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The Truth About Frivolous Tax Arguments - Section II

MARCH 2014 Introduction  1  2  3  4 │  Print PDF

FRIVOLOUS ARGUMENTS IN COLLECTION DUE PROCESS CASES

Under sections 6320 (pertaining to liens) and 6330 (pertaining to levies), the IRS must provide taxpayers notice and an opportunity for an administrative appeals hearing upon the filing of a notice of federal tax lien (section 6320) and prior to or after levy (section 6330). Taxpayers have the right to seek judicial review of the IRS’s determination in these proceedings. I.R.C. § 6330(d). These reviews can extend to the merits of the underlying tax liability, if the taxpayer has not previously received the opportunity for review of the merits, e.g., did not receive a notice of deficiency. I.R.C. § 6330(c)(2)(B). A face-to-face administrative hearing concerning a taxpayer’s underlying liability will not be granted if the hearing request raises solely frivolous arguments. Treas. Reg. §§ 301.6320-1(d)(2) Q&A D8 and 301.6330-1(d)(2) Q&A D8. The Tax Court will impose sanctions pursuant to section 6673 against taxpayers who seek judicial relief based upon frivolous or groundless positions.

On December 6, 2006, Congress passed the Tax Relief and Health Care Act of 2006 (TRHCA), Pub. L. No. 109-432, 120 Stat. 2922 (2006). Section 407 of TRHCA revised sections 6320 and 6330. The TRHCA amended section 6330 by adding new subsection (g) to provide that the IRS may disregard any portion of a section 6320 or 6330 hearing request that is based upon a position identified as frivolous by the IRS in a published list or that reflects a desire to delay or impede tax administration. Such portion shall not be subject to any further administrative or judicial review. If the entire hearing request meets one or both of these criteria, the hearing request will be denied.  The TRHCA also amended section 6702 to allow imposition of a $5,000 penalty for specified frivolous submissions, including frivolous section 6320 or 6330 hearing requests, where any portion of the submission meets one or both of these criteria.  See section III below.  These amendments are effective for hearing requests made after March 15, 2007, the release date of Notice 2007-30, 2007-1 C.B. 883, which listed frivolous positions (most recently updated by Notice 2010-33, 2010-1 C.B. 609). Accordingly, when the TRHCA amendments are applicable, a taxpayer raising only frivolous issues may not only be ineligible for a face-to-face hearing but may be denied any section 6320 or 6330 hearing.

This section discusses some of the common frivolous tax arguments raised in collection due process cases.

A. Invalidity of the Assessment
  1. Contention: A tax assessment is invalid because the taxpayer did not get a copy of the Form 23C, the Form 23C was not personally signed by the Secretary of the Treasury, or a form other than Form 23C is not a valid record of assessment
  2. Contention: A tax assessment is invalid because the assessment was made from a substitute for return prepared pursuant to section 6020(b), which is not a valid return
B. Invalidity of the Statutory Notice of Deficiency
  1. Contention: A statutory notice of deficiency is invalid because it was not signed by the Secretary of the Treasury or by someone with delegated authority
  2. Contention: A statutory notice of deficiency is invalid because the taxpayer did not file an income tax return
C. Invalidity of Notice of Federal Tax Lien
  1. Contention: A notice of federal tax lien is invalid because it is unsigned or not signed by the Secretary of the Treasury, or because IRS employees lack the delegated authority to file a notice of federal tax lien
  2. Contention: The form or content of a notice of federal tax lien is controlled by or subject to a state or local law, and a notice of federal tax lien that does not comply in form or content with a state or local law is invalid
D. Invalidity of Collection Due Process Notice
  1. Contention: A collection due process notice (e.g., Letter 1058, LT-11 or Letter 3172) is invalid because it is not signed by the Secretary or his delegate
  2. Contention: A collection due process notice is invalid because no certificate of assessment is attached
E. Verification Given as Required by I.R.C. § 6330(c)(1)
  1. Contention: Verification requires the production of certain documents
F. Invalidity of Statutory Notice and Demand
  1. Contention: No notice and demand, as required by I.R.C. § 6303, was ever received by taxpayer
  2. Contention: A notice and demand is invalid because it is not signed, it is not on the correct form (such as Form 17), or because no certificate of assessment is attached
G. Tax Court Authority
  1. Contention: The Tax Court does not have the authority to decide legal issues
H. Challenges to the Authority of IRS Employees
  1. Contention: Revenue Officers are not authorized to seize property in satisfaction of unpaid taxes
  2. Contention: IRS employees lack credentials.  For example, they have no pocket commission or the wrong color identification badge
I. Use of Unauthorized Representatives
  1. Contention: Taxpayers are entitled to be represented at hearings, such as collection due process hearings, and in court, by persons without valid powers of attorney
J. No Authorization Under I.R.C. § 7401 to Bring Action
  1. Contention: The Secretary has not authorized an action for the collection of taxes and penalties or the Attorney General has not directed an action be commenced for the collection of taxes and penalties

