Fourth Circuit Declines to Rule on Whether CDP Filing Period is Jurisdictional, but Holds Against Taxpayer, Since It Says Facts Do Not Justify Equitable Tolling

We welcome back frequent guest blogger Carl Smith who discusses the most recent circuit court opinion regarding the jurisdictional nature of the time frames for filing a petition in Tax Court. The Fourth Circuit takes a different tack but reaches the same result as prior cases. Keith 

A few days ago, I did a post on the Ninth Circuit opinion in Duggan v. Commissioner, 2018 U.S. App. LEXIS 886 (9th Cir. 1/12/18). In Duggan, a pro se taxpayer mailed a Collection Due Process (CDP) petition to the Tax Court one day late, relying on language in the notice of determination that stated that the 30-day period to file a petition did not start until the day after the notice of determination. He read this to mean that he had 31 days to file after the date of the notice of determination. Keith and I filed an amicus brief in Duggan arguing that (1) the filing deadline in section 6330(d)(1) is not jurisdictional, (2) the deadline is subject to equitable tolling, and (3) in light of the fact that 7 other pro se taxpayers over the last 2 ½ years read the notice the same way, the IRS misled the taxpayer into filing a day late – justifying equitable tolling on these facts to make the filing timely. In Duggan, the Ninth Circuit did not have to reach the second or third arguments, since it held that the language of section 6330(d)(1) made its filing deadline jurisdictional under a “clear statement” exception to the Supreme Court’s usual rule (since 2004) that filing deadlines are no longer jurisdictional. Thus, the Ninth Circuit affirmed the Tax Court’s dismissal of the case for lack of jurisdiction – a dismissal that had originally been done in an unpublished order.

Keith and I represented a formerly-pro se taxpayer in the Fourth Circuit who had a case on all fours with Duggan, Cunningham v. Commissioner. In another unpublished Tax Court order, she also had her CDP petition dismissed for lack of jurisdiction as untimely. Like the Ninth Circuit, the Fourth Circuit had no precedent on whether the CDP filing deadline is jurisdictional or subject to equitable tolling. Only days after the Ninth Circuit’s published opinion in Duggan, the Fourth Circuit, on January 18, 2018, issued an unpublished opinion in Cunningham affirming the Tax Court. But, the Fourth Circuit avoided the tricky issues of whether the filing deadline is jurisdictional or whether it might be subject to equitable tolling in an appropriate case. Instead, the Fourth Circuit held that Ms. Cunningham has misread a clear notice of determination and that her mere error was not a fact sufficient to sustain a holding of equitable tolling, even assuming (without deciding) that the filing deadline might be nonjurisdictional and might be subject to equitable tolling in an appropriate case.

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The opinions in Duggan and Cunningham do not mention the significant number of pro se taxpayers who have recently read the notice of determination filing period language differently, although the Cunningham opinion acknowledges that “other taxpayers” (number unspecified) have read the language like Ms. Cunningham.

The key passage in the Cunningham opinion states:

We have said that equitable tolling is appropriate “in those rare instances where—due to circumstances external to the party’s own conduct—it would be unconscionable to enforce the limitation period against the party and gross injustice would result.” Whiteside v. United States, 775 F.3d 180, 184 (4th Cir. 2014) (en banc) (internal quotation marks omitted).

We find these considerations to be wholly absent here. There is no suggestion of extraordinary circumstances that prevented Cunningham from timely filing her appeal, nor of circumstances external to her own conduct. Cunningham simply points to the language in the IRS’s letter, which she claims is misleading and tricked her and other taxpayers into filing late. But we see nothing misleading about it.

The letter informed Cunningham that she had “a 30-day period beginning the day after the date of this letter” to file an appeal. J.A. 5. We think the only reasonable reading of that language requires counting the day after the date of the letter (here, May 17) as “day one,” the following day (May 18) as “day two,” and so on up to “day thirty”—June 15. Cunningham claims she understood the language in the IRS letter to essentially count May 17 as “day zero,” and onward from there, resulting in a cutoff date one day later than the true deadline. Such a method of counting is certainly contrary to the practice set forth in Rule 25(a) of the Tax Court Rules of Practice and Procedure. See United States v. Sosa, 364 F.3d 507, 512 (4th Cir. 2004) (“[I]gnorance of the law is not a basis for equitable tolling.”). We think it is also contrary to the plain language of the IRS letter and to principles of common sense.2

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2Cunningham also points out (correctly) that the language in the letter is not identical to the language in the statute. But it need not be, and Cunningham fails to explain why the difference in wording matters. In our view, the language of the letter and the language of the statute are two commonsense ways of expressing the same message.

 

After the Duggan opinion was issued, the DOJ filed a FRAP 28(j) letter in the Fourth Circuit to alert the latter court to the ruling of the former. But, pointedly, the Fourth Circuit in Cunningham does not mention Duggan, even for contrast.

Since there is no Circuit split between Duggan and Cunningham (just different reasoning for affirming the Tax Court’s dismissals), it is almost certain that the Supreme Court would never grant cert. to review either of these opinions. Thus, no cert. petitions will be filed.

Keith and I want to thank Harvard Law student Amy Feinberg, who did the oral argument in Cunningham before the Fourth Circuit on December 5, 2017.

Keith and I also represent in the Fourth Circuit another formerly-pro se taxpayer who filed her Tax Court petition late. In the case of Nauflett v. Commissioner, Fourth Circuit Docket No. 17-1986, however, the notice of determination was issued under the innocent spouse provisions, and the language governing her filing deadline is contained in section 6015(e)(1)(A). In Ms. Nauflett’s case, there is a better argument for equitable tolling because (1) notes of a TAS employee clearly show that, prior to the last date to file (a date also not shown on the innocent spouse notice of determination), that TAS employee told Ms. Nauflett the wrong last date to file, on which she relied, and (2) Ms. Nauflett alleges by affidavit that the IRS CCISO employee who actually issued the notice of determination also told Ms. Nauflett (over the telephone) the identical wrong last date to file. The Tax Court, in an unpublished order, dismissed Ms. Nauflett’s petition for lack of jurisdiction as untimely. We are arguing in the case that, under recent Supreme Court case law, the innocent spouse filing period is not jurisdictional and is subject to equitable tolling, and the facts in her case justify equitable tolling. It may be harder for the Fourth Circuit to avoid issuing a ruling in Nauflett on whether or not the filing period is jurisdictional or subject, theoretically, to equitable tolling in the right case. Nauflett is fully briefed. It is not yet clear whether or when oral argument will be scheduled in the case.

