Equitable Tolling and Bankruptcy Time Periods

Bankruptcy brings out equitable rulings in a way that tax issues do not, but as discussed at the end of the post, remembering the bankruptcy equitable rulings can prove helpful.  The leading case on equitable tolling and bankruptcy in the tax context is United States v. Young, 535 U.S. 43 (2002) where the IRS argued, and the Supreme Court held, that the time period for a tax to retain priority status based on BC 507(a)(8)(A)(i) was equitably tolled based on a prior bankruptcy filing.  In that case the debtor filed a chapter 13 petition and stayed in bankruptcy long enough for the tax period to age out of priority status.  The debtor then dismissed the chapter 13 bankruptcy petition and shortly thereafter filed a chapter 7.  After obtaining a discharge in the chapter 7, the debtor argued that the debt was no longer entitled to priority status and thus discharged due to its age and status.  The Supreme Court said that under these circumstances the IRS time period for having a priority claim was tolled by the first bankruptcy since that bankruptcy prevented the IRS from collecting on the debt.

In Rader v. Internal Revenue Service, No. 3:21-ap-90125 (M.D. Tenn. 2023) the debtor made a similar argument, but this time the parties argued about the period in BC 523(a)(1)(B)(ii) which governs the discharge of taxes for individual taxpayers who file their returns late.  As in the Young case, the IRS prevailed in its equitable tolling argument.


Mr. Radar filed a chapter 13 bankruptcy petition on March 11, 2014.  He successfully completed the bankruptcy using the five-year plan option and received his discharge on November 12, 2019.  Prior to filing his successful chapter 13 petition, Mr. Radar filed a chapter 13 petition on May 11, 2011, which was dismissed without a discharge on November 7, 2013.  During both bankruptcy cases the automatic stay arose at the time of filing the petition and lasted until the dismissal (first case) or the discharge (second case.)  While the automatic stay was in effect, the IRS could not take collection action against Mr. Radar and the collection statute of limitations was tolled; however, the time period in BC 523(a)(1)(B)(ii) makes no mention of the effect of a prior bankruptcy.

I have discussed BC 523(a)(1)(B)(ii) in numerous blog posts because this subparagraph comes into play for the courts interpreting the unnumbered paragraph at the end of BC 523(a) which gave rise to the “one-day rule” discuss here and in many preceding posts.  You can find an extensive discussion of the one-day rule in IRS Practice and Procedure at Chapter 16. 

The Radar case, however, involves a straight-forward interpretation of this provision.  BC 523(a)(1)(B)(ii) provides that a taxpayer who files a return late cannot discharge a tax liability related to that return without waiting for two years after the filing of the late return.  This exception to discharge ties back to the priority provisions and to the overall goal of the bankruptcy code to generally give the IRS adequate time to collect on a debt before allowing a debtor to discharge the tax debt in bankruptcy.

Mr. Radar, like many who file for bankruptcy as well as many who do not, failed to timely file his returns for many years.  For the years 2002-2009 he filed eight years of past due returns on Mach 15, 2011.  He filed his 2010 return on April 2, 2012.  He apparently filed the past due returns without remittance or with insufficient remittance.

The timing of the filing of these late returns is not a coincidence.  So many debtors were going into bankruptcy with unfiled returns that Congress addressed the situation in the 2005 extensive revisions to the bankruptcy code.  Debtors must file past due returns or face dismissal from bankruptcy.  In the 2005 legislation Congress enacted BC 1308 entitled “Filing of prepetition tax returns.”  This section requires the filing of the four returns due prior to the filing of the bankruptcy petition.  By March of 2011, Mr. Radar was probably consulting with a bankruptcy attorney in preparation for the filing of his first bankruptcy petition and knew he needed to file the past due returns.

By filing the past due returns less than two months before he filed his first bankruptcy petition, he did not give the IRS much time to process those returns and begin collection.  Because the IRS give past due returns low priority for processing during the filing season and because the past due returns must be paper filed, the returns filed in March of 2011 were probably not processed for several months.  Once processed, the IRS would have filed a claim in the bankruptcy case but done nothing else because of the stay.

When Mr. Radar was dismissed from the first bankruptcy case, the IRS could collect; however, only four months separated the first and second bankruptcy cases at which time the IRS had to stop collection and wait for payment through the bankruptcy process.  At the time of the second bankruptcy filing, the IRS had only six months of time to collect when the automatic stay did not prevent collection.

After noting that the two-year rule of BC 523(a)(1)(B)(ii) would allow the discharge of all of the years at issue except 2010 if equitable tolling does not apply, the bankruptcy court launched into its analysis of equitable tolling.  It stated:

There is a “rebuttable presumption” that equitable tolling applies to nonjurisdictional federal statutes of limitations. Holland v. Florida, 560 U.S. 631, 645-46, 130 S. Ct. 2549, 2560 (2010) (citation omitted). “It is hornbook law that limitations periods are ‘customarily subject to ‘equitable tolling,’’ unless tolling would be ‘inconsistent with the text of the relevant statute.’” Young v. United States, 535 U.S. 43, 49, 122 S. Ct. 1036, 1040 (2002) (citations omitted).

It is not immediately obvious that the two-year lookback period in §523(a)(1)(B)(ii) is a limitations period. However, in Young, the Supreme Court explained that a similar tax-related three-year lookback period in 11 U.S.C. §507(a)(8)(A)(i), as incorporated by §523(a)(1)(A), was a “limitations period because it prescribes a period within which certain rights (namely, priority and nondischargeability in bankruptcy) may be enforced.”3 Id. at 47.

The Supreme Court noted in Young that the IRS risked older taxes becoming dischargeable if not collected or if a tax lien is not perfected before the three years under that subsection have elapsed, so the IRS was encouraged to act quickly. Id. “Thus, . . . the lookback period serves the same ‘basic policies [furthered by] all limitations provisions: repose, elimination of stale claims, and certainty about a plaintiff’s opportunity for recovery and a defendant’s potential liabilities.’” Id. at 47 (quoting Rotella v. Wood, 528 U.S. 549, 555, 120 S.Ct. 1075 (2000)). The Supreme Court acknowledged that the lookback period was limited in nature since it only barred some, but not all, legal remedies (namely priority and nondischargebilty in bankruptcy), but it held it was, nonetheless, a statute of limitations. Id. at 47-48. So that point regarding the nature of the lookback period as a limitations period is settled by the Young decision.

