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.

Tax Court Temporarily Stops Issuing Dismissals for Lack of Jurisdiction of Late Deficiency Petitions

This is an update to the post of May 3, 2022, which discussed a May 2, 2022 motion to vacate a dismissal for lack of jurisdiction of a late-filed deficiency case in Hallmark Research Collective, Docket No. 21284-21.  In the motion, Hallmark argued that, after Boechler (a Collection Due Process case), the IRC 6213(a) deadline for filing a deficiency petition also is not jurisdictional and is subject to equitable tolling.  The prior post noted that, a day after the motion was filed, the Chief Judge issued an order directing the IRS to file a response within 30 days (i.e., by June 2).  The update is that on May 10, the Chief Judge assigned the motion to Judge Gustafson for purposes of ruling on the motion.    Motions in cases that had been decided by the Chief Judge are usually assigned to Special Trial Judges for disposition, not currently active Tax Court judges.  So, this unusual assignment shows the Court is taking the motion to vacate very seriously.

Simultaneously, it appears that the Tax Court, unannounced, has stopped issuing orders of dismissal for lack of jurisdiction in late-filed deficiency cases until Judge Gustafson (or, more probably, the Tax Court en banc) rules on the Hallmark motion.

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Research shows that the Tax Court in February and March 2022, combined, dismissed 103 late deficiency petitions for lack of jurisdiction – an average dismissal rate of between 2 and 3 cases a business day.  Yet, the last order of dismissal of a deficiency petition for late filing was entered on Friday, May 6. 

PT will post the IRS response to Hallmark’s motion when that response is filed, though PT expects the IRS will ask for and get a bit more time to file its response, to coordinate its response with the National Office.

One effect of the Tax Court’s suspension of ruling on such motions to dismiss in late-filed deficiency cases is that the Court will thus not, for some time, be creating appealable orders which could be challenged by appeals to the Circuit courts as test cases for the IRC 6213(a) issue.  The time is ticking on any appeals that may be filed concerning orders of dismissal entered between mid-February and May 6.

PT is aware of only one case where an order of dismissal has been appealed:  The February 15, 2022 order of dismissal in Culp, Docket No. 14054-21, was timely appealed to the Third Circuit on April 25, 2022 (3d Cir. Docket No. 22-1789).  In Culp, the IRS sent a notice of deficiency to the taxpayers, but the taxpayers say they never received the notice and only became aware of its possible issuance when the IRS started levying.  (We assume that the Culps also did not receive the notice of intention to levy, since they filed no Collection Due Process hearing request.)  They belatedly filed a Tax Court petition, arguing that the IRS had never sent a notice of deficiency to their last known address.  In response, the IRS produced a copy of the notice and proof of proper mailing to their last known address.  So, the court dismissed the petition for lack of jurisdiction for late filing – the long-standing position of the Tax Court and most courts of appeal, pre-Boechler, being that timely filing of a deficiency petition is a necessary predicate to the Tax Court’s jurisdiction. 

The Center for Taxpayer Rights plans to file an amicus brief in Culp (drafted by the Tax Clinic at the Legal Services at Harvard Law School) that sets forth all the arguments made in the memorandum of law filed to accompany the motion to vacate in the Tax Court Hallmark case for why the Tax Court was wrong to treat timely filing as a jurisdictional requirement of a deficiency suit.

Winning Boechler Took a Village

Today we welcome back retired blogger, Carl Smith.  Carl was the architect of the argument that time periods for filing a petition in Tax Court are not jurisdictional based on his reading of Supreme Court cases coming out in other areas of the law.  He worked with the Tax Clinic at the Legal Services Center of Harvard Law School to assist in writing briefs and preparing the students to make oral arguments to Circuit courts.  He worked to identify cases in which we should make the arguments, including the first case it entered (as an amicus), Guralnik v. Commissioner, in which the Tax Clinic made the argument in a case involving a snow day and the Tax Court rejected our argument 17-0.  He also worked with attorneys around the country who had these cases helping them craft their arguments and helping the Harvard students write amicus briefs.  Today’s post is Carl recognizing the village, but I want to recognize him for creating the legal designs that ultimately led to the Supreme Court’s decision.  Keith

In Boechler v. Commissioner, the Supreme Court held that the filing deadline for a Tax Court Collection Due Process petition is not jurisdictional and is subject to equitable tolling.  This victory was about 15 years in the making, and it took a village of almost all pro bono attorneys and clinicians to make it happen.  I wanted to send out thanks to those who helped along the way:

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Jason Grimes – the young pro bono Florida attorney who first made the argument, in a district court suit brought by the IRS to collect taxes, that one of the taxpayers should be entitled to raise section 6015 innocent spouse relief as a defense.  The district court (I think, erroneously) concluded that it lacked jurisdiction to consider relief under section 6015.  Jason persuaded the district court to equitably toll the section 6015(e) filing deadline so that the taxpayer could belatedly file a Tax Court petition.  United States v. Pollock, 2007 U.S. Dist. LEXIS 98153 (S.D. Fla. 2007).  When Jason filed the Tax Court petition on behalf of Mrs. Pollock, he argued that the recent Supreme Court non-tax case law making filing deadlines usually not jurisdictional required the Tax Court to accept the case.  The Tax Court rejected accepting the case, holding the deadline jurisdictional and not subject to equitable tolling.  Pollock v. Commissioner, 132 T.C. 21 (2009).  I became aware of the argument that Tax Court filing deadlines might no longer be jurisdictional when I read the Pollock opinion and the recent Supreme Court non-tax opinions concerning jurisdiction, and I made the same argument Jason did (also unsuccessfully) for a client of the Cardozo Tax Clinic in Gormeley v. Commissioner, T.C. Memo. 2009-252.  (By the way, appeals were docketed from both the Pollock and Gormeley opinions, but the taxpayer appeals were dropped before opinion after the IRS stopped pursuing Mrs. Pollock for collection and the IRS belatedly discovered (at my insistence that they look) that they had never sent Ms. Gormeley the notice of deficiency that underlay her section 6015 relief request.)

Keith Fogg – who, as the Director of the Tax Clinic at the Legal Services Center of Harvard Law School, agreed to lend his clinic’s name and assistance to an amicus brief that he and I filed in the Tax Court case of Guralnik v. Commissioner, 146 T.C. 230 (2016), arguing that the section 6330(d)(1) deadline to file a Tax Court Collection Due Process (CDP) petition is not jurisdictional and is subject to equitable tolling under the recent Supreme Court non-tax case law on jurisdiction and equitable tolling.  We lost that argument in the case by a vote of 17 judges to zero, which might have deterred Keith from ever making the argument again, but he persisted in lending the clinic’s name and students to many later cases in which the clinic  argued (either as counsel for taxpayers or as amicus) that the Tax Court filing deadlines for innocent spouse, CDP, deficiency, and whistleblower awards petitions are not jurisdictional and are subject to equitable tolling.  In addition to Boechler v. Commissioner, 967 F.3d 760 (8th Cir. 2020) (CDP), the Harvard clinic was involved in Organic Cannabis Foundation LLC v. Commissioner, 962 F.3d 1082 (9th Cir. 2020) (deficiency); Myers v. Commissioner, 928 F.3d 1025 (9th Cir. 2019) (whistleblower award); Nauflett v. Commissioner, 892 F.3d 649 (4th Cir. 2018) (innocent spouse); Cunningham v. Commissioner, 716 Fed. Appx. 182 (4th Cir. 2018) (CDP); Duggan v. Commissioner, 879 F.3d 1029 (9th Cir. 2018) (CDP); Matuszak v. Commissioner, 862 F.3d 192 (2d Cir. 2017) (innocent spouse); and Rubel v. Commissioner, 856 F.3d 301 (3d Cir. 2017) (innocent spouse).

Amy Feinberg – a student of Keith’s in the Tax Clinic who did oral argument to the 4th Cir. in Cunningham while a Harvard Law student, and then, while at Latham & Watkins, persuaded her firm to allow her to do the oral argument in the 8th Cir. in Boechler pro bono.  Amy also persuaded her firm to do the Supreme Court Boechler case pro bono.  Amy also helped draft the taxpayer’s Supreme Court filings.  In addition to Amy, Harvard Law Students Jeff Zink, now an associate with Covington and Burling in D.C., argued the Matuszak case before the Second Circuit and Allison Bray, now an associate with Kirkland and Ellis in San Francisco, argued the Nauflett case before the Fourth Circuit.  Numerous students at the Tax Clinic assisted in writing amicus briefs over the six years since the Tax Clinic began pursuing this issue.  Jonathan Blake and Nathan Raab worked on the amicus brief in Boechler following a long line of prior clinic students. 

Melissa Sherry – the Latham attorney who took on the Supreme Court Boechler case pro bono and did one of the most outstanding oral arguments I have ever heard and who did briefing in the Supreme Court case that improved on several of the arguments that Keith and I had first made in Guralnik.

Carolyn Flynn – a Latham attorney who helped write the Supreme Court briefs in Boechler.

Joseph DiRuzzo – who, at my suggestion, entered a pro bono appearance for the petitioner in Myers v. Commissioner, where Joe successfully argued that the whistleblower award filing deadline at section 7623(b)(4) is not jurisdictional and is subject to equitable tolling.  Myers created the Circuit split that caused the Supreme Court to grant review in Boechler, since there is no practical difference between the language of sections 6330(d)(1) and 7623(b)(4).

David Clark Thompson – who represented the taxpayer in Boechler in the Tax Court and 8th Cir. and had the wisdom to make the argument that the Harvard clinic had made in Duggan to the 9th Cir.

Elizabeth Maresca – Director of the tax clinic at Fordham, who decided to pursue the argument that the CDP petition filing deadline is not jurisdictional and is subject to equitable tolling in the factually-appealing case of Castillo v. Commissioner (currently pending in the 2d Cir., waiting the Boechler ruling) – a case much cited in the briefs in the Supreme Court in Boechler.

Nina Olson – who, as IRS National Taxpayer Advocate, argued that Congress should clarify that all Tax Court petition filing deadlines are not jurisdictional and are subject to equitable tolling.  Later, as the Director of the Center for Taxpayer Rights, Nina also lent her organization’s name to briefs drafted by Keith, me, and students in the Harvard clinic in Boechler.

