Henry Randolph Consulting v. Commissioner ( 1999 )

112 T.C. No. 1
UNITED STATES TAX COURT
HENRY RANDOLPH CONSULTING, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6838-98. Filed January 6, 1999.
R determined, in a notice mailed to P,
that some of P's workers were employees and
that P was not eligible for relief under sec.
530 of the Revenue Act of 1978, Pub. L. 95-
600, 92 Stat. 2763, 3855, for certain taxable
periods. R attached to the notice a proposed
agreement to assessment of tax resulting from
R's determination. P filed a petition
seeking our redetermination under sec. 7436,
I.R.C., of R's determination, including the
amounts of tax R proposed to assess.
Held: We lack jurisdiction to decide
the amount of P's employment tax and income
tax withholding liability for the taxable
periods in issue.
George W. Connelley, Jr., Linda S. Paine, and
William O. Grimsinger, for petitioner.
M. Kathryn Bellis, for respondent.
- 2 -
OPINION
COLVIN, Judge: This case is before the Court on
respondent's motion to dismiss for lack of jurisdiction as to the
amounts of employment tax1 liability for the periods in issue.
We will grant respondent's motion for the reasons stated below.
Neither party requested a hearing, and we conclude that none
is necessary to decide respondent's motion.
Background
Petitioner is a sole proprietorship, the principal place of
business of which is in Birmingham, Alabama.
Respondent's agents audited petitioner's Federal Insurance
Contributions Act and income tax withholding tax returns (Forms
941) for March 31 to December 31, 1994, and March 31 to December
31, 1995, and petitioner's Federal Unemployment Tax Act tax
return (Form 940) for 1995. On March 19, 1998, respondent mailed
to petitioner a Notice of Determination Concerning Worker
Classification Under Section 7436 which said in part:
As a result of an employment tax audit, we are
sending you this NOTICE OF DETERMINATION CONCERNING
WORKER CLASSIFICATION UNDER SECTION 7436. We have
determined that the individual(s) listed or described
on the attached schedule are to be legally classified
as employees for purposes of federal employment taxes
under subtitle C of the Internal Revenue Code and that
your (sic) are not entitled to relief from this
1
For convenience, we use the term "employment tax" to refer
to taxes under the Federal Insurance Contributions Act (FICA),
secs. 3101-3125, the Federal Unemployment Tax Act (FUTA), secs.
3301-3311, and income tax withholding, secs. 3401-3406 and 3509.
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the taxable periods in issue.
Rule references are to the Tax Court Rules of Practice and
Procedure.
- 3 -
classification pursuant to section 530 of the Revenue
Act of 1978 with respect to such individual(s). This
determination could result in employment taxes being
assessed against you.
Respondent attached to the notice of determination an
Agreement to Assessment and Collection of Additional Tax and
Acceptance of Overassessment (Excise or Employment Tax) (Form
2504) in which respondent proposed that petitioner consent to
immediate assessment and collection of $53,194.87 in tax,
consisting of the following amounts:
1. $27,814.58 for March 31 to December 31, 1994, under the
FICA, secs. 3101-3125, and for income tax withholding, secs.
3401-3406 and 3509;
2. $22,776.29 for March 31 to December 31, 1995, under the
FICA and for income tax withholding; and
3. $2,604.00 for 1995, under the FUTA, secs. 3301-3311.
The form also proposed that petitioner agree to the
following:
I consent to the immediate assessment and
collection of any additional tax and penalties and
accept any overassessment (decrease in tax and
penalties) shown above, plus any interest provided by
law.
I understand that by signing this agreement, I am
waiving the restrictions on assessment provided in
section 7436(d) and 6213(a) of the Internal Revenue
Code of 1986, and that I will not be able to contest
the issues covered by this agreement in the United
States Tax Court.
Respondent attached to the notice of determination a copy of
Examination Changes -- Federal Unemployment Tax for 1995 (Form
4667), and Employment Tax Examination Changes Report for 1994 and
1995 (Forms 4668), detailing respondent's calculations of the
- 4 -
amounts of assessment to which respondent proposed that
petitioner agree.
