COUPLE ALLOWED TO CHALLENGE SELF-ASSESSED TAX IN CDP HEARING.

Glenn P. Thomas and Julie L. Payne, for respondent.

[4] On March 19, 2002, respondent issued to petitioners a Final Notice -- Notice of Intent to Levy and Notice of Your Right to a Hearing with regard to their unpaid tax for 2000. The notice stated that petitioners owed tax, penalties, and interest totaling $222,315.34.

[5] On April 18, 2002, petitioners submitted to respondent a Form 12153, Request for a Collection Due Process Hearing. Petitioners' request for an administrative hearing stated in pertinent part:

[6] On July 2, 2002, Appeals Officer Jerry L. Johnson wrote to petitioners to inform them that he had scheduled their Appeals Office hearing for July 25, 2002. Appeals Officer Johnson's letter stated in pertinent part:

[8] On September 26, 2002, without any further communication between the parties, the Appeals Office issued to petitioners a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330. The notice of determination, signed by Appeals Team Manager Debra M. Brush, stated in pertinent part: "The Taxpayer has indicated he would file amended returns to mitigate the liability, but such has not been done in a reasonable time, and the mere filing of such claim does not guarantee that the claim should be paid. Therefore, the levy should be allowed to proceed." As of September 26, 2002, petitioners had not submitted to respondent an amended income tax return for 2000. However, on October 11, 2002, petitioners submitted to respondent an amended income tax return for 2000 which reflects that petitioners are due a refund of $519,087.

[9] On October 28, 2002, petitioners filed with the Court a Petition for Lien or Levy Action Under Section 6320 and/or 6330.² The sole issue raised in the petition is a challenge to the amount of petitioners' underlying tax liability for 2000.

[10] After filing an answer to the petition, respondent filed a Motion for Summary Judgment. Respondent maintains that there is no dispute as to a material fact and the Court should enter judgment as a matter of law sustaining the notice of determination dated September 26, 2002. Respondent argues that petitioners are barred from challenging the existence or amount of their underlying tax liability for 2000 in this collection review proceeding on the ground that the tax liability in question was "self-assessed" on petitioners' original tax return pursuant to section 6201(a)(1). Petitioners filed an Objection to respondent's motion.

[11] This matter was called for hearing at the Court's motions session held in Washington, D. C. Counsel for both parties appeared at the hearing and made oral argument.

[13] We are satisfied from our review of the record that there is no genuine issue as to any material fact. However, we conclude, contrary to respondent's position, that petitioners may challenge the amount of their underlying tax liability in this proceeding. Consequently, we shall deny respondent's motion.

[14] Section 6331(a) provides that if any person liable to pay any tax neglects or refuses to pay such tax within 10 days after notice and demand for payment, the Secretary is authorized to collect such tax by levy on the person's property. Section 6331(d) provides that at least 30 days before enforcing collection by levy on the person's property, the Secretary is obliged to provide the person with a final notice of intent to levy, including notice of the administrative appeals available to the person.

[15] Section 6330 generally provides that the Commissioner cannot proceed with collection by levy until the person has been given notice and the opportunity for an administrative review of the matter (in the form of an Appeals Office hearing) and, if dissatisfied, with judicial review of the administrative determination. See Davis v. Commissioner, 115 T.C. 35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000). Section 6330(d) provides for judicial review of the administrative determination in the Tax Court or a Federal District Court, as may be appropriate.

[16] Section 6330(c) prescribes the matters that a person may raise at an Appeals Office hearing. Section 6330(c)(2)(A) provides that a person may raise collection issues such as spousal defenses, the appropriateness of the Commissioner's intended collection action, and possible alternative means of collection. See Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, supra. In addition, section 6330(c)(2)(B) establishes the circumstances under which a person may challenge the existence or amount of his or her underlying tax liability. Section 6330(c)(2)(B) provides:

SEC. 6330(c)(2). Issues at Hearing. --

[18] In any event, respondent's position in this case is articulated in his motion as follows:

[19] Before proceeding, we briefly review the principles of statutory construction that guide our analysis. It is well settled that in interpreting a statute, we start with the language of the statute itself. Consumer Prod. Safety Commn. v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). If the language of the statute is plain, clear, and unambiguous, we generally apply it according to its terms. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989); Burke v. Commissioner, 105 T.C. 41, 59 (1995). In Huntsberry v. Commissioner, 83 T.C. 742, 747-748 (1984), we stated that "where a statute is clear on its face, we would require unequivocal evidence of legislative purpose before construing the statute so as to override the plain meaning of the words used therein." However, if a statute "is ambiguous or silent, we may look to the statute's legislative history to determine congressional intent." Ewing v. Commissioner, 118 T. C. 494, 503 (2002) (citing Burlington N.R.R. v. Okla. Tax Commn., 481 U.S. 454, 461 (1987)); see Wells Fargo & Co. v. Commissioner, 120 T.C. 69, 89 (2003); Allen v. Commissioner, 118 T.C. 1, 7 (2002).

[20] Turning to section 6330(c)(2)(B), the provision plainly states that a person may challenge "the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." The term "underlying tax liability" is not defined in section 6320 or 6330, nor is there any specific reference to that term in the legislative history of the provisions. Taken in context, it is reasonable to interpret the term "underlying tax liability" as a reference to the amounts that the Commissioner assessed for a particular tax period. In this regard, the term "underlying tax liability" may encompass an amount assessed following the issuance of a notice of deficiency under section 6213(a), an amount "self-assessed" under section 6201(a), or a combination of such amounts.

