United States v. Alan Francis Beane

Case: 15-15444 Date Filed: 11/23/2016 Page: 1 of 29

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
________________________

No. 15-15444
________________________

D.C. Docket No. 9:06-bkc-05723-FMD

UNITED STATES OF AMERICA,

Plaintiff - Appellant,

versus

ALAN FRANCIS BEANE,

Defendant - Appellee.

________________________

Appeal from the United States District Court
for the BK - FLM Fort Myers
________________________

(November 23, 2016)
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Before TJOFLAT and HULL, Circuit Judges, and MENDOZA, * District Judge.

HULL, Circuit Judge:

Pursuant to a certification of direct appeal and an order of this Court, the

government directly appeals the decision of the Bankruptcy Court regarding the

interest due from Alan Francis Beane for the taxable year 1998. The government

claims a prior Tax Court decision never addressed the interest issue. The

government also disputes how and when interest on Beane’s 1998 tax deficiency

should be calculated. To understand the interest issue, we must recount in detail the

procedural history of the case.

I. BACKGROUND

A. 2002 Notice of Deficiency

On May 9, 2002, the United States Internal Revenue Service (“IRS”) issued

a Notice of Deficiency for 1998 and 1999 to Beane. The notice set out Beane’s

1998 federal income tax deficiency in the amount of $3,080,430. This deficiency

amount is the difference between the tax due on Beane’s taxable income for 1998

and the tax he reported on the return filed for that year. 1 On April 4, 2005, Beane

filed a petition with the United States Tax Court to contest the Notice of

Deficiency for 1998.
*
Honorable Carlos Eduardo Mendoza, United States District Judge for the Middle District of
Florida, sitting by designation.
1
Typically, a deficiency is “the difference between the tax imposed by law and the tax shown
upon the return.” Manning v. Seeley Tube & Box Co. of N.J., 338 U.S. 561, 565, 70 S. Ct. 386,
388 (1950); 26 U.S.C. § 6211(a).
2
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B. 2006 Bankruptcy Petition

On October 19, 2006, Beane filed a voluntary petition for Chapter 11

bankruptcy in the United States Bankruptcy Court for the Middle District of

Florida. On November 14, 2006, the IRS filed a Motion for Relief from the

Automatic Stay. The Bankruptcy Court granted the Motion and allowed the IRS to

continue the Tax Court proceeding against Beane.

C. June 25, 2009 Tax Court Decision

The case before the Tax Court involved the IRS’s aforementioned notice of

a tax deficiency sent to Beane regarding his 1998 federal income tax return. On

June 25, 2009, the Tax Court entered a Memorandum Findings of Fact and

Opinion in the case of Beane v. Commissioner of Internal Revenue, No. 6529-05.

Beane v. Comm’r, 97 T.C.M. (CCH) 1846 (T.C. 2009). This Memorandum

Opinion aimed to resolve multiple issues related to Beane’s 1998 tax deficiency

and directed the parties to file computations of Beane’s deficiency pursuant to the

Tax Court’s determination of the issues therein. The issue before the Tax Court

relevant to this appeal was “the extent to which, if at all, [Beane’s tax] deficiency

for 1998 may be reduced or an overpayment may be determined as a result of,”

among other things, loss carrybacks from subsequent years. 2 The government

2
Section 172 of the Internal Revenue Code allows a taxpayer to carry back or carry forward a net
operating loss as a deduction from income under certain circumstances. 26 U.S.C. § 172.
Generally, a net operating loss can be carried back to each of the two taxable years preceding the
taxable year of the loss. § 172(b)(1)(A)(i).
3
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conceded that the amount owed by Beane for 1998 should be reduced by loss

carrybacks.

The Tax Court noted that, under 26 U.S.C. § 6214(b), its jurisdiction to

determine whether there has been an overpayment is limited to the year for which

the notice of a deficiency was issued, which was 1998. As a result, the Tax Court

had “no jurisdiction in this case to redetermine the amount of the overpayment for

1999 or to determine the accrued interest on that overpayment, notwithstanding

[Beane’s] insistence that he is entitled to offset those amounts against the admitted

deficiency for 1998.”3 Because of the Tax Court’s limited jurisdiction, “[t]he

amount ultimately due to or from [Beane] will not be known until the decision is

entered in this [Tax Court] case and the correct deficiency for 1998 is assessed.

[Beane’s] account will then reflect adjustments that have been made or agreed

upon for other years.”

The Tax Court determined that “the amount to be included in [its final]

decision will reflect the tax due for 1998 on the corrected income that [Beane]

received during that year, reduced by the loss carryovers from other years and

other income, deduction, and credit adjustments” and that “[t]he tax due will

3
The Tax Court acknowledged that provisions of the Internal Revenue Code limit its jurisdiction,
in that computation and adjudication of the net amounts owed by or to Beane over a period of
years was beyond the scope of the case. The Tax Court explained that determination of a
deficiency should not be confused with an accounting for taxes owed, amounts assessed,
amounts paid, and net amounts due.
4
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reflect prior payments [Beane] remitted with his return for 1998.” 4 Notably, the

Tax Court determined the amount of Beane’s income for 1998 and the amount of

taxes due on that income. The Tax Court, however, did not determine the interest

due resulting from Beane’s underpayment of the ultimate amount of the 1998 tax

deficiency.

