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Jeffrey M. Glassman is experienced in defending businesses and individuals in all stages of federal tax controversies. He represents clients in US Internal Revenue Service (IRS) examinations, administrative appeals, voluntary disclosures, and litigation. Jeffrey has settled multiple tax disputes with IRS legal counsel avoiding litigation in court, when possible. He has significant experience advising clients on strategic and procedural considerations in US Tax Court and other federal courts. Read Jeffrey Glassman's full bio.

Within the Internal Revenue Code (Code) is a rule commonly known as the “mailbox rule” or the “timely mailed, timely filed rule.” Under Code Section 7502(b), the date that an item—including a Tax Court petition—is postmarked and mailed can also be the date the item is considered filed. When an item is received after the filing deadline, the mailbox rule can make all the difference. There are, however, procedural requirements which must be satisfied. In Pearson v. Commissioner, the Tax Court, in a court-reviewed opinion, held that a Tax Court petition mailed with a Stamps.com postage label was timely filed under the mailbox rule.

Taxpayers generally have 90 days to file a petition with the Tax Court after receiving a notice of deficiency. In Pearson, the Tax Court received the taxpayers’ petition one week after the 90-day period expired, but the envelope in which the petition was mailed bore a Stamps.com postage label dated within the 90-day period. The administrative assistant who created the Stamps.com postage label supplied the court with a declaration under penalty of perjury stating that she went to a US Post Office the same day as the postage label date and mailed the petition. Continue Reading Tax Court: Mailbox Rule Can Apply with Stamps.com Postage Label

In Estate of Levine v. Commissioner, the US Tax Court (Tax Court) rejected an Internal Revenue Service (IRS) attempt to expand upon the privilege waiver principles set forth in AD Inv. 2000 Fund LLC v. Commissioner. As background, the Tax Court held in AD Investments that asserting a good-faith and reasonable-cause defense to penalties places a taxpayer’s state of mind at issue and can waive attorney-client privilege. We have previously covered how some courts have narrowly applied AD Investments.

In Estate of Levine, the IRS served a subpoena seeking all documents that an estate’s return preparer and his law firm had in their files for a more-than-ten-year period, beginning several years before the estate return was filed and ending more than four years after a notice of deficiency (i.e., which led to the Tax Court case) was issued. The law firm prepared the estate plan and the estate tax return in issue. The law firm represented the estate during the audit, and after the notice of deficiency was issued, the law firm was engaged to represent the estate in “pending litigation with the IRS.”   Continue Reading Tax Court Says IRS’s “Drift-Net” Argument to Expand Privilege Waiver Must Be Anchored in Principles

On September 7, 2017, the Treasury Inspector General for Tax Administration (TIGTA) issued a report about the Internal Revenue Service’s (IRS) Freedom of Information Act (FOIA) procedures. After reviewing a statistically valid sample of FOIA requests, TIGTA concluded that the IRS improperly withheld information 14.3 percent of the time—or approximately 1 in 7 FOIA requests.

TIGTA also found that at the end of Fiscal Year 2016, there were 334 backlogged information requests. Below is a chart from the report showing the IRS’s recent history of backlogged FOIA requests.

TIGTA’s findings are consistent with our experiences with FOIA requests. It is not unusual for the IRS to make repeated requests for extensions to respond. We note further that, during an examination, the IRS is statutorily authorized to provide taxpayers access to their administrative file. Indeed, the Internal Revenue Manual confirms this at section 4.2.5.7 (June 15, 2017). Yet the IRS examination team often requires a FOIA request.

Practice Point 1: As a result of the IRS’s FOIA backlog, some taxpayers have resorted to filing lawsuits in federal district court to enforce their FOIA rights. Because the IRS must respond to court deadlines, taxpayers are sometimes able to force a more expedient response and move to the front of the response line.

Practice Point 2: Taxpayers should attempt to tailor their FOIA requests, only requesting the information in which they are interested. In theory, this could make the IRS’s job easier and, in turn, responses more timely.

Practice Point 3: If taxpayers intend to seek information from the government through the FOIA process, they should do so as soon as possible (e.g., at the beginning of the examination process) so that they may get the information in time to be useful.

