Court Procedure Matters Archives - Page 9 of 34

Court Procedure Matters

Reasonable Cause for E-Filing Errors?

by McDermott Will & Emery | Mar 7, 2019 | Court Procedure Matters, IRS Guidance, Tax Reform, Uncategorized

Tax return filing season is fast approaching, and taxpayers big and small are preparing to file their returns. A recent US Court of Appeals for the Fifth Circuit decision, Haynes v. United States, No. 17-50816 (5th Cir. Jan. 29, 2019), indicates that many of those taxpayers will face uncertainty if their returns are late due to preparer errors or technological issues when electronically filed (e-filed).

The court in Haynes declined to rule on whether the Supreme Court decision in United States v. Boyle, 469 US 241 (1985), applied to e-filing a tax return. The court instead remanded the case to resolve factual issues. In declining to examine the application of Boyle, the decision leaves in place uncertainty for many taxpayers who e-file their returns.

Internal Revenue Code Section 6651(a)(1) excuses a taxpayer from penalties for failure to file a return on time if they show the failure was “due to reasonable cause and not due to willful neglect.” In Boyle, an estate executor hired an experienced lawyer to prepare estate tax returns, but the lawyer failed to put the filing date on the calendar. Nevertheless, the court held that determining a deadline and meeting it did not require any special skills, and therefore relying on an agent was unreasonable. Accordingly, the Court in Boyle did not excuse late filing, and the taxpayer was subject to penalty. (more…)

Government Files Its Brief in Auer Deference Case

by Timothy S. Shuman and McDermott Will & Emery | Feb 27, 2019 | Court Procedure Matters, Tax Reform, Uncategorized

As we discussed in a prior post and in our article for Law360, the Supreme Court is poised to decide in Kisor v. Wilkie whether to overrule the Auer deference doctrine. This doctrine, which originated in the 1945 Seminole Rock case, generally affords controlling deference to an agency’s interpretation of its own ambiguous regulations. To date, the petitioner has filed its brief, several amici have filed briefs and the government has filed its brief (links to these documents can be found here). Argument is currently scheduled for March 27, 2019, and an opinion is anticipated by the end of June 2019.

The government’s brief, filed on February 25, 2019, acknowledges that Auer deference raises serious concerns. Specifically, the government states that the basis for the doctrine is unclear, the doctrine is in tension with the Administrative Procedures Act (APA) and overly broad deference to agency interpretations can have harmful practical consequences. However, relying on principles of stare decisis, the government advocates for maintaining Auer deference subject to certain prerequisites that would limit the doctrine. These prerequisites include applying deference only after all traditional tools of construction have been exhausted and only if the agency’s interpretation has reasonably interpreted any ambiguity. In deciding whether to defer to the agency’s interpretation, a reviewing court should look at whether the interpretation: (1) was issued with fair notice to regulated parties, (2) is not inconsistent with the agency’s prior views, (3) rests on the agency’s expertise and (4) represents the agency’s considered view (i.e., not merely the views of “mere field officials or other low-level employees”). Presumably these limits would curtail the application of Auer deference in circumstances where the agency’s interpretation is first widely known only because of a litigating position.

Practice Point: The Supreme Court’s decision in Kisor v. Wilkie will be important for taxpayers and their representatives in light of the substantial regulatory guidance issued in the wake of tax reform. We will continue to follow this case and provide updates after argument is held and the case is decided.

Big Change for Witness Privilege in House Investigations

by Llewelyn Engel and McDermott Will & Emery | Feb 15, 2019 | Court Procedure Matters, Privilege and Non-Disclosure, Uncategorized

On Jan. 25, 2019, U.S. House of Representatives Rules Committee Chairman James P. McGovern, D-Mass., issued regulations governing staff deposition authority in the 116th Congress, pursuant to his authority under H. Res. 6. In passing H. Res. 6, the newly empowered House Democratic majority drastically increased House committees’ investigative power by allowing committee staff to conduct depositions without members present — a stark departure from precedent. This change was a dramatic first step in the House Democratic majority’s efforts to ramp up oversight of both the executive branch and the private sector.

Access the full article.

Congress Allows Transfer of Improperly Filed Cases to Tax Court

by McDermott Will & Emery | Dec 21, 2018 | Appellate Courts, Court Procedure Matters, Tax Reform, Trial Courts, Uncategorized

Taxes and tax litigation can be complex and confusing. Taxpayers have the option of filing a petition in the United States Tax Court (Tax Court) prior to payment of any asserted deficiency. Alternatively, taxpayers can pay the deficiency, file a claim for refund with the Internal Revenue Service and, if that claim is denied or more than six months have elapsed, file a complaint in local District Court or the Court of Federal Claims requesting a refund. These forum rules sometimes trip up taxpayers and can lead to the filing of a suit in the wrong court.

