apparently would be without remedy, either in the form of damages or specific relief.20 The provisions currently found in sections 6335(f) and 7433 were enacted as part of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 102 Stat. 3342. Both provisions are included in a set of provisions known as the "Taxpayer Bill of Rights" intended, as the name connotes, to "promote and protect taxpayer rights". S. Rept. 100-309, at 1 (1988). In light of these broader purposes of the Taxpayer Bill of Rights and the specific remedial nature of section 6335(f), we do not believe that Congress intended section 7433 to displace equitable remedies for violations of section 6335(f).21 In a footnote to his memorandum in support of his motion for reconsideration, respondent suggests that he is not authorized to credit petitioners' account as contemplated in Zapara I. Citing section 6402(a), respondent states that he "is not generally authorized to credit a taxpayer's account without an overpayment". Section 6402(a) merely provides a procedure whereby respondent may credit a taxpayer's overpayment against an outstanding tax liability before refunding the balance. Neither section 6402(a) nor any other provision of law forecloses respondent from giving petitioners proper credit as ordered by this Court in the exercise of its authority pursuant to section 6330(d).22 To reflect the foregoing, An order will be issued denying respondent's motion for reconsideration. 20 Similarly, there are other gaps in the scheme of relief under sec. 7433, insofar as it might provide a remedy for a violation of sec. 6335(f). For instance, whereas sec. 6335(f) entitles the "owner" of levied-upon property (who may or may not be the same person as the taxpayer) to request sale of the property, sec. 7433(a) limits a cause of action for damages to the "taxpayer". Furthermore, the damages available under sec. 7433 are capped at $100,000 for negligent disregard of law and $1,000,000 for reckless or intentional disregard of law. 21 The legislative history of sec. 7433 gives the "Reasons for change" in toto as follows: "The committee believes that taxpayers should be provided a civil cause of action to compensate them for damages that arise out of unlawful actions or inaction of IRS employees that occur during the determination or collection of Federal taxes." S. Rept. 100-309, at 15–16 (1988). 22 The amount, if any, of credit due to petitioners will depend upon findings this Court has ordered respondent's Appeals Office to make upon remand. GARWOOD IRRIGATION COMPANY, PETITIONER v. RESPONDENT Docket No. 1459-03. Filed May 1, 2006. P, an S corporation, is due an overpayment that exceeds $10,000. R computes that overpayment using the Federal short-term rate plus 0.5 percentage point according to R's reading of sec. 6621(a)(1), I.R.C. P maintains that it should not be treated as a corporation for purposes of determining the applicable rate because of its S corporation election. P's position is based upon sec. 6621(c)(3), I.R.C., which is crossreferenced in sec. 6621(a)(1), I.R.C. Held, the lower corporate rate set forth in the flush language of sec. 6621(a)(1), I.R.C., applies to C corporations, and P is entitled to the higher rate of overpayment interest set forth in sec. 6621(a)(1)(B), I.R.C., for corporations (the Federal short-term rate, plus 2 percentage points). Donald F. Wood and Benjamin M. Leff, for petitioner. Richard T. Cummings and Michael W. Bentley, for respondent. OPINION GOEKE, Judge: Petitioner has filed a motion under Rule 2611 seeking a redetermination of overpayment interest. The issue is the appropriate rate of interest on petitioner's overpayment. The underlying facts of this case are set out in detail in Garwood Irrigation Co. v. Commissioner, T.C. Memo. 2004– 195, and are incorporated herein by this reference. Petitioner is entitled to recover with interest an overpayment of tax on its built-in gain for the taxable year ending December 31, 1999, pursuant to our Memorandum Opinion. Petitioner elected status as an S corporation effective January 1, 1997, and remains such. In determining the interest due petitioner relative to that overpayment, respondent applied the reduced interest rate provided in the flush language of section 6621(a)(1). Petitioner disputes this computation in a timely filed motion under Rule 261. Petitioner seeks the higher interest paid to 1 Rule references are to the Tax Court Rules of Practice and Procedure. Section references are to the Internal Revenue Code. noncorporate taxpayers under section 6621(a)(1)(A) and (B) rather than the lower rates for corporations provided in the parenthetical language of subparagraph (B), and the flush language of section 6621(a)(1). In other words, petitioner seeks interest to exceed the Federal short-term rate by 3 percent instead of 0.5 percent. Section 6621(a)(1) provides: SEC. 6621. DETERMINATION OF RATE OF INTEREST. (a) GENERAL RULE. (1) OVERPAYMENT RATE.-The overpayment rate established under this section shall be the sum of (A) the Federal short-term rate determined under subsection (b), plus (B) 3 percentage points (2 percentage points in the case of a corporation). To the extent that an overpayment of tax by a corporation for any taxable period (as defined in subsection (c)(3), applied by substituting "overpayment" for "underpayment") exceeds $10,000, subparagraph (B) shall be applied by substituting "0.5 percentage point" for "2 percentage points". The gist of this dispute is the cross-reference to subsection (c)(3). Subsection (c)(3) provides: (3) LARGE CORPORATE UNDERPAYMENT.