After the Young decision, Congress amended BC 507(a)(8) in 2005 to specifically addressed, at least in part, the problem of prior bankruptcy cases on the priority of the tax claim by adding an unnumbered paragraph to the end of the section.  In making that change it did not alter BC 523(a).  The bankruptcy court noted that two prior bankruptcy court decisions had addressed the specific question at issue in Mr. Radar’s case: Putnam v. IRS (In re Putnam), 503 B.R. 656 (Bankr. E.D.N.C. 2014), aff’d sub nom. Putnam v. I.R.S., No. 5:14-CV-118-D, 2014 WL 8863125 (E.D.N.C. Sept. 24, 2014); Ollie-Barnes v. IRS (In re Ollie-Barnes), No. 09-82198, 2014 WL 5794866 (Bankr. M.D.N.C. Nov. 6, 2014).

 Mr. Radar argued that the failure of Congress to make a change to BC 523 to fix this problem at the time it changed BC 507 showed that the rebuttable presumption for equitable tolling should not apply.  The bankruptcy court turned around that argument finding that the change to BC 507 showed that Congress approved of the tolling of time periods such as this and doing so would close a loophole.

Mr. Radar made a second argument regarding equitable tolling based on the facts and circumstances of the case.  He argued:

vehemently and creatively that because equitable tolling is “equitable” relief, the totality of the circumstances should be considered in determining whether it would be equitable to toll the lookback period. Debtor argues for a case-by-case review of the actions of both the debtor and the IRS. If a debtor has acted in good faith and if the IRS perhaps has not, Debtor argues that the lookback period should not be tolled. Debtor contends some actions of the IRS reflect poor conduct or bad faith, such as the way Chapter 13 plan payments were applied to the IRS debt in the earlier case and the pursuit of dischargeable penalties. Accordingly, under Debtor’s approach, all actions of the parties throughout the bankruptcies and the collection process should be considered before imposing any equitable remedy.

Debtor misconstrues the equitable focus when a limitations period is tolled. The focus is on whether the applicable claimant has been prevented in some way from acting within the limitations period. See Robertson v. Simpson, 624 F.3d 781, 783 (6th Cir. 2010) (“The doctrine of equitable tolling allows courts to toll a statute of limitations when ‘a litigant’s failure to meet a legally-mandated deadline unavoidably arose from circumstances beyond that litigant’s control.’”) (citation omitted).

While rejecting this argument as a basis for preventing equitable tolling, the court noted that in the next phase of the trial the IRS behavior in the case could become relevant. 

The decision did not surprise me based on the Supreme Court’s analysis in Young and the equities of shielding yourself from collection but wanting the benefit of the ticking clock on IRS collection opportunities.  The case indicated that a fair amount of money was at issue.  So, an appeal may occur.

I like to see the IRS make equitable arguments and believe that it deserves to make those arguments.  It also deserves to be reminded that it argues in favor of equitable tolling when it benefits the IRS and against it when it favors taxpayers.  Bringing out the cases where it makes these arguments helps in the cases where it seeks to limit equitable tolling.

Ninth Circuit En Banc Panel Reverses Seaview Trading

We should have covered this case much earlier but sometimes when a case comes out we look for an appropriate guest blogger and the process of getting out a post on an important case gets sidetracked.  That seems to have happened here.

We wrote about Seaview Trading in May of 2022 when the 9th Circuit reversed the Tax Court.  In its holding, the 9th Circuit found that delivery of a delinquent return to a revenue agent who requested it served as the filing of the return starting the statute of limitations on assessment.  This decision had significance.  So much significance that the IRS could not live with the decision and requested an en banc review which the 9th Circuit granted.  While the case was under en banc consideration, we wrote about a Rule 28(j) letter the IRS sent to the court.

On March 10, 2023, the 9th Circuit sitting en banc reversed the decision of the panel restoring the Tax Court’s decision that handing the delinquent return to the requesting revenue agent did not meet the requirements for filing a return.  This meant that the statute of limitations on assessment remained open at the time the IRS sent the taxpayer adjustments to the return since the statute of limitations on assessment never runs with respect to an unfiled return.   In this post I will explain why the full court reversed the panel and talk about the vigorous dissent. 

While the taxpayer in this case was very well represented, in many instances when the IRS employee requests back returns, the taxpayer is unrepresented and unfamiliar with the regulations that govern filing.  The practice of requesting back returns by an IRS employee should always be accompanied by a warning to the taxpayer that delivery of the return does not satisfy the filing requirements.  Without treating a return provided under these circumstances as filed or an adequate warning that providing the return does not satisfy the filing requirements, many taxpayers will be lulled into believing that handing a return to an IRS employee at the employee’s request acts to file the return with all of the attendant issues that flow from filing.  The fact that the IRS has a fair amount of internal guidance that conflicts with its regulation also makes this a tough decision for taxpayers.

The Tax Clinic at the Legal Services Center of Harvard Law School filed an amicus brief in this case at the panel stage but not during the en banc consideration.


Seaview apparently failed to file its return for the tax year 2001 by the due date or during the period after the due date.  At some point a revenue agent reached out to Seaview requesting the return.  Seaview faxed a complete, signed copy of the return to the revenue agent in 2005.  It mailed a signed copy to a Chief Counsel, IRS attorney in 2007.  If either of those actions satisfied the requirements for filing a return, the statute of limitations on assessment would have run by the time the IRS sends the notice of partnership adjustment in 2011.

The relevant regulation, 26 C.F.R. § 1.6031(a)-1(e) (2001), provides:

(e) Procedural requirements—

(1) Place for filing. The return of a partnership must be filed with the service center prescribed in the relevant IRS revenue procedure, publication, form, or instructions to the form (see § 601.601(d)(2)).
(2) Time for filing. The return of a partnership must be filed on or before the
fifteenth day of the fourth month following the close of the taxable year of the partnership.

The IRS instructions to taxpayers in 2001 with a principal place of business in California was to file their return at the Ogden Utah Service Center.  Seaview thought it timely filed its 2001 return and provided the RA not only with a copy of the return but with a copy of the certified mailing receipt for the envelope in which it allegedly placed the 2001 return in July of 2002; however, Seaview conceded on appeal that it cannot prove the IRS received the 2001 return as part of the mailing signified by the receipt.

