August 2022 Digest

In August, some were stuck in the past while others focused on the future. The DOJ was living in the past when it misinformed the Court about rules related to section 6015(f). The Center for Taxpayer Rights is reimagining tax administration; the Tax Court may be heading in the direction of making more records publicly available; and we should have more clarity on the types of circumstances that allow for equitable tolling in the coming year.

Reimagining Tax Administration

Reimagining Tax Administration: Social Programs Through the Tax Code – Characteristics of the EITC/Advance CTC Population: This multi-post series highlights Center for Taxpayer Rights’ workshops, and a forthcoming report, that looks at benefits administered through the tax system while exploring and discussing alternative approaches. This first post looks at the individuals who receive government benefits, specifically the EITC and ACTC, and the advantages and disadvantages of the IRS administering benefit programs at a time when household compositions are evolving.

Reimagining Tax Administration: Social Programs Through the Tax Code – Workshop 3: Design Theory and Administrative Burden: This second post explores how program design and administrative burdens impact the ability of individuals to understand and navigate social programs, and how the current structure may deter the target population from receiving benefits.

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

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

Tax Court Updates, Orders, and Decisions

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

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

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

District Court Decisions

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

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

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

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

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

Circuit Court Decisions

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

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

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

Equitable Tolling Litigation Updates

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

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

Comments, News, and Other Updates

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

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

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

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

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

July 2022 Digest

PT regularly brings awareness to important issues and July was no different. One notable post joined hundreds of organizations and state and local leaders to ask that the ITIN request or renewal deadline be extended to allow otherwise eligible individuals to claim the 2021 child tax credit. Another highlight is Caleb’s thought-provoking series of posts which takes a deeper dive into the rules and guidance surrounding deemed offer acceptances.

Requests, Recommendations, and Updates

Will the Commissioner agree that a filing extension is necessary so that all eligible children can claim the enhanced Child Tax Credit?: A valid ITIN was needed to claim the 2021 enhanced child tax credit and ITIN requests and renewals were required to be filed by April 18, 2022. The authors of this post join others to request that the Commissioner use his authority and the COVID-19 emergency declaration to extend the ITIN filing deadline for taxpayers who would otherwise be eligible to claim to claim the credit.

Protecting Tax Court Litigants and Revealing Records: A Conundrum for the Tax Court with a Simple Solution.: The Court has almost fixed the DAWSON glitch that sealed all documents in cases where only one document was to be sealed. Some of the documents can already be viewed on kiosks in the courthouse. The post recommends that the Court create a process so that unrepresented taxpayers can easily request that their information or documents be sealed or otherwise kept private which would be especially helpful for survivors of domestic violence.

Proposed Firearm Safety Deduction Legislation:  At What Procedural Cost?: A procedural nightmare could ensue if the proposed firearm safety deduction is enacted in its current form. The legislation contains directives on how any information shared by taxpayers about firearm ownership must be destroyed and cannot be passed onto others. Notwithstanding the procedural burdens created by the directives, it’s possible that others could still discern gun ownership status from a tax return in other ways (for example, if the income is added back for state purposes).

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Letter to IRS from AICPA: The AICPA sent a letter to the IRS with recommendations and requests related to addressing the difficulties taxpayers and representatives currently face when interacting with the IRS. It recommends and requests that the IRS: 1) become more transparent about the status of operations, 2) continue to use surge teams to address high volume areas and to process tax returns, 3) continue to suspend certain automated compliance actions, and 4) create a streamlined provision for reasonable cause penalty requests until things are operating at a more normal pace.

Going Forward and Reflecting Back: Keith reflects on his last day as Harvard’s LITC director, provides updates on his plans for the future, and thanks the colleagues and volunteers who played a significant role in his LITC career.

Offers in Compromise & Deemed Acceptance

The Age of Offers: Pitfalls and Possibilities for “Aging Into” Offer Acceptance: Time is significant to section 7122(f), and in this first of four posts, Caleb examines what starts the clock. This requires a look at the different clocks at issue when an offer is submitted through the CDP process and the difference between when an offer is “pending” versus “submitted.”

Aging Offers into Acceptance: When Does the Clock Stop?: Following his look at when the clock starts, Caleb turns his focus on when the IRC 7122(f) clock “stops” in light of the decision in Brown. After looking at varying possibilities, he concludes that the Court’s decision is problematic.

Administrative Law in Practice: Deemed Offer Acceptance and IRS Notice 2006-68: Notice 2006-68 provides guidance on the meaning of the word “reject” in section 7122(f). Caleb looks at its authority, the level of deference it should receive, and its procedural and substantive defects.

Contract Law and Rejecting Offers in Compromise: In his final post on this topic (at least for July) Caleb envisions what he would have submitted as comments on Notice 2006-68.  He also reads the IRM to allow Appeals to make determinations about offers independently, rather than just review rejections, and believes it should do so as a matter of contract law.

A Real Case in Which an Offer Aged into Acceptance: A section 7122(f) offer acceptance has happened in real life! This post shares the letter the IRS sent when accepting the offer.

Tax Court Decisions

Creativity Is Not Always Rewarded: Chavis gave the Court its first opportunity to answer whether innocent spouse relief is available for the trust fund recovery penalty. Section 6015(f) does not explicitly answer the question, but the Court looks at the revenue procedure and regulations to find that relief is limited to income taxes. The post goes onto point out that the Taxpayer First Act has created a situation where different standards and scopes of review apply depending on whether an innocent spouse request originates from 6330 or 6015, which will likely create additional new questions for the Court in the future.  

Offer in Compromise Rejection Sustained by Tax Court: An ETA OIC rejection was sustained for a taxpayer who took a retirement distribution to purchase a house for his estranged wife and children in lieu of paying child support in Serna. The petitioner argued the house was essential for many reasons because his children have developmental disabilities, but he didn’t provide any evidence about the harm selling the house would cause. Court decisions related to ETA OIC offers are rare, so this case provides a glimpse into a lesser-known area of IRS administration.

No Reasonable Cause For Failing To Include $238,000 From Information Return Sent To Old Address: LaRochelle highlights what facts are relevant when arguing for reasonable cause penalty abatement and the potential dangers of a return preparer representing parties at trial. The petitioners didn’t report a large IRA distribution because the information return was sent to an old address. The amount of the distribution, the husband’s business proficiency, and reliance upon the preparer who wasn’t provided with complete information didn’t support reasonable cause.

IRS Stuck with Concession The IRS was bound by its decision to concede an issue after mistakenly misconstruing terminology in a Rule 122 case of the Estate of Demuth, Jr. The issue involved end-of-life gifts by checks that were not yet cashed at time of death. Because a stop payment order could have been placed on any of the checks, under state law, none of the checks represented completed gifts. The Court was concerned that allowing the IRS to withdraw the concession would disadvantage the petitioner who relied upon it while drafting its Rule 122 brief.

Tax Court Refuses to Allow Petitioner to Amend the Petition: The petitioner in TBL Licensing was not allowed to amend its petition 6 and ½ years after the initial filing and a few months after a precedential decision was issued. Petitioner moved for the amendment after the IRS filed a motion to vacate asking for the decision to explicitly state the amount of the deficiency. In its amendment, petitioner argued it should be able use a research credit to reduce its liability, despite knowing of the credit when the initial petition was filed. The Court finds petitioner had no good excuse for not raising the issue earlier and allowing it to do so now would burden the Court and IRS.

District Court and Court of Federal Claims Decisions

Power of Federal Tax Lien: The power of a tax lien over an interest held by a non-liable party was at issue in Sadig. A rule in the Northern District of Illinois required the IRS to explain the procedures of how to respond to the IRS’s motion for summary judgment to the pro se petitioner. The case involved transfers for no consideration after most of the tax years were assessed and liens were filed, so it was easy for the government to foreclose on the property. One assessment happened after the transfer, but the transfer occurred while the liability existed and met the requirements for constructive fraud.

