What’s Wrong with the Tax Court’s Hallmark Opinion: Part 3

December 8, 2022 by Leave a Comment

This is the third of a multipart post discussing the recent Tax Court opinion in Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (11/29/22). 

In its jurisprudence since 2006, the Supreme Court has firmly stated that claim-processing rules (of which filing deadlines, it says, are the quintessential claim-processing rule) are not jurisdictional.  However, the Court has articulated two exceptions:  One is if Congress makes a “clear statement” in a statute that it wants the claim-processing rule to be jurisdictional.  The other is where, even in the absence of a clear statement, there exists a long line of Supreme Court precent holding the claim-processing rule jurisdictional.  In this second case, the Supreme Court will apply a stare decisis exception.

In Hallmark, how did the Tax Court get to a ruling that the deficiency filing deadline is jurisdictional?  Did the Tax Court find that either of these exceptions applied?  In fact, the Tax Court did not say that Congress’ language in the first sentence of IRC 6213(a) contains a clear statement that the deficiency filing deadline is to be treated as jurisdictional, nor did the Tax Court find a long line of Supreme Court case law had held the deficiency filing deadline jurisdictional.  In my view, the failure of the Tax Court to apply either of these exceptions properly (or at all) means that the court ruled incorrectly.

In this part 3 of the post, I will discuss the first of these exceptions, the “clear statement” exception.  In part 4, I will discuss the stare decisis exception.

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In Kontrick v. Ryan, 540 U.S. 443, 455 (2004), the Supreme Court noted that both it and lower courts had often carelessly overused the word “jurisdictional”, and the Court sought to bring some disciple to the word by saying that, henceforth, claim-processing rules would not be jurisdictional.  In Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), however, the Court admitted that there should be an exception where Congress clearly stated that it wanted a claim-processing rule to be jurisdictional.  The Court set out what it called a “readily administrable bright line” test for this exception, to avoid the usual litigation over what Congress intended:  “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.”  Id. at 515-516 (footnote and citation omitted).

While the Supreme Court has articulated this “clear statement” exception, in over a dozen cases so far since Arbaugh, the Court has never found any such clear statement from Congress – not in cases of filing deadlines or in cases of other claim-processing rules.  Much of the Boechler opinion is focused on this “clear statement” exception, where the Court found it did not apply, even though IRC 6330(d)(1) contains the words “and the Tax Court shall have jurisdiction”.

The first sentence of IRC 6213(a) provides:

Within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency.

Note that the sentence, unlike the sentence in IRC 6330(d)(1), does not contain the word “jurisdiction” or any similar word and is not addressed to the court’s power, but only to what the taxpayer may do. 

In Hallmark, the court writes:

 “Congress must do something special, beyond setting an exception-free deadline, to tag a statute of limitations as jurisdictional and so prohibit a court from tolling it.” [United States v.] Kwai Fun Wong, 575 U.S. [402 (2015)] at 410.  Congress “need not use magic words”, Henderson [v. Shinseki], 562 U.S. [428 (2011)] at 436, and a statutory deadline may be jurisdictional even without the word “jurisdiction”, see, e.g., Bowles [v. Russell], 551 U.S. [205 (2007)] at 208–10 (holding 28 U.S.C. § 2107(a) and (c) to be jurisdictional); United States v. Brockamp, 519 U.S. 347, 350–51 (1997) (holding section 6511 to be jurisdictional); but the “traditional tools of statutory construction must plainly show that Congress imbued a procedural bar with jurisdictional consequences”, Kwai Fun Wong, 575 U.S. at 410.

Slip opinion at p. 8.

First, what’s wrong about this quote?  The citations to Bowles and Brockamp are wrong or very misleading. 

Bowles is a case that I will mention in the next part of this post, but suffice it to say for now that Bowles is one of the only two (so far) Supreme Court opinions that created the stare decisis exception; the statute in Bowles does not contain a “clear statement” that the deadline to file a civil appeal from the district court is jurisdictional, so the Court decided to create a stare decisis exception. 

And Brockamp (a pre-Kontrick case)does not hold the IRC 6511 refund claim filing deadline jurisdictional.  Neither the word “jurisdiction” nor “jurisdictional” appears in the Brockamp opinion.  Brockamp, in fact, proceeds from the unstated assumption that the filing deadline is not jurisdictional and then goes on to conclude that the deadline is still not subject to equitable tolling (a separate question, as Boechler shows) under the presumption in favor of equitable tolling set out in Irwin v. Department of Veterans Affairs, 498 U. S. 89, 95–96 (1990).  Had the Supreme Court thought IRC 6511’s deadline jurisdictional, the Brockamp opinion would have been only one sentence long:  “Since we have held that jurisdictional deadlines are never subject to equitable tolling, and since IRC 6511’s deadline is jurisdictional, IRC 6511’s deadline is not subject to equitable tolling.”  In Boechler, the Supreme Court only discussed Brockamp in the section of the Court’s opinion discussing equitable tolling.

Hallmark went on to state as follows:

 “To determine whether Congress has made the necessary clear statement, we examine the ‘text, context, and relevant historical treatment’ of the provision at issue.” Musacchio v. United States, 577 U.S. 237, 246 (2016) (quoting Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 166 (2010)).  Statutes that meet this standard share several qualities:  They speak of a court’s power “in jurisdictional terms or refer in any way to the jurisdiction” of the court. Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 393–94 (1982).  They “define a federal court’s jurisdiction . . . , address its authority to hear untimely suits, [and] cabin its usual equitable powers.” Kwai Fun Wong, 575 U.S. at 411. Their context, such as placement within their statutory regime, history of reenactments, or a long-standing judicial interpretation, reflects that Congress imbued a deadline with “jurisdictional consequences”. See, e.g., Kwai Fun Wong, 575 U.S. at 410; Henderson, 562 U.S. at 439; Bowles, 551 U.S. at 209–13; Zipes, 455 U.S. at 394.

Slip opinion at pp. 8-9.

