updated 2:11 PM CET, Oct 31, 2023

U.S. District Court rules against Monte Silver Transition Tax challenge

U.S. District Court for the District of Columbia Wikimedia Commons U.S. District Court for the District of Columbia

In a ruling that has surprised many in the expatriate American community, a U.S. District Court in Washington, D.C. has officially declared Tel Aviv-headquartered U.S. tax attorney Monte Silver and his company "lack constitutional standing to pursue their claims" – thus ending, at least for now, Silver's feisty effort to force the U.S. Treasury to take small overseas businesses owned by Americans into account in its enforcement of President Trump's Tax Cuts and Jobs Act.  

The ruling  is dated March 28  and publicly emerged on Monday, in the form of a 30-page decision by the same U.S. District Court Judge, Amit P. Mehta, who three months earlier, had denied the defendants in the case, the U.S. Internal Revenue Service et al., a request to have it dismissed.

In his conclusion, Judge Mehta said he viewed the fact that Silver had "declare[d] that 'neither [he] nor [Monte Silver Ltd.] ended up owing any [of the one-time upfront element of the] Transition Tax at all", and that they had also "failed to provide facts sufficiently specific to rise above the level of 'conclusory allegations' to show that they face ongoing or imminent future injury," they "lack standing to seek injunctive relief". 

(Silver filed a "copycat" lawsuit against another TCJA feature, its so-called "global intangible low-taxed income", or GILTI provisions, last June.)

Much of Mehta's statement consists of his picking apart the TCJA legislation and its "complicated to say the least...Transition Tax" in some detail, in order to  arrive at his finding that either no IRS assessment of the economic impact of the regulation on small businesses, as required by a 1980 law known as the Regulatory Flexibility Act (RFA), was deemed to be needed, or, regarding certain other aspects, explaining how the U.S. Treasury and other bodies had ultimately "determined and certified that the final [Transition Tax] regulations would not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the RFA."


Silver didn't immediately reply to a request for comment. However, in a message posted on the American Small Businesses For Tax Fairness Facebook page, which he administers, he seemed to commit to continuing his challenge, referring in a posting on Tuesday to "getting up when you are knocked down, losing a battle but not the war".

And while he acknowledged that the District Court's judgment was "very upsetting, esp since it was totally opposite to the judge's ruling on the motion to dismiss in [December] 2020," he also vowed that in the "near future I will:

"(i) reach out to the community for its financial support to pay legal fees as we move ahead;

"(ii) host a webinar to discuss the court ruling, and the road ahead in the two lawsuits."

In his Facebook comments – which ended with a smiley-faced emoji, in between the words "Smile" and "Monte" – Silver also noted that his crusade had had "several" victories, including "two permanent fixes in GILTI, and two temporary fixes in the Transition tax.

"Against all odds we overcame what experts said were insurmountable legal challenges, in two precedent-setting high-profile lawsuits against the most powerful of adversaries," he continued. "Pretty amazing!

"Of course, having the community equally committed has always been, and will always be, an essential element of winning.

"Your support has primarily been your voice, but at times your financial support to help pay at least a part of the legal fees was needed." 

As for the expat community's reaction to the court's dismissal of Silver's case, many are only just finding out about it, but those who did know expressed annoyance and frustration. "This is crushing, but we know it was just the first of many hurdles that stood between us and relief from the Transition Tax and GILTI," said one, on Facebook. 

"The root of the problem has been Citizenship Based Taxation, and until we’re rid of that, these problems will continue."

Some asked Silver whether he thought that another plaintiff who was able to prove more significant harm to their business as a result of the Transition Tax might stand a chance, were a follow-up suit to be launched. Silver didn't immediately respond.

Silver's lawyer, Marc Zell of Zell, Aron & Co., didn't go into detail about the case, but did tell the American Expat Financial News Journal that based on a reading of Judge Mehta's opinion, "even he evidently realizes that this landmark litigation is far from over." 

Legal action in February 2019

Monte Silver low resSilver, pictured left, filed his challenge against the Transition Tax in February, 2019, after certain asked-for last-minute changes to Trump's Tax Cuts and Jobs Act weren't made, leaving intact what he and others claimed was its harsh treatment of owners of small, non-U.S. businesses owned by Americans.

At the time he filed his lawsuit, other American expatriates who owned small businesses located outside of the U.S. were reacting with frustration, dismay and in some cases, disbelief and fury, as the implications of the legislation began to emerge, alongside reports that the government had drafted it without, it was said, taking into account what it would mean for small businesses like theirs.

The Transition Tax, also sometimes referred to as the Repatriation Tax and "Section 965", is said to hit individual owners of small businesses and partnerships located outside of the U.S. particularly hard, because many of them had been counting on their set-aside corporate profits to either expand their businesses in the short term, or to rely on later in life to fund their retirements.

Designed to go after large multinational companies owned by Americans that had been seen to have held corporate profits overseas for decades to avoid paying U.S. tax on them, the new regulations imposed a one-off tax on previously-untaxed foreign earnings of small overseas companies owned by Americans, dating all the way back to 1986.

'Copycat' legal action put on hold

Silver's "copycat" lawsuit, mentioned above, against the TCJA's GILTI provisions, had been stayed by the court last month, pending, it was said at the time, resolution of his Transition Tax matter. 

Like his Transition Tax challenge, Silver's GILTI complaint had also been based on his contention that the U.S. had failed to carry out a Regulatory Flexibility Analysis of certain of the tax's most potentially damaging  – to overseas small-business owners – elements, prior to including them in the legislation. 

Both the Transition Tax and the GILTI regulations also violate something called the Administrative Procedures Act – a federal statute that sets out how U.S. laws must be written – Silver has maintained. 

As reported, a "virtual" hearing in the case took place on March 16, which had been made available to the public to listen in on, via the court's toll-free public access line.

Related story: American small biz owner in EU: ‘Trump’s made it impossible for expats like me to compete outside the U.S.’