An Update on the Center for Taxpayer Rights

It’s been a little over a year since the Center for Taxpayer Rights (CTR) began operations, and Keith, Les and I thought it might be a good time to give a short update on the Center’s activities over the last fifteen months.  Soon there will be a new “button” on PT’s homepage, which takes you to the Center’s “donate” webpage … but more on that later.

Visitors to the Center’s website can learn about the International Conference on Taxpayer Rights, sign up for the Taxpayer Rights Digest, and learn about the amicus briefs filed on behalf of the Center by the Harvard Law School Federal Tax Clinic and others.  We are committed to raising taxpayer rights issues in the courts via amicus briefs; the Center and LITCs are particularly well-situated to explain the impact of various holdings on low and moderate income taxpayers, analyses and consequences that might not otherwise be raised in litigation.


With respect to the International Conference on Taxpayer Rights, because of the pandemic we now have two conferences scheduled for 2021 – one in May 2021 which we are hoping we can physically convene in Athens, Greece, and one in October 2021, in Pretoria, South Africa (which was originally scheduled for this past October, but oh well, the pandemic intervened).  The theme of the Athens conference is Quality Tax Audits and the Protection of Fundamental Rights; its agenda will be published in December.  The theme of the Pretoria conference is Taxpayer Rights, Human Rights: Issues for Developing Countries; that agenda is now up for viewing on our website!  Both of the 2021 conferences will be live-streamed, so we can expand our reach, not just because of the pandemic but also because we want more folks from less affluent countries, and young scholars or students, to be able to participate, albeit virtually.

Because we had to postpone the 2020 Pretoria conference, we decided to launch Tax Chat!, a monthly series of conversations between myself and folks from an array of disciplines who are working in the field of tax and tax administration.  So far, we’ve had three Tax Chats!  Our topics have included the International Observatory on the Protection of Taxpayer Rights; Taxpayer Rights, Human Rights, and Achieving Sustainable Development Goals; and the Anthropology of Tax.  All of the Tax Chats! are recorded; you can access them on the Center’s YouTube channel.  They really are interesting, and they really are a chat – no power points allowed, just a good conversation about tax.

You can learn about all this and get notifications about upcoming events by signing up for the Taxpayer Rights Digest, the Center’s newsletter.  We promise not to clutter your email box; we’ll only communicate when there actually is news.

The Low Income Taxpayer Clinic Support Center When I was executive director of The Community Tax Law Project, I hoped to establish a national resource center for the growing Low Income Taxpayer Clinic movement, but my appointment as the National Taxpayer Advocate sidetracked that plan a bit.  Well, now we’re back on track – the Center has established the Low Income Taxpayer Clinic Support Center, which supports and encourages the expansion of Low Income Taxpayer Clinics (LITCs) domestically and internationally.  The idea for the LITC Support Center borrows on the practice in other areas of poverty law, which have established national support centers, including the National Consumer Law Center, the National Immigration Law Center, and the National Homelessness Law Center.  An LITC Advisory Board, drawn from the diverse LITC community and including representatives of academic, legal aid, and community-based LITCs, advises the Center on the type of support or research activities that LITCs could benefit from, including the development of training for new volunteers and conducting surveys to determine the needs of low income taxpayers. 

Perhaps the most significant aspect of the LITC Support Center’s activities is the establishment of the CTR Litigation Strategy Group.  This group, with about forty members, meets weekly to discuss ongoing casework and litigation and to identify areas of law affecting low income taxpayers that might be ripe for challenge.  The goal of the CTR Litigation Strategy Group is to help the LITCs to operate along the lines of a national law firm, working together throughout the circuits to litigate taxpayer rights and other issues affecting low income taxpayers.  We started by focusing on aspects of the IRS’s implementation of Economic Impact Payments, which, as readers of PT are well aware, drew several significant challenges, including on behalf of incarcerated individuals; US citizen spouses and children of undocumented persons; and federal beneficiaries with dependent children.  Attorneys for the plaintiffs in many of these cases are members of the CTR Litigation Strategy Group.  On our weekly calls, we also have met with attorneys raising procedural due process issues in the context of federal benefits programs; we are identifying and developing potential procedural due process challenges in tax litigation.  So … stay tuned! 

Now, here is our “ask” …..

As readers of PT know, LITCs are central to ensuring two key taxpayer rights – the right to retain representation, and the right to a fair and just tax system.  By providing pro bono representation of low income taxpayers and educating low income taxpayer about their rights and responsibilities, LITCs ensure that tax disputes are decided on the merits and not by default.  Moreover, through litigation of cases, comments on regulations and IRS notices and initiatives, and articles, research, and conferences, LITCs ensure the tax law takes into consideration the facts and circumstances of low income and other vulnerable populations, not just the affluent or corporations.

Today, there are over 130 LITCs throughout the United States, receiving a total of approximately $12 million in IRS grants annually pursuant to IRC § 7526.  To receive an IRS grant, LITCs must demonstrate a dollar-for-dollar match, in the form of either cash or in-kind contributions.  One of the challenges for many LITCs, however, is the ability to raise matching cash funds.  This is particularly the case for LITCs serving taxpayers in rural areas.  While donated volunteer attorney, CPA, and Enrolled Agent time can count as an in-kind match, for many clinics located in rural states, there may be few volunteer tax professionals available.

To address these unmet needs, in 2021, the Center plans to establish the LITC Pro Bono Referral Network, which will build upon existing informal efforts for recruiting attorneys nationally and creating a database of willing pro bono volunteers with tax expertise.  The Referral Network will also identify LITCs that are serving rural or vulnerable populations in need of pro bono attorney expertise not available in their service areas. The Network’s website will enable LITCs to request pro bono support, identifying the specific issue and the expertise required, and the Network will then connect the LITC to a qualified and available attorney.  Attorneys who are uncomfortable litigating can sign up to provide technical advice and assistance to LITCs or can volunteer to help with training (virtually).

The Network will not only enable the provision of direct assistance to low income taxpayers in tax disputes with the IRS but it will also generate matching funds for the LITCs so they can request additional funding from the IRS.  This additional funding, in turn, can be used to improve the direct delivery of service to low income taxpayers by funding more staff attorney time at the LITCs.  A win-win for everyone.

This is where we need your help – up until now, the Center has run as an all-volunteer organization.  But as we launch the LITC Pro Bono Referral Network, we need to contract programming services and secure data storage, and more importantly, we need a staff person to do the volunteer vetting, matching, answering questions, and general program duties for the Network.

So.  Please help us expand access to legal assistance for low income taxpayers – we need your financial support to help us build the Network, and we’ll later enlist your volunteer efforts to protect low income taxpayers’ rights to retain representation and to a fair and just tax system.  You can donate to the Center here.

Thank you!

Subpoenas in the Virtual Tax Court Age: Designated Orders 9/28/20 to 10/2/20

The focus for this blog post will primarily be about how the Tax Court is handling subpoenas in this age of virtual trials. There are some miscellaneous designated orders I will also touch on for the week I monitored. Also for those of you keeping track – I also monitored the week of August 31 through September 4, but did not write a report because there were no designated orders submitted that week. Perhaps the judges were ready for the Labor Day holiday?

Subpoenas and Virtual Tax Court

Docket Nos. 14546-15, 28751-15 (consolidated), YA Global Investments, LP f.k.a. Cornell Capital Partners, LP, et al., Order available here.

I was listening to the UCLA Extension’s 36th Annual Tax Controversy Conference’s panel on “Handling Your Tax Court Matter in the Covid-19 Environment” on October 20. The panel was moderated by Lavar Taylor (Law Offices of Lavar Taylor) and panelists were Judge Emin Toro (U.S. Tax Court), Lydia Turanchik (Nardiello and Turanchik), and Sebastian Voth (Special Trial Counsel, IRS Office of Chief Counsel). The topic turned to subpoenas and Ms. Turanchik cited the YA Global order in question as being a good example of the Tax Court’s, specifically Judge Halpern’s, approach to subpoenas in our virtual Tax Court era.


YA Global made a previous appearance in designated orders write-ups concerning scheduling issues in the pandemic. Now, the issue is that that the IRS requested an order setting the cases for remote hearing and a notice of remote proceeding in order to provide a return date and location for subpoenas duces tecum that they would like to issue. The petitioners requested a protective order precluding the IRS from issuing the subpoenas.

First of all, the Tax Court has a document with instructions on subpoenas for remote proceedings. With respect to subpoenas for production of documents from a third party, if a Tax Court litigant needs to obtain documents from a third party for use in a case set for trial, the litigant should, no later than 45 days before the trial session, file a motion for document subpoena hearing. If the motion is granted, the judge will issue an order setting the case for a remote hearing and issue a notice of remote proceeding. The hearing date will be approximately two weeks before the first day of the trial session. The litigant should immediately serve the subpoena for documents on the third party. The third party may voluntarily comply with the subpoena by delivering the documents and the Court will cancel the hearing. Otherwise, the third party may (assuming the party does not object to the subpoena) elect to present the relevant documents on the day of the hearing.

