Besicorp Group, Inc., et al. v. Commissioner of Internal Revenue

Summary

The United States Court of Appeals for the Second Circuit considers whether an IRS Appeals Officer conducting a collection due process hearing must verify compliance with the supervisory-approval requirement for penalties under 26 U.S.C. § 6751(b)(1). The court holds that this requirement is an applicable law or administrative procedure covered by the verification mandate in 26 U.S.C. § 6330(c)(1), even where the underlying liabilities and penalties were previously adjudicated. The court reverses the relevant Tax Court orders and remands for further proceedings.

Holdings

1. When § 6751(b)(1) applies to penalties that are the subject of IRS collection efforts, § 6330(c)(1) requires the Appeals Officer conducting a collection due process hearing concerning a lien or proposed levy to verify that the required written supervisory approval was obtained.
2. The Appeals Officer's failure to verify compliance with § 6751(b)(1) invalidated the Appeals Office's approval of the liens and proposed levies used to collect the penalties, but did not invalidate the underlying penalties or overall tax liabilities.
3. The prior adjudication of the taxpayers' underlying liabilities did not preclude their challenge to the Appeals Officer's compliance with the independent verification obligation in § 6330(c)(1).

Questions Presented

1. Whether 26 U.S.C. § 6330(c)(1) requires an Appeals Officer conducting a collection due process hearing concerning a tax lien or proposed levy to verify compliance with the written supervisory-approval requirement in 26 U.S.C. § 6751(b)(1), even when the underlying penalties and liabilities were previously adjudicated.
2. Whether the Appeals Officer's failure to perform or establish that verification invalidated the approval of liens and proposed levies used to collect the penalties.
3. Whether res judicata, claim-preclusion principles, or harmless-error considerations excused the failure to verify supervisory approval.

Disposition

reversed_and_remanded