t c memo united_states tax_court hoyt w and barbara d young et al petitioners v commissioner of internal revenue respondent docket nos filed date joe alfred izen jr for petitioners in docket nos and robert alan jones for petitioners in docket nos and henry e o’neill and peter r hochman for respondent cases of the following petitioners have been consolidated for purposes of this opinion hoyt w and barbara d young docket nos and ronald l and mattie l alverson docket no norman w and barbara l adair docket no willis f and marie d mccomas docket no wesley armand and sherry lynn cacia baughman docket no and norman a and irene cerasoli docket no contents page background discussion i introduction a b inapplicability of sec_6673 real parties_in_interest overview of sec_7430 amplification of date order a ii entitlement to relief under sec_7430 jones fee request--jurisdictional issue date order recent ninth circuit cases conclusion respondent’s position analysis a b c paid_or_incurred requirement substantial justification defense other threshold requirements conclusion b c d e a b iii amounts of awards overview reasonable attorney’s fee the lodestar in general hours reasonably expended a b the limited success factor hours relating to the issue of attorney’s fees c reasonable hourly rate under sec_7430 hours reasonably expended--izen fee request scope of representation we may consider discrepancies between fee request and alleged invoice preliminary issues a b adjustments to hours claimed a b hours relating to intervention hours subject_to billing judgment inference review of other parties’ nonsubstantive filings representation issues matters relating to remand proceedings duplicate entrie sec_42 c d e f - - g h summary separately claimed fee request hours miscellaneous additional adjustments hours reasonably expended--jones fee request reliability of documentation specific time entrie sec_2 a in general dismissal and recertification b the cerasolis’ motion to intervene c pre- and post-appeal tax_court filings d e miscellaneous additional adjustment sec_51 summary izen fee request a and through b c total d jones fee request and a and b c total calculation of lodestar sec_1 izen expense request jones expense request adjustment to izen’s fees-on-fees lodestar to reflect limited success reasonable expenses amounts paid_or_incurred by eligible_person sec_1 indirect payments indirect obligations direct payments direct obligations--fixed amounts direct obligations--additional amount sec_62 izen fee request a b c d e jones fee request summary d e f g h i appendix--date order memorandum opinion beghe judge these cases are part of the kersting tax_shelter litigation in this opinion we consider motions for attorney’s fees and expenses relating to services provided by joe alfred izen jr izen and robert alan jones jones in connection with the appeal of dixon v commissioner tcmemo_1999_101 supplemented by tcmemo_2000_116 revd and remanded 316_f3d_1041 9th cir unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended and rule references are to the tax_court rules_of_practice and procedure background the following discussion is based on the existing record and additional information submitted by the parties in connection with the fee requests we have not found it necessary to hold an evidentiary hearing see rule a petitioners hoyt and barbara young the youngs are test case petitioners in the kersting tax_shelter litigation the remaining petitioners herein the adairs alversons mccomases baughmans and cerasolis are nontest case petitioners whose cases were consolidated with the test cases for purposes of the attorney misconduct phase of this litigation discussed below the youngs and the adairs collectively the izen petitioners are represented by izen the remaining petitioners herein collectively the jones petitioners are represented by jones the kersting tax_shelter litigation arose from respondent's disallowance of interest deductions claimed by participants in various tax_shelter programs promoted by henry f k kersting kersting during the late 1970s through the 1980s under the test case procedure nontest case petitioners in more than big_number docketed cases entered into piggyback agreements in which they agreed that their cases would be resolved in accordance with the outcome of the test cases the test cases initially consisted of docketed cases of eight petitioners six of whom including the youngs were represented by izen at trial kersting who had retained izen to represent those six test case petitioners initially paid izen’s fees either directly or through alter ego corporations following a 3-week trial the court sustained virtually all of respondent's determinations in each of the test cases see dixon v commissioner tcmemo_1991_614 dixon ii however on date respondent notified the court that respondent’s management had just discovered that prior to the trial of the test cases respondent's trial attorney kenneth w mcwade and mcwade’s supervisor honolulu district_counsel william a sims upon the final disposition of the test cases the relatively few nontest case petitioners who did not enter into piggyback agreements will generally be ordered to show cause why their cases should not be decided in the same manner as the test cases see eg 99_tc_342 affd on other grounds sub nom 68_f3d_1129 9th cir prior to the trial of the test cases the court had issued an opinion rejecting the test case petitioners' arguments that certain evidence should be suppressed and that the burden_of_proof should be shifted to respondent see 90_tc_237 dixon i had entered into secret settlement agreements with the two test case petitioners not represented by izen the thompsons and the cravenses respondent asked the court to conduct an evidentiary hearing to determine whether the previously undisclosed agreements had affected the trial of the test cases or the opinion of the court the court denied respondent's request for an evidentiary hearing entered decisions giving effect to the thompson and cravens settlements and reentered or allowed to stand the decisions sustaining respondent’s determinations against the other test case petitioners around this time kersting organized and initially administered a fund hereafter the defense fund or fund through which nontest case petitioners shared the further costs of the test case litigation at various times more than nontest case petitioners contributed to the defense fund the test case petitioners other than the thompsons and the cravenses appealed to the court_of_appeals for the ninth circuit the court_of_appeals citing 499_us_279 stated we cannot determine from this record whether the extent of misconduct rises to the level of a structural defect voiding the judgment as fundamentally unfair or whether despite the government’s misconduct the judgment can be upheld as harmless error 26_f3d_105 9th cir per curiam vacating dixon v commissioner tcmemo_1991_614 the court_of_appeals vacated this court’s decisions in the test cases and remanded them for an evidentiary hearing to determine the full extent of the admitted wrong done by the government trial lawyers id in response to the direction of the court_of_appeals to consider on the merits all motions of intervention filed by interested parties this court ordered that the cases of nontest case petitioners hereafter the participating nontest case petitioners including the adairs and the four jones petitioners be consolidated with the remaining test cases for purposes of the evidentiary hearing on the basis of the record developed at the evidentiary hearing the court held that the misconduct of the government attorneys in the trial of the test cases did not cause a structural defect in the trial but rather resulted in harmless error see dixon v commissioner tcmemo_1999_101 dixon iii however the court imposed sanctions against respondent holding that kersting program participants who had not had final decisions entered in their cases would be relieved of liability for the interest component of the addition_to_tax for negligence under former sec_6653 and the incremental interest attributable to the increased rate prescribed in former sec_6621 the remaining five participating nontest case petitioners have been represented by robert patrick sticht sticht after the issuance of dixon iii izen and jones filed joint motions for attorney’s fees and costs the izen jones request the izen jones request relied primarily on sec_7430 authorizing fee awards for certain prevailing taxpayers and a b relating to misconduct of the commissioner’s attorneys in tax_court proceedings the court ordered the movants to submit documentation pertaining to fees and expenses_incurred commencing date ie the day after the court learned of the misconduct by the government attorneys in dixon v commissioner tcmemo_2000_116 dixon iv the court rejected the izen jones request insofar as it relied on sec_7430 on the ground that the movants had not substantially prevailed in the proceedings as required by sec_7430 the court did award a portion of the claimed fees and expenses under sec_6673 the court entered decisions in the remaining test cases and on date izen filed notices of appeal on behalf of the test case petitioners the dixons dufresnes hongsermeiers owenses and youngs see sec_7483 izen and jones also attempted to file notices of appeal on behalf of their respective sticht subsequently filed his own motion for sanctions including attorney’s fees and costs which we effectively treated as having been premised on sec_6673 ralph j rina the other test case petitioner initially represented by izen had settled his case in participating nontest case petitioner clients and numerous other nontest case petitioners labeled intervenors because the court had not entered decisions in any of the nontest cases pending final disposition of the test cases the court rejected the notices of appeal filed on behalf of nontest case petitioners however in response to a motion filed by attorney sticht see supra note the court certified for interlocutory appeal certain orders it had issued in the participating nontest case petitioners’ cases in connection with the evidentiary hearing thereby enabling those petitioners to apply to the court_of_appeals for immediate review see sec_7482 on the basis of this court’s certification order izen and jones as well as sticht continued their efforts on behalf of nontest case petitioners in the court_of_appeals izen submitted to that court a notice of appeal of certain intervenors bearing docket no the docket number the court_of_appeals had assigned to the test case appeal izen purported to submit that document on behalf of not only the adairs but also nontest case petitioners in more than docketed cases who had not participated in the evidentiary hearing and whose cases therefore were not included in the certification order jones submitted notices of appeal on behalf of the four jones petitioners which the court_of_appeals construed as petitions for permission to appeal under sec_7482 ie applications for interlocutory review by order dated date the court_of_appeals denied the jones petitioners’ initial applications for interlocutory review as untimely in a subsequent order addressing a motion for reconsideration by the jones petitioners the court_of_appeals suggested that they request the tax_court to recertify their cases for interlocutory appeal they did so and we recertified the cases by order dated date the court_of_appeals granted the jones petitioners’ ensuing applications for interlocutory review on date and ultimately assigned docket nos and to their cases on date the court_of_appeals assigned docket no to the adair et al matter hereafter the adair appeal on date the court_of_appeals issued an order to show cause why the adair appeal should not be dismissed for lack of jurisdiction describing izen’s initial filing as confusing in several respects the court_of_appeals apparently surmised that izen was attempting to establish