Investment Research Associates, Inc. v. Commissioner , 126 T.C. No. 7 ( 2006 )

126 T.C. No. 7UNITED STATES TAX COURT
INVESTMENT RESEARCH ASSOCIATES, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16410-05L. Filed April 18, 2006.
R filed a Federal tax lien in Florida (Florida
lien) and mailed to P a Notice of Federal Tax Lien
Filing and Your Right to a Hearing Under IRC 6320 (lien
notice) regarding P’s unpaid taxes for 1980, 1982,
1984, 1985, 1986, 1987, 1988, 1989, and 1997 (the years
in dispute). P did not submit to R a request for an
administrative hearing with regard to the Florida lien.
Three months later, R filed a Federal tax lien in
Illinois (Illinois lien) and mailed to P a second lien
notice for the years in dispute. P submitted to R’s
Office of Appeals a request for an administrative
hearing regarding the Illinois lien. Relying on sec.
301.6320-1(b)(1) and (2), Proced. & Admin. Regs., R’s
Office of Appeals determined that P’s request for an
administrative hearing was not timely because P failed
to request an administrative hearing in response to the
earlier Florida lien. The Office of Appeals conducted
a so-called equivalent hearing and mailed to petitioner
a decision letter. P filed a petition with the Court
challenging R’s decision letter.
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Held: Sec. 301.6320-1(b)(1) and (2), Proced. &
Admin. Regs., is a reasonable interpretation of sec.
6320, I.R.C., and is valid and controlling in this
case. Held, further, P failed to timely request an
administrative hearing with regard to the Florida lien,
and, therefore, the Office of Appeals was not required
to conduct an administrative hearing under sec. 6320,
I.R.C. Held, further, The decision letter in dispute
does not constitute a notice of determination which
would permit P to invoke the Court’s jurisdiction under
secs. 6320 and 6330, I.R.C., and this case shall be
dismissed for lack of jurisdiction.
Robert E. McKenzie and Kathleen M. Lach, for petitioner.
Sean Robert Gannon and Kathleen C. Schlenzig, for
respondent.
OPINION
HAINES, Judge: The question presented in this collection
review case is whether the Court has jurisdiction under sections
6320 and 6330 to review the Decision Letter Concerning Equivalent
Hearing (decision letter) upon which the petition for lien or
levy action is based.1 As discussed in detail below, we conclude
that petitioner failed to timely request an administrative
hearing, and, therefore, the decision letter in dispute does not
constitute a notice of determination which would permit
petitioner to invoke this Court’s jurisdiction under sections
6320 and 6330. Consequently, we are obliged to dismiss this case
1
Section references are to sections of the Internal
Revenue Code, as amended.
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for lack of jurisdiction.
Background
In Inv. Research Associates, Ltd. v. Commissioner, T.C.
Memo. 1999-407, a Memorandum Opinion filed in 28 consolidated
dockets, the Court held, inter alia, that Investment Research
Associates, Inc. (petitioner) was liable for deficiencies,
additions to tax, and an accuracy-related penalty for the years
1980 and 1982 to 1989.2 The Court entered decisions in
petitioner’s deficiency cases in September 2001. Petitioner did
not appeal the Court’s decisions in its deficiency cases and
those decisions are now final. Secs. 7481(a)(1), 7483.3 In
February 2002, respondent assessed the deficiencies, additions to
tax, and accuracy-related penalty described above, as well as
interest.
On October 28, 2002, respondent mailed to petitioner a
Notice of Federal Tax Lien Filing and Your Right to a Hearing
Under IRC 6320 with regard to petitioner’s unpaid taxes for 1980,
1982, 1984, 1985, 1986, 1987, 1988, 1989, and 1997 (hereinafter
2
Investment Research Associates, Inc., filed petitions for
redetermination with the Court at docket Nos. 43966-85, 45273-86,
30830-88, 27444-89, 25875-90, 23178-91, 19314-92, and 25976-93.
3
In accordance with the Supreme Court’s decision in
Ballard v. Commissioner, 544 U.S. 40, , 125 S. Ct. 1270, 1285
(2005), the Court’s Memorandum Opinion in Inv. Research
Associates, Ltd. v. Commissioner, T.C. Memo. 1999-407, recently
was deemed stricken with regard to taxpayers other than
petitioner.
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the years in dispute). On October 30, 2002, respondent filed a
Notice of Federal Tax Lien with the secretary of state for the
State of Florida (the Florida lien) with regard to petitioner’s
unpaid taxes for the years in dispute. Petitioner did not submit
to respondent a request for an administrative hearing with regard
to the Florida lien.
