Individual Argues Tax Court Had Jurisdiction to Decide Overpayment

BRIAN H. MCLANE,
Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE
Respondent-Appellee.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Appeal from Final Memorandum and Order of the United States Tax Court

APPELLANT'S OPENING BRIEF

Brian McLane,
Petitioner-Appellant pro se
8722 Eddington Rd.
Parkville, MD 21234
(443) 326-3300
bhmclane@aol.com

---

TABLE OF CONTENTS

Table of Authorities

Jurisdictional Statement

Statement of the Case

Issue Presented

Standard of Review

Summary of Argument

Argument

Conclusion

Certificate of Service

TABLE OF AUTHORITIES¹

Case Law

Bartman v. Comm'r, 446 F.3d 785 (8th Cir. 2006)

Commissioner v. McCoy, 484 U.S. 3 (1987)

Edmonds v. Compagnie Generale Trasatlantique, 443 U.S. 256 (1979)

Erickson v. Pardus, 551 U.S. 89, 94 (2007)

Erickson v. United States, 309 F.2d 760 (Ct. Cl. 1962)

Estate of Godley v. Comm'r, 286 F.3d 210 (4th Cir. 2002)

Estate of Quick v. Commissioner, 110 T.C. 440 (1998)

Estelle v. Gamble, 429 U.S. 97, 106 (1976)

Flora v. United States, 362 U.S. 145 (1960)

Goza v. Commissioner, 114 T.C. 176 (2000)

Gray v. Commissioner, 138, T.C. 295 (2012)

Greenberg's Express, Inc. v. Commissioner, 62 T.C. 324 (1974)

Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006)

Harrington v. United States, 78 U.S. 356 (1877)

Jones v. Liberty Glass Co., 332 U.S. 524 (1947)

Katz v. Commissioner, 115 T.C. 329 (2000)

King v. Commissioner, T.C. Memo 2015-36, rev'd, 829 F.3d 795 (7th Cir. 2016)

Krueger v. Commissioner, T.C. Memo. 2005-105

Laing v. United States, 423 U.S. 161 (1976)

Lunsford v. Commissioner, 117 T.C. 159 (2001)

Montgomery v. Commissioner, 122 T.C. 1 (2004)

Newstat v. Commissioner, 88 T.C.M. 254 (2004)

Ocampo v. Commissioner, T.C. Memo. 2015-150

Peerless Woolen Mills v. Rose, 28 F.2d 661 (5th Cr. 1928)

Pfister v. Comm'r, 359 F.3d 352, 353 (4th Cir.2004)

Robinette v. Commissioner, 123 T.C. 85 (2004)

Sanford's Estate v. Commissioner, 308 U.S. 39 (1939)

Skrizowski v. Commissioner, T.C. Memo. 2004-229

Smith v. Heckler, 820 F.2d 1093 (9th Cir. 1987)

Techerpenin v. Knight, 389 U.S. 332 (1967)

United States v. James Daniel Good Real Prop., 510 U.S. 43 (1993)

United Savings Ass'n v. Timbers of Inwood Forest Assoc., 484 U.S. 365 (1988)

United States v. Boisdore's Heirs, 49 U.S. 113 (1850)

United States v. Collier, Fed.Cas.No. 14,833 (Cir. Ct. S.D.N.Y. 1855)

United States v. Dalm, 494 U.S. 596 (1990)

United States v. Stewart, 311 U.S. 60 (1940)

Washington v. Commissioner, 120 T.C. 114, 126 (2003)

Waterman v. Comm'r, 179 F.3d 123 (4th Cir.1999)

Willson v. Commissioner, 805 F.3d 316 (D.C. Cir., 2015)

Wood v. United States, 41 U.S. 342 (1842)

Wright v. C.I.R., 571 F.3d 215 (2009)

Statutes

I.R.C. § 6203

I.R.C. § 6213

I.R.C. § 6214

I.R.C. § 6320

I.R.C. § 6330

I.R.C. § 6404

I.R.C. § 6501

I.R.C. § 6511

I.R.C. § 6512

I.R.C. § 7422

I.R.C. § 7482

I.R.C. § 7806

28 U.S,C, § 1346

Public Laws

Pub. L. 100-647, 102 Stat. 3750 (1988)

IRS Restructuring and Reform Act, Pub. L. 105–206, 112 Stat. 685 (1998)

Revenue Act of 1926

---

JURISDICTIONAL STATEMENT

This appeal seeks review of a Tax Court decision on a petition brought under 26 U.S.C. § 6320. This Court has jurisdiction to review decisions of the Tax Court pursuant to 26 U.S.C. § 7482(a). Under 26 U.S.C. § 7482(b)(1)(G)(i), relating to appeals from petitions under § 6320, venue is proper because Petitioner-Appellant resides in Parkville, Maryland, which is located within the Fourth Circuit.