[21] Consistent with the foregoing, the plain language of section 6330(c)(2)(B) bars a person who has received a notice of deficiency from challenging his or her underlying tax liability for that year (whether the liability was self-assessed or assessed as a deficiency) in a collection review proceeding inasmuch as the person was afforded a prior opportunity to challenge such liability under the deficiency procedures.³ In contrast, where a person has not received a notice of deficiency and has not had a prior administrative or judicial opportunity to challenge the amounts the Commissioner assessed, section 6330(c)(2)(B) provides that such person may challenge the liability as part of the collection review procedure.

[22] In the present case, petitioners' underlying tax liability consists of the amount that petitioners reported due on their tax return along with statutory interest and penalties. It is clear that petitioners did not receive a notice of deficiency for 2000. Indeed, respondent was not obliged to issue a notice of deficiency to petitioners because the assessment in question was entered under section 6201(a)(1).⁴ Moreover, the tax that petitioners reported due on their return is excluded from the definition of a deficiency under section 6211(a).

[23] The question that remains under section 6330(c)(2)(B) is whether petitioners "did not otherwise have an opportunity to dispute such tax liability" for 2000. Respondent contends that the phrase quoted above should be interpreted to exclude persons, such as petitioners, who have reported their tax liability on a duly filed tax return. However, respondent's proposed interpretation would have the effect of adding terms and conditions to section 6330(c)(2)(B) that are inconsistent with the plain language of the provision. As we see it, if Congress had intended to preclude taxpayers from challenging in a collection review proceeding taxes that were assessed pursuant to section 6201(a)(1), the statute would have been drafted to clearly so provide. Simply put, the plain language of the statute as enacted, with an emphasis on whether there was an earlier opportunity to dispute the tax liability, provides a broader remedy than respondent's interpretation would allow.

[24] To date petitioners have not had an opportunity to "dispute" their tax liability for the taxable year 2000 in any sense of the term. Although petitioners reported the tax liability that is the subject of respondent's proposed levy on their original tax return, they now contend (and would like the opportunity to show) that they erred in computing the tax attributable to certain stock options that Mr. Montgomery exercised in 2000. The record does not reflect whether respondent has given consideration to petitioners' amended tax return for 2000 and their claim that their original return contained an error. In sum, we hold that section 6330(c)(2)(B) permits petitioners to challenge the existence or amount of the tax liability reported on their original income tax return because they have not received a notice of deficiency for 2000 and they have not otherwise had an opportunity to dispute the tax liability in question.⁵

[25] Respondent asserts that it is nonsensical to permit petitioners to challenge in a collection review proceeding the very tax that they reported to be due (or "self-determined") on their original income tax return. We would not characterize an opportunity for respondent to review the correct amount of petitioners' tax liability as nonsensical. As discussed above, the controlling statutory language focuses on whether the person had a prior opportunity to dispute the tax liability -- and petitioners have not had any such opportunity. Read in context, and as applied in this case, section 6330(c)(2)(B) extends the substantive and procedural protections of sections 6320 and 6330 to taxpayers who may have erred (in the Government's favor) in preparing and filing their tax returns. Given the complexity of the Federal income tax laws, such taxpayer errors may well be common. We conclude that section 6330(c)(2)(B) is fairly read as providing a remedy to such taxpayers.

[26] Respondent also urges that the legislative history of section 6330(c)(2)(B) and principles of sovereign immunity require that the provision be construed narrowly in the Commissioner's favor. We disagree. We see no ambiguity in the plain language of section 6330(c)(2)(B) that would justify resort to the legislative history for guidance in interpreting the provision. Moreover, we are not aware of any specific expression of congressional intent in the legislative history that would bar persons, such as petitioners, from raising a valid challenge to the existence or amount of tax previously reported due on a tax return. See Huntsberry v. Commissioner, 83 T.C. at 747-748. Considering the plain language of the statute, we find respondent's reliance on principles of sovereign immunity equally unavailing.

[27] Our holding in this case advances the policies underlying sections 6320 and 6330. Those sections were enacted to provide taxpayers who have been notified that the Commissioner has filed a lien or intends to collect unpaid taxes by levy with a final opportunity to raise a spousal defense, offer an alternative means of collection, and/or challenge the appropriateness of the proposed collection action. Moreover, as pertinent herein, Congress provided taxpayers who are confronted with a lien or proposed levy, but who have not had a prior opportunity to challenge the existence or amount of the tax liability in question, with the opportunity to do so. In view of the statutory scheme as a whole, we think the substantive and procedural protections contained in sections 6320 and 6330 reflect congressional intent that the Commissioner should collect the correct amount of tax, and do so by observing all applicable laws and administrative procedures.

[28] To reflect the foregoing,

[29] An order will be issued denying respondent's motion for summary judgment.

[30] Reviewed by the Court.

[31] WELLS, COHEN, SWIFT, LARO, FOLEY, VASQUEZ, THORNTON, HAINES, WHERRY, and KROUPA, JJ., agree with this majority opinion.

²The petition was timely mailed to the Court on Oct. 25, 2002. Secs. 6330(d), 7502(a).

