The failure of adversarial process in the administrative state

Indiana Law Journal

Volumn 84, Issue 1, 2009, Pages 57-134

  Camp, Bryan T ^a  

^a TEXAS TECH UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 62249196038     PISSN: 00196665     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (375)

1. Henry J. Friendly, Some Kind of Hearing, 123 U. PA. L. REV. 1267, 1279-80 (1974).
2. Bryan T. Camp, Tax Administration as Inquisitorial Process and the Partial Paradigm Shift in the IRS Restructuring and Reform Act of 1998, 56 FLA. L. REV. 1 (2004).
3. See, e.g., Leslie Book, The Collection Due Process Rights: A Misstep or a Step in the Right Direction?, 41 Hous. L. REV. 1145, 1160-61 (2002) ("[J]udicial review of. . . IRS collection hearings ... comprise a step in the progression of the rule of law principles that... permeate twentieth century legal culture.").
4. GERALD CARSON, THE GOLDEN EGG: THE PERSONAL INCOME TAX WHERE IT CAME FROM, HOW IT GREW 119(1977) (quoting statements J.P. Morgan made in Legal Tax-Dodging Upheld by Morgan, N.Y. TIMES, June 8, 1937, at 27). Carson termed this statement "the indiscretion of a lifetime." Id.
5. Examples of the historical separation of these functions can be found in Camp, supra note 2; William T. Plumb, Tax Refund Suits Against Collectors of Internal Revenue, 60 HARV. L. REV. 685 (1947);
6. Joseph J. Thorndike, Reforming the Internal Revenue Service: A Comparative History, 53 ADMIN. L. REV. 717 (2001). For a defense of the conceptual separation, see Camp, supra note 2. The separation is not absolute in practice. For example, collection personnel also perform some liability determination functions in the form of investigating and assessing I.R.C. § 6672's Trust Fund Compliance Penalty and investigating taxpayers who have not filed any returns.
7. See Camp, supra note 2, at 37-53.
8. I.R.C. § 6203 (2000). Unless otherwise noted, all citations to code sections are to the Internal Revenue Code, beginning at 26 U.S.C. § 1 (2000).
9. See I.R.C. § 6501(a) (2000) (stating that the IRS must either assess or bring proceedings in court without assessment within three years after the return is filed); see also Ewing v. United States, 914 F.2d 499, 502-03 (4th Ctr. 1990) (rejecting taxpayer's argument that, prior to assessment, there can be no tax liability and therefore no "payment" of taxes).
10. See I.R.C. § 441 (2000) ("[T]axable income shall be computed on the basis of the taxpayer's taxable year.");
11. Healy v. Comm'r, 345 U.S. 278, 281 (1953) ("One of the basic aspects of the federal income tax is that there be an annual accounting of income. Each item of income must be reported in the year in which it is properly reportable and in no other.") (internal footnotes omitted);
12. Edelson v. Comm'r, 829 F.2d 828, 834 (9th Cir. 1987) ("[T]ax liabilities, though unassessed, are deemed obligations due and owing at the close of the taxable year."). While CDP affects all types of taxes, this Article will chiefly deal with the taxation of income, which accounted for forty-four percent of net revenue in fiscal year 2006.I.R.S., DEP'T OF THE TREASURY, INTERNAL REVENUE SERVICE DATA BOOK, 2006, at 3 tbl.l, available at http://www.irs.gov/pub/irs-soi/06databk.pdf[hereinafter 2006 DATA BOOK].
13. This distinction between assessment and liability is particularly important when a taxpayer pays the IRS (through withholding, for example) before the assessment period ends, but the IRS never assesses the liability. See, e.g., Lewis v. Reynolds, 284 U.S. 281, 283 (1932) (holding that expiration of assessment limitations period without assessment being recorded does not bar the Service from retaining payments already received if they do not exceed the amount which could have been-but was not-properly assessed within the limitations period). Amounts paid after the assessment period ends must be returned because they are, by definition, overpayments. I.R.C. § 6401(a) (2000).
14. See, e.g., Montgomery v. Comm'r, 122 T.C. 1, 36 (2004) (Gerber, J., dissenting) (referring repeatedly to a "self-assessed" tax system); A Closer Look at the Size and Sources of the Tax Gap: Hearing Before the Subcomm. on Taxation and IRS Oversight of the S. Comm, on Finance, 109th Cong. 480 (2006) [hereinafter 2006 Tax Gap Hearings] (statement of Raymond T. Wagner, Jr., Chairman, IRS Oversight Commission) ("The reporting and payment of taxes by individuals and corporations is a process that begins with a self-assessment made by the taxpayer of taxes owed.");
15. Joseph J. Darby, Confidentiality and the Law of Taxation, 46 AM. J. COMP. L. 577, 577 (1998) (stating that the tax system is "based on the principle of voluntary self-assessment");
16. Gary Klott, Tax Watch: Fighting IRS: Uneven Match, N.Y. TIMES, May 5, 1987, at D2 (quoting Michael Graetz, who states that the tax system is "structured as a self-assessment system"). But cf. Hibbs v. Winn, 542 U.S. 88, 100 n.3 (2004) (noting that the word "self-assessment" is not a technical term in the Code).
17. IRS HISTORICAL STUDIES, DEP'T OF THE TREASURY, IRS HISTORICAL FACT BOOK: A CHRONOLOGY: 1646-1992, at 181 (1993).
18. 2006 DATA BOOK, supra note 9, at 4 tbl.2, 37 tbl. 14.
19. It is not necessarily the final judgment. The Tax Code gives the IRS at least three years to review any particular return. See I.R.C. § 6501 (2000).
20. In 1994, Bolton said: The point that I want to leave with you in this very brief presentation is where I started, is that there is no United Nations- [I]t would be a real mistake to count on the United Nations as if it is some disembodied entity out there that can function on its own. Democracy Now!, John Bolton in His Own Words: Bush's UN Ambassador Nominee Condemns United Nations, http://www.democracynow.Org/2005/3/31/john-bolton-in-his-own-words.
21. When asked about this statement in his April 11, 2005, confirmation hearings, Bolton explained that the U.N. is the product of actions and decisions made by its individual members and is not an organic entity. Craig Gilbert, U.N. Nominee Hit by a Barrage of Criticism; Bush Choice Bolton Grilled on Previous Statements, MILWAUKEE J. SENTINEL, Apr. 12, 2005, at Al. People often make the same mistake of thinking of the IRS as a monolithic entity.
22. See MICHEL FOUCAULT, DISCIPLINE AND PUNISH 200-01 (Alan Sheridan trans., Vintage Books 1977) (1975) (discussing Bentham's theory underlying the Panopticon and the link between systems of punishment and internalized individual discipline);
23. Camp, supra note 2, at 8-11 (describing IRS systemic matching program based on third party information returns).
24. 2006 Tax Gap Hearings, supra note 11, at 160 (statement of Mark J. Mazur, Director, Research, Analysis, and Statistics, IRS). The point is well illustrated by the statistics: The IRS has estimated that individuals whose wages are subject to withholding report 99 percent of their wages for tax purposes. In contrast, self-employed individuals who formally operate non-farm businesses are estimated to report only about 68 percent of their income for tax purposes. Even more alarming, self-employed individuals operating businesses on a cash basis report just 19 percent of their income to the IRS. Id. at 95 (statement of J. Russell George, Treasury Inspector General for Tax Administration) (footnotes omitted).
25. United States v. Powell, 379 U.S. 48, 59 (1964) (Douglas, J., dissenting) (footnote omitted); 111. Masonic Home v. Comm'r, 93 T.C. 145, 149-50 (1989) (explaining the court's prior holding that the expiration of the period of limitations on assessment extinguishes liability). See generally, Bryan T. Camp, Tax Return Preparer Fraud and the Assessment Limitation Period, 116 TAX NOTES 687 (2007) (tracing the history of assessment limitation statutes from 1862 to show their operation as statutes of repose).
26. I.R.C. § 7421(a) (2000). The Act plugged a hole in the "pay first, litigate later" regime created by the administrative reform provisions of the 1866 Revenue Act, ch. 184, 14Stat.98. Section 19 of the 1866 Act set up the refund scheme now codified at I.R.C. § 7422 (2000), but did not prohibit taxpayers from enjoining collection on the ground that the assessment was wrong. The pay-first rule is carried over into other statutes including, for example, the Declaratory Judgment Act. See 28 U.S.C. § 2201(a) (2000).
27. Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974) (quoting Enochs v. Williams Packaging & Navigation Co., 370 U.S. 1, 7 (1962)), quoted in Hibbs v. Winn, 542 U.S. 88, 103 (2004). The Court has upheld the pay-first rule against a due process challenge. Phillips v. Comm'r, 283 U.S. 589 (1931).
28. Bull v. United States, 295 U.S. 247, 260 (1935); see also Flora v. Comm'r, 362 U.S. 145 (1960) (holding that the full payment of tax is required before a federal court will have jurisdiction over the refund suit);
29. Cheatham v. United States, 92 U.S. 85, 89 (1875) ("[P]ayment of the tax claimed ... [is] a condition precedent to a resort to the courts by the party against whom the tax is assessed.").
30. See ROBERT H. MONTGOMERY, INCOME TAX PROCEDURE 173-77, 235-38 (1921).
31. Revenue Act of 1924, tit. 9, § 900, 43 Stat. 253, 336-38. This description is somewhat simplified. The Board of Tax Appeals was widely viewed as an administrative office and not a "true" court. But it did provide independent third-party review in an adversarial forum. It served the same function as a court and eventually Congress changed the form to match the function it was already performing.
32. The deficiency procedure is codified at I.R.C. §§ 6211-6216 (2000), and "deficiency" is defined in § 6211. Note that this exception is also available only for income, estate, and gift taxes. Note too that the concept of deficiency has nothing to do with payment. A taxpayer who reports the proper tax, but does not pay it, has an underpayment, not a deficiency.
33. Treas. Reg. 301.6211-1(a) (amended 1995);
34. Taylor v. Comm'r, 36 B.T.A. 427, 429 (1937) (stating that the IRS has to use deficiency procedures when determining the tax of a non-filer).
35. Scar v. Comm'r, 814 F.2d 1363, 1372 (9th Cir. 1987) (Hall, J., dissenting).
36. Professor Leandra Lederman has reviewed these three functions. See Leandra Lederman, "Civil "izing Tax Procedure: Applying General Federal Learning to Statutory Notices of Deficiency, 30 U.C. DAVIS L. REV. 183,203 (1996).
37. The most recent attempt to count tax cases comparatively was for fiscal year 1987. See William F. Nelson & James J. Keightly, Managing the Tax Court Inventory, 1 VA. TAX REV. 451, 453 (1988). There is little reason to think the relative percentages have changed.
38. This situation could arise, for example, when taxpayers seek to amend their returns and the IRS rejects the proposed amended returns. See e.g., Koch v. Alexander, 561 F.2d 1115 (4th Cir. 1977) (taxpayer reported zero liability on amended return when original return showed $20,000);
39. Goldstone v. Comm'r, 65 T.C. 113 (1975) (IRS has no duty to accept amended returns once a valid original return is filed). Nor does the deficiency procedure apply to employment taxes, which account for over one-third of gross tax collections. Those taxes, imposed by I.R.C. § 3111 (2000) on employers for the privilege of employing workers, are not included in the definition of "deficiency" in § 6211. Employment taxes have increased in importance since 1960, rising to just over eleven percent of all taxes collected in fiscal year 1960 to almost thirty-three percent in fiscal year 2006. 2006 DATA BOOK, supra note 9, at 14-15 tbl.6.
