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.

Time Stands Still for Snow – Expanding Section 7503 on the Last Day to Timely Complete a Task

We have all prayed for snow days since entering kindergarten. Now, we have another reason to continue those prayers. The Tax Court is posed to turn a snow day from day creating terrible results for those trying to get in its doors to another legal holiday extending the time upon which to act. Let’s hope it succeeds.

Special Trial Judge Armen has issued an extraordinary order in Guralnik v. Commissioner pursuant to Tax Court Rules 182(e) and 183. Depending on what happens to this order in the Tax Court and, on appeal if the Government goes that route, a new basis for getting a petition into the Court on time may have just come into being. The facts in the case cry out for relief. Judge Armen found two possible routes to relief. Perhaps a third exists. The private carrier list update in May 2015 also gets attention in the order and deserves your attention as you read about this case.

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The Order

Perhaps the first matter to address is the order itself. Petitioner filed a petition seeking relief in a collection due process case (CDP) following the issuance of a determination letter. The letter was issued on January 16, 2015. The determination letter itself is not at issue. It seems to have been properly mailed and addressed. The last date to file a Tax Court petition in a CDP case runs 30 days after the mailing of a determination letter. In this case it would ordinarily have run on February 15, 2015. That date was a Sunday. The following date was a federal holiday, President’s Day, and the following day was a snow day in Washington, D.C., when all Federal and District offices, including the Tax Court were closed. So, the first day the Tax Court was open after February 15 was Wednesday February 18 and the petition arrived in the Tax Court early that morning.

Unfortunately, petitioner mailed the petition to the Tax Court on Friday, February 13 (an appropriate day for what he has gone through in this case) using FedEx “First Overnight” service – the most expedited and expensive service that FedEx offers. You might be thinking FedEx is an approved private carrier and you would be right; however, not every FedEx delivery service is approved. The “First Overnight” service did not exist in 2004 when the IRS had last published its list of approved private delivery services and so was not on the list. In May 2015, when the IRS next updated the list, this service did make it on the list as it logically should since it is better than all of the other FedEx services already on the list. Now you are starting to get a sense of why you should not send important documents on Friday the 13th. You are also getting a sense of why the Court might want to find a way to help Mr. Guralnik in this situation since he seems to have tried to do the right thing only to have not one but two odd things prevent him from reaching his goal.

The IRS filed a motion to dismiss the petition as untimely. Judge Armen’s order, an order ordinarily issued following such a motion, resolves the motion but in an extraordinary way. This past May 28, the Chief Judge assigned this case to Special Trial Judge Armen “for disposition”. Under 7443A(b)(4) and (c), Special Trial Judges are authorized to enter the decision of the Tax Court in CDP cases. It would appear that Judge Armen could rule on this motion without any further review.  However, he issued a “recommended” ruling that is attached to his order.  The recommended ruling is in the format of a T.C. Opinion (complete with proposed headnote).  The accompanying order says that this is governed by Rules 182 and 183, and that the parties can submit comments on the recommended ruling — the procedure the Tax Court adopted in response to Ballard v. Commissioner. The order itself gives you some sense of the importance of the decision in this case. If the proposed order stands, it may well get issued as a fully reviewed opinion of the Court because of the new ground that it stakes out in the last date to perform an act area. Since the Court started putting up designated orders on its website in 2011, this may be the first order that attached a recommended opinion.

Oddly, this issue of a snow day has apparently not come up before in deficiency cases.  Based on (1) the legislative history of 7503, (2) the Federal Rule of Civil Procedure rule governing this circumstance, and (3) a belief that Congress would want this result, Judge Armen recommends finding that the Court has jurisdiction over the case. Therefore, his proposed order restores the case to the general docket for eventual trial.

The Statute

The timely mailing rule of IRC 7502 provides that if a document is mailed timely it may be treated as timely filed. Section 7503 provides that “When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday.” The term legal holiday refers to legal holidays in the District of Columbia. Thus, a petition received by the Tax Court “after the expiration of the statutory filing period … is nevertheless deemed to be timely filed if the date of the U.S. Postal Service postmark stamped on the envelope in which the petition was mailed is within the time prescribed for filing.” Reg 301.7502-1.