Frank Agostino – who, acting pro bono, raised the Boechler argument in a late-filed CDP case apparently appealable to the D.C. Circuit, Amanasu Environment Crop. v. Commissioner, T.C. Docket No. 5192-20L, even before the Supreme Court granted cert. in Boechler.  Frank was hoping not only to benefit the taxpayer, but create a direct Circuit split with the 8th Cir. Opinion in Boechler over the section 6330(d)(1) filing deadline – on the assumption that the D.C. Circuit panel would feel compelled to follow a prior panel’s Myers opinion involving the whistleblower award filing deadline.  To this end, in April 2021, Frank also successfully made a motion to remove the case’s original small tax case designation.  However, the Tax Court deferred deciding the pending motion to dismiss in the case until after the Boechler opinion was issued.

Lavar Taylor and team at Skadden, Arps, Slate, Meagher & Flom LLP (Sam Auld, Peter Bruland, Shay Dvoretzky and Emily Kennedy) – who wrote excellent amicus briefs in support of Boechler.

CFC in Dixon Holds Improperly-Signed Timely Forms 1040-X Cannot Be Informal Refund Claims

We have reported before on a series of refund suits pending in cases brought by accountant John Castro on behalf of his clients.  The most recent post is on the recent Fed. Cir. opinion in Brown (on which Keith blogged here).  The Brown opinion actually came down before the opinion discussed in this post but is erroneously not acknowledged or followed in the CFC holding on the jurisdictional issue.  Mr. Castro’s latest opinion out of the Court of Federal Claims (CFC), issued on January 18, is in the case of Dixon v. United States, No. 20-1258T (Ct. Cl. 2022).  This is another taxpayer for whom Mr. Castro (as he did for many other taxpayers), without proper POA authorization, initially signed and filed amended returns claiming refunds, instead of properly having the clients sign.  In an earlier Dixon case, the CFC (as in all Castro cases) held that the signature requirement mandating that the taxpayer sign is statutory and not subject to waiver, so dismissed the case for Lack of Jurisdiction (LOJ). 

Once it became clear from the first Dixon case’s opinion that the client and not the representative must sign the amended return, Mr. Castro had Dixon sign copies of the amended returns and refiled them.  Since this was after the refund statute of limitations (SOL) had expired, he had to argue in this latest Dixon case that the earlier, improperly-signed claims were informal claims under the doctrine set out in United States v. Kales, 314 U.S. 186, 194 (1941) to which the properly-signed claims related back.  The latest Dixon opinion appears to be the first in which the informal claim doctrine has been litigated in one of Castro’s cases.  So, it is important that he win this because he has had other taxpayers go back and sign and file amended returns after the SOL expired.

Another recent loss in this group of cases occurred in Mills v. United States, No. 1:20-cv-00417 (Fed. Cl. 2021), blogged here. After realizing that the initial claims were not properly signed, Castro submitted a second set of amended returns electronically, but unfortunately at a time when the IRS was not accepting amended returns that way.  But Dixon’s properly-signed second set of refund claims apparently were filed by mail, not electronically, so Mills has no relevance, and the Dixon court must decide for the first time whether unsigned refund claims can constitute informal claims.

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The new Dixon case involves Department of Justice (DOJ) motions to dismiss under Rules of the Court of Federal Claims (RCFC) 12(b)(1) (lack of subject matter jurisdiction) and 6 (failure to state a claim on which relief can be granted), which are identical to the Federal Rules of Civil Procedure 12(b)(1) and (6).  

In the first issue (involving a refund sought of tax assessed by the IRS on certain additional income reported in the amended returns), the court finds a variance problem in that Dixon is trying to litigate an issue not mentioned in the initial amended returns.  Indeed, the court says Dixon seeks a refund of taxes paid after filing the first refund claims, so those taxes could not be the subject of that claim.  The court dismisses this first issue for lack of jurisdiction. 

That jurisdictional dismissal has to be wrong in light of Brown (decided on January 5, 2022), where the Federal Circuit held that the requirement to file an administrative claim is not jurisdictional.  How can there be a variance problem that is jurisdictional, when the court’s jurisdiction doesn’t even depend on a taxpayer having duly filed an administrative claim?  It is true that in the past, courts have treated variance as a jurisdictional defect, but that can no longer be true in light of Brown in the Federal Circuit. Curiously, Brown is nowhere mentioned in the opinion, though it was decided only days before Dixon.  The Dixon court issued its opinion likely in ignorance of the Brown opinion.

In the second issue (the net investment income tax), the issue was mentioned in both amended returns, so there is no variance problem.  This second issue is the most important in the case because it is the first time a CFC judge has written on whether improperly-signed amended returns can be considered informal claims under Kales to which the untimely perfecting claims relate back.  The court holds that improperly-signed returns are not informal claims — citing no other case for such holding.  Here’s language from the opinion:

Mr. Dixon’s unsigned returns cannot form the foundation of an informal claim before the IRS. The Internal Revenue Code bars a taxpayer from filing a suit for tax refund until a claim for refund has been “duly filed” with the IRS according to the regulations set out by the Secretary of Treasury. 26 U.S.C § 7422. These regulations expand on what it means for an administrative tax refund claim to be “duly filed.” Treasury Regulations require that tax refund claims before the IRS “must be verified by a written declaration that is made under the penalty of perjury.” 26 C.F.R. § 301.6402-2(b)(1). The regulation further mandates that a tax refund claim that does not comply with this requirement will not be considered “for any purpose as a claim for refund or credit.” Id. (emphasis added). The United States argues that, by incorporating the phrase “for any purpose,” the plain text of the regulation bars any unsigned tax refund claims from being considered for the purposes of the informal claim doctrine. The Court agrees.

After knocking out the claim signed by the representative as an informal claim based on the language of the regulation, the court then takes on the Supreme Court opinion in Kales:

Mr. Dixon relies on the Supreme Court’s decision in Kales in arguing that the unsigned amended tax returns qualify as valid informal claims.  Kales involved a taxpayer who submitted a timely informal letter, rather than the correct IRS form, to request a tax refund.  The taxpayer later filed an untimely amendment that complied with the regulation and remedied that error. Id. In describing the tenets of the informal claim doctrine, the Supreme Court stated that “a [timely] notice fairly advising the Commissioner of the nature of the taxpayer’s claim, which . . . does not comply with formal requirements of the statute and regulations, will nevertheless be treated as a claim,” if the “formal defects” are later remedied by another filing. Id. at 194. Mr. Dixon claims that because his unsigned amended tax returns provided the IRS with notice that he sought a tax refund, and because the amended tax returns laid out the legal and factual basis for that refund, his returns qualify as informal claims under Kales, though unsigned. (Pl.’s Resp. at 13–16). That particular deficiency, Mr. Dixon claims, was later remedied by submitting the signed amended tax returns in 2020. (Id.).

A more careful reading of the Supreme Court’s guidance in Kales undermines Mr. Dixon’s reliance on that case. Most importantly, the Court elaborated on the scope of the informal claim doctrine by emphasizing that valid informal claims are only those that “[have] not misled the [IRS] and [have been] accepted and treated” by the IRS as valid claims. Kales, 314 U.S. at 194 (emphasis added). Tax returns that are unsigned, and therefore not made under the penalty of perjury, can never be accepted and treated as valid claims by the IRS and, as such, they cannot constitute informal claims under Kales. To be legally valid, a claim must be “duly filed” with the IRS, “according to the regulations” established by the Secretary of Treasury. 26 U.S.C. § 7422(a)see also Clintwood Elkhorn Min. Co., 553 U.S. at 4 (2008) (to seek a tax refund “the taxpayer must comply with the tax refund scheme established in the [Internal Revenue] Code”). Those regulations state that any declaration that is not “verified” and is not “made under the penalties of perjury,” is not “duly filed.” Hall v. United States, 148 Fed. Cl. 371, 379 (2020) (addressing the requirements of Treas. Reg. § 301.6402-2(b)(1)). Because unsigned claims can never be deemed “duly filed” under Section 7422(a), the IRS would be prohibited from “accepting and treating as valid claims,” requests not made under the penalty of perjury. Sicanoff Vegetable Oil Corp. v. United States, 149 Ct. Cl. 278, 285 (1960) (when the IRS is “not permitted by law” to pay a claim, it cannot “enlarge [its] legal authority” by considering that claim.); see also Mobil Corp. v. United States, 52 Fed. Cl. 327, 337 (2002) (citing Finn v. United States, 123 U.S. 227 (1887)) (finding that the IRS cannot waive the requirements of § 7422 or its regulations because it cannot “require the Government to make a payment that legally it was not obligated to pay”).

Because the taxpayer signature requirement derives from statute, the IRS cannot waive those requirements. See Angelus Milling Co., 325 U.S. at 296 (1945) (finding that although IRS could waive regulatory requirements in reviewing informal claims, it cannot waive “statutory requirements”). In other words, unsigned tax returns present a more serious deficiency than garden-variety technical deficiencies that are normally protected under the informal claim doctrine. Barenfeld v. United States, 194 Ct. Cl. at 908–9 (1971); Wilson v. United States, No. 18-408, 2019 WL 988600, at *4 (Fed. Cl. Feb. 27, 2019).

Having gone back to look at both the Supreme Court and appellate court opinions in Kales, it is clear to me from the quote from the letter in the appellate opinion that a lawyer drafted the text of the letter that was held to be an informal claim.  The letter was termed a protest.  It is not clear from Kales whether the letter was signed by the taxpayer with a paragraph verifying the facts in the letter under penalties of perjury or whether it was instead signed by the taxpayer’s lawyer who at that time had held a POA authorizing him or her to sign refund claims on behalf of the taxpayer.  I can’t recall other informal refund claim cases I have read, but I am sure I have read many where a letter was considered an informal claim, and I somehow doubt that, even if those letters were signed by the taxpayers (as opposed to a POA who probably did not have authority to sign a refund claim), the letters all contained a jurat paragraph.  Somehow, I doubt that the letters held to constitute informal claims did contain jurats, which makes the Dixon court’s distinguishing of Kales surprising.

If followed in other CFC cases of Castro, this holding will kill all the other cases where he went back, after the SOL had expired, and had his clients properly sign new refund claims.

