Tax Court Has Jurisdiction Over Worker Classification Case

Vladislav M. Rozenzhak, for respondent.

Petitioner was a California corporation with its principal office in Corona, California, when it filed the petition.

A. Petitioner's Business and Petitioner's Workers

During the tax periods in issue petitioner operated a business connecting cable lines (cable splicing) for corporate and residential customers. From 2005 through 2007 petitioner employed 117 to 145 workers whom it paid to perform cable splicing services.

During the tax periods in issue petitioner treated its workers in dual capacities: as employees and as independent contractors, i.e., as lessors to petitioner of tools and vehicles they were required to provide in connection with providing services for petitioner. Petitioner reported taxable hourly wages for its workers on Forms W-2, Wage and Tax Statement. Petitioner also made payments to its workers for rental of tools and vehicles (equipment lease payments). Petitioner did not classify its workers as employees for purposes of equipment rental. Petitioner reported the equipment lease payments on Forms 1099-MISC, Miscellaneous Income, as nonemployee compensation for 2005 and as rent for 2006 and 2007.

B. The IRS Examination and Appeals Process

In 2008 respondent audited petitioner's Forms 941, Employer's Quarterly Federal Tax Return, for all tax periods in 2005, 2006, and 2007. On September 24, 2008, respondent sent petitioner an audit report (30-day letter) stating that the Examination Division had concluded that petitioner is liable for the following Federal Insurance Contributions Act and withholding tax increases (imposed under sections 3101, 3111, and 3402) and penalties as a result of respondent's classification of the equipment lease payments to petitioner's workers as wages:

                                                           Proposed

On November 15, 2008, petitioner filed a protest with the Examination Division and requested a hearing with the Internal Revenue Service (IRS) Appeals Office. In the protest, petitioner contended that for the periods in issue: (1) the equipment lease payments were not properly classified as wages; (2) its workers were independent contractors with respect to both the amounts paid to them as wages and the equipment lease payments; (3) petitioner qualifies for relief under the Revenue Act of 1978, Pub. L. No. 95-600, sec. 530, 92 Stat. at 2885 (RA '78 sec. 530), and sections 3402(d) and 3509; and (4) petitioner is not liable for any penalties.

In January 2009 Appeals acknowledged receipt of the case. Petitioner's representative met with an Appeals officer. Petitioner's representative notified the Appeals officer that it was continuing to raise all of the issues stated in its protest.

On November 9, 2009, Appeals returned the case to the Examination Division for further consideration because Appeals had concluded that "additional development by the Examination Division of the issue at hand is needed." The case was returned to Appeals on March 15, 2010. An undated Appeals Case Memo states in part the following:

A. Positions of the Parties

Both parties assert that this Court should dismiss this case for lack of jurisdiction because respondent did not issue an NDWC. Despite the superficial similarity of those motions, the parties have sharply contrasting views of the effect of dismissal. Respondent contends that dismissal would deprive this Court of jurisdiction over this case, leave the assessment in place, and allow the IRS to proceed with collection.

In contrast, petitioner contends that the failure to issue an NDWC means the assessment is invalid and the IRS may not collect the disputed employment taxes unless and until an NDWC is sent. Under petitioner's theory, issuance of an NDWC would trigger the right to file a petition and seek our determination under section 7436.

Our jurisdiction is not expanded or contracted by the positions of the parties. Thus, it is not dispositive that both parties claim that we lack jurisdiction. See Charlotte's Office Boutique, Inc. v. Commissioner, 121 T.C. 89, 102 (2003), aff'd, 425 F.3d 1203 (9th Cir. 2005). We will independently decide whether we have jurisdiction.

B. Section 7436

Section 7436 governs proceedings in the Court for determining employment status. Section 7436(a) provides:

In deciding whether we have jurisdiction, we are mindful that "in response to the expressed intent of Congress to provide a convenient, prepayment hearing, this Court and the Courts of Appeals have given the jurisdictional provisions a broad, practical construction rather than a narrow, technical meaning." Lewy v. Commissioner, 68 T.C. 779, 781 (1977) (fn. refs. omitted). Therefore, we should "adopt a construction which will permit the Court to retain jurisdiction without doing violence to the statutory language." Smith v. Commissioner, 140 T.C. 48, 51 (2013).

