## Facts

- Taxpayer failed to timely file a 1985 federal income tax return due April 15, 1986.
- In 1992, taxpayer filed the delinquent 1985 return reporting roughly $3,000 due but did not pay with the return.
- On April 12, 1993, the IRS issued a notice stating taxpayer owed about $4,200 (tax and penalties), and the IRS placed taxpayer on an installment plan.
- The IRS sent monthly installment notices stating the balance included “penalties and interest,” but the IRS’s computations omitted some accrued interest.
- By March 9, 1995, IRS records reflected a zero balance based on the incomplete interest calculation.
- On August 9, 1995, the IRS advised taxpayer that more than $5,000 of interest remained due for 1985.
- Taxpayer sought interest abatement under IRC § 6404(e), asserting IRS computational and notice errors justified abating all interest.
- The IRS administratively abated only a limited amount, then conceded in litigation that interest should be abated for the period April 12, 1993 through August 9, 1995, but refused to abate interest accruing before or after that period.
- Taxpayer petitioned the Tax Court under IRC § 6404(h) for review of the refusal to abate the full interest amount.

## Issues

1. Whether the IRS’s failure to properly compute and reflect accrued interest on installment notices constituted an unreasonable error or delay in performing a “ministerial act” within IRC § 6404(e).
2. Whether the Commissioner abused discretion by limiting abatement to interest accruing from April 12, 1993 through August 9, 1995, and denying abatement for interest accruing before and after that period.

## Decision

- The Tax Court held the IRS’s incorrect interest computation and misleading balance notices were errors in performing ministerial acts for the period April 12, 1993 through August 9, 1995.
- The Tax Court sustained the Commissioner’s decision to abate interest only for that period.
- The Tax Court concluded the refusal to abate interest accruing before April 12, 1993 and after August 9, 1995 was not an abuse of discretion.
- The taxpayer’s request for full abatement of all interest was denied.

## Legal Principles

- IRC § 6404(e) authorizes interest abatement only for interest attributable to an unreasonable IRS error or delay in performing a ministerial act, and only where the taxpayer did not significantly contribute to the delay.
- A ministerial act is a mechanical, clerical, or procedural step that does not involve legal or factual judgment.
- Erroneous computation, posting, or billing of interest may qualify as a ministerial-act error, supporting abatement for interest accruing during the period the error affects the account.
- Interest is not abatable under § 6404(e) for periods not causally tied to a qualifying ministerial error, including ordinary interest resulting from a taxpayer’s late filing or nonpayment.
- Under IRC § 6404(h), the Tax Court reviews the IRS’s failure to abate interest for abuse of discretion and will not order additional abatement absent arbitrary action, legal error, or unreasonable judgment.

## Conclusion

The Tax Court ruled that the IRS’s interest miscalculation and related billing notices justified abating interest only during the period the ministerial errors persisted, and it held that limiting abatement to that period was not an abuse of discretion under IRC § 6404.


Krugman v. Comm’r, 112 T.C. 230 (1999)