Popular search terms:
Published:   |   Last Updated: February 8, 2024

Why We Should Repeal the Flora Rule or Find Another Way to Give Taxpayers Who Cannot Pay the Same Access to Judicial Review as Those Who Can (Part 3 of 3)

NTA Blog logo no background

Subscribe to the NTA’s Blog and receive updates on the latest blog posts from National Taxpayer Advocate Erin M. Collins.


Two weeks ago, I discussed how the Flora rule blocks access to judicial review by low income taxpayers and those subject to “assessable penalties.” Last week, I discussed why the policy justification for the Flora rule has faded and why the theoretical ability to petition other courts does not always provide real access to judicial review. In this week’s blog, I discuss the solutions that policymakers should consider. More details are available in my 2018 Annual Report to Congress.

Repeal the Flora rule

Because Flora is obsolete, I agree with those who have suggested the Flora rule should be repealed (e.g., Steve Johnson here on p. 271). Such a repeal would allow taxpayers to file suit in district court or the U.S. Court of Federal Claims after paying a small fraction of the liability. If Congress prefers a more tailored approach, however, it should consider one or more of the following options:

Limit the Flora rule to cases where the taxpayer has received a notice of deficiency

The majority in Flora II suggested the Flora rule would not subject taxpayers to “hardship” because they could “appeal the deficiency to the Tax Court without paying a cent.” Notwithstanding strong arguments to the contrary (e.g.here and here), the U.S. Court of Appeals for the Second Circuit in Larson concluded that the availability of Tax Court review was not essential to the Flora court’s holding. In other words, it concluded the Flora rule applies even if a taxpayer does not receive a statutory notice of deficiency and cannot access the Tax Court. Thus, the Second Circuit held it lacked jurisdiction to review over $65 million in unpaid assessable penalties, as discussed here.

If it retains the Flora rule, Congress should consider reversing Larson by clarifying that the full payment rule only applies where the taxpayer has received a notice of deficiency, as suggested by Keith Fogg (here on p. 39). Additional legislation would be needed, however, to provide for judicial review of assessments against low income taxpayers in situations where a notice of deficiency was issued, but they missed the deadline for filing and cannot pay what the IRS says they owe.

Treat taxpayers as having fully paid for purposes of the Flora rule when they cannot pay

To provide for judicial review of assessments against low income taxpayers who missed the Tax Court filing deadline and assessments against more affluent taxpayers, such as Mr. Larson, facing too-large-to-pay assessable penalties, Congress should consider expanding the exception to the Flora rule that is currently enjoyed by those paying the estate tax in installments. Specifically, Congress should create an exception for those who have paid some of the assessment (including by refund offset) provided either (a) the IRS has classified the account as currently not collectible due to economic hardship or (b) the taxpayer has entered into an agreement to pay the liability in installments. A similar approach was recommended by Carlton Smith (here).

Authorize the U.S. Tax Court to review assessable penalties

Although the latter two alternatives would expand access to district courts and the U.S. Court of Federal Claims, the Tax Court is generally a better forum for tax cases. It is particularly accessible to pro se taxpayers and those wishing to be represented by non-attorneys. Over 70 percent of all Tax Court petitions were filed by self-represented taxpayers in 2015. Moreover, adjustments to the Tax Court’s rules, jurisdiction, and Low Income Taxpayer Clinics and state and local bar association referral practices (e.g., calendar call programs) have made it even more informal and accessible. Accordingly, Congress should consider authorizing the Tax Court to review liabilities assessed by the IRS even if the taxpayer has not received a deficiency notice (e.g., assessable penalties). It could establish a process for assessable penalties that mirrors the deficiency process, as suggested by the statutory language proposed by the Legal Services Center of Harvard Law School here (on p. 4). Of course, the legislation should cover all types of non-deficiency cases, including those involving assessable penalties not referenced in Internal Revenue Code § 6671.

Authorize the Tax Court to review more liabilities in connection with CDP appeals

Another alternative is to expand Collection Due Process (CDP) by allowing the Tax Court to consider challenges to the underlying liability, even if the taxpayer received a notice of deficiency or had an opportunity for an administrative appeal. If Congress decides to expand CDP, however, it should address several of its limitations. First, because the right to a CDP hearing is triggered by a lien or levy, a CDP appeal is not necessarily available to taxpayers whose liabilities are collected solely by offset (e.g., refundable credits the taxpayer would otherwise have received in a subsequent year). Thus, Congress should require the IRS to send CDP notices before offsetting refundable tax credits and allow taxpayers to appeal the resulting determinations to the Tax Court.

Second, the Tax Court does not have jurisdiction to order refunds in CDP appeals (e.g., to order refunds of amounts that had been paid or offset). Accordingly, Congress should consider clarifying that the Tax Court can determine overpayments in connection with CDP appeals.

In addition, both the time for requesting a CDP hearing, and the time for filing a Tax Court petition after receipt of an unfavorable CDP determination from Appeals is relatively short—only 30 days, as compared to 90 days (or 150 days if addressed to a taxpayer overseas) following a notice of deficiency. Moreover, unlike the notice of deficiency, the CDP notice and the CDP determination do not list the last day for the taxpayer to file the request for a hearing or to petition the Tax Court, respectively. Congress could address these problems by extending the period for filing to 90 days (or 150) and requiring the IRS to list the last day of the period on the CDP notice and determination letters.

Expanding the Tax Court’s jurisdiction in the context of CDP appeals will not open the floodgates to litigation. Between 2004 and 2017, only 0.08 percent receiving a CDP notice filed a petition with the Tax Court. Moreover, because these percentages include taxpayers with disputes about both collection alternatives and the underlying liability, we might expect this more limited expansion of CDP to increase the number of petitions by an even smaller fraction.

Our recommendations are consistent with the taxpayer’s right to appeal an IRS decision in an independent forum, which includes the right to “take their cases to court,” as well as the right to a fair and just tax system, which includes the right “to expect the tax system to consider facts and circumstances that might affect their underlying liabilities.” Given Congress’ support for taxpayer rights, we hope that one or more of these recommendations will be adopted.


The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

Read the past NTA Blog's

Additional Resources


Taxpayer Roadmap

Learn more about the Taxpayer Roadmap