Are Alleged Alter Egos, Successors in Interest and/or Transferees Entitled to Their Own Collection Due Process Rights Under Sections 6320 And 6330? Part 5

Lavar Taylor brings us the fifth installment of his series on Collection Due Process and third parties. Today he addresses strategies in litigating the issues. Lavar promises one more post on the topic after this one. When complete his work on this topic will be the equivalent of a law review article but with a very practical bent. For practitioners with clients who have derivative liabilities, Lavar provides significant insight into the law and the practice of representing parties operating in the dark shadows of the code and administrative practice. Although Lavar does not discuss the issue, it is interesting how the Taxpayer Bill of Rights promises of the right to challenge the IRS position and be heard and the right to appeal an IRS decision in an independent forum intersect with the way that these third parties are treated by the IRS. Keith

In Part 4 of this series, I discussed the questions of 1) how a putative alter ego/successor in interest/transferee of a taxpayer might pursue litigation in the Tax Court to raise the questions of whether they are entitled to Collection Due Process (“CDP”) rights under sections 6330 and 6320 of the Code, independent of the rights of the original taxpayer who incurred the liability, 2) whether the government can take administrative collection action against a putative alter ego/successor in interest/transferee without first obtaining a District Court judgment or making a separate assessment, and 3) whether the Tax Court has the ability to address issues 1 and 2 above, given that no notice of determination is ever issued by the IRS in these situations.

This post addresses the question of how a putative alter ego/successor in interest/transferee of a taxpayer might pursue litigation in the District Court to raise the questions of 1) whether they are entitled to Collection Due Process (“CDP”) rights under sections 6330 and 6320 of the Code, independent of the rights of the original taxpayer who incurred the liability, and 2) whether the government is prohibited from taking collection action against a putative alter ego/successor in interest/transferee of the taxpayer without first obtaining a District Court judgment against the putative alter ego/successor in interest/transferee, based on the arguments set forth in Part 3 of this series.

This post also discusses the factors affecting the decision of whether to litigate these issues in Tax Court or District Court. In addition, this post discusses why assertions of “nominee” status by the IRS are treated differently under the CDP rules.

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1. Litigating in District Court

An alleged alter ego/successor in interest/transferee has always had a remedy in District Court to challenge levy action against them in the form of a wrongful levy action brought under §7426. See, e.g., Towe Antique Ford Found. v. IRS, 999 F.2d 1387 (9th Cir. 1993). These lawsuits, however, have focused on whether the alleged alter ego/successor in interest/transferee was substantively liable for the tax liability under state law.

To the best of my knowledge, there are no reported decisions where the alleged alter ego/successor in interest/transferee has argued that the IRS levy action was improper because the IRS failed to send the alleged alter ego/successor in interest/transferee a separate §6330 Notice of Intent to Levy before taking levy action against them. Nor am I aware of any reported cases where the alleged alter ego/successor in interest/transferee brought a wrongful levy action claiming that the IRS cannot take any administrative collection action against a purported alter ego/successor in interest/transferee prior to the government obtaining a District Court judgment they are liable for the taxpayer’s taxes as an alter ego, successor in interest, or transferee of the taxpayer, based on the theory articulated in Part 3 of this series.

Frequently, the previously unannounced levy action against the alleged alter ego/successor in interest/transferee financially destroys them and deprives them of the resources needed to challenge the IRS’s assertion of liability. Under the law as interpreted by the IRS, the playing field is decidedly tilted in favor of the IRS. While there are undoubtedly many meritorious assertions of liability by the IRS, I am aware of a number cases in which the issue of liability as an alter ego/successor in interest/transferee was at best questionable or debatable. In our now-settled Tax Court case, for example, there was a state Supreme Court decision which made clear that, based on the undisputed facts in our case, it was not possible for our client to be an alter ego of the taxpayer. Yet the IRS, without properly investigating the facts, pursued levy action against our client, with the blessing of Area Counsel’s Office, based on the unsound premise that our client was an “alter ego” of the taxpayer.

Even where a third party is conceding that they are liable as an alter ego, successor in interest, or transferee of the taxpayer under state law, they can bring a wrongful levy action to challenge the procedural validity of the levy action, based on the failure of the IRS to issue a §6330 Notice of Intent to Levy to the third party prior to taking levy action against the third party.  The mere opportunity to seek administrative collection alternatives, such as an installment agreement, or even an offer in compromise based on doubt as to liability, without having to deal with unannounced levy action may often be the difference between financial life and death for an alleged alter ego/successor in interest/transferee.

For these reasons, any alleged alter ego/successor in interest/transferee, even if they agree that they are liable for the taxes assessed against the taxpayer can bring suit, either in District Court or in Tax Court to challenge the failure of the IRS to issue a separate §6330 Notice of Intent to Levy to them prior to taking levy action.   In such a suit they can also challenge the underlying ability of the government to ever take administrative collection action against an alleged alter ego/successor in interest/transferee prior to obtaining a District Court judgment in favor of the government (or prior to making a separate assessment), based on the theory articulated in Part 3 of this series.

Similar options exist to challenge the validity of an alter ego/successor in interest/transferee notice of federal tax lien. A petition can be filed with the Tax Court, although care should be taken to file the petition promptly after the filing of the lien notice, to minimize the risk that such a petition might be deemed untimely by the Court. Such a petition will be subject to the same jurisdictional challenges as a levy petition.

Alleged alter egos/successors in interest/transferees likewise have always had the opportunity to file a quiet title action in District Court, pursuant to 28 U.S.C. §2410 in order to challenge the validity of the tax lien. See Spotts v. United States, 429 F.3d 248 (6th Cir. 2005). There is no reason why an alleged alter ego/successor in interest/transferee could not file a quiet title action in District Court based on the grounds that 1) the IRS failed to give them their own lien CDP rights as required by section 6320 after the filing of the notice of federal tax lien, and 2) the government is not permitted to take collection action against them in the absence of a separate assessment against them or a District Court judgment imposing liability as an alter ego, successor in interest, or transferee of the taxpayer, for reasons outlined in Part 3 of this series.

2. Tax Court or District Court: Making a Choice

If an alleged alter ego/successor in interest/transferee wishes to pursue litigation to challenge the ability of the IRS to levy without first issuing a separate §6330 Notice of Intent to Levy to challenge the ability of the IRS to take administrative collection action against a purported alter ego/successor in interest/transferee, choosing between Tax Court and District Court as a litigation forum can be difficult. District Court offers a forum where the court clearly has jurisdiction to rule on the issues at hand. District Court also is much quicker than Tax Court. Indeed, in our now-settled case, at the time of the settlement, the IRS’s motion to dismiss the petition for lack of jurisdiction had been pending with the Tax Court for over 12 months without any opinion being issued.

District Court Judges, however, often lack even basic familiarity with tax laws in general and with CDP laws in particular. Tax Court Judges have significant expertise in tax law and regularly deal with CDP procedures in their cases. They certainly have more expertise in determining the extent of their own jurisdiction than do District Court Judges. Page limitations on filings in District Court may hamper the ability of an alleged alter ego/successor in interest to fully brief all of the issues, which are complex and arcane, even to the most dedicated tax procedure junkies.

In addition, once the Department of Justice acquires jurisdiction over a case, settling that case can become much more difficult. There can be a dramatic difference in the levels of approval needed to settle a case with the Office of Chief Counsel and the levels of approval needed to settle a case with the Department of Justice.   See the Department of Justice Tax Division Settlement Reference Manual. Furthermore, the differences between the rules governing discovery in Tax Court and the rules governing discovery in the District Court generally make it far more expensive to litigate in District Court than in Tax Court.

An alleged alter ego/successor in interest/transferee who ventures into District Court in a wrongful levy action or a quiet title action also faces the possibility that the Department of Justice will seek an affirmative judgment against them, including a judgment for the foreclosure of real property owned by the alleged alter ego/successor in interest/transferee which the government contends can be reached in an effort to satisfy the taxes owed by the taxpayer. No such counterclaims can be filed by the government in Tax Court litigation; IRS must refer the matter to the Department of Justice for a separate lawsuit.

Yet, until the Tax Court has issued an opinion in this area, anyone who chooses Tax Court as their litigation forum currently faces the possibility that the Tax Court will eventually dismiss their petition for lack of jurisdiction in a way that fails to resolve the underlying question of whether alleged alter egos/successors in interest/transferees are entitled to their own independent CDP rights or whether the IRS may ever pursue administrative collection action against an alleged alter ego/successor in interest/transferee without first obtaining a District Court judgment. And however the Tax Court rules on this issue, the Tax Court’s ruling can be appealed to the relevant Court of Appeals.

The specific facts in each case will also be an important factor, as will the proclivities of the local District Court Judges. The rulings of the District Courts can also be appealed to the relevant Court of Appeals, but there will never be any appeal on the issue of whether the District Court lacks jurisdiction over such a suit, as long as the suit is brought within the applicable statute of limitations for wrongful levy actions and quiet title actions. (The statute of limitations for wrongful levy actions is now two years. 26 U.S.C. §6532(c). The statute of limitations on quiet title actions is six years. See Nesovic v. United States, 71 F.3d 776 (9th Cir. 1995). )

3. The Long, Hard Road Ahead

Given the circumstances described in this series of posts, it is likely to be quite some time before there is a definitive answer to the questions of whether alleged alter egos/successors in interest/transferees are entitled to their own independent CDP lien and levy rights and whether the IRS may ever take administrative collection action against a putative alter ego/successor in interest/transferee without first obtaining a District Court judgment or making a separate assessment. The speed at which the case law develops will depend in large part on how the Tax Court rules in its first published opinion on these issues. If the Tax Court rules that it has jurisdiction, that holding will drive litigation of these issues to the Tax Court. The IRS will then likely appeal the Tax Court’s holding(s) to multiple Courts of Appeal, possibly leading to a split in the Circuits and Supreme Court review of the issue(s) that split the Circuits.

If the Tax Court holds that it lacks jurisdiction but refuses to follow Adolphson and holds adversely to the government on the procedural issues in dismissing the petition for lack of jurisdiction, this holding will also drive litigation to the Tax Court. This will likely be followed by government appeals to multiple Courts of Appeal and possibly an eventual Supreme Court ruling in this area.

