Carlton Smith

About Carlton Smith

Carlton M. Smith worked (as an associate and partner) at Roberts & Holland LLP in Manhattan from 1983-1999. From 2003 to 2013, he was the Director of the Cardozo School of Law tax clinic. In his retirement, he volunteers with the tax clinic at Harvard, where he was Acting Director from January to June 2019.

D.C. Circuit Denies DOJ En Banc Rehearing Petition in Myers Whistleblower Case

Just a short update:  In Myers v. Commissioner, 928 F.3d 1025 (D.C. Cir. 2019), on which I blogged here, the majority of a 3-judge panel held that the 30-day deadline in section 7623(b)(4) to file a whistleblower award petition in the Tax Court is not jurisdictional and is subject to equitable tolling.  In a petition for en banc rehearing in Myers, on which I blogged here, the DOJ argued that not only was the panel wrong, but it had set up a clear conflict with the Ninth Circuit in Duggan v. Commissioner, 879 F.3d 1029 (9th Cir., 2018).  In Duggan, the Ninth Circuit held that the very-similarly-worded 30-day deadline in section 6330(d)(1) to file a Collection Due Process petition in the Tax Court is jurisdictional and not subject to equitable tolling.  On October 4, 2019, the D.C. Circuit issued an order denying the DOJ’s petition for en banc rehearing.  In the order, the court noted that none of the 11 D.C. Circuit judges (plus Senior Judge Ginsburg, who wrote the opinion) requested a vote on the petition for en banc rehearing.  Thus, that means that even dissenting Judge Henderson did not ask for a vote on the petition. 

Now, the Solicitor General will have to decide how upset the government is and whether to file a petition for certiorari with the Supreme Court.  Will the apparent indifference of all of the judges of the D.C. Circuit to reviewing the matter en banc suggest to the Solicitor General that maybe a majority of the Supreme Court will also think the Myers opinion is correct?

Prison Mailbox Rule Doesn’t Apply to Refund Claims

In what the court thinks is apparently a case of first impression, a district court has held that a refund claim that arrived at the IRS more than three years after it was due is not timely under the “prison mailbox rule”.  Whitaker v. United States, 2019 U.S. Dist. LEXIS 165345 (N.D. Fla. 9/26/19), adopting magistrate’s opinion at 2019 U.S. Dist. LEXIS 166975.  The court also holds (following precedent in the Fifth Circuit which a court in the Eleventh Circuit had to follow) that the common law mailbox rule cannot apply because it has been superseded by section 7502.  Circuits are split as to the latter holding. Further, the court holds that the taxpayer did not make out a factual case for equitable estoppel to apply to the IRS.

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Facts

During 2012, the taxpayer, a single individual, performed some work for which he was eventually sent a Form W-2.  But he did not timely file a return for 2012 until sometime in 2016. 

The taxpayer says he filed an original Form 1040-EZ before he got a copy of the Form W-2.  The original return showed no tax liability for the year, but sought refund of (1) $446 that the taxpayer claimed had been withheld as income taxes from his wages and (2) an EITC of $475.  The taxpayer was incarcerated in 2016 and claims that he handed his original 2012 return to prison authorities for mailing on March 25, 2016 – within the 3-year lookback period of section 6511(b).  (Since it was an original return containing a claim, the return would have been timely under the 3-year look-forward rule of section 6511(a), so the issue is whether the 3-year lookback rule of section 6511(b) regarding the amount of taxes paid has been satisfied.)

The taxpayer says that in late April 2016, he first obtained a copy of the Form W-2 for 2012 and only then learned that no income tax withholding had been done on his wages.  He prepared an amended return, therefore, removing the portion of the prior claim for withheld income taxes.  The amended return still sought an EITC refund of $475.  The taxpayer handed this amended return to prison authorities for mailing on April 21, 2016.

The IRS says that it never received the original return, but on April 30, 2016, it received the amended return and filed it as of that date.  The IRS denied the claim as untimely.

The taxpayer brought suit on the $475 refund claim in the district court for the Northern District of Florida.  The DOJ moved for summary judgment that the amount of the claim was limited under section 6511(b) to $0.  The taxpayer cross-moved for summary judgment, arguing that the claim should be deemed filed on March 25, 2016.  The taxpayer supported his motion with an unsigned note purportedly from “Classification Counselor Mrs. Doll.” In that unsigned note, Mrs. Doll stated that “[o]n 3/25/16 Mailroom Staff Ms. Bailey sealed, timestamped and post-dated the 2012 tax return. This is logged in the legal/privileged mail log.”   The taxpayer also submitted a copy of his original return, his amended return, and affidavits of inmates who helped or observed him preparing his 2012 tax return.  The taxpayer did not, however, submit the envelope in which the original return was mailed or any proof of its mailing by registered or certified mail.

Holdings

The magistrate’s opinion that was later adopted by the district court judge begins by taking the position that a timely-filed refund claim is necessary to the district court’s jurisdiction, citing United States v. Dalm, 494 U.S. 596, 609 (1990).  As an aside, Keith and I have been arguing recently that Dalm is no longer good law on these points – that under more recent Supreme Court case law, both the filing of an administrative claim (required by section 7422(a)) and its timely filing (required by section 6511(a)) are merely mandatory claims processing rules not going to the court’s jurisdiction.  See Gillespie v. United States, 670 Fed. Appx. 393, 395 (7th Cir. 2016) (not deciding issue, but noting that current Supreme Court case law on the distinction between subject matter jurisdiction and mere claims processing rules “may cast doubt on the line of cases suggesting that § 7422(a) is jurisdictional”, including Dalm.).

Without discussion, the magistrate’s opinion then mentions the further tax amount paid look-back requirements of section 6511(b) and overall treats compliance with that subsection as a nonjurisdictional matter.  As another aside, most courts today, without noting it, still treat compliance with section 6511(b) as a jurisdictional matter.  However, the Federal Circuit has held that the issue of how much tax was paid during the lookback period of section 6511(b) is not jurisdictional.  See Boeri v. United States, 724 F.3d 1367, 1369 (Fed. Cir. 2013), on which Stephen blogged here.  So, the magistrate in Whitaker unknowingly aligns himself with the Federal Circuit.  By moving for summary judgment, the parties also seem to align with the Federal Circuit, since, if compliance with section 6511(b) is jurisdictional, the DOJ should, instead, have moved to dismiss for lack of jurisdiction under FRCP 12(b)(1).  It is odd, though, that sometimes in the opinion, the magistrate seems to equate compliance with section 6511(b)’s payment rules as also jurisdictional, but yet grants the DOJ summary judgment that he refund is limited to $0 – a merits holding.

Third, in applying the lookback rules of section 6511(b), the court is supposed to look at how much tax was “paid” in the 3-year period before the claim was filed.  The statute limits the refund to those taxes paid within the lookback period.  But, Whitaker’s claim is now solely predicated on the EITC, which, of course, he never actually “paid”.  Over a decade ago, while the director of the tax clinic of the University of Connecticut, now-Tax-Court-Special-Trial-Judge Leyden argued to the Second Circuit that there is no time limitation under section 6511(b) on EITC claims because they were never “paid” by the taxpayer.  In Israel v. United States, 356 F.3d 221, 225 (2d Cir. 2004), the court held that the EITC should be treated as “deemed paid” by the taxpayer on the April 15 following the end of the tax year, just like withholding and estimated taxes under section 6513(b)(1) and (2) are treated as paid on that date.  The magistrate in Whitaker cites and applies Israel.  Thus, he deems the EITC “paid” on April 15, 2013, so the amount of the claim allowable is limited to $0 if the claim was filed after April 15, 2016.  Aside:  I wonder why no one has ever litigated the Israel issue in any other Circuit?  As I see it, the Israel opinion’s reasoning is something like “ipse dixit”.

The magistrate in Whitaker then notes that section 7502(a) provides a timely-mailing-is-timely-filing rule for, among other things, refund claims.  But, that rule doesn’t benefit Whitaker, since it only extends the filing date when there is a postmark on the envelope that shows the envelope was mailed on or before the last date to file.  There is no envelope in the record, let alone one bearing such a postmark.  The court also notes the special rule under section 7502(c) that could deem evidence of the date of mailing by registered or certified mail as the date of the postmark under subsection (a), but there is also no evidence in the record as to registered or certified mailing of an envelope.

