9th Circuit En Banc Holds That Filing Tax Returns for Statute of Limitations Purposes Means Proper Filing as Prescribed in Regulations (3/11/23)

In Seaview Trading, LLC v. Commissioner, 62 F.4th 1131 (9th Cir. 3/10/23) (en banc), CA9 here and GS here,  the Ninth Circuit rejected its panel opinion analysis at 34 F.4th 666, here, and held that sending a to an IRS agent a “copy” of a tax return the partnership claimed it previously filed timely CMRRR was not a filing for purposes of starting the partnership period of limitations.

I reported on the previous panel opinions earlier: 9th Circuit Holds That Copy of Unfiled Return Delivered to Examining Agent is Filing of Return for Statute of Limitations Purposes (Federal Tax Procedure Blog 5/12/22; 3/11/23), here. In that blog, I used the Court’s Summary of the panel opinion. I will do so here (at least key excerpts) for the en banc holding, and repeat what I said earlier that, although the Ninth Circuit cautions that the summary, prepared by staff, is not part of the opinion, the summary, like a Supreme Court syllabus, is not a nothingburger. See Supreme Court Opinion Syllabus as Persuasive Authority? (Federal Tax Procedure Blog 2/8/21), here. I include only the core holdings of the majority.

SUMMARY*

* This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.

Tax

       Affirming the Tax Court’s decision concluding that the Internal Revenue Service’s notice of final partnership administrative adjustment was timely, the en banc court held that neither Seaview Trading LLC’s faxing a copy of their delinquent 2001 tax return to an IRS revenue agent in 2005, nor mailing a copy to an IRS attorney in 2007, qualified as a “filing” of the partnership’s return, and therefore the statute of limitations did not bar the IRS’s readjustment of the partnership’s tax liability.

 * * * * *

        26 U.S.C. § 6230(i) (2000), which was applicable during the period in question, provided that a partnership’s return “shall be filed . . . at such time, in such manner, and at such place as may be prescribed in regulations.” The implementing regulations, 26 C.F.R. § 1.6031(a)-1(e)(2001), in turn, provided that “[t]he return of a partnership must be filed with the service center prescribed in the relevant IRS revenue procedure, publication, form, or instructions to the form” and that “[t]he return of a partnership must be filed on or before the fifteenth day of the fourth month following the close of the taxable year of the partnership.” The Tax Court held that Seaview never “filed” its 2001 return because it failed to send the return to [*4] the designated place for filing under Treasury Regulation § 1.6031(a)-1(e)(1))—namely, the IRS’s Ogden Service Center. The en banc court agreed.

       The en banc court explained that Seaview did not meticulously comply with the regulation’s place-for-filing requirement because neither the IRS revenue agent nor the IRS attorney to whom Seaview sent copies of its 2001 return qualified as a designated place for filing. And at no point was Seaview’s return ever forwarded to the designated place for filing at the Ogden Service Center. The en banc court concluded that because Seaview did not meticulously comply with the regulation’s place-for-filing requirement, it was not entitled to claim the benefit of the three-year limitations period. Rather, having never properly filed its return, Seaview was instead subject to 26 U.S.C. § 6229(c)(3) (2000), which allows taxes attributable to partnership items to be assessed “at any time.”

JAT Comments:

9th Circuit Holds That Copy of Unfiled Return Delivered to Examining Agent is Filing of Return for Statute of Limitations Purposes (5/12/22; 3/11/23)

Caveat, by Order filed 11/10/22, the Ninth Circuit vacated this decision discussed below and ordered rehearing en banc. 9th Cir. here; TN here. On 3/10/23, the Ninth Circuit en banc held that the "copy" of the allegedly timely filed return was not a filing to start the statute of limitations.  See Seaview Trading, LLC v. Commissioner, 62 F.4th 1131 (9th Cir. 3/10/23), CA9 here, and GS here. and my blog on it, 9th Circuit En Banc Holds That Filing Tax Returns for State of Limitations Purposes Means Proper Filing as Prescribed in Regulations (Federal Tax Procedure Blog 3/11/23), here.

In Seaview Trading, LLC v. Commissioner, 34 F.4th 666 (9th Cir. 5/11/22), CA 9 here and GS here, the Court (majority panel) held that filing for starting a relevant statute of limitations (there TEFRA § 6229(a), for partnership return) is (from the summary)

when (1) an IRS official authorized to obtain and receive delinquent tax returns informs a partnership that a tax return is missing and requests that tax return, (2) the partnership responds by giving the IRS official the tax return in the manner requested, and (3) the IRS official receives the tax return, then the partnership has "filed" a tax return for purposes of § 6229(a).