D. September 9, 2009 Tax Court Decision

On September 9, 2009, following the preparation of computations by both

parties, the Tax Court entered its Order and Decision. The Tax Court adopted the

IRS’s computation and determined that there was a deficiency of $1,359,361 in the

federal income tax due from Beane for the year 1998. The IRS’s computation

included, among other things, a reduction in Beane’s 1998 income resulting from

his carryback of a net operating loss for the year 2000. But the IRS did not

consider the net operating loss carryback to have arisen until April 15, 2001, the

date that the tax year 2000 return was due. In other words, while the carryback

reduced Beane’s pre-existing 1998 deficiency, the carryback was not earned until

2000 and thus was not in play, or effective, until April 15, 2001. The IRS and the

4
In addition, the Tax Court cautioned that “arguments not addressed in this opinion are irrelevant
to [its] decision or have even less merit than those addressed.”
5
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Tax Court calculated the reduced 1998 tax deficiency but, once again, did not

calculate the interest owed by Beane for underpaying his taxes in 1998.5

E. 2011 Bankruptcy Court Decision

Following the 2009 resolution of the Tax Court case and further proceedings

in Bankruptcy Court, the IRS filed an accounting of Beane’s taxes with the

Bankruptcy Court that purported to include a “full accounting of all transactions

affecting” Beane’s taxes from 1998 to 2003. The IRS’s accounting credited part of

Beane’s 1999 tax overpayment to his 1998 tax liability, effective April 15, 2000,

which ensured “the balance of Beane’s 1998 tax liability would be fully paid as of

April 15, 2001, when a tax year 2000 net operating loss was applied.” The

accounting also credited part of Beane’s 1999 tax overpayment to his 2003 tax

liability effective April 15, 2004, making the balance of Beane’s 2003 tax liability

fully paid as of that date. Even after offsetting those liabilities, Beane’s

overpayment of his 1999 and 2000 taxes resulted in the government delivering

checks to Beane in the amounts of $963,823.55 and $105,009.43, respectively.

Beane filed objections to the IRS’s accounting of his 1998-2003 taxes.

Beane argued that the IRS had ignored the Tax Court’s determination of his 1998

5
Following the conclusion of the Tax Court case, Beane and the IRS entered into a Partial
Agreement resolving most of their disputes regarding refunds due to Beane for tax years 1999
and 2000. On April 21, 2010, the United States House and Senate Joint Committee on Taxation
approved the Partial Agreement.
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tax deficiency and pushed the tax effect of his 2000 net operating loss carryback to

April 16, 2001 (the day after his 2000 tax return was due).

On February 10, 2011, the Bankruptcy Court sustained Beane’s objections to

the government’s accounting with respect to the 1998 tax deficiency. The

Bankruptcy Court found that it was “bound by the Tax Court decision . . . that the

deficiency in federal income tax due from petitioner for the taxable year 1998 is

the amount of $1,359,361.” The Bankruptcy Court noted that the IRS, of its own

accord, had further reduced the 1998 tax deficiency “to $1,340,664.” The

Bankruptcy Court therefore ordered the government to file another accounting of

the minimum net refund due to Beane and his bankruptcy estate. As a result, the

IRS refunded Beane $433,941.14 in interest for 1998, but Beane’s attorney was

required to keep the funds in escrow until the conclusion of any appeals.

On February 24, 2011, the government appealed the Bankruptcy Court’s

February 10, 2011 Order to the District Court.6

F. 2012 District Court Decision

In a July 25, 2012 Memorandum and Opinion, the District Court affirmed

the Bankruptcy Court. The District Court noted that the Tax Court’s decision was a

final judgment as there was no post-judgment motion for reconsideration and no
6
On May 26, 2011, the Bankruptcy Court confirmed Beane’s Chapter 11 reorganization plan.
The bankruptcy plan provided that both Beane and the IRS retained any claims related to the Tax
Disputes, including the minimum net refund due to Beane and the estate and, more specifically,
the appeal of the Bankruptcy Court’s order sustaining Beane’s objections to the IRS’s
accounting.
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appeal. In re Beane, No. 2:11-CV-213, 2012 WL 3041098, at *2 (M.D. Fla. July

25, 2012). 7 A Recomputation Specialist from the Civil Tax Division, Office of

Review, Department of Justice had prepared the accounting ordered by the

Bankruptcy Court. Id. The District Court discussed the declaration of that

specialist and explained that the “Recomputation Specialist decided—probably

correctly—that the IRS calculations adopted by the Tax Court were wrong.” Id. at

*3.

