FOR THOSE OF US WHO AREN’T TAX LAWYERS the LakePoint case can be a little difficult to understand, but the gist of it if this: Under the tax code a revenue agent at the IRS responsible for initially determining the penalties in a tax case needs to get the approval of their supervisor before the IRS sends out a notice of the penalties to a taxpayer. In this case, the IRS originally said that the “lead sheet” laying out the penalties to be assessed against LakePoint was signed by an agency supervisor on July 2016, around eight months before the IRS sent out an adjustment notice to the partnership. But LakePoint says documents uncovered during the discovery process show the revenue agent had actually overlooked including the hefty misvaluation penalty in the July 2016 “lead sheet” and then went back to their supervisor in February 2017 to ask to include the penalty. “HUGE oversight,” the supervisor said in emails obtained by LakePoint’s lawyers when alerted to the omission. The partnership says the supervisor then signed off on the updated “lead sheet” and manually typed the backdated “7/16/2016.” A “digital signature” that the supervisor had used before would have reflected the true date of the signature, LakePoint says. The partnership argues that the IRS attorneys should have become aware that the date of the approval was wrong by November 2022 but that the attorneys did not attempt to rectify the court record, which included both the fraudulent documents and false sworn statements. Nor, LakePoint says, did the IRS attorneys provide key evidence in a clearly organized way that is required in the discovery process. What happens from here: There’s some legal ambiguity around how long in advance the IRS has to get a supervisor’s approval for penalty assessment and it’s possible that a tardy approval could have put the agency’s case in jeopardy, yet the signing of a fraudulent document as part of an audit by anyone in the government is no joke: it constitutes a felony. In an April motion with the Tax Court the IRS admitted to the error but said it was unintentional, adding that the “commissioner expresses his contrition and apologizes to the Court and to petitioner for this error.” But the IRS continues to argue that the penalties assessed against LakePoint should be upheld, while LakePoint wants compensation for attorney fees and sanctions against the IRS. The agency did not immediately respond to a request for comment on the case from Weekly Tax. A NEW TOP LAWYER: Perhaps amidst all the change at the IRS, there couldn’t have been a better time for the Treasury to finally get a new IRS chief counsel. After a vacancy of more than two years, President Joe Biden tapped Marjorie Rollinson to be the IRS’s top lawyer on Friday. Rollinson was most recently Deputy National Tax Leader at EY and was formerly an associate chief counsel at the IRS, overseeing an office of 100 tax lawyers that worked on, among other things, regulations related to the international tax laws implemented by the Tax Cuts and Jobs Act. “[Marjorie] will be able to hit the ground running at IRS, having worked at the agency for years in both Democratic and Republican administrations,” said Treasury Deputy Secretary Wally Adeyemo. The chief counsel will be heavily involved in the crafting of the legal interpretations of tax provisions of the Inflation Reduction Act, including those related to a 15 percent corporate minimum tax on the largest American companies as well as a new tax on stock buy backs. DEMS HAMMER IRS DEFUNDING: As for the last thing on our agenda, Democrats aren’t terribly happy about the $21.4 billion reduction in IRS funding that was included in the debt ceiling agreement, and you might find it interesting that Sen. Sheldon Whitehouse (D-R.I.) is wielding new Congressional Budget Office estimates that indicate the agency cuts would add $19 billion to the deficit. “Republicans’ fealty to their megadonors is on full display, as is the hypocrisy of forcing cuts to the IRS that add $19 billion to the deficit,” Whitehouse said. And here’s Finance Committee Chair Ron Wyden (D-Ore.), who voted for the broader Fiscal Responsibility Act despite being one of the IRS’s biggest advocates in Congress: “It should outrage every American that Republicans were ready to tank the economy just to help the rich cheat on their taxes.”
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