t c no united_states tax_court joseph giamelli petitioner v commissioner of internal revenue respondent docket no 23150-04l filed date p and his wife filed a joint federal_income_tax return for the tax_year reporting a tax due p failed to pay the amount due with the joint_return r accepted the return as filed and assessed the tax reported therein sec_6201 i r c r issued to p a notice_of_federal_tax_lien and p filed a request for a collection review hearing pursuant to sec_6320 i r c during the pendency of the collection review hearing p and r attempted to negotiate an installment_agreement r issued a notice_of_determination rejecting the proposed installment_agreement when p failed to make estimated_tax payments for later tax years after filing a petition in this court for review of r’s determination p was killed in an automobile accident the estate of p now wishes to be substituted for p and for the first time on appeal of r’s determination seeks to raise challenges to p’s underlying liability held r did not abuse his discretion in rejecting the installment_agreement when p failed to make estimated_tax payments held further the estate of p may not raise the underlying tax_liability on appeal of r’s determination when the underlying liability was not properly raised during the collection review hearing before r’s appeals_office erasmo s bruno for petitioner marc l caine for respondent opinion goeke judge this case is before the court for review of a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination respondent has moved to dismiss for lack of prosecution on the grounds that no party has been substituted for joseph giamelli since his death alternatively respondent has moved for summary_judgment on the grounds that there is no evidence that the appeals officer abused her discretion in sustaining the proposed collection action because mrs giamelli as the executrix of mr giamelli’s estate has moved to be substituted as the petitioner in this case respondent’s motion to dismiss for lack of 1unless 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 prosecution shall be denied further because mrs giamelli has failed to present any evidence to create a genuine question of fact whether the appeals officer abused her discretion sustaining the proposed collection action respondent’s motion for summary_judgment shall be granted background joseph giamelli and his wife joann giamelli resided in new york at the time this petition was filed mr and mrs giamelli filed a joint form_1040 u s individual_income_tax_return for the tax_year while mr and mrs giamelli reported a tax due they did not include payment of the tax due with the return respondent then assessed the tax due shown on the return and sent mr and mrs giamelli notice_and_demand for payment when mr and mrs giamelli failed to pay respondent issued a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 listing an unpaid balance of assessment of dollar_figure mr giamelli while represented by counsel then submitted to respondent form request for a collection_due_process_hearing and according to mrs giamelli signed her name without her knowledge or permission mr giamelli’s request for a collection review hearing was assigned to one of respondent’s appeals officers mr giamelli informed the appeals officer that he wished to enter into an installment_agreement in which he would pay dollar_figure on a monthly basis to satisfy the tax_liability during the ensuing months as mr giamelli and the appeals officer were discussing the installment_agreement mr giamelli continued to send monthly checks of dollar_figure to respondent in partial payment of the tax_liability on date the appeals officer informed mr giamelli that under internal_revenue_service irs guidelines the installment_agreement could not be processed if he was not compliant with his estimated_tax payments for tax years after mr giamelli did not become compliant with his estimated_tax payments on date respondent issued to mr and mrs giamelli the notice_of_determination sustaining the proposed collection action for the tax_liability on date mr giamelli without mrs giamelli’s knowledge or signature filed a petition for lien or levy action under sec_6320 the only issue raised by mr giamelli in his petition was his desire to be allowed to enter into an installment_agreement with respondent for the tax_year after the petition was filed mr giamelli and respondent agreed to an installment_agreement to resolve the outstanding tax_liability and mr giamelli agreed to sign the necessary decision document to submit to the court in date before the decision document was executed mr giamelli was killed in an automobile accident subsequently respondent received a telephone call from erasmo bruno informing respondent of mr giamelli’s death and that mrs giamelli had been named the executrix of his estate mr bruno further informed respondent that he was now counsel for mrs giamelli and the estate and indicated to respondent that mrs giamelli was withdrawing from the installment_agreement at a hearing before this court on respondent’s motions mr bruno filed a motion to substitute the estate of joseph giamelli deceased joann giamelli executrix as the petitioner in this case mr bruno represented to the court that mrs giamelli had received letters to administer her husband’s estate mr bruno further informed the court that mrs giamelli in her personal capacity had no knowledge of the outstanding tax_liability and had not authorized or signed the petition filed with this court by mr giamelli accordingly the court dismissed the portion of this case relating to mrs giamelli in her personal capacity for lack of jurisdiction mrs giamelli as executrix of the estate now wishes to disclose certain wrongdoings of her husband that she believes would alter the underlying tax_liability for the estate has suggested to the court that mr giamelli was involved in a fraudulent scheme whereby certain bribes were paid_by mr giamelli which were not disclosed on the income_tax return in order to conceal this illegal activity the estate would like to disclose this alleged fraudulent scheme in order to deduct the alleged illegal payments and thereby show that the tax due should be less than originally reported discussion i motion to dismiss for lack of prosecution respondent first moves for dismissal for lack of prosecution because no party has been substituted for mr giamelli since his death in july of under rule a if a petitioner dies the court on motion of a party or the decedent’s successor or representative or on its own initiative may order substitution of the proper parties under rule c the capacity of an individual to be substituted is determined by local law under new york law a personal representative is a person who has received letters to administer the estate of a decedent n y est powers trusts law sec 1-dollar_figure mckinney at a hearing before this court on respondent’s motion to dismiss counsel for mrs giamelli filed a motion to substitute as the petitioner the estate of joseph giamelli deceased joann giamelli executrix in the place of joseph giamelli counsel represented to the court that mrs giamelli had received letters to administer her husband’s estate while mrs giamelli’s motion did not include a copy of the letters to administer the estate we are satisfied on counsel’s representation that mrs giamelli has been appointed the executrix of her husband’s estate and that she wishes to continue with his petition in that capacity accordingly because we find that mrs giamelli wishes to be substituted for mr giamelli in her capacity as the executrix of mr giamelli’s estate an appropriate order will be entered amending the caption of this case further respondent’s motion to dismiss for lack of prosecution will be denied ii motion for summary_judgment respondent has also filed a motion for summary_judgment pursuant to rule a respondent argues for summary_judgment on the grounds that the appeals officer properly exercised her discretion in rejecting the proposed installment_agreement and sustaining the proposed collection action because mr giamelli was not in compliance with his current tax obligations summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 summary_judgment may be granted where there is no genuine issue of any material fact and a decision may be rendered as a matter of law rule a and b see 98_tc_518 affd 17_f3d_965 7th cir the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences will be read in a manner most favorable to the party opposing summary_judgment 85_tc_812 this collection review proceeding was filed pursuant to sec_6320 which provides for tax_court review of respondent’s administrative determinations to proceed with the collection of tax_liabilities via liens where the validity of the underlying tax_liability is at issue in a collection review proceeding the court will review the matter de novo 115_tc_35 however where the underlying liability is not at issue we review the appeals officer’s determinations regarding the collection action for an abuse_of_discretion 114_tc_176 mr giamelli did not challenge the validity of the underlying tax_liability and thus this court would pursuant to precedent review respondent's administrative determinations for abuse_of_discretion that is whether the determinations were arbitrary capricious or without sound basis in fact or law see 114_tc_604 112_tc_19 internal_revenue_service guidelines require a taxpayer to be current with filing and payment requirements to qualify for an installment_agreement administration internal_revenue_manual cch sec_5 e at big_number the appeals officer in reliance on the irs guidelines rejected mr giamelli’s proposed installment_agreement because he was not in compliance with his estimated_tax payments for tax years after