While Seaview gave copies of its return to the RA and later to a Chief Counsel attorney, neither of the individuals to whom it gave a return forwarded the 2001 return to Ogden and Seaview also did not send a return to Ogden during this period.  In October 2010, the IRS issued a notice of final partnership adjustment disallowing a $35 million loss claimed on the 2001 return.  In Tax Court, Seaview conceded it was not entitled to the claimed loss and limited its argument to the timeliness of the notice because it came too late after Seaview hand delivered the returns to the RA and the Chief Counsel attorney.  The Tax Court rejected Seaview’s argument, but it prevailed at the 9th Circuit panel garnering two votes of the three panel members.

The en banc opinion starts its legal discussion with a quote that limitations periods are “strictly construed in favor of the government.”  That quote provides a roadmap for the discussion to come.  The opening paragraph ends with another quote:

“meticulous compliance by the taxpayer with all named conditions in order to secure the benefit of the limitation.” Lucas v. Pilliod Lumber Co., 281 U.S. 245, 249 (1930).

Since Seaview did not follow the regulation requirement and the relevant IRS instructions for 2001 returns by sending the return to the Ogden Service Center the en banc court reverses the panel decision and reinstates the Tax Court decision.  It points out that its conclusion is consistent with the decisions of other circuits and with a long line of Tax Court opinions.

Seaview argued that the regulation only applies to timely filed returns.  The regulation prescribes both place for and time for filing requirements.  The en banc court rejected that interpretation stating that the regulation makes no distinction between timely and untimely returns.

Seaview argued that handing the return to a requesting IRS employee satisfies the requirement for filing a return based on the IRS’s own historical interpretation and practice.  It pointed to three guidance items promulgated by the IRS: 1) IRS, Chief Counsel Advice No. 199933039 (Aug. 20, 1999) stating Revenue Officers should accept hand delivered returns for filing as delegates of the District Director; 2) IRM § (2005) which instructions IRS personnel to process delinquent returns by sending them to the appropriate campus; and 3) IRS Policy Statement 5-133, Delinquent Returns—Enforcement of Filing Requirements (Aug. 4, 2006),  which says that absent fraud “[a]ll delinquent returns submitted by a taxpayer, whether upon his/her own initiative or at the request of a Service representative, will be accepted.”

The en banc court rejected the argument that these documents overrode the requirement of the regulation.

One judge, Judge Bumatay who served on the panel that overturned the Tax Court decision, dissented.  He finds the manual provision and other actions of the IRS regarding returns to effectively override the strict language of the regulation.  He minces no words in criticizing the decision of the majority:

What makes our court’s decision most perplexing is that the IRS’s public guidances about filing delinquent tax returns with requesting officials adheres to the Tax Code and IRS regulations. The Tax Code only requires filing a return as the IRS “may prescribe in regulations.” 26 U.S.C. § 6230(i) (repealed 2015) (emphasis added). But here, the IRS has promulgated no regulation on how partnerships must file “delinquent” returns. In such cases, we follow the plain meaning of “filing.” And, as the IRS has previously concluded, sending a delinquent return to a requesting IRS official fits with the plain meaning of the term. So the IRS’s public statements about filing delinquent returns with an IRS representative follows the law, and we should have held the IRS to its promises. Instead, our court lets the IRS “speak[] out of both sides of its mouth.”

Judge Bumatay notes that publicly the IRS encourages taxpayers to file returns with IRS representatives while allowing those representatives to decide whether to “file” the return by not forwarding the return to the appropriate Service Center.

[W]e are nation of laws, not bureaucrats. It’s the plain meaning of the Tax Code that governs this case—not the whims of some IRS agent. While the majority may feel that tax liabilities may be easily afforded—or even deserved— by a multi-million-dollar partnership like Seaview, the consequences of our court’s decision will fall on countless taxpayers without the legal resources or means to defend themselves against the arbitrary power of individual IRS officials. (emphasis added)

The dissent goes on for several more pages explaining why Judge Bumatay finds the IRS position in this case inconsistent with the IRC, the regs and its internal guidance.  The reason the Tax Clinic wrote an amicus brief supporting a well-heeled, well represented partnership that invested in a tax shelter is captured by the bolded section of the final quote.  The regulation should not be viewed in a vacuum.  If an IRS employee solicits a return in their official capacity and a taxpayer remits the return, the taxpayer should be allowed to rely on that remittance as a filing even if the IRS employee does not follow the IRM and forward a copy of the return to the appropriate Service Center. 

Of course, taxpayers should file their returns timely with the appropriate Service Center.  Anyone advising a taxpayer should advise them to file their late returns with the appropriate Service Center even if requested to file a return with an IRS employee acting in their official capacity.  The en banc decision and the position of the IRS do not align with fairness to taxpayers.  From a taxpayer rights perspective, this decision fails to protect their rights.

When Does a Pending Installment Agreement Exist

The existence of a pending installment agreement (IA) stops the IRS from levying to collect and outstanding liability. Section 6331(k) sets out four time periods when the Service cannot levy where an IA exists: 1) while consideration of IA is pending; 2) for 30 days after rejection of IA plus additional time if rejection is appealed, including 30 days after rejection of appeal; 3) while IA is in effect; and 4) for 30 days after termination of IA plus additional time if termination is appealed, including 30 days after rejection of appeal. We discuss the restraint on levy in connection with IAs in “IRS Practice and Procedure” at Ch 15.05.  The connection also plays out in the suspension of the statute of limitations on collection as discussed recently here.

In Taylor v. United States, 131 A.F.T.R. 2d 2023-458 (E.D. Mich. 2023), the court must determine whether an IA existed in deciding how it could address the remedies sought by the taxpayer.


The Taylors owed the IRS almost a million dollars.  They ask the court to: 1) require the IRS to accept an IA; 2) prohibit the IRS from taking any collection action while the proposed IA was pending; and 3) order the IRS to return money it obtained via levy on Mr. Taylor’s bank account.  They claim they are entitled to this relief because the IRS violated 6331(k)(2).  The IRS moves to dismiss their case based on Federal Rules of Civil Procedure 12(b)(1) and (b)(6) because sovereign immunity or the anti-injunction act bar their claims for relief.  To reach the point of granting the motion filed by the IRS, the court must interpret IRC 6159.

