Two Appeals Court Innocent Spouse Test Cases on Equitable Tolling

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We welcome back frequent guest blogger Carl Smith.  Today Carl writes about some cases he and I are pursuing in the circuit courts.  It may be some time before this issue is resolved and we continue to look for cases with the right facts that will best allow us to pursue this argument.  Keith

Earlier this year, I reported here that Keith and I had become pro bono counsel of record in a Tax Court case, Matuszak v. Commissioner, Docket No. 471-15, where the Tax Court had, in a December 29, 2015, unpublished order dismissed an untimely-filed innocent spouse petition under § 6015(e) for lack of jurisdiction.  Keith and I believe that, under recent non-tax Supreme Court opinions, the time periods in which to file both innocent spouse and Collection Due Process (CDP) petitions in the Tax Court are not jurisdictional and are subject to equitable tolling.  Despite the Tax Court’s recent resounding, unanimous rejection of our arguments as regards the CDP time period to file in Guralnik v. Commissioner, 145 T.C. No. 15 (June 2, 2016), we are not convinced by the Tax Court’s opinion.  Respectfully, we think the Tax Court got this part of its Guralnik opinion wrong – and not merely for the reasons stated by Bryan Camp in his post of June 6, 2016.

This post is to update readers on what Keith and I are doing to continue to press our arguments.  Our arguments are questions of first impression in all of the Circuit Courts.  In a nutshell, on August 30, 2016, we filed an appeal in the Matuszak case to the Second Circuit.  And on that same day, we filed an appeal in another case on all fours with Matuszak, Rubel v. Commissioner, Docket No. 9183-16 (order of dismissal dated July 11, 2016), to the Third Circuit.

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We don’t want to litigate the cases in this post, but suffice it to say that the Guralnik opinion, we feel, erred in not directly discussing in detail the Supreme Court’s opinion in Sebelius v. Auburn Regional Medical Center, 133 S. Ct. 817 (2013).  There, the Supreme Court found a filing period in an administrative body not jurisdictional, despite the time period’s being contained within the very statutory sentence that gave the body jurisdiction to hear certain Medicare reimbursement disputes.  We think the statutory sentence at issue in Auburn is comparable to the sentences in §§ 6015(e)(1)(A) and 6330(d)(1) that both give the Tax Court jurisdiction and include time limits in which to file petitions.  As the Ninth Circuit said of 15 U.S.C. § 1692k (which authorizes a suit for monetary damages under the Fair Debt Collection Practices Act):

[W]e attach no particular significance to the fact that this statute of limitations appears in the same sentence in which the jurisdiction provision appears. Nothing in the structure of that sentence tells us that the time limitation was also a jurisdictional limitation. In fact, a more natural reading is that parties may bring their action in any “court of competent jurisdiction” and may do so “within one year.” 15 U.S.C. § 1692k(d). It is fair to say that parties are faced with a “when” issue and a “what court” issue for every action, but the former does not usually control or affect the latter.

Magnum v. Action Collection Services, Inc., 575 F.3d 935, 940 (9th Cir. 2009).

We think the Tax Court in Guralnik also erred in justifying its ruling that the CDP petition filing period was jurisdictional on the long-standing treatment of the deficiency petition time periods to file as jurisdictional.  We don’t take issue with the long-standing, but not Supreme Court, rulings of the Tax Court and appellate courts that the § 6123(a) time periods are jurisdictional.  But, we also don’t think every grant of Tax Court jurisdiction necessarily inherits the same jurisdictional status of the § 6213(a) time periods.  So far, the Supreme Court has not allowed an exemption to its new rules that time periods to file are almost never jurisdictional on the basis of stare decisis to lower court opinions.  The exceptions in two cases to the current rules were made on stare decisis grounds only to over 100 years of Supreme Court opinions previously holding the particular time period at issue jurisdictional.  See John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008); Bowles v. Russell, 551 U.S. 205 (2007).

Matuszak

The procedural facts of Matuszak are fairly simple.  And, though we don’t discuss the merits of each case, suffice it to say that Keith and I are very optimistic about each case if the Tax Court ever gets to the merits.

