1. law, govt and politics

April–May 2008
The Struggle to Bring Justice to
CDP Cases Continues: Giamelli, and
Why the Tax Court Is Wrong
By William E. Taggart, Jr.
William E. Taggart, Jr., examines Giamelli and the Tax Court’s
continuing struggle to define its role in appeals of CDP cases.
O
n October 30, 2007, the U.S. Tax Court released its opinion in J. Giamelli.1 Giamelli
illustrates in dramatic fashion the Tax Court’s
continuing struggle to define its role in appeals of determinations in Collection Due Process (CDP) cases.
The case also illustrates the wide range of views regarding CDP cases among the judges on the Tax Court.
The decision of the majority of the court in Giamelli
is correct, but its reasoning is flawed.2 A majority of the
judges
g correctly concluded the court should not consider
the
issues raised byy the successor to the interests
si
der th
he iis
the
original
Petitioner—but
off th
he orig
o
igii
Petit
oner—
—but for the wrong reason.
Giamelli,
original
JJoseph
ossep
ph
h Gia
G
melli, the o
rigina Petitioner, was killed
in
after a settlement of his
n an aut
aautomobile accident
d
collection dispute
te in
n the pending
pend
n ngg CDP
C
CD case
case had
h been
b
been
negotiated, but be
before
settlement
agreement
was
re tthe
he se
ettlemen agr
eemen w
a
signed. As a consequence of the death of the original
Petitioner, all issues in the pending case, which was
solely a collection case, became moot. The denial of
relief in the deceased Petitioner’s CDP hearing ceased
to have significance. With the death of Petitioner, no
justiciable issue remained pending before the court.
The opinion of the majority of the Tax Court judges is
instructive, but it is wholly dicta. As a consequence
of the death of Petitioner, the dispute before the court
ceased to exist3 because it ended any dispute over the
proposed collection action against the decedent.
William E. Taggart, Jr., is Dean Emeritus of the Golden Gate
University School of Law LL.M. Program in Taxation, and a
Principal in the law firm of Taggart & Hawkins with offices in
San Francisco and Oakland, California. He wishes to thank his
partner, Karen L. Hawkins, for her valuable input on this article
©
JOURNAL OF TAX PRACTICE & PROCEDURE
The multiple opinions expressed in the concurring and dissenting opinions in Giamelli are useful
as guides to the views of various judges regarding
CDP cases. These opinions are informative, but like
the majority opinion, these opinions are dicta. The
concurring and dissenting opinions are also instructive as descriptions of the issues in CDP cases with
which the Tax Court is struggling, and will continue
to struggle.
The problem with dicta is that it can take on (and
often does) a life of its own. In its efforts to be helpful to the predominant pro se audience before it, the
Tax Court expands its opinions beyond necessity,
resulting in dicta, far too often. As a practitioner, I
encounter
this
enco
ounter th
ou
is in the form of IRS counsel’s citation to
Tax
Court
Tax C
ourt dicta
diccta as “law” and support for a particular
position. I have already experienced this “dicta reliance” on Giamelli with respect to three other CDP
cases I am handling when the government wishes to
take the position that the Tax Court has no jurisdiction
over a specific CDP fact pattern.
Factual Background
Petitioner and his wife filed a joint income tax return
for 2001 which reflected a substantial income tax
liability. The tax liability was not paid with the filing
of the return. Respondent commenced collection
action. Petitioner requested a CDP hearing—purportedly for the purpose of negotiating an installment
payment arrangement. It is unclear from the opinion
whether the wife of Petitioner joined in the request
for a CDP hearing.
2008 W.E. Taggart
23
The Struggle to Bring Justice to CDP Cases Continues
Petitioner and Respondent negotiated for a period of
time without agreeing on an installment payment arrangement. Respondent eventually issued a Notice of
Determination because Petitioner was not in compliance
for tax periods subsequent to 2001. Petitioner appealed
Respondent’s determination to the Tax Court. While the
appeal was pending, Petitioner and Respondent agreed
upon an installment payment arrangement. Petitioner
was unfortunately killed in an automobile accident before the installment payment agreement was signed.
