Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02835/USCOURTS-cand-3_05-cv-02835-1/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1346 Recovery of IRS Tax

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

TWENTY-TWO STRATEGIC INVESTMENT

FUNDS [IDENTIFIED IN EXHIBIT A];

and PRESIDIO GROWTH LLC (Tax

Matters Partner),

Petitioners,

v

UNITED STATES OF AMERICA,

Respondent. /

No C 05-2835 VRW

ORDER

Salmon Ventures, LLC (“Salmon Ventures”), a member of one

of the petitioner Strategic Investment Funds (“SIFs”), filed a

motion to intervene. Mot to Int (Doc #9). Neither the government

nor any other party in this action has opposed the motion. For the

reasons set forth below, Salmon Ventures’ motion to intervene is

GRANTED.

I

On June 27, 2005, the IRS mailed Notices of Final

Partnership Administrative Adjustment (“FPAAs”) to twenty-one of

Case 3:05-cv-02835-RS Document 15 Filed 12/12/05 Page 1 of 5
United States District Court

For the Northern District of California

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the twenty-two SIFs involved in this action (the FPAA for the other

SIF, Logan Strategic Investment Fund, was mailed on April 28,

2005). Pet for Readj, Ex A (Doc #1-2). The FPAAs claimed that

each SIF would face partnership administrative adjustments for its

taxable year ending in 2000, and that the SIFs would face

significant penalties. Answer (Doc #7) at 3:17-20. On July 12,

2005, Presidio Growth, LLC (“Presidio Growth”), which was the tax

matters partner for the SIFs, filed a consolidated petition that

challenged the FPAAs on behalf of the SIFs. Pet for Readj.

During the taxable year ending in 2000, Salmon Ventures

was the sole Class B member of Jefferson Strategic Investment Fund,

LLC (“Jefferson LLC”), one of the SIFs that received an FPAA. Mot

to Int at 2:3-4. On October 3, 2005, Salmon Ventures filed a

motion to intervene or for leave to intervene in the SIFs’ action

based on 26 USC (Internal Revenue Code) § 6226(c) and FRCP 24. Id. 

The motion is unopposed.

II

After an FPAA is mailed, 26 USC § 6226 permits certain

partners to file a petition for readjustment of partnership items. 

For the first ninety days after the FPAA is mailed, only the tax

matters partner may file the petition. 26 USC § 6226(a). If the

tax matters partner does not file a petition during this period,

any notice partner may file one within the following sixty days. 

Id § 6226(b). Once a petition has been filed, “each person who was

a partner in such partnership at any time during [the taxable year

in question] shall be treated as a party to such action,” and the

court “shall allow each such person to participate in the action.” 

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United States District Court

For the Northern District of California

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Id § 6226(c).

Additionally, a person seeking to participate must have

an interest in the outcome. Id § 6226(d). That is, the person’s

partnership items during the partnership’s taxable year must not

have become nonpartnership items by reason of an event described in

26 USC § 6231(b), which mostly deals with issues of notice and

settlement. Id §§ 6226(d)(1)(A), 6231(b). In addition, the period

within which any tax attributable to such partnership items may be

assessed against that partner must not have expired. Id §

6226(d)(1)(B).

Accordingly, section 6226(c) grants a qualifying party a

right to intervene in the petition proceeding. There are two rules

governing the right to intervene by statute in federal court. 

Under FRCP 24(a)(1), the court must allow intervention when the

motion to intervene is timely, and “when a statute of the United

States confers an unconditional right to intervene.” Under Rule

24(b)(1), the court has discretion to allow intervention when the

motion is timely and “when a statute of the United States confers a

conditional right to intervene.”

III

Salmon Ventures asserts it was a partner in Jefferson

LLC, one of the SIFs for whom Presidio Growth filed a petition,

during the taxable year at issue. Mot to Int at 2:3-14. Salmon

Ventures also alleges that it has an interest in the action because

its partnership items have not become nonpartnership items by

reason of an event described in section 6231(b), and because the

period for tax assessment has not expired. Id at 2:26-3:10. In

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sum, Salmon Ventures has alleged facts sufficient to qualify for

intervention under section 6226(c).

Because section 6226(c) states that the court “shall”

allow a qualifying party to participate, the court does not have

discretion to deny intervention to a party who meets the statute’s

requirements. Accordingly, Salmon Ventures has an unconditional

statutory right to intervene under FRCP 24(a)(1). Cf Brotherhood

of RR Trainmen v Baltimore & Ohio RR, 331 US 519, 530-31 (1947) (a

statute providing that a qualifying party “may” intervene conferred

an unconditional right of intervention).

Moreover, the court finds that Salmon Ventures’ motion

for intervention is timely. In determining timeliness, courts

generally evaluate three factors: (1) the stage of the proceeding

at which an applicant seeks to intervene; (2) the prejudice to

other parties; and (3) the reason for and length of the delay. 

United States v Oregon, 745 F 2d 550, 552 (9th Cir 1984). In

addition, courts must be more lenient in applying the timeliness

requirement where intervention is sought as a matter of right. Id.

In this case, Salmon Ventures could not file its own

readjustment petition for the first three months after the FPAAs

were mailed because that prerogative only belonged to the tax

matters partner, Presidio Growth, under 26 USC § 6226(a). 

Moreover, Salmon Ventures could not later file a petition under 26

USC § 6226(b) because Presidio Growth had already filed one on July

12, 2005. Hence, Salmon Ventures sought to intervene by filing

this motion, which it did within three months of Presidio Growth’s

petition. Because this proceeding is still at a relatively early

stage, the other parties have not raised any claims of prejudice,

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United States District Court

For the Northern District of California

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and there has not been a lengthy delay, Salmon Ventures is entitled

to intervene in this proceeding under FRCP 24(a)(1).

IV

For the reasons stated above, Salmon Ventures’ motion to

intervene is GRANTED. This order does not affect the stay granted

in this case on November 7, 2005. Doc #34 of C-04-4309 VRW.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Judge

Case 3:05-cv-02835-RS Document 15 Filed 12/12/05 Page 5 of 5