T.C. Memo. 2000-196
UNITED STATES TAX COURT
MARJORIE CATHEY MILLER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9164-99. Filed June 29, 2000.
Charles H Hammer, for petitioner.
Gregory M. Hahn, for respondent.
MEMORANDUM OPINION
COHEN, Judge: On November 12, 1998, respondent issued a
notice of final determination denying petitioner’s claim for
abatement of interest. Petitioner filed a petition under section
6404(i) and Rule 280. The case is before the Court on
respondent’s motion for summary judgment. The issue for decision
is whether respondent has the authority to abate interest on
employment taxes under section 6404(e)(1)(A). Unless otherwise
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indicated, all section references are to the Internal Revenue
Code in effect for the years in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
Background
At the time the petition in this case was filed, petitioner
resided in Deer Park, Washington. During 1984, 1985, and 1986
(the taxable years in issue), Marjorie Cathey Miller (petitioner)
operated a beauty salon known as “About Face” and employed
several individuals. Petitioner treated these individuals as
independent contractors for tax purposes and did not file
employment tax returns (Form 940, Employer’s Annual Federal
Unemployment Tax Return, and Form 941, Employee’s Quarterly
Federal Tax Return) or issue Forms W-2 for the taxable years in
issue. In 1987, respondent initiated a tax examination of
petitioner’s 1984, 1985, and 1986 business activities and, at the
conclusion of this examination in August 1987, concluded that
petitioner should have treated the individuals as employees
rather than as independent contractors.
On August 25, 1987, respondent prepared Form 4666, Summary
of Employment Tax Examination, indicating that the following
employment taxes and penalties were owed by petitioner:
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Sec. 6651/
Year Form Tax 6656 Penalty Total
1984 940 $ 520.07 $ 182.03 $ 702.10
1984 941 7,184.81 2,491.75 9,676.56
1985 940 904.50 316.58 1,221.08
1985 941 6,681.35 2,322.55 9,003.90
1986 940 911.12 318.89 1,230.01
1986 941 7,301.22 2,536.56 9,837.78
Total $23,503.07 $8,168.36 $31,671.43
On December 12, 1988, petitioner signed two Forms 2504,
Agreement to Assessment and Colection of Additional Tax and
Acceptance of Overassessment–Excise or Employment Tax, agreeing
to the assessment and collection of the above tax liabilities.
The liabilities listed on the Forms 2504 totaled $31,671.43. On
December 16, 1988, petitioner submitted a check to respondent in
the amount of $31,671.43, and respondent applied this payment to
the employment taxes, penalties, and interest due from petitioner
for failure to file employment tax returns, leaving the following
amounts owed by petitioner:
Year Form Tax Penalty Total
1985 940 $ 904.50 $ 316.58 $ 1,221.08
1986 940 911.12 318.89 1,230.01
1986 941 5,066.46 1,879.01 6,945.47
1984-86 W-2 900.00 900.00
Total $6,882.08 $3,414.48 $10,296.56
In 1993, petitioner was contacted by respondent, who claimed
that petitioner had unpaid liabilities flowing from the 1987
examination. After extensive discussions with respondent,
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petitioner was informed that, to pursue the matter further, she
had to pay the balance due and submit a claim for refund on Form
843, Claim for Refund and Request for Abatement. On or about
May 16, 1994, petitioner submitted a check to respondent for
$21,706.47, paying the full amount of tax, penalty, and interest
owing on the unpaid employment tax liabilities.
On May 15, 1996, petitioner submitted eight separate Forms
843 seeking abatement of interest assessed on the employment tax
liabilities. On November 12, 1998, respondent mailed to
petitioner a final determination denying petitioner’s claim for
interest abatement. Petitioner filed a petition to contest
respondent’s determination not to abate interest under section
6404(e)(1) for the taxable years in issue, claiming that
respondent’s denial was an abuse of discretion.