If the petition comes to the court through a “designated delivery service”, it may also meet the timely mailing requirement as if it was mailed through the USPS. See 26 U.S.C. § 7502(f)(1). The IRS says what meets the requirements of a designated delivery service and here, for the reasons discussed above, petitioner did not meet that requirement. No dispute exists, however, concerning the date petitioner gave the petition to FedEx and the fact that the petition was delivered to the Court on the first day it was open after petitioner gave the petition to FedEx. Agreeing with the IRS that the delivery service did not meet the statutory requirements, Judge Armen nevertheless found that “we hold that the petition was timely filed and that the Court has jurisdiction to hear petitioner’s case… because section 7503 served to extend the filing deadline to Wednesday, February 18, 2015, thereby making the receipt of the petition on that date timely.” To reach this conclusion, he found that the “official closing of both District and Federal government offices, specifically including the Tax Court, on Tuesday, February 17, 2015, because of a winter snowstorm as a legal holiday in the District of Columbia for purposes of section 7503.”

How did Judge Armen work his way past many decades of the Tax Court not recognizing snow days as legal holidays for purposes of the timeliness of petitions in the Tax Court? He did it by looking back at the long history and purpose of the statute which came into existence as a result of the position that if the last day for performing an act fell on a Sunday and the taxpayer had not performed the act by that date the taxpayer had missed the deadline. See Section 274(a) of the Revenue Act of 1926, ch.27, 44 Stat at 55. See also Satovsky v. Commissioner, 1 B.T.A. 22 (1924). The Sunday rule was changed about a decade later to include legal holidays in the District of Columbia. See Section 272(a), Rev Act of 1934, ch.277, 48 Stat at 741. See also S. Rept No. 558 (1034), 1939-1 C.B. (Part 2) 586. See also S.Cal. Loan Ass’n v. Commissioner, 4 B.T.A. at 237-238. The rule was changed again after another decade to include Saturdays. See Pub. L. No. 79-291, sec. 203, 59 Stat. at 673 (1945). The change in 1945 to add Saturdays to the list of days not counted as the last day to perform an act resulted because the Tax Court closed its docket room on Saturdays after September 8, 1945 to comply with the Federal Employees Pact Act of 1945. See Pub. L. No. 79-106, 59 Stat. at 303. See also Pleasant Valley Wine Co. v. Commissioner 14 T.C. 519 (1950).

In reviewing the changes to the law regarding the days that would no longer count as the last day to perform an act, Judge Armen determined that the reasons for the changes resulted from the fact that the Tax Court was closed for business on those days. He then reasoned that the same basis for not allowing the last day to fall on a day when the Tax Court was not opened because it was not a federal work day also applied when the office was closed due to weather. In some ways it is even more logical to extend the rule to weather related closings because taxpayers cannot predict them. Before the changes to the law concerning the counting of weekend days or federal holidays, taxpayers at least knew that if the last day to perform an act fell on a day the Court would not be open it was incumbent upon them to perform the act on the last day the Court was open before the deadline passed. It is not possible to predict, at least not with certainty, when a weather related closing will occur. Allowing a weather related closing, or any externally created closing, to serve as a day not counted as the last date for filing, gives taxpayers a result that places them in a position to know when to act and does not punish them for a failure caused by an external source.

The Rule

Having worked through the legal basis for interpreting section 7503 to allow a weather closing to push forward the last date to perform an act, Judge Armen circled back to the Tax Court rules. There is no Tax Court rule dealing with this situation, though there is an FRCP that would extend the filing date in these circumstances.  Rule 6(a)(3)(A) of the FRCP addresses the issue of computing and extending time when the clerk’s office is inaccessible. Judge Armen cites In re Swine Flu Immunization Prod. Liab. Litig., where the court held that the last day to file an administrative claim under the Federal Tort Claims Act excluded both Sunday and the following Monday which was a snow day when government offices were closed. The decision looked to the FRCP.

