Court Opinion

ID: 4336326
Source: CourtListenerOpinion
Date Created: 2018-11-14 02:46:36.013495+00
Date Added: 2024-06-11T13:29:07.042316
License: Public Domain

128 T.C. No. 2

                UNITED STATES TAX COURT

  THEODORE C. AND DENISE M. SCHWARTZ, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2914-06L.                Filed February 14, 2007.

     Pursuant to sec. 6330(d), I.R.C., Ps filed a
petition challenging R’s determination to proceed with
collection. Ps elected to have this case conducted
under the small tax case procedures authorized by sec.
7463, I.R.C. The unpaid income tax involved is for the
1997-2003 years. The unpaid tax for any single year
does not exceed $50,000, but the total tax for all
years exceeds $150,000.

     Held: Sec. 7463(f)(2), I.R.C., provides that a
sec. 6330, I.R.C., collection case petitioned to this
Court is eligible to be conducted under the small tax
case procedures “in the case of * * * a determination
in which the unpaid tax does not exceed $50,000.” The
total unpaid tax in this case with respect to which R
determined to take collection action exceeds $50,000,
and, therefore, the case is not eligible to be
conducted under the small tax case procedures provided
in sec. 7463, I.R.C.
                                - 2 -

     Theodore C. and Denise M. Schwartz, pro sese.

     Michele E. Craythorn, for respondent.

                               OPINION

     RUWE, Judge:    This case is before the Court for judicial

review of a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330 (determination letter).

The petition was filed pursuant to section 6330(d).1   Petitioners

requested that this case be conducted under section 7463, which

provides for what are commonly referred to as “small tax case” or

“S case” procedures.   There was no objection to this request, and

the case was designated and tried as a small tax case under

section 7463.

     Section 7463 generally allows disputes in small tax cases to

be decided in proceedings in which the normally applicable

procedural and evidentiary rules are relaxed.   For example, Rule

174(b) provides:    “Trials of small tax cases will be conducted as

informally as possible consistent with orderly procedure, and any

evidence deemed by the Court to have probative value shall be

admissible.”    Tax Court decisions in small tax cases cannot be

appealed.   Sec. 7463(b).

     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                 - 3 -

     For a case to qualify as a small tax case under section

7463, the amount involved may not exceed a specified dollar

amount.   This amount is generally expressed as $50,000.      However,

as later explained, the $50,000 limit is expressed in different

statutory language, depending on the type of tax in issue (e.g.,

income, estate, or gift) and the type of proceeding (e.g.,

deficiency cases, section 6015(e) spousal relief cases, or

section 6330 collection proceedings).

     Section 7463 procedures are available in a section 6330

collection case where the taxpayer challenges the Commissioner’s

collection determination “in which the unpaid tax does not exceed

$50,000.”    Sec. 7463(f)(2).   In posttrial filings, the parties

agree that the following amounts of unpaid income tax are

involved in this section 6330 collection case:

            Year                     Unpaid Balance of Tax1

            1997                            $2,052.96
            1998                            12,861.03
            1999                            27,040.65
            2000                            20,154.68
            2001                            37,315.70
            2002                            30,729.60
            2003                            23,566.81
              Total                        153,721.43
     1
      These amounts include interest and penalties. Interest and
penalties are generally treated as tax, and any reference in the
Internal Revenue Code to “tax” (with exceptions not applicable to
this case) shall be deemed to include interest and penalties.
Secs. 6601(e)(1), 6665(a). These are the amounts stated in the
Final Notice, Notice of Intent to Levy and Notice of Your Right
to a Hearing, dated June 7, 2005. The determination letter
upholding the proposed levy to collect this unpaid tax was issued
on Jan. 3, 2006.
                              - 4 -

