Out of Time? APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period

We welcome back previous guest blogger Susan C. Morse, who is the Angus G. Wynne Sr. Professor in Civil Jurisprudence and Associate Dean for Academic Affairs at the University of Texas at Austin School of Law.

Is it ever too late to raise an administrative procedure challenge to an old tax regulation?

Consider the pair of cases that has produced a circuit split between the Sixth and the Eleventh Circuits over the adequacy of notice-and-comment for a conservation easement final regulation. (Prior Procedurally Taxing coverage here and here.) The Sixth Circuit held in Oakbrook that the notice-and-comment process was sufficient. In contrast, the Eleventh Circuit concluded in Hewitt that Treasury “violated the Administrative Procedure Act’s requirements” when it promulgated the regulation and that therefore the IRS Commissioner’s application of the regulation was “invalid.” But neither court addressed the question of time. The regulation was promulgated in 1986 – decades before any of the facts arose in either case.

Does time ever limit taxpayers’ ability to raise administrative procedure challenges long after the promulgation of a regulation? Consider 28 U.S.C. § 2401(a), the default limitations period for suits against the federal government. It provides that “every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.”

The limitations period analysis turns on when the “right of action” to raise an administrative procedure challenge to a regulation “first accrues.” For instance, in Oakbrook and Hewitt, if this right accrued in 1986, when Treasury promulgated the regulation at issue, then the taxpayers’ claims should have been time-barred. On this theory, the taxpayers were allowed to litigate because the government did not raise 28 U.S.C. § 2401(a) as a defense. (The government can waive the defense, as it’s not jurisdictional.) If the government had raised the six-year limitations period defense, the Oakbrook or Hewitt taxpayer would have had to argue that the right of action first accrued later, when the regulation was applied to the taxpayer’s case, or that an exception to the limitations period should apply.

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Now the government has begun to raise the six-year limitations period defense, first in July 2022, in the Govig case, pending in the federal district court in Arizona. Govig involves Notice 2007-83, which was issued nine years before penalties were first proposed on Govig for the 2016 tax year, relating to the employee welfare benefit arrangement established by the taxpayer in 2015. In Govig, the taxpayer claims that the Notice is invalid because it was issued without notice and comment, and relies on the Sixth Circuit’s decision in Mann Construction. In Mann Construction, though, the government did not raise the six-year limitations period defense.

More than half the Courts of Appeal – the Second, Fourth, Fifth, Sixth, Ninth, Eleventh, D.C., and Federal Circuits – have accepted that for administrative procedure claims, the default six-year limitations period begins to run when the challenged regulation or guidance issues, in other words at the time of final agency action. This limitations period statute exists against the background of sovereign immunity, meaning that it is an exercise of Congressional power to specify on what terms the federal government may be sued. In contrast, for certain other claims, such as claims that the agency exceeded its statutory authority, the limitations period begins to run when the regulation or guidance is applied. This is called the Wind River doctrine after a key 1991 Ninth Circuit case. The Wind River doctrine would say that the limitations period for an administrative procedure challenge to Notice 2007-83 began to run in 2007 and expired in 2013, before any relevant facts arose in the Govig case.

It may seem an awkward reading to suggest that a “right of action first accrues” with the earlier issuance of a Notice, especially when the specific controversy between the taxpayer and the government arises from later enforcement proceedings. And yet that is what the cases hold. As an example, consider Sai Kwan Wong, a 2009 Second Circuit case where the plaintiff sought to challenge a Medicaid rule that treated social security disability income as an amount that offsets Medicaid funding of nursing home care, even if that income was deposited into a special needs trust. The Department of Health and Human Services had promulgated a rule providing this offset treatment in 1980, apparently without using notice and comment. The plaintiff did not have standing until 2006, when his legal guardian began to direct the plaintiff’s disability income to a special needs trust, thus raising the question of whether the offset rule would apply. The Second Circuit held that the six-year limitation period began to run in 1980, when the guidance issued, and not in 2006, when the plaintiff had standing. It then barred the plaintiff’s administrative procedure claim.

