the donee organization files a return, and the second clause merely

establishes that the Secretary may provide alternative rules detailing how a donee

organization may file such a return.1 See Estate of Neumann v. Commissioner,
1
The heading of the subparagraph in question, “[s]ubstantiation not required
for contributions reported by the donee organization”, further indicates that sec.
170(f)(8)(D) is effective regardless of whether regulations are promulgated. See
(continued...)
 - 58 -

106 T.C. 216, 219 (1996). The Secretary’s failure to create such rules and issue

new forms, however, does not render section 170(f)(8)(D) inoperative. Indeed,

“[w]e have frequently held that the Secretary may not prevent implementation of a

tax benefit provision simply by failing to issue regulations.” Francisco v.

Commissioner, 119 T.C. 317, 324 (2002), aff’d, 370 F.3d 1228 (D.C. Cir. 2004);

see also Estate of Maddox v. Commissioner, 93 T.C. 228, 233-234 (1989); First

Chicago Corp. v. Commissioner, 88 T.C. 663, 676-677 (1987), aff’d, 842 F.2d 180

(7th Cir. 1988); Occidental Petroleum Corp. v. Commissioner, 82 T.C. 819, 829

(1984). In the absence of regulations from the Secretary, a donee filing a return

that contains the information described in section 170(f)(8)(B) satisfies the

requirements of section 170(f)(8)(D).

The language “files a return, on such form and in accordance with such

regulations as the Secretary may prescribe” is found in only one place in title 26,

section 170(f)(8)(D). Thus, it must be analyzed according to its unique terms. In

section 170(f)(8)(D) “files a return” is immediately followed and modified by the

prepositional phrase “on such form and in accordance with such regulations as the

1
(...continued)
Almendarez-Torres v. United States, 523 U.S. 224, 234 (1998) (“‘[T]he title of a
statute and the heading of a section’ are ‘tools available for the resolution of a
doubt’ about the meaning of a statute.” (quoting Trainmen v. Balt. & Ohio R.R.
Co., 331 U.S. 519, 528-529 (1947))).
 - 59 -

Secretary may prescribe”. This phrase does not modify “[s]ubparagraph (A)”.

“Subparagraph (A)” is immediately followed and limited in scope by the verb

phrase “shall not apply to a contribution”. The majority’s analysis simply ignores

the statutory command that “[s]ubparagraph (A) shall not apply to a contribution”

and in essence reconstructs section 170(f)(8)(D) to state: “Under regulations

prescribed by the Secretary, subparagraph (A) may not apply to a contribution”.

Our role, however, is to review and construe, not adjust and reconstruct, the

statute. See Dodd v. United States, 545 U.S. 353, 359 (2005) (stating that courts

“are not free to rewrite the statute that Congress has enacted”). Inexplicably, the

majority's analysis relegates to mere surplusage and simply ignores the statutory

command that “[s]ubparagraph (A) shall not apply to a contribution”.2

2
Curiously, the majority contends that my reading of sec. 170(f)(8)(D)
renders the phrase “on such form and in accordance with such regulations as the
Secretary may prescribe” surplusage. See op. Ct. p. 48. That contention should
not, however, override the plain meaning of sec. 170(f)(8)(D). See Moskal v.
United States, 498 U.S. 103, 120 (1990) (Scalia, J., dissenting) (“The principle
[against mere surplusage] is sound, but its limitation (‘if possible’) must be
observed. It should not be used to distort ordinary meaning.”). Indeed, sec.
7805(a) and its predecessors have granted the Secretary the general authority to
promulgate regulations since 1916, yet Congress has regularly included the
Secretary’s authority to promulgate regulations in various other Code sections.
See, e.g., secs. 338(i), 472(a), 1256(d)(2), 1502, 5053. Certainly, each of these
specific grants of regulatory authority has an independent effect beyond sec.
7805(a) and is not dismissed as surplusage.
 - 60 -

The majority acknowledges that “the donee reporting provision received

little attention”. See op. Ct. p. 13. Indeed the only legislative history relating

directly to section 170(f)(8)(D) is a statement in the conference report that

[s]ubstantiation is not required if the donee organization files a return
with the IRS (in accordance with Treasury regulations) reporting
information sufficient to substantiate the amount of the deductible
contribution.

