Weber v. Commissioner

HERSHAL WEBER, PETITIONER v. COMMISSIONER OF INTERNAL

REVENUE, RESPONDENT

Docket No. 27369–10L. Filed May 7, 2012.

In 2007 P filed a Federal income tax return for 2006

reporting an overpayment and electing to have it applied to

his 2007 estimated income tax. However, in 2007 R deter-

mined that P was liable for an I.R.C. sec. 6672 penalty (attrib-

utable to unpaid trust fund taxes of C) and applied P’s 2006

income tax overpayment to that penalty liability instead. In

2008 the balance of C’s trust fund tax liability was satisfied

by third-party payments. When P thereafter filed his 2007

Federal income tax return in 2008, he claimed a credit

thereon for the overpaid 2006 income tax, thereby reporting

a 2007 income tax overpayment, and elected to have that

asserted 2007 overpayment applied to his 2008 estimated

income tax. The IRS notified P that it adjusted his 2007

credits downward to eliminate the claimed 2006 income tax

overpayment, thereby eliminating any overpayment for 2007,

and yielding a balance due. When P filed his 2008 Federal

income tax return in 2009, he nonetheless claimed a credit

thereon for overpaid 2007 income tax (which consisted solely

of the previously disallowed credit elect overpayment from

2006). The IRS notified P that it adjusted his 2008 credits

downward to eliminate the claimed 2007 income tax overpay-

ment, yielding a balance due greater than he had reported.

When P did not pay the balance due for 2008, R issued to P

a notice of proposed levy, and P requested a hearing under

I.R.C. sec. 6330(b). At the hearing P contended that his I.R.C.

sec. 6672 penalty was overpaid and that his 2008 liability

would be satisfied if that overpayment were applied to his

2008 liability. R determined to proceed with the levy to collect

P’s 2008 Federal income tax liability. Held: P is not entitled

to apply a credit elect overpayment from 2007 toward his

2008 income tax liability, because after application of his 2006

income tax overpayment to his I.R.C. sec. 6672 penalty

liability, he had no 2006 overpayment available for crediting

348

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(348) WEBER v. COMMISSIONER 349

to 2007 and therefore no 2007 overpayment available for cred-

iting to 2008. Held, further, in a hearing under I.R.C. sec.

6330 concerning collection of P’s unpaid 2008 income tax

liability, we do not have jurisdiction to adjudicate P’s claim of

an I.R.C. sec. 6672 penalty overpayment.

Donald Jay Pols, for petitioner.

Deborah Aloof, for respondent.

OPINION

GUSTAFSON, Judge: This is a ‘‘collection due process’’ (CDP)

appeal pursuant to section 6330(d), 1 in which petitioner

Hershal Weber asks us to review a determination by the

Office of Appeals (Appeals) of the Internal Revenue Service

(IRS) to proceed with a levy in order to collect his income tax

for the year 2008. The issue is whether the tax that the IRS

proposes to collect has already been paid by Mr. Weber’s

alleged overpayment of a section 6672 penalty liability.

Respondent, the Commissioner of Internal Revenue, moved

for summary judgment, and Mr. Weber filed an opposition

supported by exhibits. We will grant the Commissioner’s

motion.

Background

For purposes of the Commissioner’s motion, we assume

correct the facts asserted by Mr. Weber and supported by his

exhibits, as well as facts demonstrated by the Commissioner

that Mr. Weber did not dispute.

2006 income tax

In 2006 Mr. Weber earned income from which Federal

income tax was withheld. In October 2007 Mr. Weber filed

his 2006 Federal income tax return. On that return he

reported an overpayment of $46,717 (consisting entirely of

amounts withheld in 2006) and elected (pursuant to 26

C.F.R. section 301.6402–3(a)(5), Proced. & Admin. Regs.) to

have that overpayment applied to his estimated income tax

for the succeeding year, i.e., 2007. We assume that he had

in fact overpaid his 2006 liability in this amount. (Tax year

1 Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986

as in effect at all relevant times (codified in 26 U.S.C.), and all Rule references are to the Tax

Court Rules of Practice and Procedure.

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350 138 UNITED STATES TAX COURT REPORTS (348)

2006 is not at issue here, but the 2006 overpayment is rel-

evant to the 2008 tax that is at issue.)

Trust fund penalty liability

Mr. Weber evidently had some connection to S&G Services,

Inc. (S&G). The IRS determined that in three quarters of cal-

endar year 2005, S&G had failed to pay over ‘‘trust fund’’

taxes withheld from its employees’ wages pursuant to sec-

tions 3102 and 3402. By July 2007 the IRS determined that

Mr. Weber had been a ‘‘responsible person’’ of S&G in 2005;

and on July 17, 2007, the IRS therefore assessed penalties

against Mr. Weber under section 6672(a) in amounts totaling

$1,002,339. 2 The record indicates that the IRS determined

that one or more other individuals were also responsible per-

sons of S&G and assessed section 6672 penalties against

them, as against Mr. Weber.

Mr. Weber’s liability for that section 6672 penalty is not at

issue here, but it is relevant to Mr. Weber’s contentions, as

we explain below. Mr. Weber states that he ‘‘neither disputes

nor admits the merits of this trust Fund Recovery Penalty in

this proceeding’’, but in his administrative claim for refund

(discussed below) he contends that the assessment was erro-

neous.

Satisfaction of the trust fund penalty liability

In 2007 and 2008, various payments were made against

the unpaid trust fund tax liabilities of S&G or against the

corresponding penalty liabilities under section 6672. Most

important to this suit is a credit against Mr. Weber’s section

6672 penalty liability made from his 2006 income tax over-

payment: By letter dated November 12, 2007—i.e., before the

end of tax year 2007 and long before Mr. Weber filed his

2007 return—the IRS advised Mr. Weber that his reported

2006 overpayment of $46,717 had been applied not to his

2007 estimated income tax but instead to his section 6672

penalty liability. Although Mr. Weber’s 2006 tax return was

filed in October 2007 and processed in November 2007, the

IRS applied these credits with an effective date of July 17,

2 The tally of these assessments that was attached to Mr. Weber’s request for a CDP hearing

overstated the penalty for the quarter ended 12/31/2005 by $10,000 and therefore overstated the

total by the same amount.

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(348) WEBER v. COMMISSIONER 351

2007—the date on which the section 6672 penalty had been

assessed.

Almost a year later, in June 2008, the IRS received, from

responsible persons other than Mr. Weber, a payment of

$233,000 toward S&G’s liabilities. In August 2008 the IRS

executed an agreement with Mr. Weber (on Form 12257,

‘‘Summary Notice of Determination, Waiver of Right to

Judicial Review of a Collection Due Process Determination,

and Waiver of Suspension of Levy Action’’), in which Mr.

Weber acknowledged that he had received collection notices

concerning the section 6672 penalty liabilities but in which

he waived his right to a CDP hearing before Appeals con-

cerning those liabilities. The agreement stated as follows the

IRS Office of Appeals’ determination with regard to Mr.

Weber:

The trust fund portion of the liabilities have [sic] been satisfied at the cor-

porate level by the redesignation of a $233,000 payment made on 6/19/

2008.

The satisfaction of the trust fund portion of the tax at the corporate level

will offset to your [section 6672 penalty] account resulting in no balance

due remaining.

Levy action [as to the section 6672 penalty] is no longer needed and will

not take place.

