filed: March 17, 1993; As Corrected March 23, 1993.
Appeal from the United States District Court for the Middle District of Pennsylvania. (D.C. Civil No. 91-01440).
Before: Mansmann, Scirica and Feinberg,*fn* Circuit Judges.
We are asked to interpret Internal Revenue Code waiver Form 870-AD on appeal from the district court's final order of June 17, 1992, granting summary judgment in favor of the United States of America. The Aronsohns contend that the language of Form 870-AD plainly indicates that an agent may bindingly execute the agreement represented in that Form on behalf of his client only after the client has granted a power of attorney beyond the authority implicit in a general power of attorney. The Aronsohns further contend that a taxpayer may not be equitably estopped from violating the terms of an informal Form 870-AD tax settlement agreement, which unambiguously states that the taxpayer will refrain from filing for a refund in exchange for certain Internal Revenue concessions.
We hold that Form 870-AD does not mandate a grant of power of attorney, but may be properly executed by an agent acting pursuant to a general power of attorney. We also hold that a remedy may lie in equity to uphold the terms of a Form 870-AD tax settlement. Accordingly, on the basis of the undisputed facts of this case, we will affirm the district court's grant of summary judgment.
On September 2, 1986, and again on March 15, 1988, the Aronsohns executed a Form 2848 Power of Attorney and Declaration of Representative, authorizing Joseph J. Earyes, CPA, to act as a representative of their interests before the Internal Revenue Service regarding the matter of taxes and penalties assessed against them for the tax years 1983-85 and 1986-87 respectively. Pursuant to these appointments, Earyes represented the Aronsohns in the appeal process of their federal tax liabilities,*fn1 during which Earyes signed Form 870-AD, "Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and of Acceptance of Overassessment", on behalf of the Aronsohns, but without their specific consent beyond the general power of attorney. Form 870-AD provides,
This offer may be executed by the taxpayer's attorney or agent provided this action is specifically authorized by a power of attorney which, if not previously filed, must accompany the form.
Form 870-AD expedites the settlement of deficiencies by virtue of the taxpayer's waiver of certain IRS restrictions in order to spare the taxpayer additional penalties and interest, but does not per se preclude an action for refund, as is the case when the taxpayer executes a formal closing agreement. The Form does, however, provide that "if this offer is accepted by the Commissioner, the case shall not be reopened in the absence of fraud, malfeasance . . . .; and no claim for refund or credit shall be filed or prosecuted for the year(s) stated [herein] . . . ." Although an 870-AD waiver does not automatically preclude a refund action, the courts have in some cases precluded such actions on the theory of equitable estoppel.
The Aronsohns did file a subsequent claim for refund for the tax years covered by the 870-AD settlement, which was denied by the IRS, and the present suit was initiated in the district court. The Aronsohns appeal the district court's grant of the government's cross-motion for summary judgment, which held that Earyes was the Aronsohns' duly authorized representative with power to sign the 870-AD settlement on their behalf, and further that the Aronsohns were equitably estopped from maintaining their refund suit.
We must decide whether the district court erred in finding that Earyes was "specifically" authorized, under the Form 2848 Power of Attorney vested in him, to execute Form 870-AD on behalf of the Aronsohns. Also at issue is whether the district court erred in finding that the Aronsohns ...