Putting aside until the next part of this post that last-quoted sentence, Hallmark is correct that context is important in applying the “clear statement” exception.  For example, in Henderson, the Court found that the 120-deadline for a veteran seeking to contest a denial of benefits in the Article I Court of Appeals for Veterans Claims is not jurisdictional.  In that case, the Supreme Court noted that the deadline involved did not speak in jurisdictional terms and there was a separate provision that granted the Veterans Court jurisdiction to hear the cases.  Further, the Supreme Court went on to discuss the context of the deadline and noted (1) the character of the procedure from administrative filing through the Veterans Court, which the Supreme Court felt was highly protective of veterans and (2) would clash terribly with a finding that the filing deadline is jurisdictional.  But, the Supreme Court, while looking at context in Henderson and other cases, has only used context to find a filing deadline not jurisdictional.  The Supreme Court has never said that context alone can make up for the lack of a “clear statement” that a filing deadline should be jurisdictional.  To argue that context alone would be good enough would be to gut the “clear statement” exception.

On page 9 of the slip opinion, Hallmark begins Part II of the opinion with the following italicized outline sentence:  “Section 6213(a) clearly states that its 90-day deadline for filing a deficiency case is jurisdictional.”  Yet, you can read on in the opinion and the court says everything except that the words of the first sentence of IRC 6213(a) create a clear statement from Congress that Congress wants the filing deadline to be jurisdictional.  The court discusses the context of the placement of the sentence, the historical treatment of the sentence by the courts, and even what is essentially the Congressional reenactment doctrine, but the Tax Court nowhere, other than in the headline of Part II. of the opinion, says that the words of the first sentence of IRC 6213(a) (the only words that really count) “clearly state” that the filing deadline is jurisdictional.

It is thus baffling how the Tax Court in Hallmark could think its opinion a proper application of the Supreme Court’s “clear statement” exception jurisprudence.  Essentially, the Tax Court has reverted to deciding Hallmark on the pre-Arbaugh free-for-all inquiry into signs of what Congress really intended, despite the lack of a “clear statement”. 

Enough for this post.

Filed Under: Last Date to perform act, Tax Court

What’s Wrong With The Tax Court Hallmark Opinion: Part 2

December 7, 2022 by 1 Comment

This is the second of a multipart post discussing the recent Tax Court opinion in Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (11/29/22). 

In this post, I will discuss the legislative history undergirding the argument over which provision provides the Tax Court’s deficiency jurisdiction and point out things that the Hallmark opinion oddly decided not to discuss about this legislative history, even though the taxpayer presented this information to the court.

The Hallmark opinion (slip opinion at pp. 11-18) takes the position that the jurisdictional grant to the Tax Court to redetermine deficiencies first appeared in the second sentence of Revenue Act of 1924 section 274(a) – the original predecessor of the first sentence of IRC 6213(a).  At slip opinion pp. 38-40, the court explicitly rejects the argument that IRC 6214(a) is the source of the Tax Court’s deficiency jurisdiction.  I disagree.

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Section 274(a) of the Revenue Act of 1924 did two things:  It provided for the IRS to mail notices of deficiency concerning income taxes (what is currently IRC 6212).  And it stated, in its second sentence:  “Within sixty days after such notice is mailed the taxpayer may file an appeal with the Board of Tax Appeals established by section 900.”  Section 274 sets out what we would today call the deficiency procedures applicable to income taxes.  But, nowhere in § 274 can one find the word “jurisdiction”.  There are similarly-phrased sentences providing 60-day filing deadlines in the Board at Revenue Act of 1924 §§ 279(b) (for notices regarding claims for abatement of income tax jeopardy assessments), 308(a) (for notices of estate tax deficiency), and 312(b) (for notices regarding claims for abatement of estate tax jeopardy assessments). 

Congress did not think that the sentences in §§ 274(a), 279(b), 308(a), and 312(b) were sufficient to give the Board of Tax Appeals the power to hear cases, so at § 900(e) of the Revenue Act of 1924, Congress wrote:  “The Board and its divisions shall hear and determine appeals filed under Section 274, 279, 308, and 312.”  Thus, I would argue that Congress implicitly gave the Board the power – i.e., jurisdiction – to decide cases at § 900(e), not at §§ 274(a), 279(b), 308(a), and 312(b). 

In Estate of Young v. Commissioner, 81 T.C. 879, 884 (1983), Judge Dawson, writing for the en banc court, wrote:  “The origin of this Court lies in the Revenue Act of 1924, which established the Board of Tax Appeals. . . .  The act gave the Board jurisdiction to redetermine deficiencies determined by the Commissioner in a statutory notice.  Sec. 900(e), Revenue Act of 1924.”; some citations omitted).  So, you would think that Judge Dawson agrees with me.

However, the Hallmark opinion (slip opinion at pp. 39-40) includes an expanded quote from Young that retains the above quote, but also quotes from Young:  “We think that the jurisdiction conferred by section 6214(a) is merely complementary to the jurisdiction conferred by section 6213.” Id.  I disagree with this statement in Young.

In 1926, Congress decided to make the Board more court-like, including providing for direct appeals to Courts of Appeals.  One of the changes in the Revenue Act of 1926 was to explicitly, for the first time, use the word “jurisdiction” with respect to the Board.   Section 1001 of the Revenue Act of 1926 amended Title IX of the Revenue Act of 1924 to include, at a new § 904, the following:  “The Board and its divisions shall have such jurisdiction as is conferred on them by Title II and Title III of the Revenue Act of 1926 or by subsequent laws.”  Title II is headed “Income Tax”, and the procedures for income tax deficiencies and claims for abatement of jeopardy assessments relating to income taxes are found therein.  Title III is headed “Estate Tax”, and the procedures for estate tax deficiencies and claims for abatement of jeopardy assessments relating to estate taxes are found therein.

