Ninth Circuit Holds Period to File Tax Court Collection Due Process Petition Jurisdictional Under Current Supreme Court Case Law Usually Treating Filing Deadlines as Nonjurisdictional

This will be a very brief post. Today, subsequent to my post on the NTA Report calling for certain legislative fixes, the Ninth Circuit held, in a published opinion in Duggan v. Commissioner, that the 30-day period in section 6330(d) to file a Tax Court Collection Due Process petition is jurisdictional and not subject to equitable tolling under the Supreme Court’s post-2004 case law that generally excludes filing deadlines from jurisdictional status. The Ninth Circuit relied on an exception to the current Supreme Court rule that applies where Congress clearly states that the time period is jurisdictional, although the court admits that language Keith and I suggested in our amicus brief in the case might be clearer. The Ninth Circuit noted that the jurisdictional grant for the Tax Court suit was in the same sentence that set out the filing deadline. We have blogged before on Duggan here. In essence, the Ninth Circuit in Duggan adopts the position that the Tax Court adopted in Guralnik v. Commissioner, 146 T.C. 230 (2016) (where Keith and I filed an amicus brief making the same arguments that were rejected in Duggan).

Mr. Duggan was one of at least eight taxpayers over the last two years who have been misled into filing his or her Tax Court Collection Due Process petition one day late because of confusing language in the current notice of determination – a notice that does not show the last date to file.

The Duggan opinion is not the first court of appeals opinion to hold that Collection Due Process petition filing period jurisdictional. However, it is the first such court of appeals opinion that has considered the interaction of the Supreme Court’s current rules on the usual nonjurisdictional nature of most filing periods with the statutory language in section 6330(d)(1).

As I noted in my post on the NTA report from earlier today, Keith and I are imminently awaiting an opinion from the Fourth Circuit in Cunningham v. Commissioner, 4th Cir. Docket No. 17-1433 (oral argument held on Dec. 5, 2017; the Harvard Federal Tax Clinic is counsel for the taxpayer). Cunningham is on all fours with the facts and legal arguments presented in Duggan. She also argues that she was misled by the IRS through confusing language in the Collection Due Process notice of determination into mailing her Tax Court petitions to the court a day late. Like Duggan, she seeks equitable tolling to make her filing timely.

NTA Calls for Making Judicial Tax Case Filing Deadlines Subject to Forfeiture, Waiver, Estoppel, and Equitable Tolling

We welcome back frequent guest blogger Carl Smith who comments on a portion of the NTA’s recently released annual report relating to the issue of equitable tolling and adequate provision of information to taxpayers facing court filing deadlines.  The Ninth Circuit ruled this morning on this issue in the Duggan case linked below and found IRC 6330 jurisdictional.  More later. Keith

In her annual report to Congress dated December 31, 2017, National Taxpayer Advocate Nina Olson has made two legislative proposals that will, if enacted, address problems that Keith and I have faced in some cases that were are litigating or have recently litigated in the courts of appeals. These cases have been the subject of a number of posts on PT. Thus, even if we never win any of these cases (and we make no promises on that score), at least we may have provoked discussion of legislative fixes.

Among problems that have come up in these cases are ones that flow from the courts’ view that all filing deadlines in the Tax Court are jurisdictional and therefore not subject to the judicial doctrines of forfeiture, waiver, estoppel, and equitable tolling – doctrines that are often applicable to nonjurisdictional statutes of limitations in suits (1) between private parties and (2) outside the tax area, brought against the federal government in such areas of law as Social Security disability benefits, employment discrimination, tort claims, and veterans benefits. The NTA notes that, unlike with the Tax Court, the appellate courts have been divided over whether those doctrines apply to tax case filings in the district courts and the Court of Federal Claims. The NTA has recommended that the Code be amended to provide that all of these tax case judicial filing deadlines be made nonjurisdictional and subject to those doctrines. The portion of her report on this proposal can be found here.

Also, along similar lines, the NTA is recommending a legislative change to require the IRS to show the last date to file any Tax Court petition on all Collection Due Process and innocent spouse notices of determination – just as the IRS has been required (since 1998) to show the last date to file on all notices of deficiency. She would have Congress also amend the Code to state that taxpayers may rely on the last date to file shown in the notice, even if the IRS has given the wrong last date – the same rule (added in 1998) under section 6213(a) applicable to notices of deficiency that show the wrong last date. As part of this proposal, she would also ask Congress to allow persons out of the country an additional 60 days to file Tax Court Collection Due process and innocent spouse petitions. The portion of her report on this proposal can be found here.

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I had thought about extending this post to list all the various cases that Keith and I have litigated or are litigating in this area, but have decided that it makes more sense simply to report on the court rulings when they come down. I will, however, note that we are imminently awaiting rulings in the following three cases:

Duggan v. Commissioner, 9th Cir. Docket No. 15-73819   (submitted without oral argument on Dec. 7, 2017; the Harvard Federal Tax Clinic is amicus), and Cunningham v. Commissioner, 4th Cir. Docket No. 17-1433 (oral argument held on Dec. 5, 2017; the Harvard Federal Tax Clinic is counsel for the taxpayer). In both of these cases, the taxpayers argue that they were misled by the IRS through confusing language in the Collection Due Process notice of determination into mailing their Tax Court petitions to the court a day late. They seek equitable tolling to make their filings timely.

Pfizer v. United States, 2d Cir. Docket No. 17-2307 (oral argument to be held on Feb. 13, 2018; the Harvard Federal Tax Clinic is amicus). There, the IRS issued a notice of disallowance of a claim for overpayment interest under section 6611and told the taxpayer it had 6 years to bring suit on the claim in the district court (under 28 U.S.C. section 2401(a)) or the Court of Federal Claims (under 28 U.S.C. section 2501). That is the position that the IRS has long taken as to the statutes of limitations applicable to overpayment interest suits. See Rev. Rul. 56-506, 1956-2 C.B. 959. When the taxpayer brought suit in the SDNY about 3 years later, the DOJ moved to dismiss the suit for lack of jurisdiction as untimely, arguing that the applicable statute of limitations is the 2-year one of I.R.C. section 6532(a). The taxpayer argues that the applicable statute of limitations is the 6-year one, but if the 2-year statute applies, then that 2-year period is nonjurisdictional and subject to estoppel. The taxpayer points to Miller v. United States, 500 F.2d 1007 (2d Cir. 1974), which held that the 2-year period of section 6532(a) is subject to estoppel. Miller is in conflict with Federal Circuit case law holding that the 2-year period is jurisdictional and not subject to estoppel. See, e.g., RHI Holdings, Inc. v. United States, 142 F.3d 1459 (Fed. Cir. 1998).

 

The Idea of Equitable Tolling in Collection Due Process Request is Gaining Traction

Today we welcome guest blogger Samantha Galvin from the University of Denver. Professor Galvin is one of the four writers of our feature on designated orders published by the Tax Court. During the week she was “on” for the designated orders, the Court issued an which deserved its own post, and she took on that task. In the cases discussed below, the Tax Court reverses course and mitigates a somewhat harsh result that can occur when a taxpayer sends the CDP request to the wrong place within the IRS. The IRS has taken the position that if the taxpayer sends the CDP request to the wrong office, the taxpayer loses their right to a CDP hearing if the request does not find its way to the proper office within the 30 day time period allowed for making such a request. This rule has tripped up a number of pro se and represented taxpayers and becomes even harder to meet when the IRS gives wrong information. One issue raised by the cases Professor Galvin writes about today is whether these decisions represent a crack in the door regarding equitable tolling. Keith 

In the last couple of months, two designated orders have come out that suggest an unstated, equitable tolling exception may exist when it comes to collection due process (CDP) hearings requested pursuant to sections 6330 and 6320(a). The two most recent designated orders are Tarig Gabr v. C.I.R., Docket No: 24991-15 L (order here) and Taylor v. C.I.R., Docket No: 3043-17 L (order here). This issue has previously been covered in PT posts by Carl Smith most recently here and here.

