Court Opinion

ID: 4330860
Source: CourtListenerOpinion
Date Created: 2018-11-13 23:51:36.728165+00
Date Added: 2024-06-11T14:47:23.191034
License: Public Domain

107 T.C. No. 14

                 UNITED STATES TAX COURT

 PEN COAL CORPORATION, f.k.a. P&C "BITUMINOUS COAL", INC.,
Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

    PEN HOLDINGS, INC. AND SUBSIDIARIES, Petitioner v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent

 Docket Nos. 23670-95, 23672-95.       Filed November 6, 1996.

      Ps filed petitions for redetermination contesting,
 inter alia, R's determination that Ps are liable for
 interest computed at the increased rate prescribed in
 sec. 6621(c), I.R.C., applicable to large corporate
 underpayments of tax. R filed motions to dismiss for
 lack of jurisdiction and to strike allegations relating
 to Ps' liability for interest under sec. 6621(c).

      Held: Sec. 6214(a) does not provide statutory
 authority for this Court to redetermine Ps' liability for
 interest computed at the increased rate prescribed in sec.
 6621(c). Held, further, R's motions to dismiss for lack of
 jurisdiction and to strike will be granted.
                                 - 2 -

     B. John Williams Jr., Carolyn O. Ward, and Miriam L. Fisher,

for petitioners.

     Stephen M. Miller and Nancy W. Hale, for respondent.

                                OPINION

     RUWE, Judge:   This case was assigned to Special Trial Judge

Robert N. Armen, Jr., pursuant to the provisions of section

7443A(b)(4) and Rules 180, 181, and 183.1     The Court agrees with

and adopts the opinion of the Special Trial Judge, which is set

forth below.

               OPINION OF THE SPECIAL TRIAL JUDGE

     ARMEN, Special Trial Judge:     These cases are before the

Court on (1) respondent's Motion to Dismiss for Lack of

Jurisdiction and to Strike as to Interest Due From the

Petitioner, filed in docket No. 23670-95; and (2) respondent's

Motion to Dismiss for Lack of Jurisdiction and to Strike as to

the Taxable Year 1989 and as to Interest Due From the Petitioner,

filed in docket No. 23672-95.

     As explained in greater detail below, the issue for decision

is whether the Court has jurisdiction to redetermine petitioners'

liability for interest computed at the increased rate established

     1
      Unless otherwise indicated, all section, chapter, and
subtitle references are to the Internal Revenue Code in effect
for the taxable years in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
                                - 3 -

by section 6621(c) applicable to large corporate underpayments of

tax.

Background

       On August 17, 1995, respondent issued notices of deficiency

to Pen Coal Corp. (Pen Coal) in which respondent determined the

following deficiencies in, additions to, and accuracy-related

penalty in respect of Pen Coal's Federal withholding taxes under

chapter 3 of subtitle A:

                              Additions to Tax and Penalty
                           Sec.       Sec.      Sec.      Sec.
  Year     Deficiency   6651(a)(1)   6653(a)    6661       6662

  1986     $1,694,871    $423,718    $90,425      --         --
  1987      3,125,107       --          --     $781,277      --
  1988      1,638,186       --          --      409,547      --
  1989      1,600,390       --          --        --      $320,078

Respondent also determined that Pen Coal's underpayments for the

taxable years 1986 through 1989 constitute large corporate

underpayments within the meaning of section 6621(c)(3) and that

Pen Coal is therefore liable for interest computed at the

increased rate prescribed in section 6621(c)(1).2    The notices of

       2
      Sec. 6621(c), which was enacted in its present form by sec.
11341(a) of the Omnibus Budget Reconciliation Act of 1990, Pub.
L. 101-508, 104 Stat. 1388-470, effective for purposes of
determining interest for periods after Dec. 31, 1990, sets forth
the rules for determining the amount of interest payable under
sec. 6601 on large corporate underpayments of tax. Sec. 6621(c)
provides in pertinent part:
                                                   (continued...)
                         - 4 -

2
 (...continued)
SEC. 6621(c). Increase In Underpayment Rate For Large
Corporate Underpayments.--

     (1) In general.--For purposes of determining the
amount of interest payable under section 6601 on any
large corporate underpayment for periods after the
applicable date, paragraph (2) of subsection (a) shall
be applied by substituting "5 percentage points" for "3
percentage points".

