Stephen C. Loadholt Trust v. Commissioner

T.C. Memo. 2000-349

UNITED STATES TAX COURT

STEPHEN C. LOADHOLT TRUST, DEBRA M. LANCE TRUSTEE, ET AL.,1
Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket Nos. 18158-99L, 18159-99L, Filed November 13, 2000.
18521-99L.

On their 1997 income tax returns, Ps reported zero tax
liability and claimed refunds resulting from claimed income
tax withholding credits. R paid Ps the claimed refunds but
later determined that the payments of refunds were in error,
as Ps had made no income tax payments for which the
withholding credits were claimed. After R made summary
assessments of the erroneous refunds, Ps requested due
process hearings. After R issued negative determination
letters, Ps filed petitions for judicial review of R’s
administrative determinations. R filed motions to dismiss
for lack of jurisdiction. Held, because the Court lacks
jurisdiction over the underlying tax liabilities that R is
attempting to collect, the Court lacks jurisdiction to
review the administrative determinations in dispute.

1
The following cases are consolidated herewith: Samuel
Lance, Jr. Trust, docket No. 18159-99L; and Debra M. Lance Trust,
docket No. 18521-99L.
 - 2 -

Debra M. Lance (trustee), for petitioner in docket No.

18158-99L.

Samuel Lance, Jr. (trustee), for petitioner in docket No.

18159-99L.

Debra M. Lance (trustee), for petitioner in docket No.

18521-99L.

J. Craig Young, for respondent.

MEMORANDUM OPINION

THORNTON, Judge: These cases are before the Court on

respondent’s motions to dismiss for lack of jurisdiction.2 As

discussed below, we shall grant respondent’s motions.

Unless otherwise indicated, section references are to the

Internal Revenue Code as amended.

Background

In these consolidated cases, trustees (the trustees) of

three purported trusts (the trusts) petitioned this Court for

redeterminations under section 6330(d). On their Forms 1041,

U.S. Income Tax Return for Estates and Trusts, for taxable year

1997, each of the trusts reported income tax liability of zero

and certain amounts of income tax withholding credits, thereby

2
The instant cases involve the same jurisdictional issue as
Boone Trust v. Commissioner, T.C. Memo. 2000-350, also decided
today.
 - 3 -

resulting in refund claims by each trust. Respondent paid the

claimed refunds.3 Subsequently, respondent determined that the

refunds had been erroneously paid because the trusts had not made

the income tax payments for which credits had been claimed.

Respondent summarily assessed the previously refunded amounts and

mailed notices of tax due with respect thereto.4 Respondent

subsequently filed notices of Federal tax liens in connection

with the assessments.

The trustees timely filed with the Internal Revenue Service

requests for collection due process hearings with regard to the

filings of the notices of Federal tax liens. By notices of

determination, respondent’s Appeals officer5 informed the

trustees that his office had reviewed the proposed collection

actions and had determined that they complied with the applicable

administrative procedures and legal requirements. Respondent’s

notices of determination stated that if the trustees wanted to

dispute the determinations in court, they should file a petition

with the Tax Court. The notices of determination further stated:

3
Respondent refunded $80,870, $76,426, and $27,605 with
respect to the trusts in docket Nos. 18158-99L, 18159-99L, and
18521-99L, respectively.
4
Each of the collection actions involved herein was
commenced after Jan. 19, 1999. See Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3401(d), 112 Stat. 685, 750 (secs. 6320 and 6330 are effective
with regard to collection actions commenced on or after Jan. 19,
1999).
5
The same Appeals officer reviewed each trustee’s case.
 - 4 -

“If the court determines that you made your petition to the wrong

court, you will have 30 days after such determination to file

with the correct court.”

The trustees timely filed petitions for redetermination with

this Court. Before these cases were consolidated, the trustees

filed identical motions to dismiss for lack of jurisdiction on

the ground that, because respondent failed to follow certain

administrative procedures (including conducting an audit with the

trustees’ participation, providing the trustees meetings with the

revenue agent and a supervisor, and issuing 30-day letters and

notices of deficiency), jurisdiction was never conferred upon the

Court. Respondent filed objections to the trustees’ motions in

each case.6 The Court denied the trustees’ motions to dismiss on

the ground asserted by the trustees.

