FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RONALD B. BACCEI, Trustee of the
Eda O. Pucci 2004 Revocable
No. 08-16965
trust,
Plaintiff-Appellant,
D.C. No.
3:07-cv-05329-PJH
v.
OPINION
UNITED STATES OF AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Phyllis J. Hamilton, District Judge, Presiding
Argued and Submitted
July 15, 2010—San Francisco, California
Filed February 16, 2011
Before: Richard C. Tallman and Jay S. Bybee,
Circuit Judges, and Timothy M. Burgess, District Judge.*
Opinion by Judge Burgess
*The Honorable Timothy M. Burgess, District Judge for the District of
Alaska, sitting by designation.
2595
2598 BACCEI v. UNITED STATES
COUNSEL
Edward W. Suman, San Bruno, California, for the plaintiff-
appellant.
John A. DiCiccio, Acting Assistant Attorney General, Wash-
ington, D.C.; Steven W. Parks & Carol Barthel (argued),
Department of Justice, Tax Division, Washington, D.C.;
Joseph P. Russoniello, United States Attorney, Northern Dis-
trict of California, San Francisco, California; Jay Robert
Weill, Assistant United States Attorney, Northern District of
California, San Francisco, California, for the defendant-
appellee.
BACCEI v. UNITED STATES 2599
OPINION
BURGESS, District Judge:
I
Ronald B. Baccei, Trustee of the Eda O. Pucci 2004 Revo-
cable Trust, initiated this action in the Northern District of
California, seeking a refund of a penalty imposed by the Inter-
nal Revenue Service for late payment of an estate tax. Baccei
appeals the district court’s summary judgment order, arguing
that the district court erred in: (1) concluding the substantial
compliance doctrine was inapplicable to regulations govern-
ing payment extension requests; (2) finding the IRS was not
equitably estopped from assessing the late payment penalty
and interest; and (3) finding the penalty should not be abated
on grounds of “reasonable cause,” as that term is used in 26
U.S.C. § 6651(a)(2). We affirm.
A
Ronald Baccei served as trustee of the Eda O. Pucci 2004
Revocable Trust. On September 17, 2005, Eda O. Pucci
passed away, and Baccei was named executor of the estate.
Upon his appointment as executor, Baccei retained Dean Bag-
ley, a certified public accountant, to prepare and file a federal
estate tax return on behalf of the Pucci estate. On June 16,
2006, Bagley purported to file a Form 4768 Application for
Extension of Time to File a Return and/or Pay U.S. Estate
Taxes (“Form 4768”) to extend the June 19, 2006, filing dead-
line. See 26 C.F.R. § 20.6075-1 (stating that estate taxes are
due nine months after the date of death, unless the taxpayer
has obtained an extension of time to pay).
Form 4768 contains four distinct parts, in addition to a sig-
nature line requiring the preparer to verify the accuracy of the
information submitted under penalty of perjury. Prior to filing
Form 4768, Bagley completed three of the four numbered
2600 BACCEI v. UNITED STATES
parts; he did not complete Part III, entitled “Extension of
Time to Pay.” Bagley did not enter an extension period in the
field labeled “Extension date requested,” nor did he check the
box indicating that a payment extension was needed. Under
Part IV of Form 4768, Bagley reported that the amount of
estate taxes “estimated to be due” and still owing was
$131,327 and left blank the field labeled “Amount of cash
shortage (complete Part III).”
In submitting Form 4768, Bagley enclosed a letter dated
June 16, 2006, entitled “Request for extension of time to file
and pay U.S. Estate Tax” (“supplemental letter”). In relevant
part, that letter stated as follows:
I believe the tax due is the sum of $131,327, but the
amount cannot be paid at this time for the following
reason: There are more than adequate liquid assets in
the Estate to pay the tax. However, due to the litiga-
tion, letters testamentary appointing Mr. Ronald B.
Baccei were only approved on May 17, 2006. They
were promptly delivered to the bank wherein most of
the liquid assets are on deposit. The bank, however,
has to date not approved the release of funds to Mr.
Baccei as trustee so that the tax could be paid as
such. We seek this extension of time to pay as well
as asking that no penalty be asserted. The trustee has
done all in his power to comply.