Nauflett will no doubt be another uphill battle for Keith and me, however, since last year, two Circuits, in two other cases where we represented the taxpayers, held that the filing deadline in section 6015(e)(1)(A) is jurisdictional under current Supreme Court case law. Rubel v. Commissioner, 856 F.3d 301 (3d Cir. 2017); Matuszak v. Commissioner, 862 F.3d 192 (2d Cir. 2017).

Despite recent setbacks in court, I do not consider Keith and my litigation of the nature of tax suit filing deadlines under current Supreme Court case law to be a waste of time. Clearly, although we have not (yet) convinced any Circuit court to find the innocent spouse or CDP Tax Court petition filing deadline not to be jurisdictional, we have highlighted problems in those areas that have led Nina Olson to propose two legislative fixes.

Further, there is a much better case under current Supreme Court case law for finding district court filing deadlines under section 6532 nonjurisdictional and subject to equitable exceptions like tolling or estoppel. As an amicus in Volpicelli v. Commissioner, 777 F.3d 1042 (9th Cir. 2015), I helped persuade the Ninth Circuit to hold that the period in section 6532(c) in which to file a district court wrongful levy suit is nonjurisdictional and subject to equitable tolling. And, if the court reaches the issue, Keith and I hope, as amicus, to help persuade the Second Circuit to hold that the 2-year period in section 6532(a) in which to file a district court refund suit is nonjurisdictional and subject to estoppel. In both section 6532 instances, by contrast to sections 6015(e)(1)(A) and 6330(d)(1), the sentence containing the filing deadline does not also contain the word “jurisdiction”, and the jurisdictional grants to hear such suits are far away (in 28 U.S.C. section 1346) – key factors under current Supreme Court case law demonstrating that filing deadlines are not jurisdictional. As I noted in my post on Duggan, the jurisdictional and estoppel issues under section 6532(a) are among the issues presented in Pfizer v. United States, Second Circuit Docket No. 17-2307, where oral argument is scheduled for February 13.

 

Supreme Court Grants Cert. to Decide Whether SEC ALJs Need to Be Appointed Under the Appointments Clause; SG Changes Position and Now Supports Required Appointment

We welcome frequent guest blogger, Carl Smith, who blogs today on a frequently discussed topic – the Appointments Clause and its application to employees of the IRS office of Appeals. Keith

In six prior posts since September 2015 (here, here, here, here, here, and here), I have blogged about the storm at the SEC over whether its ALJs need to be appointed under the Appointments Clause or are mere “employees”, who do not need to be appointed. This issue could spill over into whether the ALJs that the Treasury uses to try Circular 230 sanctions matters need to be, and are properly, appointed. I suspect that they may not be.

I noted that in the courts of appeals, the government took the position that the SEC ALJs were mere employees, so there was no problem in the fact that SEC ALJs had been issuing recommended rulings on administrative sanctions matters without having first been appointed. Two Circuits had split on this question: The Tenth Circuit held that SEC ALJs need to be appointed; Bandimere v. SEC, 844 F.3d 1168 (10th Cir. 2016); while the D.C. Circuit held that they did not. Raymond J. Lucia Cos., Inc. v. SEC, 832 F.3d 277 (D.C. Cir. 2016). I correctly predicted that the Supreme Court would grant cert. to resolve this issue. In fact, the Court did so in Lucia on January 12, 2018. But, I never predicted that in the Solicitor General’s response to the cert. petition in Lucia he would change position 180 degrees and now argue that SEC ALJs have to be appointed. Presumably since the government was no longer seeking to reverse the ruling in Bandimere, the Court did not grant the government’s cert. petition in Bandimere.

This means that both of the parties to the Lucia case currently argue for its reversal. Although it has not done so yet, I suspect the Court will appoint an amicus to argue in favor of the ruling below, since the parties won’t. It is expected that Lucia will be heard and decided by the Court before its current Term ends on June 30.

Central to the Lucia case will be what the Court meant in Freytag v. Commissioner, 501 U.S. 868 (1991), when it held that Tax Court Special Trial Judges (STJs) were inferior officers of the United States who need to be appointed.

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In Freytag, the Supreme Court held that the Appointments Clause did not prohibit the Tax Court’s Chief Judge from appointing STJs because the Tax Court was one of the “Courts of Law” mentioned in the Clause and because the Chief Judge could act for the Tax Court.  In reaching these rulings, the Supreme Court made a subsidiary holding that STJs are not employees of the government, but inferior officers who need to be appointed. To support its holding that STJs are officers, the Supreme Court cited the many judicial duties that STJs perform.  At the end of this section of the opinion, the Supreme Court also observed that STJs can enter final decisions in some cases under  § 7443A(c). It is this finality observation that has puzzled and split the lower courts.

In Landry v. FDIC, 204 F.3d 1125 (D.C. Cir. 2000), a majority of a 3-judge panel of the D.C. Circuit held that the Supreme Court’s observation in Freytag that STJs can rule with finality in some cases meant that being able to make a final ruling was a but for requirement of officer status. Since FDIC ALJs could not enter final rulings, but simply made recommended rulings to the whole FDIC, the majority held that the ALJs were mere employees who did not need to be appointed. The third judge on the panel argued instead that, in Freytag, the Supreme Court had already decided that STJs were officers before it made the observation about STJs being in some cases allowed to enter final orders, so finality was not a but for requirement of an officer.

Like FDIC ALJs, SEC ALJs cannot make final rulings – at least where defendants appeal their proposed ruling to the whole SEC. In Bandimere, the Tenth Circuit disagreed with the Landry majority that being able to issue final rulings was a but for requirement of officer status. The Tenth Circuit held that the SEC ALJs performed nearly all the duties that STJs did, so were also officers who needed to be appointed.

In Lucia, citing Landry, the D.C. Circuit held that SEC ALJs need not be appointed because they did not have final ruling authority. After Bandimere was issued, Lucia moved for reconsideration of the ruling in his case by the full D.C. Circuit. He asked the D.C. Circuit to consider whether it should overrule Landry and agree with the Tenth Circuit in Bandimere. An en banc rehearing was granted. However, the en banc D.C. Circuit split evenly on the question, which left the original holding in Lucia intact. Lucia then sought cert.

