I’d thought epistolary jousting was gone when IRS finally took my (and others’) advice and issued whistleblower shootdowns that said “game over, we’re done, petition.” But IRS seems to have revived the sport when it comes to denying appeals from Section 6699(a) S Corp late-filing chops.

CSTJ Lewis (“Great is the Name and Great is the Fame”) Carluzzo, manifesting his magnanimous  character, shuffles through the IRS’ paper barrage, with intermittent counterbattery fire from Brighton Construction Enterprise, Docket No. 35599-21SL, filed 12/19/22. Brighton was late for two (count ’em, two) consecutive years. Appeals claims Brighton had a prior opportunity to dispute when they try to raise reasonable cause at the CDP on the NITL.

I won’t try to summarize the volleying. There are letters without dates, with strange references, and with omitted enclosures. There is a back-and-forth between IRS offices in KY and PA, but nowhere is it clear in the record that the liability issue had been considered anywhere.

So CSTJ Lew has three (count ’em, three) choices: review the record de novo and decide that Brighton had reasonable cause; reject the NITL without reviewing whether Brighton had reasonable cause; or remand for Appeals to consider reasonable cause.

“Fairness to petitioner suggests that we do not go with the first option. For various reasons we can understand why the parties did not focus on the point, but the record is not complete enough to make a finding on reasonable cause. Fairness to respondent suggests that the second option might preclude respondent from collecting a tax that might rightfully be due.

“Perhaps influenced by a children’s fairy tale, it occurs to us that the third option is just right.” Order, at p. 12.

Back to Appeals.

Here’s CSTJ Lew’s roadmap: ” (1) If upon further review and investigation respondent’s settlement officer establishes that petitioner had a meaningful prior opportunity to challenge the penalty assessments by participating in an Appeals conference that considered its claims for abatement, then respondent may supplement the record with that information, and petitioner would, as respondent argues here, be precluded from raising the issue in this proceeding. Because we have already found that in all other respects respondent’s settlement officer has proceeded as required by section 6330, that would result in decision being entered for respondent; (2) if upon further investigation or review, respondent’s settlement officer is unable to establish that petitioner had a meaningful prior opportunity to challenge the penalty assessments at an Appeals conference, then respondent’s settlement officer should conduct a further administrative hearing that addresses petitioner’s claim to reasonable cause in support of petitioner’s requests for abatements. After further consideration, if the parties agree, a stipulated decision could be submitted to the Court [edited by me: nudge nudge, wink wink]; or  (3) if after further administrative review, the parties are unable to resolve petitioner’s abatement claim, then the Court will allow either party to supplement the record with additional evidence directed to petitioner’s claim of reasonable cause and proceed accordingly.” Order, at pp. 13-14.

Just finished an enlightening CLE on Our Fair State’s Freedom Of Information Law (Public Officers Law §§84-90), especially the provision for legal fees (§89(4)(c)(i) and (ii)). In any case “…against such agency involved, reasonable attorney’s fees and other  litigation  costs reasonably incurred  by such person in any case under the provisions of  this section in which such person has substantially prevailed, and when  the agency failed to respond to a request or appeal within the statutory  time;  and  (ii)  shall assess, against such agency involved, reasonable  attorney’s fees and other litigation costs reasonably incurred by such  person  in  any  case under the provisions of this section in which such  person has substantially prevailed and the court finds that the agency  had no reasonable basis for denying access.”

And our Courts have held that if the agency folds when they’re sued, the person who brings the case has still “substantially prevailed.”

I’ll bet Bryan Edward Menge, Docket No. 12155-21L, filed 12/16/22, would like to have a similar provision in Sections 6702 and 6320, as IRS concedes the Section 6702 false return chop, and the SNOD, and released the NFTL they gave him at no extra charge. There was also a NITL, but that’s off the menu here.

