Tax Court Blocks IRS Levy in Restitution-Based Assessment Dispute

Tax Court Halts IRS Levy: $1.2 Million Restitution Dispute Resolved in Taxpayer’s Favor

The U.S. Tax Court has sided with Pennsylvania electrical contractor Joseph White, ruling that the IRS abused its discretion by attempting to levy $1.1 million in unpaid restitution-based assessments (RBAs) while a prior Department of Justice (DOJ) settlement was still in force. In a precedential memorandum opinion filed June 29, 2026, Judge Lauber held that the IRS’s collection action conflicted with the terms of a 2023 DOJ settlement that had reduced White’s $1.89 million tax liability to judgment under a structured payment plan. The decision marks a rare instance in which the Tax Court exercised its authority to block an IRS levy based on inconsistency with a separate legal resolution, underscoring the court’s willingness to police the boundaries of IRS collection power when it clashes with other federal judgments.

The ruling carries broader implications for taxpayers facing RBAs under Section 6201(a)(4), which authorizes the IRS to assess and collect criminal restitution for unpaid taxes as if it were a civil tax liability. The court’s intervention sends a clear signal that RBAs—while statutorily valid—are not immune from judicial scrutiny when the IRS’s collection actions undermine prior settlements or judgments. For practitioners, the case highlights the strategic importance of coordinating criminal restitution orders with civil settlements to avoid conflicting collection efforts.

The Story: A Decade of Tax Evasion, Criminal Conviction, and Restitution

Joseph White’s financial reckoning began quietly in the early 2000s, when he earned substantial income as an electrical contractor in Pennsylvania but failed to file federal tax returns for nine consecutive years. From 2000 through 2008, White’s delinquency went unchecked—until August 6, 2009, when he belatedly filed returns for those years at the insistence of attorneys handling his contentious divorce. Even then, he enclosed no payment for the tax liabilities reported, leaving the IRS to assess the unpaid balances, plus interest and additions to tax for failure to timely file, failure to timely pay, and failure to pay estimated tax under §§ 6651(a)(1) and (2), 6654. The IRS’s assessments for 2000–2008 totaled $962,292, a figure that ballooned with penalties and interest as White continued to evade payment.

The IRS’s collection efforts met with resistance. In June 2010, White requested a Collection Due Process (CDP) equivalent hearing for tax years 2000–2008, initially seeking an installment agreement. To support his request, he submitted a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, which contained materially false statements about his assets and liabilities. The IRS denied his request and, on October 4, 2010, he submitted an offer-in-compromise (OIC) for tax years 2000–2009, citing “doubt as to collectibility.” When he failed to provide requested documentation about his finances, the IRS rejected the OIC on March 7, 2011.

White’s evasion tactics escalated. Throughout this period, he secretly diverted money from two corporations for personal use, further depleting resources that could have satisfied his tax obligations. On March 13, 2014, he filed for bankruptcy, forcing the IRS to suspend collection activity. The bankruptcy court, however, saw through his maneuver. On June 2, 2016, the court dismissed his case with prejudice, finding that White had filed the petition and proceeded in bad faith.

The legal consequences caught up with White on January 13, 2016, when the U.S. Department of Justice filed a Criminal Information in the Eastern District of Pennsylvania, charging him with violating § 7201, which criminalizes willful attempts to evade or defeat tax. The government alleged that White had willfully attempted to evade payment of taxes owed for 2000 through 2011 by diverting corporate funds for personal consumption, concealing gambling income, and employing other deceptive tactics. On May 2, 2016, White pleaded guilty to the charge.

At his sentencing hearing on February 1, 2017, White and prosecutors agreed that the principal tax due for 2000–2011 was $748,000. When interest and penalties were added, the total tax loss to the government was approximately $1.2 million. On February 3, 2017, the district court entered judgment on White’s plea, sentencing him to 24 months in prison followed by three years of supervised release. As part of his sentence, the court ordered White to pay $1.2 million in restitution to the IRS under 18 U.S.C. § 3663(a)(3), finding that the government had incurred a tax loss of that amount. The court waived interest on the restitution, citing White’s inability to pay, and ordered him to begin making $250 monthly payments to the IRS 30 days after his release. He was released from prison early on December 28, 2018.