Dixon then argued that the claim filing requirement is not jurisdictional and is subject to waiver.  The court (not yet knowing about Brown), disagreed.  In Brown, the Fed. Cir. held that the signature and verification requirements relate to the requirement in IRC 7422(a) that a claim be “duly filed” and that these are not jurisdictional requirements to a refund suit.  I won’t quote all the Dixon court’s opinion holding the claim-filing requirement jurisdictional, since that jurisdictional holding is not consistent with the recent Federal Circuit precedent (Brown), nor does the holding contain a persuasive discussion of current Supreme Court case law.  I will quote the part in which, like the Tax Court in Guralnik v. Commissioner, 146 T.C. 230, 235-238 (2016) (en banc), the CFC distinguishes all the recent Supreme Court case law as not in the tax area, so ignorable. 

In discussing jurisdiction, the Dixon court wrote:

There is reason to believe that Section 7422(a) should be deemed jurisdictional. The cases cited by Mr. Dixon involve the Supreme Court’s review of administrative exhaustion requirements in modern administrative schemes, outside of the context of tax and revenue collection. To this end, so far, none of the statutes held to be non-jurisdictional under the Supreme Court’s administrative exhaustion jurisprudence implicate an administrative program with such a lengthy lineage in administrative claim requirements as tax and revenue collection. The Supreme Court’s treatment of administrative tax claims as jurisdictional far pre-dates the current codification of that rule at 26 U.S.C. § 7422(a)See Nichols v. United States, 74 U.S. 122, 129–30 (1869) (finding that public interest behind “prompt collection of the revenue” bars the Court of Claims from ruling on tax refund claims when the “alleged errors and mistakes” were not communicated to the tax collector). For over 100 years, the Court in addressing the predecessor to Section 7422(a) has held that “[n]o suit can be maintained for taxes illegally collected unless a claim therefor has been made” with the tax collector “within the time and in the manner pointed out by law [ ].” Kings County Savings Institution v. Blair, 116 U.S. 200, 205 (1886) (citing Cheatham v. United States, 92 U.S. 85 (1875)) (emphasis added).

The CFC in Dixon overstates the consistency of the Supreme Court’s opinions terming (often in dicta) the refund claim filing requirement of IRC 7422(a) or its predecessors jurisdictional.  In recent non-tax opinions, the Supreme Court has created a stare decisis exception to its current rule that claim-processing rules (including administrative exhaustion requirements) are generally no longer jurisdictional.  The stare decisis exception applies where, if writing on a clean slate, the Court would not currently hold the requirement jurisdictional, but a consistent line of Supreme Court opinion (generally over 100 years) has held the rule jurisdictional.

The Dixon court relies on a couple of 19th Century opinions for stare decisis.  (The opinion notes that the DOJ also cited a statement in United States v. Dalm, 494 U.S. 596 (1990) calling the filing requirement jurisdictional.) But, in Flora v. United States, 362 U.S. 145 (1960) (which the Dixon court does not mention), the Court stated:

The ancestry of the language of § 1346(a)(1) [(i.e., “any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws”)] is no more enlightening than is the legislative history of the 1921 provision. This language, which, as we have stated, appeared in substantially its present form in the 1921 amendment, was apparently taken from R.S. § 3226 (1878).  But § 3226 was not a jurisdictional statute at all; it simply specified that suits for recovery of taxes, penalties, or sums could not be maintained until after a claim for refund had been submitted to the Commissioner. 362 U.S. at p. 152 (emphasis added).  (At the end of this quoted material the Court added footnote 11 which stated: “The successor of R. S. § 3226 is I. R. C. (1954), § 7422 (a), 68A Stat. 876.”)

In the end, the Dixon court hedges its bets and holds that the dismissal with respect to the net investment income tax issue is either under RCFC 12(b)(1) or (6).  The court says the same thing as Brown, though, that, even if not jurisdictional, based on the Supreme Court’s 1945 dicta in Angelus Milling Co. v. Commissioner, 325 U.S. 293, 296 (1945), the signing requirement is statutory and can’t be waived.  The court writes:

Regardless, the Court need not determine this issue, given that Mr. Dixon’s claims fail even if, as he urges, the signature requirement was merely a claims-processing rule. If Section 7422(a) is viewed as a claims-processing rule, that only means that its requirements are subject to equitable exceptions. Bowles v. Russell, 551 U.S. 205, 213 (2007) (claims-processing rules are subject to equitable exceptions and jurisdictional limits are not). Importantly, Mr. Dixon has not established that equitable exceptions apply in this case. The only equitable exception indirectly relied upon by Mr. Dixon is the waiver exception. As the Court has already addressed, because the signature requirement is a statutory requirement, the IRS could not have waived this requirement. Therefore, even if the Court were to find the requirements of Section 7422(a) to be a claims-processing rule, because the waiver exception cannot apply, Mr. Dixon’s claim still should be dismissed for failure to state a claim upon which relief can be granted. RCFC 12(b)(6).

As in Brown, the Dixon court makes the error of holding that statutory claim-processing rules cannot be waived because dicta in the Angelus Milling case said so.  But that dicta was based on the general thinking in 1945 that any procedural requirement that Congress wrote into a statute in connection with a court case is jurisdictional.  That Angelus Milling dicta is no longer good law.  More recent Supreme Court cases make clear that anytime even a statutory rule is held to be a non-jurisdictional claim-processing rule, it is subject to waiver and forfeiture (though not necessarily estoppel or equitable tolling). Fort Bend Cnty. v. Davis, 139 S. Ct. 1843, 1849 (2019) (statutory requirement to file a predicate claim with the EEOC before district court suit was forfeited because noncompliance was raised too late in the case; “A claim-processing rule may be “mandatory” in the sense that a court must enforce the rule if a party “properly raise[s]” it. Eberhart v. United States, 546 U.S. 12, 19 (2005) (per curiam). But an objection based on a mandatory claim-processing rule may be forfeited “if the party asserting the rule waits too long to raise the point.” Id., at 15 (quoting Kontrick, 540 U.S., at 456).

The third issue in the case involves foreign tax credits with respect to the additional income reported that would only be due to Dixon if a certain entity was a partnership.  The IRS accepted the additional income (the first issue in the case) but rejected the foreign tax credits relating thereto.  The court holds against Dixon on this foreign tax credit issue on the merits (RCFC 12(b)(6)), though the court finds a variance issue with regard to some arguments made by Dixon in the CFC that were not made in the claims.  I am not sure how the court can get to this issue on the merits, since Castro signed the only timely claim, which the court held in the second issue, could not be considered an informal claim.

What a mess!

Trump Authorizes Mnuchin to Use Section 7508A to Extend Time to Pay Certain Employment Taxes Through End of Year

On August 8, President Trump issued a document entitled “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster.” Despite the impression of sloppy reporters in the non-tax press, the memorandum actually does not do anything yet.  In fact, the memorandum merely instructs Treasury Secretary Mnuchin to exercise his authority under section 7508A to extend certain tax deadlines for up to one year on account of Presidentially-declared disasters with respect to certain employees’ Social Security taxes.

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The operative part of the memorandum’s instructions read as follows:

Sec. 2.  Deferring Certain Payroll Tax Obligations.  The Secretary of the Treasury is hereby directed to use his authority pursuant to 26 U.S.C. 7508A to defer the withholding, deposit, and payment of the tax imposed by 26 U.S.C. 3101(a), and so much of the tax imposed by 26 U.S.C. 3201 as is attributable to the rate in effect under 26 U.S.C. 3101(a), on wages or compensation, as applicable, paid during the period of September 1, 2020, through December 31, 2020, subject to the following conditions:

(a)  The deferral shall be made available with respect to any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.

(b)  Amounts deferred pursuant to the implementation of this memorandum shall be deferred without any penalties, interest, additional amount, or addition to the tax.

As you can see, the President is asking Secretary Mnuchin essentially to provide an extension to pay for the compensation period from September 1 to December 31 of this year, but the instructions do not provide for a date by which those taxes must be paid.  That is being left to the IRS. 

Obviously, the statute prevents Secretary Mnuchin from providing for a deferral of more than one year.  However, the President is asking the Secretary to try to figure out a legal way that the taxes can simply be forgiven.  Section 4 of the memorandum states: “The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.”

The extensions will only apply to taxes imposed by section 3101(a) (and the equivalent portion of employment taxes imposed under the Railroad Retirement Act at section 3201).  Section 3101(a) imposes a 6.2 % Social Security tax on employees, which is withheld from their wages.  Thus, the extension does not apply to any amount of taxes imposed by section 3101(b) – the 1.45% Medicare taxes imposed on employees – or to any employment taxes normally imposed on employers under section 3301. 

Equivalent self-employment taxes under section 1401 are usually paid by the self-employed as part of their quarterly estimated tax payments.  Note that the extension will not apply to any portion of self-employment taxes.

Not to mislead anyone, in section 2302 of the CARES Act, Congress already extended, for the period from the date of enactment through the end of 2020, the times for (1) employers to pay the employer share of Social Security taxes and (2) self-employed taxpayers to pay 50% of self-employment taxes related to funding Social Security.  The deferred amounts are payable, instead, 50% on December 31, 2021 and 50% on December 31, 2022.

The IRS may also need to provide some detail as to how to apply the provision that the extension is only with respect to employees “the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period is generally less than $4,000, calculated on a pre-tax basis”.  I can see a whole host of complicated issues that the IRS and employers must face in interpreting the word “generally”.  For example, what if an employee gets a regular salary plus commissions, so that the employee’s compensation varies considerably each pay period?  If the IRS instructs to take an average of pay, what will be the testing period for the average?  Year to date during 2020 (when many employees had their incomes plunge starting in March)?  Or will it be the average earnings for a one-year period ending in February 29, 2020, before the country largely shut down?  I am sure others can come up with many other interpretive issues. 

Then, will employers even be able to figure out who are the employees to whom the extensions applies?  Employers don’t currently have software to deal with compliance with any formula that Secretary Mnuchin will come up with.  And presumably, Secretary Mnuchin needs to figure this all out and issue an IRS Notice sufficiently prior to September 1 so that employer computers can be reprogrammed (if they can be) to do appropriate paycheck withholding. 