Thus, unlike § 900(e) of the Revenue Act of 1924, § 904 (as enacted by § 1001) of the Revenue Act of 1926 did not give the Board jurisdiction to redetermine deficiencies, but it also did not pin the Board’s jurisdiction to only §§ 274(a) and 308(a) of the Revenue Act of 1926 (the provisions that set out the filing deadlines).  Section 904 referred to the entire second and third titles of the Revenue Act of 1926 as the sources of the Board’s jurisdiction, which included new provisions under the income and estate taxes that, for the first time, referred to the Board’s “jurisdiction”.   Current IRC 7442 is similar to § 904 of the Revenue Act of 1926 (no jurisdictional grant), not § 900(e) of the Revenue Act of 1924 (granting jurisdiction).

In Title II of the Revenue Act of 1926, among the income tax deficiency procedures, Congress enacted three new provisions that explicitly use the word “jurisdiction” in connection with the Board, but Congress did not alter to include the word “jurisdiction” the second sentence of § 274(a) of the Revenue Act of 1924 that provides the Board income tax deficiency petition filing deadline. Congress in 1926 also did not alter to include the word “jurisdiction” the filing deadline sentence in § 308(a) of the Revenue Act of 1924 that provides the Board estate tax deficiency petition filing deadline.

Section 274(e) of the Revenue Act of 1926 provided, for the first time:

The Board shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer, and to determine whether any penalty, additional amount or addition to the tax should be assessed, if claim therefor is asserted by the Commissioner at or before the hearing or a rehearing.

(Emphasis added).  IRC 6214(a) is the successor to this provision and a similar new one at Revenue Act of 1926 § 308(e) for deficiencies in estate tax.

Section 274(g) of the Revenue Act of 1926 provided, for the first time:

The Board in redetermining a deficiency in respect of any taxable year shall consider such facts with relation to the taxes for other taxable years as may be necessary correctly to redetermine the amount of such deficiency, but in doing so shall have no jurisdiction to determine whether or not the tax for any other taxable year has been overpaid or underpaid.

(Emphasis added).  The first sentence of IRC 6214(b) is the successor to this provision.

Section 284(e) of the Revenue Act of 1926 provided, for the first time, in part:

If the Board finds that there is no deficiency and further finds that the taxpayer has made an overpayment of tax in respect of the taxable year in respect of which the Commissioner determined the deficiency, the Board shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Board becomes final, be credited or refunded to the taxpayer. . . .

(Emphasis added).  The first sentence of IRC 6512(b)(1) is the successor to this provision and a similar new one at Revenue Act of 1926 § 319(c) for overpayments of estate tax.

The second sentences of §§ 274(a) and 308(a) of the Revenue Act of 1926 differ from the second sentences of §§ 274(a) and 308(a) of the Revenue Act of 1924 in that the 1926 sentences newly exclude Sundays from ending the deficiency petition filing deadline.  However, at the same time when Congress saw the need to write the word “jurisdiction” into multiple other provisions of the Revenue Act of 1926 in connection with the Board (see also, e.g., section 283) when redrafting the sentences providing for the Board’s deficiency petition filing deadlines, Congress did not insert the word “jurisdiction” or otherwise modify the sentences to speak to the power of the Board.  That seems a highly unlikely accident if Congress wanted to clarify the Board’s main deficiency jurisdiction.  It is often said that “[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.”  Russello v. United States, 464 U.S. 16,23 (1983) (cleaned up).    Congress knowns how to provide jurisdictional grants and appears not to have done so in drafting §§ 274(a) and 308(a) of the Revenue Act of 1926 and their successors, including current IRC 6213(a).

Hallmark conceded that probably the main reason for the enactment of §§ 274(e) and 308(e) of the Revenue Act of 1926 (the predecessors of IRC 6214(a)) was to expand the Board’s “jurisdiction” to cover increased deficiencies and penalties, but pointed out that new statutory language often serves multiple purposes, and some of those purposes are considered too technical to merit discussion in Committee reports.  The way those 1926 provisions are written, their first 13 words also literally provide the Tax Court jurisdiction to redetermine the deficiency to an amount lower than shown in the notice because claims for that deficiency are, automatically, asserted before the hearing – i.e., they are asserted in the notice and/or the answer.  The next phrase in those statutes is “even if the amount so redetermined is greater than the amount of the deficiency”.  “Even if” is an idiom that confirms the preceding words.  The Collins Dictionary states:  “You use even if or even though to indicate that a particular fact does not make the rest of your statement untrue:  ‘Cynthia is not ashamed of what she does, even if she ends up doing something wrong.’”

“Even if” is similar to “whether or not”, and, interestingly, at least one 1926 Committee report uses the phrase “whether or not” in describing the portion of § 274(e) granting the Board “jurisdiction . . . to determine whether any penalty, additional amount or addition to the tax should be assessed, if claim therefor is asserted by the Commissioner at or before the hearing or a rehearing.”  The Senate Finance Committee Report states:

It sometime occurs that after the deficiency letter has been-sent out fraud or negligence is for the first time discovered by the commissioner.  In order to avoid the necessity of sending out a second notice to the taxpayer in such cases and other similar cases, it is provided in section 274(e) that the board shall have jurisdiction upon the appeal form the original deficiency letter to determine whether any penalty, additional amount, or addition to the tax should be assessed whether or not the commissioner has asserted such claim in the deficiency letter or in his pleadings.

S. Rep. 52, 69th Cong., 1st Sess. (1926) at 27-28, 1939-1 C.B. (pt. 2) 332  (emphasis added).  Note that there is no statement in this sentence “that it is provided in” § 274(a) (setting out the filing deadline) that the Board has jurisdiction to determine these items set out in the notice of deficiency.  I think the quoted sentence confirms Congress’ understanding that § 274(e) is the jurisdictional grant for the Board to determine these items, both those set out in notices of deficiency and in pleadings.

