Free Motion to Dismiss - Rule 12(b)(1) - District Court of Federal Claims - federal

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United States Court of Federal Claims
BROWNING-FERRIS INDUSTRIES, INC. & SUBSIDIARIES, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) ) ) )

No. 05-738T Judge Thomas C. Wheeler

PLAINTIFF'S BRIEF IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE PURSUANT TO RCFC 41(a)(2) AND FOR DISMISSAL OF COUNTERCLAIM PURSUANT TO RCFC 12(b)(1)

PHILIP KARTER Miller & Chevalier Chartered 300 Conshohocken State Road, Suite 570 West Conshohocken, PA 19428 610/729-7820 Telephone 610/729-7805 Facsimile Attorney of Record for Plaintiff HERBERT ODELL Miller & Chevalier Chartered 300 Conshohocken State Road, Suite 570 West Conshohocken, PA 19428 610/729-7810 Telephone 610/729-7805 Facsimile Of Counsel

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TABLE OF CONTENTS Page Table of Authorities ......................................................................................................................ii Statement of the Question Involved..............................................................................................1 Statement of the Case....................................................................................................................1 Statement of Facts.........................................................................................................................4 Argument ......................................................................................................................................6 A. The Consolidated Return Regulations Govern Which Entities May Act on Behalf of the Consolidated Return Group .............................................................6 Under the Controlling Consolidated Return Regulations, a Common Parent that Terminates Control Cannot Act on Behalf of a Consolidated Group..................7 The Liquidation of BFI, Inc. Constituted a Termination of the Common Parent's Existence Under Treas. Reg. § 1.1502-77A(d), Rendering BFI, Inc. Unable to File Valid Refund Claims on Behalf of the BFI Group .............................11 The Court Lacks Subject Matter Jurisdiction Because the Claims for Refund Purportedly Filed by BFI, Inc. Were Invalid ..............................................................13

B.

C.

D.

Conclusion ....................................................................................................................................14 Appendix................................................................................................................................APP-1 Exhibits 1. 2. 3. 4. 5. Certificate of Conversion of BFI, Inc. to BFI, LLC ...................................... EX-01 Certificate of Formation of BFI, LLC............................................................ EX-03 Treas. Reg. § 1.332-6(b) Disclosure ............................................................. EX-05 Rev. Proc. 2002-43 ........................................................................................ EX-06 IRS Letter Approving Designation of BFI Waste Systems of North America Inc. as Agent for Consolidated Group.............................................EX-18 1997 Refund Claim ........................................................................................EX-19 1998 Refund Claim ........................................................................................EX-21

6. 7.

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TABLE OF AUTHORITIES CASES Arbaugh v. Y & H Corp., 126 S. Ct. 1235 (2006)........................................................................... 3 Buckeye Power, Inc. v. United States, 38 Fed. Cl. 154 (Ct. Cl. 1997) ......................................... 11 Interlake Corp. v. Comm'r, 112 T.C. 103 (1999) ................................................................. 7, 8, 12 McKnight v. Comm'r, 58 T.C.M. (CCH) 1390 (1990) ................................................................ 11 Rosenberg v. United States, 2006 U.S. Claims LEXIS 236 (Ct. Cl. 2006) .................................. 13 Sams v. Beech Aircraft Corp., 625 F.2d 73 (9th Cir. 1980)............................................................ 3 Southern Pacific Co. v. Comm'r, 84 T.C. 395 (1985) ................................................................ 7, 8 Stelco Holding Co. v. United States, 42 Fed. Cl. 101 (Ct. Cl. 1998)............................................ 13 Union Oil Co. of Calif. v. Comm'r, 101 T.C. 130 (1993)............................................................... 7

STATUTES Del. Code Ann. tit. 8, § 266 ............................................................................................................ 4 28 U.S.C . § 1491............................................................................................................................ 2 26 U.S.C. § 1502..................................................................................................................... 6, 7, 9 26 U.S.C. § 332............................................................................................................................... 4 26 U.S.C. § 6532(a)(1)................................................................................................................ 2, 3 26 U.S.C. § 7422................................................................................................................... 1, 2, 13

TAX MATERIALS 65 Fed. Reg. 57755 (Sept. 26, 2000) .................................................................................. 9, 10, 12 2001 NSAR 126, 2001 WL 34056128 (Mar. 12, 2001) ............................................................... 10 2001 NSAR 142, 2001 WL 34056134 (Oct. 22, 2001) ................................................................ 10 FSA 200027026 (April 10, 2000) ................................................................................................. 11 - ii -

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FSA 200210012 (Nov. 19, 2001).................................................................................................. 10 Rev. Proc. 2002-43, 2002-2 C.B. 99...........................................................................................6, 9 Rev. Rul. 2004-59, 2004-1 C.B. 1050 .......................................................................................... 11

REGULATIONS Treas. Reg. § 1.1502-77............................................................................................................ 5, 10 Treas. Reg. § 1.1502-77(d) ....................................................................................................... 9, 10 Treas. Reg. § 1.1502-77(h) ............................................................................................................. 9 Treas. Reg. § 1.1502-77A ...................................................................................................... passim Treas. Reg. § 1.1502-77A(a)........................................................................................................... 7 Treas. Reg. § 1.1502-77A(d) .......................................................................................... 6, 8, 10, 12 Treas. Reg. § 1.1502-77A(e)(2)...................................................................................................... 8 Treas. Reg. § 1.1502-77A(e)(3)...................................................................................................... 8 Treas. Reg. § 1.1502-77A(g) .......................................................................................................... 9 Treas. Reg. § 1.1502-77T ......................................................................................................... 9, 10 Treas. Reg. § 1.332-6(b) ................................................................................................................. 5 Treas. Reg. § 301.7701-3(b)(1)(ii)................................................................................................ 11 Treas. Reg. § 301.7701-3(c) ......................................................................................................... 11 Treas. Reg. § 301.7701-3(g)(1)..................................................................................................... 11 Treas. Reg. § 301.7701-3(g)(1)(iii)............................................................................................... 11

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RULES RCFC 12(h)(3) ................................................................................................................................ 3 RCFC 41(a)(1)(i) ............................................................................................................................ 3 RCFC 41(a)(1)(ii) ............................................................................................................................3 RCFC 41(a)(2) ............................................................................................................................ 3, 4

