T.C. Mem o. 2 01 5- 78

UNITED STAT ES TAX COURT

LEODIS C. MATTHEW S, APC, A CALIFORNIA CORPORATION, Pet it io ne r v.

COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 23 41 7- 14 . Fi le d Ap ril 23 , 20 15 .
Mi ch ael M. Pag e, Ell is G. W as so n, an d J acque li ne L. Maar, fo r pe ti ti on er. Van es saM. Hop pe an d Kat he rin e Hol m es Ank en y , forres po nd en t.

MEMORANDUM OPINION DAW SON, Ju dg e: Thi s ca se is be fo re u s o n re sp on de nt ’s m ot io n t o d is m is s fo r la ck of ju ris di ct io n o n the gro un d tha t p et it io ne r’s co rp or at e st atus was su sp en de d a t the ti m e th e p et it io n was fil edan d t he refo re i t d idno t h av e th e le ga l cap aci ty to l it ig at e in th is Co urt. As e xp la in edhe rei n, we wi ll gra ntres po nd en t’s m ot io n.- 2 -

[* 2] Bac kg ro un d Pet it io ne r, a la w firm , was i nc or po rat edinCal ifo rn iaon Feb ru ary 5, 2 00 8. The Cal ifo rn iaFran ch is e Tax Bo ard(CFTB) su sp en de d p et it io ne r’s po wers , rig ht s, an d p riv il eg es on May 1, 20 13 , forfai lu re t o p ay Sta te tax es . See Ca l. Re v. & Tax . Cod e se c. 23 30 1 (West20 04 ). The s us pe ns io n re m ai ne d i n e ffec t u nt il Nov em be r 26 , 20 14 , at wh ic h t im e th e CFTB r ei ns ta te d p et it io ne r’s co rp or at e cap aci ty. On J un e 3 0, 2 01 4, re sp on de ntm ai le d t o p et it io ne r a n ot ic e o f de fic ie nc y de te rm in in g a$1 ,91 4,6 68 Fed eral in co m e ta x d efi ci en cy fortax y ear e nd ed Decem be r 31 , 20 11 , anda se ct io n 6 66 2( d) pe na lty of $ 38 2,9 34 . On Oct ob er 1 , 1 20 14 , pet it io ne r fi le d ape ti ti oninth is Co urt ch al le ng in g re sp on de nt ’s de te rm in at io n. On Dec em

be r 1, 2 01 4, re sp on de ntfil eda m ot io n t o d is m is s fo r la ck of juri sd ic ti on , all eg in g tha t p et it io ne r la ck edth e cap aci ty to s ue at t he ti m e it s Tax Co urt p et it io n was fil ed . On Dece m be r 24 , 20 14 , pet it io ne r fi le d ares po ns e, ob jecti ng to th e m ot io n o n the gro un d t ha t the rei ns ta te m en t o f th e co rp or at io n o n

Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 1 Rev enue Co de ineffe ctforth e y ear i n i ss ue , andall Ru le refe ren ces are t o t he Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e.- 3 -

[* 3] Nov em

be r 26 , 20 14 , retro act iv el y res to redit s capa ci ty to the ti m e itfil edit s pe ti ti on inth is cas e an d the refo re co nf erre d juris di ct io n o n t hi s C ou rt. Dis cu ss io n The Tax C ou rt i s a c ou rt o f li m it edjuri sd ic ti on , Nafte l v . Commis si on er, 8 5 T.C. 52 7, 5 29 (19 85 ), an d m ay ex erci se juri sd ic ti on on ly to the ex te ntex pr es sl y pr ov id edby statut e, Brem anv. Co m m is si on er, 6 6 T.C. 6 1, 6 6 (1 97 6) . This Co urt’s jur is di ct io n t o d et erm in e a d efi ci en cy inFed eral in co m e ta x d ep en ds on th e is su an ce o f a v al idno ti ce o f de fic ie nc y an d ati m el y

fil edpe ti ti on . Rul e 1 3( a), (c); Mo ng e v . Comm is si on er, 9 3 T.C. 2 2, 2 7 (1 98 9) ; Ab el es v. Co m m is si on er, 9 1 T.C. 10 19 , 10 25 (19 88 ). Pur su an t t o s ect io n 6 21 3( a), a t ax pa y er h as 90 da y s af te r th e n ot ic e o f de fic ie nc y

