Fourth Circuit Joins Second and Third in Holding Innocent Spouse Suit Filing Deadline Jurisdictional

We welcome frequent guest blogger Carl Smith back to the blog. Today he writes about our most recent loss in our effort to knock down jurisdictional walls in situations where taxpayers have a strong equitable reason for missing a court deadline. Keith

In a case litigated by the Harvard Federal Tax Clinic, the Fourth Circuit in Nauflett v. Commissioner, affirmed, in a published opinion, two unpublished orders of the Tax Court (found here and here) holding that the 90-day period in section 6015(e) in which to file a Tax Court innocent spouse petition is jurisdictional and not subject to equitable tolling. The Fourth Circuit thus joins the two other Circuits to have addressed these questions – in other cases litigated by the clinic – Rubel v. Commissioner, 856 F.3d 301 (3d Cir. 2017) (on which we blogged here) and Matuszak v. Commissioner, 862 F.3d 192 (2d Cir. 2017) (on which we blogged here).

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In all three cases, the IRS misled a pro se taxpayer into filing a late Tax Court petition.

The Nauflett opinion basically just follows what was said by those prior Circuits, finding in the words of the statute a clear statement that excepts this filing deadline from the current Supreme Court general rule that filing deadlines are no longer jurisdictional. Section 6015(e) provides that an “individual may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief available to the individual under this section if the petition is filed” within 90 days of the issuance of a notice of determination (or after the taxpayer’s request for relief hasn’t been ruled on for 6 months). The Fourth Circuit noted the word “jurisdiction” in the sentence creating the filing deadline and felt that the word “if” in the sentence conditioned the Tax Court’s jurisdiction on timely filing. The court did not think the fact that the word “jurisdiction” was in a parenthetical mattered, and it did not credit (or even discuss) the taxpayer’s argument that the word “jurisdiction” was arguably addressed only to the words immediately following the parenthetical (“to determine the appropriate relief available to the individual under this section”), which made the sentence ambiguous – i.e., not “clear”, as required for a Supreme Court exception to apply. As we have noted previously, jurisdictional filing deadlines can never be subject to equitable tolling or estoppel.

Observations

All three opinions omit discussion the clinic’s assertion that Congress, in drafting section 6015(e) in 1998, would likely have been shocked to hear that its language precluded equitable tolling, since section 6015 was an equitable provision enacted as section 3201 of the IRS Restructuring and Reform Act of 1998 and was explicitly paired with section 3202, which amended section 6511 to add subsection (h), providing for equitable tolling of the tax refund claim filing deadline in cases of financial disability. The latter provision was to overrule United States v. Brockamp, 519 U.S. 347 (1997), which held that the refund claim filing deadline could not be equitably tolled. Section 6015(e) was drafted in 1998 with none of the features that led the Brockamp court to reject judicial equitable tolling of the refund claim filing period.

I hope this third loss on the section 6015(e) issue can at least be of use in lobbying Congress for Nina Olson’s proposed legislative fix to make the filing deadlines for all tax suits not jurisdictional and subject to equitable tolling. For her proposal, see the link in our blog here.

Keith and I have no further cases to litigate on this section 6015(e) filing deadline. We cry “uncle” on section 6015(e)’s filing deadline.

However, only as amici, we are still litigating the jurisdictional nature of several other judicial tax filing deadlines:

  1. Section 6213(a) (the Tax Court deficiency suit filing deadline, in the Ninth Circuit related cases of Organic Cannabis Foundation v. Commissioner, Docket No. 17-72874, and Northern California Small Business Assistants v. Commissioner, Docket No. 17-72877 – both reviewing unpublished orders of the Tax Court dismissing allegedly-late petitions for lack of jurisdiction);
  2. Section 6532(a) (the district court refund suit filing deadline, in the Second Circuit case of Pfizer Inc. v. United States, Docket No. 17-2307 – reviewing unpublished orders of the district court for the Southern District of New York that dismissed an allegedly-late complaint for lack of jurisdiction); and
  3. Section 7623(b)(4) (the Tax Court whistleblower award deadline in the D.C. Circuit case of Myers v. Commissioner, Docket No. 18-1003 – reviewing the ruling in Myers v. Commissioner, 148 T.C. No. 20 (June 5, 2017), dismissing a late petition for lack of jurisdiction (on which we blogged here).

All of those cases present statutes that are easier for us to win under than section 6015(e) (the hardest). We are expecting a ruling in Pfizer any moment, since it was argued on February 13. But, it is possible in each of these cases that the court will affirm or reverse on some other ground, so that the jurisdictional issue is not reached.

Finally, I wish to thank Harvard Law student Allison Bray for her excellent oral argument in the Nauflett case. Nauflett’s was the third court of appeals oral argument done by a Harvard Law student in the last 14 months. Hear Allison’s oral argument here. Prior to Allison, two other tax clinic students argued similar cases.  Hear Amy Feinberg’s oral argument to the 4th Circuit regarding jurisdiction in the CDP context here. Hear Jeff Zink’s argument to the 2nd Circuit in Matuszak regarding section 6015 jurisdiction here.

Eleventh Circuit Says Untimely-Made CDP Arguments “May Deserve Attention from the Bench and Bar”

We welcome back frequent guest blogger Carl Smith. Today, Carl discusses a recent decision on appeal from dismissal by the Tax Court for untimely filing a CDP request. The taxpayer timely filed the request after receipt but not within the applicable time from mailing. The facts make for a compelling case and maybe the next person with this problem now has a basis for winning this argument. We also wish to thank Tax Notes for allowing us to link to an comments to proposed regulations referred to at the bottom of this post. Keith 

Here’s something you don’t see every day: The Eleventh Circuit faced two CDP arguments that it held were raised too late for it to consider on appeal. Yet the court was so bothered by the possible correctness of the arguments that it deliberately wrote a published opinion explaining the arguments. Here’s the penultimate paragraph of the opinion:

We do not reach the due process or legislative history arguments because Mr. Berkun did not properly raise them in the tax court. Given the lack of any substantive ruling on our part, this may seem like an opinion “about nothing.” Cf. Seinfeld: The Pitch (NBC television broadcast Sept. 16, 1992). And maybe it is. But we have chosen to publish it because the issues that Mr. Berkun attempts to raise on appeal may deserve attention from the bench and bar.

Berkun v. Commissioner, 2018 U.S. App. LEXIS 13910 (11th Cir. May 25, 2018) (slip op. at 12). This post will set out the arguments to publicize them – in hopes that practitioners and Tax Court judges dealing with pro se petitioners will consider raising the arguments timely in future Tax Court cases. For the Tax Court to accept one of the arguments, though, it will have to overrule one of its prior T.C. opinions.

In a nutshell, the first argument is that when the IRS puts a person in prison for tax fraud, Due Process requires that any notice of intention to levy (NOIL), if mailed, be mailed to him or her in prison and not merely to the residential address shown on the most recent tax return (where the IRS knows he or she is not currently living).

The second argument is one that has come up a number of times. In the innocent spouse case of Mannella v. Commissioner, 132 T.C. 196, 200 (2009), rev’d and remanded on other issue, 631 F.3d 115 (3d Cir. 2011), the Tax Court wrote:

If the [NOIL] is properly sent to the taxpayer’s last known address or left at the taxpayer’s dwelling or usual place of business, it is sufficient to start the 30-day period within which an Appeals hearing may be requested. Sec. 301.6330-1(a)(3), A-A9, Proced. & Admin. Regs. Actual receipt of the notice of intent to levy is not required for the notice to be valid for purposes of starting the 30-day period. Id. We see no reason the notice of intent to levy, including information about her right to section 6015 relief, mailed to petitioner at her last known address but not received by her should start the 30-day period to request an Appeals hearing but not start the 2-year period to request relief under section 6015(b) or (c).

In Berkun, the second argument was that both the structure of CDP and a sentence from its legislative history (one that was not discussed in the pro se case of Mannella), indicate that, contrary to Mannella, a NOIL mailed to a last known address but not actually received by the taxpayer in the 30-day period in which to request a CDP hearing does not cut off the right of the taxpayer to later request a CDP hearing (i.e., not an equivalent hearing), and the CDP regulation cited in Mannella is either distinguishable or invalid.

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Berkun Facts

Alan Berkun had been convicted in New York of securities and tax fraud. The judge imposed restitution both to his victims and to the IRS. The IRS assessed the restitution under section 6201(a)(4). At the time of his incarceration, Berkun had been living with his girlfriend and their three mutual children in a house he owned in Florida, so he was incarcerated in Florida for a number of years.

While in jail, he wrote the IRS a letter asking that all correspondence concerning his tax issues be sent to him in jail. However, the income tax returns that he filed for the last two years prior to his release showed his address as the Florida house in which his girlfriend and children lived. He expected to move back into that house when he got out of prison, but shortly before release, his girlfriend ended the relationship and refused to let him move back in.

Shortly before Berkun’s release, a Revenue Officer (RO) was assigned to try to collect the restitution assessment. The RO learned that Berkun was in jail, but wanted to issue a NOIL. The RO decided to mail the NOIL to Berkun’s Florida house, without even copying Berkun in jail. Berkun’s girlfriend got the NOIL and threw it in the garbage, not telling Berkun about it.

