The government shutdown and last Friday’s closure of the Tax Court, as discussed here, provides an opportunity for taxpayers who would otherwise have missed the jurisdictional deadline for filing a Tax Court petition. Since the last government shutdown of any length the Tax Court’s precedent on jurisdiction has changed. A reminder of the Tax Court precedent regarding the impact of the closure of the Tax Court clerk’s office on the timeliness of filing a petition (and other documents?) is worth a visit. Carl Smith assisted me in the preparation of this post.
Long time readers of this blog know that we paid a fair amount of attention to the Guralnik case a few years ago perhaps because the tax clinic at Harvard filed an amicus brief in that case. See our posts here, here and here. While the tax clinic argued that the Tax Court had the power to open its doors based on equitable tolling, the court rejected the clinic’s argument in favor of a non-equitable remedy that has both broader implications as discussed below and narrower ones for other petitioners.
Mr. Guralnik’s attorney sent a petition to the Tax Court in a Collection Due Process (CDP) case via Fed Ex on the 28th day after the issuance of the CDP Notice. Unfortunately, the Fed Ex delivery service selected (the best one offered) was not on the IRS list of approved delivery services because the IRS had not updated its list in the 11 years prior to Friday, February 13, 2015 when the petition was given to Fed Ex. Because the chosen delivery service was not on the IRS list, the IRS argued and the Tax Court agreed that the mailbox rule of IRC 7502 did not apply.
Petitioner needed the mailbox rule to apply, or an expanded reading of the “weekend and holiday” rule of IRC 7503, because the petition did not arrive in the Tax Court until Wednesday, February 18. Before you conclude that Fed Ex fell down on the job of delivering the petition, it is important to understand what happened in the intervening days during which the Tax Court was closed – Saturday, Sunday, Monday (President’s Day) and Tuesday (Snow closure). The petition arrived at the Court on the first day it opened after petitioner’s attorney delivered the petition to Fed Ex.
Prior law
Among the reasons that the IRS argued that the Tax Court lacked jurisdiction in Guralnik was that there were prior orders of the Tax Court in similar cases of the Clerk’s office being closed, and one of those cases involved a government shutdown. Government shutdowns formed the basis for dismissals in the pre-Guralnik era. One of the cases forming the body of pre-Guralnik jurisdictional law in the Tax Court, McCoy v. Commissioner, Dk. No. 25941-13S, involved the dismissal of a case in which the taxpayer tried and failed to file the petition prior to the reopening of the Tax Court following the government shutdown. In McCoy, hand delivery was made at the Tax Court the first date the Clerk’s Office was open after a 2013 government shutdown. The order in McCoy reads differently than the order that the Court posted for this shutdown. The difference might be attributable to the Guralnik case.
Current law
In a fully reviewed, precedential opinion, the Tax Court concluded that because it had no rule regarding days when its clerk’s office was closed it could borrow from the Federal Rules of Civil Procedure and treat filings received on the next day after closure as timely. The IRS argued vigorously against this result; however, as we posted here, the IRS appears to have accepted the result when the issue of the closure of the clerk’s office came up in a subsequent case, Parkinson v. Commissioner, Dk. No. 296-15. In Parkinson the Tax Court asked the parties to address the issue of the Court’s jurisdiction of a case in which the petition was filed after the last date to file unless one considered the Court’s extra holiday closure on January 2, 2015. After both parties filed responses indicating that the Guralnik opinion would apply to the court closure situation, the Tax Court seems to have accepted their arguments without further elaboration in its order.
Given the precedent set by Guralnik and the non-precedential acceptance of that precedent for the situation of the Court closing down to allow its employees off on the Friday after New Year’s Day, it appears almost certain that starting on December 30, 2018, the time for filing a petition in the Tax Court is extended until the government shutdown ends and the Tax Court clerk’s office reopens. Perhaps no taxpayers will benefit from this additional time within which to file their Tax Court petitions but knowing the rule could assist someone who might otherwise have missed the deadline.
