California Lawyers Association – 2023 Washington D.C. Delegation and U.S. Supreme Court Group Swearing-In Event – May 15-18, 2023
Posted by Hochman Salkin Toscher Perez P.C. 
Posted on Friday, May 12, 2023
We are very pleased to announce that Sandra R. Brown, Robert Horwitz, Michel Stein, Edward M. Robbins, Jr., Philipp Behrendt, Gary Markarian, and Michael Greenwade will be part of the Taxation Section of the California Lawyers Association’s “DC Delegation” on May 16-17, 2023, in Washington D.C.
For over 30 years, the Taxation Section has annually sent a select delegation to bring California tax lawyers and their ideas to Washington, D.C. As in the past, our firm will be part of this important process which creates an opportunity to present significant issues and engage in fulsome discussions with key tax officials and staff members from government offices including the Internal Revenue Service Chief Counsel, National Taxpayer Advocate, Treasury Department, House Ways and Means Committee, Joint Committee on Taxation, Senate Finance Committee Members, United States Tax Court, and the Department of Justice Tax Division.
This year the principals and associates in our firm will present on the following three topics:
Judicial Jurisdiction for Assessable and Foreign Information Penalties
Currently, some civil tax penalties are subject to deficiency procedures, giving taxpayers the opportunity for pre-assessment review of the penalty by the Tax Court and postponing assessment and collection until the decision of the Tax Court becomes final. Other penalties, such as assessable penalties found in Chapter 68B of the Internal Revenue Code and foreign information penalties found under Chapter 61A, are not subject to deficiency procedures. Assessable penalties are assessed without taxpayers being afforded the right to challenge the penalty in court before assessment. To challenge these penalties in court, taxpayers must first pay the penalty in full and file a refund claim. This results in clear inequity and financial hardship for those who cannot afford to fully pay their penalties, denying some taxpayers the right to challenge IRS determinations while other taxpayers are afforded such rights. Foreign information penalties were treated the same as assessable penalties until a recent Tax Court decision held that the Commissioner of the IRS did not have statutory authority to assess them, which has unleashed an uncharted procedural web for taxpayers subjected to these penalties. The paper written by Edward Robbins and Michael Greenwade advocates for a unified application of deficiency procedures, proposing amendments to the Code to make the deficiency procedures apply to penalties found in Chapter 61A and Chapter 68B.
2023 CLA DC Delegation Assessable and Foreign Information Penalties Paper
BBA Imputed Underpayment Abuse of Discretion
The Bipartisan Budget Act of 2015 reformed the partnership audit and tax collection procedures to create a new centralized audit regime. The paper written by Sandra Brown, Michel Stein, and Philipp Behrendt, highlights the inconsistencies that arise in the computation of the tax liability resulting from an audit under the new regime. Adjustments to non-income partnership items can create a tax liability under the applicable Regulations, although these items may not have directly changed any partner’s tax liability if it were reported correctly in the first place. The IRS recognized this shortfall, and published a new regulation in December 2022 that allows for treating some adjustments to non-income items as zero to address the issue. However, the Regulations do not cover all relevant situation and grant exercise of the IRS’s discretion to include the item again. The regulation fails to set forth any standard when the exercise of this discretion is appropriate, leaving the taxpayer vulnerable to using the inclusion as leverage. The paper proposes to zero out non-income items for all relevant situations, and also the implementation of clear directives for consistency in the treatment of non-income items in calculating the IU to ensure a fair and just tax system.
2023 CLA DC Delegation BBA Imputed Underpayment Paper
IRC Section 6695A Appraiser Penalties
IRC § 6695A imposes a monetary penalty on an appraiser whose appraisal results in a substantial valuation misstatement, a substantial estate or gift tax valuation understatement, or a gross valuation misstatement, if the appraiser knew, or reasonably should have known, that the appraisal would be used in connection with a return or a claim for refund. The only defense to the appraisal penalty requires the appraiser establish to the satisfaction of the IRS that the value established in the appraisal was more likely than not the proper value. Additionally, the statute of limitations for assessing these penalties may result in situations where the IRS assesses an appraiser penalty before concluding the underlying tax return or claim for refund at issue. The paper written by Avram Salkin, Robert Horwitz, and Gary Markarian proposes changes to ensure appropriate safeguards for the imposition of appraiser penalties, including the need for a reasonable cause argument to defend against an imposition of the appraiser penalty and an amendment to the statute of limitations to allow the IRS to fully examine the underlying tax return or claim for refund before assessing the penalty.