Another IRC 6511(h) Loss: The Court grants petitioner’s motion for reconsideration on its lack of jurisdiction ruling, but then dismisses the case for failure to state a claim. In Ruebsamen petitioner’s section 6511(h) claim didn’t include evidence of his disability at the time it was filed with the IRS as required by Rev. Proc. 99-21. The Court initially dismissed the case for lack of jurisdiction under the duly filed requirement of 7422, but its views of jurisdiction in this area are changing in light of Brown

Another Tax Provision Found to Not Create a Jurisdictional Time Period for Filing: Courts continue to expansively apply Supreme Court precedent to questions of jurisdiction. In Clark, the Court held period for filing suit under for unlawful disclosure under section 7431 not jurisdictional. The resounding theme is that unless Congress has made a “clear statement,” a filing deadline is not jurisdictional.

Circuit Court Decisions

Circuit Court Holds That LLC Distinct From Its Agent For Purposes of Criminal Referral Exception To Summons Power: The 4th Circuit holds the IRS can summons a business entity related to, but not directly involved in, a criminal investigation. The case involves an LLC which was being examined about donating a conservation easement when criminal investigations of the LLC’s accountants, preparers and others simultaneously begun. An entity is a separate “person” from its owners, so because there was no DOJ referral specifically made for the LLC, the IRS is not prevented from summonsing it. 

Bankruptcy and Taxes

Filing a Notice of Federal Tax Lien For Personal Property: The IRS filed an NFTL in the wrong county, in In re: Vanessa Catherine Stephenson, so its claim was unsecured. Unlike an NOD, the IRS cannot use a taxpayer last known address to determine in which county to file an NFTL, instead it must determine the taxpayer’s residence at the time of filing. This is because the NFTL filing rule exists to protect other creditors and creditors do not have access to IRS records. If a national tax lien registry existed, like Keith has proposed, it would prevent this issue from occurring.

June 2022 Digest

Is it hot in here? A fiery debate dominated PT in June over the distinction (if any) between legislative and interpretative regulations. The issue is one that many practitioners may not spend a lot of time thinking about, but as Les points out, it is an issue that is relevant to recent cases where litigants are challenging the procedural validity of tax guidance. My summaries do not delve into all the nuances of each perspective nor discuss any of the comments made, so I encourage you to read the posts and the comments if the debate piques your interest.

The Debate

Update on CIC Services And More On The Legislative vs Interpretive Rule Difference: The Court granted the IRS’s motion for reconsideration in CIC Services and retracted its mandate that the IRS return documents and information it received from nonparties pursuant to the now invalid Notice. This is because the suit was not brought on behalf nonparties and was not a class action suit, but the Court notes the IRS’s unjust enrichment.

This post kicks off the debate by sharing the perspective of Jack Cummings who disagrees with the Sixth Circuit in Mann which held that a regulation or IRB guidance is deemed legislative and requires notice and comment proceduresifnot complying with it might lead to a penalty or higher taxes. For Cummings the distinction depends on the statute that underlies the regulation: if the statute asks the IRS to create a rule, the regulation is legislative; if the IRS is sharing its view on an aspect of a rule, the regulation is interpretative.

More On The Confusion Surrounding The Difference Between Legislative And Interpretive Rules: Jack Townsend shares his perspective and emphasizes that legislative and interpretative are APA concepts, which are not relevant to discussions of deference except for the question of whether the regulation is subject to reasonableness of interpretation testing. Although not required, an agency may utilize notice and comment for interpretative regulations and then the regulation can be tested for procedural regularity as the APA requires, but it does not make the interpretive regulation a legislative one. The APA’s procedural regularity (arbitrary and capricious) test is not the same as the judicial reasonableness of interpretation test.

It’s Time To Let Go:  Treasury Regulations Are Not Interpretative Rules: Kristin Hickman shares her perspective which challenges Jack’s. She asserts that the Supreme Court in Mayo “laid the jurisprudential groundwork” that all Treasury regulations are legally binding (or legislative) for APA purposes and thus subject to notice and comment procedures. She also finds that other courts have been consistently clear about this. She states that continuing to promote the idea that some Treasury regulations are interpretative is dangerous because it allows the IRS and Treasury to continue to not take APA requirements seriously, which undermines taxpayer confidence in the system.

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It’s Time To Get Real: Treasury Regulations Can Certainly Be Interpretive Rules: Bryan Camp chimes in with the first of a three-post series on his perspective, which is similar to Jack’s. His view is that Mayo says nothing about the distinction between interpretative and legislative rules and was only a decision that Treasury regulations should be treated the same as other agency regulations and receive Chevron deference. Despite Kristin’s view, he asserts that Mayo does not stand for the idea that all Treasury regulations are legislative for promulgation purposes. He goes on to consider “myths” that may have led Kristin to believe otherwise.

The APA Is Not A Hammer: Bryan thinks that Kristin views the APA as a hammer requiring all agencies to strictly conform to it, whereas he views it as a safety net allowing for agencies to obey its principals in differing ways. He looks to the history of Treasury regulations and the APA. Treasury regulations existed before the APA and while the APA initially hoped to be a set of uniform rules, it had to settle instead on being a prescribed balancing framework. Notice and comment procedures were intended for agencies who occupied a new space in the government after the New Deal, and Treasury Regulations were generally not subject to the procedures due to time constraints and their technical and legal nature.

The More Things Change The More They Remain The Same: Bryan disagrees with Kristin’s idea that the function of tax administration has transformed from revenue raising to social policy implementation and as a result should require more process. Bryan goes on to present three reasons to doubt claims that tax administration today involves social policies more than it has in the past. He also looks at Oakbrook and Rogerson to show that their decisions required the Court to interpret the statutes in the same way that interpretative regulations do.

Tax Court Updates and Ideas

2021 Tax Court Exam for Nonattorneys: The results of the 2021 Tax Court Exam for Nonattorneys have been released to the exam takers. The 2021 Exam was the first to be conducted in a remote format. This post contains interesting information about the history, format, and content of the exam; the reasons why it is so challenging; how it worked in the remote format; and what else is required for nonattorneys to be admitted to practice before the Court.

Tax Court Building Reopens: The Tax Court building reopened to the public on Monday, June 6, meaning that once again records can be reviewed and received immediately at no cost by anyone willing and able to go there in person. For those who still do not have the option of going to the Court in person, Harvard commented on the Court’s proposed rule changes and recommended ways in which remote viewing of records could be improved.

Speeding Up Settlement: Some ABA Conference Inspired Thoughts: This post shares thoughts on how the Tax Court could get involved to speed up the settlement process. One idea is that the Court be involved in the pretrial process, or parties could initiate pretrial conferences amongst themselves at an earlier stage. Another idea is that the Court require status reports at an earlier stage to engage the parties and encourage settlement efforts as early as possible.

COVID and DAWSON: In Foster Drive LLC a TEFRA related petition was filed twice due to the delay in the Court’s processing of petitions and uncertainty by the Tax Matters Partner about whether he filed correctly. The post makes two suggestions for the Court: 1) if prompt service is not an option, the Court should enable the Clerk to confirm receipt and correctness of electronically filed petitions, and 2) parties should be given the option to enter more than one email address to receive notifications, which is something that other Courts allow, to improve response times and decrease the risk of missed notifications.

Circuit Court Decision

IRC Levy Exemption for Disability Payments Ends Once Funds Hit Bank Account: In Charpia the IRS levied military disability payments after they were deposited into a bank account. Section 6334(a)(10) prevents levy on “any amount payable to an individual” relating to military disability payments, but the IRS has consistently held that once the money is in a bank account it can be levied. The Fifth Circuit found for the government by looking to other exemptions that extend more broadly to amounts “payable to or received by” an individual and to other Courts that applied of the plain meaning of the word payable. Even though the levy was permitted, the petitioner was able to use Consumer Credit Protection Act to limit how much the IRS could take, which is not an option is most cases.

Tax Court Decisions

Taxpayer Attending Rodeo Misses Receiving Collection Letter And Denied Chance to Challenge Liability in CDP Case: In Hammock, despite having sympathetic facts, the petitioner wasn’t allowed to challenge her liability in a CDP case. There is a presumption of receipt when the IRS mails a notice to a taxpayer’s last known address, but it can be overcome. Appeals also has discretion to consider the liability even in the absence of a statutory right. The Court didn’t inquire into why Appeals didn’t use its discretion to consider the liability, leaving open the question of whether it was an abuse of discretion to not exercise discretion in this case.

