We have reported before that the Tax Court’s rulings which prohibit petitioners in deficiency cases from voluntarily withdrawing their petitions does not apply in cases in which the petitioners reach the Tax Court based on a notice of determination. In Joseph E. Abe, DDS, Inc., v. Commissioner, 161 T.C. 1 (2023) the Tax Court holds that it has discretion to grant motions for voluntary dismissal in declaratory judgment cases. This decision is not a surprise and is completely consistent with the Court’s earlier rulings which are detailed in the post linked above. This short post will serve as a reminder of the difference between cases initiated after a notice of deficiency which comprise 95% of the Tax Court’s docket and other bases for its jurisdiction which almost always result from a notice of determination.
Petitioner created a retirement plan in 1982. In 2019 he terminated the plan. The IRS notified petitioner in November, 2020 that it selected the plan for audit. As a result of the audit, the IRS revoked the plan’s qualification for the years 2012 through 2019 for failure to meet the requirements of IRC 401(a).
On September 16, 2022, petitioner timely filed a Petition with the Court seeking a declaratory judgment pursuant to section 7476 that from 2012 through 2019 the plan was a qualified retirement plan. After the IRS answered, petitioner moved to dismiss the petition and the IRS did not object.
In its opinion the Court lays out its position regarding deficiency and non-deficiency cases that come before it:
When the Court grants a motion to dismiss, unless the dismissal is for lack of jurisdiction, section 7459 requires the Court to sustain the Commissioner’s determination set forth in the notice of deficiency. §7459(d). This Court has held that taxpayers may not move to withdraw a petition in deficiency redetermination cases. See Estate of Ming v. Commissioner, 62 T.C. 519, 522-23 (1974) (holding section 7459(d) applies in cases filed pursuant to section 6213 and mandates an entry of decision in the Commissioner’s favor).
In nondeficiency cases filed pursuant to Code sections other than section 6213, this Court has previously granted taxpayers’ motions to dismiss or withdraw petitions. See generally Stein v. Commissioner, 156 T.C. 167 (2021) (administrative costs pursuant to section 7430(f)(2)); Mainstay, 156 T.C. at 100 (failure to abate interest pursuant to section 6404(h)); Jacobson v. Commissioner, 148 T.C. 68 (2017) (whistleblower awards pursuant to section 7623(b)(4)); Davidson v. Commissioner, 144 T.C. 273 (2015) (innocent spouse determinations pursuant to section 6015(e)); Wagner v. Commissioner, 118 T.C. 330 (2002) (collection actions pursuant to sections 6320(c) and 6330(d)). Section 6213 was not applicable to these nondeficiency cases and therefore section 7459(d) did not mandate entry of decisions in the Commissioner’s favor upon the dismissals. See, e.g., Stein, 156 T.C. at 169.
The Court notes that it does not have a rule regarding voluntary dismissals. It receives so few voluntary dismissals that it probably does not feel the need for such a rule. As it usually does when no Tax Court rule exists, the Court looks to the Federal Rules of Civil Procedure. It analyzes FRCP 41(a)(2) which permits voluntary dismissal at a court’s discretion. Here, it finds that the IRS would not be prejudiced by the voluntary dismissal and grants the dismissal citing to its similar action in the earlier cases involving non-deficiency jurisdiction discussed the earlier blog post and discuss in this opinion as well.
The opinion ticks another type of non-deficiency case off the list as one in which the petitioner can seek voluntary dismissal. It serves as a reminder that in deficiency cases once you file the petition and the Court has jurisdiction the only way out is through a decision of some type that will result in an impact on the assessment of tax.