TAX COURT OPINION

Case: Nield & Linda Montgomery
Docket Number: 16864-02L
Judge: Dawson
Opinion Type: reported
Filed: 01/22/2004
Pages: 56

122 T.C. No. 1 UNITED STATFS TAX COURT GE LES NIELD AND LINDA MONTG MERY, Petitioñers v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 16864-02L. Filed January 22, 2004. Ps filed a joint Federal income tax return for the t-axable year 2000 reporting total and tax due of $T96,006. amount with their tax returri. keturn as filed and asse:ssed the tax reported therein. Sec. 6201(a) (1), R issued to Ps a final. notice for a >f ollection due process hearing under sec. 6330, I.R.C. intent to levy, and Ps filed with R a request Ps failed to remit R accepted Ps' tax of $2, 831, 360 I.R.C. tax the latter In a subsequent telephone contrersation between Ps' counsel and R's Appeals officer, Ps asserted that 1 ad overstated the total for 2000 and indicated that amended return showing that that year. letermination in which he. determined that Ps were not ntitled to challenge the amount of their tax liability n the administrative proceeding, citing sec. they intended to submit an hey were due a refund for R issued to Ps a final notice of tax on their original return they 6330 (c) (2) (B), petition for. review of R's détermination. dotion for Summary Judgmènt. R filed a Ps opposed R's motion. Ps filed with the Court a timely I.R.C. SERVED JAN 2 2 2004 Held: R's Motion for Summary Judgment will be Sec. 6330(c) (2) (B), denied. challenge the existence or amount of reported on their original not received a notice of deficiency and have not otherwise had an opportunity to dispute the tax liability in question. I.R.C., permits Ps to the tax liability tax return because Ps have Duncan C. Turner and Brian G. Isaacson, for petitioners. Glenn P. Thomas and Julie L. Payne, for respondent. OPINION DAWSON, Judge: This case was assigned to Chief Special Trial Judge Peter J. Panuthos, pursuant to the provisions of section 7443A(b) (4) and Rules 180, 181, and 182.1 The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below. OPINION OF THE SPECIAL TRIAL JUDGE PANUTHOS, Chief Special Trial Judge: This matter is before the Court on respondent's Motion for Summary Judgment, filed pursuant to Rule 121. As explained in detail below, we shall deny respondent's motion. Background On or about October 18, 2001, petitioners filed a timely 1 Section references are to the Internal Revenue Code, as amended. Rule references are to the Tax Court Rules of Practice and Procedure. joint Federal income tax return or the taxable year 2000 on whict they reported total tax of $ ,831,360,.total payments of $2, 636, 723, and tax due of: $194, 37 plus _an estimated tax ~penalty of $1,369, interest due on the ur paid balance of $9,704, and a penalty for failure to pay of $7,785, for. a total amount due of $213, 495. Petitioners failed to remit the amount due with their tax return. Respondent accepted the tax return as filed and assessed the . amount reported therein. Respondent did not audit petitioners' tax return for 2000 and did not send petitioners a notice of .deficiency for.2000. . . n March 19, 2002, respondent issued to petitioners a Final Notice--Notice of Intent to Levy nd Notice of Your Right to a. Hearir g with regard to their unpaid tax for. .2000., The notice stated that petitioners owed tax, penalties, and interest totaling $222,315.34. Cn April 18, 2002, petitione s submitted to respondent a Form 12153, Request for, a Collectioh Due Process Hearing. Petitioners' request for an administrative hearing stated in pertinent part: . j The taxpayer -has a good tracld record of paying his taxes timely in appropriate amounts, as evidenced by the 1.997-1999 tax returns * 2Ò00, the taxpayer had an extraorêlinary tax liabïlity ($2,831,360) due to his exefcise of several incentive and nonqualified stock options and the application of the AMT rates. 0:E the tax liabili=ty, but., unfortunately, the -stock received plummeted before year'end 2000 and is now essentially. worthless. The taxpayer was able to pay $2,636,723 * *. However, in tax year the value of Thus, the remaining tax liability is currently thousands of the value of The taxpayer is working diligently and in good faith with various professional advisors to evaluate the situation and remedy the outstanding tax liability. the asset received. times higher that Petitioners also stated that (1) they intended to prepare and submit an amended income tax return for 2000 that would reflect that they were entitled to a refund for that year; and (2) in any event, the parties should explore alternatives to the proposed levy including an installment agreement, an offer in compromise, posting a bond, or substitution of other assets. On July 2, 2002, Appeals Officer Jerry L. Johnson wrote to petitioners to inform them that he had scheduled their Appeals Office hearing for July 25, 2002. Appeals Officer Johnson's letter stated in pertinent part: a taxpayer may dispute the As explained in the above mentioned code sections and related documents, underlying liability in a collection due process hearing only when a notice of deficiency was not provided to the last known address of where the taxpayer did not otherwise have an opportunity to dispute the tax. Since that here, you will have the opportunity to discuss the liability at to present or discuss new material, please send me copies at least five days before our meeting. the taxpayer, or the hearing. In that regard, if you plan is the case On July 22, 2002, Appeals Officer Johnson had a telephone conversation with·petitioners' representative. During the conversation, petitioners' representative stated that, through the misapplication of complex statutory provisions, petitioners had overstated their tax liability for 2000 on their original return and that they intended to submit an amended income tax retusn for 2000. Although the'parties agreed that spetitioners woulc be permitted to submit an ámended r.eturn, the parties did not set a deadline 'for the submission of such amended return. On Séptember 26f 2002, without any further communication bÀtween thevparties, the Appeals Office issued to petitioners a Notice of Determination Concerning Collection Action (s) Under Secti n 6320 and/of 6330. The notice,of. determination, signed by Appeals'Team,Manager Debra M. Brush, stated in pertinent part: "The Taxþayer has indicated he would file amended returns to mitigi te the liability, but · such has not been done ·in a reasor able time, and the mere filÈng of suchy claim does not guarar tee that the claim should be paid;. -Therefore, the levy should be allòwed, to proceed." As of. September 26, 2002, petitioners had not submitted-to respondent an amended income tax returb for 2000. However, on Octòber 11, 2002, petitioners submitted to respondent an amended income . tax .return . for 2000 which reflects, that; petitionèrs are due a refund of $519,087. On October 28,-:2002, petitioriers filed with the Court a Petition for Irien or Levy Action Under Section 6320 and/or 6330.2 The so Le issue raised in the petitiön is a challenge to the amount of petitioners' sunderlying tax liability for 2000. 2 The 'petiition was timely mailed to tihe Court on Oct. 25, Secs. 6330 (d) ; 7502 (a) . 2002. After filing an answer to the petition, respondent filed a Motion for Summary Judgment. Respondent maintains that there is no dispute as to a material fact and the Court should enter judgment as a matter of law sustaining the notice of determination dated September 26, 2002. Respondent argues that petitioners are barred from challenging the existence or amount of their underlying tax liability for 2000 in this collection review proceeding on the ground that the tax liabilïty in question was "self-assessed" on petitioners' original tax return pursuant to section 6201(a) (1). Petitioners fil.ed an Objection to respondent's motion. This matter was called for hearing at the Court's motions session held in Washington, D.C. Counsel for both parties appeared at the hearing and made oral argument. Discussion Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. See Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be granted with respect to all or any part of the legal issues in controversy "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), -affd. 17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner, 90 T.C., 753, 754 (1988); Naftel v Commissioner, 85 T.C. (cid:0)54027,529 (1985),. The moving party bears the .burden of provincj that there is. no genuine issue of material facit,. and factual inferences will be read .in a manner most favorable to the party opposing summary judgment. See , Dahlstrom· v. Commissioner, 85 .T.C. 812, 821 (.1985);,Jacklin v. Commi sioner, 79 T.C. 340, 344 (1982). e are satisfied from our rekiew of the record that there is no genuine issue as to any materihl fact. However, we conclude, contr ry to respondent's· position that petitioners may challenge the anount of their underlying:taù liability =in this proceeding. Consecuently, we shall deny respondent's motion. Section. 