Getting Into the Tax Court

Yesterday, the Tax Court entered Administrative Order 2022-01 setting out the guidelines for entry in the Tax Court’s building in Washington, D.C. and entry into the courtrooms where it sits around the country.  The rules go into effect on August 29, 2022.  The order repeals the guidelines set out in a pair of administrative orders issued last year and updates its procedures.  There are separate rules for going into the building in DC and going into the courtrooms around the country.  Keep in mind that the Tax Court’s courtrooms around the country whether permanent or borrowed are almost always in federal buildings which could have their own rules about entry.  So, if you are going to a Tax Court proceeding outside of Washington, you need to find the rules for the building in which the Tax Court’s courtroom sits in addition to knowing the rules the Tax Court is setting out.

Washington D.C. Courthouse


Before entering the Washington, D.C. courthouse, all entrants (i.e., trial participants, visitors, employees, and contractors), are asked to self-certify that the answer to each of the health screening questions listed below is “no.” If the answer to any of the screening questions is “yes,” the entrant should not enter the courthouse.


1. Have you tested positive for COVID-19 within the past 10 days?


2. Have you experienced any of the following symptoms within the past 10 days? The symptoms are fever (a temperature more than 100.4 degrees Fahrenheit) or chills, cough, shortness of breath or difficulty breathing, fatigue, muscle or body aches, headache, new loss of taste or smell, sore throat, congestion or runny nose, nausea or vomiting, and diarrhea.


3. Are you isolating or quarantining because you may have been exposed to a person with COVID-19 or are worried that you may be sick with COVID- 19?


4. Are you currently waiting on the results of a COVID-19 test due to recent exposure or symptoms of illness?


The self-certification requirement (COVID-19 Self-Certification) will be posted at the entrance to the Washington, D.C. courthouse and outside courtrooms in other locations.  An individual who tests positive for COVID-19 within 5 days of entering the D.C. courthouse should immediately notify the Court. Court employees and contractors who work at the D.C. courthouse must follow the Centers for Disease Control and Prevention (CDC) isolation protocols.

In addition to the rules for getting into the DC courthouse, the order also provides rules for going into courtrooms around the country.

In-Person Court Proceedings


In addition to COVID-19 Self-Certification, trial participants, witnesses, and members of the public observing proceedings must register attendance via QR Code for entry into a Tax Court in-person proceeding at any location. The QR Code will be posted outside the courtroom and the registration may be accessed via a mobile device. The questions for contact tracing are:
• Name
• Phone number with Area Code
• Email Address
• Place of Trial
• Date of Trial


Rapid testing is recommended prior to entry.

The protocols will take a little time to meet as you enter the courtroom and provide another reason for arriving early.

TIGTA’s Annual Review of CDP Processing     

It’s the time of year when the Treasury Inspector General for Tax Administration (TIGTA) starts producing the annual reports required of it by the Restructuring and Reform Act of 1998.  It recently produced its report regarding the Collection Due Process program.  The report is short. 

To produce the report, TIGTA looked at a sample of CDP and Equivalent Hearing cases designed to produce a picture of CDP performance with a 95% accuracy rate.  This year it reported that in FY 2021 there were 28,667 CDP and Equivalent Hearing cases closed.  It sampled 91 of those cases finding that “Appeals complied with most of the I.R.C. and Internal Revenue Manual 8.22.4, Collection Due Process Appeals Program (May 12, 2022), requirements for processing hearing requests.”

The one area where TIGTA dinged Appeals, an area where it has dinged Appeals before and we have discussed before, here, here and here, concerned the statute of limitations on collection (CSED).  TIGTA found that in 20% of the reviewed cases the IRS got the CSED wrong.  In 10 of the cases it got the CSED wrong in a way that incorrectly extended the statute of limitations.  Based on this sample, it projected that 3,233 of the CDP and Equivalent Hearing cases closed in 2021 would have incorrect CSED in which the IRS sought to collect from taxpayers after the CSED expired.  This is way too high an error rate and it’s not the first time a high CSED error rate has been reported.  The IRS has got to learn how to calculate the CSED.

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TIGTA found that in 8 cases in its sample the IRS miscalculated the CSED in  a way that wrongly reduced the period the IRS had to collect.  It extrapolated that this meant 2,586 of the CDP cases closed in 2021 had the CSED shortened.  While shortening the CSED does not imping on the taxpayer rights of the individual taxpayer, it does mean that collectively the taxpayers of the United States may not have as much collected from people who owe.

Calculating the CSED is hard with the exceptions that currently exist and the way they operate.  If the IRS cannot get this right – and it has demonstrated over a relatively long period of time that it cannot – perhaps Congress should look at simplifying the process.  The most obvious place to simplify it would be to do away with the really confusing extension related to installment agreements.  Eliminating that statute extension would probably bring the IRS error rate down significantly but TIGTA does not provide us with an analysis of the mistakes that it found.  Had it done so, it would have provided the IRS and the public with a better roadmap for pursuing success.

