Court Opinion

ID: 4485098
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:17:10.799945+00
Date Added: 2024-06-11T14:53:46.038279
License: Public Domain

Goffe, J., dissenting: I would hold that the Commissioner has not "determine^] a deficiency” within the meaning of section 6212(a)." This section requires him to do so as a condition precedent to the mailing of "notice of such deficiency” to a taxpayer. Accordingly, the document mailed to petitioners on June 14, 1982, cannot constitute a notice of deficiency and cannot form the basis for filing a petition to invoke the jurisdiction of this Court. Petitioners’ motion to dismiss for lack of jurisdiction should be granted. The majority’s holding that the purported notice of deficiency is valid is based upon cases dealing with the language of notices of deficiency. The instant case, however, concerns those actions which the Commissioner must take prior to mailing notices of deficiency. The majority, without the citation of any authority, concludes that section 6211(a), which defines a deficiency, "simply outlines the method by which a notice of deficiency should be constructed and does not affect the jurisdiction of this Court.” This interpretation is too limited and fails to integrate the extensive usage of the term "deficiency” in the provisions granting jurisdiction to the Tax Court. "[It] is not the existence of a deficiency but the Commissioner’s determination of a deficiency that provides a predicate for Tax Court jurisdiction.” Hannan v. Commissioner, 52 T.C. 787, 791 (1969). The definition of a "deficiency” in section 6211(a), and the limited grant of authority to the Secretary in issuing notices of deficiency in section 6212(a), mandate the procedure by which the Commissioner may lawfully issue "statutory notices.” When, as in the instant case, the Commissioner blatantly and intentionally disregards these limitations upon his statutory authority, we should not confer jurisdiction which, as a matter of law, does not exist. This is an issue of first impression. The statutory provisions involved here have not previously been construed by the courts. The first step, therefore, should be an examination of the applicable statutory language. Janowski v. International Brotherhood of Teamsters, Etc., 673 F.2d 931, 936 (7th Cir. 1982), cert. denied _ U.S. _ (1983). The Supreme Court recently reviewed this analytical process in American Tobacco Co. v. Patterson, 456 U.S. 63, 68 (1982), and declared that: As in all cases involving statutory construction, "our starting point must be the language employed by Congress,” Reiter v. Sonotone Corp., 442 U.S. 330, 337 (1979), and we assume "that the legislative purpose is expressed by the ordinary meaning of the words used.” Richards v. United States, 369 U.S. 1, 9 (1962). Thus, "[ajbsent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.” Consumer Product Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). Applying this Supreme Court mandate requiring, at least initially, a literal examination of the statutory language in issue, it is apparent that Congress has enacted a comprehensive definition of what constitutes a "deficiency.” In section 6211(a), Congress declared that this term of art is: the amount by which the tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44 exceeds the excess of— (1) the sum of (A) the amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plus (B) the amounts previously assessed (or collected without assessment) as a deficiency, over— (2) the amount of rebates, as defined in subsection (b)(2), made. [Emphasis added.] Thus, it is apparent that Congress defined a deficiency associated with a taxpayer’s taxable year as a function of the amount of tax which was self-assessed by the taxpayer on his return, i.e., the excess of the correct amount of tax owed over the tax declared to be due, adjusted for prior assessments and rebates. When construing statutory definitions, the Supreme Court has recently declared that "As a rule, '[a] definition which declares what a term "means” * * * excludes any meaning that is not stated.’ 