Today we welcome guest blogger, Amanda Klopp. Amanda is a student in the Harvard Federal Tax Clinic. This semester she participated in drafting the amicus brief filed by the Harvard Federal Tax Clinic in the Guralnik case. After graduation she plans to flee the snow of New England and work in sunny Florida with the firm of Akerman LLP. Keith
In Bing Crosby’s classic Christmas movie White Christmas everyone pitches in to save the hotel run by their former company commander. In Guralnik, a case in which Tax Court Special Trial Judge Armen issued a tentative opinion finding that a snow day in DC satisfies the holiday rule of IRC 7503, read our blog post on the case here, the IRS is not pitching in to save the holiday. Instead, in Grinch-like fashion, it goes to great lengths in its response to the Tax Court to explain why a snow day should not be treated as a holiday. This post will examine the arguments the IRS makes in its response.
In full disclosure, the Harvard Federal Tax Clinic has filed an amicus brief in this case arguing that the Court should use equitable tolling to find that it has jurisdiction to hear this case.read more...
First, it is helpful to explain the procedural posture of the case. As previously discussed in a blog post, Special Trial Judge Armen issued a Recommended Findings of Fact and Conclusions of Law pursuant to Tax Court Rule 182(e). Within forty-five days of a Special Trial Judge issuing recommended findings of fact and conclusions of law, all parties may file objections to such recommended findings of fact and conclusions of law under Rule 183(c). This procedure of publishing the Special Trial Judge’s recommended opinion and allowing the parties to comment was the Tax Court’s response to Ballard v. Commissioner. Previously, the Special Trial Judge’s report was not issued to the parties and instead was issued only to the Regular Judge. The two judges would engage in a collaborative revision process, which resulted in a final, published opinion. Ballard rejected this collaborative approach, and found that the Regular Judge should merely adopt, modify, or reject the Special Trial Judge’s report. Furthermore, Ballard held that the Tax Court was required to serve a copy of the Special Trial Judge’s report to the parties. In Guralnik, the IRS filed objections to the Special Trial Judge’s report pursuant to Rule 183(c), and the rest of this blog post analyzes these objections.
The IRS’s objections begin with a textual argument, tracking Section 7503’s definition of “legal holiday,” Treasury Regulation 301.7503-1, which interprets Section 7503, D.C. Code Ann. 28-2701, which lists legal holidays in D.C., and dictionaries, which define legal holiday, to argue for why the snow day at issue does not constitute a “legal holiday” under Section 7503. From the IRS’s argument, it is clear that “snowstorm” never has been included as a “legal holiday” in any statute or regulation, and the particular snowstorm at issue was not declared by any executive or mayoral order to be a legal holiday. The IRS probably viewed these arguments as necessary because they establish that snowstorm is not within the legislative definitions or even the plain meaning of a “legal holiday” under 7503, but these arguments are not counter to the reasoning in the recommended opinion issued by Special Trial Judge Armen. This question was a difficult one in the first place because the contingency of an office-closing snowstorm was not provided for in the statute or regulations. Thus from the start, it almost seems like the IRS is talking past the court, because the recommended opinion’s reasoning was based on legislative history which explained the rationale of the statute.
Special Trial Judge Armen’s recommended opinion was supported in no small part by the legislative history of Section 7503. The recommended opinion reasoned that when Congress added Saturdays and Sundays to 7503 to prevent those days from being counted as the last day in a filing period, it did so because the Tax Court was closed on those days. When the IRS does address the legislative history of 7503, it still does not contradict the recommended opinion’s interpretation that the rationale behind each carve out in 7503 was based on the Tax Court’s inaccessibility. Instead, the IRS argues that the incremental nature of the carve outs evince an intent by Congress to not add any other types of days not named. The IRS cites case law in which courts refused to extend the statutory rationale of the Tax Court’s inaccessibility to holidays or Saturdays, before such days were included in the statute. In essence, the IRS is just countering the recommended opinion’s use of legislative history to expand 7503 based on the statutory rationale, with case law in which courts refused to do the same. But this seems less like an argument based in legislative history, and more like an argument to use a strict textual reading rather than relying on legislative history.
What was missing in the legislative history argument that would have strengthened the IRS’s position? Perhaps some history supporting the IRS’s statement that “Congress knows how to add language that would include days when the Tax Court is inaccessible.” The IRS did not show that Congress had enacted inaccessibility provisions in other parts of the Tax Code, which would have been helpful to properly analogize to the cited case, Omni Capital Int’l v. Rudolf Wolff & Co., 484 U.S. 97, 106 (1987). In Omni, the Supreme Court found Congress’s exclusion of a nationwide service of process provision in Section 22 of the Commodity Exchange Act was significant because Congress had included nationwide service of process provisions in other sections of the Act.