The Tax Court entered its final decision and order on October 18, 2019 disposing of all parties' claims, and Appellant timely filed notice of appeal on January 16, 2020.²

STATEMENT OF THE CASE

McLane filed a federal income tax return for tax year 2008 on 10/19/2009;³ the IRS subsequently issued and mailed, on 8/7/2012,⁴ a statutory notice of deficiency (“SNOD”). McLane did not receive the notice of deficiency.

McLane received a 3/14/2013 Notice of Federal Tax Lien Filing,⁵ and timely requested a collection due process hearing (“CDPH”). Appeals issued a notice of determination upholding the liability on 7/30/13;⁶ McLane submitted his timely petition to Tax Court with respect to that notice on 8/29/2013.⁷

During a supplemental hearing and a subsequent trial of the issues, McLane demonstrated he had no tax liability in 2008, and prior to a decision on the matter, the IRS conceded that McLane had deductions in excess of those claimed on his return, resulting in no tax liability at all for 2008. McLane thus requested the Tax Court determine an overpayment of his 2008 federal income tax and order a refund.⁸ No factual disputes remain.

Judge Halpern ordered supplemental briefing on the issue of whether the Tax Court may determine an overpayment and order a refund of payments and interest upon review of CDPH determinations.⁹ In a memorandum opinion filed 9/11/18, he held that I.R.C. § 6330(d)(1) gives Tax Court no jurisdiction to determine an overpayment in the context of petitions for redetermination of liability under the CDPH provisions (§ 6330), following an earlier case decided by the Tax Court, Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006).¹⁰

ISSUE PRESENTED

A person who receives a final notice of the filing of a tax lien (NFTL) may request a collection due process hearing (CDPH) with IRS Appeals, invoked under I.R.C. §§ 6320 and § 6330. If the person did not receive a statutory notice of deficiency prior to the assessment of the tax liability for the tax period in question, he or she may raise “challenges to the existence or amount of the underlying tax liability. . . .” at the CDPH. § 6330(c)(2)B). The Tax Court has authority to review a CDPH determination. In the context of such Tax Court review, the following first-impression question is presented:

Should § 6330(c)(2)(B)¹¹ be construed, in pari materia with the statutory scheme for deficiency procedures, as authorizing the Tax Court, in a Collection Due Process review under § 6330(d)(1), to fully redetermine the correct amount of underlying tax liability due, including the determination of an overpayment?

STANDARD OF REVIEW

“We review decisions of the United States Tax Court on the same basis as decisions in civil bench trials in United States district courts.” Waterman v. Comm'r, 179 F.3d 123, 126 (4th Cir.1999). 26 U.S.C. § 7482(c)(1) provides the regional federal courts of appeals “have power to affirm or, if the decision of the Tax Court is not in accordance with law, to modify or to reverse the decision of the Tax Court.” The court of appeals lacks jurisdiction to decide an issue that was not the subject of the Tax Court proceeding or to grant relief that is beyond the powers of the Tax Court itself. Commissioner v. McCoy, 484 U.S. 3, 6 (1987).

No facts are at issue in this appeal. Where only legal issues are disputed, this Court reviews the Tax Court's legal conclusions de novo. Pfister v. Comm'r, 359 F.3d 352, 353 (4th Cir.2004). See also Estate of Godley v. Comm'r, 286 F.3d 210 (4th Cir. 2002).

Finally, a document filed pro se is “to be liberally construed,” Erickson v. Pardus, 551 U.S. 89, 94 (2007); Estelle v. Gamble, 429 U.S. 97, 106 (1976).

SUMMARY OF ARGUMENT

In 1998, Congress enacted the IRS Restructuring and Reform Act (“RRA”) to provide taxpayers with procedural safeguards at the IRS collection stage. The “Collection Due Process” procedures added under § 6320 and § 6330 provide for additional notice, opportunity for a hearing, and a review of that hearing in Tax Court prior to collection action. The RRA is remedial in purpose, and should be construed broadly to effectuate its purposes.

The provisions under § 6330 are short and concise, and do not reiterate provisions of other sections of the Internal Revenue Code (I.R.C.), but instead evince a desire to provide broad relief: “a person may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy . . .” (§ 6330(c)(2)(A)). The Tax Court has jurisdiction over all issues raised and/or determined in the hearing. (§ 6330(d)(1)).

