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.

IRS Accepts Guralnik Holding in Another Case Where the Clerk’s Office Was Closed

We welcome back frequent guest blogger Carl Smith.  Carl writes today about another case involving timely filing with the Tax Court.  He explains why the Tax Court will likely find the case timely based on its new precedent and points out the apparent IRS acceptance of the new precedent.  Carl states that he would not argue for equitable tolling in a case like this because it is a deficiency case and because the Court gave prior notice of the closing.  I agree with Carl on the issue that it is a deficiency case.  While acknowledging that statements by a Court are not a usual basis for equitable tolling, the statement issued by the Tax Court concerning its closing could lead pro se petitioners and perhaps practitioners to believe that special days the Tax Court closes that are not government holidays but which it says will be treated as such for purposes of computing time under Rule 25 give a petitioner extra time to file their Tax Court petitions.  Keith

One of the big questions after the IRS on June 2 lost the Tax Court’s opinion in Guralnik v. Commissioner, 145 T.C. No. 15, unanimously en banc was whether the IRS would pursue the arguments it made in that case in other Tax Court cases and eventually try to seek appellate court review of the Tax Court’s holding.  After all, the IRS’ cumulative motion papers in Guralnik exceeded 100 pages and pointed out that several previous unpublished orders of the court involving dates on which the Tax Court Clerk’s Office was closed had come out the other way.  In its Guralnik filings, the IRS was pretty steamed about a potential loss.

In Guralnik, as Bryan Camp blogged here, the Tax Court held that when its Clerk’s Office was closed (there, because of a snowstorm), the last date to file was moved to the next business day when the office was open.  The Tax Court imported this rule from the FRCP because both the Internal Revenue Code and Tax Court Rule 25 did not address non-holiday Clerk’s Office closing days.

An August 18 filing in the Tax Court in Parkinson v. Commissioner, Docket No. 296-15 indicates that the IRS has decided to throw in the towel and simply live with the Tax Court’s Guralnik holding.

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The facts of Parkinson are as follows:  The IRS mailed Mr. Parkinson a notice of deficiency on October 3, 2014 for his 2005, 2007, and 2008 income taxes.  Ninety days from that date would have been Thursday, January 1, 2015, which, of course, was a holiday, New Year’s Day.  Thus, section 7503 would have made the last day to file Friday, January 2, 2015 (the next business day after a Saturday, Sunday, or legal holiday in the District of Columbia).

Rather than simply put his Tax Court petition in the U.S. mails (which would have completely avoided any problem), on December 31, 2014, Mr. Parkinson, acting pro se, sent his petition to the Tax Court by FedEx First Overnight service.  That service – the same one used by Mr. Guralnik – was not, at the time, a designated service under section 7502(f) that got the benefit of the timely-mailing-is-timely-filing rules of section 7502(a) applicable to use of the U.S. mails.  (But, since May 6, 2015, FedEx First Overnight is now a designated service.)

FedEx would have delivered the petition to the Tax Court on January 2, but for the fact that the Clerk’s Office was closed.  As often happens at Thanksgiving, Christmas, and New Year, the Tax Court closes to make 4-day weekends.  Indeed, on December 10, the Tax Court had issued notice to the public that the Clerk’s Office would be closed on January 2, 2015.  The notice read as follows:

The United States Tax Court will be closed on Friday, December 26, 2014, and Friday, January 2, 2015.

For purposes of computation of time under Rule 25, Tax Court Rules of Practice and Procedure, December 26, 2014, and January 2, 2015, shall each be treated in the same manner as a legal holiday. See Rule 25 (a) (2) ånd (b), Tax Court Rules of Practice and Procedure.

Actually, the second paragraph of this notice was wrong, since Tax Court Rule 25 doesn’t contain a provision indicating that any date that the Clerk’s Office is closed is treated as a legal holiday for purposes of section 7503.  That is one of the issues that was litigated in Guralnik, where the court held that a date that the Clerk’s Office was closed for a snowstorm was not a legal holiday for purposes of section 7503.

