Commissioner v. Zuch, Docket No. 24-416
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At the heart of this decision is when the Tax Court can step in. Under federal law, the Tax Court can only review an IRS determination about whether it may seize assets to cover unpaid taxes — a process called a levy. In Commissioner v. Zuch, the IRS stopped its levy because the taxpayer’s debt was wiped out by earlier overpayments. The Supreme Court held there was no longer any “determination” for the Tax Court to review once the levy lost its basis.
That ruling reverses a Third Circuit decision that had sent the case back to the Tax Court. Now the dispute returns to the IRS without that extra layer of review. Stay with us to find out what this means for people who thought they still had a chance to challenge the IRS in Tax Court.
Summary of the Case
In 2012, Jennifer Zuch and her then-husband Patrick Gennardo each filed late tax returns for 2010. Gennardo submitted an offer-in-compromise to settle his tax debt, which prompted the IRS to apply $50,000 in estimated tax payments to his account. Later, Zuch amended her return to report additional income that generated $28,000 in tax liability. She claimed that the $50,000 should have been credited to her account instead, which would have entitled her to a $22,000 refund.
The IRS disagreed with Zuch's position and issued a levy to collect the unpaid taxes. Zuch requested a collection due process hearing, where the appeals officer rejected her argument about how the payments should be allocated and determined the levy could proceed. Zuch then appealed this decision to the Tax Court.
During the years-long legal proceedings that followed, Zuch overpaid her taxes in subsequent years. Rather than refunding these overpayments, the IRS repeatedly applied them against her 2010 tax liability. Once these offsets completely eliminated her 2010 balance, the IRS moved to dismiss the case as moot, arguing there was no longer any basis for a levy. The Tax Court agreed and dismissed the case for lack of jurisdiction. The Third Circuit reversed this decision, but the Supreme Court ultimately granted review to resolve disagreements among circuit courts.
Supreme Court Limits Tax Court's Authority in Levy Cases
In an 8-1 decision authored by Justice Barrett, the Supreme Court held that the Tax Court's jurisdiction in these cases is strictly limited to reviewing whether a levy may proceed. The Court explained that once Zuch's tax liability reached zero and there was no longer any levy to enforce, the Tax Court lost its jurisdiction over the case.
The majority emphasized that Congress established a default rule requiring taxpayers to pay their taxes first and then sue for a refund later. The special collection due process hearing provision is narrowly focused on issues related to proposed levies. The Court noted that the law doesn't authorize the Tax Court to award refunds or issue declaratory judgments beyond stopping a levy.
Because Zuch's liability had been paid in full through the IRS's application of her later overpayments, no levy remained at issue. The Court concluded that the Tax Court correctly dismissed the case, and that Zuch's proper remedy would be to file a separate refund lawsuit in a different court.
Justice Gorsuch was the lone dissenter. He argued that the Tax Court should have broader authority to review all aspects of the appeals officer's determination, including whether Zuch had any underlying tax liability at all. He warned that the majority's interpretation allows the IRS to escape judicial review simply by abandoning levies after receiving unfavorable determinations.
How Tax Collection Due Process Works Under Federal Law
The Supreme Court's decision clarifies the limited role Congress created for collection due process hearings. The law provides taxpayers with one hearing before the IRS can levy (seize) their property to satisfy unpaid taxes. These hearings are specifically focused on issues related to the proposed levy or, in certain cases, the existence or amount of the underlying tax if the taxpayer hasn't had a previous opportunity to dispute it.
Appeals officers must consider specific factors during these hearings—including whether the IRS followed proper procedures, any issues raised by the taxpayer, and whether the collection action is unnecessarily intrusive. After considering these factors, the officer makes a single determination: whether the levy may proceed.
The Tax Court can review this determination, but its power is limited to stopping the levy. It cannot transform these proceedings into refund cases or declaratory judgment actions. For taxpayers who want to dispute their tax liability outside the context of an ongoing levy, the traditional path remains: pay the tax first, then file a refund lawsuit.
This structure ensures that collection due process hearings remain focused on their intended purpose—providing taxpayers with procedural protections before the IRS seizes their property—rather than becoming an alternative route to challenge tax assessments more broadly.