Kannry v. Commissioner of Internal Revenue

19-494
Kannry v. Commissioner of Internal Revenue
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER
FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
New York, on the 20th day of December, two thousand nineteen.
PRESENT:
ROBERT A. KATZMANN,
Chief Judge,
GUIDO CALABRESI,
RAYMOND J. LOHIER, JR.,
Circuit Judges.
_____________________________________
JACK S. KANNRY, JOYCE F. KANNRY,
Petitioners-Appellants,
v. 19-494-ag
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
_____________________________________
For Petitioners-Appellants: JACK S. KANNRY, ESQ., pro se, New
York, New York.
For Respondent-Appellee: NORAH E. BRINGER, Attorney (Teresa
E. McLaughlin, Attorney, on the
brief), for Richard E. Zuckerman,
Principal Deputy Assistant Attorney
General, Tax Division, U.S.
Department of Justice, Washington,
DC.
Appeal from an order of the United States Tax Court (Nega, J.) denying Petitioners-
Appellants’ motions to vacate or reconsider an order granting summary judgment to Respondent-
Appellee and denying summary judgment to Petitioners-Appellants.
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the order of the United States Tax Court is AFFIRMED.
Petitioners-Appellants Jack and Joyce Kannry, proceeding pro se,1 appeal a United States
Tax Court’s order denying their motions to vacate or reconsider the Tax Court’s grant of summary
judgment to the Commissioner of Internal Revenue and denial of summary judgment to the
Kannrys on the Kannrys’ challenge to the filing of a Notice of Federal Tax Lien (“NFTL”) against
them for the tax years 2011-14. We assume the parties’ familiarity with the underlying facts, the
procedural history of the case, and the issues on appeal.
The Kannrys, who are married, filed a joint personal income tax return in each of the years
2011, 2012, 2013, and 2014. For each year, the Kannrys reported a positive amount of tax due, but
have failed to pay the full amount of tax due. The facts with respect to the 2011 tax year are only
slightly more complex, because in April 2013, the Kannrys filed an amended return in which they
claimed additional deductions against their 2011 income related to losses suffered due to Hurricane
Sandy. The Kannrys’ amended 2011 return reported a newly reduced amount due of $21,214,
which the Kannrys then paid. After an audit, however, the Internal Revenue Service (“IRS”)
disallowed the Kannrys’ claimed deductions in May 2015. In March 2016, the IRS mailed the
Kannrys an NFTL informing them of a lien against their property in the amount of their unpaid
income taxes for the years 2011-2014. The NFTL showed an unpaid amount for tax year 2011 that
1
Petitioner-Appellant Jack S. Kannry is an attorney representing himself and his wife
Joyce F. Kannry.
2
reflected the May 2015 disallowance of the Sandy-related deductions claimed on the Kannrys’
amended 2011 return.
The Kannrys timely requested a Collection Due Process (“CDP”) hearing, in which they
contested the validity of the NFTL on the basis that it was “not permitted . . . in the absence of a
prior assessment, in the form of a statutory notice of deficiency” and that no such assessment had
occurred. Joint App’x 207. In a subsequent pre-hearing letter, the Kannrys confirmed that their
challenge “solely [sought] withdrawal” of the NFTL, again taking the position that the NFTL was
impermissible without a prior valid assessment of the tax due, which was itself impermissible
without a prior notice of deficiency. Joint App’x 254. After the CDP hearing, the hearing officer
rejected the Kannrys’ challenge on the ground that no statutory notice of deficiency was required
because the Kannrys had self-assessed the amounts due by filing their own tax returns for each of
the years at issue. The Kannrys sought review in the Tax Court, which upheld the hearing officer’s
determination.2 This appeal followed.
We review decisions of the Tax Court “in the same manner and to the same extent as
decisions of the district courts in civil actions.” 26 U.S.C. § 7482(a)(1); see Williams v. Comm’r,
718 F.3d 89, 91 (2d Cir. 2013) (per curiam). “We generally treat an appeal from a denial of a
motion for reconsideration that largely renews arguments previously made in the underlying order
as bringing up for review the underlying order or judgment.” Van Buskirk v. United Grp. of Cos.,
Inc., 935 F.3d 49, 52 (2d Cir. 2019).3 We review a grant or denial of summary judgment by the
2
While the Tax Court proceedings were pending, the IRS abated the additional amount that
it had assessed when disallowing the Kannrys’ claimed deduction for the 2011 tax year. The Tax
Court accordingly concluded that any error in sustaining the NFTL as it related to the Kannrys’
2011 tax return had been rendered harmless by the intervening abatement.
3
Unless otherwise indicated, in quoting cases, all citations, emphases, alterations, and
internal quotation marks are omitted.
3
Tax Court de novo, Eisenberg v. Comm’r, 155 F.3d 50, 53 (2d Cir. 1998), and when the underlying
tax liability is not in issue, we review the Commissioner’s determination — including its
applications of its own procedural rules, Sunik v. Comm’r, 321 F.3d 335, 337 (2d Cir. 2003) — for
abuse of discretion, Reichle v. Comm’r, 303 F. App’x 987 (2d Cir. 2008). “Summary judgment is
properly granted where no genuine issue of material fact exists and the movant is entitled to
judgment as a matter of law.” Eisenberg, 155 F.3d at 53. We review the Tax Court’s denials of
motions to vacate and reconsider for abuse of discretion. Cinema ’84 v. Comm’r, 412 F.3d 366,
370–71 (2d Cir. 2005) (motion to vacate); LaBow v. Comm’r, 763 F.2d 125, 129 (2d Cir. 1985)
(motion for reconsideration).
