Fifth Circuit Finds Taxpayer Failed to Pay the Deficiency Before Filing a Suit for Refund, Thus Requiring that the Suit for Refund Be Dismissed

The Fifth Circuit’s recent decision in Balentine v. United States serves as a critical reminder of the "pay first, litigate later" principle that has long governed federal tax refund litigation. This article will delve into the details of the Balentine case, its reliance on the landmark Supreme Court decision Flora v. United States, 362 U.S. 145 (1960), and provide a comprehensive analysis of the issues involved for the benefit of tax professionals.

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Discussion Draft of Proposed Taxpayer Assistance and Service Act Jointly Released by Ranking Members of Senate Finance Committee for Comment

In January 2025, Senators Crapo (Republican Chair of the Senate Finance Committee)  and Wyden (Ranking Democrat on the Senate Finance Committee and immediately previous Chair) released a discussion draft of bipartisan legislation (tentatively with a name of the Taxpayer Assistance and Service Act (TAS)) aimed at improving IRS procedures and administration. The proposed legislation is intended to enhance the taxpayer experience by facilitating better communication between the IRS and taxpayers, streamlining tax compliance and dispute processes, and ensuring access to timely expert assistance.

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Taxpayer Denied Innocent Spouse Relief in Tax Court Bench Opinion

In the case of Carol D. Gomez v. Commissioner, Docket No. 3339-24S, the Tax Court addressed a taxpayer’s request for relief from joint and several liability for a tax deficiency arising from a joint return. The Court’s decision, rendered orally by Special Trial Judge Diana L. Leyden on December 11, 2024, provides a detailed analysis of the facts, the taxpayer’s arguments, and the relevant legal authorities. The Court ultimately concluded that Ms. Gomez was not entitled to relief under any of the provisions of I.R.C. § 6015.

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Tax Court Finds Property Donated to Charity Had a Value Less than One-Third of What Taxpayers Claimed on Return

This case, Leo v. Commissioner, T.C. Memo. 2025-9, involves a dispute over the valuation of a property donated to charity and the resulting tax implications for the petitioners, Karl W. and Fay L. Leo. The central issue is the fair market value of the Bankhead Property, consisting of buildings and 136.4 acres of land in Union County, Mississippi, as of December 31, 2013. The Leos claimed a charitable contribution deduction based on a valuation of $15,800,000, while the Commissioner of Internal Revenue asserted a value of $4,050,000. The Tax Court sided with the Commissioner, finding the value to be $4,050,000 and upheld the deficiencies and penalties assessed against the Leos.

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Tax Court Finds No Issue With the Appeals Office Structure and Staffing

In Tooke v. Commissioner, 164 T.C. No. 2 (2025), the Tax Court adjudicated a case concerning a taxpayer’s challenge to the IRS Independent Office of Appeals’ structure and staffing. The petitioner, Charlton C. Tooke III, sought review of a Notice of Determination that sustained a federal tax lien and proposed levy action, which stemmed from his unpaid federal income tax liabilities for the years 2012 through 2017. The case is notable for its examination of the Appointments Clause, the separation of powers doctrine, and the specific roles within the IRS Independent Office of Appeals.

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Payment Made by Uber to Google to Settle a Case Against a Former Employee of Google Hired by Uber Found to Represent Taxable Income to the Former Employee

The case In re: Anthony Scott Levandowski, Case No. 20-30242 HLB, in the United States Bankruptcy Court for the Northern District of California, concerns a dispute over the taxability of a payment made by Uber to Google as part of a settlement involving Anthony Scott Levandowski. The court’s memorandum opinion and order, issued on January 24, 2025, addresses the tax implications of this payment, known as the "Uber Main Payment". The court ultimately concluded that the Uber Main Payment constituted taxable gross income to Mr. Levandowski.

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Failure to Provide Proof of Filing of Returns Fatal to Taxpayer’s Attempt at Obtaining Relief in CDP Hearing Despite IRS Procedural Errors

A taxpayer’s failure to provide additional requested financial information and proof of compliance with other tax-filing obligations was found to justify the IRS’s denial of relief in a collection due process hearing, despite significant IRS procedural errors in an order issued in the case of Nelson v. Commissioner.

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Despite Supreme Court’s Action on Texas Top Cop Shop, Inc. Ban on Enforcement of BOI Reporting, FinCEN Notes Ban on Enforcement Under the Smith Case is Still in Effect

FinCEN has updated the report on its website detailing the impact of ongoing litigation on covered entities' obligations to file BOI reports under the Corporate Transparency Act.

