Leslie Book

About Leslie Book

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

DC Circuit Oral Argument in Challenge to PTIN Fees

Last week the government and counsel for the plaintiffs faced off in the DC Circuit Court of Appeals, with Judges Garland, Srinivasan, and Millett peppering both sides with pointed questions.

Readers may recall the Steele case (now styled Montrois v US), where the DC district court enjoined the IRS from charging for new and renewed PTINs. I enjoy listening to oral arguments and this superstar panel was well-versed with the issues.

A few things jumped out at me during the one-hour oral argument. In response to Judge Millett, a healthy part of the DOJ’s portion of the argument centered on what exactly the IRS did with the money it received; that to me anyway seems more related to the plaintiffs’ alternate argument that the fees were excessive (recall that the district court did not reach that as it found that the IRS did not have authority to charge any fees). I suspect that if the court finds that it was within the IRS’s power to charge fees on remand the plaintiffs will pick up this theme to focus on exactly what the IRS did to justify the fees preparers paid.

The panel, and Judge Garland in particular, focused on an alternate rationale for the use of PTIN, that is the benefit of not using preparers’ social security numbersrather than the program’s connection to the ill-fated licensing regime Loving struck down.

The end of the argument concerned a jurisdictional question from Judge Millett that I had not considered, namely whether the preparers who will likely be entitled to some refund were required to file a refund claim before being entitled to receive a return of the fees that they paid. The government has not argued this on appeal, but given its jurisdictional nature I suspect that the court might address its merits.

Facebook Loses Challenge in District Court

We have previously discussed the case that Facebook has brought in federal district court, where it argued that it had an enforceable right to Appeals in a matter that spun from its transfer pricing dispute that it is litigating in Tax Court.  In particular Facebook brought two claims under the Administrative Procedure Act alleging that the IRS acted arbitrarily and capriciously in refusing to refer its case to Appeals. Facebook also brought a claim for mandamus, asking the court to order the IRS to refer its tax case to IRS Appeals.

In this order, the district court has granted the government’s motion to dismiss the suit, finding that Facebook did not have standing because it failed to establish that there was a statutory right to Appeals. That absence of a statutory right led the court to conclude that it had no legally protected interest, a necessary element to prove standing. In so holding, the district court considered the 2015 codification of TBOR, and Facebook’s argument that TBOR reflected Congress’ direction to give taxpayers a statutory right to Appeals:

[W]hat the statutory TBOR did was to impose an affirmative obligation on the Commissioner of Internal Revenue to “ensure that employees of the Internal Revenue Service are familiar with and act in accord with” preexisting taxpayer rights established in other provisions of the Internal Revenue Code. In other words, the TBOR directed the Commissioner to, for example,better manage and train IRS employees to ensure that IRS employees know what rights taxpayers have and act in a way that respects those rights.

In reaching its conclusion the court emphasized that the government’s interpretation did not render the adoption of TBOR a nullity:

First, the statutory TBOR imposes duties on the IRS Commissioner to manage and train IRS employees regarding taxpayer rights. See generally Toward a More Perfect Tax System at 23–36 (discussing proposals for improved management and training of IRS employees); Amanda Bartmann, Making Taxpayer Rights Real: Overcoming Challenges to Integrate Taxpayer Rights into a Tax Agency’s Operations, 69 Tax Law. 597, 614–24 (2016) (same). Second, Facebook’s interpretation that the TBOR itself created new rights ignores the statutory language that the TBOR rights are “afforded by other provisions of this title.” 26 U.S.C. § 7803(a)(3)

It also considered the rights collectively, rather than solely focus on the right to appeal to an independent forum. That led the court to question whether the codification of TBOR should lead to the creation of substantive or procedural rights:

Facebook focuses on only one TBOR right — “the right to appeal a decision of the Internal Revenue Service in an independent forum” — but Facebook’sarguments, if they were correct, would apply to the other nine rights too. For example, the first right is “the right to be informed[.]” 28 U.S.C. § 7803(a)(3)(A). Applying Facebook’s argument, this provision must have created a new substantive right “beyond those existing prior to [the TBOR’s] codification.” A new right to be informed about what? And when? The TBOR does not say, and neither does Facebook. It is implausible that the TBOR created ten new substantive rights that it defined so poorly. The logical reading of the TBOR is not that it created some new, wholly nebulous rights, but that it created no new rights at all, and instead that Congress meant what it said when it said that the TBOR rights were rights “afforded by other provisions of this title,” not new rights created by the TBOR itself. (footnotes omitted)

The opinion also considered the APA and Facebook’s mandamus claim. The court discussed the Revenue Procedure setting Counsel’s discretion to limit access to Appeals and the agency’s decision to not refer the matter to Appeals, and held that neither constituted final agency action.

This is a quick summary and I suspect not the last we will say about this case, nor this issue. The case was discussed last week at the ABA Tax Section meeting, and advocates will continue to press courts to consider the codification of TBOR in differing settings. As I discussed on a panel with Keith and the National Taxpayer Advocate at the Tax Court judicial conference, and as Chris Rizek raised at the ABA Tax Section meeting in response to a question from Special Trial Judge Leyden, a court’s consideration of TBOR would likely differ in a CDP case, where the Tax Court reviews IRS collection actions for abuse of discretion and is required to balance the government’s interest in collecting taxes with the individual’s right that the collection actions that are no more intrusive than necessary.

Injunctions as a Tool to Prevent Pyramiding of Employment Taxes

Christine and I just returned from the ABA Tax Section May meeting.  In this brief post I want to flag an issue that DOJ attorney Noreene Stehlik and Chaya Kundra discussed at an Employment Tax panel entitled “Employment Tax Liabilities and IRS Collections” as well as a case that the Civil and Criminal Tax Penalties committee flagged. In the employment tax panel, the panelists discussed the various tools that DOJ and IRS have to go after employers who pyramid employment tax liabilities by withholding taxes from employees but then failing to remit the taxes to the government.

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Section 6672 allows the government to pierce the corporate veil and creates personal liability for delinquent employment taxes. Keith has written extensively about Section 6672 (see here). The ability to go after people in their individual capacity is powerful. Yet IRS and DOJ have been proactive in using even harsher tools to combat repeat offenders. That has included an uptick in criminal prosecutions and using injunction suits against the employer, owners or principal officers of delinquent employers.

In the last few years there have been a handful of employment tax injunction cases that have led to orders discussing the practice and power that the government has to use injunction as a remedy in this context. The statutory hook is Section 7402(a), which authorizes district courts to take a number of measures related to the enforcement of the internal revenue laws, including enjoining taxpayers from taking future conduct or requiring that taxpayers do specific acts.

While courts have long had this power, and IRS and DOJ have used it over the years, its use is growing. Last fall Keith drafted a new subchapter in Saltzman and Book Chapter 14A discussing the issue.  There are no statutory guidelines or time limitations for a civil injunction. The terms could last indefinitely, and the relief requested could be narrowly tailored or rather broad.

The new subchapter discusses the differing approaches district courts have taken, with some courts requiring  the government prove that it meets traditional standards for equitable relief, and other courts not starting the analysis from traditional equitable factors but considering whether the relief is appropriate for the enforcement of the laws in light of the statutory language in Section 7402(a).