reliance on a failure to pay current taxes in rejecting a collection alternative does not constitute an abuse_of_discretion see 123_tc_1 affd 412_f3d_819 7th cir the estate has not presented any evidence to suggest the appeals officer abused her discretion in rejecting mr giamelli’s proposed installment_agreement accordingly without any evidence to the contrary we find that respondent’s appeals_office did not abuse its discretion in sustaining the proposed collection action based on the record before it we now turn to arguments raised by the estate’s new counsel for the first time after mr giamelli’s death the estate now argues that mr giamelli overstated his income_tax_liability in an effort to conceal fraudulent business dealings and that consequently the estate is only a partial successor_in_interest to mr giamelli the estate reasons that because the estate has an interest in conflict with mr giamelli it should be allowed 2the estate’s new arguments were not raised in the petition by the former counsel for mr giamelli accordingly were this case to survive summary_judgment the estate would be required to seek leave to amend the petition by informal agreement the parties have argued respondent’s motion for summary_judgment presuming the estate would be permitted to raise these new arguments and respondent argues for summary_judgment even if these new arguments were accepted as true to challenge the underlying liability alternatively the estate asserts that it is a separate person entitled to its own collection review proceeding the estate’s arguments imply that we may consider arguments about the underlying tax_liability never raised before in the administrative collection review proceedings this court’s jurisdiction in a collection review proceeding under sec_6320 and sec_6330 is dependent on the issuance of a valid notice_of_determination by respondent’s appeals_office and the timely filing of a petition for review sec_6330 see also 124_tc_36 the focus of any review in this court under sec_6330 is the determination of respondent’s appeals_office under sec_6330 114_tc_492 under sec_6330 the determination of the appeals officer shall take into consideration the issues raised under paragraph sec_6330 permits the taxpayer to sec_6330 provides as follows issues at hearing -- a in general --the person may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy including-- i appropriate spousal defenses ii challenges to the appropriateness of continued raise at the hearing any relevant issue relating to the unpaid tax or the proposed collection action sec_6330 permits a taxpayer to raise at the hearing challenges to the existence or amount of the underlying tax_liability under certain circumstances the statute contemplates consideration of issues raised by the taxpayer at the hearing thus if an issue is never raised at the hearing it cannot be a part of the appeals officer’s determination respondent’s interpretive regulation addressing the scope of an appeal to the tax_court of a determination by an appeals officer is consistent with this statutory language sec_301_6320-1 q a-f5 proced admin regs in seeking continued 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 raise at the hearing challenges to the existence or 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 4the revised regulations effective date now state in seeking tax_court review of a notice_of_determination the taxpayer can only ask the court to consider an issue including a challenge to the underlying liability that was properly raised in the taxpayer’s cdp hearing sec_301 continued tax_court review of appeals’ notice_of_determination the taxpayer can only request that the court consider an issue that was raised in the taxpayer's cdp hearing while we think the statute is clear the legislative_history of sec_6320 and sec_6330 further confirms our reading judicial review the conferees expect the appeals officer will prepare a written_determination addressing the issues presented by the taxpayer and considered at the hearing the determination of the appeals officer may be appealed to tax_court where the validity of the tax_liability was properly at issue in the hearing and where the determination with regard to the tax_liability is a part of the appeal no levy may take place during the pendency of the appeal the amount of the tax_liability will in such cases be reviewed by the appropriate court on a de novo basis h conf rept pincite 1998_3_cb_747 the history further states it is the responsibility of the taxpayer to raise all relevant issues at the time of the pre-levy hearing id while the conferees’ description of a tax_liability which was properly at issue could be read as broader than matters actually raised with the appeals officer the statutory language and conferees also anticipate tax_court review of a determination regarding the tax_liability sec_6330 h conf rept supra pincite c b pincite continued f q a-f3 proced admin regs if the tax_liability is not raised with the appeals officer the determination would not have addressed it the statute and regulation make clear that in this context we do not enjoy the same discretion as the courts of appeals to consider issues raised for the first time on appeal compare sec_6330 and sec_301_6320-1 q a-f5 proced admin regs with eg 378_f3d_210 2d cir recognizing a court of appeals’ discretion to entertain arguments raised for the first time on appeal accordingly we shall not review an underlying liability when raised for the first time on appeal of a notice_of_determination we note that our jurisdiction pursuant to sec_6330 differs from our jurisdiction under sec_6213 in deficiency cases taxpayers may raise any issue regarding their tax_liability for the period in question regardless of their prior communication of such issues to the commissioner our statutory role in such cases is for a redetermination of a deficiency and to determine the amount of an overpayment 5we do not address here the question of whether a taxpayer having raised one issue with respect to his or her underlying liability in a collection review hearing may then raise new and different issues with respect to the underlying liability for the first time on appeal of respondent’s determination before this court in this case mr giamelli did not raise any questions with respect to his underlying liability and the appeals officer did not consider the underlying liability in making her determination sec_6213 sec_6512 in contrast issues under sec_6330 must have been raised properly when the appeals officer made her determination before we can review those issues in the context of an appeal of that determination the benefit of encouraging taxpayers to raise liability questions first with the appeals officer provides further support for the approach in the regulation allowing the tax_liability to be raised initially only after the case has been petitioned to this court would eliminate the appeals officer’s role and permit liability issues to be litigated without any prior consideration by any level of respondent’s organization liability issues are likely to arise under sec_6330 based on requests for reconsideration of taxes previously reported on a return the judicial consideration of such liabilities without some prior review by the commissioner would frustrate the administrative review process created by sec_6330 this of course is not the first time we have addressed the scope or our review of respondent’s collection determinations see bruce v commissioner tcmemo_2007_161 bourbeau v commissioner tcmemo_2003_117 tabak v commissioner tcmemo_2003_4 115_tc_582 n 6in 126_tc_1 we held that our jurisdiction under sec_6330 is more limited than in the deficiency context and does not include the authority to determine an overpayment or to order a refund affd 21_fedappx_160 4th cir previously we have left the door open to the possibility that we might consider issues not raised in the administrative hearing see 118_tc_488 generally it would be anomalous and improper for us to conclude that respondent's appeals_office abused its discretion under sec_6330 in failing to grant relief or in failing to consider arguments issues or other matter not raised by taxpayers or not otherwise brought to the attention of respondent's appeals_office emphasis added we hold today that we do not have authority to consider sec_6330 issues that were not raised before the appeals_office thus while the estate now disagrees with the income_tax returns this has no bearing on the limited decision before this court mr giamelli submitted a form request for a collection_due_process_hearing to respondent the only issue raised by mr giamelli in the subsequent hearing with respondent’s appeals officer was his desire to enter into an installment_agreement to satisfy the tax_liability mr giamelli while represented by counsel did not challenge the underlying liability and the appeals officer did not consider it 7this case does not involve an issue regarding the accuracy or completeness of the administrative record see 125_tc_301 affd 469_f3d_27 1st cir when mr giamelli failed to become compliant with his estimated_tax obligations the appeals officer issued a notice_of_determination rejecting the proposed installment_agreement and sustaining respondent’s collection action because the only issue raised with the appeals officer was the installment_agreement our review is limited to the determination reached by the appeals officer to reject the proposed installment_agreement because of mr giamelli’s noncompliance the argument that an estate is a separate person and is entitled to its own collection review hearing fails for the same reason while the estate has cited no authority for this novel argument and we know of none such an argument is not timely as discussed above