Nathaniel Carter, et al v. Commissioner of Internal Revenue

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 20-12200
____________________
NATHANIEL A. CARTER,
STELLA C. CARTER,
Petitioners-Appellants,
Cross-Appellees,
versus
COMMISSIONER OF INTERNAL
REVENUE,
Respondent-Appellee,
Cross-Appellant.
____________________
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2 Opinion of the Court 20-12200
Petitions for Review of a Decision of the
U.S. Tax Court
Agency No. 23621-15
____________________
____________________
No. 20-12201
____________________
RALPH G. EVANS,
Petitioner-Appellant,
Cross-Appellee,
versus
COMMISSIONER OF INTERNAL
REVENUE,
Respondent-Appellee,
Cross-Appellant.
____________________
Petitions for Review of a Decision of the
U.S. Tax Court
Agency No. 23647-15
____________________
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20-12200 Opinion of the Court 3
Before N EWSOM , BRANCH, and B RASHER , Circuit Judges.
PER CURIAM:
This tax appeal presents two issues. First, whether a conser-
vation easement satisfied the “granted in perpetuity requirement”
of 26 U.S.C. § 170(h)(2)(C). And second, whether the IRS violated
26 U.S.C. § 6751(b)’s supervisory approval requirement as to cer-
tain penalties. The Tax Court answered the first question in the
negative and the second in the positive. Because our precedents
provide different answers, we reverse and remand.
I. BACKGROUND
Nathaniel Carter and Ralph Evans owned over 5,000 acres
in a tract called Dover Hall. Carter and Evans formed a partnership
that donated 500 acres of Dover Hall to the North American Land
Trust as a conservation easement. The conservation deed memo-
rializing the donation, however, retained various rights for the do-
nors. Evans and Carter’s partnership claimed a multimillion-dollar
deduction for the easement on its 2011 partnership tax return, and
each partner claimed an equal share on their 2011 individual re-
turns. Carter also carried part of his 2011 deduction over to 2012
and 2013.
The IRS audited Carter and Evans and disallowed the chari-
table deductions. As part of the investigation, a tax examiner
mailed each man a letter and revenue agent’s report proposing pen-
alties under 26 U.S.C. § 6662. Ten days after mailing the letter, the
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4 Opinion of the Court 20-12200
examiner sent the case to his immediate supervisor, who approved
the penalties in writing. Eventually, the IRS issued Carter and Ev-
ans statutory notices of deficiency that described the proposed tax
changes and penalties resulting from the audit. Each man timely
petitioned for pre-assessment review of his deficiency, and the Tax
Court took up the disputes.
The Tax Court held that the petitioners’ arguments failed on
the merits because their retained rights under the conservation
deed rendered the easement in violation of Section 170(h)(2)(C)’s
granted in perpetuity requirement. But it also procedurally disal-
lowed the IRS’s asserted Section 6662 penalties, holding that the
letters and examination reports constituted “initial determina-
tion[s] of . . . assessment” under Section 6751(b). Because the IRS
had mailed the letters without first obtaining supervisory approval
of the covered penalties contained within, the Tax Court held that
the government could never assess those penalties. Carter and Ev-
ans timely appealed the Tax Court’s decision on the merits, and the
IRS cross-appealed as to the procedural validity of the penalties.
II. STANDARDS OF REVIEW
We review the Tax Court’s legal conclusions
de novo and
its factual findings for clear error.
Kardash v. Comm’r., 866 F.3d
1249, 1252 (11th Cir. 2017). And although we generally provide re-
spectful consideration to the decisions of the Tax Court on similar
issues in the interest of uniform administration, those decisions do
not bind us.
See Dobson v. Comm’r., 320 U.S. 489, 499, 502 (1943).
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20-12200 Opinion of the Court 5
III. DISCUSSION
A. The Petitioners’ Conservation Easement Satisfied the
“Granted-In-Perpetuity” Requirement
We first address the conservation easement. The parties
agree that this issue is controlled by our recent decision in
Pine
Mountain Preserve, LLLP v. Commissioner, 978 F.3d 1200 (11th
Cir. 2020). They also agree that
Pine Mountain requires us to re-
verse the Tax Court on this issue. Thus, our only remaining task is
to determine what to do next. The petitioners ask us to decide the
remaining issues of their challenge to the notice of deficiency, most
notably whether the conservation easement also satisfied Section
170(h)(2)(A)’s “protected in perpetuity requirement,” despite the
Tax Court having yet to opine on those issues in the first instance.
The IRS asks us to remand. Because the issues yet to be decided by
the Tax Court are materially identical to those that we remanded
for statutory “heavy lifting” in
Pine Mountain,
see 978 F.3d at 1208
n.4, we agree with the IRS that remand is proper.
B. The IRS Did Not Violate Section 6751(b)
We next address whether the IRS violated Section 6751(b)’s
supervisory approval requirement. As an initial matter, we reject
the petitioners’ assertion that deciding this issue would constitute
an advisory opinion. The Tax Court’s decision procedurally disal-
lowed assessment of the Section 6662 penalties asserted in the pe-
titioners’ notices of deficiency. That disallowance, if affirmed,
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6 Opinion of the Court 20-12200
would permanently bar the IRS from assessing the penalties regard-
less of the eventual result of any remaining litigation.
See 26 U.S.C.
§ 6215(a). And although the petitioners correctly suggest that the
penalties issue could become moot if they eventually prevail on
their underlying challenges, the mere prospect that an issue might
be mooted at some future time does not place the issue beyond our
otherwise proper jurisdiction in the here and now.
As to the legal question, whether the IRS violated Section
6751(b) is resolved by a recent precedent. In
Kroner v. Commis-
sioner, 20-13902, --- F.4th ---- (11th Cir. 2022), we held that the Tax
Court erred in disallowing penalties under Section 6751(b) because
it believed the penalties were not timely approved by an IRS super-
visor. The facts as to the petitioners’ penalties are nearly identical
to those we addressed in
Kroner. Here, as in
Kroner, the IRS: (1)
mailed the petitioners a letter and examination report proposing
penalties subject to both pre-assessment Tax Court review and Sec-
tion 6751(b); (2) obtained supervisory approval of those penalties
after mailing the letter and report; and (3) issued the petitioners
statutory notices of deficiency later challenged in Tax Court. As in
Kroner, the Tax Court held that the supervisor had not approved
the penalties in time to satisfy Section 6751(b). And, as in
Kroner,
we reverse and remand.
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20-12200 Opinion of the Court 7
IV. CONCLUSION
For the foregoing reasons, the portions of the Tax Court’s
decision holding that the conservation easement did not satisfy Sec-
tion 170(h)(2)(C)’s granted-in-perpetuity requirement and that the
IRS violated Section 6751(b) are REVERSED. The remaining con-
servation easement issues are REMANDED to the Tax Court for
proceedings consistent with this opinion and
Pine Mountain.
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