                           149 T.C. No. 17



                  UNITED STATES TAX COURT



      CREDITGUARD OF AMERICA, INC., Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 1332-16L.                         Filed October 10, 2017.



       R revoked P’s tax-exempt status retroactively to Jan. 1, 2002.
In a subsequent deficiency proceeding P executed a stipulated de-
cision document, agreeing to assessment of a deficiency for its 2002
tax year and of underpayment interest on that deficiency “as provided
by law.”

       R accrued and assessed interest on the deficiency from the date
on which P’s 2002 corporate tax return would have been due. When
that amount remained unpaid, R began collection action. In a collec-
tion due process proceeding, P disputed its underlying liability, argu-
ing that interest can begin accruing no earlier than the date on which
R issued the final determination revoking P’s tax-exempt status, not-
withstanding the retroactive character of that revocation.

      1. Held: Retroactive revocation of P’s tax-exempt status re-
quires restoring R to the position R would have occupied if P had
never enjoyed tax-exempt status during its 2002 tax year.
                                        -2-

             2. Held, further, P is liable for interest beginning on the date
      its 2002 corporate tax return would have been due.

             3. Held, further, the SO did not abuse his discretion in sus-
      taining the proposed collection action.



      Matthew T. Journy and Carrie Garber Siegrist, for petitioner.

      Scott A. Hovey, for respondent.



                                     OPINION


      LAUBER, Judge: In this collection due process (CDP) case petitioner seeks

review pursuant to sections 6320 and 6330(d)(1)1 of the determination by the In-

ternal Revenue Service (IRS or respondent) to uphold a notice of Federal tax lien

(NFTL) filing. The parties have filed under Rule 121 cross-motions for summary

judgment presenting what seems to be a question of first impression in this Court.

That question concerns the proper computation of interest on a tax deficiency

where the IRS has retroactively revoked a corporation’s tax-exempt status under

section 501(a) and (c)(3).


      1
        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-

      The IRS revoked petitioner’s tax-exempt status in 2012, made the revoca-

tion retroactive to January 1, 2002, and eventually issued it a notice of deficiency

for that year. Petitioner timely petitioned this Court and, on November 30, 2012,

we entered a stipulated decision in that case. Our decision determined a defi-

ciency of $216,547 in petitioner’s Federal income tax for 2002. The parties in-

cluded a below-the-line stipulation that underpayment interest would later be as-

sessed “as provided by law.”

      Upon revocation of its tax-exempt status, petitioner became obligated to file

Form 1120, U.S. Corporation Income Tax Return, for 2002. Respondent contends

that the starting date for computing interest on the deficiency is determined by re-

ference to the date prescribed by law for filing a Form 1120 for 2002 by a corpora-

tion that uses the calendar taxable year, which in this case would be March 17,

2003. Petitioner contends that the starting date for computing interest is February

1, 2012, the date on which the IRS issued the final determination letter revoking

its tax-exempt status. Concluding as we do that respondent has the better side of

this argument, we will grant his motion for summary judgment, deny petitioner’s

cross-motion, and sustain the proposed collection action.
                                         -4-

                                     Background

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

pers, including the attached declaration and exhibits. Petitioner had its principal

place of business in Florida when it filed its petition.

      Petitioner was incorporated in Florida in 1991 as a nonprofit corporation en-

gaged principally in credit counseling. In December 1993 the IRS issued petition-

er a favorable determination letter recognizing it as an organization exempt from

Federal income tax under section 501(a) and (c)(3). In May 2003 petitioner filed

with the IRS, as required by section 6033(a)(1), an information return on Form

990, Return of Organization Exempt From Income Tax, for its 2002 calendar tax-

able year. See sec. 6072(e).

      In December 2003 the IRS commenced an examination of petitioner’s Form

990 for 2002. At the conclusion of this examination and the ensuing administra-

tive process, the IRS issued to petitioner, on February 1, 2012, a final adverse de-

termination letter revoking its tax-exempt status retroactively to January 1, 2002.

