                           149 T.C. No. 15



                  UNITED STATES TAX COURT



              ZIPORA KLEIN, Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent

             SAMUEL KLEIN, Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket Nos. 24595-15L, 24596-15L.             Filed October 3, 2017.



       Ps, a married couple, pleaded guilty to violating I.R.C. sec.
7206(1) by filing a false return for 2006. Ps agreed to make full resti-
tution for the losses caused by their underreporting of income for
2003-2006. At the sentencing the Government presented a Federal
tax-loss calculation of $562,179 for those years. Adopting it, the
District Court ordered Ps to pay that sum as restitution to the IRS. Ps
eventually paid the full amount of restitution, along with all appli-
cable title 18 statutory additions, and the Government released the
title 18 lien that had accompanied the restitution order.

      Relying on I.R.C. sec. 6201(a)(4), R later assessed against Ps
not only the $562,179 of restitution they had been ordered to pay, but
also underpayment interest under I.R.C. sec. 6601(a) and additions to
tax under I.R.C. sec. 6651(a)(3). When Ps did not pay the latter
amounts, R began collection action, filing notices of Federal tax lien.
                                         -2-

      Following a CDP hearing, Ps timely petitioned this Court. R con-
      tends that he can assess and collect interest and additions to tax on the
      restitution amount under I.R.C. sec. 6201(a)(4), which authorizes him
      to assess and collect restitution “as if such amount were such tax.”

              Held: I.R.C. sec. 6201(a)(4) does not authorize R to add under-
      payment interest or failure-to-pay additions to tax to a title 18 resti-
      tution award, and R may not assess or collect from Ps underpayment
      interest or additions to tax without first determining their civil tax lia-
      bilities.



      Mark M. Hathaway, for petitioners.

      Carolyn A. Schenck, Michael K. Park, and Halvor R. Melom, for

respondent.



                                      OPINION


      LAUBER, Judge: In these consolidated collection due process (CDP) cases,

petitioners seek review pursuant to sections 6320(c) and 6330(d)(1)1 of the

determination by the Internal Revenue Service (IRS or respondent) to uphold

notices of Federal tax lien (NFTL) filing. The cases present a question of first


      1
        Unless otherwise indicated, all statutory references are to the Internal
Revenue Code (Code) in effect at all relevant times, and all Rule references are to
the Tax Court Rules of Practice and Procedure. We round all monetary amounts
to the nearest dollar.
                                          -3-

impression in this Court: whether the IRS may assess and collect interest and

additions to tax on amounts assessed under section 6201(a)(4)(A). That provision

authorizes the Secretary, following a taxpayer’s criminal conviction for failure to

pay any tax imposed by title 26, to “assess and collect the amount of restitution”

ordered by the sentencing court “in the same manner as if such amount were such

tax.”

        Petitioners have fully paid the restitution ordered by the sentencing court.

The only amounts remaining in dispute are the interest and additions to tax sub-

sequently assessed by the IRS, which were the principal focus of the CDP hearing.

Respondent has moved for summary judgment, urging that we sustain the NFTL

filing to facilitate collection of the assessed interest and additions to tax.

        Although petitioners have not filed cross-motions for summary judgment,

they contend that they have fully discharged their restitution obligations and that

“the collection action set forth in the notice of determination [should] not be al-

lowed to proceed.” Under these circumstances we will recharacterize as a cross-

motion for summary judgment each petitioner’s opposition to respondent’s motion

for summary judgment.2 Concluding as we do that the statute does not authorize

        2
       Because the controlling question has been fully briefed by the parties and is
purely one of law, doing so will not prejudice respondent. See Abramo v.
                                                                      (continued...)
                                         -4-

the IRS to collect interest or additions to tax on amounts assessed under section

6201(a)(4), we will deny respondent’s motions for summary judgment and grant

that relief instead to petitioners.

                                      Background

       The following facts are derived from the parties’ pleadings and motion pa-

pers, including the exhibits attached thereto. See Rule 121(b). Pursuant to Rule

201 of the Federal Rules of Evidence, we take judicial notice of certain filings in

petitioners’ criminal case. See United States v. Klein, No. 2:10-CR-00015-RGK

(C.D. Cal.) (filed Jan. 7, 2010). Petitioners, who are husband and wife, resided in

California when they petitioned this Court.3

       Following a prosecution in the U.S. District Court for the Central District of

California, petitioners pleaded guilty to one count of violating section 7206(1) by

willfully making and subscribing to a false Federal income tax return for 2006.

Samuel Klein also pleaded guilty to two nontax counts. On August 31, 2011, the



       2
     (...continued)
Commissioner, 78 T.C. 154, 162 & n.9 (1982).
       3
         Absent stipulation to the contrary, an appeal in these cases would appear to
lie in the U.S. Court of Appeals for the Ninth Circuit. See sec. 7482(b)(1)(A).
Accordingly, where relevant to the discussion, we note that court’s precedent. See
Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir.
1971).
                                         -5-

District Court sentenced Zipora Klein to 27 months in prison, followed by a year

of supervised release, and Samuel Klein to 63 months in prison, followed by three

years of supervised release. As a separate component of each sentence, the Dist-

rict Court ordered petitioners to pay restitution to the IRS.

      Although petitioners were convicted for tax crimes committed in 2006,

Samuel Klein admitted in his plea agreement that he had underreported income on

joint returns with his wife “during the period 2003 through 2006.” At sentencing,

the Government presented a “Calculation of the Federal Tax Due and Owing for

Criminal Purposes” for petitioners’ 2003-2006 tax years. Under the U.S. Sentenc-

ing Guidelines, this is generally referred to as the “tax loss calculation.” See U.S.

Sentencing Guidelines Manual (U.S.S.G.) sec. 2T1.1(c)(1) (U.S. Sentencing

Comm’n 2006) (defining tax loss in the case of a fraudulent or false return as “the

total amount of loss that was the object of the offense”).

