After The Shutdown: Dealing with Time Limitations, Part IV — Equity

In Part IV of the series “After the Shutdown,” Professor Bryan Camp examines the role of equity in addressing time limitations that have become tangled by the shutdown. Christine

It is unconscionable to enforce against taxpayers a statutory time limitation when Congress itself denied taxpayers the ability to protect their rights during all or part of that time period by forcing the closure of the IRS and the Tax Court.  That is, Congress failed to fund either the Tax Court or the IRS, causing both to shut down for between 31 (Tax Court) and 35 (IRS) days.  This failure caused both the agency and the Court to be closed to taxpayer’s attempts to resolve disputes about either the determination or collection of tax.  This failure is an act of Congress just as much as the statutory limitations periods are acts of Congress.  And Congress should not be able to demand that a taxpayer act within a certain time period while at the same time denying the taxpayer any ability to act during all or part of that time period.  Equity should, and I believe can, prevent that result.

The above proposition is the basis for this, my last Post in the “After the Shutdown” series.  Part I discussed how a reopened Tax Court might apply the Guralnik case to ostensibly late-filed petitions.  Part II explained the new thinking about how jurisdictional time periods differ from non-jurisdictional.  Part III explained why the time period to petition the Tax Court in §6213 should no longer be viewed as a jurisdictional limitation.  I invite those readers interested in how the new thinking would apply to the time periods in §6330(d) and §6015(e) to look at my paper posted on SSRN, which I am trying to get published in a Law Review.  Legal academics must publish or perish and, apparently, blogging does not count.

Today’s post explores why the Tax Court should be able to apply equitable principles to evaluate the timeliness of taxpayer petitions filed after the shutdown, regardless of whether any of the applicable limitations periods are jurisdictional or not.

Before diving in to equity, I wanted to point out that Congress itself could actually save a lot of litigation here by passing a very simple off-Code statute that says something like: “For purposes of computing  time limitations imposed in Title 26 on taxpayers to petition the Tax Court, the days between December 22, 2018 and January 28, 2019 shall be disregarded.”  Congress could do that.  Congress should do that (for the reasons I explain below).  But you can bet you sweet bippy that Congress won’t do that.  It made this mess.  But it is unlikely to clean it up.  So it will fall to the Tax Court to sort through cases.  When it does so, I believe the circumstances of the shutdown strongly support the extraordinary remedy of equitable tolling.

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The Tax Court is truly a unique court. It is neither fish nor fowl, as Prof. Brant Hellwig so nicely explains in his article “The Constitutional Nature of the U.S. Tax Court,” 35 Va. Tax Rev. 269 (2015). That is, all efforts to type the Tax Court as part of the Legislative Branch, Judicial Branch, or Executive Branch of the federal government are flawed, both as a matter of theory and as a matter of practice. Channeling Felix Cohen and other Legal Realists, Brant sensibly concludes that we don’t really need to worry about “where” the Tax Court belongs in the Constitutional structure. It’s indeterminate position poses no threat to the structural integrity of the federal government, and its useful work in resolving taxpayer disputes with the IRS does not depend on its precise location in any branch.

But there is no doubt that the Tax Court exercises the “judicial power” of the United States. The Supreme Court said so in Freytag v. Commissioner, 501 U.S. 868 (1991). And part of that “judicial power” is the power to apply equitable principles and doctrines to the disputes that are properly brought before the Court for resolution. Prof. Leandra Lederman has a lovely article on this subject: “Equity and the Article I Court: Is the Tax Court’s. Exercise of Equitable Powers Constitutional?” 5 Fla. Tax Rev. 357 (2001).

It is important to remember that equitable doctrines are not simply free-floating grants of power. Equitable doctrines are linked to, and bounded by, a set of principles. But what distinguishes equitable principles from legal rules is that the application of equity is highly contingent on the facts before the court. The great legal historian F. W. Maitland put it this way in his 1910 Lectures On Equity: “I do not think that any one has expounded or ever will expound equity as a single, consistent system, an articulate body of law. It is a collection of appendixes between which there is no very close connection.” (p. 19) And in this 1913 law review article, Professor Wesley Newcomb Hohfeld discussed the difficulty of teaching equity as a system of rules separate from legal rules. I think it this way: equity fixes problems that legal rules cannot fix.

One equitable doctrine that might apply here is equitable tolling. When litigants show that, despite diligent efforts, some extraordinary circumstance prevented them from protecting their rights by timely filing within a period of limitations, a court will equitably toll the limitation period. See e.g. Holland v. Florida, 560 U.S. 631 (2010). The idea of “tolling” means that the limitations period is suspended for the tolling period. That is, it stops running and then starts running again when the tolling period ends, picking up where it left off. Artis v. District of Columbia, 138 S.Ct. 594 (2018).

Remember, this is equity, not a hard and fast legal rule or doctrine. So how much diligence a litigant must show varies with circumstances. Similarly, how extraordinary the barrier had to be also varies with circumstance. If the Tax Court applies that doctrine, it could decide—consistent with the logic of my very first paragraph—that the days in which Congress’s failure to fund the Court forced it to shut its doors should stop the running of any applicable limitation period. The Court may decline to apply equitable tolling, however, for two reasons.

First, the Tax Court has repeatedly said it cannot equitably toll jurisdictional time periods and it believes that the relevant time periods in the Tax Code are jurisdictional. I believe the Tax Court is simply wrong that the deficiency and CDP time periods are jurisdictional. That’s what I explained in the prior blog posts and in my SSRN paper.

Even if the time periods are jurisdictional, however, I believe there is good authority to toll them nonetheless. The authority is from the Supreme Court. In Honda v. Clark, 386 U.S. 484 (1967), 4,100 plaintiffs of Japanese descent whose assets had been seized by the U.S. during World War II sued for recovery years after the applicable limitation period had ended. The district court dismissed the cases “on the ground that the court lacked jurisdiction over the subject matter of the actions because they were not commenced within the time set forth in section 34(f) of the Trading with the Enemy Act.” 356 F.2d 351, 355 (D.C. Cir. 1966). Both the district court and the D.C. Circuit dismissed their suit for the standard reason: equitable principles did not apply to when limitation periods were a waiver of sovereign immunity. The D.C. Circuit gave the standard analysis: “All conditions of the sovereign’s consent to be sued must be complied with, and the failure to satisfy any such condition is fatal to the court’s jurisdiction.” 356 F.2d at 356.

The Supreme Court disagreed. While noting the general rule, it characterized the rule as a presumption and said that one needed to look at the particular statutory scheme at issue to discern purpose. Whether or not the time period was jurisdictional was totally absent from the Court’s approach to applying equitable tolling. The Court concluded it was “much more consistent with the overall congressional purpose to apply a traditional equitable tolling principle, aptly suited to the particular facts of this case and nowhere eschewed by Congress, to preserve petitioners’ cause of action.” 386 U.S. at 501.

The Supreme Court’s focus in Honda (and later in other cases, as I explain in my paper) was on the relationship between Congress and the limitation period. When you approach the limitation periods in §6213 and §6330(d) in that way, I believe the approach used by the Supreme Court in Honda strongly support application of equitable tolling, in two ways.

First, as I have argued here, the Tax Court itself has relied upon the great remedial purposes of §6213 and §6330 to in fact enlarge what it believes are jurisdictional time periods under certain circumstances. A careful reading of its cases shows that what animates its decisions is the remedial purpose of the statutory scheme that allows taxpayers a day in court before either (1) being forced face a tax assessment and its consequences or (2) being forced to pay an assessed tax. To count the shutdown days as part of a limitations period would run counter to that remedial purpose.

Second, I again restate the idea of my first paragraph. This is not a situation where a taxpayer would seek equitable tolling because of some individual government employee’s bad behavior. This is Congressional bad behavior. Another way to think of the relationship is this: if the time periods are part of Congress’s waiver of Sovereign Immunity, and if only Congress can waive Sovereign Immunity, then one can reasonably find that Congress itself has here waived its immunity by ceasing to fund the government.

