Pizza Pro Equipment, etc. v. CIR ( 2018 )

United States Court of Appeals
For the Eighth Circuit
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No. 17-1297
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Pizza Pro Equipment Leasing, Inc.
lllllllllllllllllllllAppellant
v.
Commissioner of Internal Revenue
lllllllllllllllllllllAppellee
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Appeal from The United States Tax Court
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Submitted: January 9, 2018
Filed: April 23, 2018
[Unpublished]
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Before GRUENDER, MELLOY, and SHEPHERD, Circuit Judges.
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PER CURIAM.
Pizza Pro Equipment Leasing, Inc. (“Pizza Pro”) appeals a tax court decision
upholding determinations by the Commissioner of Internal Revenue that it owes
excise taxes and additions to tax related to its defined benefit pension plan. We
affirm.
In 1995, Pizza Pro established a defined benefit pension plan (the “Plan”).
This case involves a dispute about a limitation on the Plan’s annual benefit, see I.R.C.
§ 415(b)(2)(C),1 which in turn determines Pizza Pro’s deductible contributions to the
Plan. The Commissioner concluded that from 2002 to 2006 Pizza Pro incorrectly
calculated the limitation on the annual benefit and therefore made nondeductible
contributions to the Plan. See I.R.C. § 404(j)(1)(A). Section 4972 of the Internal
Revenue Code imposes “a tax equal to 10 percent of the nondeductible
contributions.” The Commissioner further imposed additions to tax for failure to file
a return of excise taxes and to timely pay the excise tax owed. See I.R.C.
§ 6651(a)(1) & (a)(2).
Pizza Pro petitioned the tax court, challenging the deficiencies and additions.
The tax court decided the case without trial based on the parties’ stipulated facts and
expert reports, and it upheld the Commissioner’s determinations. It also concluded
that Pizza Pro did not make a valid election under I.R.C. § 4972(c)(7), which allows
a taxpayer to disregard contributions to a defined benefit plan under certain
conditions. Pizza Pro timely appealed to this court.
“We review tax court decisions in the same manner as we review civil bench
trials held by district courts, that is, conclusions of law are reviewed de novo and
findings of fact are upheld unless clearly erroneous.” Estate of Korby v. Comm’r, 471
F.3d 848, 852 (8th Cir. 2006). Likewise, we review for clear error “any reasonable
inferences drawn by the tax court from the stipulated or undisputed facts.” Ark. State
Police Ass’n v. Comm’r, 282 F.3d 556, 558 (8th Cir. 2002).
1
Many of the applicable statutes and regulations have been amended or
repealed since 2006. This opinion references the relevant statutory and regulatory
provisions as they existed from 2002 to 2006.
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Pizza Pro contends that the Plan’s annual benefit never exceeded the applicable
limitation. First, Pizza Pro argues that the tax court erred in holding that the word
“equivalent” in I.R.C. § 415(b)(2)(C) should be read as “actuarially equivalent.”
However, the tax court merely applied the Treasury Department regulation issued
pursuant to the statute, see Treas. Reg. § 1.415-3(e) (stating that a plan benefit
beginning before the normal retirement age is adjusted to “the actuarial equivalent”
of a benefit beginning at the normal retirement age), the validity of which Pizza Pro
has not challenged.
Because this regulation does not define actuarial equivalence, the tax court
looked to general practice within the field of actuarial science to ascertain the proper
method for determining the limitation on the annual benefit. Crediting the
Commissioner’s report, which was prepared by an actuary employed by the IRS, and
discounting Pizza Pro’s report, which was not prepared by an actuary, the tax court
found that the Commissioner’s method accords with actuarial practice while Pizza
Pro’s does not. Because the tax court did not clearly err in this finding, Pizza Pro’s
challenge to the deficiencies and additions fails. In light of the tax court’s thorough
and well-reasoned opinion, further discussion of this question would have no
precedential value. See 8th Cir. R. 47B.
Moreover, the tax court also correctly held that Pizza Pro did not make a valid
election regarding excess contributions. Under I.R.C. § 4972(c)(7), “[i]n determining
the amount of nondeductible contributions for any taxable year, an employer may
elect for such year not to take into account any contributions to a defined benefit plan
except to the extent that such contributions exceed the full-funding limitation.”
Neither Congress nor the Commissioner has specified the procedures necessary
to make an election. Thus, Pizza Pro relies on a recommendation to the IRS from two
actuarial groups that a taxpayer’s failure to file the excise tax form “should be
considered sufficient evidence of the election.” But the IRS did not adopt this
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suggestion, and the Fifth Circuit rejected a similar argument in another context. See
Young v. Comm’r, 783 F.2d 1201, 1206 (5th Cir. 1986) (concluding that “nineteen
bishops swearing as to taxpayers’ subjective intent” would not establish that the
taxpayers made an election because the Commissioner “was not otherwise informed
of their state of mind”). As the Commissioner points out, Pizza Pro’s failure to file
the requisite form stemmed from its belief that it made no excess contributions and
owed no excises taxes, not its intent to make an election. Because it failed to inform
the Commissioner in any manner, Pizza Pro did not make an election.
For these reasons, the judgment is affirmed.
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