6-5.000 CIVIL TAX CASE RESPONSIBILITY
6-5.010	Introduction
6-5.100	Parallel Proceedings
6-5.110	Affirmative Litigation—Tax Collection Suits
6-5.120	Affirmative Litigation—Other Enforcement Suits
6-5.130	Affirmative Litigation—United States' Intervention in Court Actions
6-5.140	Affirmative Litigation—Order for Entry to Effect Levy
6-5.200	Summons Litigation—Commencement of a Summons Enforcement Proceeding
6-5.210	Summons Litigation—Petitions to Quash or Enjoin IRS Summonses
6-5.220	Summons Litigation—Litigation Support
6-5.230	Summons Litigation—Direct Referrals to the United States Attorney
6-5.240	Summons Litigation—Exceptions to Direct Referrals
6-5.250	Summons Litigation—Prosecution Under 26 U.S.C. § 7210
6-5.260	Summons Litigation—Appeals
6-5.300	Actions Under 28 U.S.C. § 2410—Allocation of Responsibilities
6-5.310	Actions Under 28 U.S.C. § 2410—Nature of the Suit
6-5.320	Actions Under 28 U.S.C. § 2410—Procedures
6-5.330	Actions Under 28 U.S.C. § 2410—Removal from State Courts
6-5.400	Suits Against the United States or Its Officers and Employees—Generally
6-5.410	Tax Refund Suits/Petitions for Readjustment
6-5.420	Actions to Enjoin Tax Assessment or Collection
6-5.430	Declaratory Judgment Actions with Respect to Federal Taxes
6-5.440	Jeopardy and Termination Assessment Cases
6-5.450	Suits Under the Freedom of Information Act and the Privacy Act of 1974
6-5.460	Damage suits under Bivens or Tort Theories
6-5.470	"Wrongful Disclosure" Suits Against the United States
6-5.480	"Wrongful Collection" Suits Against the United States
6-5.490	Subpoenas Served on Employees of the Internal Revenue Service
6-5.500	Suits Involving Governmental Immunity from State and Local Taxes
6-5.600	Claims of the United States in Bankruptcy, Receivership, Probate, and Insolvency Proceedings—Generally
6-5.620	Bankruptcy Cases—Proofs of Claim
6-5.621	Bankruptcy Cases—Contested Matters and Adversary Proceedings
6-5.622	Bankruptcy Cases—Allocation of Responsibility
6-5.623	Bankruptcy Cases—Appeals from Bankruptcy Court Decisions
6-5.630	Receivership Proceedings
6-5.640	Probate Proceedings
6-5.650	Insolvency Proceedings
6-5.700	Appeals in Tax Matters—Generally
6-5.710	Appeals in Tax Matters—Taxpayer (or Other Party) Appeal
6-5.720	Appeals in Tax Matters—Adverse or Partially-Adverse Decisions
6-5.730	Appeals in Tax Matters—Government Filing of a Notice of Appeal
6-5.740	Appeals in Tax Matters—When the Solicitor General Approves an Appeal
6-5.750	Appeals in Tax Matters—When the Solicitor General Declines to Appeal
6-5.800	Applications for Attorneys' Fees and Litigation Expenses
6-5.010	Introduction
The Tax Division's six Civil Trial Sections supervise or handle civil tax litigation in the United States district courts and the state courts. The Civil Trial Sections are generally responsible for cases that arise within their respective geographic areas. In addition, the Civil Trial Sections for the Central and Eastern Regions have nationwide jurisdiction over certain cases of special interest. For a map reflecting the geographical assignments of the Tax Division Civil Trial Sections, see Tax Resource Manual 3. For contact information, including mailing and e-mail addresses and telephone and fax numbers for the Civil Trial Sections, see Tax Resource Manual 4. Ordinarily, the United States Attorney has trial responsibility in cases arising under 28 U.S.C. § 2410 (except for tax protester cases, actions raising substantive tax issues, and interpleader litigation) and in summons enforcement and bankruptcy litigation that the IRS directly refers to the United States Attorney. For administrative and informational purposes, the Tax Division trial attorney should advise the United States Attorney of any appearance in the district, and should forward to any Assistant United States Attorney who is counsel of record copies of all documents sent to opposing counsel. The United States Attorney should immediately forward to the assigned Tax Division trial attorney copies of all documents received by the United States Attorney, if such communication does not indicate service on the trial attorney. The United States Attorney should also advise the Tax Division trial attorney of any informal information received that may have a bearing on the just disposition of the case. In those civil matters that the Tax Division assigns to the United States Attorney, he or she will be responsible for the entire trial level proceeding. The United States Attorney also should keep the Tax Division advised in the manner set forth in this Manual. In situations where the Division has requested immediate notification, the United States Attorney should notify the Chief of the appropriate Civil Trial Section by e-mail, telephone, fax, or overnight delivery. See Tax Resource Manual 4 for section e-mail addresses and other contact information. The Assistant Attorney General, Tax Division, reserves the prerogative to reassign any civil tax case within the jurisdiction of the Tax Division notwithstanding the provisions of this manual. [updated September 2007]
6-5.100	Parallel Proceedings
Consistent with the Department's policies for coordinating criminal, civil, and administrative actions, the Tax Division uses all available judicial remedies and procedures to enforce the tax laws, including criminal prosecutions, civil injunction actions, summons enforcement actions, collection actions, and the defense of civil tax refund suits. The Government may take these actions simultaneously or sequentially, as appropriate. See Tax Resource Manual 22. [added September 2007 (note)]
6-5.110	Affirmative Litigation—Tax Collection Suits
