1981 U.S. Tax Ct. LEXIS 18">*18
Petitioner filed a request for determination with respondent on its status as a qualified retirement plan on Jan. 31, 1974. On Oct. 17, 1980, respondent issued a notice of deficiency to petitioner for the taxable years ending May 31, 1974, and May 31, 1975. On Jan. 14, 1981, petitioner-employer filed three petitions in this Court based on the Oct. 17 notice; in two, petitioner sought redetermination of the deficiencies and in the present case it sought a declaratory judgment concerning its retirement plan's qualification under
77 T.C. 1197">*1197 OPINION
This case was assigned to Special Trial Judge Francis J. Cantrel for the purpose of conducting the hearing and ruling on respondent's motion to dismiss for lack of jurisdiction. After a review of the record, we agree with and adopt his opinion which is set forth below. 1
1981 U.S. Tax Ct. LEXIS 18">*22 77 T.C. 1197">*1198 OPINION OF THE SPECIAL TRIAL JUDGE
Cantrel,
Shut Out Dee-Fence, Inc., is an organization incorporated on June 22, 1973, in the State of New York for the purposes of promoting athletic events and performing services related thereto. On December 31, 1973, petitioner-employer adopted a retirement plan for its employees. Petitioner submitted on January 31, 1974, a request for determination that said plan was qualified under
On January 14, 1981, petitioner filed its petition herein for declaratory judgment seeking qualification of its retirement trust under
On July 20, 1981, respondent filed a motion to dismiss for lack of jurisdiction. The basis for respondent's motion is that no "notice of determination" upon which a
Petitioner argues that in the notice of deficiency respondent "determined that the plan is not qualified" and, thus, that notice constitutes a "notice of determination" as required by
A declaratory judgment action may be brought pursuant to
1981 U.S. Tax Ct. LEXIS 18">*26 77 T.C. 1197">*1200 Petitioner bases its petition in this case on receipt of a "notice of determination" dated October 17, 1980. Respondent describes said October 17 notice not as a determination letter as required by
a written statement issued by a district director in response to a written inquiry by an individual or an organization that applies to the particular facts involved, the principles and precedents previously announced by the National Office. A determination letter is issued only where a determination can be made on the basis of clearly established rules as set forth in the statute, Treasury decision, or regulation, or by a ruling, opinion, or court decision published in the Internal Revenue Bulletin. Where such1981 U.S. Tax Ct. LEXIS 18">*27 a determination cannot be made, such as where the question presented involves a novel issue or the matter is excluded from the jurisdiction of a district director by the provisions of paragraph (c) of this section, a determination 77 T.C. 1197">*1201 letter will not be issued. However, with respect to determination letters in the pension trust area, see paragraph (o) of this section. 5
The notice of October 17, 1980, is clearly entitled "Notice of Deficiency." It is true that an attachment to that notice, which explains the reason for the income tax deficiencies, states: "It has been determined that you did not qualify as an organization exempt from tax under
In such posture, petitioner then maintains that if the October 17, 1980, notice is not a "notice of determination" then respondent has failed to make a determination with respect to its initial qualification request and this Court has jurisdiction pursuant to
Relying on
Alternatively, respondent argues that jurisdiction with this Court is discretionary and since this case is duplicative of the 77 T.C. 1197">*1202 deficiency actions where the same issue of1981 U.S. Tax Ct. LEXIS 18">*30 whether the retirement plan is qualified must be decided, this Court should choose not to exercise its jurisdiction in this case.
Generally, jurisdiction is not a discretionary matter.
However, the language of
1981 U.S. Tax Ct. LEXIS 18">*31 Before the enactment of
As a practical matter, there is no effective appeal from a Service determination (or refusal to make a determination) that a proposed pension plan fails to qualify for the special tax benefits. In these cases, although there may be a real controversy between the employer and the Service, present law permits the employer to go to court only after he has made contributions to the plan, deducted them, and had those deductions disallowed. * * *
H. Rept. 93-779 (1974),
To provide for judicial review of respondent's1981 U.S. Tax Ct. LEXIS 18">*32 determination regarding a retirement plan before a notice of deficiency is issued, Congress enacted
The point is made even clearer in the committee reports to
This provision is intended to facilitate relatively prompt judicial review of the specified types of exempt organization issues; it is not intended to supplant the normal avenues of judicial review (redetermination of a deficiency or suit for refund of taxes) where those normal procedures could be expected to provide opportunities for prompt determinations. Consequently, it is expected1981 U.S. Tax Ct. LEXIS 18">*33 that the courts will not entertain a declaratory judgment suit with regard to a period for which a notice of deficiency has already been issued, except upon a showing by the organization that the declaratory judgment route is likely to substantially reduce the time necessary to attain a final judicial review of the Service's determination. Also, it is expected that in general a court which has accepted pleadings in a declaratory judgment proceedings will yield to a court which has accepted pleadings in a redetermination of deficiency or a tax refund suit, unless the proceedings in the declaratory judgment suit are so far along that it would facilitate the interest of prompt justice for the latter court to yield to the former. The Congress' action is not to be permitted to create conflicting determinations on the parts of different trial courts with regard to any of the questions that may be determined in a declaratory judgment suit; nor is the Congress' action to operate so as to require duplication of effort on the part of parties, witnesses, or courts.
