Commissioner v. Zuch

JUSTICE GORSUCH, dissenting.¶verify

Like many Americans, Jennifer Zuch wound up owing money on her taxes. When the Internal Revenue Service told her that she had failed to pay all she owed for 2010, her (then) husband responded by paying the bill. But instead of applying that payment to resolve her liability, the agency used the money to satisfy her husband’s separate tax debt. The agency did so even after Ms. Zuch’s husband insisted the money was meant for her tab, not his. Then, because it deemed Ms. Zuch’s liability still outstanding, the agency sought to seize and sell her property in a levy.¶verify

Ms. Zuch spent more than a decade challenging the IRS’s moves before the agency and, later, the Tax Court. Finally, just as the Tax Court was poised to rule, the IRS moved to dismiss Ms. Zuch’s case. It did not do so because it admitted its mistake in crediting her husband’s payment to the wrong account. Instead, the agency told the court, it had determined that Ms. Zuch overpaid her taxes in later years, and it had decided to keep (rather than refund) those overpayments to satisfy her (disputed) 2010 debt. So, the IRS continued, a levy was no longer needed and the court should therefore dismiss the case. The Tax Court agreed, reasoning that the IRS’s decision to drop the levy deprived it of jurisdiction over the dispute. See 97 F. 4th 81, 88–91 (CA3 2024).¶verify

The Court endorses that decision. I would not. Ms. Zuch still had a live claim pending before the Tax Court. She argued that the IRS erred by failing to credit her husband’s payment to her tax debt, so she owed the agency nothing for 2010. Had she prevailed on that claim, the IRS would have had no basis for keeping her overpayments in later years. Nothing prevented the Tax Court from saying as much. Today’s decision holding otherwise leaves Ms. Zuch with no meaningful way to pursue her argument that the IRS erred or to recoup the overpayments she believes the IRS has wrongly retained. Along the way, the Court’s decision hands the IRS a powerful new tool to avoid accountability for its mistakes in future cases like this one.¶verify

I¶verify

To see where the Court and I differ, a little background helps. As many taxpayers know, the IRS can collect unpaid taxes by seizing and selling a taxpayer’s property in a levy. But, before the agency can take that step, it must afford the taxpayer an opportunity to request a hearing before the IRS’s in-house Office of Appeals. 26 U. S. C. §6330(b). At the hearing, the taxpayer may raise “any relevant issue relating to the unpaid tax or the proposed levy” and (if she hasn’t previously had the chance to do so) challenge “the existence or amount of [her] underlying tax liability.” §6330(c)(2).¶verify

After the hearing, the Office of Appeals issues a “determination.” §6330(c)(3). By statute, a “determination by an appeals officer . . . shall take into consideration” various matters. Ibid. They include whether the IRS has followed all “applicable” legal rules, whether a levy is “no more intrusive than necessary,” and whether the IRS has explained away the “issues raised” by the taxpayer—which, remember, may include a challenge to the “unpaid tax” or to the “underlying tax liability.” §§6330(c)(1)–(3).¶verify

Once the Office of Appeals issues a “determination,” the taxpayer can seek review in the Tax Court—another administrative tribunal within the Executive Branch. See Part III, infra . Section 6330(d)(1) provides that a taxpayer “may, within 30 days of a determination under this section, petition the Tax Court for review of such determination ( and the Tax Court shall have jurisdiction with respect to such matter ).” (Emphasis added.) If the Tax Court concludes that the Office of Appeals erred, it may “enjoin any action or proceeding . . . in respect of the unpaid tax or proposed levy to which the determination being appealed relates,” §6330(e)(1), or else “remand [the] case” to the Office of Appeals for further proceedings, Internal Revenue Manual §8.22.9.16(1) (Nov. 13, 2013); see also, e . g ., Drake v. Commissioner , 92 TCM 37, 44 (2006).¶verify

II¶verify

Where should all this leave Ms. Zuch? As the above sketch illustrates, the Tax Court’s jurisdiction over her case hinged on the presence of a timely appealed “determination” by the Office of Appeals. Ante, at 3, 8. Everyone agrees we have that here. As we have seen, too, a “determination” may address whether a taxpayer actually owes any “unpaid tax” or has any “underlying tax liability.” §§6330(c)(1)–(3). Everyone agrees we have that here too, for the “determination” in Ms. Zuch’s case both approved a levy and rejected her argument that she had already fully satisfied her 2010 tax bill thanks to her husband’s payment. Brief for Petitioner 9; ante, at 8.¶verify

Those undisputed facts should lead to a straightforward conclusion: Because the Tax Court had before it a valid determination, it had jurisdiction to review all the issues addressed in that determination, including whether the IRS was wrong to say Ms. Zuch owed money for 2010. Had the Tax Court ruled for Ms. Zuch on that issue, its decision would have had other important consequences too, for it would have deprived the IRS of its sole justification for keeping, rather than refunding, Ms. Zuch’s later overpayments.¶verify

