Besicorp v. Commissioner of Internal Revenue
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Opinion
23-296(L) Besicorp v. Commissioner of Internal Revenue
In the United States Court of Appeals For the Second Circuit
August Term, 2023
(Argued: February 5, 2024 Decided: June 29, 2026)
Docket Nos. 23-296(L), 23-299 (Con), 23-302 (Con), 23-321 (Con), 23-353 (Con), 23-359 (Con)
BESICORP GROUP, INC., DAY STORES, INC., HUMBOLDT SHELBY HOLDING CORPORATION, THE MARKELL COMPANY, INC., VANCE FINANCE AND HOLDING CORPORATION, SEASHORE BROADCASTING CORPORATION,
Petitioners-Appellants,
–v.–
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
B e f o r e:
LEVAL, CARNEY, and SULLIVAN, Circuit Judges.
Six Taxpayers appeal from the Tax Court’s orders sustaining federal tax liens and proposed levies by the Internal Revenue Service (“IRS”) for collection of the Taxpayers’ outstanding tax liabilities. In earlier proceedings not challenged here, the Tax Court adjudicated the Taxpayers’ liabilities, which comprised many millions of dollars in unpaid taxes, penalties, and accrued interest. The Commissioner of Internal Revenue then sought to collect the Taxpayers’ liabilities through certain liens and levies on their property. Each Taxpayer invoked its right to have a collection due process (“CDP”) hearing conducted by the Appeals Office within the IRS. The Appeals Officer in each case sustained the Commissioner’s authority to collect the Taxpayers’ liabilities through liens and levies on their property. On appeal, the Tax Court upheld the Appeals Office’s determinations. In these consolidated appeals, the Taxpayers argue that, in upholding the Commissioner’s authority to collect the assessed liabilities by liens and levies, the Tax Court erroneously concluded that the Appeals Officer “verif[ied]” that “the requirements of any applicable law or administrative procedure have been met” in accordance with 26 U.S.C. § 6330(c)(1), a necessary predicate to the Commissioner’s assertion of liens and levies. The Appeals Officer’s rulings were incorrect, they say, because he failed “to obtain verification from the Secretary,” id., that the penalties imposed on the Taxpayers received written supervisory approval, as required by 26 U.S.C. § 6751(b)(1). In opposition, the Commissioner maintains primarily that the supervisory approval called for under Section 6751(b)(1) is not an “applicable” requirement covered by Section 6330(c)(1) in light of prior liability and penalty determinations against the Taxpayers, which he argues preclude the current challenges under res judicata. We conclude that the Taxpayers are correct. The verification obligation imposed on the Appeals Officer by Section 6330(c)(1) encompasses the supervisory approval requirement imposed by Section 6751(b)(1). To proceed with liens and levies, the government was required to show that the Appeals Officer verified that the penalties imposed on the Taxpayers received the required written supervisory approval. The failure to do so did not invalidate the penalties or overall tax liability owed by the Taxpayers, but it did invalidate the Appeals Officer’s determination that the liens were proper and the Taxpayers’ properties could be levied. Accordingly, we REVERSE the relevant portions of the Tax Court’s orders, and we remand for further proceedings consistent with this opinion. REVERSED AND REMANDED.
PETER B. SIEGAL (Jasper G. Taylor III, Richard L. Hunn, Norton Rose Fulbright US LLP, Houston, TX, on the brief), Norton Rose Fulbright US LLP, Washington, DC, for Petitioners-Appellants.
2 ROBERT J. BRANMAN (David A. Hubbert, Jacob Earl Christensen, on the brief), Department of Justice, Tax Division, Washington, DC, for Respondent-Appellee.
CARNEY, Circuit Judge:
This case requires us to interpret provisions of the Internal Revenue Code
(“I.R.C.” or “Code”), 26 U.S.C. §§ 6651 et seq., concerning the government’s ability to
collect unpaid tax liabilities through liens and levies authorized by the Code.
Petitioners-Appellants (the “Taxpayers”) are sophisticated entities that participated in
what the Internal Revenue Service (the “IRS” or “Service”) concluded were tax shelter
transactions designed to avoid the payment of taxes. The Service notified the Taxpayers
that they owed many millions of dollars in unpaid taxes, penalties, and accrued interest,
and the Tax Court adjudicated these liabilities in earlier proceedings not challenged
here. The Commissioner of Internal Revenue (the “Commissioner”) then sought to
collect these liabilities through the Code-authorized tax liens and levies on the
Taxpayers’ properties.
Each Taxpayer invoked its right to have a collection due process (“CDP”) hearing
conducted by the Service’s Appeals Office in connection with the Commissioner’s
issuance of Notices of Federal Tax Liens and Notices of Intent to Levy. The Appeals
Officer in each case sustained the liens and proposed levies, and in doing so stated that
he verified the Service’s compliance with all applicable laws and regulations in
assessing the liabilities. The Tax Court upheld the Appeals Office’s determinations.
Now, in consolidated appeals to our Court, the Taxpayers argue that the Tax
Court erred in concluding that the Appeals Officer “obtain[ed] verification” that “the
requirements of any applicable law or administrative procedure have been met,” as
required by Section 6330(c)(1) of the Code. In particular, the Taxpayers contend that the
3 Appeals Officer failed to verify, and the Service failed to show, that the assessed
penalties received the written supervisory approval mandated by Section 6751(b)(1).
The Commissioner does not dispute that the Appeals Officer failed to verify that
the assessed penalties received the requisite supervisory approval. Nor does the
Commissioner contend that the required supervisory approvals were obtained before
the imposition of penalties. Instead the Commissioner offers several responses: first,
that res judicata bars the Taxpayers’ argument; next, that the written supervisory
approval required by Section 6751(b)(1) is not an “applicable” requirement where, as
here, the penalty was adjudicated in an earlier challenge; and finally, that, despite the
literal language of Section 6330(c)(1), requiring the Appeals Officer to verify compliance
with the supervisory approval mandate in a CDP hearing serves no bona fide purpose
and therefore, notwithstanding the literal language of Section 6330(c)(1), the Appeals
Officer’s failure should be treated as harmless error.
We interpret these provisions literally, as we are required to do, and hold that
Section 6751(b)’s supervisory approval requirement is a “requirement[] of . . .
applicable law or administrative procedure” encompassed by Section 6330(c)(1). The
Appeals Officer’s failure to verify that the penalties imposed on the Taxpayers received
the requisite supervisory approval therefore invalidated the Appeals Office’s approval
of the liens and proposed levies. Accordingly, we REVERSE those portions of the Tax
Court’s orders that find that the verification requirement did not apply to the
supervisory approval requirement and that the liens and proposed levies on the
Taxpayers’ property were proper. We REMAND for further proceedings consistent
with this opinion. 1
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23-296(L) Besicorp v. Commissioner of Internal Revenue
In the United States Court of Appeals For the Second Circuit
August Term, 2023
(Argued: February 5, 2024 Decided: June 29, 2026)
Docket Nos. 23-296(L), 23-299 (Con), 23-302 (Con), 23-321 (Con), 23-353 (Con), 23-359 (Con)
BESICORP GROUP, INC., DAY STORES, INC., HUMBOLDT SHELBY HOLDING CORPORATION, THE MARKELL COMPANY, INC., VANCE FINANCE AND HOLDING CORPORATION, SEASHORE BROADCASTING CORPORATION,
Petitioners-Appellants,
–v.–
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
B e f o r e:
LEVAL, CARNEY, and SULLIVAN, Circuit Judges.
