Court Opinion

ID: 4474666
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:05.074204+00
Date Added: 2024-06-11T14:50:59.484889
License: Public Domain

Marvel, J., dissenting: Relying on what the Court’s Opinion asserts is the plain meaning of prefatory language in section 6015(e)(1), the Court holds that it does not have jurisdiction under section 6015(e)(1) to review the Commissioner’s determination denying a taxpayer relief under section 6015(f) in a nondeficiency case. Specifically, the Court’s Opinion concludes that, in order for us to have jurisdiction over a taxpayer’s petition for relief under section 6015, the taxpayer must be a person “against whom a deficiency has been asserted and who elects to have subsection (b) or (c) apply”. The Court bases its holding that we have no jurisdiction to decide this case on its conclusion that petitioner is not an individual “against whom a deficiency has been asserted”. I disagree. Because I conclude that petitioner is an individual “against whom a deficiency has been asserted”, I contend that the Court’s Opinion deciding the jurisdictional issue against petitioner is in error. Congress enacted section 6015 in 1998 as part of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3201(a), 112 Stat. 734. As originally enacted, section 6015(e)(1) provided, in pertinent part, that (1) In general. — In the case of an individual who elects to have subsection (b) or (c) apply— (A) In general. — The individual may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief available to the individual under this section * * * In 2001, Congress amended section 6015(e)(1), effective on December 21, 2000 (2001 amendment). Consolidated Appropriations Act, 2001, Pub. L. 106-554, app. G, sec. 313, 114 Stat. 2763A-641 (2000). As a result, section 6015(e)(1) currently provides, in pertinent part, SEC. 6015(e). Petition for Review by Tax Court.— (1) 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— (A) In GENERAL. — In addition to any other remedy provided by law, the individual may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief available to the individual under this section * * * The Court’s Opinion concludes that we do not have jurisdiction because petitioner is not an individual against whom a deficiency has been asserted. Court op. p. 16. The Court’s Opinion explains that there is no deficiency because petitioner reported the additional tax liability attributable to the embezzlement income on an amended return, and an amount reported on an amended return must be treated as an amount shown by the taxpayer upon his return in calculating the amount of a deficiency under section 6211(a). See sec. 301.6211-l(a), Proced. & Admin. Regs. In reaching its conclusion, the Court relies upon the opinions of the Court of Appeals for the Ninth Circuit and the Court of Appeals for the Eighth Circuit in Commissioner v. Ewing, 439 F.3d 1009 (9th Cir. 2006), revg. Ewing v. Commissioner, 118 T.C. 494 (2002) (Ewing I) and vacating 122 T.C. 32 (2004), and Bartman v. Commissioner, 446 F.3d 785 (8th Cir. 2006), affg. in part and revg. in part T.C. Memo. 2004-93. Both the Court of Appeals for the Ninth Circuit and the Court of Appeals for the Eighth Circuit concluded that the language added to section 6015(e)(1) by the 2001 amendment was clear and unambiguous and that the 2001 amendment limited our jurisdiction in section 6015(f) cases to those cases in which a deficiency has been asserted. However, the Court of Appeals for the Eighth Circuit in Bartman appears to have equated the language “against whom a deficiency has been asserted” to a requirement that a section 6015(f) case must arise from a deficiency determination by the Commissioner. See Bartman v. Commissioner, supra at 787 (Tax Court has no jurisdiction over a section 6015 petitioner “where no deficiency was determined by the IRS”). The language that Congress chose to add to section 6015(e)(1) in 2001 stops far short of requiring that the Commissioner must actually have determined a deficiency. The determination of a deficiency is a technical concept that refers to the action taken by the Commissioner after he evaluates a taxpayer’s tax situation and finally concludes that the taxpayer erred either in making a return that understated his tax liability or in failing to make a return at all. The Commissioner “determines” a deficiency when he finally concludes that the taxpayer has understated his tax liability and reflects that determination in a notice of deficiency. See sec. 6212. Before the Commissioner issues a notice of deficiency, an extensive administrative examination or “audit” often occurs. It begins when the Internal Revenue Service (the Service) selects a taxpayer (in the case of a failure to file) or a taxpayer’s return for examination and notifies the taxpayer of the examination. At that point, the Service has usually taken no position