1 Unless otherwise indicated, section references are to the

Internal Revenue Code of 1986, as amended. Rule references are

to the Tax Court Rules of Practice and Procedure.

 

T.C. Memo. 2003-9 

UNITED STATES TAX COURT

H & H TRIM & UPHOLSTERY CO., INC., Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2482-00. Filed January 9, 2003.

Dane R. Halse (an officer), for petitioner.

J. Michael Melvin, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

DAWSON, Judge: This case was assigned to Special Trial

Judge Lewis R. Carluzzo pursuant to section 7443A(b)(5) and Rules

180, 181, and 183.1 The Court agrees with and adopts the opinion

of the Special Trial Judge, which is set forth below. 
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2 Previously designated sec. 6404(i). See Victims of

Terrorism Tax Relief Act of 2001, Pub. L. 107-134, sec.

112(d)(1)(B), 115 Stat. 2435.

OPINION OF THE SPECIAL TRIAL JUDGE

CARLUZZO, Special Trial Judge: On September 24, 1999,

respondent issued a notice of final determination denying

petitioner’s request to abate interest related to employment

taxes for the fourth quarter of 1993. Petitioner filed a timely

petition for review with this Court. Our jurisdiction is

established by section 6404(h).2 The issue for decision is

whether respondent’s failure to abate interest with respect to

petitioner’s employment tax liability for the fourth quarter of

1993 is an abuse of discretion.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. 

Petitioner was incorporated in Florida in 1986. At the time the

petition was filed, petitioner’s principal place of business was

located in Sarasota, Florida. At all relevant times, Dane R.

Halse served as petitioner’s president. 

On or about January 31, 1994, petitioner filed with the

Internal Revenue Service a timely Form 941, Employer’s Quarterly

Federal Tax Return (Form 941), for the quarter ending December

31, 1993, reflecting a tax liability of $5,304.09. Petitioner

made no deposits of employment tax during the fourth quarter of

1993, and it did not send in any payments with its tax return for
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that quarter. Following a similar pattern, petitioner continued

to accrue employment tax liabilities for subsequent quarters,

including the first and fourth quarters of 1994 and the first

three quarters of 1996.

In June of 1994, petitioner and respondent entered into an

agreement whereby, following a payment of $400 on June 15,

petitioner agreed to make weekly payments of $250 until

petitioner’s then-outstanding employment tax liabilities were

paid in full. Payments of $400 and $600 were applied to

petitioner’s employment tax liability for the fourth quarter of

1993 on November 8, 1996, and December 19, 1996, respectively.

In response to an inquiry made in a telephone conversation

that occurred during January of 1997, an employee of respondent

advised Mr. Halse that petitioner’s then-outstanding employment

tax liabilities were as follows: Fourth quarter of 1993–-

$6,088.36; first quarter of 1994--$3,679.45; fourth quarter of

1994--$435.69; first, second, and third quarters of 1996--

$1,277.57. On January 15, 1997, Mr. Halse delivered to

respondent’s Sarasota office four certified checks in amounts

corresponding to the account balances provided to Mr. Halse by

respondent’s employee. On January 16, 1997, the checks were

applied to the designated account balances for the abovereferenced quarters. 
- 4 -

In reliance on the payoff figures provided by respondent’s

employee, petitioner believed that, as of January 15, 1997, all

of its then-outstanding employment tax liabilities, including its

liability for the fourth quarter of 1993, had been completely

satisfied. As it turned out, respondent’s employee had provided

Mr. Halse with the wrong payoff amount for the fourth quarter of

1993; the amount did not include interest and additions to tax

that had accrued but had not been assessed as of the time the

employee provided the information. This mistake went unnoticed

for some time. Eventually, doubt arose as to whether

petitioner’s liability for the fourth quarter of 1993 had been

extinguished. As a result of discussions between respondent and

petitioner, it was clear to petitioner as of June 30, 1998, that

its employment tax liability for the fourth quarter of 1993 had

not been completely satisfied. The outstanding liability was

attributable to interest and additions to tax that had accrued

prior to January 15, 1997, but had not been assessed as of that

date. After learning of this balance, petitioner requested that

respondent abate the unpaid interest and additions to tax for the

fourth quarter of 1993. Petitioner’s request for abatement was

considered and denied by respondent’s Appeals Office by letter

dated September 24, 1999. Nevertheless, on October 25, 1999,

respondent partially abated an addition to tax assessed pursuant

to section 6651(a)(2).
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3 As best as can be determined from the record, as of the