IRS Files Motion for Reconsideration in Precedential Tax Court Case: The depth of the IRS’s disagreement with the decision in Treece Financial Service Group was demonstrated when it filed a motion for reconsideration. The issue in the case was whether the Court has jurisdiction to review Voluntary Classification Settlement Program (VCSP) eligibility determinations. The Court thinks it does because the Program involves an act of administrative discretion, and the determination directly impacts the amount of tax the company will owe. The IRS’s position is that the VCSP is a settlement program and does not constitute an examination, the determination is not made in connection with an examination, and the amount of tax is not determined through the Program. The IRS’s motion strongly suggests an appeal of this case is coming.

Tax Court Inconsistent on Economic Hardship: In Pocock, the Court holds that payment of tax liability would create an economic hardship for a petitioner who has low income but equity in property. The decision is at odds with the case of Sleeth which Harvard has appealed to the 11th Circuit.  The liability at issue was incurred when petitioner’s (now ex) husband fraudulently overstated income and withholding to generate large refunds for 11 years. There were many interesting aspects of this case (petitioner and her ex-husband still lived together, there was estate theft and a transfer of property involved) and the IRS conceded that petitioner couldn’t sell her home and meet her reasonable living expenses which may be why the Court found economic hardship unlike in Sleeth.

Update on Litigation Over Whether the Deficiency Petition Filing Deadline is Still Jurisdictional: IRS has responded to the motion to vacate in Hallmark and a link is provided. Additional updates are given on the Tax Court’s pause on dismissing untimely filed deficiency cases; Culp, the Center for Taxpayer Rights amicus brief, and the DOJ’s response to the brief; and a new case brought by an LITC in Tax Court and appealable to the Eighth circuit involving this issue.

Precedential Opinion Regarding Deemed Offer Acceptance: In Brown, the petitioner argued that his offer submitted as part of a CDP hearing should be deemed accepted when it took more than two years for the settlement officer to issue a notice of determination. The Court says the finality of an offer for purposes of 7122(f) (the 24-month rule) and the finality of a CDP hearing for purposes of 6330 are two separate things. Petitioner’s offer was returned to him within seven months because he had other investigations pending. Section 7122(f) uses the term rejected, rather than returned, but the Court finds the regulations address the effect of a return and it results in the same outcome as a rejection: it terminates the 24-month period.

District Court Decisions

Unhappy Appraisers Suing the IRS: The appraisers of conservation easements tried to bring a suit alleging that the IRS is intimidating them and using penalties to prevent them from properly appraising properties. They wanted to bring a Bivens action and sue the individual IRS employees involved in pursuing conservation easements, but their suit couldn’t move forward because they failed to serve all the necessary parties. They also didn’t respond to the issues with service or argue good cause, so the Court was required to dismiss the case.

APA Provides No Basis To Compel IRS To Provide Access To Appeals: In Rocky Branch Timberlands taxpayers in a concluded TEFRA audit tried to invoke the APA to require the IRS to: rescind the FPPA, sign a form 872-P (extending the statute of limitations), and allow the taxpayers the option to go to Appeals pursuant to section 7803(e)(4). The Court found for the IRS based on the Anti-Injunction Act which prevents the Court from restraining assessment and because there was another remedy available (Tax Court), the decision to not sign the 872-P was not a final agency action and signing the 872-P or allowing the taxpayers to go to Appeals was within IRS’s discretion.

Bankruptcy and Taxes

Court Awards Damages When IRS Tried To Collect Following Discharge: Pandemic No Excuse: In McAuliffe, the Court awarded damages to taxpayers under section 7433(e) when the IRS mistakenly sent collection letters after their liability had been discharged in bankruptcy. The IRS tried to blame pandemic-related complications and delays for the mistake, but the Court’s decision reflects disapproval of that excuse and an expectation that the IRS should have done better.


Tax Compliance for Refugees: Free Training Aims to Fill Gap in Tax Assistance: A training was held on June 15 to prepare volunteers to assist refugees with their tax returns for the first year they are in the country. First year returns for refugees are uniquely complicated and cannot be prepared by using typical free preparation resources.

Offer Mills on the IRS Dirty Dozen: The IRS warns taxpayers against using offer mills. The risk of working with a mill are plenty: they prepare offers even for people who are not good candidates, they engage in false advertising, and don’t respond to follow up requests by the IRS. Offers are not easy and if the IRS wants taxpayers to engage in process without seeking assistance, it needs to build a system that is more helpful to taxpayers.

May 2022 Digest

Posts related to Boechler and its impact on pending and future cases continued to dominate PT’s coverage in May. The month’s coverage also included interesting and significant information from the ABA Tax Section Annual Meeting.

The Ongoing Impact of Boechler: Pending Cases and Other Updates

Boechler Challenge to Tax Court Position on IRC 6213: Hallmark Research Collective filed a motion to vacate an order that dismissed their case for lack of jurisdiction when their deficiency petition was filed one day late. This may end up being the first case where the issue of jurisdiction in a section 6213(a) case is before the Court after Boechler. The IRS has 30 days to respond to the motion [and the Tax Court has assigned it to Judge Gustafson, see directly below], so there should be an update soon.

Tax Court Temporarily Stops Issuing Dismissals for Lack of Jurisdiction of Late Deficiency Petitions: Judge Gustafson (rather than a special trial judge) was assigned to rule on Hallmark’s motion indicating that the Court is taking it very seriously. The Court has not issued any orders to dismiss for lack of jurisdiction in late-filed deficiency cases recently.  This prevents appeals from being made to the Circuit courts as test cases for the section 6213(a) issue, however, there is one case out there to watch in the Third Circuit: Culp.

What’s Happening in Myers and Whistleblower Cases After the Decision the Statute is a Claims Processing Rule Four post-Myers whistleblower cases shed light on what may happen in late filed CDP cases when the IRS doesn’t raise the issue of timing. Petitioners in the cases may have had equitable tolling arguments, but never needed to raise them. The Tax Court can no longer raise timeliness issues on its own, so it proceeded to consider the cases as though they were timely filed with respect to respondent’s motions for summary judgment.

The Mess Following IRS Mistakenly Sending Determination to Taxpayer’s Former Attorney: Missed Deadlines and Damages For Wrongful Disclosure In Castillo, the IRS sent a CDP notice of determination to an attorney who was no longer authorized to represent the taxpayer, resulting in a disclosure violation. This also resulted in the taxpayer’s failure to timely challenge the underlying liability in Tax Court, which led to a levy of the taxpayer’s bank accounts and created passport restrictions. The case is still in progress and the Second Circuit will remand it back to the Tax Court. It’s one to watch, because it may result in a decision about equitable tolling in CDP cases, as well as the amount and type of damages potentially available for unauthorized disclosures.

Important Issues to Watch and Announcements

What to Do After Receiving a Notice of Claim Disallowance: Section 6514(a)(2) bars a refund or credit if more than two years have passed from a notice of claim disallowance. Pandemic-related delays in working with the IRS have increased the likelihood that a resolution will not be reached before the two-year period expires. In order to preserve the right to obtain the refund or credit, the taxpayer must either file suit or ensure that they and an authorized IRS employee sign a Form 907.

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Momentum Possibly Building for IRS To Provide Online Filing Options For Taxpayers: This post looks at recent research in the tax return filing arena, including a report on the issues with Free File, an article on the benefits that would come from the IRS pre-populating tax returns, and ideas that have been proposed by the NTA and Senator Warren.

Join the Center for Taxpayer Rights for a Celebration of Keith Fogg’s Career on the Occasion of his Retirement: Keith’s retirement is announced and details for a (now passed) Zoom celebration are shared. Nina reflects on the beginning of her friendship with Keith and the ripple effect it has had on her life and career.

