John C. Hom & Associates, Inc. v. Commissioner

JOHN C. HOM & ASSOCIATES, INC., PETITIONER v.

COMMISSIONER OF INTERNAL REVENUE,

RESPONDENT

Docket No. 14081–11. Filed May 7, 2013.

R moved to dismiss the proceeding for lack of jurisdiction

because petitioner’s corporate powers were suspended at the

time the petition was filed. Petitioner contends that the notice

of deficiency is invalid for failing to include the address and

telephone number of the local office of the National Taxpayer

Advocate and that inclusion of a Web page link is inadequate

compliance with I.R.C. sec. 6212. Held: The notice was not

invalid. The motion to dismiss will be granted.

210

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(210) JOHN C. HOM & ASSOCS., INC. v. COMMISSIONER 211

John C. Hom (an officer), for petitioner.

Sarah E. Sexton, for respondent.

OPINION

COHEN, Judge: This case is before the Court on respond-

ent’s motion to dismiss for lack of jurisdiction. The issues for

decision are whether the notice of deficiency was invalid for

failing to include the address and telephone number of the

local office of the National Taxpayer Advocate, as directed by

section 6212(a), and whether the case should be dismissed for

lack of jurisdiction because petitioner’s corporate status was

suspended at the time the petition was filed. All section ref-

erences are to the Internal Revenue Code, and all Rule ref-

erences are to the Tax Court Rules of Practice and Proce-

dure.

Background

Petitioner was incorporated in California on April 2, 1986.

The California Franchise Tax Board suspended the powers,

rights, and privileges of petitioner on March 1, 2004. The

suspension remained in effect until April 13, 2012.

In a notice of deficiency sent March 16, 2011, respondent

determined deficiencies, additions to tax, and penalties as

follows:

Penalty Addition to tax

Year Deficiency sec. 6662(a) sec. 6654(a)(1)

2005 $38,520 $7,704.00 $9,630.00

2006 47,072 9,414.40 11,768.00

2007 27,354 5,470.00 6,838.50

2008 27,886 5,577.20 6,971.50

2009 28,251 5,650.20 7,104.75

The notice of deficiency included the following paragraph:

The contact person can access your tax information and help you get

answers. You also have the right to contact the office of the Taxpayer

Advocate. Taxpayer Advocate assistance is not a substitute for estab-

lished IRS procedures such as the formal appeals process. The Taxpayer

Advocate is not able to reverse legally correct tax determinations, nor

extend the time fixed by law that you have to file a petition in the U.S.

Tax Court. The Taxpayer Advocate can, however, see that a tax matter

that may not have been resolved through normal channels gets prompt

and proper handling. If you want Taxpayer Advocate assistance, please

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212 140 UNITED STATES TAX COURT REPORTS (210)

contact the Taxpayer Advocate for the IRS office that issued this notice

of deficiency. Please visit our website at www.irs.gov/advocate/content/

0,,id=150972,00.html for the Taxpayer Advocate telephone numbers and

addresses for this location.

The petition was filed June 13, 2011. After the case was

set for trial, respondent filed a motion to dismiss for lack of

jurisdiction pointing out suspension of petitioner’s corporate

privileges as of the time the petition was filed. Petitioner

first objected to the motion on the ground that the suspen-

sion had ended. When the motion was heard, however, peti-

tioner argued that the notice of deficiency was invalid for

failure to comply with the provision of section 6212(a) that

a notice of deficiency ‘‘shall include a notice to the taxpayer

of the taxpayer’s right to contact a local office of the taxpayer

advocate and the location and phone number of the appro-

priate office.’’

