Supreme Court to Decide Key Taxpayer Rights Case in IRS Collection Dispute

In January 2025, the US Supreme Court granted certiorari to review a tax case that provides the Court with an opportunity to rule on the narrow, yet contested, question of due process regarding mootness of Tax Court challenges. Commissioner v. Zuch, No. 24-416, 2025 WL 65915, at *1 (U.S. Jan. 10, 2025). Zuch reached the Supreme Court after the Internal Revenue Service (“IRS”) petitioned to reverse a Third Circuit opinion regarding I.R.C. § 6330 due process claims. The ruling disagreed with the IRS’s argument that underlying tax liability becomes moot upon fulfilled payment of unpaid taxes by any means. Zuch v. Commissioner, 97 F.4th 81, 94 (3d Cir. 2024), cert. granted sub nom. Commissioner v. Zuch, No. 24-416, 2025 WL 65915 (U.S. Jan. 10, 2025). This Third Circuit opinion conflicts with the D.C. and Fourth Circuits, which ruled that § 6330 claims are moot once the IRS abandons its levy and concedes that no tax liability remains. (Tristan Navera & John Woolley, Bloomberg); McLane v. Commissioner, 24 F.4th 316 (4th Cir. 2022); Willson v. Commissioner, 805 F.3d 316 (D.C. Cir. 2015) (affirming Tax Court's dismissal of claims as moot after the IRS abated taxpayer’s underlying tax liability upon which a levy could be placed). If the Supreme Court returns a ruling for Zuch, US taxpayers would gain confidence in disputing IRS levies under § 6330 and face less obstacles to obtaining jurisdiction in US Tax Court. This article recounts the details and events leading to Commissioner v. Zuch and analyses how a Supreme Court verdict could change how due process is weighed in US Tax Court cases.

To understand the gravity of a future decision, it is important to first understand the relevant background of US tax law due process. Various IRS collection due process cases center around taxpayer disputes following collections made by the IRS for underlying tax liability. (Robert Romashko, Bloomberg). When a taxpayer wishes to challenge any outstanding tax debts or proposed levies, they may request a § 6330 hearing with the IRS Independent Office of Appeals. I.R.C. § 6330(b)(1). Section 6330 states that petitioners may request hearings relating to proposed levies, including challenges to the appropriateness of proposed collective actions. I.R.C. § 6330(c)(2). If the Office of Appeals sustains the IRS’s original decision, the taxpayer’s next move is to request a hearing with the US Tax Court, a special federal venue. Due process in the context of the IRS is important to comprehend before a claim is filed, but the specifics are still hotly debated, as shown in Zuch.

In Zuch, petitioner Jennifer Zuch and her ex-husband prepaid $50,000 to the IRS, which Zuch wished to allocate to her tax account with an existing debt of $27,000. Zuch, 97 F.4th at 89. The IRS instead diverted the entire $50,000 prepayment to her ex-husband’s balance, a separate account from Zuch’s outstanding $27,000 debt. Id. Procedurally, the IRS proposed a levy against Zuch to fulfill the outstanding tax liability, and Zuch challenged the alleged misattribution to her ex-husband’s account in US Tax Court under § 6330. Id. Before Zuch’s case could be heard by the Tax Court, the IRS dropped the proposed levy and instead applied Zuch’s 2018 tax refund to the account in dispute, offsetting the $27,000 debt. Id. Effectively, Zuch lost $50,000 in tax credit. Id. With the levy dropped, the Tax Court ruled that Zuch’s case had become moot and no longer fulfilled jurisdictional requirements. (Tristan Navera & John Woolley, Bloomberg).

With her challenge still unanswered, Zuch turned to the US Court of Appeals for the Third Circuit, which found that live disputes for tax liability do not become moot following payment of the disputed tax. Zuch, 97 F.4th at 101, cert. granted sub nom. Commissioner v. Zuch, No. 24-416, 2025 WL 65915 (U.S. Jan. 10, 2025). Now the US Supreme Court is tasked with finally answering the question of mootness.

If the Supreme Court upholds the Third Circuit’s decision, the Tax Court’s jurisdiction may hear a greater range of collection due process cases, which would pave a smoother path for US taxpayers to dispute tax rulings. (John Wooley, Bloomberg). However, the IRS argues that if the Third Circuit decision is upheld, it would effectively expand Tax Court’s jurisdiction beyond Congress’s intent for § 6330 proceedings. Id. Critics of the Third Circuit ruling may argue the decision would invite an increase in similar deficiency petitions, which are already overwhelmingly the majority of all petitions filed in Tax Court. (Harold Dubroff & Brant Hellwig, “The United States Tax Court: An Historical Analysis” (2d ed. 25 2014) at 909 (Appendix B); John Wooley, Bloomberg). Notwithstanding, the Center for Taxpayer Rights argues in their amicus brief that any increase in the Tax Court’s time and resources spent would be marginal, and resolving this due process question will actually be an increase to the court’s efficiency by helping eliminate confusion for taxpayers. Brief for the Center for Taxpayer Rights as Amicus Curiae in Support of Respondent at 26, Commissioner v. Zuch, No. 24-416, 2025 WL 65915, at *1. Ultimately, any way the Supreme Court decides will be helpful in navigating the grey areas of US tax law due process.