Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.) has posted Life after Mayo: Silver Linings, 131 Tax Notes 1251 (June 20, 2011), on SSRN. Here is the abstract:

Most tax practitioners interpreted the Supreme Court’s Mayo decision to mean that it is now virtually impossible for taxpayers to prevail in challenges to tax regulations and that the IRS can therefore do almost anything it wants. However, nothing in Mayo suggests the Supreme Court intended that result.

To the contrary, the Supreme Court’s clear message in Mayo is that tax law and the IRS are governed by the same rules that apply to every other area of federal administration. That provides a powerful tool for taxpayers to use in challenging IRS actions based on administrative law rules providing limits on agency discretion that taxpayers have traditionally not even attempted to invoke against the IRS. Those limitations include the Administrative Procedure Act’s arbitrary and capricious standard and its requirements for reasoned decision-making and reasoned explanations of agency decisions, the general presumption against retroactivity in regulations, the Supreme Court’s recent case law narrowing the classification of requirements for bringing suit that are put in the restrictive category of being jurisdictional, the law providing for exceptions to exhaustion of administrative remedies requirements, and the principle that agency guidance other than regulations is given weight only according to its power to persuade.