In a challenge to a notice of determination sustaining an NFTL, the Tax Court confines its
review to issues that were previously raised in the underlying CDP hearing. See 26 C.F.R.
§ 301.6320-1(f)(2). The Tax Court did not abuse its discretion by applying “this well-established
procedural rule” in deciding not to address arguments that the Kannrys did not raise in their CDP
hearing. Beeler v. Comm’r, 434 F. App’x 41, 43 (2d Cir. 2011). We therefore affirm the Tax Court
to the extent it declined to consider any such arguments, without expressing any opinion as to their
merits, and limit our own review to the Kannrys’ challenge to the NFTL.
Here, the only issue raised at the CDP hearing was the Kannrys’ argument that the NFTL
should be withdrawn because taxes for the years at issue could not have been properly assessed in
the absence of statutory notices of deficiency. The Tax Court correctly held this argument to be
meritless.
“‘Assessment’ is the formal recording of a taxpayer’s tax liability on the tax rolls.” Chai v.
Comm’r, 851 F.3d 190, 218 (2d Cir. 2017). “It is essentially a bookkeeping notation of what the
taxpayer is required to pay the Government.” Id. It is true, as the Kannrys argue, that “[b]efore it
can ‘assess’ a deficiency, the IRS must first determine a ‘deficiency’ in a taxpayer’s liability” and,
4
generally, must also mail a notice of deficiency to the taxpayer pursuant to 26 U.S.C. § 6212 and
await Tax Court review (or the expiration of the statutory deadline to seek it) before initiating any
collection procedures. Id.; see 26 U.S.C. § 6213(a). But the deficiency procedures described in 26
U.S.C. §§ 6212 and 6213 apply, by their terms, only where a “deficiency” exists within the
meaning of the Internal Revenue Code, and not every unpaid and owing amount of tax is such a
“deficiency.” In particular, there is no “deficiency” where, as here, the taxpayer has self-reported
an amount due on his or her return and failed to pay that amount.
As relevant here, the Internal Revenue Code defines “deficiency” to mean “the amount by
which the tax imposed” by federal law “exceeds the excess of . . . the sum of . . . the amount shown
as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was
shown as the tax by the taxpayer thereon, plus . . . the amounts previously assessed (or collected
without assessment as a deficiency, over . . . the amount of rebates . . . made.” 26 U.S.C. § 6211(a).
“[A] deficiency,” in other words, “is the amount of tax imposed less any amount that may have
been reported by the taxpayer on his return.” Laing v. United States, 423 U.S. 161, 173 (1976)
(emphasis added). Setting aside the now-abated amounts relating to the Kannrys’ amended 2011
return, the amounts at issue here are the same amounts that the Kannrys themselves reported on
their returns, plus penalties and interest. Those amounts are simply not “deficiencies” as that term
is defined in 26 U.S.C. § 6211(a).
The Kannrys’ principal contention is that the restrictions on pre-notice collection
procedures described in 26 U.S.C. § 6213(a) should have barred the IRS from filing an NFTL with
respect to the amounts at issue. But § 6213(a) restricts only the “assessment of a deficiency” and
any “levy or proceeding in court for its collection.” 26 U.S.C. § 6213(a). Because the amounts at
issue here were not “deficiencies” within the meaning of the Code, those restrictions did not apply.
Instead, the Kannrys’ self-reported but unpaid tax amounts fell into a different category altogether,
5
meriting different treatment under the Code: Where taxpayers self-report an amount on their
returns, the Code requires that such amounts be assessed immediately, without resort to the
deficiency procedures described in §§ 6212 or 6213. See 26 U.S.C. § 6201(a)(1) (“The Secretary
shall assess all taxes determined by the taxpayer . . . as to which returns . . . are made under [the
Internal Revenue Code].”). Pre-collection deficiency procedures are similarly unnecessary to
assess penalties incurred by a taxpayer’s failure to pay taxes or estimated tax, see 26 U.S.C.
§ 6665(b), or accrued interest, see id. § 6601(e)(1).
As for their amended 2011 return, the Kannrys assert that a statutory notice of deficiency
was required for the amount assessed when the IRS rejected the Kannrys’ claimed casualty loss
deduction. Essentially, the Kannrys ask us to hold that by filing an amended return showing a
smaller amount than on their original return, they triggered a requirement that the IRS (should it
disagree with the amounts reported on the amended return) mail them a notice of deficiency before
assessing the larger amount first reported on the original return. But as we have explained,
§ 6201(a) authorizes — and indeed, requires — the IRS to assess the amounts reported on the
original return immediately. And “there is nothing in either the Internal Revenue Code or the
regulations thereunder that requires the IRS to accept the amended tax return in place of the
original return previously filed.” Dover Corp. & Subsidiaries v. Comm’r, 148 F.3d 70, 72 (2d Cir.
1998). “[A]n amended return does not . . . change an assessment that has been made or vitiate a
notice of deficiency . . . .” Id. at 73. Instead, “[a]n amended return constitutes a claim for refund
that the Commissioner may review and adjust either by way of an immediate rejection of the refund
claim or by tentative allowance, subsequent audit, and, if necessary, issuance of a notice of
deficiency.” Fayeghi v. Comm’r, T.C. Memo. 1998-297, 1998 WL 477715, at *4 (1998).
Finally, even if the Kannrys would have been entitled to a statutory notice of deficiency
with respect to any taxes in excess of what they reported on their original 2011 return, the IRS has
6
since abated that amount. Any harm to the Kannrys’ substantial rights arising from the erroneous
inclusion in the NFTL of that now-abated amount has been mitigated by the abatement. See 28
U.S.C. § 2111.
We have considered all of the Kannrys’ remaining arguments and find them to be without
merit. Accordingly, we AFFIRM the order of the Tax Court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
7