The Tax Division brings tax collection suits at the request of the IRS, pursuant to 26 U.S.C. § 7401. Tax Division attorneys usually handle suits in which the government seeks to reduce to judgment assessments for unpaid federal taxes foreclose federal tax liens recover erroneous tax refunds pursuant to 26 U.S.C. § 7405 take judgment for failure of a party to honor an internal revenue levy pursuant to 26 U.S.C. § 6332(d)(1) set aside a fraudulent conveyance obtain a judgment under 26 U.S.C. § 3505 for unpaid taxes against a person who provided net payroll financing take other necessary legal actions to collect outstanding federal taxes On occasion in emergency situations, the IRS may request the United States Attorney to commence suit, due to severe time limitations, but the United States Attorney should not file a complaint until the Chief of the appropriate Civil Trial Section has approved the filing of the suit. [updated September 2007] [cited in USAM 6-2.000]
6-5.120	Affirmative Litigation—Other Enforcement Suits
The Tax Division also brings other affirmative non-collection actions seeking judicial assistance in enforcing the internal revenue laws. Such proceedings may include suits to enjoin tax return preparers under 26 U.S.C. § 7407 or to enjoin tax fraud promoters under 26 U.S.C. § 7408; suits under 26 U.S.C. § 7402 to expunge so-called "common law liens" filed against IRS or other government personnel or to enforce compliance with payroll withholding requirements; and applications for judicial approval for seizure of a principal residence, a procedure required by 26 U.S.C. § 6334(e). Tax Division attorneys will handle these proceedings. [updated September 2007]
6-5.130	Affirmative Litigation—United States' Intervention in Court Actions
The United States may intervene in a civil action to assert a federal tax lien on property that is the subject of the action. See 26 U.S.C. § 7424. Where the United States intervenes in a state court action, it has the same right of removal as in cases where it is named a party to an action under 28 U.S.C. § 2410(a). If, under emergency circumstances, IRS counsel requests the United States Attorney to take immediate action to intervene in a pending action, the United States Attorney should not move to intervene until the Chief of the appropriate Civil Trial Section has approved the intervention. [updated September 2007] [cited in USAM 6-2.000]
6-5.140	Affirmative Litigation—Order for Entry to Effect Levy
The IRS must obtain a warrant before entering constitutionally protected premises to seize property for the payment of taxes. In addition, the IRS may use a similar procedure to open a bank safe deposit box. The IRS will directly refer these cases to the United States Attorney. IRS counsel will prepare the pleadings—standard forms, consisting of an application, affidavit, and proposed order—for the United States Attorney to review and submit to the United States District Court. See Tax Resource Manual 23-26. If a case requires any substantial deviation from these forms, please consult immediately with the Chief of the appropriate Civil Trial Section. After receiving a referral from IRS counsel, the United States Attorney should expeditiously review the material to determine whether it meets the legal standard for obtaining an order for entry to effect levy, including making an independent determination that the taxpayer is, indeed, recalcitrant, and that the revenue officer has been unable to gain voluntary admittance to the property for purpose of seizure. The United States Attorney should assure that the revenue officer's affidavit is complete and accurate, and ascertain whether the case has any unusual features that may lead to denial of the writ. [added September 2007 (note)]
6-5.200	Summons Litigation—Commencement of a Summons Enforcement Proceeding
Summons enforcement proceedings are summary in nature. The Government commences the proceeding when it files a petition, a declaration of the examining/investigating agent, and a proposed order to show cause why the court should not enforce the summons. See Summons Enforcement Manual, Tax Resource Manual 27. IRS counsel usually will prepare and forward the pleadings to the United States Attorney along with the request for enforcement. The Government ordinarily relies on the court's Order to Show Cause to compel the summoned person to appear in court for the summons-enforcement hearing. The Government very rarely seeks the arrest of a summoned person under the attachment authority of 26 U.S.C. § 7604(b) to obtain his appearance at the summons- enforcement hearing. The United States Attorney may not seek the arrest of a summoned person under the attachment authority of 26 U.S.C. § 7604(b) unless the Chief of the appropriate Civil Trial Section authorizes this action in writing. An attachment under 26 U.S.C. § 7604(b) should not be confused with the arrest of the summoned person after a judicial finding and order of contempt for failing to comply with a court order enforcing the summons. No prior authorization is needed to seek arrest and confinement pursuant to an order of contempt. [added September 2007 (note)] [cited in USAM 6-2.000]
6-5.210	Summons Litigation—Petitions to Quash or Enjoin IRS Summonses