Six Taxpayers appeal from the Tax Court’s orders sustaining federal tax liens and proposed levies by the Internal Revenue Service (“IRS”) for collection of the Taxpayers’ outstanding tax liabilities. In earlier proceedings not challenged here, the Tax Court adjudicated the Taxpayers’ liabilities, which comprised many millions of dollars in unpaid taxes, penalties, and accrued interest. The Commissioner of Internal Revenue then sought to collect the Taxpayers’ liabilities through certain liens and levies on their property. Each Taxpayer invoked its right to have a collection due process (“CDP”) hearing conducted by the Appeals Office within the IRS. The Appeals Officer in each case sustained the Commissioner’s authority to collect the Taxpayers’ liabilities through liens and levies on their property. On appeal, the Tax Court upheld the Appeals Office’s determinations. In these consolidated appeals, the Taxpayers argue that, in upholding the Commissioner’s authority to collect the assessed liabilities by liens and levies, the Tax Court erroneously concluded that the Appeals Officer “verif[ied]” that “the requirements of any applicable law or administrative procedure have been met” in accordance with 26 U.S.C. § 6330(c)(1), a necessary predicate to the Commissioner’s assertion of liens and levies. The Appeals Officer’s rulings were incorrect, they say, because he failed “to obtain verification from the Secretary,” id., that the penalties imposed on the Taxpayers received written supervisory approval, as required by 26 U.S.C. § 6751(b)(1). In opposition, the Commissioner maintains primarily that the supervisory approval called for under Section 6751(b)(1) is not an “applicable” requirement covered by Section 6330(c)(1) in light of prior liability and penalty determinations against the Taxpayers, which he argues preclude the current challenges under res judicata. We conclude that the Taxpayers are correct. The verification obligation imposed on the Appeals Officer by Section 6330(c)(1) encompasses the supervisory approval requirement imposed by Section 6751(b)(1). To proceed with liens and levies, the government was required to show that the Appeals Officer verified that the penalties imposed on the Taxpayers received the required written supervisory approval. The failure to do so did not invalidate the penalties or overall tax liability owed by the Taxpayers, but it did invalidate the Appeals Officer’s determination that the liens were proper and the Taxpayers’ properties could be levied. Accordingly, we REVERSE the relevant portions of the Tax Court’s orders, and we remand for further proceedings consistent with this opinion. REVERSED AND REMANDED.
PETER B. SIEGAL (Jasper G. Taylor III, Richard L. Hunn, Norton Rose Fulbright US LLP, Houston, TX, on the brief), Norton Rose Fulbright US LLP, Washington, DC, for Petitioners-Appellants.
2 ROBERT J. BRANMAN (David A. Hubbert, Jacob Earl Christensen, on the brief), Department of Justice, Tax Division, Washington, DC, for Respondent-Appellee.
CARNEY, Circuit Judge:
This case requires us to interpret provisions of the Internal Revenue Code
(“I.R.C.” or “Code”), 26 U.S.C. §§ 6651 et seq., concerning the government’s ability to
collect unpaid tax liabilities through liens and levies authorized by the Code.
Petitioners-Appellants (the “Taxpayers”) are sophisticated entities that participated in
what the Internal Revenue Service (the “IRS” or “Service”) concluded were tax shelter
transactions designed to avoid the payment of taxes. The Service notified the Taxpayers
that they owed many millions of dollars in unpaid taxes, penalties, and accrued interest,
and the Tax Court adjudicated these liabilities in earlier proceedings not challenged
here. The Commissioner of Internal Revenue (the “Commissioner”) then sought to
collect these liabilities through the Code-authorized tax liens and levies on the
Taxpayers’ properties.
Each Taxpayer invoked its right to have a collection due process (“CDP”) hearing
conducted by the Service’s Appeals Office in connection with the Commissioner’s
issuance of Notices of Federal Tax Liens and Notices of Intent to Levy. The Appeals
Officer in each case sustained the liens and proposed levies, and in doing so stated that
he verified the Service’s compliance with all applicable laws and regulations in
assessing the liabilities. The Tax Court upheld the Appeals Office’s determinations.
Now, in consolidated appeals to our Court, the Taxpayers argue that the Tax
Court erred in concluding that the Appeals Officer “obtain[ed] verification” that “the
requirements of any applicable law or administrative procedure have been met,” as
required by Section 6330(c)(1) of the Code. In particular, the Taxpayers contend that the
3 Appeals Officer failed to verify, and the Service failed to show, that the assessed
penalties received the written supervisory approval mandated by Section 6751(b)(1).
The Commissioner does not dispute that the Appeals Officer failed to verify that
the assessed penalties received the requisite supervisory approval. Nor does the
Commissioner contend that the required supervisory approvals were obtained before
the imposition of penalties. Instead the Commissioner offers several responses: first,
that res judicata bars the Taxpayers’ argument; next, that the written supervisory
approval required by Section 6751(b)(1) is not an “applicable” requirement where, as
here, the penalty was adjudicated in an earlier challenge; and finally, that, despite the
literal language of Section 6330(c)(1), requiring the Appeals Officer to verify compliance
with the supervisory approval mandate in a CDP hearing serves no bona fide purpose
and therefore, notwithstanding the literal language of Section 6330(c)(1), the Appeals
Officer’s failure should be treated as harmless error.
We interpret these provisions literally, as we are required to do, and hold that
Section 6751(b)’s supervisory approval requirement is a “requirement[] of . . .
applicable law or administrative procedure” encompassed by Section 6330(c)(1). The
Appeals Officer’s failure to verify that the penalties imposed on the Taxpayers received
the requisite supervisory approval therefore invalidated the Appeals Office’s approval
of the liens and proposed levies. Accordingly, we REVERSE those portions of the Tax
Court’s orders that find that the verification requirement did not apply to the
supervisory approval requirement and that the liens and proposed levies on the
Taxpayers’ property were proper. We REMAND for further proceedings consistent
with this opinion. 1
1Judge Sullivan joins in all parts of this opinion except the final paragraph of Section I of the Discussion, which he sees as unnecessary to our holding.
4 BACKGROUND
I. Statutory framework
A. Assessment of tax liability and related penalties
The United States taxing system largely relies on “self-reporting.” United States v.
Bisceglia, 420 U.S. 141, 145 (1975). Taxpayers file tax returns, on which they compute
their net income and taxes, and pay the amount of tax indicated on said return. Only a
fraction of tax returns are audited by the Service. If, after review of a taxpayer’s return,
the Service determines that the taxpayer owes more tax than reported, it calculates a
related “deficiency”: roughly speaking, the amount by which the tax reported is less
than the tax in fact due. I.R.C. § 6211(a). 2 It then sends a “notice of such deficiency” to
the taxpayer, announcing the amount due and related information. Id. §§ 6212(a),
7522(a).
In its notice of deficiency, and in addition to the amounts presented as accrued
interest due on the tax deficiency, the IRS may also assert claims for related penalties,
identifying the authority for the penalty imposed. See id. §§ 6651 et seq. Penalties can be
severe: for example, with respect to Besicorp, one Taxpayer in this appeal, the Service
assessed a roughly $20 million penalty on a $50 million deficiency for its accuracy-
related “gross valuation misstatements.” Joint App’x at 50; see I.R.C. § 6662(h).
