Individual Argues USVI Return Triggered Limitations Period

Judith S. Coffey and Government of the United States Virgin Islands (“V.I. Government”),
Appellees,
v.
Commissioner of Internal Revenue,
Appellant.

Estate of James Coffey, Judith S. Coffey Executrix,
Appellee,
v.
Commissioner of Internal Revenue,
Appellant.

In the United States Court of Appeals
for the Eighth Circuit

Appeal from the United States Tax Court.
(004720-10)
(004949-10)

SEALED BRIEF OF APPELLEES

RANDALL P. ANDREOZZI, ESQ.
HEATHER L. MARELLO, ESQ.
MICHAEL J. TEDESCO, ESQ.
ANDREOZZI BLUESTEIN LLP
9145 Main Street
Clarence, New York 14031
(716) 565-1100

Attorneys for Appellees
Judith S. Coffey, Estate of James Coffey

SUMMARY OF THE CASE & REQUEST FOR ORAL ARGUMENT

Appellees filed their 2003 and 2004 Forms 1040 with the Virgin Islands Bureau of Internal Revenue (“VIBIR”) pursuant to 26 U.S.C. §932(c)(2).¹ Under established protocol, VIBIR sent copies of the Forms 1040 and specified attachments to Appellant's Philadelphia Service Center so that Appellant could allocate Appellees' tax prepayments that he held with respect to those returns among himself and VIBIR and refund any excess to Appellees. In this case, Appellant decided to examine the returns pursuant to his authority and responsibility under §932(c)(4). Upon completion of his examination, Appellant challenged various positions taken in the returns, including Appellees' position of bona fide USVI residency. But Appellant issued his Notices of Deficiency reflecting these determinations after the period of limitations under §6501(a) had expired. Accordingly, Appellees moved for summary judgment. The Tax Court granted Appellees' Motion.

Appellant now appeals. Pursuant to 8th Cir. R. 28A(i)(1), Appellees request oral argument allocating 30 minutes per side.

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 TABLE OF CONTENTS

SUMMARY OF THE CASE & REQUEST FOR ORAL ARGUMENT

TABLE OF AUTHORITIES

STATEMENT OF THE ISSUE

STATEMENT OF THE CASE

SUMMARY OF ARGUMENT

ARGUMENT

I. The Tax Court Opinions

II. Appellant's General Attacks on the Lead and Plurality Opinions on Brief Lack Merit

III. Appellant's Attacks on the Plurality Opinion Fail

IV. Appellant's Attacks on the Lead Opinion Fail

V. A Brief Word on Appellant's Unwarranted Disparagement of Appellees

CONCLUSION

TABLE OF AUTHORITIES

Appleton v. Commissioner, 140 T.C. 273 (T.C. 2013) 

Beard v. Commissioner, 82 T.C. 766 (1984), aff’d, 793 F.2d 139 (6th Cir. 1986)

Coffey v. Commissioner v. Gov. of the USVI, No. 11-1362 (8th Cir. 2011) 

Coffey v. Commissioner, 663 F.3d 947 (8th Cir. 2011) 

Colsen v. United States (In re Colsen), 446 F.3d 836 (8th Cir. 2006) 

Commissioner v. Estate of Sanders, 834 F.3d. 1269 (11th Cir. 2016) 

Germantown Trust Co. v. Commissioner, 309 U.S. 304 (1940) 

Mabel Elevator Co. v. Commissioner, 2 B.T.A. 517 (1925) 

New Capital Fire Inc. v. Commissioner, No. 25858-12, 2017 Tax Ct. Memo LEXIS 176 (T.C. Sep. 11, 2017) 

United States v. Auffenberg, 1:07-cr-00047-HB-GWB (Sept. 30, 2008) 

United States v. Boitano, 796 F.3d 1160 (9th Cir. 2015) 

Zellerbach Paper Co. v. Helvering, 293 U.S. 172 (1934)

Rules, Regulations and Statutes

26 C.F.R. § 1.932-1(c)(2)(B)(ii)

26 C.F.R. § 1.932-1(c)(2)(ii)

26 C.F.R. § 1.932-1(c)(3)

18 U.S.C. § 371

26 U.S.C. § 932

26 U.S.C. § 932(a)(2)

26 U.S.C. § 932(c)

26 U.S.C. § 932(c)(2)

26 U.S.C. § 932(c)(4)

26 U.S.C. § 932(c)(4)(A)

26 U.S.C. § 932(c)(4)(B)

26 U.S.C. § 932(c)(4)(C)

26 U.S.C. § 932(d)

26 U.S.C. § 932(e)

26 U.S.C. § 934

26 U.S.C. § 6011

26 U.S.C. § 6012

26 U.S.C. § 6012(a)

26 U.S.C. § 60911

26 U.S.C. § 6103

26 U.S.C. § 6402

26 U.S.C. § 6501

26 U.S.C. § 6501(a)

26 U.S.C. § 6501(g)

26 U.S.C. § 6511

26 U.S.C. § 6611(g)(1)

26 U.S.C. § 7201

26 U.S.C. § 7206

26 U.S.C. § 7654

26 U.S.C. § 7654(a)

26 U.S.C. § 7654(e)

Chief Counsel Memorandum 200624002, https://www.irs.gov/pub/irs-wd/0624002.pdf

Federal Register, Vol. 73. No. 69, April 9, 2008

Pub. L. No. 99-514

Pub. L. No. 99-514 § 1277(c)(1)

S. Rept. 100-445 (1988)

Senate Report 99-313; 99th Congress; 2d Session; H.R. 3838; Virgin Islands

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STATEMENT OF THE ISSUE

Whether the statute of limitations under §6501(a) for assessing Federal income tax — which starts on the date the taxpayer files her tax return — begins when a taxpayer files her §932(c)(2) return with VIBIR taking the position that she is a bona fide resident of the Virgin Islands (hereinafter “USVI resident”) or, alternatively, when VIBIR sends Appellant a copy of such return and select attachments under procedures established between Appellant and VIBIR. Appellant concedes that filing the §932(c)(2) return with VIBIR starts the limitations period but argues that if he subsequently examines the return and challenges the taxpayer's return position on USVI residency, he thereby nullifies the §932(c)(2) return such that the taxpayer loses the protections afforded by §6501(a).

The most apposite authorities are:

STATEMENT OF THE CASE

A. Procedural Posture

The Tax Court granted Appellees' Motions for Summary Judgment, holding that the statute of limitations under §6501(a) expired before Appellant issued his Statutory Notices of Deficiency for 2003 and 2004, and consequently the proposed tax deficiencies or additions to tax were time-barred. The Tax Court issued a final decision and order that no deficiencies in tax or additions to tax are due. Appellant appeals that decision and order. Appellees oppose.

B. Facts and §932 Filing Regime and Protocol

Appellant concedes that when an individual files her Form 1040 with VIBIR pursuant to §932(c)(2), that return is a tax return for purposes of §6501(a), but he argues that if he examines that same return and challenges under §932(c)(4)(A) the USVI residency position taken thereon, then the return is no longer a return for purposes of §6501(a). Appellant's Brief at 27 (“Br.”). He claims that his after-the-fact residency challenge causes the §932(c)(2) return to effectively disappear such that he has no access it, no authority over it, no ability to examine it, no responsibility with respect to it, and no way of knowing whether it was even filed. He concludes that, since he caused the return to disappear, there exists no return to trigger the statute of limitations.

This manufactured argument fails once Appellant acknowledges, as he must, that that he possesses the authority and responsibility to examine §932(c)(2) returns under §932(c)(4). The Tax Court Judge confronted Appellant's counsel with this very fact.And what did Appellant's counsel do? He falsely — and rather vehemently — denied such authority:

THE COURT: Well, they're saying you can choose to do so in auditing the compliance with the three (c)(4) factors: bona fide residence, reporting all your income and fully paying your tax, but that if residency is determined the same way to get you into (c)(4), namely the same Vento-type test, well then (c)(4)(A) would be completely surplus, because to get there in the first place, you would already be making a determination under (c)(4)(A).

MR. BERWIND: This is where I feel I'm going mad. We are — I'm serious. We are auditing Mrs. Coffey as a non-filer. Contrary to what they've been telling you, we have no authority to audit the territorial return that she filed with the VIBIR. We have no authority to do that. We have made that argument in our moving papers. They are not our agent; we do not have authority to step on their toes. We audit federal returns. She has not filed one. She's filed a territorial return. . . . We're not saying those are not valid returns. We don't care. Initially we don't care because we haven't received a return. We are the United States government, not that territory. We have not received a return from Mrs. Coffey and until we do, the statute of limitations cannot by law start to run.

SJA 532:5-533:10 (Emphasis added).¹

Appellant's assertions to the Tax Court are false, and he knows they are false. In this case and others, Appellant, when it suited his purposes in opposing the USVI Government's intervention, extolled his exclusive authority under §932(c)(4). For example, the same lawyer for Appellant quoted above, in another case, stated:

As a threshold matter, the authority to administer the federal tax law is granted by Congress to the Secretary of the Treasury or his delegate. See I.R.C. §7801. That authority has been delegated to Respondent under I.R.C. §7803. None of it has been delegated to the USVI. The VIBIR's administrative authority extends only to the mirror code, and I.R.C. §§932 and 934 are not provisions of that code. . . . I.R.C. §932(c) is a requirement of federal, not territorial, income tax law. . . . [IRS], not movant, administers I.R.C. §932. . . .

Commissioner/Respondent's Memorandum of Law in Support of Respondent's Notice of Objection to the Motion of the Government of the USVI to Intervene, Issam Khoury v. Commissioner, Dkt. No. 10291-09 (filed Nov. 16, 2011) at 19 and 21 (hereafter, “Appellant's Khoury v. Commissioner Brief”; See also, SJA 633:5-634:21.

Appellant made precisely the same representations to this Court in this very case:

The USVI's claim that it administers the Code sections at issue in the statute-of-limitations issue is incorrect as a matter of law. The issue turns on the impact of I.R.C. § 932(c)(4) on (1) the requirement of an individual or entity's I.R.C. §6012 obligation to file a federal tax return and pay federal taxes on their income and (2) the running of the I.R.C. §6501(a) statute of limitations. As a matter of law, the USVI does not administer these provisions and, most particularly, does not administer Section 932(c)(4). (JA268.)

Coffey Petitioner, v. Commissioner of Internal Revenue, Appellee, Government of the USVI, Appellant, Appellate Case 11-1362, filed May 10, 2011 at 63-65.

