In Uncategorized on 01/26/2022 at 20:47

My colleague Peter Reilly, CPA, is in the thick of the current refund fray. While Tax Court can order a refund in a deficiency case, the Court has no such jurisdiction in a CDP. 4 Cir just affirmed this conclusion in McClane v. Com’r, No. 20-1074, decided 1/25/22.

Brian McClane has been here before, of course. See my blogposts “SOL on SOL – Redux,” 9/11/18, and “Judge Halpern’s Conundrums,” 3/13/18.

Unhappily for Brian, who admittedly overpaid for the long-ago year at issue, the de novo review he got in his CDP (Brian never got the SNOD) never got to the SOL fence, because Tax Court can’t order a refund out of a CDP once it finds that the collection activity complained of is without basis.

I see the Great Chieftain of the Jersey Boys is on brief as amicus, along with the American College of Tax Counsel (to which august body I do not belong), and the Tax Freedom Institute, Inc. Brian’s case was argued by the FL criminal tax expert, who appeared in my blogpost “When Lawyers Get Involved,” 1/20/22.

But the result is the same.

“We cannot read the phrase ‘underlying tax liability’ in isolation, but instead must read it in ‘the specific context in which that language is used.’ Here, the ‘specific context’ is the IRS’s attempt to collect via lien or levy. (‘The relevant term, ‘underlying tax liability”, is clear and unambiguous and is read easily to mean the tax liability underlying the proposed levy.’). The phrase ‘underlying tax liability’ does not provide the Tax Court jurisdiction over independent overpayment claims when the collection action no longer exists. The Commissioner is correct that the ‘taxpayer was permitted to challenge the amount of his underlying liability in the [collection due process] hearing … only in the context of determining whether the collection action could proceed.’ Appellee’s Br. at 15– 16 (emphasis added) (‘Section 6330 provides a set of procedural safeguards for taxpayers facing a potential levy action by the IRS …” (emphasis added)). McLane no longer faces such an action.” Last paragraph of decision; citations and footnote omitted, but the footnote is a drill-down on Greene-Thapedi.

This needs Congressional action. I refrain from any political comment.


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