our review is limited to the determination issued by respondent’s appeals_office the estate has presented no evidence to suggest that the appeals officer abused her discretion on the facts as they were presented to her by mr giamelli when she declined to enter into an installment_agreement with mr giamelli accordingly without any evidence to create a question of fact whether respondent’s appeals_office abused its discretion respondent’s motion for summary_judgment will be granted to reflect the foregoing an appropriate order and decision will be entered reviewed by the court cohen halpern chiechi foley thornton haines kroupa and holmes jj agree with this majority opinion wherry j concurring the majority opinion does not expressly overrule 118_tc_488 a choice of action with which i agree the instant case and magana raise different issues this case is a question of jurisdiction to consider a new issue underlying tax_liability which was not raised at the appeals_office level under sec_6330 magana was a question of whether to consider a new_matter hardship which was not raised at the appeals_office level in an abuse_of_discretion case under sec_6330 there is no discretion much less an abuse_of_discretion in deciding whether we have jurisdiction over a sec_6330 matter either we have jurisdiction to consider the issue or we do not given this difference and the potential issue of an appeals_office hearing record’s accuracy i believe there are at least two circumstances where the rule in magana potentially permitting the consideration of arguments issues or other matters which the record indicates were not brought to the appeals office’s attention before the determination_letter was sent may continue to apply first in my view the record in a sec_6320 and or sec_6330 case is not sacrosanct initially it is prepared by respondent as a part of the stipulation of facts or on occasion as an exhibit to the answer or a motion for summary_judgment which document is then filed with the court and then incorporated by the clerk’s office in the court’s case record respondent now prepares the record presumably in accordance with sec_301_6330-1 q a-f4 proced admin regs which clarified office_of_chief_counsel notice cc-2006-019 date that office_of_chief_counsel notice had incorporated and superseded office_of_chief_counsel notice cc-2006-008 date and updated and replaced office_of_chief_counsel notice cc-2003-016 date errors in the record will inevitably occur from time to time given the large number of records their complexity and the number of people participating in the various stages of the collection_due_process cdp procedures where the accuracy of the administrative record is challenged by a party it is ultimately up to the court to determine the accuracy and completeness of the administrative record to make this determination the court may hold an evidentiary hearing to explore and document whether relevant material below was excluded from the record and or the record was inappropriately augmented after the appeals_office hearing and fla power light co v lorion 470_us_729 934_f2d_1127 10th cir 885_f2d_551 9th cir 125_tc_301 affd 469_f3d_27 1st cir 45_fedclaims_174 o’toole v u s secy 471_fsupp2d_1323 ct intl trade the issuance of the determination_letter the majority opinion does not disagree with this conclusion see majority op n second appeals_office hearings are informal see 115_tc_329 115_tc_35 sec_301_6330-1 q a-d6 proced admin regs there exists no right to subpoena witnesses or documents in connection with a sec_6330 appeals_office hearing see 118_tc_365 affd 329_f3d_1224 11th cir 118_tc_162 davis v commissioner supra pincite sec_301_6330-1 q a-d6 proced admin regs while taxpayers must raise all pertinent issues at the appeals_office hearing and make a timely good_faith effort to produce evidence in support of those issues they may be unable to provide sufficient evidence to convince a skeptical appeals_office employee this is particularly true where the supporting evidence includes the testimony or documents of uncooperative third parties in such circumstances the taxpayer may seek to provide additional evidence at the sec_6330 trial utilizing the tax court’s rule subpoena power or the threat thereof in such cases in determining whether the appeals_office abused its discretion the taking of additional evidence at trial with respect to a previously raised issue may be appropriate 123_tc_85 revd 439_f3d_455 8th cir congress enacted sec_6330 as a part of remedial legislation the internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_685 to ensure taxpayer rights against alleged internal_revenue_service mistreatment by affording taxpayers formal procedures designed to ensure due process where the irs seeks to collect taxes by levy including by seizure s rept pincite 1998_3_cb_537 because i believe that due process in formal judicial actions may need to include the right to call witnesses where that right was not previously afforded and facts are in dispute i continue to believe that robinette was correctly decided haines j agrees with this concurring opinion swift j respectfully dissenting in the past 7-plus years we have dealt with new issues raised in collection cases efficiently and summarily generally via summary_judgment and we have done so without limiting our authority or our jurisdiction the door that 118_tc_488 left only slightly open for issues involving unusual situations and spousal defenses has not in any way impeded our summary disposition post magana of a large majority of collection cases indeed it is estimated that approximately out of collection cases already are disposed of by this court via summary proceedings the magana rule that sec_6330 issues not raised with respondent’s appeals_office generally will not be considered by this court was based on a judicially crafted standard of review namely abuse_of_discretion and on the simple logic that appeals_office discretion could not have been involved let alone an abuse of that discretion where an issue was not raised at the appeals_office collection hearing this abuse_of_discretion standard of review is not set forth in the statutory language of sec_6320 or sec_6330 rather this standard of review is based on one sentence in the legislative_history in 114_tc_604 and 114_tc_176 in first adopting the abuse_of_discretion standard we relied on h conf rept pincite 1993_3_cb_747 which continued the treasury regulations on which the majority opinion relies do not speak in terms of our authority or jurisdiction and the commissioner by regulation cannot add to or restrict our authority or our jurisdiction no appellate court or other federal trial_court has criticized our magana opinion and neither party in this case expressly asks us to overrule or to modify magana the tax_court has been given a mandate from congress indeed recently an exclusive one to review respondent’s collection procedures we have taken this mandate seriously and where the occasion has demanded it either put a stop to the collection continued provided as follows the conferees expect the appeals officer will prepare a written_determination addressing the issues presented by the taxpayer and considered at the hearing where the validity of the tax_liability was properly at issue in the hearing and where the determination with regard to the tax_liability is part of the appeal no levy may take place during the pendency of the appeal the amount of the tax_liability will in such cases be reviewed by the appropriate court on a de novo basis where the validity of the tax_liability is not properly part of the appeal the taxpayer may challenge the determination of the appeals officer for abuse_of_discretion sec_6330 was amended by the pension_protection_act of publaw_109_280 and b 120_stat_1019 to give this court exclusive jurisdiction to hear appeals from respondent’s appeals_office notices of determination in collection matters issued after date process altogether or remanded the matter for further review by respondent’s appeals_office by its reading of sec_301 f q a-f5 proced admin regs the majority opinion effectively places on us a jurisdictional restriction ie that we have no authority to consider an issue unless the issue was first raised during the appeals_office collection hearing we must be reminded of what we said in 88_tc_492 when the regulation interpreting a statute is written by the very agency whose ‘abusive actions or overreaching’ were intended to be deterred by that statute we must be especially vigilant to insure that the regulation ‘harmonizes with the plain language of the statute its origins and its purpose ’ the majority’s interpretation of the statutory provisions and of respondent’s regulations is particularly unfortunate here where it is clear that we would have de novo review over the matter that the estate now seeks to raise namely the underlying tax_liability emphasis on the word matter is appropriate because that is what the statute governing our jurisdiction says sec_6330 provides as follows sec_6330 proceeding after hearing -- judicial review of determination --the person may within days of a determination under this section appeal such determination-- a to the tax_court and the tax_court shall have jurisdiction with respect to such matter emphasis supplied although titled judicial review of determination the statutory language in subparagraph a that grants our jurisdiction uses the word matter not determination if congress intended to limit our authority or our jurisdiction to issues raised in the appeals_office hearing or contained in the notice_of_determination congress certainly could have said that but congress did not--it granted us jurisdiction over the matter clearly a broader term indeed a broader interpretation is consistent with the