A.    Invalidity of the Assessment

1.    Contention:  A tax assessment is invalid because the taxpayer did not get a copy of the Form 23C, the Form 23C was not personally signed by the Secretary of the Treasury, or a form other than Form 23C is not a valid record of assessment.

The Law: Tax assessments are formally recorded on a record of assessment. I.R.C. § 6203. The assessment is made by an assessment officer signing the summary record of assessment. Treas. Reg. § 301.6203-1. The summary record of assessment must “provide identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment.” Id. The date of the assessment is the date the summary record is signed. Id. There is no requirement in the statute or regulation that the assessment be recorded on a specific form, that the Secretary of the Treasury personally sign it, or that the taxpayer be provided with a copy of the record of assessment before the IRS takes collection action. 

The IRS has refuted the frivolous argument that before the IRS may collect overdue taxes, the IRS must provide taxpayers with a summary record of assessment made on a Form 23-C, Assessment Certificate – Summary Record of Assessments, or on another particular form in Rev. Rul. 2007-21, 2007-1 C.B. 865.

Relevant Case Law:

March v. IRS, 335 F.3d 1186, 1188 (10th Cir. 2003) – the court held that the computer-generated certificate of assessment and payment form utilized by the IRS to make assessment against the taxpayers satisfied the regulatory requirements because the computer-generated form contained the same information as the non-computer-generated form previously used and was signed by the assessment officer.

Powell v. Commissioner, T.C. Memo. 2009-174, 98 T.C.M. (CCH) 56 (2009) – the court awarded a $25,000 section 6673 penalty against the petitioner for asserting, among other frivolous arguments, that respondent was obligated to produce a Form 23C even though petitioner received notices of deficiency.

Williams v. Commissioner, T.C. Memo. 2005-94, 89 T.C.M. (CCH) 114 (2005) – in this collection due process case, the court held that it was not an abuse of discretion for the Appeals Officer to provide copies of the transcripts of account (so-called MFTRA-X transcripts) to the petitioner in lieu of the copies of the assessment documents that the petitioner had requested.

Roberts v. Commissioner, 118 T.C. 365 (2002) – the court held that there was nothing in the law to show that the use of the Revenue Accounting Control System (RACS) report was not in compliance with the statute and regulation.

Nestor v. Commissioner, 118 T.C. 162 (2002) – the court held that the petitioner was not entitled to production of Form 23C at his collection due process hearing and it was not an abuse of discretion for the Appeals Officer to use Form 4340, Certificate of Assessments and Payments to verify the assessment, for purposes of section 6330(c)(1).

Other Cases:

Chang v. Commissioner, T.C. Memo. 2007-100, 93 T.C.M. (CCH) 1143 (2007); Perez v. Commissioner, T.C. Memo. 2002-274, 84 T.C.M. (CCH) 501 (2002).

2.    Contention: A tax assessment is invalid because the assessment was made from a substitute for return prepared pursuant to section 6020(b), which is not a valid return.

The Law: Section 6020(b)(1) provides that “[i]f any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefore, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.”  Section 6020(b)(2) further provides that any return prepared pursuant to section 6020(b)(1) shall be prima facie good and sufficient for all legal purposes.  See also Treas. Reg. § 301.6020-1.

