Joseph B. Williams, III v. Commissioner ( 2008 )

131 T.C. No. 6UNITED STATES TAX COURT
JOSEPH B. WILLIAMS, III, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2202-08. Filed October 2, 2008.
P filed a petition timely seeking redetermination of
deficiencies in income tax for 1993-2000 and attempting to
put at issue certain liabilities for which he received no
notice from R: P’s income tax liability for 2001, his
potential liability for unassessed interest on asserted tax
liabilities, and his liability for a so-called FBAR penalty
under 31 U.S.C. sec. 5321(a). R moved to dismiss in part,
as to the three liabilities not included in the deficiency
notice.
Held: The Tax Court lacks jurisdiction to redetermine
P’s income tax liability for 2001, liability for unassessed
interest, and liability for the FBAR penalty.
David H. Dickieson, for petitioner.
John C. McDougal, for respondent.
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OPINION
GUSTAFSON, Judge: This matter is before us on respondent’s
“Motion To Dismiss for Lack of Jurisdiction and To Strike as to
the Taxable Year 2001, as to Interest, and as to FBAR [foreign
bank account report] Penalties” (the motion). Petitioner objects
(the objection). We shall grant the motion.
Background
By notice of deficiency dated October 29, 2007, respondent
determined deficiencies in petitioner’s 1993 through 2000 Federal
income tax, along with penalties and additions to tax. By the
petition, petitioner assigned error to those determinations. We
have jurisdiction to consider petitioner’s assignments of error.
The petition, however, also addresses three other matters
that are the subject of respondent’s motion: (1) Petitioner
appears to seek relief as to the year 2001 (the first year after
the years that are the subject of the notice of deficiency). He
states that the “Tax periods involved in this Petition are income
taxes for 1993, 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001”.
(Emphasis added.) (2) He “seeks an abatement of any interest
which may be assessed” for certain periods on the deficiencies at
issue here; and he cites section 6404(e),1 “Abatement of Interest
1
Except as otherwise noted, section references are to the
Internal Revenue Code (26 U.S.C.), and Rule references are to the
Tax Court Rules of Practice and Procedure.
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Attributable to Unreasonable Errors and Delays by the Internal
Revenue Service”. (3) He discusses penalties imposed on him
under 31 U.S.C. section 5321, for failure to file foreign bank
account reports (FBARs) disclosing Swiss bank accounts. The
petition ends with a prayer “that any tax deficiency, FBAR
penalty, and/or interest be abated.”
Discussion
The Tax Court is a court of limited jurisdiction. We may
therefore exercise jurisdiction only to the extent expressly
provided by statute. Breman v. Commissioner, 66 T.C. 61, 66
(1976). Congress has not conferred jurisdiction on this Court to
consider the matters that are the subject of the motion.
1. Tax Year 2001
In a case seeking redetermination of a deficiency,
jurisdiction depends on the issuance by the Commissioner of a
notice of deficiency. Secs. 6212(a), 6214(a). The objection
acknowledges that taxable year 2001 is not included in the notice
of deficiency. Because it is not, the Court does not have
jurisdiction to determine petitioner’s tax liability for taxable
year 2001, and we shall deem stricken from paragraph 3 of the
petition the reference to 2001. See Rule 52 (“the Court may
order stricken from any pleading any insufficient claim or * * *
any * * * immaterial [or] impertinent * * * matter”); cf. Fed. R.
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Civ. P. 12(f); Bernal v. Commissioner, 120 T.C. 102, 103 n.2
(2003).
2. Interest
This Court has only limited jurisdiction to address issues
related to statutory interest. See Bax v. Commissioner, 13 F.3d
54, 56 (2d Cir. 1993). Here petitioner invokes section 6404(e),
which authorizes the Commissioner to “abate the assessment of all
or any part of such interest”. By implication, petitioner
invokes section 6404(h), which authorizes this Court, in certain
circumstances, to “determine whether the Secretary’s failure to
abate interest under this section was an abuse of discretion”.
However, the petition seeks not an abatement of interest that has
been assessed but rather “an abatement of any interest which may
be assessed”.2 (Emphasis added.)
The remedy available under section 6404(e) is for the
Commissioner to “abate the assessment” of interest. (Emphasis
added.) Thus, as this Court has observed, “Section 6404(e), by
its very terms, does not operate until after there has been an
assessment of interest”. 508 Clinton St. Corp. v. Commissioner,
89 T.C. 352, 355 (1987). As a result, jurisdiction under section
6404(h) for this Court to review the Commissioner’s determination
2
The petition also states: “The sheer size of this
potential interest liability mandates that any errors on its
calculation be raised in this petition and addressed by the Tax
Court.” (Emphasis added.)