A few months later, Berkun was released to live in his mother’s house. The RO visited him there and brought a copy of the NOIL, which he gave to Berkun. This was the first Berkun heard of the NOIL. Berkun promptly hired an attorney, who got a Form 12153 requesting a CDP hearing into the IRS’ possession within 30 days after the meeting. Berkun was not seeking to deny the correctness of the restitution assessment, but just to arrange for a collection alternative to immediate full payment through levy. One of the arguments that Berkun made was that his former girlfriend had converted a large amount of his property (including a valuable stamp collection) shortly after she learned of the NOIL, and he wanted the IRS to pursue her for collection of part of the liability.

Appeals held a hearing in which it did not agree to the collection alternative proposed or to pursue the former girlfriend. After the hearing, Appeals issued a decision letter, taking the position that the hearing was an equivalent hearing, not a CDP hearing, since Berkun had not filed his Form 12153 within 30 days of the mailing of the NOIL to his Florida house.

Tax Court Proceedings

Berkun’s lawyer filed a petition with the Tax Court and argued, under Craig v. Commissioner, 119 T.C. 252 (2002), that the decision letter should be treated as a CDP notice of determination giving the right to Tax Court review because Berkun had timely requested a CDP hearing within 30 days of actually receiving the NOIL. Berkun’s lawyer argued that, based on prior cases involving prisoners put in jail by the IRS, the last known address for Berkun on the day that the NOIL was mailed was prison, not the Florida house; thus, the NOIL that was mailed was invalid, and the NOIL that was hand-delivered was the first valid NOIL, as to which a timely Form 12153 had been filed.

In an unpublished order, Judge Carluzzo dismissed the petition for lack of jurisdiction, holding on these facts that the NOIL was mailed to Berkun’s last known address, since it was mailed to the address shown on his most recent tax return.

Keith and I read the unpublished order and realized that Berkun had a second argument for why the Tax Court had jurisdiction that Judge Carluzzo had not discussed (naturally, since Berkun’s then-lawyer did not know about the argument). We contacted Berkun and his lawyer and made them aware of the argument. Berkun’s lawyer moved to vacate the order of dismissal, making this new argument – that, even if the NOIL was mailed to Berkun’s last known address, because he did not actually receive it during the 30-day period, he was entitled to a CDP hearing by requesting one within 30 days after actual receipt. A copy of a 51-page memorandum of law that accompanied the motion to vacate can be found here.

The memorandum was so long because it takes a lot of time to explain this argument. I will not go into the argument in great detail. Instead, the reader may read the memorandum or a more detailed summary of it in a prior post I did on it here in connection with unpublished orders in a case named Godfrey v. Commissioner, Tax Court Docket No. 21507-13L. As noted in the post, Godfrey was a case where the NOIL, although mailed to the taxpayer’s last known address, was not actually received during the 30-day period. The post noted that the same had happened in Mannella and in Roberts v. Commissioner, T.C. Summary Op. 2010-21. In each case, the Tax Court cited the CDP regulation saying that an NOIL that was mailed to the last known address was valid, even if not received. But, the court did not discuss the structure of CDP or the legislative history that suggests that the regulation is distinguishable or invalid as to cutting off the right of a taxpayer in such a case to get a CDP hearing if the taxpayer did not file a hearing request within 30 days of the NOIL’s mailing.

Just to whet the reader’s appetite, here is from the Conference Committee report, where Congress wrote:

If a return receipt [for mailing the NOIL by certified mail] is not returned, the Secretary may proceed to levy on the taxpayer’s property or rights to property 30 days after the Notice of Intent to Levy was mailed. The Secretary must provide a hearing equivalent to the pre-levy hearing if later requested by the taxpayer. However, the Secretary is not required to suspend the levy process pending the completion of a hearing that is not requested within 30 days of the mailing of the Notice. If the taxpayer did not receive the required notice and requests a hearing after collection activity has begun, then collection shall be suspended and a hearing provided to the taxpayer.

H.R. Rep. (Conf.) 105-599, 105th Cong., 2nd Sess. (1998) at 266, 1998-3 C.B. at 1020 (emphasis added).

The second and third sentences of the above-quoted language are the origin of the equivalent hearing, discussed in detail at Reg. § 301.6330-1(i). The last sentence, though, appears to be a command to hold a regular CDP hearing when a properly addressed NOIL was not received within the 30-day period. Only in a real CDP hearing must the IRS suspend collection action under section section 6330(e)(1). Thus, while it is true that an NOIL that is not received in the 30-day period is valid for some purposes (e.g., to allow the IRS to start collection), it should not be valid for purposes of cutting off a right to a CDP hearing when one is requested later, after the NOIL is actually received.

Moreover, Congress was clearly concerned that nonreceipt of important IRS notices could deprive a taxpayer of prepayment Tax Court review. For that reason, Congress explicitly provided that, in a CDP hearing, the taxpayer may raise a challenge to the underlying liability if the taxpayer did not actually receive a notice of deficiency. Section 6330(c)(2)(B). It would be inconsistent with the purposes of CDP to allow Tax Court prepayment challenges to happen when a notice of deficiency was not actually received, but not when a NOIL was not actually received.

Judge Carluzzo wanted no part of this argument, so he denied the motion to vacate in a brief paragraph in an unpublished order, as follows:

In the face of seemingly plain statutory language and even plainer regulations”, Andre v. Commissioner, 127 T.C. 68, 71 (2006), petitioner, in his motion to vacate filed May 12, 2016, challenges our order of dismissal for lack of jurisdiction, entered April 15, 2016, that is supported by that plain statutory language, even plainer regulations, and numerous opinions of this Court. In support of his motion petitioner relies upon certain legislative history that his memorandum of authorities, also filed May 12, 2016, shows to raise more questions than it answers. Otherwise if, as in this case, the notice referenced in I.R.C. §6330(a)(1) & (2) is properly mailed to the taxpayer, we are aware of no authority for petitioner’s argument that the period referenced in I.R.C. §6330(a)(3)(B) should take into account the date the notice is received by the taxpayer rather than the date the notice is mailed by the Commissioner. 

Appellate Proceedings 

On appeal to the Eleventh Circuit, Berkun retained Joe DiRuzzo, who was admitted to that Circuit and had extensive appellate experience. Joe made the decision not to argue that the NOIL was not mailed to the last known address, but Joe incorporated into his brief the argument that an NOIL that is not timely received can still give rise to a CDP hearing and a new Due Process argument.

The Due Process argument was based on non-tax case law from forfeiture cases that holds that a notice of forfeiture, to satisfy Due Process, must be sent to an incarcerated person in jail. See, e.g., Dusenbery v. United States, 534 U.S. 161, 164-69 (2002) (Due Process satisfied by mailing a notice of forfeiture to a claimant by certified mail to the prison where he was incarcerated, to the residence where the claimant’s arrest occurred, and to the home where the claimant’s mother lived); United States v. McGlory, 202 F.3d 664, 672, 674 (3d Cir. 2000); Weng v. United States, 137 F.3d 709, 714 (2d Cir. 1998). Joe argued that these Due Process cases should be extended to serving NOILs, as well.

As noted above, the Eleventh Circuit held that both the legislative history and Due Process arguments should have been raised in the Tax Court before Judge Carluzzo’s order of dismissal, and the judge was within his rights not to consider the legislative history argument in a motion for reconsideration (though, query whether the judge actually considered it and rejected it on the merits?). But, the Eleventh Circuit was obviously troubled by the possible merit of these two arguments. So, it wrote it published opinion “about nothing” to make the bench and bar aware of the arguments.

Observation

The legislative history argument is not a new one to the IRS. As noted in my prior Godfrey post, in August 2013, the IRS proposed changes to the innocent spouse regulations under section 6015. See REG-132251-11, 78 F.R. 49242-49248, 2013-37 I.R.B. 191. Among the proposed changes was one to Reg. § 1.6015-5(b)(3)(ii) to “clarify” that the 2-year period of section 6015(b) or (c) starts irrespective of an electing spouse’s actual receipt of the NOIL, if it was sent by certified or registered mail to the electing spouse’s last known address. This proposal was explicitly proposed to align the regulations to the holding in Mannella. On January 30, 2014, a number of low-income taxpayer clinicians (including Keith and I) submitted combined comments on the proposed regulations that, among other things, argued that Mannella was wrongly decided and the CDP regulation about non-receipt of NOILs was inconsistent with the legislative history. We recommended that, if an NOIL is considered a collection activity, the 2-year period start from the date of actual receipt of the NOIL. Our comments were published in Tax Notes Today, where they can be found at 2014 TNT 22-64. The proposed regulations are still outstanding, and the IRS has not responded to our comments.

 

Does the Tax Court Sometimes Have Refund Jurisdiction in CDP Cases?

Frequent contributor Carl Smith discusses a case implicating the Tax Court’s ability to determine and order the credit or refund of an overpayment in a CDP case. Les

In 2006, in a court-reviewed opinion, the Tax Court in Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006), held that the Tax Court lacked jurisdiction to determine an overpayment in a Collection Due Process (“CDP”) case. Although section 6512(b) gives the Tax Court overpayment jurisdiction, the court held that section 6512(b) was limited in application to deficiency cases and interest abatement cases, where it is specifically referenced in section 6404(h)(2)(B). The Tax Court has never reexamined its Greene-Thapedi holding, and the holding was adopted only in a D.C. Circuit opinion, Willson v. Commissioner, 805 F.3d 316 (D.C. Cir. 2015), presenting a highly unusual fact pattern. A case named McLane v. Commissioner, Docket No. 20317-13L, currently pending before Judge Halpern may lead to consideration of Greene-Thapedi’s holding in the Fourth Circuit in a case with a more typical fact pattern than that presented in either Greene-Thapedi or Willson.

