Mr. (Carlton) Smith Goes to Washington…on Appellate Venue and Review Standard in CDP

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Earlier today, Keith posted regarding appellate venue in Tax Court cases, and at the end of his post indicated that Carlton Smith had recently sent a letter to Congress regarding venue and its impact on low income taxpayers.  Mr. Smith’s letter, although discussing venue, comes down to appropriate review in CDP cases, and whether it should be de novo or limited only to the administrative record.


We’ve recreated Carlton’s letter below.  Any errors are undoubtedly ours and not his.

Re:       Comment on sec. 63 of the Discussion Draft Of Provisions To Reform Tax Administration
Dear Sir or Madam,

I am the former director of the Cardozo School of Law Tax Clinic.  I served in that capacity for over ten years until I retired this past summer.  Even though I retired, I am continuing to represent low-income taxpayers pro bono whose cases had started at the clinic.  And I am also keeping involved with a number of cases where I filed an amicus brief to aid low-income taxpayers.

One of the cases in which I submitted an amicus brief is Byers v. Commissioner, D.C. Cir. Docket No. 12-1351.  A copy of my amicus brief in that case is attached — the version that Tax Notes Today thought was significant enough to publish at 2013 TNT 63-18.  Byers presents in litigation the issue that section 63 of your discussion draft is directed at prospectively resolving against the position for which Mr. Byers and I argued current law should be interpreted.  The issue is the proper venue on appeal from Tax Court Collection Due Process decisions.

I can’t speak for Mr. Byers, but the reason that I supported him on his venue argument that the correct venue under current law is the D.C. Circuit was not out of real belief that the D.C. Circuit was the best venue as a policy matter.  Rather, my argument on venue was made to accomplish an unrelated change in the law.  I am concerned that you may have been informed by the IRS that the amendment proposed by section 63 to IRC section 7482(b)(1) to place all CDP appeals from the Tax Court into the regional Circuits of residence is only for the convenience of the taxpayers.  In fact, as the DOJ attorney argued to the D.C. Circuit in the Byers oral argument on October 25, what is really at stake is something else:  the record rule in Tax Court CDP proceedings.  My venue argument was made because I wanted to retain the Tax Court’s view of what a CDP proceeding in the Tax Court should encompass, while the IRS and DOJ are trying to retain the benefit of contrary rulings made by three regional Circuit Courts of Appeals.

Below, I will explain the record rule issue that section 63 is designed by the IRS to affect.  I will also point out a number of other areas of jurisdiction given to the Tax Court over the last 40 years that section 63 does not address, but the Committee should consider adding or not adding to section 63.  Finally, I note that I do not object to section 63 so long as a new provision is added to section 6330(d)(1) enshrining the Tax Court’s current view of its proceedings in CDP cases, so that all taxpayers living countrywide get treated the same with respect to the record rule issue that is really at stake when CDP venue on appeal is decided in Byers.

Before describing the record rule, I wanted to remind you that venue on appeal can have effects on how the Tax Court rules in all of its cases.  In Lawrence v. Commissioner, 27 T.C. 713 (1957), the Tax Court held that it was created as a national court and had its own precedent that it would follow regardless of where a case was likely to be appealed.  Only 13 years later, after much criticism of Lawrence, the Tax Court modified that holding to state that where a court of appeals to which a case was appealable under section 7482(b) had ruled on a particular issue opposite from the Tax Court’s existing precedent on the issue, the Tax Court would enforce the law in the manner of the Court of Appeals’ interpretation (even though the Tax Court still thought the Court of Appeals wrong).  Golsen v. Commissioner, 54 T.C. 742, 756-757 (1970), affd. on other issue 445 F.2d 985 (10th Cir. 1971).  The Golsen rule is the nub of the issue that I am writing you about.