The Committee Reports accompanying the Revenue Act of 1926 contain no discussions of (1) why the word “jurisdiction” is, for the first time, used in that act in connection with the Board, (2) why §§ 274(a) and 308(a), although amended, were not amended to include the word “jurisdiction”, or (3) the modification of § 900(e) of the Revenue Act of 1924 from granting the Board the power to hold hearings to § 904 of the Revenue Act of 1926 (locating the “jurisdiction” of the Board in earlier provisions of the Revenue Act of 1926).  H. Rep. 69-1 at 10-11, 17-21; S. Rep. 69-52 at 25-28, 34-38, 1939-1 C.B. (pt. 2) 332; H. Rep. (Conf.) 69-356 at 39-40, 53-55, 1939-1 C.B. (pt. 2) 361.

The Hallmark opinion never addressed why, when Congress in 1926 amended §§ 274(a) and 308(a), Congress never included the word “jurisdiction”, but in 1926 Congress enacted three provisions giving the Board “jurisdiction”.  Nor did the Tax Court in Hallmark mention any of the opinions of Tax Court judges over the years (the ones quoted in part 1 of this post) that, contrary to Young, stated that IRC 6124(a) is the basis of the Tax Court’s deficiency jurisdiction.  I think the Hallmark opinion, in failing to discuss this and merely citing Young, did the public a disservice.

Filed Under: Last Date to perform act, Tax Court

What’s Wrong with the Tax Court’s Hallmark Opinion: Part 1

December 6, 2022 by 5 Comments

After the Supreme Court decided the Boechler case last April, the Tax Court decided that it should review its jurisprudence regarding the timely filing of Tax Court petitions as a jurisdictional issue in cases invoking its deficiency jurisdiction.  As Boechler involved the language in the Collection Due Process (CDP) basis for the Tax Court’s jurisdiction, the Supreme Court’s decision did not directly impact the timeliness issue in the Court’s other jurisdictional bases.  

The Court assigned the writing of the decision reviewing the timeliness to Judge Gustafson in the case of Hallmark v. Commissioner.  At the same time, it began holding in abeyance decisions on dismissals of deficiency cases pending the outcome of the Hallmark decision.  Last week the Court decided 17-0 that Boechler had no impact on its jurisdiction in deficiency cases and untimely petitions in deficiency cases still required dismissal no matter what reason petitioner had for filing past the 90 (or 150) day time period.  It also immediately began dismissing the hundreds of cases awaiting this decision.

Carl Smith was the architect of the arguments advanced by the Tax Clinic at the Legal Services Center of Harvard Law School that eventually led to the Boechler decision which reversed a 17-0 start in the Tax Court ruling that those arguments were wrong.  Carl provided significant assistance to Hallmark in the arguments it made to the Tax Court which received the same chilly reception in the Tax Court the CDP arguments received almost seven years ago.

Carl has written an eight part series breaking down the Hallmark decision and explaining how it fails to provide a supportable legal basis for its outcome.  We know that many of our readers will not want to take a deep dive into the world of jurisdiction and will run this series as a second post each day for the next week.  For those of you with an interest in the issue and an appetite for the technical arguments at issue here, Carl has provided a significant service to the taxpayer community.  Keith

This is the first of a multipart post discussing the recent Tax Court opinion in Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (11/29/22, corrected). 

Full disclosure:  Hallmark’s lawyers on their own decided to make the argument that the deficiency petition filing deadline is not jurisdictional, citing Boechler’s pendency in the Supreme Court.  However, after the Tax Court dismissed its petition anyway on April Fools Day and Boehcler was decided on April 21, Hallmark’s attorneys approached me, and I helped them, uncredited, with the arguments that they presented to the Tax Court in their May 2 timely motion to vacate the dismissal.  Anyone reading the Hallmark motion to vacate filings can see that they often parallel some of the things Keith and I have posted here before – sometimes verbatim.  And, anyone reading the filings in the pending Third Circuit test case, Culp v. Commissioner, Third Circuit Docket No. 22-1789, on which we blogged here, will see that there are verbatim parallels between the Hallmark and Culp filings – particularly in the Center for Taxpayer Rights amicus brief filed in Culp. (By the way, Culp is fully briefed – after the Third Circuit denied the DOJ motion for summary affirmance – but it is not yet clear that the case will get oral argument.)

I am writing this series of posts because I believe that anyone reading the Tax Court’s Hallmark opinion (ruling 17-0 against the taxpayer) would probably think that there is no chance of getting the Tax Court reversed.  I concede that, just as in the case of IRC 6330(d)(1), probably most appellate judges would (in my view, incorrectly) vote to affirm the Tax Court’s Hallmark position.  Keith and I, though, are of the opinion that if the Hallmark motion could have been presented instead directly to the Supreme Court, Hallmark would have won there, though not necessarily unanimously like that Court ruled for the taxpayer in Boechler (overruling the Tax Court’s earlier 17-0 ruling in Guralnik v. Commissioner 146 T.C. 230 (2016)).

There will be further appellate litigation over whether the deficiency petition filing deadline is jurisdictional or subject to equitable tolling.  I think it would be useful that any tax lawyer who winds up with such a late-filed case (whether their client brings in an originally-pro se case or the lawyer volunteers to do an appellate test case) read my series of posts so that they can see what I would argue the Tax Court got wrong in Hallmark.

The first two posts will discuss the taxpayer’s argument that IRC 6214(a), not IRC 6213(a), is the jurisdictional grant to the Tax Court to hear cases involving deficiencies set out in notices of deficiency.  This is an argument that would be very helpful for the taxpayers to win.  However, even if IRC 6213(a) provides the jurisdictional grant in such cases, I think the taxpayer should win for lack of a clear statement by Congress in IRC 6213(a) (which lacks the word “jurisdiction”, unlike IRC 6330(d)(1) analyzed in Boechler) that the filing deadline is meant to be jurisdictional. 

In today’s post, I will show that many judges of the Tax Court (including some judges who voted against the taxpayer’s argument in Hallmark) have previously written in opinions that IRC 6214(a) is the basis of the Tax Court’s deficiency jurisdiction – writing this in opinions where the IRS was not seeking an increased deficiency.  In the next post, I will discuss the legislative history undergirding the argument over which provision provides the Tax Court’s deficiency jurisdiction and point out things that the Hallmark opinion oddly decided not to discuss about this legislative history, even though the taxpayer presented this information to the court.

