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Summary Opinions for 5/9/14

Posted on May 14, 2014

The ABA Tax Section meeting was great, and we got a lot of wonderful ideas for writing (and hopefully roped in a few excellent guest bloggers, including Dan Alban from yesterday’s Loving post).  And although we were on a posting vacation in DC, the tax procedure did not stop.  Here are the things we missed last week while basking in the glory of three days of tax talk:

  • The Tax Court decision in Carpentier v. Comm’r reviewed the request for fees and costs for an interest abatement case.  The taxpayer attempted to lump some of the fees and costs from the underlying deficiency battle in with the interest abatement case, and the Court held that was “statutorily, jurisdictionally, and chronologically separate and distinct” from the abatement review.  The Court also noted an inefficiency and inequity created by the statutory structure that prevented the taxpayer from raising the interest abatement during her deficiency action, stating:

We recognize that petitioner’s inability to raise an interest abatement claim in her 2004 deficiency proceedings resulted in her inability to be the prevailing party in those proceedings and to recover costs and fees for respondent’s delay. Under existing law, however, a taxpayer is left with no remedy or ability to recover costs caused by the delay or actions of the Commissioner’s employees during the period giving rise to the abatement of interest claim. That result, as highlighted by the circumstances of this case, is unfortunate and ironic, but something that can be remedied only by Congress.

The Court did allow fees for the abatement action, but cut the fees for both a paid professional and a clinic that was assisting.  The Court appeared to look closely at each bill, and culled away portions that it thought were not specific enough or backed by the facts of the case.  This could be instructive for practitioners contemplating such a request, who should be very specific and accurate in keeping time.

  • In an opinion (Flake v. Comm’r) stay at home parents around the world should love, the Tax Court has held that poor recordkeeping and being disorganized was not indicative of fraud, but “attributable to…[the taxpayer’s] competing duties as a mother to numerous children rather than fraudulent intent.”  My wife just said, “told you so, what is your excuse.”  Uncool.  I parent…sometimes.
  • SBSE has  released internal guidance on its Fast Track Settlement (FTS) program.  SB/SE FTS is a non-mandatory dispute resolution program where SB/SE and a taxpayer can take specific issues to Appeals for review, however, the case remains in SB/SE.  The guidance provides a strong overview of which taxpayers may be eligible, when SB/SE should consider using FTS, the process and how resolution may be obtained.  FTS and other alternative dispute resolution methods available before the various Exam groups are discussed in great detail in Saltzman and Book, Chapter 8.16, which was recently rewritten this past year.
  • Another week, another FATCA notice (Notice 2014-33), this time with the Service indicating that for 2014 and 2015 it will consider whether a FFI made a good faith effort to comply with the FATCA regs.  The notice contains a fair amount of information, full coverage of which is beyond the scope of SumOp, but it is worth noting that the Service will look at good faith in enforcement in certain circumstances.  Also worth noting is that some accounts opened from July 1, 2014 to January 1, 2015 can be treated as preexisting obligations for due diligence, withholding and reporting.  Both of these points were hot topics at the ABA FATCA Update for Onshore and Offshore Private Investment Funds talk, as was how to actually use the online registration.  The panel did a great job, but could not add much as to what “good faith” was.  They did say to start the process ASAP, and to create written policies to follow.
  • I suspect someone at DOJ invested slightly too much of his or her allowance in Beanie Babies and is now looking for retribution.  Here is a nice summary by Janet Novack at Forbes of the DOJ’s argument in its appeals brief on the Ty Warner weak slap on the wrist.  They have called this “substantively unreasonable”.  Ms. Novak notes the government hasn’t won this type of appeal since SCOTUS said the sentencing guidelines were deemed not binding.  Jack Townsend also has a great summary on his Federal Tax Crimes Blog, where he discusses if Mr. Warner’s sentence will survive appeal.  From Jack’s post, the line of the day (week, year?): when the criminal tax client asks his lawyer if he will get the same leniency in sentence, the response should probably be, “You’re not rich enough to get that quality of justice.”   
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