What Makes a Whistleblower Notice of Determination?

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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  But, despite the Manual’s then requirement (since repealed) that any whistleblower award notice of determination be sent certified mail, each of these letters was sent to Myers by regular mail.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.

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