Mann Construction: An IRS Listed-Transaction Notice Had to Follow the APA

Review the primary official source.

In Mann Construction, Inc. v. United States, the Sixth Circuit held that IRS Notice 2007-83 was a legislative rule subject to Administrative Procedure Act notice and comment. Because the IRS did not use that process, the court set the notice aside in the refund action before it.

The notice created a new reporting duty

Notice 2007-83 identified certain trust arrangements involving cash-value life insurance as listed transactions. The taxpayers were penalized for failing to report an arrangement the IRS concluded fell within the notice.

The court reasoned that the reporting obligation arose from the notice and carried exposure to financial penalties and criminal sanctions. Those features indicated a legislative rule with the force and effect of law rather than a nonbinding interpretation.

The IRS used no notice-and-comment procedure

The parties agreed that the agency did not publish a proposed rule and take public comment before issuing the notice. The government argued that the notice was interpretive or that Congress had exempted this class of action from the APA.

The court rejected both arguments. It rejected the argument that Congress’s reference to regulations identifying covered transactions also authorized the IRS’s chosen process. Identifying which transactions must be disclosed was a different question from exempting the agency from notice and comment. Congressional silence and the agency’s own procedural regulation did not supply the required exemption. Mann Construction, opinion pages 9–11.

The court set aside Notice 2007-83

Because the agency had not followed the required process, the Sixth Circuit held that Notice 2007-83 had to be set aside, did not reach the taxpayers’ remaining challenges, and stated: “We reverse.” The ruling concerned this notice and the law governing the Sixth Circuit case.

Later Treasury rulemaking, appellate authority in another circuit, statutory amendments, and later proceedings can change the analysis. The separate 2023 Mann Construction opinion concerned attorney fees and should not be mistaken for the 2022 merits decision.

A procedural challenge needs a precise record

Preserve the exact notice or regulation, version and date, transaction documents, disclosure forms, penalty notices, payment, refund claim, denial, and filing deadlines. Identify whether the challenged agency action itself created the duty or interpreted a duty already imposed by statute or regulation.

Do not infer from this case that every IRS notice is invalid or that disclosure can safely be withheld. Current law, jurisdiction, applicable regulations, and protective filing options require case-specific review before a reporting deadline passes.