Next, the magistrate considers the possibility that the common law mailbox rule (allowing for parol and other extrinsic evidence of mailing) has not been eliminated by section 7502 or the regulations thereunder.  The court notes the existing split among the Circuits about whether the common law mailbox rule survived the enactment of section 7502 and the recent ruling of the Ninth Circuit in Baldwin v. United States, 921 F.3d 836 (9th Cir. 2019), that regulations under section 7502 have abrogated all case law holding that the common law mailbox rule still survives the enactment of section 7502.  We blogged on Baldwin and that case law split here.  As an aside (boy, am I abusing the privilege of asides), the Baldwins filed a petition for certiorari on September 23, 2019 at Supreme Court Docket No. 19-402, a copy of which can be found here.  In the petition, they argue that the Court should revisit the correctness of its opinion in National Cable & Telecomms. Assn. v. Band X Internet Services, 545 U.S. 967 (2005), where it held that regulations may overrule preexisting case law where the case law was not predicated on the court holding the statute’s language unambiguous.  In the alternative, the petition argues for Brand X to be limited so as not to permit regulations that overrule common law case law like the mailbox rule.

The district court in Whitaker is located in the Eleventh Circuit, which has not taken a precedential position regarding the continued existence of the common law mailbox rule since the passage of section 7502 or the enactment of the regulations thereunder.  However, the magistrate notes that the Fifth Circuit in Drake v. Commissioner, 554 F.2d 736, 738-39 (5th Cir. 1977), held the common law mailbox rule to no longer exist after section 7502.  Since that opinion was issued before the Eleventh Circuit was carved out of the Fifth Circuit in 1981, Drake is thus binding precedent on district courts in the Eleventh Circuit under Bonner v. City of Prichard, 661 F.2d 1206, 1209-10 (11th Cir. 1981), and the common law mailbox rule proof offered by Whitaker can be of no use to him.

Next, and most novel, the magistrate considers whether the “prison mailbox rule” applies to assist Whitaker.  The court apparently finds no case law on whether the prison mailbox rule can apply to tax refund claims.  In the following passage, the magistrate declines to extend the prison mailbox rule to tax refund claims:

The Supreme Court created the prison mailbox rule when it held that — for purposes of Rule 4(a)(1) of the Federal Rules of Appellate Procedure — a notice of appeal that a pro se prisoner sought to file in a federal court of appeals should be considered filed on the date the prisoner delivered it “to the prison authorities for forwarding to the court clerk.” Houston v. Lack, 487 U.S. 266, 275, 108 S. Ct. 2379, 2385 (1988); Daker v. Comm’r, Ga. Dep’t of Corrs., 820 F.3d 1278, 1286 (11th Cir. 2016). In reaching its decision, the Court reasoned that the word “filed” was ambiguous insofar as neither Rule 4(a)(1) nor the applicable statute set “forth criteria for determining the moment at which . . . ‘filing’ has occurred.” Houston at 272-76, 108 S. Ct. 2383-85; Bonilla v. United States Dep’t of Justice, 535 F. App’x 891, 893 (11th Cir. 2013). Additionally, in creating the prison mailbox rule, the Supreme Court never stated that the rule applies to every document a prisoner seeks to mail. Rather, the rule announced by the Supreme Court applied only to notices of appeal submitted to federal courts of appeals, and was subsequently codified consistent with that limitation. See Fed. R. App. P. 4(c).


Other courts expanded the rule announced in Houston v. Lack to apply the prison mailbox rule to other court filings. See Edwards v. United States, 266 F.3d 756, 758 (7th Cir. 2001) (per curiam) (noting that courts expanded the prison mailbox rule to include many other types of court filings). This expansion was codified to apply to appellate documents and habeas petitions filed with federal courts. See Fed. R. App. P. 25(a)(2)(A)(iii); Fed. R. Bankr. P. 8002(c); Rules Governing Section 2254 Proceedings For the United States District Courts, Rule 3(d); Rules Governing Section 2255 Proceedings For the United States District Courts, Rule 3(d).
Consistent with its historical roots, in the Eleventh Circuit, the prison mailbox rule is limited to filings made to courts. See Williams v. McNeil, 557 F.3d 1287, 1290 n.2 (11th Cir. 2009) (“Under the ‘prison mailbox rule,’ a pro se prisoner’s court filing is deemed filed on the date it is delivered to prison authorities for mailing.”) (emphasis added); Garvey v. Vaughn, 993 F.2d 776, 783 (11th Cir. 1993) (holding that the prison mailbox rule announced in Houston applies to pro se prisoners seeking to file in federal courts complaints under 42 U.S.C. § 1983 and the Federal Tort Claims Act) (emphasis added). Plaintiff has not cited any authority demonstrating that the prison mailbox rule applies to tax returns submitted to prison officials for mailing to the IRS.


Furthermore, the Supreme Court’s holding in Fex v. Michigan strongly suggests that the prison mailbox rule does not apply generally to all documents a prisoner seeks to mail to government entities. 507 U.S. 43, 47, 113 S. Ct. 1085, 1089 (1993). In that case, the prisoner sought to apply the prison mailbox rule to a request for disposition under the Interstate Agreement on Detainers that he had provided to prison officials to mail. Fex, 507 U.S. at 46, 113 S. Ct. at 1088. In determining the date the document was “caused to be delivered,” the Supreme Court did not apply the prison mailbox rule and instead held that the document was “caused to be delivered” on the date the prosecutor’s office and court received the request, and not on the date the inmate gave the request to prison officials for mailing. Fex, 507 U.S. at 47, 113 S. Ct. at 1089.


Other courts have noted that “the prison mailbox rule does not apply when there is a ‘specific statutory or regulatory regime’ governing the filing at issue.” Crook v. Comm’r of Internal Revenue Serv., 173 F. App’x 653, 656 (10th Cir. 2006) (quoting Longenette v. Krusing, 322 F.3d 758, 763 (3d Cir. 2003)); Smith v. Conner, 250 F.3d 277, 277, 279 (5th Cir. 2001); Nigro v. Sullivan, 40 F.3d 990, 994-95 (9th Cir. 1994). More specifically, when the particular statute defines the term “filing” or “filed” — as § 7502 essentially does — courts have seen no reason to usurp a statutory or regulatory definition by resorting to the prison mailbox rule. See Crook, 173 F. App’x at 656 (interpreting the word “filed” defined in Section 7502(a)(1) of the Internal Revenue Code); Smith, 250 F.3d at 279 (holding that the court “shall resort to Houston if the rule does not clearly define filing” and in all other cases the court “will enforce the regulations as written”); Nigro, 40 F.3d at 994 (noting that the prison-mailbox rule did not apply because the administrative regulations defined the word “filed” as “when the receipt is issued.”).  [Emphasis in original.]

Finally, Whitaker had argued that the government should be estopped from arguing for the section 6511(b) limitation in this case. It is well-settled that jurisdictional conditions are not subject to estoppel (just like they are not subject to waiver, forfeiture or equitable tolling).  Dolan v. United States, 560 U.S. 605, 610 (2010).  Since the magistrate appears not to treat section 6511(b) compliance as jurisdictional, this presents him with the question of whether estoppel could apply to the assertion that section 6511(b)’s conditions were not met. The magistrate states:

Plaintiff asserts that Defendant should be estopped from invoking § 6511’s three-year deadline because the IRS sent him a disallowance letter — dated and sent to Plaintiff on May 5, 2017 — in which the IRS incorrectly stated that May 15, 2016, was Plaintiff’s (already expired) deadline to file his claim for 2012 taxes. (Doc. 56-13 at 2). Plaintiff intimates that he relied on this letter (Doc. 56-13), even though the IRS issued this letter on May 5, 2017, more than a year after the deadline to file his return had expired (April 15, 2016), and long after the date Plaintiff claims that he sent his initial 2012 tax return to the IRS (March 25, 2016).


“The question of whether equitable estoppel is ever available against the federal government is unresolved,” but it is clear that the party asserting estoppel against the government has a heavy burden. Ferry v. Hayden, 954 F.2d 658, 661 (11th Cir. 1992) (citing Heckler v. Cmty. Health Servs., 467 U.S. 51, 61, 104 S. Ct. 2218, 2224 (1984)).  [footnote and some citations omitted; emphasis in original]

The magistrate does not decide whether estoppel could ever apply to section 6511, but details exhaustively why the facts alleged by Whitaker could not give rise to estoppel in any event.

Observations

I wonder if Whitaker will appeal his loss to the Eleventh Circuit?  The case only involves $475 plus interest from March or April of 2016 to date. 

Whitaker proceeded pro se in the district court and got the district court $350 filing fee put on an installment agreement so he could proceed in forma pauperis.  He is obligated to pay 20% of his income out of his “inmate account” towards the full $350 fee, over time.  He has so far paid $139.66 towards the fee.  Could he get the $505 appellate filing fee waived? 