The second reason that the Tax Court might look askance at applying equitable tolling here is that the doctrine usually applies in a fact pattern where the party seeking tolling has done all it can. Here, there may be instances where that is not true. For example, a taxpayer may not have even attempted to file a petition when the last day ran during the shutdown period. Or the taxpayer may not have even been prepared to file during the shutdown period and only prepares and files once the shutdown period ends. Most importantly, a taxpayer’s period might have been disrupted by the shutdown period but may not have ended during the shutdown period. How is the Tax Court supposed to measure a taxpayer’s diligence in that situation, when no one knew until Friday that the government would reopen on Monday?

I do not know the answer to these questions because equity is a case-by-case determination. The Tax Court can help avoid the time and effort of applying equitable tolling by applying a uniform counting rule that simply disregards the shutdown days, based on the idea underlying FRCP 6, as I will argue in an article I hope to publish in Tax Notes soon. Even there, however, there will be cases that are not covered even by a broad reading of FRCP 6. That will be the cases where the last day of the period came after the shutdown ended. Yet there may be such cases that command the sympathy of the Tax Court. I think the Court has the power to act and to apply equitable tolling in the cases where the circumstances support it.

After The Shutdown: Dealing with Time Limitations, Part III

Today Professor Bryan Camp returns for Part III of the series “After the Shutdown,” in which he examines the time limit for appealing a notice of deficiency. Now that the government has reopened, Professor Camp’s analysis may soon be tested in the Tax Court. The Tax Court’s website advises that the court will resume full operations on Monday, January 28, and that the February 25 trial sessions will proceed as scheduled. Christine

Part I discussed how a reopened Tax Court might apply the Guralnik case to ostensibly late-filed petitions.  The Tax Court is likely to apply Guralnik narrowly which means petitions not filed on the first day the Court reopens will be outside their Statutes of Limitation, putting the SOL in SOL.  Equitable tolling could help cure that problem but the Tax Court takes the position that it cannot apply equitable doctrines to the time periods for taxpayers to petition the Tax Court because, in its view, those time periods are jurisdictional restrictions on its powers.   

Part II explained the new thinking about how jurisdictional time periods differ from non-jurisdictional.  I read the opinions and drew out five indeterminate factors that the Supreme Court instructs lower courts to consider when deciding whether a particular statutory time period is jurisdictional or merely a “claims processing rule.”   

Today’s post applies the rules to the 90/150 day period in §6213.  The most reasonable conclusion under the new thinking is that §6213 is not a jurisdictional time period. That means that the Tax Court can apply equitable principles to decide whether an ostensibly late-filed petition is timely or not.  And when the Tax Court is closed for more than 33 days in a row, that is a big start to an equitable tolling analysis for those cases that cannot fit within a narrow or even a broad application of Guralnik.

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Four of the five factors point to treating §6213 as a claims processing rule.  Again, this is basically a summary of what I have written in this paper posted on SSRN.  As usual, please comment on any errors or omissions that you spot. 

  1. Mandatory Language

As it currently reads, §6213(a) now contains five sentences.  The first sentence contains the limitations period, as follows: “Within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in section 6212 is mailed … the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency.” 

Notice there is no mandatory language.  Nothing in that sentence tells the reader what happens if the taxpayer misses the 90/150 day deadline.  And nothing in that sentence gives the Tax Court the power to hear or decide matters raised in the petition. 

  1. Magic Words

The word “jurisdiction” does not appear in the first sentence.  One finds the jurisdictional grant to the Tax Court over in §6214, which provides that the Tax Court has “jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency…and to determine whether any additional amount, or any addition to the tax should be assessed, if claim therefor is asserted by the Secretary at or before the hearing or a rehearing.”  The §6214 power to redetermine a deficiency is simply not hooked into the §6213 timing rule.  

The fourth sentence of §6213 does contain the magic word “jurisdiction.”  But, as I explain in much greater detail in my paper on SSRN, while the word “jurisdiction” does appear in the fourth sentence, it is not there tied to the Court’s power to redetermine a deficiency.  It was added to the Tax Court much, much, later than first sentence and later than the §6214 jurisdictional language.  

  1. Statutory Context

 As I explain in my SSRN paper, Congress first gave the Tax Court jurisdiction to redetermine a proposed deficiency in 1924.  It did that in a statute separate from the 90/150 day limitation period.  The codifiers also put that jurisdictional grant in a separate section of the Tax Code, both in the 1939 Code and the 1954 Code.

Much later, in 1954, Congress added to the Tax Court’s jurisdiction the power to enjoin the IRS from assessing or collecting a tax liability when the taxpayer had filed a timely petition.  The codifiers put that injunctive power in the same statute as the 90/150 limitation period and conditioned that power on a timely petition being filed.  But the Tax Court’s jurisdiction to redetermine a deficiency is still in a separate statute.

As applied to the shutdown, that distinction possibly makes a difference.  The IRS computers will automatically set up an assessment if no IRS employee inputs the Transaction Code (TC) indicating that a petition has been filed in the Tax Court.  To account for notification delays, the computers are programmed to wait 110 days after the NOD date before setting up the assessment.  Readers should understand that assessments are made in bulk.  Each week, all the assessments that are ready to be made are aggregated into a single document that is signed, either physically or electronically, by a designated official and, hey presto, all of the taxpayers who were set up for that week are now assessed.

The problem in the shutdown is that the IRS computers keep counting the shutdown days as part of the 110 days.  So if and when the Tax Court decides that a petition ostensibly filed 140 days late is actually timely, whether under a narrow or broad reading of Guralnik or under equitable principles, the question arises as to what to do about that assessment.  The IRS should abate the assessment as §6404 authorizes when an assessment “is erroneously or illegally assessed.” 

  1. Judicial Context

 This is the only factor that supports reading §6213 as jurisdictional.  But it’s not especially strong because it consists only of lower court precedent that relies on other lower court precedent.  As I explained in Part II, the Supreme Court has not hesitated to scrub even long-standing lower court precedent when it believes the new thinking requires a different result.  The only judicial context that counts for the Supremes is their own former opinions!      

Still, there is plenty of lower court precedent holding that §6213 is jurisdictional.  First, the most recent Tax Court case to express an opinion about §6213 was—you guessed it— Guralnik.  That was in 2016.  But the Court in Gurlanik chose to look exclusively at only this factor and gave no analysis on the other four factors, saying:

In cases too numerous to mention, dating back to 1924, we have held that the statutorily-prescribed filing period in deficiency cases is jurisdictional. See, e.g., Satovsky v. Commissioner, 1 B.T.A. 22, 24 (1924); Block v. Commissioner, 2 T.C. 761, 762 (1943). Even if the “equitable tolling” argument advanced by petitioner and amicus curiae were otherwise persuasive, which it is not, we would decline to adopt that argument solely on grounds of stare decisis.

The error here is in relying on old thinking.  As I explained in Part II and also in my paper, the Supreme Court keeps emphasizing that courts should not rely solely on precedent developed under the old thinking.  In particular, my paper looks at both the cases cited by Guralnik here and not only shows how neither is particularly useful but also discovers that the Tax Court itself no longer follows Block’s rationale on how to count jurisdictional time periods!   

The most recent Circuit Court opinion of note is Tilden v. Commissioner, 846 F.3d 882 (7th Cir. 2017).  There, Judge Easterbrook gave two reasons for holding that §6213 was jurisdictional.  First, he swooned over the magic word “jurisdiction” in §6213 and totally ignored how it related, or did not relate, to the 90/150 time period.  Second, he relied on—wait for it—wait for it—Guralnik!

For many decades the Tax Court and multiple courts of appeals have deemed § 6213(a) as a whole to be a jurisdictional limit on the Tax Court’s adjudicatory competence. [String cite omitted]. We think that it would be imprudent to reject that body of precedent, which places the Tax Court and the Court of Federal Claims, two Article I tribunals, on an equal footing. So we accept Guralnik’s conclusion and treat the statutory filing deadline as a jurisdictional one.

What is especially sad here is that the string cite that I omitted from the quote does not contain a single case after 1995.  Nor could it.  There is not a single court case—much less one from the Supreme Court—that actually analyzes §6213 under the Supreme Court’s new thinking and applies all the factors.   

