General Instructions for Form 843 – Abatement of
Interest
Table of Contents
Purpose
of Form
Use Form
843 to file a claim for refund of certain overpaid taxes, interest,
penalties, and additions to tax. For example, if on your employment tax
return you reported and paid more Federal income tax than you actually
withheld from an employee, use this form to claim a refund. Also, use
Form 843 to claim a refund of excess tier 2 RRTA tax withheld and to
request a refund under section 6715 for misuse of dyed fuel.
Also use
Form 843 to request abatement of an overassessment (or the unpaid
portion of an overassessment) if more than the correct amount of tax
(except income, estate, and gift tax), interest, additions to tax, or
penalties have been assessed.
Generally, you must file a separate Form 843 for each tax period
and each type of tax. Exceptions are provided for certain claims in the Line
4 instructions on this page.
Do
not use
Form 843 to claim:
·A refund or to request an abatement of your income tax.
Individuals must use Form 1040X,
Amended U.S. Individual Income Tax Return. Corporations that filed Form
1120 or 1120-A must use Form 1120X,
Amended U.S. Corporation Income Tax Return. Other income tax filers
should file a claim on the appropriate amended tax return.
·A refund relating to excise taxes reported on Forms 11-C, 720,
730, or 2290. See Form 720X, Amended
Quarterly Federal Excise Tax Return; Form 4136,
Credit for Federal Tax Paid on Fuels; Form 8849,
Claim for Refund of Excise Taxes; Schedule C
of Form 720, Quarterly Federal Excise
Tax Return; Pub. 378, Fuel Tax Credits
and Refunds; and Pub. 510, Excise
Taxes, for information on the appropriate forms to use to claim the
various excise tax refunds. However, use Form 843 to request refund of
the penalty under section 6715 for misuse of dyed fuel and to request
abatement or refund of interest or penalties under section 6404(e) or
6404(f) relating to excise taxes.
·A refund of the required payment under section 7519. Instead, file
Form 8752, Required Payment or Refund
Under Section 7519.
Specific
Instructions
SSN or ITIN.
Enter your social security number (
SSN
) or
IRS
individual taxpayer identification number (ITIN). If you are filing Form
843 relating to a joint return, enter SSNs or ITINs for both you and
your spouse.
Line
3
Line 3a.
Check the appropriate box to show the type of tax, penalty,
or addition to tax. If you are filing a claim for refund or request for
abatement of an assessed penalty, check the box and enter the applicable
Internal Revenue Code (IRC) section. Generally, you can find the IRC
section on the Notice of Assessment you receive from the service center.
Excess tier 2 RRTA tax. Complete lines 1 and 2. On line 3a, check the box for
Employment tax. Skip lines 3b, 4a, and 4b. In the space for line 5,
identify the claim as “Excess Tier 2 RRTA”
and show your computation of the refund. You must also attach copies of
your Forms W-2 for the year to Form 843. See the worksheet in Pub.
505, Tax Withholding and Estimated Tax, to help you figure
the excess amount.
Line 3b.
Check the appropriate box to show the type of return, if
any, that you filed.
You
must attach Form 941c, Supporting
Statement To Correct Information, or an equivalent statement, if you are
claiming a refund of taxes reported on Form 941, 941-M, 941-SS, 943, or
945.
Line
4
Requesting
Abatement or Refund of Interest Under Section 6404(e)
Section
6404(e) gives the
IRS
the authority to abate interest when the additional interest is
attributable to
IRS
errors or delays.
Section
6404(e) applies only if there was an unreasonable error or delay in
performing a managerial or ministerial act (defined below) and only
relates to taxes for which a notice of deficiency is required by section
6212(a) and in which no significant aspect of the error or delay was
caused by the taxpayer. This includes income taxes, generation-skipping
transfer taxes, estate and gift taxes, and certain excise taxes imposed
by chapter 41, 42, 43, 44, or 45. Section 6404(e) does not allow
abatement of interest for employment taxes or other excise taxes. See Pub.
556, Examination of Returns, Appeal Rights, and Claims of
Refund, for more information.
Managerial act.
The term “managerial act”
means an administrative act that occurs during the processing of your
claim involving the temporary or permanent loss of records or the
exercise of judgment or discretion relating to management of personnel.
A decision regarding the proper application of Federal tax law is not
a managerial act. See Regulations section
301.6404
-2 for more information.
Ministerial act.
The term “ministerial act”
means a procedural or mechanical act that does not
involve the exercise of judgment or discretion and that occurs during
the processing of your case after all prerequisites of the act, such as
conferences and review by supervisors, have taken place. A decision
regarding the proper application of Federal tax law is not
a ministerial act. See Regulations section
301.6404
-2 for more information.
How
To Request an Abatement of Interest
Request
an abatement of interest by writing “Request for
Abatement of Interest Under Section 6404(e)” at the top of Form
843.
Complete
lines 1 through 3. Check the first box on line 4a. On line 4b, show the
dates of any payment of interest or tax liability for the tax
On line 5
state:
·The type of tax involved,
·When you were first notified by the
IRS
in writing about the deficiency or payment,
·The specific period for which you are requesting abatement of
interest,
·The circumstances of your case, and
·The reasons why you believe that failure to abate the interest
would result in grossly unfair treatment.
Multiple tax years.
File only one Form 843 if the interest assessment resulted
from the
IRS
's error or delay in performing a single managerial or ministerial act
affecting a tax assessment for multiple tax years or types of tax (for
example, where 2 or more tax years were under examination).
Where to file.
File Form 843 with the
Internal
Revenue
Service
Center
where you filed your return.
Requesting
Abatement or Refund of a Penalty or Addition to Tax as a Result of
Written Advice
Section
6404(f) gives the
IRS
the authority to abate any portion of a penalty or addition to tax
attributable to erroneous advice furnished to you in writing by an
officer or employee of the
IRS
, acting in his or her official capacity.
The
IRS
will abate the penalty or addition to tax only if:
1.You reasonably relied on the written advice,
2.The written advice was in response to a specific written request
you made for advice, and
3.The penalty or addition to tax did not result from your failure to
provide the
IRS
with adequate or accurate information.
How
To Request an Abatement or Refund of a Penalty or an Addition to Tax
Request
an abatement or refund of a penalty or addition to tax because of
erroneous written advice by writing “Request for
Abatement of Penalty or Addition to Tax Under Section 6404(f)”
at the top of Form 843.
Complete
lines 1 through 3. Check the appropriate box on line 4a. On line 4b,
enter the date of payment if the penalty or addition to tax has period
involved.
been
paid.
You must
attach copies of the following information to Form 843:
1.Your written request for advice;
2.The erroneous written advice you relied on that was furnished to
you by the
IRS
; and
3.The report, if any, of tax adjustments identifying the penalty or
addition to tax, and the item(s) relating to the erroneous advice.
When to file.
An abatement of any penalty or addition to tax under this
section will be allowed only if you submit the request for abatement
within the period allowed for collection of the penalty or addition to
tax or, if you paid the penalty or addition to tax, within the period
allowed for claiming a credit or refund of such penalty or addition to
tax.
Where to file.
If the erroneous advice received relates to an item on a
Federal tax return, send Form 843 to the
Internal
Revenue
Service
Center
where your return was filed. If the erroneous advice does not relate to
an item on a tax return, Form 843 should be sent to the service center
where your return was filed for the tax year you relied on the advice.
Line
5
Explain
in detail your reasons for filing this claim and show your computation
for the credit, refund, or abatement. If you attach an additional
sheet(s), include your name and
SSN
, ITIN, or EIN on it. Also, attach appropriate supporting evidence.
Section 7. Abatement
and Suspension of Interest: IRC 6404 and 7508
20.2.7
Abatement and Suspension of Interest: IRC 6404 and 7508
20.2.7.1
(07-31-2001)
Interest Abatement and Suspension Overview
1.This chapter includes procedures for abatement or suspension of
interest if that interest is:
·erroneously or illegally assessed
·attributable to certain errors or delays by the
IRS
[IRC section 6404(e)(1)]
·on an erroneous refund [IRC section 6404(e)(2)]
·due on a deficiency that was not identified by the
IRS
in a timely manner [IRC Section 6404(g)]
·due on an account for a taxpayer located in a disaster area [IRC
6404 (h)]
·due on an account for a participant in a military combat zone [IRC
Section 7508]
Caution:
Reasonable
cause is never a basis for abating interest.
2.An abatement may be requested for interest that is incorrectly
computed, or that is overassessed based on current tax laws, policy,
and/or procedure, or that is assessed after the expiration of the period
of limitations, or is erroneously or illegally assessed.
3.The Tax Reform Act of 1986 introduced IRC section 6404(e)(1),
(effective for taxable years beginning after
12/31/1978
) which allows abatement of interest on deficiencies or payments when
the Service makes an error or delay in the performance of a ministerial
act. As originally enacted, IRC section 6404(e)(1) allows the Service
discretionary authority to abate interest when an
IRS
employee fails to perform a ministerial act in a timely manner or makes
an error in the performance of that act. See Section 6 of this Chapter
for instruction.
Note:
The
Taxpayer Bill of Rights 2 (July 30, 1996) amended IRC section 6404(e)(1)
to add "unreasonable" before
each reference to "error" in the statute and to replace each
reference to "performing a ministerial act" with a reference
to performing a "ministerial or managerial act" for tax
periods beginning after
July 30, 1996
.
4.IRC section 6404(e)(2) provides for the abatement of interest on
any erroneous refund under Section 6602 until the date of demand unless
the taxpayer has in any way caused such erroneous refund or such
erroneous refund exceeds $50,000. See Section 7 of this Chapter for
instructions. The Internal Revenue Service Restructuring and Reform Act
of 1998, enacted on
July 22, 1998
, provided additions to Section 6404—
A.IRC section 6404(g) provides for a suspension of interest if the
Secretary fails to notify the taxpayer regarding a liability within an
18 month period (12 month period for taxable years beginning on or after
January 1, 2004
) from the later of the return filing date (without regard to
extensions) or the date of a timely filed return. This section is
effective for timely filed individual tax returns for taxable years
ending after
July 22, 1998
. See Section 8 of this Chapter for instructions.
B.IRC section 6404(h) provides for the abatement of interest on
underpayments by taxpayers in presidentially declared disaster areas.
See Section 10 of this Chapter for instructions.
5.IRC section 7508 provides for a suspension of interest for
participants in a combat zone. See Section 9 of this Chapter for
instructions.
6.Generally, the term "claim" relates to items that have
been fully paid, and "request for abatement" refers to unpaid,
assessed and/or accrued amounts.
20.2.7.2
(07-31-2001)
Interest Abatement Requests and Claims
1.Although, in many instances, the taxpayers are instructed to file
requests for abatement of interest on Form 843, all written requests
should be considered. If necessary information is missing, the claim may
be returned informing the taxpayer that additional information must be
submitted before a determination can be made.
2.Contact the Interest Abatement Coordinator (IAC) regarding any
interest abatement requests that are not addressed in this
IRM
.
20.2.7.5
(07-31-2001)
Not Legally Due, IRC 6404(a)
1.The provisions of IRC section 6404(a) authorize the Secretary to
abate the unpaid portion (request for abatement) of any tax or any
liability in respect thereof which is excessive in amount; assessed
after the statutory period of limitations has expired or is erroneously
or illegally assessed.
20.2.7.6
(07-31-2001)
Unreasonable Errors or Delays in Performing a Ministerial or Managerial
Act, IRC section 6404(e)(1)
1.Criteria for errors or delays under IRC section 6404(e)(1) are as
follows:
A.If the interest has been paid, the statutory period of limitations
on filing a claim per IRC section 6511 has not expired, and
B.The claim or request is for tax years beginning after
December 31, 1978
, and
C.The claim or request relates to interest on taxes described in
section 6212(a), i.e., income, estate, gift, certain excise taxes
[Employment taxes are specifically excluded.], and
D.An unreasonable error or delay occurred in relation to the
performance of a ministerial or managerial act [See definitions and
chart for effective date below.], and
E.The error or delay occurred afterthe taxpayer was contacted in writing with respect to the
examination, deficiency, or payment, and
F.No significant aspect of the error or delay can be attributed to
the taxpayer.
The
authority to abate interest under IRC section 6404(e)(1) can be further
explained by the following chart:
If the Tax Year
Then the error or delay
Begins on/before
July 30, 1996
Must be due to a ministerial
act
Begins after
July 30, 1996
Must be due to a ministerial
act Or managerial act and must be "unreasonable"
2.If it is determined that the Service will abate interest due to an
error or delay, interest on the tax and on any penalties or additions to
the tax should be abated.
3.For interest abatement requests pertaining to IRC section
6404(e)(1), all claims or requests for those accounts assessed,
preassessed, unpaid, and fully paid will be considered.
Note:
There
is no authority to abate unagreed, unassessed interest.
4.The definitions of ministerial act and managerial act are as
follows:
A.A "ministerial act" is a procedural or mechanical act
that does not involve the exercise of judgement or discretion and that
occurs during the processing of a taxpayer's case after all
prerequisites to the act, such as conferences and review by supervisors,
have taken place. A decision concerning the proper application of
federal tax law is not a ministerial act.
B.A "managerial act" is an administrative act that occurs
during the processing of a taxpayer's case involving the temporary or
permanent loss of records or the exercise of judgment or discretion
relating to management of personnel. Interest attributable to a general
administrative decision, such as the
IRS
's decision on how to organize the processing of tax returns, can not be
abated. Further, a decision concerning the proper application of federal
tax law is not a managerial act. [See Treas. Regulation Section
301.6404
–2]
Caution:
The
Service has the authority to abate only the amount of interest that
accrued during the period attributable to an unreasonable error or delay
in performing a ministerial or managerial act. Section 6404(e)(1)
applies only to an error or delay that occurs after the date the Service
contacts the taxpayer in writing with respect to the deficiency or
payment. Accordingly, there is no abatement of interest applicable under
this provision from the return due date to the date the Service first
contacts the taxpayer in writing. (See Section 8 for suspension
provisions under IRC section 6404(g).)