On December 19, 2006, Bagley filed the federal estate tax
return on behalf of the Pucci estate, and reported that the
estate taxes actually amounted to $1,684,408. On February 5,
2007, the IRS notified Baccei that the federal estate tax had
not been paid by the June 19, 2006, deadline. Consequently,
the IRS assessed a penalty of $58,954.28, plus interest in the
amount of $69,801, against the estate.
On February 22, 2007, Baccei submitted a payment to the
IRS in the amount of $128,755.28. However, Baccei
BACCEI v. UNITED STATES 2601
requested the IRS refund the late payment penalty and inter-
est, claiming that Bagley “had in fact sent an application for
extension of time to file a return, Form 4768, on June 16,
2006.” The IRS responded that the penalty and interest were
properly assessed, as Baccei had “filed [the] return by the
extended due date” but failed to “request an extension of time
to pay the tax.” Accordingly, the IRS denied Baccei’s claim
for a refund on the basis that Baccei failed to request an
extension of time to pay the estate taxes owed.
B
Baccei initiated this action in district court, seeking a
refund of the penalty and interest imposed by the IRS for late
payment of the federal estate tax. In his complaint, Baccei
alleged (1) a payment extension request had been filed; (2) the
late payment penalty should be abated on grounds of reason-
able cause; and (3) the IRS’s refusal to refund the penalty was
unconscionable, contrary to the meaning of the United States
Tax Code, and an abuse of discretion.
The United States moved for summary judgment, contend-
ing that Baccei did not properly request an extension of time
to pay the taxes owed and that Baccei had not established rea-
sonable cause excusing his failure to timely pay the estate tax.
Baccei cross-moved for summary judgment, claiming he
made a valid late payment request. In the alternative, Baccei
argued that reasonable cause existed excusing his failure to
timely pay the estate taxes, as he reasonably relied upon his
accountant to obtain the payment extension. The parties stipu-
lated to the material facts for purposes of the cross-motions
for summary judgment.
After supplemental briefing, the district court entered sum-
mary judgment in favor of the United States. It held that the
IRS properly assessed a penalty for late payment of taxes
because Baccei had not complied with the regulations govern-
ing payment extension requests and did not timely pay the
2602 BACCEI v. UNITED STATES
estate taxes owed. Additionally, the district court rejected
Baccei’s argument that he substantially complied with the
regulations, holding that the substantial compliance doctrine
was inapplicable since the regulatory requirements were sub-
stantive and not procedural. The court observed that Baccei’s
extension request was deficient in several respects and con-
cluded that application of the substantial compliance doctrine
would permit Baccei “to evade the substantive requirements
that the IRS has established to govern its determinations
regarding extensions of time to pay.”
Lastly, the district court found that the late payment penalty
should not be abated on the grounds of reasonable cause. The
court rejected Baccei’s argument that he exercised ordinary
business care and prudence in relying on a “well-qualified and
knowledgeable CPA” to request and obtain a payment exten-
sion. In so doing, the district court held that “[a]n individual’s
duty to file tax returns or pay tax returns or pay taxes under
26 U.S.C. § 6651(a) cannot be delegated, and reliance on a
third party, even a CPA, is not ‘reasonable cause’ for late fil-
ing.” As executor of the estate, it was Baccei’s “responsibility
to ascertain the [payment] due date, and to make certain that
a proper request for late payment had been made, and that
permission to file late had been granted.”
Accordingly, the district court found that the late payment
penalty and interest should not be refunded. The court also
denied Baccei’s cross-motion for summary judgment. How-
ever, the court concluded that neither party had adequately
addressed whether Baccei’s failure to timely pay the estate
taxes resulted from “willful neglect.” At the court’s request,
the parties submitted a joint statement addressing the issue.
Upon reviewing the parties’ statement, the district court
granted the United States’ summary judgment motion in its
entirety. Baccei filed a timely appeal, which we have jurisdic-
tion to review pursuant to 28 U.S.C. § 1291.
