T.C. Memo. 2002-1
UNITED STATES TAX COURT
MEDA SMITH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16484-99. Filed January 2, 2002.
Neil Deininger, for petitioner.
Ann L. Darnold and Michael J. O’Brien, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
THORNTON, Judge: On April 28, 1999, respondent issued a
notice of final determination denying petitioner’s claim for
abatement of interest. Petitioner timely filed a petition
pursuant to section 6404(i) and Rule 280.1 The issue for
1
Unless otherwise stated, 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.
- 2 -
decision is whether respondent abused his discretion in denying
petitioner’s request for abatement of interest.
FINDINGS OF FACT
The parties have stipulated some of the facts, which we
incorporate in our findings by this reference. When she filed
her petition, petitioner resided in Greenfield, California.
After their marriage in 1965, petitioner and her then-
husband, Frank Smith (Frank), owned and operated a farm in
Arkansas. In 1988, their farm was in financial straits, and
petitioner went to work in a laundry. In February 1990,
petitioner separated from Frank and moved to Greenfield,
California, where she worked as a live-in caregiver for the
elderly. Sometime in 1991 or 1992, petitioner and Frank
divorced.
1988 Tax Return
Petitioner and Frank filed a joint Federal income tax return
for 1988. On the return, they reported $59,925 of farm income
and $10,463 of wage income paid to petitioner. The return shows
a tax liability of $18,662, with credit claimed for $1,089 of
Federal income taxes withheld from petitioner’s wages,
resulting in $17,573 of tax owed (the 1988 liability). No
payment was included with the return.
In July 1989, respondent contacted petitioner and Frank in
writing regarding the 1988 liability. In response, petitioner
- 3 -
wrote respondent a letter, dated July 21, 1989, and signed by
Frank, stating “we just don’t have the money to pay our taxes.
* * * We would like to make some kind of payment agreements.”
In August 1990 (after petitioner had moved to California),
respondent determined that Frank’s income was insufficient to
fund a payment arrangement.2 Respondent classified the 1988
liability as uncollectible.
Collection Action on the 1988 Liability
After 1988, petitioner filed her Federal income tax returns
using a Greenfield, California, address.3 On her 1989 return,
petitioner claimed a $335 refund. On her 1993 return, she
claimed a $1,083 refund.4 In each instance, respondent applied
the claimed refund to the unpaid 1988 liability. In each
instance, petitioner received notification from respondent,
shortly after filing her return, that the refund had been applied
2
The record is unclear as to whether respondent considered
petitioner’s wage income or other assets in denying the request
for a payment arrangement.
3
For 1989 and 1990, petitioner claimed a filing status of
married filing separately. For subsequent years, she claimed a
filing status of single.
4
On her Federal income tax returns for 1990, 1991, 1992,
and 1994, petitioner reported tax liabilities which she paid when
she filed the returns.
- 4 -
to the 1988 liability. In neither instance did the notification
state the outstanding balance of the 1988 liability.5
On her 1994 return, petitioner reported taxable wages of
$50,560. On the basis of this information, on May 29, 1995,
respondent determined that the 1988 liability should no longer be
classified as uncollectible. On August 7, 1995, respondent
assigned petitioner’s case to revenue officer Garrie Ollie
(Ollie) for collection action.
On April 5, 1996, Ollie issued to petitioner’s employer in
Salinas, California, a notice of levy on petitioner’s wages with
respect to the 1988 liability. The notice shows an unpaid
balance on the 1988 liability of $16,292, plus statutory
additions (late-payment penalties and interest) of $19,391, for a
total amount due of $35,683. Petitioner then contacted Ollie and
entered into an installment agreement to pay the 1988 liability.
In June 1996, petitioner began making monthly payments. On
January 22, 1997, petitioner made a lump-sum payment of $12,939
in satisfaction of the remaining balance on the 1988 liability.
5
The text within each notification describes the 1988
liability as being “under” Frank’s Social Security number. Each
notification, however, shows petitioner’s taxpayer identification
number (i.e., her Social Security number) at the top and bears
the caption “OVERPAID TAX APPLIED TO OTHER FEDERAL TAXES OWED ON
SECONDARY SOCIAL SECURITY NUMBER” (i.e., on petitioner’s Social
Security number).