date of trial, substantially all, if not all, of petitioner’s

then-outstanding unpaid employment tax liability for the fourth

quarter of 1993 was attributable to interest. 

OPINION

In general, interest on a Federal tax liability begins to

accrue from the last date prescribed for payment of such tax and

continues to accrue, compounding daily, until payment is made. 

See secs. 6601(a), 6622. Although the accrual of interest occurs

continually, it is assessed only periodically. Section 6404(a)

provides that the Commissioner is authorized to abate the unpaid

portion of the assessment of any tax or any liability in respect

thereof that is (1) excessive in amount, (2) assessed after the

expiration of the period of limitations properly applicable

thereto, or (3) erroneously or illegally assessed. The reference

to “any tax” in section 6404(a) includes employment taxes,

Woodral v. Commissioner, 112 T.C. 19 (1999), and the reference to

“any liability in respect” to the tax includes interest that has

accrued on the underlying tax.3 The Commissioner’s failure to

abate interest as provided in section 6404(a) is subject to

review for abuse of discretion by this Court. Sec. 6404(h)(1);

Woodral v. Commissioner, supra at 22-23. 

We are satisfied that the interest that petitioner seeks to

have abated was not assessed (or will not be assessed)

erroneously, illegally, or after the period of limitations
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expired. Instead, we focus our attention on whether such

interest is “excessive” as that term relates to interest and is

used in section 6404(a). 

According to respondent, interest that is assessed

erroneously or illegally is excessive. We agree. But respondent

goes on to suggest that interest is excessive only if it is

assessed erroneously or illegally. Restricted in that manner, we

consider respondent’s construction of the term “excessive” to be

too narrow and otherwise objectionable as it renders the term

superfluous. See Conn. Natl. Bank v. Germain, 503 U.S. 249, 253

(1992) (“courts should disfavor interpretations of statutes that

render language superfluous”).

Unless it leads to a result inconsistent with the overall

objective of a statute, a word used in a statute should be

accorded its plain meaning. See id.; United States v. Ron Pair

Enters., Inc., 489 U.S. 235, 242 (1989). In this regard,

respondent points out that petitioner’s position is based upon a

“fairness” standard, and respondent argues that the concept of

fairness is not contemplated by the term “excessive” as that term

relates to interest and is used in section 6404(a). We disagree. 

Webster’s Third New International Dictionary (1993) defines

“excessive” as “whatever notably exceeds the reasonable, usual,

proper, necessary, just, or endurable”. (Emphasis added.) It

further defines “just” to mean “equitable”, and “equitable” to
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4 Petitioner’s position implicitly suggests that the

obligation to keep track of its employment tax liability

(including interest) was respondent’s, rather than its own. 

Neither party expressly addressed this point, and, in the absence

of a disagreement between the parties, we likewise decline to do

so. Nevertheless, under the circumstances of this case, we

proceed as though petitioner could, and did, reasonably expect

that the information provided by respondent’s employee was

accurate. Cf. Krugman v. Commissioner, 112 T.C. 230 (1999)

(respondent conceded that the Government’s failure to provide a

taxpayer with the correct payoff amount was an appropriate ground

for an interest abatement); Douponce v. Commissioner, T.C. Memo.

1999-398 (holding that, where the Government mistakenly provided

a taxpayer with an incorrect payoff amount, the Government’s

failure to abate some of the interest that accrued thereafter was

an abuse of discretion).

mean “fair”. As we view the matter, when used in the context of

interest, the plain meaning of the word “excessive” takes into

account the concept of what is fair, or more appropriate here,

unfair. 

