IRC 6320 & 6330

The United States Tax Court in J.E. Ryckman v. Comm’r of Internal Revenue, Docket No. 750-21L, filed August 1, 2024 held that it lacked jurisdiction because a Canadian citizen whose Canadian tax liability had been accepted by the IRS as a tax assessment, lacked Collection Due Process hearing rights. This is a case of first impression. This case is more relevant than it may first appear given the fact that approximately a million Canadian citizens permanently reside in the United States. The taxpayer owed the Canadian Revenue Agency about $200,000. In an effort to collect, Canada sent the IRS a mutual collection assistance request pursuant to the Canada-US Income Tax Treaty. Upon receipt, the IRS filed a notice of federal tax lien. The Treaty requires the IRS to collect an accepted Canadian revenue claim as it would a U.S. Tax assessment for which the taxpayer’s right to a Collection Due Process (CDP) hearing has lapsed. At submission of the lien to the taxpayer, the IRS notified the taxpayer that is had no right to a CDP hearing. In this case, the taxpayer filed the request anyway. The Tax Court reviewed the treaty and concluded that its provisions foreclosed the administrative and judicial protections of the CDP statutes in the case of Canadian revenue claims. While arguments were made that the CDP statute should override the Treaty because Congress adopted the CDP statues later, the Court found that argument unpersuasive. The Treaty simply dictates rights of Canadian citizens and the US statutes do not expand those rights. The Court also commented that it would be “untenable for the IRS to grant a collection alternative, such as an installment payment arrangement or an offer-in-compromise,” on behalf of the Canadian Revenue Agency. In fact, the face of the lien in this matter indicated that payments should be made to the “Receiver General of Canada, not the IRS.” The practical conclusion of the above is that clients in this situation should seek a collection alternative with their home government.