Your Psychologist Might Be a Physician, but Your Counselor is Not (Under Section 6511(h))

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Last week, a Magistrate Judge for the District Court of the Western District of Washington in Milton v. United States (sorry, can’t find the order for free yet) granted the IRS’ motion for reconsideration on a refund claim based on financial disability.  The order may place some restrictions on the direction financial disability cases under Section 6511(h) have been headed.  We have covered this topic in great detail, including some small breakthroughs taxpayers have made in claiming financial disability under Section 6511(h).  Most recently, Keith wrote about the potential taxpayer victory in Stauffer v. IRS, where the Court declined to afford Rev. Proc. 99-21 deference regarding the definition of physician.  Keith’s wonderful write up can be found here. In Keith’s post he links to several of our prior posts on the subject, including a comprehensive two part post on the Tax Court case, Kurko, dealing with the same general concept written by Carlton Smith.  In addition, for those who want to learn more about Section 6511(h),  Chapter 11.05[2][b] of SaltzBook was recently rewritten to cover this topic in great detail.

As Keith notes in his write up in Stauffer, that case opened the door for potential relief under Section 6511(h) regarding the use of a psychologist to show disability, but this would have to be approved by the District Court (there is other Stauffer litigation, unfortunately alleging that Mr. Stauffer’s girlfriend at the end of his life may have inappropriately taken $700,000 from him).  The IRS filed objections to the ruling in late February, which were replied to in early March.  I have not found any other filings or orders in that case.

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I will borrow heavily from Keith’s post to frame the issue and the Court holding in Stauffer before touching on the holding in Milton:

The IRS filed a motion to dismiss for lack of jurisdiction because the claim for refund was untimely…  Examining the statute led to an examination of Rev. Proc. 99-21 which “sets forth in detail the form and manner in which proof of financial disability must be provided.”  The Rev. Proc. states that the claimant must submit “a written statement by a physician (as defined in section 1861(r)(1) of the Social Security Act, 42 U.S.C. 1395x(r), qualified to make such determination…”  The court noted that the Rev. Proc. does not define “physician” but borrows the definition from the Social Security statute.  The reference to section 1861(r)(1) creates confusion because that section does not have subsections.  Instead it has one large paragraph defining physician that includes five categories: (1) “a doctor of medicine or osteopathy,” (2) a doctor of dental surgery or of dental medicine,” (3) “a doctor of podiatric medicine,” (4) “a doctor of optometry,” and (5) “a chiropractor.”

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The court notes that the Rev. Proc. does not receive Chevron deference because it expresses the view of one employee and not the view of the agency.  The Rev. Proc. receives deference “only to the extent that those interpretations have the power to persuade.”  The court then explains how the Rev. Proc. fails to persuade…

The court also cites to case law accepting the opinion of the treating psychologist while noting that the SSA and IRS definitions of disability are virtually identical.  So, the limitation argued by the IRS in its Rev. Proc. does not make sense and is inconsistent with the SSA rules it apparently sought to mimic…

Without a reasoned explanation and in light of the fact that the opinion of psychologist in these types cases is viewed as acceptable in other contexts, the Rev. Proc. does not provide persuasive authority.  The court states “I conclude that the defendant’s interpretation of the term ‘physician’ in Revenue Procedure 99-21 is not entitled to deference here.  I conclude further that to the extent the psychologist’s statement the plaintiff submitted supports a financial disability based on a mental impairment, the IRS was not required to reject it on the ground that it did not constitute a ‘physician’s statement.

In Stauffer, I believe the Court concluded that subsection (1) was the applicable definition the Rev. Proc. was seeking to use, although that is perhaps unclear, which Keith explains in his post.  Under (1), the definition is “a doctor of medicine or osteopathy.”  As quoted from Keith’s post above, the Court found that the Rev. Proc. was not persuasive on this matter, and that there was clear reason to believe a psychologist should be allowed to opine on financial disability, especially as regard mental impairment.

