This case was presented before the Court to review a penalty imposed against the plaintiff for the untimely reporting of his status in reference to a foreign trust. Plaintiff maintained the IRS applied the incorrect percentage of penalties prescribed by IRC 6677. Under this statute, the civil penalty for filing Form 3520 late is “the greater of $10,000 or 35% of the gross reported amount” unless the taxpayer filing the return is an owner/grantor of the foreign trust. Plaintiff maintained that he was the owner/grantor of the trust as opposed to the beneficiary (which would reduce his penalty from 35% to 5%), paid the penalty assessed in June 2017, and instructed his attorney-in-fact to file a claim for refund in August 2017. The attorney-in-fact, who was listed on the plaintiff’s Form 2848 power of attorney, prepared the claim for refund (IRS Form 843), signed on the line provided for the paid preparer, and filed it without the taxpayer’s signature. In response to the suit, the government filed a motion to dismiss for a lack of subject matter jurisdiction on the basis that a claim for refund was not “duly filed.” Their contention was the power of attorney issued by plaintiff did not provide the attorney-in-fact the authority to sign a claim for refund under penalty of perjury as required. The Court considered this a unique issue, as they had not previously encountered a situation where the person signing the return as the paid preparer was also the taxpayer’s attorney-in-fact under a power of attorney.

Upon review, the Court never gets to the merits of the case although the prevailing position is that the document should be signed under penalty of perjury. Instead, the court looks to determine if, by simply executing a general IRS Form 2848, the plaintiff conveyed the necessary authority for his attorney-in-fact to sign a refund claim on his behalf. After reviewing the instructions for the Form 2848, Form 843, and the requisite case law involving similar issues of powers of attorney, the Court granted the Government’s motion to dismiss for lack of subject matter jurisdiction.

The Court arrives at this conclusion by first reviewing the instructions provided for the Form 843. The instructions state that the authorized representative can file the form for the taxpayer as long as he includes a copy of the 2848 authorizing the representative to complete this particular request.

Under the Form 2848 instructions, some actions are considered general grants of authority while others must be specifically stated. The general actions include the authority “to receive and inspect [the taxpayer’s] confidential tax information and to perform acts that [the taxpayer] can perform with respect to the tax matters described below [on the power of attorney].” For purposes of the taxpayer in this case, these general actions included “income tax (Form 1040), civil penalties (From 3520 and 3520-A), and matters relating to foreign banks and financial account reports.” When the Centralized Authorization File system receives a power of attorney with general actions authorized, those authorizations are recorded on the IRS’s systems; however, for specific actions the instructions for Form 2848 provide that if the power of attorney is “a one-time or specific-issue grant of authority to a representative or is a POA that does not relate to a specific tax period…the IRS does not record [it] on the system. Claims for refund are considered a specific-use not recorded on the system.” Because the claim for refund requires a specific grant of authority and the claim must be “duly filed” in order to be considered by the Court, whether the authority was actually given goes to the heart of the issue of subject matter jurisdiction. 26 U.S.C. 7422(a). The burden of establishing jurisdiction falls on the plaintiff to prove it by a preponderance of the evidence. Reynolds v. Army & Air Force Exch. Serv., 846 F. 2d 746, 748 (Fed. Cir. 2008).

In an attempt to establish subject matter jurisdiction, plaintiff cited Aronsohn v. Commissioner. In Aronshohn, the Third Circuit explored the issue of whether a general power of attorney authorized the taxpayer’s authorized representative to sign a waiver (Form 870-
AD), which precludes the taxpayer from later filing a refund claim.   According to that court, “a more specific power of attorney” is not required before the authorized representative could give up the taxpayer’s potential future refund claim. The Government, however, argues that this is only one part of the requirement. It contends in addition to authorizing the representative to sign the claim for refund, the claim for refund must be signed under penalty of perjury like an actual return.

“The statement of the grounds and facts [of the claim] must be verified by a written declaration that it is made under penalties of perjury. A claim which does not comply with this paragraph will be not considered for any purpose for claim for refund or credit.” 26 C.F.R. 301.6402-2(b)(1).

Although plaintiff draws a distinction between returns and refunds that the Court recognizes, the Court follows the guidance provided in the regulations. The Court also reviews the Form 2848 requirements for giving a representative authority to sign a return. The form requires a taxpayer to check a box on line 5 allowing his representative to sign a return and to expressly state the representative is signing the return under penalty of perjury. No such requirement is specifically stated for Form 843; however, since the claim for refund must also be signed under penalty of perjury the Court was not convinced plaintiff provided a reason why an express statement should not also be required. Without the mandate that the claim is being signed under penalty of perjury, Form 2848’s general authority cannot authorize a representative to execute this action or create a “duly filed” claim for refund. As an ancillary matter, the Court noted that even if the POA provided the requisite authority necessary to file the claim for refund, there may be an issue with whether the representative’s signature on the preparer line was sufficient, or if the representative would also have been required to sign the plaintiff’s name on the signature line.

As an additional matter, the Court briefly reviewed the informal claim doctrine (which has been discussed in previous posts on Palomares v. CommissionerandVoulgaris v. United States) to determine whether it should be applied in this case to prevent plaintiff from having to refile the claim. The Court rejects the doctrine’s application and does not use it to remedy the jurisdiction issue, noting that plaintiff still has time to file a timely claim for refund. In fact, prior to the Court’s decision, plaintiff filed an amended claim for refund in January 2019, which he signed under penalty of perjury. Thus, plaintiff must allow the Service to make a determination on the amended claim. If that claim is rejected or not decided within 6 months, plaintiff will be permitted to file a new refund suit.