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Here is just a partial listing of cases in which Tax Court judges have previously stated that IRC 6214(a) is the source of its deficiency jurisdiction.  These quotes appear in opinions that did not involve any attempt by the IRS to seek an increased deficiency under IRC 6214(a). 

Judge Morrison has written:  “This case arises from Abdi’s timely petition. We have jurisdiction pursuant to section 6214(a).”  Abidi v. Commissioner, T.C. Memo. 2015-41 at *2.  “We have jurisdiction, pursuant to section 6214, to redetermine the deficiency and the penalty determined in the notice of deficiency. See sec. 6214(a).”  Longino v. Commissioner, T.C. Memo. 2013-80 at *3.  “Mr. and Ms. Thoma filed a timely petition for redetermination of the income-tax deficiencies and accuracy-related penalties for both years under section 6213(a).  We have jurisdiction under section 6214(a).”  Thoma v. Commissioner, T.C. Memo. 2020-67 at *4.  See Moyer v. Commissioner, T.C. Memo. 2016-236 at *2 (same).

Judge Paris has written:  “Petitioner received a notice of deficiency and invoked the Court’s jurisdiction by filing a petition for redetermination of a deficiency under section 6213(a).  Section 6214(a) grants the Court jurisdiction to redetermine the correct amount of a deficiency. . . .”  Trimble v. Commissioner, T.C. Memo. 2018-36 at *5.

Judge Ashford has written:  “Section 6214(a) establishes our deficiency jurisdiction”.  Dees v. Commissioner, 148 T.C. 1, 13 (2017) (Ashford, J., concurring in the result only).

Senior Judge Halpern has written:  “”Section 6214(a) establishes our jurisdiction to redetermine (i.e., determine de novo) deficiencies determined by the Secretary.”  Moya v. Commissioner, 152 T.C. 182, 198 (2019).  He also wrote, “We thus conclude that the notices of deficiency respondent issued to petitioners for their 2007 taxable years were valid, so that petitioners’ filing of a petition in response to those notices gave us jurisdiction under section 6214(a) to redetermine the deficiencies reflected in the notices.”  Stevens v. Commissioner, T.C. Memo. 2020-118 at *47.

Senior Judge Holmes has written:  “Our Court has for decades had the power, when we have jurisdiction over a particular taxpayer for a particular tax year, to determine or redetermine the correct amount of his deficiency – including any penalties.  See sec. 6214(a).”  Graev v. Commissioner, 149 T.C. 485, 502 (2017) (Holmes, J., concurring in the result).

Former Judge Simpson has written:

Section 6214(a) was initially enacted as part of the Revenue Act of 1926.  In addition to authorizing the Court to redetermine a deficiency, the statute provided that the Court had the authority to “determine whether any penalty, additional amount or addition to the tax should be assessed”.  Sec. 274(e), Revenue Act of 1926, ch. 27, 44 Stat. 56.

Bregin v. Commissioner, 74 T.C. 1097, 1103 (1980) (emphasis added).

Hallmark cited all of these opinions in its filings.  If Judges Morrison, Ashford, and Paris read the filings, I don’t see how they could sign on to an opinion saying the exact opposite – without at least explaining themselves in a mea cupla concurrence.

Filed Under: Last Date to perform act, Tax Court

Judge Goeke Asks: “After Boechler, Is the 30-Day Deadline to Request a CDP Hearing Subject to Equitable Tolling?”

November 15, 2022 by Leave a Comment

In Boechler, the Supreme Court held that the 30-day deadline in IRC 6330(d)(1) in which to file a Tax Court petition after the IRS issues a post-CDP-hearing notice of determination is not jurisdictional and is subject to equitable tolling.  There is another 30-day deadline in CDP – the deadline in IRC 6330(a)(3)(B) in which to file a Form 12153 requesting a CDP hearing at Appeals.  PT readers know that the regulations provide that if a taxpayer files a Form 12153 beyond that 30-day deadline, but within a year, Appeals will give the taxpayer an equivalent hearing and, at the end, issue a “Decision Letter on Equivalent Hearing”, which is not appealable to the Tax Court.  However, the Tax Court has held that it may deem a decision letter to be treated as a notice of determination grounding Tax Court jurisdiction if the court finds that, in fact, the taxpayer had not filed a late Form 12153, and so should have been given a CDP hearing and notice of determination.  Craig v. Commissioner, 119 T.C. 252 (2002).

In two cases before Judge Goeke, the taxpayer is trying to use a decision letter to ground the Tax Court’s jurisdiction under Craig: 

  1. Organic Cannabis Foundation, Docket No. 381-22L (not to be confused with the Organic Cannabis deficiency case in which the Ninth Circuit, pre-Boechler, held that the Tax Court petition filing deadline is jurisdictional and not subject to equitable tolling – issues being reconsidered by the Tax Court currently in the Hallmark Research Collective case, on which I last blogged here).
  2. Assure Healthcare Providers, Inc./Daughters of Esther Fellowship, Docket No. 10409-22L – a case assigned by the Chief Judge to Judge Goeke on November 3, 2022, presumably after Judge Goeke had made the Chief Judge aware of his already possessing a case involving the IRC 6330(a)(3)(B) deadline.

In both cases, the parties have made filings on motions to dismiss, but the Judge was unhappy because the cases involved a late filing of a Form 12153, and the parties had not discussed Boechler at all or sufficiently for him to decide whether the IRC 6330(a)(3)(B) filing deadline is jurisdictional or subject to equitable tolling.  If it is not jurisdictional and is subject to equitable tolling and the taxpayers had a sufficiently good excuse for late filing, the judge assumes (rightly, I think) that, under Craig, the Tax Court should consider the decision letter as a notice of determination after what should have been a CDP hearing.

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IRC 6330(a)(3)(B) requires that the notice of intention to levy include a statement of “the right of the person to request a hearing during the 30-day period under paragraph (2)”. 

