Miles Prod. Co. v. Comm'r of Internal Revenue, Docket No. 16543-88.

Decision Date02 April 1991
Docket NumberDocket No. 16543-88.
Citation96 T.C. No. 22,96 T.C. 595
PartiesMILES PRODUCTION COMPANY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

The Commissioner determined deficiencies in petitioner's windfall profit tax for calendar years 1981 and 1982. Petitioner filed Federal income tax returns for the taxable years ended June 30, 1981, June 30, 1982, and June 30, 1983. It did not file annual windfall profit tax returns. Petitioner claimed overpayments of windfall profit tax as credits against its income tax liabilities on its income tax returns, amended income tax return, and claims for refund based upon application of the net income limitation.

Petitioner and the Commissioner executed Special Consents to Extend the Time to Assess Tax (Forms 872-A) with respect to additional windfall profit tax for “crude oil removed during the four taxable periods of the calendar year ended December 31, 1981,” and for the “taxable periods of the calendar year ended December 31, 1982.” The consents were not terminated before the mailing of the statutory notice of deficiency.

HELD, the notice of deficiency determining deficiencies in windfall profit tax upon a calendar year basis is valid notwithstanding the fact that petitioner filed its income tax return on a fiscal year basis. Century Data Systems, Inc. v. Commissioner, 80 T.C. 529 (1983), distinguished.

HELD FURTHER, the periods of limitation on assessment of additional windfall profit tax did not expire before the date of mailing the statutory notice of deficiency. O. Jan Tyler, for the petitioner.

Mark B. Barta, for the respondent.

OPINION

GOFFE, JUDGE:

The Commissioner determined deficiencies in petitioner's windfall profit tax under section 4986, 1 for the calendar years 1981 and 1982 and additions to tax for those years as follows:

+------------------------------------------------------------------------+
                ¦               ¦                   ¦Additions to tax                    ¦
                +---------------+-------------------+------------------------------------¦
                ¦Calendar year  ¦Deficiency in tax  ¦Sec. 6653 (a)(1)  ¦Sec. 6653(a)(2)  ¦
                +---------------+-------------------+------------------+-----------------¦
                ¦1981           ¦$133,235.88        ¦$6,661.79         ¦*                ¦
                +---------------+-------------------+------------------+-----------------¦
                ¦1982           ¦78,411.80          ¦3,920.59          ¦*                ¦
                +------------------------------------------------------------------------+
                

Tax Court, 1991.Miles Production Co. v. C.I.R.96 T.C. No. 22, 96 T.C. 595, Tax Ct. Rep. (CCH) 47,265, Tax Ct. Rep. Dec. (P-H) 96.22

FN* 50 percent of the interest due on $133,235.88 for the calendar year 1981 and on $78,411.80 for the calendar year 1982.

The issue to be decided is whether a statutory notice of deficiency for windfall profit tax based upon a calendar year is valid when petitioner files its Federal income tax returns on the basis of a fiscal year ended June 30 and, if valid, whether assessment of additional windfall profit tax is barred by expiration of the periods of limitation on assessment. This matter is before the Court on petitioner's motion to dismiss for lack of jurisdiction. Some of the facts have been stipulated and are so found. The stipulation of facts and accompanying exhibits are incorporated by this reference.

Petitioner was incorporated under the laws of the State of Texas in 1959 and its principal place of business when it filed its petition was Dallas, Texas. Petitioner filed its Federal income tax returns on the basis of its fiscal year ended June 30.

Petitioner timely filed its Federal corporate income tax return (Form 1120) for the taxable year ending June 30, 1981. It attached to its return Form 6249, Computation of Overpaid Windfall Profit Tax, on which it claimed a credit for overpayment of windfall profit tax in the amount of $39,573.45. Of that amount, $27,675.04 was claimed as “Overpayment due to Withholding Error,” and $11,898.41 as “Overpayment Resulting from the Net Income Limitation.” The properties for which the net income limitation (hereinafter referred to as NIL) was claimed were identified on Part V of Form 6249, and Part V also contained computations of the NIL for each property. All of the NIL was claimed for the full fiscal year from July 1, 1980, to June 30, 1981.

On October 25, 1983, petitioner filed an amended income tax return for its taxable year ending June 30, 1981, claiming a refund for windfall profit tax in the amount of $182,293.10 based upon application of the NIL. The amended return included Page 2 of Forms 6249 which is Part V of the form. Separate pages 2 were filed for the periods from July 1, 1980, to December 31, 1980, and January 1, 1981, to June 30, 1981. Each property on which the NIL was claimed was identified on the pages 2, and the pages 2 contained computations of the NIL for each property. The Commissioner allowed the refund in full.