The theory that underpins cases like Sai Kwan Wong is articulated in Shiny Rock, a 1990 Ninth Circuit case that preceded Wind River by one year. There, the court explained that any injury “was that incurred by all persons .. in 1964” when the Bureau of Land Management issued a public land order – not in 1979, when Bureau applied the order to deny the plaintiff’s mineral patent application. The Shiny Rock court suggests that the rights that are vindicated by an administrative procedure challenge are the general public rights to participate in the administrative procedure process. A later-accrual approach, added the Shiny Rock court, “would virtually nullify the statute of limitations,” since it would always be possible for the old administrative order to applied later, to a new plaintiff who had later gained standing. Viewed this way, the case law consensus that the limitations period begins to accrue when a regulation is promulgated makes sense.

An alternative reading of 28 U.S.C. § 2401(a) might be that a particular plaintiff’s right of action cannot accrue until the plaintiff has standing. This reading is grounded in a private law understanding of the statutory provision, which envisions the government as party to a contract or tort action that arises from a specific transaction or interaction between the government and a plaintiff. But administrative procedure violations are not like these private law causes of action. They arise not from a specific interaction between government and plaintiff, but rather from the alleged failure of a process that is supposed to serve the general public function of producing better administrative law.

Thus, in Govig, if the District of Arizona follows Ninth Circuit precedent, it should conclude that the administrative procedure challenge to Notice 2007-83 is time-barred – unless, of course, the Govig plaintiffs can persuade the court that an exception to the limitations period applies. There is little in the facts of Govig that would support an equitable tolling or equitable estoppel argument. For instance, the government did not hide information or delay enforcement in order to wait out the limitations period. Instead, the facts of the case did not arise until after the limitations period had expired.

An issue that may arise in Govig relates to intervening case law. This is because the Govig plaintiff arguably relies on CIC Services, a 2021 Supreme Court case that held that some facial or pre-enforcement challenges are permitted in tax, despite the Anti-Injunction Act. (Prior Procedurally Taxing coverage here, here, and here).Historically, intervening case law has restarted the 28 U.S.C. § 2401(a) limitations period when a case has only prospective effect – but not if the case has (as is typical) retroactive effect. Plus, more recent Supreme Court precedent emphasizes that its applications of federal law “must be given full retroactive effect …as to all events, regardless of whether such events predate or postdate the announcement of the rule.” The intervening case law argument seems unlikely to offer the Govig plaintiff an exception to the time limitation of 28 U.S.C. § 2401(a).

The Govig case is one to watch. If the Arizona federal district court follows prevailing case law, it will likely allow the government’s limitations period defense and time bar the plaintiff’s administrative procedure claim. The availability of such time bars would reshape the landscape of administrative procedure in tax by putting APA claims on the clock and replacing the assumption that the government will waive the 28 U.S.C. § 2401(a) limitations period defense.

For further reading, if of interest: I have posted a preliminary draft here with additional analysis of this limitations period issue.

Lamprecht v Comm’r: Statute of Limitations, Qualified Amended Returns And The Issuance Of A John Doe Summons

The recent case of Lamprecht v Commissioner highlights some interesting nuances in applying the statute of limitations on assessment when a taxpayer files an amended return and the IRS uses a John Doe summons to gather information about taxpayers.

The Lamprechts came to the IRS’s attention as part of the government’s efforts to detect US citizens and residents who had Swiss and other jurisdictions’ bank accounts and income associated with those accounts that went unreported.

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In 2010 the Lamprechs, Swiss citizens who had green cards and a residence in Tiburon, California, filed amended 2006 and 2007 returns that reported previously omitted income from their Swiss UBS accounts. IRS examined the returns and proposed accuracy-related penalties for both years.  The taxpayers timely petitioned to Tax Court, challenging the penalties on multiple grounds, including that that their amended returns were “qualified amended returns”, that any proposed assessment of the accuracy-related penalties for 2006 and 2007 would be barred by the statute of limitations, and the IRS did not receive proper supervisory approval for the penalties under 6751(b) (note I will not discuss the 6751 issue in this post).

The procedural posture that triggered this opinion involved cross motions for summary judgment. The motions focused on the substantial understatement of income tax penalty (the government’s answer had also alleged a fraud penalty but the government later conceded the fraud penalty).