On February 24, 2003, respondent filed a Notice of Federal
Tax Lien with the secretary of state for the State of Illinois
(the Illinois lien) with regard to petitioner’s unpaid taxes for
the years in dispute. On February 24, 2003, respondent mailed to
petitioner a Notice of Federal Tax Lien Filing and Your Right to
a Hearing Under IRC 6320 with regard to petitioner’s unpaid taxes
for the years in dispute. On March 25, 2003, petitioner
submitted to respondent’s Office of Appeals (Appeals Office) a
request for an administrative hearing under section 6320.
The Appeals Office determined that petitioner’s request for
an administrative hearing was not timely and conducted a so-
called equivalent hearing. Sec. 301.6320-1(i), Proced. & Admin.
Regs. On August 4, 2005, respondent mailed to petitioner a
decision letter for the years in dispute. The decision letter
stated in pertinent part:
Your due process hearing request was not filed within
the time prescribed under Section 6320 and/or 6330.
However, you received a hearing equivalent to a due
process hearing except that there is no right to
dispute a decision by the Appeals Office in court under
IRC Sections 6320 and/or 6330.
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The decision letter stated that the Appeals Office rejected
petitioner’s offer-in-compromise and that the liens were properly
filed and would not be released.
On September 2, 2005, petitioner filed with the Court a
petition for lien or levy action challenging respondent’s
decision letter. Petitioner acknowledged in its petition that
respondent filed the Florida lien in October 2002 and that
respondent issued to petitioner a Notice of Federal Tax Lien
Filing at that time. The petition states that petitioner did not
submit to respondent a request for an administrative hearing
after receiving notice of the Florida lien because petitioner did
not own significant assets in the State of Florida.
The Court issued an order in this case directing the parties
to show cause why this case should not be dismissed for lack of
jurisdiction. Both parties filed responses to the Court’s order.
The Court subsequently directed respondent to file a reply to
petitioner’s response, and respondent complied with the Court’s
order.
Discussion
Section 6321 imposes a lien in favor of the United States on
all property and rights to property of a person liable for tax
when a demand for the payment of the person’s taxes has been made
and the person fails to pay those taxes. Such a lien arises when
an assessment is made. Sec. 6322. Section 6323(a) requires the
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Secretary to file a notice of Federal tax lien if the lien is to
be valid against any purchaser, holder of a security interest,
mechanic’s lienor, or judgment lien creditor. Lindsay v.
Commissioner, T.C. Memo. 2001-285, affd. 56 Fed. Appx. 800 (9th
Cir. 2003). Section 6323(f)(1), which addresses the place for
filing a notice of Federal tax lien, provides that the
Commissioner is required to file separate liens if a taxpayer
owns real property in more than one State, and the Commissioner
may be required to file separate liens in different counties or
other governmental subdivisions within a State, as designated by
the laws of that State.
Sections 6320 (pertaining to liens) and 6330 (pertaining to
levies) provide protections for taxpayers in tax collection
matters. In general terms, sections 6320 and 6330 provide for
notice and the right to an administrative hearing and judicial
review when the Commissioner files a Federal tax lien or proposes
to collect unpaid taxes by levy.
A. Notice Requirements
Section 6320(a)(1) provides that “The Secretary shall notify
in writing the person described in section 6321 of the filing of
a notice of lien under section 6323.” Section 6320(a)(2) sets
forth the time and methods under which the Commissioner is
required to provide the notice described in section 6320(a)(1).
The flush language of section 6320(a)(2) provides that the notice
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required by section 6320(a)(1) is to be provided not more than 5
business days after the day of the filing of the notice of lien.
Section 6320(a)(3) describes the information required to be
included in the notice described in section 6320(a)(1). Section
6320(a)(3)(B) provides that the notice shall include “the right
of the person to request a hearing during the 30-day period
beginning on the day after the 5-day period described in
paragraph (2).”
B. Right to an Administrative Hearing
Section 6320(b)(1) provides that a person requesting a
hearing under subsection (a)(3)(B) is entitled to a hearing in
respondent’s Appeals Office. Section 6320(b)(2) imposes a
qualification on subsection (b)(1) by providing that “A person
shall be entitled to only one hearing under this section with
respect to the taxable period to which the unpaid tax specified
in subsection (a)(3)(A) relates.” Section 6320(c) provides that
an Appeals Office hearing generally shall be conducted consistent
with the procedures set forth in section 6330(c), (d), and (e).
C. Judicial Review and Tax Court Jurisdiction
When the Appeals Office issues a notice of determination to
a taxpayer following an administrative hearing regarding a lien
or levy action, sections 6320(c) (by way of cross-reference) and
6330(d)(1) provide that the taxpayer will have 30 days following
the issuance of a notice of determination to file a petition for
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review with the Tax Court or Federal District Court, as may be
appropriate. See Orum v. Commissioner, 123 T.C. 1, 7-8 (2004),
affd. 412 F.3d 819 (7th Cir. 2005); Kennedy v. Commissioner, 116
T.C. 255, 260 (2001).
