Opinion
8359-23
09-20-2024
CONRAD INDUSTRIES, INC. AND SUBSIDIARIES, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Cary Douglas Pugh Judge
Background
This case tentatively is set for trial at a special trial session in New Orleans, Louisiana, on June 2, 2025. We have been refereeing ongoing discovery disputes between the parties as recounted in our Order dated August 23, 2024. In that Order, we directed petitioner to respond to respondent's August 12, 2024, Motion to Compel Responses to Interrogatories by August 30, 2024, directed respondent to file a report on the status of ongoing discovery issues before this Court by September 6, 2024, and scheduled certain pretrial deadlines using the tentative June 2, 2025, trial date. We declined to rule on respondent's three pending Motions (Motion to Compel Production of Documents, filed May 29, 2024, Motion to Compel Production of Documents, filed July 8, 2024, and Motion to Compel Responses to Interrogatories, filed August 12, 2024) until petitioner's response and respondent's report were filed.
Petitioner's Response to Motion to Compel Responses to Interrogatories contended that it provided amended responses to respondent, and represented that "[p]etitioner is not aware of any further alleged deficiency and the issue appears to be moot." The next day, however, respondent informed petitioner that he still considered certain amended responses as nonresponsive. Petitioner maintained its objections and requested until September 13, 2024, to locate the relevant documents.
Respondent's September 6, 2024, report stated that petitioner had yet to produce all responsive documents related to four document requests: First Request no. 9 ("[a]ll billing statements, invoices, and other documents concerning the fees charged by alliantgroup for services rendered to Conrad related to the determination of the Research Credits and/or preparation of the Studies"), Second Request no. 5 ("Delivery and Acceptance Certificate . . . or similar certificate, for each of the 51 projects in the sampling frame . . . each of the 2014 Repair Projects . . . and each of the 2015 Repair Projects"), Second Request no. 6 ("[a]ll documents pertaining to the work for which Max Welders was hired in connection with project number CN150296"), and Second Request no. 7 ("[t]he 'contractual terms and scope of work' for each of the 2014 Repair Projects that alliantgroup purportedly reviewed."). Respondent's report also noted that petitioner's amended responses to certain formal interrogatories remained incomplete.
Unless otherwise indicated, we will refer to respondent's Request for Production of Documents dated April 24, 2024, as First Request, and his Request for Production of Documents dated May 31, 2024, as Second Request.
Discussion
Rule 104(c) provides that this Court may impose sanctions if a party fails to obey an order of this Court with respect to Rules 71 and 72, which concern interrogatories and the production of documents, respectively. This includes entering orders that "prohibit[] such party from introducing designated matters in evidence." Rule 104(c)(2). Petitioner bears the burden of proof under Rule 142 unless it can establish that the burden should be shifted pursuant to section 7491.
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.
Ambiguity persists regarding the completeness and responsiveness of petitioner's productions, and we are, of course, unable to determine which documents petitioner may possess. The parties still dispute whether petitioner's productions relating to First Request no. 9 are fully responsive, and petitioner has acknowledged that it has been largely unable to locate the documents requested in Second Request no. 6. Additionally, while petitioner's productions for Second Request nos. 5 and 7 may be incomplete, the parties are progressing towards stipulations that may render those requests moot.
Petitioner has been given ample opportunity to address any lingering defects in its productions since informal discovery began in April. We thus conclude that petitioner should be precluded from relying upon documents sought by respondent's requests unless petitioner can establish that they were produced to respondent and identified as responsive to his requests prior to the date of this Order, unless good cause is shown for the failure. But we will deny respondent's Motions insofar as they seek a categorical proscription against reliance on a tax professional as a defense to accuracy-related penalties imposed pursuant to section 6662(a).
We will deny respondent's Motion to Compel Responses to Interrogatories on the basis of the parties' representation that petitioner's responses will be complete as of September 13, 2024, with one caveat. Namely, we will bar petitioner from relying on evidence that respondent demonstrates to be responsive to his interrogatories but not in petitioner's amended responses as of September 13, 2024, unless good cause is shown for the failure.
To reflect the foregoing, it is
ORDERED that respondent's Motion to Compel Production of Documents, filed May 29, 2024, is granted in part and denied in part as stated above. It is further
ORDERED that respondent's Motion to Compel Production of Documents, filed July 8, 2024, is granted in part and denied in part as stated above. It is further
ORDERED that respondent's Motion to Compel Responses to Interrogatories, filed August 12, 2024, is denied.