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Summary Opinions for 7/18/14

Posted on July 24, 2014

A quick thank you to Christine Speidel for her guest post last week on the unanswered questions regarding ACA and tax procedure.  If you have not yet reviewed, please take a look and check out the interesting comment from one of our readers.  Here are a few other items from last week that caught our eye:

  • Good news for employers.  Y’all can’t be held responsible for the satanic requirement of requesting a Social Security Number from your prospective employees.  Congress and/or the IRS is the devil that makes you do that, and that evil likely won’t be excised any time soon.  See Yeager v. Firstenergy Generation Corp., where the district court tossed a religious discrimination suit brought by a prospective employee who was denied an internship because of he would not supply an SSN; he believed identification by any number, including an SSN, was the “mark of the beast”.   That’s got to be tough in the deli line.
  • The First Circuit has held that interest owed by a transferee under Section 6901 is not calculated under the Code, as it would be for the transferor, and instead is calculated under the applicable state law.  See Schussel v. Werfel.  I was surprised by the holding, and I have not fully digested it yet, as it is very long.  I won’t delve too deep into the analysis, but the Court relied on the 1958 Supreme Court case, Commissioner v. Stern, which held that “where…state fraudulent transfer law supplied the substantive rule, state law controlled the existence and extent of the [transferee] liability.”  The current statute still looks to state law to determine if there has been a transfer, so the 1st Circuit determined it must also dictate the actual amount owed, including the interest calculation.  This issue is covered in ¶ 17.05 of Saltzman and Book, including the related issues as to when interest actually starts to run, and other potential conflicts between state and federal law on related procedural matters.  All very interesting.
  • On July 2, 2014, a new AJAC memo was issued regarding the second phase of the implementation.  The memo, which is very long, can be found here.  We previously covered this about a year ago here.  We continue to applaud this effort, and look forward to the implementation.  We may also have some additional coverage regarding this memo in the future (once I find time to read all 62 pages).
  • A taxpayer was booted from court on her wrongful collection claim under Section 7433 in Antioco v. US because the Court found the inappropriate actions occurred during assessment and not collections.  I only looked at the holding, and the Appeals officer seemed rude and overzealous (but I have heard of worse).  What struck me was the characterization of this matter as assessment, and not collections.  Taxpayer received a notice of intent to levy for taxes she owed from two and three years before.  She requested a CDP hearing and asked for an installment agreement.  She had the CDP hearing, the IA was denied, and the levy sustained.  Tax Court sent it back to reconsider the IA.  This is when CDP hearing is terrible, and IA is rejected.  Goes back to Court, wins again, back to Appeals, and gets an IA.  The Court highlighted the various cases that indicated Section 7433 should be construed narrowly to only collection actions, and then stated:

All of [taxpayer’s] alleged wrongdoing took pace prior, or in relation to, platinff’s CDP hearing.  They were, therefore, actions taken during the determination or assessment of plaintiff’s taxes, not during their collection….indeed, the government never collected taxes pursuant to [taxpayer’s] assessment; instead, plaintiff sought , and was granted, a second appeal which ultimately resulted in her successful application for an installment plan.

Hmmm. I’m not certain the Court was wrong in its holding, but the opinion does not clearly convince me that levy actions, liens, CDP hearings, and installment agreements (all of which would have been after assessment of the tax) are not collection actions, and are instead assessment actions.  This is especially true, because there was no mention in the opinion of the taxpayer questioning the underlying assessment of tax.  She was simply seeking collection alternatives.

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