Does anyone admitted to the Eleventh Circuit want to represent him?  (He appears to be quite the prison litigator, having filed numerous papers in the district court citing case law.)  In his motion for summary judgment, he argued for the application of the common law mailbox rule and estoppel.  In order for him to prevail in the Eleventh Circuit on the mailbox rule, he would need an en banc panel that decided to no longer follow the Fifth Circuit’s controlling Drake opinion holding that the common law mailbox rule has been supplanted by section 7502.  That is pretty unlikely.  And the Supreme Court in Baldwin is not being asked to resolve that Circuit split about the common law mailbox rule – merely to hold that the regulation under section 7502 doesn’t overrule any Circuit Court that has already held that the common law mailbox rule still applies after section 7502.  So, a taxpayer victory in Baldwin won’t be enough help Whitaker.

Whitaker’s case might have been a good litigating vehicle for the Israel issue of whether the section 6511(b) limits apply at all to EITC claims.  If section 6511(b) doesn’t apply, then all the issues decided by the magistrate on whether Whitaker mailed too late go by the wayside as irrelevant.  But, I have read Whitaker’s motion for summary judgment, and he doesn’t argue that section 6511(b) doesn’t limit EITC claims. It appears he has waived that Israel issue.  Too bad.

DOJ Seeks En Banc Rehearing of D.C. Cir. Myers Whistleblower Opinion

On July 2, 2019, the D.C. Circuit held that the 30-day filing deadline for bringing a Tax Court whistleblower award review suit at section 7623(b)(4) is not jurisdictional and is subject to equitable tolling. Myers v. Commissioner, 928 F.3d 1025. I blogged on the opinion here. Upset at its first loss in one of the cases in which Keith and I and the Harvard clinic have been making this argument as to various Tax Court filing deadlines (including in our amicus brief in Myers), the DOJ, on September 12, 2019, petitioned the D.C. Circuit to rehear the case en banc as to both the jurisdiction and equitable tolling rulings.

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I won’t repeat in detail from my prior post how the D.C. Circuit reasoned that the filing deadline is not jurisdictional under recent Supreme Court non-tax case law. But, basically, the court held that, while the Code section clearly gave the Tax Court jurisdiction to hear such cases, the Code section was not sufficiently clear, by using the words “such matter” in a parenthetical, that Congress also wanted the filing deadline to be jurisdictional. Absent such a “clear statement”, the Supreme Court’s current position is that filing deadlines are not jurisdictional. In the DOJ’s rehearing petition, the DOJ basically repeats what it argued before – that “such matter” necessarily implies the filing deadline as well as the subject matter of the case.

When the D.C. Circuit ruled (2 to 1) against the DOJ on this argument, the court stated that it recognized how its ruling was “in some tension with” both Duggan v. Commissioner, 879 F.3d 1029 (9th Cir. 2018), and Guralnik v. Commissioner, 146 T.C. 230 (2016), each of which held that the section 6330(d)(1) Collection Due Process Tax Court filing deadline is jurisdictional and not subject to equitable tolling on language virtually identical to that in section 7623(b)(4).

My favorite passage from the rehearing petition is one with which I wholly agree:

The majority recognized that its holding “is in some tension” with that of the Ninth Circuit regarding “a similarly worded provision of the Internal Revenue Code, 26 U.S.C. § 6330(d)(1).” (Add.20.) But that is an understatement (to say the least). It is simply not possible to reconcile the decision in this case with Duggan.

The petition makes no new arguments, with the exception of (in the equitable tolling section) adding information (not previously given to the court) about how many whistleblower award claims are received each year — over 10,000. The DOJ argues that there would be huge administrative problems if equitable tolling were allowed because a lot of those claimants (including ones whose claims were long ago turned down) could now file late in the Tax Court. That, of course, is pure speculation. What the DOJ doesn’t mention is that, up to now, there have only been about 100 whistleblower award cases under 7623(b)(4) pending in the Tax Court at a time. This latter figure appeared in the appellant’s brief from a 2017 report of the whistleblower office.

In its rehearing petition, the DOJ also raised the specter that some awards may already have been given to one whistleblower, but if late Tax Court petitions are allowed, equitable tolling could lead to duplicate awards. I seriously doubt that is a real concern. Equitable tolling is a matter of equity. If a court saw that by a petitioner waiting so long, the IRS could now be in a situation to have to pay two awards, no doubt that is an equitable fact the court would consider in deciding whether tolling should be allowed.

The DOJ also makes an argument that it did not make before to the panel below — that there should be no equitable tolling because there is a cottage industry of lawyers that brings whistleblower award suits. In Sebelius v. Auburn Regional Medical Center, 568 U.S. 145 (2013), the Supreme Court held that there should be no equitable tolling because the Medicare concerns who were seeking reimbursement decision reviews before administrative boards were sophisticated companies who elected continuously to participate in the Medicare system and were well-represented by counsel. The Myers court pointed out that, by contrast, the Tax Court generally is a place where petitions are filed pro se by people who have never filed before — like Myers himself. So, it distinguished Auburn.

It troubles me that the DOJ did not give statistics to support its argument on how many whistleblowers (percentagewise) file pro se and represented Tax Court petitions. In any event, whistleblowers can’t be said to have elected to participate in the award system. Mr. Myers simply felt that his former employer had misclassified both him and other similar workers as independent contractors and suggested an audit.

Observations

I am told by people who do appellate work full time that the D.C. Circuit is stingy with grants of rehearings en banc. So, I am not expecting the petition to be granted. Then, the question will be whether the Solicitor General seeks cert.

This may be a similar situation to when, as an amicus, I helped persuade the Ninth Circuit in Volpicelli v. United States, 777 F.3d 1042 (9th Cir. 2015), that the filing deadline in section 6532(c) for a district court wrongful levy suit is not jurisdictional and is subject to equitable tolling under recent Supreme Court case law. The DOJ also filed a petition for a rehearing en banc with the Ninth Circuit – pointing to a clear conflict with opinions of other Circuits holding the filing deadline jurisdictional and not subject to equitable tolling (though those opinions predated the 2004 change in Supreme Court case law on jurisdiction). The Ninth Circuit did not grant the en banc rehearing. Then, the DOJ did not pursue the matter by filing a cert. petition.

But, I would be happy to see the jurisdiction and equitable tolling issues elevated to the Supreme Court. So, I am not hoping for a similar SG abandonment of the Myers case. In the rehearing petition, the DOJ argues that this is a matter of exceptional importance to the IRS. But, then, people seeking rehearing always say that.

Reminder: The Timely Mailing Rules of Section 7502 Do Not Apply in Refund Suits

In Patel v. IRS, 124 AFTR 2d ¶2019-5097 (D. N.J. 7/29/19), a pro se CPA seeking a $4,000 refund of his income taxes found out the hard way that the timely-mailing-is-timely-filing rules of section 7502(a) do not apply to filings in district court. Section 7502(d)(1). Accordingly, even though he mailed his complaint seeking a refund to the district court just days before the 2-year deadline for filing under section 6532(a) was set to expire, because the complaint arrived after the 2-year period ended, the court dismissed his case.

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On October 8, 2015, Mr. Patel filed his original 2011 Form 1040 showing a $4,000 overpayment. One has only three years from the date a return is filed to seek a refund under section 6511(a) (leaving aside the 2 years from payment rule that can also apply in some cases). When an original return is filed late (as in this case), the refund claim shown thereon is treated as filed the same day as the tax return, so the claim is treated as timely under the 3-year rule of section 6511(a). Rev. Rul. 76-511, 1976-2 C.B. 428. But, if one gets an extension to file to October 15, 2012 (as Mr. Patel claimed he had), then the amount of the claim is limited to the tax paid in the three years immediately preceding the claim plus the extension period. Section 6511(b)(2)(A). Since the tax involved was withholding, it was treated as paid on April 15, 2012. Section 6513(b)(1). Therefore, if Mr. Patel had gotten an extension to file, his claim could have been granted in full, since October 8, 2015 is less than three years and six months after April 16, 2012.

However, the IRS said it never got an extension request from Mr. Patel, so the amount limitation in this case reduced the allowable refund to $0 (the tax paid within three years prior to October 8, 2015).

Acting with what I find surprising speed, on December 17, 2015, the IRS sent Mr. Patel a notification of claim disallowance. Under section 6532(a)(1), Mr. Patel then had two years to file a complaint seeking a refund in either the district court or the Court of Federal Claims. The complaint arrived in the mail at the district court on Wednesday, December 20, 2017 – two days past the due date (FRCP 6(a)(1)(C) having extended the due date to Monday, December 18, 2017). The court found that Mr. Patel credibly testified that he put the envelope in the mail on Friday, December 15, 2017 – three days before the filing deadline expired.

