Business Entitled to Fees Incurred After Qualified Offer (C1 Design Group, LLC, DC Idaho)

A design business was not entitled to litigation and administrative costs that were incurred before it made a qualified offer. Although the taxpayer was a “prevailing party,” the government’s position was substantially justified. Therefore, the qualified offer rule applied.

A jury found that the taxpayer’s failure to pay its excise taxes was due to reasonable cause. However, the government offered substantial evidence about the taxpayer’s financial difficulties and how it managed its finances during the period it failed to pay its excise taxes. Therefore, the government’s position was justified because reasonable minds could differ about whether the taxpayer acted with reasonable cause when it failed to timely pay its excise taxes.

Further, the taxpayer made a qualified offer to accept a refund of half the amount it claimed was due. After trial, the taxpayer was awarded the entire amount of its claimed refund. Accordingly, under the qualified offer rule, the taxpayer was entitled to an award of reasonable fees for legal services rendered after the date of the qualified offer. Since the taxpayer failed to establish a special factor that would otherwise warrant an upward adjustment of the statutory cap. Therefore, the taxpayer was awarded attorneys’ fees at the maximum statutory rate. In addition, the fees awarded to the assistant attorney, legal interns and other legal assistants were adjusted to reflect the reduction in the attorney’s fee.

C1 Design Group, LLC, DC Ida., 2017-2 ustc ¶50,302

Other References:

Code Sec. 7430

CCH Reference – 2017FED ¶41,743.15

CCH Reference – 2017FED ¶41,743.68

Tax Research Consultant

CCH Reference – TRC LITIG: 3,154

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CCHTaxGroup

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