Brief for Amicus Curiae Tax Law Center at NYU Law — Stenson Tamaddon, LLC v. IRS (9th Cir., Feb. 6, 2026)

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Brief of amicus curiae Tax Law Center at NYU Law in support of defendants-appellees in Stenson Tamaddon, LLC v. United States Internal Revenue Service, No. 25-4217, in the Ninth Circuit, dated February 6, 2026. The brief says the merits turn on whether IRS Notice 2021-20 is an interpretive rule or a legislative rule under the Administrative Procedure Act. It argues that agencies do not bear the burden to demonstrate that a rule is interpretive, that consistent application of a rule does not make it legislative, and that numerical thresholds, without more, do not indicate that a rule is legislative. It states that Employee Retention Credit frequently asked questions were later incorporated into IRS Notice 2021-20, and that the District Court correctly characterized the notice as an interpretive rule.

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“Brief for Amicus Curiae Tax Law Center at NYU Law — Stenson Tamaddon, LLC v. IRS (9th Cir., Feb. 6, 2026).” Original at taxlawcenter.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/tax-law-center-amicus-brief-9th-cir-no-25-4217-feb-6-2026-bd74d721b1/, SHA-256 4978a375f07416349b3b04b216a1d7609494a3eef998a8427deef49cc7afd486.

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Case: 25-4217, 02/06/2026, DktEntry: 31.2, Page 1 of 31

No. 25-4217

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

STENSON TAMADDON, LLC,

Plaintiff-Appellant,

UNITED STATES INTERNAL REVENUE SERVICE; UNITED
STATES OF AMERICA; UNITED STATES DEPARTMENT OF THE
TREASURY,

Defendants-Appellees.

On Appeal from the Judgment of the United States District Court
for the District of Arizona

BRIEF FOR AMICUS CURIAE TAX LAW CENTER AT NYU LAW
IN SUPPORT OF DEFENDANTS-APPELLEES

JULIE CIAMPORCERO AVETTA
KELSEY MERRICK
Tax Law Center at NYU Law
110 West 3rd Street #204
New York, NY 10012
(212) 998-6002
julie.avetta@nyu.edu

February 6, 2026 Counsel for Amicus Curiae

i
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TABLE OF CONTENTS

Table of Contents ........................................................................................ii

Table of Authorities .................................................................................. iii

Interest of Amicus Curiae and Summary of Argument ............................ 1

Argument .................................................................................................... 4

I. Agencies do not bear the burden to demonstrate that a
rule is interpretive. .............................................................................. 4

A. The IRS issued Notice 2021-20 to a public in need
of immediate guidance. ............................................................ 4

B. The District Court correctly characterized Notice
2021-20 as an interpretive rule. ............................................ 7

II. The consistent application of a rule is not an indication
that the rule is legislative. .............................................................. 11

III. The use of numerical thresholds, without more, does not
indicate that a rule is legislative. .................................................. 16

A. Safe harbors can improve IRS administration and
provide taxpayer certainty.................................................... 20

Conclusion ................................................................................................. 23

ii
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TABLE OF AUTHORITIES

Cases Page(s)

Action on Smoking & Health v. Civ. Aeronautics Bd., 713
F.2d 795 (D.C. Cir. 1983) ..................................................................... 10

Alcaraz v. Block, 746 F.2d 593 (9th Cir. 1984) ........................ 7, 10, 13, 15

Am. Mining Cong. v. Mine Safety & Health Admin., 995 F.2d
1106 (D.C. Cir. 1993) ........................................................................... 14

Am. Bus Ass’n v. United States, 627 F.2d 525 (D.C. Cir.
1980) ..................................................................................................... 12

Buschmann v. Schweiker, 676 F.2d 352 (9th Cir.1982) ............................ 9

Cath. Health Initiatives v. Sebelius, 617 F.3d 490 (D.C. Cir.
2010) ..................................................................................................... 19

E. Bay Sanctuary Covenant v. Trump, 932 F.3d 742 (9th Cir.
2018) ..................................................................................................... 10

Gill v. United States Dep’t of Just., 913 F.3d 1179 (9th Cir.
2019) ..................................................................................................... 13

Hemp Indus. Ass’n v. Drug Enf’t Admin., 333 F.3d 1082 (9th
Cir. 2003) ...................................................................................... passim

Hoctor v. Dep’t of Agric., 82 F.3d 165 (7th Cir. 1996) ................. 15, 17, 18

Kisor v. Wilkie, 588 U.S. 558 (2019) ........................................................ 19