Despite this broad jurisdiction, the Tax Court has held that it does not have jurisdiction upon review to determine overpayments of tax, holding a view, first articulated in Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006), that Congress must give it jurisdiction to determine an overpayment by explicit language so stating or by explicit reference to the Code section which authorizes determinations of overpayments, I.R.C. § 6512(b). This view has been invalidated by the Second Circuit, and the Tax Court has begin to recognize that it does have jurisdiction to determine overpayments in certain situations for which it has “concurrent” jurisdiction. Despite this, the Tax Court refuses to determine overpayments when a person who did not receive a statutory notice of deficiency (“SNOD”) challenges the existence or amount of the underlying tax liability for any tax period, as provided directly by the RRA. (§ 6330(c)(2)(B)).

In this case of first impression, Petitioner-Appellant argues that the phrase “statutory notice of deficiency” within § 6330(c)(2)(B) invokes the statutory deficiency scheme with respect to SNODs as set forth (primarily) in Chapters 63 through 68 of Subtitle F. This scheme includes specific authority of the Tax Court to determine both increases in liability and overpayments of tax in a prepayment hearing. § 6214(a), § 6512(b). Because § 6330 confers an additional opportunity for a person to challenge the “underlying tax liability” as a final safeguard affording a taxpayer previously deprived of due process a substitute prepayment hearing equivalent to the one he would have had if he had received the mailed SNOD.

ARGUMENT

Congress enacted provisions of the Internal Revenue Service Restructuring and Reform Act of 1998¹² (“RRA”) to provide taxpayers with additional procedural safeguards to oppose IRS collection, providing for notice, opportunity for a “Collection Due Process” hearing before an Appeals officer, and a prepayment (or precollection) review of Appeals' determinations in Tax Court. § 6330.

In deciding on matters in a CDP hearing, an Appeals officer must take into consideration issues relating to unpaid tax, the proposed levy, and any “challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.” § 6330(c)(2)(B).

McLane's challenge to the amount of the underlying tax liability was brought squarely on the fact that he did not receive any statutory notice of deficiency, despite it being mailed to him. His arguments concern this specific circumstance — a notice was mailed, but not received — and he contends that such circumstance is, by legislative design, not a collection issue per se, but an exceptional and priority issue related to a missed deficiency process. Accordingly, the purpose of the provisions at § 6330 is to provide, upon taxpayer request, a substitute hearing as complete as the taxpayer would have had if he had received an SNOD and timely petitioned the Tax Court.

Relevant stages of assessment and collection

Under statutory notice of deficiency proceedings, the stages of assessment and collection are, as relevant here:

The statutory deficiency scheme

To ascertain whether Tax Court has jurisdiction to determine an overpayment in an appropriate challenge to liability, the starting point must be the deficiency procedures Congress designed. By understanding the taxpayer protections afforded within that scheme, it is more readily appreciated how the opportunity to challenge the underlying tax liability at the collections stage is a final chance to petition for a deficiency proceeding rather than simply an occasion to alleviate collection.

Congress created the tax court as an avenue for prepayment judicial review of tax deficiencies. Flora v. United States, 362 U.S. 145, 158 (1960). Without this forum, the only way a taxpayer could challenge a deficiency judicially would be to pay the tax and sue for a refund in federal court. Bartman v. Comm'r, 446 F.3d 785, 787 (8th Cir. 2006); § 7422(a).

A tax deficiency “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), see § 6211(a). The IRS may not assess any deficiency it determines unless it mails an SNOD to the taxpayer' last known address by certified or registered mail. The SNOD provides the taxpayer with the opportunity to petition Tax Court for a deficiency determination. See § 6213(a).

Once a proper petition is submitted, it is well established that the Tax Court has jurisdiction to determine more than the deficiency: the “Tax Court's jurisdiction, once it attaches, extends to the entire subject of the correct tax for the particular year.” See, e.g., Erickson v. United States, 309 F.2d 760, 767 (Ct. Cl. 1962). This has been the clear position of the Courts since the passage of the Revenue Act of 1926,¹³ and this jurisdiction is set forth in §§ 6214 and 6512.

Thus, the Tax Court has jurisdiction to determine overpayments. “For tax purposes, 'overpayment' is typically defined in its usual sense as 'any payment in excess of that which is properly due.'” Newstat v. Commissioner, 88 T.C.M. 254, 260 (2004) (Citing Jones v. Liberty Glass Co., 332 U.S. 524, 531 (1947)). See also United States v. Dalm, 494 U.S. 596, 609 n.6 (1990) (“The commonsense interpretation is that a tax is overpaid when a taxpayer pays more than is owed, for whatever reason or no reason at all.”)¹⁴

An overpayment amount determined by the Tax Court in a deficiency proceeding “shall be credited or refunded to the taxpayer.” § 6512(b)(1). Section 6512(b)(3) provides that such credit or refund includes any portion of the tax that was paid “after the mailing of the notice of deficiency” or paid “within the period which would be applicable under section 6511(b)(2)¹⁵ . . . if on the date of the mailing of the notice of deficiency a claim had been filed (whether or not filed) stating the grounds upon with the Tax Court finds that there is an overpayment . . .” (emphases added).

