About Samantha Galvin

Unscrupulous Return Preparers Draw Attention At The ABA Tax Section Midyear Meeting: The highlights from the Midyear Meeting panel on unscrupulous return prepares are shared in this post, including how state law causes of action can be used to go after such preparers and the results of a special research report included in the NTA’s Annual Report to Congress which explored dividing or separating the EITC into different components.

Tax Court Practice & Procedure Updates from the 2023 ABA Tax Midyear Meeting: Tax Court updates from the Court and Counsel’s Office from the Midyear Meeting are shared in this post. Notably, practitioners can now enter a limited appearance any time after a case is set for trial and before the trial session is adjourned; the Notice Setting Case for Trial invites interested parties to file a motion for a remote trial session; and the next quarterly Tax Court webinar will be about expert witnesses and held on March 16.  This post also contains lots of data on numbers of cases filed, types of cases, etc.

Taxpayer and Practitioner Rights

Property Tax Strict Foreclosure – A Follow Up: Anna Gooch follows up from an earlier post on states using strict foreclosure to collect property taxes. Since her initial post, additional cases with similar facts have been identified, including one that will be heard by the Supreme Court. Arguments in favor of petitioners, along with the Court’s opinion on them, are discussed, including arguments involving the Takings Clause or the Excessive Fines Clause.

A Pair of FOIA Cases on Similar Trajectories (or not): This is a tale of two FOIA cases. The first involves a request for information related to an OPR referral. The second involves an inquiry into what the IRS does with a practitioner’s information (SSN and birthday) when they call on behalf of a client. In both cases, the IRS used FOIA exceptions to argue that they didn’t have to disclose some of the information. In both cases, the district court agreed with the IRS. In both cases the party seeking the information appealed and the appellate court reversed and remanded the case for furth action.  In both cases the district courts essentially stood by their initial rulings denying the FOIA request.  In the first case, the petitioner was mostly successful on his second appeal to the D.C. Circuit. In the second case, an appeal back to the Eighth Circuit has not yet been filed.

Tax Court Updates

Tax Court’s 2024 Budget Justification : The Tax Court seeks more money for the coming year to cover increased salaries for existing judges and other Court needs, but also to hire at least one more special trial judge. The Court seeks to raise its filing fee from $60 to $100. Additional information and data about the Court’s operations from the Budget Report are shared in the post.

One Computer in Tax Court Record Room: Post-pandemic there is only computer in the Court’s record room instead of two. Keith has observed that other users of the computers are typically reporters in the tax press. The Court aspires to expand public access to information and downsizing the public access computers seems inconsistent with that. After this post, at the mid-year meeting, the Court explained it removed one of the computers was because it was rarely used. The Court’s data showed that, so far, two persons had not showed up at the same time to use the computer in the records room.

Tax Court Trial Procedures: Guidelines from Judge Jones: Judge Jones provided trial guidelines and a worksheet that can be used by taxpayers with business expense issues at a recent D.C. calendar call. Both documents are worth checking out. A link to the guidelines and the worksheet are shared in the post.

Tax Court Decisions

East Coast Bias: Tax Court petitions are required to be electronically filed by 11:59 EST on the day of the petition filing deadline. This can create a disadvantage for any taxpayer outside of the Eastern time zone. The issue was demonstrated in Park when the Court dismissed petitioners’ case because they filed it two minutes after the EST deadline even though it was filed on the last date for filing the petition when viewed from the perspective of California.

Alleged Monthlong Trip to Mexico To Celebrate Día De Los Muertos Not Enough To Get Extra Sixty Days To File A Petition: Shead was dismissed as untimely when the taxpayer failed to prove he was out of the country at the time the IRS mailed the notice of deficiency. The only evidence the taxpayer presented was his testimony and unstamped passport, but it’s very probable that he had other evidence of the trip which may form a basis for the Court to reconsider its dismissal. Testimony is evidence, but in the absence of confirming documentation, a judge may not find it sufficient.  

Tax Court Denies Reconsideration in Green Valley and More District Courts Invalidate Listing Notices: The IRS’s motion to reconsider the Green Valley decision has been denied. The Court stated it is under no obligation to address every argument raised. The existence of other listed-transaction notices did not influence the Court and they stated that they were not offering any opinion related to the other notices. A district court in Alabama was persuaded by the Tax Court’s reasoning in Green Valley and both it and another district court in Ohio invalidated the same notice while limiting the remedy to particular taxpayers.

Your Advice is Sought – A Threshold Inquiry for Penalty Abatement: Taxpayers may only be eligible for penalty relief when they rely on actual advice, rather than clerical work, from a tax advisor. In Patacsil, the court determined reporting business expenses on a Schedule C may not constitute tax advice because it involves transcribing figures rather than exercising judgment or performing analysis. Conversely, the Court granted accuracy related penalty relief for incorrectly carried forward NOL’s because rules around NOLs are “tax-law arcana.” Other cases have shown that failure to report income and inputting data into software is also not tax advice.