Mada-Luna v. Fitzpatrick, 813 F.2d 1006 (9th Cir. 1987) ..................... 12

Mo. Pub. Serv. Comm’n v. FERC, 215 F.3d 1 (D.C. Cir. 2000)............... 19

Nat. Res. Def. Council v. Nat’l Highway Traffic Safety
Admin., 894 F.3d 95 (2d Cir. 2018) ....................................................... 8

Pac. Gas & Elec. Co. v. Fed. Power Comm’n, 506 F.2d 33
(D.C. Cir. 1974) .................................................................................... 13

iii
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Cases (cont.) Page(s)

Perez v. Mortg. Bankers Ass’n, 575 U.S. 92 (2015).................. 7, 11, 13, 14

Philips Petroleum Co. v. Commissioner, 101 T.C. 78 (1993) .................... 7

Reno-Sparks Indian Colony v. EPA, 336 F.3d 899 (9th Cir.
2003) ..................................................................................................... 10

Sequoia Orange Co. v. Yeutter, 973 F.2d 752 (9th Cir. 1992) ................... 9

Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87 (1995) ........................ 7, 13

Syncor Int’l Corp. v. Shalala, 127 F.3d 90 (D.C. Cir. 1997) ................... 12

United States v. McIntosh, 124 F.4th 199 (3d Cir. 2024) ....................... 16

United States v. Riccardi, 989 F.3d 476 (6th Cir. 2021) ......................... 19

United States v. Valverde, 628 F.3d 1159 (9th Cir. 2010) ........................ 8

Statutes
5 U.S.C § 553................................................................................. 2, 6, 8, 11
Pub. L. No. 116-136, 134 Stat. 281 (2020) ................................................. 4

Legislative Materials
S. Rep. No. 752, 79th Cong., 1st Sess. (1945), reprinted in
ADMINISTRATIVE PROCEDURE ACT, 79TH CONG., LEGISLATIVE HISTORY,
1944-46 (1946) ................................................................................. 10, 11

Treasury Regulations (26 C.F.R.)
Treas. Reg. § 1.6662-3(b)(2) (1991) ............................................................ 6

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IRS Publications Page(s)

Notice 2021-20…………………………………………………………………...6
Notice 2025-14 .......................................................................................... 16
Notice 2025-8 ............................................................................................ 20
Notice 2026-13 .......................................................................................... 20
Rev. Proc. 2025-32 .................................................................................... 16

Other Authorities

April 1, 2025 — September 30, 2025 Treasury Inspector Gen.
for Tax Admin., Semiannual Rep. to Cong. ........................................ 22

Attorney General’s Manual on the Administrative Procedure
Act (1947) ............................................................................................. 13

Emily Cauble, Safe Harbors in Tax Law, 47 Conn. L. Rev.
1385 (2015) ..................................................................................... 20, 21

FAQs: Employee Retention Credit under the CARES Act ....................... 5

Greg Leiserson, Senate Appropriations Bill Would Set the
IRS Up to Fail When IRA Funds Run Out, The Tax Law
Center Blog (Dec. 11, 2025) ................................................................. 22

Internal Revenue Manual 32.2.2.3.3 (Aug. 11, 2004) ............................... 6

Remarks on Signing the Coronavirus Aid, Relief, and
Economic Security Act and an Exchange With Reporters,
2020 DAILY COMP. PRES. DOC. 193 (March 27, 2020)............................ 4

Robert A. Anthony, Interpretive Rules, Policy Statements,
Guidances, Manuals, and the Like—Should Federal
Agencies Use Them to Bind the Public?, 42 Duke. L.J.
1311 (1992) ........................................................................................... 14

Ronald M. Levin, Rulemaking and Guidance Exception, 70
Admin. L. Rev. 263 (2018) ................................................................... 12

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Other Authorities (cont.) Page(s)

Saltzman & Book, IRS Practice and Procedure: Exceptions
Under The APA To The Notice-And-Comment Procedures
¶ 3B.03 (2025) ...................................................................................... 13

Susan C. Morse, The Truth About Safe Harbors, 92 Tenn. L.
Rev. 743 (2024) ..................................................................................... 21

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INTEREST OF AMICUS CURIAE AND SUMMARY OF
ARGUMENT 1

The Tax Law Center at NYU Law is a nonpartisan, nonprofit center

dedicated to improving the integrity of the federal tax system. Its staff

comprises tax law experts with experience in policymaking and

administration as well as practice of tax law on behalf of clients. The

Center aims to protect and preserve tax revenues, advance equity

through the tax system, and improve tax administration. Drawing on its

expertise in tax administration, the Center submits this brief on a

question of administrative law raised in this case with substantial

implications for the federal tax system.