the right of nontest case petitioners to appeal the decisions in the test cases in their self-proclaimed capacity as intervenors rather than seeking permission to appeal the orders this court had certified for interlocutory appeal on the same day the court_of_appeals stayed the proceedings in docket no the test case appeal pending resolution of the various nontest case matters izen and respondent contested the jurisdictional issue in the adair appeal over the next several months in an order dated date the court_of_appeals decreed that the jones petitioners’ interlocutory appeals as well as those filed by sticht shall be held in abeyance pending resolution of the appeal in no the test case appeal on date the court_of_appeals issued a similar order in the adair appeal the next day the court_of_appeals lifted the stay of proceedings in the test case appeal meanwhile in date the defense fund acting through a five-person steering committee following kersting’s death in date had retained attorney michael louis minns minns to replace izen although minns entered appearances in the test case appeal on behalf of the dixons dufresnes owenses and hongsermeiers izen remained counsel of record for the youngs in that appeal and counsel of record in the adair appeal on or about date izen sent a demand letter to the defense fund requesting payment of alleged outstanding fees in a subsequent lawsuit filed in the district_court of harris county texas against the defense fund members of its steering committee and its business manager izen alleged that as of date he was owed dollar_figure for legal work for the evidentiary hearing and for preparation of the appeal around date when the defense fund was no longer paying izen’s fees he began entering into individual engagement contracts with various nontest case petitioners pursuant to those contracts izen undertook to take all the necessary legal actions and file the necessary papers for intervention of all non-test case petitioners in the appeal as well as take all necessary actions on appeal to obtain a reversal of the decisions entered in the test cases although the contracts recite izen’s billing rate as dollar_figure per hour they limit the client’s obligation to monthly payments of dollar_figure or in one case dollar_figure the contracts also provide that attorney’s previous bill which the steering committee refused to pay and his bill for work on the appeal since april shall be paid_by payments under this agreement unless paid from another source also in date the steering committee of the defense fund replaced minns with porter hedges l l p porter hedges although porter hedges attorneys henry binder and john a irvine entered appearances in the test case appeal on behalf of the dixons dufresnes and owenses minns remained by the time the case went to trial the business manager geoffrey sjostrom was the only remaining defendant after a jury verdict in favor of the defendant the court entered a take nothing judgment that judgment is currently on appeal to the fourteenth court_of_appeals in texas counsel of record for the hongsermeiers thus three sets of counsel pursued the test case appeal izen on behalf of the youngs minns on behalf of the hongsermeiers and porter hedges on behalf of the dixons dufresnes and owenses hereafter the ph appellants on date after the test case appellants’ opening briefs respondent’s answering brief and the test case appellants’ reply briefs had all been filed jones filed a motion for leave to intervene in the test case appeal on behalf of one of the four jones petitioners the cerasolis the court_of_appeals denied the cerasolis’ motion by order dated date on date the court_of_appeals reversed and remanded the test cases holding that the misconduct of the government attorneys in the trial of the test cases was a fraud on the court for which no showing of prejudice is required see 316_f3d_1041 9th cir dixon v as for the remedy the court_of_appeals decreed that respondent be sanctioned by entry of judgment in favor of the test case petitioners and all other taxpayers properly before this court on terms equivalent to those provided in the settlement agreement with thompson and the irs id pincite the court_of_appeals also remanded the various nontest cases to the tax_court for further proceedings consistent with dixon v shortly after issuance of dixon v the ph appellants and the hongsermeiers filed separate requests with the court_of_appeals for attorney’s fees incurred on appeal see 9th cir r the ph appellants’ fee request related solely to services performed by porter hedges and the hongsermeiers’ fee request related solely to services performed by minns or under his direction as filed both of those requests hereafter the binder minns fee requests relied exclusively on sec_7430 rather than filing their own fee request with the court_of_appeals the youngs through izen filed an objection to the binder minns fee requests the primary thrust of the objection was that the ph appellants and the hongsermeiers had not paid_or_incurred the amounts requested in actuality mr binder’s motion fails to reveal the true clients in interest who have paid him fees to represent their interests on appeal these real clients in interest are the same clients represented by joe alfred izen jr in the appeal styled barbara l adair et al v commissioner no which is a related case under this court’s local rules although those real clients in interest_paid mr minns and mr binder for representation on appeal either involuntarily or voluntarily neither mr minns nor mr in response to inquiries by the dixon v panel at oral argument minns acting pro bono filed and pursued complaints against mcwade and sims before their respective state bars and the irs office_of_professional_responsibility that resulted in their suspensions from practice see dixon v commissioner tcmemo_2006_90 dixon vi at findings_of_fact part iv e binder ever substituted in on this appeal no as their attorney of record on the same day izen filed a motion in the adair appeal docket no to transfer consideration of appellate attorney’s fees to the tax_court see 9th cir r jones made no filing on behalf of any of the jones petitioners under either ninth circuit rule or the court_of_appeals granted izen’s motion to transfer under ninth circuit rule on date on date the court_of_appeals remanded the binder minns fee requests to the tax_court for a determination of entitlement and if warranted amount on date more than years after the court_of_appeals had granted his motion to transfer under ninth circuit rule in the adair appeal izen filed in this court on behalf of the youngs a motion for appellate attorney’s fees and expenses under sec_6673 the izen fee request on date jones filed a similar motion in this court on behalf of the jones petitioners the jones fee request in a date order pertaining to both the izen fee request and the jones fee request which we incorporate by to update the story regarding sticht’s appellate fees see dixon v commissioner tcmemo_2006_97 n the court has been given to understand that sticht and respondent are close to completion of a comprehensive stipulation and submission regarding the fee claims of participating nontest case petitioners represented by sticht reference and reproduce as the appendix we concluded that the reasoning of cooter gell v hartmarx corp u s precludes us from awarding appellate fees and expenses under sec_6673 we resolved instead to treat the present movants as having revived their sec_7430 claims ie those raised in the wake of dixon iii and rejected by the court in dixon iv on prevailing_party grounds dollar_figure with a nod to the youngs’ previous objection to the binder minns fee requests we ordered the submission of net_worth affidavits for all real parties_in_interest with respect to the izen fee request and the jones fee request see rule b see also infra part i a specifically we requested the affidavits of those individuals who have made payments of the requested appellate fees and expenses to mr izen--directly or through contributions to the atlas legal defense fund--or mr jones or are otherwise liable for any portion of the requested appellate fees and expenses dollar_figure on date we issued our opinion in dixon v commissioner tcmemo_2006_97 dixon vii awarding under sec_7430 dollar_figure in respect of the ph appellants’ fee request and dollar_figure in respect of the hongsermeiers’ fee consistent with that approach on date we ordered that all future filings pertaining to the izen fee request be filed on behalf of the adairs as well as the youngs we had issued a similar order pertaining to the binder minns fee requests on date see dixon v commissioner tcmemo_2006_97 app a requestdollar_figure in separate orders pertaining to the izen fee request date and the jones fee request date we afforded all parties herein an opportunity to rebut any of the conclusions reached in dixon vii that are relevant to these fee requests the izen petitioners request attorney’s fees of dollar_figure and other expenses of dollar_figure for a total of dollar_figure the jones petitioners request attorney’s fees of dollar_figure13 and other expenses of dollar_figure for a total of dollar_figure discussion i introduction a overview of sec_7430 sec_7430 provides that subject_to certain conditions a taxpayer who prevails against the government in any federal tax proceeding administrative or judicial may recover reasonable costs including attorney’s fees paid_or_incurred in connection with such proceeding if the government’s position in the as for dixon vi see dixon v commissioner tcmemo_2006_90 responding to the primary mandate of the court_of_appeals in dixon v a motion for reconsideration is pending that figure actually includes paralegal fees as well as attorney’s fees although sec_7430 does not specifically provide for recovery_of paralegal fees this court has routinely awarded them and we have no reason to believe that the court_of_appeals for the ninth circuit would take a different approach see dixon v commissioner tcmemo_2006_97 n although paralegal fees do not fit neatly within the category of either attorney’s fees or expenses we follow the jones petitioners’ lead in grouping them with attorney’s fees proceeding was not substantially justified sec_7430 c b iii c a and b see also dixon v commissioner tcmemo_2006_97 n in its report accompanying the bill in which sec_7430 originated the house_committee_on_ways_and_means contemplated that such fee awards will enable individual taxpayers to vindicate their rights regardless of their economic circumstances h rept pincite a taxpayer seeking litigation costs under sec_7430 must have exhausted all available administrative remedies prior to litigation and if an individual must not have had a net_worth in excess of dollar_figure million as of the filing_date of the suitdollar_figure sec_7430 c a ii see u s c sec d b i individual net_worth limitation contained in the equal_access_to_justice_act eaja and incorporated by reference in sec_7430 reasonable attorney’s fees may not exceed the rate of dollar_figure per hour as adjusted for inflation unless a special factor such as the limited availability of qualified attorneys for such proceeding the difficulty of the issues presented in the case or the local availability of tax we have applied the net_worth requirement as of date the date on which the attorney misconduct phase of this litigation effectively commenced see app note and accompanying text expertise justifies a higher rate sec_7430dollar_figure in addition a court may not award fees with respect to any portion of the proceedings unreasonably protracted by the taxpayer sec_7430 respondent publishes the inflation-adjusted rate cap on an annual basis the hourly rate cap for fees incurred in and the earliest years for which petitioners claim fees is dollar_figure revproc_99_42 sec_3 1999_2_cb_568 revproc_2001_13 sec_3 2001_1_cb_337 the hourly rate cap for fees incurred in through is