Court Opinion

ID: 2997833
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:39:11.040648+00
Date Added: 2024-06-11T13:38:34.709824
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

No. 04-3710
KEITH ORUM and CHERIE ORUM,
                                       Petitioners-Appellants,
                              v.

COMMISSIONER OF INTERNAL REVENUE,
                                         Respondent-Appellee.
                        ____________
            Appeal from the United States Tax Court.
            No. 18317-02L—Harry A. Haines, Judge.
                        ____________
       ARGUED MAY 2, 2005—DECIDED JUNE 23, 2005
                     ____________

  Before BAUER, EASTERBROOK, and EVANS, Circuit Judges.
  EASTERBROOK, Circuit Judge.            Keith Orum and
Cherie Orum file joint tax returns. This litigation concerns
their unpaid tax liabilities for 1998 and 1999. The amounts
they owe (more than $85,000) for these tax years are un-
contested. The Orums contend that the IRS must accept
installment payments; the IRS believes that it is entitled to
levy on the Orums’ liquid assets and real property. The Tax
Court sided with the Commissioner.
  Before collecting unpaid taxes by levy, a form of self help,
the Commissioner must notify a taxpayer and afford an
opportunity for a hearing, at which the taxpayer may
2                                                No. 04-3710

present “(i) appropriate spousal defenses; (ii) challenges to
the appropriateness of collection actions; and (iii) offers of
collection alternatives, which may include the posting of a
bond, the substitution of other assets, an installment agree-
ment, or an offer-in-compromise.” 26 U.S.C. §6330(c)(2)(A).
The Orums took advantage of this opportunity and proposed
to pay on an installment plan. The Commissioner accepted
the offer to remit $5,000 per month, starting on March 5,
2001. Over the next ten months, the Orums paid $25,000
rather than the required $50,000, and the Internal Revenue
Service then demanded immediate payment in full. Another
notice of intent to collect by levy followed, and in July 2002
the Orums asked for another hearing, proposing to resume
installment payments. The IRS said no, for several reasons:
(a) the first installment plan had failed; (b) the Orums were
not current on their taxes for years after 1999 and were not
remitting estimated tax (Keith Orum, a partner in Orum &
Roth, a patent-law firm, must use the estimated-tax route,
although Cherie Orum, a zookeeper, has income tax
deducted from wages); (c) the Orums had failed to provide
the Service with requested information, such as cash-flow
data for Orum & Roth and copies of bank statements.
Moreover, the Service concluded, the Orums’ income and
assets appeared sufficient to pay all taxes in full; the
Service accordingly was unwilling to take less or to post-
pone payment, leaving the Treasury at risk of any financial
reverses the family might suffer.
  Judicial review of such decisions is deferential, see Jones
v. CIR, 338 F.3d 463, 466 (5th Cir. 2003), and the Tax Court
held that the Commissioner did not abuse his discretion in
choosing immediate collection over another promise by
taxpayers who had demonstrated the unreliability of their
promises to pay.
 The Orums maintain that installment payments are so
much superior to seizing and selling property that the IRS
No. 04-3710                                               3

should be obliged to prefer them. They vow to do better if
given a second chance. Such arguments are unavailing, be-
cause the Judicial Branch does not instruct the Executive
Branch how to make executive decisions. See Norton v.
Southern Utah Wilderness Alliance, 542 U.S. 55 (2004). The
judicial task is to ensure that executive decisions conform
to law, and this decision is lawful. The Orums concede that
they owe the sums demanded, so 26 U.S.C. §6331(a)
authorizes collection by levy. They do not contend that the
Service used any improper criteria—for example, that it
hounds Democrats while going easy on Republicans. The
Commissioner gave notice, allowed a hearing, and made a
reasoned decision, which is supported by substantial evi-
dence—not only the collapse of the previous installment
plan but also the Orums’ failure to supply information and
keep current on new taxes. See 26 U.S.C. §6159, 26 C.F.R.
§301-7122-1.
  It would not do the Treasury any good if taxpayers used
the money owed for 2004 to pay taxes due for 1998, the
money owed for 2005 to pay taxes for 1999, and so on. That
would spawn more collection cycles yet leave a substantial
unpaid balance. The Service’s goal is to reduce and ulti-
mately eliminate the entire tax debt, which can be done
only if current taxes are paid while old tax debts are re-
tired. Whether that goal is best achieved by levy rather
than by allowing second chances is the sort of decision com-
mitted to executive officials. If there were any doubt, the
Orums’ conduct speaks volumes. They have pleaded for just
a little more time. Through the demand for hearings, and
review in two courts, they have obtained several additional
years, but they still have not paid their back taxes and are
accumulating new ones. A conclusion by the Service that the
Orums have decided to prefer consumption over meeting
their legal obligations would be hard to question.
  This disposes of the parties’ dispute about the means of
collecting the Orums’ 1999 taxes. The Tax Court held that
4                                                No. 04-3710

the Orums’ delay in seeking a hearing disentitled them to
any review with respect to the 1998 taxes. Because of that
delay, the taxpayers received not a §6330 hearing but an
“equivalent hearing” under 26 C.F.R. §301.6330-1(i)(1), and
the outcome of an “equivalent hearing” is not subject to
judicial review. 26 U.S.C. §6330(d). In this court the parties
debate whether the Orums should have received a hearing
under §6330 or an “equivalent hearing” under the regula-
tion with respect to their 1998 taxes, but neither side
thinks that the answer affects the propriety of the Commis-
sioner’s decision. If, as we have held, the Service is entitled
to collect the 1999 taxes by levy, it may do the same for the
1998 taxes.
   The parties, like the Tax Court itself, refer to the differ-
ence between statutory and equivalent hearings as “jurisdic-
tional,” because only the former is subject to review.
Federal courts must ascertain subject-matter jurisdiction
before taking up the merits. See Steel Co. v. Citizens for
Better Environment, 523 U.S. 83, 94-95 (1998). This may be
why the parties devoted so much attention to the difference
between statutory and regulatory hearings. But the Tax
Court, established under Article I rather than Article III, is
not limited to constitutional “cases” or “controversies.” Our
jurisdiction is secure, because the taxpayers filed a timely
notice of appeal. 26 U.S.C. §7482(a)(1). Whether the Orums
did what was necessary to put their claim before the Tax
Court is not the sort of “jurisdictional” question that Article
III and Steel Co. require a federal court to decide as the
first order of business (and to decide, indeed, whether the
parties raise it or not).
  Many a technical failing can be overlooked without trans-
gressing the special doctrine that confines Article III courts
to their subject-matter jurisdictions. See, e.g., Scarborough
v. Principi, 541 U.S. 401 (2004); Kontrick v. Ryan, 540 U.S.
443, 453-55 (2004). A deadline in an administrative claims-
processing rule differs from a limit on the subject-matter
No. 04-3710                                               5

jurisdiction of the Article III judiciary. When reviewing a
district court’s decision, a court of appeals may affirm on
any ground supported by the record, see Massachusetts
Mutual Life Insurance Co. v. Ludwig, 426 U.S. 479 (1976),
and 26 U.S.C. §7482(a) gives us the same authority vis-à-vis
the Tax Court as we have with respect to district courts. We
therefore need not decide when the Orums received the
notice, whether they took too long to respond, and the other
matters that affect the handling of their request for a
second installment plan for their 1998 taxes. Whether they
lose because they took too long to seek a §6330 hearing, or
because the Commissioner did not abuse his discretion, is
irrelevant.
  The Orums’ further arguments have been considered but
do not require discussion.
                                                 AFFIRMED

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                   USCA-02-C-0072—6-23-05