In the YA Global order, the IRS followed that procedure – their motion requested an order setting these cases for a remote hearing and a notice of remote proceeding. The notice then provides the date and location for the subpoenas duces tecum that the IRS would like to issue. That motion, however, triggered a motion from the petitioners for a protective order on the grounds that the IRS is trying an end run around the discovery deadline that the parties agreed to (May 1, 2020, which the Court incorporated into its pretrial order).

Tax Court Rule 147 is the rule on subpoenas, but we need some guidance on how it applies to this situation. Rule 147(d) subpoenas are time-bound by the period allowed to complete discovery, but Rule 147(b) subpoenas are not limited in the same way. Those subpoenas command the person who receives the subpoena to appear at the time and place specified (a hearing or trial). Does that mean a 147(b) trial subpoena allows a party to have additional discovery time?

There is relatively little authoritative Tax Court precedent regarding claims of misuse regarding 147(b) trial subpoenas. In Hunt v. Commissioner, the Court quashed subpoenas issued on the eve of trial for large quantities of documents not reviewed during discovery as impermissible. There, the Court stated “respondent simply cast an all-encompassing net in the search for information with which to build a case. Rule 147 was not intended to serve as a dragnet with which a party conducts discovery.”

There is, instead, larger authority in the Federal Rules of Civil Procedure (regarding civil actions and proceedings in United States district courts). In fact, when the Tax Court set up Rule 147, the goal was to have a rule governing subpoenas substantially similar to Fed. R. Civ. P. 45 (“Subpoenas”). Rule 45 has been subsequently amended to authorize the issuance of subpoenas to compel nonparties to produce evidence independent of a deposition. This is a different direction from Tax Court Rule 147.

Yet, it “is black letter law that parties may not issue subpoenas pursuant to Federal Rule of Civil Procedure 45 ‘as a means to engage in discovery after the discovery deadline has passed’” (Joseph P. Carroll Ltd. v. Baker). To expand and explain, Moore’s Federal Practice – Civil states “once the discovery deadline established by a scheduling order has passed, a party may not employ a subpoena to obtain materials from a third party that could have been procured during the discovery period.”

In reviewing the IRS actions in these cases regarding the subpoenas, some fall in the category of opportunities passed up for discovery and others allude to a purpose to learn facts or resolve uncertainty. The Court states those subpoenas fall under the current Tax Court Rules for discovery, which apply appropriately here. Overall, the Court denies the IRS motion as the subpoenas would be used for an inappropriate purpose, the conduct of discovery.

Only one subpoena is excepted from the denied subpoenas. This subpoena is intended to facilitate authorization to view and potentially use documents already produced by that individual that he may not have been authorized to produce previously. The proposed IRS subpoena is to rectify the individual’s possible lack of authority in producing documents that the IRS already has in hand and may use (presumably at trial). The Court is allowing this subpoena as an appropriate use of a trial subpoena. The Court then grants the IRS motion to set a remote hearing and notice of remote proceeding with regard to that one third party subpoena.

Miscellaneous Cases

Another Scattershot Petition

  • Docket No. 13130-19, William George Spadora v. C.I.R., Order available here.

In my last designated orders post, I wrote about scattershot petitions. Bob Probasco made a comment and I sent him a follow-up email. His theory is that these scattershot petitions may actually be a promoter scheme for tax protestors to get the dismissal in Tax Court and then file a refund suit in district court or the Court of Federal Claim with the argument that “the IRS has no jurisdiction” and the usual result of no success in that court either. That may be a possibility as there seem to be several such petitions filed in the Tax Court.

Which brings us to Mr. Spadora (whatever his motivations are) as his petition refers to tax years 2000 through 2018.  The IRS checked and there were notices of deficiency for 2004 and 2010-2012 only, but all of those were expired.  Instead of immediately granting the IRS motion to dismiss, Judge Gale strikes the case from the San Francisco calendar scheduled for October 19. The petitioner has until November 18 to respond with his reasoning why the Court has jurisdiction and to submit the applicable notices of deficiency or determination.

A Day Late and a FedEx Receipt Short

  • Docket No. 13949-19, Artur Robert Smus v. C.I.R., Order of Dismissal for Lack of Jurisdiction available here.

Mr. Smus filed his Tax Court petition 91 days after the Notice of Deficiency was sent by the IRS. He was supposed to file a response to the IRS Motion to Dismiss for Lack of Jurisdiction, but did not. He was also supposed to appear at the remote hearing for Denver to explain at the hearing regarding the motion to dismiss. Mr. Smus did not appear so the IRS Counsel explained to the Court about the attempts to reach him and why the motion should be granted. The Court tried to contact Mr. Smus, but they were unsuccessful.

What did Mr. Smus do? He electronically filed his response to the motion ten minutes prior to the scheduled remote hearing. In his response, he states he petitioned the Court on the evening of July 23, 2019 (day 90), but FedEx did not ship out the package until the morning of July 24 (day 91). He is not able to find his FedEx receipt. Because of his late response and failure to appear at the hearing combined with admitting the mailing occurred on the 91st day, the Court grants the motion to dismiss for lack of jurisdiction.

My advice? Do not wait until the last minute to file the Tax Court petition. If you are close to the deadline, you have to make sure the filing gets done absolutely right.

How Old Is Old and Cold?

  • Docket Nos. 27268-13, 27309-13, 27371-13, 27373-13, 27374-13, 27375-13 (consolidated), Edward J. Tangel & Beatrice C. Tangel, et al., v. C.I.R., Order available here.

The Tangels appeared in a prior designated orders post I wrote concerning how the IRS was nonresponsive to discovery requests in this case about the research credit. This time, they are seeking to seal 2,472 trial exhibits. 2,417 relate to “Terminal High Altitude Area Defense” while the other 55 relate to “Capstone” (no, not Treadstone). About 75% of the first group of exhibits have a warning stamp concerning technical information where the export is restricted by federal law. The petitioners argue that disclosure of the proprietary information will irreparably harm their business, violate trade secret protections, and may impact national security.

In the Court’s analysis, there is not enough evidence to support those claims. The motion for protective order is two pages long and without supporting affidavits – a party must provide appropriate testimony and factual data to support claims of harm resulting from disclosure and not rely on conclusory statements.

Next, the tax years at issue are 2008-2010 so the documents in question are presumably at least 10 years old. Sensitive documents lose saliency over time and become “old and cold.” In other cases, documents that were older than certain years (examples: 5, 7, or 10 years old) were excluded from being confidential information. The petitioners have not addressed how the age of the documents affects their confidential nature.

The Court was inclined to believe that a protective order may be necessary, but not for all 2,472 documents. The Court proposed that the parties work to submit a joint protective order or to submit their own separate proposed protective orders if they cannot agree. The current motion for a protective order from the petitioners was denied.

When Does an Innocent Spouse Request Stop a Levy

The case of Landers v. United States, 3:20-cv-00455-G (N.D. Tex. 2020) raises the issue of the timing of the injunction against collection vis a vis the completion of a bank levy.  This case appears to break ground not previously broken, as Ms. Landers seeks to undo the levy because she filed her innocent spouse request during the 21-day period the bank was holding the funds in the joint account after receipt of the levy.  The court decides that the language stopping collection resulting from the filing of an innocent spouse request does not stop the bank levy during the 21-day period.  The opinion goes through an analysis of the Anti-Injunction Act to get there.

For those interested in a deeper dive on the issue presented by the case and the arguments made by the parties you can find the following case documents: motion to dismiss; affidavit of Revenue Officer; plaintiff’s brief; IRS reply; and plaintiff’s sur reply.


Ms. Landers and her ex-husband jointly filed a 2016 return at the end of 2017.  The IRS assessed a liability of $742,728 against them jointly and severally in January of 2018.  Although the opinion does not say this explicitly, I assume from the timing of the assessment that the IRS assessed a tax shown on the return.  The couple divorced on September 14, 2018.  On December 5, 2019, the IRS issued a levy to a bank where Ms. Landers had an account owned solely by her.  The bank received the levy notice on December 11 which started the 21 day holding period after a bank levy.  On December 20, 2019, Ms. Landers submitted a request for innocent spouse relief.  At the conclusion of the 21-day period, the bank turned over all of the money in her account as of December 11.