C. Whether the April 15, 2011, Letter Was a Determination

The Commissioner's "determination" of worker classification provides the predicate for our jurisdiction under section 7436(a). Respondent states that the April 15, 2011, letter is a Letter 4451, which the IRS uses as a closing letter in employment tax cases if worker classification and RA '78 sec. 530 are not at issue. Both parties argue (though with sharply conflicting views of the effect of prevailing) that issuance of an NDWC is required to give this Court jurisdiction under section 7436.

We disagree that we have jurisdiction under section 7436 only when the Commissioner has issued an NDWC. Section 7436(a) limits our jurisdiction to cases in which there has been (among other requirements) "a determination by the Secretary". In other contexts, we have held that the absence of a document bearing a particular title or format does not mean that no determination has been made. See, e.g., Corbalis v. Commissioner, 142 T.C. _____, _____ (slip op. at 21-22) (Jan. 27, 2014) (Letters 3477, even though stating they were not final determinations with respect to interest abatement, constituted final determinations for purposes of section 6404(h)); Gray v. Commissioner, 138 T.C. 295 (2012), aff'd, 723 F.3d 790 (7th Cir. 2013); Cooper v. Commissioner, 135 T.C. 70, 75 (2010) (a letter rejecting whistleblower claims was a determination for purposes of section 7623(b)(4)); Wilson v. Commissioner, 131 T.C. 47, 53 (2008); Craig v. Commissioner, 119 T.C. 252, 259 (2002) (a form decision letter issued after an "equivalent hearing" constituted a determination conferring jurisdiction under section 6330(d)(1)); Lunsford v. Commissioner, 117 T.C. 159, 164 (2001) (a written notice to proceed with a collection action constituted a determination under section 6330).

Legislative history accompanying the Taxpayer Relief Act of 1997, Pub. L. No. 105-34, sec. 1454(a), 111 Stat. at 1055, enacting section 7436 makes abundantly clear that the April 15, 2011, letter was a determination. Section 7436 originated in the House of Representatives. H.R. 2014, 105th Cong. (1997). In H.R. Rept. No. 105-148, at 639 (1997), 1997-4 C.B. (Vol. 1) 319, 961, the Explanation of Provision states, in pertinent part:

The Senate report includes the paragraph quoted above from the House report, and also states: "A failure to agree would also be considered a determination for this purpose." S. Rept. No. 105-33, at 304 (1997), 1997-4 C.B. (Vol. 2) 1081, 1384 (emphasis added). That is exactly what happened here: the April 15, 2011, letter states that they "were unable to reach an agreement" in this case. (Emphasis added.) The conference agreement, H.R. Conf. Rept. No. 105-220, at 734 (1997), 1997-4 C.B. (Vol. 2) 1457, 2204, contains language essentially identical to that quoted above from the House report.²

In summary, the 30-day letter prepared by the Examination Division and the Appeals Case Memo both explain in detail the disagreement with petitioner's position. After saying that "unfortunately, we were unable to reach an agreement on your case", the April 15, 2011, letter states that employment tax liabilities as "determined by Appeals" will be assessed. The House report made clear that determinations for purposes of section 7436 may be made in nontraditional ways. The Senate committee report states that "[a] failure to agree" would be considered a determination, a phrase that is indistinguishable from the words "we were unable to reach an agreement" in the April 15, 2011, letter. We conclude that respondent made a determination in this case.³

Our analysis of section 7436 is buttressed by consideration of the twofold statute of limitations in section 6532(a)(1) for filing a refund suit. The provision given there is as follows, with bracketed [A] and [B] added by us to show the two distinct rules in the statute:

The features of these rules are similar to the features of section 7436(a) and (b). Section 7436(b)(2) provides a hard-and-fast 90-day deadline for filing suit that commences only "if the Secretary sends by certified or registered mail notice * * * of a determination"; yet section 7436(a) permits the filing of suit simply upon the existence of "an actual controversy involving a determination"--without regard to certified mailing and without regard to any formal "notice". Thus, a taxpayer who is the subject of a "determination" by the IRS under section 7436(a) can file suit without receiving a notice of determination under section 7436(b)(2).