legislative_history the legislative_history states that where the underlying tax_liability is properly at issue the reviewing court shall proceed on a de novo basis and the legislative_history does not preclude review de novo of the underlying tax_liability where it was not raised at the appeals_office hearing thus as to issues to be reviewed de novo the paragraph of the legislative_history cited in the majority opinion is inclusive not exclusive the court’s authority or jurisdiction over issues to be reviewed de novo should not be limited to issues raised at the appeals_office hearing for example our review of a net_operating_loss nol_carryback that arises after a collection appeals_office hearing should not be precluded on the basis of our lack of authority or jurisdiction in the context of deficiency cases the court often has continued a case in order to allow respondent to audit an nol_carryback that did not arise until after the petition was filed the majority opinion could be read to raise a serious question as to our authority or jurisdiction to remand any case for further appeals_office hearing on an issue that has not been raised at the initial appeals hearing in spite of the fact that in some of our collection cases respondent’s appeals_office appears to have made a determination where there was no hearing at all see eg 117_tc_183 118_tc_488 prudently left open the possibility that we might consider issues not raised at appeals because unusual situations may arise where it would make little sense not to consider such issues the majority opinion p states we note that our jurisdiction pursuant to sec_6330 differs from our jurisdiction under sec_6213 this and other courts have been heading in this direction for some time now--distinguishing sec_6320 and sec_6330 proceedings from deficiency proceedings--and it calls into question some of our early decisions that described how sec_6320 and sec_6330 operate our early caselaw regarding sec_6320 and sec_6330 was based on similarities to tax_deficiency proceedings not on differences for example in 115_tc_35 we concluded that appeals_office collection hearings under sec_6320 and sec_6330 should be handled in the same manner that traditional appeals_office hearings involving tax deficiencies have been handled as follows hearings at the appeals level have historically been conducted in an informal setting citing sec_601_106 statement of procedural rules when congress enacted sec_6330 and required that taxpayers be given an opportunity to seek a pre-levy hearing with appeals congress was fully aware of the existing nature and function of appeals nothing in sec_6330 or the legislative_history suggests that congress intended to alter the nature of an appeals hearing so as to compel the attendance or examination of witnesses when it enacted sec_6330 congress did not provide either appeals or taxpayers with statutory authority to subpoena witnesses the references in sec_6330 to a hearing by appeals indicate that congress contemplated the type of informal administrative appeals hearing that has been historically conducted by appeals and prescribed by sec_601_106 statement of procedural rules the nature of the administrative appeals process does not include the taking of testimony under oath or the compulsory attendance of witnesses we therefore hold that a hearing before appeals pursuant to sec_6330 does not include the right to subpoena witnesses citations and fn ref omitted the regulation on which the majority opinion relies under sec_6320 is identical to the regulation under sec_6330 and one might argue that the majority’s holding herein applies equally to sec_6330 levy cases our concerns regarding the majority opinion are even more obvious in the context of sec_6330 collection cases sec_301_6320-1 q a-f5 and sec_301_6330-1 q a-f5 proced admin regs in effect for the year in issue in the instant case contain identical language as follows q-f5 what issue or issues may the taxpayer raise before the tax_court or before a district_court if the taxpayer disagrees with the notice_of_determination a-f5 in seeking tax_court or district_court review of appeals' notice_of_determination the taxpayer can only request that the court consider an issue that was raised in the taxpayer's cdp hearing consistent with the pension_protection_act of publaw_109_280 120_stat_1019 giving the tax_court exclusive jurisdiction over both sec_6320 and sec_6330 collection cases the above regulations have been updated and the language of former q a-f5 has been moved to q a-f3 current sec_301_6320-1 q a-f3 and sec_301_6330-1 q a-f3 proced admin regs contain identical language as follows q-f3 what issue or issues may the taxpayer raise before the tax_court if the taxpayer disagrees with the notice_of_determination a-f3 in seeking tax_court review of a notice_of_determination the taxpayer can only ask the court to consider an issue including a challenge to the underlying tax_liability that was properly raised in the taxpayer's cdp hearing an issue is not properly raised if the taxpayer fails to request consideration of the issue by appeals or if consideration is requested but the taxpayer fails to present to appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence spousal defenses are specifically mentioned in sec_6330 as issues that can be raised in both sec_6320 lien and sec_6330 levy cases assume that a petitioner in a sec_6330 levy case failed to raise a spousal defense before appeals but now wishes to raise a spousal defense in the sec_6330 tax_court proceeding the majority opinion would deny our authority in the sec_6330 case to consider the spousal defense however sec_6015 would allow the petitioner to file an election for spousal relief under sec_6015 once the sec_6015 election is filed the restriction on respondent’s collection action imposed by sec_6015 would go into effect sec_6015 provides in part as follows sec_6015 petition for review by tax_court -- in general --in the case of an individual against whom a deficiency has been asserted and who elects to have subsection b or c apply or in the case of an individual who requests equitable relief under subsection f -- b restrictions applicable to collection of assessment -- the election can be made not later than years after respondent has begun collection activity sec_6015 c b a notice_of_intent_to_levy is considered the initiation of a collection activity sec_1_6015-5 income_tax regs i in general --except as otherwise provided in sec_6851 or sec_6861 no levy or proceeding in court shall be made begun or prosecuted against the individual making an election under subsection b or c or requesting equitable relief under subsection f for collection of any assessment to which such election or request relates until the close of the 90th day referred to in subparagraph a ii or if a petition has been filed with the tax_court under subparagraph a until the decision of the tax_court has become final the above provision would prohibit any levy until the sec_6015 election is finally resolved thus any final_decision in the sec_6330 case allowing the levy to proceed would be unenforceable against the electing spouse until the sec_6015 matter was resolved this probably would be reason to stay the sec_6330 case pending outcome of the sec_6015 matter however if the sec_6330 case were not stayed and we entered a decision authorizing the levy action the levy still would be prohibited until resolution of the sec_6015 election see sec_6015 indeed the sec_6015 election might eventually result in a separate sec_6015 stand-alone case before us and we might be called upon to enjoin levy action that we previously authorized in the sec_6330 case does this make any sense the court’s authority to enjoin a levy is provided in sec_6015 the advantage of the ruling in 118_tc_488 is that it gives us the latitude to deal with unusual situations as they arise rather than follow a wooden rule that may produce undesirable results lastly the statutory language of sec_6330 refers to a change_in_circumstances and makes it clear that certainly in the context of a levy case a change in a taxpayer’s circumstances may affect an appeals_office determination and may justify a result different from that reached in the initial appeals_office determination the facts before us in this case involve a significant change_in_circumstances ie a taxpayer has died and has been replaced as the party in interest by the decedent’s estate which did not exist at the time of the initial appeals_office hearing and which therefore could not have been present and could not have raised any issue at the hearing the majority’s holding that we have no authority or jurisdiction even to consider whether the taxpayer’s death might be covered by the exception preserved in magana v commissioner supra pincite for unusual illness or hardship or other special circumstance handcuffs this court from considering and reviewing a change in a taxpayer’s circumstance even though the change_of circumstance has occurred after the appeals_office hearing is final and while the case is pending before us the majority opinion may force this court in such a situation to proceed--without any ability to remand the case to respondent’s appeals office--and to decide a case based on issues and facts raised in the initial appeals_office hearing and in complete disregard of the significant change_in_circumstances what for example if while involved in a pending collection case a taxpayer wins a lottery would respondent expect us in deciding the case--perhaps deciding whether to approve an installment_agreement or an offer in compromise--to ignore the taxpayer’s change in financial condition i believe it to be unnecessary inappropriate and erroneous for us to base our holding herein on lack of authority or jurisdiction