The IRS also did not support the proposition that Congress had ever considered an amendment that would provide broadly for the inaccessibility of the clerk’s office. The IRS cited Southern California Loan Ass’n v. Commissioner, 4 B.T.A. 223 (1926), in which the Board of Tax Appeals (the predecessor to the Tax Court) analyzed a subsequently enacted Congressional amendment that tolled the time period for filing a petition with the BTA if the last day to file was a Sunday. In Southern California, the BTA refused to apply this Sunday tolling provision retroactively to a taxpayer whose final filing day was a Sunday. The BTA reasoned that the addition of a Sunday carve out in a subsequent amendment evidenced that Sundays were not intended to be tolled in the previous version of the statute. Thus, Southern California does not quite support the proposition that the rationale behind a statute should not be extended to trump the explicit statutory language – which seems to be what the IRS intended. Clearly, the IRS wants the Tax Court to prioritize the explicit statutory language. However, unlike Southern California, the IRS did not show that Congress ever considered an amendment to the Tax Code that would provide for the contingency of inaccessibility of the clerk’s office.
Special Trial Judge Armen’s recommended opinion also noted that the Tax Court rules are silent as to the tolling of a filing period due to the inaccessibility of the clerk’s office. FRCP 6(a)(3) tolls filing periods due to inaccessibility of the clerk’s office. The silence in the Tax Court rules regarding this FRCP provision implicates Tax Court Rule 1(b), which provides, “Where in any instance there is not applicable rule of procedure, the Court or the Judge before whom the matter is pending may prescribe the procedure, giving particular weight to the Federal Rule of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand.” The IRS countered this argument in three ways. First, the IRS stated that Tax Court rule 1(b) did not apply, because there were applicable rules of procedure, namely Tax Court Rule 25, Section 7502 and Section 7503, which specify methods of computing timely filing. Second, the IRS argued that while the FRCP and other court rules of procedure have been amended in the past thirty years to add an inaccessibility provision, the Tax Court rules have not been similarly amended. Of course, the IRS does not provide a reason for this because it is impossible to comment on why such a provision has not been adopted. We can imagine that this issue just has not previously provided such a compelling case to cause the court to address the need for an inaccessibility provision in the Tax Court Rules. Third, the IRS argues precedent: that the court has not relied on FRCP 6(a)(3) to fill gaps in the Tax Court rules in three recent unpublished cases with similar facts.
A previous blog post has discussed the IRS’s use of unpublished cases in unrelated Tax Court cases. The three unpublished cases, Fitzpatrick v. Commissioner, Docket No. 4416-15S; Colabella v. Commissioner, Docket No. 1034-14S; and McCoy v. Commissioner, Docket No. 25941-13S, seem to hold the opposite of the recommended opinion. These cases were all decided by Chief Judge Thornton, which perhaps reveals the reason that Special Trial Judge Armen issued recommended findings of fact and conclusions of law, rather than an opinion. The IRS acknowledges that these cases are not “to be treated as precedent,” but states that “they are illustrative with respect to how the Court has handled identical and similar cases in the past.” In Fitzpatrick and Colabella, which both dealt with Tax Court closings due to inclement weather, Chief Judge Thornton held that the one day late hand delivered petition should be dismissed for lack of jurisdiction. The facts of McCoy involve late filing due to the inability to hand deliver a petition to the Tax Court, which was closed due to a government shutdown. McCoy is less comparable to the facts in Guralnik, due to the Tax Court’s website notice which informed the public of how to file timely petitions during the government shutdown and the necessity to timely file.
These three cases are deficiency cases rather than CDP cases. The IRS does not note that distinction in its brief or address the equitable differences between deficiency proceedings and CDP proceedings. Although that distinction may not seem relevant when considering that Section 7503 governs computation of time for both deficiency and CDP jurisdiction, the distinction is relevant for purposes of the amicus brief which only focuses on the equitable tolling of Section 6330(d)(1). In Section 6330(d)(1) considerations of equity have been more prevalent, compared to deficiency jurisdiction.
The IRS makes a good point about the implications of expanding Section 7503. Section 7503 covers not only filing of petitions, but numerous other events such as filing of tax returns and refund claims. The IRS points out that the scope of filings and acts affected by this decision will be broad, and that the decision could be even further expanded to local inclement weather events. The scope of a ruling under Section 7503 and its impact on tax administration will cause the IRS to fight this case beyond the Tax Court.
Although the IRS makes good textual arguments, and with strong supporting case law, explaining why a snowstorm should not be considered a legal holiday under 7503, the IRS did not address the recommended opinion’s concern with the equities of the situation, beyond stating that the Tax Court lacks equity jurisdiction to prevent harsh results, and that the taxpayer might have avoided this result by using a designated delivery service under 7502. The recommended opinion stated “we find it inconceivable that Congress would have intended, absent a specific statutory provision requiring otherwise, to bar a taxpayer who fails to anticipate on a Friday that the Government will decide to close a filing office on the first workday of the following week on account of a snowstorm.” Instead of arguing that it was conceivable, the IRS has advocated for an approach that would leave the taxpayer literally out in the cold.
The next development in Guralnik is expected by January 8, 2016, the date by which parties may file a memorandum in response to the Amicus Memorandum. We expect the IRS’s response will argue the jurisdictional nature of Section 6330(d)(1), and that it is not subject to equitable tolling.