Update on IRS Form 11457 for Voluntary Disclosure in IRS VDP (6/30/25)

 The National Taxpayer Advocate announced that, at her urging, the IRS has agreed:

1. to eliminate the Part II (complete upon acceptance into the VDP) checkbox

2. to establish a “working group to comprehensively review the current VDP, provide recommendations for reforming the program, narrow the definition of illegal source income to encourage greater participation in the VDP, and clarify other terms.”

See Criminal VDP: TAS Reports a Win For Taxpayers – IRS Agrees to Remove Willfulness Checkbox on VDP Application Form (NTA Blog 6/24/25), here.

I revised the working draft of the Federal Tax Procedure 2025 Editions (to be published at least by early August 2025) to include this information. Perhaps the key issues I mention in the working draft are:

• As of the date of this publication, the Form available on the IRS website is dated 11/12/24 and thus does not yet implement that decision. Can a taxpayer in the meantime omit checking the box in the currently available Form?;

Billy Long Confirmed as IRS Commissioner of Internal Revenue (6/15/25)

On June 12, 2025, the Senate confirmed President’s Trump’s nomination of Billy Long as Commissioner of Internal Revenue. See Wikipedia, Billy Long, https://en.wikipedia.org/wiki/Billy_Long (Last edited 6/15/25 and viewed 6/15/25). I just updated the working draft for the 2025 editions of my Federal Tax Procedure Book. I copy and paste the relevant portion as of 6/15/25 with footnotes (note that the footnote numbers in the working draft, but in the final will certainly be different): 

                   3.     Commissioner of Internal Revenue.

           The Commissioner of Internal Revenue is a Presidential appointee confirmed by the Senate. The Commissioner heads the vast IRS bureaucracy. n216 Historically, the Commissioner has been a leading tax practitioner, most often a tax lawyer. Because of the perception that tax practitioners may not be the best managers, the statute now requires that the Commissioner have “demonstrated ability in management.”n217 Tax practitioners are not necessarily excluded, but the field is much broader now.
   n216 § 7803.
   n217 § 7803(a)(1)(A).

          On June 12, 2025, the Senate confirmed President Trump’s choice for Commissioner of Internal Revenue. The nomination and confirmation were controversial because (i) the confirmation was preceded by chaos among the acting IRS leadership,n218 and (ii), more importantly, Long has no or no credible experience in either tax or management experience.n219 Nevertheless, he is the Commissioner now. n220
   n218  Political Thrashing Around Acting Commissioners and Commissioner of Internal Revenue (Federal Tax Procedure Blog 4/18/25; 4/19/25).
   n219 Professionally (if that is the right word), Long was a realtor and auctioneer until serving in the House of Representatives from 2011-2023. Long attended college but did not graduate, subsequently graduating from the Missouri Auction School. In 2023, Long became a “tax consultant” promoting dubious tax claims related to Employee Retention Credits. In that role, he promoted himself as a “Certified Tax & Business Consultant,” a title he earned by attending a three-day course offered by a tax promoter. See Wikipedia, Billy Long, https://en.wikipedia.org/wiki/Billy_Long (Last edited 6/15/25 and viewed 6/15/25). JAT Editorial Comment: Long appears to have no relevant qualifications to be Commissioner of Internal Revenue other than sycophancy to President Trump which is the only credential he needed to be approved by the Senate on a party line vote. While awaiting his Senate confirmation, Long served as Senior Advisor in OPM (Office of Management and Budget). It is unclear to me what role he served as Senior Advisor, but I suppose one salient benefit was that, receiving a Government salary, he would have been foreclosed from abusing the tax system as he did before taking the Senior Advisor role. (That is, if he honored conflicts of interest policies, although Trump and his minions appear to have only passing acquaintance, if any, with conflicts of interest policies.)
   n220 Perhaps someone will litigate the issue of whether Long is statutorily disqualified for the position.