Relevant Case Law:

Douglas v. United States, 324 F. App’x 320, 321 (5th Cir. 2009) – the court rejected the taxpayer’s claim that “the IRS committed ‘fraud’” by completing a section 6020(b) return and held that the IRS properly issued notices of levy.

Nicklaus v. Commissioner, T.C. Memo. 2005-156, 89 T.C.M. (CCH) 1499 (2005) - the court held that the IRS may prepare substitute returns for taxpayers who fail to do so themselves under section 6020(b). 

Other Cases:

United States v. Updegrave, 1997 WL 297074, 97-1 U.S.T.C. ¶ 50,465 (E.D. Pa. May 28, 1997); Holland v. Louisiana Sec’y of Revenue & Taxation, 97-1 U.S.T.C. ¶ 50,403 (W.D. La. Feb. 7, 1997).

B.   Invalidity of the Statutory Notice of Deficiency

1.    Contention: A statutory notice of deficiency is invalid because it was not signed by the Secretary of the Treasury or by someone with delegated authority.

The Law: Section 6212(a) provides the authority for the Secretary to send notices of deficiency to taxpayers.  Section 7701(a)(11)(B) defines “Secretary” to include the Secretary of the Treasury or his delegate.  Section 7701(a)(12)(A)(i) defines the term Adelegate,” as used with respect to the Secretary of the Treasury, to mean any officer, employee, or agency of the Treasury Department duly authorized by the Secretary directly, or indirectly by redelegation of authority, to perform a certain function.  There is no statutory requirement that, to be valid, a notice of deficiency must be signed by the Secretary of the Treasury or his delegate.

Relevant Case Law:

Selgas v. Commissioner, 475 F.3d 697, 699-700 (5th Cir. 2007) – the court held that a signature is not required on a notice of deficiency to render the notice of deficiency valid.  The court stated, “Like our sister circuits, we conclude that a notice of deficiency is valid as long as it informs a taxpayer that the IRS has determined that a deficiency exists and specifies the amount of the deficiency . . . [and] [t]he existence of a signature or the identity of any IRS official who provides one, is superfluous.”

Urban v. Commissioner, 964 F.2d 888, 889 (9th Cir. 1992) – the court held that the Internal Revenue Code does not require a notice of deficiency to be signed.

Tavano v. Commissioner, T.C. Memo. 1991-237, 61 T.C.M. (CCH) 2743 – the court rejected petitioner’s argument that the notice of deficiency was invalid because it was unsigned.

Other Cases:

Marcinek v. Commissioner, 467 F. App’x 153 (3rd Cir. 2012); Reynolds v. Commissioner, T.C. Memo. 2006-192, 92 T.C.M. (CCH) 260 (2006); Ball v. Commissioner, T.C. Memo. 2006-141, 92 T.C.M. (CCH) 7 (2006); Wheeler v. Commissioner, T.C. Memo. 2006-109, 91 T.C.M. (CCH) 1194 (2006).

2.    Contention: A statutory notice of deficiency is invalid because the taxpayer did not file an income tax return.

The Law: Section 6211(a) defines “deficiency” as the amount by which the tax imposed by subtitle A or B – (including income, estate, and gift taxes), or chapter 41, 42, 43, 44 (excise taxes) exceeds the excess of the sum of the amount shown as the tax by the taxpayer upon his return (if return made and amount shown thereon) plus any amounts previously assessed (or collected without assessment) as a deficiency, over the amount of rebates, as defined in section 6211(b)(2), made.  In accordance with this definition, a taxpayer’s failure to report tax on a return does not prevent the IRS from determining a deficiency in his federal income tax and issuing a notice of deficiency, pursuant to section 6212(a).

Relevant Case Law:

Brennan v. Commissioner, T.C. Memo. 2009-77, 97 T.C.M. (CCH) 1379 (2009) – the court upheld the deficiencies determined by respondent when the petitioner made only frivolous arguments, including that the “respondent lacked the authority to issue a notice of deficiency and that no statute required him to pay income tax.”