Information from the ABA Tax Section Meeting

Update on Premature Assessments: The days of frequent premature assessments are coming to an end. The Tax Court has caught up with its backlog and is winding down the system it had in place to avert premature assessments. Petitions are generally arriving at Chief Counsel now about 3-4 weeks after filing. For the time being, practitioners and petitioners should still check for any payments made on premature assessments before signing decision documents. The taxpayer can lose the right to the payment if the issue isn’t identified within 30 days from the decision being entered.

Information from Court Practice and Procedure Programming at ABA Tax Section Meeting Part 1: U.S. Tax Court Judge Toro and Claims Court Judge Wolski participated on a panel at the Meeting. Judge Toro shared information about electronic petitions, proposed rule changes, the status of the Court’s backlog, and new Dawson features. Judge Wolski shared information about rule changes and jurisdiction in Tucker Act and Little Tucker Act claims in light of Boechler. A link to the complete outline of cases and material discussed is available on the post.

Information from Court Practice and Procedure Programming at ABA Tax Section Meeting Part 2: Mark Cottrell from the Procedure and Administration Division of Chief Counsel also participated on a panel. He shared charts and information about the tax dollars in dispute and case inventory at the various trial Courts and the cases and settlements in the Tax Court as well as updates related to Tax Court Rule 36 and recent cases, and more.

Information on Appeals Presented at ABA Tax Section Meeting: COVID’s impact on Appeals was covered in a panel at the Meeting. This post shares slides and summarizes the topics discussed in the panel, including the inventory and handling of cases in Appeals, the challenges Appeals faced working from home, and the issues around the handling of docketed cases.

Circuit Court Decisions

Rare Discharge in Bankruptcy for Taxpayers with a Return Filed After an SFR Assessment: In Golden a married couple in the Ninth Circuit was successful in having their tax liability discharged even though they filed their return after an SFR assessment. The IRS argued that the tax on a return filed after an SFR assessment is per se nondischargable, which the Court rejected. The case is a rare example of a bankruptcy court using a subjective test analysis and looking to the totality of the circumstances to determine that the return was an honest and reasonable attempt to satisfy the tax law.

The 9th Circuit Reverses The Tax Court, Finding That The Taxpayer Had Filed A Return When It Provided A Copy To The IRS During Its Examination: Subregulatory guidance played a role in the Ninth Circuit finding that a signed copy of a return faxed to an IRS agent was a return for purposes of the assessment statute which barred a later FPAA adjustment in Seaview Trading, LLC.

IRS Not Giving Up on Thorny SOL Issues When Taxpayer Fails to Backup Withhold: The IRS issued an Action on Decision disagreeing with the Fifth Circuit’s decision in Quezada. The Fifth Circuit found that the taxpayer’s Form 1040 and his business’s Forms 1099 which omitted workers’ tax identification numbers provided enough information for an informal Form 945 and started the running of the statute of limitations for backup withholding The IRS’s position is that the forms do not provide enough information and an actual Form 945 is needed before the statute starts running.

The Ongoing Effort to Properly Situate the Tax Court: Believe it or not, the location of the Tax Court within our government is still uncertain. The answer is relevant to section 7443(f) which allows the President to remove a Tax Court judge. A 2014 decision inthe D.C. Circuit, Kuretski, found that Presidential removal was permissible because the Court was an executive agency. Section 7411 was subsequently enacted and clarified that the Court was not an agency of, and was independent from the executive branch, but this had no effect on the President’s removal power. An appeal has recently been filed in the D.C. Circuit in an effort to overturn Kuretski. This post provides more information on the case and its possible implications.

Tax Court, District Court, and Claims Court Decisions

What Happens to Employees When the Employer Fails to Pay Over to the Government Withheld Taxes: In Plazzi v. FedEx Groud Package System, Inc. employees sued their employer because their withheld wages were not paid over to the government, but such suits are barred by Section 3403. The post takes a closer look at the way the third-party intermediary system of tax payment operates and the importance of documenting withholding.

Default Judgment: Timeliness is important for both filing and responding to lawsuits. The district court denied a tax return preparer’s motion to set aside a default judgment injunction against him. The judgement was entered after the preparer failed to answer the IRS’s suit in a timely manner. He argued that his untimeliness did not result from culpable conduct, and he thought he had more time, but the facts in his case failed to support his argument.

Court Blesses Offset Before Pandemic When Later Filed Return Would Have Been Treated Differently: In Seto, the taxpayer’s position was had he waited to file 2019 his return until after the CARES Act was passed, his Investment Tax Credit refund would not have been offset and applied to his student loans. The CARES relief provisions, however, were directed at EIP-related refunds and not other types of refunds. The Claims Court did not focus on the different refund types, but rather found that the taxpayer was not entitled to the amount because the CARES Act didn’t apply retroactively.

Can Intentionally Filing an Improper Information Return Justify a Claim for Damages Under Section 7434?…Continued!: Whether worker misclassification can give rise to action under section 7434 is causing a debate in district courts. Recently in Austin v. Metro Dev. Grp. the Court interpreted the section to only apply to fraudulent payment amounts on information returns and not worker misclassification. The post takes a closer look at the language of the statute and finds that there is still an argument to be made that the section should apply to fraudulent misclassifications.

Things are Different at the Government: Attorneys in the Office of Chief Counsel and the DOJ Tax Division are in the driver’s seat in deciding when to settle. They are not required to bring a settlement offer to their clients (i.e. the IRS or DOJ), in the same way that private practice attorneys are under professional conduct rules. A recent example of this was in Delponte, where the innocent spouse unit determined that petitioner was entitled to relief. The IRS attorney was not bound by that determination, however, and decided to bring the innocent spouse issue to trial.

Consent to Extend the Statute of Limitations: In Evert, the petitioner argued that she only signed a Form 872 under duress by the Appeals Officer assigned to her case. It is the petitioner’s burden to show duress and she failed to meet it. This post discusses the importance of the Form 872 and cases in which the taxpayers were able to show they signed it under duress.

April 2022 Digest

It’s no surprise that the Supreme Court decision in Boechler was the highlight of PT posts in April. PT has been covering and standing steadfast behind the argument for many, many years and the case is a huge win for taxpayers, taxpayer representatives, and everyone who has helped inch this argument along.

Boechler: Announcement, Acknowledgments and Analysis

Supreme Court Decides Boechler Case: The Supreme Court held unanimously that the deadline to file a Tax Court petition in a Collection Due Process case is not jurisdictional and late filing is subject to equitable tolling. A link to the opinion is provided.

Winning Boechler Took a Village: Carl Smith was the leader of the village that it took to win Boechler. The village consisted of almost all pro bono attorneys and clinicians. Carl individually recognizes and thanks the people who played a significant role.

What Happens After Boechler – Part 1: The IRS Argues IRC 6330 is Unique: The first of a series of posts looking at the arguments the IRS may make to prevent Boechler from applying to section 6213(a), the deadline to file a Tax Court petition in a deficiency case. IRS will likely argue Congress intended for section 6330 to play a unique and highly protective role for taxpayers, but the legislative history of the deficiency deadline reveals that section was also intended to protect taxpayer rights.

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What Happens After Boechler – Part 2:  The IRS Argues the Floodgates Will Open if the Tax Court Follows Boechler in Interpreting IRC 6213(a): The next argument that the IRS may try to make is that if the deficiency deadline is not jurisdictional, it will release a floodgate of late filed cases onto the Court. There are substantially more deficiency cases than there are CDP cases, but that doesn’t mean that there are substantial numbers of late filed cases that have valid equitable tolling arguments. The floodgate argument is an exaggeration. A lot of the work is work that is already done, so this argument is less persuasive than the IRS may try to make it out to be.

What Happens After Boechler – Part 3:  The IRS Argues that IRC 7459 Requires that IRC 6213(a) Treat the Time for Filing a Tax Court Petition as Jurisdictional: Under Section 7459, a petitioner whose case is dismissed for lack of jurisdiction is not prevented from paying the liability and suing for a refund. This post looks at the arguments regarding section 6213(a)’s relationship to section 7459 and finds that it does not require the deficiency deadline to be a jurisdictional requirement. 

