Christine Speidel

About Christine Speidel

Christine Speidel is Associate Professor and Director of the Federal Tax Clinic at Villanova University Charles Widger School of Law. Prior to her appointment at Villanova she practiced law at Vermont Legal Aid, Inc. At Vermont Legal Aid Christine directed the Vermont Low-Income Taxpayer Clinic and was a staff attorney for Vermont Legal Aid's Office of the Health Care Advocate.

Tax Court Practice & Procedure Updates from the 2023 ABA Tax Midyear Meeting

February 16, 2023 by Leave a Comment

On February 10, the Court Practice & Procedure committee of the ABA Tax Section hosted Special Trial Judge Peter Panuthos and Robert Wearing, Deputy Associate Chief Counsel (P&A), for a recent developments session moderated by Allison Baker.

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Updates from the Tax Court

Judge Panuthos first presented some figures on Tax Court filings in fiscal year 2022. These can be found in the Court’s 2024 budget justification, which Keith blogged about here. The following charts are reproduced in Keith’s post:

  • Tax Court cases filed and closed
  • Cases filed based on jurisdiction type
  • Percentage of paper and electronic petitions
  • Trial sessions held

I recommend reading that post and Carl Smith’s comment on the categorization of cases.

Judge Panuthos noted that 80% of petitions filed were without counsel. 61% of cases were filed under Regular case procedures and 39% under Small case procedures.

Limited Entry of Appearance: Practitioners can now enter a limited appearance any time after a case is set for trial and before the adjournment of the trial session. See Administrative Order 2020-03, issued May 29, 2020, and revised June 19, 2020. The Order can be found on the Court’s Covid-19 Resources page.

Since 2020 the number of limited appearance filings has grown steadily. About 40 were filed in FY 2022. Judge Panuthos noted that the option is available to paid practitioners as well as pro bono counsel. In cases where the taxpayer has some ability to hire counsel but cannot afford briefing, it may be worth offering “unbundled” representation for the pretrial period and/or the trial session only.

Remote Trial Sessions. Judge Panuthos noted that the Notice Setting Case for Trial invites the parties to file a motion for a remote trial session if they desire one. To date, all such motions have been filed by the petitioner; none have been filed by respondent. The Court has been liberally granting these motions.

Public Access. Judge Panuthos responded to Keith’s post about the removal of one computer terminal in the court’s records room. He explained that between June 2022 and February 2023, only 22 people visited the Tax Court to look at records. According to the Court, there has never been an instance of someone needing to wait to use a terminal. The Court’s intent was not to limit the public’s access; rather, they did not believe there was a need for two computers.

I can understand that rationale – computers do require maintenance, as anyone trying to work on a computer that has not had updates run for months (or years) will find out. Villanova has gradually removed nearly all of its clinic workroom computers over the last five years, for the same reason as the Court removed the second public access terminal.

Judge Panuthos stated that the Court continues to consider ways to expand access to the public, but remains concerned about inadvertent disclosure of confidential information.

Tax Court Rule Changes. Judge Panuthos thanked those who submitted comments on the Tax Court’s proposed rules last spring. The comments were given serious consideration. New rules will be coming “soon” – no date was promised.

Quarterly Webinar. The next quarterly Tax Court webinar will be held on March 16. The topic is expert witnesses. The flyer is here. Register at https://bit.ly/ustc031623.

Tax Trailblazers. The next Tax Trailblazers webinar will feature Larry D. Bailey. View the flyer and sign up here: Engagement & Outreach | United States Tax Court (ustaxcourt.gov). The program is February 22 from 7 to 8:15 PM ET.

Clinic & Calendar Call program. Judge Panuthos thanked ABA Tax Section volunteer attorneys and members of the Pro Bono and Tax Clinics committee for their commitment to improving access to justice in the Tax Court. 126 organizations are currently enrolled in the Court’s calendar call program.  

Updates from the Office of Chief Counsel, IRS

Robert Wearing, Deputy Associate Chief Counsel (P&A) presented highlights from the Office of Chief Counsel’s Fiscal Year 2022 Report to the ABA. The report consists of 27 PowerPoint slides providing a wealth of information. The slide deck can be downloaded here.

Mr. Wearing first noted that the Office of Chief Counsel’s statistics do not perfectly match the Court’s; indeed they never have. It is not clear why there are slight differences.

The docketed inventory numbers show that we may be over the coronavirus-caused backlog, or at least the trend is in the right direction.

It is no surprise that the spike in cases following the pandemic mainly came from service centers. Practitioners have complained about the IRS functions prematurely issuing notices of deficiency (and also making premature assessments). This is likely contributing to the high volume of small dollar cases.

Small dollar cases make up the vast majority of cases petitioned, but 83% of the dollars in dispute come from just 420 cases.