Ms. Matuszak filed joint returns with her husband for 2007.  When there later was a deficiency for that year, all of which was attributable to her husband, Ms. Matuszak filed a Form 8857 seeking section 6015 relief.

On October 7, 2014, the IRS sent Ms. Matuszak a notice of determination.  Notices of determination for CDP and innocent spouse purposes, unlike notices of deficiency, do not set out on the notice the last date to file a Tax Court petition.  (The requirement for the IRS to set out a last date to file was adopted by Congress in 1998, but only applies to notices of deficiency, where taxpayers are entitled to rely on any erroneous date set forth on the notice.)  On the day that the Appeals Officer (AO) mailed out the notice, the AO called Ms. Matuszak to warn her that the notice had just been mailed.  Concerned not to miss the 90-day Tax Court filing deadline, Ms. Matuszak asked the AO what would be the last date to file a Tax Court petition and was told:   January 7, 2015.  In fact, the 90 day period lasted only until January 5, 2015.  When Ms. Matuszak received the notice of determination, she called the AO, who repeated the erroneous date as the last date to file.  Ms. Matuszak took and kept contemporaneous notes of both phone calls.  In reliance on what the AO told her, Ms. Matuszak, acting pro se, sent her petition to the Tax Court on January 6, 2015, which she thought was a day early.  In fact, it was a day late.

On December 29, 2015, Judge Marvel dismissed the case for lack of jurisdiction on the grounds that the petition was filed late and this was a jurisdictional defect that could not be excused by any possible misleading information given by the AO.  In early January, Keith and I entered our appearances in the case and filed a timely motion to vacate, arguing, for the first time, that, under recent non-tax Supreme Court case law, the filing period under section 6015(e)(1)(A) is not jurisdictional and is subject to equitable tolling – the same arguments we had made in an earlier amicus brief we had filed in Guralnik relating to the CDP petition filing period.  One area where equitable tolling commonly applies is where the defendant misled the plaintiff as to the correct filing date.  Irwin v. Dept. of Veterans Affairs, 498 U.S. 89, 96 (1990).

On July 29, 2016, now Chief Judge Marvel issued an unpublished order denying the motion to vacate, citing the Tax Court’s reasoning in Guralnik on these issues.  On August 30, 2016, Keith and I mailed a notice of appeal to the Tax Court, commencing an appeal in Matuszak to the Second Circuit.  The Second Circuit docket number is 16-3034.

Rubel

Ms. Rubel’s case is virtually the same as Ms. Matuszak’s, except that Ms. Rubel is even better situated to argue for equitable tolling, since she has erroneous filing date advice in writing from the IRS.

Ms. Rubel filed joint returns with her then-husband for 2005-2008.  The IRS is still seeking to collect for these years mostly liabilities attributable to her now-ex-husband.  Ms. Rubel filed a Form 8857 seeking relief from her ex-husband’s share of the liabilities as set forth in a 2009 divorce decree.

In early January of this year, the IRS sent four separate notices of determination (three on January 4 and one January 13) denying Ms. Rubel any relief under section 6015.  After receiving these letters, Ms. Rubel continued to send material to the IRS to try to persuade the IRS to change its mind.  On March 3, 2016, the IRS mailed Ms. Rubel a letter stating that it would not reconsider its decision as to any of the four taxable years.  The letter included the following sentences:  “Please be advised that this correspondence doesn’t extend the time to file a petition with the U.S. Tax Court.  Your time to petition the U.S. Tax Court began to run when we issued our final determination on Jan. 04, 2016 and will end on Apr. 19, 2016.”  In reliance on this erroneous date, Ms. Rubel, acting pro se, sent a petition to the Tax Court on April 19, 2016.  The petition was sent at least a week late, since 90 days from the dates of the notices of determination was either April 4, 2016 or April 12, 2016.

In the Tax Court, Ms. Rubel hired counsel to respond to an IRS motion to dismiss for lack of jurisdiction.  He argued both that the March 3 letter was a new notice of determination, giving a new 90-day period to file and that the IRS was estopped from complaining about the late filing by the wrong date that the IRS had stated in the March 3 letter.