The District Court determined that that Tax Court had established “the

deficiency after allowing the loss carryback without first calculating the interest on

the total tax due during the period from April 15, 1999 (when the 1998 tax was

due) to April 15, 2001 (when the loss carryback for 2000 became available).” Id.

The District Court concluded that this “effectively forgives a substantial portion of

the interest obligation of the taxpayer that accrued on the unpaid deficiency during

that period.”8 Id. The District Court described the government’s argument: “the

Government merely uses its present calculation of the total tax deficiency before

allowing credit for the loss carryback in order to ‘correctly’ calculate and capture

the interest obligation that the Tax Court did not account for in its computations.”

7
The District Court initially noted that it shared the Tax Court’s frustration with the inability of
counsel to clearly identify the issue to be decided and the relevant chronological chain of factual
events that gave rise to the issue. 2012 WL 3041098, at *1 n.1.
8
To reach this conclusion, the District Court relied on Manning, which we discus for fully infra
Part II.C.
8
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Id. The District Court rejected that argument by the government as “an adroit but

unpersuasive explanation.” Id. Instead, the District Court concluded:

The fact remains that the calculations, as candidly explained by the
Recomputation specialist, employ a 1998 tax deficiency of $2,846,457
which is directly contrary to the Tax Court determination of
$1,359,361 as the amount of 1998 tax deficiency. And the fact that
the Tax Court calculations were probably wrong in the way they
applied the carryback credit—or wrong in any other manner—is
inconsequential. A final judgment by a court of competent
jurisdiction, even if it is demonstrably incorrect, is binding on the
parties unless set aside on appeal or through post judgment
proceedings in the court that issued the judgment . . . .

Id. The District Court thus affirmed the Bankruptcy Court’s February 10, 2011

ruling that the IRS’s method of applying the carryback to Beane’s 1998 taxes was

contrary to the Tax Court’s decision. 9 Id. at *4.

The government appealed.

G. 2013 Appeal to this Court

This Court dismissed the government’s initial appeal for lack of jurisdiction.

Specifically, this Court determined that the District Court’s order, which affirmed

the Bankruptcy Court, was not a final order and thus was not appealable under the

collateral order doctrine. United States v. Beane, No. 13-10269 (11th Cir. June 27,

2013) (unpublished).

9
The District Court separately denied, without further discussion, a motion for rehearing from the
government.
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H. Remanded Proceedings

On June 22, 2015, the Bankruptcy Court entered a consent order in this case.

According to the Bankruptcy Court, just before trial the parties reached a

settlement agreement. The Bankruptcy Court explained that its prior order of

February 10, 2011, sustaining Beane’s objection to the government’s accounting,

“held that the IRS had incorrectly applied the Debtor’s net operating loss carryback

from tax year 2000 as of April 15, 2001, instead of April 15, 1999, when

calculating accrued statutory interest on the Debtor’s 1998 tax deficiency, resulting

in an overpayment of interest by the Debtor attributable to tax year 1998.” The

parties’ settlement resolved all other matters in this case but preserved the

government’s right to appeal the Bankruptcy Court’s determination that the IRS

must refund interest paid on the 1998 tax deficiency based on applying the 2000

net operating loss carryback on April 15, 1999 (when the 1998 tax was due)

instead of April 15, 2001 (when the 2000 carryback became effective). This is the

“1998 Interest Claim” at issue now before this Court. The settlement also

preserved Beane’s claims to the amount of that refund. The Bankruptcy Court

stated that because all other contested issues had been resolved, including the 1998

Interest Claim subject to appeal, the consent order constituted a final order from

which an appeal may be taken on the 1998 Interest Claim.

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On July 21, 2015, the Bankruptcy Court, at the request of the government

and with Beane’s agreement, issued a certification for direct appeal to this Court.

According to the Bankruptcy Court, the issue on appeal “concerns the

effective date of the Debtor’s net operating loss carryback from tax year 2000 for

purposes of determining statutory interest on the 1998 tax deficiency determined

by the Tax Court.” The Bankruptcy Court explained that after the Tax Court

decision, the IRS included in the balance due from Beane for 1998 “accrued

statutory interest from the date of the deficiency (April 15, 1999) to the date on

which the 2000 net operating loss carryback became effective (April 15, 2001).”

In contrast, the Bankruptcy Court clarified that it had held, “feeling . . . bound by

the Tax Court’s determination,” “that the 2000 net operating loss carryback was

effective on April 15, 1999 for purposes of calculating statutory interest on the

1998 liability.” The Bankruptcy Court’s ruling resulted in the government issuing

a refund of $433,391.14, now held in escrow.

This Court granted the government’s petition for permission to appeal

directly from the Bankruptcy Court, United States v. Beane, No. 15-90021 (11th

Cir. Dec. 9, 2015) (unpublished), and the government appealed.

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II. DISCUSSION

A. Standard of Review

“In a bankruptcy case, this Court sits as a second court of review and thus

examines independently the factual and legal determinations of the bankruptcy

court and employs the same standards of review as the district court.” In re Fisher

Island Invs., Inc., 778 F.3d 1172, 1189 (11th Cir. 2015) (quotation marks omitted).