dollar_figure revproc_2001_59 sec_3 2001_2_cb_623 revproc_2002_70 sec_3 2002_2_cb_845 revproc_2003_85 sec_3 2003_2_cb_1184 revproc_2004_71 sec_3 2004_2_cb_970 the hourly rate cap for fees incurred in is dollar_figure revproc_2005_70 sec_3 2005_47_irb_979 b amplification of date order before turning to our analysis under sec_7430 we briefly revisit our date order app in the light of our recent dixon vii opinion the latter two examples of special factors were added by the internal_revenue_service restructuring and reform act of publaw_105_206 g 112_stat_727 effective for costs incurred after date all of the costs sought by petitioners were incurred after date inapplicability of sec_6673 in our september order we indicated that we would evaluate petitioners’ fee requests under sec_7430 rather than the proffered ground of sec_6673 we premised that decision on the distinction the supreme court has drawn between fee- shifting provisions such as sec_7430 that embody a substantive policy eg encouraging private parties to enforce their rights by allowing them to recover their attorney’s fees if successful and what may be termed fee sanction rules such as sec_6673 the applicability of which depends not on which party wins the lawsuit but on how the parties conduct themselves during the litigation 501_us_32 see also 498_us_533 496_us_384 we noted that whereas a fee award under a fee-shifting provision generally encompasses all aspects of the litigation see 496_us_154 fees awarded as a sanction are properly limited to those directly caused by the sanctionable conduct see cooter gell v hartmarx corp supra pincite in dixon vii we discussed the practical consequences of that distinction in the context of this fee litigation the ph appellants had filed a motion in this court in date requesting appellate fees under sec_6673 to continued under sec_6673 we are authorized to sanction respondent for the attorney misconduct that marred the test case trial by charging him the full amount of petitioners’ attorney’s fees relating to the tax_court proceedings necessitated by that misconduct subject only to the requirement that such amounts have been reasonably incurred because that misconduct did not extend to the appellate proceedings petitioners are relegated to the applicable fee-shifting provision-- sec_7430 with its hourly rate cap and eligibility requirements--with regard to their appellate fee requests dixon v commissioner tcmemo_2006_97 at part i c citation and fn refs omitted those observations apply equally here real parties_in_interest we also indicated in our september order that we would look to the real parties_in_interest with respect to petitioners’ fee requests in applying the net_worth requirement of sec_7430 we first adopted that approach in an order pertaining to the binder minns fee requests that we had issued week earlier see supra note and accompanying text in dixon vii we amplified our thinking in that regard the case for looking beyond the named parties is particularly compelling in these proceedings where similarly situated taxpayers not only shared the costs of the litigation but also had rights at stake in the case on the merits sisk the essentials of the equal_access_to_justice_act court awards of attorney’s fees for unreasonable government conduct part one la l rev pincite arguing that one can be a real party in interest with respect continued ensure that their requests for fees on appeal before this court are procedurally postured with the youngs’ motion we summarily denied the ph appellants’ motion for the reasons discussed in our order dated date to an eaja fee request--and thereby potentially entitled to recover the requested fees--only by virtue of one’s status as a real party in interest in the underlying litigation on the merits ie that financial responsibility for the claimed legal fees does not confer real party in interest status we now hold that the real parties_in_interest in this litigation include not only the test case petitioners and participating nontest case petitioners but also all other remaining nontest case petitioners dixon v commissioner tcmemo_2006_97 at part ii b fn refs omitted we apply that reasoning to petitioners’ fee requests as well ii entitlement to relief under sec_7430 a jones fee request--jurisdictional issue respondent’s position respondent maintains that this court lacks jurisdiction to act on the jones fee request in his response to that request respondent states mr jones never filed with the ninth circuit any application or motion pertaining to an award of appellate attorney’s fees unlike the situation with messrs binder minns and izen there is no order from the ninth circuit conferring jurisdiction on this court to determine the appropriate amount of mr jones’ appellate attorney’s fees fn ref omitted respondent then notes that under ninth circuit rule the period for mr jones to request appellate attorney’s fees in connection with his interlocutory appeal has long since expired a analysis date order as indicated above in our date order see appendix we resolved to treat petitioners as having revived their sec_7430 claims that we had rejected in dixon iv we did so in light of the test case petitioners’ subsequent appellate victory and in order to give effect to jean’s mandate to ‘ treat a case as an inclusive whole’ in applying fee- shifting statutes dollar_figure that approach presupposes in derogation of respondent’s jurisdictional argument that a request for appellate fees under a fee-shifting statute as opposed to a fee sanction rule see supra part i b need not originate in the court_of_appeals we continue to adhere to that view see 127_f3d_693 8th cir claimant’s failure to move for appellate fees under 8th cir r 47c--the analog of ninth circuit rule and 8--did not preclude district_court from including appellate fees in its fee award under civil rights fee-shifting statute although filing in the court_of_appeals is the preferred see 496_us_154 in which the supreme court held that the recipient of a fee award under the equal_access_to_justice_act eaja the fee- shifting statute from which sec_7430 derives may recover fees incurred litigating the fee award without a separate showing that the government’s opposition to the fee award was not substantially justified procedure for requesting appellate fees rule 47c cannot and does not affect the jurisdiction of the district courts b recent ninth circuit cases two recent opinions of the court_of_appeals for the ninth circuit reveal that the law of the circuit on this point is unsettled in 402_f3d_936 9th cir a case involving the general civil rights fee- shifting statute the court_of_appeals held that a district_court is authorized to award appellate fees only if in response to the requesting party’s timely filing under ninth circuit rule or the court_of_appeals remands the request or transfers the issue to the district_court however the court_of_appeals appears to have retreated from that jurisdictional reading of its rules in 429_f3d_869 9th cir involving the fee-shifting provision of the copyright act u s c sec_505 the court described the appellant’s argument in that case as follows finally appellant argues that the district_court improperly awarded fees generated by appellees in defending against appellant’s prior appeal of the district court’s summary_judgment award relying heavily on circuit rules and appellant contends that the district_court was without jurisdiction to award appellees’ appeal fees primarily because appellees did not first file an application with us to recover fees and expenses twentieth century fox film corp v entmt distrib supra pincite having spelled out the argument the court_of_appeals did not address it the court_of_appeals instead framed the issue in terms of whether a prevailing_party is entitled to fees for an intermediate appellate stage of its litigation where it was unsuccessful id the court_of_appeals upheld the district court’s award of appellate fees id something it could not have done had it believed that the district_court lacked jurisdiction to award those fees c conclusion we continue to subscribe to the view that this court has the authority to consider and award both trial fees and appellate fees under sec_7430 without the necessity of a separate filing in the court_of_appeals although we are mindful of cummings v connell supra the forbearance of the court_of_appeals in twentieth century fox film corp v entmt distrib supra leads us to believe we are not faced with a situation where we would surely be reversed on this issue on appeal see 99_tc_490 accordingly we hold that we have jurisdiction to consider the jones fee request b paid_or_incurred requirement unlike certain other fee-shifting statutes sec_7430 generally allows the recovery_of attorney’s fees only to the extent such amounts have been paid or incurreddollar_figure sec but see sec_7430 providing an exception for continued a c b iii see 87_tc_838 distinguishing the civil rights attorney’s fees awards act of crafaa u s c sec under which a court may allow the prevailing_party a reasonable attorney’s fee cf 489_us_87 fee award under crafaa is not limited to the amount the prevailing_party owes his attorney pursuant to contingent_fee agreement for purposes of sec_7430 fees are incurred when there is a legal_obligation to pay them e g 122_tc_272 in his opposition to the izen fee request respondent referring to the dollar_figure of fees and other expenses initially requested asserts that there is no showing that the youngs have paid or were obligated to pay this or any other amount respondent raised a similar argument with regard to the binder minns fee requests as we stated in dixon vii under the ‘real party in interest’ approach the fact that petitioners have not by and large paid_or_incurred the claimed fees and expenses does not render those amounts unrecoverable under sec_7430 dixon v commissioner tcmemo_2006_97 at part ii b rather the relevant inquiry is whether the real parties_in_interest who did pay or incur those amounts satisfy the net_worth requirement imposed by section continued pro bono services c a ii id see also id n as respondent has forgone the opportunity provided in our may and date orders to challenge that or any other aspect of dixon vii we shall again look to the real parties_in_interest to determine the extent to which the requested amounts were paid_or_incurred see infra part iii h c substantial justification defense under sec_7430 it is the position_of_the_united_states in the proceeding that is evaluated under the substantial justification standard in dixon vii we identified that position as respondent’s litigating position regarding the legal effect of the attorney misconduct ie that such misconduct amounted to harmless error and therefore did not invalidate the decisions entered against the test case petitioners following the issuance of dixon ii dixon v commissioner tcmemo_2006_97 at part ii c we then concluded although we had adopted that very position in dixon iii that the finding of the court_of_appeals in dixon v that we had committed clear error in that regard compelled the conclusion that respondent’s position was not substantially justified as respondent has declined our invitation to challenge that aspect of dixon vii we similarly conclude here that the position_of_the_united_states as so identified was not substantially justified d other threshold requirements respondent does not allege that petitioners failed to exhaust their administrative remedies and does not dispute that petitioners prevailed in the proceedings at issue e conclusion petitioners are entitled to relief under sec_7430 iii amounts of awards a overview our determination of the amounts of petitioners’ awards under sec_7430 turns on three inquiries with respect to each fee request first what is a reasonable attorney’s fee within the confines of sec_7430 for the representation covered by the fee request second what are the reasonable expenses associated with that