40. There is no easily accessible public data on this point. I know it from my own studies while working in the Office of Chief Counsel. However, one can fairly infer it from the various other available data. See 2006 DATA BOOK, supra note 9, at 23 tbl.9 (showing that less than one percent of all returns were audited in fiscal year 2006); id. at 41 tbl.16 (showing that just seventeen percent of reported liabilities on delinquent returns are paid with the return). In addition, taxpayers who self reported their liabilities made up nearly fifty percent of the administrative CDP hearing requests in fiscal year 2004. U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-07-112, TAX ADMINISTRATION : LITTLE EVIDENCE OF PROCEDURAL ERRORS IN COLLECTION DUE PROCESS APPEAL CASES, BUT OPPORTUNITIES EXIST TO IMPROVE THE PROGRAM 28 (2006), available at http://www.gao.gov/new.items/ d07112.pdf [hereinafter GAO 2006 CDP STUDY].
41. See I.R.C. §6159(2000).
42. See I.R.C. §7122(2000).
43. The statutory authority for CNC status derives from the abatement authority, see I.R.C. § 6404(c) (2000), which gives the IRS the discretion to abate account balances where "the administration and collection costs involved would not warrant collection of the amount due." Id. This language was added in 1954 to "codify the practice of a number of years adopted under the general administrative authority of the Department." H.R. REP. NO. 83-1337, at 412 (1954); see also S. REP. NO. 83-1622, at 581 (1954) (same language).
44. It stops liens and levies but does not keep the IRS from offsetting a future year's overpayment against the prior year's underpayment. Under the former practice, collection employees who did not believe a liability could be economically collected filled out a Form 53 to request an abatement of the assessment and to record the basis for their belief so they would not be held personally responsible for the failure to collect that assessed tax. See Treas. Reg. Art. 1303 (1926);
45. Carlin v. United States, 100 F. Supp. 451, 454 (Ct. Cl. 1951);
46. Kroyer v. United States, 55 F.2d 495, 496 (Ct. Cl. 1932);
47. Sugar Run Coal Mining v. United States, 21 F. Supp. 10, 11 (E.D. Pa. 1937). From the Form 53 procedure, the IRS has developed a collection policy. See I.R.S., INTERNAL REVENUE MANUAL § 5.16.1.1, available at http://www.irs.gov/irm/ [hereinafter INTERNAL REVENUE MANUAL]. The IRS now accomplishes the same result by inputting a computer Transaction Code 530, which simply puts a hold on the account. Id.
48. There are also other collection alternatives, such as bankruptcy, or discharging property from the tax lien, see I.R.S. Chief Couns. Notice CC-2003-016 (May 29, 2003), available at http://www.unclefed.com/ ForTaxProfs/irs-ccdm/2003/cc-2003-016.pdf (reviewing options for collection), but the three listed above are far and away the most common.
49. The authority to offset comes both from statutory and common law. See I.R.C. § 6402 (2000);
50. United States v. Munsey Trust, 332 U.S. 234, 239 (1947). The offset tool is another example of an aggregate collection decision. Taxpayers in financial straits may ask to bypass the offset, but they must convince an individual employee to allow the refund to issue. See I.R.S. Field Serv. Advice Mem. 200213012 (Mar. 29, 2002) (describing this system and its limitations).
51. I.R.C. § 6321 (2000). This section does not specify a time after which a taxpayer has failed to pay the tax for purposes of triggering the tax lien. However, another section gives the taxpayer ten days to pay before "it shall be lawful for the Secretary to collect such tax ... by levy " I.R.C. § 6331 (2000). The penalty imposed for a failure to pay is triggered only after twenty-one days from the notice and demand (ten days when the tax liability demanded equals or exceeds $100,000). I.R.C. § 6651(a)(3) (2000). As a practical matter, since the tax lien is retroactive to the date of assessment and since it takes much longer than twenty-one days before the IRS reacts to an unpaid account, the exact time period is of little consequence.
52. Glass City Bank v. United States, 326 U.S. 265, 268-69 (1945) (holding that a federal income tax lien attaches to later-acquired property).
53. United States v. City of New Britain, 347 U.S. 81, 87-88 (1953). "Perfected" means that the lien identifies the lienor, the amount claimed, and the property subject to the lien. Id. at 84. The IRS wins a tie. See United States v. McDermott, 507 U.S. 447, 453-55 (1993) (holding that a federal tax lien gets priority over simultaneously attaching, competing liens).
54. The four horsemen are purchasers for value, mechanics lienors, holders of security interests, and judgment lien creditors. See I.R.C. § 6323(a) (2000). This rule protects, for example, someone who would otherwise have paid full price for property encumbered by the tax lien. See e.g., Middlesex Sav. Bank v. Johnson, 777 F. Supp. 1024 (D. Mass. 1991) (applying the statutory lien rules to variety of competing creditors).
55. I.R.C. § 6323(b). The NFTL makes the lien visible against all personalty once the IRS files it in the state of the taxpayer's principal residence or place of business. I.R.C. § 6323(f)( 1)(A)(ii). But to make it visible for realty, the NFTL must be filed in the state or county (depending on local laws) where the realty is located. § 6323(f)(l)(A)(i).
56. U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-05-26R, OPPORTUNITIES TO IMPROVE TIMELINESS OF IRS LIEN RELEASES 1 (2005), available at http://www.gao.gov/new.items/d0526r.pdf. Even the Treasury's Acting Deputy Inspector General for Audit made the same error. See TREASURY INSPECTOR GEN. FOR TAX ADMIN., REFERENCE NO. 2004-30-086, FISCAL YEAR 2004 STATUTORY REVIEW OF COMPLIANCE WITH LIEN DUE PROCESS PROCEDURES (2004), available at http://www.treasury.gov/tigta/auditreports/2004reports/ 200430086fr.pdf ("[T]he IRS has the authority to attach a claim to the taxpayer's assets, called an NFTL, for the amount of the unpaid tax liability.").
57. I.R.C. § 6331(b) (2000).
58. For reasons unknown to me, the IRS gives the term "levy" a different meaning in its internal guidance. The IRS distinguishes between a "levy" and a "seizure," whereas the Code makes no such distinction. In Service jargon, a "seizure" is what is done to something that can be sold, usually tangible realty or personalty, while a "levy" is done to something that cannot be sold, generally intangible property such as payments due the taxpayer from a third party, or money. See generally INTERNAL REVENUE MANUAL, supra note 35, at chs. 5.10,5.11 ("Seizure and Sale" & "Notice of Levy"). That distinction is not evident from the statute or from its history, which the IRS admits, /rf. at § 5.11.1.1.2 ("There is no legal distinction between levy and seizure."). Note that the GAO interprets the distinction between "levy" and "seizure" differently. It believes that the Service "differentiates between the levy of assets in the possession of the taxpayer (referred to as 'seizure') and the levy of assets, such as bank accounts and wages, which are in the possession of third parties, such as banks or employers (referred to as a 'levy')." U.S. GEN. ACCOUNTING OFFICE, GAO-02-674, TAX ADMINISTRATION: IMPACT OF COMPLIANCE AND COLLECTION PROGRAM DECLINES ON TAXPAYERS 6 n.5 (2002), available at http://www.gao.gov/new. items/d02604.pdf. The GAO gives no citation or reason for why it believes that to be the Service's distinction and I do not think the GAO is correct, but the main point is that the Code contains no distinction; the power to "levy" is the power to "seize."
59. I.R.C.§6331(dX2).
60. The only levy that operates continuously is a wage levy. See I.R.C. § 6331 (e). As to the ability of the lien to attach to future acquired interests, see United States v. McDermott, 507 U.S. 447, 453 (1993).
61. I.R.C. § 6334(a)(3) (2000); see Popky v. United States, 326 F. Supp. 2d 594, 604 (E.D. Pa. 2004) (holding that a tax lien remained attached to assets exempt from levy, so the government could claim priority to sell proceeds once the assets were sold).
62. The Service is authorized to levy either "all property and rights to property (except such property as is exempt under § 6334) belonging to such person or on which there is a lien provided in this chapter "). I.R.C. § 6331(a) (emphasis added).
63. See United States v. Bank of Celina, 721 F.2d 163, 168 (6th Cir. 1983).
64. 2006 DATA BOOK, supra note 9, at 41 tbl.16.
65. See NAT'L TAXPAYER ADVOCATE, I.R.S., 2004 ANNUAL REPORT TO CONGRESS 232-42 (2004), available at http://ftp.irs.gov/irs-utl/ntafy2004annualreport.pdf [hereinafter 2004 TAXPAYER ADVOCATE REPORT]; U.S. GEN. ACCOUNTING OFFICE, GAO/GGD-94-2, TAX ADMINISTRATION: IRS CAN DO MORE TO COLLECT TAXES LABELED "CURRENTLY NOT COLLECTIBLE" (1993) (critiquing the lack of a "personal touch" collection practice).
66. Of the $40.8 billion collected in fiscal year 2006, $28.7 billion came from the Notice stage. 2006 DATA BOOK, supra note 9, at 41 tbl. 16.
67. While the Service has at times attempted to reach out with telephone calls rather than rely on written notices, resource constraints have pretty much squelched this approach. See TREASURY INSPECTOR GEN. FOR TAX ADMIN., REFERENCE NO. 2006-30-055, TRENDS IN COMPLIANCE ACTIVITIES THROUGH FISCAL YEAR 2005 23 (2006), available at http://www.ustreas.gov/tigta/auditreports/ 2006reports/200630055fr.pdf [hereinafter 2005 TRENDS REPORT]. Recent attempts to farm out collections to private collection firms are one response to this trend. See House Members' Letter to Everson Calls for Halt to IRS Privatization Plans, TAX NOTES TODAY, July 21, 2006, available at 2006 TNT 140-30 (LEXIS) (reprinting a July 19 letter to IRS Commissioner Mark Everson from a bipartisan group of House members calling on the IRS to halt its plans to privatize debt collection); see also NAT'L TAXPAYER ADVOCATE, I.R.S., 2006 ANNUAL REPORT TO CONGRESS 34-62 (2007), available at http://www.irs.gov/advocate/article/0" id=165806,00.html [hereinafter 2006 TAXPAYER ADVOCATE REPORT] (describing the history and performance of privatized debt collection).
68. See Rev. Proc. 2001-18, 2001-8 I.R.B. 708 (listing the fifteen sections of the Internal Revenue Code that require notices sent to the "last known address").
69. I use the term "accounts" or "accounts receivable." The IRS's technical term for this concept is "tax module." Generally, a "tax module" is one type of tax liability for one tax period. See, e.g., TREASURY INSPECTOR GEN. FOR TAX ADMIN., REFERENCE NO. 2003-30-186, SOME AUTOMATED COLLECTION SYSTEM BUSINESS RESULTS HAVE RECENTLY IMPROVED, BUT MORE EMPHASIS ON NONFILERS IS NEEDED 22 (2003), available at http://www.treas.gov/tigta/auditreports/2003reports/ 200330186fr.pdf.
70. See Treas. Reg. § 301.6212-2(b) (2001).
71. The Service Center Collection Branch is where such employees work. They handle contacts generated by both the Notice process and the ACS.
