Hallmark Cards, Incorporated and Subsidiaries v. Commissioner

111 T.C. No. 14
UNITED STATES TAX COURT
HALLMARK CARDS, INCORPORATED AND SUBSIDIARIES, Petitioner
v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 27306-92. Filed October 30, 1998.
In a decision which has become final, this Court
determined that P had an overpayment of Federal income
tax for the taxable year 1987, due to a foreign tax
carryback from 1989. Prior to the application of the
carryback, P had a deficiency for 1987. P filed a
timely motion to redetermine interest under sec.
7481(c), I.R.C. Thereafter, P filed a motion for leave
to withdraw its earlier motion on jurisdictional
grounds. Held, this Court has jurisdiction over P's
motion to redetermine interest. Held, further, the
exercise of such jurisdiction is mandatory, and, thus,
P's motion to withdraw is denied. Held, further, P's
motion to redetermine interest is denied. Intel Corp.
& Consol. Subs. v. Commissioner, 111 T.C. 90 (1998).
Jerome B. Libin, James V. Heffernan, Bradley M. Seltzer, and
James B. Overman, for petitioner.
Michael L. Boman, for respondent.
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OPINION
TANNENWALD, Judge: On January 28, 1997, the Court entered a
decision in the instant case, which became final within the
meaning of section 7481(a)1 on April 28, 1997. On March 26,
1998, petitioner timely filed a motion under section 7481(c) and
Rule 261 to redetermine interest on deficiency for the taxable
year 1987 (motion to redetermine interest). Subsequently, on
August 27, 1998, petitioner filed a motion for leave to withdraw
motion to redetermine interest on deficiency (motion to
withdraw). Petitioner filed its motion to withdraw in order to
pursue remedies in another forum, citing concerns about this
Court's jurisdiction to redetermine interest under the facts of
the instant case.
Petitioner is a corporation whose principal offices were in
Kansas City, Missouri, at the time its petition was filed. The
Court's decision, pursuant to the stipulation of the parties,
determined that there were overpayments for each of the taxable
years 1987 and 1988. According to the stipulation, the
overpayment for 1987 was due to a foreign tax carryback from
1989. The amount of the carryback exceeded the amount of the
deficiency (as shown in the stipulation) computed without taking
such foreign tax carryback into effect. Petitioner has paid the
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended, and all Rule references are
to the Tax Court Rules of Practice and Procedure.
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unreduced deficiency and the interest thereon. Respondent has
refunded the 1987 overpayment resulting from the carryback, a
portion of overpayment interest thereon, and a portion of
previously assessed deficiency interest for that year.
Petitioner's motion to redetermine interest alleges that
respondent erred in computing interest on that portion of the
previously existing deficiency that was satisfied by the
application of the foreign tax carryback. Respondent computed
interest on such deficiency during the period beginning with the
due date for petitioner's 1987 tax return and ending with the due
date of the 1989 return, March 15, 1990. It is petitioner's
position that, in any event, interest on the deficiency should
stop accruing as of December 31, 1989, the end of the taxable
year in which the carryback arose. Petitioner's position on
these issues is identical to that of the taxpayer in Intel Corp.
& Consol. Subs. v. Commissioner, 111 T.C. 90 (1998), in which we
denied the taxpayer's motion to redetermine interest.
Petitioner adopts an indecisive approach to support its
motion to withdraw. Thus, it does not directly seek to persuade
us to decide that we do not have jurisdiction, apparently
assuming that we would decide the issue unfavorably to
petitioner, see Bankamerica Corp. v. Commissioner, 109 T.C. 1, 7
(1997). Further, it is apparent that petitioner's concern over
our jurisdiction became a critical element in petitioner's
strategy only after our decision in Intel Corp. & Consol. Subs.
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v. Commissioner, supra. Petitioner obviously assumes that we
would deny its motion to redetermine interest on the authority of
that case. It seeks to avoid this result by suggesting in its
motion to withdraw that the Court of Appeals for the Eighth
Circuit, to which an appeal of this case would lie, would hold
that we did not have jurisdiction over petitioner's motion to
redetermine interest, at a time when a remedy in another forum
might be barred by the 2-year period of limitations on suits for
refund after a denial by respondent of the claim for refund.2
With due regard for petitioner's resourcefulness in seeking to
avoid adverse precedent in this case, for the reasons hereinafter
stated, we are not persuaded to follow its blandishments. In
reaching this conclusion, we note that any question as to our
jurisdiction existed at the time the motion to redetermine
interest herein was filed, and if, indeed, it presented as
serious a problem as petitioner now seeks to portray, petitioner
should not have filed such motion in the first place, but rather
should have sought relief from one of the other forums to which
it now seeks to go.