“Where the district court affirms the bankruptcy court’s order, we review the

bankruptcy court’s decision.” Id. “We review the bankruptcy court’s factual

findings for clear error and its legal conclusions de novo.” Id. “The district court’s

legal determinations are also reviewed de novo.” Id.10

B. Issue on Appeal

As an initial matter, we must determine the issue on appeal. As the District

Court noted, the parties in this case have struggled “to clearly identify the issue to

be decided.” After reviewing the orders of the Bankruptcy Court and District

Court, it is apparent that the underlying issue in this case is this: given Beane owes

interest on his underpayment of 1998 taxes that were due on April 15, 1999, do

you calculate that interest by using (1) the amount of the deficiency owed on the

1998 taxes from April 15, 1999 through April 15, 2001, when the 2000 net

10
For example, both the District Court’s application of res judicata and interpretation of the
Internal Revenue Code are reviewed de novo. Batchelor-Robjohns v. United States, 788 F.3d
1280, 1284 (11th Cir. 2015).
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operating loss carryback became effective, or (2) the amount of the deficiency

calculated by the Tax Court, which included a full reduction for the 2000 net

operating loss carryback starting as of April 15, 1999? In other words, for the

1998 interest calculation, is the net operating loss carryback effective as of April 1,

1999 or April 15, 2001? The government contends that Beane “owed interest on

the unreduced deficiency for 1998 from the time his return was due, on April 15,

1999, until April 15, 2001,” when the net operating loss carryback became

effective.

Given the decisions discussed above, the parties agree that this Court must

determine whether the Tax Court’s 2009 decisions and computation of Beane’s

1998 tax deficiency have any res judicata or collateral estoppel effect that would

preclude the Bankruptcy Court from deciding whether Beane owed interest on the

unreduced 1998 deficiency from April 15, 1999 until April 15, 2001.

C. The Effect of a Net Operating Loss Carryback on Interest Owed on an
Underpayment

In order to determine the scope of the Tax Court’s ruling and address the

government’s position on appeal, we first need to comprehend the underlying

dispute in this case.

A deficiency is usually “the difference between the tax imposed by law and

the tax shown upon the return.” Manning v. Seeley Tube & Box Co. of N.J., 338

U.S. 561, 565, 70 S. Ct. 386, 388 (1950); 26 U.S.C. § 6211(a). In Manning, the
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Supreme Court addressed “whether the interest on a validly assessed deficiency is

abated when the deficiency itself is abated by the carry-back of a net operating

loss.” 338 U.S. at 565, 70 S. Ct. at 389.11 The Supreme Court held: “The

subsequent cancellation of the duty to pay this assessed deficiency does not cancel

in like manner the duty to pay the interest on that deficiency.” Id. The Supreme

Court reasoned that until the day the deficiency was actually assessed, the taxpayer

had an obligation to pay that tax and, because the taxpayer failed to pay the tax, the

taxpayer had the use of money which should have been in the government’s

possession. Id. at 565-66, 70 S. Ct. at 389. “The fact that the statute permits the

taxpayer subsequently to avoid the payment of that debt [by a future loss

carryback] in no way indicates that the taxpayer is to derive the benefits of the

funds for the intervening period.” Id. at 566, 70 S. Ct. at 389.

Based on legislative history, the Supreme Court in Manning concluded “that

the carry-back was not to be interpreted as deferring or delaying the prompt

payment of taxes properly due.” Id. at 567, 70 S. Ct. at 390. Moreover, the

taxpayer “is not entitled to a refund of the assessed interest.” Id. at 569, 70 S. Ct.

at 391. The Supreme Court “h[e]ld that where a deficiency and interest have been

validly assessed under any applicable statutory procedure, a subsequent carry-back

11
Manning, decided in 1950, dealt with an earlier version of the Internal Revenue Code.
14
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with an abatement of the deficiency does not abate the interest previously assessed

on that deficiency.” Id. at 570, 70 S. Ct. at 391.

The Internal Revenue Code (“IRC”) provides for the reduction of income tax

by a carryback, as well as the computation of interest:

If the amount of any tax imposed by subtitle A is reduced by reason of
a carryback of a net operating loss or net capital loss, such reduction
in tax shall not affect the computation of interest under this section for
the period ending with the filing date for the taxable year in which the
net operating loss or net capital loss arises.

26 U.S.C. § 6601(d)(1). 12 The “[g]eneral rule” for interest on an underpayment is:

“If any amount of tax . . . is not paid on or before the last date prescribed for

payment, interest on such amount . . . shall be paid for the period from such last

date to the date paid.” § 6601(a). Pursuant to § 6601, the filing date for the

taxable year in which the net operating loss arose in this case is April 15, 2001, and

the reduction in tax from a carryback of a net operating loss does not affect the

computation of interest on any tax due prior to that date.