The IRS has adjusted the account for Mr. Weber’s section

6672 penalty not only by payments that he made but also by

payments from the other responsible persons. IRS transcripts

for Mr. Weber’s penalty liability for the three quarters at

issue show small balances due, but for purposes of the

Commissioner’s motion we assume that if the ‘‘redesignation’’

to which the IRS agreed is properly accomplished, then the

IRS has collected (through his section 6672 penalty payments,

the penalty payments by other responsible persons of S&G,

and S&G’s own payments of the trust fund liabilities) a total

amount greater than S&G’s trust fund liabilities.

On August 14, 2009, Mr. Weber filed claims for refund

with the IRS by submitting Forms 843, ‘‘Claim for Refund

and Request for Abatement’’. On February 16, 2010, the IRS

disallowed those refund claims. On February 14, 2012, Mr.

Weber filed a refund suit in Federal District Court chal-

lenging that disallowance. Weber v. United States, No. 1:12–

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352 138 UNITED STATES TAX COURT REPORTS (348)

CV–732 (E.D.N.Y.). Our record does not show any disposition

of that refund suit.

2007 income tax

Our record does not show precisely when in 2008 Mr.

Weber filed his 2007 Federal income tax return, but we

assume (in his favor) that he filed it after August 2008—i.e.,

after Appeals had determined he had ‘‘no balance due

remaining’’ on his section 6672 liability. On that 2007 return,

Mr. Weber reported a tax liability of $75,089 that we assume

to be correct. In addition to claiming withholding credits of

$68,310 and excess Social Security remittances of $1,231, on

line 65 (‘‘2007 estimated tax payments and amount applied

from 2006 return’’) he reported credits totaling $46,717—i.e.,

the amount of his claimed 2006 overpayment—and he there-

fore reported an overall overpayment for 2007 in the amount

of $41,169. On line 75 he elected to have that claimed over-

payment applied to his estimated income tax for the suc-

ceeding year (i.e., 2008).

As we have noted, however, before that time the IRS’s

November 2007 letter had advised him that his reported

2006 overpayment had not been applied to his 2007 esti-

mated income tax but rather to his section 6672 penalty

liability.

The IRS therefore evidently spotted as excessive the credit

claimed on line 65, and it sent Mr. Weber a letter dated

November 24, 2008, advising him that it had reduced the

amount of his 2007 estimated tax payments and that he

therefore still owed $5,962 3 of the tax he had reported due

for 2007. Our record does not show whether or when Mr.

Weber paid that liability, and 2007 is not at issue in our

case.

2008 income tax

For the year at issue—i.e., 2008—Mr. Weber filed his Fed-

eral income tax return in September 2009. He reported a tax

liability that we assume to be correct. He also reported, on

line 63 of that 2008 return, a credit amount of $61,169 that

3 This amount was determined by taking Mr. Weber’s tax liability of $75,089 less withholding

credits of $68,310 and excess Social Security remittances of $1,231, which resulted in an under-

payment of $5,548. To that underpayment, the Commissioner applied penalties of $221.92 and

interest of $192.11, for an unpaid balance of $5,962.03.

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(348) WEBER v. COMMISSIONER 353

included a supposed overpayment of $41,169 from his 2007

return. Of course, 22 months before he filed his 2008 return

he had received the IRS’s November 2007 letter indicating

that his 2006 overpayment had not been applied to 2007 but

had instead been applied to his penalty liability, leaving him

with no overpayment for 2007 that could be applied to 2008.

Consistent with its prior action as to 2007, the IRS sent Mr.

Weber a letter dated October 19, 2009, advising him that it

had adjusted his 2008 estimated tax payments (i.e., to reduce

them by the claimed 2007 overpayment of $41,169) and that

he had a balance due on his 2008 income tax account of

$41,084 (on which penalties and interest were also due).

Collection action for 2008 income tax

When Mr. Weber did not pay the 2008 balance due, the IRS

sent him a ‘‘Final Notice—Notice of Intent to Levy and

Notice of Your Right to a Hearing’’. On April 2, 2010, the IRS

received from Mr. Weber a Form 12153, ‘‘Request for a

Collection Due Process or Equivalent Hearing,’’ by which he

requested a CDP hearing pursuant to section 6330. He

attached to that form a ‘‘Calculation of trust Fund Penalty

Overpayment’’, asserting that the ‘‘Total Overpayment for

trust Funds’’ was $71,394.04. 4 The IRS granted him that

hearing before its Office of Appeals.

At the hearing Mr. Weber’s representative argued that,

because S&G’s trust fund liability had been fully satisfied (by

payments other than Mr. Weber’s), the IRS should correct its

prior actions as to Mr. Weber’s income tax liabilities for 2006

and 2007, so that his 2006 income tax overpayment would be

credited to his 2007 income tax liability as originally

requested, and the resulting 2007 overpayment would then

be credited against—and would satisfy—his 2008 income tax

liability. He argued that if those actions were taken, his 2008

income tax liability would be satisfied and no levy would be

appropriate.

4 Mr. Weber derived this ‘‘overpayment’’ by taking the total amount of payments made by him-

self, by other ‘‘responsible persons’’, and by S&G—$1,083,733.28—against the total amount of

the trust fund penalties assessed against him—$1,002,339.24, but mistakenly stated by him as

$1,012,339.24. Mr. Weber concluded that the difference, i.e., $71,394.04, was an overpayment.

Mr. Weber then reasoned that since the trust fund taxes had been overpaid by $71,394.04, his

entire payment—$46,717—was unnecessary for satisfying these liabilities.

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354 138 UNITED STATES TAX COURT REPORTS (348)

On November 10, 2010, Appeals issued a notice of deter-

mination upholding the proposed levy. An attachment to the

notice of determination stated:

The Office of Appeals does not have jurisdiction on the other tax periods

that you believe caused the liability on tax period 2008.

On December 10, 2010, Mr. Weber filed a timely petition

with this Court challenging that determination. At the time

he filed his petition, Mr. Weber resided in New York.

Discussion

I. General legal principles

A. ‘‘Collection due process’’

At issue here is the IRS’s proposal to collect Mr. Weber’s

2008 income tax liability by means of a levy. Section 6330

provides that, before the IRS may make a levy on any prop-

erty pursuant to section 6331, the taxpayer is entitled to

notice of the Commissioner’s intent to levy and of the tax-

payer’s right to a hearing before the IRS Office of Appeals.

Sec. 6330(a) and (b). That hearing addresses ‘‘the taxable

period to which the unpaid tax specified [in the notice of pro-

posed levy] * * * relates’’. Sec. 6330(b)(2). At the agency-

level CDP hearing, the taxpayer may raise ‘‘any relevant issue

relating to the unpaid tax or the proposed levy’’, sec.

6330(c)(2)(A) (emphasis added)—language important here, for

reasons we explain below. The taxpayer may make chal-

lenges to ‘‘the appropriateness of collection actions’’ and may

make ‘‘offers of collection alternatives, which may include the

posting of a bond, the substitution of other assets, an install-

ment agreement, or an offer-in-compromise.’’ Sec.

6330(c)(2)(A). The appeals officer must consider those issues,

verify the requirements of applicable law and administrative

procedure have been met, and consider ‘‘whether any pro-

posed collection action balances the need for the efficient

collection of taxes with the legitimate concern of the person

[involved] that any collection action be no more intrusive

than necessary.’’ Sec. 6330(c)(3).