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Typically, a taxpayer, or his or her representative, must request a collection due process hearing to the appropriate IRS office within 30 days from receiving either a “Final Notice of Intent to Levy” (LT 11) or a “Notice of Intent to File a Lien and Your Right to Request a Hearing” (Letter 3172).

The designated orders involve taxpayers who sent CDP requests within the 30-day period, but to the wrong IRS offices. The requests were not received by the correct offices until after the 30-day deadline. As a result, the IRS denied the taxpayers a right to a CDP hearing and instead granted them an equivalent hearing. If a request is not timely as to the 30-day deadline, but sent within one year a taxpayer is entitled to an equivalent hearing. An equivalent hearing provides a forum with IRS Appeals similar to a CDP hearing, however, it does not provide the same protection from collection or allow for judicial review.

The IRS and Tax Court’s position has generally been that the 30-day deadline is jurisdictional, which means it cannot be subject to equitable tolling. If it is instead a claim-processing rule, then there is an argument to be made that equitable tolling may apply in some cases.

The door to make this argument was opened by the Supreme Court in the context of veterans’ affairs related claims. In Irwin v. Department of Veteran’s Affairs, 498 U.S. 89 (1990), the Supreme Court held that a rebuttable presumption of equitable tolling should apply to suits against the United States, unless Congress clearly intends otherwise.

As to the question of whether the 30-day deadline is jurisdictional, in Henderson v. Shineski, 131 S. Ct. 1197 (2011), the Supreme Court urged courts to discontinue using the word “jurisdiction” for claim-processing rules, stating that the conditions that accompany the jurisdiction label should be reserved for rules that govern a court’s adjudicatory capacity such as subject-matter or personal jurisdiction. The Supreme Court acknowledged that it must look to Congress’ intent for a clear indication that a deadline is intended to carry harsh jurisdictional consequences before deciding whether equitable tolling should apply.

There have not been any Tax Court cases that decide whether equitable tolling should apply to collection due process requests, but in the recent designated orders the Tax Court rejects respondent’s argument that the Court lacks jurisdiction when a collection due process hearing request is filed within 30 days but sent to the wrong IRS office. According to respondent, this contradicts sections 7502 and 7503 which are used to determine timeliness only if a request is properly transmitted pursuant to Treas. Reg. sections 1.301.6320-1(c)(2) Q&A C-6 and Q&A C-4. In other words, respondent argues timeliness is only met when a request is sent within 30 days to the office where the request is required to be filed.

In Gabr, the taxpayer’s representative allegedly received erroneous instructions from an IRS employee and faxed the CDP request to the wrong office. In determining whether to grant or deny respondent’s motion to dismiss for lack of jurisdiction, the Tax Court acknowledged guidance from the Internal Revenue Manual section 5.9.8.4.2(8) that provides that if a taxpayer receives erroneous instructions from an IRS employee resulting in the request being sent to the wrong office then the postmark date for when the request was sent to the wrong office is used to determine timeliness.

In Taylor, however, there were no erroneous instructions given, rather the representative sent the request to a local office, instead of the office listed on the notice. Respondent relies on cases dealing with tax return filing and the assessment statute, bankruptcy, and foreclosure and lien withdrawal to argue that the CDP request cannot be equitably tolled. Respondent also relies on Gafford v. Commissioner, T.C. Memo 16-40, citing Andre v. Commissioner, 127 T.C. 68 (2006), where the Court held that requiring taxpayers to follow claim-processing rules creates procedural consistency in effectively and efficiently processing such requests. But Andre is distinguishable from Gabr and Taylor, because Andre dealt with a request that was sent to an incorrect address prematurely, prior to the issuance of an LT 11 or Letter 3172.

In Taylor, the Tax Court was not convinced by any of respondents’ arguments since it denied respondent’s motion to dismiss for lack of jurisdiction and stated that respondent did not demonstrate sufficient prejudice to enforce strict compliance with the Treasury Regulations on the matter.

Does this mean these cases will result in decisions that can be relied upon to argue that the 30-day deadline can be equitably tolled for CDP requests in certain circumstances? So far, no. In Gabr, respondent conceded the case so the final decision issued by the Court did not speak on the issue. We will have to wait and see what happens in Taylor, but at the very least these designated orders suggest the Court is open to entertaining the argument.

WARNING: In Guralnik v. Commissioner, 146 T.C. 230, 235-238 (2016), the Tax Court held, en banc, that the different 30-day period in section 6330(d)(1) to file a Tax Court petition after a CDP notice of determination is issued is jurisdictional and not subject to equitable tolling under current Supreme Court case law. But the sentence containing the 30-day period in section 6330(d)(1) explicitly contains the word “jurisdiction”, while the 30-day periods in subsections (a)(3)(B) of section 6320 and 6330 do not. Keith and Carl Smith are in the midst of litigating whether the Tax Court’s position in Guralnik is correct in both Cunningham v. Commissioner, Fourth Circuit Docket No. 17-1433, and Duggan v. Commissioner, Ninth Circuit Docket No. 15-73819 (both cases where taxpayers mailed off their petitions a day late, but argue that they were misled by the language of the notice of determination that appeared to give them 31 days to file courting from the day of the notice of determination). Oral argument happened in Cunningham on December 5, and you can hear the argument here. (Harvard Federal Tax Clinic student Amy Feinberg argued the case for Ms. Cunningham.) Whichever way the Cunningham case comes out, it is clear that the judges there were giving Keith’s and Carl’s argument a serious hearing and not dismissing it lightly. The Duggan case was submitted without oral argument on December 7.

 

Collection Due Process Determination Letter Continues to Mislead Taxpayers into Filing Their Tax Court Petition Too Late

The Harvard Tax Clinic is litigating the issue of the Tax Court’s jurisdiction to hear cases filed late. The Tax Court has soundly rejected our arguments that it has jurisdiction to hear Collection Due Process (CDP), discussed here, and Innocent Spouse (IS) cases, discussed here, filed after the respective 30 and 90 day periods following the issuance of the determination letters to the taxpayers. Not only has the Tax Court rejected our arguments, but the 2nd and 3rd Circuits have agreed with the Tax Court with respect to the IS statute. We expect to argue about the CDP statute in the 4th and 9th Circuits later this fall.

In the CDP cases, the issue concerns situations in which the taxpayers filed one day late relying on the language of the determination letter explaining to them the time within which they needed to file a Tax Court petition. In each case, the taxpayer filed on the 31st day and in each case, in responding to the motion to dismiss filed by the IRS, the taxpayer explained why they felt their petition was timely. In the Cunningham case cited below, Chief Judge Marvel described Ms. Cunningham’s interpretation of the notice as novel, and so it may seem to lawyers trained to read the type of language used in the determination letter, but after eight cases in a little over two years, the novelty has worn off and it has become clear that the language is misleading people on a regular basis. (One of the eight cases involves a pro se petitioner who is a lawyer. So, it is not only lay people who have found the language confusing.)

We blogged about this problem in a post on March 24, 2016, at a time when only three pro se taxpayers had been misled since mid-2015. See here http://procedurallytaxing.com/cdp-notice-of-determination-sentence-causing-late-pro-se-petitions/. In effect, this is an update post because five more pro se taxpayers have been misled since our last post. We have never gone back to look for orders before mid-2015 in which similar dismissals may have happened, so the figure of eight pro se taxpayers misled may actually severely understate the problem that has existed since, probably, 2006 or 2007, when the notice of determination was redrafted to include the confusing language for the first time.