TIGTA found that Appeals correctly classified CDP and Equivalent Hearing requests; however, it did so based on the criteria published in the IRM and not based on case law.  TIGTA does not address cases in which a taxpayer sends in a CDP request after the 30 day period based on a good excuse or sends the CDP to the timely but not to the office requested by the IRS.  Because it does not look for these types of cases, TIGTA misses an opportunity to assist the IRS in updating its outdated IRM provisions.  It audits based on what the IRS says and not what the IRM should say.

TIGTA also does not audit the CDP letter which does a poor job of advising taxpayers of their rights.  It might consider in future years looking at why the uptake rate of CDP cases is so low and how that relates to the notice received by taxpayers.

For this year we know that the Appeals, and the IRS generally, struggles with the CSED.  Looking for ways to fix that other than continuing to point to IRM compliance might provide an overall benefit to the system.

Commenting on Forms

One of the most important services low income taxpayer clinics (LITCs) can provide to their client base is making comments when offered the opportunity and sometimes when not offered the opportunity.  Because low income taxpayers have generally had no voice when the IRS, the Tax Court or other institutions impacting their tax circumstances have called for comments, LITCs serve their clients when using the knowledge gained from individual representation to respond to requests for comments.  We wrote about comments to the Innocent Spouse form that led to a conversation with the form drafters and a real voice in the process here and here.  The comments to the form did not lead to everything requested but did foster improvement.  Perhaps, they also let the form writers know that there are real people who care very much about form design because it has such an impact.

Recently, comments were submitted on two forms – the form for changing an address and the form used for intake of individuals seeking assistance with return preparation at volunteer sites.  The forms are very different and will be discussed separately below.  The goal of the comments, one from an individual LITC and the other from the Center for Taxpayer Rights on behalf of a collection of LITCs, is to let the IRS know what practitioners are thinking and what the IRS should consider in revising the forms.

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Change of Address Form

The Tax Clinic at the Legal Services Center of Harvard Law School sent in a comment regarding the proposed change of address form revision.  The principal author, Ben Chanenson, worked in the clinic this summer as an intern and will enter the University of Chicago Law School as a 1L student in the coming days.  Here is the comment submitted.

Form 8822 exists to allow taxpayers to notify the IRS that they have changed their home address. It is important for a taxpayer to notify the IRS when they move so that they can receive notices and other communications from the IRS. If a taxpayer notifies the IRS of a change in address and the IRS sends mail to the wrong address then under IRM 4.8.9.11.4 a notice may be invalid because the IRS has a statutory requirement to address mail to a taxpayer’s last known address. We have discussed litigation related last known address on this blog before and two years ago the Tax Clinic secured a victory in the Third Circuit over this issue.  

The Tax Clinic offered five recommendations in its letter. These recommendations included ways to simplify the form (by removing unnecessary boxes), use more accessible language (which would allow the form to adhere to the Plain Writing Act of 2010), and better explain the importance of notifying the IRS of a change of address.  The Tax Clinic also suggested that the IRS provide information on alternative ways that the IRS can learn that a taxpayer moves. Form 8822 is not the only option for taxpayers. Writing down a new address on a form 1040 serves to notify the IRS of a change in address. However, it takes considerable time for the IRS to process form 1040 and form 8822. In contrast, if a taxpayer notifies USPS of a change in address then the IRS can access the USPS’s National Change of Address database and update the taxpayer’s address more quickly. Critically, USPS allows people to change their address through an online form while the IRS requires snail mail. The Tax Clinic advocated for making form 8822 into an online form that taxpayers could submit without ever leaving the IRS website. This echoes PT’s Nina Olson’s first wish in her IRS Wishlist for 2021.  

Intake Form

The Center for Taxpayer Rights holds weekly online meetings of clinicians to discuss issues of general interest to the LITC community and to assist in formulating litigation and other strategies for better representation of their clients.  One of the long standing concerns of the LITC community is making connections with taxpayers in need of assistance.  Each LITC engages in outreach efforts in their respective communities in order to make sure that members of their community know about the existence and the purpose of the clinic.  While the Tax Court does a good job of notifying petitioners to its Court of the existence of LITCs and the possibility of representation, many low income taxpayers need assistance during the administrative process of their case and often remain unaware of the possibility of assistance.  The free tax return preparation efforts reach large numbers of community members who may need assistance regarding a prior year’s return.  Despite the fact that Congress has created grant programs for both LITCs and Volunteer Income Tax Assistance (VITA) administered by the IRS, the coordination between VITA programs and LITCs has not fully developed.  The Center’s comments on the intake form seek to foster better coordination so that individuals seeking return preparation assistance know of the ability to obtain controversy assistance if needed.

The Center’s comments on the intake form are here; you can see Form 13614-C, Intake/Interview & Quality Review Sheets, here.  In its comments, the Center suggests ways the form can be revised to more effectively prompt a VITA intake interviewer or preparer to identify a client who may have a tax matter or controversy that would warrant a referral to a LITC.  The first comment focused on the line that reads, “Last Year, Did You (or Your Spouse) … Have Earned Income Credit, Child Tax Credit or American Opportunity Credit disallowed in a prior year?”  Noting that many low income taxpayers do not necessarily know what, specifically, the IRS has changed on their prior year returns, the Center recommended the question be rephrased as, “Did you not receive your refund or have the amount of your refund changed in a prior year?”  If the answer to that question is yes, training and job aids for this line should direct the VITA/TCE volunteer to make a referral to an LITC.  The Center also suggested that an additional line be added to the form where the taxpayer has a balance due on the return, asking whether the taxpayer has the ability to pay the balance.  If the answer is no, then the VITA volunteer should make a referral to an LITC.  Similarly, where the form asks, “Did you, or your spouse if filing jointly, receive a letter from the IRS?,” if the taxpayers answers yes, the training materials should make clear a LITC referral is in order.

