The Tax Times

Friday, February 27, 2026

CDP Is Not a Do‑Over: Diversified Group Learns That An Appeals Opportunity Can Be Fatal To a Tax Court Case If Ignored

In The Diversified Group Incorporated, 166 T.C. No. 2, 2/23/2026), the court held that an IRS post-assessment offer of an Appeals conference regarding assessable penalties is a prior “opportunity to dispute” the liability under section 6330(c)(2)(B), which bars later challenges to the underlying liability in CDP hearings and in Tax Court.

Core holding

· Diversified Group and its president James Haber were assessed section 6707 penalties (about 41.2 million dollars) for failing to register “Son-of-BOSS”–type tax shelters under section 6111 for 1999–2002.

· After assessment, the IRS sent letters (Dec. 2013 and Feb. 2014) expressly offering a conference with IRS Appeals and explaining how to protest the penalties.

· Petitioners declined to pursue Appeals and later tried to contest the penalties in CDP proceedings and then in Tax Court under section 6330(d).

· The Tax Court (Judge Toro) held that the offered Appeals conference was an “opportunity to dispute” the liability within the meaning of section 6330(c)(2)(B) and Treas. Reg. § 301.6330-1(e)(3) Q&A–E2.

· Because petitioners had that opportunity and chose not to use it, they were precluded from challenging the underlying section 6707 liabilities in their CDP hearings and thus in Tax Court, following Lewis v. Commissioner, 128 T.C. 48 (2007).

Key reasoning points

· An Appeals “opportunity” need not be a formal in‑person meeting; correspondence or calls with Appeals satisfy the regulation.

· Taxpayers cannot refuse to engage with the offered administrative remedy and then argue that the remedy was not “meaningful” or was “precooked.”

· A mere offer of Appeals review, when accompanied by clear instructions on how to obtain that review, is enough to trigger section 6330(c)(2)(B)’s bar, even for post‑assessment, non–deficiency penalties like section 6707.

Other issues

· The court granted the Commissioner partial summary judgment on the section 6330(c)(2)(B) issue and on the Appointments Clause argument; it held the Appeals settlement officer was properly appointed.

· The court did not reach the Eighth Amendment excessive fines argument because petitioners were entirely barred from disputing the underlying liability; that issue was therefore moot.

· A due process (Fifth Amendment) claim was not clearly raised and did not alter the result.

Practical takeaway for practice

For assessable penalties, if the IRS issues a post‑assessment letter offering Appeals review and explaining how to request it, that documented offer can permanently foreclose later liability challenges in CDP and Tax Court under section 6330(c)(2)(B) if the taxpayer does nothing. This makes it critical to calendar and respond to any Appeals‑offer letters in penalty cases, including section 6707 and similar promoter or information‑return penalty contexts.

Have an IRS Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1. https://www.casemine.com/judgement/us/699d9ffc52d338fd3f6e77ee

2. https://www.currentfederaltaxdevelopments.com/blog/2026/2/24/tax-court-precludes-challenges-to-underlying-liabilities-in-cdp-proceedings-an-analysis-of-the-diversified-group-incorporated-v-commissioner

3. https://www.irs.gov/pub/irs-prior/p5286--122024.pdf

4. https://www.leagle.com/decision/intco20260223k63

5. https://www.currentfederaltaxdevelopments.com

6. https://www.smbiz.com/sbwday.html

7. https://kpmg.com/kpmg-us/content/dam/kpmg/taxnewsflash/pdf/2026/02/166-tc-no-1-jan28-2026.pdf

8. https://law.justia.com/cases/federal/appellate-courts/cafc/16-1014/16-1014-2016-11-10.html

9. https://www.law360.com/tax-authority/articles/2444947/tax-court-rejects-son-of-boss-promoter-s-penalty-dispute

10. https://www.vitallaw.com/news/promoters-barred-from-challenging-penalties-after-declining-appeals-review-the-diversified-group-incorporated-tc/ftd01e59aec15aba549658eadc683650a160a

11.

Thursday, February 26, 2026

IRS Launches New Web Page To Streamline Tax Fraud Reporting

In IR-2026-26 the Internal Revenue Service announced the launch of a new web page that allows taxpayers to confidentially report suspected tax fraud, scams, evasion, or other tax-related illegal activities, as well as internal-facing improvements that will enhance how referrals are used to stop illegal activity.

“Improvements to the IRS fraud reporting system make reporting suspected wrongdoing easier and simpler and will address historic challenges that had prevented the IRS from making maximum use of the referrals it receives,” said IRS Chief Executive Officer Frank J. Bisignano. “By reporting suspected tax fraud or scams, taxpayers play an important role in uncovering fraud and supporting the integrity of the nation’s tax system.”

