REPORTS OF THE UNITED STATES TAX COURT HENRY RANDOLPH CONSULTING, PETITIONER v. RESPONDENT Docket No. 6838-98. Filed January 6, 1999. R determined, in a notice mailed to P, that some of P's workers were employees and that P was not eligible for relief under sec. 530 of the Revenue Act of 1978, Pub. L. 95–600, 92 Stat. 2763, 3855, for certain taxable periods. R attached to the notice a proposed agreement to assessment of tax resulting from R's determination. P filed a petition seeking our redetermination under sec. 7436, I.R.C., of R's determination, including the amounts of tax R proposed to assess. Held, we lack jurisdiction to decide the amount of P's employment tax and income tax withholding liability for the taxable periods in issue. George W. Connelly, Jr., Linda S. Paine, and William O. Grimsinger, for petitioner. M. Kathryn Bellis, for respondent. OPINION COLVIN, Judge: This case is before the Court on respondent's motion to dismiss for lack of jurisdiction as to the amounts of employment tax1 liability for the periods in issue. 1 For convenience, we use the term "employment tax" to refer to taxes under the Federal Insurance Contributions Act (FICA), secs. 3101-3125, the Federal Unemployment Tax Act (FUTA), secs. 3301-3311, and income tax withholding, secs. 3401-3406 and 3509. Unless otherwise indicated, section references are to the Internal Revenue Code in effect for Continued 1 We will grant respondent's motion for the reasons stated below. Neither party requested a hearing, and we conclude that none is necessary to decide respondent's motion. Background Petitioner is a sole proprietorship, the principal place of business of which is in Birmingham, Alabama. Respondent's agents audited petitioner's Federal Insurance Contributions Act and income tax withholding tax returns (Forms 941) for March 31 to December 31, 1994, and March 31 to December 31, 1995, and petitioner's Federal Unemployment Tax Act tax return (Form 940) for 1995. On March 19, 1998, respondent mailed to petitioner a notice of determination concerning worker classification under section 7436 which said in part: As a result of an employment tax audit, we are sending you this NOTICE OF DETERMINATION CONCERNING WORKER CLASSIFICATION UNDER SECTION 7436. We have determined that the individual(s) listed or described on the attached schedule are to be legally classified as employees for purposes of federal employment taxes under subtitle C of the Internal Revenue Code and that your (sic) are not entitled to relief from this classification pursuant to section 530 of the Revenue Act of 1978 with respect to such individual(s). This determination could result in employment taxes being assessed against you. Respondent attached to the notice of determination an Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment (Excise or Employment Tax) (Form 2504) in which respondent proposed that petitioner consent to immediate assessment and collection of $53,194.87 in tax, consisting of the following amounts: (1) $27,814.58 for March 31 to December 31, 1994, under the FICA, secs. 3101-3125, and for income tax withholding, secs. 3401-3406 and 3509; (2) $22,776.29 for March 31 to December 31, 1995, under the FICA and for income tax withholding; and (3) $2,604 for 1995, under the FUTA, secs. 3301-3311. The form also proposed that petitioner agree to the following: the taxable periods in issue. Rule references are to the Tax Court Rules of Practice and Procedure. I consent to the immediate assessment and collection of any additional tax and penalties and accept any overassessment (decrease in tax and penalties) shown above, plus any interest provided by law. I understand that by signing this agreement, I am waiving the restrictions on assessment provided in section 7436(d) and 6213(a) of the Internal Revenue Code of 1986, and that I will not be able to contest the issues covered by this agreement in the United States Tax Court. Respondent attached to the notice of determination a copy of Examination Changes-Federal Unemployment Tax for 1995 (Form 4667), and Employment Tax Examination Changes Report for 1994 and 1995 (Forms 4668), detailing respondent's calculations of the amounts of assessment to which respondent proposed that petitioner agree. Petitioner filed a petition seeking our review of respondent's notice of determination. In it, petitioner contends that petitioner's service providers are not employees; petitioner is entitled to treatment under section 530(a) of the Revenue Act of 1978, Pub. L. 95-600, 92 Stat. 2763, 2855; respondent's computation of proposed employment tax and income tax withholding due is incorrect; and, if respondent's determinations are sustained, the correct liabilities can be recomputed under Rule 155. Petitioner also contends that the notice of determination is void because, in the notice, respondent did not identify the individuals whose worker classification was being determined. Respondent filed a motion to dismiss for lack of jurisdiction as to the amounts of tax respondent proposed to assess. Respondent also moved to strike from the petition petitioner's claim that, if respondent's determinations are sustained, the correct liabilities can be recomputed under Rule 155. Discussion The parties dispute whether we have jurisdiction under section 74362 to decide the amounts of tax for which petitioner would be liable if we sustain to any extent respond 2 Sec. 7436 was added to the Internal Revenue Code by sec. 1454(a) of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 788, 1055, effective Aug. 5, 1997. Before enactment of sec. 7436, the Tax Court lacked jurisdiction to decide worker classification disputes arising under subtit. C of the Code. See secs. 6211-6213. Before the enactment of sec. 7436, judicial review of IRS assessment of employment taxes or related penalties was available only if a taxpayer paid a divisible part of the assessment, filed a claim for refund, and filed a refund suit in Federal District Court or the Court of Federal Claims to recover amounts paid. See sec. 7422; 28 U.S.C. sec. 1291 (1994). ent's determination that petitioner's workers are employees and that petitioner is not entitled to relief under section 530 of the Revenue Act of 1978. Petitioner contends that our jurisdiction is provided by section 7436(a), (c), and (d), and that this result is consistent with logic and public policy (e.g., the convenience of the parties and judicial economy). Respondent contends that we lack jurisdiction under section 7436 to decide amounts of employment tax due. To decide this issue, we first consider the following issues relating to the text of section 7436: (1) Whether section 7436(a) provides jurisdiction over amounts of employment tax due; and (2) whether jurisdiction over amounts is provided by section 7436(d), which incorporates into section 7436 the principles of several provisions governing our deficiency jurisdiction, or by section 7436(c), which makes the small case procedures under section 7463 available for cases under section 7436 if less than $10,0003 is in dispute. Next, we consider whether our interpretation of section 7436 is altered by (1) its legislative history, (2) a comparison of section 7436 to provisions authorizing us to issue declaratory judgments (sections 7428, 7476, 7477, 7478, and 7479), (3) the fact that respondent attached a proposed consent to assess employment tax due to the notice, or (4) petitioner's contention that it would be illogical to provide jurisdiction over worker classification issues without providing jurisdiction to decide the amounts of employment tax and income tax withholding liability, e.g., from the standpoint of convenience of the parties or judicial economy. A. Section 7436 1. Section 7436(a) We may only exercise jurisdiction that is expressly permitted or provided by statute. Trost v. Commissioner, 95 T.C. 560, 565 (1990); Judge v. Commissioner, 88 T.C. 1175, 1180– 1181 (1987). Section 7436(a)4 expressly grants jurisdiction to 3 Sec. 3103(b)(1) of the IRS Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 685, 731, amended sec. 7436(c)(1) to increase the limit from $10,000 to $50,000 per quarter, effective for proceedings commenced after July 22, 1998. 4 Sec. 7436(a) provides: SEC. 7436. PROCEEDINGS FOR DETERMINATION OF EMPLOYMENT STATUS (a) CREATION OF REMEDY.-If, in connection with an audit of any person, there is an actual |