And this Court confirmed Appellant's authority: “The IRS retains audit and assessment powers" over returns filed with VIBIR. Coffey v. Commissioner v. Gov. of the USVI, No. 11-1362 (8th Cir. 2011) at 2.

Since the enactment of §932, Appellant has always possessed the authority and responsibility to examine §932(c)(2) returns. He regularly asserts and exercises that authority. Now, to salvage his time-barred Notices of Deficiency, he misrepresents to the Courts that he has no such authority. He denies that the returns are Federally mandated because to acknowledge the fact is to concede that the statute of limitations starts when those returns are filed with VIBIR.

Because Appellant attempts this false denial, and because such false denial nearly succeeded below but for the Tax Court's careful reconsideration, Appellees respectfully request this Court's indulgence as they summarize herein Appellant's implementation of his administrative framework for processing §932(c)(2) returns in accordance with his statutory authority and obligations under §932 and, specifically, §932 (c)(4). To facilitate his authority and responsibility, Appellant and VIBIR entered into the 1987 Tax Implementation Agreement (“TIA”) and many subsequent facilitating Memoranda of Understanding (“MOUs”). * * * All of this applies during the years at issue in this case, and Appellant cannot deny it. He has expressly admitted it in other cases and Appellees have placed his counsel on notice that they will oppose any attempt to dodge such admissions in this case.

i. The §932 Filing Regime

Section 932 sets forth the Federal filing requirements for (1) U.S. citizens or residents with USVI-source or USVI-effectively connected income who are not USVI residents and (2) U.S. citizens who are USVI residents. Individuals filing their returns as USVI residents must file their Form 1040 with VIBIR under §932(c)(2). Individuals filing their returns as non-USVI residents who have USVI-source or USVI-effectively connected income must file their Form 1040 with Appellant under §932(a)(2) and remit their allocable share of tax to VIBIR using Form 8689 (Allocation of Individual Income Tax to the U.S. Virgin Islands) along with a copy of their Form 1040. These filings are Federally-mandated and taxpayers taking a particular residency position do not get to choose where they file their returns.

A U.S. citizen who files her return under §932(c)(2) taking the position that she is a USVI resident has an inherent income tax liability to the U.S., but Appellant's calculation of that U.S. tax liability shall not include the gross income she reported on the tax return she filed with VIBIR as long as she meets three specific requirements: (A) she correctly took the position on the return of USVI residency; (B) she correctly reported her taxable income and identified income from all sources; and (C) she paid her full tax liability to VIBIR. §§932(c)(4)(A), (B) and (C). If the taxpayer meets all of these requirements, then her tax liability to the U.S. does not include any gross income reported on the §932(c)(2) return. §932(c)(4). If the taxpayer fails any or all of these three requirements, then her tax liability to the U.S. shall include the gross income reported on her tax return and Appellant shall calculate that tax liability accordingly, allowing her a credit for any taxes paid to VIBIR. Treas. Reg. §1.932-1(c)(3).

Appellant is charged with determining tax liabilities established under Chapter 1 of the Internal Revenue Code. Section 932(c) is part of Chapter 1 and establishes the U.S. tax liability for USVI residents. The taxes under §932(c) are “taxes imposed by Chapter 1” of the Federal Code. §§932(c), 932(e), 7654(a). Appellant is authorized to process and examine returns filed with VIBIR to determine whether they satisfy all of the §932(c)(4) requirements. He is charged with ensuring that the appropriate amount of tax is collected under Chapter 1 of the Federal Code and correctly allocated among Appellant and VIBIR with any remainder refunded to the taxpayer. Section 7654 coordinates this processing of tax prepayments made to Appellant by or on behalf of the taxpayer.

Congress mandated that the U.S. Secretary of the Treasury prescribe regulations and establish protocol necessary to carry out such coordination and allocation of the Federal taxes generated under §932(c), including, inter alia, regulations prescribing the information VIBIR shall furnish to the Secretary. §7654(e). Congress reiterated the mandate in section 1277(c)(1) of the Tax Reform Act of 1986, Pub. L. No. 99-514, stating that certain provisions of the then-new law would “become effective only when an agreement between the United States and the Virgin Islands to cooperate on tax matters became effective.” Senate Report 99-313; 99th Congress; 2d Session; H.R. 3838; Virgin Islands.

ii. Appellant's Administrative Protocol

Per Congress' mandate, Appellant and VIBIR entered into the 1987 TIA. This TIA acknowledges Appellant's authority to inspect and examine tax returns filed with VIBIR in carrying out his responsibilities under §932(c)(4). It mandates that Appellant and VIBIR exchange information and provide mutual assistance to effectively administer the internal revenue laws. JA 362-75, 372 at sec. 3.1, 369 at §1.11. Coffey v. Commissioner, No. 11-1362, at 4.

Pursuant to the TIA, Appellant and VIBIR entered into several MOUs to memorialize their coordination and information-sharing, all toward accommodating Appellant in performing his responsibility under §932(c) and the TIA. Some of the MOUs are public, and some are designated confidential and subject to the Tax Court's October 22, 2012 Protective Order. SJA 7-43.

* * * The purpose of this notification is to ensure that Appellant suppresses income tax delinquency notices to taxpayers who have filed in the USVI that might otherwise be incorrectly generated based on Forms W-2, 1099 or other information returns filed for such taxpayers. SJA 47. This illustrates Appellant's understanding that taxpayers who file their tax returns with VIBIR are not delinquent in filing their Federal tax returns with Appellant because the USVI filing satisfies their Federal filing requirements. Since it executed the TIA in 1987 through today, VIBIR has “regularly and consistently” provided Appellant with access to tax returns and return information for U.S. citizens who file their returns with VIBIR. JA 780-81.

Appellant requires access to §932(c)(2) returns because he is responsible for examining them and to confirm proper U.S. tax liabilities thereon. * * * Return classification is standard protocol in the Internal Revenue Manual whereby Appellant's Revenue Agents review and inspect tax returns at IRS filing centers to select returns for examination and identify issues to be addressed in the examinations. SJA 262-86. * * *

* * * This assures taxpayers like Appellees that Appellant will properly credit their tax payments, pay to VIBIR its allocable share of tax prepayments he holds, and refund to the taxpayers any overpayment. SJA 180-181; 127-129. Appellees were entitled to rely on those assurances in this case.

The instructions and guidance Appellant and the U.S. Department of Treasury published and made available to Appellees for filing their §932(c)(2) returns with VIBIR are entirely consistent with the information-sharing protocol set forth above.

iii. Appellees' Filings Under §932(c)(2)

The Forms 1040 Appellees used to file their §932(c)(2) returns with VIBIR are captioned “Department of the Treasury — Internal Revenue Service[,] U.S. Individual Income Tax Return.” Appellees timely filed those returns for 2003 and 2004 with VIBIR taking the position that they were USVI residents.² SJA 80-100 and 103-125. These filings complied with Appellant's Form 1040 Instructions for “permanent residents of the Virgin Islands”³ and his Publication 570 (Tax Guide for Individuals With Income From U.S. Possessions) for a “bona fide resident of the Virgin Islands.” JA 419-20, 422-23, 434-48 and 450-64. Appellees claimed credits on those returns against their tax liabilities for Federal income tax withholdings they paid to Appellant during 2003 and 2004 totaling $47,124.10 and $4,755.79, respectively. JA 267 and 271.

VIBIR received, processed and recorded Appellees' §932(c)(2) returns as filed “Forms 1040.” JA 242-44 and 246. Per the protocol described above, VIBIR imaged and transmitted Appellees' 2003 and 2004 Forms 1040 with certain specified attachments to Appellant's Philadelphia Campus. JA 265-267 and 269-271, SJA 100. Appellant recorded and processed those Forms 1040 on March 14, 2005 and March 27, 2006, respectively. JA 255 and 260. He stamped the returns with his Document Locator Numbers 66221-043-00918 and 66221-056-01213, respectively. He recorded them as “Forms 1040” on Appellees' IRS Account Transcript under Transaction Code 150 — “Tax return filed — USVI return.” JA 265-67, 255 and 269-71, 260. He recorded the returns as “received” on his Account Transcripts for Appellees using the respective October 15, 2004 and October 24, 2005 dates — the very dates those returns were filed with and stamped by VIBIR. He extracted additional information from these returns and recorded it on his Account Transcripts for Appellees. The information included Appellees' “Married Filing Joint” filing status, the income tax withholding prepayments that Appellees made to Appellant, and Appellees' claim of two exemptions. JA 255 and 260. This submission process was accomplished through the use of forms, stamps, and computer entries that Appellant and VIBIR established. IRM 21.8.1.7.4; 21.1.7.6; 21.8.1.7.7 and 21.8.1.7.10. Appellees had to rely on VIBIR to make this submission because “All U.S. Virgin Islands cover over requests must be made by the [VI]BIR, not the taxpayer.” IRM 21.8.1.7.4.

Per his authority, Appellant reviewed the §932(c)(2) returns and decided to examine them. He recorded Transaction Codes “420” on Appellees' Account Transcripts to memorialize the dates he initiated the examinations as August 4, 2005 and May 25, 2006, respectively. Id. Examination Code 420 precludes issuance of any refund to Appellees or cover-over to VIBIR of the prepayments of $47,124.00 and $4,756.00. JA 264-67, 255, 257, 268-71, 260. Appellant holds that money to this day.

Appellant decided not to examine Appellees' 2005 §932(c)(2) return. For that year, he held $4,723.00 in withholding payments from Appellees, which exceeded their net tax liability to VIBIR. So, per §7654, Appellant refunded the $4,723.00 to Appellees, plus $519.89 in interest accrued from the date Appellees filed their 2005 §932(c)(2) return with VIBIR. SJA 180-181 and 127-129. Appellant was authorized to refund to Appellees the money he held on their behalf based on the tax overpayment established in the §932(c)(2) return they filed with VIBIR. §§6402 and 6511. For purposes of paying the interest on overpayment, §6611(g)(1) provides that “a return shall not be treated as filed unless it is filed in processable form.” Coffey opinion (“Add.”) at 44. By paying the refund he owed to Appellees, Appellant acknowledged that the 2005 §932(c)(2) return filed with VIBIR was “filed in processable form” under the Federal Code and respected that return as filed on the date Appellees filed it with VIBIR. Accordingly, when they filed their 2005 §932(c)(2) return with VIBIR, Appellees filed a Federal income tax return sufficient to require Appellant to issue a refund to them and, likewise, to start the running of the period of limitations for a refund claim under §6511.

