Tax Court Addresses Verification Requirement in Trust Fund CDP Case

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Seventeen years into CDP and the Tax Court is still issuing a healthy dose of full TC CDP opinions. Yesterday was another, with the court in Lee v Commissioner listing precisely what Appeals has to verify in cases involving trust fund penalty assessments and also clarifying that it will have jurisdiction to consider whether Appeals satisfied its verification requirements even if the taxpayer does not explicitly raise that issue in its administrative request for CDP review. The case distinguished the court’s jurisdiction over matters that taxpayers must affirmatively raise on appeal under Section 6330(c)(2) (such as collection alternatives, spousal relief and challenges to the underlying liability) with the requirement under Section 6330(c)(1) that Appeals must verify that IRS has met the requirements of “any applicable law or administrative procedure” in making the assessment. Lee thus clarifies jurisdictional implications of the distinction between the court’s power to consider Appeals’ verification requirement from other issues which the taxpayer must affirmatively raise.


We have discussed CDP extensively over the last few months. The cases seem to come fast and furious. CDP cases consume a healthy dose of administrative and judicial resources; as the recent NTA Annual Report describes, CDP was the 5th most litigated issue last year, though the number of CDP cases issued in 2014 declined somewhat from the prior year. In fact, in the revised Saltzman and Book, Keith is the principal drafter of a new standalone chapter on CDP (the CDP chapter coming out via Checkpoint later this spring).

Keith discussed Mason v Commissioner last month and how taxpayers can litigate the merits of a trust fund recovery penalty when the taxpayer fails to receive a proposed assessment of a trust fund recovery penalty (IRM provisions in 5.7.6 describe that process in detail). Assessment of a trust fund recovery penalty is not subject to deficiency procedures, though the statute refers to the deficiency procedures because the IRS must issue the notice to an “address as determined under section 6212(b).” Alternatively, the statute says that the notice can be given “in person.”

What is Lee about? In Lee, IRS admitted that it did not mail the proposed assessment but claimed to have personally delivered the notice of proposed assessment of trust fund penalties (issued in Letter 1153 and Form 2751 though sometimes referred to generally as Form 1153) to Mr. Lee at a meeting on March 30, 2010. Mr. Lee claims that the IRS did not serve him the 1153. In any event, IRS assessed the penalty about three months after it claims to have served the proposed assessment; it then soon thereafter issued a notice of intent to levy and notice of federal tax lien that Lee responded to by filing a request for a CDP hearing. At the hearing there was back and forth regarding a collection alternative. Appeals issued a determination sustaining the assessment; Lee petitioned to Tax Court claiming in part that another employee was the responsible person but that the other employee’s health problems led to the shortfall. The Tax Court remanded the matter back to Appeals to consider whether Lee received 1153, whether he had an opportunity to challenge the assessment, and application of a payment to the assessment.

On remand, Appeals held a supplemental hearing, and a settlement officer received the case transcript which stated that Lee was personally served with the 1153 on March 30; the officer also faxed Lee an unsigned copy of the 1153 that was dated March 30, 2010. As the opinion describes, the settlement officer “determined that petitioner had received the Letter 1153, that the Letter 1153 had afforded petitioner appeal rights which he failed to exercise, and that petitioner therefore could not raise at the supplemental hearing the underlying liabilities for the trust fund recovery penalties assessed against him.”

After a Tax Court status report reflecting the supplemental hearing, IRS filed a motion for summary judgment stating that there were no disputed issues of material fact and the levy and NFTL should be sustained as a matter of law. In response to a motion for summary judgment, Lee argued that he was not a responsible person.

In the opinion yesterday, the Court held that there was some uncertainty regarding the supposed personal delivery of the 1153:

We conclude that the record is not sufficient for us to decide that the Letter 1153 was served on petitioner. For example, respondent has not provided the Court with a copy of the Letter 1153 that respondent contends was personally delivered to petitioner. Nor has respondent provided a statement, under oath, by the revenue officer, that he personally served the Letter 1153 on petitioner on March 30, 2010. Instead, the record contains only a copy of the ICS Transcript entry on March 31, 2010, the day after the meeting was held, stating that the Letter 1153 had been previously served on petitioner at the meeting. Indeed, the entry on March 30, 2010, the date of the actual meeting, contains no statement regarding the personal delivery of the Letter 1153 to petitioner. Moreover, neither entry, on either date, identifies the person who respondent contends delivered the Letter 1153 to petitioner.

More importantly though the case fleshes out the verification requirements in trust fund CDP cases:

In a hearing held pursuant to section 6330 to collect trust fund recovery penalties, the basic requirements the Appeals officer must verify include: (1) the Service’s proper assessment of the trust fund recovery penalties, see, e.g., secs., 6201(a)(1), 6672(b); (2) the responsible person’s failure to pay the liability after notice and demand for payment of the liability, see secs. 6303, 6321, 6331(a); and (3) the Service’s notice to the responsible person of the NFTL or the intent to levy…

Lee likely rose to a full TC opinion because it extended the Tax Court’s discussion of verification requirements that have arisen in deficiency cases to 6672 cases:

Because the Service uses Letter 1153 to provide the required notice, the proper issuance of the Letter 1153 to petitioner is a requirement of law and administrative procedure whose execution the Appeals officer must verify. See sec. 6330(c)(1); Dinino v. Commissioner, As we stated in Dinino, pursuant to our holding in Hoyle v. Commissioner, 131 T.C. 197 (2008), this Court will review any verification issue even if the taxpayer did not raise the issue at the hearing. See sec. 6330(c)(2)(B); Dinino v. Commissioner, 2009 WL 4723652, at *7-*8.