Failure to File Information Returns For Foreign Trust Keeps Statute Of Limitations Open For Individual’s Income Tax: The assessment statute does not begin to run until a taxpayer with a foreign trust and distributions furnishes information to the IRS about the trust investments according to 6501(c)(8). In Fairbank the petitioner first argued that her entity was a corporation rather than a trust and she had filed the necessary forms for a corporation after a JDS was issued. Then she argued that the information provided on the corporate forms effectively provided the IRS with the trust information. The Court disagreed citing the need for certainty in this area.

Court of Federal Claims and District Court Decisions

Circuit Precedent and Supreme Court Decisions: Vensure involved the question of whether a three-judge circuit panel has authority to overturn circuit precedent in light of undercutting (but not overturning) Supreme Court precedent. The DOJ argues the panel’s authority is very narrow, but the CFC disagrees. The case involves the jurisdiction of a refund claim, and the argument is one that the DOJ has raised in other jurisdiction cases. The post provides important information about the current litigation in this area.

District Court Rejects Claim That Government Must Choose Either Administrative or Judicial Collection Path To Collect An Assessed Tax: In U.S. v. Varner the taxpayer argued that the IRS can only collect administratively or judicially but not in both ways. More specifically, he argued that a prior levy precluded the IRS from now reducing the assessment to judgment. The Court explained that a taxpayer’s right to appeal collection actions administratively is separate from the government’s power to use judicial collection tools and the options are not mutually exclusive. 

“Refunds” and CDP Review: The first post dives into whether it’s possible to get improperly levied funds back from the IRS through a CDP hearing despite the Tax Court’s lack of refund jurisdiction. It includes a discussion of a recent case, Shwartz, which involved a credit-elect and demonstrates the ability of the Tax Court to resolve issues in CDP even if it cannot order specific relief.

Getting a Refund in CDP: Don’t Call it a (Rebate) Refund: The second post dives further into the argument that the Tax Court can order a refund in CDP, even if it can’t use those exact words. A footnote in Greene-Thapedi suggests that the Tax Court may consider overpayments when they are relevant to a proposed collection action. The significance of other cases where money has been returned are also discussed.

Getting Refunds in Collection Proceedings: Why CDP Matters: The third post looks at the people and processes that resolve most CDP controversies and emphasizes that there may be ways to get a refund in an administrative CDP hearing, even if it’s not possible in Tax Court.

Recommendations for Congress

Math Error and Limited Taxpayer Remedies: The remedies available to challenge incorrect math error adjustments are limited. The IRS can disregard an abatement request or fail to explain the reason for an assessment or fail to issue a notice of deficiency and leave taxpayers without much recourse. Congress could address the issue by expanding the Tax Court’s jurisdiction to allow it to enjoin the IRS or to review cases where a math error is not timely abated.

Exempting the Earned Income Tax Credit from the Bankruptcy Estate: Many states have exempted EITC refunds from a bankruptcy estate because the payments are considered welfare payments. This is not true for all states as the debtor from New Mexico in In re Medina discovered. Congress could address the issue by passing legislation that exempts federal anti-poverty payments for all states.

Recommendations for the Treasury and IRS

FOIA Appeals and Exception 21: Comments were requested on proposed regulations related to Appeals resolution of federal tax controversies. One comment recommended that FOIA disputes be removed from Appeals jurisdiction. This post argues that despite problems with Appeals in this realm, it is still best equipped to handle FOIA disputes. The post goes on to discuss exception 21 and why its current form allows Counsel’s Office too much deference to determine which cases can be withheld from Appeals.

IRS Requests Comments on Forms 3520 and 3520-A: The IRS is requesting comments on Form 3520 and 3520-A as part of a routine OMB review. This post provides some insight into the process, some tips for viewing the IRS’s written discussion of public comments online, and shares observations about the compliance burdens related to the forms.

GAO Report of Refunds and Customer Service:  Charts from the GAO report entitled: “2022 Tax Filing – Backlogs and Ongoing Hiring Challenges Led to Poor Customer Service and Refund Delays” are shared. The charts convey information about IRS hiring timelines, appropriations, correspondence inventory, tax return processing, telephone service, and taxpayer wait times.

Now is the Time for IRS to Enhance Digital Services: The IRS should act to immediately enhance digital services. This recommendation was emphasized by the NTA in her 2022 report, where she stated that creating robust online accounts should be the IRS’s highest priority and will prove to be the most transformational. TIGTA has found that the IRS has already made some missteps in this area.

Supreme Court Updates

Polselli Summons Case Heads To Supreme Court: The question the Supreme Court will seek to resolve is the IRS required to give notice when it issues a summons in aid of collecting an assessed tax? There is split between the Sixth and Ninth Circuits on this issue with the Sixth Circuit holding that answer is no, as long as the summons follows an assessment or judgment and was issued to aid tax collection. This interpretation places no limitations on the IRS and fails to protect private information from IRS overreach.