- 5 -
Petitioner’s Requests for Abatement of Interest and Penalties
In March 1997, petitioner filed a Form 843, Claim for Refund
and Request for Abatement, requesting abatement of $4,232 of
late-payment penalties with respect to the 1988 liability. By
letter dated May 1, 1997, respondent denied her claim.
Petitioner made no appeal.
On October 11, 1998, petitioner’s representative (an
enrolled agent) sent respondent a letter informally requesting
abatement of interest and penalties with respect to the 1988
liability. Respondent disallowed petitioner’s claim for
abatement of interest and declined to reconsider his prior denial
of petitioner’s claim for abatement of penalties.
Petitioner appealed this determination to the Internal
Revenue Service (IRS) Office of Appeals (Appeals). On April 27,
1999, Appeals abated 75 percent of the late-payment penalties and
related interest, resulting in a refund to petitioner. On April
28, 1999, respondent issued a notice of final determination,
denying petitioner’s request for abatement of interest.
OPINION
Under section 6404(e)(1), the Commissioner may abate
interest on any deficiency or payment of income, gift, estate,
and certain excise taxes to the extent that the deficiency or any
error or delay in payment is attributable to erroneous or
dilatory performance of a ministerial act by an officer or
- 6 -
employee of the Commissioner.6 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
6
Sec. 6404(e) provides:
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 error or
delay in such payment is attributable to such
officer or employee being erroneous or 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 amendment applies to tax years
beginning after July 30, 1996. Id. sec. 301(c), 110 Stat. 1457.
Therefore, the amendment is inapplicable to the instant case. We
intend no inference that we would reach a different result in
this case if the amendment were applicable.
- 7 -
it occurs after the IRS has contacted the taxpayer in writing
regarding the deficiency or payment.
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, at 844 (1985),
1986-3 C.B. (Vol. 2) 1, 844; S. Rept. 99-313, at 208 (1985),
1986-3 C.B. (Vol. 3) 1, 208.
For interest abatement claims made after July 30, 1996, the
Tax Court has jurisdiction to determine whether the
Commissioner’s failure to abate interest under section 6404(e)
was an abuse of discretion. See sec. 6404(i)(1); Woodral v.
Commissioner, 112 T.C. 19, 23 (1999). Where the taxpayer has
already paid the interest that is the subject of the request for
abatement, this Court has jurisdiction to determine the amount of
any overpayment to be refunded or credited to the taxpayer. See
secs. 6404(i)(2)(B), 6512(b).
Petitioner contends that respondent failed to request
financial information from her and to take other steps prescribed
by the Internal Revenue Manual before classifying the 1988
liability as uncollectible, without notifying her of the unpaid
balance. On brief, petitioner contends that respondent’s failure
to take these steps “left her with the reasonable belief she
didn’t owe the tax”, and thus caused her to delay paying off the
- 8 -
1988 liability. Petitioner seeks abatement and refund of all
interest that accrued after August 1990, when respondent
classified the 1988 liability as uncollectible.
Because respondent has determined no deficiency, section
6404(e)(1)(A) is inapplicable. We construe petitioner’s claim as
arising under section 6404(e)(1)(B). To be entitled to relief
under that section, petitioner must show that her delay in paying
the 1988 liability was attributable to an IRS officer or employee
being erroneous or dilatory in performing a ministerial act, and
that no significant aspect of the delay can be attributed to her.
Petitioner has failed to do so.
Respondent’s determination that the 1988 liability should be
classified as uncollectible required the exercise of discretion
and judgment. Hence it was not a ministerial act, see sec.
301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed. Reg.
30163 (Aug. 13, 1987), and cannot provide the requisite basis for
abating interest under section 6404(e).
Moreover, even if we were to assume, for sake of argument,
that respondent’s officers or employees erroneously performed (or
failed to perform) one or more prescribed ministerial acts in
classifying the 1988 liability as uncollectible, as petitioner
alleges, petitioner has still failed to establish that any such
missteps were the cause of her delayed payment of the 1988
liability. To the contrary, the evidence shows that the delay in
- 9 -
payment resulted, quite simply, from petitioner’s failure to pay
the 1988 liability that she and Frank reported on their 1988
joint return or else to ensure that Frank was taking care of it.
The evidence does not suggest that petitioner’s failure to pay
the 1988 liability resulted from respondent’s classifying it as
uncollectible. Indeed, the evidence does not indicate when
petitioner might have first become aware that respondent had
classified the 1988 liability as uncollectible.
