112 T.C. No. 8

UNITED STATES TAX COURT

ICI PENSION FUND, ICI PENSIONS TRUSTEE LIMITED, TRUSTEE,

Petitioner v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10030-97. Filed March 5, 1999. 

 

During 1991 and 1992, F, a non-U.S. pension fund,

received dividends from U.S. corporations, net of U.S.

income tax that was withheld thereon. Relying on sec.

1.6012-1(b)(2)(i), Income Tax Regs., F did not file tax

returns for those years, taking the position that its

"tax liability * * * [was] fully satisfied by the

withholding of tax at source". On Aug. 12, 1992, and

June 28, 1993, F claimed refunds of the amounts

withheld for 1991 and 1992, respectively, alleging it

was tax exempt. R refunded the amount of tax withheld

for 1991 on or about Aug. 27, 1992, and refunded the

amount withheld for 1992 on or about Aug. 11, 1993. 

Later, R determined that F was not tax exempt. On

Dec. 19, 1996, R issued notices of deficiency to F

determining that F was liable for the refunded amounts. 

F argues primarily that the deficiency notices were not

issued within the time period set forth in sec. 6501,

I.R.C., because it was not required to file a return

for either 1991 or 1992. R argues primarily that the

deficiency notices are timely under sec. 6501(c)(3),

I.R.C., because F was required to file a return for

both years and did not.
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Held: The deficiency notices are timely because F

failed to file 1991 and 1992 income tax returns. The

provision in sec. 1.6012-1(b)(2), Income Tax Regs., upon

which F relies is inapplicable because: (1) F's tax

liability for the years was not "fully satisfied" and (2) F

claimed overpayments of tax.

K. Peter Schmidt, for petitioner.

Gary D. Kallevang, for respondent.

OPINION

LARO, Judge: ICI Pension Fund, ICI Pensions Trustee

Limited, Trustee, moves for summary judgment, asserting that

section 6501 does not allow respondent to assess tax for either

year in issue. Respondent moves for partial summary judgment,

asserting primarily that the notices of deficiency are timely

under section 6501(c)(3). Respondent issued the notices of

deficiency to ICI Pension Fund, ICI Pensions Trustee Limited,

Trustee, on December 19, 1996, after determining deficiencies in

the 1991 and 1992 income tax of ICI Pension Fund (Fund). 

We must decide whether the notices of deficiency are timely. 

We hold they are. Unless otherwise indicated, section references

are to the Internal Revenue Code in effect for the subject years. 

Rule references are to the Tax Court Rules of Practice and

Procedure. Dollar amounts are rounded to the nearest dollar. 

Background

The Fund is a trust with its principal office in London,

United Kingdom. Its trustee is ICI Pension Trustee Limited
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(ICI). The Fund does not engage in a trade or business in the

United States. It does not have income effectively connected

with a U.S. trade or business. It does not have income

attributable to a permanent establishment in the United States.

During 1991 and 1992, the Fund received dividends on stock

it owned in certain domestic corporations. These dividends were

subject to Federal income tax withholding in the amounts of

$1,550,065 for 1991 and $1,627,006 for 1992. Banker's Trust Co.

(Banker's Trust), the withholding agent for the payments,

withheld the required amounts of tax and remitted the withheld

amounts to respondent. Banker's Trust filed with respondent Form

1042, Annual Withholding Tax Return for U.S. Source Income of

Foreign Persons, and Form 1042S, Foreign Person's U.S. Source

Income Subject to Withholding, on April 13, 1992 (for 1991), and

on June 9, 1993 (for 1992). (Banker's Trust had previously

issued the Fund copies of the Forms 1042S.) These forms were not

required to, and did not, list the taxpayer identification number

of either the Fund or ICI. These forms also were not signed by

either of the two. Forms 1042 and 1042S make no provision for

signature by the persons from whom taxes are withheld.

