This week of designated orders consisted of five orders on a variety of topics. One of them Keith Fogg already discussed so I will not focus on that case in depth. The other cases focus on abuse of discretion in a collection due process case, tax protesters being penalized, a whistleblower petitioner’s choice, and a ruling on requests for production of documents.
Docket No. 25751-15L, Joseph Thomas Lander & Kimberly W. Lander v. C.I.R., Order available here.
Keith Fogg wrote about this case’s proposed order here. I just want to add that I do not think the results seem very fair. The petitioners did not receive notice of their tax liability because the notices of deficiency were not sent to their address. Still, that counts against them. Also, the petitioners are unable to challenge the underlying tax liability because a postassessment conference with Appeals counts as an opportunity to dispute the liability. While the law is against them on these issues, the convoluted history of their tax proceedings combines to look like the petitioners are not receiving fair treatment.
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Abuse of Discretion for Collection Alternatives
Docket No. 17999-18SL, Milton W. Asher, Jr. v. C.I.R., Order available here.
Mr. Asher has tax liabilities for 2013 and 2014. Following a notice of intent to levy, he filed for a collection due process hearing. After receiving the hearing’s results, he petitioned the Tax Court. The IRS filed a motion for summary judgment and Mr. Asher filed his response to the IRS motion.
First, the Court looks at the history of the administrative hearing for collection due process. There, the settlement officer wanted Mr. Asher to file his 2017 tax return and show proof that estimated tax payments were paid in full for 2018. The officer also stated that past due estimated payments could be part of an installment agreement, but would not be acceptable for an offer in compromise.
Mr. Asher and his counsel did not submit any proof of checks regarding payments being improperly applied by the IRS or for an abatement of penalties.
In looking at the 2017 tax return, Mr. Asher had filed an extension and ultimately filed the tax return 2 months before the October 15 deadline. The estimated payments resulted in an overpayment that the IRS applied to reduce his 2014 liability.
For the 2018 tax return, there were three estimated tax payments made that resulted in a credit balance.
Beginning the Court’s analysis, Mr. Asher did not submit proof regarding the payments being improperly applied or abatement of penalties so those issues were barred in the Tax Court case.
However, Mr. Asher was in filing compliance for 2017 since the tax return was under extension and Mr. Asher filed the return 2 months before the October 15 deadline. Also, at the time of the hearing Mr. Asher only had one estimated tax payment in arrears. In fact, due to the variable nature of his income, it is not clear an estimated tax payment was due on April 15, 2018. The Court states it was an abuse of discretion for the settlement officer to limit his access to collection alternatives when he was compliant regarding the 2017 and 2018 tax years.
The Court granted the IRS motion for summary judgment with regard to the existence and amount of the liabilities for the 2 tax years in question, specifically additional tax penalties, the ability to raise issues regarding alleged payments made for the 2 tax years, or raise any further issues beyond what is next described.
The Court denied the IRS motion for summary judgment to allow collection alternatives for Mr. Asher. He may be allowed either an offer in compromise (based solely on inability to pay, not doubt as to liability) or an installment agreement.
The Court says the parties may wish to consider whether to move for a remand so that a different settlement officer is assigned to Mr. Asher regarding those listed collection alternatives.
Takeaway: Here is an example of an abuse of discretion in a collection due process case, though the scope is quite limited. The settlement officer’s limiting of the collection alternatives was misdirected so Mr. Asher gets to look into an offer in compromise or installment agreement.
Tax Protesters Penalized
Docket No. 11368-18L, William Michael Calpino, Jr. & Kelly Jo Calpino v. C.I.R., Order and Decision available here.
The petitioners had 3 previous Tax Court cases. Each time, the petitioners made tax protester arguments. The first time, the Court imposed a $1,000 penalty under section 6673. In the other two cases, the Court denied the IRS motion for sanctions but warned the petitioners that the Court has the ability to impose a penalty that does not exceed $25,000 under section 6673(a)(1) for making similar arguments.
