I recently wrote about an order issued by Judge Gustafson in the case of Vigon v. Commissioner in which he explained to a Chief Counsel attorney what the attorney needed to provide in order to succeed in a motion for summary judgment in a case involving a penalty. In the case of Hill v. Commissioner, Judge Gustafson continued his lessons to Chief Counsel attorneys on this subject. It appears that the attorney in the Hill case may have missed my prior post since it came out before he submitted his motion and could have been helpful to him in drafting the motion.
Judge Gustafson has the unusual background for a Tax Court judge of service as a career attorney at the Department of Justice Tax Division. Few Tax Court judges have a background as career civil servants litigating cases for the government because becoming a Tax Court judge requires a political appointment and such appointments do not usually go to individuals who have spent their careers working for the federal government in the executive branch where opportunities for the kinds of relationships that lead to a political appointment do not come easy. At the time of his appointment, Judge Gustafson was the chief of the court of claims section of the Tax Division. That section, not surprisingly, represents the IRS in cases brought before the Court of Federal Claims. The work in that section differs from the work in the other civil trial sections at the Tax Division because of the limitations of the Court of Federal Claims. Attorneys in that section do not typically handle bankruptcy cases, do not get involved in collection suits brought by the government, do not have jury trials but do, like the Tax Court, have some unique jurisdictional issues because of the nature of that court and do handle large, high profile refund matters. Like all civil trial sections at the Tax Division, attorneys in that section do have a substantial practice in motions for summary judgment.
Unlike Tax Division attorneys, Chief Counsel attorneys do not have a long tradition in summary judgment work. Prior to the passage of the collection due process (CDP) provisions in 1998, summary judgment motions in Tax Court cases were rare. Even after 1998, it took some time, maybe a decade or so, before Chief Counsel’s office settled upon summary judgment motions as a go to option for resolving CDP cases. So, many of the managers in Chief Counsel’s office did not cut their teeth on summary judgment motions and may not be in the strongest position to review and guide the attorneys in preparing such motions. Judge Gustafson, who would have prepared many summary judgment motions as a DOJ trial attorney and reviewed many as a supervisor there, is in a good position to provide guidance on these motions and he does so again in the Hill case. Now, the question is whether the Chief Counsel attorneys are paying attention to his orders since orders do not get published by the Tax Court in a formal manner but do go up on the Court’s web site each day and can be searched by issue or by judge. Because IRS attorneys may view summary judgment motions against pro se taxpayers as shooting fish in a barrel, they may not take the time to develop all of the evidence necessary to support such motions. They are finding in the recent orders issued by Judge Gustafson that even unrepresented taxpayers may present a challenge in successfully obtaining a summary judgment if the Court carefully reviews the motions submitted.
The IRS assessed a frivolous tax submission penalty against Ms. Hill. The case is set for trial on March 27, 2017. The IRS filed a motion for summary judgment in the case on January 25, 2017. The timing of the filing of the motion is not accidental. For the first several years after the IRS adopted motions for summary judgment as their go to option for CDP cases, they tended to file the motions the week before the trial calendar. Carl Smith and I wrote about this in an article back in 2011. The Tax Court changed Rule 121(a) regarding the timing of filing motions for summary judgment in 2011 to require that they be filed at least 60 days before the calendar. The Tax Court rule drove the timing of the IRS filing of the motion on January 25 for a calendar 61 days later. Keep in mind that some Chief Counsel attorney had this case in their inventory since shortly after it was filed on March 30, 2016. CDP cases do not go back to Appeals after the filing of the petition since the notice of determination always issues from Appeals. Chief Counsel attorneys each handle many cases. Here the attorney decided to wait to the very last minute to file the motion for summary judgment. There could be many reasons for the timing of the filing including that the case was only recently assigned to the attorney filing the motion but the timing of the motion was typical of the cases I see. As with the Vigon case, Judge Gustafson did not wait until the last minute to issue his order in response to the summary judgment motion and did not require a response from the pro se taxpayer.
Judge Gustafson finds that the IRS did not support some of the factual predicates in the motion as required by Tax Court Rule 121(d), sent. 3 and did not address patent legal questions. The IRS did not attach the allegedly frivolous return to the motion. So, the Court could not see what made the return frivolous. The Court describes the Form 12153 submitted by petitioner as containing “handwritten notations, words, and symbols, none of which we can understand” together with a four page handwritten attachment of “similarly indecipherable writing.” The description raises my curiosity and reminds me of some handwritten law school exams I have had to grade. The Court goes on to say that the written matter “does not appear to assert typical tax protestor contentions.” This is important if you remember the types of things that can trigger the frivolous return penalty which we have discussed in a prior post. The gibberish, if that is the right word, made it past the IRS filters for frivolous CDP requests (also discussed here and here) which differ from the filters for application of the frivolous return penalties.
The notice of determination issued by Appeals interpreted the difficult to read Form 12153 as one in which it could not determine if the petitioner intended to dispute the liability and so it did not seek to determine if the IRS should have asserted the frivolous return penalty. The Court, however, assumes that it did. Apparently, Appeals made no mention of a prior opportunity to contest the penalty which might have barred petitioner from raising the penalty in the CDP hearing. Since Appeals did not consider the merits of the penalty and since Counsel did not attach the allegedly frivolous return to the motion, the motion will fail at least in part but the failure does not stop here. The Court notes that on the penalty issue the IRS bears at trial the burden of production under IRC 7491(c) and the burden of proof under IRC 6703(a) which it fails to meet.
The liability at issue here is a penalty which raises the issue of appropriate approval which raises the issue of verification by Appeals. Appeals determination makes no mention of its efforts to verify the IRS gave the necessary approval for assertion of the penalty as required by IRC 6751(b)(1). The motion for summary judgment does not address this issue. To show compliance with this issue, which the IRS would have known had it read Judge Gustafson’s order from December in the Vigon case, it “must show (1) the identity of the individual who made the “initial determination”, (2) an approval “in writing”, and (3) the identity of the person giving approval and his or her status as the “immediate supervisor”.” The IRS failure to address any of these elements in its motion, including attaching the Form 8248 designed for this purpose dooms the motion.
I suspect that the Vigon and Hill motions for summary judgment are not the only ones out there in which the IRS has failed to meet its burden under section 6751. The IRS routinely files summary judgment motions and often does so in rote, cookie cutter fashion based on the last summary judgment motion it filed. A high percentage of cases have penalties. Until it clears out of its system the summary judgment motions that fail to mention the verification process, it may be easy to push back on such motions. Of course, many of these motions involve pro se taxpayers. It will be interesting to see if other judges begin to push back as Judge Gustafson has done on this issue.