The new web page consolidates multiple IRS fraud-reporting options into a single, centralized location, making it easier for taxpayers to report suspicious activity. The web page can be found by selecting the new ‘Report Fraud’ button on the IRS.gov homepage or at IRS.gov/SubmitATip. Taxpayers are encouraged to report suspected tax-related wrongdoing as soon as possible to help the IRS address fraud and noncompliance.

The new web page is only an initial improvement to the IRS’s fraud reporting process. Over the longer term, the IRS plans to streamline fraud reporting by reducing forms, automating processes, and using modern case management software.

These changes will address historic challenges the IRS has faced in using referrals. Creating fewer work streams, simplifying how taxpayers submit referrals, and making processing of claims more efficient will improve how IRS uses referrals in years to come.

Have an IRS Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Wednesday, February 25, 2026

White Collar Enforcement After Pullback Under President Trump

Recent data show that anti–money laundering (AML) fines in the U.S. fell from roughly $4.3 billion in 2024 to about $2.0 billion in 2025, a 54% decline that mirrors broader reports of a 58–61% drop in U.S. AML penalties as enforcement capacity shrank. At the same time, IRS Criminal Investigation cases targeting abusive tax schemes reportedly slid from 92 in 2024 to just 34 in 2025, a 63% fall and well below prior‑decade norms, even as IRS-CI continued to identify billions in tax fraud overall.

According to lawmakers, roughly 25,000 federal agents and career prosecutors who had previously focused on white collar matters were reassigned to immigration enforcement after January 2025, leaving many financial crime units “understaffed, under-resourced, and in some cases gutted.” This resource shift, paired with clemency that wiped out an estimated $1.3 billion in white collar restitution and fines, has been characterized by advocates as an extraordinary break from historic enforcement practice rather than a routine policy reprioritization.

Expert Warnings: Impunity Risk In A High‑Threat Era

Policy advocates and former enforcement officials warn that cutting back on complex financial investigations at this moment sends a dangerous signal of impunity in a global environment where financial crime risk is rising. Fenergo’s global data show total AML-related penalties fell 18% worldwide in 2025, but U.S. penalties dropped far more steeply than those in Europe and Asia, underscoring how much of the downturn is driven by U.S. resourcing and policy choices rather than a genuine fall in misconduct.

Experts highlight that technology is amplifying risk on multiple fronts: cryptocurrency has become mainstream and remains a powerful magnet for illicit finance, while rapid advances in artificial intelligence promise new tools for fraud, sanctions evasion and sophisticated laundering schemes. Against that backdrop, veteran regulators argue that pulling back experienced investigative staff and signaling leniency through pardons could embolden bad actors at home and abroad.

According to Law360 Money laundering-related fines and tax fraud investigations plummeted last year as President Donald Trump shifted federal agents away from combating financial crime to focus on the immigration crackdown, according to recent reports that have raised alarms among experts about the state of white collar enforcement in the U.S.:

FATF Scrutiny And The Risk Of A “Gray List”

This enforcement retreat coincides with the most significant review of U.S. AML defenses in a decade, as the Financial Action Task Force (FATF) conducts a full evaluation of U.S. compliance with global anti–money laundering and counter‑terrorist financing standards. FATF assessors are examining not just laws on the books but how effectively the U.S. uses those tools to detect, investigate and punish financial crime.

Advocates in the Financial Accountability and Corporate Transparency Coalition (FACT) warn that if the U.S. is viewed as failing to enforce its own rules, it could face a form of reputational downgrade similar to “gray‑listing,” in which jurisdictions are placed under enhanced monitoring for strategic deficiencies in their AML regimes. While gray‑listing is typically associated with smaller or emerging markets, being perceived as a weak link would make cross‑border banking and correspondent relationships more burdensome and could raise the cost and complexity of transacting through U.S. channels.

Congressional Pushback And DOJ’s Response

Alarmed by the trends, 27 Democratic lawmakers sent a January letter to federal inspectors general urging investigations into how the reallocation of roughly 25,000 agents away from white collar and corporate crime has affected fraud, tax evasion and money laundering enforcement. A separate letter from seven senators to Treasury Secretary and acting IRS Commissioner Scott Bessent and IRS-CI Chief Guy Ficco pressed for answers on the steep falloff in abusive tax scheme probes, which dropped 63% year‑over‑year and now sit about 40% below any other year in the last decade.

