T.C. Memo. 2000-250
UNITED STATES TAX COURT
SUSAN JANE HOYEZ, C.P.A., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13572-98. Filed August 10, 2000.
Susan Jane Hoyez, pro se.
Nhi T. Luu-Sanders, for respondent.
MEMORANDUM OPINION
POWELL, Special Trial Judge: Respondent determined a
deficiency in petitioner's 1993 Federal excise tax and an
addition to tax under section 6651(a)(1) in the respective
amounts of $415 and $104. The issue is whether a contribution to
petitioner’s pension plan was timely under section 412.1
1
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
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Petitioner resided in Portland, Oregon, at the time the petition
was filed.
This case was submitted fully stipulated under Rule 122, and
the facts may be summarized as follows. Petitioner is a
certified public accountant doing business as a sole
proprietorship. On November 22, 1993, petitioner adopted a
revised money purchase pension plan (the Plan) effective January
1, 1993. The Plan was adopted to meet the requirements of the
Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, and
subsequent legislation including the Omnibus Budget
Reconciliation Act of 1993, Pub. L. 103-66, 107 Stat. 312.
The Plan is a qualified plan within the meaning of section
401. The Plan is subject to the funding requirements of section
412, and petitioner is an employer within the meaning of section
412. Both petitioner and the Plan have taxable years ending
December 31. Petitioner made contributions to the Plan for 1993
of $1,491 and $4,145 on April 28 and October 3, 1994,
respectively.
Respondent determined that the October 3, 1994, contribution
was made after the period allowed by section 412(c)(10)(B). As a
consequence the Plan failed to meet the minimum funding standard
for 1993. Respondent also determined that petitioner failed to
file a Form 5330, Return of Excise Taxes Related to Employee
Benefit Plans. Respondent issued a notice of deficiency for 1993
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for excise tax under section 4971(a) and imposed a failure to
file penalty under section 6651(a)(1).
Discussion
A. Excise Tax Under Section 4971(a)
Section 412 was designed to ensure that qualified plans
would accumulate sufficient assets to meet those plans’
obligations to their beneficiaries. See H. Rept. 93-779, at 73
(1974), 1974-3 C.B. 244, 316. Section 412(a), in part, provides:
A plan to which this section applies shall have satisfied
the minimum funding standard for such plan for a plan year
if as of the end of such plan year, the plan does not have
an accumulated funding deficiency. For purposes of this
section and section 4971, the term “accumulated funding
deficiency” means for any plan the excess of the total
charges to the funding standard account for all plan years
(beginning with the first plan year to which this section
applies) over the total credits to such account for such
years or, if less, the excess of the total charges to the
alternative minimum funding standard account for such plan
years over the total credits to such account for such years.
* * *
To ensure that a qualified plan maintains minimum funding,
section 412(b)(1) requires employers to maintain a “funding
standard account” for each plan. Charges to the account consist
of the normal cost of the plan for the plan year and the
amortization of certain costs and liabilities. See sec.
412(b)(2). Credits to the account consist, generally, of
employer contributions for the plan year and the amortization of
certain adjustments. See sec. 412(b)(3).
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At the end of each plan year, if the charges to the account
(defined by section 412(b)(2)) exceed the credits (defined by
section 412(b)(3)), the excess is referred to as an “accumulated
funding deficiency”. Sec. 412(a). If there is an accumulated
funding deficiency for a plan year, the plan is underfunded, and
the employer is subject to excise tax under section 4971(a). See
secs. 412(a), 4971(a). Section 4971(a) imposes a 10 percent tax
upon the amount of the accumulated funding deficiency. Section
4971(e) provides that the tax shall be paid by the employer
responsible for contributing to the plan.
Under section 412(b)(3)(A) the funding standard account
shall be credited with “the amount considered contributed by the
employer to or under the plan for the plan year”. This amount
includes contributions made during the plan year and certain
contributions made after the close of the plan year. Section
412(c)(10)(B) provides that
any contributions for a plan year made by an employer after
the last day of such plan year, but not later than two and
one-half months after such day, shall be deemed to have been
made on such last day. For purposes of this subparagraph,
such two and one-half month period may be extended for not
more than six months under regulations prescribed by the
Secretary.
Section 11.412(c)-12(b)(1), Temporary Income Tax Regs., 41 Fed.
Reg. 46597 (Oct. 22, 1976), provides:
(b) Six month extension of two and one-half month
period. (1) For purposes of section 412 a contribution for
a plan year to which section 412 applies that is made not
more than eight and one half months after the end of such
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plan year shall be deemed to have been made on the last day
of such year.
The issue in this case is whether the October 3, 1994,
contribution to the Plan was timely. Both parties agree that the
contribution to the Plan made on October 3, 1994, was made more
than 8-1/2 months after the plan year ended. Petitioner contends
that the language of section 412(c)(10)(B) acts as a safe-harbor
and not as a definitive deadline. Petitioner argues that section
412(c)(10)(B) does not contain any language indicating that it is
the sole time period in which a deemed contribution can be timely
made. Petitioner points to the language of section 412(b)(3)(A),
i.e., “the amount considered contributed by the employer to or
under the plan for the plan year”, and contends that the use of
the phrase “plan year” indicates that other time periods are
contemplated by the statute.