Circuit Court Opinions

Court Tosses Lawsuit Alleging Alleging Hollywood Foreign Press Association Bylaws Inconsistent With Its Tax Exempt Status: The petitioners in Flaa v Hollywood Foreign Press Association sought a declaratory judgment that the bylaws of the HFPA conflicted with its status as an IRC § 501(c)(6) trade organization, because they only benefit its members rather than the industry as a whole. The court dismissed the claim holding that the Declaratory Judgment Act limits courts’ jurisdiction to provide relief. There’s an exception to the DJA related to determining whether an organization is entitled to tax exempt status but only in actions brought by the organization itself.

Avoiding the Federal Tax Lien in Bankruptcy: In U.S. v. Warfield (In re Tillman) the Ninth Circuit determined that a chapter 7 trustee could not avoid the federal tax lien on the debtor’s homestead. The case involves an unpaid tax penalty, an NFTL for that amount, and property for which a homestead exemption was claimed.

Tax Court and District Court Opinions

Changing a Penalty – Graev Effect: The Petitioners in Castro argued that actions of a penalty-approving supervisor demonstrated he paid little or no attention when he signed the approval form, but that doesn’t matter to the Court. Signing the right form at the right time is all that matters. The decisionaffirms prior case law that the Court will not look behind a supervisor’s signature in the same way that it will not look behind a notice of deficiency.

Public Records Exception to IRC 6103: In McGowan the plaintiffs wanted to question the government’s expert about his experience in previous cases to see if it impacted his opinion in their case. The court cites to the general disclosure prohibition in 6103, but also to the exception for information that is part of the public domain. It finds the information was disclosed to the public in the prior Court Opinions and, as a result, it also finds that the protection of the information under §6103 is futile.

A Quick Hobby Loss Refresher: Why These Losses Are Useless (At Least Until 2026): In Gregory the TCJA’s disallowance of miscellaneous itemized deductions prevented the petitioner from claiming hobby expenses against hobby income. Petitioner argues that the hobby loss provision conflicts with section 67, and because section 183 is more specific it should preempt and allow for hobby expenses to be deducted above the line. The Tax Court disagreed, finding that the statutes were not in conflict. The Gregorys have appealed their case to the 11^th Circuit.

Miscellaneous

The Low-Income Taxpayer and Form 1099-K: Most tax professionals have heard the news that the American Rescue Plan changed the amount required to be reported on forms 1099-K. Amounts more than $600 must be reported, regardless of the number of transactions. This change was supposed to go in effect this year but has been delayed until next. The public may not be as familiar with this change, so we, as practitioners, should seek to educate them about it.    

Conservation Easement Updates

Champions III: Conservation Easement and Golf: The valuation of a golf course adjacent conservation easement was at issue in Champions III. The 11^th Circuit remanded the case back to the Tax Court finding its decision was inconsistent with the record. The regulations require a specific approach for valuation, and a credible record is necessary to support the findings of the Court, especially when there is competing expert testimony. 

Tax Court Hands IRS Major Defeat In Its Battle Against Conservation Easement Transactions: In Green Valley Investors, the Tax Court held the IRS violated the APA when it issued Notice 2017-10 without complying with the notice and comment provisions or establishing that it was not required to do so. The majority opinion defined a legislative rule as one that “impose[s] new rights or duties and change the legal status of regulated parties” which made it easy for the Notice at issue to be considered legislative, rather than interpretive.  

Boechler-Related Developments

Judge Goeke Asks: “After Boechler, Is the 30-Day Deadline to Request a CDP Hearing Subject to Equitable Tolling?”: Whether equitable tolling can apply to the “other” 30-day deadline in the CDP world, the deadline to file a Form 12153 to request a CDP hearing, is being examined in two Tax Court cases before Judge Goeke. The Judge has issued orders in both cases asking for further information about the application of Boechler to the form 12153 deadline.

Dismissal of Late Filed Petition in a Post-Boechler World: Caroll provides the first example of the process that will likely take place when there is a late filed CDP petition. The IRS filed an answer with affirmative allegations regarding the lateness of the petition. Then it followed up appropriately by moving to have its affirmative allegations deemed admitted under the Rule 37(c) process.  Caroll was ultimately dismissed because the petitioner failed to respond, even after the Court gave petitioner every opportunity to provide an explanation.

Circuit Court Decisions

The Solicitor General Embraces Phantom Tax Regulations: Phantom regulations were embraced by the Sixth Circuit in Whirpool when the court concluded that a statute that contemplated rules applying “under regulations” can operate regardless of whether regulations are actually issued. In her brief in opposition of certiorari the Solicitor General maintains this argument, even though it is inconsistent from the approach taken for other code sections. The Supreme Court has distributed the case for consideration.

Hall v. Meisner: An Overreach of State Tax Collection Activity: The Sixth Circuit held that a Michigan law that allows for strict foreclosure when a taxpayer has overdue property taxes is unconstitutional. This post explains how the law operated contrary to IRS practices and centuries of laws designed to protect property owners and their equitable interests. It also highlights the importance of protecting taxpayer rights at state and local levels.