      Relying on the bank deposits method, the Government reconstructed peti-

tioners’ income for 2003-2006 and calculated an aggregate Federal tax loss of

$562,179. Objecting to that calculation, petitioners’ counsel argued that the

“[G]overnment formula does not allow deductions for all business expenses, only

[for] business expenses reported on filed income tax returns.” According to

Samuel Klein’s counsel, allowing all permissible deductions would have yielded
                                         -6-

tax losses for only two years: a tax loss of $17,701 for 2003 and a tax loss of

$4,467 for 2006.

      The sentencing court disregarded those objections and accepted the Govern-

ment’s tax-loss calculation for determining petitioners’ custodial sentences under

the Sentencing Guidelines. Those Guidelines acknowledge that “the amount of

the tax loss may be uncertain” and contemplate that the court “will simply make a

reasonable estimate based on the available facts.” Id. sec. 2T1.1, app. n.1. The

District Court based Samuel Klein’s sentence on the $562,179 tax loss calculated

by the Government and based Zipora Klein’s sentence on a smaller tax loss for

2006 alone. Separately, the court ordered petitioners to pay, with joint and several

liability, $562,179 as restitution to the IRS.

      During the sentencing hearing the District Court indicated that it would con-

sider modifying the restitution order if petitioners’ 2003-2006 Federal tax liabili-

ties were determined to be less than $562,179. With that proviso, the court or-

dered petitioners to pay this sum within 12 months of sentencing, i.e., by August

31, 2012. The Court ordered that petitioners’ “liability for restitution ceases” if

and when the IRS received full restitution.

      Pursuant to their plea agreements petitioners executed with the IRS a Form

906-C, Closing Agreement, acknowledging that their overall Federal income tax
                                         -7-

liabilities for 2003-2006 remained indeterminate.4 Petitioners agreed that the IRS

was free to conduct audits for those years at any time, “waiv[ing] all defenses

against and restrictions on assessment and collection” and waiving “any defense

based on the expiration of the period of limitations.” Six years later, the IRS does

not appear to have completed, or even commenced, a civil examination for

petitioners’ 2003-2006 tax years.

      In June 2012 petitioners filed amended individual returns for 2003-2006

showing aggregate additional tax due of $106,578. On August 31, 2012, the date

their restitution payment was due, they moved the District Court to vacate their

sentences under 28 U.S.C. sec. 2255, urging that the tax-loss calculation underly-

ing their sentences was erroneous. In support of that contention, they pointed to

IRS spreadsheets, of which they had recently become aware, indicating that they

could be entitled to substantial additional deductions against their 2003-2006


      4
       In the closing agreement petitioners conceded liability for fraudulent fail-
ure-to-file additions to tax under section 6651(f) for 2003, 2005, and 2006 and a
section 6663 fraud penalty for 2004. The bases for determining the additions to
tax and the penalty are different: tax required to be shown on the return (less
prepayments and credits) for the additions to tax; and underpayment for the
penalty. See Mohamed v. Commissioner, T.C. Memo. 2013-255. Computing
either would require ascertaining petitioners’ tax due for each year. In the absence
of an IRS civil examination determining the bases for calculating the additions to
tax and the penalty, respectively, petitioners’ overall Federal income tax liabilities
for 2003-2006 remained uncertain.
                                         -8-

income, which the Government had failed to take into account when calculating

the $562,179 tax loss. If all proper deductions were allowed, petitioners contend-

ed, the tax loss for 2003-2006 would be only $106,578, i.e., the aggregate addi-

tional tax liabilities shown on their recently filed amended returns. In October

2012 petitioners delivered to the IRS four checks totaling $106,578.

      In December 2012 petitioners filed a notice with the District Court reporting

that, by making this $106,578 payment, they had fully discharged their proper res-

titution obligation to the IRS. In March 2013 the District Court denied on proce-

dural grounds their motion to vacate sentence, explaining that they had neglected

to pursue a direct appeal challenging the tax-loss calculation on which their sen-

tences had been based. The court referred to the spreadsheets showing allowable

deductions for 2003-2006 as “being used to resolve the ongoing civil dispute, not

the criminal matter which has already been determined.” The court noted that,

“more than a year after sentencing, the civil dispute has not settled, indicating the

depth of factual inquiry necessary to resolve the issues of deductions and income.”

      After Zipora Klein was released from custody, the Government asked the

District Court to revoke her supervised release for failure to comply with the res-

titution order. To prevent that outcome she delivered to the Los Angeles U.S. At-

torney’s Office in August 2014 payment for the $455,601 balance of the restitu-
                                         -9-

tion (i.e., $562,179 minus the $106,578 paid in October 2012), plus post-judgment

interest imposed on restitution awards by title 18. See 18 U.S.C. sec. 3612(f)(2)

(2012). The U.S. Attorney’s Office thereupon released a previously filed notice of

a “lien in favor of the United States upon all property and rights to property be-

longing to” Zipora Klein. The certificate releasing that lien recited that her pay-

ment obligations with respect to the restitution ordered at sentencing, “together

with all statutory additions,” had been satisfied. On August 25, 2014, the District

Court dismissed the proceeding seeking revocation of her supervised release.

      Two months later, on October 22, 2014, the IRS filed an NFTL against each

petitioner, seeking to collect interest and failure-to-pay additions to tax on the re-

stitution amount. Eighteen months previously the IRS had assessed not only the

restitution amount of $562,179 under section 6201(a)(4), but also underpayment

interest under section 6601(a). For this purpose, the IRS treated as the “underpay-

ment” for each year the tax-loss figure accepted by the District Court at petition-

ers’ sentencing. And the IRS used as the commencement date for calculating in-

terest, not the date on which the restitution was ordered or required to be paid, but

the original due dates of petitioners’ 2003-2006 tax returns. Adopting the same
                                        - 10 -

approach, the IRS also assessed for each year a failure-to-pay addition to tax under

section 6651(a)(3).5

      Concurrently with filing the NFTLs the IRS sent petitioners Letters 3172 in-

forming them of the liens and of their rights to a CDP hearing. Each petitioner

timely requested a CDP hearing, seeking withdrawal of the NFTL and urging as

the basis therefor: “Restitution paid before lien was issued and filed.”

