PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CARROLL EUGENE SINGLETON, and

SHEILA SINGLETON,

Plaintiffs-Appellants,

No. 96-1924

v.

UNITED STATES OF AMERICA,

Defendant-Appellee.

Appeal from the United States District Court

for the Eastern District of North Carolina at Raleigh.

W. Earl Britt, District Judge.

(CA-95-15-5-BR)

Argued: May 7, 1997

Decided: October 20, 1997

Before NIEMEYER and HAMILTON, Circuit Judges, and

LEGG, United States District Judge for the

District of Maryland, sitting by designation.

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Reversed by published opinion. Judge Legg wrote the majority opinion, in which Judge Hamilton joined. Judge Niemeyer wrote a dissenting opinion.

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COUNSEL

ARGUED: David D. Dahl, Charles Edward Nichols, Jr., MANNING,

FULTON & SKINNER, Raleigh, North Carolina, for Appellants.

Thomas Vincent Linguanti, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Loretta C.

Argrett, Assistant Attorney General, David English Carmack, Janice

McKenzie Cole, United States Attorney, UNITED STATES

DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

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OPINION

LEGG, District Judge:

This appeal arises from an entry of judgment for the government

by the United States District Court for the Eastern District of North

Carolina. On May 8, 1996, the district court granted the government's

motion for summary judgment, denying the Singletons' cross-motion

for summary judgment. The court subsequently amended its judgment

on June 24, 1996, to adjust the calculation of interest. The Singletons

filed this appeal.

I.

In August 1988, the Singletons filed a joint federal individual

income tax return for 1987. With their return, they submitted a Form

3800 - General Business Credit, indicating a business credit carryforward of $92,429. Based on the advice of their tax preparer, the Singletons reported, however, that they were ineligible to receive a credit

for the full amount, and were entitled to a credit of only $423.1

Accordingly, the Singletons reported that their total 1987 tax liability was $160,370 ($160,793 tax liability - $423 general business

credit). Because they had made total payments of $190,661, they

reported that they were entitled to a refund of the $30,291 difference.

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1 A general business credit is limited to the smaller of three figures: (1)

the amount of the carryforward, (2) the excess of the taxpayer's net

income tax liability over the taxpayer's tentative minimum tax, and (3)

the excess of the taxpayer's net income tax liability over "25 percent of

the taxpayer's net regular tax liability as exceeds $25,000." 26 U.S.C.

§ 38(c)(1).

 2
On October 3, 1988, the Internal Revenue Service ("IRS") sent the

Singletons a Correction Notice stating: "[A]n error was made when

your general business credit was figured on your form 3800."2 (J.A.

76). Under the IRS' calculations, the Singletons were entitled to a

business credit carryforward of $92,429, not merely $423. Accordingly, the IRS refunded to the Singletons an additional $92,006

($92,429 credit due - $423 credit already taken). 3

Nearly three years later, on January 28, 1991, the IRS advised the

Singletons that it had increased their tax liability for 1987 by $1,173,

based on changes in the laws governing the alternative minimum tax.

(J.A. 77). Shortly thereafter, on February 11, 1991, the IRS again

wrote the Singletons, stating that: "As a result of recent changes in the

tax laws, rulings, or regulations, we changed your tax return for the

above tax year to correct your minimum tax or alternative minimum

tax and other credits." (J.A. 79). This second letter stated that the Singletons' tax liability for 1987 had been recalculated, increasing it by

$93,179 plus statutory interest of $34,012.96.4 The IRS assessed the

$127,191.96 total and demanded immediate payment. No"notice of

deficiency" was issued by the IRS.

Having no notice of deficiency, the Singletons were unable to challenge this assessment in United States Tax Court. 5 Consequently, to

forestall lien foreclosure on their primary residence, the Singletons

sold their beach house, turning the proceeds over to the IRS, and

entered into an installment agreement to pay $1,750 per month. The

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2 According to the Declaration of Doris Beard, a Lead Tax Examiner

of the Reject Unit in the Error Correction/Reject Section of the IRS, Correction Notices are issued when the IRS believes that the taxpayer has

made a mathematical or clerical error on his or her return. (J.A. 161-62).

