Court Opinion

ID: 9493885
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:22:12.582785+00
Date Added: 2024-06-11T17:56:04.958174
License: Public Domain

BRYSON, Circuit Judge,
dissenting:
I would not reach the merits of this dispute but would hold that the Court of Federal Claims lacked jurisdiction to entertain the Prochorenkos’ claim. I therefore respectfully dissent on that issue.
The first step in the jurisdictional analysis is 26 U.S.C. § 7422(h), which provides that no action may be brought “for a refund attributable to partnership items” except as provided in 26 U.S.C. §§ 6228(b) or 6230(c). The court holds that the Procho-renkos’ claim is not barred by section 7422(h) because their claim is not “for a refund attributable to partnership items,” but instead is for treatment consistent with that given to the taxpayers in the Colitti settlement. Although the matter is debatable, I would not characterize the Prochorenkos’ claim in that way. To be sure, the Prochorenkos are asking to be treated consistently with the Colittis, but the tax items as to which they are seeking consistent treatment are partnership items. The Prochorenkos’ tax liability, and thus their right to a refund if they are entitled to one, relates to the tax treatment of those partnership items. The substance of their claim is therefore “attributable to partnership items” in the ordinary sense of that phrase. The Seventh Circuit agrees with this analysis, see Kaplan v. United States, 133 F.3d 469, 473 (7th Cir.1998), although the Second Circuit does not, see Monti v. United States, 223 F.3d 76, 82 (2d Cir.2000). Because the Procho-renkos are seeking a refund that stems from the tax treatment of partnership items, I think the Seventh Circuit’s interpretation of section 7422(h) in Kaplan is correct and the Second Circuit’s interpretation in Monti is not.
In Monti, the court ruled that an action brought by non-settling partners seeking *1367tax treatment consistent with that accorded to other partners did not fall within the bar of section 7422(h). The Second Circuit reasoned that the Montis’ action was not “attributable to partnership items” because their asserted right to consistent treatment depended on facts specific to them and their dealings with the IRS rather than on facts general to the partnership. Monti, 223 F.3d at 82. That reasoning, however, would seem to apply as well to other actions brought by individual partners, such as actions claiming errors in the computations or application of partnership items to particular partners, see 26 U.S.C. § 6230(c)(1), or actions seeking a refund when the Secretary decides to treat a particular partner’s partnership items as non-partnership items, see 26 U.S.C. § 6228(b). Yet such actions fall within the scope of section 7422(h) and are exempted from its ban only by express exceptions in section 7422(h). The fact that an action turns on facts specific to particular partners therefore does not keep it from being an action “for a refund attributable to partnership items,” within the meaning of section 7422(h), as long as the tax issues on which the refund request is based arise from partnership items.
The Prochorenkos do not dispute that section 7422(h) is applicable to their claim; instead, they contend that the Court of Federal Claims has jurisdiction over their complaint because their claim falls within the express exception to section 7422(h) for claims brought under section 6230(c). That subsection provides in pertinent part that a partner may file a claim for a refund on the ground that “the Secretary failed to allow a credit or to make a refund to the partner in the amount of the overpayment attributable to the application to the partner of a settlement....” The Prochoren-kos interpret that language to provide an exception for claims based on the failure to give a partner the benefit of a prior partnership settlement. I disagree. Although the statutory language is not entirely clear on this point, it is most naturally interpreted to refer to claims in which the Secretary fails to make a refund or allow a credit in the proper amount based on a prior settlement that has been applied to the partner. The Prochorenkos contend that section 6230(c) also includes a claim for a refund that should have been paid based on a prior partnership settlement that should have been applied to the partner filing the claim, but the statutory language is not so broad. It refers to a refund “attributable to the application to the partner of a settlement,” not to a refund attributable to the erroneous failure to apply a settlement to the partner. The narrower reading of section 6230(c)(1)(B) is not only more consistent with the statutory language, but it is also more in accordance with the title of the subsection, “Claims arising out of erroneous computations, etc.” Consistent with the title, the subsection is most naturally read to apply to errors resulting from mistakes in applying the terms of a prior settlement to the suing partner, not to the Secretary’s refusal to make a prior settlement applicable to the suing partner at all. Because I am persuaded that the bar of section 7422(h) applies to the Prochoren-kos’ claim and that the exception to that bar in section 6230(c) does not, I would vacate the judgment in this case and remand with directions to dismiss the complaint for lack of jurisdiction.