Conrad Gorospe Shirley Gorospe v. Commissioner of Internal Revenue

Citations: 446 F.3d 1014; 97 A.F.T.R.2d (RIA) 2305; 2006 U.S. App. LEXIS 10956; 2006 WL 1156102Docket: 04-73277

Court: Court of Appeals for the Ninth Circuit; May 3, 2006; Federal Appellate Court

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The case involves Conrad and Shirley Gorospe appealing the United States Tax Court's dismissal of their appeal regarding trust fund recovery penalties imposed by the IRS. The crux of the appeal is whether the Tax Court possesses plenary jurisdiction over all appeals from collection due process (CDP) proceedings. The court reaffirms that the Tax Court's jurisdiction is limited to issues it would typically have jurisdiction over concerning the underlying tax liability.

When taxpayers fail to pay federal taxes, the IRS can impose a lien on their property, which only becomes effective after notice and enforcement actions are taken. Taxpayers have the right to a CDP hearing where they can contest liens or levies. After receiving a determination from the IRS Office of Appeals, taxpayers can seek judicial review in either the Tax Court or a district court.

In 1999, the IRS sought liens against the Gorospes for unpaid income taxes from 1992, 1993, 1994, and 1997, as well as a levy against Dr. Gorospe for unpaid trust fund recovery penalties. The IRS issued three Notices of Determination, sustaining the liens and the levy. The Gorospes appealed these determinations to the Tax Court, which dismissed the appeal concerning the trust fund recovery penalty, asserting it lacked subject matter jurisdiction over that issue.

The Gorospes attempted to obtain a Rule 54(b) determination from the Tax Court, which was denied. They subsequently appealed the dismissal to the Ninth Circuit, which also dismissed the appeal for lack of appellate jurisdiction. Following a stipulation admitting the validity of the income tax liens, the Tax Court entered a final judgment, prompting the Gorospes to seek further review of the dismissal regarding the trust fund recovery penalty. The Ninth Circuit reviews the Tax Court's dismissal de novo.

The Tax Court is identified as an Article I court with limited jurisdiction and no general equitable powers, as established in case law. Its jurisdiction is defined by 26 U.S.C. § 7442 and Title 26, limiting its authority to hear appeals from the IRS Office of Appeals regarding trust fund recovery penalties. Specifically, 26 U.S.C. § 6330(d) delineates that the Tax Court can only hear appeals if it has jurisdiction over the underlying tax liability; otherwise, jurisdiction falls to the district courts. The statutory language indicates that the Tax Court does not possess plenary jurisdiction over Collection Due Process (CDP) appeals where it lacks jurisdiction over the related tax liability. 

The provision in § 6330(d) includes a mechanism for appealing to the correct court if the initial appeal is made to the wrong one, reinforcing the conclusion that the Tax Court cannot have plenary jurisdiction. This interpretation is further supported by the broader context of the tax code, which shows that Congress has explicitly delineated exclusive jurisdiction for district courts in other sections. Additionally, similar language in 26 U.S.C. § 6015 does not confer unlimited jurisdiction to the Tax Court, which aligns with the limitations established in § 6330. Thus, the Tax Court's jurisdiction under both provisions cannot be interpreted as plenary.

Taxpayers contend that § 6330(d)(1)(A) of the Tax Code grants the Tax Court comprehensive jurisdiction to review Collection Due Process (CDP) determinations, irrespective of the underlying tax liabilities. They argue that the subsequent language in (d)(1)(B) should be dismissed as an oversight due to Congress's failure to specify "District Court." However, this interpretation contradicts established principles of statutory interpretation, which require that all legislative language be given effect and that any perceived drafting errors should be corrected by Congress, not the courts. 

Taxpayers further assert that a strict reading of § 6330 would effectively eliminate the Tax Court's jurisdiction, as CDP hearings occur post-assessment of taxes. This reasoning implies that the district court would always hold concurrent jurisdiction, rendering the flush language after § 6330(d)(1)(B) superfluous, a conclusion the court rejects in favor of preserving the integrity of the statute’s multiple provisions. 

Moreover, the Taxpayers suggest that a more efficient interpretation would allow the Tax Court to hear appeals related to trust fund recovery penalties concurrently with other claims. Nonetheless, the court emphasizes adherence to the plain statutory language, which does not support the notion of supplemental jurisdiction for such appeals. 

In conclusion, the court affirms the Tax Court's dismissal of the Taxpayers' appeal due to lack of subject matter jurisdiction concerning trust fund recovery penalties. The discussion also references that procedural requirements under § 6320(c) relate back to § 6330, and suggests that while the Tax Court is the presumed venue for review, district courts may be approached if the Tax Court lacks jurisdiction.

The Tax Court has exclusive jurisdiction over Collection Due Process (CDP) determinations related to income tax liabilities; however, for employment tax liabilities, the district court is the appropriate venue for reviewing administrative determinations concerning these assessments. Various cases, including Marino v. Brown and Abu-Awad v. United States, support this distinction, emphasizing that the Tax Court lacks jurisdiction over employment tax matters. Taxpayers' arguments asserting otherwise, referencing cases like Hoffman v. Commissioner and Dogwood Forest Rest Home, do not hold up under scrutiny. Additionally, the Tax Court's jurisdiction over CDP determinations involving trust fund recovery penalties would not benefit the Taxpayers, as they had already stipulated with the IRS regarding their income tax liabilities from 1992-1994 and 1997, leaving only the issue of trust fund recovery penalties to be addressed.