Finally, neither Charlotte's Office Boutique v. Commissioner, 425 F.3d 1203, Neely v. Commissioner, 115 T.C. 287 (2000),⁴ nor Henry Randolph Consulting v. Commissioner, 112 T.C. 1 (1999), establishes that an NDWC must be sent before we have jurisdiction to make a worker classification determination under section 7436. In none of those cases did the Court identify or decide the issue present here, i.e., whether we necessarily lack jurisdiction where no NDWC was sent. Therefore none of those opinions establishes whether we have jurisdiction where no NDWC was sent but a determination was otherwise made.⁵

D. Whether the Determination Related to Matters Specified in Section 7436(a) Over Which We Have Jurisdiction

Section 7436(a) provides our jurisdiction where, among other requirements, the Secretary has determined whether:

E. Whether the Determination Related to an Actual Controversy in Connection With an Audit and Was Part of an Examination

On the basis of this series of events, we conclude that the determination related to an actual controversy in connection with an audit and was part of an examination as required by section 7436(a).⁷

F. Whether the Petition Was Timely

Section 7436(b)(2) imposes a 90-day limit on filing a petition where the Commissioner sends a notice of determination by certified or registered mail but otherwise imposes no specific time limit on filing a petition with this Court. Specifically, section 7436(b) provides:

The fact that section 7436 does not require filing a petition within 90 days after a determination is made (unless the notice is sent by certified or registered mail) contrasts with section 6212 relating to our deficiency jurisdiction. However, section 7436(b) closely resembles sections 7428, 7476(b)(5), 7477(b)(3), 7478(b)(3), and 7479(b)(3), which all address the time for bringing actions for declaratory judgments.⁸ Sections 7428, 7476, 7478, and 7479 each create a judicial remedy even in the absence of a determination.⁹ Section 7477, like section 7436, requires a "determination".¹⁰ All of these declaratory judgment provisions, like section 7436, have almost identical rules establishing the time for bringing an action, stating almost identically that if the Secretary sends a notice of a determination by registered or certified mail, then the taxpayer must commence his or her action in the Tax Court within 90 days of such mailing. The similarity of section 7436(b) to these other sections eliminates any impulse we might have had to read part of section 6212 into section 7436(b). Our discussion of section 6532(a)(1) supra part C also supports our analysis here. We conclude that the 90-day limitation does not apply in this case because no notice of determination was sent by certified or registered mail and thus the petition is timely.¹¹

G. Whether Section 7436(d)(1) Alters Our Holdings Stated Above

Section 7436(d)(1) provides that the principles of several Code sections relating to "assessment and collection, etc." apply to section 7436. Specifically, section 7436(d)(1) provides as follows:

To consider the application of this paragraph to the present case, we will first identify two principles of section 6213(a).¹² The first principle of section 6213(a) is that a taxpayer has 90 (or 150) days after the notice of deficiency is mailed to file a petition. As stated supra part F, section 7436(b) imposes a 90-day limit on filing a petition where the Commissioner sends a notice by certified or registered mail but otherwise does not impose a 90-day limit. To treat section 7436(d)(1) as imposing the 90-limit that appears in section 6213(a) on section 7436 would require two leaps of faith: first, that Congress enacted an express rule (section 7436(b)) and then rewrote that rule by saying "principles" of other sections apply; and second, that the words of the title to the paragraph, "Restrictions on Assessment and Collection Pending Action", were not well chosen or were too narrowly phrased. We conclude that this principle of section 6213(a) does not cause this Court to lack jurisdiction where a petition is filed more than 90 days after a determination where the Commissioner did not exercise the right under section 7436(b)(2) to trigger a 90-day limitation period by sending the notice by certified or registered mail.