Petitioner filed a petition seeking our review of
respondent's notice of determination. In it, petitioner contends
that petitioner's service providers are not employees; petitioner
is entitled to treatment under section 530(a) of the Revenue Act
of 1978, Pub. L. 95-600, 92 Stat. 2763, 2855; respondent's
computation of proposed employment tax and income tax withholding
due is incorrect; and, if respondent's determinations are
sustained, the correct liabilities can be recomputed under Rule
155. Petitioner also contends that the notice of determination
is void because, in the notice, respondent did not identify the
individuals whose worker classification was being determined.
Respondent filed a motion to dismiss for lack of jurisdiction as
to the amounts of tax respondent proposed to assess. Respondent
also moved to strike from the petition petitioner's claim that,
if respondent's determinations are sustained, the correct
liabilities can be recomputed under Rule 155.
Discussion
The parties dispute whether we have jurisdiction under
section 74362 to decide the amounts of tax for which petitioner
2
Sec. 7436 was added to the Internal Revenue Code by sec.
1454(a) of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111
Stat. 788, 1055, effective Aug. 5, 1997. Before enactment of
sec. 7436, the Tax Court lacked jurisdiction to decide worker
classification disputes arising under subtitle C of the Code.
See secs. 6211-6213. Before the enactment of sec. 7436, judicial
review of IRS assessment of employment taxes or related penalties
was available only if a taxpayer paid a divisible part of the
(continued...)
- 5 -
would be liable if we sustain to any extent respondent's
determination that petitioner's workers are employees and that
petitioner is not entitled to relief under section 530 of the
Revenue Act of 1978.
Petitioner contends that our jurisdiction is provided by
section 7436(a), (c), and (d), and that this result is consistent
with logic and public policy (e.g., the convenience of the
parties and judicial economy). Respondent contends that we lack
jurisdiction under section 7436 to decide amounts of employment
tax due.
To decide this issue, we first consider the following issues
relating to the text of section 7436: (1) Whether section
7436(a) provides jurisdiction over amounts of employment tax due;
and (2) whether jurisdiction over amounts is provided by section
7436(d), which incorporates into section 7436 the principles of
several provisions governing our deficiency jurisdiction, or by
section 7436(c), which makes the small case procedures under
section 7463 available for cases under section 7436 if less than
$10,0003 is in dispute.
2
(...continued)
assessment, filed a claim for refund, and filed a refund suit in
Federal district court or the Court of Federal Claims to recover
amounts paid. See sec. 7422; 28 U.S.C. sec. 1291 (1994).
3
Sec. 3103(b)(1) of the IRS Restructuring and Reform Act of
1998, Pub. L. 105-206, 112 Stat. 685, 731, amended sec.
7436(c)(1) to increase the limit from $10,000 to $50,000 per
quarter, effective for proceedings commenced after July 22, 1998.
- 6 -
Next, we consider whether our interpretation of section 7436
is altered by (1) its legislative history, (2) a comparison of
section 7436 to provisions authorizing us to issue declaratory
judgments (sections 7428, 7476, 7477, 7478, and 7479), (3) the
fact that respondent attached a proposed consent to assess
employment tax due to the notice, or (4) petitioner's contention
that it would be illogical to provide jurisdiction over worker
classification issues without providing jurisdiction to decide
the amounts of employment tax and income tax withholding
liability, e.g., from the standpoint of convenience of the
parties or judicial economy.
A. Section 7436
1. Section 7436(a)
We may only exercise jurisdiction that is expressly
permitted or provided by statute. Trost v. Commissioner, 95 T.C.
560, 565 (1990); Judge v. Commissioner, 88 T.C. 1175, 1180-1181
(1987). Section 7436(a)4 expressly grants jurisdiction to this
4
Sec. 7436(a) provides:
SEC. 7436. PROCEEDINGS FOR DETERMINATION OF EMPLOYMENT
STATUS
(a) Creation of Remedy.--If, in connection with an
audit of any person, there is an actual controversy
involving a determination by the Secretary as part of
an examination that--
(1) one or more individuals performing
services for such person are employees of
such person for purposes of subtitle C, or
(2) such person is not entitled to the
(continued...)