Whether or not the Tax Court has jurisdiction to hear a case filed late because of the misleading notice, the notice itself needs to be changed now in order to avoid the continuation of a bad situation.

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I wrote about the third letter in the collection notice stream that the IRS has been sending for the past 18-24 months that misstates the law. The good news with respect to that letter is that I am told that the IRS agreed to change the letter to remove the language that misstates the law and that tells the taxpayer that the IRS can levy upon their property when it cannot levy upon their property. Based on the information provided to me, the new, improved third letter in the notice stream will go out starting in January of 2018. Until then, taxpayers will continue to receive the incorrect letter; however, I am encouraged that the IRS is changing the letter in response to concerns about its accuracy. I know that changing letters is a slow process at the IRS because of the procedures it has for approving letters and getting them into mass mailings, though I wish it were not so slow when a letter is actually wrong. Because I have not seen the new, improved third letter in the notice stream, I cannot say how improved it is.

Based on the ability of the IRS to listen and adapt regarding the wrong letter it was using in the notice stream, I am hoping that it will also change the letter that it uses in sending a taxpayer a notice of determination. Carl Smith has been tracking Tax Court orders over the past few years. He has found eight cases in which the language of the notice of determination letter has misled the taxpayer into filing Tax Court petition on the wrong day:

Order dated June 26, 2015, in Duggan v. Commissioner, Tax Court Docket No. 4100-15L, on appeal, Ninth Circuit Docket No. 15-73819;

Order dated December 7, 2016, in Cunningham v. Commissioner, Tax Court Docket No. 14090-16L, on appeal, Fourth Circuit Docket No. 17-1433;

Order dated March 4, 2016, in Pottgen v. Commissioner, Tax Court Docket No. 1410-15L;

Order dated January 14, 2016, in Swanson v. Commissioner, Tax Court Docket No. 14406-15S (The Swanson case order does not discuss any argument that the language of the notice of determination misled the taxpayer.  But, Carl Smith went down to the Tax Court and looked at Swanson’s opposition to the motion, wherein Swanson attached the notice of determination and quadruple-underlined the words “day after” in the sentence that is misleading all these pro se people, including Swanson.  It is because of the language of that sentence that he argued his filing was timely — an argument rejected in the order);

Order dated April 20, 2017, in Wallaesa v. Commissioner, Tax Court Docket No. 1179-17L;

Order dated May 31, 2017, in Saporito v. Commissioner, Tax Court Docket No. 8471-17L;

Order dated May 31, 2017, in Integrated Event Management, Inc. v. Commissioner, Tax Court Docket No. 27674-16SL;

Order dated September 26, 2017, in Protter v. Commissioner, Tax Court Docket No. 22975-15SL.

We could provide good advice to these individuals that waiting until the last day to file your Tax Court petition is not a good idea. It is a good practice to send the petition at least a week before the last day to file in order to provide some cushion, though we understand that this may not always be possible, given the short deadline in CDP (30-days) and the fact that taxpayers do not receive the notice of determination until several days after the IRS mails it. Despite this nice advice that could have saved these petitioners, we all know that filing on the last day is normal for many pro se petitioners as well as many lawyers. There should not be a question about what is the last day. The notice should make that clear.

The notice of determination creating this confusion states:  “If you want to dispute this determination in court, you must file a petition with the United States Tax Court within a 30-day period beginning the day after the date of this letter.”  (Emphasis added).  That is not the statutory language.  The statute provides:  “The person may, within 30 days of a determination under this section, petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter).”  § 6330(d)(1) (emphasis added).  Prior to a 2006 amendment of § 6330(d)(1) (an amendment which centralized all CDP review only in the Tax Court), the notice of determination more closely tracked the statutory language, stating: “If you want to dispute this determination in court, you must file a petition with the United States Tax Court for a redetermination within 30 days from the date of this letter.”  See Jones v. Commissioner, T.C. Memo. 2003-29 at *3 (language from notice issued in 2001; emphasis added).

The IRS apparently chose to write a sentence in the current version of the notice that conflates the words of the statute with elements of Tax Court Rule 25(a)(1) (discussing how to count days) and Reg. § 301.6330-1(f)(1) (“The taxpayer may appeal such determinations made by Appeals within the 30-day period commencing the day after the date of the Notice of Determination to the Tax Court.”).  However, the IRS failed to alert taxpayers as to the rules it was summarizing or where taxpayers could find examples of how the 30-day rule operated (including omitting any discussion of weekend days).  It has become clear that this language is misleading to many pro se taxpayers.  Indeed, it is because pro se taxpayers have difficulty understanding how to count days that, in 1998, Congress specifically required the IRS to place a last date to file on notices of deficiency and amended § 6213(a) to provide that taxpayers can rely on any incorrect dates shown. § 3463, Pub. L. 105-206.  (Unfortunately, Congress forgot to write the same sentences requiring showing the last date to file on the new notices of determination issued under §§ 6330(d)(1) and 6015(e)(1) that were adopted in the same statute.)

The National Taxpayer Advocate has written about problems with the innocent spouse notice before:

Problem

Even though the IRS’s relief determination under IRC § 6015 is subject to judicial review, the IRS is not required to provide and does not provide taxpayers with the last date to petition the U.S. Tax Court in the final determination letters it issues to them in connection with requests for innocent spouse relief. In contrast, IRS deficiency determinations are similarly subject to judicial review, but Congress has directed the IRS to assist taxpayers by providing them with the last date to petition the Tax Court in notices of deficiency. Providing such assistance is important because it may be difficult for some taxpayers to determine the deadline for filing a petition in Tax Court without professional assistance, assistance which many taxpayers who need relief may be unable to afford. Sixty-five percent of the taxpayers who request innocent spouse relief make less than $30,000 per year. Thus, it may be even more helpful for the IRS to include the last date to petition the Tax Court in innocent spouse determination letters than to include it in notices of deficiency.

Perhaps one reason the IRS does not include the last date to petition the Tax Court in its notice of determination letters is that if the IRS enters a date beyond the requisite period and the taxpayer relies on it, then the taxpayer could miss the filing deadline. In contrast, if the IRS enters a date beyond the requisite period for filing a Tax Court petition in a notice of deficiency, then a taxpayer will not be harmed as long as he or she files the petition on or before the date contained in the notice of deficiency because IRC § 6213 (a) provides that a taxpayer may petition the Tax Court any time on or before the date specified in the notice.

[Example and footnotes omitted]

Recommendation

Require the IRS to include the last date to petition the Tax Court in any final determination letter the IRS issues in connection with an election or request for innocent spouse relief in a manner similar to that provided by IRC § 6213 (a). Provide that a taxpayer may petition the Tax Court within 90 days of the date of the determination or by the date specified in the letter, whichever is later.

I understand that the NTA will have something about the CDP notice problem in her next annual report.

The filing deadline language in the notice of determination for CDP cases is also inconsistent with the filing deadline language for other similar IRS-issued notices that constitute “tickets” to the Tax Court.  Notices of deficiency issued under § 6212 have long stated: “If you want to contest this deficiency in court before making any payment, you have 90 days from the above date of this letter (150 days if addressed to you outside of the United States) to file a petition with the United States Tax Court for a redetermination of the deficiency.”  See Erickson v. Commissioner, T.C. Memo 1991-97 at *21 (language from 1988 notice; emphasis added); Rochelle v. Commissioner, 116 T.C. 356, 357 (2001) (same, except for addition of the word “mailing” before “date” in language from 1999 notice).  Notices of determination for Tax Court review of innocent spouse relief claims under § 6015(e)(1) state: “You can contest our determination by filing a petition with the United States Tax Court. You have 90 days from the date of this letter to file your petition.”  See Barnes v. Commissioner, 130 T.C. 248, 250 (2008) (language from 2001 notice; emphasis added).

