Government of the United States Virgin Islands v. Commissioner of IRS
743 F.3d 790
| 11th Cir. | 2014Background
- Virgin Islands sought to intervene in Tax Court proceedings over taxpayers' residency and income source disputes between the US and USVI.
- The IRS issued deficiency notices for 2002–2004 more than three years after the taxpayers filed BIR returns, prompting VI intervention requests.
- Taxpayers claimed bona fide USVI residency and paid taxes to the VI; IRS contended they were USVI nonresidents for some income and owed US taxes.
- Tax Court denied intervention based on Appleton I; Third Circuit later held in Appleton II that the denial was improper, prompting appeal.
- Court holds Rule 24(a)(2) applies to Tax Court proceedings, VI has a protectable interest, and exclusion would impair VI interests, warranting intervention; case remanded for intervention.
- IRS opposition to VI participation emphasized, but court rejects that stance and remands to grant VI intervention.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 24(a)(2) applies to Tax Court proceedings | VI; Rule 24(a)(2) applies in Tax Court | IRS; Rule 24(a)(2) does not apply in Tax Court | Rule 24(a)(2) applies |
| Whether Virgin Islands has a protectable interest justifying intervention | VI has sovereign tax administration interest | Taxpayers/IRS argue interests are not protectable | VI has a legally protectable, sovereign interest |
| Whether denial of intervention would practically impair VI ability to protect its interest | Intervention is needed to defend VI tax system integrity | No impairment without VI revenue interest | Denial would impair VI protection; intervention warranted |
| Whether existing representation is adequate to protect VI interests | Taxpayers cannot adequately represent VI interests due to differing objectives and knowledge | Taxpayers adequately represent common interests | VI is inadequately represented; Rule 24(a)(2) satisfied |
| Whether the court should address permissive intervention or remand for right intervention | Right to intervene should be recognized; remand appropriate | Discretionary decision should control; issue may be moot | Remand with instruction to grant VI intervention; not reaching permissive intervention question |
Key Cases Cited
- Appleton v. C.I.R., 135 T.C. 461 (Tax Ct. 2010) (denial of intervention reviewed; Rule 24(a)(2) applicability discussed; Appleton I relied upon but later limited by Appleton II)
- Appleton v. C.I.R., 430 F. App’x 135 (3d Cir. 2011) (Appleton II held Tax Court abused by applying wrong standard for permissive intervention)
- Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129 (U.S. 1967) (absentee may be entitled to intervene to protect its interests)
- Georgia v. U.S. Army Corps of Engineers, 302 F.3d 1242 (11th Cir. 2002) (states may intervene to protect sovereign interests in ongoing administration)
- Nuesse v. Camp, 385 F.2d 694 (D.C. Cir. 1967) (recognizes state or analogous interests can justify intervention)
- Chiles v. Thornburgh, 865 F.2d 1197 (11th Cir. 1989) (intervention adequacy standard; minimal adequate representation rule)
- Fox v. Tyson Foods, Inc., 519 F.3d 1298 (11th Cir. 2008) (timeliness and interest considerations in intervention analysis)
- Stone v. First Union Corp., 371 F.3d 1305 (11th Cir. 2004) (practical impairment and stare decisis considerations support intervention)