Harold Wilson - Page 7

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                                     Present Law                                      
                    Under present law, the deficiency procedures                      
               allowing taxpayers to litigate issues in the Tax Court                 
               relating to the earned income credit (sec. 32) and the                 
               credit for the certain payments of the gasoline and                    
               special fuels tax (sec. 34) may not apply.                             
                              Explanation of Provision                                
                    The bill provides that the Tax Court deficiency                   
               procedures apply to the credits allowable under                        
               sections 32 and 34, notwithstanding that the credits                   
               reduce the net tax to less than zero.                                  
                    The provision applies to notices of deficiencies                  
               mailed after the date of enactment of this bill.                       
          There is no mention of the amendment in H. Conf. Rept. 100-1104             
          (1988), 1988-3 C.B. 473.                                                    
               Consistent with the plain language of section 6211(b)(4), it           
          follows that, where petitioner reported a tax liability of zero             
          and claimed an overpayment based upon an earned income credit of            
          $335, the latter amount is treated as a negative amount of tax.             
          In this regard, respondent’s determination that petitioner’s                
          correct tax liability is zero and that petitioner is not entitled           
          to an earned income credit constitutes the determination of a               
          deficiency within the meaning of section 6211.  The fact that the           
          refund of $335 was intercepted by prison officials in cooperation           
          with the IRS does not change this result.  The fact of payment of           
          the credit amount is not taken into account under section                   
          6211(b)(4).  Under the circumstances, we conclude that the Court            

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