So all Judge David Gustafson can do is dismiss Bryan’ Edward’s petition as moot, since there’s neither SNOD nor NOD to consider, and IRS has agreed not to reimpose the Section 6702 chop, unlike Matty Vigon, whose tale I told in my blogpost “Crafty – Akin to the Weasel,” 7/24/17.

Sidetrack: The laughing little girl I described in the foregoing blogpost just paid us a visit, which gladdened my heart. She’s back home in TX now.

Judge David Gustafson rings the changes.

“…we see no aspect of this case that is not moot. Collection itself is moot, because the liabilities have been abated and the NFTL has been released. There is thus no liability to collect, and the assessment that would be the predicate for collection is missing entirely. Assuming that “underlying liability” issues, see sec.  6330(c)(2)(B), are not precluded from this lien case by virtue of Mr. Menge having had a prior ‘opportunity’ to litigate them in the levy case, No. 17117-18L (an assumption that seems improbable), those liability issues are also moot here because re-assessment of the liabilities could not occur. Re-assessment of the [Year Two] tax liability would, because of the passage of time, be barred by the statute of limitations, sec. 6501(a); and although the section 6702 penalty is understood to have no statute of limitations, re-assessment of that penalty is foreclosed by the Commissioner’s motion. This is not an instance like Vigon, in which ‘[t]he defect [in the Commissioner’s showing of mootness was] not simply that he fails to persuade us that in fact he will not really reassess; rather, he does not even assert that he will not reassess. He asserts instead that “it is not clear whether respondent will reassess”.’ 149 T.C. at 111. In this case, by contrast, the Commissioner states unequivocally: ‘Respondent affirms that he will not reassess the [Year One] frivolous return penalty against petitioner with respect to frivolous submissions already received by respondent with respect to [Year One]’. (Doc. 17, para. 8.).” Order, at p. 3.

OK, so march out Bryan Edward, you won.

Except Bryan Edward says he didn’t.

“Petitioner timely filed his petition in T.C. docket No. 12155-21L therefore petitioner asserts he has a due process right to be heard in the T.C on the over 1600 hours of his time spent defending himself against unlawful policies and procedures implemented against BM [i.e., petitioner Bryan Menge] and BEM [Bryan E. Menge Construction] by federal contractors, state actors, the RI Superior Court, HUD, the DOL,  the IRS since 2011, the Federal District Court for the District of RI and the T.C. [Doc. 23 at 16.].” Order, at p. 3.

And Bryan Edward has been here before with the same story. See my blogpost “SMH,” 12/15/21.

No luck this time either.

“No such claims by Mr. Menge or his company against any of these entities could fall within our jurisdiction in this case—except his claims against the IRS regarding the liens for his 2013 and 2014 liabilities, but those, as we have shown, are moot.” Order, at pp. 3-4.

It’s a rainy day here on this Minor Outlying Island off the Coast of North America, so I’m feeling awash with wet silt.  Wherefore, I chronicle Judge Gustafson, the master crafter of the lockout of the Hallmark Researchers’ equitable SNOD toll, who now has to deal with what ex-Ch J Maurice B (“Mighty Mo”) Foley started back in April, with Ha Tran (as to whom see my blogpost “Ya Can’t Make This Stuff Up – Part Deux,” 4/29/22).

All is not well with All Is Well Homecare Services, Inc., Docket No. 21210, 19L, filed 12/15/22. AIW got hit with a doubleheader, a NFTL and a NITL, for the same $131K in payroll taxes. AIW petitions both; everyone agrees the petition for the NITL is timely. The argy-bargy is about the timeliness of the NFTL petition.

AIW claims that the OIC they put in stays the 30-day SOL. Nope, says Judge Gustafson. “We are unaware of any authority to support the proposition that the submission of an OIC would affect the due date of a CDP request, and we cannot think of any arguable reason that it would.” Order, at p. 3, footnote 5.

AIW next claims that three (count ’em, three) days should be added to the 5 business days plus thirty days of Section 6320(a)(3)(B), to account for the time it takes the recording officer to docket and file the NFTL. That also is a nonstarter. “We do not know of any support for this 3 business days addition to the deadline.” Order, at p. 4.