In response to Lucia’s cert. petition, the new SG under President Trump surprisingly changed the government’s position – agreeing with the Tenth Circuit that the ability to issue final rulings was not a but for requirement of officer status. The SG felt that the SEC ALJs were sufficiently like Tax Court STJs to have to be appointed. Thus, the SG also sought reversal of the D.C. Circuit. The SG asked the Court to grant cert. in Lucia, even though the parties were no longer in disagreement. (Appointments Clause issues are not jurisdictional, so the courts can accept the parties’ waiver of Appointments Clause arguments.) The SG thinks there is a need for Supreme Court guidance in this area – including issues not discussed below as to removal powers for ALJs, which may now be problematic. A number of Court watchers thought that the issue of appointment of SEC ALJs was now moot and that cert. might not now be granted. However, they were wrong.

But, in granting cert. in Lucia, the Supreme Court did not ask the parties to brief any additional questions – e.g., involving removal powers.

Possible Effect on Appeals Office Personnel Issuing CDP Rulings 

In addition to Lucia’s possible impact on ALJs used by Treasury to hold Circular 230 sanctions hearings, the opinion may have an impact, as well, on an issue that I raised over a decade ago. In a CDP case that I had in the Tax Court, I moved to remand the case to have the CDP hearing redone by a Settlement Officer and Appeals Team Manager who were both appointed consistently with the Appointments Clause. I noted that no Appeals personnel were then appointed. But, citing Freytag, I argued that the duties of Appeals personnel in conducting statutorily-mandated CDP hearings were so similar to the duties of an STJ that such Appeals personnel were also officers for purposes of the Appointments Clause.

In Tucker v. Commissioner, 135 T.C. 114 (2010), the Tax Court rejected my argument for several reasons. For one thing, the court felt that the positions in Appeals were not “established by law” for purposes of the Clause. But, also, the Tax Court held that Appeals personnel in CDP did not make final rulings, and, citing Landry, the Tax Court held that the ability to make a final ruling was a but for requirement of officer status per Freytag.

I appealed Tucker to the D.C. Circuit. That court, at 676 F.3d 1129 (D.C. Cir. 2012), affirmed the Tax Court, but on different reasoning. The D.C. Circuit was troubled by the idea that Congress might be able to get around the Appointment Clause by assigning duties that had to be performed by a constitutional officer to preexisting employees in the bureaucracy. Therefore, the D.C. Circuit bypassed issuing any ruling on whether or not the position of CDP hearing person was “established by law”. The D.C. Circuit next held that collection issues were of too minor importance to require an officer. As to underlying tax liability rulings that could be made in CDP under section 6330(c)(2)(B), Freytag clearly would treat those rulings as ones for which an officer was required. Disagreeing with the Tax Court, the D.C. Circuit held that Appeals Office personnel issuing underlying liability rulings issued rulings with “effective finality”. However, the D.C. Circuit held that the ability to exercise discretion in a tax liability ruling was a but for requirement of officer status – one that was not met by Appeals personnel who ruled under the thumb of IRS Counsel attorneys. It was this lack of discretion that undermined the idea that Appeals personnel in CDP were officers needing to be appointed.

I thought that the D.C. Circuit’s ruling that Appeals exercised little discretion in making CDP underlying liability rulings was not factually supported, and I sought cert. But, cert. was denied.

I had not expected to again litigate the Tucker issue, but Florida attorney Joe DiRuzzo has decided that he wants to relitigate the issue in the Tax Court and in courts of appeals – hoping to create a Circuit split. Before the Supreme Court granted cert. in Lucia, Joe had made motions to remand in (at the moment) four different pending Tax Court CDP cases, arguing that the hearings should be redone by appointed Appeals personnel. The cases are: Thompson, Docket No. 7038-15L (appealable to the Ninth Circuit); Elmes, Docket No. 24872-14L (appealable to the Eleventh Circuitt); Fonticiella, Docket No. 23776-15L (appealable to the Eighth Circuit); and Crim, Docket No. 16574-17L (appealable to the D.C. Circuit). If the Supreme Court agrees with Lucia and the SG that issuing final rulings is not a but for requirement for officer status, then the Tax Court will have to at least revise its rationale for its holding that CDP hearing personnel need not be appointed. Perhaps, after reading the Supreme Court’s Lucia opinion, the Tax Court may also have to rule that CDP hearing personnel need to be appointed. In its lengthy response to the motion to remand (filed on January 5, 2018 in the Thompson case – i.e., a week before the Supreme Court granted cert. in Lucia), the IRS discusses the possible relevance of Lucia and the SG’s change in position, but argues that Landry, Lucia, and both Tucker opinions are, at least at the moment, still good law.

 

Ninth Circuit Holds Period to File Tax Court Collection Due Process Petition Jurisdictional Under Current Supreme Court Case Law Usually Treating Filing Deadlines as Nonjurisdictional

This will be a very brief post. Today, subsequent to my post on the NTA Report calling for certain legislative fixes, the Ninth Circuit held, in a published opinion in Duggan v. Commissioner, that the 30-day period in section 6330(d) to file a Tax Court Collection Due Process petition is jurisdictional and not subject to equitable tolling under the Supreme Court’s post-2004 case law that generally excludes filing deadlines from jurisdictional status. The Ninth Circuit relied on an exception to the current Supreme Court rule that applies where Congress clearly states that the time period is jurisdictional, although the court admits that language Keith and I suggested in our amicus brief in the case might be clearer. The Ninth Circuit noted that the jurisdictional grant for the Tax Court suit was in the same sentence that set out the filing deadline. We have blogged before on Duggan here. In essence, the Ninth Circuit in Duggan adopts the position that the Tax Court adopted in Guralnik v. Commissioner, 146 T.C. 230 (2016) (where Keith and I filed an amicus brief making the same arguments that were rejected in Duggan).

Mr. Duggan was one of at least eight taxpayers over the last two years who have been misled into filing his or her Tax Court Collection Due Process petition one day late because of confusing language in the current notice of determination – a notice that does not show the last date to file.

The Duggan opinion is not the first court of appeals opinion to hold that Collection Due Process petition filing period jurisdictional. However, it is the first such court of appeals opinion that has considered the interaction of the Supreme Court’s current rules on the usual nonjurisdictional nature of most filing periods with the statutory language in section 6330(d)(1).

As I noted in my post on the NTA report from earlier today, Keith and I are imminently awaiting an opinion from the Fourth Circuit in Cunningham v. Commissioner, 4th Cir. Docket No. 17-1433 (oral argument held on Dec. 5, 2017; the Harvard Federal Tax Clinic is counsel for the taxpayer). Cunningham is on all fours with the facts and legal arguments presented in Duggan. She also argues that she was misled by the IRS through confusing language in the Collection Due Process notice of determination into mailing her Tax Court petitions to the court a day late. Like Duggan, she seeks equitable tolling to make her filing timely.

