Kenneth B. and Marie L. Boyd v. Commissioner , 124 T.C. No. 18 ( 2005 )

124 T.C. No. 18UNITED STATES TAX COURT
KENNETH B. AND MARIE L. BOYD, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17660-03L. Filed June 27, 2005.
R applied an overpayment in tax from Ps’ 2002
taxable year to other taxes owed by Ps and notified Ps
of that fact (the notice). Ps rely on language in sec.
6331(i)(3)(B), I.R.C., describing “any levy to carry
out an offset” in support of their assignment that R
erred in levying against their property without first
giving them notice of their right to a sec. 6330,
I.R.C., prelevy hearing. Ps also assign error to R’s
application of the overpayment to P husband’s liability
under an installment agreement. R has moved to dismiss
for lack of jurisdiction on the grounds that Ps have
received no statutory notice of deficiency or any other
determination that would give the Court jurisdiction to
consider Ps’ assignments of error (and Ps concede as
much). R also disputes that an offset is a levy. We
need not interpret sec. 6331(i)(3)(B), I.R.C., since
even were we to consider the notice as evidence of a
determination to proceed to collect tax by levy, Ps did
not timely petition the Court within the 30-day period
prescribed by sec. 6330(d)(1), I.R.C., so that we must
dismiss for lack of jurisdiction.
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Held: Motion to dismiss for lack of jurisdiction
will be granted.
Peter L. Banis, for petitioners.
Michael R. Fiore, for respondent.
OPINION
HALPERN, Judge: This matter is before the Court on
respondent’s motion to dismiss for lack of jurisdiction (the
motion). Petitioners object. For the reasons stated, we shall
grant the motion.
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended (the Code), and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
Background
The petition in this case was filed on October 14, 2003.1
At the time they filed the petition, petitioners resided in
Dennis, Massachusetts. Accompanying the petition are various
documents, including a copy of a notice dated May 5, 2003,
addressed to petitioner wife (but pertaining to the account of
both petitioners), which states that the Internal Revenue Service
(IRS) has applied an overpayment of $6,549 in petitioners’ income
1
The wrapper containing the petition has a postmark
bearing the date Oct. 7, 2003.
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tax for 2002 (the overpayment) to other taxes owed by
petitioners: viz, their Form 1040 liability for their tax period
ended September 30, 1998. There are also copies of an IRS Form
9423, Collection Appeal Request, dated August 20, 2003, and
accompanying letter, which petitioners submitted to the IRS in
protest of the application of the overpayment to other taxes owed
by them. Finally, there is a copy of a letter from the IRS dated
September 10, 2003, rejecting petitioners’ protest on the ground
the application of the overpayment was appropriate.
Petitioners’ principal assignment of error is that the IRS
(respondent) erred in applying the overpayment to other taxes
owed by petitioners without giving them the opportunity for a
hearing pursuant to section 6330 (a section 6330 hearing or,
simply, hearing). Petitioners further claim that respondent
erred in applying the overpayment to petitioner husband’s
liability under an agreement to pay certain taxes in
installments. It was an error to do so, petitioners claim, since
neither was petitioner husband in default under the agreement nor
had respondent complied with the terms of section 6159(b)(5). In
the case of default or certain other occurrences in connection
with an installment agreement to pay tax, section 6159(b)(5)
generally requires at least 30 days’ notice if respondent intends
to terminate the agreement or modify its terms.
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Respondent did not answer the petition but, instead, made
the motion. See Rule 36(a). In support of the motion,
respondent argues that no statutory notice of deficiency, as
authorized by section 6212 and required by section 6213(a) to
form the basis for a petition to this Court, has been sent to
petitioners with respect to 2002 (the taxable year in question),
nor has respondent made any other determination with respect to
2002 that would confer jurisdiction on the Court. Replying to
petitioner’s opposition to the motion, respondent points out
that, in their papers opposing the motion, petitioners concede
that no notice of deficiency or other determination was issued by
respondent. Respondent argues that, on those grounds alone, the
motion should be granted. Nevertheless, respondent addresses
petitioners’ assignments of error. He denies that petitioners
were entitled to a section 6330 hearing since the overpayment was
applied to other taxes by way of offset and not by way of levy.
