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Tenth Circuit Court of Appeals Rejects Tax Protest

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By Tanya Roth, Esq. on June 23, 2011 4:06 PM

Here’s a long running tax case that has seen its way through the Tax Court, the Federal District Court and the Tenth Circuit Court of Appeals. The case has a bit of everything for the tax practitioner: tax liens,a notice of deficiency, a foreclosure and a tax protest. For all you non-tax lawyers, let’s try to put this in plain English.

From 1990 to 1995, a taxpayer failed to pay his taxes. As a consequence, he received two notices of deficiency from the Internal Revenue Service.

A quick sidebar: A notice of deficiency is known by tax practitioners as the “ticket to Tax Court.”

So, the taxpayer at issue took his case to Tax Court and fought. And lost. The Tax Court also sanctioned him for filing a frivolous petition intended to delay the collection of his outstanding liabilities.

The IRS then issued a notice of intent to levy (a.k.a. the IRS's "ticket to collections").

Things became somewhat more complicated when, due to a glitch in the IRS system, duplicate liens were filed and in issuing a notice of revocation of one lien, the recorded tax lien on the property was removed. It was eventually put back in place and the foreclosure action continued, but the taxpayer, nonetheless, filed a motion to dismiss the amended complaint, challenging the validity of the liens and the foreclosure action.

The IRS moved for summary judgment in district court on the grounds of res judicata on the underlying tax assessment. The IRS also sought determination that the foreclosure was not barred by the statute of limitations.

The summary judgment was granted by the district court. The taxpayer took the district court opinion to the Tenth Circuit Court of Appeals.

In an opinion by Judge Timothy M. Tymkovich, the Tenth Circuit Court of Appeals called the taxpayer's arguments "meritless," as the taxpayer fails to mention that while the liens were released, they were also subsequently refiled.

Perhaps the most meritless part of his appeal were the tax protester arguments made by the taxpayer, asserting that the "IRS has no authority to collect taxes outside of Washington D.C."

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