Supreme Court Holds that Tax Court Levy CDP Jurisdiction is Mooted by Satisfaction of Underlying Assessment (6/13/25)

I previously blogged on the

• Third Circuit's opinion in Zuch v. Commissioner, 97 F.4th 81 (3rd Cir. 2024). 3rd Circuit Holds Tax Court Has Jurisdiction to Determine Overpayments in CDP Proceedings (Federal Tax Procedure Blog 3/29/24; 3/30/24), here; and
• The Supreme Court's granting of the Government's petition for writ of certiorari. Supreme Court Accepts Cert in Zuch as to Mootness in CDP where IRS Collected by Offset the Tax Subject to Levy (Federal Tax Procedure Blog 1/13/25), here.

Yesterday, the Supreme Court decided Zuch, holding that the Tax Court loses jurisdiction over a CDP case when the assessment supporting the original proposed levy has been paid so that there is nothing behind the levy. See Opinion of the Court by Justice Barrett, joined by all other Justices except Gorsuch who dissented (SC here and GS here [to come]). The Opinion of the Court is a short (at least for Opinions of the Court) and relatively straightforward opinion. I therefore will not belabor readers with a scholarly (perhaps pseudo-scholarly) discussion of the opinion. My off-hand summary is that what is in issue in a levy CDP case is the levy and once the proposed levy is mooted by satisfaction of the underlying assessment, there is nothing left for the Tax Court to do.

So, I get back to the questions I considered in the blog entry reporting the granting of cert. The relevant ones are:

A Primer on Judicial Review of Tax Regulations after Loper Bright (6/4/25; 6/6/25)

Loper Bright held that courts review interpretive regulations de novo rather than with possible deference under the prior Chevron regime. Here are my bullet points focusing primarily on notice and comment Treasury regulations (the type subject to possible deference under the Chevron regime):

• Loper Bright de novo review means that the court will determine and apply the best interpretation (whether or not the regulation interpretation is the best interpretation).
• The sole exception to de novo review is that courts will apply some type of deference (I call it Loper Bright deference) if the statute explicitly or fairly implies the agency is to have discretion in the interpretation.
• Under Skidmore, courts may use the agency interpretation to help reach the best interpretation, (Skidmore is often called deference, but it is not deference because the court must still determine and apply the best interpretation and only uses the persuasiveness of the agency interpretation to determine the best interpretation; Skidmore is better described as “respect” rather than deference; deference means the court applies the agency “not best” interpretation rather than its own best interpretation.)
• Interpretive regulations may also be reviewed for procedural regularity under the APA § 706(2)(A)'s “arbitrary and capricious” standard (also called “hard look” review), a deferential standard that is, theoretically, much more agency-forgiving standard than de novo review standard.

I think it may be helpful to elaborate on the last bullet point. A prominent instance in tax of such arbitrary and capricious review is Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021), here, holding that Treasury failed in the notice and comment process to address material comments; the court did not hold (see p. 1339 n. 1) that if Treasury had not committed that procedural footfault, the interpretation would have been invalid under the Chevon regime (now replaced by the Loper Bright de novo regime for testing interpretations). For a recent statement of how this works, the Supreme Court said in Seven County Infrastructure Coalition v. Eagle County, Colorado, 605 U.S. ___,  ___ S.Ct. ___ [to come], 2025 WL 1520964 (2025), SC here and GS here (quote is from Supreme Court Slip Op. 8-9):

    As a general matter, when an agency interprets a statute, judicial review of the agency's interpretation is de novo. See Loper Bright Enterprises v. Raimondo, 603 U. S. 369, 391-392 (2024). But when an agency exercises discretion granted by a statute, judicial review is typically conducted under the Administrative Procedure Act's deferential arbitrary-and-capricious standard. Under that standard, a court asks not whether it agrees with the agency decision, but rather only whether the agency action was reasonable and reasonably explained. See Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29, 43 (1983); FCC v. Prometheus Radio Project, 592 U. S. 414, 423 (2021). 