The final recommendation addressed the section of the form where demographic data is gathered, including race and ethnicity.  Although the form notes that the VITA sites may need this information in order to receive grant money or federal funding, the clinics on the Center’s weekly calls felt that the form should more clearly state that this information is “for official use only” by the VITA sites alone and will not be recorded by the IRS for other than statistical purposes.

Poorly designed forms can create administrative burden or confusion and fail to elicit the appropriate responses.  A well designed form, on the other hand, can alert the user to important issues and direct to the next steps, including, in the case of the VITA intake form, to where the user can obtain free representation in resolving a tax dispute.  Both IRS and taxpayers will benefit from members of the tax community sharing their expertise by commenting on forms.

The 6511(h) Conundrum: How to Remain in the Courthouse When the IRS Tries to Bar Your Entry?

Today, I discuss a pair of recent decisions out of California that starkly contrast the different approaches courts take to the sufficiency of pleadings and to the particularly special circumstances created by the financial disability exception to three year refund period.

This discussion comes just a month after my recent post on this topic. There, I wrote about the decision in Ruebsamen v. United States in which the Court of Federal Claims denied a pro se taxpayer the right to bring a refund suit because he failed to state a claim. The IRS successfully argued that Rev. Proc. 99-21 requires that the taxpayer’s initial administrative claim for this disability exception to the refund period must include documentary support for the claim. Since the pro se taxpayer did not attach any support to his claim, the Court tossed him out.

Like a lighthouse on the California coast, the Northern District of California’s Order in Subbiah et al v. IRS is the welcome beacon on the other side of this issue. There, a married couple – each of whom had to surmount the financial disability hurdle – filed their joint tax return after the expiration of IRC 6511(a)’s three year refund period. I emphasize that each taxpayer had to overcome the refund period bar because Rev. Proc. 99-21, which explains how the IRS chooses to interpret IRC 6511(h), states, “a taxpayer is not considered to be financially disabled during any period in which the taxpayer’s spouse or any other person is authorized to act on behalf of the taxpayer in financial matters.” In the District Court, these pro se plaintiffs survived the IRS’s motion to dismiss for failure to state a claim and may now proceed to prove that their late-filed refund claim should succeed. According to the Order, each taxpayer was incapacitated –  one because of “severe ill health,” and the other because she “was incapacitated by her lack of knowledge of the couple’s finances as well as her own financial and time constraints during the relevant time period.” The Court did not discuss where it obtained this information, and it is unclear whether the taxpayers had submitted any documentary proof alongside their initial administrative claim. However, in scheduling the case to move forward, the Court invited these plaintiffs to prove their claim. In thinking about the Court’s brief Order, I note that it may be introducing another factor to consider in the 6511(h) analysis, and that is whether lacking the mental acuity necessary to participate meaningfully in tax return preparation matters may be a factor in determining the success of a financial disability claim. And this makes me wonder if the Court is considering whether taxpayer knowledge of tax matters, such as that found in IRC 6015, may be finding a foothold in this area of litigation.

The plaintiff in Barbeau v. IRS, No. 2:21-cv-08544 (C.D. Cal. 2022), down the road in the Central District of California, couldn’t have had a more opposite result.

There, the court dismissed Ms. Barbeau’s case for lack of jurisdiction because she did not attach all of the information required by Rev. Proc. 99-21 to her late filed refund returns.  And here is why the revenue procedure’s requirement is so cruel.

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Ms. Barbeau claimed she was late in filing her returns because of domestic abuse.  The court describes her allegations:

Plaintiff’s Federal tax returns for the years 2012, 2013, and 2014 were filed late due to plaintiff’s severe mental and physical impairment from an abusive relationship she was in, causing her to have mental breakdowns, severe anxiety, panic attacks and illness. Plaintiff’s abuser hid her mail, including all mail from defendant [IRS].

In a later paragraph she further alleges that she filed the three late returns “[u]pon improvement of her situation.”

Assuming these allegations are true, the Court – and the IRS – treated this survivor of domestic abuse with utter callousness.

Ms. Barbeau filed her three late returns on April 16, 2019.  In October and November of 2019, in three separate notices, the IRS formally disallowed her refund claims.  She protested each of the notices of claim disallowance and included “partial physician notes regarding an April 29, 2012 emergency room visit, and a letter dated December 2, 2019 from an individual identified as a ‘training facilitator’.”