BACCEI v. UNITED STATES 2603
II
We review a district court’s summary judgment ruling de
novo. Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915, 918 (9th
Cir. 2009). In doing so “[w]e must determine, viewing the
evidence in the light most favorable to . . . the non-moving
party, whether there are any genuine issues of material fact
and whether the district court correctly applied the substantive
law.” Olsen v. Idaho State Bd. of Med., 363 F.3d 916, 922
(9th Cir. 2004) (citation omitted).
III
On appeal, Baccei argues that the district court erred in (1)
holding the substantial compliance doctrine inapplicable to
regulations governing requests for extensions of time to pay
an estate tax; (2) finding the IRS was not equitably estopped
to assess a late payment of penalty and interest; and (3) con-
cluding that Baccei’s failure to timely pay the estate taxes
owed was not due to reasonable cause. We address each of
these claims in turn.
A
[1] Although Baccei conceded before the district court that
Bagley did not strictly comply with the requirements for
requesting an extension of time to pay the estate taxes owed—
in particular, Bagley failed to state the period of the extension
requested—Baccei argues that Bagley substantially complied
with the regulations governing payment extension requests.
The doctrine of substantial compliance is an equitable doc-
trine designed to avoid hardship in cases where a party has
done all that can be reasonably expected. Sawyer v. Sonoma
County, 719 F.2d 1001, 1008 (9th Cir. 1983). We have previ-
ously held that “[s]ubstantial compliance with regulatory
requirements may suffice when such requirements are proce-
dural and when the essential statutory purposes have been ful-
filled.” Shotgun Delivery, Inc. v. United States, 269 F.3d 969,
2604 BACCEI v. UNITED STATES
973 (9th Cir. 2001). “Full compliance is necessary when the
requirement relates to the substance of the statute or where the
essential purposes have not been fulfilled.” Id. at 973-74; see
also Sawyer, 719 F.2d at 1008 (stating that “in the context of
statutory prerequisites, the doctrine [of substantial compli-
ance] can be applied only where invocation thereof would not
defeat the policies of the underlying statutory provisions”).
Additionally, “the doctrine of substantial compliance can have
no application in the context of a clear statutory prerequisite
that is known to the party seeking to apply the doctrine.” Saw-
yer, 719 F.2d at 1008; cf. Volvo Trucks of N. Am., Inc. v.
United States, 367 F.3d 204, 210 (4th Cir. 2004) (“[A] tax-
payer may be relieved of perfect compliance with a regulatory
requirement when the taxpayer has made a good faith effort
at compliance or has a ‘good excuse’ for noncompliance, and
(1) the regulatory requirement is not essential to the tax col-
lection scheme but rather is an unimportant or ‘relatively
ancillary requirement’ or (2) the regulatory provision is so
confusingly written that it is reasonably subject to conflicting
interpretations.”); Prussner v. United States, 896 F.2d 218,
224 (7th Cir. 1990) (en banc) (“The common law doctrine of
substantial compliance should not be allowed to spread
beyond cases in which the taxpayer had a good excuse
(though not a legal justification) for failing to comply with
either an unimportant requirement or one unclearly or confus-
ingly stated in the regulations or the statute.”).
[2] Here, Baccei cannot rely on the substantial compliance
doctrine to excuse his failure to properly request an extension
of time to pay the estate tax because doing so “would . . .
defeat the policies of the underlying [regulatory] provi-
sion[ ].” Sawyer, 719 F.2d at 1008. The regulation governing
payment extensions is designed to provide the IRS with the
information necessary to determine whether an extension of
time to pay is warranted and, if so, to determine a reasonable
length for that extension. Among other things, the regulation
mandates that “[a]n application containing a request for an
extension of time for paying the [estate] tax . . . shall state the
BACCEI v. UNITED STATES 2605
period of the extension requested.” 26 C.F.R. § 20.6161-1(b)
(emphasis added). This requirement is neither unclear nor
unimportant; rather, it is essential to the IRS’s tax collection
efforts because it allows the IRS to assess the reasonableness
of the taxpayer’s request. For example, if a taxpayer requests
a 12-month extension but the facts disclosed in the request
reveal that only a much shorter extension is warranted, the
IRS may, in its discretion, conclude that the request is unrea-
sonable and refuse to grant it. See id. (“The granting of the
extension of time for paying the tax is discretionary with the
appropriate internal revenue officer and his authority will be
exercised under such conditions as he may deem advisable.”).