Lamprecht involves a John Doe summons (JDS), a topic I have been discussing here lately (see 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 and which also is discussed extensively Saltzman and Book IRS Practice and Procedure in Chapter 13). The Lamprechts’ 2006 and 2007 original 1040’s were short by about $6 million in interest, capital gains and commissions that flowed through their UBS accounts. The amended returns included the previously unreported income.

The Lamprechts’ amended returns in 2010 came after the ex parte IRS 2008 filing in federal district court to allow use of the JDS process to get identifying information about US taxpayers with accounts at UBS or its affiliates. After getting authorization, IRS issued the JDS to UBS in July of 2008. After the government initiated a February 2009 enforcement proceeding, the government of Switzerland joined in the enforcement suit as amicus curiae. In August of 2009 the enforcement suit was resolved by two agreements. The first agreement established a process for the exchange under the US –Swiss treaty that included the Swiss Federal Tax Administration and would in its terms “achieve the U.S. tax compliance goals of the UBS [John Doe] Summons while also respecting Swiss sovereignty.” The second agreement provided that “the IRS would “withdraw with prejudice” the UBS John Doe summons after receiving information concerning bank accounts from UBS pursuant to the treaty request for administrative assistance.”

In November of 2010, when IRS obtained the information it sought, the IRS formally withdrew the JDS (as we will see below, these different dates matter for SOL purposes).

Against this background, as most readers know under Section 6501(a)(1) the time period for assessing additional tax is generally three years from the filing of a return. For “substantial omissions” from gross income (greater than 25% of the amount of gross income stated in the return) that period is doubled to six years.  In addition, when IRS serves a summons, and that summons is not resolved within six months of service, then the period of limitations for assessment is suspended from the six-month anniversary of service of the summons until its final resolution. 

The Lamprechts agreed that the omission with respect to their original returns was substantial, though they and the IRS differed on the application of the SOL in light of their amended returns and the summons suspension issue.

Qualified Amended Returns

Section 6662 provides that a “substantial understatement” is determined by reference to “the amount of the tax imposed which is shown on the return”. Regulations provide that a taxpayer who files a qualified amended return can use the amount of tax shown on those returns for determining whether the understatement is substantial. The regs, however, provide that an amended return is not a qualified amended return if the amended return was filed after the service of a JDS relating to a tax liability of a group that includes the taxpayer if the “taxpayer claimed a direct or indirect tax benefit from the type of activity that is the subject of the summons…”

There was no question that the Lamprechts’ amended return filing was after the service of the JDS; the Lamprechts, however, argued that their omission of the overseas income did not constitute a direct or indirect tax benefit.

The opinion rejected the Lamprechts’ position on a few grounds, essentially concluding that:

[t]he Lamprechts omitted all foreign source income from their original 2006 and 2007 tax returns, thereby substantially understating their gross income and corresponding tax liabilities, and in doing so they received the benefit of understated tax liabilities. Furthermore, during the examination of their 2006 and 2007 income tax returns, when the Lamprechts filed amended returns for 2006 and 2007 to report foreign income previously unreported, their representative asserted that Mr. Lamprecht “did not report his foreign source income and earnings on his originally filed returns because he thought that ‘everything Swiss was not taxable in the U.S.’”

The opinion went on to discuss how the omission of income directly led to their affirmatively claiming itemized deductions that would otherwise have been phased out, thus also undercutting the Lamprechts’ position that they failed to claim a benefit.

Impact of the Summons on the SOL

Once concluding that the understatement was substantial and thus triggered the 6-year SOL, the opinion went on to discuss whether the proposed assessment was timely given that the 2006 and 2007 were filed in April of 2007 and 2008 respectively and the IRS issued the notice of deficiency for both years more than six year later, in January of 2015.  The timeliness of the potential assessment turned on whether and when the running of the six-year limitations period was suspended by the service and final resolution of the UBS JDS.

The Lamprechts argued initially that there should be no suspension of the SOL because in its view the JDS was issued without a valid purpose, just to extend the SOL. The opinion swiftly brushed that aside, noting that there was no precedent for the use of a collateral proceeding against a taxpayer in the John Doe class to raise that challenge. Alternatively the court reasoned that under the liberal Powell standard they had not shown that the summons was issued for an invalid purpose.