FedEx delivered Mr. Parkinson’s petition to the Tax Court on Monday, January 5, 2015.

The IRS initially raised no question about the timelines of the petition’s filing.  But, on July 7, 2015, the Tax Court itself raised the issue.  In an order issued that date, the Court noted the possible late filing and ordered the parties to show cause why the petition should not be dismissed for lack of jurisdiction on the grounds of untimeliness.  Although I have not seen it, I believe that the IRS, in its response filed July 28, 2015, argued what it was then arguing in Guralnik – that a day that the Clerk’s Office closed was not to be treated as a holiday for purposes of section 7503 unless it was one of the stated holidays listed in Tax Court Rule 25(b).

On May 28, 2015, Chief Judge Thornton issued an order assigning the Guralnik case to Special Trial Judge Armen to decide the motion to dismiss in that case.  Recognizing that Parkinson presented possibly the same issue, the Chief Judge apparently just stuck the Parkinson case in a drawer to await the ruling in Guralnik – a ruling eventually written by Judge Lauber.

The Guralnik opinion was issued on June 2, 2016.  It held that a day that the Tax Court Clerk’s Office was closed that was not a legal holiday in the District of Columbia should still not be treated as the last day to file.  Rather, importing a rule from the FRCP, the Tax Court held that if the last day to file had otherwise fallen on such a day, the last day to file would be moved to the next business day when the Clerk’s Office was open.

On August 1, 2016, now Chief Judge Marvel issued an order in Parkinson directing each party to “set forth and discuss fully that party’s position as to the possible application, if any, to this case of Guralnik v. Commissioner.”

On August 18, 2016, the IRS filed a response stating, in part:  “The petition in this case was timely filed. . . .  It is respondent’s position that this case should not be dismissed for lack of jurisdiction.”  This is the first indication that the IRS is not going to fight the Guralnik holding in the Tax Court or any appellate court.

The Tax Court has not yet issued its ruling in Parkinson, but the court is likely to rule that it has jurisdiction, based on its holding in Guralnik, which would have pushed the last date to file all the way to Monday, January 5, 2016, since the Clerk’s Office was closed on Friday, January 2, 2015.

Observations 

Parkinson is a deficiency case.  Guralnik was a Collection Due Process (CDP) case.  But the reasoning of the Tax Court in Guralnik did not depend upon which jurisdiction underlay the case.

Nor did the Guralnik holding turn on whether the Clerk’s Office closure was something that was unexpected (e.g., from a snowstorm) or long-anticipated (e.g., a closing to make a 4-day weekend, announced 3 weeks in advance).  In some ways, practitioners may see Parkinson as an extension of Guralnik, since many might have expected that an unanticipated snow day should get more compassion than a long-foreseeable Clerk’s Office closing day.

The instinct of greater compassion for a snow day is one based on equity.  Keith and I had made an argument in Guralnik (as amicus) that the 30-day period in section 6330(d)(1) in which to file a CDP petition is not jurisdictional and is subject to equitable tolling in an appropriate case, such as the unexpected snow day situation involved there.  My personal view is that equitable tolling would have no application in Parkinson, since the Clerk’s Office closing in Parkinson should have been taken into account by any petitioner.  It was not an unexpected circumstance beyond the petitioner’s control (one of the common grounds for equitable tolling).  Further, Keith and I don’t believe that the 90-day period to file a deficiency petition is subject to equitable tolling.  We make a distinction between the two jurisdictions.  There is a clearer statement that the section 6213(a) time period is jurisdictional.  For one thing, the legislative history of an amendment to section 6213(a) in 1998 called the time period therein “jurisdictional”.  In contrast, Congress in December 2015 called the CDP and section 6015(e)(1)(A) time periods to file “periods of limitations”.  Equitable tolling typically applies to periods of limitations, but cannot apply to a filing limit that is jurisdictional.