MISCELLANEOUS 8 Moore's Federal Practice ¶ 41.40[8][c] (3d ed. 2006) ............................................................... 3 Wright & Miller, Federal Practice & Procedure: Civil 2d § 2364 (1995) .................................... 3

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United States Court of Federal Claims
BROWNING-FERRIS INDUSTRIES, INC. & SUBSIDIARIES, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) ) ) )

No. 05-738T Judge Thomas C. Wheeler

PLAINTIFF'S BRIEF IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE PURSUANT TO RCFC 41(a)(2) AND FOR DISMISSAL OF COUNTERCLAIM PURSUANT TO RCFC 12(b)(1) STATEMENT OF THE QUESTION INVOLVED Where the putative plaintiff in a federal tax refund action liquidated prior to the commencement of the action and prior to its filing of tax refund claims for the taxable years in suit, and as a consequence, is not the proper agent duly authorized to file such refund claims under applicable law, should the court dismiss the action for lack of subject matter jurisdiction on the ground that 26 U.S.C. § 7422 has not been satisfied? STATEMENT OF THE CASE The Court's subject matter jurisdiction over this federal tax refund suit is predicated on the filing of valid tax refund claims for the taxable years at issue, 1997 and 1998, which can only be filed on behalf of the appropriate taxpayer. That jurisdictional prerequisite was thought to have been satisfied when refund claims were filed by an entity known as Browning-Ferris Industries, Inc. (hereinafter "BFI, Inc.") in May of 2005, on behalf of the consolidated group of companies of which it had been the common parent.

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In fact, BFI, Inc. had been liquidated prior to the May 2005 filing. As a consequence of this liquidation, under the applicable Treasury regulations pertaining to consolidated returns, BFI, Inc. was not the proper agent to file the claim on behalf of the consolidated return group, rendering the subsequently filed claims defective. Subject matter jurisdiction for a federal tax refund is predicated on 28 U.S.C. § 1491 and 26 U.S.C. § 7422. Section 7422(a) of the Internal Revenue Code provides in pertinent part that "[n]o suit shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected . . . until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof." [Emphasis added.]1 In this case, the filing of the original refund claims that were alleged to have satisfied the jurisdictional prerequisites for maintaining the within action was not done in accordance with the applicable law. Therefore, this action is jurisdictionally defective. To correct the defect, the filing of valid refund claims by the proper duly authorized agent for the consolidated group is required. After the earlier of the expiration of six months from the date of filing or a denial of the refund claims as required by § 6532(a)(1), a tax refund suit for the 1997 and 1998 years can be properly commenced, and jurisdiction over such suit can be properly maintained. It is well-established law that a jurisdictional defect cannot be waived and can be raised "at any stage in the litigation, even after trial and the entry of judgment." Arbaugh v. Y & H

Unless otherwise stated, all citations to the "Code" or "sections" refer to the Internal Revenue Code of 1986 (26 U.S.C.), as amended and applicable to the taxable periods involved. Unless otherwise stated, all references to "Treasury Regulations" or "Regulations" or Treasury Regulation sections" are to the Treasury Regulations operative in the taxable periods involved. Section 7422(a) is reproduced in its entirety in the Appendix immediately following this brief.

1

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Corp., 126 S. Ct. 1235, 1240 (2006). Therefore plaintiff seeks dismissal of the complaint without prejudice, pursuant to RCFC 41(a)(2), in order that the correct legally authorized taxpayer can file a jurisdictionally proper refund suit after the requisite waiting period required by § 6532(a)(1). RCFC 41(a)(2) permits a plaintiff to seek voluntary dismissal without prejudice by court order when, as here, dismissal is no longer available as of right under RCFC 41(a)(1)(i) and the plaintiff cannot obtain consent to a stipulated dismissal under RCFC41(a)(1)(ii). Courts generally allow voluntary dismissal -- without regard to the plaintiff's motives -- unless the defendant will suffer some plain legal prejudice other than the mere prospect of a second lawsuit. Wright & Miller, Federal Practice & Procedure: Civil 2d § 2364 (1995). Where, however, the court lacks subject matter jurisdiction, dismissal should be allowed as a matter of right. RCFC 12(h)(3) provides: "Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." See also Arbaugh, 126 S. Ct. at 1240. Plaintiff's motion also seeks dismissal of defendant's counterclaim. (See Defendant's First Amended Answer and Counterclaim, Docket Item No. 13). Under RCFC 41(a)(2). voluntary dismissal generally is not allowed if defendant has interposed a counterclaim that cannot remain pending for independent adjudication by the court. Defendant's counterclaim in this case cannot be adjudicated independently from the underlying tax refund action. However, an action may be voluntarily dismissed despite the pendency of a counterclaim if the counterclaim, like the claim itself, is jurisdictionally defective. See 8 Moore's Federal Practice ¶ 41.40[8][c] (3d ed. 2006). As the Ninth Circuit explained in Sams v. Beech Aircraft Corp., 625 F.2d 73, 277 (9th Cir. 1980), "an objection premised upon an improper counterclaim (that is, in

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the sense that the court lacks subject matter jurisdiction over it) cannot prevent dismissal under Rule 41(a) (2) because the counterclaim is not entitled to independent adjudication." Accordingly, if the Court concludes that it lacks subject matter jurisdiction, the counterclaim exception will not operate to prevent the dismissal. STATEMENT OF FACTS On or about June 16, 1998, and June 15, 1999, BFI, Inc. timely filed its original tax returns for the consolidated group of which it was the common parent (the "BFI Group") for the years 1997 and 1998, respectively, with the IRS in Houston, Texas. On July 30, 1999, Allied Waste North America, Inc. ("AWNA") acquired substantially all of the outstanding stock of BFI, Inc. As a result of the acquisition, BFI, Inc. became a wholly-owned subsidiary of AWNA, which was and remains a wholly owned subsidiary of Allied Waste Industries, Inc. ("Allied"). Allied is the common parent of the consolidated group that includes AWNA (the "Allied Group"). At the time of the acquisition, all of the members of the BFI group became members of the Allied Group. On December 31, 2004, BFI, Inc. converted from a Delaware corporation to a Delaware limited liability company known as Browning-Ferris Industries, LLC ("BFI, LLC") pursuant to § 266 of the Delaware General Corporation Law. Del. Code Ann. tit. 8, § 266. A copy of the Certificate of Conversion of BFI, Inc. to a limited liability company is attached as Exhibit 1. The newly formed entity, BFI, LLC, in turn, executed and filed a Certificate of Formation pursuant to the Delaware Limited Liability Company Act on that same date. A copy of the Certificate of Formation is attached as Exhibit 2. As a result of that conversion, BFI, Inc. liquidated for tax purposes into AWNA in a transaction that qualified under § 332 of the Code. A copy of the

