T.C. Memo. 1999-398
UNITED STATES TAX COURT
JOHN DOUPONCE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3756-98. Filed December 7, 1999.
John Douponce, pro se.
Marilyn Devin, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
RUWE, Judge: On December 23, 1997, respondent issued a
final determination disallowing petitioner's claim to abate
interest. Petitioner timely filed a petition under section
6404(g)1 and Rule 280. The issue for decision is whether
1
Sec. 6404(g) was redesignated as sec. 6404(i) by the
(continued...)
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respondent's denial of petitioner's request to abate interest was
an abuse of discretion.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation and attached exhibits are incorporated herein by
this reference. Petitioner resided in Los Angeles, California,
when the petition was filed. Petitioner filed delinquent Federal
income tax returns for 1988 and 1990 on or about August 25, 1993.
Petitioner filed a delinquent Federal income tax return for 1991
on or about August 2, 1994. The amounts of tax shown on the
returns, tax withheld, and interest and penalties assessed for
these years are as follows:
Credit for Late Filing Late Payment
Tax Reported Tax Penalty Penalty Interest
Year & Assessed Withheld Assessed Assessed Assessed
1988 $11,750 $8,313 $773.33 $859.25 $2,252.08
1990 13,105 11,776 299.03 199.35 369.03
1991 6,205 4,687 341.55 220.11 356.14
From May 1994 to September 1995, petitioner made monthly payments
of $500, all of which were applied to his 1988 liabilities. In
April 1995, a credit (from petitioner's 1994 taxable year) of
1
(...continued)
Internal Revenue Service Restructuring & Reform Act of 1998 (RRA
1998), Pub. L. 105-206, secs. 3305(a), 3309(a), 112 Stat. 685,
743, 745. Unless otherwise indicated, section references are to
the Internal Revenue Code of 1986, as amended. Rule references
are to the Tax Court Rules of Practice and Procedure.
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$995 was applied to his account for 1988. On March 18, 1996, a
credit (from petitioner's 1995 taxable year) of $809 was
similarly applied to 1988. When the March 18, 1996, payment was
applied, petitioner's entire liability for tax and penalties for
1988 was extinguished. The sum of $252.63, the balance after
satisfying the tax and penalty liability, was applied to interest
that had accrued for 1988. In March 1996, petitioner submitted
an Offer in Compromise with respect to the balances owed for
1988, 1990, and 1991. On May 9, 1996, after additional exchanges
of correspondence between petitioner and respondent, petitioner's
Offer in Compromise was rejected on the ground that there was no
doubt as to liability. Also on or about May 9, 1996, petitioner
telephoned respondent's Glendale, California, office to ascertain
the balance then outstanding on his accounts for 1988, 1990, and
1991. An employee of respondent told petitioner that the
following amounts had been assessed and remained outstanding:
1988--nothing; 1990--$2,196; and for 1991--$2,492. Respondent’s
employee also told petitioner to add $100 to each of these
amounts. Petitioner understood these amounts to be the full
amounts of his liabilities for these years, including all tax
due, penalties and interest. On May 30, 1996, petitioner paid
respondent the amounts of $2,296 for 1990 and $2,592 for 1991.
These payments were credited to petitioner’s 1990 and 1991
accounts on May 30, 1996. On June 24, 1996, respondent assessed
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a $100 failure to pay penalty for 1990 and 1991. At that point
all assessments for 1988, 1990, and 1991 had been paid, however,
some additional interest for each of the years 1988, 1990, and
1991 had not been assessed. On November 4, 1996, respondent
issued a Notice of Intent to Levy with respect to unpaid interest
in the following amounts:
Year: 1988 1990 1991
Amount: $676 $600 $491
Petitioner paid without delay. Petitioner sought a refund of the
interest and his claim was denied. Petitioner appealed and on
March 13, 1997, respondent abated part of the $100 late payment
penalties which petitioner had added to his May 1996 payments.
Insofar as petitioner's dispute constituted a claim for refund of
interest, respondent determined that petitioner was not entitled
to relief pursuant to section 6404(e) and mailed petitioner a
Notice of Disallowance.
