112 T.C. No. 1

UNITED STATES TAX COURT

HENRY RANDOLPH CONSULTING, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 6838-98. Filed January 6, 1999.

R determined, in a notice mailed to P,

that some of P's workers were employees and

that P was not eligible for relief under sec.

530 of the Revenue Act of 1978, Pub. L. 95-

600, 92 Stat. 2763, 3855, for certain taxable

periods. R attached to the notice a proposed

agreement to assessment of tax resulting from

R's determination. P filed a petition

seeking our redetermination under sec. 7436,

I.R.C., of R's determination, including the

amounts of tax R proposed to assess.

Held: We lack jurisdiction to decide

the amount of P's employment tax and income

tax withholding liability for the taxable

periods in issue.

George W. Connelley, Jr., Linda S. Paine, and

William O. Grimsinger, for petitioner.

M. Kathryn Bellis, for respondent.
- 2 -

1 For convenience, we use the term "employment tax" to refer

to taxes under the Federal Insurance Contributions Act (FICA),

secs. 3101-3125, the Federal Unemployment Tax Act (FUTA), secs.

3301-3311, and income tax withholding, secs. 3401-3406 and 3509.

Unless otherwise indicated, section references are to the

Internal Revenue Code in effect for the taxable periods in issue. 

Rule references are to the Tax Court Rules of Practice and

Procedure. 

OPINION

COLVIN, Judge: This case is before the Court on

respondent's motion to dismiss for lack of jurisdiction as to the

amounts of employment tax1 liability for the periods in issue. 

We will grant respondent's motion for the reasons stated below.

Neither party requested a hearing, and we conclude that none

is necessary to decide respondent's motion.

Background

Petitioner is a sole proprietorship, the principal place of

business of which is in Birmingham, Alabama.

Respondent's agents audited petitioner's Federal Insurance

Contributions Act and income tax withholding tax returns (Forms

941) for March 31 to December 31, 1994, and March 31 to December

31, 1995, and petitioner's Federal Unemployment Tax Act tax

return (Form 940) for 1995. On March 19, 1998, respondent mailed

to petitioner a Notice of Determination Concerning Worker

Classification Under Section 7436 which said in part:

As a result of an employment tax audit, we are

sending you this NOTICE OF DETERMINATION CONCERNING

WORKER CLASSIFICATION UNDER SECTION 7436. We have

determined that the individual(s) listed or described

on the attached schedule are to be legally classified

as employees for purposes of federal employment taxes

under subtitle C of the Internal Revenue Code and that

your (sic) are not entitled to relief from this
- 3 -

classification pursuant to section 530 of the Revenue

Act of 1978 with respect to such individual(s). This

determination could result in employment taxes being

assessed against you.

Respondent attached to the notice of determination an

Agreement to Assessment and Collection of Additional Tax and

Acceptance of Overassessment (Excise or Employment Tax) (Form

2504) in which respondent proposed that petitioner consent to

immediate assessment and collection of $53,194.87 in tax,

consisting of the following amounts:

1. $27,814.58 for March 31 to December 31, 1994, under the

FICA, secs. 3101-3125, and for income tax withholding, secs.

3401-3406 and 3509;

2. $22,776.29 for March 31 to December 31, 1995, under the

FICA and for income tax withholding; and 

3. $2,604.00 for 1995, under the FUTA, secs. 3301-3311. 

The form also proposed that petitioner agree to the

following:

I consent to the immediate assessment and

collection of any additional tax and penalties and

accept any overassessment (decrease in tax and

penalties) shown above, plus any interest provided by

law.

I understand that by signing this agreement, I am

waiving the restrictions on assessment provided in

section 7436(d) and 6213(a) of the Internal Revenue

Code of 1986, and that I will not be able to contest

the issues covered by this agreement in the United

States Tax Court.

Respondent attached to the notice of determination a copy of

Examination Changes -- Federal Unemployment Tax for 1995 (Form

4667), and Employment Tax Examination Changes Report for 1994 and

1995 (Forms 4668), detailing respondent's calculations of the
- 4 -

2 Sec. 7436 was added to the Internal Revenue Code by sec.

1454(a) of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111

Stat. 788, 1055, effective Aug. 5, 1997. Before enactment of

sec. 7436, the Tax Court lacked jurisdiction to decide worker

classification disputes arising under subtitle C of the Code. 