5.TEFRA/Partnerships
Section
6404(e)(1) applies to partnership/TEFRA examinations:
A.If a request for abatement alleges an error or delay during the
examination of the partnership return, the criteria above will be
applied and the determination may be applicable to every partner.
B.If a request for abatement alleges an error or delay after the
close of the partnership examination, the criteria will be applied to
each partner's claim individually and any allowable abatement will be
determined on a case by case basis.
6.When an error or delay is identified by the Service or by the
taxpayer during the course of an examination, before interest has been
assessed, when there is sufficient time remaining on the statutory
period for assessment and the criteria for interest abatement under IRC
section 6404(e)(1) are present:
A.Contact the field Examination IAC;
B.Secure a completed Form 843, Claim for Refund and Request for
Abatement or an equivalent informal statement;
C.Record the action in the workpapers; and
D.When the case is ready for assessment, forward the case to the lAC
with an explanation attached and include special handling instruction on
the Form 3198.
7.When the taxpayer raises the issue of error or delay in the course
of an examination and there is not sufficient time on the statutory
period for assessment, the examiner should secure an extension or notify
the taxpayer to file a claim once the liability is assessed. Action on
the case should take place after the tax case closes from the group and
without regard to the closing determination.
8.If the abatement of interest issue is first raised in Appeals, and
the alleged error or delay occurred in Examination, Appeals,
CID
, or Counsel, the claim and relevant case information will be sent to
the Examination IAC to issue a determination to the taxpayer. The claim
will be returned to Appeals to be closed with the tax case, and any
abatement will be entered with the tax assessment. Abatement of interest
claims concerning actions of Appeals employees will be worked by
Correction if the claim involves a payment.
9.All
IRS
employees are responsible for identifying significant errors or delays
associated with the ministerial and managerial acts occurring during
work in progress, and for forwarding relevant information to the area or
Service Center IAC. Collection employees (area and
Service
Center
) are responsible for making recommendations to the IAC with regard to
withholding collection if a taxpayer's account is under a collection
employee's control.
20.2.7.8
(07-31-2001)
Section 6404(g) Suspension of Interest - Taxpayer Notification of Tax
Liability
1.IRC section 6404(g) provides for the suspension of interest when
the
IRS
fails to provide a taxpayer timely and adequate notice of a tax
liability. IRC section 6404(g) applies only
to timely filed individual incometax
returns for taxable years ending after
July 22, 1998
.
2.The provision applies to an increase in liabilities for FICA tax,
excise tax, or household employee taxes on a Schedule H, reportable in a
Form 1040. The provision also applies to an individual's additional
liability, which results from a pass-through entity.
20.2.7.8.1
(07-31-2001)
Liabilities Subject to Section 6404(g) Interest Suspension
1.Section 6404(g) refers to the suspension of interest, penalties,
and additions to tax. However, its practical effect is only on the
suspension of interest.
2.Section 6404(g) specifically excludes:
·suspension of any penalty imposed under section 6651;
·any interest, penalty, addition to tax, or additional amount in a
case involving fraud;
·any interest, penalty, addition to tax, or additional amount with
respect to any tax liability shown on a return; and
·any criminal penalty.
3.There are not any current penalties or additions to tax, which
would be suspended by IRC section 6404(g). Interest on the tax and
interest on penalties (except as described above) would be suspended if
the conditions of 6404(g) occur.
20.2.7.8.2
(07-31-2001)
Section 6404(g) Notification Time Period
1.For taxable years ending after
July 22, 1998
, and prior to
January 1, 2004
, the
IRS
must provide adequate notice of a liability before the close of the
18-month period which begins on the later of the following:
·the due date of the return, if filed on or before the return due
date, or
·the filing date of the return, if filed timely under a valid
extension
2.The date adequate notice is provided is the section 6404(g) notice
date. If the section 6404(g) notice date is not within the prescribed
time period, interest is suspended beginning on the day after the close
of the 18-month period. Interest resumes on the 21st day after the
notice stating the liability and basis for the liability is sent to the
taxpayer. In determining the 21st day after the notice date, no
consideration is given to grace periods.
3.For a 1998 calendar year return filed by
April 15, 1999
, notification must be provided on or before
October 16, 2000
(since the 18-month period closes at the end of the day on October 14, a
Saturday, the
IRS
has the following Monday to provide notice). For a 1998 calendar year
return filed on
May 15, 1999
, with a valid extension of time to file, notification must be provided
on or before
November 14, 2000
. For a 1998 return filed on
October 15, 1999
, with a valid extension of time to file, notification must be made on
or before
April 16, 2001
(since
April 14, 2001
, is on a Saturday).
Note:
For
taxable years beginning on or after
January 1, 2004
, the 18-month notification period changes to a 12-month period.
20.2.7.8.3
(07-31-2001)
Section 6404(g) Notices
·A notice provided within the prescribed time period prevents the
suspension of interest if it adequately states the amount of the
liability and the basis for the liability. A notice should be written
and contain enough information regarding the adjustment to enable the
taxpayer to challenge the adjustment. In general, math error notices,
URP notices, 30-day letters, and statutory notices of deficiency provide
sufficient notice. Examination reports, such as Form 4549 and Form
1902-B, are sufficient notice if they contain an explanation of each
item of adjustment.
1.A tax module that is otherwise unrestricted and has only one
section 6404(g) notice date is not restricted from computation by Master
File. However, all section 6404(g) cases require special instructions on
Form 3198, Special Handling Notice (or equivalent), to ensure the
accurate input of section 6404(g) notification dates. Examining officers
must note in the " Special Instructions" section on Form 3198
(or equivalent), whether or not section 6404(g) applies. If it applies,
the notification date must be entered in that section.
2.A transcript must be reviewed to determine if there is or will be
more than one section 6404(g) notification date (more than one TC 971
with Action Code 64). When more than one date is applicable, a manual
restricted interest computation must be made. A restricted interest
computation is necessary because the 6404(g) notice date applies
separately to each item or adjustment. Interest is separately computed
for the amounts determined in each notice taking into consideration any
applicable suspension period. The total interest determined is input
with TC 340.
3.When there is more than one section 6404(g) notification date, the
examining officer must notify the interest examiner of the applicable
dates on Form 3198 or its equivalent, and that restricted interest
applies stating IRC section 6404(g). In addition, the examining officer
should refer the interest examiner to the "Other Information"
section of the RAR that indicates the notification dates and the portion
of the liability attributable to each notification date.
4.If the account involves "self-assessed" tax, IRC 6404(g)
does not apply.
Because
of different notification dates and the potential for
"self-assessed" tax adjustments, the second adjustment made
after an untimely notification date will create an unpostable condition
if20.2.7.13 (07-31-2001)
Appeals Rights
1.The taxpayer may agree to any interest determination with a
closing agreement, Form 906
2.The taxpayers will have appeal rights on all claims (regardless of
account status). The taxpayer may appeal denials of interest abatement
by writing a brief statement explaining why they think their request
should be considered.
3.The written protest should be sent to the office that issued the
determination letter.
4.Refer to Appeals Interest Abatement Manual at
IRM
8.5.
20.2.7.14
(07-31-2001)
Taxpayer Advocate
1.If during a taxpayer contact it appears there may be a hardship
situation, complete Form 911, Applicatio for Taxpayer Assistance Order,
and refer the taxpayer to the Taxpayer Advocate Service (TAS). See
IRM
Part 13 or
IRM
21.1.3.17 for more information.
2.There are no special provisions for abating or reducing interest
for cases involving the Taxpayer Advocate.
20.2.7.15
(07-31-2001)
Disputes as to Amount
1.If there is a disagreement as to the amount of restricted and/or
complex interest to be assessed, abated, and/or refunded resulting from:
A.an interpretation of a Internal Revenue Code Section, Revenue
Ruling, Revenue Procedure, court case, etc. and/or
B.the method of computing the correct interest amount
2.Prepare a memorandum along with supporting documentation and route
this memorandum to the immediate supervisor for resolution.
SEC. 6404.ABATEMENTS.
6404(a)
GENERAL RULE. --The Secretary is authorized to abate the unpaid portion
of the assessment of any tax or any liability in respect thereof, which
–
6404(a)(1)
is excessive in amount, or
6404(a)(2)
is assessed after the expiration of the period of limitations
properly applicable thereto, or
6404(a)(3)
is erroneously or illegally assessed.
6404(b)
NO CLAIM FOR ABATEMENT OF INCOME, ESTATE,
AND
GIFT
TAXES. --No claim for abatement shall be filed by a taxpayer in respect
of an assessment of any tax imposed under subtitle A or B.
6404(c)
SMALL TAX BALANCES. --The Secretary is authorized to abate the unpaid
portion of the assessment of any tax, or any liability in respect
thereof, if the Secretary determines under uniform rules prescribed by
the Secretary that the administration and collection costs involved
would not warrant collection of the amount due.
6404(d)
ASSESSMENTS ATTRIBUTABLE TO CERTAIN MATHEMATICAL ERRORS BY INTERNAL
REVENUE SERVICE. --In the case of an assessment of any tax imposed by
chapter 1 attributable in whole or in part to a mathematical error
described in section
6213(g)(2)(A), if the return was prepared by an officer or employee
of the Internal Revenue Service acting in his official capacity to
provide assistance to taxpayers in the preparation of income tax
returns, the Secretary is authorized to abate the assessment of all or
any part of any interest on such deficiency for any period ending on or
before the 30th day following the date of notice and demand by the
Secretary for payment of the deficiency.
6404(e)
ABATEMENT OF INTEREST ATTRIBUTABLE TO UNREASONABLE ERRORS
AND
DELAYS BY INTERNAL REVENUE SERVICE. --
6404(e)(1)
IN GENERAL. --In the case of any assessment of interest on --
6404(e)(1)(A)
any deficiency attributable in whole or in part to any unreasonable
error or delay by an officer or employee of the Internal Revenue Service
(acting in his official capacity) in performing a ministerial or
managerial act, or
6404(e)(1)(B)
any payment of any tax described in section
6212(a) to the extent that any unreasonable error or delay in such
payment is attributable to such officer or employee being erroneous or
dilatory in performing a ministerial or managerial act,
the Secretary may abate the
assessment of all or any part of such interest for any period. For
purposes of the preceding sentence, an error or delay shall be taken
into account only if no significant aspect of such error or delay can be
attributed to the taxpayer involved, and after the Internal Revenue
Service has contacted the taxpayer in writing with respect to such
deficiency or payment.
6404(e)(2)
INTEREST ABATED WITH RESPECT TO ERRONEOUS REFUND CHECK. --The Secretary
shall abate the assessment of all interest on any erroneous refund under
section
6602 until the date demand for repayment is made, unless --
6404(e)(2)(A)
the taxpayer (or a related party) has in any
way caused such erroneous refund, or
6404(e)(2)(B)
such erroneous refund exceeds $50,000.
6404(f)
ABATEMENT OF ANY PENALTY OR ADDITION TO TAX ATTRIBUTABLE TO ERRONEOUS
WRITTEN ADVICE BY THE INTERNAL REVENUE SERVICE. --
6404(f)(1)
IN GENERAL. --The Secretary shall abate any portion of any penalty or
addition to tax attributable to erroneous advice furnished to the
taxpayer in writing by an officer or employee of the Internal Revenue
Service, acting in such officer's or employee's official capacity.
6404(f)(2)
LIMITATIONS. --Paragraph (1) shall apply only if --
6404(f)(2)(A)
the written advice was reasonably relied upon by the taxpayer and
was in response to a specific written request of the taxpayer, and
6404(f)(2)(B)
the portion of the penalty or addition to tax did not result from a
failure by the taxpayer to provide adequate or accurate information.
6404(f)(3)
INITIAL REGULATIONS. --Within 180 days after the date of the enactment
of this subsection, the Secretary shall prescribe such initial
regulations as may be necessary to carry out this subsection.
6404(g)
SUSPENSION OF INTEREST
AND
CERTAIN PENALTIES WHERE SECRETARY FAILS TO CONTACT TAXPAYER. --
6404(g)(1)
SUSPENSION. --
6404(g)(1)(A)
IN GENERAL. --In the case of an individual who files a return of tax
imposed by subtitle A for a taxable year on or before the due date for
the return (including extensions), if the Secretary does not provide a
notice to the taxpayer specifically stating the taxpayer's liability and
the basis for the liability before the close of the 18-month period
beginning on the later of --
6404(g)(1)(A)(i)
the date on which the return is filed; or
6404(g)(1)(A)(ii)
the due date of the return without regard to extensions,
the Secretary shall suspend
the imposition of any interest, penalty, addition to tax, or additional
amount with respect to any failure relating to the return which is
computed by reference to the period of time the failure continues to
exist and which is properly allocable to the suspension period.
6404(g)(1)(B)
SEPARATE APPLICATION. --This paragraph shall be applied separately with
respect to each item or adjustment.
6404(g)(2)
EXCEPTIONS. --Paragraph (1) shall not apply to --
6404(g)(2)(A)
any penalty imposed by section
6651;
6404(g)(2)(B)
any interest, penalty, addition to tax, or additional amount in a
case involving fraud;
6404(g)(2)(C)
any interest, penalty, addition to tax, or additional amount with
respect to any tax liability shown on the return;
6404(g)(2)(D)
any interest, penalty, addition to tax, or additional amount with
respect to any gross misstatement;
6404(g)(2)(E)
any interest, penalty, addition to tax, or additional amount with
respect to any reportable transaction with respect to which the
requirement of section
6664(d)(2)(A) is not met and any listed transaction (as defined in 6707A(c));
or
6404(g)(2)(F)
any criminal penalty.
6404(g)(3)
SUSPENSION PERIOD. --For purposes of this subsection, the term
"suspension period" means the period --
6404(g)(3)(A)
beginning on the day after the close of the 18-month period under
paragraph (1); and
6404(g)(3)(B)
ending on the date which is 21 days after the date on which notice
described in paragraph (1)(A) is provided by the Secretary.