72. INTERNAL REVENUE MANUAL, supra note 35, § 5.19.5.2 ("With some exceptions, balance-due accounts and return delinquency investigations are issued to ACS at the conclusion of normal service center notice routines. The exceptions ... are listed in Exhibit 5.19.5-9."). The decision to skip ACS and go directly to CFf is still an aggregate decision; although carried out by humans, it does not result from an individualized determination but instead from rules about how to treat classes of accounts. See id. at §§ 5.1.1.13, 5.19.5.3.1.
73. NFTL, once again, stands for "Notice of Federal Tax Lien" (emphasis added). It is not the lien. Somewhat confusingly, the IRS uses a "Notice of Levy" to perform the levy on intangible items such as bank accounts. That document is the levy. See supra text accompanying notes 41-43; see also TREASURY INSPECTOR GEN. FOR TAX ADMIN., REFERENCE NO. 2004-30-094, ADDITIONAL EFFORTS ARE NEEDED TO ENSURE TAXPAYER RIGHTS ARE PROTECTED WHEN MANUAL LEVIES ARE ISSUED 2-5 (2004), available at http://www.treas.gov/tigta/ auditreports/2004reports/200430094fr.pdf (explaining the difference between automated and manual levies).
74. See TREASURY INSPECTOR GEN. FOR TAX ADMIN., REFERENCE NO. 2004-30-165, THE NEW RISK-BASED COLLECTION INITIATIVE HAS THE POTENTIAL TO INCREASE REVENUE AND IMPROVE FUTURE COLLECTION DESIGN ENHANCEMENTS, 1-2 (2004), available at http://www.treas.gov/ tigta/auditreports/2004reports/200430165fr.pdf (describing a computer system that "use[s] predictive models to characterize accounts according to the probability of productive or unproductive closure, for routing to the most effective treatment area").
75. See INTERNAL REVENUE MANUAL, supra note 35, § 5.19.4.3.5 ("Levy Sources and ACS Display").
76. See id. at § 5.19.4.3.1 ("Pre-Levy Requirements").
77. Some levies are not subject to the CDP restrictions, notably those seeking to seize state income tax refunds. Such exempt levies sail right through the system with no check. See INTERNAL REVENUE MANUAL, supra note 35, § 5.19.4.3.3 ("Levy Routing and Duties"). In 2004, the Treasury Inspector General for Tax Administration (TIGTA) found the computerized systematic levy process was better than humans at complying with the thirty day CDP wait period. See TREASURY INSPECTOR GEN. FOR TAX ADMIN., supra note 61, at 2-5. By 2006, TIGTA found both error-free. See TREASURY INSPECTOR GEN. FOR TAX ADMIN., REFERENCE NO. 2006-3 0-101, FISCAL YEAR 2006 STATUTORY REVIEW OF COMPLIANCE WITH LEGAL GUIDELINES WHEN ISSUING LEVIES 3-4 (2006), available at http ://www.ustreas.gov/tigta/auditreports/2006reports/200630101 fr.pdf.
78. See generally INTERNAL REVENUE MANUAL, supra note 35, § 5.19.1 (explaining employee procedures for levies). Along these lines, note that the ACS process does not generate paper files. All data are kept in electronic format which is then picked up by the Integrated Collection System if the account is transferred to the field. Id. (giving instructions for the virtual "Desktop Integration" system).
79. See I.R.C. § 6330(f) (2000); see also INTERNAL REVENUE MANUAL, supra note 35, § 5.19.9 ("Automated Levy Programs").
80. There is a robust debate within the IRS on whether this use of ACS is the best collection policy. The National Taxpayer Advocate has tirelessly advocated for more use of active IRS employee outreach at the ACS stage rather than passive dependence on taxpayers calling in to resolve their accounts. See, e.g., 2006 TAXPAYER ADVOCATE REPORT, supra note 54, at 62-82. The merits of that debate are beyond the scope of this Article, and the IRS management has indicated that it has no intent to modify ACS operations. Id. at 75-77. In fact, the IRS is creating even more bulk processing algorithms to "use internal and external data on taxpayer characteristics to better match taxpayers to the treatment stream that will most likely result in meaningful contact and timely resolution of the case." Id. at 76. Accordingly, this Article focuses on how ACS is used now and in the foreseeable future and not on how it might be used in a more perfect world.
81. 2005 TRENDS REPORT, supra note 54, at 25, 29.
82. Id.
83. Id.
84. See id. at 26 (showing that 788,083 delinquent accounts were removed from the queue inventory in fiscal year 2005).
85. U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-06-525, IRS OFFERS IN COMPROMISE: PERFORMANCE HAS BEEN MN;XED; BETTER MANAGEMENT INFORMATION AND SIMPLIFICATION COULD IMPROVE THE PROGRAM 8 (2006), available at http://www.gao.gov/new.items/d06525.pdfthereinafter GAO OIC STUDY],
86. See generally id. at 8-11 (describing the OIC process).
87. INTERNAL REVENUE MANUAL, supra note 35, § 5.8.8.
88. See generally INTERNAL REVENUE MANUAL, supra note 35, § 5.19.1.6 ("Analyze Taxpayer's Ability to Pay"). The National Taxpayer Advocate discusses this point in detail in her 2005 Annual Report. See 1 NAT'L TAXPAYER ADVOCATE, I.R.S., 2005 ANNUAL REPORT TO CONGRESS 271-81 (2005), available at http://www.irs.gov/ advocate/article/0" id=152735,00.html [hereinafter 2005 TAXPAYER ADVOCATE REPORT]. AS an empirical matter, how often (if at all) IRS employees deviate from the national and local tables is not clear-the National Taxpayer Advocate says they rarely do, and the IRS response disagrees. See id. at 281-86. What is clear, however, is that the tax practitioner community widely believes that the aggregate decision that the tables represent is rarely modified on an individual basis. Id.
89. The IRS has operationalized this requirement. See INTERNAL REVENUE MANUAL, supra note 35, § 5.14.5.3. As is usual, practical bulk processing reasons have led the IRS to go beyond the statutory requirements in that it will accept an installment agreement even if the taxpayer can fully pay the tax immediately. Id. This saves the IRS employees from having to make an additional determination of the taxpayer's ability to pay immediately.
90. The National Taxpayer Advocate, for one, suggests that a better tax collection policy would put all taxpayers in the can't-pay box as a start, for the common sense reason that most taxpayers, in fact, want to pay their taxes and only a small minority seeks to avoid its civic responsibilities. See 2006 TAXPAYER ADVOCATE REPORT, supra note 54, at 74-75. The operational difficulty with this approach, however, is the information asymmetry between the individual taxpayer and the IRS. See generally Camp, supra note 2, at 5-17.
91. See GAO OIC STUDY, supra note 72, at 13 fig.2.
92. See 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 311. The IRS collected nothing from thirty-seven percent of those OICs that were rejected as too low an offer or for lack of information to make a reasonable collection potential classification. Id. The National Taxpayer Advocate did not break out what part of the thirty-seven percent was due to what cause.
93. See GAO OIC STUDY, supra note 72, at 25 tbl.7.
94. See INTERNAL REVENUE MANUAL, supra note 35, § 5.16.1.6("Mandatory Follow-Up").
95. The sum of the three values within the Trends in Compliance Activities bar chart is 5.373 million.
96. 2005 TRENDS REPORT, supra note 54, at 28 tbl. 15.
97. Id. at 26 tbl.11.
98. The subtraction of the won't-pays' 1.424 million accounts paid in full and the 788,000 accounts written off the books from 5.373 million is 3.161 million.
99. It is also unfortunate that the statistics tend to be reported as "accounts" rather than "taxpayers." A taxpayer may owe multiple tax liabilities (either different kinds of taxes for the same tax period, most usually employment and income, or the same kind of tax for multiple tax periods). So reporting by "accounts" obscures just how many taxpayers we are talking about. This is one of the flaws of CDP review discussed below.
100. See I.R.C. § 6334 (2000).
101. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, § 3462, 112 Stat. 685, 764-66 (1998).
102. See I.R.C. §7122(2000).
103. Universal Camera Corp. v. NLRB, 340 U.S. 474, 487 (1951).
104. H.R.REP.NO. 105-599,at289(1998). TheideaendedupintheConferenceReport,and not in the statute, thanks in part to the negotiating skills of the lead Treasury Department representative, Chris Rizek. It is beyond the scope of this article to discuss how this introduction of equity norms into tax administration is at odds with the traditional "turn-square-corners" approach of administrative law in general and tax administration in particular. Suffice to say that a similar shift occurs in many other "equitable" provisions such as those covering Taxpayer Assistance Orders and Spousal Relief. Some of the provisions work well, others do not. But all of them undercut the traditional idea of a "true" tax liability in favor of a more flexible approach where-like much else in current postmodern life where the contingency of truth is, ironically, itself an accepted truth-tax liabilities are treated more as simply another item up for negotiation and less as a civic responsibility. One might want to debate the wisdom of that move; no one in Congress ever did.
105. See Treas. Reg. § 301.7122-l(bχ3)(2002).But see GAW OIC STUDY, supra note72, at 35-38 (critiquing implementation of the "effective tax administration" concept).
106. See generally Leandra Lederman, The Interplay Between Norms and Enforcement in Tax Compliance, 64 OHIO ST. L.J. 1453 (2003).
107. For an extensive description, see Camp, supra note 2, at 78-91.
108. Practices and Procedures of the Internal Revenue Service: Hearing Before the S. Comm. on Finance, 105th Cong. 16 (1997) (opening statement of Sen. Phil Gramm).
109. Courts were very reluctant to find exceptions outside those listed in the statute itself. See Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 5-8 (1962).
110. The three most important sets of hearings were: (\)IRS Oversight: Hearing Before the S. Comm. on Finance, 105th Cong. (1998) [hereinafter Hearing on IRS Oversight]; (2) IRS Restructuring: Hearing on H.R. 2676 Before S. Comm. on Finance, 105th Cong. (1998) [hereinafter Hearing on IRS Restructuring]; and (3) Practices and Procedures of the Internal Revenue Service: Hearing Before the S. Comm. on Finance, 105th Cong. (1997) [hereinafter Hearing on Practices and Procedures].
111. See Hearing on IRS Oversight, supra note 97, at 6 (statement of Sen. Charles E. Grassley). This week we will hear testimony about horrors caused by IRS agents .... This does not mean that all IRS employees are bad At this moment, these hearings are about these people and the horrendous acts that have taken place. But in the bigger picture they are proof that more oversight and more diligent oversight is vital. Id.
112. For a fuller analysis, see Camp, supra note 2, at 80-87. For the purposes of this paper, I highlight only how both the proposed CDP statutes and the enacted CDP statutes rest on an assumption of individualized abuse.
113. Hearing on Practices and Procedures, supra note 97, at 58 (testimony of attorney Robert Schriebman, Adjunct Professor of Tax Practice & Procedure, University of Southern California Graduate School of Accounting).
114. Hearing on IRS Oversight, supra note 97, at 210-11 (statement of Sen. Phil Gramm).
115. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, §§ 4001-02,112 Stat. 685, 783-84 (1998).
116. For the following description about the Senate proposal, see S. REP. NO. 105-174, at 67-68 (1998); see also Montgomery v. Comm'r, 122 T.C. 1, 13-17 (2004) (Laro, J. & Gale, J., concurring). See generally Camp, supra note 2, at 119-28.