In dismissing her case, the court stated:

Plaintiff here failed to “strictly comply” with the requirements of Revenue Procedure 99-21 . Schmidt v. IRS, No. 20-2336, 2021 WL 4480718 (E.D. Cal. Sept. 30, 2021) (“To take advantage of this provision, a taxpayer must strictly comply with its requirements.”) (internal quotations and citations omitted), report and recommendation adopted sub nom. Schmidt v. United States, 2021 WL 5601327 (E.D. Cal. Nov. 30, 2021). Revenue Procedure 99-21 requires the statements described above “to be submitted with a claim.” Rev. Proc. 99-21 § 4 ; see also Schmidt, 2201 WL 4480718

(“As set forth, Rev. Proc. 99-21 requires that both the physician’s statement and the taxpayer’s statement be submitted with the taxpayer’s refund claim.”). Plaintiff filed her claim on April 12, 2019, but did not submit her own written statement until December 2, 2019, (Ex. E, FAC), and the physician’s statement until July 14, 2020. (Ex. B, FAC); see also Adams v. IRS, No. 13-04525, 2014 WL 457915 (C.D. Cal. Feb. 3, 2014) (“[P]laintiffs have not alleged a basis for the suspension of these limitations period because they allege they did not provide information regarding [the taxpayer’s] disability at the time they filed the claims.”). Moreover, Plaintiff cannot assert substantial compliance as “there [was] no physician statement whatsoever” at the time she filed her claim. See Reilly v. United States, No. 14-07936, 2015 WL 5305210 (C.D. Cal. Sept. 10, 2015). Accordingly, as Plaintiff’s claim is not tolled, the three-year limitation is a jurisdictional bar to her refund claim. The Court thus GRANTS Defendant’s Motion to dismiss Plaintiff’s refund claim.

The irony in the IRS’s position in this case is that the IRS is well aware of the multitudinous challenges survivors of domestic abuse must face as they find stability. This is revealed in Rev. Proc. 2013-34, which contains a robust definition of domestic abuse, and which was developed with public input through notice and comment, as well as with strident advocacy by the former National Taxpayer Advocate. The Rev. Proc.’s definition of abuse mirrors the evidence Ms. Barbeau began to obtain: “Abuse comes in many forms and can include physical, psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate, and intimidate the requesting spouse, or to undermine the requesting spouse’s ability to reason independently and be able to do what is required under the tax laws.”

Leaving this Rev. Proc aside, the Tax Court has also instructed the IRS on myriad ways in which abuse affects taxpayers. In Nihiser v. Commissioner, T.C. Memo. 2008-135, the Tax Court held that “psychological mistreatment in the absence of physical harm [can] be “abuse.”” Psychological abuse (mental, emotional, verbal) can impact someone in a similar manner to physical abuse. Accordingly, the Tax Court noted in Stephenson v. Commissioner  “that requiring petitioner to inquire into whether [their spouse] reported on the return the income she earned could have put her at risk of abuse. Petitioner’s efforts to become more informed of what she was signing and questions about their finances in general resulted in threats of violence or verbal abuse from [their spouse].” Moreover, the Tax Court in Drayer v. Commissioner explained that abuse impacts each taxpayer differently but can include, among other things, social isolation, exhaustion, humiliation, demoralization, forced use of drugs or alcohol and the degradation of “the victim’s ability to reason independently.”

Shame on the IRS for not opening the door wider for taxpayers such as Ms. Barbeau. Its litigating position in her case lays bare the agency’s insensitivity to taxpayers whose lives are complicated and painful through no fault of their own, and yet who endeavor to be compliant.

Again, I call on the IRS to give the public the right to comment on Rev. Proc. 99-21.  In the quarter century since the passage of IRC 6511(h) giving individuals with financial disability the right to file a late claim under certain circumstances, the IRS has never issued regulations and has never engaged with the public regarding how it might administer the claims of this class of individuals.

Again, I suggest that the IRS establish a unit to facilitate claims of individuals claiming financial disability. Shielding itself behind procedural mechanisms denies taxpayers the chance to pursue their claim and thwarts the statute’s purpose.

Again, I wonder how many pro se taxpayers’ claims are denied merely because they were not attuned to a revenue procedure when they filed their claim.

Prior Opportunity and Receipt of the Notice of Deficiency

In Chinweze v. Commissioner, TC Memo 2022-56 the Tax Court finds that the petitioner received his statutory notice of deficiency even though he stated that he did not.  Proof of non-receipt is generally tricky.  Here, the Court did not need to find that he did not receive the notice in order to deny his request to have the merits of his liability considered during the Collection Due Process (CDP) case.  Mr. Chinweze presents a disorganized and unsympathetic case but the decision could make it tougher for others who make a similar argument of non-receipt.  Perhaps the case relies on the facts and does not set any precedent but it provides a cautionary tale for others seeking to argue non-receipt in order to gain access to the opportunity to argue the merits of their liability in a CDP case.

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Mr. Chinweze is a tax lawyer admitted to practice before the Tax Court.  He apparently practiced as a sole practitioner during the years at issue – 2008 to 2010.  He did not file his federal tax returns for those years.  I imagine that this makes the Tax Court a little nervous that one of its bar members falls into the non-filer category.  I have not seen it discipline a practitioner for non-filing in looking at prior disciplinary actions.  It does not take the same tack as the IRS Office of Professional Responsibility nor am I suggesting that it should; however, a Tax Court bar member who fails to file would generally not get a case off on the best footing from a sympathy perspective.