is m ai le d t o fi le a pe ti ti on inth is Co urt fo r red et erm in at io n of th e d efi ci en cy . Ju ris di ct io n m us t b e sh ownaffi rm at iv el y an d, as th e p arty in vo ki ng our juri sd ic ti on , pet it io ne r ha s the burd enof p ro vi ng th atwe ha ve juri sd ic ti on ov er i ts cas e. See, e.g ., Jo hnC. Hom & Ass oc s., In c. v. Co m m is si on er, 1 40 T.C. 21 0, 2 12 (20 13 ) (h ol di ng th atjuri sd ic ti on is de te rm in ed atth e ti m e a p et it io n i s fi le d) ; Dav idDun g Le, M .D., Inc. v . Comm is si on er, 1 14 T.C. 26 8, 2 70 (20 00 ), aff’d, 2 2 F ed . App x. 8 37 (9t h C ir. 2 00 1) . Peti ti on er m us t es tabl is h tha t: (1) res po nd en t i ss ue d t o i t a v al idno ti ce o f de fic ie nc y , and(2) it , or- 4 -

[* 4] so m eo ne au th or iz edto acton it s b eh al f, fil edwith the Co urt a t im el y pe ti ti on . See Rul e 1 3( a), (c) ; M on ge v. Co m m is si on er, 9 3 T.C. 2 2. Pet it io ne r’s co rp or at e cap aci ty w as su sp en de d at the ti m e th e p et it io n was fil edonOcto be r 1, 2 01 4, an d was no t re in st at edun ti l No ve m be r 26 , 20 14 , whi ch was aft er i t fi le d the pe ti ti on he rei n. Leg al cap aci ty is cruc ia l t o b rin gi ng anact io n in th e Tax Co urt. See Ru le 60 (c). Whethe r a co rp or at io n h as th e cap aci ty to en ga ge inli ti ga ti on inth is Co urt i s d et erm in edby app li cab le Sta te law, wh ic h, i n th is cas e, is Cal ifo rn ialaw. See id . ; Br anno n’s o f Sh awn ee, In c. v. 2 Co m m is si on er, 7 1 T.C. 1 08 , 11 1 (1 97 8) . Res po nd en t re li es onou r op in io n i n Dav idDun g Le, M .D., Inc. v . Co m m is si on er, 1 14 T.C. at 2 68 , arg ui ng th atpe ti ti on er d idno t h av e th e le ga l cap aci ty to p ro se cu te th is cas e whe n t he pe ti ti on was fi le d. We agre e. InDavi d Dun g Le, M .D., Inc., a ca se in vo lv in g ana lo go us fact s, we h el d t ha t a C al ifo rn ia co rp or at io n l ack edth e p owe r to fil e a l aws ui t i n t hi s C ou rt wh il e it s co rp or at e po wers were s us pe nd edby the Sta te of C al ifo rn iafor fai lu re t o p ay

in co m e ta x. In reac hi ng ou r ho ld in g, we ci te d C al . Rev . & Tax. C od e se cs . 23 30 1 a nd23 30 2

Ru le 60 (c) s ta te s i n re le va ntpa rt: “ The cap aci ty of a co rp or at io n t o e ng ag e 2 in su chli ti ga ti on [in th is co urt] sh al l b e d et erm in edby the law u nd er wh ic h i t was or ga ni zed .”- 5 -

[* 5] (W es t 2 00 4) , no ti ng th atth e Supr em e Co urt o f Cal ifo rn iaha s co ns tru edth os e se ct io ns to m eanth ata co rp or at io n m ay no t p ro se cu te or d efen d a n a ct io n dur in g th e p eri odinwhi chitis su sp en de d. Dav idDun g Le, M .D., Inc., 1 14 T.C. at 2 72 . Bec au se th e ta xp ay er’s co rp or at e st atus was n otrei ns ta te d a t the ti m e th e p et it io n was fil edor dur in g the 90 -d ay pe rio d, we h el d t ha t i t “ [was ] fat al to pe ti ti on er i n th atCal ifo rn ialaw d oe s n otop erat e to to ll a fi li ng pe rio d fr om run ni ng du rin g a pe rio d o f su sp en si on .” Id . at 2 75 . W e th eref or e d is mis se d t he pe ti ti on inth atcas e fo r la ck of ju ris di ct io n. Th e U.S. Co urt o f App eal s fo r th e Nin th Cir cu it , wher e an ap pe al inth is cas e wou ldli e, affi rm edth is Co urt i n Dav idDun g Le, M .D. Inc. v . Co m m is si on er, 2 2 F ed . App . 83 7. We will fol lo w ou r pr eced en t as affi rm edby th e Co urt o f App eal s fo r th e Nin th Cir cu it . As we cl earl y