Taxpayers were self-represented in 90.5% of cases petitioned during FY22.

I hope that some feedback loop exists, and there are some incentives or consequences in place for executives in charge of programs like AUR, AQC, and correspondence exam, so that the IRS will put resources into improved service center compliance processes. These processes look cheap, but in reality they often shift work downstream to Chief Counsel, the Tax Court, and calendar call programs.

Filed Under: Tax Court

Tax Court Trial Procedures: Guidelines from Judge Jones

February 2, 2023 by 2 Comments

Last week I attended my first Washington, D.C. calendar call, over which Judge Jones presided. This post describes the trial procedures announced at calendar call. While the procedures may be especially helpful in cases conducted by legally unsophisticated pro se petitioners, they offer excellent advice for attorneys appearing before any Tax Court judge.

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Before getting to the trial procedures I want to mention one curious difference between the calendar call in D.C. and the calendar calls in Philadelphia which I’ve attended for the last four years.

Three women in suits stand in front of a gray wall. On the wall is "United States Tax Court" in white. It is a cloudy and windy day.

When I arrived last Monday the trial clerk informed me that the docket was down to 7 cases, all with self-represented petitioners. I did not expect much “action” knowing that attorneys and students from American University (photo at left), UDC, Catholic University, and Legal Services of Northern Virginia were planning to attend and offer assistance. Frankly it seemed like overkill to bring everyone to court.

I was astonished when 6 of the 7 petitioners stood up at calendar call. Soon every clinic was busy advising a petitioner. According to the other clinic directors this is usual in D.C.

Unfortunately it is not the norm in Philadelphia. We have very low attendance, sometimes with zero petitioners attending. If we are lucky, one person out of ten will show up. I do not know why attendance from self-represented taxpayers would be so much higher in D.C. than in Philadelphia. It would be an interesting study if anyone would like to conduct it.

General Trial Procedures and Courtroom Rules

Judge Jones has helpfully compiled Instructions to the Parties Regarding Trials and Courtroom Rules Governing Conduct During Proceedings of the U.S. Tax Court, which are available as a single stapled packet during calendar call.

Anyone who has taken a trial advocacy course should be familiar with the guidelines (e.g., address all remarks to the Judge; keep your face neutral during witness testimony). The packet helpfully sets out the guidelines logically and succinctly. The Trial Instructions cover

  1. Opening Statements and Examining Witnesses
  2. Objections To Questions
  3. General Decorum
  4. Promptness of Counsel And Witnesses
  5. Exhibits
  6. Advance Notice of Difficult Questions
  7. Briefing Schedule
  8. Other Rules

The general Courtroom Rules document attached to the trial instructions also applies to conduct during calendar call. It addresses these topics:

  1. Courtroom Decorum
  2. Security
  3. Broadcasting and Photographs
  4. Sanctions
  5. Additional Orders  

Keep in mind that Judges may have different preferences in a few areas covered by the packet, and it is always wise to know your judge. If you don’t know your judge, Judge Jones’s instructions will guide you to make safe choices, but don’t be surprised if your judge expresses different preferences. For example, Judge Jones’s procedures direct the parties to keep opening statements under ten minutes. In contrast the late Judge Ruwe preferred that the parties waive opening and closing arguments, but he would permit them if a party insisted. As another example, it is always best to ask the Court’s permission to approach a witness as required by Judge Jones’s instructions. But, some judges will advise that you do not need to keep asking each time during an examination.

Framework for Trying Business Expense Disputes

Sole proprietorship trade or business expenses were the number one issue petitioned to the Tax Court by business taxpayers in FY 2022, according to the National Taxpayer Advocate’s 2022 Annual Report to Congress. It wasn’t even close:

2022 NTA ARC p. 177

Many of these cases will be settled by Calendar Call, but the Court still must regularly handle disputes over business expenses. For low-income taxpayers these usually involve Schedule C expense substantiation. When we consult with taxpayers in this situation two challenges often arise – lack of preparation and organization makes it challenging to prove expenses on a granular level; and lack of understanding about the legal context. Self-represented petitioners often do not understand when Respondent is making a legal argument about their expenses (e.g. clothes suitable for everyday wear are not deductible) versus when Respondent is making a substantiation argument (e.g. the receipt does not show what was purchased). And when the underlying documents are not organized for trial, it can be a frustrating exercise for everyone. Even when receipts were kept organized, they are often voluminous, and unfortunately cheap register tape fades over time.

Given the regularity with which these problems occur, Judge Jones wisely imposes order on the process and requires detailed preparation on both sides. Before trial begins, Judge Jones requires each party to complete a worksheet provided by the court.