Title 26 U.S.C. § 7609 concerns summonses issued to third parties. It requires the IRS to give notice to the taxpayer and other persons to whom the records relate ("noticee") when it issues a summons to a third party. The noticee then may petition to quash a third party's compliance with the summons by commencing a proceeding in the appropriate district court. The petition must be filed within 20 days of the date on which notice is given by mailing a copy of the petition to the third party and to the IRS office designated in the notice. The procedural rules pertaining to a petition to quash are jurisdictional. When a petitioner fails to follow these provisions meticulously, the United States Attorney should file a motion to dismiss. See Summons Enforcement Manual, Tax Resource Manual 27. A proceeding to quash is a civil action that is subject to the normal filing fee and to the provisions of Federal Rule of Civil Procedure 4 relating to service of a summons and complaint. Pursuant to Federal Rule of Civil Procedure 12(a)(3), the United States has 60 days to respond to the initial pleading. Since the filing of a petition to quash under 26 U.S.C. § 7609 stays compliance with the summons, the United States Attorney best serves the Government's interest by filing the Government's response expeditiously. After receiving a petition to quash, the United States Attorney should send a copy to the IRS counsel, who will determine whether the Government should seek to enforce the summons in federal court. If it is determined that the summons is defective, IRS Counsel may direct the IRS to withdraw the summons and, in turn, request that the United States Attorney ask the petitioner to withdraw the petition or ask the court to dismiss it as moot. If the petition appears to raise sensitive or novel issues, the United States Attorney should also send a copy to the Chief of the appropriate Civil Trial Section. See USAM 6-5.240. [updated September 2007] [cited in Tax Resource Manual 27; USAM 9-105.750]
6-5.220	Summons Litigation—Litigation Support
The Tax Division Summons Enforcement Manual contains guiding legal principles, "how to" procedures, and sample forms. See Tax Resource Manual 27 for a WordPerfect version of the forms. A United States Attorney who needs additional help with a case should request assistance from the Chief of the appropriate Civil Trial Section. [updated September 2007]
6-5.230	Summons Litigation—Direct Referrals to the United States Attorney
IRS counsel will refer directly to the United States Attorney routine requests to enforce most administrative summonses and to defend routine petitions to quash brought under 26 U.S.C. § 7609. The latter may also include a request to enforce the summons(es) pursuant to 26 U.S.C. § 7609(b)(2)(A). In summons actions that the IRS directly refers to the United States Attorney, the United States Attorney need not obtain Tax Division authorization prior to instituting court proceedings or seeking the enforcement of a summons in response to a petition. The United States Attorney must obtain prior Tax Division authorization, however, if a case involves sensitive or novel issues, as described in USAM 6-5.240. The Appellate Section of the Tax Division will handle all appeals, whether the United States or the other party initiates it. USAM 6-5.260. The United States Attorney should notify the Chief of the appropriate Civil Trial Section if a court renders an adverse decision or another party files a notice of appeal. [updated September 2007] [cited in Tax Resource Manual 27]
6-5.240	Summons Litigation—Exceptions to Direct Referrals
IRS counsel will refer to the Tax Division for handling summons cases involving sensitive or novel issues, including summonses issued to or involving attorneys tax practitioners, as defined in 26 U.S.C. § 7525 churches the press or members of the news media tax accrual workpapers foreign document requests treaty partners or other matters with international implications "John Doe" summonses section 6050I novel or complex Fifth Amendment claims computer software and other non-traditional items state and local agencies and courts "designated summonses" consent directives tax shelter promoters tax scam promoters examinations regarding institution of summons proceedings examinations into potential liabilities for penalties under 26 U.S.C. §§ 6700, 6701, 6707, and 6708 offshore records other unique issues that may arise The IRS will also refer to the Tax Division petitions to quash foreign document requests issued under 26 U.S.C. § 982. Litigation relating to these requests is similar to summons litigation. The Tax Division may also refer to the United States Attorney for handling a summons that the IRS Counsel has referred to the Tax Division. See Summons Enforcement Manual, Tax Resource Manual 27. [updated September 2007]
6-5.250	Summons Litigation—Prosecution Under 26 U.S.C. § 7210
Under 26 U.S.C. § 7210, the Government can prosecute a person for failure to honor an IRS summons. The United States Attorney may not bring these charges unless and until the Chief of the Tax Division Criminal Enforcement Section for the appropriate region approves and authorizes prosecution in writing. [added September 2007 (note)]
6-5.260	Summons Litigation—Appeals
The Appellate Section of the Tax Division handles all appeals in all tax cases, whether or not adverse to the Government, including summons cases. See USAM 6-5.700, et seq. The Assistant Attorney General of the Tax Division must approve exceptions to this policy. The United States Attorney should immediately notify the local IRS counsel and the Chief of the appropriate Civil Trial Section of all adverse decisions, and of an adverse party's notice of appeal or cross-appeal. The Tax Division treats a court's limited enforcement of a summons as an adverse decision. See USAM 6-5.710. [added September 2007 (note)]
6-5.300	Actions Under 28 U.S.C. § 2410—Allocation of Responsibilities
The United States Attorney handles most suits under 28 U.S.C. § 2410. The Tax Division, however, handles suits under § 2410 for interpleader or in the nature of interpleader, actions that tax protesters file, and actions that raise substantive tax issues. A Tax Division attorney handling related litigation may also handle a foreclosure or other matter that the United States Attorney otherwise would have handled. [updated September 2007]
6-5.310	Actions Under 28 U.S.C. § 2410—Nature of the Suit
