                           NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS
                                                                           FILED
                            FOR THE NINTH CIRCUIT
                                                                           DEC 15 2015
                                                                        MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS
ROBERT PEREZ MORALES,                            No. 13-74283

              Petitioner - Appellant,            Tax Ct. No. 4225-12

  v.
                                                 MEMORANDUM*
COMMISSIONER OF INTERNAL
REVENUE,

              Respondent - Appellee.



RONDA KAY MORALES,                               No. 13-74284

              Petitioner - Appellant,            Tax Ct. No. 5316-12

  v.

COMMISSIONER OF INTERNAL
REVENUE,

              Respondent - Appellee.


                           Appeal from a Decision of the
                                    Tax Court



        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
                           Submitted December 9, 2015**
                             San Francisco, California

Before: KOZINSKI, BYBEE, and CHRISTEN, Circuit Judges.

      This appeal concerns whether the Internal Revenue Service properly levied a

tax penalty against Robert and Ronda Morales. The tax court upheld the IRS’s

penalty, and we affirm.

      On appeal, the Moraleses primarily raise two arguments against the penalty:

(1) the tax court was wrong to reject statutory-interpretation arguments made in a

motion for reconsideration; and (2) the IRS did not meet its burden of production

to establish the penalty applied.

A.    The tax court did not abuse its discretion in denying the motion to
      reconsider

      The IRS levied its penalty against the Moraleses under I.R.C. § 6662. This

rule allows the IRS to penalize taxpayers for making “underpayments.” The

Moraleses argue that wrongly claiming a tax credit does not qualify as an

“underpayment” under this rule. The problem is that the Moraleses raised this

statutory-interpretation argument—for the first time—in a motion for

reconsideration.



        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

                                         2
      Tax Court Rule 161 permits a party to move for reconsideration, but “[t]he

granting of a motion for reconsideration rests within the discretion of the Court,

and will not be granted unless unusual circumstances or substantial error is

shown.” Alexander v. Comm’r, 95 T.C. 467, 469 (1990), aff’d without published

opinion sub nom. Stell v. Comm’r, 999 F.2d 544 (9th Cir. 1993). A motion for

reconsideration “may not be used to raise arguments . . . for the first time when

they could reasonably have been raised earlier in the litigation.” Kona Enters. v.

Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000). Indeed, we have held that

“abuse of discretion review precludes reversing the [trial] court for declining to

address an issue raised for the first time in a motion for reconsideration.” 389

Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999).

      As the tax court explained, the Moraleses “had ample opportunity to raise

this newly minted argument . . . by amending the pleadings or presenting it at trial,

but failed to do so.” The Moraleses have not articulated any exceptional

circumstances that prevented them from raising their argument before trial. And

their statutory argument was not so clear-cut that the tax court was required to

consider its merits for the first time in a motion for reconsideration. As the

Moraleses concede, the face of § 6664 was ambiguous as to whether disallowed




                                           3
credits were “underpayments.” The tax court thus did not abuse its discretion in

denying the motion for reconsideration.

B.    The tax court properly applied the burden of production to the IRS

      The Moraleses also contend that the IRS did not meet its burden of

production to show that the penalty applied to them. There are two reasons this

argument fails. First, the IRS is obligated to meet a burden of production on a

penalty only if the taxpayer first alleges that the IRS erred in its penalty

determination. See Wheeler v. Comm’r, 127 T.C. 200, 207 (2006). Otherwise, the

IRS “has no obligation . . . to produce evidence that the penalty is appropriate.” Id.

at 207 (quoting Swain v. Comm'r, 118 T.C. 358, 365 (2002)). Here, the Moraleses

did not initially challenge the merits of the IRS’s penalty determination. The

Moraleses thus conceded its validity and relieved the IRS of its burden of

production.

      Second, even if the Moraleses did not concede the penalty, the IRS met its

burden of production. The IRS provided evidence that the Moraleses negligently

claimed first-time buyers credits even though they had recently owned a home.

The tax court’s rulings are therefore affirmed.

AFFIRMED.




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