Security Indus. Ins. Co. v. U.S.

• Decision Date: 23 October 1987
• Docket Number: No. 86-3806,86-3806
• Citation: 830 F.2d 581
• Parties: -5823, 87-2 USTC P 9578 SECURITY INDUSTRIAL INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED STATES of America, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 581

830 F.2d 581

60 A.F.T.R.2d 87-5823, 87-2 USTC P 9578

SECURITY INDUSTRIAL INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED STATES of America, et al., Defendants-Appellees.

No. 86-3806.

United States Court of Appeals, Fifth Circuit.

Oct. 23, 1987.

F. Kelleher Riess, Metairie, La., for plaintiff-appellant.

John J. Boyle, Atty., Michael L. Paup, Chief, Appellate Section, Tax Div., Justice Dept., Roger M. Olsen, Asst. Atty. Gen., Robert S. Pomerance, Atty., Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Middle District of Louisiana.

Before WISDOM, GEE, and RANDALL, Circuit Judges.

GEE, Circuit Judge:

Security Industrial Insurance Co. ("the taxpayer") appeals the dismissal of this Enochs suit ¹ seeking to enjoin collection of federal income tax. We remand for dismissal.

I.

The taxpayer and the government entered into several agreements extending the three-year statute of limitations for the 1973 tax year. Under the last of these agreements, the limitation would run in December 1982. The government issued a statutory notice of deficiency to the taxpayer 46 days before the end of the extended period. The taxpayer filed a timely petition in the United States Tax Court for a redetermination, and the parties entered into a stipulated decision in October 1985. The parties agree that this stipulated decision was unappealable. The government assessed the redetermined deficiency 140 days after the entry of the Tax Court decision; the government notified the taxpayer of the new assessment 109 days after it was entered.

The taxpayer sued on two theories to enjoin collection of the tax. One of these was that the new assessment had to be entered within the 46 days remaining in the original period of limitation tacked on to 60 days after the decision of the tax court was "final," or a total of 106 days after the decision was "final." See I.R.C. Sec. 503(a)(1). ² The taxpayer asserted that under normal rules of law the Tax Court decision was "final" on the day it was entered, because as a stipulated decision it could not be challenged by appeal or otherwise. Thus, according to the taxpayer, the assessment 140 days later was untimely and invalid. Two, the taxpayer contended that under I.R.C. Sec. 6303(a) ³ it was entitled to notice of the new assessment within 60 days, and that the late (109) day notice invalidated the assessment. The government responded by invoking the protections of the Anti-Injunction Act, I.R.C. Sec. 7421(a). ⁴ On the merits, the government argued that the tax court decision did not become "final" for purposes of the limitations clock until 90 days after it was entered, thus giving it 196 days after the date of the decision to enter the new assessment. In addition, the government gave various reasons why its failure to comply with the 60-day rule of Sec. 6303(a) did not invalidate the assessment.

The district court ruled for the government. The court noted that to come within the judicially-created "narrow exception" to the Anti-Injunction Act in Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), the taxpayer had to show that "it is clear that under no circumstances could the Government prevail," and that the taxpayer "would suffer irreparable injury if collection were effected." 370 U.S. at 7, 82 S.Ct. at 1129. On the first question presented, the court accepted the government's position that all Tax Court decisions become "final" 90 days after entry, regardless of whether they are appealable or not. On the second, the court ruled that it was well-recognized that failure by the government to meet the time-limit for statutory notice specified in Sec. 6303(a) did not invalidate the assessment if the taxpayer had actual notice independent of the statutory notice, citing United States v. Friedman, 739 F.2d 252 (7th Cir.1984) (receipt of notice before assessment does not invalidate assessment). The court dismissed the suit, but apparently without prejudice to litigating the same issues in the Tax Court, since it simply ruled that the plaintiff had failed to satisfy the first prong of Enochs. The taxpayer appeals.

II.

The first question is when a stipulated Tax Court decision become "final" for purposes of Sec. 6503(a). The government urges us not to reach the merits of this question. In the government's view, the very fact that the question is novel and somewhat difficult is enough to end this Enochs action: if the question is novel or difficult, it necessarily follows that the taxpayer has failed to demonstrate that "it is clear that under no circumstances could the Government prevail." The government's argument has force, and we would accept it in many situations. This question, however, is a narrow one, a legal one, and a binary one at that: the parties agree that there are only two possible answers to the question of when a stipulated Tax Court judgment is final. If we resolve the question on the merits, it will not spawn a series of Enochs cases presenting variations on the theme, thus sapping the vitality of the Anti-Injunction Act ⁵ and the underlying Congressional tax policy of "pay first, litigate later." So far as we can see, no further variations are possible. Therefore, because of the unique characteristics of the question, we will proceed to the merits in order to determine if the case comes within the "under no circumstances could the Government prevail" prong of Enochs.

