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).

Restitution Based Assessment--Some Issues of Interest (8/3/19; 8/7/19)

Readers of this blog will likely be interested in a recent post on Procedurally Taxing Blog:  Keith Fogg, Interest and Penalties on Restitution-Based Assessments (Procedurally Taxing Blog 7/31/19).  Highly recommended.  The context is the relationship between restitution as ordered by the court in a criminal case and the restitution based assessment that the IRS is mandated to make, particularly as related to interest on the restitution.

After some emailing with Keith, I thought I would add some related material and comments that readers of this blog might find interesting or useful.

1.  The amount of the restitution can include an interest factor from the date of the loss through the date of the restitution order by judgment in the criminal case.  The DOJ Criminal Tax Manual thus says:  "Prosecutors should seek prejudgment Title 26 interest in restitution in order to fully compensate the IRS."  DOJ CTM 44.00 RESTITUTION IN CRIMINAL TAX CASES (last edited January 2019), here.

The U.S. Attorneys Manual (now called Justice Manual after renaming in 2018) had a template in the Tax Resource Manual that would include interest under 6601 and/or 6621 in the restitution order as of the date of sentencing.

• https://www.justice.gov/archives/usam/tax-resource-manual-20-optional-restitution-paragraphs
• https://www.justice.gov/archives/usam/tax-resource-manual-21-proposed-restitution-order

The Tax Resource Manual seems to have dropped off the current Manual (called the Justice Manual), although the prior Tax Resource Manual is still available per the links above.  (Perhaps it will be added back later.)  So, diligent US Attorneys should be aware of it.  And, of course, DOJ Tax CES attorneys should be aware of the CTM provision.  And, since the IRS makes the calculations, the IRS agents should be aware of as well.  (By contrast, interest is not included on tax loss for Sentencing Guidelines purposes except in the case of evasion of payment, when interest was included in the amount the defendant sought to evade.)

My understanding, though, is that courts sometimes (perhaps even often) do not include interest in restitution.  (See discussion of recent case in paragraph 3 below.)

2.  I have just updated the text and a footnote in the working draft of my Federal Tax Procedure Book (will be published on SSRN by mid-August 2019) dealing with some of the nuance.  Here is a cut and paste of the text and the key text amd footnote:

Seventh Circuit Opinion on Role of Notice of Deficiency and Last Known Address Requirement (3/7/15)

In Gyorgy v. Commissioner, ___ F.3d ___, 2015 U.S. App. LEXIS 3100 (7th Cir. Feb. 27, 2015), here, the Court addressed certain key aspects of tax procedure relating to the key role of the notice of deficiency.  For practitioners (other than novice practitioners), this is perhaps redundant to information they already know.  In some way, it is probably redundant for students also.  Still it is a pretty good summary of the process, so I offer it here.  In most cases, I will eliminate most case or other citations, except when I think they are important:  I include the Code sections because the Code is important.  The excerpts are:

We begin with an overview of the CDP process and the taxpayer's right to appeal. The Internal Revenue Code (the "Code") directs the Treasury Secretary—acting through the IRS—to determine, assess, and collect federal taxes. See I.R.C. §§ 6201(a), 6301. It also requires taxpayers to file returns as prescribed by the IRS. See id. § 6011(a). If the IRS finds that a person has unpaid taxes for a given year, it must notify him of the deficiency before it can collect the debt. See id. §§ 6212(a), 6213(a). Once the IRS mails notice, the taxpayer may petition the tax court to redetermine the correct amount of the deficiency. Id. §§ 6213(a), 6214(a). If he does not file a timely petition (normally within ninety days), then the deficiency "shall be assessed, and shall be paid upon notice and demand." Id. § 6213(c). 

If the taxpayer does not pay, then his tax liabilities become a lien on his real and personal property. Id. § 6321. To protect the government's rights against other secured creditors with respect to the encumbered property, the IRS must generally file a notice of the tax lien with the appropriate state authority. See id. § 6323(a), (f). It must then inform the taxpayer that it filed the lien notice. Id. § 6320(a). 

The taxpayer is entitled to challenge the lien in a CDP hearing before the Appeals Office, which is an independent bureau within the IRS. Id. § 6320(b). The "hearing" is informal and may consist of correspondence, telephone conversations, or in-person meetings. Treas. Reg. § 301.6330-1(d)(2), . In general, the taxpayer may raise any relevant issue. I.R.C. § 6330(c)(2)(A). That includes a challenge to his underlying tax liability if he did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability. Id. § 6330(c)(2)(B). The appeals officer must consider the issues raised by the taxpayer and verify that the IRS followed proper procedures. § 6330(c)(3). 

After the hearing, the Appeals Office issues a notice of determination containing its findings and conclusions. Treas. Reg. § 301.6330-1(e), Q&A-E8. If the taxpayer is dissatisfied, he can appeal the determination to the tax court. I.R.C. § 6330(d)(1). If his underlying tax liability was properly at issue in the CDP hearing, the tax court reviews that issue de novo. It reviews the Appeals Office's other determinations for abuse of discretion. Jones v. Comm'r, 338 F.3d 463, 466 (5th Cir. 2003) ("In a collection due process case in which the underlying tax liability is properly at issue, the Tax Court ... reviews the underlying liability de novo and reviews the other administrative determinations for an abuse of discretion." (citing Craig v. Comm'r, 119 T.C. 252, 260 (2002))). 

The tax court's decision is in turn subject to review in the appropriate court of appeals. I.R.C. § 7482(a)(1). We review tax court decisions "in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury." Id. 

With this background in hand, we turn to the two issues on appeal.