The notice and hearing requirements of section 6330, he claims,
apply only to proposed levy actions, and not to administrative
offsets. Moreover, he claims that, since an offset is not a
levy, there was no violation of any prohibition under section
6331(k)(2) that no levy with respect to unpaid tax may be made
while an installment agreement for payment of such tax is in
effect.
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Discussion
I. Sections 6330 and 6331
Section 6331(a) authorizes the Secretary of the Treasury
(Secretary) to levy against property and property rights where a
taxpayer liable for taxes fails to pay those taxes within 10 days
after notice and demand for payment is made. Section 6331(d)
requires the Secretary to send written notice of an intent to
levy to the taxpayer, and section 6330(a) requires the Secretary
to send a written notice to the taxpayer of his right to a
section 6330 hearing at least 30 days before any levy is begun.
If a section 6330 hearing is requested, the hearing is to be
conducted by the Commissioner’s Appeals Office, and, at the
hearing, the Appeals officer conducting it must verify that the
requirements of any applicable law or administrative procedure
have been met. Sec. 6330(b)(1), (c)(2). The taxpayer may raise
at the hearing any relevant issue relating to the unpaid tax or
the proposed levy. Sec. 6330(c)(2).2 At the conclusion of the
hearing, the Appeals officer must determine whether and how to
proceed with collection, taking into account, among other things,
collection alternatives proposed by the taxpayer and whether any
proposed collection action balances the need for the efficient
collection of taxes with the legitimate concern of the taxpayer
2
A taxpayer receiving a notice of Federal tax lien has
hearing rights similar to the hearing rights accorded a taxpayer
receiving notice of intent to levy. See sec. 6320(c).
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that the collection action be no more intrusive than necessary.
See sec. 6330(c)(3).
After the hearing, the taxpayer has 30 days to appeal the
determination of the Appeals officer to the appropriate court.
Sec. 6330(d)(1). We have jurisdiction to review the Appeals
officer’s determination where we have jurisdiction over the type
of tax involved in the case. Sec. 6330(d)(1)(A). In Offiler v.
Commissioner, 114 T.C. 492, 498 (2000), we held that
prerequisites to the exercise of our jurisdiction under section
6330(d) are the issuance of a valid notice of determination and a
timely petition for review. See also Lunsford v. Commissioner,
117 T.C. 159, 161 (2001) (section 6330(d) jurisdiction is
dependent on “written notice” of a section 6330 determination).
If a hearing is timely requested, section 6330(e)(1)
suspends the levy action until the conclusion of the hearing and
any judicial review. The section also overrides the so-called
Anti-Injunction Act, section 7421(a), and permits proceedings in
the proper court, including the Tax Court, to enjoin the
beginning of a levy during the period the levy action is
suspended. With respect to such proceedings brought in the Tax
Court, the Court has no jurisdiction to enjoin a levy unless the
taxpayer has timely appealed to the Court to review the Appeals
officer’s determination and then only in respect of the unpaid
tax or
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proposed levy to which the determination being appealed relates.
Sec. 6330(e)(1).
II. Levy Versus Offset
A levy is distinguishable from an offset. See, e.g.,
Belloff v. Commissioner, 996 F.2d 607, 615-616 (2d Cir. 1993)
(comparing discussion of "levy" in United States v. Natl. Bank of
Commerce, 472 U.S. 713, 720 (1985), with "setoff" in United
States v. Munsey Trust Co., 332 U.S. 234, 239 (1947)), affg. T.C.
Memo. 1991-350. The Commissioner’s levy authority derives from
the Code, sec. 6331, and it allows the Commissioner to proceed
administratively to assert the Government’s rights in the
property of the taxpayer held by any person, see United States v.
Natl. Bank of Commerce, supra at 720-721. Offset is the common
law right of a creditor, shared by the Government and all
creditors, to apply the unappropriated moneys of the debtor in
the hands of the creditor in extinguishment of the debts of the
debtor’s due the creditor. United States v. Munsey Trust Co.,
supra at 239. Section 6402(a) contains a statutory counterpart,
which authorizes the Secretary to credit a taxpayer’s overpayment
of tax against any tax liability of the taxpayer.
