                                  PRECEDENTIAL

  UNITED STATES COURT OF APPEALS
       FOR THE THIRD CIRCUIT
          ________________

                No. 13-1603
             ________________

 THE ESTATE OF JOHN R.H. THOURON,
   CHARLES H. NORRIS, EXECUTOR

                                 Appellant

                      v.

      UNITED STATES OF AMERICA

             ________________

On Appeal from the United States District Court
   for the Eastern District of Pennsylvania
   (D.C. Civil Action No. 2-11-cv-04058)
  District Judge: Honorable Joel H. Slomsky
              ________________

           Argued January 14, 2014

       Before: AMBRO, HARDIMAN,
    and GREENAWAY, Jr., Circuit Judges

        (Opinion filed: May 13, 2014)
Joel L. Frank, Esquire
William H. Lamb, Esquire
Maureen M. McBride, Esquire       (Argued)
Scot R. Withers, Esquire
Lamb McErlane
24 East Market Street
P.O. Box 565
West Chester, PA 19381

      Counsel for Appellant


Zane D. Memeger
 United States Attorney
Kathryn Keneally
 Assistant Attorney General
Jonathan S. Cohen, Esquire        (Argued)
Jennifer M. Rubin, Esquire
United States Department of Justice
Tax Division
950 Pennsylvania Avenue, N.W.
P.O. Box 502
Washington, DC 20044

William B. Russell, Jr., Esquire
United States Department of Justice
Tax Division
P.O. Box 55
Ben Franklin Station
Washington, DC 20044

      Counsel for Appellee




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                      ________________

                 OPINION OF THE COURT
                    ________________

AMBRO, Circuit Judge

       The Estate of John Thouron (“the Estate”) filed a
complaint contending that the Internal Revenue Service
improperly failed to refund the penalty assessed the Estate for
late payment of its tax liability. It argues that its reliance on
the advice of its expert tax counsel excused the failure to pay
by the deadline set by statute. The United States (the
“Government”), on behalf of the IRS, moved for summary
judgment. The District Court granted the motion, holding
that under Supreme Court precedent the Estate could not
show “reasonable cause,” a required element to excuse late
payment, based on expert advice under these facts. Because
it may be possible for the Estate to establish reasonable cause,
we vacate and remand for further proceedings in the District
Court.

I. Background

       Sir John Thouron (“Thouron”) died on February 6,
2007 at the age of 99, leaving behind a substantial estate.
Because both his wife and only child predeceased him,
Thouron’s two grandchildren are his only heirs. In his will,
he named Charles H. Norris (“Norris”) executor of his estate.
Norris, in turn, retained Cecil Smith (“Smith”), an
experienced tax attorney, to provide tax advice for the Estate.

        As discussed below, the Estate’s tax return and
payment were initially due by November 6, 2007. On that
date, the Estate filed a request for an extension of time to file
its return and made a payment of $6.5 million, which was




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much less than it would ultimately owe. The Estate argues
that it did not pay the balance of its liability or, in the
alternative, request an extension of time to pay at least in part
because of advice from Smith relating to the possibility of
electing to defer certain liabilities under 26 U.S.C. § 6166.
This provision allows qualifying estates to elect to pay a
portion of their tax liability in installments over several years.
As requested, the Estate received an automatic six-month
extension of time to file the return, which put the deadline at
May 6, 2008.

        The Estate timely filed its return in May 2008 and on
the same day requested an extension of time to pay. It made
no election to defer taxes under § 6166, because by that time
it had conclusively determined it did not qualify. The IRS
denied as untimely the Estate’s request for an extension of
time to pay and subsequently notified the Estate that it was
imposing a failure-to-pay penalty, which the Estate
unsuccessfully appealed administratively. After losing the
administrative appeal, the Estate filed an appropriate form
and paid all outstanding amounts, including a penalty of
$999,072, plus accrued interest on the penalty. Three months
later, it filed a request with the IRS for a refund of that
amount. After not receiving a response from the IRS, the
Estate filed a complaint in the Eastern District of
Pennsylvania seeking the refund and alleging that its failure
to pay resulted from reasonable cause and not willful neglect
(thus not subject to penalty). The Government moved for
summary judgment, and the District Court granted the
motion. The Estate timely appeals.
II. Jurisdiction and Standard of Review

      Because the Estate is seeking the refund of a
previously paid tax penalty, the District Court had jurisdiction
under 28 U.S.C. § 1346(a)(1). We have jurisdiction under 28