On brief, petitioner acknowledges that “there is no question
that Petitioner was aware of the [1988] tax liability at the time
the return was filed”. Similarly, petitioner acknowledges that
she “knew at the time she left her husband there was an
outstanding liability”. She states on brief that she “did not
lack the ability to pay the liability after she left her husband
in February, 1990”. Nevertheless, she claims that no significant
aspect of the delay in payment was attributable to her, because
respondent failed to send her additional notices of the balance
due. Although intrigued by the novelty of a complaint that the
IRS has failed to hound the taxpayer enough, we find therein no
basis to grant petitioner relief.
In July 1989, respondent sent petitioner and Frank a
notification of the 1988 liability they had reported on their
joint return. Respondent was under no obligation to send
additional notices. Whether respondent acted improvidently in
- 10 -
classifying the 1988 liability as uncollectible or in failing to
take more vigorous collection sooner is immaterial. This
conclusion is bolstered by the legislative history of section
6404, which states: “if a taxpayer files a return but does not
pay the taxes due, this provision would not permit abatement of
this interest regardless of how long the IRS took to contact the
taxpayer and request payment.” H. Rept. 99-426, supra at 844,
1986-3 C.B. (Vol. 2) at 844; S. Rept. 99-313, supra at 208, 1986-
3 C.B. (Vol. 3) at 208.
This is not a case where, after reporting a tax liability on
the return and failing to pay it, the taxpayer was misled by
incorrect information from respondent to make payment of less
than the full balance due. Cf. Douponce v. Commissioner, T.C.
Memo. 1999-398. Respondent did nothing that would have misled
petitioner into believing that the 1988 liability was less than
she and Frank reported on their 1988 joint return or that the
liability had been previously satisfied. As far as the evidence
shows, respondent never notified petitioner that the 1988
liability had been classified as uncollectible. In 1990,
respondent notified petitioner that her claimed 1989 refund was
being applied to the 1988 liability. In 1994, petitioner
received a similar notification shortly after claiming a refund
on her 1993 tax return. As far as the record reveals, in neither
instance did petitioner inquire of respondent why her claimed
- 11 -
refunds were being applied against the 1988 liability or what the
remaining balance was. We infer that petitioner either knew or
was content not to know the answers. Only after respondent
issued a wage levy to petitioner’s employer did petitioner act to
satisfy the 1988 liability.
With respect to respondent’s notifications that her 1989 and
1993 refunds were being applied to the 1988 liability, petitioner
argues that respondent’s failure to state the balances due, to
segregate her and Frank’s accounts, and to include her Social
Security number on the notifications constituted “malfeasance” by
respondent in performing his duty to collect taxes.7 Petitioner
concedes on brief, however, that any such failure “does not
legally justify the abatement of interest.” We agree.
On brief, petitioner suggests that the equities should lie
with her, claiming that she was the innocent victim of an abusive
marital situation that unfairly left her holding the bag for the
1988 liability. On reply brief, however, petitioner concedes
that she does not qualify for relief under section 6015. Given
that petitioner has conceded liability for the underlying tax, it
follows that interest properly accrued on that liability for the
7
In fact, as previously noted, petitioner’s Social Security
number did appear on the notices, which expressly refer to
Federal taxes owed on the “secondary social security number”
(i.e., petitioner’s). In any event, respondent’s application of
her 1989 and 1993 refunds to the 1988 liability should have
alerted petitioner that respondent believed she remained liable
on the 1988 liability.
- 12 -
period it remained unpaid. See sec. 6601. Even if we were to
assume, arguendo, that petitioner’s delay in paying the 1988
liability was partly attributable to her marital difficulties,
this circumstance would not tend to show that the delay was
attributable to ministerial error or delay by the IRS, as
required for her to establish entitlement to relief pursuant to
section 6404(e).
In sum, we are unable to conclude that there was any
erroneous or dilatory performance of a ministerial act by
respondent that caused or contributed to the delay in
petitioner’s payment of the 1988 liability, or that the delay
was not in significant part attributable to petitioner.
Consequently, respondent’s refusal to abate petitioner’s interest
under section 6404 was not an abuse of discretion.
To reflect the foregoing,
Decision will be entered for
respondent.