Supreme Court’s Tax Levy Ruling Narrows Taxpayer Rights in Prepayment Challenges

Supreme Court’s Tax Levy Ruling Narrows Taxpayer Rights in Prepayment Challenges

In Commissioner v. Zuch, the US Supreme Court issued a decision that could have far-reaching implications for taxpayers, tax practitioners, and the broader tax litigation landscape, according to Bloomberg Law.

At issue was a taxpayer’s right to challenge an IRS levy under Section 6330 of the tax code, specifically, whether the Tax Court had jurisdiction to hear such a prepayment challenge. The Court’s narrow reading of “determination” under Section 6330(d)(1) significantly curtails the scope of collection due process (CDP) hearings, limiting them to enforcement issues and excluding judicial review of the underlying tax liability unless it has been previously uncontested.

The article highlights that this shift effectively removes a key prepayment forum for taxpayers, allowing the IRS to enforce assessments, even those under legal dispute, without judicial oversight from the Tax Court. For many taxpayers, especially those unrepresented by counsel, CDP hearings are the only practical avenue to challenge alleged liabilities before assets are seized. The Court’s decision forces these individuals to navigate more complex and expensive refund litigation in federal district court, often requiring different legal counsel, further increasing costs.

Bloomberg says this tax levy ruling raises systemic concerns, including inconsistent tax enforcement across jurisdictions and erosion of constitutional protections under the Fourth and Fifth Amendments. 

By restricting the Tax Court’s jurisdiction, Zuch threatens due process and introduces significant procedural hurdles. For managing partners, litigation strategy for tax matters will need reevaluation, particularly in cases involving asset seizures, as clients may face more costly, delayed, and uncertain paths to relief.