Discussion

Prerequisites to the deficiency jurisdiction of this Court are

a valid notice of deficiency and a timely petition. Rule 13(a),

(c); see, e.g., Monge v. Commissioner, 93 T.C. 22, 27 (1989);

Abeles v. Commissioner, 91 T.C. 1019, 1025 (1988). If either

a valid notice or a timely petition is lacking, the petition will

be dismissed for lack of jurisdiction. The ground for lack of

jurisdiction is generally stated, however, because the con-

sequences of our holding the Commissioner may proceed to

assess the taxes that have been determined would be that

the taxpayer may challenge the determination on the merits

only by making payment, filing a claim for refund, and

seeking a judicial remedy in a refund forum. See, e.g.,

DeWelles v. United States, 378 F.2d 37, 39 (9th Cir. 1967);

Pietanza v. Commissioner, 92 T.C. 729, 735–736 (1989), aff ’d

without published opinion, 935 F.2d 1282 (3d Cir. 1991);

McKay v. Commissioner, 89 T.C. 1063, 1067 (1987), aff ’d, 886

F.2d 1237 (9th Cir. 1989); Keeton v. Commissioner, 74 T.C.

377, 379 (1980).

Validity of the Notice of Deficiency

Petitioner contends that the statutory notice of deficiency

is invalid because the inclusion of a Web site address where

the address and telephone number of the local office of the

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(210) JOHN C. HOM & ASSOCS., INC. v. COMMISSIONER 213

National Taxpayer Advocate may be found does not comply

with the applicable statute. The language petitioner relies on

is the last sentence of section 6212(a) and was added by the

Internal Revenue Service Restructuring and Reform Act of

1998 (RRA 98), Pub. L. No. 105–206, sec. 1102(b), 112 Stat.

at 698. That section now appears as follows:

SEC. 6212. NOTICE OF DEFICIENCY.

(a) In General.—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,

or 44, he is authorized to send notice of such deficiency to the taxpayer

by certified mail or registered mail. Such notice shall include a notice

to the taxpayer of the taxpayer’s right to contact a local office of the tax-

payer advocate and the location and phone number of the appropriate

office.

Although the adequacy of the content of a notice of defi-

ciency has frequently been litigated, courts have held repeat-

edly that a notice of deficiency is valid if it notifies the tax-

payer that a deficiency has been determined and gives the

taxpayer the opportunity to petition this Court for redeter-

mination of the proposed deficiency. See Frieling v. Commis-

sioner, 81 T.C. 42, 53 (1983); Perlmutter v. Commissioner, 44

T.C. 382 (1965), aff ’d, 373 F.2d 45 (10th Cir. 1967). A notice

is invalid for this purpose only where the notice discloses on

its face that there has been no determination. See Clapp v.

Commissioner, 875 F.2d 1396, 1400 (9th Cir. 1989) (distin-

guishing Scar v. Commissioner, 814 F.2d 1363 (9th Cir.

1987), rev’g 81 T.C. 855 (1983)). Mistakes in a notice will not

invalidate it if there is no prejudice to the taxpayer. Elings

v. Commissioner, 324 F.3d 1110 (9th Cir. 2003).

In Smith v. Commissioner, 114 T.C. 489, 491 (2000), aff ’d,

275 F.3d 912 (10th Cir. 2001), we addressed whether the

failure to include in the notice the date a petition was due

invalidated the notice. The requirement to include the last

day to file the petition was also added by RRA 98 sec. 3463,

112 Stat. at 767, and is stated as follows: ‘‘The Secretary of

the Treasury or the Secretary’s delegate shall include on

each notice of deficiency under section 6212 of the Internal

Revenue Code of 1986 the date determined by such Secretary

(or delegate) as the last day on which the taxpayer may file

a petition with the Tax Court.’’

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214 140 UNITED STATES TAX COURT REPORTS (210)

Here, as in Smith, section 6212 does not specify that a

notice sent without the specified information is invalid. As in

Smith, there was no prejudice shown by petitioner. The

information described in section 6212(a) was made available

to the addressee of the notice, although in a manner that

may not be sufficient for a taxpayer without access to a com-

puter or knowledge of how to access a Web site. The notice,

however, was not misleading, and petitioner was able to file,

and did file, a timely petition.