Now, the record rule issue:  In Robinette v. Commissioner, 123 T.C. 85 (2004), the Tax Court held that a CDP appeal in the Tax Court under section 6330(d)(1) is not limited to the administrative record created by the taxpayer with the IRS Appeals Office conducting the CDP hearing, but is a trial de novo as to evidence (though, in another case, the Tax Court has stated that the issues in the Tax Court proceeding are limited to only those previously raised to Appeals.  Giamelli v. Commissioner, 129 T.C. 107 (2007)).  This de novo Tax Court CDP proceeding as to evidence is true even though as to all issues other than underlying liability, the Committee reports accompanying the enactment of CDP have directed the Tax Court to apply a standard of review of abuse of discretion.  So, the Tax Court applies a scope of proceeding that is de novo, though the standard of review in most cases is abuse of discretion.  (By the way, that split between scope and standard is not unprecedented in the Tax Court’s deficiency jurisdiction, as the author of the Robinette opinion pointed out.)

In my experience, most taxpayers in CDP hearings at Appeals are pro se.  Since they are already in debt to the IRS, they can’t afford representation, and many of their matters are too small to merit the expenditure of professional fees, even if the taxpayers could afford representation.  They often do inadequate jobs of creating a record about their financial situation.  Then, when the Appeals employee issues the notice of determination upholding either the levy or lien filing, the taxpayers read the notice and see that there were issues of interest to the Appeals employee that the taxpayers were not aware of and that they could have responded to with documents or testimony had they realized these were important.  The taxpayers need a second chance to make that response in a Tax Court proceeding.  This is the same dynamic that for years has applied to low-income taxpayers under audit and why the Tax Court, under its deficiency jurisdiction at section 6213(a), holds a trial de novo as to evidence.  So, I strongly support, as a policy matter, the Tax Court’s Robinette holding that its CDP proceedings, as well, are de novo as to evidence.

Unfortunately, since CDP was enacted in 1998, nearly all taxpayers and the IRS, rather uncritically, have treated the regional Circuits as the venue on appeal from Tax Court CDP decisions.  After the Tax Court ruled in Robinette, it was reversed by the Eighth Circuit, which held that, since abuse of discretion was the standard of review, under the Administrative Procedures Act and ordinary principles of administrative law, the standard of review dictates the scope of the review proceeding, which should be limited to the administrative record.  439 F.3d 455 (8th Cir. 2006).  The Eighth Circuit’s rule of limiting a litigant to the administrative record makes a lot of sense when, say, a large, represented corporation is challenging the outcome of a regulatory administrative hearing.  But, it makes little sense in the world of mostly unrepresented, unsophisticated taxpayers and the informal record created in the typical IRS CDP hearing.  Indeed, for similar reasons, the Ninth Circuit earlier this year ruled that section 6015(e) innocent spouse cases in the Tax Court where the issue is requested equitable relief under section 6015(f) are not limited to the administrative record.  As the Ninth Circuit stated, “Many of the taxpayers who seek innocent spouse relief share Wilson’s limited educational background, lack of access to essential documents, and inability to hire counsel. Taxpayers in Wilson’s position may have understandable trouble comprehending, and thus fully complying with, the IRS’s process in considering requests for equitable spouse relief or establishing a complete record with the agency. Allowing the Tax Court to review a supplemented and up-to-date record under these circumstances is entirely consistent with the statutory structure of sec. 6015 and Congress’s direction that the Tax Court determine the appropriate relief.” Wilson v. Commissioner,705 F.3d 980, 992 (9th Cir. 2013) (footnote omitted). (In Wilson, the Ninth Circuit also held that a de novo standard of review should apply to 6015(f) cases.  The IRS has since decided to acquiesce in the rulings in Wilson going forward;  Chief Counsel Notice CC-2013-011 (Jun. 7, 2013); but not on the similar record rule issues in CDP.)

After the Eighth Circuit overruled the Tax Court in Robinette, the First and Ninth Circuits also ruled on the record rule issue — agreeing with the Eighth Circuit that Tax Court CDP proceedings are limited to the administrative record. Murphy v. Commissioner, 469 F.3d 27, 31 (1st Cir. 2006); Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009).  No other Circuit — including the D.C. Circuit — has ruled either way on this Tax Court CDP record rule issue.

