T.C. Memo. 2005-282
UNITED STATES TAX COURT
SCANLON WHITE, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1958-05. Filed December 6, 2005.
John Edward Leeper, for petitioner.
Dennis R. Onnen, for respondent.
MEMORANDUM OPINION
COHEN, Judge: This case is before the Court on respondent’s
motion for summary judgment. The issue for decision is whether
there was an abuse of discretion by the Internal Revenue Service
(IRS) in failing to abate interest on employment taxes.
Respondent relies on our decision in Woodral v. Commissioner, 112
T.C. 19 (1999), and petitioner disagrees with that opinion.
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Unless otherwise 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 that the petition was filed, petitioner’s
principal place of business was in New Mexico. On June 19, 2004,
petitioner submitted to respondent a request for abatement of
interest on its unpaid employment taxes for quarters ended
December 31, 1997, to December 31, 1999. On August 5, 2004,
respondent issued a letter to petitioner citing section
6404(e)(1) for the proposition that respondent lacked the
authority to abate interest due on petitioner’s unpaid employment
taxes for quarters ended December 31, 1997, to September 30,
1998. On August 9, 2004, respondent issued similar letters to
petitioner with regard to its request for abatement of interest
on its unpaid employment taxes for quarters ended December 31,
1998, to December 31, 1999.
On January 31, 2005, petitioner filed with the Court a
petition for review of failure to abate interest under section
6404. The petition alleges, in part:
The facts on which petitioner relies to establish that
the Commissioner’s final determination not to abate
interest was an abuse of discretion are as follows:
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(a) The Commissioner erred in asserting that section
6404(e) of the Internal Revenue Code does not
apply to employment taxes.
(b) The Internal Revenue Service unreasonably delayed
the processing of the taxpayer’s offer in
compromise for approximately four (4) years. The
taxpayer requested abatement of the interest that
accrued on its outstanding payroll tax liabilities
between the time that it initially submitted its
offer in compromise (March 5, 2000) and the date
that the offer was ultimately rejected
(February 5, 2004) by the Commissioner of Internal
Revenue.
Thereafter, respondent filed a motion to dismiss for lack of
jurisdiction, contending that respondent had not issued a notice
of final determination that would confer jurisdiction on the
Court under section 6404. Respondent’s motion was denied,
because the Court found that the letters sent to petitioner on
August 5 and 9, 2004, which unequivocally stated that
petitioner’s request for abatement of interest was denied,
constituted a final notice of determination not to abate interest
sufficient to confer jurisdiction on the Court.
The pending motion for summary judgment by respondent is
based on our holding on Woodral v. Commissioner, supra, that
respondent lacks authority to abate assessments of interest on
employment taxes under section 6404(e). Therefore, there can
have been no abuse of discretion in refusing to abate interest.
Respondent’s motion further argues:
This case is unlike H&H Trim & Upholstery Co. v.
Commissioner, T.C. Memo. 2003-9, where the Court found
that section 6404(a) applied to some of the accrued
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interest directly attributable to respondent’s error
(providing a wrong payoff amount). There is no such
error in this case, but merely an alleged unreasonable
delay in considering an offer in compromise. Moreover,
petitioner has not made any allegation that section
6404(a) applies. * * *
Petitioner’s objection to respondent’s motion for summary
judgment does not disagree with respondent’s characterization of
the claimed abuse of discretion in this case. Petitioner simply
disagrees with our Opinion in Woodral v. Commissioner, supra,
arguing that our Opinion too narrowly defined the term
“deficiency” as used in section 6404(e)(1)(A).
Discussion
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
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(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, 112 T.C. 19 (1999), 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:
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,
it asks us to overrule that decision of this Court. We decline
to do so.
We followed Woodral in Miller v. Commissioner, T.C. Memo.
2000-196, affd. 310 F.3d 640 (9th Cir. 2002). In affirming our
decision, the Court of Appeals for the Ninth Circuit described
Miller’s argument in terms identical to those made by petitioner
in this case. The Court of Appeals held that the implementing
regulation, section 301.6404-2(a)(1)(i), Admin. & Proced. Regs.,
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limiting section 6404(e)(1)’s application to income, estate,
gift, generation-skipping, and certain excise taxes, was entitled
to deference. The Court of Appeals concluded:
The regulation implementing I.R.C. sec. 6404(e)(1)
indicates the intent of the Secretary of the Treasury
to limit the abatement of interest to “income, estate,
gift, generation-skipping, and certain excise taxes.”
Treas. Reg. sec. 301.6404-2(a)(1)(i). This
interpretation is not unreasonable or plainly
inconsistent with the statute. * * * [Miller v.
Commissioner, 310 F.3d 640, 645 (9th Cir. 2002).]
We see no reason to reach a different conclusion here. Even
if petitioner were correct that “any deficiency” could refer to
employment taxes, there is no suggestion in this record that the
unpaid employment taxes were the result of an audit by the IRS
rather than taxes duly reported by petitioner but unpaid.
Petitioner would have us disregard the concept of a deficiency as
the difference between tax due and tax reported or previously
assessed. See sec. 6211. Petitioner has not pointed to any
provision of the Internal Revenue Code that uses the term
“deficiency” in a broad and all-inclusive manner to indicate
failure to pay taxes. Where there is no deficiency, interest
abatement under section 6404(e) is available only pursuant to
section 6404(e)(1)(B), which is expressly limited to “payment of
any tax described in section 6212(a)”, to wit, any tax imposed by
subtitle A or B or chapter 41, 42, 43, or 44. Provisions related
to employment taxes are contained in subtitle C, and subtitle C
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is not mentioned in section 6211 or section 6212(a). Woodral v.
Commissioner, 112 T.C. at 25.
As indicated above, petitioner does not argue that it is
entitled to abatement of interest under any other subsection of
section 6404. Petitioner has not suggested that the assessments
of interest were excessive, erroneous, or illegal. Cf. Woodral
v. Commissioner, 112 T.C. at 24; Law Offices of Michael B. L.
Hepps v. Commissioner, T.C. Memo. 2005-138; H&H Trim & Upholstery
Co. v. Commissioner, T.C. Memo. 2003-9. In opposing respondent’s
motion for summary judgment, petitioner has not presented any
specific facts showing that there is a genuine issue for trial.
See Rule 121(d). Petitioner has not alleged specific facts
showing that delay in the payment of its employment tax
liabilities was attributable to any action or inaction on the
part of IRS personnel in processing its offer in compromise.
Petitioner was not prevented from making payments while its offer
in compromise was pending. See Wright v. Commissioner, T.C.
Memo. 2004-69, affd. 125 Fed. Appx. 547 (5th Cir. 2005).
Following the precedent established in Woodral v.
Commissioner, supra, and Miller v. Commissioner, supra, we
conclude that there was no abuse of discretion in denying
petitioner’s claim for abatement, because the IRS does not have
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the authority under section 6404(e) to abate interest on
employment taxes. Respondent’s motion will be granted.
An appropriate order and
decision will be entered for
respondent.