112 T.C. No. 3

UNITED STATES TAX COURT

WILLIAM AND HELEN WOODRAL, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 6385-98. Filed January 12, 1999.

Ps submitted to the IRS a request for abatement of

interest relating to employment taxes. R issued to Ps

a notice of final determination not to abate interest. 

Ps filed a petition for review of R's failure to abate

interest. 

Held: R's failure to abate the assessments of

interest under sec. 6404(a), I.R.C., was not an abuse

of discretion.

Held, further: Sec. 6404(e)(1), I.R.C., does not

authorize R to abate assessments of interest on

employment taxes; therefore, R's failure to abate the

assessments of interest under sec. 6404(e), I.R.C., was

not an abuse of discretion.

Robert C. Platt, for petitioners.

Usha Ravi and Ronald G. Dong, for respondent.
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1 Sec. 6404(g) was redesignated sec. 6404(i) by the

Internal Revenue Service Restructuring & Reform Act of 1998, Pub.

L. 105-206, secs. 3305(a), 3309(a), 112 Stat. 743, 745.

2 References to "petitioner" are to petitioner William

Woodral.

OPINION

VASQUEZ, Judge: On March 26, 1998, the Commissioner issued

a notice of final determination denying petitioners' claim to

abate interest. Petitioners timely filed a petition under

section 6404(g)1 and Rule 280. Unless otherwise indicated, all

section references are to the Internal Revenue Code as amended,

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

The issue for decision is whether the Commissioner committed

an abuse of discretion under section 6404 by failing to abate

assessments of interest relating to employment taxes.

Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time they filed

their petition, petitioners resided in Ceres, California.

During 1988, petitioner2 and his brother Robert Woodral were

general partners in a partnership known as Woody's Transport (the

partnership). On July 17, 1988, the partnership dissolved. 

Under the agreement to dissolve the partnership, Robert Woodral

agreed to pay any existing tax liabilities. 
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3 For convenience, all figures are rounded to the nearest

dollar.

On March 30, 1989, respondent received an Employer's Annual

Federal Unemployment Tax Return (Form 940) for the period ending

December 31, 1988, from Woody's Transport showing an unpaid tax

liability of $295.3 On May 8, 1989, the tax liability of $295

and an interest liability of $10 were assessed. 

On May 11, 1989, respondent received an Employer's Quarterly

Federal Tax Return (Form 941) for the period ending June 30,

1988, from Woody's Transport showing an unpaid tax liability of

$30,785. On June 26, 1989, the tax liability of $30,785 and an

interest liability of $3,967 were assessed. On September 4,

1989, based on a corrected tax return received by respondent, the

assessed, unpaid tax liability was reduced from $30,785 to

$8,258, and $2,608 of interest was abated. 

Robert Woodral filed the Forms 940 and 941. At the time he

filed the returns, he did not pay the taxes that were owing. 

Robert Woodral never informed petitioner that there were any

outstanding tax liabilities. 

In or about July of 1995, petitioner received a Final Notice

(Notice of Intent to Levy) dated July 20, 1995, from respondent. 

This was the first notification petitioner received that the

partnership owed any tax or that he was liable for any of it. 

On February 15, 1996, petitioner paid the $295 and $8,258

tax liabilities. Petitioner did not pay the interest

attributable to either of the tax liabilities. 
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On December 2, 1996, petitioners filed a petition (the 1996

petition) with the Court requesting the abatement of penalties

and interest relating to employment taxes for the taxable periods

ending June 30 and December 31, 1988 (the 1988 employment taxes). 

On March 3, 1997, respondent received a Claim for Refund and

Request for Abatement (Form 843) from petitioners. 

On March 17, 1998, respondent filed a motion to dismiss for

lack of jurisdiction (motion to dismiss) the 1996 petition on the

grounds that a notice of final determination not to abate

interest (notice of final determination) on the 1988 employment

taxes had not been issued to petitioners.

 On March 26, 1998, the Commissioner issued a notice of final

determination to petitioners related to the 1988 employment

taxes. The Commissioner denied petitioners' request for

abatement. 

On April 3, 1998, petitioners opposed respondent's motion to

dismiss and lodged with the Court a first amended petition for

review of failure to abate interest under section 6404 (the

amended petition).

