John C. Hom & Associates, Inc. v. Commissioner

140 T.C. No. 11UNITED STATES TAX COURT
JOHN C. HOM & ASSOCIATES, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14081-11. Filed May 7, 2013.
R moved to dismiss the proceeding for lack of jurisdiction
because petitioner’s corporate powers were suspended at the time the
petition was filed. Petitioner contends that the notice of deficiency is
invalid for failing to include the address and telephone number of the
local office of the National Taxpayer Advocate and that inclusion of a
Web page link is inadequate compliance with I.R.C. sec. 6212.
Held: The notice was not invalid. The motion to dismiss will be
granted.
John C. Hom (an officer), for petitioner.
Sarah E. Sexton, for respondent.
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OPINION
COHEN, Judge: This case is before the Court on respondent’s motion to
dismiss for lack of jurisdiction. The issues for decision are whether the notice of
deficiency was invalid for failing to include the address and telephone number of the
local office of the National Taxpayer Advocate, as directed by section 6212(a), and
whether the case should be dismissed for lack of jurisdiction because petitioner’s
corporate status was suspended at the time the petition was filed. All section
references are to the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
Background
Petitioner was incorporated in California on April 2, 1986. The California
Franchise Tax Board suspended the powers, rights, and privileges of petitioner on
March 1, 2004. The suspension remained in effect until April 13, 2012.
In a notice of deficiency sent March 16, 2011, respondent determined
deficiencies, additions to tax, and penalties as follows:
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Penalty Penalty
Year Deficiency sec. 6662 (a) sec. 6654(a)(1)
2005 $38,520 $7,704.00 $9,630.00
2006 47,072 9,414.40 11,768.00
2007 27,354 5,470.00 6,838.50
2008 27,886 5,577.20 6,971.50
2009 28,251 5,650.20 7,104.75
The notice of deficiency included the following paragraph:
The contact person can access your tax information and help you
get answers. You also have the right to contact the office of the
Taxpayer Advocate. Taxpayer Advocate assistance is not a substitute
for established IRS procedures such as the formal appeals process.
The Taxpayer Advocate is not able to reverse legally correct tax
determinations, nor extend the time fixed by law that you have to file a
petition in the U.S. Tax Court. The Taxpayer Advocate can, however,
see that a tax matter that may not have been resolved through normal
channels gets prompt and proper handling. If you want Taxpayer
Advocate assistance, please contact the Taxpayer Advocate for the IRS
office that issued this notice of deficiency. Please visit our website at
www.irs.gov/advocate/content/0,,id=150972,00.html for the Taxpayer
Advocate telephone numbers and addresses for this location.
The petition was filed June 13, 2011. After the case was set for trial,
respondent filed a motion to dismiss for lack of jurisdiction pointing out suspension
of petitioner’s corporate privileges as of the time the petition was filed. Petitioner
first objected to the motion on the ground that the suspension had ended. When the
motion was heard, however, petitioner argued that the notice of deficiency was
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invalid for failure to comply with the provision of section 6212(a) that a notice of
deficiency “shall include a notice to the taxpayer of the taxpayer’s right to contact a
local office of the taxpayer advocate and the location and phone number of the
appropriate office.”
Discussion
Prerequisites to the deficiency jurisdiction of this Court are a valid notice of
deficiency and a timely petition. Rule 13(a), (c); see, e.g., Monge v. Commissioner,
93 T.C. 22, 27 (1989); Abeles v. Commissioner, 91 T.C. 1019, 1025 (1988). If
either a valid notice or a timely petition is lacking, the petition will be dismissed for
lack of jurisdiction. The ground for lack of jurisdiction is generally stated, however,
because the consequences of our holding the Commissioner may proceed to assess
the taxes that have been determined would be that the taxpayer may challenge the
determination on the merits only by making payment, filing a claim for refund, and
seeking a judicial remedy in a refund forum. See, e.g., DeWelles v. United States,
378 F.2d 37, 39 (9th Cir. 1967); Pietanza v. Commissioner, 92 T.C. 729, 735-736
(1989), aff’d without published opinion, 935 F.2d 1282 (3d Cir. 1991); McKay v.
Commissioner, 89 T.C. 1063, 1067 (1987), aff’d, 886 F.2d 1237 (9th Cir. 1989);
Keeton v. Commissioner, 74 T.C. 377, 379 (1980).
Validity of the Notice of Deficiency
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Petitioner contends that the statutory notice of deficiency is invalid because
the inclusion of a Web site address where the address and telephone number of the
local office of the National Taxpayer Advocate may be found does not comply with
the applicable statute. The language petitioner relies on is the last sentence of
section 6212(a) and was added by the Internal Revenue Service Restructuring and
Reform Act of 1998 (RRA 98), Pub. L. No. 105-206, sec. 1102(b), 112 Stat. at 698.
That section now appears as follows:
SEC. 6212. NOTICE OF DEFICIENCY.
(a) In General.--If the Secretary determines that there is a
deficiency in respect of any tax imposed by subtitle A or B or chapter
41, 42, 43, or 44, he is authorized to send notice of such deficiency to
the taxpayer by certified mail or registered mail. Such notice shall
include a notice to the taxpayer of the taxpayer’s right to contact a
local office of the taxpayer advocate and the location and phone
number of the appropriate office.
Although the adequacy of the content of a notice of deficiency has frequently
been litigated, courts have held repeatedly that a notice of deficiency is valid if it
notifies the taxpayer that a deficiency has been determined and gives the taxpayer
the opportunity to petition this Court for redetermination of the proposed deficiency.