That still left open precisely when the SOL was suspended. Under Section 7609(e) the service of the summons suspended the period of limitations for assessment once the summons had remained unresolved after 6 months from service; that six-month date was January 21, 2009.  The suspension ends on when the summons is finally resolved; the parties disagreed on when the matter was finally resolved.

The regs provide that a summons proceeding is  finally resolved “when the summons or any order enforcing any part of the summons is fully complied with and all appeals or requests for further review are disposed of, the period in which an appeal may be taken has expired or the period in which a request for further review may be made has expired.”

The Lamprechts claimed that the final resolution occurred in August of 2009, when the district court ordered dismissal of the government’s summons enforcement suit.

The government argued that final resolution occurred when IRS formally withdrew the summons on November 15, 2010, after it received the documents pursuant to the treaty and the matter was dismissed with prejudice. That over one-year difference mattered, because under the government’s position the SOL was suspended from January 21, 2009, to November 15, 2010 (i.e., for 664 days), with the six-year SOL for assessment for the 2006 and 2007 years thus still open when the IRS mailed the notices of deficiency in January of 2015, which further suspends the SOL.

The Tax Court agreed with the government, stating that the Lamprechts did “not assert (nor make any showing of) an earlier date by which UBS had “fully complied” with the summons and “all appeals or requests for review” had been “disposed of”.

Conclusion

This is an important government victory. This opinion is significant as it explores SOL issues in the context of aggressive IRS pursuit of taxpayers who have failed to report income in overseas accounts. The intersection of the qualified amended return rules and the somewhat unusual posture by which the government obtained documents pertaining to the Lamprechts on the surface make this a somewhat novel opinion. I suspect, however, that practitioners representing similarly situated taxpayers with overseas accounts, unreported income, amended returns and hefty penalties will carefully study this opinion.

TIGTA’s Annual Review of CDP Processing     

It’s the time of year when the Treasury Inspector General for Tax Administration (TIGTA) starts producing the annual reports required of it by the Restructuring and Reform Act of 1998.  It recently produced its report regarding the Collection Due Process program.  The report is short. 

To produce the report, TIGTA looked at a sample of CDP and Equivalent Hearing cases designed to produce a picture of CDP performance with a 95% accuracy rate.  This year it reported that in FY 2021 there were 28,667 CDP and Equivalent Hearing cases closed.  It sampled 91 of those cases finding that “Appeals complied with most of the I.R.C. and Internal Revenue Manual 8.22.4, Collection Due Process Appeals Program (May 12, 2022), requirements for processing hearing requests.”

The one area where TIGTA dinged Appeals, an area where it has dinged Appeals before and we have discussed before, here, here and here, concerned the statute of limitations on collection (CSED).  TIGTA found that in 20% of the reviewed cases the IRS got the CSED wrong.  In 10 of the cases it got the CSED wrong in a way that incorrectly extended the statute of limitations.  Based on this sample, it projected that 3,233 of the CDP and Equivalent Hearing cases closed in 2021 would have incorrect CSED in which the IRS sought to collect from taxpayers after the CSED expired.  This is way too high an error rate and it’s not the first time a high CSED error rate has been reported.  The IRS has got to learn how to calculate the CSED.

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TIGTA found that in 8 cases in its sample the IRS miscalculated the CSED in  a way that wrongly reduced the period the IRS had to collect.  It extrapolated that this meant 2,586 of the CDP cases closed in 2021 had the CSED shortened.  While shortening the CSED does not imping on the taxpayer rights of the individual taxpayer, it does mean that collectively the taxpayers of the United States may not have as much collected from people who owe.

Calculating the CSED is hard with the exceptions that currently exist and the way they operate.  If the IRS cannot get this right – and it has demonstrated over a relatively long period of time that it cannot – perhaps Congress should look at simplifying the process.  The most obvious place to simplify it would be to do away with the really confusing extension related to installment agreements.  Eliminating that statute extension would probably bring the IRS error rate down significantly but TIGTA does not provide us with an analysis of the mistakes that it found.  Had it done so, it would have provided the IRS and the public with a better roadmap for pursuing success.