On August 12, 1992, the Fund submitted to respondent a 1991

Form 990-T, Exempt Organization Business Income Tax Return,

claiming a refund of $1,550,065 in income taxes. The Fund's

claim was based on its assertion that it was a tax-exempt

organization under section 501(c)(5). The information listed on

the 1991 Form 990-T included the Fund's name, address, and
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1 Although the Fund did file claims for refunds for both

years on Form 990-T, the parties agree that these claims are not

"returns" for purposes of sec. 6501(a). See MNOPF Trustees Ltd.

v. United States, 123 F.3d 1460 (Fed. Cir. 1997).

employer identification number, and the Fund's claim that it was

entitled to a $1,550,065 refund for "ERRONEOUS WITHHOLDING". On

or about August 27, 1992, respondent refunded to the Fund the

$1,550,065 amount that had been withheld for 1991.

On June 28, 1993, the Fund submitted to respondent a 1992

Form 990-T, claiming a refund of $1,627,006 in income taxes. The

Fund's claim was again based on its assertion that the Fund was a

tax-exempt organization under section 501(c)(5). The information

listed on the 1992 Form 990-T included the Fund's name, address,

and employer identification number, its claim that it was

entitled to a $1,627,006 refund, and a statement to the effect

that "This refund claim is not an income tax return." On or

about August 11, 1993, respondent refunded to the Fund the

$1,627,006 amount that had been withheld for 1992.

The Fund did not file a 1991 or 1992 Federal income tax

return.1 For those years, the Fund did not have any U.S. source

income subject to tax, other than the dividends mentioned above.

Discussion

The Fund concedes that it was not a tax-exempt entity during

the subject years. The Fund asserts, however, that respondent

may not assess tax for those years. First, the Fund argues, the

3-year limitation period set forth in section 6501(a) never began

to run because it did not file a 1991 or 1992 Federal income tax
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return. Second, the Fund argues, the open-ended limitation

period of section 6501(c)(3) for failing to file a return does

not apply because, the Fund states, it was not required to file a

return for either year, seeing that its tax liability had been

withheld in full by Banker's Trust. The Fund relies on the first

sentence of section 1.6012-1(b)(2)(i), Income Tax Regs., to

support its second argument and acknowledges that it was required

to file a return but for this sentence. In the alternative, the

Fund argues, respondent is time barred with respect to 1991

because the notice of deficiency for that year was issued more

than 3 years after Banker's Trust filed its 1991 Form 1042. The

Fund asserts with respect to this alternative argument that the

1991 Form 1042 started the 3-year period for assessing tax owed

by it for 1991.

We disagree with the Fund's assertion that respondent is

barred from assessing an income tax deficiency for its 1991 or

1992 taxable year. The parties have requested summary

adjudication of this issue, and the record allows us to honor

their request. We may decide this issue as a matter of law

because the record shows the absence of a dispute as to a

material fact related to the issue. See Rule 121(b); see also

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). 

A plain meaning interpretation of the applicable provisions

of the Code and regulations controls our decision. See

Connecticut Natl. Bank v. Germain, 503 U.S. 249, 253-254 (1992);

TVA v. Hill, 437 U.S. 153 (1978); United States v. American
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Trucking Associations, Inc., 310 U.S. 534, 543-544 (1940). 

As provided in the Code:

SEC. 6501. LIMITATIONS ON ASSESSMENT AND COLLECTION. 

(a) General Rule.--Except as otherwise provided in

this section, the amount of any tax imposed by this

title shall be assessed within 3 years after the return

was filed (whether or not such return was filed on or

after the date prescribed) * * *

* * * * * * *

(c) Exceptions.--

* * * * * * *

(3) No return.--In the case of failure

to file a return, the tax may be assessed, or

a proceeding in court for the collection of

such tax may be begun without assessment, at

any time.