6404(h)
REVIEW OF DENIAL OF REQUEST FOR ABATEMENT OF INTEREST. –
6404(h)(1)
IN GENERAL. --The Tax Court shall have jurisdiction over any action
brought by a taxpayer who meets the requirements referred to in section
7430(c)(4)(A)(ii) to determine whether the Secretary's failure to
abate interest under this section was an abuse of discretion, and may
order an abatement, if such action is brought within 180 days after the
date of the mailing of the Secretary's final determination not to abate
such interest.
6404(h)(2)
SPECIAL RULES. --
6404(h)(2)(A)
DATE OF MAILING. --Rules similar to the rules of section
6213 shall apply for purposes of determining the date of the mailing
referred to in paragraph (1).
6404(h)(2)(B)
RELIEF. --Rules similar to the rules of section
6512(b) shall apply for purposes of this subsection.
6404(h)(2)(C)
REVIEW. --An order of the Tax Court under this subsection shall be
reviewable in the same manner as a decision of the Tax Court, but only
with respect to the matters determined in such order.
6404(i)
CROSS REFERENCE. --
For authority to suspend running of
interest, etc. by reason of Presidentially declared disaster or
terroristic or military action, see section
7508A.
Cynthia A. Bell, Petitioner v.
Commissioner, Respondent.
Under section
6404(e)(1), the Commissioner may abate part or all of an assessment
of interest on any deficiency or payment of income, gift, estate, and
certain excise tax to the extent that any error or delay in payment is
attributable to erroneous or dilatory performance of a ministerial or
managerial act by an officer or employee of the Commissioner if (a) the
Commissioner contacted the taxpayer in writing about the deficiency or
payment, and (b) the taxpayer did not contribute significantly to the
error or delay. Congress intended for the Commissioner to abate interest
under section
6404(e) "where failure to abate interest would be widely
perceived as grossly unfair" and did not intend abatement to
"be used routinely to avoid payment of interest". H. Rept.
99-426, at 844 (1985), 1986-3 C.B. (Vol. 2) 1, 844; S. Rept. 99-313, at
208 (1986), 1986-3 C.B. (Vol. 3) 1, 208.
D. Jean Bartelma and Dan F. Bartelma, Petitioners v. Commissioner,
Respondent; Cynthia C. Bartelma and James Richard Bartelma, Petitioners
v. Commissioner, Respondent.
Under section
6404(e)(1), the Commissioner may abate the assessment of interest on
any deficiency if the interest is attributable to an error or delay by
an officer or employee of the
IRS
(acting in his official capacity) in performing a ministerial act.
(Amendments to section
6404(e) in 1996 do not apply to this case because they apply only to
interest accruing with respect to deficiencies or payments for tax years
beginning after
July 30, 1996
. Taxpayer Bill of Rights 2, Pub. L. 104-168, sec. 301, 110 Stat. 1457
(1996).) A "ministerial act" is a procedural or mechanical act
that does not involve the exercise of judgment or discretion and that
occurs during the processing of a taxpayer's case after all
prerequisites to the act have taken place. Sec.
301.6404
-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 30163 (
Aug. 13, 1987
). The "mere passage of time" during a tax dispute does not
establish error or delay in performing a ministerial act. Lee v.
Commissioner, 113 T.C. 145, 150 (1999). The Court may order
abatement where the Commissioner abuses his discretion by failing to
abate interest. Sec.
6404(h)(1). In order to prevail, a taxpayer must prove that the
Commissioner exercised this discretion arbitrarily, capriciously, or
without sound basis in fact or law. Lee v. Commissioner, supra at
149; Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
Petitioners argue that
there were a number of delays and errors throughout the protest and
appeals process. At trial of these cases, however, petitioners failed to
identify any specific instances that would qualify, under the statute,
as an error or delay by an officer or employee of the
IRS
in performing a ministerial act during the processing of their various
protests, appeals, and Tax Court cases. Only broad allegations regarding
a lack of timeliness and accuracy were put forth. Petitioners made
reference to lengthy periods during which they would hear nothing from
the
IRS
. However, with the exception of McKenney's inability to get AIMS
controls in 2001 (for which an interest abatement had previously been
allowed), a review of the work history and correspondence shows that
IRS
personnel were engaged in a managerial, decision-making process during
these times and that there was no ministerial delay. Sec.
301.6404
-2T(b)(1), Temporary Proced. & Admin. Regs., supra. Acts that
are either managerial or arise out of general administrative decisions
are not ministerial. See Mekulsia v. Commissioner, T.C. Memo.
2003-138, affd. 389 F.3d 601 (6th Cir. 2004). Deciding how and when to
work on cases, based on an evaluation of the entire caseload and
workload priorities, is not a ministerial act. See id. of a
ministerial error by respondent.
Because petitioners
presented neither authority nor evidence to support their claim that
there were ministerial errors and delays above and beyond those that had
already been identified and remedied, there was no abuse of discretion
in denying an additional abatement of interest in these cases.
Abatements: Delays in resolving tax matters
A taxpayer who claimed losses from a tax shelter partnership was unable
to prove that the
IRS
abused its discretion in denying his claim for abatement of interest.
The passage of a considerable amount of time in the litigation phase of
the tax dispute did not establish error or delay by the
IRS
in performing a ministerial act for purposes of Code
Sec. 6404. The taxpayer's contention that the
IRS
committed ministerial errors when it allegedly failed to communicate
relevant information and communicated misinformation to him was also
rejected.
A pro se attorney who pled guilty to criminal tax evasion was not
entitled to an abatement of interest that accrued on his tax deficiency
as a result of the
IRS
's suspension of civil proceedings against him during its criminal
investigation and prosecution. The refusal to continue the civil
investigation was the result of a litigation strategy, not the result of
a ministerial act.
The
IRS
's denial of a request by a tax preparer and his wife to abate interest
on their deficiency did not constitute an abuse of discretion. Although
the taxpayers claimed that too much time had elapsed from the
commencement of an audit until the
IRS
issued a deficiency notice nearly two years later, they failed to show
that any agent of the
IRS
committed an error or delay in performing a ministerial act. Any delay
in transferring the taxpayers' petition from the U.S. Embassy in
Mexico City
to the Tax Court had no effect on the pace of the settlement of the case
and, thus, interest that accrued during that period was not subject to
abatement. Further, there was no prohibited delay with respect to an
IRS
Appeals officer's issuance of a settlement offer to the taxpayers. The
IRS
properly refused to abate interest that accrued solely due to the
taxpayer's failure to pay their agreed tax liability, and it did not
have to apply a refund that arose in a subsequent tax year to pay the
deficiency for the year at issue. Finally, since the taxpayers failed to
maintain proper records, interest was not abated to offset expenses they
incurred hiring an accountant and traveling to
Mexico
to obtain records.
G. Mankita, 78
TCM
1216, Dec.
53,673(M), TC Memo. 1999-420.
The
IRS
's failure to abate interest that accrued on married taxpayers'
deficiencies was not an abuse of discretion since the taxpayers did not
show that the interest was attributable to any error or delay of an
IRS
employee acting in an official capacity in performing a ministerial act.
The taxpayers failed to support their claim that they attempted to
schedule an earlier meeting with an Appeals officer than actually
occurred. Thus, they were not entitled to abate interest that accrued
from the date they received their first letter from the Appeals office
until they reached a settlement with the
IRS
regarding the amount of their deficiencies. Moreover, their claim that
the
IRS
took unreasonable legal positions did not implicate a ministerial act
since decisions regarding whether to settle a case and the application
of tax laws involve discretion and judgment.
R. Dundore, 79
TCM
1479, Dec.
53,747(M), TC Memo. 2000-45.
It was an abuse of discretion for the
IRS
to refuse to abate interest during the period in which the examination
of a partnership's return was delayed by the
IRS
's Quality Review branch since the
IRS
failed to clearly explain its basis for refusal. The abuse of discretion
standard requires the
IRS
to explain why it has exercised its discretion in a given manner, so
that the court is not required to speculate as to the basis of its
actions. However, the
IRS
did not abuse its discretion in refusing to abate interest that accrued
during the initial and final stages of the examination while
IRS
agents were reviewing the partners' expense deductions and considering
the imposition of penalties. Further, the
IRS
's decision not to reassign the case while the assigned Appeals Officer
was in training, and the officer's subsequent decision to give
precedence to cases on which the statute of limitations was near
expiration, were not ministerial acts. Finally, the version of Code
Sec. 6404 that was in effect for the tax year at issue did not
provide for abatement of interest that accrued due to delays in
performing managerial acts.
An individual was not entitled to an abatement of interest on his
deficiency because he failed to prove that the interest accrued due to
any ministerial acts on the part of
IRS
employees. The fact that his examination took several years to complete
did not prove that an erroneous or dilatory act occurred, especially
since delays were caused by the expansion of his case, his difficulty in
supplying records, the
IRS
's suspicions of fraud, and the reopening of the examination at the
taxpayer's request. A misaddressed letter from the
IRS
to one of his representatives also was not an error in performing a
ministerial act because the letter was mailed to the address provided by
the representative, and was remailed once the
IRS
determined the correct address.
The
IRS
's refusal to abate interest that had accrued on an individual's tax
liability was not an abuse of discretion since any delay in the
proceeding was not due to a ministerial act of the
IRS
. The Service responded in a timely manner to the taxpayer's
correspondence in connection with his unpaid tax liability; however, the
taxpayer canceled scheduled appointments and failed to supply requested
information. Thus, any error or delay was attributable to the taxpayer.
Moreover, his arguments that hardship prevented him from complying with
tax laws, that the
IRS
failed to include vital information in the stipulation of facts and that
the
IRS
's attorney attempted to coerce him into dropping his claim were not
proper grounds on which to base an order to abate interest.
The
IRS
did not abuse its discretion in denying a request by a sole proprietor
and his wife for an abatement of interest for tax deficiencies that
arose, in part, as the result of disallowed business expense deductions
and adjustments to the proprietorship's cost of goods sold. The
taxpayers could not avail themselves of the exceptions that would
otherwise entitle them to an interest abatement in the instant case.
They did not identify any specific delay or conduct by the
IRS
that would constitute a ministerial act or support their claim.
Moreover, the time that transpired during the examination, appeals and
settlement processes did not constitute error or unreasonable delay in
performing a ministerial act.
The
IRS
did not abuse its discretion by denying a couple's request for an
abatement of interest accrued on deficiencies assessed against the
husband's wholly-owned travel agency. The
IRS
agent's inability to work on the taxpayers' file for more than six
months due to his workload did not constitute a ministerial act.
A long civil and criminal investigation process, which spanned several
years and included use of third-party summonses, did not establish error
or delay in the government's performance of a ministerial act. Also, the
revenue agent responsible for the civil examination did not fail to
return to the taxpayer records obtained during the examination, as most
of the documents were photocopies obtained by the use of third-party
recordkeeper summonses and any original documents were returned.
The
IRS
did not abuse its discretion in refusing to abate interest that accrued
over several years during an investigation of a limited partnership's
returns. The taxpayer's dissatisfaction with the length of time it took
to resolve his case did not establish a correlation between a specific
error or delay in the performance of a ministerial act and a specific
time period for which interest should have been abated as a result of
the error or delay.
An individual who was responsible for a significant part, if not all, of
the delay in the determination of his tax liability was not entitled to
an interest abatement in excess of the amount abated following the
IRS
's reconsideration of his assessed deficiencies. The individual had
protracted the audit by demanding that it be delayed while he completed
college and until he returned from a vacation, by failing to pursue
review of the
IRS
's decisions in a timely manner, by refusing to cooperate with the
IRS
, and by making rude and insulting statements to
IRS
customer service representatives.
A tax shelter investor's contention that the
IRS
exhibited unreasonable delay in signing a decision document pertaining
to his case was not supported. Other theories also did not show that
accrual of interest on his tax deficiency was attributable to an
erroneous or dilatory performance of a ministerial duty by an
IRS
agent.
An
IRS
delay in assessing a married couple's interest due and owing was not
unreasonable and did not justify abatement. A significant portion of the
delay was due to various aspects of a related audit and the remainder
was not a ministerial error, which required the abatement of additional
amounts.
The IRS did not abuse its discretion in failing to abate interest for
specified periods with respect to married taxpayers' disallowed
investment credits and losses arising out of a partnership in which they
held a limited interest. The delays identified by the taxpayers were not
attributable to the IRS's error or delay in performing any ministerial
act; rather, they were attributable to the IRS's reasonable
prioritization decisions with respect to its caseload. For a second
period, however, the IRS conceded that it abused its discretion in
failing to abate interest attributable to an unjustified delay. The
delay appeared to have occurred in the performance of a ministerial act
by the IRS, which was the IRS agent's signing of a stipulation and
causing it to be delivered to the Tax Court.
Married taxpayers who failed to establish the existence of unusual
circumstances or substantial error in the Tax Court's decision involving
their entitlement to interest abatements (Dec.
55,049(M), above) were not entitled to reconsideration of that
ruling. Their allegation that the IRS erred in computing the amount of
interest due was rejected because the prior opinion called for the
correction of calculation errors. Also, reconsideration was not the
appropriate forum for offering new legal theories or reiterating
previously rejected arguments. Further, the record supported the IRS's
prioritization decisions, and there was no delay in the assessment of
liabilities because the taxpayers had waived restrictions on assessment.
The passage of a considerable amount of time in the litigation phase of
a tax shelter dispute did not establish error or delay by the IRS in
performing a ministerial act. The passage of a large period time in the
tax shelter litigation was due to the large number of such cases being
filed and the court's subsequent attempt to efficiently manage the
burden.
A taxpayer who claimed losses from a tax shelter partnership was unable
to prove that the IRS abused its discretion in denying his claim for
abatement of interest covering four tax years. The taxpayer's contention
that the IRS delayed issuing two final partnership administrative
adjustments (FPAAs) until several years after it had sufficient
information to issue them did not establish error or delay by the IRS in
performing a ministerial act. Further, the record revealed that the
IRS's difficulty in obtaining accurate records during the audits
hindered the audit process.