Section 6331(k)(2) limits the authority of the IRS to engage in collection activities while the Secretary considers whether to accept an IA that a taxpayer has proposed. That section provides that:

[n]o levy shall be made…on the property or rights to property of any person with respect to any unpaid tax…during the period that an offer by such person for an installment payment under section 6159 for payment of such unpaid tax is pending with the Secretary” (the “Levy Prohibition”). 26 U.S.C. § 6331(k)(2). The Levy Prohibition further provides that if the Secretary rejects a taxpayer’s proposed installment payment plan, the IRS shall not levy against the taxpayer’s property or rights in property “during the 30 days thereafter.

In deciding whether the limitation on collection authority applies, the court must decide whether the Taylors had a pending IA.  The regulation providing guidance here, section 301.6159-1(b)(2), states that an IA is pending when it is accepted for processing.  This seemingly simply statement becomes complex both because of way in which many IAs are created – over the phone with the Automated Call Site (ACS) – and subject to the IRS determination that the proposal of the IA was made to delay or impede collection.  So, the IRS holds a trump card when it comes to deciding if an IA is pending.  If it is pending, then collection activities described in the first paragraph of the post come into play.

Because of the size of their liabilities, the Taylors were privileged to work with a revenue officer (RO) rather than becoming a part of the hoi polloi that must call into ACS.  They submitted a proposed IA to the RO.  He decided the IA was submitted simply to delay collection.  Because of his decision the IRS did not accept the IA for processing, and it never became a pending IA.

The Taylors argued that they submitted several additional IAs, but the RO wrongfully refused to process their proposals.  In addition to refusing to accept the IAs, the RO also took levy action which the Taylors allege violates 6331(k).

The court finds no waiver of sovereign immunity under the facts of this case.  Two of the three actions the Taylors request the court to take concern past actions by the IRS.  Section 6331(k) does not provide relief for those actions.  Their third request which seeks to enjoin the IRS from taking further collection action could fit the requirements of the statute; however, the problem they face in seeking to use 6331(k) results from the IRS refusal to process their IA.  In order to trigger the injunctive provisions of the statute, an offer must be pending.  Here, it was not.  So, the court dismisses the claims against the IRS.

The Taylors also sued individual defendants – the two ROs who worked their case.  The court finds that the anti-injunction act prohibits this part of the case.

The Taylors are not entitled to mandamus relief against the individual Defendants because they seek to compel those Defendants to perform functions that involve at least some discretion. For example, the Taylors seek to force the individual Defendants to accept their installment plan proposals for processing, but, as described above, the Secretary (acting through her designees, such as the individual Defendants) may decline to process such a proposal if the Secretary concludes, through her designee’s exercise of discretion, that the proposal has been submitted to delay the collection of a tax. Likewise, the Taylors seek to force the individual Defendants to accept $575,000 toward their outstanding tax debt. But the Taylors have offered that payment as part of their installment plan proposal which, again, the Secretary and her designees have the discretion to reject.

The court provides more detail concerning why the Taylors cannot obtain the relief they want but the bottom line in this case is that relief from collection based on the submission of an installment agreement depends on the IRS deciding to process the IA.  In cases involving ROs, the IRS will generally have an easy time showing what the RO did and why.  For taxpayers with less money due to the IRS, the ACS site will generally not keep records of conversations to the same extent as a revenue officer.

While the determination that no pending IA existed caused the court little trouble here, the factual determination is not always so clear which is what makes statute of limitations on collection determinations difficult when the taxpayer or the IRS begins by discussing the possibility of an IA.

Trust Fund Recovery Penalty Case Raising Issues Regarding Deposit and Last Known Address

In Ahmed v. Commissioner, No. 22-10191 (3rd Cir. 2023) the taxpayer appeals from a decision of the Tax Court that an attempted deposit of the amount of his liability was properly categorized as a payment ended his Collection Due Process (CDP) case due to mootness.  On appeal, Mr. Ahmed gets another chance to prove the money he paid to the IRS should not moot his CDP case.

Along the way to its decision, the Third Circuit provide good background on the Trust Fund Recovery Penalty (TFRP), proper addressing of notices, deposit vs. payment and mootness.  Because it has so many procedural issues packed into one case, it provides a good case for a multifaceted procedural discussion.


Mr. Ahmed ran a business which failed to pay over the withheld income and social security taxes from its employees.  The IRS determined that he was a responsible officer who willfully failed to pay over the money the corporation held in trust for the IRS.  It sent Mr. Ahmed a notice setting out his liability and giving him the right to discuss the proposed assessment with Appeals.  He says that he never received the notice.  The court states that the envelope shows the street address as 5B but his CDP request form indicated that he lived at 58.  The court noted other possible problems with the address.

Because he did not receive the notice giving him the right to go to Appeals as part of the TFRP determination process, his case went into the collection stream and eventually led to a CDP notice of federal tax lien filing (NFTL).  When he received his CDP notice, he timely filed.  Appeals sustained the filing of the NFTL resulting in a determination letter from which he filed a Tax Court petition.  The Tax Court partially granted summary judgement to the IRS but remanded the case to Appeals for verification of the mailing of the TFRP notice to his last known address.

While Appeals began its reconsideration of the case, Mr. Ahmed remitted $625,000 to the IRS with the statement “Deposit in the Nature of a Cash Bond Under IRC 6603.”  The accompanying letter also instructed the IRS to treat the remittance as a deposit.  The IRS, however, determined he was ineligible for treatment of the payment as a deposit because a liability under 6672 does not fall within the sections covered by 6603 deposit procedures.  So, the IRS treated the remittance as a payment and the payment mooted the CDP proceeding by satisfying his liability.  It moved for dismissal of the CDP case as moot, the Tax Court dismissed the case for lack of jurisdiction and Mr. Ahmed appealed.

The Third Circuit states that the threshold question it must answer is whether the payment qualifies as a deposit.  It then provides historical background on this issue pointing out that common law initially served as the basis for making this determination.  The Supreme Court recognized tax deposits in Rosenman v. United States, 323 U.S. 658, 662-662 (1945).  At the time of the Rosenman decision the IRC contained no provision regarding deposits versus payment.  Following the Rosenman decision courts began using a facts and circumstances test which the court illustrates through a string citation of six cases decided between 1965 and 2013.  Congress entered this area of the law in 2004 when it enacted 6603.