TIGTA found that Appeals correctly classified CDP and Equivalent Hearing requests; however, it did so based on the criteria published in the IRM and not based on case law.  TIGTA does not address cases in which a taxpayer sends in a CDP request after the 30 day period based on a good excuse or sends the CDP to the timely but not to the office requested by the IRS.  Because it does not look for these types of cases, TIGTA misses an opportunity to assist the IRS in updating its outdated IRM provisions.  It audits based on what the IRS says and not what the IRM should say.

TIGTA also does not audit the CDP letter which does a poor job of advising taxpayers of their rights.  It might consider in future years looking at why the uptake rate of CDP cases is so low and how that relates to the notice received by taxpayers.

For this year we know that the Appeals, and the IRS generally, struggles with the CSED.  Looking for ways to fix that other than continuing to point to IRM compliance might provide an overall benefit to the system.

Consent to Extend the Statute of Limitations

In Evert v. Commissioner, T.C. Memo 2022-48, the Tax Court addressed a statute of limitations defense raised by petitioner.  Petitioner had signed a Form 872 consenting to the extension of the statute of limitations on assessment; however, she argued that she did so under duress which invalidated the consent.  For reasons discussed below, the Court found that the consent was valid and, therefore, the notice of deficiency was timely issued.  While duress arises regularly in the joint return context, it also comes into play regularly in the consent context and particularly with unrepresented taxpayers.

In the Tax Court case, Ms. Evert received representation from the low income taxpayer clinic at Syracuse Law School.  Syracuse has an excellent clinic headed by Rob Nassau.  Unfortunately, Ms. Evert found representation after signing the consent and petitioning the Tax Court.  Had she found the clinic earlier, she could have had a meaningful discussion with her representative regarding the decision of whether to sign the Form 872.

Bryan Camp wrote an excellent post on this case focusing on the calculation of the assessment period expiration date (ASED).  The ASED is a big deal for exam and Appeals.  Missing the ASED was once an almost career ending offense for revenue agents and appeals officers.  They carefully monitored every case in their inventory to insure that they were not holding a case as the time expired.

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The IRS selected Ms. Evert’s 2015 and 2016 returns for exam.  She disagreed with the results of the examination and filed an administrative appeal upon receipt of the 30 day letter.  I almost never see pro se taxpayers avail themselves of the opportunity to go to Appeals at this stage.  My clients always seem to go straight from exam to Tax Court and catch Appeals after the petition.

The court provided a paragraph of explanation of the Appeals Officer’s (AO) background.  Because the actions of the AO stood at the heart of the case, the background material assists in understanding the case.  He was former military, former SSA hearing officer, former attorney in private practice and former FBI agent before joining Appeals.  His background became important because his credibility was important in deciding whether he exerted undue pressure on Ms. Evert to sign the extension form.

The AO reached out to petitioner to schedule a conference and to gather information she might provide in support of her case.  She was somewhat slow in providing information.  Her case ended up on a report in Appeals showing cases in which the statute of limitations on assessment would expire in nine months.  As mentioned above, the IRS takes the statute of limitations on assessment very seriously and the AO decided that obtaining a statute extension would best serve this case. 

This part of the case provides good instruction for anyone not familiar with underlying motivations at the IRS.  Here, the decision to continue working with Ms. Evert tied closely to the concerns at Appeals that the statute of limitations was getting close.  While nine months may seem like plenty of time, lots of steps need to occur in resolving a case and no one at the IRS wants to feel pushed by a deadline if they can help it.  The reports the AO had to file identified Ms. Evert’s case as one requiring attention.

So, the AO wanted closure or more time on the statute of limitations and Ms. Evert wanted more time to respond to the request for information.  Each side needed something but the IRS had what some might consider the upper hand since it could issue the notice of deficiency if its comfort level dipped too low.  To gain more time to work with Appeals, Ms. Evert signed the consent form.  Did the pressure to do so exceed the normal pressures that exist in this situation?  That’s what the Court has to decide.