2A C. Sands, Statutes and Statutory Construction, sec. 47.07 (4th ed. Supp. 1978).” Colautti v. Franklin, 439 U.S. 379, 392-393 n. 10 (1979). Further, the Court of Appeals for the District of Columbia Circuit recently held in Consumers Union of U.S., Inc. v. Heimann, 589 F.2d 531, 533 (D.C. Cir. 1978), that: we are also mindful that a reviewing court must accord first priority in statutory interpretation to the plain meaning of the provision in question. Caminetti v. United States, 242 U.S. 470, 485, 37 U.S. 192, [sic] 61 L.Ed. 442 (1917); accord, United States v. American Trucking Associations,310 U.S. 534, 543, 60 S.Ct. 1059, 84 L.Ed. 1345 (1940). Thus, if the Congress has intentionally and unambiguously crafted a particularly broad, all-inclusive definition, it is not our function * * * to subvert that effort. If the Secretary determines that there is a deficiency in respect of any tax imposed by subtitle A or B or chapter 41,42,43, 44, or 45, he is authorized to send notice of such deficiency to the taxpayer by certified mail or registered mail. [Emphasis added.] In section 6212(a), Congress granted the Secretary of the Treasury limited authority to issue notices of deficiency by providing that: Even a cursory review of this provision discloses that Congress did not grant the Secretary unlimited and unfettered authority to issue notices of deficiency. Rather, Congress specifically conditioned the Secretary’s authority to issue "statutory notices” upon a preliminary event, i.e., "if the Secretary determines that there is a deficiency/’ From a literal reading of these definitive congressional enactments, it necessarily follows that the Secretary is authorized. to issue notices of deficiency only when he has determined that the amount of tax self-assessed by the taxpayer on his return (assuming a return is filed), adjusted for prior rebates and assessments, is less than the correct amount of tax due. Therefore, if the Secretary fails to make the required determination that the amount of tax self-assessed by a taxpayer on his Federal income tax return for a taxable year (adjusted for prior rebates and assessments) is less than the correct amount of tax owed, the Secretary lacks the lawful authority to issue a notice of deficiency to that taxpayer; hence, any resulting notice of a deficiency is a nullity. United States v. B. & O. R Co., 293 U.S. 454, 462 (1935). Another basis for concluding from a literal examination of section 6212(a) that Congress intended to condition the Secretary’s authority to issue notices of deficiency upon an examination of the taxpayer’s tax return (assuming one is filed) concerns Congress’ utilization of the term "determines.” When used as a verb, as in the instant case, the term denotes a decision after analysis. Given section 6211(a)’s definition of a "deficiency” and the context of the terms "determines” and "deficiency” in section 6212(a), it necessarily follows that an examination of the taxpayer’s return is essential for the Secretary to make the requisite determination. To conclude otherwise would pervert the statutory construction edict set forth in United States v. Menasche, 348 U.S. 528, 538-539 (1955), wherein the Supreme Court declared: The Government’s contention that section 405(a) does not apply to any phase in the processing of naturalization petitions would defeat and destroy the plain meaning of that section. "The cardinal principle of statutory construction is to save and not to destroy.” Labor Board v. Jones & Laughlin Steel Corp., 301 U.S. 1, 30. It is our duty "to give effect, if possible, to every clause and word of a statute,” Montclair v. Ramsdell, 107 U.S. 147, 152, rather than to emasculate an entire section, as the Government’s interpretation requires. It is well established that statutes pertaining to the same subject matter, i.e., in pari materia, are to be construed together. Estate of Sanford v. Commissioner, 308 U.S. 39, 42 (1939); 2A C. Sands, supra at sec. 51.02. Sections 6212(a) and 6213(a), which pertain to the computation of deficiencies, were enacted at the same time.1 The Supreme Court declared in Erlenbaugh v. United States, 409 U.S. 239, 244 (1972), that the application of the rule of pari materia "certainly makes the most sense when the statutes were enacted by the same legislative body at the same time.” Applying this statutory construction principle to sections 6212(a) and 6213(a), which deal with the same subject matter, the majority’s holding that the Secretary can "determine” a deficiency without examining the taxpayer’s return ridiculously implies that this Court can also "redetermine” the amount of the deficiency without reviewing the return. Finally, it should be noted that the courts have consistently utilized several basic construction techniques in construing revenue legislation. The first analytical tool provides that words are to be given their common and ordinary meaning when interpreting tax provisions. Crane v. Commissioner, 331 U.S. 1 (1947); Helvering v. San Joaquin Fruit & Investment Co., 297 U.S. 496 (1936); Old Colony R. Co. v. Commissioner, 284 U.S. 552 (1932); 3 N. Singer, Statutes and Statutory Construction, sec. 66.03 (4th ed. Supp. 1983). The remaining consideration concerns the