I’ll have a lot more to say about the argument that Keith and I made in Guralnik in a later post.  Suffice it to say that, respectfully, like Bryan Camp, Keith and I are not persuaded by the portion of the Tax Court’s opinion there holding that under current Supreme Court case law, the 30-day period in which to file a CDP petition is jurisdictional and not subject to equitable tolling.  We have some appellate test cases in the works both as to the CDP filing period and the section 6015 filing period.  Those will be discussed in a post coming out shortly.

Guralnik – Equity Through Court Rules not Court Rulings

Today we welcome back guest blogger Bryan Camp. Professor Camp, my former colleague in the General Litigation Division (aka collection division) of Chief Counsel, IRS now teaches at Texas Tech. Because Bryan teaches a wide range of subjects including administrative law and civil procedure in addition to tax, he has a perspective on the Guralnik case that someone like me, who is grounded primarily in tax, does not have.  

It is weird to receive congratulations about a case in which the Court rejected your argument 16-0. I had never had the pleasure of losing by that margin before and hope to not have that pleasure again. It gives me a better perspective of how all of the Republican Presidential wannabes felt when the voters rejected them though even their voting margins were not as bad as mine. Without going too deeply into an analogy I am ill-equipped to carry out, the case reminds me a bit of the superpower movies of the past 10-15 years. The characters frequently have misgivings about the powers they find they have and struggle to cope with their special powers. The Harvard tax clinic argued that the Tax Court has powers it has not previously exercised. The Court emphatically rejected that idea. Yet, it found it had another power it had not previously exercised and which it had rejected on more than one occasion. I might argue that the power it found it had is a more exceptional power than the one the Harvard tax clinic suggested since the Supreme Court has previously limited the power of court Rules to expand jurisdictional limits but I have had my time to argue and now it is Professor Camp’s turn to explain. Keith

Congratulations to Keith and Carl for helping the Tax Court find a way to get to the right decision in Guralnik v. CIR, 145 T.C. No. 15 (June 2, 2016). Yeah, they struck out on the home run swing, but Mr. Guralnik still managed to eke out a win, in part I think because Tax Court (mistakenly) thought the step it took was not nearly as large as what Keith and Carl urged. I am grateful to the Procedurally Taxing gang for allowing me to write my thoughts about this very interesting 37 page Tax Court opinion.

The judge I clerked for in the Court of Federal Claims used to say “where equity lies, the law will follow.” Of course, he usually said that while strictly construing jurisdictional requirements to deny the petitioner relief. So he might as well have added the caveat: “but the law has not yet followed in this case.”   Like the Court of Federal Claims, the Tax Court is very, very cautious about not overstepping its Congressionally-given bounds. In Guralnik, however, the Tax Court at least found some “law” to follow “equity” and so came to a good result. But one has to be discouraged by the convoluted path the Court took, a path forced upon it, in part, by the Supreme Court.

I have three comments about this case that may be of interest to readers. First, the Court’s opinion relies on what I believe is a mischievous distinction between “claim processing rules” and “jurisdictional rules.” Second, the Court could have done a better job applying that distinction. Third, by applying FRCP 6(a), the Court actually may be contradicting its own rationale for not applying equitable tolling, because FRCP 6(a) is best viewed as itself nothing more than an equitable tolling rule, albeit one put into the “form” of a rule (hence the law following equity idea). While I think the Court was right to follow the FRCP, I wish it had given a better reason than it did.

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For those unfamiliar with the case, here are the facts reduced to their essentials: taxpayer (TP) was trying to file a collection due process (CDP) petition. TP tried to deliver the petition on the last day of the filing period, but was unable make delivery because the Tax Court was officially closed that day due to a snowstorm. So TP had to file the next day. The question was whether the petition was untimely.

The TP, aided by Keith and Carl’s amicus brief, urged the Tax Court to find that these circumstances equitably tolled the period for filing a timely petition. The Tax Court rejected the argument because, it said, the statute granting the Court subject matter jurisdiction (SMJ) over a CDP petition made the timely filing of the CDP petition part of the jurisdictional grant. The Tax Court reasoned that while it could apply equitable tolling to what it called “claim-processing rules” it could “not apply equitable tolling to a jurisdictional filing requirement.” The Court cited to Sebelius v. Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824 (2014) for that proposition.