Thus, a taxpayer in a prepayment review of deficiency has a right to obtain a refund (or credit) of any overpayment determined by the Tax Court, because he is deemed by statute to have submitted a refund claim on the same day the SNOD was mailed, and that refund is deemed to state whatever grounds the Tax Court will find to support it. Since the Secretary is generally limited to making additional assessments within three years from the filing of a return (§ 6501(a)), and a taxpayer is likewise limited to filing a refund claim within three years from the filing of a return (§ 6511(a)), this device operates in the main to preserve the taxpayer's right to receive a refund of the entire overpayment he may have made.

The event of the mailing of a deficiency, then, preserves an imputed refund claim for the taxpayer as of the date of that mailing. That refund claim, however, is effective in only one arena — when the Tax Court is redetermining the deficiency asserted by the IRS.

The scheme devised by Congress clearly protects the taxpayer from paying tax he does not owe, while achieving maximum judicial efficiency, without the need for the taxpayer to file a separate refund claim and pursue it in another federal court. General refund suits are only allowed in District Courts or the Court of Federal Claims. 28 U.S.C. § 1346(a)(1).

If an SNOD is mailed, but never received by the taxpayer, however, he will, through no fault of his own, miss the opportunity to file a petition for a redetermination including his statutorily imputed refund claim. The amount claimed in the mailed notice, being undisputed, will be assessed. See § 6213(c), § 6203. At that point, the provisional deficiency is converted into the “underlying tax liability” referred to in § 6330(c)(2)(B), and the IRS may collect it.

Before the enactment of RRA, a person who had no notice (SNOD) of an opportunity to petition Tax Court might have their property suddenly seized and levied without due process. This was intrusive and disruptive to taxpayers: until the assessed amounts were paid or collected, a person could not sue to obtain a redetermination of the correct tax owed. Similarly, filed tax liens could affect credit scores and constrain taxpayers' ability to sell property, without any prior hearing whatsoever.

Congress remedied this situation by providing an additional notice and opportunity for the missed deficiency procedure at the collection stage, before any property can be taken. By providing that taxpayers who never received an SNOD can challenge the amount of the underlying tax liability in cases in “which [the SNOD has] been mailed to the taxpayer” (Cf. §§ 6214(a), 6213(a)), Congress gave taxpayers who were assessed without prior notice a final chance to obtain a prepayment hearing on the correct amount of tax in lieu of the original one.

To sum the SNOD procedures related to mailing and receiving deficiencies succinctly before the RRA:

Construction of statute supports § 6330 review as final opportunity for deficiency determination¹⁶

A basic rule of statutory construction is that acts in pari materia are to be read and construed together. “[A]ll acts in pari materia are to be taken together, as if they were one law.” United States v. Stewart, 311 U.S. 60, 64 (1940), also Sanford's Estate v. Commissioner, 308 U.S. 39, 44 (1939); and Harrington v. United States, 78 U.S. 356, 365 (1877). This is particularly true with respect to federal tax law. The many acts passed by Congress are regarded as parts of one system of taxation, and construction of any one act can be assisted by review of other acts in the system. See United States v. Collier, Fed.Cas.No. 14,833 (Cir. Ct. S.D.N.Y. 1855). In Wood v. United States, 41 U.S. 342, 362-263 (1842) the Supreme Court eloquently explained:

The question then arises whether the 66th section of the Act of 1799, ch. 128, has been repealed, or whether it remains in full force. That it has not been, expressly or by direct terms, repealed, is admitted, and the question resolves itself into the more narrow inquiry, whether it has been repealed by necessary implication. * * * [T]here must be a positive repugnancy between the provisions of the new law, and those of the old; and even then, the old law is repealed by implication, only pro tanto, to the extent of the repugnancy. And it may be added that in the interpretation of all laws for the collection of revenue, whose provisions are often very complicated and numerous, * * * it would be a strong ground, to assert that the main provisions of any such laws, sedulously introduced * * *, should be deemed repealed, merely because, in subsequent laws, other powers and authorities are given * * *, and other modes of proceeding are allowed to be had * * *. The more natural, if not the necessary, inference in all such cases is that the legislature intends the new laws to be auxiliary to, and in aid of the purposes of, the old law, even when some of the cases provided for may equally be within the reach of each. There, certainly, under such circumstances, ought to be a manifest and total repugnancy in the provisions, to lead to the conclusion that the latter laws abrogated, and were designed to abrogate the former. (emphases added)

Here, the RRA is auxiliary to previous laws passed; if deficiency proceedings were repealed by implication within the RRA provisions, then there ought to be a “positive repugnance” between the old procedural scheme and the new provision, such that the new law appears designed to abrogate the former statutory scheme. The old jurisdictional grant, however, is not repealed in the exercise of the new, most particularly where the expressed intent of Congress, as here, is to provide the new so that due process provisions which may not have been afforded the taxpayer previously are retroactively supplied.

