On October 19, 2021, the Tax Court issued a Memorandum Opinion in the case of Goldberg v. Commissioner (T.C. Memo. 2021-119). The primary issue presented in Goldberg v. Commissioner was whether Mr. Goldberg is prohibited from now challenging his underlying tax liabilities because of his failure to challenge an earlier Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC § 6320 or because of his nonparticipation in an even earlier TEFRA proceedings and Tax Court litigation.
Held: Sorry, Ronny. You had your shot(s).
Background to Goldberg v. Commissioner
Ronald Goldberg, the petitioner in this case, was a partner in two oil and gas partnerships. The partnerships were both subject to audit and litigation procedures under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (IRC § 6221 through IRC § 6234), which resulted in administrative adjustments to the partnerships’ information returns. Because partnerships are not taxable entities, themselves, the IRS sought to enforce the assessment of Mr. Goldberg’s share of the partnership-level adjustments against him in his individual capacity as a tax-paying partner.
The Notice of Federal Tax Lien
The IRS assessed tax and penalties against the two partnerships in April 2014, and then got around to issuing a Notice of Filing Federal Tax Lien (NFTL) with respect to his income tax liabilities for tax years 1998 and 2000. Mr. Goldberg did not timely challenge the NFTL filing by requesting a section 6320 hearing or submitting Form 12153 (Request for a Collection Due Process or Equivalent Hearing). In a footnote, the Tax Court explains that Mr. Goldberg made an untimely request for a collection due process hearing.
The IRS granted Mr. Goldberg an “equivalent hearing” and then issued a decision letter. A decision letter arising from an equivalent hearing is not a notice of determination, which is the formal document issued by Appeals at the close of a CDP proceeding. The trouble for Mr. Goldman was that because it is not a “determination,” the Tax Court does not have the jurisdiction to “redetermine” the issue. Stated differently, a decision letter is not sufficient to invoke the Tax Court’s jurisdiction under the CDP procedures of IRC § 6320 or IRC § 6330.
Thus, when Mr. Goldman petitioned the Tax Court for redress of the decision letter, challenging the merits of the equivalent hearing and decision letter, the Tax Court dismissed that portion of the petition for lack of jurisdiction sooner than it could say Jack Robinson (or Ronald Goldberg, I suppose).
The Notice of Intent to Levy
In December 2015, the IRS issued Mr. Goldberg a Letter 1058 (Final Notice of Intent to Levy and Notice of Your Right to a Hearing) for his 1998 and 2000 taxable years. Mr. Goldberg timely challenged the levy notice by submitting Form 12153 on December 20, 2015, requesting, among other things, a collection due process (CDP) hearing.
Prior to the CDP hearing, the settlement officer verified that all applicable laws and procedures had been met. In April 2016, the settlement officer issued a letter to Mr. Goldberg confirming that the IRS received his request for a CDP hearing. The letter asked Mr. Goldberg to provide his legal grounds for raising the liability issue, as well as any information pertaining to an alternative collection method.
The CDP hearing was held in June 2016, and the settlement officer had additional discussions with Mr. Goldberg’s representative through December 2017. Mr. Goldberg did not propose any collection alternatives—either during the hearing or any of the additional discussions. Instead, he challenged his underlying income tax liabilities, which included the TEFRA adjustments.
The settlement officer informed Mr. Goldberg during a December 2017, telephone conference that Mr. Goldberg could not challenge his underlying income tax liabilities because they were litigated at the partnership level in the Tax Court and thus could not be challenged at the partner level in collections. Mr. Goldberg disagreed, how vehemently Judge Paris does not say, and Appeals sustained the proposed collection action in a notice of determination issued in June 2018.
The Prior TEFRA Proceedings
While the TEFRA proceedings were…well, proceeding, Mr. Goldberg sent a letter to the IRS stating his position that the period of limitations had expired with respect to the TEFRA proceedings. In response, the IRS stated that if Mr. Goldberg disagreed with the IRS’s determination that the statute of limitations remained open, he should “pursue it formally” in the partnership proceedings. Not, apparently, a man of action, during the pendency of the TEFRA actions, Mr. Goldberg never formally pursued his argument that the statute of limitations had expired. It should also be noted, that both partnerships settled with the IRS in June 2013, and none of the partners—not even Mr. Goldberg—objected to the settlements.