According to the Court, the returns were filed in 2012 without remittance reflecting small liabilities.  The IRS audited the returns proposing relatively substantial increases and certain penalties.  A notice of deficiency was sent on March 4, 2014, by certified mail to an address he subsequently used in his correspondence with Appeals.  Mr. Chinweze did not petition the Tax Court and the IRS assessed the proposed deficiencies.

The IRS sent a notice of intent to levy on March 6, 2015 at which time he owed over $160,000.  On March 17, 2015 it sent a second CDP notice after filing notice of federal tax lien.  He requested a CDP hearing with respect to the second CDP notice.  Even though the CDP notices were sent only 11 days apart, his failure to request a CDP hearing with respect to the first notice created a bar to the litigation of the merits of his tax liability because it served as a prior opportunity to litigate the merits – an opportunity he passed up.  So, even if he could conclusively prove that he did not receive the notice of deficiency, his effort to litigate the merits was never going to get off the ground.

Despite the fact that his merits argument lacked legs, the Settlement Officer (SO) considering his CDP case asked him to submit information supporting his claim that he did not owe the assessed amount.  Mr. Chinweze did not respond the the SO’s attempts to obtain information.  This also could provide a basis for cutting off his effort to litigate the merits of his liability.

After hearing nothing from Mr. Chinweze, the SO sent out the notice of determination and he filed a petition in Tax Court.  The case was remanded to insure proper verification of the assessments and this may have been when the penalties were dropped by the IRS probably because of Graev problem in the approval.  Because of the time from of the case the IRS was not paying careful attention to penalty approval at that time.

In the supplemental hearing the SO gave Mr. Chinweze four dates to comply with sending information.  He never responded.  He has not built a sympathetic case based on his education and professional background or his lack of responsiveness.  Certainly, that must color the decision of the Court.

The Court finds that the IRS records regarding the mailing of the notice of deficiency are not sufficiently complete to create a presumption of proper mailing.  The case provides a detailed list of cases on this issue.  The Court, however, points out that the Form 3877 still provides probative information upon which the Court could concluded the IRS did mail the notice to Mr. Chinweze.  Again the Court provides a detailed list of cases.

Mr. Chinweze’s only evidence is his statement he did not receive the notice.  The Court says:

We are unconvinced. Mr. Chinweze was an experienced tax lawyer and filed a CDP request setting forth specific challenges to the NFTL filing (i.e., the liability amount and mitigating factors). His failure to contest receipt of the notice of deficiency in his CDP request undermines the credibility of his subsequent claim, particularly in light of the compelling evidence of mailing and the accompanying presumption of delivery.

The Court cites several more cases.  If nothing else, this case provides a good roadmap of the challenges for others who want to argue non-receipt.  Undoubtedly, Mr. Chinweze’s unsympathetic background plays a role in this outcome but you can see that the hill is still a steep one to climb even for taxpayers who would invoke much more sympathy.

Having determined that he received the notice, the Court did not need to further explain that he missed the boat by not seeking a CDP hearing from the levy notice but the Court also explains in one paragraph why he loses his opportunity to raise the merits of the liability for a second reason.

If he wants to fight the merits now, he needs to come up with a fair amount of cash in order to full pay the liability allowing him to satisfy the Flora rule and file a claim for refund.  He can full pay any of the three years at issue and fight over that year.  To the extent the issues are the same in each of the years, he could fight and win one and then seek a claim for abatement.  Still, he has a lot of work ahead to fight the merits of this liability.

When Will the Tax Court Redact?

An order in the case of Boateng v. Commissioner, Dk. No. 37647-21 issued on July 26, 2022, shows the Tax Court’s willingness to redact personal information that the petitioner should have but failed to redact.  Thanks to Carl Smith for bringing this to my attention and to his additional research.

Tax Court Rule 27(a) requires parties to redact certain information such as taxpayer identification numbers and financial account numbers when submitting pleadings and documents to the Court.  Maggie Goff and I published an article in Tax Notes two years ago entitled “Nonparty Remote Electronic Access to Tax Court Records.”  The article suggests that the Tax Court make its records more electronically accessible while still protecting the privacy of individuals in an appropriate manner.  We included slides and information complied by Judge Buch showing how poorly both pro se petitioners and practitioners comply with this rule, regularly placing into the Court’s records information the Rule requires they redact.  Judge Buch cited the poor compliance with this rule as a basis for the Court’s decision not to make its records electronically available.

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Historically, the Court did not redact for petitioners who failed to do so but that seems to be changing.  In the Boateng case, Special Trial Judge Choi identifies documents the petitioners should have redacted.  The case came to her on a motion filed by the IRS to dismiss the case for failure to state a claim.  Petitioners sent to the Court an unredacted copy of the notice of deficiency they received for 2019 together with copies of tax forms for that year.  In reviewing the motion, Judge Choi noticed the non-compliance with the redaction rules which puts the petitioners’ information into a public record.