Court Orders Enforcement Of A Summons Request From Abroad Allegedly To Harass Prominent Members Of Opposition Political Party: Other countries can make requests which result in the IRS issuing a third-party summons to obtain information about US-sourced investments. In the non-precedential case of Puri, the Ninth Circuit addressed allegations that an Indian tax authority sought investment information for the purpose of harassing members of an opposition political party. The Court ordered the summons to be enforced finding there was no showing that the foreign government was acting in bad faith, even though, according to a concurring opinion, inquiry into motive in these types of cases is categorically forbidden.

Suspending the CSED by Pursuing Litigation or Is This the Final Stop for the Weiss Case?: The Third Circuit extensively analyzed the impact that bringing litigation has on a collection statute in Weiss and affirmed the decision of the district court for the Eastern District of Pennsylvania that a cert request further extended the taxpayer’s collection statute. The taxpayer’s position was that his CDP hearing request should be treated as a request for an equivalent hearing, and then later that his request for cert did not extend the collection statute.

Tax Court Decisions

Innocent Spouse Bench Opinion – Part 1: The bench opinion in Bacigalupi addresses the new scope of review for innocent spouse cases. Judge Holmes, following the Fatty rule, decides that the petitioner’s testimony under oath is newly discovered evidence since she could not have given sworn testimony or be cross-examined earlier. The case goes on to demonstrate the role the economic hardship factor can play in allowing relief even when a petitioner fails the knowledge test, but this approach hasn’t been applied consistently.  

Innocent Spouse Bench Opinion – Part 2: The rules related to bench opinions are discussed in this post, along with the suggestion that the Court may want to consider increasing its use of bench opinions as a way to reduce the number of delayed case dispositions.

Chapter 11 Confirmation and Lifting of Automatic Stay: In Cochran, the Tax Court decided in a precedential opinion that confirmation of a chapter 11 plan of reorganization of an individual does not lift the automatic stay imposed by BC 362(a)(8).  The decision follows other Tax Court decisions strictly limiting its ability to move forward due to (a)(8) until a technical lifting of the stay occurs even if the stay does nothing to protect the debtor or the estate in the specific context of the case.

Seeking First Time Abatement Through Collection Due Process: In Kelly the petitioner sought to use Collection Due Process (CDP) to obtain first time abatement. A taxpayer typically has the right to go to Appeals if the IRS denies an abatement request which precludes arguments on the merits from being raised at CDP, but there was no discussion of a prior opportunity in the case. The petitioner ultimately did not prevail on his arguments, but the fact that the Court made a decision on the merits is a win for all taxpayers.

Tax Court To Consider IRS Procedure For Imposing Information Reporting Penalties: Improper IRS procedures with respect to the assessment of penalties associated with the delinquent or erroneous filing of information returns are at issue in Farhy. The taxpayer in Farhy asserts that the IRS has been acting ultra vires by using its summary assessment powers when the proper procedure is to refer 6038 penalties to the Department of Justice.

IRS Issues and Considerations

Consequences of the (Fake) Notice of Intent to Levy: The CP504 allows the IRS to levy certain property (i.e. often state tax refunds) prior to offering a CDP hearing and also increases failure to pay penalty from 0.5% per month to 1%, but what if it is defective? The significance of the notice, its effect, and its differences from the final notice of intent to levy for section 6330 purposes are examined in this post.

Robots Are Not the Only Problem and Disbarment News: It turns out robocalling services are not the only thing creating lengthy hold times at the IRS. This post shares a hilarious anecdote Barb Heggie posted on the LITC ListServe about the 26 times in a row she recently had to call the IRS.

A Checklist for Approval of Stipulated Decisions: The Tax Court files an order returning decision documents when it identifies mistakes. For at least eight days in November there were a lot of these orders filed. This post reviews the reason the decision documents were returned in each case, such as incorrect deficiency amounts, missing attachments, incorrect docket numbers, and incorrect tax years. The number of mistakes suggest that Chief Counsel attorneys may need additional training on decision document preparation.

Miscellaneous

Free Tax Court Lunchtime Webinar Starts Soon!: This post announced a Tax Court Webinar which discussed the changes to Tax Court practice in response to the pandemic.

A Successful Year For The Center for Taxpayer Rights In Our Work To Protect Taxpayer Rights: CTR’s accomplishments over the last year are shared in this post. The accomplishments include filing many influential amicus briefs in significant cases, the development and preliminary analysis of a survey about state tax administration, the International Conference on Taxpayer Rights, Tax Chats!, and the LITC Support Center.

This Giving Tuesday, Please Support The Work Of The LITC Support Center: Giving Tuesday has passed, but you can still support the work of CTR and the LITC Support Center at this link.

APA Developments

Harper v Rettig Update: Government Petitions For Rehearing: The government filed a petition for rehearing in Harper v. Rettig. At issue is the relationship between the APA, Section 7609, and challenges to the IRS’s summons power. The government argues that Section 7609 is the exclusive means to challenge the summons power and the lower court should consider whether that creates alternative grounds to dismiss the case for lack of subject-matter jurisdiction.

Taxpayer Seeks Supreme Court Review in Oakbrook Land Holdings v Commissioner: The Supreme Court may choose to expand upon when and how extensively an agency must respond in the comment process. This post reviews the APA notice and comment issues relevant to the circuit split in Oakbrook and Hewitt and touches on APA challenges arising in other areas.