IRS doesn’t move to toss; IRS moves for summary J, stating in their papers that AIW is late. AIW raises the shot-down arguments heretofore stated. Judge Gustafson parses the timeline, coming up with the conclusion that if the date IRS says was the filing date, AIW is two days late.

Except.

Judge Gustafson is under the impression that IRS prepares both NFTL and CDP notice at the same time. If that’s so, then the date of filing cannot be known then; what the IRS puts in the CDP notice is a guess.

Hence Boechler.

“…the 30-day deadline of section 6330(d)(1) is a non-jurisdictional rule subject to equitable tolling, Boechler, P.C. v. Commissioner, 142 S. Ct. 1493 (2022). A remaining question is whether Boechler should affect the application of the rule of that one has the right to request a CDP hearing during the 30-day period of section 6320(a)(3)(B). That is,  it could be argued that a taxpayer whose CDP hearing request for an NFTL is otherwise untimely might nonetheless be entitled to a CDP hearing if equitable considerations would result in the tolling of the deadline. If so, then standards or criteria should be stated by which IRS Appeals should make a decision about the appropriateness of such tolling in a given instance. There would then arise a question about the standard by which the Tax Court would review IRS Appeals’ decision whether to apply equitable tolling.” Order, at p. 5.

In English, Boechler had to do with a late petition; AIW has to do with a late Letter 12153 (CDP request). If Boechler applies to CDP requests (nudge nudge, wink wink), then how does Appeals do the sheep-and-goats number on the latecomers? And how does Tax Court review Appeals’ decision?

Is Judge Gustafson going to sort this out his own self? Nah; he has a Christmas present for IRS and AIW. Let IRS’ counsel file a supplemental memo by 1/10/23.

“…the Commissioner shall file a supplemental memorandum in support of his motion for summary judgment (and, if it would better reflect his position, a motion to dismiss) that shall discuss the matters raised in this order and shall confirm or correct the statements we have made here. In particular, that memorandum shall include a statement of the Commissioner’s position as to (1) the proper means for calculating a deadline under section 6320(a)(3)(B), (2) the date on which the NFTL was actually filed as a matter of fact, and the information supporting that fact, (3) whether the deadline of section 6320(a)(3)(B) is subject to equitable tolling, and if so, (4) the standards IRS Appeals should use in determining whether tolling applies in a given case and the standard by which the Tax Court should review such a determination by IRS Appeals.” Order, at p. 5.

And AIW gets until 2/17/23 to reply with their own version.

What a punt!

My sermonette today begins with the words of a master craftsman of law and prose. The sermonette itself brings into high relief how the blunder impacts Section 6673 frivolity.

Jeffrey A. Hartman, Docket No. 7914-22, filed 12/14/22, filed a zero wages return for the year at issue. Jeff claimed a $14K refund, which IRS reduced by withheld FICA/FUTA to $9K. But IRS cut off the claimed refund and hit Jeff with a SNOD for $7600.

Jeff petitions, but it’s the usual protester jive, which STJ Diana L. (“Sidewalks of New York”) Leyden blows off with the usual Crain language, plus the copious citation of precedent that usually follows.

Jeff also challenges the delegation order to the signer of the SNOD, but that’s also a nonstarter.

So far IRS was looking good, but when they roll out the Section 6673 chop, something is missing, hence the title first set forth at the head hereof, as my high-priced colleagues say.

“As to respondent’s request that the Court impose a penalty under I.R.C. §6673, the Court notes that respondent in his motion refers to exhibits to the Declaration of DDD that were not filed with the Court. Therefore, the Court declines to impose a penalty at this time.” Order, at p. 3. (Name omitted).

Jeff does get the yellow card.

“…the Court takes this opportunity to inform petitioner that this Court may impose a penalty of up to $25,000 if a taxpayer institutes or maintains a frivolous or groundless petition or institutes or maintains a proceeding primarily for delay. I.R.C. § 6673(a)(1). Although the Court will not impose such a penalty at this time, petitioner is warned that the Court may not be so forgiving if he continues to advance frivolous and groundless arguments.” Order, at p. 3.

