Court Opinion

ID: 9365582
Source: CourtListenerOpinion
Date Created: 2023-01-24 17:00:40.832006+00
Date Added: 2024-06-11T17:15:46.061729
License: Public Domain

FOR PUBLICATION

    UNITED STATES COURT OF APPEALS
         FOR THE NINTH CIRCUIT

MICHAEL D. BROWN,                                    No. 22-70001

                  Petitioner-Appellant,             Tax Court. No.
                                                     18104-17L
  v.

COMMISSIONER OF INTERNAL                               OPINION
REVENUE,

                  Respondent-Appellee.

                  Appeal from a Decision of the
                    United States Tax Court

          Argued and Submitted November 10, 2022
                    Pasadena, California

                      Filed January 24, 2023

Before: Mary H. Murguia, Chief Judge, and Barrington D.
      Parker, * and Kenneth K. Lee, Circuit Judges.

                     Opinion by Judge Parker

*
  The Honorable Barrington D. Parker, United States Circuit Judge for
the U.S. Court of Appeals for the Second Circuit, sitting by designation.
2                          BROWN V. CIR

                          SUMMARY **

                                Tax

    The panel affirmed the Tax Court’s decision in an action
seeking a refund of a payment made in connection with a
rejected offer in compromise to settle a tax liability.
    Taxpayer made an offer in compromise (OIC) to settle
his outstanding tax liability. Under the Tax Increase
Prevention and Reconciliation Act (TIPRA), taxpayer
submitted a payment of twenty percent of the value of his
OIC, acknowledging that this TIPRA payment would not be
refunded if the OIC was not accepted. The Commissioner of
Internal Revenue did not accept the OIC because the
Commissioner concluded that ongoing audits of taxpayer’s
businesses made the overall amount of his tax liability
uncertain. Taxpayer then sought a refund of his TIPRA
payment.
     In a previous appeal, this court held that the Internal
Revenue Service did not abuse its discretion by returning the
OIC, but vacated the Tax Court’s determination that the IRS
had not abused its discretion in refusing to return the TIPRA
payment. This court remanded for the Tax Court to consider
its refund jurisdiction in the first instance. On remand, the
Tax Court held that it did not have jurisdiction.
    The panel affirmed the Tax Court decision, because there
is no specific statutory grant conferring jurisdiction to refund
TIPRA payments. The panel explained that, as the Tax Court

**
  This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                       BROWN V. CIR                       3

correctly noted, it is a court of limited jurisdiction,
specifically granted by statute, with no authority to expand
upon that statutory grant.

                       COUNSEL

Steve R. Mather (argued), Mather Anderson, Los Angeles,
California, for Petitioner Appellant.
Matthew S. Johnshoy (argued), Trial Attorney; Joan I.
Oppenheimer Trial Attorney, Co-Counsel; Regina S.
Moriarty, Trial Attorney, Lead Counsel; David A. Hubbert,
Deputy Assistant Attorney General; United States
Department of Justice, Tax Division, Washington, D.C.;
William M. Paul, Internal Revenue Service, Washington,
D.C.; for Respondent-Appellee.
4                         BROWN V. CIR

                          OPINION

PARKER, Circuit Judge:

    Michael D. Brown owes approximately $50,000,000 in
unpaid federal taxes for various years between 2001 and
2011. In 2016, after the Internal Revenue Service (“IRS”)
placed two tax liens on his property, Brown submitted an
offer in compromise (“OIC”) to the Commissioner of
Internal Revenue. An OIC allows a taxpayer to settle his
outstanding tax liabilities for less than their total value if the
IRS determines there are doubts as to collectability or that
full payment would be inequitable or cause unusual
economic hardship. IRM 33.3.2 (Aug. 6, 2019) (Offers in
Compromise); IRS Form 656 (Offer in Compromise) at 3.
Brown’s OIC offered to settle his $50,000,000 outstanding
tax liability for a payment of $400,000, claiming that there
were doubts as to collectability.
    The Tax Increase Prevention and Reconciliation Act of
2005 (“TIPRA”), Pub. L. 109–222, requires a taxpayer who
makes an OIC to submit a payment of twenty percent of the
value of the OIC, in Brown’s case $80,000. See 26 U.S.C. §
7122(c)(1)(A)(i). As part of the OIC process, the taxpayer
must acknowledge that he understands that the TIPRA
payment will not be refunded if the OIC is not accepted.
Brown acknowledged the following on his signed OIC
submission form: “I voluntarily submit the payments made
on this offer and understand that they will not be returned
even if I withdraw the offer or the IRS rejects or returns the
Offer.” IRS Form 656 (Offer in Compromise) at 5. The
Commissioner returned Brown’s OIC after concluding that
it was inappropriate to compromise his tax liability at that
time because the existence of ongoing audits of Brown’s
                        BROWN V. CIR                        5