117. See supra text accompanying note 41.
118. For a public example of the administration's lobbying, see CBO Revenue Estimates of IRS Bill Reform, TAX NOTES TODAY, May 6, 1998, available at 98 TNT 87-17 (LEXIS). That was just the tip of the lobbying iceberg.
119. H.R. REP. NO. 105-599, at 263-67. (1998) (Conf. Rep.).
120. See id.
121. I.R.C. § 6330(cX2)(B) (2000).
122. H.R. REP. No. 105-599, at 265 (1998) (Conf. Rep.) (emphasis added).
123. See generally Pomerantz v. Comm'r, 90 T.C.M. (CCH) 628, 629 (2005) (Involving a taxpayer that "did not otherwise have an opportunity to dispute such tax liability" when properly sent a Notice of Deficiency but the taxpayer's attorney chose to waive taxpayer's rights to contest the deficiency in Tax Court by signing a Form 4549). For one startling example of the taxwriter's misunderstanding of the deficiency process, see Camp, supra note 2, at 114-17.
124. For the corresponding regulations, see Treas. Reg. §§ 301.6320-1, 301.6330-1 (both as amended in 2006).
125. See §§ 6320(a)(3)(B), 6330(a)(3χB) (2000).
126. sect; 6330(a)(2XC).
127. For fiscal year 2004, the only year for which statistics are available, ninety-four percent of levy CDP notices and eighty-four percent of all CDP notices issued from ACS. See 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 459.
128. See INTERNAL REVENUE MANUAL, supra note 35, § 5.18.4.3.4 ("Pre-Levy Requirements"). Until January 19, 1999, these notices were sent during the Notice stage, but they are now sent during the ACS stage. This theoretically allows IRS employees to call taxpayers first, although resource constraints since 1998 have prevented such proactive measures in practice. See 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 232-43 (critiquing the failure of telephone outreach).
129. The phenomenon was documented in an internal IRS study of Notices of Deficiency, which are sent certified or registered and without a return receipt. No other statute requires return receipts on such high volume notices. The National Taxpayer Advocate has recommended dropping this requirement. 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 462. It was quite a trick for the IRS to build machines that could attach the little green Post Office return receipt cards without using human labor.
130. See § 6330(a)(3)(C).
131. See § 6320(b)(4); Treas. Reg. § 301.6320-l(d) (as amended in 2006). Though the statutes do not directly discuss the implementation process, these forms are used commonly in practice.
132. See § 6320(b)(4); Treas. Reg. § 301.6320-1 (d)(2) (as amended in 2006) (questions two and three and the corresponding answers).
133. Although the statute does not require the request be in writing, the IRS put that in the regulation. See Treas. Reg. § 301.6330-l(a) (as amended in 2006).
134. However, § 6330(g) does allow the IRS to disregard "any portion of a request for a hearing" that meets the definition of "specified frivolous submission" per § 6702(b)(2)(A). I.R.C. §§ 6330(g), 6702(b)(2)(A) (2000). Congress added this provision in an attempt to cut down on the volume of won't-pays who were attempting to use CDP proceedings to delay collection. See Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, § 6702, 120 Stat. 2922, 2960-62. The provision requires the IRS to publish a list of positions it deems frivolous. The IRS published the first list in Notice 2007-30. See I.R.S. Notice 2007-30, 2007-1 C.B. 883. Thus, this provision came into force after the period examined within this Article.
135. See I.R.C. § 6330(b) (2000) (requiring that "[t]he hearing under this subsection shall be conducted by an officer or employee who has had no prior involvement with respect to the unpaid tax "). Although the statute is silent on the Office of Appeals and its role within the IRS, this statute refers to the Office of Appeals indirectly because the statute is for the appealing party, which works directly with the Office of Appeals. See INTERNAL REVENUE MANUAL, supra note 35, § 1.17.
136. Section 6330(c) requires the appeals employee to "obtain verification . . . that the requirements of any applicable law or administrative procedure have been met" and allows the taxpayer to raise "any relevant issue," either about the proposed collection action (levy or NFTL), or about the underlying tax liability. But a taxpayer may only challenge the underlying liability the taxpayer shows that he or she "did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability."
137. Cf. Carlton M. Smith, Does the Failure to Appoint Collection Due Process Hearing Officers Violate the Constitution's Appointments Clause? 8 (Cardozo Legal Studies, Research Paper No. 245,2008) (describing system used to issue notices of determination).
138. See Treas. Reg. § 301.6330-l(i)(2), Q & A 12(2006) ("[The Office of] Appeals will consider the same issues that it would have considered at a CDP hearing on the same matter."). See generally I.R.S. Chief Counsel Notice CC-2003-016 (May 23, 2003), available at http://www.unclefed.com/ForTaxProfs/irs-ccdm/2003/cc-2003-016.pdf (addressing Collection Due Process cases). The regulation follows up on the strong hint made by Congress in the Conference Report. See H.R. REP. NO. 105-599, at 266 (1998) ("The Secretary must provide an equivalent hearing to the pre-levy hearing if later requested by the taxpayer.").
139. This is seen in language of the Conference Report, which refers to the "date of the hearing," "the scheduled hearing," and "at the time of the pre-levy hearing." H.R. REP. NO. 105-599, at 266.
140. See Treas. Reg. § 301.6630-l(dχ2) (as amended in 2006);
141. Loofbourrow v. Comm'r, 208 F. Supp. 2d 698, 707 (S.D. Tex. 2002) (stating that a series of letters between taxpayer and the Office of Appeals constituted a sufficient "hearing").
142. The policy is spelled out in a 2003 I.R.S. memorandum. See I.R.S. Chief Counsel Notice CC-2003-031 (Sept. 11, 2003), available at http://www.unclefed.com/ForTaxProfs/irs-ccdm/2003/cc-2003-031 .pdf. The policy is used with non-cooperative taxpayers who tend to be tax protestors. See id. This practice has been approved by the Tax Court. See Katz v. Comm'r, 115 T.C. 329 (2000). Many federal district courts have also approved the practice. Cf. Frese v. United States, No. 05-1741, 2006 WL 231895, at *7 (D.N.J. Jan. 30, 2006) (holding that Appeals Officer's refusal to hold a face-to-face hearing until taxpayer submitted a later year's tax return and providing specific information relating to his financial status was not abuse of discretion). But see Cavanaugh v. United States, No. 03-250, 2004 WL 880442, at *6 (D.N.J. Mar. 23, 2004) (holding that a SO's decision to deny a request for a face-to-face hearing and instead proceed by telephone was an abuse of discretion).
143. AllGlass Sys., Inc. v. Comm'r, 330 F. Supp. 2d 540, 545 (E.D. Pa. 2004) ("[T]here is no requirement that a CDP hearing be specifically designated as such by the conducting officer so long as the taxpayers and IRS officers, inter se, do in fact address the issues on the merits during the communications."); see Frese, 2006 WL 231895, at *7-8 (collecting cases).
144. See Stewart v. Comm'r, No. 03-271, 2004 WL 838045, at *2-3 (W.D. Pa. Mar. 1, 2004) (holding that the taxpayers had received a CDP hearing even though the SO stated that the meeting "was an informal meeting and was not the due process hearing").
145. INTERNAL REVENUE MANUAL, supra note 35, §5.1.9.3.5.
146. See id. § 5.1.9.3.8 ("CDP and Equivalent Hearing Fast Track Mediation (FTM)").
147. Id. § 5.1.9.5 ("Communications with Appeals").
148. See id. § 5.1.9.5.1 ("Disagreement with Appeals Decisions").
149. Id. §5.1.9.3.9.1.
150. See id. § 34.5.4.
151. I.R.S. Chief Couns. Mem. CC-2006-019, at 66 (Aug. 18, 2006), available at http://www.irs.gov/pub/irs-ccdm/cc-2006-019.pdf (listing all material that should be transmitted to the court for review but emphasizing that "[i]n CDP cases, the administrative record consists of all materials relied upon by an appeals or settlement officer in making a determination regarding the collection" and that, generally, "the administrative record consists of the information an agency reviews when making its determination").
152. See Treas. Reg. § 301.6330-l(d) (as amended in 2006).
153. Barnill v. Comm'r, No. 6994-01L, 2002 WL 977364, at *3 (T.C. May 13,2002).
154. See Nestorv. Comm'r, 118 T.C. 162 (2002) (holding that a SO was not required to give taxpayer copies of the documents used to verify the Service's compliance with applicable administrative requirement); see also Roberts v. Comm'r, 118 T.C. 365 (2002) aff'd, 329 F.3d 1224(11th Cir. 2003).
155. While I could cite hundreds of cases, here are just a few: Kindred v. Comm'r, 454 F.3d 688 (7th Cir. 2006) (taxpayers failed to provide requested financial information); Olsen v. United States, 414 F.3d 144 (1st Cir. 2005) (taxpayers also failed to provide requested financial information); Pennington v. United States, No. H-04-3118,2006 WL 1896996, at *2 (S.D. Tex. Jul. 10, 2006) (taxpayer failed to submit adequate documentation in support of his offer to compromise until after filing district court action; although district court asked IRS to review petitioners claims, the court upheld the SO's decision to reject petitions offer and impose a levy);
156. Cohen Ent. v. United States, No. 05-1587, 2006 WL 1207956, at *1 (W.D. Pa. May 4, 2006) (taxpayer failed to provide requested documents);
157. Frese v. United States, No. 05-1741, 2006 WL 231895, at *3 (D.N.J. Jan. 30, 2006) (taxpayers failed to respond to SO request to "describe the legitimate issues he wished to discuss");
158. Gardner v. United States, No. 04-2686, 2005 WL 1155728, at *l-2 (D.N.J. April 5, 2005) (SO asked taxpayer to submit a corrected return, and present specific and non-frivolous arguments; taxpayer's failure to provide either warranted dismissal);
159. AllGlass Sys., Inc. v. Comm'r, 330 F. Supp. 2d 540 (E.D. Pa. 2004) (SO asked taxpayer to file current returns and current financial information in order to consider collection alternatives; taxpayer failed to respond);
160. Lister v. Comm'r, 85 T.C.M. (CCH) 774 (2003) (taxpayer railed to file requested returns or provide current financial information).
161. See, e.g., I.R.S., Telephone Conference Satisfied Collection Due Process Hearing Rights, TAX NOTES TODAY, Mar. 6, 2000, available at 2000 TNT 44-81 (LEXIS) (SO requested the exact same documents as field collection employee had requested in order to process a taxpayer's request for collection alternative). For example, if the taxpayer wants to make an Offer In Compromise, the taxpayer has to provide the same information using the same form (Form 656) regardless of whether the taxpayer submits the form to a RO or a SO.
162. GAO 2006 CDP STUDY, supra note 31, at 3-4. The GAO's report found that sixteen percent of taxpayers negotiated collection alternatives with the Office of Appeals that they had not been able to negotiate before and eleven percent "fully paid their liabilities or no longer had balances due to IRS." Id. This finding means that Appeals sometimes reduces the amount owed, by abating penalties or interest, for instance. The GAO report did not specify how many of the eleven percent received reduced liabilities. Id. My personal experience suggests it was probably most of them.
163. Id. at 19-20 (finding that "when Appeals differed from Collection on the merits of the taxpayer's argument" in thirty-one percent of the cases it did so because the taxpayer gave it more information). The National Taxpayer Advocate has also noted the ability of the Office of Appeals to elicit more information from taxpayers. 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 460.
