T.C. Memo. 1999-275
UNITED STATES TAX COURT
FRANK A. SONIER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13527-98R. Filed August 17, 1999.
Frank A. Sonier, pro se.
Lawrence H. Ackerman, for respondent.
MEMORANDUM OPINION
DEAN, Special Trial Judge: This matter is before the Court
on respondent's motion to dismiss for lack of jurisdiction. The
issues for decision are: (1) Whether petitioner has alleged that
there is an actual controversy; and (2) whether petitioner is an
"interested party" entitled to file a petition for declaratory
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judgment pursuant to section 7476(b)(1)1 with respect to the
continuing qualification of the Maritime Association
International Longshoremen's Retirement Plan Number 002 (MAIL
Plan).
Background
Petitioner is a participant in the MAIL Plan. Before its
approval for tax-exempt status under sections 401 and 501, on
May 21, 1997, the board of trustees for the MAIL Plan filed an
Application for Determination for Collectively Bargained Plan
with the Internal Revenue Service (IRS). The MAIL Plan
administrator issued a letter to all contributing employers on
July 8, 1997, asking that the Notification to Interested Parties
with respect to the application filed by the MAIL Plan be posted
at the principal places of employment and where notices
concerning employee-management issues are usually posted.
Petitioner found out about the pending application from his
employer's human resources office and filed comments with the
District Director, which were sent on August 4, 1997, opposing
approval of the plan.
1
Unless otherwise indicated, all chapter, subchapter, and
section references are to chapters, subchapters, and sections of
the Internal Revenue Code of 1986, as in effect at the time the
petition herein was filed. All Rule references are to the Tax
Court Rules of Practice and Procedure.
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Petitioner commented to the District Director that he was
unhappy with the plan, that he did not vote for the plan, and
that it was not in his best interest. Petitioner did not note in
the comment that he was dissatisfied with the form of notice he
received about the pending application for determination. The
IRS issued a favorable determination letter on May 5, 1998,
finding that the MAIL Plan satisfied the requirements for a
qualified tax-exempt retirement plan.
Petitioner filed a pleading on August 3, 1998, which the
Court filed as a petition for declaratory judgment. Pursuant to
the order of the Court dated October 16, 1998, petitioner filed
on November 17, 1998, a pleading which was filed by the Court as
an amended petition. In his pleadings, petitioner requested that
the MAIL Plan be disqualified under section 401 and thus not be
exempt from tax under section 501. Petitioner also requested
that the plan be terminated. When the petition for declaratory
judgment was filed, the address of the board of trustees of the
MAIL Plan was in Houston, Texas.
Respondent subsequently filed a motion to dismiss for lack
of jurisdiction on the grounds that petitioner is not an
interested party and that there is no actual controversy
involving the qualification of the plan.
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Discussion
Respondent's motion to dismiss for lack of jurisdiction
makes the following arguments: (1) There is no "actual
controversy" because petitioner fails to set forth any grounds
which, if proven, would result in plan disqualification; and (2)
petitioner does not qualify as an "interested party" because he
has not alleged or shown that he is a present employee or that he
is covered by a collective-bargaining agreement under which the
MAIL Plan is maintained.
Section 7476(a) provides that this Court may exercise
jurisdiction over a declaratory judgment action if there is an
actual controversy involving a determination by the Secretary
with respect to the initial or continuing qualification of a
retirement plan, or involving a failure by the Secretary to make
a determination with respect to such initial qualification or
with respect to such continuing qualification if the controversy
arises from a plan amendment or plan termination. See Loftus v.
Commissioner, 90 T.C. 845, 855 (1988), affd. without published
opinion 872 F.2d 1021 (2d Cir. 1989). Petitioner bears the
burden of proving that the jurisdictional requirements of section
7476 have been met. See Rule 217(c)(1)(A)(i); Halliburton Co. v.
Commissioner, 98 T.C. 88, 94 (1992).
We shall first address whether an actual controversy exists.
As previously stated, in order for us to exercise jurisdiction
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over a declaratory judgment action under section 7476, there must
be an actual controversy involving a determination by the
Secretary with respect to the initial or continuing qualification
of a retirement plan. See sec. 7476(a).
In deciding whether an actual controversy exists, we look to
the standard set forth by the Supreme Court in Maryland Cas. Co.
v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941). The
standard is whether, under all the facts and circumstances, there
is a "substantial controversy, between parties having adverse
legal interests, of sufficient immediacy and reality to warrant
the issuance of a declaratory judgment." Id.; see also Loftus v.
