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.

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.

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.

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.)

District Court holds the § 6707 Tax Shelter Reporting penalty Not Divisible (3/12/16)

I previously reported on a case in the Court of Federal Claims, Diversified Group Inc. v. United States, 123 Fed. Cl. 442, 2015 U.S. Claims LEXIS 1276 (2015), here, appeal docketed, No. 16-1014 (Fed. Cir. October 6, 2015), here, that held that the § 6707 penalty was not divisible for purpose of the Flora, here, full payment rule for refund suits.  See Flora Full Payment Rule and the Rough Edges (Federal Tax Procedure Blog 9/17/15), here.  In Pfaff v. United States, Civil Action No. 14-cv-03349-PAB-NYW, 2016 U.S. Dist. LEXIS 30844 (D. Colo. Mar. 10, 2016) [no link available], in a much shorter opinion, the District Court reached the same result that, in my judgment, does not provide anything not covered in the Diversified Group opinion.

Justice Scalia on Chevron Deference (2/15/16)

The Country mourns the death of Justice Scalia.  Despite being prone to hyperbole, he was a force and, I think, generally for good.  He made us think about his statements which were the product of a keen mind.

I provide below some of the more substantive quotes and references in the tax procedure area from my Federal Tax Procedure book (the latest published version can be downloaded on SSRN - footnoted version here and nonfootnoted version.here; I probably will have updated versions later this year).  Justice Scalia was not a tax lawyer, so his opinions in the tax area are few.  Most of his influence in the tax area is in the context of whether administrative agency pronouncement, principally Regulations, are subject to so-called Chevron deference.  In the tax context, the announcements are regulations and other announcement subject to Chevron or some lesser deference.  So most of the quotes below relate to Chevron deference in some of its many manifestations.  Justice Scalia early signaled the importance of Chevron deference in a lecture after the Chevron opinion reprinted in the Duke Law Journal (Antonin Scalia, Judicial Deference to Administrative Interpretations of Law, 1989 Duke L.J. 511,(footnotes omitted) here):

Administrative law is not for sissies -- so you should lean back, clutch the sides of your chairs, and steel yourselves for a pretty dull lecture. There will be a quiz afterwards. 

Five Terms ago, the Supreme Court issued its opinion in the case of Chevron, U.S.A., Inc. v. NRDC, which announced the principle that the courts will accept an agency's reasonable interpretation of the ambiguous terms of a statute that the agency administers. Dealing with the question whether the Environmental Protection Agency could permissibly adopt the "bubble concept" -- that is, a plantwide definition of "stationary source" -- under the Clean Air Act, Justice Stevens for a unanimous Court adopted an analytical approach that deals with the problem of judicial deference to agency interpretations of law in two steps: 

First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.  

Failing an affirmative response to the first inquiry, the Chevron analysis moves to step two: 

If, however, the court determines that Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.

So, with that introduction, here are the significant Scalia quotes and references in my Federal Tax Procedure Book, primarily on Chevron:

On giving primacy to the text over other forms of statutory interpretation:

Some jurists, Justice Scalia the most visible, give primacy to the statutory text and are reluctant to look beyond the statutory text (for example, to the legislative history) for assistance in determining how the statutory text should be interpreted. fn15  They may discern what they often call the “plain meaning” to statutory text; in such cases, they profess to give little or no credence to broader legislative context, including legislative history (such as Committee Reports), because, they reason, only the statutory text was enacted by Congress and the text means what they believe it plainly says. fn 16  This approach to statutory interpretation is often called textualism. fn 17  If context is relevant at all to textualists, it is internal context (i.e., context within the statute itself rather than context determined from sources external to the statute) and perhaps the context of what the legislative words would mean to the hypothetical reasonable person versed in the English language as of the date of enactment (thus, for example,  permitting resort to a contemporaneous dictionary).  Other jurists find that broader legislative context assists in interpreting text and are willing to look to that broader context, most immediately the legislative history, to determine how the enacted text should be interpreted.  This approach to interpretation has different iterations that go by the terms intentionalism, purposivism and the practical reason (or dynamic) method.
   fn 15 Justice Scalia’s impact in the debate in terms of influencing others to the same position has been questioned.  See David S. Law and David Zaring, Law Versus Ideology: The Supreme Court and the Use of Legislative History, 51 Wm. and Mary L. Rev. 1653, 1659 (2010). Other authors conclude from smaller and perhaps less sophisticated samplings that Justice Scalia has had a significant impact, if not so much on other Justices on the Supreme Court then in the lower courts.  Id. 1671-1672, 1682.  Professors Law and Zaring, however, question the sophistication of the prior analyses to address the determinants in the use of legislative history.
   fn 16 Earlier in his career while on the D.C. Circuit Court of Appeals, Justice Scalia so pronounced by quoting a marvelous floor dialog between Senator Armstrong and Senator Dole, then Chair of the Finance Committee, in which Senator Dole denied having written or even read or even knowing whether any Senator wrote or even read the Committee Report and denied that the Report had been voted on by the Committee.  Hirschey v. F.E.R.C., 250 U.S. App. D.C. 1, 777 F.2d 1, 7 n.1 (D.C. Cir. 1985) (Scalia, J., concurring) (quoting 128 Cong. Rec. S8659 (daily ed. July 19, 1982)). Senator Armstrong concluded the dialog with the following comment: “[F]or any jurist, administrator, bureaucrat, tax practitioner, or others who might chance upon the written record of this proceeding, let me just make the point that this is not the law, it was not voted on, it is not subject to amendment, and we should discipline ourselves to the task of expressing congressional intent in the statute.”
   fn 17 See http://en.wikipedia.org/wiki/Textualism (also containing a fair general description of the concept and noting the difference between textualism, of which Justice Scalia is a proponent, and strict construction, of which Justice Scalia is not a proponent). 

On the use of legislative history in statutory interpretation, I quote from a law review article::

Good Discussion of the Burden of Proof When the Trier of Fact Bases Decision on a Preponderance of the Evidence (12/17/15)

A case decided yesterday by the Fifth Circuit has a pretty good discussion on the effect of § 7491's shift of the burden of proof when the Tax Court may have improperly assigned the burden of proof under that section but had decided the case based on a preponderance of the evidence.  Brinkley v. Commissioner, ___ F.3d ___, 2015 U.S. App. LEXIS 21838 (5th Cir. 2015), here.

This is cumulative to what I state in the text book, but is probably a good reminder for students and new practitioners.  I incorporate the entire discussion on that subject:

A. The Allocation of the Burden of Proof 

"The allocation of the burden of proof [under I.R.C. § 7491] is a legal issue reviewed de novo." Whitehouse Hotel Ltd. P'ship v. Comm'r, 615 F.3d 321, 332 (5th Cir. 2010) (quoting Marathon Fin. Ins., Inc., RRG v. Ford Motor Co., 591 F.3d 458, 464 (5th Cir. 2009)). 

As a general rule, the Commissioner's determination of a tax deficiency is presumed correct, and the taxpayer has the burden of proving the determination to be erroneous. See Tax Ct. R. 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). However, I.R.C. §§ 6201(d) and 7491(a) set forth exceptions to this rule. Under § 6201(d), "if a taxpayer asserts a reasonable dispute with respect to any item of income . . . and the taxpayer has fully cooperated with the Secretary . . ., the Secretary shall have the burden of producing reasonable and probative information concerning such deficiency." Similarly, under § 7491(a), if "a taxpayer [(1)] introduces credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any tax," n7 (2) complies with certain substantiation requirements, (3) "maintain[s] all records required under this title," and (4) "cooperate[s] with reasonable requests by the Secretary for witnesses, information, documents, meetings, and interviews," then "the Secretary shall have the burden of proof with respect to such issue." Nevertheless, this Court has held that the operation of this burden-shifting scheme is irrelevant when both parties have met their burdens of production and the preponderance of the evidence supports one party. See Whitehouse Hotel, 615 F.3d at 332; Knudsen v. Comm'r, 131 T.C. 185, 189 (2008) ("[A]n allocation of the burden of proof is relevant only when there is equal evidence on both sides.").
   n7 Although this Court has yet to speak on what constitutes "credible evidence," the Eighth and Tenth Circuits have defined the term to mean "the quality of evidence, which after critical analysis, the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted. . . ." Blodgett v. Comm'r, 394 F.3d 1030, 1035 (8th Cir. 2005) (quoting Griffin v. Comm'r, 315 F.3d 1017, 1021 (8th Cir. 2003)); accord Rendall v. Comm'r, 535 F.3d 1221, 1225 (10th Cir. 2008) (citing Blodgett, 394 F.3d at 1035). 

