The case involved Barrett Business Services, Inc., a professional employer organization that claimed Work Opportunity Tax Credits and Empowerment Zone Employment Credits on its tax returns for worksite employees hired by its clients during 2017 through 2020. The IRS disallowed the credits, determining that only common law employers qualify. Barrett argued it was eligible either as a statutory employer under section 3401(d)(1) or as an agent of the common law employer. The Tax Court granted summary judgment to the IRS, holding that the credits are available only to common law employers under the text of sections 51 and 1396 and supporting legislative history, and that statutory employers or agents do not qualify.
Mission Organic Center, Inc., a state-legal marijuana dispensary, faced IRS collection actions for unpaid income taxes from 2016 to 2020 and submitted an offer-in-compromise to settle the liabilities. The IRS rejected the offer after calculating the taxpayer's reasonable collection potential while excluding business expenses that are nondeductible under I.R.C. § 280E, which disallows deductions or credits for trades or businesses involving controlled substances. The Tax Court held that the IRS settlement officer did not abuse discretion by applying the Internal Revenue Manual provisions that require disregarding such expenses, and that the Commissioner has authority under section 7122(d) to adopt this policy for evaluating offers-in-compromise.
The case involved a notice partner filing a petition in the U.S. Tax Court to challenge a Notice of Final Partnership Administrative Adjustment (FPAA) issued to a partnership under the TEFRA rules, but the filing occurred 168 days after the FPAA was mailed to the tax matters partner. The court granted the Commissioner's motion to dismiss the petition for lack of jurisdiction, holding that the statutory deadlines in I.R.C. § 6226(a) and (b)—90 days for the tax matters partner and an additional 60 days for notice partners—are jurisdictional limits. The core reasoning rested on the statutory text placing the deadlines within the jurisdictional grant, the unworkability of the TEFRA scheme if tolling were allowed, and decades of consistent judicial and congressional treatment treating the periods as jurisdictional. The court further concluded that equitable tolling does not apply to these deadlines even apart from the jurisdictional analysis.
The case concerned the timeliness of a Notice of Final Partnership Adjustment issued by the IRS to JM Assets, LP, a partnership subject to the Bipartisan Budget Act of 2015 audit procedures. After the IRS notified the partnership of a proposed imputed underpayment in June 2022, the partnership submitted all required materials for a modification request in February 2023; the IRS then issued its final adjustment in December 2023. The court held that the adjustment was untimely under I.R.C. § 6235(a)(2) because it occurred more than 270 days after the partnership's submission. It reasoned that Treas. Reg. § 301.6235-1(b)(2)(A), which sought to extend the period until after the close of the modification request window, conflicts with the plain language of the statute. The court further held that an extended six-year limitations period under § 6235(c)(2) did not apply because the partnership had adequately disclosed the relevant income items.
Soroban Capital Partners LP, a limited partnership that managed investments, calculated its net earnings from self-employment for 2016 and 2017 by excluding the limited partners' shares of partnership income under section 1402(a)(13) while including only guaranteed payments made to them. The Commissioner of Internal Revenue issued Notices of Final Partnership Administrative Adjustment that increased the reported net earnings from self-employment. The Tax Court applied a functional analysis to assess whether the limited partners were acting in that capacity, finding that they were essential to generating the firm's income, exercised day-to-day managerial control, worked full time for the business, and contributed little capital relative to their income shares. The court therefore held that the limited partners' distributive shares were not excludable and constituted net earnings from self-employment.
This case involved Dealers Auto Auction of Southwest LLC, which receives cash payments exceeding $10,000 in its auto auction business and is required under IRC section 6050I to file and furnish Forms 8300 reporting such transactions. After failing to file all required returns for 2016, the IRS assessed penalties under sections 6721 and 6722 and pursued collection; the company challenged the penalties in Tax Court, claiming reasonable cause based on its use of specialized software intended to handle the filings. The court held that Dealers Auto did not establish reasonable cause, as the record failed to show either a software malfunction or that the company had adequate controls, training, or monitoring in place to ensure compliance. It noted prior similar failures in 2014 and a drop in filings that should have alerted the company to issues, but no explanation or proof of diligent efforts was provided. The court therefore sustained the penalties and decided in favor of the Commissioner.