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disclosure attached to Allied's 2004 tax return pursuant to Treas. Reg. § 1.332-6(b) is attached as Exhibit 3. Approximately four months after the liquidation of BFI, Inc., on or about April 25, 2005, payments of $19,079,286 and $3,519,979 were made to the IRS with respect to the BFI Group's 1997 and 1998 tax years, respectively. On or about May 5, 2005, BFI, Inc., as the putative agent for the BFI Group, attempted to file formal refund claims for the consolidated taxable years 1997 and 1998 of the BFI Group. (Copies of the attempted claims are attached to the Complaint, Docket Item No. 1, as Exhibits A and C.) On May 10, 2005, the IRS sent a notice of claim disallowance to BFI, Inc. with respect to these attempted refund claims. On July 8, 2005, a complaint for the refund of taxes for BFI, Inc.'s 1997 and 1998 tax years was filed in this Court in the name of "Browning-Ferris Industries, Inc. & Subsidiaries," as the putative plaintiff. The complaint erroneously alleged that BFI, Inc. is a Delaware corporation and is an authorized agent for the group under Treas. Reg. § 1.1502-77.2 In fact, both the refund claims and the subsequently filed refund suit were improperly filed in the name of BFI, Inc., whose existence as the common parent of the BFI Group had ended on December 31, 2004. In August of 2006, in the course of its own due diligence, current counsel for Allied, who had been retained a few months earlier to represent the company in the instant action, discovered the error and advised Allied to file corrected refund claims in the name of the proper designee of

Treas. Reg. § 1.1502-77, which applies to consolidated tax years beginning on or after June 28, 2002, authorizes the common parent of a consolidated group to act as the sole agent for each member in the group. Because the tax years at issue in this suit precede the effective date of this regulation, the jurisdictional issue raised in this motion is controlled by Treas. Reg. § 1.1502-77A, the regulation in effect for tax years ending prior to such date. Relevant portions of Treas. Reg. § 1.1502-77A and Treas. Reg. § 1.1502-77 are set out in the Appendix immediately following this brief.

2

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the BFI Group pursuant to applicable regulations. On or about August 24, 2006, members of the BFI Group designated BFI Waste Systems of North America, Inc. ("BFI Waste Systems") as substitute agent for the BFI Group pursuant to Treas. Reg. § 1.1502-77A(d) and the procedures for designation set forth in Rev. Proc. 2002-43, 2002-2 C.B. 99. A copy of Rev. Proc. 2002-43 is attached as Exhibit 4. On August 31, 2006, the IRS approved the designation. A copy of the IRS's approval of BFI Waste Systems of North America, Inc. as the proper designee under § 1.1502-77A(d) is attached as Exhibit 5. As the duly authorized agent, BFI Waste Systems filed claims for refund for the consolidated tax years 1997 and 1998 for the BFI Group on or about August 24, 2006.3 Copies of Form 1120X of the 1997 and 1998 refund claims are attached as Exhibits 6 and 7, respectively.4 ARGUMENT A. The Consolidated Return Regulations Govern Which Entities May Act on Behalf of the Consolidated Return Group.

The consolidated return regulations prescribe which entities may act on behalf of the consolidated return group. The United States Treasury promulgated the consolidated return regulations under the express authority Congress granted to Treasury in Code § 1502, which provides: The Secretary shall prescribe such regulations as he may deem necessary in order that the tax liability of any affiliated group of corporations making a consolidated
3

BFI Waste Systems also filed a refund claim for 1999, a taxable year not subject

to this action. Form 1120X is the refund claim itself. For administrative convenience, attachments to the refund claim have been omitted from the exhibits because of their length. Full copies of the refund claims with all attachments were provided to counsel on August 31, 2006.
4

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return and of each corporation in the group, both during and after the period of affiliation, may be returned, determined, computed, assessed, collected, and adjusted, in such manner as clearly to reflect the income tax liability and the various factors necessary for the determination of such liability, and in order to prevent avoidance of such tax liability. In carrying out the preceding sentence, the Secretary may prescribe rules that are different from the provisions of chapter 1 that would apply if such corporations filed separate returns. Therefore, the consolidated return regulations are legislative in character and have the force and effect of law. See Southern Pacific Co. v. Comm'r, 84 T.C. 395, 400 (1985); Union Oil Co. of Calif. v. Comm'r, 101 T.C. 130, 137-38 (1993). Courts have observed that "[a] central feature of the consolidated return regulations is the role of the common parent as the exclusive agent for the consolidated group with respect to all procedural matters." Interlake Corp. v. Comm'r, 112 T.C. 103, 113 (1999); see also Southern Pacific Co., 84 T.C. at 401. Pursuant to the express statutory authority granted by § 1502, Treas. Reg. § 1.1502-77A sets forth the scope of agency of the common parent of a consolidated group for consolidated tax years beginning before June 28, 2002. The common parent of a consolidated group is "the sole agent for each subsidiary in the group, duly authorized to act in its own name in all matters relating to the tax liability for the consolidated return year." Treas. Reg. § 1.1502-77A(a). Except for the filing of certain elections, "no subsidiary shall have authority to act for or to represent itself in any such matter." Id. Of particular importance here, the regulation provides that the "common parent will file claims for refund or credit, and any refund will be made directly to and in the name of the common parent." Id. B. Under the Controlling Consolidated Return Regulations, a Common Parent that Terminates Cannot Act on Behalf of a Consolidated Group.