6331(a) provides tha if any person liable to pay any tax neglects or refuses to. paÿ such tax within .10 ,days after notice and demand forspayment, the Secretary is authorized;to collect such tax by levy ·on the person's property. Section 6331(d) provides that at least 30 kdays before enforcing collection by levy on the person' propertyg , the Secretary is oblige to provide the person with a final .notice of intent to levy, ncluding notice of the administrative appeals available to the pe son. Séction .6330 generally provides that the Commissioner cannot proceed with collection by levy un il the person has been given notice and the opportunity for an administrative review of the matter (in the form of an Appeals Office hearing) and, if dissatisfied, with judicial review of the administrative determination. See Davis v. Commissioner, 115 T.C. 35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000) . Section 6330(d) provides for judicial review of the administrative determination in the Tax Court or a Federal District Court, as may be appropriate. Section 6330(c) prescribes the matters that a person may raise at an Appeals Office hearing. Section 6330 (c) (2) (A) provides that a person may raise collection issues such as spousal defenses, the appropriateness of the Commi-ssioner's intended collection action, and possible alternative means of collection. See Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, supra. In addition, section 6330 (c) (2) (B) establishes the circumstances under which a person may challenge the existence or amount of his or her underlying tax liability. Section 6330(c) (2) (B) provides: SEC. 6330 (c) (2) . Issues at Hearing . -- (B) Underlying Liability.--The person may also the hearing challenges to the existence or raise at amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability. Respondent'has . promulgated interpretative regulations related to section 6330 (c) (2 (B) Sect-ion 301.6330-1(e), Proced. & Adirin. Regs., provides in pertinent part: * * The taxpayer also may ;raise challenges to the (e) Matters considered at CDP hearing-- (1) * existence or amount of the CDP Notice. for any tax period shown on the CDP Notice if the taxpayer .did r ot receive a statutory notice of deficiency for that ptherwise have an opportunity to dispute that liability. the tíax liability specified. on tax liability or did not In general. tax Secti n .301.6330-1(e) (3), Proced. & Admin. .Regs., provides in perti ent part: (3) Questions and answe s. The questions and answers illustrate the provisions of this paragraph (e) is follows: * * * . Q-E2.. When is a taxpayer entitled to challehge t he existence or amount of the tax liability specifie.d n the CDP Notice? A-E2. A taxpayer is entitled to challenge the existence or amount of the CDP Notice if the- taxpayer did not receive a statutory notice of deficiency for such liability or did not otherwise have an opportunity to dispute such liability. the tax liability specified in Notably, respondent' s regulations do not expressly bar a person from c allenging the existence or amount of tax previously reported due on a tax return. In any event, respondent's position in this case is articulated in his motion as foilows: Respondent interprets section 6330 (c) (2) (B) to mean that a taxpayer can challenge.. only those li.abilities asserted by respondent amount from the taxpayer's self-determination.. By, that differ in -10 - the existence or granting taxpayers a right to contest amount of an underlying tax liability, Congress was concerned with tax liabilities asserted by respondent, rather than those originally computed and reported by the taxpayers themselves. This concern is evident in the phrasing of section 6330 (c) (2) (B), which permits a taxpayer to contest an underlying tax liability in the event opportunity to contest "statutory notice of deficiency" or "otherwise." taxpayers whose tax liabilities nonsensical are self-determined to contest under section 6330 the liabilities they computed, voluntarily reported and declared to be correct under penalty of perjury. that he or she has been denied a prior that liability in the form of a It is to permit Respondent further asserts that there is no suggestion in the legislative history underlying section 6330 that Congress intended to permit taxpayers to challenge taxes that were "self- assessed" on a tax return. Finally, respondent maintains that, inasmuch as section 6330 constitutes a waiver of sovereign immunity, the provision should be narrowly construed in the Commissioner's favor. Before proceeding, we briefly review the principles of statutory construction that guide our analysis. It is well settled that in interpreting a statute, we start with the language of the statute itself. Consumer Prod. Safety Commn. v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). If the language of the statute is plain, clear, and unambiguous, we generally apply it according to its terms. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989); Burke v. Commissioner, 105 T.C. 41, 59 (1995). In Huntsberry v. Commissioner, 83 T.C. 742, 747- 748 (1984), we stated that "where a statute is clear on its face, we wóuld require unequivocal evidence of legislative ·purpose befo e construing the statute· so f as to override the plain meaning of the words used-therein." However, if a statute "is *ambiguous or silent, we may loök to the statute's legislative history .to determine congressional intent." Ewina v. Commissioner, 118 T.C. 494, 503. (2002) (citing Burlingtön N. R.R. v. Okla. Tax Commn., 481 U.S. 454, 461 (1987)); see Wells Farao .& .Co. v. Commissioner, 120 T.C. 69, 89 (2003); Allen v. Commissioner, 118 T.C. 1, 7 (2002) . Turning to sectiön 6330 (c) (2) (B) , the provision plainly states that a.person may challènge "the existence or amount of the ur derlying tax liability for any tax period if the person did not re ceive any statutory notice öf deficiency for such tax liability or did not otherwise ha e an opportunity to dispute such t ax liability." The term "urhderlying tax liability" is not defined in sections 6320 or 6330, nor is there any specific reference'to that term in the legislative histöry -of- the 1 provisions-. Taken ln context, it is reasonable to interpret the term underlying tax liability" a a reference to the amounts that the Commissioner assessed for a particular tax period. In this regard, the term "underlying tax liability" may encompass an amount assessed following the issuance of a notice of deficiency - 12 - under section 6213(a), an amount "self-assessed" under section 6201(a), or a combination of such amounts. Consistent with the foregoing, the plain language of section 6330 (c) (2) (B) bars a person who has received a notice of deficiency from challenging his or her underlying tax liability for that year (whether the liability was self-assessed or assessed as a deficiency) in a collection review proceeding inasmuch as the person was afforded a prior opportunity to challenge such liability under the deficiency procedures.3 In contrast, where a person has not received a notice of deficiency and has not had a prior administrative or judicial opportunity to challenge the amounts the Commissioner assessed, section 6330 (c) (2) (B) provides that such person may challenge the liability as part of the collection review procedu.re. In the present case, petitioners' underlying tax liability consists of the amount that petitioners reported due on their tax return along with statutory interest and penalties. It is clear that petitioners did not receive a notice of deficiency for 2000. Indeed, respondent was not obliged to issue a notice of deficiency to petitioners because the assessment in question was 3 See Naftel v. Commis,sioner, 85 T.C. 527, 531 (1985), where we observed that sec. 6213(a), an overpayment for the year(s) in issue under sec. 6512(b) (1). in a deficiency proceeding brought under the Court may also consider the taxpayer's claim of entered under section 6201-(a)r (1) Moreover, . the tax that . petitioners reported .due on their return is excluded f.rom the . definition of a deficiency under section 6211 (a) . The question that remains under section 6330 (c) (2) (B) is wheth r petitioners "did .not otherwise. haver an opportunity . to dispute such tax liability" for 2000. Respondent contends that the pl rase quoted' above should be cinterpreted to exclude persons, such as petitioners, who have repbrted- their tax liability on .a duly iled tax return-. However, respondent's. proposed inter retation .would have the eff ct of adding terms and conditions to section 6330 (c) (2) (B) -that are inconsistent with the plain language of the provisi n. As we see it, if Congress had intended to preclude taxpayer .from challenging in a collection review proceeding taxes that were assessed pursuant to section 6201(a) (1), the statute would have been drafted to clearly so provide. Simply put, t e plain language of the statutë as enacted, with an emphasis on whether there was an earlier opportunity to dispute the tax liability, provides a broade remedy than respondent's interpretation would allow. 