Summary Opinions for the week of 05/01/15

Happy Memorial Day weekend!  We won’t be posting on Monday, but will probably be back in full force on Tuesday.  I know we have a handful of guest posts coming up on really interesting topics and I’m certain Keith and Les have some insightful things to add following ABA.

In the week of May the 1st, we welcomed first time guest poster, Marilyn Ames, who wrote on NorCal Tea Party Patriots v. IRS and disclosure of return information.

Here are the other procedure items from that week:

  • A recent Tax Court decision brought back the analysis used by the Supreme Court almost 20 years ago on a similar but slightly distinct fact pattern.  The situation can be tough to follow at first because it plays out at the intersection of Sections 6511 and 6512.  It also involves reliance on the earlier Supreme Court decision which caused a change to Section 6512 after it was decided.  In Butts v. Comm’r, the Tax Court denied taxpayers’ request for refund as being untimely.  The taxpayers failed to file in ’07 and ’08.  In 2011 (and 2012), SNODs were issued for 2007 and 2008, and later that year the taxpayer filed for review in the Tax Court.  In 2013, taxpayers filed joint returns, claiming overpayment due to employer withholdings.  The Court stated SCOTUS reviewed an almost identical case in Lundy v. Comm’r.   The issue in both cases was if the refund amount was allowed under Section 6512(b)(3), which allows refunds of any amount paid:

(A) after the mailing of the notice of deficiency;

(B) within the period which would be applicable under section 6511(b)(2), (c), or (d), if on the date of the mailing of the notice of deficiency a claim had been filed (whether or not filed) stating the grounds upon which the Tax Court finds that there is an overpayment; or

(C) within the period which would be applicable under section 6511(b)(2), (c), or (d), in respect of any claim for refund filed within the applicable period specified in section 6511 and before the date of the mailing of the notice of deficiency.

Based on the facts in Butts and Lundy, (A) and (C) do not apply.  In Lundy, SCOTUS stated it considered:

the look-back period for obtaining a refund of overpaid taxes in the…Tax Court under 26 USC 6512(b)(3)(B), and decide[d] whether the Tax Court can awarded a refund of taxes paid more than two years prior to the date on which the [IRS] mailed the taxpayer a notice of deficiency, when, on the date the notice of deficiency was mailed, the taxpayer had not yet filed a return.  We hold that in these circumstances the 2-year look-back period in 6513(b)(3)(B) applies, and the Tax Court lacks jurisdiction to award a refund.

One difference in Butts and Lundy is that in Lundy the taxpayer made its request within three years of the filing date, whereas in Butts the request was made more than three years after the filing date.  Based on a prior version of the statute, Lundy was precluded from obtaining a refund because it was outside of two years and there was not a reference to the three year statute applicable. Section 6512(b)(3) was modified in 1997 by Congress, and now the minimum statute of limitations would be the three years from the filing date.

In Butts, under Section 6512(b)(3)(B), the Court stated it must look to the mailing date of the SNOD as a hypothetical claim date and determine if a timely claim could have been made then based on Section 6511.  This requires a review of the two year statute from the date of taxes paid, and three years from the due date of the return.  The withholdings for 2007 were treated as having been paid on April 15, 2008, while the initial SNOD was issued in June of 2011.  Since both statutes had passed, no claim for refund could be allowed.  There was a similar issue with the 2008 return.