She filed this action on February 24, 2020 seeking relief, arguing entitlement to an injunction for return of the funds because the IRS should have ceased the levy upon the filing of the innocent spouse relief request until the conclusion of the innocent spouse case pursuant to IRC 6015(e)(1)(B)(i). This subsection provides:

no levy or proceeding in court shall be made, begun, or prosecuted against an individual making [an innocent spouse claim] . . . for collection of any assessment to which such election or request relates until the close of the 90th day referred to in subparagraph (A)(ii) . . . .

Additionally, she argued that she deserved declaratory or injunctive relief under 28 U.S.C. 2201 and 5 U.S.C. 702 for harm caused by the action and she deserved mandamus relief under 28 U.S.C. 1361 requiring the IRS to return the money acquired through the levy.

Injunctive Relief

The IRS filed a motion to dismiss for lack of subject matter jurisdiction citing the Anti-Injunction Act (AIA) creating a situation of dueling injunctive provisions.  The innocent spouse provisions contain one of the enumerated exceptions to the AIA in subsection 6015(e)(1)(B)(ii) which provides:

Notwithstanding the provisions of section 7421(a) [the AIA], the beginning of such levy or proceeding during the time the prohibition under clause (i) is in force may be enjoined by a proceeding in the proper court[.]

The court states that it must decide two questions: (1) what is the scope of the exception to the AIA provided in the innocent spouse provision and (2) do the facts of Ms. Lander’s case fall within the scope of the innocent spouse exception to the AIA.  It then states that the innocent spouse exception to the AIA does not provide an exception upon which she can rely in these circumstances.

The parties focused extensively on the phrase in (B)(i) “no levy or proceeding in court shall be made, begun, or prosecuted.”  The court, however, notes that the discussion of the language in (B)(i) must be tied into the language in (B)(ii) to determine if the court has jurisdiction to enjoin the IRS from this collection activity.  It finds that the phrase “the beginning of such levy” in (B)(ii) crucial to its determination of jurisdiction.

The court noted the absence of case law interpreting the phrase and resorted to rules of statutory construction.  It finds that (B)(ii) allows taxpayers to seek a preemptive injunction against the IRS starting the levy process but does not provide an indefinite right allowing an injunction after a levy has issued.  I find this peculiar.  What taxpayer wants to bring a suit to enjoin the IRS from issuing a levy before it does so?  Such a construction would suggest taxpayers should preemptively bring injuction suits after filing innocent spouse requests rather than rely on the statute to stop such actions.  Courts would not look kindly on such suits.

The logical conclusion of the court leaves taxpayers helpless if they do not preemptively sue to enjoin the IRS before it issues a levy.  Ms. Landers points this out to the court arguing that its interpretation makes the injunction in the innocent spouse provision toothless.  In answer the court says it seeks to read both the innocent spouse provisions and the AIA in such a way as to protect the purposes of both statutes.  It also notes that the AIA provides a broad restriction requiring strict enforcement.  It points out that Ms. Landers had more than a year after her divorce before she filed her innocent spouse request and she received notice of the intent to levy giving her a further, more specific opportunity to act before she did.  She had a broad window for seeking an injunction and missed it.  It concludes the first section of its opinion by providing:

Without deciding when exactly the levy began (and the court’s power under subsection (B)(ii) expired), the court concludes that Landers was long past that point when she sought injunctive relief, more than a month after the funds had already been turned over to the government by ICU. Therefore, the court is without subject matter jurisdiction over Landers’ claims for injunctive relief, and they must be dismissed.

Mandamus Relief

The court relies heavily on its decision regarding the injunction to reach its conclusion here.  It points out that the mandamus provisions cannot override the AIA by obtaining injunctive relief in the guise of a mandamus.  It basically dismisses this action because it attempts to end run the AIA, which the court believes serves to prevent injunctive relief here.

Declaratory Relief

The court points out that the exception in the Declaratory Judgment Act (DJA) for taxes intended to leave the Flora rule intact requiring full payment before seeking a return of money.  It looks to the case of Cohen v. United States, 650 F.3d 717,729-31 (D.C. Cir. 2011) to find an answer to the jurisdictional issue raised here.  In Cohen the court found that the relief sought was simply a declaration with no effect on the assessment and collection of taxes.  It finds that to the extent Ms. Landers seeks merely a declaration her case closely mirrors the Cohen case.

In other words, the DJA does allow courts to issue declarations regarding procedural issues so long as the declaration does not run afoul of the AIA by interfering with the assessment and collection of taxes. Taxpayers may seek a declaration of their procedural rights, but that declaration cannot be used to bootstrap a right to injunctive relief.

The court finds that it has jurisdiction over her DJA claim as long as she only seeks a declaration that the IRS followed proper levy procedures and does not seek an injunction or return of the levy proceeds.

Obtaining a statement that the IRS did not follow procedures but can still keep the money may not help Ms. Landers very much.  If she wins her innocent spouse case, will the IRS return the money at that point or will it require her to finish paying off the balance of the large assessment before she can sue for refund.  If she seeks a refund will the IRS argue that the district court has no jurisdiction over that case as it has done in the past despite the contrary arguments it has made to appeals courts.  Ms. Landers’s path to recovery of the levy proceeds remains unclear.  Simply obtaining a statement that the IRS did not properly follow procedures will not put food on the table.  This cases raises interesting questions.  We may not have seen the last of it.

Day 2 of Collection Due Process Summit Initiative

Yesterday, we reported on the discussions of the the communication and administrative process issues related to Collection Due Process (CDP) that occurred in the 2019 CDP Summit.  Today, we continue the series with a report on the litigation issues presented by CDP as discussed in that summit.


Breakout: Exploring CDP Rights and Procedures within Judicial Proceedings

Panelists: Keith Fogg, Christine Speidel

Focused on improving effectiveness and efficiency for all participants in Tax Court matters, this session will analyze common petitioner and respondent approaches to litigating CDP in Tax Court. The session will explore opportunities to increase the number of taxpayers who exit litigation with a sustainable plan to collect the correct amount of tax due. Participants will discuss the Tax Court’s authority and limits to achieving a result satisfactorily resolving the issues between the parties; typically, a collection solution for taxpayers litigating in good faith.


Filing the CDP Request.

  • LITCs encountered the problem of the IRS offering an equivalent hearing where the taxpayer timely filed a CDP request with the IRS but sent it to the wrong address. In both cases, the jurisdictional issue was not litigated because the taxpayer’s OIC was accepted.
  • In Webber v. Commissioner, the IRS conceded that the taxpayer who accidentally used the wrong IRS address was entitled to a CDP hearing.
    • IRS Chief Counsel reported that they are working on an administrative solution within the IRS. They are working on two fronts: (a) changing the CDP notice to be more clear; and (b) granting CDP hearings if the taxpayer sends the request timely to any IRS office.
  • Question raised, could IRS accept CDP requests by e-file?
    • Clinicians should continue to litigate the issue presented in Webber, and also look out for good equitable tolling cases, where the CDP request was made late but for a very good reason.
      • E.g., reliance on bad advice from the IRS. The merits of the underlying case must also be good in order for it to make a compelling equitable tolling case.

Filing the Tax Court petition

  • Clinicians should continue to litigate equitable tolling in the circuit courts (only the 9th Circuit has conclusively ruled against equitable tolling here). The case must have compelling equitable circumstances and good merits.

Timing; Motions for Summary Judgment

IRS may expedite currently not collectible cases where a CDP hearing is requested.

  • Attendees mentioned instances in which an IRS employee (not from Appeals) responds to CDP requests by offering currently not collectible status if the taxpayer withdrew their request for a hearing. However, taxpayers do not always understand what they’re giving up (i.e., CDP hearing, Tax Court review).
    • Some attendees believe this practice continues, others thought it had stopped.
    • The working group should investigate whether this still happens and whether it violates taxpayer rights.

The group considered whether there should be an expedited track for certain CDP cases in Tax Court.

  • May be based on economic harm, including taxpayers expecting refunds and IRS concerns about pyramiding.
  • The group considered proposing criteria in the context of the Tax Court’s docket, which includes other cases that might merit expedition, like passport cases.
    • If there were a Tax Court rule allowing either party to request expedited review on economic harm grounds, could that include passport cases?
    • Is this a legislative issue rather than a Tax Court rules issue?

Could the Office of Chief Counsel review CDP petitions earlier and would that expedite these cases?

  • Some Counsel offices do review the case thoroughly as they prepare the Answer, and they do reach out to taxpayers to suggest a remand where appropriate. It would be good to ensure that is nationally uniform practice.
  • Although some in the Office of Chief Counsel are proactive at the Answer stage, in many cases the IRS does not file a motion for summary judgment until shortly before the deadline (60 days prior to the calendar call). The Tax Court could amend its rule to move up the motion for summary judgment filing deadline in CDP cases. The Office of Chief Counsel could also make a policy change to encourage earlier filling of motions for summary judgment.

