failure to offer a settlement under § 6224(c) converts a partner's tax liability into a nonpartnership item prior to an actual and binding settlement.
Likewise, nothing in the Treaty Pines decision suggests that the Court has jurisdiction over the plaintiffs' refund action. Indeed, this case supports the government's argument that the Tax Court during the TEFRA proceeding, and not the district court in a later refund suit, has an obligation to determine if the partners involved in the TEFRA proceeding have settled during the course of the TEFRA proceeding and has the authority to adjudicate the IRS' conduct in settling partnership items. Treaty Pines also makes clear that whether a partner in a TEFRA proceeding actually settled the case can be raised on the appeal of the Tax Court decision in the partnership proceeding. In this action, the Montis never brought this issue to the attention of the Tax Court nor to the Second Circuit on the appeal of the Tax Court's final decision. Accordingly, the Court finds that neither Alexander nor Treaty Pines support plaintiffs' construction of either § 6224(c) or § 6230(c) that would allow this Court to exercise subject matter jurisdiction despite the mandates of § 7422(h).
Finally, and perhaps most importantly, when ascertaining whether a section of the Code would grant jurisdiction on this Court, the Code is to be construed narrowly: "It is elementary that 'the United States, as sovereign, is immune from suit save as it consents to be sued . . . and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit' . . . and is to be strictly construed." Randell, 64 F.3d at 106 (citing United States v. Mitchell, 445 U.S. 535, 538, 100 S. Ct. 1349, 1351, 63 L. Ed. 2d 607 (1980); United States v. Sherwood, 312 U.S. 584, 586, 61 S. Ct. 767, 771, 85 L. Ed. 1058 (1941)). In keeping with this rule, the language of the Code conferring jurisdiction on this Court must be narrowly and strictly construed in favor of the government.
As a final note, the Court also points out that to provide a refund to plaintiffs based on the terms of the Craig settlement would in practice enforce a settlement between a taxpayer and the IRS that has met none of the administrative, procedural or technical requirements for settlements that are exhaustively set forth in Chapter 74 of the Tax Code. Moreover, in enforcing such a settlement, the Court further takes note that general contract principles apply to the formation of a settlement agreement, including offer, acceptance and consideration. Alexander, 44 F.3d at 332. This entire action, however, is about the fact that the IRS never made a reasonable settlement offer. Without even an offer, the Court fails to comprehend how it can enforce a settlement that neither satisfies any of the general tenets of contract law nor the specific and detailed requirements for a binding settlement with the IRS.
As such, the Court finds that the exception in § 6230(c) to the general bar on refund suits for partnership items only applies to partners who have actually entered into a settlement agreement. Accordingly, this action, which pertains to a partnership item, is barred under § 7422(h) of the Internal Revenue Code.
For the reasons set forth above, the defendant's motion to dismiss this action for lack of subject matter pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure is GRANTED in its entirety and the complaint is dismissed with prejudice. The defendant's remaining motion for summary judgment and the plaintiffs' cross-motion for summary judgment are denied as moot. The Clerk of the Court is directed to mark this case as closed.
Joanna Seybert, U.S.D.J.
Dated: Uniondale, New York
July 11, 1997