The Meaning of 'Shall' in the Internal Revenue Code

QUESTIONS PRESENTED 1. The Meaning of “Shall” in the Internal Revenue Code. Sections 6501(a), 6213(a), and 6901(a) of the Internal Revenue Code all provide that the Government “shall” or “shall not” take certain actions in connection with providing notice, making assessments, and collecting unpaid taxes, and § 6502(a) uses an equivalent phrase (“but only if”). Does the use of the word “shall” in the identified code sections make their provisions mandatory with respect to notice, assessment, payment, and collection in the case of transferees, or can the Government bring proceedings in court to collect taxes without complying with these provisions? 2. The Overall Statutory Scheme. The Internal Revenue Code has a very detailed framework of interrelated code sections dealing with a wide range of procedural and administrative issues, including provisions governing notice, assessment, payment, and collection of taxes. Can the Government substitute a judiciallycreated alternative for the very detailed statutory scheme designed by Congress for purposes of enforcing transferee liability? ii 3. Due Process and the Failure to Assess. Section 6901 provides that transferees must be assessed in the same manner as taxpayers except as otherwise provided in that section. The only exception extends the statute of limitations for assessment by at most three years. Does the Government’s practice of suing transferees without personal assessment frustrate the intent of Congress and deprive transferees of their property without due process of law? 4. Due Process and the Right to Petition the U.S. Tax Court. Section 6213(a) provides that a taxpayer “may file a petition with the Tax Court” within 90 days after the Government mails a notice of deficiency to that taxpayer. Section 6901(f) recognizes that a similar process applies for transferees. Section 6902 provides rules that have “special application to transferees” in the Tax Court, including a special burden of proof upon the IRS to show that the petitioner is liable as a transferee and special evidentiary rules to which the petitioner is “entitled.” Does the Government’s practice of suing transferees without issuing a notice of deficiency frustrate the intent of Congress and deny transferees the right to due process by preventing them from filing a petition in the Tax Court? iii 5. The Jurisdiction and Independence of the U.S. Tax Court. Section 7441 establishes the Tax Court “under article Tof the Constitution of the United States” and provides that it “shall be independent of . . . the executive branch of the Government.” Section 7442 describes the jurisdiction of the Tax Court. Does the Executive Branch practice of not sending notices of deficiency to transferees— thereby preventing them from filing a petition in the Tax Court--while suing them without such notice in federal district court, violate the independence of the Tax Court and constitute an unconstitutional infringement upon _ its jurisdiction? 6. Sovereign Capacity. Supreme Court rulings have established that when the Government acts in its sovereign capacity, it is not subject to state statutes of limitations placing time limits upon enforcement. See, e.g., United States v. California, 507 U.S. 746, 757 (1993). When the Government sues as a third-party beneficiary with respect to a private contract to pay the taxes of another, is it acting in its sovereign capacity such that it is not subject toa state statute of limitations for enforcing the contract? iv 7. Suspension of the Collections Statute of Limitations. Section 6502(a) provides that a tax may be collected from a taxpayer through a proceeding in court if the proceeding begins “within ten years after the assessment of the tax.” Section 6503 contains various provisions suspending the running of the limitation period under § 6502. Do the provisions of § 6503 suspend the running of the § 6502 collections statute of limitations with respect to both transferees and obligors unde