# Department of the Treasury (2010)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A50b17bc59fdafdf0

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

United States
Department of the Treasury

Director, Office of Professional Responsibility,
Complainant-Appellant
Complaint No. 2010-09

V.

(b)(3)/26 USC 6103 ,

Respondent-Appellee

Decision on Appeal
Authority
Under the authority of General Counsel Order No. 9 (January 19, 2001) and the
authority vested in him as the Chief Counsel of the Internal Revenue Service (IRS)
through a delegation order dated March 2, 2011, William J. Wilkins delegated the
undersigned the authority to decide disciplinary appeals to the Secretary of the Treasury
filed under Part 10 of Title 31, Code of Federal Regulations (Practice Before the Internal
Revenue Service, reprinted by the Treasury Department and hereinafter referred to as
Circular 230 - all references are to Circular 230 as in effect for the period(s) at issue).
This is such an appeal from a Decision and Order of Default (Default Order) entered
into this proceeding by Chief Administrative Law Judge Susan L. Biro (the ALJ) on June
15,2010.
Procedural History
This proceeding was commenced on April 13, 2010, when the Complainant-Appellant
Director of the Office of Professional Responsibility (OPR) filed a Complaint against
Respondent-Appellee (b)(3)/26 USC 6103 (" (b)(3)/26 USC 6103 "). The Complaint alleges
that (b)(3)/26 USC 6103 has engaged in practice before the IRS, as defined by §10.2(a)(1)
(b)(3)/26 USC 6103
of Circular 230, as an attorney. Further, that he

2
(b)(3)/26 USC 6103

as shown in tabular form below:
(b)(3)/26 USC
6103

(b)
(3)/2
(b)
6
(3)/26
(b)
USC
USC
(3)/26
(b)
6103
6103
USC
(3)/26
6103
USC
6103

(b)(3)/26 USC 6103

(b)(3)/26 USC 6103

(b)(3)/26 USC 6103

(b) 1
(3)/2
(b)(3)/26 USC 6103
6
(b)(3)/26 USC 6103
USC
(b)(3)/26 USC 6103
6103
(b)(3)/26 USC
6103
(b)(3)/26
USC 6103

(b)(3)/26
USC
6103
(b)(3)/26
USC 6103

(b)(3)/26
SC 6103
U(b)(3)/26
USC 6103

(b)(3)/26 USC 6103

(b)(3)/26 USC 6103

(b)(3)/26 USC 6103

(b)(3)/26 USC 6103

(b)(3)/26 USC

(b)(3)/26 USC 6103

(b)(3)/26 USC

6103
(b)(3)/26
USC 6103

(b)(3)/26 USC 6103

6103
(b)(3)/26
USC 6103

(b)(3)/26 USC 6103
(b)(3)/26 USC 6103

The Complaint states that, with respect to

(b)(3)/26 USC
6103 USC 6103
(b)(3)/26

(b)(3)/26 USC 6103

constituted incompetence and disreputable
conduct within the meaning of §10.51 of Circular 230 for which (b)(3)/26 USC 6103 may be
censured, suspended, or disbarred from practice before the IRS. The Complaint
requested a suspension from practice for a period of 48 months, with reinstatement
thereafter being at the sole discretion of OPR and, at a minimum, requiring that (b)
(b)(3)/26 USC 6103

(3)/

.

sua

(b)(3)/26 USC 6103 did not file an Answer to the Complaint. On June 15, 2010, the ALJ
sponte entered a Default Order suspending (b)(3)/26 USC 6103 indefinitely from practice

