Facebook Asserts that TBOR Mandates Right to Appeals

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Facebook and IRS are squaring off in Tax Court over billions in taxes relating to its transfer of intangible assets to Irish subsidiaries. That fight has spawned major procedural side skirmishes in a California federal district court, including battles over privilege and IRS’s refusal to allow the social media giant access to Appeals.

Perhaps in a later post I will return to the interesting privilege battles. This post is about the important legal issues in Facebook’s challenge to the IRS’s rules that allow Counsel discretion to eliminate a taxpayer’s right to Appeals.


In its complaint that it filed last November, Facebook seeks a declaratory judgment that IRS unlawfully issued a 2016 revenue procedure that unlawfully denied its access to an administrative forum. IRS began its audit of Facebook in 2011, and Facebook repeatedly sought Appeals consideration. After Facebook declined to extend the SOL on assessment for a sixth time because IRS did not agree to provide a timetable for Appeals consideration, IRS issued its stat notice. Facebook petitioned to Tax Court and renewed its request for Appeals consideration. IRS refused, referring to the 2016 revenue procedure that allowed Counsel to bypass its right to Appeals review in its transfer pricing deficiency case in the interest of “sound tax administration.”

The case tees up Appeals role and whether taxpayers have the right to Appeals’ consideration in light of developments over the last two decades. Prior to 1998, it was generally accepted that the right to Appeals was discretionary, and the product of IRS procedural rules that IRS was not required to follow. The pre-1998 Code barely acknowledged Appeals’ role in tax administration.   When we rewrote the Saltzman and Book IRS Practice and Procedure chapter on Appeals (currently slated for another refresh this summer) we discuss how the 1998 IRS Restructuring and Reform Act of 1998 (RRA 98) changed that through a host of Code provisions that directly mention Appeals and an off Code but still statutory directive to IRS to ensure an independent Appeals function. In addition, the 2015 codification of TBOR in Section 7803(a)(3)(E) requires that the Commissioner ensure that IRS employees be familiar with and act in accord with taxpayer rights, including the “right to appeal a decision of the Internal Revenue Service in an independent forum.”

In its response to government’s motion to dismiss Facebook argues that RRA 98 and Section 7803(a)(3)(E), taken together, mean that IRS is not free to cut off Appeals’ rights as it has done via the revenue procedure (and as an aside in the IRM when it allows for bypassing Appeals in cases designated for litigation). In making its argument, Facebook claims that TBOR itself creates a substantive right. In response to the IRS view that Section 7803(a)(3)(E) does not directly provide a remedy for violations, Facebook argues that when Congress explicitly directs agency action (as it argues was done with Appeals consideration), an agency cannot dismiss that as meaningless. In addition, Facebook claims that Section 7803(a)(3)(E) justifies the court ordering a remedy for agency violations, through Supreme Court precedent that courts should not read language in statutes as “mere surplusage.”  This argument syncs with our recent guest post on the subject.

The government makes a number of arguments in response, including that TBOR merely expresses general principles and does not create binding rights, the TBOR reference to an independent forum refers to judicial and not administrative review, and that in any event Facebook does not have Article III or statutory standing to bring the litigation.

The matter is scheduled for a hearing in April. We will keep a close eye on this litigation.

Even apart from this case, the broader issue of the role of taxpayer rights in tax procedure is an issue that is picking up steam and is likely to become one of the major issues in tax procedure in the next few years. On PT Christina Thompson recently discussed Alice Abreu and Richard Greenstein’s article on taxpayer rights (which flags some of the issues in this litigation). In addition, Keith and I will be on a panel at the Tax Court judicial conference in Chicago later this month that will consider taxpayer rights, and in May Alice and I will be moderating two panels at the ABA Tax Section Individual and Family Tax Committee and Pro Bono and Tax Clinics Committee that will consider rights in controversies and include more on the Facebook litigation. One of the main promoters of taxpayer rights in tax administration, Nina Olson, is convening the third International Taxpayer Rights Conference in May.

Avatar photo About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.


  1. Norman Diamond says

    Another commenter on the linked post showed how a court has already overturned Section 7803(a)(3)(C) (the right to pay the correct amount of tax) and the same reasoning overturns Section 7803(a)(3)(E).

    Besides, what use is it to gain access to Appeals? The IRS spent several months figuring out where my Local Appeals Office is. I’ve written to them several times. I made sample Notices CP-2000 to show them what they’re legally required to issue to me. They do not reply at all. So I gained access to Appeals and gained nothing.

    A CFR says that taxpayers located outside the US are handled by the Washington, D.C. Appeals Office of the Mid-Atlantic Region. My registered letters to the last known address of that office came back undeliverable as addressed. The IRS finally decided my Local Appeals Office is in Plantation. But so what? No matter what city the Washington, D.C. Appeals Office of the Mid-Atlantic Region is located in, they can ignore everything.

  2. Robinson Lloyd says

    During August 2017 I sued out a mandamus action at USDC Reno seeking a court order for NTA Nina Olson to provide me “clear explanations” per Taxpayer Bill Of Rights, IRC 7803, regarding several anomalies with IRS actions against me.
    My mandamus case was dismissed January 2018 with the Judge holding that “neither the Commissioner or the Advocate have a duty to plaintiff”. I have appealed to 9th Circuit, San Francisco.
    With the appeal I also filed a motion for preliminary injunction asking the court to order the IRS to stop publishing IRS Publication No. 1 – the Taxpayer Bill Of Rights. If NTA has no duty, then you have no rights. So stop publishing a lie. Simple, and good comedy.
    USDC Reno Martin vs. Olson 3:17-cv-00474.

  3. I just noticed that Facebook filed another Tax Court petition on June 26, 2018. Whatever this case involves, it has not been reported in the media, at least that I can find. It might be explained in Facebook’s corporate filings. Docket No. 012738-18

  4. Thomas Linton says

    We received a CP2000 that asserts that we both reported (as “Qualified Dividends”) and did not report (as “Taxable Dividends”) the same payment from a mutual fund and seeks to tax the Qualified Dividends a second time at Ordinary Income rates. When we sent a protest to the IRS, its only response was to issue a SNOD – with no name of the natural person responsible, much less contact information.Yet they claim that they respond, explaining why the ITS does not agree with our position and that the response bears the name of the responsible IRS official, the IRS ID number of that person and his/her.
    telephone number. NO, THEY DO NOT. IRS employees tell me theCP 2000 and the SNOD were issued autonomously by a computer. This is a disgrace. Obviously, the IRS cannot be trusted, nor can any Congress that allows this to stand.

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