Also at the meeting last week the Civil and Criminal Penalties Committee panel discussed a court order from earlier this year that did not grant injunctive relief in connection with multiple years of employment tax noncompliance. In US v Askins and Miller Orthopaedics, the Middle District of Florida denied the government’s request for injunctive relief (as an aside there seem to be a lot of doctor and dentist cases involving employment taxes); the request for injunctive relief was both broad (stating that the key individuals would be responsible for filing and paying on time) and specific (for example, detailing payment schedules and permitted ways for payroll processing companies to be involved to assist in meeting obligations). For over eight years the government had made numerous attempts to bring the practice into employment tax compliance. The order discusses the futility of levies, the apparent diversion of funds to an account that funded a private hunting club and allegations of a failure to disclose all bank accounts. Noting that the  collection efforts failed, the district court still did not grant the relief requested. In finding against the government, the court looked to traditional standards that would justify equitable relief, i.e., the government had to show absence of an alternate adequate remedy and the likelihood of suffering irreparable injury of denied relief.  That, in the courts view, cut against the injunction, as the government was bringing its traditional collection case for a money judgment for the unpaid taxes.

While the court sympathized with the government’s challenges in the past and its argument that it would have a difficult time collecting, that was not enough, as the order leaned heavily on the government’s ability to fashion a remedy in line with other creditors’ rights:

Bringing an action to recover money damages `does not entitle the claimant to equitable relief simply because the complaint alleges uncertainty of collectibility of a judgment if a fund of money is permitted to be disbursed. The test of the inadequacy of a remedy at law is whether a judgment could be obtained, not whether, once obtained it will be collectible.’ (citation omitted).

Conclusion

As we discuss in Saltzman and Book, even when courts do not rely on a traditional approach under equity to determine when an injunction is warranted, the government’s power is not unlimited.  I am sympathetic with the government in these cases, especially when there are pyramiding liabilities and repeated unsuccessful attempts to encourage voluntary compliance and efforts to defeat collection. Employment tax noncompliance is a major systemic problem, and the threat of contempt seems proportionate in light of repeat offenders who are tempted to view employment tax funds as a source to keep businesses afloat and who take affirmative steps to defeat collection.

We all suffer when employment taxes pile up, and it seems that this stubborn problem is need of more robust powers that are short of criminal prosecution but have more teeth than traditional collection suits.

Larson Part  2: Absence of Prepayment Judicial Review Is Not a Constitutional Defect

Carl Smith’s earlier post on Larson v United States discussed Larson’s argument that the Flora rule should not apply to immediately assessable civil penalties under Section 6707. Larson also argued that the absence of prepayment judicial review violated his 5th Amendment procedural due process rights.

I will briefly describe the procedural due process issue and the Second Circuit’s resolution of the issue in favor of the government.

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Larson’s argument Larson was straightforward: the absence of judicial prepayment review of the 6707 penalty violated his right to procedural due process, a right embedded in the 5thAmendment. The 5thAmendment provides that no person shall be . . . deprived of life, liberty, or property, without due process of law . . . .”  Stated differently, Larson argued that the right to challenge the penalty prior to payment at Appeals was not enough to meet constitutional due process standards. Taking the constitutional gloss off of it, as the opinion states, Larson felt that the process “just wasn’t fair.”

The Second Circuit disagreed in a fairly brief discussion of the issue, and in so doing reminds us that while courts have pushed back on tax exceptionalism in many areas, when it comes to viewing the adequacy of IRS procedures in a due process framework tax is different.

At its heart, the protections associated with procedural due process, notice and hearing, are about minimizing the risk of the government making a mistake and depriving a person of a protected interest—in this case property. In finding that the process adequate, the Larson opinion leaned on caselaw that had its pedigree in 17thcentury England which had established that when assessing and collecting taxes the sovereign is entitled to rely on summary pre-payment and assessment procedures backstopped by the right to post payment judicial review.

That case law was based on the notion that potentially interposing a hostile judiciary between the taxpayer and the fisc was just too risky; taxes, after all, are the lifeblood of the government, and if the government makes a mistake in assessing a tax, a taxpayer can get justice by bringing a refund suit.

Of course, in our modern tax system, Congress has repeatedly stepped in and provided statutory protection to allow prepayment review in many cases. The US Tax Court exists in large part to soften the impact of the lack of meaningful due process protections associated with a determination of liability. The ability to pay a divisible portion of a tax and sue for refund, as well as CDP’s opportunity to challenge a liability in certain circumstances, all soften the blow of the exceptional view of tax cases.

