Amici Rally Behind Liberty Global, Urging Tenth Circuit to Rein in Economic Substance Doctrine

What You Need to Know

Following the 10th Circuit's April 21, 2026, decision affirming the disallowance of Liberty Global’s $2.4 billion deduction under the codified economic substance doctrine, I.R.C. § 7701(o), Liberty Global filed a petition for panel rehearing or rehearing en banc on June 5, 2026. That petition has since drawn significant amicus support from various industry groups representing large taxpayers, as discussed below.

Background

On June 5, 2026, Liberty Global filed a petition for panel rehearing or rehearing en banc in the United States Court of Appeals for the 10th Circuit, seeking reconsideration of the court’s April 21, 2026, decision affirming the disallowance of Liberty Global’s $2.4 billion deduction under the codified economic substance doctrine, I.R.C. § 7701(o).

In the last month, three amici briefs in support of Liberty Global’s panel rehearing motion were filed by the Chamber of Commerce of the United States of America and the American Fuel & Petrochemical Manufacturers (together, Chamber/AFPM), the National Taxpayers Union Foundation (NTUF), and the American Forest & Paper Association (AF&PA). Together, these briefs present a coordinated challenge to the majority’s interpretation of the doctrine’s threshold relevance requirement and warn of the broad and destabilizing consequences of the decision for taxpayers and businesses alike.

Additionally, Chamber/AFPM argues that the majority’s freewheeling application of the doctrine forces businesses to operate under the specter of significant tax consequences — including strict-liability penalty of 20% to 40% on underpayments attributable to transactions lacking economic substance — for large categories of otherwise routine, Code-compliant transactions.

NTUF argues that the majority’s expansive application of the economic substance doctrine in Liberty Global conflicts with the approach taken by the Tax Court and several sister circuits, each of which has recognized that the doctrine must be applied narrowly and only where the operative statutory text makes economic reality or taxpayer motive relevant. Specifically, NTUF cites the 6th Circuit’s decision in Summa Holdings, which rejected a purpose-based approach to the economic substance doctrine. NTUF further notes that the Tax Court in Patel unanimously concluded that § 7701(o) requires a threshold relevancy determination independent of the two-pronged substantive test — an approach the majority in Liberty Global expressly declined to follow.

Finally, AF&PA argues that the current state of the law presents no fewer than four competing standards for the threshold relevance inquiry — articulated respectively by the lower court in Liberty Global, the panel majority, the dissent, and the unanimous Tax Court in Patel — and that this fragmentation underscores the urgent need for en banc clarification. AF&PA further contends that the majority’s approach raises serious due process concerns, as taxpayers who structure transactions in good-faith reliance on express Code provisions cannot reasonably be expected to anticipate that such transactions will be recharacterized under an indeterminate and inconsistently applied judicial doctrine, exposing them to strict-liability penalties without fair notice of the governing standard.

Conclusion

The amici briefs filed in support of Liberty Global’s petition for rehearing present a unified and forceful challenge to the 10th Circuit majority’s expansive reading of the economic substance doctrine. Whether the 10th Circuit grants rehearing — or the issue ultimately reaches the U.S. Supreme Court — the Liberty Global decision has already materially altered the landscape for taxpayers engaging in complex, multi-step transactions that rely on Code-compliant structures.

Pending further judicial guidance, taxpayers and their advisors should: (i) maintain robust contemporaneous documentation of the business purpose and economic substance of their transactions; (ii) ensure that a non-tax business sponsor is identified and involved in each significant transaction; and (iv) consult counsel before relying on Code provisions that produce significant tax benefits without a clear non-tax rationale, particularly in the 10th Circuit.

Our team is ready to help your organization navigate the present and ever-changing tax regulatory and enforcement landscape.

We would like to thank Abhishek Chakrabarti for his contribution to this alert.