The fact that the IRS announced its intention to drop its levy is immaterial. Nothing in the statute before us suggests that the IRS can deprive the Tax Court of jurisdiction simply by withdrawing a levy. To the contrary, three key features of the statutory scheme we have already encountered preclude that conclusion.¶verify

First, §6330(d)(1) governs the Tax Court’s jurisdiction. It provides that the Tax Court “shall have jurisdiction” over “such matter”—a phrase that refers back to the Office of Appeals’s “determination” in the taxpayer’s case under §6330(c)(3). See Boechler v. Commissioner , 596 U. S. 199, 204–205 (2022); accord, ante, at 5. That command is mandatory, and it nowhere uses the word “levy.” The absence of that term is telling, too, given that Congress used it almost 30 times elsewhere in §6330. Had Congress wished the Tax Court’s jurisdiction to rise and fall with a levy, it obviously knew how to say so. Congress’s decision instead to link jurisdiction to a “determination” is one we must respect, not allow the IRS to rewrite as it pleases. See Feliciano v. Department of Transportation , 605 U. S. ___, ___ (2025) (slip op., at 6).¶verify

Second, §6330(c)(2) provides that a “determination” may address not just an up-or-down decision on a levy but also other matters raised before the Office of Appeals, including a taxpayer’s claim that she has no “unpaid tax” or “underlying tax liability.” And, the statute tells us, resolution of those issues forms the “[b]asis” for the determination, §6330(c), supplying textual evidence that “a determination incorporates the considerations that inform it,” contra, ante, at 6, n. 2. Confirming as much, the Tax Court itself has observed that its “jurisdiction is defined by the scope of the determination” and, as a result, it may consider “challenges to the existence or amount of the underlying tax liability” if “raised by the taxpayer” and resolved by the Office of Appeals. Freije v. Commissioner , 125 T. C. 14, 25 (2005); accord, Sego v. Commissioner , 114 T. C. 605, 610 (2000); 26 CFR §301.6330–1, A–F3 (2024). As we have seen, the Office of Appeals’s determination in this case expressly addressed Ms. Zuch’s claim that she had no unpaid taxes or underlying liability for 2010.¶verify

Third, §6330(e)(1) grants the Tax Court the power to issue injunctions against “any action or proceeding . . . in respect of the unpaid tax or proposed levy to which the determination being appealed relates.” (Emphasis added). That disjunctive phrasing suggests the Tax Court may enjoin “any” IRS “action” relating to the “unpaid tax”—even if the action is not a “proposed levy.” §6330(e)(1); see Encino Motorcars, LLC v. Navarro , 584 U. S. 79, 87 (2018). Potential IRS actions relating to an “unpaid tax” include various “collection alternatives,” §6330(c)(2)(A), and decisions about “whether [a tax] liability remains unpaid,” Brief for Petitioner 25, n. 3 (internal quotation marks omitted; emphasis deleted); see 97 F. 4th, at 88. Accordingly, had the Tax Court found that Ms. Zuch owed nothing for 2010, it could have wielded its remedial authority under §6330(e)(1) to enjoin the IRS from engaging in “any action” to collect that debt. An injunction could stop the IRS from asserting its entitlement to retain Ms. Zuch’s later overpayments. See Part IV, infra . 1¶verify

Until recently, even the IRS would have agreed with all this. As the IRS once put it, a “motion to dismiss” is “inap-¶verify

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1 The Court says there is no action left to enjoin in Ms. Zuch’s case because the IRS already has her money. Ante, at 8, n. 3. But everyone agrees that Ms. Zuch may still seek a refund for at least some (but not all) of the overpayments in later years. Ante , at 9; Part IV, infra . And an injunction here could prevent the IRS from taking actions in those proceedings asserting its entitlement to the money. Even beyond that, there is the possibility that the IRS would heed the Tax Court’s view of Ms. Zuch’s case and refund all her later overpayments. Part III, infra .¶verify

propriate” in the Tax Court proceedings as long as a taxpayer (as here) still contests “the existence or amount” of her tax liability. Dept. of Treasury, IRS Office of Chief Counsel, Notice CC–2003–016 (May 29, 2003). Nor would it matter, the IRS continued, if the taxpayer had already “paid” the disputed tax—a development that, pretty plainly, would avoid any need for a levy. Ibid .; accord, IRS Notice CC–2005–008 (May 19, 2005); 97 F. 4th, at 100–101, and n. 36. Now, of course, the IRS has changed its mind and taken just the opposite view. But, when the government switches position and advances a new statutory construction that tilts the playing field in its favor, “no one should be surprised if its latest utterance isn’t the most convincing one.” Bittner v. United States , 598 U. S. 85, 98, n. 5 (2023).¶verify