The merits of this case turn on whether IRS Notice 2021-20 is an

“interpretive” rule, which is “valid despite the absence of notice and

comment procedures” under the Administrative Procedure Act, or a

“legislative” rule, which “can issue only by using the notice and comment

procedure described in the APA[.]” Hemp Indus. Ass’n v. Drug Enf’t

Admin., 333 F.3d 1082, 1087 (9th Cir. 2003). Under this Court’s

1 This brief does not represent the views, if any, of NYU School of

Law. No counsel for a party authored any part of this brief, no one other
than amicus curiae paid for its preparation or submission, and
respondent-appellees have consented to its filing.

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precedent, a putatively interpretive rule is, in fact, legislative only if “in

the absence of the rule, there would not be an adequate legislative basis

for enforcement action; . . . the agency has explicitly invoked its general

legislative authority; or . . . the rule effectively amends a prior legislative

rule.” Id. A rule is not presumptively legislative simply because it is

consistently applied. Nor do agencies bear the burden to rebut any such

presumption or otherwise demonstrate that a rule is interpretive. And

the use of numerical thresholds, without more, does not indicate that a

rule is legislative.

In support of its contrary position, appellant draws on authority

interpreting the “good cause exception” under 5 U.S.C § 553(b)(B). But

that authority is inapposite in cases where notice and comment

procedures are not required in the first place—e.g., in the case of an

interpretive rule—and the good cause exception does not apply. 5 U.S.C

§ 553(b)(A). The analogy to this inapposite standard is particularly

unwarranted where, as here, this Court’s precedent provides the

standard for distinguishing legislative from interpretive rules. See Hemp

Indus., 333 F.3d 1082.

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Appellant’s proposed standard—that “a rule is legislative when the

agency treats it as a binding norm,” (Appellant Br. 30)—would mean that

an agency could never provide its interpretation of the law without notice

and comment, which is binding on the agency as a matter of law because

it is derived from an act of Congress. It would also mean that no safe

harbor provision—even those that provide a simplified method for

qualification which taxpayers can opt into, rather than a rebuttable

presumption that taxpayers must overcome—could ever be promulgated

without notice-and-comment procedures. That would be contrary to

settled law, which makes clear that it is the substance of a rule, not the

consistency of its application, on which its characterization as legislative

or interpretive must turn.

Appellant’s proposed standard would make it impossible for the IRS

to issue even the most routine interpretive guidance documents (such as

inflation-indexed tax tables) without notice and comment. The IRS would

also be less able quickly and readily to provide clear guidance when

implementing new law, undermining sound tax administration and

creating more uncertainty and compliance burdens for many taxpayers.

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This Court should reject this proposed standard for the reasons that

follow.

ARGUMENT

I. Agencies do not bear the burden to demonstrate that a rule
is interpretive.

It is not the case, as appellant incorrectly posits, that an agency

bears the burden to show that its publication of interpretive guidance is

excepted from notice and comment under 5 U.S.C. § 553(b). (Appellant

Br. 27-28.) Interpretive rules are not governed by the standard appellant

invokes. That standard—the “good cause” exception under 5 U.S.C.

§ 553(b)(B)—governs in a different rulemaking context, distinct from the

circumstances on the record. Where, as here, a rule simply explains the

agency’s interpretation of a statute, the evidentiary showing required

under the “good cause” exception does not apply. Hemp Indus., 333 F.3d

at 1087.

A. The IRS issued Notice 2021-20 to a public in need of
immediate guidance.

In early 2020, to “deliver urgently needed relief to our nation’s

families, workers, and businesses” affected by the COVID-19 pandemic,

Congress enacted the bipartisan CARES Act. Pub. L. No. 116-136, 134

Stat. 281 (2020); Remarks on Signing the Coronavirus Aid, Relief, and

4
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Economic Security Act and an Exchange With Reporters, 2020 DAILY

COMP. PRES. DOC. 193 (March 27, 2020). This legislation provided

multiple forms of relief to taxpayers affected by emergency orders,

including, as relevant here, a tax credit (the “ERC credit”) available to

eligible employers whose business operations were affected by the

pandemic. 3-ER-362; SER-15.

After the President signed the CARES Act into law on March 27,

2020, the IRS took immediate action to implement the ERC credit: it

developed a rubric to process claims, set standards to ensure that claims

were quickly processed at scale, and communicated these standards to

the public. See 3-ER-363. To speed the delivery of relevant guidance to

the taxpayer public, the IRS did not submit these standards for notice

and comment in the Federal Register. 3-ER-363. Rather, the IRS

published guidance directly to the public on a page of frequently asked

questions, which was initially posted on the IRS website on April 29,

2020. Id.; see FAQs: Employee Retention Credit under the CARES Act,

https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-

the-cares-act (last updated May 29, 2025). As Congress continued to pass

further pandemic-relief legislation modifying the ERC credit, the IRS

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updated this website to respond to additional questions as they arose. 3-

ER-363. After nearly a year, these frequently asked questions and

answers were formally incorporated into IRS Notice 2021-20. Id.; see 3-

ER-364.