³See Naftel v. Commissioner, 85 T.C. 527, 531 (1985), where we observed that in a deficiency proceeding brought under sec. 6213(a), the Court may also consider the taxpayer's claim of an overpayment for the year(s) in issue under sec. 6512(b)(1).

⁴Sec. 6201(a)(1) provides:

[33] Judge Chiechi, however, agrees with the result reached by the majority only insofar as petitioners may challenge the existence or amount of the tax liability specified in the "final notice". I believe the majority, based on its interpretation of section 6330(c)(2)(B), correctly holds that petitioners may challenge the entire amount of tax, penalties, and interest that respondent assessed against them for the taxable year 2000.¹

[34] Section 301.6330-1(e), Proced. & Admin. Regs., quoted in full in the majority opinion, is an interpretative regulation that does nothing more than state a general proposition, to wit: A taxpayer may challenge in a collection review proceeding the existence or amount of the tax liability set forth in a final lien or levy notice if the taxpayer did not receive a notice of deficiency for such liability or did not otherwise have an opportunity to dispute such liability. The regulation largely tracks the language of section 6330(c)(2)(B), with the exception that the term "underlying tax liability" contained in the statute is in the regulation replaced by the phrase "the tax liability specified on the CDP Notice".

[35] Nowhere in the parties' motion or opposition or written and oral arguments have they cited or relied upon section 301.6330- 1(e), Proced. & Admin. Regs. I suggest that the reason for the parties' failure to cite that regulation is that the proper disposition of respondent's motion depends upon the Court's statutory construction of section 6330(c)(2)(B).

[36] In any event, the general rule espoused in the regulation is in no way dispositive of the specific question whether section 6330(c)(2)(B) permits a taxpayer to challenge the existence or amount of tax that was reported due on the taxpayer's return. It is respondent's position in the instant case that tax reported due on a return and assessed by respondent under section 6201 represents a unique assessment that Congress never intended to be subject to challenge under section 6330(c)(2)(B) (and by implication section 301.6330-1(e), Proced. & Admin. Regs.). Under the circumstances, I believe that it is incumbent upon this Court to resolve the question the parties raised and argued by analyzing the controlling statutory provision, as opposed to relying upon a general statement appearing in an interpretative regulation.

[37] FOLEY, THORNTON, and KROUPA, JJ., agree with this concurring opinion.

2. Legislative History Supports the Majority Opinion

[40] Even if we were permitted to consult the legislative history of section 6330(c)(2) to discern the meaning of the relevant term, the legislative history supports interpreting the term in accordance with its plain meaning. The history to section 6330, as stated in the committee reports and as discerned from the setting in which that section was enacted, reveals that Congress intended that a taxpayer be allowed under that section to dispute a tax liability underlying a proposed levy whenever the taxpayer did not have a prior opportunity to dispute that liability either through the receipt of a notice of deficiency or otherwise.

[41] The enactment of section 6330 followed more than a year of Congressional investigations and hearings over the future of the Internal Revenue Service (IRS), resulting in highly publicized criticisms of the agency's collection methods. Mesa Oil, Inc. v. United States, 86 AFTR 2d 2000-7312, 2001-1 USTC par. 50,130 (D. Colo. 2000). We know from the Senate report that the Senate Finance Committee intended that section 6330 would establish "formal procedures designed to insure due process where the IRS seeks to collect taxes by levy". S. Rept. 105-174, at 67 (1998), 1998-3 C.B. 537, 603. We also know from that report that the committee believed that the addition of section 6330 would afford to taxpayers in dealing with the IRS rights which were similar to the rights afforded to all persons in dealing with any other creditor. S. Rept. 105-174, supra at 67, 1998-3 C.B. at 603. To this end, the committee declared, the Commissioner would by virtue of section 6330 need henceforth to "afford taxpayers adequate notice of collection activity and a meaningful hearing before the IRS deprives them of their property." Id. The committee believed that these procedures would "increase fairness to taxpayers." Id.

[42] The history of section 6330(c)(2) also reveals that the Administration had during the legislative process voiced its concern to two Members of Congress that the relevant term included self- assessed liabilities and that those liabilities should not be included within the breadth of that section. See letter from L. Anthony Sutin, Acting Assistant Attorney General, to the Hon. William V. Roth, Jr., Chairman, Committee on Finance, U.S. Senate, and the Hon. William Archer, Chairman, Committee on Ways and Means, U.S. House of Representatives (June 8, 1998), reprinted in Tax Notes Today, 98 TNT 112-41 (June 11, 1998); letter from Robert E. Rubin, Secretary of the Treasury, to the Hon. William Archer, Chairman, Committee on Ways and Means, U.S. House of Representatives (June 2, 1998), reprinted in Tax Notes Today, 98 TNT 112-40 (June 11, 1998); cf. Statement of Administration Policy, Office of Management and Budget (May 5, 1998), reprinted in Tax Notes Today, 98 TNT 87-18 (May 6, 1998). The Administration wrote those letters after the Senate passed the Senate's version of section 6330, H.R. 2676, sec. 3401(b), 105th Cong., 2d Sess. (May 5, 1998), but before the conference committee amended that version to read as enacted. The conferees, however, opted not to change the relevant term to address the Administration's stated concern. The Senate version of section 6330(c)(2), see id., 144 Cong. Rec. S4163 (daily ed. May 4, 1998), provided (emphasis added):

SEC. 6330(c)(2). Issues at hearing.

[43] FOLEY, J., agrees with this concurring opinion.