I would not be surprised if it takes employers months to figure out the correct amount of the reduced employment tax that they are required to withhold and pay over to the IRS in each pay period. However, the memorandum contemplates that the IRS Notice will provide that nothing be withheld of the 6.2% taxes during the deferral period.  The memorandum contemplates not just an extension for the employers to pay the tax, but deferral of “withholding”.

Assuming that employers are not allowed to withhold these taxes during the deferral period, how are employers later going to collect these taxes so that they can be paid over sometime in 2021?  The Notice will have to deal with this, though the President has indicated he doesn’t believe that any employer will eventually have to pay over these taxes.  Politically, he may be right.  But, what if he is wrong because Congress doesn’t forgive the taxes – worrying about the financial stability of the Social Security trust fund?

One former IRS employee (who will remain nameless) speculated to me that, perhaps, the amounts to make the employer whole (so that funds could be paid over) could be withheld from the first paycheck of 2021.  I don’t know if that is a good idea or even possible for all employees.  For example, assume an employee worked for all of the last four months of 2020.  She was in 2020 and will in 2021 be paid $3,500 per bi-weekly pay period.  The deferral would be $217 per pay period (6.2% of $3,500).  The deferral would apply to approximately 9 pay periods, so the total deferral would be $1,953 (9 x $217).  That first paycheck of 2021 will have to reflect current income tax withholding (federal and state) and 7.65% current employee employment tax obligations.  Current 7.65% withholding would be $268.  State and local income tax withholding could eat up more than the rest of the $3,500 gross pay.

And, of course, what happens when an employee leaves between September 1, 2020 and December 31, 2020?  Say, an employee left in October and her last paycheck was October 20?  There won’t be any paychecks in 2021.  Can the employer take the money out of her last paycheck, anyway, even if that paycheck is during the extension period?

Finally, remember that failure to pay over the right amount of employment taxes could result in very large failure to deposit and failure to pay penalties, if the employers are wrong in their calculations.

Eighth Circuit Holds Tax Court CDP Filing Deadline Jurisdictional Under SCOTUS Case Law

For those interested, the DOJ Tax Division is currently advertising for experienced attorneys in the Civil Trial Sections in Washington, DC.  The job posting can be found on the Department of Justice’s Website at https://www.justice.gov/legal-careers/job/trial-attorney-451 and on USAJobs at https://www.usajobs.gov/GetJob/ViewDetails/573997200. Keith.

In Boechler, P.C. v. Commissioner, 2020 U.S. App. LEXIS 23306, on July 24, the Eighth Circuit aligned itself with the Ninth Circuit in Duggan v. Commissioner, 879 F.3d 1029 (9th Cir. 2018), and held that, even considering recent Supreme Court case law that generally treats filing deadlines as not jurisdictional, the Collection Due Process (CDP) Tax Court filing deadline at section 6330(d)(1) is jurisdictional.  The majority predicated its holding on an exception that Congress may override the general rule by making a clear statement in the statute that Congress wants the filing deadline to be jurisdictional.  In ruling that Congress had made a clear enough statement in the CDP provision, the Boechler majority rejected the D.C. Circuit’s opinion in Myers v. Commissioner, 928 F.3d 1025 (D.C. Cir. 2019), holding that the similarly-worded Tax Court filing deadline at section 7623(b)(4) for whistleblower award actions is not jurisdictional.  A concurring judge in Boechler said she felt bound to agree with the majority because of prior Eighth Circuit precedent, but if she were presented with the issue without that precedent, she would hold the filing deadline not jurisdictional.

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The facts of Boechler are simple:  The IRS mailed a CDP notice of determination to the taxpayer by certified mail at its last known address.  The taxpayer received the notice three days later, but did not mail a petition to the Tax Court until 31 days after the notice was mailed.  (Having spoken with Boechler’s lawyer who prepared and mailed the petition, I was told that he did not see the notice until the date he mailed the petition.  Unlike in many recent litigated cases we have discussed on PT, therefore, you can’t blame the lawyer here.)

In the Tax Court, Boechler argued that Due Process required that the 30 days to file a petition must be counted from the date of the notice’s receipt, not the date of its mailing.  In the alternative, Boechler argued that, under recent Supreme Court case law, the filing deadline is not jurisdictional, but is subject to equitable tolling.  Boechler did not set out any facts supporting equitable tolling in its case, but the Tax Court would not have cared if Boechler had, anyway.  In an unpublished order , the Tax Court, citing its opinion in Guralnik v. Commissioner, 146 T.C. 230, 237-238 (2016), held that the filing deadline is jurisdictional and thus is not subject to equitable tolling.  Jurisdictional filing deadlines can never be equitably tolled.  The order also found no Due Process violation, noting that “the method reflects the standard and consistent way that various periods provided for under the Internal Revenue Code and other Federal statutes are calculated.”

There were two prior opinions of the Eighth Circuit that had stated that the CDP filing deadline is jurisdictional, but neither of those opinions discussed recent Supreme Court case law or Due Process. 

The first Eighth Circuit opinion, Tschida v. Commissioner, 57 Fed. Appx. 715 (8th Cir. 2003), was decided before the Supreme Court in Kontrick v. Ryan, 540 U.S. 443 (2004), made clear that filing deadlines are generally no longer to be considered jurisdictional.  The Tschida court wrote: “the untimely filing deprived the tax court of jurisdiction”.  While Tschida is on all fours with Boechler factually, it was not a published, precedential opinion.

The second Eighth Circuit opinion was precedential, Hauptman v. Commissioner, 831 F.3d 950 (8th Cir. 2016).  In that case, a taxpayer timely filed a Tax Court CDP petition, and, during the case, Appeals issued a Supplemental Notice of determination.  The Tax Court upheld the Supplemental Notice.  On appeal, the taxpayer argued that the Tax Court lacked jurisdiction to consider the Supplemental Notice.  The parties did not brief the issue of whether the CDP filing deadline is jurisdictional, but in some prefatory remarks before reaching its holding that the Tax Court had jurisdiction to consider the Supplemental Notice, the Eighth Circuit stated that there were only two jurisdictional requirements for a Tax Court CDP suit: issuance of a notice of determination and timely filing.  For that timely filing requirement, the Eighth Circuit inserted a “see” cite to the Seventh Circuit opinion in Gray v. Commissioner, 723 F.3d 790 (7th Cir. 2013)

In Gray, a taxpayer filed late original returns, which the IRS accepted, but she did not pay the taxes shown due on the returns (or a late-filing penalty later imposed by the IRS).  She had a CDP hearing, after which the IRS issued a notice of determination.  She then filed two Tax Court petitions – both after the 30-day period in section 6330(d)(1) had expired.  The Tax Court dismissed the petitions for lack of jurisdiction.  On appeal, pro se, she argued that the petitions were timely under the 90-day period applicable to deficiency petitions at section 6213(a).  The parties did not brief whether the filing deadlines at sections 6213(a) or 6330(d)(1) are jurisdictional.  But, the Seventh Circuit, in the course of getting to its ruling that the 30-day period applied, cited a couple of Tax Court opinions holding that the CDP filing deadline is jurisdictional.  The Gray court did not discuss the recent Supreme Court case law (as, neither did the Tax Court in the cited pre-Guralnik opinions).

In Boechler, the majority of the panel first held that it was not bound by the prior Eighth Circuit opinions. The court wrote that “the jurisdictional test laid out in Hauptman was obiter dicta addressing an issue not before the court”.  Slip op. at 4.

At this point, the Eighth Circuit could have written that it need not decide whether the CDP filing deadline is jurisdictional because Boechler had not even alleged any facts showing its entitlement to equitable tolling.  That’s the approach the Fourth Circuit took in Cunningham v. Commissioner, 716 Fed. Appx. 182 (4th Cir. 2018).  But, the panel chose to decide the issue of whether the filing deadline is jurisdictional in light of the recent Supreme Court case law.  The court wrote:

We find the Ninth Circuit’s analysis [in Duggan] persuasive. The statutory text of § 6330(d)(1) is a rare instance where Congress clearly expressed its intent to make the filing deadline jurisdictional. The provision states: The person may, within 30 days of a 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). 26 U.S.C. § 6330(d)(1). The parenthetical “(and the Tax Court shall have jurisdiction with respect to such matter)” is clearly jurisdictional and renders the remainder of the sentence jurisdictional. See Fort Bend Cty. v. Davis, 139 S. Ct. 1843, 1849 (2019).

A plain reading demonstrates that the phrase “such matter” refers to a petition to the tax court that: (1) arises from “a determination under this section” and (2) was filed “within 30 days” of that determination. See Myers, 928 F.3d at 1039 (Henderson, J., dissenting) (reaching the same conclusion when analyzing the identically worded parenthetical in § 7623(b)(4)); see also 26 U.S.C. § 6330(e)(1) (“The Tax Court shall have no jurisdiction under this paragraph to enjoin any action or proceeding unless a timely appeal has been filed under subsection (d)(1). . .”). Unlike other statutory provisions that have been found to be non-jurisdictional by the Supreme Court, § 6330(d)(1) speaks “in jurisdictional terms.” Musacchio, 136 S. Ct. at 717 (finding 18 U.S.C. § 3282(a) non-jurisdictional). The use of “such matter” “plainly show[s] that Congress imbued a procedural bar with jurisdictional consequences.” Kwai Fun Wong, 575 U.S. at 410. This phrase provides the link between the 30-day filing deadline and the grant of jurisdiction to the tax court that other statutory provisions lack. While there might be alternative ways that Congress could have stated the jurisdictional nature of the statute more plainly, it has spoken clearly enough to establish that § 6330(d)(1)’s 30-day filing deadline is jurisdictional.

Slip op. at 6-7 (footnote and some citations omitted; emphasis in original).  The court rejected the Myers’ majority holding that similar language in the whistleblower award provision of section 7623(b)(4), while clearly predicating Tax Court jurisdiction on a notice of determination, was not sufficiently clear also to refer, with the words “such matter”, to the filing deadline.

As to Boechler’s Due Process argument, the court stated that both Due Process and Equal Protection arguments in this case must be analyzed under a rational basis standard.  The court held that it was rational for Congress to make the 30-day period begin on the date of mailing:

[C]alculating the filing deadline from the date of determination streamlines and simplifies the complex undertaking of enforcing the tax code. If the IRS were required to wait 30 days from the date that each individual received notice, it would be unable to levy at the statutory, uniform time. Calculating from the date of determination guards against taxpayers refusing to accept delivery of the notice and promotes efficient tax enforcement by ensuring a reasonable and workable timeframe and deadline.