Judge Choi ordered petitioners to file amended pleadings using the Court’s form petition so they could perfect their imperfect petition and she ordered payment of the filing fee (or the fee waiver form.)  I have written about imperfect petitions previously, here.  The Court then took the IRS motion under advisement pending receipt from petitioners of a corrected or perfected petition.  If they file using the Court’s form, I anticipate the Court will deny the motion.  If they fail to act, it will eventually grant the motion.

In addition to addressing the motion, Judge Choi identifies and addresses the unredacted information.  She states:

Due to the unredacted personal identifying information appearing in the Petition, the Court will take steps to seal petitioners’ petition to protect their information. 

It was this sentence that caught Carl’s eye because he found it unusual, as did I.  In looking further, however, Carl found that at least some judges on the Court had been sealing unredacted information for some time.

He went to DAWSON and put in the word “redact,” searching orders and found 28 orders redacting things in cases during the first four weeks of July 2022.  In the month of January 2021, Judge Leyden redacted two petitions on her own motion.  In January 2022 it appears the Court sealed 10 petitions for failure to properly redact.  It looks like there is a steady trend to redact.

This movement seems to reflect a change in Court policy or may just be the adoption of a practice to redact by certain judges.  From the time of filing until the calendaring of a case, petitions generally sit unassigned in the general portfolio of the Chief Judge.  So, absent an effort by the Chief Judge to root out improperly redacted submissions, orders like the one in the Boateng will be ad hoc.  There was no order in the docket list assigning the Boateng case to Judge Choi but maybe orders are not needed to assign cases to a special trial judge to respond to a motion filed by the IRS.

In any event, the Boateng order suggests an attention to redaction and sealing that is relatively recent and welcome.  The number of redaction orders in no way reflects the number of cases with improper redactions but is still a benefit to the identified petitioners.  It also suggests that some of the judges on the Court are thinking about ways to protect petitioners other than making it difficult to access public records.  District Courts and Circuit Courts routinely require a certification when filing electronically filing documents that the person filing the documents has complied with the redaction rules.  I do not know if requiring the certification would reduce the non-compliance at least among practitioners but it might be worth a try if the Tax Court wanted to look for additional ways to improve compliance with the redaction rule.

Another Tax Provision Found to Not Create a Jurisdictional Time Period for Filing

In Clark v. United States, No. 9:21-cv-82056 (S.D. Fla. 2022) a tax attorney, Celia Clark, brought an action for unlawful disclosure under IRC 7431.  The IRS moved to dismiss the case for lack of jurisdiction arguing that she waited too long to bring the suit.  The court denied the motion finding that the time period for filing suit under section 7431 is not a jurisdictional time period.

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The opinion indicates that during the years 2008 to 2016 Ms. Clark’s tax practice involved assisting small businesses establish microcaptive insurance companies.  It states that the IRS started investigating her in 2012 to determine if she was promoting abusive tax shelters.  Following its investigation, it assessed penalties against her for over $11 million.  She brought a complaint against the IRS alleging the investigation was abusive both because of its length and its failure to take “a firm position on the proper tax treatment of captive insurance companies.”

Relative to the issue here, she also alleged that during the investigation the IRS inappropriately provided information about her to her clients and to others in violation of the disclosure provisions.  During the course of the investigation she had complained to the IRS and to the Treasury Inspector for Tax Administration (TIGTA) alleging disclosure violations.

She filed her complaint in November, 2021 and the IRS filed a motion to dismiss for lack of jurisdiction the disclosure portion of the complaint in February, 2022 alleging that the two-year statute of limitations set out in 7431(d) barred the complaint.  Attached to its motion, the IRS provided the court with five letters sent in 2014 from Mr. Clark’s attorneys at Caplin & Drysdale to the IRS and TIGTA.  The letters complained about communications by IRS agents.  The IRS argued that the letters show the discovery of any disclosure violations occurred in 2014 seven years before she brought suit.

As it does in every case, the IRS argued that the time to bring the disclosure suit is a jurisdictional time frame.  The IRS remains uninterested in Supreme Court opinions regarding jurisdiction.  Ms. Clark cited an opinion from the district court in DC, Bancroft Global Dev. v. United States, 330 F. Supp. 3d 82 (D.D.C. 2018) which analyzed 7431(d) and determined it did not create a jurisdictional time period.  The court states that “The Government did not respond or further address this point in Reply.”  The court in Clark analyzed the Bancroft decision and agreed with it. 

In Bancroft, the district court noted the change in Supreme Court case law since Kontrick v. Ryan, 540 U.S. 443 (2004), and that the Supreme Court now holds that a filing deadline is not jurisdictional unless Congress makes a “clear statement” that it wants the filing deadline to be jurisdictional.  Bancroft applied that case law and found no clear statement from Congress that the deadline in IRC 7431(d) should be jurisdictional, noting, among other things, that the jurisdictional grant for these suits in district court is in IRC 7431(a) and is separate from the filing deadline in IRC 7431(d).  The Bancroft court quoted from Gonzalez v. Thaler, 565 U.S. 134, 146-148 (2012) (comparing the wording of close subparagraphs of a habeous corpus statute), that “[m]ere proximity will not turn a rule that speaks in nonjurisdictional terms into a jurisdictional hurdle”. 