Petitioner’s wife was appointed Executrix of Petitioner’s Estate. Respondent was informed of the
appointment. Respondent moved for dismissal of
the case for lack of prosecution on account of the
failure to substitute the Executrix of the Estate for
the Petitioner. In the alternative, Respondent moved
for summary judgment on the ground there was no
evidence Respondent had abused his discretion in
denying relief to Petitioner in the CDP hearing.
Before Respondent’s motions were heard, the surviving spouse, as Executrix, moved to be substituted for
Petitioner in the pending case. The Executrix also sought
to contest the underlying tax liability on the ground the
tax liability was caused by the failure of Petitioner to
claim deductions for bribes that he had paid in 2001.
The estate argued that it should be allowed to show that
the
tax liabilityy had been overstated in
th
he 2001
2
200
01 income
i
order
Petitioner’s
orrde
der to
to conceal
ccon eal Pe
titioner’s illegal
ille activities.
The
Th
he cou
ccourt
urtt aallowed
owed the ssurviving
urvivin spouse, as Executrix,
to
for
o bee substituted
su
ubs
f Petitioner. The court then granted
Respondent’s motion
forr summary
ot on fo
summaary
y judgment
dgment on
n aacccount of the failure
lur of Executrix
Execu
utrix to
to present
p ese
ent eevidence
videnc
that Respondent had abused his discretion in denying
relief to Petitioner from the proposed collection action.
The decision was correct, but the reasoning was not
because the case before the court was moot.4
The court struggles unnecessarily in its opinion in
Giamelli with the question of whether the surviving
spouse, acting as Executrix of the original Petitioner’s
estate, could raise issues in the appeal that had not
been raised at the CDP hearing. The majority of the
court concluded that a new issue with respect to the
underlying liability could not be raised in a case in
which Respondent’s decision in the CDP hearing addressed only Respondent’s collection action.
Majority Opinion
The court in Giamelli unnecessarily allowed the issue
with which it struggled to be raised. The court should
not have allowed the estate to be substituted for Pe-
24
titioner for any purpose except dismissal for lack of
subject matter jurisdiction. Respondent led the court
into this error by seeking summary judgment on the
merits as an alternative to dismissal for the failure to
substitute the representative of the estate for Petitioner.
If Respondent had moved for dismissal on the ground
the matter before the court was moot, the court would
not have struggled with its decision in Giamelli.
The failure of the parties to properly present the issues
to the court undoubtedly misled the court. However, the
court should have recognized that the matter before it had
become moot. The court should have recognized that it
lacked subject matter jurisdiction as a consequence of
the death of the Petitioner. The estate, as the successor
in interest to the debts of Petitioner, was the proper party
to replace Petitioner in the matter before the court, but
the estate was not the taxpayer against whom collection
action had been initiated. The case before the court was
an appeal of a decision denying relief to a deceased
taxpayer from a proposed collection action. The estate
was the successor in interest to the debts of the deceased
taxpayer, but the estate was not the taxpayer. Respondent
had not proposed collection action with respect to the
estate. Unless and until Respondent filed a claim against
the estate in the probate action, it could not proceed to
collect against the estate. All issues relating to Respondent’s collection action against the deceased taxpayer
were rendered moot by the taxpayer’s death.
That the tax liability in issue was a joint income tax liability is irrelevant. On the facts found by the court, the
surviving
su
rv v ng spouse,
spou
use as a separate taxpayer who presumably
was
w
as jointly
jo
ointly liable
liaab for the unpaid tax liability, was not a
party to the case before the court. The surviving spouse’s
rights and obligations with respect to the unpaid income
tax liability were not before the court. Similarly, the rights
and obligations of the deceased taxpayer’s estate with
respect to the tax liability were not before the court. Of
greatest significance, any action by Respondent with
respect to the collection of the unpaid tax liability against
either the surviving spouse, or the estate of the deceased
taxpayer, was not yet ripe for review by the Tax Court.
