Last week’s case of Steven Samaniego v. Commissioner, T.C. Memo. 2019-7 (Feb. 6, 2019) (Judge Lauber) teaches a great (and short) lesson about the Tax Court’s subject matter jurisdiction. Mr. Samaniego had asked for a CDP hearing but the Office of Appeals thought his request was untimely. So it gave him an Equivalent Hearing and issued a Determination Letter to reflect its decision. Mr. Samaniego petitioned the Tax Court. Problem: the Tax Court does not have jurisdiction to review an Equivalent Hearing. Solution: Judge Lauber treated the hearing as a CDP hearing because he found that the Office of Appeals had miscounted the applicable time period. Hey Presto! Jurisdiction. But getting Tax Court review turned out to be a Pyrrhic victory for the taxpayer, because Judge Lauber found no error.
As we gear up for post-shutdown litigation over late-filed petitions this case is a useful lesson about how the Tax Court will take seriously its obligation to determine the scope of its own jurisdiction. The case also shows the Court's willingness to look through form to substance when doing so. I see the case as a direct descendant of Marbury v. Madison, 5 U.S. 138 (1803). Details below the fold.
Marbury, RFD (Real Famous Decision)
One of the more difficult concepts to teach to my first year students in Civil Procedure is subject matter jurisdiction (SMJ). Jurisdiction is just a fancy word for power. SMJ concerns questions of a court’s power over the subject of the dispute between the parties before it. SMJ is rarely an issue at the state level. That is because state courts of general jurisdiction have plenary power over all subjects brought to them, unless a federal or state statute restricts their power. In contrast, SMJ is sometimes difficult to figure out at the federal level. That is because the federal trial courts have zero power unless and until a federal statute gives them jurisdiction over the subject of the parties’ dispute. That is what we mean when we say federal courts are courts of limited jurisdiction.
But Courts have an Ace up their collective sleeves: they have the power determine their own power. Why? Because federal statutes must be interpreted and the power of the courts to “say what the law is” includes the very laws that give federal courts power. Such is one of the lessons of that most famous of cases, Marbury v. Madison, 5 U.S. 138 (1803).
You must remember Marbury! That’s the case where President Adams, on the last day of his presidency (March 3rd), was trying to create a few more well-appointed Federalist judges. Adams signed the necessary documents and the gave them to his Secretary of State to seal and deliver them. And surely you remember who was Adam’s Secretary of State at that time? It was none other than Chief Justice John Marshall, who had been confirmed to the post six weeks before, but had agreed to also serve out Adam’s term as Secretary of State. So on March 3rd Adams threw a bunch of parchment at him and said “finish it.”
Marshall did not finish it. Instead, after putting his seal of office on the documents, he threw it all to his younger brother to deliver them. Oh, and one of the commissions was for that younger brother too. But young James Marshall failed to deliver all of them. So....awkward.
When Thomas Jefferson took over the next day, he ordered his new Secretary of State (James Madison) to sit on the undelivered commissions, one of which was for William Marbury, an ardent Maryland Federalist.
sued. Critically, he sued in the Supreme Court, claiming that the Supreme Court had original jurisdiction. Original jurisdiction is the power to be the court where a case originates, or starts. In contrast, appellate jurisdiction is the power to be the court that reviews the court that had original jurisdiction. Marbury thought he could bring suit directly in the Supreme Court because Section 13 of the Judiciary Act of 1789 said he could.
As a political matter Marbury chose this path apparently hoping it would force the Supreme Court to escalate the political conflict between the Federalists and the Jeffersonians by ordering Jefferson to do something everyone knew Jefferson would not do: deliver the commissions. Jefferson was refusing because he determined that Marbury and others had no enforceable rights in the commissions. Marbury and his buddies thought that a decision affirming his right to his commission would perhaps precipitate a constitutional crisis. At the very least it would force the Supreme Court---fellow Federalists for gosh sakes---to rescue their fellow Federalists. And if Marshall had just been a political hack, he would have done that.