More on Whether Treasury/IRS Interpretations under § 7805(a) Are Entitled to Loper Bright Deference? (5/29/25; 5/30/25)

I write today to address the issue of whether  § 7805(a) is the type of provision that Loper Bright would treat as a delegation to the Treasury/IRS that qualifies for what I call “Loper Bright deference” (for lack of a better word). By Loper Bright deference, I mean some authoritative gravitas for agency interpretations beyond Skidmore respect (Skidmore requires the Court to be persuaded that the agency interpretation is the best and is not deference, despite some claims otherwise). Some readers of this blog may recall that I have addressed the § 7805(a) issue in two prior blogs:

• Do General Authority Congressional Delegations of Authority to Prescribe Regulations to Carry Out the Provisions of the Statute Qualify for Loper Bright Deference? (Federal Tax Procedure Blog 11/12/24), here.

• Can § 7805(a) & (b) Be Read as Delegating to Treasury/IRS Interpretive Authority with Deference (Federal Tax Procedure Blog 7/14/24), here.

I am prompted to return to the issue by a recent article By Professor Mitchell M. Gans [bio here], Has the Supreme Court Already Resolved How Loper Bright Applies to Section 7805 Regulations?, 187 Tax Notes Fed. 1069 (May 12, 2025), here. Professor Gans argues that, sub silentio, the Supreme Court in Bondi v. VanDerStok, ___ U.S. ___, 145 S. Ct. 857 (2025) effectively decided that § 7805(a) is not entitled to Loper Bright deference by applying the Skidmore factors to a statute under the Gun Control Act that is functionally the same as § 7805(a). For those wishing to read VanDerStok, the Supreme Court slip opinion is here and the GS opinion (paginated to 145 S.Ct.) is here. (Caveat: some refer to the respondent in the case as Vanderstok; the proper name is VanDerStok. See the petition here and the slip opinion where most but not all references are to VanDerStok.)

I do not agree with Professor Gans’ reading of VanDerStok. I don’t read VanDerStok as a Skidmore case where the court gives the agency interpretation some oomph beyond what the statutory text and context would allow. None of the opinions in VanDerStok mention Skidmore or deference. VanDerStok involved the propriety of a facial challenge to the agency interpretation. A facial challenge requires that there is no realistic set of circumstances in which the interpretation could be valid. (By contrast, an as applied challenge claims only that as applied to the plaintiff, the interpretation is not valid.) The Court spends most of its time analyzing the consistency of the interpretation with the statute and its context, a type of classic de novo interpretation. 

Most instructively, the VanDerStok opinion for the Court, in closing, dismisses a lenity argument. Lenity is an interpretive rule for interpretations in a criminal or penalty context that resolves ambiguity in favor of the person subject to the criminal law or penalty. (Something like the now rejected Chevron deference requiring ambiguity.) The Court says (145 S.Ct. at 876; bold face supplied by me):

Tax Court Rejects Too Good to be True Tax Shelter Defense Based on Tax Opinion Purchased to Support a Reasonable Cause Defense (5/17/25)

In Stevens v. Commissioner, T.C. Memo. 2025-45, TCM here * & GS here [to come] the court rejected the taxpayer’s arguments for the merits of the bullshit, “too good to be true,” tax shelter. Most of the findings of facts and opinion relate to the merits. As usual, the shelter was effected through a shroud of complex financial documents that, in the end, signified nothing that was cognizable for tax purposes. 

* Readers wishing to access the opinion through the docket entries may do so here at docket # 199.]

I find the penalties interesting because the taxpayers recognized that the shelter might be subject to penalties and, for that reason, “purchased” a tax opinion that, they hoped, would protect them against penalties if the IRS saw through the smoke and mirrors in the documents and disallowed the tax benefits of the shelter. Here are some quotes from the opinion (boldface supplied by JAT):

In July 2014 Shannon Stevens [the wife-taxpayer] became concerned with the risk of tax penalties if SLS engaged in the Dermody transaction and claimed interest deductions related to it. Shannon Stevens was the longtime owner and operator of her own accounting firm. She had substantial experience preparing tax returns for individuals and small businesses. She discussed with both Dermody and Witten her concern about tax penalties.

 On July 29, 2014, Dermody sent Shannon Stevens a sample tax opinion letter relating to a transaction of a different type from the Dermody transaction. Dermody recommended that she obtain a tax opinion letter about the Dermody transaction.

