Tax Courts Have Exclusive Jurisdiction Over Interest Abatement Actions

Hinck v. United States

IRS code section 6404(e) allows the Secretary of the Treasury to forgive (in whole or in part) any interest accrued on unpaid taxes if the assessment of the interest on a deficiency is attributable to an unreasonable error or delay on the part of the IRS. 6404(h), passed as part of the taxpayers bill of rights, allows for judicial review over the Secretary’s decision not to grant such an abatement. The question in this case is whether that review is available in district court, as opposed to tax court.

6404(h) states that “In general.—The Tax Court shall have jurisdiction over any action brought by a taxpayer who meets the requirements referred to in section 7430… 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.” “A precisely drawn, detailed statute pre-empts more general remedies.” “When Congress enacts a specific remedy when no remedy was previously recognized, or when previous remedies were ‘problematic’ the remedy provided is generally regarded as exclusive.” Both of these axioms fit the tax statute. That the primary argument against judicial review no longer applies (when Congress supplied a standard of review the argument that the agency’s determination should not be disturbed for lack of judicially manageable standards ceased to apply) does not affect the issue of the exclusivity of jurisdiction.

Petitioners argue that this interpretation impliedly repeals preexisting jurisdiction, something that is disfavored in statutory construction, but in actuality there had been no jurisdiction preexisting before this statute. Nor does this interpretation depart from the normal understanding of the metaphysical relationship between the tax courts and district courts, since granting any jurisdiction to the Tax Court, as Congress clearly did, breaks the general scheme whereby prepayment actions are brought in Tax Court and postpayment actions brought in District Court. The fact that there are no issues of substantive tax law in interest abatement claims suggests that the Tax Courts are at least as well situated to address these claims as the District Court. Finally, it is not odd that this interpretation prevents persons with wealth exceeding $2m, and companies with wealth exceeding $7m, from seeking judicial review, since this reflects Congress’ judgment that these classes of persons are more likely to be able to pay the interest.