Mr. Weber does not complain of any failure by the IRS to

comply with these provisions, except that he contends it

erred by failing to apply against his 2008 income tax liability

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(348) WEBER v. COMMISSIONER 355

his claimed credit elect overpayment from 2007 (derived

from his claimed credit elect overpayment from 2006), or in

the alternative, to credit to his 2008 liability his (alleged)

section 6672 penalty overpayment, which he asks us to deter-

mine. Both parties ask us to review for abuse of discretion,

see Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff ’d,

469 F.3d 27 (1st Cir. 2006), the determination by Appeals to

proceed with collection. As we show below, Mr. Weber’s

contention involves the assertion that Appeals made errors of

law; and if a determination is indeed based upon an error of

law, then by definition it constitutes an abuse of discretion.

See Swanson v. Commissioner, 121 T.C. 111, 119 (2003).

B. Summary judgment

Under Rule 121 (the Tax Court’s analog to Rule 56 of the

Federal Rules of Civil Procedure), the Court may grant sum-

mary judgment where there is no genuine issue of any mate-

rial fact and a decision may be rendered as a matter of law.

The moving party (here, the Commissioner) bears the burden

of showing that no genuine issue of material fact exists, and

the Court will view any factual material and inferences in

the light most favorable to the nonmoving party. Dahlstrom

v. Commissioner, 85 T.C. 812, 821 (1985); cf. Anderson v. Lib-

erty Lobby, Inc., 477 U.S. 242, 255 (1986) (same standard

under Fed. R. Civ. P. 56). ‘‘The opposing party is to be

afforded the benefit of all reasonable doubt, and any

inference to be drawn from the underlying facts contained in

the record must be viewed in a light most favorable to the

party opposing the motion for summary judgment.’’ Espinoza

v. Commissioner, 78 T.C. 412, 416 (1982).

In this case we assume the facts as shown by Mr. Weber,

the non-moving party, or as shown by the Commissioner and

not disputed by Mr. Weber.

C. Credit elect overpayments

Mr. Weber contends that the IRS erred by failing to apply

his claimed 2006 income tax overpayment against his 2007

income tax liability, and by failing to apply his claimed 2007

income tax overpayment against his 2008 income tax liability

at issue here. When a taxpayer has made an overpayment of

tax, the IRS has discretion to credit that overpayment to

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356 138 UNITED STATES TAX COURT REPORTS (348)

another liability—a discretion given to it by section 6402(a), 5

which provides:

In the case of any overpayment, the Secretary * * * may credit the

amount of such overpayment * * * against any liability in respect of an

internal revenue tax on the part of the person who made the overpayment

and shall * * * refund any balance to such person. [Emphasis added.]

That is, the IRS ‘‘shall’’ refund any overpayment not other-

wise credited, but the IRS ‘‘may credit’’ an overpayment to

another liability.

In the case of a prior year’s overpayment reported on the

succeeding year’s tax return (such as is at issue here), Con-

gress underscored the IRS’s discretion to allow credits or over-

payments by providing in section 6402(b):

The Secretary is authorized to prescribe regulations providing for the cred-

iting against the estimated income tax for any taxable year of the amount

determined by the taxpayer or the Secretary to be an overpayment of the

income tax for a preceding taxable year.

Pursuant to that authority, the Secretary promulgated 26

C.F.R. section 301.6402–3(a)(5), Proced. & Admin. Regs.,

which provides:

If the taxpayer indicates on its return (or amended return) that all or part

of the overpayment shown by its return (or amended return) is to be

applied to its estimated income tax for its succeeding taxable year, such

indication shall constitute an election to so apply such overpayment * * *.

5 See Kaffenberger v. United States, 314 F.3d 944, 958 n.4 (8th Cir. 2003); IRS v. Luongo (In

re Luongo), 259 F.3d 323, 335 (5th Cir. 2001); Kalb v. United States, 505 F.2d 506, 509 (2d Cir.

1974); Estate of Bender v. Commissioner, 86 T.C. 770, 778–779 (1986) (discussing Kalb), aff ’d

in part, rev’d in part, 827 F.2d 884 (3d Cir. 1987); Georgeff v. United States, 67 Fed. Cl. 598,

608 (2005) (‘‘From the plain language of the statute, the IRS has no obligation to credit any

individual’s tax overpayment to specific preexisting outstanding tax liabilities upon the tax-

payer’s request. The statute, 26 U.S.C. § 6402, gives the IRS the discretionary authority to cred-

it tax overpayments to any tax liability. See Northern States Power Co. v. United States, 73 F.3d

764, 766–67 (8th Cir.), cert. denied, 519 U.S. 862, 136 L. Ed. 2d 110, 117 S. Ct. 168 (1996); In

re Ryan, 64 F.3d 1516, 1523–24 (11th Cir. 1995) (holding that 26 U.S.C. § 6402 gives the IRS

the discretionary authority to credit tax overpayments to any tax liability); Pettibone Corp. v.

United States, 34 F.3d 536, 538 (7th Cir. 1994); Acker v. United States, 519 F. Supp. 178, 182

(N.D. Ohio 1981) (finding that the government may apply tax overpayments to subsequent

years’ liabilities, but is not required to do so). The statute and case law are clear that the discre-

tionary authority of the IRS supersedes any desires or wishes on the part of a taxpayer to have

their overpayment credited to specific, preexisting, tax liabilities.’’). For purposes of the Commis-

sioner’s motion for summary judgment, we assume that, in a collection due process case, we can

review for an abuse of discretion the IRS’s decision under section 6402 to credit an overpayment

to a nondetermination year rather than to the year at issue. Cf. N. States Power Co. v. United

States, 73 F.3d 764, 768 (8th Cir. 1996) (‘‘In a proper case, the failure to credit overpayments

might be reviewable on an abuse-of-discretion basis’’); Winn-Dixie Stores, Inc. v. Commissioner,

110 T.C. 291, 294–296 (1998); see also Orian v. Commissioner, T.C. Memo. 2010–234, slip op.

at 13–17 (and cases cited thereat).

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(348) WEBER v. COMMISSIONER 357

‘‘The subject of such an election is known as a ‘credit elect

overpayment’ or simply a ‘credit elect.’ ’’ FleetBoston Fin. v.

United States, 483 F.3d 1345, 1347 (Fed. Cir. 2007). How-

ever, section 301.6402–3(a)(6) makes it clear that the tax-

payer’s election to apply an overpayment to the succeeding

year is not binding on the IRS:

Notwithstanding paragraph (a)(5) of this section, the Internal Revenue

Service, within the applicable period of limitations, may credit any overpay-

ment of individual, fiduciary, or corporation income tax, including interest

thereon, against * * * any outstanding liability for any tax (or for any

interest, additional amount, additions to the tax, or assessable penalty)

owed by the taxpayer making the overpayment * * *. [Emphasis added.]

Thus, a taxpayer may request a credit elect overpayment,

but the IRS has discretion whether to allow it or instead to

credit the overpayment to another liability owed by the tax-

payer or to refund it.