2
Petitioner does not elaborate on this assertion.
However, it would appear to rest on the prohibition set forth in
sec. 6512(a) against bringing a suit for refund while a
proceeding is pending in this Court with the result that any suit
for refund would be dismissed, exposing petitioner to the running
of the 2-year period of limitations on any subsequent suit for
such refund instituted after action by the Court of Appeals for
the Eighth Circuit.
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At the outset, we are constrained to observe that we cannot
accept petitioner's invitation to leave open the question of our
jurisdiction of its motion to redetermine interest under section
7481(c). Even where the parties fail to raise the issue, we are
required to resolve a question as to our jurisdiction on our own
initiative. Powell v. Commissioner, 96 T.C. 709, 710 (1991).
We turn first to the scope of section 7481(c), which
currently provides:
(c) Jurisdiction Over Interest Determinations.--
(1) In general.--Notwithstanding subsection
(a), if, within 1 year after the date the decision
of the Tax Court becomes final under subsection
(a) in a case to which this subsection applies,
the taxpayer files a motion in the Tax Court for a
redetermination of the amount of interest
involved, then the Tax Court may reopen the case
solely to determine whether the taxpayer has made
an overpayment of such interest or the Secretary
has made an underpayment of such interest and the
amount thereof.
(2) Cases to which this subsection applies.--
This subsection shall apply where--
(A)(i) an assessment has been made by
the Secretary under section 6215 which
includes interest as imposed by this title,
and
(ii) the taxpayer has paid the entire
amount of the deficiency plus interest
claimed by the Secretary, and
(B) the Tax Court finds under section
6512(b) that the taxpayer has made an
overpayment.
(3) Special rules.--If the Tax Court
determines under this subsection that the taxpayer
has made an overpayment of interest or that the
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Secretary has made an underpayment of interest,
then that determination shall be treated under
section 6512(b)(1) as a determination of an
overpayment of tax. An order of the Tax Court
redetermining interest, when entered upon the
records of the court, shall be reviewable in the
same manner as a decision of the Tax Court.
Section 7481(c) was amended by the Taxpayer Relief Act of 1997
(the amendment), Pub. L. 105-34, sec. 1452, 111 Stat. 1054,
effective on the date of enactment, August 5, 1997. Prior to the
amendment, section 7481(c) read:
(c) Jurisdiction Over Interest Determinations.--
Notwithstanding subsection (a), if--
(1) an assessment has been made by the
Secretary under section 6215 which includes
interest as imposed by this title,
(2) the taxpayer has paid the entire amount
of the deficiency plus interest claimed by the
Secretary, and
(3) within 1 year after the date the decision
of the Tax Court becomes final under subsection
(a), the taxpayer files a petition in the Tax
Court for a determination that the amount of
interest claimed by the Secretary exceeds the
amount of interest imposed by this title,
then the Tax Court may reopen the case solely to
determine whether the taxpayer has made an overpayment
of such interest and the amount of any such
overpayment. * * *
Specifically, petitioner argues that, since the decision in
this case became final under section 7481(a) prior to the
amendment, the earlier version of section 7481(c) applies, and
such version may be viewed as giving this Court jurisdiction to
determine interest only where a deficiency is assessed under
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section 6215. Because our decision in this case did not
determine any deficiency for 1987, no deficiency was assessed
under section 6215, and therefore, petitioner argues, the Court
may not have jurisdiction under the earlier version of section
7481(c).
As indicated, the amendment has an effective date of
August 5, 1997. Unlike some statutory amendments, the effective
date is not tied to a specific event.3 Although the decision in
this case became final under section 7481(a) before the effective
date, the motion to redetermine interest was filed after the
effective date. Thus, at the time of filing the motion to
redetermine interest, the Court's jurisdiction undoubtedly
extended to interest where the Court's decision on its face has
determined only an overpayment, as is the case herein.
Aside from the effective date issue, we do not share
petitioner's concern as to our jurisdiction because no deficiency
was determined by this Court and assessed pursuant to section
6215 as provided in section 7481(c)(1) as it existed prior to the
amendment.
Section 6215 provides in pertinent part:
3
Cf., e.g., Technical and Miscellaneous Revenue Act of
1988 (TAMRA), Pub. L. 100-647, sec. 6246, 102 Stat. 3751
(jurisdiction to review interest assessed on deficiency
determined by the Tax Court effective with assessments made after
date of enactment); TAMRA, sec. 6247, 102 Stat. 3751
(jurisdiction to reopen estate tax cases to determine deduction
for interest paid on installments of taxes effective for cases
for which the decision is not final on date of enactment).
