Court Opinion

ID: 4474155
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:10:47.303567+00
Date Added: 2024-06-11T12:23:11.424745
License: Public Domain

Laro, J., dissenting: I respectfully disagree with the opinions adopted by the majority and agree with the dissenting views of Judge Foley. I write separately in this important case to stress the importance of an appeal to a higher court. I also write to stress what I consider to be the legislative mandate that taxpayers must be afforded face-to-face collection due process (CDP) hearings upon all proper requests. The U.S. Department of Justice, the Internal Revenue Service (IRS) Office of Chief Counsel (Chief Counsel), and the IRS Office of Appeals (Appeals) have concluded that all taxpayers possess such a right and that this right may not be denied. See Chief Counsel Advisory 200123060 (June 8, 2001) (the advisory). But for the majority, no one who has considered this issue has concluded differently. 1. Majority’s Factual Finding of an Abandonment of Issues Is Contrary to the Well-Supported Finding of the Trial Judge The majority conclude that petitioners have abandoned all arguments and contentions not articulated clearly in their pleadings and trial memorandum and that petitioners’ sole argument in this case was one rejected by the Court in Davis v. Commissioner, 115 T.C. 35 (2000). Judge Foley has concluded differently. As I understand Judge Foley’s opinion, at issue in this case (exclusive of the jurisdictional issue) is whether Appeals held the requisite CDP hearing with petitioners (the hearing requirement). Such a conclusion by Judge Foley is adequately supported by the record. Petitioners allege in their petition that they want to meet with Appeals in person and that the failure of Appeals to schedule a face-to-face conference has deprived them of the ability to present their case. The petition prays that the Court direct Appeals to “Hold a meaningful due process hearing as required by law”. The fact that the hearing requirement is at issue is also seen clearly from the record and from the posttrial brief of respondent, who, like Judge Foley, but unlike the majority, has been involved in this judicial proceeding since its start. But for an argument for sanctions under section 6673, the sole argument that respondent advances on brief concerns the hearing requirement.1 Although petitioners failed to file a posttrial brief, their counsel, Ms. Griggs, stated at trial that “by not having a hearing date they [petitioners] were not afforded an adequate right to have a hearing.” Tr. at 4. Further, she stated: “I do not believe that they’ve been afforded due process proceedings in this [case by virtue of the lack of a CDP hearing], and I believe they should be allowed to have a hearing.” Id. at 5. The Court even clarified for the parties that the hearing requirement remained at issue by stating: “All right. So that [the hearing] issue is not being conceded by Petitioners.” Id. I am at a loss to reconcile these statements with the majority’s conclusions that: (1) “In the entire course of this judicial proceeding, petitioners have raised only one substantive issue that they want to be considered; i.e., whether there was a sufficient record showing that the taxes in issue were assessed under section 6203 and section 301.6203-1, Proced. & Admin. Regs.”, (2) “When this case was called for trial, petitioners’ counsel gave no indication that petitioners wanted to contest anything other than the issue [discussed by the majority]”, and (3) £iWe do not construe the instant appeal as being predicated on allegations that respondent failed to offer petitioners a hearing per se.” Majority op. pp. 186-188. The majority focus exclusively on their reading of the petition and make no reference to the statements at trial or, for that matter, Rule 41(b)(1), which mandates that an issue not raised in the pleadings be treated as if raised in the pleadings when it is tried with the express or implied consent of the parties. The fact that the hearing requirement was tried by the express or implied consent of the parties (and, therefore, is at issue in this case) is evidenced not only by the statements of all of the speakers at trial but by the fact that, with the exception of the section 6673 argument, respondent limited his brief to that one issue. E.g., Knapp v. Commissioner, 90 T.C. 430, 439 (1988), affd. 867 F.2d 749 (2d Cir. 1989); Ewart v. Commissioner, 85 T.C. 544, 547-548 (1985), affd. 814 F.2d 321 (6th Cir. 1987); Estate of Belcher v. Commissioner, 83 T.C. 227, 227 n.2 (1984) (Court reviewed); Sharon v. Commissioner, 66 T.C. 515, 527 n.5 (1976), affd. 591 F.2d 1273, 1275 (9th Cir. 1978); see also Bishop