Or, a Bad Day in Ogden

Judge David Gustafson has been on a tear before, but today the Ogden Sunseteers are down range, and they lose two (count ’em, two) tries at summary J.

Lawrence W. Doyle and John F. Moynihan, 2020 T. C. Memo. 139, filed 10/8/20, blow on some 501(c)(3)s Messrs. Dole and Moynihan allege have strayed from the straight-and-narrow. And they have 100 exhibits, which contain 6000 (count ’em, 6000) pages of stuff, enough for someone at Ogden to write on the file “contains specific credible documentation,” although much is publicly-available. Meesrs. Doyle and Moynihan originally filed a 211 in the name of some corporation, but later filed same info as individuals. No corporate blowing allowed.

Initial evaluator bucked the stuff over to TEGE (Tax Exempt and Governmental Entities) for subject matter expertise. Judge Gustafson reckons that any toss thereafter must be “denial,” and not “rejection.” Wherefore, there must be enough in the AR to be worth looking into.

The TEGE SME got an e-mail from her boss to buck this on to Criminal Investigation; she does, but CI sends it back, saying it declined to go further. The 11369, which CI generated, said yes, the claim was “surveyed or declined.” And no investigation was opened. But it took CI three tries for CI to get the Form 11369 filled out right.

Meanwhile, “Petitioners allege–but the administrative record does not reflect–that, in this same general time period, one of them had a telephone conversation… with a Special Agent of the Federal Bureau of Investigation who said, ‘I can’t say enough about what you and your colleagues have done in filing your submission and providing your materials. We greatly appreciate everything you and your colleagues have done in your work.’ Such non-record information might be pertinent to a motion to supplement the administrative record, see Van Bemmelen v. Commissioner, 155 T.C. __, __ (slip op. at 15-16) (Aug. 27, 2020), or to a request to obtain discovery; but we do not consider such information in ruling on the Commissioner’s motion for summary judgment.” 2020 T. C. Memo. 139, at p. 7, footnote 2.

Chaps, that’s Judge Gustafson saying “nudge nudge, wink wink.”

Notwithstanding the foregoing, when TEGE got the file back, they “rejected” the claim, saying no credible information. Judge Gustafson notes that this incorrect nomenclature, but says TEGE was being colloquial. Should be “denied.”

But the OS bounced Messrs. Doyle and Moynihan, saying no collection. Doyle and Moynihan petition, claiming many governmental officials blessed their work, and wanting Judge Gustafson to breathe threatenings and slaughter in Ogden.

Well, post-Van Bemmelen, all Judge Gustafson can do on a summary J motion is examine the AR. A mere dispute of fact is irrelevant. “That distinction (the more demanding standard of denying the motion if the record simply shows a dispute of fact versus [emphasis in original] the less demanding standard of denying the motion only if the record fails to support the conclusion) does not affect the outcome in this case since, as we explain below, the administrative record does not support a critical premise of the WBO’s determination, and we therefore deny the motion even under the less demanding standard.” 2020 T. C. Memo 139, at p. 21.

Now non-collection is a winner, but the final bounce letter says “no proceedings.” You can collect without proceedings, but the bounce letter didn’t say so. And IRS is Cheneryed into what it did say, not what it could’a should’a would’a said.

Now Tax Court can’t oversee or direct Exam, Collection or CI to do anything. But here, it looks like IRS is weasel-wording, and Judge Gustafson is no fan of weasel-wording.

“Prompted by petitioners’ allegations–explicit and detailed, with names, dates, and locations–the WBO’s email put a single direct question to CI: ‘Can you please confirm that IRS CI is not working with these WBs on any investigation with these [target] entities?’ CI’s reply was a non-answer that looks like it may have been a deliberate evasion: ‘The claim was appropriately declined by criminal investigation.’

“But was CI ‘working with’ petitioners or not? CI did not say. And it gives us no confidence in the WBO’s determination to note (as the administrative record shows) that… CI had to be asked three times to complete its Form 11369 for this case, giving ‘unacceptable’ responses to the WBO and grousing that it’s ‘somebody else’s job’. We therefore hold that the administrative record, containing petitioners’ detailed allegations and CI’s non-response, fails to support the WBO’s conclusion that CI had not proceeded with any action based on petitioners’ information. Accordingly, we deny the motion on the grounds that the WBO abused its discretion in reaching its conclusion, because not all of its factual determinations underlying that conclusion are supported by that record.” 2020 T. C. Memo. 139, at pp. 26-27.