The second principle of section 6213(a)¹³ is that, if a petition is filed, the IRS may not assess tax resulting from a deficiency until the Tax Court case commenced by filing a petition with respect to that deficiency is final. To treat section 7436(d)(1) as imposing this restriction on assessment requires neither of the leaps of faith just stated: There is no contrary rule on assessment in section 7436 that would be rewritten on the basis of application of principles of another section; and the title to the paragraph, "Restrictions on assessment and collection pending action", directly suggests that this second principle of section 6213(a) -- i.e., if a petition is filed, the IRS may not assess tax determined to be owing as a result of a deficiency until the Tax Court case is final -- applies to section 7436 because of section 7436(a)(1). In the context of section 7436, this appears to bar assessment and collection of employment tax determined to be owing after the filing of a Form 941.

In none of the sections cross-referenced by section 7436(d)(1) is there any suggestion that a 90-day (or any other) time limit applies where a notice was not sent by certified or registered mail, nor that a determination may be made only through a notice of determination. Thus, we conclude that application by section 7436(d)(1) of "the principles of" several Code sections "relating to assessment and collection, etc." to section 7436 does not limit our jurisdiction to cases in which the Commissioner sends a formal notice of determination (e.g., a Letter 3523), or imposition of the 90-day period where the Commissioner does not send a notice by certified or registered mail.¹⁴

H. Conclusion

We hold that we have jurisdiction over this case. Respondent's motion and petitioner's cross-motion will be denied.

To reflect the foregoing,

An appropriate order will be issued.

Reviewed by the Court.

THORNTON, HALPERN, FOLEY, VASQUEZ, GALE, WHERRY, KROUPA, HOLMES, GUSTAFSON, PARIS, MORRISON, BUCH, LAUBER, and NEGA, JJ., agree with this opinion of the Court.

² The staff of the Joint Committee on Taxation stated in its General Explanation of Tax Legislation Enacted in 1997, at 428 (J. Comm. Print 1997) (Blue Book): "A failure to agree would also be considered a determination for this purpose, to the extent permitted under Tax Court rules." (Emphasis added.) (None of the Committee reports cited in the text includes the underscored phrase.) The Supreme Court said in United States v. Woods, 571 U.S. ____, _____, 134 S. Ct. 557, 568 (2013), that "the Blue Book, like a law review article, may be relevant to the extent it is persuasive." This Blue Book phrase does not alter our conclusion stated in the text.

³ In arguing that we lack jurisdiction under sec. 7436, the dissenting opinion does not cite or discuss sec. 7436(a), which establishes our worker classification jurisdiction, or the legislative history underlying it, which expressly shows that we have jurisdiction under circumstances like those present here.

⁴ Similarly, we do not consider Tree-Tech, Inc. v. Commissioner, T.C. Memo. 2011-162, slip op. at 14, a collection due process case in which we cited Neely v. Commissioner, 115 T.C. 287 (2000), to have decided the issue now before the Court.

⁵ We disregard the Commissioner's statement in Notice 2002-5, 2002-1 C.B. 320, 321, that "[b]ecause the Notice of Determination constitutes the Service's determination described in § 7436(a), * * * [it] is a jurisdictional prerequisite for seeking Tax Court review of * * * determinations regarding worker classification, § 530 treatment, and the proper amount of employment tax under those determinations." We owe no deference to what an administrative agency says about our jurisdictional bounds. See Fox Television Stations, Inc. v. FCC, 280 F.3d 1027, 1038-1039 (D.C. Cir. 2002). This is so even if an agency directly or indirectly interprets the bounds of our jurisdiction through the implementation of regulations construing a statute which it administers. See also Adams Fruit Co. v. Barrett, 494 U.S. 638, 650 (1990) (the delegation of power to an agency to administer a statute does not empower that agency to "regulate the scope of the judicial power vested by the statute"). The dissenting opinion argues that we lack jurisdiction because the IRS did not intend for us to have jurisdiction. See dissenting op. pp. 35-36. The concurring opinion, which is joined by 11 of the Judges who voted yes, makes a similar point, see concurring op. pp. 27-28; and we note that it is the statute, not the IRS, that grants us jurisdiction.

