In a pivotal ruling, the U.S. Supreme Court on June 12, 2025, held that the U.S. Tax Court lacks jurisdiction to hear a taxpayer’s Collection Due Process appeal under IRC § 6330 once the IRS can no longer pursue a levy, effectively ending the case if the tax liability has been paid in full.
IRC § 6330: Taxpayer’s Right to Challenge IRS Collection Actions
When a taxpayer disagrees with an IRS-assessed tax liability, the typical course of action to stop interest from accruing is to first pay the amount assessed and then file a claim for refund. However, when the IRS initiates collection through a levy on the taxpayer’s property, IRC § 6330 grants the taxpayer the right to request a Collection Due Process (“CDP”) hearing.
Before proceeding with a levy, the IRS is required to notify the taxpayer of their right to a CDP hearing. In this process, the taxpayer may raise objections to the underlying liability or propose collection alternatives. An officer from the IRS Independent Office of Appeals evaluates the issues and makes a formal determination on whether the collection action should go forward.
If the taxpayer disagrees with the determination, IRC § 6330(d)(1) allows them to petition the U.S. Tax Court within 30 days. Any decision by the Tax Court can be appealed to a federal circuit court.
Case Background
In the matter at hand, Zuch v. Commissioner, the taxpayer, Jennifer Zuch, who at the time was married to Patrick Gennardo, but filed separately, filed her 2010 federal income tax return late, specifically in 2012.
Although Zuch’s initial return showed no tax due, Gennardo reported a tax liability of approximately $385,000, prompting him to pursue an offer in compromise to resolve his balance. That same year, Zuch and Gennardo made two estimated tax payments to the IRS totaling $50,000, drawn from their joint bank account. However, because both checks were in Gennardo’s name, the IRS applied the full amount to his account, contrary to the couple’s request that the funds be applied to Zuch’s account.
Shortly after filing her original return, Zuch submitted an amended return that reported an additional $71,000 in retirement income, creating a new liability of $28,000. She argued that the $50,000 should be credited to her account to offset this amount, resulting in a refund of roughly $22,000, but the IRS had already applied the funds to Gennardo’s liability.
When the IRS moved to collect the $28,000 by levy, Zuch requested a CDP hearing and raised the issue of the misapplied payment. The Appeals Officer rejected her argument and sustained the levy. Zuch subsequently appealed the matter to Tax Court.
Zuch’s case before the Tax Court unfolded over the course of several years. During that time, she became entitled to tax refunds, which the IRS applied to her 2010 liability, ultimately paying it off in full.
This raised the key question of whether the Tax Court retained jurisdiction to review Zuch’s CDP appeal under IRC § 6330, even though the IRS was no longer pursuing a levy and the liability had been satisfied.
The Tax Court concluded that it did not. Because the issue fell within the scope of collection actions governed by § 6330, and no collection action remained, the court found the case moot. Whether the IRS should have originally credited the $50,000 payment to Zuch was, in its view, no longer a matter it could consider.
The Supreme Court’s Holding: Jurisdiction Ends When the Levy Threat Ends
Writing for the majority, the Court focused narrowly on the statutory language of IRC § 6330(d)(1), which allows the Tax Court to review a “determination” made during a CDP hearing. That determination, the Court explained, is a limited to whether the IRS may proceed with a proposed collection action, typically a levy or lien.
Once there is no longer a proposed levy because the liability has been paid, the Court said, there is no determination left to review. “At that point, the case becomes moot,” the majority concluded, adding that “it would be strange if a taxpayer could use IRC § 6330 appeal to resolve tax disputes that no longer have any connection to an ongoing levy.”
The Court noted that taxpayers in Zuch’s position may still file a refund suit by first paying the disputed liability and then suing for a refund under IRC § 7421(a). However, that route comes with its own risks, including the potential expiration of the refund statute of limitations.
Dissent: A Roadmap for the IRS to Evade Review
Justice Neil Gorsuch dissented, warning that the Court’s decision effectively leaves taxpayers without meaningful redress for IRS errors once a liability is quietly paid off. “The IRS seeks, and the Court endorses, a view of the law that gives that agency a roadmap for evading Tax Court review,” he wrote.
Gorsuch emphasized that a CDP hearing determination necessarily includes consideration of the taxpayer’s challenges to the underlying liability, which should remain reviewable. By cutting off judicial oversight once a balance hits zero, he argued, the Court risks trapping taxpayers in a procedural catch-22.
Key Takeaways
This decision reinforces a narrower interpretation of the Tax Court’s jurisdiction in CDP cases, confirming that once the IRS no longer has grounds to levy, the case becomes moot. This holds, even though IRC § 6330 establishes that the taxpayer may raise at the CDP hearing any relevant issue relating to the unpaid tax, or to the proposed levy.
The ruling raises practical concerns for taxpayers who may not realize that paying off a liability could permanently foreclose their day in Tax Court.
Tax professionals and taxpayers alike will need to be especially mindful of the consequences of this decision. Therefore, it may be prudent not to pay a tax debt when in dispute, and where disputes over payment allocation or the underlying liability remain after the tax has been paid, pursuing a refund claim may be the only option and should be considered promptly, as the opportunity to do so may be lost once the statute of limitations expires.
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