What Happens After Boechler – Part 4: The IRS Argues That Equitable Tolling Would Not Apply in Deficiency Cases: The fourth post in the series discusses the Supreme Court’s approach to the application of equitable tolling, what CDP petitioners must do to show that equitable tolling is warranted, and how equitable tolling could apply in deficiency proceedings. The Tax Court will need to look to the decisions of other courts to develop its approach in these cases.

Taxpayer Rights

State Level Taxpayer Rights: A Survey of State Tax Administration: Results of the State Tax Administration Survey slowly trickle in, but already allow for some interesting observations. Information about various state practices and procedures is being collected with the goal of being able to advocate more effectively for taxpayer rights at state levels.

Partial Pay Installment Agreements In the Dark: A TIGTA report has revealed PPIAs are not frequently used. There is a lack of outward guidance about them and the option is not even listed on the installment agreement request form. This jeopardizes taxpayer rights by interfering with a taxpayer’s right to be informed. The IRS will remedy this by adding information about PPIAs to its website and exploring ways to change the request form.

Principal Residences as Collection Target: TIGTA Criticizes IRS Practice: The TIGTA report also examined the IRS’s use of lien foreclosure suits when targeting a taxpayer’s principal residence. The process is quicker and offers less protections to taxpayers than the administrative seizure process which requires notice, due process rights, court approval and the right to redeem the property. TIGTA recommends the law be amended to provide taxpayers with the same rights and protections under both processes.

Recommendations to the IRS

Dial, redial, repeat: An entertaining, albeit frustrating portrayal of what a call to the IRS looks like these days. Robocalling services, staffing shortages, and technology issues have ushered in a new degree of a familiar frustration.

GAO Assesses IRS 2021 Filing Season Progress: The GAO issued a report evaluating the IRS’s performance with processing 2021 returns and providing customer service. The report includes unique recommendations, such as using the amount of interest paid on refunds as a measure of IRS performance. It also includes the run-of-the-mill recommendations that IRS modernize its technology and improve customer service on various fronts. PT will cover the report in more detail in a later post.

Interest and Accountability

Losing Interest: Delayed IRS Assessments: Inequity can occur between low income taxpayers who cannot afford to pay a deposit when their tax liability is in dispute and the middle- to high-income taxpayers who can. This post begins to examine possible arguments for an abatement of interest in situations where the IRS is delayed in making an assessment after a Tax Court decision has been entered.

Boilerplate Provisions in Stipulated Decisions May Have “Interesting” Consequences: Continuing to explore the arguments for interest abatement, this post specifically looks at section 6601(c) and whether a stipulated decision can have the same effect as a form 870 for purposes of suspending interest when the IRS takes too long.

Circuit Court Decisions

APA and FBAR Skirmishes Continue in Schwarzbaum v US: Schwarzbaum continues to shed light on the somewhat different ways the APA may be applied to the IRS’s conduct. The case was remanded back to the IRS to properly calculate the FBAR penalties, but now the parties disagree over whether the Court should retain jurisdiction over the case. The IRS speculates that petitioner will try to argue that the Government is time-barred from bringing a new suit to collect the recalculated penalties if the Court does not retain jurisdiction.

Ninth Circuit Reverses Tax Court Interpretation of IRC 6751(b): The Ninth Circuit reversed the Tax Court in Laidlaw’s Harley Davidson Sales and casts doubt on the approach the Tax Court has taken in section 6751(b) cases over the past several years. The Court held that penalty approval simply needs to occur before assessment, rather than before the initial determination. This case is a win for the IRS, but it is unlikely it will result in the Tax Court changing its approach for now.

Tax Court Decisions

The Limits of Community Property Relief When Spouses Split a Joint Business: Married couples who do not file jointly in community property states, generally, must report half of the total community income on their individual returns. Section 66(c) provides for relief, similar to innocent spouse relief, for these spouses when it is warranted. In Wheeler v. Commissioner, a requesting spouse failed to meet a requirement for relief when the income at issue was not attributable to the nonrequesting spouse. It was income from a jointly operated business and such income is treated as the gross income of each spouse on the basis of their individual shares.

Tax Court Answers

Eliminating Answers in Certain District Court Cases: In a follow up to other recent posts about Chief Counsel answers, this post looks at a new proposed rule change which seeks to simplify answers in cases that challenge social security determinations. The answer needs only to contain a copy of the record and set forth any affirmative defenses. This could be a model that the Tax Court considers adopting with some appropriate modifications.

Bankruptcy and Taxes

Can Bankruptcy Trustee Be Held Liable for Trust Fund Recovery Penalty of Responsible Officer?: In In re Big Apple Energy, LLC, a business owner sought to make the bankruptcy trustee personally liable for interest and penalties arising from the business’s failure to pay employee withholding to the IRS. The underlying tax amount was held in a segregated account and paid over as part of the bankruptcy estate. Interest and penalties accrued before the amount was paid to the IRS and state, but there was no claim filed against the estate for those amounts. As a result, the trustee could not be held liable for debts that occurred before he was involved and when he had fully paid the claims as filed.


Biden Administration Floats Refundable Pet Tax Credit Idea to Boost Child Tax Credit: As one of the most anticipated curators of April Fool’s jokes, PT has done it again- a great April Fool’s post from PT that I kind of wish was true.

A Beneficial Effect of Inflation: The IRS has updated the Collection Financial Standard amounts substantially this year. A new offer in compromise booklet has also been published and must be used for offers submitted after April 25.

March 2022 Digest

Spring has arrived and the Tax Court has resumed in-person sessions for many locations. In Denver, we have our first in-person calendar call on Monday. I’m looking forward to it, but also need figure out if any of my suits still fit. PT’s March posts focused on issues with examinations, IRS answers, and more.

A Time Sensitive Opportunity

Loretta Collins Argrett Fellowship: The Loretta Collins Argrett Fellowship seeks to support the inclusiveness of the tax profession by encouraging underrepresented individuals to join and actively participate in the ABA Tax Section and Tax Section leadership by providing fellowship opportunities. More information about the fellowships and how to apply are in the post. Applications are due April 3.

Taxpayer Rights

The 7th International Conference on Taxpayer Rights: Tax Collection & Taxpayer Rights in the Post-COVID World: The virtual online conference is from May 18 – 20 and focuses on the actual collection of tax. The agenda and the link to register are in the post. Additionally, the Center for Taxpayer Rights is hosting a free workshop called The Role of Tax Clinics and Taxpayer Ombuds/Advocates in Protecting Taxpayer Rights in Collection Matters on May 16 and a link to register is also in the post.

How Did We Get Here? Correspondence Exams and the Erosion of Fundamental Taxpayer Rights – Part 1: Correspondence exams now account for 85% of all audits, up from about 80% in the previous two years. This post looks at data on correspondence audits and identifies a disproportionate emphasis on EITC audits which burden and harm low income taxpayers. 

How Did We Get Here? Correspondence Exams and the Erosion of Fundamental Taxpayer Rights – Part 2: This post considers the long-term goal of audits, along with recommendations for how the IRS can improve correspondence exams. Such recommendations include utilizing virtual office audits; using plain language, tailored, and helpful audit notices; and assigning the audit to one specific person at the IRS. Making correspondence audits more customer friendly could fall under the purview of the newly created IRS Customer Experience Office.

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Opportunities for Improving Referrals by VITA Sites to LITCs: Taxpayer rights could be better protected if VITA sites better understood when a referral to an LITC may be necessary and how to make such a referral. This post explores opportunities to improve this process, including a training initiative begun by the Center for Taxpayer Rights.

Tax Court Updates and Information

Tax Court is on the Road Again: The Tax Court officially resumed in-person calendars on Monday, February 28, but select calendars are still being conducted remotely. Practitioners who have recently attended in-person calendars share more information about what it’s like to be back.

Ordering Documents from the Tax Court: A “how to” on ordering documents from the Court. Phone requests are currently the only way, but in-person requests may resume once the Court reopens to the public. Both options come with a per page or per document fee.

Tax Court Proposed Rule Changes: The Tax Court has proposed rule changes which are largely intended to clean up language or more closely conform the Tax Court rules to the Federal Rules of Civil Procedure. It invites public comments on the proposals by May 25, 2022.

