In Some Cases IRS Seeks to Conflict Out Lawyers Who Represented Taxpayers in CDP Hearings

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Today we welcome back Carl Smith who raises an important issue for practitioners who have CDP cases. Les

A solo practitioner friend of mine in a pending Tax Court Collection Due Process case two weeks ago received a letter from IRS counsel demanding that she withdraw because the solo practitioner was at the CDP hearing and has indicated that, if the case proceeds to trial, she may want to testify as to what went on at the hearing.  The reason for her testimony would be to fill in gaps in the CDP hearing record.  Since this is the third time in my career that I have run into this problem myself or heard of someone who did, I thought it was worth a post.  This may present an inherent problem with the way CDP records are maintained.


As we all know, the record in a CDP hearing at Appeals is an informal one.  It should include all correspondence between the taxpayer and the Settlement Officer and the Settlement Officer’s Case Activity Record Print.  That Print (for those who have never seen one) consists of entries that are dated and indicate time spent, like attorney billing sheets.  The entries on the Print are sometimes as terse as attorney billing sheet entries, too.  Often, little can be gleaned from them of what was discussed on the various unrecorded phone calls and at in-person face-to-face conferences.  As an example of such a terse entry, I give the entry for a 45-minute CDP hearing that I held in the Tucker case in 2005.  The entry basically just read:  “Had a telephonic hearing. Prof. Smith spoke for the taxpayer, who was on the line.”  Not a word of the multiple issues discussed!  Because I felt I could never trust Settlement Officers to write much in their Case Activity Record Prints, it was always my practice to follow up any telephone discussion with a letter to the Settlement Officer summarizing the call or conference and what the next expected steps were.  This was my way of writing the administrative record, since I never got a return letter contradicting what I summarized as just having happened, and my letter would later appear in the administrative record in Tax Court.

Unfortunately, even taking the precautions I did was not always enough to end up with a complete administrative record reflecting all discussions.  And, then, it is fairly common for the IRS to mislay parts of the administrative record.  Thus, even in the Tucker case, where there were cross-motions for summary judgment, I had to submit affidavits by which I filled in gaps in the administrative record — which affidavits accompanied the motions and responses.  I worried, though, whether, at least if the case went to a trial, I would also be able to testify for the taxpayer to fill in the gaps in the administrative record.  My concern was the ABA Model Rules of Professional Conduct, which the Tax Court has adopted under its Rule 201(a) and variations of which all states by now have adopted.  ABA Model Rules Rule 3.7 Lawyer As Witness, provides:

(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless:

(1) the testimony relates to an uncontested issue;

(2) the testimony relates to the nature and value of legal services rendered in the case; or

(3) disqualification of the lawyer would work substantial hardship on the client.

(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer’s firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9.

In Tucker, I hoped that anything I would have to say as a witness was “uncontested”, but I wasn’t too sure of that exception.  In lieu of that exception, I hoped to rely on the exception that my disqualification “would work a substantial hardship” on Mr. Tucker, who was then in debt to the IRS and who could not afford to hire any counsel.  I was representing Mr. Tucker for free as a client of the Cardozo School of Law Tax Clinic, which I headed at the time.  Luckily, the IRS lawyers in the Tucker case never raised the issue under Rule 3.7.  But, I know two subsequent cases where the issue was raised — the most recent being my friend’s case.

Before getting to my friend’s case, though, I want to mention the Kuretski case, on which there have been a number of posts in the last year that can be read here, here, here, and here.  Kuretski currently involves a challenge to the President’s removal power over Tax Court judges.  We are in the midst of drafting a cert. petition on that issue.  But, the case originally arose from a CDP hearing in which the Kuretskis were represented (for a modest fee) by a local attorney, who I believe was a solo practitioner.  Frank Agostino tried the Kuretski case in the Tax Court.  He wasn’t the local attorney, but he just happened to be at the calendar call where the local attorney told the judge that she needed to testify, since the Case Activity Record Print was missing entries for several telephone calls she was certain she made in which she proposed an alternative installment agreement.  The IRS brought up Model Rule 3.7, and the judge told the local attorney that she could not both be lawyer and witness.  At that point, Frank, being the great guy he is, jumped in and volunteered to take over the case pro bono.  Frank promptly called the local attorney to the stand to fill in the gaps in the record.  Then, Frank questioned the Settlement Officer about her recollections. Unfortunately, taxpayers represented by attorneys in CDP cases can’t all count on Frank being present at their calendar calls.