If the Tax Court holds that it lacks jurisdiction and follows Adolphson, a few brave hardy souls may continue to litigate in Tax Court, with the idea of taking their cases to the relevant Courts of Appeal But most litigation involving these issues will be driven to the District Courts, many of which may be reluctant to second guess the Tax Court’s holding on the jurisdictional issue. But the District Courts will still be able to rule on the substantive CDP issue, as well as on the issue of whether the government is required to obtain a District Court judgment (or make a separate assessment) against purported alter egos/successors in interest before the government can take collection action against them.

One or more of these issues are likely to end up being argued before the Supreme Court, absent any future legislative action by Congress. But it is likely to be a number of years before that happens.

4. “Nominee” Liens and Levies- Why The CDP Rules Are Different

In writing this series of posts, I have purposefully avoided including “nominee” liens and levies within the scope of my discussion of the extent to which the CDP provisions may be invoked by third party non-taxpayers against whom the IRS is pursuing collection action to collect taxes owed by the original taxpayer. Putative “nominees” are different from putative alter egos/successors in interest/transferees in that “nominees” are not themselves personally liable for the tax liability. Rather, a true nominee holds “property or rights to property” of a taxpayer as the agent of the taxpayer.   They are not personally liable for the tax. This distinction is critical for purposes of determining the rights of putative “nominees” under the CDP procedures.

In Part 1 of this series I noted that there are important differences between §§6320 and 6330, and their counterparts, §§ 6321 and 6331. Section 6321 imposes a lien against all “property and rights to property” of a person who is “liable for the tax.” Thus, there must be a personal liability for a tax obligation before a lien can arise against a person’s “property or rights to property” under §6321.

The language of §6320 makes clear that a lien CDP notice is only required to be sent to the “the person described in section 6321,” i.e., a person who is personally liable for the tax. Thus, a putative nominee of the taxpayer is not entitled to notice under §6320 and cannot invoke the lien CDP procedures if the IRS files a “nominee” notice of federal tax lien. Note, however, that a true “nominee” notice of federal tax lien should make clear that the IRS lien only attaches to the specific property, real or personal, which the putative nominee is supposedly holding as an agent of the taxpayer. As I will discuss in Part 6 of this series, virtually all “nominee” notices of federal tax lien flunk this test.

Section 6331, on the other hand, authorizes the IRS to levy on all “property and rights to property” of a person who is personally liable for a tax and to levy on all property on which there is a tax lien. Thus, it is possible that the IRS could levy on property that is possessed or owned by a third party which the IRS claims is encumbered by a tax lien, even though the person who possesses or owns that property is not personally liable for the tax.

Section 6330 provides that “[n]o levy may be made on any property or right to property of any person” unless notice is given to “such person” under §6330. Importantly, §6330 uses the phrase “any person,” not the phrase “person liable for the tax.” Section 6330 also does not refer specifically to the “person” described in §6331(a). I personally believe that this a distinction with a difference, and that Congress intended for any person who has a facially recognizable possessory or ownership interest in property under state law upon which the IRS intends to levy is entitled to notice under section 6330 and thus is entitled to invoke the collection due process procedures.

But the IRS thinks otherwise, and issued regulations which define the term “person” in §6330 as the “person liable for the tax.” Treasury Regulation §301.6330-1(a)(3), Question and Answer 1. If this regulation is valid, only persons who are personally liable for the tax are entitled to notice under §6330 and may invoke the CDP levy procedures. No true “nominees” can invoke CDP levy procedures under the IRS’s interpretation of the law.

If the cited Treasury Regulation is struck down as being inconsistent with the statute, however, true nominees would be entitled to notice under §6330 and would be entitled to avail themselves of the CDP levy appeal process. I believe this regulation is inconsistent with the statute. The phrase “any person” is about as broad as you can get, and the contrasting language of §6320 supports the conclusion that Congress’ use of the phrase “any person” in section 6330 was deliberate. Limiting the availability of the levy CDP appeal procedures to persons who are personally liable for the tax is contrary to the language of the statute.

I leave a more detailed analysis of why I believe that this regulation is not valid for another day. Suffice to say that anyone who is the subject of true nominee collection action, where the IRS merely claims that the property held by or ostensibly belonging to a third party on which the IRS has levied is being held by the third party putative nominee for the benefit of the taxpayer and is not asserting that the third party is personally liable for the taxes owed by the taxpayer, will have to convince the Court that this regulation is invalid should they bring an action in Tax Court or District Court to challenge the IRS “nominee” levy action on the grounds that the IRS failed to issue a §6330 Notice of Intent to Levy to the third party prior to levying on property owned or held by the third party.

Because alleged “nominees” are in a more perilous legal position than alleged alter egos/successors in interest/transferees when it comes to invoking the CDP procedures, It may be that the IRS will, in the future, show a greater interest in pursuing “nominee” collection activity as opposed to pursuing “alter ego/successor in interest/transferee” collection activity.   I have seen some evidence of this here in southern California, after the IRS read our pleadings in our now-settled case.

My experience is that many people in the IRS throw around the terms “alter ego,” “transferee,” and “nominee” like these terms are interchangeable body parts. Of course, nothing could be further from the truth. Alter egos and transferees are personally liable for the taxpayer’s taxes, based on applicable state law. Under California law, for example, the legal test for holding a third party liable as an alter ego is different from holding a third party liable as a transferee. The legal test for holding a third party liable as a successor in interest is likewise distinct from the tests for imposing liability as an alter ego or transferee. Nominees are not personally liable for the taxpayer’s tax liability.

Private practitioners should be prepared to call out the IRS if it attempts to sidestep efforts to hold the IRS accountable under the CDP provisions by improperly labeling all third party collection action as “nominee” collection action.

I have one more post to add to this series of posts. In Part 6, I will explain why virtually all IRS “nominee” notices of federal tax lien are improper in a way which can cause legal detriment to the alleged nominees. I have also seen a “transferee” notice of federal tax lien with this same impropriety. In addition to explaining the impropriety, I will offer a suggestion to the IRS on how it can cure this impropriety.

 

Are Alleged Alter Egos, Successors in Interest and/or Transferees Entitled to Their Own Collection Due Process Rights Under Sections 6320 and 6330? Part 4

Guest blogger Lavar Taylor continues his series on Collection Due Process and third parties. The series provides a deep dive into the jurisprudence of CDP cases and the rights of third parties to have an outlet to challenge the liens and levies made against these non-taxpayer parties held liable for the taxpayer’s obligations. Keith

This post looks at the question of how a putative alter ego, successor in interest or transferee of a taxpayer might pursue litigation in the Tax Court to raise the question of whether they are entitled to Collection Due Process (“CDP”) rights under §§6330 and 6320 of the Code, independent of the rights of the original taxpayer who incurred the liability. This discussion assumes, of course, that the IRS has the legal ability to pursue administrative collection action against a putative alter ego or successor in interest of the taxpayer, without first obtaining a judgment in District Court or without first making a separate assessment against the third party under section 6901.   As is explained in Part 3 of this series, such an assumption may not be correct.

This post also discusses how a putative alter ego/successor in interest/transferee might pursue litigation in the Tax Court to raise the issue discussed in Part 3, namely, whether the government can ever take administrative collection action against the putative alter ego/successor in interest/transferee in the absence of a District Court judgment holding that the putative alter ego/successor in interest/transferee is liable for some or all of the taxpayer’s tax liability.

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  1. Existing Tax Court Jurisprudence Regarding Tax Court Jurisdiction

The Tax Court has stated on numerous occasions that a notice of determination under the CDP provisions is a taxpayer’s “ticket” to the Tax Court in CDP cases, see Weber v. Commissioner, 122 T.C. 258, 263 (2004), and that a failure to file a timely petition in response to a notice of determination requires the Court to dismiss the petition for lack of jurisdiction. Id. The Tax Court has also held that, in a situation where the IRS issued a notice of intent to levy under §6330 and the taxpayer failed to request a CDP hearing, the Court lacked jurisdiction because no CDP hearing had been requested and no notice of determination had been issued by the IRS. Offiler v. Commissioner, 114 T.C. 492 (2000).

Thus, in situations where the IRS takes levy action, whether against a taxpayer or against a putative alter ego/successor in interest/transferee, without first issuing a CDP notice of intent to levy under §6330, and the party against which levy action files a petition with the Tax Court to challenge the validity of the levy action as having been taken in violation of §6330, the IRS will likely argue that the Tax Court lacks jurisdiction over the petition. Indeed, that is exactly what the IRS did in the case in which we filed petition with the Tax Court on behalf of our client, an alleged alter ego/successor in interest, after the IRS levied on our client’s bank accounts without providing any notice or other advanced warning whatsoever to our client.

The IRS can take this position even if the failure to issue a §6330 notice of intent to levy is in clear violation of the law. Of course, even if the IRS were to “concede” that the Tax Court has jurisdiction over a petition in this situation, such a “concession” would not be binding on the Tax Court. The Court has an independent duty to determine whether it has jurisdiction over a petition, regardless of the positions taken by the parties. SECC Corp. v. Commissioner, 142 T.C. 225 (2014).

The Tax Court has never held that it lacks jurisdiction over a petition in this precise situation, however. In one case where the Tax Court concluded that the IRS improperly levied on a taxpayer’s bank account without first issuing a Notice of Intent to Levy, the Court held that it had jurisdiction over the case because the IRS made a de facto “determination” for purposes of section 6330 in response to which a petition was filed and thus formed the basis of the Court’s jurisdiction. See Chocallo v. Commissioner, T.C. Memo 2004-152, 87 T.C.M. (CCH) 1432 (2004). In Chocallo, the Court also held that it had the ability to order the IRS to refund to the Petitioner all funds which Respondent had improperly seized or levied from the taxpayer.

[Curiously, it is not possible to access the docket sheet in the Chocallo case electronically. The Tax Court’s website indicates that the case is filed under seal. This seems to me to be very strange.   I have a distinct memory, from a number of years ago, of reading another Memorandum Decision, the name of which I cannot recall, which seemingly was issued either in the Chocallo case or in another case involving facts that were very similar to the facts in Chocallo, prior to the date of 2004 Chocallo opinon. Since I have not able to locate any other Memorandum Decision with similar facts, it would be nice if the seal in Chocallo were somehow lifted. I would then be able to figure out whether my memory is correct about the existence of the other Memorandum Decision or instead be able to confirm that my memory has been completely corrupted from lead poisoning. (Most of my ill-spent youth was spent growing up on the site of a defunct lead-smelting plant in southern Illinois. I blame all of my mistakes on this fact.)]