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The McLane case is not new to readers of PT. A March designated order in the case was discussed by Samantha Galvin in her post on April 5. But, that post did not discuss Greene-Thapedi, so I think another post expanding on McLane is called for.

In Greene-Thapdei, a taxpayer complained during a CDP hearing of alleged excess interest and late-payment penalty that she had been charged after she settled a Tax Court deficiency case.  The IRS had assessed the agreed tax, as well as interest and late-payment penalty thereon.  During the Tax Court CDP case, the balance charged was fully paid by a credit that the IRS took from a later taxable year, so the Tax Court dismissed the case as moot, concluding that it had no overpayment jurisdiction in CDP.  But, a curious footnote (19) in the majority opinion may have tried to leave open the issue of overpayment jurisdiction in cases where the taxpayer did not receive a notice of deficiency and so could challenge the underlying liability in CDP. However, the footnote is far from clear.  The footnote reads:

We do not mean to suggest that this Court is foreclosed from considering whether the taxpayer has paid more than was owed, where such a determination is necessary for a correct and complete determination of whether the proposed collection action should proceed. Conceivably, there could be a collection action review proceeding where (unlike the instant case) the proposed collection action is not moot and where pursuant to sec. 6330(c)(2)(B), the taxpayer is entitled to challenge “the existence or amount of the underlying tax liability”. In such a case, the validity of the proposed collection action might depend upon whether the taxpayer has any unpaid balance, which might implicate the question of whether the taxpayer has paid more than was owed.

Judge Halpern joined nearly every other judge in the majority opinion.  Judge Vasquez filed a dissent arguing that the Tax Court implicitly had jurisdiction to determine an overpayment in CDP.

In McLane, the IRS says it issued a notice of deficiency to McLane’s last known address, but, when he never filed a Tax Court petition, it assessed the income tax deficiency.  It later sent him a notice of intention to levy.  In the CDP case in Tax Court, the IRS conceded that he did not receive the notice of deficiency so could challenge the underlying liability.  After a trial, the IRS conceded that McLane proved not only the disputed deductions in the notice of deficiency, but also that he had more deductions than were reported on his return and so overpaid his taxes by about $2,500.  After the post-trial briefs were in (but before any opinion was issued), the parties held a conference call with Judge Halpern about what to do.  The IRS took the position that the Tax Court had no jurisdiction to find an overpayment and any claim filed today would be time barred.  After the conference call, the Judge in March issued an order asking for the parties to file memoranda addressing whether the court had overpayment jurisdiction.  The 6-page order did not mention Greene-Thapedi, but stated:

Because the question of our jurisdiction in a collection due process (CDP) case to determine and order the credit or refund of an overpayment appears to be a novel one, we will require the parties to submit supplemental briefs addressing the issue before we resolve it.

Judge Halpern doesn’t usually forget about relevant opinions, so I suspect that he may be thinking that Greene-Thapedi is distinguishable (maybe under footnote 19?).  In the order, the judge also suggested that the pro se taxpayer consult a tax clinic in the Baltimore or D.C. area before submitting his memorandum.

Although the taxpayer spoke to the tax clinic at the University of the District of Columbia, he decided not to retain that clinic and stayed pro se.

In response to the judge’s order, three memoranda were eventually filed with the Tax Court: (1) an IRS’ memorandum, (2) the taxpayer’s memorandum, and (3) an amicus memorandum that the judge allowed the UDC clinic to submit. Full disclosure: Although the amicus memorandum was written primarily by UDC law student Roxy Araghi and her clinic director, Jacqueline Lainez, since I assisted them significantly, I am also listed as of counsel on the memorandum.

Essentially, the IRS simply points to Greene-Thapedi as controlling and argues that the Tax Court lacks overpayment jurisdiction in CDP for the reasons stated by the majority in that opinion.

The IRS also cites and relies on Willson. In Willson, the IRS erroneously sent the taxpayer refund checks for two taxable years, when it should have sent only one refund check. Later realizing its mistake, the IRS assessed in the earlier year the erroneous payment amount. The taxpayer eventually realized that one of the two refunds checks was erroneous, and he voluntarily sent the IRS some money for the year for which the IRS had set up the assessment. When the IRS did not get back the rest of the assessment from the taxpayer, it issued a notice of intention to levy for the balance. During the Tax Court CDP case, the Tax Court held that assessment was not a proper way of collecting back the erroneous refund. And appropriate methods (such as a suit for erroneous refund) were now time-barred. So, the IRS abated the assessment. Then, the IRS argued that the case was moot. But, at that point, the taxpayer contended that he had overpaid his tax (the voluntary payments), and he asked the Tax Court to so hold, citing the Tax Court’s authority under section 6330(c)(2)(B) to consider challenges to the underlying liability. The Tax Court dismissed the CDP case as moot, without finding an overpayment.

The D.C. Circuit in Willson agreed with the Tax Court, but stated: “The IRS retained the $5,100 not to satisfy a tax liability but to recover an erroneous refund sent as a result of a clerical error. The debt created by such an erroneous refund is not a tax liability.” 805 F.3d at 320 (emphasis in original).

Since Willson does not involve a deficiency in tax and may not even involve underlying tax liability at all, it may not be controlling in McLane.

And, no other Court of Appeals has considered Greene-Thapedi’s Tax Court jurisdictional issue.

The McLane taxpayer and UDC amicus memoranda argue that Greene-Thapedi is distinguishable from McLane on the facts or was, simply, wrongly decided. The taxpayer’s memorandum also distinguishes Willson factually in a footnote. Both memoranda make many of the arguments that Judge Vasquez included in his dissents in Greene-Thapedi for why the Tax Court has inherent overpayment jurisdiction in a CDP case – especially one where a taxpayer is litigating a deficiency because he did not receive a notice of deficiency.

As I see it, either way Judge Halpern rules, there is a good chance that the losing party will take this issue up to the Fourth Circuit on appeal, where we might finally get a ruling on whether the Greene-Thapedi opinion is right or not after all.

 

CDP Requests Timely Filed in Wrong IRS Office – Tax Court Judges Disagree on Jurisdictional Consequences

We welcome back frequent guest blogger Carl Smith who writes about a jurisdictional issue in CDP cases that seems to have split the Tax Court and on which the IRS seeks to control jurisdiction with administrative pronouncements. Keith

A common fact pattern in Tax Court orders dealing with an IRS motion to dismiss for lack of jurisdiction is a taxpayer whose Collection Due Process (CDP) hearing request arrives in the wrong IRS office within the 30-day period, and then that wrong IRS office forwards the request to the right IRS office, where it arrives after the 30-day period has expired. In such cases, the IRS treats the request as untimely, provides an equivalent hearing, and issues a decision letter thereafter. When a taxpayer petitions the Tax Court in response to the decision letter, how do Tax Court judges rule on the inevitable IRS motion to dismiss for lack of jurisdiction? Well, there is no published opinion on this issue, but there are at least three recent orders (which are, of course, non-precedential), and the Tax Court judges therein ruled have inconsistently with each other. Compare Taylor v. Commissioner, Docket No. 3043-17L (order dated Nov. 8, 2017) (holding that the Tax Court has jurisdiction) (Carluzzo, STJ); with Nunez v. Commissioner, Docket No. 2946-17L (order dated May 18, 2018) (holding that the Tax Court lacks jurisdiction in a section 6672 penalty case) (Nega, J.), and Nunez v. Commissioner, Docket No. 2925-17L (order dated May 21, 2018) (holding that the Tax Court lacks jurisdiction) (Nega, J.).

A Tax Court opinion to establish binding precedent on this common fact pattern is needed. In a third recent order, Khanna v. Commissioner, Docket No. 5469-16L (order dated Feb. 13, 2018) (Gale, J.), the judge never had to rule on this issue; however, the order indicates the analysis that the T.C. opinion should use: whether the 30-day period to request a CDP hearing is not jurisdictional and is subject to equitable tolling under recent Supreme Court case law. For under equitable tolling, timely filing in the wrong forum is one of the ways to satisfy a nonjurisdictional time limit.

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This is not an original post: Samantha Galvin published posts on two of the relevant orders within the last year, here and here. Meanwhile, this post discusses the recent inconsistent orders in Nunez.

Background

Both section 6320(a)(3)(B) and (b)(2) and section 6330(a)(3)(B) and (b)(2) provide a 30-day period to request a CDP hearing after the IRS issues a notice of filing of a tax lien (NFTL) or a notice of intention to levy (NOIL). If the taxpayer timely files the request (on a Form 12153), the taxpayer receives a CDP hearing and a notice of determination (NOD) at the end thereof. If the taxpayer misses the 30-day period, he or she may receive an equivalent hearing and a decision letter at the end thereof. A NOD may be reviewed by the Tax Court if the taxpayer files a petition within a different 30-day period provided in section 6330(d)(1).

The courts have held that the section 6330(d)(1) 30-day period is jurisdictional and not subject to equitable tolling. See, e.g., Guralnik v. Commissioner, 146 T.C. 230, 235-238 (2016); Duggan v. Commissioner, 879 F.3d 1029 (9th Cir. 2018).

An equivalent hearing decision letter is not reviewable, unless the Tax Court concludes that the taxpayer had in fact timely requested a CDP hearing; in the latter case, the Tax Court treats the decision letter issued by the IRS as if it were a reviewable NOD. Craig v. Commissioner, 119 T.C. 252, 259 (2002).