Married taxpayers who, in the underlying Tax Court proceeding, were held
liable for deficiencies and interest computed during Tax
Court Rule 155 proceedings, failed to establish that any erroneous
or dilatory performance of a ministerial duty by an IRS agent
contributed to a delay or error in the payment of the deficiency
interest. The mere passage of time since the inception of an audit did
not establish that the IRS delayed in performing ministerial acts. Also,
errors relating to the audit did not entitle the taxpayers to abatement;
the IRS's classification and evaluation of information required judgment
or discretion and did not contribute to errors or delays in the couple's
payment of their tax liabilities.
W. Landvogt, 86 TCM 104, Dec.
55,236(M), T.C. Memo. 2003-217.
Married taxpayers were not entitled to an abatement of interest that
resulted from the denial of their deductions for donations of whale meat
and whaling expenses. The taxpayers failed to establish that the accrual
of interest was attributable to an error or delay by an official or
employee of the IRS. In their opening brief, the taxpayers admitted that
the delay resulted from a suspension of their case to allow for the
enactment of pertinent proposed federal legislation. Moreover, a death
in the family of the taxpayers' attorney did not provide a basis for an
abatement of interest.
The taxpayers failed to establish that any unreasonable error or delay
in the performance of a ministerial duty by an IRS agent contributed to
the nonpayment of interest on their tax deficiency. The record indicated
that the interest accruals were merely the result of the taxpayers'
failure to pay the entire balance owed, and not the result of an IRS
employee's erroneous or dilatory performance of a ministerial or
managerial act.
An abatement of interest was denied because the delay was significantly
attributable to the taxpayer. Although the IRS agent working on their
case was hospitalized and later died, the case was quickly reassigned,
thus, any delay resulted from the taxpayers' continual failure to
provide requested documentation.
An IRS Appeals officer did not abuse his discretion in issuing a
Collection Due Process (CDP) determination permitting the collection of
the trust fund recovery penalty and interest from a corporate
treasurer/responsible person. While the federal district court
determined that it had jurisdiction under Code
Sec. 6404(h) to review the IRS's refusal to abate interest on the
trust fund recovery penalty, it found that the treasurer did not qualify
for an abatement. The record did not show, and the treasurer did not
identify, any specific acts attributable to the IRS that would
constitute ministerial or managerial acts entitling him to an interest
abatement. The mere passage of time did not establish that the IRS erred
or delayed in performing a ministerial act.
A married couple, who invested in a multi-level tax shelter partnership,
was entitled to an abatement of interest during the periods that the
IRS's inaction delayed the resolution of their case. Since the IRS was
unable to explain a six-month delay in sending out the taxpayer's
settlement agreement, they were entitled to an abatement of interest for
those months. Further, the IRS waited another 3-1/2 months to
countersign the document, which was an unreasonable delay. Since the IRS
drafted the settlement agreement, its countersignature on the document
did not require an act of discretion; it was a ministerial act.
Therefore, the taxpayers were entitled to an abatement of interest for
those months also.
The IRS did not abuse its discretion in denying a taxpayer's request for
abatement of interest on his tax deficiencies. The taxpayer invested in
a partnership that was a limited partner in a tax shelter and claimed
losses with respect to his investments. Following an investigation of
the tax shelter, the IRS reached a settlement agreement with it and with
the taxpayer, resulting in adjustment of the taxpayer's returns,
assessment of deficiencies, and payment of those deficiencies by the
taxpayer. The IRS denied the taxpayer's request for abatement of
interest accrued during the investigation, however, holding the statute
of limitation for the assessment was not violated, and all of the delays
in the case resulted from discretionary, rather than ministerial, acts
by the IRS, and so abatement was not required by statute.
The IRS did not abuse its discretion by rejecting taxpayer's interest
abatement claim. IRS issued notice of deficiency determining fraud
penalties. Delay caused by suspension of civil action to allow for the
criminal prosecution of the taxpayer, including the delay in the
issuance of the notice of deficiency, was not a delay in the performance
of a ministerial act. Taxpayer's contention that IRS also abused its
discretion by failing to disclose the basis for its denial of the claim
for abatement was also rejected. Investigation of the taxpayer's case
and the criminal proceedings were adequate reasons and did not
constitute a delay in the performance of a ministerial act.
Married owners of a scrap metal business were not entitled to an
abatement of interest. The taxpayers failed to pay the tax liability
reported on their tax return for the year at issue, and the liability
was outstanding until a third party's bankruptcy trustee paid the IRS on
the taxpayers' behalf. Moreover, the taxpayers failed to show that any
interest that accrued after the bankruptcy trustee's payment was due to
the IRS's error or delay.
The Tax Court properly denied taxpayers an abatement of interest. An
abatement of interest is generally not available when the taxpayer files
a return but does not pay the taxes due, regardless of how long the IRS
takes to contact the taxpayer and demand payment. Abatement of interest
is also not appropriate where the evidence shows that the taxpayers
lacked the assets to pay the taxes, suggesting that their failure to pay
was due to inability. In either case the delay in resolving the matter
is not the fault of the IRS.
COUVILLION, Special Trial
Judge: Respondent issued a notice of final determination denying
petitioners' claim to abate interest for their 1989 and 1990 tax years.
Petitioners The Commissioner's authority to abate an assessment of
interest involves the exercise of discretion, and this Court gives due
deference to the Commissioner's discretion. See Woodral v.
Commissioner [Dec.
53,206 ], 112 T.C. 19, 23 (1999); Mailman v. Commissioner [Dec.
45,218 ], 91 T.C. 1079, 1082 (1988). However, this Court may order
abatement where the Commissioner abuses his discretion. See sec.
6404(g) ; 3Woodral v. Commissioner, supra.
Pursuant to section
6404(e)(1) , the Commissioner may abate part or all of an assessment
of interest on any deficiency or payment of income tax to the extent
that any delay in payment is attributable to any error or delay caused
by an officer or employee of the
IRS
(acting in an official capacity) in performing a ministerial act. 4
However, an error or delay is taken into account only if it occurs after
the
IRS
has contacted the taxpayer in writing with respect to such deficiency or
payment, and as long as no significant aspect of such error or delay can
be attributed to the taxpayer. See sec.
6404(e)(1) . Congress intended the Commissioner to abate interest
under section
6404(e) "where failure to abate interest would be widely
perceived as grossly unfair" but not that it "be used to
routinely avoid payment of interest." H. Rept. 99-426, at 844
(1985), 1986-3 C.B. (Vol. 2) 844; S. Rept. 99-313, at 208 (1985), 1986-3
C.B. (Vol. 3) 208.
Petitioners claim that the
delay in the consideration of their case was due to error or delay by
employees of
IRS
, acting in their official capacity, in performing various ministerial
acts.
The regulations provide, in
pertinent part, that the term "ministerial act" means a
procedural or mechanical act that does not involve the exercise of
judgment or discretion. See sec.
301.6404-2T(b)(1) , Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 30163 (
Aug. 13, 1987
). 5
The regulations issued by the Secretary provide several examples of what
does and does not constitute a ministerial act.
A decision concerning the
proper application of Federal tax law is not a ministerial act. See sec.
301.6404-2T(b)(1) , Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 30163 (
Aug. 13, 1987
). Petitioners had not provided respondent with any documentary evidence
relating to the adjustments to their 1989 and 1990 returns before the
meeting on
January 24, 1994
.
A decision concerning the
proper application of Federal tax law is not a ministerial act. See sec.
301.6404-2T(b)(1) , Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 30163 (
Aug. 13, 1987
). The agent, the Appeals officer, and respondent's attorney continually
attempted to settle petitioners' case. The positions they took regarding
the issues in petitioners' case were based on their application of
Federal tax law to the facts and circumstances surrounding petitioners'
case. These actions required the exercise of discretion and judgment.
Moreover, petitioners' lack of cooperation and failure to respond to
IRS
counsel's requests for discovery necessitated that respondent resort to
this Court for an order compelling petitioners to produce documentation
and show cause why proposed stipulations should not be accepted. Any
delays caused by petitioners' decision to retain an attorney and to
continue their case were attributable to petitioners. There was no
erroneous or dilatory performance of a ministerial act by an officer or
employee of respondent during this period and any delays perceived by
petitioners during this period were of petitioners' own making.
Therefore, on this record, the Commissioner's refusal to abate interest
was not an abuse of discretion under section
6404(e) . Respondent's determination is sustained.
Decision will be entered
for respondent.
1
All Rule references are to the Tax Court Rules of Practice and
Procedure.
2
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the periods involved.
4
In 1996, sec.
6404(e) was amended by sec. 301 of the Taxpayer Bill of Rights 2,
Pub. L. 104-168, 110 Stat. 1452, 1457 (1996), to permit the Secretary to
abate interest attributable to an unreasonable error or delay resulting
from managerial and ministerial acts. This amendment, however, applies
to interest accruing with respect to deficiencies or payments for tax
years beginning after
July 30, 1996
. This case involves petitioners' 1989 and 1990 tax years. Therefore,
the amendment is inapplicable to the case at bar. See Woodral v.
Commissioner [Dec.
53,206 ], 112 T.C. 19, 25 n.8 (1999).
5
The final Treasury regulation under sec.
6404 was issued on
Dec. 18, 1998
. The final regulation contains the same definition of ministerial act
as the temporary regulation. See sec.
301.6404-2(b)(2) , Proced. & Admin. Regs. The final regulation
generally applies to interest accruing on deficiencies or payments of
tax described in sec.
6212(a) for tax years beginning after
July 30, 1996
. See sec.
301.6404-2(d)(1) , Proced. & Admin. Regs
Interest that accrued on an individual's income tax liabilities prior to
the
IRS
's application of the his carryback losses was attributable to the
taxpayer's own conduct; thus, the
IRS
did not abuse its discretion by denying his request for an abatement of
interest. The taxpayer failed to file Form 1045, Application for
Tentative Refund, although he conceded that he knew he had to file the
form in order to carry back the loss. He also was not entitled to abate
interest on his liabilities for self-employment taxes and civil
penalties that continued to accrue after the carryback losses eliminated
his income tax deficiency. He failed to show that any
IRS
employee was erroneous or dilatory in performing a ministerial act
because his self-serving testimony was insufficient to prove that a
revenue officer erroneously advised him not to file a Form 1045 or
promised him that the carryback would eliminate his entire deficiency.
Finally, the Tax Court lacked jurisdiction to review the
IRS
's failure to abate his penalties for failure to pay tax.
Married taxpayers failed to establish that any erroneous or dilatory
performance of a ministerial duty by an
IRS
agent contributed to a delay or error in the payment of interest on
their tax deficiency. Consequently, the
IRS
did not abuse its discretion in denying their request for abatement of
interest. The taxpayers' contentions that the examining
IRS
agent improperly evaluated their joint returns, that the deficiency
determinations were improper, and that inadequate consideration was
given to their arguments by the appeals officer were insufficient to
support abatement under Code
Sec. 6404(e). The conduct of the
IRS
and appeals officer concerning the proper application of federal tax
laws involved judgment and discretion and, thus, did not qualify as a
ministerial act.
E. Brown, 79
TCM
1561, Dec.
53,766(M), TC Memo. 2000-61.
The
IRS
's refusal to abate interest owed by married taxpayers did not
constitute an abuse of discretion because no ministerial acts on the
part of
IRS
employees or officers caused delay. Its decisions to examine three tax
years, to conduct a bank deposits analysis of the taxpayers' accounts,
to suspend the audit until a related audit of the husband's employer was
completed, and to refer the case for criminal investigation all involved
the exercise of judgment and discretion. The
IRS
did not engage in "ministerial acts," which are procedural or
mechanical acts that do not involve the exercise of judgment or
discretion and that occur during the processing of a case after all
prerequisites to the act have taken place. Moreover, the record
established that the taxpayers were largely responsible for any delays
in the proceedings.
Jurisdiction existed over an
IRS
appeals officer's determination that statutory interest had accrued on
an individual's tax liability because the taxpayer's contention that
interest should not have accrued during his bankruptcy case was viewed
as a request for abatement of interest. However, the taxpayer did not
allege that the assessment of interest was attributable to a ministerial
error within the meaning of Code
Sec. 6404(e) and the evidence did not establish that the
IRS
committed a ministerial error. Thus, no abatement was permitted.
The
IRS
's denial of an individual's request for an abatement of interest did
not constitute an abuse of discretion absent proof of its erroneous or
dilatory performance of a ministerial act. The
IRS
's alleged loss of some of the taxpayer's records that were seized in
conjunction with the arrest of his former representative did not entitle
him to abatement because the seizure did not qualify as a ministerial
act. Moreover, any error or delay that arose with respect to the seizure
could also be attributed to the taxpayer, who did not respond to
IRS
correspondence and notices, produce requested documentation, or pursue
litigation opportunities.
An individual, whose former spouse was granted innocent spouse relief
under former Code
Sec. 6013(e), did not qualify for an abatement of interest. The
taxpayer did not allege that the assessment of interest was attributable
to a ministerial error within the meaning of Code
Sec. 6404(e).
The
IRS
properly denied an accountant's request for an abatement of interest
accrued on deficiencies resulting from his investment in a general
partnership. The denial of abatement did not constitute an abuse of
discretion in the performance of a ministerial act by an
IRS
agent. The agent's decision whether and when to work on the
partnership's case involved the exercise of judgment based on an
evaluation of his entire caseload and, thus, could not be characterized
as a procedural or mechanical act.
S. Leffert, 81
TCM
1093, Dec.
54,229(M), TC Memo. 2001-23.
The government was entitled to summary judgment in a refund suit brought
by a trust that sought a marital deduction in connection with a lump sum
payment to the trust beneficiary, the settlor's surviving spouse. The
beneficiary, as a surviving spouse, did not, prior to the settlement,
have an enforceable right under state (
Maine
) law to an interest deductible under Code
Sec. 2056. As a result, the trust was not entitled to an abatement
of interest on the grounds of
IRS
ministerial or managerial acts that resulted in unreasonable error or
delay.