The aspect of the Chocallo opinion dealing with the ability of the Tax Court to exercise jurisdiction in this situation has been discussed by the Tax Court in TC opinions, see Greene-Thapedi v. Commissioner, 126 T.C. 1, 9 n.13 (2006), and Bussell v. Commissioner, 130 T.C. 222, 245 (2008), but it has never been disavowed by the Court. Thus, it is an open question as to how the Tax Court would rule in a Reviewed Opinion or a TC Opinion by one Division of the Court on the issue of whether the Tax Court can acquire jurisdiction in the fact pattern that was faced by our clients. If the Tax Court does acquire jurisdiction, however, it would appear that it can exercise equitable powers to restore the status quo ante and order the IRS to undo the effects of an illegal levy. See Zapara v. Commissioner, 652 F.3d 1042 (9th Cir.2011), affirming 124 T.C. 223 (2005).

Notwithstanding this uncertainty, there is one step which practitioners can take to increase the chances that the Tax Court will hold that it has acquired jurisdiction in a case where the IRS has taken levy action against an alleged alter ego/successor in interest/transferee of the taxpayer without sending a separate notice of intent to levy to the alleged alter ego/successor in interest/transferee. That step is well illustrated by the opinion in Grover v. Commissioner, T.C. Memo 2007-176, 94 T.C.M. 28 (2007). In Grover, the taxpayer filed a petition asserting that the IRS had issued levies without first sending the taxpayer a §6330 Notice of Intent to Levy.   The IRS moved to dismiss for lack of jurisdiction, based on the grounds that no Notice of Determination had ever been issued to the taxpayer. The IRS also noted that it had previously issued a §6330 Notice of Intent to Levy to the taxpayer well before the taxpayer filed a Tax Court petition.

In dismissing the petition for lack of jurisdiction, the Tax Court stated as follows:

The parties agree that respondent issued no notice of determination. Petitioner does not contend that respondent otherwise made any section 6330 determination. Cf. Chocallo v. Comm’r, T.C. Memo 2004-152 (describing an order denying a motion to dismiss for lack of jurisdiction predicated on the nonissuance of any notice of determination, where the Court had found that the taxpayer had received a “‘determination’ within the contemplation of section 6330” on the basis of “various discrepancies” in the transcripts of account). But as suggested in Boyd v. Comm’r, supra at 303, even if we were to conclude that the notice of levy was “evidence of a concurrent section 6330 determination”, we would be required to dismiss this case for lack of jurisdiction because petitioner did not file his petition until November 17, 2006, which was more than 30 days after the October 9, 2006, notice of levy.

This quote makes clear that, if an alleged alter ego/successor in interest/transferee of a taxpayer wants to have a fighting chance to convince the Tax Court to take jurisdiction over a petition filed in a case where the IRS took levy action against an alleged alter ego/successor in interest/transferee of the taxpayer without first sending a separate §6330 Notice of Intent to Levy to the alleged alter ego/successor in interest/transferee, the alleged alter ego/successor in interest must file the petition within 30 days of the date of the initial IRS levy. In our now-settled Tax Court case, we made sure to file a petition within this 30 day period.

It is possible to argue that a petition filed under these circumstances is timely if filed within 30 days of the date on which the alleged alter ego/successor in interest/transferee receives notice of the levy action. But the prudent course of action is to file a petition within 30 days of the date of the initial levy action if possible.

Even then, it is possible that the Tax Court will end up holding that it lacks jurisdiction in this situation. In our case, we argued in the alternative that, even if the Tax Court lacks jurisdiction in this situation because there was no “determination,” the Tax Court can dismiss the petition for lack of jurisdiction in a way that makes clear that the IRS’s levy action was illegal. I now turn to those alternative arguments.

  1. Alternative Arguments- Getting the Case Dismissed for Lack of Jurisdiction for the Right Reasons

The Tax Court has issued opinions in a number of cases in which taxpayers filed petitions claiming that the IRS had failed to send a §6330 Notice of Intent to Levy to the taxpayer’s last known address before taking levy action. In these situations, the Tax Court has dismissed the petition based on lack of jurisdiction due to the failure of the IRS to send a valid notice of intent to levy prior to taking levy action. See, e.g., Buffano v. Commissioner, T.C. Memo 2007-32, 93 T.C.M. (CCH) 901 (2007). This approach is consistent with the Tax Court’s jurisprudence involving the failure of the IRS to issue a notice of deficiency to a taxpayer’s last known address. See King v. Commissioner, 88 T.C. 1042 (1987), aff’d,  857 F.2d 676 (9th Cir. 1988).

The Ninth Circuit has held that a failure of the Tax Court to explain the reasons for dismissing a petition for lack of jurisdiction where a taxpayer has alleged that the IRS failed to send a notice of deficiency to the taxpayer’s last known address is legal error. See Rosewood Hotel, Inc. v. Commissioner, 275 F.2d 786 (9th Cir. 1960).

In our now-settled case, we argued in the alternative that, if the Tax Court lacked jurisdiction over our petition, it should dismiss the petition for lack of jurisdiction on the grounds that the IRS was required to issue a separate §6330 Notice of Intent to Levy to our client prior to taking levy action and had failed to do so.   We cited to Rosewood and other case law involving for the proposition that the Court could not simply dismiss the petition for lack of jurisdiction without explanation in the face of an argument that the IRS had violated the law by levying on our client’s property without first issuing our client a separate §6330 Notice of Intent to Levy

We also argued in the alternative that the Tax Court should dismiss the petition for lack of jurisdiction on the grounds that the IRS could not pursue levy action at all against our client, because the Code does not permit collection action against an alleged alter ego/successor in interest/transferee in the absence of a judgment (or separate assessment) against the alleged alter ego/successor in interest/transferee. In essence, we raised the argument discussed in Part 3 of this series of blog posts, based on the fact that the IRS could not take administrative collection action against alleged transferees of a taxpayer prior to the enactment of the predecessor to what is now section 6901 of the Code, as another alternative argument.

In raising these arguments, however, we had to deal with the case of Adolphson v. Commissioner, 842 F. 3d 478 (7th Cir. 2016). Adolphson held that the Tax Court erred in cases such as Buffano v. Commissioner, supra, when the Court dismissed the petition for lack of jurisdiction while explaining that Respondent had failed to issue the Notice of Determination to the petitioner’s last known address. The Seventh Circuit held that this latter topic should not have been addressed at all when the Court dismissed the petition for lack of jurisdiction. Instead, per the Seventh Circuit, the Tax Court should have just dismissed the petition for lack of jurisdiction, without further comment.

Ironically, the Seventh Circuit, in reaching its conclusion, violated the very rule which it pronounced in its own opinion. The Seventh Circuit discussed the IRS’s failure to send the Notice of Determination to the petitioner’s “last known address” at length. Aside from the Seventh Circuit’s failure to adhere to its own holding in its opinion, my biggest concern about the Seventh Circuit’s holding is that it permits the IRS to unilaterally deprive taxpayers, along with putative alter egos/successors in interest, of the ability to challenge levy action in the Tax Court. This ruling forces parties to vindicate their CDP rights in District Court, a forum that, since 2006, has no familiarity whatsoever with these rights. The notion that only District Courts, and not the Tax Court, can decide the scope of the Tax Court’s jurisdiction in CDP cases where the IRS refuses or fails to issue a §6330 Notice of Intent to Levy seems to me to be utterly absurd and contrary to Congressional intent.

When we settled our case, we deprived the Tax Court of the opportunity to rule on whether it will continue to follow its prior holding in Buffano in cases which are not appealable to the Seventh Circuit. The Tax Court will face that issue in the not too distant future, and the Tax Court’s holding in that case will impact the ability of alleged alter egos/successors in interest to obtain a dismissal of a petition based on lack of jurisdiction with a discussion and analysis by the Tax Court of the IRS’s alleged procedural irregularities.

If the Tax Court holds that it lacks jurisdiction in these types of cases and, in doing so, follows the holding of the Seventh Circuit in Adolphson, alleged alter egos/successors in interest will be forced to litigate in District Court the question of whether they are entitled to their own independent CDP rights.

This concludes Part 4 of this series. Part 5 of this series will address how these issues can be raised in District Court litigation. Part 5 will also discuss why assertions by the IRS of “nominee” status require a different analysis regarding the potential applicability of the CDP procedures than assertions by the IRS of “alter ego,” “successor in interest” or “transferee” status.   I will also explain why virtually all “nominee” notices of federal tax lien that have been filed by the IRS, along with some “transferee” notices of federal tax lien filed by the IRS, are likely improper in one important respect, to the legal detriment of most, if not all of the persons/entities against whom/which these lien notices have been filed.

 

Unpacking the Collection Due Process Case of Melasky v. Commissioner Part 3: The Installment Agreement

As discussed in three prior posts, the Tax Court issued two opinions in the Collection Due Process (CDP) case involving the Melaskys. In 151 T.C. No. 8 it issued a precedential opinion holding that a challenge to the crediting of payment is reviewed pursuant to an abuse of discretion standard and not de novo. In 151 T.C. No. 9 it issued a fully reviewed precedential opinion addressing the collection issues raised in the case before sustaining the determination of the Appeals employee and allowing the IRS to move forward toward levy. See our prior posts on the case here, here and here.  In this third and final post on the second opinion, the issue discussed concerns the taxpayers proposed collection alternative. Even though the IRS rejected the taxpayers’ attempt to make a voluntary payment, they could still have reached an agreement had the IRS accepted their proposed partial pay installment agreement. The majority decided that the Appeals employee did not abuse his discretion in refusing to accept the proposed agreement.

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From the prior posts you know that the Melaskys owe taxes for many years dating back to 1995. Over the years from 1996 until they filed their CDP request in 2011, they made various attempts to settle the debt through offers in compromise (OIC) and installment agreements (IA). When they filed their CDP request, they asked the IRS to give them a partial pay installment agreement. This type of IA allows the taxpayers to achieve a result similar to an OIC because it involves resolving the tax debt for less than full payment.

