IRS Win at Supreme Court Allows Agency to Hinder Taxpayer Rights

The US Supreme Court’s decision in Commissioner v. Zuch demonstrates a lack of familiarity with the day-to-day realities of tax administration and creates an opportunity for future bad behavior by the IRS.

One problem with judicial decisions about tax law is that many judges aren’t particularly interested in it. Even Justice Neil Gorsuch, who I believe got this case right, thanked his colleagues at oral argument for their indulgence “on tax law of all things.”

But tax is an area of law that people interact with more directly than others. Most people will never be charged with a federal crime. Most people won’t need to understand federal permitting processes. But nearly every person will need to pay taxes. And the court’s opinion enables the IRS to stymie taxpayer rights, as Gorsuch says in his dissent.

The first sentence of the court’s discussion demonstrates its unfamiliarity with how taxes are administered. It reads, “[t]he typical way to dispute a tax liability is to pay first and then seek a refund.” But that is simply not the case.

The Taxpayer Advocate’s 2023 Annual Report to Congress shows that over 10 years, the average federal court inventory of tax refund cases was only 767 total cases. Over the same period, the US Tax Court received about 27,200 cases a year. Also, most taxpayers who dispute their tax liabilities do so pre-assessment, not by paying the tax first and requesting a refund.

Perhaps this unfamiliarity, and this incorrect assumption that most people pay their tax liabilities before challenging them, is part of the reason the Supreme Court overlooks the obvious risks its opinion creates.

Gorsuch notes that not only is the decision atextual, but it also creates a situation where collection due process cases are risk-free for the IRS: The agency can deprive the Tax Court of jurisdiction to resolve underlying liability issues simply by dropping its levy action, forcing a dismissal. Nothing stops the IRS from then instituting new collection actions.

IRS action to evade judicial review or scrutiny is hardly a hypothetical situation. In Lakepoint Land II, LLC v. Commissioner, the IRS was sanctioned for submitting a false declaration supporting the claim that penalty approvals were backdated.

The IRS settled the case after being sanctioned, but as a condition of settlement, it required the taxpayer to dismiss a Freedom of Information Act complaint that sought communications related to investigating the backdating.

Procedurally, the case was a very different matter from Zuch. But it indicates that, institutionally, the IRS is comfortable with the notion of evading review and scrutiny of its actions, rendering Gorsuch’s concerns significant.

Worse, the Supreme Court’s opinion seems to go beyond the facts of the case, crafting a broader rule that is more fraught for abuse than it needed to be. Zuch’s facts were unique—the IRS seized refunds to pay off the tax, but there was no question the tax was fully paid.

But the Supreme Court didn’t rule that Tax Court jurisdiction hinged on the tax’s payment status, which would only affect a small number of cases; it ruled that the Tax Court’s jurisdiction hinged on the IRS’s levy determination.

The IRS could use this new rule to evade underlying liability review in any collection due process case, forcing taxpayers to defend themselves against repeated collection actions with no end.

One would hope that the IRS wouldn’t take this decision as a license to subject taxpayers to repeated collection attempts with little hope of resolving questions about underlying liability. In the average case, the IRS is primarily interested in getting to the right answer, not getting every dollar possible out of the taxpayer. It will be worth watching how the agency behaves in collection cases going forward.

The case is Comm’r v. Zuch, 2025 BL 8095, U.S., 24-416., 6/12/25.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Robert M. Romashko is leader of Husch Blackwell’s tax practice specialty group and previously was an attorney in the IRS Office of Chief Counsel.

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