  1. Legislative Context

The legislative context of §6213(a) also supports reading the provision as a claims-processing rule and not as a jurisdictional requirement.  The legislative context is very similar to that which the Supreme Court found so important in Henderson v. Shinseki, 562 U.S. 428 (2011) discussed in Part II.  In brief, Congress created the original Board of Tax Appeals to give taxpayers a theretofore unavailable judicial remedy.  The legislation creating the BTA was manifestly remedial.   

The remedial nature of deficiency proceedings has been long recognized by the Supreme Court.  I think Helvering v. Taylor, 293 U.S. 507 (1935) is particularly instructive.  There, the taxpayers proved that the Notice of Deficiency contained significant error.  The government argued that taxpayers had to not just show the NOD was wrong but also had to prove up their correct tax.  The Supreme Court responded this way: “The rule for which the Commissioner here contends is not consonant with the great remedial purposes of the legislation creating the Board of Tax Appeals.”

The Tax Court itself has used the remedial nature of deficiency proceedings to soften the effect of its continued holding that §6213 is jurisdictional.  In effect, the Tax Court “cheats” on applying §6213 by choosing from among multiple starting dates to help taxpayers meet the 90 day requirement.  It does so because it recognizes the legislative context of the deadline.  I explain this in my article Equitable Principles and Jurisdictional Time Periods, Part II, 159 Tax Notes 1581 (free download here).

It would be no stretch at all for the Tax Court to apply that precedent to an analysis of whether §6213 is jurisdictional in the first place.  

Under the new thinking, then, four of the five factors point towards reading §6213 as a claims processing rule and not a jurisdictional rule.

Finding Guidance on the Effects of the Shutdown

As the IRS and Tax Court reopen (at least for about three weeks), readers might be interested in resources to help them.  The IRS has published a short announcement that answers some basic questions, here.   In addition, the ABA Section of Taxation is hosting a webinar on the effects of the shutdown on administrative operations and on Tax Court cases. The 1.5 hour webinar is scheduled for Monday, January 28, 2019 starting at 1 pm EST.  The cost is $10 for Tax Section members and $25 for non-members.  It is free to Low Income Tax Clinic or other pro-bono attorneys.

Topics will include:

  1. How the shutdown affected the Service’s issuance of notices;
  2. The ways taxpayers and representatives should consider reacting and responding to Service correspondence;
  3. The impact of the shutdown on applications for discretionary relief and IRS administrative services;
  4. The Service’s current collection efforts; and
  5. The impact on filings with the United States Tax Court.

You can find more information from the ABA Tax Section website.

The Taxpayer Advocate Service’s Role During an IRS Shutdown

The ongoing lapse in federal government appropriations is now the longest in modern history. On January 15, the IRS released an updated shutdown plan which substantially alters how the ongoing shutdown impacts taxpayers. Regular PT contributor Bob Kamman described the updated plan here; he summarized the original shutdown plan here. The biggest change of plan is the recall of about half the IRS workforce primarily to process tax returns and ensure that refunds will be paid this filing season. But the plan also calls for expanded operations in another important arena: collections. And automated notices of intent to levy are still being issued. Meanwhile, Taxpayer Advocate Service (TAS) employees are largely furloughed and those who are excepted are not permitted to work on individual taxpayer cases. This situation raises important questions about the IRS and Treasury’s interpretation of the Anti-Deficiency Act. What should be TAS’s role in a shutdown, and who will protect taxpayer rights if TAS is not permitted to engage in those activities?  

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In a February 2018 PT post, guest bloggeStuart J. Bassin explained the legal framework around a shutdown:

Spending and taxation authority reside in Congress under Article I, Section 8 of the Constitution; the Executive has no independent taxation or spending power. Separately, Article I Section 9 prevents unauthorized spending, providing that “No Money shall be drawn from the Treasury, but in consequence of appropriations made by law.” When a lapse in appropriations occurs, the government necessarily shuts down. Neither the President nor Congress decides to shut down the Government; it happens automatically under the Constitution. 

Statutory law develops the constitutional prohibitions and invokes the criminal law to enforce the prohibition. Under Section 1341(a) to Title 31 of the U.S. Code, federal employees “may not make or authorize an expenditure or obligation” or involve the “government in a contract or obligation” absent a lawful appropriation. Similarly, under Section 1342, federal employees “may not accept voluntary services for the government … except for emergencies involving the safety of human life or the protection of property.” The “emergency” exception is narrowly defined to exclude “ongoing, regular functions of government the suspension of which would not imminently threaten the safety of human life or the protection of property.” Section 1350 makes a knowing violation of either provision a felony punishable by up to two years in prison. 

So, when there is no Congressional appropriation funding the IRS, the Anti-Deficiency Act allows the agency to continue limited operations only “for emergencies involving the safety of human life or the protection of property, albeit with “volunteer” labor.  

This brings us to the Taxpayer Advocate Service. Given the substantial expansion of IRS operations reflected in the revised shutdown plan, it was disappointing to see the role of the Taxpayer Advocate Service remain the same. Bob Kamman notes: 

There are now two “excepted” Category B employees allowed in each local office: The local TA, and either a group manager or a “lead case advocate.”  Their jobs are to “Check mail to comply with the IRS’s requirement to open and process checks during a shutdown while also complying with the statutory requirements that TAS maintain confidential and separate communications with taxpayers and that TAS operate independently of any other IRS office . . .Screen the mail for incoming requests for Taxpayer Assistance Orders and notify the appropriate Business Unit that a request has been made tolling any statute of limitations.” 

It doesn’t sound like they are allowed to answer the phone or work cases.  Protecting IRS integrity doesn’t extend this far? 

Apparently it doesn’t, at least not in the eyes of the IRS. Multiple TAS employees have privately confirmed that they are not permitted to work on taxpayer cases during the shutdown, even where a hardship is present.

TAS plays a crucial role in the tax collection system, as a backstop protecting taxpayers from serious financial hardship. As such, one might think that TAS activities related to taxpayer hardships would be excepted. Certainly taxpayers threatened with homelessness or living without heat or water view their situations as “emergencies involving the safety of human life or the protection of property”. However, the IRS Office of Chief Counsel has interpreted the “protection of property” prong to refer only to government property (Exception Category B of the shutdown plan: “Necessary for the Safety of Human Life or Protection of Government Property”). The NTA strongly disagrees with this interpretation, and she has called on Congress to clarify the statute.  

In her Fiscal Year 2015 Objectives Report to Congress (June 30, 2014), Nina Olson analyzed the Anti-Deficiency Act and raised several concerns with the IRS’s interpretation of its exceptions as applied to TAS. She also compared the IRS’s 2013 shutdown policy to its prior shutdown contingency plan and to the interpretations of other federal agencies and the OMB. It’s illuminating to revisit that report now in light of the original and revised shutdown plans for 2018/2019. I recommend reading the report for the full background and detailed analysis.  

The good news is that the IRS has addressed or partially addressed some of the NTA’s previous concerns. The January 2019 shutdown plan provides for the recall of 1,989 SBSE collection representatives whose duties include releasing liens and levies as required by law. Shockingly, release of levies was not a function performed at all during the 2013 shutdown. The current plan also preserves TAS’s independence by permitting TAS employees to open their own mail, which also was not allowed in 2013. However, the IRS has not changed its interpretation of the “protection of property” exception and it has not conceded that TAS plays an integral role in protecting the integrity of tax collection and in preventing taxpayers from experiencing irreparable harm.  

The limited IRS telephone service provided for in the new shutdown plan has only been open since January 22, and it is not clear yet whether the current operations plan will be sufficient to protect taxpayers against serious harm from unlawful collection actions. Anecdotal reports on the ABA Tax Section’s Low-Income Taxpayer email list suggest that taxpayers and representatives may experience inconsistent treatment when calling in, with some IRS representatives able to accept faxed authorizations and some not, and some representatives claiming they have no ability to address the caller’s hardship. Problems with front-line collection employees are nothing new to taxpayer representatives. One could argue that the sufficiency of the new shutdown plan is not open to debate, as Congress has already determined in enacting sections 7803(c) and 7811 that the NTA and TAS are a necessary safeguard within the system to protect taxpayers from unlawful collection action.  