The Bancroft court noted that by 2018, only two Circuits had directly addressed this issue under IRC 7431(d).  In Gandy v. United States, 234 F.3d 281, 283 (5th Cir. 2000) (i.e., decided before Kontrick), the Fifth Circuit held that the filing deadline is jurisdictional.  In Aloe Vera of America, Inc. v. United States (9th Cir. 2009), the Ninth Circuit — much influenced by language in a recent Supreme Court opinion in John R. Sand & Gravel, Inc. v. United States, 552 U.S. 130 (2008) (finding the filing deadline at 28 U.S.C. 2501 jurisdictional) — held the IRC 7431(d) filing deadline jurisdictional.  The Bancroft court noted that more recent Supreme Court opinions make clear that John R. Sand’s holding was based really on an exception to the new jurisdictional rules in the case of a long line of prior Supreme Court cases holding the filing deadline jurisdictional.  But, the Bancroft court stated that, since the Supreme Court has never addressed IRC 7431(d), the John R. Sand case exception does not apply.  The Bancroft court cited several post-2009 Supreme Court opinions making clear how the new jurisdictional rules apply.  Oddly, though, the Bancroft court did not cite a very analogous opinion from its supervising Circuit, the D.C. Circuit, in Keohane v. United States, 669 F.3d 325, 330 (D.C. Cir. 2012), holding the filing deadline in IRC 7433(d) (a provision almost identically-phrased to IRC 7431(d)) not jurisdictional under current Supreme Court case law.

Based on that decision, it refused to dismiss the case based on the Federal Rule of Civil Procedure (FRCP) 12(b)(1) motion submitted by the IRS.

That did not end the inquiry because the court then shifted to an analysis of whether it should dismiss the case under FRCP 12(b)(6).  This rule requires a complaint to provide “a short and plain statement of the claim showing that the pleader is entitled to relief.”  To avoid dismissal under this rule the complaint must state a claim for relief plausible on its face meaning that the complaint will allow the court to draw an inference that the defendant committed an act that could give rise to relief.

The court decided that it could not base a dismissal of the case on the attached letters at this stage of the proceeding.  While Ms. Clark did not challenge the authenticity of the letters the court found that a significant dispute remains regarding the centrality of the letter to her disclosure complaint.  In other words, it’s possible that the IRS made wrongful disclosures after these letters and within the statutory time period for bring suit.  The court’s decision does not mean Ms. Clark will win the case or even that the IRS committed a disclosure violation at any time.  It simply allows the case to proceed so that she can show a disclosure violation occurred and that it did so in the appropriate time frame relative to the bringing of the suit.

Tax Court Refuses to Allow Petitioner to Amend the Petition

Yesterday, I wrote about a case in which the IRS was stuck with a concession even though its proof showed that the concession allowed a deduction it should not have allowed.  In the discussion of the Demuth case in that post I wrote about other times in which the Court did or did not allow changes.  In TBL Licensing v. Commissioner, TC Memo 2022-71 the court refuses to allow a petitioner to amend the petition six and one half years after the filing of the petition and after, in February of this year, it had rendered a precedential decision in the case, 158 T.C. No. 1 (2022).

One could ask why a case was still pending in the Tax Court six and one half years after the filing of the petition.  I have pointed out in enough previous blog posts how slow the Tax Court can be in rendering opinions.  I looked at the docket sheet here to obtain a sense of the case.  The parties have been active as has the court.  Based on an earlier opinion of the court, the case involves over $500 million in tax.  With that amount at issue, it is not surprising to see a long docket sheet with lots of activity.  The case involves an issue of corporate reorganization and resulted in a precedential opinion issued in November 2021, withdrawn shortly thereafter and reissued in February 2022. 

A couple things struck me as unusual from the docket sheet.  Petitioners sent the IRS five separate requests for admission.  That doesn’t happen very often.  The second thing is after the precedential opinion, petitioner moves to amend its petition for the second time in the case.  Why would you amend you petition after losing the case?  Generally, a party would do that after an opinion where the opinion did not cover all of the issues in the case but to find out exactly when, it’s necessary to read the memo opinion.

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In the summary of the case, the court quickly answers my question regarding why petitioner would move the amend the petition after losing the case.  My original guess was wrong.  The precedential opinion did fully resolve the case; however, petitioner had by this point found another issue which might reduce its liability.  Here’s how the court describes it:

P and R each moved for summary judgment on issues regarding the application of I.R.C. § 367(d), which they presented as the sole issues in the case requiring resolution. The Court resolved those issues in TBL Licensing LLC & Subs. v. Commissioner, No. 21146-15, 158 T.C. (Jan. 31, 2022). In March 2022, more than 6½ years after filing its Petition, P moved for leave to amend its Petition to assert a claim for a research credit under I.R.C. § 41. R opposes P’s Motion.

Keep in mind that when you try a Tax Court case the resolution of the case ends the tax year.  After the case neither party can go back and try to change the tax result for the year(s) before the court.  The decision acts as a form of closing agreement ending any further consideration of the year. 