Appeals Removes Challenges to Validity To Regs or IRB Guidance From Hazards of Litigation Analysis: In response to an increasing number of APA-related challenges, the IRS announced that Appeals is not to take into account the validity of regulations or IRB guidance when assessing the hazards of litigation. Practitioners and academics are concerned about the negative effect this constraint on Appeals’ independence may have on tax administration, but on the other hand, Courts may be the most appropriate venues for these complex questions.

Issues Related to Return Filing

The Stain of Fraud and Amended Returns: Gaskin involves a fraud penalty for a taxpayer who filed an amended return to report the income he omitted on his original return. The taxpayer argues that the fraud penalty is not justified because his amended returns were not fraudulent. The Court held the subsequent filing of an amended return after an audit begin does not purge the original fraudulent filing or the taxpayer’s fraudulent intent.

Lesson From The Tax Court: Don’t Confuse Dummy Returns With Substitutes For Returns: In the case of a non-filer, the IRS can issue a Notice of Deficiency or prepare a Substitute for Return. Each process has its own consequences, including that a failure to pay penalty can only be assessed on an SFR. The history, law, and rules of each process are discussed in this post along with a recent and relevant Tax Court decision.

Supreme Court Updates

Supreme Court Update for Taxes and the October 2022 Term: The Supreme Court will hear five tax-related cases during the term that began earlier this month. Three of the cases relate to issue of jurisdiction and equitable tolling and one relates to the calculation of the FBAR penalty.

Another Tax Case Headed for a Supreme Court Decision: The fifth tax-related case the Supreme Court will consider involves the question about the types of information that can be shielded when there is a combination of privileged (attorney work product) and non-privileged (tax return preparation) documents.  

Circuit Court Updates and Decisions

Anti-Injunction Act Does Not Bar Defendant Taxpayer’s Motion to Prevent Government From Using Discovery Admissions In Later IRS Proceedings: In U.S. v. Myer the 11^th Circuit considered whether the AIA prevents a defendant from moving for a protective order to restrain the government from using discovery admissions when assessing a tax penalty in a separate proceeding. Finding for the defendant, the Court reversed the district court and found that the AIA did not apply because “moving for a protective order in an action filed by the government does not amount to maintenance of a ‘suit.’”

Federal Rule of Appellate Procedure 28(j): The IRS requested that the 9th Circuit reconsidered its decision in Seaview due to an order issued in Dollarhide. It used an Appellate Rule 28(j) letter to bring the Court’s attention to the order. The order involved the question of whether a tax return provided to a revenue agent constitutes a filing, but Seaview argues there’s a distinction between the filing options available for timely versus untimely filed returns.

Second Appellate Case on Whether IRC 6213(a)’s Deadline is Still Jurisdictional and First Tax Court Case Involving IRC 6015(e)(1)(A): Carl provides an update on equitable tolling litigation in this post. In addition to Hallmark and Culp, a new appellate case involving a deficiency petition has emerged and the taxpayer has a COVID-related basis for missing the filing deadline. Meanwhile, the Tax Court is deciding a case about whether the deadline to file a stand-alone innocent spouse petition is jurisdictional and has invited amicus briefs on the issue.

Getting to Appeals: In Rocky Branch Timberlands LLC the right to go to Appeals in a conservation easement case was brought before the 11^th Circuit. The IRS denied petitioners the right to go to Appeals because petitioners were initially not cooperative in agreeing to extend the assessment statute. The 11^th Circuit dismissed the appeal because the appellants failed to file a Civil Appeal Statement form within the required time frame. Still the petitioners may not have been successful on the merits due to a similar case in the 11th Circuit that was recently dismissed.

Tax Court Decisions

Immunity: The Petitioner filed a motion for immunity on behalf of expert witnesses in Oconee Landing Property LLC. The petitioner wants to admit the testimony of the experts who appraised the easements in the case while protecting them from self-incrimination. The Court denied the request holding that it lacks jurisdiction to grant criminal immunity as the power resides solely with U.S. District Courts upon the request of the applicable U.S. Attorney.

What Happens When the Tax Court Petitioner Dies: The daughter of the deceased taxpayer in Sander petitioned the Court on her mother’s behalf when a notice of deficiency was issued after her mother’s death. The Court finds she does not have the authority to act on behalf of her mother’s estate but allows the opportunity for a probate action to be commenced. When a death occurs after a petition is already filed, the Court allows for a substitution of parties.

Miscellaneous Updates and Information

State Taxpayer Rights Protections – Some Highlights & a Free Online Workshop Series: The preliminary results of a state-based survey conducted by the Center for Taxpayer Rights has revealed encouraging statistics and some concerning trends. The Center has used the data to begin to identify best practices and areas that would benefit from advocacy. More will be discussed during the Center’s Reimagining Tax Administration: State Tax Practices & Taxpayer Rights series which began in October. 

