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ANAND v. COMMISSIONER OF INTERNAL REVENUE (2021)

United States Court of Appeals, Second Circuit.2021-04-16No. 20-2408

Summary · law.co

Holding. The Tax Court's decision was affirmed, upholding the denial of interest abatement, the rejection of the challenge to underlying tax liability based on claim preclusion, and the dismissal of claims beyond the Tax Court's jurisdiction.

Davendra Anand, representing himself, appealed a Tax Court decision denying his request for abatement of interest on unpaid taxes and refunds of penalties related to unreported rental income from Indian property. Anand also sought to amend a U.S.-India tax treaty and obtain relief from foreign bank reporting penalties. The Tax Court dismissed claims outside its jurisdiction, rejected his challenge to the underlying tax liability based on a prior settlement agreement, and found he failed to demonstrate that the IRS abused its discretion in denying interest abatement.

On appeal, the court examined whether Anand could qualify for interest abatement under federal law, which permits abatement only when delays result from unreasonable IRS error or administrative action. The court found that Anand bore responsibility for some delays (such as his withdrawal from a voluntary disclosure program) and that other claimed delays either occurred after interest was assessed or involved legal analysis rather than ministerial acts. The court also confirmed that Anand could not relitigate tax liabilities already resolved through a prior settlement and stipulated judgment, and that the Tax Court had no authority to modify treaty provisions or address foreign reporting penalties.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether the IRS abused its discretion in denying interest abatement under 26 U.S.C. § 6404(e)
  • Whether prior settlement and Tax Court judgment precluded relitigation of tax liabilities under res judicata doctrine
  • Whether Tax Court has jurisdiction to amend international tax treaties
  • Whether FBAR penalties fall within Tax Court jurisdiction

Procedural posture

Anand appealed a Tax Court decision dismissing portions of his petition, granting partial summary judgment to the IRS on his tax liability claim, and denying his request for interest abatement.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

SUMMARY ORDER

Appellant Davendra Anand, proceeding pro se, filed a petition in the Tax Court, seeking an abatement of interest; refunds of taxes and Report of Foreign Bank and Financial Accounts (“FBAR”) penalties paid for failing to report rental income from a commercial property in India; and amendment of a treaty between the United States and India (the Double Taxation Abatement Agreement (“DTAA”)). The Tax Court dismissed the portion of Anands petition related to the DTAA and the FBAR penalties, reasoning that it lacked jurisdiction over those issues. It granted partial summary judgment to the Commissioner of the Internal Revenue Service (“IRS”) with respect to Anands challenge to his underlying tax liability because Anands challenge was precluded by the decision in a prior 2016 Tax Court proceeding. It also granted partial summary judgment to the Commissioner with respect to the denial of an interest abatement, reasoning that Anand was entitled to an abatement only for a certain period where the accrued interest was attributable to an unreasonable delay by the IRS. We assume the parties’ familiarity with the underlying facts, the procedural history of the case, and the issues on appeal.

We review the Tax Courts grant of summary judgment de novo. Sunik v. Commr, 321 F.3d 335, 337 (2d Cir. 2003); Eisenberg v. Commr, 155 F.3d 50, 53 (2d Cir. 1998); 26 U.S.C. § 7482(a)(1) (providing that tax court decisions reviewed in same manner as district court decisions in civil cases tried without a jury). “Summary judgment is properly granted where no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law.” Eisenberg, 155 F.3d at 53.

In general, the IRS may abate interest when the interest is “attributable in whole or in part to any unreasonable error or delay by an officer or employee of the Internal Revenue Service (acting in his official capacity) in performing a ministerial or managerial act[.]” 26 U.S.C. § 6404(e)(1)(A). However, any delay that is attributable to the taxpayer is not eligible for abatement. Id. § 6404(e)(1). Further, delays must occur in the period between when the IRS first contacts a taxpayer about a deficiency and when interest is assessed. See Banat v. Commr, T.C. Mem. 2000-141, at * 2 (2000), affd, 5 Fed. Appx 36 (2d Cir. 2001). The Tax Court reviews the Commissioners decision to deny an abatement of interest for an abuse of discretion. 26 U.S.C. § 6404(h)(1).