before the IRS, with reinstatement to practice thereafter at the sole discretion of OPR.
In entering the Order, the ALJ found that the five-year statute of limitations in 28 U.S.C
§2462 applied to this Circular 230 disciplinary proceeding. The ALJ also found that
(b)(3)/26 USC 6103
since the counts for 2001, 2002, and 2003 accrued on
, respectively, and the Complaint was filed on April, 13,
2010, more than five years later, those counts could not be grounds on which to enforce
a penalty. The Default Order reasons that because OPR had sought a four-year
(b)(3)/26 USC 6103
suspension for
and that since
(b)(3)/26 USC 6103
were time barred, an indefinite suspension was
warranted, which allows OPR "complete discretion to determine when (b)(3)/26 USC 6103
may be reinstated." Default Order at 7.
OPR filed an appeal asserting that the Default Order was in error as (i) 28 U.S.C. §2462
does not apply to OPR practitioner proceedings; (ii) even if §2462 applies, the claim did
not accrue until the "date of discovery," that is, when QPR learned of (b)(3)/26 USC 6103 ;
(b)(3)/26 USC 6103
and (iii) alternatively,
is a continuing violation and that the statute
of limitations is triggered only when the violative acts cease. OPR requests that the
sanction be modified to 48 months rather than an indefinite suspension, which it views
1

no bearing on the result herein.

(b)(3)/26 USC 6103

, which have

3
as more serious than an indefinite suspension. Further, OPR states that if §2462 is
found to apply, that time-barred violations should not be considered as an aggravating
factor in the sanction determination.
Findings of Fact
The Appellate Authority reviews the ALJ's findings of fact under a clearly erroneous
standard of review. Section 10. 78 of Circular 230. The ALJ's findings of fact are well
supported by the record and are not clearly erroneous.
Analysis as to §2462
The Appellate Authority reviews the ALJ's findings as to issues that are exclusively
matters of law de novo. Section 10. 78 of Circular 230. The application of §2462 is
exclusively a matter of law.
(i) Applicability of §2462 to this OPR Disciplinary Proceeding Generally.
28 U.S.C. §2462 provides in part:
Except as otherwise provided by Act of Congress, an action, suit or proceeding
for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise,
shall not be entertained unless commenced within five years from the date when
the claim first accrued ...
OPR argues that the authority to regulate practice before the IRS as set forth in 31
U.S.C. §330 and the implementing regulations contained in Circular 230 are remedial in
nature, and do not involve the enforcement of a civil fine, penalty, or forfeiture.2 A
previous Appellate Authority held in an unpublished decision that §2462 is generally not
applicable to OPR disciplinary proceedings absent a finding that the primary purpose of
a particular proceeding was penal. See Director, OPR v. Francis, Complaint No. 200409, p. 12, n. 15 (Decision on Appeal, February 4, 2008). OPR emphasizes that in this
particular case there were no findings that the primary purpose of this proceeding was
penal as opposed to remedial. In this connection, the ALJ recognized that the
suspension from practice is imposed in furtherance of the IRS regulatory duty to protect
the public interest and the Treasury Department by conducting business with
responsible persons only. Default Order at 5.
The five-year limitations period provided for in §2462 has been held to a';J'IY to
administrative proceedings such as this one. 3M Co. v. Browner, 17 F.3 1453 (D.C.
Cir. 1994). The question remains whether a suspension for (b)(3)/26 USC 6103 is
punitive, in which case the five year limitation period provided for in §2462 would apply,
or is remedial, in which case it would not apply.

2

However, that section specifically provides that the Secretary may impose a "monetary penalty" even
though such a penalty is not proposed here.