The worksheet includes this example of a correctly completed form:

Petitioner is the owner of a sports bar and restaurant and claims a $5,000 advertising expense deduction on his Schedule C, Profit or Loss From Business, attached to his 2009 Federal income tax return. Petitioner’s advertising expense consists of: (1) A $3,000 advertisement placed in a national newspaper; (2) a $ 1,000 advertisement placed in a local newspaper; and (3) a $1,000 advertisement on a billboard. Respondent concedes that $ 1,000 of the $5,000 advertising expense is deductible, but disallows the remaining $4,000 for lack of substantiation.

Judge Jones also explained that she tries substantiation cases year by year, and item by item within each year. For example, a two-issue case covering two tax years might proceed like this: evidence on 2018 car and truck expenses, then 2018 office expenses, then 2019 car and truck expenses, then 2019 office expenses.

Conclusion

The substantiation worksheet and the trial guidelines are useful preparation documents for attorneys. But more importantly, both of these documents should help a self-represented petitioner present their best possible case to the Court, so that the case can be decided on its merits and the petitioner can truly be heard.

Filed Under: Tax Court

IRS Delays $600 Reporting Threshold for Forms 1099-K

December 23, 2022 by 1 Comment

The American Rescue Plan Act of 2021 lowered the reporting threshold to $600 for third parties that process credit card and other payments relating to business activities. In an early Christmas present to those who seek repeal of the provision, the IRS announced today that it will delay implementing new reporting threshold for another year.

IRS Notice 2023-10 sets out the details: calendar year 2022 will be treated as a transition period, and no penalties will be imposed for third party payment processors who follow the pre-ARPA rules:

The IRS will not assert penalties … for TPSOs failing to file or failing to furnish Forms 1099-K unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of transactions exceeds 200. For returns for calendar years beginning after December 31, 2022, a TPSO is required to report payments in settlement of third party network transactions with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of such transactions.

Income from transactions not reported to the IRS is a major part of the U.S. tax gap, as the IRS FAQ on the provision explains. However, the IRS press release states that

“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” said Acting IRS Commissioner Doug O’Donnell. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”

For now, third-party settlement organizations can relax, and we will all wait to see what Congress does with IRC 6050W in the coming year.

Filed Under: Information Returns

Will the “Blogger Rule” Join the “Fatty Rule” as Litigation over IRC 6015(e)(7) Continues? (Part Two)

December 13, 2022 by Leave a Comment

In Part One I introduced the pending case Thomas v. Commissioner, in which a taxpayer seeks to exclude some of her blog posts from evidence in her innocent spouse trial. She argues the blog posts must be excluded under 6015(e)(7) as they were public at the time of the administrative determination and so should not be considered “newly discovered” or “previously unavailable” to respondent.

Does “Newly Discovered” Imply Any Diligence Requirement?

As you’ll recall from Part One, Judge Toro set out nine questions for the parties to consider in their memoranda of law. Perhaps the most crucial question is this:

  1. Should Federal Rule of Civil Procedure 60(b)(2) inform our interpretation of the term “newly discovered evidence” in I.R.C. § 6015(e)(7)? That rule provides that “[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b). Fed. R. Civ. P. 60(b)(2) (emphasis added).
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In her motion to strike, Ms. Thomas argues that applying the FRCP 60(b)(2) standard makes sense under Tax Court Rule 1(b) and Tax Court precedents applying the standard to Tax Court Rules 161 and 162. She notes:

Applying the ordinary meaning would set a very low bar in determining whether evidence is “newly discovered,” as it would allow Respondent to freely reopen the record and submit any evidence at trial just on a showing that it did not previously know about it without any consideration of Respondent’s attempt to obtain the evidence sooner. It is unlikely that this is what Congress intended when enacting the TFA.

Fed. R. Civ. P. 60(b)(2), in contrast, provides an administrable standard for admitting newly discovered evidence, by requiring a showing that the party seeking admission has exercised reasonable diligence.

In petitioner’s view, 6015(e)(7) would be meaningless if “materials which were publicly and freely available on the internet, and which Respondent could have easily located with a simple internet search, are ‘newly discovered evidence.’” She points out that the IRM permits CCISO to engage in internet research.

Respondent’s Objection to Motion to Strike, in contrast, argues that the plain language of the statute should control without any requirement of IRS diligence during the administrative proceeding. Respondent points out that a requesting spouse bears the burden to establish that they are entitled to relief, and that CCISO is not directed to thoroughly investigate each case before it: “It would be a waste of IRS resources to gather additional evidence to refute an inadequate claim…”

Petitioner states that respondent would have been able to find the blog by doing a simple internet search for petitioner’s name. Respondent should not have to do that because petitioner generally has the burden of proof at all stages of the request for relief and, to the extent important information is on a blog or elsewhere, petitioner ought forthrightly to provide the information as required by the Form 8857 she signed under penalties of perjury. The ease with which one may be able to find evidence does not matter when a party omits it…

…Exhibit 13-R, in its entirety, should be admitted into evidence as respondent did not become aware of petitioner’s blog until after the final administrative determination.