Under 28 U.S.C. § 2410, the United States consents to be sued in a federal or state court having jurisdiction of the subject matter in cases involving real or personal property on which the United States has or claims a mortgage or other lien. The consent is limited to suits that seek to quiet title, foreclose a mortgage or other lien, partition, or condemn the property, interpleader suits, and suits in the nature of interpleader. This waiver of sovereign immunity requires strict compliance with the conditions specified in § 2410 as a jurisdictional prerequisite for suit. The United States has sixty days in which to plead. When a judicial sale is held, the tax lien of the United States is discharged, provided the United States has received proper notice. The United States then may redeem the realty sold within 120 days from the date of sale, or within a longer period as allowed under local law. See 26 U.S.C. § 7425(d)(1). Congress has authorized a revolving fund for this purpose. 28 U.S.C. § 7810. Title 28 U.S.C. § 2410(d) establishes the amount that the United States must pay to exercise its right of redemption for either sales under 28 U.S.C. § 2410(c) or sales in foreclosure. If the United States Attorney thinks that the United States should redeem the realty sold, he or she should contact the local IRS office. [added September 2007 (note)]
6-5.320	Actions Under 28 U.S.C. § 2410—Procedures
Notice to Tax Division and IRS. In foreclosure, partition, condemnation, and most quiet title actions (except as provided in paragraph B), the United States Attorney should ask the appropriate local IRS office to provide the information necessary to prepare an answer. The United States Attorney need not forward the summons and complaint to the Tax Division or the local IRS counsel, or correspond with the Tax Division about these cases at all, except as follows: the case involves a tax protester (as described below); a party submits an offer in compromise; an appellate issue arises; or assistance is needed in the case. Please direct any questions to the Chief of the appropriate Civil Trial Section. Quiet title actions. Taxpayers, including tax protesters, sometimes use quiet title actions in an attempt to remove federal tax liens from real property. They often do so either to contest the merits of the tax assessment or to challenge the procedural validity of the assessment or lien filing process. In addition, a nominee or alter ego, who holds the property on behalf of a taxpayer, may commence a quiet title action to contest the validity of the IRS nominee or alter ego determination. The Tax Division handles these types of quiet title actions, as well as other quiet title actions that raise similar federal tax issues. The United States Attorney should refer these cases to the Chief of the appropriate Civil Trial Section. Offer in Compromise. An offer in compromise that is made in a case being handled by the United States Attorney should be promptly submitted to the Chief of the appropriate Civil Trial Section, with the United States Attorney's recommendation and sufficient supporting data. At the same time, the United States Attorney should forward a copy of the compromise offer, together with a copy of the complaint, to the local IRS counsel. This procedure does not apply to applications for release of the Government's right to redemption for which the Tax Division has delegated authority to the United States Attorney. See USAM 6-6.140 and 6-6.700. Appeal. If another party to the proceeding takes an appeal, the United States Attorney should promptly advise the Chief of the appropriate Civil Trial Section and explain the applicable time limitation. If a court renders a decision adverse to the Government on an issue that the United States Attorney has contested, the United States Attorney should submit an appeal recommendation with sufficient information to enable the Tax Division to evaluate the appropriateness of appeal. Until the Department makes a final decision regarding whether the Government should appeal, the United States Attorney should take all necessary steps to protect the Government's interest, including filing a notice of appeal and preparing the record on appeal. Lien Priority. Title 26 U.S.C. § 6323 governs the priority of the federal tax lien in most § 2410 cases. Should any interpretative problems concerning the priority accorded to the tax lien arise, the United States Attorney should contact the Chief of the appropriate Civil Trial Section. He or she may also call upon the local IRS counsel for advice. Closing. The United States Attorney should notify the appropriate local IRS office when a case is closed. [updated September 2007]
6-5.330	Actions Under 28 U.S.C. § 2410—Removal from State Courts
Most cases brought under 28 U.S.C. § 2410 are filed in state court. The Government may remove these cases to the United States district court within 30 days. See 28 U.S.C. § 1444. The 30-day period begins on the date the plaintiff properly serves the United States, not on the date the Government receives pleadings unaccompanied by formal process. See 28 U.S.C. § 1446(b); Murphy Brothers, Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344 (1999). The Tax Division frequently removes a § 2410 case that it is handling, particularly when the case involves a substantial sum of money or turns on application of federal law, or where the purpose of the suit is to interfere with internal revenue procedures (as in tax protester litigation). The Tax Division may, from time to time, contact the United States Attorney either to request assistance with removal or to discuss whether a case merits removal. [updated September 2007]
6-5.400	Suits Against the United States or Its Officers and Employees—Generally
