Roat v. C.I.R.

• Decision Date: 27 May 1988
• Docket Number: 86-7479,86-7482,Nos. 86-3857,86-7483,86-7480,86-7487 and 87-1559,s. 86-3857
• Citation: 847 F.2d 1379
• Parties: -1254, 88-1 USTC P 9364 Charles A. ROAT, Plaintiff-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE; Alaska USA Federal Credit Union; Felec Services, Inc., Defendants-Appellees. Robert J. HAGGERTY, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee. Douglas G. WADE, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee. H. Milton MOORE, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee. Erby D. BROWN, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee. John M. SHORTER, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee. Manuel C. BORBON, Plaintiff-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1379

847 F.2d 1379

61 A.F.T.R.2d 88-1254, 88-1 USTC P 9364

Charles A. ROAT, Plaintiff-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE; Alaska USA Federal

Credit Union; Felec Services, Inc., Defendants-Appellees.

Robert J. HAGGERTY, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee.

Douglas G. WADE, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee.

H. Milton MOORE, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee.

Erby D. BROWN, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee.

John M. SHORTER, Petitioner-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Respondent-Appellee.

Manuel C. BORBON, Plaintiff-Appellant, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Defendant-Appellee.

Nos. 86-3857, 86-7479, 86-7480, 86-7482, 86-7483, 86-7487

and 87-1559.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 6, 1988.

Decided May 27, 1988.

Jeffrey A. Dickstein, Missoula, Mont., for plaintiff-appellant.

Gary R. Allen and Howard M. Soloman, Tax Div., U.S. Dept. of Justice, Washington, D.C., for the defendants-appellees.

On Appeal From the United States District Court for the District of Alaska.

Appeal From the United States District Court for the Eastern District of California.

Before BEEZER, HALL and WIGGINS, Circuit Judges.

BEEZER, Circuit Judge:

Appellants did not file income tax returns. They challenge their income tax on the theory that the Commissioner cannot determine their tax deficiencies until he prepares returns on their behalf. The Tax Court denied five appellants' motions to dismiss for lack of jurisdiction, and granted the Commissioner's motions for failure to prosecute. The district courts denied injunctive relief to two other appellants as barred by the Anti-Injunction Act. We affirm, except that we dismiss as to appellant Roat and remand, for a limited purpose, as to appellant Moore.

I

Each appellant failed to file federal income tax returns for the years at issue. The Commissioner determined that each appellant had taxable income and issued statutory notices asserting deficiencies and additions to tax.

Appellants Brown, Haggerty, Moore, Shorter, and Wade petitioned the Tax Court for redeterminations. They argued that the Tax Court lacked jurisdiction because the Commissioner had not issued valid notices of deficiency; their theory was that the Commissioner could not determine their deficiencies unless he prepared returns on their behalf. In addition, Moore and Wade made formal requests for discovery and served interrogatories on the Commissioner.

The Tax Court rejected appellants' argument that the determinations of deficiency were invalid and denied appellants' motions to dismiss for lack of jurisdiction. The Tax Court granted the Commissioner's motions for protective orders against discovery by Moore and Wade on grounds that they had not made informal requests and that their discovery requests were onerous. After appellants declined to present evidence on whether the Commissioner's determinations of deficiency were factually correct, the Tax Court granted the Commissioner's motions for failure to prosecute.

Appellants Borbon and Roat sued in district court to enjoin the Commissioner from collecting their taxes. They offered the same argument that the notices of deficiency were invalid because the Commissioner had not filed returns on their behalf. The district court in the Borbon case granted the government's motion to dismiss the suit as barred by the Anti-Injunction Act, 26 U.S.C. Sec. 7421. The district court in the Roat case denied Roat's request for injunctive relief but did not dismiss his case.

II

A. Tax Return Not Prerequisite

If the Secretary has determined a tax deficiency he may send notice to the taxpayer. 26 U.S.C. 6212(a). The taxpayer then may petition the Tax Court for a redetermination of the deficiency. 26 U.S.C. 6213(a). To decide whether a notice of deficiency was invalid, precluding jurisdiction in the Tax Court, this court reviews de novo the Tax Court's interpretation of section 6212(a). Scar v. C.I.R., 814 F.2d 1363, 1366 (9th Cir.1987).

Deficiency procedures set out in the Internal Revenue Code, 26 U.S.C. Secs. 6211-6213, do not require the Commissioner to prepare a return on a taxpayer's behalf before determining and issuing a notice of deficiency. Section 6211(a) defines "deficiency" as follows:

[T]he amount by which the tax imposed by [the Code] 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 by the taxpayer thereon, plus

(B) the amounts previously assessed (or collected without assessment) as a deficiency, over--

(2) the amount of rebates....