The IRS then assesses the amount due. Id.

3 The $92,006 refund was in addition to the anticipated $30,291 refund,

resulting in a total refund of $122,297. (J.A. 76).

4 Unlike the first letter, which referred to specific Code provisions and

contained a thorough explanation of the changes in the tax laws (as well

as an apology), the second letter was terse, vague, and contained no Code

references whatsoever.

5 A notice of deficiency is a prerequisite to filing suit in Tax Court to

challenge an assessment. 26 U.S.C. § 6213(a).

 3
Singletons paid the entire $93,179 principal balance, but only paid a

fraction of the accrued interest ($58,965.19 as of September 11,

1995).

Having avoided foreclosure, the Singletons then sought a refund

from the IRS on August 31, 1992. When none was forthcoming, they

filed this action. The government filed a counterclaim for the unpaid

statutory interest under 26 U.S.C. § 6601. Both parties moved for partial summary judgment as to liability.

In their summary judgment motion, the Singletons contended that

the 1991 assessment was unlawful because the IRS failed to follow

required statutory procedures. Under § 6213(a), the IRS is prohibited

from assessing a deficiency unless it first issues a notice of deficiency

to the taxpayer. After issuing the notice, the IRS must wait 90 days

before assessing and collecting the amount due, to give the taxpayer

an opportunity to litigate the deficiency in Tax Court. Id.

The government, in response, argued that the procedures outlined

in § 6213(a) were not required here. It contended that the Singletons'

1987 return was correct, and that IRS mistakes resulted in an erroneous refund to the Singletons in 1988. When the IRS realized its mistake, in 1991, the government argued, it properly made a

"supplemental assessment," pursuant to 26 U.S.C. § 6204, for the full

amount of tax reported on the Singletons' original return. Under

§ 6204, the government asserted, the IRS may make a supplemental

assessment, "whenever it is ascertained that any assessment is imperfect or incomplete in any material respect." Id. In addition, the government claimed that the IRS was not required to issue a notice of

deficiency prior to making a supplemental assessment, because the

Singletons' erroneous refund was of a type exempted from such procedural requirements.

In support of this argument, the government contended that the

procedures followed in making a supplemental assessment depend

upon whether the refund is a "rebate refund" or a "non-rebate refund."

A rebate refund, the government argued, occurs when the IRS

determines that a taxpayer's liability under the Code is less than the

amount reported on his or her return. 26 U.S.C.§ 6211(b)(2). In other

 4
words, it occurs when the IRS reviews a taxpayer's return, determines

that the taxpayer overcalculated his or her tax liability, and then

refunds the overpayment. Id. If the IRS were to later recalculate and

determine that it had misapplied the tax rules and regulations, it could

collect the erroneous rebate refund by making a supplemental

assessment.6 26 U.S.C. § 6204. This supplemental assessment, the

government conceded, should be preceded by a "notice of deficiency." 26 U.S.C. § 6213(a).

The government contended, however, that there is a second category of refunds which is excepted from this notice of deficiency

requirement. These so-called "non-rebate" refunds are returned to the

taxpayer not because of a determination that no tax is owed, but

because of a mistake, such as a computer error. See O'Bryant, 49 F.3d

at 342. For example, a non-rebate refund occurs when the IRS accidentally credits a taxpayer's payment twice. Id. 

In this case, the government argued that the $92,006 refund issued

to the Singletons was a non-rebate refund. As a result, it contended,

the IRS was entitled to make a corrective, supplemental assessment

in 1991 to reclaim the erroneous refund -- without first issuing a

notice of deficiency. The government explained that no notice was

required because the erroneous refund was issued by mistake, and the

Singletons' tax liability, as reported on their 1987 return, never

changed.7

Alternatively, the government argued to the district court that the

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6 See Bilzerian v. United States , 86 F.3d 1067, 1069 (11th Cir. 1996);

Clark v. United States, 63 F.3d 83, 88 (1st Cir. 1995); O'Bryant v.

