US Supreme Court Rules IRS Limits Tax Court Jurisdiction After Levy Lifted

The U.S. Supreme Court ruled 8-1 in Commissioner of Internal Revenue v. Zuch that the Tax Court lacks jurisdiction to hear a collection due process (CDP) appeal once the IRS has satisfied the underlying tax liability and ceased levy actions. The case involved Jennifer Zuch, who disputed the IRS's application of tax payments between her and her former husband, leading to a proposed levy on her property. While the IRS initially pursued the levy, overpayments eventually satisfied Zuch's tax debt, prompting the IRS to move to dismiss the Tax Court case as moot, a decision the Supreme Court upheld. The ruling reversed the Third Circuit, which had sided with Zuch by maintaining jurisdiction despite the satisfied liability. Justice Gorsuch dissented, warning that the decision gives the IRS a new tool to avoid accountability by dropping levies to render appeals moot and potentially restart collection efforts, thus hindering taxpayer rights. Critics argue the Court's decision shows a misunderstanding of tax administration realities, as many taxpayers dispute liabilities without paying first, and it risks enabling IRS misconduct by limiting judicial review.