Federal Circuit Holds that Timely Filed Claim Can be Rectified by Untimely Filed Formal Refund Claim Before the IRS Acts (7/17/26)

In Dougherty Electric, Inc. v. United States, ___ F.4th ___ (Fed. Cir. 2026), FC here and GS here [to come], the taxpayer timely filed a letter to the IRS titled “PROTECTIVE CLAIM FOR REFUND.” the letter was processed as a claim for refund for the issue identified in the letter. The taxpayer later filed another letter outside the refund claim period called a “MODIFIED PROTECTIVE CLAIM FOR REFUND,” which stated a new issue not asserted in the original letter. The IRS requested more information and that the taxpayer file Forms 843 for each claim. The taxpayer filed Forms 843 for the two claims. The IRS denied both claims. The taxpayer sued for refund in the Court of Federal Claims. Applying § 7422(a) prohibition of a refund suit where a formal claim for refund has not been filed, the Court (i) sustained the first timely filed protective claim as an informal claim that had been “rectified” by filing the Form 843 before the IRS denied the claim; and (ii) rejected the second untimely filed protective claim, since it was a different claim that was untimely.

In the course of the decision, the Court clarified (Slip Op. 14-17) it’s precedent in Computervision Corp. v. United States, 445 F.3d 1355 (Fed. Cir. 2006) that the timely filed claim may be an informal claim that is not formal claim for refund on the required form, such as Form 843; rather it can be a timely filed informal written claim (e.g., by letter) that can then be “rectified” by filing the formal claim before the IRS denies the claim.

Another Bullshit SCE Case Fails for the Usual Reasons, but Court also Rejects the Jarkesy Claim (7/16/26)

In Piton Holdings, LLC v. Commissioner, 167 T.C. ___, No. 4 (2026), TC Dkt 637-23, here, at # 237 and GS here [to come], the Court (Judge Kerrigan) gave the IRS the victory in yet another syndicated conservation easement (“SCE”) case. The Court

• rejected the usual bullshit about the before contribution valuation from which the after valuation is deducted. The before contribution value claimed was $42,200,000; the Court found the before contribution value was $1,440,000. Since the parties stipulated that the after contribution value of the property subject to the easement was $640,000, the contribution value was reduced from $41,635,000 to $800,000. Hence, the value of the “contribution” was greatly, should I say grossly, reduced based on a gross overvaluation of the value of the easement. I address this in my comments below.
• found that the partnership improperly allocated the resulting deductions among the partners. This holding applies in the “varying interests” rule in partnership tax law. The allocation made by the partnership failed the requirements of that rule. It is a bit esoteric, so I do not discuss it further. (See Slip Op. 36-44.)
• found, applying simple math (and as usual with SCE bullshit valuation claims that are litigated), the gross valuation misstatement penalty in § 6662(h) applies (Slip Op. 44-45.)
• rejected the claim that § 6662 penalties are not assessable as a matter of law because of the application of U.S. Const. amend. VII, raising the Jarkesy case. (Slip Op. 45-I briefly discuss this in my comments below.

JAT Comments:

1. At the outset, I am amazed that the Tax Court has not found some way to better manage these SCE cases where, it seems on the anecdotal cases I have read, the partnership proffers grossly excessive valuations and requires enormous judicial and other resources to call the partnerships out on the bullshit valuation claims. I thought Judge Buch was trying to do that in a case about which I blogged earlier. Tax Court Rejects a Bullshit Tax Shelter False Valuation Claim with Warning of Sanctions for Taxpayers, their Counsel, and Expert Witness Proffering the Bullshit (Federal Tax Procedure Blog 7/16/25; 9/10/25), here. Perhaps Judge Buch’s warnings have been effective in some cases which have settled. But Piton Holdings illustrates that the message has not been respected by some. So, for example, why did Judge Kerrigan not consider the penalties Judge Buch indicated were possible?

2. The Court’s findings of fact and conclusions regarding the valuation issue are standard for SCE cases. The key valuation always in dispute is the “before contribution” value of the property for which an easement was contributed. Remember that the valuation of the easement because there is no market for such easements, is derived by the “before contribution” value less the after contribution value of the property subject to the easement contributed. (That simple subtraction produces the contribution value, but I suggest (without further explanation) that even that method may overvalue the easement for contribution purposes.

