Michael Brown v. Cir

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MICHAEL D. BROWN, No. 22-70001

Petitioner-Appellant, Tax Court. No.

18104-17L

v.

COMMISSIONER OF INTERNAL OPINION

REVENUE,

Respondent-Appellee.

Appeal from a Decision of the

United States Tax Court

Argued and Submitted November 10, 2022

Pasadena, California

Filed January 24, 2023

Before: Mary H. Murguia, Chief Judge, and Barrington D.

Parker, * and Kenneth K. Lee, Circuit Judges.

Opinion by Judge Parker

*

The Honorable Barrington D. Parker, United States Circuit Judge for

the U.S. Court of Appeals for the Second Circuit, sitting by designation.

2 BROWN V. CIR

SUMMARY **

Tax

The panel affirmed the Tax Court’s decision in an action

seeking a refund of a payment made in connection with a

rejected offer in compromise to settle a tax liability.

Taxpayer made an offer in compromise (OIC) to settle

his outstanding tax liability. Under the Tax Increase

Prevention and Reconciliation Act (TIPRA), taxpayer

submitted a payment of twenty percent of the value of his

OIC, acknowledging that this TIPRA payment would not be

refunded if the OIC was not accepted. The Commissioner of

Internal Revenue did not accept the OIC because the

Commissioner concluded that ongoing audits of taxpayer’s

businesses made the overall amount of his tax liability

uncertain. Taxpayer then sought a refund of his TIPRA

payment.

In a previous appeal, this court held that the Internal

Revenue Service did not abuse its discretion by returning the

OIC, but vacated the Tax Court’s determination that the IRS

had not abused its discretion in refusing to return the TIPRA

payment. This court remanded for the Tax Court to consider

its refund jurisdiction in the first instance. On remand, the

Tax Court held that it did not have jurisdiction.

The panel affirmed the Tax Court decision, because there

is no specific statutory grant conferring jurisdiction to refund

TIPRA payments. The panel explained that, as the Tax Court

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

BROWN V. CIR 3

correctly noted, it is a court of limited jurisdiction,

specifically granted by statute, with no authority to expand

upon that statutory grant.

COUNSEL

Steve R. Mather (argued), Mather Anderson, Los Angeles,

California, for Petitioner Appellant.

Matthew S. Johnshoy (argued), Trial Attorney; Joan I.

Oppenheimer Trial Attorney, Co-Counsel; Regina S.

Moriarty, Trial Attorney, Lead Counsel; David A. Hubbert,

Deputy Assistant Attorney General; United States

Department of Justice, Tax Division, Washington, D.C.;

William M. Paul, Internal Revenue Service, Washington,

D.C.; for Respondent-Appellee.

4 BROWN V. CIR

OPINION

PARKER, Circuit Judge:

Michael D. Brown owes approximately $50,000,000 in

unpaid federal taxes for various years between 2001 and

2011. In 2016, after the Internal Revenue Service (“IRS”)

placed two tax liens on his property, Brown submitted an

offer in compromise (“OIC”) to the Commissioner of

Internal Revenue. An OIC allows a taxpayer to settle his

outstanding tax liabilities for less than their total value if the

IRS determines there are doubts as to collectability or that

full payment would be inequitable or cause unusual

economic hardship. IRM 33.3.2 (Aug. 6, 2019) (Offers in

Compromise); IRS Form 656 (Offer in Compromise) at 3.

Brown’s OIC offered to settle his $50,000,000 outstanding

tax liability for a payment of $400,000, claiming that there

were doubts as to collectability.

The Tax Increase Prevention and Reconciliation Act of

2005 (“TIPRA”), Pub. L. 109–222, requires a taxpayer who

makes an OIC to submit a payment of twenty percent of the

value of the OIC, in Brown’s case $80,000. See 26 U.S.C. §

7122(c)(1)(A)(i). As part of the OIC process, the taxpayer

must acknowledge that he understands that the TIPRA

payment will not be refunded if the OIC is not accepted.

Brown acknowledged the following on his signed OIC

submission form: “I voluntarily submit the payments made

on this offer and understand that they will not be returned

even if I withdraw the offer or the IRS rejects or returns the

Offer.” IRS Form 656 (Offer in Compromise) at 5. The

Commissioner returned Brown’s OIC after concluding that

it was inappropriate to compromise his tax liability at that

time because the existence of ongoing audits of Brown’s

BROWN V. CIR 5

businesses made the overall amount of his tax liability

uncertain. The IRS, in accordance with the terms of the OIC,

did not return Brown’s $80,000 TIPRA payment. This

litigation is Brown’s attempt to retrieve that money.

In a previous appeal, we held that the IRS’s decision to

return Brown’s OIC was proper but remanded to allow the

Tax Court to determine if it had jurisdiction to refund

Brown’s $80,000 TIPRA payment. Brown v. Comm’r, 826

F. App’x 673, 674 (9th Cir. 2020). On remand, the Tax Court

held that it did not have jurisdiction to refund the payment

because the power to do so had not been specifically granted

to it by any statute. Brown v. Comm’r, 122 T.C.M. (CCH)

199, at *7 (2021). We agree and therefore we affirm.

I.