[45] Assuming that the language of section 6330(c)(2)(B) contains sufficient ambiguity to justify resort to the legislative history, that history offers little support for respondent's position and indeed suggests the contrary.

[46] Section 6330 originated in section 3401 of the Senate version of H.R. 2676, the bill that, after amendment, was enacted as the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 747. The predecessor of section 6330(c)(2)(B) in the Senate version provided without limitation that a taxpayer could raise in a section 6330 proceeding "challenges to the underlying tax liability as to existence or amount". H.R. 2676, sec. 3401(b), 105th Cong., 2d Sess. (1998), 144 Cong. Rec. S4163 (daily ed. May 4, 1998).

[47] The expansive Senate version provoked a critical response from the Treasury Department and other representatives of the executive branch concerned with its overbreadth. An OMB Statement of Administration Policy issued after the Senate Finance Committee reported the Senate version, and a letter from the Treasury Secretary sent to the Chairman of the House Ways & Means Committee (after Senate passage, with respect to the House-Senate conference on the legislation), both identified two principal concerns of overbreadth; namely, that under the Senate version a taxpayer could dispute, in a section 6330 proceeding, (i) tax liabilities that had been previously litigated or (ii) tax liabilities that had been self-assessed. See Statement of Administration Policy, Executive Office of the President (Office of Management and Budget), on H.R. 2676 -- Internal Revenue Service Restructuring and Reform Act (Reported by the Senate Committee on Finance) (May 5, 1998), 1 reprinted in Tax Notes Today, 98 TNT 87-18 (May 6, 1998); letter from Robert E. Rubin, Secretary of the Treasury to William Archer, Chairman, Committee on Ways & Means, U.S. House of Representatives (June 2, 1998),² reprinted in Tax Notes Today, 98 TNT 112-40 (June 11, 1998).

[48] The final version of the legislation devised by the conference committee added the following (emphasized) limiting language in section 6330(c)(2)(B):

SEC. 6330(c)(2). Issues at hearing.

[50] SWIFT, LARO, FOLEY, MARVEL, and WHERRY, JJ., agree with this concurring opinion.

[52] The majority opinion states that, on April 18, 2002, petitioners submitted a request for an administrative hearing. In the letter accompanying the request, petitioners' representative advised the Internal Revenue Service that petitioners intended to file an amended income tax return to "more appropriately report the exercise of the incentive and nonqualified stock options" that gave rise to petitioners' unpaid tax liability for 2000. Petitioners' representative also challenged the appropriateness of the proposed levy, indicated that the levy would cause irreparable harm to petititoners, [sic] and stated that there were reasonable collection alternatives. Appeals Officer Johnson had a conversation with petitioners' representative on July 22, 2002, in which he agreed that petitioners would be permitted to submit the amended return, but he did not set any deadline for doing so. On September 26, 2002, without any further notice to petitioners and apparently without holding the required hearing, the Appeals Office issued to petitioners a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330.

[53] These facts raise a material issue of fact regarding whether or not petitioners received the hearing to which they were entitled under section 6330. Section 6330 requires that a taxpayer who timely requests a hearing receive a hearing. In this case, petitioners were not only challenging the underlying tax liability, but they were also challenging the reasonableness of the proposed levy and had clearly stated their desire to explore collection alternatives at the section 6330 hearing. The issuance of the notice of determination without any warning to petitioners and without any hearing deprived petitioners of the opportunity to present, and receive a determination on, all relevant issues as required by section 6330(c)(2) and (3).

[54] If, instead of precipitously issuing the notice of determination, the Appeals Office had notified petitioners that it was rescheduling the hearing that was originally scheduled for July 25, 2002, petitioners would have had fair warning and could have prepared to present all of their issues at the hearing, including those related to the underlying tax liability. As it turned out, petitioners submitted their amended return, reflecting that they were due a refund of $519,087, on October 11, 2002.

[55] Taxpayers who assert that they intend to file an amended return for the first time in connection with a hearing under section 6320 or 6330 should not take solace from the majority opinion. The majority opinion addresses a case in which the petitioners apparently demonstrated to the Appeals Office that they were serious about filing an amended return and that they had substantial reasons for doing so, because the Appeals Office agreed to give petitioners time to file their amended return. A taxpayer who procrastinates and seeks to rely solely on his announced intention to file an amended return as a defense to a proposed levy or lien in a section 6320/6330 hearing or in a section 6320/6330 proceeding before this Court proceeds at his peril as his undocumented intention is not likely to be viewed as a credible challenge to the underlying tax liability.

[56] HAINES, GOEKE, and WHERRY, JJ., agree with this concurring opinion.

[58] Under section 6330(c)(2)(B), petitioners were permitted to raise at the hearing challenges to the existence or amount of their underlying tax liability. Petitioners raised a challenge to the amount of their underlying liability and the parties agreed that petitioners would be permitted to submit an amended return reflecting their position. The Appeals officer abruptly issued the notice of determination. Petitioners subsequently submitted an amended return. I believe that if petitioners had been given a reasonable opportunity to challenge the amount of their underlying liability during the hearing process (e.g., by filing an amended return) and they had failed to do so, then we should not review the underlying tax liability because it was not properly raised at the hearing, but in this case they were not given the opportunity to challenge their underlying liability, so the hearing was inadequate.

