In Uncategorized on 02/21/2018 at 16:24

And Tax Court

IRS outrageously stalled the Friends of the Benedictines In the Holy Land, Inc., 150 T. C. 5, filed 2/21/18, sitting for a year on the Friends’ 1023 application for 501(c)(3) exemption, and refusing to give a date certain when they would act.

IRS blew past the 270-day Section 7428(b)(2) clear-to-sue; but the Friends, mindful of St. Benedict’s Rule 54, didn’t want to receive letters, so they waited until fourteen (count ‘em, fourteen) months had passed, to send in a petition, arduously and painstakingly drafted by their high-priced attorneys.

They served it on a Friday. IRS folded on the Monday.

Judge Wells takes up the tale.

A week after IRS unloaded the letter exempting the Friends, “…counsel for respondent spoke with petitioner’s counsel and discussed the recently issued determination letter.  Respondent’s counsel intended to file a motion to dismiss, but petitioner’s counsel instead proposed that they resolve the case with a joint decision and stipulation.  Respondent agreed, and over the next month and a half worked with three separate attorneys for petitioner to file the stipulation and decision documents.” 150 T. C. 5, at p. 3.

Does the phrase “Section 7430” come to mind?

The Friends want $68,990 in undifferentiated admins and legals. That sum they had not yet paid, at least when the Section 7430 motion was filed (150 T. C. 5, at p. 19, footnote 8). And some invoices were directed to an organization different from the Friends.

Bottom line: IRS’ folderoo means that no admins or legals can be allowed.

“Congress amended section 7430 to allow for the awarding of costs in declaratory judgment proceedings…but only where the Government’s position is not ‘substantially justified’.  While we recognize that section 7430 leaves a gap in coverage in circumstances such as this one, it is not our place to provide a remedy.  See, e.g., Pac. Fisheries, Inc. v. United States, 484 F.3d 1103, 1111 (9th Cir. 2007) (Although the IRS’s issuance of the administrative summonses forced the taxpayers into litigation, we see no fees remedy for them in the judicial proceeding.  We conclude that their case falls into a gap in the statute, but it is not our role to bridge that gap.’).  In the instant judicial proceeding, because respondent’s counsel promptly conceded the case, the Government’s position was substantially justified, and petitioner is not a prevailing party entitled to recover litigation costs.” 150 T. C. 5, at p. 19. (Footnote omitted, but read it, lawyers; informal billing can torpedo your claim for fees).

Judge Wells is sympathetic to the Friends, but as far as Tax Court is concerned, they are friendless.

Not only are they friendless, but as far as the Friends, or any would-be 501(c)(3), is concerned, Section 7430 is toothless. All IRS has to do is jack them around for a year (or more), let them run up a bill for preparing a petition (unless they can find a pro bono), and fold the minute the petition hits. Given the games played with the 501(c)(4)s, here is a first-class reason why the statute needs Congressional remediation.

I will refrain from making a political comment on the possibility of that happening.

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