Could petitioners’ counsel file early motions for summary judgment? What would need to happen for this to be possible?

  • The parties would need to agree on the administrative record and identify if there are any disputes about what evidence the Court can consider.
  • Something to keep in mind regarding an early motion for summary judgment is how the Tax Court works its cases. When a case is not on a trial calendar yet, the case is not assigned to a trial judge. The Special Trial Judges take turns reviewing motions that come in on those cases. If it appears that a hearing is needed, they need to ask permission from the judge presiding over the next calendar in the petitioner’s city whether they can add the case to their calendar.

Could expedited CDP cases be heard by video conference?

  • Some Tax Court judges may prefer in-person hearing/testimony.
  • Though no one in the group could recall seeing video conferences used, petitioners might prefer a virtual method that was expedited over waiting for trial.

The group briefly discussed the use of FOIA versus requesting the administrative file from Counsel.

  • Several clinicians use both tools and get different results from each.
  • Counsel does not like taxpayer representatives using FOIA while a case is pending, but if they want to stop the practice they need to address the problems that exist with getting the full administrative file from them.
  • Concerns about obtaining the administrative file by members of the group include inappropriate redaction by Counsel of the record produced; difficulty in obtaining the administration file from Counsel’s office; failure by Counsel’s office to provide a complete administrative record to settlement officers; and Counsel’s office including hearsay in the administrative record, such as in the settlement officer’s declaration.

How could the administrative record be established early in CDP cases?

  • Petitioners’ counsel could send a Branerton letter soon after the pleadings close, requesting the administrative record and a conference to reach agreement on the contents of the record.
  • Tax Court judges could individually implement a standing order requiring the parties to agree on the administrative record and jointly certify it to the court by X date, or otherwise file their proposals/objections.
    • Judge Leyden has a standing order that she uses to efficiently handle 6751(b) issues in deficiency cases that include a 6662 penalty: 60 days prior to trial, she asks the IRS to let her know if they have proof of supervisory approval and, if not, to explain why it’s not needed. This clears out many issues prior to calendar call. A standing order akin to Judge Leyden’s in the context of administrative records would also streamline the trial process. 
  • The Tax Court could adopt a rule requiring Respondent to propose the administrative record within 30 days of filing the answer and giving a period of time for Petitioner to respond.
    • This could parallel or draw from the procedures that US district courts have implemented to manage litigation.
    • This process would set up either party to make a motion for summary judgment as the next step in the case.

Verification vs Merits

  • Petitioner’s counsel should ensure they raise any potential verification issues in the petition.
    • The group did not see the verification issues in petitions very often.
    • Include manager approval of penalties.
    • Include the Marlow issue – IRS cannot rely solely on its computer system when taxpayer raises a credible dispute to the information contained in the system (e.g., that Statutory Notice of Deficiency was correctly mailed).


Keith brought up the Brown v. Commissioner case, in which there were 3 remands to a settlement officer to consider a merits issue that the settlement officer did not understand how to handle.

  • Why couldn’t the Office of Chief Counsel simply resolve the merits of the liability?
    • There was a general consensus among attendees that Chief Counsel’s office could settle the underlying liability in CDP as they do in deficiency cases, as detailed within the Chief Counsel Directives Manual.

In addition to settling the merits when they are properly at issue, many attendees thought it would be helpful if the Office of Chief Counsel were empowered to settle CDP collection alternative cases.

  • The IRS is not currently set up to do this and it would take quite a lot of effort to accomplish. However, the Department of Justice is a model that the Office of Chief Counsel could use. The Department of Justice consults with the IRS but it makes the settlement decision/offer.
  • There is some limited authority for Counsel to facilitate a collection solution, but they seem reluctant to use it.

A potential suggestion for change was that the IRS develop a 1-page flyer explaining what a remand means, which Counsel could send to pro se taxpayers alongside the motion to remand. The IRS did a great job with this in the deficiency Answer context.

  • It was suggested that the Court develop an FAQ on remands as well.

Breakouts: Other Issues Raised

  • Increased funding is necessary for IT services at the IRS;
  • Creating secure portals and QR codes which will provide a web link in the notice explaining in the Taxpayer Roadmap where the taxpayer is in process with the IRS;
  • Adding confirmation language to the CDP withdrawal form that the taxpayer is in currently not collectible status;
  • Adjust account transcripts to reflect the CDP notice and hearing activity (also, general transcripts information could be improved).


  • Previously, the IRS position was to treat timely requested CDP hearings as those mailed only to the proper address as listed in the CDP notice.  The problem was that there may be two or more addresses listed on the CDP notice mailed to the taxpayer.  It was IRS policy that if there was a delay in routing a request mailed to the wrong address, that request would likely be treated as not timely filed.  Some of these issues came to a head in the Webber v. Commissioner case as Judge Gustafson criticized this IRS practice in a designated order as discussed here.  Later in the year, Keith wrote about changes to IRS policy regarding the request of a CDP hearing here.  Now, A CDP hearing request mailed to any address on the CDP notice with a postmark by the 30th day after the notice will be treated as timely filed.  This change comes from Chief Counsel technical advice memorandum PMTA-2020-02, dated December 12, 2019.  The memo SBSE-05-0720-0049, dated July 6, 2020, provides that IRM will be updated within 2 years from the date of the memo to reflect that change.  I credit Procedurally Taxing and the CDP Summit Initiative for bringing attention to this issue and helping to foster this IRS solution for taxpayers.
  • One of the breakout issues raised regarding QR codes has partially been implemented by the IRS.  IR 2020-233 (October 9, 2020) gives details about how taxpayers can use the QR codes on CP14 notices to find information on the IRS website.  Starting in 2021, the taxpayers will be able to access their account, set up a payment plan or contact the Taxpayer Advocate Service.

We appreciate those of you interested in CDP reform and those of you who have taken the time to read these reports.  For those of you interested in taking part in a CDP committee, please contact my email address, schmidtw at

Breakout Session Reports From the Collection Due Process Summit Initiative

Last year, Procedurally Taxing reported on the Collection Due Process Summit Initiative here.  The Initiative grew out of the American Bar Association Section of Taxation 2019 May Meeting and continued for an in-person meeting in Washington, D.C. for the Section of Taxation’s Low Income Taxpayer Representation Workshop.

At the Workshop, we gathered individuals in IRS Chief Counsel, LITC personnel, Taxpayer Advocate Service representatives, private practitioners, law school professors and others interested in discussing CDP reform.  The Workshop included breakout sessions where the group solicited feedback and asked if individuals were willing to volunteer for committees that would discuss CDP issues and bring potential solutions to the IRS for evaluation.  You can still sign up – send me an email:  schmidtw at


This year, there were some setbacks from the COVID-19 pandemic and shifts in the leadership of the CDP Summit Initiative.  While the larger discussion in the tax arena during this year has been on various pandemic issues regarding the distribution of Economic Impact Payments and interruptions of IRS services, we do believe that problems in CDP areas will be another tax concern resulting from the pandemic.  As taxpayers face difficult economic times based on unemployment or other financial situations, that will ultimately result in tax issues dealt with in the CDP process. 

Most recently, there has been a small group working to continue the focus on CDP issues and advance goals from the Summit Initiative.  We are working to build out our committees and regularly seek for people to contact us if they would like to take part.  An additional goal has been to organize and submit the findings from the breakout sessions for you to read.  For those efforts, I would like to thank Matthew James, Low Income Taxpayer Clinic Director at North Carolina Central University School of Law and Nikki McCain, in private practice and former Low Income Taxpayer Clinic Director at the University of South Dakota School of Law.  They are helping to drive CDP Summit Initiative efforts and edited these session reports.

As we provide you with the reports from the breakout sessions, we also included the introductory notes from the session descriptions to give you context and acknowledge the session leaders.  Thank you also to Erin Stearns and Christine Speidel for providing the notes for their sessions that made up these reports.

Today’s post will provide the reports of the breakout groups discussing notices and the administrative process.  Tomorrow’s post will discuss the report of the litigation breakout group.

Breakout: Improving IRS CDP Notices and Communications

Panelists: William Schmidt, Jeff Wilson, Beverly Winstead

This session will educate participants about IRS communication approaches as they pertain to CDP rights and procedures and known issues with the communications. The session leaders will facilitate an exchange of ideas for more effective messaging to increase taxpayer participation in CDP and more effective engagement with Collections at the earliest possible stage.

Prompts provided by the steering committee.