The actions taken by Appellant and VIBIR on §932(c)(2) returns are all pursuant to directives and protocol established under Federal law, and it was Appellees' filing of the returns with VIBIR that set such actions in motion. The returns (1) contained sufficient data for Appellant and VIBIR to calculate a tax liability, (2) purported to be returns, (3) were filed in an honest and reasonable attempt to satisfy the requirements of the Code, and (4) were signed under the penalties of perjury.

Despite receiving Appellee's 2003 and 2004 §932(c)(2) Forms 1040 and opening audits of them within a year from when they were filed with VIBIR, Appellant failed to issue timely Notices of Deficiency for either year. He issued his Notices of Deficiency on September 28, 2009, more than three years after Appellees filed the returns with VIBIR and more than three years after Appellant's Philadelphia Service Center received and recorded VIBIR's cover-over submissions.

iv. This Case Evolved Below as Facts on Appellant's Protocol on §932(c)(2) Returns Came to Light.

Appellees timely petitioned the U.S. Tax Court. They filed a Motion for Summary Judgment on the statute of limitations issue. JA 1-61, 62-122, 129-39, 140-226, 227-582. The Government of the USVI intervened and joined the Motion. Appellant opposed the Motions, arguing that Appellees failed to file Federal income tax returns. He professed to have no access to the §932(c)(2) returns filed with VIBIR, no authority over them, no ability to examine them, no responsibility with respect to them, and no way of knowing whether they were even filed. He equated the §932(c)(2) returns with returns filed with some foreign country.

Appellant hoped that he would made these bold assertions against a blank canvas. But as the case proceeded and when the USVI intervened, and the governments agreed to produce the MOUs under a protective order, Appellees gradually came to know Appellant's procedures, protocol, and actions detailed above and set forth in this record on appeal. All of this information is consistent with the law and contrary to Appellant's claims. The exhaustive pleadings, stipulations, and hearings below reflect Appellees' and the Tax Court's arduous path toward uncovering the truth — Appellant has authority over §932(c)(2) returns filed with VIBIR, he has responsibilities with respect to them, he exercises that authority and responsibility, he accesses the returns, he examines them, * * * And he has done all of this since 1987. That is because §932(c)(2) returns are returns required under the Code as contemplated by §6501(a).

The Tax Court's Order granting Appellees' Motion for Reconsideration of its original Order denying summary judgment illustrate how close Appellant came to succeeding in carrying the day with his misrepresentations to the Court. The Tax Court, considering Appellees' and the USVI's frantic urgings that things are not as Appellant made them appear, stated in that succinct order: What if the Coffeys and USVI are correct and Appellant did have access to and authority over §932(c)(2) returns all along? In the context of that consideration and reconsideration — which lasted, remarkably, more than a decade — Appellees and the Tax Court have confirmed that the coordination and information-sharing they discovered on the Coffeys' returns is no chance anomaly. Appellant indeed possesses by Congressional mandate the authority to access, inspect, classify and examine §932(c)(2) returns and he bears responsibilities imposed by Federal statute with respect to those returns.

These are the facts of the case. They lead to the inescapable conclusions reached in the Tax Court's plurality opinion and its lead opinion. The §932(c)(2) return is an income tax return for purposes of §6501(a). Appellant, of course, requires access to these returns so that he may examine them and perform all of his statutorily-mandated responsibilities with respect to them. Where Appellant and VIBIR choose to house these returns and the efficiencies (or lack thereof) of their processing protocol with respect to them cannot change the law.

v. Appellant's “Zero-Dollar Protective Return” Idea

Appellant agrees that when a USVI resident files a §932(c)(2) return with VIBIR, she meets her Federal filing obligation and this filing starts the limitations period under §6501(a). Br. at 27. But, Appellant contends that if he later challenges that taxpayer's USVI residency in an examination conducted after a taxpayer files her §932(c)(2) return, the return then becomes no return at all and loses the protection afforded by §6501(a). He claims that, in such a circumstance, the only way the taxpayer could start the limitations period would be to file a §932(a)(2) return claiming to be a non-USVI resident. Br. at i and 21.

But Appellant conceded this very argument in the proceedings below when he represented to the Court that a taxpayer cannot file both a §932(a)(2) return and a §932(c)(2) return because, inter alia, to do so would require her to take, under penalty of perjury, inconsistent residency positions. SJA 540:11-25. So, in a last-ditch effort salvage his argument that Appellees failed to file some other return that was required, Appellant proffered that Appellees should have sent a so-called “zero-dollar protective return” (which Appellant's trial counsel explained to be a Form 1040 with all zeroes on it) to Appellant's Philadelphia Campus to let him know that they filed their §932(c)(2) return with VIBIR. This, he claims, would have “put the correct IRS office on notice that it had three years to issue a notice of deficiency to the Coffeys.” SJA 540:23-25; 535:5-544:20, Br. at 38. Appellant's trial counsel explained that he himself concocted this idea; that it was “his little baby.” SJA 653:13-14. To be sure, this “little baby” exists nowhere in either published or internal guidance for the years at issue, and there was no Campus or other IRS office authorized to receive or process this made-up “zero-dollar protective return.” According to Appellant's trial counsel, savvy taxpayers should have known to send such a “zero-dollar protective return” notice to some unknown IRS office to let IRS know that they filed their §932(c)(2) return — pursuant to the instructions on that Federal return — with VIBIR. Any such thing with all zeroes on it filed with some random IRS office purporting to be some “return” required nowhere in guidance or the Code would, in the best case, be deemed unprocessable and, in the worst and perhaps most likely case, subject the filer to a frivolous return penalty.

The reality, of course, is that there is no such thing as a “zero-dollar protective return” notice because there is no need for it. Appellant already has the authority and protocol in place to know whether a taxpayer has filed her §932(c)(2) return with VIBIR and to demand copies of this return from VIBIR whenever he wishes. He does not need taxpayers to give him a head's up on the filing.

vi. Congress Reprimands Appellant for His Position in this Case.

In June 2006, certain members of Congress learned for the first time of the “no statute of limitations” argument Appellant was making in cases handled by his USVI Economic Development Credit Issue Management Team (“IMT”) when Appellant made public his February 16, 2005 Chief Counsel Memorandum 200624002. (Available at https://www.irs.gov/pub/irs-wd/0624002.pdf). They immediately recognized it as contrary to the statute and contrary to Appellant's own policies. Accordingly, in January 2007 they sent a letter to the Secretary of the Treasury admonishing him that “the intent of that [1986] Act, was to coordinate the two systems, not to repeal procedural rights,” and that the purpose of the Act was to treat returns filed with VIBIR as returns “that would begin the statute of limitations for purposes of any IRS assessments.” JA 399-401 at 400. The representatives stated further: “For approximately 20 years, the IRS treated the return filed with the Virgin Islands as the return that would begin the running of the Statute of limitations for purposes of any IRS assessments. That position was reversed early last year, with the result that citizens of the United States who in good faith filed their tax returns with the Virgin Islands have no statute of limitations protection. In addition, Virgin Islands taxpayers could face penalties as non-filers because the IRS now disregards the filing of the Virgin Islands return.” Id. They informed the Secretary that Congress disagreed with Appellant's “new interpretation” of §6501(a), as it deprives U.S. citizens who filed their §932(c)(2) returns with VIBIR their statute of limitations protection. Id. at 400; JA 140-226 at 195-203; JA 737-75. The admonition was clear: A taxpayer who files her tax return with VIBIR taking the position that she is a USVI resident begins the running of the statute of limitations for any IRS assessment of tax for that year whether or not IRS later determines that he is not a USVI resident.

Appellant responded to the first letter from Congress by issuing Notice 2007-19, I.R.B. 2007-11. In that Notice, the Secretary stated that the statute of limitations applies to all §932(c)(2) returns filed with VIBIR by individuals whose gross income was less than $75,000 because those returns “take[ ] the position” of USVI residency. Appellant hoped to appease Congress while at the same time use the $75,000 gross income limit to salvage his time-barred cases. The Congressional representatives saw through this and promptly responded to the Notice by stating that the $75,000 rule has “dubious legal basis.” JA 402-404 at 403.

Appellant responded to this reprimand by issuing Notice 2007-31, I.R.B. 2007-16. In that Notice, the Secretary stated that the statute of limitations applies to all §932(c)(2) returns filed with VIBIR regardless of their gross income because those returns “take[ ] the position” of USVI residency. Treasury later issued Treas. Reg. §1.932-1(c)(2)(ii) which reaffirms the Notice.

Appellant never mentions Congress' admonitions nor his convoluted efforts to appease Congress but also salvage his IMT's 260 time-barred cases. He falsely claims that Treas. Reg. §1.932-1(c)(2)(ii) gives §932(c)(2) return filers statute of limitations protections that are prohibited under the Code. He cautions, however, that this extra-statutory gift applies only to returns filed on or after December 31, 2006, because in 2007 he and VIBIR “reached 'a new working arrangement for the automatic exchange of information' in which the VIBIR routinely transmits full returns to the IRS.” Br. 54-58, n. 12, emphasis added. So, claims Appellant, now that he receives every single full §932(c)(2) return filed with VIBIR, there's no harm to the fisc in giving these taxpayers this unwarranted protection. But, this claim too is false. We know that no such change occurred, as VIBIR had provided Appellant with the same categories of information in the same manner on an annual basis before 2007 as it did after 2007. JA 780-81. VIBIR never — either before or after 2007 — transmitted to Appellant every single full §932(c)(2) return filed with VIBIR. There was — and is — no need to. Appellant could access those returns at VIBIR offices any time he wished and he could request from VIBIR any information he required to satisfy his responsibilities over those returns.

Appellant's representation to this Court — false as it may be — that in 2007 he directed VIBIR to transmit to one of his offices every single full §932(c)(2) return filed with VIBIR illustrates that he can make such directive. This discretion reaffirms and facilitates Appellant's authority and responsibility over §932(c)(2) returns.

SUMMARY OF ARGUMENT

The Tax Court's plurality correctly found that a taxpayer who files her §932(c)(2) return starts the limitations period even if that return contains errors, including an error on USVI residency. Such a return reflects on its face an “honest and reasonable” attempt to file correctly. Errors with respect to positions taken and adequately disclosed thereon do not nullify the return for statute of limitations purposes. The lead opinion correctly held that even if we consider Appellant's lament that Appellees should have let him know that they filed their §932(c)(2) return with VIBIR a “protective zero-dollar return,” the copies of the returns VIBIR transmitted to Appellant provided him with more information than any notice with zeros on it.

