Public-Policy Rejection of an Offer-in-Compromise May Stand Despite Collectability Disputes When Undisputed Noncompliance Would Undermine Voluntary Compliance

I. Introduction

Case: Andrew Filipowski v. Commissioner of Internal Revenue (11th Cir. Sept. 2, 2026).
Posture: Petition for review of a U.S. Tax Court decision sustaining an IRS levy determination and affirming the IRS’s rejection of a taxpayer’s offer-in-compromise (“OIC”).
Parties: Andrew J. Filipowski (taxpayer/petitioner-appellant) vs. Commissioner of Internal Revenue (respondent-appellee).

The dispute arose from Filipowski’s attempt to settle approximately $140 million in assessed tax, penalties, and interest stemming from the 1999 tax year for $1.5 million. Although the IRS’s internal calculation suggested a reasonable collection potential (“RCP”) far below the total liability, the IRS rejected the OIC on public policy/effective tax administration grounds—concluding that acceptance would be detrimental to fair tax administration and could reduce voluntary compliance by the public.

The key appellate issues were (1) whether the IRS abused its discretion in rejecting the OIC on public policy grounds, and (2) whether alleged factual disputes about collectability and related details were “material” such that summary judgment for the Commissioner was improper.

II. Summary of the Opinion

The Eleventh Circuit affirmed the Tax Court’s grant of summary judgment to the Commissioner. The court held:

  • The IRS has broad discretion to accept or reject an OIC, including considering public policy and tax administration concerns.
  • The IRS did not abuse its discretion in rejecting Filipowski’s OIC on public policy grounds given the undisputed facts: (i) the liability originated in a tax shelter involving a “sham partnership,” (ii) the liability’s magnitude ($140 million), (iii) the extreme gap between the liability and the offer ($1.5 million), and (iv) a history of delinquent filing (2015–2018 returns filed only after IRS prompting).
  • Even if factual disputes existed regarding RCP inputs (e.g., alleged undisclosed assets, trust characterization, illness), those disputes were not material because the rejection rested on public policy concerns sufficiently supported by undisputed facts.

III. Analysis

A. Precedents Cited

The opinion’s reasoning is anchored in well-settled standards governing summary judgment, review of Tax Court decisions, and deference to IRS discretion in OIC determinations.

1. Roberts v. Comm’r, 329 F.3d 1224 (11th Cir. 2003) (per curiam)

  • Used for: The Eleventh Circuit’s de novo review of the Tax Court’s grant of summary judgment and application of the same legal standards as the Tax Court.
  • Influence here: Frames the appellate lens: the court independently assesses whether any genuine dispute of material fact exists and whether the IRS abused its discretion.

2. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986)

  • Used for: The definition of “material” facts—only disputes that could affect the outcome under governing law preclude summary judgment.
  • Influence here: Central to the holding: alleged errors in facts affecting RCP/collectability were immaterial because the dispositive ground was public policy, supported by undisputed facts.

3. Kendricks v. Comm’r, 124 T.C. 69 (2005)

  • Used for: When underlying tax liability is not contested in a CDP context, the Tax Court reviews IRS determinations for abuse of discretion.
  • Influence here: Establishes that the relevant question is not whether the IRS made the “best” decision, but whether it acted arbitrarily/capriciously or without sound basis.

4. Vinatieri v. Comm’r, 133 T.C. 392 (2009)

  • Used for: The abuse-of-discretion definition: arbitrary, capricious, or without sound basis in fact or law.
  • Influence here: Supplies the court’s evaluative benchmark; the panel concludes the public policy rationale had a sound factual basis.

5. Estate of Duncan v. Comm’r, 890 F.3d 192 (5th Cir. 2018)

  • Used for: Abuse-of-discretion review governs Appeals’ rejection of an OIC; the IRS generally declines offers below RCP.
  • Influence here: Reinforces the discretionary nature of OIC decisions and contextualizes that even where collectability is at issue, the IRS is not compelled to accept an offer.

6. Fargo v. Comm’r, 447 F.3d 706 (9th Cir. 2006)

  • Used for: Affirming public policy/effective tax administration considerations where the liability derived from tax shelters and where acceptance might harm compliance incentives.
  • Influence here: Provides a persuasive analog: the Eleventh Circuit cites Fargo to validate the notion that requiring fuller payment can promote compliance and careful tax behavior, especially in tax shelter contexts.

7. New Millennium Trading, LLC v. Comm’r, No. 06-tc-3439, 201 7 WL 891 30 (T.C. Jan. 10, 2017)

  • Used for: The factual predicate that the partnership was a “sham partnership” created solely for tax avoidance purposes.
  • Influence here: Anchors the “source” of the liability—an important factor supporting the IRS’s public policy rejection.