     (2) Applicable rate.--For purposes of this
subsection--

          (A) In general.--The applicable date is
     the 30th day after the earlier of--

               (i) the date on which the 1st
          letter of proposed deficiency which
          allows the taxpayer an opportunity
          for administrative review in the
          Internal Revenue Service Office of
          Appeals is sent, or

               (ii) the date on which the
          deficiency notice under section
          6212 is sent.

         *     *     *     *     *     *     *

     (3) Large corporate underpayment.--For purposes of
this subsection--

          (A) In general.--The term "large
     corporate underpayment" means any
     underpayment of a tax by a C corporation for
     any taxable period if the amount of such
     underpayment for such period exceeds
     $100,000.

          (B) Taxable period.--For purposes of
     subparagraph (A), the term "taxable period"
     means--

               (i) in the case of any tax
                                                 (continued...)
                                - 5 -

deficiency also state that interest will be computed on the

addition to tax under section 6651(a)(1) for the taxable year

1986 pursuant to section 6601(e)(2).3

     On August 17, 1995, respondent issued notices of deficiency

to Pen Holdings, Inc., and its subsidiaries (Pen Holdings) in

which respondent determined the following deficiencies in, and

additions to, Pen Holdings' Federal income taxes:

     2
      (...continued)
               imposed by subtitle A, the taxable
               year, or

                      (ii) in the case of any other
                 tax, the period to which the
                 underpayment relates.
     3
      Sec. 6601(e)(2)(B) provides in pertinent part:

     SEC. 6601(e). Applicable Rules.--Except as otherwise
     provided in this title--

             *      *     *     *       *   *        *

          (2) Interest on penalties, additional amounts, or
     additions to the tax.--

             *      *     *     *       *   *        *

               (B) Interest on certain additions to
          tax.--Interest shall be imposed under this
          section with respect to any addition to tax
          imposed by section 6651(a)(1) * * * for the
          period which--

                      (i) begins on the date on
                 which the return of the tax with
                 respect to which such addition to
                 tax is imposed is required to be
                 filed (including any extensions),
                 and

                      (ii) ends on the date of
                 payment of such addition to tax.
                              - 6 -

                                         Additions To Tax
     Year      Deficiency          Sec. 6651(a)(1)    Sec. 6661

     1982      $1,457,191               --            $364,298
     1983         990,664               --             247,666
     1984       1,510,584               --             377,646
     1985       2,317,050            $175,058          579,263
     1986       5,102,222               --           1,275,556
     1987       4,229,739               --             158,778
     1988       3,181,108               --               --

Respondent also determined that Pen Holdings' underpayments for

the taxable years 1982 through 1988 constitute large corporate

underpayments within the meaning of section 6621(c)(3) and that

Pen Holdings is therefore liable for interest computed at the

increased rate prescribed in section 6621(c)(1).     The notices of

deficiency also state that interest will be computed on the

addition to tax under section 6651(a)(1) for the taxable year

1985 pursuant to section 6601(e)(2).

     On August 17, 1995, respondent issued additional notices of

deficiency to Pen Holdings in which respondent determined the

following deficiencies in, and additions to, Pen Holdings'

Federal withholding taxes under chapter 3 of subtitle A:

                                        Addition To Tax
            Year      Deficiency        Sec. 6651(a)(1)

            1982        $676,894          $169,223
            1983         972,657           243,164
            1984         729,143           182,286
            1985       1,079,888           269,972

Respondent also determined that Pen Holdings' underpayments for

the taxable years 1982 through 1985 constitute large corporate
                               - 7 -

underpayments within the meaning of section 6621(c)(3) and that

Pen Holdings is therefore liable for interest computed at the

increased rate prescribed in section 6621(c)(1).   The notices of

deficiency also state that interest will be computed on the

additions to tax under section 6651(a)(1) for the taxable years

1982 through 1985, pursuant to section 6601(e)(2).

