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.
The Comprehensive Interpretation of Section 7463(f) in Schwartz v. Commissioner
In Schwartz v. Commissioner, the Tax Court held that the jurisdictional limit on a section 6330(d) appeal under section 7463(f)(2) of the Code is the total amount being appealed. The calculation used by the Tax Court is distinct from that of the limits described in section 7463(a). The Schwartz court made its decision based on a literal interpretation of section 7463(f)(2) using the plain meaning rule. Perhaps inadvertently, it interpreted only a portion of the entire sentence. Had the Tax Court read the entire provision, it would have discovered strong evidence to support the conclusion that an appeal under section 6330(d) has a limit of $50,000 per any one taxable period as described in section 7463(a). Schwartz, in fact, demonstrates a case where several approaches to statutory interpretation yield the same result: a result opposite to the ruling of the Tax Court.
Commentators and the courts, including the Tax Court, have written pages of literature and opinions over which form of statutory interpretation is paramount. Literal, nonliteral, structural or purposive, and canonical interpretations have all been cited and used across-the-board. In Supreme Court opinions, the Court has used “dictionary meanings of words, linguistic canons of construction, the way the specific provision being construed relates to the statute as a whole, or to other legislative enactments.” Other courts have followed suit.
This Note proposes that the reasoning by the Tax Court should be set aside as an incomplete interpretation of section 7463(f)(2). Varying interpretations, whether literal or nonliteral, call for further analysis into the statute beyond the text.
A brief overview on the development of the “small tax case procedures” as described in section 7463 and the various acts passed by Congress to facilitate continued use of this advantageous procedure is provided in Part I. Underlying this section is the strong policy of efficiency and ease for the layperson. Additionally, a look into the appeals process within the Service, leading to a section 6330(d) appeal, is provided as factual background for a better understanding of the section at issue.
Part II examines the Tax Court’s ruling that the plain language clearly does not require any other application but that of the total amount of a section 6330(d) appeal.Part III discusses the varying interpretations and illustrates an analysis that leads to an opposite conclusion than that of the Schwartz court. The “Thrust” canon of construction the court utilized, better known as the “Plain Meaning Rule,” is applied to the entire provision at issue, and its counterpart “Parry,” as described by Karl Llewellyn, are explored. Two chief approaches to interpreting a statute, textualist and purposive or structural, as they relate to the Schwartz opinion, are integrated into this section. Despite the varying interpretation methods, each leads to the outcome that the Tax Court should have reached: the same taxable period limits of section 7463(a) should apply to section 7463(f)(2).