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 36.2.5.8(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.
About Leslie Book
The D.C. Circuit’s Byers opinion is momentous in Collection Due Process law. I was sorry Mr. Byers lost on the merits. A pro se litigant has, however, done a great service to those of us in the CDP tax practitioner community.
Byers helps us avoid the record rule trap in three federal circuits. And it should cause Chief Counsel to be more amenable to CDP settlements, both in Tax Court and in the Office of Appeals. The Department of Justice and the IRS have no wiggle room in Byers. It was a clear-cut victory on venue. Kudos must go as well to Carl Smith and James Bamberg.
With that said, who thinks the DOJ will request panel and/or en banc rehearing? Yes, a bill to effectively override Byers is sitting in the Joint Committee on Taxation. It is, though, an election year. That means Congress is apt to recess earlier in the year and therefore the IRS/DOJ cannot bank on a quick legislative fix. Byers could create some kind of chaos for the tax collector before Congress could amend I.R.C. section 7482(b)(1)–if it even desires to do so.
I say the DOJ has to request rehearing. Although it has the legislative repair in the wings, what sense would it be for it to forfeit its D.C. Circuit rehearings/Supreme Court petition options?
Several people have already contacted me about a sentence in the D.C. Cir. opinion that seems to them to make no sense. They have offered explanations suggesting that there is an error in the sentence or that the court seemed to be contradicting itself. I don’t think any of the concerns I have heard raised is correct. I think the sentence is a response to something I wrote in my amicus brief and what the IRS says in the Manual. The sentence on page 15 concludes the venue discussion and reads: “We have 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.”
In my amicus brief, at pp. 38-39, I wrote:
“And, the government can mitigate any taxpayer ‘hardship’ by not objecting to venue when a taxpayer incorrectly files a CDP appeal in the Circuit of residence. Indeed, that is already the IRS’ stated policy. Internal Revenue Manual §36.2.5.8(6) (rev. 5-2-12) (‘Although none of subparagraphs (A)-(F) expressly mentions a decision in a CDP case, the Department of Justice should not be asked to object to venue when a taxpayer appeals a CDP decision to the court of appeals of the taxpayer’s residence or principal place of business, which is the rule for deficiency cases. . . .’) By failing to object to improper venue, in effect, the government stipulates to a different venue under § 7482(b)(2). The inconvenience argument is a canard.”
Some courts (like the D.C. Cir.?) may not be as convinced as I am (only from hearing it in law school) that venue is not a jurisdictional issue. The D.C. Cir. says elsewhere in the opinion that the parties can expressly stipulate to a regional Circuit — citing 7482(b)(2). But, I think I got the D.C. Cir. uncomfortable with my assertion and the Manual provision I highlighted, that the parties might, in effect, get to the same result by filing in the wrong Circuit and having the other party not object to improper venue. So, the D.C. Cir. did not want to say it was OK to do that. That issue is left to another day and possibly another court.
On another matter, I don’t think anything binds the Tax Court to accept the D.C. Cir.’s reading of the venue statute — or that any other Court of Appeals is bound. However, if I were a person representing a taxpayer in the Tax Court who had a CDP case and resided in the 1st, 8th, or 9th Cir., I would ask the Tax Court to rely on its own Robinette opinion and expand the record, since the Tax Court could not be certain at the time of trial (or when a motion for summary judgment was filed) where the parties will take the appeal (though it is clear that the D.C. Cir would accept the appeal). In that situation, it makes no sense to apply the Golsen rule, since, in the absence of knowing where the case will be appealed, reversal by a court of appeals is not certain.
Frankly, I think it will take a Tax Court court conference opinion to overrule all the prior opinions where the Tax Court — without discussing this language issue — said that CDP cases are appealable to the regional Circuits for purposes of applying Golsen. Indeed, the court conference should probably be heard when this issue next comes up, since I recall that one reason for a court conference is when an issue comes up for the first time after a court of appeal has ruled contrary to what the Tax Court has previously ruled.
Thank you Carl for these points; I found this confusing as well
“We have 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.”
I originally thought the court was reserving for another day venue for a case that challenged the IRS’s view of a collection alternative. Your explanation is persuasive and the context is very helpful.
I concur as well your views on how this case does not bind Tax Court and other appellate courts.
I must respectfully disagree about Byers’ effect on the Tax Court. The D.C. Circuit held that it alone has venue in non-liability CDP cases. The Tax Court is sited in the District of Columbia; it is therefore, as is the D.C. U.S. District Court, a lower federal court within the District of Columbia Circuit. That means the Byers venue holding binds the Tax Court. Would the D.C. Circuit have bother to issue a published opinion on CDP venue if it thought that even the Tax Court could disregard it?