This letter informed petitioner: “You are required to file Federal income tax re-

turns on Forms 1120 for the tax periods stated in the heading of this letter and for

all tax years thereafter.”
                                         -5-

      When petitioner did not promptly file a Form 1120 for 2002, the IRS pre-

pared on its behalf a substitute for return (SFR) that met the requirements of sec-

tion 6020(b). On June 6, 2012, on the basis of that SFR, the IRS issued petitioner

a notice of deficiency, and in response petitioner timely petitioned this Court. See

CreditGuard of Am., Inc. v. Commissioner, docket No. 21935-12 (filed Aug. 30,

2012). On November 30, 2012, we entered a stipulated decision in that case, de-

ciding that there was a deficiency in income tax of $216,547 due from petitioner

for 2002. Our decision recited the parties’ further stipulation that “interest will be

assessed as provided by law on the deficiency in income tax due from petitioner.”

      On March 13, 2013, the IRS assessed the $216,547 deficiency as well as in-

terest of $142,185 on that deficiency. Under the IRS’ computation, interest began

accruing on March 17, 2003, the date prescribed by law for filing a Form 1120 for

2002 by a corporation using the calendar taxable year.2

      In an effort to collect these unpaid liabilities, the IRS sent petitioner a No-

tice of Federal Tax Lien Filing and Your Right to a Hearing. Petitioner timely re-

quested a CDP hearing. On its hearing request form it checked the boxes cap-

tioned “installment agreement,” “offer in compromise,” and lien “withdrawal.”

      2
       Ordinarily, the due date for a corporate tax return for 2002 would have
been March 15, 2003. Because that day was a Saturday, the due date was pushed
back two days to the following Monday. See infra p. 11.
                                        -6-

      Following numerous email and telephone exchanges, a settlement officer

(SO) from the IRS Appeals Office held a face-to-face CDP hearing with petition-

er’s representative on June 11, 2015. With respect to its underlying tax liability,

petitioner sought abatement of most of the assessed interest. It contended that the

earliest the interest could begin accruing would be the date on which the IRS as-

sessed the deficiency, March 13, 2013, rejecting the IRS’ position that liability for

interest would be governed by the date on which the Form 1120 was due for filing,

March 17, 2003.

      The SO allowed petitioner to challenge its underlying liability in this re-

spect, but he rejected petitioner’s argument on the merits. Under the applicable

Code provisions, he determined, “interest is to be charged on unpaid taxes from

the date the taxes were due until the date they are paid.” He thus concluded that

the IRS had correctly calculated interest by reference to the due date for the Form

1120 that petitioner was obligated to file for 2002.

      With respect to collection alternatives, petitioner submitted two offers-in-

compromise (OICs). The first OIC, submitted June 10, 2015, was returned for

failure to include the required initial payment. The second OIC, submitted July

21, 2015, offered to compromise petitioner’s outstanding 2002 liability (then
                                         -7-

about $354,532) for $96,000. But petitioner withdrew that offer by letter dated

October 30, 2015, and did not submit another offer.

      Petitioner also sought withdrawal of the NFTL. Noting that petitioner was

currently making payments toward satisfaction of its 2002 liability with the NFTL

in place, the SO concluded that lien withdrawal was not necessary to facilitate col-

lection. And he determined that petitioner had not met the other conditions set

forth in section 6323(j) for withdrawal of the NFTL.

      On December 17, 2015, the IRS sent petitioner a notice of determination

sustaining the collection action for the reasons outlined above. On January 19,

2016, petitioner timely petitioned this Court. The petition did not dispute the SO’s

rejection of the proposed collection alternatives. Rather, the sole error alleged in

the petition is that the SO “erred in failing to abate interest unlawfully assessed on

the amount of the underlying liability.” The petition based this assignment of

error on the premise that the starting date for calculating interest should have been

February 1, 2012, the date on which the IRS mailed the final adverse determina-

tion letter revoking petitioner’s tax-exempt status.3

      3
       The petition also contended that interest abatement was required by section
6404(g), which mandates suspension of interest in certain situations where the IRS
does not promptly contact the taxpayer. However, this provision applies only “[i]n
the case of an individual who files a return * * * on or before the due date for the
                                                                        (continued...)
                                        -8-

      The sole question remaining for decision concerns the starting date for cal-

culating interest on petitioner’s 2002 tax deficiency. On January 19, 2017, re-

spondent filed a motion for summary judgment addressing this issue. On February

24, 2017, petitioner filed an objection to respondent’s motion and, on February 27,

2017, a cross-motion for summary judgment.