The burden to show that the AO obtained the consent by duress falls on Ms. Evert.  The Court quoted from an old Board of Tax Appeals case, Diescher v. Commissioner, 18 B.T.A 353, 358 (1929) to define duress:

In modern jurisprudence the definition of duress has been enlarged much beyond the narrow limits recognized in the common law. It is now well settled that if an act of one party deprives another of his freedom of will to do or not to do a specific act the party so coerced becomes subject to the will of the other, there is duress, and in such a situation no act of the coerced person is voluntary and [*7] contracts made in such circumstances are void because there has been no voluntary meeting of the minds of the parties thereto.

In Diescher the Court found that the taxpayer signed the waiver under duress because the IRS threatened to impose the fraud penalty if he did not sign.  The Tax Court has also held on numerous occasions that simply advising a taxpayer that an assessment will occur without a consent to extend does not rise to the level of duress stating in one case:

it was not duress for the revenue agent to inform the taxpayer that a notice of deficiency would be issued without an opportunity for administrative appeal because such statements were nothing more than notice that the Commissioner intended to use lawful means at his disposal to assess the tax.

Here, the court found that petitioner failed to meet her burden.  The AO simply informed her that he would close her case without a consent holding open the statute.  In finding this the Court accepted the testimony of the AO as credible and found petitioner’s testimony about statements made by the AO too vague to overcome the AO’s credible testimony about his actions.  The Court distinguished Diescher because it found no evidence that the request to sign the consent was coupled with a threat of the imposition of a penalty of the taxpayer withheld consent.

Ms. Evert also cited Robertson v. Commissioner, T.C. Memo 1973-205 which held a consent invalid because the revenue agent harassed the taxpayer to sign a consent less than two weeks prior to the ASED.  In finding for the petitioner in that case the court noted that the revenue agent did not testify and the court had only the testimony of the taxpayer.  Here, the Court had the testimony of the AO and it found nothing in the record to suggest that the AO harassed her into signing.

I have never litigated the specific issue presented here but did once file a motion seeking to set aside a Tax Court decision document a taxpayer represented was signed after receipt of threats of the consequences of failing to sign.  Under the circumstances of that case, I found the taxpayer’s assertions credible; however, the situation presented a conflict of testimony between the taxpayer and the Chief Counsel attorney.  The Court denied my motion without even holding a hearing.

Cases challenging agreements whether the consent to extend or some other type of agreement put a relatively heavy burden on the taxpayer seeking to show the signing resulted from some wrongdoing on the part of the IRS.  I don’t doubt Ms. Evert’s sincerity in believing that she was coerced into signing the consent but the outcome of her case does not surprise me in the least.  She received the benefit of the extension and causing the IRS to lose its ability to assess puts a burden on her to show something unusual happened in the granting of the extension.

IRS Not Giving Up on Thorny SOL Issues When Taxpayer Fails to Backup Withhold

An issue that is often litigated is whether and when a return is deemed filed for purposes of starting the SOL on assessment. In today’s post, I will discuss Quezada v US and the IRS’s decision to publish an Action on Decision disagreeing with the Fifth Circuit.

We have not discussed AOD’s though we have discussed the Quezada case a few times. The most recent is here, where Keith reviewed how the Fifth Circuit held that the Form 1040 filed by the Quezadas and the Forms 1099 issued by his business to its workers that omitted the workers’ tax identification numbers started the running of the statute of limitations for backup withholding.  As readers may know, the Code requires payers to backup withhold at a rate of 24 percent on reportable payments for a payee that refuses or neglects to provide a correct TIN

An AOD is the Service’s way of notifying the public and its employees about the Office of Chief Counsel’s litigating position. When the IRS loses in a circuit court case, as in Quezada, or a precedential Tax Court opinion, if Counsel disagrees with the opinion, an AOD discusses the reasons why. The AOD lets the public and practitioners know that taking a position consistent with the opinion will lead to the IRS challenging the position if the matter is appealable to a different circuit.

Back to Quezada.

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As Keith discussed, the Fifth Circuit based its holding on the view that the combination of Quezada’s 1040 and the business’ deficient 1099’s provided the IRS with sufficient information to determine potential backup withholding liability:

The court decides that the Forms 1040 and 1099 did provide the IRS with enough information to create an informal Form 945.  The forms filed contained enough data to show he had a backup withholding liability.  The Forms 1099 showed the amount paid and the person paid thus allowing the IRS to calculate the amount of backup withholding that Quezada should have made.  Case over.