As Carl mentioned the 6707 penalty is not divisible, and we have discussed the limits of CDP providing a forum for challenging the penalty.

This brings us to Larson’s constitutional challenge.  As Larson and others have argued, much has happened since the Supreme Court first blessed the assess first pay later constitutionality of the US tax system in the latter part of the 19thand early part of the 20thcentury. A number of meaningful Supreme Court cases, such as Goldberg v Kelly, provided that in most instances, the norm should be more defined pre-deprivation review. Most creditors are no longer entitled to rely on post payment judicial protections to ensure that a debtor’s interests are protected. In Mathews v Eldridge, the Supreme Court instructed courts to consider three factors when faced with a due process claim: (1) “the private interest that will be affected by the official action”; (2) “the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards”; and (3) “the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

In concluding that Larson did not have a successful procedural due process claim, the court did acknowledge that the Mathews factors were instructive and did in fact apply those factors to Larson’s facts. That  is more than some courts have done with tax cases, where some opinions state that since the time of King Charles the sovereign is entitled to rely on summary assessment procedures, and leave it at that.

In applying Mathews, the opinion stated that on balance while Appeals might not have afforded a perfect process the taxpayer did get a major reduction in the penalty assessment, and, in any event, the government interest in tax cases is “singularly significant”:

Larson’s interest is not insignificant; the IRS has imposed onerous penalties that Larson claims he cannot pay. But, as we previously noted, the IRS Office of Appeals review resulted in a substantial reduction of Larson’s penalties. No review is perfect and Larson offers no record‐based criticism of how the appeal was conducted. We are satisfied that the current procedures effectively reduced the risk of an erroneous deprivation and gave Larson a meaningful opportunity to present his case. Indeed, the Seventh Circuit recently observed that the IRS Office of Appeals “is an independent bureau of the IRS charged with impartially resolving disputes between the government and taxpayers,” and that “Congress has determined that hearings before this office constitute significant protections for taxpayers.” Our Country Home Enters., Inc., 855 F.3d at 789. Lastly, the governmental interest here is singularly significant due to the careful structuring of the tax system and the Government’s “substantial interest in protecting the public purse.” Flora II, 362 U.S. at 175. Considering all three factors, our Mathewsanalysis weighs in the Government’s favor. Therefore, application of the full‐payment rule to Larson’s § 6707 penalties does not result in a violation of Larson’s due process rights.

Observations and Conclusion

The opinion leans heavily on Appeals’ role, both in terms of how Congress has emphasized Appeals’ importance to the tax system (an issue front and center in the Facebook litigation we have discussed) and how Appeals reduced the penalties at issue in the case by $100 million.  The opinion heavily weighs the government’s interest without thinking on a more granular level as to what the government interest is. For example, what is the government’s interest in summary process for this penalty? What additional burdens or risks would the government face by allowing for judicial review of the penalty? I also would have liked to have seen a more robust discussion of the individual’s interest and a bit more on the structural deficiencies with Appeals as a resolution forum relative to a judicial forum.

To be sure, due process is not a one size fits all analysis. And as a comment to Carl’s post notes perhaps Larson is not the most sympathetic of taxpayers. Yet, over time, our tax system has changed to reflect an increased sense that taxpayers should have the right to challenge an IRS assessment without having to full pay the liability. Congress has also added significant civil penalties that are immediately assessable; that progression has been piecemeal and could stand to use some reform that might also consider the procedural aspects of challenging those penalties.

Norms with respect to individual protections and taxpayer rights are changing as well. Perhaps the appropriate remedy here is a statutory fix to CDP that would allow for Tax Court review of the penalty and possible refund of any amount paid in a CDP proceeding. That would more closely align collection due process with the 5thAmendment notion of due process.