4 Sec. 6201(a) (1) provides: . . (1) Taxes shown on return. -The Secretary shall a sess all taxes determined bÿ the taxpayer or by the Secretary2as to which returns or lists are made -under this title. - 14 - To date petitioners have not had an opportunity to "dispute" their tax liability for the taxable year 2000 in any sense of the term. Although petitioners reported the tax liability that.is the subject of respondent's proposed levy on their original tax return, they now contend (and would like the opportunity to show) that they erred in computing the tax attributable to certain stock options that Mr. Montgomery exercised in 2000. The record does not reflect whether respondent has given consideration to petitioners' amended tax return for 2000 and their claim that their original return contained an error. In sum, we hold that section 6330 (c) (2) (B) permits petitioners to c.hallenge the existence or amount of the tax liability reported on their original income tax return because they have not received a notice of deficiency for 2000 and they have not otherwise had an opportunity to dispute the tax liability in question.5 5 We also observe that carving out self-assessed amounts that tax by commercially acceptable means. term in sec. 6311 which deals with the from the term "underlying tax liability" under sec. 6330(c) (2) (B), as respondent would have us do, does not comport with the use of payment of it is another provision of the Code relating to collection. Specifically, sec. 6311(d) (3) (A) provides in relevant part "a payment of card shall not be subject Act * to the underlying tax liability". Similarly, sec. 6311(d) (3) (C) provides in relevant part that "a payment of taxes * section 908 of error alleged by the person is an error relating to the underlying tax liability". * by use of a debit card shall not be subject * if the error alleged by the person is an error relating to section 161 of the Truth in Lending internal revenue taxes * * * by use of a credit In both instances, use of the term internal revenue the Electronic Fund Transfer Act * * * if the * * Like sec. 6330, that to (continued...) - 15 - Respondent -asserts that it 1s· nonsensical- to permit petitioners to chällenge in a collect1on revlew proceeding the very tax that they reported to b due (or ,"self-determined") on , their original income ~tax return. We would not characterize an opportunity "for respondent to review the correct amount of petitioners'- tax -liability asl nonsensical. As discussed above, the c ntrolling statutory language focuses on whether the person had a prior opportunity to dispute the tax liability-and· petitloners have not had any such opportunity. Read int context, and as applied in this case, sect on 6330 (c) (2) (B) extends the substantive and procedural protec ions - of sectio'ns 6320 and 6330 to ta payers 'who may have erred *(in the Government's favor) in prepaning and filïng their tax returns Given the complexity of the Federal income tax laws sudh taxpayer errors may well be common. We ·conclude that section 6330 (c) (2) (B) is. fairly read as providing a remedy to such taxpayers. Respondènt. also urges thãt t e legislative history of section 6330 (c) (2) (B) andeprinciples e of sovereign .immunity requir that the provision be construed narrowly in the Commissioner's favor. We disagree. We see no ambiguity in the plain Language of section96330 (c) ( ) (B) that would ^justify resort to the legislative history for qui ance in interpreting the 5 (. . . continued) . "underlying tax liability" in sec. 6311 patently~ificludes selfassess d amounts. - 16 - provision. Moreover, we are not aware of any specific expression of congressional intent in the legislative history that would bar persons, such as petitioners, from raising a valid challenge to the existence or amount of tax previously reported due on a tax return. See Huntsberry v. Commissioner, 83 T.C. at 747-748. Considering the plain language of the statute, we find respondent's reliance on principles of sovereign immunity equally unavailing. Our holding in this case advances.the policies underlying sections 6320 and 6330. Those sections were enacted to provide taxpayers who have been notified that the Commissioner has filed a lien or intends to collect unpaid taxes by levy with a final opportunity to raise a spousal defense, offer an alternative . means of collection, and/or challenge the appropriateness of the proposed collection action. Moreover, as pertinent herein, Congress provided taxpayers who are confronted with a lien or proposed levy, but who have not had a prior opportunity to challenge the existence or amount of the tax liability in question, with the opportunity to do so. In view of the statutory scheme as a whole, we think the substantive and procedural protections contained in sections 6320 and 6330 reflect congressional intent that the Commissioner should collect the correct amount of tax, and do so by observing all applicable laws and administrative procedures. To reflect the foregoing, An order will be issued deüying respondent's motion for summary i udgment . Reviewed by the Court. WELLS, COHEN, SWIFT, LARO, FOLEY, VASQUEZ, THORNTON, HAINES, WHERRY, and KROUPA, JJ., agree with thi.s ma ority opinion. I I 1 - 18 - WELLS, C.J., concurring: Respectfully, I write separately to respond to the suggestion, raised by Judge Chiechi in her opinion dissenting and concurring in part, that respondent's Motion for Summary Judgment should be denied on the narrow ground that section 301.6330-1(e), Proced. & Admin. Regs., 67 Fed. Reg. 2555 (Jan. 18, 2002), is dispositive of the issue in the instant case. The issue before us is whether section 6330 (c) (2) (B) permits a taxpayer to challenge in a lien and levy action in this Court the existence or amount of tax that the taxpayer previously reported due on his or her income tax return. The majority concludes, and I believe correctly so, that the plain language of section 6330(c) (2) (B) permits a taxpayer to raise such a challenge. Judge Chiechi, however, agrees with the result reached by the majority only insofar as petitioners may challenge the existence or amount of the tax liability specified in the "final notice". I believe the majority, based on its interpretation of section 6330(c) (2) (B), correctly holds that petitioners may challenge the entire amount of tax, penalties, and interest that respondent assessed against them for the taxable year 2000.1 Section 301.6330-1(e), Proced. & Admin. Regs., quoted in Petitioners not only challenge the $222,315.34 amount intent to levy, but specified in respondent's final notice of they also contend that they overpaid their taxes in the amount of $519,087. full in the majority opinionµ is an interpretative regulation . that does nothing more than stat a gerieral proposition, to wit: A taxpayer may challénge in a co lection review proceeding the exi(cid:0)541tenceor amount of the tax 1 ability set forth in a final lien or levy notice -if the taxpa er (did not receive a notice of deficïency for such liability, or did= not otherwise have an., opportunity to dispute such liability. The regulation largely track the language of set:tion 6330 (c) (2) (B) , with the exception that the term "underlying tax liability" contained in the statute is in the regulation replaced by the phrase "the tax liability specified on the CDP Notice". Nowhere in the parties' motion or opposition or written and oral arguments have they cited or relied upon section 301. 6330- 1(e), Proced. & Admin. Regs. I suggest that the reason for the partids' failure to cite that regulation is that the proper disposition of respondent's motio depends upon the Court's statutory construction of section 6330 (c) (2) (B) . In any event, the general rule. espoused in the regulation is in no waý dispositive of the spec fic question whether section 6330 (c) (2) (B) permits a taxpayer t o challenge the existence or amount of tax that was reported due on the taxpayer's return. It is res ondent's position in the instant case that tax reported due on a return and assessed by respondent under. section 6201 repres nts a unique assessment that Congress never intended to be - 20 - subject. to challenge under section 6330(c) (2) (B) (and by implication section 301. 6330-1 (e) , Proced. & Admin . Regs . ) . Under the circumstances, I believe that it is incumbent upon this Court to resolve the question the parties raised and.argued by analyzing the controlling statutory provlslon, as opposed to relying upon a general statement appearing in an interpretative regulation. FOLEY, THORNTON, and KROUPA, JJ., agree with this concurring opinion. -·21 - LARO, J., concurring: I agkee .with the majority opinion. I write separately to emphasize wo points underlying that opin on. r . 1. = The Term "Underlyina Tax Liability" Is Unambiauous The 'relevant term, "underleying tax liability", is clear and unam iguous. and is read easily tá mean the tax liability underlying the proposed levy. The beginning and end of our inquiry, therefore; must be the tatutory text, and we must apply the plain!meaning. of that·text. TVA v. Hill, .437 U.S. 153, 185 n.29 (1978).; United States v. Am. Trucking Associations, 310 U.S. 534, 543 (1940) . Only when text is inescapably ambiguous" may we resort to the legislative history. to discern its meaning. Garcià v. United States, 469 U.S. 70 76 n.3 (1984) . .. The meaning oftthe relevant term is not inescapably ambiguous. Whereas respoñdent essentiMly reads 'the relevant term; to mean unde5 lying tax: deficiency"., Cong ess obviously knew how to use the wc rd "deficiency" and presuma ly would have used that word in the 'rålevant term had it intended the reading advocated by re spor dent . 