But Marshall was no political hack. He was a political sophisticate. He knew that Marbury’s plan was stupid: the proposed battle with the Executive was not one the Court could win. But if the Court could preserve and protect its place in the constitutional power structure, it could do much more for the Federalists in the long run. A couple of lousy minor judicial posts were not worth the long-term costs to national stability.
So Marshall‘s problem was this: how to write an opinion that avoided the looming constitutional crisis without abdicating the Court’s authority to decide legal rights and remedies, and without ceding to the Executive branch the authority to determine property rights, as Jefferson was trying to do. That is what Marshall meant when he oh-so-politely said: “The peculiar delicacy of this case, the novelty of some of its circumstances, and the real difficulty attending the points which occur in it require a complete exposition of the principles on which the opinion to be given by the Court is founded.”
Marshall’s solution was...self-denial. His bottom line is the famous one: Congress (via §13 of the Judiciary Act) could not give the Supreme Court power to hear Marbury’s case as an original matter because the Constitution restricts the Supreme Court’s original jurisdiction to a few narrow situations and this was not one of them. Self-denial of one power---a power granted by statute---is what established the Supreme Court’s greater power, the power to define constitutional limits on Congressional power. In one of the most famous lines from the case, Justice Marshall says: “It is emphatically the province and duty of the Judicial Department to say what the law is.”
also is a master lesson in the use of dicta, but that is beyond the scope of today’s blog. For us, it is enough that Marbury is the foundation of federal court power to determine the scope of their own power. The concept is so standard now that modern federal courts can safely declare that "the jurisdiction of the federal courts to construe the jurisdictional provisions of a statute cannot be a matter of serious dispute." In re Swine Flu Immunization Prod. Liab. Litig., 880 F.2d 1439 (D.C. Cir. 1989). And that jurisdiction to determine jurisdiction is held by the Tax Court as much as by any other court because it depends on statutory grants of power in the same way that every other federal court does. Judge Posner snarkily reminded us of that in Flight Attendants v. Commissioner, 165 F.3d 572, 578 (7th Cir. 1999). There he wrote: “The argument that the Tax Court cannot apply the doctrines of equitable tolling and equitable estoppel because it is a court of limited jurisdiction is fatuous. All federal courts are courts of limited jurisdiction.”
Where the Tax Court is different from other federal trial courts---especially federal district courts---is in the scope of subjects over which it has power. Originally, Congress gave the Tax Court only the SMJ to resolve disputes about “deficiencies,” one of the most difficult terms of art in the entire Tax Code, IMHO. Over time, Congress has crab-wise expanded the portfolio of disputes that the Tax Court has power to adjudicate. But each expansion brings with it litigation about the true scope of the Tax Court’s powers. So it is that the Tax Court has repeatedly needed to figure out its own power. Last week’s case involved the Court’s need to decide how much power it has to review a collection decision by the Office of Appeals.
In 1998 Congress created the Collection Due Process (CDP) procedure and codified it in §6330. It’s an awkwardly written section.
Section 6330(a) starts off by prohibiting the IRS from levying for before giving the taxpayer a notice of the taxpayer’s right to a hearing. Section 6330(a)(2) then says the IRS must give the notice at least 30 days before it makes its first levy. Section 6330(a)(3) then creates a right to “a hearing” if the taxpayer asks for it “during the 30-day period in paragraph (2).”
Section 6330(b) fleshes out the procedural scope of the right to “a hearing” granted in §6330(a)(3). It says that an impartial employee of the Office of Appeals shall conduct the hearing.
Section 6330(c) sets out the substantive scope of the right to “a hearing” granted in §6330(a)(3). It says that the Appeals Officer must make a “determination” with respect to a bunch of different subjects, including whether the IRS complied with applicable collection law, whether the taxpayer has offered any viable collection alternatives to levy, and sometimes whether the liability sought to be collected is really owed.
