The Truth About Frivolous Tax Arguments — Section II

 

March 2022

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II. 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 before 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.

Under section 6330(g), 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. Also, section 6702(b) allows 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. The most recent published list of frivolous positions is Notice 2010-33, 2010-1 C.B. 609. Accordingly, when the Tax Relief Health Care Act of 2006 (TRHCA) amendments are applicable, a taxpayer raising only frivolous issues may not only be ineligible for a face-to-face hearing but may also be denied any section 6320 or 6330 hearing and may be subject to a penalty.

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: 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
  3. Contention: Certain employees in the IRS Office of Appeals are not authorized to conduct collection due process hearings

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. Authorization Under I.R.C. § 7401 is Required in a Collection Due Process Case

  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:

Best v. Commissioner, 702 F. App'x 615 (9th Cir. 2017) – the court held that Forms 4340 provided sufficient record of assessment for purposes of the taxpayer's request and that the Appeals Officer was not obligated to provide Taxpayers with a specific, signed delegation order for the Forms 4340.

March v. IRS, 335 F.3d 1186 (10th Cir. 2003) – the Tenth Circuit held that the computer-generated certificate of assessment and payment form (RACS Report 006) used by the IRS to record assessments against the taxpayers satisfied the regulatory requirements as it is equivalent to the non-computer-generated form (Form 23C) previously used by the IRS. Furthermore, production of a Form 4340 creates a presumption that a Summary Record of Assessment, whether on Form 23C or RACS Report 006, was validly executed and certified.

Best v. Commissioner, T.C. Memo. 2014-72, 107 T.C.M. (CCH) 1376 (2014)—the court held that the Forms 4340 provided sufficient record of assessment for purposes of the taxpayer's request, the Appeals Officer was not obligated to furnish a Revenue Accounting Control System (RACS) report or signed Form 23C, and imposed a $5,000 section 6673 penalty.

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 taxpayer for asserting, among other frivolous arguments, that the IRS was obligated to produce a Form 23C.

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 taxpayer in lieu of the copies of the assessment documents that he had requested.

Nestor v. Commissioner, 118 T.C. 162 (2002) – the court held that the taxpayer 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:

May v. Commissioner, T.C. Memo. 2014-194, 108 T.C.M. (CCH) 324 (2014); 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 (5th Cir. 2009) – the Fifth Circuit 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.

Wnuck v. Commissioner, 136 T.C. 498 (2011) – the court rejected the taxpayer's claim that the IRS lacked authority to prepare a section 6020(b) return for income taxes and imposed a $5,000 penalty under section 6673.

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 under section 6020(b) for taxpayers who fail to do so themselves.

Other Cases:

United States v. Updegrave, 1997 WL 297074 (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); Shakir v. Commissioner, T.C. Memo. 2015-147, 110 T.C.M. (CCH) 137 (2015); Reynolds v. Commissioner, T.C. Memo. 2009-181, 98 T.C.M. (CCH) 83 (2009).

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: 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. The Secretary is authorized to send notices of deficiency to taxpayers. I.R.C. § 6212(a). "Secretary" includes the Secretary of the Treasury or his delegate. I.R.C. § 7701(a)(11)(B). "Delegate," as used with respect to the Secretary of the Treasury, means 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. I.R.C. § 7701(a)(12)(A)(i). Thus, the authority to sign notices of deficiency may be delegated to any IRS officer, employee, or agency of the Treasury Department duly authorized by the Secretary directly, or indirectly by redelegation of authority.

Relevant Case Law:

Selgas v. Commissioner, 475 F.3d 697 (5th Cir. 2007) – on appeal, the taxpayer argued that the Tax Court lacked jurisdiction because the notice of deficiency sent to him was invalid because the employee who signed it lacked authority to do so. The Fifth Circuit held that a signature is not required on a notice of deficiency to render the notice of deficiency valid, stating, "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 (9th Cir. 1992) – the Ninth Circuit 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 taxpayer'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); United States v. Reading, 2012 WL 4120439 (D. Ariz. 2012); Muncy v. Commissioner, T.C. Memo. 2017-83, 113 T.C.M. (CCH) 1399 (2017); ;;   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); Nestor v. Commissioner, 118 T.C. 162 (2002).

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 (income taxes) or B (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 a return was made and amount was shown thereon) plus amounts previously assessed (or collected without assessment) as a deficiency, over the amount of rebates, as defined in section 6211(b)(2). 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 tax and issuing a notice of deficiency under 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 the IRS; taxpayer made only frivolous arguments, including that the "[IRS] 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 taxpayers' "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 their contention that failing to file a return shields a nonfiler from income tax liability is also frivolous and, due to the frivolous arguments, 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 taxpayer liable for the section 6673(a) penalty: taxpayer 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. 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. I.R.C. § 6323(f)(3). 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. Treas. Reg. § 301.6323(f)-1(d). There is no statutory or regulatory requirement that a notice of federal tax lien, to be valid, must be signed by anyone or, if it is signed, that it must be signed by the Secretary of the Treasury.

"The 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." I.R.C. § 6323(a). "Secretary" is defined to include the Secretary of the Treasury or his delegate and the term "delegate," as used with respect to the Secretary of the Treasury, is defined 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. I.R.C. §§ 7701(a)(11)(B) and 7701(a)(12)(A)(i). 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. 3 delegates to IRS personnel the Commissioner's authority with respect to notices of federal tax lien.

Relevant Case Law:

Fairchild v. IRS, 450 F. Supp. 2d 654 (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 U.S. Dist. LEXIS 20636, 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 of 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 taxpayer'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:

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

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. 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. I.R.C.§ 6323(f)(3). 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. Treas. Reg. § 301.6323(f)-1(d).

