Recent Case Demonstrates Limitations of Tax Court Jurisdiction

Originally published by Matthew Roberts.

 

 

 

 

Pope v. Comm’r, T.C. Memo. 2020-62 | May 18, 2020 | Lauber, J. | Dkt. No. 3411-19

• Opinion 

Short Summary:  The IRS disallowed Taxpayer’s withholding credits of $7,856.  In conjunction with the disallowance, the IRS issued a notice of deficiency for 2017 of “$.00.”  Although the notice erroneously referred to adjusting Taxpayer’s earned income tax credit, Taxpayer had not claimed the earned income tax credit on his return.  After Taxpayer filed a petition with the Tax Court, the IRS moved to dismiss the case for lack of jurisdiction under I.R.C. § 6213.  On these facts, the Tax Court granted the IRS’ motion.

Key Issue:  Whether the Tax Court has jurisdiction to redetermine an adjustment to withholding credits under I.R.C. § 31.

Primary Holdings:

• Adjustments in a notice of deficiency to withholding credits under I.R.C. § 31 lie outside the Tax Court’s deficiency jurisdiction.
• Because the correct tax for the year and the tax shown on the return are both determined “without regard to credit under section 31,” withholding credits (and overstatements thereof) are necessarily excluded from “deficiencies” as defined by I.R.C. § 6211(a)(1). And because the Tax Court’s jurisdiction relevant to this case was limited to “redetermination of the deficiency” determined by the IRS, it lacked jurisdiction to redetermine an adjustment to withholding credits.

Key Points of Law:

• This Court is a court of limited jurisdiction and may exercise jurisdiction only to the extent expressly authorized by Congress. Naftel v. Comm’r, 85 T.C. 527, 529 (1985); Breman v. Comm’r, 66 T.C. 61, 66 (1976).  “Jurisdiction must be shown affirmatively, and petitioner, as the party invoking our jurisdiction * * *, bears the burden of proving that we have jurisdiction over * * * [the] case.”  David Dung Le, M.D., Inc. v. Comm’r, 114 T.C. 268, 270 (2000), aff’d, 22 F. App’x 837 (9th Cir. 2001).
• I.R.C. § 6212(a) authorizes the IRS to send the taxpayer a notice of deficiency, and I.R.C. § 6213(a) grants this Court jurisdiction to make a “redetermination of the deficiency” determined by the IRS. A “deficiency” is defined as the amount by which the tax imposed for the year (i.e., the correct amount of tax) exceeds “the amount shown as the tax by the taxpayer upon his return” plus any “amounts previously assessed * * * as a deficiency.”  I.R.C. § 6211(a)(1).  I.R.C. § 6211(b)(1) in turn provides that the “tax imposed * * * and the tax shown on the return shall both be determined * * * without regard to credit under section 31.”  I.R.C. § 31, captioned “Tax withheld on wages,” provides:  “The amount withheld as tax [by an employer] under chapter 24 shall be allowed to the recipient of the income as a credit against the [income] tax.”  I.R.C. § 31(a)(1).
• Because the correct tax for the year and the tax shown on the return are both determined “without regard to the credit under section 31,” withholding credits (and overstatements thereof) are necessarily excluded from “deficiencies” as defined by I.R.C. § 6211(a)(1). And because our jurisdiction as relevant here is limited to “redetermination of the deficiency” determined by the IRS, we lack jurisdiction to determine an adjustment to withholding credits.  See Bregin v. Comm’r, 74 T.C. 1097, 1102 (1980).
• That withholding credit adjustments lie outside our deficiency jurisdiction is confirmed by I.R.C. § 6201(a)(3). It provides that if an “overstatement of the credit for income tax withheld” appears on a tax return, then the amount of the overstatement “may be assessed by the Secretary in the same manner as in the case of a mathematical or clerical error.”    Adjustments for mathematical and clerical errors typically are assessed summarily outside deficiency procedures.  I.R.C. § 6213(b)(1).

Insight:  The Pope case demonstrates the fundamental principle that the Tax Court is a court of limited jurisdiction.  Its jurisdiction is therefore limited to that expressly provided by Congress.

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