Taylor Porter Represents Client in Noteworthy Taxpayer Assistance Order Case

December 28, 2015

Click here for article on case by Villanova Law Professor
Click here for Ruling from United States Court of Appeals for The Fifth Circuit

Taylor Porter attorneys John F. McDermott and Michael S. Walsh represented client Kathryn Rothkamm in Rothkamm v. U.S., in which the United States Court of Appeals for The Fifth Circuit issued an opinion that considered whether a wife’s application for a Taxpayer Assistance Order (TAO) concerning a recovery of funds levied from her bank account to satisfy her husband’s tax debt tolled the nine-month wrongful levy statute of limitations. The Fifth Circuit held that the wife’s application for assistance to the Taxpayer Advocate Service tolled the statute, thus preventing the government from using sovereign immunity as a defense to the suit.

“This case will cause the TAO and IRS to be more attentive of each other and more responsive to the taxpayer,” said McDermott, who has more than 35 years of experience in tax law, representing individuals, business entities, trusts, estates and tax exempt organizations. “The TAO will have to closely monitor applications to log them in and have a formal procedure for providing notice of discharge and for recording the date. The TAO will surely feel pressure to quickly analyze applications and quickly discharge those on which it cannot or will not take action.”

The result of the case was featured in Villanova Law Professor Les Book’s blog, “Procedurally Taxing,” and his article, “Fifth Circuit Tackles Intersection of TAO Rules and Statutes of Limitation.” Book writes that because of the decision, “Steve (Olsen) and I are in the process of rewriting the Saltz/Book chapter on statutes of limitation, and this case will cause us to think hard about the reach of the statute.”

Book continued: “The case is important. It touches on the intersection of requests for assistance from TAS and statutes of limitation generally, and contains a full-throated consideration of the effect of requests for Taxpayer Assistance Orders on the time for bringing an action for a wrongful levy. That alone merits consideration in PT but the case’s reasoning and spirited dissent also suggest that it will have an impact on other matters that are subject to Taxpayer Advocate Service assistance requests.”

Kathryn Rothkamm and her husband filed separate tax returns. Kathryn also had a separate bank account which she claimed consisted of her separate property. IRS issued a notice of levy on March 6, 2012, to collect on the husband’s tax debt. In response, the bank remitted the full amount of account (over $73,000) to the IRS on April 18, 2012. Within two weeks of the bank remitting the funds pursuant to the IRS levy, Kathryn filed an application for assistance with Taxpayer Advocate Service. In October of 2012, TAS responded to Kathryn and said it could not help. By May 15, 2013, Kathryn filed an administrative claim for wrongful levy under Section 6343(b) with the IRS. IRS denied the claim in July 2013. In September of 2013, Kathryn filed a suit for wrongful levy.

As the district court explained, the IRS levied Rothkamm’s account on April 18, 2012. Thus, the general statute of limitations would have expired on January 18, 2013, absent any tolling. Rothkamm’s administrative wrongful levy claim, which she filed on May 15, 2013, would toll the running of the statute of limitations if filed within the statute of limitations. Thus, the core question is whether, as Rothkamm contends, the statute of limitations was tolled while her application for a TAO was pending before the TAS. If so, her administrative claim under § 6343(b) would also have been timely, and the statute of limitations for filing suit would have been suspended until January.

“Significantly, the Court affirmed the definition of ‘taxpayer,’” McDermott said. “Although the term is defined in the Internal Revenue Code, and the U.S. Supreme Court had interpreted the statute in a clear, common sense manner, the IRS has persisted in restricting the definition in cases involving taxpayers’ procedural remedies.”

McDermott added: “For those applications for which the TAO can provide assistance, the TAO will have more time to review and work the case without undue concern for prejudicing the taxpayer’s rights and remedies due to the running of important statutes of limitation affecting the taxpayer’s procedural rights.”

About Taylor Porter and Our Tax Practice: Founded more than 100 years ago in the state capitol Baton Rouge, Taylor Porter is one of the oldest, largest and most respected law firms in Louisiana, representing a diverse range of local, regional, national and international clients in the most complex transactions and litigation across a variety of industries. As a full-service, general law practice with more than 70 attorneys, Taylor Porter’s capabilities cover the complete spectrum of civil law, including state and federal trial and appellate practice. The firm’s tax practice represents individuals, business entities, trusts, estates and tax exempt organizations, with controversies before the IRS examinations and appeals, US District Court, US Court of Appeals for the Fifth Circuit, the Louisiana Department of Revenue, the Louisiana Board of Tax Appeals, and parish and municipal taxing authorities. 

Read our Case Studies

See how we can help. Contact us today

  • Disclaimer
  • © Taylor, Porter, Brooks & Phillips L.L.P. All rights reserved.