Interior Glass Systems, Inc. v. United States, No. 17-15713 (9th Cir. 2019)Annotate this Case
The Ninth Circuit affirmed the district court's grant of summary judgment for the United States in a tax refund action. On appeal, taxpayer argued that the penalties were wrongly imposed because it did not actually participate in a listed transaction and thus had nothing to disclose, and that its due process rights were violated because it was not afforded an opportunity for pre-collection judicial review.
The court found neither contention meritorious, holding that taxpayer was required to disclose its participation in the transaction at issue because it was similar to the listed transaction identified in Notice 2007-83. The court held that taxpayer could not evade a finding of substantial similarity solely by claiming a deduction on a different basis or by using a different intermediary to complete the transaction. The court also held that taxpayer received all the process it was due where the combination of pre-collection administrative review plus post-collection judicial review satisfied the requirements of the Due Process Clause.
Court Description: Tax The panel affirmed the district court’s summary judgment in favor of the United States in a tax refund action by taxpayer Interior Glass Systems, Inc. Taxpayer joined a Group Life Insurance Term Plan (GLTP) to fund a cash-value life insurance policy owned by its sole shareholder and only employee. Under Notice 2007- 83, the Internal Revenue Service requires disclosure of certain “listed transactions” that involve cash-value life insurance policies, because of their potential for use in tax- avoidance schemes. The parties agree that taxpayer’s transaction satisfies three of the four elements of a listed transaction. The district court determined that taxpayer’s transaction—joining the GLTP—was substantially similar to a listed transaction and should have been disclosed, and the panel agreed. The panel also held that taxpayer’s procedural due process rights were not violated when it was required to pay penalties for non-disclosure in full before seeking judicial review. The panel held that taxpayer was not entitled to pre- collection judicial review under Jolly v. United States, 764 F.2d 642 (9th Cir. 1985).