Lee goes on to discuss Hoyle and Giamelli and the rationale distinguishing between court review of 6330(c)(1) and (c)(2):

In Hoyle, the taxpayer asserted that the Service had failed to properly mail a notice of deficiency before assessing the income tax in issue. Hoyle v. Commissioner, 131 T.C. at 200. In Hoyle, following the rule in Giamelli v. Commissioner, 129 T.C. 107 (2007), the Commissioner argued that the taxpayer could not raise the issue of receipt of the notice of deficiency because the taxpayer had not raised it at the hearing. Hoyle v. Commissioner, 131 T.C. at 200.

The Court explained in Hoyle that the Giamelli rule, which prohibits taxpayers from raising in Court any issues not raised at the hearing, applies only to “any relevant issue relating to the unpaid tax” which the taxpayer “may raise” under section 6330(c)(2), not to the verification requirements of section 6330(c)(1). Hoyle v. Commissioner, 131 T.C. at 201-202. Section 6330(c)(2) issues such as spousal defenses or collection alternatives cannot be a part of the Appeals officer’s determination unless raised by the taxpayer. Id. The concern underpinning our holding in Giamelli is that litigating new issues in Court without any prior consideration by the Service would frustrate the administrative review process created by section 6330. Id. In contrast, the section 6330(c)(1) verification requirements will always form part of the determination because the statute requires their consideration at the hearing regardless of whether the taxpayer raises the issue. Id. Because section 6330 requires Appeals officers to independently consider section 6330(c)(1) issues at the hearing, they are not “new” when asserted in Court and there is no danger of frustrating the administrative review process.


The takeaway is that in trust fund CDP cases Appeals should in its determination satisfy the specific verification requirements that Lee identifies. A failure to do so could generate a remand. If there is some uncertainty as to whether a person has received a proposed assessment that IRS claims was served in person, then it is likely as in Lee the matter may not be appropriate for summary judgment, though one might expect in future cases IRS counsel to include along with the summary judgment motion a sworn statement from the revenue officer attesting to that fact.

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


  1. For many years in the ’00s, CDP was the most frequently litigated issue according to the TAS annual report to Congress. While it has fallen from that height in the last few years according to TAS’ count, I think CDP is still the biggest use of judicial resources on any one legal issue. The reason for my view is that, for its count of litigated cases, TAS considers only cases that produce T.C., T.C. Memo., or T.C. Summary Opinions. That’s, in my view, too small a universe to consider.

    Since 2011, the Tax Court has been publishing on its website orders that are issued each day on matters that are not routine (such as notices of trial). The Tax Court calls these “significant orders”. Nearly every day, there is a significant order in a CDP case granting an IRS motion for summary judgment or denying it and remanding the matter to Appeals. These summary judgment or remand orders are really the length of opinions — often 5 or 6 pages single-spaced. There seems to be no rhyme or reason why the orders are not set out in published opinions. Lee is one of many examples where a Tax Court opinion concerns a ruling on a motion for summary judgment, so its is not true that only post-trial or fully-stipulated cases get published opinions. Nina Olson is aware of these designated orders, but has decided that TAS should not change its methodology and count them.

    I recognize that counting orders as litigations might become unworkable, since many orders are 2-page non-CDP orders on such issues as pleadings and discovery. Further, changing the methodology of what counts as a litigation for purposes of the statistics furnished to Congress would make fair comparisons of statistics in the future to statistics of the past impossible. But, I would still propose that, in the future, orders that are posted by the Tax Court as “designated orders” that either remand a CDP case to Appeals after a contested issue or that fully dispose of a case (whether it is CDP or another jurisdiction), should be counted, so that Congress has a better sense of the real extent of serious litigation that happens in the Tax Court.

    Many judges seem to have few published opinions, but have many lengthy designated orders. Judge Holmes comes to mind as a judge who usually is a bit below average on published opinions, but is above average in writing many fascinating multi-page designated orders. Such judges — and really all Tax Court judges — are not being given credit for how much time they invest in rulings that do not result in published opinions but do resolve cases.

    There are also some judges who like to do occasional bench opinions. Judge Gustafson is one. Those bench opinions don’t get counted by TAS either, though the judge in the case issues an order (which the Tax Court posts as a designated order) that attaches the relevant pages from the transcript when the transcript is received from the court reporter. I would also count these bench opinions in the litigated cases category for purposes of TAS’ report to Congress.

  2. Oops. I meant that the Tax Court calls the orders “designated orders”. I accidentally said “significant orders” sometimes in my prior post.

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