Appellant raises three general arguments against the lead and plurality opinions. Each fails. First, Appellant premises his entire argument on facts that he has already conceded in this and other cases. For example, he falsely claims to have no authority over §932(c)(2) returns and that such returns are no different than returns filed with some foreign country. Second, Appellant, as he must, accepts Appleton as established law. But he fails to reconcile his arguments with such precedent. Third, Appellant erroneously states that the Tax Court assumed for purposes of summary judgment that Appellees were required to file §932(a)(2) returns and then claims victory because they did not do so. The Tax Court made no such assumption.

Appellant raises three specific arguments against the plurality opinion. Each fails. First, he erroneously asserts that the plurality held that a “good-faith” but unsuccessful attempt to file a tax return satisfies §6501(a). The plurality made no such determination. Second, he misquotes this Court's earlier opinion in this case as holding that §932(c)(2) returns are like foreign returns. This Court made no such determination, but rather affirmed that Appellant has audit and assessment authority over §932(c)(2) returns. Third, he improperly relies on dicta from Estate of Sanders because, inter alia, that Court was led to erroneously believe that §932(c)(2) returns do enter Appellant's “audit machinery” and are like returns filed with some foreign government.

Appellant raises two specific arguments against the lead opinion. Each fails. First, he claims that the cover-over returns that VIBIR transmitted to Appellant on Appellees' behalf do not rise to the level of his “zero-dollar protective return.” But they provide much more information than any protective notice with zeros on it. Second, he argues that the cover-over returns should not be respected under Beard because they came from VIBIR without “authorization” of Appellees. He ignores the fact that his own protocol authorizes such transmittal so as to facilitate processing and allocation of the taxpayer's payments and, when warranted, refunds to the taxpayer.

ARGUMENT

I. The Tax Court Opinions

The lead and plurality opinions analyze the framework of §932 and Appellant's authority with respect to §932(c)(2) returns under that framework. In the proceedings below, there was some common ground. The parties and the Tax Court agreed that a taxpayer cannot, under the §932 regime, file two tax returns reporting two tax liabilities on the same income — one as a USVI resident under §932(c)(2) and one as a non-USVI resident with USVI income under §932(a)(2). SJA 540:11-22. A taxpayer must file as one or the other but cannot file as both.

All agreed that Appellees filed their §932(c)(2) returns with VIBIR and that those returns took the position of USVI residency. Appellant conceded that the returns qualified as returns filed with VIBIR and that, but for his USVI residency challenge under §932(c)(4)(A), those §932(c)(2) returns constitute returns under §6501(a). Appellant argued that whenever he challenges residency, the §932(c)(2) returns become nullities and no longer trigger the Federal limitations period under §6501(a). This argument begged the question — What could Appellees have done to trigger the limitations period given everyone's agreement that their filing of a §932(c)(2) return precluded them from filing a §932(a)(2) return? Appellant answered this question with his “zero-dollar protective return” notice.

After extensive case development, briefings, oral argument, consideration, and reconsideration, the Tax Court rendered its opinions. The lead opinion, joined by five judges including the author, addresses Appellant's “zero-dollar protective return” notice argument. It concludes that, even if such a notice “return” was required, the cover-over returns VIBIR transmitted to Appellant provided him with far more information than some notice “return” with a bunch of zeroes on it.

The concurring opinion was joined by eight judges including the author and one judge who also joined the lead opinion — greater than either the lead opinion or the four-judge dissent. We refer to that opinion as the “plurality opinion” because it was joined by the most judges considering the matter. The plurality concludes as a matter of law that a §932(c)(2) return is a return required under the Code and therefore triggers the limitations period under §6501(a). It rejects Appellant's false claim that he has no authority or responsibility over these returns. The extensive evidence in the record on Appellant's protocol and practice under §932 belied his earlier claims that he does not examine §932(c)(2) returns and that he has no authority or responsibilities over the returns. He is so authorized under §932 and he exercised that authority. The plurality did not need to evaluate the efficiencies or inefficiencies of this protocol, trace what pieces of what documents were transmitted to particular offices, or consider Appellant's false lament that he needs some notice from taxpayers to help him figure out when the §932(c)(2) returns are filed.

The Tax Court does not explain why it arranged and labelled the opinions in this manner. The lead and plurality opinions address separate and distinct alternative issues on the summary judgment motions. We summarize and analyze the Tax Court's opinions below, addressing first the plurality opinion, then the lead opinion, and finally the dissent.

A. The Plurality Correctly Held that a Form 1040 Filed with VIBIR Taking the Position of USVI Residency is a Return for Purposes of §6501(a).

The plurality found that a taxpayer who files her §932(c)(2) return has filed a return that starts the limitations period under §6501(a) even if that return contains errors, including an error on residency. Both the lead opinion (Add. 53-56) and the plurality opinion (Add. 73) hold that such a return reflects on its face an “honest and reasonable” attempt to file correctly. Appellant cannot defeat the statute of limitations by claiming that honest and reasonable positions taken on the return and adequately disclosed thereon are erroneous. Add. 73; In re Colsen, 446 F.3d 836 (8th Cir. 2006).

The plurality found it unnecessary to decide whether Appellees were USVI residents, or to parse through the efficiencies of the coordination between VIBIR and Appellant in a particular case. It refused to create a slippery slope whereby Appellant may use his own failures of administration to salvage a time-barred assessment.

The plurality rejected Appellant's position that the U.S. and the USVI are separate taxing jurisdictions: “'U.S. territories . . . are not sovereigns distinct from the United States. Puerto Rico v. Sanchez Valle, 579 U.S. ___, ___. 136 S. Ct. 1863, 1866 (2016).” Add. 77. It likewise made clear that §932(c)(2) returns are not income tax returns filed under the laws of some third-party foreign sovereign. They are filed pursuant to the mandates of U.S. Internal Revenue Code. It is Federal law “which labels a return filed with the Virgin Islands a 'return.' The authority for treating a filing with the Virgin Islands as a return therefore flows from the Internal Revenue Code and not from any powers of the Virgin Islands territorial government.” Add. 77.

Based on this, the plurality found that Appellees' §932(c)(2) returns started the limitations period under §6501(a) regardless of the accuracy of the residency position or any other position taken thereon. The plurality concluded that, like the taxpayers in Mabel Elevator Co. v. Commissioner, 2 B.T.A. 517 (1925); New Capital Fire Inc. v. Commissioner, No. 25858-12, 2017 Tax Ct. Memo LEXIS 176 (T.C. Sep. 11, 2017); and Germantown Trust Co. v. Commissioner, 309 U.S. 304 (1940), Appellees filed returns that were appropriate for reporting the positions taken on those returns.

Appellant cannot feign surprise over the plurality opinion. Indeed, he never espoused a position that was contrary to the plurality's reasoning that a §932(c)(2) return starts the limitations period under §6501(a) — except for a tiny window of time. That window opened in February 2005 when Appellant issued a Chief Counsel Memorandum (later published in 2006 as IRS CCM 200624002) wherein he first revealed his new argument in an attempt to salvage 260 time-barred cases under examination by his USVI EDC IMT with more than $300 million of proposed tax deficiencies. JA206, 385-398, 387. Congress caught wind of this new position and promptly admonished Appellant that the position was wrong and that he should abandon it. So, Appellant closed the window on the argument when he issued Treas. Reg. §1.932-1(c)(2)(B)(ii). The plurality notes:

Although these regulations were not in effect for the Coffeys' tax years . . . they align with the position of this concurring opinion except that they condition the limitations protection on the existence of an information-sharing agreement between the IRS and the VIBIR. While we have no occasion to question the validity of these regulations, we see no reason to think that this requirement for an information-sharing agreement should preclude limitations protection in appropriate cases for periods before the regulations were effective. Indeed, interim guidance which preceded the final regulations was not similarly conditioned on the existence of an information-sharing agreement. See Notice 2007-19, 2007-1 C.B. 689.

Add. 76, n.2.

The plurality, the statute, Congress' mandate and Appellant's Regulation all agree that the §932(c)(2) return is born of Chapter 1 of the Internal Revenue Code and is a Federal income tax return under §6501(a). Appellees filed their returns in accordance with the statute and as instructed by Appellant's Publication 570 and his Instructions to Form 1040 based on the positions they took on the returns. Their filings, therefore, were the returns required to be filed to start the statute of limitations under §6501(a).

The plurality explained “that it would be unreasonable to require a taxpayer to file one or more additional returns staking out phantom positions” that she believes not to be correct just to protect herself against the possibility that Appellant might someday challenge the position taken and disclosed on the return that was filed. Add. 75.

Appellant may implement any internal processing protocol in handling tax returns he deems appropriate. But he cannot claim flaws in his own protocol to deny taxpayers repose and resurrect time-barred tax years. The plurality reasoned:

Under the plain statutory text, section 6501(a) applies where a return has been filed, and section 932(c)(2) directs the taxpayer to file a 'return' with the Virgin Islands under certain circumstances — it does not say that such a return will not commence the period of limitations unless the IRS gets the message, or unless the return is correct with respect to the taxpayer's residency status. The return, and not the correctness of the return, is the focus of section 6501(a).

Add. 76-77.

The plurality also succinctly labelled “unreasonable” Appellant's position that the only means of repose for taxpayers filing §932(c)(2) returns is his made-up “protective zero-dollar return” notice:

As we noted in Appleton v. Commissioner, 140 T.C. 273, 288-289 (2013) (a case very similar to the present one): (1) there was no guidance at the time which would have directed taxpayers to file a second protective return; (2) in any event, we have traditionally considered a zero return to be a frivolous return . . .; and (3) “to expect a taxpayer to file a protective zero return with a service center to which the taxpayer was not directed, and where IRS employees were not alerted to expect such returns, is unreasonable.”

Add. 74.

B. The Lead Opinion Correctly Found That the Information Available to Appellant in This Case Went Far Beyond His Fabricated “Zero-Dollar Protective Filing.”

The lead opinion takes Appellant up on his claim that the only way a taxpayer filing a §932(c)(2) return may gain repose is by submitting a “zero-dollar protective return” notice.