The IRS should change the language in the notice of determination now. Undoubtedly, this will not stop late petitions. It should, however, greatly decrease the number of late petitions caused by confusing language. The language of the CDP notice now provides the date by which the taxpayer must make their CDP request. It is hard to object to that type of clarity.

 

 

Designated Orders: 7/24 – 7/28/2017

Professor Patrick Thomas of Notre Dame discusses last week’s designated orders. Les

Last week’s orders follow up on some previously covered developments in the Tax Court, including the Vigon opinion on the finality of a CDP case and the ongoing fight over the jurisdictional nature of section 6015(e)(1)(A). We also cover a very odd postal error and highlight remaining uncertainties in the Tax Court’s whistleblower jurisprudence. Other orders this week included a Judge Jacobs order and Judge Wherry’s order in a tax shelter case. The latter case showcases the continuing fallout from the Graev and Chai opinions.

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Deposits in a CDP Liability Challenge? – Dkt. # 14945-16L, ASG Services, LLC v. C.I.R. (Order Here)

The first order this week follows on the heels of the Vigon division opinion, about which Keith recently wrote. In a challenge to the underlying liability in a CDP case, ASG paid the liabilities at issue in full in August 2016, and the Service quickly followed with a motion to dismiss for mootness, given that no further collection activity would take place. Judge Gustafson (Vigon’s author) orders ASG to answer three hypotheses, which attempt to distinguish ASG from Vigon.

Judge Gustafson contrasts ASG’s situation with the taxpayer in Vigon, given that the Service has not indicated an inclination to assess the liabilities again in ASG. Indeed, this may be because the IRS cannot assess ASG’s liabilities a second time due to the assessment statute of limitations under section 6501. As a corollary, Judge Gustafson posits that ASG is asking for a refund of the tax, without any contest as to a collection matter. Thus, as in Greene-Thapedi, the court may lack jurisdiction to entertain the refund suit. Finally, the Court notes that even if the refund claim could proceed, ASG would need to show that it had filed a claim for a refund with the Service. Judge Gustafson requests a response from ASG (and the Service) on these suggestions.

Separately, ASG noted in its response to the motion to dismiss that “Petitioner paid the amounts to stop the running of interest.” Judge Gustafson therefore ordered ASG to document whether these remittances were “deposits”, rather than “payments,” along with the effect on mootness. Under section 6603, deposits are remittances to the Service that stop underpayment interest from running. However, deposits are ordinarily always remitted prior to assessment, during an examination. The Service must return the deposit to the taxpayer upon request, and, if at the end of the examination the resulting assessment is less than the deposit, the Service must refund the remainder.

It’s unclear whether a remittance made during a CDP proceeding challenging the underlying liability could be treated as a deposit, though Judge Gustafson seems to be opening the door to this possibility.

The Continuing Saga of Section 6015(e)(1)(A) – Dkt. # 21661-14S, Vu v. C.I.R. (Order Here)

Vu is one of four innocent spouse Tax Court cases in which Keith and Carl Smith have argued that the period under section 6015(e)(1)(A) to petition the Tax Court from the Service’s denial of an innocent spouse request is not jurisdictional. Les wrote previously about this case when Judge Ashford issued an opinion dismissing the case for lack of jurisdiction. Vu is unique among the four cases; in the three other Tax Court dockets (Rubel, Matuszak, and Nauflett), petitioners argue that the time period is not jurisdictional and is subject to equitable tolling in circumstances where the Service misled the taxpayers into filing late. In contrast, Ms. Vu filed too early, but by the time she realized this, it was too late to refile. As a result, Judge Ashford dismissed the case for lack of jurisdiction, because of an untimely petition.

Shortly after the opinion, Keith and Carl entered an appearance in Vu and filed motions to reconsider, vacate, and remove the small tax case designation, arguing that the Service forfeited the right to belatedly raise a nonjurisdictional statute of limitations defense.

Last week, Judge Ashford denied those motions. Substantively, Judge Ashford relied on the opinions of the Second and Third Circuits in Matuszak v. Commissioner and Rubel v. Commissioner, which hold that the time limitation in section 6015(e)(1)(A) is jurisdictional. (The Tax Court also recently ruled against the petitioner in Nauflett, but Keith and Carl plan to appeal this to the Fourth Circuit). Given that, therefore, Judge Ashford believed there to be no “substantial error of fact or law” or “unusual circumstances or substantial error” that would justify granting a motion to reconsider or motion to vacate, she denies those two motions.

To compound matters, Vu also filed her petition requesting a small case designation; decisions in small tax cases are not appealable. While Vu moved to remove the small case designation, Judge Ashford denied that motion as well. The standard for granting a motion to remove a small case designation is whether “the orderly conduct of the work of the Court or the administration of the tax laws would be better served by a regular trial of the case.” In particular, the court may grant such a motion where a regular decision will provide precedent to dispose of a substantial number of other cases. But because Judge Ashford views there to already be substantial precedent against Vu’s position, she denies this motion as well.

Keith and Carl plan to appeal Vu to the Tenth Circuit anyway, arguing that the ban on appeal of small tax cases does not apply where the Tax Court mistakenly ruled that it did not have jurisdiction to hear a case. This argument will be one of first impression.

A second argument will be that the denial of a motion to remove a small case designation is appealable. In Cole v. Commissioner, 958 F.2d 288 (9th Cir. 1992) the Ninth Circuit dismissed an appeal from an S case for lack of jurisdiction, noting that neither party had actually moved to remove the small case designation. In Risley v. Commissioner, 472 Fed. Appx. 557 (9th Cir. 2012), where there is no mention of the issue of a motion to remove the small tax case designation, the court raised, but did not have to decide, whether it could hear an appeal from an S case if there was a due process claim. A due process violation allegation might be another occasion for appealing an S case, but there will be no due process violation alleged in the appeal of Vu.

Keith and Carl also note that they will not be filing a cert petition in either Matuszak or Rubel. They will only do so if they can generate, through Nauflett or Vu, a circuit split on whether the time period under section 6015(e)(1)(A) is jurisdictional.

Postal Error? – Dkt. # 9469-16L Marineau v. C.I.R. (Order Here)

In Marineau, Judge Leyden tackles the Service’s motion for summary judgment in a CDP case. The facts start as is typical: the Service filed a motion for summary judgment, and the Petitioner responded that the Service hadn’t sent the Notice of Deficiency to their last known address in Florida. Dutifully, the Service responded with a copy of the Notice of Deficiency showing the taxpayer’s Florida address and a Form 3877 indicating the NOD was sent by certified mail to that address. Both the NOD and the Form 3877 have the same US Postal Service tracking number.

But then things take a turn. The Service also submitted a copy of the tracking record for that tracking number from the post office. It shows that the NOD was sent from Ogden, Utah, but that it was attempted to be delivered in Michigan, rather than Florida. The NOD was unclaimed and eventually returned to the Service.

Judge Leyden appears to be as perplexed as I am by this situation. So, she ordered the Service to explain what happened. I’ll be looking forward to finding out as well.

Remand and Standard of Review in a Whistleblower Action – Dkt. # 28731-15W Epstein v. C.I.R. (Order Here)

In this whistleblower action, the Service and the Petitioner apparently agreed that the Petitioner was entitled to an award (or perhaps, an increased award). The Service filed a motion to remand the case so that a new final determination letter could be issued. The Petitioner opposed this motion, as he believed that the Tax Court could decide the issue for itself, without need to remand.

Judge Lauber appears to be cautious towards remanding a case, for two reasons: first, it’s unclear whether the Court has the authority to remand a whistleblower case. While CDP cases are subject to remand, due to the abuse of discretion standard applicable in most cases, cases in which the Court may decide an issue de novo are, according to Judge Lauber, generally not subject to remand. (I’m not sure that’s entirely correct, as CDP cases challenging the underlying liability are indeed subject to remand.) Relatedly, the Court isn’t yet even sure what the standard of review for a whistleblower case is.