Based on the distinction between levy and offset, and the
limitation of section 6330 to levy actions, we have held that the
Commissioner’s application of a taxpayer’s overpayment for one
taxable year to offset the taxpayer’s liability for another
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taxable year does not constitute a collection action that is
subject to review under section 6330. Bullock v. Commissioner,
T.C. Memo. 2003-5. We have relied on the same distinction in a
case involving restrictions applicable to levy actions during the
pendency of an action for relief from joint and several
liability. Trent v. Commissioner, T.C. Memo. 2002-285. In
section 301.6330-1(g)(2), Q&A-G3, Proced. & Admin. Regs., the
Secretary of the Treasury has provided that offset is a nonlevy
collection activity that the IRS may take during the suspension
period provided in section 6330(e)(1). See also sec. 301.6331-
4(b)(1), Proced. & Admin. Regs.
III. Petitioners’ Defense to the Motion
Petitioners’ defense to the motion rests on two propositions
set forth in the petition: (1) In applying the overpayment to
other taxes, respondent “effected an offset”, and (2) “a levy
must be carried out to effect an offset”. They claim that,
because the offset was by levy, respondent erred in not according
them their rights under section 6330 to notice and a hearing.
They pray that, on account of such error, the Court compel
respondent to return the overpayment to them.
Petitioners argue that an offset can be effected only by
levy. They believe that we erred in Bullock v. Commissioner,
supra, in holding that offset is not a levy subject to the
provisions of section 6330. Petitioners support their argument
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by pointing to the language of section 6331(i)(3)(B)(i). Section
6331(i) provides that no levy may be made during the pendency of
proceedings for the refund of a divisible tax (e.g., any
employment tax). In pertinent part, section 6331(i)(3)(B)
provides: “Certain levies. This subsection shall not apply to-
–(i) any levy to carry out an offset under section 6402”.
By reference to the language of section 6331(i)(3)(B), a
similar exception is incorporated into section 6331(k), which
provides that no levy may be made while an offer in compromise is
pending or an installment agreement is pending or in effect.
Sec. 6331(k)(3)(A).
Petitioners sum up their argument as follows:
So there we have it. To carry out an offset[,]
you must levy first. That is how the Commissioner
acquires a taxpayer’s property, by levy. If a levy
upon an overpayment were not required, and[,] as the
Respondent contends, an[] offset has independent
authority to operate without the predicate act of a
levy, the statute would * * * [read differently].
Petitioners acknowledge that they received no notice of
determination, but they ask us to overrule our holdings in
Offiler v. Commissioner, 114 T.C. 492 (2000), and Lunsford v.
Commissioner, 117 T.C. 159 (2001), that a notice of determination
is a prerequisite to our section 6330 jurisdiction. They argue
that, in a case where the Secretary has levied on property of the
taxpayer without first providing the taxpayer the written notice
of the taxpayer’s right to a prelevy hearing required by section
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6330(a)(1), we have injunctive power under section 6330(e)(1) to
undo the levy notwithstanding that the taxpayer has not received
the posthearing notice of determination to levy contemplated in
Offiler and Lunsford. In support of their argument, they claim
that, if we lack authority to act, they have no remedy for the
Secretary’s unlawful conduct in levying on their property without
complying with the terms of section 6330, a result (they believe)
Congress plainly did not intend.
IV. Discussion
A. Section 6331(i)(3)(B)(i)
Both subsections (i) and (k) of section 6331 (as they
presently read) were added to that section by the Internal
Revenue Service Restructuring and Reform Act of 1998 (the 1998
Act), Pub. L. 105-206, secs. 3433(a), 3462(b), 112 Stat. 759,
765. S. Rept. 105-174 (1998), 1998-3 C.B. 537, is the report of
the Committee on Finance that accompanied H.R. 2676, 105th Cong.,
2d Sess. (1998), which became the 1998 Act. That report makes
clear the committee’s intent that new section 6331(i) (which
originated in the Senate) would not affect the IRS’s ability to
offset refunds. S. Rept. 105-174, supra at 80, 1998-3 C.B. at
616. Given the historic distinction between levy and offset,
there is no indication why the committee thought necessary the
exception found in section 6331(i)(3)(B)(i), nor is there any
explanation of the language “levy to carry out an offset”.
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We need not solve the puzzle of section 6331(i)(3)(B)(i),
however, because we agree with respondent that we cannot grant
petitioners the relief they request in any event.
