The opinion of the court was delivered by: NOONAN
The defendant in this proceeding has moved pursuant to Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. for summary judgment dismissing the complaint, or pursuant to Rule 12(b) for an order dismissing the complaint on the ground that the complaint fails to state a claim upon which relief can be granted: the plaintiff has cross-moved for summary judgment in its favor.
Since none of the material facts are in dispute, the case is one well-suited to summary judgment.
The defendant bases its motion on two theories: one, that the plaintiff is barred by its signing of a Treasury Department Form 870-TS; the other, that the plaintiff is barred by a rule known as the 'contested tax rule'. If these two affirmative defenses fail, summary judgment for the plaintiff is proper. Therefore, the merits of these defenses are the sole issues before the court.
The form 870-TS is entitled 'Offer of Waiver of Restrictions on Assessments and Collection of Deficiency in Tax'. It differs from Form 870, which is entitled 'Waiver * * *' (rather than 'Offer of Waiver * * *') in that the former is an offer which must be accepted by the Treasury Department, while the latter is a simple waiver. Both forms contain the notification that the signing of the form '* * * is not, however, a final closing agreement under section 3760 of the Internal Revenue Code * * *' and '* * * does not extend the statutory period of limitation for refund, assessment, or collection of the tax.'
In addition to this wording Form 870-TS omits certain other wording included in Form 870, to wit: that the form 'does not preclude the assertion of a further deficiency in the manner provided by law should it subsequently be determined that additional tax is due.'
Form 870-TS also contains other statements not included in Form 870. After notice that the offer is subject to acceptance by or on behalf of the Commissioner, and is of no effect unless so accepted, it goes on to provide that, if accepted: '* * * the case shall not be reopened nor shall any claim for refund be filed or prosecuted respecting the taxes for the year(s) above stated, in the absence of fraud, malfeasance, concealment or misrepresentation of material fact, or of an important mistake in mathematical calculations; and the taxpayer also agrees * * * (2) upon request of the Commissioner to execute at any time a final closing agreement as to the tax liability, on the foregoing basis, for said year(s) under the provisions of section 3760 of the Internal Revenue Code [26 U.S.C.A. § 3760].'
The taxpayer executed a Form 870-TS, the offer was accepted on behalf of the Commissioner by the head of a division, and the plaintiff has introduced no allegation of fraud, malfeasance, concealment or misrepresentation of any material fact, or of any important mistake in mathematical calculations.
Accordingly, if the agreement means what it says, the taxpayer has waived restrictions under section 272(a) and has agreed to pay the tax set out in the offer and not to reopen the case nor apply for a refund for that year. But the taxpayer is not applying for relief under section 272(a), which has to do with petitioning the Board of Tax Appeals (or, now, appealing to the Tax Court). He does, however seek a refund for that year. $ The government concedes that the signing of Form 870 would not prevent the bringing of this suit, but it claims that the Form 870-TS is more binding in that respect, and does preclude the suit. Certainly the wording does seem designed to create a binding agreement; but whether the agreement amounts to a 'closing agreement' is the real issue. On the surface, it does not. In fact, it specifically says that it is not a final closing agreement 'under section 3760'.
Turning to that section of the Internal Revenue Code, we note that the agreement pursuant to that section finally and conclusively disposes of the matter unless the party seeking to reopen it can show:
3. misrepresentation of a material fact.
Comparing these provisions that allow reopening of the case with those allowed by Form 870-TS, we note that the latter allows the matter to be reopened ...