                                    Discussion

A.    Summary Judgment Standard

      The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

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

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

of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994). The question presented is purely one of law.

The parties agree that no material facts are in dispute, and they have expressed that




      3
        (...continued)
return (including extensions).” Sec. 6404(g)(1)(A). Because petitioner is not “an
individual,” section 6404(g) does not apply here. See H.R. Conf. Rept. No. 105-
599, at 260 (1998), 1998 U.S.C.C.A.N. 288 (noting that interest suspension “ap-
plies only to individuals”). In its motion for summary judgment petitioner explic-
itly abandoned any argument based on section 6404(g).
                                        -9-

consensus by filing cross-motions for summary judgment. We conclude that this

case is appropriate for summary adjudication.

B.    Standard of Review

      Section 6330(d)(1) does not prescribe the standard of review that this Court

should apply in reviewing an IRS administrative determination in a CDP case.

Where the taxpayer has properly challenged its underlying tax liability for the year

in question, we review the IRS determination de novo. Goza v. Commissioner,

114 T.C. 176, 181-182 (2000). A taxpayer may challenge the existence or amount

of its underlying liability in a CDP proceeding only “if the person did not receive

any statutory notice of deficiency for such liability or did not otherwise have an

opportunity to dispute such tax liability.” Sec. 6330(c)(2)(B).

      Petitioner seeks to challenge its underlying liability for 2002 only with re-

spect to the interest assessed on the deficiency. The amount of interest properly

assessable was not (and could not have been) considered by this Court in petition-

er’s prior deficiency case. See White v. Commissioner, 95 T.C. 209, 213 (1990)

(holding that underpayment interest is excluded from the definition of a “defi-

ciency” in section 6211). And respondent agrees that petitioner has had no other
                                         - 10 -

prepayment opportunity to dispute such interest.4 Petitioner properly advanced its

challenge to the assessed interest during the CDP hearing, and the SO considered

and rejected its argument. We review de novo his determination to this effect.

C.    Analysis

      Section 6601(a)(1) provides: “If any amount of tax imposed by this title

* * * is not paid on or before the last date prescribed for payment, interest on such

amount * * * shall be paid for the period from such last date to the date paid.”

Section 6601(b) provides that “the last date prescribed for payment of the tax shall

be determined under chapter 62.” Chapter 62 includes section 6151, captioned

“Time and Place for Paying Tax Shown on Returns.” It provides that, “when a

return of tax is required under this title,” the taxpayer “shall pay such tax at the

time * * * fixed for filing the return (determined without regard to any extension

of time for filing the return).” Sec. 6151(a).




      4
        In certain circumstances this Court is authorized to reopen a deficiency
case, within one year after our decision has become final, “solely to determine
whether the taxpayer has made an overpayment of * * * interest.” Sec. 7481(c)(1);
Rule 261. But we have jurisdiction to do this only if “the taxpayer has paid the
entire amount of the deficiency plus interest claimed by the Secretary.” Sec.
7481(c)(2)(A)(ii); Rule 261(b)(2)(A). Respondent concedes that this provision did
not afford petitioner a prior opportunity to dispute its liability for interest.
                                        - 11 -

      Section 6072(b) would have determined the timely filing of a corporate in-

come tax return for the taxable year 2002.5 It provided that the return of a corpor-

ation using the calendar taxable year “shall be filed on or before the 15th day of

March following the close of the calendar year.” See sec. 1.6012-2(a)(3), Income

Tax Regs. That day, March 15, 2003, was a Saturday. Thus, for a corporate tax-

payer using the calendar taxable year, the due date for its 2002 Form 1120 was

Monday, March 17, 2003. See sec. 7503.