The Majority Decision, a
Concurring Opinion and a Dissent
Giamelli was not the proper case for the court to attempt to refine its jurisdiction over appeals in CDP
cases. In Giamelli a majority of the court concluded:
Previously, we have left the door open to the possibility that we might consider issues not raised
April–May 2008
in the administrative hearing. See Magana v.
Commissioner, 118 T.C. 488, 493 (2002) (“generally it would be anomalous and improper for
us to conclude that Respondent’s Appeals Office
abused its discretion under section 6330(c)(3)
in failing to grant relief, or in failing to consider
arguments, issues, or other matter not raised by
taxpayers or not otherwise brought to the attention of Respondent’s Appeals Office” [Emphasis
added.] We hold today that we do not have authority to consider section 6330(c)(2) issues that
were not raised before the Appeals Office.5
The court’s opinion is unnecessary dicta. The court
was trying too hard to reach a legal conclusion in a
case in which the court lacked jurisdiction to make
any decision except to dismiss the case because the
matter before it was moot. The discussion Giamelli
has generated, however, makes the case significant.
Judge Wherry accurately points out in his concurring opinion6 that the majority’s decision does
not expressly overrule R.B. Magana,7 even though
Judge Swift believes that Giamelli closes the door
left slightly ajar by Magana. Judge Wherry identifies
two substantial limitations that must be placed on the
majority’s
j y statement that an issue must be raised at
Appeals
to review by the court
Appeals in
in order to be subject
j
in
in an
n appeal
a pe of a CDP
app
CDP determination.
determ
Judge
J dgee Wherry
Jud
W ry first
Whe
rst points
points out
ou that the record of a
CDP
is prepared by Respondent, and that
DP
P hearing
hea
h
the record prepared
Respondent
may
neither
ar d by Re
espo
onde
en ma
y bee ne
ither
complete nor accurate.
ccu te Judge
udge Wherry’s
Wherr s observation
observat on is
an understatement. Almost invariably the record in an
appeal of a decision in a CDP case will be incomplete
or inaccurate to some degree. The record is prepared
by Respondent to provide support for Respondent’s
determination. Judge Wherry accurately observes that
it may be necessary for the court to receive evidence
in order to determine the completeness or accuracy
of the record.
Judge Wherry also observes that all of the evidence
relevant to a determination in a CDP hearing may not
be readily available to Appeals. The need to allow the
introduction of additional evidence with respect to
an issue that was properly raised in a CDP hearing is
a second limitation that Judge Wherry urges must be
placed on a strict reading of the majority’s statement
regarding the limitations on the court’s jurisdiction.
In his dissenting opinion Judge Swift correctly
observes that Giamelli is not the case that should
be used to overturn Magana. Indeed, as Judge Swift
JOURNAL OF TAX PRACTICE & PROCEDURE
points out, there is no reason for the court to overturn
Magana. Judge Swift is correct in urging that it was:
... unnecessary, inappropriate, and erroneous for
us to base our holding herein [in Giamelli] on a
lack of authority or jurisdiction and to eliminate
the special circumstances exception of Magana
... .8
Magana may require clarification, but there is
no reason to overrule Magana. There are too many
instances in a CDP case in which the record is seriously deficient. As Judge Swift notes, the Tax Court’s
universe of CDP cases is expanding. Giamelli is not
the proper case for the court to conclude it does
not have jurisdiction under Code Sec. 6330(c)(2)9 to
consider issues that were not raised at Appeals.