representation third to what extent have real parties_in_interest who satisfy sec_7430’s net_worth requirement hereafter eligible persons paid_or_incurred those amounts b reasonable attorney’s fee the lodestar in general the most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate hensley respondent does not allege that petitioners unreasonably protracted any portion of the proceedings at issue see sec_7430 v eckerhart 461_us_424 the resulting figure commonly referred to as the lodestar ‘has as its name suggests become the guiding light of the supreme court’s fee-shifting jurisprudence ’ 535_us_789 quoting burlington v dague 505_us_557 see also hensley v eckerhart supra pincite n the standards set forth in this opinion are generally applicable in all cases in which congress has authorized an award of fees to a ‘prevailing party ’ a hours reasonably expended the limited success factor in hensley the supreme court recognized that the determination of hours reasonably expended extends beyond considerations of efficiency and documentation as the court stated if a plaintiff has achieved only partial or limited success the product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive_amount that the plaintiff is a prevailing_party therefore may say little about whether the expenditure of counsel’s time was reasonable in relation to the success achieved hensley v eckerhart supra pincite professor sisk sometimes refers to this aspect of reasonableness as the limited success factor sisk the essentials of the equal_access_to_justice_act court awards of attorney’s fees for unreasonable government conduct part two la l rev while it is often difficult to allocate attorney time between successful and unsuccessful issues and claims denial of a particular form or aspect of relief occasionally may be attributable to a discrete motion or proceeding thus allowing the limited success factor to be measured by hours devoted to that effort id see also hensley v eckerhart supra pincite a court applying these principles may attempt to identify specific hours that should be eliminated b hours relating to the issue of attorney’s fees respondent does not dispute that hours devoted to the recovery_of attorney’s fees sometimes referred to herein as fee request hours are potentially compensable under sec_7430 see eg huffman v commissioner 978_f2d_1139 9th cir affg in part and revg in part on other grounds tcmemo_1991_144 the fees generated by fee request hours are commonly referred to as fees-on-fees or fees-for-fees as opposed to merits fees which are attributable to merits hours because we apply a separate percentage reduction to the portion of izen’s lodestar attributable to fee request hours the fees-on-fees lodestar based on the ratio of merits hours allowed to merits hours claimed see infra part iii f we separately identify his merits hours and fee request hoursdollar_figure the jones fee request as supplemented does not include continued reasonable hourly rate under sec_7430 as discussed supra in part i a the determination of a reasonable hourly rate under sec_7430 is subject_to an inflation-adjusted cap unless the court determines that a special factor such as the limited availability of qualified attorneys for such proceeding the difficulty of the issues presented in the case or the local availability of tax expertise justifies a higher rate sec_7430 in dixon vii after a thorough analysis of the relevant caselaw we concluded that we were constrained to apply the statutory rate cap as petitioners have not proffered any additional arguments in that regard we stand by our analysis and conclusion in dixon vii and shall apply the rate cap to petitioners’ fee requests c hours reasonably expended--izen fee request preliminary issues before we set forth our analysis of and adjustments to izen’s specific time entries we address two overarching issues raised by respondent a scope of representation we may consider respondent maintains in his opposition to the izen fee request that only the time spent on the ‘adair appeal’ approximately hours is subject_to the court’s evaluation for a determination of an appropriate award of attorney’s fees on continued any time entries relating to work on the fee request appeal respondent reasons that izen filed his ninth circuit rule motion requesting that the court_of_appeals transfer consideration of attorney’s fees to the tax_court in case no 01-70155--the adair appeal--and that t he period for mr izen to request appellate attorney’s fees in connection with the appeal in case no the test case appeal has long since expired see 9th cir r we begin by observing that we have already held we have jurisdiction to consider the jones fee request even though jones made no filing under either ninth circuit rule or see supra part ii a it follows that we may consider the izen fee request in its entirety despite the fact that izen made no filing in the test case appeal under either ninth circuit rule or moreover we would reach the same conclusion even if an appellate filing were a prerequisite to our consideration of appellate fees under sec_7430 that is we conclude in the alternative that izen’s timely motion under ninth circuit rule in the adair appeal was sufficient to transfer the issue of izen’s fees in the test case appeal as well although we have been unable to find a case directly on point we believe 307_f3d_1075 9th cir is sufficiently analogous to support our alternative ground for considering the izen fee request in its entirety quinhagak was one of several lawsuits filed in the u s district_court for the district of alaska challenging the federal government’s implementation of the alaska national interest lands conservation act anilca u s c secs as the court_of_appeals explained the district_court had consolidated two such cases known as katie john and babbitt to serve as the lead cases although several other cases were filed that turned on the resolution of the issues in katie john babbitt the district_court declined to consolidate these additional dependent cases and chose instead to manage them together and stayed proceedings pending resolution of the core katie john babbitt issues the district_court added the instant case to the list of cases to be managed jointly in connection with katie john babbitt and as part of an order explaining how the joint management would proceed the district_court invited the plaintiffs in the jointly managed cases including the case at hand to submit amicus briefing on the issues in the consolidated cases native vill of quinhagak v united_states supra pincite8 the various plaintiffs ultimately prevailed and the quinhagak plaintiffs moved for attorney’s fees under anilca’s fee-shifting provision see u s c sec a the district_court granted the quinhagak plaintiffs’ fee request in large part rejecting the argument that they were not entitled to fees for work relating to the katie john babbitt cases in holding that the district_court did not abuse its discretion in that regard the court_of_appeals quoted at length from the district court’s order the katie john case was the vehicle which the court chose to resolve the issues for all of the jointly managed cases for defendants to suggest as they do that plaintiffs’ work was for different parties in a different case misconstrues and misrepresents the reality of what was going on in these jointly managed cases for all practical purposes there was but one case in which the issues were going to be decided and that decision was going to be binding in all of the cases the actual briefs may have been filed were filed in the katie john case but they bore directly upon issues raised by the plaintiffs in this case native vill of quinhagak v united_states supra pincite thus even though their brief in the katie john babbitt cases had been ‘proffered by a technical non-party’ id again quoting the district_court the quinhagak plaintiffs were entitled to recover the corresponding attorney’s fees inasmuch as the test case appeal and the adair appeal share the same real parties_in_interest and substantive issues we similarly conclude that izen’s timely motion under ninth circuit rule although technically filed in the adair appeal effectively transferred the issue of izen’s fees in the test case appeal as well b discrepancies between fee request and alleged invoice on date respondent submitted to the court certain documents he had recently received from geoffrey sjostrom the business manager of the defense fund see supra note and accompanying text the documents include several pages of a facsimile transmission that based on the identifying information printed thereon appear to have originated from izen’s telecopier on the evening of date sjostrom alleges that the pages which contain time entries substantially_similar in content and format to those included in the izen fee request are part of a contemporaneous invoice submitted by izen to the defense fund as sjostrom points out for the period date through date the time entries in the alleged invoice amount to dollar_figure hours while those included in the izen fee request for the same period amount to dollar_figure hoursdollar_figure the 68-hour discrepancy is attributable to new entries as well as additional time claimed for existing entries in the supplemental filing by which he submitted those documents to the court respondent states although respondent did not previously question the veracity of the billing records respondent requests that in light of this new information the court review all of mr izen’s billing records and reduce the fee award in his response to respondent’s supplemental filing izen neither questions the authenticity of the date document nor alleges that the discrepancies are attributable to some kind of billing error rather izen attempts to downplay the significance of the document describing it as an informational sjostrom also observes that the billing rate in the alleged invoice is much lower than the rate claimed in the izen fee request we are not troubled by that discrepancy izen clearly based his request for the higher rate on his notion of the market_value of his services see infra part iii h e bill he then separately addresses of the discrepancies vouching for the necessity of the services and reasonableness of the time not included in the bill hereafter the sjostrom bill although izen has not in our view adequately explained why the sjostrom bill does not include certain charges claimed in the izen fee request we are not inclined to pass judgment on his veracity in that regard without further investigation which we are loath to undertake at this late datedollar_figure accordingly we shall assume that the time entries in the izen fee request accurately depict the services performed by izen and the number of hours devoted thereto as discussed below however that does not mean that the sjostrom bill is irrelevant to our determination of hours reasonably expended adjustments to hours claimed the izen petitioners base their fee request on dollar_figure hours of attorney time including dollar_figure hours we have identified as fee request hours leaving merits hours our adjustments to the hours claimed fall into eight major categories of course where adjustments are described in more than one category we take them into account only once 22respondent after receiving the sjostrom bill from sjostrom and bringing it to the court’s attention by means of a supplement to respondent’s opposition to izen’s appellate fee request did not request an evidentiary hearing on this point a hours relating to intervention izen allocates dollar_figure hours of his time to intervention which we take to include not only his efforts to include in the adair appeal hundreds of nontest cases that had never been consolidated with the test cases but also time relating to jones’s belated attempt to intervene in the test case appeal on behalf of the cerasolis we have previously described izen’s own intervention efforts as unsuccessful and