We recently wrote here about “John Doe” summonses and a case where an anonymous “John Doe” was allowed to intervene in a summons enforcement action. To refresh, under Internal Revenue Code (IRC) Section 7602 the Internal Revenue Service (IRS) has broad authority to issue administrative summonses to taxpayers and third parties to gather information to ascertain the correctness of any return. If the IRS does not know the identity of the parties whose records would be covered by the summons, the IRS may issue a “John Doe” summons to a third party to produce documents related to the unidentified taxpayers.

In Hohman v. United States, Case No. 16-cv-11429 (E.D. Mich. July 11, 2017), two John Doe summonses directed a banking institution to deliver to the IRS records related to three accounts, which were identified only by account numbers. Two of the accounts were held by limited liability companies (LLCs) and the other was held by an individual. The banking institution notified some of the account-holders that it had received a John Doe summons that sought records for accounts relating to them.

The account-holders filed a civil action, alleging that the IRS’s efforts to obtain their financial records through the use of John Doe summonses violated the federal Right to Financial Privacy Act (RFPA). The RFPA accords customers of banks and similar financial institutions certain rights to be notified of and to challenge in court administrative subpoenas of financial records in the possession of banks.  The individual account-holder did not allege that the IRS actually obtained or disclosed any records of account information as a result of the John Doe summons.

The government moved, under Rule 12(b)(1) of the Federal Rules of Civil Procedure (FRCP), to dismiss the RFPA claims for lack of subject-matter jurisdiction. The government asserted that it has sovereign immunity from the account-holders’ RFPA claims. The waiver of sovereign immunity under the RFPA applies only to claims that a government authority disclosed or obtained financial records.

The court agreed with the government. First, the court concluded that the RFPA’s waiver of sovereign immunity applies only to “customers,” and the LLCs were not “customers” as defined under the RFPA. The court reasoned that the plain language of the RFPA does not state that an LLC is either a “person” or a “customer” and the court was not at liberty to expand the definitions. Second, the court concluded that sovereign immunity was not waived with respect to the individual’s claim because the individual had not alleged that the IRS actually obtained or disclosed any financial records or information from the account as a result of the John Doe summons.

Practice Point:  Although waivers of sovereign immunity are often construed strictly, taxpayers should consult with their advisors to determine whether their particular facts may allow an action against the government.

On August 3, 2017, President Donald Trump nominated two judges to the US Tax Court. The nominations were received in the US Senate (Senate) and referred to the Committee on Finance.

One of the nominees, Elizabeth Copeland, was previously nominated by President Barack Obama. Her previous nomination expired with the conclusion of the 114th Congress in January 2017. The Committee on Finance unanimously approved her previous nomination, but the nomination was never voted on by the full Senate. Copeland is a partner at the law firm Strasburger & Price, LLP. If confirmed, she will be assuming the position left vacant by the 2015 retirement of Judge James S. Halpern. Judge Halpern still performs judicial duties as a Senior Judge on recall.

The second nominee, Patrick Urda, is counsel to the deputy assistant attorney general in the US Department of Justice’s Tax Division. If confirmed, he will be assuming the position left vacant by the 2014 retirement of Judge Diane L. Kroupa. We previously covered the circumstances of Judge Kroupa’s retirement and related criminal proceedings.

On June 20, 2017, the Internal Revenue Service (IRS) Large Business and International Division (LB&I) hosted its final webinar regarding LB&I Campaigns. Our previous coverage of LB&I Campaigns can be found here. The webinar focused on two campaigns:  (1) Section 48C Energy Credits and (2) Land Developers – Completed Contract Method.

Continue Reading LB&I’s Final Campaigns Webinar: Section 48C Energy Credits and Completed Contract Method for Land Developers

On Tuesday, May 23, 2017, the Internal Revenue Service (IRS) Large Business and International Division (LB&I) hosted its sixth in a series of eight webinars regarding LB&I Campaigns. Our previous coverage of LB&I Campaigns can be found here. The webinar focused on two cross-border activities campaigns: (1) the Repatriation Campaign and (2) the Form 1120-F Non-Filer Campaign. Below, we summarize LB&I’s comments on the new campaigns.

