T.C. Memo. 2005-64
UNITED STATES TAX COURT
D. JEAN BARTELMA AND DAN F. BARTELMA, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
CYNTHIA C. BARTELMA AND JAMES RICHARD BARTELMA, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 19477-02, 19478-02. Filed March 30, 2005.
D. Jean Bartelma and Dan F. Bartelma, pro sese.
Cynthia C. Bartelma and James Richard Bartelma, pro sese.
Douglas S. Polsky, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: The petitions in these consolidated cases
were filed in response to notices of Partial Allowance--Final
Determination granting in part and denying in part petitioners’
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claims to abate interest on income tax liabilities for 1995
pursuant to section 6404(e). The issue for decision is whether
the failure to abate the additional interest was an abuse of
discretion.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioners resided in Runnells, Iowa, at the time that they
filed their petitions in these cases.
Dan F. Bartelma (Dan) and James Richard Bartelma (James)
were equal general partners in Bartelma Farm Partnership (the
partnership). They were also shareholders, along with other
family members, in Bartelma Farms, Inc. The partnership timely
filed its Form 1065, U.S. Partnership Return of Income, for 1995.
Petitioners timely filed their individual income tax returns for
1995.
On May 9, 1997, petitioners were notified that the
partnership’s Form 1065 for 1995 was assigned for examination.
Petitioners met with an agent of the Internal Revenue Service
(IRS), Matthew M. McKenney (McKenney), on May 27, 1997, and
received the examination results in a letter dated July 14, 1997.
The examination resulted in adjustments to the partnership’s
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liabilities that flowed through to petitioners’ individual returns.
In January 1998, the IRS sent to petitioners 30-day letters
regarding the adjustments made with respect to the partnership’s
liabilities. Petitioners, through their representative,
Marvin D. Berger (Berger), filed protests to the IRS
determination on or about February 3, 1998, and requested that
the examination findings be appealed to the IRS Appeals Office
(Appeals). Their cases were assigned to an Appeals officer,
Eugene H. DeBoer (DeBoer), in August 1998. DeBoer sent letters
dated August 13, 1998, to Berger informing him that petitioners’
cases had been referred to him for consideration. After a
conference with petitioners and after exchanging correspondence
for a number of months, DeBoer sent a letter dated December 21,
1999, to Berger requesting that petitioners sign a proposed
agreement. This letter stated that “By law, interest accrues
from the due date of the return. In order to stop additional
interest from accruing, you may enclose full payment payable to
the United States Treasury.” Petitioners had also been advised
during the examination and audit process that they could make an
advance payment of tax to stop the running of interest.
On February 1, 2000, the IRS sent statutory notices of
deficiency (notices) to petitioners. The notice sent to Dan and
D. Jean Bartelma (Jean) determined a deficiency of $23,808. The
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notice sent to James and Cynthia C. Bartelma (Cynthia) determined
a deficiency of $27,457. These notices stated that, if
petitioners did not agree with the deficiency but wished to stop
the running of interest, they should make a cash bond and mail it
to the Appeals officer. Dan and Jean filed their petition with
the Court on March 13, 2000, and James and Cynthia filed their
petition with the Court on March 3, 2000. They did not make a
cash bond to stop the running of interest. Those cases were
consolidated and settled, and decisions were entered on
October 26, 2000. The decisions resulted in deficiencies of
$10,760 against Dan and Jean and $14,396 against James and
Cynthia. Additionally, the decisions stated that “interest will
be assessed as provided by law on the deficiency due from the
petitioners.”
On March 8, 2001, interest was assessed against petitioners.
On April 24, 2001, McKenney, who had been reassigned to
petitioners’ cases, sent to petitioners letters estimating the
amount of tax petitioners would owe for 1995. Additionally,
petitioners were made aware of the interest that was accruing on
their deficiencies. In a letter dated April 26, 2001, Berger
requested that the IRS grant petitioners a 63-percent abatement
of interest on the deficiencies due to unreasonable IRS delays.
There was no Form 843, Claim for Refund and Request for
Abatement, attached to this letter. In letters dated May 3 and
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May 4, 2001, McKenney stated that the requested interest
abatement was unreasonable. However, he did include the forms
and procedures necessary for petitioners to file a claim
properly. Additionally, McKenney recommended that petitioners
“pay at least the tax due and the amount of interest that you
reasonably believe you owe” in order to avoid additional interest
charges.
Petitioners filed Forms 843 on or about May 9, 2001,
requesting a 75-percent abatement of interest. On May 17, 2001,
petitioners’ voluntary payments of the tax deficiencies were
posted to their accounts. These payments included the tax
estimated as owed plus what petitioners asserted to be a
reasonable amount of interest, that being 25 percent of the
interest quoted in the April 24, 2001, letters from McKenney.
Petitioners had the ability to pay the entire amount due at the
time that they made their voluntary payments. However, they
believed that the amount of interest was unreasonable.
As of May 17, 2001, McKenney was also working on
petitioners’ 1993, 1994, and 1996 taxable years. Between May 17,
2001, and October 31, 2001, McKenney was unable to obtain Audit
Information Management System (AIMS) controls, which allow agents
to control their cases, for petitioners’ accounts. McKenney
determined that the process of obtaining AIMS controls should
have taken only 90 days. Therefore, on December 19, 2001, the
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IRS partially allowed petitioners’ claims for interest abatement
for the period starting August 17, 2001, and ending October 31,
2001. The IRS determined that $32.13 of interest should be
abated with respect to Dan and Jean and that $136.52 of interest
should be abated with respect to James and Cynthia. These
amounts were posted to petitioners’ accounts on February 18,
2002. The notices of partial allowance dated December 19, 2001,
stated that “Interest will continue to be charged on any unpaid
liability.”