In the opinion, the court notes that it is well-settled that district court filings are made on the day the court receives a document – even if the document is sent by mail. McIntosh v. Antonio, 71 F.3d 29, 36 (1st Cir. 1995). So, the court dismissed the case as untimely brought. The court did not decide the other issue of whether the administrative refund claim amount limit was $0 because that would have required an evidentiary hearing, since Mr. Patel showed the court a copy of a Form 4868 extension form for 2011 that he claimed he had filed, while the IRS denied receipt of such form.

Being a tax controversy lawyer, I would have expected the court to discuss the timely-mailing-is-timely-filing rules of section 7502(a). However, the court didn’t, for reasons that become obvious once you read those rules. Section 7502(a)(1) states:

If any return, claim, statement, or other document required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed, or to which such payment is required to be made, the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document, or payment, is mailed shall be deemed to be the date of delivery or the date of payment, as the case may be.

But, section 7502(d) states, in part: “This section shall not apply with respect to—(1) the filing of a document in, or the making of a payment to, any court other than the Tax Court . . . .” (Emphasis added.) Since I have filed few refund suits in my life, and I have always filed those in person at the local New York district court courthouse, I was never aware of this limitation. Both petitions to the Tax Court and notices of appeals from the Tax Court (which I have more often filed, and always by mail) are filed in the Tax Court, so are subject to the section 7502(a) timely-mailing-is-timely-filing rules. I bet I am not the only tax controversy lawyer who is surprised to find these rule inapplicable to refund lawsuits. So, I write this post as a warning to people like me.

In one of his filings in response to the motion to dismiss, Mr. Patel argued that it must be the case that the district court actually received the mailing within two days, which would make the filing timely (on Monday, December 18, 2017), even if the receipt date governed. As evidence that it usually took only two days to mail something from his home in West New York, New Jersey to the district court in Newark, he attached a printout from a USPS website in connection with his mailing of a document in the refund suit to the court in May, 2019, indicating likely delivery in two days.

The district court in Mr. Patel’s case noted, however, that the mailing done of the complaint was done both over a weekend and at the height of the Christmas mailing season, so the court wouldn’t accept this proof from a more normal time of year. But, the court clearly felt bad for Mr. Patel, writing:

One may sympathize with the plaintiff here. The § 6532(a)(1) deadline, however, is a rigid one; it is not subject to equitable tolling on sympathetic or other grounds. See RHI Holdings, Inc. v. United States, 142 F.3d 1459, 1462 (Fed. Cir. 1998); cf. United States v. Brockamp, 519 U.S. 347, 348 (1997) (analogous statute of limitations in 26 U.S.C. § 6511 not subject to equitable tolling).

Still, the district court found that the filing deadline issue is jurisdictional, so the court dismissed the case for lack of jurisdiction (as opposed to failure to state a claim on which relief could be granted).

Comments

Readers of PT know that Keith and I have litigated whether certain judicial filing deadlines in tax are jurisdictional or subject to equitable tolling in light of Supreme Court changed case law since 2004. Indeed, for over a year now, the Second Circuit has been working on an opinion in Pfizer v. United States, 2d Cir. Docket No. 17-2307, where the Harvard clinic (as amicus) has asked the court to be the first appellate court since the Supreme Court changed the rules to reconsider the issue of whether the section 6532(a) filing deadline is still jurisdictional (as many other courts of appeal had held prior to 2004). In our brief, we criticize RHI Holdings as a case that both predated the 2004 change in the jurisdictional rules and improperly conflated the factors that go into the equitable tolling question with the jurisdictional question. We also found Brockamp distinguishable on many factors that went into the Supreme Court’s analysis there of the section 6511 filing deadline’s ability to be equitable tolled.

And I blogged last November on an opinion in Wagner v. United States, 353 F. Supp. 3d 1062 (E.D. Wash. 2018), where the district court, in a refund suit, considered the recent Supreme Court case law and held that the section 6532(a) filing deadline is not jurisdictional and is subject to equitable tolling (and actually tolled the deadline in the case). So, the Patel case is in clear conflict with Wagner.

It will be interesting to see if Mr. Patel appeals the dismissal. Although the clinic at Harvard doesn’t plan to volunteer to represent him, if he does appeal, we would likely want to file an amicus brief in the Third Circuit arguing that the filing deadline is not jurisdictional and is subject to equitable tolling under the right facts. Anyone else who thinks they want to help the pro se Mr. Patel file an appeal, be our guest.

Seventh Circuit to Hear First Case about Applying Latest Innocent Spouse Equitable Rev. Proc.

Last summer, the Tax Court decided what seemed to be a fairly routine innocent spouse case involving three tax years, Jacobsen v. Commissioner, T.C. Memo. 2018-115. Mr. Jacobsen’s former wife had embezzled about $500,000 from her employer, and he was seeking to be relieved of taxes on the embezzlement income that had been omitted from their joint returns. The Tax Court dismissed the 2009 year from the case because the taxes had already been discharged in Mr. Jacobsen’s unfortunate ensuing bankruptcy. For the 2010 year, the court relieved him under section 6015(b) because he did not even have reason to know of the embezzlement (his ex-wife having hidden the money in small deposits in their joint business account and then gambled it all away), and four other equitable factors favored relief, while none disfavored relief. For the 2011 year, though, the court denied him relief under section 6015(b), (c), and (f), holding that, because he helped a return preparer prepare the 2011 return after his wife had already gone to jail, he had actual knowledge by then of the omitted income.

Of course, actual knowledge precludes relief under subsections (b) and (c), but it doesn’t preclude relief under subsection (f), equitable relief. Rev. Proc. 2013-34, 2013-2 C.B. 397, applicable to the case, provides factors to consider for equitable relief. Prior Rev. Proc. 2003-61, 2003-2 C.B. 296, had provided that actual knowledge was an especially strong factor weighing against relief, though it could be overcome. A major liberalization of relief in the 2013 Rev. Proc. is that actual knowledge is now weighed no more heavily against a taxpayer than reason to know. But then, Judge Paris, purporting to apply the 2013 Rev. Proc., but with no comparison of the factors for 2011, held that because Mr. Jacobsen had actual knowledge and helped prepare the 2011 return, he could not get equitable relief.

Mr. Jacobsen had been pro se. Keith and I were perplexed by the 2011 ruling. There were four positive factors for relief – marital status (divorced), no significant benefit, compliance with later tax filing requirements, and adverse health issues (Mr. Jacobsen is a vet with PTSD). How could they be outweighed by merely one negative factor, actual knowledge, which is no longer held extra-strong weight? (Helping prepare a return does not seem to be a separate factor, but simply part of the knowledge factor.) So, the Harvard Federal Tax Clinic volunteered to represent Mr. Jacobsen in an appeal of the 2011 part of the case to the Seventh Circuit. The DOJ did not cross-appeal the IRS loss on the 2010 year.

We think this is an important case to vindicate the liberalization of the actual knowledge factor in Rev. Proc. 2013-34. While there have been many court of appeals opinions under the prior Rev. Procs. under subsection (f), this will apparently be the first appellate case applying Rev. Proc. 2013-34. We know that the Tax Court has held that it isn’t bound to follow the Rev. Proc., but Judge Paris purported to follow the Rev. Proc. when discussing the equity factor for relief under subsection (b) for 2010. Even if the Rev. Proc. is only advisory, can a court purporting to apply it let one negative factor outweigh four positive factors? And isn’t the judge making actual knowledge, in effect, a per se disqualifier from relief under subsection (f), which contains no provision concerning knowledge?

A law student helped the IRS try the case in the Tax Court. Three law students at Harvard helped Keith and me draft our appellate brief. Here is the appellee’s brief. No reply brief was filed. A Harvard clinic student will do the oral argument for Mr. Jacobsen in the Seventh Circuit on September 13 – which we hope will be a lucky day, despite its being a Friday. This must be either the first case or one of the first cases where law students have helped both taxpayers and the IRS in litigating a case.

Appointments Clause Errors in the Taxpayer First Act that the President is Deeming that He Corrected

On July 1, 2019, the President signed into law H.R. 3151, the Taxpayer First Act – bipartisan legislation primarily making a number of changes to the IRS. Section 1001 of the Act amends Code section 7803 to add a new subsection (e), creating the IRS “Independent Office of Appeals” as a separate office within the IRS, whose “Chief of Appeals” reports directly to the Commissioner of Internal Revenue. Section 2101 of the Act also amends Code section 7803 to add a new subsection (f), creating within the IRS a new position of IRS “Chief Information Officer” (CIO).

