Judge Holmes is back with a designated hitter in a shifty case, and a hard result for Drill Right Consultants, LLC, Docket No. 16986-14, filed 1/28/19, and its skilled lawyer, who gets a Taishoff “Good Try.”

Drill Right mimics an ancient Roman centurion. “Drill Right acts as a labor-market middleman. It finds qualified workers for oil-field operators in the Permian Basin — welders, drivers, and the like — tells them where to go if they want the work, and to take their tools with them. The workers get hourly wages and Drill Right collects a small margin on what they are paid. At the end of the year, the company sent out 1099s and not W2s, because it takes the position that the workers are independent contractors and not its employees. If Drill Right is right, it is a facilitator for the oil field’s equivalent of a Hollywood production team of the sort we analyzed in Quintanilla v. Commissioner, 111 T.C.M. 1017 (2016).” Order, at p. 2.

Indubitably all y’all will recollect Jorge Quintanilla, the sets-and-props whiz of TV commercials. What, the shutdown has befogged your memory? Then dig my blogpost “Gigged,” 1/7/16.

There now.

Drill Right got hit by the TX Workforce Commission (no, not chain-gang operators; they’re the TX equivalent of Our Fair State’s Labor Department) for unemployment compensation tax.

“That tax is not large — at least in comparison to the cost of lawyers skilled in the field — and Drill Right made the business decision to just pay it and move on.” Order, at p. 2.

But alas, the TX Workforcers tipped off IRS, who whanged the Drill Right pate with heavy-duty FICA-FUTA. And these being assessable without SNOD, collection jumped in to the tune of $2.5 million-plus. And that’s enough to hire a skilled lawyer.

Skilled lawyer invokes Section 7436(a) to petition, and Section 7436(d) to abate said assessment. And skilled lawyer raises Section 7491 to shift the burden of proof to IRS that the Drill Right workers are ICs and not EEs, hence no FICA-FUTA, rather Sched Cs.

But here’s the rub: Section 7491 allows the shift if petitioner introduces credible evidence with respect to any factual issue about liability for any tax imposed by subtitle A or B.

And we all know that FICA-FUTA is subtitle C.

Judge Holmes looks at the pre-amended Section 7491 cases, but none fits here. And Scar (the patently defective SNOD case) involved a SNOD, which is not required for subtitle C taxes like these. For the Scar story, see my blogpost “Scar Tissue,” 4/14/17. And unlike Scar, here there’s no asserted deficiency (none needed for FICA-FUTA) and no assessment (because abated by Section 7491(d) pending trial and decision).

Drill Right’s skilled lawyer is out of luck. Congress excluded Title C cases from the Section 7491 shift.

Time for a Section 7482 interlocutory?