⁶ The dissenting opinion finds fault with what it calls "the majority's dual use of the word 'determination'" to refer both to the IRS decision concerning worker classification and to the April 15, 2011, letter. See dissenting op. pp. 32-33. There is no inconsistency in this usage. The IRS makes an internal determination concerning worker classification before it issues a letter that conveys the determination to the taxpayer. Because it is clear to us that the April 15, 2011, letter shows that a determination requisite to our jurisdiction was made, we need not decide whether, or when, the IRS made a determination for purposes of sec. 7436(a) before sending the April 15, 2011, letter.

⁷ In Staffmore, LLC v. Commissioner, T.C. Memo. 2013-187, we concluded that the Court had no jurisdiction over a determination as to employment status because there was no IRS audit or examination. In this case, however, there was an audit.

⁸ Secs. 7478(b)(3), 7477(b)(3), 7479(b)(3) all provide: "If the Secretary sends by certified or registered mail notice of his determination * * *, no proceeding may be initiated under this section unless the pleading is filed before the 91st day after the date of such mailing." Sec. 7476(b)(5) is slightly different but materially the same.

⁹ Secs. 7476(a) and 7478(a) both provide: "In a case of actual controversy involving--(1) a [particular] determination by the Secretary * * *, or (2) a failure by the Secretary to make a [particular] determination * * *, upon the filing of an appropriate pleading, the Tax Court may make a declaration" regarding the particular determination or lack thereof. Sec. 7476(a) is slightly different but materially the same.

¹⁰ Sec. 7477(a) provides: "In case of an actual controversy involving a [particular] determination by the Secretary * * *, upon the filing of an appropriate pleading, the Tax Court may make a declaration" regarding the particular determination. Sec. 7436(a) is slightly different but materially the same.

¹¹ In keeping with its conclusion that the analysis of the opinion of the Court "simply do[es] not work", see dissenting op. pp. 29-30, the dissenting opinion asks: "If the April 15, 2011, letter had been sent by certified mail, would it have triggered that deadline even though it did not purport to be a determination?", see id. pp. 30-31, and: "Would the undisclosed section 7436 determination the opinion of the Court found here have allowed the IRS to assess after 90 days in the absence of a petition?", see id. p. 30. We are satisfied that the analysis herein does not cause the administrative problems posed in the dissenting opinion. In raising those questions, the dissenting opinion does not cite or discuss subsecs. (a) and (b) of sec. 7436. Subsec. (a) provides our jurisdiction simply if there has been a determination. But application of the 90-day rule is not triggered so easily; instead, under subsec. (b), the 90-day period applies only if the Secretary sends notice of the determination to the taxpayer (by certified or registered mail).

The statute, properly interpreted, provides clear and logical answers to the questions posed by the dissenting opinion. First, if the IRS sends the taxpayer a letter by certified or registered mail including clear notice that the IRS has made a determination of worker classification, it triggers the jurisdictional period for filing a petition in our Court. Second, if the IRS does not send a letter by certified or registered mail including clear notice that the IRS has made a determination of worker classification, the IRS may not assess after 90 days absent a petition because sec. 7436(b) requires that the Secretary first "send[ ] * * * notice" to the taxpayer.

¹² The first sentence of sec. 6213(a) provides as follows:

I join the majority opinion without reservation. I write only to emphasize that, not only is the majority's analysis of our jurisdiction under section 7436 correct as a matter of law; it is also correct as a matter of tax policy.