The
IRS
's denial of a married couple's request for an abatement of interest
that arose in connection with certain partnership investments did not
constitute an abuse of its discretion because they did not identify any
specific delay or errors by the
IRS
in performing a ministerial act. The Tax Court declined to characterize
the
IRS
's processing of the taxpayer's refund claim, the proceeds from which
they anticipated would cover their outstanding tax liabilities, as the
cause for any delay in payment of their outstanding tax liability. The
IRS
committed no errors or delays in determining or assessing their tax
deficiency.
The
IRS
did not abuse its discretion by denying a couple's request for an
abatement of interest accrued on deficiencies attributable to unreported
gambling income and the husband's social security income. The
IRS
agent's decision to review only the two tax years assigned to him
despite the couple's desire to have all tax years resolved at the same
time did not constitute a ministerial act. Even if it did, his failure
to resolve those tax year issues could not be considered because the
taxpayers had not yet received corresponding deficiency notices.
Consequently, they did not establish that the accrual of interest on
their tax underpayments was due to an error or delay in the performance
of a ministerial act. In addition, erroneous advice they received from
an
IRS
employee was not furnished in writing, and their Appeals officer had
informed them that it was incorrect.
An individual was not entitled to an abatement of interest that accrued
on deficiencies caused by disallowed charitable deductions for gifts
made to family members. The
IRS
's failure to detect her erroneous tax treatment of the cash gifts,
which she deducted as a result of a good faith misunderstanding of the
$10,000 annual exclusion, was not a ministerial error. Moreover, the
IRS
properly refused to abate interest that accrued as a result of the
taxpayer's failure to sign a proposed stipulated decision with regard to
the deficiency assessed for the first tax year. Likewise, the
IRS
's refusal to abate interest that accrued for the remaining tax years
because of the taxpayer's failure to promptly pay the assessed
deficiencies and interest was correct.
The
IRS
's denial of an individual's request for an abatement of interest did
not constitute an abuse of discretion absent proof of its erroneous or
dilatory performance of a ministerial act. The taxpayer's contention
that the
IRS
failed to properly credit an overpayment to the subsequent year's tax
liability, thereby overstating his interest for the following tax year
and depriving him of an opportunity to pay the interest in full, was
rejected as meritless. He introduced no credible evidence showing that
he relied on the overstated amount as his true unpaid liability or that
he had the financial resources to pay his true liability.
The sole owner of an S corporation was not entitled to an abatement of
interest that accrued on deficiencies caused by the disallowance of
certain office expenses and from his failure to report capital gains and
dividend income from his business. He contended that the
IRS
's erroneous determination that his company was a personal holding
company prevented him from settling earlier with the
IRS
and thereby caused the accrual of interest. However, nothing in the
record indicated that the individual made any attempt to pay or
acknowledge the deficiencies in tax attributable to his failure to
report taxable income from his business.
Taxpayers were not entitled to an abatement of interest on deficiencies
that accrued over the period during which they submitted seven offers in
compromise to the
IRS
. A revenue officer's application of the local standards for housing and
utility costs in determining the differential between their monthly
income and necessary living expenses, which resulted in a finding that
the payment offered was inadequate, was a not "ministerial
error." Application of the local standards was only one step in the
process of investigating and evaluating the offers in compromise --a
process that repeatedly called for the exercise of judgment and
discretion.
An attorney failed to establish that the accrual of interest on his tax
deficiency was attributable to an erroneous or dilatory performance of a
ministerial duty by an
IRS
agent. It was not unreasonable for the
IRS
to send the taxpayer's file to his last known address rather than to his
office in another state, and the taxpayer knew of the substance of the
file and that he owed tax before the file was sent to his last known
address.
The
IRS
did not abuse its discretion in denying an individual's request to abate
and refund interest accrued on her tax liability after the
IRS
classified it as uncollectible. Because classifying it as such required
the exercise of discretion and judgment, the determination was not a
ministerial act. The taxpayer's delayed payment also did not result from
the
IRS
classifying it as uncollectible.
An individual failed to show that the delay in her payment was
attributable to erroneous or dilatory actions by the
IRS
in performing a ministerial act. Moreover, the taxpayer had the ability
to stop the accrual of interest for each of the three tax years in issue
by paying her liability.
A tax shelter investor was not entitled to an abatement of interest
based on denial of his request for a transfer of his appeal to another
IRS
office because this was not a ministerial act. Any oral or written
statements by the
IRS
with respect to application of the federal tax laws required the
exercise of judgment and did not constitute a ministerial act. No
statute mandated an abatement of interest on tax deficiencies in order
to treat similarly situated taxpayers alike, including deficiencies that
are the result of a partnership level proceeding under the TEFRA
provisions.
Jurisdiction existed over an
IRS
Appeals officer's assessment of interest based on the Tax Court's
determination that the issue of interest abatement was raised by the
taxpayer during the Collection Due Process (CDP) hearing. Testimony
provided by the taxpayer and the Appeals officer established the claim.
However, the taxpayer was not entitled to an abatement of interest in
amounts greater than those abated or conceded by the
IRS
because he did not allege that the assessment of interest was
attributable to a ministerial error within the meaning of Code
Sec. 6404(e)and the evidence did not establish that the
IRS
committed a ministerial error.
R. Wright, 84
TCM
675, Dec.
54,970(M), TC Memo. 2002-312.
The
IRS
did not abuse its discretion in failing to abate interest for specified
periods with respect to married taxpayers' disallowed investment credits
and losses arising out of a partnership in which they held a limited
interest. The delays identified by the taxpayers were not attributable
to the
IRS
's error or delay in performing any ministerial act; rather, they were
attributable to the
IRS
's reasonable prioritization decisions with respect to its caseload. For
a second period, however, the
IRS
conceded that it abused its discretion in failing to abate interest
attributable to an unjustified delay. The delay appeared to have
occurred in the performance of a ministerial act by the
IRS
, which was the
IRS
agent's signing of a stipulation and causing it to be delivered to the
Tax Court.
Married taxpayers who failed to establish the existence of unusual
circumstances or substantial error in the Tax Court's decision involving
their entitlement to interest abatements (Dec.
55,049(M), were not entitled to reconsideration of that ruling.
Their allegation that the
IRS
erred in computing the amount of interest due was rejected because the
prior opinion called for the correction of calculation errors. Also,
reconsideration was not the appropriate forum for offering new legal
theories or reiterating previously rejected arguments. Further, the
record supported the
IRS
's prioritization decisions, and there was no delay in the assessment of
liabilities because the taxpayers had waived restrictions on assessment.
The passage of a considerable amount of time in the litigation phase of
a tax shelter dispute did not establish error or delay by the
IRS
in performing a ministerial act.
Married taxpayers who, in the underlying Tax Court proceeding, were held
liable for deficiencies and interest computed during Tax
Court Rule 155 proceedings, failed to establish that any erroneous
or dilatory performance of a ministerial duty by an
IRS
agent contributed to a delay or error in the payment of the deficiency
interest. Thus, the
IRS
did not abuse its discretion in denying their request for an abatement
of the interest. The
IRS
's application of the law regarding the tax assessment did not qualify
as a ministerial act. Also, errors relating to the audit did not entitle
the taxpayers to abatement; the
IRS
's classification and evaluation of information required judgment or
discretion and was not a ministerial act.
W. Landvogt, 86 TC 104, Dec.
55,236(M), TC Memo. 2003-217.
A divorced taxpayer was not entitled to an abatement of interest because
the
IRS
' decision to re-allocate the majority of an estimated tax payment to
his ex-wife's return was not a ministerial error.
The
IRS
properly denied a married couple an abatement of interest for two
distinct time periods because the delays did not result from a
ministerial act, and were significantly attributable to the taxpayers'
conduct. Under the law in effect for the period at issue, managerial
error did not permit an abatement, and the
IRS
manager's decision to assign the taxpayers' audit case to an agent who
first had to attend training classes was not a ministerial error.
The
IRS
did not abuse its discretion in denying an individual's request for
abatement of interest. The taxpayer submitted her returns but failed to
pay the taxes due. Her delay in payment was due solely to her failure to
pay such tax when due, and was not attributable to the erroneous or
dilatory performance of a ministerial act by an official or employee of
the
IRS
. The
IRS
's determination of her employee status for the year in issue was not a
ministerial act because it involved the exercise of judgment and proper
application of law.
The
IRS
's loss of married partnership investors' amended returns for nearly 11
years was a ministerial act within the meaning of Code
Sec. 6404(e). The loss of the returns was a procedural or mechanical
act that did not involve the exercise of discretion or judgment by the
IRS
.
The
IRS
did not abuse its discretion by denying married taxpayers' request for
an abatement of interest for a period of five months. Interest accruing
during that period was attributed to the couple's inability to pay on a
installment agreement and not to any unreasonable error or delay in the
performance of a ministerial duty by an
IRS
agent. However, the
IRS
did abuse its discretion in refusing to abate interest that accrued on
the taxpayers' liabilities for a period after they began to pay pursuant
to the installment agreement. The
IRS
did not clarify to the taxpayers that unassessed interest would continue
to accrue during the installment period, but instead confirmed the
taxpayers' mistaken belief that their total tax liabilities would be
extinguished after making the required payments.
An
IRS
Appeals officer did not abuse his discretion in issuing a Collection Due
Process (CDP) determination permitting the collection of the trust fund
recovery penalty and interest from a corporate treasurer/responsible
person. While the federal district court determined that it had
jurisdiction under Code
Sec. 6404(h) to review the
IRS
's refusal to abate interest on the trust fund recovery penalty, it
found that the treasurer did not qualify for an abatement. The record
did not show, and the treasurer did not identify, any specific acts
attributable to the
IRS
that would constitute ministerial or managerial acts entitling him to an
interest abatement. The mere passage of time did not establish that the
IRS
erred or delayed in performing a ministerial act.
Married taxpayers who submitted multiple offers in compromise with
respect to their reported but unpaid federal income tax liabilities for
two tax years failed to establish that any delay in their payment was
attributable to any action or inaction on the part of
IRS
personnel in processing their offers. The taxpayers failed to show that
the
IRS
unreasonably delayed the processing of their offers in compromise, all
of which the
IRS
rejected. The taxpayers could have commenced their tax payments at any
time. Consequently, interest was not abatable under Code
Sec. 6404(e) and the
IRS
did not abuse its discretion in rejecting the taxpayers' request for
abatement.
The
IRS
did not abuse its discretion in denying a request by an individual to
abate interest on his tax deficiency. The deficiency stemmed from the
taxpayer's investment in a coal mining partnership. The Tax Court
rejected the taxpayer's claim that the
IRS
improperly imposed interest for a period beginning after he received a
letter by a representative of the partnership indicating that pending
litigation between the partnership and the
IRS
had been settled. The court noted that the
IRS
is not bound by a letter that was not sent by it. Further, the passage
of time from the receipt of the letter until a final judgment had been
issued in the case was attributable to the complexity and extent of the
coal litigation and not due to ministerial error.
D. Deverna, 87
TCM
1139, Dec.
55,592(M), TC Memo. 2004-80.
A married couple, who invested in a multi-level tax shelter partnership,
was entitled to an abatement of interest during the periods that the
IRS
's inaction delayed the resolution of their case. After the tax matters
partner signed a settlement agreement, the
IRS
waited 3-1/2 months to countersign the document, which was an
unreasonable delay. Since the
IRS
drafted the settlement agreement, its countersignature on the document
did not require an act of discretion; it was a ministerial act.
Therefore, the taxpayers were entitled to an abatement of interest for
those months.
The
IRS
did not abuse its discretion in denying a taxpayer's request for
abatement of interest on his tax deficiencies. The taxpayer invested in
a partnership that was a limited partner in a tax shelter and claimed
losses with respect to his investments. Following an investigation of
the tax shelter, the
IRS
reached a settlement agreement with it and with the taxpayer, resulting
in adjustment of the taxpayer's returns, assessment of deficiencies, and
payment of those deficiencies by the taxpayer. The
IRS
denied the taxpayer's request for abatement of interest accrued during
the investigation, however, holding that all of the delays in the case
resulted from discretionary, rather than ministerial, acts by the
IRS
, and so abatement was not required by statute.
The
IRS
was not equitably estopped from assessing interest for one tax year
because the taxpayer did not prove that she reasonably relied on
misrepresentations made by the
IRS
regarding the full amount of her tax liability. The record reflected
that the lump-sum payoff figure given to the taxpayer represented the
amount of her tax liability, exclusive of additions to tax, penalties or
interest. Further, the correspondence sent by the
IRS
to the taxpayer repeatedly indicated that further adjustments could be
made.
The
IRS
's failure to assess tax liabilities and issue notice and demand were
ministerial acts. The liabilities arose out of a 1985 settlement
agreement that was entered into in connection with tax shelter
litigation. The assessment was made in 1999, the year the litigation was
completed. Although litigation decisions are not ministerial, the tax
year at issue was not the subject of the litigation.
The
IRS
did not abuse its discretion in denying a married couple's claim for
abatement of interest on their tax deficiency during the period that the
IRS
conducted a criminal investigation of the partnerships in which the
couple had invested. The
IRS
's disorganization and loss of partnership books and records and failure
to return to books and records did not constitute a ministerial act
under Code Sec. 6404(e) prior to its amendment. On remand from CA-5, 2003-2
USTC ¶50,551.
The
IRS
did not abuse its discretion in denying an individual's request for an
abatement of interest on her tax deficiencies. The taxpayer failed to
support her claim that the assessments of interest erroneously accrued
on assessments that she claimed to have paid since she did not provide
sufficient evidence that she had made any payments on the balance due.
She also failed to show that her delay in paying the liabilities was
attributable to any ministerial act performed by an
IRS
agent in an erroneous or dilatory manner. Moreover, her claim that the
IRS
erroneously denied her earned income tax credits for subsequent tax
years did not present a cognizable claim under Code
Sec. 6404(a) or (e)
since such a determination did not require the exercise of judgment of
discretion.