164. See Leslie M. Book, CDP and Collections: Perceptions and Misperceptions, TAX NOTES TODAY, Apr. 26, 2005, at 487, available at 2005 TNT 79-42 (LEXIS); Camp, supra note 2, at 127 ("[T]ilting Appeals towards becoming a "mini-me" Tax Court is unwise.");
165. Pete Lowry, Thoughts on the Practicalities of the CDP Process, TAX NOTES TODAY, May 9, 2005, at 783 (2005), available at 2005 TNT 89-42 (LEXIS).
166. The CAP process is set out at INTERNAL REVENUE MANUAL, supra note 35, § 8.24.1 ("Special Collections Appeals Programs Overview").
167. Id. at §8.24.1.2.7.8.
168. Id. at §8.24.1.2.7.10
169. 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 455 (based on internal information obtained from the Office of Appeals). My database shows that those CDP hearings from which taxpayers appeal to courts take, on average, 339 days. I discuss the longer processing time below.
170. See I.R.C. § 6330(d) (2000). Congress amended § 6330(d) in August 2006. Pension Protection Act of 2006, ch. 8, 120 Stat. 1019 (2006). Before Congress acted, § 6330(d) provided that appeals went to whatever court had jurisdiction over the underlying tax liability. I.R.C. § 6330(d) (2000). Thus, if the tax being collected was the type of tax over which the Tax Court would otherwise have jurisdiction (such as income, estate, or gift taxes), the taxpayer filed there. If the Tax Court would not otherwise have jurisdiction over the tax (such as employment tax liabilities and certain penalties), then the taxpayer had to file in federal district court. Taxpayers who filed in the wrong court had thirty days from the dismissal of the case to file in the correct court. See Render v. IRS, 309 F. Supp. 2d 938 (E.D. Mich. 2004) (rejecting the IRS's argument that the court was without jurisdiction to hear taxpayer's appeal because taxpayer had not waited for a Tax Court order dismissing the case before she refilled). As is typical with such taxpayer "victories," Ms. Render later lost on the "merits." Render v. IRS, 389 F. Supp. 2d 808 (E.D. Mich. 2005).
171. Goza v. Comm'r, 114 T.C. 176, 179 (2000) (relying on Conference Report language). For a time, a divided Tax Court allowed taxpayers to supplement the administrative record by introducing new evidence not submitted to the Appeals SO. It was reversed by the Eighth Circuit, which limited the abuse of discretion review to whatever record is produced. Robinette v. Comm'r, 439 F.3d 455, 462 (8th Cir. 2006), rev'g 123 T.C. 85 (2004); see also Olsen v. United States, 414 F.3d 144, 150 (1st Cir. 2005);
172. Living Care Alternatives, Inc. v. United States, 411 F.3d 621, 631 (6th Cir. 2004).
173. See Cavanaugh v. United States, No. 03-250, 2004 WL 880442, at *6 (D.N.J. 2004) (holding that the SO's denial of a request for a face-to-face hearing and choice to proceed by telephone was an abuse of discretion);
174. Sego v. Comm'r, 114 T.C. 604, 612 (2000).
175. Sego, 114 T.C. at 610. If the taxpayer properly challenges his or her liability because he or she did not receive a Notice of Deficiency or otherwise did not have a prior opportunity to contest the assessed liability, the review is always de novo. Likewise, if the taxpayer challenges the liability decision by invoking the spousal relief rules in § 6015 (b) or (c) the review is de novo. I.R.C. § 6015 (2000). However, if the taxpayer seeks spousal relief under § 6015(f), the Court reviews the closed record for abuse of discretion. I.R.C. § 6015(f); see also Butler v. Comm'r, 114 T.C. 276, 283 (2000).
176. I.R.C. § 6330(d)(2)(B) (2000).
177. See, e.g., MRCA Info. Servs. v. Comm'r, 145 F. Supp. 2d 194, 201 (D. Conn. 2000);
178. Lunsford v. Comm'r, 117 T.C. 183, 189 (2003).
179. See, e.g., Ahee v. United States, No. CV-S-01-0211, 2002 WL 1023165, at *1 (D. Nev. Dec. 27, 2001);
180. Rennie v. IRS, No. F-01-5712, 2001 U.S. Dist. LEXIS 18954, at *1 (E.D. Cal. Sept. 26, 2001).
181. Living Care Alternatives of Utica, Inc. v. United States, 411 F.3d 621, 635 (6th Cir. 2005).
182. See Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985) ("The [Administrative Procedures Act] specifically contemplates judicial review on the basis of the agency record compiled in the course of informal agency action in which a hearing has not occurred.").
183. See Marvin E. Frankel, The Search for Truth: An Umpireal View, 123 U. PA. L. REV. 1031, 1036-41 (1975);
184. Friendly, supra note 1, at 1291-92; Amalia D. Kessler, Our Inquisitorial Tradition: Equity Procedure, Due Process, and the Search for an Alternative to the Adversarial, 90 CORNELL L. REV. 1181, 1188-89 (2005).
185. See Camp v. Pitts, 411 U.S. 138, 142 (1973) ("[T]he focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court.");
186. United States v. Carlo Bianchi & Co., 373 U.S. 709, 715 (1963) ("[I]n cases where Congress has simply provided for review, without setting forth the standards to be used or the procedures to be followed, this Court has held that consideration is to be confined to the administrative record and that no de novo proceeding may be held.") (italics in original);
187. Tagg Bros. & Moorhead v. United States, 280 U.S. 420, 443 (1930); 2 RICHARD J. PIERCE, JR., ADMINISTRATIVE LAW TREATISE § 11.6 (4th ed. 2002) (collecting cases).
188. See Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50 (1938).
189. Robinette v. Comm'r, 123 T.C. 85, 95 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006).
190. Id. at 114 (Wells, J., concurring).
191. Id. at 116 (Thornton, J., concurring).
192. Id. at 114 (Wells, J., concurring).
193. See Barry v. Comm'r, 1 B.T.A. 156, 157 (1924) ("The record of the case made in the Internal Revenue Bureau is not before the Board except in so far as it may be properly placed in evidence by the taxpayer or by the Commissioner. The Board must decide each case upon the record made at the hearing before it, and, in order that it may properly do so, the taxpayer must be permitted to fully present any questions relating to his tax liability which may be necessary to a correct determination of the deficiency. To say that the taxpayer who brings his case before the Board is limited to questions presented before the Commissioner, and that the Board in its determination of the case is restricted to a decision of issues raised in the Internal Revenue Bureau would be to deny the taxpayer a full and complete hearing and an open and neutral consideration of his case.").
194. For an interesting discussion of the various times that the Tax Court engages in an abuse of discretion review of liability determinations, see Charles A. Boreck, Social Science Explanations for Disparate Outcomes in Tax Court Abuse of Discretion Cases: A Tax Justice Perspective, 33 CAP. U. L. REV. 623 (2005).
195. See Ewing v. Comm'r, 122 T.C 32, 41 (2005) (Thornton, J., concurring) (listing examples), rev'don other grounds, 439 F.3d 1009 (9th Cir. 2006).
196. No. Civ. A 00-B-851, 2000 WL 1745280 (D. Colo. Nov. 21, 2000).
197. Id. at *7; accord Muhammad v. United States, No. C/A 0:02-2677-17BD, 2003 WL 21152978, at *4 (D.S.C. Jul. 15, 2003) (quoting Southmark Prime Plus, L.P. v. Falzone, 776 F. Supp. 888, 893 (D. Del. 1991) (remanding to the IRS because the record did not contain enough information for the court "to find that the Appeals Officer did not commit an abuse of discretion in rendering her decision, or that 'no relief could be granted to the Plaintiff under any set of facts that could be proved.'")- Note the placement of the default rule-the Appeals Officer abused his discretion unless the record shows sufficient justification.
198. Robinette v. Comm'r, 439 F.3d 455, 459 (8th Cir. 2006).
199. Id. at 461 (citations omitted) (emphasis added).
200. 1, 629 (6th Cir. 2005).
201. Id. at 625.
202. Id. at 631; see also Olsen v. United States, 414 F.3d 144, 150-51 (1st Cir. 2005) (adopting a strong record review standard).
203. See AllGlass Sys., Inc. v. Comm'r, 330 F. Supp. 2d 540, 541 (E.D. Pa. 2004).
204. Id. at 547 (internal citations omitted) (emphasis added).
205. I.R.S. Chief Counsel Notice CC-2006-019, 60-61 (Aug. 18, 2006), available at http://www.irs.gov/pub/irs-ccdm/cc-2006-019.pdf. I do not suggest the IRS is trying to hide the record from court review. It is just that, as I show above, the "hearing" basically encompasses the entirety of the taxpayer account history. That is a lot of information to wade through. From the IRS's point of view, it makes sense to minimize the court's burden by simply providing the smallest amount of information necessary to support its decision. That the decision to minimize the record is administratively sound does not make it any less harmful to taxpayers. It is the taxpayer's responsibility to put into the record for review any other materials. As I argue below, that is well nigh impossible for most of the taxpayers to understand, much less accomplish.
206. See Leslie Book, Fix CDP, But Do Not Repeal It, A.B.A. SEC. OF TAX'N NEWSQUARTERLY, Fall 2004, at 13, 13.
207. Id. at 15 ("It is the review of agency action that provides systemic pressure for the agency to do the job right in the first place.... The focus of... review should be (and is in other areas of the law) on what the agency did, rather than on wrestling, on an individualized basis, with the right answer...."). The National Taxpayer Advocate has also recognized this second argument for court review and has proposed expanding court review to provide "the authority to review the entirety of the collection life cycle" so that "where the courts find that the IRS has abused its discretion, all taxpayers will benefit from the changes in procedures or additional training that result from such decisions." 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 463.
208. See notes 282-84 and accompanying text.
209. This claim again betrays a nineteenth century vision of how the IRS operates. See Stanwood v. Green, 22 F. Cas. 1077 (S.D. Miss. 1870) (No. 13,300) and United States v. Fordyce, 25 F. Cas. 1143 (N.D. Ala. 1871) (No. 15,130) for examples of judicial review to check the excesses of a particular IRS agent named Stanwood.
210. F. Supp. 2d 1209 (D. Nev. 2006).
211. Id. at 1214.
212. Id. at 1210.
213. Id. at 1214.
214. Id. at 1209.
215. INTERNAL REVENUE MANUAL, supra note 35, § 8.22.2.4.8 ("Requests to Collect from Third Parties").
216. Id.
217. See text accompanying notes 293-335.
218. INTERNAL REVENUE MANUAL, supra note 35, § 8.22.2.4.8.1 (emphasis in original). Even if the issue is framed as a question of "law" (as the court framed it in Crawford), it generally takes more than one trial court opinion to convince the decision makers within the IRS to change an institutional position. For example, it took the decisions of five different circuit courts over a three-year period before the IRS abandoned its systemic practice of reviving a tax liability when, due to a clerical error, it erroneously refunded a payment to the taxpayer. For a more complete description, see Bryan T. Camp, The Mysteries of Erroneous Refunds, TAX NOTES, Jan. 17, 2007, available at 2007 TNT11-55 (LEXIS).
219. See Camp, supra note 191 for one example where it took adverse decisions from five different courts of appeals before the IRS changed its position.