2 More specifically:
[T]he term ”deficiency” means the amount by which the tax imposed . . . exceeds the excess of . . . (1) the sum of (A) the amount shown as the tax by the taxpayer upon his return . . ., plus (B) the amounts previously assessed (or collected without assessment) as a deficiency, over — (2) the amount of rebates . . . made.
I.R.C. § 6211(a). This definition is subject to certain additional rules, as set forth in Section 6211(b). Those additional rules do not bear on our discussion.
5 The Code imposes procedural requirements on the Service before it can impose
penalties. One such requirement is found in Section 6751(b)(1), entitled “Approval of
assessment.” 3 It provides:
No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate. I.R.C. § 6751(b)(1). We refer to this as the “supervisory approval” requirement, and it is
key here.
A taxpayer who wishes to contest the deficiency or penalty amounts stated in a
notice of deficiency may file a petition for a redetermination with the Tax Court within
90 days from the date of the notice’s issuance. See id. §§ 6213, 6214. 4 If the Tax Court
issues a final decision upholding the stated deficiency and penalties, or if no timely
petition for redetermination is filed, the Service may then take the pivotal step of
“assess[ing]” the amount due by “recording the liability of the taxpayer in the office of
the Secretary.” Id. § 6203; see id. §§ 6213(a), 6215(a). The assessment “fix[es] the amount
payable.” Michael I. Saltzman & Leslie Book, IRS Prac. & Proc. ¶ 10.01[1] (2025) (citing
I.R.C. § 6203). The Service must then notify the taxpayer of the unpaid tax liability “as
soon as practicable, and within 60 days” of the assessment, and demand payment. I.R.C.
§ 6303(a).
3Section 6751 is entitled “Procedural requirements.” I.R.C. § 6751. It explains that its provisions use the word “penalty” to mean “any addition to tax or any additional amount.” Id. § 6751(c). Subsection (a) requires the Service to inform the taxpayer subject to a penalty the source of its authority to impose the penalty and “a computation of the penalty.” Id. § 6751(a).
4Alternatively, the taxpayer may pay the amount of deficiency and then bring suit for a refund in U.S. District Court or the Court of Federal Claims. See 14 Mertens Law of Fed. Income Tax’n § 49C:1 (July 2025 Update).
6 B. Collection of tax debt
The Service may then take various steps toward collection. Notably, if after
assessment and demand the taxpayer “neglects or refuses” to pay the outstanding
liability, the Code provides that “the amount. . . shall be a lien in favor of the United
States upon all property and rights to property, whether real or personal, belonging to
such person.” Id. § 6321. The Service may also record a federal tax lien on the taxpayer’s
property in the appropriate jurisdiction. See id. § 6323(f); see generally Saltzman & Book,
supra, at ¶ 14A.04.5 More intrusively, it may levy (that is, seize) the taxpayer’s property
and sell it to satisfy the tax debt. I.R.C. § 6331.
In 1998, complaints of abusive collection tactics by the Service in its use of these
tools (and other concerns) led to the passage of the Internal Revenue Service
Restructuring and Reform Act of 1998 (the “Reform Act”), Pub. L. No. 105–206, 112 Stat.
685, establishing new procedural protections for taxpayers facing IRS collection actions.
See Our Country Home Enters., Inc. v. Comm’r, 855 F.3d 773, 779 (7th Cir. 2017); Iames v.
Comm’r, 850 F.3d 160, 162 (4th Cir. 2017). Paramount here, the Reform Act afforded a
taxpayer subject to collection actions two separate rights: the right to a hearing after
receiving a Notice of Federal Tax Lien, see I.R.C. § 6320, and the right to a hearing before
the IRS levies on its property, see id. § 6330. These are the CDP hearings we have
referred to above.6
5If it does so, the Service must “notify in writing the person . . . of the filing of a notice of lien” and provide post-recording process to the taxpayer who wishes to contest the lien or any element of it. I.R.C. § 6320.
6Section 6330(c)(1), the focus of our discussion here, is entitled “Requirement of investigation,” and provides in full, “The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.” I.R.C. § 6330(c)(1). The Code section concerning the Service’s imposition of liens, Section
7 Officers within the Internal Revenue Service Independent Office of Appeals
(“Appeals Office”) conduct the CDP hearings prescribed by the Reform Act. 7 Id.
§ 6320(b)(1). Appeals Officers (also known as Settlement Officers) are charged with
“impartially resolving disputes between the government and taxpayers,” Our Country
Home Enters., 855 F.3d at 779, while advocating for neither the taxpayer nor the Service.
To preserve that impartiality, the Appeals Officer conducting the CDP hearing must
have had “no prior involvement with respect to the unpaid tax” and is subject to other
procedural constraints. I.R.C. §§ 6320(b)(3), 6330(b)(3).
At the most general level, the Appeals Officer is charged with determining (i)
whether a Notice of Federal Tax Lien should remain in effect, and (ii) if a Notice of
Intent to Levy is at issue, whether the IRS may proceed with the proposed levy. See id.
§ 6320(b)(1) (liens); id. § 6330(b)(1) (levies). Before making those determinations, the
Appeals Officer must permit the taxpayer “[to] raise . . . any relevant issue relating to
the unpaid tax,” subject to certain limitations. 8 Id. § 6330(c)(2). Further, the Appeals
Officer must consider “whether any proposed collection action balances the need for the
efficient collection of taxes with the legitimate concern of the person that any collection
6320, incorporates the provisions concerning levies into those governing imposition of liens. Id. § 6320(c).
The key difference in the CDP hearing aspect of the two sections is that the taxpayer’s opportunity for a CDP hearing follows the Service’s imposition of a federal tax lien, whereas it comes before the Service levies on a taxpayer’s property. But for both liens and levies, the verification requirement set out in Section 6330(c)(1) applies: the Appeals Officer conducting the CDP hearing shall verify the Service’s compliance with “any applicable law.”
7Before 2019, this office was simply called the Office of Appeals. Ruhaak v. Comm'r, 157 T.C. 103, 104 n.2 (2021).
8The taxpayer may raise “challenges to the existence or amount of the underlying tax liability” only if it “did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.” I.R.C. § 6330(c)(2)(B).
8 action be no more intrusive than necessary.” Id. § 6330(c)(3)(C). Most salient here, the
Appeals Officer must also “obtain verification from the Secretary [of the Treasury] that
the requirements of any applicable law or administrative procedure have been met.” Id.
§ 6330(c)(1). Only after satisfying these requirements and considering the arguments
and evidence presented by the Service and the taxpayer may the Appeals Officer issue a
“Notice of Determination” upholding or rejecting the lien or proposed levy.
CDP proceedings are subject to few formalities and are not the full-blown civil
trials one might imagine. As one of our sister Circuits has observed, “calling the [CDP]
proceeding a ‘hearing’ is somewhat misleading in that there is no obligation [for the
Appeals Office] to conduct a face-to-face hearing, no formal discovery, no requirement
for either testimony or cross-examination, and no transcript.” Our Country Home Enters.,
855 F.3d at 780 (internal quotation marks omitted). A CDP hearing offers a taxpayer
more than it had before the 1998 Reform Act, but in practice the CDP hearing can be
“nothing more than an opportunity for an informal oral or written conversation with
the IRS before [it] must pay a tax.” Id.