United States, 49 F.3d 340, 346 (7th Cir. 1995). Because the taxpayer's

initial payments extinguished the original assessment, the IRS would be

required to make a second assessment for any subsequent liability. Id.;

Wilkes v. United States, 946 F.2d 1143 (5th Cir. 1991); 26 U.S.C.

§ 6213(a).

7 Before the district court, the government conceded that it was not

entitled to collect the $1,173 portion of the 1991 assessment. Because

this amount was based on a substantive recalculation of the Singletons'

alternative minimum tax, the government conceded that its failure to

issue a notice of deficiency was improper.

 5
Singletons had "waived" their right to a refund when they signed the

installment agreement, effectively admitting that they were entitled to

a business credit of only $423 (not $92,429).

The district court rejected the government's supplemental assessment argument, holding that the IRS was required to issue a notice of

deficiency before it lawfully could assess and collect the $92,006 liability. The court accepted the government's alternative argument,

however, that the Singletons' installment agreement constituted a

waiver of their right to a refund. Accordingly, the court granted judgment for the government as to the $92,006 tax debt and the

$58,965.19 unpaid statutory interest. The Singletons then filed this

appeal.8

II.

The issue on appeal is whether the IRS was required by statute to

issue a notice of deficiency to the Singletons prior to making its 1991

supplemental assessment.9

On appeal, the Singletons reiterate the argument they made to the

district court: that the IRS must, before assessing and collecting this

tax liability, follow the statutory procedures in 26 U.S.C. § 6213(a),

including first issuing a notice of deficiency. In response, the government concedes that the IRS did not follow these procedures. It contends, however, that the IRS was not required to do so because the

1991 assessment was merely a supplemental assessment to reclaim an

erroneous non-rebate refund. In support of this argument, the government re-asserts the purported distinction between rebate and nonrebate refunds which it argued to the district court.

In addition, the government explains that no notice of deficiency

was required because, by definition, no deficiency existed. A "defi-

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8 The district court's grant of summary judgment is subject to review

de novo. Riley v. Dorton, 93 F.3d 113, 115 (4th Cir. 1996).

9 The government has abandoned its waiver argument on which the district court based its opinion, believing the reasoning to be incorrect.

Accordingly, the Court will not address the waiver issue.

 6
ciency" can be defined loosely as the amount by which a taxpayer's

liability exceeds the tax reported on his or her return.10

Technically, the government argues, the Singletons had no deficiency. Their 1987 tax return reported liability of $160,370, the same

amount assessed by the IRS ($68,364 in 1988 + $92,006 in 1991).

There were no "rebates," the government contends, because the Singletons' $92,006 refund was of the non-rebate variety.11 As a result,

the government argues, the refund should not be included in the deficiency calculation, resulting in a deficiency of zero. Because no deficiency exists, the government argues, no notice of deficiency needed

to be issued. The Court rejects this argument.

A.

IRS procedures for assessing taxes have been succinctly summarized by the Seventh Circuit as follows:

Typically, when the IRS receives a tax return it evaluates

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10 Specifically, a deficiency is the amount by which the liability

exceeds the excess of:

(1) the sum of:

 (a) the tax reported, and

 (b) any prior assessments,

(2) less any rebates.

26 U.S.C. § 6211(a).

11 As discussed above, a rebate refund is issued when the IRS determines that the tax imposed is less than the tax reported. Specifically, the

term "rebate" is defined as "an abatement, credit, refund, or other repayment," made on the ground that the tax imposed was less than:

(1) the sum of:

 (a) the tax reported, and

 (b) any prior assessments,

(2) less any prior rebates.

26 U.S.C. § 6211(b)(1).

 7
the return for accuracy. If it finds the return satisfactory, it

enters an assessment for the amount of tax that the taxpayer

has calculated to be owing. If the IRS disagrees with the taxpayer's determination of his tax liability, it can enter a different assessment, but only after it issues a notice of

deficiency to the taxpayer and gives him 90 days to challenge its calculations in the Tax Court. The IRS has three

years from the date the refund is filed to make an assessment of liability. 26 U.S.C. §§ 6201, 6212, 6213.

