There are some interesting developments percolating in Congress. In addition to a hearing today which features former Senators Bradley and Packwood and is meant to highlight lessons on tax reform from the 86 Tax Reform Act, Congress is considering a few procedural issues in less controversial bills. Specifically the Senate Finance Committee has scheduled for tomorrow a mark up of a number of relatively noncontroversial measures, including a grab bag of procedural provisions.
The Joint Committee has summarized those measures, under a title that pegs the changes to proposals relating to access and administration of the Tax Court. I have not yet seen language in the bill, but there are three items in particular that have received a fair bit of coverage in Procedurally Taxing over the past year. These items relate to venue of appeals of CDP cases, interest abatement disputes and the fallout from last year’s Kuretski litigation.
read more...Venue
One of the proposals addresses the venue issue for CDP and innocent spouse cases we have discussed previously in the context of last year’s DC Circuit Byers case. The Joint Committee summary states that the provision “amends section 7482(b) to clarify that Tax Court decisions rendered in cases involving petitions under sections 6015, 6320, or 6330 follow the generally applicable rule for appellate review. That rule provides that the cases are appealable to the U.S. Court of Appeals for the circuit in which is located the petitioner’s legal residence in the case of an individual or the petitioner’s principal place of business or principal office of agency in the case of an entity other than an individual.”
I am not sure that I agree with the notion that this is a clarification of current law; seems to me the DC Circuit’s analysis in Byers is persuasive that venue absent a legislative change for CDP cases not involving liability issues is the DC Circuit irrespective of the petitioner’s residence. Be that as it may, this will bring some certainty into an area that could use some certainty.
Interest Abatement
The Joint Committee also summarizes a proposal that would provide that a taxpayer can petition Tax Court even in the absence of a determination 180 days after an abatement request; a separate proposal would allow a taxpayer to elect small case procedures for abatement requests when the “total amount of interest for which abatement is sought does not exceed $50,000.”
Kuretski , or Where Does the Tax Court Belong?
We and others have discussed Kuretski and related cases on numerous occasions this past year. The Joint Committee indicates that the bill Senate Finance is considering would purport to essentially attempt to overturn the DC Court of Appeals holding that found (at least for some purposes) that the Tax Court is part of the Executive Branch. Here is the entire language (absent footnotes though we did enjoy that the Joint Committee Report dropped a footnote to Procedurally Taxing in its description):
Present Law
The Tax Court was created in 1969 as a court of record established under Article I of the U.S. Constitution with jurisdiction over tax matters as conferred upon it under the Code. It superseded an independent agency of the Executive Branch known as the Tax Court of the United States, which itself superseded the Board of Tax Appeals.
As judges of an Article I court, Tax Court judges do not have lifetime tenure nor do they enjoy the salary protection afforded judges in Article III courts. They are subject to removal only for cause, by the President. The authority to remove a judge for cause was the basis for a recent unsuccessful challenge to an order of the Tax Court, in which the taxpayer claimed that the removal authority was an unconstitutional interference of the executive branch with the exercise of judicial powers. In rejecting that challenge, the Court of Appeals for the District of Columbia held that the Tax Court is not part of the Article III Judicial Branch and is an independent Executive Branch agency, while acknowledging that the Tax Court is a “court of law” for purposes of the Appointments Clause.
Description of Proposal
The proposal clarifies that the Tax Court is not within the Executive Branch.
Effective Date
The provision is effective upon the date of enactment.
I will reserve comment on this proposal until I see the bill.
For those interested in this issue, and the confusion as to where the Tax Court fits, I commend readers to an excellent piece called Where the Bough Breaks: The U.S. Tax Court’s Branch Difficulties by Professor Leandra Lederman in the recent ABA Tax Section Newsquarterly. Professor Lederman is one of the (if not the) top tax procedure scholars in the country. This entertaining and well-researched piece shows how schizophrenic the government itself has been in describing where the Tax Court belongs.
About Leslie Book
I don’t mind the overruling of Byers on CDP appellate venue if Congress also fixes the problem that got me arguing for the Byers venue position: The administrative record rule in CDP cases in Tax Court. The Tax Court holds that it can supplement the administrative record, while the 1st, 8th, and 9th Cirs. hold that it can’t. Directing CDP case venue to the D.C. Cir., which has not expressed itself on this administrative record issue, allows the Tax Court currently to ignore the three regional Court of Appeals rulings (at least in cases where there is no challenge to the underlying liability). Why can’t we also then, at the same time amend 6630(d)(1)’s jurisdictional grant to the Tax Court to clarify that the proceeding in the Tax Court allows supplementing the administrative record — i.e., statutorily adopting the Tax Court’s position?
I also think Keith has discussed on PT the issue of the failure of the IRC to contain tolling provisions for CDP cases under 6330(d)(1) and innocent spouse cases under 6330(e)(1)(like the tolling that applies to filing for deficiency cases) where the IRS issues a notice of determination during a bankruptcy case and the bankruptcy Code stays any filing in the Tax Court while the bankruptcy case is open. This can lead to people getting CDP and innocent spouse notices from the IRS that they are never able to contest by filing a Tax Court petition before the 30 days or 90 days runs. The proposed legislation would put in similar tolling for CDP and innocent spouse case filings.
Please let the U.S. Senate’s legislative proposal to override the Byers CDP venue opinion die on the vine. I dislike “one-stop shopping.”
I do agree with Carl on the record rule problem. But I would not sacrifice Byers in exchange for its resolution. Collection Due Process is essentially administrative law. In that field, the D.C. Circuit, as the general federal agency overseer, is the best of the appellate lot. We are therefore apt to receive more cogent, and favorable, CDP outcomes in the D.C. Circuit. Even in CDP losses, e.g. Tucker, Kuretski, and the Byers merits, the D.C. Circuit will at least issue a reasoned opinion. Compare that court’s CDP case treatment to that given us by the numbered circuits’ mainly unpublished garbage.
As Les points out, applied to CDP cases § 7482 says what it says, which means Byers is correct. Unlike Les, though, I don’t see an uncertainty problem. Instead, I see the CDP venue issue as, “if it ain’t broke, don’t fix it.”
The D.C. Circuit has a robust record-rule when reviewing the administrative actions of federal agencies, and that court will not likely fall into the Tax Court exceptionalism trap. And the reason the numbered circuits give you unpublished garbage in CDP cases: Simple, garbage in garbage out. Most CDP cases are in fact garbage, and that’s why the Tax Court routinely disposes of them in unpublished orders.