Even so, an Appeals Officer’s failure to comply with the procedural requirements
set forth in the statute can be consequential, and the Tax Court, which considers appeals
from CDP hearings, may overturn a determination when it identifies such a failure. See
I.R.C. § 6330(d)(1). In particular, if on review it is established that the Appeals Officer
has not “verif[ied]” the Service’s compliance with “an[] applicable law or
administrative procedure,” id. § 6330(c)(1), the Tax Court may strike the proposed lien
or levy. See, e.g., Pfetzer v. Comm’r, 122 T.C.M. (CCH) 395, 2021 WL 6143712, at *5 (2008)
(concluding that the Appeals Office abused its discretion in sustaining a Notice of
Federal Tax Lien when the Appeals Officer “ha[d] not fulfilled her duty of verification
under section 6330(c)(1)”); see generally Hoyle v. Comm’r, 131 T.C. 197 (2008) (“Hoyle I”).
9 II. Factual and procedural history
Unless otherwise noted, the facts set forth below are drawn from the Tax Court
record and are undisputed. The facts and procedural history in all six of these
consolidated appeals are materially identical for purposes of our decision, as the parties
acknowledge. Taxpayers’ Br. at 4−5; Comm’r Br. at 4.
From 1999 to 2003, the Taxpayers—Besicorp Group, Day Stores, Humboldt
Shelby Holding Corporation, the Markell Company, Vance Finance and Holding
Corporation, and Seashore Broadcasting Corporation—each participated in what the
IRS concluded were “intermediary tax shelter transactions designed to avoid the
payment of taxes.” Joint App’x at 36 (Besicorp Notice of Determination dated Feb. 1,
2017). 9 In the underlying liability proceedings, the IRS determined that each Taxpayer
was liable for deficiencies and penalties, and, on petitions for review of those
determinations, the Tax Court upheld the noticed deficiencies and penalties. 10. No
Taxpayer appears to have litigated any issue related to Section 6751’s supervisory
approval requirement in those earlier proceedings.
In the years after the Taxpayers’ liabilities for tax, penalties, and interest were
affirmed, the IRS formally assessed the liabilities in accordance with Section 6215(a). It
sent each Taxpayer a notice of deficiency and demanded payment. The Taxpayers failed
9 For brevity, we quote only from the materials filed in the appeal by Besicorp.
10Of the six Taxpayers, only one—Humboldt Shelby Holding Corporation—appealed the Tax Court’s decision on the liability ruling to this Court. On de novo review of that decision, we affirmed. See Humboldt Shelby Holding Corp. & Subs. v. Comm’r, 606 F. App’x 20, 21 (2d Cir. 2015) (affirming 107 T.C.M. (CCH) 1242, 2014 WL 1041485 (T.C. 2014)). Four of the other Taxpayers agreed to the identified tax liability in “stipulated decision[s], entered in the United States Tax Court.” Joint App’x at 36. The final Taxpayer, Vance Finance, does not appear to have stipulated to the Tax Court’s liability decision, but it did not appeal the decision and “did not dispute the liability” in its CDP hearing. Joint App’x at 544.
10 to pay. Accordingly, the IRS filed liens and sent each Taxpayer Notices of Federal Tax
Liens and Notices of Intent to Levy. By the time the Service sent Notices of Intent to
Levy to the Taxpayers, in late 2014 through early 2016, the Taxpayers owed
accumulated amounts ranging from just under $13 million (for Day Stores) to almost
$200 million (for Besicorp). These notices also informed each Taxpayer of the statutory
right to a CDP hearing in connection with the liens and levies.
In response, each Taxpayer made a token “offer in compromise” to the Service,
proposing to settle its liabilities for $1,000. In connection with those offers in
compromise, each represented to the Service that it was an “inactive corporation”
without assets, checking a box that expressed “[d]oubt as to [c]ollectability,” and
explaining “I have insufficient assets and income to pay the full amount.” Joint App’x at
59, 71. 11 The Taxpayers then each requested, and received, a CDP hearing. Each of these
hearings was conducted by the same Appeals Officer within the Appeals Office.
In his concluding Notices of Determination, which announced the results of the
CDP hearings, the Appeals Officer sustained the IRS’s liens and proposed levy actions;
rejected the offers in compromise, primarily on the ground that accepting the offers
“would be detrimental to the interests of fair tax administration,” Joint App’x at 37; and
upheld the assessed liabilities and penalties.
In each Notice of Determination, the Appeals Officer wrote:
I . . . verified the requirements of any applicable law or administrative procedure were met. IRS records confirmed the proper issuance of the notice and
11The proposed offers in compromise also requested that the IRS “accept the offer amount listed in this offer application as payment in satisfaction of any claims by the IRS against any person, as an alter ego, agent, nominee, transferee, or otherwise, for my outstanding tax debt.” See Joint App’x at 73.
11 demand, Notice of Intent to Levy, Notice of Federal Tax Lien (NFTL) filing and notice of a right to a [CDP] hearing. An assessment was properly made for each tax and period listed on the CDP notice. Notice and demand for payment was mailed to your last known address. There was a balance due when the Notice of Intent to Levy was issued and when the NFTL filing was requested. I had no prior involvement with respect to the specific tax periods either in Appeals or Compliance. I reviewed the Collection file, IRS records and information you provided. My review confirmed that the IRS followed all legal and procedural requirements, and the actions taken or proposed were appropriate under the circumstances.
Id. at 32–33 (emphases added). The Notices of Determination made no express mention
of Section 6751(b)’s supervisory approval requirement.
The Taxpayers then each sought review in the Tax Court. They were able to
obtain some discovery in these proceedings, and requested “all documents on which
the Appeals officer based his conclusion that ‘the requirements of any applicable law or
administrative procedure were met,’ including but not limited to the requirements of
section 6751(b).” Joint App’x at 91 ¶ 2(w). The Service produced no documents in
response to this request. Rather, as quoted by the Taxpayers, the Service took the
position that “[b]ecause the applicability of the penalty at issue in this CDP case had
already been conclusively determined by the Tax Court . . . , and the Tax Court’s prior,
final decision ha[d] res judicata effect, no further verification of compliance with the
requirements of [Section] 6751(b) was required.” Id. ¶ 2(x) (internal quotation marks
omitted).
In all six cases, the Commissioner then moved the Tax Court for summary
judgment. The Taxpayers opposed, asserting that the Appeals Officer had failed in his
12 duty to verify the Service’s compliance with Section 6751(b)(1) in assessing penalties.
They also claimed he had abused his discretion by rejecting the Taxpayers’ offers in
compromise.
The Special Trial Judge assigned to the cases by the Tax Court granted in part
and denied in part the Commissioner’s motions in an unpublished order. She found no
abuse of discretion in the Appeals Officer’s rejection of the offers in compromise. But
she also concluded that the Appeals Officer’s “failure to verify [the] IRS’[s] compliance
with section 6751(b) was a failure to meet the verification requirement of section
6630(c)(1) [sic: 6330(c)(1)] and therefore was an abuse of discretion.” Joint App’x at 115.
She thus denied the Service summary judgment in part, with the effect that, although
the Taxpayers’ penalty assessment and overall tax liability were unaffected, the
Service’s liens and proposed levies could not be enforced as to the penalties.
Only weeks later, however, in a published Tax Court Memorandum, a Tax Court
Judge reached the opposite conclusion about the requirements of Section 6330 and
Section 6751(b). See Warner Enters., Inc. v. Comm’r, 124 T.C.M. (CCH) 98, 2022 WL
3584090 (T.C. 2022), appeal filed No. 24-611 (2d Cir. 2024). 12 In Warner Enterprises, the Tax
Court held that “where the Court previously adjudicated and entered a decision
determining the applicability of penalties,” a CDP Appeals Officer need not verify
compliance with the supervisory approval requirement of Section 6751(b)(1). Id. at *4.