Appeals rejected the proposed IA because the Melaskys “have not paid over the equity in all of their assets” and because they declined to commit all of their monthly income to the IA. Either the failure to pay all assets or the failure to commit available income could provide a basis for rejecting the IA. The Tax Court concluded that Appeals had a sound basis based on both grounds. IRM 5.14.2.1 (March 11, 2011) provides that “Before a [partial payment installment agreement] may be granted, equity in assets must be addressed and, if appropriate, be used to make payment.” Generally, once the taxpayer gives the IRS all of their assets, the IA can be reached if the taxpayer will commit to paying the maximum monthly payment based on the taxpayer’s ability to pay taking into account the taxpayer’s necessary expenses and their income.

Before going into CDP the Melaskys had previously had two installment agreements. After meeting with Appeals in the CDP hearing, they were again told they had to provide the IRS with the equity in all of their assets. On December 2, 2011, they were given until December 16, 2011 to do this. By this point they had been in CDP 10 months. They came back on December 11 and said that they needed to use some of the assets to pay for the medical expense of their daughter. The Settlement Officer agreed to this as long as they provided proof and extended the time to provide payment from the assets until the first week of January 2012. On January 24, the Melaskys as for a further extension and the SO agreed while again requesting proof of the use of the funds for medical expenses. On February 9 they asked for another extension but this time they did not mention the need to use the funds for medical expenses. On April 4, the SO extended the deadline again to April 11. On April 20, 2012, the SO issued the determination letter and at that time the Melaskys still had not provided the equity in four of their assets: an IRA; a 401(k); a life insurance cash value and jointly owned stock.

The Tax Court found that in giving the taxpayers four and one-half months the SO gave them enough time to perform with respect to the assets and did not abuse his discretion in sending out the determination letter rejecting the IA. This is an unremarkable basis for sustaining a CDP determination.

With respect to the income side of the equation, the facts become more difficult because Mrs. Melasky had become the beneficiary of a trust under the will of her father. Based on the facts here it appears that her father died not long before petitioners made their CDP request. This raises strategy issues for individuals who stand to inherit property and who owe taxes. If you find yourself in that situation and you want to make a deal with the IRS either through an OIC or a partial pay installment agreement, you should strive to do so before the person dies. Her father’s death makes it hard for the Melaskys to get to the income number that they seek since the trust could provide funds for their support.

The court looked at the trust instrument and agreed with Appeals that it provided a source of funds which the IRS could use in calculating the Melaskys’ ability to pay a monthly amount to the IRS. The Melaskys disagreed with the IRS and the Court on this point but the Court goes through the trust document and determines what it allowed. If you represent someone with a trust who faces collection issues, you might the Court’s analysis helpful in deciding how much your client can pay.

As with the voluntary payment issue, Judge Holmes dissents. His dissent on this issue does not draw the same level of push back he received regarding his analysis of the voluntary payment issue but footnote 26 of the majority opinion does push back concerning the full payment issue. Judge Holmes again cites the Chenery rule because he finds that the majority have “saved” the SO by finding reasons for sustaining the determination that were not in the Appeals determination. Judge Holmes points out that partitioning the stock Mr. Melasky owned with his former spouse could have created real practical problems in terms of value. This is an issue that arises regularly when a taxpayer owns a partial interest in an asset of marginal value. How much effort and expense should the taxpayer expend to break free their fractional equity? Similarly with the cash value of the life insurance, its small value may have been outweighed by the fact it might cause the taxpayers to lose life insurance coverage altogether.

Because the SO did not consider, or did not record how he considered the difficulty in liquidation of certain assets, Judge Holmes would send the case back. On this point I think the taxpayers’ delays hurt them together with a failure to build out the record with proof of the difficulties. Judge Holmes makes good points about the difficulties with the two specific assets but the fact that the taxpayers changed their tune about the need to use the assets for medical expense and that after four and one-half months they still had not liquidated their IRA and 401(k) plans, something that should not take very long to do, left the taxpayers in a bad situation to defend against the decision of Appeals.

On the income side Judge Holmes does not agree with the way in which the Court sustained the decision of Appeals regarding Mrs. Melasky’s rights under the trust instrument. The SO had to determine what the trust instrument allowed her to withdraw in order to determine how much the couple could pay the IRS each month. Judge Holmes point here is one of administrative law and what role the Tax Court plays in the review of a determination by Appeals of the meaning of a trust instrument governed by state law. He states:

We have instead [instead of doing a full analysis of the intent of the trust document] a fact-intensive subsidiary (or “preludal”) legal issue that presented itself in a CDP hearing, before an SO incapable as a matter of training of deciding it as a trial judge would; and, more importantly, deprived of all the extensive and expensive fact finding weapons a trial judge could wield. This may harm taxpayers in some cases, while the lower cost of informal adjudication benefits them in others. It’s up to Congress to decide which is best; and here congress has opted for informal adjudication. That makes our review of such mixed questions an appropriate place to depart from the stricter standard that we would apply on purely legal issues. Doing so would also nudge us closer to the mainstream of administrative law.

In the end Judge Holmes states that he would not hold that the SO reached the right conclusion in deciding that the trust would allow the Melaskys to pay more money than they offer but that the SO “acted reasonably in answering this question and therefore did not abuse his discretion in rejecting the Melaskys’ proposed collection alternative on this ground. This makes good sense to me. Although it reaches the same result as the majority, I like this framing of the role of the Tax Court in these cases.

 

Unpacking the Collection Due Process Case of Melasky v. Commissioner Part 2: The Payment

As discussed in two prior posts, the Tax Court issued two opinions in the Collection Due Process (CDP) case involving the Melaskys. In 151 T.C. No. 8 it issued a precedential opinion holding that a challenge to the crediting of payment is reviewed pursuant to an abuse of discretion standard and not de novo. In 151 T.C. No. 9 it issued a fully reviewed precedential opinion addressing the collection issues raised in the case before sustaining the determination of the Appeals employee and allowing the IRS to move forward toward levy. See our prior posts on the case here and here.  In this second post on the second opinion, the issue discussed concerns the attempt to make a voluntary payment. The majority decided that the attempt fails leaving the taxpayers with outstanding debt on more recent, but still old, years.

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The Melaskys owe taxes for many years dating back to 1995. Over the years from 1996 until they filed their CDP request in 2011, they made various attempts to settle the debt through offers in compromise (OIC) and installment agreements (IA). They had also made at least one designated payment of a lump sum to one of their more recent tax years.

On Thursday, January 27, 2011, the Melaskys hand-delivered a check for $18,000 to the IRS office in Houston handling their case, directing the IRS to apply the check against their 2009 income tax liability. On Monday, January 31, 2011, the IRS Campus Collection function in Philadelphia issued a levy to the same bank on which the check was drawn. The levy caused the bank to place a 21 day hold on their account and the hold occurred prior to the payment on the January 27th check.

Regular readers of this blog know that a taxpayer can make a voluntary payment and direct the IRS where to apply the check; however, if the IRS collects funds involuntarily the IRS can decide where to apply the levy proceeds and it does so in a manner that best protects the government. We have discussed the general issue of the voluntary payment rule here, here and here.

There are many reasons for a taxpayer to want to make a voluntary payment. In the employment tax context, a corporate taxpayer will almost always want to designate a payment to outstanding trust fund portion of the liability in order to protect corporate officers from the trust fund recover penalty found in IRC 6672. For individual income taxes such as the ones at issue here, taxpayers almost always want to designate payments to the most recent tax years, or the most recently assessed tax years, in order to obtain the possible benefit of older periods falling off the books due to the statute of limitations on collection or due to positioning for a bankruptcy petition in which the priority rules of bankruptcy will allow discharge of older tax years. Whatever was motivating the Melaskys, their strategy followed the normal pattern for taxpayers with multiple periods of outstanding tax liabilities.

The abnormal aspect of this case results from the timing of the levy vis a vis the voluntary payment. While I imagine that this fact pattern may occur in other cases, it would not occur often. The fact pattern also raises the question of whether the IRS sought to levy quickly after receiving a check in order to reorder the application of payments. The court addresses whether the voluntary submission of the check prior to the levy on the bank account permits the Melaskys to designate the application of the payment here or whether the fact that the payment to the IRS actually comes via the levy rather than the check allows the IRS to post the payment to the earliest outstanding liability.

On the same day that the IRS issued the levy to the Melaskys bank, it also sent them a CDP Notice for the years 2002-2003, 2006, 2008 and 2009. They timely requested a CDP hearing and subsequently petitioned the Tax Court upon receiving an adverse determination letter from Appeals. The Tax Court found two issues in the CDP case: (1) did the IRS abuse its discretion in not treating the check as a voluntary payment and (2) did the IRS abuse its discretion in rejecting a proposed installment agreement. Part 3 of this series will focus on the installment agreement aspect of the case while this post focuses on the voluntary payment issue.

The court notes that “a payment by check is a conditional payment because it is subject to the condition subsequent that the check be paid upon presentation to the drawee.” It also notes that delivery of a check does not discharge a debt. Anyone who has ever received a bad check can easily identify with that rule. If, however, a check is honored the payment relates back to the time of delivery of the check.

Here, the bank never honored the check because by the time it went to clear the account had no funds. Since the check did not clear, it could not constitute payment and since it did not constitute payment, any instructions regarding what to do with the payment because irrelevant. The court found that “taxpayers may direct the application of a payment only if payment occurs.” This seems like a rather straightforward application of the law but the petitioners want equity and not law. They argued that the Tax Court should create an equitable exception for situations in which the check does not clear due to that actions of the IRS.

The Melaskys cited no authority for the adoption of such an equitable rule which is not to say they cited no authority. The court finds no reason to create an equitable exception to the normal rule of allowing designation only if a payment occurs. The IRS levy appears procedurally sound in its execution and logical in its use given the long history of non-payment. The court states that “Respondent did not cause petitioners’ check to bounce; petitioners’ check bounced because they owed and have chronically failed to pay various taxes, a portion of which was collected by levy after respondent’s man attempts at compromise failed to reach a voluntary resolution.”