     All references to petitioners are to Pen Coal and Pen

Holdings (and its subsidiaries).

     On November 14, 1995, petitioners separately filed petitions

for redetermination with this Court contesting the notices of

deficiency described above.   Each of the petitions contains

allegations that respondent erred in her determinations regarding

the imposition of interest under sections 6601(e)(2) and

6621(c)(1).   Specifically, petitioners allege that they are not

liable for interest computed at the increased rate prescribed in

section 6621(c) because petitioners do not have a "large

corporate underpayment" for any of the taxable years in issue.

In the alternative, petitioners allege that respondent failed to

allow them an opportunity for administrative review prior to the

issuance of the notices of deficiency and that, as a consequence,

the applicable date for computing increased interest under

section 6621(c) is the date that the notices of deficiency were

mailed.4

     4
      We note that pursuant to sec. 6621(c)(2)(A)(ii), the
"applicable date" is the 30th day after the date on which the
                                                   (continued...)
                                - 8 -

     As indicated, respondent moved to dismiss for lack of

jurisdiction and to strike the allegations in the petitions

concerning petitioners' liability for interest.   Respondent

contends that this Court lacks jurisdiction in these proceedings

to redetermine petitioners' liability for interest under sections

6601(e)(2) and 6621(c).

     Petitioners filed objections to respondent's motions in

which they cited Ohio Farm Bureau Federation v. Commissioner, 106

T.C. 222 (1996), and Northwestern Indiana Telephone Co. v.

Commissioner, T.C. Memo. 1996-168, for the proposition that this

Court has the authority, by virtue of its jurisdiction to

redetermine deficiencies in tax, to redetermine a corporation's

liability for interest under section 6621(c).   In the

alternative, petitioners argued in their objections that this

Court has jurisdiction to redetermine such interest after payment

and within 1 year of the date on which the decision of the Court

becomes final, pursuant to section 7481(c).

     During the course of the oral argument on respondent's

motions, counsel for both parties acknowledged that the Court's

memorandum opinion in Northwestern Indiana Telephone Co. v.

Commissioner, supra, had been modified (by Order dated April 17,

1996) to eliminate all references to section 6621(c).    The

parties also acknowledged that, although Ohio Farm Bureau

(...continued)
notice of deficiency is sent.
                               - 9 -

Federation v. Commissioner, supra, includes references to section

6621(c), the Court did not address in that case the

Commissioner's determination that the taxpayer was liable for the

increased rate of interest applicable to large corporate

underpayments of tax.   Id. at 223, 236 n.9.   In addition, counsel

for petitioners conceded that the Court lacks jurisdiction as to

petitioners' liability for interest under section 6601(e)(2).

And, based on respondent's concession that no notice of

deficiency was issued to Pen Holdings for 1989, counsel for

petitioners also conceded that insofar as Pen Holdings is

concerned, the Court lacks jurisdiction as to the taxable year

1989.5

     Following the hearing on respondent's motions, both parties

filed additional memoranda with the Court.

Discussion

     The issue for decision in these cases is whether this Court

has jurisdiction to redetermine petitioners' liability for

interest computed at the increased rate prescribed by section

6621(c) on large corporate underpayments of tax.   As explained in

greater detail below, we conclude that we lack jurisdiction to

redetermine such interest in these deficiency proceedings.    We

leave for another day whether we have jurisdiction to determine

     5
      Both parties recognized that the Court may consider Pen
Holdings' 1989 taxable year in determining its correct tax
liability for the years in issue. Sec. 6214(b).
                                - 10 -

such interest in a supplemental proceeding commenced pursuant to

section 7481(c) and Rule 261.

     Section 6601(a) provides the general rule that interest will

be imposed at the rate established under section 6621 on any tax

that is not paid on or before the last date prescribed for

payment.    Section 6621(a)(2) provides the general rule that the

underpayment rate shall be the sum of the Federal short-term rate

determined under section 6221(b) plus 3 percentage points.