  1. IRS Publications and Website:
    1. Improve communication effectiveness of CDP publications and IRS website’s CDP content to educate taxpayers to make informed procedure choices;
    1. Emphasize to taxpayers and practitioners the importance, at the earliest possible stage, of creating a comprehensive record supporting a fair and sustainable collection alternative.
  2. IRS Notices (Section 6320 –lien and 6330 –levy). Improve CDP notices to look less like a bill for tax, with CDP hearing rights offered later in the notice without highlight or comment about the value of exercising CDP rights. For example, among other strategies and tactics, pursue the rights-based notice test developed by TAS that was suspended.
  3. IRS Form 12153: Revise CDP hearing request Form 12153, without losing its ease of completion, to make it more functional for the taxpayer. Potential changes include content clarifying lien vs. levy circumstances and explaining collection alternatives.

During this session, the group brainstormed revisions to the CDP Notices, which included:

  • Work towards simpler, layman’s notification letter available in various languages (as required by IRM, but also noting issues with determining taxpayers’ primary language), including term definitions such as garnishment;
  • Notice should clearly explain information to taxpayers and representatives and provide the expectations at and from a CDP hearing. Such information may include:
    • What can be achieved through a CDP hearing; 
      • E.g., collection alternatives available, methods of addressing liens (discharge, subordination, withdrawal, and explanations), ability to address issue of liability.
    • What documents IRS will require and why they need them;
    • What else taxpayers need to do to prepare for their CDP hearings.
      • Note: this information is not readily available on the IRS website. Pub 1660 addresses CDP hearings but could more plainly and thoroughly explain the process and options involved, e.g., Pub. 1660 does not mention Currently Not Collectible status at all.
  • Adjust the appearance of the notice informing the taxpayer of the right to request a CDP hearing (e.g., emphasize the difference/importance of the notice so the taxpayer does not disregard this notice as they would other notices);
  • Add a cover letter to the notice that explains taxpayer rights, collection alternatives (written in bold), availability of LITCs, and references important information listed elsewhere;
  • Appeals should be more consistent in acknowledging when it receives CDP cases;
    • E.g., standardize the letter that indicates the CDP hearing is in progress.
  • Develop a mechanism for taxpayers and representatives to track case status similar to the “Where’s My Refund” tool on the IRS website;
    • Alternatively, a call-in line to track CDP hearing status based on an assigned CDP hearing number.
  • Include contact information for LITCs that serve the taxpayer’s geographic area as part of the notices giving the taxpayer a right to a CDP hearing (LT 11 or Letter 1058).
    • Appeals could send out the current IRS Pub. 4134, which lists all LITCs by state but does not indicate each LITC’s geographic coverage area. Some attendees expressed concerns that Pub. 4134 is too long to send with CDP notices. As something of an aside, someone suggested it would be helpful to modify Pub. 4134 to better indicate each LITC’s geographic coverage area.

The group then discussed potential modifications to Form 12153, Request for a Collection Due Process or Equivalent Hearing:

  • Changing the “I can’t pay” answers to add a Comment box rather than an “other” box in order to better explain the situation;
  • Possibility of adding a collection information statement (e.g., 433-F) with Form 12153.

The group also developed questions for the Service:

  • Are there ways to get clients to respond to notices sooner or convince them to open letters faster?
    • Perhaps there is a way to emphasize taxpayer rights, such as printing on the outside of the envelope or putting in a different stuffer notice.

Breakout: Improving CDP Administrative Proceedings

Panelists: Soree Finley, Susan Morgenstern, Erin Stearns

Participants will learn about opportunities for more effective engagement with IRS Appeals, including when a taxpayer may challenge the accuracy of an assessed liability, the critical role of a record in establishing a sustainable collection alternative to immediate full payment, and procedural traps for the unwary. Participants will collaborate to identify improvements yielding more efficient and effective application of CDP through constructive interaction between taxpayers (or their representatives) and Appeals.

This breakout session was very well attended with approximately 35 attendees (standing room only). The discussion was built around the three priorities identified by the Steering Committee, then transformed into the following questions:

  1. What if IRS expanded telephone outreach efforts and contacted taxpayers in CDP to request a completed Form 433-F or -A?
    1. IRS could proactively assist taxpayers early on with a sustainable collection alternative. If no collection alternative results, then IRS could assign a settlement officer for a CDP hearing.
  2. How could the IRS better promote availability of LITC assistance earlier in the CDP process?
  3. What could be done to educate taxpayers and representatives on how to challenge liability through CDP?

The discussion focused most on the first question. The group spent some time discussing pre-CDP hearing screening measures but primarily discussed work with Appeals generally and improvements to the Appeals process. On this question, the group offered the following suggestions:

  • Remedy some of the staffing challenges by hiring more Settlement Officers;
    • Noted effects of staffing challenges included instances where settlement officers missed CDP hearings without advanced warning and delays in processing hearings and receiving communications scheduling hearings.
  • IRS should consistently apply pre-CDP hearing screening by geographic region;
    • Attendees from all over the U.S. in the breakout session and many indicated they had never been contacted by an IRS employee screening the case prior to sending it to a Settlement Officer for a full-blown hearing, and overall the group expressed interest in having the IRS do this.
    • One concern expressed by a participant was that taxpayers (and perhaps representatives) might feel railroaded by the screening person into agreeing to a collection alternative that might not be the best long-term option. However, most of the group welcomed the idea of being able to resolve cases without a full-blown CDP hearing.
  • Allow representatives (even if just at LITCs) to engage in email dialogue with IRS;
    • This could enable an LITC representative to receive emails from either Collections or Appeals – verifying that the CDP hearing was timely requested, identifying what needs to be submitted, and allowing representatives to submit documents via email.
    • Alternatively, develop an online portal system, like medical providers, which allows taxpayers and representatives to engage with the IRS in a secure setting, and to upload documents, receive messages, schedule phone calls or in person appointments at a Taxpayer Assistance Center, etc. CDP hearings could be handled through such a portal more efficiently than they are handled now and with required privacy protections.
    • Briefly discussed that not all taxpayers are connected and online and there would still need to be opportunities for less connected taxpayers to engage that do not require online interaction.
  • Appeals should provide more face-to-face hearing opportunities (in-person or virtual), which several attendees indicated, were useful for taxpayers facing anxiety;
  • Improve interpreter services available to taxpayers with language barriers.
    • Taxpayers should not have to provide their own interpreters for CDP hearings.

The next question addressed how the IRS could better promote availability of LITC assistance earlier in the CDP process. The group provided the following suggestions:

  • Better inform Appeals offices of LITCs, the location of local LITCs, and the work performed by LITCs;
    • Attendees discussed that the Taxpayer First Act now permits all IRS employees, including those within Appeals, to inform taxpayers of not just the presence of LITCs, but to tell them about LITCs local to them who might be able to help them.
  • Discussed whether more involvement with taxpayers in CDP would be undesirable on any level, e.g., increasing workload in an undesirable way, but attendees did not see this as a problem and indicated they would like to be involved in CDP cases earlier so they could provide more assistance.

DAWSON Almost Here

We are now less than a week away from the beginning of the transition at the Tax Court to DAWSON and this deserves another reminder for those who practice in the Tax Court because of the shutdown of the Court’s electronic filing system.

If you are a Tax Court practitioner who has given the Court your current email address, you may have received an email on Friday the 13th directly alerting you to the upcoming shift to DAWSON.


The email does a good job of explaining what is to happen.  Here’s what I received:

You are receiving this email because you are a member of the bar of the United States Tax Court. This is an official notice from the Court to inform you about our transition to a new Case Management System that begins soon. If you feel you received this message in error, please contact our Admissions Section, at

In December 2020, the United States Tax Court will be launching DAWSON (Docket Access Within a Secure Online Network), the Court’s new case management system. The Court expects DAWSON to be active no later than December 28, 2020.

Beginning at 5:00 PM Eastern Time on November 20, 2020, the current e-filing system will become inaccessible and all electronic files will become read-only. See the October 7, 2020 Press Release for more information.

In early December, a new user name and temporary password for DAWSON will be emailed to this address, along with a link to activate your DAWSON account. You must promptly activate your account. The temporary credentials will expire after 7 days, and if you do not activate your account, you will not have access to your electronic case records.

For more information and updates, including FAQs, please continue to monitor the Court’s website,

If you are a Tax Court practitioner and did not receive this email, you might want to contact the Admissions Section to make sure that your information at the Tax Court is accurate.  If it is not accurate you will not receive the link to activate DAWSON that the Court will send out next month and that will make it difficult for you to operate in the new environment.

If you want to learn more about DAWSON, you can read the Court’s description here where it announces the coming of DAWSON.  You can also read more about it in my earlier post here.