District Court for SD Florida Calls Out Trump's Weaponization Fund and Get-Out-Of-Audit Free Release Order (7/13/26; 7/15//26)

The big tax-related news today is the Order issued by Southern District of Florida judge, Kathleen Williams, today effectively holding the purported settlement between Trump and related plaintiffs and the Government (through DOJ) was effectively a sham. The Court also cast doubt upon the purported get out-of-tax audit-free benefit conferred in a separate document one day after the settlement agreement (the Court calls this separate document the “Release Order,” and I will use that term in this blog).

Today’s Court Order may be viewed CL here and GS here [to come]; the docket entries may be viewed here, with the order at docket # 106.

Since the Court Order has been adequately covered in the news, I will just make some points that may resonate with tax lawyers. 

1. The Release Order conferring get out-of-tax audit-free benefit was to me the biggest deal because it benefited Trump personally, as well as persons and entities close to him. By contrast, the Weaponization Fund would have helped a category of Trump supporters prone to violence in his name and other at least antisocial acts. When I first heard about the Weaponization Fund I believed it was strange on its face. But then a day later I the Release Order surfaced, making the whole gambit understandable. The Weaponization Fund was not the real object of Trump’s gambit; rather, the Weaponization Fund was a stalking horse to draw attention from the brazen Release Order that would more directly benefit Trump. I suspected that they (being his co-conspirators) planned all along that there would be so much public angst about the Weaponization Fund that they could give it up, with the Release Order sliding under the public radar screen/attention span.

 2. Some reasons that I think the Release Order was the real motive for Trump are:

FTPB Working Draft 2026 Revisions on § 6501(c) Unlimited Civil Statute of Limitation for Fraud (7/12/26)

In working on my working draft for the Federal Tax Procedure 2026 editions (due for publication on SSRN in early August), I have substantially revised the discussion of § 6501(c)(1). Readers will recall that one hot issue in tax litigation is whether § 6501(c)(1) requires taxpayer fraud or may apply when nontaxpayer fraud is on the return without the taxpayer having committed the fraud.

The working draft revisions with footnotes may be downloaded here. The following is the text for the Student Edition without Footnotes (same as Practitioner Edition without footnotes).

          C.     Exceptions to the General Three-year Statute.

          The exceptions to assessment statutes of limitations are in the statute. The key exceptions to the general 3-year rule are: 

                   1.     False Return or Attempted Evasion.

                             a.      General Rule-Fraud on Return and Unlimited Statute.

          Section 6501(c)(1) and (c)(2) provide exceptions to the normal 3- or 6-year statutes of limitation in certain instances involving tax fraud:

          (1) False return. 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.

          (2) Willful attempt to evade tax. In case of a willful attempt in any manner to defeat or evade tax imposed by this title (other than tax imposed by subtitle A or B), the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

We encountered the (c)(1) Exception in Badaracco (p. 161) where the Supreme Court held that a subsequently filed nonfraudulent amended return does not avoid the unlimited statute of limitations for an original fraudulent return. Fraud for this purpose is the same as the definition for fraud for purposes of the civil fraud penalty under § 6663. I often refer to these two civil consequences of fraud as “civil fraud.”

          Badaracco addressed a potential anomaly between failure to file a return and filing a fraudulent return. The anomaly is this: A person who fails to file a timely return with the intent to evade tax can get the benefit of the three-year statute of limitations by simply filing a delinquent nonfraudulent original return. Yet, a person who files a fraudulent original return but then files an amended nonfraudulent return cannot achieve the benefit of the statute of limitations. That is the holding of Badaracco. Consider the following examples:

           Example 1. Assume the taxpayer files a Year 01 original fraudulent return on April 1 of Year 02 and then files a nonfraudulent amended return on January 1 of Year 03. Under Badaracco's holding, there is no statute of limitations because his original return was fraudulent. 

Two Highly Recommend Articles (One a Draft) on Law Text Interpretation (7/10/26)

I write today to recommend two articles on interpretations of law text—Constitution or statute. Text interpretation is text interpretation. However, text interpretation by originalist/textualist leaning judges considers extra-text “history” leading to ratification of constitutional text in interpreting Constitutional text but reject such history (commonly called legislative history) for interpreting statutory text. (Why that difference I hope you ask?) For originalists in interpretation (often but not always textualists) the permissible tools are those that focus on the original public meaning or some variant of that to some imagined audience including as some fear “Joe the Ploughman” with arguably marginal reading skills generally or for law text. See Jack N. Rakove, Joe the Ploughman Reads the Constitution, or The Poverty of Public Meaning Originalism, 48 San Diego L. Rev. 575 (2011), here.