See secs. 6211-6213. Before the enactment of sec. 7436, judicial

review of IRS assessment of employment taxes or related penalties

was available only if a taxpayer paid a divisible part of the

(continued...)

amounts of assessment to which respondent proposed that

petitioner agree.

Petitioner filed a petition seeking our review of

respondent's notice of determination. In it, petitioner contends

that petitioner's service providers are not employees; petitioner

is entitled to treatment under section 530(a) of the Revenue Act

of 1978, Pub. L. 95-600, 92 Stat. 2763, 2855; respondent's

computation of proposed employment tax and income tax withholding

due is incorrect; and, if respondent's determinations are

sustained, the correct liabilities can be recomputed under Rule

155. Petitioner also contends that the notice of determination

is void because, in the notice, respondent did not identify the

individuals whose worker classification was being determined. 

Respondent filed a motion to dismiss for lack of jurisdiction as

to the amounts of tax respondent proposed to assess. Respondent

also moved to strike from the petition petitioner's claim that,

if respondent's determinations are sustained, the correct

liabilities can be recomputed under Rule 155.

Discussion

The parties dispute whether we have jurisdiction under

section 74362 to decide the amounts of tax for which petitioner
- 5 -

2(...continued)

assessment, filed a claim for refund, and filed a refund suit in

Federal district court or the Court of Federal Claims to recover

amounts paid. See sec. 7422; 28 U.S.C. sec. 1291 (1994).

3 Sec. 3103(b)(1) of the IRS Restructuring and Reform Act of

1998, Pub. L. 105-206, 112 Stat. 685, 731, amended sec.

7436(c)(1) to increase the limit from $10,000 to $50,000 per

quarter, effective for proceedings commenced after July 22, 1998.

would be liable if we sustain to any extent respondent's

determination that petitioner's workers are employees and that

petitioner is not entitled to relief under section 530 of the

Revenue Act of 1978.

Petitioner contends that our jurisdiction is provided by

section 7436(a), (c), and (d), and that this result is consistent

with logic and public policy (e.g., the convenience of the

parties and judicial economy). Respondent contends that we lack

jurisdiction under section 7436 to decide amounts of employment

tax due.

To decide this issue, we first consider the following issues

relating to the text of section 7436: (1) Whether section

7436(a) provides jurisdiction over amounts of employment tax due;

and (2) whether jurisdiction over amounts is provided by section

7436(d), which incorporates into section 7436 the principles of

several provisions governing our deficiency jurisdiction, or by

section 7436(c), which makes the small case procedures under

section 7463 available for cases under section 7436 if less than

$10,0003 is in dispute.
- 6 -

4 Sec. 7436(a) provides:

SEC. 7436. PROCEEDINGS FOR DETERMINATION OF EMPLOYMENT

 STATUS

(a) Creation of Remedy.--If, in connection with an

audit of any person, there is an actual controversy

involving a determination by the Secretary as part of

an examination that--

(1) one or more individuals performing

services for such person are employees of

such person for purposes of subtitle C, or

(2) such person is not entitled to the

(continued...)

Next, we consider whether our interpretation of section 7436

is altered by (1) its legislative history, (2) a comparison of

section 7436 to provisions authorizing us to issue declaratory

judgments (sections 7428, 7476, 7477, 7478, and 7479), (3) the

fact that respondent attached a proposed consent to assess

employment tax due to the notice, or (4) petitioner's contention

that it would be illogical to provide jurisdiction over worker

classification issues without providing jurisdiction to decide

the amounts of employment tax and income tax withholding

liability, e.g., from the standpoint of convenience of the

parties or judicial economy.

A. Section 7436

1. Section 7436(a)

We may only exercise jurisdiction that is expressly

permitted or provided by statute. Trost v. Commissioner, 95 T.C.