Tax Court Decisions

Tax Court Takes Almost Five Years to Decide a Dependency Exemption Case: Hicks v. Commissioner highlights the procedures required to claim a qualified child as a dependent when the child does not reside with the taxpayer. The case is noteworthy for the length of time it took the Court to issue an opinion, especially because there were no continuances or other reasons for a delay.

Jeopardy Assessment Case Originating in the Tax Court: The opinion Yerushalmi v. Commissioner is rare because the Tax Court reviews whether jeopardy exists in the first instance, rather than following a district court decision. The post looks at the case, the standard of review, and the facts that can be relevant to the Tax Court when it must decide whether the IRS’s jeopardy assessment was reasonable.

Tax Court Answers

Tax Court Answers: There are issues caused by requiring the IRS to file answers in small tax cases. It delays a review of the case on its merits, the process is slow and impersonal, and there are risks that a taxpayer won’t understand what the answer says. The Court should consider conducting an empirical study, engaging with taxpayer representatives, or forming a judicial advisory committee to identify best practices.

Making the IRS Answer to Taxpayers…By Making the IRS Answer: In the first of a three-part series looking at issues with IRS Counsel answers, Caleb looks at the case of Vermouth v. Commissioner. The case emphasizes the importance of the administrative file during the pleading stages of litigation. Cases involving bad answers and their impact on the burden of proof and burden of production are also discussed.

Making the IRS Answer to Taxpayer Inquiries…By Making the IRS Reasonably Inquire: Tax Court Rule 33(b) requires a signer of a pleading to reasonably inquire into the truth of the facts stated therein. To what degree are IRS Counsel attorneys required to reasonably inquire when filing an answer? This post explores that question and sheds some light on the Court’s expectations.  

Making the IRS Answer to Taxpayer Inquiries…By Making the IRS Reasonably Inquire (Part Two): Continuing the discussion of the IRS’s responsibilities under Rule 33(b), this post looks closer at the consequences to the IRS when a bad answer is filed. Caleb examines the Court’s response in cases where an administrative file was excessively lengthy or not available quickly enough and shares the lessons to be learned.

Circuit Court Decisions

Naked Owners Lose Wrongful Levy Appeal: Goodrich et. al. v. United States demonstrates the interplay of state and federal law upon lien and levy law under the Internal Revenue Code. The 5th Circuit affirmed that a taxpayer’s children had a claim against their father’s property, but only as unsecured creditors according to state law. As a result, the children’s interests were not sufficient to sustain a wrongful levy claim.

Confusion Over Attorney’s Fees in Ninth Circuit Stems from Statute and Regulation…: In Dang v. Commissioner the parties debated the starting point in which reasonable administrative costs are incurred in the context of a CDP hearing. The IRS argued it’s after the notice of determination. Petitioners argued it’s after the 30-day notice which provides the right to request a CDP hearing. The Court decided no costs were incurred before the commencement date of the relevant proceeding without deciding when that date was. The case provides another reason why the statute and regulation involving the recovery of administrative costs from administrative proceedings should be changed.

Attorney’s Fees Cases in the Ninth Circuit and Requesting a Retirement Account Levy: The concurring judge in Dang demonstrates that he understands the entire argument and finds that the exclusion of collection action from the definition of administrative proceedings is contrary to the plain language of the statute. 

Oh Mann: The Sixth Circuit Holds IRS Notice Issued in Violation of the APA; District Court in CIC Services Finds Case is Binding Precedent: The decision Mann v. United States is binding on CIC Services and is examined more closely in this post. In Mann, the Sixth Circuit found that the IRS notice at issue was invalid because the public was not provided a notice and comment opportunity. The case is significant because it is another circuit court opinion that applies general administrative law principles to the IRS.

You Call That “Notice”? Seriously?:  General Mills, Inc. v. United States involves refund claims that were made within the two-year period under section 6511, but outside of the six-month period which starts when a notice of computational adjustment is issued to partners. The Court seemingly concluded that notices, unless misleading, need only to comport with statutory requirements regardless of due process considerations. The post also evaluates and discusses the adequacy of common notices in relation to the notice of computational adjustment.

No Rehearing En Banc for Goldring: Is Supreme Court Review Possible?: The issue in Goldring was how underpayment interest should be computed on a later assessed deficiency when a taxpayer elects to credit forward an overpayment from an earlier filed return. The government’s rehearing en banc petition was denied leaving in place the circuit split. IRS Counsel has advised that there are thousands of similar cases, which could result in refunds of multiple millions of dollars, so it is yet to been seen if the government will petition the Supreme Court.

Challenging Levy Compliance: In Nicholson v. Unify Financial Credit Union the Fourth Circuit affirmed the dismissal of a suit to stop a levy brought by a taxpayer against his credit union. The law requires a third party to turn over the property to the IRS and then allows the taxpayer whose property was wrongfully taken to seek the return of that property from the IRS, so suing the credit union is not an effective avenue.

Offers in Compromise

Suspension of Statute of Limitations Due to an Offer in Compromise: The statute of limitations on when the IRS can bring suit to reduce a liability to judgment is at issue in United States v. Park. An offer in compromise suspends the collection statute and can give the IRS more time than a taxpayer would expect. It’s good idea to consider the risks before submitting an offer.

Public Policy and Not in the Best Interest of the Government Offer in Compromise Rejections: Cases where the IRS rejects an offer in compromise based on public policy or for not being in the best interest of the government are reviewed to better understand the reasons for such rejections. The IRS may look at past and future voluntary compliance and criminal tax convictions. The IRS should make offer decisions easily reviewable to provide more transparency in this area.

Correction on Making Offers in Compromise Public: Keith has learned that the IRS has updated the way in which the public can inspect accepted offers. It is by requesting an Offer Acceptance Report by fax or mail. The report, however, only contains limited and targeted information, so FOIA is still the only way to receive broad and general information.

Bankruptcy and Taxes

General Discharge Denial in Chapter 7 Based on Taxes: In Kresock v. United States, a bankruptcy court’s denial of discharge was sustained by an appellate panel due tothe debtor’s bad behavior in connection with his tax debts. It is seemingly unusual for a general discharge denial to occur where the basis for denial is tax related.


The Passing of Michael Mulroney: Les and Keith share remembrances of Michael Mulroney, an emeritus professor at Villanova Law School.

Congress Should Make 2022 Donations to Ukraine Relief Deductible in 2021: In order to encourage taxpayers to make donations in support of Ukraine, this post recommends that Congress create a deduction similar to the one permitted for the Indian Ocean Tsunami Act, which allowed deductions made in the current tax year to be claimed on the prior year’s return.

February 2022 Digest

Hot topics covered by Procedurally Taxing in February included recommendations about how IRS can best move forward, changes the IRS is already implementing, and court decisions that reflect shifting views about a court’s jurisdiction when an informal refund claim is defective or absent.

Recommendations to the IRS

How Did We Get Here? A New Series …: A new series plans to explore the root causes of current IRS problems and envision what the future of our tax system could look like. This introductory post hints that the series will include recommendations for ways the IRS can better utilize the resources it already has, instead of continuing to use a lack of resources as justification for poor organizational performance.

How Did We Get Here? 2-D Barcoding and the Paper Return Backlog – A Missed Opportunity: The NTA began recommending that the IRS use 2-D barcoding as a means of increasing efficiency in the processing of paper returns as early as 2004. If this recommendation had been implemented at any time prior to the pandemic, it would have significantly reduced much of the IRS’s current backlog. The IRS has finally expressed interest in the idea, but issues still loom as Chief Counsel recently concluded the IRS cannot require tax software developers to include barcodes on computer-prepared returns.

Washington Post Editorial With Suggestions for Immediate Ways to Help IRS: This post links to a Washington Post Editorial by Nina titled, “Five Ways to Fix the IRS, Starting with a Halt to Most Audits.”

Current and Future Changes for the IRS

“Empowering” Taxpayers: Reflections on the IRS Strategic Plan Annual Review: The “Putting Taxpayers First” report focuses on the IRS’s larger goals and its strategic plan for accomplishing them. This post looks at the IRS’s wins, losses and ambiguities in accomplishing the first of ten goals, which is “to empower and enable all taxpayers to meet their tax obligations.”