unnecessary dixon v commissioner tcmemo_2006_97 n in response to that characterization the izen petitioners assert in their latest filing that izen was successful in at least establishing before the ninth circuit that the prospective intervenors which were denied intervention status before this court had an interest in this case which entitled them to appeal further it was never clear in this proceeding that the test cases were at all times adequate representatives of the prospective intervenors or the participating nontest case petitioners the assertion that izen established before the ninth circuit that the prospective intervenors were entitled we distinguish those efforts from actions necessary to preserve the participation rights of the adairs whose case was included in our certification order see infra note in september and date after this court had entered decisions in the thompson and cravens cases izen and sticht filed motions for leave to intervene in those cases on behalf of numerous nontest case petitioners which we denied see adair v commissioner 26_f3d_129 9th cir dismissing appeal of that denial respondent notes that izen’s lists of prospective intervenors in the thompson cravens cases and the test case appeal respectively are photocopies of the same document to appeal does not square with the language of that court’s date order holding the adair appeal in abeyance pending the resolution of the test case appeal in that order the court_of_appeals stated that because the tax_court had consolidated the adairs’ case with the test cases for purposes of the evidentiary hearing it appears at least arguable that the adairs could appeal as intervenors from a final_decision in the test cases the court added however that if petitioners’ counsel joe alfred izen jr esq asserts that this court has jurisdiction in this case over any non-test tax_court case other than no ie the adairs’ case he shall submit to the court evidence of the following that the additional non-test case or cases were at one time consolidated with the test cases because none of izen’s other prospective intervenors had ever had any of their cases consolidated with the test cases izen would not have been able to establish jurisdiction of the court_of_appeals over their cases given the unsuccessful nature of izen’s intervention efforts we believe a complete disallowance of the corresponding hours would be well within our discretion see hensley v eckerhart u s pincite discussed supra part as discussed above the court_of_appeals apparently construed izen’s notice of appeal of certain intervenors as an attempt to appeal the decisions entered in the test cases rather than a petition for permission to appeal the orders this court had certified for interlocutory appeal iii b a dollar_figure we hesitate however to disregard completely izen’s concern that the test cases were insufficiently representative accordingly we shall defer to izen’s professional judgment in that regard--up to a point when the court_of_appeals stayed the proceedings in the interlocutory appeals of the other participating nontest case petitioners on date pending resolution of the test case appeal it effectively determined that the interests of those nontest case petitioners were adequately represented in the test case appeal that determination belies any continued justification for izen’s efforts that could counteract hensley’s limited success factor we therefore disallow dollar_figure hours izen incurred after date that relate to intervention including dollar_figure hours relating to jones’s date motion to intervenedollar_figure see infra part iii d c we do not mean to suggest that hensley requires courts to scalpel out attorney’s fees for every setback suffered by a prevailing_party 935_f2d_1050 9th cir however we fail to see how izen’s intervention efforts contributed to the ultimate victory in the lawsuit id pincite izen’s first time entry after date relating to intervention is dated date given the extent of communications between izen jones and sticht we presume that izen was aware of the court of appeals’ date order by that time b hours subject_to billing judgment inference although we accept izen’s contention that the time charges he excluded from the sjostrom bill are bona_fide see supra part iii c b his exclusion of those charges undermines his claim that the additional hours are properly chargeable to the government just as a recent arm’s-length sale of property is a reliable indicator of that property’s fair_market_value see eg huber v commissioner tcmemo_2006_96 a contemporaneous invoice is a reliable indicator of the hours reasonably expended aspect of the lodestar calculation as the supreme court recognized in hensley v eckerhart supra pincite in the private sector ‘billing judgment’ is an important component in fee setting it is no less important here hours that are not properly billed to one’s client also are not properly billed to one’s adversary pursuant to statutory authority copeland v marshall u s app d c 641_f2d_880 en_banc we believe it likely that most of the discrepancies between the sjostrom bill and the izen fee request are attributable to izen’s exercise of billing judgment indeed except as noted in the next paragraph the new entries in the fee request and existing entries with time increases relate to procedural or peripheral matters administrative tasks or other expenditures of time that strike us as prime candidates for izen’s billing judgment cleaverdollar_figure for instance the fee request but not the one of the new entries is actually a duplicate entry for continued sjostrom bill includes a 75-hour charge for izen’s preparation for conference on top of the next day’s 6-hour charge for the meeting itself the fee request but not the sjostrom bill includes a charge for an additional hour that izen currently claims he spent locating the petition for writ of certiorari he filed with the supreme court as any billing attorney can attest these are the types of attorney time charges that however necessary the underlying activity are difficult to justify on a client invoice under the corollary espoused by the supreme court in hensley v eckerhart supra they should not be chargeable to respondent eitherdollar_figure on the other hand we have identified five time entries between january and date that despite their continued the same date date--2 hours other examples include the following new entry for dollar_figure hours devoted to forwarding this court’s notice of filing of notice of appeal to the test case petitioners additional hours for transcript search for the court’s comments concerning settlement additional time claimed for routine filings such as motions for enlargement of time hours and the ninth circuit’s civil appeals docketing statement dollar_figure hours additional time for legal research check of citations or research of authorities cited relating to other attorneys’ procedural filings including jones’s motion for reconsideration of the court of appeals’ dismissal of his interlocutory appeal as untimely dollar_figure hours the government’s response thereto hours the ensuing order of the court_of_appeals hours and sticht’s objection to consolidation on appeal hour new entry for dollar_figure hours devoted to proof of filing notice of appeals and additional hours for travel time to minns’s office for meeting re - providing access to hongsermeier records omission from the sjostrom bill are not as susceptible to the billing judgment inference those entries none of which is among the time entries to which respondent specifically objected in his initial response chronicle izen’s earliest substantive efforts with respect to his opening brief in the test case appeal whatever izen’s reasons for not including those entries in the sjostrom bill we deem the corresponding hours to have been a reasonable expenditure of time on his partdollar_figure accordingly we disallow only dollar_figure of the dollar_figure hours excluded from the sjostrom bill dollar_figure - c review of other parties’ nonsubstantive filings izen’s time entries include numerous references to his review filing and analysis of other parties’ filings and corresponding orders relating to attorney appearances and withdrawals changes of address extension requests and bills of costs while these entries typically claiming dollar_figure hours do not necessarily stand out when viewed in isolation we deem their cumulative effect to be unreasonable for instance izen claims to have spent full hours on date reviewing filing it is conceivable that izen feared he would have to share his substantive work product with the minns faction if he included those time entries in the sjostrom bill for his part izen merely asserts that at this point neither sjostrom nor the legal defense fund had any intention of paying izen for any work he was doing on appeal the omission of those hours from the sjostrom bill does raise the issue of whether the corresponding fees were paid_or_incurred see infra part iii h e and analyzing motions for withdrawal from joint representation filed by attorney declan o’donnell we find that difficult to believe and even if it were true it would constitute a grossly inefficient use of attorney time we have identified entries of this nature and we disallow in full the corresponding dollar_figure hours including dollar_figure fee request hours d representation issues in dixon vii we resolved not to hold the government responsible for fees attributable to the legal and proprietary jockeying occasioned by the steering committee’s break with minns we take the same approach here with respect to the steering committee’s earlier break with izen thus for example we disregard time spent by izen addressing matters such as status of atlas defense fund continued representation payment of outstanding bill and demand for accounting for jai clients as was the case in dixon vii where time entries from the period of the appeal do not reveal the subject matter of client communications we assume a split between compensable and noncompensable matters the foregoing adjustments involving time entries result in an additional 025-hour reduction e matters relating to remand proceedings we have identified time entries totaling dollar_figure hours that relate to the post-appellate remand proceedings in this court rather than the appeal we reduce the claimed hours accordingly f duplicate entries we have identified time entries that appear to be duplicative or in our judgment are excessive in light of other similar entries elimination of those entries results in an additional 05-hour reduction including fee request hours g separately claimed fee request hours in their latest filing the izen petitioners claim an additional hours of attorney time relating to work on their fee request in an affidavit submitted with that filing izen states that he devoted hours to the initial preparation of the fee request dollar_figure hours to the latest filing and dollar_figure hours to a variety of tasks described and dated in numbered paragraphs between date and date the problem here is one of overlap the initial fee request apparently mailed on date includes time entries for may claiming hours and hours respectively for preparation of the fee request in his latest affidavit izen claims an additional dollar_figure hours relating to fee request preparation on may and dollar_figure and hours respectively the new claim of dollar_figure hours for may duplicates the earlier may time entry claiming hours adding the additional hours claimed for may to the hours previously claimed for may produces a total of hours devoted to fee request preparation which approximates the hours izen separately claims to have devoted to that taskdollar_figure we therefore conclude that the hours separately referenced in izen’s latest affidavit are accounted for in the initial fee request hours and his new claim for date hours disallowance of the duplicate claim for hours as well as the duplicate