IRC 6330(b)(1) states:  “If the person requests a hearing in writing under subsection (a)(3)(B) and states the grounds for the requested hearing, such hearing shall be held by the Internal Revenue Service Independent Office of Appeals.” 

I don’t see that this language contains any “clear statement” from Congress that excepts this deadline from the current rule that filing deadlines are no longer jurisdictional.  Nor do I see anything in the language that rebuts the presumption that filing deadlines are subject to equitable tolling.

This is not the first time that the issue of whether the IRC 6330(a)(3)(B) filing deadline is subject to equitable tolling has arisen in a Tax Court case.  There have been a few cases involving whether a Form 12153 was timely filed when it was mailed to the wrong IRS office within the 30-day deadline, but was received in the right office (by internal IRS forwarding) after the 30-day deadline passed.  In a 2018 post, I noted several cases in which Tax Court judges appeared to take inconsistent positions regarding these situations and a case before Judge Gale in which he indicated that he might have to ask for briefing on the issue of whether the filing deadline is jurisdictional or subject to equitable tolling under recent Supreme Court case law.  Judge Gale never had to ask for the additional briefing because the parties reached a settlement, and the taxpayer successfully moved to voluntarily dismiss the case – something one can do in a CDP case, but not in a deficiency case. 

In my post, I also noted that the Internal Revenue Manual also sometimes treats timely mailing or delivery to the wrong IRS office as giving rise to a CDP hearing, even though the right office does not receive the request in the 30-day period.  Current IRM 5.19.8.4.2(8) (12-17-19) states: 

If the CDP hearing request is not addressed to the correct office as indicated in the CDP notice, the date to determine timeliness is the date the request is received by the IRS office to which the request should have been sent. However, if the address does not appear on the notice, or if it is determined that the taxpayer received erroneous instructions from an IRS employee resulting in the request being sent to the wrong office, use the postmark date to that office to determine timeliness.

Note:  A request that is hand-carried to a local Taxpayer Assistance Center will be timely if delivered within the 30-day period during which taxpayers may request a hearing.

To take advantage of the IRC 7502(a) timely-mailing-is-timely-filing statutory extension, the mailing must be to the correct address.  This may not be the case for equitable tolling, where timely filing in the wrong forum is a common equitable tolling ground – a ground that the IRS seems to be using for a CDP request erroneously filed in a Taxpayer Assistance Center.  Another common equitable tolling ground is where the defendant misled the plaintiff into late filing, which is another situation discussed in the above-quoted Manual section.  These IRS-accepted excuses are, it seems to me, not compatible with the IRS arguing that the filing deadline is jurisdictional.

Judge Goeke issued an order on November 7, 2022, in the Assure Healthcare case directing that “each party . . . on or before January 17, 2023, . . . file with the Court a memorandum as to their position regarding the application of Boechler to the facts of this case and to address whether ‘determination’ under section 6330(d)(1) includes an alternative hearing result when equitable tolling would have required respondent to apply the hearing procedures for a timely administrative hearing request.”

The Judge also issued an order on November 14, 2022, in the Organic Cannabis case directing the taxpayer “on or before January 10, 2023, to file with the Court a memorandum regarding the application of Boechler to the facts of this case and to address whether ‘determination’ includes the result of an equivalent hearing when the doctrine of equitable tolling would have required respondent to apply the CDP hearing procedures for a timely administrative hearing request” and the IRS “on or before February 1, 2023, to file with the Court a reply to petitioner’s memorandum”.

We will keep you posted on additional developments in these cases.

Filed Under: Equitable tolling

Second Appellate Case on Whether IRC 6213(a)’s Deadline is Still Jurisdictional and First Tax Court Case Involving IRC 6015(e)(1)(A)

October 26, 2022 by Leave a Comment

It has been six months since Boechler was decided.  Where are we?

In my last post of August 1, 2022, giving an update onlitigation over whether the 90-day deadline in IRC 6213(a) in which to file a Tax Court deficiency petition is, after Boechler, still jurisdictional or is subject to equitable tolling, I noted two principal test cases:  First, the Tax Court is considering the issue in Hallmark Research Collective v. Commissioner, Tax Ct. Docket No. 21284-21, and I expect a ruling from the Tax Court therein probably around Christmas.  Second, the Third Circuit is considering the issue in Culp v. Commissioner, 3d Cir. Docket No. 22-1789, where I expect a ruling next spring.

Since my last post, another appellate case under IRC 6213(a) has surfaced, Allen v. Commissioner, 11th Cir. Docket No. 22-12537. 

And in Frutiger v. Commissioner, Tax Court Docket No. 31153-21 – a case mentioned by Chief Special Trial Judge Carluzzo at the recent ABA Tax Section meeting – the Tax Court will likely decide whether, after Boechler, the 90-day deadline in IRC 6015(e)(1)(A) to file a stand-alone innocent spouse petition is still jurisdictional and not subject to equitable tolling.

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Allen, like the Culps, is a semi-retired non-tax attorney.  Under the IRC 7508A(a) COVID extension set out in Notice 2020-23, the due date for Allen to file his Tax Court deficiency petition was July 15, 2020.  On the due date, he went late in the day to the post office, but the line was unusually long (including 6-foot spacing) and stretched outside the building.  As he waited in line, a post office employee walked up and down it trying to triage the most important filings.  The employee spoke to Allen, who explained that he needed to send the envelope containing the notice certified mail so that it would be postmarked July 15, 2020. The employee thought the post office might close before Allen got up to the window, and the employee persuaded Allen to simply drop the envelope into a slot for regular mail, assuring Allen that the envelope would be postmarked July 15, 2020.  Naturally, the envelope arrived at the Tax Court postmarked July 16, 2020.

