In Uncategorized on 07/20/2013 at 02:06

Tax Court echoes the Frank Silver and Irving Cohn 1922 opus (but they were concerned with bananas) in a rash of designated hitters and one plain-vanilla order.

First up, with a solid half-dozen designated hitters, all involving la famille Zerjav, and all being dealt with by Special Trial Judge Lewis (“His Name Is His Fame”) R. Carluzzo. They involve the Section 6707A penalty for failing to report reportable transactions, with a special extra hit for not reporting a listed transaction.

Tax Court has no jurisdiction over those. Congress has left review to the US District Courts (even the Court of Federal Claims can’t go there). See Smith v. Com’r, 133 T. C. 18, filed 12/21/09.

On to the next case. Section 7428 Tax Court reviews of Section 501(c)(3) tax exemption disallowances do not permit Tax Court to enjoin IRS from yanking the exemption while the review is ongoing. Special Trial Judge John F. Dean refuses to enjoin IRS from yanking the exemption, and trumpeting same to all and sundry, in Consumer Education Services, Inc., Docket No. 6281-13X, filed 7/19/13.

Apparently IRS audited the educated consumers, yanked their 501(c)(3) letter retroactive to Day One, and then, when the consumers went to Appeals, confirmed the yank, but then rescinded the yank.

Consumers wanted the retroactive yank and its attendant publicity enjoined.

Now notwithstanding Tax Court’s limited general jurisdiction, and complete lack of equitable jurisdiction to give injunctive relief far and wide, there are exceptions, and STJ Dean lists them all. But Section 7428 isn’t one of them.

Even so, Consumers’ attorneys come up with a Taishoff “good try”. They agree that Tax Court’s jurisdiction in a Section 7428 is limited to declaring whether an entity does or does not qualify for Section 501(c)(3), as a special exception to the Declaratory Judgment Act, and they also agree the Anti-Injunction Act, Section 7421, bars enjoining collection of any tax.

“Petitioner argues, however, that notwithstanding the Declaratory Judgment Act’s general prohibition on declaratory judgments in tax cases, section 7428 actions are excepted from the prohibition. Petitioner posits the proposition that the Declaratory Judgment act is ‘coextensive and coterminous’ with the Anti-injunction Act. Because the two acts are coextensive and coterminous, according to petitioner, ‘an action allowed under one will not preclude relief afforded by the other’ and, therefore, the Court may, despite the prohibition of the Anti-injunction act, enjoin respondent’s actions pursuant to 5 U.S.C. sections 701 – 706 (2012), the Administrative Procedure Act (APA).” Order, at p. 4. (footnote and citations omitted).

Nice, but even if Consumers’ lawyers have it right, Tax Court’s jurisdiction is limited, its injunctive powers are confined to the specific instances that Congress has expressly granted, so no injunction from Tax Court.

Yes, we have no jurisdiction.


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