Some Updates to Prior Posts and Tax Procedure Conferences of Note

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In today’s post I will update readers on some past cases we have discussed and highlight a couple of conferences that relate to tax procedure and administration.

First, to the updates.

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Senyszen v Commissioner: Tax Court Holding Insufficient to Free Convicted Former IRS Employee

Readers may remember the Tax Court case of Senyszen v Commissioner. Keith discussed it twice, first in Collateral Estoppel in Civil Tax Case Following Conviction of Tax Evasion and also Motion for Reconsideration. In that case, Mr. Senyszen, a former CPA who was working for the IRS, pled guilty to 1) filing false returns; (2) tax evasion; (3) structuring financial transactions; and (4) bank fraud. The Tax Court considered the impact of his tax evasion conviction on the amount of his civil liability. The evasion charge included allegations in the information that he embezzled about $250,000 from a former business associate.

At Tax Court IRS argued that Senyszen was subject to collateral estoppel on the issue of his civil tax liability stemming from the embezzled $250,000. The Tax Court, however, found that Senyzsen had actually returned the embezzled funds and held that the IRS cannot use collateral estoppel to impose a liability where it otherwise does not exist. The IRS did not like that outcome and filed a motion for reconsideration. On reconsideration the Tax Court refined its reasoning but stuck to its guns and held that without an actual tax liability the prior tax evasion conviction was not enough to justify his civil tax liability.

As a result of the Tax Court victory, Mr. Senyszen filed a motion with a federal district court in New Jersey for relief from his criminal conviction. The court considered the pro se motion as a writ of error coram nobis, which gives the court the power to overturn a prior conviction if he could establish, in light of all the evidence, it was more likely than not that no reasonable juror would have convicted him.

Senyszen essentially argued that the district court should reconsider his conviction in light of the Tax Court finding that he had no taxable income from the embezzlement (an issue he had raised previously with the district court and Third Circuit when he tried unsuccessfully to withdraw his tax evasion plea). The district court opinion took note of the significance of the Tax Court outcome on the evasion charge:

The Tax Court’s finding certainly contradicts a portion of the second count of the Information, which alleged tax evasion as a product of “embezzled taxable income from the sale of real estate.”…To that extent, the Court acknowledges that the Tax Court’s decision conclusively establishes that Petitioner is not guilty of evading taxes through the embezzlement of taxable income in 2003.

The district court did not go as far as Senyszen wanted:

[H]owever, that is not all that the Information alleges. Notably, the first paragraph under the second count reads: “The allegations contained in paragraphs 1 through 10 of Count One of this Superseding Information are repeated, realleged and incorporated by reference as though fully set forth herein.” In other words, Petitioner’s conduct under the first count was also sufficient to establish his guilt under the second count. The Tax Court confirmed: “[Petitioner’s] preparation of a fraudulent return on behalf of [the corporation] were themselves sufficient grounds to justify his conviction for tax evasion.”

The upshot is that for now Senyszen’s 36 month sentence stands. The court’s power to overturn a conviction is narrow; the Tax Court holding only went so far and did note that the Senyszen’s preparation of a false return on behalf of the corporation was sufficient to justify the evasion conviction.

For more detail on the opinion check out Jack Townsend, who in his Federal Tax Crimes blog has discussed the Tax Court case, and he also reports on the case’s latest chapter. Jack notes that the oft-litigating Senyszen has filed a motion for reconsideration and suggests that another appeal is likely.

More on the Secret Subpoena in Tax Court

The law firm of McDermott Will & Emery has an excellent tax controversy practice and that group publishes a blog called Tax Controversy 360. Last week Andy Roberson, a PT guest poster, partner in the firm’s tax controversy group, petitioner’s counsel in the important penalty decision in Rand which Keith discussed in Government Drops Appeal in Rand Case, and prior winner of the ABA Tax Section Janet Spragens Award for his commitment to pro bono, discussed the Tangel case. In his post he noted the differing approach Judges Chiechi and Holmes have on whether parties have a notice requirement before service of non-party subpoenas for the production of documents, information or tangible things, a topic I also discussed last week. Andy offers some practical tips for overcoming the surprise that is the harm from allowing a party to issue a subpoena without notifying the other side:

Until the Tax Court adopts a uniform rule against “secret subpoenas,” taxpayers should routinely and regularly issue discovery requests on the IRS seeking: (1) a list of all third-party contacts, including the documents sent and received; (2) copies of all subpoenas, including a copy of all documents sent and received; and (3) a list of the dates on which the third-party contacts occurred, including phone calls and meetings. These requests should be made at the beginning of every case, and it should be stated that the requests are continuing in nature.

Conferences on Tax Administration and Procedure of Note

There are some interesting tax procedure conferences that Keith and I are involved in, one very near term and another in March of next year.

 Low Income Taxpayer Workshop

This afternoon in Washington at the offices of McDermott Will & Emery the ABA Tax Section is cohosting a low income taxpayer representation workshop that will cover important developments, property tax issues, criminal tax matters and health insurance marketplace issues. The session includes Keith and Andy Roberson talking about their so far unsuccessful actions seeking to get the IRS to abate the penalties made against taxpayers that the IRS agrees were wrongfully made based on the Tax Court decision in Rand (for more on Counsel guidance after the 2015 PATH legislation see Keith’s January 2016 post here), Tax Court Special Trial Judge Judge Diana Leyden, Harvard Tax Clinic fellow Caleb Smith and Vermont Legal Aid’s Christine Speidel, Treasury’s Rochelle Hodes, and many others.

