SCOTUS Reports

Tag: IRC Section 6702

  • Thornberry v. Comm’r, 136 T.C. 356 (2011): Judicial Review of IRS Disregard of Frivolous Hearing Requests

    Thornberry v. Commissioner, 136 T. C. 356 (United States Tax Court 2011)

    In Thornberry v. Commissioner, the U. S. Tax Court ruled that it has jurisdiction to review IRS determinations to disregard requests for collection due process hearings as frivolous. The IRS had sent notices to the Thornberrys about tax liens and levies for unpaid taxes and penalties, and the Thornberrys requested a hearing using a generic form from a website known for promoting tax avoidance. The IRS deemed their request frivolous and proceeded with collection. The court held that while certain portions of a request deemed frivolous can be disregarded, the IRS must specifically identify those portions, and the court retains jurisdiction to review the IRS’s determination to disregard the entire request. This ruling clarifies the judicial oversight over IRS actions in response to potentially frivolous taxpayer submissions.

    Parties

    James Bruce Thornberry and Laura Anne Thornberry, as petitioners, filed a case against the Commissioner of Internal Revenue, the respondent, in the United States Tax Court. Throughout the proceedings, the Thornberrys represented themselves (pro se), while the Commissioner was represented by counsel, James R. Bamberg.

    Facts

    The Internal Revenue Service (IRS) issued notices of intent to levy and notices of Federal tax lien filing to the Thornberrys for unpaid income taxes assessed for the years 2000, 2001, and 2002, and a civil penalty under section 6702 of the Internal Revenue Code (IRC) assessed for 2007. The Thornberrys timely requested an administrative hearing under IRC sections 6320 and 6330. Their request included a generic form obtained from an Internet website, which listed numerous grounds for their disagreement, including collection alternatives, lien withdrawal, and challenges to the underlying tax liabilities. The IRS Appeals Office determined that the Thornberrys’ request contained frivolous positions and disregarded it, stating that the IRS collection office could proceed with collection action as if the hearing request was never submitted.

    Procedural History

    The IRS issued notices of intent to levy and notices of Federal tax lien filing to the Thornberrys, who subsequently requested an administrative hearing. The IRS Appeals Office, after reviewing the request, determined it contained frivolous positions and disregarded it. The Thornberrys filed a petition in the United States Tax Court seeking review of the Appeals Office’s determination. The Commissioner moved to dismiss the case for lack of jurisdiction, arguing that the Appeals Office’s decision to disregard the request was not subject to judicial review.

    Issue(s)

    Whether the United States Tax Court has jurisdiction to review the IRS Appeals Office’s determination to disregard a taxpayer’s request for a collection due process hearing as frivolous under IRC section 6330(g)?

    Rule(s) of Law

    IRC section 6330(d)(1) grants the Tax Court jurisdiction to review determinations made by the IRS Appeals Office in response to a timely request for a collection due process hearing. IRC section 6330(g) allows the IRS to treat portions of a request as if they were never submitted if they meet the requirements of IRC section 6702(b)(2)(A)(i) or (ii), which pertain to frivolous positions or submissions reflecting a desire to delay or impede tax administration. However, the Appeals Office must make a specific determination regarding which portions are frivolous.

    Holding

    The United States Tax Court held that it has jurisdiction to review the IRS Appeals Office’s determination to disregard the Thornberrys’ request for a collection due process hearing as frivolous under IRC section 6330(g). The court clarified that while the IRS may disregard portions of a request deemed frivolous, it must specifically identify those portions, and the court retains jurisdiction to review the determination to disregard the entire request.

    Reasoning

    The court’s reasoning focused on the interpretation of IRC sections 6330 and 6702, which were amended to address frivolous submissions. The court emphasized that IRC section 6330(g) permits the IRS to treat only specific portions of a request as if they were never submitted, based on a determination that they are frivolous or reflect a desire to delay tax administration. The court noted that the Appeals Office’s determination letters did not specifically identify which portions of the Thornberrys’ request were frivolous, nor did they explain how the request reflected a desire to delay tax administration. The court found that the use of boilerplate forms by both parties contributed to the confusion, and that the IRS must clearly identify the specific portions of a request deemed frivolous. The court also considered the legislative history, which aimed to reduce frivolous submissions while ensuring fairness and effective tax administration. The court concluded that judicial review of the IRS’s determination to disregard a request is necessary to ensure that the IRS does not improperly deny taxpayers a hearing on legitimate issues.

    Disposition

    The court denied the Commissioner’s motion to dismiss for lack of jurisdiction and ordered the Thornberrys to identify the specific issues and grounds they wished to raise before taking further action in the case.

    Significance/Impact

    Thornberry v. Commissioner is significant for clarifying the scope of judicial review over IRS determinations regarding frivolous hearing requests. The decision emphasizes the need for the IRS to specifically identify portions of a request deemed frivolous and the importance of judicial oversight to prevent the IRS from denying taxpayers a hearing on legitimate issues. The ruling impacts the administration of tax collection procedures by requiring the IRS to provide clear and specific determinations when disregarding hearing requests. It also highlights the potential pitfalls of using generic forms for tax disputes and the need for taxpayers to clearly articulate their grounds for requesting a hearing.

