Opinion ID: 4528264
Heading Depth: 2
Heading Rank: 2

Heading: whether the irs provided gmi with sufficient

Text: NOTICE OF COMPUTATIONAL ADJUSTMENT GMI contends that even if the six-month limitations period under § 6230(c) applies, the notices it received from the IRS were inadequate to trigger the running of the limitations period and therefore, the six month period never began. We disagree. The six-month limitations period is triggered by a “notice of computational adjustment.” § 6230(c)(2)(A) (providing that the taxpayer must file a refund claim “within 6 months after . . . the [IRS] mails the notice of Case: 19-1124 Document: 42 Page: 23 Filed: 04/23/2020 GENERAL MILLS, INC. v. UNITED STATES 23 computational adjustment to the partner”). Although § 6230(c) does not define what constitutes adequate notice, “notice must meet the general ‘fairness’ requirements of due process.” Estate of Yaeger v. Comm’r, 889 F.2d 29, 35 (2d Cir. 1989) (quoting Planned Invs., Inc. v. United States, 881 F.2d 340, 344 (6th Cir. 1989)). In a number of cases, courts have been called upon to examine notices of deficiency, which are issued pursuant to the deficiency procedures set forth in §§ 6211–16, to determine “whether the notice imparted enough information to provide the taxpayer with fair notice.” Scar v. Comm’r, 814 F.2d 1363, 1367–68 (9th Cir. 1987). To be considered adequate, a notice of deficiency must (i) advise the taxpayer that the IRS determined that a deficiency exists for a particular year, and (ii) specify the amount of the deficiency or provide the information necessary to compute the deficiency. Acute Care Specialists II, 727 F.3d at 813 (considering the inquiry for whether a notice of deficiency imparted fair notice to be instructive for deciding whether the IRS provided taxpayer with fair notice of a computational adjustment); Portillo v. Comm’r, 932 F.2d 1128, 1132 (5th Cir. 1991) (citing Donley v. Comm’r, 791 F.2d 383, 384–85 (5th Cir. 1986)); Abrams v. Comm’r, 814 F.2d 1356, 1357 (9th Cir. 1987); Geiselman v. United States, 961 F.2d 1, 5 (1st Cir. 1992); Estate of Yaeger, 889 F.2d at 35; Benzvi v. Comm’r, 787 F.2d 1541, 1542 (11th Cir. 1986); Del Castillo v. Comm’r, 92 T.C.M. (CCH) 112, 2006 WL 2346452, at  (2006). The record shows GMI received interest computation schedules from the IRS dated April 18, 2011 and April 20, 2011 for the 2002–2003 tax years and dated June 14, 2011 for the 2004–2006 tax years. J.A. 334–38, 342–44, 559–63. The interest computation schedules were accompanied by cover letters (Letter 3535) 10 informing GMI that: “As 10 The Internal Revenue Manual states that the in- terest computation cover letter (Letter 3535) should be Case: 19-1124 Document: 42 Page: 24 Filed: 04/23/2020 24 GENERAL MILLS, INC. v. UNITED STATES required by Internal Revenue Code Section 6631, [the IRS is] providing a copy of the schedule we used to calculate interest on the tax adjustment for the return” for each respective tax year. J.A. 334, 342, 559. The interest computation schedules themselves identified GMI’s tax underpayments, payments, and refunds for each of the tax years and computed the amount of interest (including LCU interest) on GMI’s tax underpayments that had accrued to date. Further, each of the interest computation schedules identified the “applicable date” in two places: the line titled “LCU Interest Date” and the line for the earliest date of “Underpay LCU.” The schedules for the 2002 and 2003 tax years each stated, “LCU Interest Date: 07/15/2007,” as the Court of Federal Claims noted. General Mills, 123 Fed. Cl. at 590 (citing J.A. 335, 337). The interest computation schedules described the accrued interest as “Underpay” for the dates prior to and including July 15, 2007 and as “Underpay LCU” for the dates following July 15, 2007. J.A. 336, 338. The schedules thus informed GMI that interest accrued at the default underpayment rate prior to and on July 15, 2007, and then at an enhanced interest rate following July 15, 2007. Id. Likewise, the schedules for the 2004, 2005, and 2006 tax years each stated, “LCU Interest Date: 05/29/2009,” as the Court of Federal Claims noted. General Mills, 