Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
A Different Point of Venue: The Plainer Meaning of Section 7482(b)(1)
*University of Florida, LL.M. (Taxation); Florida A&M University, J.D.
It is commonly believed that an appeal from the United States Tax Court should be in the federal circuit court where the taxpayer resides. Without any thought or discussion, everyone just accepts that section 7482(b)(1) prescribes this course of action. Indeed, the taxpayers, the government, and the courts all assume section 7482(b)(1) designates proper appellate venue to the regional United States Court of Appeals of the taxpayer’s residence. Lamentably, they are mistaken; this mass presumption is an emperor that has no clothes.
In fact, a plain reading of the Code confirms a different venue, the Court of Appeals for the District of Columbia, to be the only proper forum for an appeal in certain proceedings. Yet, the D.C. Circuit Court is never taken into account. This persistent oversight reveals a problem with section 7482(b)(1) deserving of congressional focus and clarification.
This Article closely examines section 7482(b), which provides proper venue for judicial review of Tax Court decisions. Focusing on the flush language, this Article explains that, contrary to popular belief, section 7482(b)(1) provides that the D.C. Circuit Court acts as the “default court” for appellate review. Additionally, because the Tax Court’s jurisdiction is constantly expanding, more and more types of tax cases should fall within this alternate venue.
Congress intentionally designated the types of Tax Court proceedings that are to be appealed in the regional circuit courts by enumerating them. Correspondingly, it chose not to include proceedings that rise from “newer” areas of Tax Court subject matter jurisdiction. Seven of these more recent jurisdictional grants, not specifically listed, are: (1) in 1976, the right to review disclosure actions; (2) in 1988, the right to review Service denials of reasonable administrative costs; (3) in 1996, the right to review Service denials of requests for interest abatement; (4) in 1997, the right to review worker classification disputes; (5) in 1998, the right to hear appeals of Service determinations in “collection due process” proceedings; (6) in 1998, the right to review Service denials of relief from joint and several liability for income taxes; and (7) in 2006, the right to review Service awards to whistleblowers. Consequently, because Congress chose not to list these seven jurisdictional grants within section 7482(b)(1), the Tax Court decisions that spring from these jurisdictions fall squarely in the D.C. Circuit Court for review.
As a starting point for analysis, Part II looks at the historical development of both the Tax Court and section 7482(b). Part II also expounds on how the current form of the venue provisions dates back to 1966, and how Congress has consciously amended section 7482(b)(1) by enumerating some of the subsequent jurisdictional grants to the Tax Court. Nonetheless, even though Congress has updated the enumeration in section 7482(b)(1) several times, and as recently as 1997, Congress has made no amendments regarding the above-mentioned, seven subject matter jurisdictional grants, which date back as far as 1976. This lack of action suggests that Congress determined these seven Tax Court jurisdictional areas were not to be specifically listed in section 7482(b)(1).
Part III highlights the previously described misreading of section 7482(b)(1) by scrutinizing the section’s language under the well-established canons of statutory construction. This part considers the fact that, to date, every appeal in these seven jurisdictional areas has been heard in the circuit court in which the individual taxpayers resided at the time they filed their Tax Court petitions. This has been the outcome despite the fact that usually only appeals “in the case of a petitioner seeking redetermination of tax liability” are supposed to be held in those circuit courts. This Article contends that some or possibly all of these seven jurisdictional grants do not involve petitioners seeking a redetermination of a tax liability. Therefore, cases stemming from these jurisdictional grants should not be appealed to the circuit court of the taxpayer’s residence. Instead, appeals from the Tax Court in these instances should go to the D.C. Circuit Court, as is clearly stated in the Code. In these types of cases, appeals are being held in the wrong circuit courts because apparently no party has yet objected to venue in the wrong circuit in the arguments presented.
Part IV provides concrete examples to help illuminate the arguments posited by this article. First, in the innocent spouse area, a definitive scenario shows how a taxpayer in the Sixth Circuit might use section 6015(e) to avoid a harsh “knowledge of the transaction” deduction rule applied by that circuit in the Purcell case. Next, Robinette shows how a taxpayer involved in a collection due process proceeding may avoid the precedent of the circuit court of her residence. Finally, a hypothetical illustrating forum shopping at the appellate level is extrapolated from the facts of the Montgomery case.
Finally, Part V concludes the article by suggesting a possible and, hopefully, practical solution to the misinterpretation of section 7482(b)(1). On the one hand, section 7482(b)(1) could be amended to specifically include the more numerous collection due process, interest abatement, and innocent spouse cases. These cases would most likely over-burden the D.C. Circuit Court and, additionally, could benefit from localized, regional review.On the other hand, centralizing appeals from the Tax Court in cases involving administrative costs, worker classification, disclosure actions, as well as whistleblower awards, may be quite sensible. By maintaining the D.C. Circuit Court’s jurisdiction to review the Tax Court’s decisions regarding these cases, section 7482(b)(1) establishes a uniform body of law for areas not frequently litigated. In effect, the D.C. Circuit would serve as a national court of tax appeals in those limited situations.