st at edina rece ntcas e, Med . W ei gh t Co nt ro l Sp eci al is t v . Co m m is si on er, T.C. Mem o. 2 01 5- 52 , at * 7: Ju rs id ic ti on al st atut es su chas s ect io n 6 21 3( a) ar e co nd it io ns onth e waiv er o f th e Fed eral Gov ern m en t’s s ov erei gn imm un ity an d m us t b e st ric tl y co ns tru ed . See Bo wenv. Ci ty of New York, 4 76 U.S. 46 7, 47 9 (1 98 6) . Sect io n 6 21 3( a) p ro vi de s tha t a p et it io n m ay be fil edby th e ta xp ay er dur in g the 90 -d ay pe rio d. * * * [The tax pa y er’s] su sp en si on un de r Cal . Rev . & Tax. C od e se c. 23 30 1 d ep riv editof the cap aci ty to s ue un de r se ct io n 6 21 3( a) an d p rev en ts it s co rp or at e rev iv al fro m

pre jud ic in g * * * [th e Co m

m is si on er’s] defe ns e o f la ck of subjec t m at te r juri sd ic ti on .- 6 -

[* 6] W e wil l co nt in ue to fol lo w exi st in g c as el aw in ho ld in g t ha t a r ev iv ed Cal ifo rn iaco rp or at io n m ay no t re tro act iv el y

va li da te th e fi li ng of ape ti ti onth at oc cu rreddu rin g the su sp en si on of i ts co rp or at e p owe rs an d wh ere t he rev iv al oc cu rredon ly after t he pe rio d fo r ti m el y fil in g t he pe ti ti on . See AMA En te rs ., Inc . v. Co m m is si on er, 5 23 Fed . App x. 4 55 (9th C ir. 2 01 3) (ho ld in g t ha t al th ou gh AMA fi le d ati m el y

pe ti ti oninth is Co urt, i t d idno t h av e th e cap aci ty to en ga ge in li ti ga ti on be cau se it s co rp or at e “po wers , rig ht s an d p riv il eg es ” were s us pe nd ed un de r Cal ifo rn ialaw atth e ti m e th e p et it io n was fil ed ; the subs eque ntrev iv al of AMA’s co rp or at e p owe rs aft er the st atut ory pe rio d d idno t re tro act iv el y sat is fy se ct io n 7 42 8( b) (3 ), whi chrequi res th atanorg an iz at io n fi le a se ct io n 7 42 8 p et it io n withi n 9 0 d ay s o f th e Servi ce’s m ai li ng anadve rs e d et erm in at io n l ette r); Jo hn C. Hom & Ass oc s., In c. v. Co m

m is si on er, 1 40 T.C. 21 0 (h ol di ng th atTax C ourt la ck edjuri sd ic ti on to he ar co rp or at e ta xp ay er’s p et it io n fo r red et erm in at io n o f in co m e ta x d efi ci en cy

be cau se tax pa y er’s co rp or at e cap aci ty w as su sp en de d b y th e CFTB atth e ti m e itfil edit s p et it io n, re ga rd le ss of t he factth atit s s ta tu s was rei ns tate d b efo re the sch edul edtri al ); M ed . W ei gh t Co nt ro l Sp eci al is t v . Co m m is si on er, T.C. Mem o. 2 01 5- 52 (ho ld in g t ha t t ax pa y er l ack edth e cap aci ty to pe ti ti on th e Tax Co urt dur in g the 90 -d ay pe rio d o f se ct io n 6 21 3( a), ren de rin g the Co urt wi th ou t juris di ct io n) . Clea rly, any rev iv al of aco rp or at io n’s co rp or at e- 7 -