The Tax Court is a court of limited jurisdiction, and we may
exercise our jurisdiction only to the extent authorized by
Congress. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). It
is well settled that the Court’s jurisdiction under sections 6320
and 6330 depends upon the issuance of a valid notice of
determination and the filing of a timely petition for review.
Sec. 6330(d)(1); Prevo v. Commissioner, 123 T.C. 326, 328 (2004);
Orum v. Commissioner, supra. Respondent’s issuance of a decision
letter (as opposed to a notice of determination) is not
conclusive with respect to the question of whether the Court has
jurisdiction in this case.
D. The Parties’ Positions
1. Respondent
Relying on section 301.6320-1(b)(1) and (2), Proced. &
Admin. Regs., respondent asserts that, because petitioner failed
to submit to respondent a request for an administrative hearing
in respect of the Florida lien filed in October 2002, the Appeals
Office was not obliged to provide petitioner with an
administrative hearing under section 6320 in response to
petitioner’s challenge to the Illinois lien filed in February
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2003. Section 301.6320-1(b)(1), Proced. & Admin. Regs., provides
in pertinent part that “A taxpayer is entitled to one CDP
[collection due process] hearing with respect to the first filing
of a NFTL (on or after January 19, 1999) for a given tax period
or periods with respect to the unpaid tax shown on the NFTL if
the taxpayer timely requests such a hearing.” Section 301.6320-
1(b)(2), Q&A-B1, Proced. & Admin. Regs., states:
Q-B1. Is a taxpayer entitled to a CDP hearing with
respect to the filing of a NFTL for a type of tax and
tax periods previously subject to a CDP Notice with
respect to a NFTL filed in a different location on or
after January 19, 1999?
A-B1. No. Although the taxpayer will receive notice
of each filing of a NFTL, under section 6320(b)(2), the
taxpayer is entitled to only one CDP hearing under
section 6320 for the type of tax and tax periods with
respect to the first filing of a NFTL that occurs on or
after January 19, 1999, with respect to that unpaid
tax. Accordingly, if the taxpayer does not timely
request a CDP hearing with respect to the first filing
of a NFTL on or after January 19, 1999, for a given tax
period or periods with respect to an unpaid tax, the
taxpayer forgoes the right to a CDP hearing with
Appeals and judicial review of the Appeals’
determination with respect to the NFTL. Under such
circumstances, the taxpayer may request an equivalent
hearing as described in paragraph (i) of this section.
Thus, respondent avers that the Court lacks jurisdiction in this
case on the ground the decision letter in dispute does not
constitute a notice of determination that would permit petitioner
to invoke the Court’s jurisdiction under sections 6320 and 6330.
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2. Petitioner
Petitioner argues that section 301.6320-1(b)(1) and (2),
Proced. & Admin. Regs., is not a reasonable interpretation of
section 6320 and is invalid. Specifically, petitioner argues
that, although section 6320(b)(2) expressly limits a taxpayer to
one hearing for a particular taxable period, section 6320 does
not contain any language requiring a taxpayer to request an
administrative hearing with respect to the first notice of
Federal tax lien filed by the Commissioner. As petitioner sees
it, if the Commissioner files multiple liens in different States
or governmental subdivisions at different times, the taxpayer may
request an administrative hearing with regard to any one of those
liens, so long as his or her request is made within the time
limit imposed under section 6320(a)(3)(B). Petitioner contends
that it is manifestly unreasonable to interpret section 6320 to
require a taxpayer to challenge a Federal tax lien that is filed
in a jurisdiction in which the taxpayer has little, if any,
property. Asserting that it timely filed its request for an
administrative hearing with regard to the Illinois lien,
petitioner maintains that the Court has jurisdiction in this case
on the ground the decision letter in dispute should be considered
a notice of determination consistent with the Court’s holding in
Craig v. Commissioner, 119 T.C. 252 (2002).
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E. Analysis
Section 6320(a)(1) requires the Commissioner to give written
notice to a taxpayer when a Federal tax lien is filed under
section 6323. Given that section 6323(f)(1) contemplates the
filing of separate liens in multiple States, or in multiple
counties or other governmental subdivisions within a State, it
follows that a taxpayer (like petitioner in the present case) may
receive multiple lien notices under section 6320(a)(1). Although
a person may receive multiple lien notices under section
6320(a)(1), section 6320(b)(2) clearly states that the person is
entitled to only one administrative hearing under section 6320
with respect to the unpaid tax for a particular taxable period
for which a lien was filed. The statute does not, however,
explicitly address the narrow question presented in this case;
i.e., whether a taxpayer’s right to an administrative hearing in
the Appeals Office and judicial review of the Appeals Office’s
determination is tied to the first Federal tax lien filed against
the taxpayer or whether the taxpayer may defer and request an
administrative hearing in respect of a later filed lien.