Section 6601 thus provides that any net operating loss carryback accrued by

Beane would not affect the computation of interest Beane would have owed on the

1998 underpayment from April 15, 1999 through April 15, 2001, when the net

12
Section 6601(d)(1) “codifies the principle announced in [Manning] that a taxpayer is liable for
interest on a deficiency until the deficiency is paid or otherwise abated” and “provides that a
reduction in tax by reason of a carryback of an NOL does not affect the computation of statutory
interest due for the period ending with the filing date for the taxable year in which the NOL
arose.” Urbano v. Comm’r, 122 T.C. 384, 394–95 (2004).
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operating loss carryback became effective. Based on § 6601, the lower deficiency

number, determined by the Tax Court, would not be used in the calculation of that

interest amount. This Court thus must determine whether the Tax Court in its

proceedings made a contrary ruling, which, even if wrong, has preclusive effect.

D. Res Judicata Standard

“Res judicata is a judicially crafted doctrine, created to provide finality and

conserve resources.” Maldonado v. U.S. Att’y Gen., 664 F.3d 1369, 1375 (11th

Cir. 2011). “Res judicata comes in two forms: claim preclusion (traditional ‘res

judicata’) and issue preclusion (also known as ‘collateral estoppel’).” Cmty. State

Bank v. Strong, 651 F.3d 1241, 1263 (11th Cir. 2011); see also Johnson v. United

States, 576 F.2d 606, 611 (5th Cir. 1978) (“While the term ‘res judicata’ in its

broadest sense encompasses collateral estoppel, in a narrower sense these two

phrases do carry different although related meanings. Under the principles of ‘res

judicata’ in the narrower sense, a judgment in a prior suit between the same parties

bars a suit on the same cause of action not only as to all matters offered at the first

proceeding, but also as to all issues that could have been litigated. Collateral

estoppel, however, precludes relitigation only of those issues actually litigated in

the original action, whether or not the second suit is based on the same cause of

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action.”).13 The parties in this case raised both res judicata in its narrow sense

(claim preclusion), and collateral estoppel (issue preclusion).

“For res judicata to bar a subsequent case, four elements must be present:

(1) there is a final judgment on the merits; (2) the decision was rendered by a court

of competent jurisdiction; (3) the parties, or those in privity with them, are

identical in both suits; and (4) the same cause of action is involved in both cases.”

Maldonado, 664 F.3d at 1375 (quotation marks omitted). “For collateral estoppel

to be invoked 1) the issue must be identical in the pending case to that decided in

the prior proceeding; 2) the issue must necessarily have been decided in the prior

proceeding; 3) the party to be estopped must have been a party or have been

adequately represented by a party in the first proceeding; and 4) the precluded

issue must actually have been litigated in the first proceeding.” Blohm v. Comm’r,

994 F.2d 1542, 1553 (11th Cir. 1993).

The parties in this case contest whether the Bankruptcy Court and District

Court erred in giving res judicata effect to the Tax Court’s determination of the

1998 tax deficiency. There is no dispute that the Tax Court’s decision was a final

judgment or that the parties were identical in both suits. We thus address, for

claim preclusion, whether the Tax Court acted within its jurisdiction and whether

13
This Court adopted as binding precedent all Fifth Circuit decisions prior to October 1, 1981.
Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
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the same cause of action was present, and, for issue preclusion, whether the issue at

hand was actually litigated and decided by the Tax Court.

E. The Tax Court’s Jurisdiction over the Interest Calculation

In this case, determining what the Tax Court actually decided is closely

related to the extent of its jurisdiction, in part because the Tax Court’s decision

emphasized its limited jurisdiction to hear all of the issues raised by the parties.

We first determine whether the Tax Court had jurisdiction to render a decision on

how to calculate the interest owed by Beane on the 1998 underpayment.

“[T]he Tax Court is a court of strictly limited jurisdiction and powers.”

Roberts v. Comm’r, 175 F.3d 889, 896 (11th Cir. 1999). A Tax Court case is not

one for collection of taxes but a review of the government’s determination of a

deficiency by the taxpayer. Id. Section 6213(a) of the IRC gives the Tax Court

jurisdiction to redetermine a deficiency assessed by the IRS following a notice of

deficiency to the taxpayer. 26 U.S.C. § 6213(a); see also Clark v. Campbell, 501

F.2d 108, 112 (5th Cir. 1974) (“The jurisdiction of the Tax Court to redetermine

tax liability prior to payment is explicitly based on the issuance of a deficiency

notice.”). Moreover, “the receipt of a notice of deficiency is a jurisdictional

requirement for access to the Tax Court.” Musso v. Comm’r, 531 F.2d 772, 774

(5th Cir. 1976). The IRC then provides that “the Tax Court shall have jurisdiction

to redetermine the correct amount of the deficiency . . . and to determine whether

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any additional amount, or any addition to the tax should be assessed, if claim

therefor is asserted.” 26 U.S.C. § 6214(a).