 On July 30, 2014, Gopman spoke to Witten and recommended to Witten that petitioners obtain a tax opinion letter from Jeffrey Rubinger, a tax attorney. On July 30, 2014, Witten emailed Shannon Stevens with a copy to Kirk Stevens and Gopman. Witten recommended that petitioners obtain a tax opinion letter for their “protection.” Witten stated that a tax opinion letter could be obtained from Rubinger “for a reasonable price.” In a separate communication with Shannon Stevens, Witten specifically suggested that a tax opinion letter could be obtained from Rubinger for $10,000.

The estimated cost of the opinion letter was too low; the opinion letter ultimately cost $40,000.

Tax Court Discovery Subpoenas to Third Parties Returnable Before Trial Calendaring (5/13/25)

I have just revised the working draft discussion relating to third-party subpoenas. (Practitioner Ed. p. 572; Student Ed. p. 394. As revised, the text and footnotes (not in Student Ed.) are (with redline for changes and one strikeout; note footnote numbers are for this posting but will change in the 2025 Practitioner Ed.):

Trial Subpoenas (both for testimony or for documents or things) may be used for discovery. Section 7456(a)(1) permits Tax Court judges and some officers to issue subpoenas compelling “the attendance and testimony of witnesses, and the production of all necessary returns, books, papers, documents, correspondence, and other evidence, from any place in the United States at any designated place of hearing.” As interpreted in orders, subpoenas may have a return date in advance of the trial calendar in which the case is to be tried.n1 Indeed, discovery subpoenas for a return date at the calendar session for trial may irritate the judge if the discovery should have occurred before the trial calendar, which may cause the judge to quash the subpoena.n2 These discovery subpoenas are used to compel third-party testimony or production of documents; discovery from the taxpayer-petitioner is pursued through the informal and formal discovery procedures (such as request for production, interrogatories, etc.), preceded by a Branerton request. The depositions or documents may be used at trial with the proper predicate (which may be by stipulation); either party may still desire to issue a trial subpoena in order to ensure that the documents can be admitted.
   n1 Production in advance of the trial setting may be more efficient to manage the documents and trial. The Tax Court may issue an order for return on the subpoena in advance of the trail session, permitting subpoenaed testimony. Ubiquiti, Inc. v. Commissioner (T.C. Case No. 22581-22 Dkt. # 54 Order dtd. 5/12/25) (Judge Lauber, citing North Donald LA Property LLC v. Commissioner (Order T.C. Dkt. 24703-21 #52 10/14/22), said: “For more than four years this Court has been conducting regularly-scheduled document subpoena hearings on virtually every Wednesday during the calendar year. The purpose of this well-established procedure is to set a hearing date in advance of trial at which document subpoenas may be returnable under Rule 147(a). Neither section 7456(a) nor Rule 147(c) requires that a case be  calendared for trial as a precondition to the convening of a document subpoena hearing.”).
            Section 301 of The Taxpayer Assistance Act (“TAS”), a bipartisan bill in the Senate in 2025, would eliminate the “at any designated place of hearing,” that was read by some to require the return date at the trial setting (a reading that, as noted in the preceding paragraph is rejected). The Section-by-Section discussion of the proposal explains that, under present law, the Tax Court does not have “express authority to issue a third-party subpoena for the production of documents before or in the absence of a hearing date”; the discussion indicates that the wording of § 301 grants the express authority presumably by eliminating the language that had been misread by some.
   n2 See YA Global Investments, LP v. Commissioner (Docket Nos. 14546-15, 28751-15 Order dtd. 10/1/20) (holding that trial subpoenas for documents were used for improper discovery). See Samantha Galvin, A Tax Court Procedural Anomaly: the Trial Subpoena Duces Tecum, Designated Orders July 29 – August 2 (Procedurally Taxing Blog 9/24/19) (discussing unpublished order in Cross Refined Coal, LLC,  v. Commissioner (Dkt 19502-17 Order Dtd. 8/1/19)).

