Teresa G. Murphy v. Commissioner of Internal Revenue

UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
_________________________________
TERESA G. MURPHY,
Petitioner - Appellant,
v.
COMMISSIONER OF INTERNAL
REVENUE,
Respondent - Appellee.
No. 22-9001
(CIR No. 13970-19)
(United States Tax Court)
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before PHILLIPS, MURPHY, and EID, Circuit Judges.
_________________________________
Teresa Murphy, pro se, appeals from an adverse decision of the Tax Court. The
Tax Court held that her Social Security income is taxable and that she owes back taxes.
Murphy disagrees and appeals. We have jurisdiction to review the Tax Court’s decision
* After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
FILED
United States Court of Appeals
Tenth Circuit
August 31, 2022
Christopher M. Wolpert
Clerk of Court
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under I.R.C. § 7482(a)(1) “in the same manner and to the same extent as decisions of the
district courts . . . tried without a jury.”
In 2019, the Commissioner of Internal Revenue determined that Murphy had
underreported her Social Security income on her 2016 tax return. The Commissioner
issued her a deficiency notice for that year. Murphy timely appealed to the Tax Court.
The Tax Court held a trial and issued a decision agreeing with the Commissioner. The
Tax Court found that the Social Security benefits were taxable and Murphy owed $3,437
as part of her 2016 taxable income. Murphy filed a motion to vacate and included her
notice of appeal (“NOA”) as an attachment to her motion on February 14, 2022. The Tax
Court denied her motion to vacate on March 30, 2022 and ordered that her NOA be
deemed filed as of February 14, 2022. (“ORDERED that petitioner’s motion to vacate,
filed on February 14, 2022, is denied. It is further ORDERED that the Clerk of Court is
directed to file the notice of appeal as of the date of petitioner’s motion to vacate in this
case.”).
We review the Tax Court’s legal conclusions de novo and its findings of fact for
clear error. Consol. Mfg., Inc. v. C.I.R., 249 F.3d 1231, 1236 (10th Cir. 2001). Murphy
makes one legal argument in her opening brief: Her Social Security benefits are tax-
exempt because, in her view, they are part of her employer-provided disability benefits.
But because our jurisdiction is predicated on a timely filed NOA, we start by addressing
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our jurisdiction. See Okon v. C.I.R., 26 F.3d 1025, 1026 (10th Cir. 1994) (parties have 90
days to appeal a final Tax Court decision).
As mentioned, Murphy attached her NOA to her motion to vacate. Thus, her NOA
was initially mis-filed. But the Tax Court caught this issue when it denied her motion to
vacate on March 30th, 2022. So the Tax Court ordered that the NOA be deemed filed as
of February 14, 2022. Her NOA was therefore timely filed as of this date, and the
Commissioner hasn’t argued otherwise. We therefore conclude that we have jurisdiction.1
Turning to the merits of Murphy’s appeal, Murphy explains that she is a former
employee of Cigna Health, and her disability benefits from Cigna were supposed to be
tax-exempt. Importantly, Cigna has a policy of reducing the Cigna-provided disability
benefits by the amount of an employee’s Social Security benefits. And the offset amount
is paid by the Social Security Administration. Even so, Murphy believes that her Social
Security benefits shouldn’t be taxed.
Murphy’s argument fails to grapple with the plain text of I.R.C. § 86. This is the
relevant provision of the Internal Revenue Code that led to an adverse decision against
her in the Tax Court. The Tax Court found that I.R.C. § 86(a) treats her Social Security
income as taxable, at least in part. See R. Vol. 2 at 64 (explaining that “section 86
provides that a taxpayer whose modified adjusted gross income plus one-half of the
1 We note that we have discretion to give effect to a prematurely filed NOA.
Davison v. C.I.R., No. 20-9002, 2022 WL 2196884, at *3 (10th Cir. June 17, 2022).
So even if Murphy’s NOA was prematurely filed before her motion to vacate was
resolved, we would exercise our jurisdiction to address the merits of this otherwise
straightforward case.
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Social Security benefits received exceeds an ‘adjusted base amount’ of $34,000 must
include 85% of the Social Security benefits, including Social Security Disability benefits,
into gross income.” (citing Reimels v. C.I.R., 123 T.C. 245, 247 (2004), aff’d, 436 F.3d
344 (2d. Cir. 2006)). Courts have held that I.R.C. § 86(a) means exactly what it says. See,
e.g., Green v. C.I.R., 262 F. App’x 790, 790 (9th Cir. 2007) (“The plain language of
I.R.C. § 86(a) expressly includes Social Security benefits as taxable income.”). And we
are bound to apply federal statutes as they are written. Thompson R2-J Sch. Dist. v. Luke
P. ex rel. Jeff P., 540 F.3d 1143, 1155 (10th Cir. 2008) (“Our job, however, is to apply
the law as Congress has written it[.]”).
The Tax Court didn’t err in finding Murphy’s Social Security income to be
taxable. And it’s of no legal consequence for tax purposes that Cigna reduces its
employer-provided disability benefits by the amount of an employee’s Social Security
income. We therefore affirm the Tax Court.2
Entered for the Court
Gregory A. Phillips
Circuit Judge
2 Murphy also tells us that, on various occasions, IRS employees told her that
her view of the law was correct. It’s unclear whether Murphy believes this is relevant
to her position on appeal. In any event, Murphy would be mistaken in giving legal
weight to these discussions because “statements by individual IRS employees cannot
bind the Secretary.” Sidell v. Comm’r, 225 F.3d 103, 111 (1st Cir. 2000) (citations
omitted).
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