                                4
U.S.C. § 1291. We review summary judgment orders de
novo. Hampton v. Borough of Tinton Falls Police Dep’t, 98
F.3d 107, 111-12 (3d Cir. 1996). In this review, we apply the
same test as the District Court, id. at 112, which states that
“[t]he court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
III. Analysis

        Under the Internal Revenue Code, an estate is required
to file an estate and gift tax return within nine months after
the decedent’s death. See 26 U.S.C. § 6075. Unless properly
extended or subject to some exception, the payment of tax is
due at the same time as the relevant return. 26 U.S.C.
§ 6151(a). Here, the nine-month deadline was November 6,
2007. Although the Estate requested and received an
automatic six-month extension of the time to file, “[a]n
extension of time for filing a return does not operate to extend
the time for payment of the tax.” Treas. Reg. § 20.6081-1(e);
see also 26 U.S.C. § 6151(a) (stating that the payment
deadline is “determined without regard to any extension of
time for filing the return”). Therefore, despite the filing
extension, the Estate was required to pay its full tax liability,
ultimately calculated at just over $20 million, on or before the
November deadline. Instead, the Estate paid only part of its
tax liability, $6.5 million, by that date.

       If a tax is not paid in full by the prescribed due date, a
mandatory penalty is assessed of “0.5 percent of the amount
of such tax if the failure is for not more than 1 month, with an
additional 0.5 percent for each additional month or fraction
thereof during which such failure continues,” up to a
maximum of 25 percent. 26 U.S.C. § 6651(a)(2). The
penalty applies “unless it is shown that such failure is due to




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reasonable cause and not due to willful neglect.” Id. The
“heavy burden” of showing both elements falls on the
taxpayer. United States v. Boyle, 469 U.S. 241, 245 (1985).

        A taxpayer shows reasonable cause for failure to pay a
tax on time by establishing that “he [or she] exercised
ordinary business care and prudence in providing for payment
of his [or her] tax liability and was nevertheless either unable
to pay the tax or would suffer an undue hardship . . . if he [or
she] paid on the due date.” Treas. Reg. § 301.6651-1(c)(1).
Among other things, the Estate argues that its reliance on the
advice of Smith, a tax expert, as to the applicable tax law was
reasonable cause for the failure to pay its full tax liability by
the November 2007 deadline.

         The District Court read the Supreme Court’s decision
in Boyle to preclude any finding of reasonable cause based on
reliance on an expert or other agent. “The Court [there]
established a bright line rule that the ‘failure to make a timely
filing of a tax return is not excused by the taxpayer’s reliance
on an agent, and such reliance is not ‘reasonable cause’ for a
late filing.’” Dist. Ct. Op. at 9-10 (quoting Boyle, 469 U.S. at
252).      Although the opinion of the District Court
acknowledged that retaining Smith was an exercise of
“ordinary business care and prudence,” it concluded that
“reliance on an agent for compliance with unambiguous
deadlines does not constitute ‘reasonable cause’ for a late
payment of tax within the meaning of Section 6651(a)(2).” Id.
at 13.

       While Boyle was a late-filing case, the District Court
adopted the reasoning of the Ninth Circuit Court in Baccei v.
United States, 632 F.3d 1140 (9th Cir. 2011), to conclude that
“the holding in Boyle applies with equal force to a failure to
pay a tax because the ‘reasonable cause’ excuse for failing to
file a return or pay a tax timely in both subsections is the




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same.” 1 Dist. Ct. Op. at 11 (citing 26 U.S.C. § 6651(a)(1)-
(2)). We agree that Boyle is relevant to failure-to-pay cases.
See E. Wind Indus., Inc. v. United States, 196 F.3d 499, 504
n.5 (3d Cir. 1999). The District Court, however, applied
Boyle more bluntly than would we.

        As we read it, Boyle identifies three distinct categories
of late-filing or, by extension, late-payment cases. In the first
category, a taxpayer relies on an agent for the ministerial task
of filing or paying. See Boyle, 469 U.S. at 249-50. In the
second, “in reliance on the advice of his [or her] accountant
or attorney, the taxpayer files a return after the actual due date
but within the time the adviser erroneously told him [or her]
was available.” Id. at 251 n.9. In the third, “an accountant or
attorney advises a taxpayer on a matter of tax law[.]” Id. at
251 (emphasis in original).