NTA Calls for Making Judicial Tax Case Filing Deadlines Subject to Forfeiture, Waiver, Estoppel, and Equitable Tolling

We welcome back frequent guest blogger Carl Smith who comments on a portion of the NTA’s recently released annual report relating to the issue of equitable tolling and adequate provision of information to taxpayers facing court filing deadlines.  The Ninth Circuit ruled this morning on this issue in the Duggan case linked below and found IRC 6330 jurisdictional.  More later. Keith

In her annual report to Congress dated December 31, 2017, National Taxpayer Advocate Nina Olson has made two legislative proposals that will, if enacted, address problems that Keith and I have faced in some cases that were are litigating or have recently litigated in the courts of appeals. These cases have been the subject of a number of posts on PT. Thus, even if we never win any of these cases (and we make no promises on that score), at least we may have provoked discussion of legislative fixes.

Among problems that have come up in these cases are ones that flow from the courts’ view that all filing deadlines in the Tax Court are jurisdictional and therefore not subject to the judicial doctrines of forfeiture, waiver, estoppel, and equitable tolling – doctrines that are often applicable to nonjurisdictional statutes of limitations in suits (1) between private parties and (2) outside the tax area, brought against the federal government in such areas of law as Social Security disability benefits, employment discrimination, tort claims, and veterans benefits. The NTA notes that, unlike with the Tax Court, the appellate courts have been divided over whether those doctrines apply to tax case filings in the district courts and the Court of Federal Claims. The NTA has recommended that the Code be amended to provide that all of these tax case judicial filing deadlines be made nonjurisdictional and subject to those doctrines. The portion of her report on this proposal can be found here.

Also, along similar lines, the NTA is recommending a legislative change to require the IRS to show the last date to file any Tax Court petition on all Collection Due Process and innocent spouse notices of determination – just as the IRS has been required (since 1998) to show the last date to file on all notices of deficiency. She would have Congress also amend the Code to state that taxpayers may rely on the last date to file shown in the notice, even if the IRS has given the wrong last date – the same rule (added in 1998) under section 6213(a) applicable to notices of deficiency that show the wrong last date. As part of this proposal, she would also ask Congress to allow persons out of the country an additional 60 days to file Tax Court Collection Due process and innocent spouse petitions. The portion of her report on this proposal can be found here.

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I had thought about extending this post to list all the various cases that Keith and I have litigated or are litigating in this area, but have decided that it makes more sense simply to report on the court rulings when they come down. I will, however, note that we are imminently awaiting rulings in the following three cases:

Duggan v. Commissioner, 9th Cir. Docket No. 15-73819   (submitted without oral argument on Dec. 7, 2017; the Harvard Federal Tax Clinic is amicus), and Cunningham v. Commissioner, 4th Cir. Docket No. 17-1433 (oral argument held on Dec. 5, 2017; the Harvard Federal Tax Clinic is counsel for the taxpayer). In both of these cases, the taxpayers argue that they were misled by the IRS through confusing language in the Collection Due Process notice of determination into mailing their Tax Court petitions to the court a day late. They seek equitable tolling to make their filings timely.

Pfizer v. United States, 2d Cir. Docket No. 17-2307 (oral argument to be held on Feb. 13, 2018; the Harvard Federal Tax Clinic is amicus). There, the IRS issued a notice of disallowance of a claim for overpayment interest under section 6611and told the taxpayer it had 6 years to bring suit on the claim in the district court (under 28 U.S.C. section 2401(a)) or the Court of Federal Claims (under 28 U.S.C. section 2501). That is the position that the IRS has long taken as to the statutes of limitations applicable to overpayment interest suits. See Rev. Rul. 56-506, 1956-2 C.B. 959. When the taxpayer brought suit in the SDNY about 3 years later, the DOJ moved to dismiss the suit for lack of jurisdiction as untimely, arguing that the applicable statute of limitations is the 2-year one of I.R.C. section 6532(a). The taxpayer argues that the applicable statute of limitations is the 6-year one, but if the 2-year statute applies, then that 2-year period is nonjurisdictional and subject to estoppel. The taxpayer points to Miller v. United States, 500 F.2d 1007 (2d Cir. 1974), which held that the 2-year period of section 6532(a) is subject to estoppel. Miller is in conflict with Federal Circuit case law holding that the 2-year period is jurisdictional and not subject to estoppel. See, e.g., RHI Holdings, Inc. v. United States, 142 F.3d 1459 (Fed. Cir. 1998).

 

Must the Taxpayer Mention Section 6751(b)(1) in a Deficiency Case for the Tax Court to Have to Consider Compliance With That Section?

We welcome back frequent guest blogger Carl Smith who raises another Graev III question. The issues raised by that case will continue to present themselves for some time as the Tax Court continues to sort through different scenarios. Keith

There are a lot of questions now about how the Tax Court will administer its recent holding in Graev III (i.e., Graev v. Commissioner, 149 T.C. No. 23 (Dec. 20, 2017)). Graev is a deficiency case in which penalties were sought under section 6662 and where the taxpayer specifically raised the issue before trial that the IRS had not shown compliance with the written penalty supervisor approval requirement set forth in section 6751(b). In Graev III, the Tax Court overruled its immediately-prior opinion in the case and held that the IRS burden of production under section 7491(c) for certain penalties in a deficiency case included showing compliance with section 6751(b)’s approval rules.

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In the days since Graev III, around 30 orders have been issued by various Tax Court judges in deficiency cases that have already been tried, but where the court has not yet ruled. In those orders, a number of judges have solicited the views of the parties as to how, if at all, Graev III applies to the case. The orders generally direct that any motions (presumably by the IRS to supplement the record to show section 6751(b) compliance) be filed very quickly. It is unclear whether such motions will be granted. And, it is unclear whether the taxpayers in some of those cases had raised section 6751(b) noncompliance as an issue earlier in the case. (In other cases, section 6751(b) noncompliance was definitely raised earlier.)

In Collection Due Process cases, Tax Court judges have recently differed as to whether the IRS must come forward to show section 6751(b) compliance where a taxpayer does not mention the section in his or her pleadings or filings. The same question will now be presented in deficiency cases: Will the Tax Court now insist that the IRS show compliance with the section 6751(b) approval requirement in deficiency cases where a taxpayer (unlike in Graev III) never mentions section 6751(b) in any pleadings or filings? This is of great importance to pro se taxpayers, who no doubt will be ignorant of section 6751(b)’s existence.