An IRS Notice is distinct from a notice of proposed rulemaking,

which is published in the Federal Register and indicates the

commencement of notice and comment procedures on what will

ultimately issue as a regulation. See 5 U.S.C. § 553(b). Instead, an IRS

Notice is “a public pronouncement by the [Internal Revenue] Service that

may contain guidance that involves substantive interpretations of the

Internal Revenue Code or other provisions of the law” and is published

in the Internal Revenue Bulletin. Internal Revenue Manual 32.2.2.3.3

(Aug. 11, 2004); see, e.g., Treas. Reg. § 1.6662-3(b)(2) (“The term ‘rules or

regulations’ includes the provisions of the Internal Revenue Code,

temporary or final Treasury regulations issued under the Code, and

revenue rulings or notices (other than notices of proposed rulemaking)

issued by the Internal Revenue Service and published in the Internal

Revenue Bulletin.”). Unlike statutes or regulations which are intended

to impose substantive obligations on taxpayers, IRS Notices are meant to

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be “administrative pronouncements” that “do not have the force of law,

are merely statements of the Commissioner’s position, and are entitled

to no special deference” in the courts. Philips Petroleum Co. v.

Commissioner, 101 T.C. 78, 117 (1993), aff’d, 70 F.3d 1282 (10th Cir.

1995).

B. The District Court correctly characterized Notice
2021-20 as an interpretive rule.

Whether an agency rule is interpretive or legislative is a question

of law reviewed de novo. Hemp Indus. Ass’n v. Drug Enf’t Admin., 333

F.3d 1082, 1086 (9th Cir. 2003). As the Supreme Court has recognized,

“the critical feature of interpretive rules is that they are ‘issued by an

agency to advise the public of the agency’s construction of the statutes

and rules which it administers,’” and not as statements intended to “have

the force and effect of law” or be “accorded that weight in the adjudicatory

process.” Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 97 (2015), quoting

Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 99 (1995)). Notice 2021-

20 fits this definition of an interpretive rule: it neither affects the

statutory conditions for relief nor imposes adverse consequences for

noncompliance with the CARES Act provisions governing the ERC credit

and is due no deference in any court. Cf. Alcaraz v. Block, 746 F.2d 593,

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613 (9th Cir. 1984) (“No law was created; the regulations simply

explained something the statute already required. . . . [T]hat the

regulations may have altered administrative duties or other hardships

does not make them substantive.”). Rather, Notice 2021-20 served as an

accessible platform to articulate the IRS’s understanding of the ERC

credit as it evolved through multiple statutory amendments and how the

IRS would thus evaluate taxpayer claims of entitlement. 3-ER-364.

Appellant incorrectly posits that an agency bears the burden to

show that its publication of interpretive guidance is excepted from notice

and comment under 5 U.S.C. § 553(b), or that “in close cases, courts

should therefore err on the side of requiring rulemaking.” Appellant Br.

27-28; see Nat. Res. Def. Council v. Nat’l Highway Traffic Safety Admin.,

894 F.3d 95, 113-14 (2d Cir. 2018). Appellant confuses the judicial

standard for the good cause exception to notice-and-comment with the

exception for non-legislative rules. See 5 U.S.C. § 553(b)(A-B). The good

cause exception to notice-and-comment procedures under section

553(b)(B) allows an agency to waive otherwise obligatory notice-and-

comment procedures where the agency “for good cause finds” that those

are “impracticable, unnecessary, or contrary to the public interest.” Id.

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The good cause exception is “essentially an emergency procedure.” United

States v. Valverde, 628 F.3d 1159, 1165 (9th Cir. 2010), quoting

Buschmann v. Schweiker, 676 F.2d 352, 357 (9th Cir.1982); see also

Sequoia Orange Co. v. Yeutter, 973 F.2d 752, 757 n.4 (9th Cir. 1992)

(“Complying with the notice and comment provisions of the APA is not a

matter of agency choice.”). Conversely, no such conditions apply to the

exception for interpretive or other non-legislative rules described under

553(b)(A), for which notice-and-comment procedures are not required in

the first place. See, e.g., Hemp Indus., 333 F.3d at 1087:

An agency can issue a legislative rule only by using the
notice and comment procedure described in the APA,
unless it publishes a specific finding of good cause
documenting why such procedures “are impracticable,
unnecessary, or contrary to the public interest.” 5 U.S.C.
§ 553(b), (b)(B). In contrast, an agency need not follow the
notice and comment procedure to issue an interpretive
rule. § 553(b)(A). The distinction between the two
procedures is key in this case. If the [agency’s] rule is
genuinely an interpretive rule, it is valid despite the
absence of notice and comment procedures. If the
[agency’s] rule has the effect of a legislative rule, it is
invalid because of the agency’s failure to comply with the
APA procedures.