H.R. Conf. Rept. No. 103-213, at 565 (1993), 1993-3 C.B. at 443. This statement

is consistent with the unambiguous language of the statute. The majority fails to

cite anything that establishes Congressional intention to cede to Treasury the au-

thority to determine whether section 170(F)(8)(D) will be applicable. In a valiant

attempt to legitimize a holding not supported by the statute, the majority is com-

pelled to rely on regulatory history relating to regulations that were never promul-

gated and legislative history (i.e., pledges from Treasury officials who served in a

previous Administration, a hearing statement from a congressman who retired

before section 170(f)(8)(D) was enacted, etc.) relating to a bill vetoed during a

previous Congress. In short, the majority pays great attention to the wrong details.

COLVIN, VASQUEZ, GUSTAFSON, PARIS, and MORRISON, JJ., agree
with this dissent.
 - 61 -

GUSTAFSON, J., dissenting: Section 170(f)(8)(A) provides the general

rule for substantiation of a charitable contribution by a “contemporaneous written

acknowledgment”; and section 170(f)(8)(D) provides this alternative:

(D) Substantiation not required for contributions reported by
the donee organization.-- Subparagraph (A) shall not apply to a
contribution if the donee organization files a return, on such form and
in accordance with such regulations as the Secretary may prescribe,
which includes the information described in subparagraph (B) with
respect to the contribution. [Emphasis added.]

I would hold that petitioner’s donee organization successfully employed this

alternative when it filed its amended Form 990, “Return of Organization Exempt

from Income Tax”. In holding otherwise, the majority opinion makes a simple

misreading of the phrase in (f)(8)(D) referring to “regulations”. This misreading

appears no later than the headnote, which observes that “the Secretary has not

issued regulations to implement the donee-reporting regime referred to in

subparagraph (D).” See op. Ct. p. 1 (emphasis added). Strictly speaking, this

observation is correct; but in fact the statute makes no mention of regulations to

implement such a regime.1
1
Had Congress conceived the rule that the opinion assumes, the phrase
“which includes” might have been moved and the statute might have read--

Subparagraph (A) shall not apply to a contribution if the donee
organization files a return which includes, on such form and in
accordance with such regulations as the Secretary may prescribe, the
(continued...)
 - 62 -

Rather, the statute provides that subsection (f)(8)(A) will not apply “if the

donee organization files a return, on such form and in accordance with such

regulations as the Secretary may prescribe”. (Emphasis added.) (The statute then

adds the condition that the return must “include[] the information described in

subparagraph (B)”.) Thus, the only regulation referred to in the statute (and the

only regulation that could be argued as being required by the statute) is a

regulation providing for “a return” to be filed by a donee organization.

For tax-exempt charitable organizations,2 the regulations already did (and

still do) prescribe a “return”--i.e., Form 990, “Return of Organization Exempt from

Income Tax”:

§ 1.6033-2. Returns by exempt organizations * * *

(a) In general.--(1) * * * [E]very organization exempt from
taxation under section 501(a) shall file an annual information return
1
(...continued)
information described in subparagraph (B) with respect to the
contribution.

A hypothetical statute worded thus might support the argument that the donee-
reporting regime itself was to be the subject of regulations. But instead, in the
statute as actually enacted, the only subject of regulations is the “return”.
2
Not all organizations that may be the donees of deductible charitable
contributions must file returns. See, e.g., sec. 170(c)(1) (“A State, a possession of
the United States, * * * or the United States or the District of Columbia”).
However, at least some tax-exempt organizations not required to file Form 990
may file it voluntarily. See Rev. Rul. 71-55, 1971-1 C.B. 403.
 - 63 -

specifically setting forth its items of gross income, gross receipts and
disbursements, and such other information as may be prescribed in
the instructions issued with respect to the return * * *.