Despite the Supreme Court’s action on January 23, 2025 in Texas Top Cop Shop, Inc. v. McHenry, reporting companies are not currently required to file beneficial ownership information with FinCEN. Additionally, these companies are not subject to liability if they fail to file this information.

This is because of a separate nationwide order issued on January 7, 2025 by a different federal judge, also from the Eastern District of Texas, in Smith v. U.S. Department of the Treasury remains in place. (See Third US District Court Grants an Injunction Against Enforcement of the BOI Reporting Requirements With Effective Date Portion of the Injunction Applicable to All Taxpayers )

FinCEN notes that despite the current lack of a requirement to file, reporting companies may still voluntarily submit beneficial ownership information reports.

You can read the alert at https://www.fincen.gov/boi

Prepared with the assistance of NotebookLM

Supreme Court Reverses Fifth Circuit Merits Panel, Again Removes Emergency Injunction Against Enforcement of the CTA BOI Reports

The US Supreme Court has reversed the decision of the Fifth Circuit Court of Appeals Merits Panel and again removed the injunction issued by the US District Court for the Eastern District of Texas against enforcement of the beneficial ownership reports under the Corporate Transparency Act (McHenry v. Texas Top Cop Shop (originally Texas Top Cop Shop, Inc. v. Garland), Application for Stay, US Supreme Court, January 23, 2025). As of the time this is being written FinCEN has not yet posted information about the new due date for reports originally due while the enforcement was on hold.

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Tax Court Allows a Reduced Deduction for a Conservation Easement

This case, Seabrook Property, LLC v. Commissioner, involves a dispute over a noncash charitable contribution deduction claimed by Seabrook Property, LLC (Seabrook) for a conservation easement it granted on approximately 622 acres of land in Liberty County, Georgia. The Commissioner of Internal Revenue disallowed the deduction in full, also determining that Seabrook was subject to accuracy-related and reportable transaction penalties.

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Congressional Research Service Updates Its Report on the Expiring Provisions of the TCJA

The Tax Cuts and Jobs Act (TCJA) of 2017 included many provisions that are scheduled to expire, mostly at the end of 2025. The Congressional Research Service (CRS) report from January 17, 2025, details these expiring provisions and provides estimates of the revenue effects of extending them. According to the Joint Committee on Taxation (JCT), extending the expiring individual income tax provisions would reduce federal tax collections by $3.3 trillion over the 10-year budget window from FY2025-FY2034. Extending the higher estate tax exemptions would cost $167 billion, and extending the business provisions would cost $551 billion. Overall, the JCT forecasts that extending these provisions would cost $4 trillion. In most years, the revenue loss would be between 1.2% and 1.4% of gross domestic product (GDP)

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IRS Issues Updated Energy Efficient Home Improvement Credit and the Residential Clean Energy Property Credit Frequently Asked Questions

The Inflation Reduction Act of 2022 (IRA) contained significant changes to both the Energy Efficient Home Improvement Credit under Internal Revenue Code (IRC) Section 25C and the Residential Clean Energy Property Credit under IRC Section 25D. These updated FAQs provide details on the IRA’s changes to these credits, revised as of January 17, 2025.  One key update is the addition of information regarding the PIN reporting requirements for claiming these credits for assets placed in service on or after January 1, 2025.

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Tax Court Rejects Equitable Tolling in Untimely CDP Petition

In Debra Reed and Timothy Reed v. Commissioner of Internal Revenue, T.C. Memo. 2025-4, the Tax Court addressed whether it had the authority to review a petition filed outside the 30-day deadline for challenging a notice of determination in a collection due process (CDP) case. The court ultimately granted the Commissioner’s motion to dismiss, finding that the taxpayers had failed to demonstrate they were entitled to equitable tolling of the filing deadline. This case serves as an important reminder of the strict deadlines associated with Tax Court filings and the high bar for establishing equitable tolling.

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State Mandated Paid Family and Medical Leave Ruling Issued

The IRS recently issued Revenue Ruling 2025-4 to clarify the federal income and employment tax treatment of contributions and benefits paid under state-mandated Paid Family and Medical Leave (PFML) programs. This ruling addresses the tax implications for both employers and employees, especially in states like State X which is used as a model throughout the ruling. Let’s break down each aspect of this ruling in detail.

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