On this point Judge Homes raises a vigorous dissent; however, he makes clear in footnote 6 that his dissent is not grounded in equity.  One could almost get the feeling equity is a bad word here. As an aside, you may be wondering how Judge Holmes can even participate in a fully reviewed opinion since his term as an appointed Tax Court judge ended on June 29, 2018, causing him to assume senior status while Congress works through its amazingly quick appointment process to approve his reappointment. Because he is the trial judge in this case, he is allowed to participate in court conference on this case and to have his voice heard in the fully reviewed opinion.

Judge Holmes has concerns that the majority’s failure to create an equitable rule in this situation stems from the incredibly bad tax payment behavior exhibited by the Melaskys across the decades leading up to this opinion. On the point of his dissent, Judge Lauber writes a spirited concurring opinion in which he is joined by several judges. Judges Buch and Pugh write a narrow concurring opinion pointing out that on the facts of this case it appears the IRS followed all procedures but on similar facts it might be possible to find that the levy interfered with the attempted voluntary payment. All in all, the opinion gets very long because of the depth of the disagreement and the Tax Court shows more fractures in its personal relationships than we might normally observe. For this inside glimpse, you might read the entire opinion.

In footnotes, Judge Holmes raises interesting points about the IRS hitting the Melaskys with a bad check penalty. He expresses concerns about whether in doing so it followed the requirement of IRC 6751(b) to obtain proper approval and why it would impose such a penalty when IRC 6657 has a good faith and reasonable cause exception. It’s hard to imagine how this penalty would apply on these facts when they tendered payment with sufficient funds in the account and had no reason to know of the impending levy. Because the amount is small relative to the overall liabilities and maybe because of the timing of the imposition of the penalty vis a vis the CDP case, the Melaskys did not raise an objection to the imposition of this penalty. So, that issue will wait for another day.

Judge Holmes finds that the Appeals employee handling the CDP case did not provide an adequate explanation of the basis for concluding the payment did not meet the voluntary payment rules and, therefore, the court should remand the case. The primary concern raised by Judge Homes brings in the Chenery doctrine which binds the agency to the reasons expressed for its decision. He provides a detailed analysis of federal tax cases regarding the timing of application of payment when made by check. The concurring opinion does not spend much time addressing this collection of cases but focuses on Judge Holmes analysis of contract law and the interference the levy created with the ability of the Melaskys to complete performance of the payment of their check.

While Judge Holmes acknowledges that the parties had no express contract he points to the Melaskys’ reliance on Rev. Proc. 2002-26. He proposes a bright line rule that if the IRS causes a check to bounce the taxpayers should receive the benefit of the voluntary payment rule. The concurring opinion pushes back hard on the use of contract principles, the application of the Chenery doctrine in the way described by Judge Holmes and in the idea that the Appeals employee did anything wrong in making his decision. As always I learned a lot by reading Judge Holmes dissent but I am persuaded here that the majority got it right. Whether the IRS inadvertently caused the attempted voluntary payment to fail or the cause had been some third party, the failure of the check to clear keeps a taxpayer from gaining the benefits of the voluntary payment rule. As the concurrence points out, the Melaskys could have obtained a cashier’s check had they wanted to make sure the funds were in the account when the IRS sought to cash the check. That may be the greatest lesson for those seeking to make a voluntary payment and who want to avoid unpleasant surprises.

 

Unpacking the Collection Due Process Case of Melasky v. Commissioner Part 1: The Delay

The Tax Court issued two opinions in the Collection Due Process (CDP) case involving the Melaskys. In 151 T.C. No. 8 it issued a precedential opinion holding that a challenge to the crediting of payment is reviewed pursuant to an abuse of discretion standard and not de novo. See our post on the case here. In 151 T.C. No. 9 it issued a fully reviewed precedential opinion addressing the collection issues raised in the case before sustaining the determination of the Appeals employee and allowing the IRS to move forward toward levy. As discussed more fully below, this case took way too long to resolve. We suggest that it serve as a sign that the process needs to change in order to go back to its original design.

I acknowledge that by suggesting the system move more quickly some low income taxpayers who gather information slowly may be disadvantaged.  The IRS already closes cases based on lack of taxpayer responsiveness – and it should.  Except for taxpayer who seek to use CDP to delay, I think that quicker movement by Appeals and the Court actually benefits most low income taxpayers because they stay engaged in the process.  When their case goes on the shelf for six months or a year, they disengage.  At the Appeals stage taxpayers generally have a relatively short time to reengage and that hurts low income taxpayers.  I would rather see early engagement with a slightly longer time to respond.

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The Melaskys filed their Tax Court petition on May 21, 2012. The Tax Court rendered its opinion on October 10, 2018. That’s way too long. When Congress created CDP it only gave taxpayers 30 days to file their request for a CDP hearing after the mailing of the CDP notice and only gave taxpayers 30 days to file their Tax Court petition after mailing of the CDP determination. The extremely short time frame provided to taxpayers in CDP cases reflected Congressional intent that these cases move quickly because delay in collection often proves fatal to successful collection. Congress placed no time limits on either Appeals or the Tax Court even though it placed these tight time frames on taxpayers. Carl Smith and I wrote about the disparity in a pair or articles, here and here, back in 2009 and 2011 analyzing that both Appeals and the Tax Court took longer to resolve CDP cases than deficiency cases. This could not have been what Congress intended. Since our articles, my non-empirical observation is that CDP cases may be moving faster in Tax Court because IRS counsel is filing more motions for summary judgment, the court rules require that they be filed earlier and the Tax Court disposes of most of the cases slightly quicker. The Melasky case shows the opposite side of the coin.

The Tax Court has decided not to adopt procedures that would move CDP cases on a faster track than deficiency cases. This case provides a perfect demonstration of why Bryan Camp calls CDP the 11th Taxpayer Bill of Rights provision – the right to delay. Appeals also has not created procedures that fast track CDP cases. Maybe it’s time to rethink the process and move these cases through the system with the speed Congress anticipated. Congress would not have anticipated it created a process that caused a case to take almost six and ½ years to work its way through the Tax Court to the point of an opinion.

Can it be so hard to move CDP case quickly through the system of Appeals and Tax Court review? In addition to the six plus years this case has spent in Tax Court to this point, the case spent 14 months in Appeals. Taxpayers filed their CDP request on February 9, 2011. Appeals held the initial hearing over six months later on August 25, 2011. The hearing occurred back in a bygone era when taxpayers could obtain a face to face hearing. I read that part of the opinion with nostalgia wondering how they received a face to face meeting until I looked at the dates. Appeals issued the notice of determination on April 20, 2012.

These taxpayers were no strangers to collection by the time they made their CDP request. They have liabilities going back to 1995 with multiple proposals for offers in compromise and installment agreements strewn along the way. Maybe it took six months just to send their undoubtedly voluminous collection file over to the Appeals Office but it seems that Appeals could create a system of moving these cases quickly into hearing. CDP was loosely modeled on CAP appeals which are to take place within five business days after the request. That time frame would not allow Appeals to perform the verification required by the statute but it should not take months to engage in the verification and the evaluation of taxpayer’s collection proposal.

The Appeals employee working this case gave the taxpayers months to liquidate their assets. As will be discussed in Part 3, taxpayers failed to liquidate all of their assets and that ultimately led to the determination to sustain the levy. The taxpayers here were able to actively delay the case because Appeals lacks a triage system. Appeals needs to adopt a triage system that gets to the taxpayer quickly to engage in a conversation about what is expected and necessary for a successful outcome. Then it can perform its verification and balancing while the taxpayer provides the necessary information to support its request. Treat the initial hearing like a CAP hearing to get the process going. By waiting six months just to hold the initial hearing, the CDP process will necessarily move slowly. In our article from nine years ago Carl and I made the following proposals:

To carry out the intent of the creators of CDP for an expedited process, the authors propose that the tolling of the statute of limitations on collection end six months after the CDP notice is sent if the taxpayer makes a timely CDP request. However, the authors would not propose altering one current protection of the CDP statute that in no event can the collection period expire before the 90th day after the date on which there is a final determination by the IRS or the courts) in that hearing….

To address the issue of mounting interest and time sensitive penalties, another possible avenue for revision of the statue is to adopt a provision similar to section 6404 (b) to stop the further accrual of interest and penalties once the administrative portion of the hearing exceeds six months.

The Tax Court also could adopt procedures to move these cases faster. It could give the IRS 30 days to file the answer instead of 60 days. It does not take very long to deny everything. It could schedule a telephonic conference within 30 days of the case coming at issue and encourage summary judgment motions from the parties at that point. In our article seven years ago Carl and I made the following proposals:

We recommend that the Tax Court amend its rules and adopt procedures that foster the early movement of CDP cases through the court. Under a new rule in Title XXXII of the Tax Court Rules (perhaps Rule 335) Chief Counsel should be required to file within 14 days after the case is at issue (1) the administrative record and (2) a current literal transcript of the taxpayer’s account for the years at issue.

Following this filing, the court should either issue an order to show cause or an order for the filing of a report by the parties. This would require the taxpayer to state how the administrative record might be inaccurate or incomplete, and it would require both parties to state why the case should not be decided on the administrative record. This order should also note that supplementing the administrative record may be possible on a party’s request and any needed discovery should be raised with the court at that time. The parties should be given a relatively short time to identify any additional evidence they think is needed to supplement the record or to convince the court that additional discovery is necessary We recommend that the period for the parties to respond to the Court’s order be no more than 30 days.

This case should be a wake-up call that the CDP process is broken and that in 20 years the players have not taken steps to avoid making it Collection Delay Process instead of Collection Due Process. Of course a fraction of the cases will take more time to resolve but none should take six and ½ years and the vast majority should be resolved within months and not years allowing collection to proceed when needed and stop when appropriate. Cases involving a merits or an innocent spouse determination would obviously move on a slower track more in line with regular cases of those types while pure collection cases would get resolved quickly to allow the process to work as intended.