The first article addresses the effects of Loper Bright. Lindsay L. Clayton,  Defending Agency Actions After Loper Bright: Sea Change or the Same Old Beach? 74 DOJ J. Fed. Law. & Prac. no. 2, 49 (July 2026), here. An Appendix for the article is here. Ms. Clayton is Assistant Director in the Civil Division’s Tax Litigation Branch. The article is quite good in assessing the effects of Loper Bright on DOJ’s civil litigation. One would have to assume that, prior to publication in the DOJ’s house organ, the contents were vetted and approved by at least some of the attorneys in DOJ responsible for positions before the courts.

Some comments on Ms. Clayton’s articles:

The article repeats (pp. 50-51) the Loper Bright claim:

The decision criticized Chevron for requiring courts “to ignore, not follow, ‘the reading the court would have reached’ had it exercised its independent judgment” and for “demand[ing] that courts mechanically afford binding deference to agency interpretations.”

I believe that Loper Bright claim was false or, in any event, overstated what Chevron actually did. My claim is that Chevron allowed judges to apply (not defer to) an agency interpretation only where they were interpretive equipoise (same as ambiguity) where they could not decide whether the agency interpretation or the opposing interpretation was best or not best. In that zone of equipoise, courts were simply applying the agency interpretation as a default rule, like the rule of lenity; there were not deferring to an agency not best interpretation. I develop my claim further in an article for publication in the ABA Tax Lawyer sometime in the near future. But consider:

• For a succinct statement addressing Chevron’s meaning of reasonable interpretation and the latitude it gave courts to apply their own best meaning. See Jon Newman (respected 2d Circuit Judge), On Reasonableness: The Many Meanings of Law’s Most Ubiquitous Concept, 21 J. App. Prac. & Process 1, 83 (2021), here (“It would probably be too cynical to suggest that [under Chevron] the courts are just accepting agency interpretations with which they agree and rejecting those they disfavor, but in some cases that almost seems to be what is happening. Clearly there is no one meaning of “reasonable” in the context of Chevron deference.”)
• Judge Newman’s insight is consistent with empirical research of large data sets of cases that commoted about Chevron but none said or reasonably implied that the court deferred to a not best agency interpretation. Rather, Judge Newman was saying that the court determined a best interpretation and applied that interpretation or were in  interpretive equipoise. For my research, see Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here; and Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (Federal Tax Procedure Blog 2/9/23), here. 
• Following through on my claim, the question is what courts do after Loper Bright do when they face ambiguous statutory text where they cannot honestly say that the agency interpretation or the opposing interpretation is the best? I cover that issue in my article addressing interpretive equipoise in percentage ranges, but just think about that. Keep in mind that Loper Bright cannot responsibly command or be interpreted to command that there cannot be ambiguity after applying all the tools of statutory interpretation.

FTP Book Clean Up - Restitution-Based Assessments (RBAs) (7/8/26; 7/10/26)

In working on my 2026 editions of my Federal Tax Procedure Book for publication on SSRN in early August, I am trying to eliminate bloat accreted over the years from the text and the footnotes (particularly the footnotes). I conceive the text (as opposed to footnotes) to be directed to students of tax procedure for whom I provide the Student Edition without footnotes. I hope to shorten the text, but the major changes will be in footnotes. I feel that some of the eliminations I make in the footnotes have good discussions, so I will be posting on the Federal Tax Procedure Blog some of the eliminations (doing some clean-up).

I start today with a footnote on “restitution-based assessments” (“RBAs) under §§ 6201(a)(4) & 6213(b)(5). The discussion of RBAs is in the text discussing exceptions to the prohibitions on assessment arising from the general requirement in income and estate and gift tax cases that the IRS first issue a notice of deficiency. One of the exceptions is “restitution for tax in a criminal tax case which may be assessed despite the  prohibition (“restitution-based assessment, or “RBA”).” I eliminate from the footnote the discussion after citing the statute sections for the RBA, §§ 6201(a)(4) & 6213(b)(5). The eliminations are (as I have cleaned them):

Certain points about RBAs:

1. First, normally, tax restitution is not available for Title 26 offenses. However, courts may impose tax restitution for Title 18 convictions, such as the ubiquitous Klein / defraud conspiracy under 18 U.S.C. §  371(a). See Daugerdas v. Commissioner, 171 F. 4th 924 (7th Cir. 2026) (holding that §  6201(a)(4)(A) authorizes the IRS to assess and collect tax restitution ordered in Title 18 convictions and the IRS collection measures do not have to be consistent with the restitution order for deferred payment of restitution).

2. In tax cases, in pleading guilty to a Title 26 offense, a defendant often agrees to “contractual” restitution in the plea agreement that the sentencing court then incorporates as a restitution order in the criminal judgment. Or, in imposing sentence for Title 26 offenses, a court may impose restitution as a condition for some benefit (such as supervised release for some period rather than incarceration).