No doubt the drafters of the legislation (presumably, the staffs of the Joint Committee on Taxation, the Senate Finance Committee, and the House Ways & Means Committee) have little experience with the requirements of the Constitution’s Appointments Clause (art. II, sec. 2, cl. 2), since there are so few appointed “Officers of the Unites States” in the IRS. Indeed, as far as I can tell, the only appointed “Officers” in that vast bureaucracy are the Commissioner, the Chief Counsel, and the members of the IRS Oversight Board (each appointed by the President with the advice and consent of the Senate); sections 7802(b)(1)(A) and 7803(a)(1)(A) and (b)(1); and the National Taxpayer Advocate (appointed by the Secretary of the Treasury). Section 7803(c)(1)(B)(ii).

New Code section 7803(e)(2)(B) and (f)(1) provide that the Chief of Appeals and the CIO shall be appointed by the Commissioner of Internal Revenue. Unfortunately, assuming that those individuals are “inferior officers” under the Appointments Clause (as opposed to a mere governmental employee lacking “significant authority” to act on behalf of the government), those appointment delegations would be invalid.

Somebody at the White House or DOJ noticed this error before the President signed the bill and thought that the President had an easy work-around. So, in signing the bill into law, the President executed a signing statement that reads in its entirety:

Today, I have signed into law H.R. 3151, the “Taxpayer First Act” (the “Act”). Sections 1001(a) and 2101(a) of the Act require the Commissioner of Internal Revenue to appoint persons to positions responsible for significant functions of the Internal Revenue Service (IRS). Such persons are likely inferior officers under the Appointments Clause of the Constitution. Because the IRS is a component of the Department of the Treasury, the Commissioner is not the head of a department and thus lacks constitutional authority to appoint inferior officers. I therefore direct the Secretary of the Treasury, as the head of the department, to approve any appointments made pursuant to sections 1001(a) and 2101(a) of the Act. DONALD J. TRUMP

Having litigated a case involving the Appointments Clause; see Tucker v Commissioner, 676 F. 3d 1129 (D.C. Cir. 2012), aff’g 135 T.C. 114 (2010) (holding that Appeals Settlement Officers and their Team Managers holding Collection Due Process hearings are not inferior officers, but mere employees not needing appointment), I am quite familiar with case law under the Clause outside the tax area. And, it is my considered opinion that if the Supreme Court were asked if the President’s fix worked, the ghost of former Justice Scalia would cause the Court to call the President’s signing statement “applesauce”. In my view, only Congress can fix the problem, not the President.

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The Appointments Clause provides in relevant part:

[The President] . . . shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

The Framers sought to prevent the diffusion of appointment power by limiting who may make appointments and to whom Congress, by enacting a law, may delegate appointing power. The default is that, assuming a delegation law is invalid, the appointment of inferior Officers must be made by the President with the advice and consent of the Senate. There is little question that, if these new IRS individuals are “Officers of the United States” (which I am confident that they are), they are inferior officers, since they report to a higher officer, the Commissioner. Edmond v. United States, 520 U.S. 651, 662 (1997) (“Generally speaking, the term ‘inferior officer’ connotes a relationship with some higher ranking officer or officers below the President: whether one is an ‘inferior’ officer depends on whether he has a superior.”)

In the case of Cabinet Departments, only the Department’s Secretary has been held to be the Head of a Department under Supreme Court Appointments Clause case law. Freytag v. Commissioner, 501 U.S. 868, 886 (1990) (“This Court for more than a century has held that the term ‘Department’ refers only to “‘a part or division of the executive government, as the Department of State, or of the Treasury,'” expressly ‘created’ and ‘giv[en] . . . the name of a department’ by Congress.”). (Note that, since Freytag, the Supreme Court has also held that independent agencies, such as the SEC, can also be “Departments”. See Free Enterprise Fund v. PCOAB, 561 U.S. 477, 510-511 (2010).) Thus, the Commissioner of Internal Revenue, as the head of a mere unit within the Treasury Department, is not one of the individuals to whom Congress may delegate appointment power for an inferior officer. The Commissioner is not the Head of a Department.

This is not the first time Congressional drafters made an Appointments Clause error in naming an appointer who was not the Head of a Department. What happened most recently to the Patent and Trademark Judges is instructive. The history is set out in detail in Stryker Spine v. Biedermann Motech GmbH, 684 F. Supp. 2d 68, 80-88 (D.D.C. 2010). The Patent and Trademark Judges were part of the Patent and Trademark Office of the Department of Commerce. Congress had long given the Secretary of Commerce the power to appoint such judges. But, in 2000, some bright bulb in Congress changed the law so that the Director of the Patent and Trademark Office could appoint such judges. When Prof. John Duffy, in a 2007 blog post, questioned the constitutionality of this appointment if the judges, as he argued, were inferior officers, not employees, patent and trademark lawyers started to raise this issue in the courts in challenges to the post-2000 rulings of such judges. Congress solved the problem by enacting a law allowing the Secretary of Commerce to appoint such judges – i.e., reverting to the prior law. Congress purported to make the new law retroactive to cure any error, something at least Duffy thought not constitutional, either. But, no court has ever held the Congressional fix improper.

I don’t see how the Secretary of the Treasury has been authorized by law to appoint the new IRS officers. The President’s mere deeming the Secretary to be the proper co-appointer has not been approved by Congress.

On the bright side for Congress, though, they can clearly add this fix to a Technical Correction Act. And, when they do so, I expect that they will follow the lead of what they did in fixing the similar problem with the Patent and Trademark Judges – complete with making the fix retroactive.

Also on the bright side for both the President and the IRS, I have a hard time figuring out who has the standing to bring a legal challenge under the Appointments Clause to what the President just did. After all, who is aggrieved by the error? The Chief of Appeals doesn’t make individual taxpayer rulings within Appeals. Perhaps some government contractor, whose proposed information technology contract was turned down by the IRS CIO, though, might have standing to complain. But, really, would such a lawsuit really be worth it to anyone?

D.C. Circuit Holds Tax Court Whistleblower Award Filing Deadline Not Jurisdictional and Subject to Equitable tolling

As many of you know, the Tax Clinic at the Legal Services Center of Harvard Law School has been arguing, since its 2015 inception, that judicial filing deadlines in tax are not jurisdictional and are subject to equitable tolling under recent Supreme Court case law. Accepting this argument would upend decades of case law in the appellate courts and the Tax Court. We first made the argument in a Collection Due Process (CDP) case filed in the Tax Court. In Guralnik v. Commissioner, 146 T.C. 230, 235-238 (2016), an en banc Tax Court unanimously rejected our argument (but found another way to rule for the taxpayer). Later, in another case, Duggan v. Commissioner, 879 F.3d 1029 (9th Cir. 2018), the Ninth Circuit also held the CDP filing deadline at section 6330(d) jurisdictional and not subject to equitable tolling. (In Cunningham v. Commissioner, 716 Fed. Appx. 182 (4th Cir. 2018), the Fourth Circuit said there were no facts that would justify equitable tolling, so it passed on deciding whether the CDP filing deadline was jurisdictional.) 

The whistleblower award jurisdiction of the Tax Court at section 7623(b)(4) dates from 2006 and was copied almost verbatim from the CDP filing deadline language. In a 2-1 opinion in Myers v. Commmissioner, U.S. App. LEXIS 19757 (D.C. Cir. July 2, 2019), rev’g 148 T.C. 148 (2017), the D.C. Circuit has just held that the whistleblower award petition filing deadline is not jurisdictional and is subject to equitable tolling. The D.C. Circuit reversed the Tax Court’s dismissal of the case for lack of jurisdiction. The Tax Court had so held because it felt that the whistleblower’s failure to timely file the petition within 30 days of the issuance of various notices that the Tax Court found were notices of determination deprived the Tax Court of jurisdiction. I previously blogged on the Tax Court’s Myers opinion here. The D.C. Circuit remanded the Myers case to the Tax Court for the Tax Court to decide, in the first instance, whether the confusing nature of the determinations and their being sent by regular mail (and not even mentioning possible Tax Court review) justified equitable tolling in this case to make the Tax Court petition timely.

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Facts

Davis Myers told the whistleblowers office that he thought a company at which he had worked had misclassified employees as independent contractors. He sought a mandatory whistleblower award under section 7623(b) for a portion of the proceeds of any audit of the company. In a series of four letters written by the office to him and sent by regular mail, the office declined to pay him an award. The letters did not state that they were determinations under the statute, nor did they explain that the next step the whistleblower could take to contest the letters was to file a Tax Court petition within 30 days. Myers was puzzled what to do next. He wrote various people in the government complaining of his lack of award and mentioning the letters he had received. After getting no satisfaction form anyone, he decided to try filing a Tax Court petition – more than a year after the date on the last letter.