In the Protecting Access to the Courts for Taxpayers Act (H.R. 3996), Congress has provided relief for taxpayers in this type of situation through an amendment to 28 USC section 1631:

Whenever a civil action is filed in a court as defined in section 610 of this title or an appeal, including a petition for review of administrative action, is noticed for or filed with such a court and that court finds that there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action or appeal to any other such court (or, for cases within the jurisdiction of the United States Tax Court) in which the action or appeal could have been brought at the time it was filed or noticed, and the action or appeal shall proceed as if it had been filed in or noticed for the court to which it is transferred on the date upon which it was actually filed in or noticed for the court from which it is transferred.

Practice Point: Allowing improperly filed cases to be transferred to the Tax Court is a welcome development for taxpayers. The amendment to 28 USC section 1631 protects taxpayers in situations where a complaint is filed within 90 days of receipt of a Notice of Deficiency in a refund jurisdiction when it should have been filed in the Tax Court.

The (Potential) Demise of Auer Deference?

by Editorial Team | Dec 12, 2018 | Appellate Courts, Court Procedure Matters, Uncategorized

On December 10, 2018, the Supreme Court granted certiorari in the case of James L. Kisor v. Peter O’Rourke, Acting Secretary of Veteran Affairs, S.Ct. Dkt. No. 18-15. Although this is not a tax case, it has significant implications for taxpayers and tax practitioners. The reason: the Court will finally squarely address the issue of whether it should overrule its controversial opinions in Auer v. Robbins, 519 US 452 (1997) and Bowles v. Seminole Rock & Sand Co., 325 US 410 (1945). Those opinions held that an agency is uniquely positioned to interpret any ambiguity in its own regulations and, therefore, such interpretations should be afforded controlling deference so long as reasonable. The Court’s decision to grant certiorari in Kisor is significant because the sole question to be considered is “[w]hether the Court should overrule Auer and Seminole Rock” and not how to apply that doctrine.

In the tax context, the Internal Revenue Service (IRS) and the Department of Justice (DOJ) Tax Division have both argued that interpretations taken in unpublished guidance are eligible for Auer deference, even if such positions are articulated for the first time on brief in a pending case in which the agency is a party. Courts have not been uniform in their application of Auer. For example, the Tax Court has indicated that to receive deference the IRS’s position should be in published guidance while some courts have given deference to statements made on brief.

The death of Justice Scalia, who ironically wrote Auer but later advocated for its demise, seemed to strike a blow to those seeking to overrule it. However, with the recent additions of Justices Gorsuch and Kavanaugh, it appears that the Supreme Court many now have a majority of Justices in the anti-Auer camp given that Chief Justice Roberts and Justices Thomas and Alito have all expressed doubts about the doctrine in the past. Additionally, the continuing role of Chevron deference has been questioned and, if Auer is overruled, Chevron could be the next deference battleground.

We will continue to follow this case closely and provide updates in the future. In the meantime, the links below contain prior discussions on Auer and other forms of deference in the tax context.

Tax Court Announces Adoption of Amendments to Rules of Practice and Procedure

by Kevin Spencer and McDermott Will & Emery | Dec 4, 2018 | Court Procedure Matters, Trial Courts, Uncategorized

Back in April, we discussed possible changes to the Tax Court Rules of Practice and Procedure based on comments made at the Tax Court Judicial Conference in Chicago. On November 30, 2018, the Tax Court announced the adoption of amendments to its Rules in several areas. Certain amendments are discussed below.

Payments to the Tax Court

Payments to court, which previously were required to be made by cash, check or money order, may now be made electronically through Pay.gov.

Filing

A paper may be filed electronically either during or outside of business hours, unless the paper relates to an ongoing trial session, in which case it generally must be filed at the session. A document electronically filed is considered timely if filed at or before 11:59 pm, Eastern Time, on the last day of the applicable period for filing. This amendment comports with the practice in other federal courts, e.g., US District Courts.

Signature

A signature on an electronic filing does not have to be handwritten if the filing meets the standards required by the court. An email address must be provided immediately beneath the signature.

Electronic Filing of Petitions

The court is in the process of implementing procedures to allow the electronic filing of a petition to commence a case. Additional information will be furnished to taxpayers on the Tax Court’s website in its electronic filings guidelines.

Evidence

In accordance with recent legislation, the Rules were updated to require that the court to follow the Federal Rules of Evidence instead of the rules of evidence applicable in trials without a jury in the United States District Court for the District of Columbia.

Passport Actions

In accordance with recent legislation, new Rules are provided regarding the court’s jurisdiction and review of determinations to certain passport revocation actions.

Interest Abatement

Certain changes were made to the interest abatement rules and a corresponding change was made to the sample form of petition contained on the Tax Court’s website.

Kovel Protections Upheld | Government Loses Aggressive Arguments for Waiver of Privilege for Controversy Advice

by McDermott Will & Emery | Nov 12, 2018 | Court Procedure Matters, IRS Guidance, Privilege and Non-Disclosure, Trial Courts, Uncategorized

On October 27, the US District Court for the District of Minnesota issued an opinion in United States v. Adams, No. 0:17-cr-00064-DWF-KMM (D. Minn. Oct. 27, 2018), addressing attorney-client privilege issues relevant to accountants working alongside tax attorneys. The court adopted a narrow, nuanced view of the waiver that applies when the taxpayer discloses an accountant’s work to the Internal Revenue Service (IRS) by filing an amended return.