      A settlement officer (SO) from the IRS Appeals Office conducted a tele-

phone CDP hearing with petitioners and their counsel on July 28, 2015. Accord-

ing to the SO’s case activity record, the only issue petitioners raised during the

hearing was that they had paid the “balance in full.” The SO acknowledged that

the restitution portion of the assessment “appear[s] to have been paid” but noted

that the assessed interest and additions to tax (he called them “penalties”) had not

been paid. Petitioners during the hearing did not request a collection alternative,

but the SO allowed them two weeks to seek one.

      Not having heard from petitioners by August 14, 2015, the SO closed the

case. On August 25, 2015, the IRS issued petitioners notices of determination sus-

      5
         After assessing underpayment interest, the IRS appears to have issued to
each petitioner a notice and demand for the unpaid balance. Pursuant to section
6651(a)(3), additions to tax, computed on the unpaid balance shown in the notice
and demand, would have begun accruing 11 business days thereafter. By the time
it filed the NFTLs, the IRS had imposed and assessed those additions.
                                        - 11 -

taining the NFTL filings and showing a “total balance due” of $359,933 as of

August 14, 2015. The notices explained that this balance consisted entirely of

assessed interest and additions to tax calculated on the amount of restitution.

      Both petitioners timely petitioned this Court. Respondent moved for sum-

mary judgment in each docket on September 15, 2016. Attached to the motions

were assessment certificates for petitioners showing that by June 27, 2016, the

aggregate balance due had declined to $245,150.6 We consolidated the cases on

our own motion and ordered supplemental briefing addressing the IRS’ authority

to collect statutory interest and failure-to-pay additions to tax on amounts of resti-

tution assessed under section 6201(a)(4)(A).

                                     Discussion

I.    Summary Judgment Standard and Standard of Review

      The purpose of summary judgment is to expedite litigation and avoid un-

necessary and time-consuming trials. Fla. Peach Corp. v. Commissioner, 90 T.C.

678, 681 (1988). The Court may grant summary judgment when there is no genu-

ine dispute as to any material fact and a decision may be rendered as a matter of


      6
        This reduction was apparently attributable to the IRS’ recognizing its delay
in processing the $455,601 payment Zipora Klein had submitted to the U.S. Attor-
ney’s Office in October 2012, and recomputing interest and additions to tax it had
initially imposed and assessed.
                                         - 12 -

law. Rule 121(b); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002);

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965

(7th Cir. 1994).

      The parties agree on all material facts affecting the application of section

6201(a)(4) to these cases. The proper interpretation of that provision poses a pure

question of law. We conclude that the issues presented by respondent’s motions

and petitioners’ deemed cross-motions are appropriate for summary adjudication.

      Although neither section 6320(c) nor section 6330(d)(1) prescribes the

standard of review that this Court should apply in reviewing an IRS administrative

determination in a CDP case, our case law tells us what standard to adopt. Where

the validity of a taxpayer’s “underlying tax liability” is properly at issue, we re-

view the IRS’ determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-

182 (2000). Where the taxpayer’s underlying liability is not before us, we review

the IRS’ decision for abuse of discretion only. Id. at 182. Abuse of discretion ex-

ists when a determination is arbitrary, capricious, or without sound basis in fact or

law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st

Cir. 2006); see also Keller v. Commissioner, 568 F.3d 710, 716 (9th Cir. 2009),

aff’g in part T.C. Memo. 2006-166.
                                         - 13 -

      The term “underlying tax liability” is not “defined in section 6320 or 6330,

nor is there any specific reference to that term in the legislative history.” Mont-

gomery v. Commissioner, 122 T.C. 1, 7 (2004). That being so, we have deemed it

“reasonable to interpret the term ‘underlying tax liability’ as a reference to the

amounts that the Commissioner assessed for a particular tax period.” Ibid. In

other words, in any CDP proceeding, “underlying tax liability” refers to the as-

sessed liabilities that the IRS is seeking to collect via the challenged lien or levy.

      If we apply that definition here, petitioners’ “underlying tax liability” con-

sists of the criminal restitution, interest, and additions to tax that the IRS assessed

for 2003-2006. Because petitioners have fully paid the $562,179 restitution, the

underlying liability remaining in dispute consists of the statutory interest and

additions to tax that the IRS calculated with reference to the restitution amount.

As of June 27, 2016, that unpaid balance totaled $245,150.

       Under section 6330(c)(2)(B), a taxpayer may challenge his underlying tax

liability at a CDP hearing only “if the person did not receive any statutory notice

of deficiency for such tax liability or did not otherwise have an opportunity to dis-

pute [it].” Respondent concedes that petitioners did not receive a notice of

deficiency for 2003-2006. Section 6213(b)(5) expressly excepts from deficiency

procedures an “assessment [that] has been or will be made pursuant to section
                                         - 14 -

6201(a)(4).” Because the IRS has not yet completed a civil examination of peti-

tioners’ 2003-2006 returns, it could not possibly have issued them a notice of de-

ficiency for those years. And petitioners have had no other opportunity to dispute

their liability for the assessed interest and additions to tax.

      In order to dispute his underlying tax liability in this Court, the taxpayer

must have properly raised that issue at the CDP hearing. See secs. 301.6320-

1(f)(2), Q&A-F3, 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.; see also

Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). Petitioners distinctly con-

tested at the CDP hearing their liability for the interest and additions to tax, and

we find that they sufficiently preserved this issue in their petitions to this Court.7

We accordingly review de novo the SO’s determination that the Code authorized

the IRS to assess these amounts.