The Supreme Court has explained that when a Tax Court finds the existence

of a deficiency, it does not decide other questions such as those related to interest

or penalties, as those are outside the scope of the petition to the Tax Court.

Comm’r v. McCoy, 484 U.S. 3, 6–7, 108 S. Ct. 217, 219 (1987).

The Tax Court itself has noted that: “It is equally well settled that this

Court’s jurisdiction to redetermine a deficiency in tax generally does not extend to

statutory interest imposed under section 6601.” Pen Coal Corp. v. Comm’r, 107

T.C. 249 (1996); see also Sunoco Inc. v. Comm’r, 663 F.3d 181, 189 (3d Cir.

2011) (“Except in limited circumstances, the Tax Court also lacks jurisdiction over

issues relating to interest, whether on underpayments or overpayments.”). Pen

Coal explained: “[S]ection 6601(e)(1) expressly provides that interest prescribed

by section 6601 is treated as tax ‘except [for purposes of] subchapter B of chapter

63, relating to deficiency procedures’. Because the effect of such language is to

exclude interest from the definition of a ‘tax’ for purposes of section 6211(a), it

follows that such interest is not a deficiency.” 107 T.C. 249; see also Sunoco, 663

F.3d at 189 (“The interest imposed on underpayments by I.R.C. § 6601(a) is

generally excluded from the definition of a ‘deficiency’ which the Tax Court has

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jurisdiction over, but it is otherwise treated as a tax pursuant to I.R.C.

§ 6601(e)(1).” (citation omitted)).14

A deficiency therefore does not include interest on an underpayment. 26

U.S.C. § 6211(a). Indeed, “it has long been held that without a deficiency letter

that [tax] court has no jurisdiction.” Musso, 531 F.2d at 774; see also Stoecklin v.

Comm’r, 865 F.2d 1221, 1224 (11th Cir. 1989) (“A deficiency notice . . . is a

taxpayers’ ticket to the Tax Court . . . .” (quotation marks omitted)). The Tax

Court’s jurisdiction is limited to the deficiency in the notice, which does not

include interest pursuant to §§ 6601(e)(1) and 6211(a).

Accordingly, the Tax Court in Beane’s case did not have jurisdiction over

the calculation of § 6601 interest on the underpayment for 1998. The Tax Court

was clear in this case that its jurisdiction was limited to the notice of deficiency for

the 1998 taxes. In a deficiency proceeding, the amount of the deficiency does not

include the interest. While in some instances, such as an overpayment, the Tax

Court may have jurisdiction over interest issues, none of those are present here. To

the extent the Tax Court determined that Beane’s reduced 1998 tax deficiency,

including the net operating loss carryback, should be used to calculate the

14
Sunoco further explained that there is an exception to this general rule: when “the Tax Court
properly obtains jurisdiction over a deficiency for a given year and then finds that the taxpayer
has overpaid its taxes for that year, the Tax Court may determine an overpayment of interest paid
on the deficiency, if the interest accrued and was paid before the overpayment arose.” 663 F.3d
at 189. This “overpayment” exception does not apply to Beane’s Tax Court proceeding.
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underpayment interest Beane owed, the Tax Court did not have jurisdiction to

make such a determination. Claim preclusion therefore does not apply.

F. The Cause of Action in the Tax Court Proceeding

Claim preclusion fails for a second reason too.

“In federal tax litigation one’s total income tax liability for each taxable year

constitutes a single, unified cause of action, regardless of the variety of contested

issues and points that may bear on the final computation.” Finley v. United States,

612 F.2d 166, 170 (5th Cir. 1980). “As in any other area, res judicata bars

subsequent litigation of a previously adjudicated cause of action, including those

claims and defenses that could have been, but were not, raised in the earlier

proceeding.” Id. “For this reason, courts have long held that res judicata does not

bar a subsequent tax suit unless the suit involves the same tax year and tax liability

as a previous one.” Batchelor-Robjohns v. United States, 788 F.3d 1280, 1288

(11th Cir. 2015). Similarly, “res judicata does not apply to suits involving

different types of tax liability, even when the suits involve the same underlying

transaction, and, at least in some respects, the same tax year.” Id. at 1289.

Beane’s “single, unified” cause of action in the Tax Court proceeding was

his “total income tax liability for” 1998. The proceeding stemmed from a notice of

deficiency for 1998. Section 6601(e)(1) makes it clear that interest on an

underpayment under § 6601 is treated as a tax except for purposes of a deficiency

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proceeding. Beane’s Tax Court proceeding was a deficiency proceeding on his

1998 tax liability and did not encompass the § 6601 underpayment interest. The

government’s claim in the Bankruptcy Court, however, sought payment of that

interest, which was a different cause of action. Claim preclusion therefore does not

apply to any Tax Court ruling on the calculation of the § 6601 underpayment

interest, and the Bankruptcy Court did not have to defer to the 1998 tax deficiency

calculated by the Tax Court for purposes of computing the interest owed.

