The recent Supreme Court decision in Commissioner of Internal Revenue v. Zuch, issued on June 12, 2025, significantly clarifies the jurisdictional limits of the United States Tax Court concerning appeals arising from Collection Due Process (CDP) hearings, particularly when the Internal Revenue Service (IRS) is no longer actively pursuing a levy. This ruling holds substantial implications for CPAs, EAs, and attorneys advising taxpayers navigating IRS collection actions.

Factual Background as Presented by the Supreme Court

The dispute originated in 2012 when Jennifer Zuch and her then-husband, Patrick Gennardo, each filed untimely federal tax returns for the 2010 tax year. Gennardo subsequently submitted an offer in compromise to resolve his outstanding tax liabilities, which involved $50,000 in estimated tax payments the couple had previously sent to the IRS. The IRS applied these payments to Gennardo’s account.

Several weeks later, Zuch amended her 2010 tax return, reporting additional income that resulted in an additional $28,000 in taxes due. However, Zuch maintained that the $50,000 in estimated tax payments should have been credited to her account, which would have entitled her to a $22,000 refund. The IRS disagreed with Zuch’s claim and proceeded to seek collection of her alleged unpaid taxes by proposing a levy on her property under 26 U.S.C. §6331(a).

In response, Zuch requested a CDP hearing to contest the proposed levy, specifically arguing that the $50,000 tax payment had been misapplied. The appeals officer, however, rejected Zuch’s argument regarding the misapplied payment and issued a Notice of Determination sustaining the levy action under §6330(c)(3). Zuch then appealed this determination to the Tax Court under §6330(d)(1).

During the multi-year proceedings that followed before both the agency and the Tax Court, Zuch continued to file annual tax returns showing overpayments. Each time, the IRS, instead of issuing refunds, applied these overpayments to her outstanding 2010 tax liability, eventually reducing her liability to zero. Once Zuch’s 2010 tax liability reached zero, the IRS moved to dismiss the Tax Court proceeding as moot, arguing that the Tax Court no longer had jurisdiction because the IRS no longer had a basis to levy on Zuch’s property. The Tax Court agreed with the IRS, concluding it lacked “freestanding jurisdiction to determine an overpayment or to order a refund or credit of tax paid in a section 6330 proceeding,” and dismissed the case.

Zuch appealed this dismissal to the Third Circuit, which vacated the Tax Court’s decision. The Third Circuit held that the IRS’s abandonment of the levy did not moot the Tax Court proceedings, reasoning that §6330(c)(2)(B) authorizes taxpayers to raise challenges to the “existence or amount of the underlying tax liability,” and Zuch still disputed the IRS’s allocation of the $50,000 payment. The Third Circuit acknowledged its divergence from the Fourth and D.C. Circuits on this issue. The Supreme Court granted certiorari to resolve this circuit split.

The Taxpayer’s Request for Relief

Jennifer Zuch sought to continue her appeal in the Tax Court even after the IRS abandoned the proposed levy. Her primary goal was to litigate the underlying dispute regarding the misapplication of the $50,000 estimated tax payment. Zuch contended that if the Tax Court ruled in her favor on this issue, it would effectively obligate the IRS to refund the overpayments it had withheld and applied to her (disputed) 2010 tax liability. She believed the Tax Court retained jurisdiction to review the appeals officer’s conclusion on the allocation of the $50,000 payment.

The Supreme Court’s Analysis of the Law

The Supreme Court’s analysis centered on the scope of the Tax Court’s jurisdiction within the framework of Section 6330.

Tax Court’s Limited Jurisdiction The Court reiterated the foundational principle that the Tax Court is a court of limited jurisdiction, possessing only the powers expressly conferred upon it by Congress. Both parties agreed that §6330(d)(1) was the sole jurisdiction-conferring provision applicable to Zuch’s appeal.

Defining the Scope of "Determination" under §6330(d)(1) The core of the dispute revolved around the meaning of "determination" as used in §6330(d)(1).

Government’s Position: The IRS argued that "determination" refers exclusively to the binary decision of whether a levy may proceed. If there is no longer a proposed levy, then there is no "adverse determination" for the Tax Court to review.
Zuch’s Position: Zuch contended that "determination" encompassed the appeals officer’s resolution of all issues raised by the taxpayer during the CDP hearing, including challenges to liability and unpaid tax.
Supreme Court’s Holding: The Court agreed with the Government, definitively stating that the "determination" in §6330(d)(1) refers to the binary decision whether a levy may proceed. The Court analyzed §6330(c)(3), which outlines the factors an appeals officer "shall take into consideration" when making a determination. These factors include verifying IRS compliance, considering "issues raised" by the taxpayer, and balancing the need for efficient tax collection with taxpayer interests. The Court emphasized that the statute distinguishes between these "considerations" (inputs) that inform the determination and the "determination" (output) itself. Thus, Zuch’s dispute about the estimated tax payments was merely an input—an "issu[e] raised" under §6330(c)(3)(B)—not the determination itself, which was the appeals officer’s decision to sustain the levy.