B. Lack of Jurisdiction
As the Supreme Court observed in Owen Equip. & Erection Co.
v. Kroger, 437 U.S. 365, 374 (1978): “It is a fundamental
precept that federal courts are courts of limited jurisdiction.
The limits upon federal jurisdiction, whether imposed by the
Constitution or by Congress, must be neither disregarded nor
evaded.” We have only the authority given to us by Congress.
Sec. 7442; e.g., Bernal v. Commissioner, 120 T.C. 102, 107
(2003). Petitioners invoke our authority under section 6330(d)
to review a determination made pursuant to that section to
proceed with a collection action (a section 6330 determination)
and, under certain circumstances, to enjoin that action. They
pray that we compel respondent to return the overpayment to them.
With respect to the content of the petition in an action
brought under section 6330(d), Rule 331(b) provides that a copy
of the notice of determination accompany the petition. We have
described the notice of determination as the taxpayer’s “ticket”
to the Tax Court. Weber v. Commissioner, 122 T.C. 258, 263
(2004). We have held that the absence of a section 6330
determination is grounds for dismissal of a petition that
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purports to be based on section 6330. Offiler v. Commissioner,
114 T.C. at 498.
Petitioners argue that, if written notice of the taxpayer’s
right to a hearing is a prerequisite to a levy, the Secretary
cannot avoid court review of a levy by failing to give the
requisite notice. What petitioners consider to be a levy in this
case was respondent’s application of the overpayment to other
taxes owed by petitioners. The IRS notified petitioners of that
action by a notice dated May 5, 2003 (the notice). The petition
was filed on October 14, 2003. Our jurisdiction under section
6330(e)(1) to enjoin an improper levy is dependent on both a
section 6330 determination and an appeal to this Court within 30
days of that determination. Sec. 6330(d)(1), (e)(1). Thus, even
if we were to consider the notice as evidence of a concurrent
section 6330 determination, petitioners failed to seek our review
of that determination within 30 days of May 5, 2003, and, for
that reason alone, we would be required to dismiss for lack of
jurisdiction. See, e.g., Jones v. Commissioner, T.C. Memo. 2003-
29 (“statutory periods are jurisdictional and cannot be
extended”).3 We do not have facts in front of us that provide
3
By letter dated Sept. 10, 2003 (the letter), the IRS
rejected petitioners’ protest of the application of the
overpayment to other taxes owed by them. The letter was in
response to an IRS Form 9423, Collection Appeal Request (Form
9423), with accompanying correspondence, submitted by
petitioners. In Offiler v. Commissioner, 114 T.C. 492, 494-495,
(continued...)
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any basis to overrule Offiler v. Commissioner, supra, and
Lunsford v. Commissioner, supra.
Petitioners also claim that respondent erred in applying the
overpayment to a liability subject to an installment agreement,
thus violating the provisions of section 6159. While petitioners
do not claim that section 6159 provides a jurisdictional basis
for the Court to take any action in that regard, they do claim
that, had they been allowed a section 6330 hearing, and had they
been allowed to offer a collection alternative, they would have
had the opportunity to demonstrate not only their entitlement to
the collection alternative of an installment agreement but that
petitioner husband already had an installment agreement to pay
the unpaid tax against which was applied the overpayment.
Because petitioners have not satisfied the prerequisites to
invoke our jurisdiction under section 6330, we have no authority
to consider petitioners’ claim.4
3
(...continued)
(2000), the taxpayer, after receiving a notice of intent to levy
and being advised of her right to a sec. 6330 hearing, but
failing to make a timely request for such hearing, submitted a
Form 9423, to the IRS “accepting” the offer of a sec. 6330
hearing. The request was rejected (the rejection). We observed
that the Commissioner’s Collection Appeals Program “is an
administrative review program not required by statute.” Id. at
494. We found that the rejection “was not, and did not purport
to be, a notice of determination pursuant to section 6330.”
4
Since petitioners do not rely on the exception to the so-
called Anti-Injunction Act, sec. 7421(a), found in sec.
6331(k)(3)(A), we do not rule on its application or consider
(continued...)
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V. Conclusion
We shall grant the motion since we have no jurisdiction to
consider the errors assigned by petitioners.
To reflect the foregoing,
An order of dismissal
for lack of jurisdiction will
be entered.
4
(...continued)
whether we have injunctive power under that provision.