Collection Due Process (CDP) Decision Shows Why it Matters

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I am not a fan of CDP.  It makes little sense to me because, like many of the misguided provisions passed in the Revenue Reform Act of 1998, it creates a benefit for a small number of people at a high cost to the system of tax administration.

Les Book, my fellow blogger, and I met because of CDP.  In the fall of 1998, I served as the acting director of the General Litigation Division of Chief Counsel, IRS.  That division of the national office handled the sections of the Internal Revenue Code that dealt with collection of tax.  Most of the major changes to the Internal Revenue Code made in the Revenue Reform Act of 1998 impacted the Code sections controlled by the General Litigation Division.  (The functions of the General Litigation Division were subsequently reorganized into a larger division now called the Procedure and Administration Division.) The director of that division had recently left the Government, and I spent that fall working on the administrative issues necessary to address the many new Code provisions.  CDP headed the list.  Each day I spent a couple of hours with the person writing the regulations necessary to implement CDP by the six month anniversary of the passage of the CDP provisions.  The experience was interesting and intense.


As a result of that experience, I ended up on numerous panels around the country for the next year or so discussing the CDP provisions.  At that time Les was drafting an article on CDP.  We met at a conference where he asked me some questions, and we engaged in correspondence thereafter as part of his research of the issue.  That meeting led me to contact Les when I sought an academic position several years later and led to us becoming colleagues.  So, despite my dislike of CDP, my current wonderful job teaching at Villanova Law School traces right back to my work on the CDP regulations.

Professor Bryan Camp, who worked with me in the General Litigation Division of Chief Counsel, IRS immediately after the passage of the Revenue Reform Act of 1998, has written eloquently on why CDP fails in our tax system.  See his article here; but see Professor Book’s response here. Unlike Bryan, I do not have a sophisticated explanation for why I think CDP fails as a statutory scheme.  I just think it creates a system that wastes too much time and energy for the overall results produced.  I acknowledge that it can be very useful in certain situations and have used it to benefit my clients.  As an advocate I am happy to have it available to achieve certain results not easily achieved without it even though I think that a better system for achieving those results could have been crafted.

I have written with Carl Smith on the delays that exist in the CDP process and why those delays, in Appeals and at the Tax Court, seem inappropriate for a statute designed, ostensibly, for a speedy collection determination. See my previous articles here and here.  The Treasury Inspector General for Tax Administration has just issued another report on the handling of CDP cases by Appeals. See the report here.

At the ABA Tax Section meeting on September 21, 2013, I attended the program of the Pro Bono and Tax Clinic Committee where Les and Carl joined Nina Olson and Mary Gillum, a clinician with Legal Aid of Middle Tennessee and the Cumberlands, to discuss CDP issues focusing on remand of CDP cases.  This excellent presentation causes me to rethink my longstanding dislike of CDP.  Perhaps one day I will overcome my skepticism of CDP as a net benefit to the system of tax administration.

Remands of CDP cases made up about 8% of the Tax Court cases Carl and I sampled in our article on CDP cases in Tax Court.  Some remands resulted from the Court’s concerns about the handling of the cases while other remands stemmed from the request of the Chief Counsel attorney handling the case who saw something that did not sit right.  In my experience remands usually result in working out a failed situation and making it right.

Judge Lauber just entered an opinion remanding a CDP case.  He appears to have gotten it right where the Settlement Officer did not.  See Szekely v. Commissioner, (September 23, 2013). The taxpayer requested permission to submit an offer in compromise after discussing that possibility at the CDP hearing.  The Settlement Officer, who took four months to set the hearing after the taxpayer made the CDP request, only gave the taxpayer 14 days after the hearing to submit the offer in compromise.  The taxpayer submitted it about one week after the 14 day deadline.  Judge Lauber determined that the Settlement Officer needed to work with the taxpayer in this situation and not make a mechanical judgment based on an arbitrary deadline that bore no relationship to the time frame already passed before Appeals got to the case.

The timing issues discussed in this case reflect my experience with CDP cases.  As Carl and I mentioned in our article, Appeals does not quickly hold CDP hearings.  It typically takes months to get even a telephonic hearing with a Settlement Officer in a remote service center.  Yet, despite that fact that Appeals takes months to hold the hearing, Settlement Officers generally demand the taxpayer or the taxpayer’s representative to submit additional information in a very short time after the hearing.  Their time frame expectations for responses place a very heavy burden on an academic clinic such as the one I run because the delay in holding the hearing means the students who worked the case initially and requested the hearing have left the clinic.  The file has sat in our drawer for several months with nothing happening.  New students have been assigned who basically no nothing about the case and must come up to speed on a case they know nothing about.  The Settlement Officers may have tight deadlines for completion of the case which has sat in their inventory for some time prior to the scheduling of the hearing and may have internal pressures to finish the case quickly by the time of the scheduling of the hearing.  These pressures may drive their demands for unreasonable response times that burden taxpayers and representatives in these situations.