effect to be given to detailed congressional revenue legislation which was neatly summarized in Lykes Bros. Steamship Co. v. United States, 206 Ct. Cl. 344, 513 F.2d 1342, 1349 (1975), wherein they stated: Congress often expresses its will in the customary meaning of the language it uses, and when "The requirements of the [statute] are detailed and specific, * * * [they] must lie applied with precision.” Commissioner v. Gordon, 391 U.S. 83, 91-92, 88 S.Ct. 1517, 1523, 20 L.Ed.2d 448 (1968); see, e. g., Braunstein v. Commissioner, 374 U.S. 65, 69-73, 83 S.Ct. 1663, 10 L.Ed.2d 757 (1963); Hanover Bank v. Commissioner, 369 U.S. 672, 687, 82 S.Ct. 1080, 8 L.Ed.2d 187 (1962); First Nat’l Bank of Chicago v. United States, 38 F.2d 925, 931, 69 Ct.Cl. 312, 325 (1930), affd, 283 U.S. 142, 51 S.Ct. 378, 75 L.Ed 913 (1931). From the preceding literal analysis of the pertinent sections, it is apparent that Congress intended to limit the Secretary’s authority to issue statutory notices and specifically conditioned any exercise of such power upon an examination of the taxpayer’s return (assuming one is filed) and a finding that the amount of self-assessed tax thereon, adjusted for prior assessments and rebates, is less than the correct amount of tax due. The plain meaning of the language employed by Congress is ordinarily regarded as conclusive, absent a clearly expressed legislative intent to the contrary. American Tobacco Co. v. Patterson, 456 U.S. 63, 68 (1982); Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). Yet the majority’s holding clearly departs from the statutes’ plain meaning without any citation of contrary legislative intent. The legislative history accompanying the enactment of sections 6211(a) and 6212(a) and their predecessor provisions in the Internal Revenue Code of 1939 and the Revenue Act of 1924 do not specifically address the immediate issues. Correlative legislative history, however, supports a literal construction of these sections. The Senate Finance Committee Report to the Individual Income Tax Act of 1944 (S. Rept. 885, 78th Cong., 2d Sess. (1944), 1944 C.B. 858, 887) concerning a technical amendment to the definition of a "deficiency” noted that "In general, the starting point in the determination of a deficiency is the amount shown as the tax by the taxpayer upon his return.” In addition, in amending section 6659(b), the following language suggests that Congress assumed that the Commissioner would examine the tax return before mailing a statutory notice: These court decisions have confronted the Internal Revenue Service with very serious administrative problems. For example, before a 90-day letter could be mailed with respect to the addition to tax for late filing, the Internal Revenue Service would have to examine the return to insure that there was no deficiency in tax which might be barred from later assessment because of the restrictions on the issuance of additional 90-day letters under section 6212(c) of the 1954 code. Such a procedure would force the Service to audit many thousands of returns which otherwise might not be audited. If the Service were forced to follow the 90-day letter procedure for additions to tax for late filing of returns and for underpayment of estimated tax, the number of 90-day letters issued each year would be increased to about 1 million; whereas the Service now issues only about 78,000 90-day letters each year for all causes. [H. Rept. 1217, 86th Cong., 2d Sess. (1960), 1960-1 C.B. 840,841-842.] In our recent case of Metzger Trust v. Commissioner, 76 T.C. 42, 59-60 (1981), affd. 693 F.2d 459 (5th Cir. 1982), a Court-reviewed opinion, we stated that "It is not the function of a Court to rewrite or amend a statute in the guise of construing it. It is the Court’s duty to construe and apply the statute as it is written.” Further, we continued and stated on page 71 that; Our individual appraisal of the wisdom or unwisdom of a particular course consciously selected by the Congress is to be put aside in the process of interpreting a statute. Once the meaning of an enactment is discerned and its constitutionality determined, the judicial process comes to an end. We do not sit as a committee of review, nor are we vested with the power of veto. [Tennessee Valley Authority v. Hill, 437 U.S. 153, 194-195 (1978).] * * * "There is a basic difference between filling a gap left by Congress’ silence and rewriting rules that Congress has affirmatively and specifically enacted. * * * Perhaps the wisdom we possess today would enable us to do a better job * * * than Congress did [years ago] * * * but even if that be true,' we have no authority to substitute our views for those