Johnston v. Commissioner, T.C. Memo. 2004-107, 87 T.C.M. (CCH) 1256 (2004) – the court stated that “[p]etitioners’ contention that the Commissioner cannot determine a deficiency for a year for which a taxpayer did not file a return is frivolous.”  The court further emphasized that the “petitioners’ contention that failure to file a return shields the nonfiler from income tax liability is also frivolous.”  Due to the petitioner’s frivolous arguments, the court imposed a penalty under section 6673.

Robinson v. Commissioner, T.C. Memo. 2002-316, 84 T.C.M. (CCH) 694 (2002) – the court found the petitioner liable for the section 6673(a) penalty in this case where petitioner argued, among other frivolous arguments, that the IRS was not authorized to determine a deficiency for a taxpayer who has not filed a return.

C.   Invalidity of Notice of Federal Tax Lien

1.    Contention: A notice of federal tax lien is invalid because it is unsigned or not signed by the Secretary of the Treasury, or because IRS employees lack the delegated authority to file a notice of federal tax lien.

The Law: The form and content of the notice of federal tax lien is controlled by federal law.  Section 6323(f)(3) provides that the form and content of the notice of federal tax lien shall be prescribed by the Secretary and shall be valid notwithstanding any other provision of law regarding the form or content of a notice of lien.  Treas. Reg. ' 301.6323(f)-1(d) further provides that the notice of federal tax lien must be filed on a Form 668, Notice of Federal Tax Lien Under Internal Revenue Laws, and must identify the taxpayer, the tax liability giving rise to the lien, and the date the assessment arose.  There is no statutory or regulatory requirement that, to be valid, a notice of federal tax lien must be signed by anyone or, if it is signed, that it must be signed by the Secretary of the Treasury.

Section 6323(a) provides that “[t]he lien imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic’s lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary.”  Section 7701(a)(11)(B) defines “Secretary” to include the Secretary of the Treasury or his delegate.  Section 7701(a)(12)(A)(i) defines the term “delegate,” as used with respect to the Secretary of the Treasury, to mean any officer, employee, or agency of the Treasury Department duly authorized by the Secretary directly, or indirectly by redelegation of authority, to perform a certain function.  Treasury Order 150-10 delegates to the Commissioner the Secretary’s authority to enforce and administer the internal revenue laws.  Delegation Order 5-4, Rev. 2 delegates to IRS personnel the Commissioner’s authority with respect to notices of federal tax lien. 

Relevant Case Law:

Fairchild v. Internal Revenue Service, 450 F. Supp. 2d 654, 659 (M.D. La. 2006) – the court rejected the argument that IRS employees lacked the authority to file notices of federal tax lien. 

Uveges v. United States, 2002-2 U.S.T.C. ¶ 50,740 (D. Nev. 2002) – the court noted that with respect to section 6323, along with other Code sections that use the term “Secretary,” “Secretary” refers to the Secretary of the Treasury and any delegates. 

Hult v. Commissioner, T.C. Memo. 2007-302, 94 T.C.M. (CCH) 359 (2007) – the court dismissed petitioner’s argument that the notice of federal tax lien was invalid because it was not signed, as it is not necessary for a notice of federal tax lien to be signed.

Other Cases:

Thompson v. Commissioner, T.C. Memo. 2004-204, 88 T.C.M. (CCH) 219 (2004); In re Kroll, 1994 WL 650127, 74 A.F.T.R. 2d 94-6161 (W.D. Mich. Aug. 11, 1994).

2.    Contention: The form or content of a notice of federal tax lien is controlled by or subject to a state or local law, and a notice of federal tax lien that does not comply in form or content with a state or local law is invalid.

The Law: The form and content of the notice of federal tax lien is controlled by federal law.  Section 6323(f)(3) provides that the form and content of the notice of federal tax lien shall be prescribed by the Secretary and shall be valid notwithstanding any other provision of law regarding the form or content of a notice of lien.  Treas. Reg. ' 301.6323(f)-1(d) further provides that the notice of federal tax lien must be filed on a Form 668, Notice of Federal Tax Lien Under Internal Revenue Laws, and must identify the taxpayer, the tax liability giving rise to the lien, and the date the assessment arose.