The FAQs referred to in the email from the Court were recently updated.  There are many FAQs but I want to highlight a few focusing on what is going to happen on November 20:

What happens November 20, 2020?
  • Beginning at 5:00 PM Eastern Time on November 20, 2020, the eAccess system will become “read only”. See this Press Release.
  • Records in the eAccess system—including opinions and orders—will remain visible to parties and the public but no new electronic case filings will be permitted.

I think it’s important to note that you will be able to see documents in the system even though you will not be able to electronically file documents.  This leads to the next important question answered by the FAQs regarding what do you do if you need to file a document during the period of the DAWSON installation:

What if I need to file something after November 20, 2020 and before DAWSON is active?

If you must file something with the Court after 5:00 PM Eastern Time on November 20, 2020 and before DAWSON “goes live” in December, you can do so by mailing your document to the United States Tax Court, 400 2nd Street NW, Washington DC 20217. See this Press Release.

For those of us old enough to have practiced at the Court before the Court adopted the current electronic filing system, things have returned to our youth or maybe our middle age.  It will be more expensive to file documents because of postage.  You may want to spend the extra nickels and send things via certified mail.  Of course, you should already be doing that for the petitions you mail to the Court.  It is also possible under IRC 7502 to send mail to the Court using an authorized private delivery service, but please make sure you use an authorized service as problems, like the situation in Guralnik, can occur when using an unauthorized service and problems in general can occur when mailing without some type of receipt. 

Since many of us have not paper filed in some time, also remember that pursuant to Rule 23(b) you should send the original and one copy of the document you are filing. 

Note that the Court hopes to not issue orders and opinions during the period of Dawson installation.

Will the Court still issue opinions and orders during the time E-Filing is inaccessible?

The Court does not currently anticipate issuing any orders or opinions from 5:00 PM Eastern Time on November 20, 2020, until DAWSON goes live. If circumstances necessitate issuing an opinion or order, the Court will do so.

This might limit the material available on certain blog sites that regularly cover the Tax Court.  So, look for lots of material on refund and bankruptcy cases at this blog site over the next month with an occasional TIGTA or GAO report thrown in for good measure.

Sixth Circuit to (Maybe) Decide Whether Taxpayers Who Don’t Receive a Notice of Deficiency Can Contest an Underlying Liability in a CDP Hearing

We welcome first-time guest blogger Chaim Gordon, a solo tax controversy attorney. In his practice, Chaim represents individuals and small businesses in civil tax audit and litigation matters nationwide. Chaim regularly blogs about tax procedure matters on his Tax Cases & Controversies blog. Keith.

In a case currently pending before the Sixth Circuit, the taxpayer makes the novel argument that a taxpayer can contest an underlying liability in a CDP hearing even if the taxpayer had a prior opportunity to contest the liability before the IRS Appeals Office. The case is Patrick’s Payroll Services, Inc. v. Commissioner, No. 20-1772 (6th Cir.), and the parties have filed their opening briefs. This post discusses the arguments advanced by the parties in their respective briefs and offers some critiques. This is a case to watch with potentially significant ramifications for how certain tax cases are resolved, both administratively and judicially.



Generally, the IRS is required to issue a notice of deficiency to taxpayers before assessing additional tax on a taxpayer. See IRC §§ 6212, 6213. The notice of deficiency is the taxpayer’s ticket to the Tax Court. Without it, a taxpayer must generally fully pay the assessed tax before suing for a refund. See Flora v. United States, 362 U.S. 145 (1960). In some situations, however, the IRS may assess tax on a taxpayer without using the deficiency procedures. One such situation that commonly arises is where the IRS assesses a trust fund recovery penalty under section 6672 on a responsible person. Typically, the IRS gives taxpayers facing the assessment of a trust fund recovery penalty an opportunity to contest the penalty in the IRS Appeals Office.

Taxpayers facing such assessments understandably would like to contest such assessments in a prepayment, judicial forum. Specifically, such taxpayers would like to contest such assessments in a collection due process (“CDP”) hearing, which is subject to judicial review. See IRC § 6330. Unfortunately for such taxpayers, the Tax Court, in Lewis v. Commissioner, 128 T.C. 48 (2007), held that a taxpayer is not permitted to challenge an assessed tax in a CDP hearing if the taxpayer had a prior opportunity to contest the assessed tax before the IRS Appeals Office. In doing so, the Tax Court upheld the validity of Treas. Reg. § 301.6320-1(e)(3), Q&A-E2, which provides that the “opportunity to dispute” referred to in section 6330(c)(2)(B) includes an opportunity to dispute the underlying liability administratively. The holding in Lewis was later affirmed by three circuit courts of appeal. See Our Country Home Enterprises Inc. v. Comm’r, 855 F.3d 773 (7th Cir. 2017); Keller Tank Services II Inc. v. Comm’r, 854 F.3d 1178 (10th Cir. 2017); and Iames v. Comm’r, 850 F.3d 160 (4th Cir. 2017).

In a 2018 Tax Notes article, I argued that the Tax Court and the circuit courts misread section 6330(c)(2)(B) by ignoring its first disjunctive test. In describing the issues that may be raised in a CDP hearing, section 6330(c)(2)(B) provides that:

The person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability. [Emphasis added.]

I argued that section 6330(c)(2)(B) imposes a disjunctive test. That is, section 6330(c)(2)(B) allows a taxpayer to contest the underlying liability if either (1) the taxpayer did not receive a notice of deficiency, or (2) the taxpayer received a notice of deficiency but did not have an opportunity to contest the underlying liability for some other reason. Read this way, a taxpayer who has not received a notice of deficiency may contest an underlying liability in a CDP hearing even if the taxpayer had a prior opportunity to contest the underlying liability before the IRS Appeals Office. Surprisingly, the Tax Court and the three circuit courts of appeal never explained why section 6330(c)(2)(B) did not impose a disjunctive test.

In my article, I concluded as follows:

Lewis and the circuit court cases entirely fail to address why the taxpayers in each case did not satisfy the first disjunctive test for challenging the tax or penalty in a CDP hearing under section 6330(c)(2)(B). Responsible persons everywhere deserve to know why they are being deprived of the opportunity to obtain prepayment judicial review in contravention of what appears to be an express statutory provision granting them that opportunity.

Presumably, the courts failed to address this argument in those cases because the taxpayers failed to argue it. But a new case pending before the Sixth Circuit may force the courts to finally address the plain meaning of section 6330(c)(2)(B).

New case in the Sixth Circuit:

A corporate taxpayer in the Sixth Circuit that did not receive a notice of deficiency but had an opportunity to contest the underlying liability in the IRS Appeals Office recently argued that it should be allowed to contest its underlying liability in a CDP hearing because section 6330(c)(2)(B) imposes a disjunctive test. The taxpayer’s and the government’s opening briefs have both been filed, and it is time to evaluate the strength of the arguments put forth by the parties. The case has not yet been set for oral argument, but argument was requested by the parties.

Procedural background:

In Patrick’s Payroll Services, the taxpayer attempted to contest its underlying liability for unpaid payroll and unemployment taxes and associated penalties in a CDP hearing, but the IRS Appeals Office determined that it could not do because the taxpayer had a prior opportunity to contest the underlying liability before the IRS Appeals Office. The Taxpayer petitioned the Tax Court and again argued that the IRS Appeals Office should have allowed it to contest the underlying liability in a CDP hearing.

The IRS filed a motion for summary judgment, arguing that, under Lewis, the taxpayer could not contest the underlying liability because the taxpayer had a prior opportunity to contest the underlying liability before the IRS Appeals Office. In response, the taxpayer argued that the prior “opportunity to dispute” the tax liability described in section 6330(c)(2)(B) “must mean judicial review, not review by the Internal Revenue Service itself.” Although acknowledging that Treas. Reg. § 301.6330-(e)(3), Q&A-E2, as well as applicable Tax Court precedent, provide otherwise, the taxpayer noted that the Sixth Circuit has not yet opined on the validity of Treas. Reg. § 301.6330-(e)(3).

The Tax Court entered a memorandum opinion granting the IRS’s summary judgment motion. See Patrick’s Payroll Services, T.C. Memo. 2020-47. The court stated that it has “consistently rejected” the argument an opportunity to contest an underlying liability before the IRS Appeals Office is not a prior “opportunity to dispute” a tax liability within the meaning of section 6330(c)(2)(B).

Taxpayer filed a timely motion for reconsideration of the Tax Court’s opinion. See Tax Ct. R. 161. In the motion, the taxpayer argued that it did not matter whether it had a prior “opportunity to dispute” the tax liability underlying the IRS’s collection action because section 6330(c)(2)(B) must be read disjunctively and it had not received a notice of deficiency. The Tax Court denied the taxpayer’s motion for reconsideration, and the taxpayer appealed to the Sixth Circuit.