Slip op. at 8.

Concurring Judge Kelly argued that the panel was wrong not to follow Hauptman, contending that while the issue of whether the filing deadline is jurisdictional was not briefed in Hauptman, the statement therein that the filing deadline is jurisdictional was necessary to the ultimate holding that the Tax Court had jurisdiction to consider the Supplemental Notice and so was binding on the current panel.

Judge Kelly indicated that, had she not felt bound by the holding in Hauptman, she would have come out differently with the majority on the nature of the filing deadline.  She wrote:

As the court notes, deeming the 30-day filing deadline in 26 U.S.C. § 6330(d)(1) jurisdictional is an unusual departure from the ordinary rule that filing deadlines are “quintessential claim-processing rules.” See Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 435 (2011). This may have “drastic” consequences for litigants, id., and I am concerned the burden may fall disproportionately on low-income taxpayers, as the amicus [the Tax Clinic at the Legal Services Center of Harvard Law School] suggests. I am not convinced the statute contains a sufficiently clear statement to justify this result. See Myers v. Comm’r, 928 F.3d 1025, 1036 (D.C. Cir. 2019) (holding that the “nearly identical” filing deadline in 26 U.S.C. § 7623(b)(4) is not jurisdictional). But in light of our long-standing precedent, I concur in the court’s judgment.

Slip op. at 10.

Observations

Nine appellate judges have now considered the filing deadline language in the Tax Court’s CDP and whistleblower award jurisdictions (in Duggan, Myers, and Boechler).  Of those nine, six have held that the filing deadlines should be jurisdictional and three have held the deadlines should not be (at least, if writing on a blank slate).  Thus, one should not be embarrassed to continue litigating this issue. 

In fact, the issue is currently before another Circuit – the Second Circuit, in a case named Castillo v. Commissioner, Second Circuit Docket No. 20-1635.  The case was filed in the Tax Court by the tax clinic at Fordham Law School headed by Prof. Elizabeth Maresca.  The clinic’s client never received a CDP notice of determination that the IRS had mailed to the client’s last known address.  USPS records state that the notice is still “in transit”.  Several months after the notice was sent, Elizabeth saw an IRS transcript indicating that such a notice had been issued.  Within 30 days after seeing the transcript, the clinic filed a Tax Court petition.  In response to a motion to dismiss, the clinic argued (1) that the filing deadline is not jurisdictional and should be equitably tolled under the facts of the case, and (2) that the Tax Court was wrong in Weber v. Commissioner, 122 T.C. 258 (2004), to have imported into its CDP jurisdiction case law from its deficiency jurisdiction holding that a notice of deficiency mailed to the taxpayer’s last known address starts the filing period, even if the notice is never received.  The Tax Clinic at the Legal Services Center of Harvard Law School has filed an amicus brief  in Castillo limited to making the second (anti-Weber) argument.  Ms. Castillo’s opening brief is due October 22.  An amicus brief from some other party arguing that the filing deadline is not jurisdictional and is subject to equitable tolling is also expected.

Ninth Circuit Holds the Deficiency Petition Filing Deadline Still Jurisdictional

The Tax Court and every Circuit court has long held the deadline to file a Tax Court deficiency petition at section 6213(a) to be a jurisdictional condition of the suit.  Of course, jurisdictional deadlines are never subject to equitable tolling, waiver, estoppel, or forfeiture.  But, nearly every court opinion so holding had been issued before the Supreme Court changed the rules in 2004 making filing deadlines now almost never jurisdictional.

In 2016, a panel of the Seventh Circuit, sua sponte, at oral argument, questioned whether the section 6213(a) filing deadline is still jurisdictional under the recent Supreme Court case law.  In Tilden v. Commissioner, 846 F.3d 882 (7th Cir. 2017), on which we blogged here, in spite of the Tax Court’s dismissing the petition for lack of jurisdiction as untimely, on appeal, the IRS and taxpayer both agreed that the petition was timely under section 7502.  The panel wondered why the IRS was not waiving any untimeliness argument if the filing deadline isn’t still jurisdictional.  However, after some post-argument supplemental briefing on the issue of whether the filing deadline is still jurisdictional, the panel ruled that it is. Id. at 886-887.  (The panel went on to rule the filing timely.)

No other Circuit had since addressed in a published opinion whether the deficiency filing deadline is still jurisdictional under recent Supreme Court case law.  (Though, in an unpublished last known address case, where the parties did not brief the issue, the Third Circuit last year stated that the filing deadline still jurisdictional under recent Supreme Court case law.  Garrett v. Commissioner, 798 Fed. Appx. 731, 733.)  That changed on June 18, 2020, when the Ninth Circuit issued its opinion in Organic Cannabis Foundation v. Commissioner, ___________, in which it affirmed the Tax Court’s dismissal of two deficiency petitions of California marijuana dispensaries.  The Ninth Circuit, aligning with the Seventh Circuit in Tilden, held that untimely petitions should be dismissed for lack of jurisdiction, even under current Supreme Court case law. 

As will be discussed below, the fact pattern in Organic Cannabis paralleled that in the CDP case of Guralnik v. Commissioner, 146 T.C.230 (2016) – an opinion that was never appealed.  Organic Cannabis adopts and expands upon the Tax Court’s additional analysis in Guralnik of what consequences ensue when the Tax Court Clerk’s Office is inaccessible for filing and what makes the Clerk’s Office inaccessible.

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Organic Cannabis Facts

Both Organic Cannabis Foundation LLC and its sister company, Northern California Small Business Assistants, Inc., ran California marijuana dispensaries.  On the same date, the IRS issued separate notices of deficiency to the two taxpayers disallowing, under section 280E, all their deductions.  (For a Tax Court opinion involving the latter company’s taxes for a different tax year and where the application of section 280E was upheld, see Northern California Small Business Assistants, Inc. v. Commissioner, 153 T.C. 65 (2019).) 

A single law firm represented both taxpayers.  That law firm sent the petitions jointly in a single envelope by FedEx on the day before the petitions were due.  Like the taxpayer in Guralnik, the firm used the FedEx First Overnight Service, which, at the time (as opposed to a few weeks later), was not listed by the IRS as an approved private delivery service under section 7502(f).  First Overnight differs from the previously-approved Standard Overnight and Priority Overnight FedEx services only in promising the earliest possible delivery.  Thus, even if First Overnight was not an approved service, the petitions still should have gotten to the Tax Court Clerk’s Office on the last date to file.

But, there was a problem.  For some reason, the FedEx driver didn’t deliver the envelope on the last date to file, but delivered it a day later.  A secretary in the law firm’s office, concerned that she had not received delivery confirmation from FedEx, called FedEx and learned of the non-delivery mid-day on the last date to file.  FedEx told her something like that the driver couldn’t get through to the Clerk’s Office because of construction or police activity nearby.  Unwisely, the secretary did not think to mail out new petitions that afternoon or evening, say, by certified mail.  There would have been no Ninth Circuit opinion had she done so.

The IRS filed answers in both cases.  Neither answer raised any issue of untimely filing.  About a year later, the IRS moved to dismiss both cases for lack of jurisdiction as having been late filed.  When the taxpayers then went back to FedEx for the driver’s written explanation of what had gone wrong, FedEx told the taxpayers that it had deleted all delivery information, which it did not keep for that long a period.

Tax Court Orders

In responses to the motions to dismiss, the taxpayers argued that the petitions were timely filed because FedEx First Overnight should be deemed to be the same service as FedEx Standard Overnight or Priority Overnight, just with a faster delivery feature.  In Guralnik, the Tax Court had rejected this very argument, and it did so in the two unpublished orders in which it dismissed the taxpayers’ petitions for lack of jurisdiction as being untimely, here and here.

The taxpayers also argued that the Clerk’s Office was not accessible at the time the FedEx driver arrived, citing Guralnik, so that the last date to file should be moved to the following day, making the petitions timely.  In Guralnik, the last date to file turned out to be a day on which the Clerk’s Office was closed all day due to a snowstorm.  The Guralnik court borrowed from FRCP 6 and held that when its Clerk’s Office is inaccessible, the last date to file is moved to the next day when the Clerk’s Office is open.  In the two taxpayers’ cases, though, the Tax Court distinguished Guralnik as follows: “Unlike the snow emergency closing in Guralnik, here, the Court’s Clerk’s office was open during its normal business hours and was not inaccessible the entire day due to inclement weather, government closings, or other reasons.”

Finally, the taxpayers had contended that the notices of deficiency were not mailed to the taxpayer’s last known addresses, citing discrepancies in the address of one (omission of a P.O. Box, though the box number was shown as part of the 9-digit ZIP Code) and a wrong digit on the Form 3877 proving mailing of the other.  The Tax Court said it need not determine whether the deficiency notices were sent to the last known addresses, since the taxpayers clearly got the notices 78 days before the filing date, which was enough to make the notices valid under Tax Court precedent, even if they were not sent to the last known addresses.

Ninth Circuit Holdings

On appeal, the taxpayers made the same arguments (except the taxpayers abandoned the Form 3877 argument).  The taxpayers also added the argument that the filing deadline is no longer jurisdictional and is subject to forfeiture, waiver, and equitable tolling.  The taxpayers argued that the IRS had waived or forfeited the right to complain about late filing by waiting too long to raise the issue – i.e., at a time when FedEx had deleted the driver’s notes concerning what had happened. 

In the Ninth Circuit, the Harvard clinic filed amicus briefs supporting the taxpayers only in the arguments that the filing deadline is no longer jurisdictional and is subject to forfeiture, waiver, and equitable tolling.

The Ninth Circuit began its opinion stating, “This unhappy case presents a cautionary tale about the need for lawyers to ensure that they have done exactly what is statutorily required to invoke a court’s jurisdiction.”  Slip op. at 4. 

In its 28-page opinion (of which I give only a thumbnail sketch here), the Ninth Circuit first accepted the Tax Court’s Guralnik adoption of FRCP 6 – which the Ninth Circuit was probably compelled to do, since the Tax Court, under section 7453, is entitled to set up its own rules, and its rules (i.e., Rule 1) allow it to borrow FRCP rules in the absence of a Tax Court rule directly on point. 