Time to supplement the AR…and how!

But wait…there’s more! See my next blogpost.

New Tax Court Rules have been announced. None deals with anything of substance. The antediluvian single-appearance Rule 24 remains, rewritten for stylistic purposes. Apparently law firms are unknown at the Glasshouse in the City of the Stateless.

Stealth Subpoenas are alive and well, twenty-nine (count ’em, twenty nine) years after the FRCP abolished them.

Comments on these revisions were received from such august bodies as American Bar Association, Section of Taxation; the Tax Clinic at the Legal Services Center of Harvard Law School; and the Office of Chief Counsel of the Internal Revenue Service.

No ordinary practitioner, whose shoes are not “exceeding white as snow; so as no fuller on earth can white them,” as a much more exalted authority put it, need apply.

There are a couple these (hi, Judge Holmes) today. I know, my readers, few in number but strong in stomach, will cry out as one “Those who read it don’t need it, and those who need it won’t read it!” But I have to try; to which they will again reply as one “Nous n’en voyons pas la necessité.”

First up, Richard W. Bandler, 21723-18, filed 10/7/20. Richard moves to amend his petition. Ch J Maurice B (Mighty Mo”) Foley whistles the play dead. “… the motion for leave was not accompanied by the proposed amendment to the pleading as required under Tax Court Rule 41(a).” Order, at p. 1. Note also that Rule 41(a) provides “(A) motion for leave to amend a pleading shall state the reasons for the amendment and shall be accompanied by the proposed amendment. The amendment to the pleading shall not be incorporated into the motion but rather shall be separately set forth and consistent with the requirements of Rule 23 regarding form and style of papers filed with the Court.”

Taishoff asks “why separately”? Our State court practice always included the proposed amended pleading in the motion, so the Judge (or more usually the Judge’s overworked law clerk) didn’t have to flip back and forth between documents.  Note FRCP 15 has no such prohibition as Rule 41(a).

Second, Jaroslaw Janusz Waszczuk, Docket No. 23105-18W, filed 10/7/20. This is JJ’s second appearance in this my blog. Last time out, JJ got tossed. See my blogpost “Blown or Tossed,” 7/9/19. JJ wants to appeal the toss to DC Cir, but doesn’t want to pay the filing fee for the appeal, and asks Ch J Maurice B (“Mighty Mo”) Foley for a waiver. This is a nonstarter.

“…petitioner filed this Court’s form for an Application for Waiver of Filing Fee (application). The filing of that application to request a waiver of the filing fee for the petitioner’s appeal is procedurally improper, as that form may be used only to request the waiver of this Court’s fee for filing a petition. Accordingly, we will strike petitioner’s application from the record.” Order, at p. 1.

JJ, try Form 4 on the Appellate Rules Forms page. See also FRAP 24.

It’s an old gibe, one I’ve often repeated here, that lawyers can’t add. Well, today STJ Diana L (“The Taxpayer’s Friend”) Leyden seems to evince doubts that IRS correctly toted up the salary and wages of Cong T. Phan & Tien Thai, Docket No. 9989-19SL, filed 10/7/20.

Cong & Tien were nailers, working for various salons, which gave Cong & Tien 1099-MISCs for the year at issue. Cong & Tien, notwithstanding their limited English proficiency, dropped “…Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS claiming that they were employee’s [sic; should be “employees”] not independent contractors for the period March 2014 to November 2014 of Spa Nails, the business that had issued the Forms 1099-MISC. By letter dated May 9, 2016, the IRS agreed with petitioners and informed them that they were employees and that they must pay Federal income tax and their share of Federal Insurance Contribution Act (FICA) tax on the income they received because the employer had not withheld and paid such taxes. The letter does not indicate what amount of income was considered as wages paid to petitioners as employees and did not provide any appeal rights for petitioners to challenge the amount of income that Spa Nails had reported as paid to petitioners.” Order, at p. 3.

Now begins the fun. IRS thinks Cong & Tien are contesting liability. Cong & Tien only want to find out how IRS got the number for FICA/FUTA they want Cong & Tien to pay.

I’ll spare you a recitation of STJ Di’s slog through IRS’ and Appeals’ various numbers, no two of which agree.

IRS wants summary J sustaining the NITL. They don’t get it.