Like the IRS and most litigants, the Tax Court over the years has rather uncritically assumed that CDP venue on appeal tracks that of venue on appeal of its deficiency cases — i.e., venue on appeal is to the regional Circuit in which the individual petitioner resided when the Tax Court petition was filed.  Of course, this is the issue now being litigated in Byers v. Commissioner.  And, at oral argument in Byers on October 25, 2013, it seemed pretty clear that the D.C. Circuit judges could not square this assumption with the literal language of the venue statute.  But, because the Tax Court has maintained this venue on appeal assumption, it has applied its Lawrence/Golsen rule such that in CDP proceedings where the individual taxpayer lives in the First, Eighth, and Ninth Circuits, the Tax Court limits the taxpayer to the administrative record.  See, e.g., Klingenberg v. Commissioner, T.C. Memo. 2012-292.  In the CDP proceedings of individual taxpayers living in all other Circuits, the Tax Court follows its own precedent and holds a trial de novo as to evidence.  See, e.g., Murphy v. Commissioner, 125 T.C. 301, 313 n. 6 (2005).

My goal in trying to get the D.C. Circuit in Byers to hold that only the D.C. Circuit is the correct venue on appeal for CDP cases from the Tax Court is to make the situation such that the Tax Court applies its Lawrence/Golsen rule on this CDP record rule issue as stated in Robinette (i.e., trial de novo) for individuals living throughout the country, since the D.C. Circuit has not yet ruled on the issue.  At least this gives a temporary taxpayer-friendly ruling countrywide application until, perhaps, the D.C. Circuit finally decides to rule on the record rule issue.

Section 63, if enacted, would essentially confirm that a minority of the country must have its Tax Court CDP proceedings limited to the administrative record, while a majority of the country can have a de novo Tax Court CDP proceeding.  I am not sure whether the IRS made this record rule outcome clear to you as its major goal when it asked for you to consider enacting section 63.

I do not, in fact, object to the enactment of section 63 with respect to CDP and 6015(e) cases of the Tax Court.  I am happy to have such cases decided by the regional Circuits.  However, my lack of objection is conditioned on Congress amending section 6330(d)(1) to clarify that the Tax Court’s holding in Robinette is the appropriate one for taxpayers countrywide.  So, in addition to section 63, I would urge an amendment that adds a sentence to the end of section 6330(d)(1) reading as follows:  “In any proceeding by the Tax Court under this paragraph, the Tax Court shall allow into evidence both such administrative record created at the Office of Appeals’ hearing and such additional evidence on the issues raised at the hearing as the Tax Court deems relevant.”

The second issue I wanted to raise has to do with the fact that, while section 63 addresses venue on appeal former Tax Court CDP and 6015(e) proceedings, it does not address a number of other jurisdictions given to the Tax Court over the last 40 years for which section 7482(b)(1) provides no specific rule.  Many of these unnamed jurisdictions may not fairly be described as involving a “petitioner seeking redetermination of tax liability” (within the meaning of the exceptions at subparagraphs (A) and (B) that direct such cases’ appeals to the regional Circuit courts), so, arguably, the flush language at the end of section 7482(b)(1) directs appeals of these Tax Court jurisdictions (absent stipulation to the contrary) only to the D.C. Circuit.

The following jurisdictions of the Tax Court do not have any specific subparagraph in section 7482(b)(1), so Tax Court decisions in these cases are arguably all appealable only to the D.C. Circuit under the flush language at the end of that paragraph:

1.  Section 7430(f) proceedings to review the IRS’ grant or denial (in whole or in part) of an award of reasonable administrative costs where there was no underlying Tax Court proceeding;

2.  Section 7479 Tax Court declaratory judgment actions relating to eligibility of estates to make installment payment of estate taxes under section 6166;

3. Section 6404(h) Tax Court actions to review the IRS failure to abate interest attributable to unreasonable errors or delays;

4.  Section 7436 Tax Court proceedings for determination of employment status;

5. Section 7623(b)(4) Tax Court proceedings to consider petitions from whistleblowers who complain of insufficient IRS award; and

6. Section 6110(d)(3), (f)(3)(A), (f)(4)(A), and (h)(4) disclosure actions.

Congress should consider whether any of these six jurisdictions should be specifically named in the venue statute and that appeals be directed to courts other than the D.C. Circuit.

