Pen Coal Corp. v. Comm'r of Internal Revenue
| Citation | 107 T.C. No. 14,107 T.C. 249 |
| Decision Date | 06 November 1996 |
| Docket Number | 23672–95.,Nos. 23670–95,s. 23670–95 |
| Parties | PEN COAL CORPORATION, f.k.a. P & C “Bituminous Coal”, Inc., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.PEN HOLDINGS, INC. AND SUBSIDIARIES, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
B. John Williams, Jr., Carolyn O. Ward and Miriam L. Fisher, for petitioner.
Stephen M. Miller and Nancy W. Hale, for respondent.
Ps filed petitions for redetermination contesting, inter alia, R's determination that Ps are liable for interest computed at the increased rate prescribed in sec. 6621(c), I.R.C., applicable to large corporate underpayments of tax. R filed motions to dismiss for lack of jurisdiction and to strike allegations relating to Ps' liability for interest under sec. 6621(c).
Held: Sec. 6214(a) does not provide statutory authority for this Court to redetermine Ps' liability for interest computed at the increased rate prescribed in sec. 6621(c). Held, further, R's motions to dismiss for lack of jurisdiction and to strike will be granted.
This case was assigned to Special Trial Judge Robert N. Armen, Jr., pursuant to the provisions of section 7443A(b)(4) and Rules 180, 181, and 183.1 The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below.
ARMEN, Special Trial Judge:
These cases are before the Court on (1) respondent's Motion to Dismiss for Lack of Jurisdiction and to Strike as to Interest Due From the Petitioner, filed in docket No. 23670–95; and (2) respondent's Motion to Dismiss for Lack of Jurisdiction and to Strike as to the Taxable Year 1989 and as to Interest Due From the Petitioner, filed in docket No. 23672–95.
As explained in greater detail below, the issue for decision is whether the Court has jurisdiction to redetermine petitioners' liability for interest computed at the increased rate established by section 6621(c) applicable to large corporate underpayments of tax.
On August 17, 1995, respondent issued notices of deficiency to Pen Coal Corp. (Pen Coal) in which respondent determined the following deficiencies in, additions to, and accuracy-related penalty in respect of Pen Coal's Federal withholding taxes under chapter 3 of subtitle A:
+------------------------------------------------------------------------------+
¦Additions to Tax and ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦Penalty ¦ ¦ ¦ ¦ ¦ ¦ ¦
+--------------------------+----+----------+---------+-------+--------+--------¦
¦ ¦ ¦ ¦Sec. ¦Sec. ¦Sec. ¦Sec. ¦
+--------------------------+----+----------+---------+-------+--------+--------¦
¦ ¦Year¦Deficiency¦6651(a) ¦6653(a)¦6661 ¦6662 ¦
¦ ¦ ¦ ¦(1) ¦ ¦ ¦ ¦
+--------------------------+----+----------+---------+-------+--------+--------¦
¦ ¦1986¦$1,694,871¦$423,718 ¦$90,425¦— ¦— ¦
+--------------------------+----+----------+---------+-------+--------+--------¦
¦ ¦1987¦3,125,107 ¦— ¦— ¦$781,277¦— ¦
+--------------------------+----+----------+---------+-------+--------+--------¦
¦ ¦1988¦1,638,186 ¦— ¦— ¦409,547 ¦— ¦
+--------------------------+----+----------+---------+-------+--------+--------¦
¦ ¦1989¦1,600,390 ¦— ¦— ¦— ¦$320,078¦
+------------------------------------------------------------------------------+
Respondent also determined that Pen Coal's underpayments for the taxable years 1986 through 1989 constitute large corporate underpayments within the meaning of section 6621(c)(3) and that Pen Coal is therefore liable for interest computed at the increased rate prescribed in section 6621(c)(1). 2 The notices of deficiency also state that interest will be computed on the addition to tax under section 6651(a)(1) for the taxable year 1986 pursuant to section 6601(e)(2).3
On August 17, 1995, respondent issued notices of deficiency to Pen Holdings, Inc., and its subsidiaries (Pen Holdings) in which respondent determined the following deficiencies in, and additions to, Pen Holdings' Federal income taxes:
+----------------------------------------------------------------+
¦Additions To Tax ¦ ¦ ¦ ¦ ¦
+------------------+------+------------+---------------+---------¦
¦ ¦Year ¦Deficiency ¦Sec. 6651(a)(1)¦Sec. 6661¦
+------------------+------+------------+---------------+---------¦
¦ ¦1982 ¦$1,457,191 ¦— ¦$364,298 ¦
+------------------+------+------------+---------------+---------¦
¦ ¦1983 ¦990,664 ¦— ¦247,666 ¦
+------------------+------+------------+---------------+---------¦
¦ ¦1984 ¦1,510,584 ¦— ¦377,646 ¦
+------------------+------+------------+---------------+---------¦
¦ ¦1985 ¦2,317,050 ¦$175,058 ¦579,263 ¦
+------------------+------+------------+---------------+---------¦
¦ ¦1986 ¦5,102,222 ¦— ¦1,275,556¦
+------------------+------+------------+---------------+---------¦
¦ ¦1987 ¦4,229,739 ¦— ¦158,778 ¦
+------------------+------+------------+---------------+---------¦
¦ ¦1988 ¦3,181,108 ¦— ¦— ¦
+----------------------------------------------------------------+
Respondent also determined that Pen Holdings' underpayments for the taxable years 1982 through 1988 constitute large corporate underpayments within the meaning of section 6621(c)(3) and that Pen Holdings is therefore liable for interest computed at the increased rate prescribed in section 6621(c)(1). The notices of deficiency also state that interest will be computed on the addition to tax under section 6651(a)(1) for the taxable year 1985 pursuant to section 6601(e)(2).
