T.C. Memo. 2000-61
UNITED STATES TAX COURT
EDGAR & DORIS BROWN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8538-98. Filed February 28, 2000.
Edgar Brown and Doris Brown, pro sese.
Charles Pillitteri, for respondent.
MEMORANDUM OPINION
THORNTON, Judge: Respondent issued a final determination
denying petitioners’ claim for abatement of interest pursuant to
section 6404(e).1 Petitioners timely filed a petition pursuant
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended, and all Rule references are
to the Tax Court Rules of Practice and Procedure.
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to section 6404(g) and Rule 280.2 The sole issue for decision is
whether respondent’s denial of petitioners’ request to abate
interest was an abuse of discretion.
Background
The parties have stipulated some of the facts, which are
incorporated in our findings by this reference. When they
petitioned this Court, petitioners resided in Lucedale,
Mississippi.
Petitioners timely filed joint Federal income tax returns
for taxable years 1989 and 1990. On June 6, 1991, respondent’s
examining agent mailed petitioners a letter informing them that
their 1989 return had been selected for examination. During the
examination, the examining agent solicited petitioners’ consent
to extend the period of limitations to assess tax with respect to
taxable year 1989, and they agreed.
On November 18, 1992, respondent mailed petitioners a 30-day
letter, proposing deficiencies of $14,088 and $14,417, and
accuracy-related penalties of $2,818 and $2,883, for taxable
years 1989 and 1990, respectively. On December 10, 1992,
petitioners responded by filing a protest, requesting
consideration of their case by respondent’s Appeals Office. By
2
Sec. 6404(g) was redesignated sec. 6404(i) by the Internal
Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-
206, secs. 3305(a), 3309(a), 112 Stat. 743, 745, with respect to
taxable years beginning after Dec. 31, 1997.
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letter dated January 20, 1993, respondent advised petitioners
that their case was being forwarded to respondent’s Appeals
Office for consideration.
On February 22, 1993, petitioners’ case was received in the
Birmingham, Alabama, Appeals Office and assigned to Appeals
officer Dennis Smith, who worked out of respondent’s Jackson,
Mississippi, suboffice. Shortly thereafter, Smith mailed
petitioners two letters advising them that the case had been
referred to the Appeals Office and requesting they schedule an
appointment. On April 21, 1993, Smith met with petitioner wife
as scheduled. On November 12, 1993, Smith mailed petitioners a
letter asking their consent to extend indefinitely the period of
limitations to assess tax with respect to both taxable years 1989
and 1990. On November 20, 1993, petitioners executed a Form 872-
A, Special Consent to Extend the Time to Assess Tax. On
November 30, 1993, Smith mailed petitioners a letter transmitting
a copy of the executed Form 872-A.
On June 23, 1994, after attempting unsuccessfully to settle
the case, respondent mailed petitioners a notice of deficiency
from the Birmingham Appeals Office. In the notice, respondent
determined that petitioners were liable for deficiencies of
$14,088 and $16,610, and accuracy-related penalties of $2,818 and
$3,322, for taxable years 1989 and 1990, respectively. The
notice was sent by certified mail to petitioners’ last known
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address. Petitioners, however, never actually received the
notice. On August 1, 1994, the notice of deficiency was returned
to the Birmingham Appeals Office. The envelope containing the
notice had been stamped with a notation indicating that it was
returned to sender because it was “unclaimed”.
The 90-day period for filing a Tax Court petition with
respect to petitioners’ notice of deficiency expired on
September 21, 1994, without petitioners’ having filed a Tax Court
petition. On November 2, 1994, the deficiencies and accuracy-
related penalties determined by respondent, as well as interest
accrued thereon, were assessed. Also on November 2, 1994,
respondent mailed petitioners a separate Notice of Tax Due on
Federal Tax Return for each of the taxable years 1989 and 1990.
On November 10, 1994, respondent’s Memphis Service Center
received from petitioners copies of these notices, each bearing
petitioner husband’s handwritten notation, “I don’t agree with
this finding and am appealing it to tax court.”
Respondent’s Memphis Service Center mailed petitioners
subsequent notices, culminating in the issuance of notices of
intent to levy dated May 8, 1995. By letter dated May 10, 1995,
petitioners responded that they were still seeking to appeal
their case, but had learned that it would be necessary to file a
court petition.
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On May 29, 1997, respondent received $11,622 pursuant to a
notice of levy on petitioners’ bank account. This amount was
applied to petitioners’ balance due for taxable year 1989. On
June 3, 1997, petitioners paid in full the balances due for
taxable years 1989 and 1990, including interest of $14,687 for
1989 and $13,483 for 1990.
On June 21, 1997, petitioners filed Form 843, Claim for
Refund and Request for Abatement, for taxable years 1989 and
1990. Petitioners requested abatement of interest in the amounts
of $10,038 for taxable year 1989 and $11,039 for taxable year
1990. On July 7, 1997, petitioners also filed Forms 843
requesting refunds approximating the total tax, penalties, and
interest assessed for taxable years 1989 and 1990.
On April 13, 1998, respondent issued a notice of final
determination disallowing petitioners’ June 21, 1997, claim for
abatement of interest. On August 26, 1998, respondent issued a
notice disallowing petitioners’ July 7, 1997, claims for refunds.
Discussion
In seeking abatement of respondent’s assessment of interest,
petitioners have alleged that respondent erred in the
determination, assessment, and collection of their Federal income
taxes, and that they were improperly denied their right to
petition this Court to review respondent’s deficiency
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determination because they never received their statutory notice
of deficiency.
