Opinion
CIVIL ACTION NO. H-01-0170.
March 25, 2002.
MEMORANDUM AND ORDER
Pending before the Court is Defendant United States of America's motion for partial dismissal. (Instrument No. 15). After reviewing the record and the applicable law, the Court concludes that the motion should be GRANTED.
I. Background
On October 15, 1985 Ronald Whitley ("Whitley") filed his Individual Income Tax Return for 1984. The tax return included a deduction with respect to a partnership named Agri-Venture associates. The following year Whitley's tax return for 1985 included similar deductions with respect to a partnership named Agri-Ventures-1985. Similarly, in 1987 Whitley filed his tax return for 1986 from which deductions were made regarding two partnerships: Agri-Cal Venture Associates and Western Ag Venture Associates. Whitley's interest in the various partnerships was held through a partnership called Roy E. Whitley Investments.
In 1990 and 1991 the Internal Revenue Service ("IRS") issued Notices of Final Partnership Administrative Adjustment with respect to all of the partnerships from which Whitley claimed deductions in 1984 through 1986. On December 20, 1996 the IRS sent Roy E. Whitley Investments proposals for resolving the income tax liability for the relevant years. On April 4, 1997 Whitley agreed to the proposals by returning executed forms 870-P(AD). Accordingly, the IRS then informed Whitley that the settlement required adjustment to his individual tax liability for 1984, 1985, and 1986. The IRS also informed Whitley that his tax liability for 1982 had been adjusted because of a credit he claimed with respect to the partnerships in 1985.
On May 15, 1998 Whitley filed claims for refund of income taxes and interest for the years 1982, 1984, 1985, and 1986. The IRS, however, denied Whitley's claim.
On January 16, 2001 Whitley filed the present action seeking, in part, an abatement or refund of interest caused by IRS error or delay under Section 6404 of the Internal Revenue Code. Presently before the Court is the United States' motion to dismiss Whitley's claims for relief under § 6404 for lack of subject matter jurisdiction.
II. Dismissal Standard
Federal Rule of Civil Procedure 12(b)(1) provides for dismissal for "lack of jurisdiction over the subject matter." The Plaintiff bears the burden of demonstrating the existence of jurisdiction. St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998). In considering the motion to dismiss, the court may look at "(1) the complaint alone; (2) the complaint supplemented by undisputed facts; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Robinson v. TCI/US West Communications, Inc., 117 F.3d 900, 904 (5th Cir. 1997).
III. Discussion
26 U.S.C. § 6404 (e) authorizes the Secretary to abate "assessments of interest attributable to errors and delays by Internal Revenue Service." Prior to 1996 the statute was silent on whether a court could review the Secretary's decision whether to abate. However, several courts held that such a decision was not subject to review. See Arabright 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).
The Arabright line of cases reasoned that while courts have jurisdiction under 28 U.S.C. § 1346 over any actions to recover "any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws," including interest, that jurisdiction was limited bythe Administrative Procedures Act ("APA"). Selman, 941 F.2d at 1062; Horton, 936 F.2d at 550-51. The three circuit courts concluded that review of abatement decisions under § 6404 fell within the exceptions to the application of the APA. Arabright, 35 F.3d at 476; Selman, 941 F.2d at 1064; Horton, 936 F.2d at 553, 554. The courts reasoned that because § 6404 lacked standards by which a court could review the agency's action, the statute committed abatement decisions to the sole discretion of the IRS. Arabright, 35 F.3d at 475-76; Selman, 941 F.2d at 1063; Horton, 936 F.2d at 552, 553.
In 1996, however, Congress amended the code to specifically address the review of abatement decisions. 26 U.S.C. § 6404 (i) provides that "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 [6404] was an abuse of discretion . . ."
Whitley contends that the 1996 amendment of § 6404 was intended by Congress to explicitly provide for review of abatement decisions by district courts. The Court, however, concludes otherwise. When enacting the 1996 amendments, Congress was aware that courts declined to exercise jurisdiction over abatement decisions. Congress's response, however, was not to provide taxpayers with a right to review in district courts. Rather, as enacted, § 6404(i) specifically limited review to the Tax Court. In fact, the explanation contained within the House Report which accompanied the bill states:
Present law
Federal courts generally do not have the jurisdiction to review the IRS's failure to abate interest.Reasons for change.
The Committee believes that it is appropriate for the Tax Court to have jurisdiction to review IRS's failure to abate interest with respect to certain taxpayers.Explanation of provision
The bill grants the Tax Court jurisdiction to determine whether the IRS's failure to abate interest for an eligible taxpayer was an abuse of discretion. The Tax Court may order an abatement of interest. The action must be brought within 180 days after the date of mailing of the Secretary's final determination not to abate interest. An eligible taxpayer must meet the net worth and size requirements imposed with respect to awards of attorney's fees. No interference is intended as to whether under present law any court has jurisdiction to review IRS's failure to abate interest.
H.R. REP. No. 104-506, at 28 (1996). This statement of Congressional intent makes clear that Congress did not intend to provide district courts with jurisdiction to review the IRS's abatement decisions through the 1996 amendment. In fact, Congress explicitly affirmed the Arabright rule that courts lack jurisdiction to review abatement decisions.
The Court concludes that district courts do not have jurisdiction to review abatement decisions under § 6404 of the Internal Revenue Code. Other district courts considering this issue reached the same conclusion. See Beall v. United States, 170 F. Supp.2d 709, 711 (E.D. Tex. 2001); Davies v. United States, 124 F. Supp.2d 717, 721 (D. Me. 2000).
Accordingly, the Court
ORDERS that the United States' motion for partial dismissal is GRANTED. The Court further
ORDERS that Plaintiffs claims for abatement of interest under 26 U.S.C. § 6404 are DISMISSED for lack of subject matter jurisdiction.