While the Tax Court has never called the 30-day periods to request a CDP hearing jurisdictional, and not subject to equitable tolling, it has treated compliance with the 30-day periods as mandatory to its review jurisdiction under section 6330(d)(1). See, e.g., Offiler v. Commissioner, 114 T.C. 492 (2000) (dismissing a petition for lack of jurisdiction when the IRS did not hold a CDP hearing because the taxpayer filed a late request). On the other hand, when the IRS properly held an equivalent hearing (because the request was late), but erroneously thereafter issued a CDP NOD, the Tax Court held that it had jurisdiction on account of the NOD’s issuance, but the Tax Court did not dismiss the case for lack of jurisdiction, but rather granted summary judgment to the IRS (a merits ruling). Kim v. Commissioner, T.C. Memo. 2005-96 (suggesting that compliance with the 30-day request period is not jurisdictional to the Tax Court).

Reg. §§ 301.6320-1(c)(2)(A-C6) and 301.6330-1(c)(2)(A-C6) state:

The written request for a CDP hearing must be sent, or hand delivered (if permitted), to the IRS office and address as directed on the CDP Notice. If the address of that office does not appear on the CDP Notice, the taxpayer should obtain the address of the office to which the written request should be sent or hand delivered by calling, toll-free, 1-800-829-1040 and providing the taxpayer’s identification number (e.g., SSN, ITIN or EIN).

Internal Revenue Manual § 5.19.8.4.2(8) (8-5-16) states:

If the CDP hearing request is not addressed to the correct office as indicated in the CDP notice, the date to determine timeliness is the date the request is received by the IRS office to which the request should have been sent. However, if the address does not appear on the notice, or if it is determined that the taxpayer received erroneous instructions from an IRS employee resulting in the request being sent to the wrong office, use the postmark date to that office to determine timeliness.

Note: 

A request that is hand-carried to a local Taxpayer Assistance Center will be timely if delivered within the 30-day period during which taxpayers may request a hearing. See IRM 5.19.8.4.7.1.2, CDP Hearing Requests Hand Delivered to Taxpayer Assistance Centers (TAC).

Taylor 

Judge Carluzzo’s order in Taylor is so short that I will quote it in its entirety. Essentially, he holds the request timely because the IRS wasn’t much prejudiced by timely receipt in the wrong office. He used a “substantial compliance” analysis. He wrote:

Because petitioner’s request for an administrative hearing was mailed to, and received by the Internal Revenue Service within the period contemplated in section 6320(a)(3) and (b), even though the request was not mailed to the address designated in the relevant collection notice, and because respondent has not demonstrated sufficient prejudice resulting from the manner that the request was mailed to insist upon strict compliance with the Treasury Regulations relied upon in support of his motion, we find that petitioner’s request for an administrative hearing was timely made. That being so, we further find that the decision letter attached to the petition is the equivalent of a notice of determination for purposes of sections 6320(c) and 6330(d). See Craig v. Commissioner, 119 T.C. 252 (2002). Because the petition in this case was filed within the period prescribed in section 6330(d) in response to that document, it is

ORDERED that respondent’s motion to dismiss for lack of jurisdiction, filed March 30, 2017, is denied.

The Taylor case is set for a trial on September 10, 2018.

Nunez

Nunez involved a CDP hearing request mailed to a wrong IRS address, not simply a wrong IRS office. NOILs for section 6672 penalties and income tax deficiencies instructed the taxpayer to mail his request to Internal Revenue Service, P.O. Box 145566, Cincinnati, OH 45250-5566. Although he mailed the request to the correct address, the taxpayer accidentally wrote the city and state as Hartford, CT. It is not clear why the USPS did not follow the P.O. Box and ZIP Code information and send the request to Cincinnati anyway, but the IRS office in Kansas City first received the request on the 30th day. At least nine days later, that office forwarded the request to the Cincinnati office. Eventually, the IRS concluded that the requests were late, provided an equivalent hearing, and issued separate decision letters thereafter. Nunez then filed two separate Tax Court petitions: one for the section 6672 penalties and another for the income tax deficiencies.

In both of his orders, Judge Nega only considered whether the request might be treated as timely filed under section 7502’s timely-mailing-is-timely-filing rules. He wrote in the income tax docket order:

Unfortunately, petitioner cannot rely on the mailbox rule to treat his Form 12153, that was delivered after the 30-day period specified in section 6320 and/or 6330, as timely filed because he did not properly address the envelope. See sec. 301.7502-1(c)(1), Proced. & Admin. Regs. Therefore, the Appeals Office properly issued petitioner a decision letter for tax years 2012 and 2014, and as mentioned above, a decision letter is not a notice of determination sufficient to invoke’s (sic) this Court’s jurisdiction under section 6320 or 6330. Kennedy v. Commissioner, 116 T.C. 255, 262-263 (2001). Accordingly, we are obliged to dismiss this case for lack of jurisdiction.

The section 6672 docket order is virtually verbatim as the order in the income tax docket.

Observations

In my view, both judges failed to do the proper legal analysis with respect to the facts. That analysis, however, was stated by Judge Gale in Khanna v. Commissioner, Docket No. 5469-16L (order dated Feb. 13, 2018). In Khanna, the taxpayers not only mailed their CDP hearing request to the wrong IRS office (where it arrived two days early), but also, after the IRS sent the taxpayers a decision letter, it appeared from the date of that letter that the taxpayers filed their petition late under the 30-day period in section 6330(d)(1). The decision letter had not been mailed by certified mail, though, so the court was unwilling to assume that the date shown on the decision letter was the date of its mailing. In directing the IRS to file a supplement to its motion giving evidence of the decision letter’s mailing date, the court also wrote:

Depending upon the evidence identified concerning the decision letter’s mailing date, we may still need to decide the more difficult issue of the timeliness of petitioners’ CDP hearing request. In that event, we may further direct respondent to address three additional issues bearing upon the timeliness of petitioners’ CDP hearing request: . . . (2) the impact of recent U.S. Supreme Court and Third Circuit Court of Appeals cases concerning equitable tolling upon respondent’s position that the requirement that a CDP hearing request be filed within 30 days of the CDP notice is jurisdictional, see United States v. Kwai Fun Wong, 575 U.S. __, 135 S. Ct. 1625 (2015); Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145 (2013); Gonzalez v. Thaler, 565 U.S. 134, 141 (2012) (cautioning courts not to lightly attach the drastic consequences of labeling a deadline enacted by Congress as “jurisdictional” in an effort to bring some discipline to the term’s use); Kontrick v. Ryan, 540 U.S. 443 (2004); United States v. Brockamp, 519 U.S. 347 (1997); Irwin v. Dept. of Veterans Affairs, 498 U.S. 89 (1990); Rubel v. Commissioner, 856 F.3d 301, 304 (3d Cir. 2017) (cautioning courts to avoid “drive-by jurisdictional rulings” due to the drastic consequences of a “jurisdictional” label) . . . .

Judge Gale will never have to decide this issue, since the parties to Khanna have reached a settlement, and the judge has indicated that he will grant a taxpayers’ motion to dismiss the case (whether or not the case had been properly filed).

In an appeal from a Tax Court innocent spouse case dismissal, the Third Circuit once stated:

There may be equitable tolling “(1) where the defendant has actively misled the plaintiff respecting the plaintiff’s cause of action; (2) where the plaintiff in some extraordinary way has been prevented from asserting his or her rights; or (3) where the plaintiff has timely asserted his or her rights mistakenly in the wrong forum.” Hedges v. United States, 404 F.3d 744, 751 (3d Cir. 2005) (internal quotation marks and citation omitted).

Mannella v. Commissioner, 631 F.3d 115, 125 (3d Cir. 2011).

It appears that, as Judge Gale must have recognized, timely filing a CDP request in the wrong IRS office might meet the third stated common ground for equitable tolling. See, e.g., Bailey v. Principi, 351 F.3d 1381, 1382 (Fed. Cir. 2003) (“We hold that the filing with the regional office of a document that expresses the veteran’s intention to appeal to the Veterans Court equitably tolls the running of the 120–day notice of appeal period, and we therefore reverse and remand.”); Santana-Venegas v. Principi, 314 F.3d 1293, 1298 (Fed. Cir. 2002) (“We hold as a matter of law that a veteran who misfiles his or her notice of appeal at the same VARO from which the claim originated within the 120–day judicial appeal period of 38 U.S.C. § 7266, thereby actively pursues his or her judicial remedies, despite the defective filing, so as to toll the statute of limitations.”); Doherty v. Teamsters Pension Trust Fund of Philadelphia & Vicinity, 16 F.3d 1386, 1393 (3d Cir. 1994) (equitable tolling could be allowed when the plaintiff mistakenly filed in federal court rather than the appropriate arbitration forum).  Note that, in Nunez, the request actually arrived in the incorrect Kansas City office on the 30th day, which made it unnecessary to determine whether section 7502 had any impact on the issue of timely filing if a person is invoking equitable tolling.

If the 30-day periods to request a CDP hearing are jurisdictional, then the IRS may not extend them by regulation or the Manual. Auburn Reg’l Med. Ctr., 568 U.S. at 154 (holding that if the filing deadline is jurisdictional, “[n]ot only could there be no equitable tolling. The Secretary’s regulation providing for a good-cause extension . . . would fall as well.”). And, if the time periods are jurisdictional, then they cannot be subject to equitable exceptions either, such as equitable tolling. Dolan v. United States, 560 U.S. 605, 610 (2010).

But, Wong teaches that “Congress must do something special, beyond setting an exception-free deadline, to tag a statute of limitations as jurisdictional and so prohibit a court from tolling it.” Wong, 135 S. Ct. at 1632.