  • Peter Hardy and Carolyn Kendall, attorneys from Post & Schell, and prior guest bloggers here at PT, have posted on Jack Townsend’s Federal Tax Crimes blog (two-timers!) on the Microsoft appeal in In re Warrant to Search a Certain E-mail Account.  The guest post can be found here, and Jack’s summary of related materials on the Stored Communications Act can be found here.  Although the post deals with a drug case, the impact could be far reaching regarding subpoena power over electronic communications in the cloud (including datacenters outside of the US).  Peter and Carolyn tie in the Service’s review of foreign accounts nicely.
  • It’s like speed dating, but it might cost more and you only get lucky if you don’t get picked.  The NY Times has an op-ed on the IRS speed audit, with agency cut backs causing reduced response time for taxpayers, which if not promptly responded to could result in important collection due process rights being forfeited.  The op-ed indicates that the IRS may be sending out follow up letters the same day as the initial letter, which the author argues is in violation of the updated taxpayer bill of rights issued last year.  When you are on the op-ed, check out the comments the NY Times has picked as important.  Carl Smith was highlighted for indicating a few other ways the tax system is failing taxpayers.  This practice may save time for the Examination Division of the IRS but pushes more cases into the collection stream which also impacts the IRS resources.
  • On April 20th, the Tax Court issued a decision in Yuska v. Comm’r, holding the automatic stay invalidated a Notice of Determination Concerning Collection Actions regarding a tax lien that was issued after the bankruptcy petition.  Importantly, the Court declined to follow the IRS’s suggestion that the Court distinguish this case from Smith v. Comm’r, which had similar facts but pertained to a levy.  The timing of events were very important in following Smith, and the Service also argued that the Court should instead follow Prevo v. Comm’r, which was a lien case where the collection action occurred before the BR petition.  In Smith, the Serviced began collection actions, and then the taxpayer filed a bankruptcy petition, followed by the Service issuing a notice of determination concerning the levy, and then the taxpayer petitioning the Tax Court for review of the levy action.  The Court held the continuance of the collection action violated the stay under 11 USC 362(a)(1).  In Prevo, the sustaining of the lien occurred before the BR petition.  As to differentiating between a lien and levy case, the Court found the administrative review of a lien was clearly part of the administrative collection process and subject to the ruling in Smith, even if future administrative review was possible. Although the Court declined to differentiate between the two in this case, Keith noted that if the stay stopped the CDP case there can be important differences.  In a lien case, the NFTL remains valid (if not enforceable) until after the stay is lifted.  In a levy case, the stay prevents the IRS from moving forward with the levy completely.  Keith didn’t read the case, and still came up with something much more insightful and helpful to add.
  • This is becoming a little like an advertisement for Jack Townsend’s Criminal Tax Crimes Blog.  Jack posted on the recent 7th Circuit case, US v. Michaud, which reviewed whether or not the IRS had authority to issue a summons in a criminal matter prior to a DOJ referral.  The statute in question is Section 7602(b) & (d), which was modified after US v. LaSalle Nat’l Bank to make it clear the IRS did have this authority.  The 7th Circuit had some additional thoughts on when the IRS couldn’t issue the summons.  Check out the post for a discussion of that point, and Jack’s always helpful thoughts on the matter.
  • Context is always important.  For instance, being suspended can be very good (we took our daughters rock climbing this weekend, and being suspended by the rope was really helpful), but it can also be pretty bad in the school, professional or corporate context.  Such was the case in Leodis C. Matthews, APC, a CA Corp. v. Comm’r, where the Tax Court held that it lacked jurisdiction  over a deficiency petition brought be a corporation (law firm) that California had suspended its corporate privileges for due to failure to pay state taxes.  Interesting point of law.  Can someone bring the petition on behalf of the corporation so it does not lose its ability to contest the tax?  Timing is also interesting.   Corp is suspended May 1, 2013, and 90 day letter is issued June 30, 2014.  Taxpayer petitions court Oct. 1, 2014 (presumably timely), and had its corporation reinstated November 26, 2014.  You would guess he was trying to deal with his state tax issue during the 90 day period.  I also wonder if there is a way to get limited rights reinstated, so that the corporation could have petitioned the Tax Court.
  • We all hear the scare tactics on the radio about how if you owe more than $10,000, the IRS is going to come and take your assets, steal your children, put you in jail, shoot your dog, etc.  We are lucky enough to know this is BS, and an effort to garner business.  Sometimes, however, the IRS can show up at your premises (probably armed), and take your stuff.  You have to owe a bit more than $10k, and the Service has to jump through a lot of hoops.  In re: The Tax Indebtedness of Voulgarelis is one such writ of entry case.  In Voulgarelis, the taxpayer apparently owed around $300k, possibly more, and ignored six notices of intent to levy.  The Service sought an order authorizing it to enter the premises and levy the tangible property, which was granted in accordance with GM Leasing Corp. v. United States, 429 US 338 (1977).
  • The Service has updated its list of private delivery services that count for the timely mailing is timely filing rules under Section 7502.  The update can be found in Notice 2015-38.  As we’ve discussed before, failure to file these rules can result in harsh results.  These results can be seemingly arbitrary when a taxpayer selects a quicker FedEx/UPS delivery method that isn’t approved, and cannot rely on the rule.
  • In information notice 2015-74, the IRS has reminded businesses of the temporary pilot penalty relief program for small businesses that have failed to properly comply with administrative and reporting requirements for retirement plans.  That program ends June 2nd.


