Opinion
19354-23
07-22-2024
FOUR SQUARE IMPEX, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER OF DISMISSAL FOR LACK OF JURISDICTION
Ronald L. Buch, Judge.
Pending before us is the Commissioner's Motion to Dismiss for Lack of Jurisdiction filed on June 4, 2024. The Commissioner argues that Four Square Impex did not and does not exist as a legal entity, and it therefore lacks the capacity to litigate this case. Because the proper steps were never taken to create Four Square Impex as a distinct legal entity, we will grant the Commissioner's Motion.
Background
The origin of Four Square Impex is unclear. The earliest operating agreement shows Sai Nirupa as its sole owner. A later operating agreement shows Thilak Raju, a citizen and resident of India, as the sole owner of Four Square Impex. Both operating agreements identify Four Square Impex as a limited liability company organized under the laws of Colorado. The Commissioner assigned an employer identification number ("EIN") to Four Square Impex on July 14, 2017. The Commissioner addressed a Notice CP575 letter to Four Square Impex, with Sai Nirupa as the sole member, at a Colorado address. Notwithstanding the existence of at least two operating agreements and having obtained an employer identification number, Four Square Impex never filed organizational documents with the state of Colorado, or any other state, to be recognized as a limited liability company or any other legal entity.
Four Square Impex timely filed a Form 1120, U.S. Corporation Income Tax Return, for taxable year 2020. Thilak Raju signed Four Square Impex's Form 1120 for tax year 2020 as its "Director." And when the Commissioner examined that return, Thilak Raju acted on behalf of Four Square Impex. On September 20, 2023, the Commissioner issued a statutory notice of deficiency to Four Square Impex for tax year 2020. On December 8, 2023, Four Square Impex filed a petition with the this Court.
The Commissioner filed a Motion to Dismiss for Lack of Jurisdiction arguing that Four Square Impex lacked the capacity to litigate at the time the petition was filed. We ordered Four Square Impex to respond by June 28, 2024. On that date, Mr. Raju, rather than responding to the Commissioner's Motion, filed a Motion to Dismiss for Lack of Jurisdiction informing the Court that he has no objection to the granting of the Commissioner's motion.
We will recharacterize Mr. Raju's Motion to Dismiss for Lack of Jurisdiction as a Response to Commissioner's Motion to Dismiss for Lack of Jurisdiction.
Discussion
Like other federal courts, the Tax Court is a court of limited jurisdiction and can exercise its jurisdiction only to the extent provided by Congress. I.R.C. § 7442; Judge v. Commissioner, 88 T.C. 1175, 1180-81 (1987). And of course the Tax Court has jurisdiction to determine whether it has jurisdiction. Bongam v. Commissioner, 146 T.C. 52, 54 (2016); Kluger v. Commissioner, 83 T.C. 309, 314 (1984). Whether this Court has jurisdiction to decide a matter is an issue any party may raise at any time. David Dung Le, M.D., Inc. v. Commissioner, 114 T.C. 268, 269 (2000), aff'd, 22 Fed.Appx. 837 (9th Cir. 2001). Regardless of the parties' views as to our jurisdiction, it is the Court, not the parties, that must determine whether we have jurisdiction. Charlotte's Off. Boutique, Inc. v. Commissioner, 121 T.C. 89, 102 (2003) ("Where, as here, the parties agree that we lack jurisdiction, that agreement is not dispositive . . . ."), aff'd, 425 F.3d 1203 (9th Cir. 2005).
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times; regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times; and all Rule references are to the Tax Court Rules of Practice and Procedure.
Petitioners must have the capacity to engage in litigation before the Tax Court. Rule 60(c); see also Brannon's of Shawnee, Inc. v. Commissioner, 71 T.C. 108, 111 (1978); Condo v. Commissioner, 69 T.C. 149, 151 (1977). Under Rule 60(c), "[t]he capacity of a corporation to engage in such litigation shall be determined by the law under which it was organized." If a petitioner lacks capacity, this Court must dismiss the case for lack of jurisdiction. Brannon's of Shawnee, 71 T.C. at 111. Four Square Impex listed a Colorado address on its organizational documents, on its Form 1120 for 2020, and on its Tax Court petition. To determine the capacity of Four Square Impex to litigate its Tax Court case, we look to Colorado law.
Under Colorado law, a person may form a limited liability company by filing articles of organization with the secretary of state. Colo. Rev. Stat. Ann. § 7-80-203 (West 2024). Filing articles of organization with the secretary of state "is notice that the limited liability company is a limited liability company." Colo. Rev. Stat. Ann. § 7-80-208. Also, "a corporation is incorporated when the articles of incorporation are filed by the secretary of state." Colo. Rev. Stat. Ann. § 7-102-103 (West 2024); see also Black Canyon Citizens Coal., Inc. v. Bd. Of Cnty. Comm'rs of Montrose Cnty., 80 P.3d 932, 933 (Colo.App. 2003).
Some jurisdictions will recognize an entity that has not been incorporated under certain circumstances, such as de facto corporations and corporations by estoppel. A de facto corporation exists when there is a bona fide attempt to incorporate under existing statutory authority, coupled with the exercise of corporate powers. See O'Bryan v. Commissioner, T.C. Memo. 1991-593, 62 T.C.M. (CCH) 1347; Fletcher Cyclopedia of the Law of Private Corporations § 3761 (perm. ed. rev. 2023). The doctrine of "corporation by estoppel" provides that if an opposing party has recognized an entity's corporate status and has dealt with it as such, the opposing party is then estopped to deny that entity is a corporation. Fletcher Cyclopedia of the Law of Private Corporations § 3889 (perm. ed. rev. 2023). Colorado, however, does not recognize de facto corporations or corporations by estoppel. Black Canyon Citizens Coal., 80 P.3d at 933.
Four Square Impex did not file articles of organization or articles of incorporation with the Colorado secretary of state. Therefore, Four Square Impex is neither a limited liability company nor a corporation. Also, if it is a single-member entity, Four Square Impex is not a partnership. See Treas. Reg. § 301.7701-2(a)(2019); see also, Colo. Rev. Stat. Ann. § 7-60-106 (West 2024). Four Square Impex is, therefore, not a legal entity under Colorado law and not recognized as an entity for federal income tax purposes.
In Colorado, an entity that does not exist does not have the capacity to bring an action. Black Canyon Citizens Coal., 80 P.3d at 934-935. And an action filed by such an entity is a nullity. Id. Because Four Square Impex is not a legal entity under Colorado law, it lacked the requisite capacity to file its Petition.
Conclusion
Four Square Impex lacks the capacity to litigate in this Court. Therefore, it is
ORDERED that Four Square Impex's Motion to Dismiss for Lack of Jurisdiction filed June 28, 2024, is recharacterized as a Response to Commissioner's Motion to Dismiss for Lack of Jurisdiction. It is further
ORDERED that the Commissioner's Motion to Dismiss for Lack of Jurisdiction is granted and this case is dismissed for lack of jurisdiction.