The taxpayer’s opening brief:

The taxpayer’s opening brief argued that section 6330(c)(2)(B) should be read as imposing a disjunctive test for two reasons:

First, courts generally read the word “or” as “and” only when the reading the “or” as a disjunctive would lead to absurd results. See, e.g., OfficeMax v. United States, 428 F.3d 583, 590 (6th Cir. 2005). For example, in United States v. Woods, 571 U.S. 31, 45, (2013) (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979)), the Supreme Court stated as follows:

Moreover, the operative terms are connected by the conjunction “or.” While that can sometimes introduce an appositive—a word or phrase that is synonymous with what precedes it (“Vienna or Wien,” “Batman or the Caped Crusader”—its ordinary use is almost always disjunctive, that is, the words it connects are to “be given separate meanings.”

Second, reading the word “or” in section 6330(c)(2)(B) as imposing a conjunctive test would render the first part of such test—i.e., the phrase “did not receive a notice of deficiency”—superfluous because any taxpayer who received a notice of deficiency had a prior opportunity to contest the underlying liability by filing a petition with the U.S. Tax Court.

The government’s brief:

The government’s brief argued that the court should affirm the Tax Court for two reasons: (1) the taxpayer forfeited its argument by failing to timely raise it below, and (2) section 6330(c)(2)(B) is properly read as imposing a conjunctive test.

The taxpayer forfeited its argument by not timely raising it below.

The government’s first argument in opposition of the taxpayer’s appeal in this case is that the taxpayer forfeited its “novel statutory argument” by failing to timely raising it before the Tax Court and only raised it in a motion for reconsideration. See Evanston Ins. Co. v. Cogswell Properties, LLC, 683 F.3d 684, 692 (6th Cir. 2012). The government noted that, although the rule an argument cannot be raised for the first time in a motion for reconsideration is prudential rather than jurisdictional, this is not an exceptional case.

The government further noted that the Sixth Circuit held that the Tax Court did not abuse its discretion by entertaining the IRS’s motion for reconsideration in Law Office of John H. Eggertsen P.C. v. Commissioner, 800 F.3d 758, 765–66 (6th Cir. 2015), because that motion was to correct “errors of law.” But the government argued that a court is not required to, and should generally not, entertain such motions. The government’s brief does not explain why, however, there should be one rule for motions for reconsideration by the IRS and another rule for motions for reconsideration by taxpayers. If the IRS can file a motion for reconsideration for errors of law of its own making, then taxpayers should be offered the same courtesy.

Section 6330(c)(2)(B) does not impose a disjunctive test.

The government’s second argument is that—even if the court considers the taxpayer’s argument—the court should reject it because section 6330(c)(2)(B) is properly read as imposing a conjunctive test. Specifically, the government argued as follows:

“[T]he word ‘or’ is often used as a careless substitute for the word ‘and’; that is, it is often used in phrases where ‘and’ would express the thought with greater clarity.” De Sylva v. Ballentine, 351 U.S. 570, 573 (1956). Where, as here, “the statute requires proof of a negative,” the word “or” is often read conjunctively. Valadez-Lara v. Barr, 963 F.3d 560, 567 (6th Cir. 2020). For instance, if someone says, “I don’t like apples or oranges,” no one would reasonably interpret this to mean that they find one of either apples or oranges distasteful. They mean that they dislike apples and they dislike oranges.

The government, however, ignores a crucial distinction between “I don’t like apples or oranges” and “I don’t like apples or don’t like oranges.” In the former case, De Morgan’s theorem applies. In the latter case, De Morgan’s theorem is inapplicable. Section 6330(c)(2)(B) is written like the latter case, not the former case. Thus, the government’s apples and oranges example is, pardon the pun, comparing apples to oranges.

(For those wondering, De Morgan’s theorem states that the negation of a disjunction is the conjunction of the negations and the negation of a conjunction is the disjunction of the negations. See O’Donnabhain v. Comm’r, 134 T.C. 34, 81 (2010) (Halpern, J., concurring) (“In formal logic, there is a set of rules, De Morgan’s laws, relating the logical operators ‘and’ and ‘or’ in terms of each other via negation. . . . . The rules are: [1.] not (p or q) = (not p) and (not q) [and 2.] not (p and q) = (not p) or (not q)”); Antonin Scalia and Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 119 (2012) (“The principle that ‘not A, B, or C’ means ‘not A, not B, and not C’ is part of what is called DeMorgan’s theorem.”).)

The government alternatively argues that the inclusion of the word “otherwise” indicates that Congress only intended to provide an example of not having an opportunity to contest a liability. The government offers the following example: Suppose a person offers “I will pick you up if you don’t have a car or if you don’t otherwise have some way of getting here.” In this case, the government argues that someone who had a truck would clearly not be included in the offer simply because that person lacked a car. The reference to having a car is just included as an example of a common means of having some way to get there.

The government’s brief cites a 2003 Tax Court opinion that adopts this reading of section 6330(c)(2)(B). (I unfortunately missed this opinion when I was drafting my article and therefore failed to address the reading it suggests there.) In that opinion, the Tax Court stated as follows:

Section 6330(c)(2)(B) plainly sets forth a single operative criterion, in the form of a stricture: the person seeking to challenge the underlying tax liability in a collection proceeding must not have had another opportunity to raise the challenge. Presumably for the sake of clarity and emphasis, the statute refers particularly to persons who have not received notices of deficiency while referring more generally to persons who “otherwise” lacked opportunities to dispute their tax liabilities. Contrary to petitioners’ argument, however, these references do not denote separate criteria; they merely circumscribe the two categories of persons that, taken together, make up the complete class of persons who satisfy the single operative criterion.

Oyer v. Comm’r, T.C. Memo 2003-178.

Even if this is a possible reading of the phrase “or did not otherwise,” there is no reason to assume that this is how the phrase is commonly understood. Indeed, a quick Google search of the phrase “or did not otherwise” did not turn up any examples where that phrase cannot be read disjunctively. See, e.g., here and here. And many Tax Court cases—including some that cite to Oyer—simply express section 6330(c)(2)(B) in the conjunctive and do not suggest that there is only one criteria—i.e., not having an opportunity to contest the underlying liability. See, e.g., Streiffert v. Comm’r, T.C. Memo. 2014-62 (“Section 6330(c)(2)(B) provides that the taxpayer may contest the existence and amount of the underlying tax liability, but only if the taxpayer did not receive a notice of deficiency and ‘did not otherwise have an opportunity to dispute such tax liability.’” (citing Baltic v. Comm’r, 129 T.C. 178 (2007), and Oyer v. Comm’r, T.C. Memo. 2003-178)).

Moreover, if the government is correct that the phrase “did not receive any statutory notice of deficiency for such tax liability” is merely an example of someone who “did not otherwise have an opportunity to dispute such tax liability,” then it should follow that the opportunity to dispute a liability referred to is—like a notice of deficiency—an opportunity to judicially contest the underlying liability. In a universe that contains opportunities to dispute a liability that give you a ticket to the Tax Court and opportunities to dispute a liability that do not give you a ticket to the Tax Court, it is curious that Congress chose to give as its sole example an opportunity that provides a ticket to the Tax Court. The logical takeaway would seem to be that the opportunity to contest the underlying liability being referred to in the statute is one that, like a notice of deficiency, provides the taxpayer with an opportunity to judicially contest the liability. This would, of course, contradict the regulation upheld by the Tax Court in Lewis and three circuit courts of appeal that provides that an opportunity to contest an underlying liability before the IRS Appeals Office constitutes a prior opportunity under section 6330(c)(2)(B). See Treas. Reg. § 301.6330-(e)(3), Q&A-E2.

By contrast, in the government’s illustration, “I will pick you up if you don’t have a car or if you don’t otherwise have some way of getting here,” cars and trucks are functionally identical. In that case, having a car is a valid example for a set that also includes having a truck. But it would not be a valid example for a set that included having a car, a truck, and feet. Clearly, the offeror intended to offer the ride even if the offeree could theoretically walk to his or her destination.

Finally, the government argued that the taxpayer’s interpretation of section 6330(c)(2)(B) would mean that those who simply received a deficiency notice would not be precluded from challenging their liability in a CDP case unless they also were given a second opportunity to dispute the liability. This appears to be an incorrect result. See Treas. Reg. § 6330-1(e)(4), Example 1 (“The IRS sends a statutory notice of deficiency to the taxpayer at his last known address asserting a deficiency for the tax year 1995. The taxpayer receives the notice of deficiency in time to petition the Tax Court for a redetermination of the asserted deficiency. The taxpayer does not timely file a petition with the Tax Court. The taxpayer is precluded from challenging the existence or amount of the tax liability in a subsequent CDP hearing.”).