and to eliminate the special circumstances exception of magana v commissioner supra colvin wells laro and vasquez jj agree with this dissenting opinion vasquez j dissenting as pointed out by judge swift in 115_tc_35 we created the informal setting and procedures for sec_6330 hearings subsequent jurisprudence has rendered the holding of davis obsolete and has eviscerated the court’s sec_6330 review function the current state of sec_6330 jurisprudence leaves us with two equally unpalatable choices overrule davis and require the irs to conduct more formal hearings in order to create a record sufficient for the court to fulfill our review function or steadily become more handcuffed and less able to meaningfully review sec_6330 cases i believe either of these eventualities is contrary to the purpose of sec_6330 after a year of intensive work days of public hearings three field hearings and hundreds of hours in private sessions with public and private sector experts academics and citizens’ groups the report of the national commission on restructuring the internal_revenue_service a vision for a new irs irs restructuring report at v-vi concluded that the irs needed to be more accountable and that a significant part of improving the system would be taxpayers’ ability to seek redress or review of irs actions in the courts expeditiously the irs restructuring report was the foundation for the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_685 during the hearings and deliberations over rra many members of congress spoke of an agency out of control and the need for a system of checks and balances to oversee the irs so that the irs was not acting as judge and jury and to ensure the irs was not abusing taxpayers’ rights a witness from the u s general accounting office gao stated that although the irs believed that it had adequate checks and balances in place to identify misuse of collection actions the gao did not believe adequate checks and balances were in place cong rec s4400 daily ed date sec_4521 daily ed date cong rec h5354 daily ed date practices and procedures of the internal_revenue_service hearings before the s comm on finance 105th cong 1st sess s hrg first hearing cong rec s9992-s9993 daily ed date s11584-s11591 s11594 daily ed date cong rec h10004 h10024 h10042 daily ed date irs restructuring hearings on h_r before the s comm on finance 105th cong 2d sess s hrg irs restructuring hearings irs oversight hearings before the s comm on finance 105th cong 2d sess s hrg irs oversight hearings cong rec s4028 s4031 daily ed date s4184 sec_4191 daily ed date s4407 s4415 daily ed date sec_4472 s4478 s4490 sec_4495 s4499 daily ed date s7629 daily ed date s7718 daily ed date cong rec h5359 daily ed date s hrg first hearing pincite the u s general accounting office is now called the u s government accountability office see qwest commcns intl inc continued senators heard from the former historian of the irs the gao and the acting commissioner that the irs did not maintain adequate or any records regarding their collection activities the witness from the gao further noted that the collection case files were often incomplete or inaccurate the acting commissioner even admitted that there have been records management problems witnesses including former commissioners both in their own statements and in response to questions by senators agreed that judicial review of collection actions was necessary and specifically recommended the tax_court as the forum to provide checks and balances by allowing taxpayers to appeal irs collection actions to the tax_court congressmen and senators also stated that review of collection actions needed to be done continued v fcc 398_f3d_1222 n 10th cir 67_fedclaims_218 s hrg first hearing pincite s hrg first hearing pincite s hrg first hearing pincite s hrg first hearing pincite s hrg irs restructuring hearings pincite expeditiously by an independent judge that is not part of the irs and decided on the tax_court as the forum although some senators wanted to pass h_r 105th cong 1st sess the internal_revenue_service restructuring and reform act of h_r as quickly as possible h_r did not contain any provision similar to sec_6320 and sec_6330 senator roth chairman of the senate_finance_committee and the senator presiding over hearings to reform the irs and other senators felt that congress should not rush to pass irs reform legislation and one issue that needed to be further addressed was insuring that all taxpayers have due process and that the irs does not abusively use its liens and seizures authority dollar_figure during the senate hearings senator gramm stated that before somebody’s home or somebody’s business can be taken by the irs that they get their day in court to make their case where they s hrg first hearing cong rec s9992-s9993 daily ed date cong rec h10031 daily ed date s hrg irs restructuring hearings pincite cong rec s4031 daily ed date s4184 sec_4191 daily ed date s4490 sec_4494 s4508 daily ed date cong rec h10006-10022 daily ed date cong rec s4508 daily ed date h conf rept pincite 1998_3_cb_747 cong rec s11913-s11914 daily ed date s12100 daily ed date s hrg irs restructuring hearings pincite are heard where an independent judgment is rendered senator nickles also stated some people were saying well let us just pass the house bill we can pass that unanimously and it can be signed into law by the bill but we are adding a provision that came out in oklahoma and also the hearings here that a taxpayer would be given the opportunity for a court hearing before liens levies or seizures of his assets that is a very important provision it was not in the house bill but is in the senate bill s hrg irs oversight hearings pincite congress knew that proceedings in tax_court would be conducted de novo in response to a question from senator roth what can be done to protect the taxpayers’ legitimate interest michael saltzman--an attorney with years of experience a professor of taxation and author of a treatise on irs practice and procedure--responded that the tax_court has ruled and has for years stated that what happens in the tax_court is a de novo proceeding dollar_figure emphasis added s hrg irs restructuring hearings pincite s hrg irs restructuring hearings pincite as judges halpern and holmes aptly wrote it is important to distinguish between two concepts--‘scope of review’ and ‘standard of review’--that delimit judicial review of agency action 122_tc_32 halpern and holmes jj dissenting vacated 439_f3d_1009 9th cir citing 934_f2d_1127 10th cir they explained the scope of judicial review refers merely to the evidence the reviewing court will examine in reviewing an agency decision the standard of judicial review refers to how the reviewing court will examine that evidence id pincite i continued the legislative_history establishes that in sec_6330 cases congress intended there to be a trial de novo in the tax_court that we can receive evidence beyond the administrative record and we may consider issues not raised at the sec_6330 hearing davis was premised on the idea that we would be able to hear issues and receive evidence beyond those raised or provided at the sec_6330 hearing if our review is limited to those issues raised at the sec_6330 hearing and possibly to the administrative record davis is outdated in order to fulfill our sec_6330 review function as mandated by congress after lengthy and careful deliberation the court needs more information than is provided by current sec_6330 hearings this statement is tempered by almost a decade of experience handling sec_6330 cases where the irs consistently has attempted to limit the evidence the court can review frequently the court is provided virtually no record at all or the scant documents accumulated by appeals making meaningful review impossible by abandoning our precedent and interpreting the statute in continued believe it is incorrect to conclude that when the standard of review is abuse_of_discretion that a fortiori the scope of our review is limited to the administrative record a manner contrary to the intent of congress the majority opinion bears striking similarity to the decision in 127_tc_7 i hope that congress moves as expeditiously to correct the jurisprudential errors regarding sec_6330 as it did to correct the jurisprudential errors regarding section dollar_figure see tax relief and health care act of publaw_109_432 div c sec_408 120_stat_3061 within a matter of months congress reinstated our jurisdiction to review the commissioner’s determinations under sec_6015 as we originally had held in 118_tc_494 revd 439_f3d_1009 9th cir 127_tc_7 abandoning ewing 446_f3d_785 8th cir affg in part and vacating in part tcmemo_2004_93 439_f3d_1009 9th cir revg 118_tc_494 and vacating 122_tc_32 marvel j dissenting this court continues its struggle with sec_6320 and sec_6330 in this case the majority holds that mr giamelli’s estate the estate may not raise any issue before this court that mr giamelli did not raise at his sec_6320 administrative hearing sec_6320 hearing before the internal_revenue_service irs appeals_office because the majority opinion rejects both issues raised by the estate without drawing a distinction between an issue that could have been raised at the administrative hearing and was not and an issue that arises because of a change_in_circumstances occurring after the administrative hearing was held and the notice_of_determination was issued i respectfully dissent in this case mr giamelli and his wife had filed a joint federal_income_tax return for but did not pay the tax that was due with the return after assessing the tax reported on the return and requesting payment respondent issued to the giamellis a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 mr giamelli through counsel timely requested