Discussion
Respondent argues that there was no abuse of discretion
under section 6404(e) because respondent is not authorized under
section 6404(e)(1) to abate interest assessed with respect to
employment taxes. Respondent relies on our holding in Woodral v.
Commissioner, 112 T.C. 19 (1999). Petitioner argues that Woodral
was incorrectly decided, that respondent has the authority to
abate interest on employment taxes, and that respondent’s failure
to abate the interest in this case under section 6404(e)(1) was
an abuse of discretion.
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Under Rule 121, a summary adjudication may be made “if the
pleadings, answers to interrogatories, depositions, admissions,
and any other acceptable materials, together with the affidavits,
if any, show that there is no genuine issue as to any material
fact and that a decision may be rendered as a matter of law.”
Rule 121(b). No material facts are in dispute in this case;
thus, whether respondent has authority to abate interest on
employment taxes may be decided as a matter of law.
Section 6404(e)(1) provides in pertinent part:
(1) In general.--In the case of any assessment of
interest on--
(A) any deficiency attributable in whole
or in part to any unreasonable error or delay
by an officer or employee of the Internal
Revenue Service (acting in his official
capacity) in performing a ministerial or
managerial act, or
(B) any payment of any tax described in
section 6212(a) to the extent that any
unreasonable error or delay in such payment
is attributable to such officer or employee
being erroneous or dilatory in performing a
ministerial or managerial act,
the Secretary may abate the assessment of all or any
part of such interest for any period. * * *
In Woodral v. Commissioner, supra, this Court held that
respondent is authorized under section 6404(e) to abate interest
only on any “deficiency” or payment of tax relating to income,
estate, gift, generation skipping, or certain excise taxes. See
id. at 25. This Court stated:
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Based on our review of section 6404(e) and the
Code sections it references, we hold that the
Commissioner lacks the authority to abate assessments
of interest on employment taxes under section 6404(e).
As the Commissioner has no authority to abate
assessments of interest on employment taxes under
section 6404(e), the Commissioner could not have
committed an abuse of discretion--a person with no
discretion simply cannot abuse it. [Id.]
Petitioner does not distinguish this case from Woodral. Rather,
she asks us to overrule a recent decision of this Court. We
decline to do so.
Petitioner contends that Woodral “intermingled and combined
the wording of Subsection (A) and (B)” and “tampered with the
clear and unambiguous language” of section 6404(e)(1)(A) in
contravention of Exxon v. Commissioner, 102 T.C. 721 (1994).
“Courts are forbidden to tamper with the plain meaning of the
words employed unless they are clearly ambiguous or nonsensical.”
Id. at 727. Petitioner also argues that section 6404 was enacted
to provide taxpayer relief and that there is absolutely no reason
to believe that Congress intended to limit section 6404(e)(1)(A)
as set forth in Woodral.
As we stated in Woodral, if a statute is clear, we focus on
the language of the statute in determining congressional intent.
Particular phrases are construed in consideration of the overall
statutory scheme. See Woodral v. Commissioner, supra at 22.
“Deficiency” is a term of art, and, according to section 6211,
deficiency does not deal with the realm of employment taxes.
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Thus, we must conclude that, in using the term “deficiency” in
section 6404(e)(1)(A), Congress intended only that respondent
have authority to abate interest with respect to income, estate,
gift, generation skipping, and certain excise taxes and not with
respect to employment taxes. See sec. 6211.
In this case, petitioner seeks to have interest relating to
employment tax liabilities abated under section 6404(e).
Following the precedent established in Woodral v. Commissioner,
supra, we conclude that respondent did not commit an abuse of
discretion in this case by denying petitioner’s claim for
abatement because respondent does not have the authority under
section 6404(e) to abate interest on employment taxes. See
Woodral v. Commissioner, supra at 25.
To reflect the foregoing,
Respondent’s motion will
be granted, and decision will
be entered for respondent.