Statutory Context and the Default Rule The Court’s interpretation was further supported by the broader statutory context, particularly the default rule requiring taxpayers to "pay first and then seek a refund" when contesting tax liability, as articulated in 26 U.S.C. §7421(a). Section 6330 provides a narrow exception to this rule, triggered specifically by a proposed levy. The Court pointed to the statute’s title, "Notice and opportunity for hearing before levy," and its repeated focus on levy-related information and procedures, to underscore that §6330 is fundamentally about contesting a proposed levy. The scope of the CDP hearing is designed to track this purpose, allowing taxpayers to raise only "levy-related issues". The Court found it "strange" to assume that Congress intended a §6330 appeal to be a vehicle for resolving tax disputes that no longer have a connection to an ongoing levy.

Remedial Authority Under §6330(e) The Court also expressed skepticism regarding the Tax Court’s authority to provide relief beyond enjoining a levy under §6330(e). Section 6330(e)(1) authorizes the Tax Court to "enjoi[n]" a levy or proceeding, but "only in respect of the unpaid tax or proposed levy to which the determination being appealed relates". The Court clarified that this provision does not authorize the Tax Court to order refunds or issue declaratory judgments resolving tax liability disputes. While the authority to enjoin a levy might incidentally involve declarations about underlying tax obligations, this power depends entirely on the levy’s existence. Without a levy, the Tax Court lacks such authority.

Application of Law to the Facts and Conclusions

Applying its legal interpretation to the facts of Zuch’s case, the Supreme Court concluded that the Tax Court had properly dismissed her appeal.

The appeals officer’s "determination" was whether the IRS’s proposed levy on Zuch’s property could proceed. The Tax Court initially had jurisdiction to review this specific determination—that is, to decide if the levy could (or could not) go forward. As part of this initial review, the Tax Court possessed the authority to assess the correctness of any "predicate conclusions" made by the appeals officer, such as whether the $50,000 should have been exclusively credited to Gennardo.

However, the crucial turning point was when the IRS used Zuch’s subsequent overpayments to reduce her alleged 2010 tax liability to zero. At that point, there was no longer any factual basis for a levy, and consequently, no relevant "determination" remained for the Tax Court to review. The Court determined that Zuch’s continuing appeal had transformed into a request for the Tax Court to issue an opinion on a disputed tax liability question that was entirely independent of any ongoing collection effort. Since the Tax Court lacked jurisdiction to entertain such an independent request, its dismissal of the case was correct.

The Supreme Court therefore held that the Tax Court lacks jurisdiction under §6330 to resolve disputes between a taxpayer and the IRS when the IRS is no longer pursuing a levy. The Court clarified that Zuch is not left without recourse; like any taxpayer, she retains the option to file a post-deprivation suit for a refund in a federal district court or the Court of Federal Claims, which she has already done.

The judgment of the Third Circuit was reversed, and the case was remanded for further proceedings consistent with the Supreme Court’s opinion.

Dissenting View

Justice Gorsuch filed a dissenting opinion, arguing that Ms. Zuch still had a live claim before the Tax Court concerning the IRS’s alleged error in crediting the $50,000 payment. He asserted that a Tax Court ruling in Zuch’s favor on this underlying liability would have deprived the IRS of its justification for retaining her later overpayments. Gorsuch emphasized that §6330(d)(1) explicitly links Tax Court jurisdiction to an Appeals Office "determination," not to a "continuing levy," and noted Congress’s extensive use of the word "levy" elsewhere in the statute, implying a deliberate choice not to link jurisdiction solely to it in (d)(1). He further argued that a "determination" under §6330(c)(2) encompasses issues of "unpaid tax" and "underlying tax liability". Gorsuch also suggested that §6330(e)(1) grants the Tax Court the power to enjoin "any action" by the IRS relating to an "unpaid tax," implying broader remedial authority beyond just stopping a levy. He highlighted that Article III mootness principles do not fully apply to the Tax Court, as it is an Article II administrative tribunal. Gorsuch also commented on the IRS’s shift in position regarding mootness motions, suggesting it was a strategic move. He concluded that the majority’s decision provides the IRS with a "roadmap for evading Tax Court review" by dropping levies to avoid unfavorable rulings on underlying tax liability, potentially leaving taxpayers without a meaningful challenge mechanism.

Implications for Tax Professionals

The Zuch decision underscores the paramount importance of the proposed levy as the jurisdictional anchor for Tax Court review in CDP cases under §6330. Tax professionals must understand that if the IRS resolves the underlying tax liability, thereby eliminating the need for a levy, the Tax Court will likely lose jurisdiction over any remaining disputes concerning the underlying tax liability or claims for overpayment. This means that while CDP hearings provide an opportunity to challenge the merits of a tax liability when a levy is threatened and no prior opportunity to dispute existed, this avenue of prepayment review ceases once the collection threat (the levy) is removed, even if due to subsequent IRS actions like credit offsets. For taxpayers wishing to pursue such underlying disputes or seek refunds for overpayments after a levy threat has been withdrawn, the traditional refund suit in a federal district court or the Court of Federal Claims remains the appropriate, and often only, recourse. Professionals should advise clients accordingly, considering the potential need for separate administrative refund claims and the applicable statutes of limitations for such actions.

Prepared with assistance from NotebookLM.