This litigation began in 2015 when the IRS filed the first

of two notices of federal tax lien (“NFTLs”) against Brown’s

property as a consequence of Brown’s unpaid taxes. In

response to the NFTLs, Brown requested a Collection Due

Process (“CDP”) hearing and indicated that he intended to

make an OIC. At that time, there were multiple ongoing

audits of Brown’s businesses.

In November 2016, Brown submitted his OIC. As noted,

his OIC offered to settle his $50,000,000 tax liability for

$400,000 and included the required twenty percent

($80,000) TIPRA payment. The law is clear that TIPRA

payments are not refundable deposits but rather are non-

refundable payments of tax. See Isley v. Comm’r, 141 T.C.

349, 372 (2013) (“[T]he [TIPRA] payment constitutes a

nonrefundable, partial payment of the taxpayer’s liability . .

.”) (citing H.R. Conf. Rept. No. 109–455, at 234 (2006)); see

also 26 U.S.C. § 7122(c)(2)(A)–(C) (establishing that any

TIPRA payment goes to the taxpayer’s liabilities). The IRS

6 BROWN V. CIR

accepted Brown’s OIC for processing but decided that it

should be returned because of the ongoing audits. After the

OIC was returned, Brown received a Notice of

Determination (“NOD”) which permitted him to appeal to

the Tax Court to contest the liens and the return of his OIC.

See 26 U.S.C. § 6330(d)(1).

Brown appealed to the Tax Court and lost. The Tax

Court held that the liens were appropriate and that the IRS

did not abuse its discretion by declining to refund Brown’s

TIPRA payment. See Brown v. Comm’r, 118 T.C.M. (CCH)

260 (2019). Brown then appealed to this Court. We affirmed

in part and vacated in part. Brown, 826 F. App’x at 673. We

held that the IRS did not abuse its discretion by returning

Brown’s OIC but vacated the Tax Court’s determination that

the IRS had not abused its discretion in refusing to return

Brown’s TIPRA payment. Because the Commissioner

argued to us that the Tax Court lacked jurisdiction to order a

refund of the TIPRA payment, but that issue had not been

fully briefed, we remanded to the Tax Court to consider its

refund jurisdiction in the first instance. Id. at 674.

On remand, the Tax Court held that it did not have

jurisdiction to refund Brown’s TIPRA payment. The court

emphasized that it is “a court of limited jurisdiction and has

only such jurisdiction as is granted it by the [Internal

Revenue] Code.” Brown, 122 T.C.M. (CCH) at *5. The court

reasoned that although it had jurisdiction to hear the appeal

pursuant to 26 U.S.C. §§ 6320(c) and 6330(d)(1), it had no

jurisdiction under these or any other Code provisions to pay

Brown the refund he was seeking. Id. at *6–7. It therefore

granted the Commissioner’s motion to dismiss for lack of

jurisdiction. Id. at *8. This appeal followed.

BROWN V. CIR 7

II.

We review the Tax Court’s interpretation of federal

statutes and its determinations of its own jurisdiction de

novo. Meruelo v. Comm’r, 691 F.3d 1108, 1114 (9th Cir.

2012), as amended on denial of reh’g and reh’g en banc

(Nov. 14, 2012).

As the Tax Court correctly noted, it is a court of limited

jurisdiction and possesses no general equitable powers. See

Comm’r v. McCoy, 484 U.S. 3, 7 (1987). In other words, it

has only the jurisdiction specifically granted by statute and

lacks the authority to expand upon that statutory grant. Id.;

see 26 U.S.C. § 7442. We have been clear that “[t]he Tax

Court’s jurisdiction is defined and limited by Title 26 and it

may not use general equitable powers to expand its

jurisdictional grant beyond this limited Congressional

authorization. It may exercise its authority only within its

statutorily defined sphere.” Est. of Branson v. Comm’r, 264

F.3d 904, 908 (9th Cir. 2001).

Brown argues that 26 U.S.C. §§ 6320 and 6330 give the

Tax Court jurisdiction to refund his TIPRA payment. This is

not so. Section 6320 merely requires that taxpayers be given

notice and an opportunity for a hearing when a tax lien is

filed. And section 6330 deals with procedures governing

levies on property and administrative reviews of both liens

and levies. See 26 U.S.C. § 6320(c) (explaining that

provisions of § 6330 shall apply to the review of tax-lien

hearings). Nothing in either section grants the Tax Court the

power to refund TIPRA payments. 1

1

Cf. 26 U.S.C. § 6512(b)(1) (giving the Tax Court, in its deficiency

jurisdiction, the power to determine an overpayment and refund such

overpayment to the taxpayer).

8 BROWN V. CIR

In Greene-Thapedi v. Commissioner, 126 T.C. 1, 8

(2006), the Tax Court held that “section 6330 does not

expressly give [the Tax Court] jurisdiction to determine an

overpayment or to order a refund or credit of taxes paid.”

The Tax Court went on to state “we do not believe we should

assume, without explicit statutory authority, jurisdiction

either to determine an overpayment or to order a refund or

credit of taxes paid in a section 6330 collection proceeding.”

Greene-Thapedi, 126 T.C. at 11.

Thus, the Tax Court lacks jurisdiction to refund TIPRA

payments because there is no specific statutory grant

conferring jurisdiction to do so. We have considered

Brown’s remaining arguments and find them to be without

merit.

III.

The judgment of the Tax Court is AFFIRMED.