There are too many variations on, “What is an issue?” and, “What does it mean to raise an issue?”
for the court to overrule Magana, or for the court to
conclude it can never consider an “issue” that was not
raised at Appeals. Does Appeals have to understand
the issue? Is a new and different argument regarding
facts and law that were presented in a CDP hearing
to be treated in the same manner as an argument that
depends in part on facts that were not available in the
CDP hearing? Are facts that were proffered, but not
considered by Appeals, the same as facts that were
not proffered because they were not available at the
time Appeals considered the case? Suppose the facts
were
available
w
ere ava
aila
able in Respondent’s records, and Respondent
chose
not to search for such facts, or deemed
de
ent cho
ose
e no
n
the facts irrelevant without searching?
Dissenting Opinions of Judge
Vasquez and Judge Marvel
Both Judge Vasquez and Judge Marvel10 wrote dissenting opinions. Judge Vasquez’s dissenting opinion is
an instructive review of the legislative environment
that spawned CDP hearings, and the Tax Court’s
supervision of CDP hearings. While Judge Vasquez’
dissenting opinion is informative, it is largely a cry
for legislative assistance.
Congress has taken the sole action that it is likely
to take in the immediate future with respect to CDP
cases. Congress has thrust upon the Tax Court jurisdiction over all appeals of determinations in CDP cases.11
Congress’ expansion of the Tax Court’s jurisdiction to
include all CDP cases could be viewed as Congress’
approval of the Tax Court’s handling of CDP cases.
25
The Struggle to Bring Justice to CDP Cases Continues
If Congress approves of the Tax Court’s handling of CDP
cases, the uncertainty suggested by the diversity of the
opinions in Giamelli indicates Judge Vasquez is correct in
seeking legislative guidance with respect to CDP cases.
Perhaps Congress should assist the Tax Court in describing more specifically what it expects the Tax Court to do,
and how it expects the Tax Court to do it. However, it is
unlikely Congress will provide any such guidance.
Judge Marvel’s dissenting opinion focuses on the
difference between the failure of a taxpayer to raise an
issue in a CDP hearing that could have been raised,
and the failure to raise an issue that could not have
been raised. In footnote 2 of her dissenting opinion,
Judge Marvel succinctly describes the most critical
aspect of the factual analysis in Giamelli—the estate
is a separate taxpayer that may be responsible for the
payment of the debts of the deceased taxpayer, but
the estate is not the taxpayer.
Judge Marvel quite accurately points out that the
standing of the estate to contest an unpaid tax liability
after the taxpayer has died could not have been raised
at the taxpayer’s CDP hearing. Essentially pointing out
the obvious Judge Marvel correctly observes, “The
majority’s conclusion that the issue was not timely
raised makes no sense.”12 The court no longer has
jurisdiction over the CDP case before it because the
taxpayer
ta
axp
payeer has
h died.
The
dissenting
Vasquez and Judge
Th
h d
he
dissse ng opinions
di
opinion of Judge
Ju
Marvel
illustrate
other
issues
that have complicated the
Marvvell ill
illustr
us te oth
er issu
es tha
Tax
handling
off CDP cases. The Tax Court has
ax Court’s
Court
o
h
l
always been a “peoples’
cases
p opless ccourt.”
o rt. IIn
ou
n defi
eficciency
ency ccas
es
the Tax Court has
stretched
as ffrequently
quently st
retche the
e letter
etter of
o tthe
h
law to assist taxpayers who have not been treated fairly
by the tax system. This attitude is reflected in the Tax
Court’s procedures as well as in its decisions.
The carryover of a “peoples’ court” attitude, coupled
with the numerous CDP cases that have confronted the
Tax Court that were nothing more than protests against
the tax system, has created an almost schizophrenic
aspect to some of the court’s decisions in CDP cases. In
light of the recent expansion of the Tax Court’s jurisdiction through the amendment of Code Sec. 6330(d)(1),
the court should carefully reconsider some of its decisions in CDP cases. Cases involving taxpayers who are
protesting the tax system, cases involving taxpayers who
cannot reasonably pay their tax liabilities, and cases
involving taxpayers who have been unfairly treated by
the collection processes of the IRS do not fully describe
the universe of cases that fall within Code Sec. 6330.