v. Commissioner, T.C. Memo. 2001-82; McGee v. Commissioner, T.C. Memo. 2000-308. The majority opinion contains no statement as to why the majority do not respect the factual finding of the trial Judge that the hearing requirement is at issue. Nor am I aware of any legitimate reason why, under the facts herein, the majority alone may consider that issue abandoned. The question of whether a party has abandoned an issue involves a factual determination that rests on the facts and circumstances of the case, and the trial Judge is the one who is best able to make that determination. See United States v. Bencher (In re Bencher), 1992 U.S. Dist. LEXIS 9869, 1992 WL 687180 (W.D. Mich. June 11, 1992) (court applied a clearly erroneous standard in reviewing a bankruptcy court’s finding that the IRS had waived an argument in the bankruptcy court). I know of no principle of law that allows a Judge who did not preside over a trial to conclude contrary to the trial Judge that an issue has been abandoned. 2. Pertinent Legislative History Congress promulgated section 6330 to establish “formal procedures designed to insure due process where the IRS seeks to collect taxes by levy”. S. Rept. 105-174, at 67 (1998), 1998-3 C.B. 537, 603. The Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3401, 112 Stat. 746, of which section 6330 was a part, fortified taxpayers’ rights mainly by the addition of new taxpayers’ rights. Its enactment followed a year of congressional investigations and hearings over the future of the IRS, resulting in highly publicized criticisms of the agency’s collection methods. Mesa Oil, Inc. v. United States, 86 AFTR 2d 2000-7312, 2001-1 USTC par. 50130 (D. Colo. 2000). The Senate Finance Committee believed that the addition of section 6330 would afford to taxpayers in dealing with the IRS rights which were similar to the rights afforded to all persons in dealing with any other creditor. Id. at 67, 1998-3 C.B. at 603. To this end, the committee declared, the Commissioner would by virtue of section 6330 need henceforth to “afford taxpayers adequate notice of collection activity and a meaningful hearing before the IRS deprives them of their property.” Id. The committee designed these procedures “to afford taxpayers due process in collections” by the IRS and believed that these procedures would “increase fairness to taxpayers.” Id. The committee averred emphatically as to a proposed levy that a “taxpayer may demand a hearing to take place before an appeals officer who has had no prior involvement in the taxpayer’s case * * * [and] If the taxpayer demands a hearing within that [prescribed] period, the proposed collection action may not proceed until the hearing has concluded and the appeals officer has issued his or her determination.” Id. at 68, 1998-3 C.B. at 604 (emphasis added); see also H. Conf. Rept. 105-599, at 265 (1998), 1998-3 C.B. 747, 1019 (similar language). 3. CDP Hearing Allowed as a Matter of Right Section 6330(a) provides unambiguously that taxpayers have a “right to a [CDP] hearing under this section before such levy is made”. (Emphasis added.) Although the majority recognize that Appeals did not honor petitioners’ request for a face-to-face CDP hearing, the majority hold that petitioners are not entitled to participate (let alone face to face with an Appeals officer) in such a hearing.2 The majority acknowledge that petitioners’ request for the hearing was proper. Yet, the majority deny petitioners their legislatively mandated right to meet with Appeals in a CDP hearing because, they find, the petition fails to set forth any position that this Court considers meritorious.3 The majority conclude without a citation to authority that Appeals need not hold the hearing because “We do not believe that it is either necessary or productive”. Majority op. p. 189. The majority misapply relevant statutory text in that their opinion conflicts directly with the explicit requirements of section 6330(a) (taxpayers have a “right to a hearing”) and of section 6330(b)(1) (“If the person requests a hearing under subsection (a)(3)(B), such hearing shall be held by the Internal Revenue Service Office of Appeals”. (Emphasis added.)). Although the majority may be holding sub silentio that the Court can waive this legislatively mandated right in certain cases, I know of no grant of authority that would allow the Court do so under the facts at hand, especially seeing that Chief Counsel has advised Appeals that it “must” hold a face-to-face CDP hearing with any taxpayer who requests one. See the advisory; cf. Kennedy v. Commissioner, 116 T.C. 255, 262 (2001), wherein the Court noted that “section 6330 does not authorize the Commissioner to waive the time restrictions imposed therein.” In fact, respondent has not even asked the Court to consider the right waived in the instant setting. 