     Section 6621(c), which was enacted in its present form by

section 11341(a) of the Omnibus Budget Reconciliation Act of

1990, Pub. L. 101-508, 104 Stat. 1388, effective for purposes of

determining interest for periods after December 31, 1990, sets

forth the rules for determining the amount of interest payable

under section 6601 on large corporate underpayments of tax.    As

relevant herein, section 6621(c) provides that interest shall be

computed on an underpayment of tax by a C corporation that

exceeds $100,000 at an increased rate equal to the Federal short-

term rate determined under section 6621(b) plus 5 percentage

points.    The computation of interest under section 6621(c) is

applicable for periods after the 30th day after the earlier of

(1) the date of mailing of the first letter of proposed

deficiency which allows the taxpayer the opportunity for the IRS

Appeals Office review, or (2) the date of mailing of a notice of

deficiency under section 6212.
                              - 11 -

     Petitioners have attempted to place in dispute their

liability for interest under section 6621(c) in an effort to have

the Court determine the correct "applicable date" for computing

such interest.   Petitioners allege that they were not given a

meaningful opportunity for Appeals Office review and that the

applicable date should be from August 17, 1995, the date on which

the deficiency notices were mailed in these cases, rather than

the earlier dates determined by respondent.6

     It is well settled that this Court is a court of limited

jurisdiction and that we may exercise jurisdiction only to the

extent expressly authorized by statute.   Sec. 7442; Judge v.

Commissioner, 88 T.C. 1175, 1180-1181 (1987); Naftel v.

Commissioner, 85 T.C. 527, 529 (1985).    It is equally well

settled that this Court's jurisdiction to redetermine a

deficiency in tax generally does not extend to statutory interest

imposed under section 6601.   See Bax v. Commissioner, 13 F.3d 54,

56-57 (2d Cir. 1993), affg. an Order of this Court; LTV Corp. v.

Commissioner, 64 T.C. 589, 597 (1975); see also Asciutto v.

Commissioner, T.C. Memo. 1992-564, affd. 26 F.3d 108 (9th Cir.

1994).   Indeed, section 6601(e)(1) expressly provides that

interest prescribed by section 6601 is treated as tax "except

[for purposes of] subchapter B of chapter 63, relating to

deficiency procedures".   Because the effect of such language is

to exclude interest from the definition of a "tax" for purposes

     6
      See supra note 4.
                              - 12 -

of section 6211(a), it follows that such interest is not a

deficiency.   See White v. Commissioner, 95 T.C. 209, 213 (1990).

     Respondent moves to dismiss and to strike the allegations in

the petitions insofar as they pertain to section 6621(c) on the

grounds that (1) such interest does not fall within the

definition of a deficiency under section 6211(a), and (2) there

is otherwise no specific grant of statutory authority for this

Court to redetermine a taxpayer's liability for such interest.

     Petitioners acknowledge the general limitations respecting

this Court's jurisdiction as to statutory interest.

Nevertheless, petitioners contend that section 6214(a) vests this

Court with jurisdiction to redetermine interest computed at the

increased rate prescribed in section 6621(c)(1).

Section 6214(a)

     Section 6214(a) provides in pertinent part:

          SEC. 6214(a). Jurisdiction as to Increase of
     Deficiency, Additional Amounts, or Additions to the
     Tax.--Except as provided by section 7463, the Tax Court
     shall have jurisdiction to redetermine the correct
     amount of the deficiency even if the amount so
     redetermined is greater than the amount of the
     deficiency, notice of which has been mailed to the
     taxpayer, and to determine whether any additional
     amount, or any addition to the tax should be assessed,
     if claim therefor is asserted by the Secretary at or
     before the hearing or a rehearing. [Emphasis added.]

Specifically, petitioners contend that section 6214(a) provides

this Court with authority to redetermine interest computed at the
                                - 13 -

increased rate prescribed in section 6621(c) on the ground that

such interest constitutes an "additional amount" within the

meaning of section 6214(a).    In conjunction with the foregoing,

petitioners contend that this Court's narrow interpretation of

section 6214(a) in Bregin v. Commissioner, 74 T.C. 1097 (1980),

is erroneous.   Petitioners further contend that the lack of any

mention of this Court's jurisdiction in section 6621(c), despite

the presence of such a provision in former section 6621(c), is at

most a neutral factor to be taken into account in resolving

congressional intent.   We disagree with petitioners' contentions.