claim for dollar_figure hours on date results in a downward adjustment of dollar_figure hours h miscellaneous additional adjustments we have identified an additional time entries only of which exceed dollar_figure hours that either pertain to matters that are unrelated to or are only marginally related to the appellate proceedings or the izen fee request or are insufficiently descriptive to establish the required nexus the first category includes two entries relating to the izen jones motion for trial fees that we ruled on in dixon iv and three entries relating to parallel state tax proceedings the second category includes unexplained references such as letter requesting trust documents from darrell hatcher and handwritten izen actually claims that the undated hours relate to both preparation of the fee request and responding to respondent’s objections to the application we note that izen separately claims--and we allow in full--dollar_figure hours on dec and relating to the izen petitioners’ supplemental response which responds to respondent’s opposition to the fee request notation from alan jones the entries amount to dollar_figure hours which we disallow in full summary the foregoing adjustments amount to hours comprising merits hours and dollar_figure fee request hours accordingly we conclude that izen reasonably expended hours dollar_figure - overall comprising merits hours - and dollar_figure fee request hours dollar_figure - d hours reasonably expended--jones fee request reliability of documentation the jones fee request initially contained no time entries whatsoever covering the period of the appeal rather the jones petitioners based the amount of their fee request dollar_figure on the aggregate payments received by jones from his nontest case petitioner clients from date through date after two requests for additional documentation the jones petitioners finally submitted reconstructed worksheets of time for jones and two unidentified paralegalsdollar_figure the time entries included in jones’s worksheet amount to dollar_figure hours while those the jones petitioners explain the computer system in jones’s office was completely overhauled and reformatted in january of so much of the previously stored information was not accessible for the purposes required herein and worksheets had to be manually reconstructed included in the paralegals’ worksheets amount to hours dollar_figure hours and dollar_figure hours respectively respondent points out that with the exception of four time entries totaling hours that appear in one of the paralegal worksheets but not the other the paralegals’ worksheets are in all respects identical furthermore the identical time entries contained in the paralegals’ worksheets also appear in jones’s worksheet with the only difference being the amount of time claimed for each entry the dates and descriptions are identical dollar_figure respondent understandably questions the reliability of these worksheets while we are willing to accept the reconstruction of paralegal time based on jones’s worksheet we question the total number of paralegal hours so reconstructed in a declaration submitted with the initial fee request jones’s office manager- controller posits an attorney paralegal hours ratio for the period date through date of almost to materials submitted by the jones petitioners for the post-appeal period date to date not addressed in this opinion reveal an attorney nonattorney hours ratio of approximately to dollar_figure turning to the reconstructed worksheet sec_34 jones’s worksheet contains an additional time entries that do not appear in the paralegals’ worksheets the nonattorney time for the post-appeal period includes time charged by a law clerk an accountant and an account continued at issue if we consider only one of the paralegal worksheets the attorney paralegal hours ratio becomes dollar_figure to or approximately to the foregoing comparison coupled with the questionable nature of the worksheets prompts us to disregard the duplicate paralegal worksheet claiming dollar_figure hours a specific time entries in general quite apart from the reliability concerns discussed above the time entries contained in the reconstructed worksheets are woefully nondescriptive however as we did in dixon iv we shall give the jones petitioners the benefit of the doubt here on the ground that they should not be overly penalized for their counsel’s poor documentation efforts b dismissal and recertification respondent urges us to disallow the time jones and by extension his paralegal spent on behalf of the jones petitioners contesting the court of appeals’ initial dismissal of their applications for interlocutory review and obtaining this court’s recertification of their cases describing such efforts as caused by jones’ own error we find respondent’s argument somewhat disingenuous in light of his appellate attorneys’ concurrence in response to jones’s motion continued manager as well as paralegal time for reconsideration of the court of appeals’ dismissal regarding the applicability of the mailbox rule under which jones’s initial filing would have been deemed timely without regard to the factual issue of the time of receipt see sec_7502 the 113_f3d_1087 9th cir revg tcmemo_1994_604 because it is not at all clear that jones’s efforts on this procedural front were required because of any error by him we decline respondent’s invitation to disregard those efforts altogetherdollar_figure c the cerasolis’ motion to intervene given the denial by the court_of_appeals of the cerasolis’ motion to intervene in the test case appeal the hours that jones and his paralegal devoted to that matter are subject_to disallowance under the limited success principle of 461_us_424 dollar_figure see supra part iii b a respondent objects to one recertification time entry hours on the ground that recertification had occurred months prior to the date of the entry we assume that the entry is simply misdated and we allow the time in full one could argue that the time jones devoted to his clients’ separate interlocutory appeals should be disallowed as well since the court_of_appeals effectively rendered those appeals nugatory by putting them on the back burner and ultimately remanding the nontest cases for disposition consistent with the mandate of dixon v we do not hold that view jones pursued those appeals in response to this court’s order certifying the cases of the participating nontest case petitioners for interlocutory appeal we issued that order to ensure that the participation rights endorsed by the court_of_appeals in 26_f3d_105 9th cir per curiam vacating dixon v commissioner t c memo continued moreover unlike izen jones commenced his intervention efforts well after the court_of_appeals had effectively determined that the interests of the participating nontest case petitioners were adequately represented in the test case appeal see supra part iii c a we therefore disallow all of his and his paralegal’s time relating to the cerasolis’ motion to intervene amounting to dollar_figure hours of attorney time and hours of paralegal timedollar_figure d pre- and post-appeal tax_court filings the reconstructed worksheets include time entries relating to filings in this court that both predate motion for reconsideration of dixon iv--date and postdate status reports--april and date the period of the appeal as those entries are not properly includable in a request for appellate fees we disallow the corresponding dollar_figure hours of attorney time and hours of paralegal time continued would not automatically terminate at the tax_court door consequently we believe jones’s efforts in that regard are properly compensable in their third supplement to the jones fee request the jones petitioners assert that jones’s work on the cerasolis’ motion to intervene was useful to other counsel as they prepared for oral argument again we fail to see the beneficial effect see supra note e miscellaneous additional adjustments we have identified additional time entries that are either excessive in terms of attorney time or insufficiently related to the appellate proceedings the first category includes an 8-hour charge for letters to izen binder o’donnell minns sticht and a 5-hour charge for analysis of the court of appeals’ amended dixon v opinion which contained no substantive changes examples from the second category include state-law research for an alaskan client and a consultation with attorney o’donnell regarding efforts to reopen previously settled cases in the wake of dixon v the resulting downward adjustments amount to dollar_figure hours of attorney time and dollar_figure hours of paralegal time summary the foregoing adjustments coupled with our rejection of the duplicate paralegal worksheet amount to dollar_figure hours of attorney time and hours of paralegal time it follows that jones and his paralegal reasonably expended dollar_figure hours dollar_figure - and hours - respectively e calculation of lodestar sec_1 a izen fee request and izen’s time entries for and amount to dollar_figure hours we subtract dollar_figure hours from that total to reflect the adjustments discussed above that apply to time entries we then multiply the remaining dollar_figure hours by the dollar_figure rate cap in effect for and to obtain the lodestar for this period dollar_figure b through izen’s time entries for through amount to dollar_figure hours we subtract hours from that total to reflect the adjustments discussed above that apply to time entries we then multiply the remaining hours by the dollar_figure rate cap in effect from through to obtain the lodestar for this period dollar_figure the dollar_figure hours claimed for this period include dollar_figure fee request hours and the hours disallowed for this period include dollar_figure fee request hours c izen’s time entries for amount to dollar_figure hours all of which are fee request hours since none of our adjustments relate to we multiply the full dollar_figure hours by the dollar_figure rate cap in effect for to obtain the lodestar for this period dollar_figure d total the lodestar with respect to the izen fee request is dollar_figure dollar_figure dollar_figure dollar_figure the fees-on- fees lodestar is dollar_figure calculated as follows dollar_figure - x dollar_figure dollar_figure dollar_figure x dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure that leaves a merits fees lodestar of dollar_figure dollar_figure - dollar_figure a jones fee request and jones’s time entries for and amount to dollar_figure hours we subtract hours from that total to reflect the adjustments discussed above that apply to attorney time entries we then multiply the remaining dollar_figure hours by the dollar_figure rate cap in effect for and to obtain jones’s lodestar for this period dollar_figure the paralegal time entries for and amount to hours we subtract hours from that total to reflect the adjustments discussed above that apply to paralegal time entries we then multiply the remaining hours by the hourly paralegal rate charged by jones dollar_figure to obtain the paralegal lodestar for this period dollar_figure b and jones’s time entries for and amount to dollar_figure hours we subtract dollar_figure hours from that total to reflect the adjustments discussed above that apply to attorney time entries we then multiply the remaining hours by the dollar_figure rate cap in effect for and to obtain jones’s lodestar for this period dollar_figure the paralegal time entries for and amount to hours we subtract hours from that total to reflect the adjustments discussed above that apply to paralegal time entries we then multiply the remaining hours by the hourly paralegal rate charged by jones dollar_figure to obtain the paralegal lodestar for this period dollar_figure c total the lodestar with respect to the jones fee request is dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure f adjustment to izen’s fees-on-fees lodestar to reflect limited success