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SEC. 6215. ASSESSMENT OF DEFICIENCY FOUND BY TAX
COURT.
(a) General Rule.--If the taxpayer files a
petition with the Tax Court, the entire amount
redetermined as the deficiency by the decision of the
Tax Court which has become final shall be assessed and
shall be paid upon notice and demand * * *
It cannot be gainsaid that, on its face, our decision herein
did not determine a deficiency for 1987 and that consequently no
deficiency as determined by the Court was assessed. In this
narrow context, it can be argued that the literal language of
section 7481(c)(1) has not been satisfied. We are satisfied that
section 7481(c)(1) should not be given such a narrow
interpretation. This case originally involved a deficiency
notice for 1987, and the stipulated settlement which formed the
basis of our decision reflected a deficiency, albeit that it was
wiped out by the application of the 1989 foreign tax carryback.
Indeed, if there had not been a deficiency for 1987, there could
have been no basis for the assessment of deficiency interest by
respondent. The fact is that a deficiency was the underpinning
for our determination of the amount of the 1987 overpayment.
Under these circumstances, we are satisfied that the requirements
of section 7481(c)(1) have been met.4 Bankamerica Corp. v.
Commissioner, 109 T.C. 7.
4
We would reach the same conclusion if the current version
(sec. 7481(c)(2)(A)(i)), containing identical language, were
found to be applicable.
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Having decided that we have jurisdiction over petitioner's
motion to redetermine interest, we turn to the question whether
to grant or deny petitioner's motion to withdraw such motion.
Respondent argues that, if our jurisdiction attaches, we must
exercise that jurisdiction and cannot grant petitioner's motion
to withdraw.
During the pendency of a case in this Court, our
jurisdiction is exclusive and, with a few exceptions, another
proceeding may not be commenced or, if already commenced, is
stayed. Secs. 6213(a), 6512(a), 7422(e). Filing a petition in
this Court that is properly subject to our jurisdiction precludes
the taxpayer from later bringing a refund suit for the same type
of tax for the same taxable period. Sec. 6512(a); Estate of Ming
v. Commissioner, 62 T.C. 519, 521 (1974) (quoting Dorl v.
Commissioner, 57 T.C. 720, 721-722 (1972)). It is well settled
that, when the jurisdiction of this Court is properly invoked by
the filing of a valid petition to redetermine a deficiency, we
cannot refuse to exercise that jurisdiction. Coninck v.
Commissioner, 100 T.C. 495, 498 (1993); cf. sec. 7459(d).
The question before us is the extent to which the foregoing
principles should apply to a motion to redetermine interest under
section 7481(c). Section 6512(a) provides in pertinent part:
If the Secretary has mailed to the taxpayer a notice of
deficiency under section 6212(a) (relating to
deficiencies of income, estate, gift, and certain
excise taxes) and if the taxpayer files a petition with
the Tax Court within the time prescribed in section
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6213(a) (or 7481(c) with respect to a determination of
statutory interest or section 7481(d) solely with
respect to a determination of estate tax by the Tax
Court), no credit or refund of income tax for the same
taxable year, * * * to which such petition relates, in
respect of which the Secretary has determined the
deficiency shall be allowed or made and no suit by the
taxpayer for the recovery of any part of the tax shall
be instituted in any court * * * [Emphasis added.]
We think it significant that Congress, in enacting section
7481(c) in 1988, saw fit specifically to include action under
that section in section 6512(a).5 In so doing, Congress voiced
its belief that the impact, in respect of a motion to redetermine
interest, should be the same as that in respect of a petition to
redetermine a deficiency. In Estate of Ming v. Commissioner,
supra (which involved a motion to withdraw), and Dorl v.
Commissioner, supra (which involved a motion for removal to a
District Court), we expressly rested our decision on our
inability to renounce jurisdiction under section 6512(a). Such
being the case, we conclude that, since we have jurisdiction over
petitioner's motion to redetermine interest under section
7481(c), we must dispose of it on the merits. It is that task to
which we now turn.
As stated above, the issues are the same as those involved
in Intel Corp. & Consol. Subs. v. Commissioner, 111 T.C. 90
(1998). For the reasons stated in our opinion in that case, we
5
TAMRA, sec. 6246(b)(1), 102 Stat. 3751. Although the
amendment of sec. 7481(c) changed the word "petition" to
"motion", sec. 6512(a) was not similarly amended.
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hold that interest accrues on petitioner's deficiency expunged by
a later foreign tax carryback and does so until the due date of
the return for the taxable year from which the carryback arises,
rather than only until the end of the taxable year in which the
carryback arose.
Petitioner's motion to withdraw its motion to redetermine
interest and its motion for such redetermination will be denied.
An appropriate order will
be entered.