On April 17, 2018, the Taxpayer Advocate, Nina E. Olson, testified before a Congressional Oversight Committee regarding on-going challenges to the administration of an efficient and effective tax system. Ms. Olson runs the Taxpayer Advocate Service (TAS), an independent office within the Internal Revenue Service (IRS). The Taxpayer Advocate is appointed by and reports directly to the Commissioner of Internal Revenue. The office was created under the Taxpayer Bill of Rights, which became law on July 30, 1996. The office replaced the IRS Office of the Ombudsman. Continue Reading National Taxpayer Advocate Reminds Congress of IRS Deficiencies
Andrew (Andy) R. Roberson focuses his practice on tax controversy and litigation matters. He represents clients before the Internal Revenue Service (IRS) Examination Division and Appeals Office and has been involved in more than 50 matters at all levels of the federal court system, including the US Tax Court, several US courts of appeal and the Supreme Court. Andy has experience settling tax disputes through alternative dispute resolution procedures, including Fast Track Settlement and Post-Appeals Mediation, and in representing clients in Compliance Assurance Process (CAP) audits. He also represents individuals in Global High Wealth Industry Group audits and in connection with offshore disclosure programs. Read Andy Roberson's full bio.
Our recent post on potential changes to the Tax Court’s procedure rules has been republished in the Corporate Tax Newsletter – USA by The International Law Office. See here for the article.
The expiration of the time for the Internal Revenue Service (IRS) to assess tax can bring closure on prior tax and financial reporting positions for taxpayers. We have previously reported and written for the International Tax Journal about tax statutes of limitation both generally and in the international tax context. As a follow-up to those materials, we wanted to alert you that the IRS recently released a Practice Unit providing an overview of statutes of limitation on the assessment of tax. These materials are all good resources and starting points for taxpayers and practitioners with questions on statutes of limitation.
In a press release this morning, President Trump announced his intent to nominate Emin Toro to serve as a judge on the United States Tax Court (Tax Court). This is the latest in a wave of nominations to high-level tax positions within the government, as we have previously covered here and here.
Mr. Toro is currently a partner in the Washington, DC, office of Covington & Burling LLP. His practice focuses on the needs of multinational companies, including both tax controversies and counseling. Mr. Toro’s experience includes audits, administrative appeals, litigation and transfer pricing matters. He received his JD from the University of North Carolina School of Law in 2000 and clerked for the Honorable Karen LeCraft Henderson, US Court of Appeals for the District of Columbia (2000–2001) and the Honorable Clarence Thomas, US Supreme Court (2002–2003).
Tax controversy practitioners are undoubtedly aware of the gradual movement over the years to conform certain Tax Court procedure rules (Tax Court Rules) to those of the Federal Rules of Civil Procedure. In many ways, this makes sense to ensure uniformity of tax cases regardless of whether a taxpayer litigates his tax dispute in a refund forum in the US District Court or the US Court of Federal Claims, or prior to payment of tax in the Tax Court. Below we note a few important areas of divergence between the different rules, and point out situations where the Tax Court Rules do not address a particular matter. These matters were discussed at the recent Tax Court Judicial Conference held in Chicago last week.
As we have discussed before, amicus briefs are not uncommon in other courts. However, the Tax Court does not have specific rules on the topic and, instead, permits each judge to decide a case-by-case basis whether to permit the filing of an amicus brief. Although the Tax Court has discussed standards for filing amicus briefs in unpublished orders, given the nationwide importance of many issues that arise in Tax Court litigation, it may be time for the court to issue specific rules addressing the issue. Continue Reading Are Changes Looming over the Tax Court’s Procedure Rules?
A shrinking Internal Revenue Budget (IRS) budget has meant that fewer agents are available to make sure that the tax laws are being enforced. We have reported previously about how Congress has decreased the IRS’s budget. In 2017, the audit rate fell to its lowest levels in 15 years because of a shrinking IRS budget and workforce. Indeed, your chance of being audited fell to 0.6% in 2017, the lowest rate since 2002. Similarly, tax collection levies fell 32% from the prior year, and the IRS filed 5% fewer liens year-over-year. Detailed information from the IRS can be found here.
Practice Point. The decreased funding of the IRS in the wake of bipartisan disagreements seems to have quelled in recent weeks. We have seen movement to get the IRS more funding in the wake of tax reform but it remains to be seen whether some of those funds will be used to increase the enforcement functions of the IRS. We anticipate, however, an increase in enforcement activity as a result of some of the positions taken by taxpayers in anticipation of tax reform and the myriad of interpretive questions that are expected to result from the new tax laws.
