part34-1
- 34.1.1.1
General Jurisdiction to Issue Judgments and Writs to Enforce Internal
Revenue Laws - 34.1.1.2
Suits Challenging the Validity of Tax Determinations/Counterclaims
- 34.1.1.3
Enforcement of Summonses and Challenges to Summonses - 34.1.1.4
Suits Related To Wrongful Levy, Surplus Proceeds, Substituted Sales
Proceeds, and Substitution of Value, Generally Brought by Persons Other Than
Taxpayers - 34.1.1.5
Suits by Taxpayer Alleging Improper Acts by the IRS - 34.1.1.6
Review of IRS Due Process Hearings - 34.1.1.7
Review of IRS Collection Actions before Levy on Principal Residence
- 34.1.1.8
Interpleader/Quiet Title/Foreclosure or Other Actions Involving
Property in Which IRS may Claim an Interest - 34.1.1.9
Injunctive Relief Sought by Taxpayer or Third Party - 34.1.1.10
Injunctive Relief Sought by United States - 34.1.1.11
Declaratory Judgments Relating to Status and Classification of Organizations
under Section 501(c)(3)
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The United States District Courts have a broad grant of jurisdiction
to issue orders, judgments, and decrees necessary to enforce the internal
revenue laws. Typical enforcement actions that are commenced in the district
courts include:-
Reducing tax assessments against a taxpayer to judgment. Section 7402.
Commencing an action to reduce tax assessments to judgment effectively extends
the statute of limitation for collection. Section 6502. -
Obtaining judgments against third parties, including:
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Estate fiduciaries for liability arising under 37 U.S.C. § 3713(b),
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Transferees of property from insolvent estates to the extent that they
received property subject to federal tax liens, and -
Transferees of fraudulently conveyed property, who may be liable under
state law. Section 7402.
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Foreclosing tax liens by sale of property, either real estate or personal
property. Section 7403. As part of the foreclosure proceeding, the district
court may decree that the property was fraudulently conveyed by the taxpayer.
The court can also issue any order or writ incidental to the seizure and sale
of property. Sections 7402 & 7403. Orders relating to the seizure
and sale of property could include eviction, appointment of a receiver, sale
of property by the U.S. Marshal, and confirmation of sale. -
Recovery of erroneous refund by judgment against either the taxpayer or
a third party. Section 7405. -
Collecting Estate Tax from Property of Decedent. Section 7404.
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Taxpayers may challenge the validity of the Service’s tax determination
by paying the disputed tax and commencing a suit for a refund. Section 7422;
28 U.S.C. § 1346. In order to invoke the court’s jurisdiction,
a taxpayer must first have filed an administrative claim for refund or credit
which was denied or deemed denied under applicable regulations. Section 7422(a).
In certain instances, it may be necessary for the Service to assert a counterclaim
against the taxpayer for any unpaid tax liability that should be made part
of the lawsuit (e.g., a Trust Fund Recovery Penalty is considered a divisible
tax, and the taxpayer need pay only a portion of the total assessment before
filing a refund claim). -
Under the Tax Equity and Fiscal Responsibility Act (TEFRA), a tax matters
partner, or, if the tax matters partner fails to do so, certain other partners,
may file a petition for readjustment of the partnership item. Section 6226.
A tax matters partner or another partner may also petition the court if the
Service denies any part of an administrative adjustment request. Section 6228.
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The statutory authority for issuing a summons is contained in section 7604.
Prior court approval is required before service of a summons which does not
identify the person with respect to whose liability the summons is to be issued
(a “John Doe”
summons). Section 7609(f). If the taxpayer
or other summoned party fails to comply with the summons, the Service, by
referral to the Tax Division or U.S. Attorney, must obtain an order enforcing
the summons from the district court. Section 7602. -
Taxpayers may commence proceedings to challenge or quash summonses served
upon third parties. In these proceedings, the Service may seek an order compelling
compliance with the summons. Section 7609(b)(2). In an enforcement proceeding
commenced by the government against a summoned party, taxpayers may also intervene
for the purpose of challenging a summons. Section 7609(b)(1).
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The district courts have jurisdiction over wrongful levy actions under
section 7426(a)(1). “Wrongful”
as used in this section
refers to a proceeding against property that is not the taxpayer’s.
In general, if a levy has been made on property, or property has been sold
pursuant to a levy, any person other than the taxpayer who claims an interest
in or lien on such property, and that such property was wrongfully levied
upon, may bring a civil action against the United States. The district courts
have jurisdiction over actions related to surplus proceeds, section 7426(a)(2),
and substitution of value. Section 7426(a)(4). Like wrongful levy actions,
these actions can only be brought by persons other than the taxpayer. -
The district courts also have jurisdiction over actions related to substituted
sales proceeds. Section 7426(b)(3). These actions can be brought by both
taxpayers and persons other than taxpayers. -
Pursuant to 28 U.S.C. § 1402, venue for these actions lies
only in the judicial district where the property levied on is situated at
the time of levy. Where the action does not arise out of a wrongful levy,
proper venue for the action is where the event giving rise to the lawsuit
occurred.