We cannot read the phrase “plan year” in section
412(b)(3)(A) to mean that separate time periods are contemplated
by the statute. The use of the phrase “plan year” is a reference
to the actual calendar or fiscal tax year of the plan. In this
case, references to the “plan year” would be references to the
Plan in 1993 that ended December 31. Section 412(c)(10)(B)
determines when a contribution is deemed contributed, not section
412(b)(3)(A). If an amount is deemed contributed under section
412(c)(10)(B), section 412(b)(3)(A) simply acts to credit that
amount to the funding standard account. Section 412(c)(10)(B)
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provides that the “two and one-half month period may be extended
for not more than six months”. That language sets a definitive
time limit.
Moreover, the legislative history of section 412 does not
support petitioner’s “safe-harbor” argument. The conference
report states that
the contribution may relate back to the plan year if it is
made within 2-1/2 months after the close of that plan year,
plus any extension granted by the Internal Revenue Service
up to an additional 6 months (for a maximum of 8-1/2 months
after the end of the year). [H. Conf. Rept. 93-1280, at 290
(1974), 1974-3 C.B. 415, 451; emphasis added.]
The use of the word “maximum” is also definitive. The
legislative intent was to create a fixed time period in which
deemed contributions would be allowed.
Petitioner contends that section 412(c)(10)(B) should be
read to allow deemed contributions beyond the 8-1/2 months
because of our holding in Aero Rental v. Commissioner, 64 T.C.
331 (1975). In Aero Rental we held that the statutory timeframe
of section 401(b) for retroactive amendments acted as a safe-
harbor and was not a definitive deadline. The taxpayer in Aero
Rental initiated a stock bonus plan in December 1969. The
taxpayer requested a determination that the plan qualified under
section 401 in June 1970. After extended negotiations with the
Commissioner, the taxpayer amended the plan to comply with the
Commissioner’s position in July 1971. But the Commissioner
disallowed the taxpayer’s deductions for plan contributions for
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1969 and 1970 on the ground that the plan in actual operation had
not met the requirements of section 401 during those years.
The Court found that the legislative history indicated that
Congress did not intend that section 401(b) would set an
exclusive time period. We noted that Congress subsequently
amended section 401(b) to give the Commissioner discretion in
determining the amount of time to permit retroactive amendments.
Furthermore, the taxpayer had negotiated with the Commissioner in
good faith and acted in a timely manner. We concluded that
section 401(b) was not an exclusive timeframe, but was intended
to act only as a safe-harbor, and, therefore, the taxpayer’s
retroactive amendments were valid.
But we are faced with a different statute here. In cases
specifically dealing with the time limit of section
412(c)(10)(B), the Court has adhered to the strict language of
the statute and the regulations. See D.J. Lee, M.D., Inc. v.
Commissioner, 92 T.C. 291 (1989), affd. 931 F.2d 418 (6th Cir.
1991); Wenger v. Commissioner, T.C. Memo. 2000-156. Moreover,
Aero Rental v. Commissioner, supra, has not been expanded to
apply outside of section 401, and it has been narrowly construed
within the confines of section 401. See, e.g., Bolinger v.
Commissioner, 77 T.C. 1353, 1360-1361 (1981); Jack R. Mendenhall
Corp. v. Commissioner, 68 T.C. 676, 682 (1977); Pawlak v.
Commissioner, T.C. Memo. 1995-7. Finally, there is no indication
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that Congress intended to create a case-by-case reasonableness
determination of whether a contribution could be deemed timely.
We sustain respondent’s determination of the excise tax.2
B. Failure To File Penalty
Section 6011(a) provides that, when required by regulations,
any person liable for a tax shall make a return. Section
54.6011-1(a), Pension Excise Regs., requires any employer who is
liable for the tax under section 4971(a) to file an annual return
on Form 5330. Petitioner did not file such a return.
Section 6651(a)(1) imposes a minimum addition to tax for
failure to timely file a return in the amount of $100 or 5
percent of the amount of tax due per month for each month that a
return is not timely filed, not to exceed 25 percent “unless it
is shown that such failure is due to reasonable cause and not due
to willful neglect”. United States v. Boyle, 469 U.S. 241, 246
(1985). Petitioner has not addressed this issue, and, we assume
that, if she is liable for the excise tax, she concedes the
addition to tax under section 6651(a)(1).
Decision will be entered
for respondent.
2
Petitioner contends that under IRS Publication 560,
Retirement Plans for the Self-Employed, contributions can be
retroactively applied to the previous year if the contributions
are made by the due date of the employer’s return. We have
recently considered and rejected this argument. See Wenger v.
Commissioner, T.C. Memo. 2000-156. We see no reason to restate
our reasoning here.