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Halyard Holdings, LLC v. Comm'r of Internal Revenue

United States Tax Court
Nov 30, 2022
No. 14145-21 (U.S.T.C. Nov. 30, 2022)

Opinion

14145-21

11-30-2022

HALYARD HOLDINGS, LLC, HALYARD HOLDINGS GROUP, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent


ORDER

Joseph Robert Goeke Judge

On May 21, 2022, respondent filed a Motion for Partial Summary Judgment that he complied with the supervisory approval requirements of section 6751(b)(1), and on October 19, 2022, filed a First Supplement to Motion for Partial Summary Judgment. On November 10, 2022, petitioner filed a Response to Motion for Partial Summary Judgment, objecting to respondent's Motion.

All statutory references are to the Internal Revenue Code in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure

Standards for Summary Judgment

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(b) the Court may grant summary judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment, we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party. Id. However, the nonmoving party may not rest upon the mere allegations or denials of his pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); see Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).

Background

The following background is based on the parties' pleading and motion papers including declarations and exhibits attached thereto. In the Petition, petitioner asserted that Halyard Holdings, LLC (Halyard) had a mailing address in Georgia and its principal place of business in Florida when the Petition was filed. Accordingly, this case would be appealable to the Eleventh Circuit. See § 7482(b)(1)(E).

In a Notice of Final Partnership Administrative Adjustment (FPAA) dated April 15, 2021, respondent asserted penalties for a gross valuation misstatement under section 6662(h), a reportable transaction understatement under section 6662A, a substantial valuation misstatement under section 6662(e), and negligence or substantial understatement under section 6662(a) (FPAA penalties). Petitioner filed the Petition on July 12, 2021, and respondent alleged a section 6663 fraud penalty in the Answer filed November 9, 2021.

Revenue Agent (RA) James L. Person made the initial determination to assert the FPAA penalties and obtained written approval from his supervisor, Kenneth Glover Sr., on March 11, 2021, before respondent first communicated the FPAA penalty determinations to petitioner by Letter 1807-A dated March 25, 2021, which was reviewed and reissued on April 6, 2021, correcting an error in Halyard's name and address.

Respondent's counsel Emily Giomett made the initial determination to assert the fraud penalty. Her immediate supervisor was Strategic Litigation Counsel Travis Vance, and her immediate supervisor for this case was Senior Level Strategic Litigation Counsel R. Scott Shieldes. Ms. Giometti communicated the fraud penalty determination to both Mr. Vance and Mr. Shieldes by a penalty recommendation memorandum, dated November 5, 2021, which Mr. Shieldes signed on November 7, 2021, and Mr. Vance signed on November 8, 2021. Mr. Vance and Mr. Shieldes also signed the Answer. The Answer was the first formal communication of the fraud penalty determination to petitioner.

Discussion

Section 6751(b)(1) provides that "No penalty ... shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate."

On September 13, 2022, the Court of Appeals for the Eleventh Circuit held in Kroner v. Commissioner, 48 F.4th 1272, 1274 (11th Cir. 2022), rev'g in part T.C. Memo. 2020-73, that section 6751(b)(1) requires written supervisory approval to occur before assessment. By Order dated September 29, 2022, the Court directed the parties to address the applicability of Kroner to the facts of this case. See Golsen v. Commissioner, 54 T.C. 742, 756-757 (1970) aff'd, 445 F.2d 985 (10th Cir. 1971). Petitioner has not distinguished this case from Kroner. Thus, respondent has met the requirements of section 6751(b)(1) as interpreted by the Eleventh Circuit. Assessment has not yet occurred, and there is no genuine dispute of material fact that respondent obtained written supervisory approval of the FPAA and fraud penalties in compliance with section 6751(b)(1).

Respondent has established through declarations and exhibits attached thereto the facts relating to the initial determinations and written supervisory approvals for the fraud and FPAA penalties. There is no genuine dispute of material fact that respondent has complied with the section 6751(b)(1) requirements as set forth by this Court. See Belair Woods, LLC v. Commissioner, 154 T.C. 1 (2020); Palmolive Bldg. Inv'rs, LLC v. Commissioner, 152 T.C. 75, 83 (2019). Petitioner has made various allegations concerning the supervisors' authority and verification of electronic signatures. This Court has repeatedly rejected similar arguments. See Patel v. Commissioner, T.C. Memo. 2020-133, at *9; Raifman v. Commissioner, T.C. Memo. 2018-101, at *21.

Upon due consideration, it is ORDERED that respondent's Motion for Partial Summary Judgment, as supplemented, is granted.


Summaries of

Halyard Holdings, LLC v. Comm'r of Internal Revenue

United States Tax Court
Nov 30, 2022
No. 14145-21 (U.S.T.C. Nov. 30, 2022)
Case details for

Halyard Holdings, LLC v. Comm'r of Internal Revenue

Case Details

Full title:HALYARD HOLDINGS, LLC, HALYARD HOLDINGS GROUP, LLC, TAX MATTERS PARTNER…

Court:United States Tax Court

Date published: Nov 30, 2022

Citations

No. 14145-21 (U.S.T.C. Nov. 30, 2022)