[* 7] po wers wil l n otres to re i ts cap aci ty to l it ig at e a Tax Co urt ca se when th e d at e of th e rev iv al is be y on d the 90 -d ay pe rio d i n wh ic h ape ti ti on inth is Co urt was requi redto be fil ed . See Dav idDun g Le, M .D., Inc. v . Comm is si on er, 1 14 T.C. at 27 4- 27 5. Non ethe le ss , pet it io ne r rel ie s o n B ou rh is v. Lo rd , 15 3 C al . Rpt r. 3d51 0 (2 01 3) , to arg ue th atitha d the cap aci ty to co m m en ce an act io n i n t hi s C ou rt b y vi rtu e o f a “ retro act iv e rev iv al ” an d t ha t Dav idDun g Le, M .D., Inc. i s n o l on ge r go odlaw. We dis ag ree. Th e Bo urhi s d eci si ondo es no t co nt rad ic t Dav idDun g Le, M.D., Inc . The u lt im at e que st io n i n t hi s ca se is whethe r th e co rp or at io n’s rev iv al retro act iv el y

va li da te d the act io ns tak endu rin g t he su sp en si on (i.e ., th e fil in g o f th e p et it io n i n thi s ca se ). The an swe r de pe nd s upo n wh ethe r th e in it ia l fil in g i s treat edas a“pr oc edur al ” o r “ subs tant it iv e” ac t. See Bo urhi s, 1 53 Cal . Rp tr. 3 d 5 10 . “ Pro cedur al act s i n t he pro se cuti onor d efen se of alaws ui t ar e va li da te d re tro act iv el y

by corp or at e rev iv al . Mos t l it ig at io n a ct iv ity ha s b een ch arac te riz edas p ro cedur al forpu rp os es of c or po rat e rev iv al .” Ben to n v . Cnt y . of Nap a, 27 7 C al . Rpt r. 54 1, 5 45 (Ct . App . 19 91 ). In c on tra st , wher e th e st atut e o f li mit at io ns for

purs ui ng anact io n e xp ire s wh il e th e co rp or at io n i s s us pe nd ed , subs eque ntrev iv al of t he co rp or at io n d oe s n otretro act iv el y va li da te th e fi li ng of th e la wsu itbe cau se st atut es of l im it at io ns are “ subs tant iv e”. See , e.g., Me d.- 8 -

[* 8] W ei gh t Co nt ro l Sp eci al is t v . Comm is si on er, at*5 -* 8; Sad e Sh oe Co . v. Osc hi n & Sn y de r, 26 6 C al . Rptr. 61 9, 6 22 n.2 (Ct . App . 19 90 ). Altho ug h o ur Co urt i n Dav idDun g Le, M .D., Inc. d idno t s pe ci fic al ly use th e te rm s “pr oc edur al ” or“ subs tant iv e”, we eff

ect iv el y tre at edsec ti on62 13 as asubs tant iv e requi rem en t, an d the refo re the pe ti ti on can no t b e ret ro act iv el y rat ifi edup on co rp or at e rev iv al . See, e.g ., AMA Ent ers ., Inc . v. Co m mis si on er, 5 23 Fed . App x. 4 55 . Pet it io ne r’s rev iv al di d n otretro act iv el y res to re i ts cap aci ty to fi le th e pe ti ti on inth is cas e an d c on fer juris di ct io n o n t hi s C ou rt. Se e Dav idDun g Le, M.D., Inc ., 11 4 T.C. at27 4, 2 76 . Peti ti on er’s co rp or at e st atus was n otrei ns ta te d un ti l af te r th e p et it io n was fil edan d a fte r th e ex pi rat io n o f th e 9 0- da y pe rio d i n whi chth e p et it io n was requi redto be fil ed . See s ec. 6 21 3( a). Insu m , pet it io ne r la ck edth e cap aci ty to p et it io n t hi s C ou rt dur in g t he 90 - da y pe rio d p ro vi de d i n s ect io n 6 21 3( a), an d t he refo re thi s C ou rt l ack s juris di ct io n in th is cas e. Acco rd in gl y , res po nd en t’s m ot io n t o d is mis s fo r la ckof ju ris di ct io n wil l b e g ran te d. To re fle ctth e fo reg oi ng , An ap pr op ria te ord er o f di sm is sa l fo r la ckof ju ris di ct io n wi ll be en te red .