“Respondent is incorrect that the statutory notice of deficiency provided petitioners with the opportunity to dispute the calculation of their Federal income tax and Social Security and Medicare taxes that the IRS calculated as a result of agreeing with petitioners that they should have been classified as employees of Spa Nails. Instead, the record does not indicate that petitioners were issued another statutory notice of deficiency after they were reclassified as employees or that they were otherwise given an opportunity to dispute the new calculation of their taxes, including Medicare and Social Security taxes, and the SO did not verify the calculation or allow petitioners an opportunity to dispute the calculation.” Order, at pp. 7-8.

Remand to Appeals to sort out the numbers.

The Continuing Legal Education merchants are big on winning before trial. While I am no merchant, I agree with the premise, especially where Section 7623 is in play. And even more especially post-Van Bemmelen. You must go all-in at once. As we saw with David Shaun Neal, if you haven’t made sure your stuff gets into the sacred administrative record (“AR”) the best you can hope for is an evidentiary hearing; and unless you’re a good trial lawyer, you will lose. See my blogpost “Blown Alone,” 9/28/20.

For those who missed the debut of Van Bemmelen, see my blogpost “Administering Supplements,” 8/27/20.

With only three (count ’em, three) ways to supplement the AR, and such supplementation being looked at askance by the CCAs, see what happens to Amelia Carlson, Docket No. 6794-19W, filed 10/6/20.

Granted, Amelia’s case isn’t the strongest, and her belated material is…well… I’ll let ex-Ch J Michael B (“Iron Mike”) Thornton tell you.

“Three of the four exhibits in question are dated or were generated in 2020 and consequently could not have been before the WBO when it considered petitioner’s claims in 2019. Insofar as the record shows, the materials comprising the fourth exhibit and relating to an unlawful detainer/eviction proceeding brought against petitioner in 2018 were never presented to the WBO although such a proceeding is alluded to in the attachment to petitioner’s Form 211.” Order, at p. 4.

If you’re going to use schedules and tables, generate them pre-Form 211 and attach them. If you’re going to refer to litigation bearing on your case, attach the papers. I know it’s ecologically unsound, but print the e-mails, unless you can drop them to a CD-ROM or flashdrive. And timeline; lay out the chronology.

And bear in mind: “Although it is sometimes appropriate to consider extra record information, this ‘is the exception, not the rule.’ Theodore Roosevelt Conversation [sic] P’ship v. Salazar, 616 F.3d 497, 514 (D.C. Cir. 2010).” Order, at p. 5.

I think you meant “Theodore Roosevelt Conservation P’ship,” Judge; a conversation p’ship is all talk, no action.

Ex-Ch j Iron Mike is impatient, as usual, with the objections to the much-loved Ogden Sunseteers’ “and/or” weasel-wording in the “FINAL DECISION UNDER SECTION 7623(a)”, which at last ends the formerly customary epistolary volleying. ” The record shows, however, that Ms. P, having investigated petitioner’s claims by retrieving the targets’ account transcripts, explicitly premised her recommended rejection of the claims on conclusions both that the allegations were ‘purely speculative’ and that they lacked adequate substantiation.” Order, at p. 7. (Name omitted).

I know, those who need it won’t read it, and those who read it don’t need it. But it is still worth putting on the record.

Since Judge David Gustafson removed from sight 2020 T. C. Memo. 135, filed 9/28/20, “(F)or good cause,” (Order, at p. 1), before I had a chance to compare it to David Shaun Neal, 2020 T. C. Memo. 138, filed 10/5/20, I cannot tell you how 138 differs from 135.

But the result is the same, and the wince at which I read page 13 of the now-obliterated T. C. Memo. 135 was repeated as I read page 13 of its successor.

As the good cause for which 135 was erased has not been set forth, I am unable to do more than refer the reader to my blogpost “Blown Alone,” 9/28 20.

Eaton Corporation and Subsidiaries, Docket No. 5576-12, filed 10/5/20, wants to carryback NOLs and FTCs (Foreign Tax Credits) as part of the Rule 155 beancount, off to which Judge Kerrigan sent Eaton and IRS back in 2017.

The backstory can be found in my blogpost “Breaking Bad,” 7/26/17.

