Supreme Court Accepts Cert in Zuch as to Mootness in CDP where IRS Collected by Offset the Tax Subject to Levy (1/13/25)

On Friday, January 10, 2024, the Supreme Court granted the Solicitor General’s petition for writ of certiorari in Commissioner v. Zuch (S.Ct. No. 24-416), here. The order granting the petition is here; the Supreme Court’s docket sheet is here; the Third Circuit opinion is Zuch v. Commissioner, 97 F.4th 81 (3rd Cir. 2024), here. My blog on the 3^rd Circuit panel opinion in Zuch is 3rd Circuit Holds Tax Court Has Jurisdiction to Determine Overpayments in CDP Proceedings (3/29/24; 3/30/24), here. (Although I cite my prior blog, I recommend those new to the issue, spend their time on the briefing on the petition for writ of certiorari and the 3rd Circuit panel opinion.)

The Question Presented from the petition, filed by Solicitor General Prelogar but naming attorneys from the Solicitor General’s office and the Tax Division, is:

Whether a proceeding under 26 U.S.C. 6330 for a pre-deprivation determination about a levy proposed by the Internal Revenue Service to collect unpaid taxes becomes moot when there is no longer a live dispute over the proposed levy that gave rise to the proceeding.

The Question Presented from the Brief in Opposition. here, filed by a formidable Skadden Arps team led by Shay Dvoretzky, here, and joined by the ubiquitous Frank Agostino, here,

          The Internal Revenue Code authorizes the IRS to levy—that is, seize—a taxpayer’s property to collect unpaid taxes, but only after providing the taxpayer with notice and an opportunity for an administrative hearing before the IRS Independent Office of Appeals. (Appeals Office). See I.R.C. § 6330. At the hearing, the taxpayer may raise “any relevant issue relating to the unpaid tax or the proposed levy.” I.R.C. § 6330(c)(2)(A). The taxpayer may also challenge her underlying tax liability if she did not previously have an opportunity to do so. I.R.C. § 6330(c)(2)(B). After the Appeals Office renders its decision, the taxpayer may “petition the Tax Court for review of such determination,” “and the Tax Court shall have jurisdiction with respect to such matter.” I.R.C. § 6330(d)(1).

          The question presented is whether the Tax Court retains jurisdiction under I.R.C. § 6330 to review and issue declaratory relief as to the Appeals Office’s determination of the taxpayer’s underlying liability when, despite the parties’ live dispute about that liability, the IRS stops pursuing the levy.

JAT Comments:

1. No amicus brief with respect to the petition was filed. I predict that at least one merits amicus brief will be filed. (What petition-granted cases do not now draw merits amicus briefs?)

2. Why would the Supreme Court grant the petition in Zuch? Perhaps one reason is that the Solicitor General requested the writ. Given the historic internal selection process for cases, particularly tax cases, the Solicitor General’s petition or acquiescence in the petition is a good signal to the Court that, after careful vetting, the issue may be important. I say, “may be important.” I’ll leave it at that until later in the comments.

3. My more cynical thought is that, perhaps, Zuch is an example where the Solicitor General (or even the Court) selects tax cases to limit the damage the Supreme Court can do if it moves to merits decisions in tax cases. The Supreme Court in each term hears on the merits only a limited number of tax cases, perhaps around four. Given the Supreme Court’s propensity to screw up tax cases, I suppose Zuch is a good case to grant the petition, because there does not seem to be much collateral damage that can come out of Zuch in the hands of the Supreme Court. See Some Justices' Aversions to Tax Cases (Federal Tax Procedure Blog 8/4/23; 9/6/23), here.