Judge Lauber manages to avoid these issues. Because the Court retains jurisdiction where the Service changes its mind about the original whistleblower claim post-petition (see Ringo v. Commissioner), Judge Lauber does not believe there’s any point in remanding the case for issuance of a new letter. The Service can simply issue the letter now, and the Court can enforce any resulting settlement through a judgment. Of course, it can’t hurt to not have to decide the tricky issues surrounding the Court’s standard of review and possibility of a remand

 

Second Circuit Agrees with Third That Time to File an Innocent Spouse Petition is Jurisdictional and Not Subject to Equitable Tolling

We welcome back frequent guest blogger Carl Smith who writes about a case he has assisted the Harvard Tax Clinic in litigating before the Second Circuit.  The court found the time for filing a Tax Court petition is jurisdictional meaning that our client’s reliance on the IRS statement regarding the last date to file her petition has landed her outside of the court without a judicial remedy for review of the innocent spouse determination unless she can come up with the money to fully pay the liability which she cannot.  Keith

This post updates a post on Rubel v. Commissioner, 856 F.3d 301 (3d Cir. May 9, 2017).  In Rubel, the IRS told the taxpayer the wrong date for the end of the 90-day period in section 6015(e)(1)(A) to file a Tax Court innocent spouse petition.  The taxpayer relied on that date – mailing the petition on the last date the IRS told her.  Then, the IRS moved to dismiss her case for lack of jurisdiction as untimely.  In response, the taxpayer argued that the IRS should be estopped from making an untimeliness argument, having caused the late filing.  But, the Tax Court and, later, the Third Circuit held that the filing period is jurisdictional.  Jurisdictional periods are never subject to equitable exceptions.

Keith and I litigated Rubel.  We also litigated a factually virtually-identical case in the Second Circuit named Matuszak v. Commissioner.  On July 5, the Second Circuit reached the identical conclusion as the Third Circuit.

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The reasoning of both opinions is almost the same:  Under recent Supreme Court case law, time periods to file are no longer jurisdictional.  But, there are two exceptions:

One is that if the Supreme Court has called a time period jurisdictional in multiple past opinions issued over decades, the time period is still jurisdictional under stare decisis.  This stare decisis exception can’t apply to the innocent spouse petition filing period because the Supreme Court has never called any time period to file in the Tax Court jurisdictional or not jurisdictional.

The other exception is the “rare” case where Congress makes a “clear statement” that it wants a time period to be jurisdictional, notwithstanding the ordinary rule.  Both Rubel and Matuszak rely on the language of section 6015(e)(1)(A) as providing such a clear statement through the words “and the Tax Court shall have jurisdiction . . . if” the petition is filed within 90 days of the notice of determination’s issuance.

Keith and I think this “clear statement” analysis is a bit too pat:  The words “and the Tax Court shall have jurisdiction” appear only in a parenthetical.  Further, the “if” clause does not immediately follow that parenthetical.  We think that, based on Supreme Court case law on this clear statement exception, one can fairly argue that the parenthetical only applies to the language immediately following it – i.e., “to determine the appropriate relief available to the individual under this section” – and which precedes the “if”.  In any case, if the language is not “clear”, then the time period should be held nonjurisdictional.

Both the Rubel and Matuszak opinion also pointed out the provision in section 6015(e)(1)(B)(ii) that gives the Tax Court jurisdiction to enjoin the IRS from collection of the disputed amount while the request for relief and all judicial appeals is pending.  There is a sentence in this provision that limits the Tax Court’s injunctive jurisdiction only to cases of the “timely” filing of a Tax Court petition under section 6015(e)(1)(A).  Keith and I don’t see the relevance of this injunctive provision to the clear statement exception, and we don’t see that “timely” means not considering any extensions provided under statutes (such as sections 7502 (tolling for timely mailing), 7508 (combat zone tolling), or 7508A (disaster zone tolling)) or judicial equitable exceptions.

And as to the context of the statute, remember both (1) that the statute explicitly invokes equity (in subsections (b) and (f)) and (2) that section 6015(e) was adopted joined in the same 1998 act to a legislative overruling of United States v. Brockamp, 519 U.S. 347 (1997).  In Brockamp, the Supreme Court held that, due to the high volume of administrative refund claims and the complexity of section 6511, the time periods therein were not subject to equitable tolling under the presumption in favor of equitable tolling against the government laid down in Irwin v. Department of Veterans Affairs, 498 U.S. 89 (1990).  Congress adopted section 6511(h) to provide what it called a legislative “equitable tolling” in cases of financial disability.  Does anyone think Congress’ desire to overrule the Supreme Court as to equitable tolling in section 6511 means that the same Congress did not want equitable tolling to apply in its new equitable innocent spouse provision?

In Rubel, the Third Circuit also cited Brockamp for the proposition that Congress in 1998 would have thought all time periods in the Internal Revenue Code jurisdictional.  Keith and I pointed out to both Circuits, however, that Brockamp doesn’t even contain the word “jurisdiction” or “jurisdictional”.  About the only significant difference between the opinions of the two Circuits is that the Second Circuit declines to include this questionable characterization of Brockamp.

No other Circuit has yet considered whether the time period in section 6015(e)(1)(A) is jurisdictional or not.  Keith and I are about to litigate the identical issue in the Fourth Circuit.  Clearly, the opinions in Rubel and Matuszak are not helping us.

Taxpayer Who Detrimentally Relied on IRS Erroneous Filing Information Properly Tossed from Tax Court

Frequent guest poster Carl Smith updates us on the Third Circuit’s decision last week in Rubel v Commissioner, which considers whether IRS mistakes when it communicates deadlines to people seeking relief from joint and several liability could be subject to equitable tolling. As we have discussed in prior posts, Carl and Keith have been actively litigating this issue; Rubel is the first circuit court opinion on the issue. Les

As you may recall from my post of last September, Keith and I have appeared pro bono in several Tax Court cases presenting the issue of whether, under current non-tax Supreme Court case law on jurisdiction, the time period to file an innocent spouse petition in the Tax Court under § 6015(e) is jurisdictional or subject to equitable tolling. This is an issue of first impression in the Circuit courts, though the Tax Court has held the period jurisdictional and not subject to equitable tolling since Pollock v. Commissioner, 132 T.C. 131 (2009). Two of our cases were in the courts of appeals, Rubel v. Commissioner, Third Circuit Docket No. 16-3526, and Matuszak v. Commissioner, Second Circuit Docket No. 16-3034, where the oral arguments were held on March 16 and April 20, respectively.

In both cases, during the 90-day period to file, an IRS employee told the taxpayers a date for the end of the 90-day period that was erroneous, and the taxpayers relied on that date in filing their petitions. In both cases, the Tax Court dismissed the cases for lack of jurisdiction as having been filed late — considering the timely filing requirement to be a jurisdictional one. Jurisdictional time periods can never be equitably tolled or subject to estoppel. A common ground for equitable tolling outside the tax area is when the defendant actively misleads the plaintiff as to a filing deadline.

In Rubel v. Commissioner, the Third Circuit has just affirmed the Tax Court.

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Background

For decades, both the Tax Court and the Circuit courts have held that the Tax Court, being a court of limited jurisdiction, has only such jurisdiction as is provided by Congress and that absent compliance with the time period to file a deficiency petition, the Tax Court lacks jurisdiction (i.e., the power to act). But, more recently, in Kontrick v. Ryan, 540 U.S. 443, 454-455 (2004), the Supreme Court held that both it and lower courts had overused the word “jurisdictional”; henceforth, the Supreme Court insisted that “jurisdiction” only be used to denote subject matter and personal jurisdiction, not claims-processing rules that Congress imposes to move litigation along. The Supreme Court has since called filing deadlines “quintessential claims-processing rules”. Henderson v. Shinseki, 562 U.S. 428, 435 (2011).