Debts Owed by Insolvent Taxpayers to the IRS: The Federal Priority Statute provides that when a person indebted to the United States is insolvent and engages in some action that threatens the government’s ability to collect its debt, or when a deceased debtor dies and the property of the estate is insufficient to pay all their debts, the claim of the United States is to be paid first. There are circumstances in which a fiduciary can be held personally liable for failing to pay the U.S. in full. There are also protections when the debt is tax debt and judicially created exceptions in other circumstances. There are many rules in this area and professionals dealing with insolvent debtors or estates should be familiar with them.

Inflation and Tax Procedure: The IRS recently issued Rev. Proc. 2022-38 to advise the public of the inflation adjusted applicable numbers starting in 2023. The dollar amounts of property exempt from levy, seriously delinquent tax debts, and the hourly limitation for attorney’s fees have all increased.

The IRS Strikes Back Against Robocalls: The IRS has rolled out a pilot program for the Practitioner Priority Line that uses artificial intelligence to prevent phone line cutting services to combat lengthy hold times. If the IRS is successful, the pilot will be expanded and will benefit individual taxpayers as well as practitioners without enough money to pay for the robocall service.  

It is Time To Take Remedial Steps To Improve The Timeliness of Tax Court Dispositions: This editorial post calls out the significant delays for some Tax Court dispositions and asks the Court to correct the problem. It identifies ways that Court can consider remedying the issue, including tracking data, hiring more judges, or better managing existing judges. It also suggests that Congress can act to require the Court to publicly disclose certain information to put some pressure on the Judges who take longer amounts of time.

Graev’s Long Shadow: Section 6751(b) and Supervisory Approval of Penalties: Professor Monica Gianni shares and summarizes an article she wrote about section 6751(b) and the hundreds of cases that have inconsistently interpreted the statute. Her article aims to bring some order into the case law and concludes by recommending that the statute be repealed. 

Tax Court Orders and Decisions

Tax Court Vacates at Least 40 Dismissals of Whistleblower Cases: Under the assumption that the Supreme Court had denied the cert petition filed in Li, because the docket was belatedly created, the Tax Court dismissed for lack of jurisdiction pending whistleblower awards involving threshold rejections. Once the Li docket was created, the Tax Court vacated those dismissals. In her cert petition, the taxpayer argues that the Court has jurisdiction to review threshold rejections under the statute and the APA.

A Procedural Goldmine: Dollarhide Enterprises is a more than a decade old procedural goldmine and recent circuit splits have thrown some uncertainty in the mix. The case involves questions about the conditions under which parties can make a biding settlement of issues without agreeing on computations and what it means to file a return.

Boechler Works: The first order holding that the IRS waived the right to raise late filing as a defense and allowing the case to move forward happened in Ahmad. Prior to the Boechler decision, the Tax Court would affirmatively analyze the filing to determine timeliness rather than rely on the IRS to raise it. This order reflects the change in approach and demonstrates that Boechler works.

Lamprecht v Comm’r: Statute of Limitations, Qualified Amended Returns And The Issuance Of A John Doe Summons: This opinion is significant for practitioners with clients who have oversea accounts, unreported income, amended returns, and hefty penalties. Lamprecht involves the statute of limitations on assessment when a taxpayer files an amended return and the IRS uses a John Doe Summons to gather information. The taxpayers argued that the amended returns filed after the JDS were qualified amended returns and the SOL prevented the IRS from assessing penalties.

District Court Decisions

Polish Lottery Winner’s Son Sues Over Penalties For Failing To Report Foreign Gifts: The taxpayer in Wrezesinski received a foreign gifts from his mother after she won the Polish lottery. Relying upon an advisor he did not report the gifts, but once he realized he was given incorrect advice he quickly reported them. The IRS assessed penalties but agreed to abate only 80% of them in Appeals which is confusing and seems contrary to the purpose of penalties in this case. The taxpayer has now filed a refund suit in District Court for the remaining penalties.

Circuit Court Decisions

Fifth Circuit Upholds Constitutionality of Passport Revocation Statute: The Fifth Circuit held that there is a fundamental right to interstate travel, but not international travel in Franklin. As a result, the passport revocation statute is constitutional. The concern that taxpayer who owes substantial tax can travel internationally and hide assets is a constitutionally justifiable basis under rational basis or intermediate scrutiny.

Courtney v US Illustrates Limits of Taxpayer Challenges to Allegedly Improper IRS Collection: The Fifth Circuit affirmed the district court’s decision to dismiss petitioner’s case in Courtney. The taxpayer wasseeking damages under Section 7433 for allegedly improper collection and an injunction barring further collection actions against him, limited liability companies, and an irrevocable trust. The Court held that he needed to exhaust his administrative remedies first, the futility doctrine didn’t apply, and the AIA barred his demand and Enochs v. Williams Packing exception didn’t apply.

TIGTA Reports

Some Interesting Data from this Year’s TIGTA Federal Tax Lien Filing Review: This post shares data from TIGTA’s review of the IRS’s lien filing procedures, including the number of times the IRS failed to send a CDP lien notice to a correct address or to a representative, and also the number of times the IRS chose not to file a lien broken down by dollar amount.

