We have previously written about the case of Byers v Commissioner, a collection due process (CDP) case on appeal at the DC Circuit. The case considers what is the proper venue for appeals challenging Tax Court CDP decisions. Guest blogger Carlton Smith wrote a detailed post discussing the case, and Keith wrote a piece discussing appellate venue in nondeficiency Tax Court cases. The DC circuit decided the case today. The court agreed with the taxpayer that the proper venue was the DC Circuit Court of Appeals, but found for the IRS on the merits and sustained the determination of the Tax Court. The case is of great significance, as it will channel non-liability CDP cases exclusively to the DC Circuit and free the Tax Court to apply its rules allowing parties to supplement the record in CDP cases.
I will focus on the court’s analysis of venue under Section 7482.read more...
Byers essentially held that in CDP cases where there is no challenge to the underlying liability, venue for an appeal is the DC Circuit Court of Appeals, unless the parties stipulate otherwise. For CDP cases where there is a mixed question of liability and collection matters, or a CDP case where there is solely a question as to the amount or existence of an underlying liability, venue for individuals would likely be tied to the legal residence of the taxpayer at the time of filing the petition, or, if a corporation, the principal place of business or principal office or agency of the corporation.
Here is how the court framed the venue issue:
The Internal Revenue Manual clearly states that “none of subparagraphs (A)-(F) [in 26 U.S.C. § 7482(b)(1)] expressly mentions a decision in a CDP case.” IRM 22.214.171.124(1). We agree with this characterization of the statute, which makes the Commissioner’s motion to transfer all the more puzzling. The statute’s plain language says that, “[i]f for any reason no subparagraph of the preceding sentence applies, then [Tax Court] decisions may be reviewed by the Court of Appeals for the District of Columbia.” 26 U.S.C. § 7482(b)(1). Because none of the subparagraphs expressly mentions a decision in a CDP case, this catch-all provision applies, and venue lies in this court. As such, venue cannot be proper in the Eighth Circuit unless the parties so stipulate in writing. Id. § 7482(b)(2). Appellant timely filed his appeal in this court and he has not acceded to the IRS’s request to transfer the case. Therefore, venue in this court is proper.
The court rejected the government’s arguments, mainly on the basis that they conflicted with the plain language of 7482. On the impracticality of the rule given that CDP cases often involve both questions of liability and collection matters, the court stated that
[i]n such cases, venue may not be proper in the D.C. Circuit. But this possibility does not justify shoehorning all CDP cases into the redetermination venue provision. Just as we see in this case, it normally will be obvious from the taxpayer’s statement of the issues whether an appeal involves a challenge to a redetermination decision, a CDP decision on a collection method, or both. Therefore, it will not be difficult for this court to distinguish between the two types of cases to determine whether venue is proper in the D.C. Circuit.
I suspect that the bifurcating of CDP appeals along this line will lead to some complexity for the Tax Court, especially when it may not be so clear whether the taxpayer has the right to challenge the liability in the CDP proceeding. I note—as we previously blogged, there is proposed legislation in Senator Baucus’s administrative reforms that would clarify that venue for appeals involving CDP and spousal relief would follow the general residency rules applicable to appeals involving redetermination of tax liabilities. There may be some momentum for a congressional fix, as in Byers the DC Circuit told the IRS that its views were better told to the legislature:
Excluding a few exceptions that are not relevant here, the plain text of § 7482(b)(1) says that the proper venue to seek review of a Tax Court decision lies in the D.C. Circuit unless one of the circumstances enumerated in subparagraphs (A)-(F) applies. If the IRS believes that compliance with the statute as written will result in “undesirable consequences,” then it must “take its concerns to Congress.”
The DC Circuit seemed to recognize that taxpayers may improperly file appeals to the wrong circuit, though it declined to express a view as to whether an appeal would effectively serve as a stipulation, stating that it has “no occasion to decide in this case whether a taxpayer who is seeking review of a CDP decision on a collection method may file in a court of appeals other than the D.C. Circuit if the parties have not stipulated to venue in another circuit.”
Some Parting Thoughts
As Carl observed in his post, the short-term importance of the decision is that in collection CDP cases, the Tax Court in CDP cases can follow its rule in Robinette, essentially allowing in appropriate circumstances the taxpayer to supplement the record. I suspect there will be some messy cases where it is unclear if the CDP case properly raises liability issues, leaving the Tax Court in a difficult situation as it tries to determine which circuit’s law controls.
As to the Tax Court being free to follow its approach in Robinette, as I have previously stated I am not sure that the Tax Court approach is best as a policy matter. Yet Byers certainly opens the door to greater opportunity for court decisions that will take into account individual circumstances notwithstanding the limited nature of CDP court review. I believe that the case is of broader significance. Channeling CDP appeals to the DC Circuit is consistent with court review of federal agency actions generally. The DC Circuit is the court most used to providing oversight over federal agencies. As we move away from tax exceptionalism, shouldn’t the IRS be subjected court review in a manner consistent with most other federal agencies? Given the importance of CDP—and other nonliability matters that are now likely to have appellate venue in the DC Circuit– the Byers approach is likely to lead to greater uniformity and consistency. As Jack Townsend stated in a recent post here
where the appeal must be taken under the default provision to the Court of Appeals for the District of Columbia, a uniform rule will apply. For example, if the taxpayer pursues a CDP remedy in the Tax Court, the Golsen result for the Court of Appeals for the District of Columbia will apply to all – taxpayers and the Government alike. In some ways, on this issue, the Court of Appeals for the District of Columbia will become the court of tax appeals that various practitioners and scholars have argued for and against over many years.
I do think, however, that CDP cases that mix challenges to collection procedures or considerations of collection alternatives and questions of liability will create additional complexity and confusion for the Tax Court. As I state above, Senator Baucus’ reform proposals from last year would treat CDP and spousal relief cases as subject to the general venue rules that apply to appeals involving redeterminations of tax. I think a better fix would be to give the DC Circuit exclusive jurisdiction over most nondeficiency Tax Court determinations. At a minimum, there should be an informed and reasoned debate about the merits of the venue rules. Our tax system has changed considerably over the years, with many more rights given to taxpayers, additional responsibilities for the Tax Court, and a growing awareness that the IRS is not so different from other federal agencies. Perhaps Byers will trigger a review of which court should as a policy matter hear appeals in many of the types of cases the Tax Court considers.