III¶verify

At the IRS’s urging, the Court today upholds the Tax Court’s dismissal of Ms. Zuch’s claims. In doing so, the Court embraces the agency’s (present) view that the Tax Court is powerless to resolve a §6330 case once the IRS abandons a levy. But the three arguments the IRS advances (and the Court adopts) in support of that conclusion do not come close to proving it.¶verify

The IRS first posits that the word “determination” in §6330(d)(1) “refers to the binary decision whether a levy may proceed.” Ante, at 6; Brief for Petitioner 19. So when the Office of Appeals issues a “determination,” the IRS says, that office simply decides whether a levy is appropriate. And given that, the IRS extrapolates, the Tax Court’s jurisdiction must also be limited to assessing the propriety of a levy. See id ., at 19–21.¶verify

The statute the IRS imagines is not the statute we have. Congress did not say that a “determination” refers to a binary decision whether a levy may proceed. Instead, Congress said that the Tax Court may review the full scope of a¶verify

“determination,” including its resolution of a taxpayer’s “unpaid tax” or her “underlying tax liability.” §§6330(c)(2), (d)(1). Congress discussed levies in many other places in §6330 and it easily could have said that the Tax Court may review only a “determination whether the levy may go forward .” Yet nothing like that italicized condition appears in Congress’s work. 2¶verify

Next, the IRS suggests that the Tax Court’s jurisdiction must be limited to assessing levies because the only remedy it can issue is an order directing the government “ not to pursue a levy.” Brief for Petitioner 20 . Along similar but more restrained lines, the Court expresses “skeptic[ism]” that the Tax Court’s remedial authority extends beyond enjoining a levy. Ante, at 7.¶verify

Whether full-throated or half-hearted, that argument, too, disregards the statute’s terms. Remember, §6330(e)(1) permits the Tax Court to enjoin “any action” by the IRS relating to the “unpaid tax or the proposed levy.” See Part I, supra ; cf. ante, at 7. So, if the Tax Court were to conclude that Ms. Zuch is right—that her husband paid her bill and she owes nothing for 2010—then it could enjoin the IRS from pursuing “any action” to seek or retain money from her for that tax year or from making any contrary decision about the matter. And, as we have seen, that relief would effectively foreclose the agency from asserting any lawful¶verify

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2 Seeking a textual hook for its view that a “determination” really means a “levy,” the Court observes that a “determination” must be something separate from the “considerations” that inform it, like the taxpayer’s underlying liability. Ante, at 6. That hardly helps. Of course, a “determination” is not the same as the issues it resolves. But that does not mean the Tax Court is powerless to review the considerations that inform a “determination.” Indeed, the Court admits that the Tax Court can attend to such “predicate conclusions” while a levy is ongoing. Ante, at 8. So why would things play out differently once the IRS no longer intends a levy? As even the government concedes, abandoning a levy does not withdraw or vacate an adverse IRS “determination.” Tr. of Oral Arg. 11–12.¶verify

entitlement to Ms. Zuch’s overpayments in later years.¶verify

The IRS’s remedial theory suffers another flaw, too. Sometimes, of course, developments during litigation that leave an Article III court powerless to issue any binding relief can present a jurisdictional problem. The Constitution, after all, authorizes federal courts to entertain only live cases and controversies, not moot ones where it is no longer possible “to grant any effectual relief” to the parties. Chafin v. Chafin , 568 U. S. 165, 172 (2013). But, as the Court seems to recognize, ante , at 9, n. 4, that constitutional constraint does not apply to the Tax Court. Name notwithstanding, that body is not part of the Judicial Branch. Instead, it exercises Article II “[e]xecutive authority as part of the Executive Branch.” Kuretski v. Commissioner , 755 F. 3d 929, 932 (CADC 2014). 3 So when the Tax Court addresses a tax dispute and returns it to the Office of Appeals, it is just one executive agency advising another about how to enforce federal law in a particular setting. And even without an injunction compelling it to do so, the Office of Appeals may choose to follow the Tax Court’s views when carrying out its duty to resolve “tax controversies . . . to the maximum extent possible through an administrative settlement.” Internal Revenue Manual §8.1.1.1.1 (Jan. 9, 2024). For taxpayers like Ms. Zuch, that may be all the relief they need.¶verify

Without statutory text on its side, the IRS resorts to legislative history. Citing a committee report, the agency contends that Congress meant for §6330 proceedings in the Tax Court to be rare and few, and for most “[c]hallenges to the¶verify