The relevant facts and law, highly summarized, are: (1) pursuant to the regulations and procedures, the partnership return was required to be filed timely at the relevant IRS service center; (2) the IRS service center did not receive a timely filed 2001 partnership return; (3) the partnership did not timely file (or could not prove that it timely filed) an original 2001 partnership return (see JAT Note #2 below); (4) the IRS in due course audited the partnership for 2001; (5) in the course of the audit, the IRS agent requested and received a copy of the 2001 partnership return and had that copy in his possession by January 2006; and (6) in October 2010 (more than three years after the agent had the return in his possession for use in the audit), the IRS issued the partnership FPAA, noting that no return was filed but that a copy of the return was provided "during the examination;" the FPAA reduced the reported loss of $35 million to zero. [As an aside, likely a bullshit tax shelter, but that is only inference from the large loss disallowed.]

The partnership filed a petition in the Tax  Court. The Tax Court held that "(1) Seaview did not "file" the tax return by faxing a copy to the IRS revenue agent or by mailing a copy to the IRS counsel, and (2) in any case, the copies of the 2001 Form 1065 sent to the IRS in 2005 and 2007 were not "returns." Seaview and the IRS then settled all their disputes but preserved Seaview's right to appeal the Tax Court's denial of summary judgment."

The issue was whether a return (said to be a copy of the original return) delivered to an agent in the audit was a delinquent filing or whether the delinquent return must be filed with the service center. The Court held that the regulations requiring filing with the service center applied only to timely filed returns, that there are no regulations applying to filing delinquent returns and that "no IRS regulation prohibits the filing of untimely returns with a requesting IRS official." Based on that, the Court held "we hold that a delinquent partnership return is "filed" under § 6229(a) when an IRS official authorized to obtain and process a delinquent return asks a partnership for such a return, the partnership delivers the return to the IRS official in the manner requested, and the IRS official receives the return."

What is the Date of Filing for Returns Solicited by and Delivered to an Agent (8/18/15)

I posted a blog on my Federal Tax Crimes Blog that may have some discussion that Federal Tax Procedure enthusiasts may find interesting.  The FTC Blog entry is:  Ninth Circuit Requires a Filing for Tax Perjury Charge (8/16/15; 8/17/15), here.  The Blog discusses the recent opinion in United States v. Boitano, ___ F.3d ___, 2015 U.S. App. LEXIS 14096 (9th Cir. 2015), here.

The criminal tax issue was whether filing of the tax return was an element of the crime of tax perjury, § 7206(1), here.  This invites the question of precisely what is a filing of a tax return.  In Boitano, the taxpayer signed and submitted the returns to an IRS agent not authorized to receive returns for filing.  That agent perceived irregularities in the returns and therefore did not send the returns for processing.

The Government conceded that the returns were not filed because the agent did not send the returns for processing.  The issue on appeal in Boitano was whether filing was an element of the crime of tax perjury.  The text of § 7206(1) does not require filing, but the Ninth Circuit had earlier held that filing was an element of the crime.  The Government argued, in effect, that that earlier holding was incorrect.  This panel of the Ninth Circuit held itself to be bound by the earlier precedent.  (The panel offers some interesting analysis of what constitutes a binding precedent for a three judge panel.)

The key for readers of this tax procedure blog is the question of what constitutes a filing (as opposed to the elements of the crime of tax perjury).  In many civil audits or other encounters with agents, the agents will sometimes request either delinquent original returns or amended returns.  As noted in Boitano, most agents are not authorized to receive returns for filing purposes and thus the mere act of receipt is not a filing.  The agents receiving such returns should process those returns which, when processed, would constitute a filing.  The issue practitioners face when the agent asks for the return(s) is whether, to insure that the return(s) will be treated as filed, they should (i) file the original returns in the normal manner (usually by mailing to the service center) with a copy to the agent or (ii) deliver the original return(s) to the agent with the expectation the the agent will process the return(s).  Readers interested in this issue should review the FTC Blog linked above and consider the following additional matters.

In my practice, I have been wary of giving the agent the original for processing.  I can't recall if I have ever done that.  I much prefer filing the regular way with a copy to the agent.

This issue may lurk in the OVDP where amended or delinquent returns are submitted to the OVDP group.  Are the OVDP agents authorized to receive the returns and, upon mere receipt, have them treated as filed?  I don't know the answer to the question.  Within OVDP, at least sometimes, the agents just hold the returns without processing and make an agent's report incorporating the items in the amended or delinquent returns as adjustments in the agent's report as if the amended or delinquent returns had not been filed.  If the OVDP is closed out with a closing agreement, I suppose that it does not make any difference.  But, if the taxpayer opts out, it might make a difference, particularly in the case of delinquent returns that would start the running of the statute of limitations under § 6501(c)(3), here.  I would hope that, in cases like that, the IRS would not attempt to assert that the receipt was not a filing for purposes of the civil statute of limitations.  But who knows?  In this regard, as I note in the FTC Blog entry, the Government's brief in Boitano said (in footnote 4):

   n4 * * * * Defendant’s handing the returns to Agent Connors did not constitute filing, and Agent Connor’s forwarding the form (but not the returns) to the service center did not result in the returns being filed. See 26 U.S.C. § 6501; 26 U.S.C. § 6091(b)(4); 26 C.F.R. § 1.6091-2. 

I would appreciate readers views and experiences.