Designated Orders: 7/3/2017 – 7/7/2017

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Today’s designated order post was written by Samatha Galvin from Denver Law School.  The orders continue to cover a variety of issues many of which we would not otherwise cover.  Keith

The Tax Court designated five orders last week and three are discussed below. The orders not discussed involved a TEFRA related issue (order here) and a motion to add small (S) case designation (order here).

Language Barrier Does Not Prevent NFTL Filing

Docket # 21856-16L, Carlos Barcelo & Vanessa Gonzalez-Rubio v. C.I.R. (Order and Decision Here)

In this designated order and decision, the Tax Court decided that the IRS Appeals Office did not abuse its discretion when it sustained a filing of a Notice of Federal Tax Lien (“NFTL”) for Spanish-speaking taxpayers, even though the taxpayers’ limited understanding of English may have created confusion about the administrative process and the IRS’s right to file an NFTL.

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The tax years involved were 2006 and 2007. The tax was self-reported and assessed after examination by the IRS for 2006, and only assessed after examination by the IRS for 2007.

Taxpayers set up a partial payment installment agreement but were informed that an NFTL would be filed to protect the government’s interest. Under section 6321, a lien is imposed whenever a taxpayer fails to pay any tax liability owed and this lien arises automatically at the time the tax is assessed. An NFTL is filed in certain circumstances to make this automatic lien valid against other creditors. Section 6320 requires the IRS to inform taxpayers of the NFTL and allow for an administrative review in the form of a collection due process (“CDP”) hearing.

Taxpayers timely requested a CDP hearing using the Spanish version of the Form 12153. In their request they asked for an installment agreement and asked that the NFTL be withdrawn. In an attachment they stated the NFTL would affect their credit and ability to find alternative employment. They also stated that their primary language was Spanish and they wanted assistance in Spanish.

The settlement officer assigned to the case sent taxpayers a letter, in English, scheduling a telephone conference for the hearing, but when the settlement officer called at the scheduled time and date the petitioners did not answer. The settlement officer made subsequent attempts to contact the taxpayers by mail and phone, including after the taxpayers had faxed her a letter, in English, requesting that the hearing be rescheduled. The record was not clear as to whether the settlement officer’s contact attempts were in English or Spanish.

After the unsuccessful attempts to hold a hearing with the taxpayers, the settlement officer determined that the requirements of applicable law and administrative procedures were met and that the filing of the NFTL balanced the need for efficient collection of taxes with petitioners’ concern regarding intrusiveness of the filing, as sections 6320(c) and 6330(c)(3) require.

Taxpayers (hereafter, petitioners) petitioned the Tax Court on the settlement officer’s notice of determination, and since their petition did not involve a challenge to liability the Court reviewed the case under an abuse of discretion standard.

At a hearing before the Court, petitioners with assistance from a Spanish language interpreter, argued that the NFTL should be withdrawn since they were in an installment agreement, but the Court held it was not an abuse of discretion for Appeals to sustain the filing of an NFTL because the partial pay installment agreement would not satisfy their liability in full. Petitioners also argued that the NFTL would affect their credit and their ability to find employment or housing if their circumstances changed, but did not offer any specific evidence to support the likelihood that their circumstances would change or that the NFTL would cause them hardship.

Respondent filed a motion for summary judgment which was supported by a declaration from the settlement officer involved in the case. Since petitioners’ did not submit any facts or offer any evidence that the determination to sustain the NFTL was arbitrary, capricious or without sound basis in fact or law, including any evidence that the language barrier may have been an issue, the Court granted respondent’s motion.

Take-away points:

  • Taxpayers often want to request a CDP hearing with respect to an NFTL filing whether or not there is a language barrier. Many taxpayers do not understand there are only a limited number of ways to have an NFTL withdrawn.
  • Although it may not have been an option for these taxpayers, the quickest way to have an NFTL withdrawn, without paying the liability in full, is to enter into a Direct Debit installment agreement. There are additional requirements, including that the liability must be $25,000 or less and paid in full after 60 months, but if the requirements are met, a taxpayer can request that the lien be withdrawn after payments are made for three months.

