Hinck v. U.S.

• Citation: 446 F.3d 1307
• Decision Date: 04 May 2006
• Docket Number: No. 05-5099.,05-5099.
• Parties: John F. HINCK and Pamela F. Hinck, Plaintiffs-Appellants, v. THE UNITED STATES, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

446 F.3d 1307

John F. HINCK and Pamela F. Hinck, Plaintiffs-Appellants, v. THE UNITED STATES, Defendant-Appellee.

No. 05-5099.

United States Court of Appeals, Federal Circuit.

May 4, 2006.

Teresa J. Womack, Redding & Associates, P.C., of Houston, Texas, argued for plaintiffs-appellants. With her on the brief was Sallie W. Gladney.

Bethany B. Hauser, Attorney, Tax Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Eileen J. O'Connor, Assistant Attorney General, and Kenneth L. Greene, Attorney. Of counsel was Marion E.M. Erickson.

Before LOURIE, LINN, and DYK, Circuit Judges.

LOURIE, Circuit Judge.

John and Pamela Hinck (collectively the "Hincks") appeal from the judgment of the United States Court of Federal Claims dismissing their suit for lack of jurisdiction. Hinck v. United States, 64 Fed.Cl. 71 (Fed.Cl.2005). Because the court lacked subject matter jurisdiction over the Hincks' interest abatement claim, we affirm.

BACKGROUND

Section 6404 of the Internal Revenue Code authorizes the Secretary of the Treasury to abate a tax or liability assessment in certain circumstances.¹ In 1986, Congress amended § 6404 by adding a new subsection (e)(1) that, for the first time, authorized the Secretary of the Treasury to grant an abatement of interest assessed against a taxpayer. As originally enacted by the Tax Reform Act of 1986, § 1563, Pub.L. No. 99-514, 100 Stat.2085, 2762, § 6404(e)(1) provided in its entirety as follows:

(e) ASSESSMENTS OF INTEREST ATTRIBUTABLE TO ERRORS AND DELAYS BY INTERNAL REVENUE SERVICE.—

(1) In General — In the case of any assessment of interest on —

(A) any deficiency attributable in whole or in part to any error or delay by an officer or employee of the Internal Revenue Service (acting in his official capacity) in performing a ministerial act, or (B) any payment of any tax described in section 6212(a) to the extent that any delay in such payment is attributable to such an officer or employee being dilatory in performing a ministerial act,

the Secretary may abate the assessment of all or any part of such interest for any period. For purposes of the preceding sentence, an error or delay shall be taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved, and after the Internal Revenue Service has contacted the taxpayer in writing with respect to such deficiency or payment.

26 U.S.C. § 6404(e)(1) (1986).

In 1996, Congress enacted the Taxpayer Bill of Rights II, P.L. 104-168, § 301(a), 110 Stat. 1452 (1996), which made two changes to § 6404. First, it amended § 6404(e)(1) by adding the word "unreasonable" before the words "error or delay" and by changing the words "ministerial act" to "ministerial or managerial act." Those changes to § 6404(e)(1) were effective for interest accruing with respect to deficiencies or payments for tax years beginning after July 30, 1996, and thus do not apply to this appeal, which concerns the tax year 1986. Because of the effective date of the § 6404(e)(1) change, the original version of § 6404(e)(1) thus applies to the Hincks' claim.

The second change involved the addition of the present § 6404(h),² which provides for review of abatement determinations made by the IRS in the Tax Court as follows:

The Tax Court shall have jurisdiction over any action brought by a taxpayer who meets the requirements referred to in section 7430(c)(4)(A)(ii) to determine whether the Secretary's failure to abate interest under this section was an abuse of discretion, and may order an abatement, if such action is brought within 180 days after the date of the mailing of the Secretary's final determination not to abate such interest.

Taxpayer Bill of Rights 2, P.L. 104-168 § 301(a) (1996). Section 7430(c)(4)(A)(ii) of Title 26 references 28 U.S.C. § 2412(d)(2)(B), and provides that, for purposes of a claim brought under § 6404, a taxpayer may not have a net worth of more than $2,000,000 or be the owner of a business worth more than $7,000,000. The addition of § 6404(h) applies to requests for abatement submitted to the IRS after July 30, 1996, regardless of the tax year involved, and thus applies to the Hincks' suit. P.L. 104-168 § 301(b), (c) (1996).