TP won his backstop position, however. Federal Rule of Civil Procedure 6(a)(3)(A) says that “Unless the court orders otherwise, if the clerk’s office is inaccessible…on the last day for filing…then the time for filing is extended to the first accessible day that is not a Saturday, Sunday, or legal holiday.”   The Tax Court had no difficulty in applying FRCP 6(a)(3)(A) to save the taxpayer, reasoning that “procedural rules for computing time are fully applicable where the time period in question embodies a jurisdictional requirement. Rather than expanding a court’s jurisdiction, Civil Rule 6 simply supplies the tools for counting days to determine the precise due date.” (Internal quotes and cites omitted).

  1. The Silly Distinction between “Claim Processing” and “Jurisdictional” Timing Rules

The notion that courts have equitable powers to modify ordinary “claim processing” rules but have no ability to modify “jurisdictional” timing rules is a nefarious formalist distinction. This is not the Tax Court’s doing. The Court here is just obeying the distinction created by the Supreme Court in cases such as Irwin v. Department of Veterans Affairs. 498 U.S. 89 (1990). As that Court noted in Auburn Reg’l Med. Ctr., 133 S. Ct. 817 at 824, it has “tried in recent cases to bring some discipline to the use” of the term “jurisdiction” which it has called a “word of many, too many, meanings.” (Internal quotation marks and citations omitted).

I have two reasons for disliking the distinction. I think briefly stating them may help future courts (or to litigants educating courts!) who are called upon to make the distinction.

First, the word “jurisdiction” just means “power.” It is true there are many types of jurisdiction that one considers, but, for this type of case, we are concerned with the problem faced by all federal courts, whether established under Article I or III: their power over the substance of the lawsuit comes from statutes. We call that Subject Matter Jurisdiction (SMJ).

I do not believe rules about filing deadlines are usually really rules about power, such as to say “oh, you HAD power, but after this deadline passes, you no longer have power, nanny nanny boo boo.” All deadlines are “claim processing rules” in the sense that they speak to a party’s ability to invoke the power, to open the courthouse door, so to speak. They do not speak to a court’s power over a subject per se. Consider a statute that says “A party wishing to invoke the court’s subject matter powers must dance the Macarena for five minutes in the street before the party may open the courthouse door.” Determining whether a party actually performs the dance or leaves out a step is not a question about the court’s power over the subject of the lawsuit but is only a determination about whether the party has earned the right to come in. Determining whether a party has taken the proper action to have filed a timely petition is like evaluating whether the dance was properly done.

To be sure, there is a long-standing, never-ending, permanent, floating crap-game of arguments that one throws up to debate whether timing provisions are “substantive” or “procedural.” First year law students study one (and only one) dimension of this debate in the context of studying the Erie Doctrine. And when one looks carefully at the Erie case law, one finds that courts (and the Supreme Court) are careful to answer the question “is it substantive or procedural” with “why do you want to know.” So, while timing rules might be substantive for some purposes, that does not make them per se part and parcel of a jurisdictional grant.

The second reason I dislike the distinction is because it ignores the fundamentals of separation of powers. Every branch of government (legislative, executive, judicial) has the power to determine its own powers, subject to the allowed corrections from the other branches. So there is really no reason for courts not to apply equitable powers to modify even “jurisdictional” provisions. If the courts get it wrong, the legislatures can always come back and codify corrections. Maintaining the distinction between “claim processing rules” and “jurisdictional rules” just seems to create unneeded problems and litigation.

2. Applying the Silly Distinction to Section 6330.

Recognizing that the Tax Court was stuck with the distinction, I nonetheless wished it had given more attention to analyzing the particular statute that gives it SMJ over CDP claims. Section 6330(d) provides that the TP “may, within 30 days of a determination under this section, appeal such determination to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter).” (Emphasis supplied, for reasons you will shortly read.)