But I think that this argument shows that the government continues to misapprehend the plain meaning of section 6330(c)(2)(B). Under the plain meaning of section 6330(c)(2)(B) that I suggested in my article, a taxpayer can contest an underlying liability if (1) the taxpayer did not receive a notice of deficiency, or (2) the taxpayer received a notice of deficiency but—for some other reason—did not have an opportunity to contest the underlying liability. The latter case can refer to a situation where a taxpayer could not file a timely Tax Court petition for medical reasons (e.g., the taxpayer was in a coma for the 90 days following receipt of a notice of deficiency) or did not receive the notice of deficiency before the deadline for filing a timely petition with the Tax Court. See Treas. Reg. § 6330-1(e)(4), Example 2 (“Same facts as in Example 1, except the taxpayer does not receive the notice of deficiency in time to petition the Tax Court and did not have another prior opportunity to dispute the tax liability. The taxpayer is not precluded from challenging the existence or amount of the tax liability in a subsequent CDP hearing.”). Thus, in the ordinary case, a taxpayer who timely receives a notice of deficiency cannot contest the underlying liability in a subsequent CDP hearing.

Concluding thoughts:

We do not know whether the Sixth Circuit will take this opportunity to decide whether a taxpayer can contest an underlying liability if the taxpayer did not receive a notice of deficiency but had an opportunity to contest the underlying liability before the IRS Appeals Office. But even the government’s brief indicates that the court could decide the issue if it chooses to do so. In any event, similarly situated taxpayers would be well advised to argue that section 6330(c)(2)(B) imposes a disjunctive test in their merits briefs before the Tax Court.

But if the Sixth Circuit agrees to decide this issue in this case, the ramifications may be significant with respect to how certain tax cases are resolved, both administratively and judicially. In my view, the court should only adopt the government’s “contextualized” reading of section 6330(c)(2)(B) if the court cannot accept an alternative reading that gives meaning to both prongs of section 6330(c)(2)(B). Because I believe that the taxpayer has advanced such an alternative reading, the court should conclude that a taxpayer who has not received a notice of deficiency can contest the underlying liability in a CDP hearing even if the taxpayer had a prior opportunity to contest the liability before the IRS Appeals Office.

Refund Claim Time Limits Create an Unwelcome Barrier

Today’s post is from occasional guest blogger Marilyn Ames, a retired Chief Counsel attorney. Marilyn is a Contributing Author who works with me on Saltzman and Book, IRS Practice & Procedure. She and I recently substantially revised the chapter on statute of limitations relating to refund claims, one of the trickiest areas in tax procedure. We also have just completed the last treatise update of the 2020 calendar year, and in that update we came across the sad case of Koopman v United States, which, as Marilyn discusses below, highlights how the rules in Section 6511 can lead to some harsh results. Les

For even the most experienced tax lawyers, one of the most confusing parts of the Internal Revenue Code is Section 6511, which sets out the statute of limitations for refund claims. For most claims, the requirements for filing a timely refund claim are contained in Section 6511(a) and (b), which consists of two parts. First, Section 6511(a) requires the claim for the refund to be filed with a period of three years from the time the return was filed or two years from the time the tax was paid. However, this is only the first hurdle that a taxpayer must successfully cross in order to get a refund. Section 6511(b) then provides that the amount of the refund is limited to the tax paid within the three-year period immediately before the claim is filed if the taxpayer filed the claim within three years from filing the return, as set out in section 6511(a). If the taxpayer had an extension to file the return, that period is added to the three-year period of subsection 6511(b) for determining the amount of the claim allowed. If the claim was filed within subsection (a)’s two-year period, then the refund is limited to the tax paid within the two years immediately prior to the claim. The two-year rule allows taxpayers to file a claim for refund if the taxpayer pays the tax more than three years after filing the return, and then wishes to challenge some aspect of the tax within two years of the payment. The subsection (b) limitations are often referred to as the “look-back” rules. Because of the look-back rules, taxpayers can file a claim for refund that is timely, but still be barred from receiving any part of the refund. The Supreme Court determined in United States v. Clintwood Elkhorn Mining Co. (553 US 1 (2008)) that taxpayers must meet the Section 6511 requirements in order for the court to have jurisdiction to hear a refund suit. (It should be noted that Section 6511 has a long list of exceptions to the Section 6511(a) and (b) requirements that apply in special cases.)


These two requirements work together in a sometimes-Byzantine way that can create results that seem unfair to taxpayers.  The recent case of Koopman v. United States decided by the Court of Federal Claims in September of this year, illustrates the difficulties a taxpayer can encounter when trying to meet the requirements of both subsections (a) and (b) of Section 6511.  The taxpayer, William Koopman, retired from United Airlines in 2001. When he retired, he was covered by United’s non-qualified deferred compensation plan. Because of the special timing rule for FICA taxes, Mr. Koopman was required to pay the relevant portion of FICA on the present value of his deferred compensation in 2001, the year he retired, although he was to receive his benefits under United’s plan from 2001 through 2006. Unfortunately for Mr. Koopman, United filed a Chapter 11 bankruptcy in 2002, and he only received $248,293 of his deferred compensation instead of the $415,025.91 on which he paid FICA tax.  Instead of cash, he eventually received common stock in partial compensation, with the last distribution of the stock occurring in April of 2007.  

Mr. Koopman, unhappy he had paid FICA taxes on compensation he did not receive, filed a claim for refund in August of 2007 seeking a refund of the FICA taxes paid on the difference between the amount he actually received as deferred compensation and the amount on which he paid the tax. He subsequently filed suit in the Court of Federal Claims, and the United States filed a motion for lack of jurisdiction based on Mr. Koopman’s failure to meet the requirements of section 6511. Although Mr. Koopman was seeking a refund of only $2,416, he was not the only unhappy former United employee; the court notes that he had a co-plaintiff and that there are other cases involving the same issue.  

In ruling on the government’s motion to dismiss for lack of jurisdiction, the court held that under the deemed paid rules of Section 6513(c), United’s quarterly returns for 2001 were deemed filed and the FICA tax included on the returns was deemed paid on April 15, 2002.

Under Section 6511(a), Mr. Koopman only had until April 15, 2005 –three years after the returns were filed—to file a timely refund claim.  He missed that date by over two years.  Additionally, the court determined, under the look-back rules, the taxes were paid no later than April 29, 2004, as United had transferred credits to its FICA taxes for 2001 as late as April 29, 2002. Under Section 6511(b), no amount was paid within either the three-year or two-year periods looking back from the filing of the claim. Accordingly, because neither the three-year or two-year rule of Section 6511(a) was met, the court held it did not have jurisdiction over Mr. Koopman’s refund suit.

Mr. Koopman, pointing out the unfairness of this due to the litigation in the United bankruptcy that had prevented the final distribution being made to him any earlier, raised several arguments to try and overcome the barriers of Section 6511.  The court quickly disposed of his argument that Section 6511 did not apply to FICA taxes, as the statute expressly provides that it applies to any tax imposed by the Internal Revenue Code.  The court then rejected his argument that the statute of limitations should be equitably tolled, as the final determination that United was not going to pay him the full amount of the deferred compensation was made long after the statute of limitations on filing a refund claim expired.  Based on precedent, the court concluded that there is no equitable tolling of the refund statute of limitations as general principles of equity may not override the statutory requirements.  Mr. Koopman also argued that the statute of limitations should not begin running until the taxpayer has an opportunity to learn that the tax has been paid in error.  The court also rejected this argument, based on the precedent of another Supreme Court case, United States v. Dalm (494 US 596 (1990)). Although Mr. Koopman argued that application of Section 6511(a)’s time periods to his situation was unconstitutional under the due process clause, the court concluded that the United States can only be sued in its own courts under the express authorization given by Congress.  

Although situations such as Mr. Koopman’s seem to cry out for a remedy, Mr. Koopman could have acted earlier to protect his rights.  United filed bankruptcy in 2002, which should have been a red flag to Mr. Koopman that he was not going to receive all his deferred compensation.  He could have filed a protective claim for refund any time before April 15, 2005 that would have been timely, and then waited for the result of the bankruptcy litigation that was delaying a final determination as to his treatment.  The Internal Revenue Service is not only familiar with protective refund claims, but in some cases, reminds taxpayers who may be affected by ongoing litigation to file such a claim.  Earlier this year, the IRS issued a notice that the due date for filing a protective claim for the 2016 tax year for individual tax payments had been postponed until July 15, 2020, with an emphasis that this included claims involving the Affordable Care Act litigation.  The protective claim procedure allows tax practitioners to protect taxpayers whose rights may be affected by current litigation or expected changes in the law from being caught up in the Draconian maze of Section 6511 without a right to recourse if they wait for a final outcome.