Judge Elizabeth A. (“Tex”) Copeland sings out a variant of that old cadence I (and a generation now thinning out) remember so well. Judge Tex Copeland is telling Peter E. Barker-Homek, half of Peter E. Barker-Homek & Shay Serdy, Docket No. 2172-17, filed 3/31/26, that he must sort out his bankruptcy dischargeability issues elsewhere than at The Glasshouse in the City of the Partial Shutdown. 

Peter wants an order clarified, but exactly which order and how it is unclear are themselves unclear. Order, at p. 2. Judge Copeland surmises Peter means whether she or the BJ in whichever of the three (count ’em, three) bankruptcy cases he and Ms. Serdy filed can decide which, if any, of the deficiencies he’s now petitioning are discharged or dischargeable. The last of the bankruptcy cases resulted in an order returning the deficiency case to Tax Court to decide whether there are deficiencies at all, and if so, how much is owed.

Tax Court decides deficiencies, Bankruptcy Court decides dischargeability.

“On this point, we refer the parties to our holding in Neilson v. Commissioner, 94 T.C. 1, 9 (1990), where we clarified that ‘we are without subject matter jurisdiction [to determine dischargeability] and petitioners, if they want a ruling on their dischargeability position, would be required to seek the jurisdiction of the bankruptcy court.’ What this means for Mr. Barker-Homek in this case is that we must conclude our deficiency determination before such deficiency can be discharged in bankruptcy.” Order, at pp. 2-3.

Judge Copeland lays out two (count ’em, two) scenarios this case might follow, but refrains from any more, and strongly suggests the parties settle the numbers.

Peter is rebuked for failing to serve Ms. Serdy (who is mail only, not electronic), leaving the burden on Mr. Jeane and his faithful few.

Oh yes, Peter also moves to reopen the record and recuse Judge Copeland, but those will have to await IRS’ replies. Cain’t hardly wait.

Daniel Isaiah Thody, T. C. Memo. 2026-30, filed 3/30/26, need not worry that he might be twice mulcted for the tax he never paid, as shown on the SFRs he got for the five (count ’em, five) years he never filed. Daniel Isaiah’s business, which his father started, sold airplane parts to DOD. Daniel Isaiah was in jail when he petitioned the deficiencies; his father was in jail during the years at issue, T. C. Memo. 2026-30, at p. 2.

Judge Elizabeth A. (“Tex”) Copeland thinks so little of Daniel Isaiah’s arguments on his own behalf as to give him a Section 6673 frivolity yellow card, T. C. Memo. 2026-30, at pp. 10-11. 

Since Daniel Isaiah did pay the criminal restitution amerced by USDSWDTX, he needn’t pay the $162K twice.

“Although the IRS may have previously collected without assessment or even summarily assessed the restitution liability, it neither assessed nor collected such restitution as a deficiency.  This does not necessarily mean that the IRS is not required to later credit its deficiency assessments for the years in issue with amounts (if any) collected on the restitution. Mr. Thody’s payments on the restitution liability, if any, do not affect the existence of deficiencies for the years in issue; but rather such payments will apply after assessment to satisfy that deficiency or a portion thereof.” T. C. Memo. 2026-30, at pp. 7-8. (Citations omitted; emphasis by the Court).

Restitution is estimated loss to the guvmint; deficiency is adjudicated tax due. Latter may be greater or less, so sort it out in the Rule 155 beancount.

That’s what Judge Ronald L. (“Ingenuity”) Buch finds Barrett Business Services, Inc., 166 T. C. 7, filed 3/30/26, to be when BBS seeks to take the  “Work Opportunity Tax Credit (WOTC) and the Empowerment Zone Employment Credit (EZEC) with respect to its clients’ worksite employees for… (years in issue).” 166 T. C. 7, at p. 2.

Judge Buch finds sufficient Congressional guidance to keep the largesse bestowed on commonlaw employees (the hands-on, tell-the-workers what-and-how-to-do, fire-and-hire types) out of the hands of the backoffice payroll bookkeeper types like BBS.

Backstory: ” The WOTC allows employers to claim a tax credit for a percentage of wages paid to individuals of a ‘targeted group.’ See I.R.C. §§ 38(a), (b)(2), 51(a) and (b)(1). individuals of a ‘targeted group’ include certain veterans, ex-felons, individuals with disabilities, or long-term unemployment recipients. I.R.C. § 51(d)(1). The EZEC allows employers to claim a tax credit for a percentage of qualified zone wages paid for services performed by qualified zone employees who both live and work in an empowerment zone. See I.R.C. §§ 38(a), (b)(9), 1396(a), (c)(1), (d)(1). An empowerment zone is an area suffering from high poverty and unemployment in an urban or rural area designated under section 1391(a) by either the Secretary of Housing and Urban Development or he Secretary of Agriculture. See Rev. Proc. 2021-18, § 2.01, 2021-15 I.R.B. 1007, 1007; H.R. Rep. No. 103-111, at 792 (1993), as reprinted in 1993-3 C.B. 167, 368; see also I.R.C. § 1393.” 166 T. C. 7, at pp. 3-4.

While the statutes don’t define “employer,” commonlaw is the rule. BBS’ try to use Section 3401(d)(1) statutory employer cover falls short. Section 3401 is specifically limited to Title C employment taxes. Employment taxes aren’t income taxes.

And for those who care about legislative intent, Judge Buch has the following: “Congress enacted these credits to encourage employers to hire disadvantaged individuals who live and provide services in economically distressed areas. Congress intended the credit to help these disadvantaged individuals and to revitalize these economically distressed areas. Barrett provides employment-related services to its clients, which include payroll services. Barrett is not the entity that is providing the work opportunity for disadvantaged individuals or in distressed economic areas. A statutory employer who pays wages for services provided to another person is not Congress’s intended beneficiary of these credits.” 166 T. C. 7, at p. 10. My kind of judge.

Section 3504 agency only subjects agents of employers to the same liabilities as employers, not the same benefits. And as these are cross-motions for summary J, and the agency relationship is a fact question, Judge Buch can’t tell if BBS is an agent of the various employers who retain their services.