Pro Se Petitioner Attempts to Recover Costs

Docket # 12784-16, James J. Yedlick v. C.I.R (Order Here)

In this designated order, the parties appear to have reached a basis for settlement and the petitioner does not have a deficiency in income tax due for tax year 2013; however, petitioner indicated that he would like to recover his litigation costs (consisting of his Tax Court filing fee and then other costs, first of $60 and in a second request of $5,000).

Petitioner is representing himself pro se. On two separate occasions he submitted signed decision documents. The first time to the Court, bearing only his signature and not Respondent’s, with a letter asking the Court to “not close the case entirely” because he had planned to ask the Court about a secondary matter, but didn’t state what the matter involved.

Respondent filed a response to the letter stating that they had received a signed stipulated decision document with a written disclaimer from petitioner stating his signature was only agreeing with the decision, and he was requesting the case be ongoing, so respondent did not file them with the Court.

The Court informed petitioner that no stipulated decision had been submitted, and therefore, no decision had been entered and directed the parties to confer and file a status report regarding the present status of the case. In response to this, petitioner filed a motion to dismiss and requested litigation costs. The Court denied his motion because it is required to enter a decision, it also informed petitioner that if he wanted to recover his litigation costs he should agree to a stipulation of settled issues since doing so is required by Rule 231.

Under section 7430(a)(2), a prevailing party may be awarded the reasonable litigation costs that were incurred during a proceeding. The award of litigation costs is included in a single decision from the Tax Court, so petitioner’s attempt to agree to the decision and address the issue of costs later was not the correct way to do it.

If the signed decision documents were filed by the Court, petitioner would waive his right to recover such costs. Respondent planned to file a motion for entry of decision, and if the motion was granted, it would also prevent the petitioner from recovering litigation costs.

In order to allow the petitioner an opportunity to receive litigation costs, the Court explained the correct procedure for requesting such costs under Rule 231 and ordered petitioner to file a motion for an award of costs pursuant to the rule.

Take-away points:

  • If you wish to recover litigation costs, make sure to follow the procedures outlined in Rule 231.
  • This is a very good example of the Tax Court going above and beyond to help a pro se petitioner understand the Tax Court procedures and, hopefully, get the results he is after.

Whistleblowers Should Act Early to Protect Anonymity

Docket # 13513-16W, Loys Vallee v. C.I.R. (Order Here)

Earlier this week, we mentioned a designated order in a whistleblower case where Rule 345 was used to protect a petitioner’s identity. Here is another designated order involving a whistleblower who moved the Court to seal the case under Rule 345, but in this case the Tax Court denied petitioner’s motion on the grounds that he had already revealed his identity to the public when he filed his Tax Court petition, which also had the final determination letter from the IRS denying petitioner’s request for a whistleblower award attached to it. Section 7461 makes reports of the Tax Court and evidence received by the Tax Court a matter of public record.

The petitioner’s desire for anonymity, eleven months into the case, came about after respondent accidentally sent two informal discovery letters meant for petitioner to an incorrect address. The letters were subsequently forwarded to petitioner but had been opened and resealed with tape.

In petitioner’s motion, he stated that good cause existed to seal the case because of his general concerns that he would be harmed or suffer economic retaliation if his identity was not protected, but his motion did not provide any specific proof that he was at risk of actual harm or retaliation.

It is possible for a petitioner to proceed anonymously in a whistleblower case pursuant to the factors enumerated in Rule 345(a). One such factor is that the litigant’s identity has thus far been kept confidential. This factor was not met in petitioner’s case since his request for anonymity came eleven months after the case began. Another factor is that the petitioner must set forth a sufficient, fact-specific basis for anonymity showing that the harm to petitioner outweighs society’s interest in knowing the whistleblower’s identity. In this case, since petitioner’s concerns were general and not specific this factor was also not met.

The Court denied petitioner’s motion to seal the case and instructed respondent to take care in assuring that any mail sent to the petitioner is correctly addressed going forward.

Take-away points and interesting information:

  • If anonymity is desired in a whistleblower case it should be requested early on in the case.
  • The requirements of Rule 345 must be met before the Court will seal a case.

 

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