G. Whether the Tax Court Decided the Interest Issue

The Tax Court limited its ruling in this case to determining the amount of

Beane’s 1998 tax deficiency. The 1998 deficiency was the subject of the notice of

deficiency sent to Beane. The Tax Court explained that the determination of the

amount of the 1998 deficiency is distinct from any accounting of any “net amounts

due” and that computation of such amounts “is well beyond the proper scope of

this case.” In directing the filing of computations by the parties, the Tax Court

directed that “[f]or our purposes in this case, the amount to be included in the

decision will reflect the tax due for 1998 on the corrected income that petitioner

received during that year, reduced by the loss carryovers from other years and

other income, deduction, and credit adjustments.” (emphasis added).

Notably, the Tax Court did not discuss § 6601 or any interest owed by

Beane. Indeed, the Tax Court explained that, because of the limited inquiry of the

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Tax Court proceedings, the “amount ultimately due to or from [Beane] will not be

known until the decision is entered in this case and the correct deficiency for 1998

is assessed.” Nothing in the Tax Court’s opinion addressed the calculation of

interest in general, much less whether a 2000 net operating loss carryback on a

1998 tax deficiency would preclude interest accruing before that carryback. The

Tax Court did not ask for any computations of interest and provided no instructions

for how to do so. The statement of income tax changes submitted by the IRS to the

Tax Court, and upon which the Tax Court relied for computation of the deficiency,

did not include any calculation of interest. Instead, the Tax Court stressed that the

computations were only for the purposes of that particular case—to determine the

amount of tax owed by Beane for tax year 1998 as per the notice of deficiency.

We therefore conclude that collateral estoppel does not require the use of the

Tax Court-determined 1998 deficiency amount for calculating interest because the

Tax Court did not decide the issue of whether that amount had to be used for the

subsequent interest calculation. For collateral estoppel to apply, the issues litigated

and decided in the previous cause must be identical, Matter of McWhorter, 887

F.2d 1564, 1567 (11th Cir. 1989), as well as “a critical and necessary part” of the

judgment, Pleming v. Universal-Rundle Corp., 142 F.3d 1354, 1359 (11th Cir.

1998). The Tax Court determined the amount of Beane’s 1998 tax deficiency but

did not decide the next step—how that determination affected his liability for

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interest on the 1998 underpayment. The issue presented to the Bankruptcy Court

was therefore neither identical to the issue decided by the Tax Court nor critical

and necessary to the Tax Court’s judgment. Collateral estoppel does not apply.

H. The Partial Agreement and Equitable Estoppel

Beane contends that the Partial Agreement entered into between himself and

the IRS, coupled with the estimated interest amounts given to him by the IRS

agent, equitably estops the government from using any amount of the 1998 tax

deficiency other than the amount, decided by the Tax Court, that Beane and the

IRS used in negotiating and entering into the Partial Agreement. “To make out a

claim of estoppel against the Government, a party must adduce evidence of the

following: (1) words, conduct, or acquiescence that induces reliance;

(2) willfulness or negligence with regard to the acts, conduct, or acquiescence;

(3) detrimental reliance; and (4) affirmative misconduct by the Government.”

United States v. McCorkle, 321 F.3d 1292, 1297 (11th Cir. 2003). Beane’s

position is without merit.

First, Beane admits that, during the negotiation of the Partial Agreement, the

IRS agent gave him only an “estimate” of the interest on the 1998 deficiency. The

government thus did not engage in conduct that induces reliance. Second, Beane

has not shown that the government acted negligently. Instead, the IRS agent

warned Beane that he was “not a specialist in the computation of interest” and

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provided his “opinion only,” which “should not be construed as the final

determination of the matter.” Because the IRS agent warned Beane of the

possibility of an error, Beane could not reasonably rely on the IRS agent’s

estimations.

Third, Beane cites no evidence in the record supporting the supposition that

he “relied on the beginning balance-interest accrual information provided by IRS

in deciding to enter into the proposed Partial Agreement.” Instead, a letter from

Beane’s attorney indicates that he understood partial agreements are entered into

where the taxpayer agrees with some, but not all, of the issues. Because Beane

cannot show actual reliance, he cannot fulfill the third element of equitable

estoppel.

Fourth, there is no evidence of affirmative misconduct by the government.

Instead, the parties agree that the IRS willingly reduced Beane’s 1998 tax

deficiency from the amount determined by the Tax Court because of errors in the

computations. If anything, this shows positive conduct by the government. By

appealing, the government has not engaged in misconduct either. Instead, it has

appealed a serious and difficult question of law. See McCorkle, 321 F.3d at 1297

(“Affirmative misconduct requires more than governmental negligence or inaction;

otherwise, prong two and prong four would be redundant.”).