When the shutdown ends, I anticipate the NTA forcefully renewing her legislative recommendation that Congress 

Clarify that the emergency exception to the Anti-Deficiency Act for the protection of property includes taxpayer property as well as government property. Alternatively, clarify that the National Taxpayer Advocate may incur obligations in advance of appropriations for purposes of assisting taxpayers experiencing an economic hardship within the meaning of IRC § 6343(a)(1)(D) due to an IRS action or inaction, and that the IRS may incur obligations in advance of appropriations for purposes of complying with any Taxpayer Assistance Order issued pursuant to IRC § 7811.

Such clarification would be a relief for taxpayers in a world in which future shutdowns seem inevitable.  

After The Shutdown:  Dealing with Time Limitations, Part II

In the second post of the series “After the Shutdown” Professor Bryan Camp connects the shutdown with the thorny issue of when a time limit is jurisdictional. Les

Part I discussed how a reopened Tax Court might apply the Guralnik case to ostensibly late-filed petitions.  I explained how it might apply the case narrowly or broadly.  This post moves beyond Guralnikand starts exploring the correctness of the Court’s underlying assumption: that time limits in the Tax Code for taxpayers to petition the Tax Court to hear their disputes with the IRS are jurisdictional.  A possible silver lining to the shutdown may be that it gives the Court an opportunity to revisit that assumption.

Guralnik is essentially a work-around to equitable tolling.  The Tax Court says it cannot apply equitable principles to most statutes of limitation in the Tax Code because those statutes are, in its view, part and parcel of the Congressional grant of subject matter jurisdiction to the Tax Court.  I believe that view is based on an outdated understanding of the law.  I have posted a paper on SSRN that goes into great detail on what the current law is and how it should apply to three limitation periods in the Code: §6213, §6330(d), and §6015(e).  Today’s post is a summary of what I call the “new thinking” about jurisdictional time periods that the Supreme Court has been wrestling with for the past 10-15 years. For fuller treatment, please see my paper on SSRN.  For the Cliff Notes version, read on.

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Starting in Kondrick v. Ryan, 540 U.S. 443 (2004), the Supreme Court became obsessed with distinguishing between jurisdictional time periods and “mere” claims processing rules.  At that time, courts routinely presumed that all time limits were jurisdictional in nature. By 2013, however, the Court had totally flipped the traditional presumption.  The new thinking is that time limits are presumed non-jurisdictional unless Congress had done something special to indicate otherwise.  Here is how the Court summed it up in Sebelius v. Auburn Regional Medical Center, 568 U.S. 145 (2013).  Be sure to empty your mouth of liquid before you read on.

To ward off profligate use of the term jurisdiction, we have adopted a readily administrable bright line for determining whether to classify a statutory limitation as jurisdictional. We inquire whether Congress has clearly stated that the rule is jurisdictional; absent such a clear statement, we have cautioned, courts should treat the restriction as nonjurisdictional in character. This is not to say that Congress must incant magic words in order to speak clearly. We consider context, including this Court’s interpretations of similar provisions in many years past, as probative of whether Congress intended a particular provision to rank as jurisdictional. 568 U.S. at 153.

The spit-take is on the phrase “readily administrable bright line.”  It makes you wonder what planet the Justices had just visited.  Folks, there is no bright line.  There are, by my count, five indeterminate factors that the Court instructs lower courts to consider.  But fear not!  The task is not hopeless; it is merely very difficult.

Please note that all my case cites are to Supreme Court cases after 2000.  I’ve read what I think are all the relevant ones in order to synthesize these factors.  Note further that you simply cannot trust any court case before then.  And you cannot really trust many lower court cases before the Supreme Court’s “we-really-mean-it” decisions in 2013 (Auburn Regional) and 2015 (Kwai Fun Wong).  If someone cites a case to you, go look at the date to see if it is even attempting to reflect the Supreme Court’s new thinking.  Here is my summary of that thinking, divided into five factors.

  1. Mandatory Language

 The first factor any court will consider is the text of the relevant statute.  If  the text expressly refers to subject-matter jurisdiction or speaks in jurisdictional terms, then that will generally be the end of the analysis.  Under the old presumption, a statute that used mandatory language was presumed jurisdictional and mandatory language made it difficult to overcome the presumption.  Under the new thinking, however, while mandatory language is still one factor to consider, it is no longer very important.  Words like “shall” or “must” just don’t cut it anymore.  The Supreme Court has repeatedly rejected the idea that mandatory language alone—even really emphatic language—makes a time period jurisdictional. Musacchio v. United States, 136 S.Ct. 709 (2016)(defendant in criminal prosecution not allowed to raise statute of limitations for first time on appeal because the limitation period was not jurisdictional despite its mandatory language); United States v. Kwai Fun Wong, 135 S.Ct. 1625 (2015)(limitations period which said a claim brought after the deadline date “shall be forever barred” was not jurisdictional).

  1. Magic Words

A second factor is the presence or absence of the term “jurisdiction.”  It turns out that while the word “jurisdiction” is important, it is not determinative.  The Supreme Court has found a statute jurisdictional even without the word “jurisdiction” in it. Miller-El v. Cockrell, 537 U.S. 322 (2003)(finding that the statutory context of 28 U.S.C. §2253 made it jurisdictional even though it did not contain the magic word “jurisdiction”).  And on the flip side, the Court has also found a statute of limitations to be non-jurisdictional even though the statute contained the word “jurisdiction” in it! SeeReed Elsevier v. Muchnick, 559 U.S. 154 (2010)(overruling widespread agreement among Circuit Courts to hold that the term “jurisdiction” in 17 U.S.C. §441(a) was not a clear enough statement because it just described a court’s ability to hear a particular issue in a larger copyright infringement suit and not the courts ability to hear the rest of the suit).

  1. Statutory Context

A third important factor to consider is the relationship of the limitation period to the surrounding statutory scheme.  That is statutory context.  The Supreme Court has focused on this factor to explain its reluctance to label a limitation period as “jurisdictional” when the limitation period is present in the same statutory section as a concededly jurisdictional grant.  SeeGonzalez v. Thaler, 565 U.S. 134 (2012)(even though 28 U.S.C. §2253(c)(1) was a jurisdictional provision, the neighboring limitation in §2253(c)(3) was not);Sebelius v. Auburn Regional Medical Center, 568 U.S. 145 (2013)(rejecting argument that proximity of 42 U.S.C. §1395oo(a)(3) to concededly jurisdictional requirements in §1395oo(a)(1) and §1395oo(a)(2) made the (a)(3) time requirements also jurisdictional).

  1. Judicial Context

This is just another word for “precedent.”  The Court has not been reluctant to reverse long-standing precedent…when the precedent is from lower courts.  See e.g.Reed Elsevier v. Muchnick, 559 U.S. 154 (2010).  But it’s a different story when the long-standing precedent is of the Supreme Court’s own making.  SeeBowles v. Russell, 551 U.S. 205 (2007)(deciding that the time limits in 28 U.S.C. §2107 were jurisdictional simply because of “our longstanding treatment of statutory time limits for taking an appeal”); J.R. Sand and Gravel v. United States, 552 U.S. 130 (2008)(holding that time limits in 28 U.S.C. § 2501 were jurisdictional because of four prior Supreme Court cases said so and “petitioner can succeed only by convincing us that this Court has overturned, or that it should now overturn, its earlier precedent.”).

  1. Legislative Context

The final type of context that the Supreme Court has factored into its jurisdictional analysis is what I call the legislative context.  Others might call it legislative purpose.  Whatever you call it, the Court has sometimes looked to see whether finding a limitation period jurisdictional would further or hinder the policy goals of the underlying statutory scheme.   I would not put a whole lotta faith in this factor right now because the current composition of the Supreme Court seems to me (and to this USA Today article) to tilt towards textualists. And textualists don’t seem to like looking to purpose unless they get really desperate.

But there is hope.  I think the clearest example of where the Court found legislative context to be the deciding factor is Henderson v. Shinseki, 562 U.S. 428 (2011).  And that opinion was authored by Justice Alito.  There the Court held that the limitation period in 38 U.S.C. §7266(a) for a veteran to obtain court review from an adverse Veterans Administration agency decision was not jurisdictional.  After first finding that neither the factors of text nor precedent pointed clearly in one direction or another, Justice Alito turned to the legislative context.  “While the terms and placement of §7266 provide some indication of Congress’ intent, what is most telling here are the singular characteristics of the review scheme that Congress created for the adjudication of veterans’ benefits.” Focusing then on the Congressional intent, Justice Alito found that Congress meant for the entire statutory scheme for veterans benefits to be highly remedial.