- 7 -
Court (if certain conditions are met) to decide whether service
providers are employees or independent contractors for purposes
of subtitle C (Employment Taxes and Collection of Income Tax),
and whether section 530 of the Revenue Act of 1978 applies.
Section 7436(a) does not expressly give us jurisdiction to decide
any other matter, such as the amount of a taxpayer's employment
tax liability that results from respondent's worker
classification determination. This contrasts with our deficiency
jurisdiction under section 6213, which expressly permits us to
redetermine the "amount" of a deficiency in cases involving
income, gift, estate, or certain other taxes, albeit not
including employment taxes. Sec. 6211(a). Section 7436(a) more
closely parallels our authority to make declaratory judgments
(sections 7428, 7476, 7477, 7478, and 7479). Those provisions
each specify a subject matter, but do not state that we may
decide the amount of tax due. See paragraph C, below, for a
comparison of section 7436 with the declaratory judgment
provisions. Also, the last sentence of section 7436(a) makes our
redetermination reviewable as a decision. This provision would
be unnecessary if we were redetermining a deficiency. Cf. sec.
4
(...continued)
treatment under subsection (a) of section 530 of
the Revenue Act of 1978 with respect to such an
individual,
upon the filing of an appropriate pleading, the Tax
Court may determine whether such a determination by the
Secretary is correct. Any such redetermination by the
Tax Court shall have the force and effect of a decision
of the Tax Court and shall be reviewable as such.
- 8 -
7459(c). Thus, based on the text of section 7436(a), we conclude
that we lack jurisdiction to decide the amounts of tax due in
cases arising under section 7436.
2. Section 7436(d)
Section 7436(d)5 provides that "the principles" of sections
6213(a), (b), (c), (d), and (f), 6214(a), 6215, 6503(a), 6512,
and 7481 apply to cases that arise under section 7436. Section
7436(d) does not expressly state that it provides any
jurisdiction. However, petitioner contends that the references
to several deficiency procedure provisions in section 7436(d)
create, or imply that we have, jurisdiction to decide the amount
of its employment tax liability for the periods in issue.
Petitioner also contends that the references in section 7436(d)
are surplusage if we do not have jurisdiction to decide the
amount of employment taxes owed for those years.
5
Sec. 7436(d) provides as follows:
(d) Special Rules.--
(1) Restrictions on assessment and collection
pending action, etc.--The principles of
subsections (a), (b), (c), (d), and (f) of
section 6213, section 6214(a), section 6215,
section 6503(a), section 6512, and section
7481 shall apply to proceedings brought under
this section in the same manner as if the
Secretary's determination described in
subsection (a) were a notice of deficiency.
(2) Awarding of costs and certain
fees.--Section 7430 shall apply to proceedings
brought under this section.
- 9 -
We disagree. Each of the references in section 7436(d) to
deficiency procedures can be read to have a rational purpose even
if we lack jurisdiction over the amounts in dispute in section
7436 cases. The following chart briefly describes each provision
listed in section 7436(d), and states how the principle of each
listed section could apply to a section 7436 case even if we lack
jurisdiction to decide amounts of tax due.
Provisions Listed In Possible Application Of Principles
Sec. 7436(d) Of That Section To Sec. 7436
Sec. 6213(a). The The Commissioner may not assess
Commissioner may not assess employment tax during the time
tax for the years in issue that the taxpayer may file a
during the time a taxpayer petition under section 7436 in
may file a petition or this Court, and, if a petition is
while we have jurisdiction. filed, until the decision is
final.
Sec. 6213(b). The The Commissioner may assess tax
Commissioner may assess tax relating to worker classification
related to mathematical issues or mathematical errors on a
errors on a return, refund return, refund adjustments, or any
adjustments, or any amount amount paid, and a taxpayer may
paid. A taxpayer may ask ask the Commissioner to abate the
the Commissioner to abate assessment.
assessment of mathematical
or clerical errors.