      Petitioner is a corporation. Upon revocation of its tax-exempt status retro-

actively to January 1, 2002, it became obligated to file a corporate income tax re-

turn on Form 1120 for 2002. Under section 6601(a), interest runs from the “last

date prescribed for payment.” Under section 6151(a), the “last date prescribed for

payment” is the date “fixed for filing the return.” Because the date fixed for filing

petitioner’s 2002 Form 1120 was March 17, 2003, these provisions indicate that

petitioner must pay interest on the unpaid tax “for the period from such last date to

the date paid.” See sec. 6601(a). Respondent accordingly argues, with consider-

      5
       Section 6072(b) was amended for tax years beginning after December 31,
2015, by the Surface Transportation and Veterans Health Care Choice Improve-
ment Act of 2015, Pub. L. No. 114-41, sec. 2006(a), 129 Stat. at 457. As amend-
ed, section 6072(b) now applies only to returns filed by partnerships and S cor-
porations. The due date for filing returns by C corporations is now governed by
section 6072(a), which generally specifies “the 15th day of the fourth month fol-
lowing the close of the fiscal year.”
                                        - 12 -

able force, that the starting date for computing interest on petitioner’s unpaid 2002

corporate income tax is March 17, 2013.

      Petitioner notes that it was tax exempt during 2002, that it correctly filed

Form 990 for that year, and that it had no obligation to file Form 1120 until its tax

exemption was revoked. It accordingly contends that the starting date for paying

interest is governed by section 6601(b)(5), captioned “Last date for payment not

otherwise prescribed.” That section provides that, “[i]n the case of taxes payable

by stamp and in all other cases in which the last date for payment is not otherwise

prescribed, the last date for payment shall be deemed to be the date the liability for

tax arises.”

      Section 6601(b)(5) by its terms is inapplicable here. It applies only to taxes

payable by stamp and other taxes for which “the last date for payment is not other-

wise prescribed.” The tax involved here is the corporate income tax. The last date

for payment of the corporate income tax is “otherwise prescribed,” namely, by sec-

tion 6072(b). For a calendar year corporate taxpayer in 2002, that date was March

17, 2003.

      Even if section 6601(b)(5) applied, it would not help petitioner. Petitioner’s

corporate income tax liability for 2002 did not “arise” on February 1, 2012, when

the IRS mailed the letter revoking petitioner’s tax-exempt status. Nor did it arise
                                        - 13 -

on November 30, 2012, when this Court entered a decision determining a deficien-

cy of $216,547 for 2002. And it did not arise on March 13, 2013, when the IRS

assessed that tax.

      Rather, by virtue of the retroactive revocation of petitioner’s tax-exempt

status to January 1, 2002, its corporate income tax liability arose during 2002, the

calendar year for which it had become a “corporation subject to tax under subtitle

A.” Sec. 6012(a)(2); see Helvering v. Morgan’s, Inc., 293 U.S. 121, 127 (1934)

(defining taxpayers’ taxable year as “the twelve months’ accounting period for

which they were bound to report income and pay taxes”). And petitioner’s liabil-

ity for payment of that tax arose on March 17, 2003, the due date of its Form 1120

for 2002. In contending that it had no tax liability for 2002 until 2012, petitioner

is ignoring the fact that its tax-exempt status was revoked, not prospectively, but

retroactively to January 1, 2002. Retroactive revocation is not just a slap on the

wrist; it has real tax consequences.

      To be sure, “until we devise time machines, a change can have its effects

only in the future.” Bergerco Can. v. U.S. Treasury Dep’t, Office of Foreign

Assets Control, 129 F.3d 189, 192 (D.C. Cir. 1997). But the purpose of making a

change retroactive is to suspend reality and invoke a counterfactual premise.

Here, the premise is that petitioner was not in fact tax exempt during 2002 but
                                         - 14 -

rather was a corporation subject to the regular corporate income tax. Because pe-

titioner did not actually pay that tax on the date prescribed for payment, it is liable

for interest beginning on that date.6

      Petitioner emphasizes that it could not possibly have paid its 2002 tax liabil-

ity timely because it did not know on March 17, 2003, that this liability existed.

