Judge Lauber has to decide if Tax Court can decide whether Panagiota Pam Sotiropoulos can get a hearing in Tax Court, in the eponymous opinion, filed 5/5/14, in 142 T. C. 15.

Pam got involved in some UK movie shelters whilst working in the UK and taking foreign tax credits for her UK withholdings. It turns out she got big UK tax write-offs and money back, but never bothered to tell IRS, because the UK refunds she got were “under investigation” by HMRC (Her Majesty’s Revenue and Customs).

IRS sent Pam a SNOD, but wants a mulligan, because Section 905(c)(3) ousts Tax Court of jurisdiction via a cross-reference from Section 6213(h)(2)(a), so Tax Court should forget the SNOD, bounce Pam’s petition and let IRS go assess and lien and levy.

Now the accuracy penalties IRS demanded are clearly subject to Tax Court jurisdiction, but IRS will concede them in order to grab Pam’s cash, untouched by Judge Lauber and his colleagues.

The only issue here is jurisdiction: can Tax Court even decide that it has jurisdiction?

You betcha it can, says Judge Lauber:

“This Court always has jurisdiction to determine whether it has jurisdiction. The Tax Court is a court of limited jurisdiction, and we must ascertain whether the case before us is one that Congress has authorized us to consider. In determining whether we have jurisdiction over a given matter, this Court and the Courts of Appeals have given our jurisdictional provisions a broad, practical construction rather than a narrow, technical one.” 142 T. C. 15, at p. 6 (Citations omitted, but read them; good stuff).

Remember, Tax Court is the sixty buck ticket to justice, where a taxpayer doesn’t have to pay to play, and gets an automatic stay while his/her case is pending at no extra charge.

Of course, there are exceptions, like a self-assessed tax (“you said it, so you owe it”), assessable penalties, jeopardy assessments, and obvious arithmetic errors. For a quick note on assessable penalties, see my blogpost “Jet Lag?”, 12/19/11.

Section 905 is an outlier. Because with foreign taxes one can’t always know ultimate liability, the taxpayer has to tell IRS when s/he finds out what the real tax bill is. And Section 905(c)(3) specifically lists refunds as a mandatory “show-and-tell”.

And if the taxpayer doesn’t, and hasn’t reasonable cause why s/he didn’t, there’s a 25% penalty.

Of course, IRS doesn’t give Tax Court jurisdiction by sending a SNOD; only the statute does.

True, says Judge Lauber, but that’s not the end of the story. IRS can go after the taxpayer once there has been a refund of the foreign tax for which taxpayer claimed credit.

But here the issue is “was there a refund?”

Now Judge Lauber makes it clear again that Tax Court isn’t passing on the merits or otherwise of Pam’s case. And Tax Court has adjudicated whether or not there was a refund of foreign creditable taxes, when no one raised the jurisdictional issue.

Tax Court exists to adjudicate contested taxes. The exceptions are the self-reporteds, the obvious math errors and the emergencies. “The common thread in these non-emergency situations is that the assessment is uncontroverted and does not need independent review, since the taxpayer does not dispute that the tax is owing.” 142 T. C. 15, at p. 16.

But careful as always, Judge Lauber limits the inquiry: “At this point, we need not decide whether we have subject matter jurisdiction over all aspects of this controversy. At the very least, we have jurisdiction to determine our jurisdiction. We thus have jurisdiction to decide whether the statutory provision alleged to divest us of jurisdiction applies, i.e., whether the U.K. taxes paid by petitioner have been ‘refunded in whole or in part’ within the meaning of section 905(c)(1)(C). This will afford petitioner a prepayment forum for resolving the central issue that she raises on the merits, namely, that the amounts she received from U.K. taxing authorities during 2003-05 were not ‘refunds’.” 142 T. C. 15, at p. 17.

Stay tuned; more to come.