Consulting v. Comm'r of Internal Revenue, 6838–98.
| Citation | 112 T.C. 1,112 T.C. No. 1 |
| Decision Date | 06 January 1999 |
| Docket Number | No. 6838–98.,6838–98. |
| Parties | Henry Randolph CONSULTING, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
R determined, in a notice mailed to P, that some of P's workers were employees and that P was not eligible for relief under sec. 530 of the Revenue Act of 1978, Pub.L. 95–600, 92 Stat. 2763, 3855, for certain taxable periods. R attached to the notice a proposed agreement to assessment of tax resulting from R's determination. P filed a petition seeking our redetermination under sec. 7436, I.R.C., of R's determination, including the amounts of tax R proposed to assess.Held: We lack jurisdiction to decide the amount of P's employment tax and income tax withholding liability for the taxable periods in issue.George W. Connelley, Jr., Linda S. Paine, and William O. Grimsinger, for petitioner.
M. Kathryn Bellis, for respondent.
This case is before the Court on respondent's motion to dismiss for lack of jurisdiction as to the amounts of employment tax 1 liability for the periods in issue. We will grant respondent's motion for the reasons stated below.
Neither party requested a hearing, and we conclude that none is necessary to decide respondent's motion.
Petitioner is a sole proprietorship, the principal place of business of which is in Birmingham, Alabama.
Respondent's agents audited petitioner's Federal Insurance Contributions Act and income tax withholding tax returns (Forms 941) for March 31 to December 31, 1994, and March 31 to December 31, 1995, and petitioner's Federal Unemployment Tax Act tax return (Form 940) for 1995. On March 19, 1998, respondent mailed to petitioner a Notice of Determination Concerning Worker Classification Under Section 7436 which said in part:
As a result of an employment tax audit, we are sending you this NOTICE OF DETERMINATION CONCERNING WORKER CLASSIFICATION UNDER SECTION 7436. We have determined that the individual(s) listed or described on the attached schedule are to be legally classified as employees for purposes of federal employment taxes under subtitle C of the Internal Revenue Code and that your (sic) are not entitled to relief from this classification pursuant to section 530 of the Revenue Act of 1978 with respect to such individual(s). This determination could result in employment taxes being assessed against you.
Respondent attached to the notice of determination an Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment (Excise or Employment Tax) (Form 2504) in which respondent proposed that petitioner consent to immediate assessment and collection of $53,194.87 in tax, consisting of the following amounts:
1. $27,814.58 for March 31 to December 31, 1994, under the FICA, secs. 3101–3125, and for income tax withholding, secs. 3401–3406 and 3509;
2. $22,776.29 for March 31 to December 31, 1995, under the FICA and for income tax withholding; and
3. $2,604.00 for 1995, under the FUTA, secs. 3301–3311.
The form also proposed that petitioner agree to the following:
I consent to the immediate assessment and collection of any additional tax and penalties and accept any overassessment (decrease in tax and penalties) shown above, plus any interest provided by law.
I understand that by signing this agreement, I am waiving the restrictions on assessment provided in section 7436(d) and 6213(a) of the Internal Revenue Code of 1986, and that I will not be able to contest the issues covered by this agreement in the United States Tax Court.
Respondent attached to the notice of determination a copy of Examination Changes—Federal Unemployment Tax for 1995 (Form 4667), and Employment Tax Examination Changes Report for 1994 and 1995 (Forms 4668), detailing respondent's calculations of the amounts of assessment to which respondent proposed that petitioner agree.
Petitioner filed a petition seeking our review of respondent's notice of determination. In it, petitioner contends that petitioner's service providers are not employees; petitioner is entitled to treatment under section 530(a) of the Revenue Act of 1978, Pub.L. 95–600, 92 Stat. 2763, 2855; respondent's computation of proposed employment tax and income tax withholding due is incorrect; and, if respondent's determinations are sustained, the correct liabilities can be recomputed under Rule 155. Petitioner also contends that the notice of determination is void because, in the notice, respondent did not identify the individuals whose worker classification was being determined. Respondent filed a motion to dismiss for lack of jurisdiction as to the amounts of tax respondent proposed to assess. Respondent also moved to strike from the petition petitioner's claim that, if respondent's determinations are sustained, the correct liabilities can be recomputed under Rule 155.