To its credit, petitioner here comes in quickly after losing the case and does not try to obtain a result in a separate proceeding; however, the timing is terrible in general since the case has by this time been pending for over six years with lots of activity and many attorneys representing petitioner.  The memo opinion lists seven attorneys of record for petitioner at the time of its issuance.  So, this is not a case in which an attorney suddenly comes into the picture to assist a previously unrepresented taxpayer.  This is a case with numerous attorneys on both sides and lots of time to uncover issues relating to the 2011 fiscal year.

There was other post-decision action occurring into which petitioner’s motion to amend its petition fits:

On March 4, 2022, respondent filed a Motion asking us to vacate the February 9th Order and Decision and replace it with one that states the amount of the upheld deficiency (rather than simply cross-referencing the notice of deficiency). Petitioner opposed respondent’s Motion to Vacate, alleging that the deficiency should be reduced by a research credit petitioner claimed under section 41 in an amended return petitioner apparently filed in June 2015, after respondent had issued the notice of deficiency but before petitioner had petitioned this Court for redetermination of the deficiency. Petitioner had not made any claim to a research credit for the taxable year in issue in its Petition
or at any other time before March 8, 2022, when petitioner responded to respondent’s Motion to Vacate.

So, not only were lots of attorneys involved for petitioner but the research credit it now wants to add to the case by amending the petition was known to petitioner since before the filing of its initial petition yet it had never raised this issue in its pleadings.

The court granted the IRS motion but held off issuing a new order in order to give petitioner the opportunity to make an appropriate motion.  It did by filing a motion for leave to amend.  In deciding whether to allow the requested amendment the court said:

“[D]etermining the justice of a proposed amendment” requires an “examin[ation of] the particular circumstances in the case.” Estate of Quick v. Commissioner, 110 T.C. 172, 178 (1998), supplemented by 110 T.C. 440 (1998). Among the circumstances considered are “whether an excuse for the delay [in raising the issue] exists and whether the opposing party would suffer unfair surprise, disadvantage, or prejudice if the motion to amend were granted.” Id. We also take into account whether the issue sought to be raised would require the consideration of “stale evidence,” the availability of relevant witnesses or documents, the time passed since the party’s initial pleading, the “remoteness in time of
[the] taxable years involved in the underlying dispute, or [the] completion of discovery and/or trial.” Scar v. Commissioner, 81 T.C. 855, 867 (1983) (Swift, J., concurring), rev’d on other grounds, 814 F.2d 1363 (9th Cir. 1987).

Petitioner argued that the court must allow it to amend the pleadings unless the amendment would prejudice the IRS.  Here, it alleged that no prejudice would exist and justice would best be served by allowing the amendment.  Petitioner argues that the IRS would not be surprised because it knew about the credit argument for seven years since the filing of the amended return.  The IRS has apparently allowed the same credit in other years.

The IRS objected to the amendment pointing out that petitioner offered no explanation for its failure to place this issue before the court at an earlier and more appropriate time.  It says petitioner abandoned the issue by its inaction.  The IRS also pointed to a conversation between counsel in 2015 in which petitioner’s counsel advised the IRS counsel that it had no plans to amend its petition to add this issue.  The IRS did not explain how raising the issue at this point would make it more difficult that if petitioner had raised the issue at the outset.

The court looks at an earlier opinion in which it said that a motion for leave to amend can be denied when absence of excuse and prejudice exists.  But the court distinguished that opinion and held the either the absence of excuse or the existence of prejudice, alone, can justify denial of a motion to amend the pleadings.  Here, the additional factor hurting petitioner is its apparent statement early in the case that it did not intend to raise this issue:

Petitioner’s efforts to elevate prejudice or substantial inconvenience as the sole dispositive factor, coupled with its repeated failures to provide any explanation for its delay in raising before the
Court its claim to a research credit for 2011, convince us that petitioner has no good excuse for its delay. In respondent’s unrefuted telling of the procedural history, petitioner’s failure to have raised the research credit issue reflects a conscious decision not to pursue the issue.

Similar to the Demuth case the denial here of the amendment to the petition probably leaves the petitioner paying more tax than it should.  In Demuth the court stated flatly that the concession gave petitioners a windfall.  A similar statement was not made in TBL Licensing but the implication of the treatment of the credit in earlier years leaves the impression that if timely raised the credit would have been allowed here.  In both cases the court goes for finality over finding the precise right answer.

The Court injected a new consideration into the equation – the impact of the motion on the Court: “Consideration of petitioner’s claim could impose a significant burden on both the Court and respondent.” (emphasis added) The Court explains in some detail the burdens reopening the case would place on the IRS.  It does not explain the burden it would place on the Court but does reference judicial economy and the burden that will be placed on the Court – “a burden likely to be greater than it would have been had petitioner raised the issue in the petition it filed more than 6½ years ago.”  The addition of the burden to the Court, while certainly present in any case in which a party seeks to have a second bite at the apple, has not regularly been a basis for denial of a motion such as this.

I am not troubled by the need for finality and allowing that need to overcome arguments that might get to a more perfect tax answer.  Both parties have a need to bring the issues to the court in a timely fashion.  The failure to do so has consequences as both cases point out.