In an order dated April 9, 1998, the Court granted

respondent's motion to dismiss the 1996 petition. Furthermore,

we ordered the amended petition be filed as petitioners' petition

for review of failure to abate interest under section 6404, and
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4 As we stated in our order dated Apr. 9, 1998, the Court

lacks jurisdiction to review the Commissioner's failure to abate

penalties. Sec. 6404(g) only provides the Court jurisdiction to

review the failure to abate interest, and sec. 7436 does not

provide the Court with jurisdiction because this case does not

involve a redetermination of employment status.

we ordered the portion of the amended petition that seeks an

abatement of penalties be stricken for lack of jurisdiction.4

Discussion

Respondent argues (1) to the extent that petitioners' claim

for abatement of interest arises under section 6404(a), the Court

lacks jurisdiction to review respondent's denial of that claim,

(2) if the Court concludes that it has jurisdiction over

petitioners' claim under section 6404(a), there was no abuse of

discretion under section 6404(a) because the assessments of

interest were not excessive in amount, assessed after the

expiration of the period of limitations, or erroneously or

illegally assessed, and (3) there was no abuse of discretion

under section 6404(e) because the Commissioner is not authorized

under section 6404(e)(1) to abate interest assessed with respect

to employment taxes. Petitioners contend that the Court has

jurisdiction pursuant to section 6404(g), and the Commissioner

committed an abuse of discretion by failing to abate the interest

under either section 6404(a) or (e).

In construing section 6404, our task is to give effect to

the intent of Congress. We begin with the statutory language,

which is the most persuasive evidence of the statutory purpose. 

United States v. American Trucking Associations, Inc., 310 U.S.
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534, 542-543 (1940); Hospital Corp. of Am. v. Commissioner, 107

T.C. 116, 128 (1996). Phrases must be construed in light of the

overall purpose and structure of the whole statutory scheme. 

Dole v. United Steelworkers of Am., 494 U.S. 26, 35 (1990).

The plain meaning of statutory language ordinarily is

conclusive. United States v. Ron Pair Enters., Inc., 489 U.S.

235, 241-242 (1989); Hospital Corp. of Am. v. Commissioner,

supra. If the language of a statute is clear, we look no further

than that language in determining the statute's meaning. See

Sullivan v. Stroop, 496 U.S. 478, 482 (1990); United States v.

Ron Pair Enters., Inc., supra at 241. A court looks to

legislative history only if the statute is unclear. Blum v.

Stenson, 465 U.S. 886, 896 (1984); United States v. Lewis, 67

F.3d 225, 228-229 (9th Cir. 1995).

I. Jurisdiction Under Section 6404(g)

The Tax Court is a court of limited jurisdiction and may

exercise jurisdiction only to the extent authorized by Congress. 

Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The question of

the Court's jurisdiction is fundamental and must be addressed

when raised by a party. Id. at 530. 

Section 6404(g) provides in pertinent part:

The Tax Court shall have jurisdiction over any action

brought by a taxpayer who meets the requirements

referred to in section 7430(c)(4)(A)(ii) to determine

whether the Secretary's failure to abate interest under

this section was an abuse of discretion, and may order

an abatement, if such action is brought within 180 days

after the date of the mailing of the Secretary's final

determination not to abate such interest. [Emphasis

added.]
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5 Even if we were to look at the legislative history,

however, it does not contradict the language of the statute.

Section 6404(g) clearly grants the Court jurisdiction to

review the Commissioner's failure to abate interest under all

subsections of section 6404 and does not limit the Court's

jurisdiction to review cases arising only under section 6404(e). 

Respondent, on brief, acknowledges that the language of section

6404(g) does not specifically limit the Court's jurisdiction to

the review of denials of claims for abatement brought under

section 6404(e) but argues that the legislative history

demonstrates that it was the intent of Congress to impose such a

limit on the Court's jurisdiction.

Respondent's argument fails. The language of the statute is

clear; therefore, we do not look to the legislative history to

determine the statute's meaning.5 See Sullivan v. Stroop, supra;

United States v. Ron Pair Enters., Inc., supra at 241-242; see

also Blum v. Stenson, supra; United States v. Lewis, supra.