      7
        Both when requesting the CDP hearing and during that hearing, petitioners
insisted that there was no balance remaining on their restitution obligation. In
their petitions, they reiterated that they had “paid all deficiencies for 2003, 2004,
2005, and 2006, and there is nothing due.” It is apparent that petitioners used the
word “deficiencies,” not as the technical term defined in section 6211 but to mean
unpaid tax liabilities. By alleging that they had no unpaid tax liabilities for 2003-
2006, they necessarily challenged the interest and additions to tax that the IRS had
tacked on to the restitution-based assessment.
                                        - 15 -

II.   Disputed Interest and Additions to Tax

      Section 6601(a) provides that interest shall be paid “[i]f any amount of tax

imposed by this title * * * is not paid on or before the last date prescribed for

payment.” Section 6651(a)(3) imposes an “addition to tax” in case of failure to

pay timely “any amount in respect of any tax required to be shown on a return

* * * which is not so shown.” The question is whether these provisions authorize

the Secretary to assess and collect interest and additions to tax on amounts of

restitution ordered by a sentencing court and assessed under section 6201(a)(4).

      A.     The Statutory Text

      The parties agree that the restitution ordered by the sentencing court is an

“amount of restitution under an order pursuant to section 3556 of title 18,” within

the meaning of section 6201(a)(4). But that provision does not label the restitution

amount “tax.” Rather, it enables the Secretary to “assess and collect the amount of

restitution * * * for failure to pay any tax * * * in the same manner as if such

amount were such tax.” One way of phrasing the question presented is whether

Congress meant what it said when it used the subjunctive mood in drafting this

provision. We think that it did.

      Congress enacted section 6201(a)(4) in 2010, effective for restitution or-

dered after August 16 of that year. Firearms Excise Tax Improvement Act of 2010
                                        - 16 -

(FETIA), Pub. L. No. 111-237, sec. 3, 124 Stat. at 2497. For many years previous-

ly, various provisions of title 18 had authorized District Courts to order restitution

to the IRS when imposing sentences for tax-related crimes. As with other restitu-

tion awards, responsibility for such restitution lay principally with the Department

of Justice, specifically, the Financial Litigation Unit (FLU) at the U.S. Attorney’s

Office that prosecuted the defendant. The FLU reported restitution payments to

the sentencing court and eventually transmitted the funds to the IRS.

      FETIA did not purport to change any of that. But before its enactment in

2010 the IRS lacked a proper accounting mechanism to credit receipts of

restitution payments. The IRS typically waits until after criminal proceedings

have concluded before commencing an examination to determine the taxpayer’s

civil liabilities. And section 6213(a) generally restricts the IRS from making any

assessment until it has sent the taxpayer a notice of deficiency following such an

examination.

      By adding section 6201(a)(4) to the Code in FETIA, Congress sought to fill

this gap by granting the IRS early assessment authority for restitution awards. The

IRS can now assess the amount of restitution ordered by a District Court as soon

as that order becomes final. See sec. 6201(a)(4)(B). Thus, when the defendant

pays the restitution and the FLU transmits those funds to the IRS, the taxpayer’s
                                        - 17 -

account will show an assessment (i.e., an account receivable) against which the

payment can be credited.

      Congress implemented this new accounting mechanism by authorizing the

Secretary to “assess and collect the amount of restitution * * * for failure to pay

any tax * * * in the same manner as if such amount were such tax.” Sec.

6201(a)(4)(A). We begin our inquiry, as we must, by considering the plain and

ordinary meaning of the text Congress enacted. See, e.g., Jimenez v. Quarterman,

555 U.S. 113, 118 (2009); Rainero v. Archon Corp., 844 F.3d 832, 837 (9th Cir.

2016).

      The focus of our attention is the clause “in the same manner as if such

amount were such tax.” This clause is drafted in the subjunctive mood. Clauses

of this type are commonly used to express a counterfactual hypothesis. See, e.g.,

Andrea A. Lunsford, The St. Martin’s Handbook 633 (5th ed. 2003) (describing

the subjunctive mood as expressing “a wish, suggestion, requirement, or a condi-

tion contrary to fact”). For example, assume a statute providing that certain per-

sons (green card holders, perhaps) shall be treated “in the same manner as if they

were citizens.” In such a statute, Congress would necessarily presume that such

persons were not in fact citizens, providing merely that they should be accorded

the treatment which citizens receive.
                                        - 18 -

      Section 6201(a)(4)(A) is read most naturally as expressing such a counter-

factual hypothesis. Respondent acknowledges that restitution is not literally “a

tax.” See Staff of J. Comm. on Taxation, General Explanation of Tax Legislation

Enacted in the 111th Congress, 461 (J. Comm. Print 2011) (noting that “restitution

is not itself a determination of tax,” so that before the enactment of section

6201(a)(4) the Code “d[id] not provide a basis on which tax may be assessed”).

And the courts have recognized that “[c]riminal restitution, even as a penalty for a

failure to pay taxes, is not a tax.” United States v. Tilford, 810 F.3d 370, 372 (5th

Cir. 2016). Rather, Congress adopted in section 6201(a)(4) the counterfactual

hypothesis that restitution is a tax for the limited purpose of enabling the IRS to

assess that amount, thus creating an account receivable on the taxpayer’s transcript

against which the restitution payment can be credited.

      Section 6601(a) provides that interest shall be paid “[i]f any amount of tax

imposed by this title” is not timely paid. And section 6651(a)(3) imposes an

“addition to tax” in case of failure to pay timely “any tax required to be shown on

a return * * * which is not so shown.” The amount of restitution is not a “tax im-

posed by” title 26. Nor is it a “tax required to be shown on a return * * * which is

not so shown.” Rather, it is an amount assessed “in the same manner as if such

amount were such tax.” Interpreted according to its plain meaning, the statutory
                                         - 19 -

text shows that assessments of restitution under section 6201(a)(4) do not generate

interest under section 6601(a) or additions to tax under section 6651(a)(3).8

      The Secretary has not issued regulations interpreting section 6201(a)(4).

Instead, respondent cites provisions of the Internal Revenue Manual (IRM) in

support of his position that interest and additions to tax arise on amounts assessed

under that provision. In respondent’s view, the statute creates “another avenue for

collection” because every award of criminal tax restitution now constitutes “two

separate debts”--one to the FLU and the other to the IRS. See IRM pt.

25.26.1.2(6) (Mar. 24, 2014).