On July 11, 2016, Chief Judge Marvel issued an unpublished order dismissing the case.  The judge held that the time period in which to file was jurisdictional and not subject to equitable estoppel, even if the IRS letter showing the April 19 filing date was misleading.  The judge also noted that in Barnes v. Commissioner, 130 T.C. 248 (2008), it had held that a letter denying reconsideration of an innocent spouse determination was not a new notice of determination that started a new 90-day period running.  The court rejected Ms. Rubel’s counsel’s attempts to distinguish Barnes.

Keith and I entered pro bono appearances in Ms. Rubel’s case (replacing her prior lawyer), and on August 30, 2016, we mailed a notice of appeal to the Tax Court, commencing an appeal in Rubel to the Third Circuit.  In the notice, we did not make the argument rejected in Barnes, but we did argue that, under current non-tax Supreme Court case law, the 90-day filing period was not jurisdictional and was subject to equitable tolling and equitable estoppel.  The Third Circuit docket number is 16-3526.

Observations

Because the Third Circuit has less of a backlog, our hunch is that the Third Circuit will be the first to decide the issues we are raising.

But, anticipating Chief Judge Marvel’s July 29 ruling in Matuszak, earlier this year, Keith and I, acting as counsel to Ms. Matuszak, filed a motion for leave to file an amicus brief in a Ninth Circuit case named Duggan v. Commissioner, Docket No. 15-73819.  I wrote a post on the Duggan case.  In Duggan, a pro se taxpayer argued that he was misled by the language of a CDP notice of determination into mailing his Tax Court petition a day late.  In our Duggan proposed amicus brief (a copy of which we attached to the motion), we raised the same arguments that we had raised in our Guralnik amicus brief – that the 30-day period in which to file a CDP petition is not jurisdictional and is subject to equitable tolling under current non-tax Supreme Court case law.

The parties in Duggan have filed their briefs, with the taxpayer’s reply brief having been filed in late June.  Earlier in June, the government brought to the Ninth Circuit’s attention the Tax Court’s opinion in Guralnik.  Mr. Duggan’s reply brief, we think, adequately responds to the Tax Court’s holding in Guralnik.  Although our motion to file an amicus brief in Duggan is unopposed, the panel hearing the case has not yet ruled on the motion.  And, the government has asked that it be allowed to respond to our brief if the motion is granted.  Because the Ninth Circuit is such a slow, backlogged court, it would not surprise me if it was the last of the three circuit courts to rule on these issues.

I know that some practitioners think Keith and I are on a wild goose chase here – especially after our unanimous loss in Guralnik.  We have warned our clients that this is probably an uphill battle in the appeals courts.  But, there is little downside to the clients here, as neither Ms. Matuszak nor Ms. Rubel wants to or can afford to fully pay the liabilities and sue for refund in district court.  Keith and I don’t think the appeals courts will be as concerned as the Tax Court was about the Tax Court’s prior precedents holding the time period in which to file deficiency petitions to be jurisdictional.  Appellate judges have a lot of experience already in applying the new non-tax Supreme Court case law on jurisdiction and equitable tolling to various filing deadlines.  And note that, last year, the Ninth Circuit was persuaded in Volpicelli v. United States, 777 F.3d 1042, to hold that the 9-month period in section 6532(c) in which to file a wrongful levy suit is not jurisdictional and is subject to equitable tolling, applying the recent non-tax Supreme Court case law.  For my post on Volpicelli, see here.  It is time for someone to bring these issues regarding the CDP and innocent spouse filing deadlines up to appeals courts.  The issues Keith and I are raising are far from frivolous.  If we lose, these cases may prompt Congress to amend the statutes to require the IRS to place last dates to file in CDP and innocent spouse notices of determination and allow taxpayers to rely on any erroneous dates set forth.

Finally, it is unclear that Guarlnik will ever be appealed.  If there were an appeal, it would go to the Second Circuit.  The Tax Court has set the Guralnik case for trial on the merits on a calendar commencing November 28.  Stay tuned.

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