Sec. 6213(c). The The Commissioner shall assess and
Commissioner shall assess collect tax related to worker
and collect tax if the classification issues if the
taxpayer does not timely taxpayer does not timely file a
file a petition. petition under sec. 7436.
Sec. 6213(d). A taxpayer The taxpayer may consent to
may consent to an assessment of employment tax.
assessment.
Sec. 6213(f)(1). The time The time to file a petition under
to file a petition is section 7436 is suspended if the
suspended if a taxpayer taxpayer seeks relief under title
files for bankruptcy under 11.
title 11 of the U.S. Code.
- 10 -
Sec. 6214(a). We have We may decide worker
jurisdiction to redetermine classification claims raised by
a deficiency in an amount the Commissioner that are not
which is greater than the included in the notice of
amount stated in the notice determination (e.g., a claim
of deficiency. regarding the status of additional
persons alleged to be employees)
if such claims relate to the
taxpayer and taxable periods in
the notice of determination.
Sec. 6512(b). The The Commissioner shall recognize
Commissioner shall credit the status of workers as decided
or refund to the taxpayer by the Tax Court. If the
any overpayment of tax when Commissioner fails to do so within
our decision becomes final. 120 days after the decision of the
We have jurisdiction to Tax Court becomes final, then we
decide a taxpayer's motion may issue an order requiring the
to require the Commissioner Commissioner to do so.
to refund an overpayment of
tax if the motion is filed
more than 120 days after
the decision becomes final.
Secs. 6215 and 6503. The running of the time to assess
Certain circumstances employment tax is suspended while
suspend the running of the a section 7436 case is pending and
time to assess tax (e.g., resumes when our decision is
when the Commissioner mails final. The Commissioner's
a notice of deficiency), or authority to assess employment tax
cause it to resume running. resumes when the bar to assessment
The Commissioner may assess is lifted and the running of the
the deficiency that we time to assess resumes.
redetermine after our
decision is final and
require the taxpayer to pay
that amount on notice and
demand.
- 11 -
Sec. 7481. Our decision A decision under section 7436
becomes final 90 days after becomes final under the same
it is entered; when the circumstances.
time to file a petition for
certiorari expires if our
decision has been affirmed
or the appeal dismissed and
no petition for certiorari
has been filed; a petition
for certiorari is denied;
or 30 days after the
Supreme Court mandates that
our decision be affirmed or
the appeal dismissed.
The principles of each of the deficiency procedure sections
listed in section 7436(d) reasonably apply to section 7436 cases
even if we lack jurisdiction over amounts in dispute in section
7436 cases. Thus, section 7436(d) does not create, or imply that
we have, jurisdiction to decide the amounts of employment tax due
in a case arising under section 7436.
3. Application of Small Case Procedures to Cases Arising
Under Section 7436
We will next consider whether references in section
7436(c)6 to "amounts in dispute" and the small case procedures
6
Sec. 7436(c) provides:
(c) Small case procedures
(1) In general.--At the option of the
petitioner, concurred in by the Tax Court or a
division thereof before the hearing of the case,
proceedings under this section may
(notwithstanding the provisions of section 7453)
be conducted subject to the rules of evidence,
practice, and procedure applicable under section
7463 if the amount of employment taxes placed in
dispute is $10,000 or less for each calendar
quarter involved.
(2) Finality of decisions.--A decision
(continued...)
- 12 -
under section 7463 provide, or imply that we have, jurisdiction
under section 7436 to decide amounts of tax due.
A taxpayer may elect to have the small case procedures under
section 7463 apply to a case brought under section 7436 if the
"amount of employment taxes placed in dispute" is $10,000
($50,000 after July 22, 1998) or less. Sec. 7436(c)(1). Section
7436(c) does not expressly state that it provides any
jurisdiction. However, petitioner contends that section
7436(c)(1) would not require the Court to review the
Commissioner's calculation that less than $10,000 ($50,000 after
July 22, 1998) is in dispute unless we have jurisdiction to
decide the amount of a taxpayer's employment tax liability.