If the existence of the common parent terminates, it is no longer authorized to act on behalf of the consolidated group. Interpreting the consolidated return regulations in Southern Pacific, the Tax Court concluded that the common parent remained as the consolidated group's

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agent only so long as it did not terminate. 84 T.C. at 401 ("Obviously, if the existence of the common parent were to terminate after the filing of a consolidated return for a particular year, the agency relationship would terminate, and the group would, in the absence of any provision in the regulations, be left without an agent to act on its behalf in any subsequent dispute over its liability for that year."); see also Interlake, 112 T.C. at 114 ("Of course, if the common parent ceases to exist, its authority to act for the group terminates.") The consolidated return regulations provide procedures for authorizing a new agent to act on behalf of the group in the event of a termination of the common parent. If the common parent is about to be dissolved, "or if for any other reason its existence is about to terminate," the common parent can designate another member to act as agent for the consolidated group. Treas. Reg. § 1.1502-77A(d). Such a designation by the common parent is supposed to be made before the existence of the common parent terminates. Id. However, if the common parent does not designate a new agent for the consolidated group before its existence terminates, the regulation provides that "the remaining members may, subject to the approval of the Commissioner, designate another member to act as such agent, and notice of such designation shall be given to the Commissioner." Id. Apart from this designation procedure, Treas. Reg. § 1.1502-77A does not authorize any corporation to act as agent for a consolidated group whose common parent's existence has terminated. The regulations provide that certain specified entities may serve as alternative agents, but only for the limited purposes of receiving notices of deficiencies and waiving the statute of limitations. See Treas. Reg. § 1.1502-77A(e)(2) and (e)(3) . Where the common parent terminates without designating a new agent, the remaining members of the consolidated group must designate one such remaining member to be the sole

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agent for the group. The IRS has taken the position that this designation "may be filed at any time after the common parent's existence terminates." Rev. Proc. 2002-43 § 8.02. In 2000, the Treasury proposed new regulations under § 1502 in order to provide for a more comprehensive regime to address the scope of common parent agency. These new regulations, which were finalized in 2002, apply prospectively to consolidated tax years beginning on or after June 28, 2002. See Treas. Reg. § 1.1502-77(h). The agent for the BFI Group's 1997 and 1998 tax years, which are at issue here, is therefore determined according to the prior regulations. See Treas. Reg. § 1.1502-77A(g). Although the new regulations do not apply in this instance, the preamble to these regulations when they were proposed in 2000 confirms Treasury's own acknowledgement under the then existing law of the loss of agency authority by the former common parent of a consolidated group, to wit: . . . issues arise about who has the authority to act on behalf of the group for consolidated return years where the common parent has ceased to exist (e.g., due to a merger or liquidation) or where, while continuing to exist, it has ceased to be the common parent of the group (e.g., as a result of being acquired by another corporation). 65 Fed. Reg. 57755, 57756 (Sept. 26, 2000). The Treasury acknowledged that the existing regulations (i.e., Treas. Reg. § 1.1502-77A) provide for an alternative agent in certain circumstances but noted: However, an alternative agent provided by § 1.1502-77T [current § 1.150277A(e)] is the agent for the group only for purposes of mailing notices of deficiency or for executing consents to extend periods of limitations. Under § 1.1502-77T [current § 1.1502-77A(e)], an alternative agent has no authority to act as the group's agent for other purposes (e.g., filing a refund claim, receiving refund payments or executing a closing agreement). As a result, under the current rules, absent a designation of one of the remaining members to act as agent under § 1.1502-77(d) [current § 1.1502-77A(d)], the IRS may have no option other than to deal separately with each remaining member for any purpose not covered by § 1.1502-77T [current § 1.1502-77A(e)].

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Id. (emphasis added). In order to ensure that a consolidated group would always have an agent, the new regulations applicable for consolidated tax years beginning on or after June 28, 2002, provide for a substitute agent that has expansive authority, including the authority to file refund claims, for a consolidated group whose common parent has terminated. See Treas. Reg. § 1.1502-77. No comparable provision, and consequently no comparable authority, exists under the pre-June 28, 2002 law that applies to this case. The regulatory activity undertaken by the Treasury and IRS therefore confirms that, with respect to tax years prior to June 28, 2002, when the common parent of a consolidated group terminates without designating an agent for the group, the only alternatives are for the remaining members to designate one such remaining member agent under Treas. Reg. § 1.1502-77A(d) or for the IRS "to deal separately with each remaining member for any purpose not covered by § 1.1502-77T," e.g., filing claims for refund. 65 Fed. Reg. at 57756. Consistent with the view taken by the preamble to the new regulations, the IRS has concluded in written determinations, including Field Service Advices ("FSAs") and Non Docketed Service Advice Reviews ("NSARs") that the designation procedure contained in Treas. Reg. § 1.1502-77A is the exclusive procedure for determining what entity is authorized to act on behalf of a consolidated group whose parent has terminated, and absent such designation, the IRS is left with no choice but to deal with each group member individually. See, e.g., FSA 200210012 (Nov. 19, 2001) (where common parent's existence terminated, the consolidated group has "no agent" until the remaining members designate a new agent); 2001 NSAR 142, 2001 WL 34056134 (Oct. 22, 2001) (remaining members of consolidated group whose common parent terminated must designate an agent to file claims for refund); 2001 NSAR 126, 2001 WL 34056128 (Mar. 12, 2001) (the remaining members of a group whose common parent merged

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into another corporation must designate a new agent to sign a closing agreement with the IRS); FSA 200027026 (April 10, 2000) (the remaining members of a group whose common parent merged into another corporation must designate a new agent to claim credits).5 C. The Liquidation of BFI, Inc. Constituted a Termination of the Common Parent's Existence Under Treas. Reg. § 1.1502-77A(d), Rendering BFI, Inc. Unable to File Valid Refund Claims on Behalf of the BFI Group.

BFI, LLC is a single-member limited liability company that is disregarded as an entity separate from its owner for federal tax purposes. For federal tax purposes, a domestic entity other than a corporation, a joint-stock company or association, an insurance company, a bank, a government-owned entity or certain foreign entities is "[d]isregarded as an entity separate from its owner if it has a single owner." See Treas. Reg. § 301.7701-3(b)(1)(ii). Such a disregarded entity may elect to be treated as a corporation for tax purposes under Treas. Reg. § 301.77013(c), but BFI, LLC has not made an election to be classified other than its default classification as a disregarded entity. When a corporation becomes a disregarded entity, the following is "deemed to occur" for federal tax purposes: the corporation distributes all of its assets and liabilities to its single owner in "liquidation." Treas. Reg. § 301.7701-3(g)(1)(iii); see also Rev. Rul. 2004-59, 2004-1 C.B. 1050 (effect of conversion of a partnership into a corporation pursuant to state conversion statute is determined by Treas. Reg. § 301.7701-3(g)(1)). BFI, Inc. therefore liquidated for federal tax purposes as a result of its conversion into BFI, LLC under Delaware law. BFI, Inc. was deemed
5

Although IRS administrative pronouncements such as FSAs and NSARs are not binding precedent, they can be taken into account as persuasive authority. See, e.g., Buckeye Power, Inc. v. United States, 38 Fed. Cl. 154 (Ct. Cl. 1997) (finding that a technical advice memorandum demonstrates "the strength of [the taxpayer's] evidentiary position"); McKnight v. Comm'r, 58 T.C.M. (CCH) 1390, 1393 (1990) (in following the reason of a technical advice memorandum, the court noted that it "may, in the absence of authority to the contrary, accept the reasoning of a technical advice memorandum as persuasive").