But Eaton has to await another case to find out. 2020 T. C. Memo. 147, the subject of my above-cited blogpost (hereinafter “Breaking Bad”), never addressed the carrybacks, nor the availability of Rev. Proc. 99-32 if the carrybacks meant that Eaton had to bring back onshore cash paid to offshores (the subsidiaries). Eaton petitioned the disallowed NOLs and FTCs, but Judge Kerrigan never got to deal with them.

“Petitioner contends that carrybacks should be allowed for the years in issue and that a later adjustment can be made to reflect the outcome of the 2007-10 case. It proposes that the parties agree to a stipulated decision for this case that includes language which allows for subsequent adjustments to be made to the carrybacks contingent on the resolution of the 2007-10 case. By contrast, respondent contends that the carrybacks are an issue in this case that was not determined by the Court and that to allow carrybacks to be included in a decision would cause prejudice to respondent.” Order, at p. 4.

Eaton had BoP, but presented no evidence on the trial in the “Breaking Bad” case. This they can do in the other case. But all is not lost: “To preserve this issue, we agree with respondent’s recommendation to include language below the line in a stipulated decision indicating petitioner would be entitled to refunds for NOL and FTC carrybacks if appropriate as determined in the 2007-10 case.” Order, at p. 5.

 As for Rev. Proc. 99-32, which allows repatriation of offshored cash without negative tax consequences, that’s only for Section 482 adjustments among related entities. Eaton claimed the adjustments IRS made were made to the Advance Pricing Agreements they had with IRS, not Section 482 adjustments, but that Rev. Proc. 99-32 covered APAs as well as 482s

“We disagree with petitioner’s argument that relief under Rev. Proc. 99-32, supra, is available to adjustments other than those made under section 482. Relief under Rev. Proc. 99-32, supra, is only available if the taxpayer’s income has been adjusted by respondent pursuant to section 482 or the taxpayer has increased or decreased its taxable income pursuant to section 482 and section 1.482-1(a)(3), Income Tax Regs. Rev. Proc. 99-32, sec. 5.01-.02, 1999-2 C.B. at 300.

“Petitioner argued previously that its corrections were not section 482 adjustments. In [“Breaking Bad”]  we agreed with petitioner that its corrections were not section 482 adjustments. Petitioner cannot have it both ways. We reject its contention that its corrections meet the requirements of Rev. Proc. 99-32, supra, because these corrections are not section 482 adjustments.” Order, at p. 6.

So do the numbers, guys.

I’ve remarked before that this my blog has been read in over 140 countries, territories, semi-autonomous regions, confederations, and commonwealths, but today is most unusual. So far, five (count ’em, five) views from Nigeria. WordPress’ statisticians tell me I have had fifty-five (count ’em, fifty-five) Nigerian views since this blog debuted ten years ago.

My curiosity is piqued. Why this interest today? So I looked: was there anything to do with that country in USTC today? Turns out maybe so there might could be.

Chidozie Ononuju, Docket No. 22414-18, filed 10/5/20, gets hit with Section 4958 excess benefits excise tax when he takes $648K out of his 501(c)(3) medical missionary outfit. Chidozie blows past the Section 4958(a)(1) first-tier 25% hit, and reaches the second plateau, the Section 4958(b) 200% grand slam. Plus the nonfiling, nonpaying Section 6651s. So Chidozie is looking at around $1,540,000, plus interest. Mrs Ononuju, who also had signatory power on the bank account, is in for her own excise tax separately.

Mrs. is in GA, but Chidozie is medical-missionarying in the back country in Nigeria, and has trouble with the internet. So much trouble, that when he fails to show for the teletrial, he sends Judge Albert G (“Scholar Al”) Lauber to the CIA for help.

“Petitioner has provided no plausible excuse for failing to appear for trial. Because the trial was to be conducted remotely, his inability to return to the United States is irrelevant. We do not find his assertions about poor communication facilities in Nigeria credible. Abuja, the capital of Nigeria, is a modern planned city with a population exceeding three million. See Central Intelligence Agency, Nigeria, The World Factbook 2020, https://www.cia.gov/library/ publications/the- world-factbook/geos/ni.html (last updated Sept. 16, 2020). Petitioner has not explained why he was able to communicate regularly with respondent’s counsel by telephone and email before March 2020 but cannot do so now. One of his motions included a phone number where he could be reached via WhatsApp. Assuming arguendo that he could not access the internet, he has not explained why he could not use that number to participate in the trial by phone.

