Productivity during the Pandemic: Designated Orders April 6 – 10, 2020

This case was originally calendared for the Omaha trial session on April 30 before that session was canceled on March 17. About a month before the cancellation order was served on the parties, however, the IRS filed a motion for summary judgment and the Court ordered petitioner to respond by March 13th. The petitioner did not respond by that date and still had not responded at the time of this order.

Nebraska is one of the few states that did not issue a formal stay-at-home order, but the state did take other precautions such as closing non-essential businesses, closing some schools, and limiting large gatherings, but all of those things happened after March 13th.

The Court directs petitioner to the language in the cancellation order which states that it expects the parties to continue working toward a resolution, which requires resolving the summary judgment motion.

The Court tacitly acknowledges the odd times we are living in and exercises its discretion to waive any consequences to petitioner for failing to respond and extends the time she has to respond until May 1st. Petitioner’s counsel withdrew his representation after this order was issued, which could suggest any number of things during these unusual times.

Docket No. 6344-18, Paul D. Rice v. CIR (Order Here)

In an effort to conduct business as usual, millions of employees around the world have gone from working at their employer’s office to working at home. In this designated bench opinion an employee-petitioner, in pre-COVID-19 times, tried to deduct employee business and home office expenses. He was mostly unsuccessful because he didn’t prove that his employer didn’t have a reimbursement policy. The Court allowed his home office deduction, but it was less than the standard deduction that the IRS had already allowed.

The order itself is somewhat unremarkable, but it got me thinking -as I write this from my daughter’s nursery turned home office- that had the TCJA not done away with unreimbursed employee expense deductions, there would have likely been surge of opportunities and attempts to deduct these types of expenses this year.

I brought a lot of supplies and equipment home from my office, but still incurred some expenses (in addition to the obvious increase in electricity costs) in an effort to work as efficiently as possible. 

I won’t dive into the requirements under section 280A since it is irrelevant in these circumstances, but a lot of people who are required to work from home during this time would have met the principal place of business and convenience of the employer requirements for home office deductions, at least temporarily.

During this time, for many of us in the tax and academic worlds, working from home is necessary for our employer’s business to properly function and needed to allow us to properly perform our duties. Hopefully, many employers will reimburse their employees for the expenses they incur to work from home. There’s a good chance, however, that some aren’t willing or able to do it – at least not until the dust settles and we know what the post-COVID-19 world looks like. 

Docket No. 27571-10, Sandra M. Conrad v. CIR (Order Here and Here)

Two orders were designated for this case which involves a liability that resulted from a section 72(t) early withdrawal penalty. The IRS moved to vacate the Court’s original decision (here) and the first of the two orders grants that motion.

In the original case, petitioner had argued that the age and disability exceptions for the penalty violate the equal protection clause of the Fifth Amendment to the Constitution. The Court applied a rational-basis test and concluded that the exceptions bear a reasonable relationship to a legitimate Government purpose. It found that Congress created the penalty to dissuade people from using retirement savings for non-retirement purposes, and the penalty and its exceptions rationally relate to the “objective of encouraging taxpayers to save for periods of their lives when they might not be able, or wish, to work.”

The Court’s reason for vacating its decision, however, is not because it is reconsidering petitioner’s constitutional argument. Rather the Court vacates the decision to allow the parties to determine the petitioner’s correct liability, since the amount may be impacted by an NOL carryback she can utilize. The second order of the two changes the language in the Court’s decision to sustain respondent’s position rather than the deficiency amount and directs decision to be entered under rule 155. 

As a separate but related matter fitting with this pandemic-themed post, the section 2202 of the CARES Act provides an exception to the early withdrawal penalty for individuals impacted by COVID-19, specifically for those who have been diagnosed with the virus, have a spouse or dependent diagnosed, or who experience adverse financial consequences from the virus, such as being laid off, furloughed, or unable to work due to being sick or lacking childcare. This exception seems to fit with the other exceptions that rationally relate to Congress’s objective, since many people are unexpectedly finding themselves in a period of their lives during which they are unable to work.