Subsequently, respondent filed motions to dismiss for lack

of jurisdiction, arguing for the first time that the Tax Court

lacks jurisdiction because the tax liabilities in issue were

summarily assessed under the authority of section 6201(a)(3) and

“arose from a nonrebate erroneous refund which could not have

been assessed as a deficiency, or otherwise been subject to the

jurisdiction of this Court under an alternative to assessment

6
In his objections to the trustees’ motions to dismiss for
lack of jurisdiction, respondent argued, among other things, that
the Court had jurisdiction under sec. 6330 “because the taxes
respondent seeks to collect are income taxes, a tax over which
this Court generally has jurisdiction.”
 - 5 -

under section 6201(a)(3).”

On October 2, 2000, a hearing on respondent’s motions was

held at the Court’s trial session in Columbia, South Carolina.

Discussion

The trustees seek judicial review of administrative actions

instituted by respondent to recover what respondent alleges were

erroneous refunds paid to the trusts. As described below, the

administrative collection procedures instituted by respondent are

distinct from the deficiency procedures upon which this Court’s

jurisdiction is generally predicated.

Section 6201 authorizes and requires the Secretary “to make

the inquiries, determinations, and assessments of all taxes * * *

imposed” by the Internal Revenue Code. The assessment of tax,

which is ordinarily the first step in the collection process, is

accomplished by recording the taxpayer’s liability in the office

of the Secretary. See sec. 6203.

In certain circumstances, pursuant to the general authority

of section 6201, the Commissioner can summarily (immediately)

assess certain amounts, including overstatements on a return or a

claim for refund of the credit for income tax withholdings. See

sec. 6201(a)(3).

In other circumstances, the Commissioner cannot assess the

tax until he has followed deficiency proceedings. In particular,

if the Commissioner determines that there is a deficiency in the
 - 6 -

taxpayer’s reported liability with respect to income taxes,

estate and gift taxes, and certain specified excise taxes, he

generally cannot assess the tax until a statutorily prescribed

period of time (generally 90 days or, for taxpayers outside the

country, 150 days) after he has issued the taxpayer a notice of

deficiency. See sec. 6213(a). During this time, the taxpayer

may file a petition in the Tax Court, and the Commissioner

generally may not assess or collect the tax until the Tax Court’s

decision has become final. See id.

Once the Commissioner has assessed the tax, he may institute

administrative collection action. Section 6321 provides that if

any person liable to pay any tax neglects or refuses to pay the

same after notice and demand, the amount shall be a lien in favor

of the United States upon all property and rights to property,

whether real or personal, belonging to that person. Section 6323

generally requires the Commissioner to file a notice of Federal

tax lien with the appropriate State office or the local Federal

District Court.

Section 6331(a) provides that if any person liable to pay

any tax neglects or refuses to pay such tax within 10 days after

notice and demand for payment, the Secretary is authorized to

collect such tax by levy upon property belonging to the taxpayer.

Under section 6331(d) the Secretary must provide the taxpayer
 - 7 -

with notice, including notice of the administrative appeals

available to the taxpayer, before proceeding with collection by

levy on the taxpayer’s property.

As enacted in the Internal Revenue Service Restructuring and

Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3401, 112

Stat. 685, 746, sections 6320 (pertaining to liens) and 6330

(pertaining to levies) provide protections for taxpayers in tax

collection matters. Sections 6320 and 6330 are effective with

regard to collection actions commenced on or after January 19,

1999. See RRA 1998 sec. 3401(d), 112 Stat. 750.

Section 6320(a)(1) requires the Commissioner to provide

notice to a person described in section 6321 of the filing of a

notice of lien under section 6323. Section 6320(a)(3) and (b)

provides that the person described in section 6321 is entitled to

notice of and the opportunity for an administrative review of the

lien in the form of an Appeals Office hearing. Section 6330

provides for a similar hearing where the Commissioner has

proposed to levy on the taxpayer’s property. Section 6320(c)

adopts the procedures set forth in section 6330(c), (d), and (e)

governing the issues that may be raised in a hearing and the

means for obtaining judicial review of the matter. See Goza v.