Additionally, where the taxpayer fails to state the period of
the extension requested, the IRS may be forced to guess when
the taxpayer will acquire the necessary funds to pay the tax
due. For these reasons, we hold that “the purposes of the . . .
[regulation] are unsatisfied where the applicant fails to [state
the period of the extension requested].” Sawyer, 719 F.2d at
1008.
[3] Baccei argues that in requesting an automatic six-
month extension of time to file the estate tax return, the IRS
could infer that he also requested a six-month extension of
time to pay the estate taxes owed. However, in establishing
allowable extension periods, the statute and regulations
clearly distinguish extensions of time to file from extensions
of time to pay. Upon submitting Form 4768, taxpayers are
entitled to an automatic six-month extension of time to file an
estate tax return. 26 U.S.C. § 6081(a); 26 C.F.R. § 20.6081-
1(b). In contrast, an extension of time to pay is discretionary
and may be granted only for a “reasonable period of time” not
to exceed twelve months. 26 U.S.C. § 6161(a); 26 C.F.R.
§ 20.6161-1(a)(1). As Baccei conceded to the district court,
his request for an automatic six-month extension to file could
have led the IRS to rationally infer that he was requesting a
payment extension for any period less than twelve months, the
statutory maximum. Such an ambiguous and undefined exten-
sion request does not fulfill the purposes of the regulations
2606 BACCEI v. UNITED STATES
because it deprives the IRS of the information necessary to
determine whether to grant the extension of time to pay.
Accordingly, we hold that the district court correctly refused
to apply the substantial compliance doctrine.1
B
Baccei also argues that the district court erred in denying
his estoppel claim. Specifically, Baccei claims the IRS had an
obligation to inform him that his payment extension request
was deficient, and to provide him with an opportunity to
amend his extension application or otherwise mitigate the late
payment penalty. Baccei contends that the IRS did not fulfill
its obligations and may not profit from its “own wrong” by
imposing a late payment penalty and assessing interest.
[4] The traditional elements of an equitable estoppel claim
include “(1) the party to be estopped must know the facts; (2)
he must intend that his conduct shall be acted on or must so
act that the party asserting the estoppel has a right to believe
it is so intended; (3) the latter must be ignorant of the true
facts; and (4) he must rely on the former’s conduct to his inju-
ry.” Morgan v. Gonzales, 495 F.3d 1084, 1092 (9th Cir. 2007)
(quoting Watkins v. U.S. Army, 875 F.2d 699, 709 (9th Cir.
1989) (en banc)). Additionally, a party asserting equitable
estoppel against the government must also establish that (1)
the government engaged in affirmative misconduct going
beyond mere negligence; (2) the government’s wrongful acts
1
Baccei cites Germantown Trust Co. v. Commissioner, 309 U.S. 304
(1940), in support of his argument that the submitted materials substan-
tially complied with the regulations. However, in Germantown Trust, the
Supreme Court held that a tax return was complete, even though the return
did not include a computation of the tax owed, because the return con-
tained all of the information necessary to calculate the tax owed. Id. at
310. In contrast, neither Form 4768 nor the supplemental letter submitted
by Bagley contained all of the information necessary to permit the IRS to
calculate the appropriate length of the extension requested or to determine
whether a payment extension was reasonable and warranted.
BACCEI v. UNITED STATES 2607
will cause a serious injustice; and (3) the public’s interest will
not suffer undue damage by imposition of estoppel. Morgan
v. Heckler, 779 F.2d 544, 545 (9th Cir. 1985); see also Wat-
kins, 875 F.2d at 708.
[5] Baccei has not sustained his burden of establishing that
the IRS engaged in affirmative misconduct. Affirmative mis-
conduct on the part of the government requires an affirmative
misrepresentation or affirmative concealment of a material
fact, Watkins, 875 F.2d at 707, such as a deliberate lie or a
pattern of false promises. See, e.g., Mukherjee v. INS, 793
F.2d 1006, 1009 (9th Cir. 1986). While Baccei complains that
the IRS failed to notify him that his extension request was
incomplete or invalid, Baccei does not contend that this fail-
ure resulted from anything more than negligent oversight.
