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

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

Fifth Circuit Upholds Penalties in NPR

The Fifth Circuit has finally issued its opinion in NPR (as reflected in our prior coverage, this case was argued almost two years ago), a case involving a Son-of-BOSS tax shelter in which the district court absolved the taxpayers of penalties.  The taxpayers were not as fortunate on appeal, as the Fifth Circuit handed the government a complete victory.

The court’s consideration of the two issues before the court of broadest applicability were overtaken by events — specifically, the Supreme Court’s December 2013 decision in United States v. Woods.  See our report here.  In line with that … Read More

Taxpayer’s Opening Brief Filed in BMC Software

The taxpayer filed its opening brief in the Fifth Circuit appeal of BMC Software v. Commissioner.  As we described in our earlier coverage, the Tax Court relied on the legal fiction that accounts receivable created pursuant to Rev. Proc. 99-32 in a 2007 closing agreement were indebtedness for earlier years (2004-06) in order to deny some of the taxpayer’s section 965 deductions.  There are three main avenues of attack in the taxpayer’s brief.

First, the taxpayer argues that the Tax Court incorrectly treated those accounts receivable as “indebtedness” as that term is used in the exception to section … Read More

Ninth Circuit Sides with Government’s Interpretation of QAR Regulations in Bergmann

That didn’t take long.  Less than two weeks after learning that the parties would not be mediating their dispute (see our previous report here), the Ninth Circuit issued a brief five-page unpublished opinion affirming the Bergmann case in favor of the government.  The court held that the time for filing a qualified amended return for an undisclosed listed transaction terminates when the promoter (here, KPMG) is first contacted by the IRS about examining the transaction, not when the IRS later determines the transaction is a tax shelter.

To recap the issue (see our original report here), … Read More

Supreme Court Hears Oral Argument in Quality Stores

The Supreme Court heard oral argument on January 14 in Quality Stores.  Whether it was because of a lack of interest in the subject matter or because it was the third argument of the day at the unusually late hour of 1:00 (the Court’s usual schedule in recent years calls for two (sometimes only one) arguments in the morning that finish before lunch), the Court was less active than usual in its questioning.  Indeed, the government’s counsel began to sit down after using only five of his allotted 30 minutes for his opening argument (though he was then persuaded … Read More

Ninth Circuit Consideration of Bergmann Is Back On

A court can lead the parties to mediation, but can’t make them drink.  We reported last month that, after oral argument, the Ninth Circuit had suspended its consideration of the Bergmann case so that the parties could pursue court-sponsored mediation.  Apparently, that effort never got off the ground.  Yesterday, the Ninth Circuit entered a new order:  “We previously withdrew submission pending an opportunity for mediation.  Because mediation has not resolved this appeal, the case is ordered resubmitted as of the date of this order.”  The Court will now proceed to write an opinion and issue its decision in due course.  … Read More

Briefing Complete in Quality Stores

The government’s reply brief has now been filed in Quality Stores, completing the briefing.  The Court will hear oral argument on January 14.

Also linked below are three amicus briefs that have been filed in support of the taxpayer.  The brief filed by the ERISA Industry Committee comprehensively addresses the question presented, examining the relevant statutes, legislative history, administrative pronouncements, and judicial precedents.  The brief filed by the American Payroll Association engages in a statutory analysis and examines the administrative pronouncements, concluding that the government’s position “would replace the straightforward definition provided by Congress with a cumbersome and essentially … Read More

Taxpayer Brief Filed in Quality Stores

The taxpayer has filed its responsive brief in Quality Stores, setting forth both its basic position that SUB payments are not FICA “wages” and responding in detail to the government’s contrary arguments.  The taxpayer’s affirmative case begins with the income tax withholding provisions that the government has argued are irrelevant.  The taxpayer argues that the payments are not “remuneration . . . for services” within the meaning of Code section 3401(a) and, in particular, cannot be “wages” because they fall within the category of payments that section 3402(o) describes in its title as “certain payments other than wages” and … Read More

Ninth Circuit Refers Bergmann Case to Mediation After Oral Argument

In a somewhat unusual move, the Ninth Circuit issued an order last week suggesting that the parties pursue mediation in the Bergmann case.  The order came two days after the court heard oral argument.  The order states that “the court believes this case may be appropriate for mediation” and therefore it is being referred to the Ninth Circuit’s Mediation Office.  A mediator will then contact the parties to determine their interest, but the parties are not required to elect mediation.  The Circuit Mediator is directed to report back to the panel by January 4.  In the meantime, the court will … Read More

Supreme Court Rules for Government on Both Issues in Woods

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

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