All federal tax disputes involving collection issues
are now subject to judicial supervision by the Tax
26
Court. The federal government has a single system
for the collection of most taxes, and related penalties and interest. Consequently, federal tax collection
disputes for a wide variety of cases, including a wide
variety of cases under Code Sec. 6330(c)(2)(B), are
now subject to judicial review by the Tax Court.
Because Code Sec. 6330 encompasses two distinct
types of cases, the multiple opinions in Giamelli
should be viewed as a dialogue that calls for the Tax
Court’s careful review of its practices and procedures
as well as the court’s interpretation of the law in CDP
cases. CDP cases are an instance in which all of the
cases cannot be wrapped in a single garment.
In commenting on the statement in the majority
opinion that “[w]e note that our jurisdiction pursuant
to section 6330(d) differs from our jurisdiction under
section 6213(e).”13 Judge Swift points out that the
court’s recognition of this difference calls into question
some of the court’s early decisions in CDP cases. As
Judge Swift indicates in his dissenting opinion, the Tax
Court has been erratic in its recognition of the differences between CDP cases and deficiency cases.
For substantive cases, cases under Code Sec.
6330(c)(2)(B), the court serves its purposes well when
the court grants latitude for the correction of errors
in the application of the tax system to taxpayers who
have not had an opportunity for judicial review of
their circumstances. However, in cases in which the
sole issue is the propriety of a collection action, the
court will serve its purposes better by applying both
to Respondent,
Re po
ond
dent and to taxpayers, the strict rule that it
espouses—the
es
pouses th
he record of a CDP hearing must clearly
establish that Respondent gave a full and fair opportunity to the taxpayer to address all issues involving
the collection of tax, and that Respondent did not
abuse his discretion in denying the taxpayer relief
from the proposed collection action.14
In an appeal to the Tax Court of a decision in a
CDP hearing, different sets of rules must apply to
an appeal of a decision in a hearing raising an issue
pursuant to Code Sec. 6330(c)(2)(B), as distinguished
from an appeal of a decision in a hearing involving
solely collection action under Code Sec. 6330(c)(2)
(A). From some of the Tax Court’s earliest decisions in
CDP cases, the court has recognized that there must
be different sets of rules for the two types of CDP
cases. However, in many of the decisions the court
has rendered in CDP cases over the past eight years,
the court has failed to carefully consider the nature of
the particular CDP case before it as it struggled, on a
largely ad hoc basis, to apply the law in CDP cases.
April–May 2008
Conclusion
Anyone who is interested in CDP cases should carefully read Giamelli, although the case should never
be cited as controlling authority. Giamelli should be
regularly considered for its guidance in the refinement
of the practices and procedures applicable to CDP
cases. However, Giamelli is not “reliable” law.
The Tax Court should be applauded for addressing as well as it has a difficult area of jurisprudence
which was thrust upon the court with little guidance.
Congress created CDP hearings to the great dismay of
Respondent in order to curb what Congress perceived
as abuses in the collection processes. The idea for
CDP hearings may have been well conceived, but the
implementing legislation was not well considered.
The Tax Court is stuck with CDP cases for the foreseeable future. As a consequence of the amendment
of Code Sec. 6330(d)(1), it is likely the Tax Court
will experience an increase in the number of CDP
cases filed. It is also likely the court will experience a
significant increase in the number of CDP cases that
involve substantive determinations pursuant to Code
Sec. 6330(c)(2)(B). The mundane collection cases
under Code Sec. 6330(c)(2)(A) that have so badly
muddied the CDP waters are not likely to significantly
increase in numbers, although it is likely such cases
will become more challenging as taxpayers, and their
representatives, become more proficient in availing
themselves of the CDP hearing process.
The Tax Court’s views regarding CDP cases have
evolved over the past eight years. In some respects
the diversity of views in Giamelli illustrates that evolution. As a consequence of the amendment to Code
Sec. 6330(d)(1), the evolution is likely to continue for
the foreseeable future, and at an accelerated rate.