      The IRM states that this second debt will be “assessed and collected by the

Service in the same manner as if it was a tax.” Id. pt. 5.1.5.15.7(1)(b) (Dec. 12,

2014). Because criminal restitution is “assessed and collected the same as any

civil tax assessment, * * * interest and the failure to pay [addition to tax] * * *

would apply as they would for any other civil tax assessment.” Id. pt. 25.26.1.2(6)

      8
        Under title 18 post-judgment interest accrues on most restitution obliga-
tions that are not “paid in full before the fifteenth day after the date of the judg-
ment.” 18 U.S.C. sec. 3612(f) (2012). In their final payment to the U.S. At-
torney’s Office, petitioners appear to have included title 18 post-judgment interest
that had accrued on the $562,179 restitution award. In thereafter releasing the
restitution lien, the U.S. attorney certified petitioners’ compliance with the resti-
tution order “together with all statutory additions.” In view of our disposition, we
need not decide whether this certification had any effect on the IRS’ ability to im-
pose interest and additions to tax on the restitution amount.
                                        - 20 -

(Mar. 24, 2014). Thus, “[n]ormal interest rules will apply,” id. pt. 25.26.1.2(8)

(Mar. 24, 2014), and the addition to tax “for paying late applies the same as it

would for any other civil tax assessment,” id. pt. 20.1.2.2.8.9(1) (July 2, 2013).

For the latter purpose, the amount of restitution ordered will “represent[] tax re-

quired to be shown on a return that was not shown.” Id. pt. 25.26.1.2(7) (Mar. 24,

2014).

      Respondent’s position, in short, is that interest and additions to tax are an

inevitable adjunct of the civil tax collection machinery that section 6201(a)(4) ac-

tivates. According to the IRM, even the sentencing court is powerless to stop this

machine: “If the court waives all interest and additions to tax during sentencing,

the interest and additions to tax being waived are those that may be imposed under

Title 18.” IRM 5.1.5.15.1 (Note) (Dec. 16, 2014). In the Commissioner’s view,

the sentencing court “does not have jurisdiction to waive civil interest and addi-

tions to tax that may be imposed under Title 26.” Ibid.

      These IRM provisions, while long on instructions, are short on analysis. It

is well established that IRM provisions do not bind the courts. See United States

v. Wanland, 830 F.3d 947, 956 (9th Cir. 2016); Fargo v. Commissioner, 447 F.3d

706, 713 (9th Cir. 2006) (noting that the IRM “does not have the force of law”),

aff’g T.C. Memo. 2004-13; Riland v. Commissioner, 79 T.C. 185 (1982) (holding
                                       - 21 -

that a failure to abide by IRM provisions does not violate due process). The re-

spect that courts accord an agency manual is limited to its “power to persuade” by

its “thoroughness, logic, and expertness.” United States v. Mead Corp., 533 U.S.

218, 234-235 (2001). On a question of statutory construction such as this, IRM

provisions would have limited power to persuade, even if they evidenced

“thoroughness, logic, and expertness,” which these do not.

      When pressed on the significance of Congress’ use of the subjunctive mood

in section 6201(a)(4)(A), respondent submits that “there is no meaningful differ-

ence between an amount that is assessed and collected * * * as if it were a tax and

an amount that is assessed and collected * * * as a tax.” But just as we presume

that Congress knows the settled legal definitions of the words it uses, see Com-

missioner v. Keystone Consol. Industries, Inc., 508 U.S. 152, 159 (1993), we as-

cribe to Congress an understanding of “ordinary English grammar,” Flores-Figue-

roa v. United States, 556 U.S. 646, 650 (2009). Other things being equal, we will

opt for a statutory construction that “imputes to Congress a surer grammatical

touch than does the alternative interpretation.” Flora v. United States, 362 U.S.

145, 150 (1960).

      We previously considered the “as if” language of section 6201(a)(4) in

Muncy v. Commissioner, T.C. Memo. 2017-83, supplementing T.C. Memo.
                                        - 22 -

2014-251, vacated and remanded on other grounds, 637 F. App’x 276 (8th Cir.

2016). The taxpayer there had been convicted of tax crimes and ordered to pay

restitution. The Commissioner commenced a civil audit for the years in question,

sent the taxpayer a notice of deficiency determining deficiencies and additions to

tax, and later amended his answer to assert increased deficiencies and additions to

tax.

       One of the questions in Muncy, at *13, was whether the Commissioner

“should reduce his deficiency determinations by amounts of restitution previously

ordered by the District Court,” which the taxpayer had not paid. Section 6211(a)

defines a “deficiency” as the correct tax for a year minus “amounts previously

assessed * * * as a deficiency.” We held that no offset was required, ruling that

the amounts of restitution assessed under section 6201(a)(4) had not been “as-

sessed * * * as a deficiency.”

       In reaching that conclusion, we contrasted the text of section 6201(a)(4)(A)

with that of section 6665(a)(1), which provides that additions to tax, additional

amounts, and civil penalties “shall be assessed, collected, and paid in the same

manner as taxes.” Section 6201(a)(4)(A), by contrast, provides that the Secretary

“shall assess and collect the amount of restitution * * * for failure to pay any tax

* * * in the same manner as if such amount were such tax.” (Emphasis added.)
                                         - 23 -

We stated in Muncy, at *15, our belief that “the distinction between ‘as if’ and

‘as’ is significant.” The fact that restitution is assessed not as a tax, but only in the

same manner as if it were a tax, supported our conclusion that the restitution the

taxpayer had been ordered (but failed) to pay should not reduce the deficiencies

the Commissioner had determined. Accord Rozin v. Commissioner, T.C. Memo.

2017-52, at *11 (ruling that “restitution payments are not included as ‘amounts

previously assessed * * * as a deficiency’”); see Muncy, at *16.

      Analogous reasoning seems appropriate here. Respondent contends that we

should interpret section 6201(a)(4)(A) as if Congress had drafted it to authorize

the Secretary to assess restitution “in the same manner as such tax.” In so con-

tending, respondent is either asserting that “as if” and “as” have the same meaning

(no educated English speaker would think so) or that the words “if such amount

were,” which Congress inserted between “as” and “such tax,” should be ignored as

surplusage. But it is well established that we must interpret a statute so as to give

meaning to every word and phrase. See, e.g., Lamie v. United States Tr., 540 U.S.