—For purposes of this subsection (A) IN GENERAL.-The term "large corporate underpayment" means any underpayment of a tax by a C corporation for any taxable period if the amount of such underpayment for such period exceeds $100,000. (B) TAXABLE PERIOD.-For purposes of subparagraph (A), the term "taxable period" means or (i) in the case of any tax imposed by subtitle A, the taxable year, (ii) in the case of any other tax, the period to which the underpayment relates. Petitioner maintains that the term that is defined by subsection (c)(3) is not "taxable period" as respondent asserts, but rather "overpayment of tax by a corporation for any taxable period". Petitioner makes this argument in order to incorporate not simply the provisions of subsection (c)(3)(B) of section 6621 into the operation of section 6621(a)(1), but also subsection (c)(3)(A). Thereby petitioner hopes to limit the meaning of "corporation" in subsection (a)(1) to C corporations. In other words, this dispute turns on what is defined for purposes of the flush language in subsection (a)(1) by the cross-reference to subsection (c)(3) of section 6621. Respondent counters that subsection (c)(3)(A) provides a different threshold than subsection (a)(1), $100,000 rather than $10,000. The parenthetical in subsection (a)(1) substitutes "overpayment” for “underpayment", but it does not say "$10,000" rather than "$100,000". The lower threshold is set forth after the parenthetical. This creates a question as to why Congress did not more artfully express the incongruity in dollar thresholds, if petitioner's argument is assumed to be correct. Respondent argues that if "taxable period" is the defined term, the incongruity of the threshold amount is avoided because only subsection (c)(3)(B) is required to define the term. Petitioner forms its counterargument out of the broader reference in the flush language of subsection (a)(1) to subsection (c)(3) rather than subsection (c)(3)(B). Petitioner states that the broader subsection reference is intentional and must not be disregarded. Petitioner reasons that the reference to subsection (c)(3) means that "overpayment" and the words that follow are included in the defined term, not simply "taxable period". Another complication is that subsection (c)(3) does not define "underpayment" but rather the phrase "large corporate underpayment". "Large corporate overpayments" does not appear in subsection (a)(1). Because neither party's interpretation is without difficulty, we find the statutory language to be ambiguous, and we find reference to legislative history is appropriate. While we do not find a definitive answer in the legislative history, there is some guidance. The stated reason for the addition of the flush language to section 6621(a)(1) was: Distortions may result if the rates of interest in the Code differ appreciably from market rates. Reducing the overpayment rate for large corporate overpayments of taxes will reduce the possibility of distortions. [H. Rept. 103-826 (Pt. 1), at 178 (1994), 1995-1 C.B. 250, 254.] The phrase “large corporate overpayments" in the committee report is significant since it echoes the definition of “large corporate underpayment" in subsection (c)(3). This parallel language causes us to find that the reference to "(c)(3)" rather than "(c)(3)(B)" was intentional and tilts the scales of the statutory interpretation to petitioner's broader reading. It follows that the overpayments subject to the lower rate of overpayment interest set forth in the flush language are those of C corporations, and petitioner is not limited to the 0.5-percent addition to the Federal short-term rate. We have also considered that petitioner was at one time a C corporation and is only now subject to a corporate-level tax liability because of its prior status and the operation of section 1374. However, this does not change our conclusion because in interpreting the application of section 6621(c)(3) to underpayments, section 301.6621-3(b)(3), Proced. & Admin. Regs., provides that after the year of the S corporation election, the S corporation is not to be treated as a C corporation in applying the large corporate underpayment provision of section 6621(c)(3). We find that the overpayment provisions of section 6621(a)(1) should be applied in the same manner. We are left with one final issue. Petitioner seeks the additional 3 percentage points provided for a noncorporate taxpayer in section 6621(a)(1)(B), but that section provides clearly "2 percentage points in the case of a corporation". While we agree with petitioner that "corporation" in the flush language means C corporation as a result of the crossreference to subsection (c)(3), we do not find that cross-reference applicable to the operation of subsection (a)(1)(B) and are left with the word "corporation" with no cross-reference. The general definition of "corporation" in section 7701(a)(3) and section 301.7701-2(b)(1), Proced. & Admin. Regs., does not distinguish between C and S corporations. Accordingly, we find petitioner is entitled to an additional 2 percentage points interest, rather than the 3 percentage points for noncorporate taxpayers. To reflect the foregoing, An appropriate order will be entered. |