It’s no surprise that the Supreme Court decision in Boechler was the highlight of PT posts in April. PT has been covering and standing steadfast behind the argument for many, many years and the case is a huge win for taxpayers, taxpayer representatives, and everyone who has helped inch this argument along.
Boechler: Announcement, Acknowledgments and Analysis
Supreme Court Decides Boechler Case: The Supreme Court held unanimously that the deadline to file a Tax Court petition in a Collection Due Process case is not jurisdictional and late filing is subject to equitable tolling. A link to the opinion is provided.
Winning Boechler Took a Village: Carl Smith was the leader of the village that it took to win Boechler. The village consisted of almost all pro bono attorneys and clinicians. Carl individually recognizes and thanks the people who played a significant role.
What Happens After Boechler – Part 1: The IRS Argues IRC 6330 is Unique: The first of a series of posts looking at the arguments the IRS may make to prevent Boechler from applying to section 6213(a), the deadline to file a Tax Court petition in a deficiency case. IRS will likely argue Congress intended for section 6330 to play a unique and highly protective role for taxpayers, but the legislative history of the deficiency deadline reveals that section was also intended to protect taxpayer rights.
What Happens After Boechler – Part 2: The IRS Argues the Floodgates Will Open if the Tax Court Follows Boechler in Interpreting IRC 6213(a): The next argument that the IRS may try to make is that if the deficiency deadline is not jurisdictional, it will release a floodgate of late filed cases onto the Court. There are substantially more deficiency cases than there are CDP cases, but that doesn’t mean that there are substantial numbers of late filed cases that have valid equitable tolling arguments. The floodgate argument is an exaggeration. A lot of the work is work that is already done, so this argument is less persuasive than the IRS may try to make it out to be.
What Happens After Boechler – Part 3: The IRS Argues that IRC 7459 Requires that IRC 6213(a) Treat the Time for Filing a Tax Court Petition as Jurisdictional: Under Section 7459, a petitioner whose case is dismissed for lack of jurisdiction is not prevented from paying the liability and suing for a refund. This post looks at the arguments regarding section 6213(a)’s relationship to section 7459 and finds that it does not require the deficiency deadline to be a jurisdictional requirement.
What Happens After Boechler – Part 4: The IRS Argues That Equitable Tolling Would Not Apply in Deficiency Cases: The fourth post in the series discusses the Supreme Court’s approach to the application of equitable tolling, what CDP petitioners must do to show that equitable tolling is warranted, and how equitable tolling could apply in deficiency proceedings. The Tax Court will need to look to the decisions of other courts to develop its approach in these cases.
Taxpayer Rights
State Level Taxpayer Rights: A Survey of State Tax Administration: Results of the State Tax Administration Survey slowly trickle in, but already allow for some interesting observations. Information about various state practices and procedures is being collected with the goal of being able to advocate more effectively for taxpayer rights at state levels.
Partial Pay Installment Agreements In the Dark: A TIGTA report has revealed PPIAs are not frequently used. There is a lack of outward guidance about them and the option is not even listed on the installment agreement request form. This jeopardizes taxpayer rights by interfering with a taxpayer’s right to be informed. The IRS will remedy this by adding information about PPIAs to its website and exploring ways to change the request form.
Principal Residences as Collection Target: TIGTA Criticizes IRS Practice: The TIGTA report also examined the IRS’s use of lien foreclosure suits when targeting a taxpayer’s principal residence. The process is quicker and offers less protections to taxpayers than the administrative seizure process which requires notice, due process rights, court approval and the right to redeem the property. TIGTA recommends the law be amended to provide taxpayers with the same rights and protections under both processes.
Recommendations to the IRS
Dial, redial, repeat: An entertaining, albeit frustrating portrayal of what a call to the IRS looks like these days. Robocalling services, staffing shortages, and technology issues have ushered in a new degree of a familiar frustration.
GAO Assesses IRS 2021 Filing Season Progress: The GAO issued a report evaluating the IRS’s performance with processing 2021 returns and providing customer service. The report includes unique recommendations, such as using the amount of interest paid on refunds as a measure of IRS performance. It also includes the run-of-the-mill recommendations that IRS modernize its technology and improve customer service on various fronts. PT will cover the report in more detail in a later post.
Interest and Accountability
Losing Interest: Delayed IRS Assessments: Inequity can occur between low income taxpayers who cannot afford to pay a deposit when their tax liability is in dispute and the middle- to high-income taxpayers who can. This post begins to examine possible arguments for an abatement of interest in situations where the IRS is delayed in making an assessment after a Tax Court decision has been entered.
Boilerplate Provisions in Stipulated Decisions May Have “Interesting” Consequences: Continuing to explore the arguments for interest abatement, this post specifically looks at section 6601(c) and whether a stipulated decision can have the same effect as a form 870 for purposes of suspending interest when the IRS takes too long.
Circuit Court Decisions
APA and FBAR Skirmishes Continue in Schwarzbaum v US: Schwarzbaum continues to shed light on the somewhat different ways the APA may be applied to the IRS’s conduct. The case was remanded back to the IRS to properly calculate the FBAR penalties, but now the parties disagree over whether the Court should retain jurisdiction over the case. The IRS speculates that petitioner will try to argue that the Government is time-barred from bringing a new suit to collect the recalculated penalties if the Court does not retain jurisdiction.
Ninth Circuit Reverses Tax Court Interpretation of IRC 6751(b): The Ninth Circuit reversed the Tax Court in Laidlaw’s Harley Davidson Sales and casts doubt on the approach the Tax Court has taken in section 6751(b) cases over the past several years. The Court held that penalty approval simply needs to occur before assessment, rather than before the initial determination. This case is a win for the IRS, but it is unlikely it will result in the Tax Court changing its approach for now.
Tax Court Decisions
The Limits of Community Property Relief When Spouses Split a Joint Business: Married couples who do not file jointly in community property states, generally, must report half of the total community income on their individual returns. Section 66(c) provides for relief, similar to innocent spouse relief, for these spouses when it is warranted. In Wheeler v. Commissioner, a requesting spouse failed to meet a requirement for relief when the income at issue was not attributable to the nonrequesting spouse. It was income from a jointly operated business and such income is treated as the gross income of each spouse on the basis of their individual shares.
Tax Court Answers
Eliminating Answers in Certain District Court Cases: In a follow up to other recent posts about Chief Counsel answers, this post looks at a new proposed rule change which seeks to simplify answers in cases that challenge social security determinations. The answer needs only to contain a copy of the record and set forth any affirmative defenses. This could be a model that the Tax Court considers adopting with some appropriate modifications.
Bankruptcy and Taxes
Can Bankruptcy Trustee Be Held Liable for Trust Fund Recovery Penalty of Responsible Officer?: In In re Big Apple Energy, LLC, a business owner sought to make the bankruptcy trustee personally liable for interest and penalties arising from the business’s failure to pay employee withholding to the IRS. The underlying tax amount was held in a segregated account and paid over as part of the bankruptcy estate. Interest and penalties accrued before the amount was paid to the IRS and state, but there was no claim filed against the estate for those amounts. As a result, the trustee could not be held liable for debts that occurred before he was involved and when he had fully paid the claims as filed.
Miscellaneous
Biden Administration Floats Refundable Pet Tax Credit Idea to Boost Child Tax Credit: As one of the most anticipated curators of April Fool’s jokes, PT has done it again- a great April Fool’s post from PT that I kind of wish was true.
A Beneficial Effect of Inflation: The IRS has updated the Collection Financial Standard amounts substantially this year. A new offer in compromise booklet has also been published and must be used for offers submitted after April 25.