This appeal arises from a claim by the Hincks to recover tax interest paid for the tax year 1986. The facts are not disputed. The Hincks filed a joint federal income tax return for the tax year 1986. Hinck, 64 Fed.Cl. at 72. Ten years later, in May 1996, while their return for the tax year 1986 was under investigation by the Internal Revenue Service (the "IRS"), the Hincks made an advance remittance of $93,890.00 to the IRS towards any income tax deficiency for that year. Id. The IRS later assessed $16,409.00 in additional taxes and $21,669.22 in interest against the Hincks for the taxable year 1986. Id. On February 14, 2000, the IRS applied the advance remittance payment to the total amount owed by the Hincks and refunded them the balance, $55,811.78. Id. On June 14, 2000, the Hincks filed a claim for a refund, which included a request that, owing to IRS errors and delays, interest assessed against the Hincks should be abated, pursuant to § 6404(e)(1) of the Internal Revenue Code, for the period from March 21, 1989, until April 1, 1993. Id. at 72-73. The IRS denied the Hincks' request on April 30, 2001. Id. at 72-73.

On April 20, 2003, the Hincks filed suit in the United States Court of Federal Claims seeking review of the IRS's refusal to abate the interest. Id. The government moved to dismiss the suit for lack of jurisdiction. On February 3, 2005, the court granted that motion. The court first determined that it possessed subject matter jurisdiction over tax refund claims under the Tucker Act, 28 U.S.C. § 1491(a), which provides that "[t]he United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department. . ." Id. at 76. It concluded, however, that it still could not review the IRS's determination whether to abate the interest under I.R.C. § 6404(e)(1).

The court noted that prior to 1996, several cases had held that tax abatement determinations under § 6404(e)(1) are not judicially reviewable because the IRS has sole discretion to abate interest and there are no tests or standards by which to adjudicate the correctness of the IRS's determination. But, in 1996, § 6404 had been amended to include § 6404(h), which provides that the Tax Court shall have jurisdiction to review abatement determinations. The trial court analyzed the statutory language of the amended version of § 6404 and its legislative history and determined that § 6404(h) did not disturb the holdings of the prior decisions, and that the rationale set forth in those decisions that there was no appeal from denial of interest abatement decisions was still applicable. Thus, the court determined that only the Tax Court, not the Court of Federal Claims, could review interest abatement determinations by the IRS.

The Hincks timely appealed the final judgment of the Court of Federal Claims dismissing their action; we have jurisdiction to hear this appeal pursuant to 28 U.S.C. § 1295(a)(3).

DISCUSSION

"A decision of the Court of Federal Claims `to dismiss a complaint for lack of jurisdiction is a question of law subject to. . . independent review by this court.'" Texas State Bank v. United States, 423 F.3d 1370, 1375 (Fed.Cir.2005) (quoting Shearin v. United States, 992 F.2d 1195, 1195 (Fed.Cir.1993)).

Whether the Court of Federal Claims has jurisdiction over § 6404(e)(1) interest abatement decisions is one of first impression in our court. However, several other circuit and district courts have previously considered the same issue, both before the enactment of § 6404(h) in 1996 and subsequent to its enactment. That case law, although not binding on us, is relevant to our analysis, and thus we begin by discussing that authority.

Prior to 1996, several courts had held that district courts had subject matter jurisdiction over § 6404(e)(1) claims, but that the Administrative Procedure Act ("APA") barred judicial review of those claims. Argabright v. United States, 35 F.3d 472 (9th Cir.1994); Selman v. United States, 941 F.2d 1060 (10th Cir.1991); Horton Homes, Inc. v. United States, 936 F.2d 548 (11th Cir.1991). In Horton Homes, the Eleventh Circuit held that the district court had subject matter jurisdiction over the taxpayers' interest abatement claim because 28 U.S.C. § 1346 states that the "district court shall have original jurisdiction . . . of [a]ny civil action against the United States for the recovery of internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws"; the court held that the reference in the statute to "tax" included interest imposed on such tax. 936 F.2d at 550. The court also held, however, that the taxpayers' claim was not subject to judicial review because § 6404(e)(1) left the interest abatement decision to the Secretary, and the APA specifies that decisions committed to agency discretion by law were not reviewable. Id. at 554.

In Selman, the Tenth Circuit reached the same result through a different interpretation of 28 U.S.C. § 1346, reasoning that the taxpayers' § 6404(e)(1) claim fell "within the district court's jurisdiction to decide cases regarding `any sum alleged to have been excessive . . . under the internal revenue laws" ' because "any sum" may refer to amounts which are neither taxes nor penalties, and one obvious example of such a "sum" was interest. 941 F.2d at 1062 (citing Flora v. United States, 362 U.S. 145, 149, 80 S.Ct....