When served with a summons and complaint in a suit involving the internal revenue laws or otherwise connected with tax administration, the United States Attorney should forward a copy of the summons and complaint to the Chief of the appropriate Civil Trial Section and to the local IRS counsel office, except as provided in USAM 6-5.320 (relating to § 2410 cases). If the court sets an expedited hearing or otherwise requires the Government to respond in less than 60 days, the United States Attorney should telephone the Chief of the appropriate Civil Trial Section immediately and arrange to provide the relevant papers as quickly as possible. If a person brings suit in a state court naming the United States or an IRS official as a party, the United States Attorney should remove the action to the federal court immediately (except that the United States Attorney may elect not to remove § 2410 cases that the United States Attorney will be handling). In any suit in which the person has not named either the United States or any IRS official as a party (such as a taxpayer's suit against an employer), the United States Attorney should not become involved in any manner. [updated September 2007]
6-5.410	Tax Refund Suits/Petitions for Readjustment
The Tax Division is responsible for defending tax refund suits brought pursuant to 28 U.S.C. § 1346(a)(1) and 26 U.S.C. § 7422(a), and petitions for readjustment of final partnership administrative adjustments (FPAA) brought pursuant to 28 U.S.C. § 1346(e) and 26 U.S.C. § 6226. When a taxpayer serves the United States Attorney with a tax refund suit or readjustment petition, the United States Attorney should immediately notify both the Chief of the appropriate Civil Trial Section and the appropriate IRS counsel office. [added September 2007 (note)]
6-5.420	Actions to Enjoin Tax Assessment or Collection
Taxpayers sometimes bring suit to quash or enjoin an IRS examination or investigation. The tax Anti-Injunction Act, 26 U.S.C. § 7421(a), provides that, except as permitted by the Internal Revenue Code, no person shall maintain a suit for the purpose of restraining the assessment or collection of any tax in any court, whether or not the IRS assessed a tax against that person. Under the Anti-Injunction Act, a person may obtain injunctive relief only when: (1) the person was certain to succeed on the merits, and could demonstrate that collection would cause irreparable harm; or (2) in the extremely rare situation where Congress has provided no judicial review of the IRS's assessment or collection actions, as set forth in South Carolina v. Regan, 465 U.S. 367 (1984). When a person brings suit to attempt to restrain the assessment or collection of taxes, he or she must serve the Attorney General. On receiving such a suit, the United States Attorney should immediately notify the Chief of the appropriate Civil Trial Section and the appropriate IRS counsel office. When the court sets a hearing on a motion for a temporary restraining order or a preliminary injunction, the United States Attorney should immediately notify the Chief of the appropriate Civil Trial Section. The courts often set hearings on injunction cases on very short notice. Thus, when necessary, the Tax Division may consent to an arrangement in which the IRS agrees to take no collection activity for a specified period of time. Alternatively, the Tax Division may consent to a temporary restraining order (TRO). See Fed.R.Civ.P. 65(b). Before committing the United States to temporarily cease collection action or to consent to entry of a TRO, however, the United States Attorney must obtain authorization from the Chief of the appropriate Civil Trial Section. [added September 2007 (note)]
6-5.430	Declaratory Judgment Actions with Respect to Federal Taxes
The Declaratory Judgment Act, 28 U.S.C. § 2201, excludes from its coverage any suit that a person brings "with respect to Federal taxes," other than actions brought under 26 U.S.C. § 7428, 11 U.S.C. §§ 505 and 1146. The federal tax exception to the Declaratory Judgment Act has the same scope and judicially-created exceptions as the Anti-Injunction Act. See Alexander v. "Americans United," Inc., 416 U.S. 752 (1974). Persons who seek declaratory judgments with respect to federal taxes often seek injunctive relief at the same time. As is the case with suits seeking injunctions against federal taxes, the United States Attorney should immediately notify both the Chief of the appropriate Civil Trial Section and the appropriate IRS counsel office on receiving such a suit. [added September 2007 (note)]
6-5.440	Jeopardy and Termination Assessment Cases
In suits for judicial review of jeopardy or termination assessments, 26 U.S.C. § 7429 requires the court to hold an expedited hearing within 20 days of the filing of the complaint. On receiving notice of the suit—by service of process or otherwise—the United States Attorney should immediately notify both the Chief of the appropriate Civil Trial Section and the appropriate IRS counsel office. [added September 2007 (note)]
6-5.450	Suits Under the Freedom of Information Act and the Privacy Act of 1974
The Tax Division's Civil Trial Section, Eastern Region, handles suits against the IRS and the Tax Division brought under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, and under the Privacy Act of 1974, 5 U.S.C. § 552a. When a plaintiff serves the United States Attorney with a complaint in a tax-related FOIA or Privacy Act suit, the United States Attorney should immediately notify the Chief of the Civil Trial Section, Eastern Region, of the filing, and should also notify the appropriate IRS counsel office if the suit concerns IRS documents or activities. [added September 2007 (note)]
6-5.460	Damage suits under Bivens or Tort Theories