(2)(i) * * * [E]very organization exempt from taxation under
section 501(a), and required to file a return under section 6033 and
this section ... shall file its annual return on Form 990. * * *

(ii) The information generally required to be furnished by an
organization exempt under section 501(a) is: * * *

(f) The total of the contributions, gifts, grants and similar
amounts received by it during the taxable year, and the names and
addresses of all persons who contributed, bequeathed, or devised
$5,000 or more (in money or other property) during the taxable
year. * * * [Emphasis added.]

As the Commissioner has acknowledged on brief: “The legislative history

suggests that, when Congress referred to ‘return,’ it meant the return under section

6033” (citing H.R. Conf. Rept. No. 103-213, at 563 (1993), 1993-3 C.B. 393, 441

(“Tax-exempt organizations generally are required to file an annual information

return (Form 990) with the IRS”)). And on that Form 990, donee organizations

have long been able (and still are able) to report information about donors and

donations:

As in effect in 1992--i.e., before the legislative initiative described in the

opinion of the Court--the Form 990 had no prescribed schedule for identifying

donors, but the instructions for Form 990 stated (at 8):
 - 64 -

Line 1d-- Total contributions, etc.-- Enter the total of amounts
reported on lines 1a through 1c.

Attached schedule.-- Schedule of contributors (not open to
public inspection)

Caution: See Note (2) below.

Attach a schedule listing contributors who gave the
organization, directly or indirectly, money, securities, or other
property worth $5,000 or more during the year. If no one contributed
the reportable minimum, the organization does not need to attach a
schedule. Show each contributor’s name and address, the total
amount received, and the date received. Contributors include
individuals, fiduciaries, partnerships, corporations, associations,
trusts, or exempt organizations. * * *

Note (2): Caution: If the organization files a copy of Form 990 and
attachments with any state, do not include, in the attachments for the
state, the schedule of contributors discussed above, unless the
schedule is specifically required by the state with which the
organization is filing the return. States that do not require the
information might nevertheless make it available for public
inspection along with the rest of the return.

Thus, under the status quo before the enactment of section 170(f)(8), an exempt

organization would--without using any explicitly prescribed schedule--compose its

own schedule to give some donor information on its Form 990 information return.

When section 170(f)(8)(D) was enacted, the tax-exempt charity’s “return, on

such form and in accordance with such regulations as the Secretary may

prescribe”, was already prescribed as Form 990, and the explicitly authorized
 - 65 -

practice was for the organization to compose its own schedule giving donor

information.

By 2007, the IRS had prescribed a Schedule B, “Schedule of Contributors”.

However, Schedule A, part III, line 3c asked--

Did the organization receive or hold an easement for conservation
purposes, including easements to preserve * * * historic structures?
If “Yes,” attach a detailed statement

--and the “detailed statement” was, again, to be composed by the organization. It

was in such a “detailed statement” attached to its Form 990 that petitioner’s donee

organization “include[d]”, in compliance with subsection (f)(8)(D), the

information required by paragraph (B)--i.e., on “a return, on such form and in

accordance with such regulations as the Secretary may prescribe”, to wit,

Form 990.

When it applies, section 170(f)(8)(A) requires a “contemporaneous” receipt

from the donor organization. On the one hand, in certain respects the statute is not

very demanding. For example, there is no requirement that anyone sign the

receipt, and this Court’s experience is that such receipts often bear neither a

signature nor even an individual’s name. On the other hand, if the donee

organization fails to comply in any respect with what the statute does require,3
3
A deduction will be disallowed if the receipt is issued after the donee’s tax
(continued...)
 - 66 -

then that failure strictly defeats an otherwise valid deduction, even if the donor is

fully capable of substantiating the fact and amount of the donation. If

section 170(f)(8)(A) were viewed by itself, this selective strictness might seem

strange. Section 170(f)(8)(D), however, has the effect of providing an alternative

that may save the otherwise defeated contribution deduction.4

Admittedly, section 170(f)(8)(D) gives the Secretary the power to

promulgate additional regulations and specific forms or schedules for the reporting

