The Idea of Equitable Tolling in Collection Due Process Request is Gaining Traction

0 Flares Filament.io 0 Flares ×

Today we welcome guest blogger Samantha Galvin from the University of Denver. Professor Galvin is one of the four writers of our feature on designated orders published by the Tax Court. During the week she was “on” for the designated orders, the Court issued an which deserved its own post, and she took on that task. In the cases discussed below, the Tax Court reverses course and mitigates a somewhat harsh result that can occur when a taxpayer sends the CDP request to the wrong place within the IRS. The IRS has taken the position that if the taxpayer sends the CDP request to the wrong office, the taxpayer loses their right to a CDP hearing if the request does not find its way to the proper office within the 30 day time period allowed for making such a request. This rule has tripped up a number of pro se and represented taxpayers and becomes even harder to meet when the IRS gives wrong information. One issue raised by the cases Professor Galvin writes about today is whether these decisions represent a crack in the door regarding equitable tolling. Keith 

In the last couple of months, two designated orders have come out that suggest an unstated, equitable tolling exception may exist when it comes to collection due process (CDP) hearings requested pursuant to sections 6330 and 6320(a). The two most recent designated orders are Tarig Gabr v. C.I.R., Docket No: 24991-15 L (order here) and Taylor v. C.I.R., Docket No: 3043-17 L (order here). This issue has previously been covered in PT posts by Carl Smith most recently here and here.

read more...

Typically, a taxpayer, or his or her representative, must request a collection due process hearing to the appropriate IRS office within 30 days from receiving either a “Final Notice of Intent to Levy” (LT 11) or a “Notice of Intent to File a Lien and Your Right to Request a Hearing” (Letter 3172).

The designated orders involve taxpayers who sent CDP requests within the 30-day period, but to the wrong IRS offices. The requests were not received by the correct offices until after the 30-day deadline. As a result, the IRS denied the taxpayers a right to a CDP hearing and instead granted them an equivalent hearing. If a request is not timely as to the 30-day deadline, but sent within one year a taxpayer is entitled to an equivalent hearing. An equivalent hearing provides a forum with IRS Appeals similar to a CDP hearing, however, it does not provide the same protection from collection or allow for judicial review.

The IRS and Tax Court’s position has generally been that the 30-day deadline is jurisdictional, which means it cannot be subject to equitable tolling. If it is instead a claim-processing rule, then there is an argument to be made that equitable tolling may apply in some cases.

The door to make this argument was opened by the Supreme Court in the context of veterans’ affairs related claims. In Irwin v. Department of Veteran’s Affairs, 498 U.S. 89 (1990), the Supreme Court held that a rebuttable presumption of equitable tolling should apply to suits against the United States, unless Congress clearly intends otherwise.

As to the question of whether the 30-day deadline is jurisdictional, in Henderson v. Shineski, 131 S. Ct. 1197 (2011), the Supreme Court urged courts to discontinue using the word “jurisdiction” for claim-processing rules, stating that the conditions that accompany the jurisdiction label should be reserved for rules that govern a court’s adjudicatory capacity such as subject-matter or personal jurisdiction. The Supreme Court acknowledged that it must look to Congress’ intent for a clear indication that a deadline is intended to carry harsh jurisdictional consequences before deciding whether equitable tolling should apply.

There have not been any Tax Court cases that decide whether equitable tolling should apply to collection due process requests, but in the recent designated orders the Tax Court rejects respondent’s argument that the Court lacks jurisdiction when a collection due process hearing request is filed within 30 days but sent to the wrong IRS office. According to respondent, this contradicts sections 7502 and 7503 which are used to determine timeliness only if a request is properly transmitted pursuant to Treas. Reg. sections 1.301.6320-1(c)(2) Q&A C-6 and Q&A C-4. In other words, respondent argues timeliness is only met when a request is sent within 30 days to the office where the request is required to be filed.

In Gabr, the taxpayer’s representative allegedly received erroneous instructions from an IRS employee and faxed the CDP request to the wrong office. In determining whether to grant or deny respondent’s motion to dismiss for lack of jurisdiction, the Tax Court acknowledged guidance from the Internal Revenue Manual section 5.9.8.4.2(8) that provides that if a taxpayer receives erroneous instructions from an IRS employee resulting in the request being sent to the wrong office then the postmark date for when the request was sent to the wrong office is used to determine timeliness.