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to distribute all of its assets and liabilities to its sole owner AWNA in complete liquidation. Allied Waste properly reported the conversion of BFI, Inc. into BFI, LLC as a liquidation of BFI, Inc. on the 2004 consolidated tax return of the Allied Group. See again, Exhibit 3. This liquidation of BFI, Inc. constitutes a termination of its existence as the common parent of the BFI Group for purposes of the federal tax law. As a result of its liquidation, BFI, Inc. ceased to be a member of the BFI Group. In Interlake Corp. v. Commissioner, 112 T.C. 103 (1999), the Tax Court considered the authority of a former common parent, Acme, to receive tentative refunds when it had been spun off and had therefore ceased to be a member of the consolidated group. The court determined that "Acme's authority to act for the group . . . terminated when its affiliation with the group terminated. With respect to the group, it is as though Acme ceased to exist." Id. at 114-15. Similarly, BFI, Inc.'s authority to act for the BFI Group terminated when it liquidated and ceased to be a member of the consolidated group. The IRS and Treasury Department also have acknowledged that a liquidation constitutes a termination of common parent agency. In the preamble to the consolidated return regulations proposed in 2000, the Treasury stated that a common parent ceases to exist when it is liquidated and that, in such circumstances, the only way for the group to have an agent is for the remaining members to designate one pursuant to Treas. Reg. § 1.1502-77A(d). See 65 Fed. Reg. at 57756 (designation of an agent is required "where the common parent has ceased to exist (e.g., due to a merger or liquidation)") (emphasis added). Finally, the IRS itself confirmed that "Browning-Ferris Industries, Inc. has terminated," in its August 31, 2006 approval of the BFI Group's designation of BFI Waste Systems of North America, Inc. See again, Exhibit 5.

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As a result of its liquidation, BFI, Inc. is not authorized to file refund claims on behalf of the BFI Group. Thus, the claims for refund that BFI, Inc. attempted to file in its own name for the tax years of the BFI Group at issue in this suit, 1997 and 1998, are invalid. D. The Court Lacks Subject Matter Jurisdiction Because the Claims for Refund Purportedly Filed by BFI, Inc. Were Invalid.

As the Court observed in Stelco Holding Co. v. United States, "[i]t is firmly settled that a properly filed administrative claim for refund is the indispensable prerequisite to this court's exercise of jurisdiction over a taxpayer's suit for refund." 42 Fed. Cl. 101, 104 (Ct. Cl. 1998) (emphasis added). See also Rosenberg v. United States, 2006 U.S. Claims LEXIS 236 (Ct. Cl. 2006) (citing § 7422) ("Before the United States Court of Federal Claims can exercise jurisdiction over a tax refund claim, the plaintiff must first file a tax refund claim with the IRS"). As noted at the outset, § 7422 itself requires that the claim have "been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof." That did not occur here and, as a consequence, the refund claims that were filed in May of 2005 in the name of BFI, Inc. -- a taxpayer that no longer exists under the federal tax law -- were invalid. BFI, Inc., pursuant to the consolidated return regulations, no longer had authority to act on behalf of the consolidated return group. Because jurisdiction necessarily depends on a taxpayer's satisfaction of the requirements of § 7422, the failure to satisfy the statutory requirements constitutes a failure to satisfy the jurisdictional prerequisites to maintain this action.

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CONCLUSION For the foregoing reasons, the court lacks subject matter jurisdiction over this suit and should dismiss the action, including defendant's counterclaims, without prejudice. Respectfully submitted,

/s/ Philip Karter PHILIP KARTER Miller & Chevalier Chartered 300 Conshohocken State Road, Suite 570 West Conshohocken, PA 19428 610/729-7820 Telephone 610/729-7805 Facsimile Attorney of Record for Plaintiff HERBERT ODELL Miller & Chevalier Chartered 300 Conshohocken State Road, Suite 570 West Conshohocken, PA 19428 610/729-7810 Telephone 610/729-7805 Facsimile Of Counsel Dated: September 12, 2006

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United States Court of Federal Claims
BROWNING-FERRIS INDUSTRIES, INC. & SUBSIDIARIES, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) ) ) )

No. 05-738T Judge Thomas C. Wheeler

PLAINTIFF'S BRIEF IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE PURSUANT TO RCFC 41(a)(2) AND FOR DISMISSAL OF COUNTERCLAIM PURSUANT TO RCFC 12(b)(1)

APPENDIX

PHILIP KARTER Miller & Chevalier Chartered 300 Conshohocken State Road, Suite 570 West Conshohocken, PA 19428 610/729-7820 Telephone 610/729-7805 Facsimile Attorney of Record for Plaintiff HERBERT ODELL Miller & Chevalier Chartered 300 Conshohocken State Road, Suite 570 West Conshohocken, PA 19428 610/729-7810 Telephone 610/729-7805 Facsimile Of Counsel September 12, 2006

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26 U.S.C. § 7422(a)

§ 7422. Civil actions for refund. (a) No suit prior to filing claim for refund. No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.