D. ‘‘Responsible person’’ penalty

The liability to which the IRS applied Mr. Weber’s 2006

income tax overpayment was the penalty imposed by section

6672, sometimes known as the ‘‘responsible person penalty’’

or the ‘‘trust fund recovery penalty’’ (TFRP). An employer is

required by sections 3102 and 3402 to withhold from an

employee’s wages and then pay over to the IRS both income

tax, under section 3402, and the employee’s share of Social

Security and Medicare tax (i.e., Federal Insurance Contribu-

tions Act (FICA) tax), under section 3102. Under section

7501(a), ‘‘the amount of tax so collected or withheld shall be

held to be a special fund in trust for the United States’’; con-

sequently, these withheld taxes are referred to as ‘‘trust fund

taxes’’. One of the means Congress has enacted to ensure

that these trust fund taxes are paid over to the Government

is section 6672, under which ‘‘the officers or employees of the

employer responsible for effectuating the collection and pay-

ment of trust-fund taxes who willfully fail to do so are made

personally liable to a ‘penalty’ equal to the amount of the

delinquent taxes.’’ Slodov v. United States, 436 U.S. 238,

244–245 (1978). Section 6672(a) provides:

Any person required to collect, truthfully account for, and pay over any tax

imposed by this title who willfully fails to collect such tax, or truthfully

account for and pay over such tax, or willfully attempts in any manner to

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358 138 UNITED STATES TAX COURT REPORTS (348)

evade or defeat any such tax or the payment thereof, shall, in addition to

other penalties provided by law, be liable to a penalty equal to the total

amount of the tax evaded, or not collected, or not accounted for and paid

over. * * *

The trust fund penalty of section 6672 is a means of col-

lecting from the responsible persons (here, Mr. Weber and

others) the unpaid trust fund liability of the employer (here,

S&G). The IRS collects the trust fund liability no more than

once. 6 Consequently, the IRS cross-references payments

against the trust fund liability itself and payments against

the section 6672 penalty liabilities of responsible persons, 7

and those payments ultimately reduce the amount of the

penalty liability of each responsible person. 8 However, where

there are multiple responsible persons who have paid pen-

alties under section 6672 arising from the same unpaid trust

fund taxes, the IRS faces the risk that, if it stops collecting

after receiving amounts that equal the trust fund shortage,

one assessed person may later prove himself not responsible

and therefore entitled to a refund. For that reason, ‘‘the TFRP

is considered ‘collected’ only after the passage of two years

from the date of payment with no claim for refund filed by

or for the payor in those two years, so there may be cases

where the Service retains more than 100% payment from two

or more taxpayers until the TFRP is conclusively collected’’.

Internal Revenue Manual pt. 8.25.2.3 (Oct. 17, 2007)

6 See Avildsen v. United States (In re Avildsen Tools & Mach., Inc.), 794 F.2d 1248, 1254 n.10

(7th Cir. 1986) (‘‘if the corporate trust fund tax obligations are subsequently paid by the corpora-

tion this payment may also relieve the corporate officials of their separate liability for delin-

quent trust fund taxes under section 6672’’); USLIFE Title Ins. Co. of Dallas v. Harbison, 784

F.2d 1238, 1241 (5th Cir. 1986) (‘‘as a matter of policy, it [the Government] does not retain pay-

ments exceeding the underlying withholding tax delinquency’’); Spivak v. United States, 370

F.2d 612, 615 (2d Cir. 1967) (‘‘Had the government’s claim in the bankruptcy been defeated by

an adjudication that the payments should have been credited to Lincoln [the employer], the gov-

ernment concedes that it would be bound to release appellants [the responsible officers], for it

is its practice not to attempt enforcement of § 6672 liability if the corporate obligation is met,

and an adjudication that the payments should have been credited to Lincoln would have entitled

Lincoln to credits as great as its entire tax obligation.’’); Internal Revenue Manual (IRM) pt.

1.2.14.1.3 (Policy Statement 5–14), para. 2 (June 9, 2003) (‘‘The withheld income and employ-

ment taxes or collected excise taxes will be collected only once, whether from the business, or

from one or more of its responsible persons’’), pt. 8.25.2.3(5) (Oct. 19, 2007) (‘‘Even though the

Service may make assessments against more than one responsible person for a specific quarterly

liability, it only collects the total amount once’’) (bold in original).

7 See IRM pt. 5.19.14.15 (Apr. 29, 2008).

8 In addition, for the circumstance in which more than one person has been held liable for

the section 6672 penalty and one of those persons believes he is entitled to contribution from

one or more of the other persons, Congress has provided that a taxpayer may bring a separate

suit claiming a right of contribution, pursuant to section 6672(d).

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(348) WEBER v. COMMISSIONER 359

(‘‘Related TFRP Cases’’), para. 5. 9 For that reason, the mere

presence of a credit balance in the penalty account of a

responsible person does not assure that he is entitled to a

refund. In addition, the settling of the penalty account of a

responsible person may be complicated by questions about

liability for interest and additions to tax under section

6651(a)(3) (both by the employer on its liability for the trust

fund tax in the first instance and by the responsible person

on his liability for the penalty).

The liability at issue in this collection review case is Mr.

Weber’s unpaid 2008 income tax liability, not a section 6672

penalty. However, such a penalty was assessed against Mr.

Weber; and his overpayment of 2006 income tax was credited

toward that liability and not toward his 2007 income tax

liability as he had requested. The IRS’s refusal to alter that

crediting after S&G’s trust fund tax liability was satisfied by

another taxpayer’s payment is important to Mr. Weber’s

contentions here.

II. Whether the tax at issue is ‘‘unpaid’’

Mr. Weber complains that Appeals refused to consider a

‘‘collection alternative’’, but by that he really means that it

failed to consider his contention that the liability at issue

should be treated as having been satisfied and therefore as

not ‘‘unpaid’’. His position was and is that, in view of the

resolution of S&G’s withholding tax liability, his 2006 income

tax overpayment—originally credited against a section 6672

penalty to compensate for S&G’s unpaid liability—should

now be credited instead to his 2007 income tax liability (as

he elected on his 2006 return) and that, if it is, the result

will be a 2007 income tax overpayment that, when applied

to his 2008 income tax liability (as he elected on his 2007

return), will satisfy that liability and render moot any fur-

ther collection for 2008. Alternatively, Mr. Weber contends

that, because of the satisfaction of S&G’s trust fund liability

from other sources, he has overpaid his section 6672 penalty,

9 See also IRM pt. 8.25.2.6(4) (Oct. 19, 2007) (‘‘In related trust fund recovery penalty cases

where all responsible parties are not in agreement with an Appeals settlement based on hazards

of litigation, a Form 2751, Proposed Assessment of Trust Fund Recovery Penalty, should be se-

cured from the agreeing responsible person(s). Inform the agreeing responsible person(s) by clos-

ing letter that the case can be reopened if the Department of Justice decides to join all poten-

tially responsible persons in a refund suit before the assessment limitation period expires’’).

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360 138 UNITED STATES TAX COURT REPORTS (348)

and that overpayment, if applied, would be sufficient to sat-

isfy his unpaid 2008 income tax liability.

A. The claimed credit elect overpayment

As we have held, we have jurisdiction to consider Mr.

Weber’s claim of a credit elect that would satisfy the liability

at issue here, but we hold that his claim of a credit elect

cannot be sustained.

1. The credit elect overpayment claimed on the 2008 return

depends on the credit elect overpayment claimed on the

2007 return.

On his tax return for the year at issue, 2008, Mr. Weber

claimed a credit that included $41,169 of an asserted over-

payment of 2007 income tax. If such a credit elect overpay-

ment is applied to his 2008 liability as he requested, then the

2008 liability is satisfied and no levy should occur. We note

that a credit elect overpayment is not a claimed overpayment

of an unrelated liability that the taxpayer asks us to adju-

dicate and then to offset against the different liability that

is the subject of the IRS’s collection efforts. Rather, the credit

elect overpayment is a credit that a taxpayer is explicitly

permitted by regulation to report on the income tax return

for the year at issue. In such an instance—where a credit

elect overpayment is claimed on the return for the year at

issue—we have held that ‘‘the validity of the underlying tax

liability, i.e., the amount unpaid after application of credits

to which * * * [the taxpayer] is entitled, is properly at issue’’

in a CDP case. See Landry v. Commissioner, 116 T.C. 60, 62

(2001). We therefore have jurisdiction to consider Mr.