Facial Recognition Is No Longer Coming: Due to privacy and civil rights concerns, the IRS is abandoning its plans to require facial recognition to verify taxpayer accounts and access tax information online.


Causing Less Work for Themselves and Others: In order to focus efforts on digging out of the pandemic backlog, the IRS has decided to suspend notices in the collection notice stream, including the section 6331(d) notice of intent to levy, among others. This has the effect of delaying collections and potentially creates some opportunities for improvement.

The Taxpayer First Act’s Legacy: What Comes Next: The Taxpayer First Act requires the IRS to provide a Comprehensive Customer Service Strategy, which includes a Taxpayer Experience Strategy. The IRS plans to utilize technology to create a fully digital CAF, improve phone service, and use artificial intelligence to enhance the taxpayer experience.

Making Offers in Compromise Public: TIGTA has suggested that the IRS should make accepted offers available online to provide a meaningful method for public inspection as required by section 6103(k)(1), but unless and until that happens, this post examines the other ways available to inspect offers. In Epic v. IRS a non-profit organization succeeded in having the district court order the IRS to disclose information about all accepted offers relating to the past or present tax liability of Donald Trump pursuant to a FOIA request.

Tax Court Recommendations

DAWSON Continues to Evolve: New features are being added to DAWSON, but the Tax Court disappointingly continues its practice of only making documents generated by the Court (such as, orders and opinions) available online.

Pro Se Petitions in Tax Court: According to the NTA Report, last year 86% of Tax Court petitioners were pro se. This post looks more closely at recent pro se precedential opinions. It also requests that the Court actively seek amicus briefs when it encounters precedential cases brought by pro se petitioners. Doing so would allow the Court to consider meaningful legal arguments from both sides before establishing precedent.

Practitioner and Taxpayer Considerations

Attorneys Behaving Badly: The Tax Court’s press release about suspensions and disbarments was published shortly after the 9th Circuit decided a case involving a former IRS Counsel attorney who committed tax evasion. In United States v. Orrock the statute of limitations to bring criminal prosecution was at issue. Unlike the unlimited assessment statute in the civil context, a limited criminal prosecution statute begins to run on the date of the filing but also begins to run again on the date of each additional affirmative act of evasion.

No Reasonable Cause When Tax Return Preparer Fails to E-file Extension: In Oosterwijk v. United States, the petitioners were not entitled to reasonable cause penalty relief for filing late when their preparer first failed to request a timely extension and later provided them with incorrect advice. The post highlights interesting reasonable cause issues, the divisibility of penalties, the limits of the IRS’s First Time Penalty Abatement policy, and more.

Honest Mistakes Happen, But a Two Million Dollar Difference in Mortgage Interest Will Likely Trigger An Accuracy-Related Penalty: In Busch v. Commissioner, the petitioners were not entitled to reasonable cause penalty relief for an accuracy-related penalty when the tax software they used allegedly converted a number from thousands to millions. The Court finds their mistake was not caused by the tax software, but rather by their failure to carefully review the return. The post further explores whether reliance on tax software could ever insulate a taxpayer from penalties.

Circuit Court Decisions

Two Recent Circuit Level Decisions Appear to Dispute View That the Refund Claim Filing Requirement is Jurisdictional (Part 1): In Morton v. United States,the petitioner appealed the district court’s finding that it lacked jurisdiction because the petitioner had not filed a return before suing. The Third Circuit held that the district court had jurisdiction because the section 7422(a) requirement to file a predicate administrative refund claim is not jurisdictional.

Two Recent Circuit Level Decisions Appear to Dispute View That the Refund Claim Filing Requirement is Jurisdictional (Part 2): The Supreme Court’s decision in Lexmark Int’l, Inc. v. Static Control Components, Inc. clarified that statutory standing defects do not implicate a court’s jurisdiction. This has caused other courts to reexamine their precedent in this area. In Brown v. United States, the Federal Circuit held that the duly filed requirement in section 7422 serves a claim processing rule rather than a jurisdictional requirement. Other relevant cases are also discussed in this post.

Two Circuits Sustain Tax Court’s Inability to Grant Requested Relief: In the Second Circuit case of Ruesch v. Commissioner, the Court sustained the Tax Court’s finding that it did not have jurisdiction to determine an underlying tax liability in a passport revocation case. In the Fourth Circuit case of McLane v. Commissioner, the Court sustained the Tax Court’s finding that it did not have jurisdiction to order an overpayment refund in a Collection Due Process case when the IRS withdrew its notice of federal tax lien. Both cases, however, left open questions about the limits of the Court’s authority which are further considered in this post.

11th Circuit Remands Willful FBAR Penalty Case Back to IRS Due to APA Violation: The role of the Administrative Procedure Act (APA) in FBAR penalty cases is discussed and highlighted in this post about the decision in United States v. Schwarzbaum. In his appeal, the petitioner argued that the IRS’s actions in calculating the penalty were not in accordance with the law.The APA empowers the 11th Circuit to examine whether the IRS’s calculations should be sustained because the FBAR penalty falls under Title 31. This is different from Title 26 penalty cases where the APA does not provide a means for the Court to examine IRS conduct in the same way.

District Court and Claims Court Decisions

District Court in Rewwer Holds Improperly-Signed Timely Forms 843 Can be Informal Refund Claims: This post examines five opposite or contradictory recent decisions involving informal claims that were not properly filed, including the decision in Rewwer v. United States. Rewwer involved a misfiled (on the wrong form with the wrong person signing and verifying) refund claim that was later corrected and held by the district court to be an informal refund claim. The petitioners in the other cases did not get as far.

CFC in Dixon Holds Improperly-Signed Timely Forms 1040-X Cannot Be Informal Refund Claims: The Claims Court in Dixon v. United States helds that the Court lacks jurisdiction in a case involving a defective informal refund claim. This post more closely analyzes the inconsistency of this holding in light of the Federal Circuit decision in the Brown (discussed above).

Low Income Taxpayer Clinics

How a Low Income Tax Clinic Can Help You and Vice Versa: This posts educates readers about Low Income Taxpayer Clinics and encourages practitioners to refer clients and volunteer. The LITC Support Center and LITC Connect are new resources developed by the Center for Taxpayer Rights to help connect LITCs with tax practitioners interested in volunteering.

Bankruptcy and Taxes

The Train Tracks: This post highlights the importance of considering the benefits of certain tax attributes before filing for bankruptcy. In Chow v. Lee a married debtor’s decision to individually file for bankruptcy resulted being required to forgo net operating losses on his joint returns. The post contemplates possible options available to the parties and goes on to separately discuss another aspect of the Court’s analysis of circumstances that are common among modern families.

Discharging Student Loan Debt: In Wheat v. Great Lakes Higher Education Corp the Department of Education lost its motion for reconsideration and the Court highlighted exactly what is required in order to have student loans discharged in bankruptcy.

A New Twist on What Constitutes a Tax Return: The debtor in Sienega v. Cal. Franchise Tax Bd. argued that the bankruptcy court should treat his audit report from the IRS, which he faxed to the California Franchise Tax Board, as his state tax return to allow him to discharge his state tax liabilities. He never filed an actual state return and the Ninth Circuit concludes that the audit report is not a return under the Beard test. The debtor had a decent point in that the audit report allowed the state to assess the tax and gave it adequate time to collect before the bankruptcy was filed, but the state tax debt could not be discharged.

Career Opportunities

Villanova Graduate Tax Program Looking To Hire A Professor of Practice/Faculty Director: Villanova has launched a national search for a new Faculty Director for its Graduate Tax Program. The position is posted here.

January 2022 Digest

A lot has happened in the tax world since the year began, then filing season began last week, and the ABA Tax Section 2022 Virtual Midyear Meeting began yesterday. There are no signs that things will slow down soon, except for (maybe) IRS notices.

Procedurally Taxing will continually provide comprehensive updates and information, but if you fall behind with your reading or struggle to keep up- I’ll be digesting each month’s posts from here on out.

January’s posts highlighted the NTA’s Report, the ongoing impact of the pandemic, and recent Circuit splits.