The U.S. Department of Justice has maintained publicly that assisting with immigration enforcement has not prevented it from successfully investigating and prosecuting white collar crime, pointing to ongoing work in areas such as healthcare fraud and False Claims Act litigation. DOJ’s Criminal Division also installed a new Assistant Attorney General in December and a new Fraud Section chief in January, changes some practitioners interpret as a sign of renewed stability and potential rebuilding of depleted white collar ranks.

How The Shift Is Reshaping White Collar Practice

On the ground, white collar defense lawyers report that active federal investigations have stalled or gone quiet, often after key agents left or teams were thinned out, leading some matters to “wither on the vine” rather than progress to charges. In response, many practitioners are pivoting from traditional criminal defense to a heavier mix of civil litigation, compliance counseling and internal investigations as demand shifts away from full‑scale criminal prosecutions.

Despite the downturn in AML penalties and tax scheme prosecutions, enforcement remains robust in pockets such as healthcare fraud, pandemic‑related benefit fraud and certain high‑profile bank and crypto cases, where penalties continue to reach into the hundreds of millions. Looking ahead, practitioners say the key questions are whether the administration will reallocate agents back to financial crime, how DOJ’s new leadership will prioritize corporate enforcement, and what signal FATF and global markets will send about the U.S.’s willingness to police money flows through its financial system.

Have an IRS Criminal Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources

1. https://resources.fenergo.com/newsroom/global-financial-regulatory-penalties-fall-by-18-in-2025-as-enforcement-shifts-from-us-to-emea-and-apac

2. https://ffnews.com/newsarticle/fintech/fenergo-study-u-s-financial-regulatory-penalties-plunge-61-amid-regulatory-capacity-strain-but-lighter-enforcement-not-likely/

3. https://www.irs.gov/newsroom/irs-ci-issues-fiscal-year-2025-annual-report-showcasing-banner-investigative-results

4. https://www.natptax.com/news-insights/blog/irs-ci-2025-report-highlights-new-investigation-techniques/

5. https://ibsintelligence.com/ibsi-news/us-aml-penalties-fall-despite-firm-regulatory-expectations-fenergo-study-shows/

6. https://www.kahntaxlaw.com/irs-criminal-investigation-division-releases-its-2025-annual-report/

7. https://www.cfobrew.com/stories/2025/03/04/trump-s-treasury-department-neuters-anti-money-laundering-rule

8. https://truthout.org/articles/trump-administration-moves-to-gut-anti-money-laundering-law/

9. https://thefactcoalition.org/wp-content/uploads/2025/05/FACT-Comment-on-CTA-Interim-Final-Rule.pdf

10. https://www.fenergo.com/aml-report

11. https://resources.fenergo.com/reports/fenergo-fines-report-2025

12. https://www.complianceweek.com/reports/us-sees-steep-drop-in-penalties-in-2025-while-fines-elsewhere-increase/36450.article

13. https://www.tradersmagazine.com/am/financial-regulatory-penalties-decline-in-2025/

14. https://www.newsweek.com/donald-trump-corporate-transparency-act-boi-treasury-2038564

15. https://www.corporatecomplianceinsights.com/news-roundup-january-15-2026/

Tuesday, February 24, 2026

The U.S. Supreme Court Just Killed Trump’s Tariffs. Now What About Refunds?

The U.S. Supreme Court has struck down President Donald Trump’s emergency tariffs as illegal, leaving a massive unanswered question: how will companies get back an estimated $175 billion in duties they paid at the border? The Court invalidated the tariffs but did not spell out any refund process, effectively tossing that problem back to the lower courts and the trade bar.

At a press conference, President Trump himself predicted, “we’ll end up being in court for the next five years,” which is probably not far off the mark for many importers.

How the Tariffs Worked in Practice

To understand the refund mess, you have to start with how tariffs are actually collected.

When goods subject to tariffs enter the United States, the importer typically:

· Posts a bond with U.S. Customs and Border Protection (CBP).

· Pays estimated tariffs at the time of entry to get the goods released.

Those entries are not final. CBP later conducts a process called “liquidation” — essentially a final duty calculation — which in normal times occurs roughly 314 days after entry. At liquidation:

· If the importer overpaid, CBP issues a refund.

· If the importer underpaid, CBP bills the shortfall.

Once liquidation occurs and becomes final, duty liability is usually locked in, which is why importers rushed to court while the Supreme Court was still considering the legality of the tariffs. Some tried to stop liquidation so their entries would remain open, but the Court of International Trade (CIT) denied that request.

What the Supreme Court Did — and Didn’t — Decide

The Supreme Court held that the tariffs imposed under an economic emergency statute were illegal. That is a huge substantive victory, but procedurally it was narrow: the Court did not address how, or even whether, the government must return the money that has already been collected.