Until the hardlaboring Tax Court clericus unloads an opinion or order with a novel approach, I’m thrown back on the latest silt-stir: equitable tolling. As set forth in my blogpost “For Whom the Equitable Tolls,” 4/10/20, “‘It is hornbook law that limitations periods are subject to equitable tolling.’”

Except in Tax Court they aren’t, despite Supreme Court learning from this past April, and ex-Ch J Maurice B (“Mighty Mo”) Foley’s efforts along those lines. Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan holds the line resolutely.

Sharif M. Giurgius, Docket No. 11263-20S, filed 12/13/22, is eight days late, taking in the suspension of the SOL caused by COVID; see my blogpost “Le Quinzième Juillet,” 4/10/20, wherein I explicated Treasury’s attempt to sidestep the supposedly iron gates of Section 6213. Interesting that the Supremes never mentioned that suspension in Boechler. How Treasury had the power to suspend a supposedly explicit act of Congress, upon which they were relying in Boechler, is nowhere explained.

Howbeit, “…in narrowly defined circumstances, scenarios involving disasters, related conditions, and concomitant closures can extend the deadline. As relevant here, the COVID-19 pandemic led to an extension of time for tax-related deadlines, including those for petitions to the Court. Specifically, Guralnik v. Commissioner, 146 T.C. 320 (2016), and IRS Notice 2020-23, 2020-18 I.R.B. 742 (April 27, 2020), in combination, extended the deadline for filing petitions due between March 19, 2020,  and July 15, 2020, to July 15, 2020.” Order, at pp. 1-2.

So Section 6213’s 90-150 day cut-offs aren’t ironclad. Maybe they can be tolled.

But Ch J TBS Kerrigan is adamant, notwithstanding Sharif’s claim that IRS is jerking him around.

“Hence, while the Court is sympathetic to petitioner’s situation and understands the unintentional character of the inadvertence here, as well as the challenges of the circumstances faced and the good faith efforts made, the fundamental nature of the filing deadline precludes the case from going forward. As a Court of limited jurisdiction, the Court is unable to offer any remedy or assistance when a petition is filed late. Rather, the Court is barred from considering in any way petitioner’s case or the correctness of petitioner’s claims. Unfortunately, governing law recognizes no reasonable cause or other applicable exception to the statutory deadline, and the allegation that the petition was sent eight days late remains unrebutted.” Order, at pp. 4-5.

Taishoff says “fundamental nature of the filing deadline”? The Supremes didn’t think so; DC Cir didn’t think so; and Treasury didn’t think so in April 2020, although they’ve changed their tune since.

I’m waiting for the LITCs, the pro bonos, or the calendar call commandos to take one of these quick-kick tosses up on appeal.

Lest I be misunderstood, I am not advocating for a completely fluid cut-off for petitions. I pointed out in my blogpost “Ya Can’t Make This Stuff Up – Part Deux,” 4/29/22, that an open-ended cut-off would result in chaos. But equity considers the rights of both parties, and can shut down gameplayers, wits, wags, and wiseacres. Honest petitioners with legitimate grievances should be protected when they make finger-fehler that do not prejudice proper collection of the revenue.

And Treasury has shown us we don’t need Congress to set this right.

The battle of the experts goes on at speed in Excelsior Aggregates, LLC, Big Escambia Ventures, LLC, Tax Matters Partner, et al., Docket No. 20608-18, filed 12/10/22. Judge Albert G (“Scholar Al”) Lauber tosses IRS’ staff forester’s report and the Big Scambies’ appraiser’s report on their respective rebuttals. As is my usual practice, names are omitted throughout.

