Carl Smith discusses the challenges that pro se taxpayers faced in trying to timely file an appeal of a Tax Court case. Les
On May 20, 2016, through an unpublished order in Adams v Commissioner, the Fourth Circuit dismissed for lack of jurisdiction an untimely appeal from a Tax Court deficiency case. Adams presents a veritable law school exam question of how not to file a timely appeal. The pro se taxpayers in the case tried multiple ways to file a timely appeal, but to no avail. This case provides a convenient review of what you can and cannot do to file a timely appeal from the Tax Court. But, in this post, I also raise the question whether the Fourth Circuit was correct in dismissing the untimely appeal from the Tax Court for lack of jurisdiction; I think the dismissal should have been on the merits, though there was little practical difference in this case either way.read more...
Substantively, the Adams case was not likely to prevail on the merits, anyway. The Adamses had omitted from their 2010 income tax return part of the qualified plan distributions that the husband took after he was discharged from his Defense Department job and could not find replacement work. So, the IRS sent the Adamses a notice of deficiency seeking income tax on the underreported distributions, as well as a § 72(t) 10% penalty for early withdrawal and a 20% accuracy-related penalty on the deficiency. In response, the Adamses timely filed a pro se Tax Court petition.
On August 17, 2015, the Tax Court issued its opinion at T.C. Memo. 2015-162, holding that it could not exempt the taxpayers from taxation on the distributions under some undefined equitable exception that the taxpayers sought on the ground that the husband’s discharge was discriminatory. At trial, the Adamses were afforded an opportunity, at least, to substantiate any medical expenses that might have reduced the 10% penalty, but the taxpayers did not do so, contending that the receipts were too voluminous to produce and too expensive to photocopy. So, the court sustained the § 72(t) penalty in full. The court also found a substantial understatement of tax as to which there was no reasonable cause and good faith, so it sustained the accuracy-related penalty in full.
On August 26, 2015, the Tax Court entered its decision consistent with the opinion.
On September 2, 2015, the taxpayers tried to electronically file in the Tax Court a notice of appeal, but since there is no tab on the court’s electronic filing system for a notice of appeal, they filed the notice of appeal under the “memorandum” tab.
On September 4, 2015, the Tax Court issued an order striking the attempted filing and pointing out to the taxpayers that a notice of appeal is one of the documents that must be filed with the Tax Court on paper, not electronically. The court’s order also noted that, under Tax Court Rules 161 and 162, respectively, unless otherwise permitted by the court, a motion for reconsideration of an opinion had to be filed within 30 days of the service of the opinion, and a motion to vacate a decision had to be filed within 30 days of the entry of the decision.
On September 16, 2015, the taxpayers filed a timely motion for reconsideration of the opinion under Rule 161 – again arguing for an equitable exception to taxation of the distributions. In an order dated September 29, 2015, but served on September 30, 2015, the Tax Court denied the motion.
On October 12, 2015, the taxpayers filed a motion for a new trial that was stamped denied on October 16, 2015.
On November 23, 2015, the taxpayers again tried to file a notice of appeal electronically in the Tax Court under the memorandum tab. On November 24, 2015, the Tax Court issued an order striking the attempted filing and again pointing out to the taxpayers that a notice of appeal is one of the documents that must be filed with the Tax Court on paper.
On November 24, 2015, December 11, 2015, and December 19, 2015, the taxpayers again electronically filed various papers under the memorandum tab. On January 5, 2016, the Tax Court issued an order striking the attempted filings and again pointing out to the taxpayers that a notice of appeal is one of the documents that must be filed with the Tax Court on paper.
According to a DOJ filing on November 30, 2015, the taxpayer attempted to file a paper notice of appeal with the Fourth Circuit, but no case was set up. An appeals court is the wrong court in which to file a notice of appeal from the Tax Court. The notice of appeal must be filed with the Tax Court.
On January 12, 2016, the taxpayer finally filed with the Tax Court a paper notice of appeal to the Fourth Circuit. As a result of this filing, the Fourth Circuit established a docket for the appeal, Docket No. 16-1043.
In the Fourth Circuit, the DOJ argued that the appeal should be dismissed for lack of jurisdiction as untimely for several reasons:
First, the normal rule is that an appeal is timely filed if it is filed on paper with the Tax Court within 90 days of entry of the decision. § 7483, FRAP Rule 13(a)(1)(A); Tax Court Rule 190(a). Ninety days from the entry of decision was November 24, 2015, yet the notice of appeal was filed with the Tax Court on paper only on January 12, 2016. Therefore, absent something that extended the period, the filing was untimely.