This key distinction is supported in the implementation of the (b)(A)

and (b)(B) exceptions, which have developed separate lines of case law.

9
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Unlike the (b)(B) good cause exception—which must be supported by

agency findings at the time of issuance, see, e.g., E. Bay Sanctuary

Covenant v. Trump, 932 F.3d 742, 777 (9th Cir. 2018); Action on Smoking

& Health v. Civ. Aeronautics Bd., 713 F.2d 795, 801 n.6 (D.C. Cir. 1983)—

the exceptions under 553(b)(A) may be raised for the first time on appeal.

Reno-Sparks Indian Colony v. EPA, 336 F.3d 899, 910 n.12 (9th Cir.

2003); see also Hemp Indus., 333 F.3d at 1085 (deciding whether a rule

was legislative or interpretive even though the agency never considered

the issue); Alcaraz, 746 F.2d at 613 (same). And while courts often invoke

the legislative history of the APA for the proposition that none of the

exceptions under 553(b) are meant to be an “escape clause” around notice-

and-comment, these cases invariably do so in the context of the good

cause exception, as does the committee report. See, e.g., Alcaraz, 746 F.2d

at 612; S. Rep. No. 752, 79th Cong., 1st Sess. (1945), reprinted in

ADMINISTRATIVE PROCEDURE ACT, 79TH CONG., LEGISLATIVE HISTORY,

1944-46, at 200, 201 (1946). 2 The law does not demand that an agency

2 In relevant part, the committee report states: “Agencies are given

discretion to dispense with notice (and consequently with public
proceedings) in the case of interpretative rules, general statements of

10
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defend, ab initio, every consumer-facing publication against potential

allegations that the publication is the equivalent of a legislative rule.

II. The consistent application of a rule is not an indication
that the rule is legislative.

Appellant’s position—that “a rule is legislative when the agency

treats it as a binding norm” (Appellant Br. 30) and that the agency has

the burden to demonstrate otherwise (Appellant Br. 27-28)—should not

persuade this Court. As a threshold matter, it cannot be the case that a

rule is “legislative” simply because the agency follows it. No inference

arises as to whether a rule is legislative or interpretive merely because

the agency acts in accordance with stated policies and consistently

applies the rule.

Both parties correctly observe that the ultimate distinction between

a legislative and non-legislative rule is whether it has the force of law.

Appellant Br. 26; Appellee Br. 29; See Perez v. Mortg. Bankers Ass’n, 575

policy, or rules of agency organization, procedure, or practice. This does
not mean, however, that agencies should not—where useful to them or
helpful to the public—undertake public procedures in connection with
such rule making. The exemption of situations of emergency or necessity
is not an “escape clause” in the sense that any agency has discretion to
disregard its terms or the facts. A true and supported or supportable
finding of necessity or emergency must be made and published.” Id.

11
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U.S. 92, 96 (2015); Hemp Indus., 333 F.3d at 1087; 5 U.S.C. 553(b)(A).

However, testing whether a rule has the force of law depends on the type

of non-legislative rule being considered. See Syncor Int’l Corp. v. Shalala,

127 F.3d 90, 94 (D.C. Cir. 1997) (emphasizing the distinction between

interpretive rules and general statements of policy); Ronald M. Levin,

Rulemaking and Guidance Exception, 70 Admin. L. Rev. 263 (2018)

(noting that courts apply different analyses to interpretive rules and

general statements of policy). As appellees correctly note, it is largely

irrelevant that Notice 2021-20 leaves room for IRS discretion. 3 Appellee

Br. 32, 47-49. Courts consider the “binding” effect of a rule only for

general statements of policy, which are meant to advise the public on how

an agency intends to exercise enforcement discretion. See, e.g., Mada-

3 As discussed infra, the 10 percent nominal effects test is
interpretive in part because it is a safe harbor that encompasses only a
subset of the circumstances contemplated by Congress when it made the
ERC credit available to businesses “fully or partially suspended” by a
government order. In implementing statutory standards such as this, the
agency may be able to identify “easy calls” as an interpretive matter
while other situations may require closer scrutiny. Here, the IRS has
used the tools of statutory interpretation to determine that employers
that satisfy the 10 percent nominal effects test are “easy calls” for
meeting the statutory standard of “fully or partially suspended.” The 10
percent test thus leaves IRS agents with discretion insofar as it requires
the IRS to further interpret what it means to be “fully or partially
suspended” for claims that fall outside the safe harbor.