Relevant Case Law:

United States v. Union Cent. Life Ins. Co., 368 U.S. 291, 294 (1961) – the Supreme Court held that the form used for filing a federal tax lien does not have to comply with an additional state law requirement that it describe the property affected, although the lien did have to be filed in a designated state office.

Tolotti v. Commissioner, T.C. Memo. 2002-86, 83 T.C.M. (CCH) 1436 (2002) - in upholding the validity of a notice of federal tax lien filed even though the lien was not certified pursuant to a Nevada statute, the court noted that it is “well settled” that the form and content of the notice of federal tax lien is controlled by federal, not state, law.

D.   Invalidity of Collection Due Process Notice

1.    Contention: A collection due process notice (e.g., Letter 1058, LT-11 or Letter 3172) is invalid because it is not signed by the Secretary or his delegate.

The Law: Section 6320(a)(1) provides that the Secretary shall notify a taxpayer in writing of the filing of a notice of federal tax lien, pursuant to section 6323, advising the taxpayer of the right to request a collection due process hearing.  Section 6330(a)(1) provides that no levy may be made on any property or rights to property of any person unless the Secretary has notified such person of his or her right to a collection due process hearing before levy.  There is no requirement for a signature on the collection due process notice in the statute or regulations.

Relevant Case Law:

Oropeza v. Commissioner, T.C. Memo. 2008-94, 95 T.C.M. (CCH) 1367 (2008) – the court reaffirmed that there is “no statutory requirement” that the Final Notice of Intent to Levy and Notice of Your Right to a Hearing be signed.

Craig v. Commissioner, 119 T.C. 252 (2002) – the court held that for purposes of section 6330(a), either the Secretary or his delegate (e.g., the Commissioner) may issue a final notice of intent to levy.  In this case, the authority to levy was delegated to the Automated Collection Branch Chiefs pursuant to a delegation order.

Other Cases:

Thompson v. Commissioner, T.C. Memo. 2004-204, 88 T.C.M. (CCH) 219 (2004); Hodgson v. Commissioner, T.C. Memo. 2003-122, 85 T.C.M. (CCH) 1232 (2003).

2.    Contention: A collection due process notice is invalid because no certificate of assessment is attached.

The Law: Sections 6320(a)(3) and 6330(a)(3) list the information required to be included with the collection due process notice, such as the amount of unpaid tax, the right of the person to request a collection due process hearing, administrative appeals available, and the provisions of the Internal Revenue Code and procedures pertaining to the notice of federal tax lien or levy.  See also Treas. Reg. '' 301.6320-1(a)(2), Q&A A10 and 301.6330-1(a)(3), Q&A A6.  There is no requirement in the statute or regulations that a certificate of assessment be attached to the collection due process notice.

E.   Verification Given as Required by I.R.C. § 6330(c)(1)

1.    Contention: Verification requires the production of certain documents.

The Law: Pursuant to sections 6320(c) and 6330(c)(1), at a collection due process hearing, the appeals officer is required to obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.  Treas. Reg. §§ 301.6320-1(e)(1) and 301.6330-1(e)(1) direct Appeals to obtain verification from the IRS office collecting the tax.  Neither the statutes nor the regulations require the appeals officer to rely upon a particular document (e.g., the summary record of assessment) to satisfy the verification requirement.  Sections 6320(c) and 6330(c)(1) also do not require the Appeals Officer to give the taxpayer a copy of the verification upon which the Appeals Officer relied.  See also Treas. Reg. '' 301.6320-1(e)(1) and 301.6330-1(e)(1).  There is no requirement in the statute or regulations that the taxpayer be provided with any documents as a part of the verification process.  As a matter of practice, however, the taxpayer will be provided with a transcript of account such as a Form 4340 or MFTRA-X computer transcript.  Transcripts such as the Form 4340 or MFTRA-X, which identify the taxpayer, the character of the liability assessed, the taxable period and the amount of the assessment, are sufficient to show the validity of an assessment, absent a showing of irregularity.

Relevant Case Law:

Standifird v. Commissioner, T.C. Memo. 2002-245, 84 T.C.M. (CCH) 371 (2002) – the court held that a MFTRA-X transcript “is a valid verification that the requirements of any applicable law or administrative procedure have been met.”