2. Legislative History S.ubports the Maiority Opinion . .Even if we ,were permitted tojcònsult the legislative history of section 6330 (c) (2) to discern t he meaning of the relevant term, the .legislative history sup orts interpreting the term in accordance with its plain meaning The history to section 6330, - 22 - as stated in the committee reports and as discerned from the setting in which that section was enacted, reveals that Congress intended that a taxpayer be allowed under that section to dispute a tax liability underlying a proposed levy whenever the taxpayer did not have a prior opportunity to dispute that liability either through the receipt of a notice of deficiency or otherwise. The enactment of section 6330 followed more than a year of Congressional investigations and hearings over the future of the Internal Revenue Service (IRS), resulting in highly publicized criticisms of the agency's collection methods. Mesa Oil, Inc. v. United States, 86 AFTR 2d 2000-7312, 2001-1 USTC par. 50,130 (D. Colo. 2000). We know from the Senate report that the Senate Finance Committee intended that section 6330 would establish "formal procedures designed to insure due process where the IRS seeks to collect taxes by levy". S. Rept. 105-174, at 67 (1998), 1998-3 C.B. 537, 603. We also know from that report that the committee believed that the addition of section 6330 would afford to taxpayers in dealing with the IRS rights which were similar to the rights afforded to all persons in dealing with any other creditor. S. Rept. 105-174, supra at 67, 1998-3 C.B. at 603. To this end, the committee declared, the Commissioner would by virtue of section 6330 need henceforth to "afford taxpayers adequate notice of collection activity and a meaningful hearing s - 23 - befo e the IRS deprives them of their property." Id. .The comm .ttee believed that these prpcedures would "increase fairness to t xpayers." Id. The history of section 6330 (c) (2) .also reveals that the Admirlistration had during the .legislative process' voiced its concèrn to two . Members . of Congress that_ the (cid:16)042 relevant term incl ded self-assessed liabiliti s and that those liabilities should not be included within th breadth of that section. See letter from L. Anthony Sutin, Act ing .Assistant Attorney General, to the Hon. William V. Roth, .Jr., Chairman, Committee .on Finance, U.S. Senate, and the Hon. Willian Archer, Cha$rman, Committee on Ways and Means, U.S. House of Representatives (June 8, 1998), reprinted in Tax Notes Today,. 98 T T 11N-41 (Ju e 11, 1998); letter from Robert E. Rubin, Secr tary of the T easur , to the Hon. William Archeri Chairman, Committee oÊ Ways and Means, U.S. House of Representatives (June 2, 1998), reprinted in Tax Notes Today 98 TNT 112--40 (June 11, 1998); cf. Statement of Administration Policy, Office of anagement and Budget (May 5, 1998), reprinted in Tax Notes Today, 98 TNT 87-18 (May 6, 1998) . The Acministration wrote those le ters after the Senate passed the Sénate's version of section 6 30, H.R. 2676, sec. 3401(b), 105th Cong., 2d Sess. (May 5, 1998), but before the conference committee amended that version to read as enacted. 'Î'h conferees, however, opted not to hange the relevant term to - 24 - address the Administration's stated concern. The Senate version of section 6330(c) (2), see id., 144 Cong. Rec. S4163 (daily ed. May 4, 1998), provided (emphasis added): SEC. 6330 (c) (2). Issues at hearing.--The person may raise at the unpaid tax or the proposed levy, the hearing any relevant issue relating to including-- (A) challenges to the underlying tax liability as to existence and amount. (B) appropriate spousal defenses, (C) challenges to the appropriateness of collection actions, and (D) offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise. Section 6330 as enacted provided (emphasis added): SEC. 6330(c) (2). Issues at hearing. (A) In general. hearing any relevant or the proposed levy, The person may raise at the issue relating to the unpaid tax including (i) appropriate spousal defenses; (ii) challenges to the appropriateness of collection actions; and (iii) offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise. (B) Underlying liability. The person may also the hearing challenges to the existence or raise at amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability. As t< the emphasized language, t e conference report> states: - 25 - The conference agreeme t includes a modified form The IRS would be required to of the Senate amendment . provide the taxpayer with a "Notice of Intent to .Levy, " formally stating its intention to collect a tax liability by levy against t le taxpayer's property or rights to property. * * * - * * is relevant to the the taxpayer can .r quest In general, any issue that * appropriateness of the proposed collection against taxpayer can be raised at tl e pre-levy hearing. example, status, make an offer-in-coinpromise, installment, agreement . or suc)gest, which as sets ,should be used to satisfy the tax lia ility. However, validity of the tax .liabi.lity cann be challenged only. if the taxpayer did not actualÄy receive the statutory notice of deficiency or has (not otherwise had an opportunity to. dispute the 105-599, at 265 (1998), added. ] .1998 3 C.B. 1019; emphasis innocent spouse orÍf. Rept. request an iability. [H.. the For the The conferees' use of the term "tax liability" in both 'places is consistent with a plain meaning application and is inconsistent with he position taken by respondent i 1 this case. OLEY, J., agrees with this concurring opinion. - 26 - GALE, J., concurring: I agree with result reached by the majority. I write separately to address respondent's contention that the legislative history supports an interpretation of section 6330(c) (2) (B) that precludes a taxpayer's ability to dispute a tax liability reported on the return (a self-reported or "self-assessed" liability) in a section 6330 proceeding. Assuming that the language of section 6330(c) (2) (B) contains sufficient ambiguity to justify resort to the legislative history, that history offers little support for respondent's position and indeed suggests the contrary. Section 6330 originated in section 34.01 of the Senate version of H.R. 2676, the bill that, after amendment, was enacted as the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 747. The predecessor of section 6330(c) (2) (B) in the Senate version provided without limitation that a taxpayer could raise in a section 6330 proceeding "challenges to the underlying tax liability as to existence or amount". H.R. 2676, sec. 3401(b), 105th Cong., 2d Sess. (1998), 144 Cong. Rec. S4163 (daily ed..May 4, 1998). The expansive Senate version provoked a critical response from the Treasury Department and other representatives of the executive branch concerned with its overbreadth. An OMB Statement of Administration Policy issued after the Senate Finance Comhittee reported the Senate version, and a letter from .27 - the Preasury Secretary sent to t e .Chairman of the House Ways & Mean¼ Committée (after Senate passage, with respect to the House- Senat e conference on the legisla ion), both sidentified two prinÄipal concerns of overbreadt ; namely, that under the Senate versjon a taxpayer could dispute in a section .6330 proceeding, (i) t ax liabilities that had bee previously litigated or (ii) tax liabilities that had been self-assessed. See Statement .of Admir istration Policy, Executivé Office of the President (Office of Management:and Budget), on H.R. 2676.-..Internal Revenue Service Restructuring and Reform Act (Reported. b the Senate Committee on Finance) (May 5, 1998),1 reprinted in Tax Notes Today, 98 TNT 87-1-8 (May 6, 1998) letter from Robert<E. Rubin, Sed etary of the Treasury to William Archer, Chairman, Committee The OMB Statement of Administration Policy states: some of the new.procedural provisions in the Iowever, reported bill· may unintentio ally make it easier for r1oncompliant taxpayers to avoid paying their fair share c>f ill would allow additional tppeals' and court challenges before the IRS can collect t ax from a taxpayer who refuses to pay., even if the t axpayer has -voluntarily self,assessed the amount due taxes. For example, tthe r a court has held that [Emphasis. added.] the taxt>aver owes the tax. - 28 - on Ways & Means, U.S. House of Representatives (June 2, 1998),2 reprinted in Tax Notes Today, 98 TNT 112-40 (June 11, 1998). The final version of the legislation devised by the conference committee added the following (emphasized) limiting language in section 6330(c) (2) (B): SEC. 6330(c) (2). Issues at hearing. (B) Underlying liability. The person may also the hearing challenges to the existence or raise at amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability. [Emphasis added.] - I would submit that it is clear that the conferees, in adding this limiting language to the statute, intended to address the expressed concern about a taxpayer's ability to dispute previously litigated tax liabilities in a section 6330 proceeding. The new language is directed specifically at a taxpayer's previous opportunities for dispute, either by having been afforded an opportunity for a deficiency proceeding or 2 Treasury Secretary Rubin's letter states: * * * * *. The Senate bill provides taxpayers with additional advance notification and appeal rights prior to levy * The appeal right in. levy cases would enable taxpayers to litigate the same tax liability repeatedly * entire collections process, many taxpayers who have self-assessed their tax liability but not paid in full The provision would change the includina the process for * *. * * *. [Emphasis added.] - 29 - othe wise -(as, 'foi. example, - ïn the case of··taxes not eligible for defi iency proceedings) f But on can:not as readily infer from..