National Taxpayer Advocate’s Report

NTA Report Released: Essential Reading: The Report is available and contains new features, including an enhanced summary of the Ten Most Serious Problems and a change in the methodology used to determine the Most Litigated Issues.

What are the Most Litigated Issues and What’s Happening in Collection?: A closer look at the Most Litigated Issues. EITC issues are often petitioned but rarely result in an opinion, suggesting that most are settled before trial. In Collection, lien cases referred to the DOJ have declined substantially over the years corresponding with the decline in Revenue Officers and resources.

Who Settles Cases – Appeals or Counsel (and Why?): An analysis of data on the number of Tax Court cases settled by Appeals or Counsel. An increasing percentage of settlements are handled by Counsel, but why? Possible reasons and possible solutions are considered.

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Where Have Tax Court Deficiency Cases Come from in the Past Decade?: Most deficiency cases have come from correspondence exams of low- and middle-income pro se taxpayers. The focus of IRS examinations over the past decade has influenced the cases that end up in Tax Court. A shift in focus may be coming as IRS seeks to hire attorneys to specifically combat syndicated conservation easements, abusive micro-captive insurance arrangements and other tax schemes.

The Melt – Cases That Drop Away in Tax Court: Around 20% of Tax Court cases get dismissed each year- likely due, in part, to untimely filed petitions. Also due to a failure to prosecute, that is the petitioner abandoned the process somewhere along the way. Ways to address this issue are worth exploring, such as increasing access to representation and implementing a model utilized by the Veterans Court of Appeals.

Supreme Court Updates and Information

Who Qualifies as Press and the Boechler Supreme Court Argument Today: Being consider a member of the press comes with benefits, including the option to attend Supreme Court arguments with a press day pass when Covid-restrictions end. In lieu of being there in person, real-time broadcast links of Oral Arguments are made available on the Supreme Court website.

Transcript of Boechler Oral Argument: A link to the transcript of the Boechler Oral Argument is provided and Keith shares his in-person experiences observing the Supreme Court and the options available to others who are interested in doing so when Covid-restrictions end.

Pandemic-Related Considerations

Refund Claims and Section 7508A: A well-informed analysis of the disaster area suspensions under section 7508A and the refund lookback limits. Does the language in section 7508A allow for an extended lookback period? The IRS Office of Chief Counsel doesn’t think so, but TAS has recommended that Congress amend section 6511(b)(2)(A) for that purpose, and there is an argument that a regulatory solution is already available.

 Making Additional Work for Yourself and Others: The IRS has been cashing taxpayer payments without acknowledging receipt of the associated return. This improper recordkeeping resulted in the IRS sending CP80 notices to taxpayers requesting duplicate returns. This created more work for the IRS, practitioners, and clients. The IRS, however, recently announced it would stop doing this, as summarized directly below.

IRS Announces Stoppage of Notice to Paper Filers Who Remitted Payment and Tax Court Announces Continued Zooming: The IRS will stop requesting duplicate returns from paper filers who remitted payments with their original returns. Members of Congress also made specific requests to the IRS with the goal of providing relief to taxpayers until the IRS backlog is resolved, including temporarily halting automated collections, among other things. The Tax Court announced all February trial sessions will be by Zoom.

Practice and Procedure Considerations

“But I’ve Always Done It That Way!” Practitioner Considerations on Subsequent Year Exams: A TIGTA recommended change to IRS procedure may increase the audit risk for taxpayers who do not respond to audit notices. There is no blanket prohibition on telling clients about audit rates and general likelihoods of audit, so practitioners should be able to advise their clients of this potentially emerging risk and ways to avoid it.

New Rules in Effect for Refund Claims For Section 41 Research Credits Raise A Number of Procedural Issues: New rules for research credit refund claims require extensive documentation which increases costs and the risk of a deficient claim determination. Procedures for determinations were issued at the beginning of the month and have generated concern among practitioners because a determination cannot be challenged with a traditional refund suit and because the IRS modified regulatory requirements without utilizing formal notice and comment procedures.

Tax Court News

Tax Court Going Remote for the Remainder of January[and February]: January calendars (and now February, as mentioned above) scheduled in-person sessions have switched to remote sessions due to ongoing Covid-concerns.

Tax Court Orders and Decisions

The Tacit Consent Doctrine May Extend Far Beyond Signing a Joint Return: The Court in Soni v. Commissioner, allowed the tacit consent doctrine (where facts and circumstances led to finding of consent on the part of a non-signing spouse) to apply to returns, power of attorney authorizations and forms 872. The doctrine could be expanded in future cases, so it should be kept in mind when representing innocent spouses.

Timely TFRP Appeal?: The administrative 60-day deadline to respond to TFRP notices is discussed in an order requesting that the IRS supplement its motion for summary judgment. The origin of a deadline is important. Jurisdictional deadlines are different from administrative deadlines, and cases involving administrative deadlines can be reviewed for abuse of discretion.

Circuit Court Decisions

Eleventh Circuit finds Regulation Invalid under APA: The Eleventh Circuit, in Hewitt, calls into question who has the burden to show that a comment made during a notice and comment period: 1) was significant, and 2) consideration of it was adequate. The Tax Courts says it’s the taxpayer, the Eleventh Circuit says it’s the IRS, but what does this mean for everyone else?

The Fifth Circuit Parts Ways with the Ninth Circuit Regarding the Non-Willful FBAR Penalty: A difference in statutory interpretation results in a recent split between the Ninth and Fifth Circuits over whether the non-willful penalty under section 5321(a)(5)(A) should be assessed on a per-form or per-account basis. The Ninth Circuit held that legislative history, purpose, and fairness support a per-form penalty, but the Fifth Circuit held that Congress’ intent and the objective of the penalty support a finding that it’s per-account.

Goldring is Back with a Circuit Split: The Fifth Circuit addresses how underpayment interest should be computed on a later assessed deficiency when a taxpayer elects to credit forward an overpayment from an earlier filed return. It held “a taxpayer is liable for interest only when the Government does not have the use of money it is lawfully due.” This contrasts with other Circuits which have decided that the law allows the IRS to begin computing interest when an amount is “due and unpaid.”

Polselli v US: Circuit Split on Notice Rules for Summonses to Aid Collection: A recent Sixth Circuit decision continues a circuit split on a fundamental issue in IRS summons practice: does the IRS have to give notice when it issues a summons on accounts owned by third parties in the aid of collecting an assessed tax? The Sixth, Seventh and Tenth Circuits read section 7609 notice requirements and its exclusion without limitations, which contrasts with the Ninth Circuit’s more narrow interpretation.

D.C. Circuit Narrows Tax Court Whistleblower Award Jurisdiction: The D.C. Circuit overturns Tax Court precedent by holding that the Tax Court lacks jurisdiction over appeals of threshold rejections of whistleblower requests. Since all appeals of whistleblower cases go to the D.C. Circuit, the Tax Court is bound by the decision unless the Supreme Court takes up the issue. 

Liens and Judgments

Local Taxes and the Federal Tax Lien: The effect of the Tax Lien Act of 1966 was reiterated in United States v. Tilley.  Section 6323(a) sets up the first in time rule of law, but 6323(b) provides ten exceptions, including one for local property taxes, which allows a local lien to defeat a federal tax lien even when the local lien comes later in time.

Tax Judgments and Quiet Titles: Tax judgments can benefit the IRS beyond the 10-year federal collection statute of limitations. Boykin v. United States, like Tilley, involves real property held by nominal owners. The taxpayer brought suit to quiet title, the IRS counterclaimed that the money used to purchase the property was fraudulently transferred, and the taxpayer argued that a state statute of limitations prevented the IRS’s argument. The Boykin Court disagreed with the taxpayer relying upon Supreme Court precedent that state statutes do not override controlling federal statutes.

Bankruptcy and Taxes

Diving Beneath the Surface of In re Webb: An in-depth analysis of a technical bankruptcy issue that can impact taxes involving an election under section 1305, which allows postpetition tax claims to be deemed prepetition claims. The classification of the claims impacts whether a subsequent IRS refund offset violates a debtor’s rights.