Obscure Tax Jurisdiction Case. I am going to share an obscure Tax Court ruling in today’s article. You may ask yourself, this is a fine case but a very minimal chance that it would ever apply to me. Why should I keep reading? But read to the end for why I include this case. There is an important Tax Court lesson to be learned.
In Federal District Courts in 11th Circuit, the district court does not possess jurisdiction over cases solely involving alleged overpayment of interest to the IRS. This was the recent ruling by the 11th Circuit Court of Appeals in the case of Paresky v. United States. In Paresky, a Bernie Madoff fraud victim sued for a refund of tax interest overpayments. The refund suit did not involve tax principle, only interest.
The 11th Circuit ruled that interest-only refund claims do not confer jurisdiction on the district court under 28 USC § 1346(a). This statute provides jurisdiction in three areas: (i) internal revenue tax erroneously assessed or illegally collected, (ii) any penalty claimed to have been collected without authority, or (iii) any sum alleged to have been excessive or wrongfully collected under internal revenue laws.
The 11th Circuit joined the Second Circuit in denying federal district court jurisdiction for interest-only claims, which is opposite of the Sixth Circuit. Thus, in the 11th Circuit, cases involving only claims for interest refund may only be brought in the Court of Federal Claims.
Practice Point. Why do I devote precious tax article space to an obscure case that deals with a limited issue of jurisdiction over tax interest? To show that federal court jurisdiction over tax matters is a quagmire for the unwary which can distract the taxpayer from the main goal of resolving the tax dispute and bog the taxpayer down in a quicksand of jurisdictional motions. IRS legal counsel seems to like nothing better than to file a motion to dismiss based on lack of jurisdiction. Such motions cost taxpayer in legal fees and stamina to fight the IRS.
Thus, it is critically important to understand Tax Court jurisdiction and make sure the taxpayer is filing the right case in the right court at the right time.
Taxpayers are urged to contact Jared Le Fevre to discuss the right court in which to bring a tax case so that the case can be heard on its merits and not get bogged down in a jurisdictional quagmire.
About the Author. Jared M. Le Fevre is a Partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal, state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions.
 2021 WL 1703599 (11th Cir. 2021).