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Summary Opinions for 02/07/2014

Posted on Feb. 8, 2014

Before getting to the interesting tax procedure items that jumped out at us this week, I have to thank our guest bloggers again and highlight the great content they added to Procedurally Taxing.

Professor J. Richard (“Dick”) Harvey of Villanova wrote an interesting post on the surprising decline in corporate disclosure on the schedule UTP.  As many of you know, Professor Harvey was instrumental in creating the UTP regime.  Carlton Smith guest posted again, providing another update on the Rand case and what the Service may be contemplating in wake of its loss.   And, from late last week, we had Andrew Roberson of McDermott Will & Emery adding his thoughts on the rule of lenity and other statutory construction in tax cases in the wake of Mayo.  Also from last week, Professor Sedo from U. of Minn. Law and third year student Frank DiPietro discussing Ibrahim v. Comm’r, and issues faced by unrepresented taxpayers.  Thank you all again.  The posts provided great insight and were very entertaining.

In addition to some brand new content, Summary Opinions this week also has a few important updates to cases we covered before.

  • First to the Jackson case that Les wrote on in December, and we’ve updated in Summary Opinions before, where the Tax Court issued an order questioning whether a Form 3219N was in fact a SNOD providing the Court with jurisdiction to hear the matter.  The Service responded to the request for briefing on the matter claiming it was a valid SNOD, but the pro se taxpayer did not respond.  The Court on Friday issued a new order in the case, leaving this matter open and adding it to the matters to be discussed at oral argument.  An LL.M. student from Georgetown, Reuben Muller, was the first person I saw covering this matter in early December, and he has been providing updates (including the first one I saw yesterday).  Reuben has a good handle on the matter, and his comments were as follows, inducing a link to the order:

STJ Armen issued an order today in this case.

Quoting from the Order: “One might conclude, therefore, that petitioners either are unable to show cause why the Court should not dismiss this case in its entirety or affirmatively think that the case should be so dismissed.”

I think that another plausible explanation is that pro se petitioners may not be fully aware of the necessary legal argument they would need to present to defend jurisdiction in the Tax Court. Nor are they necessarily skilled in doing so.

Recall that the IRS took the position that this was a valid NOD. The petition, Petitioners’ only pleading in this case, (implicitly at least) takes the position that the Notice was a valid NOD. If the Court can sua sponte decide it doesn’t have jurisdiction when not pleaded by the parties in a case — which is my understanding — I don’t understand what is holding back the Court.

Also note that the Court never ordered a response to the government’s SJM as to jurisdiction for TPW’s case. All of this is now rolled into a separate hearing the week of the trial.

  • A few weeks ago, Summary Opinions covered the case of Clark v. United States, where the Court of Federal Claims held it lacked jurisdiction to hear a refund suit because the taxpayer had not paid the tax shown due in the SNOD.  The pro se taxpayer requested the Court transfer the case to the Tax Court for prepayment review.  The Court transferred the case to the Tax Court in early January, holding this was appropriate and “in the interest of justice” under 28 USC § 1631, and many practitioners and commentators were surprised, stating they have never seen this occur.  On February 3, the Court of Federal Claims reconsidered, and reversed its decision to transfer the case in this order.  The government contended the Court lacked the authority to make the transfer, and, like in Jackson, the pro se taxpayer failed to respond.  The thrust of the government’s position is that the transfer statute limits transfers to a “court” defined under 28 USC § 610, which does not include the United States Tax Court.  The statute does have somewhat broad language allowing for transfers to “such other courts”, but prior holdings from the Court of Federal Claims precluded the Court from taking the position that a transfer was allowed.  Perhaps a different District Court would feel differently.
  • The Taishoff Law Blog alerted us to a Tax Court scam that has caught the interest of the Court.  Apparently, letters and emails appearing to be from the Tax Court are being sent, requesting money from the recipient.  The Tax Court notice states the “United States Tax Court does not solicit money via letter or email.”   What a bunch of jerks; they should focus on victimless crimes, like insider trading or punching someone in the dark.
  • From Jack Townsend’s Federal Tax Crimes blog, some comments on the TRAC report on IRS criminal prosecutions.  Looks like Barry O. is nailing some tax criminals, or at least more than Bush II.  I should note, I have not looked into these statistics or the methodology (hopefully, Mr. Townsend will do that eventually, as he seems to be a trustworthy gentleman).
  • Although Tax Girl and Les Book have both been without power for days, you will note that the tax blogging from them both continues.  Weather disaster areas cannot keep Chester County tax bloggers down!  Respect.
  • Les had two great posts this week.  One was on willful blindness and tax compliance (but mostly peeing in pools), and the other on the EITC statistics (and tax compliance, but no potty humor).
  • Agostino & Associates has issued its newsletter, which can be found here.  The letter has articles on issues with joint returns and confidentiality, offshore compliance, and a great article on comparing withdrawing CDP requests and the rescission of the 6330 Letter when a Revenue Officer wants to consider the matter for a longer period of time.
  • From Accounting Today, a summary of recent tax fraud cases—mostly of the preparer variety.
  • From the best law firm in the world, Gawthrop Greenwood has a post on the Third Circuit holding in Klein v. Weidner, where the Court stated punitive damages are available to creditors under the PA Fraudulent Transfer Act.  This was not a tax case, but the Service is permitted to look to state law on fraudulent transfer issues.  In general, the Service has the same rights as any other creditor under a state FTA.  See Wiener v. Comm’r, 12 TC 701; IRM  Not sure how that works with punitive damages.
  • I had no idea this was going on here in Pennsylvania—apparently, State Representative Todd Stevens of the 151st district has proposed raiding the Race Horse Development Fund (what the hell is that?) to pay for education funding.  Apparently, a portion of our casino tax is set aside to assist in the development of race horses.  In my mind, I see scientists building a bionic, “better…stronger…faster” horse, but it’s not that cool; just kickbacks for race track operators.   Tax Analysts has coverage.  As I have a Janey about to enter school (makes sense if you read the post and know I have a four year old daughter named Jane)– and I like it when other people have to pay taxes instead of me– I’m not against this plan, but I also somewhat agree with the author that broad based tax reform that ensures funding for education would be a good idea (natural gas, I’m looking at you).
  • From the libertarian Econlog of The Library of Economics and Liberty is an editorial on tax compliance not being tacit consent to unfair taxes.  I largely only link to this because it links to and discusses the Minnesota tax compliance experiment from the 1990.  The experiment attempted to test the impact of compliance based on various strategies, included increased audits with prior notice to taxpayers, enhanced customer service, redesigned forms, and information letters provided to taxpayers highlighting the importance and extent of voluntary compliance.  The results showed that the notice about others complying had the greatest impact.  It would be interesting to do a blind study on the impact of such a statement on self-employed folks at the federal level, and see what the audit results would be.  Please let me know if any of you know about similar studies done by the Service or other taxing authorities.           

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