We disagree. We must know the amount placed in dispute to
decide whether a taxpayer may elect under section 7436(c) to have
the small case procedures of section 7463 apply. However, the
fact that we must consider the amount in dispute for that purpose
does not provide, or imply that we have, jurisdiction to decide
the amount of the taxpayer's employment tax liability for the
periods in issue.
6
(...continued)
entered in any proceeding conducted under this
subsection shall not be reviewed in any other
court and shall not be treated as a precedent for
any other case not involving the same petitioner
and the same determinations.
(3) Certain rules to apply.--Rules similar to
the rules of the last sentence of subsection (a),
and subsections (c), (d), and (e), of section 7463
shall apply to proceedings conducted under this
subsection.
- 13 -
Section 7436(c)(3) provides that rules similar to those in
section 7463(a) (last sentence), (c), (d), and (e) apply to cases
under section 7436(c)(3). Each of those rules has a rational
purpose. The following chart briefly describes each provision
listed in section 7436(c)(3), and states how rules similar to
each of those provisions could apply to a case brought under
section 7436 even if we lack jurisdiction to decide amounts of
tax due.
Provisions Listed Possible Application Of The Rules
In Sec. 7463 Of That Section To Sec. 7436(c)
Sec. 7463(a) (last We must include similar
sentence). We must include information in an opinion
a brief summary of reasons deciding a case brought under
for our opinion to comply section 7436(c).
with secs. 7459(b) and 7460.
Sec. 7463(c). If a taxpayer We may not find that more workers
elects to have the small were employees or that the
case procedures apply, we taxpayer was eligible for more
may enter a decision only relief under section 530 of the
for amounts placed in Revenue Act of 1978 than would
dispute of $10,000 or less cause the amount in dispute to
per year ($50,000 after July exceed $10,000 ($50,000 after
22, 1998). July 22, 1998).
Sec. 7463(d). Before a Either party may ask that use of
decision is entered, any the small case procedures be
party may ask that small discontinued if the request is
case procedures not apply if made before a decision is entered
there are reasonable grounds and if there are reasonable
to believe that more than grounds to believe that more than
$10,000 is in dispute or was $10,000 ($50,000 after July 22,
overpaid ($50,000 after July 1998) is potentially in dispute.
22, 1998).
Sec. 7463(e). The amount of We must include proposed
deficiency in dispute additions to tax and penalties
includes additions to tax when calculating the amount in
and penalties. dispute under section 7436(c).
The rules provided in each of the sections listed in section
7436(c)(3) reasonably apply to section 7436 cases even if we lack
- 14 -
jurisdiction under section 7436 to decide the amounts of
employment tax due. Thus, we conclude that section 7436(c) does
not provide, or imply that we have, jurisdiction to decide the
amount of employment tax due in a case arising under section
7436.
4. Conclusion Based on the Text of Section 7436
Petitioner contends that if we read section 7436(a), (c),
and (d) together, section 7436 provides jurisdiction to decide
amounts of employment tax liability. We disagree. We see no
difference in the meaning of section 7436 whether each subsection
is analyzed separately or the entire section is analyzed as a
whole. Based on the text of section 7436(a), (c), and (d) we
conclude that we lack jurisdiction to decide the amounts of tax
due in cases arising under section 7436.
B. Legislative History
Petitioner contends that the legislative history of section
7436 shows that Congress intended for us to have jurisdiction to
decide amounts of employment tax liability. We disagree.
Nothing in the legislative history conflicts with our
construction of section 7436. The House and Senate committee
reports accompanying enactment of section 7436 use the same terms
to describe our jurisdiction as appear in section 7436(a). Both
reports said that Congress intended to create jurisdiction for us
to decide certain employment status disputes, and neither report
states that we have jurisdiction to decide amounts in dispute.