12
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Luna v. Fitzpatrick, 813 F.2d 1006, 1013 (9th Cir. 1987); Am. Bus Ass’n

v. United States, 627 F.2d 525, 528-29 (D.C. Cir. 1980) (citing Attorney

General’s Manual on the Administrative Procedure Act (1947)). The

“critical factor” distinguishing a general statement of policy from a

legislative rule is the extent to which the agency retains “discretion to

follow, or not to follow, the [announced] policy in an individual case.” Gill

v. United States Dep’t of Just., 913 F.3d 1179, 1186 (9th Cir. 2019)

(citations omitted); see also Pac. Gas & Elec. Co. v. Fed. Power Comm’n,

506 F.2d 33, 40 (D.C. Cir. 1974) (a legislative rule is “finally

determinative of [] rights and duties” whereas a general statement of

policy “envisions further proceedings”).

By contrast, interpretive rules are meant to advise the public on

how an agency interprets the law. Perez v. Mortg. Bankers Ass’n, 575 U.S.

92 (2015); Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 99 (1995).

Because an interpretive rule is not an exercise of discretion, it follows

that the agency should consistently follow the rule. See Alcaraz v. Block,

746 F.2d 593, 613 (9th Cir. 1984); Saltzman & Book, IRS Practice and

Procedure: Exceptions Under The APA To The Notice-And-Comment

Procedures ¶ 3B.03 (2025) (“[I]nterpretative rules often have de facto

13
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power in that they signal agency positions upon which the public can rely,

and a failure to follow such rules may have negative consequences (such

as the imposition of civil penalties) as a result of the agency taking action

consistent with the interpretative rule.”); Robert A. Anthony, Interpretive

Rules, Policy Statements, Guidances, Manuals, and the Like—Should

Federal Agencies Use Them to Bind the Public?, 42 Duke. L.J. 1311, 1313

(1992) (“The sole category of exceptions—where an agency may

permissibly attempt to make a substantive nonlegislative rulemaking

document binding on private parties—is for interpretive rules.”). An

interpretive rule can be practically binding, even if a court later rules

that the interpretation was wrong. See Perez, 575 U.S. at 109 (Scalia, J.,

concurring) (“An agency may use interpretive rules to advise the public

by explaining its interpretation of the law. But an agency may not use

interpretive rules to bind the public by making law, because it remains

the responsibility of the court to decide whether the law means what the

agency says it means”).

This Court in Hemp thus adopted the three-factor test laid out by

the D.C. Circuit in American Mining for good reason: both cases

ultimately involved interpretive rules. Hemp Indus., 333 F.3d at 1087-88;

14
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Am. Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1109

(D.C. Cir. 1993). As this Court explained in Hemp, interpretive rules

“merely explain, but do not add to, the substantive law that already exists

in the form of a statute or legislative rule.” Hemp Indus., 333 F.3d at

1087. The district court below appropriately applied the Hemp factors

here, and—contrary to Appellant’s claim (Appellant Br. 30-31)—even

looked beyond the Hemp factors in considering the degree to which the

IRS retained discretion in applying Notice 2021-20, and thus arguably

applied a more stringent test than was necessary to evaluate a putatively

interpretive rule. 1-ER-17. In applying this test, the District Court

correctly accorded no weight to the degree of consistency of the IRS’

conduct. Id.; Cf. Hoctor v. Dep’t of Agric., 82 F.3d 165, 171 (7th Cir. 1996)

(“attach[ing] no weight to the Department’s inconsistency” where notice

and comment procedures were used in some similar circumstances, but

not others). The fact that the IRS behaved in accordance with the

guidance it issued in Notice 2021-20 does not elevate that rule to the force

of law.

It is the substance of a rule, not the consistency of its application,

on which its characterization as legislative or interpretive must turn. See

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Alcaraz, 746 F.2d at 614 (“all rules are ‘binding’ on the regulated parties

in the sense that they set, for the time, the legal minima of behavioral

standards”). To hold otherwise would place the burden on agencies to self-

inculpate: if a rule applied consistently is a “binding norm” presumptively

subject to notice and comment procedures, that presumption could only

be rebutted by an agency’s own evidence that the agency failed to follow

the rule consistently. This Court should reject appellant’s invitation to do

so here.