·. the statutory modifications an intention. .to foreclose consÁderation of self-assessed liabilities in a section 6330 - procèeding. The report of the conference committee is similarly opaqt e, lacking any specific indication that the conferees inter ded to address the concern expressed about allowing taxpåyers to dispute self-assess d liabilities in a section 6330 proc eding. The only reference in the report to the newly added limiting language of the statute is a single sentence that closely tracks the statute. the propÄsed collection against the the validity of In general, any issue that is relevant appropriateness of taxpayer can. be raised at tl e pre-levy hearing. However, challencred only if the taxpÅver did not actually receive the statutory notice.of deficiency or has not otherwise had an opportunity to dispute the liability. [H. Conf. Rept. 105-599, at 265 (1998), 1998-3 C.B. 747, 1019; emphasis added.] * th tax liability can be to the * * . These aspects of the legislative history, rather · than offering any support for respondent's position, give rise to a negative inference concerning. Cor gress's intention to foreclose review of self-assessed liabilit es in section 6330 proceedings. Havin been advised of the executive branch's concern about allowing taxpayers to dispute self-assessed liabilities in secti n 6330 proceedings, the cor ferees' failure to refer to self-assessed amounts when modif ing the provision at issue, in - 30 - either the statute itself or the conference report, suggests that they chose not to address this particular concern. SWIFT, LARO, FOLEY, MARVEL, and WHERRY, JJ., agree with this concurring op1nlon. 31 - MARVEL, -J. , concurring: I agree with the majority that respondent's motion for summary udgment must be denied in this case There are several reasons for doing so, including the reas ns set forth in the majori'ty op1næon. I believe, ,however, that the facts of th1s .case ralse 'a ser.1ous factual issue as to whet er the taxpayers receivèd the hearing mandated by section 6330 and on this ground alone, I would deny respondent's motion. The majority opinion*states that, on April 18, 2002, petitioners submittèd a request for an administrative hearing. In t e ·letitèr accompanying the request, -petitioners' representative advised the Internal Revenue Service that petitioners intended to file an amended income tax return to "more appropriately report the e ercise of the incentive- and nong alified stock options" that gave rise to petitioners' unpaid tax liability for 2000. Petitioners' representative -also challenged the appröpriateness o the proposed levy, indicated that the levy would cause irreparable harm to.petititoners, and stated that there Were réasonable collection alternatives s Appeals OfficeF Jöhnsòn had a cònversation with petitioners' representative on July 22, 2002, in which he agreed that petitioners would be:permitted to submit the amended return, but he di not set any deadline for'doing so. On September 26,. 2002, without any further notice to petitioners and apparently without .hold ng the reghired hearing, the Appeals Office issued to - 32 - petitioners a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330. These facts raise a material issue of fact regarding whether or not petitioners received the hearing to which they were entitled under section 6330. Section 6330 requires that a taxpayer who timely requests a hearing receive a hearing. In this case, petitioners were not only challenging the underlying tax liability, but they were also challenging the reasonableness of the proposed levy and had clearly stated their desire to explore collection alternatives at the section 6330 hearing. The issuance of the notice of determination without any warning to petitioners and without any hearing deprived petitioners of the opportunity to present, and receive a determination on, all relevant issues as required by section 6330(c) (2) and (3). If, instead of precipitously issuing the notice of determination, the Appeals Office had notified petitioners that it was rescheduling the hearing that was originally scheduled for July 25, 2002, petitioners would have had fair warning and could have prepared to present all of their issues at the hearing, including those related to the underlying tax liability. As it turned out, petitioners submitted their amended return, reflecting that they were due a refund of $519,087, on October 11, 2002. Taxpayers who assert that they intend to file an amended retu n for .the first -time iñ connection with a hearing under sect LOn 6320 or 6330 should not .take solace from the ,majority opin LOn. The majority opinion addresses a.case in which the . (cid:16)042 peti ioners: apparently demonstrated to the Appeals Office that they were serious about filing an amended return, and .that they had ubstantial reasons for doing so, because the Appeals Office agreèd to give~petitioners time to file their amended return. A taxpäyer who procrastinates and seeks to rely solely-on his . annotinced intent!ion to file an amended return as a defense, to a propc sed levy or lien in a section § 320/6330 hearing or in a section .6320/6330 proceeding before this Court proceeds at his peril as his undocumented intent Lon is not likely to be viewed as a cre dible challenge to the unde clying tax liability. HAINES, GOEKE, and· WHERRY, JJ. agree with this concurring opin on. - 34 - GOEKE, J., concurring in result: I agree with the result reached by the majority and its interpretation of the term "underlying tax liability". I write separately to clarify the significance of petitioners' amended return. Under section 6330(c) (2) (B), petitioners were permitted to raise at the hearing challenges to the existence or amount of their underlying tax liability. Petitioners raised a challenge to the amount of their underlying liability and the parties agreed that petitioners would be permitted to submit an amended return reflecting their position. The Appeals officer abruptly issued the notice of determination. Petitioners subsequently submitted an amended return. I believe that if petitioners had been given a reasonable opportunity to challenge the amount of their underlying liability during the hearing process (e.g., by filing an amended return) and they had failed to do so, then we should not review the underlying tax liability because it was not properly raised at the hearing, but in this case they were not given the opportunity to challenge their underlying liability, so the hearing was inadequate. This situation is analogous to offers in compromise (OIC). Before an OIC can be considered, the taxpayer must submit current financial information. Moorhous v. Commissioner, T.C. Memo. 2003-183; see also Rodriguez v. Commissioner, T.C. Memo. 2003-153 (finding that the Appeals officer did not.abuse his discretion in - 35-.- not considering OIC where all .required returns had not been filed) . Without this information, the Appeals; officer cannot prop fly^ consider the OIC. , Likewise; a taxpayer desiring to , chall:enge the existence or amount of..the underlying tax liability who has not previously filed an amended return should-generally be required to file an amended return in conjunction with the hear ing if such amended return is reques.ted by the. Appeals offi er in' order to satisfy the requirement that the liability be at i sue at the hearing. Although petitioners' amended return ref-lects that they are due á refund of $519,08'7A, I*do not interpret the majority as implýing that we have the authori.ty to order a refund if petit ioners establish that they have ove.rpaid their 2000 taxes. Our jurisdiction under section 6330 .is limited to deciding whetlier respondent can proceed with .the proposed collection actic>n. Accordingly, we would need only decide .whether petifioners' 2000 tax liability rs equal to or less than the amourit they previously paid for the· year. HAINES and WHERRY, JJ., agree with this concurring opinion. - 36 - GERBER, J., dissenting: With due respect, I dissent from the holding of the majority. I agree that the majority's literal reading of the phrase, "underlying tax liability", is one possible way to interpret that phrase. It is my view, however, that the phrase "underlying tax liability", when considered in the context of section 6330 and specifically in context of section 6330(c) (2) (B), could also be read to not include a tax liability that a taxpayer has reported and admitted was owing. The intent of the statute was to give a taxpayer the right to challenge the "underlying tax liability * * * if the [taxpayer] * * * .did not otherwise have an opportunity to dispute such tax liability." Sec. 6330(c) (2) (B) (emphasis added). That phrase should not be interpreted to mean that a person could contest their own judgment as to the correct tax. The opportunity to contest tax liabilities is, without exception, granted by statute.1 If a person files a tax return and self- assesses or admits to owing a tax liability, but fails to pay the admitted liability, the statutory opportunity to contest such liabi'lity has traditionally been through a refund suit.2 1 It is well established that the United States is immune from suit except where Congress by specific statute has waived its sovereign immunity. See, e.g., United States v. Sherwood, 312 U.S. 584, 586 (1941). 