 

Tax Court Clarifies Standard of Review in CDP Payment Disputes

Two recent opinions in Melasky v. Commissioner, Docket No. 12777-12L offer a cornucopia of issues for tax procedure watchers to digest. The Melaskys appealed a Collection Due Process (CDP) determination and ultimately lost. On its way to upholding the IRS determination, the Tax Court tackled several unresolved questions in two precedential opinions.  In its preliminary opinion in Melasky (151 T.C. No. 8), the Tax Court decided the standard of review when the dispute concerns the correct application of a payment. This sets the stage for the Court’s opinion on the merits of the Melaskys’ contentions, which we’ll cover in later posts.  

The facts of the case are unusual. The Melaskys hand-delivered a check for $18,000 to their local IRS office on Thursday, January 27, 2011, with direction to apply the check to their 2009 income tax liability. Unfortunately, on Monday, January 31 the IRS issued a notice of levy to the bank on which the check was drawn, which prevented the check from being honored. The IRS applied the bank levy proceeds to an earlier tax year, not 2009. Subsequently a notice of intent to levy was issued for several tax years including 2009. The Melaskys requested a CDP appeal. They argued that the proposed levy should not be sustained as to 2009 because they had no balance for that year after proper application of their payment. 

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Before we get to the caselaw, it’s helpful to review a little background. For both lien and levy notices, section 6330(c) sets out the matters to be considered in a CDP hearing: 

(c)Matters considered at hearing. In the case of any hearing conducted under this section—

(1) Requirement of investigation. The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.

(2) Issues at hearing

(A) In general. The person may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy, including—

(i) appropriate spousal defenses;

(ii) challenges to the appropriateness of collection actions; and

(iii) offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise.

(B) Underlying liability. The person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.

So, issues raised by the taxpayer under 6330(c)(2) fall into two separate buckets: “any relevant issue relating to the unpaid tax” under 6330(c)(2)(A); and “challenges to the existence or amount of the underlying tax liability” under 6330(c)(2)(B).  

Why does it matter which bucket the taxpayer’s argument falls into? It matters for a couple of reasons, one of which is the standard of judicial review. In sections 6330 and 6320 Congress failed to specify the standard that the Tax Court should use in reviewing CDP determinations. However, the legislative history provides clear direction, which the Tax Court recognized and adopted in Goza v. Commissioner, 114 T.C. 176 (2000):

The conferees expect the appeals officer will prepare a written determination addressing the issues presented by the taxpayer and considered at the hearing. … Where the validity of the tax liability was properly at issue in the hearing, and where the determination with regard to the tax liability is part of the appeal, no levy may take place during the pendency of the appeal. The amount of the tax liability will in such cases be reviewed by the appropriate court on a de novo basis. Where the validity of the tax liability is not properly part of the appeal, the taxpayer may challenge the determination of the appeals officer for abuse of discretion. 

(quoting H. Conf. Rept. 105-599, at 266 (1998)). Therefore, whether a taxpayer’s argument falls under 6330(c)(2)(A) or 6330(c)(2)(B) determines the Tax Court’s standard of review. Taxpayers prefer de novo review since there is a relatively lower hurdle for success. Of course, sometimes review of the underlying liability is not available to the taxpayer under the terms of section 6330(c)(2)(B), and in those situations a taxpayer would prefer to have their contentions reviewed for abuse of discretion than not at all.   

This brings us back to the Melaskys. The proper application of the $18,000 taken from the Melaskys’ bank account is disputed, and if the taxpayers’ view prevails they will have no unpaid liability for the 2009 tax year. Does this dispute fall under 6330(c)(2)(A) – “any relevant issue relating to the unpaid tax”? Or does it fall under 6330(c)(2)(B) – a challenge to “the existence or amount of the underlying tax liability”? It cannot be both, since the statute restricts when a taxpayer may challenge the underlying liability.  

A few months ago, Judge Lauber noted in Morgan v. Comm’r, T.C. Memo. 2018-98 that the Tax Court’s caselaw on this issue has been inconsistent, citing cases as far back as 2001. This is a debate that has been brewing for some time.  

It is worth noting that there was no dispute between the parties to the Melasky case over the standard of review. Both parties agreed that for the 2009 liability, the Court’s review should be de novo because “the Melaskys argue that they had no 2009 tax liability.” (Slip op. at 5) This opinion is a good reminder that the Court is not bound by the parties’ views of the law.  

So, the Court considers the question despite nobody asking, and answers it here in a precedential opinion. In his opinion, Judge Holmes cites his earlier case of Kovacevich v. Commissioner, T.C. Memo. 2009-160. It is worth reviewing Kovacevich for a more thorough understanding of Judge Homes’s reasoning.  

Mr. Kovacevich argued that the IRS had not properly applied five payments he’d made by check. In order to parse section 6330 and figure out which category of argument this fit into, the Court first needed to define the term “tax liability.” Judge Holmes looks to the IRC and finds that “[a] tax liability is the tax imposed by the Code on a particular taxpayer for a particular tax year. Sec. 26(b)(1).” With that definition in mind,

challenges to the proper crediting of checks that a taxpayer sends to the IRS are not ‘challenges to the underlying liability,’ because they don’t raise questions of the amount of tax imposed by the Code for a particular tax year. They raise, instead, questions of whether that liability remains unpaid. 

Kovacevich, slip op at 14. In the Kovacevich litigation and in a 2014 Chief Counsel Notice, the IRS agrees, and further argues that this conclusion finds support in the structure of section 6330(c). See Notice CC-2014-002 (May 5, 2014).  

Judge Holmes has not changed his mind since deciding Kovacevich and he reiterates his earlier reasoning and conclusion in Melasky. Despite the agreement of the IRS and the taxpayer, the Melaskys will receive abuse of discretion review for all tax years, including 2009.  

Judge Holmes’s analysis in Kovacevich and Melasky is consistent with the IRS’s views set out in Notice CC-2014-002, except for one point: whether overpayment credits are different from payments such that they fall into a different 6330(c)(2) bucket.  

Melasky did not involve overpayment credits, so the opinion naturally does not analyze the issue. However, Judge Holmes does take pains to distinguish it. The main puzzle for me in both the Kovacevich and Melasky opinions is Judge Holmes’ deferential treatment of Landry v. Commissioner, 116 T.C. 60 (2001). Both opinions distinguish LandryLandry involved a taxpayer who elected to apply his tax refunds to his estimated tax for the following year. Things did not go smoothly for Mr. Landry and he ended up in CDP arguing about his entitlement to some of these credits. The Landry opinion takes just one sentence plus a cite to Goza to conclude that a dispute regarding the amount unpaid after application of overpayment credits places “the validity of the underlying tax liability” at issue. Slip. Op. at 5. There is no analysis of the issue or recognition that some might argue otherwise. It is quite a contrast to the detailed parsing and analysis of the Kovacevich opinion.  

In an income tax case, if the underlying liability is the “tax imposed under subtitle A” of the Code, it is not obvious to me that disputes about overpayment credits are disputes regarding the underlying liability. Under section 6513(d), overpayment credits applied from a prior year return “shall be considered as a payment of the income tax for the succeeding taxable year…” (emphasis added). In contrast, the Code uses different language to describe refundable credits (which are also listed as “payments” on Form 1040, alongside estimated taxes). For example, section 32 begins, “In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year…”

The Landry opinion seems to me inconsistent with the reasoning in Kovacevich, and it is plainly inconsistent with the Chief Counsel’s position. Notice CC-2014-002 argues that, “payments and overpayment credits and their proper application have no effect on how much tax is imposed by the Code.” No distinction is made between payments and overpayment credits. This approach seems right to me under the analytical framework used by both the IRS and Judge Holmes. However, I welcome comments on this. There may be Tax Court opinions addressing this issue in depth which I did not find.  

If overpayment credit disputes under section 6513 are subject to de novo review but also the limitations of 6330(c)(2)(B), you could have situations where a taxpayer ends up in very different places depending on whether they elected to have their refund credited to next year’s taxes or whether they got the cash and then paid estimated taxes with it. This does not seem ideal from a taxpayer fairness point of view, since nearly identical taxpayers will get different levels of judicial review. It reminds me of an earlier post, where the distinction between an overpayment credit and a refund made all the difference.  

For now, the Tax Court has decided that payment disputes are not “challenges to the existence or amount of the underlying liability,” but are instead “a relevant issue relating to the unpaid tax.” The law is clearer than it was, although many disputes remain to be litigated.

Designated Orders: One-Two Punch for Respondent in CDP Disputes before Judge Gustafson

This week Patrick Thomas who teaches and runs the low income taxpayer clinic at Notre Dame Law School brings us the designated orders. I have written before about the lessons in making motions for summary judgment that Judge Gustafson provides to Chief Counsel attorneys. Like the wonderful blog series written by Bryan Camp entitled Lessons from the Tax Court (samples here and here), Judge Gustafson provides his own lessons from the Tax Court to the attorneys in Chief Counsel’s Office who file summary judgment motions with him without carefully preparing their motions. At some point we hope the Chief Counsel attorneys will read our blog posts (not to mention his prior orders) and realize that they need to spend some time with these motions and especially when they know the motion will go to Judge Gustafson’s chambers. Professor Thomas writes about the Judge’s most recent lessons below. Keith 

Designated Orders: 9/17 – 9/21/2018

There were only three orders this week, two of which will be discussed here. Not discussed is a routine scheduling order from Judge Jacobs. The two others are both from Judge Gustafson and involve an IRS motion for summary judgment in collection due process cases. Judge Gustafson denies both motions—the first because material facts remained in dispute, and the second because the motion mischaracterized facts elsewhere in the record (and omitted other facts that might have saved the motion). More below.

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Docket No. 26438-17L, Schumacher v. C.I.R. (Order Here)

This CDP case stems from a Notice of Federal Tax Lien filed against Mr. Schumacher for multiple tax years. After Petitioner timely requesting a hearing, the Settlement Officer (SO) sent an initial contact letter to Petitioner and his authorized representative—at least, to what the IRS computers thought was his authorized representative. On the hearing date, the SO called petitioner; the order states “[Petitioner] was not available and his telephone message stated that he did not accept blocked calls.” I’m assuming that the SO was therefore unable to leave a message on Petitioner’s voicemail.

Undeterred, the SO attempted to call the authorized representative on file with the IRS CAF Unit. The representative’s office informed the SO that they no longer represented Petitioner. The SO called the next listed authorized representative and left a message, but didn’t receive a response.