in dixon vii we reduced our awards of fees-on-fees to account for the limited success achieved by the ph appellants and the hongsermeiers in pursuing their fee requests see eg 45_f3d_1365 9th cir the legal principles for recovering attorney’s fees laid out in hensley citation omitted apply to requests for fees-on-fees see also commissioner ins v jean u s pincite ndollar_figure dicta the ph appellants had unsuccessfully pursued certain discrete issues relating to their fee request thus allowing the limited success factor to be measured by hours devoted to that effort sisk la l rev pincite see supra part iii b a having lacked that alternative in the case of the hongsermeiers we instead compared the number of merits hours allowed to merits hours claimed and applied the resulting success ratio to their fees-on-fees lodestar see thompson v gomez supra applying 2-percent success ratio 790_f2d_753 9th cir applying 5-percent success ratio we take the same approach here with respect to izen’s fees-on-fees lodestardollar_figure the numerator of the izen petitioners’ success ratio merits hours allowed i sec_676 and the denominator merits hours claimed i sec_848 see supra parts iii c iii c applying the percentage equivalent dollar_figure percent to izen’s fees-on-fees lodestar of dollar_figure see supra part iii e d yields an adjusted fees-on-fees lodestar of dollar_figure the resulting reasonable attorney’s fee with respect to the izen fee request is dollar_figure merits fees lodestar of dollar_figure plus adjusted fees-on-fees lodestar of dollar_figure g reasonable expense sec_1 izen expense request two items account for more than percent of the izen petitioners’ claimed expenses of dollar_figure the court reporter’s fee for the transcript of the test case trial dollar_figure incurred date and the court reporter’s fee plus postage for the transcript of the evidentiary hearing dollar_figure incurred date the first transcript fee predates the attorney misconduct phase of this litigation and presumably was paid_by kersting in any event the second as we did in dixon vii we focus on merits hours rather than merits fees because much of the difference between the amounts of merits fees claimed and merits fees allowed is attributable to sec_7430’s rate cap the effect of which is already reflected in the fees-on-fees lodestar transcript fee plus postage was included in the fees and costs we considered in dixon iv accordingly we disallow both amounts we also disallow the following items initial fee to set up legal defense fund file --dollar_figure set up legal authority file --dollar_figure postage copy charges of letter to clerk state board_of equalization re dixon appeal and stay --dollar_figure postage copy charges of the rest of the wayne young story to all of clients -- dollar_figure set up steering committee file --dollar_figure postage copy charges fee application --dollar_figure subsumed within the dollar_figure postage copy charge subsequently claimed with respect to the initial filing difference between aggregate expenses claimed in latest filing and sum of broken out amounts--dollar_figure the remaining allowable expenses amount to dollar_figure jones expense request the jones petitioners claim additional expenses of dollar_figure we disallow the following items copying and postage for tax_court filings relating to dixon iii and dixon iv--dollar_figure copying and postage for court filings relating to the cerasolis’ motion to intervene in the test case appeal-- dollar_figure copying and postage for client correspondence predating the period of the appeal--dollar_figure copying and postage for client correspondence postdating the period of the appeal--dollar_figure the remaining allowable expenses amount to dollar_figure h amounts paid_or_incurred by eligible_person sec_1 a izen fee request indirect payments in his affidavit submitted with the izen fee request izen states from the time of the filing of the notice of appeal june until november a portion but not all of my billings for test case representation were paid_by the atlas legal defense fund however in response to respondent’s subsequent reference to that statement the izen petitioners state respondent is mistaken when respondent claims that the atlas legal defense fund paid izen’s fees on appeal for work performed between june and november the atlas legal defense fund refused to pay izen’s bill accordingly we need not concern ourselves as we did in dixon vii with indirect payments by eligible persons through the defense fund b indirect obligations in dixon vii we concluded that three members of the defense fund’s steering committee all nontest case petitioners were liable for the defense fund’s obligations to porter hedges under the terms of the fund’s retainer agreement with that firm in contrast the izen petitioners have failed to produce any contract between izen and the defense fund for the provision of appellate legal services let alone any agreement on the part of individual nontest case petitioners to accept personal liability thereunderdollar_figure although izen has attempted through litigation to establish the liability of four steering committee members all nontest case petitioners to pay for a portion of his appellate services those efforts have thus far proved unsuccessful we therefore have no basis for finding any individual payment obligations vis-a-vis the defense fund c direct payments in their second supplement to the izen fee request the izen petitioners submitted a list of payments on appeal made to izen by nontest case petitioners as discussed below the izen petitioners have also submitted or established the existence of individual contracts for appellate legal services between izen and of the listed payors since none of those payors is credited with having made payments on appeal in excess of his contractual obligation the latter amount independently satisfying the paid_or_incurred requirement we focus on the four remaining listed payors we further narrow our focus to the three remaining payors out of that group for whom we have received net_worth affidavits in our date order we indicated that if the izen petitioners were unable to establish a payor’s fixed contractual obligation to pay for izen’s appellate services we would assume as indicated above izen’s initial agreement to provide legal services in this litigation was with kersting not the defense fund as reconstituted after kersting’s death in date that payments made by that person after the period of the appeal were intended to compensate izen for representation in the ensuing remand proceedings in this court since most of the additional izen contracts we have received relating to those remand proceedings call for monthly payments beginning date we shall deem the period of the appeal to have ended date for these purposes rather than the date issue_date of dixon v under that convention the three remaining listed payors who are eligible persons made payments to izen for appellate services in the aggregate amount of dollar_figure d direct obligations--fixed amounts the izen petitioners have submitted or established the existence of individual contracts for appellate legal services between izen and nontest case petitioners as well as net_worth affidavits for of those petitioners all but one of the contracts require payments of dollar_figure the other calls for payments of dollar_figure thus the aggregate fixed payment obligation of the eligible persons is dollar_figure x dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure two of those nontest case petitioners apparently did not make any payments on appeal e direct obligations--additional amounts at first blush it would appear that the amount potentially recoverable with respect to the izen fee request reasonable attorney’s fee of dollar_figure plus reasonable expenses of dollar_figure equals dollar_figure far exceeds the amount_paid or incurred by eligible persons dollar_figure dollar_figure dollar_figure that is not the end of the story however on the basis of the authority discussed below we construe the izen appellate contracts as creating additional payment obligations that eliminate the apparent shortfall in 924_f2d_1577 fed cir the court_of_appeals awarded ms phillips more than dollar_figure in attorney’s fees under the eaja which similarly limits awards to amounts incurred even though her attorney had agreed to prosecute her appeal for a flat fee of dollar_figure in an affidavit submitted with the fee application and quoted by the court_of_appeals the attorney described the fee arrangement as follows she was to pay me dollar_figure of her back pay for the appeal and i was to charge her no more the recovery would then be contingent upon success recovery to be based upon a statutory fee award if we prevailed we kept bookkeeping entries of my time but once the dollar_figure was paid_by the client she was not responsible for further payment of our charges id pincite the government argued that ms phillips’s fee award should be limited to dollar_figure because that is all she has paid or is obligated to pay to her attorney id the court_of_appeals noting that the eaja provides for an award to the ‘prevailing party’ rather than to the attorney construed the fee arrangement to mean that if an award of attorney fees is obtained on her behalf she is obligated to turn it over to her attorney in this sense phillips incurs the attorney fees that may be awarded to her on the other hand if no fee award is made to her she does not have any obligation to pay any further fees to her attorney from her own resources id pincite3 see also sisk la l rev pincite adopting professor silver’s argument that such an arrangement is the economic equivalent of a nonrecourse debt and concluding that the eaja’s incurred requirement should be deemed satisfied thereby silver unloading the lodestar toward a new fee award procedure tex l rev in affidavits submitted with the izen petitioners’ third supplement to their fee request izen’s clients describe a billing arrangement similar to that depicted in phillips v gsa supra specifically each affiant states it was also my our understanding that he izen could seek the full value of his services when he applied for fees and that we would not be responsible for any fees in excess of our payments under our contract s i we agreed that we would be reimbursed any money we had paid mr izen out of any recovery he received and that he would keep the difference if any sec_7430 similarly provides that the prevailing_party may be awarded the costs specified therein see also 475_us_717 fee award under crafaa which provides that a court may allow the prevailing_party a reasonable attorney’s fee belongs to the prevailing_party rather than the attorney between the amounts we had paid him and the reasonable fees he was awarded by the court those representations are consistent with the inclusion of izen’s hourly billing rate in his flat-fee appellate contracts we therefore conclude that each such contract encompasses an implied agreement that any fee award will be paid over to the legal_representative id pincite to the extent the client’s share of the award exceeds the amount_paid by the client pursuant to the contract in this manner the contracts supply the additional payment obligations that support an award of the potentially recoverable amount in its entirety jones fee request as indicated above the jones petitioners actually base the amount of their fee request dollar_figure on the aggregate payments received by jones from his nontest case petitioner clients between date and date disregarding amounts received prior to the period of the appeal amounts received from persons for whom the jones petitioners have not submitted net_worth affidavits and amounts received from persons who had settled their cases prior to the appeal the remaining amount in excess of dollar_figure still far exceeds the reasonable fees dollar_figure and expenses dollar_figure with respect to the jones fee request accordingly we conclude that eligible persons have paid the potentially recoverable amount dollar_figure in its entirety i summary we shall award attorney’s fees and expenses in the amount of dollar_figure in respect of the izen fee request and dollar_figure in respect of the jones fee requestdollar_figure we shall address the manner in which the awards are to be administered in a separate order or orders implementing this opinion to reflect the foregoing appropriate orders will be issued it turns out that the izen fee award is the smallest of the three fee awards we have granted that are premised on actual participation in the briefing and argument of the test case appeal in dixon vii we posited a range of reasonableness with regard to the number of hours properly devoted to the core aspects of the test case appeal with izen occupying the low end of that range see dixon v commissioner tcmemo_2006_97 at part iii c b it is not surprising that the attorneys who joined the fray at a later stage--who did not participate in the dixon ii trial of the test cases or the dixon iii evidentiary hearing--would have spent more startup time than izen in order to familiarize themselves with the records of the trial and hearing that he was instrumental in creating nor is it surprising that porter hedges which had the most available_resources and the least amount of time to deploy them would come in on the high end of the range even after application of a 130-hour haircut suffice it to say that the variances in the amounts of the three awards should not be interpreted as a judgment on our part regarding the relative quality and effectiveness of the underlying appellate representations - - - - - -