526, 534 (2004); Negonsott v. Samuels, 507 U.S. 99, 106 (1993). And “if” is a

dangerous word to deem surplusage. As Rudyard Kipling reminded us in his 1895

poem of the same name, much rides on “if.”
                                         - 24 -

      B.     The Legislative History

      In support of a contrary conclusion respondent relies on the statute’s legisla-

tive history. He adduces no support from any reports that accompanied the enact-

ment of section 6201(a)(4). Rather, he cites a floor speech by a House member

expressing her belief that the bill would enable the Secretary “to assess and col-

lect, in the same manner as delinquent taxes are assessed and collected, mandatory

orders of restitution for victims of crime.” 156 Cong. Rec. 12032 (June 29, 2010).

      The Supreme Court held long ago that “contemporaneous remarks of a

sponsor of legislation are certainly not controlling in analyzing legislative his-

tory.” Weinberger v. Rossi, 456 U.S. 25, 35 n.15 (1982). Where, as here, a “floor

speech and statutory language collide, the floor speech[] must give way,” because

Congress expresses its “constitutional voice [in] the text of the statutes it enacts.”

Szehinskyj v. Atty. Gen. of United States, 432 F.3d 253, 260 (3d Cir. 2005). In

Muncy, at *17-*18, we rejected reliance on the same floor speech, ruling that sec-

tion 6201(a)(4) was “not intended to be a radical departure from the way restitu-

tion was previously collected for criminal tax cases.”

      Respondent contends that the enactment of section 6201(a)(4) subjected re-

stitution payments to the IRS’ entire civil tax collection apparatus, automatically

bringing interest, additions to tax, and penalties in its wake. But nothing in the
                                         - 25 -

legislative history suggests that Congress intended this provision to accomplish

such a sea change. For many years previously, restitution orders had operated as

liens in favor of the United States, essentially equivalent to Federal tax liens. See

18 U.S.C. sec. 3613(c) and (f) (2012) (providing that a restitution lien “arises on

the entry of judgment” and attaches to “all property and rights to property” of the

defendant); United States v. Ridgeway, 489 F.3d 732, 737 n.9 (5th Cir. 2007).

Upon the filing of a notice of that lien, a restitution order had the same priority,

force, and effect as a Federal tax lien. See, e.g., United States v. Loftis, 607 F.3d

173, 179 n.7 (5th Cir. 2010) (stating that “a restitution order [is] enforceable to the

same extent as a tax lien”); United States v. Kollintzas, 501 F.3d 796, 802 (7th Cir.

2007) (holding that restitution orders “are effective against every interest in pro-

perty accorded a taxpayer by state law”).

       Thus, when Congress enacted section 6201(a)(4) in 2010, the IRS’ usual

toolkit for collecting a Federal tax liability was already at the Government’s dispo-

sal for enforcing a restitution order.9 Following the conclusion of criminal pro-

ceedings, the IRS normally commences a civil audit, leading to a notice of

      9
       In particular, the tax lien foreclosure procedures of section 7403 and the
levy and distraint procedures of sections 6331-6344 were available to the Govern-
ment (and still remain available) for enforcing a restitution lien. See generally
United States v. Novak, 476 F.3d 1041, 1045 n.6 (9th Cir. 2007); see also United
States v. Lampien, 89 F.3d 1316, 1322 n.6 (7th Cir. 1996).
                                         - 26 -

deficiency and eventual establishment of the taxpayer’s actual tax liability for the

relevant years. Congress presumably understood that this civil liability, once

finally determined, would attract interest under section 6601(a), as well as addi-

tions to tax where applicable. That being so, Congress is unlikely to have intend-

ed section 6201(a)(4) as a vehicle for giving the Secretary new powers to assess

and collect additions to tax and interest.10

      The explanation offered by the Joint Committee on Taxation in its Blue

Book suggests that Congress had a more modest aim. See Staff of J. Comm. on




      10
         We find further support for this conclusion in the rules applicable to the
Government’s use of the Federal Debt Collection Procedures Act of 1990
(FDCPA), 28 U.S.C. secs. 3001-3308 (2012), to enforce restitution orders. See
United States v. Mays, 430 F.3d 963, 967 (9th Cir. 2005); see also United States v.
Gianelli, 543 F.3d 1178, 1182-1183 (9th Cir. 2008). The FDCPA allows the
Government to move the sentencing court to obtain writs of execution, 28 U.S.C.
sec. 3203, and garnishment, 28 U.S.C. sec. 3205, without the need “to obtain a
civil judgment prior to enforcing a criminal restitution order,” Mays, 430 F.3d at
966. But FDCPA’s civil remedies grant the Government “statutory authority to
enforce only the terms of a restitution order, not to take an enforcement action that
would exceed a restitution order’s payment terms.” United States v. Martinez, 812
F.3d 1200, 1207 (10th Cir. 2015). Our research has discovered no case where the
Government argued (let alone argued successfully) that FDCPA authorized it to
collect more in restitution than what the sentencing court had originally ordered.
FETIA’s legislative history is devoid of any suggestion that Congress, when en-
acting section 6201(a)(4), intended to change this long-settled practice of accord-
ing primacy to the terms of the restitution order in executing a civil collection
remedy.
                                        - 27 -

Taxation, supra, at 459-461.11 In explaining the reason for the enactment of sec-

tion 6201(a)(4), the Committee focused exclusively on the need to allow the IRS

to create an “account receivable against which the restitution payments can be

credited.” Id. at 461. In the absence of an agreement with the Department of

Justice, the IRS generally defers “work on the civil aspects of determining the tax

liability * * * until after the conclusion of criminal proceedings.” Ibid. Thus,

under pre-enactment law, when a sentencing court ordered a defendant to pay res-

titution to the IRS, the agency “often ha[d] not yet assessed the relevant civil tax

liability” and thus lacked an account receivable against which to credit restitution

payments. Ibid. According to the Joint Committee, the intended effect of section

6201(a)(4) was limited to improving the IRS’ bookkeeping for such awards.