Instead, it ruled, the Appeals Officer “merely needs to determine that the penalty was
properly assessed.” Id. “To permit otherwise,” it reasoned, “would place the
administrative agency in review of the Court.” Id. And because no authority “would
12The appeal in Warner Enterprises has been held in abeyance pending our Court’s decision in the consolidated Besicorp cases. Order Granting Unopposed Motion to Stay Appeal, Warner Enters., Inc., No. 24-611 (2d Cir. Mar. 28, 2024), Dkt. No. 18.
13 permit the Court to set aside the prior—and now final—decision” on the underlying
liability, “verification of IRS compliance with [S]ection 6751(b) at this stage would serve
no purpose.” Id. at *5. In short, the Tax Court in Warner Enterprises squarely rejected the
Taxpayers’ argument that Section 6330(c)(1)’s verification requirement “includes
confirmation of whether the supervisory approval requirement of section 6751(b) has
been met.” Id. at *4.
Soon after Warner Enterprises issued, the Special Trial Judge assigned these
Taxpayers’ cases vacated her earlier decisions, and, in a new set of Orders and
Decisions, granted in full the Commissioner’s motions for summary judgment. Citing
Warner Enterprises, the judge now accepted the Commissioner’s argument that
“compliance with section 6751(b) is not part of the verification requirements of section
6330(c)(1) because th[e] [Tax] Court . . . already conclusively determined the
applicability of penalties.” Joint App’x at 125. She ruled that the Appeals Officer in the
case at bar complied with the requirements of Section 6330(c)(1), on the ground that, as
in Warner Enterprises, ”’the [Tax] Court previously adjudicated and entered a decision
determining the applicability of penalties,’” so that the Appeals Officer “’merely
need[ed] to determine that the penalty was properly assessed.’” Id. (quoting Warner
Enters., Inc., 2022 WL 3584090, at *4).
The Taxpayers appealed to our Court, challenging only this part of the Tax
Court’s decision. Taxpayers’ Br. at 7–8. The Taxpayers do not challenge the portions of
the Tax Court’s orders affirming the Appeals Officer’s rejection of the Taxpayers’ offers
in compromise, and do not challenge the IRS’s assessments of their very large tax
liabilities, including penalties. Rather, they contend that because the Service did not
show that the Appeals Officer satisfied the verification requirements of Section
6330(c)(1) with respect to the supervisory approval requirement of Section 6751(b)(1), it
may not use liens and levies to collect the amounts of the penalties that are owed.
14 On appeal, we consolidated the six cases.
DISCUSSION
We review de novo the Tax Court’s grant of summary judgment. Williams v.
Comm’r, 718 F.3d 89, 91 (2d Cir. 2013). In doing so, we “must also review the decision by
the Appeals Office.” Id. We review the Appeals Office’s determinations for abuse of
discretion. Id. at 92. 13
The Taxpayers argue that Section 6330(c)(1) obligates the Appeals Officer in
every CDP hearing to verify the Service’s compliance with Section 6751(b)(1)—that is,
its satisfaction of the basic requirement that no penalty be assessed “unless the initial
determination of such assessment is personally approved (in writing) by the immediate
supervisor of the individual making such determination.” I.R.C. § 6751(b)(1). Failure to
do so, they urge, prevents the Service from using the federal tax liens authorized by
Section 6323 and the levies authorized by Section 6331 to collect the assessed liabilities.
For his part, the Commissioner maintains that where, as here, the underlying
liabilities have already been conclusively determined in earlier IRS proceedings,
verification that supervisory approval was obtained would “serve[] no bona fide
purpose” at the CDP hearing stage. Comm’r Br. at 33. And so, he argues, the
supervisory approval requirement is not correctly understood to be an “applicable law
or administrative procedure” under Section 6330(c)(1). Id. (quoting I.R.C. § 6330(c)(1)).
13As relevant here, Section 7482 of the Code generally gives the Courts of Appeals “exclusive jurisdiction to review the decisions of the Tax Court, . . . in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury,” subject only to further review by the Supreme Court upon certiorari. I.R.C. § 7482(a)(1). On such review, our Court has the power “to affirm or, if the decision of the Tax Court is not in accordance with law, to modify or to reverse the decision of the Tax Court, with or without remanding the case for a rehearing, as justice may require.” Id. § 7482(c)(1).
15 He urges that, in such cases, the Appeals Officer is under no obligation at all to verify
that the Service obtained supervisory approval. All challenges related to the penalties
that required supervisory approval have been settled in the earlier proceedings, he
maintains, and the related verification requirement has become meaningless.
For the reasons set forth below, we cannot agree.
I. Section 6330(c)(1) requires the Appeals Officer in a CDP hearing to verify that “the requirements of any applicable law or administrative procedure” have been met without regard to the stage of the Service’s proceedings.
We begin, as always, with the text of the statute whose meaning the parties
dispute. Bartenwerfer v. Buckley, 598 U.S. 69, 74 (2023).
Section 6330(c)(1) states that it imposes a “[r]equirement of investigation” on the
Appeals Officer conducting a CDP hearing. In language as unmistakably mandatory as
it is unmistakably broad, it provides: “The appeals officer shall at the hearing obtain
verification from the Secretary that the requirements of any applicable law or
administrative procedure have been met.” I.R.C. § 6330(c)(1) (emphases added).
The Code does not specify which requirements of law or administrative
procedure must be verified by the Appeals Officer at the hearing. But the Tax Court has
held that the “basic” requirements for which an Appeals Officer must obtain Section
6330(c)(1) verification, Dinino v. Comm’r, 98 T.C.M. (CCH) 559, 2009 WL 4723652, at *7
(T.C. 2009), include at least these four:
(i) that a valid assessment was made;
(ii) that notice of the assessment was given, and demand for payment
made, to the taxpayer;
(iii) that the taxpayer failed to pay; and
16 (iv) that the IRS issued a notice of the recorded lien or notice of intent to
levy, together with a notice of the taxpayer’s right to a hearing.
See Ron Lykins, Inc. v. Comm’r, 133 T.C. 87, 97 (2009).
Section 6330(c)(1)’s verification mandate has been held to apply to other legal
requirements as well: for example, the Tax Court has ruled that the Appeals Officer
must verify that before the deficiency was assessed, the notice of deficiency was mailed
to the taxpayer at its last known address. Hoyle I, 131 T.C. at 200 (observing that “[o]ne
requirement of applicable law” subject to Section 6330(c)(1) verification is the
Commissioner’s obligation to “duly mail[] a notice of deficiency” to a taxpayer).
As we have said, the question in the cases before us now is whether Section
6751(b)(1)’s supervisory approval requirement is a “requirement[] of any applicable law
or administrative procedure” that is subject to Section 6330(c)(1)’s verification mandate.
I.R.C. § 6330(c)(1). Looking to the literal meaning of the statutory language, we think
the presumptive answer to that question has to be “yes.” Section 6330(c)(1) applies to
requirements set forth in “any” applicable law or administrative procedure. Id. The
Supreme Court has underscored that “the word ‘any’ . . . has an ‘expansive meaning.’”
Republic of Iraq v. Beaty, 556 U.S. 848, 856 (2009) (quoting United States v. Gonzales, 520
U.S. 1, 5 (1997)). Current dictionaries tell us the same, with one defining “any” as “one
or some indiscriminately of whatever kind.” Any, Merriam-Webster's Unabridged
Dictionary, https://unabridged.merriam-webster.com/unabridged/any (last visited Dec.
