## Facts

- W. Richard Morgan and Janice J. Morgan incurred federal income tax deficiencies for 1981–1983 stemming from investments in a tax shelter later disallowed by the IRS.
- After the Morgans filed for bankruptcy, the bankruptcy court ruled (1) the 1981 and 1982 tax liabilities were not dischargeable, (2) the 1983 tax liability was discharged as a personal obligation, but (3) the IRS could still collect the 1983 liability from exempt assets, limited to a pension plan held in W. Richard Morgan’s name.
- In 1995, Morgan submitted an offer-in-compromise that the IRS rejected.
- In 1998, Revenue Officer Elizabeth Cooper pursued collection and issued a wage levy; she also wrote that the 1983 liability was “in the process of getting it abated.”
- On June 4, 1998, Morgan and the IRS executed an installment agreement covering only the 1981 and 1982 liabilities; both sides believed the 1983 liability would be abated.
- The IRS later decided not to abate the 1983 liability and began collection activity on that year, including levy action.
- The IRS Office of Appeals concluded the IRS could not levy for 1981–1982 but could proceed to collect the 1983 liability; the Tax Court rejected Morgan’s equitable estoppel argument and sustained collection for 1983.
- Morgan appealed, asserting the IRS should be equitably estopped from collecting the 1983 liability based on Cooper’s communications and Morgan’s reliance.

## Issues

1. Whether the IRS was equitably estopped from collecting Morgan’s 1983 tax liability based on a revenue officer’s statement that abatement was underway and Morgan’s installment agreement covering only 1981–1982.
2. Whether Morgan proved the additional requirement for estoppel against the United States: affirmative misconduct by government officials.

## Decision

- The Eighth Circuit affirmed the Tax Court.
- The court held the IRS was not equitably estopped from collecting the 1983 tax liability.
- Morgan failed to show affirmative misconduct, and the record did not support reasonable, detrimental reliance sufficient to estop the government.

## Legal Principles

- Equitable estoppel against the United States is disfavored and requires both the traditional estoppel elements and a showing of affirmative misconduct by government agents.
- Affirmative misconduct requires more than mistake, misunderstanding, negligent misstatement, or a later change in agency position; it generally entails deliberate deception, concealment, or comparable wrongdoing.
- Informal communications by IRS personnel about anticipated administrative action do not, without clear authority and formalization, constitute a binding commitment that forecloses collection of a valid tax liability.
- An installment agreement limited to specified tax years does not bar collection of other assessed liabilities absent explicit terms to that effect.
- The public interest in collection of lawfully assessed taxes weighs against applying estoppel to prevent enforcement absent egregious government conduct.

## Conclusion

The Eighth Circuit held that a revenue officer’s good-faith statement that abatement was being pursued, and a related installment agreement covering different tax years, did not amount to affirmative misconduct or create a binding promise that could equitably estop the IRS from collecting Morgan’s 1983 tax liability.


Morgan v. Comm’r of Internal Revenue, 345 F.3d 563 (8th Cir. 2003)