In Adams, the taxpayer is facing a 17 count superseding indictment in which the government alleges he spearheaded a scheme to defraud investors in two companies and to embezzle corporate funds for his personal benefit. In late 2017, the government added three counts of tax evasion to the indictment, alleging that amended returns the taxpayer filed in late 2011 for the 2008, 2009 and 2010 tax years were willfully false under IRC § 7206(1).

The addition of the tax evasion charges is significant for the government’s arguments for waiver of privilege and work-product protection. It appears that the taxpayer filed the amended returns at issue in late 2011 under advice of counsel, working with the taxpayer’s accountant under a Kovel arrangement. (We have previously discussed the scope of Kovel protections here.) In our experience, filing of amended returns in advance of a criminal investigation or trial is one potential strategy to demonstrate good faith and lack of criminal intent and, if combined with payment, amended returns may have the added benefit of reducing the tax loss at issue in a criminal case. Of course, every case is different, but it appears this may have been the strategy at work in Adams. (more…)

Law360: A Look At Tax Code Section 199’s Last Stand

by Kevin Spencer and McDermott Will & Emery | Nov 7, 2018 | Alternative Dispute Resolution, Court Procedure Matters, IRS Guidance, Settlements, Tax Reform, Trial Courts, Uncategorized

Andy Roberson, Kevin Spencer and Emily Mussio recently authored an article for Law360 entitled, “A Look At Tax Code Section 199’s Last Stand.” The article discusses the IRS’s contentious history in handling Code Section 199 and the taxpayers’ continued battle to claim the benefit – even after its recent repeal.

Access the full article.

Originally published in Law360, November 2018.

ABA Recommends Allowing Limited Representation Before the Tax Court

by McDermott Will & Emery | Oct 4, 2018 | Court Procedure Matters, Trial Courts, Uncategorized

Last May, the US Tax Court (Tax Court) announced that approximately 70 percent of all taxpayers in Tax Court cases and approximately 90 percent of taxpayers in small tax cases are self-represented. The Tax Court encourages assistance by pro bono attorneys at its calendar calls, and strives to provide information to taxpayers about how they may be able to connect with those attorneys (more background on the Tax Court’s efforts can be found here). Although pro bono attorneys appear at Tax Court calendar calls to assist self-represented taxpayers, ethical rules may limit the ability of these attorneys to provide certain kinds of legal assistance. For example, once an attorney makes an appearance in a court case, typically the attorney cannot simply withdraw and stop representing the client. The attorney may have to get both the client’s and court’s consent to withdraw from the representation. The inability to provide legal advice for one or more occasions without potentially being stuck on a case is perceived to dissuade many practitioners from providing pro bono service.

In response to these concerns, the American Bar Association (ABA) Section of Taxation recently provided comments to the Tax Court regarding potential amendments to its rules relating to appearance and representation before the Tax Court. The ABA comments encourage the Tax Court to consider a limited appearance rule for pro bono attorneys appearing at the calendar call. This one-time appearance representation may encourage more attorneys to get involved in providing pro bono legal assistance to taxpayers. We will provide an update on any future action that the Tax Court may take in this regard.

Links to McDermott posts and articles about tax pro bono efforts by volunteer attorneys are listed below:

A Lot Is Going on at the Tax Court

by Kevin Spencer and McDermott Will & Emery | Sep 25, 2018 | Court Procedure Matters, Trial Courts, Uncategorized

The US Tax Court is alive with action these days. First, two new judges will start soon after they are sworn in. Ms. Elizabeth Copeland and Mr. Patrick Urda were nominated on August 2017 for 15-year terms to fill openings created by retiring tax court judges. They were confirmed on August 28, 2018. Ms. Copeland will replace Judge James S. Halpern, who retired from the court on August 28, 2018, but continues to perform judicial duties as a Senior Judge on recall. Mr. Urda will replace Judge Diana L. Kroupa, who retired from the court in June 2014.

Second, the Tax Court announced that Senior Judge Carolyn P. Chiechi will retire, effective October 19, 2018. Judge Chiechi was appointed by President George H.W. Bush October 1, 1992, and took senior status in 2007. Any cases submitted or assigned to Judge Chiechi will be reassigned.

Finally, Senior Judge David Laro passed away on September 21, 2018. More information about Judge Laro can be found on the TaxProf Blog. Judge Laro started at the Tax Court in 1992 and was involved in several important cases. In addition, he is well known among practitioners for his use of concurrent expert testimony (also referred to as “hot tubbing”). We have previously written about Judge Laro’s use of hot tubbing here.

Prior coverage of Tax Court nominations can be found in our previously shared articles.