Congress has done no such thing here. The statutory filing deadlines for requesting CDP hearings do not contain the word “jurisdiction” (unlike the section 6330(d)(1) filing deadline) or otherwise speak in jurisdictional terms, and there is no history of treating the CDP request deadlines as jurisdictional – in contrast to the Tax Court’s long-standing position that filing deadlines in the Tax Court are jurisdictional. Thus, there is no reason for the Tax Court to follow its Guralnik holding is jurisdictional when looking at the 30-day periods to request a CDP hearing.

And it would not be surprising for the Tax Court to hold that the Tax Court CDP filing deadline is not subject to equitable tolling, while the deadlines to request a CDP hearing from the IRS are subject to equitable tolling. In Hall v. Commissioner, 135 T.C. 374 (2010), the Tax Court reaffirmed its holding that the since-abandoned 2-year regulatory filing deadline to request innocent spouse relief under section 6015(f) was invalid. Judge Wells, in a concurrence joined by five other Tax Court judges, stated that, even if the regulation had been valid, the 2-year period should be subject to equitable tolling, unlike the 90-day deadline in section 6015(e)(1)(A) to petition the Tax Court for a determination of entitlement to section 6015 relief, which the Tax Court in Pollock v. Commissioner, 132 T.C. 21 (2009), held was jurisdictional. Hall, 135 T.C. at 387 n.5 (Wells, J., concurring).

Finally, it appears that the IRS, in the Manual, essentially treats the CDP request filing deadlines as nonjurisdictional and subject to equitable tolling.

First, as noted above, the Manual provides that if a CDP request arrives timely at the wrong IRS office, if taxpayer received erroneous instructions from an IRS employee, the filing is treated as timely. That is the first ground in Mannella listed for equitable tolling in which the defendant had actively misled the plaintiff with respect to the plaintiff’s cause of action.

Second, there are provisions in the regulations (Reg. §§ 301.6320-1(c)(2)(A-C7) and 301.6330-1(c)(2)(A-C7) ) and Manual (§ 5.19.8.4.2.2 (8-27-10)) for giving the taxpayers up to an additional 15 days to perfect a timely CDP request that arrived in an unprocessable form. Paragraph (2) of that Manual provision states:

If a request for a CDP hearing is filed timely, but is not processable, contact the taxpayer and allow up to 15 calendar days for the taxpayer to perfect the request so that it is processable. If the taxpayer meets this requirement, the request is timely filed.

Note: 

If the taxpayer demonstrates that the late response was due to extenuating circumstances, such as being in the hospital or out of the country during that period, then treat the request as timely.

Such extenuating circumstances mentioned in the Manual are basically the same as the second ground listed in Mannella for equitable tolling, in which the plaintiff has been prevented from asserting his or her rights in some extraordinary way. Not that the IRS’ interpretation of the CDP request filing deadlines should control the courts, but it was my intention to illustrate that it would not be shocking to the IRS if the filing deadlines were treated as nonjurisdictional and subject to equitable tolling.

If he chooses to do so, Mr. Nunez’s cases are appealable to the Ninth Circuit. We will watch closely.

 

What Makes a Whistleblower Notice of Determination?

Carlton Smith brings us a thought-provoking discussion of the Myers whistleblower case which raises important issues of Tax Court jurisdiction and tax exceptionalism. Christine

There is a case pending in the D.C. Circuit that may upend several Tax Court precedents concerning what constitutes a valid notice of determination concerning a whistleblower award.  Such notices give the Tax Court review jurisdiction under section 7623(b)(4).  In Myers v. Commissioner, 148 T.C. No. 20 (June 5, 2017), the Tax Court followed its prior precedent of Cooper v. Commissioner, 135 T.C. 70, 75-76 (2010), which held that there is no particular form for a whistleblower award notice of determination, and that multiple letters from the Whistleblower Office indicating that an award was not being granted each constituted tickets to the Tax Court.  In an appeal of Myers, the whistleblower is challenging those holdings, which have never been reviewed by an appellate court.  Under section 7482(b)(1)’s flush language, all appeals from Tax Court whistleblower award cases go to the D.C. Circuit – not the Circuit of residence.  So, under Golsen, the Tax Court will have to accept anything the D.C. Circuit rules in the appeal of Myers.

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Facts

Myers sought an award with respect to a former employer of his.  He told the IRS that the employer had misclassified him and many of his co-workers as independent contractors.  It is unclear whether the IRS ever used this information to conduct an administrative proceeding.  In one letter to Myers, the IRS alleged that it did not collect $2 million – the threshold for awards under section 7623(b)(5) – which may imply it did audit the employer and collect some money.  Starting in 2009 and going through 2014, Myers exchanged correspondence with the Whistleblower’s Office.  In a series of four letters written to him in 2013 and 2014, the Office made clear that it was not giving him an award.  But, despite the Manual’s then requirement (since repealed) that any whistleblower award notice of determination be sent certified mail, each of these letters was sent to Myers by regular mail.  Further, none of the letters stated therein that this was a notice of determination, that review was available in the Tax Court, or that he had 30 days to file a Tax Court petition.

Myers was representing himself, and he was frustrated and did not know what to do to pursue his claim.  Eventually, in 2015, Myers filed a Tax Court petition, and the IRS moved to dismiss the petition for lack of jurisdiction as untimely.

Tax Court Proceedings

In the Tax Court, Myers resisted the IRS motion, arguing that the letters were not valid notices of determination, particularly since they were not sent certified mail, but also because they did not alert him to the possibility of filing in the Tax Court.  Of course, if he were right on this, then perhaps the correct ruling would be for the court to dismiss the case for lack of jurisdiction for lack of a ticket to the Tax Court, rather than for untimely filing.

But, Myers also argued that, if the letters constituted valid notices of determination, then the Tax Court had jurisdiction because either equitable tolling or estoppel should prevent the IRS from arguing that he filed too late.

The case was first discussed in a phone call with Special Trial Judge Guy, and then a hearing on the motion was held before Judge Ashford.  The transcript of the hearing is here.  At the hearing, Judge Ashford’s concern was how the IRS could prove the date of mailing of the letters, when they were not sent certified mail.  But, the judge also wondered why the IRS couldn’t just fix the problem by now sending a notice of determination by certified mail.  Here’s the judge speaking at pp. 47-48 of the transcript:

I’m going to take this matter under advisement. I am still — I mean, based on the testimony, you know, of both Ms. Carr and Mr. Myers, you know, Mr. Arthur and Mr. Barnes, I am still troubled, to be frank with you, by the fact that all of these letters or determinations, you know, they’re ambiguous. They give no clue as to — first, you know, like I said, at the outset starting the 30 days — starting the 30-day clock, so to speak.

And it just seems like, you know, the Internal Revenue Service issuing these letters, they can easily frustrate judicial review, you know, by issuing ambiguous denials.

You know, I don’t know whether, you know, it’s a matter of — and I think Judge Guy may have alluded to this when you all had a telephone conference. You know, the IRS whistleblower office, you know, issuing, you know, another, you know, denial letter certified mail, you know, so that — so that The Court, you know, can proceed, I guess.

When she wrote her opinion in Myers, though, Judge Ashford followed Cooper and held that each of these letters constituted notices of determination, and she got around the issue of the date the IRS sent the letters by holding that Mr. Myers’s actions in responding to them shows that he received the letters in sufficient time to petition the Tax Court within 30 days after the date of the letters, so his later Tax Court filing was untimely.  She imported into the whistleblower award jurisdiction the similar case law from deficiency jurisdiction holding that if one actually received a notice of deficiency – one that was either not sent certified mail or not properly addressed – with enough time left on the 90-day period to file a petition, then the notice of deficiency was valid.  She also observed that the Tax Court could not equitably toll the whistleblower award filing period, citing Friedland v. Commissioner, T.C. Memo. 2011-90, since the filing period is jurisdictional.  As a side note, when Friedland came out, I questioned whether it was correct in light of recent Supreme Court case law that now only rarely makes filing deadlines jurisdictional and the existing presumption in favor of finding that statutes of limitations running against the government are subject to equitable tolling.  See my “Friedland:  Did the Tax Court Blow its Whistleblower Jurisdiction?”, Tax Notes Today, 2011 TNT 100-10 (May 24, 2011).

Myers moved to reconsider the opinion, in part because both Judges Guy and Ashford had considered asking the IRS to just issue a proper notice of determination by certified mail.  In an order, Judge Ashford denied the motion, writing in part:

[P]etitioner places undue import on what transpired during a telephone conference the Court held with the parties before the hearing on respondent’s motion to dismiss and at the hearing. What the Court suggested to respondent was just that — a suggestion (to potentially resolve a previously unaddressed legal question).  Indeed, as a court of limited jurisdiction, sec. 7442, we lack the authority to order respondent to take such a specific action as reissuing a determination letter. Cf. Cooper v. Commissioner, 136 T.C. 597, 600 (2011) (no authority under sec. 7623 to order Commissioner to initiate examination on basis of whistleblower information). The suggestion in any event (and respondent’s apparent disinclination to take up the Court’s suggestion) does not cause us to question the direct evidence that petitioner received actual notice of the Whistleblower Office’s determination letters significantly more than 30 days before he filed his petition with the Court.

