Tax Procedure: Don’t Expect Perfection

Diebold, taxOn November 15th, the Second Circuit affirmed a $33 million judgment assessing a foundation with transferee liability for another corporation’s taxes; instead of addressing the merits, the court’s opinion was focused on a date contained in the notice of transferee liability that the IRS sent to the foundation. That was because the taxpayer, Diebold Foundation, Inc. (“Diebold”), moved to dismiss its Tax Court petition for lack of jurisdiction after seven years of litigation. Diebold Found., Inc. v. Comm’r, No. 17-3622-cv, 2018 U.S. App. LEXIS 32309, *3-*4 (2d Cir. Nov. 15, 2018).

While Diebold’s decision to move for the dismissal of its case sounds a little strange, it is a legitimate strategy: If the statutory notice issued to the taxpayer is defective or it is not mailed, the Tax Court may lack jurisdiction, and if the action is dismissed, the IRS may be barred from correcting the notice if the statute of limitations has expired.… Read More

Refund Litigation: Think Before You Sue…Your Choice of Forum Matters

Pfizer, Inc. v. United States Choice of venue mattersDistrict courts and the Court of Federal Claims have concurrent jurisdiction over tax refund actions. Specifically, their jurisdiction reaches the following types of claims:

  • A civil action to recover “any internal-revenue tax alleged to have been erroneously or illegally assessed or collected”;
  • A civil action to recover “any penalty claimed to have been collected without authority”; or
  • A civil action to recover “any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws.”

28 U.S.C. § 1346(a)(1). Section 1346(a)(1) also serves as a waiver of sovereign immunity by the United States.… Read More