In the Guralnik opinion, the Tax Court focuses on the fact that the parenthetical occurs in the same sentence as the SMJ grant. That’s a strange reason to find the timing rule jurisdictional. There are two better reasons to find otherwise. First, the use of the word “and” is, to me, a HUGE clue that the SMJ grant has nothing to do with the 30 day period. Grammatically, the connector “and” denotes the start of a new independent clause, a clause that can stand on its own as a separate sentence. I am all the time telling my students to write shorter sentences. That often means substituting a period for an “and.” So, functionally, the clause after the “and” in 6330(d) is a different sentence.

Second, the statute says the Tax Court has SMJ “with respect to such matters.” If you want to find a reference in the same subsection, the word “such” most naturally references the phrase “determination under this section” and not the clause “within 30 days.” However, I think the better reading is to read section 6330 as a whole. In the immediately preceding subsection, 6330(c) lists all the “Matters Considered at Hearing.” So it makes sense to me that 6330(c) tells the IRS what matters it must consider at the CDP hearing and then 6330(d) tells the Tax Court it has SMJ over “such matters.” I think THAT’s the reference as to what the Tax Court has power to review.   Again, SMJ is just the power Congress gives a court over the subject of a lawsuit. Here, the subject is the review of the CDP hearing and the “matters” contained in the CDP hearing are listed in 6330(c).

3. Is The Tax Court’s Reason for Applying FRCP 6 Consistent With Its Reason for Refusing to Apply Equitable Tolling?

Once the Tax Court concludes that the 30-day requirements is not just a “claim-processing rule” but is jurisdiction, it rejects the Taxpayer’s equitable tolling argument because, it says, “A court may not apply equitable tolling to a jurisdictional filing requirement.” The Court never explains why it cannot apply equitable tolling to a jurisdictional filing requirement but instead just cites to the Supreme Court’s opinion in Sebelius v.Auburn Reg’l Med. Ctr., 133 S. Ct. 817 (2914) and to its own opinion in Pollock v. CIR, 132 T.C. 21 (2009). When one reads the cited opinions, however, and then reads the opinions cited in the cited opinions (!) one sees two basic concerns courts have articulated in explaining their reluctance to use equitable powers to jurisdictional filing requirements. First is a concern for finality. Here is how the 11th Cir. has explained it:

The principal reason underlying decisions which hold that statutory periods of limitation are jurisdictional… is to set a definite point of time when litigation shall be at an end, unless within that time the prescribed application has been made; and if it has not, to advise prospective appellees that they are freed of the appellant’s demands. In the specific context of direct appeals from decisions of administrative agencies, the time limitation serves the important purpose of imparting finality into the administrative process, thereby conserving administrative resources and protecting the reliance interests of regulatees who conform their conduct to the regulations.

Brown v. Dir., Office of Workers’ Comp. Programs, 864 F.2d 120, 124 (11th Cir.1989) (citations and internal quote marks omitted).

The second concern is about the proper separation of powers. Courts might abuse their equitable tolling powers and thereby screw up a carefully calibrated statutory scheme. That’s the thrust of the Supreme Court’s concern in United States v. Brockamp, 519 U.S. 347 (1997), when it refused to allow equitable tolling to the section 6511 limitations on refund claims and suits.

Section 6511’s detail, its technical language, the iteration of the limitations in both procedural and substantive forms, and the explicit listing of exceptions, taken together, indicate to us that Congress did not intend courts to read other unmentioned, open-ended, “equitable” exceptions into the statute that it wrote. There are no counter-indications. Tax law, after all, is not normally characterized by case-specific exceptions reflecting individualized equities.