560, 565 (1990); Judge v. Commissioner, 88 T.C. 1175, 1180-1181

(1987). Section 7436(a)4 expressly grants jurisdiction to this
- 7 -

4(...continued)

treatment under subsection (a) of section 530 of

the Revenue Act of 1978 with respect to such an

individual,

upon the filing of an appropriate pleading, the Tax

Court may determine whether such a determination by the

Secretary is correct. Any such redetermination by the

Tax Court shall have the force and effect of a decision

of the Tax Court and shall be reviewable as such.

Court (if certain conditions are met) to decide whether service

providers are employees or independent contractors for purposes

of subtitle C (Employment Taxes and Collection of Income Tax),

and whether section 530 of the Revenue Act of 1978 applies. 

Section 7436(a) does not expressly give us jurisdiction to decide

any other matter, such as the amount of a taxpayer's employment

tax liability that results from respondent's worker

classification determination. This contrasts with our deficiency

jurisdiction under section 6213, which expressly permits us to

redetermine the "amount" of a deficiency in cases involving

income, gift, estate, or certain other taxes, albeit not

including employment taxes. Sec. 6211(a). Section 7436(a) more

closely parallels our authority to make declaratory judgments

(sections 7428, 7476, 7477, 7478, and 7479). Those provisions

each specify a subject matter, but do not state that we may

decide the amount of tax due. See paragraph C, below, for a

comparison of section 7436 with the declaratory judgment

provisions. Also, the last sentence of section 7436(a) makes our

redetermination reviewable as a decision. This provision would

be unnecessary if we were redetermining a deficiency. Cf. sec.
- 8 -

5 Sec. 7436(d) provides as follows:

(d) Special Rules.--

(1) Restrictions on assessment and collection

pending action, etc.--The principles of

subsections (a), (b), (c), (d), and (f) of

section 6213, section 6214(a), section 6215,

section 6503(a), section 6512, and section

7481 shall apply to proceedings brought under

this section in the same manner as if the

Secretary's determination described in

subsection (a) were a notice of deficiency.

(2) Awarding of costs and certain

fees.--Section 7430 shall apply to proceedings

brought under this section.

7459(c). Thus, based on the text of section 7436(a), we conclude

that we lack jurisdiction to decide the amounts of tax due in

cases arising under section 7436.

2. Section 7436(d)

Section 7436(d)5 provides that "the principles" of sections

6213(a), (b), (c), (d), and (f), 6214(a), 6215, 6503(a), 6512,

and 7481 apply to cases that arise under section 7436. Section

7436(d) does not expressly state that it provides any

jurisdiction. However, petitioner contends that the references

to several deficiency procedure provisions in section 7436(d)

create, or imply that we have, jurisdiction to decide the amount

of its employment tax liability for the periods in issue. 

Petitioner also contends that the references in section 7436(d)

are surplusage if we do not have jurisdiction to decide the

amount of employment taxes owed for those years.
- 9 -

We disagree. Each of the references in section 7436(d) to

deficiency procedures can be read to have a rational purpose even

if we lack jurisdiction over the amounts in dispute in section

7436 cases. The following chart briefly describes each provision

listed in section 7436(d), and states how the principle of each

listed section could apply to a section 7436 case even if we lack

jurisdiction to decide amounts of tax due.

 Provisions Listed In 

 Sec. 7436(d) 

Possible Application Of Principles

 Of That Section To Sec. 7436 

Sec. 6213(a). The

Commissioner may not assess

tax for the years in issue

during the time a taxpayer

may file a petition or

while we have jurisdiction. 

The Commissioner may not assess

employment tax during the time

that the taxpayer may file a

petition under section 7436 in

this Court, and, if a petition is

filed, until the decision is

final.

Sec. 6213(b). The

Commissioner may assess tax

related to mathematical

errors on a return, refund

adjustments, or any amount

paid. A taxpayer may ask

the Commissioner to abate

assessment of mathematical

or clerical errors. 

The Commissioner may assess tax

relating to worker classification

issues or mathematical errors on a

return, refund adjustments, or any

amount paid, and a taxpayer may

ask the Commissioner to abate the

assessment.