Summary Opinions for 11/21/14 to 12/5/14

Once again, trying to catch up and cover a few weeks in one SumOp post.  Before getting to the new items from the last three weeks, I wanted to give a short update on Hawkins v. Franchise Tax Board.  In September, A. Lavar Taylor wrote a two part guest post on the 9th Circuit’s holding, which can be found here and here.  The case deals with, as the guest post title indicates, “What Constitutes An Attempt to Evade or Defeat Taxes for Purposes of Section 523(a)(1)(C) of the Bankruptcy Code,” and a split found between the recent holding and other Circuits.  Carlton Smith shared with us last week that the Government sought en banc review, the debtor has responded, and the petition is now before the entire 9th Circuit to decide whether the review is appropriate or not.  Either way, some court may be reviewing soon, and we will let you know if we hear more.


I also want to highlight some really strong guest posts over the last three weeks, and thank all of our guest posters again!  The aforementioned Carlton Smith wrote on the Lippolis Tax Court jurisdiction case relating to the $2MM Whistleblower amount limitation.  Professor Andy Grewal covered the recent Petaluma FX Partners oral argument in the DC Circuit, regarding the scope of TEFRA jurisdiction when the underlying partnership is a sham.

A few first time guest posters also contributed over the last few weeks.  Rachel Partain, an attorney at Caplin & Drysdale, wrote on the LB&I policy restricting informal refund claims for taxpayers in exam.  And, finally, Jeffrey Sklarz, of Green and Sklarz, touched on the interaction between Section 6020(b) and Deficiency Assessments in the recent Radar case.

To the other procedure.

  • PWC provided a fairly comprehensive overview regarding the new information document request process.  The document outlines the history behind the changes, how the process works, and what occurs if the IDR is not responded to in a manner the IRS finds acceptable.
  • As I mentioned above, Carlton Smith had a write up on PT regarding the Lippolis case.  Tax Litigation Survey has added its thoughts here.
  • Two weeks ago, Jack Townsend on his Federal Tax Crimes Blog posted about a FOIA information dump regarding FBAR audits found on Dennis Brager’s web page.  You can find Jack’s post about it here.  The FOIA request resulted in over 6,500 pages of info.  Jack’s page has some good comments and responses.
  • Chief Counsel has taken the position that a company which acquired, pursuant to Section 381, another company that had taken TARP funds was subject to the same restrictions as the TARP company regarding NOL carrybacks.
  • Tax Girl has a well written story on Forbes about the Whistleblower case brought against Vanguard.  Vanguard is a huge financial company located in Chester County (same as me), which is known for its low cost investing options.  A prior in house tax attorney, David Danon, has brought an action under the New York False Claims Act regarding its internal transfer pricing for investment services, which he claims caused Vanguard to underpay its taxes substantially.  The New York statute was expanded in 2010 to include tax claims.  Last year, this expanded statute was discussed on the whistleblower panel at the VLS Shachoy symposium, although this case was under seal at that time (if it had been filed), and was not discussed.  There is probably a IRS and SEC action moving forward, although those were not highlighted in the story.
  • This story deals with a few Golden Corral restaurants.  Apparently the slogan there is “Help Yourself to Happiness,” which is a reference to its all you can eat buffet.  The one time I went to the Corral, that didn’t summarize my experience, but it seems like a popular chain, so others would probably disagree with me.  Also interesting, there is a lot of internet debate out there about the fact that Golden Corral no longer allows people to bring guns into its establishments.  This really pisses people off.

In Erwin v. United States, 114 AFTR2d 2014-6630 (MD NC), a general manager (a gent named Pintner) of a company that owned five GC restaurants (these are franchises) was found to be a responsible person for the TFRP.  He clearly handled day to day operations, oversaw payroll, could hire and fire, and could write checks.  The fact that the owners and officers indicated they would take care of the issue did not mitigate the responsibility.  There was an argument about whether he knew of the debt in June or October of the year in question, but the Court directed that did not matter, which is somewhat interesting because he left the company two months after finding out about the issue.  Tough holding for the manager, as the amount was substantial, and his knowledge may have been less than 60 days.  Should have left the Corral sooner.  Keith had a good post a few months ago about postponing the assessment of the TFRP when others might be liable (and hopefully pay), which can be found here.  I bet most folks in the manager’s position would be surprised to know this is how the law works.