The AOD that Counsel issued this past February flatly disagrees with the Fifth Circuit’s discussion of the IRS’s ability to determine backup withholding liability based just on the 1040 and Form 1099:

The omission of a payee’s TIN on a Form 1099-MISC does not conclusively establish the payor’s liability for backup withholding. Instead, backup withholding liability arises from the failure to obtain a payee’s TIN, which is not evident on the face of the Form 1099-MISC. I.R.C. § 3406(a)(1)(A); Treas. Reg. § 31.3406(a)-1(b)(1)(i).

As the AOD notes, if upon making payments to the workers the taxpayer had obtained the workers’ TIN but mistakenly omitted the number, there would be no backup withholding liability. In addition, as the AOD notes, the Service could not determine the extent of the liability just by the taxpayer’s filed 1040 and 1099’s.

As Keith discusses in his post, the Fifth Circuit and IRS disagreed about how to apply the 1944 Supreme Court Lane-Wells opinion.  The AOD does not go so far as arguing for a per se rule that would prevent the SOL from running when there is no return filed for the tax liability at issue, but it takes the view that Form 945 is needed for the SOL to start running on backup withholding liability:

Under Lane-Wells, it is inappropriate to treat a payor’s Form 1099-MISC information returns reporting payments to payees, in combination with the payor’s individual income tax return, as “the return” that triggers the running of the period of limitations for assessing backup withholding liability. This is because: (1) the Forms 1040 and 1099-MISC are separate returns that neither reference nor rely upon each other for either return to be complete; (2) neither the Form 1040 nor the Form 1099-MISC requires reporting backup withholding liability; and (3) the Service has prescribed a separate Form 945 for a payor to report backup withholding liability and that is the form to which it looks in determining whether such liability exists.

Conclusion

The Inspector General has reported taxpayers avoiding payment of billions of dollars in backup withholding. TIGTA noted that IRS was developing a cross-functional working group to analyze current backup withholding policies, so the compliance issue is on IRS’s radar.

Of course the Inspector General’s disclosure two weeks ago revealing that IRS destroyed millions of filed information returns does not atmospherically contribute to liberally allowing IRS to chase taxpayers who themselves make mistakes relating to returns akin to information returns (for that bombshell, see A Service-Wide Strategy Is Needed to Address Challenges Limiting Growth in Business Tax Return Electronic Filing at page 2).

This AOD tells us that IRS is likely to press the issue. Stay tuned.

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.

Miscellaneous

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.

Suspension of Statute of Limitations Due to an Offer in Compromise

In United States v. Park, 128 AFTR 2d 2021-6390 (2021), aff’d 128 AFTR 2d 6394 (2021) the magistrate judge, sustained by the district court judge, grapples with the statute of limitations on collection and whether the IRS has timely brought a suit to reduce a liability to judgment.  The court determines that the IRS brought the suit timely because of the submission of an offer in compromise by the taxpayer.  The case provides the opportunity to discuss not only the way the statute of limitations works in this situation but things taxpayers should consider when deciding to file an offer in compromise.

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The collection statute of limitations (CSED) is 10 years from the date of assessment – that means each assessment, since for some taxpayer periods a taxpayer could have multiple assessments creating multiple CSEDs.  If the IRS wants to sue someone to reduce the assessment to judgment or to foreclose a tax lien or similar collection suit, it must do so within the CSED.  When that period expires, the IRS loses its ability to collect both administratively or by bringing a suit.  So, when the IRS brings a suit, the existence of an open CSED marks one of the things that it must prove.  Typically, the IRS brings these suits close to the CSED for practical reasons having to do with trying to collect administratively, if possible, before turning to litigation and because the Department of Justice Tax Division attorneys who bring these cases tend, like attorneys everywhere, to wait until the last minute before acting.

The IRS assessed a liability against Ms. Park for 2005 on October 1, 2007 and for 2006 on September 24, 2007.  The initial CSED for these liabilities runs on October 1, 2017 and September 24, 2017.  On October 31, 2018, the IRS filed suit.  Now, it must show that something kept open the CSED or it will lose quickly.  Here, both parties agreed that Ms. Park had filed an offer in compromise.  The question became how the offer impacted the CSED.