26 C.F.R. 1.1502-77A

§ 1.1502-77A. Common parent agent for subsidiaries applicable for consolidated return years beginning before June 28, 2002. (a) Scope of agency of common parent corporation. The common parent, for all purposes (other than the making of the consent required by paragraph (a)(1) of § 1.1502-75, the making of an election under section 936(e), the making of an election to be treated as a DISC under § 1.992-2, and a change of the annual accounting period pursuant to paragraph (b)(3)(ii) of § 1.991-1) shall be the sole agent for each subsidiary in the group, duly authorized to act in its own name in all matters relating to the tax liability for the consolidated return year. Except as provided in the preceding sentence, no subsidiary shall have authority to act for or to represent itself in any such matter. For example, any election available to a subsidiary corporation in the computation of its separate taxable income must be made by the common parent, as must any change in an election previously made by the subsidiary corporation; all correspondence will be carried on directly with the common parent; the common parent shall file for all extensions of time including extensions of time for payment of tax under section 6164; notices of deficiencies will be mailed only to the common parent, and the mailing to the common parent shall be considered as a mailing to each subsidiary in the group; notice and demand for payment of taxes will be given only to the common parent and such notice and demand will be considered as a notice and demand to each subsidiary; the common parent will file petitions and conduct proceedings before the Tax Court of the United States, and any such petition shall be considered as also having been filed by each such subsidiary. The common parent will file claims for refund or credit, and any refund will be made directly to and in the name of the common parent and will discharge any liability of the Government in respect thereof to any such subsidiary; and the common parent in its name will give waivers, give bonds, and execute closing agreements, offers in compromise, and all other documents, and any waiver or bond so given, or agreement, offer in compromise, or any other document so executed, shall be considered as having also been given or executed by each such subsidiary. Notwithstanding the provisions of this paragraph, any notice of deficiency, in respect of the tax for a consolidated return year, will name each corporation which was a member of the group during any part of such period (but a failure to include the name of any such member will not affect the validity of the notice of deficiency as to

APP-2

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the other members); any notice and demand for payment will name each corporation which was a member of the group during any part of such period (but a failure to include the name of any such member will not affect the validity of the notice and demand as to the other members); and any levy, any notice of a lien, or any other proceeding to collect the amount of any assessment, after the assessment has been made, will name the corporation from which such collection is to be made. The provisions of this paragraph shall apply whether or not a consolidated return is made for any subsequent year, and whether or not one or more subsidiaries have become or have ceased to be members of the group at any time. Notwithstanding the provisions of this paragraph, the Commissioner may, upon notifying the common parent, deal directly with any member of the group in respect of its liability, in which event such member shall have full authority to act for itself. (b) Notification of deficiency to corporation which has ceased to be a member of the group. If a subsidiary has ceased to be a member of the group and if such subsidiary files written notice of such cessation with the Commissioner, then the Commissioner upon request of such subsidiary will furnish it with a copy of any notice of deficiency in respect of the tax for a consolidated return year for which it was a member and a copy of any notice and demand for payment of such deficiency. The filing of such written notification and request by a corporation shall not have the effect of limiting the scope of the agency of the common parent provided for in paragraph (a) of this section and a failure by the Commissioner to comply with such written request shall not have the effect of limiting the tax liability of such corporation provided for in § 1.1502-6. (c) Effect of waiver given by common parent. Unless the Commissioner agrees to the contrary, an agreement entered into by the common parent extending the time within which an assessment may be made or levy or proceeding in court begun in respect of the tax for a consolidated return year shall be applicable: (1) To each corporation which was a member of the group during any part of such taxable year, and To each corporation the income of which was included in the consolidated return for such taxable year, notwithstanding that the tax liability of any such corporation is subsequently computed on the basis of a separate return under the provisions of § 1.1502-75.

(2)

(d) Effect of dissolution of common parent corporation. If the common parent corporation contemplates dissolution, or is about to be dissolved, or if for any other reason its existence is about to terminate, it shall forthwith notify the Commissioner of such fact and designate, subject to the approval of the Commissioner, another member to act as agent in its place to the same extent and subject to the same conditions and limitations as are applicable to the common parent. If the notice thus required is not given by the common parent, or the designation is not approved by the Commissioner, the remaining members may, subject to the approval of the Commissioner, designate another member to act as such agent, and notice of such designation shall be given to the Commissioner. Until a notice in writing designating a new agent has been approved by the Commissioner, any notice of deficiency or other communication mailed to the common parent shall be considered as having been properly mailed to the agent of the group; or, if the

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Commissioner has reason to believe that the existence of the common parent has terminated, he may, if he deems it advisable, deal directly with any member in respect of its liability. (e) General rules -(1) Scope. This section applies if the corporation that is the common parent of the group ceases to be the common parent, whether or not the group remains in existence under § 1.1502-75(d). Notice of deficiency. A notice of deficiency mailed to any one or more corporations referred to in paragraph (a)(4) of this section is deemed for purposes of § 1.1502-77 to be mailed to the agent of the group. If the group has designated an agent that has been approved by the Commissioner under § 1.1502-77(d), a notice of deficiency shall be mailed to that designated agent in addition to any other corporation referred to in paragraph (a)(4) of this section. However, failure by the Commissioner to mail a notice of deficiency to that designated agent shall not invalidate the notice of deficiency mailed to any other corporation referred to in paragraph (a)(4) of this section. Waiver of statute of limitations. A waiver of the statute of limitations with respect to the group given by any one or more corporations referred to in paragraph (a)(4) of this section is deemed to be given by the agent of the group. Alternative agents. The corporations referred to in paragraph (a) (2) and (3) of this section are-(i) The common parent of the group for all or any part of the year to which the notice or waiver applies, A successor to the former common parent in a transaction to which section 381(a) applies, The agent designated by the group under § 1.1502-77(d), or If the group remains in existence under § 1.1502-75(d) (2) or (3), the common parent of the group at the time the notice is mailed or the waiver given.

(2)

(3)

(4)

(ii)

(iii) (iv)

(f) Cross-reference. For further rules applicable to groups that include insolvent financial institutions, see § 301.6402-7 of this chapter. (g) Effective date. This section applies to taxable years beginning before June 28, 2002, except paragraph (e) of this section applies to statutory notices and waivers of the statute of limitations for taxable years for which the due date (without extensions) of the consolidated return is after September 7, 1988, and which begin before June 28, 2002.

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26 C.F.R. § 1.1502-77 § 1.1502-77 Agent for the group. (a) Scope of agency -(1) In general -(i) Common parent. Except as provided in paragraphs (a)(3) and (6) of this section, the common parent (or a substitute agent described in paragraph (a)(1)(ii) of this section) for a consolidated return year is the sole agent (agent for the group) that is authorized to act in its own name with respect to all matters relating to the tax liability for that consolidated return year, for -(A) (B) Each member in the group; and Any successor (see paragraph (a)(1)(iii) of this section) of a member.