of contributions on a donee’s return--a power the Secretary has not explicitly

3
(...continued)
return is filed or is due, sec. 170(f)(8)(C), of if the receipt fails to state an amount
of a cash contribution or a description (but not a value) of a non-cash contribution,
sec. 170(f)(8)(B)(i), or lacks a statement whether the donee provided goods or
services and a statement of the value of those goods or services, sec.
170(f)(8)(B)(iii).
4
The majority suggests, see op. Ct. p. 49, that this interpretation “would
make subparagraph (A) elective with charities,” but in fact the alternative in
section 170(f)(8)(D) is significantly more demanding than the contemporaneous
receipt that satisfies subsection (f)(8)(A). This alternative substantiation must be
made on the Form 990 return (not a mere receipt) and thus is potentially subject to
civil penalties under section 6701 and, since the return is signed “[u]nder penalties
of perjury”, the criminal penalties of section 7206(1) as well. In addition, an
organization that decided not to issue receipts would surely disappoint and
confuse its donors--not a good thing for an organization that depends on
donations. It would therefore seem unlikely that an organization would elect not
to issue receipts but instead to report its contributions on its return.
 - 67 -

exercised. But contrary to the Commissioner’s position5 and the majority’s

holding, a donee’s compliance with section 170(f)(8)(D) did not require the

Secretary to promulgate any additional regulations,6 since the existing regulations

prescribed for donees that are exempt from tax under section 501(c)(3) a return--

Form 990--and thereby gave such donees an occasion to “include[] the information

described in subparagraph (B)” on that return.7 The statutory text shows no reason

5
See “Respondent’s Response to Petitioner’s Motion for Partial Summary
Judgment”, at 13-16 (Aug. 15, 2014). Neither the Commissioner nor the majority
suggests that this Court is bound to defer to this agency position (which has never
been promulgated in a regulation). We therefore construe the statute by normal
principles.
6
Cf. Francisco v. Commissioner, 119 T.C. 317, 323-324 (2002) (“Section
931(d)(2) * * * is silent as to whether those regulations may be issued under
section 931 or another section of the Code, such as sections governing the
determination of sources of income (sections 861-865). In the absence of
regulations under section 931(d)(2), we believe it is appropriate to consider
sections 861-865 and related regulations”), aff’d, 370 F.3d 1228 (D.C. Cir. 2004).
7
The information that section 170(f)(8)(D) requires a donee’s return to
report is “the information described in subparagraph (B)” of section 170(f)(8); and
that “information” does not include the donor’s social security number nor even
his address. The majority, see op. Ct. p. 22 (citing 80 Fed. Reg. 55804), shows
that the Department of the Treasury once envisioned a more ambitious regime that
would have required not only information required in the statute but more--i.e.,
“[t]he donor’s taxpayer identification number * * * in order to properly associate
the donation information with the correct donor.” However, since Treasury
declined to set up such a system (because of “the potential risk for identity theft”),
we need not speculate about the validity of such extra-statutory requirements if
Treasury were ever to promulgate such regulations. At present it is sufficient to
note that a donee organization filing Form 990 is currently able to comply with
(continued...)
 - 68 -

that the Department of the Treasury should be able to veto this alternative by

declining to promulgate additional regulations.

Nor does the legislative history suggest such a de facto veto power. That

history, as described by the majority, see op. Ct. pp. 12-18, shows that Congress

once considered but did not enact mandatory donee reporting as the primary

substantiation of charitable contributions, and that the notion of donee reporting

survives in section 170(f)(8)(D) as a non-mandatory alternative. That history

provides no basis whatsoever for the idea that the actually enacted alternative

cannot be employed until the IRS promulgates new regulations.

The Tax Court should not give to Treasury the power to veto

section 170(f)(8)(D) by regulatory inaction--a power that Congress did not grant--

and thereby deprive taxpayers of a means that Congress did grant.

COLVIN, FOLEY, VASQUEZ, PARIS, and MORRISON, JJ., agree with

this dissent.

7
(...continued)
section 170(f)(8)(D) by providing “the information described in subparagraph (B)
with respect to the contribution”.