But respondent is not contending that petitioner was negligent and is not seeking

to collect an addition to tax for failure timely to pay. Respondent is seeking only

to collect interest on the unpaid tax from the date the tax was due to be paid. In so

doing, respondent is simply implementing the logical consequences of the retro-

active revocation to which petitioner agreed, whereby the IRS is restored to the

position it would have occupied if petitioner had never enjoyed tax-exempt status

during 2002.7


      6
        Section 6501(g)(2) provides that the filing of a Form 990 by a taxpayer that
determines in good faith that it is a tax-exempt organization “shall be deemed the
return of the organization” for purposes of starting the period of limitations on as-
sessment. By triggering the start of the three-year limitations period of section
6501(a), the good-faith filing of a Form 990 prevents the IRS from revoking an
entity’s tax-exempt status for years in the distant past. But if the assessment limi-
tations period remains open, as it was here upon the IRS’ prompt examination of
petitioner’s 2002 Form 990, neither section 6501(g) nor any other Code provision
prevents the IRS from assessing the accrued interest.
      7
       In any event, by stipulating a $216,547 deficiency for 2002 in the prior
deficiency case, petitioner agreed to the revocation of its tax-exempt status retro-
                                                                        (continued...)
                                          - 15 -

      Underpayment interest is designed to compensate the Government for the

period during which the taxpayer has enjoyed use of the Government’s money.

“Interest, in tax cases as in others, is merely compensatory; it is not a penalty.”

Vick v. Phinney, 414 F.2d 444, 448 (5th Cir. 1969). Under this use-of-funds ra-

tionale, “a taxpayer who initially failed to satisfy his tax liability is obligated to

pay interest on the taxes due from the date the tax return should have been filed,

regardless of whether the failure to pay resulted from the taxpayer’s miscalculation

or the [G]overnment’s redetermination.” Brookhurst, Inc. v. United States, 931

F.2d 554, 558 (9th Cir. 1991).

      By executing a stipulated decision in the prior deficiency case, petitioner

has agreed that it had a corporate income tax deficiency of $216,547 for 2002. It

has had use and enjoyment of that $216,547 from March 17, 2003, until now. It

has supplied no reason, in law or logic, why it should not have to pay interest as

any other corporate taxpayer would have to do.8


      7
       (...continued)
actively to January 1, 2002. Petitioner cannot plausibly raise a reliance argument
against the consequences of a retroactive revocation to which it agreed. Cf. Dick-
man v. Commissioner, 465 U.S. 330, 343 (1984) (sustaining the Commissioner’s
authority to change his position “even though a taxpayer may have relied to his
detriment upon the Commissioner’s prior position”).
      8
          Petitioner notes that it was legally required to file a Form 990 for 2002 and
                                                                           (continued...)
                                        - 16 -

D.    Abuse of Discretion

      In deciding whether the SO abused his discretion in sustaining the NFTL

filing, we consider whether he: (1) properly verified that the requirements of ap-

plicable law or administrative procedure have been met; (2) considered any rele-

vant issues petitioner raised; and (3) considered “whether any proposed collection

action balances the need for the efficient collection of taxes with the legitimate

concern of * * * [petitioner] that any collection action be no more than intrusive

that necessary.” See sec. 6330(c)(3). We find that the SO properly verified that

all requirements of applicable law and administrative procedure were followed.

And petitioner did not dispute in its petition the SO’s rejection of the proposed

collection alternatives. Those issues are thus conceded. See Rule 331(b)(4) (“Any

issue not raised in the assignments of error shall be deemed to be conceded.”).




      8
         (...continued)
that, if it had filed a Form 1120 instead, it might have been liable for a penalty un-
der section 6652(c)(1). But respondent is not contending that petitioner was non-
compliant in its tax filings or that it should have filed something other than it did.
Respondent is simply seeking to collect interest on a deficiency that arose in 2002
and has not been paid. The fact that petitioner could not literally have filed a
Form 1120 on March 17, 2003, does not negate the existence of a corporate in-
come tax liability for 2002 or entitle petitioner to free use of the Government’s
money for the ensuing decade.
                            - 17 -

To reflect the foregoing,


                                     An appropriate order and decision

                            will be entered.