  • Johnson v. Comm’r, 117 T.C. 204 (2001): Jurisdiction in Tax Collection Cases

    Johnson v. Commissioner, 117 T. C. 204 (2001)

    In Johnson v. Commissioner, the U. S. Tax Court ruled that it lacked jurisdiction to review the IRS’s determination to collect a frivolous return penalty under sections 6320 and 6330 of the Internal Revenue Code. The case underscores the court’s limited jurisdiction over certain tax penalties, impacting how taxpayers challenge IRS collection actions. This decision reinforces the separation of judicial authority between the Tax Court and district courts in tax disputes, particularly concerning frivolous return penalties.

    Parties

    David J. and Jo Dena Johnson (Petitioners) v. Commissioner of Internal Revenue (Respondent). The Johnsons filed their petition pro se, while the Commissioner was represented by Horace Crump.

    Facts

    The Johnsons filed their 1994, 1995, and 1996 tax returns reporting wages as income. Subsequently, they filed amended returns asserting that wages were not taxable income and thus they had no income. The IRS assessed a frivolous return penalty under section 6702 against them for these amended returns. The Johnsons requested a collection due process hearing, which led to a notice of determination by the IRS to proceed with collection of the penalties. They appealed this determination to the U. S. Tax Court.

    Procedural History

    The Johnsons filed a petition in the U. S. Tax Court to appeal the IRS’s notice of determination to collect the frivolous return penalty. The Commissioner moved to dismiss for lack of jurisdiction, citing previous case law that the Tax Court lacked jurisdiction over such penalties. The Tax Court granted the Commissioner’s motion to dismiss based on the precedent established in Van Es v. Commissioner.

    Issue(s)

    Whether the U. S. Tax Court has jurisdiction under section 6330(d)(1)(A) to review the IRS’s determination to collect a frivolous return penalty assessed under section 6702?

    Rule(s) of Law

    The U. S. Tax Court’s jurisdiction over collection actions under sections 6320 and 6330 is limited to cases where the underlying tax liability is within the court’s jurisdiction. Section 6330(d)(1)(A) grants the Tax Court jurisdiction over determinations under these sections, but section 6330(d)(1)(B) specifies that if the Tax Court does not have jurisdiction over the underlying liability, the appeal should go to a district court. The frivolous return penalty under section 6702 falls outside the Tax Court’s deficiency jurisdiction, as established in Van Es v. Commissioner.

    Holding

    The U. S. Tax Court held that it lacked jurisdiction to review the IRS’s determination to collect the frivolous return penalty assessed under section 6702, in line with the precedent set by Van Es v. Commissioner.

    Reasoning

    The court’s reasoning was primarily based on the established precedent in Van Es v. Commissioner, which clearly stated that the Tax Court does not have jurisdiction over frivolous return penalties. The majority opinion emphasized that since the court lacked jurisdiction over the underlying tax liability (the frivolous return penalty), it could not review the IRS’s determination under sections 6320 and 6330. The court also addressed the issue of whether to decide if the hearing requirement under section 6330(b) was met, concluding that it would not do so in cases where jurisdiction is lacking. This decision overruled a prior holding in Meyer v. Commissioner, which had suggested that the Tax Court could review whether a hearing requirement was met even in cases where it lacked jurisdiction over the underlying tax liability. The court justified this departure from Meyer by arguing that after further experience with section 6330 cases, it was no longer appropriate to decide on the hearing requirement in cases where it lacked subject matter jurisdiction. The majority opinion also discussed the doctrine of stare decisis, asserting that the court’s additional experience justified reconsidering Meyer. The concurring and dissenting opinions provided further perspectives on the court’s jurisdiction and the implications of its decision, with the dissent arguing for broader jurisdiction to streamline the judicial process.

    Disposition

    The U. S. Tax Court granted the Commissioner’s motion to dismiss for lack of jurisdiction, affirming the IRS’s determination to proceed with collection of the frivolous return penalty.

    Significance/Impact

    The Johnson v. Commissioner decision has significant implications for taxpayers challenging IRS collection actions related to certain penalties. It reinforces the limited jurisdiction of the U. S. Tax Court over specific tax liabilities, particularly frivolous return penalties, and the necessity for taxpayers to file appeals in the appropriate district courts for such cases. This ruling clarifies the jurisdictional boundaries between the Tax Court and district courts in tax disputes, potentially reducing confusion and litigation in tax collection cases. The decision also highlights the court’s willingness to reconsider its precedents based on experience and practical considerations, as seen in its departure from Meyer v. Commissioner. This case serves as a reminder to taxpayers and practitioners of the importance of understanding the jurisdictional limits of the Tax Court and the need to follow IRS instructions regarding the appropriate forum for challenging collection actions.