regarding the possible existence of a deficiency. The Service typically will take no position regarding the existence of a deficiency until the examination has been completed. If the Service concludes that there is an understatement of tax on a taxpayer’s return, it will usually issue a preliminary report, commonly referred to as the 30-day letter. The 30-day letter advises the taxpayer that the Service believes adjustments are necessary to the taxpayer’s return and provides the taxpayer with a listing of the adjustments and a calculation of the taxpayer’s correct income tax liability. The 30-day letter will also state the amount of the understatement that the Service contends the taxpayer has made, and it will calculate the deficiency and any additions to tax or penalties for which the Service alleges the taxpayer is liable. The 30-day letter gives the taxpayer an opportunity to dispute the Service’s asserted tax deficiency administratively and to contest the proposed imposition of any addition to tax or penalty. The Commissioner usually will issue a notice of deficiency after the administrative appeal process has been completed and the case is unagreed, or after the time limit, for pursuing an administrative appeal has expired without taxpayer action, or if the expiration of the period of limitations for assessment is about to expire. A taxpayer who agrees to the proposed deficiency or who voluntarily files an amended return reflecting the proposed deficiency ordinarily does not receive a notice of deficiency. With this background in mind, we must turn to the actual language of section 6015(e)(1) as amended. Although Congress is well aware of the words it has used in other sections of the Internal Revenue Code (the Code) to reflect that the Commissioner has determined a deficiency and issued a notice of deficiency, see sec. 6212(a), the words used by Congress in section 6015(e)(1) as amended do not contain any reference to a determination of a deficiency by the Commissioner. Section 6015(e)(1) refers only to “an individual against whom a deficiency has been asserted”. It does not require that the Commissioner (or anyone else for that matter) must actually have determined a deficiency. The pertinent language of section 6015(e)(1) as amended requires only that a deficiency must have been asserted by someone, but it does not specify by whom or how or when. Because section 6015(e) as amended does not use the magic words “determine a deficiency” or specify that the deficiency must actually be asserted by the Commissioner, section 6015(e)(1) as amended screams out for interpretation. If Congress had intended to limit the right to petition this Court in section 6015 cases only to those taxpayers who had received a notice of deficiency, it is beyond debate that Congress knew how to say so clearly and unequivocally. The fact that Congress did not refer to “an individual against whom a deficiency has been determined” or to “an individual against whom the Commissioner has determined a deficiency” is compelling evidence that Congress did not intend, when it amended section 6015(e)(1), to limit the right to petition this Court in section 6015 cases to those taxpayers to whom the Commissioner had mailed a notice of deficiency. This case illustrates why recourse to the legislative history is warranted now and was warranted in Ewing I. Petitioner filed a joint return for 1999 with his wife. On that return, there is an understatement of tax attributable to the erroneous items (unreported embezzlement income) of petitioner’s wife. Petitioner discovered the understatement after the joint return was filed. On the advice of counsel, petitioner and his wife filed an amended return for 1999 that reported the previously unreported embezzlement income of petitioner’s wife and calculated an additional income tax liability attributable to the previously unreported embezzlement income. That additional tax liability was not paid when petitioner and his wife filed the amended return, nor has it been paid to date. Although respondent was under no legal obligation to do so, respondent processed the amended return1 and, without issuing a notice of deficiency, assessed2 the additional tax liability reported on the amended return. Subsequently, petitioner submitted a second Form 8857, Request for Innocent Spouse Relief, which respondent denied.3 Petitioner then filed a petition in this Court seeking a review of respondent’s determination. It is our jurisdiction over this petition that the Court’s Opinion concludes is nonexistent. In order to apply section 6015(e)(1) to these facts, we must first decide what the term “asserted” means. Section 6015(e)(1) does not contain any definition, so, in accordance with accepted principles of statutory construction, we apply the commonly accepted definition. See, e.g., Muscarello v. United States, 524 U.S. 125, 127-132 (1998); Nw. Forest Res. Council v. Glickman, 82 F.3d 825, 833 (9th Cir. 1996); Keene v. Commissioner, 121 T.C. 8, 14 (2003). In Webster’s Third New International Dictionary, the word “assert” means “to state or affirm positively, assuredly, plainly or strongly” or, alternatively, “to demonstrate the existence of”. Webster’s Third New International Dictionary 131 (1993). In Merriam Webster’s Collegiate Dictionary, the word “assert” means “to state or declare positively and often forcefully or aggressively” or, alternatively, “to demonstrate the existence of”. Merriam Webster’s Collegiate Dictionary 69 (10th ed. 1997). In order to apply section 6015(e)(1) to these facts, we must also understand the term “deficiency”. The term is not defined in section 6015. However, it is defined in section 6211(a). Section 6211(a) provides: SEC. 6211(a). In General. — For purposes of this title in the case of income, estate, and gift taxes imposed by subtitles A and B and excise taxes imposed by chapters 41, 42, 43, and 44 the term “deficiency” means the amount by which the tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44 exceeds the excess of— (1) the sum of (A) the amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plus (B) the amounts previously assessed (or collected without assessment) as a deficiency, over— (2) the amount of rebates, as defined in subsection (b)(2), made. Essentially, a deficiency, as defined in section 6211(a), is the number remaining after the amount of tax shown on a taxpayer’s return plus any amounts previously assessed as deficiencies (minus refunds) is subtracted from the taxpayer’s correct tax liability. In order to ascertain whether a deficiency within the meaning of section 6211 has been asserted, we must analyze whether section 6211 requires us to examine petitioner’s original return or his amended return. The Court’s Opinion did not make this analysis. Instead, the Court’s Opinion, apparently relying on section 301.6211-l(a), Proced. & Admin. Regs., concluded that a deficiency must be calculated with reference to the amended return. I believe that, if an analysis had been performed, it would have supported a conclusion that the references to “return” in sections 6211 and 6015 are to the taxpayer’s original return and not to an amended return. An amended return is a document of uncertain status under the Internal Revenue Code. There is no statutory requirement to file an amended return in the Code. See Badaracco v. Commissioner, 464 U.S. 386 (1984). There is no regulatory or administrative requirement promulgated by the Commissioner requiring a taxpayer to file an amended return. See id. In fact, the Commissioner is not required to accept and process an amended return. See, e.g., Dover Corp. & Subs. v. Commissioner, 148 F.3d 70, 72-73 (2d Cir. 1998), affg. T.C. Memo. 1997-339 and T.C. Memo. 1997-340; Koch v. Alexander, 561 F.2d 1115, 1117 (4th Cir. 1977); Miskovsky v. United States, 414 F.2d 954 (3d Cir. 1969). The Commissioner will process an amended return only when he chooses to do so. As the Court of Appeals for the Fourth Circuit stated in Koch v. Alexander, supra at 1117: There is simply no statutory provision authorizing the filing of amended tax returns, and while the IRS has, as a matter of internal administration, recognized and accepted such returns for limited purposes, their treatment has not been elevated beyond a matter of internal agency discretion. [Fn. ref. omitted.] There are many instances in which the Federal courts have examined provisions of the Code and determined that a statutory reference to “return” is to the taxpayer’s original return. In Badaracco v. Commissioner, supra at 393, the U.S. Supreme Court stated: Indeed, as this Court recently has noted, Hillsboro National Bank v. Commissioner, 460 U.S. 370, 378-380, n.10 (1983), the Internal Revenue Code does not explicitly provide either for a taxpayer’s filing, or for the Commissioner’s acceptance, of an amended return; instead, an amended return is a creature of administrative origin and grace. Thus, when Congress provided for assessment at any time in the case of a false and fraudulent “return,” it plainly included by this language a false or fraudulent original return. In this connection, we note that until the decision of the Tenth Circuit in Dowell v. Commissioner, 614 F.2d 1263 (1980), cert. pending, No. 82-1873, courts consistently had held that the operation of §6501 and its predecessors turned on the nature of the taxpayer’s original, and not his amended, return.8  The undisputed facts of this case establish that (1) petitioner’s original return understated his and his wife’s income tax liability for 1999, and (2) there was a deficiency in income tax for 1999 resulting from that understatement. Given the commonly accepted definition of the term “assert”, I contend that it is also clear that (1) petitioner and his