The rule construing acts in pari materia as one is heightened and made an explicit requirement by § 7806. Concerning the construction of the I.R.C., § 7806 instructs that neither the location nor grouping of any particular section, provision, or portion of the law, nor any cross references or descriptive material, are to be given any legal implication, inference, nor presumption of legislative construction when construing the title's provisions. While this provision is often ignored in practice, it is paramount in a taxing statute that has been refined and added to across generations:

§7806. Construction of title. . . .

(b) Arrangement and classification

No inference, implication, or presumption of legislative construction shall be drawn or made by reason of the location or grouping of any particular section or provision or portion of this title, nor shall any table of contents, table of cross references, or similar outline, analysis, or descriptive matter relating to the contents of this title be given any legal effect. The preceding sentence also applies to the sidenotes and ancillary tables contained in the various prints of this Act before its enactment into law. (emphasis added)

This section mandates that all provisions of the I.R.C. are to be understood and read together, no matter where they may be located or grouped. This is particularly important when analyzing §§ 6320 and 6330, as they are more recent additions to an already existing procedural scheme prescribed by the Code.

By specifying that the amount of underlying tax liability can be challenged where an SNOD was mailed but not received, Congress set a procedural safeguard that is not primarily related to the collection process, but is in respect of the due process rights which were not afforded a taxpayer prior to the assessment of liability. If § 6330(c)(2)(B) is construed merely by its location within the provision for a CDP hearing, and as subordinate to only one of the purposes of CDP hearings — whether levies or liens should be maintained or modified — then a narrow construction distorted by the primacy of collection issues will result.

Instead, when Congress added the provision of § 6330(c)(2)(B) to the issues which can be raised at a CDP hearing, it included an issue that must actually must be determined prior to any other — a challenge to the existence and amount of the underlying tax liability. Unless the existence and amount of the liability is established correctly, every other collection issue is unwarranted.

Reading § 6330(c)(2)(B) as a final opportunity to obtain full prepayment adjudication of the deficiency would likewise be in accordance with a cardinal rule of text-based analysis: that the whole statute should be drawn upon as necessary, and its various parts interpreted within their broader statutory context in a manner that furthers statutory purposes. “In expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy.” United States v. Boisdore's Heirs, 49 U.S. 113, 122 (1850). The meaning of a specific directive may be shaped by the whole of the statute's definitions, by its relationship to other directives, by purposes inferred from those directives, or the statute's overall structure. “A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme — because the same terminology is used elsewhere in a context that makes its meaning clear, or because only one of the meanings produces a substantive effect that is compatible with the rest of the law.” United Savings Ass'n v. Timbers of Inwood Forest Associates, 484 U.S. 365, 371 (1988) (citations omitted).

One permissible meaning of the specific reference to persons who did not “receive a statutory notice of deficiency” being able to challenge the existence or amount of the entire “underlying tax liability” is that a § 6330 (or § 6320) notice provides a final chance for redetermination of the correct amount of tax. This redetermination would include both any increases to tax as may be determined under § 6214(a) and credits or overpayments under § 6512(b) in the event an SNOD was mailed, and the taxpayer did not receive it. This meaning produces a substantive effect compatible with the rest of the law.¹⁷

Construction of remedial provision should favor persons for whose benefit provision was enacted

Sections 6320 and 6330 are remedial in purpose. S. Rept. 105-174, at 67 (1998), stated these new provisions were to entitle taxpayers to protections in dealing with the IRS, protections arising out of a concern that taxpayers have due process before being deprived of their property:

The Committee believes that taxpayers are entitled to protections in dealing with the IRS what are similar to those they would have in dealing with any other creditors . . . the IRS should afford taxpayers adequate notice of collection activity and a meaningful hearing before the IRS deprives them of their property . . . The Committee believes the following procedures designed to afford taxpayers due process in collections will increase fairness to taxpayers. (emphases added)

“Remedial legislation should be construed broadly to effectuate its purposes.” Techerpenin v. Knight, 389 U.S. 332, 336 (1967). This principle may be difficult to apply in practice, but if understood to require that any ambiguities ought to be resolved in favor of persons for whose benefit the statute was enacted, then any ambiguity concerning the extent of § 6330(c)(2)(B)'s due process remedy should be resolved in McLane's favor. See, e.g., Smith v. Heckler, 820 F.2d 1093, 1095 (9th Cir. 1987) (Social Security Act “is remedial, to be construed liberally . . . and not so as to withhold benefits in marginal cases”).