3. The net effect of these statutory changes to the Code is that (i) the IRS can immediately assess the tax restitution as if it were a tax (the assessment acronymed RBA) and (ii) deploy the IRS collection tools for tax assessments. Carpenter v. Commissioner, 152 T.C. 202 (2020), aff’d 788 F. App’x 187 (4th Cir. 2019); and Reynolds v. Commissioner, T.C. Memo. 2021-10 (also holding that the IRS can collect on the RBA even if the person has an agreement with DOJ for installment payment of the restitution). However, if the sentencing judge sets the terms of installment payment of the restitution, the Tax Court can consider those terms in a CDP proceeding contesting an IRS levy and the IRS should consider that as well. White v. Commissioner, T.C. Memo. 2026-56 (remanding to IRS Appeals to consider).

CFC Invalidates GILTI Gap-Filling Regulation That Avoided Textual Statute Inconsistency (7/7/26)

In Keysight Technologies, Inc. v. United States, ___ Fed.Cl. ___ (7/2/26), the Court held invalid a Treasury Regulation designed to plug a gap in the statutory text. The opinion may be found: CFC here, TN here, GS here.

The Court opens with this sentence projecting the outcome (Slip Op. 1):

When Chevron fell, so too did the presumption that statutory ambiguity favors the agency. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), overruled by Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).

If that were not clear enough as to where it is going, the Court opens the next paragraph (bold face supplied by JAT):

This controversy relates to the Treasury’s self-inflicted fix of a mismatch between foreign subsidiaries with fiscal- or calendar-year tax filing requirements that Congress quietly built into the global intangible low-taxed income ("GILTI") statutory scheme.

And the next paragraph (bold face supplied by JAT):

The Treasury’s antipathy for this inconsistency resulted in the Secretary promulgating Regulation 1.951A-2(c)(5) ("the Regulation").

I won’t parse the quoted text any further (although my bold face may imply something).

The technical issue was whether Treasury could, by interpretive regulation, fix what appears textually to be a timing glitch producing materially different tax result based on differences in tax years between calendar year taxpayers and fiscal year taxpayers. As the Court says (Slip Op. 2): “Enactment of the TCJA created an inconsistency between treatment of certain taxpayers depending on whether they were fiscal-year or calendar-year filers.”

Basically, the taxpayer argued that it, as a fiscal year taxpayer, was entitled to a benefit that a calendar year taxpayer could not achieve. Without wallowing around in the details, it appears to me that an intuitive view of how Congress enacts tax legislation, one can fairly infer that Congress did not intend the result that the regulation sought to forbid and the Court blesses. Congress appears to have had no specifically articulated intent on the precise issue, but Congress generally does not make such distinctions to permit disparities between otherwise similarly situated taxpayers.

Second Circuit Says § 6751(b) Means What It Says-Appeals Officer in CDP Appeal Must Verify the Supervisor Approval Requirement (6/30/29)

In Besicorp Group, Inc. v. Commissioner, ___ F.4th ___ (2d Cir. 2026), 2Cir here and GS here, the Court held that, in a CDP Appeals Office Conference, the Appeals Officer must verify the IRS’s compliance with § 6751(b)’s written supervisor approval requirement for penalties. The Court says that in 29 pages cogently, if not succinctly, traversing the applicable statute and other authority. Those 29 pages are not all fluff without lessons for students and practitioners, so I address certain key points.

1. I open with a comment I make in a soon to be published article. Section 6751(b) is nonsensical and a textual mess. That comment was focused on the courts’ flailing around to make sense of the mess and was an argument for courts to approve the regulations adopted in December 2024 to make sense of key components of § 6751(b). However, as to the text in § 6751(b) that Besicorp interprets and applies, the text is clear, so Besicorp is correct that CDP Appeals Office proceedings require verification of the written supervisor approval requirement. (I except from that the possible application of res judicata discussed below in ¶ 5.) That is a textualist reading of the text; I don’t see any reasonable mode of interpretation that would reach a different conclusion.

2. Of course, in making that verification, the Appeals Officer must wade into the mess of the other components of § 6751(b) which are a mess with differing interpretations by the courts. I suppose, the Appeals Officer might rely upon the § 6751(b) regulations, either proposed or permanent, although the Besicorp Appeals Office hearing likely occurred before the regulations were proposed or adopted. (In this regard, the Second Circuit argument in Besicorp was 2/5/24; and Besicorp (and consolidated cases) were filed in the Tax Court in 2017. See T.C. dkt. Entries here, before the 2024 regulations were even a twinkle in the Commissioner’s eye.

