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Tax Court had no jurisdiction to credit taxpayer’s claimed overpayment

Blog, Checkpoint Daily Newsstand August 12, 2015

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Tax Court had no jurisdiction to credit taxpayer’s claimed overpayment

Del-Co Western, TC Memo 2015-142TC Memo 2015-142

The Tax Court has ruled that, in a case brought by a taxpayer for review of an IRS collection due process (CDP) hearing, it did not have jurisdiction to credit an overpayment that taxpayer alleged it had made because that overpayment was not an “available credit.”

Background. Code Sec. 6331(a) authorizes IRS to levy upon property and property rights of a taxpayer liable for taxes who fails to pay those taxes within 10 days after notice and demand for payment is made. Before levying on a taxpayer’s property or right to property, IRS must give the taxpayer notice and the right to a CDP hearing with an impartial officer of the Appeals Office. (Code Sec. 6330(a)(1))

After the administrative hearing is completed, the Appeals Office issues a written notice of determination indicating whether the proposed levy may proceed. (Code Sec. 6330(c)(3), Reg. § 301.6330-1(e)(3), Q&A E8) A taxpayer may appeal the Appeals Office determination to the Tax Court. (Code Sec. 6330(d)(1), Reg. § 301.6330-1(f)(1))

Facts. Taxpayer, Del-Co, was assessed deficiencies for 2004 and 2005. Taxpayer claimed that it paid the amount of the deficiencies after receiving IRS’s notice of deficiency, but IRS said that it didn’t pay the 2004 deficiency and sent taxpayer Final Notice of Intent to Levy and Notice of Your Right to a Hearing with respect to that deficiency. Del-Co timely requested a CDP hearing.

A CDP hearing was held, but taxpayer was unable to satisfy the IRS settlement officer that any portion of tax liability for 2004 had been paid. IRS issued Del-Co a notice of determination sustaining the levy, and Del-Co timely petitioned the Tax Court.

After the case was docketed, IRS credited an amount to the 2004 liability and moved to dismiss the case. Taxpayer opposed the motion, arguing that its payment for 2005 should also be applied toward its liability for 2004. Del-Co based this contention on the assertion that the statute of limitations on assessment against it for 2005 has expired, with the supposed result that the payment it made toward the 2005 tax liability had given rise to an overpayment or credit.

Tax Court says it doesn’t have jurisdiction. The Tax Court held that it didn’t have jurisdiction to apply the alleged 2005 overpayment against taxpayer’s 2004 liability.

Citing Weber, (2012) 138 TC 348138 TC 348, the Court said that an overpayment of a tax liability that has been determined by IRS or a court but has not been either refunded or applied to another liability may be an “available credit” that could be taken into account in a CDP hearing to determine whether the tax at issue remains “unpaid” and whether IRS can proceed with collection. But a mere claim of an overpayment is not an “available credit” but is instead a claim for a credit, and such a claim need not be resolved before IRS can proceed with collection of the liability at issue.

The Court concluded that neither IRS nor any court had determined that Del-Co overpaid its tax for 2005. Therefore, Del-Co did not have an “available credit” for 2005 that could be taken into account in determining the extent to which its tax liability for 2004 remained unpaid.

References: For Tax Court jurisdiction for CDP hearing appeals, see FTC 2d/FIN ¶  V-5272  ; United States Tax Reporter ¶  63,304  ; TaxDesk ¶  902,522  ; TG ¶  71948  .