As of January 8, 2018, there have been two opinions issued by the Tax Court in deficiency cases involving penalties covered by section 6751(b):

In Roth v. Commissioner, T.C. Memo. 2017-248 (Dec. 28, 2017), the Tax Court made specific rulings on whether the IRS had complied with section 6751(b) in a case involving section 6662 penalties. This result was not surprising, however, since the taxpayers had raised possible noncompliance with section 6751(b)’s rules earlier in the case.

But, in Ankerberg v. Commissioner, T.C. Memo. 2018-1 (Jan. 8, 2018), the Tax Court did not discuss compliance with section 6751(b) before imposing a fraud penalty under section 6663. The taxpayer was pro se in this deficiency case and presumably did not mention section 6751(b) in his pleadings or other filings.

Ankerberg is a bad sign for pro se taxpayers. It is also, I would argue, inconsistent with what the Tax Court has understood to be the burden of production under section 7491(c) on other penalty sub-issues when a taxpayer has pleaded merely that he or she contests the penalties (but gives no more details).

Without any prompting, the Tax Court began enforcing 7491(c), starting with Higbee v. Commissioner, 116 T.C. 438 (2001), any time a taxpayer contested the penalties. But, in Swain v. Commissioner, 118 T.C. 358, 364-365 (2002), the court put in a caveat — that if the taxpayer never mentioned contesting penalties, the IRS had no burden of production under 7491(c). In Wheeler v. Commissioner, 127 T.C. 200 (2006), affd. 521 F.3d 1289 (10th Cir. 2008), when a taxpayer merely wrote in the petition: that “[t]he petitioner is not liable for a penalty”, the Tax Court held that this was sufficient to put the IRS to its burden of production on all penalty sub-issues other than reasonable cause. In Wheeler, the Tax Court refused to impose (1) a late-payment penalty because the IRS had failed to show that it had filed a substitute for return, and (2) an estimated tax penalty because the IRS had failed to show that the taxpayer had filed a return for the prior year (necessary to determine the required quarterly estimated tax payment for the current year).

To me, it seems clear that, under Wheeler, proof of compliance with the section 6751(b) approval requirement should be just another penalty sub-issue on which the IRS should have the burden of production, even in cases where a taxpayer does no more than state that he or she thinks the penalty doesn’t apply. I would hope any Tax Court judges reading this post would on their own seriously consider the import of Wheeler when they next face the issue of a penalty under section 6662 or 6663 in a case where the taxpayer is ignorant of section 6751(b), but has manifested an interest to contest the penalty.

UPDATE:  After this post went up, Carl learned that, although the Ankerberg opinion does not discuss section 6751(b) compliance, the parties had stipulated to the signed penalty approval form.  Knowledge of the form’s existence may have led the court into not discussing the section 6751(b) compliance issue.

 

Tenth Circuit Dismisses Appeal of Small Tax Case Where Taxpayer Was Only Seeking Review of Tax Court Procedural Rulings

We welcome back frequent guest blogger Carl Smith who brings news that the Tenth Circuit sees no path to appeal a Tax Court case with the small tax case designation even when the cases is dismissed for lack of jurisdiction. So, the Tax Court has enough jurisdiction to accept the designation of a case as a small case but not enough to actually decide the case.  This is big lump of coal in Ms. Vu’s stocking.  Tomorrow, we hope to spread some tax procedure holiday cheer with a discussion of yesterday’s Tax Court decision in Graev and the orders that followed it. Keith

I will keep this short, since there have already been three prior blog posts, see here, here, and here, on the case of Vu v. Commissioner, T.C. Summary Op. 2016-75. The last post was concerned with arguments raised by the parties about whether the Tenth Circuit could review procedural rulings in this small tax case. On December 18, 2017, the Tenth Circuit issued an order dismissing the appeal for lack of appellate jurisdiction.

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Keith and I represented Ms. Vu, and argued that the Tax Court’s dismissal of her case for lack of jurisdiction as untimely was an erroneous procedural ruling that could be reviewed by an appellate court, notwithstanding the usual prohibition at section 7463(b) on review of “decisions” of the Tax Court in small tax cases. We pointed out appellate case law under section 7429(f) (which contains a similar prohibition on appellate review of certain jeopardy assessment determinations) holding that the prohibition on review did not apply to procedural rulings, such as rulings dismissing a case for lack of jurisdiction. We thought there should be a similar exception for section 7463(b).

At the Tax Court in the Vu case, Keith and I had also asked Judge Ashford, pursuant to section 7463(d), to remove the small tax case designation so an appeal would be possible and precedent could be created in the Tenth Circuit on the underlying innocent spouse jurisdictional issue. The judge refused to remove the small tax case designation. Her action was, as best we could tell, a unique refusal to a taxpayer since orders have been searchable on the Tax Court’s website (mid-2011). So, we also argued to the Tenth Circuit that Judge Ashford abused her discretion by not granting the taxpayer’s timely request to remove the small tax case designation and that the appellate court could review that ruling on our motion. No court has ever considered whether it has appellate jurisdiction to review the denial of a party’s motion to remove a small tax case designation. In response, the DOJ took the surprising view that the only authority the Tax Court had under section 7463(d) to remove a small tax case designation was where the court belatedly discovered that the amount in dispute threshold ($50,000) had been exceeded. The Vu case concededly did not involve more than $50,000.

In an unpublished order, the Tenth Circuit did not address most of the parties’ arguments. Instead, the Tenth Circuit wrote:

In her response to the jurisdictional show cause order, Ms. Vu recognizes that small tax cases are not ordinarily appealable under I.R.C. § 7463(b), but argues that “[t]he prohibition on appellate review does not apply in this case, since Ms. Vu is not seeking merits review, but review of an erroneous procedural ruling of the Tax Court that precluded the Tax Court from deciding the case on the merits (i.e., a ruling that it lacked jurisdiction.” The court finds this to be a distinction without a difference: the Tax Court’s decision to dismiss a small tax case on jurisdictional grounds is nonetheless a “decision” rendered in a small tax case and, as such, “shall not be reviewed in any other court.” See I.R.C. § 7463(b); see also Rayle v. C.I.R., 594 F. App’x 305, 307 (7th Cir. 2014) (unpublished) (holding that “[t]he Tax Court’s dismissal of a case for lack of jurisdiction is a ‘decision’” and dismissing appeal of that decision for lack of appellate jurisdiction); Edge v. C.I.R., 552 F. App’x 255, 255 (4th Cir. 2014) (unpublished) (same). Accordingly, this court is without jurisdiction to hear Ms. Vu’s appeal.