Justice Brett Kavanaugh, in dissent, warned that the majority’s decision would have “serious practical consequences,” including the refund issue, noting it was conceded at oral argument that distributing refunds would likely be “a mess.” The Court essentially acknowledged the problem and then left it for the lower courts to solve.

The case now returns to the Court of International Trade, which will be ground zero for unwinding years of tariff collections.

What Refunds Might Look Like

Even before the ruling, more than 1,000 lawsuits had already been filed in the CIT by importers seeking refunds. That number will almost certainly skyrocket as more companies realize they may have refund rights.

A key development: in December, the CIT held that it has authority to reopen final tariff determinations (liquidations) and order the government to pay refunds with interest. The Trump administration told the court it would not challenge that authority. That removes one major legal roadblock and makes it far more realistic that refunds will ultimately be ordered, at least for companies that properly pursue their claims.

In other words, the door is open, but importers will likely need to walk through it one by one.

Will Companies Have to Sue to Get Paid?

For many importers, the answer is: yes.

Trade lawyers expect that:

· Each importer may have to file its own case in the CIT to secure a refund.

· It is unclear that a single, sweeping class action can cover the diverse universe of companies, products, and tariff lines involved.

Under U.S. trade law, importers generally have two years to sue for a refund. That limitations period will be crucial. Companies that sit on their rights may simply lose them.

This structure heavily favors large, well-funded players who can afford to hire counsel and litigate. Smaller importers, already hit harder by the tariffs in the first place, may find that paying thousands of dollars in legal and court fees to chase a claim is not worth the likely recovery. Some will simply walk away.

Lessons from Past Large-Scale Refunds

This is not the first time the CIT has had to manage a massive refund program flowing from an unconstitutional levy.

In 1986, Congress enacted a harbor maintenance tax, assessed on the value of cargo moving through U.S. ports. In 1998, the Supreme Court held that part of that tax was unconstitutional. That triggered a wave of refund claims — over 100,000 in total — which were managed under the supervision of Judge Jane Restani at the CIT.

That episode shows that, while complex, a court-administered refund process for a huge number of claimants is possible. It also suggests that the tariff refund saga will likely involve years of claims processing, test cases, and procedural rulings.

Does It Have to Be a Total Mess?

There are some reasons for cautious optimism.

Compared with the 1980s and 1990s, the government now has better systems for tracking tariff payments and entry data. Improved recordkeeping should, at least in theory, make calculating what each importer is owed more straightforward.

However, several thorny issues remain:

· Small businesses are already urging the administration to authorize automatic repayments rather than forcing everyone into court.

· There is concern that, instead of streamlining refunds, the government could respond with heightened scrutiny of entry documentation, slowing the process to a crawl.

Even if the mechanics of writing checks are manageable, the legal and administrative architecture around who qualifies, what evidence is required, and how disputes are resolved can easily stretch out over years.

Who Ultimately Gets the Money?

Even where the government does issue a refund, the answer to “who actually benefits?” is not always straightforward.

Key points:

· Only the “importer of record” – the party listed as responsible for the entry and payment of duties – is entitled to the refund from the government.

· Many operating companies are not the importer of record; instead, a broker, distributor, or other intermediary may sit in that seat.

Once a refund reaches the importer of record, contract law takes over. Private agreements between the importer and its customers or affiliates will determine who ultimately keeps the money. If contracts are silent or ambiguous on tariff risk allocation and pass-through, that sets the stage for a second wave of disputes — this time between businesses, not against the government.

Financial Markets Are Already Moving

Given the uncertainty and delay, some companies are treating potential tariff refunds like contingent litigation assets. Rather than wait years and shoulder legal costs, they are selling their potential claims to Wall Street investors and claims funds in exchange for immediate, but discounted, cash.

This securitization-like approach turns a messy legal claim into a financial product. Investors bet that, after legal expenses and time, the ultimate payout will exceed what they paid for the claim. For companies with strained cash flow post-tariffs, that trade-off can be attractive.

What Companies Should Be Doing Now

For importers and their advisors, this is not a “wait and see” moment. Steps to consider include:

· Identifying which entries were subject to the now-illegal tariffs and who was the importer of record.

· Reviewing customs records and internal contracts to understand who bore tariff costs and who has refund rights.

· Tracking the evolving CIT litigation strategy and deadlines, including the two-year window for filing claims.

· Evaluating whether to litigate directly, join coordinated efforts, or consider monetizing claims through third-party investors.

The bottom line: the Supreme Court’s ruling ended one chapter — the legality of Trump’s emergency tariffs — but opened an even more complex sequel about getting the money back. For many companies, the real work of recovery is only beginning.

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