- 15 -
H. Rept. 105-148, at 640 (1997); S. Rept. 105-33, at 304 (1997).
The House report states:
Explanation of Provisions
The bill provides that, in connection with the
audit of any person, if there is an actual controversy
involving a determination by the IRS as part of an
examination that (a) one or more individuals performing
services for that person are employees of that person
or (b) that person is not entitled to relief under
section 530 of the Revenue Act of 1978, the Tax Court
would have jurisdiction to determine whether the IRS is
correct. For example, one way the IRS could make the
required determination is through a mechanism similar
to the employment tax early referral procedures.[7]
The bill provides for de novo review (rather than
review of the administrative record). Assessment and
collection of the tax would be suspended while the
matter is pending in the Tax Court. Any determination
by the Tax Court would have the force and effect of a
decision of the Tax Court and would be reviewable as
such; accordingly, it would be binding on the parties.
Awards of costs and certain fees (pursuant to section
7430) would be available to eligible taxpayers with
respect to Tax Court determinations pursuant to the
bill. The bill also provides a number of procedural
rules to incorporate this new jurisdiction within the
existing procedures applicable in the Tax Court.
H. Rept. 105-148, supra at 639-640. The Senate report is
essentially the same. S. Rept. 105-33, supra at 304-305.
The last sentence of the explanation states that section
7436 provides several procedural rules to incorporate this new
jurisdiction into the existing procedural rules which apply to
cases before our Court. H. Rept. 105-148, supra at 640; S. Rept.
105-33, supra at 305; see H. Conf. Rept. 105-220, at 734 (1997).
7
See Announcement 97-52, 1997-2 I.R.B. 22; Announcement 96-
13, 1996-12 I.R.B. 33.
- 16 -
The reports do not state that section 7436(c) and (d) provide
procedural rules, but it appears that those are the procedural
rules referred to in this legislative history.
Petitioner contends that the legislative history for section
7436 shows that we have jurisdiction to decide the amounts of
employment tax due for the workers whose status is before the
Court. We disagree. The legislative history states that
Congress intended that we decide "certain"8 and not all employment
tax disputes, and does not state that we should decide any issues
other than those specified in section 7436(a).
C. Section 7436 Compared to Declaratory Judgment Provisions
Petitioner points out that section 7436 differs in several
ways from the declaratory judgment provisions (sections 7428,
7476, 7477, 7478, 7479), and contends that this shows that
Congress intended to provide jurisdiction to decide the amounts
of employment tax due. Petitioner points out that section 7436
and the declaratory judgment provisions differ in that (1)
section 7436(a) uses the term "determination", and the
declaratory judgment provisions state "make a declaration"; (2)
section 7436 incorporates the principles of several sections that
pertain to deficiency procedures, and the declaratory judgment
8
The House and Senate committee reports stated as reasons
for change:
It will be advantageous to taxpayers to
have the option of going to the Tax Court to
resolve certain disputes regarding employment
status. [H. Rept. 105-148, at 639 (1997); S.
Rept. 105-33, at 304 (1997); emphasis added.]
- 17 -
provisions do not; and (3) declaratory judgment proceedings are
generally based on the administrative record, Rule 217(a), while
a proceeding under section 7436 is de novo. H. Rept. 105-148,
supra at 640; S. Rept. 105-33, supra at 304.
Petitioner also points out that we may not know the identity
of all taxpayers affected by our decision in a declaratory
judgment case. For example, when we decide that an organization
does not qualify under section 501(c)(3), many taxpayers who have
made contributions to the organization and are affected by the
decision are unknown to the Court. Petitioner contends that this
shows that cases arising under section 7436 are unlike
declaratory judgment cases because we know the identity of the
taxpayer in a case brought under section 7436.
In response, respondent points out that section 7436 and the
declaratory judgment provisions are similar in that, for example,
(1) our jurisdiction in a case brought under section 7436 and in
a declaratory judgment case is triggered by respondent's issuance
of a notice of determination, see secs. 7428(a)(1), 7476(a)(1),
7477(a), 7478(a)(1), 7479(a); (2) section 7436 and the
declaratory judgment provisions have as subsection (a) "Creation
of remedy" and as subsection (b) "Limitations"; (3) section 7436
and the declaratory judgment provisions specifically require an
actual controversy involving a determination by the Secretary;
(4) section 7436 and the declaratory relief provisions include
"Petitioner" as subsection (b)(1) and have a subsection which
- 18 -
limits the time to file a petition in the Tax Court; and (5)
after stating the prerequisites for the type of determination,
section 7436 and the declaratory judgment provisions state:
"upon the filing of an appropriate pleading, the Tax Court may"
decide a specified issue or issues, without specific reference to
the amount of tax liability that results from that decision.