So, on that day, the SO sent a letter to Petitioner, noting these attempts. It further stated that if Petitioner didn’t contact the SO within 14 days, she would issue a Notice of Determination sustaining the lien. 14 days came and went, and the SO did just that.

In the motion, Respondent argues that the SO was justified in issuing the NOD, because neither Petitioner nor his authorized representative responded during the CDP hearing. In opposition, the Petitioner notes that (1) he didn’t receive any phone calls from the IRS and (2) he didn’t have any authorized IRS representative at that time. Judge Gustafson finds the latter plausible, given there’s no indication on the Form 12153 that Petitioner had representation. Good for Petitioner, as the Tax Court will ordinarily sustain a NOD if a truly authorized representative fails to respond.

Judge Gustafson denies the motion because, in his view, there appears to be a dispute as to whether Petitioner had a reasonable opportunity to challenge the NFTL. Specifically, Judge Gustafson finds troubling that there were no attempts to phone Petitioner a second time and no attempt to “unblock” the SO’s phone, such that Petitioner could receive its calls or a message. Further, he takes issue with the language in the 14-day letter sent to Petitioner; it included language noting that “your account has been closed” and might reasonably suggest to a taxpayer without CDP experience that the SO had already made her decision. Accordingly, Judge Gustafson denies the motion and sets the case for trial in Baltimore on November 5.

Takeaways: First, at the end of representation, practitioners should remember to withdraw their Forms 2848. Some portion of the confusion could have been avoided here.

Second, I didn’t know there was a mechanism that could block voicemails or calls from blocked numbers. To the extent our clients have such a mechanism, I might advise them to disable this feature until their tax controversy is resolved. As an aside, to the extent this seeks to reduce spam calls, it appears ill suited to the task. From my own experience, I don’t think I’ve ever received a spam call from a blocked number; rather, it’s usually an IRS employee calling. The spam calls tend instead to come from unblocked numbers.

Docket No. 1117-18L, Northside Carting, Inc. v. C.I.R. (Order Here)

This combined NFTL and levy case involves Petitioner’s unpaid employment taxes. Here, Petitioner does itself no favors in not responding to the motion for summary judgment. Nonetheless, Judge Gustafson finds that Respondent fails to carry own their burden on the motion because of other record evidence.

Respondent argues that Petitioner asked for an OIC or installment agreement in the CDP request, failed to provide the information and documentation necessary to consider an installment agreement. Specifically, Respondent notes that when Petitioner’s authorized representative informed the SO on July 13, 2017 of their desire to renegotiate a collection alternative, the SO asked for additional documentation. That documentation not being forthcoming, the motion states, the SO justifiably upheld the levy and NFTL filing.

Not so fast, says Judge Gustafson. The administrative record shows that the representative submitted some portion of the requested information on two occasions after July 13. Ultimately, the SO still wanted more; after a final deadline of November 16, the SO issued the Notice of Determination.

Judge Gustafson finds the motion’s failure to recite this information problematic. It doesn’t say what was requested or given—only that the SO requested something, part of which was provided and part of which was not. This is a material difference; if the SO receives no information at all, and issues a NOD on that basis, that’s understandable. But here the Court must at least understand the information that was provided; perhaps the SO required a piece of meaningless or trivial information, and on that basis upheld the NFTL and levy. Probably not, but without the specific information, the Court is left without any idea.

The motion could probably have been saved for another reason: when the NOD was issued, Petitioner wasn’t in filing compliance, a necessary requirement for any collection alternative. While the declaration underlying the motion mentions this, the motion itself fails to do so. Judge Gustafson seems unwilling to entertain an argument not presented to the Court, and so ultimately denies the motion, setting the case for trial in Boston on October 15. He suggests that an ultimate outcome may be remand to Appeals for further development of the record, or simply that the NFTL cannot be sustained.

So, good news for Petitioner. Hopefully Petitioner realizes its good fortune, and begins to participate in this case.

 

For IRS Appeals Office, An Epidemic of Remands

We welcome back frequent commentor and occasional guest blogger Bob Kamman. As usual, Bob digs into a topic that the rest of us may have overlooked. Today, he writes, and primarily reports, about remands from the Tax Court. Remands in Tax Court cases most frequently occur in the Collection Due Process (CDP) setting in which the Appeals employee reviewing the CDP case fails to properly review some aspect of the case. When Chief Counsel’s office or the Tax Court notices the failure, the case gets sent back to Appeals to fix the problem. In most CDP cases a remand serves as the best result a taxpayer can hope for in the case. It does represent an opportunity for the Appeals to agree with the taxpayer’s position after initially disagreeing but a remand does not necessarily mean the taxpayer will succeed. It generally does, however, signal some failure at Appeals. To that extent, Bob’s research shows that Appeals appears to fail often. Remands can occur after a failed motion for summary judgment by Chief Counsel’s office and we have written often about failures of those motions and particularly the observations of Judge Gustafson. Remands also delay the process. Bryan Camp recently wrote about a case that serves as a reminder of the slow movement of CDP cases which is something Carl Smith and I wrote about in an article in 2011. Today’s post is long which speaks to the problem. Keith

The New York Mets once again have avoided the World Series, but we still recall their first manager Casey Stengel and his immortal question, “Can’t anybody here play this game?”

The same question might now be asked about the IRS Appeals Office. It seems that Chief Counsel is batting clean-up – that is, cleaning up the cases that end up in Tax Court and must be sent back down to the minors for the administrative equivalent of a not-so-instant replay “further review.”

I did a search for the word “remand” in Tax Court orders for the period September 4 through October 4, 2018.   How many motions to remand would you expect IRS lawyers to file in a month? Would twenty seem to be a high number?

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Here is the list, along with excerpts from the orders. Most of these are CDP cases, although one “whistleblower” case appears. Another case came back up a year after a remand, and there were still problems that resulted in an IRS motion for summary judgment being denied.

For many of these cases, a trial date had already been set, some of them within the following month. For one, the IRS asked for the remand at the Tax Court calendar call.

1) Murphy, Docket No. 10992‑18SL. Chief Judge Foley.

ORDERED that the above‑referenced motion to remand is granted, and this case is remanded to respondent’s Office of Appeals for the purpose of affording petitioner an administrative hearing pursuant to I.R.C. section 6320 and/or 6330. It is further

ORDERED that respondent shall offer petitioners an administrative hearing at respondent’s Appeals Office located closest to petitioners’ residence (or at such other place as may be mutually agreed upon) at a reasonable and mutually agreed upon date and time, but no later than December 13, 2018.

2) Morring, Docket No. 13226‑18 L. Chief Judge Foley.

On September 5, 2018, respondent filed a Motion To Remand. Upon due consideration, it is

ORDERED that, on or before October 1, 2018, petitioners shall file an Objection, if any, to the above‑described motion to remand. Failure to comply with this Order may result in the granting of the motion to remand.

3) Ferrie, Docket No. 17979‑17 L. Judge Kerrigan order dated September 12.

This case is scheduled to be tried at the Court’s session in Los Angeles, California beginning September 24, 2018. On September 11, 2018, respondent filed a motion to remand in which it asks the Court to remand this Collection Due Process case to respondent’s Office of Appeals for further consideration. The motion further indicates that petitioner does not object to granting of the motion. Upon due consideration, it is

ORDERED that respondent’s motion to remand is granted and this case is remanded to respondent’s Office of Appeals for purposes of affording petitioner an administrative hearing pursuant to I.R.C. section 6330.

4) Harropson, Docket No. 16313‑17 L. Judge Kerrigan order dated September 19.

This case is calendared for trial at the Court’s session in Los Angeles, California beginning September 24, 2018. On September 18, 2018, respondent filed a motion to remand in which it asks the Court to remand this Collection Due Process case to respondent’s Office of Appeals for further consideration. The motion further indicates that petitioner does not object to the granting of the motion. Upon due consideration, it is

ORDERED that respondent’s motion to remand is granted and this case is remanded to respondent’s Office of Appeals for the purposes of affording petitioner an administrative hearing pursuant to I.R.C. section 6330. It is further

ORDERED that this case is stricken for trial from the Court’s September 24, 2018, trial session in Los Angeles, California, and that the undersigned judge retains jurisdiction. . . .

ORDERED that on or before December 18, 2018, the parties shall file with the Court a joint status report regarding the then‑present status of this case.

5) East Bank Center LLC, Docket No. 7194‑17L. Judge Gale.

On September 15, 2017, the parties, concluding that the foregoing findings in the notice of determination were contradictory, jointly moved for a remand of the case for a supplemental hearing. On September 19, 2017, the Court granted the motion and the case was remanded to Appeals for a supplemental hearing.

The record as currently developed does not demonstrate to our satisfaction that respondent is entitled to a decision in his favor as a matter of law. It is undisputed that SO Kammers, in connection with the supplemental hearing, reviewed petitioner’s 2016 Form 1065 and used the financial information therein as her basis to determine petitioner’s ability to pay. An Appeals officer’s use of a tax return in this manner would appear to contravene Internal Revenue Manual (IRM) pts. 8.23.3.3(5) and (6) (Aug. 18, 2017). In these circumstances, we conclude that summary adjudication is not appropriate. Accordingly, we shall deny respondent’s Motion.

6) Lewis, Docket No. 14911‑17W. Judge Goeke order dated September 26.

This case is calendared for trial at the Session of the Court commencing November 5, 2018, in St. Louis, Missouri.

Upon due consideration of respondent’s Motion to Remand, filed September 26, 2018, it is

ORDERED that petitioner is directed on or before October 15, 2018, to file with the Court a response to respondent’s above‑referenced motion.

7) Barragan, Docket No. 18245‑17L, Judge Kerrigan.

On September 24, 2018, this case was called from the calendar for the Trial Session of the Court at Los Angeles, California, at which time a Joint Motion to Remand was filed. Upon due consideration, and for cause more fully appearing in the transcript of the proceeding, it is

ORDERED that the joint motion is granted and this case is remanded to respondent’s Office of Appeals for the purpose of affording petitioner an administrative hearing pursuant to I.R.C. § 6330.

8) Dennis, Docket No. 398‑18 L. Chief Judge Foley.

