The Validity of Near Duplicate Notices, Designated Orders: November 18 – 22, 2019

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Five orders were designated during the week of November 18 – November 22, 2019 and the most interesting two are discussed below. The orders not discussed involve an unchallenged American Opportunity Tax Credit denial (here), a motion for failure to prosecute an absent petitioner (here), and a bench opinion involving frivolous returns and whether more than one section 6702(a)(1) penalty should apply (here).

Docket No. 11284-18, SNJ Limited, Ritchie N. Stevens & Julie A. Keene-Stevens, Partners other than the Tax Matters Partner v. CIR (Order Here)

In this first order the Court addresses the IRS’s motion to dismiss for lack of jurisdiction. This case is before the Court on notices of federal partnership administrative adjustment (“FPAA”), and the outcome of the IRS’s motion depends on whether the FPAAs are valid.  

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Validity is at issue because the two separate near duplicate sets of notices, for the same tax periods, were sent a few months apart from each other. Petitioners timely petitioned the Tax Court based on the date on the second set of notices, however, section 6223(f) states that only one FPAA can be valid (with some limited exceptions not applicable here) – which means that if the first set notices is valid, then the second is not and petitioners’ petition was not timely filed.

The notices pertain to 2006 and 2008. The first set was mailed in November of 2017 and the second in February of 2018. Petitioners oppose the IRS’s motion to dismiss by arguing that the first set of notices are not valid, because they were not sent to petitioners’ correct address.

In addition to that argument, but not specifically raised by petitioners, the Court considers whether the November notices are not valid by looking to the reason why the February set of notices covering the same periods were sent.

First, regarding petitioners’ address-related argument, the Court looks to section 6223(c)(1), which requires the IRS to send the FPAAs to the names and addresses listed on a partnership return. In this case, the partnership did not file returns for either year at issue. The IRS is obligated to use another address if it is provided in the manner specified in Treas. Reg. Sec. 6223(c)-1(b)(2) and (b)(3)(v), which is in a written statement signed by the person supplying it, and filed with the service center where the partnership return is filed.

Petitioners did not provide a new address in this manner, and instead, listed the allegedly incorrect address on unsigned returns provided during the examination. The IRS is permitted, though not required, to use the address provided on these unsigned returns pursuant to Treas. Reg. 301.6223(c)-1(f) and that is what it did. The IRS also sent a set of FPAAs (in November and February) to what it believed to be the Tax Matters Partner’s (“TMP”) address. Petitioners argue that address was not the TMP’s address. Petitioners, however, received the February FPAAs sent to that address because they were attached to their petition. As a result, the Court finds that the November FPAAs were not invalid as a result of being incorrectly addressed.

The Court then goes on to evaluate why a second set of FPAAs was even sent – was there an issue with the first set that calls into question its validity?

The IRS explains that it sent the second set of FPAAs out of an abundance of caution because an incorrect partnership name was used on a schedule attached to the November FPAAs. The correct partnership name was used on FPAAs themselves, the FPAAs and schedule listed the partnership’s correct EIN, and the adjustments reflected on the schedule appear to be based on information for the correct partnership. In other words, it was only the partnership name used on the schedule that was incorrect and nothing else, and as a result, the Court determines that doesn’t impact the validity of the November FPAAs. 

In making this determination the Court looks to Campbell v. CIR, 90 T.C. 110, 113-114 (1998), which upheld the validity of a notice of deficiency that named another taxpayer (and even listed amounts related to that other taxpayer) in an attached schedule. Although this case involves FPAAs, rather than a notice of deficiency the Court points out that “the standards governing the validity of an FPAA are less exacting than those governing the validity of a statutory notice of deficiency” and “for an FPAA to be valid it needs to only provide ‘minimal notice’ that the IRS has finally determined adjustments to the partnership return.”

The Court determines that even with the error the November FPAAs meet the “minimal notice” test and are valid. As a result, petitioners’ petition is not timely, the Court does not have jurisdiction, and the case is dismissed.

Docket No. 11229-15, Michael J. Hogan v. CIR (Order Here)

In this bench opinion the Court addresses the IRS’s motion for partial summary judgment on an interest abatement request related to petitioner’s 1994 and 1995 balances. It also addresses the IRS’s motion to compel, which I do not discuss. The years at issue do cause one to wonder why these balances still exist nearly 25 years later, but was the delay caused by an IRS ministerial act?

More information on the interest abatement request is found in an earlier order (here), but to summarize: the Form 843 was submitted in 2012 and requested abatement for interest accrued, according to petitioner, as a result of the returns being “put in a drawer by IRS/CID agent .  .  .” and “not filed by the IRS and processed until August 13, 2001.”  The petitioner never clearly stated the exact period for which he is requesting interest abatement.

The period referenced in the IRS’s motion for partial summary judgment in the earlier order was from the return due dates in 1995 and 1996 through when the original returns were filed in September 1997. The IRS was granted summary judgment with respect to that limited period because petitioner did not assert there was a delay caused by a ministerial act (or any genuine issue of material fact) for the 1995 – 1997 period.

It’s also relevant that in 1999 petitioner pled guilty to conspiring to defraud the government and tax evasion related to his 1994 and 1995 tax years. Pursuant to terms of the agreement, petitioner filed amended tax returns for those years in 2001.

The Court found that all of petitioner’s interest abatement related assertions are for the period after he filed his original returns in 1997, and it is (partially) that period which is addressed in this order. The IRS’s motion here requests that the Court grant summary judgment for the period from 1997 through November 21, 2000, which is the date both parties agree the criminal proceedings related to 1994 and 1995 terminated.

Relying on similar cases cited by the IRS (Badaracco v. CIR and Taylor v. CIR), which reference generally the IRS’s right to take more time evaluating cases that involve fraud or criminal proceedings, the Court decides petitioner is not entitled to interest abatement for the 1997 – 2000 period for either tax year and grants IRS’s motion for partial summary judgment.

The bench opinion doesn’t discuss whether periods after 2000 remain at issue in this case, but I assume they do since only a limited period is addressed by the IRS’s motion. Although the Court acknowledges that it is unclear, petitioner’s interest abatement request may include the interest accrued until at least 2012 when the Form 843 was submitted.

Samantha Galvin About Samantha Galvin

Samantha Galvin is an Associate Professor of the Practice of Taxation and the Assistant Director of the Low Income Taxpayer Clinic (LITC) at the University of Denver. Professor Galvin has been teaching full-time at the University of Denver since October of 2013 and teaches courses in tax controversy representation, individual income tax, and tax research and writing. In the LITC, she teaches, supervises and assists students representing low income taxpayers with controversy and collection issues.

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