eric johnson on behalf of petitioner martin as area and professional association may please the court your honors i'd like to start by just making sure we're on the same page in terms of the the that is at issue the appellant is a an entity that for the years at issue was a one man operation it was a solo attorney practice and that attorney was mr  determination is that the i r s reclassified a portion of the dividends that were paid to mr a syrian and the effect of that is that as the i r s sees it the appellant owes employment taxes on those dividends that have been reclassified as wages is mr is an employee of the firm in the years that issue he was is that in dispute here no that isn't he received a w two and to the extent of the wages that were actually declared he was an employee or so why isn't that the end of the case why isn't there not an actual controversy about whether mr is ariane as an employee well there's not an actual controversy about that your honor and i i think that your honor is getting to the main point of the case and this is what we've been arguing along the way is that seventy four thirty six also applies to what i would term a partial reclassification where you have a person who already is an employee and who is receiving not an employee amounts from the same pay or and the i r s comes in and says those other amounts are wages it's our position that that partial reclassification comes under seventy four thirty six tax court review your honor i think using the language of the statute how can you get me there i'm trying to figure out how we could buy your argument and still apply the plain language of the statute and you could convince me i'm open on th s i really don't think the plain language of the statute directly addresses this kind of issue i think from our perspective mr is arean in this situation was essentially wearing two hats he was two separate persons with respect appellate he was a shareholder and he was also an employee and he has these two separate hats and these two separate rules when the i r s came along and said the dividends need to be reclassified as wages it was address as a shareholder and in that capacity was reclassifying him as an employee or not wait there only because partly saying he's not a shareholder right and not completely and they're really saying he's partly an employee right around about respect to one hat and i don't think the plain language of the statute really goes into detail either way to clarify this issue it just says well if you've reclassified a worker the tax court can review it it doesn't directly address either way  there are payments that are part for a worker in part not for a worker does the part not for worker come under the statute and we pointed out in briefs your honor the government's interpretation of the statute would lead to the somewhat absurd result in this case that if mr is area and had been completely non compliant with the employment tax rules and if the appellant had paid him zero wages he wouldn't be an employee and when the i r s comes along reclassified his dividends he would come under the statute but we only we only get to the absurdity can and if the statute is ambiguous i think and here the statute is unambiguous and it requires an actual amusing language of actual controversy involving a determination by the secretary an examination a determination that one or more individuals performing services for such persons are employees of such person and so it requires an actual determination by the i r s that somebody has an employee and an actual controversy about that and why why isn't that missing here well right your honor and of course that's the united states argument and you know we take the other side that that includes these two hats that we're addressing the one hat the one rule that comes taxation you own a dollar you you you pay another dollar in wages you earn another dollar wages in gun and you mail five more dollars in taxes there's absurdity throughout the internal revenue code and since the one nine hundred fifty s the supreme court says that doesn't state much of a constitutional or statutory claim right how do you respond to that sort of you know where i'm coming well i know where you're coming from and your honour's a tax attorney the internal revenue code can lead to absurdities but again i think the absurdity here is that the less compliant taxpayer would get tax review the more compliant tax court taxpayer would not want what you know don't you don't you eventually get there don't they want to give you a notice of determination and like as you know happened in your charlotte's office case you know no notice of deficiency process doesn't apply to this right and i don't like the way the code works but the code clearly that way that a notice of deficiency is not given here and they're going to give you a notice of determination right they they could your honor although it your honor if you look at the case law there wasn't a notice of determination work or classification in this case the courts have already ruled in for example s e c c corpus that there doesn't have to be an explicit notice of determination it's just the s decision itself that de facto creates that the notice of determination that gets here and just below i don't think that the government really question that we're properly here that we have a force that's the ultimate way they had the same employees they were classifying as employees for some purposes and independent contractors for other purposes right and he king of the way to get the i r s after you got rights gracious it just one moment you're right your and i guess in response to you know if you were just looking at the statutory language i think there is this issue about whether it properly applies to a a partial reclassification if we look to the case law as we've pointed out there  c corp case decided by the tax court and it's worth noting that in both of those cases the courts have come out and said yes a partial reclassification is subject to review by the tax  on what time you're measuring because in the charlottes office case they started out fighting completely about it you understand they said they want employees at all and the court said you measure the controversy at the time the cases filed order it and this is where the united states i think is trying to distinguish from these cases and