The Tax Court’s 2018 Judicial Conference starts tomorrow morning on the campus of Northwestern University’s Pritzker School of Law. For prior coverage, see here. The many panels taking place tomorrow and Wednesday include:
- Mediation in the Tax Court
- Discovery and Stipulations Process
- Litigating Individual Cases
- Large Case Litigation
- Whistleblower Jurisdiction
- A Trip Through the Tax Court’s Exotic Jurisdictions
- Ethical Issues in Representing Clients
- The Future of Tax Court Practice and Litigation
I will be participating on the Discovery and Stipulations Process panel along with Tax Court Judges Kathleen Kerrigan and Joseph Goeke, Peter Reilley (Special Counsel IRS), and Jenny Johnson Ware (Johnson Moore).
We have all heard the famous quote about doing the same thing over and over again and expecting different results. The Court of Appeals for the Fifth Circuit applied this concept in its March 8 opinion in Annamalai v. Comm’r, No. 17-60255. There, the issue was whether the taxpayers could extend into perpetuity the 90-day deadline to file an appeal by filing successive motions to vacate a Tax Court decision. Under the facts presented, the answer was no.
Taxpayers have 90 days after a decision of the Tax Court to file an appeal. If a party makes a timely motion to vacate or revise the Tax Court’s decision, the 90 days runs from the later of either entry of the order disposing the motion or entry of a new decision.
In Annamalai, the taxpayers filed successive motions to vacate a Tax Court decision. After the Tax Court entered a final decision in favor of the government, the taxpayers unsuccessfully moved to vacate the decision. Rather than filing a notice of appeal within 90 days after the denial, the taxpayers filed another motion to vacate that did not raise any substantially new grounds or arguments. After the Tax Court denied the second motion, the taxpayers filed the notice of appeal. The notice of appeal was filed 117 days after the ruling on the first motion and 83 days after the ruling on the second motion.
The Fifth Circuit dismissed the taxpayers’ appeal, which it noted involved a jurisdictional issue of first impression. The court agreed with the general principle that tolling motions may not be tacked together to perpetuate the prescribed time for appeal. As such, the 90-day period ran from the ruling on the first motion, and the appeal was thereby untimely and dismissed.
The Fifth Circuit declined to address the issue of whether a second motion to vacate on substantially different grounds and new arguments would be acceptable. The court noted that it is acceptable in the civil context, suggesting it may be permitted.
Practice Point: Absent intervening events such as new case law directly on point, motions to vacate or reconsider are rarely granted in tax cases. Indeed, filing a motion to vacate or reconsider may provide an opportunity for the court to bolster its prior opinion and lessen the chances of success on appeal. In a situation where a motion to vacate or reconsider is pursued, taxpayers should take care to ensure that all arguments supporting such a motion are properly placed before the court and that an appeal is filed within the statutory-prescribed period if the motion is denied.
In 2015, after repeated efforts by Nina E. Olson, the National Taxpayer Advocate, Congress enacted the Taxpayer Bill of Rights (TBOR) in Internal Revenue Code (Code) Section 7803(a)(3). We have previously written about TBOR here, here and here.
Since TBOR was enacted, the IRS has issued information on its website regarding the 10 rights contained in Code Section 7803(a)(3). The IRS provides a summary of these rights. Additionally, the IRS has provided specific information on these rights. To summarize, the 10 rights are:
- The right to be informed.
- The right to quality services.
- The right to pay no more than the correct amount of tax.
- The right to challenge the position of the Internal Revenue Service and be heard.
- The right to appeal a decision of the Internal Revenue Service in an independent forum.
- The right to finality.
- The right to privacy.
- The right to confidentiality.
- The right to retain representation.
- The right to a fair and just tax system.
We have previously commented on changes at the Internal Revenue Service (IRS) Appeals Division, including: (1) the allowance of Appeals to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel to the Appeals conference, (2) the limitations on in-person conferences, and (3) the use of “virtual” conferences.
- IRS Extends Permanent Invitation to Exam to Attend Appeals Conferences
- Appeals Large Case Pilot Program Draws Criticism
- Virtual IRS Appeals – A New Frontier?
- More Changes to IRS Appeals, in Response to Taxpayer and Practitioner Concerns
IRS Appeals Chief Donna Hansberry discussed these changes at a recent tax law conference held by the Federal Bar Association. According to reports, Ms. Hansberry wants feedback from practitioners on the compliance attendance and virtual conferences. Continue Reading More Changes to IRS Appeals’ Practices?