220. No. 16142-03S, 2004 WL 1775680 (Aug. 10, 2004).
221. Id. at*3.
222. Id.
223. See id. at *l-3. Mr. Brown is most likely what I call an inarticulate taxpayer who got tripped up by procedural rules. See infra text accompanying notes 207-19.
224. See, e.g., Meyer v. Comm'r, 115 T.C. 417 (2000).
225. See Lunsford v. Comm'r, 117 T.C. 159 (2001).
226. Id.
227. S. 80, 95 (1943) (Black, J., dissenting).
228. See id. at 99 ("Of course, the Commission can now change the form of its decision to comply with the Court order."). This is precisely what happened. See SEC v. Chenery Corp., 332 U.S. 194 (1947) (Jackson, J., dissenting) ("The Court by this present decision sustains the identical administrative order which only recently it held invalid.").
229. Robinette v. Comm'r, 123 T.C. 85 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006).
230. 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 459.
231. Remember, the taxpayer can theoretically bring a refund suit after fully paying the tax owed. See, e.g., Flora v. Comm'r, 357 U.S. 63 (1958);
232. Phillips v. Comm'r, 283 U.S. 589, 597-99 (1931) (finding that administrative collection of taxes comported with Fifth Amendment due process because taxpayers had a "prompt" postdeprivation action in the form of the refund suit).
233. Over two-thirds of the total amount collected on taxpayer delinquent accounts comes from the Notice stage and less than one-third comes from liens, levies, and offsets, labeled "additional actions" in the table. 2006 DATA BOOK, supra note 9, at 41 tbl. 16.
234. The National Taxpayer Advocate reports that, in the 2004 fiscal year, ninety-four percent of the 1.7 million CDP notices for first levies issued from ACS and fifty-two percent of the 0.5 million CDP notices for NFTLs came out of ACS. See 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 459 tbl.2.7.1. Combined, that means that eighty-four percent of all first levies and first NFTLs stem from the ACS stage.
235. Many sources suggest that many, if not most, of the taxpayers who fail to resolve their accounts during the Notice stage are of the type I call inarticulate. A 2006 GAO study made several findings which suggest that inarticulate taxpayers make up the largest group of those who invoke the CDP process. First, it found that the Office of Appeals was initiating more than twice as many contacts with the taxpayers as the taxpayers were initiating with the IRS. GAO 2006 CDP STUDY, supra note 31, at 20 tbl.3. This suggests that taxpayers needed considerable prompting to pursue the hearing. Second, it found that over thirty percent of the cases were closed because the taxpayer failed to respond to requests for information. Id. at 15 tbl. 1.1. This suggests that a significant number of taxpayers were unable to gather and present the information needed to evaluate their claims of can't-pay. Third, although forty percent of taxpayers wanted to contest the merits of the tax liability decision, less than ten percent of those could even make the proper allegation (that they had not received a statutory Notice of Deficiency from the IRS) to enable a review of their liability. Id. at 27-28. This suggests that many taxpayers simply did not understand the scope and limitations of the CDP hearing.
236. 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 459 tbl.2.7.1 (reporting that of the 2,276,684 CDP notices issued in fiscal year 2004, only 28,133 resulted in a request for a CDP hearing). Note that a single taxpayer may be the recipient of more than one CDP notice because many taxpayers are delinquent for more than one tax period. There is no published data on how many taxpayers receive CDP notices per year, but TIGTA's 2005 Trends Report does report that the ratio of uncollected accounts per taxpayer for cases waiting action in the queue is three to one. See 2005 TRENDS REPORT, supra note 54, at 27 fig. 13. Moreover, the National Taxpayer Advocate has stated that for fiscal year 2006 "taxpayers with delinquencies whose accounts were assigned to ACS for collection had an average of 1.9 delinquent tax periods, [and] taxpayers whose accounts were waiting in the . . . [queue] to be assigned to field personnel had an average of 3.1 delinquent tax periods . . . ." 2006 TAXPAYER ADVOCATE REPORT, supra note 54, at 64 (footnotes omitted). Thus, the 2.276 million CDP notices in fiscal year 2004 probably affected between 750,000 and 900,000 taxpayers. However, since the 28, 133 appeals are also counted on a per account basis and not on a per taxpayer basis, the ratio between CDP notices and appeals remains the same, whether counted as accounts or taxpayers.
237. 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 461 ("[T]he system is operating exactly as any due process review should. The vast majority of taxpayers work with the IRS or do not object to collection actions; but for those few taxpayers who do object, CDP is there.").
238. See 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 459 tbl.2.7.1.
239. C.M. (CCH) 774 (2003).
240. Id. at 774.
241. Id.
242. Id. at 775.
243. Id.
244. Id. at 177.
245. Id.
246. See I.R.C. § 6673 (2000).
247. Lister, 85 T.C.M. (CCH) at 778 (emphasis omitted).
248. Both the Installment Agreement and OIC forms contain clauses in which the taxpayer agrees to timely file and pay all taxes for the term of the agreements (or five years for OICs). See I.R.S., FORM 9465: INSTALLMENT AGREEMENT REQUEST (2007), available at http://www.irs.gov/pub/irs-pdf/f9465.pdf; I.R.S., FORM 656: OFFER IN COMPROMISE (2007), available at http://www.irs.gov/pub/irs-pdf/f656.pdf. The IRS monitors compliance closely and treats defaults as presumptive evidence that the taxpayer was really just a crafty won't-pay. See, e.g., Robinette v. Comm'r, 123 T.C. 85, 95 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006).
249. 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 459 (emphasis added).
250. The quote is Justice Holmes's famous tag line in Bi-Metallic Inv. Co. v. Colo. Bd. of Equalization, 239 U.S. 441,446 (1915), and is commonly thought of as the great demarcation between what constitutes adjudicative action and what constitutes legislative action. Holmes was distinguishing what process was due to persons affected by legislative decisions (rules) from the process due to persons affected by adjudications. The latter was the subject of Londonerv. City and County of Denver, 210U.S. 373 (1908). Interestingly, both Londoner and Bi-Metallic were tax cases.
251. One can look at almost any CDP case for examples of how the courts frame the question. See, e.g., Sampson v. Comm'r, No. 4170-05S, 2006 WL1228593, at *1 (T.C. May 8, 2006) (stating that the issue is "whether [the IRS] abused [its] discretion in rejecting an offer-in-compromise ... that petitioner submitted for the taxable year 2002").
252. See, e.g., Rivera v. Comm'r, 85 T.C.M. (CCH) 832 (2003); see also infra text accompanying notes 267-71.
253. For example, Congress could provide narrowly tailored causes of action for each time the IRS rejects a collection alternative. This would at least put an individualized decision in front of a court: was the IRS correct in rejecting the taxpayer's Offer In Compromise or proposed Installment Agreement? Congress has done something similar for taxpayers who seek to undo the joint liability of a prior return. Section 6015(e) allows for judicial review of IRS refusals to relieve spouses of joint liability. See I.R.C. § 6015(e) (2000). While that is not a collection decision, it is still an example of a targeted cause of action. But as I explain in the text, it would still not make sense because collection is such a moving target.
254. See I.R.C § 7421 (2000).
255. Bennett v. Spear, 520 U.S. 154, 178 (1997) (emphasis added); see also Appalachian Power Co. v. EPA, 208 F.3d 1015,1022 (D.C. Cir. 2000).
256. See Bennett, 520 U.S. at 177-78 (articulating a two-part test for determining the finality of agency actions in which "affecting legal relations" is the second part).
257. RICHARD J. PIERCE, JR., SIDNEY A. SHAPIRO, & PAUL R. VERKUIL, ADMINISTRATIVE LAW AND PROCESS § 5.7.1 (4th ed. 2004) ("The requirement of final agency action as a prerequisite to judicial review is designed to avoid premature judicial involvement in the agency decision making process.").
258. 51 (7th Cir. 1970).
259. Id. at 1155.
260. Id. at 1157.
261. I.R.C. § 7433 (2000); see also Treas. Reg. § 301.7433-1 (as amended in 2003).
262. See Treas. Reg. § 301.7433-1.
263. See generally Steve R. Johnson Code Sec. 7433: Damages Against the IRS for Wrongful Collection Actions, J. TAX. PRAC. & PROC., Dec. 2006-Jan. 2007, at 23.
264. YOGI BERRA WITH TOM HORTON, YOGI: IT AIN'T OVER ... 5(1989).
265. See JOINT COMM. ON TAXATION, JCX-53-03, REPORT RELATING TO THE INTERNAL REVENUE SERVICE AS REQUIRED BY THE IRS REFORM AND RESTRUCTURING ACT OF 1998, at 15 (2003), available at http://www.house.gov/jct/x-53-03.pdf; GAO 2006 CDP STUDY, supra note 31, at 17. The IRS has surmised that five percent of taxpayers hogged agency resources because "[a]ppeals personnel must often read lengthy frivolous submissions in search of any substantive issue that might be contained within the case file." Similarly, courts have to deal with even more of the same. Id.
266. See infra app. tbl.l.
267. GAO 2006 CDP STUDY, supra note 31, at 17.
268. F. Supp. 2d 941, 944 (W.D. Mo. 2006).
269. See id. at 941-48.
270. Harris v. Comm'r, 92 T.C.M. (CCH) 217 (2006).
271. Id.
272. See 2006 TAXPAYER ADVOCATE REPORT, supra, note 54, at 65-66.
273. Id. at 69.
274. The table is created using data from 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 233 tbl.1.15.1 (footnotes omitted).
275. See Montgomery v. Comm'r, 122 T.C. 1 (2004).
276. See I.R.C. § 7421(a) (2000).
277. See 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 461 -63 ("Providing a second opportunity to go to court to a taxpayer who, for whatever reason, has already had one opportunity to challenge the underlying tax liability in Tax Court and missed it, diminishes the meaning of the Notice of Deficiency and pre-assessment review."); see also Danshera Cords, Collection Due Process: The Scope and Nature of Judicial Review, 73 U. ClN. L. REV. 1021, 1044-45 (2005).
278. See supra text accompanying notes 183-96.
279. See Crawford v. United States, 422 F. Supp. 2d 1209 (D. Nev. 2006). For an excellent, thoughtful essay on the proper ethical role of government counsel, see Michael Hatfield, Fear, Legal Indeterminacy, and the American Lawyering Culture, 10 LEWIS & CLARK L. REV. 511 (2007). It is, of course, possible that the government position was not simply a litigation position and that the Office of Appeals had sought guidance from the Office of Chief Counsel, which had concluded that the statute barred consideration of third-party payments in evaluating collection options. But that would be very strange, especially considering the CDP regulations were deliberately crafted to emphasize the broad range of alternatives that the Office of Appeals could consider. See Treas. Reg. § 301.6330-1(e)(3) (as amended in 2006).
280. See Parker v. Comm'r, 88 T.C.M. (CCH) 327 (2004). In her 2005 Annual Report, the National Taxpayer Advocate cites Parker as a case showing how "[j]udicial review is an essential component of CDP rights because in some instances the IRS collection system demonstrates . . . [t]he desire to obtain efficiencies of scale at the expense of providing taxpayers with a reasonable CDP hearing " 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 457-58 & 458 n.70.