It begins its analysis by rejecting Appellant's argument that §932(c)(2) returns are “territorial” returns and not “federal” returns: “section 932 makes the filing of VI returns part of one's federal-filing obligation which means the Code doesn't draw a distinction between 'territorial' and 'federal' returns but between territorial and federal filing obligations — not as much what Form 1040 is filed but where.” Add. 51-52. Appellant's instructions to taxpayers filing under the §932 regime make it simple: If you file as a USVI resident under §932(c)(2) send your return to a VIBIR office; if you file as a non-USVI resident with USVI-sourced income under §932(a)(2) send your return to an IRS office and a copy of the return with Form 8689 to VIBIR.

VIBIR and Appellant take it from there. Beginning in 1987, they established, per Congress' mandate, protocol for sharing returns and return information necessary for each office to perform its responsibilities with respect to those returns. In this case, for example, VIBIR sent Appellant, inter alia, “cover-over” Forms 1040. The lead opinion concludes that even if Appellant needed something beyond the §932(c)(2) return itself for him to realize that it was filed, those Forms 1040 that VIBIR transmitted to Appellant on Appellees' behalf easily did the trick. They provided Appellant with much more information than any “zero-dollar protective return” notice:

[I]f the Coffeys were required to send a return to the IRS that showed a reasonable attempt to reflect their true income and deductions, how could a return with all zeros constitute such an attempt? It seems to us that a form reporting all the Coffeys' income and deductions, even if it included an erroneous credit on its face, is a much more reasonable attempt to satisfy their obligations than one containing all zeros. . . . And what the IRS actually got had more information than any zero return. . . . And what did the IRS do with these? It created transcripts of account that showed all zeros — exactly what would have happened if the Coffeys had sent in the zero returns that the IRS now says they should have sent.

Add. 56, Add. 50-51.

VIBIR transmitted the Forms 1040 to Appellant's Philadelphia Campus on Appellees' behalf because that is the office authorized to process Appellant's allocation of their tax prepayments among IRS, VIBIR and the taxpayer. Appellant and VIBIR established this protocol and designated the responsible offices.He could designate any city or any return information he wished. He decided that a copy of the Form 1040 and specified attachments was sufficient for the Philadelphia office to accomplish the tasks. These internal decisions do nothing to change the fact that these Form 1040s constitute “returns” under Beard.

In analyzing the Beard factors, the lead opinion considered, inter alia, the information transmitted between Appellant's offices and VIBIR and whether the information enabled him to compute taxable income and tax liabilities to the U.S. so that he could properly determine allocations of tax payments among the U.S., the USVI and the taxpayer. The lead opinion deemed the transmittals sufficient, * * * them sufficient. Indeed, if the transmittals to Philadelphia were insufficient (as Appellant laments on Brief), Appellant and VIBIR would have changed their protocol to fix the problem so that Appellant could perform his responsibilities with respect to the §932(c)(2) returns.

The lead opinion concluded that the Forms 1040 VIBIR transmitted to Appellant — returns that Appellant recorded, processed and examined — are returns under Beard. Those returns provided Appellant's Philadelphia office with far more information than any “zero-dollar protective return.” Accordingly, even if we take Appellant up on this notice idea, the subject return transmittals satisfy such notice requirement. Appellant issued his Notices of Deficiency more than three years after Philadelphia's receipt of such notice.

C. The Dissent is Based on a Fear That Doesn't Exist.

The Tax Court's dissent is premised upon a fear that taxpayers will gain unfair statute of limitations repose based on tax returns they file with some foreign sovereign that are not Federal returns at all and which Appellant has no knowledge of or authority over. This fear is unjustified and contrary to the record.

Since the enactment of §932, Appellant has always possessed and exercised authority and responsibility over §932(c)(2) returns. Understanding that authority and responsibility, he and VIBIR constructed a system to facilitate it. He can classify §932(c)(2) returns for his examination at VIBIR offices. He can have VIBIR send him copies of the returns, with or without attachments. He can request all returns, or he can request some specific returns.

The dissenting judges erroneously think that the cover-over return that VIBIR submitted to Appellant in this case was “unauthorized.” But the transmittal was authorized because it is necessary to facilitate allocations of funds among IRS and VIBIR and refunds to taxpayers. Under §6511, Appellant may remit a refund only upon the timely filing of a tax return. Per established protocol, a taxpayer filing a §932(c)(2) return doesn't directly file a refund claim with Appellant. The §932(c)(2) return constitutes the claim and VIBIR (and only VIBIR) submits a copy of that Form 1040 to Appellant for processing. “All U.S. Virgin Islands cover over requests must be made by the BIR not the taxpayer.” IRM 21.8.1.7.4. Appellant records and acknowledges the date of the refund claim as the date the §932(c)(2) return was filed with VIBIR. VIBIR must promptly submit the Form 1040 to Appellant so that he may timely pay the refund to avoid or limit interest owed to the taxpayer. SJA 21-25. The §932(c)(2) return and cover-over transmittal serve a purpose in the process and do not become nullities based on some subsequent residency challenge. This process is just one aspect of the integrated protocol in facilitating Appellant's authority over §932(c)(2) returns. There exists, therefore, absolutely no fear that this process — created and blessed by Appellant — will open some door “that should not be opened.” Add. 84.

II. Appellant's General Attacks on the Lead and Plurality Opinions on Brief Lack Merit.

A. Appellant's General Arguments on Brief Conflict with his Prior Concessions.

Appellant acknowledges that under §6501(a), “the term 'return' means the return required to be filed by the taxpayer.” §6501(a); Br. at 24. He likewise acknowledges that “in order for returns to be considered 'filed' for purposes of setting the period of limitations in motion, the returns must be delivered, in the appropriate form, to the specific individual or individuals identified in the Code or Regulations.” Br. at 25. And, finally, he acknowledges that “Congress has given discretion to the Commissioner to prescribe by regulation forms of returns.” Br. at 26.

Appellees filed the returns that §932(c)(2) requires from taxpayers who take the position that they are USVI residents in the manner prescribed by Appellant — they filed them with VIBIR. They delivered those returns on the correct form, to the correct office, and in the correct manner as prescribed under the Code, the Regulations, Appellant's Instructions to Form 1040, and his Publication 570. Pursuant to Congress' express mandate, Appellant and VIBIR established a protocol to facilitate the task of processing §932(c)(2) returns. Appellant and VIBIR processed Appellees' returns in conformance with that protocol. Appellant conceded all of this.

Appellant cannot deny that since the statute's inception he possessed the authority and responsibility to examine §932(c)(2) returns filed with VIBIR. To facilitate such responsibility, he is authorized to classify §932(c)(2) returns for examination at VIBIR just as he does with returns filed with any of his Campuses. He has the means to know what §932(c)(2) returns were filed with VIBIR and when they were filed; to obtain copies of such returns; to obtain account transcripts for such returns; and to obtain specific information regarding such returns that he deems necessary to carry out his responsibilities with respect to such returns.

Now Appellant denies these facts and argues on Brief that if any of this coordination happened, it was unauthorized and attributable to the accidental benevolence or self-serving greed of the “foreign” sovereign taxing authority VIBIR. Appellees respectfully submit that Appellant cannot deny the realities. He must truthfully acknowledge the facts to this Court, and when he does so, the factual foundation of his appeal disappears.

B. Appellant Now Accepts the Appleton Case but Cannot Reconcile It with His Arguments.

Appellant concedes: “Courts have held, and the Commissioner does not dispute, that a bona fide USVI resident generally meets her filing obligation by filing a return solely with the VIBIR. See I.R.C. Sec. 932(c)(4); see, e.g., Appleton v. Comm'r, 140 T.C. 273 (2013).” Br. at 27. But Appellant did not always honor this concession. Indeed, that is why Appleton is a case. In Appleton, Appellant argued that any taxpayer's §932(c)(2) return — USVI resident or non-USVI resident — is a filing with some foreign government and was not a filing under Federal law. CCM 200624002. The Tax Court told Appellant that he was wrong. Appellant now accepts that.

Section 932(c)(4) provides Appellant with exclusive authority and responsibility to examine §932(c) returns filed with VIBIR to determine whether such returns satisfy the requirements of §932(c)(4)(A),(B), and (C) and to make and manage any consequential assessments of a U.S. tax liability resulting from such examinations. And the very first examination inquiry — under §932(c)(4)(A) — is whether the taxpayer is a USVI resident.

In Appleton, Appellant determined that Mr. Appleton satisfied the residency requirement under §932(c)(4)(A) but argued that he failed to report and identify the source of all income on the return he filed with VIBIR (violating §932(c)(4)(B)), and he failed to fully pay his tax liability to VIBIR (violating §932(c)(4)(C)). Appellant argued that a tax return that fails to satisfy any one of the three requirements of §932(c)(4) is rendered a nullity for Federal purposes and fails to trigger the statute of limitations under §6501(a).

The Tax Court assumed for purposes of summary judgment that Mr. Appleton failed §§932(c)(4)(B) and (C). Based on this, it granted Mr. Appleton's motion for summary judgment, holding that such an erroneous return is a return nonetheless for purposes of §6501(a) and the proposed assessments made by IRS were time-barred even in light of the adverse assumption of the errors. Appleton, 140 T.C. at 282.

Here, Appellant conducted his §932(c)(4) examination of Appellees' returns just as he did in Appleton. He argued that the returns failed §§932(c)(4)(A),(B) and (C), and the Tax Court assumed as much for purposes of summary judgment. Appellant claims that by adding a challenge to Appellees' residency position (that they violated §932(c)(4)(A)) he causes their §932(c)(2) return to disappear such that they filed no return at all. Br. at 29. But, Appellant avoids mentioning that he makes his residency challenge under §932(c)(4)(A) in the context of his examination of that §932(c)(2) return — a return he claims is no return at all. But to presume the return is no return would preclude any determination under §932(c)(4). It would restrict any §932(c)(4) analysis to returns filed by USVI residents and would consequently render §932(c)(4)(A) meaningless surplusage. SJA 418:17–419:16, 532:5-13. The plain language of the statute contemplates that all three of the §932(c)(4) requirements apply to an individual who files a §932(c)(2) return, and not to some select group of individuals who Appellant deems to be USVI residents. S. Rept. 100-445, at 315 (1988). Indeed, Appellant's Treas. Reg. §1.932-1(c)(2)(ii) respects the §932(c)(2) return because it “takes the position” of USVI residency. This is the only logical and rational interpretation that eliminates the problem and respects the statute.