As the majority states, see op. Ct. note 5: "We owe no deference to what an administrative agency says about our jurisdictional bounds." Moreover, respondent's position, reflected both in this case and in Notice 2002-5, 2002-1 C.B. 320, 321, that only his issuance of a notice of determination as described in Notice 2002-5 may confer jurisdiction on this Court to resolve a worker classification or RA '78 sec. 530 issue would improperly permit the Commissioner to determine, in his sole discretion, whether a taxpayer shall have access to this Court in order to resolve any such issue raised on audit. Were we to adopt respondent's position, the Commissioner, by refusing to issue a notice of determination, would be able to deny the taxpayer access to this Court, which he may be tempted to do whenever he feels his chance of success on a worker classification or RA '78 sec. 530 issue is better in either the District Court or the Court of Federal Claims than in this Court. There is no basis in section 7436 or as a matter of policy for granting the Commissioner this "forum shopping" discretion, and it would thwart the obvious congressional intent embodied in that provision to permit taxpayers, in their discretion,¹ to litigate, in this Court, worker classification and RA '78 sec. 530 issues that the Commissioner has raised on audit.

THORNTON, COLVIN, VASQUEZ, GALE, WHERRY, KROUPA, HOLMES, GUSTAFSON, MORRISON, BUCH, and LAUBER, JJ., agree with this concurring opinion.

Section 6213(a) prevents the IRS from assessing and collecting tax before it has sent a notice of deficiency. It also provides the taxpayer 90 days from the notice of deficiency date to petition the Tax Court. Would the undisclosed section 7436 determination the Court found here have allowed the IRS to assess after 90 days in the absence of a petition? Section 6503(a) provides that a notice of deficiency suspends the running of the period of limitations for the IRS to assess and collect. Would a determination the IRS had not disclosed to a taxpayer have the same effect? Section 7436(b) provides that a taxpayer must file a petition within 90 days of a notice of determination if the IRS sent it by certified mail. If the April 15, 2011, letter had been sent by certified mail, would it have triggered that deadline even though it did not purport to be a determination? The opinion of the Court raises all these questions but dismisses them.

In note 11, the opinion of the Court points out that under section 7436(b) the 90-day window to file a petition begins only after the IRS has sent notice of its determination by certified or registered mail. According to the opinion of the Court, this means that the 90-day period will not begin "[i]f the IRS does not send a letter by certified or registered mail including clear notice that the IRS has made a determination of worker classification". See op. Ct. p. 21 note 11 (emphasis added). Although the plain language of section 7436(b) requires only "notice", the opinion of the Court reads a "clear notice" requirement into the statute in responding to our questions. In so doing, the opinion reinforces our point. By requiring clear notice, we can avoid the administrative problems we discussed above. If we accept jurisdiction in the absence of clear notice, as the Court has in this very case, the administrative problems return. Here the IRS failed to send clear notice; instead, it sent an ambiguous letter that neither party believed was a notice. Nevertheless, the Court finds that the letter provided notice of a determination. Thus, if the IRS had sent the letter by certified mail, the Court presumably would have found that it triggered the 90-day period. Would the Court have decided not to recharacterize the letter if the IRS had used certified mail?

The Court's approach also creates an open-ended period to file a petition, which has no touchstone in the deficiency procedures. The Court ignores the possibilities for abuse that an unlimited period to bring action will create. We should avoid these and other problems by simply recognizing that only a clear notice of determination can trigger our jurisdiction under section 7436.

If it is the first, the administrative problems we described above return. See supra pp. 29-32. How could we enforce time limits for filing against taxpayers who were unaware the Commissioner had made a decision? If it is the second, we think the opinion of the Court is confusing the terms "determination" and "notice of determination". Semantically speaking, a letter cannot be a determination. A determination is a decision--an abstraction. A letter is tangible. A letter can communicate a determination or serve as evidence of a determination, but it cannot itself be a determination. If the letter triggered our jurisdiction, we are not sure the Court disagrees with our conclusion that notice is required. It simply chooses to call the notice of determination a "determination".