In construing new provisions, it should also be assumed that Congress does not create discontinuities in legal rights and obligations without some clear statement. See, e.g., Edmonds v. Compagnie Generale Trasatlantique, 443 U.S. 256 (1979). The clear statement made in conference that the “procedures [are] designed to afford taxpayers due process,” “before the IRS deprives them of their property,” underscores that no discontinuity from pre-existing legal rights created under Subtitle F should be inferred or implied.

The de novo standard of H. Conf. Rept. 105-599

A petition for redetermination of deficiency invokes a de novo prepayment hearing under the jurisdiction of the Tax Court. “[A] trial before the Tax Court is a proceeding de novo.” Greenberg's Express, Inc. v. Commissioner, 62 T.C. 324, 327 (1974). “We thus consider a taxpayer's tax liability afresh, on the basis of evidence introduced at trial, without regard to what happened during the examination or during any interactions between the taxpayer and the IRS Appeals Office.” Ocampo v. Commissioner, T.C. Memo. 2015-150.

Under § 6330(d)(1), the standard of review employed with respect to the issue of existence or amount of underlying tax liability is likewise de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). The evidentiary scope of review employed by the Tax Court is de novo as well. Robinette v. Commissioner, 123 T.C. 85, 101 (2004), rev'd, 439 F.3d 455, 459-462 (8th Cir. 2006).

In deciding that review of the existence and amount of underlying tax liability is de novo, Goza specifically cited the legislative history of § 6330, in particular H. Conf. Rept. 105-599, at 266 (1998):

Where the validity of the tax liability was properly at issue in the hearing, and where the determination with regard to the tax liability is part of the appeal, no levy may take place during the pendency of the appeal. The amount of the tax liability will in such cases be reviewed by the appropriate court on a de novo basis.

Did Congress, in explicitly stating that, where the determination of liability is part of the CDP appeal, the review will in such cases be de novo, intend anything other than a reference to the same standard used with original deficiency hearings? McLane submits they did not. These observations provide further support for his position that in the event a notice of deficiency was mailed but not received, the purpose of a § 6330(d)(1) hearing is to perform the role of a substitute and equivalent de novo deficiency hearing, nunc pro tunc.

Basis for opinion below has been invalidated

In Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006), relied upon by the opinion below, the Tax Court opined it had no jurisdiction to determine an overpayment or order a refund in CDP cases. However, the case was dismissed as moot on grounds that IRS had offset the disputed liability with an overpayment from another year, and no liability remained to collect.¹⁸

Nevertheless, the Tax Court, by majority opinion (two dissenting), declared in dictum that “section 6330 does not expressly give this Court jurisdiction to determine an overpayment or to order a refund or credit of taxes paid. This Court has not addressed the question as to whether such jurisdiction arises implicitly in collection review proceedings commended in this Court pursuant to section 6330.”¹⁹ Id., at 14.

Noting that the Revenue Act of 1926, ch. 27, 44 Stat. 9, established the Board of Tax Appeals'²⁰ jurisdiction to determine an overpayment in a deficiency proceeding, and that the authority to order the IRS to refund such overpayments (in the event the IRS fails to do so) was lacking until Congress established it in 1988, Pub. L. 100-647, sec. 6244, 102 Stat. 3750, the majority nevertheless drew a broad brush, determining that without “explicit statutory authority” in § 6330, they “should not assume . . . jurisdiction either to determine an overpayment or to order a refund or credit of taxes paid in a section 6330 collection proceeding.” Id., at 18.

Greene-Thapedi leaned heavily on the location of cross-references to conclude that since § 6330 did not expressly contain a cross-reference to § 6404(h)(2)(B) or § 6512(b), Congress did not “extend” the Court's overpayment jurisdiction to CDP hearings. Id., at 12-13. The Tax Court undertook no analysis of the relevant provisions of the deficiency procedures, as outlined supra, nor even its established precedent that “'[i]n view of the statutory scheme as a whole, we think the substantive and procedural protections contained in sections 6320 and 6330 reflect congressional intent that the Commissioner should collect the correct amount of tax.' Montgomery v. Commissioner, 122 T.C. at 10.” Judge Vasquez, dissenting, Id., at 24.

In Wright v. C.I.R., 571 F.3d 215 (2009), the Second Circuit invalidated the Tax Court's all-encompassing conclusion. The Wright Court pointed out that I.R.C. § 6404(h)(i) authorizes the Tax Court “to determine whether the Secretary's failure to abate interest . . . was an abuse of discretion, and [to] order an abatement, if such action is brought within 180 days after the date of the mailing of the Secretary's final determination not to abate such interest.” The Code further empowers the Tax Court to determine an overpayment and order a refund in those circumstances. I.R.C. § 6404(h)(2)(B)(incorporating I.R.C. § 6512(b)); Wright, at 219.