 

District Court Holds That Taxpayer With Rejected E-Filed Return Subject to Late Filing Penalties

Last week, in Spottiswood v US, Docket No. 3:17-cv-00209 [link not yet available], the District Court for the Northern District of California held that a taxpayer who attempted to e-file his return a few days before the filing deadline but who incorrectly entered his child’s Social Security number was responsible for a late filing penalty. The case is the latest in I am certain to be a growing number of cases attempting to apply a 20thcentury approach to tax administration to the realities of 21stcentury tax return filing.

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Here are the facts.

Taxpayer John Spottiswood used Turbo Tax to prepare his federal return and California return. The federal return was submitted to Intuit for the software provider to then submit to IRS for electronic filing. Also using the Turbo Tax software, Spottiswood printed out his state return and mailed the State return via old-fashioned snail mail.

Here comes the problem. On the federal return his child’s Social Security number differed from information IRS had when it crosschecked the numbers with its databases. IRS notified Intuit, which sent an email to Spottiswood telling him IRS failed to accept the return.

Spottiswood failed to notice the email and he had no idea that all was not kosher until months later:

When I was investigating the issue, I discovered the following by logging back into my Turbo Tax 2012 software. [] I discovered that my return, which I thought had been successfully e-filed, had actually been rejected. If I had realized that there was a chance of rejection I would have mailed in my return, but e-filing seemed like an easier option and it was free with the software. Intuit may have informed me in the fine print that I needed to log back in to make sure that my return had not been rejected, but if so I did not read this fine print. Had I logged back in a few days later I would have realized that the return had been rejected. But I did not log back in until 18 months later.

Eventually Spottiswood got around to fixing the error and resubmitting the return.  IRS, however, assessed a late filing penalty of about $89,000.

Spottiswood paid the interest on the penalty and filed a claim for abatement and refund claim, which IRS rejected, leading to a suit (an aside: not clear how this gets around Flora as it does not appear based on the order that Spottiswood paid the penalty). In his motion for summary judgment, he had two main arguments: 1) the rejected return should have been considered a return and therefore no late filing penalty was appropriate and 2) in the alternative he had reasonable cause for the late filing.

The court held for the government and granted its cross-motion for summary judgment.

As to the first issue, the taxpayer’s main argument revolved around how if he had sent the precise information contained in the attempted e-filed return via old fashioned paper return, IRS would have accepted it and the information contained qualified as a return under the Beard standard as to whether a document is a return for federal income tax purposes.

I am sympathetic to this argument, as the IRS’s current approach essentially creates an additional burden for e-filers who, if they had just mailed the return in the old fashioned way, would not have found themselves facing a late filing penalty.

The court sidestepped the argument though because Spottiswood failed to establish that in fact IRS would have treated the information in a paper return differently than the e-filed return:

Plaintiffs argue that the IRS would have accepted a paper-filed return containing the same error, and that the IRS unlawfully applied a more stringent standard to their electronically- submitted return. Pls.’ Mem. at 7-8. Plaintiffs’ only support for this argument is a document entitled “Internal Revenue Manual Part 3. Submission Processing Chapter 11. Returns and Documents Analysis Section 3. Individual Income Tax Returns.” See Pls.’ Opp’n at 1 (“Plaintiffs submit Exhibits 1 through 3”); id., Ex. 2. This document is not authenticated, and Plaintiffs establish no foundation for the document. The document shows a transmittal date of November 17, 2017, and Plaintiffs do not establish any foundation showing the IRS followed the procedures described therein when Plaintiffs attempted to submit their tax return more than four years prior to that date. Plaintiffs also establish no foundation to show their interpretation of the procedures described in the document is correct. Plaintiffs fail to create a triable issue that the same mistake contained in their submission would have been treated differently if it had been presented as a paper filing, and that the IRS’ rejection of their submission because it contained an erroneous Social Security number was not lawful.

