PARTNERSHIP LIMITATIONS PERIOD LENGTHENS PARTNER LIMITATIONS PERIOD, FIFTH CIRCUIT AFFIRMS.

JACQUES L. WIENER, JR., Circuit Judge:

Petitioner-Appellant Curr-Spec Partners, L.P. ("Curr-Spec"), asks us to interpret the interplay between the limitation provisions of Internal Revenue Code ("IRC") § 6229(a) and IRC § 6501(a). Specifically, we are asked to determine whether IRC § 6229(a) provides an independent limitations period for Respondent-Appellee Commissioner of Internal Revenue's (the "Commissioner's") issuance of a notice of Final Partnership Administrative Adjustment ("FPAA"). The Tax Court ruled in favor of the Commissioner, holding that IRC § 6229(a) does not provide a separate statute of limitations for partnership items and that the relevant limitations periods are those of each individual partner -- generally three years after the date of filing the individual's return -- as set forth in IRC § 6501(a).¹ The Tax Court reasoned that the limitations period of IRC § 6229(a) can prolong -- but can never shorten -- the period within which the Commissioner may assess individual tax liabilities attributable to partnership items. Although this issue of statutory interpretation is res nova in this circuit, the Tax Court sitting as an en banc-like court,² the D.C. Circuit,³ and the Federal Circuit⁴ have each resolved it in favor of the Commissioner. Affirming the Tax Court's decision, we now join these other courts and hold that IRC § 6229(a) does not establish an independent statute of limitations for issuing FPAAs.

The Commissioner responded that at least three Curr-Spec partners had claimed net operating loss carryforwards of a 1999 partnership item on their respective individual 2000 and 2001 returns. The Commissioner proposed to assess tax based on the claimed carryforwards on these partners' 2000 and 2001 returns, under the theory that the FPAA was issued less than three years after the partners had filed their respective individual tax returns for those tax years, viz., within the statute of limitations for individual returns as set forth in IRC § 6501(a).

The Tax Court ruled in favor of the Commissioner, emphasizing that the Internal Revenue Code "prescribes no period during which TEFRA⁵ partnership-level proceedings, which begin with the mailing of an FPAA, must be commenced." The court held that IRC § 6229(a) does not provide an assessment period independent of the three-year individual limitations period of IRC § 6501(a); that instead IRC § 6229(a) provides a three-year minimum, which can extend IRC § 6501(a)'s period, but cannot curtail it.

This timely appeal followed, in which Curr-Spec challenges only the timeliness of the FPAA.⁶

We review a Tax Court decision the same way that we would review a district court decision.⁷ In the instant case, Curr-Spec presents purely an issue of statutory interpretation, which we review de novo.⁸

B. Statutory Framework

"[TEFRA] . . . prescribes the administrative and litigation procedures for addressing partnership tax issues."⁹ "[It] requires partnerships to file informational returns reflecting the distributive shares of income, gains, deductions, and credits attributable to its partners. Accordingly, the individual partners are responsible for reporting their pro rata share of tax on their income tax returns."¹⁰ Items more appropriate for determination at the partnership level are designated "partnership items," which are to be treated at the partnership level; other items are designated "nonpartnership items," which are to be treated at the individual partner level.¹¹

When the IRS proposes an adjustment of taxes at the partnership level, it issues a notice of adjustment, the FPAA, which is analogous to the statutory notice of deficiency furnished to individuals.¹² After the FPAA becomes final, the Commissioner may assess tax to the individual partners whose tax returns for the year or years in question remain open under IRC § 6501(a), for those partners' distributive shares of the adjusted partnership items.¹³

IRC § 6501(a) is the three-year statute of limitations which is generally applicable to the Commissioner's assessment of tax. ¹⁴ That section states:

"When the plain language of a statute is unambiguous and does not lead to an absurd result, our inquiry begins and ends with the plain meaning of that language."²¹ The unambiguous language of IRC § 6229(a) and IRC § 6501(a) mandates our conclusion that IRC § 6501(a) creates a three-year limitations period within which the Commissioner must assess "any tax" on individual partners -- a period which IRC § 6229(a) can never shorten, regardless of the length of time that might have elapsed between the filing of the partnership's informational return and the Commissioner's issuance of an FPAA. Rather, IRC § 6229(a) establishes only the minimum time period that, when necessary, extends, i.e., supercedes, the general three-year limitations period of IRC § 6501(a). For partnership items, the otherwise applicable limitations period of IRC § 6501(a) "shall not expire before the date which is 3 years after the later of . . . the date on which the partnership return . . . was filed" or the date on which it was due.²² In reaching this conclusion, we find persuasive (1) the Tax Court's en banc decision in Rhone-Poulenc Surfactants & Specialties, L.P. v. Commissioner,²³ (2) the D.C. Circuit's opinion in Andantech L.L.C. v. Commissioner,²⁴ and (3) the Federal Circuit's opinion in AD Global Fund, LLC ex rel. North Hills Holding, Inc. v. United States. ²⁵

In Rhone-Poulenc, the Tax Court said:

The Federal Circuit, in AD Global Fund, reached the same result as had the D.C. Circuit and the en banc Tax Court before it. The court in AD Global Fund emphasized that

We perceive no flaw in the interpretations of those courts, which reached the instant issue before we did, and we adopt their analyses.³⁷ We emphasize, however, that once a partner's individual three-year statute of limitations under IRC § 6501(a) for any given tax year has run without that period having been extended under IRC § 6229 or any other statute,³⁸ the Commissioner has no authority to assess tax based on any partnership items against that partner for that closed tax year, even if the Commissioner subsequently issues an FPAA for that year. The plain language of IRC § 6501(a) guarantees as much. As counsel for the Commissioner represented at oral argument, "[i]f one partner carried [partnership losses] over ten years, but the others did not and used it all in '99, the Commissioner wouldn't be able to assess against them. . . . It's only to the extent that a partner's individual statute of limitations is still open that we could do an assessment."

The practical result of our holding today is that the Commissioner may issue an FPAA at anytime, subject only to the practical limitation that the FPAA may affect only those partners whose individual returns remain open under IRC § 6501(a) or some extension thereto, such as the minimum period of IRC § 6229(a), before which the statute of limitations may not expire. Stated differently, the Commissioner is free to assess partnership-item tax on any taxpayer who, on his individual tax return, has taken advantage of the now-challenged partnership items within the preceding three years (or, in the event of an extension, within the extended statute of limitations). Even though our holding will permit assessments against some partners and not against others, depending on their respective limitations periods under IRC § 6501(a), this interpretation is consistent with the other portions of IRC § 6229, which explicitly contemplate distinct treatment of different partners.³⁹ If Congress intended a different result, it is for Congress -- not this court -- to re-draft the statutory language.⁴⁰

We continue briefly to explain that our decision today does not contradict this circuit's precedent. On at least two occasions -- in Weiner v. United States⁴¹ and In re Martinez⁴² -- we have referred to IRC § 6229(a) as a three-year statute of limitations. Yet, those descriptions were mere dicta,⁴³ and they did not address the relationship of IRC § 6229(a) to IRC § 6501(a). They thus do not constrain today's decision. Weiner involved multiple partners who had commenced partner-level refund suits, arguing that IRC § 6229(a) statutorily barred an FPAA.⁴⁴ There we had no need to consider the merits of the taxpayers' argument because we determined that IRC § 7422(h) deprived us of jurisdiction.⁴⁵ IRC § 7422(h) provides that "[n]o action may be brought for a refund attributable to partnership items."⁴⁶ And, because we held that the IRC § 6229(a) period is a partnership item, "the district courts lack jurisdiction to decide the FPAA statute of limitations issue."⁴⁷ The jurisdictional issue was dispositive in Weiner; to the extent we discussed IRC § 6229 as a strict statute of limitations for the issuance of an FPAA, it was mere dicta.