8, 2025).
And Section 6751(b)(1) is equally plain: “No penalty under this title shall be assessed
unless the initial determination of such assessment is personally approved (in writing)
by the immediate supervisor of the individual making such determination or such
higher level official as the Secretary may designate.” I.R.C. § 6751(b)(1) (emphasis
17 added). We find it difficult to say that, literally read, this statute is not an “applicable
law” as to any case in which penalties are imposed. 14
The Commissioner contends, however, that the Appeals Officer’s obligation to
verify that supervisory approval for penalties was obtained falls away when the
taxpayer’s liability for the deficiency, penalties, and interest—the basis for the Service’s
lien and desired levies—has already been “conclusively determined” by the Service
either in prior proceedings or in a stipulation by the taxpayer. Comm’r Br. at 24. He
relies on the word “applicable” in Section 6330(c)(1) to support his reading, and presses
the view that, “[a]t the time of the CDP hearings, . . . [Section] 6751(b)(1)’s supervisory
approval requirement was no longer ‘applicable’ because each taxpayer’s liability for
the penalties had already been conclusively determined by the Tax Court, [and] the
appeals officer was bound by those determinations . . . .” Comm’r Br. at 33. The Appeals
Officer could not overturn those determinations, he says, and so the Service’s earlier
compliance—or non-compliance—with the supervisory approval requirement became
irrelevant.
We must decline the Commissioner’s invitation to read into Section 6330(c)(1) the
limitation that Section 6751(b)(1) was “applicable” before the underlying tax liabilities
and penalties were finally adjudicated in the Tax Court, but not thereafter. Nothing in
the text of Section 6330(c)(1) suggests that the scope of the Appeals Officer’s verification
obligation is altered by the happenstance that the underlying liabilities were previously
litigated and decided. See Bates v. United States, 522 U.S. 23, 29 (1997) (“[W]e ordinarily
resist reading words or elements into a statute that do not appear on its face.”).
14Even the Commissioner concedes that, “if [Section] 6751(b)(1) applies to a penalty that becomes the subject of a CDP hearing, then the appeals officer generally should obtain verification that proper supervisory approval of the penalty was obtained.” Comm’r Br. at 24 (emphasis added).
18 Congress expressly excluded certain taxes from Section 6751(b)(1)’s supervisory
approval requirements. See I.R.C. § 6751(b)(2); ATL & Sons Holdings, Inc. v. Comm’r, 152
T.C. 138, 144, 148–54 (2019) (describing types of penalties exempt from the supervisory
approval requirement). 15 But it did not do so here, and the Commissioner does not (and
cannot reasonably) contend that any of these stated exceptions actually applies to the
penalties that the IRS seeks to collect in the cases now before us. The Code broadly
defines “penalty” as “any addition to tax or any additional amount,” I.R.C. § 6751(c),
further signaling an inclusive intention on Congress’s part. Taken together, these
observations reinforce that in Section 6751, “any” means “any.”
The Commissioner also fails to persuade when he invokes other provisions
within Section 6330 to support his view that verification of the penalties’ supervisory
approval is not required for the Service to assert liens and to levy on taxpayers’
property. For example, the Commissioner points to Section 6330(c)(2)(B), which permits
a taxpayer to raise “challenges to the existence or amount of the underlying tax
liability” at CDP hearings only if the taxpayer “did not receive any statutory notice of
deficiency for such tax liability or did not otherwise have an opportunity to dispute
such tax liability.” Id. § 6330(c)(2); see ante, note 8; Comm’r Br. at 21–22, 29–32. As the
Fourth Circuit has explained, Section 6330(c)(2)(B) “incorporate[s] the principle[] of
claim preclusion . . . into the CDP context,” animated by the idea that “CDP hearings do
15 Section 6751(b) expressly exempts the following from the supervisory approval requirement:
(A) any addition to tax under section 6651, 6654, 6655, or 6662 (but only with respect to an addition to tax by reason of paragraph (9) or (10) of subsection (b) thereof); or
(B) any other penalty automatically calculated through electronic means.
I.R.C. § 6751(b)(2).
19 not afford taxpayers a chance to relitigate questions that have already been settled or
should have been.” Iames, 850 F.3d at 167.
But while the Taxpayers here each had an opportunity to dispute their
underlying tax liabilities, including the assessed penalties, and availed themselves of
those opportunities, res judicata—as codified in Section 6330(c)(2)(B)—does not
preclude them from raising the verification issue in their CDP hearings, because a
challenge on verification grounds is not a “challenge[] to the existence or amount of the
underlying tax liability.” I.R.C. § 6330(c)(2)(B). True, the IRS does not have authority to
impose a penalty unless supervisory approval of it is obtained, so disputing whether a
penalty received supervisory approval in the first place implicates “the existence or
amount of the underlying tax liability,” including the assessed penalties. Id.; see Chai v.
Comm’r, 851 F.3d 190, 222 (2d Cir. 2017) (“[T]he written-approval requirement of
[Section] 6751(b)(1) is appropriately viewed as an element of a penalty claim, and
therefore part of the IRS’s prima facie penalty case.”). 16 But whether supervisory approval
of the penalty was in fact obtained pre-assessment (as called for by Section 6751(b)(1))
presents a question separate from that of whether the Appeals Officer verified
compliance with the supervisory approval requirement at a post-assessment CDP
16The record before us does not establish, so far as we can tell, that supervisory approval was in fact obtained for the penalties imposed on the Taxpayers. We held in Chai that “the written- approval requirement of [Section] 6751(b)(1) is . . . an element of a penalty claim, and therefore part of the IRS's prima facie penalty case.” Chai, 851 F.3d at 222. As explained above, however, the Taxpayers’ assessed penalties and overall liabilities have already been litigated and conclusively determined, see ante, note 10, and the Taxpayers did not raise any issues related to the supervisory approval requirement in these underlying liability proceedings. See Chai, 851 F.3d at 223 (explaining that while the Commissioner bears the burden of proving that the supervisory approval requirement has been met, taxpayers have “the responsibility of arguing in the Tax Court that the Commissioner had not complied with [Section 6751]” (internal quotation marks omitted)). The “existence or amount” of the assessed penalties is thus not at issue in this appeal.
20 hearing (conducted under Section 6330(c)(1)). Cf. Pfetzer, 2021 WL 6143712, at *4
(“[P]roper verification is not a challenge to the underlying liability; it is a stand-alone
requirement in section 6330(c)(1) and is independent of the issues that may be
considered under section 6330(c)(2) (such as the taxpayer's underlying tax liability).”).