expressed by Congress in a duly enacted statute.” Mobil Oil Corp. v. Higginbotham, Administratrix, 436 U.S. 618, 625-626 (1978). Where Congress has specifically excluded a term or phrase, it is not for the courts to read that term or phrase into the statute. United States v. Moreno, 561 F.2d 1321, 1322 (9th Cir. 1977). Such a rewriting of a statute, plain on its face, is an example of lawmaking as distinguished from statutory interpretation that is beyond the power of the courts. Gaddis v. Calgon Corp., 449 F.2d 1318, 1319 (5th Cir. 1971). Accord, Allen v. David, 334 F.2d 592, 601 (5th Cir. 1964), cert. denied 379 U.S. 967 (1965). Despite this Court’s prior denunciation against judicial legislation, this is precisely what the majority here does. Ignoring both the plain meaning of the statutory provisions and the absence of conflicting legislative history, the majority has amended sections 6211(a) and 6212(a) to empower the Secretary with unbridled authority to issue notices of deficiency without even determining whether a taxpayer has, in fact, filed a return or self-assessed the correct amount of tax due. This is amply demonstrated by the majority’s holding that a valid notice of deficiency was issued to petitioners despite the following Orwellian2 language in the document: In order to protect the government’s interest and since your original income tax return is unavailable at this time, the income tax is being assessed at the maximum rate of 70%. The tax assessment will be corrected when we receive the original return or when you send a copy of the return to us. These excerpts from the purported notice of deficiency conclusively demonstrate that it was not based upon an examination of petitioners’ tax return. Further, it is equally apparent that when this document was mailed to petitioners, the Secretary had not even determined whether petitioners had, in fact, filed a tax return. Therefore, it is impossible for the Secretary to have made a "determination” that a "deficiency” as defined in section 6211(a) existed, i.e., "the amount shown as the tax by the taxpayer upon his return,” adjusted for prior assessments and rebates, was less than the correct amount of taxes due. Given that Congress specifically conditioned the Secretary’s authority to issue notices of deficiency upon an examination of the taxpayer’s return (assuming one is filed), I would hold that the purported notice of deficiency is a nullity. United States v. B. & O. R. Co., 293 U.S. 454, 462 (1935). From these conclusions, it necessarily follows that we have no jurisdiction to continue these proceedings and accordingly, must grant petitioners’ motion to dismiss. Rule 13(a), Tax Court Rules of Practice and Procedure.3  The majority concludes that the determination of a deficiency is not germane to this Court’s jurisdiction. Sections 6211 through 6216 comprise Subchapter B — Deficiency Procedures in the Case of Income, Estate, Gift and Certain Excise Taxes, all of which inextricably relate to the jurisdiction and proceedings in the Tax Court. The jurisdiction of this Court is set forth in section 6214. Under section 6214(a), jurisdiction is conferred upon the Tax Court to "redetermine” the correct amount of a "deficiency,” notice of which has been mailed to the taxpayer. Use of the word "redetermine” necessarily implies that the deficiency has been "determined.” Section 6212(a) authorizes the Secretary (who has delegated such authority to the Commissioner) to send a notice of deficiency to a taxpayer with respect to a deficiency that the Secretary has "determined.” Section 6213 prescribes the time for filing a petition with the Tax Court based upon the date of mailing the notice of deficiency. If the petition is not timely mailed, the Tax Court has no jurisdiction. The determination of a deficiency in a notice of deficiency is a prerequisite to invoking the jurisdiction of the Tax Court. It is inconceivable to me how the majority can hold that the steps involved in preparing a notice of deficiency cannot affect the jurisdiction of this Court. The majority also bases its holding upon our admonition that we will not ordinarily look behind a deficiency notice, citing Riland v. Commissioner, 79 T.C. 185, 201 (1982), and Greenberg’s Express v. Commissioner, 62 T.C. 324, 327 (1974). First, there is no need to go behind the statutory notice in the instant case because, on its face, it states that the return was not examined. Second, going behind the statutory notice is a policy consideration and we have stated that "our jurisdiction is purely statutory and not dependent on policy considerations.” Estate of Young v. Commissioner, 81 T.C. 879, 888 (1983). The