      By its facts, Boyle fits into the first category. Robert
W. Boyle was the executor of the will of his mother, Myra
Boyle, and retained an attorney, Ronald Keyser, on behalf of
his mother’s estate. Id. at 242. Boyle “relied on Keyser for

1
  Contrary to the District Court’s statement, the definitions of
“reasonable cause” for failure to file and failure to pay are
similar but not identical. Reasonable cause for failure to file is
shown where “the taxpayer exercised ordinary business care
and prudence and was nevertheless unable to file the return
within the prescribed time[.]” Treas. Reg. § 301.6651-1(c)(1).
Reasonable cause excuses failure to pay, as noted above, “to
the extent that the taxpayer has made a satisfactory showing
that he [or she] exercised ordinary business care and prudence
in providing for payment of his [or her] tax liability and was
nevertheless either unable to pay the tax or would suffer an
undue hardship (as described in [Treas. Reg. § 1.6161-1(b)])
if he [or she] paid on the due date.” Id.




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instruction and guidance.” Id. Although Boyle repeatedly
checked in with Keyser on the status of the estate’s return, the
attorney “overlooked the matter because of a clerical
oversight in omitting the filing date from Keyser’s master
calendar.” Id. at 243. As a result, the return was not filed
until almost three months after the deadline. Id. In this
context, the Court opined that executors have a “fixed and
clear” duty to ensure that returns are timely filed that cannot
be discharged by delegating responsibility to an attorney or
accountant. Id. at 249-50; see also id. at 250 (“That the
attorney, as the executor’s agent, was expected to attend to
the matter does not relieve the principal of his duty to comply
with the statute.”). Thus, when the Supreme Court reached
the holding quoted by the District Court, the relevant
“reliance on an agent” was for the administrative act of filing
the return. See id. at 252.

        Boyle specifically did not reach the remaining
categories. It noted a split of authority as to the second
category, citing, inter alia, our decision in Sanderling, Inc. v.
Commissioner, 571 F.2d 174, 178-79 (3d Cir. 1978), as
among those holding that a taxpayer could show reasonable
cause where he or she filed (or paid) before what he or she
was erroneously advised was the deadline. Boyle, 469 U.S. at
251 n.9. The Court explicitly declined to resolve this dispute.
Id. (“We need not and do not address ourselves to this
issue.”). As to the third category, Boyle stated that “[t]his
case is not one in which a taxpayer has relied on the
erroneous advice of counsel concerning a question of law.”
Id. at 250. In such cases, “[c]ourts have frequently held that
‘reasonable cause’ is established when a taxpayer shows that
he reasonably relied on the advice of an accountant or
attorney that it was unnecessary to file a return, even when
such advice turned out to have been mistaken.” Id. (citing
cases). The Court identified our opinions in Hatfried, Inc. v.
Commissioner, 162 F.2d 628, 633-35 (3d Cir. 1947), and




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Girard Investment Co. v. Commissioner, 122 F.2d 843, 848
(3d Cir. 1941), as among those so holding.

        The Court drew a distinction between relying an
expert’s clerical action, as in the first category, and relying on
expert’s advice, as in the second and third categories.
Resolving questions of tax law is difficult, and “[m]ost
taxpayers are not competent to discern error in the substantive
advice of an accountant or attorney.” Boyle, 469 U.S. at 251.
“By contrast, one does not have to be a tax expert to know
that tax returns have fixed filing dates and that taxes must be
paid when they are due.” Id. As the Court noted, lay people
can and often do file or pay themselves. Id. at 251-52. For
this reason, taxpayers may rely on the advice of an expert but
may not, for purposes of completing their statutory duty, rely
on an agent to perform the task of filing or paying.

       Therefore, we read Boyle as reaching only the first
category of cases and requiring only that reliance on another
to perform the ministerial task of filing or paying cannot be
reasonable cause for failure to file or pay by the deadline. By
any account, much less interpreting the facts in the light most
favorable to the non-movant, that is not what occurred here.
Hence we hold that a taxpayer’s reliance on the advice of a
tax expert may be reasonable cause for failure to pay by the
deadline if the taxpayer can also show either an inability to
pay or undue hardship from paying at the deadline. Because
there is at least a genuine dispute of material fact as to
whether that reliance occurred here, it remains for the District
Court, after further factfinding, to apply the law in light of
this holding.
                        *   *   *   *   *




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       Boyle dealt with a “clerical oversight” in failing to file
a return by the deadline. It did not rule on when taxpayers
rely on the advice of an expert, whether that advice relates to
a substantive question of tax law or identifying the correct
deadline. Our case is one of the failure of expert advice, not
(at least on the record before us) the failure of agent task-
completion. Thus the Estate has the right to make, if it can,
the showings required to avoid late-payment penalties and
interest. We thus vacate and remand to the District Court for
further proceedings.




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