The IRS sent a letter to Mr. Goldberg in February 2014, along with Form 4549-A (Income Tax Examination Changes), explaining the adjustments to Mr. Goldberg’s 2000 income tax return flowing from the partnership-level adjustments. A month later, Mr. Goldberg filed a protest in which he maintained that the adjustments were hogwash due to the statute of limitations issue. Approximately five months later, the IRS issued a sternly worded letter stating that Mr. Goldberg’s protest would not be considered because it raised substantive issues which should have been raised during the TEFRA proceedings. shortly thereafter, the IRS sent a letter (by regular USPS mail) to Mr. Goldberg, providing him with notice of the IRS’s adjustments with respect to his 1998 income tax return.
First and foremost, your fearless editor would like to observe that having said “En-Bap” in his head, he will for the rest of the day have the chorus of the Hanson song Mmmbop cycling, without end or hope for relief. His only consolation is that you, dear reader, now have the damn thing stuck in your head too. He’s not sorry.
Meanwhile, back at the ranch…Mr. Goldberg went through all kinds of gyrations including a Freedom of Information Act (FOIA) request to prove that he never received the NBAPs. One does feel a bit bad for Mr. Goldberg, as he expended an inordinate amount of effort attempting to disprove something, which the Tax Court dismissed as a futile endeavor, stating that “[u]ltimately, none of Mr. Goldberg’s allegations regarding the [mailing and/or receipt of the NBAPs] affects the outcome of this case.”
A Quick Note on Summary Judgment
Having not covered the procedures for summary judgment in Tax Court recently, we thought it prudent to revisit the procedural nuances very briefly for your reference.
Summary judgment serves to “expedite litigation and avoid unnecessary and expensive trials.” It is not, however, a substitute for trial and should not be used to resolve genuine disputes over issues of material fact. The Tax Court may grant summary judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. The moving party has the burden of showing the absence of a genuine dispute of material fact.
For purposes of the summary judgment motion, the Tax Court affords the party opposing the motion the benefit of all reasonable doubt further, the Tax Court weighs or “views” the material submitted by both sides in the light most favorable to the opposing party. This is to say that in the event that the Tax Court has a doubt about the existence of a material fact, it will resolve such doubt as to a material fact in favor of the nonmovant.
Once the moving party has appropriately supported its motion for summary judgment with “facts” and “law,” the nonmoving party may not oppose such motion by merely denying the allegations contained in the motion for summary judgment. Stated differently, the “liar-liar-pants-on-fire” defense or the equally childish response of leaning into the microphone, waggling its unnaturally bronzed finger hither and thither, and stating, simply and assuredly—“Wrong”—will not move the needle in favor of the party opposing the motion. Instead, the nonmovant must set forth specific facts showing that there is a genuine dispute for trial.
Mr. Goldberg’s Doomed Argument
The trouble with Mr. Goldberg’s argument—aside from the fact that he was jurisdictionally barred from making it—was that it was predicated on the invalidity of the Tax Matters Partner’s consents to the IRS’s requests for extensions of the statute of limitations on assessment pursuant to IRC § 6501(a). Mr. Goldberg had every right to object to the consents, and he even had the right to request that the Tax Court remove the Tax Matters Partner (TMP) pursuant to Tax Court Rule 250. Unfortunately (for Mr. Goldberg), he failed to do either.
The Tax Court wraps it up in a nice bow when it states
Mr. Goldberg cannot now demand a de novo review of his underlying liabilities for timely assessed partnership liabilities for multiple reasons. First, he failed to raise his underlying liabilities by timely challenging the earlier NFTL filing. Second, the Final Partnership Audit Adjustments (FPAAs) were validly issued, and Mr. Goldberg had actual notice of the TEFRA litigation but neither participated in nor made IRC § 6223(e) elections to convert the proceedings to partner-level challenges (nor did he seek, pursuant to Tax Court Rule 250, to remove the TMPs to whom he now objects).