The IRS moved to dismiss Allen’s petition for lack of jurisdiction.  In an order dated April 29, 2022, the Tax Court granted the motion.  The dismissal for lack of jurisdiction occurred eight days after the Supreme Court decided Boechler and seven days before the Tax Court suspended ruling on these kinds of motions in deficiency cases, pending the Hallmark ruling.  Allen appealed pro se to the Eleventh Circuit, arguing that, after Boechler, the deficiency petition filing deadline is no longer jurisdictional and is subject to equitable tolling.  Allen argues that both the unusual COVID situation and the actions of the USPS employee caused the late filing.

In the Culp case, the DOJ moved for summary affirmance, but the Third Circuit denied that motion.  In my August 1, 2022 post, I linked to the taxpayers’ subsequent opening brief in Culp.  Since then, the DOJ has filed its Culp opening brief, which you can find here.

In Allen, the DOJ also moved for summary affirmance.  All of the filings are in on that motion since October 6, 2022, and we are awaiting the Eleventh Circuit’s ruling on that motion.

Just as it had done in Culp, the Center for Taxpayer Rights, represented by the Tax Clinic at the Legal Services of Harvard Law School, hopes to file an amicus brief in Allen if the case survives the motion for summary affirmance.

The third biggest jurisdiction of the Tax Court by volume is stand-alone innocent spouse cases.  That jurisdiction now has its own test case pending on whether the IRC 6015(e)(1)(A) 90-day filing deadline is still jurisdictional after Boechler.  The case is Frutiger v. Commissioner, Tax Court Docket No. 31153-21, involving relief for only about $4,000 of liability under subsection (f).  The case was on the eve of trial – indeed, the IRS had already filed its pretrial memo – when Judge Buch noticed that the pro se taxpayer’s petition appeared to be mailed to the Tax Court two days late.  In an order dated September 7, 2022, Judge Buch continued the trial and asked the IRS to submit proof of mailing and explain (1) whether the Tax Court’s precedent at Pollock v. Commissioner, 132 T.C 21 (2009) (holding that the filing deadline is jurisdictional and not subject to equitable tolling) is still good law after Boechler and (2) “what would be the consequence of filing an untimely petition” if the deadline is jurisdictional or not.  The IRS response was filed on October 4, 2022. That response provided proof of mailing showing that the taxpayer filed late and argued that Pollock is still good law after Boechler because the Collection Due Process and innocent spouse statutes are not identically phrased.  On October 21, 2022, the IRS moved to allow the filing of a first supplement to its response that more fully attempted to distinguish Boechler, stating, “Respondent recognizes his original response lacked information warranted for consideration regarding the issues raised in the Court’s Order.”  I expect the motion to be granted.  You can find the first supplemental response here.

After Pollock was issued, three Circuit courts had ruled that the IRC 6015(e)(1)(A) filing deadline is jurisdictional and is not subject to equitable tolling.  Rubel v. Commissioner, 856 F.3d 301 (3d Cir. 2017); Matuszak v. Commissioner, 862 F.3d 192 (2d Cir. 2017); Nauflett v. Commissioner, 892 F.3d 649 (4th Cir. 2017).  No other Circuit has any precedent on whether this filing deadline is jurisdictional or subject to equitable tolling.  Frutiger lives in the Ninth Circuit. 

Under IRC 7459(d), a dismissal that is not jurisdictional upholds the deficiency set out in the notice, which would possibly preclude the taxpayer by res judicata from later paying and suing for a refund.  While there is no similar provision to IRC 7459(d) in IRC 6015, there is a special res judicata provisions for innocent spouse cases at IRC 6015(g)(2) that may prove problematic.  There is also conflicting case law over whether district courts (except in one rare situation described in IRC 6015(e)(3)) ever have jurisdiction to consider refund suits seeking IRC 6015 relief.  See the post on the Hockin opinion here.

Judge Buch instructed Frutiger to file a response to the IRS filing by November 18, 2022. 

Recognizing that a pro se taxpayer was probably not likely to be able to present adequate arguments on the legal issues, in his order, the judge invited the submission of motions for leave to file amicus briefs in the case (accompanied by the proposed amicus brief), also by November 18, 2022.  Judge Buch’s action inviting a brief is laudable and consistent with the Tax Court’s March 23, 2022, proposed new Rule 152 on amicus briefs.  You can find a link to an article calling for amicus briefs in certain pro se Tax Court cases within a post of Keith’s on pro se petitions in the Tax Court.  The Tax Court’s proposed new Rule 152 on amicus briefs is linked within another of Keith’s posts.

The Center for Taxpayer Rights, represented by the Tax Clinic at the Legal Services of Harvard Law School, hopes to file an amicus brief in Fruitger.  The parties have told the Center that they would not object to a motion by the Center for leave to file such an amicus brief.  Perhaps Keith’s request to the IRS attorney in the case for the IRS position on a motion for leave to file an amicus brief triggered the IRS to file its fuller, supplemental response?

I would not call it a test case, but Judge Choi may not be aware that in a case before her, Cabral v. Commissioner, Tax Ct. Docket No. 12078-20S, she is facing the same issue as in Frutiger.  Cabral concerns an IRC 6015(e) notice of determination and a petition that was filed about three weeks beyond the 90-day deadline.  On October 13,2022, Judge Choi issued an order to show cause why the court should not dismiss the petition for lack of jurisdiction for late filing.  Judge Choi may want to hold off ruling on her order until after Judge Buch issues his opinion in Frutiger.  The taxpayer in Cabral lives in the Third Circuit, which, of course, has the above-cited Rubel opinion as current precedent.

On a related topic, it appears that, as I expected, the IRS will now try to dispose of at least some late-filed CDP cases by summary judgment motion (see Sherman v. Commissioner, Tax Ct. Docket No. 11951-20L (order dated Oct. 6, 2022), directing the IRS to file the summary judgment motion that it said in a status report that it intended to file).  However, there is, as yet, no ruling on such a motion that I could find – whether or not the taxpayer has also sought equitable tolling.  It may be too early to see orders on such summary judgment motions, but, so far, the IRS-predicted flood of late-filed CDP petitions seeking equitable tolling seems not to have materialized.