The court notes, as the IRS had determined, that 6603 does not apply to money remitted to the IRS with respect to a 6672 liability.  Although 6603 does not apply to allow a deposit in this situation, 6672 has its own deposit provision in 6672(c) which allows a taxpayer to post a bond.  Here, Mr. Ahmed was arguably prevented from using the specific provision due to the lack of receipt of the 6672 notice because the IRS mailed it to someplace other than his last known address.  So, the issue turns back to whether the IRS sent a valid notice.  Because the issue of the validity of the notice required by 6672(b) remains unresolved, the court notes that his remittance may have occurred prior to an appropriate assessment in which case the facts and circumstances test could render the remittance a deposit rather than a payment.

The court then notes that if the 6672 notice was sent to his last known address, then he should have used the bond provision of 6672(c) rather than seeking to make a deposit under 6603.  If a valid notice was sent, the Tax Court’s decision was correct, and the payment mooted the CDP case with one possible exception.  The court finds that he may be entitled to request interest abatement under 6404(h).  The court explains the ability of the Tax Court to view his CDP request as also encompassing an interest abatement request and leaves it to the Tax Court to determine whether the request could be construed to cover interest abatement once the remittance issue is resolved.

The court also drops a footnote swatting away Mr. Ahmed’s effort to argue for a refund citing to McLane v. Commissioner, 24 F.4th 316 (2022) and Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006).  In the same footnote it also notes the CDP case involving the NFTL is moot because the IRS released the liens after treating the remittance as a payment.

So, Mr. Ahmed gets a trip back to Appeals where he will argue that the 6672 notice was improperly addressed.  If he fails to convince Appeals, he can make the argument to the Tax Court and if he fails there head back to the Third Circuit.  If he wins on the address issue, the remittance will be changed to a deposit, the IRS will send a new notice if it is still within the assessment period or he will have a complete victory if the statute has run.  In the end the deposit issue is really a sidelight to the issue of proper notice.  Based on the facts presented in the opinion the notice issue will be close if it is based on a typo of “5B” versus “58.” 

Timing Your Bankruptcy Petition to Obtain a Discharge of 2019 Taxes

The effect of the pandemic continues to play out with tax issues.  In yesterday’s post regarding the timing of filing a refund claim for 2019 Bob Probasco explained how the extension of time to file the 2019 return impacts the three year rule for timely filing a claim.

Another impact of the extension of time to file the 2019 return plays out for individuals waiting out the three year rule for income tax liability to transform from priority claims in bankruptcy to general unsecured claims eligible for discharge.  This post raises questions regarding the timing of bankruptcy filings in 2023 seeking to gain the benefit of what is normally a cut and dry time period.


Bankruptcy Code section 507(a)(8)(A)(i) provides that the IRS is entitled to priority claim status for

A) a tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition –

i) For which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition

 Ordinarily, this provision grants priority status to taxes owed when a person goes into bankruptcy for the periods in which the return due date fell less than three years before the filing of the bankruptcy petition.

For example, if an individual filed bankruptcy on April 10, 2023, the taxes for the years 2019 through 2022 would have priority status since the due dates for the returns for those years fell less than three years before the filing of the bankruptcy petition.

Why does this matter?  Unless the bankruptcy estate will fully pay the taxes for these years, the individual debtor will exit bankruptcy still owing the taxes for these years because of the operation of Bankruptcy Code section 523(a)(1) which excepts from discharge all taxes entitled to priority status.

So, a debtor with outstanding taxes who wants to rid themselves of a tax liability will wait until April 16 of the year three years after the due date of the return for the year of the tax liability to file their bankruptcy petition. (If they obtained an extension of time to file the return they will wait until October 16.)

Now, enter the pandemic and the global extension of time to file tax returns for 2019.  How does that global extension of time impact the debtor’s decision on when to file their bankruptcy petition in order to obtain the benefit of a discharge.  On the refund side the post by Bob Probasco argues that the global extension provides additional time for a taxpayer to file their refund claim for 2019.  Taxpayers who need debt relief want an earlier date to apply.  Unlike its pronouncement in Notice 2023-21 that seeks to provide guidance regarding the timing of refund claims for 2019, the IRS has issued no guidance on its view of when a tax claim turns from a priority claim into a general unsecured claim.  It must have internally issued this guidance because it will start filing claims taking a position on this issue almost immediately.

This question was recently posed to me by a tax clinician.  Like any good lawyer, I declined to answer the question and instead consulted someone else.  In this case I consulted Ken Weil who has written several bankruptcy posts for PT and to whom I bring all of my thorny bankruptcy questions.

Ken said he had given the issue much thought and he felt strongly that unless a taxpayer had filed for an extension of time to file their 2019 return, the three year rule for priority claims should cause 2019 taxes to turn into general unsecured claims on April 16, 2023. He also thought that since the IRS had not issued guidance on this issue taxpayers should wait until July 16, 2023 to file their bankruptcy petition out of an abundance of caution. I agree with Ken’s conclusion regarding the timing of the priority status and also with his advice to wait, if possible, until the sure thing.

He cited to IRM § (07-25-2022) and said  “I think it is pretty clear that the IRS issued its extension under the emergency rules.  IRS Notice 2020-18 (March 20, 2020).”  He also cited to Bryan Camp’s “Lesson From The Tax Court: Counting the Days,” TaxProf Blog (May 23, 2022).”

There will ways in which the pandemic extension impacts tax procedure other than refund claims and bankruptcy discharge but these are two obvious and immediate areas of concern raised by the special events in the spring of 2020.  Just as getting vaccinated can assist you in preventing the worst consequences of COVID, thinking about a planning the timing issues presented by the special extension of time to file in 2020 can keep you from an unpleasant tax result.

