Source: https://painehamblen.com/news/may-the-real-prevailing-party-please-stand-up-tax-court-denies-attorneys-request-for-fees-because-attorney-was-not-the-actual-prevailing-party/
Timestamp: 2019-04-18 12:51:28+00:00

Document:
The Tax Court in Greenberg, David B., 147 T.C. No. 13 (2016), held that an attorney who had represented a taxpayer in an administrative proceeding was not a proper party to file a petition seeking an award of attorney’s fees for the representation, in part because he did not “incur” the costs. Rather, he was to be the recipient of any fees. Because the attorney was not a party to the underlying proceeding, he could not be a prevailing party under I.R.C. § 7430. Therefore, the attorney was not the proper party to file a claim under § 7430, and the Tax Court lacked jurisdiction.
The attorney sought the award of administrative costs (his attorney’s fees) with respect to an earlier administrative proceeding in which he represented a taxpayer (his client) before the I.R.S. pursuant to a power of attorney. His client’s matter was eventually resolved. The attorney was owed fees for this representation that remained outstanding, and his client agreed that the attorney would receive any administrative fees awarded under § 7430. The attorney filed his petition with the Tax Court arguing that he was the real party in interest because he was contractually entitled to any award of administrative costs to his client, and as such, had a right to claim administrative costs on this own behalf.
Under § 7430, in any administrative or court proceeding brought by or against the U.S. Government in connection with the determination, collection, or refund of any tax, interest, or penalty, the prevailing party may be awarded reasonable litigation and administrative costs. § 7430(f)(2) grants the Tax Court jurisdiction over petitions filed to contest a decision denying administrative costs. An I.R.S. decision denying a taxpayer’s request for reasonable administrative costs in whole or in part is subject to review by the Tax Court.
The court held that the attorney was not the proper party to file a § 7430 claim, and thus, it did not have jurisdiction over the case. The court considered a line of cases that construed fee awards under § 7430 and 28 U.S.C. § 2412, which is a fee-shifting statute under the Equal Access to Justice Act that similarly provides that a prevailing party may seek judgment for attorney’s fees. The court found that cases applying both laws have required the prevailing party to actually be a party to the underlying proceedings based on the plain, unambiguous language of the term. Also, the case law found that attorneys lack standing to apply for fees thereunder on their own behalf.
Further, § 7430(a) refers to administrative costs “incurred by” the prevailing party, which means that under its most natural reading, costs paid, not charged, by the prevailing party. The attorney did not “incur” these fees; rather, he was their intended recipient. The court said that this position was also supported by United States v. McPherson, 840 F.2d 244, 245 (4th Cir. 1988), in which the court denied § 7430 recovery to an attorney who represented himself, and thus, did not “incur” any fees for legal services. In addition, § 7430’s legislative history supported the court’s conclusion that only a party to an underlying action may pursue an award.

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