We welcome back frequent guest blogger Carl Smith to discuss the recently announced IRS position on the appellate venue of Tax Court cases. Keith
Last year, I did a post on Byers v. Commissioner, 740 F.3d 668(D.C. Cir. 2014). In that case, the D.C. Circuit held that appeals of Tax Court Collection Due Process (CDP) proceedings that did not involve challenges to the underlying tax liability only have proper venue in the D.C. Circuit. Prior to Byers, the IRS and almost all taxpayers had brought such appeals in the Circuit in which the taxpayer resided when the taxpayer filed the Tax Court petition – i.e., in the “regional” Circuits of residence. Since Byers was decided, the Tax Court has studiously avoided discussing whether it agrees with the D.C. Circuit’s contrary ruling – an issue that is of relevance to the Tax Court in applying its Golsen rule. The IRS, as well, has been silent as to whether or not it will accept the D.C. Circuit’s interpretation of the venue statute. As Keith discussed in a previous post, section 103 of S. 903 (which was passed by the Senate Finance Committee earlier this year) would prospectively overrule Byers and clearly require that appeals of CDP and section 6015(e) stand-alone innocent spouse cases go from the Tax Court to the regional Circuits of residence. This post is to report that, finally, on June 30, 2015, Chief Counsel issued Notice CC-2015-006, in which the office takes the position that it thinks Byers was wrongly decided. Below, I will point out the highlights of the Notice – including both what it covered and what it did not.
As the Notice points out, unless the parties stipulate to a different Circuit under section 7482(b)(2), venue on appeal from Tax Court cases under section 7482(b)(1) is to the D.C. Circuit, unless one of six subparagraphs applies. Subparagraph (A) provides that a non-corporate petitioner should appeal to the Circuit where he or she lived when he or she filed a Tax Court petition seeking “redetermination of tax liability”. Deficiency cases and transferee cases were the only two types of cases that were heard by the Tax Court in 1966, when the current version of section 7482(b)(1) was enacted. Clearly, subparagraph (A) was drafted to cover deficiency and transferee liability cases. Subparagraph (B) generally provides a principal place of business Circuit for corporate petitioners in cases of petitions seeking “redetermination of tax liability” (also, clearly including deficiency and transferee liability cases).
After 1966, Congress gave the Tax Court over a dozen new jurisdictions, but only added references to those new jurisdictions in 4 more subparagraphs (from (C) to (F)). The following jurisdictions are not mentioned by Code section in section 7482(b)(1): (1) section 6330(d)(1)
CDP cases , (2) section 6015(e) stand-alone innocent spouse cases, (3) section 6110 disclosure cases, (4) section 7623(b)(4) whistleblower award cases, (5) section 6404(h) interest abatement cases, (6) section 7436 proceedings for determination of employment status, (7) section 7430(f) proceedings to review the IRS’ grant or denial of an award for reasonable administrative costs where there was no underlying Tax Court proceeding, and (8) section 7479 Tax Court declaratory judgment actions relating to eligibility of estates to make installment payments of estate taxes under section 6166. For these 8 jurisdictions, the IRS and most taxpayers have tried to shoehorn as many as possible into the language of subparagraph (A), so that the cases can be appealed to the Circuits of residence.
In Byers, the D.C. Circuit held that CDP cases that do not involve challenges to underlying tax liability are not described in the plain language of subparagraph (A), so are appealable only to the D.C. Circuit under the flush language at the end of section 7482(b)(1).
The Chief Counsel Notice addresses some of these 8 unnamed jurisdictions.
Whistleblower Award and Disclosure Cases
For two jurisdictions, the Notice concedes that appeals only go to the D.C. Circuit, since these jurisdictions cannot possibly be described as involving “redetermination of tax liability” under subparagraph (A) and (B). These two jurisdictions are section 7623(b)(4) whistleblower award cases and section 6110 disclosure cases.
The Tax Court has already stated, in dicta, that whistleblower award cases are only appealable to the D.C. Circuit. See Whistleblower 14106-10W v. Commissioner, 137 T.C. 183, 193 n. 12 (2011) (“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 legislative history of the disclosure provisions makes it clear that Congress was counting on subparagraph (A) not applying to appeals of these cases. In two places in each of the House Ways and Means Committee Report and the Senate Finance Committee Report, one can find the sentence: “A decision of the Tax Court in such a [section 6110 disclosure] case could be appealed only to the United States Court of Appeals for the District of Columbia Circuit unless the Secretary agrees with the person involved to review by another court of appeals (sec. 7482(b)).” H.R. Rep. 94-658 at 324-325, 1976-3 (Vol. 2) C.B. 697, 1016-1017 (emphasis added); S. Rep. 94-938 at 313-314, 1976-3 (Vol. 3) C.B. 49, 351-352 (emphasis added).
CDP, Innocent Spouse, and Interest Abatement Cases
The Notice takes the position that CDP, innocent spouse, and interest abatement cases fit within subparagraphs (A) or (B), even though the Notice concedes: “Innocent spouse and interest abatement cases involve relief from liability and so arguably should not be categorized as redeterminations of liability.” However, the Notice states:
[I]t has been the longstanding practice of taxpayers and the government to appeal CDP, innocent spouse, and interest abatement cases to the circuit of the petitioner’s legal residence, principal place of business, or principal office or agency. The government has taken the position that Congress intended the same venue rules that apply to deficiency and transferee cases to apply to these newer categories of cases. Additionally, these cases generally involve the taxpayer’s obligation to pay the underlying tax liability.The Notice also points out that the Tax Court has also historically followed this approach for purposes of applying its Golsen rule. (By the way, contrary to what the IRS says, there is nothing in any legislative history to support the IRS’ statement of what Congress intended — either way — as to venue on appeal for any of these 3 jurisdictions.)
Accordingly, the IRS gives the following operative guidance to Chief Counsel attorneys:
The D.C. Circuit is the only court of appeals to have held that the proper venue for an appeal of a non-liability CDP case that is not enumerated in section 7482(b) is the D.C. Circuit. In litigating Tax Court cases, Chief Counsel attorneys should continue to assert the Office’s longstanding position that, for purposes of the Golsen rule, venue generally lies in the circuit of the taxpayer’s legal residence, principal place of business, or principal office or agency, regardless of whether the issues in the case involve liability.2/ In CDP cases in which liability is at issue, Chief Counsel attorneys should also argue, in the alternative, that under the rationale of Byers, venue lies in the regional circuit.
When evaluating appellate venue after a taxpayer files a notice of appeal, if the taxpayer appeals a non-liability case to the D.C. Circuit, and the case is not enumerated in section 7482(b), Chief Counsel attorneys should not recommend objecting to venue since Byers is controlling in the D.C. Circuit. If a taxpayer appeals a non-liability case to the proper regional circuit, Chief Counsel attorneys should likewise not object to venue as the taxpayer’s choice of venue is consistent with our position.
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- Note that our Office’s position is that issues raised in a CDP case concerning the validity of an assessment, the assessment or collection statutes of limitation, or other procedural requirements for administrative collection do not involve liability. See CC-2014-002, Proper Standard of Review for Collection Due Process Determinations (2014).
Final Observations
The Notice does not address all of the jurisdictions that are not specifically cited in the subparagraphs under section 7482(b)(1). Apparently, the IRS, for now, only wanted to address 5 of the 8 such jurisdictions.
Finally, the Notice effectively allows a taxpayer who wants to appeal a CDP case loss – where the case did not involve a challenge to the underlying liability – to either the Circuit of residence or the D.C. Circuit. Thus, to the extent that there are differences in precedent between the two Circuits, taxpayers are afforded a chance to do some forum shopping.