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Dudley v. Commissioner of Internal Revenue

decided: July 25, 1958.

GEORGE H. T. DUDLEY, PETITIONER,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.



Author: Maris

Before MARIS, GOODRICH and McLAUGHLIN, Circuit Judges.

MARIS, Circuit Judge.

This is a petition to review an order of the Tax Court of the United States dismissing a petition for redetermination of income tax liability for the year 1955. The petitioner and his wife had received a letter dated October 26, 1956, from the Head of the Tax Division of the Department of Finance of the Government of the Virgin Islands of the United States which stated that $6,567.31 was due on their income tax for the year 1955. They had also received a letter dated February 15, 1957, likewise from the Head of the Tax Division of the Department of Finance of the Government of the Virgin Islands, which asserted an income tax deficiency and stated that the "District Court is apparently the Court of jurisdiction in the case of an appeal from the decision of this office" and "Unless a petition is filed with the Court for review or redetermination of the proposed deficiency, within 90 days of today's date," the proposed deficiency would be assessed.

On May 1, 1957, the petitioner filed in the Tax Court of the United States a petition "for redetermination of deficiency claimed by the Commissioner of Internal Revenue in notices of deficiency dated October 26, 1956 and February 15, 1957, attached hereto, Exhibits 1 and 2 [the above-described letters], as basis for this proceeding". The taxpayer also alleged that his "income tax return for the year 1955 was filed with the office of the Tax Division of the Department of Finance, Government of the Virgin Islands". The Commissioner of Internal Revenue filed a motion to dismiss on the ground that the Tax Court had not acquired jurisdiction because no statutory notice of deficiency, as authorized by Section 6212(a), Internal Revenue Code of 1954, 26 U.S.C. § 6212(a), had been issued by the Secretary of the Treasury of the United States or his delegate. The Tax Court decided that no appropriate notice of deficiency had been shown to have been given to the petitioner and that it, therefore, did not have jurisdiction to entertain the petition. Accordingly, it dismissed the proceedings. 28 T.C. 992.

The Tax Court is a judicial agency of the United States with limited statutory jurisdiction. Section 7442, Internal Revenue Code of 1954, 26 U.S.C. § 7442; Stern v. Commissioner of Internal Revenue, 3 Cir., 1954, 215 F.2d 701. In the case of a deficiency in income tax the Tax Court acquires jurisdiction to redetermine the deficiency only after a notice of deficiency, as authorized by section 6212(a) of the Internal Revenue Code of 1954, is mailed to a taxpayer who thereafter files a petition for redetermination within the appropriate time. Section 6213(a), Internal Revenue Code of 1954, 26 U.S.C. § 6213(a).

Only the Secretary of the Treasury of the United States or his delegate is authorized to mail a notice of deficiency. Section 6212(a), Internal Revenue Code of 1954. The Secretary of the Treasury delegated general authority over the functions of the Internal Revenue Service to the Commissioner of Internal Revenue. Treasury Department Order No. 150-2, May 15, 1952, 17 F.R. 4590, as made effective under the Internal Revenue Code of 1954 by Treasury Department Order 150-36, August 17, 1954, 1954-2 C.B. 733. In addition, the Secretary has stated in T.C. 6118, 1955-1 C.B. 698, 718-719:

"In any case in which a function is vested by the Internal Revenue Code of 1954 in the Secretary or his delegate, and Treasury regulations or Treasury decisions (including this Treasury decision) provide that such function may be performed by a District Director of Internal Revenue, a Regional Commissioner of Internal Revenue, an Assistant Commissioner of Internal Revenue, or by a designated officer or employee in the office of a District Director, Regional Commissioner or Assistant Commissioner -

"(a) Such provision in the regulations or a Treasury Decision shall constitute a delegation by the Secretary to the Commissioner of the authority to perform such function and a redelegation thereof by the Commissioner to the designated officer or employee, * * *."

Section 301.6212-1 of the Treasury Regulations authorize a district director or an assistant regional commissioner, appellate, to notify a taxpayer of a deficiency by registered mail.

We agree with the Tax Court that the alleged deficiency notice which formed the basis for invoking its jurisdiction here was not issued by the Secretary of the Treasury of the United States or his delegate. Indeed, the letters of October 26, 1956, and February 15, 1957, attached to taxpayer's petition for redetermination and which he states constitute the "basis for this proceeding" were not signed or issued by any officer of the United States. On the contrary, they show on their face that they were sent by an officer of the Government of the Virgin Islands, to wit, Reuben B. Wheatley, Head of the Tax Division of the Department of Finance of the territorial government.

Furthermore, the taxpayer alleges in his petition for redetermination that the income tax return for the year in dispute was filed with the Tax Division of the Department of Finance, Government of the Virgin Islands. He nowhere asserts that the tax was returned to the Government of the United States. Accordingly it is clear from the face of the petition and the alleged deficiency letters annexed thereto, that the deficiency here sought to be redetermined was not claimed by the Commissioner of Internal Revenue or by any officer of the United States. The Tax Court was, therefore, correct in ruling that the alleged notice of deficiency was not issued by the Secretary of the Treasury or his delegate. Since, as we have seen, the jurisdiction of the Tax Court is limited to redetermining deficiency determinations made by officers of the United States, namely, the Secretary or his delegate, with respect to certain specified taxes, the Court did not err in holding that it did not have jurisdiction in this case.

Moreover, we are satisfied that the tax here in dispute is actually not a tax of the United States but a territorial income tax and for this additional reason the Tax Court had no jurisdiction in the premises.

The territorial official who caused the notice of deficiency to be issued under the authority of the Government of the Virgin Islands upon which taxpayer bases his petition here was undoubtedly enforcing the following provision with respect to the Virgin Islands income tax contained in the Naval Appropriation Act of July 12, 1921:*fn1

"* * * the income-tax laws mow in force in the United States of America and those which may hereafter be enacted shall be held to be likewise in force in the Virgin Islands of the United States, except that the proceeds of such ...


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