Respondent's interpretation of section 6404(g) is contrary

to the clear language of the statute. We reject respondent's

contention that we lack jurisdiction to review the denial of

petitioners' request for abatement of interest to the extent

their claim arises under section 6404(a). In light of

petitioners' timely petition for review, we hold that petitioners
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6 While the Court has jurisdiction pursuant to sec. 6404(a)

and (g) to review the Commissioner's failure to abate interest on

employment taxes, sec. 6404(a) and (g) does not provide the Court

with jurisdiction to review a failure by the Commissioner to

abate an assessment of employment taxes.

properly invoked the Court's jurisdiction pursuant to section

6404(g).6 See Rule 280(b)(2).

II. Abuse of Discretion

The Commissioner's power to abate an assessment of interest

involves the exercise of discretion, and we shall give due

deference to the Commissioner's discretion. See Mailman v.

Commissioner, 91 T.C. 1079, 1082 (1988). In order to prevail, a

taxpayer must prove that the Commissioner exercised this

discretion arbitrarily, capriciously, or without sound basis in

fact or law. See id. at 1084. Petitioners bear the burden of

proof. Rule 142(a).

A. Section 6404(a)

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. See also sec. 6601(e)(1) (stating that "any reference

in this title", except subchapter B of Chapter 63 (i.e., sections

6211-6216) to "any tax" also refers to interest imposed by

section 6601 on such tax). Section 301.6404-1(c), Proced. &

Admin. Regs., provides, in pertinent part:
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7 Petitioners, however, do not assert that respondent

calculated the amount of the interest incorrectly.

(c) Except in the case of income, estate, or gift

tax, if more than the correct amount of tax, [or]

interest, * * * is assessed but not paid to the

district director, the person against whom the

assessment is made may file a claim for abatement of

such overassessment. Each claim for abatement under

this section shall be made on Form 843. * * *

In the petition, petitioners stated that the interest at

issue is the statutory interest attributable to the correct

employment taxes that were reported on the Forms 940 and 941

filed with respondent. Petitioner paid those taxes on February

15, 1996. Petitioners argue, however, that respondent's failure

to act (i.e., waiting 7 years to contact petitioner regarding the

taxes and interest owed) was illegal; therefore, petitioners

contend that the amounts of interest assessed are erroneous and

in excess of the proper amount.7 Respondent contends that the

assessments of interest were not excessive, assessed after the

expiration of the period of limitations, or erroneously or

illegally made.

On brief, petitioners cite no authority to support their

claim that the assessments of interest were excessive, erroneous,

or illegal. Additionally, the evidence does not establish that

the interest was excessive in amount, assessed after the

expiration of the period of limitations properly applicable

thereto, or erroneously or illegally assessed. See In re Burns,

974 F.2d 1064, 1066 (9th Cir. 1992). 
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8 In 1996, sec. 6404(e) was amended under sec. 301 of the

Taxpayer Bill of Rights 2, Pub. L. 104-168, 110 Stat. 1452, 1457

(1996), to permit respondent to abate interest with respect to an

"unreasonable" error or delay resulting from "managerial" and

ministerial acts. The new provision applies to interest accruing

with respect to deficiencies or payments for tax years beginning

after July 30, 1996; therefore, it is not applicable to the case

at bar.

Based on the foregoing, we conclude that the Commissioner

did not commit an abuse of discretion by failing to abate the

assessments of interest under section 6404(a).

B. Section 6404(e)

Section 6404(e)(1) provides, in pertinent part, that the

Commissioner may abate the assessment of interest on: (1) Any

deficiency attributable to any error or delay by an officer or

employee of the Internal Revenue Service (acting in his official

capacity) in performing a ministerial act, or (2) any payment of

any tax described in section 6212(a) to the extent that any error

or delay in such payment is attributable to such officer or

employee being erroneous or dilatory in performing a ministerial

act.8 

Section 6211 defines a deficiency as the amount by which the

tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44 of

the Code exceeds the amount of such tax shown on the taxpayer's

return and the amount of such tax previously assessed. Section

6212(a) also refers to deficiencies with respect to taxes imposed

by subtitle A or B, or chapter 41, 42, 43, or 44 of the Code. 

These subtitles and chapters of the Code cover taxes on: Income;

estates, gifts, and certain generation-skipping transfers; public
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charities; private foundations and certain other tax-exempt

organizations; qualified pension, etc., plans; and qualified

investment entities. See Speers v. United States, 38 Fed. Cl.

197, 201 (1997). The Code contains the provisions related to

employment taxes in subtitle C, and subtitle C is not mentioned

in section 6211 or section 6212(a). 

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.

To reflect the foregoing,

Decision will be entered 

for respondent.