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Drake L. Rev.


Almost 20 years ago Congress enacted the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98), with the intention of protecting taxpayers against perceived abuses in tax collection by the Internal Revenue Service (IRS). RRA 98 contained provisions creating the so-called collection due process (CDP) provisions. CDP changed existing law by providing taxpayers with a pre-deprivation right to an administrative hearing and judicial review of any proposed collection actions by the IRS such as liens or levies. CDP has been both championed as a valuable mechanism to protect taxpayers from improper collection and criticized as a tool used by taxpayers making meritless arguments to further delay payment of tax. Regardless, the CDP provisions have exacted a toll on the tax administrative system, particularly on the IRS Office of Appeals, which conducts the CDP hearings, and the U.S. Tax Court, which generally has judicial review of the administrative hearings. CDP cases often require a disproportionate share of resources to resolve. One reason for this is that CDP cases can be messy. CDP cases can involve mistakes or anomalies made by the IRS and are often brought by taxpayers pro se. One particularly messy factual scenario occurs when a taxpayer raises an issue in a non-CDP tax year and asks the IRS and the Tax Court to adjudicate as to the non-CDP year. For example, if a taxpayer alleges that he or she has a credit from a prior year that should carry forward to satisfy a tax liability that remains unpaid or alleges that he or she has made payments that were applied to a non-CDP year that were meant to apply to the CDP year, the Tax Court has struggled with whether and how it can properly exercise jurisdiction over the non-CDP year.

This Article makes two novel contributions. First, it highlights how CDP cases can be particularly messy and how the IRS and Tax Court have struggled in resolving CDP cases. In particular, this Article examines the Tax Court's difficulty in determining its proper jurisdiction in CDP cases in which the taxpayer raises issues in non-CDP years by examining two relevant cases, Freije v. Commissioner and Weber v. Commissioner. Concluding that the Tax Court has properly exercised (or limited) its jurisdiction in both Freije and Weber, this Article reconciles the two cases in light of the purpose of the CDP provisions on the one hand and the Tax Court's limited jurisdictional grant on the other. Second, this Article makes recommendations to the IRS on how to encourage administrative resolution of messy CDP cases to prevent litigation and reduce the cost of CDP.

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