  • Foundation was granted reasonable cause relief to abate first-tier excise taxes under Section 4943 by the Service.  The TAM found that the foundation had reasonably relied on a memorandum that incorrectly determined the attribution rules regarding excess business holdings, and how the percentage applied.  The memorandum was made by a qualified tax preparer.  The foundation realized the error and fixed the issue.  The Service determined there was not willful neglect, and the error was due to reasonable cause.
  • The Service issued Announcement 2014-34 discussing the realignment of technical work between TE/GE and Chief Counsel to shift authority for preparing revenue rulings, revenue procedures, announcements, notices, technical advice, and certain letter rulings relating to exempt orgs and certain qualified plans.
  • Occasionally, a nice woman from sends me a link to infographics they have created, which are usually interesting.  This one is a fairly simple chart regarding entity choice, including the tax impacts.  Unlike most similar lists, this one covers cooperatives…which are useful if you want to be a snooty building or start an organic farm in a vacant lot.

IRS May Restrict Informal Refund Claims for LB&I Taxpayers Under Exam

Today’s guest poster is Rachel Partain.  Rachel is of counsel at Caplin & Drysdale, Chtd. in New York, NY and her practice involves tax controversy matters for corporations, partnerships, and individuals.  Rachel was formerly an associate at Dewey & LeBoeuf LLP and a 2012-2013 Nolan Fellow of the ABA Section of Taxation.  In this post, Rachel explores a proposed change relating to refund claims for LB&I taxpayers.  Steve.

LB&I is considering sharply curtailing the ability of LB&I taxpayers under examination to submit informal refund claims and will be seeking comments on a claim cutoff from external stakeholders.  As informal claims are very common in LB&I (and other) examinations, there likely will be significant feedback to LB&I’s proposal.

On November 10, 2014, the IRS made available a draft of Publication 5125 dated as of July 2014 relating to the LB&I quality examination process.  See 2014 TNT 217-62 (Nov. 10, 2014).  Among other things, the publication indicates that LB&I is considering reducing the period in which taxpayers may submit informal claims to within 30 days after the examination opening conference.  After the expiration of the 30 day period, LB&I taxpayers would be required to submit documented and supported formal refund claims on Forms 1120X or 843 and, presumably, administrative adjustment requests for TEFRA partnerships and Form 1040X for Global High Wealth taxpayers.  Currently, LB&I asks that taxpayers submit refund claims, formal or informal, as soon as possible.  See I.R.M.  In practice, it is common for exam to establish a deadline for the submission of informal claims.  LB&I’s proposal would apply an informal claim period uniformly to all LB&I taxpayers.

The Code furnishes the time in which refund claims must be filed.  See I.R.C. § 6511. The regulations provide additional requirements that refund claims must satisfy, including that claims must be filed on a tax return or Form 843.  See Treas. Reg. §§ 301.6402-2, -3.  Numerous court decisions have held that informal claims constitute valid refund claims, despite the requirements in the regulations.  An informal claim is any written document that provides the IRS with notice that the taxpayer is claiming a refund and the grounds for the taxpayer’s claim, and generally is not submitted with tax computations.  See Mobil Corp. v. Unites States, 67 Fed. Cl. 708 (2005).  There is precedent addressing informal claims in the context of an exam-imposed cutoff.  For example, in Mobil, the exam team set a date certain by which informal claims were to be filed.  The court held that the IRS has the ability to require taxpayers to follow the refund claim regulations, with the result being that one of the taxpayer’s informal claims submitted after the informal claim deadline did not constitute a valid refund claim.  As a result, under the proposed change and Mobil, LB&I taxpayers would be precluded from asserting that a submission to exam after the period for filing informal claims has elapsed constitutes an informal refund claim.


The draft publication states that the purpose of informal claim end point is to “deploy resources efficiently.”  LB&I’s industry director of natural resources and construction stated that LB&I taxpayers submit a significant number of informal claims and that the informal claims impede the examination of issues identified on LB&I exam plans.  See 222 DTR G-2 (Nov. 18, 2014).  The publication indicates that LB&I wants taxpayers to submit fully documented and supported refund claims, which would enable exam teams to make determinations on refund claims without engaging in a lengthy examination process.  In fact, the LB&I Commissioner has publicly stated that exam will no longer be developing refund claims and instead will reject claims that are not fully developed.  See 2014 TNT 217-2 (Nov. 10, 2014).