Repatriation Campaign

In general, the active earnings of foreign subsidiaries are not subject to tax until repatriated to the United States. Typically, those repatriations would be treated as dividends and would be subject to tax. LB&I stated that, through examination experience, it has observed that some taxpayers have engaged in techniques to permit repatriation from such entities while inappropriately avoiding US taxation.

LB&I developed the Repatriation Campaign with three goals in mind. First, LB&I was concerned with developing better objective techniques to identify risks across the broad taxpayer population. Second, LB&I is trying to improve sightlines into a broader segment of the LB&I population beyond the largest taxpayers under continuous audit. Third, LB&I intends to address any compliance risks related to repatriation in a way that increases voluntary compliance.

Unlike other campaigns, LB&I is not focused on a specific structure or techniques. LB&I is instead trying to identify objective indicators of opportunities to implement questionable planning (in the IRS’s view). Per LB&I, returns with those indicators are more likely to present compliance risks and are more likely to be selected. LB&I stated that it does not believe publicly identifying those indicators will increase voluntary compliance. Historically, when LB&I selected a return for examination, it did not necessarily start with any particular issue; any issue could be examined. If a return is selected under this campaign, LB&I’s initial focus will be narrower, but other compliance issues, if discovered, can still be added to the audit. Repatriation issues can also be raised outside of the Repatriation Campaign—possibly in a continuous audit or in an audit relating to another LB&I campaign. Continue Reading The View from Here: LB&I’s Cross-Border Activities Campaigns Webinar

On April 4, 2017, QinetiQ U.S. Holdings, Inc. petitioned the US Supreme Court to review the US Court of Appeals for the Fourth Circuit’s decision that the Administrative Procedure Act of 1946 (APA) does not apply to the Internal Revenue Service (IRS) Notices of Deficiency. We previously wrote about the case (QinetiQ U.S. Holdings, Inc. v. Commissioner, No. 15-2192) here, here, here and here. To refresh, the taxpayer had argued in the US Tax Court that the Notice of Deficiency issued by the IRS, which contained a one-sentence reason for the deficiency determination, violated the APA because it was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” The APA provides a general rule that a reviewing court that is subject to the APA must hold unlawful and set aside an agency action unwarranted by the facts to the extent the facts are subject to trial de novo by the reviewing court. The Tax Court disagreed, emphasizing that it was well settled that the court is not subject to the APA and holding that the Notice of Deficiency adequately notified the taxpayer that a deficiency had been determined under relevant case law. The taxpayer appealed to the 4th Circuit, which ultimately affirmed the Tax Court’s decision. Continue Reading APA Challenge to Notice of Deficiency: QinetiQ Requests Supreme Court Review

On March 28, 2017, EY and the Internal Revenue Service (IRS) held a joint webcast presenting the Large Business & International’s (LB&I) new “Campaign” examination process. This was the IRS’s second in a planned eight-part series about Campaigns. The IRS speakers for the presentation were Tina Meaux (Assistant Deputy Commissioner Compliance Integration) and Kathy Robbins (Enterprise Activity Practice Area). We previously blogged about Campaigns on February 1, 2017 (link), and the first Campaigns webinar on March 8, 2017 (link).

Continue Reading Understanding LB&I “Campaigns” – The Second Webinar

In Battat v. Commissioner, the US Tax Court recently affirmed its own constitutionality, in releasing an opinion relating to the President’s authority to remove Tax Court Judges.  The taxpayer filed a motion asking the court to disqualify all Tax Court Judges and to declare unconstitutional IRC Section 7443(f), which provides circumstances by which the President can remove Tax Court Judges.  The court denied this motion, holding that the President’s limited removal authority does not violate separation of powers principles.  The opinion describes the court’s operations, including procedures for the removal of judges, statutory provisions relating to the establishment and government of the court, and caselaw relating to the jurisprudence of the court.  Most interestingly, it provides a detailed history of the Tax Court—from its creation by Congress in 1924 as the Board of Tax Appeals and its reestablishment as the US Tax Court in 1969 through present day.