Even if the IRS were negligent in failing to notify Baccei,
negligence alone will not support a claim of equitable estop-
pel against the government. Jaa v. INS, 779 F.2d 569, 572
(9th Cir. 1986).
[6] Further, Baccei has not pointed to any affirmative mis-
conduct by the IRS at all. Instead, Baccei complains of inac-
tion, namely, that the IRS should have notified him that his
payment extension request was deficient and had been denied.
However, the IRS did not deny any payment extension
request; Baccei never properly requested a payment extension
in the first place. The IRS’s failure to inform a taxpayer that
he has not properly requested an extension is mere inaction
that cannot support a claim of equitable estoppel. See Lehman
v. United States, 154 F.3d 1010, 1017 (9th Cir. 1998); Cad-
walder v. United States, 45 F.3d 297, 299-300 (9th Cir. 1995).
[7] In light of the foregoing, we conclude that the district
court properly rejected Baccei’s argument that the doctrine of
equitable estoppel barred the IRS from imposing a late pay-
ment penalty and assessing interest.
2608 BACCEI v. UNITED STATES
C
Baccei’s final argument is that the district court erred in
concluding that his failure to timely pay the estate taxes owed
was not due to reasonable cause. The Internal Revenue Code
provides that a late payment penalty will be assessed if the
taxpayer fails to timely pay taxes owed, unless that failure is
“due to reasonable cause and not due to willful neglect.” 26
U.S.C. § 6651(a)(2). A taxpayer can establish reasonable
cause for failure to timely pay by making “a satisfactory
showing that he exercised ordinary business care and pru-
dence in providing for the payment of his tax liability and was
nevertheless either unable to pay the tax or would suffer an
undue hardship . . . if he paid [the tax] on the due date.” 26
C.F.R. § 301.6651-1(c)(1).
Baccei asserts that the late payment penalty should be
abated on grounds of reasonable cause because he exercised
“ordinary business care and prudence in providing for the
payment of [the estate’s] tax liability.”2 Baccei advances two
arguments in support of his position.
1
[8] First, Baccei argues that he exercised “ordinary busi-
ness care and prudence” in relying upon his accountant, Bag-
ley, to competently file a payment extension request. See 26
C.F.R. § 301.6651-1(c)(1). Although we have found no cases
evaluating whether a taxpayer’s reliance on an accountant to
obtain an extension of time to pay taxes owed constitutes
“reasonable cause” under § 6651(a)(2), we draw guidance
from United States v. Boyle, 469 U.S. 241 (1985). In Boyle,
an executor claimed that he relied on his attorney to file a fed-
eral estate tax return and argued that this reliance constituted
reasonable cause under § 6651(a)(1) for failing to timely file
2
Baccei does not argue that undue hardship would result if a payment
extension request were refused.
BACCEI v. UNITED STATES 2609
the return. Id. at 251-52. The Supreme Court denied the exec-
utor’s claim, holding that “[t]he failure to make a timely filing
of a tax return is not excused by the taxpayer’s reliance on an
agent, and such reliance is not ‘reasonable cause’ for a late fil-
ing under § 6651(a)(1).” Id. at 252. The Court noted that
“Congress has placed the burden of prompt filing on the exec-
utor, not on some agent or employee of the executor.” Id. at
249.
Applying Boyle, we have also explained that a taxpayer’s
reasonable reliance on an agent to timely file a return does not
constitute reasonable cause when the due date of the return
was ascertainable by the taxpayer. Conklin Bros. of Santa
Rosa, Inc. v. United States, 986 F.2d 315, 317-18 (9th Cir.
1993); accord In re Am. Biomaterials Corp., 954 F.2d 919,
923 (3d Cir. 1992). As we noted in Conklin Bros., a taxpayer
“cannot rely on its employee or agent to escape responsibility
for the nonperformance of nondelegable tax duties.” Id. at
319.