Similarly, Rule 26(a)(3)(A) of the Federal Rules of Appellate Procedure extend the filing time when the clerk’s office is inaccessible. Tax Court Rule 25 is silent regarding inaccessibility of the Tax Court; however, that silence implicates Tax Court Rule 1(b) which provides “Where in any instance there is not applicable rule of procedure, the Court or the Judge before whom the matter is pending may prescribe the procedure, giving particular weight to the Federal Rule of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand.”

Equitable Tolling

If the IRS appeals this decision, petitioner may have another avenue for arguing that the time period should be held open for the filing of this petition – equitable tolling. We have written on equitable tolling many times and will probably write on it many more times. I credit Carl Smith with keeping this issue in our thinking and for many of the thoughts expressed here. Mr. Guralnik’s facts certainly present the type of situation in which one would want to raise equitable tolling. Denying him the opportunity to have his petition heard under these circumstances would not seem equitable. The IRS in its response in this case to the Court’s order to address the impact of the official closing of the Court due to snow acknowledged that dismissal of petitioner’s case “may seem harsh.” With a concession like that how could equitable tolling not apply?

This discussion needs to start by acknowledging that the Tax Court held that section 6330(d)(1)’s 30-day filing deadline is jurisdictional and not subject to extension in Boyd v. Commissioner, 124 T.C. 296, 303 (2005), aff’d 451 F.3d 8 (1st Cir. 2006).  The Tax Court made that ruling based on the since-rejected view of “jurisdictional” as any mandatory deadline.  Since the recent narrowing of the use of the word “jurisdictional” by the Supreme Court, the Tax Court has not revisited that Boyd holding.  Yet, Judge Armen has called the 30-day period jurisdictional in the recommended ruling. Even including the 1st Cir. in Boyd, no Circuit has ruled on the 6330(d)(1) period’s jurisdictional status one way or the other.  See Carlton M. Smith, “Equitably Tolling Innocent Spouse and Collection Due Process Periods”, Tax Notes Today, 2010 TNT 41-8 (Mar. 3, 2010) and several prior posts for a detailed discussion of equitable tolling issues as they might apply to this situation.

Within the last year, the Tax Court in Lippolis v. Commissioner has cited Supreme Court case law for the proposition that proximity of a dollar-amount requirement in whistleblower cases to the jurisdictional grant does not make that other requirement jurisdictional. Raising the equitable tolling argument here may provide another path to success even though it would require overturning the Tax Court’s decision in Boyd.    Since section 7503 does not literally mention snow days or other non-holidays when the federal government in D.C. is closed down, it is possible that the IRS will appeal this decision and seek to limit the scope of section 7503. Opening up another pathway for possible success could not hurt Mr. Guralnik’s chances to ultimately have his CDP argument heard on the merits.

Under recent case law, “filing deadlines ordinarily are not jurisdictional.”  Sebelius v. Auburn Regional Med. Center, 133 S. Ct. 817, 825 (2013). The Supreme Court in Auburn wrote:  “”We inquire whether Congress has ‘clearly state[d]’ that the rule is jurisdictional; absent such a clear statement, we have cautioned, ‘courts should treat the restriction as nonjurisdictional in character.’” Id. at 824. In a number of recent cases, the Supreme Court has found filing deadlines not to be jurisdictional. See Henderson v. Shinseki, 131 S. Ct. 1197 (2011) (time to file in Art. I Veterans Appeals Ct.); Auburn (time to file in a Medicare reimbursement contest forum); United States v. Wong, 135 S. Ct. 1625 (4-22-15) (FTCA times to file administrative claims and court suits under 28 usc 2401(b)).

Conclusion

This is an important case changing a long held position on the last day for performing an act. The procedural aspect of the case is interesting as well. Watch closely to see what the Tax Court does and how the IRS reacts. I suspect this is not the last time we write about Mr. Guralnik.

 

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