The nature of the underlying subject matter—tax collection—underscores the linguistic point. The IRS processes more than 200 million tax returns each year. It issues more than 90 million refunds. To read an “equitable tolling” exception into § 6511 could create serious administrative problems by forcing the IRS to respond to, and perhaps litigate, large numbers of late claims, accompanied by requests for “equitable tolling” which, upon close inspection, might turn out to lack sufficient equitable justification. See H.R. Conf. Rep. No. 356, 69th Cong., 1st Sess., 41 (1926) (deleting provision excusing tax deficiencies in the estates of insane or deceased individuals because of difficulties involved in defining incompetence). The nature and potential magnitude of the administrative problem suggest that Congress decided to pay the price of occasional unfairness in individual cases (penalizing a taxpayer whose claim is unavoidably delayed) in order to maintain a more workable tax enforcement system. At the least it tells us that Congress would likely have wanted to decide explicitly whether, or just where and when, to expand the statute’s limitations periods, rather than delegate to the courts a generalized power to do so wherever a court concludes that equity so requires.

United States v. Brockamp, 519 U.S. at 352 (citations and internal quote marks omitted).

Tax exceptionalism alert!! Note the way the Supreme Court acknowledges how “the nature of the underlying subject matter” is an important part of its analysis. That’s tax exceptionalism, folks.

It would have been helpful for the Tax Court to explicitly acknowledge these two traditional concerns underlying the historic refusal of courts to apply equitable tolling to jurisdictional timing periods because the Tax Court then goes on to find a substitute for equitable tolling in FRCP Rule 6.

FRCP Rule 6, however, is just a rule that explicitly permits federal courts to equitably toll a filing limitation when the place of filing is “inaccessible.” My claim that this is an equitable rule rests on two observations. First, note how FRCP 6(a)(3)(A) starts: “Unless the court orders otherwise…” In order words, the courts have discretion to overrule the rule. Why would they do that? Why, for “good cause.” That’s all equitable tolling is, a determination that for a good reason or good cause a seemingly late-filed document will be deemed to have been filed within the applicable period. FRCP just reverses the presumption, but it still leaves the determination up to the court. If there is a good reason to NOT extend the time for filing despite the inaccessibility of the court, the court may “order otherwise.” So in this case, for example, if Mr. Guralnik’s Fed Ex delivery person had been scheduled to deliver the package late, the fact that the Court was inaccessible the day before scheduled delivery would probably be a good reason to “order otherwise.”

Second, note that the FRCP applies whenever the clerk’s office is “inaccessible.” What does that word mean? Does that mean physically inaccessible? Some courts think so. U.S. Leather, Inc. v. H & W Partnership, 60 F.3d 222, 225, (5th Cir. 1995). Other disagree and say it means only when legally closed. In re Bicoastal Corp., 136 B.R. 288 (Bankr.M.D.Fla.1990). Does the term include situations when the clerk’s office is physically open but the party is trying to electronically file from across the country and the servers are down?   All of these questions rest in the good hands and heads of the judges applying the FRCP. They will decide in light of what is fair. That is what the drafters say they intended in the 2009 Advisory Committee Notes: “The rule does not attempt to define inaccessibility. Rather, the concept will continue to develop through case law.” And “case law” here just means the judicial application both legal rules and of equitable rules. After all, law and equity have been merged in the federal courts since 1938. There is no longer a “law” side and an “equity” side and both sets of rules—legal and equitable—are in the judicial tool box under every federal bench.

So if the Tax Court is not going to apply “equitable tolling” doctrines to the section 6330 30-day deadline, why does it decide to use FRCP 6? After all, not only does the Advisory Committee say that the FRCP will develop by case law, the FRCP itself is a judge-made rule, subject to case law development, just as is the doctrine of equitable tolling. To be sure, the FRCPs are promulgated by the Supreme Court pursuant to the Rules Enabling Act (REA), but it would be difficult to argue that the writers of the REA thought they were thereby giving courts license to alter SMJ! So is not using the FRCP to alter the jurisdictional timing rule of 6330 doing exactly what the Tax Court says it courts cannot do??

The Tax Court thinks applying FRCP 6 is different than applying equitable tolling. It says “Rather than expanding a court’s jurisdiction, Civil Rule 6 simply supplies the tools for counting days to determine the precise due date. Such rules of procedure do nothing more than provide the court and the parties with a means of determining the beginning and end of a statute of limitations prescribed elsewhere in the law.” (Internal quotes and cites omitted).