4. Need for Appeals To Obtain Verification at the Hearing The majority fail to discuss persuasively the fact that petitioners have alleged in paragraph 6(a) of their petition that “The appeals officer took the position that the assessment is valid without verifying that there was in fact an assessment.” Under the statutory scheme, it would appear that petitioners are correct in this assertion. The statute requires explicitly that this verification come “at the hearing”.4 Sec. 6330(c)(1) (“The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met”. (Emphasis added.)). The legislative history reinforces this result by stating that “jDuring the hearing, the IRS is required to verify that all statutory, regulatory, and administrative requirements for the proposed collection action have been met.” S. Rept. 105-174, supra at 68, 1998-3 C.B. at 604 (emphasis added). Absent a hearing, I do not see how the Commissioner can meet this “at the hearing” verification requirement. The mere fact that the verification may have come at a time other than “at the hearing” is of no concern. Congress obviously believed it important to require explicitly and unambiguously that this verification occur “at”, rather than before or after, the hearing. As the Supreme Court has instructed lower courts as to the proper approach to statutory construction: canons of construction are no more than rules of thumb that help courts determine the meaning of legislation, and in interpreting a statute a court should always turn first to one, cardinal canon before all others. We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then, this first canon is also the last: judicial inquiry is complete. [Conn. Natl. Bank v. Germain, 503 U.S. 249, 253-254 (1992); citations and quotation marks omitted.] 5. Right To Raise New Issues at the Hearing Section 6330(c)(2)(A) provides unambiguously that a taxpayer “may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy”.5 (Emphasis added.) The legislative history reinforces this result by also stating unambiguously that a taxpayer is entitled to raise any relevant issue at (as opposed to before) the hearing and that relevant issues may “include (but not limited to)” the issues set forth in section 6330(c)(2)(A). S. Rept. 105-174, supra at 68, 1998-3 C.B. at 604; see also H. Conf. Rept. 105-599, supra at 265, 1998-3 C.B. at 1019 (similar language). I conclude that petitioners were entitled to raise at a CDP hearing any relevant issue related to the Commissioner’s proposed levy and that the majority are wrong in not allowing petitioners to have a CDP hearing at which to raise relevant issues. 6. Substituting Their Judgment for the Judgment of Appeals The CDP hearing allows the Appeals officer to exercise his or her judgment as to the propriety of a proposed collection action and to make a resulting determination from matters discussed at the hearing. See, e.g., sec. 6330(c)(2) and (3). Absent an Appeals officer’s consideration of issues at a hearing, I do not believe that there is any determination of an Appeals officer that this Court could sustain. Given the statement in the legislative history that this Court is “expected to review the appellate officer’s determination for abuse of discretion”, S. Rept. 105-174, supra at 68, 1998-3 C.B. at 604; see also H. Conf. Rept. 105-599, supra at 266, 1998-3 C.B. at 1020 (similar language), I find inescapable the conclusion that where an Appeals officer fails to hold a properly requested CDP hearing, that there is an abuse of discretion. Indeed, to my mind, the mere fact that the Appeals officer here did not comply with the statute and hold the legislatively mandated hearing with petitioners, as they properly requested, is a per se abuse of discretion. I disagree with the majority’s conclusion that we may decide this case favorably to respondent on the basis of the record at hand. The notice of determination concludes that: (1) All procedural, administrative, and statutory requirements were met; (2) the Form 4340 satisfied the requirements of section 6203; (3) petitioners failed to present any collection alternatives; and (4) balancing of the taxpayer’s privacy interests and the need for collection weighed in favor of the proposed levy. Absent a hearing, I do not believe that the Court can properly conclude that the Appeals officer did not abuse his discretion. To be sure, the Appeals officer abused his discretion at least by concluding that all statutory requirements had been met. How could those requirements have been met when respondent never held the statutorily