Relevant Case Law:

United States v. Union Cent. Life Ins. Co., 368 U.S. 291 (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), aff'd, 70 F. App'x 971 (9th Cir. 2003) – 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: 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. I.R.C. § 6320(a)(1). 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. I.R.C. § 6330(a)(1). 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 IRC Section 6330(c)(1)

1. Contention: Verification requires producing certain documents.

The Law: 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. I.R.C. §§ 6320(c) and 6330(c)(1). Appeals must obtain verification from the IRS office collecting the tax. Treas. Reg. §§ 301.6320-1(e)(1) and 301.6330-1(e)(1). 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:

May v. Commissioner, T.C. Memo. 2014-194, 108 T.C.M. (CCH) 324 (2014); Best v. Commisioner, T.C. Memo. 2014-72, 107 T.C.M. (CCH) 1376 (2014); Harper v. Commissioner, T.C. Memo. 2013-79, 105 T.C.M. (CCH) 1484 (2013); 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: 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: 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. I.R.C. § 6303(a). 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.

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" can establish proper issuance of a section 6303 notice and demand.

Relevant Case Law:

Williams v. Commissioner, T.C. Memo. 2008-173, 96 T.C.M. (CCH) 25 (2008) – the court rejected taxpayer's argument that he is entitled to see proof that the Notice and Demand Letter was received, holding 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.

Flathers v. Commissioner, T.C. Memo. 2003-60, 85 T.C.M. (CCH) 969 (2003) – the court rejected as frivolous and/or groundless taxpayer's argument that she did not receive proper notice and demand under section 6303(a) because, according to her, 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 the taxpayer received, 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 her 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 taxpayer'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 before paying the disputed amount. The Tax Court's jurisdiction 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, administrative costs, worker classification, relief from joint and several liability on a joint return, and to review collection due process actions and the IRS's failure to abate interest.

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.

Kuretski v. Commissioner, 755 F.3d 929 (D.C. Cir. 2014) – the D.C. Circuit rejected the taxpayer's argument that the President's right to remove Tax Court judges under section 7443(f) violated the Constitutional separation of powers, reasoning that the Tax Court is not an Article III court, but part of the Executive branch. The D.C. Circuit noted that the majority holding in Freytag — that the Tax Court is a "Court of Law" for Appointments Clause purposes — does not call into question the constitutionality of presidential removal power under section 7443(f).

Knighten v. Commissioner, 705 F.2d 777 (5th Cir. 1983) – the Fifth Circuit 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 Seventh Circuit ruled that taxpayers' contention that the Tax Court is without a valid constitutional existence lacked substance and merit.

Other Cases:

Blair v. Commissioner, T.C. Memo. 2016-255, 112 T.C.M. (CCH) 577 (2016);      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: "If 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." I.R.C. § 6331(a). The term "levy" includes the power of distraint and seizure by any means. I.R.C. § 6331(b). 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 "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. 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 taxpayer's property was delegated to Automated Collection Branch Chiefs pursuant to delegation order.

Other Cases:

O'Brien v. Green, 114 A.F.T.R.2d 2014-5613 (E.D. Va. 2014).

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.

3. Contention: Certain employees in the IRS Office of Appeals are not authorized to conduct collection due process hearings.

The Law: Hearings must be conducted by an officer or employee in the Internal Revenue Service Independent Office of Appeals who has had no prior involvement with respect to the same unpaid tax. I.R.C. §§ 6320(b)(3) and 6330(b)(3). The statute does not specify that any particular category or officer conduct the hearing.

Relevant Case Law:

Tucker v. Commissioner, 135 T.C. 114, 155 (2010), aff'd, 676 F.3d 1129 (2012), cert. denied, 133 S.Ct. 646 (2012) – the Tax Court held that "an 'appeals officer' is any 'officer or employee' in the IRS Office of Appeals to whom is assigned the task of conducting a CDP hearing under section 6330(b)(3)." The D.C. Circuit affirmed the Tax Court's holding that such officers or employees are not inferior officers for purposes of the Appointments clause of the United States Constitution, and so are properly hired by the Commissioner of the Internal Revenue pursuant to section 7804(a).

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 500 of Title 5 of the United States Code authorizes (subject to some limitations) an attorney in good standing of the bar of the highest court of a State to represent a person before an agency upon filing with the agency a written declaration that they are currently qualified and authorized to represent the person on whose behalf they act. It also authorizes (subject to some limitations) an individual who is duly qualified to practice as a certified public accountant to represent a person before the IRS upon filing a written declaration that they are currently qualified and authorized to represent the particular person on whose behalf they act. 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:

Marett v. Commissioner, T.C. Memo. 2009-14, 97 T.C.M. (CCH) 1054 (2009) –the Appeals Officer did not abuse his discretion in refusing to allow a party to represent the taxpayer where there was no proof he was an attorney, CPA or enrolled agent in good standing.

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 taxpayer in a collection due process hearing because he was not a practitioner listed in Circular No. 230 (attorney, CPA, etc.).

J.  Authorization Under I.R.C. § 7401 is Required in a Collection Due Process Case

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.

Section 7401 does not apply in collection due process cases. The issue in a collection due process case is whether to sustain a levy or proposed levy or a notice of federal tax lien filing. These are administrative collection actions authorized under I.R.C. §§ 6323 and 6331, not "civil actions" for purposes of section 7401.

Relevant Case Law:

Schwersensky v. Commissioner, T.C. Memo. 2006-178, 92 T.C.M. (CCH) 177 (2006) – the court observed that taxpayer's contention "that the instant collection due process action has not been authorized as required by section 7401 is meritless" for "[s]ection 7401 applies to a 'civil action'" and "[t]he levy (made pursuant to section 6331) is an administrative action that does not necessitate the institution of a civil suit."

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