The reason I go into some detail on the Henderson case is because I think it is pretty relevant to how a court might approach interpreting the limitation provisions in the Tax Code.  After all, the whole point of the U.S. Tax Court’s existence is to give taxpayers a pre-payment remedy.  It’s a big-time remedial scheme.  That is, I think, particularly important when considering the limitation periods in §6213, §6330(d), and §6015(e).  More on that in Part III, coming soon.

After The Shutdown:  Dealing with Time Limitations, Part I

Professor Bryan Camp offers the first of a series of posts discussing the shutdown and its impact on taxpayers receiving IRS stat notices and notices of determinations. This is a particularly timely post as we heard at the ABA Tax Section meeting that IRS and Tax Court staff and practitioners are meeting today to discuss the shutdown. Bryan offers some suggestions to minimize the impact of the shutdown on taxpayers with Tax Court filing deadlines. Les

The Tax Court officially closed its doors on December 28, 2018.  During one of the panels at the ABA Tax Section Pro Bono and Tax Clinics Committee meeting this past weekend in New Orleans, the question arose of how the shutdown affected the various administrative and judicial time periods for taxpayers to take various actions.  For example, if the 90 day period in § 6213 for filing a petition expired during the shutdown, would the taxpayer still be able to file a timely petition on the day the Tax Court reopens?

Like Winter, litigation is coming.  The point of this series of posts is to help readers prepare.

The Tax Court may actually have already given us one answer to the question of how the shutdown affects various time periods.  In Guralnik v. Commissioner, 146 T.C. 230 (2016), the Court held that a day the Tax Court was physically closed would not count as part of the §6330(d) time period to protest a CDP Notice of Determination.

Keith Fogg and I have slightly different takes on how Guralnik might apply and he kindly invited me to post my thoughts on the matter.  Today’s post will explain why I believe that Guralnik is strong support for the proposition that none of the shutdown days are days that count for jurisdictional time periods.

In future posts I will explain how taxpayers and the Tax Court might actually make some lemonade from this lemon of a shutdown.  The Tax Court currently holds that the following time periods are jurisdictional: the 90/150 day period in §6213; the 30 day period in §6330(d); and the 90 day period in §6015(e).  That means that the IRS Office of Chief Counsel cannot simply stipulate away the problem.  The looming litigation gives the Tax Court a wonderful opportunity to revisit its thinking about the jurisdictional nature of these statutes.  So in the next series of posts I will summarize a paper I posted on SSRN that explains: (1) the current Supreme Court doctrine for evaluating whether a statutory time period is truly a limitation on a court’s subject matter jurisdiction; and (2) how that doctrine applies to the time periods in §6213, §6330 and §6015(f).

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Facts and Holding in Guralnik

In Guralnik, the taxpayer (TP) was trying to file a collection due process (CDP) petition.  On the day before the 30thday, the TP sent his petition using Fed Ex “First Overnight” service.  Fed Ex was unable to physically deliver the petition the next day (the last day of the 30 days) because the Tax Court was officially closed that day due to a snowstorm. Fed Ex successfully delivered the petition the next day, one day late.  The question was whether the petition was timely.

The TP first asked for equitable tolling.  Keith Fogg and Carl Smith filed an amicus brief in the case, arguing the Court could do that because the 30 day period was not jurisdictional.  The Tax Court rejected the argument because, it said, §6330(d) 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 TP next argued for the §7502 statutory mailbox rule.  The Tax Court rejected that argument because the particular Fed Ex service used (“First Overnight”) was not listed as an approved private delivery service.  If the TP had just used “Standard Overnight” that would have been fine.  But the “First Overnight” was a new service and the IRS had not updated the list of approved private delivery services to include it. And you wonder why people hate lawyers.

The TP next argued that the snow day was a “legal holiday” within the meaning of §7503.  The Tax Court said “nope.”

But the Tax Court then latched onto a really nifty idea.  It decided that Tax Court Rule 1(b) allowed it to adopt the rules for counting days contained in Federal Rules of Civil Procedure (FRCP) 6.  Included in FRCP 6 is a rule for dealing with days when a court is inaccessible.  FRCP 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 happily reasoned 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).

The Tax Court then applied FRCP 6(a)(3) to the facts of the case and did not count the snow day as part of the 30 day time period set out in §6330(d).  Wrote Judge Lauber:

We conclude that Civil Rule 6(a)(3) is “suitably adaptable” to specify the principle for computing time when our Clerk’s Office is inaccessible because of inclement weather, government closings, or other reasons. Civil Rule 6(a)(3) provides that the time for filing is then “extended to the first accessible day that is not a Saturday, Sunday, or legal holiday.” Because the petition was filed on February 18, 2015, the first accessible day after the Court reopened for business, the petition was timely filed and we have jurisdiction to hear this case.

Application of Guralnik to Shutdown Cases:  The Good, the Bad, and the Different.

One could read Guralnik as a supersized mailbox rule.  It would apply to taxpayers faced with a time period that expired during the shutdown.  Such taxpayers could still successfully file a timely petition so long as they did so on “the first accessible day after the Court reopen[s] for business.” I think this is how Keith and most folks read the case and I admit it’s the most solid reading.  Let’s call it the narrow reading.

The Good

The narrow reading of Guralnik has the advantage of letting the Court avoid messy equitable inquiries.  It’s a bright-line counting rule and could really help process a bunch of cases into the system and get them to a quicker resolution on the merits.  That’s good.  And it will probably give relief to a large number of taxpayers who are actually able to quick-like-a-bunny file on the day the Tax Court reopens.  It will also give relief to taxpayers who have attempted to file but whose petitions were undeliverable because of the shutdown and are being held for re-delivery by their chosen delivery service.  That’s also good.

The Bad

The first downside of the narrow reading is that it would only help those taxpayers whose deadline hit during the shutdown.  While that is likely the largest group of affected taxpayers, there may be some who received their Ticket to the Tax Court (be it a Notice of Determination or Notice of Deficiency or other ticket) at some point during the shutdown but at a time where their deadline comes after the shutdown ends.

For example, let’s say a taxpayer received an NOD 40 days ago, when the shutdown had not begun.  There are still 30 days left to petition the Tax Court, but the shutdown has prevented the taxpayer from dealing with the NOD, either by filing a petition or by going to Appeals.  Or perhaps a taxpayer receives an AUR NOD during the shutdown.  I have heard of taxpayers still receiving automated notices of intent to levy during the shutdown (and having no one to call), but I welcome comments on whether some IRS automated processes are still spitting out NODs.

For these types of taxpayers, the narrow reading of Guralnik means they must ignore the shutdown and plan on the Tax Court reopening in time for them to make a timely filing without having the usual opportunity to resolve the matter with Appeals or other IRS office.

The second downside to the narrow reading is that it requires taxpayers to assiduously monitor the shutdown situation and the Tax Court’s status.  They cannot plan.  They, or their representative must carefully monitor the Tax Court’s status because the shutdown has essentially reduced their limitations period to one day.  Especially if the Tax Court reopens with no warning, very few taxpayers would be able to meet the  “the first accessible day after the Court reopen[s] for business.”  So the cautious use of Guralnik would help only those taxpayers who filed their petition on the FIRST day the Court reopens (hereinafter “the Magic Day”).

One way the Court could ameliorate this second downside is to delay its reopening after the Shutdown Ends.  For example, the Court could post an order that says it will remain closed for the first 10 business days after the President signs an appropriation bill funding the Court.  That would not only allow taxpayers time to get their acts (and petitions) together to file on the Magic Day, it will also allow Tax Court personnel to clear the decks of accumulated work, re-calendar cases, and prepare for the Magic Day snowstorm of filings.  This idea was floated at the ABA Tax Section Meeting last week.  I think Keith came up with it, but cannot recall for sure.

A Different Understanding of Guralnik?

