If the IRS fails to mail or mails a required collection notice to a taxpayer using the wrong address, should the taxpayer be able to get a court ruling invalidating the IRS’s subsequent collection efforts? The court addresses this in Adolphson v. Commissioner, No. 15-2242 (7th Cir. 2016).
Facts & Procedural History
The IRS “issued” a Notice of Intent to Levy to the taxpayer, but it could not prove that it mailed the notice. The IRS eventually conceded that the notice was sent to the wrong address.
Given that he did not receive the notice, the taxpayer missed the 30 day period to respond to the IRS notice by requesting a CDP hearing.
The IRS then levied on the taxpayer’s assets.
The taxpayer filed suit in U.S. Tax Court, asking the court to invalidate the IRS levy because the taxpayer was prevented from requesting a CDP hearing due to the IRS’s failure to mail a Final Notice of Intent to Levy to the proper address.
The IRS moved to dismiss the tax court petition–arguing that the U.S. Tax Court lacked jurisdiction over the matter because the taxpayer did not request a CDP hearing timely.
The tax court granted the IRS’s motion to dismiss, reasoning that it lacked the authority to grant relief without a notice of determination.
Contesting a Levy by Challenging Jurisdiction
The U.S. Tax Court is a court of limited jurisdiction. This means that it can only hear specific types of matters.
With collection matters, this is pretty much limited to cases where the taxpayer filed a collection due process hearing request and disagreed with the IRS Appeals Office determination in the hearing.
But in the Adolphson case, the taxpayer missed the deadline for filing a collection due process hearing request. Instead, he filed a petition with the U.S. Tax Court and then asked the court to dismiss his own petition.
The Seventh Circuit’s Ruling
This is not a new technique for challenging IRS collection actions. As noted by the Seventh Circuit’s court opinion, there are quite a we court cases where the U.S. Tax Court invalidated IRS’s levies after the taxpayer filed his petition and the court dismissed it.
In reviewing the prior cases, the Seventh Circuit noted that whether the IRS complied with its notice requirements is not a jurisdictional issue:
A decision invalidating administrative action for not following statutory procedures is a quintessential merits analysis, not a jurisdictional ruling. The Buffano line of cases therefore represents an improper extension of the tax court’s statutorily defined jurisdiction.”
Because it is a challenge on the merits, not a jurisdictional challenge, the Tax Anti-Injunction Act bars the taxpayer from bringing suit before first paying the tax and suing for a refund. So the Seventh Circuit concluded that the levy must stand. This effectively puts an end to this process for challenging IRS collection actions for taxpayers in the Seventh Circuit.