Appellant fails to consider that Mr. Appleton and the Coffeys, like all taxpayers, were in the same boat when they filed their tax returns. Both took the position they were USVI residents, both took the position they properly reported their income, and both took the position that they had paid all of their taxes. Both filed their returns in conformance with existing law and guidance to reflect the position they took on those returns. Neither is omniscient, and neither could foresee Appellant's challenge to their returns or predict what quarrel, if any, he might have with respect to those returns. For all anyone knew at the time, Appellant might have accepted Mrs. Coffey's residency and rejected Mr. Appleton's residency.

So, the question here is whether a taxpayer who files her §932(c)(2) return with VIBIR, just as Mr. Appleton and the Coffeys filed theirs, has filed a return under §6501(a) if Appellant subsequently challenges the residency position taken on the return in his examination of that return under §932(c)(4)(A). Their fates should not be different, and the Court's inquiry with respect to their returns should not be different. Appellant had the same authority over both returns and he made his determinations on audit exercising such authority. He understands, however, that if he acknowledges such authority, he loses this case just as he lost Appleton. Indeed, contrary to fears Appellant tries to instill, he cannot and does not argue that Appellees' tax returns were more difficult for him to find and examine than Mr. Appleton's returns. So, he simply — and improperly — ignores §932(c)(4) in his Brief.

C. Appellant Materially Misstates the Tax Court's Assumption on Summary Judgment.

It is undisputed that Ms. Coffey filed her returns with VIBIR under §932(c)(2) taking the position that she was a USVI resident. Because it must review all facts in the light most favorable to the opposing party, the Tax Court assumed, solely for purposes of summary judgment, that Ms. Coffey would be unable to establish at trial that she was a USVI resident under §932(c)(4)(A).

Appellant materially misstates the Tax Courts' assumption to be that “Judith Coffey was not a bona fide USVI resident and the Coffeys were therefore required to file a federal income tax return with the IRS [under §932(a)(2)] to start the limitations period under Sec. 6501(a).” Br. at 30. He then claims victory because Appellees did not file a §932(a)(2) return.

But the Court made no such assumption. Rather, the Court assumed a taxpayer “who filed with the VIBIR” (Add. 11) under §932(c)(2) but would be unable at trial to establish that she complied with §932(c)(4)(A). The Court expressly states that it does not assume that the Coffeys had to file a return taking a position that they are not USVI residents — a §932(a)(2) return. Add. 52 n. 22. The Coffeys could, and did, file a return taking the position that they were USVI residents — a §932(c)(2) return. Just like any other position they take on their returns with respect to any other fact, that position is subject to Appellant's challenge on examination, and the Coffeys may or may not be able at trial to establish that fact.

In Appleton, the Tax Court made a nearly identical assumption on summary judgment that the petitioner would be unable at trial to establish that the return complied with §932(c)(4)(B) and (C). Appleton, 140 T.C. at 282. Appleton holds, and Appellant agrees, that even if we assume errors on the return causing failure to meet the requirements of §932(c)(4), such assumed errors do not cause the subject tax return to be no return at all.

The parties and the Tax Court agreed below that taxpayers must file their returns under §932 as either a USVI resident under §932(c)(2) or a non-USVI resident under §932(a)(2), but they may not do both. Appellant's position on Brief, therefore, contradicts his concession in the Tax Court and confronts him with the same dilemma he faced below that compelled his concessions in the first place — his position would require all taxpayers filing returns as USVI residents under §932(c)(2) to also file returns taking the opposite position under §932(a)(2), each return reporting independent tax liabilities to Appellant and VIBIR on the same income. The position is wrong and Appellant admitted as much to the Court below, acknowledging that such a double filing requirement taking sworn contrary positions and assessing double tax on the same income would be irrational and contrary to the statute. “Taking it to an even further extreme, the Commissioner actually told us that even the Coffeys' complete return (i.e., including all the attachments) would've been worse than a zero return because such a return would've been incompatible with their belief that they were bona fide VI residents.” Add. 66, n.29.

III. Appellant's Attacks on the Plurality Opinion Fail.

Appellant raises three challenges to the plurality opinion. First, he claims that the opinion incorrectly holds that a “good-faith” but unsuccessful attempt to file an income tax return satisfies §6501(a). Second, he claims that this Court of Appeals, in this case, held that §932(c)(2) returns are like foreign returns filed with a foreign sovereign. Br. at 60. Third, he cites dicta in Commissioner v. Estate of Sanders, 834 F.3d. 1269 (11th Cir. 2016) and claims that such reasoning controls. We address each challenge below.

A. Appellant Incorrectly Interprets the Plurality Opinion.

Appellant interprets the plurality opinion to hold that a taxpayer files a tax return under §6501(a) if she makes a “good-faith” but unsuccessful attempt to file such return. Br. at 54. That is simply not what the plurality opinion says. This is not a case where a taxpayer claims to have made a “good-faith” effort to file her tax return but somehow failed along the way to get it to the taxing authority. Rather, this is a case where the taxpayer filed the proper return in the proper place in the proper form based on the positions taken and the information contained on the face of that return. Appellees did not try and fail to file their tax returns; rather, they filed tax returns that Appellant now claims contain errors. An error on a return does not render the return a nullity for purposes of §6501(a). “The section 6501(a) limitations period is meant to provide repose to taxpayers who file honest and genuine — though possibly erroneous — returns.” Add. 69.

Eighth Circuit law is entirely consistent with the notion that an “honest and genuine” attempt to satisfy the tax laws is sufficient to start the limitations period, and that “the honesty and genuineness of the filer's attempt to satisfy that tax laws should be determined from the face of the form itself.” Such a determination “does not require inquiry into the circumstances under which the document was filed” because the “filer's subjective intent is irrelevant.” In re Colsen, 446 F.3d 836, 840 (8th Cir. 2006). It is enough to know that the return was correctly filed based on the information contained on its face. The information contained on Appellees' returns was sufficient for Appellant to understand that they filed them with VIBIR under §932(c)(2) taking the position that they were USVI residents.

Appellant does not dispute the precedent established in In re Colsen, supra; Beard v. Commissioner, 82 T.C. 766 (1984), aff'd., 793 F.2d 139 (6th Cir. 1986); Zellerbach Paper Co. v. Helvering, 293 U.S. 172 (1934); Germantown Trust Co. v. Commissioner, 309 U.S. 304 (1940); Mabel Elevator Co. v. Commissioner, 2 B.T.A. 517 (1925) and New Capital Fire Inc. v. Commissioner, T.C. Memo. 2017-177 (Sept. 11, 2017). He cannot dispute that the §932(c)(2) returns Appellees filed were the correct returns filed with the correct office based on the residency position taken thereon. He therefore cannot challenge the plurality's incontrovertible reasoning based on the agreed facts and established precedent. So instead, he materially misconstrues the opinion as holding something else — that a taxpayer's good-faith but failed attempt to file a return makes that return a return under §6501(a) — and attacks that instead. The plurality used no such reasoning, and the attack fails.

Finally, we address Appellant's reference to §6501(g), which says that certain entities that in “good faith” filed the wrong return, thinking themselves to be one type of entity when in fact they are another, shall for statute of limitations purposes be deemed to have filed the correct return. Appellant claims victory because no such “good faith” exception exists for individuals who file §932(c)(2) returns erroneously taking the position of USVI residency. But no such “good faith” exception is required because §932(c)(4) charges Appellant with the authority and responsibility to examine §932(c)(2) returns for errors, omissions, failure to pay the proper tax, and erroneous claims of USVI residency. Section 932(c)(4)(A),(B) and (C). Appellant knows and has conceded in other cases that “[d]eterminations under I.R.C. §§932 and 934 (including whether an individual is a bona fide resident of the USVI . . .) are determinations of federal income tax under the Internal Revenue Code.” Appellant's Khoury v. Commissioner Brief, supra, at p. 24. This statutory framework, and Appellant's authority and responsibilities thereunder, expressly contemplates that tax returns filed under §932(c)(2) might erroneously take a position of USVI residency and expressly authorizes Appellant to examine such returns for such errors. That is precisely what he did in this case. Appellees did not file the wrong return, necessitating some 6501(g) “good faith” relief; they filed the right return based upon the positions taken thereon. Appellant had three years in which to examine that return and assess any deficiencies, and he failed to do so.

B. Appellant Misquotes this Court's Earlier Opinion in this Case.

Appellant next cites this Court's opinion in this case on USVI intervention, and interprets it to hold that the §932(c)(2) return is like some return filed with some foreign sovereign: “When ruling that the USVI could intervene in this dispute, this Court expressly stated that the USVI represents 'a separate taxing entity' from the United States. Coffey, 663 F.3d at 949.” Br. at 60.

But Appellant cuts the quote short, omitting this Court's express recognition that “[t]he IRS retains audit and assessment powers” over the §932(c)(2) return. Coffey v. Commissioner, 663 F.3d 947, 949 (8th Cir. 2011). Appellant audits and assesses taxes on returns over which he has authority pursuant to the Internal Revenue Code. He has such authority over §932(c)(2) returns and he cannot disavow it in order to resurrect a blown statute.

C. Appellant's Reliance on Sanders Dicta Fails.

Appellant's final challenge to the plurality opinion is that Appellees “filed no return at all” — an argument he presented years ago to the Court of Appeals in Commissioner v. Estate of Sanders, 834 F.3d. 1269 (11th Cir. 2016). Appellant persuaded the Eleventh Circuit that, before 2007, he had no authority over §932(c)(2) returns and no access to them. Sanders at 16. Based on this, Judge Anderson expressed his belief during oral argument that §932(c)(2) returns filed before 2007 could never enter Appellant's “audit machinery.” Appellant's counsel falsely confirmed that the notion was correct. SJA 194-254, 207-209; Sanders Oral Argument CD 17:21-17:45; 17:45-18:59. Judge Anderson relied on this misrepresentation to incorrectly find, in dicta, that Treas. Reg. §1.932-1(c)(2)(ii) should not apply to years before 2007 since such returns never entered IRS' “audit machinery.” Id.

Appellant made this representation to several other courts and even did so in the proceedings below. But, with the reams of documents discovered by Appellees laying bare the truth and extent of pre-2007 coordination outlined above, Appellant can no longer deny that, since the inception of the §932 regime, he has always possessed the authority to examine §932(c)(2) returns, he exercised that authority, and he had access to the returns to facilitate that authority. Thus the Coffeys, Mr. Appleton, Mr. Sanders, and the other §932(c)(2) filers entered the IRS “audit machinery.” * * * SJA 353.