The Ninth Circuit acknowledged that case law under FRCP 6 did not limit the word “inaccessible” only to the situation where the Clerk’s Office was closed for the day – citing the inaccessibility holding of several appellate courts making clear that, even if a Clerk’s Office is technically open, it is still “inaccessible” if it would only be possible to access the office through “heroic” measures.  See, e.g., U.S. Leather, Inc. v. H&W P’ship, 60 F.3d 222, 226 (5th Cir. 1995) (where “ice storm . . . temporarily knocks out an area’s power and telephone service and makes travelling dangerous, difficult or impossible,” clerk’s office, even though open, was rendered “inaccessible to those in the area near the courthouse”), abrogated on other grounds by Kontrick v. Ryan, 540 U.S. 443 (2004).  The court held that,

for non-electronic filings (such as those at issue here), a clerk’s office is “inaccessible” on the “last day” of a filing period only if the office cannot practicably be accessed for delivery of documents during a sufficient period of time up to and including the point at which “the clerk’s office is scheduled to close.” Fed. R. Civ. P. 6(a)(3), (4)(B). Because, as the Tax Court noted, Appellants presented no evidence to show that the clerk’s office could not be accessed during the substantial remaining portion of the day after FedEx’s unsuccessful earlier delivery attempt, the extension in Rule 6(a)(3) did not apply.

Slip op. at 14-15. 

Of course, it is hard to criticize the taxpayers for lack of proof on how long the obstruction to the Clerk’s Office lasted, since, by the time anyone asked about it, FedEx had no evidence of what happened in this case or to other drivers perhaps attempting to deliver envelopes to the Tax Court later in the day.

Next, agreeing with the Tax Court, the Ninth Circuit held that the FedEx First Overnight service was a different service from the other two approved FedEx services, so was not yet an approved delivery service under section 7502(f) on the date of its use. 

As to Organic Cannabis’s complaint that its notice was not mailed to its last known address because the address was lacking “P.O. Box 5286”, the Ninth Circuit affirmed the Tax Court, but on different reasoning.  The Tax Court held that actual receipt of the notice with 78 days left to file was good enough to make the notice valid, even if the notice might not have been mailed to the last known address.  Apparently concerned because the taxpayer had pointed out that the Ninth Circuit had never held an incorrectly-addressed notice to be valid when the taxpayer did not timely file that Tax Court petition, the Ninth Circuit decided to hold that the notice was indeed sent to the taxpayer’s last known address.  The panel observed that the first 5 digits of the 9-digit ZIP Code were not only the ZIP Code of the post office, but was only used for post office boxes at that office.  The panel observed that the last 4 digits of the 9-digit ZIP Code showed the P.O. Box number.  Thus, in this case, the ZIP Code alone could constitute the last known address.  Query if this means that any 9-digit ZIP Code that only relates to a single location (e.g., an individual’s apartment number) alone can constitute a last known address if the street address, city, and state are all omitted from the IRS address used?

Finally, the Ninth Circuit faced the question of whether the filing deadline was still jurisdictional.  The DOJ asked the court not to rule on the issue, since it had not been properly raised below.  However, the Ninth Circuit exercised its discretion to consider this issue, since it was purely a question of law, “[a]nd the issue has been well briefed by both sides, including with the helpful participation of amicus curiae from a law school clinic.”  Slip op. at 19 n.6.

Readers of PT know from too numerous posts that current Supreme Court case law begins with the general rule that filing deadlines are no longer jurisdictional.  The two exceptions to the rule are (1) if Congress made a clear statement in the statute that it wanted the filing deadline to be jurisdictional, and (2) a stare decisis exception to a long line of Supreme Court case law holding the deadline to be jurisdictional.

The Ninth Circuit found three reasons why the deadline should be still treated as jurisdictional. 

First, in the fourth sentence of section 6213(a), the Tax Court is also awarded injunctive jurisdiction to enforce a stay on collection after a notice of deficiency is issued, but only in the case of a petition that is “timely filed”.  The Ninth Circuit apparently assumed that a timely filing can’t occur through equitable tolling, forfeiture, or waiver, so said that, if the injunctive jurisdiction was one limited to timely filed petitions, then the regular deficiency jurisdiction must also be limited to timely filed petitions.  (I think that a non sequitur, but who am I?)  The Ninth Circuit adopted the reasoning of Tilden that the appearance of the word “jurisdiction” in the fourth sentence in section 6213(a) (giving the Tax Court injunctive jurisdiction only in the case of timely filed petitions) meant that the filing deadline in the first sentence – a sentence that does not contain the word “jurisdiction” – must also be jurisdictional.  The Ninth Circuit also argued that accepting the taxpayers’ arguments would cause discontinuities in the periods in which the IRS was prohibited from assessment if the Tax Court could later accept a petition under equitable tolling.  We addressed this issue in the Harvard clinic amicus brief, arguing that there was no discontinuity, since the word “timely filed” must necessarily include filings made under statutory extensions (such as those allowed by sections 7502, 7508, and 7508A), and we saw no reason why equitable exceptions could not also be considered in whether a Tax Court petition had been timely filed.

Second, the Ninth Circuit raised a problem with section 7459(d) if the filing deadline is not jurisdictional.  Tilden had not discussed this section.  Section 7459(d) provides that dismissals from the Tax Court in deficiency cases uphold the deficiency on the merits, except in cases where the dismissal is for lack of jurisdiction.  The Ninth Circuit noted the long-standing belief of the courts (which it imputed to Congress) that the jurisdictional dismissal exception allowed a person who had filed a late Tax Court petition to later pay and sue for a refund, without having a res judicata issue of a merits finding from the prior Tax Court dismissal.  The Ninth Circuit did not want to undermine that judicial understanding, though I would note that the exception for jurisdictional dismissals was added by the Revenue Act of 1928, and Congress nowhere explained why the jurisdictional exception was being adopted.  Dismissals can be for lack of jurisdiction on ground other than untimeliness – e.g., a petition (1) filed challenging the validity of the notice of deficiency, (2) filed by the wrong taxpayer, or (3) filed by the right taxpayer, but who lost corporate capacity or who filed during a bankruptcy stay.

Third, the Ninth Circuit noted the long-standing judicial interpretations of section 6213(a)’s filing deadline being jurisdictional.  The Ninth Circuit wrote,

As noted earlier, the circuits have uniformly adopted a jurisdictional reading of § 6213(a) or its predecessor since at least 1928. See supra at 20. Congress presumptively “‘legislates against the backdrop of existing law,’” Parker Drilling Mgmt. Servs., Ltd. v. Newton, 139 S. Ct. 1881, 1890 (2019) (citation omitted), and despite multiple amendments to the Code (including two substantial overhauls in 1954 and 1986), Congress has never seen fit to disturb this long-settled understanding of § 6213(a). Cf. Fort Bend County v. Davis, 139 S. Ct. 1843, 1849 (2019) (“[T]he Court has stated it would treat a requirement as jurisdictional when a long line of Supreme Court decisions left undisturbed by Congress attached a jurisdictional label to the prescription.” (cleaned up)).

Slip op. at 25-26.  In response, I would point out (as the Harvard clinic told the court) that the Supreme Court has never ruled one way or the other on whether the deficiency filing deadline is jurisdictional and has 7 times (most recently in the above quote from Fort Bend) stated that the stare decisis exception from the current treatment of claims processing rules (including filing deadlines) as not jurisdictional only applies to a long line of Supreme Court opinions.  Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 173-174 (2010) (Ginsburg, J, concurring, joined by Stevens and Breyer, JJ.) (“[I]n Bowles and John R. Sand & Gravel Co. . . . we relied on longstanding decisions of this Court typing the relevant prescriptions ‘jurisdictional.’  Amicus cites well over 200 opinions that characterize § 411(a) as jurisdictional, but not one is from this Court. . . .”; emphasis in original; citations omitted).  All the opinions on which the Ninth Circuit relies are opinions of lower courts.  Sigh.

Finally, in prior posts, I have mentioned the CDP case dismissed for late filing for lack of jurisdiction that is before the Eighth Circuit, Boechler, P.C. v. Commissioner, Eighth Circuit Docket No. 19-2003.  In that case, the parties are litigating whether the CDP Tax Court filing deadline at section 6330(d) is still jurisdictional and not subject to equitable tolling.  Oral argument occurred in Boechler the day before the Ninth Circuit ruled in Organic Cannabis. The day Organic Cannabis was issued, the DOJ immediately brought the opinion to the attention of the Eighth Circuit through an FRAP 28(j) letter.

Federal Circuit Panel Calls For Reconsidering the Court’s Precedent Holding Refund Claim Filing and Timing Requirements Jurisdictional to a Refund Suit

In posts too numerous to cite, I have been calling for the courts to reexamine their prior precedents calling many tax filing deadlines and administrative exhaustion requirements jurisdictional.  In non-tax opinions issued by the Supreme Court since 2004, the Court has changed its precedent and held that “claims processing rules” that merely move litigation along are now almost never jurisdictional.  See, e,g. United States v. Wong, 575 U.S. 402 (2015) (Federal Tort Claims Act suit filing deadlines in agency and courts are not jurisdictional and are subject to equitable tolling); Fort Bend County v. Davis, 139 S. Ct. 1843 (2019) (Title VII charge filing requirement is not jurisdictional) (see here for my thoughts on the implications of Fort Bend to the tax world).  Now, a panel of the Federal Circuit in a pro se tax protester case, Walby v. United States, 2020 U.S. App. LEXIS 13711 (Apr. 29, 2020), has joined a panel of the Seventh Circuit in Gillepsie v. United States, 670 F. App’x 393, 394–95 (7th Cir. 2016), in questioning their Circuit’s precedent holding that the administrative tax refund claim filing requirement at section 7422(a) is a jurisdictional requirement to the brining of a refund suit.  Further, the Federal Circuit panel in the Walby opinion stated it believes that the filing deadlines for tax refund administrative claims at section 6511(a) are no longer jurisdictional, also calling for overturning its Circuit’s precedent.

It will take an en banc Federal Circuit opinion to overrule the Circuit’s prior precedents, so the panels’ opinion in Walby doesn’t change that court’s precedents, yet.  But, it certainly makes it likely that the issues will reach an en banc panel soon.