As Section 6211(a) makes plain, only "if a return was made by the taxpayer" does the tax shown on a return figure in the Commissioner's determination of deficiency. In the absence of an amount "shown by the taxpayer thereon," section 6211 defaults to the Commissioner's independent calculation of tax owed under substantive provisions of the Code.

Treasury regulations are even more explicit. As 26 C.F.R. Sec. 301.6211-1(a) (1987) indicates, the Commissioner need not prepare a return for the taxpayer before determining the taxpayer's deficiency: "If no return is made, or if the return ... does not show any tax, for the purpose of the definition 'the amount shown as the tax by the taxpayer upon his return' shall be considered as zero." If no return is made the Commissioner simply proceeds with his independent calculation: "In any such case ... the deficiency is the amount of the income tax imposed by [the Code]." Id.

The Supreme Court has read this regulation the same way: "Where there has been no tax return filed, the deficiency is the amount of tax due." Laing v. United States, 423 U.S. 161, 174, 96 S.Ct. 473, 481, 46 L.Ed.2d 416 (1976) (citing 26 C.F.R. Sec. 301.6211-1(a)). In a case directly on point, the Tax Court has held that this regulation "clearly provides that where a taxpayer files no return, the deficiency can be determined as if a return was made showing the amount of tax to be zero." Hartman v. C.I.R., 65 T.C. 542, 546 (1975).

Appellants argue that the deficiency provisions should be read in conjunction with another statute, 26 U.S.C. Sec. 6020(b); appellants contend that section 6020(b) amounts to a "jurisdictional prerequisite to the issuance of a notice of deficiency." Section 6020(b)(1) says:

(1) Authority of Secretary to execute return.--If any person fails to make any return required by any internal revenue law or regulation ... the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

Nothing in the language of either statute suggests section 6211(a) should be read together with section 6020(b). Nothing in the Code's structure suggests the statutes should be read together, either. Section 6020 resides in Chapter 61 of Title 26, governing information and returns. By contrast, section 6211 resides in Chapter 63, governing assessment. See Hartman, 65 T.C. at 545.

Tax policy calls for the statutes to be read independently. A rule requiring the Commissioner to prepare a return before determining a deficiency "is not within the spirit of our self-assessment system of taxation." Id. at 546. The rule would create a bad incentive for delinquent taxpayers: inertia would pay. As a matter of policy, "that petitioner failed to file a return will not insulate him from a determination by the Commissioner that a tax is due and owing." Id.

A rule requiring the Commissioner to prepare a return first would create an administrative burden for no good reason. The deficiency letter itself gives the taxpayer fair notice of his status, including amounts owed. See Olsen v. Helvering, 88 F.2d 650, 651 (2d Cir.1937). A substitute return ordinarily would add nothing: even if the Commissioner prepared a dummy return on behalf of the taxpayer, the Commissioner would not use the return in determining the deficiency. As the Treasury regulation says, "if the return ... does not show any tax, for the purpose of the definition 'the amount shown as the tax by the taxpayer upon his return' shall be considered as zero." 26 C.F.R. Sec. 301.6211-1(a).

Finally, appellants garner no support from Scar v. C.I.R., 814 F.2d 1363 (9th Cir.1987). Scar fits best in a line of cases addressing determinations of deficiency on their merits. These cases state that the Commissioner, to rely on the presumption that his deficiency determination was correct, must have recourse to some evidence showing a taxpayer received income from the charged activity. Compare id. at 1366 (Commissioner did not consider any information relating to taxpayer) with Weimerskirch v. C.I.R., 596 F.2d 358, 360 (9th Cir.1979) (determination unsupported by any evidence is arbitrary and erroneous). In this case, as usual, "the sending of the notice of deficiency presumes a determination" for purposes of jurisdiction in the Tax Court. Scar, 814 F.2d at 1369 n. 9. Once in the Tax Court, appellants did not contest the determinations of deficiency on the merits: they did not, for example, contend that the Commissioner determined their deficiencies without evidence that they had received income from charged activities.

Considering that section 6211(a) need not be read in conjunction with 6020(b), we do not have to decide whether section 6020(b)(1) otherwise requires the Commissioner to prepare a return on behalf of a taxpayer who fails to do so himself. ¹ As far as section 6211(a) is concerned, the Commissioner was not required to prepare a return on appellants' behalf before issuing them valid notices of deficiency. The Tax Court properly exercised jurisdiction over appellants' petitions for redetermination.

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