Second Circuit Archives | TAX CONTROVERSY 360

Latest tax updates: Section 7508A refund claims, whistleblower award eligibility, and court restrictions on IRS collection

by Kai M. Fenty and Edward L. Froelich | Jul 14, 2026 | Appellate Courts, Court Procedure Matters, IRS Appeals, IRS Guidance, Penalties, Significant Court Decision, Tax Reform, Tax Refunds

This roundup covers key Internal Revenue Service (IRS) developments from June 23 to July 2, 2026, including a notable executive nomination, new electronic filing procedures for COVID-19 disaster relief refund claims, and three significant court decisions shaping tax controversy.

June 23, 2026: US President Donald Trump nominated Jim Gadwood, a tax controversy partner at Miller & Chevalier, to serve as IRS chief counsel. The agency’s top legal official, the chief counsel is responsible for advising IRS leadership, issuing legal guidance, and overseeing the development of US Department of the Treasury regulations, including implementation of the One Big Beautiful Bill Act. Gadwood has focused his practice on federal tax controversies; transfer pricing; tax accounting; and representing large corporations, partnerships, and high-net-worth individuals before the IRS.

June 26, 2026: The IRS issued PLR 202626001, granting a limited liability company 120 days of § 9100 relief to file a late Form 8832 for electing to be treated as an association taxable as a corporation under the entity classification regulations. The IRS concluded that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the interests of the government after the taxpayer inadvertently failed to timely file its entity classification election despite intending corporate tax treatment from the desired effective date.

The taxpayer must file Form 8832 within 120 days and file all required federal income tax and information returns, including amended returns, consistent with the requested classification. The IRS emphasized that its ruling does not address the taxpayer’s eligibility to make the election or provide relief from any interest or penalties that may otherwise apply, and, as with all private letter rulings, the decision may not be cited as precedent.

July 2, 2026: The IRS announced an electronic filing option for taxpayers seeking to preserve potential claims for COVID-19 disaster relief refunds pending the government’s appeal in Kwong v. United States. Taxpayers with an IRS online account may electronically submit Form 843 before the July 10, 2026, deadline by identifying the claim as relating to Kwong. The IRS stated that it will process the claims only if the government is ultimately unsuccessful in its appeal. The Kwong decision held that the COVID-19 pandemic automatically postponed certain federal tax deadlines until July 10, 2023, potentially entitling taxpayers to refunds of penalties and interest previously assessed for late filing or payment. The IRS continues to challenge that ruling, but the new filing procedure allows taxpayers to preserve potential refund claims while the appeal remains pending.

The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).

Recent court developments

June 29, 2026: In White v. Commissioner, T.C. Memo. 2026-56, the US Tax Court held that the IRS abused its discretion by sustaining a proposed levy to collect restitution-based assessments (RBAs) under § 6201(a)(4) because the collection action conflicted with a prior US Department of Justice [...]

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An Update on Section 6751 Penalties

by Kevin Spencer and McDermott Will & Schulte | Mar 23, 2022 | Appellate Courts, Court Procedure Matters, IRS Appeals, IRS Audits, IRS Guidance, Trial Courts

Tax penalties are always a hot topic here. The Internal Revenue Service (IRS) has a large arsenal when it comes to grounds for asserting penalties on income tax deficiencies, ranging from the common 20% penalty under Internal Revenue Code (Code) Section 6662(a) to higher penalties ranging from 40% (gross valuation or basis misstatements and economic substance) to 75% (fraud).

However, before the IRS can assert most penalties against taxpayers, it must comply with the procedural requirement in Code Section 6751(b): That the “initial determination” to assert the penalty be “personally approved (in writing) by the immediate supervisor of the individual making such determination.” As the US Court of Appeals for the Second Circuit explained in Chai v. Commissioner, US Congress imposed this requirement because it “believes that penalties should only be imposed where appropriate and not as a bargaining chip” and “[t]he statute was meant to prevent IRS agents from threatening unjustified penalties to encourage taxpayers to settle.”

