NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FILED
FOR THE NINTH CIRCUIT
DEC 15 2015
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
ROBERT PEREZ MORALES, No. 13-74283
Petitioner - Appellant, Tax Ct. No. 4225-12
v.
MEMORANDUM*
COMMISSIONER OF INTERNAL
REVENUE,
Respondent - Appellee.
RONDA KAY MORALES, No. 13-74284
Petitioner - Appellant, Tax Ct. No. 5316-12
v.
COMMISSIONER OF INTERNAL
REVENUE,
Respondent - Appellee.
Appeal from a Decision of the
Tax Court
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Submitted December 9, 2015**
San Francisco, California
Before: KOZINSKI, BYBEE, and CHRISTEN, Circuit Judges.
This appeal concerns whether the Internal Revenue Service properly levied a
tax penalty against Robert and Ronda Morales. The tax court upheld the IRS’s
penalty, and we affirm.
On appeal, the Moraleses primarily raise two arguments against the penalty:
(1) the tax court was wrong to reject statutory-interpretation arguments made in a
motion for reconsideration; and (2) the IRS did not meet its burden of production
to establish the penalty applied.
A. The tax court did not abuse its discretion in denying the motion to
reconsider
The IRS levied its penalty against the Moraleses under I.R.C. § 6662. This
rule allows the IRS to penalize taxpayers for making “underpayments.” The
Moraleses argue that wrongly claiming a tax credit does not qualify as an
“underpayment” under this rule. The problem is that the Moraleses raised this
statutory-interpretation argument—for the first time—in a motion for
reconsideration.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
2
Tax Court Rule 161 permits a party to move for reconsideration, but “[t]he
granting of a motion for reconsideration rests within the discretion of the Court,
and will not be granted unless unusual circumstances or substantial error is
shown.” Alexander v. Comm’r, 95 T.C. 467, 469 (1990), aff’d without published
opinion sub nom. Stell v. Comm’r, 999 F.2d 544 (9th Cir. 1993). A motion for
reconsideration “may not be used to raise arguments . . . for the first time when
they could reasonably have been raised earlier in the litigation.” Kona Enters. v.
Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000). Indeed, we have held that
“abuse of discretion review precludes reversing the [trial] court for declining to
address an issue raised for the first time in a motion for reconsideration.” 389
Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999).
As the tax court explained, the Moraleses “had ample opportunity to raise
this newly minted argument . . . by amending the pleadings or presenting it at trial,
but failed to do so.” The Moraleses have not articulated any exceptional
circumstances that prevented them from raising their argument before trial. And
their statutory argument was not so clear-cut that the tax court was required to
consider its merits for the first time in a motion for reconsideration. As the
Moraleses concede, the face of § 6664 was ambiguous as to whether disallowed
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credits were “underpayments.” The tax court thus did not abuse its discretion in
denying the motion for reconsideration.
B. The tax court properly applied the burden of production to the IRS
The Moraleses also contend that the IRS did not meet its burden of
production to show that the penalty applied to them. There are two reasons this
argument fails. First, the IRS is obligated to meet a burden of production on a
penalty only if the taxpayer first alleges that the IRS erred in its penalty
determination. See Wheeler v. Comm’r, 127 T.C. 200, 207 (2006). Otherwise, the
IRS “has no obligation . . . to produce evidence that the penalty is appropriate.” Id.
at 207 (quoting Swain v. Comm'r, 118 T.C. 358, 365 (2002)). Here, the Moraleses
did not initially challenge the merits of the IRS’s penalty determination. The
Moraleses thus conceded its validity and relieved the IRS of its burden of
production.
Second, even if the Moraleses did not concede the penalty, the IRS met its
burden of production. The IRS provided evidence that the Moraleses negligently
claimed first-time buyers credits even though they had recently owned a home.
The tax court’s rulings are therefore affirmed.
AFFIRMED.
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