In Taylor, however, there were no erroneous instructions given, rather the representative sent the request to a local office, instead of the office listed on the notice. Respondent relies on cases dealing with tax return filing and the assessment statute, bankruptcy, and foreclosure and lien withdrawal to argue that the CDP request cannot be equitably tolled. Respondent also relies on Gafford v. Commissioner, T.C. Memo 16-40, citing Andre v. Commissioner, 127 T.C. 68 (2006), where the Court held that requiring taxpayers to follow claim-processing rules creates procedural consistency in effectively and efficiently processing such requests. But Andre is distinguishable from Gabr and Taylor, because Andre dealt with a request that was sent to an incorrect address prematurely, prior to the issuance of an LT 11 or Letter 3172.

In Taylor, the Tax Court was not convinced by any of respondents’ arguments since it denied respondent’s motion to dismiss for lack of jurisdiction and stated that respondent did not demonstrate sufficient prejudice to enforce strict compliance with the Treasury Regulations on the matter.

Does this mean these cases will result in decisions that can be relied upon to argue that the 30-day deadline can be equitably tolled for CDP requests in certain circumstances? So far, no. In Gabr, respondent conceded the case so the final decision issued by the Court did not speak on the issue. We will have to wait and see what happens in Taylor, but at the very least these designated orders suggest the Court is open to entertaining the argument.

WARNING: In Guralnik v. Commissioner, 146 T.C. 230, 235-238 (2016), the Tax Court held, en banc, that the different 30-day period in section 6330(d)(1) to file a Tax Court petition after a CDP notice of determination is issued is jurisdictional and not subject to equitable tolling under current Supreme Court case law. But the sentence containing the 30-day period in section 6330(d)(1) explicitly contains the word “jurisdiction”, while the 30-day periods in subsections (a)(3)(B) of section 6320 and 6330 do not. Keith and Carl Smith are in the midst of litigating whether the Tax Court’s position in Guralnik is correct in both Cunningham v. Commissioner, Fourth Circuit Docket No. 17-1433, and Duggan v. Commissioner, Ninth Circuit Docket No. 15-73819 (both cases where taxpayers mailed off their petitions a day late, but argue that they were misled by the language of the notice of determination that appeared to give them 31 days to file courting from the day of the notice of determination). Oral argument happened in Cunningham on December 5, and you can hear the argument here. (Harvard Federal Tax Clinic student Amy Feinberg argued the case for Ms. Cunningham.) Whichever way the Cunningham case comes out, it is clear that the judges there were giving Keith’s and Carl’s argument a serious hearing and not dismissing it lightly. The Duggan case was submitted without oral argument on December 7.

 

Comments

  1. Steve Kassel, EA says:

    A very practical problem and part of the consideration is that the tax practitioner often does not know where the notice originated.

    I have had many clients that hired me after they received a Final Notice of Intent to Levy. In quite a number of cases, they didn’t have the notice. Often I discovered the Final Notice of Intent only after I logged on to e-Services.

    When I receive a Final Notice of Intent to Levy from a Revenue Officer, I have a fax number where I can respond in just a few minutes, even at the last minute.

    Unfortunately, that convenience is often NOT the case. When I discover the FNOFTL (I got tired of typing Final Notice of Intent to Levy) on e-Services, I have no idea where to mail the 12153 nor do I have a number to fax it. There is a SIMPLE cure.

    IRS can establish a number or numbers to which you can respond in the same manner that you can fax a form 911, Request for Taxpayer Advocate Service Assistance.

  2. Richard Gavaghan says:

    Good article, but alas it misses a very critical ancillary question regarding CDP and EH which is; Is the TP better off with a CDP vs. EH?

    The article correctly notes, “An equivalent hearing provides a forum with IRS Appeals similar to a CDP hearing, however, it does not provide the same protection from collection or allow for judicial review.” However, this article (and many others) omit that the CDP suspends the collection statute. Very often the collection statute suspension will harm the taxpayer more than the enforcement action under Appeal. For this reason, the exchange of losing judicial review for a continuous running of the collection statute will be very often a trade in favor of the taxpayer.

    Be wary of the CDP!!!

Comment Policy: While we all have years of experience as practitioners and attorneys, and while Keith and Les have taught for many years, we think our work is better when we generate input from others. That is one of the reasons we solicit guest posts (and also because of the time it takes to write what we think are high quality posts). Involvement from others makes our site better. That is why we have kept our site open to comments.

If you want to make a public comment, you must identify yourself (using your first and last name) and register by including your email. If you do not, we will remove your comment. In a comment, if you disagree with or intend to criticize someone (such as the poster, another commenter, a party or counsel in a case), you must do so in a respectful manner. We reserve the right to delete comments. If your comment is obnoxious, mean-spirited or violates our sense of decency we will remove the comment. While you have the right to say what you want, you do not have the right to say what you want on our blog.

Speak Your Mind

*