Berger v. United States

Berger (plaintiff) was a tax attorney. In 1987 and 1988, Berger prepared applications (Forms 5300) asking the Internal Revenue Service (IRS) to determine that the employee-benefit plans for 23 corporate employers qualified for preferential treatment under the Internal Revenue Code (code). In the 1980s, Congress changed the qualification requirements for employee-benefit plans, requiring Berger’s clients to have modified their plans by June 30, 1986, to be retroactively qualified for 1984 and 1985. The Forms 5300 that Berger prepared for his clients stated that the clients had modified their plans. However, the IRS determined that Berger had created backdated documents to falsely show that his clients complied with the June 1986 deadline, and it penalized Berger $700,000 pursuant to 26 U.S.C. § 6701 for aiding and abetting his clients’ tax understatements. The IRS arrived at the $700,000 figure by assessing a $10,000 penalty for each of the four affected tax years with respect to each allegedly false form. Berger paid 15 percent of the penalty and filed a refund claim with the IRS, which took no action. Berger then sued the United States (defendant). Shortly thereafter, the IRS reduced the penalty to $540,000 after determining that no penalty was warranted regarding certain clients. Without conceding that the Forms 5300 were false, Berger moved for partial summary judgment, arguing that § 6701(a)(1) imposed aider-and-abettor liability only with respect to the preparation of false forms, not the filing of understated tax returns. Thus, per Berger, the IRS could penalize him only for 1986 and 1987, the years for which the allegedly false forms were prepared.