t c memo united_states tax_court russell s greene petitioner v commissioner of internal revenue respondent docket no filed date p maintaining that income_tax could not constitutionally be imposed on his earnings did not file income_tax returns for the taxable years through r determined deficiencies for individual income taxes and self-employment taxes attributable to compensation interest dividends and capital_gain received by p r further determined an addition_to_tax under sec_6651 i r c for failure_to_file held p is subject_to federal_income_tax statutes and is liable for the deficiencies determined by r held further p is liable for the sec_6651l a i r c delinquency addition_to_tax for failure_to_file held further on the court’s own motion p is liable for a penalty in the amount of dollar_figure pursuant to sec_6673 i r c for asserting a frivolous and groundless position in this proceeding russell s greene pro_se mark a weiner for respondent memorandum opinion nims judge respondent determined the following deficiencies and additions to tax with respect to petitioner’s federal income taxes for the taxable years through taxable_income tax addition_to_tax year deficiency sec_6651 a dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number big_number after concessions the issues remaining for decision are whether petitioner failed to report income from wages nonemployee compensation interest dividends and capital_gain upon which petitioner is liable for individual federal income taxes whether petitioner is liable for self-employment taxes pursuant to sec_1401 on income earned in the form of nonemployee compensation and whether petitioner is liable for the sec_6651 a addition_to_tax for failure to timely file income_tax returns for the taxable years through unless otherwise indicated all section references are to sections of the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure this case was submitted fully stipulated and the facts are so found the stipulations of the parties with accompanying exhibit are incorporated herein by this reference background russell s greene resided in oxnard california at the time of filing his petition in this case petitioner maintains that he 1s not subject_to federal income taxes he did not file tax returns for the taxable years and he stipulated however to having received income from the following sources in the amounts and of the types stated payor type of income ventura county shuttle inc dollar_figure dollar_figure dollar_figure wages survival systems staffing big_number big_number center wages st bernarine of siena church big_number dollar_figure wages sandra jo ann nickerson big_number dollar_figure wages padre serra parish big_number nonemployee compensation st maximilian kolbe church big_number big_number big_number big_number nonemployee compensation patrick mcdonald paddy music nonemployee compensation st judes catholic church big_number nonemployee compensation chesne boren music nonemployee compensation bank of america interest atlantic financial federal savings bank interest jobee development company big_number big_number big_number dividend marvin goodson alvin duras - co-trustees capital_gain the amounts listed above as wages and nonemployee compensation were paid to petitioner in consideration of contractual services performed by him the amounts identified as interest dividend and capital_gain were likewise received by petitioner as personal earnings discussion petitioner contends that federal_income_tax statutes including sec_1 and may not constitutionally be applied to a private independent_contractor or citizen such as himself he argues that to subject persons who are not employees of a government-created or -sanctioned entity to the tax laws both contravenes the language of the statutes and constitutes a violation of due process he additionally claims that because he 1s contesting the power to tax rather than the amount of tax the burden_of_proof in this matter should rest upon respondent - - conversely respondent asserts that income received by petitioner is taxable pursuant to the explicit terms of the internal_revenue_code respondent further contends that petitioner’s constitutional arguments are without merit and as petitioner has presented no other evidence rebutting the determinations made by respondent the deficiencies and additions to tax should be sustained we agree with respondent that the federal_income_tax statutes are properly applicable to petitioner we therefore conclude that petitioner is liable for the deficiencies as determined by respondent and that petitioner’s failure_to_file income_tax returns justifies imposing the delinquency addition_to_tax as a threshold matter we observe that petitioner’s efforts to shift the burden_of_proof to respondent on constitutional grounds are meritless the burden_of_proof rests on the taxpayer except in certain situations not relevant here see rule a furthermore this burden_of_proof has been uniformly applied regardless of whether the taxpayer’s arguments addressed the amount or the constitutionality of the tax see eg 765_f2d_939 9th cir 82_tc_403 kish v commissioner tcmemo_1998_16 minguske v commissioner tcmemo_1997_573 frami v commissioner tcmemo_1997_509 fisher v commissioner tcmemo_1996_277 as a general_rule sec_1 and impose a federal tax on the taxable_income of every individual sec_61 defines gross_income for purposes of calculating such taxable_income as all income from whatever source derived and specifies that compensation_for services gains from dealings in property interest and dividends are included within this broad definition see sec 6l1 a sec_1401 then imposes an additional tax on the self- employment income of every individual both for old age survivors and disability insurance and for hospital insurance the term self-employment_income denotes net_earnings_from_self-employment sec_1402 net_earnings from self- employment in turn means the gross_income derived by an individual from any trade_or_business carried on by such individual less the deductions allowed by this subtitle which are attributable to such trade_or_business sec_1402 petitioner contends that private independent contractors and citizens are not properly included within the meaning of individual or person as used in the tax code and that to treat them as such contravenes the principles of due process in petitioner’s view only employees of government-created or - government--sanctioned entities may constitutionally be subjected to individual income_tax under petitioner’s theory the prohibited disparity results from taxing those whose income derives in some way from a legislatively authorized entity in the same manner as those who do not receive a similar benefit this court has repeatedly held taxpayers to be liable for taxes on income accruing from self-employment sole_proprietorship or nonemployee activities despite the tax_protester rhetoric advanced in contending for the opposite result see eg kish v commissioner supra minguske v commissioner supra frami v commissioner supra fisher v commissioner supra arguments by such individuals that they do not hold the status of taxpayer or person within the meaning of the internal_revenue_code have been summarily dismissed as well see eg kish v commissioner supra fisher v commissioner supra petitioner’s position is untenable since petitioner has offered no further evidence establishing that respondent’s determinations are erroneous we hold that petitioner is liable for the deficiencies as determined by respondent in addition sec_6651 provides in relevant part as follows - - sec_6651 fatlure to file tax_return or to pay tax a addition to the tax --in case of failure-- to file any return required under authority of subchapter_a of chapter on the date prescribed therefor determined with regard to any extension of time for filing unless it is shown that such failure is due to reasonable_cause and not due to willful neglect there shall be added to the amount_required_to_be_shown_as_tax on such return percent of the amount of such tax if the failure is for not more than month with an additional percent for each additional month or fraction thereof during which such failure continues not exceeding percent in the aggregate the supreme court has characterized the foregoing section as imposing a civil penalty to ensure timely filing of tax returns and as placing on the taxpayer the heavy burden of proving both that the failure did not result from ‘willful neglect ’ and that the failure was ‘due to reasonable cause’ in order to escape the penalty 469_us_241 willful neglect denotes a conscious intentional failure or reckless indifference id reasonable_cause correlates to ordinary business care and prudence id pincite n sec_301_6651-1 proced admin regs here petitioner did not file tax returns in or furthermore he has offered no reason for - - this failure_to_file other than his belief that income_tax could not constitutionally be imposed on his earnings in light of the extensive authority rejecting similar arguments we conclude that petitioner’s failure_to_file was not due to reasonable_cause we therefore hold that petitioner is liable for the sec_6651 delinquency addition_to_tax finally sec_6673 authorizes this court to impose a penalty on its own motion and reads in pertinent part sec_6673 sanctions and costs awarded by courts a tax_court proceedings ---- procedures instituted primarily for delay etc --whenever it appears to the tax_court that--- a proceedings before it have been instituted or maintained by the taxpayer primarily for delay b the taxpayer’s position in such proceeding is frivolous or groundless or c the taxpayer unreasonably failed to pursue available administrative remedies the tax_court in its decision may require the taxpayer to pay to the united_states a penalty not in excess of dollar_figure on this record we find that petitioner’s position is frivolous and groundless the body of case law unequivocally upholding the constitutionality of the income_tax statues and -- - rejecting countless tax_protester challenges thereto leaves petitioner’s contentions without merit or support accordingly a penalty is awarded to the united_states in the amount of dollar_figure to reflect the foregoing decision will be entered under rule