The narrow reading of Guralnik limits its application to only those situations where the last day of the applicable deadline falls on an inaccessible day.  But the Court could also apply Guralnik more broadly, in a way that would ameliorate both downsides.  I take this idea from Judge Lauber’s reasoning: “Rather than expanding a court’s jurisdiction, Civil Rule 6 simply supplies the tools for counting days to determine the precise due date.”  The idea here is to read FRCP 6 as a tolling provision and not just as a bulked-up mailbox rule.

Judge Lauber’s reasoning recognizes the underlying concern of FRCP 6’s counting rule:  unpredictable events should not count against limitation periods.  The idea of unpredictability was central to the D.C. Circuit’s opinion in In re Swine Flu Immunization Prod. Liab. Litig., 880 F.2d 1439 (D.C. Cir. 1989), a case the Tax Court relied on in Guralnik.  The Swine Flu court used Civil Rule 6(a) “as a guide to interpreting the `jurisdictional’ statute establishing the time for filing with the agency,”  (emphasis supplied). The court there  applied the idea of FRCP 6 to an administrative deadline, excluding both the final Sunday and the following day when government offices were closed on account of a snowstorm.  Notice that, by its plain language, FRCP 6 deals only with counting dates relating to court filings.  But the idea of unpredictability is larger than the words.  Put another way, the words of FRCP 6 embody an idea.  The idea of unpredictability.  The D.C. court explained: “we find it inconceivable that Congress would have wished to bar plaintiffs who fail to anticipate on Friday that the Government will decide to close a filing office the following Monday due to a snowstorm.”

Both Judge Lauber’s reasoning and the D.C. Circuit’s reasoning allow for a more generous reading of Guralnik.   If the principle underlying FRCP 6(a)(3) is truly that we do not count inaccessible days that arise because of unpredictable or extraordinary circumstances—whether they be snowstorms or shutdowns—then such days should not count, period.  No logic limits the counting rule to only the situations where the last day of the deadline falls on an inaccessible day.

This broader reading of Guralnik would not be decision that forces the Court to apply equitable principles to each case.  It would be a decision simply about whether the days when the Court is inaccessible were predictable or not.  Saturdays and Sundays and federal holidays are predictable.  They are on the calendar.  But snowstorms and shutdowns are not predictable.  So those days should not “count” for limitation periods.

One obvious barrier to this broader reading of Guralnik is that the text of FRCP 6 talks only about situations where the last day falls on an inaccessible day.  But, again, just as the D.C. Circuit applied FRCP 6 to a situation that was not covered by its plain language, so can the Tax Court here apply the idea of FRCP 6—the purpose of FRCP 6—to the shutdown situation.  Again, in the words of the D.C. Circuit: “Statutory provisions laying down time periods for taking appeals, like any other enactments, must be interpreted and applied by courts; in so doing, we use the federal rules as guides. Surely, the jurisdiction of the federal courts to construe the jurisdictional provisions of a statute cannot be a matter of serious dispute.” (citations and internal quotes omitted).

The insight of the D.C. Circuit, adopted by the Tax Court in Guralnik is that taxpayers should not be held accountable for situations which they cannot neither predict or control.  The unpredictability of the shutdown mirrors the unpredictability of snowstorms.  Nay, it magnifies that unpredictability.  No one can predict precisely when the shutdown will end.  This inability makes it impossible for taxpayers and their representatives to plan their filings.  They simply cannot determine the precise due date.  Every day the shutdown continues is another day that some deadlines have run and is another penultimate day for other deadlines.  Will the shutdown continue the next day?  Will the shutdown continue for three more days?  Who the heck knows!  Similarly, taxpayers subject to a 90 day deadline who received their Tax Court ticket before the shutdown will have unexpectedly lost all the days of the shutdown to resolve their case in the Office of Appeals.

Remember, the FRCP is just a standardized rule of procedure, promulgated by the Supreme Court.  The courts can, and do, regularly interpret the FRCPs using a common law case-by-case approach.  Recent opinions on the meaning and application of FRCP 8(a)(2) are good examples.  So if the D.C. Circuit can apply FRCP 6 to an agency deadline by using the idea that it was “inconceivable” that Congress intended the limitation period to include inaccessible days, the Tax Court can do the same here and for the same reason: it is inconceivable that Congress intended the 30 and 90 day periods within which to petition the Tax Court for relief to be swallowed up by a government shutdown that is now over 30 days in length.  Those shutdown days simply should not count towards the applicable limitation period.

An alternative approach to applying this broader reading of Guralnik to the shutdown situation would also treat FRCP 6 more as a tolling provision, but in a more limited way than allowing any and all inaccessible days to not count towards the applicable limitation period.  Again, keep in mind we are not talking about equitable tolling.  The question is about finding an administrable bright-line counting rule to deal with the cases filed after the shutdown ends, both those cases filed on the Magic Day, and those cases that miss the Magic Day but are still filed timely….if you don’t count the shutdown days.

The alternative approach would recognize that a single inaccessible day in the middle of a 90 day period or 2 year period would be little more than a Saturday or Sunday or holiday in terms of impact.  It would not interfere with planning nor with the ability of the taxpayer to determine the precise due date for the Tax Court petition the way that this interminable shutdown does.  But when, as here, the inaccessible days keep piling up and their end point is unknowable, the FRCP 6(a)(3) could be applied to acknowledge that difference.  One bright line interpretation would stop counting inaccessible days when they reach some percentage of the applicable limitations period, perhaps over a third.  Another bright line would be to say inaccessible days do not count when they are in excess of four in a row (longer than any three day weekend).

Next Posts

The Court could also take an equitable tolling approach by apply FRCP 6 to the Magic Day filings but then evaluating all other filings on a case by case basis.  That would require the Court to depart from its long-standing view that sections 6213, 6330(d) and 6015(e) are jurisdictional statutes.  I think there is a very good case to be made why the first two are not jurisdictional and a very weak case for the third.  That is the subject of future posts in this series.

IRS Updates Contingency Plan

Frequent contributor Bob Kamman discusses the IRS’s updated lapsed appropriations contingency plan for the filing season. Les

The first thing to realize about the IRS Filing Season Contingency Plan is that it is already outdated. As the Overview states,

“The IRS Lapse in Appropriations Contingency Plan describes actions and activities for the first five (5) business days following a lapse in appropriations. The plan is updated annually in accordance with guidance from the Office of Management and Budget (OMB) and the Department of Treasury. While we do not anticipate using the plan, prudent management requires that agencies prepare for this contingency.”

Although the cover sheet is dated January 15, 2019, that excerpt from Page 5 is dated January 11, 2019.  Filing season, it states, runs from January 1 through April 30, 2019.  What happens after the first five days?

“In the event the lapse extends beyond five (5) business days, the Deputy Commissioner for Operations Support will direct the IRS Human Capital Officer to reassess ongoing activities and identify necessary adjustments of excepted positions and personnel.”

In lay terms, this is known as “flying by the seat of your pants.”

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The general rule is that all IRS employees must stay home because they are not essential and there is no money to pay them.  (Of course, history tells us that they will be paid when the shutdown ends.)  The exception to the rule is that they must work, without pay, if they fall into one of several “excepted” categories.

Category “A” includes activities that (A1) are already funded, like those related to TCJA implementation and disaster relief; activities (A2)  “authorized by statutes that expressly permit obligations in advance of appropriations; and the catch-all (A3) “authorized by necessary implication from the specific terms of duties that have been imposed on, or of authorities that have been invested in, the agency.”  Until anyone objects, this A3 means what any given lawyer says it means on any given day.

Then there are “excepted” employees (remember, these are the ones who must show up to work) in Category B.  Their jobs are necessary to safeguard human life (see Police Officers, below) and, more often, to protect government property.

To understand this category, note that “tax revenues constitute Government property which the Service must safeguard.”  But not just money is involved:

 “…the Service may continue processing tax returns to ensure the protection of those returns that contain remittances. Activities necessary to protect other types of Government property, including computer data and Federal lands and buildings, may continue during a shutdown as well.”

In fact, not just money, buildings, and computers are at stake.  It is the IRS reputation itself.  The agency must “maintain the integrity of the federal tax collection process.” (This mostly seems to come under A3, not B, for those keeping score at home.)

Finally, there is the “turn out the lights” Category C, for activities that “provided for the orderly termination of those functions that may not continue” during a shutdown.