4. In further digression on points ## 2 and 3,back when I was with DOJ Tax Appellate, the Solicitor General was Erwin Griswold who was both a prominent professor of tax law and then Dean at Harvard Law School. He was very select about petitioning for writ of certiorari in tax cases. See Giants in Tax Law: Roger John Traynor (Federal Tax Procedure Blog 10/26/19; 8/26/23), here (with an anecdote about Dean Griswold as Solicitor General). Hence, at least during Griswold’s tenure as Solicitor General (well into the 20th Century), the Supreme Court understood how selective the Solicitor General was generally and in tax cases in particular. At any rate, apparently riding that wave after he left the Solicitor General’s office, the first petition for writ of certiorari Dean Griswold filed after as a private practitioner was the petition in Frank Lyon Co. v. United States, 435 U.S. 561 (1978), here, in which, I am convinced, the Supreme Court granted the petition because Dean Griswold filed it and then having gotten into the mess in a case in which it should not have granted the writ, rather than “DIG” the case—dismiss as improvidently granted—it rendered its decision which has proved a continuing disaster over the years and perhaps, in my mind, the classic illustration for why the Supreme Court should get out of the business of deciding important tax cases. See the following (Kirk Stark, The Unfulfilled Tax Legacy of Justice Robert H. Jackson, 54 Tax L. Rev. 171, 173 (2001)):

Tax lawyers have derided the Supreme Court, complaining that the Court "hates tax cases" and generally bungles the tax cases it does hear.19 Charles Lowndes echoed a longstanding sentiment of the tax bar when he wrote, "[i]t is time to rescue the Supreme Court from federal taxation; it is time to rescue federal taxation from the Supreme Court." 20
   n19 See Erwin N. Griswold, Is the Tax Law Going to Seed? Remarks Before the Annual Meeting of the American College of Tax Counsel (Feb. 5, 1993), in 11 Am. J. Tax Pol'y 1, 7 (1994). Writing about the Burger Court in 1975, Erwin Griswold commented that Supreme Court Justices often find "no intellectual interest or challenge in tax cases.... Indeed,... it is hard to find a member of the present Court who has a real 'feel' for tax law." Erwin N. Griswold, Foreword to Bernard Wolfman, Jonathan LF. Silver & Marjorie A. Silver, Dissent Without Opinion: The Behavior of Justice William 0. Douglas in Federal Tax Cases, at xii (1975) [hereinafter Foreword].
   n20 Charles L.B. Lowndes, Federal Taxation and the Supreme Court, 1960 Sup. Ct. Rev. 222, 222. The tax bar's disillusionment with the Supreme Court has provoked some scathing critiques. See, e.g., Martin D. Ginsburg, The Federal Courts Study Committee on Claims Court Tax Jurisdiction, 40 Cath. U. L. Rev. 631, 634-35 (1991) ([Practitioners cannot expect, and surely, as rational men and women, practitioners ought not to hope, that the Supreme Court will take too many tax cases. It is, history teaches, not a job the high court performs superbly."); William A. Klein, Tailor to the Emperor With No Clothes: The Supreme Court's Tax Rules for Deposits and Advance Payments, 41 UCLA L Rev. 1685, 1721, 1727 (1994) (characterizing Supreme Court tax opinion as "[gobbledegook" and suggesting that Court may "lack the tools for effective development of new tax principles and rules"); Bernard Wolfman, The Supreme Court in the Lyon's Den: A Failure of  Judicial Process, 66 Cornell L. Rev. 1075, 1099 (1981) (noting that "[A] Supreme Court opinion ought not become the basis for tax lawyers to make a laughingstock of the Court as they now do ... ").

5. Upon re-reading Zuch, I am impressed yet again as to the scholarship that went into the panel opinion; at the panel’s request, Audrey Patten of the Legal Services Center of Harvard Law School served as amicus on briefing (see 97 F.4^th, at 86 n. 1); that request may have come because the Government attorney was confused on key procedural issues: e.g., 97 F.4^th, at 95 n. 26 (IRS attorney made an oral argument that “It retreated from that position in its supplemental briefing;”); & 96 (“as a result of being pressed on that issue at oral argument, the IRS now professes a different view,”.)

6. The Supreme Court docket sheet lists Brian Halligan Fletcher as Counsel of Record for the Petitioner. In the Solicitor General’s Reply Brief (p. 11), the signature block indicates that Fletcher signed as “Acting Solicitor General” with a starred footnote that “* The Solicitor General is recused in this case.” I found no statement as to why Solicitor General Prelogar recused after not recusing on the original petition. (Speculation, somewhat tongue in cheek: Perhaps in light of the change of administration requiring that Solicitor General Prelogar not continue as Solicitor General she is interviewing or has accepted a position with either of the firms opposing cert—Skadden Arps (where Shay Dvoretzky serves as a partner) or Agostino & Associates (where Frank Agostino serves as name partner).