281. See Parker, 88 T.C.M. (CCH) at 327.
282. See INTERNAL REVENUE MANUAL, supra note 35, at § 8.22.2.2.
283. Treas. Reg. § 301.6320-1 (dχ2), Q & A D7 (as amended in 2006).
284. Parker, 88 T.C.M. (CCH) at 327.
285. See id.
286. See id.
287. See generally KERMN T L. HALL, THE MAGIC MIRROR: LAW IN AMERICAN HISTORY (1989) (emphasizing the growth of law as growth of individual rights against the state);
288. PERRY MILLER, THE LIFE OF THE MIND IN AMERICA: FROM THE REVOLUTION TO THE CIVIL WAR BOOKS ONE THROUGH THREE (1965) (introducing and defending the "head/heart" dichotomy).
289. See Camp, supra note 2, at 17-20 (discussing the differences between the inquisitorial and adversarial systems).
290. See generally Jon C. Dubin, Torquemada Meets Kafka: The Misapplication of the Issue Exhaustion Doctrine to Inquisitorial Administrative Proceedings, 97 COLUM. L. REV. 1289 (1997);
291. Mark Fenster, The Birth of a "Logical System": Thurman Arnold and the Making of Modern Administrative Law, 84 OR. L. REV. 69 (2005);
292. Jerry L. Mashaw, The Management Side of Due Process: Some Theoretical and Litigation Notes on the Assurance of Accuracy, Fairness, and Timeliness in the Adjudication of Social Security Claims, 59 CORNELL L. REV. 772(1974).
293. See, e.g., Danshera Cords, How Much Process Is Due? LR. C. Sections 6320 and 6330 Collection Due Process Hearings, 29 VT. L. REV. 51, 102 (2004) ("Without a consistent process that comports with our notions of'due process,' public confidence in the fairness, equality, and effectiveness of the tax collection system may be reduced. This risk may pose a significant threat to our system of tax collection. Taxpayers are far less likely to comply with the tax law if they believe that the tax law is unfair or that they are not afforded the same rights as others.").
294. Steve R. Johnson, The Dangers of Symbolic Legislation: Perceptions and Realities of the New Burden-of-Proof Rules, 84 IOWA L. REV. 413, 415 (1999) (describing recent tax law provisions as a "pernicious exercise in symbolic legislation").
295. As the IRS explains on its Web site, "you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. The IRS will automatically apply the refund to the [amounts] owed." I.R.S., Refund Inquiries, http://www.irs.gov/faqs/faq/ 0" id=199566,00.html.
296. See, e.g., Bartman v. Comm'r, 87 T.C.M. (CCH) 1213 (2004), aff'd in part, vacated in part, 446 F.3d 785 (8th Cir. 2006) (describing how one taxpayer's EITC of $3000 was setoff when the newly divorced and unemployed taxpayer had less than $5000 gross income). Since the IRS collected by setoff, the taxpayer had no recourse to CDP. Id. Not only does the IRS automatically setoff refunds against past tax liabilities reflected in the IRS records, but in another bulk processing decision, it also will automatically hold refunds if its records show that the taxpayer did not file a return in any one of the five prior years. INTERNAL REVENUE MANUAL, supra note 35, § 25.12.1.1. The taxpayer must then contact the IRS and show a legitimate reason for the non-filing in order to get the refund.
297. See Goldberg v. Kelly, 397 U.S. 254 (1970). Whether EITCs are "property" to the extent of triggering a constitutional due process analysis is beyond the scope of this Article. I happen to think that a good case can be made that they are.
298. C.M. (CCH) 832 (2003).
299. See id. at 835.
300. See id.
301. See id.
302. See id. Since Rivera had not filed returns for those years, there was no limitation period for the IRS to assess. See generally I.R.C. § 6501(c) (2000).
303. The record suggests that Rivera may have been an inarticulate taxpayer who needed a voice. See Rivera, 85 T.C.M. (CCH) at 832 (suggesting that the face-to-face conference seemed to define some issues, but that Rivera did not follow up). After he filed his petition to the Tax Court, the IRS sent him copies of Form 4340 for all the tax periods at issue asking Rivera to admit to the truth of them. Id. at 833. Rivera failed to respond. Id. These failures to respond and Rivera's failure to get counsel suggest that Rivera may not have had the resources to articulate his position.
304. My assistants searched three electronic databases to find evidence of opinions: LEXIS, Westlaw, and Tax Analysts. In addition, if upon reading a case my assistants found evidence of another court decision that had not been picked up by any of those services (such as a reported appellate decision referencing a trial court decision), they tracked it down on PACER. Once again, I must thank my assistant Lee Franks for his prodigious assistance in this matter. He was truly the Oscar Peterson of Excel and performed the heavy lifting for data input and quality control. He also rendered many of the charts and graphs and, most importantly, gave thought and care to his work. I would also like to thank my prior research assistants Ariya McGrew, Peter Hall, and John Valdez for all their help in setting up the database and doing the initial data entry. Naturally, I remain responsible for any errors.
305. The first case was Diefenbaugh v. Weiss, No. 3:99 MC 7029, 2000 WL 202705 (N.D. Ohio Jan. 6, 2000), aff'd, No. 00-3344, 2000 WL 1679510 (6th Cir. Nov. 3, 2000).
306. I initially gathered data to compare outcomes as between district courts, which handled approximately forty percent of all CDP appeals, and the Tax Court, which handled the remaining sixty percent. Note that neither the Court of Federal Claims, nor any bankruptcy court, issued any decision reviewing a CDP hearing during the review period. However, since all CDP appeals must now be taken to the Tax Court, I have not analyzed this data in this Article.
307. See infra app. tbl.2 for a listing of these cases.
308. I did not count cases as "win" cases where a subsequent decision showed that the taxpayer had lost on remand. See Newstat v. Comm'r, No. 16989-02L, 2004 WL 2075172 (T.C. Sept. 16, 2004) (upholding an IRS collection decision for one year, but remanding the case a second year for a new CDP hearing). The remand in Newstat produced the same collection decision and the court upheld it. Newstat v. Comm'r, No. 16989-02L, 2005 WL 3068347 (T.C. Nov. 10, 2005); see also Ahee v. United States, No. CV-S-01-0211-KJD LRL, 2002 WL 10223165 (D. Nev. Dec. 27, 2001) (where the government moved for the remand to give a taxpayer a face-to-face hearing). The same court later upheld the resulting decision to collect. Ahee v. United States, No. CV-S-01-0211-KJD LRL, 2002 WL 31061637 (D. Nev. July 22, 2002). Nor did I count as a "win" cases like Burt, Inc. v. IRS, No. 2:05-CV-301, 2006 WL 2797744 (N.D. Ind. Sept. 28, 2006) (where the taxpayer survived an IRS Motion for Summary Affirmance). The same court later awarded the IRS a Motion for Summary Judgment. Burt, Inc. v. IRS, No. 2:05-CV-301, 2007 WL 952009 (N.D. Ind. Mar. 27, 2007). In addition, I did not count cases like Dorn v. Comm'r, 119 T.C. 356 (2002) (where the taxpayer survived a Motion to Dismiss when the court decided it had jurisdiction to review the IRS decision to collect by jeopardy levy). Petitioner ultimately lost the case on the merits. Dorn v. Comm'r, No. 6240-00L, 2003 WL 21500028 (T.C. July 1, 2003). To the same effect, compare Parker v. Comm'r, 117 T.C. 63 (2001) (establishing that the tax court had jurisdiction to review), with Parker v. Comm'r, 90 T.C.M. (CCH) (2005) (upholding the IRS collection decision). Finally, I did not include as a "win" one case that was later reversed on appeal. Robinette v. Comm'r, 123 T.C. 85 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006). In sum, unless I could find an adverse final outcome, I counted all remands and interstitial victories as taxpayer "wins."
309. GAO 2006 CDP STUDY, supra note 31, at 4. The GAO studied 208 of the 32,241 CDP administrative hearings closed by the IRS Office of Appeals in fiscal year 2004. Id. at 2.
310. This number was a bit tricky to find. First, I looked at the GAO 2006 CDP STUDY, supra note 31, at 12 fig.2, which reports that the Office of Appeals closed 126,200 hearings between fiscal year 2000 and fiscal year 2005. The 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 459 tbl.2.7.1, reports that the 2,276,684 CDP Notices issued in fiscal year 2004 generated 28, 113 requests for CDP hearings. The report does not say, however, how many CDP requests were made during any other time period. Id. The 2006 GAO study reports the number of CDP administrative case closures per year through fiscal year 2005, but does not report the number of requests. GAO 2006 CDP STUDY, supra note 31, at 12 fig.2. Given that a CDP case takes an average of 300 days to process in the Office of Appeals, the GAO figure of 27,900 case closures in fiscal year 2005, id., correlates nicely with the Taxpayer Advocate's report of 28, 133 CDP requests in fiscal year 2004. 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at tbl.2.7.1. Accordingly, I used the number of case closures reported by the GAO for fiscal year 2000 through fiscal year 2005, and then took an average to project a value for fiscal year 2006. Since the number of administrative CDP cases has been fairly steady since fiscal year 2002, it seems reasonable to assume similar numbers over the course of the calendar year compared to the fiscal year. Accordingly, I apply the two percent estimate to the number of hearings closed.
311. See supra text accompanying notes 267-72.
312. These cases include two where the taxpayer was also in bankruptcy and sought a ruling that the IRS was thereby prohibited from proceeding with any CDP hearing during the bankruptcy. This issue could just as well be raised before the bankruptcy court, as the taxpayer did in In re Parker, 279 B.R. 596 (Bankr. S.D. Ala. 2002). Two other cases involved the taxpayer's claim of entitlement to innocent spouse relief under § 6015, which the taxpayer could have just as well raised through the court review provisions in § 6015(e). For a discussion of the interplay between the CDP provisions in §§ 6320 and 6330 and the Innocent Spouse provisions in § 6015, see Bryan T. Camp, The Equal Protection Problem in Innocent Spouse Procedures, TAX NOTES TODAY, July 18, 2006, available at 2006 TNT 137-C (LEXIS). Finally, three cases involved taxpayers seeking court review of the liability for the Trust Fund Recovery Penalty (TFRP) imposed by § 6672. This is a penalty imposed on a responsible person for failure to properly pay withholding taxes of his or her employees. While there is no pure prepayment court review, taxpayers have to only pay one employee's withholding for one quarter to get into court. See, e.g., Fidelity Bank v. United States, 616 F.2d 1181, 1182 n.l (10th Cir. 1980) (taxpayer paid $381 to gain review of assessed penalty of over $36,000). Once a taxpayer pays the withholding, the IRS will cease collection of the entire liability pending the outcome of judicial review. See I.R.C. § 6672(c) (2000);
313. INTERNAL REVENUE MANUAL, supra note 35, § 5.7.7.6.2. Accordingly, the CDP provisions are simply a duplicate method for taxpayers who want to contest their TFRP liability. Notice, however, that I did not count as duplicative those cases where a taxpayer sought relief from a collection decision regarding the TFRP, only those where a taxpayer contested a liability decision.
314. This figure is the sum total of cases reported by the IRS in 2003 and 2006 for the years 2000-2006. I.R.S., DEP'T OF THE TREASURY, 2003 DATA BOOK 27 tbl.16, available at http://www.irs.gov/pub/irs-soiy03databk.pdf; 2006 DATA BOOK, supra note 9, at41 tbl. 16. Each table breaks the collection decisions into NFTLs filed, levies issued, and seizures made. Furthermore, each table provides data for the three years prior to the year being reported. Recall that most of these collection actions were not individualized decisions. For example, ninety-four percent of all levies were the product of aggregate decisions made at the ACS stage. See supra text accompanying notes 205-07.
