Facts of the Case

Provided by Oyez

In 2010 and 2011, while still married, Jennifer Zuch and Patrick Gennardo made two estimated tax payments totaling $50,000 for their 2010 taxes, without specifying how to allocate the payments between them. In September 2012, after filing separate tax returns, Gennardo reported owing $385,393 while Zuch reported an overpayment. The IRS applied the entire $50,000 in estimated payments to Gennardo’s liability. When Zuch later filed an amended return reporting additional income and claiming her share of the $50,000, the IRS assessed the additional tax but did not credit her for any portion of the estimated payments, even after Gennardo filed his own amended return indicating the payments should be allocated to Zuch.

In August 2013, the IRS notified Zuch of its intent to levy her property to collect approximately $36,000 in unpaid 2010 taxes. During the ensuing Collection Due Process hearing, Zuch challenged her underlying tax liability, arguing she was entitled to credit for the estimated payments. Meanwhile, over several years while Zuch was disputing her 2010 liability, the IRS repeatedly took her tax refunds from other years and applied them to what it calculated as her 2010 liability, eventually reducing the balance to zero by April 2019.

The case went through the Tax Court, which initially denied summary judgment and remanded to the IRS Office of Appeals. When the balance was reduced to zero through the IRS’s seizure of Zuch's later tax refunds, the Tax Court dismissed the case as moot. The U.S. Court of Appeals for the Third Circuit reversed, holding that the IRS cannot eliminate Tax Court jurisdiction over a disputed tax liability simply by seizing a taxpayer’s refunds to cover the contested debt.

Questions

  1. Does a proceeding under 26 U.S.C. § 6330 for a pre-deprivation determination about a levy proposed by the Internal Revenue Service to collect unpaid taxes become moot when there is no longer a live dispute over the proposed levy that gave rise to the proceeding?

Conclusions

  1. The Tax Court lacks jurisdiction under 26 U.S.C. §6330 to adjudicate disputes between a taxpayer and the IRS once the IRS is no longer pursuing a levy. Justice Amy Coney Barrett authored the 8-1 majority opinion of the Court.

    Section 6330 of the Internal Revenue Code grants taxpayers the right to a hearing before the IRS can levy (seize and sell) a taxpayer’s property to collect unpaid taxes. At this hearing, a taxpayer can raise issues about the levy, including the existence or amount of the underlying tax liability, and the appeals officer makes a “determination” about whether the levy may proceed. The law then permits review of this “determination” by the Tax Court. The Tax Court’s jurisdiction is strictly limited to reviewing the determination whether a levy may go forward, not every dispute considered at the hearing. If there is no longer a proposed or ongoing levy—for example, because the taxpayer’s liability has been zeroed out during the pendency of the appeal—there is no determination left to review, and thus, no case or controversy for the Tax Court to resolve under §6330.

    The reasoning rests on several points: (1) The statutory text and structure focus the collection due process hearing and subsequent Tax Court review on the levy alone; (2) The default rule in tax litigation is that challenges to tax liability must proceed as refund suits after payment, except where specifically authorized exceptions, like the collection due process review, apply; and (3) The statute does not authorize the Tax Court to issue refunds or declaratory judgments unrelated to stopping a levy. Therefore, after the IRS drops the levy because the tax debt has been satisfied, any continuing disputes about liability or overpayment must proceed through a refund suit in district court, not in the Tax Court under §6330.

    Justice Neil Gorsuch authored a dissenting opinion, arguing that the Tax Court retains jurisdiction over all issues addressed in the IRS’s determination—including disputes about underlying tax liability—even after a levy is abandoned, and that stripping jurisdiction in these circumstances creates opportunities for the IRS to evade judicial review and leaves taxpayers without meaningful remedies for erroneous IRS actions.