Law School Case Brief
Robinette v. Commissioner - 439 F.3d 455 (8th Cir. 2006)
In the context of appeals of an Internal Revenue Service (IRS) hearing officer decisions in collection due process matters, Congress likely contemplated review for a clear abuse of discretion in the sense of clear taxpayer abuse and unfairness by the IRS, lest the judiciary become involved on a daily basis with tax enforcement details that Congress intended to leave with the IRS.
Between 1983 and 1991, Robinette failed to pay his federal income taxes. By May 31, 1993, Robinette had liabilities amounting to $1,091,506.43. On June 1, 1994, Robinette sought to settle his liabilities through an offer-incompromise. Pursuant to the offer, Robinette submitted $1,000, promised to pay an additional $99,000 within 60 days of receiving notice of the IRS's acceptance of his offer, and agreed to several additional terms and conditions. Among the conditions was a promise that Robinette will comply with all provisions of the Internal Revenue Code relating to the filing of his returns and paying his required taxes for five years from the date IRS accepts the offer. The offer further recognized the IRS’s power, if Robinette failed to meet the terms of the offer, to file suit or levy to collect the original amount of the tax liability, without further notice of any kind. Robinette filed his tax returns for 1996 and 1997 in a timely manner. Except for a delay in providing statements of annual income for 1996, 1997, and 1998, he complied with the terms of his offer-in-compromise. Almost six years later, on February 21, 2000, the IRS wrote to notify Robinette that it had not received his 1998 tax return and to request that he immediately file the late return. On July 3, 2000, the IRS sent a letter notifying Robinette that no return had been filed; that the failure to file violated the terms of the agreement; and that the offer was in default. On September 28, 2000, the IRS sent Robinette a notice of its intent to impose a levy to collect the full original liability. Robinette responded with a timely request for a collection due process hearing, in which he noted that he was disputing whether he owed the amounts being levied. The collection due process proceedings were conducted informally and consisted of a series of telephone calls and correspondence between an IRS appeals officer and Robinette's accountant/attorney, Douglas Coy. Despite Coy’s insistence that he mailed the 1998 return by first-class mail shortly before midnight on October 16, 1999, the appeals officer determined that the return had not been timely filed, and he recommended that the levy be imposed. Consistent with this recommendation, the IRS Office of Appeals issued a determination that the notice of intent to levy was appropriate. Robinette appealed to the Tax Court pursuant to I.R.C. § 6330(d)(1), arguing that the appeals officer had abused his discretion by proceeding with the collection. The Tax Court held a trial and agreed with Robinette. The Tax Court found that Robinette had not filed his 1998 return in a timely manner, but that his failure to do so was not material to his offer-in-compromise. Since the breach was immaterial, the Tax Court reasoned, the offer should not have been defaulted, and the decision to proceed with collection was an abuse of discretion. The Commissioner sought further appellate review.
Did the Tax Court err in setting aside the determination of IRS, and holding that the breach in question was immaterial the compromise agreement between IRS and Robinette?
The Court of Appeals for the Eighth Circuit held that the Tax Court's decision was based in part on an erroneous application of administrative law and contract law. The appellate court was not persuaded that Congress endorsed such a departure when it authorized pre-deprivation judicial review of IRS levy activity in the Tax Court. The Court therefore limited its review to information that was before the IRS. As to the balancing of considerations identified by I.R.C. § 6330(c)(3)(C), the Court believed that given the absence in the record of taxpayer abuse and unfairness by the IRS, and under the appropriate standard and scope of review, it was inappropriate for the Tax Court to set aside the decision of the IRS appeals officer.
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