In fact, in 1976, Congress specifically discussed in the Committee reports accompanying the creation of the disclosure actions that Congress expected the D.C Circuit (under the flush language of section 7482(b)(1)) to be the sole venue on appeal, absent stipulation to the contrary.  H.R. Rep. 94-658 at 324-325, 1976-3 (Vol. 2) C.B. 697, 1016-1017; S. Rep. 94-938 at 313-314, 1976-3 (Vol. 3) C.B. 49, 351-352.

There was no discussion in any of the Committee reports with respect to any of the other five jurisdictions as to where Congress expected venue on appeal to go from the Tax Court.

So far, only one jurisdiction, section 7623(b)(4), has generated any comment as to the proper venue on appeal:  In Whistleblower 14106-10W v. Commissioner, 137 T.C. 183, 193 n. 12, the Tax Court wrote: “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).”  And the Department of Justice recently forced a whistleblower who appealed the loss of his Tax Court case to the Eighth Circuit, where he lived, to be transferred to the D.C. Circuit under a similar statutory reading.  A copy of the government’s motion to transfer in the Cohen case is attached.  The motion was unopposed, so the case was transferred and is presently pending before the D.C. Circuit.  Congress should consider whether centralizing all whistleblower award cases in the D.C. Circuit makes sense.

Since all of these Tax Court jurisdictions (including whistleblower) are infrequently the subject of petitions, it may make sense to have only one court be the sole location of appellate litigation so that a body of consistent precedent can be created that applies countrywide.  On the other hand, in some of these cases, like the administrative fees cases, there likely would be little money at stake in any case so that taxpayer convenience might dictate they be directed to the regional Circuits. I don’t have a strong opinion about any of these jurisdictions, but think that Congress should discuss them — at least in the Committee reports — if it is making the decision not to specifically name them because it prefers that all of their appeals be made to the D.C. Circuit.

I would be happy to speak to anyone at the Committee to discuss the issues presented in this e-mail.

Carlton M. Smith, Esq.


Carlton Smith About Carlton Smith

Carlton M. Smith worked (as an associate and partner) at Roberts & Holland LLP in Manhattan from 1983-1999. From 2003 to 2013, he was the Director of the Cardozo School of Law tax clinic. In his retirement, he volunteers with the tax clinic at Harvard, where he was Acting Director from January to June 2019.


  1. Lots of issues in this letter and Keith’s post. Some quick thoughts:
    As a policy matter, I have felt that the larger purpose behind CDP is to provide for a systemic check on agency conduct over adjudications in the admin law sense of the term (i.e., a subset of IRS collection determinations). Prior to CDP most of IRS decisions on collection actions were exempt from systemic judicial scrutiny. CDP–unlike equitable relief review-is not in my view principally about the correctness of agency determinations on collection alternatives. IRS collection actions under a deferential standard of review should be upheld even if a court thinks the IRS is wrong–so long as the IRS explains its actions, applies an internally consistent standard, considers the evidence before it. The challenge in setting up procedures in CDP is that arguably the more procedural rights taxpayers have at judicial review of the determination, the greater the likelihood that the court can reach a correct result. If I am right on the overall purpose behind CDP, courts should be less willing to allow taxpayers as a matter of right to introduce different evidence at trial from that available at hearing. Different issues arise if there are changed circumstances following the agency determination, or if the taxpayer can establish why she was unable to introduce evidence at the hearing (given no right to compel a witness to testify or obtain third party documents), mindful of the fact that most determinations relating to collection alternatives relate to information the taxpayer should possess. I recognize as Carl points out that the same reasons the 9th Circuit stated in Wilson as to why taxpayers may at the admin hearing level might not bring in facts before the IRS suggests that allowing taxpayers to bring in new evidence at court would surely assist the court. Yet, unlike equitable relief, which is meant to allow for individualized equitable considerations in all cases, the individualized interest at stake in CDP I believe is less important, and less essential to the statute at large. CDP is better situated as a limited means for judicial review of agency action, not as a means of allowing the court to substitute its judgment on the manner in which an agreed to liability should be paid. This leads me to think that perhaps the DC Circuit-as the court most experienced in agency oversight–should have exclusive venue over CDP cases but that it on the merits should conclude that the Tax Court was wrong in Robinette.

