Tax Litigation Update: The D.C. Circuit is the Proper Venue for Many Appeals of Tax Court Cases

Jan 22, 2014   

Last month, we wrote about the uncertainty in choosing the proper appeals court in certain Tax Court cases, and described the rift between the First, Eighth and Ninth Circuits on the one hand and the D.C. Circuit on the other. More specifically, we described that the First, Eighth and Ninth Circuits had previously held that they themselves were the proper forums for appeals based solely on the residence of the taxpayer, but that the Tax Court had written that in many cases the D.C. Circuit was the proper forum, regardless of the residence of the taxpayer. As of last month, the D.C. Circuit had not opined.

On January 17, 2014, the United States Court of Appeals for the D.C. Circuit issued its opinion in Byers v. Commissioner of Internal Revenue, available
here. In Byers, as the DC Circuit described, “Appellant does not seek review of the amount of the taxes he owes. Rather, he raises a number of procedural and substantive challenges emanating from an IRS Office of Appeals Collection Due Process (“CDP”) hearing which resulted in the contested levy.” The Department of Justice, litigating on behalf of the IRS, moved the DC Circuit to transfer the case to the U.S. Court of Appeals for the Eighth Circuit, which would have been the proper forum if the case involvedthe more typical petition for a re-determination of an income tax deficiency (commonly referred to as a “Ninety Day Letter” or“Stat.Notice”).

In opposing the Government’s Motion to Transfer, the Appellant argued that because he was “not seeking a redetermination of the amount of his taxes,” venue was proper in the D.C. Circuit. As the DC Circuit described:

Appellant points the court to an illuminating article, James Bamberg, A Different Point of Venue: The Plainer Meaning of Section 7482(b)(1), 61 TAX LAW. 445 (2008), in which the author contends that [a] plain meaning reading of the [statute] instructs that the D.C. Circuit Court is the appropriate venue, the default even, for all tax cases on appeal from the Tax Court that are not expressly brought up in section 7482(b)(1). Thus, it would appear that cases dealing with  . . ”˜collection due process’ hearings . . . should all be appealed to the D.C. Circuit Court. Id. at 456-57. We agree and therefore deny the Commissioner’s motion to transfer this case to the Eighth Circuit.

Slip op. at 2; (emphasis added).

Later in its Opinion, the Court reviewed the types of tax litigation in the district courts (refund litigation), the Claims Court (refund litigation), the Tax Court (re-determination litigation and Collection Due Process litigation) and compared and contrasted the different types of tax litigation and the appropriate forum for each. The DC Circuit then delved into the history of the Tax Court and the D.C. Circuit’s default status for appeals arising from Tax Court cases.  The D.C. Circuit observed that for many years it was the “default” court for tax appeals, but in 1966 the venue provision was amended by Congress giving rise to the statutory scheme in place today:

For both corporations and individuals, the statute stated that the proper venue for appeals involving redeterminations of liability was the federal court of appeals for the circuit in which the taxpayer’s residence was located. However, for the appeal of any case not enumerated in subsection (A) and (B), it assigned venue to the D.C. Circuit. Id. In other words, in 1966, Congress deliberately made the D.C. Circuit the default venue for tax cases.

Slip op., at 6.

The Court also noted:

Between 1966 and 1997, as Congress continued to expand the jurisdiction of the Tax Court, it also amended § 7482(b)(1) to add four more subsections, § 7482(b)(1)(C)-(F), that established venue based on a taxpayer’s residency”¦After these various revisions, the D.C. Circuit remained the default venue if “for any reason no subparagraph [assigning venue to a regional circuit] applies.” 26 U.S.C. § 7482(b)(1). Unlike its approach when expanding Tax Court jurisdiction to other areas, Congress did not alter the venue provision when it created the CDP framework in 1998.

Id.; (internal citations omitted).

In rejecting the Government’s position that the case should be transferred, the D.C. Circuit stated: “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.”  Slip op. at 11.

So, what does this mean for taxpayers?  In collection due process cases, and other cases not falling expressly within subparagraphs (A)-(F) of 26 U.S.C. 7482, the appropriate Court of Appeals is the D.C. Circuit.  Moreover, and perhaps more importantly, the D.C. Circuit’s jurisprudence now controls the Tax Court’s analysis.  This, in essence, means that in collection due process cases, there will only be one Court of Appeals (absent a stipulation between the parties to the contrary) that is the appropriate appellate forum, and as such, the “baby Supreme Court” just became even more important.

The attorneys at Fuerst, Ittleman, David & Joseph have extensive experience in tax litigation and working with taxpayers facing tax deficiencies and IRS collection efforts.  We have litigated numerous cases before the United States Tax Court, the district courts, and the various Circuit Courts of Appeal including the DC Circuit. You can reach an attorney by calling us at 305-350-5690 or emailing us at contact@fidjlaw.com.