The Supreme Court has recognized two exceptions to its current jurisdictional rules: First, Congress may overrule the Supreme Court’s preference by making a “clear statement” that a claims-processing rule is intended to be jurisdictional. Arbaugh v. Y & H Corp., 546 U.S. 500, 515-516 (2006). Second, if a long line of Supreme Court precedents over 100 years has called a time period jurisdictional, it will remain so under stare decisis. Bowles v. Russell, 551 U.S. 207 (2007); John R. Sand & Gravel Co, v. United States, 552 U.S. 130 (2008). Still, the Supreme Court has noted the “rarity of jurisdictional time limits” under the clear statement exception; United States v. Wong, 135 S. Ct. 1625, 1632 (2015); and stated that “Congress must do something special, beyond setting an exception-free deadline, to tag a statute of limitations as jurisdictional and so prohibit a court from tolling it.” Id.

In fact, in about a dozen cases, beginning with Kontrick, the Supreme Court has never found that any claims-processing rule is jurisdictional under the “clear statement” exception. So, for now, that exception is only a theoretical one, with no concrete examples from the Supreme Court. And the Supreme Court has never expressed any view on whether either a Tax Court or Board of Tax Appeals filing deadline is jurisdictional.

Rubel Holding

In both Rubel and Matuszak, the IRS has argued that both exceptions to the Kontrick rule apply to make the 90-day period in § 6015(e) jurisdictional and not subject to equitable tolling.

At least one bright spot (to me) of the holding in Rubel is no mention in the opinion of the stare decisis exception’s application. The IRS had argued that the Second and Third Circuits should give stare decisis deference to all the rulings from the Tax Court and Circuit courts that have held the deficiency filing period jurisdictional and more recent Tax Court opinions holding the § 6015(e) and § 6330(d)(1) (for Collection Due Process (CDP)) time periods jurisdictional. I assume the Third Circuit in Rubel steered away from discussing this because there is no Supreme Court opinion that articulates this stare decisis exception as applying to rulings of courts below the Supreme Court. See Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 173-174 (2010) (Ginsburg, J, concurring, joined by Stevens and Breyer, JJ.) (“[I]n Bowles and John R. Sand & Gravel Co. . . . we relied on longstanding decisions of this Court typing the relevant prescriptions ‘jurisdictional.’ Amicus cites well over 200 opinions that characterize § 411(a) as jurisdictional, but not one is from this Court. . . .”; emphasis in original; citations omitted). However, in doing so, the Rubel opinion differs from the recent opinions in Guralnik v. Commissioner, 146 T.C. No. 15 (2016) (holding § 6330(d)(1) time period jurisdictional in part by applying stare decisis exception to rulings of lower courts in CDP and deficiency opinions), and Tilden v. Commissioner, 846 F.3d 882, 886 (7th Cir. 2017) (holding § 6213(a) time period jurisdictional in part by applying stare decisis exception to rulings of lower courts in deficiency opinions).

Section 6015(e)(1) provides that:

In the case of an individual . . . who requests equitable relief [,(the kind requested by Ms. Rubel)] . . . the individual may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief available to the individual under this section if such petition is filed . . . not later than the close of the 90th day after the date [on which the IRS mails notice of its final determination of relief available to the individual].

The Third Circuit found two reasons for interpreting the time provision in this sentence as jurisdictional:

First, the context of the provision—how § 6015(e)(1)(A) fits within the statute as a whole—shows that it is jurisdictional. The statute’s grant of jurisdiction to the Tax Court and the time limit for activating that jurisdiction are located within the same provision. Moreover, the provision is located within the same subsection of § 6015 that sets forth other conditions that trigger or limit the Tax Court’s jurisdiction. § 6015(e)(3) (setting forth the limitations on the Tax Court’s jurisdiction). In addition, the filing period and the filing of the petition itself impacts the IRS’s ability to begin its collection efforts. More specifically, § 6015(e)(1)(B)(i) provides that no levy or collection proceeding can commence during the ninety-day window to petition for relief or, if a petition is filed in the Tax Court, until the Tax Court’s decision becomes final. This further reflects that the ninety-day period is meant to allocate when different components of the tax system have the authority to act and further supports the view that § 6015(e) is jurisdictional. Thus, the structure of § 6015 reflects Congress’s intent to set the boundaries of the Tax Court’s authority.

. . . .

Second, the Supreme Court has historically found that filing deadlines in tax statutes are jurisdictional because allowing case-specific exceptions and individualized equities could lead to unending claims and challenges and upset the IRS’s need for “finality and certainty.” Becton Dickinson & Co. v. Wolckenhauer, 215 F.3d 340, 351 (3d Cir. 2000); accord United States v. Brockamp, 519 U.S. 347, 349-54 (1997) (“Tax law . . . is not normally characterized by case-specific exceptions reflecting individualized equities.”). Rigid deadlines, such as those embodied in the tax law’s jurisdictional requirements, promote predictability of the revenue stream, which is vital to the government. See Becton Dickinson, 215 F.3d at 348 (stating that “the nature of the underlying subject matter—tax collection” underscores the need for an emphatic deadline (quoting Brockamp, 519 U.S. at 352)).

Slip op. at pp 8-11 (some citations omitted).

In a footnote, the Third Circuit provided rather cold comfort to Ms. Rubel: “While the Tax Court and this Court cannot alter a jurisdictional deadline, and the taxpayer is responsible for calculating when the deadline expires, we remind the IRS to exercise care when drafting correspondence to a taxpayer to assure it is accurate. “ Slip op. at p. 11 n.8.

Observations

Keith and I think the Rubel opinion is wrong for many reasons. We particularly think the court does not do an adequate job of distinguishing the Supreme Court opinion on which we principally relied, Sebelius v. Auburn Regional Medical Center, 133 S. Ct. 817 (2013). In Auburn, a single sentence in a subsection of the U.S. Code authorized a Medicare provider who was unhappy with the amount of reimbursement received to bring an action before a board “if” three conditions were met, one of which was meeting a 180-day filing deadline. There was no other provision in the U.S. Code that authorized the board to hold such hearings, so the sentence, in effect, created an implicit jurisdictional grant. The Supreme Court did not contradict the amicus, who argued that the first two conditions of the sentence were jurisdictional in nature. But, the Supreme Court took issue with the amicus’ argument that this made the filing period in the sentence also jurisdictional, noting that it wrote in Gonzalez v. Thaler, 565 U.S. 134, 147 (2012), that “[m]ere proximity will not turn a rule that speaks in nonjurisdictional terms into a jurisdictional hurdle.” The Rubel court distinguished Auburn by saying that, by contrast, § 6015(e) includes an explicit, not implicit, jurisdictional grant. Slip op. at p. 9-10 n.7. But, Keith and I don’t see why that should make a big difference, since in both statutes, the power of the court or board is authorized by the same sentence that contains the jurisdictional grant (implicit or explicit) and is followed by the condition “if” a time period is met. We don’t think the Supreme Court would want to make only this slight difference of the additional use of the word “jurisdiction” somewhere before the time period enough to satisfy the clear statement exception.

Moreover, the Supreme Court has also emphasized that in interpreting a statute’s time period as jurisdictional, the context of the entire action should be considered. In Henderson v. Shinseki, supra, the Court found the time period for veterans to file an appeal of a denial of benefits in the Court of Appeals for Veterans Claims nonjurisdictional, in part, because of the long period Congress gave for veterans to raise their claims and the solicitous nature of Congress toward veterans. Taxpayers who request innocent spouse relief can do so at any time during the 10-year period in which collection may be made under § 6502. And Congress has made equity a major reason for the granting of innocent spouse relief. Surely, it seems odd that equitable tolling would not be allowed in an area of the Tax Code providing unusual equitable relief.