      Respondent urges that his construction of section 6201(a)(4) is supported by

a negative inference he draws from section 6305(a). That provision authorizes the

IRS, upon certification from the Secretary of Health and Human Services of an

amount of delinquent spousal or child support, to “assess and collect the amount

certified * * * in the same manner * * * and (except as provided in this section)




      11
        Although not legislative history, a “Blue Book, like a law review article,
may be relevant to the extent it is persuasive.” United States v. Woods, 571 U.S.
__, __, 134 S. Ct. 557, 568 (2013).
                                        - 28 -

subject to the same limitations as if such amount were a tax * * * the collection of

which would be jeopardized by delay.”

      As respondent notes, sections 6305(a) and 6201(a)(4) are worded similarly

in that each authorizes the Secretary to assess an amount “as if such amount were”

a tax. But in section 6305(a) Congress explicitly provided, as one of the “excep-

tions” enumerated therein, that “no interest or penalties shall be assessed or col-

lected.” Sec. 6305(a)(1). According to respondent, this shows that Congress

knows how to bar the imposition of interest and additions to tax upon assessments

of deemed tax when it wishes to do so. The absence of a similar exception from

section 6201(a)(4)(A) supposedly “indicates that Congress did intend for statutory

interest * * * [and additions to tax] to accrue on restitution assessments.”

      Under a familiar canon of statutory construction, “a negative inference may

be drawn from the exclusion of language from one statutory provision that is in-

cluded in other provisions of the same statute.” Hamdan v. Rumsfeld, 548 U.S.

557, 578 (2006). But such negative implications “are strongest when the provi-

sions were considered simultaneously when the language raising the implication

was inserted.” Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 175 (2009). Section

6305 was added to the Code in 1975. See Social Services Amendments of 1974,

Pub. L. No. 93-647, sec. 101(b)(1), 88 Stat. at 2358. There is no reason to believe
                                        - 29 -

that the Congress which enacted FETIA 35 years later focused on the clause in

section 6305(a) excluding interest and additions to tax, let alone that it considered

(but decided against) providing such an exclusion in section 6201(a)(4).12

      C.     Tax Loss vs. Civil Tax Liability

      The restitution ordered in a criminal tax case is designed to compensate the

IRS for the loss caused by the defendant’s wrongdoing. But that award does not

purport to reflect the defendant’s actual civil tax liability. Generally, the IRS will

later commence an examination to determine what the taxpayer’s civil tax liability

is. That liability may be higher or (as petitioners contend here) lower than the tax

loss that formed the basis for the restitution award. This shows the fundamental

error of respondent’s submission that the tax-loss-based restitution amount should

be equated with a “tax imposed by” title 26 or a “tax required to be shown on a

return * * * which is not so shown.” Secs. 6601(a), 6651(a)(3).


      12
         Title 18 has long provided, in language resembling that subsequently ad-
opted by Congress in section 6201(a)(4), that a restitution order shall be enforced
“as if the liability * * * were a liability for a tax assessed under the Internal Reve-
nue Code.” 18 U.S.C. sec. 3613(c), (f) (2012). In the years preceding the enact-
ment of section 6201(a)(4), we are aware of no instance in which the Government
sought to use those title 18 provisions to argue for adding, to the amount of resti-
tution the sentencing court had ordered, interest under section 6601 or additions to
tax under section 6651. This is consistent with the modest goal we have ascribed
to Congress in FETIA, namely, to facilitate IRS bookkeeping by transforming the
restitution obligation from a deemed assessment to an actual assessment.
                                        - 30 -

      The restitution award is based on the same tax-loss calculation that governs

the defendant’s sentencing under the Sentencing Guidelines. See, e.g., Kawashi-

ma v. Holder, 615 F.3d 1043, 1051 (9th Cir. 2010), aff’d, 565 U.S. 478 (2012);

United States v. Conway, 323 F. App’x 517, 519 (9th Cir. 2009). But because the

Guidelines are only advisory after United States v. Booker, 543 U.S. 220 (2005), it

is within a sentencing court’s discretion not “to dwell on the exact amount of the

tax loss” as defined in the Guidelines. United States v. Suzuki, 180 F. App’x 751,

752 (9th Cir. 2006); see also United States v. Kohler, 359 F. App’x 877, 879 (9th

Cir. 2009) (holding that a District Court may “find additional facts”when calculat-

ing the tax loss); United States v. Poseley, 267 F. App’x 613, 616 (9th Cir. 2008).

      But even if the sentencing court were to adhere strictly to the Guidelines,

the resulting tax-loss number is unlikely to bear more than a passing resemblance

to the defendant’s civil liability under the Code. The Guidelines explain that “the

definition of tax loss corresponds to what is commonly called the ‘criminal fig-

ures.’” U.S.S.G. sec. 2T1.1, app. n.1. Those “criminal figures” stand in contrast

to the terms the Code uses for civil tax liability, such as “deficiency” or “under-

payment of tax.”

      The “[G]uidelines employ simplified calculations of tax loss in order to

avoid complex disputes over late-blooming adjustments and deductions the
                                        - 31 -

taxpayer asserts he could have taken.” United States v. O’Brien, 35 F.3d 573,

1994 WL 470265, at *3 (9th Cir. 1994) (unpublished). They do so because at

sentencing, “the amount of the tax loss may be uncertain.” U.S.S.G. sec. 2T1.1,

app. n.1. In such circumstances, “the court will simply make a reasonable estimate

based on the available facts.” Ibid.

