Ward v. Comm'r ( 2007 )

T.C. Memo. 2007-374
UNITED STATES TAX COURT
MARC AND SHERRI WARD, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14688-06. Filed December 26, 2007.
Eugene A. Steger, Jr., for petitioners.
Harry J. Negro, for respondent.
MEMORANDUM OPINION
GALE, Judge: This matter is before the Court on
respondent's motion to dismiss for lack of jurisdiction.1 In his
motion, respondent contends that no notice was issued to
petitioners upon which to form the basis for a petition to this
1
In addition, petitioners submitted a document to the Court
that was filed as a motion to restrain assessment or collection.
See discussion infra note 6.
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Court. Petitioners filed a response, and the Court conducted a
hearing on the matter.
Background
At the time their petition was filed, petitioners resided in
Pennsylvania.
Petitioners did not timely file returns for their 1994 or
1995 taxable year. On June 29, 1999, subsequent to an
examination by respondent, petitioners signed a Form 870-AD,
Offer to Waive Restrictions on Assessment and Collection of Tax
Deficiency and to Accept Overassessment, agreeing to the
assessment and collection of deficiencies and section 6651(a)(1)
additions to tax for 1994 and 1995 "with interest as provided by
law".2 Respondent accepted petitioners' offer by countersigning
it on August 10, 1999.
Petitioners received a notice of intent to levy concerning
their tax liabilities for 1994 and 1995 on or about July 27,
2001. Petitioners did not request a hearing after receiving this
notice.
On or about June 14, 2002, petitioners mailed a letter,
prepared by their attorney and signed by them,3 to respondent.
2
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986 as amended, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
3
The letter, dated June 12, 2002, was signed by
petitioners' attorney and petitioners. However, the handwritten
(continued...)
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The letter contained the heading "Interest & Penalty Abatement
Request". The letter was accompanied by a $22,000 check and
requested that respondent "apply the amount to tax principal
only" and accept the amount as "payment in full" of petitioners'
outstanding "tax principal" for taxable years 1994 and 1995. The
letter further requested that all interest and penalties for 1994
and 1995 be abated due to "financial hardships". The letter
alleged that petitioners had been unaware, when they signed the
consent to the assessment of their tax liabilities arising from
the examination of their 1994 and 1995 taxable years, that the
amounts consented to included penalties and would continue to
accrue interest until paid. The letter concluded: "We are
requesting abatement of the penalty and interest and the Service
accept the $22,000.00 as payment. Please advise us of your
decision."
Subsequent to sending the foregoing letter, petitioners
received a notice from respondent's Automated Collection System
dated December 23, 2004, that listed assessed balances, accrued
interest, and late payment penalties still owed with respect to
petitioners' 1994 and 1995 taxable years.
3
(...continued)
dates entered next to petitioners' signatures were both June 14,
2002.
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On March 31, 2005, approximately 33 months after
petitioners' letter was received by respondent,4 respondent sent
a Letter 853C to petitioners. The letter was issued with respect
to petitioners' section 6651(a)(1) addition for 1995 and stated
that respondent could not grant petitioners' request to remove
the penalty because the information they provided did not
establish reasonable cause. The letter made no reference to
petitioners' request for an abatement of either the section
6651(a)(1) addition for 1994 or interest for either year.
On July 31, 2006, the Court received and filed a petition
submitted by petitioners and their counsel which they designated
as a petition for redetermination of a deficiency. On the
petition, petitioners elected "small tax case" procedures. On
the basis of the foregoing, this case was docketed initially as a
small tax case and designated as a petition for redetermination
of a deficiency.5
4
Respondent stipulated that he received the June 14, 2002
letter.
5
Upon further review of the petition, which is described in
its body as a "petition to remove penalties and interest"
determined by respondent for 1994 and 1995, and petitioners'
arguments at the hearing, it is apparent that the relief sought
by petitioners is an abatement of interest (and penalties). As
actions for review of the Commissioner's failure to abate
interest may not be conducted under the Court's small tax case
procedures, see sec. 7463, the small tax case designation has
been stricken by order of the Court. As this case is being
dismissed for lack of jurisdiction, the principal impact of this
change is to restore the parties’ right to appeal.
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Respondent thereafter filed a motion to dismiss for lack of
jurisdiction, to which petitioners filed an objection.
Petitioners subsequently submitted a document to the Court that
was filed as a motion to restrain assessment or collection.
Therein, petitioners contend that certain levies issued with
respect to petitioner Marc Ward were wrongful in light of the
pendency of this case.
Discussion
Respondent maintains that we lack jurisdiction in this case
because no notice of deficiency or notice of final determination
not to abate interest with respect to taxable year 1994 or 1995
was issued to petitioners, nor was any other notice of
determination sufficient to confer jurisdiction on this Court
issued to them.
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 undisputed that no notice of deficiency was ever issued to
petitioners for 1994 or 1995. It is also undisputed that
petitioners failed to request a hearing pursuant to section
6330(b) after they received a notice of intent to levy with
respect to their tax liabilities for 1994 and 1995, and that no
notice of determination concerning a collection action was issued
to them concerning the levy. Consequently, we have no
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jurisdiction over this case pursuant to section 6213 or
6330(d)(1).6
Section 6404 authorizes the abatement of interest,
penalties, or additions to tax in limited circumstances. Section
6404(e) authorizes the Commissioner to abate interest assessments
for taxable years beginning after December 31, 1978, that are
attributable to errors or delays by the Internal Revenue Service
(Service). Section 6404(f) authorizes the Commissioner to abate
penalties or additions to tax that are attributable to erroneous
written advice by the Service. Section 301.6404-1(c), Proced. &
Admin. Regs., provides that taxpayers shall make a request for
abatement on Form 843, Claim for Refund and Request for
Abatement.