The most recent case involves an offer in compromise discussed as part of a CDP hearing in which my upstate New York friend, a solo practitioner, represented the taxpayer at the Appeals CDP hearing.  I believe that cross motions for summary judgment are pending in the Tax Court case she brought in response to the notice of determination denying the OIC.  Oral argument was had on the motions earlier this year, and the judge in charge of the case raised several serious concerns both about IRS procedures followed in the case and what powers he had to remedy any problems.  The judge asked the parties to file memoranda on the various issues by early September. The judge insisted that he wanted the IRS lawyers to consult the National Office before giving their positions on certain issues.  One of the issues on which the judge requested briefing was whether Rule 3.7 precluded my friend from testifying at a trial in the case to fill in alleged gaps in the administrative record.  (BTW, some of that missing administrative record has recently reappeared out of nowhere.)  Not waiting for the taxpayer to respond in September, the IRS sent a letter to my friend telling her that it thought she had an immediate conflict under Rule 3.7, and so could not even respond to the judge’s order.  It threatened to file a motion to disqualify, which it is my understanding, the IRS attorneys will be doing at the behest of the National Office, which supposedly feels strongly about the conflict issue.  My friend is in an area of New York in which people who do tax controversy work are few and far between.  No one in the area has volunteered to take over the case from her, and she is loathe to press everyone she knows in upstate New York on substituting for her — likely pro bono, since the client couldn’t afford more lawyers — since the issue of trial testimony may be mooted by the granting of one of the motions for summary judgment.  As it is, my friend is never going to be compensated enough for the work she is already being ordered to perform in the case.

It seems to me that it is time for the Tax Court to either order the IRS in CDP hearings to create more complete records (i.e., recording all telephonic communications and face-to-face meetings) or issue a ruling that, because CDP cases are already brought by people in financial distress, attorneys for taxpayers in such cases will automatically be allowed to testify to attempt to complete incomplete administrative records — i.e., issue a blanket ruling under Model Rule 3.7.  As Judge Vasquez noted in his dissent in Giamelli v. Commissioner, 129 T.C. 107, 125 (2007): “The current state of section 6330 jurisprudence leaves us with two equally unpalatable choices: (1) Overrule Davis and require the IRS to conduct more formal hearings in order to create a record sufficient for the Court to fulfill our review function, or (2) steadily become more handcuffed and less able to meaningfully review section 6330 cases.”  Hopefully, a ruling in favor of my friend will issue in her case in a published opinion.  This area needs guidance.  Taxpayers in CDP cases should not be expected to hire two different lawyers — one for the Appeals hearing and another for any Tax Court appeal.

Carlton Smith About Carlton Smith

Carlton M. Smith worked (as an associate and partner) at Roberts & Holland LLP in Manhattan from 1983-1999. From 2003 to 2013, he was the Director of the Cardozo School of Law tax clinic. In his retirement, he volunteers with the tax clinic at Harvard, where he was Acting Director from January to June 2019.


  1. Great post. A real potential trap. I have heard some suggest that you bring an unaffiliated person with you to avoid the problem.

  2. Kathleen Adcock says

    Great advice for papering the trail, as it were. Might I also suggest two mundane suggestions to the process: (i) all correspondence be sent certified with proof of delivery, with an exterior reference code to the letter within and keep copies of the envelopes, and (ii) add a standard paragraph requesting that the agent please respond with any discrepancies to the summary provided within 30 days of the signed receipt.

  3. To avoid this mess, simply do what I do on all IRS cases, conduct all IRS hearings/conferences in-person and audio record every hearing/conference as federal law permits, so that a truthful administrative record is consummated. 26 U.S.C. § 7521. In doing so, we lawyers create a 100% truthful administrative record consisting mostly of correspondence letters and the remainder audio recorded hearings/conferences which are court reporter transcribed into a written hearing transcript. Tax Court judges will be impressed, clients too will be impressed, we as tax defense lawyers need not testify as fact witness because the audio recordings and transcripts may be introduced into the evidence record. Seems to me that leaves IRS’ lawyers no ability to motion for removal/disqualification due to purported conflicts.

  4. Carl writes: “Unfortunately, taxpayers represented by attorneys in CDP cases can’t all count on Frank being present at their calendar calls.” In New York City, you can – whether its me or another volunteer from the NYCLA calendar call program, we can generally get representation to assist an attorney that needs to testify on behalf of a taxpayer in a CDP case. Thank you for the kind words.

  5. I handled a case in Manhattan last year and the IRS attorney was gunning to have me removed as I’d represented the client through the OIC and CDP processes. Fortunately, the judge managed the situation well and just told me to do my best to refrain from testifying at trial.

  6. Bob Kamman says

    WWLLD? Considering the futility of CDP hearings and Tax Court cases based on IRS definition of due process, I wonder why cases are not just submitted on a written record to SO’s, who have little or no discretion anyway when it comes to following the decision-making matrix. The difference between IRS procedural formalities and kabuki is that everyone at the Japanese theatre admits that it’s just a dance.

  7. A J Decaria EA says

    Another option would be to have a non-attorney, an EA or CPA, handle the administrative actions such as representing in the OIC or CDP process. I do work for several attorneys who subcontract with me for assistance in administrative matters. It would seem that would leave them free to represent in Tax Court.

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