Opinion
14916-15
06-28-2022
GENECURE, L.L.C., FRANK Y. TUNG, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Courtney D. Jones, Judge
This TEFRA partnership-level case was heard pursuant to section 6226(a)(1).On May 23, 2022, the Court issued its Memorandum Findings of Fact and Opinion (Opinion) in this case. See Genecure v. Commissioner, T.C. Memo. 2022-52. Among other things, we held that Genecure, L.L.C. (Genecure), is liable for a $230,979 recapture tax with respect to its taxable year 2010 for the excess amount it received as a Qualified Therapeutic Discovery Project grant. See id. at *2, *29-*32, *41. We arrived at this holding upon examining the evidence offered to substantiate the QTDP grant, which we ultimately found inadequate for Genecure to avoid recapture tax. See id. at *30-*32.
Unless indicated otherwise, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar.
On June 20, 2022, Frank Y. Tung (Mr. Tung), in his capacity as Genecure's Tax Matters Partner (TMP) and petitioner in this case, timely filed a Motion for Reconsideration (docket entry No. 106) pursuant to Rule 161. The gravamen of the Motion is a renewed attempt to avoid the $230,979 recapture tax. For the reasons elaborated upon below, we will deny Mr. Tung's Motion for Reconsideration.
Background
We incorporate herein our Findings of Fact in this case. See Genecure, T.C. Memo. 2022-52, at *2-*9.
In the Motion for Reconsideration, Mr. Tung argues that we incorrectly found that the $244,479 Genecure received as a QTDP grant in taxable year 2010 was attributable to qualified investments it reported (on Form 8942) for taxable year 2009. As a result of that finding, we concluded that Mr. Tung had to prove that Genecure actually paid for an additional $461,958 in qualified investments in taxable year 2009 in order to avoid the $230,979 in recapture tax, notwithstanding the fact that the IRS certification letter did not specify whether the certified qualified investments related to 2009, 2010, or both. See id. at *5, *31. Mr. Tung renews his contention that the grant was awarded to Genecure for qualified investments reported for both taxable years 2009 and 2010. Relatedly, he provides citations to the evidentiary record in an attempt to substantiate expenses for purposes of the QTDP grant; the evidence in question was previously cited on brief to substantiate deductions claimed under sections 162 and 174.
The $461,958 figure is derived from the $488,958 certified by the IRS as qualified investment when Genecure applied for the grant less the $27,000 conceded by respondent. The disputed recapture tax amount, $230,979, represents the $244,479 received as a grant (i.e., 50% of qualified investment pursuant to section 48D) less the $13,500 entitled by application of respondent's concession. See Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 9023(e)(5)(B)(i), 124 Stat. 119, 882 (2010).
Analysis
Rule 161 provides:
Any motion for reconsideration of an opinion or findings of fact, with or without a new or further trial, shall be filed within 30 days after a written opinion or the pages of the transcript that contain findings of fact or opinion stated orally pursuant to Rule 152 (or a written summary thereof) have been served, unless the Court shall otherwise permit.
Reconsideration under Rule 161 is designed to correct substantial errors of fact or law, and we will not exercise our discretionary authority to grant a motion thereunder in the absence of such error or unusual circumstance. See Estate of Quick v. Commissioner, 110 T.C. 440, 441 (1998). Reconsideration is not the appropriate forum to relitigate previously rejected legal arguments or to tender new legal theories to reach the end result desired by the moving party. See id. at 441-42.
With respect to Mr. Tung's assertion that we erroneously concluded the $244,479 QTDP grant was attributable to qualified investment reported for taxable year 2009, we find no error to disturb our finding. This finding was based on the parties' Joint First Stipulation of Facts, ¶ 11, which states in pertinent part:
Respondent granted Genecure's application for a Qualifying Therapeutic Discovery (QTDP) grant and awarded Genecure a $244,479 grant as a result of its reported investment expenses for 2009.
As was the case on brief when Mr. Tung previously raised his objection to the stipulation, we "decline[] to entertain [his] . . . inconsistent position as justice does not require [us] to release him from the binding effect of the stipulation. See Rule 91(e)." Genecure, T.C. Memo. 2022-52, at *31. Mr. Tung offered no justification on brief for doing so, see id., but now alleges that the stipulation was agreed to in error and that he requested his then-counsel to correct it. Mr. Tung so alleges without any citation to the evidentiary record, nor has he offered a declaration or affidavit from his prior counsel. We find this dilatory and wholly unsubstantiated justification insufficient to displace the binding effect of the stipulation.
The parties' Joint First Stipulation of Facts was executed on January 23, 2017, and signed by Jonathan A. Slack as counsel for Mr. Tung.
Moreover, as stated in the Opinion, we cannot come to any other conclusion regarding the reported investment expenses (i.e., 2009 versus 2010 or both) to which the QTDP grant relates given I.R.S. Notice 2010-45, 2010-23 I.R.B. 734. Section 5.02(10) therein provides that (1) if a taxpayer requests a grant for both 2009 and 2010 and (2) the aggregate qualified investment ultimately certified is less than that reported, then the amount certified must first be attributed to 2009 before 2010. Genecure requested a grant for both 2009 and 2010. The aggregate qualified investment ultimately certified was $488,985, which is less than the aggregate amount Genecure reported for both years, $1,660,000. Consequently, the $488,985 must first be attributed to the qualified investment reported for 2009, which was $600,000. As the amount certified is less than the amount reported for 2009, there is no residual amount to attribute to the investment expenses reported for 2010. Thus, the entirety of the $488,985 certified qualified investment (and by extension, the $244,479 QTDP grant awarded therefrom) must be attributed to 2009 expenses. None of preceding analysis is news to Mr. Tung, as we stated as much in the Opinion. See Genecure, T.C. Memo. 2022-52, at *31.
This notice was issued to provide taxpayers guidance on the procedures governing application for the QTDP credit and grant.
To the extent Mr. Tung quotes section 5.02(9) of Notice 2010-45 to argue that he is entitled to attribute the grant to both years, we must address his misleading characterization of that authority. Mr. Tung is correct to state that section 5.02(9) provides: "If the amount of the taxpayer's qualified investment certified by the Service is less than the taxpayer's total qualified investment for 2009 and 2010, then the taxpayer may attribute the certification to any of the qualified investment costs of the project(s) to which the certification relates." Nonetheless, he self-servingly omits the last clause of the aforementioned sentence, which states that it is "subject to the provisions of section 5.02(10) of this notice." (Emphasis added.)
Lastly, with respect to the additional citations to the evidentiary record raised by Mr. Tung in the present Motion to substantiate qualified investment expenses, we note that they (1) are dilatory and (2) refer to evidence previously cited to on brief to substantiate deductions under sections 162 and 174. We will not allow Mr. Tung to reformulate his arguments at this stage of the action to achieve his desired end result.
For the reasons elaborated upon above, it is
ORDERED that petitioner's Motion for Reconsideration (docket entry No. 106) is denied.