TIGTA Report on Government Contractor Tax Delinquency: TIGTA reported that there are billions of dollars owed in delinquent taxes by federal contractors and grantees, contrary to the law and despite self-reporting requirements. Until recently, disclosure laws prevented the IRS from affirmatively discussing tax delinquencies of federal contractors with other government agencies, but Congress appropriated $30 million to the IRS to create an application through which entities could request a certification that the entity did or did not owe seriously delinquent taxes.

Bankruptcy and Taxes

Tracing Social Security Payments: In re Weber, The bankruptcy court determined that when a social security recipient uses a portion of that payment for tax withholding, the individual’s consent to the use of those funds extends only to the payment of tax liabilities and not to the payment of other claims. The court looked to Spolarich to find that protection for social security payments is exceptionally expansive and only subject to modification by express statute.

Updates and Ideas

Proposed Regs Address Access To Appeals: The IRS is soliciting comments by November 14 on proposed regulations regarding a taxpayer’s right to access Appeals.  The regulations allow access when a matter involves a federal tax controversy, but other types of matters do no trigger the same right. The regulations also require that the originating branch complete its action and make a determination before a taxpayer can access Appeals and that there is only one opportunity to go.

Out of Time? APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period: This post discusses the idea that some APA challenges to old tax guidance may be time barred due to 28 U.S.C. § 2401(a) which sets the default limitations period for suits against the federal government to six years “after the right of action first accrues.” The question becomes when has the right of action first accrued and more than half of Appeals Courts have accepted that it happens at the time the regulation or guidance is issued. The government can waive the limitations period defense but may be less likely to do so as an increasing number of APA challenges are brought.

Information from Administrative Practice Programming at the May ABA Tax Section Meeting: This post shares a summary of what was discussed during the Administrative Practice panel at the May Meeting. The panelists discussed Exam’s return to office, innovations and challenges encountered during COVID, and what Exam is currently focusing on. Some of the notable topics include: the IRS’s adoption of virtual reading rooms, video conferencing, and web-based upload tools; changes to the application procedure for CAP; and that the Fast Track Appeals Process is being reviewed. 

Failing to Respond to the IRS and the Tax Court: An attorney who did not respond to Court orders and had a history of other unresponsiveness was reprimanded in a Tax Court press release. This post suggest it would benefit the public if information about such matters was easier to find the Tax Court’s website.

When Regulatory and Sub-Regulatory Guidance Collides… (Part One): This two-part post looks at what happens when regulatory and sub-regulatory guidance contradict each other. The problem arises when the statutory language is unclear and there is at least some room for interpretation delegated to the agency. The first post looks at the contradictory information in an IRS regulation and an IRS notice about nature and refundability of the 20% offer payment when an offer is not accepted.

When Regulatory and Sub-Regulatory Guidance Collides… (Part Two): This post looks at the reasons why a notice that contradicts a regulation is unpersuasive and at risk of being challenged under administrative law principles. One such reason is that the Accardi Doctrine requires an agency to follow its own rules when individual rights would be affected if the agency deviates from those rules.

Reimagining Tax Administration: Social Programs Through the Tax Code – Workshop 4: Eligibility Rules for EITC/CTC and Other Family Benefit/Anti-Poverty Programs, Part I: This post closely examines the eligibility rules for tax benefits (and other benefits); and explores whether the rules fit the characteristics of the target population; whether otherwise eligible children may be missed due to the rules; and the nature, extent, and impact of EITC errors.

Reimagining Tax Administration: Social Programs Through the Tax Code – Workshop 4: Eligibility Rules for EITC/CTC and Other Family Benefit/Anti-Poverty Programs, Part 2: This post addresses the risks that might arise in using the tax system to deliver benefits, how other countries have tried to minimize the risk, and why the tax code is the place to house these programs despite the risks.

Tax Court Updates, Orders, and Decisions

Getting Into the Tax Court: The Tax Court set out the guidelines for entry to the courthouse in D.C. and other places where it sits. The guidelines require all entrants to answer self-certifying health screening questions. Trial participants, witnesses, and members of the public are also required to register their name, phone number, email address, place of trial and date of trial using a QR code before entering any courthouse.

When Will the Tax Court Redact?: A recent order from the Tax Court indicates the Court is willing to redact a petitioner’s unredacted sensitive information. This may suggest the Court is thinking about how to balance protecting petitioners’ information with the public’s right to access Court records, but it could also just be a new practice adopted only by certain judges.

Prior Opportunity and Receipt of the Notice of Deficiency: The tax lawyer petitioner in Chinweze argued he did not receive a notice of deficiency and therefore can raise his underlying liability in a CDP hearing. His facts were not very sympathetic, and the Court used the probative information gleaned from a form 3877 to conclude the notice was properly mailed. The case provides a good roadmap of the challenges petitioners may encounter when arguing non-receipt.   

District Court Decisions

Latest Round in PTIN Litigation With District Court Finding For Government In Steele v US: The Court allowed the government to assert the deliberative process privilege when plaintiffs tried to compel discovery about the creation and implementation of the original PTIN program. The Court also strongly disagreed with the plaintiffs claim that the government failed to assert the privilege with sufficient detail.