Concern for Moral Hazards versus Concern for Unsophisticated Taxpayers

The Objection also raises the danger that petitioners could potentially withhold information or documents from CCISO. If the government does not discover those items on its own, a petitioner could be rewarded for their malfeasance. In her reply, petitioner points out that there is no evidence the blog posts were deliberately withheld from CCISO.

as Petitioner explained during the trial, she did not view her blog, which was an attempt at self-branding and marketing, as relevant to her actual real world financial circumstances.

I cannot think of any client (or even any attorney) who would submit all potentially relevant documents to CCISO in the first instance. Innocent spouse cases (especially equitable relief cases) are fact-dense, and the universe of potentially relevant documents is enormous. Without the ability for some development of the case by exchanges of information and arguments on both sides, it is difficult to see how one could reach the right result on the merits of most equitable relief cases.

The clinics’ amicus brief urges the Court consider the realities of the administrative process and how self-represented taxpayers experience that process. Ms. Thomas likewise argues that

the Tax Court should take special care in determining what constitutes reasonable diligence in the innocent spouse context, particularly where the taxpayer is pro se and/or has suffered domestic abuse. …[T]he determination of whether the party seeking admission of the evidence exercised reasonable diligence should take into account the resources and wherewithal of that party. (Petitioner’s reply)

Respondent agrees that “the court should consider factors like who has knowledge of and control over the evidence and which party has the burden of proof.” But, Respondent also asks the Court to “consider the administrative burden of extensive research to try to capture evidence uniquely within petitioner’s control or that which petitioner willfully hides.” (Objection ¶42) And in response to petitioner’s reply, Respondent contends the requesting spouse actually has the upper hand before CCISO:

If anything, because the requesting spouse is the expert on their factual circumstances, respondent’s burden should be lighter unless the requesting spouse affirmatively discloses information during the administrative stage.

CCISO Engages in Limited Factfinding: On which side should that weigh?

Respondent’s filings and the amicus brief both point out the limitations of the current administrative process, but they draw very different conclusions. The amicus brief spends some paragraphs detailing the administrative process in the CCISO IRM, pointing out that it is not designed to generate a full factual record upon which the Tax Court can reach a de novo conclusion on the merits of the case. (A forthcoming Tax Lawyer article by Scott Schumacher argues that the administrative process is so flawed that CCISO does not reach the correct result except by accident.)

Respondent presents a similarly limited view of CCISO’s role, but for reasons of administrative efficiency and capacity as well as the burden of proof, the government would place all the onus on the requesting spouse to establish the administrative record. Respondent ties this to the “general requirement in administrative law to exhaust administrative remedies.” (Objection ¶ 11.) I find this an odd fit with 6015(e). Not only is there no requirement to request an administrative appeal before a court appeal (reflected in Respondent’s practice of sending docketed cases to Appeals for settlement consideration), a requesting spouse can file a petition before the IRS makes any determination at all. IRC 6015(e)(1)(A)(i)(II).

I found it interesting that in Respondent’s view, requiring a fuller investigation by CCISO would make the administrative process more adversarial. (Response to Reply ¶14, 15) Given that many requesting taxpayers are unrepresented and often face considerable barriers, it would be a terrible outcome for taxpayers if future CCISO technicians only investigated to uncover unfavorable or impeachment evidence. If the Court ultimately views 6015(e)(7) as incorporating a reasonable diligence requirement on the part of the agency, the IRS should consider other models of non-adversarial investigative processes, such as those employed for veterans benefit or Social Security disability claims. The Center for Taxpayer Rights’ Reimagining Tax Administration workshops, especially sessions 5, 6, and 7, provide much food for thought here.

A Note about The Role of Amicus Briefs

Responding to the amicus brief, Respondent commented that (in their view) the clinics’ amicus brief is counter to petitioner’s position. I disagree, but it is true that the amicus brief does not exactly track petitioner’s analysis.

One of the benefits of an amicus brief is that it can bring “to the attention of the Court relevant matter not already brought to its attention by the parties.” In the clinics’ view, this includes taking a broader perspective on the issues which may include analysis that is not identical to that of the petitioner, despite the amicus brief ultimately supporting petitioner.

Conclusion

Thomas raises thorny issues as everyone grapples with an unclear and ill-advised statute. The difficulties posed in applying 6015(e)(7) to the blogging taxpayer perhaps show why this is a highly unusual standard and scope of review in the administrative state. Innocent Spouse litigation may be very messy for many years to come.