an administrative hearing under sec_6320 the majority opinion states that mr giamelli informed the appeals officer to whom his hearing request was assigned that he wished to enter into an installment_agreement and that the appeals officer and mr giamelli discussed the installment 1a hearing requested under sec_6320 is conducted in accordance with sec_6330 d other than par b thereof and e agreement request during the ensuing months the discussions did not result in an installment_agreement because mr giamelli was not current with his estimated_tax payments for tax years after as required by existing irs guidelines after respondent issued a notice_of_determination to the giamellis sustaining the tax_lien_filing for mr giamelli filed a petition with this court pursuant to sec_6320 and sec_6330 the only issue raised by mr giamelli in his petition was his desire to be allowed to enter into an installment_agreement to resolve his unpaid tax_liability for respondent and mr giamelli subsequently reached an agreement regarding an installment_agreement unfortunately before a decision document could be executed by the parties mr giamelli was killed in an automobile accident the majority opinion indicates that mr giamelli’s estate of which mrs giamelli is the executrix will be substituted as petitioner mrs giamelli as executrix of the estate repudiated the installment_agreement and notified respondent that she wishes to disclose certain wrongdoings of her deceased husband that she believes will alter the underlying tax_liability for specifically she wants to disclose alleged illegal payments that she believes are deductible and will reduce the tax_liability reported on the joint_return respondent filed a motion for summary_judgment in which he alleges that there is no dispute regarding material facts and that respondent is entitled to summary disposition as a matter of law on the question of whether the appeals_office abused its discretion in upholding respondent’s collection action the majority opinion identifies two arguments raised by the estate’s attorney for the first time after mr giamelli’s death the first argument is that mr giamelli overstated his income_tax_liability for in an effort to conceal fraudulent business dealings and that consequently the estate is only a partial successor_in_interest to mr giamelli majority op p the second argument is that the estate is a separate person entitled to its own collection review proceeding majority op p both arguments focus on an estate’s standing to raise issues in a sec_6320 proceeding however the first argument addresses an issue with respect to mr giamelli’s underlying tax_liability that at least in part could have been raised by mr giamelli at the sec_6320 hearing but was not the second argument addresses an issue that could not have been raised at the sec_6320 hearing because mr giamelli was still alive and there was no estate in existence to raise it the majority opinion treats both arguments as an untimely attempt on the part of the estate to raise an issue regarding mr giamelli’s underlying tax_liability for that mr giamelli could have raised at the sec_6320 hearing but did not the majority opinion concludes as follows because the only issue raised with the appeals officer was the installment_agreement our review is limited to the determination reached by the appeals officer to reject the proposed installment_agreement because of mr giamelli’s noncompliance the argument that an estate is a separate person and is entitled to its own collection review hearing fails for the same reason while the estate has cited no authority for this novel argument and we know of none such an argument is not timely as discussed above our review is limited to the determination issued by respondent’s appeals_office majority op p the majority justifies its summary dismissal of the estate’s argument that it is entitled to its own collection review hearing under sec_6320 by its conclusion that the argument is not timely however the estate did not exist at any time during the sec_6320 hearing process and consequently could not have raised any issue before the appeals_office it is only because of the unexpected death of mr giamelli in an automobile accident after the sec_6320 hearing process had been completed and after mr giamelli had filed his petition in this court that the estate came into being and had any opportunity to raise issues regarding the lien filed with respect to mr giamelli’s unpaid tax_liability the majority appears to assume that the only reason the estate is contending it should receive a separate notice under sec_6320 is to permit the estate to receive a sec_6320 hearing at which it could raise an issue about the amount of mr giamelli’ sec_2001 tax_liability although that may be true the assumption obscures the fact that the estate has raised a legal issue under sec_6320 that should be addressed on its merits before summary_judgment is granted that issue focuses on the standing of an estate to contest an unpaid tax_liability of a taxpayer after the taxpayer has died and it is not an issue that could have been raised at the sec_6320 hearing by mr giamelli the majority’s conclusion that the issue was not timely raised makes no sense colvin swift laro and gale jj agree with this dissenting opinion 2under federal tax law an estate is a separate taxable entity that may have an obligation to file both an estate_tax_return see sec_6018 and income_tax returns see sec_6012 under state law an estate typically has obligations regarding the payment of a decedent’s debts and the distribution of decedent’s assets to beneficiaries


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n number release date date date contact person identification_number ein contact number uil no legend a date b date c state of d date e date j f g date h date i dear this is in response to your request for an advance_ruling under sec_1_507-2 of the income_tax regulations that a can be expected to satisfy the requirements of sec_507 of the internal_revenue_code during the month period beginning on date b facts the information submitted indicates that you were incorporated on date c under the laws of the state of d you have been recognized as exempt from federal_income_tax under sec_501 of the code and determined to be a private_foundation as described in sec_509 your primary activities consist of supporting charitable projects in your community including a blood drive distribution of food to the poor and services for hospitalized children we have received your notification of intent to terminate your private_foundation_status under sec_507 of the code during the month period beginning on date b you also notified the manager of the exempt_organizations determinations division in a letter dated date e that you are terminating your private_foundation_status under sec_507 the information you have submitted indicates that beginning on date b and for a continuous 60-month period thereafter you will operate as a non-private foundation as described in sec_509 and sec_170 of the code you have developed a fundraising plan that will include a bi-annual raffle beginning in appeals to your members and members of the affiliated f for greater support beginning this year and solicitations for broader support from the general_public for example you plan to raise funds from the public this fall to support a local_tax exempt charity g you anticipate that contributions from your members and the general_public will constitute a substantial part of your income you have submitted projected financial data indicating that you expect to meet the public support_test under sec_509 and sec_170 for the 60-month period you have filed a form_872 consent to extend the time to assess tax to extend the period of limitations upon assessment of tax for the period ending on date h through date i law sec_507 of the code provides in relevant part that an organization’s status as a private_foundation shall be terminated if that organization meets the requirements of sec_509 sec_509 or sec_509 for a continuous period of calendar months notifies the secretary before the commencement of such 60-month period that it is terminating its private_foundation_status and establishes at the end of the month period that it has met the requirements of sec_509 sec_509 or sec_509 continuously during the termination period sec_1_507-2 of the regulations states in relevant part that an organization can terminate its private_foundation_status under sec_507 of the code if it properly notifies the internal_revenue_service before the commencement of its 60-month termination period that it is terminating its private_foundation_status sec_1_507-2 of the regulations provides that an organization which files the notification required by sec_507 that it is commencing a 60-month termination may obtain an advance_ruling from the commissioner that it can be expected to satisfy the requirements of sec_507 during the 60-month period such an advance_ruling may be issued if the organization can reasonably be expected to meet the requirements of sec_507 during the 60-month period sec_1_507-2 of the regulations provides that a 60-month advance_ruling letter shall only be issued if the organization’s request for an advance_ruling is filed with a consent under sec_6501 to the effect that the period of limitation upon assessment under sec_4940 for any taxable_year within the advance_ruling period shall not expire prior to one year after the date of the expiration of the time prescribed by law for the assessment of a deficiency for the last taxable_year within the 60-month period sec_1_507-2 of the regulations states in relevant part that an organization can terminate its private_foundation_status under sec_507 of the code if it meets the requirements of sec_509 