I confess I do not follow this reasoning. That is, I think one can make the same statements about equitable tolling. Let’s try: “Rather than expanding a court’s jurisdiction, the rules of equitable tolling simply supply the tools for counting days to determine the precise due date. Such rules do nothing more than provide the court and the parties with a means of determining the beginning and end of a statute of limitations prescribed elsewhere in the law.”

Hmmm. What’s the difference here? Both sets of rules are entirely judge made!   Well, one obvious difference is that the “rules” of equitable tolling are manifold whereas FRCP 6 is narrower, dealing with only one (recurring) set of facts that, as such, warrant an actual rule.   The Tax Court implicitly claims that FRCP 6 gives parties more certainty than the myriad rules of equitable tolling.   So that may go to the first concern about allowing equitable tolling of jurisdictional timing rules: finality. It would have been better for the Court to explicitly discuss that concern.

The Tax Court’s reluctance to embrace a far-reaching ill-defined equitable tolling concept may also reflect the Brockcamp concerns. That is, at first blush the CDP provisions do not appear nearly as integral to tax administration as the 6511 periods. Something like 1% of taxpayers who receive a CDP Notice actually try for a CDP hearing. But perhaps the concern is that if the Tax Court allows equitable tolling, you will start getting double or triple the number of petitions to deal with. Or more. You will start getting really, really stale petitions and lame excuses. Hey, I am a professor. I know from lame excuses. So is that what the Tax Court fears? Is it worried about opening the proverbial floodgates of lame excuses?

If the flood-gate concern is what is really animating the Tax Court’s decision here, it would have been useful to see it and to see the Tax Court more explicitly tie it to Brockcamp. I personally think there is a plausible argument that sticking with a bright line rule is itself equitable, especially since there is absolutely no constitutional concern here about due process. Phillips v. Commissioner, 283 U.S. 589 (1931). So I am not unhappy with the Tax Court’s Solomonic decision to reject one form of equitable tolling in favor of what may well be a more limited exercise of equitable tolling. And for this TP, in this case, that’s all that is needed.

 

 

 

Adams v. Comm’r: How Not to File an Appeal from the Tax Court

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.

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Adams Facts

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.

DOJ Arguments

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.

Observations

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.

 

Procedure Grab Bag

Or an interesting limitations case and a limiting interest TAM.

The last SumOp got a little lengthy, so I pulled out two items to trim it down.  The first I also thought deserved slightly more explanation, as the facts were complicated and the IRS somewhat reversed course on a position.  The second case deals with an untimely refund in a quirky situation.

  • The first tax procedure item is TAM 201548019, which highlights one way that  overpayment and underpayment interest can be complicated.  The issues and conclusion were as follows:

ISSUES:

I. Under Section 6611, does interest accrue on a general adjustment overassessment when the Service has simultaneously determined that there is an increase in tax due to adjustments to carrybacks from subsequent years, where the net effect of these increases and decreases is an overassessment?

II. If interest is allowed pursuant to Section 6611 on the general adjustment overassessment, to what date does such interest accrual run?

CONCLUSIONS:

I & II. Yes. Overpayment interest is allowable on the portion of the overpayment used to satisfy the underpayment from the date of said overpayment to the due date of the loss year return.

The applicable facts are that taxpayer filed a return for tax year 1, and timely paid the tax due.  In a subsequent year the taxpayer filed a tentative refund based on a net operating loss carry back from a future year 2.  The Service issued a refund based on the claim.  Later, on audit, the NOL was largely disallowed from year 2, causing a potentially increased assessment for year 1, which was less than the original refund amount.  The IRS also adjusted the original return for tax year 1 for other reasons, resulting in an original net overassessment and refund even after the reduced NOL.

