Tuesday, August 30, 2016

Filing Motions for Reconsideration (8/30/16)

Keith Fogg has a great posting titled, descriptively, Motion for Reconsideration (Procedurally Taxing Blog 8/30/16). here.  I highly recommend that students and new lawyers doing any type of trial practise and particularly tax litigation practise click on the link and read the blog entry.

The starting point for this discussion is Senyszyn v. Commissioner, TC Memo 2016-137,. here, which I have previously discussed in my Federal Tax Crimes Blog because, although a civil case, the background is a criminal tax evasion case.  See Tax Court Again Rejects Collateral Estoppel For Some Deficiency and Civil Fraud Penalty Where No Tax is Due (Federal Tax Crimes Blog 7/24/16), here.  The issue was whether the Court had to apply the doctrine of collateral estoppel based on on the tax evasion conviction that had as an element an evaded tax (sometimes call tax due and owing or tax deficiency).  A specific amount of evaded tax is not required for conviction.  So, in his case, there was just some unstated amount of tax due and owing.  The Court knew based on the record that, in fact there was no tax evaded.  That knowledge certainly casts doubt on the criminal conviction, but the criminal conviction was not an issue in the case.  Judge Halpern, the Tax Court Judge, had to do justice in the case before him where the facts showed that there was no tax deficiency.  He simply decided to do justice.

Some of the key points Keith discusses are:

  • Filing motions for reconsideration is a strategic step.  Those motions can backfire.
  • Keith notes the procedures that the IRS has to follow to obtain approval to file a motion for reconsideration.
  • Keith notes that, bottom line, the doctrine of collateral estoppel exists to achieve efficient justice by avoiding re-litigating facts already determined.  But there may be outlier cases where following the previous determination will patently defeat justice.  This was one of them, and the judge exercised the equitable powers he perceived he had to do justice.
Again, I strongly urge that you read Keith's blog entry.

Monday, August 29, 2016

Tax Procedure Book Errata - Addition re Starting Date for Statute of Limitations to Return Filed Before Due Date (8/29/16)

I have made an addition to Example 1 on p.  115 of the Student Edition and 162 of the Practitioner edition.  I quote here the entire example, noting the text added in red and the footnote added in red.\
Example 1: The Year 01 return is mailed on February 1 of Year 02 and received by the IRS on February 6 of Year 02.  The return is timely filed, so the timely-mailing, timely-filing rule does not apply or need to apply.  The return is deemed filed on the due date of April 15 of Year 02.  (Note that this filing date applies to establish the filing date for purpose of the civil and criminal statutes of limitations even if April 15 falls on a weekend or holiday which is treated by § 7503 as being timley filed on the next succeeding.) fn.
   fn. See United States v. Johnson, 2016 U.S. App. LEXIS 15879 (6th Cir. 2016) and the relate case United States v. Johnson, 599 Fed. Appx. 242; 2015 U.S. App. LEXIS 5446 (6th Cir. 2015) dealing with the starting date for the criminal statute of limitations.  The same analysis applies for the civil statute of limitations, although if, as in Johnson, the return was fraudulent, the unlimited civil statute would apply.  The statutory analysis for both civil and criminal statutes is: (1) § 6501(b)(1) treats an early filed return as being filed on the “the last day prescribed by law;” (2) § 6072(a) provides that the last day prescribed by law for an individual return is April 15 of the next year; and (3) § 7503 provides that, where the day prescribed by law is a weekend or holiday, a return filed after the day prescribed by law but on the next business day after the weekend or holiday shall be “considered timely.”  The key point is that the day prescribed by law is still April 15; but a subsequent filing on the next succeeding business day is simply “considered timely.”  Hence, from a statutory interpretation context, conceded by the Government in the Johnson cases, the statute of limitations starts on the last day prescribed by law, which is April 15 for an early filed return.  Now, for a return filed after that normal due date which falls on a weekend or holiday, I suspect that the statute would start running on the date of filing. 
For more detail, see my Federal Tax Crimes Blog entry titled Government Avoids Hyde Amendment Fees and Expense Liability After It Blew the Criminal Statute of Limitations (Federal Tax Crimes Blog 8/29/16), here.

Monday, August 22, 2016

Tax Procedure Book Errata - Correction Related to Abatement of Erroneous Assessment (8/22/16)

Delete the entire section (1 paragraph) in Chapter 6 at V. Abatements of Erroneous Asessments (at p. 240 of the Practitioner edition and p. 167 of the Student edition substituting in its place the following (note that the footnote numbers may not tie to the current editions):

V. Abatements of Erroneous Assessments.

Section 6404(a) authorizes the IRS to abate an assessment of tax (or liability) which is “(1) is excessive in amount, or (2) is assessed after the expiration of the period of limitation properly applicable thereto, or (3) is erroneously or illegally assessed.”  All of these alternatives seem straight-forward.  For example, if the taxpayer has been assessed $100 in tax or interest but shows that the correct tax or interest liability is $50 rather than the $100 assessed, under subparagraph (1), the IRS can abate the excessive $50 amount assessed. n848
   n848 In King v. Commissioner, ___ F.3d ___, 2016 U.S. App. LEXIS 13269 (7th Cir. 2016), dealing with abatement of interest rather than tax, the Seventh Circuit reversed the Tax Court’s holding that “excessive” could mean “unfair.”  The Court cited several reasons, including the indeterminancy of the concept of “unfair” and the Chevron appropriate regulation saying that, in the context of tax, “excessive” means "in excess of the correct tax liability,” with the conclusion that, as to interest, it must mean in excess of the correct interest.  See Regs. § 301.6404-1(a).