Weber’s contention that he is entitled to apply a credit elect

overpayment from 2007 to the 2008 liability at issue here.

However, that 2007 overpayment depended in turn on the

validity of a credit elect overpayment claimed on the 2007

return. Mr. Weber’s tax return for 2006 had reported an

overpayment and had requested it be applied as a credit

against his 2007 estimated income tax. If the credit elect

overpayment from 2006 claimed on the 2007 return is not

allowed, then there is no overpayment from 2007 to pass on

to 2008, and the 2008 liability remains unsatisfied. There-

fore, to address Mr. Weber’s contention, we must decide the

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(348) WEBER v. COMMISSIONER 361

merits of the credit elect overpayment from 2006 as reported

on the 2007 return. 10

2. Mr. Weber was not entitled to a credit elect overpayment

on his 2007 return.

Mr. Weber claims (and the Commissioner does not dispute)

that he overpaid his 2006 income tax by $46,717. It is clear

that on his 2006 return, he elected that this overpayment be

applied to his 2007 estimated income tax. However, at the

time Mr. Weber filed that return in 2007, a section 6672 pen-

alty had been assessed against him and at that time had not

been paid. (The payments that he now contends satisfied

that liability were not made until months later.)

Thus, when the IRS received Mr. Weber’s 2006 income tax

return in 2007, it was confronted with the question whether

to treat the 2006 overpayment as an estimated payment

toward Mr. Weber’s future 2007 income tax liability (which

would ultimately be due in April 2008) or instead to credit

the overpayment against his already due and owing liability

for a section 6672 penalty. As we have shown (in part I.C.

above), section 6402(a) gives the IRS broad discretion in the

crediting of overpayments, and a taxpayer’s election under 26

C.F.R. section 301.6402–3(a)(5) to apply an overpayment to

estimated tax for the succeeding year is not binding on the

IRS. See sec. 301.6402–3(a)(6). We see no basis for criticizing

the IRS’s exercise of its discretion to apply the overpayment

to the due-and-owing section 6672 penalty rather than the

future and only potential 2007 income tax liability. Con-

sequently, we must say that the 2006 overpayment was prop-

erly applied to the penalty liability.

The IRS did not disallow Mr. Weber the overpayment he

claimed for 2006. Rather, it allowed the claim but applied

that overpayment to his outstanding liability for a section

6672 penalty. After the IRS thus allowed Mr. Weber the

credit against the penalty liability, the 2006 overpayment

was no longer (in the words of Freije v. Commissioner, 125

10 As we stated in Freije v. Commissioner, 125 T.C. 14, 27 (2005), ‘‘our jurisdiction under sec-

tion 6330(d)(1)(A) encompasses consideration of facts and issues in nondetermination years

where the facts and issues are relevant in evaluating a claim that an unpaid tax has been paid.’’

If there are scenarios in which a cascading series of multiple credit elect overpayments might

implicate years or issues so remote from the year at issue that they should not fall within a

CDP case, this case does not present such a scenario, and we do not here test the outer limits

of our CDP jurisdiction.

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362 138 UNITED STATES TAX COURT REPORTS (348)

T.C. 14, 26 (2005)) an ‘‘available credit’’. It had been used up.

The Government’s defense to any subsequent claim for

refund of a 2006 income tax overpayment would be accord

and satisfaction; the claim has already been allowed. Under

section 7422(d), ‘‘The credit of an overpayment of any tax

[here, 2006 income tax] in satisfaction of any tax liability

[here, the section 6672 penalty] shall, for the purpose of any

suit for refund of such tax liability so satisfied, be deemed to

be a payment in respect of such tax liability [i.e., of section

6672 penalty] at the time such credit is allowed.’’ (Emphasis

added.) 11

As a result, if the IRS holds Mr. Weber’s money wrongly,

it holds it not as an overpaid 2006 income tax but as an over-

paid section 6672 penalty. But there is no regulation that

permits a taxpayer to elect to have an overpayment of a sec-

tion 6672 penalty applied to his income tax liability, and

there is no line on the Federal income tax return form that

permits the reporting of an overpaid section 6672 penalty as

a credit to income tax. A credit elect overpayment can be an

issue in a CDP case (as in Landry), but Mr. Weber has no

valid claim of a credit elect overpayment. After the 2006

income tax overpayment was credited against the section

6672 penalty, the 2006 income tax overpayment was no

longer available for application to 2007 income tax. In the

absence of that credit elect overpayment, Mr. Weber had no

2007 income tax overpayment that could be credited to his

liability for 2008 income tax. The 2008 income tax liability

could thus not be satisfied by cascading credit elect overpay-

ments from 2006 and 2007.

B. Overpayment of section 6672 penalty

The argument remaining to Mr. Weber is that his section

6672 penalty liability has been overpaid and that the over-

payment is ‘‘available’’ to be credited to his 2008 income tax

liability. He cites our Opinion in Freije v. Commissioner, 125

T.C. at 26, in which we stated that—

11 See Greene-Thapedi v. United States, 549 F.3d 530, 532 (7th Cir. 2008) (‘‘Under section

7422(d), when the IRS applies an overpayment as a credit to a liability for a separate tax year,

the taxpayer must file a refund claim for the year in which the IRS applied the credit. See

Kaffenberger v. United States, 314 F.3d 944, 959 (8th Cir. 2003); Republic Petroleum Corp. v.

United States, 613 F.2d 518, 525 n.19 (5th Cir. 1980)’’); see also Recchie v. United States, 1 Cl.

Ct. 726, 727 (1983) (1981 income tax overpayment applied in 1982 to a 1975 tax deficiency held

to be ‘‘1975 tax * * * deemed paid in 1982 for the purpose of the statute of limitations’’).

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(348) WEBER v. COMMISSIONER 363

a ‘‘relevant issue relating to the unpaid tax or the proposed levy’’ [quoting

section 6330(c)(2)(A)] surely includes a claim, such as the one here, that

the ‘‘unpaid tax’’ has in fact been satisfied by a remittance that the

Commissioner improperly applied elsewhere. * * * Meaningful review of a

claim that a tax sought to be collected by levy has been paid, by means of

a remittance or an available credit, will typically require consideration of

facts and issues in nondetermination years, as those years may constitute

the years to which a remittance was applied or from which a credit origi-

nated. [Emphasis added; fn. ref. omitted.]

Mr. Weber contends that S&G’s trust fund liability has been

satisfied by other payments, leaving ‘‘available’’ the amount

paid by credit from his 2006 income tax that was originally

credited against his corresponding penalty assessment. And

he contends in his refund claim that he did not owe the pen-

alty at all. He asks us to hold that the resulting overpayment

of section 6672 penalty is an ‘‘available credit’’ that could sat-

isfy the 2008 income tax liability at issue here and should

preclude the IRS from proceeding otherwise to collect that

liability. But there are flaws in this contention.