The Tax Division represents IRS officers and employees and Department of Justice personnel in civil damage suits based on Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971), or based on common-law tort theories when the alleged misconduct relates to the internal revenue laws or tax administration. Upon receiving a complaint in such actions, the United States Attorney should immediately notify the Chief of the appropriate Civil Trial Section and the appropriate IRS counsel office. [added September 2007 (note)]
6-5.470	"Wrongful Disclosure" Suits Against the United States
The Internal Revenue Code provides a taxpayer with a cause of action to recover damages where the taxpayer's tax returns and/or tax return information have been disclosed or inspected contrary to the Internal Revenue Code's strict privacy requirements. See 26 U.S.C. § 7431. The Civil Trial Section, Eastern Region, handles these cases. When the plaintiff serves the United States Attorney with a complaint in a wrongful disclosure suit, the United States Attorney should immediately notify both the Chief of the Eastern Region and the appropriate IRS counsel office. [added September 2007 (note)]
6-5.480	"Wrongful Collection" Suits Against the United States
The Internal Revenue Code provides a taxpayer with two causes of action to recover damages where the IRS has engaged in collection practices that contravene or fail to meet statutory standards. First, based on allegations that an IRS employee has negligently, recklessly, or intentionally disregarded any provision of the Internal Revenue Code or of the applicable regulations, a taxpayer may file suit against the United States to recover economic damages. See 26 U.S.C. § 7433. Second, for wrongful failure to release a federal tax lien, a taxpayer may also file a damage suit against the United States under 26 U.S.C. § 7432. When a plaintiff serves the United States Attorney with a complaint citing either of these statutes or asserting such claims, the United States Attorney should immediately notify both the Chief of the appropriate Civil Trial Section and the appropriate IRS counsel office. [added September 2007 (note)]
6-5.490	Subpoenas Served on Employees of the Internal Revenue Service
Frequently, subpoenas are served upon IRS agents and other employees in cases not involving federal taxes, and in which the United States is not a party. The subpoenas purport to require these persons to appear in court to produce official IRS documents and records or to testify with respect to matters that have come to their attention in their official capacity. Title 26 C.F.R. § 301.9000-1 provides that, in such cases, the internal revenue officer should appear in court and respectfully decline to testify or produce records on the ground that the Treasury regulations prohibit the employee from doing so. In most cases, the IRS will issue the employee specific written instructions that the employee can furnish to the United States Attorney. When a subpoenaed IRS employee contacts the United States Attorney, the United States Attorney should take steps to protect the employee's and the Government's interests. First, he or she should telephone the Chief of the Civil Trial Section, Eastern Region. Second, contact the opposing counsel. In the Tax Division's experience, if the United States Attorney explains the prohibition, the attorney who issued the subpoena often will agree to release the employee from complying and the United States Attorney will not need to seek court assistance to secure that release. Third, if necessary, he or she should appear with the individual employee before the court issuing the subpoena. [added September 2007 (note)]
6-5.500	Suits Involving Governmental Immunity from State and Local Taxes
The Tax Division represents the interests of government agencies and officers in contesting the improper imposition of state or local taxes. Requests for assistance come directly from government contractors and members of the Armed Forces, as well as from government agencies. Tax Division attorneys handle all tax immunity matters. The United States Attorney should promptly refer to the Chief of the Civil Trial Section, Eastern Region, all requests for advice on tax immunity matters or for representation in persuading taxing authorities not to impose a tax or to institute litigation. [updated September 2007]
6-5.600	Claims of the United States in Bankruptcy, Receivership, Probate, and Insolvency Proceedings—Generally
The IRS files proofs of claim for unpaid taxes in bankruptcy cases, receivership proceedings, and state-court probate and insolvency proceedings. Ordinarily, the IRS does not notify the Tax Division of the filing of these claims. It also may or may not advise the United States Attorney of the filing. When a controversy arises and the IRS requests that the United States Attorney take action or make a court appearance, the United States Attorney should notify the Chief of the appropriate Civil Trial Section as soon as possible and prior to filing any pleading or making any court appearance. The United States Attorney does not need to notify the Tax Division in direct referral bankruptcy cases. See USAM 6-5.622. [updated September 2007]
6-5.620	Bankruptcy Cases—Proofs of Claim
The IRS Insolvency Unit files proofs of claim for taxes directly with the bankruptcy court. The bankruptcy trustee often pays tax claims in due course. [updated September 2007]
6-5.621	Bankruptcy Cases—Contested Matters and Adversary Proceedings
In contested matters and adversary proceedings, the United States Attorney should promptly forward any pleading involving matters relating to the internal revenue laws to the IRS counsel and the IRS Insolvency Unit. The United States Attorney should notify the Tax Division only when it appears, pursuant to USAM 6-5.622, that the Tax Division will handle the matter. [updated September 2007]