Interest that accrued on an individual's income tax liabilities prior to
the
IRS
's application of the his carryback losses was attributable to the
taxpayer's own conduct; thus, the
IRS
did not abuse its discretion by denying his request for an abatement of
interest. The taxpayer failed to file Form 1045, Application for
Tentative Refund, although he conceded that he knew he had to file the
form in order to carry back the loss. He also was not entitled to abate
interest on his liabilities for self-employment taxes and civil
penalties that continued to accrue after the carryback losses eliminated
his income tax deficiency. He failed to show that any
IRS
employee was erroneous or dilatory in performing a ministerial act
because his self-serving testimony was insufficient to prove that a
revenue officer erroneously advised him not to file a Form 1045 or
promised him that the carryback would eliminate his entire deficiency.
Finally, the Tax Court lacked jurisdiction to review the
IRS
's failure to abate his penalties for failure to pay tax.
Married taxpayers failed to establish that any erroneous or dilatory
performance of a ministerial duty by an
IRS
agent contributed to a delay or error in the payment of interest on
their tax deficiency. Consequently, the
IRS
did not abuse its discretion in denying their request for abatement of
interest. The taxpayers' contentions that the examining
IRS
agent improperly evaluated their joint returns, that the deficiency
determinations were improper, and that inadequate consideration was
given to their arguments by the appeals officer were insufficient to
support abatement under Code
Sec. 6404(e). The conduct of the
IRS
and appeals officer concerning the proper application of federal tax
laws involved judgment and discretion and, thus, did not qualify as a
ministerial act.
E. Brown, 79
TCM
1561, Dec.
53,766(M), TC Memo. 2000-61.
The
IRS
's refusal to abate interest owed by married taxpayers did not
constitute an abuse of discretion because no ministerial acts on the
part of
IRS
employees or officers caused delay. Its decisions to examine three tax
years, to conduct a bank deposits analysis of the taxpayers' accounts,
to suspend the audit until a related audit of the husband's employer was
completed, and to refer the case for criminal investigation all involved
the exercise of judgment and discretion. The
IRS
did not engage in "ministerial acts," which are procedural or
mechanical acts that do not involve the exercise of judgment or
discretion and that occur during the processing of a case after all
prerequisites to the act have taken place. Moreover, the record
established that the taxpayers were largely responsible for any delays
in the proceedings.
Jurisdiction existed over an
IRS
appeals officer's determination that statutory interest had accrued on
an individual's tax liability because the taxpayer's contention that
interest should not have accrued during his bankruptcy case was viewed
as a request for abatement of interest. However, the taxpayer did not
allege that the assessment of interest was attributable to a ministerial
error within the meaning of Code
Sec. 6404(e) and the evidence did not establish that the
IRS
committed a ministerial error. Thus, no abatement was permitted.
The
IRS
's denial of an individual's request for an abatement of interest did
not constitute an abuse of discretion absent proof of its erroneous or
dilatory performance of a ministerial act. The
IRS
's alleged loss of some of the taxpayer's records that were seized in
conjunction with the arrest of his former representative did not entitle
him to abatement because the seizure did not qualify as a ministerial
act. Moreover, any error or delay that arose with respect to the seizure
could also be attributed to the taxpayer, who did not respond to
IRS
correspondence and notices, produce requested documentation, or pursue
litigation opportunities.
An individual, whose former spouse was granted innocent spouse relief
under former Code
Sec. 6013(e), did not qualify for an abatement of interest. The
taxpayer did not allege that the assessment of interest was attributable
to a ministerial error within the meaning of Code
Sec. 6404(e).
The
IRS
properly denied an accountant's request for an abatement of interest
accrued on deficiencies resulting from his investment in a general
partnership. The denial of abatement did not constitute an abuse of
discretion in the performance of a ministerial act by an
IRS
agent. The agent's decision whether and when to work on the
partnership's case involved the exercise of judgment based on an
evaluation of his entire caseload and, thus, could not be characterized
as a procedural or mechanical act.
S. Leffert, 81
TCM
1093, Dec.
54,229(M), TC Memo. 2001-23.
The government was entitled to summary judgment in a refund suit brought
by a trust that sought a marital deduction in connection with a lump sum
payment to the trust beneficiary, the settlor's surviving spouse. The
beneficiary, as a surviving spouse, did not, prior to the settlement,
have an enforceable right under state (
Maine
) law to an interest deductible under Code
Sec. 2056. As a result, the trust was not entitled to an abatement
of interest on the grounds of
IRS
ministerial or managerial acts that resulted in unreasonable error or
delay.
The
IRS
's denial of a married couple's request for an abatement of interest
that arose in connection with certain partnership investments did not
constitute an abuse of its discretion because they did not identify any
specific delay or errors by the
IRS
in performing a ministerial act. The Tax Court declined to characterize
the
IRS
's processing of the taxpayer's refund claim, the proceeds from which
they anticipated would cover their outstanding tax liabilities, as the
cause for any delay in payment of their outstanding tax liability. The
IRS
committed no errors or delays in determining or assessing their tax
deficiency.
The
IRS
did not abuse its discretion by denying a couple's request for an
abatement of interest accrued on deficiencies attributable to unreported
gambling income and the husband's social security income. The
IRS
agent's decision to review only the two tax years assigned to him
despite the couple's desire to have all tax years resolved at the same
time did not constitute a ministerial act. Even if it did, his failure
to resolve those tax year issues could not be considered because the
taxpayers had not yet received corresponding deficiency notices.
Consequently, they did not establish that the accrual of interest on
their tax underpayments was due to an error or delay in the performance
of a ministerial act. In addition, erroneous advice they received from
an
IRS
employee was not furnished in writing, and their Appeals officer had
informed them that it was incorrect.
An individual was not entitled to an abatement of interest that accrued
on deficiencies caused by disallowed charitable deductions for gifts
made to family members. The
IRS
's failure to detect her erroneous tax treatment of the cash gifts,
which she deducted as a result of a good faith misunderstanding of the
$10,000 annual exclusion, was not a ministerial error. Moreover, the
IRS
properly refused to abate interest that accrued as a result of the
taxpayer's failure to sign a proposed stipulated decision with regard to
the deficiency assessed for the first tax year. Likewise, the
IRS
's refusal to abate interest that accrued for the remaining tax years
because of the taxpayer's failure to promptly pay the assessed
deficiencies and interest was correct.
The
IRS
's denial of an individual's request for an abatement of interest did
not constitute an abuse of discretion absent proof of its erroneous or
dilatory performance of a ministerial act. The taxpayer's contention
that the
IRS
failed to properly credit an overpayment to the subsequent year's tax
liability, thereby overstating his interest for the following tax year
and depriving him of an opportunity to pay the interest in full, was
rejected as meritless. He introduced no credible evidence showing that
he relied on the overstated amount as his true unpaid liability or that
he had the financial resources to pay his true liability.
The sole owner of an S corporation was not entitled to an abatement of
interest that accrued on deficiencies caused by the disallowance of
certain office expenses and from his failure to report capital gains and
dividend income from his business. He contended that the
IRS
's erroneous determination that his company was a personal holding
company prevented him from settling earlier with the
IRS
and thereby caused the accrual of interest. However, nothing in the
record indicated that the individual made any attempt to pay or
acknowledge the deficiencies in tax attributable to his failure to
report taxable income from his business.
Taxpayers were not entitled to an abatement of interest on deficiencies
that accrued over the period during which they submitted seven offers in
compromise to the
IRS
. A revenue officer's application of the local standards for housing and
utility costs in determining the differential between their monthly
income and necessary living expenses, which resulted in a finding that
the payment offered was inadequate, was a not "ministerial
error." Application of the local standards was only one step in the
process of investigating and evaluating the offers in compromise --a
process that repeatedly called for the exercise of judgment and
discretion.
An attorney failed to establish that the accrual of interest on his tax
deficiency was attributable to an erroneous or dilatory performance of a
ministerial duty by an
IRS
agent. It was not unreasonable for the
IRS
to send the taxpayer's file to his last known address rather than to his
office in another state, and the taxpayer knew of the substance of the
file and that he owed tax before the file was sent to his last known
address.
The
IRS
did not abuse its discretion in denying an individual's request to abate
and refund interest accrued on her tax liability after the
IRS
classified it as uncollectible. Because classifying it as such required
the exercise of discretion and judgment, the determination was not a
ministerial act. The taxpayer's delayed payment also did not result from
the
IRS
classifying it as uncollectible.
An individual failed to show that the delay in her payment was
attributable to erroneous or dilatory actions by the
IRS
in performing a ministerial act. Moreover, the taxpayer had the ability
to stop the accrual of interest for each of the three tax years in issue
by paying her liability.
A tax shelter investor was not entitled to an abatement of interest
based on denial of his request for a transfer of his appeal to another
IRS
office because this was not a ministerial act. Any oral or written
statements by the
IRS
with respect to application of the federal tax laws required the
exercise of judgment and did not constitute a ministerial act. No
statute mandated an abatement of interest on tax deficiencies in order
to treat similarly situated taxpayers alike, including deficiencies that
are the result of a partnership level proceeding under the TEFRA
provisions.
Jurisdiction existed over an
IRS
Appeals officer's assessment of interest based on the Tax Court's
determination that the issue of interest abatement was raised by the
taxpayer during the Collection Due Process (CDP) hearing. Testimony
provided by the taxpayer and the Appeals officer established the claim.
However, the taxpayer was not entitled to an abatement of interest in
amounts greater than those abated or conceded by the
IRS
because he did not allege that the assessment of interest was
attributable to a ministerial error within the meaning of Code
Sec. 6404(e)and the evidence did not establish that the
IRS
committed a ministerial error.
R. Wright, 84
TCM
675, Dec.
54,970(M), TC Memo. 2002-312.
The
IRS
did not abuse its discretion in failing to abate interest for specified
periods with respect to married taxpayers' disallowed investment credits
and losses arising out of a partnership in which they held a limited
interest. The delays identified by the taxpayers were not attributable
to the
IRS
's error or delay in performing any ministerial act; rather, they were
attributable to the
IRS
's reasonable prioritization decisions with respect to its caseload. For
a second period, however, the
IRS
conceded that it abused its discretion in failing to abate interest
attributable to an unjustified delay. The delay appeared to have
occurred in the performance of a ministerial act by the
IRS
, which was the
IRS
agent's signing of a stipulation and causing it to be delivered to the
Tax Court.
Married taxpayers who failed to establish the existence of unusual
circumstances or substantial error in the Tax Court's decision involving
their entitlement to interest abatements (Dec.
55,049(M), were not entitled to reconsideration of that ruling.
Their allegation that the
IRS
erred in computing the amount of interest due was rejected because the
prior opinion called for the correction of calculation errors. Also,
reconsideration was not the appropriate forum for offering new legal
theories or reiterating previously rejected arguments. Further, the
record supported the
IRS
's prioritization decisions, and there was no delay in the assessment of
liabilities because the taxpayers had waived restrictions on assessment.
The passage of a considerable amount of time in the litigation phase of
a tax shelter dispute did not establish error or delay by the
IRS
in performing a ministerial act.
Married taxpayers who, in the underlying Tax Court proceeding, were held
liable for deficiencies and interest computed during Tax
Court Rule 155 proceedings, failed to establish that any erroneous
or dilatory performance of a ministerial duty by an
IRS
agent contributed to a delay or error in the payment of the deficiency
interest. Thus, the
IRS
did not abuse its discretion in denying their request for an abatement
of the interest. The
IRS
's application of the law regarding the tax assessment did not qualify
as a ministerial act. Also, errors relating to the audit did not entitle
the taxpayers to abatement; the
IRS
's classification and evaluation of information required judgment or
discretion and was not a ministerial act.
W. Landvogt, 86 TC 104, Dec.
55,236(M), TC Memo. 2003-217.
A divorced taxpayer was not entitled to an abatement of interest because
the
IRS
' decision to re-allocate the majority of an estimated tax payment to
his ex-wife's return was not a ministerial error.
The
IRS
properly denied a married couple an abatement of interest for two
distinct time periods because the delays did not result from a
ministerial act, and were significantly attributable to the taxpayers'
conduct. Under the law in effect for the period at issue, managerial
error did not permit an abatement, and the
IRS
manager's decision to assign the taxpayers' audit case to an agent who
first had to attend training classes was not a ministerial error.
The
IRS
did not abuse its discretion in denying an individual's request for
abatement of interest. The taxpayer submitted her returns but failed to
pay the taxes due. Her delay in payment was due solely to her failure to
pay such tax when due, and was not attributable to the erroneous or
dilatory performance of a ministerial act by an official or employee of
the
IRS
. The
IRS
's determination of her employee status for the year in issue was not a
ministerial act because it involved the exercise of judgment and proper
application of law.
The
IRS
's loss of married partnership investors' amended returns for nearly 11
years was a ministerial act within the meaning of Code
Sec. 6404(e). The loss of the returns was a procedural or mechanical
act that did not involve the exercise of discretion or judgment by the
IRS
.
The
IRS
did not abuse its discretion by denying married taxpayers' request for
an abatement of interest for a period of five months. Interest accruing
during that period was attributed to the couple's inability to pay on a
installment agreement and not to any unreasonable error or delay in the
performance of a ministerial duty by an
IRS
agent. However, the
IRS
did abuse its discretion in refusing to abate interest that accrued on
the taxpayers' liabilities for a period after they began to pay pursuant
to the installment agreement. The
IRS
did not clarify to the taxpayers that unassessed interest would continue
to accrue during the installment period, but instead confirmed the
taxpayers' mistaken belief that their total tax liabilities would be
extinguished after making the required payments.
An
IRS
Appeals officer did not abuse his discretion in issuing a Collection Due
Process (CDP) determination permitting the collection of the trust fund
recovery penalty and interest from a corporate treasurer/responsible
person. While the federal district court determined that it had
jurisdiction under Code
Sec. 6404(h) to review the
IRS
's refusal to abate interest on the trust fund recovery penalty, it
found that the treasurer did not qualify for an abatement. The record
did not show, and the treasurer did not identify, any specific acts
attributable to the
IRS
that would constitute ministerial or managerial acts entitling him to an
interest abatement. The mere passage of time did not establish that the
IRS
erred or delayed in performing a ministerial act.