Second, the timely filing of a motion to vacate under Tax Court Rule 162 could have extended the time to appeal. Under FRAP Rule 13(a)(1)(B), the 90-day time to appeal would commence anew on the date an order was entered by the Tax Court denying such motion. However, the taxpayers never filed such a motion to vacate the decision.
Third, there is a bit of disagreement among the Circuit courts as to whether the filing of a timely motion to reconsider an opinion under Tax Court Rule 161 can serve to extend the time period to appeal. FRAP Rule 13(a)(1)(B) does not expressly provide for tolling in that situation. The Ninth Circuit in Nordvik v. Commissioner, 67 F.3d 1489, 1493 (9th Cir. 1995), has held that a timely Tax Court Rule 161 motion tolls the appeal period. The Tenth Circuit reached the opposite conclusion in Mitchell v. Commissioner, 283 Fed. Appx. 641, 644 (10th Cir. 2008), observing that it “has never given tolling effect in a tax appeal to a motion for reconsideration, which is not mentioned in Rule 13.” In Spencer Med. Assocs. v. Commissioner, 155 F.3d 268, 269-271 (4th Cir. 1998), the Fourth Circuit declined to address the issue whether a timely Tax Court Rule 161 motion for reconsideration tolls the appeal period, since the motion for reconsideration there was untimely and thus would not have tolled the appeal period in any event.
The DOJ argued in Adams that the better view was that a motion for reconsideration does not extend the time to appeal from the Tax Court. However, even though the motion in this case was timely filed, it was denied on September 29, 2015. Ninety days after that date was December 28, 2015. Yet the appeal was only properly filed on January 12, 2016, so the notice of appeal would have been late, even if the motion for reconsideration’s denial restarted a 90-day appeal period.
Fourth, FRAP Rule 4(d) states: “If a notice of appeal in either a civil or a criminal case is mistakenly filed in the court of appeals, the clerk of that court must note on the notice the date when it was received and send it to the district clerk. The notice is then considered filed in the district court on the date so noted.” However, the mistaken filing in the Fourth Circuit by the taxpayers here on November 30, 2015, was not with respect to an appeal from a district court. So, FRAP Rule 4(d) did not apply, and there was no comparable rule for appeals from the Tax Court. In any case, even if one could file a notice of appeal from a Tax Court decision in a Court of Appeal under a rule similar to FRAP Rule 4(d), the November 30, 2015 filing was 6 days late – i.e., 6 days beyond the 90-day period starting from the date of the Tax Court decision herein (August 26, 2015).
Finally, the DOJ argued that the 90-day period in section 7483 in which to file an appeal from the Tax Court is jurisdictional. Therefore, it cannot be extended for equitable reasons – i.e., it cannot be equitably tolled, even if the taxpayers could prove the necessary facts for tolling. Timely filing an appeal in the wrong forum is often a ground for equitable tolling of nonjurisdictional filing periods. See Mannella v. Commissioner, 631 F.3d 115, 125 (3d Cir. 2011). The DOJ did not want the taxpayer to be able to argue that timely filing the notice of appeal in the Tax Court by the wrong method (electronically) could be excused under equitable tolling.
Fourth Circuit’s Ruling
The Fourth Circuit, in an unpublished opinion, did not discuss each of the arguments that the DOJ raised. Instead, it wrote merely:
A notice of appeal from a decision of the tax court must be filed within ninety days after the decision is entered. 26 U.S.C. section 7483 (2012); Spenser Med. Assocs. v. Comm’r, 155 F.3d 268, 269 (4th Cir. 1998). The timely filing of a notice of appeal is a jurisdictional requirement. Bowles v. Russell, 551 U.S. 205, 213-14 (2007).
The tax court’s order was entered on the docket on August 26, 2015. The notice of appeal was filed on January 12, 2016. Because taxpayers failed to file a timely notice of appeal, and because this jurisdictional appeal period is not subject to equitable tolling, see Bowles, 551 U.S. at 214, we dismiss the appeal.