Sec. 6213(c). The

Commissioner shall assess

and collect tax if the

taxpayer does not timely

file a petition. 

The Commissioner shall assess and

collect tax related to worker

classification issues if the

taxpayer does not timely file a

petition under sec. 7436.

Sec. 6213(d). A taxpayer

may consent to an

assessment.

The taxpayer may consent to

assessment of employment tax.

Sec. 6213(f)(1). The time

to file a petition is

suspended if a taxpayer

files for bankruptcy under

title 11 of the U.S. Code.

The time to file a petition under

section 7436 is suspended if the

taxpayer seeks relief under title

11.
- 10 -

Sec. 6214(a). We have

jurisdiction to redetermine

a deficiency in an amount

which is greater than the

amount stated in the notice

of deficiency. 

We may decide worker

classification claims raised by

the Commissioner that are not

included in the notice of

determination (e.g., a claim

regarding the status of additional

persons alleged to be employees)

if such claims relate to the

taxpayer and taxable periods in

the notice of determination.

Sec. 6512(b). The

Commissioner shall credit

or refund to the taxpayer

any overpayment of tax when

our decision becomes final. 

We have jurisdiction to

decide a taxpayer's motion

to require the Commissioner

to refund an overpayment of

tax if the motion is filed

more than 120 days after

the decision becomes final.

The Commissioner shall recognize

the status of workers as decided

by the Tax Court. If the

Commissioner fails to do so within

120 days after the decision of the

Tax Court becomes final, then we

may issue an order requiring the

Commissioner to do so.

Secs. 6215 and 6503. 

Certain circumstances

suspend the running of the

time to assess tax (e.g.,

when the Commissioner mails

a notice of deficiency), or

cause it to resume running. 

The Commissioner may assess

the deficiency that we

redetermine after our

decision is final and

require the taxpayer to pay

that amount on notice and

demand.

The running of the time to assess

employment tax is suspended while

a section 7436 case is pending and

resumes when our decision is

final. The Commissioner's

authority to assess employment tax

resumes when the bar to assessment

is lifted and the running of the

time to assess resumes.
- 11 -

6Sec. 7436(c) provides:

(c) Small case procedures

(1) In general.--At the option of the

petitioner, concurred in by the Tax Court or a

division thereof before the hearing of the case,

proceedings under this section may

(notwithstanding the provisions of section 7453)

be conducted subject to the rules of evidence,

practice, and procedure applicable under section

7463 if the amount of employment taxes placed in

dispute is $10,000 or less for each calendar

quarter involved.

(2) Finality of decisions.--A decision

(continued...)

Sec. 7481. Our decision

becomes final 90 days after

it is entered; when the

time to file a petition for

certiorari expires if our

decision has been affirmed

or the appeal dismissed and

no petition for certiorari

has been filed; a petition

for certiorari is denied;

or 30 days after the

Supreme Court mandates that

our decision be affirmed or

the appeal dismissed.

A decision under section 7436

becomes final under the same

circumstances.

The principles of each of the deficiency procedure sections

listed in section 7436(d) reasonably apply to section 7436 cases

even if we lack jurisdiction over amounts in dispute in section

7436 cases. Thus, section 7436(d) does not create, or imply that

we have, jurisdiction to decide the amounts of employment tax due

in a case arising under section 7436.

3. Application of Small Case Procedures to Cases Arising

Under Section 7436

We will next consider whether references in section

7436(c)6 to "amounts in dispute" and the small case procedures
- 12 -

6(...continued)

entered in any proceeding conducted under this

subsection shall not be reviewed in any other

court and shall not be treated as a precedent for

any other case not involving the same petitioner

and the same determinations.

(3) Certain rules to apply.--Rules similar to

the rules of the last sentence of subsection (a),

and subsections (c), (d), and (e), of section 7463

shall apply to proceedings conducted under this

subsection. 

under section 7463 provide, or imply that we have, jurisdiction

under section 7436 to decide amounts of tax due.