The order continued with its critique of the way the taxpayer argued that the information it submitted should have been enough to constitute a return for tax purposes:

Plaintiffs’ assertion that the document “contained sufficient data to calculate the couple’s tax liability” (Pls.’ Mem. at 7) is purely conclusory. Their support for this argument is based entirely on an unauthenticated copy of a document faxed by the IRS to an unidentified recipient on May 23, 2016. Id. (citing Pls.’ Opp’n at 1 (“Plaintiffs submit Exhibits 1 through 3”); id., Ex. 1). Plaintiffs do not set out facts showing the document is a true and correct copy of the data they submitted to the IRS in 2013; indeed, it does not appear to be, given that the document displays information received on January 26, 2015. See, e.g., Pls.’ Opp’n, Ex. 1, passim (“TRDB-DT- RCVD:2015-01-26”). Nor do they set out facts showing the information contained in this document would be sufficient to calculate their tax liability. They thus have not created a triable issue of fact that the document they attempted to submit to the IRS in 2013 qualifies as a tax return under Beard, such that the IRS should have accepted it for filing under their theory of the case. The United States does not actually challenge this point, arguing only that the first Beard factor was not met because the IRS could not calculate Plaintiffs’ tax liability because the return had not been accepted for filing.

With a better foundation, the court would have had to address this issue head on, and I think it is a close case and requires courts and IRS to apply some fresh thinking on the issue.

The court also summarily rejected the taxpayer’s argument that reasonable cause should excuse the penalty, looking to the taxpayer’s failure to check his email account that he provided Intuit and the taxpayer’s failure to look at the “check e-file status” on his software to confirm that everything went well with the e-filing. For good measure, although the court did not emphasize this in the order, IRS also failed to debit the $395,000 that Spottiswood designated as a payment with the  purportedly e-filed return, and he failed to notice this due to as he described the high balance in the account. That failure to confirm that in fact IRS accepted the payment cuts against the argument that he had reasonable cause for failing to file on time.

Additional readings on this and related issues:

For more on this issue, see a prior PT post discussing the Haynes case on appeal in the Fifth Circuit, Boyle in the Age of E-Filing(linking an amicus brief from the ACTC) and a PT post on e-file rejections.

In December of 2017 and January of 2018 ABA Tax Section submitted letters to IRS asking IRS to reconsider its approach to timeliness of e-filed returns after a failed transmission; see here and here. (Note: Keith was the initial drafter of these letters, and he was part of the ABA Tax group that called on Counsel to change its policies on this issue).

A 2012 Journal of Tax Practice and Procedure article by Bryan Skarlatos and Christopher Ferguson making the persuasive case for a new approach to Boyle in the age of e-filing.

Some Developments on CDP Statutes of Limitation: US v Hendrick and Weiss v Commissioner

In this post I will discuss  two cases involving statutes of limitation and CDP, US v Hendrick and Weiss v Commissioner.

US v Hendrick is a recent federal district court opinion out of the Western District of PA that concluded that the statute of limitations on collection was tolled for the 30-day period following a CDP determination even when the taxpayer chose not to challenge the determination in Tax Court. Weiss v Commissioner is a case on appeal in the DC Circuit that addresses when a 30-day period runs requesting a CDP hearing when the date the CDP notice was mailed differs from the date on the notice itself.

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First Hendrick. Simplifying somewhat, the case involved trust fund assessments, the taxpayer’s timely filing of a CDP request, and the IRS’s issuing of a Notice of Determination sustaining the proposed levy action which informed the taxpayer of the right to appeal the determination in Tax Court within 30 days (I note, and perhaps will return in a later post, to the possible significance of the 2015 legislative change substituting the word “petition” for “appeal” in Section 6330, a subtle point made in Judge Holmes’ Kasper opinion concerning the relationship of the APA and administrative law generally to the mix of non deficiency cases in Tax Court).

The taxpayer did not file an appeal in the 30-day window. Moving with not much speed, the government waited about ten years to file a suit to reduce the assessment to judgment. (It is possible that the government had made administrative efforts to collect; the opinion is silent on that).