say ok these don't apply i think if you and there are various procedural aspects going on in those cases especially in charlotte's boutique there is a an issue there was a notice of determination of worker classification which sort of per se brought in jurisdiction there were a moment of jurisdiction if you look at the wording of the court both at the tax court level and at the ninth circuit level the court actually does engage directly with what i would call substance of seventy four thirty six jurisdiction the i r s made these precise arguments to the courts in those cases and the i r s said hey whatever the details of how we got here procedurally were not properly under seventy four thirty six because these people are already employees and therefore as is your honor was pointing out under the statute they shouldn't even be here that that argument was made in both of those cases it was the fact that the person that issue is already an employee is not a bar to and here's your fears or question for left field several times in the code but not in this section i understand they talk about proposed determination they use the term determination or propose determination isn't this really a proposed determination because it's a summary of what happened at all it i actually had a few one point on that your honor and on a tax attorney b administrates we have a little understanding but i don't think this was entered into the record but the amounts that are in that determination orders have been assessed by the internal revenue service i'm not sure that we have anything in the record on point they have actually been i believe at this point your honor the united states is refraining from enforcing the assessments until we get to the end of this litigation is more or less a voluntary matter oh but for the record it's my understanding that it is on record as the appe good morning and may it please the court my name is john schumann and i represent the commissioner of internal revenue the plain meaning of the statute does control this case the court jurisdiction is triggered by the statute section seventy four thirty six and under the statute to get tax court jurisdiction you have to have an actual controversy involving a determination by the commission of an individual performing services for the taxpayer as an employee in other words you have to have a determination of employment status and the question then is is this individual a employee or independent contractor or some other non employee status here that was not the issue at all here at the issue throughout the case from the very beginning it was about the reasonable this of the wages plate paid to an acknowledged employee there was no actual controversy concerning employment status now here that good or bad for you that says employment status in the title of the section well that's very good for us because there is no determination of employment status here mr is arean was an employee and twenty twelve twenty thirteen twenty fourteen all the years at issue and there was never any dispute about that and he was paid wages he was issued dubey to a low wages in the services of you right they were unreasonable wages they should have been the term to be higher and so there was a germination of the of the reason for the unreasonable ness of the wages paid in this instance but there was no determination of employment status everyone referred to him as an employee and still to this point the only employee right that i read that the briefs had i don't cit in the determination is that he is more of an employee then he otherwise would be and so therefore at least in part there's a determination that he is an employee i think that the best actual argument you could make and what your response to that well the statute doesn't talk about degrees of being an employee you're just an employee or you're not you're not like a super employee that is only an employee or your partial employee you're just an employee if you're an employee the question is you know were reasonable wages paid to that employee and if so were the proper amounts withheld for employment taxes so security medicare so and so forth like that so the statute doesn't really get into partial employment and it's just a matter of is the person an employee also this is different because you know these are trust taxes and are worried about other kinds of situations that this is not the typical case as you well know so you go directly from this to assessment and i understand that and of course in charlotte's office you tried something you made up i think called a notice of determination it isn't your regulations i get that but but and that didn't work so you're doing it now by assessments and how does the taxpayer protest  in the normal way that a taxpayer would challenge any employment tax determination he would pay the tax and then seek or refund administratively from the i r s and if necessary could bring a refund suit in district court or the court of federal i don't dispute what housing counselor said here don't know it's not in the record and i would you tell us of the twenty a j letter what the status of the assessment is and i certainly can yeah i suppose an assessment made how long does he have to do something about it  intended a separate remedy in the tax court where the issue is the reasonable ness of the wages paid to the employee where congress intends to add this circumstance in this circumstance lots of other reason most cases go that well there has to be a determination status to get to tax court in this kind of employee tax for the geisha and when congress intends to add a tax court remedy it does so plainly and clearly as it did in section sixty two thirteen which is the provision of the code  that allows taxpayers to take a notice of deficiency and go to tax court if there is a controversy concerning income tax state tax gift taxes or certain excise taxes there you have your so called ticket employment employment status cases to go to tax court here it's not such a case and so it doesn't fall within that exception and in fact if you were to take  taxpayers lead here and decide that this is an employment status case it's really difficult to determine where you would then draw the line and say well some employment litigation can be in tax court and some cannot the money shifts just from one role to another whether it's employee or