Extending the Statute of Limitations on Collection

In a pair of recent cases, taxpayers argued unsuccessfully that before the IRS brought suit against them the statute of limitations on collection had expired.  We have written before about the difficulty in calculating the statute of limitations in collection cases and about the government’s penchant for bringing the cases close to the statute expiration period.  You can find earlier posts here, here, here and here.  If a taxpayer is uncertain whether the statute of limitations on collection has expired prior to the bringing of the suit, there is little downside to the taxpayer of putting the government to its proof regarding the statute of limitations.  The government almost always wins these cases because the lawyers in Chief Counsel and Department of Justice Tax Division do a good job at calculating the statute.  In the two cases I will discuss today, the government attorneys again calculated the time period correctly though different statute of limitation provisions governed each case.  In both cases the taxpayers raised as a defense to suspension of the statute the IRS failure to suspend collection when it should have.


In United States v. Sparkman, No. 5:21-cv-00788 (C.D. Cal. 2023) the taxpayer owed over $600,000 stemming from a Tax Court decision in 2005, Sparkman v. Commissioner, TC Memo 2005-136.  He substantially reduced his liabilities in the Tax Court case but still had a sizable liability which he did not pay.  Because of his outstanding liability and the inability of the IRS to collect on it administratively, the government filed a suit in May 2021 seeking to reduce the liability to assessment.

After the Tax Court decision, Mr. Sparkman appealed to the 9th Circuit and continued to seek redress in the Tax Court where there are just as many docket entries after the decision as before.  More importantly for purposes of this case, the IRS sent him a CDP levy notice in August 2006 and he timely requested a hearing.  The IRS issued a determination letter in March 2008.  Running on a parallel track was a CDP lien notice just a couple months later and a determination letter issued at the same time as the letter issued with respect to the levy.  He timely filed Tax Court petitions with respect to both determinations and the Tax Court issued decisions on both in December 2009.

In January 2012 he sought an installment agreement.  The discussion regarding the installment went on for some time.  The decision details all of the back and forth which principally centered around the view of the IRS that he should sell some property to pay down his debt.  In June of 2013 a deal was struck regarding an acceptable installment agreement amount and in January 2014, he began to make the payment.  In making the payments, Mr. Sparkman designated them to be applied to his 2007 liability which was assessed in 2013 after an audit.  This designation violated the installment agreement since it essentially meant he was not making payments on the liabilities covered by that agreement.  The IRS terminated the installment agreement in March 2016.

The IRS framed the issues as follows: 1) whether the CDP hearings and Tax Court cases suspended the statute of limitations on collection and 2) whether the installment agreement request and subsequent discussions also suspended the statute.  Mr. Sparkman argued that the IRS failed to honor his CDP request and engaged in illegal collection activities.  Without deciding if the IRS engaged in illegal collection activities, which it said was irrelevant, the court found that the CDP request and Tax Court case suspended the collection statute of limitations for the period stated by the IRS.  This was a relatively simple and straightforward calculation that really raised no new issues.

With respect to the installment agreement suspension, things get a little stickier as is normal with this basis for suspension of the collection statute.  Section 6502 suspends the statute for the period during which a proposed installment agreement is pending and for 30 days immediately following the termination of an installment agreement.  Treasury Regulation 301.6331-(4)(a)(2) provides that an installment agreement is pending when accepted for processing.  The court cited to “IRS Practice and Procedure” at 15.06[1] to find the three circumstances supporting acceptance for processing: 1) a request for an installment agreement is received before a case is referred by the IRS to the Department of Justice; 2) the request contains sufficient information for the IRS to decide if the proposal is acceptable and 3) the IRS has not returned the proposed installment agreement.  Mr. Sparkman said the installment agreement was not pending for the entire period because at some points in the discussion the IRS told him his proposal was unacceptable; however, the court finds that there was an ongoing negotiation for 546 days leading to the acceptance of the installment agreement.

This is murky water.  The court finds a period most beneficial to the IRS.  I cannot say that it is wrong but only that the concept of pending installment agreement is one that places a heavy burden on parties trying to nail down the statute of limitations.

A second case decided was decided not long after Sparkman.  The case of United States v. Colasuonno, No. 7:21-cv-10877 finds that the government timely filed a suit to collect based on the suspension of the statute of limitations caused by a bankruptcy filing.  The IRS brought this suit on December 20, 2021, seeking to reduce its liability to judgment.  Mr. Colasuonno has a substantial liability for Trust Fund Recovery Penalty and was successfully prosecuted in conjunction with the liability.  He filed a chapter 7 petition on July 24, 2009.  Because the TFRP liability is entitled to priority status no matter how old it is and because BC 523(a)(1)(A) excepts from discharge all taxes entitled to priority status, the bankruptcy had no ability to assist him in removing the TFRP liability.  Nonetheless, it suspends the statute of limitations on collection since the bankruptcy automatic stay prevents the IRS from pursuing collection which it is in effect.  He received a discharge in the bankruptcy case on June 8, 2011.  The discharge would lift the automatic stay with respect to collection action against Mr. Colasuonno though not necessarily against assets in the bankruptcy estate.

Similar to the argument made by Mr. Sparkman, Mr. Colasuonno takes the position that the IRS should not receive the benefit of an extended statute of limitations by virtue of the bankruptcy because it violated the automatic stay and sought to collect from him by filing a notice of federal tax lien after the filing of the bankruptcy petition.  The IRS argues that if it violated the automatic stay Mr. Colasuonno could bring an action against it with respect to the violation but that has nothing to do with the statute extension caused by the filing of his bankruptcy petition.  The court analyses the relevant statutory provisions and agrees with the IRS.  It finds that Mr. Colasuonno’s remedy for a stay violation is to bring a specific suit for an injunction and/or to recover damages caused by the violation but that he cannot use the stay violation to change the statutory calculation of the time of the suspension. Calculating the suspension of the statute based on the period of the bankruptcy stay, the court finds that the suit was timely filed.

I agree with the decision of the court here as well.  It is unfortunate for both defendants that they did not, or allegedly did not, receive the full measure of the stay on collection that they should have received by filing a CDP or bankruptcy case.  They have the right to be compensated for the IRS missteps but that right does not stop the clock on a suspension described by statute.  These cases point out the different actions by a taxpayer that can suspend the statute of limitations on collection as well as the conclusion that the suspension goes into effect whether or not the IRS complies with the reason for granting the suspension.

