Document: 464 U.S. 386 104 S.Ct. 756 78 L.Ed.2d 549 Ernest BADARACCO, Sr., et al., Petitioners,v.COMMISSIONER OF INTERNAL REVENUE. DELEET MERCHANDISING CORP., Petitioner, v. UNITED STATES. Nos. 82-1453, 82-1509. Argued Nov. 28, 1983. Decided Jan. 17, 1984.* Syllabus Section 6501(a) of the Internal Revenue Code 1954 establishes a general 3-year period limitations "after return was filed" for assessment federal income taxes. However, § 6501(c)(1) provides that when there is "a false or fraudulent with intent to evade tax," tax then may be assessed "at any time." In No. petitioners conceded, purposes this litigation, they had filed partnership and individual returns years 1965-1969. in 1971 nonfraudulent amended paid additional basic taxes shown thereon. 1977, Commissioner issued notices deficiency, asserting liability under 6653(b) addition on account fraud 50% underpayment tax. Petitioners sought redetermination United States Tax Court asserted deficiencies, contending did not apply because filing returns, Commissioner's action barred by deficiency were more than three from date returns. The agreed petitioners. 82-1509, petitioner timely corporation 1967 1968, but 1973 it disclosing certain receipts been reported original 1979, notice deficiencies additions 1968. Petitioner alleged brought suit refund Federal District Court, which granted summary judgment ground 6501(a), regardless whether fraudulent. Appeals, consolidating appeals, reversed both cases. Held: Where taxpayer files later return, applies time," have expired since return. Pp. 391-401. (a) plain unambiguous language permits assess time" year has return," despite subsequent disclosure might make. Nothing present statute can construed suspend its operation as consequence filer's repentant conduct. Neither anything wording itself enables reinstate section's an Moreover, substantive provisions confirms conclusion at time cases taxpayer's repentance. 391-396. (b) statutory language, structure Code, decided supports petitioners' contention "nullity" therefore necessarily "the return" referred 6501(a). 396 -397. (c) There no need twist beyond contours order comport good policy, literal supported substantial policy considerations—the increased difficulty investigating opposed marked routine audits; fact document styled "amended does fundamentally change nature investigation; compounding difficulties attend civil investigation where initial findings lead him conclude case should Department Justice criminal prosecution. 397-400. (d) Petitioners' argument reading 6501(c) would elevate one form over another produces disparity treatment between who first instance fraudulently fails file all, cannot prevail. 6501(c)(3)—which failure time"—has ceasing once particular year, late even though due fraud. employed respective subsections 6501 Congress intended different results 6501(c)(1). 400-401. 693 F.2d 298 (3rd Cir.1982), affirmed. Barry I. Fredericks, New York City, Albert G. Lauber, Jr., Washington, D.C., respondents. BLACKMUN delivered opinion Court. 1 These focus upon 1954, 26 U.S.C. 6501. Subsection three-year other taxes.1 (c)(1) 6501, however, exception tax." time."2 2 issue before us proper application §§ situation May after return? 3 * 82-1453. Badaracco, partners electrical contracting business. They calendar 1965-1969, inclusive. "[F]or case," these concede "fraudulent returns." App. 37a. 4 1970 1971, grand juries Jersey subpoenaed books records partnership. On August question Three months later, indicted violation 7206(1) 7206(1). Each pleaded guilty charge respect judgments conviction entered. Crim. 766-71(DNJ). remaining counts indictment dismissed. 5 November 21, mailed each question. He asserted, only 6653(b), (the so-called "penalty") See 5a. 6 claimed caused specified operate; notices, having obviously forthcoming long expiration 7 line then-recent decision Klemp Commissioner, 77 T.C. 201 (1981), appeal pending, (CA9 81-7744), petitioners.3 42 TCM 573, ¶ 81,404 P-H Memo TC (1981). 8 Deleet Merchandising Corp. so filed, report derived printing supply 9, 1973, 1968 reported.4 Although charged violations, although formal initiated it, investigations centered former officers taxpayer. After completion those investigations, December 14, Deleet. 71a. 9 their Jersey. motion judgment, contended It could 10 535 F.Supp. 402 relied Court's supra, Dowell 614 1263 (CA10 1980), cert. 82-1873. 11 Appeals. Government appealed Appeals Third Circuit. heard together. That court, vote, Badaracco (1982). Circuit's ruling consistent Fifth holding Nesmith 699 712 (1983), 82-2008. Second Circuit ruled otherwise. Britton States, 532 275 (Vt.1981), aff'd mem., 697 288 (CA2 1982). also Espinoza 412 (1982).5 Because conflict, we certiorari, --- ----, 103 2084, 296 (1983). II 12 Our task here determine construction written assessments. This ago pronounced standard: "Statutes limitation applied bar rights Government, must receive strict favor Government." E.I. Dupont de Nemours & Co. Davis, 264 456, 462, 44 364, 366, 68 L.Ed. 788 (1924). Lucas Pilliod Lumber Co., 281 245, 249, 50 297, 299, 74 829 (1930). More recently, Judge Roney, speaking Circuit, observed "limitations statutes barring collection otherwise unpaid are strictly Lucia 474 565, 570 (1973). 