The Rubel opinion’s citation to Becton Dickinson and Brockamp for the proposition that all Tax Code time periods are jurisdictional is also problematic. Brockamp never said that. Indeed, the words “jurisdiction” and “jurisdictional” do not even appear in the Brockamp opinion. That opinion merely held that the period to file a refund claim in § 6511(a) is not subject to equitable tolling under the presumption in favor of equitable tolling of nonjurisdictional statutes of limitations laid out in Irwin v. Dept. of Veterans Affairs, 498 U.S. 89 (1990), because of the many complicated rules already set out in the statute and the administrative problems that would ensue as to the then nearly 100 million refund returns filed annually, which would all have to be considered eligible for equitable tolling when filed late. There is no similar administrative problem with Tax Court innocent spouse suits because there appear to be only about 500 filed annually. And I checked that in the last 12 months, only 15 such suits have been dismissed for lack of jurisdictional as untimely (either late or premature), and only four such suits (including Rubel and Matuszak) presented any fact pattern approaching one where the Tax Court might have to consider equitable tolling.

The Rubel court also did not consider the context of the enactment of § 6015. It seems wrong to assume that Congress would want the time period not to be subject to equitable tolling, since the equitable provision, § 6015, was enacted by Pub. L. 105-206, § 3201, paired with § 3202, under the heading “Relief for Innocent Spouses and for Taxpayers Unable to Manage Their Financial Affairs Due to Disabilities” in H.R. Conf. Rept. 105-599 at 249. Section 3202 amended I.R.C. § 6511 to add a new subjection (h) to legislatively overrule the result in Brockamp as to financially disabled taxpayers. It is implausible that Congress would want the refund claim statute of limitations to be subject to equitable tolling yet want the time period in the related new equitable innocent spouse statute not to be subject to equitable tolling.

Finally, Becton Dickinson in 2000 held that the 9-month time period in § 6532(c) in which to bring a wrongful levy suit in district court is jurisdictional and not subject to equitable tolling. But, recently, the Ninth Circuit completely disagreed with that holding in Volpicelli v. United States, 777 F.3d 1042 (9th Cir. 2015), holding that, under more recent Supreme Court case law, the time period is not jurisdictional and is subject to equitable tolling under the Irwin presumption. The Third Circuit should have read Volpicelli (which we cited) and realized that Becton Dickinson can’t stand up under current Supreme Court case law. Indeed, Volpicelli wrote:

The [Supreme] Court may in time decide that Congress did not intend equitable tolling to be available with respect to any tax-related statute of limitations. But that’s not what the Court held in Brockamp. It instead engaged in a statute-specific analysis of the factors that indicated Congress did not want equitable tolling to be available under § 6511. The Court later made clear in Holland [v. Florida] that the “‘underlying subject matter’” of § 6511—tax law—was only one of those factors. 560 U.S. at 646, 130 S. Ct. 2549 (quoting Brockamp, 519 U.S. at 352).   As we have explained, the other factors on which the Court relied are not a close enough fit with § 6532(c) to render Brockamp controlling here.

777 F.3d at 1046.

Absent generating a Circuit split, though, Keith and I are unlikely to seek Supreme Court review of Rubel.

If we lose everywhere, we will probably urge a legislative fix.

Two Appeals Court Innocent Spouse Test Cases on Equitable Tolling

We welcome back frequent guest blogger Carl Smith.  Today Carl writes about some cases he and I are pursuing in the circuit courts.  It may be some time before this issue is resolved and we continue to look for cases with the right facts that will best allow us to pursue this argument.  Keith

Earlier this year, I reported here that Keith and I had become pro bono counsel of record in a Tax Court case, Matuszak v. Commissioner, Docket No. 471-15, where the Tax Court had, in a December 29, 2015, unpublished order dismissed an untimely-filed innocent spouse petition under § 6015(e) for lack of jurisdiction.  Keith and I believe that, under recent non-tax Supreme Court opinions, the time periods in which to file both innocent spouse and Collection Due Process (CDP) petitions in the Tax Court are not jurisdictional and are subject to equitable tolling.  Despite the Tax Court’s recent resounding, unanimous rejection of our arguments as regards the CDP time period to file in Guralnik v. Commissioner, 145 T.C. No. 15 (June 2, 2016), we are not convinced by the Tax Court’s opinion.  Respectfully, we think the Tax Court got this part of its Guralnik opinion wrong – and not merely for the reasons stated by Bryan Camp in his post of June 6, 2016.

This post is to update readers on what Keith and I are doing to continue to press our arguments.  Our arguments are questions of first impression in all of the Circuit Courts.  In a nutshell, on August 30, 2016, we filed an appeal in the Matuszak case to the Second Circuit.  And on that same day, we filed an appeal in another case on all fours with Matuszak, Rubel v. Commissioner, Docket No. 9183-16 (order of dismissal dated July 11, 2016), to the Third Circuit.

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We don’t want to litigate the cases in this post, but suffice it to say that the Guralnik opinion, we feel, erred in not directly discussing in detail the Supreme Court’s opinion in Sebelius v. Auburn Regional Medical Center, 133 S. Ct. 817 (2013).  There, the Supreme Court found a filing period in an administrative body not jurisdictional, despite the time period’s being contained within the very statutory sentence that gave the body jurisdiction to hear certain Medicare reimbursement disputes.  We think the statutory sentence at issue in Auburn is comparable to the sentences in §§ 6015(e)(1)(A) and 6330(d)(1) that both give the Tax Court jurisdiction and include time limits in which to file petitions.  As the Ninth Circuit said of 15 U.S.C. § 1692k (which authorizes a suit for monetary damages under the Fair Debt Collection Practices Act):

[W]e attach no particular significance to the fact that this statute of limitations appears in the same sentence in which the jurisdiction provision appears. Nothing in the structure of that sentence tells us that the time limitation was also a jurisdictional limitation. In fact, a more natural reading is that parties may bring their action in any “court of competent jurisdiction” and may do so “within one year.” 15 U.S.C. § 1692k(d). It is fair to say that parties are faced with a “when” issue and a “what court” issue for every action, but the former does not usually control or affect the latter.

Magnum v. Action Collection Services, Inc., 575 F.3d 935, 940 (9th Cir. 2009).

We think the Tax Court in Guralnik also erred in justifying its ruling that the CDP petition filing period was jurisdictional on the long-standing treatment of the deficiency petition time periods to file as jurisdictional.  We don’t take issue with the long-standing, but not Supreme Court, rulings of the Tax Court and appellate courts that the § 6123(a) time periods are jurisdictional.  But, we also don’t think every grant of Tax Court jurisdiction necessarily inherits the same jurisdictional status of the § 6213(a) time periods.  So far, the Supreme Court has not allowed an exemption to its new rules that time periods to file are almost never jurisdictional on the basis of stare decisis to lower court opinions.  The exceptions in two cases to the current rules were made on stare decisis grounds only to over 100 years of Supreme Court opinions previously holding the particular time period at issue jurisdictional.  See John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008); Bowles v. Russell, 551 U.S. 205 (2007).

Matuszak

The procedural facts of Matuszak are fairly simple.  And, though we don’t discuss the merits of each case, suffice it to say that Keith and I are very optimistic about each case if the Tax Court ever gets to the merits.

Ms. Matuszak filed joint returns with her husband for 2007.  When there later was a deficiency for that year, all of which was attributable to her husband, Ms. Matuszak filed a Form 8857 seeking section 6015 relief.