On these facts, the court clearly made the right decision to dismiss the appeal, but I question whether the appeal should have been dismissed for lack of jurisdiction. I believe that it should have been dismissed on the merits. This wouldn’t make a material difference in this case, but it could have in a different case where, say, a taxpayer filed a timely notice of appeal in the Circuit court (the wrong place) and so wanted to argue for equitable tolling.
In my opinion, the 90-day time period in § 7483 to file an appeal from the Tax Court is not jurisdictional and is subject to equitable tolling under the right facts under the current Supreme Court case law on jurisdiction and equitable tolling that Keith and I have repeatedly cited in PT posts in recent years. See, e.g., my post on Volpicelli v. United States, 777 F.3d 1042 (9th Cir. 2015)
As you know from prior posts here, here, and here, Keith and I are in the midst of litigating test cases in the Tax Court and the Ninth Circuit in which we argue that the time periods in which to file Tax Court petitions in Collection Due Process cases under § 6330(d)(1) and in stand-alone innocent spouse cases under § 6015(e)(1)(A) are not jurisdictional and are subject to equitable tolling under recent, non-tax Supreme Court case law. We are seeking to overturn existing Tax Court precedent, which has not considered the recent Supreme Court case law. Under that case law, such as Musacchio v. United States, 136 S. Ct. 709 (2016); United States v. Wong, 135 S. Ct. 1625 (2015); Sebelius v. Auburn Regional Med. Cntr., 133 S. Ct. 817 (2013); and Henderson v. Shinseki, 562 U.S. 428 (2011), time periods to file in court are no longer considered jurisdictional unless Congress has clearly stated a preference that the time period be jurisdictional. The Court has noted, under the current rule, “the rarity of jurisdictional time limits”; Wong, supra, at 1632; and stated, “This Court has often explained that Congress’s separation of a filing deadline from a jurisdictional grant indicates that the time bar is not jurisdictional.” Id. at 1633. The only exception to this rule is that, so as not to overturn the expectations of Congress, for stare decisis reasons, the Supreme Court will ignore its current case law if there exists a string of Supreme Court authority on the exact statutory time period going back 100 years or more holding the time period jurisdictional.
The current Supreme Court jurisdictional rules show that the 90-day period under § 7483 to file an appeal from the Tax Court is not jurisdictional. Congress has not clearly stated in § 7483 that the period is jurisdictional. For example, there is no provision in § 7483 that speaks to the jurisdiction of the appeals courts. Indeed, the jurisdictional grant to Circuit courts to hear appeals is elsewhere, at § 7482(a)(1), and contains no references to a time period in which to file.
Then, what of the Fourth Circuit’s citation of Bowles v. Russell, 551 U.S. 205 (2007), in support of its Adams holding that the time in which to file an appeal from the Tax Court is jurisdictional? In Bowles, the question was whether the 30- and 60-day periods under 28 U.S.C. § 2107(a) and (b) in which to file appeals from the district courts in civil cases were jurisdictional. 28 U.S.C. § 2107(c) allows the district court to extend the time to file an appeal for up to 14 days in certain circumstances. In the case, a district court accidentally issued an order extending the time to file an appeal by 17 days, and the appellant relied on that order to his detriment. Only because the Court has for over 100 year had held the § 2107 appeal period jurisdictional did the Court stick with that holding. Since I can locate no Supreme Court opinion holding that the § 7483 period in which to file appeals from the Tax Court is jurisdictional, there is no stare decisis exception available to the current case law that generally makes filing deadlines nonjurisdictional.
The § 7483 time period is also likely subject to equitable tolling, since it is more akin to the simple 1-year period under 28 U.S.C. § 2244(d) to file for death penalty habeas review in district court that was held subject to equitable tolling in Holland v. Florida, 560 U.S. 631 (2010), than it is like the complex, multi-exception time periods under § 6511 to file tax refund claims that was held not subject to equitable tolling in United States v. Brockamp, 519 U.S. 347 (1997).
Precedential case law from various Circuits, including the Fourth Circuit, that has held the Tax Court appeals period to be jurisdictional generally predates and always lacks discussion of current Supreme Court case law on jurisdiction and equitable tolling. Such case law as Spencer Med. Assocs. v. Commissioner, 155 F.3d 268, 269 (4th Cir. 1998); Okon v. Commissioner, 26 F.3d 1025 (10th Cir. 1994), and Davies v. Commissioner, 715 F.2d 435 (9th Cir. 1983), is ripe for overruling.