13 We naturally turn statute. sets forth rule: 6501(e)(1)(A) (first introduced 275(c) Act 1934, 48 Stat. 745) extended nonfraudulently omits 25% his gross income; kind, now permitted within filed." 14 Both rule six-year rule, explicitly made inapplicable circumstances covered 6501(c). subsection identifies situations allowed unlimited relates tax" (c)(3) covers all (whether fraud) (c)(2) similar "willful attempt manner defeat income, estate, gift taxes.6 15 All appear face, seem follow squarely controlled clear "false Deleet, purposes, review deemed 6501(c)(1), unqualified allows light conduct.7 Indeed, recently noted, Hillsboro National Bank n. 10, 1134, 1140, 75 130 provide either filing, acceptance, return; instead, creature administrative origin grace. Thus, provided "return," plainly included connection, note until Tenth (1980), 82-1873, courts consistently held predecessors turned original, amended, return.8 16 established submits purge voluntary disclosure; committed, offense completed, prepared filed. See, e.g., Habig, 390 222, 88 926, 19 1055 (1968); Plunkett 465 302-303 (CA7 1972). "Any result make sport penalty. A merely take chances investigated discovered, then, if made, simply pay he owed anyhow thereby nullify penalty." George M. Still, Inc. 1072, 1077 (1953), aff'd, 218 639 1955). short, remains "of revised conduct, prosecution 6653(b). likewise remain such 17 persuaded Deleet's suggestion, Brief p. 15, read commencement while uncorrected. observation effect, stating "put limbo" pending further action. F.2d, 1266. statute, contrary suggestion. "suspend" filer makes disclosure. reference 6501(a); And contains mechanism repents. By very terms, case, "otherwise provided" When intends temporary suspension running period, knows how unambiguously accomplish result. 6503(a)(1), (a)(2), (b), (c), (d). 18 weakness proposed demonstrated impact 6501(e)(1)(A), whenever income. Under reasoning, gains benefit Yet gain live 6501(e)(1)(A).9 agree instant "create persons committed willful, deliberate better position" understated inadvertently without 302. 20 permit consequences arguing "nullities." Alternatively, urge nonliteral based considerations practicality. successively proposals. III 21 argue extent fraudulent, "nullities" purposes. pp. 22-27; 32-34. Inasmuch nullity, said, nonfraudulent, inoperative normal applies. nullity notion persuade us, 22 do contend nullities generally. numerous relate penalties submitting assisting preparation returns; presence face plausibly purports compliance, signed taxpayer, inaccuracies. 7207, 6531(3), contend, limited purpose applying 24; 33-34. word appears less 64 times Surely, rationally thought given meaning totally 6501(b) through (q). 23 Zellerbach Paper Helvering, 293 172, 55 127, 79 (1934), cite, affords support argument. inaccuracy, "return" start new running. cases, similarly purported sworn such, appeared faces constitute endeavors satisfy law. fact, honest, render them nullities. To sure, current Regulations, several places, Treas.Reg. 301.6211-1(a), 301.6402-3(a), 1.451-1(a) 1.461-1(a)(3)(i) refer 6213(g)(1) itself, (1976 ed., Supp. V). None provisions, requires becomes 24 conclude, therefore, nothing IV 25 accorded grounds equity policy. "Once information knowledgeable assessment, justification suspending longer viable yield favored limiting Government's proceed against taxpayer." 12. also, 17. concern existing statutes. relevant whether, abstract matter, advocated accords consider effectuated enactment Courts authorized rewrite deem effects susceptible improvement. TVA Hill, 437 153, 194-195, 98 2279, 2301-2302, 57 117 (1978). especially construe limitations, "must U.S., S.Ct., 366. 27 that, free so, language. First, ordinarily difficult investigate audits. practiced, distinct possibility underlying will falsified destroyed. diminish amount effort required verify correct liability. Even proves honest one, "remov[e] disadvantageous position originally placed." 28 Second, investigation. An however accurate ultimately prove be, comes greater guarantee trustworthiness submission. carrying special significant imprimatur; already statements penalty perjury. responsible examiner accept furnished substitute thorough into existence see "tax policy" singular effect shortening usual years. Fraud differ burden proof 7454(a) 7454(a). course, admission underpayment, enough intent. 29 Third, compounded where, prosecuting generally six 6531. Once referral well-known restraints side often find complete period; difference respect. LaSalle Bank, 298, 311-313, 2357, 2364-2365, 221 (1978); Equity Fiscal Responsibility 1982, Pub.L. 97-248, 333(a), 96 622. As practical frequently forced place audit abeyance recommended.10 30 complaint "unfair treatment" persuasive. claim unfair "to forever Sword Damocles subsequently recanted providing necessary properly 26. 