See Frieling v. Commissioner, 81 T.C. 42, 53 (1983); Perlmutter v. Commissioner,
44 T.C. 382 (1965), aff’d, 373 F.2d 45 (10th Cir. 1967). A notice
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is invalid for this purpose only where the notice discloses on its face that there has
been no determination. See Clapp v. Commissioner, 875 F.2d 1396, 1400 (9th Cir.
1989) (distinguishing Scar v. Commissioner, 814 F.2d 1363 (9th Cir. 1987), rev’g
81 T.C. 855 (1983)). Mistakes in a notice will not invalidate it if there is no
prejudice to the taxpayer. Elings v. Commissioner, 324 F.3d 1110 (9th Cir. 2003).
In Smith v. Commissioner, 114 T.C. 489, 491 (2000), aff’d, 275 F.3d 912(10th Cir. 2001), we addressed whether the failure to include in the notice the date a
petition was due invalidated the notice. The requirement to include the last day to
file the petition was also added by RRA 98 sec. 3463, 112 Stat. at 767, and is stated
as follows: “The Secretary of the Treasury or the Secretary’s delegate shall include
on each notice of deficiency under section 6212 of the Internal Revenue Code of
1986 the date determined by such Secretary (or delegate) as the last day on which
the taxpayer may file a petition with the Tax Court.”
Here, as in Smith, section 6212 does not specify that a notice sent without the
specified information is invalid. As in Smith, there was no prejudice shown by
petitioner. The information described in section 6212(a) was made available to the
addressee of the notice, although in a manner that may not be sufficient for a
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taxpayer without access to a computer or knowledge of how to access a Web site.
The notice, however, was not misleading, and petitioner was able to file, and did
file, a timely petition.
The Court of Appeals for the Ninth Circuit reached the same result in Elings
v. Commissioner, 324 F.3d at 1112-1113, explaining:
In other contexts, the Supreme Court and this court have held that,
when Congress fails to specify a consequence for an agency’s failure to
follow mandatory requirements, the failure does not render the
agency’s action ineffectual.14 Obedient to this instruction, we conclude
that the IRS’s failure to include the calculated date does not invalidate
the notice.
The minor and technical nature of the error and the lack of
prejudice in this case further supports our conclusion. Non-prejudicial
minor or technical errors in a notice do not invalidate the notice. Major
errors, such as those that show the IRS failed to comply with the most
fundamental statutory mandate, can invalidate a notice. However,
these errors are quite rare. The failure to include the calculated date,
when notice was dated and instructed Elings that he had ninety days in
which to file his petition, was a non-prejudicial minor or technical
error. Therefore, the error did not invalidate the notice. [Additional fn.
refs. omitted.]
14
See United States v. James Daniel Good Real Prop., 510 U.S.
43, 63-65, 114 S.Ct. 492, 126 L.Ed.2nd 490 (1993); Brock v. Pierce
County, 476 U.S. 253, 258-62, 106 S.Ct. 1834, 90 L.Ed.2d 248 (1986)
(holding, when addressing an agency’s mandatory duty to act within a
certain time period, that “courts should not assume that Congress
intended the agency to lose its power to act” for failure to follow even
mandatory statutory requirements when Congress has not so stated);
see also Inter-continental Travel Mktg., Inc. v. FDIC, 45 F.3d 1278,
1284-85 (9th Cir. 1994) (concluding that FDIC’s failure to comply
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with mandatory statutory requirement of mailing a notice, when the
failure was merely negligent, did not justify precluding the agency from
further action).
The Court of Appeals for the Ninth Circuit specifically agreed with the
analysis by the Court of Appeals for the Tenth Circuit in affirming Smith v.
Commissioner, 275 F.3d 912, and with the Court of Appeals for the Fifth Circuit
reaching the same result in Rochelle v. Commissioner, 293 F.3d 740 (5th Cir.
2002), aff’g 116 T.C. 356, 362-363 (2001).
The rationale of Smith and Elings applies at least as much to this case. There
was no prejudice to petitioner. Petitioner does not allege that any attempt to contact
the local office of the National Taxpayer Advocate was made. Moreover, it is
apparent from the record that petitioner’s officer and shareholder is adept at Internet
research and could easily have accessed the Web site to locate the appropriate local
office of the National Taxpayer Advocate. We conclude that the notice of
deficiency was valid.
We have considered the case petitioner cites, Marangi v. Gov’t of Guam, 319
F. Supp. 2d 1179 (D. Guam 2004). The notice in question, and held invalid there,
did not include any reference to the taxpayer’s right to contact a local office of the
National Taxpayer Advocate, and there was no such office in Guam at the time.
Thus the taxpayer was prejudiced by the denial of a right described by the District
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Court as meaningful assistance and protection, significant and important. Id. at
1184. That case is distinguishable and, in any event, not precedential.
Corporate Capacity To File Petition
Rule 60(c) states in part: “The capacity of a corporation to engage in such
litigation [in this Court] shall be determined by the law under which it was
organized.” Petitioner’s corporate capacity was suspended at the time the petition
was filed on June 13, 2011, and was not reinstated until April 2012, shortly before
trial. Under the same scenario, in David Dung Le, M.D., Inc. v. Commissioner, 114
T.C. 268 (2000), aff’d, 22 Fed. Appx. 837 (9th Cir. 2001), interpreting California
law, we concluded that the Court lacked jurisdiction. That case is controlling here.
Respondent’s motion to dismiss for lack of jurisdiction will be granted.
To reflect the foregoing,
An appropriate order of dismissal
for lack of jurisdiction will be entered.