Following the deficiencies in those two Tax Court cases, the IRS mailed to petitioners the final notices of intent to levy and their ability to request a Collection Due Process hearing. The petitioners requested such a hearing. They did not propose collection alternatives, but made further tax protester arguments.
When the settlement officer tried to schedule a phone conference, requested financial information for a collection alternative, and requested that the petitioners file their 2015 tax return, the response was a letter refusing to provide financial information and making further frivolous arguments.
From the notice of determination, the petitioners filed the current case with the Tax Court with (guess what?) more tax protester arguments. They also filed a frivolous motion to dismiss for lack of jurisdiction and motion for summary judgment similar to those denied in their first Tax Court case that led to the $1,000 penalty.
The IRS had filed a motion for summary judgment, motion to permit levy and motion to impose a penalty. The Tax Court granted all 3 motions. Based on the history for the petitioners with the Tax Court (such as making frivolous arguments when warned not to do so), the Court imposed the maximum penalty of $25,000.
Takeaway: The Tax Court only has so much patience with tax protesters and arguments the IRS terms as frivolous (for some interesting reading from the IRS on frivolous tax arguments, look here). The deficiencies at issue were about $16,000 for 2012 and 2013. I think it is ironic that making those arguments gained them no ground and more than doubled their liability for those years based on that maximum penalty they received.
Whistleblower Petitioner’s Choice
Docket No. 23105-18W, Jaroslaw Janusz Waszczuk v. C.I.R., Order available here.
The IRS filed a motion for protective order in a whistleblower case that the Tax Court assures is substantively identical to other protective orders filed in other whistleblower cases.
The Court is trying to inform petitioner about the commonality of the IRS motion because the petitioner filed a 136-page opposition to the IRS motion, stating it is “frivolous, meritless, and groundless”. Petitioner’s argument is that granting the motion would interfere with his current litigation in California courts or complaints with various state and federal law enforcement agencies. The Court suggests that the petitioner is using the whistleblower proceeding as collateral to and useful to unearth material for use in the other litigation and complaints.
The Court spells out plainly that the petitioner can either choose to withdraw his opposition to the motion or not withdraw the opposition, which will be denied. In choosing to withdraw his opposition, the petitioner will also have to certify that he will abide by court order prohibiting him from using the information furnished to him by the IRS outside the whistleblower case or face criminal felony punishment. The petitioner is assured that without the disclosure of the section 6103 information to him as a whistleblower, his whistleblower claim for reward shows little chance of success (though it is not a guarantee of success, either).
The Court goes on to say a lengthy response is not required and would be inappropriate. If that is what the petitioner does, it will be treated as unwillingness to withdraw the opposition. If petitioner tries to condition, qualify, or limit the withdrawal and compliance, that will also be treated as unwillingness to withdraw the opposition.
Takeaway: Hmm. Do what the judge says and withdraw the opposition or likely lose the case. Seems like an easy choice to me – pick # 1!
Privileges and Waivers
Docket Nos. 20940-16 and 20941-16 (consolidated), Tribune Media Company f.k.a. Tribune Company & Affiliates, et al., v. C.I.R., Order available here.
These cases have gone through several rounds of motions and are in the discovery phase before trial. This current order concerns IRS requests for production of documents. Tribune argued that the scope of one request should be limited and that everything has been produced for the second.
Regarding the discovery arguments, the Court discusses the limitations of relevancy and privileged information relating to the IRS requests. Specifically, Tribune objects to the production of documents in the first request based on the attorney-client privilege, the work product doctrine and the tax practitioner privilege under section 7525. However, those privileges were waived.
The Court reviews the scope of the waiver and generally sides with Tribune. For the first request, the Court agrees with 2 of the 3 limitations that Tribune asks for. On the second request, the Court takes Tribune at their word that they have complied with the document request.
Takeaway: If you are interested in learning more about privilege and waiver in discovery, reading this order would shed more light on that subject.
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