16. But seems hardly complain fairness facilitates due. subject likely surprised arrives, arrive promptly 31 "punishes" repentantly 44. status taxpayer; left precisely same before. argued incentives taxpayers disclose voluntarily. Congress, done legislative controlling here. V 32 finally, all. This, another. 33 centers 6501(c)(3), settled section ceases Bennett 114 (1958), acq., 1958-2 Cum.Bull. 3. Rev.Rul. 79-178, 1979-1 435. mean produce two situations. From results. 6501(c)(3) "failure return." (cf. 6651(a)(1) 7203), nor speak file. literally contrast, some superficial plausibility part petitioners, If unmistakable language.11 34 35 ordered. 36 STEVENS, dissenting. 37 conveys message me enough: "In tax, assessed, proceeding court begun What why 38 concededly taxpayers' prior basis obligated elected use assessment.1 initiates I believe resulting 39 reading. version enacted 1921. true 1921, today, concealment facts giving rise tolled full made. entirely repeal limitations; rather begin run least discoverable. Exploration 247 435, 571, 62 1200 (1918). soon constitutes genuine law, sufficient commence limitations. (1934).2 adhered position. Lane-Wells 321 219, 511, 684 (1944); Germantown Trust 309 304, 60 566, 84 770 (1940). For example, portion dealing underreporting forming deficiency. 40 "We think enacting [the statute] manifested broader give omission taxable item, disadvantage detecting errors. instances clue omitted item. hand, when, here, understatement arises error reporting item disclosed disadvantage." Colony, 357 36, 1033, 1037, 1119 (1958). 41 common law background well previous what is, apparent fall rationale disregarding absent. over, principles run.3 means disadvantage; reason period. 1921 follows. 43 "That determined, collected, begun, due." 250(d), 265. bifurcated; relating placed 6501(c)(3).4 history revision indicates division statute's meaning.5 Fraudulent treated neither gives adequate assessment. provided, inapplicable; "case 45 practically concedes much agrees acq. 3, nevertheless begins 458. indicating bifurcated simple command. certainly logical supporting result; compare previously fraudulent.6 46 Whatever standard construing operates government, ante, 391-392, surely presumption ought applicable. 47 "It probably intolerable, regarded ill-advised, system never come day final settlement stand ready vouchers, events, establish values recall details goes contest. Hence, almost indispensible element administration policy." Rothensies Electric Battery 329 296, 301, 67 271, 273, 91 (1946). position, adopted ever actions, attempts 49 "Respondent leave open eternity concurrent life, lives score ten Methuselah. most religions repent saved peculiar theology respondent act contrition suffice prevent perpetuity. Merely state proposition refute unless compelling visiting absurdity 201, 207 (1981) (Wilbur, J., concurring).7 anything, reached today. crucial incentive reveal past announced today creates incentive; gets advantage Not fail used time. Since defense action, 394, Apparently believes advised silent, hoping go undetected, result.8 51 respectfully dissent. Together certiorari court. reads full: "Except section, imposed title shall prescribed) or, payable stamp, became paid, period." reads: Klemp, reviewed five judges dissenting issue, departed earlier 646 (1977), rev'd, asserts voluntary. yet determined. conceded Pet. Cert. 4d, (CA3 1982), assumed, hereinafter to, were. assumption concerning officers, followed supra. Kramer 42, 82,308 (1982); Elliott Liroff 47, 82,309 Derfel 45, 82,311 Richard B. 82,312 Galvin 221, 82,689 Subsections separately Code. combined. 265; 1939, 276(a). every 1918, indefinitely 1083; 1924, 278(a), 299; 1926, Stat., pt. 2, 59; 1928, 276(a), 857; 1932, 238; 745; 1936, 1726; 1938, 52 540; significance stressed other, related, contexts. thus serve extend (1934); Products 183, 132, 274 Refining B.T.A. 236 reduce trigger 6501(e) predecessors. Houston 486 (1962); Goldring (1953). predecessor 6511(a) Kaltreider Construction, 303 368 (CA3), denied, 371 877, 83 148, (1962). nonetheless untimely. flows construction. unacceptably anomalous. favorable 33-34; 35-36. assertion irrelevant, involve laches, usually subject. Summerlin, 310 414, 416, 1019, 1020, 1283 Brennan, Uncertain Status Amended Returns, Rev. Taxation Individuals 235, 252-264 Applicable regulations indicate C.F.R. 301.6211-1(a) Florsheim Bros. 280 453, 215, 218, 542 axiomatic derogation narrowly construed, pointed out Term. Norfolk Redev. Housing Auth. C P Tel., 307, 6501(c)(3). S.Rep. 83-1622, 83d Cong., 2d Sess., 583-585 (1954); H.R.Rep. 83-1337, A413-A414 (1954). justify her noting escape Ante, 8-9. held; majority justifies assuming cites old decisions considers arguments advanced incorrect innocently understates 25%, sanctions faced severe. Finally, rely separate parts willing tolerate disparate (c)(3), purpose. Wilbur's estimation sweep too modest, 6901(c)(1) entitled beneficiaries death runs. run, presumably hound descendants argues expected comply hampered 339. problem, appropriate during pendancy Tolling periods reasonably accord reaches Additionally, conflicting demands dual evidently obstacle context, able event, conduct events end years, power perpetuity,

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