APA Provides No Basis To Compel IRS To Provide Access To Appeals

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Add Rocky Branch Timberlands v US to the list of interesting cases invoking the APA to challenge IRS actions.  As the case shows, the APA can be a taxpayer’s friend, but it is does not provide the means to get a court to second guess what the court believes are decisions that are solely committed to the agency’s discretion.

The case involves yet another audit of taxpayers claiming conservation easement deductions. The taxpayers, subject to the not quite dead TEFRA partnership audit procedures, initially refused to extend the SOL on assessment. With the three-year period coming close, the IRS issued a Notice of Final Partnership Administrative Adjustment (FPAA). The taxpayers changed their mind about the extension, and sent a signed 872-P extension form to the audit team and sought review before Appeals. IRS declined to sign the 872-P and refused to revoke its FPAA. The taxpayers sued, asking the court to order the IRS (1) to rescind the FPAA and (2) to sign the Form 872-P that would extend the time to assess, all with the hope of getting before Appeals and not having to take the case to Tax Court.


The government filed a motion to dismiss for lack of jurisdiction.

The court quickly found in favor of the government. As to the taxpayer’s request to rescind the FPAA, the court noted that the Anti Inunction Act prevented the court from ordering an injunction that would restrain assessment.  The Supreme Court has carved an exception to the AIA when there is no adequate remedy and the plaintiff shows that the government could not prevail. Here, the opinion notes that the FPAA did in fact trigger a separate remedy: the chance to challenge the denial in Tax Court, one in which the taxpayer through the tax matters partner had in fact done.

As to the demand that IRS sign the extension/Form 872-P, the court looked to the APA, noting that while it waives sovereign immunity there is no basis for a court to gain jurisdiction if the decision is committed solely to the agency’s discretion. In addition, there is no jurisdiction if the agency decision is not final. Both of these exceptions have a fair bit of nuance described in Saltzman and Book, IRS Practice & Procedure in our soon to be revised but still really good discussion of the APA.

But there was not much nuance presented here. As to not being final agency action:

The IRS’s decision not to sign the Form 872-P, and thereby decline to extend the statutory period, was not a final agency action within the meaning of [5 U.S.C] § 704.  Rather, it was an intermediary and procedural step leading up to the issuance of the FPAA and did not alter Plaintiffs’ rights or obligations.  The IRS’s decision not to sign the Form 872-P did not alter the limitations period.

As to discretion, the court similarly dismissed the taxpayer’s argument:

The IRS’s decision not to extend the statutory period was also discretionary.  Plaintiffs identify no requirement that the IRS agree to an extension, and the Court is aware of none.  To the contrary, the law provides the statutory period may be extended only upon agreement by the taxpayer and the IRS.  See 26 U.S.C. § 6501(c)(4); Feldman v. Comm’r, 20 F.3d 1128, 1132 (11th Cir. 1994).  This provision clearly provides the IRS discretion—co-equal to a taxpayer’s discretion—as to whether it will extend the statutory period.  It is strange that Plaintiffs would deny the IRS the same discretion is previously exercised in the very same review. 

A somewhat more interesting issue involved the taxpayer’s argument that the court should give some teeth to IRC 7803(e)(4), which as part of the Taxpayer First Act provides that review by Appeals (renamed Independent Office of Appeals) “shall be generally available to all taxpayers.”

As the taxpayer had sought access to Appeals prior to the issuance of the FPAA, the opinion noted that the request was moot in light of its decision to find that the AIA precluded the IRS from rescinding the FPAA. For good measure, the opinion stated that the APA would not help, as the discretion to decline to provide access to Appeals was solely vested in IRS. In finding that this was committed to the agency’s sole discretion, the court accepted the government’s analogy settlement power generally, as it is settled law that an agency’s decision to settle (or not) is solely a matter for agencies to determine.  

The opinion also concluded that the point in time that the taxpayers sought relief in the form of Appeals consideration, prior to the issuance of the FPAA, was merely an interim step in the agency process, and thus not final agency action.


The taxpayers have challenged the IRS’s denial of their deduction in Tax Court, so it is not as if they are without recourse to independent review on the merits. And the taxpayers’ initial refusal to sign the extension contributed to their problems. Add to the mix that there is not a lot of sympathy around those claiming easement deductions.

Yet, access to Appeals is a fundamental part of tax administration and embedded in the Taxpayer Bill of Rights. The language in this opinion, as well as other cases we have blogged about (including the Facebook case I discussed here)have held that access to Appeals is something that IRS can allow, or not allow, for essentially any reason. The TFA provides protections for taxpayers denied access to Appeals following the issuance of a stat notice.  Prior to that time, IRS controls the process, and the APA will likely not help.

Avatar photo About Leslie Book

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


  1. Jack Townsend says

    Les, good post. Thanks.

    Long ago, my former partner, Larry Jones and I authored an article, John A. Townsend & Lawrence R. Jones, Jr., Interpreting Consents to Extend the Statute of Limitations, 78 Tax Notes 459 (1998). Our argument was (and is) that courts confuse categories by constantly referring to such consents as waivers (which may be unilateral in the law) rather than contract-like agreements requiring mutuality. The consent authorized by § 6501(c)(4) is a contract requiring mutual agreement rather than a waiver that can be unilateral. I suppose that category error (it is surely that) is harmless, so long as the parties and the courts know (and so act) that a mutual agreement/contract is required.

    One of the consequences of requiring mutual (contract-like) consent is that a taxpayer (or partnership) cannot unilaterally waive or force the IRS to enter the consent, as the Court held in Rocky Branch.

    I just noticed one difference between statutes for consent for income tax under § 6501(c)(4) and TEFRA § 6229(b). The former requires agreement “in writing;” the latter does not textually require an agreement in writing. The only “in writing” requirement for § 6229(b) is that the agreement with respect to all partners be made by the TMP “(or any other person authorized by the partnership in writing to enter into such an agreement).” Of course, the implication is that the extension must be entered in writing, but the statute does not say that, and the sole regulation (TEFRA § 301.6229(b)-1 – Extension by agreement) does not require it either. I wonder if this opens up some opportunity to argue that an agreement was orally made or, if the “waiver” construct repeated rotely by courts is valid, that the taxpayer (partnership) can unilaterally “waive” the statute of limitations. (Not sure why the taxpayer (partnership) might want to unilaterally waive (I realize unilateral and waive my be redundant) the statute of limitations, and don’t think it would have helped the partnership in Rocky Branch; but if that urge were to arise, perhaps this argument could be deployed.)

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