United States Court of Appeals For the Seventh Circuit
Tax – partnerships — statute of limitations
Statute of limitations challenges cannot be raised in partner-level proceedings.
“Having rejected the taxpayers’ invitation to interpret §6229 and §6501 in the manner they propose, Kaplan’s logic remains sound. Because the determination of whether a valid written agreement exists will affect the entire partnership’s bottom-line— i.e., because it is a ‘legal and factual determination that underlie[s] the determination’ of various balance-sheet items for tax purposes, 26 C.F.R. §301.6231(a)(3)–1(b)—this determination meets the statutory and regulatory definitions of a partnership item. See 26 U.S.C. §6231(a)(3); 26 C.F.R. §301.6231(a)(3)–1(b). In making this determination, we note that our practice is consistent with that of several of our sister circuits, which have determined that statute-of-limitations challenges cannot be raised in partner-level proceedings under the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, 26 U.S.C. §§6221–6234. See, e.g., Keener, 551 F.3d at 1364 (“To remain consistent with [TEFRA’s] structure, the limitations claim … should not be litigated in a partner-level proceeding because it affects the partnership as a whole.’); Weiner v. United States, 389 F.3d 152, 156 (5th Cir. 2004); Davenport Recycling Assocs. v. Comm’r, 220 F.3d 1255, 1260 (11th Cir. 2000); Chimblo v. Comm’r, 177 F.3d 119, 125 (2d Cir. 1999); Williams v. United States, 165 F.3d 30 (6th Cir. 1998) (unpublished table decision). Because the taxpayers’ claims in this part of its appeal are attributable to a partnership item, courts lack subject-matter jurisdiction to hear them under §7422(h). Accordingly, we affirm the district court’s dismissal for want of jurisdiction.”
Appeal from the United States District Court for the Northern District of Illinois, Kennelly, J., Tinder, J.