Anand failed to show that the Commissioner abused his discretion by denying an abatement of interest. The Tax Court determined that the only period that Anand could be eligible for an interest abatement was from September 26, 2013, to February 11, 2014, when the IRS stopped working on Anands case in order to work on his brothers audit. Anand did not offer any evidence that other delays were unreasonable. Anand argued in the Tax Court that delays had been caused by changes in the personnel handling his case. But the first change in personnel, from an agent working as a part of the Offshore Voluntary Disclosure Initiative (“OVDI”) to IRS Revenue Agent Karen Vazquez, was caused by Anand when he left the OVDI program. Delays attributable to the taxpayer are not eligible for interest abatements. See id. § 6404(e)(1). The other changes in personnel involved a change from Agent Vazquez to Revenue Agent Jennifer Jones—the resultant delay for which the Tax Court had already abated Anands interest—and the assignment of Appeals Officer Karen Graham. However, Officer Graham was assigned in December 2015, after the IRS assessed Anands interest in July 2015 and Anand had filed a petition in the Tax Court. Because this was after the interest was assessed, any delay attributable to Officer Grahams assignment is not eligible for abatement. See Banat, T.C. Mem. 2000-41, at * 2.

Anand contends that the IRS agents working on his tax case were “confused and in disarray” about the effect of the DTAA and the propertys location in India. Appellants Br. 7. To the extent that Anand argues that the delay in his case was caused by the IRS agents’ need to obtain legal advice on these issues, he cannot obtain an abatement for time spent obtaining legal advice. Under Treasury Department regulations, such an act is not considered ministerial or managerial. See 26 C.F.R. § 301.6404-2(c) (stating in Example 12 that any delay or error caused by the need to interpret “complex provisions of federal tax law” is not a ministerial or managerial act). Anand also argues that Appeals Officer Graham intentionally misled him and told him he would not accrue interest in order to convince him to settle. But this argument is clearly contradicted by the text of the 2016 Tax Court decision, which stated that the parties stipulated that Anand would be subject to interest on his unpaid deficiencies.

The Tax Court also properly granted summary judgment to the Commissioner with respect to the underlying tax liability. The doctrine of res judicata (claim preclusion) prevents parties from relitigating issues that were, or could have been, decided on the merits in a previous action. Brown Media Corp. v. K&L Gates, LLP, 854 F.3d 150, 157 (2d Cir. 2017). “To determine whether the doctrine of res judicata bars a subsequent action, [this Court] consider[s] whether 1) the prior decision was a final judgment on the merits, 2) the litigants [or their privies] were the same parties, 3) the prior court was of competent jurisdiction, and 4) the causes of action were the same.” Id. (internal quotation marks and citation omitted). The Supreme Court has held that Tax Court decisions based on an agreement of the parties “are res judicata of the tax claims for the years” at issue in the Tax Court decision. United States v. Intl Bldg. Co., 345 U.S. 502, 505–06, 73 S.Ct. 807, 97 L.Ed. 1182 (1953). Anand entered into a settlement agreement with the Commissioner regarding his tax liability for tax years 2004 to 2011 and the Tax Court entered a decision based on their stipulation. Therefore, the Tax Court decision concerning Anands tax liabilities for tax years 2004 to 2011 has preclusive effect. Anand could not relitigate those tax liabilities in his second Tax Court proceeding, much less in this appeal.

Finally, we cannot address any of Anands claims concerning amendment of the DTAA or his FBAR penalties because we lack jurisdiction “to grant relief that is beyond the powers of the Tax Court itself.” Maier v. Commr, 360 F.3d 361, 363 (2d Cir. 2004) (internal quotation marks and citation omitted). “[T]he Tax Court is a court of limited jurisdiction that possesses only those powers expressly conferred upon it by Congress; it may exercise jurisdiction only pursuant to specific legislative enactments.” Id. The Tax Court lacked jurisdiction to alter the DTAA. Anand points to no statutory provision permitting the Tax Court, or this Court, to alter treaties. Further, the Tax Court does not have jurisdiction over FBAR penalties because they are not considered tax deficiencies. See Williams v. Commr, 131 T.C. 54, 56–59 (2008). Therefore, we lack jurisdiction over these issues.

We have reviewed the remainder of Anands arguments and find them to be without merit. For the foregoing reasons, the decision of the Tax Court is AFFIRMED.