If the “Fatty rule” holds, it will mitigate the harmful impact of the TFA on self-represented petitioners who are unlikely to build an adequate administrative record for judicial review. Here’s hoping that a future “blogger rule” does not have the opposite result. No matter how the case comes out, it will set important precedent on a novel question of law.

Filed Under: Innocent Spouse

Will the “Blogger Rule” Join the “Fatty Rule” as Litigation over IRC 6015(e)(7) Continues? (Part One)

December 12, 2022 by Leave a Comment

In Thomas v. Commissioner, Dkt. 12982-20, the interpretation of “newly discovered or previously unavailable evidence” in IRC 6015(e)(7) seems to be squarely before the Tax Court.

We have covered the Taxpayer First Act changes to the Tax Court’s innocent spouse jurisdiction in prior posts, such as my early post here. Most recently, Keith blogged the bench opinion in Bacigalupi v. Commissioner in which Judge Holmes followed the analysis he first adopted in Fatty v. Commissioner (blogged by Les here): since the IRS administrative process to adjudicate innocent spouse claims does not allow for sworn testimony or cross examination, witness testimony is “previously unavailable” and thus admissible evidence in a Tax Court trial. Judge Holmes was careful to note that in these nonprecedential orders he was not establishing a general rule for all future cases and that he might take a different view in the future. Nevertheless, the opinions show one potential approach to “previously unavailable” evidence.

The Thomas case presents an opportunity for the Tax Court to flesh out the other caveat in 6015(e)(7): “newly discovered” evidence. In Thomas, Respondent offered as trial exhibits several blog posts written by the petitioner Ms. Thomas, including some that were published before the final innocent spouse determination issued but which were not part of the administrative record. The Center for Taxpayer Rights, the Community Tax Law Project, and the Tax Clinics at Hastings and Villanova with my colleague Les Book together filed an amicus brief in the case flagging some broader concerns, including the inadequacy of the current administrative process in building a record for de novo review, particularly as to claimants navigating the impacts of domestic violence and other barriers.

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Thomas v. Commissioner and Initial Evidentiary Issues Presented

Ms. Thomas and her husband were going through financial and marital difficulties when he passed away unexpectedly. Ms. Thomas then requested relief from joint underpayments, offering (among other reasons) that her husband was abusive and that she could not afford to pay the debts. Before her husband’s death, Ms. Thomas had started a new business targeting a well-heeled clientele and she wrote a blog to promote that business. Ms. Thomas continued to post on her blog while her innocent spouse claim was pending. In Respondent’s view, the blog posts show a very different lifestyle than the picture Ms. Thomas painted for CCISO.

The IRS, though CCISO, denied Ms. Thomas’s claim on September 8, 2020. (The record does not reveal why Ms. Thomas did not appeal the preliminary determination.) Ms. Thomas appealed CCISO’s denial to the Tax Court, and she represented herself at trial on April 4, 2022. At trial both parties sought to introduce new documents that weren’t part of the administrative record, and respondent also raised hearsay and relevance objections to some documents in the record.

Judge Toro took the objections under advisement, and on April 26 issued an order discussing IRC 6015(e)(7) and the eight challenged trial exhibits. Here is a modified version of the table that appears in the order:

Exhibit NumberDescriptionObjection (P or R)Included in the Administrative Record?
Exhibit 6-J, p. 10-14 Exhibit 29-PLetters of supportHearsay (R)Yes
Exhibit 6-J, p. 15-18Real estate recordsRelevance (R)Yes
Exhibit 6-J, p. 29Employment ContractRelevance (R)Yes
Exhibit 13-RBlog postsI.R.C. § 6015(e)(7) (P)No
Exhibit 31-PBankruptcy Court filingsI.R.C. § 6015(e)(7) (R)No
Exhibit 32-PNews articleHearsay; Relevance (R)No
Exhibit 33-PLand Rover invoiceRelevance (R)No

After setting out some preliminary considerations, Judge Toro determined that “it would advance the orderly resolution of this case to treat each of the exhibits listed above as admitted in full.” However, the Court invited either party to file a motion to strike, and further noted that if such a motion was filed, the Court would entertain a motion for leave to file an amicus brief “in support or opposition.”

Respondent declined this invitation, but petitioner filed a motion to strike part of Exhibit 13-R: the blog posts that were published before the September 2020 determination. As noted above, an amicus brief (to which Les and I contributed) was filed in support of petitioner. Respondent filed an objection to the motion, to which petitioner replied, as well as a response to the amicus brief and a response to petitioner’s reply.