In In re Martinez, the issue was the extent to which a partnership's conflicted tax-matters partner could bind the other partners to an agreement into which he and the Commissioner had entered to extend the IRC § 6229(a) period.⁴⁸ Under IRC § 6229(b)(1)(B), such agreements usually bind all partners.⁴⁹ The In re Martinez taxpayer (who was not the tax-matters partner) argued that the tax-matters partner's conflict of interest nullified his actions with respect to the partnership. We acknowledged that "there may be times when a tax matters partner's actions beneficial to himself are so contrary to the interests of the partnership that they are rendered null with respect to the partners." ⁵⁰ We concluded, however, that In re Martinez was not such a case, and that the extension granted to the Commissioner applied to all partners.⁵¹ As in Weiner, the interplay of IRC § 6229(a) and IRC § 6501(a) was not at issue, and our reference to IRC § 6229(a) as a three-year statute of limitations was dicta. We thus have not previously had occasion to address squarely the instant issue, and our decision today is not in conflict with our precedent.⁵²

AFFIRMED.

²Rhone-Poulenc Surfactants & Specialties, L.P. v. Commissioner, 114 T.C. 533, 2000 WL 863142 (2000) (en banc). Technically, the Tax Court does not sit en banc. Nevertheless, the full Tax Court reviews cases that the Chief Judge selects for review by the entire court. See IRC § 7460; David F. Shores, Deferential Review of Tax Court Decisions: Dobson Revisited, 49 TAX LAW. 629, 646 n.117 (1996). Rhone-Poulenc is one such case, and, for simplicity, we will refer to it as decided en banc.

³Andantech L.L.C. v. Commissioner, 331 F.3d 972 (D.C. Cir. 2003).

⁴ AD Global Fund, LLC ex rel. N. Hills Holding, Inc. v. United States, 481 F.3d 1351 (Fed. Cir. 2007).

⁵ "TEFRA" is the Tax Equity and Fiscal Responsibility Act of 1982.

⁶ In the instant proceedings, Curr-Spec has stipulated to the merits of the Commissioner's adjustments in the FPAA.

⁷Minton v. Commissioner, 562 F.3d 730, 734 (5th Cir. 2009) (per curiam).

⁸Copeland v. Commissioner, 290 F.3d 326, 329 (5th Cir. 2002).

⁹United States v. Martinez (In re Martinez), 564 F.3d 719, 726 (5th Cir. 2009) (citing Pub. L. No. 97-248, § 402(a), 96 Stat. 648, 653 (1982) (codified as amended at IRC§§ 6221-23)).

¹⁰Weiner v. United States, 389 F.3d 152, 154 (5th Cir. 2004) (internal citation omitted); see IRC § 6031 (partnership returns); id. §§ 701-04 (individual partners' reporting distributive shares of partnership income).

¹¹In re Martinez, 564 F.3d at 726; see IRC § 6221 (mandating that partnership items be determined at the partnership level). A "partnership item" is statutorily defined as:

¹²In re Martinez, 564 F.3d at 726 (citing IRC § 6223(a)).

¹³See IRC § 6225(a) (stating that the FPAA becomes final if it goes unchallenged for 150 days, or upon final judicial resolution of a petition for review of the FPAA). The IRS may sometimes assess this tax on individual partners, without notice, as a computational adjustment. See Callaway v. Commissioner, 231 F.3d 106, 109-10 (2d Cir. 2000) (citing IRC§§ 6225(a), 6230(a)(1), 6231(a)(6)). Other times, factual determinations of "affected items" at the partner level are necessary, which requires the issuance of a notice of deficiency. See id. at 110 (citing IRC § 6230(a)(2)(A)(i)); see also IRC § 6231(a)(5) (defining "affected item" as "any item to the extent such item is affected by a partnership item").

¹⁴Payne v. Commissioner, 224 F.3d 415, 419-20 (5th Cir. 2000). This statute of limitations is subject to provisions in IRC § 6501, IRC § 6503, and elsewhere that toll the limitations period, see Doe v. KPMG, LLP, 398 F.3d 686, 688-89 (5th Cir. 2005), none of which are at issue in the instant appeal.

¹⁵ IRC § 6501(a) (emphasis added).

¹⁶Id. § 6229(a) (emphasis added).

¹⁷ As in the principal issue of statutory interpretation presented in Curr-Spec's appeal, our review of the Tax Court's jurisdiction is de novo. Ferguson v. Commissioner, 568 F.3d 498, 502 (5th Cir. 2009).