2 We must distinguish the circumstances we consider from deficiency proceedings where we have authority to consider overpayments. See sec. 6512(b). A proceeding under section 6330 (continued...) - 37 - Norm lly, with respect to an inc me ·tax'liability, the right to sue or a refund requires full payment of the disputed liability. Unde the majority's reading of section 6330 (c) (2) (B), there would be no such requirement for payment prior ;to being able to contèst the underlying merits of a self-assessed amount in the contêxt of a section 6330 hearing before this Court. The majority's interpretation results in -a dramatic and imprcbable change from more than 75 years of established tax litiçation procedure and precedemt. If Congress had -intended such a dramatic change, it certa...nly would have made some reference or modification to the existing statutory framework for refund claims and/or suits. Finally, I findv it~ inconceivable. that Congress intended that taxpayers who filed returns· admitt=ing that they owed tax are to (cid:16)042 be given the opportunity to contest their own "assessment" of the tax due, when the respondent see s to collect it.. It is my view that Congress intended to ensure that taxpayers had certain rights with respect to the collect'ion þrocess and to permit, them to contest any changes respondent propbsed, if tthey had not alrea:ly had the opportunity to do so. HIECHI, _J., ,agrees with thfs dissenting op1nlon. ( . . . continued) is not a deficiency proceeding. - Including respondent's proposed changes from a taxpayer's self- ssessed tax liability. - 38 - HALPERN, , dissenting: I. Introduction I cannot agree with the majority that the term "underlying tax liability", as used in section 6330 (c) (2) (B), is.to be interpreted "as a reference to the amounts that the Commissioner assessed for a particular tax period." Majority op. p. 11. What I believe to be a mistaken interpretation of the term leads the majority to a "plain language" reading of section 6330(c) (2) (B) that would allow a taxpayer, at a section 6330 hearing, to challenge the Government's right to collect from her the portion of any tax that she had reported but failed to pay. The meaning of the term "underlying tax liability" in section 6330(c) (2) (B) is ambiguous. Because it is ambiguous, we are entitled to examine extrinsic evidence to discern its meaning. The legislative history of section 6330(c) (2) (B) leads me to agree with respondent that, as used in that section, the term "underlying tax liability" refers to liabilities asserted by the Commissioner that differ in amount from liabilities self- assessed by the taxpayer.1 I conclude, therefore, that, at a section 6330 hearing, a taxpayer may not challenge the Government's right to collect from her any reported but unpaid tax. For the reasons stated, I dissent. 1 in The term "self-assessed" is somewhat of a misnomer that tax reported on a return is actually assessed by the Commissioner. colloquial sense. See sec. 6201(a) (1). I use the term in the II. Section 301.v6330-1(e), Proced. & Admin. 4Regs. Before proceeding, it is necessary to comment on .the inajo2 ity s disposition of section 301..6330-1(e), Proced. & Admin. Regs , set forth in pertinent part on page +9 of the majority's opin on. Subsection (e) (1) . of that regulation states quite clea ly that, at a section 6330 (Collection -Due Process (CDP) hearing), the taxpayer "may,rais challenges to the existence or amour t of the tax liability specified ion the CDP Notice * * *« if the t axpayer did not receive a statutory. notice of .deficiency for that tax liability or did not otherwise have an opportunity ,to dispute that tax liability." ,(Eruphasis added.) See also subs ction (e) (3); Q&A-E2 (similar).2 The perti.nent language of subsection (e) (1) of the-regulation is .essentially the same as the language of section 6330 (c) (2) (B) except that, in the regulatiòn, the term "tax liabil ty specified on the CDP Notice" is sdbstituted for the. term "und rlying tax liability". Thus, the drafters of the regulation fixed thesmeaning of the term underlyinge tax liability" as "the tax liability specified on the CDP Notice". . . As the majority recites, on March 19, 2002,. respondent issued to petitioners a final not ice (CDP notice) stating that petitioners owed tax, penalties, and interest (for 2002) totaling 2 Regs., Sec'. 301.6320-1(e) (1), is similar but relates to liens rather than levies. (3), Q&A-E2 Proced. & Admin. - 40 - $222,315.34. Majority op. p. 3. The dispute here is over whether petitioners could challenge respondent's right to collect that debt (or at least the tax portion of it) at the section 6330 hearing they subsequently requested. The regulations under section 6330(c) (2) (B) cited above appear to be dispositive of that issue in petitioners' favor. Surprisingly, however, neither party mentioned those provisions in their papers or oral argument with respect to respondent's motion for summary judgment, and the majority treats the provisions almost as an afterthought, proceeding to consider whether the term "underlying tax liability" means something quite different than the meaning given the term in the regulations. If respondent's position in this case is that the term "underlying tax liability" means liabilities in excess of self-assessed liabilities, then that position is directly contradicted by the meaning fixed for that term in the regulations; i.e., "the tax liability specified on the CDP Notice". The majority has not even asked respondent to explain that contradiction. To me, the best course would be to ask respondent to explain the contradiction and, perhaps, say: "Oops!"3 As a matter of judicial economy, we should attempt to 3 Recently, by Chief Counsel Notice (CC-2002-043), reprinted in Tax Notes Today, 2002 TNT 206-13, attorneys working in the Office of Chief Counsel, reminded that that are inconsistent with positions that taken in published guidance,. Internal Revenue Service, were take positions in litigation the Commissioner has the office does not including regulations. resolve the dispute in front of as on the basis of section 301.6330-1.(e), Proced.s &,Admin. Regs., -if. at all possible. I continue with my dissent because the ambiguity that afflicts the statute also afflic:s the regulation, and respondent may say "Oops!" .onl'y because .the regulation does.not, say what he wants it to esay, and the Secreta y may. try to amend it, in which case the majority's. analysis becomes relevant. III. Secti-on 6330 . A. Introduction The· majority. adequately describes the general- operation of section 6330.2 Majority op. pp. -8. n Putting aside section 301. 6330-1(e), Proced. &. Admin. Regs., _the question presented is whether respondent's Appeals Office could, -pursuant to section 6330 (c) (2)*(B), refuse to allow petitioners .to challenge their obligation to .pay-the amount of -t ax:that -they had reported but not paid (the unpaid tax) .4 It is clear (and respondent does not suggest otherwise) that petitioners did not receive a statutory notice of deficiency with respect to tlíe unpaid tax.5 Nor, does Generally,. when a return of tax is made-and an amount of tax is shown on the return, without assessment. or notice and demand, pay such tax at and place the return is filed. the person making the return shall, Sec. 6151(a) . the time As used -in sec . 6330 (c) (2 ) (B) , the term -"statutory notice of deficiency" refers to the means,by which, certain taxes (includirig the inccme tax), person .that it has determined a deficiency in that person's tax. See sec. 6212. . In the context of,those·taxes, the .IRS notifies a in) the case of the term (continued. . . ) - 42 - respondent argue that petitioners otherwise had an opportunity to dispute the unpaid tax within the meaning of section 6330(c) (2) (B).6 Rather, respondent's contention that petitioners' obligation to pay the unpaid tax is not properly at issue is based on his position that, as used in section 6330 (c) (2) (B), the term "underlying tax liability" is properly interpreted to refer only to amounts asserted by the Internal Revenue Service (IRS) in excess of the amount of tax reported by the taxpayer on her return. In the context of the income tax, that amount would generally correspond to the amount of any deficiency assessed by the Commissioner and would exclude any amount of self-assessed tax (such as the unpaid tax here in issue). As previously discussed, the majority interprets the term "underlying tax liability" in section 6330(c) (2) (B) to mean "the amounts that the Commissioner assessed for a particular tax 5(...continued) "deficiency" essentially means the amount by which a person's tax liability exceeds the tax shown on the person's return. See sec. 6211(a). Respondent's regulations provide: "An opportunity to the liability." Sec. 301.6330-1(e) (3), Q&A-E2, dispute a liability includes a prior opportunity for a conferen.ce with Appeals that was offered either before or after the assessment of & Admin. Regs. Without regard to sec. 6330 (c) (2) (B), a Proced. taxpayer's subsequent disavowal of a reported and assessed, but unpaid, abatement. affd. 211 F.3d 504 (9th Cir. 2000). formal procedural significance, see sec. 6404 (b), presumably it is not subject to the Appeals process. income tax liability amounts to an informal claim for See Fayeghi v. Commissioner, T.C. Memo. 1998-297, Because such a claim has no period" (sòfnetimes, simply, assessed amounts.) . Thus, for the majo(city, in the context of a tax that is subject to the defigiency procedures (such às the income tax-), the term "underlying tax liability" means the sum'of (r) any self-assessed tax lus (2) any deflöiency assessment. Id: pp. 11-12.' I agree with the majority tyhat the term "underlying tax liáb lity" must be interpreted "in context"; Id. p. 11, and only add, as stated by the Court of Anpeals for the Fifth Circuit: However, even apparently plain words, divorced from the context in which they arise and in which