In the Tax Court, the IRS moved to dismiss the petition for lack of jurisdiction, arguing that the filing deadline is jurisdictional. The Tax Court asked the IRS for proof of mailing of each letter. Normally, other tickets to the Tax Court are sent certified mail, but these letters hadn’t been. The IRS conceded that it had no proof of when the letters were actually mailed. But, pointing to Myers’ correspondence with other government individuals, the IRS argued that Myers had received the letters at least by the dates of such correspondence. Since he had waited more than 30 days thereafter to file, the IRS argued that the petition was untimely. In an opinion importing some of its case law from its deficiency jurisdiction, the Tax Court granted the IRS motion.

Myers then had 30 days to file either a motion to vacate under Rule 162 or a motion for reconsideration of findings or opinion under Rule 161. He filed such a timely motion, but styled it one for reconsideration when he uploaded it electronically though the Tax Court’s efiling system. After the Tax Court denied the motion, he filed a notice of appeal of the Tax Court case, seeking an appeal to the Tenth Circuit. The notice of appeal was filed more than 90 days after the entry of the decision in the Tax Court case. Section 7483 gives an appellant only 90 days from the decision’s entry to file an appeal. But, FRAP 13 provides that if a person files a timely motion to vacate the decision, then the 90-day period to appeal starts running on the date the Tax Court rules on the motion. The FRAP does not mention motions to reconsider findings or opinions, however.

The Tenth Circuit transferred the appeal to the D.C. Circuit because, under section 7482(b)(1), the D.C. Circuit is the sole proper appellate venue for whistleblower appeals from the Tax Court.

Myers had been pro se to this point. But, for the D.C. Circuit, Joe DiRuzzo and Alex Golubitsky entered appearances on Myers’ behalf. The Harvard Federal Tax Clinic filed an amicus brief in the D.C. Circuit case.

D.C. Circuit Rulings

Initially, in its ruling, the D.C. Circuit addressed whether it had proper appellate jurisdiction from the Tax Court. Only one Circuit had ruled precedentially on the issue, the Ninth in Nordvik v. Commissioner, 67 F.3d 1489, 1493-1494 (9th Cir. 1995). In Nordvik, the court held that, despite FRAP 13’s lack of mention of a motion for reconsideration, such a motion also triggers the running of the 90-day period beginning from the date the Tax Court rules on the motion. In Myers, the D.C. Circuit reasoned that many Tax Court petitioners file pro se, and there is no explanation in Tax Court rules as to the difference between the two types of motions. Indeed, the motions are governed by similar review standards. Further, in non-tax appeals, motions for reconsideration are treated the same as motions to vacate a judgment – i.e., both postponing the appeal period until after such motions are ruled on. In order not to create a trap for unwary pro se filers, the D.C. Circuit held that motions for reconsideration are treated the same as motions to vacate the decision for purposes of the 90-day period to appeal under FRAP 13. Thus, Myers had filed a timely notice of appeal within 90 days of the Tax Court’s ruling on his motion for reconsideration.

Regarding the question of whether the Tax Court whistleblower award petition’s filing deadline is jurisdictional, the appellate court took a liberal view of Myers’ pro se pleadings to consider this issue and the issue of equitable tolling (even though Myers had never mentioned that exact doctrine before the Tax Court).

But first, contrary to some of Myers’ arguments, the D.C. Circuit held that the letters were proper notices of determination, since there was no legal requirement that the notices be sent certified mail, mention Tax Court review, or mention a 30-day filing period to contest them. Further, the D.C. Circuit did not disturb the Tax Court’s holding that Myers actually received the letters more than 30 days before he filed the Tax Court petition, and the 30-day period started no later than the date of provable receipt.

Turning to whether Myers could be forgiven for not filing timely, this raised two separate questions: Whether the filing deadline is jurisdictional and, if not, whether it is subject to equitable tolling?

Section 7623(b)(4) provides: “Any determination regarding [a whistleblower] award under paragraph (1), (2), or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter).” This language is virtually the same as the CDP jurisdiction language at section 6330(d)(1), from which it was copied. Section 6330(d)(1) provides: “The person may, within 30 days of a [CDP] determination under this section, petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter).” Both provide a deadline for filing a Tax Court petition 30 days after the issuance of a determination, and both contain an ending parenthetical stating “and the Tax Court shall have jurisdiction with respect to such matter”.

PT had published a post by Texas Tech Prof. Bryan Camp criticizing Guralnik’s holding that the CDP filing deadline is jurisdictional. The post can be found here. In the clinic’s amicus brief in Myers, we quoted Bryan’s criticism of the Tax Court’s logic that the jurisdictional grant was made in the same breath as the filing deadline, so the filing deadline must also be jurisdictional. In its Myers opinion, although the D.C. Circuit did not cite Bryan’s blog post, it clearly borrowed from it in coming to its conclusion.

Under recent Supreme Court case law, a filing deadline is almost never jurisdictional. But, Congress can override that conclusion by making a “clear statement” that the filing deadline is intended to be jurisdictional. The D.C. Circuit acknowledged that it may be pushing the law a bit farther than the Supreme Court had so far in its cases, but the D.C. Circuit simply did not see that Congress had made a clear statement that the filing deadline in section 7623(b)(4) is jurisdictional by inserting the parenthetical grant “with respect to such matter”. The D.C. Circuit wrote:

The IRS contends this constitutes a “clear statement” because the Congress “placed the jurisdictional language in the same sentence and subsection as the time limit.” As our amicus points out, however, the Supreme Court has explicitly rejected “proximity-based arguments” to that effect. See Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 155 (2013) [where a single sentence contained both the jurisdictional grant and a filing deadline, but the Supreme Court still held the filing deadline not jurisdictional] . . . .

On the contrary, the jurisdictional grant is separated from the rest of the provision by being put in parentheses and introduced by the word “and,” which announces a new independent clause. We therefore do not attach dispositive significance to the proximity between the provision setting the time period and the jurisdictional grant. . . .

The IRS counters that “the test is whether Congress made a clear statement, not whether it made the clearest statement possible.” See Duggan v. Commissioner, 879 F.3d 1029, 1034 (9th Cir. 2018). True enough, but we are not saying the Congress must “incant magic words in order to speak clearly.” Auburn, 568 U.S. at 153. The Congress need only include words linking the time period for filing to the grant of jurisdiction . . . .

Our dissenting colleague reads “such matter” in the parenthetical to provide the connection that makes the filing period jurisdictional. We agree that “such matter” means “the subject of litigation previously specified,” which is “an appeal to the Tax Court.” Dissent 3. In our view, however, the type of appeal to which “such matter” refers is most naturally identified by the subject matter of the appeal – namely, “any determination regarding an award under paragraph (1), (2), or (3)” – and not by the requirement that it be filed “within 30 days of such determination.”

Slip Op. at 16-19 (some citations omitted).

The majority distinguished the three recent court of appeals opinions in which the Harvard clinic had unsuccessfully argued that the innocent spouse filing deadline at section 6015(e) is also not jurisdictional (Rubel v. Commissioner, 856 F.3d 301(3d Cir. 2017), Matuszak v. Commissioner, 862 F.3d 192 (2d Cir. 2017), and Nauflett v. Commissioner, 892 F.3d 649 (4th Cir. 2018)) because the language in the innocent spouse jurisdictional grant contains an “if” condition that is not present in the CDP or whistleblower award provision. The D.C. Circuit wrote:

[Section 6015(e)(1)(A)] differs from the provision at hand in one critical respect: The grant of jurisdiction is followed by an “if” clause that expressly conditions jurisdiction upon timely filing. There is no conflict, therefore, between this case and the cited decisions. Indeed, we think § 6015(e)(1)(A) just shows one way the Congress could have more clearly conditioned the Tax Court’s jurisdiction upon timely filing in § 7623(b)(4), viz., with a parenthetical that stated “the Tax Court shall have jurisdiction with respect to such matter if the appeal is brought within such period.”

Footnote on slip op. at 18-19.

In his forthcoming law review article in The Tax Lawyer, Prof. Camp makes the similar distinction, concluding that section 6330(d)(1)’s filing deadline is not jurisdictional, while section 6015(e)(1)(A)’s filing deadline is jurisdictional. See “New Thinking About Jurisdictional Time Periods in the Tax Code.