A Brief Word on TEFRA Proceedings
Subsequent to the passage of the Bipartisan Budget Act of 2015, TEFRA was effectively repealed—particularly for smaller partnerships—and was replaced with a new “centralized partnership audit regime.” TEFRA requires that all partnership items be determined in a single partnership-level proceeding unless a partner makes a timely election to opt out of the TEFRA proceeding by having his items converted to non-partnership items. In the absence of a timely election, the determination of partnership items in a TEFRA proceeding is binding on the partners and may not be challenged in a later partner-level proceeding.
Note that under the default rules of new centralized partnership audit regime, the IRS audits the partnership’s items of income, gain, loss, deduction, credit, and partners’ distributive shares for a particular year of the partnership. However, any adjustments are made at the partnership level and are taken into account by the partnership in the year that the audit or any judicial review is completed. Briefly Taxing has a series of three great articles that discuss the new centralized partnership audit regime in great detail (and surprising clarity).
The issue before the Tax Court, then, was whether a challenge to the period of limitations is a challenge to the underlying liability which must be raised at the partnership level (i.e., in a TEFRA proceeding). The answer, for those keeping score at home, is a resounding “yes.”
In Kaplan v. United States, a partnership’s “small-share” partners (i.e., those owning less than 1% of the partnership) brought a refund claim in which they challenged the period of limitations in an underlying TEFRA proceeding. As in Goldberg, the partners in Kaplan argued that the TMP’s consents to extensions of time were invalid because the TMP did not properly provide them notice.
The court observed that “[t]his is precisely the type of challenge prohibited by TEFRA in light of Congress’s decision that such suits are better addressed in one fell swoop at the ‘partnership level’ than in countless suits by individual partners.” The Seventh Circuit digs the knife in a bit deeper with a long string cite of all the other courts that had decided the issue in the same manner.
The “Weight of Authority” Spells Doom for Mr. Goldberg
The writing was on the wall for Mr. Goldberg, and the Tax Court concluded that he was required to raise his statute of limitations challenge at the partnership level. Because he did not, he was barred from raising such a challenge in a later Tax Court proceeding.
- Pub. L. No. 97-248, sec. 402(a), 96 Stat. at 648. ↑
- Kennedy v. Commissioner, 116 T.C. 255, 262-263 (2001). ↑
- According to the American Heritage Book of Idioms, the phrase traces its roots back to an entry in Grose’s Classical Dictionary (1785), and refers to an individual (Jack) whose social visits were so short that he would be departing almost before his arrival was announced (before you could even say his name). ↑
- See IRC § 6230(c)(4). ↑
- Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). ↑
- See e.g., Vallone v. Commissioner, 88 T.C. 794, 801-805 (1987). ↑
- Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994). ↑
- FPL Grp., Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Bond v. Commissioner, 100 T.C. 32, 36 (1993); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). ↑
- Sundstrand Corp. v. Commissioner, 98 T.C. at 520; see, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). ↑
- Rule 121(d); see also Naftel, 85 T.C. at 529. ↑
- IRC § 6221; IRC § 6223(e)(3); see also Randell v. United States, 64 F.3d 101, 103 (2d Cir. 1995). ↑
- See IRC § 6230(c)(4); IRC § 7422(h). ↑
- The first article provided an overview of the primary differences between the BBA regime and that of the old TEFRA procedures. The second article takes a deep dive into the Code and Treasury Regulations, explaining each new provision under the BBA. This third article wraps everything up in a nice bow and provides guidance for partners and practitioners alike in implementing the centralized audit regime of the BBA. ↑
- 133 F.3d 469 (7th Cir. 1998). ↑
- Id. at 473; see Bedrosian v. Commissioner, 940 F.3d 467, 471-472 (9th Cir. 2019), aff’g 143 T.C. 83 (2014); Keener v. United States, 551 F.3d 1358, 1362-63 & n.3 (Fed. Cir. 2009); Weiner v. United States, 389 F.3d 152, 156 (5th Cir. 2004); Davenport Recycling Assocs. v. Commissioner, 220 F.3d 1255, 1260 (11th Cir. 2000), aff’g T.C. Memo. 1998-347; Chimblo v. Commissioner, 177 F.3d 119, 125 (2d Cir. 1999), aff’g T.C. Memo. 1997-535; Williams v. United States, 165 F.3d 30 (6th Cir. 1998). ↑