If Judge Gustafson is reading this post, his ears must have just pricked up, since he had a much ballyhooed whistleblower case a while ago in which he indicated that he was not so sure that the Tax Court did not have the power to order the IRS to issue a whistleblower award notice of determination where the IRS had unreasonably delayed in sending such a notice.  Indeed, an amicus brief was submitted to him in that case, Insinga v. Commissioner, T.C. Docket No. 4609-12W.  Here’s what he wrote in a 2013 order in Insinga:

The amicus curiae (National Whistleblower Center) argues in the alternative that where an award determination has been unreasonably delayed, the Tax Court has jurisdiction–in light of § 7623(b)(4) and under § 706(1) of the Administrative Procedures Act (“APA”), 5 U.S.C. § 551 et seq.–to “compel agency action unlawfully withheld or unreasonably delayed”. Respondent counters that the APA itself confers no jurisdiction and that the mandamus statute (28 U.S.C. § 1361) by its terms gives jurisdiction only to “[t]he district courts”. Respondent is correct; but the “All Writs Act” (28 U.S.C. § 1651) applies to “all courts established by Act of Congress” (cf 26 U.S.C. § 7441, establishing the U.S. Tax Court); and the U.S. Court of Appeals for the D.C. Circuit has held in Telecommunications Research and Action Center v. FCC, 750 F.2d 70, 75 (D.C. Cir. 1984) (“TRAC“), that, in view of the APA and the All Writs Act, “it is clear–and no party disputes this point–that” if a statute (there, 28 U.S.C. § 23421(1)) confers on a court exclusive jurisdiction to review a final agency order, then even before the final order has been issued, the court has “jurisdiction over claims of unreasonable [agency] delay”. (The D.C. Circuit would appear to be the default venue for any appeal in this case; see 26 U.S.C. § 7482(b)(1).)

We have not decided whether the reasoning in TRAC applies to the Tax Court and its jurisdiction under § 7623(b)(4). Nor have we decided whether, if the APA does not directly apply, this case nonetheless presents one of those instances in which the Tax Court, “in appropriate circumstances, borrow[s] principles of judicial review embodied in the APA.” Ewing v. Commissioner, 122 T.C. 32, 54 (2004) (Thornton, J., concurring).

We believe we ought not to reach those questions if we do not need to do so.

Before Judge Gustafson had to rule on this issue, the Insinga mater became moot when the IRS issued a notice of determination and the parties settled the Insinga case.

Appellate Proceedings

Still acting pro se, Myers appealed the Tax Court’s dismissal of his case to the Tenth Circuit.  At the urging of the DOJ, though, the Tenth Circuit transferred the appeal to the Circuit with correct venue, the D.C. Circuit, per the following order.

At this point, Joe DiRuzzo and Alex Golubitsky tendered their legal services pro bono to Mr. Myers and filed an opening brief in his case in the D.C. Circuit.  In that brief, they did not contest whether Mr. Myers received the letters in time to file a Tax Court petition, but rather argued, first, that the letters did not constitute notices of determination.  Rather than immediately asking the Tax Court to dismiss the case for lack of jurisdiction for lack of the predicate notice of determination, they argued that, under the TRAC opinion cited by Judge Gustafson in his Insinga order, the Tax Court had the power under the All Writs Act to order the IRS to issue a notice of determination to Myers and that the Tax Court should exercise that power.  They also noted that the Federal Circuit last year held that the Article I Court of Appeals for Veterans Claims (the “Veterans Court”), under the All Writs Act, had the power to order the VA to issue the predicate tickets to the Veterans Court if they had been unreasonably delayed.  Monk v. Shulkin, 855 F.3d 1312 (Fed. Cir. 2017).  (As an aside, the Monk case is one Tax Court judges should read and ponder, since the Federal Circuit also held in that case that, despite the lack of Veterans Court rules authorizing class actions, the Veterans Court also had the power to hear class actions.  Might the Tax Court also have class action powers, despite no current class action rules?  Monk may be the subject of another post, but I just flag the opinion here as worth reading by all tax procedure buffs for several reasons.)

In the alternative, if the letters were valid notices, Messrs. DiRuzzo and Golubitsky argued that the 30-day filing deadline in section 7623(b)(4) was not jurisdictional under current Supreme Court case law that now rarely makes filing deadlines jurisdictional, and the petition should be held timely under the doctrine of equitable tolling because of the misleading behavior of the IRS in this case.  The Harvard Federal Tax Clinic filed an amicus brief in Myers (written by Keith and me) limited to the argument that the filing deadline is not jurisdictional.  This is just another case in our campaign against judicial tax filing deadlines still being considered jurisdictional.

The DOJ has not yet filed its answering brief in Myers, so the government position on many of these issues is not yet known.  This should be an interesting case to follow for many reasons.  PT will keep you posted on further interesting developments therein.

Larson Part I Post: Full-Payment Rule of Refund Suits Held to Apply to Assessable Penalties

Frequent contributor Carlton Smith discusses last month’s Larson v United States out of the Second Circuit. The Larson opinion situates civil penalties in the context of the Flora full payment rule, the APA, the 5th Amendment’s procedural due process protections and the 8th Amendment’s prohibition on excessive fines. Today’s post looks at the Flora full payment issue. Future posts will address the other issues. Les

In Flora v. United States, 357 U.S. 63 (1958) (“Flora I”), and, again, in an expanded opinion at 362 U.S. 145 (1960) (“Flora II”), the Supreme Court held that a jurisdictional predicate to a district court or Court of Federal Claims suit under 28 U.S.C. § 1346(a)(1) for refund of an income tax deficiency is full payment of the tax deficiency.  In oral argument in a later Supreme Court case, Laing v. United States, 423 U.S. 161 (1976), the Solicitor General’s office made clear its position that Flora’s full payment requirement only applies where the taxpayer could have, instead, petitioned the Tax Court to contest the deficiency prepayment, but chose not to.  A recent opinion, Larson v. United States, 2018 U.S. App. LEXIS 10418 (2d Cir., Apr. 25, 2018), involved a tax shelter promoter penalty assessed under section 6707 – one of the many “assessable” penalties that Congress has enacted since Flora that may be assessed without first allowing prepayment review in Tax Court through a notice of deficiency.  In Larson, the DOJ argued contrary to what the SG’s office did in Laing, and the Second Circuit accepted this changed position – holding that the Florafull payment requirement also applies to assessable penalties for which there is no possibility of Tax Court prepayment review through deficiency procedures.

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Larson Facts

The facts of Larson were as follows:  Larson was criminally convicted in connection with promoting several tax shelters.  The IRS later decided to impose assessable penalties under section 6707 for the promoters’ failure to file the necessary form under section 6111 (Form 8918) with the Office of Tax Shelter Analysis in Ogden, Utah alerting the IRS to the shelters.  Under section 6707 at the time (though not currently), the penalty under section 6707 was calculated as 1% of “the aggregate amount [that taxpayers] invested in such tax shelter”.

The IRS proposed to assess penalties of $160 million on a collection of promoters (including Larson), jointly and severally.  This means that the “aggregate amount invested”, according to the IRS, was $16 billion.

Other promoters paid the IRS about $100 million toward the penalty.  Larson contested the $160 million penalty at Appeals, arguing that the amount actually invested in the shelters in cash was only about $700 million, meaning the total penalty should be $7 million.  The rest “invested” was through notes that the courts had now held to be bogus for income tax purposes, so he argued that they were bogus, as well, for purposes of calculating the penalty.  (Of course, the taxpayers must have used those bogus notes to inflate their bases for purposes of claiming deductions far beyond the cash they invested.)

Appeals did not agree with Larson’s argument for lowering the penalties to $7 million, though it did give him credit for the penalties already paid by other promoters, reducing what Larson owed to about $60 million.

Larson District Court Suit

Larson paid $1.4 million toward the penalties, filed a refund claim, and then sued for a refund in the district court of the Southern District of New York.  It is not clear why he paid $1.4 million, but it appears that he thought the section 6707 penalty was “divisible”, and that $1.4 million was enough payment of a divisible tax to give the court jurisdiction.  In a footnote in Flora II, the Supreme Court said that full payment would not be required if a divisible tax was involved — a footnote that many people take advantage of with respect to section 6672 responsible person penalties (which have been held to be divisible).

In his suit, Larson argued that he had made a sufficient jurisdictional payment to commence suit, but that, even if he did not, the court had alternative jurisdiction under the Administrative Procedure Act, mandamus, Due Process, and because the size of the penalty violated the Eight Amendment’s excessive fines clause.

Unfortunately for Larson, shortly after he commenced his suit, the Federal Circuit held in Diversified Group Inc. v. United States, 841 F.3d 975 (Fed. Cir. 2016), that the section 6707 penalty was not divisible, so Flora IIrequired full payment in order to commence a refund suit.  The district court in Larson cited and followed Diversified Group, also rejecting all the other bases for jurisdiction that Larson alleged.  Larson v. United States, 2016 U.S. Dist. LEXIS 179314 (SDNY 2016).  Stephen did a prior post on both Diversified and the Larson district court opinion.

This post will not address the other grounds alleged for jurisdiction, but Les will be doing a later post on at least one of those other grounds.

Larson Appellate Arguments

 In his Second Circuit Appeal, Larson repeated all of his arguments for why the district court had jurisdiction, but abandoned his argument that section 6707 penalties are divisible.  Rather, Larson’s main argument was now that Flora II did not require full payment in a case like section 6707 penalties where no prepayment review was available in the Tax Court through a notice of deficiency.  Larson also argued that he couldn’t afford to pay the roughly $60 million left to make full payment, so requiring him to make full payment would leave him without a practical remedy for judicial review.