their creators intended them to functión, may not accurately convey the meaning the creators intended to impart. only, word, can communicate an idea. therefore, within a óontëxt that a word, any It is LeacÑ v. FDIC, 860 F.2d 1266, .1270 (5th Cir. 1988) . B. Language of Section 6330 (c) (2) (B) Section 6330 (c) (2) (B) provi es: (B) Underlying liabili y. The persori may also the hearing challenges to the' existence 'or raise at amount of the underlying tax liability for any tax period if the person did not receive any statutory On p. 12, the majority states: "In the present case, the amount the term "underlyiNg tax liability" includes both petit.ioners' underlying tax liabÏlity consists of that petitioners reported due on their tax return along, with statutory inte¶est and penalties." Since Óetitioners paid a portion of the amount they reported due ,on their return, it . would seem ,that, . for the nhajority, paid and unpaid assessments of táx. whethier, under sec. 6330 (d) (1), Ñe have the authority to order a refurid. I do not see how we do, since our jurisdiction under that )section is to review the Commissioner's determination to procejed with collection of a given amount. Chief Judge Wells, cont¶ary, in his concur fing opinion, suggests to the The majority does not say To "the extent I disagree. that notice of deficiency.for such tax liability or did not otherwise have an opportunity to dispute such tax liability. Having determined as a first step that the term "underlying tax liability" means assessed amounts, the.majority proceeds as a second step to find the plain meaning of section 6330 (c) (2) (B) without adequately considering whether the phrasing of that provision contradicts such meaning. Thus, consider the meaning of section 6330(c) (2) (B) with respect to the following hypothetical taxpayer if, as the majority would have it, the term "underlying tax liability" means assessed amounts. The taxpayer files a return but fails to pay the $100 tax shown on that return, which tax is assessed by the Commissioner (the return assessment). Subsequently, the Commissioner determines that additional tax of $50 is due and sends the taxpayer a notice of deficiency in that amount, which the taxpayer receives and ignores, resulting in a subsequent assessment of $50 (the notice assessment). The taxpayer's total (comp.osite) liability is $150.8 If, at a section 6330 hearing, the taxpayer attempts to challenge the Commissioner's right to collect the $150 liability, and if the taxpayer's underlying tax liability equates to the assessed amounts, then does not the plain language of section 6330(c) (2) (B) dictate that the taxpayer can challenge both the 8 For an example of a composite liability where the taxpayer did not Commissioner, supra. ignore the notice of deficiency, see Fayeghi v. retu n assessment and the notice assessment ($150) (i.e., because the axpayer did not receive a notice of deficiency "for" the compbsite liability of $150)? Yet the majority would reach the opposite conclusion, i.e., the hypothetical taxpayer could challenge neither ässessment., on the basis that the hypothetical taxpayer "was afforded a prior opportunity to challenge such [the comp<psite] liability under the d ficiency procedures." Majority op. . 12. '- It is nott clear to m -how, under the deficiency procèdures, à taxpayer can challenge a return assessment that she has f10t paid. See, e.g., O'Connor v. Commissioner, T.C. Memo. 1992 -410 (Tax Court cannot enter a decision .determining an overpayment of assessed tax where the- assessed tax has ,not been paid; section 6404 (b) forestalls forced abatementr of any assessed inco ne tàx, and "we:know sof no basis upon :which we could hold that petitioner is entitled to credits for any"amounts. assessed but 110t paid") . Alternätively, the majority could stick with its , s inte pretations of the term "underlying tax liability" as assessed amou ts and interpret the term if" in section 6330 (c) (2) (B) to mean to the extent".9 That, ho ever, would be an abandonment of Viz, "The person may also raise at .the hearing challenges to tlle existence or amount of any 1 ax period?to the extent not receive àny statutory notice of deficiencylfor such tax . liability or did not otherwise h ve an. opportuñi'ty.to dispute such tax liability. th underlying tax liability for [as opposed to "if"] the person d;i.d its "plain landuage" claim. - 46 - Finally, the majority might decide that the meaning of the term "underlying tax liability" is not fixed; i.e., it does not always mean all assessed amounts. Thus, e.g., in the case of. a composite liability, the underlying tax liability might be exclusive of the deficiency if the deficiency was the subject of a notice assessment (or the taxpayer otherwise had an opportunity to dispute the deficiency1°) and inclusive of the deficiency in all other instances. Under that argument, in the example used above, the underlying tax liability would be $100, since the deficiency of $50 was the subject of a notice assessment. If, instead, the taxpayer had not received the notice of deficiency and did not otherwise have an opportunity to dispute the deficiency, then the underlying tax liability would be $150. The result under that alternative approach is similar to the result reached under respondent's interpretation in that (at least in some circumstances) the term "underlying tax liability" means something other than the total assessments made by the 1° A taxpayer would have "otherwise had an opportunity to (and would therefore be precluded from challenging at a thus making it dispute" sec. 6330 hearing) such amount without having received a notice of deficiency if, for example, following the Commissioner's examination of her income tax return and determination of a deficiency in tax, restrictions on assessment and collection, unnecessary for the Commissioner to mail deficiency. (2001). to her a notice of See Aguirre v. Commissioner, 117 T.C. 324, 327 the taxpayer had executed a waiver of Commissïoner for the taxable period. From a plain meaning" standipoint,'such a eading of th statüte would seem to be no more preferable than respondent' itnterpretation. Indeed, the benefit of respondent's interpretatipn (i.e.., ·that the term "undierlying tax liability" in section 6330 (.c),(2) (B) refers· only to tl1at<portion of the uríderlying tat liability that.the taxpayer failéd to report) is that it do s no .in most cases require ment 1 gymnastics to square such term with the remaining language of t1e section.1 Based on the foregoing, I an satisfied that,the term "und rlying tax liability", as u ed in section 6330 (c) (2) (B), is susceptible to more than one reasonable interpretation.12 .We may therèfore look beyond the langua e of the provision in. our6 . endeavor to discern Congress's purpóse. 11 Of course, if it turns out that respondent' s inte¼pretation is actually that liabîlity specified on the CDP Notice" sec . 301. 6330-1 (e) (1) , inte¼pretation presents similar ambiguities to, those discussed in the t ext . the term equates to "the tax (which is the term used in & Admin . Reg s . ) (3) , . Proced . , then such 12 In Washington v. Commissioner, 120 T.C. 114, 127 (2003) _J_ , concurring), withoµt benefit of a consideration of (Halpern, the iegislative history discusseél below, term "underlying tax liability", ,as used in sec means the tax on which the Commi sioner based his assessment (whe her shown on the return or~determined by the Commissioner) . I ha e since changed my mind. I concluded that 6330 (c) (2) (B) , the C. Extrinsic Interpretive Aids 1. Use of the Term Elsewhere in the Section Besides appearing in section 6330 (c) (2) (B), the term "underlying tax liability" appears in section 6330(d) (1)." Section 6330(d) (1) provides: SEC. 6330(d) (1). Judicial Review of Determination. -- The person [the subject of a section 6330 determination] may, within 30 days of a determination under this section, appeal such determination -- (A) to the Tax Court have jurisdiction with respect (and the Tax Court shall to such matter); or (B) if the Tax Court does not have jurisdiction of district court of the underlyina tax liability, to a the United States. We have interpreted section 6330(d) (1) to mean that we have jurisdiction in section 6330 cases involving the types of taxes, e.g., income, estate, and gift taxes, that we normally may consider, regardless of whether the section 6330 case in front of us involves a deficiency in such taxes. See Landry v. Commissioner, 116 T.C. 60, 62 (2001). Under that interpretation, the term "underlying tax liability" means "the type of tax at issue"." Neither petitioner nor respondent argues for that As pertinent to this proceeding, both provisions originated with the addition of sec. 6330 to the Internal Revenue Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3401(b), 112 Stat. 747. In Katz v. Commissioner, 115 T.C. 329, 339 (2000), we interpreted the term "underlying tax liability" in sec. 6330(d) (1) (B) as including "any amounts owed by a taxpayer (continued...) meanïng in this case; indeed, such interpretation makes.little sens) in the context of section 6330(c).(2),(B). Accordingly,.we cannot resolve this,case on-the basis of the meaning of the term "underlying tax-liability" as used in,section 6330 (d) (1.) (B) (whi h, in any event, the-majority does not mention) .15 2. Legislative History of Section 6330 (.c) (2) (B) Section 6330 was added to the Internal Rev.enue Code by the. Inte cnal Revenue Service Restruc ur=ing and Reform Act of,1998 (the Act), Pub. L. 105-206, sec. 3401(b), -112 Stat. 747. H.R. . 