Also, the LB&I document states, without explanation, that late informal refund claims “may result in unnecessary refund litigation.”  Perhaps the later an informal claim is filed, the more likely exam is to reject the claim in order to focus on wrapping up the examination.

It has been suggested that another purpose for LB&I’s proposed informal claim window may relate to the section 6676 penalty for erroneous refund claims.  However, the IRS’s position is that the penalty applies to both formal and informal claims.  See I.R.M.  Therefore, the penalty may not be a driving factor behind LB&I’s proposal to require the filing of formal claims that otherwise would have been submitted as informal claims.

The LB&I Commissioner also announced that refund claims will be risk assessed, which means that claims will be preliminarily reviewed to determine whether to allow the claim or to initiate an examination of the issues raised in the claim.  See 2014 TNT 217-2.  LB&I’s considerations during risk assessment include the materiality of the issues in the claim, the time and resources needed to examine the issues and whether the issues in the claim may affect future years.  See I.R.M.

The effect of an informal claim cutoff would be to shift the development and computation of claims more fully to taxpayers.  If implemented, the policy may result in an LB&I taxpayer delaying the filing of a formal claim until the end of the examination.  This would permit the submission of a comprehensive claim covering all of the taxpayer’s issues and their grounds and alternative grounds, and would require the taxpayer to prepare tax computations only once.  Where taxpayers submit formal claims towards the end of the refund limitations period, taxpayers will be under greater pressure, given the variance doctrine, to submit full and complete claims explaining all possible grounds for the taxpayer’s recovery as taxpayers will have a shorter window within which they can timely correct defective claims with amended or superseding claims.  Further, a formal claim requirement may deter taxpayers from filing smaller dollar amount claims if the time and expense of amending the return is more than the value of the refund claim.

Also, a policy limiting the period in which taxpayers may submit informal refund claims may lead to less collaboration between taxpayers and exam, which relationship has already become more formalized as a result of the recent changes to the LB&I information document request procedures.  See., e.g., LB&I-04-0214-004 (Feb. 28, 2014).

Given the IRS’s resource limitations resulting from budget constraints and exam’s objective of adhering to the LB&I exam timeline, it seems likely that LB&I will adopt an informal claim window.  However, many practitioners feel that 30 days is too short of a period.  I would expect an enlargement of the period in which LB&I taxpayers will be permitted to submit informal claims.  A more reasonable period would be at least 90 days, and perhaps a longer timeframe for TEFRA partnerships as opposed to other LB&I taxpayers.

Although the publication is in draft form and LB&I has not issued a notice announcing the proposed changes, it appears that LB&I has already determined that action should not be taken on late-raised informal refund claims.  I have seen LB&I exam respond to informal claims by directing the taxpayers to submit formal refund claims, or an administrative adjustment request in the case of a TEFRA partnership.

IRS Makes Novel Use Of Outside Contractors—To Audit Microsoft


Earlier this year I wrote about the effort by some Senators to revive the private debt collector provisions that expired several years ago.  For the moment the revival of that bad idea seems to have lost steam.  A new and creative way to use private parties for what seems like a governmental function – the examination of a tax return – has surfaced and deserves watching.

The IRS has changed the regulation concerning who can participate in an examination to include private contractors.  It has hired a private law firm as an expert.  Microsoft appears to be the first examination using private contractors to become public.  The issue deserves attention in order to determine if this represents a new and better way to examine complex returns or a capitulation of what was previously considered a governmental function.

Today, Microsoft filed a FOIA suit against the IRS seeking to learn more about the terms of the contract between the IRS and Quinn Emanuel, a commercial litigation law firm (the complaint can be found here, along with the required declaration, and Exhibit I.aExhibit I.bExhibit I.c,  Exhibit I.dExhibit IIExhibit III, and Exhibit IV).  It appears that the IRS examination team wants to use the law firm to assist it in conducting the examination and has hired the firm as experts.  If successful, the FOIA litigation will make clear the precise intentions of the IRS as it moves to a new method of examining tax returns.  Those intentions, if they become public, will allow a better understanding of what appears to be a new avenue of removing the wall between government and private contractor in the area of taxation.