Following on the logic of filing documents late when the clerk’s office is closed, it would also seem that brief and other responses due to the Tax Court during the period of the clerk’s office closure can also be filed when the court reopens. For veteran procrastinators this may seem like an opportunity to sit back and wait; however, government shutdowns can end as quickly as they begin. A late night agreement among the parties could restart the government unexpectedly. While we do not recommend delaying a filing because of the shutdown, perhaps an opportunity exists for those who prefer not to file before the absolute last minute. Another reason for not waiting is discussed below; however, if you have a client appear in a situation that would otherwise be too late to file the petition, perhaps Guralnik will provide some magic for your client.
Tax Court action prior to shutdown
In addition to posting the notice on its website that we discussed in a prior post, the court issued nearly 300 orders on Thursday and Friday before it shutdown to the parties involved in the cases set for trial in the first two weeks of trial session in January. The orders generally contain the following language:
The parties are notified that the cases set for trial and/or hearing during the trial session scheduled to begin in New York, New York, on January 14, 2019, shall proceed as scheduled. To avoid potential complications caused by the partial government shutdown, it is
ORDERED that a paper copy of any document submitted to the Court for filing, either electronically or in paper, between the date of this Order and the date of the above-referenced trial session, shall be made available at the trial session by the party who submitted the document.
For a case containing the sample language see the order in Gross v. Commissioner (Docket No. 2010-18S). The fact that the Tax Court had to issue nearly 300 orders is just another example of the colossal waste of resources when the government shuts down. This one is probably small in comparison to others but provides a very tangible example.
Caveat
One caveat should be noted before relying on a government closure to make a petition filing’s timely: The Tax Court’s Guralnik ruling was never appealed, and no court of appeals has yet considered whether the Tax Court may import rules from the Federal Rules of Civil Procedure to extend Tax Court filing deadlines that have been in the past held jurisdictional. But, there are currently before the Ninth Circuit two companion cases of petitions sent in around the same time as Guralnik, also by FedEx First Overnight, that arrived a day late. In these cases, Organic Cannabis Foundation LLC v. Commissioner, Ninth Cir. Docket No. 17-72874, and Northern California Small Business Assistants, Inc. v. Commissioner, Ninth Circuit Docket No. 17-72877, it is not clear why the petitions were filed late, but it appears that the Federal Express driver could not access the open Tax Court Clerk’s Office on the last day – either because of construction work, police activity, or some other reason – so the driver returned the following day (one day too late if section 7502 can’t be used). In unpublished orders issued on July 25, 2017 (here and here), the Tax Court declined to extend Guranik to cover situations where the Clerk’s Office was in fact open.
In the Ninth Circuit, the taxpayers not only seek to extend Guralnik, but also argue (as the tax clinic at Harvard did in Guralnik) that the deficiency petition filing deadline is not jurisdictional and is subject to equitable tolling. The DOJ relies on the holding in Guralnik, but argues that Guralnik cannot be stretched to cover the situation where the Clerk’s office is actually open. Since the parties cannot confer jurisdiction in a case merely by not making certain arguments, it would not be impossible for the Ninth Circuit to eventually rule both in these cases that the filing deadline is jurisdictional and that the Tax Court cannot import into its own rules any rule from the Federal Rules of Civil Procedure that extends the filing deadline when the Clerk’s Office is formally closed. That is, nothing stops the Ninth Circuit from rejecting the latter holding in Guralnik. Thus, until there are some court of appeals rulings on this fact pattern, it may be wise not to try to rely on the closure of the government as a reason for not mailing a Tax Court petition on time or attempting hand delivery to the court on the first date it reopens. The cases before the Ninth Circuit are fully briefed, but a date for oral argument therein has not yet been set. Among the briefs there are amicus briefs from the Harvard tax clinic arguing that the filing deadline is not jurisdictional and is subject to equitable tolling.