Because the total unpaid tax exceeds $50,000, but the tax for any

single year in issue is less than $50,000, we ordered the parties

to file responses to the question of whether this case could be

decided as a small tax case pursuant to section 7463.   Respondent

and petitioners both took the position that it was appropriate to

proceed pursuant to section 7463 because the unpaid tax for any

single year was less than $50,000.2   Nevertheless, because this

issue concerns the Court’s authority to proceed under section

7463 and is in the nature of a jurisdictional question,3 we will

     2
       Respondent’s response filed Jan. 16, 2007, states:
“Respondent’s National Office has approved the position taken in
this Statement.” Shortly after the trial, the Court became aware
of a motion that the Commissioner had filed in an unrelated case,
docket No. 17199-06S, where he took the position that a
collection case brought pursuant to sec. 6330(d) could not
proceed under the small tax case procedures of sec. 7463 because
the total unpaid tax for the years in issue exceeds $50,000 even
though the unpaid tax for each separate year was less than
$50,000. The Commissioner has recently withdrawn the motion in
that case.
     3
       We have previously referred to the dollar limits in sec.
7463 as “the jurisdictional maximum for a small tax case”.
Kallich v. Commissioner, 89 T.C. 676, 681 (1987); Page v.
Commissioner, 86 T.C. 1, 13 (1986). While there is no question
that we have jurisdiction to decide whether the proposed sec.
6330 collection action is appropriate, there is a question
whether we can proceed to decide this matter as a small tax case
under sec. 7463. Sec. 7463(c), Limitation of Jurisdiction,
prohibits decisions in excess of the prescribed amounts. Sec.
7463(d), Discontinuance of Proceedings, provides for
discontinuance of proceedings under sec. 7463 where the amount
placed in dispute “exceeds the applicable jurisdictional amount”.
Appellate court jurisdiction is also affected because a decision
in a case decided under the sec. 7463 procedures is final and may
not be reviewed by a Court of Appeals. Sec. 7463(b).
                                - 5 -

decide whether the Court has the authority to decide this case

pursuant to the small tax case provisions of section 7463.

     Section 7463(a) allows the small tax case procedures to be

used for cases

     filed with the Tax Court for a redetermination of a
     deficiency where neither the amount of the deficiency
     placed in dispute, nor the amount of any claimed
     overpayment, exceeds--

                (1) $50,000 for any one taxable year, in
            the case of the taxes imposed by subtitle A,

                (2) $50,000, in the case of the tax
            imposed by chapter 11,

                (3) $50,000 for any one calendar year, in
            the case of the tax imposed by chapter 12, or

                (4) $50,000 for any 1 taxable period (or,
            if there is no taxable period, taxable event)
            in the case of any tax imposed by subtitle D
            which is described in section 6212(a)
            (relating to a notice of deficiency) * * *
            [Emphasis added.]

Prior to December 21, 2000, there was no statutory authority for

utilizing the small tax case procedures for section 6330

collection cases.    However, effective December 21, 2000, the

Community Renewal Tax Relief Act of 2000, Pub. L. 106-554, sec.

313(b)(1), 114 Stat. 2763A-642, added section 7463(f), which

provides:

          SEC. 7463(f). Additional Cases in Which
     Proceedings May Be Conducted Under This Section.--At
     the option of the taxpayer concurred in by the Tax
     Court or a division thereof before the hearing of the
     case, proceedings may be conducted under this section
     (in the same manner as a case described in subsection
     (a)) in the case of--
                                - 6 -

              (1) a petition to the Tax Court under
          section 6015(e) in which the amount of relief
          sought does not exceed $50,000, and

              (2) an appeal under section 6330(d)(1)(A)
          to the Tax Court of a determination in which
          the unpaid tax does not exceed $50,000.[4]

Section 7463(f)(2) is the provision that controls whether the

instant section 6330 collection case qualifies under the small

tax case procedures.

     The difference between the expressions of the dollar limit

in subsections (a) and (f) of section 7463 presents the issue

that confronts us.   Subsection (a) deals with deficiency cases

where a petition is filed on the basis of a notice of deficiency.

A deficiency notice and a petition can encompass a number of tax

years or periods.    For example, a deficiency case might involve 3

taxable years where the amount of the tax deficiency in dispute

is $40,000 per year.   Such a case would be eligible for small tax

case treatment because the amount of the deficiency placed in

dispute does not exceed “$50,000 for any one taxable year”.   Sec.