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under section 6404(e) is lacking unless and until an assessment
of interest has occurred and the Secretary has mailed his “final
determination not to abate such interest”. Sec. 6404(h)(1);
see Rule 280; Bourekis v. Commissioner, 110 T.C. 20, 26-27
(1998).
Petitioner seeks instead a preassessment review by this
Court, which Congress has not empowered the Court to undertake.
Rather, the Supreme Court has characterized section 6404(h) as “a
precisely drawn, detailed statute [that] pre-empts more general
remedies.” Hinck v. United States, 550 U.S. ___, ___, 127 S. Ct.
2011, 2015 (2007) (quoting EC Term of Years Trust v. United
States, 550 U.S. ___, ___, 127 S. Ct. 1763, 1767 (2007)). We
therefore lack jurisdiction over the petition to the extent it
seeks relief pertaining to interest, and we shall deem stricken
from the petition paragraphs 5(d) and 54-66, and the reference to
interest in the prayer for relief.
3. FBAR Penalties
The FBAR penalties that the petitioner alleges have been
imposed on him are authorized in Title 31 (“Money and Finance”)
of the United States Code, not Title 26 (the Internal Revenue
Code). The FBAR provisions originated in the Bank Secrecy Act,
Pub. L. 91-508, 84 Stat. 1114 (1970); and after the terrorist
attacks of September 11, 2001, Congress directed, in the USA
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Patriot Act,3 that attempts should be made to improve compliance
with these provisions. Title 31 U.S.C. sec. 5314 (2000)
authorizes the Secretary of the Treasury to “require a * * *
citizen of the United States * * * to * * * keep records and file
reports, when the * * * citizen * * * maintains a relation for
any person with a foreign financial agency.” The Secretary of
the Treasury exercised that authority by requiring that citizens
report their foreign bank accounts, see 31 C.F.R. sec. 103.24
(2007), and by ordering that the reports be made on forms to be
filed with the Internal Revenue Service (IRS), see id.sec. 103.27(c)-(e).
Section 5321(a) of Title 31 provides for civil penalties for
violations of the reporting requirements of section 5314, and
section 5321(b)(1) provides that the Secretary of the Treasury
may assess those penalties. (Section 5321(b)(2) provides that
the Secretary may “commence a civil action to recover” the
penalty.) The Secretary’s authority to assess the civil FBAR
3
See USA Patriot Act, Pub. L. 107-56, sec. 361(b), 115 Stat.
272 (2001):
The Secretary of the Treasury shall study methods for
improving compliance with the reporting requirements
established in section 5314 of title 31, United States
Code, and shall submit a report on such study to the
Congress by the end of the 6-month period beginning on
the date of enactment of this Act and each 1-year
period thereafter.
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penalties has been delegated to the IRS. See 31 C.F.R.
sec. 103.56(g) (2007).
The petition states that such FBAR penalties were “imposed”
on the petitioner (not specifying whether they have been
assessed, or merely proposed); states that the IRS Appeals Office
in Baltimore upheld the imposition of the penalties; urges that
the Appeals Office abused its discretion in so doing; and asks
this Court to “abate” the FBAR penalties. We cannot do so. “The
Tax Court and its divisions shall have such jurisdiction as is
conferred on them by this title” (i.e., Title 26) and predecessor
internal revenue statutes. See sec. 7442. Petitioner does not
point to any grant of jurisdiction to this Court that would
extend to FBAR penalties, and we find none.
The FBAR penalties provided in Title 31 are nowhere made
subject to the deficiency procedures of Title 26, see secs. 6212-
6214, on which procedures the bulk of this Court’s jurisdiction
is predicated. For certain taxes, section 6212(a) authorizes the
Commissioner to issue a notice of deficiency. Section 6213(a)
provides that the tax may not be assessed until such a notice has
been issued, and it provides that the assessment of the tax must
be delayed pending a possible redetermination by the Tax Court if
the taxpayer files a timely petition with the Court. However,
under sections 6212(a) and 6213(a), such a notice of deficiency
is to be sent in the case of “a deficiency in respect of any tax
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imposed by subtitle A [“Income Taxes”] or B [“Estate and Gift
Taxes”] or chapter 41, 42, 43, or 44 [in subtitle D,
“Miscellaneous Excise Taxes”]”. By negative implication, any
other taxes--even if imposed in Title 26--fall outside this
Court’s deficiency jurisdiction.4
The same conclusion must be reached as to the FBAR penalties
imposed in Title 31: The Secretary of the Treasury is authorized
by 31 U.S.C. sec. 5321(b)(1) to assess the FBAR penalty; no
notice of deficiency is authorized by section 6212(a) nor
required by section 6213(a) before that assessment may be made;
and the penalty therefore falls outside our jurisdiction to
review deficiency determinations.