If the answer to the first question lies in the Internal Revenue Code, it appears at Sec. 7481, which reads:

Sec. 7481. Date when Tax Court decision becomes final

(a) Reviewable decisions.--Except as provided in subsection (b), the decision of the Tax Court shall become final--

(1) Timely notice of appeal not filed.--Upon the expiration of the time allowed for filing a notice of appeal [90 days; see Sec. 7483], if no such notice has been duly filed within such time; or

(2) Decision affirmed or appeal dismissed.--[details about finality of appealed cases.]

* * *

* * *

(b) Nonreviewable decisions.--The decision of the Tax Court in a proceeding conducted under section 7463 [cases involving less than $10,000] shall become final upon the expiration of 90 days after the decision is entered.

Small cases under Sec. 7463, described in Sec. 7481 as "nonreviewable decisions," cannot be directly reviewed or appealed. See Sec. 7463(b) (decisions under Sec. 7463 "shall not be reviewed in any other court"). ⁶

The taxpayer's argument is this: (1) A stipulated decision cannot be appealed, see, e.g., White v. Commissioner of Internal Revenue, 776 F.2d 976, 977 (11th Cir.1985) (citing cases); (2) therefore, it is not a "reviewable decision" within the meaning of Sec. 7481; (3) therefore, the date that a stipulated case becomes final is not provided for in Sec. 7481, and the normal rules in federal litigation apply, see I.R.C. Sec. 7482; and (4) the normal rule as to finality is that the decision is final upon entry of the stipulated judgment, see, e.g., Stanford v. Utley, 341 F.2d 265 (8th Cir.1965) (since no appeal could be taken from consent judgment, the judgment was final and the time for appeal expired upon entry). The taxpayer also finds support for its position in the two opinions in United States v. Shepard's Estate, 196 F.Supp. 281 (N.D.N.Y.1961), aff'd, 319 F.2d 699 (2d Cir.1963). We do not find the opinions in Shepard's Estate to be particularly useful, since they were concerned with an entirely different issue; however, because they provide indirect support for the taxpayer's position we summarize them in the margin. ⁷

The taxpayer's argument contains a logical hiatus. The jump is from the first to the second premise: The fact that a decision is unreviewable by appeal does not necessarily mean that it is not a "reviewable decision" within the meaning of subsection (a) of Sec. 7481.

We must begin with the language and structure of the statute itself. First, its broad title--"Date when Tax Court decision becomes final"--is of critical importance because it implies that this particular section is intended to answer all questions about the date of finality, that it contains and categorizes the entire universe of possible times for the finality of Tax Court decisions. The statute then divides up the "date the decision becomes final" universe into only two categories: "(a) Reviewable decisions," and "(b) Nonreviewable decisions." Category (a) is not further defined, and the taxpayer's argument derives its rhetorical power from the subtitle itself: "reviewable decisions" seems to name a category that must exclude decisions that were stipulated, thus unreviewable by appeal. However, because Sec. 7481 divides the universe of finality into only two categories, we can understand category (a) only by contrasting it with category (b), which is carefully defined. Category (b)--"nonreviewable decisions"--is limited to a particular class of small cases (under $10,000) transferred "at the option of the taxpayer" from the Tax Court to a special docket under Sec. 7463. Therefore, if Sec. 7481 describes the entire universe of cases, by negative inference category (a) must include all other Tax Court cases, regardless of their disposition.

It is clear from the statute that the category labels in Sec. 7481--"reviewable decisions" and "unreviewable decisions"--are not functional descriptions of each and every case within the category. Rather, the labels are short-hand for a structural and institutional distinction, namely, the two distinct dockets in the Tax Court. The regular "large case" Tax Court docket is made up of cases that (as a general rule) are "reviewable" in the Courts of Appeals. The "small case" docket is made up of cases that are "unreviewable" in the Courts of Appeals. The fact that a particular case on the "large case" docket is unreviewable by appeal for some idiosyncratic reason does not take it out of the...