Commissioner, 114 T.C. 176 (2000).
 - 8 -

Section 6330(d) provides for judicial review of an

administrative determination regarding a collection matter as

follows:

SEC. 6330(d). Proceeding After Hearing.--

(1) Judicial review of determination.--The person may,
within 30 days of a determination under this section, appeal
such determination–-

(A) to the Tax Court (and the Tax Court shall have
jurisdiction to hear such matter); or

(B) if the Tax Court does not have jurisdiction of
the underlying tax liability, to a district court of
the United States.

If a court determines that the appeal was to an incorrect
court, a person shall have 30 days after the court
determination to file such appeal with the correct court.

Interpreting these statutory provisions, we stated in Moore v.

Commissioner, 114 T.C. 171, 175 (2000):

While Congress clearly intended for section 6330 to provide
an opportunity for judicial review of collection matters, we
interpret section 6330(d)(1)(A) and (B) together to mean
that Congress did not intend to expand the [Tax] Court’s
jurisdiction beyond the types of taxes that the Court may
normally consider. Thus, section 6330(d)(1)(A) and (B)
provides for Tax Court jurisdiction except where the Court
does not normally have jurisdiction over the underlying
liability. [Emphasis added.]

See also Van Es v. Commissioner, 115 T.C. ____ (2000).

This Court is a court of limited jurisdiction, having only

such jurisdiction as provided by Congress. See sec. 7442; see

also Estate of Meyer v. Commissioner, 84 T.C. 560, 562 (1985);

Adams v. Commissioner, 72 T.C. 81, 84 (1979), affd. without

published opinion 688 F.2d 815 (2d Cir. 1982). With exceptions
 - 9 -

not germane here, this Court’s jurisdiction is generally limited

to redetermining deficiencies in income taxes, estate and gift

taxes, and certain specified excise taxes that are subject to the

deficiency procedures outlined above. See secs. 6214, 7442; see

also Estate of Meyer v. Commissioner, supra at 562; Judd v.

Commissioner, 74 T.C. 651, 653 (1980).

In the instant cases, respondent is attempting to collect

alleged erroneous refunds resulting from the trusts’ alleged

overstatements of income taxes withheld. The assessments at

issue were not subject to the deficiency procedures but instead

were subject to the summary assessment procedures of section

6201(a)(3). Under those procedures, overstatements of withheld

income taxes are generally treated in the same manner as

mathematical or clerical errors appearing on the return, except

that in the case of an assessment of an overstated credit for

withholding, the taxpayer has no right to request an abatement.

See secs. 6201(a)(3), 6213(b)(1) and (2). Therefore, summary

assessments with respect to overstatements of withheld taxes

provide the taxpayer no right to petition the Tax Court to

contest the liability. See sec. 6213(b)(1).7

7
Sec. 6213(b)(1) provides:

If the taxpayer is notified that, on account of a
mathematical or clerical error appearing on the
return, an amount of tax in excess of that shown
on the return is due, and that an assessment of
(continued...)
 - 10 -

In sum, because we have no jurisdiction over the “underlying

tax liability” within the meaning of section 6330(d)(1)(B), we

have no jurisdiction over the instant petitions for

redetermination, and we must grant respondent’s motions to

dismiss.

Although the trustees cannot pursue their cases in this

Court, they are not without a remedy. The trustees may seek

judicial review in the appropriate District Court of the United

States. See sec. 6330(d)(1)(B).

To reflect the foregoing,

Appropriate orders of

dismissal will be entered.

7
(...continued)
the tax has been or will be made on the basis of
what would have been the correct amount of tax but
for the mathematical or clerical error, such
notice shall not be considered as a notice of
deficiency * * * and the taxpayer shall have no
right to file a petition with the Tax Court based
on such notice, nor shall such assessment or
collection be prohibited by the provisions of
subsection (a) of this section. [Emphasis added.]

As noted above, if the taxpayer so requests, a summary
assessment relating to a mathematical or clerical error must be
abated, and any reassessment must be made subject to the
deficiency procedures. See sec. 6213(b)(2). Such abatement and
reassessment procedures do not apply, however, to assessments of
erroneous income tax prepayment credits. See sec. 6201(a)(3).