4
In Johnson v. Securities and Exchange Commission, 87 F.3d 484, 488-89 (D.C. Cir.
1996), the D.C. Circuit considered the imposition by the SEC of a six-month license
suspension on a securities industry supervisor for failing to adequately supervise a
subordinate to be a penalty within the meaning of §2462. The court found that a
penalty, within the meaning of §2462, is a form of punishment imposed by the
government for unlawful or proscribed conduct ''which goes beyond remedying the
damage caused to the harmed parties by the defendant's action." Id. at 488. "[T]he test
for whether a sanction is sufficiently punitive to constitute a 'penalty' within the meaning
of §2462 is an objective one, not measured from the subjective perspective of the
accused (which would render virtually every sanction a penalty)," but "the degree and
extent of the consequences to the subject of the sanction must be considered as a
relevant factor in determining whether the sanction is a penalty." Id. The court noted
that "[t]his sanction would less resemble punishment if the SEC had focused on
Johnson's current competence or the degree of risk she posed to the public," and that "it
is evident that the sanctions here were not based on any general finding of Johnson's
unfitness as a supervisor, nor any showing of the risk she posed to the public," but
rather her failure reasonably to supervise a subordinate. Id. at 489. The court explicitly
rejected a public policy exception for government agencies protecting public interests
(Id. at 492). The court found that the §2462 limitations period applied with respect to
the SEC's proposed suspension. 3
In Proffitt v. Federal Deposit Insurance Co., 200 F3d. 855 (D.C. Cir. 2000), the FDIC's
removal of a banker from his position and his expulsion from the banking industry was
held to constitute a penalty within the meaning of §2462. In Coghlan v. NTSB, 470 F.3d
1300, 1306 (11 th Cir. 2006), revocation of an airline transport pilot certificate was held to
be remedial as it implicated matters of air safety. In Meadows v. SEC, 119 F.3d 1219,
1228 (5th Cir. 1997), the temporary bar of a stockbroker who had misrepresented the
risks of investing to investors was held to be remedial where the ALJ made specific
findings as to lack of fitness and the danger posed to the investing public. In SEC v.
Microtune, Inc., 2011 U.S. Dist. LEXIS 14850 (N.D. Tex. 2011 ), the court followed
Johnson in considering an injunction penal, focusing on the degree and extent of the
sanctions as a factor in whether it is a penalty; permanent public disclosure evidences
SEC action as penal and a focus on past conduct also weighs in favor of considering
action as penal. It has been recognized that the distinction between punitive and
remedial measures is not always easy to make. See SEC v. Quinlan, 2008 U.S. Dist.
Lexis 95789 (E.D. Mich. 2008), affirmed, 2010 U.S. App. LEXIS 8205 (6th Cir. 2010).
Attorney disbarment proceedings have been recognized as not for the purpose of
punishment but to determine fitness to continue as an officer of the court and to prevent
the ministrations of unfit persons to practice. While offenses after a lengthy lapse of
time do not provide the sole foundation for a disbarment they may be considered with

3

For a critique of the Johnson application of §2462 to the suspension of a professional license see
McDonald, S., A Case of Statutory Misinterpretation: An 1839 Statute of limitation on a Form of Debt
Action is Being Misapplied to Limit Modern Regulatory Proceedings, 49 Am. U. L. Rev. 659, 701, 715-19
(2000).

5
more recent facts in a disciplinary proceeding at any time. See In the Matter of Echeles,
430 F.2d 347, 349, 355 (ih Cir. 1970).
(b)(3)/26 USC 6103
In applying the above law to a sanction for
,
several factors support that a suspension is remedial. They include (1) that OPR has a
duty to protect both taxpayers and the government from less than responsible
(b)(3)/26 USC 6103
, someone who earns his livelihood
practitioners, and
is dishonorable,
participating in the administration of the tax laws, (b)(3)/26 USC 6103
unprofessional, and adversely reflects upon fitness to practice (Default Order at 5 and
6) and it is an indicator of incompetence4 ; (2) QPR credibly states that its disciplinary
proceedings consider the practitioner's current fitness to practice and provide
(b)(3)/26 USC 6103
practitioners an opportunity to present their case and
prior to the
filing of a Complaint (see §10.60(c) of Circular 230), and in this case QPR worked with
(b)(3)/26 USC 6103 to try
(b)(3)/26 USC 6103
; and (3) that an OPR suspension only
bars practice before the IRS and, for most practitioners, practice before the IRS does
not comprise the bulk of their livelihood - (b)(3)/26 USC 6103 may continue to practice law
and he may even continue to represent his clients in the U.S. Tax Court during the
period of suspension.

