In Uncategorized on 09/13/2012 at 16:06

Judge Kroupa blows off Cigna Corporation in T. C. Memo. 2012-266, filed 9/13/12. The issue was whether Cigna could reserve for maximum guaranteed death benefits when it was reinsurer, using a method not approved at the time by the relevant State regulator, although subsequently it was generally adopted.

IRS conceded the deficiency, and the parties stipulated that IRS would accept Cigna’s numbers for every year except those that pre-dated the year at issue. Even though those years are not before the Court, Cigna claims it’s vital for the life insurers to know whether the magic method can be used for the years before it was adopted.

Nope, says Judge Kroupa. “It rests within our discretion to issue an opinion on the merits even where the Commissioner concedes that there will be no deficiency for the years before the Court.” T. C. Memo. 2012-266, at p. 7. But Cigna shouldn’t get too elated.

“Petitioner suggests the ‘interests of justice’ entitle petitioner and other taxpayers to an opinion resolving the tax reserve issue. See McGowan v. Commissioner, 67 T.C. at 604, 608. We disagree. In McGowan we were asked to decide whether a compulsory employee contribution constituted a State income tax that the taxpayer could deduct. Id. at 602. The Commissioner conceded the deficiency and asked us to enter a decision in the taxpayer’s favor. Id. We rejected the concession and issued a substantive opinion at the taxpayer’s request. Id. at 608. The interests of justice compelled us to issue the substantive opinion. See id. at 607. First, unlike here, we found that the unresolved issue would arise in the upcoming tax year for thousands of taxpayers. Id. at 601, 608. A substantive opinion would consequently alleviate confusion in an area that lacked clarity. Second, the taxpayer rejected the unilateral concession in its entirety. Id. at 606.” T. C. Memo. 2012-266, at pp. 9-10.

But in this case, Cigna agreed to the concession; the reserve issue affects only a small group of taxpayers, not thousands; the new method is already in place and IRS will allow it for future years, so it is only past years (not before the Court) that are at issue. While it might be nice for Cigna if Tax Court sorted out those years, to do so would be an advisory opinion, and we don’t give those.

In short, Cigna, you won, go home. And on the way, see my blogpost “Victory is Not Vindication,” 5/1/12, where Judge Kroupa teaches the same lesson.

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