Once it makes an assessment the IRS generally has 60 days

to issue a notice and demand for payment to the taxpayer,

and ten years to collect the assessed amount. 26 U.S.C.

§§ 6303, 6502(a)(1). Collection may be made through

administrative methods (including federal liens, summonses,

and levies) or judicial methods (suits to foreclose liens or

reduce assessments to judgment). 26 U.S.C. #8E8E # 6321-6326,

7403. If the IRS discovers that "any assessment is imperfect

or incomplete in any material respect," it may correct the

problem by making a supplemental assessment within three

years of the filing of the return. 26 U.S.C. § 6204.

O'Bryant v. United States, 49 F.3d 340, 342 (7th Cir. 1995). See also

Clark v. United States, 63 F.3d 83, 85 n. 1 (1st Cir. 1995).

If, on the other hand, the taxpayer's reported liability is less than

the amount paid to the Treasury, the IRS will issue a refund.

O'Bryant, 49 F.3d at 342. Occasionally, the IRS makes mistakes during this process, by miscalculating the refund or by issuing the refund

check twice. Id. In these cases, the IRS can reclaim the erroneous

refund in one of two ways. Id. First, the IRS can bring an erroneous

refund suit under 26 U.S.C. § 7405, within two years after the refund

was made. Id. at 342-43. Second, the IRS can pursue the "postcollection assessment procedures" outlined above (§ 6213 notice of

deficiency and demand for payment, followed by judicial or administrative action). Id. at 343. Here, the IRS chose the latter course of

action, albeit without complying with the procedural requirements.12

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12 Presumably, the IRS did not file an erroneous refund suit here

because the two-year statute of limitations imposed by 26 U.S.C.

§ 6532(b) had expired when the IRS realized its error.

 8
Several circuit courts have rejected IRS attempts to reclaim erroneous refunds through such procedural shortcuts. See, e.g., Bilzerian, 86

F.3d 1067; Clark, 63 F.3d 83; O'Bryant , 49 F.3d 340. In each of these

cases, the IRS mistakenly had issued a refund to the taxpayer, which

the IRS later sought to collect through summary procedures. Id. In

each case, the government argued that, because the erroneous refunds

were of the non-rebate variety, the IRS was not required to make a

new assessment or follow deficiency procedures before collecting the

money.

Each court rejected this argument. Declining to accept the government's proposed distinction between the treatment of rebate and nonrebate refunds, our sister circuits uniformly held that the IRS had

acted improperly by failing to follow the statutory methods for

reclaiming an erroneous refund. Bilzerian, 86 F.3d at 1069 (holding

that "once a tax liability is paid, no erroneous refund -- whether

rebate or non-rebate -- can revive it"); Clark, 63 F.3d at 87-88;

O'Bryant, 49 F.3d at 346-47; Wilkes, 946 F.2d at 1152.

In those cases, however, the courts criticized the IRS' failure to

issue a supplemental assessment. Here, the IRS did issue a supplemental assessment to the Singletons before attempting to collect the

erroneous refund. Thus, unlike these previous opinions, the Court

must consider an additional wrinkle: Before issuing the 1991 supplemental assessment, was the IRS required to follow the assessment

procedures in 26 U.S.C. § 6213(a), notably sending the Singletons a

notice of deficiency? The Court concludes that a notice of deficiency

was required and that, in its absence, the assessment was invalid.

B.

Section 6204, which authorizes the IRS to make supplemental

assessments, explicitly incorporates the assessment procedures

described in § 6213.13 This latter provision states:

[N]o assessment of a deficiency . . . shall be made, begun,

or prosecuted until such notice has been mailed to the tax-

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13 "For restrictions on assessment of deficiency in income, estate, gift,

and certain excise taxes, see § 6213." 26 U.S.C. § 6204(b).

 9
payer, nor until the expiration of such 90-day [ ] period . . .

nor, if a petition has been filed with the Tax Court, until the

decision of the Tax Court has become final.