[59] This situation is analogous to offers in compromise (OIC). Before an OIC can be considered, the taxpayer must submit current financial information. Moorhous v. Commissioner, T.C. Memo. 2003-183; see also Rodriguez v. Commissioner, T.C. Memo. 2003- 153 (finding that the Appeals officer did not abuse his discretion in not considering OIC where all required returns had not been filed). Without this information, the Appeals officer cannot properly consider the OIC. Likewise, a taxpayer desiring to challenge the existence or amount of the underlying tax liability who has not previously filed an amended return should generally be required to file an amended return in conjunction with the hearing if such amended return is requested by the Appeals officer in order to satisfy the requirement that the liability be at issue at the hearing.

[60] Although petitioners' amended return reflects that they are due a refund of $519,087, I do not interpret the majority as implying that we have the authority to order a refund if petitioners establish that they have overpaid their 2000 taxes. Our jurisdiction under section 6330 is limited to deciding whether respondent can proceed with the proposed collection action. Accordingly, we would need only decide whether petitioners' 2000 tax liability is equal to or less than the amount they previously paid for the year.

[61] HAINES and WHERRY, JJ., agree with this concurring opinion.

[63] The intent of the statute was to give a taxpayer the right to challenge the "underlying tax liability * * * if the [taxpayer] * * * did not otherwise have an opportunity to dispute such tax liability." Sec. 6330(c)(2)(B)(emphasis added). That phrase should not be interpreted to mean that a person could contest their own judgment as to the correct tax. The opportunity to contest tax liabilities is, without exception, granted by statute.¹ If a person files a tax return and self-assesses or admits to owing a tax liability, but fails to pay the admitted liability, the statutory opportunity to contest such liability has traditionally been through a refund suit.² Normally, with respect to an income tax liability, the right to sue for a refund requires full payment of the disputed liability. Under the majority's reading of section 6330(c)(2)(B), there would be no such requirement for payment prior to being able to contest the underlying merits of a self- assessed amount in the context of a section 6330 hearing before this Court.

[64] The majority's interpretation results in a dramatic and improbable change from more than 75 years of established tax litigation procedure and precedent. If Congress had intended such a dramatic change, it certainly would have made some reference or modification to the existing statutory framework for refund claims and/or suits.

[65] Finally, I find it inconceivable that Congress intended that taxpayers who filed returns admitting that they owed tax are to be given the opportunity to contest their own "assessment" of the tax due, when the respondent seeks to collect it. It is my view that Congress intended to ensure that taxpayers had certain rights with respect to the collection process and to permit them to contest any changes respondent proposed,³ if they had not already had the opportunity to do so.

[66] CHIECHI, J., agrees with this dissenting opinion.

²We must distinguish the circumstances we consider from deficiency proceedings where we have authority to consider overpayments. See sec. 6512(b). A proceeding under section 6330 is not a deficiency proceeding.

³Including respondent's proposed changes from a taxpayer's self-assessed tax liability.

I. Introduction

[68] I cannot agree with the majority that the term "underlying tax liability", as used in section 6330(c)(2)(B), is to be interpreted "as a reference to the amounts that the Commissioner assessed for a particular tax period." Majority op. p. 11. What I believe to be a mistaken interpretation of the term leads the majority to a "plain language" reading of section 6330(c)(2)(B) that would allow a taxpayer, at a section 6330 hearing, to challenge the Government's right to collect from her the portion of any tax that she had reported but failed to pay.

[69] The meaning of the term "underlying tax liability" in section 6330(c)(2)(B) is ambiguous. Because it is ambiguous, we are entitled to examine extrinsic evidence to discern its meaning. The legislative history of section 6330(c)(2)(B) leads me to agree with respondent that, as used in that section, the term "underlying tax liability" refers to liabilities asserted by the Commissioner that differ in amount from liabilities self-assessed by the taxpayer.¹ I conclude, therefore, that, at a section 6330 hearing, a taxpayer may not challenge the Government's right to collect from her any reported but unpaid tax. For the reasons stated, I dissent.

II. Section 301.6330-1(e), Proced. & Admin. Regs.

[70] Before proceeding, it is necessary to comment on the majority's disposition of section 301.6330-1(e), Proced. & Admin. Regs., set forth in pertinent part on page 9 of the majority's opinion. Subsection (e)(1) of that regulation states quite clearly that, at a section 6330 (Collection Due Process (CDP) hearing), the taxpayer "may raise challenges to the existence or amount of the tax liability specified on the CDP Notice * * * if the taxpayer did not receive a statutory notice of deficiency for that tax liability or did not otherwise have an opportunity to dispute that tax liability." (Emphasis added.) See also subsection (e)(3), Q& A-E2 (similar).² The pertinent language of subsection (e)(1) of the regulation is essentially the same as the language of section 6330(c)(2)(B) except that, in the regulation, the term "tax liability specified on the CDP Notice" is substituted for the term "underlying tax liability". Thus, the drafters of the regulation fixed the meaning of the term "underlying tax liability" as "the tax liability specified on the CDP Notice".