Schroeder v. Commissioner, T.C. Memo. 2002-190, 84 T.C.M. (CCH) 141 (2002) – the court held that the TXMODA transcript is sufficient for the verification requirement.

Craig v. Commissioner, 119 T.C. 252 (2002) – the court held that section 6330(c)(1) does not require the Appeals Officer to rely upon a particular document, such as the summary record of assessment, to satisfy the verification requirement of section 6330(c)(1) or mandate that the Appeals Officer actually provide the taxpayer with a copy of the verification upon which the appeals officer relied. 

Other Cases:

Nestor v. Commissioner, 118 T.C. 162 (2002); Wagner v. Commissioner, T.C. Memo. 2002-180, 84 T.C.M. (CCH) 96 (2002); Davis v. Commissioner, 115 T.C. 35 (2000).

F.    Invalidity of Statutory Notice and Demand

1.    Contention: No notice and demand, as required by I.R.C. § 6303, was ever received by taxpayer.

The Law:  Section 6303(a) provides that the Secretary shall, as soon as practicable, and within 60 days, after the making of an assessment pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof.  This notice is to be left at the dwelling or usual place of business of such person, or shall be mailed to such person’s last known address.  See also Treas. Reg. § 301.6303-1(a) (establishing that failure to give notice within 60 days does not invalidate notice).  Nothing in the statute or regulation requires the IRS to establish receipt of the notice and demand, as long as it is mailed to the taxpayer’s last known address.

At a collection due process hearing, an Appeals Officer may rely upon a computer transcript to verify that notice and demand for payment has been sent to a taxpayer in accordance with section 6303.  For example, the entry in a Form 4340 showing “notice of balance due” is a section 6303 notice and demand. 

Relevant Case Law:

United States v. Chila, 871 F.2d 1015, 1018-19 (11th Cir. 1989) – the court held in a case in which the taxpayer denied receiving notice under section 6303 that, even though notice was not required under section 6303 prior to judicial collection, proper notice was given as established by the Form 4340. 

Williams v. Commissioner, T.C. Memo. 2008-173, 96 T.C.M. (CCH) 25 (2008) – the court rejected petitioner’s argument that he is entitled to see proof that the Notice and Demand Letter was received, and held that Forms 4340 sufficiently showed that the IRS issued notices of balance due (which constitute notice and demand for payment under section 6303(a)) on the same day that the IRS assessed petitioner’s tax.

Other Cases:

United States v. Lisle, 92-1 U.S.T.C. ¶ 50,286 (N.D. Cal. 1992); Reynolds v. Commissioner, T.C. Memo. 2006-192, 92 T.C.M. (CCH) 260 (2006); Craig v. Commissioner, 119 T.C. 252, 262-63 (2002).

2.    Contention: A notice and demand is invalid because it is not signed, it is not on the correct form (such as Form 17), or because no certificate of assessment is attached.

The Law:  Section 6303(a) provides that the Secretary shall, as soon as practicable, and within 60 days, after the making of an assessment pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof.  This notice is to be left at the dwelling or usual place of business of such person, or shall be mailed to such person’s last known address.  See also Treas. Reg. § 301.6303-1(a) (failure to give notice within 60 days does not invalidate notice).  Notice and demand is sufficient for purposes of section 6303 as long as it states the amount due and makes demand for payment.  There is no requirement in the statute or regulation that the notice and demand be made on a specific form, have a signature, or include any specific attachments.

Relevant Case Law:

Flathers v. Commissioner, T.C. Memo. 2003-60, 85 T.C.M. (CCH) 969 (2003) – the court rejected as frivolous and/or groundless petitioner’s argument that she did not receive proper notice and demand under section 6303(a) because, according to petitioner, the IRS must use Form 17 in issuing such notice and demand.

Craig v. Commissioner, 119 T.C. 252, 262-63 (2002) – the court held that notices received by the petitioner, such as notices of intent to levy and notices of deficiency, were sufficient to meet the requirements of section 6303(a) and the form on which notice of assessment and demand for payment is made was irrelevant, as long as it provided the petitioner with the information specified in section 6303(a).