26 U.S.C. § 6213(a). In other words, sections 6204(b) and 6213(a)

prohibit the IRS from issuing a supplemental assessment without first

issuing a notice of deficiency and giving the taxpayer an opportunity

to contest the assessment in Tax Court.

The Court finds no applicable exception to these procedural

requirements. Section 6213(a) applies to all assessments; it does not

distinguish between assessments intended to reclaim rebate refunds

versus those intended to reclaim non-rebate refunds.

1.

Section 6213(b) describes the sole statutory exceptions to these

assessment procedures. Section 6213(b)(1) specifies that, in the case

of "mathematical or clerical errors," no notice of deficiency is

required before the IRS assesses the tax due.14 This category is limited, however, to errors appearing on the taxpayer's return. Id.

When a taxpayer makes such "mathematical or clerical errors," the

IRS must send a notice to the taxpayer "set[ting] forth the error

alleged and an explanation thereof." 26 U.S.C.§ 6213(b)(1). According to § 6213(b)(1), this notice does not constitute a notice of deficiency and does not entitle the taxpayer to file a petition with the Tax

Court. Denying the taxpayer access to the Tax Court in this circumstance is understandable, however, because any increase in tax due

would result from the taxpayer's own computational error rather than

from a substantive IRS calculation. As a result, access to Tax Court

is unnecessary.

In the Singletons' case, however, this exception to the assessment

procedures is inapplicable. The government does not contend that the

Singletons made a "mathematical or clerical" error on their return; in

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14 Section 6213(b)(2) & (3) relate to taxpayer requests to abate an

assessment specified in a notice of deficiency;§ 6213(b)(4) permits the

IRS to assess one's taxes upon receipt of payment.

 10
fact, the government asserts the accuracy of their return as the basis

for the IRS' supplemental assessment.

2.

According to the government, no notice of deficiency was required

in this case because no deficiency existed. This argument is premised

on the assumption that the $92,006 refund issued to the Singletons

was a non-rebate refund and, therefore, was excluded from the deficiency formula.15

The Court disagrees with this analysis. Following our sister circuits, the Court frowns upon the government's attempt to bypass

congressionally-mandated procedures in the case of purported nonrebate refunds. See Bilzerian, 86 F.3d at 1069; Clark, 63 F.3d at 87-

88; O'Bryant, 49 F.3d at 346-47; Wilkes , 946 F.2d at 1152.

Even assuming, arguendo, that the distinction between rebate and

non-rebate refunds is valid, the Court concludes that this case

involves a rebate refund. Unlike obvious mistakes such as those in

O'Bryant, in which the IRS credited a taxpayer's payment twice and

in Clark, in which the IRS applied a tax payment to the wrong year,

the Singletons' erroneous refund is not easily classified as a nonrebate refund.

Instead, the Court finds that the changes in the Singletons' tax status were based not on computer or computational errors, as the government contends, but on substantive recalculations of their tax

liability. Indeed, in its February 1991 letter to the Singletons, the IRS

explicitly stated that their liability had increased due to "recent

changes in the tax laws, rulings, or regulations." (J.A. 79). As a result,

the Court finds that the IRS recalculated the Singletons' tax liability

(albeit erroneously) when it mistakenly permitted the full business

credit carryforward in 1988, and the IRS recalculated a second time

when it realized this error and sought to collect the erroneous $92,006

refund in 1991. Accordingly, the 1988 refund would be characterized

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15 As noted above, a deficiency is defined as the amount by which a

taxpayer's liability exceeds the tax reported on the return, less any rebate

refunds. 26 U.S.C. § 6211(a).

 11
properly as a rebate refund, and would be included in the deficiency

calculation.

C.

In sum, the Court finds that the IRS issued a rebate refund to the

Singletons in 1988. Because rebate refunds are included in the deficiency formula, the 1988 $92,006 rebate refund resulted in a deficiency of $92,006 when the IRS supplementally assessed the

Singletons in 1991. 26 U.S.C. § 6211(a). Accordingly, the IRS was

required to issue the Singletons a notice of deficiency for this amount

before making a supplementary assessment and collecting the tax due.