The Big Scambies serve their rebuttal twenty (count ’em, twenty) minutes before the deadline. And it’s not a true rebuttal. “A report properly characterized as a ‘rebuttal report’ must devote essentially its entire analysis to dissection of an opposing expert’s affirmative report, pointing out specific statements or conclusions with which it disagrees and explaining why.” Order, at p. 2. (Citation omitted).

The Big Scambies’ expert’s report mentions IRS’ expert’s report only twice in seventy (count ’em, seventy) pages. Their expert’s report might as well be an opening expert’s appraisal. Every opposing expert’s report differs substantially from the others, or there wouldn’t be battling experts. To treat a report that never drills down into the adversary’s report but merely differs robs the term “rebuttal” of all meaning.  And serving that late deprives IRS of a chance to review and rebut.

As for IRS’ staff forester, he does find fault with the Big Scambies’ forestry team’s reports for failing to take environmental degradation from Big Scambies’ permitted activities in the servient tenement, so to that extent it is rebuttal.

But “…he could have filed an opening report making the affirmative case that exercise of reserved rights would impair the alleged conservation purposes, and petitioners’ experts could then have filed rebuttal reports disputing that position. Petitioners have been deprived of the opportunity to do that, just as respondent has been deprived of the opportunity to rebut Mr. D’s reports. Although we find the arguments for excluding Mr. [forester]’s reports less strong than those for excluding Mr. [IRS expert]’s, we will exclude them all to avoid risk of prejudice to petitioners.” Order, at p. 3

Burt all is not lost for IRS. “Respondent remains free to raise, during cross-examination of petitioners’ experts, the points Mr. [forester] makes about alleged deficiencies in their reports.” Order, at p. 3.

Stand by for another Judge Scholar Al mix-and-match.

When I say that this is a nonpolitical blog, I mean it is nonpartisan; I advocate for no policies, grind no axes, support neither programs nor candidates. All those I do elsewhere.

Today I have to inveigh against the current silt-stir, or should I better say maelstrom, that is coming from Boechler, P.C.,  the Supremes’ gift to United States Tax Court.

I chronicled the first attempt of the Tax Court bench to deal with equitable tolling post-Boechler in my blogpost “Ya Can’t Make This Stuff Up – Part Deux,” 4/29/22. But that pioneering effort of ex-Ch J Maurice B (“Mighty Mo”) Foley to extend whatever benefits Boechler might bestow upon the hapless pro se has gone nowhere.

Judge David Gustafson’s corrected masterpiece Hallmark Research Collective is only the final nail on the cliché.

See, for example, Corrie L. Bowman & Anna M. Bowman, 4502-22S, filed 12/8/22. Corrie & Anna, pro sese (natch) are two (count ’em, two) days late with their petition from a SNOD. Howbeit, a docket search shows IRS didn’t get the petition from Tax Court for almost a month, but were able to bang out an answer in two weeks. And IRS didn’t raise the late petition defense.

So maybe the government wasn’t prejudiced by the two day delay in filing.

But Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan issues an OSC why the petition should not be tossed for want of jurisdiction.

The first, basic question when equitable tolling is in view is “was the party against whom equitable tolling is asserted prejudiced?” Had that party changed its position in reliance on the SOL? Was evidence, or witnesses, formerly available rendered unavailable or impaired by passage of time?

But Tax Court does now not consider that question.

In my above-cited blogpost, I described the Boechler opinion as a “psycholinguistic canoe-paddle through our insane English grammar.” Judge David Gustafson refuted Boechler, as to petitions from deficiencies, with “copious citation of precedent” in Hallmark.  

Yes, the history is clear, but that is not the end.

Congress can clear the matter up. Is there to be equitable tolling for SNODs, NODs, or both or neither?

As this is a non-partisan, non-political blog, my position here is that of Lord Melbourne, Prime Minister under Queen Victoria in the mid-Nineteenth Century, at the end of a Cabinet Council. He put his back against the door and said to his colleagues before he let them out of the room—”Now, gentlemen, are we agreed that a sliding scale lowers or raises the price of corn? I do not care myself twopence which it is, but let us all have the same story.”