A taxpayer may elect to have the small case procedures under

section 7463 apply to a case brought under section 7436 if the

"amount of employment taxes placed in dispute" is $10,000

($50,000 after July 22, 1998) or less. Sec. 7436(c)(1). Section

7436(c) does not expressly state that it provides any

jurisdiction. However, petitioner contends that section

7436(c)(1) would not require the Court to review the

Commissioner's calculation that less than $10,000 ($50,000 after

July 22, 1998) is in dispute unless we have jurisdiction to

decide the amount of a taxpayer's employment tax liability. 

We disagree. We must know the amount placed in dispute to

decide whether a taxpayer may elect under section 7436(c) to have

the small case procedures of section 7463 apply. However, the

fact that we must consider the amount in dispute for that purpose

does not provide, or imply that we have, jurisdiction to decide

the amount of the taxpayer's employment tax liability for the

periods in issue.
- 13 -

Section 7436(c)(3) provides that rules similar to those in

section 7463(a) (last sentence), (c), (d), and (e) apply to cases

under section 7436(c)(3). Each of those rules has a rational

purpose. The following chart briefly describes each provision

listed in section 7436(c)(3), and states how rules similar to

each of those provisions could apply to a case brought under

section 7436 even if we lack jurisdiction to decide amounts of

tax due.

 Provisions Listed 

 In Sec. 7463 

Possible Application Of The Rules

Of That Section To Sec. 7436(c)

Sec. 7463(a) (last

sentence). We must include

a brief summary of reasons

for our opinion to comply

with secs. 7459(b) and 7460.

We must include similar

information in an opinion

deciding a case brought under

section 7436(c).

Sec. 7463(c). If a taxpayer

elects to have the small

case procedures apply, we

may enter a decision only

for amounts placed in

dispute of $10,000 or less

per year ($50,000 after July

22, 1998).

We may not find that more workers

were employees or that the

taxpayer was eligible for more

relief under section 530 of the

Revenue Act of 1978 than would

cause the amount in dispute to

exceed $10,000 ($50,000 after

July 22, 1998).

Sec. 7463(d). Before a

decision is entered, any

party may ask that small

case procedures not apply if

there are reasonable grounds

to believe that more than

$10,000 is in dispute or was

overpaid ($50,000 after July

22, 1998).

Either party may ask that use of

the small case procedures be

discontinued if the request is

made before a decision is entered

and if there are reasonable

grounds to believe that more than

$10,000 ($50,000 after July 22,

1998) is potentially in dispute.

Sec. 7463(e). The amount of

deficiency in dispute

includes additions to tax

and penalties. 

We must include proposed

additions to tax and penalties

when calculating the amount in

dispute under section 7436(c).

The rules provided in each of the sections listed in section

7436(c)(3) reasonably apply to section 7436 cases even if we lack
- 14 -

jurisdiction under section 7436 to decide the amounts of

employment tax due. Thus, we conclude that section 7436(c) does

not provide, or imply that we have, jurisdiction to decide the

amount of employment tax due in a case arising under section

7436.

4. Conclusion Based on the Text of Section 7436

Petitioner contends that if we read section 7436(a), (c),

and (d) together, section 7436 provides jurisdiction to decide

amounts of employment tax liability. We disagree. We see no

difference in the meaning of section 7436 whether each subsection

is analyzed separately or the entire section is analyzed as a

whole. Based on the text of section 7436(a), (c), and (d) we

conclude that we lack jurisdiction to decide the amounts of tax

due in cases arising under section 7436.

B. Legislative History

Petitioner contends that the legislative history of section

7436 shows that Congress intended for us to have jurisdiction to

decide amounts of employment tax liability. We disagree.

Nothing in the legislative history conflicts with our

construction of section 7436. The House and Senate committee

reports accompanying enactment of section 7436 use the same terms

to describe our jurisdiction as appear in section 7436(a). Both

reports said that Congress intended to create jurisdiction for us

to decide certain employment status disputes, and neither report

states that we have jurisdiction to decide amounts in dispute. 
- 15 -

7 See Announcement 97-52, 1997-2 I.R.B. 22; Announcement 96-

13, 1996-12 I.R.B. 33.