As noted earlier, respondent relies on section 301.6320-1(b)
(1) and (2), Proced. & Admin. Regs., as authority for the
proposition that a taxpayer must request an administrative
hearing with respect to the first Federal tax lien that is filed
in respect of unpaid tax for a particular taxable period.
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Petitioner counters that section 301.6320-1(b)(1) and (2),
Proced. & Admin. Regs., is an interpretative regulation
promulgated under section 7805(a)4 that is entitled to very
little deference and, in any event, the regulation is
inconsistent “with the letter and the spirit of Section 6320.”
It is well settled that an interpretative Treasury
Department regulation is valid if it implements a congressional
mandate in a reasonable manner. See Natl. Muffler Dealers
Association, Inc. v. United States, 440 U.S. 472, 476-477 (1979)
(citing United States v. Cartwright, 411 U.S. 546, 550 (1973)).
An interpretative Treasury Department regulation is reasonable
under Natl. Muffler Dealers Association, Inc. v. United States,
supra, if it "harmonizes with the plain language of the statute,
its origin, and its purpose." Id. at 477; see also United States
v. Vogel Fertilizer Co., 455 U.S. 16, 26 (1982).
As previously discussed, the language of section 6320 does
not address explicitly the precise point we must decide in this
case. Where a statute is ambiguous or silent, we may look to the
statute’s legislative history to determine congressional intent.
See, e.g., Burlington N. R.R. v. Okla. Tax Commn., 481 U.S. 454,
461 (1987). In this case, Congress directly addressed the
question at issue in the legislative history underlying section
4
Sec. 7805(a) provides in pertinent part that “the
Secretary shall prescribe all needful rules and regulations for
the enforcement of this title”.
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6320. Specifically, H. Conf. Rept. 105-599, at 265, 1998-3 C.B.
747, 1019, under the heading “Liens”, states in pertinent part:
The conference agreement generally follows the
Senate amendment, except that taxpayers would have a
right to a hearing after the Notice of Lien is filed.
The IRS would be required to notify the taxpayer that a
Notice of Lien had been filed within 5 days after
filing. During the 30-day period beginning with the
mailing or delivery of such notification, the taxpayer
may demand a hearing before an appeals officer who has
had no prior involvement with the taxpayer’s case.
* * * This hearing right applies only after the
first Notice of Lien with regard to each tax liability
is filed. [Emphasis added.]
In short, the House conference report states that a taxpayer’s
right to an administrative hearing and judicial review under
section 6320 arises only with respect to the first lien that is
filed for a particular tax liability.
Where, as here, Congress has directly spoken to the precise
question at issue, and the intent of Congress is clear, that is
the end of the matter. Inasmuch as section 301.6320-1(b)(1) and
(2), Proced. & Admin. Regs., reiterates a procedural principle
that was unambiguously articulated by Congress in the legislative
history of section 6320, the regulation is valid and controlling
in this case. See Walliser v. Commissioner, 72 T.C. 433, 439
(1979) (sustaining the validity of section 1.274-2(b), Income Tax
Regs., where the regulation was “squarely based on the language
of the legislative history of section 274").
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F. Conclusion
There is no dispute that, although petitioner received
notice of the lien that respondent filed in Florida in October
2002, petitioner did not submit to respondent a request for an
administrative hearing. Consistent with section 301.6320-1(b)(1)
and (2), Proced. & Admin. Regs., respondent’s Appeals Office was
not obliged to (and did not) provide petitioner with an
administrative hearing under section 6320 when petitioner
subsequently sought to challenge the Illinois lien filed in
February 2003. See Prakasam v. Commissioner, T.C. Memo. 2006-53.
It is well settled that respondent may not waive the statutory
period in which a taxpayer must request an administrative hearing
under sections 6320 and 6330. See Kennedy v. Commissioner, 116
T.C. 255, 262 (2001). The Appeals Office conducted an equivalent
hearing and issued to petitioner a decision letter. The decision
letter in question does not constitute a notice of determination
that would permit petitioner to invoke the Court’s jurisdiction
under section 6320. See, e.g., id. at 263. Accordingly, we are
obliged to dismiss this case for lack of jurisdiction.
To reflect the foregoing,
An Order of Dismissal for
Lack of Jurisdiction will be
entered.