Petitioner is right that section 7436 differs in some ways
from the declaratory judgment provisions. However, we agree with
respondent that section 7436 is more like the declaratory
judgment provisions, which specify a subject matter over which we
have jurisdiction, but do not state that we may decide the amount
of tax due. This contrasts with our deficiency jurisdiction
under section 6213, under which we may redetermine the "amount"
of tax due. Sec. 6211(a). Thus, a comparison of the declaratory
judgment provisions with section 7436 supports our conclusion
that section 7436 does not provide jurisdiction to decide amounts
of employment tax due.
D. Whether It Would Be Illogical To Give Us Jurisdiction To
Decide Worker Classification Status Without Jurisdiction To
Decide Amounts of Tax Due
Petitioner contends that it would be illogical to give us
jurisdiction to decide worker classification issues without
jurisdiction to decide amounts of tax due. Petitioner points out
that if we lack jurisdiction to decide amounts of employment tax
due, a taxpayer would be required to go to a second judicial
forum to dispute those amounts. Petitioner contends that
limiting our jurisdiction violates logic and public policy (e.g.,
- 19 -
the convenience of the parties and judicial economy). We
disagree. First, we do not acquire jurisdiction from theories
based on public policy, convenience of the parties, or judicial
economy. See Trost v. Commissioner, 95 T.C. 565; Judge v.
Commissioner, 88 T.C. 1180-1181; Axe v. Commissioner, 58 T.C.
256, 259 (1972). Although petitioner contends that a broader
grant of jurisdiction might have provided an additional
efficiency regarding the resolution of worker classification
disputes, we believe section 7436 does not give us that
authority.
Second, section 7436 provides a reasonable and helpful
alternative to litigating worker classification cases in other
courts even if it does not provide jurisdiction to decide the
amounts of employment tax due. Before section 7436 was enacted,
the U.S. District Courts and Court of Federal Claims had refund
jurisdiction over employment classification, entitlement to
relief under section 530 of the Revenue Act of 1978, and other
employment tax issues. Congress found that disputes with the
Internal Revenue Service over worker classification and
entitlement to relief under section 530 of the Revenue Act of
1978 have been difficult for many taxpayers and decided to
provide for judicial review of these issues before this Court on
a prepayment basis. See sec. 7436(d); H. Rept. 105-148, supra;
S. Rept. 105-33, supra. Once these issues are decided, we
believe the parties will be much more likely to reach an
agreement about amounts of tax owing, if any. A Tax Court
- 20 -
decision on worker classification issues will facilitate a final
resolution of the controversy.
E. Whether the Attachment of a Consent To Assess Tax to the
Notice of Determination Conflicts With Respondent's
Contention That We Lack Jurisdiction To Decide the Amount of
Employment Tax Due
Petitioner points out that respondent attached a calculation
of the amount of tax that petitioner owes to the notice of
determination and contends that this is inconsistent with
respondent's position that we lack jurisdiction to decide amounts
of employment tax due. Respondent contends that the calculation
to which petitioner refers is included only to show whether
petitioner may elect the small case procedures under section
7436(c). Respondent's explanation is reasonable; a calculation
of amounts due is necessary if the small case procedures are to
apply for cases in which up to $10,000 ($50,000 after July 22,
1998) is in dispute. The notice of determination and attachments
thereto do not create jurisdiction not otherwise provided by
statute to decide whether the amount of tax proposed to be
assessed is correct.
F. Conclusion
We conclude that we lack jurisdiction under section 7436 to
decide the amount of petitioner's employment tax liability for
the periods in issue. For the foregoing reasons, we will grant
respondent's motion to dismiss for lack of jurisdiction and to
strike.
An appropriate order
will be issued.