own or so that you don't have that concern about where with the stop this is  a case it is dependent on the circumstances here where you have an employee here because because in in the determination that it's not employee it shifts to another form of income c right there is sort of a de facto determination right and in this case it was it was a little unusual also because many of the dividends that were paid to the  understand on this subject or where you talk about near term revenue manual talks about proposed determinations as opposed to determinations you think this is a proposed determination and not a determination i think it looks more like a proposed determination on reasonable ness rather than a final determination on anything i think and part of the reason for that is that the taxpayer could have taken this to the office of appeals  that asks were the workers at issue in a pen of contractors and they answered no so they made a determine a determination of employment status and there as you have noted that was not made in a specific notice of determination but it was there of course the commissioner did issue a notice of determination concerning worker pacification under section seventy four or all of the years of issues and that in that case that was taxpayers took it to the tax court and so it was only much later after trial in the tax court where the parties then agreed that well no this isn't an issue anymore and we now you know we agree on that but the issue as the ninth circuit looked at was once the jurisdiction of the tax court was invoked by this determination made by the commissioner could then the parties or even the commissioner unilaterally revoke that jurisdiction and the and get get rid of a case that way and the comes up with a form for every possible situation and that was the way they did that they have changed their form somewhat since then but there still is a form that can be sent out to let people know just for clarity sake that this is the kind of determination that we think can now be taken to the tax court here's your deadline for filing a petition the tax court and so forth we're not trying to cloud the waters here we want to be as clear as possible given the fact that we're interpreting the internal revenue johnson thank you your honors unless your honour's have questions i'm going to launch into just a few issues i'd point out first of all i think there was some mention of dividends being paid to third parties here i don't think that was a matter that was ever brought up below i'm not sure what's in the record on that point  would point out that as an s corporation for income tax purposes it doesn't really matter if you take the money out and pay for third parties or if it comes directly out of the us corporation account yes corporation owes no income tax and if you call it a dividend you don't have to pay employment taxes it occult wages you do that if it is in fact a dividend or you don't get employed but i think i think some of that argumentation is irrelevant i'd also point out i'm not sure what's in the record again this wasn't raised below it's my recollection that and i was the attorney during the impetus training process we did actually a file with the i r s office of appeals for an administrative appeal and got no response and when enough time passed that we felt we had to file with the tax court and response to the examiner's report we did in fact file with the tax court so the argument on that we did not pursue the appeal i don't think is supported by the record lastly or a few other points i think there was a discussion about yes the taxpayer in this circumstance could get review through the district courts through a refund claim and go that route that's always available to the taxpayer employment tax cases of course the difference is you have to pay in full for all of these periods to get into the district court for a lot of taxpayers one may imagi unemployment these taxes if you call dividend that you don't pay they didn't want the employers put taking the stuff using it to run their businesses and keep their businesses going without paying the taxes in advance right and then but they also opened up seven statute we have an issue that a lot a way to get pre payment and i like to emphasize i think that's a very important right here that's why it matters so much that seventy four thirty six be interpreted to allow people in when appropriate congress recognize the hardship for companies to have to pay the employment tax in full to go the district court route for the refund which procedurally is more cumbrous than the tax court route congress is opening up a door for people to get prepayment review just like they get for income tax that isn't the real problem with that argument the fact that the notice a deficiency proceeding which is why you don't have to pay for a long time they left this one out they exempt that out this whole subchapter and this procedure i'm sorry i'm not sure i follow you ok there is a deficiency is a way you don't have to pay correct or if you get the notice of deficiency you go to tax court takes a long time you know all that you don't have to pay right that applies to normal income taxes that does not apply to trust fund taxes generally does not apply to employment taxes right and i point out he would be able to pay only a portion and go for a refund claim in federal district court although i point out even that route is difficult because even though a portion is paid the i r s doesn't hold off on collection as a certainly during those  proceedings i appreciate that your honor as a knowledge of the tax procedures the the final point that i would make or another point that i would make is your honor was asking about it at textual support i think if your honor looks at the charlotte's boutique case and the s e c c corp case they do find support in the statute that the tax court is to review the determination by the secretary as to employments taxes taxes and under age two and the proper amount of employment tax under such determination how far that gets you i don't know each of those court said well that's enough you know textual support that the amount subject to employment tax is eisley this issue and rule precisely in the tax payers favor thank you thank you counsel for the argument case number seventeen dash twenty one thirty four is submitted for decision by the