On October 7, 2014, the IRS sent Ms. Matuszak a notice of determination.  Notices of determination for CDP and innocent spouse purposes, unlike notices of deficiency, do not set out on the notice the last date to file a Tax Court petition.  (The requirement for the IRS to set out a last date to file was adopted by Congress in 1998, but only applies to notices of deficiency, where taxpayers are entitled to rely on any erroneous date set forth on the notice.)  On the day that the Appeals Officer (AO) mailed out the notice, the AO called Ms. Matuszak to warn her that the notice had just been mailed.  Concerned not to miss the 90-day Tax Court filing deadline, Ms. Matuszak asked the AO what would be the last date to file a Tax Court petition and was told:   January 7, 2015.  In fact, the 90 day period lasted only until January 5, 2015.  When Ms. Matuszak received the notice of determination, she called the AO, who repeated the erroneous date as the last date to file.  Ms. Matuszak took and kept contemporaneous notes of both phone calls.  In reliance on what the AO told her, Ms. Matuszak, acting pro se, sent her petition to the Tax Court on January 6, 2015, which she thought was a day early.  In fact, it was a day late.

On December 29, 2015, Judge Marvel dismissed the case for lack of jurisdiction on the grounds that the petition was filed late and this was a jurisdictional defect that could not be excused by any possible misleading information given by the AO.  In early January, Keith and I entered our appearances in the case and filed a timely motion to vacate, arguing, for the first time, that, under recent non-tax Supreme Court case law, the filing period under section 6015(e)(1)(A) is not jurisdictional and is subject to equitable tolling – the same arguments we had made in an earlier amicus brief we had filed in Guralnik relating to the CDP petition filing period.  One area where equitable tolling commonly applies is where the defendant misled the plaintiff as to the correct filing date.  Irwin v. Dept. of Veterans Affairs, 498 U.S. 89, 96 (1990).

On July 29, 2016, now Chief Judge Marvel issued an unpublished order denying the motion to vacate, citing the Tax Court’s reasoning in Guralnik on these issues.  On August 30, 2016, Keith and I mailed a notice of appeal to the Tax Court, commencing an appeal in Matuszak to the Second Circuit.  The Second Circuit docket number is 16-3034.

Rubel

Ms. Rubel’s case is virtually the same as Ms. Matuszak’s, except that Ms. Rubel is even better situated to argue for equitable tolling, since she has erroneous filing date advice in writing from the IRS.

Ms. Rubel filed joint returns with her then-husband for 2005-2008.  The IRS is still seeking to collect for these years mostly liabilities attributable to her now-ex-husband.  Ms. Rubel filed a Form 8857 seeking relief from her ex-husband’s share of the liabilities as set forth in a 2009 divorce decree.

In early January of this year, the IRS sent four separate notices of determination (three on January 4 and one January 13) denying Ms. Rubel any relief under section 6015.  After receiving these letters, Ms. Rubel continued to send material to the IRS to try to persuade the IRS to change its mind.  On March 3, 2016, the IRS mailed Ms. Rubel a letter stating that it would not reconsider its decision as to any of the four taxable years.  The letter included the following sentences:  “Please be advised that this correspondence doesn’t extend the time to file a petition with the U.S. Tax Court.  Your time to petition the U.S. Tax Court began to run when we issued our final determination on Jan. 04, 2016 and will end on Apr. 19, 2016.”  In reliance on this erroneous date, Ms. Rubel, acting pro se, sent a petition to the Tax Court on April 19, 2016.  The petition was sent at least a week late, since 90 days from the dates of the notices of determination was either April 4, 2016 or April 12, 2016.

In the Tax Court, Ms. Rubel hired counsel to respond to an IRS motion to dismiss for lack of jurisdiction.  He argued both that the March 3 letter was a new notice of determination, giving a new 90-day period to file and that the IRS was estopped from complaining about the late filing by the wrong date that the IRS had stated in the March 3 letter.

On July 11, 2016, Chief Judge Marvel issued an unpublished order dismissing the case.  The judge held that the time period in which to file was jurisdictional and not subject to equitable estoppel, even if the IRS letter showing the April 19 filing date was misleading.  The judge also noted that in Barnes v. Commissioner, 130 T.C. 248 (2008), it had held that a letter denying reconsideration of an innocent spouse determination was not a new notice of determination that started a new 90-day period running.  The court rejected Ms. Rubel’s counsel’s attempts to distinguish Barnes.

Keith and I entered pro bono appearances in Ms. Rubel’s case (replacing her prior lawyer), and on August 30, 2016, we mailed a notice of appeal to the Tax Court, commencing an appeal in Rubel to the Third Circuit.  In the notice, we did not make the argument rejected in Barnes, but we did argue that, under current non-tax Supreme Court case law, the 90-day filing period was not jurisdictional and was subject to equitable tolling and equitable estoppel.  The Third Circuit docket number is 16-3526.

Observations

Because the Third Circuit has less of a backlog, our hunch is that the Third Circuit will be the first to decide the issues we are raising.

But, anticipating Chief Judge Marvel’s July 29 ruling in Matuszak, earlier this year, Keith and I, acting as counsel to Ms. Matuszak, filed a motion for leave to file an amicus brief in a Ninth Circuit case named Duggan v. Commissioner, Docket No. 15-73819.  I wrote a post on the Duggan case.  In Duggan, a pro se taxpayer argued that he was misled by the language of a CDP notice of determination into mailing his Tax Court petition a day late.  In our Duggan proposed amicus brief (a copy of which we attached to the motion), we raised the same arguments that we had raised in our Guralnik amicus brief – that the 30-day period in which to file a CDP petition is not jurisdictional and is subject to equitable tolling under current non-tax Supreme Court case law.

The parties in Duggan have filed their briefs, with the taxpayer’s reply brief having been filed in late June.  Earlier in June, the government brought to the Ninth Circuit’s attention the Tax Court’s opinion in Guralnik.  Mr. Duggan’s reply brief, we think, adequately responds to the Tax Court’s holding in Guralnik.  Although our motion to file an amicus brief in Duggan is unopposed, the panel hearing the case has not yet ruled on the motion.  And, the government has asked that it be allowed to respond to our brief if the motion is granted.  Because the Ninth Circuit is such a slow, backlogged court, it would not surprise me if it was the last of the three circuit courts to rule on these issues.

I know that some practitioners think Keith and I are on a wild goose chase here – especially after our unanimous loss in Guralnik.  We have warned our clients that this is probably an uphill battle in the appeals courts.  But, there is little downside to the clients here, as neither Ms. Matuszak nor Ms. Rubel wants to or can afford to fully pay the liabilities and sue for refund in district court.  Keith and I don’t think the appeals courts will be as concerned as the Tax Court was about the Tax Court’s prior precedents holding the time period in which to file deficiency petitions to be jurisdictional.  Appellate judges have a lot of experience already in applying the new non-tax Supreme Court case law on jurisdiction and equitable tolling to various filing deadlines.  And note that, last year, the Ninth Circuit was persuaded in Volpicelli v. United States, 777 F.3d 1042, to hold that the 9-month period in section 6532(c) in which to file a wrongful levy suit is not jurisdictional and is subject to equitable tolling, applying the recent non-tax Supreme Court case law.  For my post on Volpicelli, see here.  It is time for someone to bring these issues regarding the CDP and innocent spouse filing deadlines up to appeals courts.  The issues Keith and I are raising are far from frivolous.  If we lose, these cases may prompt Congress to amend the statutes to require the IRS to place last dates to file in CDP and innocent spouse notices of determination and allow taxpayers to rely on any erroneous dates set forth.

Finally, it is unclear that Guarlnik will ever be appealed.  If there were an appeal, it would go to the Second Circuit.  The Tax Court has set the Guralnik case for trial on the merits on a calendar commencing November 28.  Stay tuned.