 A pdf of the changes is here (note that the footnote numbers are not final).

On Win-Loss Records on Appeal (with War Stories) (5/5/25; 5/6/25)

Note, some of my statistics reported below have been corrected on 5/6/25 11:00am.

I have sprinkled some of my blog entries with war stories from my time with DOJ Tax (1969-1977, with just over 4 years in Appellate and just over 3 years in a refund trial section, called Refund 2, which covered roughly Virginia through Texas. In the Refund 2 trial section, I handled cases in South Carolina, the Northern and Middle Districts of Georgia, Eastern District of North Carolina, and 2 life insurance company cases in Florida and Texas (I forget which districts, but I think Middle District of Florida and Northern District of Texas (because Vester Hughes was opposing counsel) although those cases were not resolved by the time I left DOJ Tax. Today, inspired by the article I quote below, I offer some more war stories through statistics.

The inspiration is a recent article, Stephen K. Cooper, DOJ Tax Chief Touts Winning Court Record On Appeals, 2025 Law360 16-164 (1/16/25) [free link unavailable]. The article covers a talk by Francesca Ugolini, the acting chief of the DOJ Tax Division—there has been no Presidentially appointed and Senate-approved Assistant Attorney General for some time. The article includes the following: 

          The U.S. Department of Justice's Tax Division won an overwhelming majority of appeals in tax cases last year by prioritizing strong legal arguments in disputes that had the potential to significantly affect federal tax administration, the head of the division said Thursday.

          Francesca Ugolini, chief of the DOJ's Tax Division, said in the last fiscal year, the government prevailed in 94% of appeals brought by taxpayers and had an unexpected success rate of 75% for its own appeals.

          "We usually do prevail in over 90% of the taxpayer appeals," Ugolini said at the D.C. Bar Tax Conference, held in Washington, D.C., and online. Regarding the government's appeals, "it's usually over 50%," she said.

          "It's not always as high as 75%, but we have some pretty, pretty good success in the appellate courts," she said.

          Ugolini attributed the higher-than-normal success rate to the division's thorough review process that was used to decide whether to appeal a case the government has lost at the trial level. This includes assessing the strength of the legal arguments, the potential impact on federal tax administration and whether the case presents the best vehicle to address the issue.

          "We don't like to lose on appeal, so we're looking at the strength of the case," she said. "That includes … the strength of our legal argument, what the standard of review is [and] what the precedent is in the circuit.

          "We're more likely to appeal cases that involve legal questions, because those are reviewed de novo on appeal, whereas adverse fact findings are reviewed for clear error, and they're really hard to reverse on appeal."

          The administrative implications of the case are also important to the DOJ in its decision-making process, Ugolini said.

          "We're also looking at what is the broader effect on the federal tax system," she said. "Is this issue important to the IRS administratively? What's the impact on federal tax administration? And then we're also looking at, is this the best case to present the issue?"

Sixth Circuit Opines on Types of Deference after Loper Bright (4/28/25)

In United States v. Bricker, 135 F.4th 427 (6th Cir. 2/22/25), CA6 here and GS here the majority held that 18 U.S.C. § 3582(c)(1)(A) allowing a court to reduce a final prison sentence for “extraordinary and compelling reasons” was sufficiently plain in meaning that Congress did not delegate to the Sentencing Commission the authority to interpret the phrase to include consideration of a nonretroactive sentencing law change it as it had in U.S.S.G. § 1B1.13(b)(6). The majority reached that conclusion based on its holding of plain meaning or nonambiguity.

Query would the majority holding have been different if the Court found an express delegation of interpretive authority which still requires ambiguity but cannot be based on ambiguity alone? I get into that issue below.

The dissenting judge (Jane Stranch) argues that “extraordinary and compelling reasons” is ambiguous, without a plain meaning (at least with regard to the factor under consideration), and that Congress delegated the authority to the Commission to interpret “extraordinary and compelling reasons” within the bounds of its ambiguity. The dissent did not argue that ambiguity alone warranted the conclusion of congressional delegation of interpretive authority (that is prohibited by Loper Bright’s rejection of Chevron deference), but that the structure and context of the provision made it clear that Congress intended the Commission to interpret the ambiguous phrase. Under this argument, the delegation would pass muster under Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024).