123 Fed. Cl. at 590. The schedules described the accrued interest prior to and on this date as “Underpay” and after this date as “Underpay LCU.” J.A. 560, 562–63. In other words, the schedules showed used “when providing an interest computation report to the taxpayer as required by IRC 6631.” Internal Revenue Manual § 20.2.8.3 (2011). Further, “IRC 6631 requires that an explanation of interest computation be sent to an individual (IMF) taxpayer with each notice; which includes an amount of interest required to be paid.” Id. Case: 19-1124 Document: 42 Page: 25 Filed: 04/23/2020 GENERAL MILLS, INC. v. UNITED STATES 25 GMI that, after May 29, 2009, the IRS began calculating accrued interest at a higher interest rate than the default underpayment rate. Id. We agree with the Court of Federal Claims’ conclusion that the schedules provided GMI with fair notice of a computational adjustment as to LCU interest and were adequate to trigger the running of the limitations period. See General Mills, 123 Fed. Cl. at 590. The schedules clearly informed GMI that the IRS had imposed the enhanced interest rate for large corporate underpayments at specific trigger dates. The schedules clearly identified July 15, 2007 and May 29, 2009 as the applicable dates for computing LCU interest for 2002–2003 and 2004–2006, respectively. The schedules further informed GMI of the amount of LCU interest actually assessed due to the enhanced interest rate for each tax year. GMI contends that the notices were defective for various reasons. First, GMI says that the IRS was required to give notice that “a jurisdictional period was being triggered,” and the schedules failed to mention § 6230(c) or the six-month limitations period. See Appellant’s Br. at 56–57. GMI also argues that the schedules were tainted by the failure to mention the Partnership proceedings and the failure to separate the accrued interest on underpayments resulting from the corporate proceedings from that of the Partnership proceedings. These contentions lack merit. The Court of Federal Claims stated that the notice of computational adjustment need not be in any particular form, and we agree. General Mills, 123 Fed. Cl. at 589; see Urban v. Comm’r, 964 F.2d 888, 890 (9th Cir. 1992); Abrams v. Comm’r, 787 F.2d 939, 941 (4th Cir.1986); Benzvi, 787 F.2d at 1542. Indeed, the Internal Revenue Code does not define what a notice of computational adjustment should contain. In Acute Care Specialists II, the taxpayers claimed that the IRS failed to provide adequate notice of computational adjustment, even though the IRS mailed them a Case: 19-1124 Document: 42 Page: 26 Filed: 04/23/2020 26 GENERAL MILLS, INC. v. UNITED STATES Form 4549A showing the amount of tax deficiency and the balance due. 727 F.3d at 812–13. The Form 4549A “did not, however, specifically indicate that it was a notice of computational adjustment or state the length of time that the [taxpayers] had in which to challenge the adjustment.” Id. at 812. The Seventh Circuit found the Form 4549A met the standard for adequate notice because it showed “the existence and amount of the [taxpayers’] tax deficiency.” Id. at 813. Here, the interest computation schedules gave GMI fair notice of the tax years at issue, the means to compute the accrued LCU interest, and the balance due. In other words, the schedules provided GMI with all the information it needed to assess whether the IRS may have erroneously computed the computational adjustment. GMI urges upon us the case of McGann v. United States, 76 Fed. Cl. 745 (2007), as analogous to this case. GMI argues that, like in McGann, the IRS provided GMI with misleading information that contradicts the documents the Government now relies on for providing adequate notice. GMI points to the cover letters accompanying the interest computation schedules that stated: “[The IRS] will either send you a bill within the next few weeks or send you a statement of any refund.” J.A. 334, 342, 559. According to GMI, the cover letters “suggest[ed] that a refund could be automatic.” Appellant’s Br. at 56. GMI also suggests that, based on other documents provided by the IRS, the IRS misled