  2. Les, I agree with you that I don’t want the Tax Court deciding, say, what is the correct number for an OIC that the IRS and taxpayer should enter into. So, collection issue review should be for abuse of discretion. However, I think review should be of both what was shown to the Settlement Officer and what should have been shown so that all parties could make an informed decision. This is similar to section 482 review in the Tax Court in deficiency cases: The Tax Court reviews for abuse of discretion, but the parties can introduce evidence that probably should have been shown to each other at the audit.

    The Tax Court, under Robinette, still excludes material deliberately withheld from the Settlement Officer, so I am not worried about abuse or the situation of a taxpayer not showing anything to the Settlement Officer merely to have a first crack with it in front of a judge.

    Further, I think we need to keep in mind how few CDP proceedings there are in the Tax Court. While figures vary considerably from year to year, last I looked the average was about 1,500 CDP petitions per year. About 100 to 200 end up with some ruling from a judge — either a published opinion or an unpublished granting of an IRS motion for summary judgment. The rest are settled or dismissed for lack of jurisdiction or mootness. What I am talking about is how to handle those 100 to 200 cases. Probably currently, over 3/4 are already operating quite successfully under the Tax Court’s Robinette opinion allowing limited expansion of the administrative record (i.e., allowing introduction of evidence only accidentally not shown before to Appeals and limited to the issues raised at Appeals). I just want to give taxpayers in the other 50 or so cases that don’t get de novo scope proceedings the benefit of the same rule. This will have no great impact on how the over 50,000 CDP or equivalent hearings each year are conducted. In my experience, taxpayers deliberately keeping back evidence is not going on. People have plenty of incentive now to show everything to Appeals and not merely hope for a rare court reversal of Appeals’ determination under an abuse of discretion standard.

    I disagree with you about CDP not being equitable. While 6330 does not have the magic “inequitable” word that appears in 6015(b)and (f), Congress, I think, made clear that it wanted an individualized investigation of each taxpayer and an equitable weighing of the need for a levy or a lien. I think this is found in 6330(c)(3)(C)’s direction that the “appeals officer . . . shall take into consideration . . . whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary”. I think that is largely an equitable consideration.

    • I think calibrating the amount of procedural protections at a particular point in time is a tricky business, though am guided by the tri-partite balancing that the Supreme Court suggests is appropriate in procedural due process cases(I am not suggesting that the protections are constitutionally mandated; just that constitutional analysis can inform as we think about statutory protections). One should look at the government’s interest at stake, the individual interest and the likelihood that the procedural protection sought would reduce the risk of error. In my view the individual interest at stake in innocent spouse cases is much greater than that in most CDP cases, and the government’s interest is heightened when the determination is solely on the manner in which it collects an agreed to liability. Innocent spouse cases are not a neat fit in the procedural spectrum, as they share some attributes of collection cases and some attributes of liability cases. Yet to me they are more like liability cases, and as such the balance of procedural protections normally afforded in Tax Court cases should apply to those cases. That is why I think Wilson is correctly decided.
      Collection cases are a different animal. Admittedly Congress, through CDP and other protections, has suggested that the historical weighting of the interests is no longer accurate. There is an individual interest at stake, and the longstanding reflexive statement that taxes are the lifeblood of the government alone does not mean that taxpayers should have no procedural protections in collection cases. I think on balance a limited right to introduce evidence at trial (changed circs or reasons why the taxpayer could not introduce below at appeals) with a limited standard of review strikes the right balance. I also think it more likely in considerations of collection alternatives the information is in the taxpayer’s control, unlike 482 cases or even equitable relief cases where third party testimony and documents are more essential to getting to the right answer

      I also think that to the extent court review of IRS actions differs from review of other agency determinations, there is a less compelling case to have the DC Circuit be the exclusive reviewing court.

      This is a tough issue. I suspect that most practitioners disagree and want the ability to introduce evidence at Tax Court. It just seems inconsistent with the overall spirit of CDP.

      As an aside, I think the current exclusion of some collection determinations from judicial review strikes the wrong balance; it does not seem right that some offers, for example, get limited judicial review and others do not, depending on whether the offer is submitted in CDP. I think CDP is both under and overinclusive as it pertains to the balance of individual and government rights in the collection process

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