United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit

FILED August 31, 2022 No. 21-20258 Lyle W. Cayce Clerk

Donald E. Baxter; Frances P. Baxter,

Plaintiffs—Appellees,

versus

United States of America,

Defendant—Appellant.

Appeal from the United States District Court for the Southern District of Texas USDC No. 4:09-CV-1271

Before Richman, Chief Judge, and Clement and Engelhardt, Circuit Judges. Kurt D. Engelhardt, Circuit Judge: The United States appeals the district court’s summary judgment rulings rendered in this federal income tax refund action filed by Plaintiffs- Appellees Donald E. Baxter and Frances P. Baxter. Because the district court erred in its jurisdictional determinations, we REVERSE the judgment of the district court and REMAND with instructions to dismiss for lack of jurisdiction. As stated below, we also deny the motion that has been carried with the case. Case: 21-20258 Document: 00516455110 Page: 2 Date Filed: 08/31/2022

No. 21-20258

I. This appeal is the latest in a long line of tax suits involving limited partnerships that were organized in the mid-1980s by American Agri- Corp (“AMCOR”) and marketed to high-income professionals across the country. Our recent decision in one of these actions, Foster v. United States, 801 F. App’x 210, 211–12 (5th Cir. 2020)(unpub.), provides a helpful explanation of federal taxation of partnership income and the legislation gov- erning partnership-related audit and tax adjustment procedures that applies here: A partnership is not a taxable entity. United States v. Woods, 571 U.S. 31, 38 (2013) (citing 26 U.S.C. § 701). Rather, it is a conduit through which “its taxable income and losses pass through to the partners.” Id. Even so, a partnership must file an informational tax return reflecting its income and losses, and the partners report their shares of the partnership’s tax items on their own individual returns. Id.; see also Irvine v. United States, 729 F.3d 455, 459 (5th Cir. 2013). “Before 1982, examining a partnership for federal tax purposes was a tedious process.” Duffie v. United States, 600 F.3d 362, 365 (5th Cir. 2010). To adjust an item on a partnership’s return, the IRS had to audit each partner separately, which led to duplicative proceedings and inconsistent results. See Woods, 571 U.S. at 38. Recognizing these difficulties, Congress enacted the Tax Treatment of Partnership Items Act of 1982 as Title IV of the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), Pub. L. No. 97- 248, §§ 401–07, 96 Stat. 324, 648–71.1 TEFRA created a

1 TEFRA’s partnership procedures were codified as amended at 26 U.S.C. §§ 6221–6234 (2012). The Bipartisan Budget Act of 2015 [“the Act”], Pub. L. No. 114-74, § 1101, 129 Stat. 584, 625–38, repealed those procedures and struck 26 U.S.C. § 7422(h), the jurisdictional provision at issue. But those changes do not apply here because the Act is effective only