required CDP hearing or performed at the appropriate time the required verification? The legislative history clarifies that the role of this Court as to a proposed levy is limited to reviewing the Appeals officer’s determination as to the propriety of a levy, as well as assuring that the procedural requirements have been met. S. Rept. 105-174, supra at 68-69, 1998-3 C.B. at 604-605; see also H. Conf. Rept. 105-599, supra at 266, 1998-3 C.B. at 1020 (similar language). In contrast with the result of the majority’s opinion, our role is not to substitute our judgment for that of the Appeals officer as to the propriety of a levy. The conferees provided specifically in their report that they expected that “the appeals officer will prepare a written determination addressing the issues presented by the taxpayer and considered at the hearing”, H. Conf. Rept. 105-599, supra at 266, 1998-3 C.B. at 1020, and that the Court must review that determination, 7. The Advisory The majority’s conclusion that Appeals need not hold a CDP hearing with petitioners is inconsistent with, and unexplainably significantly broader than, the Commissioner’s administrative practice on this subject. In the advisory, the Chief Counsel stated that a meeting of Chief Counsel, Appeals, and the U.S. Department of Justice had resulted in the decision that “Appeals would strive to grant, at a minimum, face-to-face conferences to all requesting taxpayers.” The advisory was generated when Las Vegas Appeals (L.V. Appeals) informed Chief Counsel that L.V. Appeals intended to no longer schedule a face-to-face or telephone CDP conference when a taxpayer’s request for a CDP hearing set forth only frivolous or constitutional arguments. The Chief Counsel, upon consultation with the U.S. Department of Justice and Appeals, concluded in the advisory that the intended practice did not satisfy the statutory requirements of section 6330. The Chief Counsel advised Appeals (and Appeals agreed) that it had to conduct a face-to-face CDP hearing with any taxpayer that requested such a hearing, regardless of the matter set forth in the request, that the manner of the hearing should be “informal”, and that the length of the hearing should hinge on the amount of time necessary to discuss “relevant” issues. The advisory declares unequivocally that: “A taxpayer is entitled to a CDP hearing even if he [or she] will raise only frivolous or constitutional arguments because the appeals officer must cover the statutory requirements of sections [sic] 6330(c)(1) and (3)(C) of verification and balancing.” (Emphasis added.) Pursuant to the legislative mandate in section 6330(c)(1), “The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.” (Emphasis added.) Pursuant to the legislative mandate of section 6330(c)(3)(C), the Appeals officer must consider “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.” The fact that the majority do not give proper regard to the Commissioner’s administrative practice is, to my mind, a mistake. Section 6330 is a relatively new provision, and the Commissioner is obviously looking to the courts for guidance as to the proper rules which he must apply to implement that provision properly. Given the fact that he has announced that he is now providing a CDP hearing to all taxpayers who request one, regardless of their motives, I believe it wrong for the majority to undermine that position by usurpation. Foley and Vasquez, JJ., agree with this dissenting opinion.   Respondent’s specific argument on brief is that Appeals need not hold a CDP hearing face to face and that the correspondence between Appeals and petitioners constituted the requisite hearing. Respondent’s brief predates the advisory and is inconsistent with it.    While the majority recognize that sec. 6330(a) and (b) provides on its face that taxpayers have a right to a CDP hearing, majority op. p. 183, the majority make no further reference to this “right”.    The majority essentially find that petitioners would have made only one argument at their CDP hearing, had one in fact been held. I disagree. In Davis v. Commissioner, 115 T.C. 35 (2000), the taxpayer set forth in the request for a CDP hearing only the argument that the Commissioner’s assessment was invalid for lack of a valid summary record of assessment. At the CDP hearing, the taxpayer advanced two additional arguments for consideration.    The majority conveniently omit from their paraphrasing of sec. 6330(c)(1) that the verification must occur “at the hearing”. See majority op. p. 184.   The majority conveniently omit from their paraphrasing of sec. 6330(c)(2)(A) that the taxpayer is allowed to raise any relevant issue “at the hearing”. See majority op. p. 184.