7463(a)(1).   However, a section 6330 collection case is not a

     4
       Sec. 6330(d) was amended by the Pension Protection Act of
2006, Pub. L. 109-280, sec. 855(a), 120 Stat. 1019, for
determinations made after the date which is 60 days after Aug.
17, 2006. As a result, the amendment eliminated subsec.
(d)(1)(A). However, the reference to subsec. (d)(1)(A) in sec.
7463(f)(2) was not changed. The amendment does not affect this
case because the determination was made on Jan. 3, 2006.
                                  - 7 -

case for “redetermination of a deficiency”.5    Rather, a section

6330 collection case deals with the propriety of collecting tax

that has already been assessed.     Because, as in this case, the

tax has already been assessed when the section 6330 collection

procedures are initiated, there is no deficiency in existence

when the proposed collection action is initiated.6

     5
         Sec. 6211(a), Definition of a Deficiency, 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.

Sec. 6213 generally requires the issuance of a notice of
deficiency before assessment and collection of a deficiency.
Sec. 6213 allows taxpayers to petition this Court in order to
contest the Commissioner’s deficiency determination. If they do
so, assessment is generally prohibited before the Tax Court’s
decision becomes final. These cases are what we refer to as
deficiency cases.
     6
         In certain limited circumstances, the “underlying
                                                     (continued...)
                               - 8 -

     Congress obviously recognized that section 7463(a) failed to

encompass section 6330 collection cases when it enacted section

7463(f) to clarify that a section 6330 collection case can be

litigated as a small tax case.7   However, in section 7463(f),

Congress provided an articulation of the $50,000 limit for

section 6330 collection cases that was different from that

expressed in section 7463(a) for deficiency cases.   Section

7463(f) provides for the availability of the small tax case

procedures in a section 6330 collection case challenging “a

determination in which the unpaid tax does not exceed $50,000.”

The “determination” being appealed to the Tax Court referenced in

section 7463(f) is the same determination referenced in section

6330(c) and (d).   In the instant case, the determination is that

     6
      (...continued)
liability” can be placed in issue in a sec. 6330 collection case.
See sec. 6330(c)(2)(B). However, the underlying liability is not
a deficiency, and a sec. 6330 collection case is not a case for
the redetermination of a deficiency within the meaning of sec.
7463(a). This is why Congress added sec. 7463(f). Petitioners
have not attempted to contest the underlying liability in this
case.
     7
       In enacting sec. 7463(f), Congress also recognized the
distinction between deficiency cases within the purview of sec.
7463(a) and cases petitioned under sec. 6015(e), in which
taxpayers seek relief only from joint liability. Cases brought
under sec. 6015(e) have become known as “stand alone” cases
because only the right to spousal relief is in issue. See
Fernandez v. Commissioner, 114 T.C. 324, 329 (2000). Similarly,
Congress has authorized the use of small tax case procedures in
employment tax cases “if the amount of employment taxes placed in
dispute is $50,000 or less for each calendar quarter involved.”
Sec. 7436(c).
                                - 9 -

of an Appeals officer to proceed with collection by levy with

respect to petitioners’ 1997 through 2003 unpaid income tax

liabilities, which total more than $150,000.    The “case” referred

to in section 7463(f) is the case before us in which petitioners

are disputing respondent’s determination to collect the unpaid

tax.    Unlike the dollar limitation in section 7463(a) that refers

to tax dollars in dispute for each year, period, or taxable

event, the limitation in section 7463(f)(2) refers to the amount

of unpaid tax involved in a section 6330 collection case.    The

unpaid tax in the instant case far exceeds that $50,000

limitation.

       Respondent argues:

       While section 7463(f)(2) may on its face appear to
       suggest that the Court should consider the entire
       unpaid balance of tax in determining whether the unpaid
       tax exceeds $50,000.00, section 7463(f) provides, in
       pertinent part, “... proceedings may be conducted under
       this section (in the same manner as a case described in
       subsection (a))”.

From this respondent concludes that the dollar limit in section

7463(f)(2) should be applied on a per-year basis as in deficiency

cases controlled by section 7463(a).    The problem with this

argument is that it is contrary to the plain meaning of the

language in section 7463(f)(2).    The dollar limit is clearly

expressed in terms of the “case” of “an appeal * * * to the Tax

Court of a determination in which the unpaid tax does not exceed

$50,000.”    The dollar limit refers to the amount of unpaid tax
                                - 10 -

the collection of which is being challenged.     The dollar limit in

section 7463(f)(2) is a condition that must be met before a

section 6330 collection case can qualify to be conducted as a

small tax case in the same manner as a case described in

subsection (a).     If Congress had intended that the $50,000

limitation in subsection (f)(2) be applied to the amount of tax

for each year, period, or taxable event, it surely knew how to do

so; and it presumably would have used the same terminology as in

section 7463(a).8

     In interpreting a statute, our purpose is to give effect to

Congress’s intent.     Fernandez v. Commissioner, 114 T.C. 324, 329

(2000); see also Gati v. Commissioner, 113 T.C. 132, 133 (1999).