Married taxpayers who submitted multiple offers in compromise with
respect to their reported but unpaid federal income tax liabilities for
two tax years failed to establish that any delay in their payment was
attributable to any action or inaction on the part of
IRS
personnel in processing their offers. The taxpayers failed to show that
the
IRS
unreasonably delayed the processing of their offers in compromise, all
of which the
IRS
rejected. The taxpayers could have commenced their tax payments at any
time. Consequently, interest was not abatable under Code
Sec. 6404(e) and the
IRS
did not abuse its discretion in rejecting the taxpayers' request for
abatement.
The
IRS
did not abuse its discretion in denying a request by an individual to
abate interest on his tax deficiency. The deficiency stemmed from the
taxpayer's investment in a coal mining partnership. The Tax Court
rejected the taxpayer's claim that the
IRS
improperly imposed interest for a period beginning after he received a
letter by a representative of the partnership indicating that pending
litigation between the partnership and the
IRS
had been settled. The court noted that the
IRS
is not bound by a letter that was not sent by it. Further, the passage
of time from the receipt of the letter until a final judgment had been
issued in the case was attributable to the complexity and extent of the
coal litigation and not due to ministerial error.
D. Deverna, 87
TCM
1139, Dec.
55,592(M), TC Memo. 2004-80.
A married couple, who invested in a multi-level tax shelter partnership,
was entitled to an abatement of interest during the periods that the
IRS
's inaction delayed the resolution of their case. After the tax matters
partner signed a settlement agreement, the
IRS
waited 3-1/2 months to countersign the document, which was an
unreasonable delay. Since the
IRS
drafted the settlement agreement, its countersignature on the document
did not require an act of discretion; it was a ministerial act.
Therefore, the taxpayers were entitled to an abatement of interest for
those months.
The
IRS
did not abuse its discretion in denying a taxpayer's request for
abatement of interest on his tax deficiencies. The taxpayer invested in
a partnership that was a limited partner in a tax shelter and claimed
losses with respect to his investments. Following an investigation of
the tax shelter, the
IRS
reached a settlement agreement with it and with the taxpayer, resulting
in adjustment of the taxpayer's returns, assessment of deficiencies, and
payment of those deficiencies by the taxpayer. The
IRS
denied the taxpayer's request for abatement of interest accrued during
the investigation, however, holding that all of the delays in the case
resulted from discretionary, rather than ministerial, acts by the
IRS
, and so abatement was not required by statute.
The
IRS
was not equitably estopped from assessing interest for one tax year
because the taxpayer did not prove that she reasonably relied on
misrepresentations made by the
IRS
regarding the full amount of her tax liability. The record reflected
that the lump-sum payoff figure given to the taxpayer represented the
amount of her tax liability, exclusive of additions to tax, penalties or
interest. Further, the correspondence sent by the
IRS
to the taxpayer repeatedly indicated that further adjustments could be
made.
The
IRS
's failure to assess tax liabilities and issue notice and demand were
ministerial acts. The liabilities arose out of a 1985 settlement
agreement that was entered into in connection with tax shelter
litigation. The assessment was made in 1999, the year the litigation was
completed. Although litigation decisions are not ministerial, the tax
year at issue was not the subject of the litigation.
The
IRS
did not abuse its discretion in denying a married couple's claim for
abatement of interest on their tax deficiency during the period that the
IRS
conducted a criminal investigation of the partnerships in which the
couple had invested. The
IRS
's disorganization and loss of partnership books and records and failure
to return to books and records did not constitute a ministerial act
under Code Sec. 6404(e) prior to its amendment. On remand from CA-5, 2003-2
USTC ¶50,551.
A taxpayer who claimed losses from a tax shelter partnership was unable
to prove that the
IRS
abused its discretion in denying his claim for abatement of interest.
The passage of a considerable amount of time in the litigation phase of
the tax dispute did not establish error or delay by the
IRS
in performing a ministerial act for purposes of Code
Sec. 6404. The taxpayer's contention that the
IRS
committed ministerial errors when it allegedly failed to communicate
relevant information and communicated misinformation to him was also
rejected.
A pro se attorney who pled guilty to criminal tax evasion was not
entitled to an abatement of interest that accrued on his tax deficiency
as a result of the
IRS
's suspension of civil proceedings against him during its criminal
investigation and prosecution. The refusal to continue the civil
investigation was the result of a litigation strategy, not the result of
a ministerial act.
The
IRS
's denial of a request by a tax preparer and his wife to abate interest
on their deficiency did not constitute an abuse of discretion. Although
the taxpayers claimed that too much time had elapsed from the
commencement of an audit until the
IRS
issued a deficiency notice nearly two years later, they failed to show
that any agent of the
IRS
committed an error or delay in performing a ministerial act. Any delay
in transferring the taxpayers' petition from the U.S. Embassy in
Mexico City
to the Tax Court had no effect on the pace of the settlement of the case
and, thus, interest that accrued during that period was not subject to
abatement. Further, there was no prohibited delay with respect to an
IRS
Appeals officer's issuance of a settlement offer to the taxpayers. The
IRS
properly refused to abate interest that accrued solely due to the
taxpayer's failure to pay their agreed tax liability, and it did not
have to apply a refund that arose in a subsequent tax year to pay the
deficiency for the year at issue. Finally, since the taxpayers failed to
maintain proper records, interest was not abated to offset expenses they
incurred hiring an accountant and traveling to
Mexico
to obtain records.
G. Mankita, 78
TCM
1216, Dec.
53,673(M), TC Memo. 1999-420.
The
IRS
's failure to abate interest that accrued on married taxpayers'
deficiencies was not an abuse of discretion since the taxpayers did not
show that the interest was attributable to any error or delay of an
IRS
employee acting in an official capacity in performing a ministerial act.
The taxpayers failed to support their claim that they attempted to
schedule an earlier meeting with an Appeals officer than actually
occurred. Thus, they were not entitled to abate interest that accrued
from the date they received their first letter from the Appeals office
until they reached a settlement with the
IRS
regarding the amount of their deficiencies. Moreover, their claim that
the
IRS
took unreasonable legal positions did not implicate a ministerial act
since decisions regarding whether to settle a case and the application
of tax laws involve discretion and judgment.
R. Dundore, 79
TCM
1479, Dec.
53,747(M), TC Memo. 2000-45.
It was an abuse of discretion for the
IRS
to refuse to abate interest during the period in which the examination
of a partnership's return was delayed by the
IRS
's Quality Review branch since the
IRS
failed to clearly explain its basis for refusal. The abuse of discretion
standard requires the
IRS
to explain why it has exercised its discretion in a given manner, so
that the court is not required to speculate as to the basis of its
actions. However, the
IRS
did not abuse its discretion in refusing to abate interest that accrued
during the initial and final stages of the examination while
IRS
agents were reviewing the partners' expense deductions and considering
the imposition of penalties. Further, the
IRS
's decision not to reassign the case while the assigned Appeals Officer
was in training, and the officer's subsequent decision to give
precedence to cases on which the statute of limitations was near
expiration, were not ministerial acts. Finally, the version of Code
Sec. 6404 that was in effect for the tax year at issue did not
provide for abatement of interest that accrued due to delays in
performing managerial acts.
An individual was not entitled to an abatement of interest on his
deficiency because he failed to prove that the interest accrued due to
any ministerial acts on the part of
IRS
employees. The fact that his examination took several years to complete
did not prove that an erroneous or dilatory act occurred, especially
since delays were caused by the expansion of his case, his difficulty in
supplying records, the
IRS
's suspicions of fraud, and the reopening of the examination at the
taxpayer's request. A misaddressed letter from the
IRS
to one of his representatives also was not an error in performing a
ministerial act because the letter was mailed to the address provided by
the representative, and was remailed once the
IRS
determined the correct address.
The
IRS
's refusal to abate interest that had accrued on an individual's tax
liability was not an abuse of discretion since any delay in the
proceeding was not due to a ministerial act of the
IRS
. The Service responded in a timely manner to the taxpayer's
correspondence in connection with his unpaid tax liability; however, the
taxpayer canceled scheduled appointments and failed to supply requested
information. Thus, any error or delay was attributable to the taxpayer.
Moreover, his arguments that hardship prevented him from complying with
tax laws, that the
IRS
failed to include vital information in the stipulation of facts and that
the
IRS
's attorney attempted to coerce him into dropping his claim were not
proper grounds on which to base an order to abate interest.
The
IRS
did not abuse its discretion in denying a request by a sole proprietor
and his wife for an abatement of interest for tax deficiencies that
arose, in part, as the result of disallowed business expense deductions
and adjustments to the proprietorship's cost of goods sold. The
taxpayers could not avail themselves of the exceptions that would
otherwise entitle them to an interest abatement in the instant case.
They did not identify any specific delay or conduct by the
IRS
that would constitute a ministerial act or support their claim.
Moreover, the time that transpired during the examination, appeals and
settlement processes did not constitute error or unreasonable delay in
performing a ministerial act.
The
IRS
did not abuse its discretion by denying a couple's request for an
abatement of interest accrued on deficiencies assessed against the
husband's wholly-owned travel agency. The
IRS
agent's inability to work on the taxpayers' file for more than six
months due to his workload did not constitute a ministerial act.
A long civil and criminal investigation process, which spanned several
years and included use of third-party summonses, did not establish error
or delay in the government's performance of a ministerial act. Also, the
revenue agent responsible for the civil examination did not fail to
return to the taxpayer records obtained during the examination, as most
of the documents were photocopies obtained by the use of third-party
recordkeeper summonses and any original documents were returned.
The
IRS
did not abuse its discretion in refusing to abate interest that accrued
over several years during an investigation of a limited partnership's
returns. The taxpayer's dissatisfaction with the length of time it took
to resolve his case did not establish a correlation between a specific
error or delay in the performance of a ministerial act and a specific
time period for which interest should have been abated as a result of
the error or delay.
An individual who was responsible for a significant part, if not all, of
the delay in the determination of his tax liability was not entitled to
an interest abatement in excess of the amount abated following the
IRS
's reconsideration of his assessed deficiencies. The individual had
protracted the audit by demanding that it be delayed while he completed
college and until he returned from a vacation, by failing to pursue
review of the
IRS
's decisions in a timely manner, by refusing to cooperate with the
IRS
, and by making rude and insulting statements to
IRS
customer service representatives.
A tax shelter investor's contention that the
IRS
exhibited unreasonable delay in signing a decision document pertaining
to his case was not supported. Other theories also did not show that
accrual of interest on his tax deficiency was attributable to an
erroneous or dilatory performance of a ministerial duty by an
IRS
agent.
An
IRS
delay in assessing a married couple's interest due and owing was not
unreasonable and did not justify abatement. A significant portion of the
delay was due to various aspects of a related audit and the remainder
was not a ministerial error, which required the abatement of additional
amounts.
The IRS did not abuse its discretion in failing to abate interest for
specified periods with respect to married taxpayers' disallowed
investment credits and losses arising out of a partnership in which they
held a limited interest. The delays identified by the taxpayers were not
attributable to the IRS's error or delay in performing any ministerial
act; rather, they were attributable to the IRS's reasonable
prioritization decisions with respect to its caseload. For a second
period, however, the IRS conceded that it abused its discretion in
failing to abate interest attributable to an unjustified delay. The
delay appeared to have occurred in the performance of a ministerial act
by the IRS, which was the IRS agent's signing of a stipulation and
causing it to be delivered to the Tax Court.
Married taxpayers who failed to establish the existence of unusual
circumstances or substantial error in the Tax Court's decision involving
their entitlement to interest abatements (Dec.
55,049(M), above) were not entitled to reconsideration of that
ruling. Their allegation that the IRS erred in computing the amount of
interest due was rejected because the prior opinion called for the
correction of calculation errors. Also, reconsideration was not the
appropriate forum for offering new legal theories or reiterating
previously rejected arguments. Further, the record supported the IRS's
prioritization decisions, and there was no delay in the assessment of
liabilities because the taxpayers had waived restrictions on assessment.
The passage of a considerable amount of time in the litigation phase of
a tax shelter dispute did not establish error or delay by the IRS in
performing a ministerial act. The passage of a large period time in the
tax shelter litigation was due to the large number of such cases being
filed and the court's subsequent attempt to efficiently manage the
burden.
A taxpayer who claimed losses from a tax shelter partnership was unable
to prove that the IRS abused its discretion in denying his claim for
abatement of interest covering four tax years. The taxpayer's contention
that the IRS delayed issuing two final partnership administrative
adjustments (FPAAs) until several years after it had sufficient
information to issue them did not establish error or delay by the IRS in
performing a ministerial act. Further, the record revealed that the
IRS's difficulty in obtaining accurate records during the audits
hindered the audit process.
Married taxpayers who, in the underlying Tax Court proceeding, were held
liable for deficiencies and interest computed during Tax
Court Rule 155 proceedings, failed to establish that any erroneous
or dilatory performance of a ministerial duty by an IRS agent
contributed to a delay or error in the payment of the deficiency
interest. The mere passage of time since the inception of an audit did
not establish that the IRS delayed in performing ministerial acts. Also,
errors relating to the audit did not entitle the taxpayers to abatement;
the IRS's classification and evaluation of information required judgment
or discretion and did not contribute to errors or delays in the couple's
payment of their tax liabilities.
W. Landvogt, 86 TCM 104, Dec.
55,236(M), T.C. Memo. 2003-217.
Married taxpayers were not entitled to an abatement of interest that
resulted from the denial of their deductions for donations of whale meat
and whaling expenses. The taxpayers failed to establish that the accrual
of interest was attributable to an error or delay by an official or
employee of the IRS. In their opening brief, the taxpayers admitted that
the delay resulted from a suspension of their case to allow for the
enactment of pertinent proposed federal legislation. Moreover, a death
in the family of the taxpayers' attorney did not provide a basis for an
abatement of interest.
The taxpayers failed to establish that any unreasonable error or delay
in the performance of a ministerial duty by an IRS agent contributed to
the nonpayment of interest on their tax deficiency. The record indicated
that the interest accruals were merely the result of the taxpayers'
failure to pay the entire balance owed, and not the result of an IRS
employee's erroneous or dilatory performance of a ministerial or
managerial act.
