United States Court of Appeals for the Federal Circuit ______________________

VENSURE HR, INC., Plaintiff-Appellant

v.

UNITED STATES, Defendant-Appellee ______________________

2023-1640 ______________________

Appeal from the United States Court of Federal Claims in No. 1:20-cv-00728-PEC, Judge Patricia E. Campbell- Smith. ______________________

Decided: October 4, 2024 ______________________

RIC HULSHOFF, Ric Hulshoff Attorney at Law, PLLC, Henderson, NV, argued for plaintiff-appellant. Also repre- sented by JASON M. SILVER, Silver Law, PLC, Scottsdale, AZ.

ISAAC B. ROSENBERG, Tax Division, United States De- partment of Justice, Washington, DC, argued for defend- ant-appellee. Also represented by BRUCE R. ELLISEN, DAVID A. HUBBERT. ______________________

Before PROST, CLEVENGER, and CHEN, Circuit Judges. Case: 23-1640 Document: 43 Page: 2 Filed: 10/04/2024

2 VENSURE HR, INC. v. US

PROST, Circuit Judge. Vensure HR, Inc. (“Vensure”) appeals the final judg- ment of the U.S. Court of Federal Claims dismissing Ven- sure’s complaint for failing to state a claim upon which relief could be granted. Vensure HR, Inc. v. United States, 164 Fed. Cl. 276 (2023) (“Decision”). This case involves the procedural mechanisms for filing a tax refund for penalties under the Internal Revenue Code. Vensure filed certain tax-penalty-refund claims, which the Internal Revenue Service (“IRS”) denied on their merits. Then, when Vensure filed a complaint in the Court of Federal Claims, the IRS sought to dismiss the complaint based on a procedural flaw with Vensure’s claims—namely, that Vensure had failed to “attach” a power of attorney to those claims. Despite having already filed two powers of attorney that potentially covered these tax claims, the Court of Federal Claims dismissed Vensure’s case on the sole basis that a power of attorney was not “attached” to the claims at the time of filing. The question before us is whether the regulation that requires a power of attorney to “accompany” a claim is an explicit statutory requirement, which cannot be waived, or is purely regulatory in nature and thus waivable. We conclude that 26 C.F.R. § 301.6402-2(e)’s requirement that “a power of attorney must accompany the claim” is regulatory and not statutory. Therefore, this requirement may be waived by the IRS in certain circumstances. In other words, while the IRS may demand strict compliance with its regulations, when it fails to do so, and instead addresses a claim on its merits, the requirement may be waived. For the reasons below, we va- cate and remand for further proceedings. BACKGROUND I Vensure is a professional-employer organization that provides other companies with services to outsource Case: 23-1640 Document: 43 Page: 3 Filed: 10/04/2024

VENSURE HR, INC. v. US 3

employee-management tasks, including payroll and tax re- porting services. As part of the tax reporting services, Ven- sure withholds, reports, and pays employment-related taxes on behalf of companies to the IRS. In the second quarter of 2014, Vensure reported and paid employment taxes. Believing those payments to be an overpayment of more than $3.7 million, Vensure filed tax refund claims with the IRS in October 2014 and June 2015.1 App’x 61.2 Vensure alleges that these overpay- ments “led to Vensure’s inability to timely pay” taxes for later periods. App’x 62. As a result of the belated pay- ments, the IRS assessed tax penalties amounting to more than $1.5 million. App’x 47. Ven