The Tax Times: Tax Court Says Treaty Bars Collections Hearing

Monday, August 5, 2024

Tax Court Says Treaty Bars Collections Hearing

A divided U.S. Tax Court ruled on August 1, 2024 that it lacked authority to review an Internal Revenue Service decision preventing a woman from challenging a federal tax lien the agency issued on behalf of the Canadian government to secure her tax debt to that country.

In a 7-6 vote, the Tax Court said it lacked jurisdiction over J.E. Ryckman's petition to review the agency's denial of a collections hearing in which she hoped to challenge a lien issued in response to a request from the Canada Revenue Agency under the Canada-U.S. Income Tax Treaty.

The question of the court's authority in the case was one of first impression, Judge Elizabeth A. Copeland wrote in the majority opinion, which drew both concurring and dissenting opinions about the interplay between the treaty and provisions of the Internal Revenue Code affording the right to collection due process hearings.

The Court Ultimately Held That The Treaty Required The U.S. To Accept A Canadian Revenue Claim As It Would Treat A U.S. Tax Assessment In Which A Taxpayer's Right To A Collection Due Process Hearing "Has Lapsed Or Been Exhausted."

The court only has jurisdiction to review an agency determination regarding a collections hearing if the IRS was subject to obligations under Internal Revenue Code sections 6320 or 6330 affording rights to those hearings and granting jurisdiction to the Tax Court, the court said.

According to Canadian tax authorities, Ryckman owes about $200,000 in Canadian tax for 1993 and 1994, the court said. She lived in the U.S. in 2017 when the country's tax collector asked the IRS for mutual collection assistance under the tax treaty.

A dissenting opinion written by Judge Patrick J. Urda on behalf of six judges on the court agreed with Ryckman's argument that the CDP hearing statutes, which were added in 1998, should have trumped the requirements of the treaty because those statutes were enacted later. "The opinion of the court fails to pay due heed to the long-established rules governing the resolution of such conflicts, which dictate that the later-in-time statute applies to render the treaty provisions null to the extent of the conflict," Judge Urda said.

Judge Copeland said in the opinion that the provisions in the treaty shouldn't be overtaken "by the more general CDP statutes." She cited the U.S. Supreme Court ruling in Radzanower v. Touche Ross & Co. from 1976, which said, regarding statutory construction, "that a statute dealing with a narrow, precise, and specific subject is not submerged by a later enacted statute covering a more generalized spectrum."

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