315. See supra note 279 and accompanying text.
316. The GAO estimated that approximately two percent of the taxpayers who requested an administrative hearing during fiscal year 2004 later sought court review. GAO 2006 CDP STUDY, supra note 31, at 4.
317. One of the main technical pleading rules provides that a taxpayer may not seek court review of an issue that the taxpayer did not mention during the administrative hearing. Treas. Reg. § 301.6330-l(f)(2) (2006); see also Bourbeau v. Comm'r, No. 6896-02L, 2003 WL 1918920 (T.C. Apr. 22, 2003). While normally it is pro se taxpayers who commit this error, counsel can do so as well. See Bruce v. Comm'r, No. 24303-05L, 2007 WL 1793448 (T.C. June 21, 2007) (refusing to consider a taxpayer's request for penalty abatement because, while the taxpayer appeared to raise an issue of liability in his request for CDP hearing, "petitioner's representative stated at the hearing that no such challenge to the amount of assessment existed. Accordingly, in this proceeding we do not consider petitioner's underlying tax liability.").
318. No. 16142-03S, 2004 WL 1775680 (T.C. Aug. 10, 2004).
319. Id at*3.
320. GAO 2006 CDP STUDY, supra note 31, at 25.
321. Id.
322. Camp, supra note 2, at 122.
323. See infra app. tbl.l for the data used in making this graph.
324. See infra app. tbl.2. This figure is consistent with figures presented by researchers who have studied this subject in the past. In a study of fiscal year 2001 CDP cases, the Taxpayer Advocate found an average CDP appeals processing time of 300 days. NAT'L TAXPAYER ADVOCATE, I.R.S., 2003 ANNUAL REPORT TO CONGRESS 47 (2003). In a study of fiscal year 2004 CDP cases, the GAO found an average cycle time of 314 days for cases involving nonresponsive taxpayers-those who were either completely unresponsive to all contact attempts initiated by the Office of Appeals, as well as those who ultimately failed to provide the information requested by the Office of Appeals. GAO 2006 CDP STUDY, supra note 31, at 27.
325. THOMAS PAINE, COMMON SENSE, reprinted in THOMAS PAINE: COLLECTED WRITINGS 1, 34 (Eric Foner ed., 1996) (1776) (emphasis in original).
326. See generally BRIAN TAMANAHA, ON THE RULE OF LAW: HISTORY, POLITICS, THEORY (2004) (reviewing historical conflicts over meanings associated with rule of law).
327. Compare, e.g., LoN M. FULLER, THE MORALITY OF LAW (1964) (arguing that moral content inheres in the rule of law), and JOSEPH RAZ, THE AUTHORITY OF LAW: ESSAYS ON LAW AND MORALITY (1984) (arguing that rule of law has no necessary connection to systems of morals), with Gary Peller, The Metaphysics of American Law, Ti CAL. L. REV. 1151 (1985) (arguing that rule of law is an empty phrase, used as a rhetorical device by the powerful to subjugate the powerless). For an example of the contemporary debate see Hamish Stewart, Incentives and the Rule of Law: An Intervention in the Kramer/Simmonds Debate, 51 AM. J. JURIS. 149 (2006) (recounting and participating in an ongoing debate between two particular theorists). I am somewhat puzzled by this debate, which seems little more than exercises in box-drawing, at least to my admittedly untrained eye. After all, few would disagree with either of the following statements: (1) the United States legal system followed the rule of law from 1789 through 1865; and (2) during that time period, the laws that treated certain categories of humans as property were immoral, even though democratically enacted and impartially enforced. See generally A.E. Keir Nash, Reason of Slavery: Understanding the Judicial Role in the Peculiar Institution, 32 VAND. L. REV. 7 (1979) (demonstrating the impartiality and formalism of slave law application). To claim that immoral legal systems cannot "qualify" as following the rule of law, it seems to me that one must reject one of those propositions. If one cannot, then one must concede that even systems imposing immoral obligations or conferring immoral benefits may do so per the rule of law. Since that is unsatisfactory, one must then create another analytical box to decry the immoral legal regime. See RAZ, supra, at 307 ("[c]onformity to the rule of law is a virtue, but only one of the many virtues a legal system should possess.").
328. I leave out the deconstructionists, like Professor Peller, from any further consideration since their main purpose is to remind us why all theories are ultimately social constructs. While that is all well and good, it does not help figure out which social constructs are preferable or possible.
329. See FULLER, supra note 295, at 81 (describing the congruence between official action and declared rule as one of the eight elements of a legal system that conforms to a "rule of law");
330. RAZ, supra note 295, at 210-13; TAMANAHA, supra note 294, at 114-19 (asserting this idea to be "a thread that has run for over 2,000 years, often frayed thin, but never completely severed...").
331. See FULLER, supra note 295, at 81 (locating in courts the task of preventing "the lawless administration of the law");
332. RAZ, supra note 295, at 216-17 (discussing the importance of an independent judiciary);
333. TAMANAHA, supra note 294, at 122-26.
334. U.S. Const. amend. V; see Lawrence M. Friedman, Law, Lawyers, and Popular Culture, 98 YALE L.J. 1579, 1603 (1989) ("Lawyers are taught and trained to regard 'due process' as the very essence of fairness and the rule of law."). Of course, "due process" is itself a conceptual box of many colors (and mixed metaphors).
335. Book, supra note 3, at 1161.
336. Id. at 1162.
337. Id. at 1161.
338. Id.
339. Cords, supra note 249, at 1024.
340. Cords, supra note 262, at 107.
341. Professor Cords's latest article reiterates both her assertion that judicial review is necessary and her concern that it can add value only if done properly. See Danshera Cords, Administrative Law and Judicial Review of Tax Collection Decisions, 52 ST. LOUIS U. L.J. 429, 477 (2008) (asserting that "[a] consistent approach to judicial review of tax collection decisions will benefit taxpayers and tax collection administration"). Her approach is to limit court involvement to a review of the record in existence at the time of the administrative hearing. Id. Her article, however, neither addresses the problems that I identify above, nor explains why judicial review is a necessary component of procedural regularity. Professor Cords simply assumes that judicial review is intrinsically good.
342. 2006 TAXPAYER ADVOCATE REPORT, supra note 54, at 556.
343. Id. at 557.
344. Id. at 561.
345. See generally INTERNAL REVENUE MANUAL, supra note 35, at ch. 5.8; GAO OIC STUDY, supra note 72.
346. For an in-depth discussion of the failure of evidence see Camp, supra note 2, at 80-81; see also Cords, supra note 262, at 52.
347. Antonin Scalia, The Rule of Law As a Law of Rules, 56 U. CHI. L. REV. 1175,1182 (1989).
348. JERRY L. MASHAW, BUREAUCRATIC JUSTICE: MANAGING SOCIAL DISABILITY CLAIMS 29-31(1983).
349. Id. at 25-26.
350. Id. at 30.
351. Id.
352. I.R.C. § 6330(cX2)(A) (2000).
353. MASHAW, supra note 313, at 30. The struggle over administration of Social Security Disability claims illustrates the resiliency and power of the idea that adversarial process is a necessary component of the administrative state. Professors Paul Verkuil and Jeffrey Lubbers have documented twenty-five years worth of failed attempts to remove or reduce the role of adversary process in making or reviewing Social Security Administration disability determinations. See Paul Verkuil & Jeffrey Lubbers, Alternative Approaches to Judicial Review of Social Security Disability Cases: A Report to the Social Security Advisory Board, 44 ADMIN. L. REV. 731(2003).
354. See Camp, supra note 2.
355. Armstrong v. Manzo, 380 U.S. 545, 552 (1965).
356. Phillips v. Comm'r, 283 U.S. 589 (1931).
357. I discuss these ideas further in Camp, supra note 2, at 18-20. See also MASHAW, supra note 313, at 223 ("Bureaucracy is probably the most important of our negative symbols." (quoting THURMAN W. ARNOLD, THE SYMBOLS OF GOVERNMENT 209 (1941))).
358. See generally Henry J. Friendly, supra note 1 (reviewing the historical developments and understandings of the term "hearing" with respect to administrative agencies).
359. I do not worry about won't-pays: they do not have a claim to voice. And articulate can't-pays are generally able to interact with the bureaucracy well enough to be heard.
360. See infra app. tbl. 1 (indicating that seventy-six percent of CDP cases are argued pro se).
361. In fiscal year 2008, the IRS funded 154 clinics. Hearing on Internal Revenue Service FY 2009 Budget Request Before the S. Comm. on Finance Serv, and General Gov't Comm. on Appropriations, 110th Cong. 17 (2008) (written statement of Nina Olson, National Taxpayer Advocate). About half of the clinics are located in law schools and service far fewer taxpayers than nonacademic clinics. The Tax Clinic at Texas Tech, for example, assisted approximately thirty-four taxpayers in calendar year 2007.
362. See generally Cass R. Sunstein, Problems with Rules, 83 CAL. L. REV. 953 (1995).
363. 2005 TAXPAYER ADVOCATE REPORT, supra note 75, at 463. The National Taxpayer Advocate actually suggests this idea be codified. Id. This would be an unhappy result since statutory provisions prevent an agency from reforming its practices as time and technology bring about new opportunities to improve administration.
364. For a detailed review of the history and function of these offices, see Camp, supra note 2, at 93-103.
365. See, e.g., Testimony Before the Joint Congressional Review on the Strategic Plans and Budget of the IRS, 109th Cong. (2005) (written testimony of Raymond T. Wagner, Jr., Chairman, IRS Oversight Board) (discussing "shifts in customer service and enforcement"); Practices and Procedures of the Internal Revenue Service: Hearing Before the S. Comm. on Finance, 105th Cong. 23 (1997) (statement of Joseph F. Lane, Chairman, Nat'l Gov't Relations Comm., The Nat'l Ass'n of Enrolled Agents) (suggesting that we "divide the IRS into two separate agencies, one for the taxpayer service, and the other for tax law compliance");
366. GOV'T ACCOUNTABILITY OFFICE, ASSESSMENT OF FISCAL YEAR 2006 BUDGET REQUEST 24 (2005), available at http://www.gao.gov/new.items/d05566.pdf (describing the "swinging pendulum, where enforcement gains are achieved at the cost of taxpayer service and vice versa");
367. Alvin Lurie, Killed with Kindness or How We Stopped Hating the IRS, 100 TAX NOTES 593 (July 28, 2003) (arguing enforcement should be the primary mission of the IRS);
368. William Stevenson, IRS's Primary Focus on Service is the Right Way to Go, 99 TAX NOTES 1850 (June 23,2003).
369. 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 227.
370. See Camp, supra note 2, at 5-17.
371. See 2004 TAXPAYER ADVOCATE REPORT, supra note 52, at 460 ("Often Appeals Officers are more helpful and successful in eliciting information from and conversing with the taxpayer than [field IRS] employees.").
372. See MASHAW, supra note 313, at 222-27.
373. NAT'L TAXPAYER ADVOCATE, I.R.S., 2007 ANNUAL REPORT TO CONGRESS 478-90 (2007), available at http://www.irs.gov/advocate/article/0" id=177301,00.html.
374. See I.R.C. § 6330(c)(2)(B) (2000).
375. C. 1,36(2004).