As noted above, however, the taxpayer still must claim his right to a refund timely, and, if he fails to do so, the statute of limitations on actually getting the refund will prevent the IRS from refunding the tax.  If for some reason, after the statute of limitations for refund has closed, the taxpayer establishes his or her right to an abatement, the IRS may make the abatement because there is no statute of limitations on abatement.n849  The problem, of course, is that the IRS cannot refund or credit the abated tax liability, if paid, to the taxpayer and, instead, the payments will be posted internally by the IRS to the Excess Collections File.
   n849 ILM 200915034 (3/2/2009), published at 2009 TNT 68-16.

Sunday, August 21, 2016

Excellent Law Review Article on Statutory Interpretation and Use of Legislative History (8/21/16)

An  important topic in all tax courses, including Federal Tax Procedure, is statutory construction.  One of the issues I discuss is the use of legislative history in statutory construction.  (See practitioner edition beginning on p. 6 and Student edition beginning on p. 4.)

I have just read a law review article that I think would be a worthy read for those wishing to dig further into the issue.  The article is:  Robert A. Katzman, Madison Lecture: Statutes, 87 N.Y.U.L. Rev. 637 (2012), here.   Katzman is a judge on the Second Circuit and a prominent constitutional scholar in his own right.  I offer below some snippets and my own comments.  In most quotes, I omit footnotes, except in some cases where I think the footnote is important

First, in a bow to James Madison who is often called the father of the Constitution because of his major contribution to the Constitution:
I owe much to James Madison, that diminutive giant, one of the founding architects of our constitutional structure.
Then, the author deploys Madison in support of his argument that legislative history is an important tool in statutory interpretation:
Generally, the interpretative problem arises because the statute is ambiguous. n127 From the start, the founders understood that legislation would often be unclear and admit of differing interpretations. Madison wrote in The Federalist No. 37, describing laws in general:
All new laws, though penned with the greatest technical skill, and passed on the fullest and most mature deliberation, are considered as more or less obscure and equivocal, until their meaning be liquidated and ascertained by a series of particular discussions and adjudications. Besides the obscurity arising from the complexity of objects, and the imperfection of the human faculties, the medium through which the conceptions of men are conveyed to each other, adds a fresh embarrassment... . No language is so copious as to supply words and phrases for every complex idea, or so correct as not to include many equivocally denoting different ideas. Hence, it must happen that however accurately objects may be discriminated in themselves, and however accurately the discrimination may be considered, the definition of them may be rendered inaccurate by the inaccuracy of the terms in which it is delivered. And this unavoidable inaccuracy must be greater or less, according to the complexity and novelty of the objects defined. n128
   n128. The Federalist No. 37, at 255 (James Madison) (Cynthia Brantley Johnson ed., 2004). It merits a note that Madison and other founders proposed an active role for judges in the legislative process by having members of the Supreme Court serve on a council of revision to help the President exercise the veto power. 2 The Records of the Federal Convention of 1787, at 73-80 (Max Farrand ed., 1911). Such a scheme, argued Madison, would help "preserve a consistency, conciseness, perspicuity & technical propriety in the laws, qualities peculiarly necessary; & yet shamefully wanting in our republican Codes." Id. at 74. With respect, I think that is one proposal whose rejection was well advised.

2016 Editions (Student and Practitioner) of Townsend on Federal Tax Procedure (8/21/16)

I have prepared my 2016 editions (Student and Practitioner) of my Federal Tax Procedure Book.  I am providing links to the pdf versions of those books:
  • Federal Tax Procedure (Student 2016), SSRN link for download, here.
  • Federal Tax Procedure (Practitioner 2016), SSRN link for download, here.
I invite and welcome comments from  readers of these books as to how I might improve them.  Now that I am no longer actually teaching this course, I plan to keep up the publications and make them available once a year in August (hopefully so that those schools that use the book can do so at the beginning of the semester).  But, I no longer have the regular give and take with students on the subject and the book.  Hence, input from users of the book is invaluable.  I would appreciate input both on substance (errors and omissions as to content) and on style (grammar, syntax, misspelling, hard to understand sentences, etc.).  Please help me make this a better book (actually it is a single book -- the student version is the same as the practitioner version with the footnotes stripped out.

I have submitted these books to SSRN but they have not yet been cleared by their opaque processes.  When they are cleared, I will provide links in the columns to the right of this blog.

While I was teaching a class in Federal Tax Procedure (at UH Law School through Fall 2015), I used this blog for two purposes:  (i) to keep my students informed and (ii) to provide updates to the books.  I will continue to use this blog to provide such updates.  I will link all such updates as "Federal Tax Procedure Book - Errata."  In most cases, I will provide the appropriate page numbers for the errata, but some postings may be more general interest for tax procedure enthusiasts with no specific page numbers being appropriate.

I remind readers that the best blog on tax procedure is Procedurally Taxing, here.  You can get daily fixes (well most days' fixes) for your addictions to tax procedure on that blog.  My fixes on this blog will be more infrequent and more episodic and usually less nuanced and often less edifying.

For even more in depth reading on tax procedure, the best text is Michael Saltzman and Leslie Book, IRS Practice and Procedure (Thomsen Reuters 2015), here.  Leslie Book is a principal contributor to Procedurally Taxing, but his magnum opus is the Saltzman and Book book (sounds redundant but it is not).  This book is the go-to resource for depth on the subject.  (I have to disclose that I am the principal author for Chapter 12 dealing with Criminal Penalties and the Investigation Function.)