Suppose, after examining a taxpayer's Federal income tax return, the IRS assessed additional income tax without following the deficiency procedures established by sections 6211-6216. Next, suppose that the IRS mailed that taxpayer a notice of the additional assessment. We would not treat that letter as a notice of deficiency, and we have found that the Court is without jurisdiction under those circumstances. See Lerer v. Commissioner, 52 T.C. 358, 363 (1969); Kane v. Commissioner, T.C. Memo. 1989-272.

Now substitute the type of tax contemplated by section 7436 for the types of tax subject to the deficiency procedures referenced above. Under similar circumstances, the Court is doing exactly the opposite of what we have done with respect to taxes subject to the deficiency procedures. And to make matters worse, it is doing so in the face of express statutory language instructing us to treat worker classification determinations like notices of deficiency.

In income tax deficiency cases, a notice of deficiency is the taxpayer's ticket to our Court. If the IRS has not sent a notice of deficiency, we do not have jurisdiction over the dispute. We have, on occasion, decided whether an ambiguous letter from the IRS was a notice of deficiency that triggered our jurisdiction. In each of those cases, we relied heavily on the IRS intent in reaching our conclusion. See Lerer v. Commissioner, 52 T.C. at 363; Kane v. Commissioner, T.C. Memo. 1989-272. When the IRS sends a letter that neither purports to be nor is intended to be a notice of deficiency, we do not recharacterize the letter as a notice of deficiency. We simply dismiss the case for lack of jurisdiction. Here the IRS did not intend to send a notice of worker classification determination, and the letter it sent did not purport to be such a notice. In fact, the IRS sent a letter reserved for cases not involving worker classification determinations. We disagree with the Court's decision to recharacterize that letter.

The opinion of the Court does not dispute that the IRS did not intend the April 15, 2011, letter to be a notice of determination,¹ but it nevertheless concludes that the letter triggered our jurisdiction. Instead of citing cases involving notices of deficiency, the opinion of the Court cites a whistleblower case and two collection due process cases in which we found that unofficial letters were notices of determination. See op. Ct. p. 11. Those cases are inapposite because they involve statutes that do not incorporate the restrictions on assessment applicable in income tax deficiency cases. In the light of Congress' explicit instruction to treat worker classification determinations as if they were notices of deficiency, we find our notice of deficiency jurisprudence more relevant. In keeping with our notice of deficiency cases, we would find that the IRS intent is the most important factor in characterizing an ambiguous notice. The IRS did not intend the April 15, 2011, letter to be a notice of determination, and the letter did not purport to be a notice of determination. Accordingly, we would find that it did not trigger our jurisdiction under section 7436.

The IRS bears the burden of providing proper notice before assessing tax. If it has made a determination, it has no reason not to notify the taxpayer. If the IRS fails to issue a timely notice, applicable statutes of limitation may bar its later assessment. Moreover, dismissing the case here would not leave the taxpayer without recourse. SECC would have the same options as a taxpayer challenging an income tax deficiency whose case had been dismissed because the IRS had not issued a notice of deficiency. It could bring a refund case attacking the invalid assessment, file for an injunction against the assessment,² seek an abatement under section 6404(a), or contest the assessment's legality in a collection due process case pursuant to section 6330.

The workers at issue here performed a single task, and SECC calculated both payments on the number of hours they spent performing that task. SECC self-reported the workers as employees on its employment tax returns. The IRS could have reasonably concluded that the worker classification arguments were frivolous and did not justify a determination. Instead of permitting this result, the Court combs through the administrative record to discover whether the IRS should have issued a notice of determination. This approach sets a dangerous precedent that may require us to review the administrative record every time a taxpayer makes a worker classification argument and the IRS chooses not to issue a notice of determination. We believe we should permit the IRS to decide when its examination warrants a notice of determination. If it improperly fails to issue a notice, it will face the consequences of an invalid assessment.

² Sec. 6213(a) provides for this remedy by waiving the sec. 7421 anti-injunction provisions.