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Review of Termination of Taxable Period, Jeopardy Assessment and Jeopardy
Levy Procedures. The district courts have jurisdiction under section 7429(b)
to review a taxpayer’s challenge to any jeopardy assessment, jeopardy
levy, or termination assessment undertaken by the Service. -
Unauthorized Collection Actions. Taxpayers may bring suit for damages
if an officer or employee of the Service recklessly or intentionally, or by
reason of negligence, disregards any provision of the Code or any regulation
thereunder in connection with any collection of tax. Section 7433. -
Failure to Release Lien. Taxpayers may bring suit for damages if an
officer or employee of the IRS knowingly, or by reason of negligence, fails
to release a lien under section 6325. See section 7432. -
Unauthorized Enticement of Information Disclosure. Taxpayers may bring
suit for damages if any officer or employee of the Service intentionally compromises
the determination or collection of any tax due from an attorney, certified
public accountant, or enrolled agent representing the taxpayer in exchange
for information concerning the taxpayer’s tax liability. Section 7435. -
Unauthorized Inspection or Disclosure of Returns and Return Information.
Taxpayers may bring suit for damages if any officer or employee of the United
States knowingly, or by reason of negligence, inspects or discloses any return
or return information with respect to a taxpayer in violation of any provision
of section 6103. See Section 7431. -
Failure to Disclose — Freedom of Information Act and Privacy Act
Litigation. The district courts have jurisdiction for actions under the Freedom
of Information Act, 5 U.S.C. § 552, and any actions in the nature
of injunctions under the Privacy Act of 1974, 5 U.S.C. § 552a.
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For taxes that do not fall under the jurisdiction of the Tax Court,
the district courts have jurisdiction to review the Service’s determination
reached in due process hearings conducted under sections 6320 and 6330. See sections 6330(d) & 6320(c) (incorporating
section 6330(d)).
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Section 6334(e)(1) requires a district court order prior to administrative
seizure of certain principal residences. These include the principal residence
of the taxpayer, the taxpayer’s spouse, the taxpayer’s former
spouse, and the taxpayer’s minor child.
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Under 28 U.S.C. § 2410, Congress has consented to the joinder
of the United States, under prescribed conditions, in a civil action in any
Federal or state court having jurisdiction of the following suits with respect
to any real or personal property on which the United States has a mortgage
or other lien:-
Suits to quiet title to property
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Suits to foreclose a mortgage or other lien upon property
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Suits to partition property
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Condemnation suits
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Interpleader suits or suits in the nature of interpleader
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Section 2410 of Title 28 is a consent statute only; it does not
confer authority upon any court to foreclose a lien, quiet title to property,
partition or condemn property, or to entertain an interpleader suit. There
must be a basis for jurisdiction independent of section 2410. Generally these
actions apply to cases where the claim of the United States is based upon
a lien and not one of title.
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Actions to Quiet Title. An “action to quiet title”
is
a proceeding instituted by persons claiming some interest or title in the
property and seeking to remove a cloud from their title. -
Foreclosure Actions. Section 2410(a)(2) permits the Government to be
brought into a judicial proceeding as a party to foreclose a mortgage or other
lien upon property. An action to foreclose a mortgage or other lien, where
the United States is named a party under section 2410, must seek a judicial
sale. -
Partition Suits. A partition is a division between two or more persons
of real or personal property which they own as coparceners (joint heirs),
joint tenants, or tenants in common.-
As a general rule, a partition purchaser takes subject to liens and outstanding
interests unless the decree of court provides for the sale free and clear
of such encumbrances. The question whether the interests of third parties,
including the United States, may be satisfied out of the property partitioned,
or must be satisfied from the proceeds of sale of the property, are governed
by state law.
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Condemnation Suits. Eminent domain is, broadly, the right or power to
take private property for public use. A condemnation proceeding is one to
set apart or expropriate land for public use in the exercise of the power
of eminent domain.-
Being a proceeding in rem, a condemnation action is not a taking of rights
in the ordinary sense but an appropriation of the land or property itself.
All existing estates or interest in the land are appropriated. As a consequence,
the condemnation award stands in the place of the land, and federal tax liens
attaching to the land are transferred to the award.
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Interpleader Suits. An interpleader suit is devised for the purpose
of enabling a person, of whom the same debt, duty, or thing is claimed adversely
by two or more parties, to compel the claimants to litigate the right or title
between themselves and thereby be relieved from the suits which might otherwise
be instituted.
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A taxpayer or a third party is generally prohibited from seeking an
injunction against the enforcement of the internal revenue laws. This prohibition
is contained in section 7421, the Anti-Injunction Act. This act codifies
the general rule of equity that where a person has an adequate remedy at law,
by way of suit for refund or appeal to the Tax Court, equitable relief by
way of injunction against the assessment or collection of taxes may not be
sought. -
The prohibition against declaratory judgments with respect to tax matters,
provided by 28 U.S.C. § 2201, can often be utilized to prohibit
injunctive relief.
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Action to Enjoin Income Tax Return Preparer. The district court for
the district in which an income tax preparer resides, or has his principal
place of business, or in which the taxpayer with respect to whose return the
action is brought resides, has jurisdiction over any action commenced by the
United States to enjoin the tax preparer. Section 7407. -
Action to Enjoin Promoters Of Abusive Tax Shelters. The district court
for the district in which a promoter resides, has his principal place of business,
or has engaged in conduct subject to penalty under section 6700 or 6701 has
jurisdiction over any action commenced by the United States to enjoin the
promoter. Section 7408. -
Action to Enjoin Political Expenditures by Section 501(c)(3) Organizations.
The district court for the district in which the section 501(c)(3) organization
has its principal place of business, or any district in which the organization
has made political expenditures, has jurisdiction over any action commenced
by the United States to enjoin the organization. Section 7409.
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The United States District Court for the District of Columbia (in addition
to the Tax Court and Claims Court), has jurisdiction to make a declaration
with respect to the Service’s determination, or failure to make a timely
determination, of an organization’s initial qualification or continuing
qualification under section 501(c)(3) or with respect to its classification
as a private foundation. Section 7428.