¹⁸ IRC § 6226(f).

¹⁹Id. § 6226(d)(1) (emphasis added).

²⁰ Our opinion in Weiner v. United States is not to the contrary. 389 F.3d 152 (5th Cir. 2004). We decided that case on the dissimilar issue "whether district courts have jurisdiction to decide the FPAA statute of limitations question in [individual] refund actions." Id. at 155. More specifically, we asked "whether the taxpayers' refund requests [were] attributable to any partnership item such that the district court would be deprived of jurisdiction." Id. We concluded that IRC § 6229(a)'s period was a partnership item and that thus "the district courts lack jurisdiction to decide the FPAA statute of limitations issue" (which, today, we conclusively determine is not an independent "statute of limitations"). See id. at 156, 159. In Weiner, we had no occasion to inquire whether, in a partnership proceeding, the Tax Court was deprived of jurisdiction to consider the filing date of a partner's individual return.

²¹United States v. Dison, --- F.3d ---, 2009 WL 1759029, at *2 (5th Cir. 2009) (internal quotation marks and citation omitted).

²² IRC § 6229(a) (emphasis added).

²³ 114 T.C. 533, 2000 WL 863142 (2000) (en banc).

²⁴ 331 F.3d 972 (D.C. Cir. 2003).

²⁵ 481 F.3d 1351 (Fed. Cir. 2007). The Ninth Circuit has also referred to IRC § 6229(a) as a minimum period for assessment. Bakersfield Energy Partners, LP v. Commissioner, 568 F.3d 767, 770 n.5 (9th Cir. 2009) ("Subsection (a) [of IRC § 6229] provides the minimum time period in which the IRS can assess a tax deficiency.").

²⁶ 114 T.C. at 542 (internal citations and footnotes omitted) (emphases added by Tax Court).

²⁷ 331 F.3d at 977.

²⁸Id.

²⁹Id.

³⁰ 481 F.3d at 1354 (internal citation omitted).

³¹Id. (quoting IRC § 6501(a)).

³²Id.; see Salman Ranch Ltd. v. United States, --- F.3d ---, 2009 WL 2256020, at *3 (Fed. Cir. 2009) (explaining that the general three-year period of IRC § 6501(a) applies to partnership items and that IRC § 6229(a) sets only a minimum period for assessments of partnership items).

³³AD Global Fund, 481 F.3d at 1354 (quoting Barnhart v. Sigmon Coal Co., 534 U.S. 438, 452 (2002)).

³⁴Id. at 1354-55.

³⁵Id. at 1355.

³⁶Id.

³⁷ The unambiguous statutory language mandates our result today. Nevertheless, even if the correct decision were not so clear, we would look to the opinions of the D.C. and Federal Circuits for persuasive guidance. See Alfaro v. Commissioner, 349 F.3d 225, 229 (5th Cir. 2003) ("We are always chary to create a circuit split.").

³⁸ The limitations period may be extended for any of several reasons. As we have discussed, IRC § 6229(a) provides for an extension when three years from the date the partnership return is filed or is due has not yet expired. The IRC § 6229(a) period itself is suspended when the Commissioner files an FPAA. See IRC § 6229(d). The FPAA suspends the running of the IRC § 6229(a) period until one year after the close of the period during which a petition for readjustment of the partnership items may be filed, or, if such a petition is filed, one year after the court's decision in that proceeding becomes final. Id.; see United States v. Martinez (In re Martinez), 564 F.3d, 719, 727 (5th Cir. 2009). Of course, if a partner's limitations period has already closed, IRC § 6229(d) cannot re-open that period.

An individual's limitations period would also be extended forever if that person filed "a false or fraudulent return with the intent to evade tax." IRC § 6501(c)(1).

³⁹See, e.g., IRC § 6229(b)(1)(A) (permitting partners to enter into individual agreements with the Commissioner to extend the three-year period of IRC § 6229(a)); id. § 6229(c)(1)(setting different limitations periods for partners when a partnership submits a false or fraudulent return, depending on each partner's involvement in the fraud); id. § 6229(h)(providing for a suspension of the IRC § 6229(a) period for a partner who enters bankruptcy proceedings).