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What is perhaps most surprising about the Walby panel’s statements is that the opinion below did not raise these concerns about recent Supreme Court opinions, but simply followed the Federal Circuit precedents holding that sections 6511(a)’s and 7422(a)’s requirements are jurisdictional.  Further, the DOJ brief in Walby in the Federal Circuit did not discuss the potential impact of the recent Supreme Court case law on this question, but merely cited prior Federal Circuit precedent.  And the pro se taxpayer, of course, did not complain about the Circuit precedents.  So, the panel on its own chose to research these issues and make its statement in a published opinion.

Here is what the Federal Circuit panel wrote in Walby on these issues:

In Walby’s case, her 2014 claims were deemed paid on April 15, 2015 because withheld income taxes are deemed to have been paid on April 15th of the following year. I.R.C. § 6513(b). To be timely, her administrative refund claim should have been filed with the IRS by April 15, 2017. But Walby did not file her refund claim until December 22, 2017. Walby’s 2014 refund claim was, therefore, untimely and the Claims Court properly dismissed that claim.

There is one aspect of the court’s conclusion regarding this claim, however, that warrants additional examination. The Claims Court concluded that, because Walby’s 2014 administrative refund claim was untimely, pursuant to 26 U.S.C. § 7422(a), it lacked subject matter jurisdiction over that claim. Although this conclusion is correct under our existing case law, see, e.g.Stephens v. United States, 884 F.3d 1151, 1156 (Fed. Cir. 2018), it may be time to reexamine that case law in light of the Supreme Court’s clarification that so-called “statutory standing” defects — i.e., whether a party can sue under a given statute — do not implicate a court’s subject matter jurisdiction. Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 n.4 (2014)see also Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225, 1235 (Fed. Cir. 2019) (recognizing that, following Lexmark, it is incorrect to classify “so-called” statutory-standing defects as jurisdictional).

The Tucker Act grants the Claims Court jurisdiction to render judgment “upon any claim against the United States founded either upon the Constitution, or any Act of Congress . . . in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1). Additionally, 28 U.S.C. § 1346(a) provides that the Claims Court shall have original jurisdiction (concurrent with the district courts) of “[a]ny civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected.” As such, Walby’s failure to meet the § 7422(a) statutory requirement of a timely administrative claim for her 2014 tax claim would not seem to implicate the Claims Court’s subject matter jurisdiction; rather, it appears to be a simple failure to meet the statutory precondition to maintain a suit against the government with respect to those taxes.

The Supreme Court has not addressed § 7422(a) following Lexmark. We note, however, that the Court’s most recent discussion of § 7422(a) does not describe it as “jurisdictional.” See Clintwood Elkhorn Mining Co., 553 U.S. 1 at 4–5, 11–12. And, although our court has continued to refer to this statute as jurisdictional following Lexmark, we have not yet addressed the implications of that case and the many Supreme Court cases applying it.2

In view of the Supreme Court’s guidance in Lexmark, it may be improper to continue to refer to the administrative exhaustion requirements of § 7422(a) and § 6511 as “jurisdictional prerequisites.” That these provisions concern the United States’ consent to be sued would not seem to change this conclusion. The Supreme Court has “made plain that most time bars are nonjurisdictional.” United States v. Kwai Fun Wong, 575 U.S. 402, 410 (2015). In Kwai Fun, the Court held that the time bar in the Federal Tort Claims Act is nonjurisdictional. In doing so, it rejected the Government’s argument that, because that time bar is a precondition to the FTCA’s waiver of sovereign immunity, the time bar must be jurisdictional. As it had in Lexmark, the Court distinguished jurisdictional statutes from “quintessential claim-processing rules which seek to promote the orderly progress of litigation, but do not deprive a court of authority to hear a case.” Id. (internal quotation marks omitted). It did not except statutes that implicate the government’s waiver of sovereign immunity from that distinction.

In reaching this conclusion, the Court relied on Arbaugh v. Y&H Corp., where, finding Title VII’s numerical employee threshold nonjurisdictional, the Supreme Court stated:

“If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.”

546 U.S. 500, 515–16 (2006). This “clear statement” rule “does not mean Congress must incant magic words. But traditional tools of statutory construction must plainly show that Congress imbued a procedural bar with jurisdictional consequences.” Kwai Fun, 575 U.S. at 410 (internal quotation marks omitted). There is no such clear statement apparent in the statutes at issue here, 28 U.S.C. § 7422(a) and § 6511(a).3 Other courts also have begun to question whether the time limits and administrative exhaustion requirements in these and other tax provisions should continue to be deemed jurisdictional. See Gillespie v. United States, 670 F. App’x 393, 394–95 (7th Cir. 2016) (whether § 7422(a) is jurisdictional); Bullock v. I.R.S, 602 F. App’x 58, 60 n.3 (3d Cir. 2015) (whether I.R.C. § 7433 is jurisdictional). As to at least one administrative exhaustion requirement, one court has held that it should not be deemed jurisdictional. See Gray v. United States, 723 F.3d 795, 798 (7th Cir. 2013) (I.R.C. § 7433 “contains no language suggesting that Congress intended to strip federal courts of jurisdiction when plaintiffs do not exhaust administrative remedies”); cf. Duggan v. Comm’r of Internal Revenue, 879 F.3d 1029, 1034 (9th Cir. 2018) (I.R.C. § 6630(d)(1)‘s 30-day filing deadline “expressly contemplates the Tax Court’s jurisdiction . . . the filing deadline is given in the same breath as the grant of jurisdiction.”).

Accordingly, although the Claims Court properly dismissed Walby’s 2014 refund claim because she did not meet the prerequisite for bringing such a claim, we think that, under LexmarkArbaugh, and their progeny, the court likely did not lack subject matter jurisdiction over this claim.

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2. See, e.g., Stephens v. United States, 884 F.3d 1151, 1156 (Fed. Cir. 2018); see also Ellis v. United States, 796 F. App’x 749, 750 (Fed. Cir. 2020); Langley v. United States, 716 F. App’x 960, 963 (Fed. Cir. 2017).

3. We are mindful of the Supreme Court’s pre-Lexmark jurisprudence concerning § 7422(a). In United States v. Dalm, the Court held that the district court lacked jurisdiction over gift tax refund suit because “[d]espite its spacious terms, § 1346(a)(1) must be read in conformity with [§ 7422(a) and § 6511(a)] which qualify a taxpayer’s right to bring a refund suit upon compliance with certain conditions.” 494 U.S. 596, 601 (1990). The Court referred to the statutes as “controlling jurisdictional statutes.” Id. at 611. But this view was a departure from the Court’s prior commentary on a predecessor to § 7422(a), recognizing that it “was not a jurisdictional statute at all; it simply specified that suits for recovery of taxes, penalties, or sums could not be maintained until after a claim for refund had been submitted.” Flora v. United States, 362 U.S. 145 (1960).

If you would like to read a little of the Gillespie opinion of the Seventh Circuit, see my post on it here.  It was the statements within Gillespie questioning whether section 7422(a)’s claim-filing requirement is still jurisdictional that the DOJ cited for its decision, post-oral argument, in Tilden v. Commissioner, 846 F.3d 882 (7th Cir. 2017), to file a memorandum of law arguing that the section 6213(a) Tax Court deficiency jurisdiction filing deadline is still jurisdictional – a point with which the Seventh Circuit in Tilden agreed, despite Gillepsie.  See my post on Tilden here.  Of course, as I have noted before, the Harvard tax clinic continues to litigate the issues under section 6213(a) of whether the filing deadlines are still jurisdictional or subject to equitable tolling; companion cases on that issue are currently pending in the Ninth Circuit (and have been pending for over 6 months after oral argument there).

Observations

For most refund suit plaintiffs, it will make little difference whether the section 6511(a) and 7422(a) requirements are jurisdictional, since no one expects the Supreme Court to overturn its ruling in United States v. Brockamp, 519 U.S. 347 (1997), that the filing deadline of section 6511(a) is, in any case, not subject to equitable tolling.  So, who might benefit from making these two requirements nonjurisdictional?  Well, there are always a small number of cases where the DOJ could make an argument that the refund claim filing deadline was missed or that a refund claim was not in proper form, but the DOJ either chose not to raise those issues or just missed that the DOJ had potential arguments under those provisions.  Under current law, treating the requirements as jurisdictional, courts should step in in such cases and police their jurisdiction by raising issues not raised by the DOJ.  But, if the claim filing requirement and claim filing deadline are not jurisdictional to a refund suit, then, in such cases, the court will no longer worry about the issues if the DOJ never raises them.  Non-jurisdictional conditions of suit are merely affirmative defenses.  If the DOJ doesn’t raise an affirmative defense (either accidentally or knowingly), it simply forfeits or waives the defense.  Indeed, if the DOJ wanted to expeditiously litigate a test case brought by a plaintiff who hadn’t yet filed a refund claim, if the claim filing requirements is no longer jurisdictional, the DOJ could choose to waive any argument that a claim should have been filed before suit was brought.

Tax Court Jurisdiction in Late-Filed Deficiency Cases

Yesterday, PT put up a post providing guidance in the timing of the filing of Tax Court petitions and noting the different time frames for filing caused by the Tax Court shutdown and IRS Notice 2020-23 exercising the power to extend Tax Court filing deadlines granted in IRC 7508A. If last year’s government shutdown is any indication of what will happen in 2020, it is almost a certainty that some taxpayers who try to get into the Tax Court will miss the deadline for one reason or another.  Some of those reasons are good reasons.  Those taxpayers will face a motion to dismiss filed by the IRS or an order to show cause generated by the Tax Court seeking to knock them out of Tax Court because of a late filing.  For those of you who read yesterday’s post and have a good grasp of the time to file your Tax Court petition and the need to file using the USPS, certified mail with a filing slip, this post is unnecessary.  For the rest of you, including those who come to the rescue of pro se taxpayers who may have filed late, this post will provide you with assistance if yesterday’s post did not keep you, or your current client from the shoals of a jurisdictional dismissal.

