Opinion ID: 2778177
Heading Depth: 2
Heading Rank: 1

Heading: 2008 Abatement Claim

Text: The Court of Federal Claims, concurrently with the United States District Courts, has jurisdiction over tax refund suits. See 28 U.S.C. §§ 1346(a)(1), 1491(a)(1). But a prerequisite to bringing such a claim in the Court of DIAMOND v. US 5 Federal Claims is full payment of the assessed taxes. Flora v. United States, 362 U.S. 145, 177 (1960) (finding that the proper construction of 28 U.S.C. §1346(a)(1) “require[d] full payment of an assessment before an income tax refund suit [could] be maintained”); Ledford v. United States, 297 F.3d 1378, 1382 (Fed. Cir. 2002) (affirming a dismissal of a tax refund case because the assessed tax had not been paid). This rule also applies when a taxpayer is protesting a penalty imposed under 26 U.S.C. § 6702 by the IRS. 1 Accordingly, the Court of Federal Claims lacks jurisdiction to consider a refund claim for an assessment made pursuant to § 6702, if the taxpayer does not pay the entire amount of the assessment. On appeal, Appellants question whether any court can consider its 2008 abatement claim, given that both the Court of Federal Claims and the Tax Court dismissed claims relating to that question for lack of subject matter jurisdiction. See Claims Decision, 115 Fed. Cl. at 522. Typically, a taxpayer can challenge an assessment in one of two ways. The first is to file a petition with the Tax 1 Unlike Section 6702 penalties, penalties assessed under Section 6700 or 6701 do not require full payment. Rather, a taxpayer can contest a penalty assessment under these sections by paying only 15% of the fine. 26 U.S.C. § 6703(c) (requiring the taxpayer to pay at least 15% of any penalty imposed under sections 6700 or 6701, and to file a claim seeking a refund of the amounts paid, before filing a suit in district court); see Nielsen v. United States, 976 F.2d 951, 954 n.7 (5th Cir. 1992) (“Section 6703 provides an exception to the general rule that the entire amount of the assessment must be paid up front. Under Section 6703 the taxpayer may contest § 6700 and 6701 penalties by paying only 15% of the assessment and filing a refund suit in federal district court.”). 6 DIAMOND v. US Court without paying the assessment, and the second is to pay the assessment, request a refund from the IRS, and then file a refund suit in the Court of Federal Claims or in the district court. See 26 U.S.C. § 7422(a); Smith v. United States, 495 F. App’x 44, 48 (Fed. Cir. 2012) (explaining how a taxpayer can dispute an income tax assessment in the Tax Court or the Court of Federal Claims). In this case, Appellants first filed a petition in the Tax Court regarding their 2008 fee, and then subsequently filed a complaint in the Court of Federal Claims after the Tax Court dismissed their petition. Appellants are correct that both courts dismissed their claim for lack of subject matter jurisdiction, but neither court stated it could never consider the claim. Rather, in both instances, Appellants failed to comply with certain prerequisites to the exercise of jurisdiction in those courts. The Tax Court dismissed Appellants’ 2008 abatement claim because Appellants failed to provide an IRS notice sufficient to confer jurisdiction upon the court and the Court of Federal Claims dismissed this same claim because Appellants did not pay the disputed penalty in full. 2 See Diamond v. Comm’r, No. 13878-12S (T.C. Aug. 28, 2012); Claims Decision, 115 Fed. Cl. at 526. In order to bring a claim in either venue, Appellants had to comply with all governing prerequisites to doing so. See Rochelle v. Comm’r, 116 T.C. 356, 358 (2001) (“There are two prerequisites to this Court’s jurisdiction to redetermine a deficiency: (1) The issuance of a valid notice of deficiency by the Commissioner; and (2) the timely filing of a petition with the Court by the taxpayer.”); Shore v. United States, 9 F.3d 1524, 1526 (Fed. Cir. 1993) (holding that a tax refund claim must be dismissed 2 The propriety of the dismissal by the Tax Court is not before us. DIAMOND v. US 7 if the “principal tax deficiency has not been paid in full”); see also Brach v. United States, 443 F. App’x. 543, 545 (Fed. Cir. 2011) (explaining that full payment of an assessment was a “jurisdictional prerequisite to suing for a refund suit.”); Chi. Milwaukee Corp. v. United States, 40 F.3d 373, 374 (Fed. Cir. 1994) (finding that 26 U.S.C. § 7422(a) “imposes, as a jurisdictional prerequisite to a refund suit, filing a refund claim with the IRS that complies with IRS regulations”). In the case of the Court of Federal Claims, this includes full payment of the challenged assessment. In the present case, the Court of Federal Claims found that there was no allegation and no proof that Appellants had paid the entire 2008 penalty assessment. See Claims Decision, 115 Fed. Cl. at 525–26. Because Appellants failed to pay the full 2008 assessment, the Court of Federal Claims concluded it did not have jurisdiction to consider this claim. See Schell v. United States, 589 F.3d 1378, 1381 (Fed. Cir. 2009) (“As the party seeking the exercise of jurisdiction, the Taxpayers have the burden of establishing that jurisdiction exists.”). As there was no evidence that Appellants paid the entire fee, the Court of Federal Claims correctly determined that it lacked jurisdiction to consider the Appellants’ 2008 abatement claim. Accordingly, the Court of Federal Claims did not err when it dismissed this portion of Appellants’ complaint for lack of jurisdiction.