it to believe LCU interest would not be imposed. GMI refers to interest computation schedules for the 2004 and 2005 tax years that were issued by the IRS prior to, and were later superseded by, the June 14, 2011 interest computation schedules. The superseded interest computation schedules stated, “LCU Interest Date: LCU Interest is OFF.” J.A. 339, 341. GMI also points to a Form 4549-A, issued on March 4, 2011 to inform GMI of its underpayments for the 2004–2006 tax years. GMI argues the Form 4549-A was misleading because it showed “0” (zero) in the line for “Interest (IRC § 6601).” J.A. 483. Case: 19-1124 Document: 42 Page: 27 Filed: 04/23/2020 GENERAL MILLS, INC. v. UNITED STATES 27 We agree with the Court of Federal Claims that McGann is not analogous to GMI’s case. General Mills, 123 Fed. Cl. at 590. The Court of Federal Claims determined that, unlike in McGann, “none of the notices sent by the IRS to [GMI] in this case were misleading or contradictory.” Id. By stating that the IRS would either send a bill or send a refund, the cover letters could not have reasonably misled GMI to conclude that it need not file an administrative refund claim in order to contest the IRS’s calculation of the amount of LCU interest owed. See J.A. 334, 342, 559. Nor were the superseded interest computation schedules misleading as to whether LCU interest would be imposed on GMI. The schedules simply notified GMI that the IRS would later account for LCU interest in subsequently issued interest computation schedules. These documents were not misleading or contradictory as to identifying the amount of LCU interest due and the years at issue. See Estate of Yaeger, 889 F.2d at 35 (“The taxpayer must demonstrate that the notice was misleading.”). The Form 4549-A, issued on March 4, 2011 for the 2004–2006 tax years, does not change our conclusion. As a general rule, notices containing technical defects are still valid unless the taxpayer has been prejudiced or misled by the error. See Stewart v. Comm’r, 714 F.2d 977, 986 (9th Cir. 1983) (“The basic consideration is whether the taxpayer is surprised and disadvantaged.”) (quoting Comm’r v. Transp. Mfg. & Equip. Co., 478 F.2d 731, 736 (8th Cir. 1973)); see also Sanderling, Inc. v. Comm’r, 571 F.2d 174, 176 (3d Cir. 1978) (finding that the deficiency notice is valid if a taxpayer has not been misled as to the year or amount involved; notice was valid since it referenced correct year and transaction despite references to wrong years); Estate of Yaeger, 889 F.2d at 36 (finding that the deficiency notice was valid, even though it incorrectly identified year in question, because information in notice was sufficient for taxpayer to determine actual year in Case: 19-1124 Document: 42 Page: 28 Filed: 04/23/2020 28 GENERAL MILLS, INC. v. UNITED STATES question). As the Court of Federal Claims noted, the Form 4549-A was accompanied by a cover letter informing GMI of the conditions under which the IRS would impose the enhanced interest rate on large corporate underpayments. J.A. 478 (“If you are a ‘C’ Corporation, Section 6621(c) of the Internal Revenue Code provides that an interest rate 2% higher than the standard rate of interest will be charged on [large corporate underpayments].”). We agree with the Court of Federal Claims that, irrespective of the documents issued prior to the interest computation schedules, by the time GMI “receive[d] the detailed interest computation schedules, [GMI] was well aware of the IRS’s computation of its LCU interest and the interest accrual dates the IRS had used.” General Mills, 123 Fed. Cl. at 590. GMI could not have been prejudiced or misled as to the IRS’s intent to impose LCU interest for the 2004–2006 tax years, as well as the amounts, once it received the interest computation schedules on June 14, 2011. In sum, at the latest, the six-month limitations period began to run by April 2011 and June 2011 for the 2002– 2003 and the 2004–2006 tax years, respectively. GMI did not file its refund claims until March 28, 2013, which was over a year too late. Accordingly, GMI did not file a timely claim for refund under the governing statute. See § 6230(c)(2)(A).