In Uncategorized on 02/04/2015 at 19:08

If you, like me, are a fan of premier grand cru Holmes, today’s designated hitter is a rare treat. It brings Broadway to Appeals, confusion to IRS and its counsel, and tramples the partitive genitive once again.

Hear now the tale of James D. Hurley & Ruth N. Hurley, Docket No. 30681-13L, filed 2/4/15, by Hisself, The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Irrefragable, Indefatigable, Irresistible, Illustrious (but never Incomprehensible or Insensitive) Foe of the Partitive Genitive, His Honor (drumroll and fanfare) Mark V. Holmes.

The Hurleys were timely, they claim, with their 1040 for the year at issue. No they were not, says IRS, check the postmark and Section 7502. Your website did an Obamacare twice when we tried to file, riposte the Hurleys, so we went to the snail mail.

That might be an interesting moot-court question, but the actual facts of this case led everyone in a different direction. The Hurleys’ return was received by the Commissioner and he assessed the tax shown, plus a penalty for late filing. The Hurleys didn’t pay after the Commissioner sent them the usual notices, and then he began to threaten them with collection by levy. He sent one of these threats to them in April 2013. It wasn’t a final notice of levy, but the Hurleys filled out and sent in the IRS form requesting a CDP hearing in early May 2013.” Order, at p. 2.

IRS later sent the right one (NITL), and the Hurleys filed a second CDP request, claiming they only were contesting the late-filing penalty from the website crash and weren’t offering a collection alternative.

The Hurleys also claimed IRS ignored the first CDP request, which should stay collection activity, but as that came before a NITL, it doesn’t count and doesn’t stop anything.

Appeals denied the Hurleys’ request because they didn’t supply financial info for a collection alternative–but they never asked for one.

The IRS’ counsel said they’d abate the late-filing penalty, but as the Hurleys never disputed they owe the tax shown on the late-filed-but-now-unpenalized-1040, and the first CDP request didn’t come after a NITL, the Hurleys’ second CDP should be rejected. IRS wants summary J.

Judge Holmes doesn’t cut this baby in half; he throws the baby away.

“The Court doesn’t think any of the parties are right, and will deny the motion.” Order, at p. 2.

And then, as I would do were I in so exalted a position as Judge Holmes, he goes Broadway (in a footnote, yet): “Cf Fiddler on the Roof (United Artists 1971) (Tevye: ‘He’s right.’ Avram: ‘He’s right, and he’s right. They can’t both be right.’ Tevye: ‘You know, you are also right.’).” Order, at p. 2, footnote 1.

Now the SO rejected the Hurleys’ CDP request because they didn’t provide the SO with financial information for a collection alternative the Hurleys never asked for.

“We have often held that the IRS can refuse to consider collection alternatives if a taxpayer doesn’t show that he is current in his tax reporting or doesn’t submit financial information. But we’ve never held — and the Commissioner doesn’t argue — that taxpayers have to prove both these things just to get the arguments that they do raise heard and decided by the settlement officer who is running their CDP hearing.” Order, at pp. 4-5.

OK, but since IRS is dropping the penalty, thus giving the Hurleys what they asked for, and since the Hurley’s first CDP request is a nullity because it wasn’t preceded by a NITL, and therefore collection isn’t stayed thereby, why not summary J for IRS?

Now Judge Holmes shows why his loyal fans cheer even his grammatical solecisms. And here it is, citations included.

“But there is a problem. And, it is a problem that should be increasingly familiar: The Commissioner is making an argument in our Court that is not what the settlement officer made in the notice of determination after the CDP hearing. See SEC v. Chenery Corp., 332 U.S. 194 ( 1947) (Chenery II); SEC v. Chenery Corp., 318 U.S. 80 (1943) (Chenery 1). Chenery summarizes the administrative law principle that says ‘a reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency.’ Chenery II, 332 U.S. at 196 (describing its holding in Chenery 1). The Supreme Court not too long ago announced that ‘we are not inclined to carve out an approach to administrative review good for tax law only’ and noted ‘the importance of maintaining a uniform approach to judicial review of administrative action.’ Mayo Found.for Med. Educ. & Research v. United States, 562 U.S. 44,__, 131 S. Ct. 704, 713 (2011) (citation and internal quotation marks omitted). This dictates that we follow the Chenery doctrine in CDP cases. See Jones v. Commissioner, 104 T.C.M. (CCH) 364, 369 (2012); Salahuddin v. Commissioner, 103 T.C.M. (CCH) 1764, 1768 (2012). And it means that we cannot sustain a notice of determination on grounds other than those upon which the settlement officer relied, at least when a taxpayer says that he wants to rely on Chenery.” Order, at p. 5.

Great, so Chenery bails out Hurley. Or does it?

“There is a practical problem here: The Hurleys haven’t said that they want to rely on Chenery. And even though our Court hasn’t ruled on the issue, Chenery might be waived if it’s not raised, Catholic Health Initiatives Iowa Corp. v. Sebelius, 718 F.3d 914, 922 n. 6 (D.C. Cir. 2013), as one can predict it won’t be by all but a tiny fraction of litigants who, like the Hurleys, are pro se. It may turn out that ‘Chenery ‘, like an incantation, must be uttered by taxpayers to be effective. Or maybe not: In Hoyle v. Commissioner, 131 T.C. 197 (2008), supplemented by 136 T.C. 463 (2011), we held that the Commissioner is obliged by section 6330(c)(1) to verify ‘that the requirements of any applicable law or administrative procedure have been met.’ Perhaps this background principle of administrative law is one of those ‘applicable requirements.’ See Tax Court Rule 121. But until this small puzzle is solved, we cannot conclude that the Commissioner is entitled to judgment ‘as a matter of law.’” Order, at pp. 5-6.

Now you see why I forgive Judge Holmes even such as “They made a couple points”, Order, at p. 2, and “A couple months later”, Order, at p. 3.

OK, I know Judge Holmes, as a graduate of Harvard College and of the University of Chicago Law School (“where joy goes to die”), knows better. I suspect he writes thus for the same reason as C. Lutwidge Dodgson’s little boy sneezes: “He only does it to annoy, Because he knows it teases”.

Getting back to business, Judge Holmes denies IRS’s summary J, and tells the parties: “The Court expects to discuss further motions, including one to remand, with the parties at calendar call if they do not settle the case before then.” Order, at p. 6.

Walk-off home run, as the fans go wild.




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