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Zuch v. Commissioner of Internal Revenue, No. 22-2244 (3d Cir. 2024) (Jordan, C.J.).

When Congress grants taxpayers the right to challenge what the Internal Revenue Service says is owed to the government, Congress’s will prevails. The IRS cannot say that such a right exists only under the circumstances it prescribes. That ought to go without saying, but this case requires us to say it.

The IRS sent Jennifer Zuch a notice informing her that it intended to levy on her property to collect unpaid tax. She challenged the levy, arguing that she had prepaid the tax. The IRS Independent Office of Appeals (the “IRS Office of Appeals”) sustained the levy, and Zuch petitioned the United States Tax Court for review of that decision. While the issue was being litigated in that Court over several years, the IRS withheld tax refunds owed to Zuch and applied them to what it said was her unpaid balance, satisfying it in full. When, according to the IRS’s accounting, there was no more tax to be paid, the IRS filed a motion to dismiss the Tax Court proceeding for mootness, and the Court granted the motion.

Because Zuch’s claim is not moot, we will vacate the dismissal and remand this matter to the Tax Court to determine whether Zuch’s petition is meritorious.

This case has a lengthy discussion about mootness in the context of regulatory structure. Here, the court said there was no mootness because it was an issue of credit setoffs and the Tax Court originally had jurisdiction to hear the claim, including the claim that the setoff performed by the IRS was invalid.