In any event, it would be impractical for the Tax Court to not follow Byers. What if it proceeded in a case on a belief that it had to follow the 1st, 8th or 9th Circuit’s record rule? In such a case, as frequently happens, the taxpayer loses. All the taxpayer need do then is appeal to the D.C. Circuit, citing the Tax Court’s disregard of Byers and its deciding the case on a rule the D.C. Circuit does not recognize. Naturally, the taxpayer would argue that if the Tax Court had only followed Byers, the outcome would have been different.
I do agree with Carl Smith’s comment regarding a Tax Court conference. The Tax Court would be smart to take my friend’s advice before Byers causes it more trouble than it will soon cause the DOJ and the IRS.
It seems arguable that the same logic would apply to appeals of the Tax Court’s rulings in stand-alone requests for innocent spouse relief under 6015(f). The determinations of whether it is “inequitable” to hold a spouse liable under 6015(f) – like the determination of whether or not the collection actions was appropriate under 6330(c)(2)(A) – does not involve a “redetermination of tax liability” under 7482(b)(1)(A). “Redetermination” is a term of art from 6213, and is not used in 6015(f).
Maybe whistleblower claims under 7623(b)(4) as well …
John,
The Tax Court and DOJ have already taken the position that whistleblower cases only are appealable to the D.C. Cir. Here is what Keith wrote in his Nov. 26 post:
The Tax Court wrote about the venue issue in Whistleblower 14106-10W v. Commissioner, 137 T.C. 183, 193 n. 12 (2011) in which it said “Any appeal of this case would likely lie with the Court of Appeals for the D.C. Circuit. See Sec. 7482(b)(1)(flush language).”
The Department of Justice Appellate Section filed Commissioner’s Motion to Transfer Appeal to the United States Court of Appeals for the District of Columbia Circuit” on December 27, 2012, in the whistleblower case Cohen v. Commissioner, 139 T.C. No. 12 (2012). Mr. Cohen, who lived in New Jersey at the time of filing his Tax Court petition, lost in the Tax Court and filed an appeal in the Third Circuit. The Department of Justice quoted the language of IRC 7482(b)(1) in its motion and then stated “Cohen’s appeal does not fit within any of the six subparagraphs listed in Section 7482(b)(1). Accordingly, venue lies in the United States Court of Appeals for the District of Columbia Circuit under the flush language at the end of Section 7482(b)(1).”
John,
That is the position that I have argued — that the Tax Court’s stand-alone jurisdiction under 6015(e) to determine relief available under 6015 is also not about “redetermination of tax liability”. (Mr. Bamberg also agreed.)
When the IRS won the Lantz case in the 7th Cir. (upholding the 2-year regulatory deadline, contrary to the Tax Court’s holding in Lantz), the IRS next went on to win the same issue in the 3d Cir. in a case named Mannella in Jan. 2011. Shortly thereafter (and still before the IRS threw in the towel on the regulation), a woman in the Tax Court who lived in New Jersey (3d Cir.) faced the same issue. Mrs. Asante was at the time represented by a clinic in New Jersey, and she was also being helped by Frank Agostino. The IRS thought Mrs. Asante was bound by the Mannella holding. But, at my suggestion, in May 2011, Frank — citing the Bamberg article — moved for summary judgment in favor of Mrs. Asante, arguing to Judge Halpern that 6015(e) cases were not appealable to regional Circuits, but to the D.C. Cir. under 7482(b)(1)’s flush language. Therefore, Frank wrote, Judge Halpern should follow the Tax Court’s Lantz opinion under Golsen, since the D.C. Cir. had not yet ruled on the validity of the regulation.
Judge Halpern allowed me to file an amicus brief in Asante elaborating on the legislative history of all amendments to 7482(b) since 1966. However, the IRS abandoned the regulation in July 2011 before Judge Haplern got to rule on Frank’s motion in Asante.
All was not lost, however, since, two years later, I cut and pasted from my Asante amicus brief to make Frank and my amicus brief in Byers arguing that CDP Tax Court proceedings, as well, are only appealable to the D.C. Cir.
The legislative proposal to amend 7482(b)(1) adds references both to 6330(d) and 6015(e) in directing appeals to the regional Circuits. The proposal would thus prospectively foreclose the argument that both of those types of cases are appealable only to the D.C. Cir.
Carl
Thanks for the background.
-John