While only Ms. Thomas’s pre-determination blog posts remain at issue, practitioners may want to take note of the items that Respondent initially challenged and prepare to litigate these issues if necessary in other cases. To the government’s credit, here it did not maintain its initial relevance or hearsay objections to documents found in the administrative record.

Kudos to the Court for soliciting amicus briefs on this novel issue, and for encouraging the petitioner to seek counsel. Ms. Thomas is now represented pro bono by Megan Brackney of Kostelanetz & Fink.

The Blogger Problem

Judge Toro’s order identifies many questions raised by the blog posts:

  1. Are the blog posts newly discovered or previously unavailable evidence?
  2. In making that determination, what is the importance (if any) of the fact that some of the blog posts were publicly available via Internet search during the IRS innocent spouse administrative proceeding?
  3. If the Commissioner did not “discover” the blog posts until after the administrative proceeding was complete, is that sufficient to allow the blog posts into evidence at trial?
  4. Should the phrase given its ordinary meaning (e.g., evidence that was not “found out” before a relevant time) or should it be viewed as a term of art? […]
  5. If the phrase is viewed as a term of art, is its meaning different from the ordinary meaning of the phrase?
  6. Should Federal Rule of Civil Procedure 60(b)(2) inform our interpretation of the term “newly discovered evidence” in I.R.C. § 6015(e)(7)? That rule provides that “[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b). Fed. R. Civ. P. 60(b)(2) (emphasis added).
  7. If Federal Rule of Civil Procedure 60(b)(2) should inform our interpretation of the term “newly discovered evidence” in I.R.C. § 6015(e)(7), what is the import of the qualifying language used in that rule and italicized above?
  8. Relatedly, should this Court’s interpretation of the term “newly discovered evidence” in other contexts inform our interpretation of the same term in I.R.C. § 6015(e)(7)? See, e.g. Estate of Quick v. Commissioner, 110 T.C. 440, 441 (1998) (applying the term “newly discovered evidence” in the context of a motion to reconsider pursuant to Rule 161, Tax Court Rules of Practice and Procedure); Fairmont Aluminum Co. v. Commissioner, 22 T.C. 1377, 1383 84 (1954) (same, regarding a motion for new trial pursuant to Rule 162, Tax Court Rules of Practice and Procedure); Rule 1(b), Tax Court Rules of Practice and procedure, the Court . . . may prescribe the procedure, giving particular weight to the Federal Rules of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand.”).
  9. Does the “newly discovered evidence” standard mean that the same evidence could be admissible if offered by one party but inadmissible if offered by the other? For example, might the older blog posts be admissible if the Commissioner offers them (because they existed at the time of the administrative proceeding but were then unknown to (or had not been “found out” by) the Commissioner), but not if the petitioner offers them (because she knew of them at the time of the administrative proceeding)? And if the one party is allowed to offer “newly discovered evidence,” how can the other party rebut that evidence in a manner consistent with I.R.C. § 6015(e)(7)?

The parties’ answers to these questions reflect very different visions for the future of innocent spouse cases under the TFA. In Part Two, we’ll examine the arguments raised.

Filed Under: Innocent Spouse

Updates from the ABA Tax Section 2022 Fall Meeting: Court Procedure & Practice

October 21, 2022 by 3 Comments

Les, Samantha, Caleb, and I recently returned from the ABA Tax Section’s Fall Meeting in Dallas. Among the excellent sessions I attended was a Recent Developments program of the Court Procedure & Practice committee on October 14. The panelists were Judge Lewis T. Carluzzo, Chief Special Trial Judge, United States Tax Court; Cynthia Messersmith, Chief, Southwestern Civil Trial Section, U.S. Department of Justice, Tax Division, Dallas, TX; and Melissa Avrutine, Special Counsel, IRS Office of Chief Counsel, Procedure & Administration. The moderator was Kandyce Jayasinghe, Covington & Burling LLP. This post will focus on the Tax Court updates provided by the panel, grouped by topic.

General Tax Court Updates

Chief Special Trial Judge Carluzzo began the session with updates from the Tax Court. He first offered a tribute to former Tax Court Judge Herbert Chabot, whose passing was announced by the Court that same day.

Judge Carluzzo announced that the court will hold a webinar on November 16, moderated by Chief Judge Kerrigan. The flyer is here, and you can register here.

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From the flyer:

Please join the United States Tax Court for an informative webinar panel discussion moderated by Chief Judge Kathleen Kerrigan. The program will highlight changes to Tax Court practice made in response to the COVID-19 pandemic, including lessons learned, best practices, and practical implications for ongoing controversy matters and trial calendars.

The webinar participants are Chief Judge Kathleen Kerrigan, Judge Cary Douglas Pugh, Judge Emin Toro, Sheri Dillon of Morgan Lewis & Bockius LLP, Michael Garrett and Andrew Titktin of the IRS Office of Chief Counsel, and myself. Experience with both large and small cases is represented on the panel.