We begin with the statutory language.     Allen v. Commissioner, 118

T.C. 1, 7 (2002) (and cases cited therein).     Usually, the plain

meaning of the statutory language is conclusive.     United States

v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989); Woodral v.

Commissioner, 112 T.C. 19, 23 (1999).     “When a statute appears to

be clear on its face, there must be unequivocal evidence of

legislative purpose before interpreting the statute so as to

override the plain meaning of the words used therein.”     Fernandez

v. Commissioner, supra at 330; see also Huntsberry v.

     8
       Sec. 7436, dealing with employment taxes, contains
language similar to that of sec. 7463(a); i.e., the tax may not
exceed $50,000 for each quarter in order for the case to qualify
for small tax case procedures. See supra note 7.
                              - 11 -

Commissioner, 83 T.C. 742, 747-748 (1984).   If the statute is

ambiguous or silent, we may look to the statute’s legislative

history to determine congressional intent.   Burlington N. R.R. v.

Okla. Tax Commn., 481 U.S. 454, 461 (1987); Fernandez v.

Commissioner, supra at 329-330.

     As indicated, we believe that the relevant statutory

language is clear.   Neither party has cited any legislative

history that is inconsistent with the plain language of the

statute and we have found none.   The parties have not argued that

a literal application of section 7463(f)(2) produces an absurd

result, and it is certainly not unreasonable for Congress to have

articulated different dollar thresholds for different types of

cases.   Indeed, before the enactment of section 7463(f) in

December 2000, there was no provision for using the small tax

case procedure in section 6330 collection cases.   We therefore

hold that the $50,000 limit in section 7463(f)(2) refers to the

total amount of unpaid tax which the Commissioner has determined

to collect.   The fact that the unpaid tax for each year, period,

or taxable event does not exceed $50,000 is irrelevant.9

     As previously indicated, a trial in this case has already

been conducted.   Ideally, removal of the small tax case

designation should occur before trial.   See Rule 171(c).

     9
       We express no opinion on the application of the dollar
limit contained in sec. 7463(f)(1) regarding cases under sec.
6015(e).
                              - 12 -

However, Congress foresaw the possibility that the parties and

the Court might, at any time prior to entry of decision, discover

that the relevant amount of tax exceeds the applicable

jurisdictional amount.   Section 7463(d) thus provides:

          SEC. 7463(d). Discontinuance of Proceedings.--At
     any time before a decision entered in a case in which
     the proceedings are conducted under this section
     becomes final, the taxpayer or the Secretary may
     request that further proceedings under this section in
     such case be discontinued. The Tax Court, or the
     division thereof hearing such case, may, if it finds
     that (1) there are reasonable grounds for believing
     that the amount of the deficiency placed in dispute, or
     the amount of an overpayment, exceeds the applicable
     jurisdictional amount described in subsection (a), and
     (2) the amount of such excess is large enough to
     justify granting such request, discontinue further
     proceedings in such case under this section. Upon any
     such discontinuance, proceedings in such case shall be
     conducted in the same manner as cases to which the
     provisions of sections 6214(a) and 6512(b) apply.

Section 7463(d) was enacted prior to section 7463(f) and does not

reference section 6330 collection cases.   Nevertheless, the

procedures for discontinuance of small tax case proceedings

contained in section 7463(d) apply to “a case in which the

proceedings are conducted under this section”.   Since it is now

apparent that this case does not qualify for small tax case

treatment under section 7463, section 7463(d) provides a logical

remedy.10

     10
       Sec. 7436(c) provides for availability of sec. 7463 small
tax case procedures in employment tax cases where the amount in
dispute is $50,000 or less for each calendar quarter and provides
for use of the discontinuance procedures in sec. 7463(d). Sec.
                                                   (continued...)
                             - 13 -

     The unpaid tax in this case is more than three times the

$50,000 limit provided in section 7463(f)(2).    We have therefore

removed the small tax case designation and discontinued the

proceedings under section 7463.   We will take appropriate action

so that proceedings in this case will be conducted in conformity

with procedures applicable to section 6330 collection cases that

are not designated as small tax cases under section 7463.

                                         An appropriate order will

                                    be issued.

     10
      (...continued)
7436(c)(3) provides: “Rules similar to the rules of the last
sentence of subsection (a), and subsections (c), (d), and (e), of
section 7463 shall apply to proceedings conducted under this
subsection.”