Those are the rules.  Here are some examples of how they are being applied.

Category A1: This includes “Income Verification Express Service (IVES) and Revenue & Income Verification Service (RAIVS) Photocopy Programs.”  These allow mortgage lenders  to verify taxpayer incomes.  It was recently determined that this was “excepted” work, perhaps because it is funded by user fees.

Category A2: This one is easy.  IRS does not have any.  It just shows up in the report because Treasury needs it for other reports.

Category A3: “Maintaining minimum staff necessary to handle budget matters related to the lapse in appropriations.”  Presumably these employees will have other work to do, when the lapse ends.

Category A3 also includes “Activities necessary for the payment of refunds, including processing electronic returns through issuance of refunds; processing “Paper Refund Tax Returns” through issuance of refunds; and processing “1040X Amended Refund Returns Adjustments including Carrybacks, Amended Returns, Duplicate Filed Returns (DUPF), Correspondence, Injured Spouse Claims, Disaster Claims, F843 Claim for Refund and Request for Abatement in support of issuing refunds.”

Issuing those refunds is necessary, not because they are government property, but because they are part of a system that maintains IRS integrity.

For Category B, there is a long list of activities necessary for the protection of human life or government property.  “The risk to life or property must be near at hand and demand an immediate response. To ensure that employees only perform functions that meet this requirement, each business unit will conduct regular meetings throughout a lapse in appropriations to identify actual imminent threats and activate excepted personnel only as required to perform related excepted activities.”   Here are just some of these examples:

  • Completion and testing of the upcoming Filing Year programs
  • Processing Remittances including Payment Perfection
  •  Responding to taxpayer filing season questions (call sites)
  • Continuing the IRS’ computer operations to prevent the loss of data
  • Protection of statute expiration, bankruptcy, liens and seizure cases
  •  Protecting Federal lands, buildings, and other property owned by the United States
  • Upcoming Tax Year forms design and printing
  • Maintaining criminal law enforcement and undercover operations

(You might find it odd that designing next year’s forms has at least the same priority as criminal law enforcement.  You will agree, however, once you see this year’s forms.)

Those are the activities that are necessary.  Here are some examples of work that is not:

  •  Non-automated collections
  •  Legal counsel
  • Taxpayer services such as responding to taxpayer questions (call sites) (But only during Non-Filing Season.  During Tax Season, they hope to operate.)
  • All audit functions, examination of returns, and processing of non-electronic tax returns that do not include remittances

So let’s not call it a shutdown.  When audit and collection work is suspended, let’s call it a holiday.  Were it not for the staff trying to prevent statute expirations, we could almost call it amnesty.

Here are some details from the latest plan:

Chief Counsel

“Chief Counsel’s primary responsibility during a lapse is to manage pending litigation, the time-sensitive filing of motions, briefs, answers and other pleadings related to the protection of the government’s material interests. Due to Counsel’s separate litigation function, the number of excepted Counsel positions will not align with excepted activities authorized in other IRS business units. Counsel’s plan assumes that the Federal and District Courts will be open, and that litigation will continue uninterrupted. The plan excepts, on an as needed basis, those personnel assigned to litigation that is scheduled for trial or where there is a court-imposed deadline during the first five days of a lapse. Personnel are not generally excepted to perform litigation activities where a trial or other court-imposed deadline is scheduled more than five days after the start of the lapse. Personnel assigned to those cases should seek continuances as part of an orderly shutdown. If a continuance is denied, the case will be reviewed to determine if work on the case may be excepted. . . .

“Chief Counsel personnel are also excepted, on an as needed basis to provide required legal advice necessary to protect statute expiration, and the government’s interest in bankruptcy, lien, and seizure cases.”

Taxpayer Advocate Service

There are now two “excepted” Category B employees allowed in each local office: The local TA, and either a group manager or a “lead case advocate.”  Their jobs are to “Check mail to comply with the IRS’s requirement to open and process checks during a shutdown while also complying with the statutory requirements that TAS maintain confidential and separate communications with taxpayers and that TAS operate independently of any other IRS office . . .Screen the mail for incoming requests for Taxpayer Assistance Orders and notify the appropriate Business Unit that a request has been made tolling any statute of limitations.”

It doesn’t sound like they are allowed to answer the phone or work cases.  Protecting IRS integrity doesn’t extend this far?

Small Business / Self Employed

In this operating division, 2,614 of the 2,938 Category B employees are in Collection and another 264 are in Examination. But wait – what happened to that  holiday?

Most of them are Collection Representatives who “carry out revenue protection activities that include responding to taxpayers who have received a collection notice through the Automated Collection System and clarifying the payment process; assisting taxpayers with setting up installment agreements for tax payments; assist taxpayers with general collection processes; serve as the gateway for transferring taxpayers to Accounts Management for appropriate filing season inquiries;  and provide assistance with releasing levies and liens as required by law.” In other words, you can contact them but they won’t contact you.

Those in Examination “protect statute expiration/assessment activities, bankruptcy or other revenue generating issues.   Open incoming mail to identify documents required to be processed to protect the government’s interest during shutdown. Complete computer operations required to determine necessary actions, prevent data loss and route documents associated with imminent statutes.”

Wage And Investment

These are the workers at 10 Service Centers and 15 call sites,  most of whom are in Category A3.  IRS hopes that 12,961 show up for Submission Processing, and 17,520 show up for Accounts Management, which includes call sites.

From other sources, I find that at least 6,600 of these employees are seasonal.  Would you take a temporary job with IRS in January, with the hope of being paid by April? It might make a difference if you needed to pay for daycare.

How many in W&I “Refundable Credits Policy & Program Management” will work on “Pre-refund case selection to protect improper payments from being released to ineligible taxpayers and perfect refunds to verify the refund is appropriate”?  An army of 51.

Compare that with the 469 needed for the IVES and RAIVS programs.  IVES “provides express return transcript, W-2 transcript, and 1099 transcript delivery services to mortgage lenders and others within the financial community to confirm the income of a borrower during the processing of a loan application. RAIVS services taxpayer request for copy of tax return.”

Online Services

In Category B, 25 employees are needed because “Online Services (OLS) is responsible for the development and continuity of operations for IRS.gov, which is the agency’s exclusive external facing website servicing the public. IRS.gov is the means in which taxpayers may continue to file returns and submit remittances online. OLS anticipates that 9 employees will be needed for the duration of the shutdown to maintain the IRS.gov website.”

Facilities Management

Did you know IRS has Police Officers?  There are nine of them kept on duty who along with 13 Security Specialists and five Safety Officers “support general security services that increase as the IRS population escalates in excepted employees during the Filing Season.   Additionally, security and emergency response actions are influenced by other external activities such as bomb threats, suspicious packages and threats to employees. Situational Awareness Management Center/Threat Incident Reporting is operational 24/7 during a shutdown.”

Leave (Not Brexit) Policy

Finally, current and former IRS employees should find this interesting.  I am not sure it  is how the situation was handled in previous shutdowns, but maybe I am thinking of snow days.

“Managers should advise employees who are scheduled to be on annual, sick, court, or military leave that, if a lapse in appropriations occurs while they are on leave, their leave will be canceled, and they will be placed in a furlough status. According to 5 CFR § 752.402, a furlough means ‘the placing of an employee in a temporary status without duties and pay because of lack of work or funds or other non-disciplinary reasons.’”

Dealing with the Shutdown When You Have an Impending Calendar Call: Take Me Back to 2013

We welcome Professor Caleb Smith who has decided to do something productive at a time when productivity does not seem to be the watchword of our politicians. I wrote a post about Tax Court calendars before and after a government shutdown in the early days of our blog. What happened in 2013 might also give you some perspective on what to expect now when the shutdown ceases. Keith

It probably comes as no shock that, in the midst of the government shutdown the Tax Court did not issue any designated orders during the week of December 31 – January 4. So, because I apparently don’t handle having free-time well, I looked to orders of the past to help with this (not quite unprecedented) period of Tax Court history. In particular, I wanted to look into orders that dealt with government shutdowns.