Upon due consideration of respondent’s Motion To Remand, filed in the above‑docketed proceeding on August 20, 2018, and first supplement thereto clarifying the Court’s jurisdiction in this matter, filed August 31, 2018, it is

ORDERED that the above‑referenced motion to remand, as supplemented, is granted, and this case is remanded to respondent’s Office of Appeals for the purpose of affording petitioners an administrative hearing pursuant to I.R.C. section 6320 and/or 6330.

9) Akins, Docket No. 22097‑17L. Judge Gale.

This case is calendared for trial at the Los Angeles, California, trial session commencing November 26, 2018. On July 19, 2018, respondent filed a Motion for Continuance and a Motion to Remand therein requesting that the Court continue this case for purposes of remanding it to respondent’s Office of Appeals for a supplemental hearing. By Order dated July 23, 2018, the Court directed petitioner to file responses stating his position regarding respondent’s Motions by August 13, 2018. To date, petitioner has not filed a response to either Motion. The foregoing considered, it is

ORDERED that respondent’s Motion for Continuance, filed July 19, 2018, is granted and this case is stricken from the calendar of the November 26, 2018, Los Angeles, California, trial session, and continued. It is further

ORDERED that respondent’s Motion to Remand, filed July 19, 2018, is granted and this case is remanded to respondent’s Office of Appeals for purposes of affording petitioner a supplemental collection due process hearing under I.R.C. section 6330.

10) Billing Enterprise, Inc., Docket No. 20540‑17 L. Judge Paris.

This case is calendared for the trial at the November 5, 2018, Dallas, Texas Trial Session of the Court. On September 4, 2018, respondent filed a Motion to Remand. After due consideration, it is

ORDERED that jurisdiction in this case is retained by this Division of the Court. It is further

ORDERED that this case is continued from the November 5, 2018, Dallas, Texas Trial Session of the Court until further direction by this Division of the Court. It is further

ORDERED that respondent’s Motion for Remand is granted, IN THAT this case is remanded to respondent’s Appeals Office for reconsideration of petitioner’s request for a collection alternative and to allow respondent to subsequently issue a supplemental notice of determination or other appropriate notice.

11) Horner, Docket No. 15601‑17 L. Chief Judge Foley.

On July 27, 2018, respondent filed a Motion To Remand. Although the Court directed petitioner to file an Objection, if any, to respondent’s motion, petitioner failed to do so. Upon due consideration, it is

ORDERED that respondent’s Motion To Remand is granted and this case is remanded to respondent’s Appeals Office for further administrative hearing pursuant to I.R.C. section 6330.

12) Ceneviva, Docket No. 19445‑17 L. Chief Judge Foley.

On August 28, 2018, respondent filed a Motion To Remand. In it, respondent states that petitioner has no objection to the granting of the motion. Upon due consideration, it is

ORDERED that respondent’s Motion To Remand is granted and this case is remanded to respondent’s Appeals Office for further administrative hearing pursuant to I.R.C. section 6330 wherein the assigned appeals officer shall consider collection alternatives proposed by petitioner as well as any other issue appropriately raised by petitioner.

13) Jenkins, Docket No. 25422‑17 L. Judge Lauber order of September 10, 2018.

This collection due process (CDP) case is calendared on the Court’s October 22, 2018, Washington, D.C., trial session. On November 8, 2017, the IRS sent petitioner a Final Notice of Intent to Levy and Your Right to a Hearing and petitioner timely requested a CDP hearing. On September 7, 2018, the parties filed a Joint Motion to Remand asking that the case be sent back to the IRS Office of Appeals for a supplemental CDP hearing. Upon due consideration, it is

ORDERED that the parties’ Joint Motion to Remand, filed September 7, 2018, is granted, and this case is remanded to the IRS Office of Appeals for a supplemental CDP hearing.

14) McNeil, Docket No. 19965‑17 L. Judge Thornton.

This case is calendared for trial during the Court’s October 1, 2018, Dallas, Texas, trial session. On September 7, 2018, respondent filed a motion to remand stating therein that petitioners have no objection to the granting of said motion. Upon due consideration, it is

ORDERED: That this case is stricken for trial from the Court’s October 1, 2018, Dallas, Texas, trial session and jurisdiction is retained by the undersigned. It is further

ORDERED: That respondent’s above‑referenced motion to remand is granted and this case is remanded to respondent’s Appeals Office for a supplemental collection due process hearing with a new settlement officer for further consideration.

15) Hodges Legends Café LLC, Docket No. 18317‑16SL. Judge Panuthos.

This case is presently calendared for trial at the Trial Session of the Court scheduled to commence on December 3, 2018, at Atlanta, Georgia. On September 13, 2018, respondent filed a Motion to Remand this case to respondent’s Appeals Office. Premises considered, it is

ORDERED that respondent’s motion to remand is granted and this case is remanded to respondent’s Appeals Office for the purpose of affording petitioner an administrative hearing pursuant to I.R.C. section 6330.

16) Whitesides, Docket No. 17752‑17 L. Judge Kerrigan.

This case is scheduled to be tried at the Court’s session in San Francisco, California, beginning October 29, 2018. On September 28, 2018, respondent filed a motion for continuance and a motion to remand in which it asks the Court to remand this Collection Due Process case to respondent’s Office of Appeals for further consideration. The motions indicate that petitioners do not object to the granting of the motions. Upon due consideration, it is

ORDERED that respondent’s motion for continuance is granted in that this case is stricken for trial from the Court’s trial session beginning October 29, 2018, in San Francisco, California, and that the undersigned judge retains jurisdiction. It is further

ORDERED that respondent’s motion to remand is granted and this case is remanded to respondent’s Office of Appeals for the purposes of affording petitioners an administrative hearing pursuant to I.R.C. section 6330.

17) Russell, Docket No. 7757‑18 L. Judge Vasquez.

Upon due consideration of respondent’s motion to remand, filed September 13, 2018, and respondent’s motion for continuance, filed September 13, 2018, it is

ORDERED that respondent’s motion for continuance is granted in that this case is stricken for trial from the Court’s November 26, 2018, Tampa, Florida, trial session. It is further

ORDERED that respondent’s motion for remand to respondent’s Appeals Office is granted and this case is remanded to respondent’s Appeals Office for further consideration. It is further

ORDERED that respondent shall offer petitioner an administrative hearing at respondent’s Appeals Office located closest to petitioner’s residence (or at such other place as may be mutually agreed upon) at a reasonable and mutually agreed upon date and time, but no later than December 17, 2018.

18) Baxter, Docket No. 950‑18L. Judge Lauber.

This collection due process (CDP) case is calendared on the Court’s October 22, 2018, Washington, D.C. trial session. On September 17, 2018, respondent filed a Motion to Remand asking that the case be sent back to the IRS Office of Appeals for a supplemental CDP hearing. Petitioner does not oppose the motion and we shall grant it. Upon due consideration, it is

ORDERED that the respondent’s Motion to Remand, filed September 17, 2018, is granted, and this case is remanded to the IRS Office of Appeals for a supplemental CDP hearing.

19) Lucas, Docket No. 24611‑17 L. Judge Thornton.

This case is calendared for trial during the Court’s November 26, 2018, New York, New York, trial session. On September 21, 2018, respondent filed a motion to remand and stated therein that petitioner has no objection to the granting of said motion. Upon due consideration, it is

ORDERED: That this case is stricken for trial from the Court’s November 26, 2018, New York, New York, trial session and jurisdiction is retained by the undersigned. It is further

ORDERED: That respondent’s above‑referenced motion to remand is granted and this case is remanded to respondent’s Appeals Office for a supplemental collection due process hearing with a new settlement officer for further consideration.

20) Gibson, Docket No. 20421‑17 L. Judge Halpern.

This case is calendared for trial at the Court’s December 3, 2018, Las Vegas, Nevada trial session. On September 26, 2018, respondent filed a motion to remand. Respondent’s motion advises that petitioner has no objection to the granting of this motion. Upon due consideration, it is

ORDERED that respondent’s motion to remand is granted, and this case is remanded to respondent’s Office of Appeals, at respondent’s Appeals Office located closest to petitioner’s residence (or at such other place as may be mutually agreed upon) at a reasonable and mutually agreed upon date and time, but no later than December 27, 2018, for a supplemental CDP hearing with an appeals settlement officer, for the purpose of considering an offer in compromise or other alternative to collection of petitioner’s unpaid taxes.

21) Monaco, Docket No. 25731‑17 L. Chief Judge Foley.

On August 16, 2018, respondent filed a Motion To Remand. Although the Court directed petitioner to file an Objection, if any, to respondent’s motion, petitioner failed to do so. Upon due consideration, it is

ORDERED that respondent’s Motion To Remand is granted and this case is remanded to respondent’s Appeals Office for further administrative hearing pursuant to I.R.C. section 6330. It is further

ORDERED that the above‑referenced hearing shall take place at a reasonable and mutually agreed upon date and time, but no later than November 28, 2018.

22) Maddox, Docket No. 15184‑17 L. Judge Lauber.

This collection due process (CDP) case is calendared on the Court’s October 22, 2018, Washington, D.C., trial session. On August 20, 2018, respondent filed a Motion to Remand asking that the case be sent back to the IRS Office of Appeals for further consideration. By order dated August 24, 2018, petitioners were directed to file a response to respondent’s motion on or before September 17, 2018.

Petitioners did not respond to that order. Upon due consideration, it is

ORDERED that respondent’s Motion to Remand, filed August 20, 2018, is granted, and this case is remanded to the IRS Office of Appeals for further consideration.

23) Kelly, Docket No. 26941‑17SL. Judge Armen.

This case was called from the calendar for the Trial Session of the Court on September 24, 2018 at Chicago, Illinois. Both parties appeared and filed with the Court a joint Motion For Remand. After due consideration, and for cause more fully appearing in the transcript of the proceedings, it is

ORDERED that the parties’ joint Motion For Remand, filed September 24, 2018, is granted and this case is remanded to respondent’s Office of Appeals in order to conduct a supplemental hearing consistent with the aforementioned motion.

24) And finally there is the case of Johnson and Roberson, Docket No. 22224‑17 L, which was discussed here in the text and comments of the blog post for Designated Orders on October 3, 2018. Judge Gustafson suggested a remand, but petitioners declined, doubting that they would get to first base with the Appeals Office.