Opinion
16284-21
08-01-2024
ALBERO HOLDINGS, LLC, ALBERO INVESTORS, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Elizabeth Crewson Paris, Judge.
This case involves a charitable contribution deduction that Albero Holdings, LLC (Albero) claimed for its 2017 donation of a conservation easement under section 170. The Internal Revenue Service (IRS) issued a notice of final partnership administrative adjustment (FPAA) disallowing the deduction and determining penalties. This Order addresses petitioner's Motion for Partial Summary Judgment on the Inapplicability of Section 6662A and Memorandum of Law in Support, filed May 21, 2024, docket entry 70.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
On July 28, 2021, docket entry 1, petitioner filed a Petition for Readjustment of Partnership Items as set forth in the FPAA issued May 3, 2021. The FPAA asserted penalties, including the section 6662A reportable transaction understatement penalty.
On April 26, 2023, docket entry 23, the parties filed a First Stipulation of Facts consisting of paragraphs 1 through 133 and Exhibits 1-J through 21-J. On August 3, 2023, docket entry 28, the parties filed a Stipulation of Settled Issues consisting of paragraphs 1 through 3. On August 3, 2023, docket entries 29 and 30, the parties filed a Second Stipulation of Facts consisting of paragraphs 134 through 252 and Exhibits 22-J through 121-J.
On May 21, 2024, docket entry 70, petitioner filed a Motion for Partial Summary Judgement on the Inapplicability of Section 6662A and Memorandum of Law in Support on the grounds that respondent's assertion of a penalty under section 6662A in this case is based on Notice 2017-10, which is procedurally invalid, and therefore respondent cannot impose the section 6662A penalty in this case.
On June 12, 2024, docket entry 84, respondent filed a Response in Opposition to Petitioner's Motion for Partial Summary Judgment on the Inapplicability of Section 6662A.
Background
The following facts are drawn from the parties' pleadings, motion papers, declarations, stipulations, and exhibits attached thereto. They are stated solely for purposes of deciding respondent's Motion and not as findings of fact in this case. See Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994).
Albero is a Georgia limited liability company, which had a principal place of business in Atlanta, Georgia, when it filed its Petition. Albero was classified as a partnership for federal income tax purposes subject to TEFRA for tax year 2017. Albero Investors, LLC, is Albero's tax matters partner.
Absent an agreement to the contrary, an appeal in this case would lie to the U.S. Court of Appeals for the Eleventh Circuit. See § 7482(b)(1)(E). Therefore, the Court will follow that court's precedent. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971).
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248, §§401-407, 96 Stat. 324, 648-71 (repealed by the Bipartisan Budget Act of 2015, Pub. L. No. 114-74, § 1101(a), 129 Stat. 584, 625).
Albero timely filed its Form 1065, U.S. Return of Partnership Income, for the taxable year ending December 31, 2017 (2017 return), reporting a $29,196,000 noncash charitable contribution deduction for the grant of a conservation easement on approximately 170.189 acres of real property in Wilkinson County, Georgia.
The IRS selected petitioner's 2017 return for examination and, upon conclusion of the examination, issued petitioner the FPAA dated May 3, 2021. The FPAA asserted, among other things, that petitioner was subject to a reportable transaction understatement penalty under section 6662A.
Discussion
I. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid costly time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Under Rule 121(a), the Court shall grant summary judgment when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. The Court may grant partial summary judgment if some but not all issues in a case can be disposed of summarily. Rule 121(a); Sundstrand Corp., 98 T.C. at 520. The moving party bears the burden of proving that no genuine dispute of material fact exists. Sundstrand Corp., 98 T.C. at 520. However, the nonmoving party may not rest upon the allegations or denials in its pleadings but must set forth specific facts establishing that there is a genuine dispute of fact for trial. Rule 121(d); Sundstrand Corp., 98 T.C. at 520. In deciding whether to grant summary judgment, the Court views the facts and inferences drawn from them in the light most favorable to the nonmoving party (here respondent). Sundstrand Corp., 98 T.C. at 520.
II. Analysis
Petitioner argues that respondent's assertion of the section 6662A reportable transaction understatement penalty is based on Notice 2017-10, which this Court held procedurally invalid in Green Valley Invs., LLC v. Commissioner, 159 T.C. 80 (2022), and therefore respondent cannot impose the section 6662A penalty against Albero in this case.
Notwithstanding this Court's precedent holding otherwise, respondent argues that Notice 2017-10 is valid because Congress excepted the IRS from using the Administrative Procedure Act's (APA) notice-and-comment rulemaking procedures when identifying listed transactions. Respondent acknowledges that both this Court and the U.S. Circuit Court of Appeals for the Eleventh Circuit have held Notice 2017-10 invalid because the IRS was required but failed to follow the APA's notice-and-comment rulemaking procedures when it issued Notice 2017-10. See Green Rock LLC v. Internal Revenue Service, 104 F.4th 220 (11th Cir. 2024); Green Valley Invs., 159 T.C. at 103.
Respondent objects to petitioner's Motion for Partial Summary Judgment and maintains that Notice 2017-10 is valid to preserve its argument for purposes of appeal.
The Court has previously held in Green Valley Invs., LLC, 159 T.C. at 103, the imposition of the reportable transaction understatement penalty on conservation easements pursuant to Notice 2017-10 was invalid because Notice 2017-10 was issued without the notice and comment required by the Administrative Procedure Act. See 5 U.S.C. § 553.
After due consideration, it is
ORDERED that petitioner's Motion for Partial Summary Judgment, filed May 21, 2024, docket entry 70, is granted in that the section 6662A reportable transaction understatement penalty imposed pursuant to Notice 2017-10 is invalid and cannot be imposed against petitioner in this case.