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The taxpayer took the position that interest was due on the full overpayment amount until the tentative refund was issued based on the NOL (no interest was paid when the refund was generated by the NOL).  The IRS rejected this position somewhat.  It was willing to pay interest on the full amount, but not until the erroneous refund date.  The TAM states the IRS position is that interest on the total overpayment amount from year 1 runs until the due date of the loss year return, when the incorrect credit was generated and deemed applied.  The TAM states this is because Section 6611(b) only allows interest on an overpayment when there is a refund or an amount is credited.   Here, the Service determined the amount of refund in question was not “refunded” following the audit, and was instead applied against an outstanding underpayment from the erroneous refund generated by the incorrect NOL carryback.  The date the NOL was generated, the credit date, is the date used by the Service, instead of the actual refund date arising from the incorrect NOL carryback.  The TAM points out that neither refund nor credit are defined in the statute, and walks through the Service’s analysis of why the payment here is a credit.  The Service also stated that its prior similar TAM (201123029) was not binding and that the analysis was incorrect; specifically that an overpayment that was not in fact refunded could be considered refunded.   It will be interesting to see if something percolates through the courts with this fact pattern.

  • The second item is a tax procedure case out of the Middle District of Florida.  US v. Bates is as interesting as crippled valet, John Bates, but with tax procedure and not scheming servants. The taxpayer was a pilot who worked for an airline that went bankrupt.  Pursuant to the bankruptcy, the airline ceased paying retirement payments.  Prior to the order ceasing the retirement payments, the airline had prepaid FICA taxes on a portion of the amount that was going to be paid to the taxpayer, but the underlying income was never paid.    The taxpayer sought a refund of the withheld taxes, which was granted by Appeals.  The Service later sought to recoup what it deemed an erroneous refund, as it believed the refund request was outside the statute of limitations.

The payment was made in January of 2004.  Mr. Bates filed his refund claim on January 28, 2008.  He was denied, and went to Appeals.  While that was occurring, in May of 2009, another pilot filed suit in the Federal Claims Court seeking a refund of the FICA taxes, and claiming to represent himself and other pilots, including Bates (he was not a lawyer).  The Court tossed the claim for all plaintiffs except Kooperman, because he couldn’t represent others before the court.  In April of 2010, Appeals ok’d the entire refund to Bates.  In May of 2010, the Court order was vacated, and all claims were stayed to allow the non-Kooperman plaintiffs to get a lawyer instead of a pilot.  Bates, having a refund, did not pursue the claim.   In January 2011, the Service requested the refund back, stating the refund was erroneous because it was untimely, but also because Bates was a plaintiff at the time in the Kooperman case.  The United States in June of 2012 then sought to remove Bates from the Kooperman case because he had already received the refund.  Sticking it to him on both ends. That motion was opposed by Bates and is still pending.

Both parties agreed the refund was made, and the erroneous refund claim was timely, so the only question was whether the refund was erroneous.  Bates (having lawyered up) argued the request was timely, he was not a plaintiff, and even if he was, the government can’t recoup a refund issued by Appeals in settlement of an issue.  On the last issue, the Court relied on Johnson v. United States, 54 Fed. Cl. 187 (Fed. Cl. 2002), which held Appeals cannot issue refunds on untimely claims.

As to the timing, both parties agreed that the original refund request was outside of the stated time period in Section 6511(a).  Bates argued, however, that there was no basis for a refund until after the bankruptcy court held that Bates would not receive retirement payments under the plan.  Apparently, Bates did not have sufficient statutory grounds for this position, as the court stated it was essentially an argument for equitable tolling.   I really should have pulled the briefs, as I would assume there would be some Code or Bankruptcy Code argument to be made that the statute was suspended until all facts were available (even if it was a losing one).

The Court apparently has not been following Carl Smith’s various strong posts on equitable tolling.  The Court held that the results were unusual for Bates and harsh, but that it lacked authority to apply equitable tolling and cited to Vintilla v. United States, 931 F.2d 1444 (11th Cir. 1991).  The Court also noted it lacked the authority to grant interest abatement on the erroneous refund, as the taxpayer requested, even though Appeals had mistakenly issued the refund, and that authority was vested with the Department of Treasury, which can only be reviewed by the Tax Court. See Section 6404(h).