An abatement of interest was denied because the delay was significantly
attributable to the taxpayer. Although the IRS agent working on their
case was hospitalized and later died, the case was quickly reassigned,
thus, any delay resulted from the taxpayers' continual failure to
provide requested documentation.
An IRS Appeals officer did not abuse his discretion in issuing a
Collection Due Process (CDP) determination permitting the collection of
the trust fund recovery penalty and interest from a corporate
treasurer/responsible person. While the federal district court
determined that it had jurisdiction under Code
Sec. 6404(h) to review the IRS's refusal to abate interest on the
trust fund recovery penalty, it found that the treasurer did not qualify
for an abatement. The record did not show, and the treasurer did not
identify, any specific acts attributable to the IRS that would
constitute ministerial or managerial acts entitling him to an interest
abatement. The mere passage of time did not establish that the IRS erred
or delayed in performing a ministerial act.
A married couple, who invested in a multi-level tax shelter partnership,
was entitled to an abatement of interest during the periods that the
IRS's inaction delayed the resolution of their case. Since the IRS was
unable to explain a six-month delay in sending out the taxpayer's
settlement agreement, they were entitled to an abatement of interest for
those months. Further, the IRS waited another 3-1/2 months to
countersign the document, which was an unreasonable delay. Since the IRS
drafted the settlement agreement, its countersignature on the document
did not require an act of discretion; it was a ministerial act.
Therefore, the taxpayers were entitled to an abatement of interest for
those months also.
The IRS did not abuse its discretion in denying a taxpayer's request for
abatement of interest on his tax deficiencies. The taxpayer invested in
a partnership that was a limited partner in a tax shelter and claimed
losses with respect to his investments. Following an investigation of
the tax shelter, the IRS reached a settlement agreement with it and with
the taxpayer, resulting in adjustment of the taxpayer's returns,
assessment of deficiencies, and payment of those deficiencies by the
taxpayer. The IRS denied the taxpayer's request for abatement of
interest accrued during the investigation, however, holding the statute
of limitation for the assessment was not violated, and all of the delays
in the case resulted from discretionary, rather than ministerial, acts
by the IRS, and so abatement was not required by statute.
The IRS did not abuse its discretion by rejecting taxpayer's interest
abatement claim. IRS issued notice of deficiency determining fraud
penalties. Delay caused by suspension of civil action to allow for the
criminal prosecution of the taxpayer, including the delay in the
issuance of the notice of deficiency, was not a delay in the performance
of a ministerial act. Taxpayer's contention that IRS also abused its
discretion by failing to disclose the basis for its denial of the claim
for abatement was also rejected. Investigation of the taxpayer's case
and the criminal proceedings were adequate reasons and did not
constitute a delay in the performance of a ministerial act.
Married owners of a scrap metal business were not entitled to an
abatement of interest. The taxpayers failed to pay the tax liability
reported on their tax return for the year at issue, and the liability
was outstanding until a third party's bankruptcy trustee paid the IRS on
the taxpayers' behalf. Moreover, the taxpayers failed to show that any
interest that accrued after the bankruptcy trustee's payment was due to
the IRS's error or delay.
Joe Nathan Wright and Lola H. Wright,
Petitioners-Appellants v. Commissioner of Internal Revenue, Respondent-Appellee.
U.S.
Court of Appeals, 5th Circuit; 04-60549,
March 14, 2005
.
]
Section
6404 of the Internal Revenue Code gives the
IRS
discretion to abate interest assessments in limited circumstances. 2
Because the Wrights reported their tax liability due on their 1993 and
1994 returns, this is not a deficiency case, in which unpaid taxes are
identified by the
IRS
. Accordingly, §
6404(e)(1)(A) does not apply. Section
6404(e)(1)(B) allows abatement only if any error or delay in payment
is caused by the
IRS
error or being dilatory in performing a ministerial act, that occurred
after the
IRS
contacted the taxpayer in writing about the payment and where the
taxpayer did not significantly contribute to the error or delay. For the
taxpayer to prevail, he must also show "that the Commissioner
exercised this discretion arbitrarily, capriciously, or without sound
basis in fact or law." Woodral v. Commissioner, 112 T.C. 19, 23
(1999).
The Wright's case fails on all counts. First, it is not clear that the
IRS
was erroneous or dilatory in performing a ministerial act. Treasury
regulations define a ministerial act as "a procedural or mechanical
act that does not involve the exercise of discretion, and that occurs
during the processing of a taxpayer's case after all prerequisites to
the act, such as conferences, have taken place. A decision concerning
the proper application of federal tax law (or other federal or state
law) is not a ministerial act." Treas. Reg. § 301.6404-2T(b)(1).
Although neither party cites any case law on this point, it is clear to
us that deciding whether to accept or how to respond to an offer in
compromise is not a "procedural or mechanical act that does not
involve the exercise of discretion."
Second, it is not clear that the Wrights did not contribute to the error
or delay. The taxpayers reported their own tax liability. They made
partial payments of approximately $30,000 that did not come close to
satisfying the approximately $120,000 originally due. Nothing the
IRS
did prevented the Wrights from paying the balance. As stated in Cannon
v. Comm'r, T.C. Memo 2002-205, "Generally, the relief provided
by section
6404 is not available under those circumstances [taxpayer reported
but unpaid tax liability]. As noted in the legislative history of that
section, 'if a taxpayer files a return but does not pay the taxes due, [
section
6404] would not permit abatement of this interest regardless of how
long the
IRS
took to contact the taxpayer and request payment.' S. Rept. 99-313
(1985), 1986-3 C.B. (Vol. 3) 1, 208; see also Smith v. Comm'r,
T.C. Memo 2002-1."
In addition, as noted by the Tax Court, the taxpayers' proposed findings
of fact state that they had net assets of about $20,000 on given dates
in 1996 and substantially less in 1998, supporting the Tax Court's
conclusion that the petitioners delayed paying their 1993 and 1994 tax
liabilities as a result of their own inability to pay, not as a result
of any fault of the
IRS
.
AFFIRMED.
1
Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion
should not be published and is not precedent except under the limited
circumstances set forth in 5th Cir. R. 47.5.4.
(e) Assessments of Interest Attributable to Errors and Delays by
Internal Revenue Service. --
(1) In general. In the case of any assessment of interest on
(A) any deficiency attributable in whole or in part to any error or
delay by an officer or employee of the Internal Revenue Service (acting
in his official capacity) in performing a ministerial act, or
(B) any payment of any tax described in section
6212(a) to the extent that any delay in such payment is attributable
to such officer or employee being dilatory in performing a ministerial
act,
the Secretary may abate the assessment of all or any part of such
interest for any period. For purposes of the preceding sentence, an
error or delay shall be taken into account only if no significant aspect
of such error or delay can be attributed to the taxpayer involved, and
after the Internal Revenue Service has contacted the taxpayer in writing
with respect to such deficiency or payment.
DAVID
JACKSON
AND
BETTY S. JACKSON, Petitioners v. COMMISSIONER OF INTERNAL REVENUE,
Respondent
T.C.
Summary Opinion 2005-12
Docket
No. 525-04S.
Filed
February 14, 2005
. Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, sec. 3401(d), 112 Stat. 750.
************
(1)
Whether respondent abused his discretion in failing to abate interest
for the years in issue that had accrued from March 27 through
November 30, 2003
. We hold that he did to the extent provided herein.
(2)
Whether respondent improperly refused to abate assessment for the
addition to tax for failure to timely pay under section 6651(a)(2) for
the years in issue. We hold that he did not.
(3)
Whether respondent abused his discretion in denying petitioners’ claim
for damages for respondent’s unnecessary filing of a lien. We hold
that the Court lacks jurisdiction to consider this claim.
Discussion
A. Abatement of Interest
We have jurisdiction over petitioners’
request for abatement of interest because such request was made as part
of a section 6330 proceeding. See Katz v. Commissioner , 115 T.C.
329, 340-341 (2000).
This Court may order an abatement of interest
if the Commissioner abuses his discretion in failing to abate interest.
Sec. 6404(h)(1). 5 The taxpayer must prove that the
Commissioner exercised his discretion arbitrarily, capriciously, or
without sound basis in fact or law. See Rule 142(a); Woodral v.
Commissioner , 112 T.C. 19, 23 (1999).
************
5 Sec. 6404(h),
formerly sec. 6404(g), is applicable to requests for abatement after
July 30, 1996
. Taxpayer Bill of Rights 2, Pub. L. 104-168, sec. 302, 110 Stat. 1457
(1996).
As applicable to 1995 and 1996, preamendment
section 6404(e)(1) permits the Commissioner to abate all or any part of
an assessment of interest on any payment of tax if an error or delay in
such payment is attributable to an officer or employee of the
IRS
being “erroneous or dilatory in performing a ministerial act”, and
the taxpayer caused no significant aspect of the delay.
As applicable to 1998 through 2001, section
6404(e) permits the Commissioner to abate interest with respect to any
“unreasonable” error or delay resulting from “managerial” or
ministerial acts. See Taxpayer Bill of Rights 2, sec. 301(a)(1) and (2),
Pub. L. 104-168, 110 Stat. 1457 (1996), effective for interest accruing
with respect to tax years beginning after
July 30, 1996
.
Section
301.6404
-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 30163
(Aug. 13, 1987), defines a “ministerial act” as “a procedural or
mechanical act that does not involve the exercise of judgment or
discretion, and that occurs during the processing of a taxpayer’s case
after all prerequisites to the act, such as conferences and review by
supervisors, have taken place.” The final regulations under section
6404(e) provide the same definition. See sec.
301.6404
-2(b)(2), Proced. & Admin. Regs. 6 The final regulations
define a “managerial act” as “an administrative act that occurs
during the processing of a taxpayer’s case involving the temporary or
permanent loss of records or the exercise of judgment or discretion
relating to management of personnel.” Sec.
301.6404
-2(b)(1), Proced. & Admin. Regs.
************
6 The final regulations
were issued on
Dec. 18, 1998
, generally effective with respect to interest accruing on deficiencies
or payments of tax for tax years beginning after
July 30, 1996
.
************
Petitioners do not dispute that they are
liable for the interest that had accrued on their outstanding tax
liabilities. Petitioners contend, however, that respondent abused his
discretion in not abating interest that had accrued since
March 27, 2003
, the earliest date that petitioners requested an escrow demand letter.
Petitioners argue that had respondent provided them with the escrow
demand letter at that time, then petitioners would have been able to
refinance their home and to pay in full their tax liabilities. Thus,
petitioners contend that respondent’s failure to send them the escrow
demand letter on
March 27, 2003
, was an unreasonable ministerial delay.
On or about
March 27, 2003
, petitioners requested a payoff amount to refinance their home to pay
their tax liabilities. Respondent sent petitioners a computer printout
for each year disclosing their total outstanding tax liabilities,
including interest and additions to tax. Petitioners, however, did not
submit a loan application for the refinancing of their home until almost
4 months later on or about
July 14, 2003
, which was rejected on
July 16, 2003
, because of petitioners’ poor performance with World Savings. 7 From
March 27 until on or about
July 16, 2003
, there was no erroneous or dilatory performance of a ministerial act by
respondent, nor was there any unreasonable error or delay resulting from
any managerial or ministerial act that contributed to a delay in the
payment of petitioners’ tax liabilities. Under these circumstances,
respondent did not abuse his discretion to refuse to abate interest that
accrued for that period.
Based on the entirety of the record, we
conclude that there was dilatory performance of a ministerial act by
respondent that contributed to an unreasonable delay in the payment of
petitioners’ tax liabilities from July 31 to
November 30, 2003
. Accordingly, respondent abused his discretion in refusing to abate
interest that had accrued for the years in issue for that period.
D.
Jackson,
February 15, 2005
, T.C. Summary Opinion 2005-12
This Court may order an abatement of interest if the Commissioner abuses
his discretion in failing to abate interest. Sec.
6404(h)(1).5
The taxpayer must prove that the Commissioner exercised his discretion
arbitrarily, capriciously, or without sound basis in fact or law. See
Rule 142(a); Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
As applicable to 1995 and 1996, preamendment section
6404(e)(1)
permits the Commissioner to abate all or any part of an assessment of
interest on any payment of tax if an error or delay in such payment is
attributable to an officer or employee of the
IRS
being "erroneous or dilatory in performing a ministerial act",
and the taxpayer caused no significant aspect of the delay.
As applicable to 1998 through 2001, section
6404(e)
permits the Commissioner to abate interest with respect to any
"unreasonable" error or delay resulting from
"managerial" or ministerial acts. See Taxpayer Bill of Rights
2, sec. 301(a)(1) and (2), Pub. L. 104-168, 110 Stat. 1457 (1996),
effective for interest accruing with respect to tax years beginning
after
July 30, 1996
.
Section 301.6404-2T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 30163 (Aug. 13, 1987), defines a "ministerial act" as
"a procedural or mechanical act that does not involve the exercise
of judgment or discretion, and that occurs during the processing of a
taxpayer's case after all prerequisites to the act, such as conferences
and review by supervisors, have taken place." The final regulations
under section
6404(e)
provide the same definition. See sec. 301.6404-2(b)(2), Proced. &
Admin. Regs.6
The final regulations define a "managerial act" as "an
administrative act that occurs during the processing of a taxpayer's
case involving the temporary or permanent loss of records or the
exercise of judgment or discretion relating to management of
personnel." Sec. 301.6404-2(b)(1), Proced. & Admin. Regs.
The income tax assessments against petitioners include additions to tax
under section
6651(a)(1)
for 1996, 1998, and 1999, and sections
6651(a)(2)
and 6654
for all the years in issue. Petitioners did not have an opportunity to
dispute the additions to tax relating to their income tax liabilities;
therefore, they can challenge them during the section
6330
proceeding. Sec.
6330(c)(2)(B).
We review de novo respondent's determination with respect to these
additions to tax. See Goza v. Commissioner, 114 T.C. 176, 181-182
(2000).
Presented by Alvin Brown and Associates,
tax attorney, formerly with the Office of the Chief Counsel of the
IRS.
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