[71] As the majority recites, on March 19, 2002, respondent issued to petitioners a final notice (CDP notice) stating that petitioners owed tax, penalties, and interest (for 2002) totaling $222,315.34. Majority op. p. 3. The dispute here is over whether petitioners could challenge respondent's right to collect that debt (or at least the tax portion of it) at the section 6330 hearing they subsequently requested. The regulations under section 6330(c)(2)(B) cited above appear to be dispositive of that issue in petitioners' favor. Surprisingly, however, neither party mentioned those provisions in their papers or oral argument with respect to respondent's motion for summary judgment, and the majority treats the provisions almost as an afterthought, proceeding to consider whether the term "underlying tax liability" means something quite different than the meaning given the term in the regulations. If respondent's position in this case is that the term "underlying tax liability" means liabilities in excess of self-assessed liabilities, then that position is directly contradicted by the meaning fixed for that term in the regulations; i.e., "the tax liability specified on the CDP Notice". The majority has not even asked respondent to explain that contradiction. To me, the best course would be to ask respondent to explain the contradiction and, perhaps, say: "Oops!"³ As a matter of judicial economy, we should attempt to resolve the dispute in front of us on the basis of section 301.6330-1(e), Proced. & Admin. Regs., if at all possible.

[72] I continue with my dissent because the ambiguity that afflicts the statute also afflicts the regulation, and respondent may say "Oops!" only because the regulation does not say what he wants it to say, and the Secretary may try to amend it, in which case the majority's analysis becomes relevant.

III. Section 6330

A. Introduction

[73] The majority adequately describes the general operation of section 6330. Majority op. pp. 7-8. Putting aside section 301.6330- 1(e), Proced. & Admin. Regs., the question presented is whether respondent's Appeals Office could, pursuant to section 6330(c)(2)(B), refuse to allow petitioners to challenge their obligation to pay the amount of tax that they had reported but not paid (the unpaid tax).⁴ It is clear (and respondent does not suggest otherwise) that petitioners did not receive a statutory notice of deficiency with respect to the unpaid tax.⁵ Nor does respondent argue that petitioners otherwise had an opportunity to dispute the unpaid tax within the meaning of section 6330(c)(2)(B).⁶ Rather, respondent's contention that petitioners' obligation to pay the unpaid tax is not properly at issue is based on his position that, as used in section 6330(c)(2)(B), the term "underlying tax liability" is properly interpreted to refer only to amounts asserted by the Internal Revenue Service (IRS) in excess of the amount of tax reported by the taxpayer on her return. In the context of the income tax, that amount would generally correspond to the amount of any deficiency assessed by the Commissioner and would exclude any amount of self-assessed tax (such as the unpaid tax here in issue). As previously discussed, the majority interprets the term "underlying tax liability" in section 6330(c)(2)(B) to mean "the amounts that the Commissioner assessed for a particular tax period" (sometimes, simply, assessed amounts). Thus, for the majority, in the context of a tax that is subject to the deficiency procedures (such as the income tax), the term "underlying tax liability" means the sum of (1) any self-assessed tax plus (2) any deficiency assessment. Id. pp. 11-12.⁷

[74] I agree with the majority that the term "underlying tax liability" must be interpreted "in context", Id. p. 11, and only add, as stated by the Court of Appeals for the Fifth Circuit:

B. Language of Section 6330(c)(2)(B)

[75] Section 6330(c)(2)(B) provides:

[77] Alternatively, the majority could stick with its interpretation of the term "underlying tax liability" as assessed amounts and interpret the term "if" in section 6330(c)(2)(B) to mean "to the extent".⁹ That, however, would be an abandonment of its "plain language" claim.

[78] Finally, the majority might decide that the meaning of the term "underlying tax liability" is not fixed; i. e., it does not always mean all assessed amounts. Thus, e.g., in the case of a composite liability, the underlying tax liability might be exclusive of the deficiency if the deficiency was the subject of a notice assessment (or the taxpayer otherwise had an opportunity to dispute the deficiency¹⁰) and inclusive of the deficiency in all other instances. Under that argument, in the example used above, the underlying tax liability would be $100, since the deficiency of $50 was the subject of a notice assessment. If, instead, the taxpayer had not received the notice of deficiency and did not otherwise have an opportunity to dispute the deficiency, then the underlying tax liability would be $150. The result under that alternative approach is similar to the result reached under respondent's interpretation in that (at least in some circumstances) the term "underlying tax liability" means something other than the total assessments made by the Commissioner for the taxable period. From a "plain meaning" standpoint, such a reading of the statute would seem to be no more preferable than respondent's interpretation. Indeed, the benefit of respondent's interpretation (i.e., that the term "underlying tax liability" in section 6330(c)(2)(B) refers only to that portion of the underlying tax liability that the taxpayer failed to report) is that it does not in most cases require mental gymnastics to square such term with the remaining language of the section.¹¹

[79] Based on the foregoing, I am satisfied that the term "underlying tax liability", as used in section 6330(c)(2)(B), is susceptible to more than one reasonable interpretation.¹² We may therefore look beyond the language of the provision in our endeavor to discern Congress's purpose.