for a continuous 60-month termination period sec_1_507-2 of the regulations states in relevant part that in order to meet the requirements of sec_507 of the code for the 60-month termination period as a sec_509 organization an organization must meet the requirements of sec_509 of the code for a continuous period of at least calendar months sec_1_507-2 of the regulations provides that in determining whether an organization will satisfy the requirements of sec_507 of the code for the month period the basic consideration is whether its organizational structure proposed programs or activities intended methods of operation and projected methods of support are such as to indicate that the organization is likely to satisfy the requirements of sec_509 or of the code and sec_1_507-2 of the regulations during the 60-month period in making such determination all facts and circumstances shall be considered sec_509 a - b of the code provides that an exempt_organization will be classified as other than a private_foundation if it normally receives more than one-third of its support in each taxable_year from any combination of i gifts grants contributions or membership fees and ii gross_receipts from admissions sales of merchandise performance of services or furnishing of facilities in an activity which is not an unrelated_trade_or_business not including such receipts from any person or government unit in any taxable_year to the extent that such receipts exceed the greater of dollar_figure or one percent of the organization’s support in such taxable_year from persons other than disqualified persons with respect to the organization from governmental units described in sec_170 or from organizations described in sec_170 other than in clauses vii and viii of the code and normally receives not more than one-third of its support in each taxable_year from the sum of i gross_investment_income and ii the excess of the amount of the unrelated_business_taxable_income over the over the amount of the unrelated_business_income_tax sec_1_507-2 of the regulations states that an organization can terminate its private_foundation_status under sec_507 of the code if immediately after the expiration of its 60-month termination period it establishes that it has complied with the requirements of sec_509 or of the code during that 60-month period sec_1_507-2 of the regulations states that in order to comply with the requirements under sec_507 of the code an organization shall within days after the expiration of the 60-month period file such information with the internal_revenue_service as is necessary to make a determination as to the organization’s status as an organization described under sec_509 or of the code and the regulations thereunder sec_1_507-2 of the regulations states that a private_foundation which elects to terminate its private_foundation_status and to operate as a public charity and which satisfies the requirements of sec_507 for termination of its private_foundation_status by the end of its 60-month termination period will be treated as a public charity for such period sec_1_507-2 of the regulations states that any organization which fails to satisfy the requirements of sec_507 of the code for termination of its private_foundation_status by the end of the 60-month termination period shall be treated as a private_foundation for the entire 60-month period for purposes of sections and chapter of the code sec_1_6033-2 of the regulations requires every private_foundation to file a form pf as its annual information_return analysis procedure as required by sec_507 of the code and sec_1_507-2 and sec_1 e of the regulations you notified the manager of the exempt_organizations determination division by letter dated date e that you were terminating your private_foundation_status under sec_507 of the code as required by sec_1_507-2 of the regulations you have filed a consent to extend the period of limitation upon assessment of tax for the period ending date h through a date that i sec_1 year or more after the expiration date for the assessment of a deficiency for the last taxable_year within the month period operation a sec_509 organization during 60-month period sec_507 and sec_507 of the code provide that the status of a qualified private_foundation shall be terminated if that foundation meets the requirements of sec_509 sec_509 or sec_509 for a period of calendar months and establishes at the end of the month period that it has met those requirements continuously during the 60-month period you have submitted information indicating that beginning on date b and for a continuous month period thereafter you will operate to support charitable projects in your community including a blood drive distribution of food to the poor and services for hospitalized children you have developed a fundraising plan that will include a bi-annual raffle beginning in appeals to your members and members of the affiliated f for greater support beginning this year and solicitations for broader support from the general_public you anticipate that contributions from your members and the general_public will constitute a substantial part of your income you have submitted projected financial data indicating that you expect to meet the public support_test under sec_509 and sec_170 of the code for the 60-month period specifically during the 60-month period you expect to receive more than one-third of your support from gifts grants contributions and membership fees as provided in sec_509 of the code and no more than one-third of your support from gross_investment_income and unrelated_business_taxable_income as provided in sec_509 of the code therefore you have established that you can reasonably be expected to meet the requirements of sec_509 of the code over that 60-month period beginning on date b ruling accordingly based on your proposed activities and support we conclude that a can reasonably be expected to meet the requirements of sec_507 of the code as a publicly supported charity under sec_509 of the code during an advance_ruling period of months beginning on date b sec_1_507-2 and sec_1_507-2 of the regulations state that in order to comply with the requirements under sec_507 of the code an organization shall within days after the expiration of the 60-month period file such information with the internal_revenue_service as is necessary to make a determination as to the organization’s status as an organization described under sec_509 or of the code and the regulations thereunder thus within days plus any applicable extensions after the end of your month period you must establish to the satisfaction of the internal_revenue_service that you have qualified as an organization which meets the requirements of paragraph or of sec_509 of the code for the month period if you do establish that fact you will be so classified for all purposes beginning with the first day of the first taxable_year of the month period and thereafter so long as you continue to meet the requirements of sec_509 or of the code if however you do not ultimately establish that you have met these requirements for the month period you will be classified as a private_foundation as of the first day of the first taxable_year of the month period see sec_1_507-2 and sec_1_507-2 of the regulations until your private_foundation_status is terminated and you are classified as a public charity you will continue to be required to file form_990-pf see sec_1_6033-2 of the regulations this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely steven grodnitzky manager exempt_organizations technical group enclosure notice


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa rwyzik scaf-130910-09 uilc date date to associate area_counsel salt lake city small_business self-employed from ashton p trice chief branch procedure administration subject period of limitations under sec_6501 and sec_6511 for employment_tax reported on form_941 this memorandum responds to your request for advice issue sec_1 whether for purposes of calculating the period of limitations for assessment pola under sec_6501 and the period of limitations for refunds and credits polrc under sec_6511 with respect to employment_taxes quarterly form sec_941 employer’s quarterly federal tax_return may be aggregated and treated as a single return for a taxable_year rather than being treated as four separate returns whether an overpayment of employment_tax in one quarter can be moved to another quarter if the polrc has expired for the quarter containing the overpayment conclusion sec_1 for purposes of calculating the pola and the polrc with respect to employment_taxes quarterly form sec_941 should not be aggregated and treated as a single return for a taxable_year because the limitations periods may vary depending on the date each quarterly form_941 is filed and cc pa b2 scaf-130910-09 page an overpayment of employment_tax in one quarter cannot be moved to another quarter if the polrc has expired for the quarter containing the overpayment before an interest-free adjustment or claim_for_refund_or_credit has been made facts for our opinion in this matter we have relied on the following information if you believe we have misstated the facts or omitted key facts please let us know as this could affect our opinion in this matter we received no taxpayer specific facts in conjunction with this request rather the ogden campus appears to have general questions regarding how to calculate the pola and the polrc for employment_taxes reported on form_941 they also provided us with several examples appearing below which they have asked us to resolve law and analysi sec_1 for purposes of calculating the pola and the polrc with respect to employment_taxes quarterly form sec_941 should not be aggregated and treated as a single return for a taxable_year