1. Threshold requirements

Before a CDP petitioner could contend that overpayments

(other than credit elect overpayments) ought to be applied to

satisfy the liability at issue, he would have to show that he

had satisfied the threshold requirements for claiming a

refund. See Brady v. Commissioner, 136 T.C. 422, 427–431

(2011) (citing sections 6402, 6514). These threshold require-

ments include (1) the prior full payment of the liability; 12 (2)

the filing of a proper administrative claim, see sec. 7422(a); 13

12 See Flora v. United States, 362 U.S. 145 (1960). Only requirements (2) through (5) as num-

bered here are actually implicated in section 6514, the statute that we looked to in Brady v.

Commissioner, 136 T.C. 422 (2011). The Flora full-payment rule is founded on 28 U.S.C. sec.

1346(a)(1), which according to the Supreme Court’s subtle reading requires full payment as a

prerequisite to court review. Section 6330, by contrast, necessarily allows court review where

there is ‘‘unpaid tax’’. If overpayment jurisdiction were read into section 6330, then a Flora-like

full payment rule limiting that jurisdiction would be difficult to base on the statute. However,

the full-payment rule would in any event be satisfied in this case. The Supreme Court observed

that ‘‘excise tax deficiencies may be divisible into a tax on each transaction or event, and there-

fore present an entirely different problem with respect to the full-payment rule’’, id. at 171 n.37;

and the courts have thereafter held that the section 6672 penalty is divisible, so that a taxpayer

may litigate the penalty after having paid an amount corresponding to the tax withheld from

a single employee, see, e.g., Davis v. United States, 961 F.2d 867, 870 n.2 (9th Cir. 1992); Bland

v. Commissioner, T.C. Memo. 2012–84, slip op. at 22 n.13. There is no question that Mr. Weber’s

payment of penalty exceeded the trust fund amount attributable to one employee.

13 The requirement of section 7422(a) that a claim be filed can give rise to complicated dis-

putes about the adequacy and validity of an ‘‘informal claim’’, see United States v. Kales, 314

Continued

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364 138 UNITED STATES TAX COURT REPORTS (348)

(3) the timely filing of that claim, see sec. 6511; (4) the dis-

allowance of the claim (or the passage of six months), see sec.

6532(a)(1); and (5) the timely filing of the refund suit, see id.

The IRS disputes Mr. Weber’s fulfillment of only one of these

requirements—i.e., the timeliness of his August 2009 refund

claim. However, we find that, for purposes of the Commis-

sioner’s motion, the claim was timely.

Under section 6511(a), the period of limitations applicable

in the case of claims for refund of the section 6672 penalty

is two years from the date of payment. 14 In this case, the

allegedly overpaid penalty must have been paid no earlier

than two years before Mr. Weber filed his refund claim in

August 2009. When an overpayment of one liability arises

from the application of an overpayment from another

liability, the timing rules of section 6513 for the effective

date of payments do not apply; rather, section 7422(d)

applies. Favret v. United States, 92 A.F.T.R.2d (RIA) 2003–

7249, 2004–1 U.S. Tax Cas. (CCH) para. 50,142 (E.D. La.

2003). Section 7422(d) provides:

The credit of an overpayment of any tax in satisfaction of any tax liability

shall, for the purpose of any suit for refund of such tax liability so satis-

fied, be deemed to be a payment in respect of such tax liability at the time

such credit is allowed. [Emphasis added.]

Thus, the question before us is: At what time was Mr.

Weber’s overpayment of his 2006 income tax liability

‘‘allowed’’ as a credit against his section 6672 penalty? The

IRS’s position is that the credit was allowed on its effective

date in July 2007 (requiring a refund claim no later than

U.S. 186 (1941), and about whether the complaint that the taxpayer files in court is at substan-

tial variance with his administrative refund claim, see Hertz Corp. v. United States, 364 U.S.

122, 125–126 (1960)—disputes that may not often arise in the Tax Court’s deficiency suits, but

that could indeed arise in CDP cases if we had the expanded jurisdiction that Mr. Weber pro-

poses.

14 See Kuznitsky v. United States, 17 F.3d 1029, 1032–1033 (7th Cir. 1994) (and cases cited

thereat); Pham v. United States, 42 Fed. Cl. 886, 889 (1999). Although Mr. Weber’s 2006 income

tax overpayment was credited against the penalty liability (and was thus paid) in 2007, his

overpayment of the section 6672 penalty arguably did not arise until the third party made the

$233,000 payment in June 2008. If that third-party payment were the event that commenced

the running of the two-year period of section 6511(a) for Mr. Weber, then a claim filed as late

as June 2010 would have been timely. However, section 6511(a) looks to the time the tax was

‘‘paid’’ (not overpaid). Likewise, the corresponding look-back provision of section 6511(b)(2)(B) al-

lows a refund of ‘‘the portion of the tax paid during the 2 years immediately preceding the filing

of the claim.’’ Given the way section 6511 operates, it is thus incumbent on the payor of section

6672 penalty to file timely protective claims for refund of his payments of penalty even if they

are not (yet) ‘‘overpayments’’.

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(348) WEBER v. COMMISSIONER 365

July 2009), while Mr. Weber asserts that the credit could not

have been allowed until he filed his 2006 income tax return

reporting such overpayment in October 2007 (requiring a

refund claim no later than October 2009)—or more likely

when the IRS processed the return in November 2007. Given

that Mr. Weber filed his claim for refund on August 14, 2009,

the determination of when the credit was ‘‘allowed’’ is deter-

minative as to whether his refund claim was timely.

Section 6407 provides that a refund or credit is deemed

allowed on the date ‘‘the Secretary first authorizes the sched-

uling of an overassessment,’’ and 26 C.F.R. section 301.6407–

1, Proced. & Admin. Regs., elaborates that the relevant date

is the date an enumerated IRS official certifies the allowance

of the overassessment. In the instant case, it would seem all

but impossible (and the Commissioner has not shown) that

the IRS actually certified Mr. Weber’s 2006 overpayment

before his filing of his 2006 return in October 2007. The IRS

did have in hand Mr. Weber’s 2006 withheld tax in July

2007; but at that time he had not yet filed his 2006 return,

so the IRS could not yet know his 2006 income tax liability

and could not yet know how much of that 2006 withholding

would be available to credit to another liability.

The IRS’s only proof of a supposed July 2007 crediting is its

transcripts that show an effective date of the crediting—i.e.,

the same date that it recorded the penalty assessments. The

allowance of this earlier effective date (which would affect, in

Mr. Weber’s favor, the running of interest on his penalty

assessment) is not at all inconsistent with, and does not dis-

prove, a later actual date of allowing and posting the

credit. 15 Therefore, making the inferences favorable to Mr.

Weber, the IRS did not ‘‘allow’’ the credit from his 2006 over-

payment against his section 6672 penalty until sometime

after it received his 2006 return in October 2007. Therefore,

Mr. Weber’s claim for refund submitted less than two years

later in August 2009 was timely.

In previous cases in which CDP petitioners have asked us

to determine an unrelated overpayment that would satisfy

15 The IRS account transcript for Mr. Weber’s penalty for the quarter ended September 30,

2005, gives for the penalty assessment an entry that includes both a ‘‘Date’’ of ‘‘07–17–2007’’

(evidently an effective date) and a ‘‘Cycle’’ of ‘‘20073108’’ (evidently a ‘‘posting’’ date, see

Dingman v. Commissioner, T.C. Memo. 2011–116, slip op. at 17 n.15, in which the fifth and

sixth digits are the ‘‘posting cycle’’ within the year, see IRM pts. 5.2.4–19 (Oct. 1, 2009),

3.17.79.2.1(9) (Jan. 1, 2012)). The transcript gives no posting date for the credit entry.