2676 105th Cong., 2d Sèss. (1998) (H:R. 2676), is the bill that, when enacted, became, thetAct:. As passed by the 'House of Repr sentatives, H.R. 2676 did no contain any vers.ion of section 6330 Section 6330 was added by a Senate:amendment to.H.R. 2676 (the Senate ^amendment). See H.R. 2676, sec. 3 01(b), 105th (...continued) to the tax laws".. As that statement was not necessary pursùant to r solve the case (thê case di amounts), it is dicta that does.not control this case. not involve self-assessed 15 The term underlying tax liability" also appears in sec. 6311 which deals with the payment of taxes by commercïally acceptable means. that "a payment of cred t card shall not be subject Lending Act relating to the underlying tax liability". In relevant part, sec. 6311(d) (3) (A) provides internal * if the error a leged by the person is an error to section 161 of the Truth in * * by use of a reve ue taxes * * * Sèö. ~6311(d) (3)'(B) to payments made by debit rotides a similar rule with res ect Those provisions were added to the Internal Revenue.Code .L..105-34, sec.,1205(a), It is by nonmeans apparent, that- Congress. intended cards. by tile Taxpayer Relief Act of 1997, Pub. 111 Stat. 995. the same meaning to apply for pu poses of- sec. 6311(d),(3) and sec. 6330 (c)-(2) (B) . - 50 - Cong., 2d Sess. (1998), 144 Cong. Rec. S4163 (daily ed. May 4, 1998). The Senate amendment provides without. qualification_ that, at a CDP hearing, taxpayers can raise "challenges to the underlying tax liability as to existence or amount". Id. In response to the Senatè amendment, Administration officials expressed concern over the breadth of the proposed appeal rights, noting, among other concerns, that, under the Senate amendment, taxpayers could challenge even self-assessed (i.e., reported) amounts at CDP hearings. Sëe Statement of Administration Policy, Office of Management and Budget (May 5, 1998), reprinted in Tax Notes Today, 98 TNT 87-18 (May 6, 1998); letter from the Hon. Robert E. Rubin, Secretary of the Treasury, to the Hon. William Archer, Chairman, Committee on. Ways and Means, U.S. House of Representatives (June 2, 1998), reprinted in Daily Tax Report, 112 DTR at L-3 (June 11, 1998) (Department of Treasury views)." The limiting language found in section 6330 (c) (2) (B) originated in the conference agreement on H.R. 2676. While the accompanying committee report (the conference report), H. Conf. Rept. 105-599, at 265-266 (1998), 1998-3 C.B. 747, 1019-1020, reveals neither the impetus for, nor the intended effect of, the 16 See also letter from L. Anthony Sutin, Acting Assistant Attorney General, to the Hon. William V. Roth, Jr., Chairman, . Committee on Finance, U.S. Senate, and the Hon. William Archer, Chairman, Committee on Ways and Means, U.S. House of Representatives (June 8, 1998), 112 DTR at L-7 (June 11, 1998) reprinted in Daily Tax Report, (Department of Justice views). chan e to the Senate amendment reflected in section 6330 c) (2) (B) , . it is reasonable to infer that the conferees were respónding, at . least in part, to the stated concerns of Admir istration..officials and did not tintend the result reached by the najority. The foregoing inference 1s supported by other language in the conference report. Regarding; the scope of the section 6330 hearing, the report provides: owever, the validity of the tax l-iability can be challenged only i-f the taxpayer did not actually receijve - the statutory notice .of deficiency ,or has -not otherwise had an oþportunity to dispute the·liability." Id. at 265, 1998-3 C.B. àt 1019 (emphasis added) . That language suggests that Congress did not intend'to allow challenges to the Commissioner s right to collect the unpaid tàx 1 áÈ>ility in those instances in which the taxpayer' s nonreceipt o a státutory notice of defic eñcy is: solely attributable to the fact that the Comm1ssioner did not determine a eficiency in the first pläce. Rather, the reference to "adtual receipt·bf l'the notice of- deficiency suggests thát, in the case of taxes subject to the deficiency pro'cedures, . such as the income tax, Congress was targeting the situation in which, although the Commissioner determined a deficiency and.properly issued a statutory notice of deficiency, the taxpaÿer id no actually (or copstructively, see Seco v. Commisisioner, 114 T.C. 604 611 (2000)) kecelive that - 52 - notice" and therefore did not have a realistic opportunity to challenge the proposed deficiency in the Tax Court." That interpretation is consistent with respondent's position that the term "underlying tax liability", as used in section 6330 (c) (2) (B), does not include self-assessed amounts. IV. Conclusion I conclude that section 6330(c) (2) (B), describing the limited circumstances in which a taxpayer may challenge the existence or amount of the underlying tax liability at a section 6330 hearing, does not allow the taxpayer to challenge her obligation to pay any reported but unpaid tax." Accordingly, " In informal remarks, one Treasury official specifically See Holmes, identified that situation as the proper focus of any expanded appeal rights. "Proposed Taxpayer Rights Changes Questioned by Treasury Attorney Rizek", 74 Daily Tax Rept. at G-3 (Apr. 17, 1998); see also Donmoyer, Reform Bill's Controversial Elements," 78 Tax Notes 411 (describing Associate Tax Legislative Counsel Rizek as "one of Treasury's chief negotiators during the drafting'of the IRS reform bill"). "Treasury Still Ignoring IRS A notice of deficiency mailed to a taxpayer's "last known address" is sufficient to commence the usual 90-day period during which the taxpayer may petition the Tax Court for a redetermination of taxpayer actually receives the notice. Commissioner, 81 T.C. 42, 52 (1983); Tatum v. Commissioner, T.C. Memo. 2003-115 n.4; see also sec. 6212 (b); sec. 301.6212-2, Proced. regardless of whether the See, e.g., Frieling v. the deficiency, & Admin. Regs. 19 I aCknOwledge that such conclusion is at odds with dicta appearing in prior reports of concessions made by the Commissioner. 119 T.C. 252, 261 (2002) entitled to dispute self-assessed liability at CDP hearing); See Craig v. Commissioner, (Commissioner conceded that taxpayer. was the Court,. which reflect (continued...) putting aside section 301.6330-1(e) (1), (3), Proced. &, Admin. Regs., the reported but. unpaid tax here in*question is not · properly at issue.20 19 . . COntinued) Hoffman v. Commissioner, 119 T.C. 140, 145 (2002) conte¼t of liability) . interest and penalties attributable to a self-assessed (same in the 9° That is not to say that, at a sec. 6330 hearing, a to sec.- 6330 (c) (2) (B) on account of erroneous items on items, e.g., overlookededeductions, not taxpater may nót show that she hás no liability (or a reduced liabi(cid:16)041ity)for a deficiency properly before the Appeals Office pursuant her return (or, on-her return) . heafir g, a taxpaye'r has the right to challenge her obligation to pay ary amóunt shown on her return but remaining unpaid (she does not) . foreclose the taxpayer from submitting an a ended return or, .upon payment, filing a claim for refund. The absence of such a right, however, does not indeed, Thé question is whether, during a sec. 6330 - 54 - CHIECHI, J., dissenting in part and concurring in part: I dissent from the holding and rationale of the majority opinion. I concur with the majority opinion only to the extent that the majority opinion results in allowing petitioners to challenge the existence or the amount of the tax liability specified in the final notice--notice of intent to levy and notice of your right to a hearing (notice of intent to levy) with respect to their taxable year 2000." The foregoing result is the only proper result in the instant case because the following regulations,. which bind respondent, require it: (e) Matters considered at CDP hearing--(1) In * * * The taxpayer also may raise challenges ceneral. to the existence or amount of specified on the CDP Notice for any tax period shown on the CDP Notice if the taxpayer did not receive a statutory notice of deficiency for that or did not otherwise have an opportunity to dispute that tax liability. * the tax liability tax liability * * (3) Questions and answers. The questions and answers illustrate the provisions of this paragraph (e) as follows: "The notice of intent to levy specified that petitioners the tax due, penalties, and interest tax liability for 2000 of $222,315.34. income tax return for 2000 that they filed on or about totaling $213,495, which petitioners reported in their had a total liability consisted of thereon, Federal Oct. 18, 2001, and which respondent assessed, plus any penalties as well as interest on the total 18, 2001, and before Mar. 19, 2002, issued the notice of taxable year 2000. the date on which respondent to petitioners' liability accruing after Oct. intent to levy with respect That - S5 - Q-E2. When is a taxpayer entitled to challenge the existence or amount of the tax liability specified in the CDP Notice? . A-E2. A taxpayer is entitled to challenge the existence or amount of the tax liability specified in the CDP Notice if the taxpa er did not receive a statutory notice of deficiency for such liability or did not otherwise have an o portunity to dispute such liability. * (3) Q&A-E2, Proced. & Admin. Regs.; emphasis added.] [Sec. 301.6330-1(e) (1), * * HOLMES, J., agrees with this dissenting in part and concurring in part opinion.