James (“Little Jim”) Haber, immunologist and dodgeflogger, has another of his progeny up today on a bounced OIC, claiming IRS needs a fresh Section 6751(b) Boss Hoss signoff on the long-ago decided chops in Humboldt Shelby Holding Corp., Docket No. 23763-16L, filed 12/7/22.

STJ Eunkyong (“N’Yawk”) Choi says no.

“This Court has found that ‘where the Court previously adjudicated and entered a decision determining the applicability of penalties, the settlement officer merely needs to determine that the penalty was properly assessed …’ Warner Enterprises, T.C. Memo. 2022-85 at *6. The settlement officer in this case did so. We therefore find that the settlement officer complied with the requirements of section 6330(c)(1).” Order, at p. 5.

For the Warner story, see my blogpost “How Now?” 8/22/22.

There’s another twist, of course. The OIC provided that it would be a universal settlement, letting off both Humboldt Shelby and “any person, as an alter ego, agent, nominee, transferee or otherwise, for my outstanding tax debt.” Order, at p. 6.

Well, since Little Jim’s M.O. involved intermediary transactions to avoid tax (shares of Mid-Coast), transferee liability is definitely in play.

What’s more, even though the initial offer was only $1K, and even though Humboldt Shelby is Broke From Brokesville, Humboldt Shelby’s lawyer thinks he might have more money in the file. STJ N’Yawk Choi jumps on that.

“If it truly is unreasonable to believe that respondent may be able to collect from a third party in this matter, then petitioner would not have gone so far as to impermissibly add this additional term to Form 656. Petitioner’s counsel previously indicated that petitioner is prepared to offer a ‘substantial amount of money’ to settle its liability. This is so even though petitioner submitted an OIC showing that petitioner has no assets and no income. The $1,000 offer amount and additional amount petitioner planned to negotiate can only come from a third party. It is reasonable for respondent to refuse to accept petitioner’s OIC based on the concern that doing so may foreclose collecting from a third party to the fullest extent possible.” Order, at p. 6.

Summary J for IRS. But I doubt that’s the last we’ll hear from Little Jim.

Takeaway, if one is necessary- Don’t be cute.

IRS tries to short-circuit the “primarily for the benefit of the shareholder” test by laying off all disallowed deductions on Benito Palmarini, a shareholder in Palmarini, Inc., T. C. Memo. 2022-119, filed 12/7/22. But Benito is not the largest shareholder, although he runs the corporation as its president, and writes off a lot of personal expenses from the corporation.                            

One can understand IRS’ frustration with Benito’s methods, or lack thereof. Palmarini, Inc., had no books and records.

“Palmarini Inc.’s disorganized recordkeeping (if it can be called recordkeeping) does not enable one to verify the business purpose and specific amounts paid for  ‘other’ expenses. His documents show a tangle of business and personal, of capital and ordinary, and of mixed lines of potential business. His information was in such disarray that he himself, preparing returns in the months after the close of the years at issue, was unable to determine with reasonable certainty his own deductible expenses, so he filed a series of amended returns claiming deductions inexplicably ‘not included’ in a return filed days before, or stating ‘[m]ore deductions found in Line 26’.” T. C. Memo. 2022-119, at p. 36.

To show a constructive dividend, the payment must be tied to the shareholder and shown to benefit the shareholder. The RA who did the bank account reconstruction had to drain a major swamp, but there were other shareholders who got money and did work for Palmarini, Inc. IRS is definitely behind the curve in tying disallowed deductions to Benito.

Although Benito filed seven (count ’em, seven) amended corporate income tax returns for Year One, and four amended returns for Year Two, he never filed FICA/FUTA, so Judge David Gustafson, obliging as always, reminds IRS that the SOL is open on that, T. C. Memo. 2022-119, at p. 30, footnote 17.

Judge Gustafson sorts out the constructive dividends, and Benito and IRS horsetrade most of the rest.

The Rule 155 beancount is going to be a beaut.