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3 See also Crim v. Commissioner , 66 F. 4th 999, 1000 (CADC 2023) (holding that the Tax Court remains “part of the Executive Branch” notwithstanding a statutory amendment, §7441, confirming its “indepeden[ce]”); Freytag v. Commissioner , 501 U. S. 868, 912 (1991) (Scalia, J., concurring in part and concurring in judgment) (“It seems to me entirely obvious that the Tax Court, like the Internal Revenue Service, . . . exercises executive power”).¶verify

assessment of a tax” to be brought in “post-payment refund suits” or “pre-payment deficiency actions” in federal district court. Brief for Petitioner 23 (citing S. Rep. No. 105–174 (1998)); see ante, at 6–7. That background rule, the IRS says, counsels against reading §6330 to allow the Tax Court to entertain disputes after the government abandons a levy.¶verify

But even if refund suits and deficiency actions were once the usual ways for individuals to contest their tax liabilities, nobody disputes that Congress afforded taxpayers a new way of doing so when it adopted §6330. And taxpayers are entitled to expect that provision will be applied as written, not whittled down to a nub to suit the IRS. See Feliciano , 605 U. S., at ___ (slip op., at 14); Epic Systems Corp . v. Lewis , 584 U. S. 497, 525 (2018).¶verify

IV¶verify

Recognizing that today’s decision leaves Ms. Zuch, after a decade of litigation, without resolution of her straightforward argument that the IRS erred when it concluded she had not paid her 2010 tax bill, the agency invites her to “start over.” Ante, at 4, 8. All she has to do, the IRS says, is file a new refund suit in federal district court. There, she can make all the arguments she sought to press in the Tax Court. And, if she prevails, she can secure a refund of the overpayments the agency kept to satisfy her (disputed) 2010 debt. See Brief for Petitioner 15, 34; ante, at 8. But that is no answer. More nearly, it is a trap for the unwary.¶verify

The reason has to do with a statutory deadline. Taxpayers may not pursue refund suits until they have filed administrative claims with the IRS, something they must accomplish “within 3 years from the time the return was filed or 2 years from the time the tax was paid,” whichever period ends later. §6511(a). Yet a taxpayer who chooses to contest her tax liability in §6330 proceedings may not know that she needs to file such an administrative claim until the time for doing so has passed. See Brief for Center for Taxpayer¶verify

Rights as Amicus Curiae 19–21. 4¶verify

Ms. Zuch’s case illustrates the problem. The government deemed her 2010 tax debt “paid” when it kept overpayments she made in 2013–2016 and 2019. 97 F. 4th, at 91. To seek the return of those overpayments, Ms. Zuch needed to submit an administrative claim with the IRS within two years of when the agency kept each payment. §6511(a). Yet for a couple reasons, she did not know that she had any need to file a claim. See 97 F. 4th, at 91. For one, she was actively litigating §6330 proceedings and understandably thought that was sufficient unto the day. For another, it appears the government did not tell her that she had overpaid her taxes in 2013–2016 and 2019, or that it intended to use those overpayments to satisfy her (disputed) 2010 tax liability, until it moved to dismiss her case in the Tax Court. 97 F. 4th, at 91, n. 19. Consequently, Ms. Zuch had no reason to think administrative refund claims might be necessary, or even available, until that point. And by the time she filed a refund suit in district court, it was too late for her to submit prerequisite administrative claims for some (but not all) of the years in question and thus too late for the court to adjudicate her entitlement to refunds for those years. See Tr. of Oral Arg. 28, 44–45. So the IRS’s invitation for Ms. Zuch to “start over” really turns out to be little more than an effort to deprive her of complete relief.¶verify

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The short of it all is this. The IRS seeks, and the Court endorses, a view of the law that gives that agency a roadmap for evading Tax Court review and never having to answer a taxpayer’s complaint that it has made a mistake.¶verify

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4 Though §6330(e)(1) automatically suspends the limitations period for filing a refund suit in district court during the pendency of Tax Court proceedings, the government contends that it does not automatically suspend the period for filing an administrative claim. See Tr. of Oral Arg. 24–25, 28; accord, id ., at 44–45.¶verify

After today, §6330 proceedings are essentially risk-free for the IRS. It may pursue a levy and argue its case to the Tax Court. Then, if the Tax Court seems likely to side with the taxpayer, the IRS can drop the levy and avoid an unfavorable ruling on the taxpayer’s underlying tax liability. Doing so will often prove only a small setback for the IRS because the agency remains free to pursue other collection methods—including keeping, rather than refunding, a taxpayer’s later overpayments. And the taxpayer will often find herself without any way to challenge the IRS’s error or prevent the agency from keeping more of her money than it is lawfully due. Seeing nothing in the law compelling any of those results, I respectfully dissent.¶verify