Section 6404(h), originally enacted by the Taxpayer Bill of
Rights 2, Pub. L. 104-168, sec. 302, 110 Stat. 1457 (1996), and
codified as section 6404(g), gives the Tax Court jurisdiction to
review the Commissioner's denial of certain taxpayers'7 requests
6
In the absence of jurisdiction under sec. 6213 or
6330(d)(1), it follows that the Court has no authority to act on
petitioners' motion to restrain assessment or collection, as
petitioners have identified no other exception to sec. 7421(a)'s
broad prohibition against suits to restrain assessment or
collection. Accordingly, petitioners' motion to restrain
assessment or collection will be denied.
7
To be eligible, taxpayers must meet the requirements
referred to in sec. 7430(c)(4)(A)(ii). Sec. 6404(h)(1).
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for abatement of interest (but not penalties) if the taxpayer
files a petition with the Court within 180 days after the date a
final determination not to abate interest is mailed by the
Secretary. Sec. 6404(h)(1); Banat v. Commissioner, 109 T.C. 92,
95 (1997). The Commissioner's final determination letter "is a
prerequisite to the Court's jurisdiction and serves as a
taxpayer's 'ticket' to the Tax Court." Bourekis v. Commissioner,
110 T.C. 20, 26 (1998); see Kraft v. Commissioner, T.C. Memo.
1997-476.
Respondent argues that the Letter 853C issued to
petitioners denying their request for penalty relief with respect
to taxable year 1995 is not a final determination not to abate
interest. No final determination was issued, respondent argues,
because petitioners never filed a proper request for interest
abatement; i.e., a Form 843, and because the reasons articulated
in petitioners' June 14, 2002 letter do not form a basis under
which respondent is authorized by section 6404(e) to abate
interest.
Petitioners contend that their letter of June 12, 2002,
constituted a specific request that respondent abate both accrued
interest and penalties for taxable years 1994 and 1995.
Petitioners argue that respondent's failure to issue a final
determination with respect to petitioner's request for interest
abatement within a reasonable period of time after receipt of
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that request is equivalent to a final determination not to abate
interest for purposes of section 6404(h).8 In the alternative,
petitioners argue that respondent's Letter 853C denying
petitioners' request for removal of a section 6651(a)(1) addition
for 1995 is sufficient to confer jurisdiction on this Court
because the letter's silence concerning interest abatement
constitutes a denial.
To resolve our jurisdiction, we must determine whether
respondent has made a final determination not to abate interest
within the meaning of section 6404(h). We note at the outset
that petitioners' June 2002 letter clearly and unequivocally
requested an abatement of interest with respect to petitioners'
1994 and 1995 income tax liabilities, although the request was
not made on a Form 843, as required in section 301.6404-1(c),
Proced. & Admin. Regs. We find it unnecessary to decide whether
petitioners' letter was an adequate substitute for a Form 843,
however, because even assuming it was, a decision in respondent's
favor would still follow.
Petitioners' first argument is that we should treat
respondent's failure to issue any response to their request for
interest abatement as a "final determination" for section 6404(h)
8
Petitioners further note that respondent's issuance of
demands for payments of interest subsequent to their request,
including the Automated Collection System notice of Dec. 23,
2004, demonstrates that respondent made a determination not to
abate interest.
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purposes, especially given respondent's subsequent written
demands for payment of the interest. That argument, however, has
been considered and rejected by this Court. See Cho v.
Commissioner, T.C. Memo. 1998-363. In Cho we held that the Court
lacks authority to graft a time limit within which the
Commissioner is obliged to respond to a request for interest
abatement. Id. Thus, a failure to act on a request within a
reasonable time does not constitute a final determination for
section 6404(h) purposes. Id. Whether a remedy should be
provided in the case of the Commissioner's failure to act on an
interest abatement request is a decision for Congress rather than
this Court, we reasoned. Id.
Petitioners alternatively argue that we should consider
respondent's Letter 853C refusing to abate the 1995 late filing
penalty as a notice of final determination for section 6404(h)
purposes. However, a letter must be intended as a notice of
final determination not to abate interest under section 6404 to
be treated as such for jurisdictional purposes. See Bourekis v.
Commissioner, supra at 26. As in Bourekis, the letter upon which
petitioners rely contains no indication that respondent intended
it as a notice of final determination or that respondent "[had]
given any consideration to whether it would be appropriate to
abate an assessment of interest" in petitioners' case. Id.
Consistent with Bourekis, respondent's Letter 853C may not be
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treated as a notice of final determination not to abate interest
under section 6404(h).
Moreover, even if respondent's Letter 853C were treated as a
notice of final determination, the prerequisites to our
jurisdiction would not be satisfied, since petitioners did not
file their petition with this Court within 180 days after the
date of mailing of respondent's letter. See sec. 6404(h)(1);
Rule 280(b)(2); Banat v. Commissioner, supra at 95. The petition
was filed on July 20, 2006, nearly a year beyond the 180-day
period after the Letter 853C that was dated March 31, 2005. See
Gati v. Commissioner, 113 T.C. 132 (1999).
Accordingly, we shall grant respondent's motion to dismiss
for lack of jurisdiction.9
To reflect the foregoing,
An appropriate order of
dismissal for lack of jurisdiction
will be entered.
9
As respondent has not, insofar as the record discloses,
issued any notice of final determination not to abate interest
with respect to petitioners' 1994 and 1995 taxable years, nothing
precludes petitioners from filing a Form 843 to request abatement
of interest for those years. We express no view, however, on
whether petitioners have shown that they satisfy the requirements
of sec. 6404.