On August 17, 1995, respondent issued additional notices of deficiency to Pen Holdings in which respondent determined the following deficiencies in, and additions to, Pen Holdings' Federal withholding taxes under chapter 3 of subtitle A:
+---------------------------------+
¦¦ ¦ ¦Addition To Tax ¦
++----+----------+----------------¦
¦¦Year¦Deficiency¦Sec. 6651(a)(1) ¦
++----+----------+----------------¦
¦¦1982¦$676,894 ¦$169,223 ¦
++----+----------+----------------¦
¦¦1983¦972,657 ¦243,164 ¦
++----+----------+----------------¦
¦¦1984¦729,143 ¦182,286 ¦
++----+----------+----------------¦
¦¦1985¦1,079,888 ¦269,972 ¦
+---------------------------------+
Respondent also determined that Pen Holdings' underpayments for the taxable years 1982 through 1985 constitute large corporate underpayments within the meaning of section 6621(c)(3) and that Pen Holdings is therefore liable for interest computed at the increased rate prescribed in section 6621(c)(1). The notices of deficiency also state that interest will be computed on the additions to tax under section 6651(a)(1) for the taxable years 1982 through 1985, pursuant to section 6601(e)(2).
All references to petitioners are to Pen Coal and Pen Holdings (and its subsidiaries).
On November 14, 1995, petitioners separately filed petitions for redetermination with this Court contesting the notices of deficiency described above. Each of the petitions contains allegations that respondent erred in her determinations regarding the imposition of interest under sections 6601(e)(2) and 6621(c)(1). Specifically, petitioners allege that they are not liable for interest computed at the increased rate prescribed in section 6621(c) because petitioners do not have a “large corporate underpayment” for any of the taxable years in issue. In the alternative, petitioners allege that respondent failed to allow them an opportunity for administrative review prior to the issuance of the notices of deficiency and that, as a consequence, the applicable date for computing increased interest under section 6621(c) is the date that the notices of deficiency were mailed.4
As indicated, respondent moved to dismiss for lack of jurisdiction and to strike the allegations in the petitions concerning petitioners' liability for interest. Respondent contends that this Court lacks jurisdiction in these proceedings to redetermine petitioners' liability for interest under sections 6601(e)(2) and 6621(c).
Petitioners filed objections to respondent's motions in which they cited Ohio Farm Bureau Federation v. Commissioner, 106 T.C. 222 (1996), and Northwestern Indiana Telephone Co. v. Commissioner, T.C.Memo. 1996–168, for the proposition that this Court has the authority, by virtue of its jurisdiction to redetermine deficiencies in tax, to redetermine a corporation's liability for interest under section 6621(c). In the alternative, petitioners argued in their objections that this Court has jurisdiction to redetermine such interest after payment and within 1 year of the date on which the decision of the Court becomes final, pursuant to section 7481(c).
During the course of the oral argument on respondent's motions, counsel for both parties acknowledged that the Court's memorandum opinion in Northwestern Indiana Telephone Co. v. Commissioner, supra, had been modified (by Order dated April 17, 1996) to eliminate all references to section 6621(c). The parties also acknowledged that, although Ohio Farm Bureau Federation v. Commissioner, supra, includes references to section 6621(c), the Court did not address in that case the Commissioner's determination that the taxpayer was liable for the increased rate of interest applicable to large corporate underpayments of tax. Id. at 223, 236 n. 9. In addition, counsel for petitioners...
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