because the limitations periods may vary depending on the date each quarterly form_941 is filed form_941 is a quarterly-filed return generally used to report an employer’s social_security_tax medicare_tax and income_tax_withholding obligations see instructions for form_941 who must file form p each form_941 is a separate_return and could have a different filing_date for purposes of determining the limitations_period for assessment or for claiming a refund_or_credit under sec_6501 the three-year pola begins running on the date that the relevant return is filed for purposes of sec_6501 a return of employment_tax filed prior to april 15th of the succeeding calendar_year is deemed to be filed on april 15th of the succeeding calendar_year sec_6501 sec_301_6501_b_-1 the filing_date of an employment_tax return filed after april 15th of the succeeding calendar_year is the date the return is actually filed sec_301_6501_b_-1 these rules are illustrated in the example in sec_301_6501_b_-1 which provides that if all the quarterly employment_tax returns for a calendar_year are timely filed the pola with respect to each return is the same and is measured from april of the succeeding calendar_year sec_301_6501_b_-1 however if any of the quarterly returns is filed after april of the succeeding calendar_year the pola with respect to that return is measured from the date the form_941 is actually filed id furthermore sec_6501 provides that in the case of failure_to_file a return the tax may be assessed at any time because the pola could vary for the tax reportable on each of the quarterly form sec_941 the form sec_941 should not be aggregated and treated as a single return for purposes of determining the pola the same principles prohibit quarterly form sec_941 from being aggregated for polrc purposes under sec_6511 the period within which to file a refund claim cc pa b2 scaf-130910-09 page ends either three years after the date the employment_tax return is filed or two years from the time the tax was paid whichever is later or if no return was filed within two years from the time the employment_tax is paid sec_6511 for the purpose of determining the limitations_period on refund claims sec_6513 states that a return of employment_tax filed prior to april 15th of the succeeding calendar_year is deemed to be filed on april 15th of that year see also sec_301_6513-1 for purposes of sec_6511 an employment_tax return filed after april 15th of the succeeding calendar_year is considered filed on the date the return is actually filed sec_6513 provides that if a tax with respect to remuneration or other amount_paid during any period ending with or within a calendar_year is paid before april of the succeeding calendar_year the tax shall be considered paid on april of that year because the limitations_period for filing a refund claim may vary depending upon the filing_date of each quarterly form_941 the quarterly form sec_941 should not be aggregated and treated as a single return for purposes of determining the polrc see sec_6511 an overpayment of employment_tax in one quarter cannot be moved to another quarter if the polrc has expired for the quarter containing the overpayment before an interest-free adjustment or claim_for_refund_or_credit is made under sec_6402 the irs within the applicable_period of limitations on credit or refund under sec_6511 may credit the amount of an overpayment including any allowable interest against any_tax liability of the person who made the overpayment and shall subject_to certain offsets refund any balance to such person sec_31_6402_a_-2 sets forth the rules for claiming a credit or refund of overpaid employment_taxes under sec_6413 an overpayment of employment_tax may be adjusted without interest within the applicable_period of limitations on credit or refund under sec_6511 sec_31_6413_a_-1 and sec_31_6413_a_-2 set forth the rules for making interest-free adjustments of overpayments of employment_taxes consequently an overpayment of employment_taxes in one quarter may be credited to another quarter or refunded to the taxpayer either under sec_6402 or sec_6413 subject_to the applicable_period of limitations on credit or refund under sec_6511 thus a credit for an overpayment of employment_taxes can be applied to another quarter only if the polrc remains open for the quarter in which the overpayment occurred if a claim is not filed or an adjustment is not made within the polrc sec_6511 prohibits the credit or refund of the overpayment example sec_1 deposit of tax for a quarter for which taxpayer files no form employer makes a timely deposit of tax for the first quarter of but fails to file form_941 for first quarter of employer timely files form_941 for the last three cc pa b2 scaf-130910-09 page quarters of prior to expiration of the polrc for the fourth quarter of the service adjusts the liability for the fourth quarter so that the total of the second third and fourth quarter liabilities agree with the taxes reported on the corresponding forms w-2 which results in a fourth quarter underpayment employer requests in date that the deposits from the first quarter of be treated as an overpayment and applied to satisfy the fourth quarter underpayment can a first quarter deposit be applied to satisfy the fourth quarter underpayment first without the filing of a return it is not clear that there is any overpayment to be applied from that quarter second absent the filing of a return the polrc for the first quarter of expired on date employer cannot successfully claim a credit in date for any overpayment that might exist assuming employer deposited its tax for the first quarter of prior to date under sec_6513 the polrc for the first quarter began running on date because employer filed no form_941 for the first quarter under sec_6511 the polrc on the first quarter expired on date two years from the date deemed payment_date under sec_6513 if employer ultimately files the form_941 after the expiration of the two-year period the polrc would then expire three years from the filing_date and the claim for credit would be timely but the amount of the credit would be limited to the amount_paid within the period immediately preceding the filing of the claim equal to three years plus the period of any extension of time for filing the return sec_6511 see revrul_76_511 had employer timely filed its form_941 for the first quarter of under sec_6513 the deemed filing_date of that return would have been date because the polrc for any first quarter overpayment would have expired on date three years from the deemed filing_date of date under sec_6513 employer would still not have been entitled to a credit for any first quarter overpayment because employer requested a credit for the first quarter overpayment in date which is after the polrc would have already expired deposit of tax for a quarter for which taxpayer late-files form employer timely deposits tax for all quarters of employer timely files form sec_941 for the third and fourth quarters of but does not file form sec_941 for the first and second quarters of employer receives a letter from the irs on date informing it that it has payments on quarters where no return has been filed and asking that it file the missing returns on date employer files the missing returns for first and second quarters of based upon the first and second quarter return_information employer determines that deposits made in for the first quarter of were in excess of its first quarter liability and that deposits made in for the second quarter were insufficient to cover its second quarter liability as such when employer files the missing returns employer requests that the overpayment from the first quarter be applied to the second quarter underpayment cc pa b2 scaf-130910-09 page a can the first quarter overpayment be applied to satisfy the second quarter underpayment sec_6511 provides that the polrc expires on the later of the three-year period from the time the return is filed or the two-year period from the time the tax is paid in this example the polrc begins to run from date the date the form sec_941 for the first and second quarters are actually filed because the three-year filing period expires later than the two-year payment period see sec_6511 revrul_76_511 therefore the polrc expires on date three years from the date actual filing_date however employer is not entitled to the credit even though the claim for the credit is made within the polrc sec_6511 states that if a claim for a refund is filed within the three-year period from the filing_date of the return the amount of the credit or refund is limited to the amount_paid within the period immediately preceding the filing of the claim equal to three years plus the period of any extension of time for filing the return because the form sec_941 were filed on date employer’s claim for credit is limited to payments made on or after date the tax deposits which were timely made are deemed to have been paid on date and fall outside this look-back period see sec_31_6302-1 i sec_6511 thus the first quarter credit overpayment cannot be applied to satisfy the second quarter underpayment see revrul_76_511 b if there had been an underpayment in the first quarter rather than an overpayment could the irs assess the underpayment on date under sec_6501 the pola for the first quarter expires three years from the date the form_941 was filed or deemed filed because employer did not file its form_941 for the first quarter of prior to date under sec_301_6501_b_-1 the pola is calculated from the date on which employer actually filed the form_941 here date the pola expires three years after that date on date sec_6501 as such the underpayment may be assessed at any time on or before date case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views