Section 6330(d) says that the taxpayer “may, within 30 days of a determination under this section, petition the Tax Court for review of such determination.” That’s pretty awkward because the statute does not say what action by the IRS actually triggers the 30 days. That is, how does one know when the IRS has made an appealable “determination” within the meaning of the statute. Treas. Reg. 310.6330-1(e), Q&A E8, E10, answers that question. It provides that the IRS determination will be in a document titled “Notice of Determination” and the statutory 30 day period to petition the Tax Court will be triggered by “the date of the Notice of Determination” with the first day of the 30 day period starting “the day after the date of the Notice of Determination.”
Section 6330(d) then provides that the Tax Court “shall have jurisdiction with respect to such matter.” That’s the grant of subject matter jurisdiction.
If all of the events contemplated by the statute happen, that is a CDP hearing. That is the hearing that the Tax Court has jurisdiction to review. The regulations, however, build off of the legislative history to provide a second type of hearing for taxpayers who blow the 30-day period. The regulations call it an “Equivalent Hearing.” The regulations instruct the Office of Appeals to give taxpayers the same consideration in an Equivalent Hearing as it does in a CDP hearing. One big difference is that taxpayers cannot obtain Tax Court review of an Equivalent Hearing outcome they do not like. I would read with interest any comments on whether taxpayers experience the same treatment from Appeals in both types of hearings.
The Regulations provide that Appeals will issue a “Notice of Determination” at the conclusion of a CDP hearing but will only issue a “Decision Letter” for an Equivalent Hearing. The Notice of Determination tells the taxpayer how to obtain Tax Court review. A Decision Letter tells the taxpayer to not even try to petition the Court.
In last week’s case, Mr. Samaniego received a Decision Letter because Appeals treated his CDP request as too late to entitle him to a CDP hearing. It instead granted him an Equivalent Hearing. He nonetheless petitioned the Tax Court and the Tax Court held it had jurisdiction because Appeals had miscounted the days by ignoring operation of §7503, and Mr. Samaniego’s CDP request was actually timely.
This is more than a form over substance decision. In his ruling, Judge Lauber relied on Craig v. Commissioner, 119 T.C. 252 (2002). There the Tax Court interpreted its jurisdiction in §6330(d) as extending to any “determination” made within the scope of §6330. The type of document issued at the end of the administrative hearing was not conclusive on whether the hearing the taxpayer received was the type of hearing (and, hence, the type of "determination") described in §6330. Thus, normally, the Court takes jurisdiction only when the Office of Appeals issues a document titled “Notice of Decision” because normally that document is the result of the kind of hearing authorized by §6330. But the Court will not be told by the IRS or anyone else in the Executive branch how to interpret the scope of its own jurisdiction.
This is the Tax Court following Marbury, by exercising the power to decide the scope of its own powers. It interprets the governing statutory authority to say what the law is. It is a lesson in who decides the Tax Court’s jurisdiction: the IRS or the Tax Court. Samaniego applies the teaching of Craig: whenever taxpayers receive the type of hearing described in §6330, then the court has the power to review the Office of Appeals’ decision, even if that decision is not printed on the proper “ticket to the Tax Court.” Put another way, the type of document that the IRS issues at the conclusion of a hearing does not determine the Tax Court’s power to hear a petition. The document is evidence of the type of hearing held, but is not conclusive.
Judge Lauber issued a similar opinion a few months ago in James Edward Terrell v. Commissioner, T.C. Memo 2018-216 (December 27, 2018). That this kind of decision is now seemingly routine does not diminish the importance of the lesson. The lesson will become important in the coming litigation over the effect of the government shutdown on the timeliness of petitions to the Tax Court. And when that happens today's case shows that taxpayers can count on the Tax Court to be conscientious in exercising its jurisdiction to determine jurisdiction.
Bryan Camp is the George H. Mahon Professor of Law at Texas Tech School of Law