Judge Carluzzo also addressed mail irradiation, which was recently a topic of discussion on the ABA’s Low-Income Taxpayer Clinic listserv and in the news. The judge explained that irradiation of mail to the Court is not within the Tax Court’s control – it is conducted by the U.S. Postal Service. Some types of ink do disappear in the process. Kelly Philiips Erb wrote about the issue, and her search for a pen whose ink would not be affected, here ($). There does not seem to be an easy way to tell if your ink will disappear. This provides another reason to use DAWSON and pay.gov whenever possible.

Case Statistics and Filing

Judge Carluzzo reported that the Tax Court continues to receive a high volume of petitions, approximately two thousand per month. The Court has received over 20 thousand petitions so far this calendar year. However, the Court is closing more cases than it is opening, and the majority of cases are disposed by stipulated decision. The Court is pleased that many cases are settling earlier in the process. This past August 1,300 cases were closed that had never been calendared.

Electronic filing of petitions has been at a consistent level of around 35%. This indicates that some self-represented petitioners are using the e-filing system, but the Court would like to see that number rise. The Court encourages practitioners to make clients aware of DAWSON when consulting with people who may petition pro se.

As of October 14, 2022, the Tax Court had 31,831 cases pending, of which 8,295 were assigned to a judicial officer. Of those, 250 cases are fully submitted and awaiting an opinion. The Court does not track the time it takes cases to move from submission to opinion, or the time from petition to decision. There is no average figure available for either timeframe.

Later in the session, Melissa Avrutine offered additional case figures from the IRS Office of Chief Counsel. As of 6/30/22, the Office of Chief Counsel records showed 40,400 dockets open in Tax Court, representing $30.1 billion in dispute. Ms. Avrutine noted that this is $10 billion more in dispute than any of the years from 2012 to 2020; however the 2022 numbers are down from 2021. In the first three quarters of FFY 2022, 28,100 dockets were opened (of which about 25,000 had self-represented petitioners), and 20,400 dockets were closed.

Post-Boechler Issues

Judge Carluzzo noted that the Supreme Court’s Boechler opinion has impacted the court’s case processing, in that the court will no longer scrutinize CDP petitions for late filing. He acknowledged that the Court will need to develop law on equitable tolling, but cautioned that the Court may not have occasion to reach the issue in very many cases. For equitable tolling to come before the Court, (1) the answer must raise late filing as a defense; and (2) petitioner’s reply to the answer must raise equitable tolling.

Judge Carluzzo noted that post-Boechler challenges to the jurisdictional nature of filing deadlines are pending in the Hallmark (deficiency) and Frutiger (innocent spouse) cases. Ms. Avrutine also commented on the Hallmark case, referring attendees to Respondent’s filing of June 22 (linked in Carl’s post here; the taxpayer’s reply is linked in another of Carl’s posts here). She noted that the government believes the Ninth Circuit opinion in Organic Cannabis is controlling under the Golson rule. Notably, in the Frutiger case Judge Buch has invited motions for leave to file an amicus brief.

Keith and Carl recently blogged on the impact of Boechler and pending litigation here, here, and here.

Tax Court Rules

As PT readers know, last March the Tax Court released proposed amendments to its Rules of Practice and Procedure. Judge Carluzzo said that the Court is still in the process of finalizing its rule changes. All of the public comments can be found on the Court’s website here.

Ms. Avrutine highlighted some of the comments from the IRS Office of Chief Counsel on the proposed rules. In particular, Ms. Avrutine noted the government has concerns about the proposed requirement for it to locate and file the statutory notice with the Court if a petitioner fails to attach the notice to their petition. At least 8 different offices issue jurisdiction-granting notices, and it is difficult for the Office of Chief Counsel to find the notice by the Answer deadline. If the rule is finalized as proposed, Respondent will often have to move to extend the deadline. Ms. Avrutine stated the government’s position is that the Court should treat such filings as imperfect petitions and order petitioners to supplement with the statutory notice within 60 days. Presumably, the case could be dismissed if the petitioner is unable to find the notice, or a complete copy of the notice. Such a position would cause many more cases to be dismissed.

Regarding proposed rule 92, Respondent supports the proposal for the parties to stipulate to the administrative record but believes 60 days after the notice setting the case for trial would be more administrable than the proposed 30 days, and 90 days would be appropriate for whistleblower cases. Ms. Avrutine further stated that the administrative record should have a uniform definition across all cases where the validity of a rule could be challenged under the APA.