H. Rept. 105-148, at 640 (1997); S. Rept. 105-33, at 304 (1997). 

The House report states:

Explanation of Provisions

The bill provides that, in connection with the

audit of any person, if there is an actual controversy

involving a determination by the IRS as part of an

examination that (a) one or more individuals performing

services for that person are employees of that person

or (b) that person is not entitled to relief under

section 530 of the Revenue Act of 1978, the Tax Court

would have jurisdiction to determine whether the IRS is

correct. For example, one way the IRS could make the

required determination is through a mechanism similar

to the employment tax early referral procedures.[7]

The bill provides for de novo review (rather than

review of the administrative record). Assessment and

collection of the tax would be suspended while the

matter is pending in the Tax Court. Any determination

by the Tax Court would have the force and effect of a

decision of the Tax Court and would be reviewable as

such; accordingly, it would be binding on the parties. 

Awards of costs and certain fees (pursuant to section

7430) would be available to eligible taxpayers with

respect to Tax Court determinations pursuant to the

bill. The bill also provides a number of procedural

rules to incorporate this new jurisdiction within the

existing procedures applicable in the Tax Court.

H. Rept. 105-148, supra at 639-640. The Senate report is

essentially the same. S. Rept. 105-33, supra at 304-305.

The last sentence of the explanation states that section

7436 provides several procedural rules to incorporate this new

jurisdiction into the existing procedural rules which apply to

cases before our Court. H. Rept. 105-148, supra at 640; S. Rept.

105-33, supra at 305; see H. Conf. Rept. 105-220, at 734 (1997). 
- 16 -

8 The House and Senate committee reports stated as reasons

for change:

It will be advantageous to taxpayers to

have the option of going to the Tax Court to

resolve certain disputes regarding employment

status. [H. Rept. 105-148, at 639 (1997); S.

Rept. 105-33, at 304 (1997); emphasis added.]

The reports do not state that section 7436(c) and (d) provide

procedural rules, but it appears that those are the procedural

rules referred to in this legislative history.

Petitioner contends that the legislative history for section

7436 shows that we have jurisdiction to decide the amounts of

employment tax due for the workers whose status is before the

Court. We disagree. The legislative history states that

Congress intended that we decide "certain"8 and not all employment

tax disputes, and does not state that we should decide any issues

other than those specified in section 7436(a).

C. Section 7436 Compared to Declaratory Judgment Provisions

Petitioner points out that section 7436 differs in several

ways from the declaratory judgment provisions (sections 7428,

7476, 7477, 7478, 7479), and contends that this shows that

Congress intended to provide jurisdiction to decide the amounts

of employment tax due. Petitioner points out that section 7436

and the declaratory judgment provisions differ in that (1)

section 7436(a) uses the term "determination", and the

declaratory judgment provisions state "make a declaration"; (2)

section 7436 incorporates the principles of several sections that

pertain to deficiency procedures, and the declaratory judgment
- 17 -

provisions do not; and (3) declaratory judgment proceedings are

generally based on the administrative record, Rule 217(a), while

a proceeding under section 7436 is de novo. H. Rept. 105-148,

supra at 640; S. Rept. 105-33, supra at 304.

Petitioner also points out that we may not know the identity

of all taxpayers affected by our decision in a declaratory

judgment case. For example, when we decide that an organization

does not qualify under section 501(c)(3), many taxpayers who have

made contributions to the organization and are affected by the

decision are unknown to the Court. Petitioner contends that this

shows that cases arising under section 7436 are unlike

declaratory judgment cases because we know the identity of the

taxpayer in a case brought under section 7436.

In response, respondent points out that section 7436 and the

declaratory judgment provisions are similar in that, for example,

(1) our jurisdiction in a case brought under section 7436 and in

a declaratory judgment case is triggered by respondent's issuance

of a notice of determination, see secs. 7428(a)(1), 7476(a)(1),

7477(a), 7478(a)(1), 7479(a); (2) section 7436 and the

declaratory judgment provisions have as subsection (a) "Creation

of remedy" and as subsection (b) "Limitations"; (3) section 7436

and the declaratory judgment provisions specifically require an

actual controversy involving a determination by the Secretary;

(4) section 7436 and the declaratory relief provisions include

"Petitioner" as subsection (b)(1) and have a subsection which
- 18 -

limits the time to file a petition in the Tax Court; and (5)

after stating the prerequisites for the type of determination,

section 7436 and the declaratory judgment provisions state: 

"upon the filing of an appropriate pleading, the Tax Court may"

decide a specified issue or issues, without specific reference to

the amount of tax liability that results from that decision.

