Answering Brief Filed in Clarke

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April 7, 2014

The parties resisting summons enforcement have filed their brief in the Supreme Court in Clarke responding to the government’s opening brief.  Underlying the two sets of briefs is a fundamentally different perspective on the significance of holding an evidentiary hearing at which the agent issuing the summons can be questioned about his motives.  For the government, such a hearing is a big deal, and the courts should not impose that burden on the IRS on the basis of a mere allegation of an improper purpose.  For the summoned parties, such a hearing is a very limited intrusion that must be … Read More

Opening Brief Filed in Clarke Summons Enforcement Case

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March 3, 2014

The government has filed its opening brief in Clarke.  The brief, which is quite short for a Supreme Court brief, hews closely to the arguments made in the petition for certiorari.  As we noted in our previous report, the government and the parties resisting summons enforcement took a very different view at the petition stage of the quantum of evidence that formed the basis for requiring the evidentiary hearing in this case.  The private parties contended that they had made “substantial allegations” that the summonses were for an improper purpose, while the government referred to those allegations as … Read More

Supreme Court to Address the Right to an Evidentiary Hearing in Summons Enforcement Proceedings

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February 3, 2014

The Supreme Court has granted certiorari in United States v. Clarke, No. 13-301, to explore the circumstances under which an entity is entitled to an evidentiary hearing before an IRS summons is enforced, so that it can question IRS officials about their motives for issuing the summons.  The parties’ different views of the case are aptly captured by the dueling questions presented.  The government says the case presents the question “whether an unsupported allegation” that the IRS issued a summons for an improper purpose entitles an opponent to examine IRS officials at an evidentiary hearing.  The entities contesting … Read More

Supreme Court Rules for Government on Both Issues in Woods

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December 3, 2013

The Supreme Court this morning ruled 9-0 in favor of the government on both issues in Woods, holding that:  (1) there is partnership-level TEFRA jurisdiction to consider the appropriateness of a penalty when the partnership is invalidated for lack of economic substance; and (2) the 40% valuation overstatement penalty can apply in that setting on the theory that the basis of a sham partnership is zero and therefore the taxpayers overstated their basis.  See our prior coverage here.  The opinion, authored by Justice Scalia, is concise and appears to resolve definitively both issues that had previously divided the … Read More

Supreme Court Struggles to Unravel TEFRA Jurisdiction in Woods Oral Argument

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October 11, 2013

The Supreme Court held oral argument in United States v. Woods on October 9.  As we have previously reported, the case presents two distinct questions:  (1) a TEFRA jurisdictional question concerning whether the court could determine the applicability of the valuation overstatement penalty in a partnership-level proceeding; and (2) the merits question whether the 40% penalty applied when the partnership was found not to have economic substance and therefore the basis claimed by the taxpayers in the partnership was not recognized.

Most of the argument time for both advocates was spent on the jurisdictional issue, as the Justices often … Read More

Government Faces Sharp Questioning from D.C. Circuit in Loving

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September 25, 2013

The D.C. Circuit heard oral argument on September 24 in the government’s appeal in Loving from the district court decision enjoining the IRS from enforcing its new registration regime for paid tax return preparers.  The panel consisted of Judges Sentelle, Williams, and Kavanaugh.  The court was active, jumping in with questions in the first minute of the government’s opening presentation.  The court asked several questions of the plaintiffs’ counsel as well, but those questions seemed to evince less skepticism of the advocate’s position.  While it is always hazardous to predict the outcome based on the oral argument, the court of … Read More

Briefing Complete in Woods

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August 28, 2013

The government has filed its reply brief in the Supreme Court in Woods.  See our reports on the opening briefs here and here.  The discussion of the jurisdictional issue focuses less on the textual analysis set forth in the government’s opening brief and more on the policy implications of adopting the taxpayers’ position.  The government asserts that the taxpayers’ reading of the statute would effectively “negate Congress’s grant of authority to courts in partnership-level proceedings to determine the applicability of penalties.”

On the merits, the reply brief devotes most of its attention to responding to the taxpayers’ threshold … Read More

Taxpayers’ Brief Filed in Woods

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July 31, 2013

The taxpayers have filed their response brief in the Supreme Court in the Woods case, contending first that the courts lacked jurisdiction to impose the penalties requested by the IRS and, second, that, if jurisdiction exists, the Fifth Circuit correctly held that the valuation misstatement penalty could not be imposed.

On the jurisdictional point, the brief emphasizes the same basic point made by the courts that have questioned jurisdiction in similar partnership cases (see our previous report here) – namely, that the statute allows for partnership-level jurisdiction in a TEFRA proceeding only over a penalty that relates to adjustment … Read More

Supreme Court Briefing Underway in Woods on Penalty and TEFRA Issues

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June 5, 2013

The government has filed its opening brief in the Supreme Court in the Woods case, which involves whether the 40% gross valuation overstatement penalty applies in the context of a basis-inflating transaction held not to have economic substance.  See our earlier report here.

The government’s arguments on the question whether the penalty can be applied in these circumstances are similar to those discussed here previously and addressed in several court of appeals decisions.  It relies on the “plain text” of the statute, arguing that “[t]he word ‘attributable’ means ‘capable of being attributed’” and therefore a finding of lack of … Read More

Two Amicus Briefs Filed in Loving, Including One by a Group of Former IRS Commissioners

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April 10, 2013

[Note:  Miller & Chevalier member and former Commissioner of Internal Revenue Lawrence B. Gibbs is among the five former Commissioners who filed an amicus brief in support of the Government in the Loving appeal.]

Five former IRS Commissioners filed an amicus brief in support of the Government’s appeal of the district court decision invalidating the IRS’s registration regime for paid tax return preparers.  The former Commissioners “take no position regarding whether the manner in which the Treasury has chosen to regulate tax return preparers is advisable, but they strongly disagree with the District Court’s view that Congress has not empowered … Read More

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