The Wright Court found the Tax Court erred when it “declined to exercise that [§ 6404(h)] grant of jurisdiction on the ground that Wright's action challenged a 'Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330.'” Id. Since Wright raised the issue of interest abatement during the CDPH at the IRS, it followed that the Notice of Determination issued by the agency was the “the Secretary's final determination not to abate interest” under § 6404(h)(1), and Wright's petition for redetermination of the Notice of Determination was timely under not only § 6330, but also § 6404(h). Accordingly, the Tax Court had jurisdiction to determine whether Wright was entitled to an abatement, and if he was, whether he had made an overpayment and was entitled to a refund. Id., at 220.

Following Wright, the Tax Court accepted that it can have “concurrent” jurisdiction under § 6330(d)(1) and other provisions of the Code, specifically § 6404. See Gray v. Commissioner, 138, T.C. 295 (2012) and King v. Commissioner, T.C. Memo 2015-36, rev'd, 829 F.3d 795 (7th Cir. 2016) (reversed on other grounds). Thus, as Judge Halpern noted, in his decision below: “[the Tax Court has] concluded that a petition ostensibly filed under [§ 6330] can be viewed as giving independent jurisdiction under another provision that may provide us with the authority to consider overpayment claims.” App. F, p. 33.

This “independent” jurisdiction under another provision of the Code would extend, in Judge Halpern's view, to ordering credits or refunds under the authority of § 6015(g) when innocent spouse relief is sought in connection with a CDPH under § 6330(c)(2)(A)(i), because a person “may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy, including . . . appropriate spousal defenses.” App. F, p. 34. (emphasis added). McLane submits that this is correct, and in keeping with the holding in Wright. But more importantly, this admission negates a key argument made by the majority in Greene-Thapedi to support their conclusion that determination of overpayments as set forth in § 6512(b) are not within the jurisdiction of the Tax Court under § 6330: “Unlike section 6404(h), section 6330 contains no cross-reference to the rules of section 6512(b), nor does section 6330 cross-reference section 6404(h)(2)(B), which makes section 6512(b)-type rules applicable only “'for purposes of this subsection.'” Greene-Thapedi, at 12.

The non-existence of a cross-reference to § 6404(h)(2)(B), as Wright showed, and the Tax Court has since acknowledged, is not determinative of the Tax Court's jurisdiction to determine overpayments in accordance with that section. Likewise, the non-existence of a cross-reference to § 6015(g) is not determinative of the Tax Court's jurisdiction to determine overpayments in appropriate “spousal defenses” cases, as the Tax Court acknowledged in its opinion below. Thus, lack of explicit reference to § 6512(b) within § 6330 similarly does not indicate that the Tax Court lacks jurisdiction over the determination of overpayments when a notice of deficiency is at issue.

Tax Court given broad authority under § 6330

Section 6330 is a terse section of the statute, but it is so because it is a comprehensive remedial section, referring to and encompassing by its own terms a range of issues which could arise under other sections of the I.R.C. Because a person can “raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy,” and such issues also include “challenges to the existence or amount of the underlying tax liability for any tax period” if such person “did not . . . have an opportunity to dispute such tax liability” (§ 6330(c)(2)), it is axiomatic that when a determination is issued which “shall take into consideration . . . the issues raised” (§ 6330(c)(3)), then the Tax Court will have jurisdiction over those issues, which will undoubtedly involve reliance on the provisions of the relevant I.R.C. sections concerning the issues raised. It is submitted that this jurisdiction potentially extends beyond areas where the Tax Court is said to have “concurrent” jurisdiction; it may extend to whatever issues arise within the four corners of the I.R.C., if they are relevant to challenges to the underlying tax liability or the unpaid tax.

As Judge Vasquez noted in Greene-Thapedi, citing previous majority decisions of the Tax Court regarding the extent of its jurisdiction under § 6330, the Tax Court's jurisdiction is over all issues raised and/or considered by the determination issued by Appeals following a CDPH:

The “determination” that we have jurisdiction to review under section 6330(d) is set forth in section 6330(c)(3). The determination made “by an appeals officer under this subsection” shall take into consideration “(A) the verification presented under paragraph (1); (B) the issues raised under paragraph (2); and (C) whether any proposed collection action balances the need for efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.” Sec. 6330(c)(3); see Washington v. Commissioner, 120 T.C. 114, 126 (2003) (Washington I) (Halpern, J., concurring). Thus, the components of subparagraphs (A), (B), and (C) of section 6330(c)(3) are part of “the determination” of the Appeals officer and “the determination” that the Tax Court has jurisdiction over pursuant to section 6330(d)(1). See Washington I, supra at 129 (Halpern, J., concurring); id. at 131 (Beghe, J., concurring). Accordingly, the section 6330 determination, and our review of the section 6330 determination, consists of more than merely whether or not a notice of intent to levy (or lien) should be sustained and whether the Commissioner can proceed with collection. See also Washington I; Katz v. Commissioner, 115 T.C. 329 (2000); Krueger v. Commissioner, T.C. Memo. 2005-105; Skrizowski v. Commissioner, T.C. Memo. 2004-229; . . . .