ENDNOTES
1
2
3
4
5
6
7
J. Giamelli, 129 TC 107, Dec. 57,155
(2007).
Judge Goeke authored the opinion of the
court. Judges Cohen, Halpern, Chiechi, Foley, Thornton, Haines, Kroupa and Holmes
concurred in the opinion.
See, L. Greene-Thapedi, 126 TC 1, Dec.
56,401 (2006). In Greene-Thapedi the tax liability
ability for which
w
a decision upholding a proposed
p sed coll
pos
collection
ec
action was co
collected
ected w
while
the appeal
app
peal was
w pending.
en
In Greene-Thapedi,
ene-Tha
thee so
sole
le iissue
ssue appealed
ppealed to th
the
e Tax C
Court
was Respondent’s
Reespo d
denial
d
off relieff from
f
his
proposed collection action.
on The
The court
u held in
Greene-Thapedi that
at the
t collection of
of the tax
liability rendered moot the taxpayer’s appeal
of the IRS’s proposed collection action. In
footnote 6 of the majority opinion, the court
misstates its holding in Greene-Thapedi. The
court’s erroneous description of its opinion
in Greene-Thapedi may explain the majority’s error in Giamelli.
Greene-Thapedi, id.
Giamelli, supra note 1, at 15.
Judge Haines agreed with Judge Wherry’s
concurring opinion.
R.B. Magana, 118 TC 488, Dec. 54,765
8
9
10
(2002).
Judges Colvin, Wells, Laro and Vasquez agreed
with Judge Swift’s dissenting opinion.
Code Sec. 6330(c)(2) provides:
(2) ISSUES AT HEARING.—
(A) In General.—The person may raise
at the hearing any relevant issue relating to the unpaid tax or the proposed
levy, including—
(i) appropriate spousal defenses;
(ii) challenges to the appropriateness
of collection actions; and
(iii) offers of collection alternatives,
which may include
d posting o
of a bond,
the
he substitution
substitutio of other assets,
asse s, an
installment
ll
agreement, or an offer-inff
compromise.
(B) Underlying Liability.—The person
may also raise at the hearing challenges to the existence or amount of
the underlying tax liability for any tax
period if the person did not receive
any statutory notice of deficiency for
such tax liability or did not otherwise
have an opportunity to dispute such
tax liability.
Judges Colvin, Swift, Laro and Gale agreed
11
12
13
14
with Judge Marvel’s dissenting opinion.
As part of the Pension Protection Act of 2006
(P.L. 109-280), Code Sec. 6330(d)(1) was
amended to read:
(1) JUDICIAL REVIEW OF
DETERMINATION.—The person
may, within 30 days of the determination under this section, appeal such
determination to the Tax Court (and
the Tax Court shall have jurisdiction
with respect to such matter).
The Joint Committee on Taxation stated
the express reason for this change was
to place all appeals of determinations in
CDP cases under the jurisdiction of the Tax
Court.
Giamelli, supra note 1, at 44.
Giamelli, supra note 1, at 16.
See, e.g., Judge Nimms’ decision in D.L.
Samuel, 94 TCM 392, Dec. 57,141(M), TC
Memo 2007-312. Judge Nimms’ thoughtful
analysis of this difficult case is excellent, but
his decision to remand the case is unfortunate. Judge Nimms also was far too gentle
in his treatment both of a difficult taxpayer,
and of the IRS’s inability to pragmatically
address a difficult collection case.
This article is reprinted with the publisher’s permission from the JOURNAL OF TAX PRACTICE &
PROCEDURE, a bi-monthly journal published by CCH, a Wolters Kluwer business. Copying or
distribution without the publisher’s permission is prohibited. To subscribe to the JOURNAL OF
TAX PRACTICE & PROCEDURE or other CCH Journals please call 800-449-8114 or visit
www.CCHGroup.com. All views expressed in the articles and columns are those
of the author and not necessarily those of CCH.
JOURNAL OF TAX PRACTICE & PROCEDURE
27