“The five-hour difference between the two time zones was not a plausible excuse either: The trial was estimated to take two hours and was to begin at 3:00 p.m. local time for petitioner, well within traditional business hours. In his second motion for continuance, he asserted that he was then in a rural area where communication facilities were poor. But he resides in Abuja, and he was obligated to plan his affairs so as to be available for trial. His professed concerns about unreliable internet and telephone service in Abuja simply do not justify refusing to appear at all. If he had appeared for trial as scheduled and experienced communication problems, the Court would have worked with him to address them.” Order, at p. 4.

I have never experienced any problems with communications from Nigeria. I receive many e-mails daily from there. I’m sure my readers share that experience.

When I welcomed Judge Patrick J (Scholar Pat”) Urda to the Glasshouse bench two years ago today, I treated (if that is the word) my readers to an egregious pun, while disclaiming any intention of being a punster (see my blogpost “Welcome, Judge Urda, 10/2/18).

But today, honoring His Honor’s second anniversary illuminating us all from 400 Second Street, NW, Andrea Finegan-Bryan, Docket No. 17566-18, filed 10/2/20, gives me a golden opportunity for another. I doubt either Ms Finegan-Bryan or Judge Scholar Pat has any connection with Yorkshire or the Yorkie national anthem whose title I misquote at the head hereof.

However, as there’s neither opinion nor designated hitter today, here goes.

IRS concedes Ms. Finegan-Bryan’s case, but wants Ms Finegan-Bryan to drop her motion for Judge Scholar Pat to recuse himself. Nothing wrong with that; to memorialize the concession, there has to be a decision and order, and a judge has to sign it.

“In her motion, Ms. Finegan-Bryan asserts that the President’s authority under section 7443(f) of the Internal Revenue Code to remove Tax Court judges violates the Constitution’s separation of powers because separation of powers precludes a government actor exercising one power from removing another government act or exercising a different power. She argues that we should declare section 7443(f) unconstitutional and recuse ourselves from consideration of this case until the alleged constitutional infirmity is cured.

“Section 7443(f) provides that ‘[j]udges of the Tax Court may be removed by the President, after notice and opportunity for public hearing, for inefficiency, neglect of duty, or malfeasance in office, but for no other cause.'” Order, at p. 1.

Sound familiar? It did to Judge Scholar Pat.

“We have held that presidential authority to remove Tax Court judges for cause under section 7443(f) does not violate the Constitution’s separation of powers and that we need not recuse ourselves. See Battat v. Commissioner, 148 T.C.32 (2017)….” Order, at p. 1.

Judge Scholar Pat directs us all to leave Battat alone.

I should have taken his advice.

I haven’t found a name for the petition-forty-years gambit, but Tax Court Judges are on to it. Ex-Ch J L Paige (“Iron Fist”) Marvel was, I think, the first, with “A New Gambit?”, 4/2/18, and her later “I’m Beginning to See the Light,” 4/9/18, showed the game for what it was, a dodger’s ploy to try to duck assessables and timed-out deficiencies.

Today we have William George Spadora, Docket 13130-19, filed 10/1/20. Wm G only wants to petition eighteen (count ’em, eighteen) years.

Now we heard ex-Ch J Iron Fist’s lament last month, how IRS was overburdened with checking out multitudinous years for every dodger who played this gambit. So she showed the Section 6673 yellow card in my blogpost “Pour Encourager Les Autres,” 8/17/20.

Judge Gale has Wm G moving to toss for no jurisdiction, as there are no NODs or SNODs against him from 2000 to 2018. IRS moves to toss because the SNODs for 2004, 2010, 2011, and 2012 were never petitioned, and there aren’t any others.

Judge Gale, seeing Wm G is playing the Old Times gambit, plays Gale’s Defense.

Holding in abeyance both IRS’ motion to toss and Wm G’s motion to toss, Judge Gale orders as follows: “…petitioner shall, on or before November 18, 2020, file a response to respondent’s Motion to Dismiss for Lack of Jurisdiction, which shall: (1) for each taxable year listed in the Petition, clearly and concisely set forth the matters in dispute and the basis upon which petitioner invokes our jurisdiction; and (2) for each taxable year with respect to which petitioner contends we have jurisdiction, include a copy of any notice of deficiency or notice of determination concerning collection action issued for such year.” Order, at p. 2.

This is known in certain circles as a “call.” It is generally followed with a swift gathering up of cards (by the dealer) and chips (by the caller).