As most readers know, under Section 6502 the government may bring a suit within ten years. The government’s collection suit was outside the ten-year period if you did not include in the tolling period the 30-day period that the taxpayer could have filed a petition for review to the Tax Court. Not surprisingly, the taxpayer argued that the 30-day appeal window should not count when in fact the taxpayer does not exercise his appeal rights and challenge a CDP determination in Tax Court.

Section 6330 essentially states that the ten-year period is suspended while a CDP hearing and any appeal is pending. The case turned on whether the hearing or an appeal was pending in that 30-day window when the taxpayer could have filed a petition to Tax Court. The statute does not define the term pending, though regulations provide that the period when the taxpayer could have appealed the determination is part of the time that the statute is suspended:

[t]he period of limitation under section 6502 (relating to collection after assessment) … [is] suspended until the date the IRS receives the taxpayer’s written withdrawal of the request for a CDP hearing by Appeals or the determination resulting from the CDP hearing becomes final by expiration of the time for seeking judicial review or the exhaustion of any rights to appeals following judicial review. 26 C.F.R. § 301.6330-1(g)(1).

This precise issue was addressed in a 2014 Ninth Circuit case, US v Kollman, that Keith blogged about here. The district court opinion, as did the Ninth Circuit, concluded that the statute itself was not clear and the regulation under a Chevron Step Two analysis was a reasonable interpretation of an ambiguous statute.

In finding for the government, the opinion notes that in analogous areas IRS and courts have taken a consistent approach and concluded that limitations periods are tolled pending periods when appeals could be taken. From a policy perspective, the decision is correct, as apart from offset,  the IRS cannot take administrative collection action during that 30-day period.

Weiss: A Case for the Dogs?

Another case involving a CDP statute of limitations issue is percolating its way through the DC Circuit Court of Appeals, Weiss v Commissioner, a case that Keith blogged here. The case involves some colorful facts: the revenue offer attempted to hand deliver the notice of intent to levy but a dog prevented him from making it up the driveway. After failing to successfully hand deliver the notice, when he returned the office two days later, the Revenue Officer mailed it using certified mail but did not change the date on the notice.The taxpayer claimed that the earlier date on the notice governed the 30-day period to make the CDP request.

The taxpayer in Weiss was trying to wait out the SOL on collection, as an equivalent hearing filed outside the 30-day window does not toll the SOL, and if the request was considered an equivalent hearing the IRS was out of time to collect. The Tax Court did not buy the argument, and held that the actual date of mailing controlled the 30-day period, and since Weiss filed within that 30-day period, the request was for a full blown CDP hearing and not an equivalent hearing.

On brief, Weiss also argues in the alternative that the government should be estopped from arguing that the mailing date controls, since it showed the earlier date in the notice of intent to levy. This argument presupposes that the deadline at issue is not jurisdictional, an issue that should be familiar to our readers, though the taxpayer did not press the jurisdictional predicate on brief.

For those wanting a deeper dive, an audio recording of the Weiss oral argument can be found here. Weiss’ brief can be found here; government brief here; and taxpayer’s reply here.

Proposed Regulations Narrow Ability of Private Attorneys to Participate on Behalf of IRS in Exams

A few years ago we discussed litigation involving Microsoft (see, eg., Keith’s Enforcing the Summons Against Microsoft), which implicated Treasury regulations that allowed private lawyers to participate in exams. While the litigation did not strike down that practice, it was heavily criticized, and Treasury now proposes to scale back the practice significantly.

Last week Treasury has proposed to “significantly narrow the scope of the current regulations by excluding non-government attorneys from receiving summoned books, papers, records, or other data or from participating in the interview of a witness summoned by the IRS to provide testimony under oath, with a limited exception.”

The exception relates to lawyers who have expertise in issues other than federal tax law, such as state, local or other countries’ tax laws, or in other substantive areas, like patent law. The exception does not extent to nonsubstantive specialized knowledge (like litigation skills).