The factors indicating that the sanctions proposed by OPR are punitive, at least insofar
(b)(3)/26 USC 6103
as the sanction is for
, include (1)
although OPR asserts that its sanctions are not designed to visit retribution for past
acts, past sanctions proposed by OPR have strongly focused on past conduct rather
than current competence, and disbarment and the duration of suspensions has strongly
(b)(3)/26 USC 6103
correlated with
carrying less weight the suspension to be imposed is for (b)(3)/26 USC
(b)(3)/26 USC 6103 which is personal conduct; (2) while there is a clear nexus6103
between
(b)(3)/26 USC 6103 and the competence and character needed to represent
others in a tax controversy practice, improper personal behavior has a limited
correlation with professional performance, particularly when there is a more than fiveyear gap between the improper personal behavior and the professional sanction; (3)
notwithstanding that many of those of us in tax administration mightily agree with
Justice Oliver Wendell Holmes that taxes are essential for a civilized society (see
Compania General De Tobaccos De Filipinas v. Collector of Internal Revenue, 275 U.S.
87, 100 ( 1927)), I believe that for the larger public the perceived degree of risk of
(b)(3)/26 USC 6103
representation by a practitioner
is far less than the
degree of risk to the public of an unqualified pilot (see Coghlan, supra), an unreliable
investment advisor, or the degree of risk associated with the other situations where the
sanction was found to be remedial 5 ; and (4) the sanction is made public.

4

(b)(3)/26 USC 6103
However, if the practitioner
preceding the
Complaint, the practitioner's having been subject to a suspension may be brought to the public's attention
as the result of an OPR proceeding (b)(3)/26 USC 6103 .
5
OPR's claim that a suspension is needed to protect the public is undercut by its not instituting this
proceeding until well over two years after substantiating (b)(3)/26 USC 6103 violations.

6
(b)(3)/26 USC 6103

The typical reported QPR case has been for

. If QPR proposed a suspension for a
(b)(3)/26 USC 6103
practitioner who
, the predominant purpose of that suspension would be penal rather than
remedial. The closer in time that a suspension for (b)(3)/26 USC 6103 occurs to the
errant conduct, the more the purpose is remedial.

In weighing the penal and remedial factors I find that although both penal and remedial
purposes are present in an QPR count for (b)(3)/26 USC 6103 , that the ALJ is correct: a
more than five years before
count instituted against a practitioner for (b)(3)/26 USC 6103
the institution of proceedings is, as a matter of law, a penalty within the meaning of
(b)(3)/26 USC 6103
§2462. 6 Further, I find that for the reasons stated below,
, is the date that commences the running of the §2462
limitations period and that the violation is not a continuing one.

(ii) Date of Commencement of §2462 Accrual.
A claim normally accrues when the factual and legal prerequisites for filing suit are in
place. See 3M Co. v. Browner, supra at 1460; Proffitt, supra at 862-63. Thus, where
the basis for a disbarment from federal practice is disbarment from another jurisdiction it
·
is the act of disbarment in the other jurisdiction that sets the statute of limitations
running. See Sheinbein v. Dudas, 465 F.3d 493,496 (Fed. Cir. 2006). Cf., Public
Interest Research Group of New Jersey, Inc. v. Powell Duffryn Terminals Inc., 913 F.2
64 (3rd Cir. 1990) (§2462 period begins when reports are filed with the EPA as public
(b)(3)/26 USC 6103
can't know of violation until a filing occurs; however,
). In 3M Co., the D.C. Circuit explicitly rejected the application of a
"discovery of violation" rule to §2462. Id. at 1460-61. The court specifically found that
under §2462 it is the breach of the duty, not the discovery of the violation by the federal
agency, that is controlling notwithstanding the difficulties that the federal agency may
have in discovering the violation or enforcing the law. Neither fraudulent concealment,
latent injuries, nor any of the other special statute tolling doctrines apply here.
Although it may be difficult as a practical matter for the IRS to know for certain that
(b)(3)/26
(b)(3)/26 USC 6103
, or to monitor all practitioner USC
6103 , the factual and legal prerequisites for
(b)(3)/26 USC 6103
.
the filing of a Complaint are in place when
Because §10.51 of Circular 230 describes the conduct giving rise to the sanction as
(b)(3)/26 USC 6103

which provides the factual and legal prerequisites for filing suit, a2nd
that date cannot be extended due to the inevitable difficulties in determining that a
(b)(3)/26 USC 6103
practitioner
, or until QPR receives information from an IRS
employee concerning the practitioner (see §10.53 of Circular 230). Accordingly,

6

Because the Default Order was entered based only on the Complaint, CPR did not present to the ALJ
its evidence in support of the Complaint. I have reviewed that evidence and it would not affect my
conclusion.