The D.C. Circuit in Myers noted that its holding is “in some tension with that of another circuit regarding a similarly worded provision of the Internal Revenue Code, 26 U.S.C. §6330(d)(1)”, citing the Ninth Circuit’s opinion in Duggan and the Tax Court’s opinion in Guralnik, and writing:

This provision is nearly identical in structure to the one at hand. Nevertheless, for the reasons given above, we cannot agree that ‘timely filing of the petition [is] a condition of the Tax Court’s jurisdiction’ simply because ‘the filing deadline is given in the same breath as the grant of jurisdiction.’ Duggan, 879 F.3d at 1034.

Slip op. at 20.

Moving on to whether the filing deadline is subject to equitable tolling, the Myers court noted that in Irwin v. Dept. of Veterans Affairs, 498 U.S. 89 (1990), the Supreme Court laid down a rebuttable presumption that nonjurisdictional federal statutes of limitations are subject to equitable tolling. The Myers court dismissed the DOJ’s argument that the filing deadline, even if not jurisdictional, is not subject to equitable tolling because, the DOJ argued, the whistleblower award Tax Court filing deadline is similar to the internal administrative filing deadline held not subject to equitable tolling in the Auburn case. The scheme in Auburn involved health care providers seeking reimbursements from Medicare internal boards, where the providers were represented by counsel and were repeat players before the boards. The Myers court wrote:

None of these other indicators of legislative intent is present in this case: The Tax Court is not an “internal” “administrative body” and Tax Court petitioners are typically pro se, individual taxpayers who have never petitioned the Tax Court before. Moreover, the IRS points to no regulation or history of legislative revision that might contradict the Irwin presumption. That the whistleblower award statute is not unusually protective of claimants is the only consideration on the IRS side of the ledger. Without more, we are not persuaded to set aside a presumption that has been so consistently applied. See, e.g. Young v. United States, 535 U.S. 43, 49 (2002) (“It is hornbook law that limitations periods are customarily subject to equitable tolling”) (cleaned up).

Slip op. at 22.

The D.C. Circuit remanded the case to the Tax Court for the Tax Court to determine, in the first instance, whether the facts in Myers required equitable tolling.

Observations

The D.C. Circuit is the sole appellate jurisdiction for whistleblower award ruling appeals from the Tax Court. So, this is a nationwide victory for whistleblowers. But, the DOJ might seek reconsideration en banc or cert. because of the split with the Ninth Circuit in Duggan. I would not be shocked if the Supreme Court would grant cert., since it has always been the position of the Tax Court and the government that the filing of a timely petition is necessary to any of its jurisdictions. See Tax Court Rule 13(c). Yet, the Supreme Court has never said anything about the jurisdictional nature of the Tax Court’s filing deadlines or whether they are subject to equitable tolling.

In sum, I am delighted to report that, after a series of disappointing losses involving Tax Court filing deadlines, we finally have a winner — and one that might generate a Supreme Court opinion, depending on how the Solicitor General feels about the case.

Implications for the Tax World of New Supreme Court Opinion Finding Another Claims Processing Rule Not Jurisdictional

I know some of you think I have “jurisdiction” on the brain. However, anyone who reads Supreme Court opinions over the last 15 years should also have that malady by now, since over that period the Court seems to have issued at least one opinion a year on the question of whether a particular rule of federal litigation is jurisdictional or a mandatory non-jurisdictional claims processing rule. Keith and I recognized that this question inevitably also applies to the tax world, where much discussion of the question in court opinions preceded the current thinking making claims processing rules presumptively not jurisdictional. We have tried to alert the lower courts (including the Tax Court) to these Supreme Court developments. Since 2014, tax opinions have begun to follow the developing Supreme Court non-tax authority in analyzing the tax statute requirements. Compare Lippolis v. Commissioner, 143 T.C. 393 (2014) ($2 million amount in dispute whistleblower award threshold in section 7623(b)(5) is not jurisdictional) and Volpicelli v. United States, 777 F.3d 1042 (9th Cir. 2015) (section 6532(c) wrongful levy judicial filing deadline is not jurisdictional and is subject to equitable tolling) with Duggan v. Commissioner, 879 F.3d 1029 (9th Cir. 2018) (section 6330(d)(1) CDP filing deadline is jurisdictional and not subject to equitable tolling) and Rubel v. Commissioner, 856 F.3d 301 (3d Cir. 2017) (section 6015(e)(1)(A) innocent spouse filing deadline is jurisdictional and not subject to estoppel).

Well, the Supreme Court just issued its second “jurisdictional” ruling of the current Term, Fort Bend County v. Davis, Docket No. 18-525 (June 3, 2019). The first ruling was in Nutraceutical Corp. v. Lambert, 139 S. Ct. 710 (Feb. 26, 2019). The Court in both cases held mandatory claims processing rules non-jurisdictional. Could these cases contribute to a larger effect in the tax world, since they underscore that almost no claims processing rule is held jurisdictional by the Court these days?

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First, a reminder of the principal differences between jurisdictional rules and non-jurisdictional rules. Non-jurisdictional rules are subject to waiver and also are subject to forfeiture if not raised soon enough in a case; courts need not police these rules. By contrast, courts must independently police jurisdictional rules, and complaints about lack of jurisdiction can be raised at any time during a case – either by the defendant or the court. Some non-jurisdictional claims processing rules are also subject to the equitable exceptions of estoppel and, in the case of rules that are filing deadlines, equitable tolling, but this is a separate issue. The Court in Nutraceutical, for example, held a deadline in which to ask permission from a court of appeal to appeal a district court denial of class certification not jurisdictional and yet still not subject to equitable tolling.

Second, before getting deep into this subject, I highly recommend to readers Bryan Camp’s forthcoming article in The Tax Lawyer (for the Summer 2019 issue) entitled, “New Thinking About Jurisdictional Time Periods in the Tax Code”, where he argues that the filing deadlines for Tax Court deficiency and CDP cases should not be jurisdictional under the new thinking, but that the filing deadline for a stand-alone innocent spouse case should be jurisdictional, and the district court refund suit filing deadline in section 6532(a) should not be jurisdictional.

Fort Bend Facts

Lois Davis worked for Fort Bend County. She filed with the EEOC two documents complaining that she was being harassed and retaliated against, since she had complained of another worker’s sexual harassment, after which the other worker quit. The first document was an intake questionnaire; the second, a formal “charge”.

Subsequent to the EEOC filings, she was ordered to work on a Sunday, when she had a planned church function. When she went to the church function, rather than work, the county fired her. She then went back and tried to amend the EEOC intake questionnaire by handwriting “religion” on it, but she made no similar amendment to the EEOC charge.

A few months later, the DOJ notified her of her right to sue in district court, and she did – arguing both retaliation and religious discrimination. The district court granted the county’s summary judgment motion, but the court of appeals reversed the grant as to the religious discrimination claim. The county then sought cert. on the issue, but cert. was denied.

On remand, the county for the first time moved the district court to dismiss the religious discrimination claim for lack of jurisdiction because Ms. Davis had not alleged religious discrimination in the EEOC charge. The district court dismissed the case for lack of jurisdiction, but on a second trip to the court of appeals, the court of appeals held that the requirement to file an EEOC charge before filing suit was not jurisdictional, but a mandatory claims processing suit. The court of appeals held that the county had forfeited the right to complain about non-compliance with this requirement by waiting until after the case had already gone once through a round of appeals all the way to the Supreme Court. Because other Circuits had held the EEOC charge-filing requirement jurisdictional, the Supreme Court granted cert. this time to resolve the split.

Fort Bend Opinion

The Supreme Court issued a unanimous opinion, authored by Justice Ginsburg – who is the first Justice to have raised the issue of the overuse of the word “jurisdictional” by the courts. Her Fort Bend opinion, therefore, follows her earlier views, which all of the Justices have since adopted. Under those views (the adopted legal standard since 2004), mandatory claims processing rules are not jurisdictional unless either (1) Congress makes a “clear statement” that it wants the rule to be jurisdictional (a rare event, according to the Court) or (2) there exists a long line of Supreme Court precedent over many years holding the rule jurisdictional (a stare decisis exception). Since there was no previous Supreme Court authority on this EEOC requirement, the county only argued for the clear statement exception.

