Court Opinion

ID: 4550415
Source: CourtListenerOpinion
Date Created: 2020-07-22 21:00:20.047143+00
Date Added: 2024-06-11T08:39:53.289314
License: Public Domain

NONPRECEDENTIAL DISPOSITION
                 To be cited only in accordance with Fed. R. App. P. 32.1

                United States Court of Appeals
                                 For the Seventh Circuit
                                 Chicago, Illinois 60604

                                  Submitted July 7, 2020*
                                   Decided July 22, 2020

                                          Before

                        DIANE S. SYKES, Chief Judge

                        FRANK H. EASTERBROOK, Circuit Judge

                        MICHAEL S. KANNE, Circuit Judge

No. 19-2121

PAMELA E. VEAL-HILL,                          Appeal from the United States Tax Court.
    Petitioner-Appellant,

       v.                                     No. 1517-17

COMMISSIONER OF                               Richard T. Morrison,
INTERNAL REVENUE,                             Judge.
     Respondent-Appellee.

                                        ORDER

       After reaching a settlement in a dispute with the Internal Revenue Service,
Pamela Veal-Hill filed a motion for attorney’s fees and administrative costs, as well as
damages for intentional infliction of emotional distress. The Tax Court denied the
motion, explaining that it lacked jurisdiction over her tort claim and that she could not
recover fees or costs because she failed to exhaust administrative remedies. We affirm
the judgment and order Veal-Hill’s attorneys to show cause why they should not be
sanctioned for filing briefs that do not remotely confront the issues in this appeal.

       *We previously determined that oral argument is unnecessary to resolve this
appeal, so the case is submitted on the briefs and the record. FED. R. APP. P. 34(a)(2)(C).
No. 19-2121                                                                          Page 2

       This suit stems from an audit of Veal-Hill’s 2013 and 2014 tax returns. After
completing its examination in July 2016, the IRS sent Veal-Hill a letter identifying
proposed changes to her returns, showing that she owed nearly $84,000 in back taxes
and penalties. The letter stated that if she did not agree with the IRS’s findings, she
could request a meeting with a revenue agent, and if that did not resolve the dispute,
she could file (within 30 days) a written request for a conference with the agency’s
Office of Appeals. Veal-Hill did not respond to the letter, so in December 2016 the IRS
sent her a formal Notice of Deficiency incorporating the unchallenged audit findings.

        In January 2017 Veal-Hill timely petitioned the Tax Court for a redetermination
of her tax liabilities. After answering the petition, the Commissioner of Internal
Revenue asked the Office of Appeals to review the case. Ultimately, after Veal-Hill
furnished hundreds of pages of additional documents and nine affidavits, the appeals
officer recommended that the Commissioner retract most of the deficiencies identified
in the audit. The parties filed a joint stipulation in the Tax Court, agreeing that Veal-Hill
owed approximately $550 in taxes and no penalties. The settlement resolved “all of the
issues … except [Veal-Hill’s] claim for litigation and administrative costs.”

        Veal-Hill then filed a motion for litigation costs under 26 U.S.C. § 7430(a) seeking
approximately $44,000 in attorney’s fees. She also sought compensatory and punitive
damages for intentional infliction of emotional distress because the revenue agent
allegedly conducted the audits in an “outrageous, incompetent[,] and extremely
reckless manner.” The Commissioner opposed the motion, arguing in part that
Veal-Hill had not exhausted administrative remedies with respect to her claim for costs
and fees as required by 26 U.S.C. § 7430(b)(1). Veal-Hill attached a “Protest and Request
for Appeals Conference” dated April 2, 2019, and directed to the IRS Appeals Office to
her reply in which she asked the agency to consider her (already resolved) tax liabilities
for 2013 and 2014 and her motion for litigation costs. It is not clear whether she also
filed this written protest with the IRS directly.

        The Tax Court denied Veal-Hill’s motion, concluding that she could not recover
litigation costs because she did not exhaust administrative remedies before filing her
petition. The judge also concluded that he lacked jurisdiction over her tort claim.

        Veal-Hill appeals both rulings. Her opening brief, signed by her two attorneys, is
practically devoid of coherent legal argument and primarily focuses on irrelevant topics
like biblical ethics and the life story of one of the attorneys. The reply brief is more of
No. 19-2121                                                                           Page 3

the same. Although we could dismiss the appeal on this basis alone, see FED. R. APP.
P. 28(a) & 38, the merits here are straightforward, so we will address them.

        First, the Tax Court did not abuse its discretion in denying Veal-Hill’s motion for
litigation costs under § 7430. See Zinniel v. Comm’r, 883 F.2d 1350, 1355 (7th Cir. 1989)
(abuse-of-discretion standard for reviewing § 7430 motions). “[L]itigation costs shall not
be awarded … unless the court determines that the prevailing party has exhausted the
administrative remedies available to such party within the [IRS].” § 7430(b)(1). For
matters in which a conference with the IRS Office of Appeals is available to resolve
disputes, a party exhausts administrative remedies only by (1) participating in a
conference “prior to filing a petition in the Tax Court” or (2) requesting a conference,
even if none is granted, “prior to the issuance of a statutory notice [of deficiency].”
26 C.F.R. § 301.7430-1(b). Veal-Hill did neither. In fact, she “chose” to bypass the
administrative appeals process because she believed the Tax Court would be more
impartial than the IRS. But “believ[ing] a conference would not aid in the resolution of
the tax dispute” is not a valid reason for failing to request one. Id. § 301.7430-1(g)
(Example 9). And even assuming Veal-Hill submitted her written protest to the IRS in
April 2019, belatedly seeking an appeals conference more than two years after receiving
the notice of deficiency and filing a petition does not satisfy the exhaustion requirement.
See id. (Example 11).

        Second, the Tax Court lacks subject-matter jurisdiction over Veal-Hill’s tort claim
for intentional infliction of emotional distress. “The Tax Court is a court of limited
jurisdiction[] and possesses only such adjudicatory powers as Congress has expressly
conferred on it in the Internal Revenue Code.” Sanders v. Comm’r, 813 F.2d 859, 861
(7th Cir. 1987); see also 26 U.S.C. § 7442. As Veal-Hill admits in her reply brief, no statute
grants the Tax Court jurisdiction over common-law tort claims. And in any case, she
could not use a motion for litigation costs under § 7430 to bring one; as we have
observed, that section is neither “an independent grant of jurisdiction to the Tax Court,
nor an enlargement of the [T]ax [C]ourt’s jurisdiction.” Sanders, 813 F.2d at 862. That
claim would have to be brought in a court with original jurisdiction over common-law
torts, though we are not suggesting that Veal-Hill has grounds to do so.

       The judgment of the Tax Court is AFFIRMED. Because the appeal is frivolous
and Veal-Hill’s brief is nearly incoherent and discusses irrelevant subjects at
inexcusable length, we order her lawyers, Edward A. Williams and Crystal L. Johnson,
to show cause within 30 days why they should not be sanctioned for violating Federal
Rules of Appellate Procedure 28(a)(6)–(8) and 38.