      Under the Guidelines, the yardstick for measuring the tax loss is typically

not understated taxable income, but underreported gross income “unless a more

accurate determination of the tax loss can be made.” Id. sec. 2T1.1(c)(1)(A); see

also id. app. n.1, Exs. 1 & 2. According to the Court of Appeals for the Ninth Cir-

cuit, the exception for “a more accurate determination” does not apply to “tax

deductions that the taxpayer chose not to claim.” United States v. Yip, 592 F.3d

1035, 1041 (9th Cir. 2010). The Ninth Circuit has therefore held that the Guide-

lines do “not entitle a defendant to reduce the tax loss charged to him by the

amount of potentially legitimate, but unclaimed, deductions even if those deduc-

tions are related to the offense.” Ibid. By contrast, unclaimed deductions for

legitimate expenses would be fully available to the taxpayer, upon his furnishing

adequate substantiation, in determining his civil tax liability in an IRS audit.13

      13
       Even when a defendant admits to an exact tax-loss amount at sentencing,
he remains free to establish a smaller deficiency. That is true whether the prior
                                                                       (continued...)
                                        - 32 -

      The process by which the District Court determined petitioners’ sentences

reflected the application of these general principles. That court stated that it

would consider modifying the restitution order if petitioners’ 2003-2006 Federal

tax liabilities were determined to be less than the tax loss it had estimated. It

referred to spreadsheets showing possible deductions for 2003-2006 as “being

used to resolve the ongoing civil dispute, not the criminal matter which has al-

ready been determined.” And it noted that, “more than a year after sentencing, the

civil dispute has not settled, indicating the depth of factual inquiry necessary to

resolve the issues of deductions and income.”

      All of this goes to show why restitution assessed under section 6201(a)(4)

cannot be equated to a “tax imposed by this title,” upon which interest arises under

section 6601(a), or a “tax required to be shown on a return * * * which is not so

      13
         (...continued)
criminal conviction was for violating section 7206(1) by filing a false return, see
Ephrem v. Commissioner, T.C. Memo. 2014-12, or for another tax crime, such as
tax evasion in violation of section 7201, see Livingston v. Commissioner, T.C.
Memo. 2000-121. Indeed, a defendant’s admitting to a tax-loss number at sen-
tencing, while constituting “strong evidence” of the amount of unreported income,
does not “establish that there is no genuine issue of fact as to the precise amount”
of unreported income. Uscinski v. Commissioner, T.C. Memo. 2006-200, 92
T.C.M. (CCH) 285, 287; see also Ephrem, T.C. Memo. 2014-12, 107 T.C.M.
(CCH) 1066, 1067 (denying the Commissioner summary judgment because the
taxpayer’s plea agreement reciting a tax-loss figure did not “establish[] as a fact in
this civil proceeding the precise amounts” of understated income).
                                           - 33 -

shown,” upon which an addition to tax may arise under section 6651(a)(3). The

restitution obligation is based on a simplified estimate of the Government’s tax

loss and typically ignores inputs (such as previously unclaimed deductions) that

may be critical in determining the taxpayer’s actual civil liability. See Rozin v.

Commissioner, T.C. Memo. 2017-52, at *5 (“Although restitution is based upon

an estimate of civil tax liability, it is not determinative of civil tax liability.”).14

The restitution obligation is not a civil tax liability, and Congress did not change

that fact when it authorized the IRS in 2010 to assess and collect restitution “in the

same manner as if such amount were such tax.” Sec. 6201(a)(4)(A).15


       14
         Conversely, nothing bars the IRS “from asserting a deficiency greater than
* * * [a defendant’s] restitution obligation.” Durland v. Commissioner, T.C.
Memo. 2016-133, 112 T.C.M. (CCH) 37, 52; see also Morse v. Commissioner,
419 F.3d 829, 833-835 (8th Cir. 2005) (holding that sentencing court’s restitution
order does not preclude the Commissioner from litigating defendant’s deficiency),
aff’g T.C. Memo. 2003-332.
       15
         Adoption of respondent’s position could lead to absurd results. Several
courts have held that, “[i]f the object of the offense is to avoid the tax, additions to
tax, penalties, and interest, then additions to tax and interest should be included in
the tax loss.” United States v. Black, 815 F.3d 1048, 1055 (7th Cir. 2016) (citing
United States v. Thomas, 635 F.3d 13 (1st Cir. 2011)); see Staff of J. Comm. on
Taxation, General Explanation of Tax Legislation Enacted in the 111th Congress,
at 460 (J. Comm. Print 2001) (noting possibility that interest and additions to tax
might be included in a restitution award); Garavaglia v. Commissioner, T.C.
Memo. 2017-131 (addressing taxpayer’s entitlement to overpayment interest when
prejudgment interest included in restitution award exceeds underpayment interest).
If the tax loss were calculated in this way, imposition of interest and additions to
                                                                          (continued...)
                                           - 34 -

         In holding that interest and additions to tax do not arise on amounts as-

sessed under section 6201(a)(4), we are not disabling the IRS from collecting

interest or additions to tax for petitioners’ 2003-2006 tax years. At the time of

sentencing, petitioners executed a closing agreement “waiv[ing] all defenses

against and restrictions on assessment and collection” and waiving “any defense

based on the expiration of the period of limitations.” In June 2012 petitioners

filed amended returns reporting that their aggregate tax liability for 2003-2006

was $106,578, as opposed to the $562,179 tax loss determined by the District

Court.

         If the IRS wishes to collect interest and additions to tax, it is free to com-

mence a civil examination of those returns at any time. Upon final determination

of petitioners’ 2003-2006 civil tax liabilities, interest will arise automatically un-

der section 6601(a), and additions to tax (if appropriate) may be imposed under

section 6651(a)(3). But the interest and additions to tax would then be computed,

         15
         (...continued)
tax on the amount of restitution assessed under section 6201(a)(4) would obvious-
ly be duplicative. Evidently recognizing this problem, the IRS is now instructing
its agents to exclude from a section 6201(a)(4) assessment any pre-judgment in-
terest awarded as restitution, because “to include it would be to double assess the
interest.” IRM pt. 8.7.1.11.2(f) (Feb. 24, 2017). While this instruction seems
reasonable, it undermines respondent’s submission that the amount of restitution
ordered by the sentencing court is assessed under section 6201(a)(4) “as a tax” that
automatically generates interest under section 6601(a).
                                         - 35 -

not by reference to the $562,179 tax loss, but by reference to whatever petitioners’

actual tax liabilities are ultimately determined to be.

      To reflect the foregoing,


                                                  Appropriate orders and decisions

                                        will be entered.
