Judgment summary
Petitioner, Mammoth Cave Property, LLC, is a limited liability company treated as a partnership for federal income tax purposes under the Bipartisan Budget Act of 2015 (BBA). The respondent issued a Notice of Final Partnership Adjustment (FPA) disallowing a charitable contribution deduction claimed for 2018.
The case came before the Court on petitioner's Motion for Summary Judgment. Petitioner argued that the period of limitations had expired before the respondent issued the FPA on January 5, 2024.
The Court disagreed. It held that the FPA was timely issued pursuant to I.R.C. section 6235(a)(2) and was valid.
Background
Petitioner was a Kentucky limited liability company with its principal place of business in Missouri when it filed its Petition. During the 2018 tax year, petitioner comprised four members: McLand Investments, LLC (90% ownership), Mammoth Cave JV, LLC (MCJV) (8% ownership), Commonwealth Raw Materials, LLC (1% ownership), and Randolph N. Reynolds (1% ownership). McLand was formed and managed by Mammoth Cave Manager, LLC (MCML), and Matthew Mills served as the manager of MCML. Petitioner, MCJV, and MCML were related parties that shared the same address at 6439 Highway 99, Welsh, Louisiana 70591 (Welsh address).
Petitioner filed its 2018 Form 1065 on September 16, 2019, designating MCJV as its partnership representative and Timothy Pollock as MCJV's designated individual, and giving the Welsh address for MCJV.
On October 22, 2020, petitioner received a Notice of Administrative Proceeding (NAP) listing the Welsh address. On November 13, 2020, Mr. Pollock received a copy of the NAP.
On December 14, 2020, petitioner submitted a Form 8979 seeking to revoke MCJV and designate MCML as its new partnership representative, with Mr. Mills as designated individual. Respondent rejected this form because it did not bear petitioner's employer identification number. Petitioner submitted a second Form 8979 dated March 26, 2021, which respondent received on April 2, 2021. On October 28, 2021, respondent confirmed the resignation and designation effective April 2, 2021.
On December 17, 2021, respondent issued to MCML an unsigned Form 872-M consenting to extend the time to make partnership adjustments. Petitioner did not agree to an extension.
On January 7, 2022, Mr. Mills signed two Forms 8822-B requesting that petitioner's and MCML's addresses be changed from the Welsh address to 718 W. Business Highway 60, Dexter, Missouri 63841 (Dexter address). Attorney Sidney Jackson submitted these by certified mail to the IRS service center in Ogden, Utah, on January 19, 2022, together with 31 other such forms for other businesses. Petitioner did not provide a copy to the revenue agent conducting the examination.
On May 20, 2022, respondent mailed a Preliminary Partnership Examination Changes document to MCML at the Welsh address. On July 11, 2022, respondent issued a Notice of Proposed Partnership Adjustment (NOPPA). Respondent mailed four copies of the NOPPA to petitioner, to two attorneys, and to MCJV (the former partnership representative), but not to MCML. The copy to MCJV was sent to the Welsh address to the attention of Mr. Mills as designated individual.
Respondent processed petitioner's address change request on August 24, 2022, one month after the NOPPA was issued. The average processing time was listed as four to six weeks, but the IRS experienced significant backlogs because of the COVID-19 pandemic.
For more than a year after requesting the change, petitioner and its attorneys continued to list the Welsh address. On March 30, 2023, petitioner filed Form 8984 requesting an extension of the modification submission period, listing the Welsh address. On June 6, 2023, petitioner filed Form 8980 requesting modification of imputed underpayments, again using the Welsh address.
On January 5, 2024, respondent issued the FPA for 2018 at the Dexter address. Petitioner filed its Petition on April 4, 2024, alleging the period of limitations had expired because the NOPPA was sent to the incorrect partnership representative.
Core dispute
Petitioner contended that the period of limitations on making adjustments under I.R.C. section 6235(a) had expired before the respondent issued the FPA on January 5, 2024, and that the FPA was therefore invalid.
Petitioner argued that the NOPPA was not properly issued because it was addressed to MCJV rather than MCML, and that this was not a mere technical defect given the critical role of the partnership representative under the BBA regime. Petitioner also contended that the Welsh address was the incorrect address.
The issue for the Court was whether the FPA was issued within the period of limitations under section 6235(a), and whether alleged errors in the NOPPA affected its validity or the running of the limitations period.
Court findings
The Court applied the summary judgment standard under Rule 121(a), noting that neither party alleged a genuine dispute of material fact preventing a decision on the validity of the FPA.
The Court found that petitioner's 2018 Form 1065 was timely filed on September 16, 2019, and the NOPPA was timely issued on July 11, 2022. Because there was a modification of an imputed underpayment, section 6235(a)(2) applied.
The deadline to submit a modification request was April 7, 2023. Petitioner timely requested a 60-day extension on March 30, 2023, which respondent consented to, and petitioner timely submitted a modification request on June 6, 2023. Under section 6235(a)(2), the deadline for issuing the FPA was at least 270 days from the extended modification date of June 6, 2023. The FPA, mailed on January 5, 2024, was before that deadline. The Court noted that petitioner had not explained why the modification would not trigger an extension of the limitation period under section 6235(a)(2), notwithstanding any flaws in the NOPPA.
The Court found the requirement that the NOPPA be sent to the partnership representative was met. Respondent mailed the NOPPA to the attention of the correct designated individual, Mr. Mills, at the Welsh address. As MCML's designated individual, Mr. Mills was the sole individual through whom the partnership representative could act, and such mailing was to the partnership representative within the meaning of section 6231(a).
Drawing on TEFRA caselaw addressing the adequacy of notices, the Court applied a standard of minimal or adequate notice, citing Clovis I v. Commissioner and Chomp Assocs. v. Commissioner. It found petitioner received adequate or minimal notice, which resulted in a timely filed Petition, and that petitioner had not shown it was prejudiced by errors in the NOPPA because the audit and communications continued without interruption.
On the address issue, the Court noted that although petitioner mailed the change of address request before the NOPPA, respondent did not process it until after the NOPPA was mailed. Petitioner received the NOPPA and continued to use the Welsh address for more than a year. The Court held that even if the NOPPA was not sent to the right address, actual receipt and petitioner's actions would cure the defect in mailing, citing Dees v. Commissioner.
Outcome
The Court held that the NOPPA issued on July 11, 2022, was valid and that the FPA issued to petitioner was timely pursuant to section 6235(a)(2). An appropriate order was to be issued. The opinion was reviewed by the Court, with the named judges agreeing.
Major issues / areas of contention
- Whether the period of limitations on making partnership adjustments under I.R.C. section 6235(a) had expired before the FPA was issued.
- Whether the FPA issued on January 5, 2024, was timely under I.R.C. section 6235(a)(2), given the modification of an imputed underpayment.
- Whether addressing the NOPPA to the former partnership representative (MCJV) rather than the current one (MCML) was a fatal defect or a technical one.
- Whether mailing the NOPPA to the attention of the designated individual satisfied the requirement to send it to the partnership representative under section 6231(a).
- Whether the NOPPA sent to the Welsh address rather than the Dexter address invalidated it, and whether actual receipt cured any mailing defect.
- Whether petitioner was prejudiced by any errors in the NOPPA.