     In Bregin v. Commissioner, supra, the taxpayer filed a tax

return for 1974 on which he claimed a credit for taxes withheld

on his wages in excess of the amounts shown to have been withheld

on his Forms W-2.   The Commissioner overlooked the discrepancy

and allowed a refund to the taxpayer based on the withholding

credit reported on the taxpayer's return.    Later, the

Commissioner issued a notice of deficiency to the taxpayer in

which the Commissioner determined that the taxpayer had received

unreported income in 1974.    The notice did not include any

allegation that the taxpayer had claimed any excessive credit.

The taxpayer invoked this Court's jurisdiction by filing a

petition for redetermination.

     Shortly before trial, the Commissioner filed a motion for

leave to amend answer to include an allegation that the taxpayer

had claimed an excessive withholding credit under section 31.
                                - 14 -

Although recognizing that the alleged excessive credit did not

fall within the definition of a deficiency under section 6211(a),

the Commissioner argued that the Court had jurisdiction over the

issue on the ground that it constituted an "additional amount"

within the meaning of section 6214(a).

     Upon review of the matter, we rejected the Commissioner's

argument for several reasons.    First, we looked to chapter 68

entitled "Additions to the Tax, Additional Amounts, and

Assessable Penalties", for guidance as to the meaning of the term

"additional amount" as used in section 6214(a).    In light of the

similarity between the language used in section 6214(a) and the

various provisions included under chapter 68, we concluded that

the term "additional amount" as used in section 6214(a) was meant

to refer to one of the assessable civil penalties described in

chapter 68.   Bregin v. Commissioner, supra at 1102-1103.

     Next, we examined the plain language of section 6214(a) and

its predecessors and reviewed the legislative history of such

section.   We noted that section 6214(a) originated as section

274(e) of the Revenue Act of 1926, ch. 27, 44 Stat. 56, which

authorized this Court's predecessor, the Board of Tax Appeals, to

determine "whether any penalty, additional amount or addition to

the tax should be assessed."    Bregin v. Commissioner, supra at

1103.   Although the term "penalty" was later omitted when section

6214(a) was enacted as part of the Internal Revenue Code of 1954,

we observed that the committee reports declared that no material
                                - 15 -

change was intended.   Id.    We further observed that the language

in former section 274(e) expanding the Board's authority to

determine whether "any penalty, additional amount or addition to

the tax should be assessed" was added by the Senate Finance

Committee for the express purpose of allowing the Commissioner to

determine that a deficiency is attributable to fraud or

negligence, after the issuance of a deficiency notice, but

without requiring the Commissioner to issue a second notice of

deficiency to the taxpayer.     Id. at 1103-1104 (citing S. Rept.

52, 69th Cong., 1st Sess. (1926), 1939-1 C.B. (Part 2) 332, 353).

We stated that "the legislative history of section 6214(a)

indicates that the provision was not designed to have the broad

meaning urged by the Commissioner."      Id. at 1104.

     We also pointed out in Bregin that the Commissioner was

given the authority under section 6201(a)(3) to recover amounts

due from a taxpayer's overstatement of withholding credits

without issuing a notice of deficiency.     Under the circumstances,

we could find no indication that Congress intended section

6214(a) to provide the Commissioner with an alternative method

for recovering on such a claim.     Id. at 1104-1105.

     Petitioners, like the Commissioner in Bregin, propose a

broad interpretation of the term "additional amount" in section

6214(a) in an effort to persuade the Court to exercise

jurisdiction over an item that otherwise does not satisfy the

statutory definition of a deficiency under section 6211(a).    In
                              - 16 -

furtherance of their position, petitioners assert that the

Court's more restrictive interpretation of section 6214(a) in

Bregin is erroneous on the grounds that (1) the Court's

interpretation impermissibly renders the term "additional amount"