Petitioner timely filed its Federal income tax return for the taxable year ending June 30, 1982. It attached to that return the appropriate copies of Forms 6248, “Annual Information Return of Windfall Profit Tax,” which reflect petitioner's tax liability and the amount of windfall profit tax withheld by each oil purchaser. In addition, petitioner attached Form 6249 on which petitioner claimed a credit for overpayment of windfall profit tax in the amount of $16,497.90. Of that amount, petitioner claimed $15,190.96 as resulting from withholding in excess of its tax liability and $1,306.94 as resulting from application of the NIL. The property for which the NIL was claimed was identified on Part V of the Form 6249, and Part V also contained a computation of the NIL for that property.

On November 21, 1983, petitioner filed Claim for Refund (Form 843), with attached Form 6249, for the 6-month period July 1, 1981, to December 31, 1981, claiming a refund in the amount of $60,130.66 for windfall profit tax based upon application of the NIL. The Forms 6249 identified the properties on which the NIL was claimed and computations for each property.

On November 21, 1983, petitioner also filed Claim for Refund (Form 843), with attached Form 6249, for the 6-month period January 1, 1982, to June 30, 1982, claiming a refund in the amount of $32,713.88 for windfall profit tax based upon application of the NIL. The claim for refund included page 2 (Part V) of Forms 6249 which reflected the properties on which the NIL was based with computations for each property. The Commissioner allowed in full both of the claims for refund filed on November 21, 1983.

Petitioner timely filed its Federal income tax return for the taxable year ending June 30, 1983. It did not attach Forms 6248 or 6249 to that return. On February 10, 1984, petitioner filed Claim for Refund (Form 843), with attached Form 6249, claiming a refund of $56,074.46 for the 6-month period July 1, 1982, to December 31, 1982, for windfall profit tax based upon application of the NIL. The claim for refund included page 2 (Part V) of Forms 6249 which reflected the properties on which the NIL was based with computations for each property. The Commissioner allowed the claim for refund in full.

On April 8, 1988, the Commissioner mailed a statutory notice of deficiency to petitioner for the calendar years 1981 and 1982. In the statutory notice, the Commissioner determined deficiencies in windfall profit tax, and the adjustments pertain only to the NIL. The statutory notice made no adjustments to the income tax liabilities of petitioner. The statutory notice identified the properties on which an adjustment was made to the NIL, including the allowance of the NIL on a property which petitioner had not claimed. The notice reflected the amount of the NIL as reported on the income tax return, amended income tax return, and claims for refund, as well as the amount of the NIL as determined by the Commissioner. The amounts of the NIL as reported and the amounts as determined were set forth in 6-month increments from January 1 to June 30 and from July 1 through December 31. Such amounts were then combined to show the amounts as filed, as corrected, and as adjustments on the basis of calendar years.

The statutory notice identified each of the properties on which the Commissioner adjusted the NIL by the name of the property. The amount of the NIL which petitioner claimed for each property on the amended return and the claims for refund corresponded to the amounts of NIL identified as “as reported” in the statutory notice.

After the case was at issue, petitioner filed its motion to dismiss for lack of jurisdiction. In its motion, petitioner contends that the statutory notice of deficiency mailed by the Commissioner is invalid because it is based upon calendar years rather than petitioner's taxable years for income tax purposes, i.e., July 1, 1981, to June 30, 1982. In addition, petitioner contends that if the statutory notice is not invalid because it was issued for the incorrect taxable periods, it is, nevertheless, invalid because it was issued after expiration of the periods of limitation on assessment. This is not a plea to the Court's jurisdiction but is, instead, a defense on the merits. See, e.g., Woods v. Commissioner, 92 T.C. 776, 787 (1989). In substance, petitioner's motion, in this regard, will be treated as a motion for summary judgment.

In order to appreciate the requirements of filing returns for purposes of windfall profit tax and the interplay with income tax, it is necessary to explain some of the concepts indigenous to the windfall profit tax. The windfall profit tax is imposed upon and is to be paid by the “producer” of crude oil, as the producer is the holder of the economic interest. Sec. 4986(b); sec. 4996(a)(1)(A).

Petitioner is a producer for purposes of imposition of the windfall profit tax. Although the producer is liable for the tax, the first purchaser of the oil is...

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2 cases
  • Dees v. Comm'r
    • United States
    • United States Tax Court
    • February 2, 2017
    ...knew or should have known that the Commissioner determined a deficiency. This approach is evident in Miles Prod. Co. v. Commissioner, 96 T.C. 595 (1991), aff'd, 987 F.2d 273 (5th Cir. 1993), a case in which the Commissioner issued a notice of deficiency determining deficiencies in the taxpa......
  • Jacobson v. Comm'r of Internal Revenue, Docket Nos. 5866-87
    • United States
    • United States Tax Court
    • April 2, 1991

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