On April 27, 2017, the IRS acted under § 6201(a)(4), which authorizes the assessment of criminal restitution for unpaid taxes as if it were a civil tax liability. The agency made restitution-based assessments (RBAs) totaling $1.2 million against White—the exact amount of the court-ordered restitution. More than five years later, the IRS sent White a levy notice for tax years 2001 through 2011, seeking $1,101,788, the unpaid portion of the RBA. In response, White timely filed Form 12153, requesting a Collection Due Process or equivalent hearing and checking the box for an installment agreement. In an attachment, he demanded “verification of assessments for all years,” challenged the tax liabilities, penalties, and interest, and proposed a “partial pay installment agreement in the amount of $5,000 per month.” The case was assigned to a settlement officer from Appeals, and a telephone conference was scheduled for May 24, 2023—setting the stage for the dispute that would ultimately reach the Tax Court.

The DOJ Settlement: A Compromise on $1.8 Million in Tax Liabilities

In September 2022, the Department of Justice initiated a civil lawsuit under § 6502 to reduce to judgment petitioner Joseph White’s unpaid Federal income tax liabilities for 2000–2011. By August 21, 2023, those liabilities—including tax, penalties, and interest—had grown to $1,893,404. The IRS had previously assessed White’s tax liabilities for those years, and the accrual of interest and additions to tax after his 2017 criminal conviction had further increased the total.

On September 29, 2023, the DOJ and White’s counsel reached a settlement agreement. Under the terms of the compromise, White consented to a judgment in the amount of $1,893,403.87 as of August 21, 2023, plus statutory interest that would continue to accrue until the liability was paid in full. In exchange, the DOJ agreed to treat the judgment as fully satisfied if White paid a total of $1.6 million by July 1, 2027, under a structured payment plan.

The payment plan required White to make monthly payments of $4,000 in November and December 2023, followed by quarterly payments of $108,000 through June 1, 2027, with a final payment of $80,000 due on July 1, 2027. The agreement explicitly stated that if White failed to make any payment as scheduled, the United States would be entitled to collect the full judgment amount. The Federal district court entered judgment consistent with the settlement on October 2, 2023.

White has complied fully with the payment plan. From November 2023 to the present, he has made the required $4,000 monthly payments and additional $96,000 quarterly payments. As of March 2, 2026, he had made payments totaling nearly $1 million toward his 2000–2011 income tax liabilities. The settlement represented a compromise on the full amount claimed by the DOJ, reflecting both the original tax liabilities and the accrued interest and penalties.

The IRS’s Levy: A Clash with the DOJ Settlement

The IRS issued a levy notice on White for $1,101,788—the unpaid portion of the $1.2 million restitution-based assessment (RBA) under § 6201(a)(4), which authorizes the IRS to assess and collect criminal restitution for unpaid taxes as if it were a civil tax liability. White responded by requesting a Collection Due Process (CDP) hearing under § 6330(d)(1), arguing that the levy was inconsistent with the DOJ’s civil settlement agreement finalized in October 2023.

The IRS took the position that the RBA was a separate liability from the civil tax assessments covered by the DOJ settlement. Appeals sustained the levy, asserting that the DOJ’s judgment did not include the RBA because the IRS had withdrawn it from the DOJ’s referral. The IRS further contended that White could not challenge the RBA’s validity in the CDP hearing, citing § 6201(a)(4)(C), which bars challenges to the underlying liability for restitution-based assessments. White countered that the levy would result in duplicative taxation, as the DOJ settlement already compromised the civil tax liabilities for 2000–2011, and the IRS’s attempt to collect the RBA would effectively double-count the same tax debt.

The Court’s Analysis: Why the IRS’s Levy Was an Abuse of Discretion

The court held that the IRS’s levy action constituted an abuse of discretion under § 6330(c)(3), which requires the IRS to balance the need for efficient tax collection with the taxpayer’s legitimate concern that any collection action be no more intrusive than necessary. The court’s conclusion rested on two critical findings: first, that the levy would have allowed the IRS to collect White’s entire remaining balance immediately, directly conflicting with the DOJ settlement’s installment plan; and second, that the restitution-based assessments (RBAs) were not separate liabilities but merely a different collection mechanism for the same tax debts.

The analysis began with the standard of review. Under § 6330(d)(1), the Tax Court reviews IRS collection determinations for abuse of discretion when the taxpayer does not challenge the underlying liability. Here, White could not challenge the RBAs’ validity because § 6201(a)(4)(C) explicitly bars such challenges in CDP hearings. That section provides that “the amount of such restitution may not be challenged by the person against whom assessed on the basis of the existence or amount of the underlying tax liability in any proceeding authorized under this title.” The court emphasized that this restriction is absolute: White’s underlying civil tax liabilities for 2000–2011 had been converted into RBAs, and the Tax Court lacked jurisdiction to revisit their validity. The only question before the court was whether the IRS’s levy action was an abuse of discretion.