Rooms Where it Happened

When Tony Infanti and Phil Hackney approached Les and me about partnering between Procedurally Taxing and the Pittsburgh Tax Review for an edition on tax procedure, we decided fairly quickly to focus on the 25th Anniversary of the Restructuring and Reform Act of 1998 (RRA 98).  As we talked about people who were involved in RRA 98 in a significant way and who are still involved in tax procedure, I thought it would be interesting to have them write about their personal experiences.  Instead, we got something better, these individuals reflected on the legislation from a policy perspective with their deep knowledge of both tax procedure and the history of what happened in 1998 and the years leading up to the legislation.

I wrote an article about Section 1203 of the legislation which bothers me because it was a very personal slap at the employees of the IRS and not really at the people who shape the tax laws and policies that seemed to aggravate Congress.  IRS employees are probably the most rule following group of federal employees around.  If the policy makers can craft the right rules, the IRS employees will follow those rules – for better or worse.  You can see a discussion of my article here.

In addition to writing a policy article, I took the opportunity to write about my personal experiences during the period immediately before and after RRA 98 as an attorney in IRS Chief Counsel’s Office.  My post today highlights those experiences.


One of the highlights for me of my experiences during the RRA 98 period and one I do not write about in the article was the opportunity to occupy the office of the former Chief Judge of the Tax Court.  Many readers may not realize that for a long period of its history which will be highlighted next year as it celebrates 100 years, the IRS national office headquarters at 1111 Constitution Avenue served also as the location of the Tax Court.  When Congress elevated the Tax Court to an Article I Court in 1969, the Court felt a need to physically divorce itself from the IRS in order to demonstrate its independence.  That separation resulted in the construction of the current Tax Court building in the Judiciary Square section of Washington, DC a few years later.

During the time the Tax Court was co-located with the IRS, it occupied much  of the second floor of the building at 1111 Constitution Avenue and the Chief Judge had an office at the corner of 12th and Constitution immediately below the office of the Commissioner.  The offices of the Chief Judge and the Commissioner are quite large and come with their own private half bath.  Both offices have nice views of the Washington Monument and other buildings on the National Mall.  I occupied the office during the fall of 1998 while I was on assignment as the head of the General Litigation Division.  It was, by far, the best office I ever occupied.

 That office was one of the “rooms” where RRA 98 happened for me.  In a short article in the Pittsburgh Tax Review, I recount four episodes from that period that were particularly memorable.  I will briefly mention them in this post.  Read them in greater detail here.

Senate Testimony

Senator Roth and the Senate Finance staff chose 10 IRS collection cases that appeared abusive and subpoenaed the IRS employees to come to the Senate and testify about those cases before Senate staffers who were looking to pick cases for testimony before the Finance Committee.  The first case up before the staffers was a case from Virginia where I was the District Counsel back in the days when the IRS operated geographically with districts around the country.  The District Director asked me to look into the case to determine if the IRS had done something wrong and later asked me to accompany the four employees from the district on their trip to the Hill.

Working with my colleagues in the Richmond office, John McDougal and Chris Sterner, I didn’t find anything wrong with the way the IRS had handled the case.  Ultimately, I think the Senate staffers agreed but going to the Senate and representing clients at the preliminary hearing was a memorable experience.  It certainly heightened my interest in all that was to follow in this legislation.

The Call from the Chief Counsel

As the legislative process heated up it became clear that the collection practices of the IRS were at the heart of the concerns on Capital Hill.  One day I received a call from the Chief Counsel, Stuart Brown, asking me to draft proposed legislation that would improve the collection provisions of the code without crippling the ability of the IRS to collect.  Chris Sterner and I spent a frantic few days drafting 25 proposed changes to the code six of which made it into the legislation.  None of our proposed changes were earth shattering but the process was quite memorable.

The Case with Nina Olson

Most of you know Nina as the long serving National Taxpayer Advocate but before she assumed that role she founded and ran the Community Tax Law Project (CTLP) in Richmond.  She started CTLP not long after I became the District Counsel in Richmond.  My office and I worked with her on many cases as CTLP represented low income taxpayers in Virginia.  One of the cases resulted in an offer in compromise, but Nina did not like my view of how much a taxpayer should pay in order to receive a compromise.  After we resolved the case, she testified before Congress about how unfair the compromise provisions were to low income taxpayers and persuaded Congress to change the law to eliminate the IRS’s ability to reject an offer solely on the basis of the amount of the offer, a provision that is found in Section 7122(d)(3)(A).

The Aftermath of RRA 98

Following the passage of RRA 98, it was clear that the IRS needed to publish a significant amount of guidance.  Much of that guidance needed to be written about the collection provisions of the code.  The new Collection Due Process (CDP) provision was the law that created the largest change in the way the IRS operated.  (As part of this series, stay tuned for additional blog posts from Les and Bryan Camp that offer differing perspectives on the value of CDP). Writing the regulations for this somewhat radical change to the collection provisions of the code, created the biggest challenge.

I had the opportunity to go from Richmond to DC to temporarily occupy the position at the head of the General Litigation Division.  I worked with the attorneys in that division to write the CDP and other regulations working during a very compressed time period.  During this time I occupied the office I described above.  Because of the long hours worked to get out these regulations I became more familiar with that office than I might have preferred.


A quarter century later the time surrounding the passage of RRA 98 still stands out to me as a critical period of my legal career.  The laws passed during that legislation provided some good and some less good changes to the way the tax system operates.  The articles in the recently published edition of the Pittsburgh Tax Review give you an opportunity to reflect on those laws and for any readers old enough to have practiced before RRA 98 to remember the way it was.

Precedential Passport Case

The Low Income Tax Clinic at Temple Law School in Philadelphia seeks a full time director for its tax clinic.  Temple is an especially good school at which to teach a tax clinic because of its strong tax program which includes an LLM and MLT in tax.  In addition, its location in a neighborhood with significant need for services situates it in a great place for building relationships with community organizations serving the same population of taxpayers.  For persons interested in this position, please read the attached brochure advertising the position and reach out to the appropriate persons at Temple.  Keith

As we have explained previously, this blog started because Les, Steve and I work on updating the treatise “IRS Practice and Procedure” published by Thomson Reuters and available through RIA Checkpoint.  While we try to keep the treatise updated on a regular basis, each year we go through a specific review every four months.  I recently went through that review and in doing so noticed several cases I thought were important that we had not written about shortly after they came out.  The first of those cases I thought I would write about is a precedential opinion involving a pro se taxpayer seeking to contest the seriously delinquent tax debt classification that caused the IRS to send a letter about him to the State Department requesting that it revoke or deny his passport.  The case is Adams v. Commissioner, 160 T.C. No. 1 (2023).