Over the past several years, there has been substantial litigation over the proper interpretation and application of Code Section 6751(b). The US Tax Court’s recent opinion in Oxbow Bend, LLC v. Commissioner is the latest development. In Oxbow Bend, the Tax Court rejected the taxpayer’s position that the “initial determination” was made on the date that the examining agent prepared a penalty lead sheet reflecting her recommendation to assert penalties and stated in a telephone conference with the taxpayer’s representative on that same day that penalties were being considered. Approximately three months later, the examining agent’s supervisor approved the penalty lead sheet, and the IRS issued a Notice of Final Partnership Administrative Adjustment asserting the penalties. The Tax Court, relying on its prior precedent, held that the word “determination”:

“has an established meaning in the tax context and denotes a communication with a high degree of concreteness and formality”
“signifies a consequential moment of IRS action”
is not a “mere suggestion, proposal, or initial informal mention of penalties”
“will be embodied in a formal written communication that notifies the taxpayer of the decision to assert penalties.”

Thus, under the Tax Court’s analysis, an “initial determination” can only be made in a “written” document that is provided to the taxpayer.

Oxbow Bend is a memorandum opinion of the Tax Court and, therefore, is limited to its facts and technically not precedential, as we have discussed in the past. However, memorandum opinions are often cited by litigants, and the Tax Court does not disregard these types of opinions lightly. One has to wonder whether, under different facts where an examining agent makes an explicit oral statement to a taxpayer that penalties “will” be asserted, courts might reach a different result given Congress’s express intent that examining agents should not threaten penalties and use them as a bargaining chip for settlement purposes. Further, Code Section 6751(b) expressly requires that the supervisory approval be “in writing” but contains a written requirement for purposes of the [...]

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Supreme Court Grants Certiorari in One Tax Case, Denies it in Several Others

by Kevin Spencer and McDermott Will & Schulte | Oct 6, 2021 | Appellate Courts, Court Procedure Matters, Trial Courts

Historically, the Supreme Court of the United States rarely grants petitions for certiorari in tax cases, and it appears this trend continues in the current term.

On September 30, 2021, the Supreme Court granted the petition for certiorari in Boechler, P.C. v. Commissioner. The case presents the question of whether Internal Revenue Code Section 6330(d)(1), which establishes a 30-day time limit for filing a petition in the US Tax Court to review a notice of determination by the Internal Revenue Service (IRS) in a collection due process matter, is a jurisdictional requirement or a claim-processing rule subject to the equitable tolling doctrine.

On October 4, 2021, the Supreme Court denied petitions for certiorari in Healthcare Distribution Alliance v. James and Taylor Lohmeyer Law Firm PLLC v. United States. The former involved a challenge to a US Court of Appeals for the Second Circuit decision that held that an opioid stewardship surcharge was a tax within the meaning of the Tax Injunction Act. The Court also found that the district court lacked subject matter jurisdiction to rule on the challenge to the payment. The latter case involved a law firm’s challenge to the US Court of Appeals for the Fifth Circuit’s decision that the IRS could use a “John Doe” summons to seek the identifies of taxpayers who it believed may have taken the firm’s advice to hide income offshore.

The Supreme Court also denied petitions for certiorari in the following cases:

Perkins v. Commissioner: A case regarding the taxability of income derived from the sale of land and gravel mined from treaty-protected land by an enrolled member of the Seneca Nation
Kimble v. United States: A case focused on Report of Foreign Bank and Financial Accounts penalties and
Razzouk v. United States: A case involving restitution for tax and bribery convictions

Still pending are petitions in Willis v. United States (which involves the value of collectible coins seized by the government and deposited into an IRS account) and Clay v. Commissioner (which deals with a dispute over whether to follow guidance from the Bureau of Indian Affairs or the IRS).

Practice Point: Although the Supreme Court rarely reviews tax cases, when it does, the decision is usually important because it’s applicable to numerous taxpayers. For example, cases such as Mayo Found. for Med. Educ. & Research v. United States and United States v. Home Concrete & Supply LLC both provided significant guidance for taxpayers regarding the IRS’s scope of regulatory authority. Additionally, non-tax cases from the Supreme Court can contain general principles that are also applicable and impact tax positions taken, or being considered, by taxpayers. Thus, it is important that taxpayers and their representatives stay abreast on what is happening at the Supreme Court.