6-5.622	Bankruptcy Cases—Allocation of Responsibility
The United States Attorneys handle the following bankruptcy matters: Complaints or other pleadings to sell property Cash collateral hearings Conversion from chapter 11 or 13 to chapter 7, or dismissal of chapter 11 or 13 cases Motions to compel distribution and accounting Motions to pay taxes or stop the pyramiding of taxes Motions for a more particularized disclosure statement Motions for relief from the automatic stay, including motions to permit commencement or continuation of proceedings before the United States Tax Court Objection to confirmation of a plan Motion for order compelling the production of records and/or the filing of pre-petition tax returns Motion for order compelling the filing of post-petition tax returns Motion for order requiring the segregation and/or the deposit of post-petition trust fund taxes Adversary proceedings involving dischargeability (except those involving an attempt to evade tax, fraud or novel issues) Turn-over hearings Objections to proofs of claims (except those involving substantive tax issues, trust fund recovery penalties, evidentiary hearings on disputed matters or important or novel issues) In a number of districts, IRS attorneys have been appointed Special Assistant United States Attorneys under a program for handling bankruptcy cases. In districts having such a program, Special Assistant United States Attorneys may handle the types of matters listed above. Also, a Tax Division trial attorney may handle such matters because of the trial attorney's involvement in other aspects of the bankruptcy case, the attorney's involvement in other litigation with the debtor, or if the Tax Division has other reasons for handling the matter. The United States Attorney and/or the IRS will refer all other tax-related bankruptcy matters to the Tax Division, including matters for which IRS National Office requires review, cases in which the debtors are prominent individuals or major corporations, and any matters not subject to the direct referral procedure. Before filing an acceptance or rejection of a plan of reorganization, IRS counsel will notify the United States Attorney. IRS counsel also will notify the Tax Division when the debtor is a prominent individual or major corporation or when the plan of reorganization would affect litigation that the Tax Division is handling. [updated September 2007]
6-5.623	Bankruptcy Cases—Appeals from Bankruptcy Court Decisions
The Tax Division decides whether to appeal an adverse bankruptcy court decision, and Tax Division attorneys handle all appeals from such decisions. The United States Attorney should promptly notify the Chief of the appropriate Civil Trial Section and IRS counsel of any adverse bankruptcy court decision, and take all steps necessary to protect the Government's interest, including filing a notice of appeal. The time for appeal from an order of a bankruptcy court is only 10 calendar days, but the bankruptcy court may extend the time for an additional 20 days. Given this short time limit, the United States Attorney should consider requesting an extension of time at the same time that he or she refers the matter to the Tax Division. The United States Attorney should also promptly notify the Chief of the appropriate Civil Trial Section and IRS counsel if an adverse party appeals a decision favorable to the Government. The Tax Division also handles these appeals. In jurisdictions where there is a Bankruptcy Appellate Panel, the United States Attorney should consult with the Chief of appropriate Civil Trial Section and determine whether the Government should elect to proceed in the district court rather than before the Bankruptcy Appellate Panel. Title 11 U.S.C. § 158(d)(2) gives the court of appeals discretionary jurisdiction, under some circumstances, to hear a direct appeal from a judgment or order of the bankruptcy court, bypassing a district court's or Bankruptcy Appellate Panel's intermediate review. This procedure is similar to the interlocutory appeal process under 28 U.S.C. § 1292(b). The Solicitor General must approve a direct appeal that the Government initiates under § 158(d)(2). For the procedure regarding appeals from orders of a United States district court or Bankruptcy Appellate Panel to a court of appeals, see USAM 6-5.720. [added September 2007 (note)]
6-5.630	Receivership Proceedings
Title 26 U.S.C. § 6871(a) provides that, when a federal or state court appoints a receiver for the taxpayer, the IRS may immediately assess any tax due and file a proof of claim. The United States asserts its priorities in receivership proceedings under 31 U.S.C. § 3713. Whenever a contest develops as to the merits or priority of an IRS claim, the United States Attorney should notify the Chief of the appropriate Civil Trial Section by sending all relevant pleadings and information. In state court proceedings, the courts generally require the United States to follow the procedural rules and time limits applicable in those proceedings. [added September 2007 (note)]
6-5.640	Probate Proceedings
In probate proceedings, the IRS sends a proof of claim to the decedent's personal representative. Generally, the representative allows and pays the claim in the due course of the administration of the estate. When the representative does not pay the claim and the IRS wants to initiate collection action, IRS counsel will ask the Tax Division to initiate suit or take other action. Occasionally, the IRS will request that the United States Attorney seek an order from the probate court compelling the personal representative to satisfy the IRS's proof of claim. If the estate is insolvent, the United States Attorney can sometimes discourage the personal representative's failure to recognize the Government's priority by calling the representative's attention to the provisions of 31 U.S.C. § 3713. [added September 2007 (note)]