a mere redundancy; and (2) the Court violated section 7806(b) by

relying on the use of the term "additional amounts" in chapter 68

in interpreting the term "additional amount" in section 6214(a).7

     We disagree with petitioners' assertion that this Court's

interpretation of section 6214(a) in Bregin v. Commissioner, 74

T.C. 1097 (1980), renders the term "additional amount" a mere

redundancy.   As our detailed analysis of section 6214(a) and its

legislative history in Bregin amply demonstrates, Congress used

the phrase "any additional amount, or any addition to the tax" in

section 6214(a) to ensure an understanding that this Court's

jurisdiction encompasses items that are to be assessed,

collected, and paid in the same manner as taxes, including the

     7
      Sec. 7806(b) provides in pertinent part:

           SEC. 7806(b). Arrangement and Classification.--No
     inference, implication, or presumption of legislative
     construction shall be drawn or made by reason of the
     location or grouping of any particular section or
     provision or portion of this title, nor shall any table
     of contents, table of cross references, or similar
     outline, analysis, or descriptive matter relating to
     the contents of this title be given any legal effect.
     * * *
                               - 17 -

additions to tax and other additional amounts (not labeled

"additions to tax") described in chapter 68.8

     We likewise find petitioners' reliance on section 7806(b) to

be misplaced.   Section 7806(b) provides that no inference,

implication, or presumption of legislative construction shall be

drawn or made by reason of the location or grouping of any

particular section or provision or portion of title 26.   In

Bregin, we did not draw an inference, implication, or presumption

of legislative construction by reason of the location or grouping

of any particular section or provision of the Internal Revenue

Code in interpreting section 6214(a).   As explained above, we

merely looked to chapter 68, and the meaning given to the term

"additional amounts" therein, to aid in interpreting the same

term as it is found in section 6214(a).   Simply stated, we see no

tension between the Court's analysis in Bregin and the

proscriptions of section 7806(b).

Former Section 6621(c)

     Contrary to petitioners' contention, we also find former

section 6621(c) and the case law interpreting that section to be

relevant in resolving the jurisdictional issue presented by

respondent's motions.    A brief review of the provisions of former

section 6621(c), as well as the case law developed by this Court

     8
      We observe that the accuracy-related penalty imposed by
current sec. 6662 and the fraud penalty imposed by current sec.
6663 are both penalties and not additions to tax.
                             - 18 -

in regard to our jurisdiction thereover, will be helpful before

we discuss this matter further.

     Former section 6621(c), originally codified as section

6621(d) and applicable with respect to interest accruing after

December 31, 1984, provided that interest payable under section

6601 will be computed at a rate equal to 120 percent of the

normal rate provided under section 6601 on any substantial

underpayment of tax attributable to a tax-motivated transaction.9

Former section 6621(c)(4) provided in pertinent part:

          (4) Jurisdiction of Tax Court.--In the case of any
     proceeding in the Tax Court for a redetermination of a
     deficiency, the Tax Court shall also have jurisdiction
     to determine the portion (if any) of such deficiency
     which is a substantial underpayment attributable to tax
     motivated transactions.

     In short, former section 6621(c)(4) established a limited

exception to the general rule that this Court lacks jurisdiction

over statutory interest by providing that, in a proceeding for

redetermination of a deficiency, this Court has jurisdiction to

determine the portion (if any) of such a deficiency that is a

substantial underpayment attributable to tax-motivated

transactions.

     9
      Sec. 6621(d) was added to the Internal Revenue Code by the
Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 144(a), 98
Stat. 494, 682. Sec. 6621(d) was redesignated sec. 6621(c) by
the Tax Reform Act of 1986, Pub. L. 99-514, sec. 1511(c)(1)(A)-
(C), 100 Stat. 2085, 2744. Former sec. 6621(c) was repealed by
sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989,
Pub. L. 101-239, 103 Stat. 2106, 2399, effective with respect to
returns the due date for which is after Dec. 31, 1989.
                              - 19 -

     The question of the scope of this Court's jurisdiction under

former section 6621(c) arose in White v. Commissioner, 95 T.C. at

212-214, involving a so-called affected items proceeding.     In

White, the Commissioner issued a notice of deficiency to the

taxpayers solely for additions to tax after the underlying tax

deficiency was assessed following the conclusion of partnership

level proceedings.   The taxpayers filed a petition contesting the

additions to tax as well as their liability for additional

interest under former section 6621(c).   This prompted the

Commissioner to file a motion to dismiss for lack of jurisdiction

as to the additional interest.