The Sanders Court never addressed §§932(c)(4), 932(e), or 7654(a), and therefore never considered the fact that those statutes contemplate the computation of an “income tax liability to the United States” for all taxpayers who file their §932(c)(2) returns and that it is Appellant who determines that tax liability to the United States. The §932(c) regime contemplates and mandates that Appellant has examination authority over §932(c)(2) returns — yet the Sanders Court incorrectly believed that he did not. By failing to recognize these fundamental concepts, the Sanders Court created a fiction that spawned an otherwise baseless fear that §932(c)(2) returns filed under Federal law are entirely hidden from and inaccessible by Appellant.

Appellant led the Sanders Court to believe that Appellant was prohibited from examining tax returns filed with VIBIR under §932(c)(2): “If you have a return that is somewhat flawed, that then triggers the IRS procedures, they know they've got three years and it triggers the audit procedures. When you file no return at all in the place you're supposed to that procedure is not triggered. Isn't that a real problem?” SJA 194-254, 203-204. Under this mistaken belief, the Sanders Court never considered that there has been protocol in place since 1987 that was mandated by Congress to ensure that Appellant would properly carry out his authority to examine §932(c)(2) returns. Tax Reform Act of 1986, Pub. L. No. 99-514 section 1277(c)(1). Had the Sanders Court considered that, it might have learned about the TIA and subsequent MOUs that detail the coordination that accommodates and facilitate Appellant's examinations and implementation of §§932 and 934. (JA 361-75 at 372 sec. 3.1 and 369 sec. 1.11).

The inevitable ebbs and flows in the efficiencies of coordination, which occur within any bureaucracy, reaffirms Appellant's authority and responsibilities under the law. Appellant tries here the same maneuver he used on the Sanders Court. He claims that “the IRS issued its 2007 guidance only after, and because, it reached 'a new working arrangement for the automatic exchange of information' in which the VIBIR routinely transmits full returns to the IRS. IRS Notice 2007-31.” Br. at 58, n.12 (Emphasis added). The assertion is false, as the 2007 Working Arrangement attached to Notice 2007-31 expressly states that VIBIR will provide tax information and tax returns to IRS only “upon a written request for information” by IRS and not automatically. Notice 2007-31, Attachment sec. IV.A.-D. The USVI confirms that this protocol is no different from the coordination before 2007. JA 780-81. But, even if Appellant's representation was true, and from 2007 on VIBIR transmits every single §932(c)(2) return to Appellant, that protocol would have to be consistent with a lawful reason for Appellant's right to demand every single §932(c)(2) return. And that lawful reason is that Appellant has, since 1986, responsibility and authority over those returns. Appellant's claim illustrates the breadth of the control he has over §932(c)(2) returns. For all of that time he has controlled and directed the flow of returns and return information from VIBIR to his mainland offices as needed based on any changes or administrative considerations that might occur over the years. JA 780-81.

With this misleading record, the Sanders Court mistook Mr. Sanders' §932(c)(2) return as no return at all for Federal purposes and thus suggested in dicta that there should be no Federal limitations period on Appellant's assessment of taxes with respect to such returns. Appellant grasps this dicta as authority that the plurality is wrong. The truth, as Appellant must now face, is that the plurality saw through Appellant's misrepresentations while the Sanders Court did not. The Regulation is not Appellant's gift to taxpayers that contradicts the statute. It is consistent with the statute and with Congress' intent. Appellant wrote the Regulation because Congress admonished him in 2007 for taking the very position he is taking in this case and demanded that he abandon it as contrary to the statute. JA 399-401 at 400; JA140-226 at 195-203; JA 737-75; Federal Register, Vol. 73. No. 69, April 9, 2008. In January 2007, Congress stated unequivocally to the Secretary that “the intent of that [1986] Act, was to coordinate the two systems, not to repeal procedural rights,” and that the purpose of the Act was to treat returns filed with VIBIR as returns “that would begin the statute of limitations for purposes of any IRS assessments.” JA 402-404 at 403 and 399-401. Despite that admonition and despite having capitulated in his 2008 Regulations, he stands before this Court with the same false assertion in an effort to salvage his time-barred cases.

The Tax Court below confronted Appellant on this false proposition, and Appellant there made the appropriate concession:

COURT: Are you saying a regulation can change the Code, Mr. Berwind?

MR. BERWIND: No, absolutely not.

COURT: Oh, that's good.

MR. BERWIND: We have no authority to do that, none, and it doesn't change the Code.

COURT: What does it do to the Code?

MR. BERWIND: What — the Code is the Code. It hasn't moved one inch.

SJA 580:22-581:5. Appellant seems to have forgotten this exchange. He has already in this case justifiably conceded that Treas. Reg. §1.932-1(c)(2)(ii) is valid and that it is a correct interpretation of the statute as it existed from its inception until today. Section 932 establishes an inextricably interwoven system of filing returns that is premised upon choreographed coordination between IRS and VIBIR, Congress mandated that IRS and VIBIR promulgate procedures to facilitate such coordination, and they promptly complied with the TIA and subsequent MOUs. Appellant's false suggestion now that his coordination was lacking before 2007 does not change the statute one bit. That ends this case because it ends Appellant's argument.

IV. Appellant's Attacks on the Lead Opinion Fail.

Appellant attacks the lead opinion with two arguments. First, he claims that the copies of Appellees' Forms 1040 that VIBIR transmitted to Appellant to facilitate his processing of the tax prepayments he held on their behalf do not rise to the level of the information provided in his “zero-dollar protective return.” Second, he claims that those copies of the Forms 1040 do not constitute returns under the Beard analysis. We address each challenge below.

A. The Forms 1040 VIBIR Transmitted to Appellant Provide More Information Than a Return with Zeroes on It.

Appellant challenges the lead opinion, asserting that the 2003 and 2004 Forms 1040 and attached forms that VIBIR transmitted to Appellant's Philadelphia office do not rise to the level of notice that his “zero-dollar protective return” he says Appellees should have sent.

Appellant's “zero-dollar protective return” is not a §932(a)(2) return or any other return required under the Code. It is, rather, the “little baby” spawned by Respondent's trial counsel below that he claims serves to let Appellant know that a taxpayer filed her §932(c)(2) return with VIBIR. He says that such a heads up would be sufficient to start the statute of limitations. The concept has no basis in the law and is in no published guidance or instructions existing during the relevant time.

The lead opinion addressed this alternative position and found that if such a “zero-dollar protective return” notice sufficed, then the 2003 and 2004 Forms 1040 and attached forms VIBIR forwarded to Appellant's Philadelphia office provided this same heads-up notice and then some. Appellant says they don't because they aren't full returns and don't provide sufficient information. But the same is true of Appellant's zero-dollar notice. Moreover, the Tax Court pointed out that the cover-over return is merely one among many procedures established in the TIA and MOUs that facilitate Appellant's awareness of and access to the §932(c)(2) returns filed with VIBIR so that he may satisfy his statutory responsibilities with respect to those returns. VIBIR transmits the Form 1040 and specified attachments to Appellant's Philadelphia office so that he may process the return and pay to VIBIR and the taxpayer their allocable shares of the money he is holding on the taxpayer's behalf. Appellant determined that the protocol he put in place would suffice for him to timely satisfy his responsibilities. The Tax Court agreed that the cover-over return contains the information Appellant deemed necessary for him to perform his responsibilities with respect to the returns.

There is one important distinction between Appellant's “zero-dollar protective return” and the cover-over return. Appellant claims that the purpose of his “little baby” is to alert IRS that the taxpayer filed a return with another sovereign. But the established purpose of the cover-over return is to facilitate some of Appellant's responsibilities over the §932(c)(2) return. Appellant cannot deny his responsibilities and authority with respect to the §932(c)(2) return and likewise cannot deny that it is he who developed this and other protocol to facilitate his responsibilities. The analysis herein, therefore, supports (1) the lead opinion's determination that the cover-over return provides more notice and information to Appellant than any purported “zero-dollar protective return”, and (2) the plurality's determination that the §932(c)(2) return is indeed a Federal return over which Appellant has authority and responsibility.

B. Appellant's Attack on the Lead Opinion's Beard Analysis is Without Merit.

Appellant next argues that the cover-over returns should not be respected because they did not come directly from Appellees. He claims that Appellees never authorized VIBIR to send the returns to Appellant. He argues that §6012(a) requires a taxpayer to file her own return and that, here, Appellees filed their returns with some third-party foreign taxing jurisdiction. Appellant claims that the third-party taxing authority's happenstance actions that somehow caused Appellees' “foreign” tax returns to make their way into some IRS office without Appellees' knowledge or authorization cannot constitute the filing of a return with Appellant. He criticizes the style and manner of the delivery of the returns to his Philadelphia office, but it is he who dictated that style and manner of delivery to the entity delivering the returns.

Appellant is careful to say that the Coffeys did not authorize VIBIR to transmit their returns to Appellant but seems to avoid accusing VIBIR of the unauthorized disclosure of the Coffeys' return information. Indeed, §6103 prohibits the unauthorized disclosure of taxpayer information and employees of IRS and VIBIR are punished for such transgressions. Appellant cannot parse words, and must concede that there was no unauthorized transmittal here because VIBIR was authorized and required to transmit the Forms 1040 to his Philadelphia office to facilitate his work with respect to the returns. The protocol referenced above and documented in the record directs the flow of returns and return information without any requirement for taxpayers to authorize such transfers. That is because no such taxpayer authorization is required, just as no taxpayer authorization is required for Appellant to transfer tax returns and tax return information between and among his offices across the country in order to facilitate his responsibilities with respect to those returns. There is no requirement that taxpayers understand the intricacies of Appellant's return processing protocol for a return to be valid.

Congress mandated the coordination and exchange of taxpayer returns and information under §932 between Appellant and VIBIR. Indeed, the title of the Section is “Coordination of United States and Virgin Islands income taxes.” Per that mandate, Appellant and VIBIR collaborated on detailed and extensive procedures to facilitate such exchange of returns and return information to facilitate their coordinated processing of returns filed under §932(c)(2). Appellees filed their §932(c)(2) returns with VIBIR expecting that such returns would be processed correctly and that Appellant would properly pay over to VIBIR and refund to them any excess tax prepayments they made to Appellant. VIBIR must transmit the cover-over returns to Philadelphia in order for Appellees to receive their refunds. To suggest that Appellees did not authorize or expect such processing is absurd. They were entitled to such processing as it was the only means by which they could secure proper application and refund of their payments. Appellant could not have issued a refund to Appellees for 2005 had they not filed a §932(c)(2) return, had he not treated the return as a validly filed tax return, and had VIBIR not facilitated the processing by transmitting the cover-over return to him. SJA 180-181; §6511.

