Liberty Global Court Holds that Government May Proceed by Collection Suit without a Notice of Deficiency (8/13/23)

I earlier wrote on an unresolved issue in United States v Liberty Global (D. Colo. Civil Dkt.22-cv-02622-RBJ), CL here. The issue was whether, as in this case, the Government could bring a tax collection suit without first issuing a notice of deficiency. See Further Commotion in Liberty Global Collection Suit Over Whether a Notice of Deficiency Is Required Before Collection Suit (1/16/23; 1/19/23), here.

The district court resolved the issue in United States v. Liberty Global, Inc. (D. Colo. Opinion dated June 1, 2023), CL here. The Court summarizes its holding (Slip Op.. 5-6):

          LGI’s proposition that § 6213(a) was intended to convert the administrative route to a plenary scheme for income tax collection is inconsistent with the weight of authority among courts who have addressed this issue. Moreover, the analysis required to reach that conclusion does not comport with canonical approaches to statutory interpretation, which charge courts to refrain from adopting interpretations that would displace longstanding common-law rights or disrupt established distributions of power among governmental bodies in the absence of clear language demonstrating Congress’s intent to do so. See FBI v. Fazaga, 142 S. Ct. 1051, 1060-1061 (2022). Because there is no indication that § 6213(a) was intended to supplant the existing common-law avenue for the government to recover unpaid taxes, the Court will not infer that intent here.

          Therefore, this analysis adopts the proposition that there exist two avenues for the government to collect unpaid taxes: the administrative route (assessment and collection) and the common-law route (filing suit on the debt). Defendant alleges a defect in the government’s compliance with the requirements to proceed via the administrative route. However, compliance with those requirements is irrelevant here because the government does not seek to proceed via the administrative route (and in fact was foreclosed from doing so by defendant’s own maneuvers), and because defendant has not shown that the notice requirements in the administrative process have been or should be read onto the alternative common-law process.

 JAT Notes:

1. Perhaps not a good sign, but the Court notes (p. 3 n. 1): a tax strategy promoted (or at least described) on a Skadden Arps web page. A Skadden Arps attorney, Rajiv Madan, appears from the recent filings to be the lead attorney for Global Liberty in the case.

1 Tax litigators apparently are starting to recommend strategies for bypassing the administrative process (filing a tax return claiming a benefit and then undergoing an audit if selected) by instead paying the tax and then bringing a section 7422 refund suit in federal court. See ECF No. 26 at 2 (citing ECF No. 26-1  at 4, “Skadden Insights: Challenging Tax Cuts and Jobs Act Regulations and IRS Guidance” (1/21/2020)). 

2. See also Leslie Book, Liberty Global: Court Blesses IRS’s Creative Litigation Strategy (Part II) (Procedurally Taxing 6/26/23), here.