Because the passport revocation provision in IRC 7345 is still relatively new, it’s not surprising that a decision regarding this section would merit a precedential decision.


Like most taxpayers caught up in the passport revocation process, Mr. Adams has not been a model taxpayer citizen.  He failed to file returns for most of the years between 2007 and 2015 which caused the IRS to prepare substitute returns pursuant to IRC 6020(b).  These returns created assessments totaling over $1.2 million which significantly exceeds the amount of liability needed to have one’s passport revoked.  As part of its collection efforts, the IRS filed a notice of federal tax lien.  Following the filing of the notice, the IRS sent the required Collection Due Process (CDP) notice to Mr. Adams.  He did not request a CDP hearing.  The CDP notice meets one of the prerequisites for making a referral to the State Department.

At the time of the case, the State Department had not taken any action regarding Mr. Adams’ passport; however, he reported that he had lost his passport and intended to file for a replacement.  He did make a request for a new passport while his Tax Court case was pending and received a response from the State Department alerting him that the IRS had certified his liability as seriously delinquent and he needed to work out the tax issue with the IRS before it would move forward on issuing a new passport.

The Tax Court described its role in a passport revocation case drawing from its prior case law:

Section 7345(e)(1) permits a taxpayer who has been certified as having a seriously delinquent tax debt to petition this Court to determine “whether the certification was erroneous or whether the [IRS] has failed to reverse the certification.” Our jurisdiction in reviewing certifications of seriously delinquent tax debts is set forth in section 7345(e)(1). If we find that a certification was erroneous, we “may order the Secretary [of the Treasury] to notify the Secretary of State that such certification was erroneous.” I.R.C. § 7345(e)(2). The statute specifies no other form of relief that we may grant. Ruesch v. Commissioner, 25 F.4th 67, 70 (2d Cir. 2022), aff’g in part, vacating and remanding in part 154 T.C. 289 (2020).

The Court quickly agrees with the IRS that the facts here meet the basis for certification.  It knocks down the two arguments made by Mr. Adams.  First, he argued that the IRS lacked admissible evidence that the notices of deficiency giving rise to the assessments were mailed to his last known address.  Second, he argued that the taking of his passport is unconstitutional because it violates his right to international travel.

The Court notes that his first challenge could be read as a substantive challenge to the liabilities.  The Tax Court had previously answered this question in Ruesch v. Commissioner, 154 T.C. 289 (2020); however, that opinion was affirmed in part and vacated in part because of mootness at 25 F.4th 67 (2nd Cir. 2022).  So, the Court goes into an analysis of what happens to an opinion when a judgment is vacated.  It notes that vacature “deprives the underlying opinion of any precedential effect.”  Nonetheless, the vacated opinion can still provide value.  The Court states:

Although an opinion issued in connection with a vacated judgment retains no precedential effect, if the judgment is vacated for reasons unrelated to the opinion’s analysis of an issue, nothing precludes a future court from considering that analysis as persuasive authority. To illustrate, in Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th 1150 (10th Cir. 2021), aff’g T.C. Memo. 2017-102, the U.S. Court of Appeals for the Tenth Circuit recently accepted our Court’s reliance on a previous decision, Lindsay Manor Nursing Home, Inc. v. Commissioner, 148 T.C. 235 (2017), vacated on other grounds, 725 F. App’x 713 (10th Cir. 2018), that had been vacated by the Tenth Circuit for mootness. Explaining its rationale, the Tenth Circuit stated: “[W]e vacated [the Tax Court’s] ruling only because the case had been moot at the time of the ruling. . . . It was hardly an abuse of discretion for the Tax Court to continue to adopt that court’s prior reasoning when no higher court had cast doubt on that reasoning.” Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th at 1160. for the Tax Court to continue to adopt that court’s prior reasoning when no higher court had cast doubt on that reasoning.” Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th at 1160.

The Ruesch opinion was vacated because of mootness similar to the opinion in Lindsay Manor.  So, the Tax Court readopts its opinion in Ruesch.  This means that that Tax Court’s position is that it lacks the ability to redetermine the amount of a taxpayer’s liability.  The readoption of the reasoning in Ruesch, a precedential opinion, is undoubtedly the reason for making the Adams case precedential.  It’s no surprise the Court would readopt its prior position and the opinion provides a useful analysis of what to expect when a Tax Court precedential opinion is vacated at the circuit level for reasons having nothing to do with the underlying analysis.

Because the Court seeks to give the pro se taxpayer the benefit of possible arguments he makes, it looks at another possible facet of his attack on the underlying assessment.  It interprets his argument as stating that the underlying liabilities were not assessed and notes that liabilities must be assessed before the IRS can move forward with passport revocation.  It further refines the argument of Mr. Adams to be that although the IRS did take the steps to record his liabilities on its books, viz., to assess the liabilities, it did so wrongfully because it failed to take the necessary steps make the assessments.  The Court finds that it lacks jurisdiction to consider the correctness of the assessments.  It can merely confirm that the assessments existed at the time of the passport revocation referral.  It notes that he had numerous opportunities to contest the validity of the assessments and passed on those opportunities.  It finds that IRC 7345 does not provide another opportunity for challenging whether the assessments were properly made.

The Court then turns to his constitutional argument in which he urges the Court to reconsider its opinion in Rowen v. Commissioner, 156 T.C. 101 (2021) which held that IRC 7345 authorizes the IRS to send a revocation letter to the State Department.  The IRS does not deprive a taxpayer of the right to international travel by sending the passport revocation letter.  The Tax Court takes the position that it lacks jurisdiction to review the State Department’s determination.

So, Mr. Adam’s gets no relief from his passport or assessment problems through this case.  The Adams case primarily restates the Tax Court’s prior positions regarding IRC 7345 and breaks little or no new ground regarding a petitioner’s right to relief.  If Mr. Adams wants relief, he needs to pay off the taxes or take one of the other steps that will cause the IRS to generate a letter to the State Department requesting it to restore his travel rights.  To end where we began, you can find a deeper discussion of those issues in Chapter 14A-17[2] of IRS Practice and Procedure.