(ii)

Substitute agents. For purposes of this section, any corporation designated as a substitute agent pursuant to paragraph (d) of this section to replace the common parent or a previously designated substitute agent acts as agent for the group to the same extent and subject to the same limitations as are applicable to the common parent, and any reference in this section to the common parent includes any such substitute agent. Successor. For purposes of this section only, the term successor means an individual or entity (including a disregarded entity) that is primarily liable, pursuant to applicable law (including, for example, by operation of a state or Federal merger statute), for the tax liability of a member of the group. Such determination is made without regard to § 1.1502-1(f)(4) or 1.15026(a). (For inclusion of a successor in references to a subsidiary or member, see paragraph (c)(2) of this section.) Disregarded entity. If a subsidiary of a group becomes, or its successor is or becomes, a disregarded entity for Federal tax purposes, the common parent continues to serve as the agent with respect to that subsidiary's tax liability under § 1.1502-6 for consolidated return years during which it was included in the group, even though the entity generally is not treated as a person separate from its owner for Federal tax purposes. Transferee liability. For purposes of assessing, paying and collecting transferee liability, any exercise of or reliance on the common parent's agency authority pursuant to this section is binding on a transferee (or

(iii)

(iv)

(v)

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subsequent transferees) of a member, regardless of whether the member's existence terminates prior to such exercise or reliance. (vi) Purported common parent. If any corporation files a consolidated return purporting to be the common parent of a consolidated group but is subsequently determined not to have been the common parent of the claimed group, that corporation is treated, to the extent necessary to avoid prejudice to the Commissioner, as if it were the common parent.

(2)

Examples of matters subject to agency. With respect to any consolidated return year for which it is the common parent -(i) The common parent makes any election (or similar choice of a permissible option) that is available to a subsidiary in the computation of its separate taxable income, and any change in an election (or similar choice of a permissible option) previously made by or for a subsidiary, including, for example, a request to change a subsidiary's method or period of accounting; All correspondence concerning the income tax liability for the consolidated return year is carried on directly with the common parent; The common parent files for all extensions of time, including extensions of time for payment of tax under section 6164, and any extension so filed is considered as having been filed by each member; The common parent gives waivers, gives bonds, and executes closing agreements, offers in compromise, and all other documents, and any waiver or bond so given, or agreement, offer in compromise, or any other document so executed, is considered as having also been given or executed by each member; The common parent files claims for refund, and any refund is made directly to and in the name of the common parent and discharges any liability of the Government to any member with respect to such refund; The common parent takes any action on behalf of a member of the group with respect to a foreign corporation, for example, elections by, and changes to the method of accounting of, a controlled foreign corporation in accordance with § 1.964-1(c)(3); Notices of claim disallowance are mailed only to the common parent, and the mailing to the common parent is considered as a mailing to each member;

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

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(viii) Notices of deficiencies are mailed only to the common parent (except as provided in paragraph (b) of this section), and the mailing to the common parent is considered as a mailing to each member; (ix) Notices of final partnership administrative adjustment under section 6223 with respect to any partnership in which a member of the group is a partner may be mailed to the common parent, and, if so, the mailing to the common parent is considered as a mailing to each member that is a partner entitled to receive such notice (for other rules regarding partnership proceedings, see paragraphs (a)(3)(v) and (a)(6)(iii) of this section); The common parent files petitions and conducts proceedings before the United States Tax Court, and any such petition is considered as also having been filed by each member; Any assessment of tax may be made in the name of the common parent, and an assessment naming the common parent is considered as an assessment with respect to each member; and Notice and demand for payment of taxes is given only to the common parent, and such notice and demand is considered as a notice and demand to each member.

(x)

(xi)

(xii)

(3)

Matters reserved to subsidiaries. Except as provided in this paragraph (a)(3) and paragraph (a)(6) of this section, no subsidiary has authority to act for or to represent itself in any matter related to the tax liability for the consolidated return year. The following matters, however, are reserved exclusively to each subsidiary -(i) (ii) The making of the consent required by § 1.1502-75(a)(1); Any action with respect to the subsidiary's liability for a federal tax other than the income tax imposed by chapter 1 of the Internal Revenue Code (including, for example, employment taxes under chapters 21 through 25 of the Internal Revenue Code, and miscellaneous excise taxes under chapters 31 through 47 of the Internal Revenue Code); The making of an election under section 936(e); The making of an election to be treated as a DISC under § 1.992-2; and Any actions by a subsidiary acting as tax matters partner under sections 6221 through 6234 and the accompanying regulations (but see paragraph (a)(2)(ix) of this section regarding the mailing of a final partnership administrative adjustment to the common parent).

(iii) (iv) (v)

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(4)

Term of agency -(i) In general. Except as provided in paragraph (a)(4)(iii) of this section, the common parent for the consolidated return year remains the agent for the group with respect to that year until the common parent's existence terminates, regardless of whether one or more subsidiaries in that year cease to be members of the group, whether the group files a consolidated return for any subsequent year, whether the common parent ceases to be the common parent or a member of the group in any subsequent year, or whether the group continues pursuant to § 1.1502-75(d) with a new common parent in any subsequent year. Replacement of substitute agent designated by Commissioner. If the Commissioner replaces a previously designated substitute agent pursuant to paragraph (d)(3)(ii) of this section, the replaced substitute agent ceases to be the agent after the Commissioner designates another substitute agent. New common parent after a group structure change. If the group continues in existence with a new common parent pursuant to § 1.1502-75(d) during a consolidated return year, the common parent at the beginning of the year is the agent for the group through the date of the § 1.1502-75(d) transaction, and the new common parent becomes the agent for the group beginning the day after the transaction, at which time it becomes the agent for the group with respect to the entire consolidated return year (including the period through the date of the transaction) and the former common parent is no longer the agent for that year.