Petitioner is right that section 7436 differs in some ways

from the declaratory judgment provisions. However, we agree with

respondent that section 7436 is more like the declaratory

judgment provisions, which specify a subject matter over which we

have jurisdiction, but do not state that we may decide the amount

of tax due. This contrasts with our deficiency jurisdiction

under section 6213, under which we may redetermine the "amount"

of tax due. Sec. 6211(a). Thus, a comparison of the declaratory

judgment provisions with section 7436 supports our conclusion

that section 7436 does not provide jurisdiction to decide amounts

of employment tax due.

D. Whether It Would Be Illogical To Give Us Jurisdiction To

Decide Worker Classification Status Without Jurisdiction To

Decide Amounts of Tax Due

Petitioner contends that it would be illogical to give us

jurisdiction to decide worker classification issues without

jurisdiction to decide amounts of tax due. Petitioner points out

that if we lack jurisdiction to decide amounts of employment tax

due, a taxpayer would be required to go to a second judicial

forum to dispute those amounts. Petitioner contends that

limiting our jurisdiction violates logic and public policy (e.g.,
- 19 -

the convenience of the parties and judicial economy). We

disagree. First, we do not acquire jurisdiction from theories

based on public policy, convenience of the parties, or judicial

economy. See Trost v. Commissioner, 95 T.C. at 565; Judge v.

Commissioner, 88 T.C. at 1180-1181; Axe v. Commissioner, 58 T.C.

256, 259 (1972). Although petitioner contends that a broader

grant of jurisdiction might have provided an additional

efficiency regarding the resolution of worker classification

disputes, we believe section 7436 does not give us that

authority. 

Second, section 7436 provides a reasonable and helpful

alternative to litigating worker classification cases in other

courts even if it does not provide jurisdiction to decide the

amounts of employment tax due. Before section 7436 was enacted,

the U.S. District Courts and Court of Federal Claims had refund

jurisdiction over employment classification, entitlement to

relief under section 530 of the Revenue Act of 1978, and other

employment tax issues. Congress found that disputes with the

Internal Revenue Service over worker classification and

entitlement to relief under section 530 of the Revenue Act of

1978 have been difficult for many taxpayers and decided to

provide for judicial review of these issues before this Court on

a prepayment basis. See sec. 7436(d); H. Rept. 105-148, supra;

S. Rept. 105-33, supra. Once these issues are decided, we

believe the parties will be much more likely to reach an

agreement about amounts of tax owing, if any. A Tax Court
- 20 -

decision on worker classification issues will facilitate a final

resolution of the controversy.

E. Whether the Attachment of a Consent To Assess Tax to the

Notice of Determination Conflicts With Respondent's

Contention That We Lack Jurisdiction To Decide the Amount of

Employment Tax Due

Petitioner points out that respondent attached a calculation

of the amount of tax that petitioner owes to the notice of

determination and contends that this is inconsistent with

respondent's position that we lack jurisdiction to decide amounts

of employment tax due. Respondent contends that the calculation

to which petitioner refers is included only to show whether

petitioner may elect the small case procedures under section

7436(c). Respondent's explanation is reasonable; a calculation

of amounts due is necessary if the small case procedures are to

apply for cases in which up to $10,000 ($50,000 after July 22,

1998) is in dispute. The notice of determination and attachments

thereto do not create jurisdiction not otherwise provided by

statute to decide whether the amount of tax proposed to be

assessed is correct.

F. Conclusion

We conclude that we lack jurisdiction under section 7436 to

decide the amount of petitioner's employment tax liability for

the periods in issue. For the foregoing reasons, we will grant

respondent's motion to dismiss for lack of jurisdiction and to

strike.

An appropriate order

will be issued.