Petitioner does not allege here that he received any notice
of deficiency for the FBAR penalties, nor does he allege having
4
For example, the “Assessable Penalties” provided under
Chapter 68 (i.e., within Subtitle F, “Procedure and Administra-
tion”) fall outside the deficiency notice regime of sections 6212
to 6214 and thus fall outside this Court’s deficiency
jurisdiction. See, e.g., sec. 6682(c) (“Deficiency Procedures
Not to Apply”); sec. 6703 (“deficiency procedures * * * shall not
apply with respect to the assessment or collection of the
penalties provided by sections 6700, 6701, and 6702”); Van Es v.
Commissioner, 115 T.C. 324, 329 (2000) (the Tax Court does not
have jurisdiction to redetermine liability for sec. 6702
penalties); Wilt v. Commissioner, 60 T.C. 977 (1973) (trust fund
recovery penalties under sec. 6672 fall outside the Tax Court’s
deficiency jurisdiction). Whether the Tax Court’s “collection
due process” jurisdiction extends to the review of collection
efforts directed to the assessable penalties is a different
question, to which the answer is now affirmative, in view of a
2006 amendment to section 6330(d)(1). See Callahan v.
Commissioner, 130 T.C. 44, 48 (2008).
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received any other notice that might confer jurisdiction on this
Court, such as a notice pertaining to a lien under section 6321
or to a levy under section 6331 (both of which are procedures
applicable to “any person liable to pay any tax” (emphasis
added)).5 Such collection activities give rise to a notice and
opportunity for a hearing under section 6320 or section 6330
(both of which explicitly presume “unpaid tax”). That notice may
result in an agency determination that this Court would then have
jurisdiction to review, in the lien and levy context. See secs.
6320(c), 6330(d)(1). Under section 6330(d)(1), this Court’s
authority to review IRS collection activity depends on the
Commissioner’s prior issuance of such a notice of “determination”
under section 6330(c)(3), see Goza v. Commissioner, 114 T.C. 176,
182 (2000); and in the absence of such a notice, this Court lacks
jurisdiction to review the Commissioner’s collection activity.
The statutes creating the “collection due process”
procedures, and the statutes creating the lien and levy
collection mechanisms reviewed by those procedures, all
5
The lien created in section 6321 arises only in the case of
“any tax * * * (including any interest, additional amount,
addition to tax, or assessable penalty, together with any costs
that may accrue in addition thereto)”. (Emphasis added.) The
“assessable penalt[ies]” referred to in section 6321 are
evidently those denominated as such in Chapter 68, Subchapter B
(“Assessable Penalties,” sections 6671-6725). Similarly,
collection by levy is authorized in section 6331(a) only for “any
tax * * * (and such further sum as shall be sufficient to cover
the expenses of the levy)”. (Emphasis added.)
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explicitly pertain to “tax”,6 not to the FBAR penalty that
petitioner attempts to put at issue here. Petitioner does not
allege that he received any notice of determination under
section 6320 or 6330 upholding any lien or proposed levy as to
FBAR penalties, nor does he allege any action whatsoever by the
Secretary leading toward the collection of the FBAR penalty.
The Tax Court has no jurisdiction to review the Secretary’s
determination as to petitioner’s liability for FBAR penalties.
As a result, respondent’s motion must be granted, and we shall
deem stricken from the petition paragraphs 5(e) and 67-73, and
the reference to FBAR penalty in the prayer for relief.
To reflect the foregoing,
An appropriate order will be
issued.
6
The definition of the word “tax” in sections 6320, 6321,
6330, and 6331 is broadened by section 6665(a) to include “addi-
tions to the tax, additional amounts, and penalties provided by
this chapter [i.e., ch. 68 (secs. 6651-6751)]”; but we are aware
of no statute that would expand “tax” as used in the lien and
levy statutes in Title 26 to include the FBAR penalty of
Title 31. The collection mechanism authorized in the FBAR
statute itself is not lien or levy but “a civil action to recover
a civil penalty”. 31 U.S.C. sec. 5321(b)(2).