wife “asserted” the deficiency on their amended 1999 return, and (2) respondent “asserted” the same deficiency when he assessed the additional tax liability reported on petitioner’s amended 1999 return. If one concludes, however, that the language of section 6015(e)(1) is not clear because it is susceptible of more than one interpretation as outlined above, then recourse to the legislative history of section 6015(e)(1) as amended is warranted. In Ewing I, we reviewed the legislative history of the 2001 amendment to section 6015(e). After quoting pertinent language in the conference report accompanying the Consolidated Appropriations Act, 2001, see H. Conf. Rept. 106-1033, at 1023 (2000), 2000-3 C.B. 304, 353, we concluded as follows: The conference report indicates that the language “against whom a deficiency has been asserted” was inserted into section 6015(e) to clarify the proper time for making a request to the Commissioner for relief from joint and several liability for tax that may have been underreported on the return. Congress wanted to prevent taxpayers from submitting premature requests to the Commissioner' for relief from potential deficiencies before the Commissioner had asserted that additional taxes were owed. Congress also wanted to make it clear that a taxpayer does not have to wait until after an assessment has been made before submitting a request to the Commissioner for relief under section 6015 * * * [Ewing v. Commissioner, 118 T.C. at 505.] I contend that, in Ewing I, we properly relied on the legislative history to interpret whether petitioner was “an individual against whom a deficiency has been asserted” because the language does not support a conclusion that a deficiency must actually have been determined before a taxpayer may seek relief under section 6015, and interpretation is necessary to ascertain the meaning of section 6015(e)(1) as amended. I also contend that the legislative history makes it clear that the assessment of tax is one way, but not the only way, in which a deficiency may be asserted.4  Because I believe we properly concluded in Ewing I that section 6015(e)(1) as amended is ambiguous and that recourse to the legislative history of the 2001 amendment was appropriate, I respectfully dissent. Cohen and Swift, JJ., agree with this dissenting opinion.   See, e.g., Badaracco v. Commissioner, 464 U.S. 386 (1984).    Assessment is a technical term in the tax field. It is generally used to describe the formal act of recording on the records of the Internal Revenue Service a tax liability that has been reported on a tax return, sec. 6201(a)(1), or that otherwise has become final and/or assessable, sec. 6213(b), (c), and (d); see sec. 6203.    Petitioner filed his initial Form 8867 when he filed his amended return. However, respondent did not process that request. A copy of the initial Form 8857 is not in the record.    The significance of the original, and not the amended, return has been stressed in other, but related, contexts. It thus has been held consistently that the filing of an amended return in a nonfraudulent situation does not serve to extend the period within which the Commissioner may assess a deficiency. See, e.g., Zellerbach Paper Co. v. Helvering, 293 U.S. 172 (1934); National Paper Products Co. v. Helvering, 293 U.S. 183 (1934); National Refining Co. v. Commissioner, 1 B.T.A. 236 (1924). It also has been held that the filing of an amended return does not serve to reduce the period within which the Commissioner may assess taxes where the original return omitted enough income to trigger the operation of the extended limitations period provided by §6501(e) or its predecessors. See, e.g., Houston v. Commissioner, 38 T.C. 486 (1962); Goldring v. Commissioner, 20 T.C. 79 (1953). And the period of limitations for filing a refund claim under the predecessor of §6511(a) begins to run on the filing of the original, not the amended, return. Kaltreider Construction, Inc. v. United States, 303 F.2d 366, 368 (CA3), cert. denied, 371 U.S. 877 (1962).    4 The Commissioner’s own regulations also are consistent with the legislative history. After sec. 6015(e) was amended in 2001, the Commissioner promulgated sec. 1.6015 — 5(b)(5), Income Tax Regs., entitled “Time and manner for requesting relief”: (5) Premature requests for relief — The Internal Revenue Service will not consider premature claims for relief under §1.6015-2, 1.6015-3, or 1.6015-4. A premature claim is a claim for relief that is filed for a tax year prior to the receipt of a notification of an audit or a letter or notice from the IRS indicating that there may be an outstanding liability with regard to that year. Such notices or letters do not include notices issued pursuant to section 6223 relating to TEFRA partnership proceedings. A premature claim is not considered an election or request under §1.6015-l(h)(5). [Emphasis added.]