Not long ago, I posted on the Reinhart case in which the IRS erroneously issued a decision letter in a collection due process case (CDP) when it should have issued a determination letter. That post drew a number of comments and the commenters made several references to the Ziegler case. In Ziegler the Tax Court refused to dismiss a Tax Court case for lack of jurisdiction and instead granted summary judgment to the IRS. Zeigler is a CDP case where the IRS erroneously issued a determination letter to the taxpayer when it should have issued a decision letter. The taxpayer deserved a decision letter because he filed his request for a CDP hearing too late. The jurisdiction issue presented here continues a discussion raised in an earlier post by guest blogger Carl Smith on the Lippolis case.
Perhaps these cases point to the need for some training in Appeals concerning which letter to queue up in the typewriter, but I will set that issue to the side.read more...
The IRS sent Mr. Ziegler a Notice of Intent to Levy (NOIL) either on June 10, 2011 or June 13, 2011. I will spend a moment wading through the thicket of when the notice was mailed and who screwed up but you can skip this paragraph because in the end it does not matter. The NOIL bears the date June 13 on the first page next to the heading “Notice Date.” I have seen enough notices from the IRS to know that the date on the letter and the date the letter is actually mailed do not necessarily bear any relation to each other. The IRS sometimes mails letters before the date on the letter and even more frequently mails letters after the date on the letter. I imagine it occasionally even mails letters on the actual date stamped on the letter. In any event, the post office stamped June 10 on the certified mailing records to indicate that the NOIL went out on that date.
Interestingly, the IRS argued that it thought the post office “may have erroneously reflected a date of June 10, 2011 because the post office failed to reset its date stamp to June 13, 2011.” (In 2011 June 10 fell on Friday and June 13 fell on a Monday if that matters to anyone.) Given that the IRS regularly relies on the correctness of the postmark in arguing that the postmark sets the time frame for a certain action, and given that it did not matter here whether the date was June 10 or June 13, I question the wisdom of placing the blame for the differing dates on the post office but maybe that is just me. See Proving That You Mailed Tax Court Petition within 90 Days and Still Getting Dismissed as Untimely (forthcoming).
So, either on June 10 or June 13 the CDP notice went to Mr. Ziegler. The Tax Court found that the post office delivered the NOIL to Mr. Ziegler’s address on June 14. Mr. Ziegler, unfortunately, mailed his request for a CDP hearing to the IRS on July 14 and the IRS received it on either July 19 or 20 depending on whether the IRS employee handwritten note or its date stamp controls. It does not matter.
Appeals worked the CDP case with its usual alacrity and issued a determination letter 14 months later on September 28, 2012. Mr. Ziegler timely filed a Tax Court petition within 30 days on October 26, 2012. At some point between October and February 2013 the Chief Counsel attorney assigned to the case realized that the request for the CDP hearing came 31 days after the date of the NOIL. Based on that discovery, the IRS filed a motion to dismiss for lack of jurisdiction.
In the case of Kim v. Commissioner, the Tax Court addressed the issue of a motion to dismiss for lack of jurisdiction where the taxpayer timely petitioned the determination letter but the IRS should not have sent a determination letter. In the Kim case the Tax Court held that it had jurisdiction over the case in this situation even though the taxpayer had failed to timely file the CDP request.
The decision here is inconsistent, or at least arguably so, with the Tax Court’s decision in Boyd which found that missing the 30 day period to petition the Tax Court after the issuance of a determination letter does create a basis for dismissing the case for lack of jurisdiction. However the decision here is consistent with Lippolis. In a prior post, Carl Smith discussed the inconsistency between the Boyd and Lippolis decisions. No doubt the Chief Counsel attorney filed the wrong motion because of this type of confusion. At least, Zeigler provides an opinion in which the Tax Court does not find a time period contained in the same code section dealing with a Tax Court time frame as creating a jurisdictional barrier.
Even though the Tax Court has jurisdiction of Mr. Ziegler’s case, does the mistake by Appeals in sending out the notice of determination letter instead of the notice of decision letter allow him to argue in Tax Court for the correctness of the collection alternative to levy that he proposes? No. It had not reached that issue in Kim but did reach that decision in this case. It changed the motion of the IRS to a motion for summary judgment and then went through an analysis to determine if it should grant that motion. Because of the late request for a CDP hearing, it looked for authority for the IRS to extend the 30 day period within which to make such a request and found none.
It found that Mr. Ziegler’s CDP request would have been timely if received by the IRS within the 30 day period from the date of the NOIL or if mailed during that time. In addressing that question, the Court looked at the issue of “what the date of the CDP notice [here the NOIL]” means. “Is it the date a notice is mailed by the IRS? Is it the date appearing on the face of the notice? Is it the date the notice is received by the taxpayer?”
The IRS took the position in its motion that the date of the NOIL is the date written on the face of the notice even though the regulations suggest that the date of the NOIL is the date the IRS mailed the notice. See Treas. Regs. § 301.6330-1(c)(3), Q&A Ex. 1. The Court noted that whether it went with the date on the NOIL or the unclear date on which the NOIL got mailed in this case it still came to the result that Mr. Ziegler did not send in his request within 30 days. I realize that the Court did not need to make a decision on this issue in order to decide this case but it would be nice 16 years after the statute came into existence to have the answer to this rather basic issue. I have trouble not believing that the regulations suggest the right answer here.
If the 30 day period runs from the date the IRS happens to stamp on the letter without regard to when the IRS actually mails out the letter, taxpayers could have their time to make a CDP request severely shortened if something caused a delay in the IRS mailing after it stamp dated the letter. As mentioned above, I have seen enough letters dated with a date that bore no relationship to the actual mailing date to fear a different result. By the same token, I would not advise my client to rely on the mailing date unless absolutely necessary because the date on the IRS letter provides a safe haven. Note that Congress did not mandate the IRS to state on the CDP determination letter the last date for filing a Tax Court petition the same way it mandated the IRS do that in sending out the notice of deficiency. Because Congress did not mandate that date and because of all of the issues that come up when the IRS incorrectly calculates that date as it sometimes does on the notice of deficiency, I do not expect the IRS to start putting the last date to petition the Tax Court on the CDP determination letter.
So Mr. Ziegler loses his attempt to get into Tax Court to discuss other ways to collect from him than levy. How did the treatment of his case as a CDP case rather than an equivalent hearing impact the statute of limitations on collection? In a CDP case the statute of limitations on collection gets suspended for the period of time the case works its way through Appeals and, where applicable, the Court. Here, Mr. Ziegler did not have a CDP case even though he and the Settlement Officer in Appeals may not have known that. He had an equivalent hearing that should have resulted in a Decision letter rather than a Determination letter. I sometimes choose not to make a CDP case a regular case because I want the statute of limitations on collection to continue to run. Did it run here? If so, Mr. Ziegler, while losing the case, did manage to shave about three and one half years off of the collection statute. While not a complete victory, it may serve as a partial one. Assuming I am right on the statute of limitations, it also probably allowed the time frames to run for this liability to meet the priority criteria under Bankruptcy Code section 507(a)(8). This tax year is probably now old enough to qualify as a general unsecured claim dischargeable in bankruptcy. That may help him if he goes into bankruptcy or if he makes an offer in compromise and points to discharge as a reason for the IRS to take a harder look at his offer.