The last government shutdown (of a lasting duration) was in 2013. (For a list of all the government shutdowns since 1976, check out this helpful PBS post.) The most natural consequence of a shutdown (and the break in communication between parties) is that additional time is needed -either on deadlines that have previously been established (see T.C. Rule 25(c)), or for the trial itself (see T.C. Rule 133). Because I happen to have a calendar call that is still technically set for February 4, 2019 I was more interested in how the Court had previously dealt with motions for continuance for the trial. As noted on the Tax Court website I should learn by January 19 whether the calendar call will actually take place, but I’d rather not wait until then to begin planning.

In my research of motions for a continuance and referenced the government shutdown, I found six orders from three Tax Court judges. Although there are some general requirements to T.C. Rule 133 that any motion for continuance should wrestle with (addressed later), the orders demonstrate more than anything that, in these sorts of discretionary matters, different judges have different preferences. Accordingly, I have broken up the orders by the issuing judge.

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Judicial Approach Number One (Former Judge Kroupa): “Take Two Aspirin and Call Me If You Still Can’t Figure It Out”

The 2013 shutdown lasted 16 days from October 1 to the October 17. The 2013 Salt Lake City trial session was set for November 4. In my experience, the month before trial is set is often the month things actually start getting done, so it is understandable that the parties may not be prepared for trial with the critical period of time effectively cut in half. The IRS appears to say as much in its motion in two separate Salt Lake City cases (Docket 24802-12 and Docket 16322-12): “we haven’t been able to resolve or narrow the issues over the last few weeks because we were locked out of our offices, so please give us more time.”

To this, Judge Kroupa says: “I encourage you to try to settle or narrow the issues for trial. So I’m holding your continuance motion in abeyance until calendar call where you can give an update. And, because I’m serious about encouraging you to settle or narrow the issues, at calendar you will also have to actually discuss the efforts you’ve made to settle or narrow the issues.”

This approach either reflects stubborn optimism or stern stewardship over churning through cases on the Tax Court docket. In either case, the result was the same: for both cases, continuance was granted at trial, and a stipulated decision entered in August of the following year.

Judicial Approach Number Two (Judge Holmes): “Take Two Aspirins and Be Prepared to Submit Status Reports”

The approach taken by Judge Holmes (Docket 10600-12 and Docket 1659-13) was not significantly different from Judge Kroupa’s. Essentially, they each ended in the parties showing up to trial and orally requesting a continuance (which was subsequently granted).

In the Villegas case, the motion for continuance wasn’t even made until the calendar call on October 21, so there really wasn’t much of another option for Judge Holmes. What is striking to me is that Tax Court didn’t cancel the calendar when the shutdown continued within a week of it (as stated earlier, that will likely not be the case this year).

In the other case (Mid City Cannabis Club), the trial was not actually set until January 27, 2014 (i.e. with more time than that “magical final month” still remaining), but the parties were both nervous because, although they may settle, they were confident they wouldn’t be ready for trial. Although Judge Holmes assures the parties that the case will be put on “status-report track” if it doesn’t settle by calendar, he denies the continuance request until then.

 

Again, denying (or holding in abeyance, like Judge Kroupa) a continuance motion until the trial date is perhaps a way to keep parties working diligently towards resolution. But, also again, the ultimate result is generally the same: the Mid City Cannabis case was continued at trial and a stipulated decision was reached in the summer of 2014 (this time July).

Judicial Approach Number Three (Judge Wherry): “Sure, I’ll Grant the Continuance: We’re in Los Angeles All the Time Anyway”

Only the retired Judge Wherry gives the immediate relief (i.e. granting of the continuance motion prior to trial) that the parties requested. Both of the parties (in both of the orders) simply say they need more time because of issues relating to the shutdown, and that appears to be enough.

 

It should be noted, however, that both of the orders (Docket 23698-12, and Docket 145-11), concern cases on the Los Angeles calendar set for December 9, 2013. Of the four cases that Judges Kroupa and Holmes granted continuances for, only one ended up having to go to trial. And that trial took place in… Los Angeles.

Although it goes unstated in the order, the Tax Court simply comes to L.A. more frequently than it does to places like Salt Lake City. Accordingly, by granting a continuance the Court could simply allow the parties to regroup and come back to the table five months later during the May calendar call. Perhaps things would settle by then (as they did in the Moore case, during that “magical” pre-trial month). Or perhaps they would simply have the trial at that later date (as they did in the Coastal Heart Medical Group case). Either way, the efficiency concerns (that the parties will be at loggerheads, and the case sit on the docket for almost another year) don’t present themselves as starkly in the bigger cities as they do in the smaller.

Learning From the Past and Preparing for the Future: Crafting Your Rule 133 Motion

So what can be gleaned from these six orders (four of which come from judges that no longer are on the Tax Court)? In spite of my preliminary take-away (“different tax court judges deal with these things in their own way”) there are some commonalities, and, dare I say, some lessons to be learned from the orders.

Lesson One: Make the judge aware of your need for a continuance in advance of the trial date, rather than just assuming that they will “get it” that you need one because of the shutdown. The fact that (most of) the continuances weren’t automatically granted in the above cases is evidence that the Court expects you to work things out as much as possible even in limited timeframes. Which leads to the second lesson:

Lesson Two: Give reasons why granting the continuance won’t significantly hinder (or may actually help) the efficiency of the court. If both parties were in the process of working out a settlement (that was thwarted primarily because of a breakdown in communications caused by the shutdown) that seems a pretty good reason to give additional time to work things out and may avoid a trial that was never needed. Similarly, it doesn’t do anyone any favors (and makes everyone look bad) to show up for trial when the issues still aren’t well defined. But you have to be prepared to explain why it is the shutdown “caused” these issues to remain ill-defined or the settlement to remain out of reach. Perhaps there were meetings or document exchanges that had to be cancelled and, if only the shutdown wouldn’t have occurred, the case would be much clearer for all involved. Specificity (rather than just saying “we could use more time to define the issues… even though the petition was filed almost a year ago”) is key.

Lesson Three: Provide the court with a plan (specifically, deadlines) to show you will continue to diligently work on the case. The trial date is, in some ways, just a helpful deadline for the Court to keep parties moving towards settlement. If Tax Court isn’t coming to your town again in the near future, asking for continuance may appear to be an indefinite hold on having any accountability. If Tax Court is coming to town again in the not-so-distant future, you may suggest that it be calendared at that date. Of course, since not every location has that luxury, proposing to be put on the “status report track” may be the best you can do. Four of the six cases discussed above settled without needing to go to trial after the continuance was granted. The two that didn’t settle were able to get calendared within roughly half-a-year. If at all possible, you want to be able to demonstrate a similar likely outcome with your case.

Lesson Four: Detail why you are not dilatory in requesting the continuance at this late date. This lesson is less from the orders and more from the rule itself: namely, that a request for a continuance hearing within 30 days of the calendar/trial that it relates to will ordinarily “be deemed dilatory and will be denied unless the ground therefor arose during that period or there was good reason for not making the motion sooner.” The general rule is that the closer to the trial date you make the continuance motion the less likely it is to succeed unless (1) the reason for the motion only just arose, or (2) there is some other good reason for waiting. Of course, if your calendar date is within 30 days of the shutdown you can argue the reason for the motion “arose during that period”, but you will still want to provide other good reasons why it couldn’t be made sooner. One reason may well be logistics: every continuance motion specifically (and every motion generally, see T.C. Rule 50) is supposed to include whether it is objected to or not by the opposing party. At the moment, it is rather hard to get a word from IRS Counsel as to whether they reject, because they aren’t really around.

I could easily go broke betting on when this shutdown will end, but one thing I am confident of is that there is a lot of work piling up for the Tax Court and IRS in the meantime. On return from the shutdown you don’t want to greet the Tax Court judge with a motion that effectively says “let’s keep this case in your (massive) to-do pile because, man, that shutdown was rough.” Rather, try to empathize: “I know you have a lot on your plate, and we’re working to get this case resolved without a trial (or with as orderly a trial as possible). Help us help you by giving us time to do that.” By (1) letting the court know as far in advance as possible of the need for continuance, (2) providing specific reasons why the continuance is in their interest, and (3) drawing up a plan for how to work towards a resolution of the case you demonstrate to the Court that you are doing your part to keep things orderly and efficient.