We construe petitioners’ claim for interest abatement as
arising under section 6404(e)(1), which authorizes the Treasury
Secretary to abate interest on any deficiency or payment of
income, gift, estate, and certain excise taxes to the extent that
any error or delay in payment is attributable to any error or
delay by an officer or employee of the Internal Revenue Service
acting in his or her official capacity and performing a
ministerial act. Such an error or delay in performing a
ministerial act is taken into account only if it is in no
significant aspect attributable to the taxpayer and only if it
occurs after the IRS has contacted the taxpayer in writing
regarding the deficiency or payment.3
3
Sec. 6404(e) provides:
Abatement 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 error
or delay in such payment is attributable to
such officer or employee being erroneous or
(continued...)
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The temporary regulations define “ministerial act” as:
a procedural or mechanical act that does not involve
the exercise of judgment or discretion, and that occurs
during the processing of a taxpayer’s case after all
prerequisites to the act, such as conferences and
review by supervisors, have taken place.* * * [Sec.
301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., 52
Fed. Reg. 30163 (Aug. 13, 1987).]
Section 6404(e) is not intended to be “used routinely to
avoid payment of interest”, but rather is to be “utilized in
instances where failure to abate interest would be widely
perceived as grossly unfair.” H. Rept. 99-426 (1985), 1986-3
C.B. (Vol. 2) 844; S. Rept. 99-313 (1985), 1986-3 C.B. (Vol. 3)
208.
For interest abatement claims made after July 30, 1996, the
Tax Court has jurisdiction to determine whether the
3
(...continued)
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.
In 1996, sec. 6404(e) was amended to permit abatement of
interest for “unreasonable” error or delay resulting from the
performance of ministerial or “managerial” acts. Taxpayer Bill
of Rights 2, Pub. L. 104-168, sec. 301(a)(1) and (2), 110 Stat.
1452, 1457 (1996). The amended provision applies to tax years
beginning after July 30, 1996. See id., sec. 301(c). Therefore,
the amendment is inapplicable to the instant case.
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Commissioner’s failure to abate interest under section 6404 was
an abuse of discretion. See sec. 6404(g)(1); Woodral v.
Commissioner, 112 T.C. 19, 23 (1999). Section 6404 does not
authorize the Treasury Secretary to abate assessments of taxes
and does not confer jurisdiction on this Court to review the
denial of such requests.
Petitioners cannot point to, nor does the record credibly
suggest, any 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 has accrued on petitioners’ outstanding tax liabilities.
Cf. Douponce v. Commissioner, T.C. Memo. 1999-398.
Petitioners argue generally that respondent’s agent
improperly performed the examination of their tax returns, that
respondent’s determinations in the statutory notice were
improper, and that the Appeals officer gave inadequate
consideration to their protest. The actions of respondent’s
agent and Appeals officer in applying Federal tax law to
petitioners’ facts and circumstances required the exercise of
discretion and judgment. A decision concerning the proper
application of Federal tax law is not a ministerial act, see
sec. 301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 310163 (Aug. 13, 1987), and hence cannot provide a basis for
abating interest under section 6404(e).
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Petitioners also suggest that respondent’s error or delay
caused them not to receive their notice of deficiency and thus to
be denied their right to petition this Court regarding
respondent’s determination of their tax liability. We do not
believe, however, that the interest which petitioners seek to
have abated was attributable to ministerial errors or delays in
respondent’s processing their unclaimed statutory notice. It is
undisputed that the notice of deficiency was mailed to
petitioners’ last known address. Respondent was under no
statutory obligation to remail a notice of deficiency that had
been properly mailed to a taxpayer and returned unclaimed. See
King v. Commissioner, 857 F.2d 676, 681 (9th Cir. 1988), affg. 88
T.C. 1042 (1987); Monge v. Commissioner, 93 T.C. 22, 33 (1989).
As in effect when the notice of deficiency was issued in
this case, the Internal Revenue Manual directs that an unclaimed
notice of deficiency should be returned to the Appeals officer
and states that “if the appeals officer wishes” and there is
enough time remaining before the period of limitations runs, the
Appeals officer may direct additional checks of respondent’s
computer files to verify the taxpayer’s last known address.
8 Appeals, Internal Revenue Manual (CCH), sec. 363(2), at
8114-20. The Internal Revenue Manual states:
If, after checking all possible sources, another address
cannot be found, and the appeals officer determines that
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the notice was sent to the last known address, he/she
should initial the statutory notice and no further action
need be taken to try to deliver the notice. [Id.]
Because further action with regard to the unclaimed
statutory notice was left to the Appeals officer’s discretion and
judgment, his inaction in this regard did not constitute error or
delay in performing a ministerial act for purposes of applying
section 6404(e).
Petitioners further suggest that after their taxes were
assessed by default on November 2, 1994, they were led to believe
that the notice of deficiency would be forthcoming or reissued,
at which time they could contest the deficiency in the Tax Court,
or that respondent intended to take other action in response to
their protest. Again, however, the record does not credibly
suggest any basis for concluding that petitioners’ delay in
paying the assessed taxes after receiving the notice of tax due
on November 2, 1994, was attributable to ministerial errors or
delays by respondent’s officers or employees.
Accordingly, we conclude that respondent’s failure to abate
petitioners’ interest under section 6404 was not an abuse of
discretion.
To reflect the foregoing,
Decision will be entered
for respondent.