Keene v. Commissioner, T.C. Memo. 2002-277, 84 T.C.M. (CCH) 514 (2002) – the court rejected as frivolous and groundless petitioner’s argument that a notice and demand for payment was not in accord with a Treasury decision issued in 1914 that required a Form 17 be used for such purpose.

G.   Tax Court Authority

1.    Contention: The Tax Court does not have the authority to decide legal issues.

The Law: The United States Tax Court is a federal court of record established by Congress under Article I of the United States Constitution.  Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies prior to payment of the disputed amount.  The jurisdiction of the Tax Court includes the authority to hear tax disputes concerning notices of deficiency, notices of transferee liability, certain types of declaratory judgment, readjustment and adjustment of partnership items, review of the failure to abate interest, administrative costs, worker classification, relief from joint and several liability on a joint return, and review of collection due process actions.

Section 7441 provides that “[t]here is hereby established, under article I of the Constitution of the United States, a court of record to be known as the United States Tax Court.  The members of the Tax Court shall be the chief judge and the judges of the Tax Court.”  Section 7442 provides that “[t]he Tax Court and its divisions shall have such jurisdiction as is conferred on them by this title, by Chapters 1, 2, 3, and 4 of the Internal Revenue Code of 1939, by title II and title III of the Revenue Act of 1926 (44 Stat. 10-87), or by laws enacted subsequent to February 26, 1926.”  See also I.R.C. §§ 7443-7448.

Relevant Case Law:

Freytag v. Commissioner, 501 U.S. 868 (1991) – the Supreme Court held that section 7443A(b)(4) authorized the Chief Judge of the Tax Court to assign petitioners' cases to a special trial judge and concluded that the special trial judge's appointment did not violate the Appointments Clause of the Constitution.

Knighten v. Commissioner, 705 F.2d 777 (5th Cir. 1983) – the court held as frivolous the contention that, as a court created under Article I of the Constitution, the Tax Court could not hear any cases that could be heard by Article III courts. 

Martin v. Commissioner, 358 F.2d 63 (7th Cir. 1966) – the court ruled that petitioners’ contention that the Tax Court is without a valid constitutional existence lacked substance and merit.

Other Cases:

Burns, Stix Friedman & Co. v. Commissioner, 57 T.C. 392 (1971).

H.   Challenges to the Authority of IRS Employees

1.    Contention: Revenue Officers are not authorized to seize property in satisfaction of unpaid taxes.

The Law: Section 6331(a) provides that “[i]f any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax ... by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax.”  Section 6331(b) provides that the term “levy” includes the power of distraint and seizure by any means.  In any case in which the Secretary may levy upon property or property rights, he may also seize and sell such property or property rights.  I.R.C. § 6331(b).

Section 7701(a)(11)(B) defines “Secretary” to include the Secretary of the Treasury or his delegate.  Section 7701(a)(12)(A)(i) defines the term Adelegate,” as used with respect to the Secretary of the Treasury, to mean any officer, employee, or agency of the Treasury Department duly authorized by the Secretary directly, or indirectly by redelegation of authority, to perform a certain function.  Treasury Order 150-10 delegates to the Commissioner the Secretary’s authority to enforce and administer the internal revenue laws.  See also Treas. Reg. § 301.6331-1(a)(1) (district director is authorized to levy); see, e.g., Delegation Order 5-3 (formerly D.O. 191 Rev. 3) (redelegation of authority with respect to levies to revenue officers and other IRS employees).

Relevant Case Law:

Gibbs v. Commissioner, 673 F. Supp. 1088, 1092 (N.D. Ala. 1987) – the court held that revenue officers “are specifically delegated and charged with the responsibility for collection of taxes. “

Craig v. Commissioner; 119 T.C. 252 (2002) – the court found that the authority to levy on petitioner’s property was delegated to Automated Collection Branch Chiefs pursuant to delegation order.

2.    Contention: IRS employees lack credentials.  For example, they have no pocket commission or the wrong color identification badge.

The Law: The authority of IRS employees is derived from Internal Code provisions, Treasury Regulations, and other redelegations of authority (such as delegation orders).  See the previous discussion on the authority of revenue officers to seize property.  The authority of IRS employees is not contingent upon such criteria as possession of a pocket commission or a specific type of identification badge.