6-5.650	Insolvency Proceedings
Insolvency proceedings in state court take various forms; the most frequent is an assignment for the benefit of creditors. The IRS files proofs of claim in such proceedings. If litigation arises, 31 U.S.C. § 3713 applies. When an objection to an IRS claim is filed, the United States Attorney should notify the Chief of the appropriate Civil Trial Section prior to taking any action and should furnish all relevant pleadings and information. [added September 2007 (note)]
6-5.700	Appeals in Tax Matters—Generally
The Tax Division handles all appeals in all tax cases, whether or not adverse to the Government. Only the Assistant Attorney General of the Tax Division may approve exceptions to this policy. The Tax Division's Appellate Section handles all appeals in all tax cases in the courts of appeals. The Tax Division's Civil Trial Sections handle appeals from the decision of a bankruptcy court in tax-related matters to a district court or a Bankruptcy Appellate Panel. [updated September 2007]
6-5.710	Appeals in Tax Matters—Taxpayer (or Other Party) Appeal
After a taxpayer or other party files a notice of appeal, the United States Attorney should notify the Chief of the appropriate Civil Trial Section, with a copy to the IRS counsel, if it appears that a Tax Division trial attorney did not receive from the court electronic notice of the appeal. The Civil Trial Section then will transfer the case to the Appellate Section of the Tax Division (except for appeals from decisions of a bankruptcy court to the district court or Bankruptcy Appellate Panel, which the Civil Trial Section will handle). [added September 2007 (note)]
6-5.720	Appeals in Tax Matters—Adverse or Partially-Adverse Decisions
After receiving an adverse or partially adverse district court, Bankruptcy Appellate Panel, or state court decision, the United States Attorney should immediately notify the Chief of the appropriate Civil Trial Section and the IRS counsel office, if it appears that a Tax Division trial attorney did not receive from the court electronic notice of the decision. The United States Attorney also should forward a recommendation concerning appeal, along with any pertinent documents not available electronically, to the Chief of the appropriate Civil Trial Section, in cases handled by the United States Attorney's office. The United States Attorney is responsible for timely filing the notice of appeal and related papers in the district court, in cases handled by the United States Attorney's office. For a further discussion on appeals, see USAM Title 2 (Appeals). The Civil Trial Section prepares its own recommendation on whether to appeal, which it forwards to the Appellate Section, along with the files for preparation of the Tax Division's recommendation to the Solicitor General. When a court enters an adverse judgment or order that requires the United States to make a tax refund or credit, pay attorneys' fees or costs or make some other payment, the United States Attorney should furnish two certified copies of each judgment or order to the Chief of the appropriate Civil Trial Section. The Tax Division needs these copies in order to make prompt payment of the ordered amount, should the Solicitor General decide that the Government will not prosecute an appeal or should the Government lose the appeal. [updated September 2007]
6-5.730	Appeals in Tax Matters—Government Filing of a Notice of Appeal
In cases handled by the United States Attorney's office, the United States Attorney is responsible for protecting the Government's interests in the case, including filing a timely notice of appeal and any related papers, until the Solicitor General decides whether the Government will prosecute an appeal. [added September 2007 (note)]
6-5.740	Appeals in Tax Matters—When the Solicitor General Approves an Appeal
If the Solicitor General authorizes an appeal, the Civil Trial Section must take all appropriate steps to perfect an appeal under the rules of the particular court of appeals, and may request the assistance of the United States Attorney. [added September 2007 (note)]
6-5.750	Appeals in Tax Matters—When the Solicitor General Declines to Appeal
Should the Solicitor General decide that the Government will not prosecute an appeal, the Tax Division will immediately advise the United States Attorney. If the adverse judgment or order requires the United States to make a payment to the opposing side, the Tax Division will then transfer the case to its Post- Litigation Unit, which will process and make prompt payment of the judgment, when required. See USAM 6-7.200. In consultation with the Chief of the appropriate Civil Trial Section, the United States Attorney should take all other appropriate action in the trial court in accordance with the Solicitor General's decision. [added September 2007 (note)]
6-5.800	Applications for Attorneys' Fees and Litigation Expenses
The United States Attorney should notify the Chief of the appropriate Civil Trial Section and the IRS counsel of applications for attorneys' fees and related expenses filed in cases handled by the United States Attorney. [added September 2007 (note)] [cited in Tax Resource Manual 27] Note. This Chapter was substantially revised in September 2007 as part of a general revision of USAM Title 6 that involved a significant amount of renumbering. Many of the provisions that are marked as "added September 2007" contain language and provisions that formerly appeared under different section numbers. The number is new, but the policy may not be new.