B. Legal Reasoning

1. The statutory/regulatory framework grants discretion and allows public policy considerations

  • 26 U.S.C. § 7122(a), (d) authorizes compromises and mandates guidelines. The implementing regulation 26 C.F.R. § 301.7122-1 identifies grounds for compromise (doubt as to liability, doubt as to collectability, and promotion of effective tax administration) and clarifies that acceptance/rejection is within IRS discretion.
  • Critically, 26 C.F.R. § 301.7122-1(b)(3)(iii) restricts “effective tax administration” compromises if acceptance would undermine compliance by taxpayers with the tax laws.
  • The court also points to Rev. Proc. 2003-71 § 6.03 (public policy/tax administration concerns) and the Internal Revenue Manual 5.8.7.7.2(2) (“rare” rejections on this basis) to explain the doctrine’s contours, while treating the regulation as the controlling legal authority.

2. Why the alleged factual errors did not matter (materiality)

Filipowski challenged several factual premises (e.g., characterization as a “high income non-filer,” mistaken belief about cryptocurrency, a small Canadian account, trust-related inferences, and the effect of Parkinson’s disease). The Eleventh Circuit treated these disputes as directed primarily at collectability/RCP—i.e., whether the IRS could collect more than the offered amount.

The decisive move in the opinion is to separate collectability from public policy as independent bases for rejecting an OIC. Even accepting that RCP disputes exist, the court held they are not “material” because:

  • The IRS acknowledged the RCP was far below the total liability, yet still rejected the offer as detrimental to fair tax administration.
  • The public policy rationale was supported by undisputed facts: the liability’s origin in a sham-tax-shelter structure, the enormous liability, the extremely low settlement offer relative to that liability, and repeated delinquent filing behavior.

Thus, under Anderson, the contested RCP details could not change the legal outcome: the rejection stands so long as the public policy basis is not arbitrary or capricious.

3. The court’s “sound basis” for public policy rejection

The opinion identifies a compliance-risk narrative: accepting a steep discount for a taxpayer whose liability stems from a sham partnership and whose later filing conduct was delinquent could reasonably “have a negative impact on compliance by the general public.” That conclusion is tied to the regulatory command that the IRS may not compromise if it would undermine compliance, and the statutory context that accepted OICs can be publicly inspected (26 U.S.C. § 6103(k)(1)), affecting public perception.

C. Impact

1. Reinforcing IRS latitude to deny OICs on public policy grounds even when RCP is low

The decision strengthens the practical lesson that a taxpayer’s inability to pay (even if credibly shown) does not guarantee acceptance of an OIC when the IRS articulates a supported public policy concern. In effect, the Eleventh Circuit confirms that “doubt as to collectability” is not the only axis; “effective tax administration” can independently justify denial.

2. Tightening summary-judgment pathways in CDP/OIC litigation

By holding that disputes over RCP inputs are not material when the denial rests on public policy supported by undisputed facts, the opinion offers the government a clearer route to summary judgment: taxpayers must identify disputes that bear on the actual stated basis for denial, not merely on collateral collectability calculations.

3. Special salience for tax shelter-derived liabilities and compliance history

The opinion signals that where liabilities arise from adjudicated sham structures (as in New Millennium Trading, LLC v. Comm’r), and the taxpayer exhibits later compliance lapses (delinquent filing), the IRS can credibly invoke broader compliance norms to deny substantial discounts. That may influence negotiation dynamics: taxpayers may need to address “tax administration” optics directly, not only present financial inability.

IV. Complex Concepts Simplified

  • Offer-in-Compromise (OIC): A proposal by a taxpayer to settle a tax debt for less than the full amount. The IRS may accept for reasons including inability to pay, but acceptance is discretionary.
  • Reasonable Collection Potential (RCP): The IRS’s estimate of what it can collect through available assets and future income. A low RCP can support an OIC, but does not compel acceptance if other concerns apply.
  • Effective tax administration / public policy rejection: The IRS may reject an offer if acceptance would undermine voluntary compliance—i.e., if it would send a message that materially weakens the public’s incentive to comply.
  • Collection Due Process (CDP) hearing (26 U.S.C. § 6330): A procedure allowing a taxpayer to challenge certain collection actions (like levies) and propose alternatives (installment agreements, OICs).
  • Abuse of discretion: A deferential standard. The court does not decide what it would do in the IRS’s place; it asks whether the IRS acted arbitrarily, capriciously, or without a sound factual/legal basis.
  • Material fact (summary judgment): A fact is “material” only if it could change the outcome under the controlling legal theory. Disputes that do not affect the dispositive ground for decision do not prevent summary judgment.
  • Sham partnership: A partnership arrangement found to lack economic substance and created primarily to generate tax benefits rather than real business activity.

V. Conclusion

Filipowski establishes a clear, litigation-significant rule within the Eleventh Circuit’s CDP/OIC jurisprudence: when the IRS rejects an OIC on public policy/effective tax administration grounds, alleged factual disputes about collectability and RCP calculations will not preclude summary judgment if undisputed facts provide a sound basis for concluding that acceptance would undermine voluntary compliance.

The decision underscores both the breadth of IRS discretion under 26 C.F.R. § 301.7122-1 and the importance of “tax administration optics” in high-dollar, tax-shelter-derived liabilities—particularly when coupled with a demonstrated pattern of noncompliance such as delinquent filing.