Here, the tax court initially found that Brinkley "did not introduce credible evidence regarding the tax character of the income in issue that merited a shifting of th[e] burden [of proof] to [the Commissioner]" under §§ 6201(d) and 7491(a). But the court ultimately declined to hold Brinkley to his burden, concluding instead that "[t]he preponderance of the evidence, without regard to burden of proof, is that [under letter agreement II] petitioner received the value of his stock and compensation for service previously rendered or to be rendered in the future." Accordingly, the resolution of this issue turns on the tax court's finding that the preponderance of the evidence supports the Commissioner's position that the $3.1 million payout in letter agreement II amounted to compensation for both his stock and his services to Zave and/or Google -- and therefore was properly characterized as ordinary income. 

We agree with the tax court's finding that the preponderance of the evidence favors the Commissioner's deficiency determination, so any error in the court's allocation of the burden of proof is harmless. See Whitehouse Hotel, 615 F.3d at 332; Blodgett v. Comm'r, 394 F.3d 1030, 1039 (8th Cir. 2005).

Addendum 12/18/15 9:00am:

Significant 2d Circuit Opinion on Lack of Waiver of Attorney-Client and Work Product Privileges in Common Interest Situation (11/14/16)

Note, this presentation was substantially revised on 11/15/16.

In Schaeffler v. United States, ___ F.3d ___, 2015 U.S. App. LEXIS 19617 (2d Cir. 2015), here, the Second Circuit rendered a major decision on the issue of waiver of the attorney client privilege, through § 7525, here, in a common legal interest context.  The Court's opening paragraph is:

Georg F.W. Schaeffler ("Mr. Schaeffler" or "Schaeffler") and associated entities ("Schaeffler Group") (collectively "appellants") appeal from Magistrate Judge Gorenstein's order denying a petition to quash an IRS summons. n1 We conclude that: (i) the attorney-client privilege was not waived by appellants' provision of documents to a consortium of banks ("Consortium") sharing a common legal interest in the tax treatment of a refinancing and corporate restructuring resulting from an ill-fated acquisition originally financed by the Consortium; and (ii) the work-product doctrine protects documents analyzing the tax treatment of the refinancing and restructuring prepared in anticipation of litigation with the IRS. We therefore vacate and remand.

So, how did the 2d Circuit justify that holding?  The opinion is relatively short, so that is the best source for its reasoning.  At the risk of oversimplification, I offer my short analysis of the points I think appropriate.

Schaeffler, a U.S. resident (perhaps not citizen), was 80% owner of a German corporation which attempted to acquire a minority interest in another German corporation by a tender offer.  German law requires such tender offers to at least offer to acquire all shares.  The offer, unfortunately, was made just before the 2008 financial crisis, hence "far more shareholders than expected or desired accepted [4]  the offer, leaving the Schaeffler Group the owner of nearly 89.9% of outstanding Continental AG shares."  The net result was that the Schaeffler Group had to re-group, so to speak, or refinance with its committed lenders.  That created a potential bust in the financing as a result of the decline in the market and German law.  That required coordination among all parties, including Schaeffler and the coordination in order to respond to the crisis.

From that re-grouping and refinancing and sharing among the parties of information, documents and legal analysis, this dispute arose.  Did that sharing among parties with a common legal interest waive the privileges -- attorney-client and work product?

The issue presented a subtlety in the application of the attorney-client privilege in a common-interest situation.  What exactly does it mean that sharing of otherwise attorney-client or work product privileged information among persons with a common interest preserves the privileges from waiver?  The opinion does not provide any black letter law on that issue, but does address the issue in the specific context before it.