Subpoena Procedures

Perhaps the most positive development to emerge from the pandemic has been the availability of remote hearing sessions for the purpose of receiving subpoena responses before the calendar call. Pre-pandemic, the inability to serve a subpoena returnable in advance of trial was a longstanding source of practitioner frustration. Samantha Galvin wrote about the anomaly of Tax Court subpoenas here, and William Schmidt wrote about the new procedures here.

Judge Carluzzo stated that the Court intends to continue regular remote motion and subpoena sessions indefinitely as long as standalone remote calendars continue to be scheduled. He commented that the Court’s remote subpoena procedures have been well received on all sides, and generally occur weekly on Wednesdays. Although the document is titled “Subpoenas for Remote Proceedings,” I understand that attorneys are currently requesting and receiving remote subpoena hearings for cases that will be tried in person.

A subpoena returnable only at the calendar call is much less useful to the parties and the court and needlessly prolongs litigation. However, Judge Carluzzo noted that there is a pending case before Judge Lauber in which petitioner challenges the remote subpoena hearing process as a violation of the Tax Court rules and the statute (presumably rule 147 and IRC 7456). As the Court finalizes its next round of rule changes, perhaps remote subpoenas will be formally incorporated.

Trial Sessions

Judge Carluzzo reported that all trial sessions are now being scheduled in person, except for some smaller cities. However, the calendar may be changed to a remote format at the discretion of the trial judge, or by order of the Chief Judge.

I recently experienced this in Philadelphia, where on September 20 we were notified that the September 26 trial calendar would be heard on Zoomgov. I can understand the Court’s decision. The docket was down to 5 unresolved cases, all with unresponsive petitioners. I understand that two of the petitioners appeared at the remote calendar call, notwithstanding the late format change.

National Virtual Settlement Week October 24-27

Ms. Avrutine announced the upcoming national Virtual Settlement Week, happening October 24 -27 as part of National Celebration of Pro Bono Week. This event is a partnership between the IRS Office of Chief Counsel and the ABA Section of Taxation. Practitioners can learn more and sign up for a shift here.

Whistleblower Litigation

Ms. Avrutine alerted attendees to an important new appeal to watch, Whistleblower case Docket 972-17W, concerning disclosure of nonparty return information under IRC 6103(h)(4)(A). The Tax Court opinion held that respondent is authorized under the statute to submit the unredacted administrative record to the Court, and that the Court had jurisdiction over the case, consistent with the D.C. Circuit’s opinion in Li v. Comm’r. Keith most recently blogged about the jurisdictional issue here. The disclosure issue is significant in these cases, and we will follow the issue in the D.C. Circuit.

Filed Under: ABA Tax Section, Tax Court

Late Filing Penalty Relief for 2019 and 2020 Returns to Generate Automatic Refunds

August 24, 2022 by 2 Comments

Today the IRS issued a press release announcing extremely broad late filing penalty relief for the 2019 and 2020 taxable years. Importantly, relief is being applied automatically, and taxpayers do not need to take any action to receive a refund of penalties they paid.

Notice 2022-36 details the specific tax returns and penalties for which relief is provided. Returns must be filed by September 30, 2022 to qualify for relief.

The notice also explains the government’s rationale for providing relief, citing the President’s coronavirus pandemic emergency declaration as well as the pandemic’s impact on IRS operations and return processing backlog. The notice states, “the Treasury Department and the IRS have determined that the penalty relief described in this notice will allow the IRS to focus its resources more effectively, as well as provide relief to taxpayers affected by the COVID-19 pandemic.”

Kudos to the IRS for making relief automatic. The press release indicates that most refunds will be issued by the end of September.

Edited to add: the National Taxpayer Advocate blog has a very good summary of the relief provided.

Filed Under: Civil Penalties, Disaster

Tax Compliance for Refugees: Free Training Aims to Fill Gap in Tax Assistance

June 8, 2022 by 1 Comment

The ABA Tax Section is co-sponsoring a free training on June 15 to prepare volunteers to provide tax preparation for first-year refugees. Volunteers with e-filing capabilities are particularly needed to help refugees file their first U.S. tax return correctly. “First year” tax returns are outside the scope of what FreeFile, VITA, and TCE sites can handle, due to their complexity. The unmet need for competent, free assistance with first-year returns has been clear for many years. Hopefully this training will lead to permanent tax preparation assistance projects for refugees nationwide.

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The training will cover tax residency, elections, foreign account disclosure, economic impact payments, child tax credits, and other issues relating to tax compliance for people who arrived in the U.S. during 2021. Many kudos to Frank Agostino for coordinating the training and providing for 3 free IRS continuing education credits.

To RSVP: https://t.co/d0zkNtVrU4

When: Wednesday, June 15, 2022, 1:30-4:30 PM ET

Where: Virtual

A flyer advertising the Tax Compliance for Refugees Training
Filed Under: miscellaneous
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