businesses made the overall amount of his tax liability
uncertain. The IRS, in accordance with the terms of the OIC,
did not return Brown’s $80,000 TIPRA payment. This
litigation is Brown’s attempt to retrieve that money.
    In a previous appeal, we held that the IRS’s decision to
return Brown’s OIC was proper but remanded to allow the
Tax Court to determine if it had jurisdiction to refund
Brown’s $80,000 TIPRA payment. Brown v. Comm’r, 826
F. App’x 673, 674 (9th Cir. 2020). On remand, the Tax Court
held that it did not have jurisdiction to refund the payment
because the power to do so had not been specifically granted
to it by any statute. Brown v. Comm’r, 122 T.C.M. (CCH)
199, at *7 (2021). We agree and therefore we affirm.
                              I.
    This litigation began in 2015 when the IRS filed the first
of two notices of federal tax lien (“NFTLs”) against Brown’s
property as a consequence of Brown’s unpaid taxes. In
response to the NFTLs, Brown requested a Collection Due
Process (“CDP”) hearing and indicated that he intended to
make an OIC. At that time, there were multiple ongoing
audits of Brown’s businesses.
     In November 2016, Brown submitted his OIC. As noted,
his OIC offered to settle his $50,000,000 tax liability for
$400,000 and included the required twenty percent
($80,000) TIPRA payment. The law is clear that TIPRA
payments are not refundable deposits but rather are non-
refundable payments of tax. See Isley v. Comm’r, 141 T.C.
349, 372 (2013) (“[T]he [TIPRA] payment constitutes a
nonrefundable, partial payment of the taxpayer’s liability . .
.”) (citing H.R. Conf. Rept. No. 109–455, at 234 (2006)); see
also 26 U.S.C. § 7122(c)(2)(A)–(C) (establishing that any
TIPRA payment goes to the taxpayer’s liabilities). The IRS
6                       BROWN V. CIR

accepted Brown’s OIC for processing but decided that it
should be returned because of the ongoing audits. After the
OIC was returned, Brown received a Notice of
Determination (“NOD”) which permitted him to appeal to
the Tax Court to contest the liens and the return of his OIC.
See 26 U.S.C. § 6330(d)(1).
    Brown appealed to the Tax Court and lost. The Tax
Court held that the liens were appropriate and that the IRS
did not abuse its discretion by declining to refund Brown’s
TIPRA payment. See Brown v. Comm’r, 118 T.C.M. (CCH)
260 (2019). Brown then appealed to this Court. We affirmed
in part and vacated in part. Brown, 826 F. App’x at 673. We
held that the IRS did not abuse its discretion by returning
Brown’s OIC but vacated the Tax Court’s determination that
the IRS had not abused its discretion in refusing to return
Brown’s TIPRA payment. Because the Commissioner
argued to us that the Tax Court lacked jurisdiction to order a
refund of the TIPRA payment, but that issue had not been
fully briefed, we remanded to the Tax Court to consider its
refund jurisdiction in the first instance. Id. at 674.
    On remand, the Tax Court held that it did not have
jurisdiction to refund Brown’s TIPRA payment. The court
emphasized that it is “a court of limited jurisdiction and has
only such jurisdiction as is granted it by the [Internal
Revenue] Code.” Brown, 122 T.C.M. (CCH) at *5. The court
reasoned that although it had jurisdiction to hear the appeal
pursuant to 26 U.S.C. §§ 6320(c) and 6330(d)(1), it had no
jurisdiction under these or any other Code provisions to pay
Brown the refund he was seeking. Id. at *6–7. It therefore
granted the Commissioner’s motion to dismiss for lack of
jurisdiction. Id. at *8. This appeal followed.
                           BROWN V. CIR                            7

                                 II.
    We review the Tax Court’s interpretation of federal
statutes and its determinations of its own jurisdiction de
novo. Meruelo v. Comm’r, 691 F.3d 1108, 1114 (9th Cir.
2012), as amended on denial of reh’g and reh’g en banc
(Nov. 14, 2012).
    As the Tax Court correctly noted, it is a court of limited
jurisdiction and possesses no general equitable powers. See
Comm’r v. McCoy, 484 U.S. 3, 7 (1987). In other words, it
has only the jurisdiction specifically granted by statute and
lacks the authority to expand upon that statutory grant. Id.;
see 26 U.S.C. § 7442. We have been clear that “[t]he Tax
Court’s jurisdiction is defined and limited by Title 26 and it
may not use general equitable powers to expand its
jurisdictional grant beyond this limited Congressional
authorization. It may exercise its authority only within its
statutorily defined sphere.” Est. of Branson v. Comm’r, 264
F.3d 904, 908 (9th Cir. 2001).
    Brown argues that 26 U.S.C. §§ 6320 and 6330 give the
Tax Court jurisdiction to refund his TIPRA payment. This is
not so. Section 6320 merely requires that taxpayers be given
notice and an opportunity for a hearing when a tax lien is
filed. And section 6330 deals with procedures governing
levies on property and administrative reviews of both liens
and levies. See 26 U.S.C. § 6320(c) (explaining that
provisions of § 6330 shall apply to the review of tax-lien
hearings). Nothing in either section grants the Tax Court the
power to refund TIPRA payments. 1

1
  Cf. 26 U.S.C. § 6512(b)(1) (giving the Tax Court, in its deficiency
jurisdiction, the power to determine an overpayment and refund such
overpayment to the taxpayer).
8                       BROWN V. CIR

    In Greene-Thapedi v. Commissioner, 126 T.C. 1, 8
(2006), the Tax Court held that “section 6330 does not
expressly give [the Tax Court] jurisdiction to determine an
overpayment or to order a refund or credit of taxes paid.”
The Tax Court went on to state “we do not believe we should
assume, without explicit statutory authority, jurisdiction
either to determine an overpayment or to order a refund or
credit of taxes paid in a section 6330 collection proceeding.”
Greene-Thapedi, 126 T.C. at 11.
   Thus, the Tax Court lacks jurisdiction to refund TIPRA
payments because there is no specific statutory grant
conferring jurisdiction to do so. We have considered
Brown’s remaining arguments and find them to be without
merit.
                             III.
    The judgment of the Tax Court is AFFIRMED.