Hiring private experts in tax cases does not present new or novel issues.  The IRS regularly hires experts to assist it in valuing property or other discreet functions where expert testimony or expertise in a particular subject not within the realm of the IRS is needed.  To my knowledge the IRS has not previously hired an expert to participate in the examination of a return but rather has hired experts to assist with discreet issues which turned up during the audit.  The hiring of Quinn Emanuel in conjunction with the promulgation of the new temporary regulation allowing private contractors to participate in questioning a taxpayer during the examination process suggests that the IRS seeks to try a new technique in the examination of large corporations presenting sophisticated issues that may test the capabilities of the IRS examiners and the Chief Counsel attorneys who assist them.

Some of the concerns raised about the use of private collectors appear relevant in deciding if this new direction brings a good or bad direction for the IRS.  Like collection, the examination of a tax return seems to represent a core government function.  If a private contractor can conduct a little bit of the examination of a return, at what point does the use of the contractor stop or could the entire examination process get turned over to third parties?  If using a private contractor to assist in the examination of a large and sophisticated corporate tax return becomes accepted, could private contractors also examine the returns of smaller corporations or individuals?  Where should the line between core government function and private action exist on the exam side of the equation and does it present different issues about government function than the collection side of this issue?  Does this need to stop at the examination level or should the IRS consider hiring private lawyers who might possess greater expertise than Chief Counsel lawyers to provide advice on the case or to try the case?

Bringing greater expertise to the examination of a large corporation makes sense if the IRS lacks the expertise currently but should such expertise come in the form of a private contractor or new government employees.  This case appears to start the IRS down a new path which, unlike the decision on the use of private debt collectors has not played out in the public. The temporary regulation is titled “Participation of a Person Described in Section 6103(n) in a Summons Interview Under Section 7602(a)(2) of the Internal Revenue Code.”  The description of the change suggests that the change clarifies “that persons with whom the IRS of the Office of Chief Counsel contracts for services described in section 6103(n) and its implementing regulations may be included as person designated to receive summonsed books, papers, records, or other data and to take summoned testimony under oath.” (emphasis added)

Section 7602 is the general summons provision of the Code.  The issue of the IRS using summonses in large case examinations has been much debated over the past year as the IRS has initiated a new strategy and received some tongue in cheek commentary from me in a prior blog post.  Historically, the IRS has used summonses very sparingly as a part of its examination of large corporations (and of small corporations and of individuals).  Summonsing information generally comes as a last resort when a taxpayer refuses to cooperate.  The examiners dislike the summons process because it significantly slows down an examination and fosters an adversarial atmosphere.  I do not know if summonsing has become routine over the past year following the issuance of the new audit guidelines by the IRS.

The temporary regulation says that the contractor can fully participate in a summons interview and describes full participation to include “receipt, review, and use of summonsed books, papers, records, or other data, being present during summons interviews, questioning the person providing testimony under oath, and asking a summonsed person’s representative to clarify an objection or an assertion of privilege.”  The temporary regulation cites to transfer pricing as a circumstance in which outside contractors often assist the IRS by providing specialized knowledge.

The temporary regulation acknowledges the potential concerns of having an outside contractor perform an inherently governmental function and states that the IRS will ensure that the core functions surrounding the summons will remain in the control of the IRS – “deciding whether to issue a summons, deciding whom to summon, what information must be produced or who will be required to testify.”  The explanation with the temporary regulation states that the IRS employee will issue the summons and says that it will safe guard the inherent governmental function by making sure that an IRS employee is always present when the private contractor ask questions of a summonsed witness testifying under oath.

The issuance of the temporary regulation giving private contractors the right to examine taxpayers during a summons drew one public comment from the Texas bar.  The comment made by the Texas Bar to the temporary regulation acknowledged that giving a private contractor information obtained during a summons enforcement was appropriate and that having an IRS employee consult with an expert during the interview was an appropriate use of the expert but expressed concern with the expert actually questioning the summonsed party.  The commenter expressed concern relating to the issue of multiple counsel examining a witness during trial.  Courts do not permit more than one counsel to examine a witness and for many of the reasons it is not allowed in court, the Texas Bar commentators felt it would present problems in examining a witness during a summons enforcement proceeding.  They also expressed concern about loss of control over the contractor by the government agents and attorneys coupled with the legal uncertainty of the authority of a private contractor to examine a witness.  They questioned whether the statute provided authority for the regulation citing the language of the statute which authorizes “only an officer, employee or agency of the Treasury Department to take testimony of witnesses.”

This should be an interesting issue to follow.  Whether it will receive attention from Congress or the IRS employee union could add to that interest but it will almost certainly come to the attention of the court system when the IRS seeks the examination under oath by a contractor.