The Tenth Circuit’s order did not mention Ms. Vu’s arguments under section 7429(f) for an analogous exception for procedural rulings.

The Tenth Circuit also did not discuss the separate issue of whether a denied motion to remove a small tax case designation is ever appealable. Nor did it discuss the DOJ’s position that removal under section 7463(d) was only permitted when it was discovered that the small tax case amount in dispute threshold was exceeded.

Observations

Keith and I were aware that in three unpublished opinions (including Rayle and Edge), courts of appeal had declined to review Tax Court dismissals of small tax cases for lack of jurisdiction. Still, it was not clear to us that any of those appellate court opinions seriously considered treating Tax Court procedural rulings on a different footing from merits rulings. Further, none of those opinions mentioned section 7429(f).

 

Tax Court Holds that Evidence of Internet Postage Purchase Constitutes Private Postmark for Timely Mailing Purposes

We welcome back frequent guest blogger Carl Smith who discusses another case dealing with the jurisdiction of the Tax Court. Here, the taxpayer’s issue concerns the postage which was purchased over the internet. Keith

In Pearson v. Commissioner, 149 T.C. No. 20 (Nov. 29, 2017), the Tax Court, sitting en banc, abandoned the holdings in its memorandum opinion in Tilden v. Commissioner, T.C. Memo. 2015-188, and adopted the holdings of the Seventh Circuit in Tilden v. Commissioner, 846 F.3d 882 (7th Cir. 2017), that (1) postage bought over the internet that is affixed to an envelope creates a private postmark as of the date of purchase for purposes of the regulations under the timely-mailing-is-timely-filing provisions of section 7502 and (2) internal tracking data of the USPS is not treated as a USPS postmark for purposes of those regulations. Applying those holdings to the facts of Pearson (which were virtually identical to Tilden – even involving the same law firm), the Tax Court found that it had jurisdiction.

Pearson frees up the Tax Court to issue similar rulings in a number of cases where the Tax Court had stayed proceedings in anticipation of both the Seventh Circuit’s ruling in Tilden and the Tax Court’s response in Pearson. Indeed, on the same day that Pearson was issued, the Tax Court issued a similar jurisdictional ruling in Baham v. Commissioner, T.C. Summary Op. 2017-85 – a case also involving internet-purchased postage.

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I have blogged five previous times on the Tilden case as it winded its way through the courts (see here, here, here, here, and here), so I will try to keep repetition in this post to a minimum.

Pearson Facts

To understand how the Pearson holdings occurred and were applied, I will summarize the facts (noting the trivial differences between Pearson and Tilden) and the relevant regulation provisions.

Pearson is a deficiency case where, on the 89th day after the notice was issued, an employee at a lawyer’s office in Salt Lake City (the same office as in Tilden) went to the internet website of stamps.com and purchased a stamp for the appropriate postage amount. (In Tilden, the stamps.com postage was purchased and the envelope was mailed on the 90th day.) After printing out the stamp, the employee affixed it to an envelope addressed to the Tax Court. The stamp had printed on it the date of purchase. The employee then filled out a certified mail receipt form (the white slip) and also attached it to the envelope. On the white slip, where there is space for the USPS to stamp a postmark, the employee wrote in by hand the date the stamp was purchased. Then, the employee walked the envelope over to the Post Office and mailed it, without getting a stamp from the USPS on the envelope or on the receipt. The employee kept the receipt.

The USPS never placed its own postmark on the envelope during its long journey to the Tax Court, but internal USPS tracking data showed the envelope first in the USPS system on the 91st day. (In Tilden, the tracking data indicated the 92nd day.) The tracking data for the initial entry was from a different Salt Lake City postal facility from the site of mailing, however.

On the 97th day, the envelope arrived at the Tax Court in Washington, D.C. – presumably after the now-common delay to irradiate the envelope to kill possible anthrax. (In Tilden, the envelope arrived on day 98.) The IRS concedes that if an envelope were mailed from Salt Lake City to the Tax Court on the 90th day, it would ordinarily be received in a range of days that included the 8th day after mailing.

Potentially Relevant Regulations 

Section 7502(b) states: “This section shall apply in the case of postmarks made other than the United States Postal Service only if and to the extent provided by regulations prescribed by the Secretary.”

Two regulations could have applied to determine whether the filing was timely.

A regulation involving a situation where there is a private postmark, but not a USPS postmark, Reg. section 301.7502-1(c)(1)(iii)(B)(1), reads:

(B) Postmark made by other than U.S. Postal Service.–(1) In general.–If the postmark on the envelope is made other than by the U.S. Postal Service–

(i) The postmark so made must bear a legible date on or before the last date, or the last day of the period, prescribed for filing the document or making the payment; and

(ii) The document or payment must be received by the agency, officer, or office with which it is required to be filed not later than the time when a document or payment contained in an envelope that is properly addressed, mailed, and sent by the same class of mail would ordinarily be received if it were postmarked at the same point of origin by the U.S. Postal Service on the last date, or the last day of the period, prescribed for filing the document or mailing the payment.

A regulation involving a situation where there is a USPS postmark and a private postmark, Reg. section 301.7502-1(c)(1)(iii)(B)(3), reads, in part:

(3) U.S. and non-U.S. postmarks.–If the envelope has a postmark made by the U.S. Postal Service in addition to a postmark not so made, the postmark that was not made by the U.S. Postal Service is disregarded . . . .

Tilden Tax Court Holding 

On these virtually identical facts in Tilden, the Tax Court had held that it lacked jurisdiction because the petition was untimely filed. In the opinion, the Tax Court always referred to the stamps.com date stamp on the postage as a “postmark” – using quotes around postmark to apparently indicate that the court was dubious about calling a mere internet stamp purchase date a true postmark. However, even if it were a true private postmark, then the court held that USPS tracking data constitutes a USPS postmark, so that the second regulation quoted above governs and makes the USPS postmark determinative. The judge relied on the Tax Court’s earlier opinion in Boultbee v. Commissioner, T.C. Memo. 2011-11, where it had held that timely USPS tracking information could be used by a party as a timely USPS postmark in the case of an envelope lacking a true USPS postmark. (In Boultbee, the envelope was mailed from Canada through its own postal system and never got a USPS postmark after it crossed the border.)