From a distance, that difference may seem insubstantial, but it carries real-world
implications. Because Section 6330(c)(1)’s verification requirement does not attach until
the CDP hearing stage, when collection actions—not the underlying liability—are at
issue, “proper verification” is not an issue that the Taxpayers could have raised in the
earlier litigation adjudicating their underlying tax liability. Thus, res judicata, as
codified in Section 6330(c)(2)(B), has not attached to the Taxpayers’ challenge to the
Appeals Officer’s failure to verify supervisory approval. See I.R.C. § 6330(c)(2)(B). And
the Appeals Officer’s failure to comply with the verification requirement has no impact
on a taxpayer’s underlying tax liability in substance or amount: the Appeals Officer’s
failure to verify bears only on the IRS’s authority to collect the assessed penalty
amounts through liens or levies; it does not preclude the IRS from collecting the
assessed penalty amounts through other measures. 17 As counsel for the Commissioner
acknowledged at oral argument in our court, the government may, for example, file a
17This Court has interpreted Section 6751 to have a timing requirement: it requires the individual making the penalty determination to obtain written approval of the initial penalty determination “no later than the date the IRS issues the notice of deficiency (or files an answer or amended answer) asserting such penalty.” Chai, 851 F.3d at 221 (emphasis added). We explained that, by enacting Section 6751(b) as a part of the Reform Act, see § 3306, 112 Stat. at 744, Congress aimed “to prevent IRS agents from threatening unjustified penalties to encourage taxpayers to settle.” Chai, 851 F.3d at 219; see also Report to Accompany H.R. 2676, S. Rep. No. 105-174, at 65 (1998) (“The Committee believes that penalties should only be imposed where appropriate and not as a bargaining chip.”). The Service thus cannot satisfy Section 6751 by obtaining retroactive approval of the penalties, and so must pursue other means of collection that do not require the Appeals Officer to verify that the Service complied with this provision. See Transcript of Oral Argument at 13 (counsel for the Commissioner confirming that there is no way for the Service to “backtrack” and obtain supervisory approval for these penalties).
21 complaint in U.S. District Court, reduce to judgment the amounts owed, and then use
state remedies to collect on that judgment. See Tr. of Oral Argument at 13:19–21; see also
I.R.C. §§ 7401 et seq. What the Service loses is its ability to enforce its liens against the
Taxpayers’ property and to use its expedited levy process, at least insofar as they relate
to the penalties assessed against the Taxpayers. 18
In that way, this procedural limit is consonant with the Code’s broader
enforcement scheme. To ensure fairness in the determination of penalty liabilities, the
Code requires supervisory approval of that imposition by a more senior official. I.R.C.
§ 6751(b)(1). And to ensure fairness in the use of expedited and intrusive collection tools
such as federal tax liens and levies, the Code requires Appeals Officers to double check
that all applicable requirements, including the supervisory approval requirement, were
satisfied before allowing those collections to go forward. Id. § 6330(c)(1). This latter
requirement stems from Congress’s desire to “establish[] formal procedures designed to
insure due process” at the collections stage specifically, and particularly the “collect[ion
of] taxes by levy (including by seizure).” Report to Accompany H.R. 2676, S. Rep. No. 105-
174, at 67 (1998). Thus, these dual, layered requirements serve important—and
different—functions within the broader statutory scheme.
18 We do not decide whether the Appeals Officer’s failure to comply with Section 6330(c)(1)’s verification requirement bars collection by liens and levies of only the penalties to which Section 6751(b)(1)’s supervisory approval requirement attaches or of the entire tax liability addressed in the Notices of Determination. In its initial, later vacated, summary judgment rulings, the Tax Court denied summary judgment only as to the Service’s collection of the assessed penalties by liens and levies. But the parties seemed to suggest at oral argument in our Court that the Service would have to collect all amounts owed by the Taxpayers—tax deficiencies, penalties, and interest—by other means. See Transcript of Oral Argument at 6, 9−10, 13−14. We question why this provision should bar the use of liens and levies to collect the underlying tax liabilities (as opposed to penalties). Because the parties did not brief this issue, however, we leave it for another day (including, perhaps, for resolution by the Tax Court on remand).
22 In any event, Section 6330(c)(2)(B) has little bearing on the Appeals Officer’s
verification obligation under Section 6330(c)(1). Section 6330(c)(2)(B) governs what
issues the taxpayer may raise at a CDP hearing. See I.R.C. § 6330(c)(2)(B) (“The person may
also raise at the hearing challenges to the existence or amount of the underlying tax
liability for any tax period . . . .” (emphasis added)). The Appeals Officer has a
freestanding obligation under Section 6330(c)(1) to verify that the requirements of any
applicable law or procedure have been met: that statute provides that “[t]he appeals
officer shall at the hearing obtain verification from the Secretary that [such]
requirements . . . have been met.” Id. § 6330(c)(1) (emphasis added). The verification
obligation thus exists whether or not a taxpayer raises the issue. In other words, even if
Section 6330(c)(2)(B) precluded the Taxpayers from questioning the IRS’s compliance
with Section 6751(b)(1)’s supervisory approval requirement at the CDP hearing, the
Appeals Officer had an independent obligation under Section 6330(c)(1) to verify the
Commissioner’s compliance with this requirement. 19
Section 6330(c)(1) unambiguously states its requirements, and the Service bore
the burden of demonstrating compliance. The Commissioner does not contend that the
approval required by Section 6751(b)(1) was obtained. Because the burden of proving
compliance is on the Commissioner, we draw the inference that the required approval
was not obtained.
19The Commissioner additionally cites Section 6330(c)(4)(A) in support of his position. That section “precludes any issue that ‘was raised and considered at a previous hearing under section 6320 or in any other previous administrative or judicial proceeding’ in which the taxpayer meaningfully participated.” Jeffers v. Comm’r, 992 F.3d 649, 655 (7th Cir. 2021) (quoting I.R.C. § 6330(c)(4)(A)); see also Iames, 850 F.3d at 167 (observing that Section 6330(c)(4)(A) “incorporate[s] the principles of claim preclusion and issue preclusion into the CDP context”). Because neither the record nor any party suggests that compliance with Section 6751(b)(1) was raised or considered in the earlier liability proceedings, however, we do not address Section 6330(c)(4)(A) further here.
23 Where it applies to the penalties that are the subject of the IRS’s collection efforts,
Section 6751(b)(1) is an “applicable law,” and the IRS’s compliance with that law is
subject to verification in CDP hearings. I.R.C. § 6330(c)(1). Section 6330(c)(1) contains no
res judicata carveout: it states no exception to the Appeals Officer’s obligation to
“obtain verification . . . that the requirements of any applicable law or administrative
procedure have been met” for cases where the taxpayer’s underlying liability has been
conclusively adjudicated. Id. Liens and levies are intrusive collection methods and
requiring verification that written supervisory approval of penalties imposed was
obtained provides an additional incentive, in line with the goals of the Reform Act, for
the Service to be meticulous in its imposition of penalties and, consequently, in its use
of those methods to collect tax. Because the Appeals Officer failed to verify that this
requirement was met, the Tax Court erred in upholding the IRS’s authority to impose
the liens and to effect the proposed levies for collection of the penalties.
Our decision does not affect the Taxpayers’ liabilities for either the deficiencies in
payment of taxes due or the penalties imposed, as those have been previously
determined by rulings of the Tax Court. Our decision affects only the use of Code-
authorized liens and levies. Furthermore, as to the use of liens and levies, our decision
affects only their use to collect penalties, because the Commissioner’s failures related
only to the requirements for imposition of penalties. See supra note 18.