Commissioner, supra at 856.
We have noted that an actual controversy under section 7476
generally arises from some disagreement between a petitioner and
the Commissioner as to the qualified status of the plan. See
Halliburton Co. v. Commissioner, supra at 105; Loftus v.
Commissioner, supra at 855-859.
We begin, therefore, by examining petitioner's arguments
with respect to the qualified status of the plan. Petitioner
claims that the IRS should not have approved the plan because the
rate of return is unfavorable, petitioner preferred a section
401(k) plan, and the proper notice requirements were not met. We
address his defective notice argument first.
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In his comment to the District Director, petitioner did not
raise the issue of defective notice. Assuming, arguendo, that in
the absence of such an argument in the administrative record we
can address petitioner's concern, we examine whether petitioner's
complaint is grounds for disqualification of the plan. Cf.
Halliburton Co. v. Commissioner, supra; Thompson v. Commissioner,
71 T.C. 32, 37 (1978). Petitioner alleges that he never saw any
posted notices at his place of employment and only found out
about the application pending before the IRS when he called the
human resources department to inquire about the status of the
MAIL Plan application. Petitioner claims that the board of
trustees failed to post the requisite notice, so the plan should
never have been approved; and therefore there is a disagreement
between him and the IRS regarding the qualified status of the
plan. Respondent, on the other hand, claims that notice was
properly given, and irrespective of petitioner's claim,
petitioner received actual notice of the pending application in
time to file a comment with the IRS.
In general, before a determination as to the qualified
status of a retirement plan can be made, notice must be given to
all interested parties. See secs. 1.7476-1(a) and 1.7476-2(a),
Income Tax Regs; see also Employee Retirement Income Security Act
of 1974, Pub. L. 93-406, sec. 3001(a), 88 Stat. 829, 995. Notice
may be given "in person, by mailing, by posting, or by printing
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it in a publication of the employer or an employee organization".
Sec. 1.7476-2(c)(1), Income Tax Regs. Failure to give proper
notice may result in the petition's being dismissed as premature,
and the Court will not conduct a review of the plan. See sec.
7476(b)(2); Hawes v. Commissioner, 73 T.C. 916, 921 (1980).
In the present case, petitioner does not contend that he
failed to receive notice. In fact, petitioner concedes that he
did indeed receive notice in person of the pending application
and filed timely comments with the District Director before the
determination was made. See sec. 1.7476-2(c)(1), Income Tax
Regs. The IRS considered petitioner's comments while the
application was pending and issued a determination with respect
to the plan. Under these circumstances, we do not find that
defective notice is a ground for plan disqualification, or that
petitioner's filing of his petition was premature. See sec.
7476(b)(2). Accordingly, we do not dismiss his petition on this
basis.
Petitioner also complains about the rate of return on plan
assets and expresses his desire for a section 401(k) plan instead
of the MAIL Plan. Respondent contends that petitioner's
arguments regarding the low rate of return and his desire to have
his assets transferred into another type of plan would not result
in plan disqualification and therefore do not amount to an actual
controversy.
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We agree with respondent that even if the plan has a low
rate of return, no actual controversy exists because petitioner
has not raised an issue that would put at risk the qualification
of the plan under section 401.
Petitioner complains that the MAIL Plan's rate of return is
unsatisfactory, and that he did not vote for this plan. There is
no requirement in section 401, or in related provisions, that a
retirement plan grow at a specified rate, or that its
participants be satisfied with the rate of return. Likewise,
there is no requirement that the plan be approved by all present
employees. Thus, petitioner raises no argument that calls into
question the qualified status of the plan under section 401 and
related provisions.
Petitioner's primary request is that we terminate the MAIL
Plan. However, section 7476 authorizes the Court only to make
declarations with respect to the initial qualification, the
continuing qualification, or the failure to make a determination
with respect to a retirement plan. Thus, section 7476 allows us
only to review the qualification of the plan. It does not afford
the remedy of termination of a retirement plan.
This appears to be a dispute between petitioner and the MAIL
Plan administrators. Accordingly, we find that there is no
actual controversy over which we have jurisdiction under section
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7476(a), and we do not address whether petitioner is an
interested party. Respondent's motion to dismiss will be
granted.
An appropriate order of
dismissal for lack of jurisdiction
will be entered.