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366 138 UNITED STATES TAX COURT REPORTS (348)

the liability that the IRS proposed to collect, the petitioners

had failed to meet the threshold requirements for refund

litigation, and we dismissed the cases on those grounds. See

Brady v. Commissioner, 136 T.C. at 427 (‘‘Assuming that it

would be appropriate in this case to consider the merits of

petitioner’s claims of overpayments in prior years’’); Conn v.

Commissioner, T.C. Memo. 2011–166, slip op. at 14–15 (‘‘if

we assume our jurisdiction in cases governed by section 6330

may permit us to consider overpayment claims arising from

nondetermination years’’). However, since Mr. Weber has ful-

filled those requirements, we must now address the premise

‘‘assum[ed]’’ in those cases and answer the question whether,

in a CDP case, we have jurisdiction to determine an overpay-

ment of an unrelated liability. We hold that we do not have

that jurisdiction.

2. Lack of refund jurisdiction in CDP proceedings

Mr. Weber’s contention proposes that we turn from the

subject of his 2008 income tax liability—the liability whose

collection is at issue—and address the distinct question of his

section 6672 penalty liability. We do have jurisdiction to

review the collection of a section 6672 penalty liability, see,

e.g., Mason v. Commissioner, 132 T.C. 301 (2009), when the

IRS has issued a ‘‘determination’’ to proceed with collection of

such a liability; but the IRS does not propose collection of any

such liability for Mr. Weber. Rather, Mr. Weber asks us to

find that he has overpaid that penalty liability, and then to

order the IRS to apply the overpayment to his 2008 income

tax (or, more precisely, asks us to hold that it would be an

abuse of discretion for the IRS to do anything other than to

apply it to his 2008 income tax liability), and to overrule

Appeals’s determination to proceed with a levy. Mr. Weber’s

argument would thus require us to adjudicate his right to a

section 6672 penalty refund.

a. Refund jurisdiction generally

However, ‘‘Congress has indeed established a detailed

refund scheme that subjects complaining taxpayers to var-

ious requirements before they can bring suit.’’ United States

v. Clintwood Elkhorn Min. Co., 553 U.S. 1, 11 (2008). In post-

payment circumstances, ‘‘[a] taxpayer seeking a refund of

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(348) WEBER v. COMMISSIONER 367

taxes erroneously or unlawfully assessed or collected may

bring an action against the Government either in United

States district court [see 28 U.S.C. sec. 1346(a)(1) (2006)] or

in the United States Court of Federal Claims [see id. secs.

1346(a)(1), 1491(a)(1)].’’ Clintwood Elkhorn, 553 U.S. at 4.

Under the tax litigation regime Congress created, the Tax

Court’s principal jurisdiction (pursuant to section 6213(a)) is

over pre-payment ‘‘deficiency cases’’. In a deficiency case

within this Court’s jurisdiction, the Tax Court has also been

explicitly granted jurisdiction to determine ‘‘an overpayment

of income tax for the same taxable year, of gift tax for the

same calendar year or calendar quarter, [or] of estate tax in

respect of the taxable estate of the same decedent’’. Sec.

6512(b)(1) (emphasis added). That is, the Tax Court’s over-

payment jurisdiction in deficiency cases is explicitly limited

to determining an overpayment of the same liability already

at issue. In a deficiency case involving income tax for 2008

(for example), we could determine an overpayment of 2008

income tax but could not determine an overpayment of a sec-

tion 6672 penalty.

Where the Tax Court does have jurisdiction to determine

an overpayment in a deficiency case, the Court nonetheless

may not order a refund of that overpayment until 120 days

after its decision has become final. Sec. 6512(b)(2). And even

where the Tax Court does have jurisdiction to determine an

overpayment and to order a refund of that overpayment, sec-

tion 6512(b)(4) provides, ‘‘The Tax Court shall have no juris-

diction under this subsection to restrain or review any credit

or reduction made by the Secretary under section 6402.’’ Con-

sequently, in that 120-day period the IRS retains its discre-

tion under section 6402 to credit or refund the overpayment;

and if the IRS allows the determined overpayment by cred-

iting it to another liability (rather than refunding it or

applying it as the taxpayer might have preferred), the Tax

Court has no jurisdiction to upset the IRS’s action.

The foregoing description is intended to show how explicit

Congress has been in establishing a remedy for litigating tax

refund claims in forums other than the Tax Court and in

establishing a circumscribed exception for litigating such

claims in a Tax Court deficiency case.

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368 138 UNITED STATES TAX COURT REPORTS (348)

b. CDP proceedings contrasted

The instant case is obviously not a refund suit brought in

District Court nor in the Court of Federal Claims; and it is

not a deficiency case to which section 6512(b) might apply (to

limit overpayment jurisdiction in deficiency cases); rather, it

is a collection review case brought pursuant to section 6330.

It is true, as we noted above, that in determining whether

tax is ‘‘unpaid’’, we sometimes do have the responsibility, as

in Freije, to determine the presence of ‘‘available credits’’. 16

Freije involved contentions that the IRS had misapplied pay-

ments that, if applied correctly, would have satisfied the

determination-year liability that the IRS proposed to collect;

and Mr. Weber’s analogous contention (that the IRS mis-

applied his 2006 credit elect) has been dealt with above. Our

reasoning in Freije might also warrant bringing into consid-

eration in a CDP case other ‘‘available credits’’—such as a

credit carryover prescribed by statute that would affect the

tax liability for the determination year, 17 or an overpayment

that had been determined in a refund or deficiency suit but

that had not yet been refunded or credited, or an overpay-

ment that had been determined by the IRS (e.g., in response

to a claim for refund) but that had not yet been refunded or

credited.

Mr. Weber, however, asks us not to consider a credit that

is already ‘‘available’’ (because it has already been deter-

mined) but rather to make ‘‘available’’ a credit that is cur-

rently not available because the IRS has disallowed it. He

contends that there is a positive balance in his penalty

account and that we could decide this case in his favor as an

16 See, e.g., Wright v. Commissioner, 471 Fed. Appx. 21, 23 (2d Cir. 2012) (‘‘the Tax Court

erred in declining to consider Wright’s final argument, which was that he did not receive a 1994

refund for $960. On remand, the Tax Court should resolve this last issue and determine whether

the 1994 refund—if such refund was due to Wright—was sent to him’’). In Wright, a CDP case

involving collection of 1987 and 1989 income tax, the taxpayer pointed to an IRS transcript for

his 1994 year that reflected a $960 credit and the allowance of a $960 refund, asserted that

he had never received the refund, and contended that it should therefore be applied to satisfy

his determination year liability. See taxpayer-appellant’s reply brief filed with the Court of Ap-

peals for the Second Circuit on June 10, 2011, at 22 n.6 (citing Exhibit A to the Commissioner’s

motion for summary judgment filed June 17, 2005, in Wright v. Commissioner, docket No. 6240–

01L). That is, Wright involved an alleged existing credit and not a taxpayer’s request that the

Tax Court adjudicate a refund claim.

17 For example, section 39 allows the carryback and carryforward of business credits listed in

section 38(b); and in 2008 such carrybacks and carryforwards were claimed on lines 6 and 7

of Form 3800, ‘‘General Business Credit’’, and thus could contribute to the total credit claimed

on line 53 of Form 1040, ‘‘U.S. Individual Income Tax Return’’.