Petitioners objected to the IRS determination and, in
letters dated January 15, 2002, requested that their cases be
sent to Appeals. Their cases were assigned to Diane Paulson
(Paulson) on February 26, 2002. Paulson contacted petitioners by
letters dated May 30, 2002, to inform them that she was assigned
to their cases and that, due to her caseload, she would be in
touch with them within the next 6 months. On July 31, 2002, the
cases were transferred to another Appeals officer, Al W. Haring
(Haring). After a telephone conversation with James, Haring
transferred petitioners’ cases to Appeals officer Arthur C. Welp
(Welp) in Des Moines, Iowa, on August 8, 2002.
By letters dated August 16, 2002, Welp told petitioners that
he would contact them to schedule a conference. In September
2002, Welp informed petitioners that an “interest specialist” had
discovered errors in the amounts shown as due in the letters
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dated April 24, 2001. These errors had subsequently been
corrected on Dan and Jean’s December 10, 2001, tax bill and on
James and Cynthia’s January 7, 2002, tax bill. Welp determined
that petitioners should be granted an interest abatement for the
period between April 24, 2001, and January 7, 2002. Therefore,
Dan and Jean received 28 extra days of interest abatement because
they received their tax bill on December 10, 2001, but were
allowed interest abatement through January 7, 2002. The interest
abatement was reduced by the amount of abatement previously
allowed for the period between August 17 and October 31, 2001.
As a result, Dan and Jean received an abatement of $23.42, and
James and Cynthia received an abatement of $75.44. These amounts
were reflected in the notices of Partial Allowance--Final
Determination sent to petitioners on October 22, 2002.
Petitioners paid the disputed balances on December 10, 2002, and
filed petitions with the Court on December 16, 2002. The amounts
in dispute are $1,204.08 for Dan and Jean and $5,124.07 for James
and Cynthia.
OPINION
Under section 6404(e)(1), the Commissioner may abate the
assessment of interest on any deficiency if the interest is
attributable to an error or delay by an officer or employee of
the IRS (acting in his official capacity) in performing a
ministerial act. (Amendments to section 6404(e) in 1996 do not
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apply to this case because they apply only to interest accruing
with respect to deficiencies or payments for tax years beginning
after July 30, 1996. Taxpayer Bill of Rights 2, Pub. L. 104-168,
sec. 301, 110 Stat. 1457 (1996).) A “ministerial act” is 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 have
taken place. Sec. 301.6404-2T(b)(1), Temporary Proced. & Admin.
Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987). The “mere passage of
time” during a tax dispute does not establish error or delay in
performing a ministerial act. Lee v. Commissioner, 113 T.C. 145,
150 (1999). The Court may order abatement where the Commissioner
abuses his discretion by failing to abate interest. Sec.
6404(h)(1). In order to prevail, a taxpayer must prove that the
Commissioner exercised this discretion arbitrarily, capriciously,
or without sound basis in fact or law. Lee v. Commissioner,
supra at 149; Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
Petitioners argue that there were a number of delays and
errors throughout the protest and appeals process. At trial of
these cases, however, petitioners failed to identify any specific
instances that would qualify, under the statute, as an error or
delay by an officer or employee of the IRS in performing a
ministerial act during the processing of their various protests,
appeals, and Tax Court cases. Only broad allegations regarding a
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lack of timeliness and accuracy were put forth. Petitioners made
reference to lengthy periods during which they would hear nothing
from the IRS. However, with the exception of McKenney’s
inability to get AIMS controls in 2001 (for which an interest
abatement had previously been allowed), a review of the work
history and correspondence shows that IRS personnel were engaged
in a managerial, decision-making process during these times and
that there was no ministerial delay. Sec. 301.6404-2T(b)(1),
Temporary Proced. & Admin. Regs., supra. Acts that are either
managerial or arise out of general administrative decisions are
not ministerial. See Mekulsia v. Commissioner, T.C. Memo. 2003-
138, affd. 389 F.3d 601 (6th Cir. 2004). Deciding how and when
to work on cases, based on an evaluation of the entire caseload
and workload priorities, is not a ministerial act. See id.
Petitioners also cite errors and miscalculations made in the
amounts of liabilities owed for 1995, which were set forth in the
April 24, 2001, letter from McKenney and later corrected by Welp.
Again, petitioners were granted an abatement of interest for this
period. There were no other specific instances of a ministerial
error by respondent.
In addition to denying any ministerial errors or delays,
respondent argues that petitioners were made aware of the
increasing interest on their liabilities in numerous letters and
had the ability to pay their liabilities to stop the interest
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from accruing. Petitioners could have paid as early as the date
of the original notices of deficiency in February 2000, or they
could have paid upon settlement of the original Tax Court cases
in October 2000. When petitioners made voluntary payments in May
2001, they could have paid the entire amounts due and requested
refunds in their abatement claims. Finally, petitioners could
have paid when they received their final tax bills in December
2001 and January 2002, respectively. However, petitioners did
not pay the entire amounts due until December 10, 2002.
Petitioners’ delayed payments of their liabilities are not
attributable to error or delay by any officer or employee of the
IRS in performing a ministerial act. Sec. 6404(e)(1)(B).
Because petitioners presented neither authority nor evidence
to support their claim that there were ministerial errors and
delays above and beyond those that had already been identified
and remedied, there was no abuse of discretion in denying an
additional abatement of interest in these cases.
To reflect the foregoing,
Decisions will be entered
for respondent.