III. The use of numerical thresholds, without more, does not
indicate that a rule is legislative.

The presence of a numerical threshold in a rule does not

immediately categorize that rule as legislative, or preclude it being

interpretive. Courts of appeals have frequently “upheld agencies’

numeric interpretations of qualitative regulatory terms.” United States

v. McIntosh, 124 F.4th 199, 209 n.6 (3d Cir. 2024) (collecting cases); see

Appellee Br. 35-36. Indeed, the IRS routinely interprets code provisions

through numerical thresholds without notice and comment. See, e.g., Rev.

Proc. 2025-32 (setting forth rate tables and other inflation adjustments

for tax year 2026 pursuant to section 1(f)); Notice 2025-14 (providing

updated interest rate guidance for purposes of administering minimum

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funding rules for defined benefit and pension plans pursuant to sections

417 and 430).

As the Hemp factors would suggest, the key factor in determining

whether a numerical threshold is an interpretive rule is the extent to

which the threshold is derived from the underlying standard it purports

to interpret. Hoctor, 82 F.3d at 170. The more attenuated the numeric

threshold is from the text, the more likely it involves the use of delegated

policymaking discretion and is therefore a legislative rule. See id. at 171.

This test is more demanding for bright line rules where the line alone is

dispositive than for safe harbors within a broader, non-numerical

standard. 4 In Hoctor, for example, the court held that a strict eight-foot

minimum fence height requirement was not “derivable from” the

underlying regulation imposing a “duty of secure containment” for

animal enclosures because “[t]here is no way to reason to an eight-foot

4
Of course, some statutes require the agency to come up with a
bright line, single numerical threshold and therefore would not permit a
safe harbor rule. An obvious example is section 1(f), noted supra at 16,
which provides detailed instructions for the Secretary to update the tax
tables annually for inflation. The analysis here focuses on statutes and
regulations that require the agency to interpret a non-numeric standard,
such as the requirement that animal enclosures be “structurally sound”
(as in Hoctor), or as here, that an eligible employer be “fully or partially
suspended.”

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perimeter-fence rule as opposed to a seven-and-a-half foot fence or a nine-

foot fence or a ten-foot fence.” Id. at 170-71. As noted by appellees, the

rule in Hoctor could not be interpretive because there was no “intrinsic

relationship” between “the underlying regulation’s focus on structural

soundness and the challenged rule’s focus on height.” Appellee Br. 39.

The Hoctor court suggested that if, instead of the strict height

requirement, the agency adopted a height standard as a “rule of thumb

to guide the application of [the] general norm,” it would be “legitimately

interpretive.” Hoctor, 82 F.3d at 171 (“Had the Department of Agriculture

said in the internal memorandum that it could not imagine a case in

which a perimeter fence for dangerous animals that was lower than eight

feet would provide secure containment, and would therefore presume,

subject to rebuttal, that a lower fence was insecure, it would have been

on stronger ground. For it would have been tying the rule to the

animating standard, that of secure containment, rather than making it

stand free of the standard, self-contained, unbending, arbitrary.”).

Similarly, in United States v. Riccardi, commentary on a sentencing

guideline establishing a mandatory minimum loss of $500 for access

device crimes was found to be a substantive legislative rule subject to

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notice-and-comment because “even if there is some ambiguity in § 2B1.1’s

use of the word ‘loss,’ the commentary's bright-line rule requiring a $500

loss amount for every gift card does not fall ‘within the zone of ambiguity’

that exists.” 989 F.3d 476, 480 (6th Cir. 2021) (quoting Kisor v. Wilkie,

588 U.S. 558, 576 (2019) (emphasis added)). And in Catholic Health

Initiatives v. Sebelius, “[w]ith respect to the ten percent limits ‘it is

impossible to give a reasoned distinction between numbers just a hair on

the OK side of the line and ones just a hair on the not-OK side.’” 617 F.3d

490, 496 (D.C. Cir. 2010) (quoting Mo. Pub. Serv. Comm’n v. FERC, 215

F.3d 1, 4 (D.C. Cir. 2000)).

Here, the 10 percent safe harbor is an interpretation of what

constitutes a partial suspension because it is not an “unbending” line or

even the line itself. Rather, it is a separate threshold that lies within the

broader and vaguer standard of what constitutes a “fully or partially

suspended” business. The 10 percent safe harbor is an interpretation of

the statute that identifies a set of circumstances that clearly fall within

the meaning of “fully or partially suspended” without deciding where or

how to draw the line in every case. The 10 percent safe harbor is thus

akin to the hypothetical rebuttable presumption considered in Hoctor,

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and arguably even more flexible, in that it creates a simplified method

for qualification which taxpayers can opt into, rather than a rebuttable

presumption that taxpayers must overcome.