Moreover, the Court frowns upon the IRS' attempt to bypass these

assessment procedures by characterizing refunds as non-rebate. The

requirement that a notice of deficiency be issued to the taxpayer is not

a mere technicality. This notice serves as a jurisdictional prerequisite

for a taxpayer to challenge an assessment in Tax Court. Taxpayers

should not be deprived of their access to the Tax Court because of a

mistake by the IRS.

Without a notice of deficiency, the taxpayer's only recourse is to

pay the disputed bill and later file for a refund, as the Singletons did

here. As illustrated by this case, a subsequent suit in federal court to

recover the disputed funds could result in a lengthy delay, while the

IRS retains the disputed funds.

Accordingly, the Court holds that the IRS was required to issue a

notice of deficiency before making its supplemental assessment in

1991. Because this notice was never sent, the Singletons were

deprived of their opportunity to contest the tax due (as well as the

mounting interest). In the absence of this vital procedural step, the

IRS assessment was invalid.

The judgment of the District Court is hereby

REVERSED.

NIEMEYER, Circuit Judge, dissenting:

The question presented in this case is whether the taxpayer may

retain a $92,006 refund made by the IRS in error.

 12
The Singletons correctly reported their tax liability for 1987 and

requested an appropriate refund. The IRS, however, made a computational error in recording their tax and refunded an additional $92,006

as the result of that error. When the IRS discovered the error over two

years later, it sent the taxpayer a supplemental assessment to collect

the erroneously refunded money, and the taxpayer and the IRS

entered into a payback arrangement. But thereafter, the taxpayer sued

the IRS in the district court for the amount of the erroneous refund,

claiming that the IRS was not entitled to collect the erroneous refund

without first sending them a notice of deficiency, which the IRS did

not do, and that it was now too late to correct the procedure, because

any further assessment would be beyond the three-year limitation

period provided by the Tax Code.

Because I believe the IRS was not required to give notice of deficiency, since no deficiency, as defined by the Code, was involved, I

would affirm the IRS's method of proceeding, and for that reason I

would affirm the judgment of the district court.

More than two years after the IRS discovered its refund error, it

issued a supplemental assessment under I.R.C. § 6204, correcting its

error. It then began with efforts to collect from the Singletons the

amounts erroneously refunded. The IRS did not issue a notice of deficiency before issuing the supplemental assessment because the tax

reported by the taxpayer was never less than that due under the Tax

Code and therefore a deficiency as defined by the Tax Code was

never involved.

Both parties agree that, in general, the IRS may recover erroneous

refunds resulting from erroneous initial assessments in one of two

ways. First, the IRS may file suit under I.R.C.§ 7405, which explicitly authorizes suits to recover erroneous refunds. Second, the IRS

may make a "supplemental assessment" to correct the original error

in the tax assessment, under I.R.C. § 6204(a) (authorizing "supplemental assessment whenever it is ascertained that any assessment is

imperfect or incomplete in any material respect"). The IRS may then

follow administrative or judicial procedures for collecting the amount

due.

In this case, the IRS did not file suit under I.R.C.§ 7405, apparently because it did not discover the erroneous refund within the two-

 13
year period after the refund as allowed by the Code. See I.R.C.

§ 6532(b) (allowing suit under § 7405"only if such suit is begun

within two years after the making of such refund"). Instead, the IRS

made a "supplemental assessment" under I.R.C.§ 6204. The question

before us is whether the IRS correctly followed procedures in making

such a "supplemental assessment" without first issuing a notice of

deficiency. If it did, the IRS may retain the money that has been collected from the Singletons and may collect the remaining sums not

yet paid. And if the IRS was not allowed to omit a notice of deficiency, the Singletons must be awarded the money because no additional assessments may now be made. See I.R.C. § 6204(a) (allowing

supplemental assessments "within the period prescribed for assessment"); I.R.C. § 6501 (requiring assessments to be made within three

years of filing of return, except as otherwise provided). While the

question might appear rather straightforward, it quickly plunges us

into the dense, technical definitions of the Internal Revenue Code,

which I respectfully suggest the majority has misread.