Flora II

Flora II expanded upon the opinion in Flora Iand corrected a significant misstatement in the earlier opinion.  Hereafter, I will discuss only Flora II.  In Flora II, the IRS had sent the taxpayer a notice of deficiency for income tax.  He did not file a Tax Court petition, but rather paid part of the deficiency, filed a refund claim, and brought suit for refund in district court. The Supreme Court held that a jurisdictional predicate to a refund suit under 28 U.S.C. § 1346(a)(1) is full payment of the tax.  But, the way it got to this holding was curious.

The statute being interpreted first appeared in the Revenue Act of 1921.  But, the court found that, even though there were statutory antecedents, with regard to whether full payment is required for a refund suit, the actual “statutory language . . . is inconclusive and legislative history . . . is irrelevant”.  Flora II, 362 U.S. at 152.

So, the Court then turned to three subsequent enactments of Congress to conclude that section 1346(a)(1) required full payment:

  • The establishment of the Board of Tax Appeals in 1924, which allowed taxpayers to contest deficiencies without prepayment, seemed to be done with the assumption that the Board was needed because refund suits concerning deficiencies otherwise required full payment.
  • In 1935, Congress amended the Declaratory Judgment Act (28 U.S.C. § 2201) to prohibit declaratory judgments “with respect to taxes”. The Court noted that if full payment were not required, then nothing would stop a taxpayer from paying $1, filing a refund claim, and suing for a refund. The latter would effectively be a suit for a declaratory judgment.
  • The adoption of section 7422(e), which provides that, if a refund lawsuit is underway when the taxpayer receives a notice of deficiency for the same taxable year, the taxpayer may either continue the suit in district court or move it to the Tax Court, but not litigate simultaneously in both courts.The Court concluded that the logic of not requiring full payment for a refund suit would be that a taxpayer could simultaneously conduct a deficiency suit in the Tax Court and a refund suit in the district court – a situation that section 7422(e) does not contemplate.

The Flora II court concluded with the following observation:

A word should also be said about the argument that requiring taxpayers to pay the full assessments before bringing suits will subject some of them to great hardship.  This contention seems to ignore entirely the right of the taxpayer to appeal the deficiency to the Tax Court without paying a cent.  If he permits his time for filing such an appeal to expire, he can hardly complain that he has been unjustly treated, for he is in precisely the same position as any other person who is barred by a statute of limitations.

362 U.S. at 175 (footnote omitted).

Laing

Laing v. United States, 423 U.S. 161(1976), involved income tax termination and jeopardy assessments under section 6851 and 6861 at a time when those sections did not state that the IRS must issue a notice of deficiency in connection with making such assessments.  The IRS had made such an assessment and argued that it was not required to issue a notice of deficiency before or after the assessment.

At the oral argument, the Solicitor General’s Office assured the Court that there would be no problem with the FloraII full payment rule, since Flora II did not require full payment if no deficiency notice could be sent to the taxpayer.  Here is a portion of the SG’s office oral argument that was quoted to the Second Circuit on page 6 of the Larson reply brief:

What this Court held in Flora was that under general circumstances a taxpayer cannot bring a refund suit until he has paid the full amount of the assessment.  In reaching that decision, the Court painstakingly went through the legislative history in connection with the creation of the Board of Tax Appeals, and there were indications going both ways as to what Congress really intended.  But I think that the really operative portion of the Chief Justice’[s] opinion in Flora was the fact that there the taxpayer had another remedy.  He could have gone to the Tax Court, and that made all the difference in Flora . . . .

For those interested, attached are all the briefs filed in Larson:  the appellant’s brief, the appellee’s brief, the reply brief(which contains the entire Laing oral argument transcript as an addendum), and an amicus brieffiled by the tax clinics at Harvard and Georgia State.  I believe that Keith will be doing a further post about what the amicus brief discussed.

The majority in Laing held that the IRS was required to send a notice of deficiency, so it did not reach the issue of whether Flora II required full payment for a refund suit in the absence of the possibility of receiving a notice of deficiency.

But, Justice Blackmun (joined by Chief Justice Berger and Justice Rehnquist) wrote a lengthy dissent in which he argued that no notice of deficiency was required in connection with a termination or jeopardy assessment.  However, he concluded that the taxpayer could bring suit in district court without full payment of the assessment.  After quoting part of the quote that I have quoted above from Flora II, Justice Blackmun wrote:

This passage demonstrates that the full-payment rule applies only where a deficiency has been noticed, that is, only where the taxpayer has access to the Tax Court for redetermination prior to payment.  This is the thrust of the ruling in Flora, which was concerned with the possibility, otherwise, of splitting actions between, and overlapping jurisdiction of, the Tax Court and the district court.  Where, as here, in these terminated period situations, there is no deficiency and no consequent right of access to the Tax Court, there is and can be no requirement of full payment in order to institute a refund suit.

423 U.S. at 208-209 (citation omitted).

Larson Second Circuit Ruling

In its opinion in Larson, the Second Circuit held that Flora II required the full payment of the section 6707 penalty before a refund suit could be brought.  It quoted the passage from Flora IIthat I have quoted above, yet argued that the availability of Tax Court deficiency review was not critical to the holding of Flora II.  The Second Circuit wrote:

While it is true that Flora I and Flora II acknowledge the existence and availability of Tax Court review, see Flora I, 357 U.S. at 75–76; Flora II, 362 U.S. at 175, Tax Court availability was not essential to the Supreme Court’s conclusion in either opinion.  The basis of the Flora decisions is that when Congress enacted § 1346(a)(1) it understood the statute to require full‐payment to maintain “the harmony of our carefully structured twentieth century system of tax litigation,” not that the full‐payment rule only applies when Tax Court review is available. Flora II, 362 U.S. at 176–77.

Slip op. at 10.

The Larson court did not acknowledge that the government had changed position as to the applicability of the full payment rule between Laingto Larson.  The Larson court did quote Justice Blackmun’s statements from his dissent in Laing, but noted:  “Justice Blackmun’s view did not garner majority support.  No subsequent majority of the Supreme Court has adopted that understanding of the statute.” Slip op. at 12 n.8.

As more evidence that full payment was required to commence the section 6707 refund suit, the Second Circuit noted that other assessable penalties have been enacted by Congress since Flora II with specific provisions that allow for payment of 15% before a refund suit can be commenced.  (“[O]ur reading is supported by Congress’s decision to provide partial payment review for other assessable penalties, but not for § 6707. See 26 U.S.C. §§ 6694(c), 6703(c).”  Slip op. at 8.)

After rejecting the other bases alleged by Larson for jurisdiction (which I won’t discuss here), the court concluded that this is a problem for Congress, writing:

We close with a final thought.  The notion that a taxpayer can be assessed a penalty of $61 million or more without any judicial review unless he first pays the penalty in full seems troubling, particularly where, as Larson alleges here, the taxpayer is unable to do so.  But, “[w]hile the Flora rule may result in economic hardship in some cases, it is Congress’ responsibility to amend the law.”  Rocovich v. United States, 933 F.2d 991, 995 (Fed. Cir. 1991).

Slip op. at 22.

Observations

The most surprising thing about the Larson opinion, to me, is that this issue of Flora’s application to assessable penalties has not been litigated before – i.e., until about 60 years later.  But, then most assessable penalties are either severable, require only 15% payment to commence suit, or are rather nominal in amount, so there were few in a position to argue that a full payment requirement to commence an assessable penalty refund suit was neither required by Flora II nor economically practicable.

The second most surprising thing is that both Flora II and Larson defend their statutory interpretation exclusively by reference to understandings of later Congresses when legislating.  I have always read that one is not to pay much attention to what later Congresses think a statute means.

But, ultimately, I was not surprised at the Larson ruling, and I don’t think Keith was either. I refer people to my statutory proposal made some years ago:  “Let the Poor Sue for a Refund Without Full Payment”, Tax Notes Today, 2009 TNT 191-4 (Oct. 6, 2009).  Although my proposal was designed primarily for the poor, it would help Larson (assuming that he gets himself on an installment agreement or in currently not collectible status first).  The opinion in Larson just underscores the need for a legislative fix.

Passport Action Appellate Forum Shopping

Frequent guest blogger Carlton Smith discusses the possibility of appellate forum shopping in passport actions, and alerts us to one pertinent Circuit split that will apply to passport actions. -Christine

Keith did a post discussing CC-2018-005, which gives Chief Counsel advice to IRS attorneys in passport actions brought by taxpayers in the Tax Court under section 7345(e).  Section 7345(a) authorizes the Treasury Secretary to transmit an IRS certification to the Secretary of State that there exists a “seriously delinquent tax debt” “for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.”  Section 7345(d) requires the IRS to “contemporaneously notify an individual of any certification under subsection (a) . . . with respect to such individual.” And section 7345(e) allows a taxpayer to bring a suit to determine whether the certification was erroneous in either a district court or the Tax Court.  Apparently, during this winter or spring, the IRS issued or will issue the first notices to taxpayers under section 7345(d).

Before I read Keith’s post, I had not thought of the possible opportunities that this system of passport action litigation in different courts provides for appellate forum shopping.  I had assumed that Tax Court passport actions would be made appealable to the regional Circuit Courts of Appeals in which the taxpayer resided – i.e., the same appellate court to which the district court would look for controlling authority.  Under Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971), the Tax Court will follow the precedent, if there is any, of the Circuit Court to which the Tax Court case is appealable.  Flush language at the end of section 7482(b)(1) provides that if no subparagraph applies to direct venue otherwise (such as subparagraph (A) directing non-corporate deficiency cases to the Circuit of residence), venue on appeal from the Tax Court is only to the D.C. Circuit.  But, as in the case of whistleblower award jurisdiction under section 7623(b)(4), there is no subparagraph of section 7482(b)(1) mentioning passport actions, so the flush language directs all appeals from Tax Court passport actions to the D.C. Circuit.  (The Tax Court has stated that, under that flush language, all whistleblower award actions appear appealable only to the D.C. Circuit.  See Kasper v. Commissioner, 150 T.C. No. 2, at slip op. page 6 n.1 (Jan. 9, 2018).)