7
(b)(3)/26 USC 6103

, is the date that commences the

running of the §2462 limitations period.
USC
as a Continuing Violation.
(iii) (b)(3)/26
6103

Section 2462 provides that its limitations period begins to run "from the date when the
(b)(3)/26 USC 6103
claim first accrued" [italics added]. This is
. See
generally United States v. Kirkman, 755 F. Supp. 304,306 (D. Idaho 1991) (tax evasion
under 26 U.S.C. §7201 is not a continuing offense). The Supreme Court has
recognized that a statutory prohibition should only rarely be construed as a continuing
violation for statute of limitations purposes. Toussie v. United States, 397 U.S. 112, 115
(1970). In Toussie, the Court held that with regard to an individual legally obligated to
register for the draft on or five days after his 18th birthday who did not do so, his crime
was completed at that time and the applicable five-year statute of limitations began to
run at that time, barring his prosecution eight years later. See also 3M Company, supra
at 1455 n. 2. Although 26 U.S.C. §6501(c)(3) provides that when no return has been
filed that tax may be assessed or a proceeding may be begun to collect the tax without
assessment at any time, it does not address the time for filing a disciplinary proceeding.
Accordingly, I conclude that the limitations periods for bringing a disciplinary action for
(b)(3)/26 USC 6103

.
Appropriate Sanction
The Appellate Authority reviews the sanction sought by QPR and imposed by the ALJ
USC
, Complaint No. 2007-12 (April 21, 2009) at
de novo. See, e.g., Director, OPR v. (b)(3)/26
6103
(b)(3)/26 USC
p. 3; Director of OPR v.
Complaint No. 2006-23 (April 2008) at p. 3; Director,
6103
USC
(b)(3)/26
OPR v. (b)(3)/26
,
Complaint
No.
2007-08
(July 2008) at p. 4); Director, OPR v. USC
6103
6103 ,
(b)(3)/26
Complaint No. 2008-12 (January 20, 2010) at p. 6; Director, OPR v. USC 6103 , Complaint
No. 2008-19 (May 26, 2009) at p. 4). I modify the suspension imposed by the ALJ for
the reasons stated below.
(b)(3)/26 USC 6103
The Complaint requests a sanction of 48 months, based on
, but, as stated above, because of §2462, only the violations for
(b)(3)/26 USC 6103
may be properly charged. Because less counts were sustained,
the Default Order purports to impose a lesser sanction - it provides for an indefinite
suspension which allows QPR "sole discretion" to determine when (b)(3)/26 USC 6103
be reinstated. Default Order at 8. This would seem to allow OPR to suspend
(b)(3)/26 USC 6103
for exactly 48 months or for a shorter or conceivably a longer period within
its sole discretion. However, OPR has appealed the indefinite suspension as being less
severe than a 48 month suspension because (b)(3)/26 USC 6103 may seek readmission
immediately and repeatedly. OPR also expresses concern that that an indefinite
suspension will not provide clarity to practitioners regarding the severity of the sanction
for comparable misconduct.