Before deciding the case, the Court noted:

The Court has characterized as nonjurisdictional an array of mandatory claim-processing rules and other preconditions to relief. These include: the Copyright Act’s requirement that parties register their copyrights (or receive a denial of registration from the Copyright Register) before commencing an infringement action, Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 157, 163–164 (2010); the Railway Labor Act’s direction that, before arbitrating, parties to certain railroad labor disputes “attempt settlement ‘in conference,’” Union Pacific, 558 U.S., at 82 (quoting 45 U.S.C. §152); the Clean Air Act’s instruction that, to maintain an objection in court on certain issues, one must first raise the objection “with reasonable specificity” during agency rulemaking, EPA v. EME Homer City Generation, L. P., 572 U.S. 489, 511–512 (2014) (quoting 42 U.S.C. § 7607(d)(7)(B)); the Antiterrorism and Effective Death Penalty Act’s requirement that a certificate of appealability “indicate [the] specific issue” warranting issuance of the certificate, Gonzalez, 565 U.S., at 137 (quoting 28 U.S.C. § 2253(c)(3)); Title VII’s limitation of covered “employer[s]” to those with 15 or more employees, Arbaugh v. Y & H Corp., 546 U.S. 500, 503– 504 (2006) (quoting 42 U.S.C. § 2000e(b)); Title VII’s time limit for filing a charge with the EEOC, Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 393 (1982); and several other time prescriptions for procedural steps in judicial or agency forums. See, e.g., Hamer v. Neighborhood Housing Servs. of Chicago, 583 U.S. ___, ___ (2017) (slip op., at 1); Musacchio v. United States, 577 U.S. ___, ___ (2016) (slip op., at 8); Kwai Fun Wong, 575 U.S., at ___ (slip op., at 9); Auburn, 568 U.S., at 149; Henderson, 562 U.S., at 431; Eberhart, 546 U.S., at 13; Scarborough v. Principi, 541 U.S. 401, 414 (2004); Kontrick, 540 U.S., at 447.6/

__________ 6. “If a time prescription governing the transfer of adjudicatory authority from one Article III court to another appears in a statute, the limitation [will rank as] jurisdictional; otherwise, the time specification fits within the claim-processing category.” Hamer, 583 U.S., at ___ (slip op., at 8) (citation omitted).

Slip op. at 7-8.

As to the particular EEOC rule at issue in Fort Bend, the Court wrote:

Title VII’s charge-filing requirement is not of jurisdictional cast. Federal courts exercise jurisdiction over Title VII actions pursuant to 28 U.S.C. § 1331’s grant of general federal-question jurisdiction, and Title VII’s own jurisdictional provision, 42 U.S C. § 2000e–5(f )(3) (giving federal courts “jurisdiction [over] actions brought under this subchapter”). Separate provisions of Title VII, § 2000e–5(e)(1) and (f )(1), contain the Act’s charge-filing requirement. Those provisions “d[o] not speak to a court’s authority,” EME Homer, 572 U.S., at 512, or “refer in any way to the jurisdiction of the district courts,” Arbaugh, 546 U.S., at 515 (quoting Zipes, 455 U.S., at 394). Instead, Title VII’s charge-filing provisions “speak to . . . a party’s procedural obligations.” EME Homer, 572 U.S., at 512. They require complainants to submit information to the EEOC and to wait a specified period before commencing a civil action. Like kindred provisions directing parties to raise objections in agency rulemaking, id., at 511–512; follow procedures governing copyright registration, Reed Elsevier, 559 U.S., at 157; or attempt settlement, Union Pacific, 558 U.S., at 82, Title VII’s charge filing requirement is a processing rule, albeit a mandatory one, not a jurisdictional prescription delineating the adjudicatory authority of courts.

Slip op. at 9-10 (footnotes omitted).

In Zipes and later cases, the Court has stated that the separation of a claims processing rule from a jurisdictional grant is a strong indication that the claims processing rule is not jurisdictional.

Impact of Fort Bend on Tax Rules

Any tax lawyer reading Fort Bend will instantly recognize the similarity between the EEOC charge stating rule and the tax refund claim rule of section 7422(a), requiring an administrative claim to have been filed before a refund suit is brought. In United States v. Dalm, 494 U.S. 596 (1990) (involving equitable recoupment jurisdiction), the Court stated that the section 7422(a) requirement is jurisdictional, but the Court’s statement was not really important to the outcome of the case, since the taxpayer would lose whether the section 7422(a) requirement was jurisdictional or not. Dalm is likely one of the opinions that the current Court would call “drive-by jurisdictional rulings”, entitled to no weight since the new rules of jurisdiction have applied. In Gillespie v. United States, 670 Fed. Appx. 393 (7th Cir. 2016), the Seventh Circuit recently observed (in dicta) that recent Supreme Court case law on jurisdiction “may cast doubt on the line of cases suggesting that § 7422(a) is jurisdictional”, including Dalm. Fort Bend throws more shade on this statement in Dalm.

Tax lawyers reading Fort Bend will also recognize the similarity between the EEOC charge stating rule and the rule (related to that of section 7422(a)) that a tax refund suit cannot have its basis be at substantial variance with the basis for the refund set out in the administrative claim. I have not made a study of all case law on the substantial variance rule, but I do know that the Federal Circuit treats that rule as jurisdictional. See Ottawa Silica Co. v. United States, 699 F.2d 1124, 1135-1136 (Fed. Cir. 1983). It also seems doubtful that such rule is jurisdictional after Fort Bend.

Finally, Fort Bend may help the D.C. Circuit resolve an issue presented to it in an appeal of the opinion of the Tax Court in Myers v. Commissioner, 148 T.C. 438 (a section 7623(b)(4) whistleblower action, previously discussed on PT here and here). The issue is whether the appeal to the D.C. Circuit was taken timely under section 7483, which provides only 90 days after the Tax Court decision is entered to file a notice of appeal. The jurisdictional grant for courts of appeals to hear appeals from the Tax Court is elsewhere, at section 7482(a)(1), and the word “jurisdiction” does not appear in section 7483. Section 7483 appears to be a mere run-of-the-mill, non-jurisdictional claims processing rule. Yet the D.C. Circuit has no precedent on this section 7483 jurisdictional issue, and the notice of appeal was filed more than 90 days after the Tax Court decision was entered.

FRAP 13(a)(1)(B) provides: “If, under Tax Court rules, a party makes a timely motion to vacate or revise the Tax Court’s decision, the time to file a notice of appeal runs from the entry of the order disposing of the motion or from the entry of a new decision, whichever is later.” After the Tax Court decision was entered, Mr. Myers had made a timely motion that he styled one for reconsideration (not to vacate). He filed his notice of appeal within 90 days of the Tax Court’s denial of this motion.

The D.C. Circuit raised sua sponte during the Myers appeal whether the notice of appeal was timely filed – something the court may do only if the filing deadline is jurisdictional. Both parties argue that the appeal was timely brought – with the DOJ arguing that the motion for reconsideration should be treated as a motion to vacate, as a practical matter, for purposes of FRAP 13(a)(1)(B). If the appellate filing deadline is not jurisdictional, the DOJ is clearly validly waiving any complaint about late filing.

But, at oral argument this past December, judges on the panel thought that maybe section 7483’s deadline is jurisdictional. If it is, then the judges did not see how a mere FRAP could extend the statutory 90-day period. Further, in Bowles v. Russell, 551 U.S. 205 (2007), creating the stare decisis exception to the new jurisdictional rules, the Supreme Court held that a deadline in 28 U.S.C. section 2107 to file a civil appeal from a federal district court to a court of appeal is jurisdictional because for over 100 years, in multiple opinions, the Supreme Court had called that deadline jurisdictional. The Myers judges wondered why Bowles does not dictate that section 7483’s filing deadline is also jurisdictional because this is a civil appeal.

In response, Mr. Myers’ counsel, Joe DiRuzzo, argued that Bowles only applied to appeals between Article III courts, and did not apply to an appeal from an Article I court (the Tax Court) to an Article III court. Mr. DiRuzzo noted a footnote in Hamer v. Neighborhood Housing Servs. of Chicago, 138 S. Ct. 13, 20 n.9 (2017), suggesting that Bowles only applied to appeals between Article III courts. The Myers judges seemed not impressed by this footnote, correctly noting that it was dicta. However, it is interesting that Justice Ginsburg, in footnote 6 of Fort Bend (quoted above), again states this limitation (between Article III courts), citing Hamer. Again, Justice Ginsburg’s statement constitutes dicta, but how many courts of appeal will disregard well-considered, repeated dicta of the Supreme Court characterizing the scope of the Court’s own precedent?

The opinion of the D.C. Circuit in Myers is by now overdue. We shall see what it decides.

Note that the D.C. Circuit is not hostile to the new Supreme Court jurisdictional rules in tax cases. In Kim v. United States, 632 F.3d 713 (D.C. Cir. 2011), that court held that failure to comply with the administrative exhaustion requirement of section 7433(d)(1) before bringing a suit for damages for wrongful collection actions is a merits affirmative defense. Further, the next year, the court held that the filing deadline for such a suit at section 7433(d)(3) is also not jurisdictional – citing recent Supreme Court case law. Keohane v. United States, 669 F.3d 325, 330 (D.C. Cir. 2012).