This means that one of the considerations in choosing the court in which to bring a passport action will be whether there is more favorable appellate authority for the taxpayer in either the D.C. Circuit or the Circuit of the taxpayer’s residence.  In deficiency cases, appellate forum shopping is discouraged (though not eliminated) by the requirement that to file a refund lawsuit in the district court or the Court of Federal Claims (e.g., to obtain more favorable appellate precedent), one must first pay all the tax under the rule of Flora v. United States, 362 U.S. 145 (1960).  But no full payment rule applies to passport actions.  While the district court filing fee is a few hundred dollars more than the $60 Tax Court filing fee, that will be little discouragement from filing passport actions in the district courts.  So, there may end up quite a lot of passport actions brought in the district courts (by comparison to only about 200 refund suits being brought annually).

The rest of this post will address one issue relevant to passport actions as to which there is already a split of authority between the D.C. Circuit and some regional Circuits – i.e., whether the filing deadline in 28 U.S.C. section 2401(a) is “jurisdictional”.

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PT readers are well aware that Keith and I are in the midst of litigating the issue of whether, under recent nontax Supreme Court case law, many Tax Court and other judicial tax filing deadlines are not jurisdictional and are subject to equitable exceptions (such as tolling or estoppel), waiver, and forfeiture. The Tax Court takes what I believe to be the today untenable position that all of its roughly 20 petition filing deadlines are jurisdictional, regardless of the varying language of the statutes giving the court the power to hear such cases. See Tax Court Rule 13(c).

CC-2018-005 notes that section 7345 contains no judicial filing deadline for a passport action after the notice under section 7345(d) is issued.  The Chief Counsel notice states that, absent a filing deadline in section 7435, the courts must apply the catchall federal judicial 6-year filing deadline contained in 28 U.S.C. section 2401(a).  I agree with Chief Counsel’s analysis that section 2401(a) is the relevant filing deadline for passport actions.

In United States v. Wong, 135 S. Ct. 1625 (2015), the Supreme Court held that the 2-year administrative and 6-month judicial filing deadlines under 28 U.S.C. section 2401(b) (the Federal Tort Claims Act) are not jurisdictional and are subject to equitable tolling — consistent with its current position that filing deadlines are no longer jurisdictional (except for when (1) stare decisis to previous Supreme Court opinions requires or (2) Congress makes a “clear statement” otherwise).

Without making an exhaustive search of every Circuit currently, I note that there has long existed a split in the Circuit courts over whether the 6-year filing deadline of 28 U.S.C. section 2401(a) is jurisdictional.  Here’s from a 2015 opinion of the Sixth Circuit (decided shortly after Wong) that explains where the split then stood and holding that under the recent Supreme Court case law the filing deadline is not jurisdictional:

After today’s decision, it is true, there is a 4-3 circuit split on the point, with four of the circuits favoring the government’s position that § 2401(a) creates a jurisdictional bar. Compare Konecny v. United States, 388 F.2d 59, 61-62 (8th Cir. 1967); Ctr. for Biological Diversity v. Hamilton, 453 F.3d 1331, 1334 (11th Cir. 2006) (per curiam); Mendoza v. Perez, 754 F.3d 1002, 1018, 410 U.S. App. D.C. 210 (D.C. Cir. 2014); and Hopland Band of Pomo Indians v. United States, 855 F.2d 1573, 1576-77 (Fed. Cir. 1988), with Clymore v. United States, 217 F.3d 370, 374 (5th Cir. 2000); Herr v. U.S. Forest Serv., [i.e., this case] (6th Cir. Oct. 9, 2015); and Cedars-Sinai Med. Ctr. v. Shalala, 125 F.3d 765, 770 (9th Cir. 1997). Many of these cases, however, have not grappled with the Supreme Court’s recent cases limiting the concept of jurisdiction. None has considered the impact of Kwai Fun Wong, decided just this year. When the D.C. Circuit has noted the apparent conflict between its decision and the Arbaugh [v. Y & H Corp., 546 U.S. 500 (2006),] line of cases, it has acknowledged the point each time yet steered the basis for decision to other grounds. See Mendoza, 754 F.3d at 1018 n.11; P & V Enters. v. U.S. Army Corps of Eng’rs, 516 F.3d 1021, 1026-27, 380 U.S. App. D.C. 96 & n.2 (D.C. Cir. 2008); Felter v. Kempthorne, 473 F.3d 1255, 1260, 374 U.S. App. D.C. 272 (D.C. Cir. 2007); Harris v. FAA, 353 F.3d 1006, 1013 n.7, 359 U.S. App. D.C. 281 (D.C. Cir. 2004). The Arbaugh rule [(that Congress must make a clear statement to make a claims processing rule, such as a filing deadline, jurisdictional)] together with its application in Kwai Fun Wong gives us comfort in siding with the non-jurisdictional side of this split. Section 2401(a) does not limit a federal court’s subject-matter jurisdiction.

Herr v. U.S. Forest Service, 803 F.3d 809, 817-818 (6th Cir. 2015).

Even since the Herr opinion, the D.C. Circuit has noted its prior holdings that the 6-year filing deadline in section 2401(a) is jurisdictional.  See Owens v. Republic of Sudan, 864 F.3d 751, 802 (D.C. Cir. 2017), noting, without reexamining, the holding of the D.C. Circuit in Spannus v. U.S.D.O.J., 824 F.2d 52 (D.C. Cir. 1987). So, under Golsen, the Tax Court will have to find the 6-year section 7345 action filing deadline in section 2401(a) jurisdictional.

It will be a long time (if ever) before the issue of whether the passport action deadline is jurisdictional comes before a district court or the Tax Court, since the issue will only be relevant if a taxpayer files the action late (i.e., after the 6-year statute has expired) and seeks a judicial extension occasioned by equitable tolling or estoppel.  But, this is only one potential Circuit split as to which appellate forum shopping in passport actions may be beneficial.  There may eventually be others – and ones that come about more rapidly.

Anyway, to eliminate the possibility of appellate form shopping as to passport actions, perhaps it is time for Congress to consider adding section 7345(e) passport actions to the list of subparagraphs in section 7482(b)(1) that direct appeals of Tax Court cases to the Circuit of an individual’s residence.

D.C. Circuit Asked to Agree With Second Circuit and Tax Court About Application of Section 6751(b)

We welcome back frequent guest blogger Carl Smith who brings us up to date on a Graev case headed to the DC Circuit. So far, only the Second Circuit has had the chance to write an opinion on this issue. This will be an important case to watch. Keith

In RERI Holdings I, LLC v. Commissioner, 149 T.C. 1 (2017), the Tax Court disallowed a TEFRA partnership’s $33 million charitable contribution deduction because RERI failed to show on its Form 8283 its cost basis in the property (only $3 million).  The Tax Court also imposed a substantial valuation misstatement penalty under section 6662(h).  In the notice of final partnership administrative adjustment, the IRS had determined a regular valuation misstatement penalty under section 6662(e).  By amended answer, the IRS increased the penalty to a substantial valuation misstatement penalty under section 6662(h).  The case was tried and briefed in 2015 — long before the Tax Court in Graev III (Graev v. Commissioner, 149 T.C. No. 23 (Dec. 20, 2017)) and the Second Circuit in Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017), held that, in a deficiency case involving an individual, section 7491(c) imposed the burden of production on the IRS to demonstrate compliance with the managerial approval requirement in section 6751(b) for imposing penalties.  The IRS in RERI had not introduced any evidence that a manager approved either of the penalties under section 6662.

The partnership has appealed both the disallowance of the charitable deduction and the imposition of the penalties to the D.C. Circuit (Docket No. 17-1266).  In its opening brief filed on April 2, 2018, among other arguments, the partnership has for the first time argued that the IRS had an obligation under sections 6751(b) and 7491(c) to introduce in the Tax Court evidence of managerial approval of the penalties.  The IRS having not done so, the partnership seeks to be relieved of any penalties — citing ChaiRERI may thus present the first time after Chai that an appellate court deals with section 6751(b)’s requirements.

Since the DOJ hasn’t yet filed its brief, it is unknown whether the government will agree that it had the burden of production on this approval issue or whether the approval issue can even be considered in a case prior to the assessment of the penalty.  Note, however, that there are two large issues lurking in the case now:  First, do Chai and Graev III, which involved deficiency cases, also extend to TEFRA partnership cases?  Second, does section 7491(c)’s shift in the burden of production extend to TEFRA partnership cases, since that section nominally applies only to cases of an individual?  The tax matters partner of RERI who brought the Tax Court case is an individual.  Does that affect the analysis under section 7491(c)?  These are issues that Judge Holmes recently invited the parties to brief in a designated order he issued on January 5, 2018 in a TEFRA partnership case named Oakbrook Land Holdings, LLC v. Commissioner, Docket No. 5444-13.  Caleb Smith blogged on this designated order in a post on January 17, 2018.  In its opening brief in the D.C. Circuit, RERI does not discuss these two potential issues.  Wisely, RERI is leaving it to the government to raise these issues, if it wants, in its answering brief.