Greene-Thapedi, at 29-30 (dissenting opinion, concurred in by Judge Swift).

See also Lunsford v. Commissioner, 117 T.C. 159, 161 (2001) (the requirements for exercising jurisdiction under § 6330 are that “we have general jurisdiction over the type of tax involved, a 'determination' by Appeals and a timely [filed] petition.”).

If § 6330 jurisdiction invokes § 6214 authority, it should invoke § 6512(b) authority as well

Moreover, Judge Halpern has acknowledged that it determines appeals under § 6330 where nonreceipt of an SNOD is at issue according to I.R.C. § 6214:

Where, upon appeal from a section 6330 determination, a challenge to the existence or amount of the taxpayer's underlying tax liability (i.e., a challenge to the determination of the tax on which the Commissioner based his assessment) is properly before us, the taxpayer is entitled to a hearing de novo and may make a record, and we should decide that challenge in the same manner as we would redetermine a deficiency pursuant to section 6214.

Washington v. Commissioner, 120 T.C. 114, 128 (Judge Halpern, concurring). (emphasis added)

I.R.C. § 6214 provides, in pertinent part:

[T]he Tax Court shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer, and to determine whether any additional amount, or any addition to the tax should be assessed, if claim therefor is asserted by the Secretary at or before the hearing or a rehearing. (emphasis added)

If the Tax Court, by its own acknowledgment, has authority to determine an appeal with respect to the underlying tax liability pursuant to § 6214, which allows it to increase the amount of the underlying tax liability, then it also has authority to determine such appeal pursuant to § 6215(b) — which allows it to determine overpayments — as well. Indeed, if the Tax Court will proceed under the jurisdiction of § 6214 alone, then Tax Court proceedings would allow for greater tax liability to be determined, while unjustly disallowing the taxpayer opportunity for overpayments to be determined. As stated supra, Congress has not explicitly repealed these provisions, or stated that they do not apply with respect to a § 6330 redetermination hearings on the underlying tax liability.

Moreover, the provisions now codified at § 6214(a) and § 6512(b)(1) were passed in the Revenue Act of 1926, ch. 27, § 274(e), 44 Stat. 56, and § 284(e), 44 Stat. 67, respectively. Congress clearly intended to give both parties — the Commissioner and the taxpayer — opportunity to have the correct amount of tax due adjudicated, and for the Tax Court to see to it that both increases to tax and overpayments of tax were determined.

Jurisdiction to order refund ancillary to determination of overpayment

The question of overpayment determination is separate from the question of jurisdiction to enforce an overpayment determination. Sec. 6512(b)(2) was passed as part of Pub. L. 100-647, 102 Stat. 3750, in 1988, for the purpose of reinforcing any decision of the Tax Court determining an overpayment when the Secretary fails to refund the overpayment and interest, within 120 days:

If, after 120 days after a decision of the Tax Court has become final, the Secretary has failed to refund the overpayment determined by the Tax Court, together with the interest thereon as provided in subchapter B of chapter 67, then the Tax Court, upon motion by the taxpayer, shall have jurisdiction to order the refund of such overpayment and interest. An order of the Tax Court disposing of a motion under this paragraph shall be reviewable in the same manner as a decision of the Tax Court, but only with respect to the matters determined in such order.

Thus, whenever Tax Court has jurisdiction to determine an overpayment, as McLane contends is here the case, it has the ancillary jurisdiction to enforce that determination (in the event taxpayer makes a motion for such at the proper time). See, e.g., Estate of Quick v. Commissioner, 110 T.C. 440, 443 (1998).

CONCLUSION

WHEREFORE, Appellant prays this Court will find that the Tax Court has jurisdiction under § 6330(d)(1) to determine the correct amount of an overpayment for tax year 2008; remand this matter to the Tax Court with instructions that it determine Appellant's overpayment for said tax year, in accordance with the rules set forth in § 6512(b); and provide such other and further relief, including court costs, as the Court may deem just and equitable.

Submitted this 22nd day of June, 2020.

Brian McLane, Petitioner-Appellant
8722 Eddington Rd.
Parkville, MD 21234
(443) 326-3300