     In granting the Commissioner's motion to dismiss in White,

we first held, based upon a combined reading of sections 6211(a),

6230(a), and 6601(e)(1), that interest computed at the increased

rate prescribed in former section 6621(c)(1) is not a deficiency

within the meaning of section 6211(a).   Consistent with this

holding, we rejected the taxpayers' argument that section

6230(a)(2)(A)(i) provided statutory authority for this Court to

redetermine such interest.   Next, we analyzed former section

6621(c)(4) and concluded that our jurisdiction under that

provision is limited to cases where the parties dispute a

deficiency in tax imposed by subtitle A, and, specifically, to

determining whether a portion of such a deficiency constitutes a

substantial underpayment attributable to tax-motivated

transactions.   In other words, Congress granted this Court
                             - 20 -

limited authority to determine only the portion of a deficiency

in tax that is subject to interest computed at the increased rate

prescribed in former section 6621(c)(1).   Because the only items

in dispute in White concerned additions to tax, the underlying

deficiency in tax having been previously assessed as a

computational adjustment pursuant to section 6230(a)(1), we held

that former section 6621(c)(4) did not provide this Court with

jurisdiction to redetermine the taxpayers' liability for

increased interest under former section 6621(c).10    Accord

Odend'Hal v. Commissioner, 95 T.C. 617 (1990) (where addition to

tax was sole item in dispute, this Court lacks jurisdiction to

redetermine interest computed at the increased rate prescribed in

former section 6621(c)(1)); cf. Barton v. Commissioner, 97 T.C.

548 (1991) (this Court has jurisdiction to redetermine additional

interest computed at the increased rate prescribed in former

section 6621(c)(1) pursuant to this Court's jurisdiction to

determine an overpayment under section 6512(b)(1)).

     Although the specific subject matter of present section

6621(c) regarding corporate underpayments is different from that

of former section 6621(c) regarding substantial understatements

attributable to tax-motivated transactions, the operative

principle common to both provisions is the imposition of

     10
      In concluding our opinion in White v. Commissioner, 95
T.C. 209, 217 (1990), we expressly suggested that congressional
action would be needed to fill the jurisdictional gap identified
in that case.
                             - 21 -

statutory interest at an increased rate.   Given the commonality

of purpose of the two provisions, it is wholly appropriate to

draw a negative inference from the fact that Congress expressly

granted this Court jurisdiction in former section 6621(c)(4) but

failed to do the same in present section 6621(c).   In this

regard, a brief recapitulation of the various elements of our

analysis will buttress the point and expose the inherent weakness

in petitioners' position.

     As previously discussed, this Court's jurisdiction to

redetermine a deficiency in tax generally does not extend to

statutory interest imposed under section 6601.   Significantly,

section 6601(e)(1) provides that the deficiency procedures set

forth in subchapter B of chapter 63 are not applicable to

interest imposed under section 6601.   In addition to these

principles, we have discussed this Court's opinion in Bregin v.

Commissioner, 74 T.C. 1097 (1980), where we held that the term

"additional amount" in section 6214(a) is limited to the

assessable civil penalties described in chapter 68.   These

factors alone are adequate to overcome petitioners' assertion

that section 6214(a) provides a jurisdictional basis for this

Court to redetermine interest computed at the increased rate

prescribed in present section 6621(c).

     Moreover, when Congress' enactment of former section

6621(c)(4) is also taken into account, the result is overwhelming

confirmation that (1) petitioners' reliance on section 6214(a) is
                                - 22 -

misplaced; and (2) Congress simply did not intend for this Court

to exercise jurisdiction, at least in the context of a deficiency

proceeding, to redetermine a taxpayer's liability for interest

computed at the increased rate prescribed in present section

6621(c).