The Court of Appeals for the Ninth Circuit reached the

same result in Elings v. Commissioner, 324 F.3d at 1112–

1113, explaining:

In other contexts, the Supreme Court and this court have held that,

when Congress fails to specify a consequence for an agency’s failure to

follow mandatory requirements, the failure does not render the agency’s

action ineffectual.14 Obedient to this instruction, we conclude that the

IRS’s failure to include the calculated date does not invalidate the notice.

The minor and technical nature of the error and the lack of prejudice

in this case further supports our conclusion. Non-prejudicial minor or

technical errors in a notice do not invalidate the notice. Major errors,

such as those that show the IRS failed to comply with the most funda-

mental statutory mandate, can invalidate a notice. However, these

errors are quite rare. The failure to include the calculated date, when

notice was dated and instructed Elings that he had ninety days in which

to file his petition, was a non-prejudicial minor or technical error. There-

fore, the error did not invalidate the notice. [Additional fn. refs. omitted.]

14See United States v. James Daniel Good Real Prop., 510 U.S. 43, 63–

65, 114 S.Ct. 492, 126 L.Ed.2nd 490 (1993); Brock v. Pierce County, 476

U.S. 253, 258–62, 106 S.Ct. 1834, 90 L.Ed.2d 248 (1986) (holding, when

addressing an agency’s mandatory duty to act within a certain time

period, that ‘‘courts should not assume that Congress intended the

agency to lose its power to act’’ for failure to follow even mandatory

statutory requirements when Congress has not so stated); see also Inter-

continental Travel Mktg., Inc. v. FDIC, 45 F.3d 1278, 1284–85 (9th Cir.

1994) (concluding that FDIC’s failure to comply with mandatory statu-

tory requirement of mailing a notice, when the failure was merely neg-

ligent, did not justify precluding the agency from further action).

The Court of Appeals for the Ninth Circuit specifically

agreed with the analysis by the Court of Appeals for the

Tenth Circuit in affirming Smith v. Commissioner, 275 F.3d

912, and with the Court of Appeals for the Fifth Circuit

reaching the same result in Rochelle v. Commissioner, 293

F.3d 740 (5th Cir. 2002), aff ’g 116 T.C. 356, 362–363 (2001).

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(210) JOHN C. HOM & ASSOCS., INC. v. COMMISSIONER 215

The rationale of Smith and Elings applies at least as much

to this case. There was no prejudice to petitioner. Petitioner

does not allege that any attempt to contact the local office of

the National Taxpayer Advocate was made. Moreover, it is

apparent from the record that petitioner’s officer and share-

holder is adept at Internet research and could easily have

accessed the Web site to locate the appropriate local office of

the National Taxpayer Advocate. We conclude that the notice

of deficiency was valid.

We have considered the case petitioner cites, Marangi v.

Gov’t of Guam, 319 F. Supp. 2d 1179 (D. Guam 2004). The

notice in question, and held invalid there, did not include

any reference to the taxpayer’s right to contact a local office

of the National Taxpayer Advocate, and there was no such

office in Guam at the time. Thus the taxpayer was prejudiced

by the denial of a right described by the District Court as

meaningful assistance and protection, significant and impor-

tant. Id. at 1184. That case is distinguishable and, in any

event, not precedential.

Corporate Capacity To File Petition

Rule 60(c) states in part: ‘‘The capacity of a corporation to

engage in such litigation [in this Court] shall be determined

by the law under which it was organized.’’ Petitioner’s cor-

porate capacity was suspended at the time the petition was

filed on June 13, 2011, and was not reinstated until April

2012, shortly before trial. Under the same scenario, in David

Dung Le, M.D., Inc. v. Commissioner, 114 T.C. 268 (2000),

aff ’d, 22 Fed. Appx. 837 (9th Cir. 2001), interpreting Cali-

fornia law, we concluded that the Court lacked jurisdiction.

That case is controlling here. Respondent’s motion to dismiss

for lack of jurisdiction will be granted.

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216 140 UNITED STATES TAX COURT REPORTS (210)

To reflect the foregoing,

An appropriate order of dismissal for lack

of jurisdiction will be entered.

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