The United States Tax Court has held that Canada-U.S. Income Tax Treaty bars collections hearing by the United States.
The court opined that it would be strange for the Internal Revenue Service (IRS) to be in the position of verifying requirements of Canadian law or to grant a collection alternative. It is not odd, however, for sovereign nations to respect and abide by each other’s collection procedures. The practical concerns recited by the opinion of the Court are mole hills, nothing more. Verification would be accomplished by confirming that an application was properly made under the Treaty. The grant of a collection alternative would not compromise Canada’s tax claim but merely represent the IRS’s best judgement as to what part of the claim may be collected and which collection mechanisms the United States will employ to do so.
The court held that Treaty Article XXVI A requires the United States to collect an accepted Canadian revenue claim as it would a U.S. tax assessment for which the taxpayer’s right to a CDP hearing (among other rights) has lapsed or been exhausted. Consequently, P has no additional rights under I.R.C. § 6320 or § 6330 with respect to the IRS’s collection of her Canadian tax liability, and those statutes imposed no obligations on the IRS with respect to P’s hearing request.
The court held that it lack jurisdiction over P’s Petition because the IRS did not issue a determination letter to P that would invoke our jurisdiction under I.R.C. § 6330(d)(1), and it had no obligation to do so.
Issue Raised
Whether US Tax Court has jurisdiction to review an IRS denial of a hearing request regarding collection of taxes pursuant to a mutual collection assistance request (MCAR) made by Canada under the Treaty.
Facts
Petitioner, J.E. Ryckman owes approximately $200,000 in Canadian tax for tax years 1993 and 1994. In 2017 the Canada Revenue Agency sent the Internal Revenue Service (IRS) a mutual collection assistance request (MCAR) under the Canada- U.S. Income Tax Treaty (Treaty). Once the U.S. Competent Authority granted the MCAR, the IRS filed a notice of federal tax lien (NFTL) against Petitioner, J.E. Ryckman. The IRS notified Petitioner, J.E. Ryckman of the NFTL filing but stated that she had no right to a collection due process (CDP) hearing under I.R.C. §§ 6320 and 6330. Petitioner, J.E. Ryckman nonetheless requested a CDP hearing within 30 days of the IRS’s notice. When the IRS denied P’s request, she petitioned for review of that denial under the color of I.R.C. § 6330(d)(1).
Petitioner, J.E. Ryckman, filed her Petition to contest the determination of the Commissioner of Internal Revenue (Commissioner) to deny her a hearing to challenge the filing of a notice of federal tax lien (NFTL) against her by the Internal Revenue Service (IRS). The NFTL was filed to secure Ms. Ryckman’s tax liabilities owed to Canada. The IRS is attempting to collect those liabilities on Canada’s behalf pursuant to Article XXVI A (Assistance in Collection) of the Canada-U.S. Income Tax Treaty (Treaty).
According to the Canada Revenue Agency (CRA), Ms. Ryckman owes approximately $200,000 in Canadian tax for tax years 1993 and 1994. Ms. Ryckman resided in the United States in 2017 when the CRA sent the IRS an MCAR in accordance with Treaty Article XXVI A(2) (Ryckman MCAR), representing that the 1993 and 1994 tax liabilities are “finally determined” within the meaning of Treaty Article XXVI A(2), i.e., Canada “has the right under its internal law to collect the revenue claim and all administrative and judicial rights of the taxpayer to restrain collection in [Canada] have lapsed or been exhausted.” The U.S. Competent Authority, an office within the IRS, granted the MCAR under Treaty Article XXVI A(3) and forwarded it to an IRS collection office.
Case Information
Case Name: J.E. Ryckman V. Commissioner Of Internal Revenue
Judicial Level & Location : US Tax Court
Case Number : Docket No. 750-21L.
Date of Decision : 01/08/2024