Relevant Case Law:

Oropeza v. Commissioner, T.C. Memo. 2008-94, 95 T.C.M. (CCH) 1367 (2008) – the court ordered the taxpayer to pay a fine of $10,000 for making only frivolous and groundless arguments, including the argument that he never received the pocket commissions of the IRS agents, which is one of the “patently spurious” issues the taxpayer raised.

Gunselman v. Commissioner, T.C. Memo. 2003-11, 85 T.C.M. (CCH) 756 (2003) – the court held that an Appeals Officer at a collection due process hearing does not have to produce enforcement pocket commission for himself or for the IRS employee who signed the notice of lien filing.

I.      Use of Unauthorized Representatives

1.    Contention: Taxpayers are entitled to be represented at hearings, such as collection due process hearings, and in court, by persons without valid powers of attorney.

The Law: Section 330 of Title 31 of the United States Code authorizes the Secretary of the Treasury to regulate the practice of representatives before the Treasury Department and, after notice and an opportunity for a proceeding, to suspend or disbar from practice before the Treasury Department those representatives who are incompetent, disreputable, or who violate regulations prescribed under section 330.  Pursuant to section 330, the Secretary, in Circular No. 230 (31 CFR part 10), published regulations that authorize the Office of Professional Responsibility to act on matters related to practitioner conduct and discipline, including disciplinary proceedings and sanctions.  The regulations provide that only certain practitioners are entitled to represent taxpayers before the IRS.    Attorneys and non-attorneys are entitled to practice before the United States Tax Court only upon application and admission to practice, pursuant to Tax Court Rule of Practice and Procedure 200.

Relevant Case Law:

Young v. Commissioner, T.C. Memo. 2003-6, 85 T.C.M. (CCH) 739 (2003) – the court held that a third party was not entitled to represent petitioner in a collection due process hearing because he was not a practitioner listed in Circular No. 230 (attorney, CPA, etc.). 

J.    No Authorization Under I.R.C. § 7401 to Bring Action

1.    Contention: The Secretary has not authorized an action for the collection of taxes and penalties or the Attorney General has not directed an action be commenced for the collection of taxes and penalties.

The Law: Section 7401 provides that “[n]o civil action for the collection or recovery of taxes, or of any fine, penalty, or forfeiture, shall be commenced unless the Secretary authorizes or sanctions the proceedings and the Attorney General or his delegate directs that the action be commenced.”  Treas. Reg. § 301.7401-1(a) further provides that such action must be authorized by the Commissioner (or the Director, Alcohol, Tobacco and Firearms Division, with respect to subtitle E of the Code), or Chief Counsel for the IRS or his delegate, and such action must be commenced by the Attorney General or his delegate.  

The Attorney General is the head of the Department of Justice, appointed by the President.  28 U.S.C. § 503.  The Attorney General may from time to time make such provisions as he or she deems appropriate delegating authority to any other officer, employee, or agency of the Department of Justice.  28 U.S.C. § 510; see 28 U.S.C.'' 501-530D.

Relevant Case Law:

Perez v. United States, 2001 U.S. Dist. LEXIS 17641, 2001-2 U.S.T.C. ¶ 50,735 (W.D. Tex. 2001) – the court held that section 7401 does not require production of a certified copy of a document in which the Attorney General or a United States Attorney authorized the cause of action against the plaintiff.  The court held that the United States demonstrated compliance with section 7401 by producing a letter from the Office of Chief Counsel to a United States Attorney and a declaration from the counsel of record for the United States.

United States v. Bodwell, 1996 U.S. Dist. LEXIS 11217, 96-2 U.S.T.C. ¶ 50,592 (E.D. Cal. 1996) – the court noted that the defendant’s argument that this suit was not authorized because section 7401 is rooted in the Federal Regulations concerning the Bureau of Alcohol, Tobacco and Firearms has been “flatly rejected” by the Ninth Circuit.

Other Cases:

United States v. Nuttall, 713 F. Supp. 132 (D. Del. 1989).



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Page Last Reviewed or Updated: 11-Apr-2014