In a post last month, I called for a legislative clarification that judicial filing deadlines in most tax cases are not jurisdictional and are subject to equitable tolling.  The extensions for filing Tax Court petitions provided by the IRS in its recent Notice 2020-23 (from April 1, 2020 to July 15, 2020) and, effectively, by the Tax Court itself in Guralnik v. Commissioner, 146 T.C. 230 (2016) (from March 19, 2020 [when the Clerk’s Office first closed] until the Clerk’s Office reopens) may not be sufficient for all COVID-19 sufferers.  Reports are that people coming out of the hospital are often extremely weakened by the virus.  They may not be physically able to meet even these extended deadlines.  That’s where equitable tolling may help, for one of the most common grounds for equitable tolling is the plaintiff being prevented by circumstances beyond his or her control from complying with the filing deadline.  Using equitable tolling, judges using their equity hats can give extensions after hearing all the facts and circumstances and making sure the taxpayer behaved at least with reasonable diligence under the circumstances.

Over the last year, The Tax Clinic at the Legal Services Center of Harvard Law School (The Clinic) has been looking to litigate test cases in the Tax Court concerning whether the deficiency filing deadline of section 6213(a) is still jurisdictional or is subject to equitable tolling under recent Supreme Court case law that, starting in 2004, made filing deadlines now almost never jurisdictional and usually subject to equitable tolling.  I assist The Clinic in finding good test cases by nightly scouring Tax Court orders in this area (not just designated orders).

I thought it would be useful to tell the story of the cat and mouse game that has been going on between The Clinic and the IRS since last fall in The Clinic’s attempt to litigate these issues.  In the three best test cases that I found, and where Keith and I entered appearances and filed lengthy papers to litigate the issues, in each case, the IRS took steps to avoid having to respond – in one case reissuing the notice of deficiency just before The Clinic filed its response to an order to show cause and in two others conceding the underlying deficiency shortly after The Clinic filed motions to vacate dismissal orders, leading to withdrawal of the motions to vacate as moot.  Is the IRS that afraid that The Clinic may be right? 

With this post, I also share the filing we made in one such case, since there is no reason that others shouldn’t be able to borrow from it for purposes of making these same arguments in their cases.  All I would ask is that you keep Keith or me informed if you do use it and have such a test case for yourself.

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You know from prior posts (too many, so I won’t give cites) that The Clinic initially tried to argue that the Tax Court innocent spouse (section 6015(e)(1)(A)) and Collection Due Process (section 6330(d)(1)) petition filing deadlines are not jurisdictional and are subject to equitable tolling under recent Supreme Court case law.  We lost the innocent spouse cases in three Circuits.  We lost the Collection Due Process cases in the Tax Court (Guralnik) and the Ninth Circuit (as amicus).  But, we won a case in the D.C. Circuit (as amicus with the court adopting significant portions of our brief) concerning the section 7623(b)(4) whistleblower award petition filing deadline, where the statutory language regarding the time period for filing the petition was taken almost verbatim, from the Collection Due Process provision. And for further discussion of these issues, see Bryan Camp’s article on jurisdictional tax deadlines (Prof. Camp argues that the deficiency, CDP and refund deadlines are non-jurisdictional, but that the innocent spouse deadline is jurisdictional).

However, probably 90% of Tax Court petitions are not under these jurisdictions, but are deficiency cases, where section 6213(a) supplies the deadline.  Initially, The Clinic avoided litigating the section 6213(a) deadline because of concerns that under section 7459(d), any late-filed petition that was dismissed would end up being dismissed on the merits and upholding the deficiency – thereby precluding by res judicata the taxpayer from subsequently paying and suing for a refund in district court. 

Only later, by doing a little research and thinking did we conclude that almost no one who is dismissed from the Tax Court for having late filed a deficiency case ever pays and sues for a refund.  There are only about 200 refund suits brought in the entire U.S. each year, and Keith and I don’t recall seeing any having been brought after a Tax Court dismissal for late filing.  So, the section 7459(d) concern is extremely unlikely as a factual matter. 

On the other hand, if the filing deadline is no longer jurisdictional, judges wouldn’t police the filing deadline themselves as they now do.  Our research showed that, each month, Tax Court judges on their own find 7 to 10 cases in which the IRS failed to notice a possible late filing and so the judges issue orders to show cause why the cases should not be dismissed.  So, 7 to 10 taxpayers a month might benefit if the deficiency filing deadline were not jurisdictional.  If the IRS fails to raise late filing as to a nonjurisdictional deadline, the IRS simply forfeits the issue.

The Tax Court and every Circuit court has long held that the deficiency filing deadline is jurisdictional.  But, surprisingly, only two Circuit courts to date and no Tax Court opinion has analyzed whether the deficiency filing deadline is still jurisdictional or is subject to equitable tolling under recent Supreme Court case law.  The one Circuit court precedential opinion, Tilden v. Commissioner, 846 F.3d 882 (7th Cir. 2017), held that the filing deadline is still jurisdictional, but its reasoning is subject to substantial criticism.  Another Circuit court opinion reaches the same result in an unpublished opinion; Garrett v. Commissioner, 2019 U.S. App. LEXIS 37483 (3d Cir. 2019); yet the case was a last known address case in which the parties did not even discuss in their briefs the issue of whether the filing deadline is still jurisdictional, and the court’s reasoning is similar to Tilden (which it doesn’t even cite).  So, since 2004 (when the Supreme Court changed its precedent), the issues have somehow been avoided in the Tax Court and most Circuits.

There are pending two companion cases in the Ninth Circuit presenting the issues of whether the section 6213(a) filing deadline is still jurisdictional or is subject to equitable tolling under the recent Supreme Court case law, Organic Cannabis Foundation v. Commissioner, Ninth Circuit Docket No. 17-72874, and Northern California Small Business Assistants, Inc. v. Commissioner, Ninth Circuit Docket No. 17-72877.  The cases had oral argument on October 22, 2019.  An opinion

could issue in the cases any day.  However, because of another issue presented in the cases, the Ninth Circuit may never reach the jurisdiction and equitable tolling issues.  (The Clinic filed amicus briefs in the cases.)

Because the issues may be avoided in those two Ninth Circuit cases, since last year, Keith and I have been looking in pro se Tax Court cases for fact patterns that would make great test cases on the issue.  We find the cases by searching orders issued daily by the Tax Court.  The orders are ones of dismissal or to show cause why the petition should not be dismissed for late filing.  Some of the orders come from S cases, which presents an extra layer of problem because, to date, no court has held that an S case petitioner can appeal a Tax Court dismissal of a petition for lack of jurisdiction.  (That’s another issue The Clinic is litigating and in another Ninth Circuit case – but I will not go into that issue here.)  If the order we find is one for dismissal, we try to enter an appearance and, within 30 days, move to vacate the dismissal, arguing that the Tax Court erred in treating the filing deadline as still jurisdictional.  If it is an order to show cause, we try to enter an appearance and respond to the order on behalf of the taxpayer.  If the case is an S case, we also move to remove the S designation, since it would be easier to appeal if that designation were removed.  To date, we have found about a half dozen apparently great test cases on the facts, but taxpayers have only responded to our approaches in three cases.

The funny thing about those three cases, though, is that the IRS attorneys in the cases have done everything possible to avoid having to respond to our papers.  In two cases, where we had moved to vacate dismissal orders, the IRS, before responding, looked into the facts of the underlying deficiency and represented that the deficiency would be abandoned by the IRS.  Such actions made our pursing further Tax Court litigation moot, so we moved to withdraw our motions to vacate (and, in one case, to remove the S designation).  The Tax Court granted our motion to withdraw without comment in one case and we are awaiting the outcome of the motion to withdraw in the other.  In effect, The Clinic helped the taxpayers in these cases to win the cases by other means.

In the third case, the IRS felt so bad about what had happened that it reissued the notice of deficiency and represented that it would not try to assess the deficiency sent out in the first notice.  The IRS sent out the new notice of deficiency shortly after the Tax Court issued an order to show cause why the case should not be dismissed and just prior to our entry of appearance though neither the taxpayers nor The Clinic knew this at the time of filing the taxpayers’ response to the order.  Only after The Clinic filed its response did the IRS inform The Clinic and the court that the IRS had sent out a new notice of deficiency. The new notice of deficiency afforded the taxpayers an opportunity to timely file in the Tax Court which the IRS hoped would make any fight on the first notice moot. 

However, the Tax Court has not cooperated with the IRS strategy (at least, yet).  The court does not simply dismiss a petition as duplicative when it might be that the petition did give the Tax Court jurisdiction.  Parties can’t stipulate the court into or out of jurisdiction.  So, in the case involving the first notice of deficiency, where the court had issued an order to show cause, and The Clinic filed papers, the Court has ordered the IRS to respond to our papers by April 27.  This may result in a Tax Court opinion, not just an unpublished order – especially if the Tax Court decides that the deficiency filing deadline is not jurisdictional and is subject to equitable tolling (which would no doubt be a court-reviewed opinion).

This third case is an S case, Rosenthal v. Commissioner, T.C. Docket No. 18392-19S[WMS1] , possibly appealable to the Ninth Circuit.  Here are the facts that we think present an excellent case for equitable tolling:  The taxpayers received a notice of deficiency and filled out a Tax Court Form 2 petition.  They incorrectly mailed the petition to the IRS Laguna Nigel office.  That office stamped the petition “received” four days before the end of the 90-day filing deadline.  Weeks later, the IRS forwarded the petition to the Tax Court, which filed it as of the date the Tax Court received the petition.  One of the classic grounds for equitable tolling is timely filing in the wrong forum.  Just in case anyone wants to read our response to the order to show cause (or copy from it), here it is in Word.

Since the first two cases got resolved in favor of the taxpayers without an opinion or order, for privacy purposes, I won’t identify them here by name or docket number.  But, one of those cases presented the exact same factual pattern as Rosenthal – i.e., timely filing of the Form 2 petition with the IRS office that generated the notice of deficiency. 

In sum, it is rather curious that the IRS keeps trying to prevent The Clinic from litigating in the Tax Court the issues of whether the deficiency petition filing deadline is not jurisdictional and is subject to equitable tolling.  But, these issues won’t be dodged forever.  If the Ninth Circuit rules favorably in the two pending test cases in which The Clinic filed amicus briefs, I expect the DOJ to seek en banc rehearing and Supreme Court review, if necessary.  In the event The Clinic loses in the Ninth Circuit, it is not yet prepared to give up on these issues in other appellate courts.  So, we will continue looking for Tax Court deficiency test cases.