and Submitted September 13, 2018 San Francisco, California
from the United States District Court for the Northern
District of California D.C. No. 5:13-cv-05563-EJD Edward J.
Davila, District Judge, Presiding
P. McDonnell (argued), Law Offices of John P. McDonnell, Los
Altos, California, for Plaintiff-Appellant.
E. McLaughlin (argued) and Geoffrey J. Klimas, Attorneys;
David A. Hubbert, Acting Assistant Attorney General; Thomas
Moore, Assistant United States Attorney; Brian Stretch,
United States Attorney; Tax Division, United States
Department of Justice, Washington, D.C.; for
Before: A. Wallace Tashima, Johnnie B. Rawlinson, and Paul J.
Watford, Circuit Judges.
panel affirmed the district court's summary judgment in
favor of the United States in a tax refund action by taxpayer
Interior Glass Systems, Inc.
joined a Group Life Insurance Term Plan (GLTP) to fund a
cash-value life insurance policy owned by its sole
shareholder and only employee. Under Notice 2007-83, the
Internal Revenue Service requires disclosure of certain
"listed transactions" that involve cash-value life
insurance policies, because of their potential for use in
tax-avoidance schemes. The parties agree that taxpayer's
transaction satisfies three of the four elements of a listed
transaction. The district court determined that
taxpayer's transaction-joining the GLTP-was substantially
similar to a listed transaction and should have been
disclosed, and the panel agreed.
panel also held that taxpayer's procedural due process
rights were not violated when it was required to pay
penalties for non-disclosure in full before seeking judicial
review. The panel held that taxpayer was not entitled to
pre-collection judicial review under Jolly v. United
States, 764 F.2d 642 (9th Cir. 1985).
WATFORD, CIRCUIT JUDGE
Internal Revenue Service (IRS) requires taxpayers to disclose
their participation in certain transactions, known as
"listed transactions," that the agency has
designated for close scrutiny. 26 C.F.R. § 1.6011-4(a),
(b)(2); see 26 U.S.C. § 6011(a). To compel
compliance with this obligation, Congress has authorized the
IRS to impose monetary penalties on those who fail to file
the required disclosure statement. 26 U.S.C. § 6707A(a).
The IRS determined that the taxpayer in this case, Interior
Glass Systems, Inc., failed to disclose its participation in
a listed transaction in three different tax years and imposed
a penalty of $10, 000 per year. Interior Glass paid the
penalties and then challenged their imposition by seeking an
administrative refund. When that challenge failed, the
company filed this action in the district court to recover
the money it had been forced to pay. See 28 U.S.C.
§ 1346(a)(1); 26 U.S.C. § 7422(a). The district
court granted the government's motion for summary
judgment, concluding that the penalties were properly
appeal, Interior Glass raises two principal arguments. First,
it contends that the penalties were wrongly imposed because
it did not actually participate in a listed transaction and
thus had nothing to disclose. Second, Interior Glass contends
that its due process rights were violated because it was not
afforded an opportunity for ...