The Second Circuit described the common interest rule as follows (omitting all citations and most quotation marks for easier readability):

While the privilege is generally waived by voluntary disclosure of the communication to another party, the privilege is not waived by disclosure of communications to a party that is engaged in a “common legal enterprise” with the holder of the privilege. Such disclosures remain privileged where a joint defense effort or strategy has been decided upon and undertaken by the parties and their respective counsel in the course of an ongoing common enterprise and multiple clients share a common interest about a legal matter. The need to protect the free flow of information from client to attorney logically exists whenever multiple clients share a common interest about a legal matter. 

Parties may share a “common legal interest” even if they are not parties in ongoing litigation. The common-interest-rule serves to protect the confidentiality of communications passing from one party to the attorney for another party where a  joint defense effort or strategy has been decided upon and undertaken by the parties and their respective counsel. It is therefore unnecessary that there be actual litigation in progress for the common interest rule of the attorney-client privilege to apply. However, only those communications made in the course of an ongoing common enterprise and intended to further the enterprise are protected. The dispositive issue is, therefore, whether the Consortium's common interest with appellants was of a sufficient legal character to prevent a waiver by the sharing of those communications.

The Saltzman Tax Procedure treatise, here, has a good discussion of the common interest rule.  Saltzman and Book, Tax Practice and Procedure, ¶ 13.04[3][a][viii][A] Express waiver [of the attorney-client privilege].

The TFRP and the § 6751(b) Requirement for Supervisor Written Approval (11/9/15)

In United States v. Rozbruch, 2015 U.S. App. LEXIS 19223 (2d Cir. 2105), here, a nonprecedential opinion, the Second Circuit sustained the district court's holding that the TFRP penalty in the case under § 6672, here, did not fail the requirement in § 6751(b), here, for the written approval of "the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate."  The Court's holding is cryptic, so I will include the entire discussion of the argument on appeal:

Appellants argue that the District Court erred in holding that TFRPs imposed pursuant to Section 6672(a) of the Internal Revenue Code, 26 U.S.C. § 6672(a), do not trigger the written supervisory approval requirement of Section 6751(b)(1), id. § 6751(b)(1). But even assuming, without deciding, that TFRPs are governed by Section 6751(b)(1), the record here nevertheless supports a finding that the Government functionally satisfied Section 6751(b)(1)'s written supervisory approval requirement. Thus, we affirm the District Court's grant of summary judgment, which reduced to judgment Appellants' unpaid TFRPs. See Thyroff v. Nationwide Mut. Ins. Co., 460 F.3d 400, 405 (2d Cir. 2006) ("[W]e are free to affirm a decision on any grounds supported in the record, even if it is not one on which the trial court relied.").

Apparently the Court cited Thyroff because the district court had not held for the Government based on functional satisfaction of § 6751(b)'s requirement.

The briefs are helpful in understanding how the Court threaded the needle to get to a summary affirmance while avoiding having to decide whether the TFRP was even subject to § 6751(b).  The briefs are here.

• Appellant's opening brief, here.
• Appellee U.S. Answering brief, here.
• Appellant's reply brief, here.

The gravamen of of the Appellant's argument is that the TFRP is a penalty subject to § 6751(b) because Congress said the TFRP is a penalty.  Appellant does make some policy arguments, but the force of the argument is that the TFRP is a penalty because Congress said so.  And this is true even though it functions, unlike other penalties, as simply a collection mechanism.  The Government's argument is that, although labeled a penalty, it is really just a fall-back collection device for the trust fund tax that was not withheld and paid over.  The applicability of § 6751(b) to the TFRP has not yet been decided, so, rather than decide the issue, the Court said that, even § 6751(b) did apply, there was functional satisfaction of the requirement.  I presume functional satisfaction is something like substantial compliance.  The reason, as recounted in more detail in the Government brief is that manager level approval was given in the process required to approve the TFRP.

Here is the relevant portion of the argument from the Government's brief (pp. 9-10):