In Milton v. United States, the taxpayer sought to push this argument slightly further.  Procedurally, the IRS had previously sought to dismiss the case for lack of jurisdiction.  The Court denied that motion in May, which can be found here.  That order did not focus on financial disability.  Instead, the Court held as follows:

Plaintiff waited until January 2014 to file his tax return for his income tax liabilities from 2000… Plaintiff asserts that he filed a subsequent late return in May 2014 for the same tax liabilities from 2000… Defendant concedes that the late return filed in 2014 constitutes both a return and a refund claim… Accordingly, Defendant appears to concede that Plaintiff meets the requirements of § 6511(a) because Plaintiff “duly filed” his refund claim within three years of his tax return. Because Plaintiff meets § 6511(a)’s time limitation, this Court may exercise jurisdiction over the lawsuit…

Defendant offers no authority to prove that § 6511(b)(2)(A)—the “lookback” period—has any bearing on subject-matter jurisdiction. The remaining arguments in Defendant’s brief are more appropriately analyzed in a motion for summary judgment.

If the Section 6511(h) argument was initially briefed, the holding on jurisdiction above would have rendered it moot.  I did not pull the briefs.  We have discussed whether the Section 6511(b) look back is jurisdictional or not.  I blogged the case Boeri v. United States, where the Federal Circuit determined it was not.  Carl Smith has forwarded to me what I believe the Ninth Circuit’s last statement on this issue was, which can be found in Reynoso v. United States.  The Ninth Circuit held it was jurisdictional, but did so without reviewing more current SCOTUS holdings limiting use of that term.  Given the Ninth Circuit’s holding, the Service was understandably unhappy with this result, and filed a motion for reconsideration.  The Judge granted the motion, determining that Section 6511(b)(2)(A) was jurisdictional, and the refund claim was outside of the time frame.

The taxpayer, in response, made an argument that he was disabled under Section 6511(h).  It does not specify his disability, but he submitted a statement from “Tim Liddle, a ‘MA, LMHC, MAC.’”  Those designations, I believe, are a Masters of Arts (presumably in counseling), a Licensed Mental Health Counselor designation, and either a Master Addiction Counselor or a Master of Arts in Counseling.  He was clearly a trained counselor who was assisting the taxpayer for some mental health issues.

I found two points of the holding here interesting.  First, the Court states “physician” under Rev. Proc. 99-21 is “a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a licensed chiropractor. 42 U.S.C. § 1395x(r).”  As Keith noted in his post, it is unclear if this entire paragraph is intended to apply, or only “a doctor of medicine or osteopathy.”  The Court did not provide its rationale.  This could be an interesting issue moving forward with other cases.  It would also be fairly interesting to have a podiatrist or chiropractor provide an opinion about a taxpayer’s mental health.

And, second, the Court found that none of the above designations qualify as a physician, as it is defined.  This was a “fatal error”, finding that Congress deliberately drafted the definition of “physician” narrowly, and the matter was dismissed for lack of subject matter jurisdiction.  While the District Court for Massachusetts was willing to look at the SSA procedures in determining disability, the Washington court did not provide the same review.  I believe counselor notes can be used as evidence to show disability in an SSA hearing (if the requesting party consents to disclosure), although I am not certain if they are sufficient without other evidence.

The strides made in Stauffer and Kurko make sense.  Someone suffering from mental illness will likely see a psychologist.  For that person, it may be the absolutely 100% correct treatment option, and the failure to have contemporaneous interaction with a physician should not preclude them from making the claim.  It is not surprising, however, that this court did not extend the rationale to counselors at this point.

Stephen Olsen About Stephen Olsen

Stephen J. Olsen’s practice includes tax planning and controversy matters for individuals, businesses and exempt entities for the law firm Gawthrop Greenwood, PC.

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Comments

  1. Carl Smith says:

    For those who have access to Tax Notes Today, the June magistrate’s opinion in Milton can be found at 2017 TNT 115-23. Stephen is right that the court stated: “Congress deliberately drafted the definition of ‘physician’ narrowly, and the Court will not disturb that decision.” But, Congress only did so in a non-tax statute. IRC section 6511(h) doesn’t contain the word “physician” or cross-reference the non-tax statute. “Physician” only appears in the Rev. Proc., with the cite to the non-tax statute defining “physician”. I think it is dubious to say this result is compelled by what Congress drafted in defining “physician” elsewhere in the U.S. Code for a totally different purpose. This was what concerned Judge Gustafson in Kurko.

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