Opinion
Civil Action Case No. 03-5730.
September 1, 2004
ORDER
AND NOW, this 1st day of September, 2004, upon consideration of the defendant's motion for summary judgment (Docket No. 5), the plaintiff's motion for discovery (Docket No. 6), the defendant's opposition thereto and the plaintiff's reply, IT IS HEREBY ORDERED that the defendant's motion for summary judgment in DENIED without prejudice and the plaintiff's motion for discovery is GRANTED.
IT IS FURTHER ORDERED that the plaintiff may take the depositions of Appeals Officer Edith A. Dermody and Revenue Officer Patrick Bacelli within the next thirty days. The defendant may take the deposition of the plaintiff, as well, if it so desires. After the taking of the depositions, the defendant shall send a letter to the Court, informing the Court whether it wants to renew its motion for summary judgment on the same papers that it filed previously or whether it prefers to file a new brief, discussing the evidentiary record. The plaintiff shall have two weeks from the filing of the letter or the new brief to respond to the motion for summary judgment.
The complaint challenges both the underlying tax liability and the Commissioner's determination sustaining the collection action proposed to be taken against him. The legislative history of the statute quoted by the United States in its brief calls for an abuse of discretion standard of review "where the validity of the tax liability is not properly part of the appeal." When the validity of the tax liability is part of the appeal, many courts apply a de novo standard of review to that issue. See, e.g., PCT Services, Inc. v. United States of America Dep't of Treasury Internal Revenue Service, No. CIVA1:02-CV2085BBM, 2003 WL 21541283, *3 (N.D. Ga. 2003). Other district courts apply a de novo standard of review to the entire appeal. See, e.g., Medlock v. United States, ___ F. Supp. 2d ___, 2003 WL 23654087, *11 (C.D. Cal. 2003) (citing Goza v. Commissioner of Internal Revenue, 114 T.C. No. 176, 181-182 (2000)).
The United States has not discussed this issue in enough detail in its brief. It appears to argue that the underlying tax liability is not "properly" part of the appeal, although its argument is unclear. In any event, the Court believes that discovery is necessary at least on the question relating to the underlying tax liability.
It is likely that the standard of review of the Notice of Determination is abuse of discretion. If so, the Court is probably limited to the administrative record in deciding this issue. But the Court will allow questioning on all aspects of the case during the depositions, and will reserve final decisions on all issues until after discovery.