C. Extrinsic Interpretive Aids

1. Use of the Term Elsewhere in the Section

[80] Besides appearing in section 6330(c)(2)(B), the term "underlying tax liability" appears in section 6330(d)(1).¹³ Section 6330(d)(1) provides:

2. Legislative History of Section 6330(c)(2)(B)

[82] Section 6330 was added to the Internal Revenue Code by the Internal Revenue Service Restructuring and Reform Act of 1998 (the Act), Pub. L. 105-206, sec. 3401(b), 112 Stat. 747. H.R. 2676, 105th Cong., 2d Sess. (1998) (H.R. 2676), is the bill that, when enacted, became the Act. As passed by the House of Representatives, H.R. 2676 did not contain any version of section 6330. Section 6330 was added by a Senate amendment to H.R. 2676 (the Senate amendment). See H.R. 2676, sec. 3401(b), 105th Cong., 2d Sess. (1998), 144 Cong. Rec. S4163 (daily ed. May 4, 1998). The Senate amendment provides without qualification that, at a CDP hearing, taxpayers can raise "challenges to the underlying tax liability as to existence or amount". Id. In response to the Senate amendment, Administration officials expressed concern over the breadth of the proposed appeal rights, noting, among other concerns, that, under the Senate amendment, taxpayers could challenge even self-assessed (i.e., reported) amounts at CDP hearings. See Statement of Administration Policy, Office of Management and Budget (May 5, 1998), reprinted in Tax Notes Today, 98 TNT 87-18 (May 6, 1998); letter from the Hon. Robert E. Rubin, Secretary of the Treasury, to the Hon. William Archer, Chairman, Committee on Ways and Means, U.S. House of Representatives (June 2, 1998), reprinted in Daily Tax Report, 112 DTR at L-3 (June 11, 1998) (Department of Treasury views).¹⁶

[83] The limiting language found in section 6330(c)(2)(B) originated in the conference agreement on H.R. 2676. While the accompanying committee report (the conference report), H. Conf. Rept. 105-599, at 265-266 (1998), 1998-3 C.B. 747, 1019-1020, reveals neither the impetus for, nor the intended effect of, the change to the Senate amendment reflected in section 6330(c)(2)(B), it is reasonable to infer that the conferees were responding, at least in part, to the stated concerns of Administration officials and did not intend the result reached by the majority.

[84] The foregoing inference is supported by other language in the conference report. Regarding the scope of the section 6330 hearing, the report provides: "However, the validity of the tax liability can be challenged only if the taxpayer did not actually receive the statutory notice of deficiency or has not otherwise had an opportunity to dispute the liability." Id. at 265, 1998-3 C.B. at 1019 (emphasis added). That language suggests that Congress did not intend to allow challenges to the Commissioner's right to collect the unpaid tax liability in those instances in which the taxpayer's nonreceipt of a statutory notice of deficiency is solely attributable to the fact that the Commissioner did not determine a deficiency in the first place. Rather, the reference to "actual" receipt of "the" notice of deficiency suggests that, in the case of taxes subject to the deficiency procedures, such as the income tax, Congress was targeting the situation in which, although the Commissioner determined a deficiency and properly issued a statutory notice of deficiency, the taxpayer did not actually (or constructively, see Sego v. Commissioner, 114 T.C. 604, 611 (2000)) receive that notice¹⁷ and therefore did not have a realistic opportunity to challenge the proposed deficiency in the Tax Court.¹⁸ That interpretation is consistent with respondent's position that the term "underlying tax liability", as used in section 6330(c)(2)(B), does not include self-assessed amounts.

IV. Conclusion

[85] I conclude that section 6330(c)(2)(B), describing the limited circumstances in which a taxpayer may challenge the existence or amount of the underlying tax liability at a section 6330 hearing, does not allow the taxpayer to challenge her obligation to pay any reported but unpaid tax.¹⁹ Accordingly, putting aside section 301.6330-1(e)(1), (3), Proced. & Admin. Regs., the reported but unpaid tax here in question is not properly at issue.²⁰

²Sec. 301.6320-1(e)(1), (3), Q& A-E2, Proced. & Admin. Regs., is similar but relates to liens rather than levies.

³Recently, by Chief Counsel Notice (CC-2002-043), reprinted in Tax Notes Today, 2002 TNT 206-13, attorneys working in the Office of Chief Counsel, Internal Revenue Service, were reminded that the office does not take positions in litigation that are inconsistent with positions that the Commissioner has taken in published guidance, including regulations.

⁴Generally, when a return of tax is made and an amount of tax is shown on the return, the person making the return shall, without assessment or notice and demand, pay such tax at the time and place the return is filed. Sec. 6151(a).

⁵As used in sec. 6330(c)(2)(B), the term "statutory notice of deficiency" refers to the means by which, in the case of certain taxes (including the income tax), the IRS notifies a person that it has determined a deficiency in that person's tax. See sec. 6212. In the context of those taxes, the term "deficiency" essentially means the amount by which a person's tax liability exceeds the tax shown on the person's return. See sec. 6211(a).

⁶Respondent's regulations provide: "An opportunity to dispute a liability includes a prior opportunity for a conference with Appeals that was offered either before or after the assessment of the liability." Sec. 301.6330-1(e)(3), Q& A-E2, Proced. & Admin. Regs. Without regard to sec. 6330(c)(2)(B), a taxpayer's subsequent disavowal of a reported and assessed, but unpaid, income tax liability amounts to an informal claim for abatement. See Fayeghi v. Commissioner, T.C. Memo. 1998-297, affd. 211 F.3d 504 (9th Cir. 2000). Because such a claim has no formal procedural significance, see sec. 6404(b), presumably it is not subject to the Appeals process.