     With regard to the first point, we note that if petitioners'

theory that section 6214(a) provides this Court with jurisdiction

to redetermine interest under section 6621(c) were correct, there

would have been no need for Congress to enact former section

6621(c)(4).11    Thus, in order to avoid an interpretation that

would render former section 6621(c)(4) redundant and superfluous,

it follows that petitioners' theory of jurisdiction is incorrect.

     In addition to the foregoing, we believe that former section

6621(c)(4) reflects Congress' understanding of the need to

specifically define this Court's jurisdiction with respect to

matters involving statutory interest in recognition of section

6601(e)(1), which serves to deny this Court jurisdiction over

such interest.    Against this background, we conclude that

Congress would have expressly granted this Court jurisdiction to

redetermine interest computed at the increased rate prescribed by

present section 6621(c) if such had been the intent of Congress.

     11
      Further, taking petitioners' theory to its logical
conclusions, the issue might arise whether this Court has
jurisdiction as to interest in general, notwithstanding the
provisions of sec. 6601(e) or as to any item that would not
otherwise satisfy the definition of a deficiency under sec.
6211(a).
                               - 23 -

Section 7481(c)

     Petitioners' initial objections to respondent's motions to

dismiss included an alternative argument that this Court has the

authority, by virtue of section 7481(c), to consider petitioners'

liability for interest computed at the increased rate prescribed

in section 6621(c).

     Section 7481(c), codified by section 6246(a) of the

Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,

102 Stat. 3342, 3751, serves to confer jurisdiction on this Court

to resolve disputes concerning respondent's post-decision

computation of statutory interest; i.e., to determine interest on

deficiencies that have been redetermined by this Court and

assessed under section 6215.   See, e.g., Stauffacher v.

Commissioner, 97 T.C. 453 (1991); Note to Rule 261, 93 T.C. 821,

1040-1041 (1989).

     Section 7481(c) provides in pertinent part as follows:

          SEC. 7481(c). Jurisdiction Over Interest
     Determinations.--Notwithstanding subsection (a), if--

               (1) an assessment has been made by the
          Secretary under section 6215 which includes
          interest as imposed by this title,

               (2) the taxpayer has paid the entire
          amount of the deficiency plus interest
          claimed by the Secretary, and

               (3) within 1 year after the date the
          decision of the Tax Court becomes final under
          subsection (a), the taxpayer files a petition
          in the Tax Court for a determination that the
                              - 24 -

           amount of interest claimed by the Secretary
           exceeds the amount of interest imposed by
           this title,

     then the Tax Court may reopen the case solely to
     determine whether the taxpayer has made an overpayment
     of such interest and the amount of any such
     overpayment. * * *

     Notably, petitioners abandoned their alternative position in

the memoranda that they filed after the hearing in these cases.

Petitioners now assert that the question regarding the

"applicable date" for computing interest at the increased rate

prescribed in section 6621(c) is not an issue the resolution of

which falls within this Court's jurisdiction under section

7481(c).   Petitioners further assert that if this Court also

lacks jurisdiction to redetermine their liability for such

interest in these deficiency proceedings, then they would be left

without a remedy in this Court.12

     Consistent with the plain language of section 7481(c), it is

evident that the proceeding contemplated by such section may only

be brought after this Court's decision regarding the underlying

deficiency is final and the taxpayer has paid the interest in

dispute.   See Asciutto v. Commissioner, T.C. Memo. 1992-564,

affd. 26 F.3d 108 (9th Cir. 1994).     Accordingly, the scope of

this Court's jurisdiction under section 7481(c) is not a matter

that is properly before us at this time, and we therefore leave

     12
      Petitioners do not assert that they would be without a
remedy in some other court.
                             - 25 -

consideration of that issue for another day.    Suffice it to say

that the mere possibility that our jurisdiction may be limited in

a proceeding under section 7481(c) to determine petitioners'

liability for interest pursuant to section 6621(c) does not

provide the requisite statutory basis for us to exercise

jurisdiction over that matter in these deficiency proceedings.

Conclusion

     In order to reflect the foregoing,

                                   Orders granting respondent's

                              Motions to Dismiss for Lack of

                              Jurisdiction and to Strike

                              will be issued.