OPINION
Petitioner argues that respondent abused his discretion in
not abating the interest that accrued on petitioner’s 1988, 1990,
and 1991 liabilities. Petitioner argues he was provided with
amounts of his total liability for tax, penalties, and interest
in a telephone conversation with an employee of respondent on May
9, 1996. Petitioner contends these amounts when paid should have
satisfied his liability for interest.
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Under section 6404(e)(1)2, the Commissioner may abate part
or all of an assessment of interest on any deficiency or payment
of income tax to the extent that any error or delay in payment is
attributable to erroneous or dilatory performance of a
ministerial act by an officer or employee of the Commissioner.
For abatement to be appropriate, the taxpayer must not have
contributed significantly to the error or delay. Congress
intended for the Commissioner to abate interest under section
2
Sec. 6404(e)(1), as enacted in 1986 and as applicable here,
provides:
(e) Assessments of Interest Attributable to Errors
and Delays by Internal Revenue Service.--
(1) In general.--In the case of any
assessment of interest on–
(A) any deficiency attributable in whole
or in part to any error or delay by an
officer or employee of the Internal Revenue
Service (acting in his official capacity) in
performing a ministerial act, or
(B) any payment of any tax described in
section 6212(a) to the extent that any delay
in such payment is attributable to such
officer or employee being dilatory in
performing a ministerial act,
the Secretary may abate the assessment of all or
any part of such interest for any period. For
purposes of the preceding sentence, an error or
delay shall be taken into account only if no
significant aspect of such error or delay can be
attributed to the taxpayer involved, and after the
Internal Revenue Service has contacted the
taxpayer in writing with respect to such
deficiency or payment.
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6404(e) "where failure to abate interest would be widely
perceived as grossly unfair" but not that it "be used routinely
to avoid payment of interest". H. Rept. 99-426, at 844 (1985),
1986-3 C.B. (Vol. 2) 1, 844; S. Rept. 99-313, at 208 (1986),
1986-3 C.B. (Vol. 3) 1, 208.
Prior to contacting respondent to obtain "payout" amounts on
May 9, 1996, there was no erroneous or dilatory performance of a
ministerial act by an officer or employee of the Commissioner
that contributed to a delay or error in the payment of the
interest which had accrued on petitioner's outstanding tax
liabilities. Since there was no erroneous or dilatory
performance of a ministerial act, the Commissioner lacked
authority to abate interest. Under these circumstances, it can
hardly be an abuse of his discretion to refuse to abate interest
that accrued prior to May 9, 1996.
For the period from May 9 to May 30, 1996, when petitioner
made his payments of $2,296 and $2,592, any interest which
accrued was solely due to petitioner's failure to pay his
outstanding tax liabilities. Again in these circumstances there
was no erroneous or dilatory performance of a ministerial act and
the Commissioner lacked authority to abate interest.
For the period from May 30 to November 4, 1996 (when
respondent finally notified petitioner of additional interest by
issuing a Notice of Intent to Levy), the facts dictate a
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different outcome. The Commissioner's refusal to abate the
interest on interest after all of petitioner's liability for tax
and penalties had been satisfied is an abuse of discretion.
Petitioner asked an employee of respondent what the "total amount
due" was for 1988, 1990, and 1991. Respondent’s employee told
petitioner the total amount due, and petitioner promptly paid
those amounts. However, the employee did not include all of the
accrued but unassessed interest in the amounts given to
petitioner. Petitioner promptly discharged his liability for
interest when he was notified of it on November 4, 1996. It is
reasonable to assume the only reason for the delay of in excess
of 5 months was caused by respondent's failure to tell petitioner
the correct amounts due when petitioner requested that
information on May 9, 1996. Respondent acknowledges on brief
"that, under some circumstances, giving an incorrect payout
figure may constitute a ministerial act and respondent may abate
interest attributable to that act." In the circumstances of this
case, the Commissioner should have abated the interest on unpaid
interest that accrued for the period from May 30 to the date on
which petitioner made full payment. Respondent’s failure to do
so was an abuse of discretion.
Decision will be entered
pursuant to the foregoing.
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