The interesting part of Judge Stranch’s dissent is her conclusion that Congress delegated interpretive authority to the Commission. She argues that delegated interpretive authority (again based on factors other than ambiguity alone) is governed by the same deference as under Chevron—reasonable within the scope of ambiguity. (All iterations of deference have required statutory ambiguity; Chevron alone treated ambiguity as the basis for a fictional congressional delegation.) Of course, delegated interpretive authority requires some ambiguity, otherwise there is no interpretive authority to delegate or apply. But once there is ambiguity and a delegation of interpretive authority not based on ambiguity, the agency reasonable interpretation should control. And, the elements for Loper Bright qualified deference are present--congressional delegation and reasonable interpretation within the scope of the statutory ambiguity.

A key issue in the difference between the majority and the dissent was a Sixth Circuit precedent, United States v. McCall, 56 F.4th 1048 (6th Cir. 2022) (en banc). McCall’s en banc decision had treated the phrase “extraordinary and compelling reasons” before the Commission’s later guidance in question in Bricker to have a plain meaning not to include a nonretroactive factor such as a reduction in authorized sentences. Of course, under the Chevron regime, agency interpretations could overrule prior court precedents in some cases. Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005). With the demise of Chevron via Loper Bright, Brand X was no longer controlling for agency interpretations given deference based on ambiguity alone. In Bricker, the majority held that McCall was controlling on the issue of whether the phrase “extraordinary and compelling reasons” was ambiguous; McCall held the phrase was not on the retroactive factor issue. The majority thought McCall’s holding of nonambiguity was binding precedent on the issue of consideration of a nonretroactive sentencing factor. 

Conflicting Statutes of Limitations for Regular Tax Assessments and Restitution-Based Assessments (4/27/25)

 In United States v. Brown (W.D. WA Case No. 24-cv-05021 Dkt. No. 38 Order dated 4/21/25), GS here and CL here, the Court upheld the validity of a restitution-based assessment (“RBA”) against Brown that was for the same tax that had been previously assessed against Brown. (For prior Blogs on RBAs on the Federal Tax Crimes Blog, see here, and on the Federal Tax Procedure Blog, here.) For clarity, I will differentiate the two assessments by calling the first-in-time assessment, the regular assessment and the second-in-time assessment the RBA. The reason that was even an issue was because Brown never fully paid the regular assessment and the 10-year statute of limitations to collect any balance on the regular assessment (by reducing to judgment) had expired. Brown claimed that, since the statute of limitations on the regular assessment had expired, thus preventing the IRS from claiming on that regular assessment, the IRS could not end-run the regular assessment statute of limitations based on the RBA assessment. At least that is how I understand Brown’s claim that the court rejected, thus permitting the government to reduce the RBA to judgment and use the RBA extended statute of limitations to collect (including further extending the statute of limitations).

I think the court properly gives a good textual reading of the applicable statutory provisions. I am concerned that the decision may not be consistent with the purpose or intent of the statute. (For a textualist, purpose or intent may not matter.) Although I have not filtered back through the legislative history, my understanding of the purpose of the RBA was to avoid requiring the IRS to jump through assessment hoops for tax ordered as restitution. In other words, it was to permit the IRS to make an immediate assessment where it had not assessed before. (Stated otherwise, it was not to give the IRS two independent assessments to collect. The Code provisions do not say that, but that is my understanding of the need for an RBA. If the tax later subject to restitution had already been assessed, there would be no need for an RBA. And the IRS could deal with an expiring statute of limitations on the regular assessment by simply reducing the regular assessment to judgment, thereby refreshing the statute of limitations.

It is true that § 6501 says that § 6501(c)(1) says: “In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.” But, at a minimum, that would only apply where there was no regular assessment and presumably no RBA. Where there is a regular assessment, one might argue through inference that the regular assessment statute and its limitation period should apply.