Finally, our decision depends on the combined effect of two failures by the
Service: (i) the failure of the Appeals Officer at the CDP hearing to verify whether the
IRS employee imposing penalties had complied with the requirement of Section
6751(b)(1) to obtain prior written approval of a supervisor; and (ii) that officer’s failure
to obtain the prior written approval required by Section 6751(b)(1). If the circumstances
were that the Appeals Officer failed to verify whether the officer imposing the penalty
had obtained prior approval, but subsequent inquiry showed that in fact the required
24 written prior approval had been obtained, the IRS could possibly be permitted to cure
its verification error on remand and eventually use liens and levies to collect the
penalties. See Hoyle v. Comm'r, 136 T.C. 463, 468 (2011) (“Hoyle II”) (explaining that in
Hoyle I, the Tax Court remanded the case “for the Appeals Office to determine, as a part
of its verification [under Section 6330(c)(1)] whether a notice of deficiency was properly
mailed to petitioner,” and holding that when making this determination on remand, the
Appeals Officer “was not limited to what the original Appeals [O]fficer considered”);
Rivas v. Comm'r, 113 T.C.M. (CCH) 1268, 2017 WL 1224708, at *4 (T.C. 2017) (collecting
cases in which the Tax Court “remanded . . . to allow [the] Appeals [Office] to
supplement the administrative record with sufficient evidence to meet the section
6330(c)(1) verification requirement”). Because that circumstance is not before us, we
make neither ruling nor suggestion as to the appropriate course of action in such a case.
We leave that question to be resolved in a case that raises it.
II. The Commissioner’s remaining arguments fail.
Without a meaningful answer to the literal text of the statute, the Commissioner
falls back on his claim that verification of compliance with Section 6751(b)(1) would
serve “no bona fide interest.” Comm’r Br. at 33. He argues that verification in cases
where liability has already been conclusively determined would be meaningless,
practically speaking, because “the appeals officer was bound by and could not have set
aside the Tax Court’s earlier decisions determining the penalties.” Id. We again
disagree.
In advancing this argument, the Commissioner conflates the supervisory
approval requirement and the verification requirement. Failure to satisfy the former
precludes the IRS from imposing a penalty, see I.R.C. § 6751(b)(1); failure to satisfy the
latter precludes the IRS from using liens or levies to collect what is owed, see id.
25 § 6330(c)(1). In essence, a successful challenge here based on the Appeals Officer’s
failure-to-verify would eliminate the IRS’s authority to impose liens or levies without
affecting the underlying liabilities and penalties themselves. See Tr. of Oral Argument at
6:2–7 (counsel for the Taxpayers explaining that reversal of the Tax Court’s grant of
summary judgment “would prevent the collection by [liens and levies] of the amounts
that the [T]ax [C]ourt previously determined were owing. But it would not invalidate
the determination that those amounts were, in fact, owed.”).
By verifying in the CDP hearing that the IRS complied with the supervisory
approval requirement, then, the Appeals Officer would not revisit the Tax Court’s
underlying liability determinations. Nor would requiring such verification “place the
administrative agency in review of the [Tax] Court.” Warner Enters., Inc., 2022 WL
3584090, at *4. Moreover, as mentioned above, prohibiting collection by lien or levy
does not preclude collection altogether. The Commissioner may still pursue collection
through other means, such as reducing the liability to judgment in a civil action filed by
the government in U.S. District Court. From the Commissioner’s point of view, that
alternative is surely more cumbersome and less desirable than the measures described
in the Code, but it is still an available means.
The Commissioner nevertheless asserts that accepting the Taxpayers’
interpretation leads to an “absurd result[].” Comm’r Br. at 37. As the Commissioner
puts it, the distinction between verification of supervisory approval and obtaining
supervisory approval is artificial: if the Taxpayers are not in fact challenging whether
supervisory approval was given, he asks, what point is there in requiring that the Appeals
Officer verify that it was?
Unlike the Commissioner, we identify a difference, in timing and in meaning,
between obtaining supervisory approval for a penalty in the first instance and later
verifying, at the collection phase, that it was given before allowing the Service to collect
26 the penalties through liens and levies. We can be confident that the Service (and
taxpayers generally) have an interest in ensuring that individual approval of proposed
penalties was duly obtained before penalties were imposed, as a matter of the integrity
of Service operations. And in any event, “our constitutional structure does not permit
this Court to rewrite the statute that Congress has enacted.” Commonwealth of Puerto Rico
v. Franklin Calif. Tax-Free Tr., 579 U.S. 115, 130 (2016) (internal quotation marks omitted).
In attempting to equate the supervisory approval and verification requirements, the
Commissioner ignores the fact that failure to comply with each requirement has distinct
consequences: as we have pointed out, whereas the IRS’s initial failure to obtain
supervisory approval precludes it altogether from imposing penalties, the Appeals
Officer’s failure to verify that approval was obtained does no more than limit the
methods available to the IRS for collecting the Taxpayers’ liabilities. That limitation is
inconvenient for the Service, to be sure, but the result is hardly absurd and reasonably
can be understood as creating an additional safeguard for taxpayers before penalties are
collected through expedited means.
Our conclusion fits comfortably with what we perceive to be Congress’s vision
for the function of Section 6330 in the overall scheme of the Tax Code. Section 6330’s
“general focus” rested “on the Commissioner’s collection of a predetermined liability,
not the merits of that liability.” Iames, 850 F.3d at 165. In a scheme designed “to make
the collection process less onerous, to encourage negotiation between taxpayers and the
Commissioner, and to impose a measure of procedural regularity and oversight on the
Commissioner's significant and previously unfettered power to levy, . . . Congress
envisioned only limited CDP review of the taxpayer’s underlying liability.” Id.; see also
id. at 166 (“[W]ithin this collection-focused framework, liability review plays no more
than a minor part[.]”); Jeffers v. Comm’r, 992 F.3d 649, 655 (7th Cir. 2021) (“Congress
enacted the [Reform Act] as a procedural protection for taxpayers to oppose IRS
27 collection actions, with mere incidental review of underlying liability in specifically
enumerated instances.”); Report to Accompany H.R. 2676, S. Rep. No. 105-174, at 67 (1998)
(explaining that CDP “procedures designed to afford taxpayers due process in
collections will increase fairness to taxpayers”). Our decision—that Section 6330(c)(1)
imposes an obligation on the Appeals Officer conducting the CDP hearing to verify that
the supervisory approval requirement was met—does not in our view unduly expand
“the peripheral role Congress accorded to liability challenges at the CDP stage.” Iames,
850 F.3d at 166. And we stress that our ruling does not disturb the Tax Court’s earlier,
underlying liability determinations or other collection techniques: it bears only on
whether the IRS may collect the amounts of the penalties owed by the Taxpayers by lien
or levy.
* * *
We therefore conclude that, where Section 6751(b)(1) applies to the penalties that
are the subject of the IRS’s collection efforts, Section 6330(c)(1) requires the Appeals
Officer conducting a CDP hearing with respect to a lien or proposed levy to verify that
Section 6751(b)(1)’s supervisory approval requirement was met. Otherwise stated: the
Appeals Officer must verify that the IRS employee who determined the penalties
obtained written supervisory approval “no later than the date the IRS issue[d] the
notice of deficiency (or file[d] an answer or amended answer) asserting such penalty.”
Chai, 851 F.3d at 221. In the cases on appeal, no party points to any record evidence that
the Appeals Officer made such a verification. Nor is there evidence showing that the
IRS employees who assessed penalties in this case obtained prior written supervisory
approval. Accordingly, the Tax Court erred in granting summary judgment for the
Commissioner insofar as it determined that the Appeals Officer complied with Section
6330(c)(1), and the Appeals Officer abused his discretion in upholding the liens and
proposed levies.
28 CONCLUSION
For the foregoing reasons, we REVERSE the Tax Court’s orders and REMAND
for further proceedings consistent with this opinion.
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Besicorp v. Commissioner of Internal Revenue, Counsel Stack Legal Research, https://law.counselstack.com/opinion/besicorp-v-commissioner-of-internal-revenue-ca2-2026.