Treasury regulations still permit other outside specialists like economists to “receive and review summoned information and fully participate in the summons interview, including questioning witnesses.” The proposed regs also allow for lawyers who are not acting as lawyers but who are performing services associated with outside permitted specialists to participate.

The proposed regs attempt to restrike the balance between the need for outside assistance to help administer the tax laws with the “perceived risk that the IRS may not be able to maintain full control over the actions of a non-government attorney hired by the IRS when such an attorney, with the limited exception described below, questions witnesses.”

Perhaps the rebalancing of these interests will inspire a fresh look at the private debt collection issue, an area that likewise has raised questions about risks associated with non-government employees performing essential IRS functions.

4/3 Update: Title Changed to clarify we are talking about IRS limitations!

Pecker Buys Procedurally Taxing For Undisclosed Sum

David Pecker, whose company owns the National Enquirer, purchased all rights to the name and likeness and prior posts of Procedurally Taxing for an undisclosed sum. Pecker, whose National Enquirer has been in the news of late due to its cozy relationship with President Trump, has long felt the need to enter the nascent world of legal blogging, especially tax, with its cross over to and connection with the world of entertainment.

In commenting on the purchase, Pecker noted that just in the last few weeks we have seen Cardi B talk about tax policy, rapper DMX get sentenced to jail for tax evasion, an innocent taxpayer sue Howard Stern and the IRS for an employee talking about her tax account on the shock jock’s radio show, and John Oliver sing the praises of tax exemptions as he discusses prosperity gospel.

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Noting the extensive reach that PT has in the bar, the bench and in government, Pecker hopes to leverage his company’s marketing and publicity to expand the blog’s footprint.

“Tax is everywhere,” said Pecker. “Outlets like Procedurally Taxing do not have a clue about the real world.”

While we are working out the final details, it appears that Keith, Stephen, and I, the founding bloggers, will remain affiliated with the blog in some capacity, though it is expected that we will significantly reduce time spent on the blog to allow well known celebrity authors to post.

The first post, due to be published Monday is entitled “Frequent Contributor Carl Smith Abducted by Aliens Claiming to Know Precise Constitutional Status of Tax Court.” Written by Fogg’s Harvard Law School colleague Steve Shay, who specializes in international and intergalactic transactions, the post hopes to explore issues that have long troubled not only the tax bar but also the public at large.

Pecker has released Monday’s post in preview form to a number of tax celebrities. Frank Agostino commented:  “The aliens have made a Graev mistake.  There is no evidence that the initial determination to abduct was personally approved in writing by the immediate supervisor of the alien making the abduction.  I plan to appeal this matter to the Court of Appeals for the Milky Way Circuit.  Or, at least go out and buy a Milky Way bar.”

Nina Olson thought:  “Carl Smith’s abduction no doubt violates a number of provisions of the Taxpayer Bill of Rights that I recently got Congress to incorporate into section 7803.  I won’t help Carl, but I will closely monitor any litigation in this area.”

Tax Court Chief Judge L. Paige Marvel expressed surprise that PT was aware of the abduction. “Information about the abduction,” she said, “is contained within the Tax Court files of a case Smith brought, but the information is not available on line.  To get this information, someone had to go to the Tax Court Public Files Office in D.C. or pay 50 cents a page for it to get it mailed out.  Who would do that?”

Pat Smith of Ivins Philips argued that Carl Smith’s abduction was invalid as a violation of the Administrative Procedure Act and looked forward to any court case that might overcome the limits of the Galactic Anti-Abduction Injunction Act.”

President Trump tweeted that “Regardless, the Trump campaign and Trump Administration did not speak to any of the aliens who abducted Smith.  There was NO COLLUSION.  Covfefe.”

Hillary Clinton noted that Carl Smith was a resident of Manhattan, a locale that voted overwhelmingly for her in 2016.  “Obviously, the aliens wanted someone smarter to probe.”