Tilden Seventh Circuit Holding

The Seventh Circuit overruled the Tax Court in Tilden, noting that the initial USPS tracking information could occur at a time long after true mailing, so was not reliable evidence of the date of mailing. Thus, the Seventh Circuit refused to treat the tracking information as a USPS postmark. By contrast, the Seventh Circuit held that the date stamp on the stamps.com postage affixed to the envelope constituted a private postmark for purposes of the first regulation quoted above. The court noted that, while it is true that there is no guarantee that the date of purchase is also the date that the envelope was mailed, that is also true in the situation (addressed by the regulations) where postage meters (such as by Pitney-Bowes) affix private postmarks with dates that can be manipulated by parties. Thus, since the envelope with this timely private postmark arrived within the ordinary period that a letter mailed from Salt Lake City on the 90th day would arrive, the petition was timely filed.

Pearson Holding

The Tax Court in Pearson completely accepted the Seventh Circuit’s analysis in its Tilden opinion, even though the Pearson case would be appealable to the Eighth Circuit. This now creates a nationwide rule that internet-purchased postage is a private postmark for purposes of the regulations and that USPS tracking data does not create a USPS postmark.

The Pearson majority opinion and the joint dissent of Judges Gustafson and Morrison sparred over the definition of “postmark” in the regulations – with the majority looking to a dictionary definition. The dissent did not think this envelope contained a private postmark. There are interesting discussions in both opinions of the origins of section 7502(b) – originally titled “Stamp Machine”, but now titled “Postmarks” – and the history of Pitney-Bowes-type machines. The majority wrote: “[A] Stamps.com postage label is the modern equivalent of the output of an old-fashioned postage meter. We find no plausible basis for making a legally significant distinction between these two means of affixing postage.”

The majority also gave Auer deference to the IRS’ current interpretation of the word “postmark” in its regulations to include dates shown on internet-purchased postage. (See Auer v. Robbins, 519 U.S. 452, 461 (1997).) The dissent did not think Auer deference should be accorded and pointed out the shaky continuing existence of the Auer deference line of cases in the Supreme Court.

Baham

Baham, issued the same date as Pearson, is a case where Judge Wherry, on his own, investigated the USPS tracking information and took judicial notice of it. In Baham, the envelope contained a petition that was signed on the 89th day and that was mailed to the Tax Court from “The UPS Store” in Acadia, California. The envelope bore a shipping label purchased from Endicia.com on the 90th day. The taxpayer also introduced a receipt from The UPS Store for mailing at 2:44 pm on the 90th day, but, of course, that evidence is not itself a postmark. Other evidence was later introduced that The UPS Store typically brought its mail over to the USPS at 5 pm on the date the mail was received. The envelope was sent by certified mail, but never acquired a USPS postmark. USPS certified mail tracking information showed the envelope first in the USPS system at 8:03 am on the 91st day. Judge Wherry held that the petition was mailed on the 90th day and so was timely.

Observations

Since the IRS agrees with the Tax Court in Pearson, it is doubtful that any party (the IRS or the taxpayer) will ever argue in the courts of appeals that a petition was late under facts similar to Pearson, Tilden, or Baham. Thus, I expect no further appellate court opinions on this issue.

However, given the widespread use of internet-purchased postage, I think it long overdue that the IRS update the regulations under section 7502 to bring them into the 21st Century. There should be no need for people to ever wonder about whether internet postage or USPS tracking information constitutes a postmark.

 

DOJ Argues that Small Tax Case Designations Can Only Be Removed for Exceeding the Jurisdictional Amount in Dispute Limit

We welcome back frequent guest blogger Carl Smith who writes about an interesting development regarding the government’s view of the effect of electing small case status in a Tax Court case. Keith

I write this post because I am sure that what the DOJ is arguing in the Tenth Circuit is, if accepted, going to be a shock to both the Tax Court and the IRS. I suspect that the latter has no idea that the DOJ is trying to take away a case management tool it has been using for almost 50 years. The DOJ is arguing that under section 7463(d), the sole circumstance in which the Tax Court may remove a small tax case designation is when it is belatedly discovered that the $50,000 amount in dispute limit for small tax cases has been exceeded. The DOJ argues that legislative history (relied on by the IRS and Tax Court over the years) that suggests other reasons for removing the small tax case designation (such as to create precedential rulings either in the Tax Court or the appellate courts) should be ignored, as the statute itself is clear.

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Section 7463 gives taxpayers the option (concurred in by the Tax Court pre-trial) to designate a case as a small tax case. The scope of the authority to remove the small tax case designation is one thing at issue in the Tenth Circuit in an appeal of Vu v. Commissioner, T.C. Summary Op. 2016-75 – a case on which Les previously blogged here.

In Vu, the taxpayer filed a pro se innocent spouse petition under section 6015(e) too early (though she had no reason to think so). The IRS filed an answer that did not allege any premature filing. By the time that the IRS moved to dismiss her case for lack of jurisdiction as prematurely filed, she could no longer correct her error by timely filing another petition. Judge Ashford stated that she had to dismiss the petition for lack of jurisdiction because the filing deadlines in section 6015(e) are jurisdictional. Though, as she did so, Judge Ashford herself wrote that “this is an inequitable result”.

At that point, Keith and I stepped in to represent Ms. Vu pro bono and moved for reconsideration, to vacate, and to remove the small tax case designation.

In the motions for reconsideration and to vacate, we argued that (1) under current Supreme Court case law, the filing deadlines are not jurisdictional and (2) the IRS waited too long to raise – and so forfeited – what is really a non-jurisdictional statute of limitations defense. At the time we made those arguments, the Tax Court in Pollock v. Commissioner, 132 T.C. 21 (2009), had held the 90-day filing deadline in section 6015(e) to be jurisdictional – based, in part, on Supreme Court case law up to 2009. But, no court of appeals had ruled one way or the other on whether the filing deadlines in section 6015(e) are jurisdictional.

In our motion to remove the small tax case designation, we pointed out the novelty of the jurisdictional issue in the appellate courts, that Ms. Vu’s case (if the designation were removed) could be appealed to the Tenth Circuit, and that the issue of whether the section 6015(e) 90-day filing deadline is jurisdictional was presented in two then-pending Circuit courts in appeals that Keith and I had also brought.

Rather than ruling immediately, Judge Ashford waited until the Second and Third Circuits held the 90-day period in section 6015(e) jurisdictional in Rubel v. Commissioner, 856 F.3d 301 (3d Cir. 2017), and Matuszak v. Commissioner, 862 F.3d 192 (2d Cir. 2017). Then, relying on Pollock, Rubel, and Matuszak, Judge Ashford denied the motions to reconsider and to vacate.