⁷On p. 12, the majority states: "In the present case, petitioners' underlying tax liability consists of the amount that petitioners reported due on their tax return along with statutory interest and penalties." Since petitioners paid a portion of the amount they reported due on their return, it would seem that, for the majority, the term "underlying tax liability" includes both paid and unpaid assessments of tax. The majority does not say whether, under sec. 6330(d)(1), we have the authority to order a refund. I do not see how we do, since our jurisdiction under that section is to review the Commissioner's determination to proceed with collection of a given amount. To the extent that Chief Judge Wells, in his concurring opinion, suggests to the contrary, I disagree.

⁸For an example of a composite liability where the taxpayer did not ignore the notice of deficiency, see Fayeghi v. Commissioner, supra.

⁹Viz, "The person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period to the extent [as opposed to "if" ] the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability."

¹⁰A taxpayer would have "otherwise had an opportunity to dispute" (and would therefore be precluded from challenging at a sec. 6330 hearing) such amount without having received a notice of deficiency if, for example, following the Commissioner's examination of her income tax return and determination of a deficiency in tax, the taxpayer had executed a waiver of restrictions on assessment and collection, thus making it unnecessary for the Commissioner to mail to her a notice of deficiency. See Aguirre v. Commissioner, 117 T.C. 324, 327 (2001).

¹¹Of course, if it turns out that respondent's interpretation is actually that the term equates to "the tax liability specified on the CDP Notice" (which is the term used in sec. 301.6330-1(e)(1), (3), Proced. & Admin. Regs.), then such interpretation presents similar ambiguities to those discussed in the text.

¹²In Washington v. Commissioner, 120 T.C. 114, 127 (2003) (Halpern, J., concurring), without benefit of a consideration of the legislative history discussed below, I concluded that the term "underlying tax liability", as used in sec. 6330(c)(2)(B), means the tax on which the Commissioner based his assessment (whether shown on the return or determined by the Commissioner). I have since changed my mind.

¹³As pertinent to this proceeding, both provisions originated with the addition of sec. 6330 to the Internal Revenue Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3401(b), 112 Stat. 747.

¹⁴In Katz v. Commissioner, 115 T.C. 329, 339 (2000), we interpreted the term "underlying tax liability" in sec. 6330(d)(1)(B) as including "any amounts owed by a taxpayer pursuant to the tax laws". As that statement was not necessary to resolve the case (the case did not involve self-assessed amounts), it is dicta that does not control this case.

¹⁵The term "underlying tax liability" also appears in sec. 6311, which deals with the payment of taxes by commercially acceptable means. In relevant part, sec. 6311(d)(3)(A) provides that "a payment of internal revenue taxes * * * by use of a credit card shall not be subject to section 161 of the Truth in Lending Act * * * if the error alleged by the person is an error relating to the underlying tax liability". Sec. 6311(d)(3)(B) provides a similar rule with respect to payments made by debit cards. Those provisions were added to the Internal Revenue Code by the Taxpayer Relief Act of 1997, Pub. L. 105-34, sec. 1205(a), 111 Stat. 995. It is by no means apparent that Congress intended the same meaning to apply for purposes of sec. 6311(d)(3) and sec. 6330(c)(2)(B).

¹⁶See also letter from L. Anthony Sutin, Acting Assistant Attorney General, to the Hon. William V. Roth, Jr., Chairman, Committee on Finance, U.S. Senate, and the Hon. William Archer, Chairman, Committee on Ways and Means, U.S. House of Representatives (June 8, 1998), reprinted in Daily Tax Report, 112 DTR at L-7 (June 11, 1998) (Department of Justice views).

¹⁷In informal remarks, one Treasury official specifically identified that situation as the proper focus of any expanded appeal rights. See Holmes, "Proposed Taxpayer Rights Changes Questioned by Treasury Attorney Rizek", 74 Daily Tax Rept. at G-3 (Apr. 17, 1998); see also Donmoyer, "Treasury Still Ignoring IRS Reform Bill's Controversial Elements," 78 Tax Notes 411 (describing Associate Tax Legislative Counsel Rizek as "one of Treasury's chief negotiators during the drafting of the IRS reform bill").

¹⁸A notice of deficiency mailed to a taxpayer's "last known address" is sufficient to commence the usual 90- day period during which the taxpayer may petition the Tax Court for a redetermination of the deficiency, regardless of whether the taxpayer actually receives the notice. See, e.g., Frieling v. Commissioner, 81 T.C. 42, 52 (1983); Tatum v. Commissioner, T. C. Memo. 2003-115 n. 4; see also sec. 6212(b); sec. 301.6212-2, Proced. & Admin. Regs.

¹⁹I acknowledge that such conclusion is at odds with dicta appearing in prior reports of the Court, which reflect concessions made by the Commissioner. See Craig v. Commissioner, 119 T.C. 252, 261 (2002) (Commissioner conceded that taxpayer was entitled to dispute self-assessed liability at CDP hearing); Hoffman v. Commissioner, 119 T.C. 140, 145 (2002) (same in the context of interest and penalties attributable to a self-assessed liability).

²⁰That is not to say that, at a sec. 6330 hearing, a taxpayer may not show that she has no liability (or a reduced liability) for a deficiency properly before the Appeals Office pursuant to sec. 6330(c)(2)(B) on account of erroneous items on her return (or, indeed, items, e.g., overlooked deductions, not on her return). The question is whether, during a sec. 6330 hearing, a taxpayer has the right to challenge her obligation to pay any amount shown on her return but remaining unpaid (she does not). The absence of such a right, however, does not foreclose the taxpayer from submitting an amended return or, upon payment, filing a claim for refund.