Second International Taxpayer Rights Conference

This March in Vienna the Institute for Austrian and International Tax Law at Vienna University of Economics and Business is hosting the second international taxpayer rights conference. It is sponsored by Tax Analysts and is convened by the US’s National Taxpayer Advocate. The first international taxpayer rights conference in 2015 brought together many administrators, practitioners and academics. It was a terrific conference, with panelists discussing issues like transparency, privacy, rights to administrative and judicial appeal, the relationship of trust to ensuring tax compliance and the role of ombuds offices. The above link takes you to the 2015 proceedings. Keith and I were speakers at that conference. If you would like to read our conference papers, Keith wrote about tax collection and taxpayer rights which you can see here; I discussed how IRS can learn from nontax scholars who have looked at the ways that administrative agencies interact with low-income individuals; that paper is here.

The second conference is accepting registrations at the conference website; the agenda includes the following topics:

  • Taxpayer Rights in Multi-Jurisdictional Disputes
  • Privacy and Transparency in Tax Administration
  • Access to Taxpayer Rights: The Right to Quality Service in Today’s Environment
  • Transforming Cultures of Agencies and Taxpayers
  • Impact of Penalty Administration on Taxpayer Trust

I will be speaking about taxpayer rights with a focus on refundable credits and am in the process of writing a paper on that important topic.

I was reminded of the importance of taxpayer rights as last week I watched parts of Senator Harry Reid’s farewell speech to the Senate. It was a personal and deeply moving speech, touching on topics like the suicide of Senator Reid’s father and the stigma of growing up poor in Searchlight, Nevada. As part of his talk Senator Reid discussed some of his legislative highlights. The first item he mentioned was his role, along with Senators Pryor, Grassley and others, in getting the first Taxpayer Bill of Rights enacted. Taxpayer rights have come a long way since that legislation but there is considerable room for improvement. Conferences like the International Taxpayer Rights Conference help situate some of the issues and identify common global challenges and best practices.

Leslie Book About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

Comments

  1. Bob Kamman says:

    Before waltzing off to the world pastry capital to exchange essays on global perspectives, the National Taxpayer Advocate should consider whether the time and effort should instead be directed at addressing the issues described recently in a scathing report from the Treasury Inspector General for Tax Administration.

    Treasury has a web-based system, JAMES, for tracking problems identified by TIGTA, GAO and other investigators. According to TIGTA, “this report receives a great amount of attention from senior management across the Treasury Department, including the Deputy Secretary. In addition, the IRS has developed guidance and assigned responsibilities to help ensure that its corrective actions are completed. For example, the IRS Commissioner has the overall organizational responsibility to ensure that recommendations are completed, corrective actions are taken in a timely fashion through independent verification, and that validation occurs. Based on the IRS’s procedures, it must notify TIGTA if it plans to significantly revise or cancel a corrective action, and TIGTA must consent to the change.”

    What TIGTA found might best be described as an attitude from TAS that “we don’t need no stinkin’ corrective action tracking system.” It would be kind to describe this situation not as “lying” but simply “poor management.” Some members of Congress are trying to impeach the NTA’s boss for lesser transgressions.

    “TAS had not completed seven corrective actions as reported, did not substantiate that three corrective actions had been completed, and implemented three corrective actions after the completion date reported,” TIGTA found. “As a result, the TAS incorrectly reported that 13 corrective actions had been completed. Examples of these actions include . . . ensuring that Taxpayer Advocacy Panel (TAP) members are in good standing with the IRS, and ensuring that Low Income Taxpayer Clinic (LITC) grant recipients expend funds appropriately.”

    TIGTA asked for an explanation but got only weak excuses, if any. “TAS management agreed that some actions were closed prematurely on the JAMES, but they did not know why this occurred.

    “The TAS agreed that some actions should be reopened on the JAMES to ensure that corrective actions are completed. The National Taxpayer Advocate (NTA) also confirmed that the TAS did not retain documents showing whether it obtained written approval from TIGTA (as required) prior to taking alternative actions to address our findings. While TAS management contends the alternative actions adequately addressed our recommendations, we do not agree.”

    At one point the Lois Lerner Defense was invoked (“She doesn’t work here anymore.”) This finding reflects badly not only on the Taxpayer Advocate Service, but on Low-Income Tax Clinics, likely not hotbeds of corruption but now tainted with the suggestion that no one at IRS keeps track of their grants.

    “For example, the TAS reported that the LITC Program Office had developed and implemented procedures to follow up with clinics that did not timely file required reports. However, the information it provided did not establish that these procedures were implemented when the corrective action was closed. Management stated that because the former JAMES Audit Coordinator for the TAS retired several years ago, the supporting documentation for some corrective actions was unavailable.”

    Housekeeping first. Then, perhaps, some struedel for dessert.

    The TIGTA report is at https://www.treasury.gov/tigta/auditreports/2017reports/201710005fr.pdf

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