Opinion ID: 563670
Heading Depth: 2
Heading Rank: 3

Heading: The Applicable Cost of Living Adjustment to the $75 an Hour Rate

Text: 33 The Commissioner argues on appeal that the Tax Court erred in dating colas to the $75 an hour rate for attorneys' fees from 1981, the date the EAJA became effective, instead of from 1986, when Sec. 7430 first allowed for colas to a $75 hourly fee rate. We agree. 34 In dating Sec. 7430 colas from 1981, the Tax Court stated that it was following both Congress' desire to conform the EAJA and Sec. 7430, and this circuit's decision in Trichilo v. Secretary of Health and Human Services, 823 F.2d 702 (2d Cir.1987), which held that colas under the EAJA should be dated from 1981, the date the EAJA originally became effective, instead of 1985, the date of its reenactment after the first statute expired of its own accord. We believe, however, that the Tax Court overstated both precedents. 35 Congress clearly intended Sec. 7430 to follow the same fee structure as the EAJA when it amended the statute in 1986 to conform ... more closely to the Equal Access to Justice Act. H.R.Conf.Rep. No. 841, 99th Cong.2d Sess. Before that time, Sec. 7430 set forth no hourly fee reimbursement rate, but allowed simply for a maximum award of $25,000 in undifferentiated litigation costs. The 1986 amendment established the $75 an hour fee rate, and allowed courts to subsequently add colas to that rate. There is no evidence, however, that Congress intended to pre-date Sec. 7430's new structure to the date of the EAJA. If that had been Congress' intent, it would have been easy for Congress to make this known, or to have simply calculated a cola from 1981 to 1986, and made that the new base hourly rate. Instead, rather than completely conforming the statutes, Congress has made clear its intent to separate the awarding of litigation costs in the tax area from the general civil area to which the EAJA applies. For example, the EAJA specifically does not apply to tax cases; the statute defers to Sec. 7430 in connection with any proceeding to which section 7430 of the Internal Revenue Code of 1954 applies 28 U.S.C. Sec. 2412(e). Also, Sec. 7430 puts the burden on taxpayers to show that the position of the government was not substantially justified, whereas the EAJA authorizes courts to award costs to prevailing parties unless the court finds that the position of the United States was substantially justified, see 26 U.S.C. Sec. 7430(c)(4)(A)(i); 28 U.S.C. Sec. 2412(d)(1)(A) (emphasis added), thus making it more difficult for Tax Court litigants to win fee awards than for other civil litigants. Taxpayers seeking fees under Sec. 7430 must also show that they have exhausted all administrative remedies prior to commencing litigation, whereas the EAJA carries no similar requirement. See Sec. 7430(b)(1). Congress has thus set up two separate, albeit similar, fee award systems for tax and non-tax cases; the fact that they both contain a $75 an hour fee cap with colas cannot be read as an open invitation to transport wholesale the EAJA's cola commencement date to Sec. 7430. 36 Nor does our decision in Trichilo require such a result. The 1985 reenactment of the EAJA changed nothing in the statute and was mandated by the 1981 Act's sunset clause which caused the Act to expire of its own accord. Trichilo merely held that because the 1985 reenactment was intended to restore the 1981 Act as if [it] had not been repealed, colas to EAJA awards made after 1985 should be dated from 1981, when the $75 an hour fee structure with colas was first introduced. Trichilo, 823 F.2d at 706. The decision dealt specifically with the unique history and intent of the EAJA's 1985 reenactment and did not address the question of whether other statutes should use the EAJA's effective date in calculating their colas. 37 Putting aside, therefore, the Tax Court's erroneous determination that the starting date for the colas should be 1981, we are still left with the question of whether the starting date for colas should be 1983, when Sec. 7430 first became effective, or 1986, when the $75 an hour reimbursement rate was fixed and colas permitted. Colas are to be calculated, generally, with reference to the date on which [the statute] became effective ... Parks v. Bowen, 839 F.2d 44, 46 (2d Cir.1988); Wells v. Bowen, 855 F.2d 37, 43 (2d Cir.1988). Although Sec. 7430 first became effective in 1983, it did not allow for colas until 1986. We believe, therefore, that these adjustments should be calculated as of 1986, not 1983, because Sec. 7430's 1986 amendment, unlike the 1985 EAJA reenactment, did not restore the 1983 Sec. 7430 as if it had not been repealed, but substantially altered the statute's method of awarding and calculating fees. It established the $75 an hour fee structure with future colas in place of the previous $25,000 undifferentiated total fee cap. Because the concept of awarding colas was not in place until 1986, we decline to recognize an earlier starting date. 38