DISTRICT COUNSEL
District Counsel is the local office of the Chief Counsel's Office. In essence, the District Counsel and his or her staff of attorneys are the in-house counsel to the IRS. Technically, however, the district counsel attorneys are not employees of the IRS. The local District Counsel Office is at Suite 500, 28 Church Street, Buffalo, N.Y. It services the entire IRS Buffalo District.
The district counsel attorneys have been trained as litigators. They are adept at evaluating the outcome at trial based on the evidence expected to be submitted and the legal arguments to be made. Cases are settled at the district counsel level for the following reasons:
- The parties have fully prepared their case for trial and are well aware of the "hazards of litigation", thereby making rational settlement decisions possible.
- One or both parties are not ready for trial and the quickly approaching trial calendar brings about settlement to avoid the hazard of litigating with inadequate preparation.
- One of the parties has decided that the time and effort of litigation of the particular case is not worth the expected results, even though the only settlement possibility is something less than the expected results.
As at the Appeals Division, cases are seldom settled on nuisance value, or for raw dollar amounts, or to avoid potential adverse publicity. Instead, cases are settled on the expected trial outcome of factual issues. The government's position on legal issues is usually determined by the national office rather than the trial attorney.
ANSWER
Once the taxpayer files a petition with the United States Tax Court, the Tax Court forwards the petition to the IRS’s National Office. The National Office then forwards the petition to the District Counsel office responsible for cases in the city designated as the place of trial. The IRS has 60 days to file an answer responding to the taxpayer’s allegations contained in the petition. However, unlike the 90 days provided to the petitioner, the 60 days is not jurisdictional and the Court may permit the IRS to file a late answer if the taxpayer is not prejudiced. See Bolton v. Commissioner, 92 T.C. 656 (1989). But see Betz v. Commissioner, 90 T.C. 816 (1988), where the IRS was allowed to file a late answer, but was denied a claim for additional interest under IRC §6621(c) as a sanction.
Under the current Tax Court Rules, the answer must advise the petitioner of the nature of the IRS’ defenses to the taxpayer’s allegations contained in the petition. The responses are in the form of admissions, denials, or unable to admit or deny for lack of sufficient information. These responses must be designated to correctly respond to the paragraphs of the petition to which they relate. The answer must also contain factual statements supporting the Service’s allegations for those issues for which the IRS has the burden of proof. The IRS must also plead any affirmative defenses to the petitioner’s petition in its answer.
The Service may raise the issue of jurisdiction or the petitioner’s failure to state a claim by motion rather than filing an answer. If these issues are raised by motion in lieu of the answer, the motion must be filed within 45 days of the date the IRS is served with the petition. Tax Court Rule 36(a). If the Court denies the Service’s motion, the IRS is given additional time to file an answer. Tax Court Rule 25(c).
The IRS has a right to amend its answer once, prior to the service of a reply by the petitioner. After the petitioner’s service of a reply, the IRS can only amend by leave of court or by consent of the parties. However, the IRS will have the burden of proof for any new matters raised after the filing of a petition in the Tax Court. Tax Court Rule 142(a).
REPLY
The petitioner has 45 days after service of the IRS’ answer to reply to the allegations contained in the answer. However, a reply is not required and rarely is it advantageous for the petitioner to do so. If the petitioner fails to file a reply, the petitioner is deemed to deny all of the allegations contained in the IRS’ answer. Tax Court Rule 37(c). However, if a reply is filed, and the petitioner fails to deny any or all of the allegations contained in the answer, said allegations are deemed admitted. Tax Court Rule 37(c).
If the taxpayer fails to file a reply, the IRS can make a motion to compel the reply. The motion must be filed with 45 days of the expiration of time for filing the reply, and must specify the allegations to which the Service seeks a reply. When the IRS makes a motion to compel a reply, the Tax Court will designate the time in which the taxpayer has to file a reply. If the taxpayer fails to file a reply within the time specified by the court, the court can grant the IRS’ motion and order the undenied allegations deemed admitted.
Bluestein & Muhlbauer, P.C.
333 International Drive
Williamsville, NY 14221
716.633.3200