[9] We extend these determinations of reasonable cause
under § 6651(a)(1) to determinations of reasonable cause
under § 6651(a)(2). There is no reason to distinguish between
reasonable cause for a failure to timely file an estate tax return
and reasonable cause for a failure to timely pay an estate tax,
and we refuse to do so.3 Accordingly, we affirm the district
3
Baccei cites several cases construing the negligence penalty under for-
mer 26 U.S.C. § 6653(a) for the proposition that “[w]hen an accountant or
attorney advises a taxpayer on a matter of tax law, such as whether a lia-
bility exists, it is reasonable for the taxpayer to rely on that advice.” Henry
v. Comm’r, 170 F.3d 1217, 1220 (9th Cir. 1999) (quoting Boyle, 469 U.S.
at 251). However, these cases are distinguishable as they involve a taxpay-
er’s reliance on the advice of tax professionals to take aggressive tax
deductions or adopt positions that can be classified as “reasonably debat-
able.” See Foster v. Comm’r, 756 F.2d 1430, 1439 (9th Cir. 1985). Baccei
does not contend that Bagley inaccurately advised him of his liability
under the tax code or provided him with substantive advice on a debatable
tax position. Rather, Baccei solely claims that he relied on Bagley to
request and obtain a payment extension.
2610 BACCEI v. UNITED STATES
court’s finding that Baccei’s reliance upon Bagley to compe-
tently file a payment extension request does not constitute
reasonable cause excusing Baccei’s failure to timely pay the
estate taxes owed. Although Baccei was entitled to retain an
accountant to seek a payment extension, Baccei was responsi-
ble for either identifying the payment deadline and ensuring
that payment was made prior to that deadline, or confirming
that a payment extension had been properly requested and
granted. By failing to confirm that an extension had been
requested and granted before the payment deadline lapsed,
Baccei failed to exercise the “ordinary business care and pru-
dence” necessary to establish reasonable cause under 26
C.F.R. § 301.6651-1(c)(1).
2
[10] Secondly, Baccei argues that the late payment penalty
should be abated on grounds of reasonable cause because he
was unable to liquidate the estate’s real property assets before
the payment deadline lapsed. Baccei contends that the district
court did not adequately evaluate whether the estate possessed
sufficient liquid assets to pay the estate taxes owed in a timely
manner. However, Baccei did not argue before the district
court that the estate’s lack of funds constituted reasonable
cause excusing the late payment. Rather, he raises this argu-
ment for the first time on appeal.
Absent exceptional circumstances, we generally will not
consider arguments raised for the first time on appeal,
although we have discretion to do so. In re Am. W. Airlines,
Inc., 217 F.3d 1161, 1165 (9th Cir. 2000). We may exercise
this discretion (1) to prevent a miscarriage of justice; (2) when
a change in law raises a new issue while an appeal is pending;
and (3) when the issue is purely one of law. Kimes v. Stone,
84 F.3d 1121, 1126 (9th Cir. 1996). However, we will not
reframe an appeal to review what would be in effect a differ-
ent case than the one decided by the district court. Robb v.
BACCEI v. UNITED STATES 2611
Bethel Sch. Dist. No. 403, 308 F.3d 1047, 1052 n.4 (9th Cir.
2002).
[11] Baccei bore the burden of proving that his failure to
timely pay the estate tax was due to reasonable cause and not
willful neglect. See Boyle, 469 U.S. at 243 (citing 26 U.S.C.
§ 6651(a)). However, Baccei did not argue in either the com-
plaint or his cross-motion for summary judgment that the
estate’s financial need to liquidate real property assets consti-
tuted reasonable cause. If Baccei believed that the estate’s
need to liquidate real property assets constituted reasonable
cause for abatement of the late payment penalty under
§ 6651(a)(2), it was incumbent on him to make that argument
before the district court. Because Baccei failed to do so and
this case does not present “exceptional circumstances” war-
ranting our consideration of his argument for the first time on
appeal, we decline to address it.
IV
We hold that the district court correctly found that the sub-
stantial compliance doctrine does not excuse Baccei’s failure
to strictly comply with the regulations governing requests for
extension of time to pay estate taxes. We also hold that the
district court appropriately rejected Baccei’s argument that
the doctrine of equitable estoppel barred the IRS from impos-
ing a late payment penalty and assessing interest. Lastly, we
hold that the district court properly granted summary judg-
ment to the United States on the issue of whether the late pay-
ment penalty should be abated on the grounds of reasonable
cause. The judgment entered by the district court is therefore
AFFIRMED.