As stated in the regulations:

§ 1.6012-1. Individuals required to make returns of

income.-- * * * 

* * * * * * *

(b) Return of nonresident alien individual--* * *

* * * * * * *

(2) Exceptions.--(i) Return not required

when tax is fully paid at source. A

nonresident alien individual * * * who at no

time during the taxable year is engaged in a

trade or business in the United States is not

required to make a return for the taxable

year if his tax liability for the taxable

year is fully satisfied by the withholding of

tax at source under chapter 3 of the Code. 

This subdivision does not apply to * * * a

nonresident alien individual making a claim

under § 301.6402-3 of this chapter (Procedure

and Administration Regulations) for the

refund of an overpayment of tax for the

taxable year. * * *
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The statutory text reveals that Congress has generally given

the Commissioner 3 years after the filing of a return to assess

tax for the taxable year covered therein. See sec. 6501(a). The

statutory text also reveals that Congress has extended this

3-year period indefinitely in cases where a taxpayer fails to

file a return. See sec. 6501(c)(3). Because the Fund did not

file tax returns for the subject years, our decision turns on

whether the Fund was required to file returns for those years. 

We do not read the regulations on which the Fund relies to

except the Fund from a requirement that it file returns for the

subject years. Although the Secretary, pursuant to the authority

delegated to him in section 6012(a), has promulgated rules in

those regulations under which certain nonresident taxpayers are

excepted from filing a return in a certain situation, see sec.

1.6012-1(b)(2)(i), Income Tax Regs., these rules do not apply to

the facts at hand. First, the Fund's tax liability is not "fully

satisfied" by amounts that have been withheld. Although the Fund

states correctly that the Fund did satisfy this requirement at

one time, the Fund ceased to meet this requirement when it

requested and received a refund of the withheld tax. The fact

that the Fund claimed a refund of these withheld amounts also

removed it from the regulatory exception. Section 1.6012-

1(b)(2)(i), Income Tax Regs., states specifically that that

exception is not applicable where, as is the case here, the

taxpayer claims a refund of an overpaid tax.
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Nor do we agree with the Fund's alternative argument as to

1991; namely, that Banker's Trust's 1991 Form 1042 triggered the

running of the Fund's 3-year assessment period. The Fund is the

"taxpayer" to which section 6501(a) refers, and, more

importantly, Banker's Trust's Form 1042 is not the Fund's return. 

See Holmstrom v. Commissioner, 35 B.T.A. 1092, 1103 (1937);

Iderstine v. Commissioner, 24 B.T.A. 291, 296 (1931); Cantrell &

Cochrane, Ltd. v. Commissioner, 19 B.T.A. 16, 26 (1930). 

Banker's Trust's 1991 Form 1042 is not even a "return" within the

meaning of section 6501. A document is a "return" for purposes

of section 6501 only when it (1) purports to be a return,

(2) evinces an honest and reasonable attempt to satisfy the

requirements of the tax law, (3) contains sufficient information

to calculate the taxpayer's tax liability, and (4) is executed by

the taxpayer under penalties of perjury. See Beard v.

Commissioner, 82 T.C. 766 (1984), affd. per curiam 793 F.2d 139

(6th Cir. 1986). In addition to the fact that Banker's Trust's

1991 Form 1042 fails to set forth enough information to allow

respondent to determine the Fund's tax liability for 1991 (e.g.,

it does not list either the Fund's or ICI's taxpayer

identification number, and it does not necessarily limit the

Fund's U.S.-source income to the dividends reported therein),

Banker's Trust's 1991 Form 1042 was not signed by ICI or the Fund

under penalties of perjury.

We hold that respondent issued the deficiency notices to ICI

Pension Fund, ICI Pensions Trustee Limited, Trustee, within the
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limitation period set forth in section 6501. In so holding, we

have considered all arguments made for a contrary holding, and to

the extent not discussed above, find them to be irrelevant or

without merit. To reflect the foregoing,

An order will be issued

granting respondent's motion for

partial summary judgment and

denying petitioner's motion for

summary judgment.