DOJ Misinfoms District Court on IRC 6015(f) Relief Filing Deadline: The DOJ misinformed the Court about the relevant case law and regulations and ignored the 2019 amendment to section 6015(f) in U.S. v. Weathers. How could the DOJ attorneys not know that the Lantz and Jones cases and the regulation were all legislatively overruled? They subsequently admit their error as discussed below.

The 6511(h) Conundrum: How to Remain in the Courthouse When the IRS Tries to Bar Your Entry?: Recent decisions involving section 6511(h) are summarized. The IRS has been successful in having most cases dismissed when the taxpayers failed to include documentary support with their administrative claims, but the plaintiffs in Subbiah are in the minority who have avoided dismissal. The post calls on the IRS to solicit comments on Rev. Proc. 99-21 and establish a unit to facilitate the claims of taxpayers who claim financial disability.

DOJ Apologizes for Misinforming District Court on IRC 6015(f) Deadline: The DOJ filed a notice admitting it was wrong about the filing deadline under section 6015(f), however, the Court still lacks subject matter jurisdiction since the District Court holds that only the Tax Court can consider innocent spouse relief.

Another Offer Denied, Another Reason for Submitting in Collection Due Process: The benefits and protections available when submitting an offer through a collection due process hearing are highlighted in this post. In Dillon the taxpayers tried to obtain district court review of their offer which was returned as non-processable because the IRS determined it was submitted to hinder or delay collections. The Court held that the suit was barred by the APA.

Circuit Court Decisions

DC Circuit Blesses IRS’ Glomar Defense In Long Running FOIA Dispute: The taxpayers in Montgomery submitted a FOIA request for documents related to whistleblower forms in an effort to determine how the IRS learned of its partnership transactions. The IRS refused to either confirm or deny the existence of such documents. This is a Glomar defense and can be used in cases where confirming or denying the existence of the records would reveal protected information.

First Circuit Finds Anti-Injunction Act Does Not Bar Challenge to IRS’s Use of John Doe Summons That Gathered Taxpayer’s Virtual Currency Transactions: The First Circuit in Harper v Rettig held that a constitutional challenge to the IRS using John Doe Summons authority to obtain information about virtual currency transactions is not barred by the Anti-Injunction Act (AIA). The Court remanded the case saying that the taxpayer is seeking relief from the legal wrong of acquisition and retention of financial records, rather than the assessment or collection of tax.

11th Circuit Affirms That Anti-Injunction Act Prevents Taxpayer Seeking Access to Appeals: In Hancock County Land Acquisitions the taxpayer alleged that the IRS’s failure to refer its case to the IRS’s Independent Office of Appeals violated the Taxpayer First Act’s mandate that Appeals be generally available to all taxpayers. The Eleventh Circuit’s unpublished opinion held that the AIA barred the lawsuit, which is difficult to harmonize with the Harper decision above.

Equitable Tolling Litigation Updates

Another Update on Boechler Follow-on Litigation – Part 1: This two-part post provides updates on equitable tolling litigation. The first part looks at the deficiency cases and provides updates on Hallmark and Culp. The parties have completed briefing in Hallmark. The petitioners in Culp have filed their opening brief after the Court denied the government’s motions for summary affirmance and to strike merits amicus brief filed by the Center for Taxpayer Rights. It will likely be next year when we have an opinion on both cases.

Another Update on Boechler Follow-on Litigation – Part 2: This post looks at the CDP equitable tolling cases. Boechler may never generate a ruling on whether its facts support equitable tolling because the parties may settle on the merits. Updates on Castillo, Amanasu, and Myers are provided, along with an analysis about what may happen in other cases. Amanasu or Myers are the ones to watch to be the first precedential opinions on the issue.

Comments, News, and Other Updates

Commenting on Forms: The Center for Taxpayer Rights and an LITC made comments on the change of address and VITA intake forms. The recommendations were that IRS simplify the form 8822, make it more accessible, better explain its importance, and allow it to be electronically submitted. With respect to the VITA intake form, it recommended changes that foster better coordination between VITA and LITCs so that individuals having their returns prepared know how to obtain controversy assistance when needed.

The Fear Over IRS Funding: Many practitioners have spoken out against the scare tactics being used by politicians over the IRS’s funding news. This post links to Les’s NBC Think Op-Ed on the issue.

TIGTA’s Annual Review of CDP Processing     : TIGTA’s review found that the IRS complied with the IRM in most cases, but the IRS is still making mistakes when it comes to calculating collection statute expiration dates.

Late Filing Penalty Relief for 2019 and 2020 Returns to Generate Automatic Refunds: The IRS is automatically abating penalties for late filed 2019 and 2020 returns. Returns must be filed by September 30 to qualify. The post contains a link to the NTA’s blog which provides more information.

IRS Criminal Investigation in the News: CI’s 2021 Annual report is discussed in order to help provide information about what CI actually does and why their work is not something most taxpayers should fear.