According to petitioner, it would be unfair to hold it

liable for any amount of interest in excess of the erroneous

payoff amount provided by respondent in January 1997.4

Petitioner’s position extends to all of the unpaid interest

related to its employment tax liability for the fourth quarter of

1993, but we think it is more appropriate to focus on

petitioner’s position as it relates to specific periods over

which the interest accrued. Cf. Donovan v. Commissioner, T.C.

Memo. 2000-220.
- 8 -

Accrued-But-Unassessed Interest as of January 15, 1997

In January 1997, petitioner contacted respondent and asked

for a payoff amount for its then-outstanding Federal employment

tax liabilities. For the fourth quarter of 1993, respondent’s

employee quoted petitioner an erroneous payoff amount that failed

to take into account interest and additions to tax that had

accrued but had not yet been assessed. Unaware of respondent’s

error, petitioner paid this payoff amount on January 15, 1997,

but now suggests that, because respondent failed to include

accrued but unassessed interest in the payoff amount, such

interest should be abated. Petitioner’s position is without

merit.

In effect, petitioner asks to be relieved of this interest

liability because respondent failed to notify petitioner that the

interest was due. There is no suggestion that petitioner was not

otherwise liable for that interest, and petitioner readily

acknowledges that, had it been made aware of such interest, it

would have paid the interest on January 15, 1997. Under these

circumstances, we do not consider the unassessed interest that

accrued prior to January 16, 1997, to be unfair. Because that

interest is not otherwise excessive in amount, assessed after the

expiration of the period of limitations, or erroneously or

illegally assessed, section 6404(a) does not provide respondent

with the authority to abate that unpaid interest. Because there
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is no statutory authority that supports the abatement of such

interest, respondent’s failure to abate is hardly an abuse of

discretion. Therefore, respondent’s failure to abate interest

that accrued prior to January 16, 1997, is not an abuse of

discretion.

Interest From January 16, 1997 Through June 30, 1998

As of January 15, 1997, petitioner, in good faith,

considered its Federal employment tax liability for the fourth

quarter of 1993 to have been completely satisfied upon payment of

the amount specified by respondent’s employee. As of 

June 30, 1998, it was clear to petitioner that the January 15,

1997, payment did not entirely extinguish its Federal employment

tax liability for the fourth quarter of 1993 because that payment

did not include interest that had accrued but had not been

assessed as of the payment date.

Under the circumstances, we are satisfied that, but for

respondent’s error, petitioner’s then-outstanding Federal

employment tax liability for the fourth quarter of 1993 would

have been completely paid on January 15, 1997. Had petitioner

completely paid its employment tax liability on January 15, 1997,

no additional interest would have accrued. 

Although the point is not specifically conceded, respondent

makes little attempt to persuade us that, under these

circumstances, it would not be unfair to charge petitioner with
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the interest that accrued from January 16, 1997, through June 30,

1998. Assuming that it was respondent’s obligation to accurately

advise petitioner of its outstanding employment tax liability,

and that petitioner reasonably expected respondent would do so

(see supra note 4), we consider the interest that accrued as a

result of respondent’s error to be unfair and, under the

circumstances presented, excessive. Because we find such

interest to be excessive within the meaning of section 6404(a),

we hold that respondent’s failure to abate the unpaid portion of

such interest is an abuse of discretion.

Interest That Accrued Subsequent to June 30, 1998

As of June 30, 1998, it was clear to petitioner that the

January 15, 1997, payment did not extinguish its then-outstanding

employment tax liability for the fourth quarter of 1993. The

interest that accrued after June 30, 1998, is a result of

petitioner’s decision not to pay that liability, rather than

respondent’s erroneous advice. There is no evidence to establish

that during this period the interest was excessive, assessed

beyond the period of limitations, erroneous, or illegal. 

Accordingly, respondent’s failure to abate interest that accrued

subsequent to June 30, 1998, is not an abuse of discretion.

To reflect the foregoing,

An appropriate decision

will be entered.