Joint Comm. on Taxation, 94th Cong., 2d Sess., General Explanation of the Tax Reform Act of 1976, 1976-3 C.B. (Vol. 2) 416.1981 U.S. Tax Ct. LEXIS 18">*34 See also H. Rept. 94-658 (1975), 1976-3 C.B. (Vol. 2) 978; S. Rept. 94-938 (1976), 1976-3 C.B. (Vol. 3) 626-627.
Proceeding with this declaratory judgment action would not only be duplicative but also contrary to the Congress' direction. The deficiency cases are at issue 12 and ready to be set for 77 T.C. 1197">*1204 trial. Moreover, this declaratory judgment action is not ready for determination since the administrative record has not yet been filed. The most expeditious avenue to a determination of the underlying issue will be obtained in the deficiency1981 U.S. Tax Ct. LEXIS 18">*35 actions and, thus, we must follow the legislature's mandate and dismiss this case.
1. Since this is a preliminary jurisdictional motion, the Court has concluded that the post-trial procedures of
2. All section references are to the Internal Revenue Code of 1954, as amended, unless otherwise indicated.↩
3. Respondent's reasoning for not sending a determination letter previously was that petitioner had no employees.↩
4.
(a) Creation of Remedy. -- In a case of actual controversy involving -- (1) a determination by the Secretary with respect to the initial qualification or continuing qualification of a retirement plan under subchapter D of chapter 1, or (2) a failure by the Secretary to make a determination with respect to (A) such initial qualification, or (B) such continuing qualification if the controversy arises from a plan amendment or plan termination, upon the filing of an appropriate pleading, the Tax Court may make a declaration with respect to such initial qualification or continuing qualification. Any such declaration shall have the force and effect of a decision of the Tax Court and shall be reviewable as such. For purposes of this section, a determination with respect to a continuing qualification includes any revocation of or other change in a qualification.
(b) Limitations. -- (1) Petitioner. -- A pleading may be filed under this section only by a petitioner who is the employer, the plan administrator, an employee who has qualified under regulations prescribed by the Secretary as an interested party for purposes of pursuing administrative remedies within the Internal Revenue Service, or the Pension Benefit Guaranty Corporation. (2) Notice. -- For purposes of this section, the filing of a pleading by any petitioner may be held by the Tax Court to be premature, unless the petitioner establishes to the satisfaction of the court that he has complied with the requirements prescribed by regulations of the Secretary with respect to notice to other interested parties of the filing of the request for a determination referred to in subsection (a). (3) Exhaustion of administrative remedies. -- The Tax Court shall not issue a declaratory judgment or decree under this section in any proceeding unless it determines that the petitioner has exhausted administrative remedies available to him within the Internal Revenue Service. A petitioner shall not be deemed to have exhausted his administrative remedies with respect to a failure by the Secretary to make a determination with respect to initial qualification or continuing qualification of a retirement plan before the expiration of 270 days after the request for such determination was made. (4) Plan put into effect. -- No proceeding may be maintained under this section unless the plan (and, in the case of a controversy involving the continuing qualification of the plan because of an amendment to the plan, the amendment) with respect to which a decision of the Tax Court is sought has been put into effect before the filing of the pleading. A plan or amendment shall not be treated as not being in effect merely because under the plan the funds contributed to the plan may be refunded if the plan (or the plan as so amended) is found to be not qualified. (5) Time for bringing action. -- If the Secretary sends by certified or registered mail notice of his determination with respect to the qualification of the plan to the persons referred to in paragraph (1) (or, in the case of employees referred to in paragraph (1), to any individual designated under regulations prescribed by the Secretary as a representative of such employee), no proceeding may be initiated under this section by any person unless the pleading is filed before the ninety-first day after the day after such notice is mailed to such person (or to his designated representative, in the case of an employee).
(c) Retirement Plan. -- For purposes of this section, the term "retirement plan" means -- (1) a pension, profit-sharing, or stock bonus plan described in (2) an annuity plan described in section 403(a), or (3) a bond purchase plan described in section 405(a).↩
5. See also sec. 601.201(n) and (o), Statement of Procedural Rules, relating to the procedures involved in obtaining a determination letter with respect to exempt status under
6. See also
7. All Rule references hereinafter are to the Tax Court Rules of Practice and Procedure.↩
8.
9. See also
10. See also the language in
11. It is clear that Congress intended that the procedures under
12. Respondent's answer in each one of those cases was filed on Mar. 6, 1981. Rule 38.↩