A. Safe harbors can improve IRS administration and
provide taxpayer certainty.

A safe harbor rule can be legislative rule, interpretive rule, or a

general statement of policy. See Emily Cauble, Safe Harbors in Tax Law,

47 Conn. L. Rev. 1385, 1392 (2015) (explaining that safe harbors exist in

statute, regulations, and in IRS sub-regulatory guidance). Whether a safe

harbor can be deployed as an interpretive rule depends on the underlying

statute or regulation; where, as here, a statute can be interpreted

through a safe harbor, there are compelling policy reasons to do so.

Maintaining that interpretive rules can establish numerical safe

harbors is important to the IRS’s enforcement capabilities and taxpayer

planning and certainty. Safe harbors provide a way for both agencies and

regulated entities to employ clear, ex ante rules while maintaining

flexible, ex post standards, and are employed throughout tax law. Id. at

1390, 1392; see, e.g. Notice 2026-13 (providing safe harbor language that

retirement plan administrators can use to comply with notice

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requirements under section 402(f); Notice 2025-8 (updating the safe

harbor framework for taxpayers to qualify for the domestic bonus credit).

Compared to flexible standards, safe harbors help reduce risk and

ambiguity for taxpayers, which in turn can help ensure continued

fairness and confidence in the tax system because ambiguity is more

likely to be exploited by the most aggressive taxpayers. Cauble, Safe

Harbors in Tax Law at 1406 (“Taxpayers who seek to push boundaries

and game the system as much as possible will try to take advantage of

additional risk and ambiguity by structuring their transactions more

aggressively… [which] could contribute to the perception that taxpayers

who exploit the system are not subject to the same rules that apply to the

rest of us”). “A safe harbor reduces risk for a taxpayer who qualifies for

it because the taxpayer’s chances of obtaining a favorable outcome will

be 100% (or nearly 100%).” Id. at 1399.

Employing safe harbors also allows the IRS to conserve scarce

resources by focusing enforcement on claims that fall outside the safe

harbor. See Susan C. Morse, The Truth About Safe Harbors, 92 Tenn. L.

Rev. 743, 756 (2024). (“A reasonable, nonarbitrary response to limited

enforcement resources is to treat some fact patterns as legal, while

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leaving others open for future decision.”) Efficient use of IRS enforcement

resources is especially important now, as the IRS lost a full quarter of its

workforce in 2025 and Congress recently passed a nearly $1 billion

budget cut that continues chronic underfunding of the agency. April 1,

2025 — September 30, 2025 Treasury Inspector Gen. for Tax Admin.,

Semiannual Rep. to Cong.,

https://www.tigta.gov/sites/default/files/reports/2025-11/TIGTA-SA-

FALL-2025.pdf; H.R. 7148, 119th Cong. § (2026); Greg Leiserson, Senate

Appropriations Bill Would Set the IRS Up to Fail When IRA Funds Run

Out, The Tax Law Center Blog (Dec. 11, 2025),

https://taxlawcenter.org/blog/senate-appropriations-bill-would-set-the-

irs-up-to-fail-when-ira-funds-run-out. The IRS’s ability to direct its

enforcement resources as needed will only grow more imperative amidst

these changes.

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CONCLUSION

This Court should affirm the District Court’s decision below.

Respectfully submitted,

/s/ Julie Ciamporcero Avetta
JULIE CIAMPORCERO AVETTA
KELSEY MERRICK
TAX LAW CENTER AT NYU LAW
110 West 3rd Street #204
New York, NY 10012
(212) 998-6002
julie.avetta@nyu.edu

February 6, 2026 Counsel for Amicus Curiae

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CERTIFICATE OF COMPLIANCE

9th Cir. Case Number(s) _25-4217_________________________________

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FRAP 32(a)(5) and (6).

I certify that this brief (select only one):

[ ] complies with the word limit of Cir. R. 32-1.

[ ] is a cross-appeal brief and complies with the word limit of Cir. R.
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Signature /s/ Julie Ciamporcero Avetta____ Date __2/6/2026______
Case: 25-4217, 02/06/2026, DktEntry: 31.2, Page 31 of 31

CERTIFICATE OF SERVICE

I certify that on February 6, 2026, a true and correct copy of the

foregoing brief was filed with the Clerk of the Court using the ACMS

system, which will send notice of electronic filing to all ACMS

participants, resulting in service upon all counsel of record.

/s/ Julie Ciamporcero Avetta
Julie Ciamporcero Avetta
Counsel for Amicus Curiae

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