In the same order (on which Patrick Thomas blogged here in a designated order post), Judge Ashford also denied Ms. Vu’s motion to remove the small tax case designation. Judge Ashford noted that the amount in dispute in the case did not exceed $50,000. She also thought there was now enough precedent on the jurisdictional issue adverse to Ms. Vu so as not to justify removing the designation so that Ms. Vu could attempt to create Tenth Circuit precedent. The Judge also felt that, while technically timely (since the motion was made before the decision was final or any trial began), granting a motion to remove the small tax case designation after the judge had already issued an opinion “violates the spirit of the Court’s small tax case rules”.

Section 7463(b) states, in part: “A decision entered in any case in which the proceedings are conducted under this section shall not be reviewed . . . .”

Section 7463(d) states, in relevant part:

At any time before a decision entered in a case in which the proceedings are conducted under this section becomes final, the taxpayer or the Secretary may request that further proceedings under this section in such case be discontinued. The Tax Court, or the division thereof hearing such case, may, if it finds that (1) there are reasonable grounds for believing that the amount of the deficiency placed in dispute, or the amount of an overpayment, exceeds the applicable jurisdictional amount described in subsection (a), and (2) the amount of such excess is large enough to justify granting such request, discontinue further proceedings in such case under this section.

Legislative history states:

In view of the proposed increase in the small tax case jurisdictional amount to $5,000 it is contemplated that, the Tax Court will give careful consideration to a request by the Commissioner of Internal Revenue to remove a case from the small tax case procedures when the orderly conduct of the work of the Court or the administration of the tax laws would be better served by a regular trial of the case. . . . [R]emoval of the case from the small tax case category may be appropriate where a decision in the case will provide a precedent for the disposition of a substantial number of other cases or where an appellate court decision is needed on a significant issue.

  1. Rept. 95-1800 at 277-278.

Relying on this legislative history, the Tax Court, over the years, has taken the position (with which the IRS agreed) that it had the power to remove small tax case designations for pretty much any reason (if the taxpayer asked) and for the reasons stated in the legislative history (if the IRS asked or the court acted sua sponte). See, e.g., IRS Chief Counsel Memorandum 200115033, 2001 IRS CCA LEXIS 13 (Feb. 14, 2001) (“While the small tax case designation turns chiefly on the amount in dispute, the government has succeeded in having the small tax case designation removed in cases where a decision in the case will provide a precedent for the disposition of a substantial number of other cases or where an appellate court decision is needed on a significant issue.”) The Tax Court views the second sentence of section 7463(d) as providing merely an illustration of one of the grounds for removing small tax case designations, not the exclusive reason.

Despite our setback in not getting the Tax Court to remove the small tax case designation – which would have made an appeal easier – Keith and I appealed the Vu case to the Tenth Circuit (Docket No. 17-9007). That Circuit suspended briefing in the case and requested the parties to discuss its appellate jurisdiction in light of section 7463(b)’s prohibition on appeals from small tax cases.

On November 15, 2017, Keith and I filed a response to the Tenth Circuit arguing two grounds for appellate jurisdiction:

First, we contend that section 7463(b) does not preclude appellate review of certain procedural rulings of the Tax Court in small tax cases. This is a novel argument under section 7463(b). However, section 7429(f) precludes appellate review of district court or Tax Court determinations made in section 7429 jeopardy assessment proceedings, and the majority of courts of appeals to have considered the issue has held that review of section 7429 procedural rulings is not barred by the statute. See, e.g., Wapnick v. United States, 112 F.3d 74 (2d Cir. 1997) (“Following other circuits, we hold that this limitation applies only to decisions on the merits regarding the jeopardy assessment in question. A dismissal of a Section 7429 proceeding for lack of subject matter jurisdiction is, therefore, appealable.”; citations omitted). Keith and I argue that the limitation of appeal in small tax cases should similarly not preclude review of the Tax Court’s (in our view erroneous) dismissal of a small tax case for lack of jurisdiction.

Second, we take the position that a denial of a motion to remove a small tax case designation is itself appealable (also a novel issue on which there is no case law). We argue (1) that Judge Ashford abused her discretion in denying a taxpayer request that was technically timely, and (2) that the statute’s authorization of removal before a decision in a small tax case becomes final shows that Congress intended to have the Tax Court sometimes remove small tax case designations after the court had already ruled on an issue. Relying on the legislative history of section 7463(d) and long-standing Tax Court practice, we argue that Judge Ashford was wrong to deny Ms. Vu a chance to create Tenth Circuit precedent on a significant, novel legal issue in that Circuit.

In a response filed on November 30, 2017, the DOJ distinguished section 7429(f) precedent on the ground that the statute there precludes the review of “determination[s]”, not “decision[s]” (as in section 7463(b)). Most shockingly, though, the DOJ, while conceding that Ms. Vu timely filed her motion to remove the small tax designation, argues that section 7463(d) only allows the Tax Court to remove a small tax case designation where the court finds that the $50,000 jurisdictional amount in dispute limit is exceeded. The DOJ contends that the statute’s language plainly shows this, so the legislative history laying out other grounds for removing the small tax case designation should be disregarded.

On December 7, 2017, Keith and I filed a reply that showed the Tenth Circuit the long history of the Tax Court making determinations on motions to remove small tax case designations using the criteria set out in the legislative history (such as to create appellate precedent) – not just looking at whether the jurisdictional limit has been exceeded.

Observations

As a litigant in the Vu case, I don’t feel comfortable saying anything more than this: Whether the DOJ is right on the removal power’s scope, I am pretty certain that the DOJ did not consult with the IRS before making the argument that the only ground on which the Tax Court can remove a small tax case designation is that the jurisdictional limit has been exceeded. Indeed, it is ironic that Ms. Vu’s case is an innocent spouse case where an argument is untimely filing. It wasn’t too many years ago that the Tax Court in Lantz v. Commissioner, 132 T.C. 131 (2009), invalidated a 2-year limitation on requesting section 6015(f) equitable innocent spouse relief that was set out only in a regulation. In order to challenge this ruling in many Circuits, the IRS sought to remove small tax case designations in a number of pending Tax Court cases so that the IRS could create precedent in many Circuits (and hopefully generate a Circuit split). See Iljazi v. Commissioner, T.C. Summary Op. 2010-59 at p. *4 n.1, where I was counsel for the taxpayer and where Judge Panuthos denied the IRS motion – basically on the theory that taxpayer preferences to stay as small tax cases should generally be honored.