⁴⁰Lamie v. U.S. Trustee, 540 U.S. 526, 542 (2004) ("If Congress enacted into law something different from what it intended, then it should amend the statute to conform to its intent.").

⁴¹ 389 F.3d 152, 154-55 (5th Cir. 2004).

⁴²United States v. Martinez (In re Martinez), 564 F.3d 719, 724, 726 (5th Cir. 2009).

⁴³See Centennial Ins. Co. v. Ryder Truck Rental, Inc., 149 F.3d 378, 385-86 (5th Cir. 1998) ("That which is 'obiter dictum' is stated only 'by the way' to the holding of a case and does not constitute an essential or integral part of the legal reasoning behind a decision." (citing Charles W. Collier, Precedent and Legal Authority, 1988 WIS.L.REV. 771, 772)); see also United States v. Crawley, 837 F.2d 291, 292 (7th Cir. 1988) (Posner, J.) (noting that as a practical matter, a court can determine whether a particular passage in an earlier opinion is dictum by considering factors such as whether "the passage was unnecessary to the outcome of the earlier case and therefore perhaps not as fully considered as it would have been if it were essential to the outcome," or whether "the passage was not an integral part of the earlier opinion -- it can be sloughed off without damaging the analytical structure of the opinion, and so it was a redundant part of that opinion and, again, may not have been fully considered").

⁴⁴ 389 F.3d at 156.

⁴⁵Id. at 156-59.

⁴⁶ IRC § 7422(h).

⁴⁷See Weiner, 389 F.3d at 156, 159. We did state, however, that one factor in favor of determination at the partnership level was that "[t]he timeliness of an FPAA affects the IRS's ability to make adjustments to partnership items, which in turn affects all partners alike." Id. at 158. This statement remains true because an extension of the IRC § 6501(a) statute of limitations by IRC § 6229(a) affects the IRS's ability to adjust partnership items, which affects all partners alike.

⁴⁸United States v. Martinez (In re Martinez), 564 F.3d 719, 727 (5th Cir. 2009).

⁴⁹See IRC § 6229(b)(1)(B) ("The period described in subsection (a) . . . may be extended . . . with respect to all partners, by an agreement entered into by the Secretary and the tax matters partner . . . before the expiration of such period.").

⁵⁰In re Martinez, 564 F.3d at 728.

⁵¹Id.

⁵² Curr-Spec also interprets the Second Circuit's opinion in Callaway as rejecting Rhone-Poulenc. Callaway v. Commissioner, 231 F.3d 106, 110 (2d Cir. 2000). As in our circuit's precedent, Callaway's discussion of IRC § 6229(a) occurred in dicta. See id. at 110 (referring to IRC § 6229 as a three-year statute of limitations, which "supercedes" the individual partner's three-year period under IRC § 6501); id. at 112-13 (describing the effect that IRC § 6229(a) would have had in the absence of an extension). The issue in Callaway was the conversion of partnership items into nonpartnership items. See id. at 116. The relationship of IRC § 6229(a) to IRC § 6501(a) was not at issue. In fact, Callaway interpreted the similar "shall not expire before . . . 1 year" language of IRC § 6229(f) as prescribing the time within which "the limitations period on assessments . . . could not have expired sooner." Id. at 122 & n.20 (emphasis in original). The court expressly said that, depending on the facts, such a provision might "not provide the limiting date." Id. Our analysis in the instant case is consistent with such an interpretation. Additionally, the Second Circuit has, in a subsequent case, cautioned that IRC "section 6229(a), by its terms, does not purport to limit the time available to assess tax, but only to extend limitations otherwise applicable." Field v. United States, 381 F.3d 109, 112 n.1 (2d Cir. 2004) (emphasis in original). Such language offers a clear indication that the Second Circuit does not view Callaway as having held the opposite. See U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., 241 F.3d 135, 149 (2d Cir. 2001) ("[W]e will not overrule a prior decision of a panel of this Court absent a change in the law by higher authority or by way of an in banc proceeding of this Court." (internal quotation marks omitted)).