Section 6204 of the Tax Code, which authorizes supplemental

assessments, incorporates as "restrictions on assessment" the provisions of § 6213 (relating to deficiencies). Section 6213, in turn, provides that "no assessment of a deficiency . . . and no levy or

proceeding in court for its collection shall be made, begun, or prosecuted until such notice [of deficiency] has been mailed to the taxpayer." I.R.C. § 6213(a). It is on the basis of this section that the

majority says that the Tax Code "prohibit[s] the IRS from issuing a

supplemental assessment without first issuing a notice of deficiency."

Slip op. at 10. To make that conclusion, however, the majority must

assume that a deficiency existed, or it simply misreads the statute.

The Tax Code does not prohibit supplemental assessments without

a notice of deficiency. It prohibits supplemental assessments of a

deficiency without notice of a deficiency. See I.R.C. § 6213(a) ("no

assessment of a deficiency . . . shall be made" without notice (emphasis added)). In this regard, the majority misreads"Section 6213(a) [to]

appl[y] to all assessments." Slip op. at 10. That section, however,

reads only to require a notice of deficiency when there is a deficiency

at stake. When no deficiency is involved, as is the case before us, then

the notice of deficiency is not required. Accordingly, we must turn to

 14
whether a deficiency was involved in this case, recognizing that "deficiency" is a specifically defined term under the Code.

Section 6211 defines deficiency as:

The amount by which the tax imposed by [the Code]

exceeds the excess of . . . the amount shown as the tax by

the taxpayer upon his return . . . plus . . . the amounts previously assessed (or collected without assessment) as a deficiency over . . . the amount of rebates, as defined in

subsection (b)(2) made.

I.R.C. § 6211(a). In other words, a deficiency is equal to the Codeimposed tax, minus the taxpayer's calculated amount of tax and prior

deficiency assessments, plus prior rebates. Moreover, "rebate" is also

specifically defined by the Code as:

So much of an abatement, credit, refund, or other repayment, as was made on the ground that the tax imposed by

[the Code] was less than the excess of the amount specified

in subsection (a)(1) over the rebates previously made.

I.R.C. § 6211(b)(2). In other words, a rebate is money sent to the taxpayer because the taxpayer's calculation (plus prior deficiency assessments) was greater than the Tax Code liability (minus past rebates).

Notably, a "rebate" does not include all of a refund, but only so much

of it as is made "on the ground that" the taxpayer overestimated his

tax liability (when past deficiencies and rebates are accounted for). In

this limitation on the definition inheres the distinction between "rebate" and "non-rebate" refunds.

At the risk of oversimplification, a deficiency, as defined by the

Tax Code, is a measurement defined in respect to Tax Code liability.

Thus, if the Tax Code imposes liability for an amount greater than

reported by the taxpayer, the difference, as adjusted by any rebates,

is the deficiency. And a rebate is likewise a Tax Code-liability measurement defined to be the difference between a tax payment made to

a taxpayer and the Tax Code liability.

 15
In this case, the Tax Code liability of the Singletons was the same

as they reported on their tax return, and therefore there was neither

a deficiency nor a rebate involved. The IRS refunded $92,006, not

because the taxpayer calculated his liability to be greater than the Tax

Code imposed it, but because the IRS made a computational error.

The IRS's refund of $92,006 was thus a "non-rebate refund" for

which no notice of deficiency is required. The limitation imposed by

I.R.C. § 6213(a), requiring a notice of deficiency, applies only when

there is an "assessment of a deficiency." (Emphasis added).

For these reasons, I respectfully submit that the IRS's position

reflects, not an "attempt to bypass congressionally-mandated procedures," see slip op. at 11, but a recognition that Congress mandated

a notice of deficiency only with respect to the assessment of a

deficiency.

While it would have been much simpler if the IRS had discovered

its error within the two years and therefore been able to file suit under

I.R.C. § 7405, the fact that it discovered the error within three years

entitled it to file a supplemental assessment without giving a notice

of deficiency because a deficiency was not involved. Accordingly,

following its assessment, it was entitled to collect the erroneously

refunded money.

For these reasons, I would affirm the judgment of the district court.

 16