What will ultimately happen in the Szekely case remains unknown but the remand here signals willingness by the Tax Court to take a hard look at the CDP process and insure that a taxpayer willing to actively pursue their case receives a reasonable opportunity to do so.  This is a good procedural result which, I hope, will lead to a good substantive result for this taxpayer and the government.  Coming so soon after the excellent presentation, it serves to continue my rethinking of the CDP process.  Perhaps one day I will change my view.  For now, I continue to embrace the process for my clients in appropriate situations while holding my nose from a tax administration perspective.


  1. CDP affords people in economic distress to bring their circumstsnces to bear with the government. Regardless if they are at fault or not, CDP is the fairest method for the full spectrum of taxpayers. Very few people actually use CDP, but my experience is that of those who do, really need the CDP hearing.

    • I agree that CDP does provide relief for those in distress trying to deal with the IRS on a collection matter. It is hard to tell whether a procedure works based solely upon the litigation results. Taxpayers have such a low success rate in CDP litigation that perhaps the litigated cases skew the benefits of this system much like the litigation rates skew the benefits of financial disability. When I worked at Chief Counsel, IRS, we saw many many CDP cases that did not seem meritorious. Used appropropriately, as you describe, it offers a significant and appropriate opportunity. Used inappropriately, it gloms up the system needlessly wasting resources that could be devoted to helping people with problems or collecting from delinquent individuals with the ability to pay.

  2. Robert E. Boyer, CPA, EA says

    CDP can work, the problem is with an Appeals Office that is significantly undermanned and forced to follow arbitrary deadlines and often managed by those that either have never done the job or couldn’t do the job. I had been an Appeals Officer for 20 years before I retired and know the work and the demands, most Appeals Officers and Settlement Officers really want to work with the taxpayer and get a good solution to the case, unfortunately the large volume of their inventory, and the often artificail deadlines impossed on them often lead to the wrong answer due to a “shove it out the door mentality” on the part of Appeals upper maagement. GET APPEALS THE STAFFING IT NEEDS SO THAT IT CAN DO IT’S JOB!

    • I agree that staffing is a problem at many offices within the Service including Appeals. It is possible to make an argument that Appeals was doing too good a job settling disputes prior to 1998 and that is why Congress placed upon that office the responsbility for CDP and other initiatives. Since 1998, Appeals has struggled to respond to the increase in volume caused by CDP and the other programs. Perhaps these programs were added at a time when new resources were unavailable and that has led to precisely the problem you identify. I think that Appeals has had the opportunity during some parts of the 15 years since CDP came into existence to build a more responsive system than they have built and that is what Carl Smith and I discussed in the article we wrote about the timeliness of the handling of CDP cases in Appeals. Your point, however, deserves consideration whenever anyone looks at the performance of an office to whom additional responsibilities were given without necessarily receiving the necessary additional resources.

  3. Professor Fogg could not be more accurate. The system costs way too much for the value provided. I cannot imagine being a Tax Court judge and having to deal with CDP appeals.

    That said, CDP Hearings serve the singular purpose of being the most efficient procedural tool to begin a review of an OIC or an installment agreement.

    For most tax liabilities in CDP cases,most OICs and partial payment agreements, a bankrutpcy proceeding provides much more bang for the buck than a CDP hearing and a Tax Court appeal. A very well oiled system, designed to deal with all unpaid liabilities. What’s not to love?

    Of course that assumes that most CDP cases involve stale taxes, and generally speaking they do. Even if not stale, the tax liability can be litigated in a bankruptcy court as to liability, without payment, as long as some payment (however small) will be made to creditors, or you use a Chapter 13.

    Just can’t get the tax guys to walk over (actually you file electronically) to the Bankruptcy Court, a foreign entity; but what a great place to try a tax case.

    Be Well!

    • Bob’s advertisement for bankruptcy deserves consideration in many tax collection cases in which the taxes are “old.” Some individuals spend lots of time and effort trying to work with the Service when bankruptcy could eliminate the tax debts quickly.

      • Dead On!!
        And even with the new tax liabilities, Chapters 13 and 11 have delightful payment options. Much less expensive than OIC’s.
        Most importantly, disputing a tax liability before a bankruptcy judge truly provides the most favorable judicial posture.

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