concurring opinions examine the peculiar facts of this case, yet this Court-reviewed opinion stands for the broad proposition that the Commissioner is not required to examine the tax return before he mails a notice of deficiency to a taxpayer. If the harm to petitioners is so inconsequential, then the opinion should have been issued as a memorandum opinion, one having no effect as precedent. But that is not the case. The opinion of the majority has broad and far-reaching implications. None of the concurring opinions point to other critical lurking implications arising from the holding of the majority. First, by the following scenario, the Commissioner successfully circumvented the statute of limitations. Petitioners’ income tax return for 1978, the year in issue, was filed on September 3, 1979. The period of limitations on assessment of additional tax for the year 1978 expired on September 2, 1982. Respondent’s motion to amend his answer was filed with the Court on April 5, 1983, after the period of limitations expired. The amendment to the answer is actually the first time that the Commissioner determined a deficiency in petitioners’ income tax as "deficiency” is defined in section 6211(a). Therefore, this constitutes the first valid "notice of deficiency.” In the amendment to the answer, the Commissioner disallowed several deductions which petitioners claimed and, at that late date, determined a deficiency of $10,374, as distinguished from the arbitrary "deficiency” of $96,600 purported to have previously been "determined.” The record also reveals that the Commissioner did not contact petitioners prior to mailing the purported notice of deficiency, yet over 2 months remained within which to timely mail a valid statutory notice. If the Commissioner had contacted petitioners, he could have possibly obtained petitioners’ retained copy of their return, which would reveal the absence of any connection with the Nevada Mining Project Partnership and petitioners’ marginal tax rate. Further, petitioners might have been willing to consent to extend the period of limitations on assessment to permit an examination of their return for 1978. Instead, the Commissioner acted precipitously, thereby forcing petitioners to incur substantial legal expenses in order to avoid an assessment of $96,600 against them. Second, none of the opinions observe that this notice of deficiency apparently is clothed with the usual presumption of correctness. How can a notice of deficiency be presumptively correct if it is not based upon an examination of the tax return? Welch v. Helvering, 290 U.S. 111, 115 (1933). The record is devoid of any explanation concerning respondent’s counsel’s denial, in his answer, of petitioners’ allegations of the absence of any relationship with the Nevada Mining Project Partnership. Pursuant to Rule 33(b), Tax Court Rules of Practice and Procedure, the signature of counsel for respondent "constitutes a certificate by him that he has read the pleading; that, to the best of his knowledge, information, or belief, there is good ground to support it.” Given respondent’s subsequent admission of this allegation, it is clear that he should have expressed a lack of knowledge in his answer and later, when he knew the allegation to be true, moved to amend to admit this allegation. The action of the Commissioner, approved by the majority, has far-reaching effect on all taxpayers which, in my view, is contrary to law and contrary to our self-assessment system. Sterrett and Wiles, JJ., agree with this dissent.  The modern predecessor provisions of these sections were first enacted in the Act of Feb. 10,1939, Pub. L. 76-1, 53 Stat. 1; and were re-enacted in the Act of Aug. 16, 1954, Pub. L. 83-591, 68A Stat. 1.   G. Orwell, 1984(1949).   RULE 13. JURISDICTION (a) Notice of Deficiency or of Transferee or Fiduciary Liability Required: Except in actions for declaratory judgment or for disclosure (see Titles XXI and XXII), the jurisdiction of the Court depends (1) in a case commenced in the Court by a taxpayer, upon the issuance by the Commissioner of a notice of deficiency in income, gift, or estate tax or, in the taxes under Chapter 41, 42, 43, or 44 of the Code (relating to the excise taxes on certain organizations and persons dealing with them), or in the tax under Chapter 45 of the Code (relating to the windfall profit tax), or in any other taxes which are the subject of the issuance of a notice of deficiency by the Commissioner; and (2) in a case commenced in the Court by a transferee or fiduciary, upon the issuance by the Commissioner of a notice of liability to the transferee or fiduciary. See Code Sections 6212,6213 and 6901.