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(348) WEBER v. COMMISSIONER 369

almost arithmetical matter—but that is not the case:

Whether the penalty has really been overcollected is a poten-

tially complex question that may depend not only on the bal-

ance in his account (which in fact is still negative) but also

on the pendency of refund claims by other responsible per-

sons and on liabilities for interest and additions to tax. See

supra pp. 358–359. Mr. Weber thus asks us not to allocate

an uncontroversial credit but rather to adjudicate a disputed

refund claim that is unrelated to the liability the IRS pro-

poses to collect, and this stretches Freije past the breaking

point.

Unlike section 6512(b) (which gives us overpayment juris-

diction in a deficiency case), section 6330—the statute confer-

ring our CDP jurisdiction—has no provisions conferring and

delimiting any overpayment jurisdiction. Mr. Weber’s posi-

tion would require us to conclude that, in enacting the CDP

regime in section 6330, Congress intended to implicitly grant

us jurisdiction to adjudicate refund claims for unrelated

liabilities. This would contradict our prior holding that ‘‘Con-

gress did not intend section 6330 to provide for the allowance

of tax refunds and credits’’. Greene-Thapedi v. Commissioner,

126 T.C. 1, 12 (2006).

Mr. Weber’s position would also require us to conclude

that, in conferring this supposed CDP overpayment jurisdic-

tion, Congress determined not to circumscribe that

jurisdiction (as it circumscribed overpayment jurisdiction in

deficiency cases). That is, this supposed grant of CDP over-

payment jurisdiction would apparently include no restriction

as in section 6512(b)(4) but rather would include the power,

in effect, not only to determine an overpayment but also—

critical to the relief Mr. Weber seeks—to direct how it shall

be credited. This supposed grant of CDP overpayment juris-

diction would have no apparent full-payment rule, see supra

note 12, but would in that respect evidently be broader than

the refund jurisdiction of the District Courts. Most tax litiga-

tion is restricted to a specific taxable period at issue, and in

a CDP hearing Appeals ‘‘review[s] only a particular collection

episode—a given notice of lien or notice of proposed levy.’’

Tucker v. Commissioner, 135 T.C. 114, 164 (2010), aff ’d, 676

F.3d 1129 (D.C. Cir. 2012). By contrast, a CDP hearing with

the expanded reach that Mr. Weber proposes would then not

be confined to consideration of ‘‘the taxable period to which

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370 138 UNITED STATES TAX COURT REPORTS (348)

the unpaid tax specified [in the notice of proposed levy] * * *

relates’’, sec. 6330(b)(2); rather, a CDP hearing could become

an almost plenary review of the taxpayer’s situation vis-a-vis

the IRS for all liabilities and for all periods; and a delinquent

taxpayer would have the power to halt IRS collection of any

given tax simply by filing a refund claim for any other tax,

however unrelated it might be to the tax that the IRS pro-

posed to collect. There is nothing in the text or legislative

history of section 6330 to suggest that, in establishing the

CDP regime, Congress intended to so constrain the collection

of revenue.

In addition, there would be several other practical prob-

lems and conceptual anomalies generated by the adjudication

of such a claim in this CDP proceeding. First, Mr. Weber

waived in writing his right to a CDP hearing before IRS

Appeals concerning his penalty liability. That would have

been the natural occasion to dispute his liability for this pen-

alty; and if this were a CDP hearing concerning the penalty,

that ‘‘prior opportunity’’ would deprive both Appeals and this

Court of jurisdiction to entertain his challenge to underlying

liability. See sec. 6330(c)(2)(B). However, in this collection

review case concerning his 2008 income tax, his challenge to

liability for the section 6672 penalty is raised as an issue con-

cerning whether the 2008 income tax should be deemed

‘‘unpaid’’, so the congressional intent to offer only one oppor-

tunity would be side-stepped, if Mr. Weber’s view prevailed.

Second, if collection of Mr. Weber’s 2008 income tax must

await litigation of his claim of overpaid penalty, then that

wait may be substantial. ‘‘Responsible person’’ cases, like

other cases involving substantive tax disputes, can be factu-

ally and legally complex and can take years to resolve. To

properly adjudicate Mr. Weber’s claim would require a deter-

mination of whether he was, in fact, a ‘‘responsible person’’

who willfully failed to pay over S&G’s trust fund taxes, so

that the section 6672 penalty was properly assessed; and if

so, whether the trust fund taxes of S&G (along with any

interest and penalties that may have accrued against the

entity and all ‘‘responsible persons’’) have by now been over-

paid when taking into consideration payments by him, by

other ‘‘responsible persons’’, and/or by S&G. Then, if such an

overpayment does exist, a determination must be made

whether there are other possible claimants to that overpay-

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(348) WEBER v. COMMISSIONER 371

ment and to what extent those other claimants have claims

currently pending or have time left to file such a claim.

Thereafter, a determination of each respective claimant’s

share in such overpayment would also be necessary. Only

then would Mr. Weber’s share of any such overpayment be

known and possibly ‘‘available’’ to apply to his 2008 income

tax liability.

Third, if a taxpayer may assert an overpayment of an

unrelated liability in a CDP proceeding, Mr. Weber does not

say whether the IRS may raise in turn (as it could in a refund

suit) an issue not stated in the refund claim as an ‘‘offset’’

to reduce the amount of the overpayment, see Lewis v.

Reynolds, 284 U.S. 281 (1932), or a counterclaim for an unre-

lated liability, see 28 U.S.C. secs. 1346(c), 1503, 2508. Section

6330 is silent on the point—surprisingly silent, if Congress

meant to confer jurisdiction to entertain overpayment claims.

Fourth, where the deadline for filing a refund suit, see sec.

6532(a), was looming, and where the taxpayer has been cau-

tious and (like Mr. Weber) has filed not only a CDP case in

this Court but also an actual refund suit in one of the courts

with refund jurisdiction, the courts are presented with the

vexing question of which court should proceed to adjudicate

the claim, and which should defer. (Section 7422(e), which

applies only when a deficiency case is pending in the Tax

Court, and not a CDP case, would not answer the question.)

It is true that Mr. Weber has disclaimed any intention to dis-

pute in this Court his underlying liability for the penalty

(and has said he argues here only an allegedly excessive

collection of the penalty); but this tactical decision on his

part does not solve the problems the courts would face in

other cases if his view were adopted but his tactic was not

imitated. Moreover, his approach involves inevitable difficul-

ties: He proposes to litigate his excessive collection argument

here and his non-liability argument in District Court; but

these are two aspects of a single cause of action that he

thereby purports to split. When one court reached an out-

come, whether favorable or unfavorable, its judgment might

be res judicata for his entire claim and might cut off the

aspect still supposedly pending in the other court.

An overpayment of a section 6672 penalty (or any other

liability) that has been determined by the IRS or a court but

has not been either refunded or applied to another liability

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372 138 UNITED STATES TAX COURT REPORTS (348)

may be an ‘‘available credit’’ that, under Freije, could be

taken into account in a CDP hearing to determine whether

the tax at issue remains ‘‘unpaid’’ and whether the 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 the IRS can pro-

ceed with collection of the liability at issue. Mr. Weber’s sec-

tion 6672 penalty liability is distinct from and unrelated to

his 2008 income tax liability. His remedy regarding his sec-

tion 6672 penalty refund claim is to be found in the District

Court refund suit he has already commenced.

Conclusion

The IRS’s Office of Appeals did not abuse its discretion in

determining to proceed with a levy to collect Mr. Weber’s

unpaid 2008 income tax, notwithstanding his contention that

his liability for a section 6672 penalty was overpaid.

An appropriate order and decision will be

entered.

f

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