The court then turned to the merits. It first rejected White’s argument that the levy would result in duplicative taxation. While acknowledging that the RBAs and civil tax liabilities were distinct in form, the court found they were functionally identical in substance. The RBAs were calculated to match White’s unpaid 2000–2011 tax liabilities as of February 2017, and the IRS conceded that any payments toward restitution would be credited to those tax years. Thus, no double collection would occur if the levy were enforced—payments would simply be applied to the same debts twice, which the court deemed permissible under the statutory framework.

However, the court sided with White on the far more consequential issue: the levy’s timing and its clash with the DOJ settlement. The settlement, executed in September 2023, required White to pay $1.6 million by July 2027 in monthly installments, with the government agreeing to take no further collection action for the 2000–2011 liabilities if he complied. By May 2025, White had paid nearly $1 million under this plan, reducing his balance to roughly $600,000. The IRS’s proposed levy, for $1,101,788, would have allowed it to seize funds immediately—far exceeding White’s then-current balance and the DOJ’s structured payment terms. The court found this timing inconsistent with the settlement’s purpose of providing White with manageable payment terms over several years.

Most critically, the court determined that the settlement’s terms were binding on the IRS. The DOJ’s agreement to refrain from further collection action was a judicial resolution of the civil tax liabilities, and the IRS’s attempt to levy White’s assets undermined that compromise. The court held that the settlement was not merely a private agreement but a judicial resolution that the IRS was obligated to respect. By pursuing the levy, the IRS effectively sought to collect the same debts twice—once through the DOJ’s installment plan and again through immediate seizure—despite the government’s prior commitment to the contrary.

The court also faulted the IRS’s failure to consider White’s compliance with the DOJ settlement. The settlement officer (SO) did not mention White’s monthly payments in the CDP hearing, nor did the IRS dispute White’s representation that he had made every payment due under the plan. The levy amount, $1,101,788, exceeded White’s remaining balance by over $500,000, demonstrating that the IRS was not merely seeking to collect the unpaid tax but to extract an additional penalty. The court concluded that the SO had not balanced the need for efficient collection with White’s legitimate concern about intrusiveness, as required by § 6330(c)(3). The levy was not the least intrusive means of collecting the tax; it was, in fact, the most intrusive, given the existence of a structured, court-approved payment plan.

In short, the court found that the IRS’s actions were arbitrary and capricious. The levy served no legitimate collection purpose beyond undermining the DOJ settlement, and it disregarded White’s demonstrated compliance with the payment plan. The court emphasized that while the IRS has broad discretion in collection matters, it is not unbounded. When that discretion is exercised in a manner that conflicts with a prior judicial resolution or imposes undue hardship without justification, the Tax Court will intervene. The decision marks a significant assertion of judicial oversight over IRS collection actions, particularly where they clash with other government settlements.

What This Means for Taxpayers: Restitution-Based Assessments and Settlement Agreements

The Tax Court’s ruling in White v. Commissioner marks a pivotal moment for taxpayers facing restitution-based assessments (RBAs) and DOJ settlements, signaling that the court will not tolerate IRS collection actions that undermine other legal resolutions. Practitioners must now recognize that RBAs are not standalone liabilities but alternative collection mechanisms tied to criminal restitution orders. The decision underscores that settlements with the DOJ—whether through plea agreements or deferred prosecution—can restrict the IRS’s ability to pursue aggressive levies, particularly when those actions conflict with structured payment plans.

The court’s emphasis on § 6330(c)(3)—which requires the IRS to balance efficient tax collection with the least intrusive means—serves as a warning to the agency that its discretion is not absolute. Taxpayers with criminal tax convictions should scrutinize any DOJ settlement for explicit language waiving tax-related restitution or civil liabilities. Silence in a settlement agreement does not shield the IRS from assessing an RBA, but it may provide grounds to challenge subsequent collection actions in Tax Court. The ruling also reinforces that practitioners must treat RBAs as part of a broader legal framework, where criminal restitution orders, civil assessments, and settlement agreements interact in ways that can limit the IRS’s enforcement power.

For future taxpayers, this decision means that strategic negotiation in criminal cases—whether through restitution amounts that align with actual tax liabilities or DOJ settlements that preempt IRS collection—can be as critical as post-conviction tax planning. The Tax Court’s willingness to intervene when IRS actions clash with prior judicial resolutions suggests that taxpayers now have a powerful tool to prevent undue hardship, provided they act swiftly to challenge levies that disregard existing legal agreements.