3. The income tax liabilities in Besicorp and consolidated cases arose from bullshit tax shelters. The Court says the tax and interest (Slip Op. 3) reporting and tax savings from “tax shelter transactions designed to avoid the payment of taxes,” as determined by the IRS. The tax shelter transactions were of the “intermediary tax shelter” aka Midco ilk. (Slip Op. 10.) Besicorp’s deficiency was $50 million. (Slip Op. 5.) And, being a category of bullshit tax shelters, the IRS also asserted the 40% penalty which for Besicorp was “roughly $20 million penalty on a $50 million deficiency for its accuracy-related gross valuation misstatements,” citing § 6662(h). (Slip Op. 5.)

4. The taxpayers involved in Besicorp and consolidated cases may have been affiliated with the promoters who promoted the bullshit tax shelters. Indeed, from my work in this area, I found it was not uncommon for the promoters who “earned” very large amounts from promoting the fake tax savings (a price taxpayers were willing to pay for fraud insurance) to themselves then “shelter” their income with their own bullshit tax shelters (always permitting some variance in the smoke and mirrors game). I note in this regard that one of the attorneys for the taxpayers was also an attorney for at least one promoter and related corporation.

Wherefore Art Thou Tax Court? (6/29/26; 7/1/26)

In two cases today, the Court held that

• The general rule is that (i) the President can fire executive agency personnel at will even if the statute says that they can only be removed for cause or for some other similarly worded reason  Trump v. Slaughter, 609 U. S. ___ (2026) (stating the general rule); but
• An exception to the general rule in the case  of members of the Board of Governors of the Federal Reserve where the statute requires “for cause” removal. Trump v. Cook, 609 U. S. ____ (2026) (stating the exception).

The opinions may be viewed and downloaded here: Trump v. Slaughter, SC Slip Op. here and GS here; and Trump v. Cook, SC Slip Op. here and GS here. 

Of course, the general rule (concocted under the “unitary executive” theory) and the exception require a definition of an executive agency subject to the respective rule and exception. In other words, it is not clear that Cook states a single exception applicable to the Federal Reserve. 

In the tax world, the Tax Court is potentially implicated in this brouhaha. Consider the following statutory text:

26 U.S. Code § 7441 – Status
There is hereby established, under article I of the Constitution of the United States, a court of record to be known as the United States Tax Court. The members of the Tax Court shall be the chief judge and the judges of the Tax Court. The Tax Court is not an agency of, and shall be independent of, the executive branch of the Government.

26 U.S. Code § 7443 - Membership
* * * *
(f)Removal from office
Judges of the Tax Court may be removed by the President, after notice and opportunity for public hearing, for inefficiency, neglect of duty, or malfeasance in office, but for no other cause.

A strict textual reading of § 7441 specifically states that the Tax Court is not an executive body (agency in administrative law lingo). The President has the power to appoint Tax Court Judges, “by and with the advice and consent of the Senate, solely on the grounds of fitness to perform the duties of the office.”  § 7443(b). (That may suggest that politics should not be involved, but babies come in baskets (although politics is involved some of the Tax Court Judges are exceptional on the metric of “fitness to perform”).) Then, once the Senate has advised and consented, the President alone has the power to remove Tax Court Judges but only, to repeat, “after notice and opportunity for public hearing, for inefficiency, neglect of duty, or malfeasance in office, but for no other cause.”

Supreme Court Denies Cert in Murrin on Issue of Whether Taxpayer's Fraud is Required for § 6501(c)(1) Unlimited Statute of Limitations (6/22/26)

Today, the Supreme Court denied the petition for certiorari in Murrin v. Commissioner (Sup. Ct. No. 25-988), docket here. See Order List dated 6/22/26, here at p.3, The Third Circuit opinion from which Murrin sought cert was Murrin v. Commissioner, 158 F.4th 527 (3rd Cir. 2025), here.

The question presented in the petition here was:

Whether, under 26 U.S.C. § 6501(c)(1), the IRS may assess tax beyond the Code’s three-year limitations period based solely on the fraudulent intent of a third-party, even when the taxpayer herself neither intended to evade tax nor knew of any wrongdoing.

The question as framed by the SG in the Commissioner’s Brief in Opposition here was:

Whether the indefinite limitations period in 26 U.S.C. 6501(c)(1) applies to a false or fraudulent return prepared by a tax return preparer who acted with the intent to evade tax.