Appellant certainly understands his own established protocols and IRM provisions, and he often stumbles over them as he weaves his false assertions to salvage his blown statutes. For example, at page 42 of his Brief, he claims that VIBIR's transmittal was pure happenstance. But then, in the same breath, he complains that VIBIR “patently was acting on its own behalf, and not on the Coffeys' behalf” in attempting to get from Appellant money it believed Appellant owed it with respect to Appellees' returns. Br. at 22. So, Appellant knows full well the significance of the transmittal of the returns and he knows full well that his claim of inadvertent transmittal by some foreign sovereign is frivolous.

In another misstep, at pages 43-44 of his Brief, Appellant momentarily forgets his “zero-dollar protective return” and repeats his argument that the cover-over returns are not §932(a)(2) returns and nothing but a §932(a)(2) return would be sufficient to begin the statute of limitations.

Appellant again stumbles at page 44 of his Brief where he asserts that under §7654(a), he and VIBIR process cover-over returns “only for taxes collected from individuals who are 'bona fide residents' of the U.S. possessions.” He triumphantly concludes that since he and VIBIR treat people who filed with VIBIR taking the position that they are USVI residents and process their returns and cover-over requests as such, then the cover-over return cannot possibly be a §932(a)(2) return because §932(a)(2) returns “are filed only by those who are not bona fide USVI residents.” Br. at 44. But nobody is arguing that the cover-over returns VIBIR transmitted to Philadelphia are §932(a)(2) returns. They are copies of the §932(c)(2) returns over which Appellant has authority and responsibilities, including the responsibility to allocate and refund tax payments. Appellant therefore concedes that he and VIBIR process and take actions on returns filed with VIBIR under §932(c)(2). They processed Appellees' returns as §932(c)(2) returns because Appellees filed them as such, they swore to them as such, and they included in them information sufficient to permit taxes to be calculated (and cover-overs and refunds, if any, to be paid). By arguing that he and VIBIR process cover-over returns only for §932(c)(2) returns, Appellant concedes that VIBIR's cover-over transmittal to him of Appellees' §932(c)(2) returns and his recording of such returns in his transcripts means that he and VIBIR understood Appellees' cover-over returns to be §932(c)(2) returns.

This illustrates Appellant's concession that he treats the face of the §932(c)(2) returns as evincing Appellees' honest and genuine endeavor to file those returns in satisfaction of the law. The returns satisfy Beard and In re Colsen, and Appellant concedes that he and VIBIR treated and processed them as §932(c)(2) returns. Appellant and VIBIR glean the honest and genuine attempt to satisfy the law from the face of the return, and not from any speculation or guessing on what the taxpayer might have been thinking or intending subjectively when he or she filed the return. And Appellant concedes that the face of these returns caused him and VIBIR to treat them as §932(c)(2) returns and start that cover-over process of getting the money Appellant held on Appellees' behalf to the place it belonged.

Appellant complains at pages 44-49 that the §932(c)(2) returns VIBIR transmitted to his Philadelphia office aren't really returns because they aren't the whole returns and because they are copies of the returns held by VIBIR rather than originals. But he processed them per the Code, the MOUs and the IRM presuming the accuracy and integrity of the returns filed with VIBIR from the income, to the deductions, to the fact that they purport to be §932(c)(2) returns. He verified tax liabilities and calculated cover-overs to VIBIR and refunds to Appellees based on these returns. In drafting his protocol back in 1987 and throughout the years, he could have directed VIBIR to transmit the complete original returns (like he claims to have done in 2007) but he chose not to. Instead, he required something less. He may have done this for the sake of efficiency or for other reasons. Regardless, it was Appellant who determined that he required that something less to make his tax liability determinations and allocation calculations. Appellant and VIBIR processed §932(c)(2) returns in this manner for decades. But now he represents to this Court that this accepted method is unreliable and fraught with risk. The argument is without merit and is contrary to the factual record and the law.

With this said, it is vital to view the entire argument for what it is — a misdirect. The lead opinion found that the cover-over return provided far more information than the “zero-dollar protective return” the government contends would have triggered §6501(a). Rather than address that issue, Appellant argues that the cover-over return is not a §932(a)(2) return. But of course, neither is the “zero-dollar protective return.”

At pages 50-53, Appellant repeats his mantra that a §932(c)(2) return is indistinguishable from some tax returns filed with a foreign country, and claims that no one would ever claim that an income tax return they filed with a foreign country is an income tax return filed under U.S. law even if that return somehow found its way into Appellant's hands. Appellees filed their income tax returns with VIBIR pursuant to Federal law and as directed by the Title, Chapter and section that tells U.S. citizens where and how to file their Federal income tax returns. VIBIR transmitted the cover-over returns to Appellant per protocol to facilitate his responsibilities over the returns. Appellant does not tell U.S. citizens how to file tax returns owed to foreign countries, does not collect and process prepayments of tax owed to foreign countries, and does not examine or collect liabilities on tax returns filed with foreign countries. But he does all of this with respect to returns filed under Federal law, including §932(c)(2) returns.

And finally, Appellant seals his fate in a footnote. In attempting to illustrate the absurd results that would arise if Appellant were granted authority over tax returns filed with foreign sovereigns, he asks us to imagine a scenario wherein the U.S. could prosecute people for filing fraudulent tax returns under §7206 for returns they filed with a foreign country. He states: “We know of no authority that would sanction such a bizarre result.” Br. 53 n.11. Appellees agree that it would be bizarre and unlawful for Appellant to prosecute people under §§7201 and 7206 for filing false or fraudulent tax returns with some foreign country. Appellees agree that Appellant's authority to prosecute people under §§7201 and 7206 extends only to tax returns filed under Federal law and over which Appellant has authority — returns contemplated under §6501(a). And, as the Tax Court pointed out, the U.S. can and does prosecute individuals under §7206 for filing false or fraudulent income tax returns with VIBIR under §932(c)(2). Add. 52 (quoting United States v. Miller, Criminal No. 2013-07, Indictment at 1 (D.V.I. Apr. 4, 2013), ECF No. 1; and United States v. Auffenberg, Criminal No. 2007-0047-F/B, Second Superseding Indictment at 1-8 (Mar. 18, 2008), ECF No. 295 (charging defendants with conspiracy to defraud the United States under 18 U.S.C. §371 by fraudulently claiming EDC credits in the Virgin Islands)). The language in the Auffenberg indictment could not be clearer on this point:

Defendant herein, did willfully make and subscribe a United States Individual Income Tax Return, Form 1040, for year 2001, which was verified by a written declaration that it was made under the penalties of perjury and was filed with the BIR, which said return Defendant did not believe to be true and correct as to every material matter in that it stated that he was a bona fide resident of the Virgin Islands in the year 2001 and was entitled to a reduction in tax in the amount of $3,656,149 . . ., whereas, as Defendant then and there well knew and believed, he was not a bona fide resident of the Virgin Islands in the year 2001 and was not entitled to a reduction in tax in the amount of $3,656,149. . . . All of Count 16 in violation of Title 26, United States Code, Section 7206(1).

United States v. Auffenberg, 1:07-cr-00047-HB-GWB, Doc. 429 at 53 (Sept. 30, 2008).

So, the U.S. does prosecute people for filing false or fraudulent tax returns with VIBIR. Appellant concedes in his footnote 11 that if such returns are filings in the criminal context they are likewise filings in the civil context:

26 U.S.C. § 6091(b)(4) and 26 C.F.R. § 1.6091-2, returns are deemed filed if they are electronically filed, mailed to the appropriate IRS service center, or hand-delivered to an agent authorized to receive them.

United States v. Boitano 796 F.3d 1160, n.2 (9th Cir. 2015). The U.S. deems returns filed with VIBIR to meet these criteria and therefore deems them to be returns filed under Title 26. By recognizing this in his footnote, Appellant has conceded his case — as he should have fifteen years ago.

V. A Brief Word on Appellant's Unwarranted Disparagement of Appellees

Appellant begins his Brief not with a discussion of the issue on appeal, but, rather, with unfounded disparagement of Appellees as participants in some abusive tax shelter because they participated in the USVI EDP authorized under §934. He plants the seed early, and then brings it home later on Brief when he complains that the “manifest incorrectness” of the Tax Court's opinion is that it “absolve[ed] the Coffeys of any tax liability.”⁴ The “correctness” or “incorrectness” of a court's ruling is not in the resulting tax liability but, rather, in the integrity of the ruling itself. Appellant's efforts to sway this Court with tax revenues to be gained merely serves to spotlight his own misguided motives that brought him to this place in Appleton and, having not learned from his experience, now in this case. Embarrassing as this predicament may be to Appellant, this decade-long ordeal has taken a severe emotional and financial toll on Mr. and Mrs. Coffey — which makes the unwarranted disparagement all the more hurtful.

CONCLUSION

Section 6501(a) provides Appellant with three years from the date a return is filed to assess a deficiency. The Code prohibits repose for non-filers. Appellant calls Appellees non-filers, claiming that if he examines a §932(c)(2) return and challenges the residency position asserted thereon, he causes the return to be no return. But there is no authority for such a position. He claims that Appellants should have sent him a return with zeros on it to let him know that the filed a §932(c)(2) return. But there is no such requirement. The return is a Federal return over which Appellant has authority. He exercised that authority. Under protocol he established, he examined the §932(c)(2) returns Appellees filed with the VIBIR. But he failed to issue a timely Notice of Deficiency. Appellees “made an honest and reasonable effort to comply with their filing obligations and provided enough information on the return they filed with VIBIR to allow proper computation of tax.” Add. 75. They filed the proper return in the proper place at the proper time based on the information reported thereon.“That should be enough.” Id. The Tax Court's determination should be affirmed.

Respectfully submitted,

ANDREOZZI BLUESTEIN LLP
Attorneys for Appellees

By: Randall P. Andreozzi, Esq.
Heather L. Marello, Esq.
Michael J. Tedesco, Esq.
9145 Main Street
Clarence, New York 14031
(716) 565-1100
rpa@andreozzibluestein.com
hlm@andreozzibluestein.com
mjt@andreozzibluestein.com