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Fifth, the Partial Agreement, by its own terms, only dealt with the tax and

penalties for the years 1999 and 2000. Form 886-A, “Explanation of Items,”

attached to the Partial Agreement, makes it clear that the “partial agreement relates

only to the calculation of the minimum tax refund due taxpayer for the years 1999

and 2000. The taxpayer disputes . . . application of the net operating loss for the

year 2000 as originally used in the Rule 155 computation for the 1998 tax year.”

This document makes it clear that the IRS and Beane did not come to an agreement

about the interest calculation for the 1998 tax deficiency. 15

For all of these reasons, we conclude the government’s claim of interest is

not barred by equitable estoppel.

I. Judicial Estoppel

Beane argues that judicial estoppel prevents the government, through the

Department of Justice, from taking a contrary position on this appeal from one

taken by the IRS in front of the Tax Court, namely whether to use the net operating

loss to determine Beane’s 1998 tax deficiency. Beane’s position is without merit.

Under the equitable doctrine of judicial estoppel, “a party is precluded from

‘asserting a claim in a legal proceeding that is inconsistent with a claim taken by

that party in a previous proceeding.’” Burnes v. Pemco Aeroplex, Inc., 291 F.3d

15
Additionally, “it is far from clear that the doctrine of equitable estoppel may even be applied
against a government agency.” Savoury v. U.S. Att’y Gen., 449 F.3d 1307, 1318 (11th Cir.
2006). We need not come to that conclusion here, however, as Beane has no case for the
application of equitable estoppel.
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1282, 1285 (11th Cir. 2002) (quoting 18 JAMES WM. MOORE ET AL., MOORE’S

FEDERAL PRACTICE § 134.30 (3d ed. 2000)). In this case, the government did not

take any contradictory or inconsistent positions.

Beane points to no place in the record where the IRS took a position in the

Tax Court proceedings on how to calculate the interest on Beane’s 1998

underpayment that contradicts the IRS’s later application of those rules or its

position before the Bankruptcy Court. The IRS did concede that Beane’s

deficiency for that year should be reduced by the carryback of the 2000 net

operating loss. The IRS, however, took no position on how it would calculate the

relevant interest. We need not go any further. Beane conflates two separate but

closely related issues on which the IRS took a position. Those positions—on how

to calculate the deficiency and how to calculate the interest—are not contradictory.

Accordingly, judicial estoppel does not apply.

J. Assessment of the Interest

Beane argues that the IRS “never assessed any deficiency interest against

Beane in excess of that which had accrued on the [Tax Court-determined

deficiency amount].”

As an initial matter, it appears that Beane did not raise this issue below and

has thus waived it. “It is well-settled that we will generally refuse to consider

arguments raised for the first time on appeal.” Ramirez v. Sec’y, U.S. Dep’t of

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Transp., 686 F.3d 1239, 1249 (11th Cir. 2012). Because the question Beane now

raises is a factual one, the District Court did not have the opportunity to address it,

and, because no substantial miscarriage of justice would occur by doing so, we

exercise our discretion to not consider this issue. 16 In any event, Beane points to

no evidence in the record, other than the agent’s estimated calculations, showing

whether or not the IRS assessed interest on the deficiency. Additionally, it is more

than clear that Beane has been aware for a number of years of the IRS’s claim to

seek payment of this interest. Finally, Beane concedes in his conclusion that

whether the IRS ever assessed the interest on the deficiency, or may do so now, is

a factual issue best addressed by the Bankruptcy Court on remand. 17

III. CONCLUSION

The Tax Court never reached the issue of Beane’s interest owed on the 1998

tax deficiency. The Bankruptcy Court therefore erred in deferring to the Tax Court

16
The government also argues that it need not separately assess interest on an assessed tax
liability in order to collect on that interest. The government relies on non-binding district court
orders from other circuits for this proposition. See, e.g., United States v. Toyota of Visalia, 772
F. Supp. 481, 488 (E.D. Cal. 1991) (“There is no authority cited by Toyota or of which the court
is aware that requires the Internal Revenue Service to make a separate assessment of interest on
an assessed tax liability in order to collect that interest.”), aff’d sub nom. United States v. Toyota
of Visalia, Inc., 988 F.2d 126 (9th Cir. 1993) (unpublished). The district court in that case cited,
without explanation, § 6601, which provides: “Interest prescribed under this section on any tax
shall be paid upon notice and demand, and shall be assessed, collected, and paid in the same
manner as taxes.” 26 U.S.C. § 6601(e)(1). An “‘assessment,’ essentially a bookkeeping
notation, is made when the Secretary or his delegate establishes an account against the taxpayer
on the tax rolls.” Laing v. United States, 423 U.S. 161, 171 n.13, 96 S. Ct. 473, 479 n.13 (1976).
17
Because we do not rule in favor of Beane, we need not address his request for an order
directing the government to pay Beane statutory interest accruing on the money currently being
held in escrow by his counsel.
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for its calculation of the interest on Beane’s underpayment for 1998. Accordingly,

we reverse the decision of the District Court, which affirmed the Bankruptcy

Court, and remand for further proceedings consistent with this opinion.

REVERSED AND REMANDED.

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