8
A practitioner whose sanction is initiated through a disciplinary proceeding, as provided
for in §§10.60 et seq. of Circular 230, that is not resolved between the practitioner and
QPR consensually as provided for in §10.61 of Circular 230, should have his case
resolved by the ALJ as provided for in § 10. 76 of Circular 230, or by the agency on
appeal as provided for in § 10. 78 of Circular 230. The purpose of the disciplinary
proceeding is to have the sanction determined by the ALJ or the agency, not by QPR.
Section 10.82 of Circular 230 provides for an expedited suspension for a duration within
the control of QPR, but that section applies only under n·arrow and specifically defined
circumstances and is an interim measure that provides the practitioner with the ability to
obtain prompt resolution with a sanction determined by the ALJ or agency as described
above in a proceeding administered per §10.60 of Circular 230. I conclude that
practitioners such as (b)(3)/26 USC 6103 , and QPR, are entitled to a determinate sanction
by the ALJ under §10.76 of Circular 230, the application of which may be readily and
unambiguously understood and complied with by the practitioner and QPR, subject to
any specific conditions as provided in §10.79(d) of Circular 230.
Circular 230 does not provide specific guidance as to the application of aggravating or
mitigating factors in imposing an appropriate sanction and QPR has not provided any
aggravating or mitigating factors specifically applicable to (b)(3)/26 USC 6103 . QPR has
(b)(3)/26 USC 6103
requested that if §2462 is found to bar the counts for
not be considered as aggravating factors in
(b)(3)/26
imposing a sanction (Cf., Director, QPR v. USC
Complaint No. 2008-12 (Decision on
6103
Appeal, January 20, 2010) at p. 3, wherein QPR alleged (b)(3)/26 USC 6103 prior to the
counts alleged in the Complaint as "background facts."). Since (b)(3)/26 USC 6103 has not
responded and it is in his interest, I will assume that he does not disagree.
Accordingly, I will determine the sanction based on the counts for (b)(3)/26 USC 6103 ,
(b)(3)/26 USC 6103
without any consideration of (b)(3)/26 USC 6103 . Based on
(b)(3)/26 USC 6103
, I hereby impose a
(b)(3)/26 USC 6103
suspension of 40 months provided that
. Had all of the counts been sustained, I would have imposed a
(b)(3)/26 USC 6103
suspension of 48 months. I impose this sanction because
by
a tax practitioner is a serious offense, and the four counts sustained together comprise
a significant breach of a practitioner's responsibilities. The reason that the reduction in
(b)(3)/26 USC 6103
suspension is not proportionate with the number of counts
(b)(3)/26 USC 6103
, and so should be given greater weight, and
(b)(3)/26 USC 6103

, all other things being equal.
I have considered all of the arguments made by QPR and to the extent not mentioned
herein, I find them to be irrelevant or without merit.
Conclusion
For the reasons stated above, (b)(3)/26 USC 6103 is suspended from practice before the
IRS for a period of 40 months provided that (b)(3)/26 USC 6103 will be reinstated thereafter

9
on application to OPR, if he has at that time proven to OPR that

(b)(3)/26 USC 6103

, and
subject to conditions as imposed by OPR under §10.79(d) of Circular 230. This
constitutes FINAL AGENCY ACTION in this proceeding.

Bernard H. Weberman
Appellate Authority
Office of Chief Counsel
Internal Revenue Service
(As Authorized Delegate of the
Secretary of the Treasury)
May 26, 2011
Lanham, MD

CERTIFICATE OF SERVICE
I hereby certify that the Decision on Appeal dated May 26, 2011 in Complaint No. 201009 was sent this day by UPS Next Day Air and by First Class U.S. Mail to the addresses
listed below:
UPS Next Day Air:
(b)(3)/26 USC 6103

First Class U.S. Mail:
Honorable Susan L. Biro
Chief Administrative Law Judge
U.S. Environmental Protection Agency
Office of Administrative Law Judges
Mail Code 1900L
1200 Pennsylvania Avenue, N.W.
Washington, D.C. 20460
Karen L. Hawkins
Director, Office of Professional Responsibility
Internal Revenue Service
1111 Constitution Avenue, NW - Room 7238
Washington, DC 20224
Michael Salyards, Attorney
Internal Revenue Service
Office of Chief Counsel, General Legal Services
MS 2400 NDAL
4050 Alpha Road, 14th Floor
Dallas, TX 75244-4203

sf&:-:tJtL0:n ~

Appellate Authority
Office of Chief Counsel
Internal Revenue Service
(As Authorized Delegate of the
Secretary of the Treasury)
May 26, 2011
Lanham, MD

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A50b17bc59fdafdf0. Public record. Not legal advice.