(ii)

(iii)

(5)

Identifying members in notice of a lien. Notwithstanding any other provisions of this paragraph (a), any notice of a lien, any levy or any other proceeding to collect the amount of any assessment, after the assessment has been made, must name the entity from which such collection is to be made. Direct dealing with a member -(i) Several liability. The Commissioner may, upon issuing to the common parent written notice that expressly invokes the authority of this provision, deal directly with any member of the group with respect to its liability under § 1.1502-6 for the consolidated tax of the group, in which event such member has sole authority to act for itself with respect to that liability. However, if the Commissioner believes or has reason to believe that the existence of the common parent has terminated, he may, if he deems it advisable, deal directly with any member with respect to that member's liability under § 1.1502-6 without giving the notice required by this provision.

(6)

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(ii)

Information requests. The Commissioner may, upon informing the common parent, request information relevant to the consolidated tax liability from any member of the group. However, if the Commissioner believes or has reason to believe that the existence of the common parent has terminated, he may request such information from any member of the group without informing the common parent. Members as partners in partnerships. The Commissioner generally will deal directly with any member in its capacity as a partner of a partnership that is subject to the provisions of sections 6221 through 6234 and the accompanying regulations (but see paragraph (a)(2)(ix) of this section regarding the mailing of a final partnership administrative adjustment to the common parent). However, if requested to do so in accordance with the provisions of § 301.6223(c)-1(b) of this chapter, the Commissioner may deal with the common parent as agent for such member on any matter related to the partnership, except in regards to a settlement under section 6224(c) and except to the extent the member acts as tax matters partner of the partnership.

(iii)

(b) Copy of notice of deficiency to entity that has ceased to be a member of the group. An entity that ceases to be a member of the group during or after a consolidated return year may file a written notice of that fact with the Commissioner and request a copy of any notice of deficiency with respect to the tax for a consolidated return year during which the entity was a member, or a copy of any notice and demand for payment of such deficiency, or both. Such filing does not limit the scope of the agency of the common parent provided for in paragraph (a) of this section. Any failure by the Commissioner to comply with such request does not limit an entity's tax liability under § 1.1502-6. For purposes of this paragraph (b), references to an entity include a successor of such entity. (c) References to member or subsidiary. For purposes of this section, all references to a member or subsidiary for a consolidated return year include -(1) Each corporation that was a member of the group during any part of such year (except that any reference to a subsidiary does not include the common parent); Except as indicated otherwise, a successor (as defined in paragraph (a)(1)(iii) of this section) of any corporation described in paragraph (c)(1) of this section; and Each corporation whose income was included in the consolidated return for such year, notwithstanding that the tax liability of such corporation should have been computed on the basis of a separate return, or as a member of another consolidated group, under the provisions of § 1.1502-75.

(2)

(3)

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(d) Termination of common parent -(1) Designation of substitute agent by common parent. (i) If the common parent's existence terminates, it may designate a substitute agent for the group and notify the Commissioner, as provided in this paragraph (d)(1). (A) Subject to the Commissioner's approval under paragraph (d)(1)(ii) of this section, before the common parent's existence terminates, the common parent may designate, for each consolidated return year for which it is the common parent and for which the period of limitations either for assessment, for collection after assessment, or for claiming a credit or refund has not expired, one of the following to act as substitute agent in its place -(1) Any corporation that was a member of the group during any part of the consolidated return year and, except as provided in paragraph (e)(3)(ii) of this section, has not subsequently been disregarded as an entity separate from its owner or reclassified as a partnership for Federal tax purposes; or Any successor (as defined in paragraph (a)(1)(iii) of this section) of such a corporation or of the common parent that is a domestic corporation (and, except as provided in paragraph (e)(3)(ii) of this section, is not disregarded as an entity separate from its owner or classified as a partnership for Federal tax purposes), including a corporation that will become a successor at the time that the common parent's existence terminates.

(2)

(B)

The common parent must notify the Commissioner in writing (under procedures prescribed by the Commissioner) of the designation and provide the following -(1) An agreement executed by the designated corporation agreeing to serve as the group's substitute agent; and If the designated corporation was not itself a member of the group during the consolidated return year (because the designated corporation is a successor of a member of the group for the consolidated return year), a statement by the designated corporation acknowledging that it is or will be primarily liable for the consolidated tax as a successor of a

(2)

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member. (ii) A designation under paragraph (d)(1)(i)(A) of this section does not apply unless and until it is approved by the Commissioner. The Commissioner's approval of such a designation is not effective before the existence of the common parent terminates.

(2)

Default substitute agent. If the common parent fails to designate a substitute agent for the group before its existence terminates and if the common parent has a single successor that is a domestic corporation, such successor becomes the substitute agent for the group upon termination of the common parent's existence. However, see paragraph (d)(4) of this section regarding the consequences of the successor's failure to notify the Commissioner of its status as default substitute agent in accordance with procedures established by the Commissioner. Designation by the Commissioner. (i) In the event the common parent's existence terminates and no designation is made and approved under paragraph (d)(1) of this section and the Commissioner believes or has reason to believe that there is no successor of the common parent that satisfies the requirements of paragraph (d)(2) of this section (or the Commissioner believes or has reason to believe there is such a successor but has no last known address on file for such successor), the Commissioner may, at any time, with or without a request from any member of the group, designate a corporation described in paragraph (d)(1)(i)(A) of this section to act as the substitute agent. The Commissioner will notify the designated substitute agent in writing of its designation, and the designation is effective upon receipt by the designated substitute agent of such notice. The designated substitute agent must give notice of the designation to each corporation that was a member of the group during any part of the consolidated return year, but a failure by the designated substitute agent to notify any such member of the group does not invalidate the designation. At the request of any member, the Commissioner may, but is not required to, replace a substitute agent previously designated under paragraph (d)(3)(i) of this section with another corporation described in paragraph (d)(1)(i)(A) of this section.

(3)

(ii)

(4)

Absence of designation or notification of default substitute agent. Until a designation of a substitute agent for the group under paragraph (d)(1) of this section has become effective, the Commissioner has received notification in accordance with procedures established by the Commissioner that a successor qualifying under paragraph (d)(2) of this section has become the substitute agent by default, or the Commissioner has designated a substitute agent under paragraph (d)(3) of this section --

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(i)

Any notice of deficiency or other communication mailed to the common parent, even if no longer in existence, is considered as having been properly mailed to the agent for the group; and The Commissioner is not required to act on any communication (including, for example, a claim for refund) submitted on behalf of the group by any person other than the common parent (including a successor of the common parent qualifying as a default substitute agent under paragraph (d)(2) of this section).

(ii)

(e) Termination of a corporation's exi