Although she submitted the offer in March of 2008, the court cited the language of Form 656 in determining the start date for the suspension of the CSED:

(k) The offer is pending starting with the date an authorized IRS official signs the form. The offer remains pending until an authorized IRS official accepts, rejects, returns, or acknowledges withdrawal of the offer in writing. If I/we appeal an IRS rejection decision on the offer, IRS will continue to treat the offer as pending until the Appeals Office accepts or rejects the offer in writing.

Here, the parties agreed that the beginning of the suspension occurred on April 17, 2008 when the authorized IRS official signed the Form 656.  Note that COVID could create a long gap between the submission of an offer and the signature of the authorized official because the authorized officials, like almost all IRS employees, stayed away from the office for months.  Finding this date will provide critical information in any contest of this type.  Usually, but not always, the beginning date does not present significant challenges.

As with many offers, the ending involved a series of steps.  The offer examiner rejected the offer on August 19, 2008.  Pre-COVID, the four-month period between formal receipt and decision was pretty normal.  This case almost perfectly reflects a normal offer submitted by the tax clinic at Harvard.  Usually, students finish up an offer in late March or early April and the offer group calls up in August requesting more information at a time when no students work in the clinic and I must do all of the follow up work to complete an offer without student assistance.  Fall semester offers almost always seem to generate a contact in May once the students leave the clinic to begin exams.

Here, Ms. Park appealed the offer rejection on September 18, 2008.  Following her appeal, a Settlement Officer sustained the rejection on February 26, 2009.  She, however, did not stop there and requested that the Appeals Team Manager look at the offer rejection.  The manager wrote to Ms. Park on July 6, 2009 also sustaining the rejection.

She argues that the offer suspension ended when the Settlement Officer rejected her offer and the IRS argues that the suspension period did not end until the Appeals Team Manager sent the rejection letter.  Here are the respective calculations:

The IRS submitted to the court its official transcript, seeking to use the transcript to prove the correctness of its determination of the July 6, 2009 date as the correct date for calculating the tolling.  It argued that the transcript Form 4340 was entitled to a presumption of correctness unless she presented some evidence to the contrary.

I don’t think the transcript should make much difference in a case like this where the facts are known.  The fact that the IRS put its interpretation of the law on an official transcript should carry no weight in assisting the court to find the right conclusion.  The real issue turns on the effect of asking for the Settlement Officer’s manager to overturn the decision of the Settlement Officer.  Does the taxpayer get that consideration during a period in which the statute of limitations has started running again, or by asking for this additional review does the taxpayer further suspend the statute?

Ms. Park cites to the Internal Revenue Manual in support of her position, but unfortunately for her the manual actually delegates the authority to accept or reject an offer to the manager and says it cannot be redelegated.  For this reason, the court rejects her argument as it should.

She next makes an argument I have seen many taxpayers make.  She argues that the IRS release of the notice of federal tax lien supports her claim that the statute had run.  The IRS counters that the lien release resulted from a mistake.  The statute allows the IRS to correct this mistake and that the release itself does not extinguish the liability.

The case is unremarkable but provides a reminder that going up the chain provides a further suspension of the statute of limitations on collection.  She made her offer early in the life of the statute and probably did not pay too much attention to the statute until many years later.  Since the taxpayer does not control when or if the IRS will seek to bring a collection suit, there is not much she can do as she tries to wait out the statute hoping that her liabilities will drop off the books.

In the clinic we do get clients who come to us near the end of the CSED as well as at the beginning.  We are reluctant to file an offer in the last year or two prior to the CSED because of the suspension it brings.  Of course, if the client wants to do an offer after a discussion of its consequences, it’s fine to do so.  It also makes a difference whether the client has the type of profile that would cause the IRS to bring a suit.  Most clinic clients have few assets so do not present the type of case likely to cause the IRS to bring a collection suit.  Before it brings such a suit, the revenue officer handling the case needs to show that obtaining the extended statute of limitations the judgment will bring has a relatively high likelihood of allowing the IRS to collect even though it has failed to do so during the initial 10 year CSED.

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.