The parties dispute whether we have jurisdiction under section 7436 2 to decide the amounts of tax for which petitioner would be liable if we sustain to any extent respondent's determination that petitioner's workers are employees and that petitioner is not entitled to relief under section 530 of the Revenue Act of 1978.
Petitioner contends that our jurisdiction is provided by section 7436(a), (c), and (d), and that this result is consistent with logic and public policy (e.g., the convenience of the parties and judicial economy). Respondent contends that we lack jurisdiction under section 7436 to decide amounts of employment tax due.
To decide this issue, we first consider the following issues relating to the text of section 7436:(1) Whether section 7436(a) provides jurisdiction over amounts of employment tax due; and (2) whether jurisdiction over amounts is provided by section 7436(d), which incorporates into section 7436 the principles of several provisions governing our deficiency jurisdiction, or by section 7436(c), which makes the small case procedures under section 7463 available for cases under section 7436 if less than $10,000 3 is in dispute.
Next, we consider whether our interpretation of section 7436 is altered by (1) its legislative history, (2) a comparison of section 7436 to provisions authorizing us to issue declaratory judgments (sections 7428, 7476, 7477, 7478, and 7479), (3) the fact that respondent attached a proposed consent to assess employment tax due to the notice, or (4) petitioner's contention that it would be illogical to provide jurisdiction over worker classification issues without providing jurisdiction to decide the amounts of employment tax and income tax withholding liability, e.g., from the standpoint of convenience of the parties or judicial economy.
A. Section 74361. Section 7436(a)
We may only exercise jurisdiction that is expressly permitted or provided by statute. Trost v. Commissioner, 95 T.C. 560, 565 (1990); Judge v. Commissioner, 88 T.C. 1175, 1180–1181 (1987). Section 7436(a) 4 expressly grants jurisdiction to this Court (if certain conditions are met) to decide whether service providers are employees or independent contractors for purposes of subtitle C (Employment Taxes and Collection of Income Tax), and whether section 530 of the Revenue Act of 1978 applies. Section 7436(a) does not expressly give us jurisdiction to decide any other matter, such as the amount of a taxpayer's employment tax liability that results from respondent's worker classification determination. This contrasts with our deficiency jurisdiction under section 6213, which expressly permits us to redetermine the “amount” of a deficiency in cases involving income, gift, estate, or certain other taxes, albeit not including employment taxes. Sec. 6211(a). Section 7436(a) more closely parallels our authority to make declaratory judgments (sections 7428, 7476, 7477, 7478, and 7479). Those provisions each specify a subject matter, but do not state that we may decide the amount of tax due. See paragraph C, below, for a comparison of section 7436 with the declaratory judgment provisions. Also, the last sentence of section 7436(a) makes our redetermination reviewable as a decision. This provision would be unnecessary if we were redetermining a deficiency. Cf. sec. 7459(c). Thus, based on the text of section 7436(a), we conclude that we lack jurisdiction to decide the amounts of tax due in cases arising under section 7436.
2. Section 7436(d)
Section 7436(d) 5 provides that “the principles” of sections 6213(a), (b), (c), (d), and (f), 6214(a), 6215, 6503(a), 6512, and 7481 apply to cases that arise under section 7436. Section 7436 (d) does not expressly state that it provides any jurisdiction. However, petitioner contends that the references to several deficiency procedure provisions in section 7436(d) create, or imply that we have, jurisdiction to decide the amount of its employment tax liability for the periods in issue. Petitioner also contends that the references in section 7436(d) are surplusage if we do not have jurisdiction to decide the amount of employment taxes owed for those years.
We disagree. Each of the references in section 7436(d) to deficiency procedures can be read to have a rational purpose even if we lack jurisdiction over the amounts in dispute in section 7436 cases. The following chart briefly describes each provision listed in section 7436(d), and states how the principle of each listed section could apply to a section 7436 case even if we lack jurisdiction to decide amounts of tax due.
+-----------------------------------------------------------------------------+
¦Provisions Listed In Sec. 7436(d) ¦Possible Application Of Principles ¦
¦ ¦Of That Section To Sec. 7436 ¦
+----------------------------------------+------------------------------------¦
¦ ¦The Commissioner may not assess ¦
¦Sec. 6213(a). The Commissioner may not ¦employment tax during the time that ¦
¦assess tax for the years in issue...To continue reading
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