At the most recent ABA Tax Section meeting, Judge Carluzzo said that the court would not likely have to rule on equitable tolling in very many cases.  In Christine’s post of October 21, 2022, on that meeting, she reports that he also told the audience what PT has been saying – that in CDP cases, the IRS should now assert late petition filing as a statute of limitations defense in answers, and that taxpayers should assert equitable tolling defenses in replies in such case.  That appears to be what Rule 39 requires for pleading special matter.

Filed Under: Federal Courts - Jurisdiction, Tax Court Tagged With:

DOJ Apologizes for Misinforming District Court on IRC 6015(f) Deadline

August 18, 2022 by 3 Comments

I did a post on August 15 in which I expressed shock that the DOJ lawyers in a district court collection suit told the court that the taxpayer could no longer seek IRC 6015(f) relief, since a two-year period to ask for such relief had passed.  The DOJ had cited a regulation that is no longer effective after a 2019 statutory amendment allowing a taxpayer to seek (f) relief at any time while the collection statute of limitations is still open, as it is in the case before the court.  This is a short post, just to let everyone know that on August 17, the United States filed a document in the district court entitled “United States’ Notice of Errata to United States’ Memorandum in Support of Motion for Partial Summary Judgment.”

The operative language from the notice is as follows:

[T]he United States . . .  argued that to qualify for relief under § 6015, a taxpayer must first present an administrative claim to the IRS within two years of the date on which the IRS first began collection activity against the taxpayer claiming innocent spouse relief. While innocent spouse relief under 26 U.S.C. § 6015(b) and (c) is limited by a two-year statute of limitations, the United States erroneously asserted that the same statute of limitations also applies to innocent spouse relief sought under 26 U.S.C. § 6015(f). Although Mrs. Weathers remains time barred from seeking innocent spouse relief under 26 U.S.C. § 6015(b) and (c), she could seek relief under 26 U.S.C. § 6015(f) before the IRS. This does not impact the Court’s lack of subject matter jurisdiction, as Mrs. Weathers would still have to avail herself of the administrative processes before the IRS to seek this relief and, if necessary, follow procedures for review established in 26 U.S.C. § 6015(e).

We just understood our error and respectfully alert the Court and parties through this errata filing. As stated, however, our inadvertent error does not impact the Court’s memorandum opinion and Order, which properly dismissed the asserted affirmative defense for lack of subject matter jurisdiction.

Undersigned counsel apologizes to the Court for the mistake.

The case was headed for a jury trial beginning August 22.  However, there is an entry on the docket sheet that the case settled on August 18.  There is no entry (yet?) correcting the district court’s order, though.

Filed Under: Federal Courts - Jurisdiction, Innocent Spouse

DOJ Misinfoms District Court on IRC 6015(f) Relief Filing Deadline

August 15, 2022 by 4 Comments

Sometimes, I am amazed at what DOJ attorneys don’t know about tax procedure.  Once, I wrote a post on how a court misapplied the amount lookback period of IRC 6511(b)(2)(A) when a refund claim was mailed before the end of the filing deadline but was received by the IRS afterward.  The DOJ in that case had misled the court by not citing the relevant case law and regulations.  I brought the error to the attention of the taxpayer’s attorney, who got the court to immediately reverse its holding and scold the DOJ for not citing the relevant authority.

Well, the DOJ has done it again:  In a collection suit brought against a husband and wife, where the wife has raised IRC 6015 innocent spouse relief as a defense, United States v. Weathers, Docket No. 5:21-cv-5012 (W.D. Arkansas, 8/10/22), not only did the DOJ get the court to follow likely-incorrect district court holdings saying that IRC 6015 relief cannot be raised in a collection suit, but the IRS persuaded the court that it would be too late for the taxpayer to now file a Form 8857 seeking such relief, citing still-current Reg. 1.6015-5(b) and the opinion in Lantz v. Commissioner, 607 F.3d 479 (7th Cir. 2010) (holding that regulation valid to the extent that it imposes a 2-year limit after collection activity has begun to seek relief under IRC 6015(f)).  While it is true that the statutes impose the 2-year rule for requesting relief under subsections (b) and (c), the regulation, as applied to relief under subsection (f) was abrogated by an amendment to section 6015(f) in 2019 that provides that a taxpayer who hasn’t paid an assessment can file a request for subsection (f) relief at any time while the statute of limitations on collection is still open.  If a collection suit is in process, then the statute of limitations on collection must still be open.

I contacted the taxpayers’ attorney to alert her to the revised statute, but she says that she already brought this information to the attention of the court.  I also suggested to her that the wife immediately file a Form 8857 because, if the wife does so, the district court suit can’t continue against the wife.  IRC 6015(e)(1)(B)(i) prohibits the IRS from levying or commencing or prosecuting a suit for collection of the liability involved in the Form 8857 while the Form 8857 is being considered, including during any subsequent Tax Court suit.  I expect that Form 8857 to be filed very shortly.

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I am not surprised that the district court held that it lacked jurisdiction to consider IRC 6015 relief in a collection suit, since as far as I am aware, all district courts to have considered the issue have held that only the Tax Court can consider IRC 6015 relief.  No appellate court has considered the issue, however, and at least one appellate court noted that the DOJ Appellate Section lawyers conceded that a refund suit could be filed in district court where a taxpayer late-filed a Tax Court IRC 6015(e)(1)(A) stand-alone suit that was dismissed for lack of jurisdiction.  The counter-argument to the district court opinions, to which Nina Olson and various tax procedure professors and former professors agree, is that under former IRC 6013(e) (the innocent spouse statute up to 1998), the courts had considered innocent spouse relief in (1) collection cases in district court, (2) refund cases in district court, (3) deficiency cases in Tax Court, and (4) cases in bankruptcy courts.  In 2000, Congress amended IRC 6015 to make clear that the provision of IRC 6015(e)(1)(A) authorizing a Tax Court stand-alone suit is “[i]n addition to any other remedy provided by law”. 

We did a post in September 2019 on the Hockin district court opinion that held that it had jurisdiction to consider IRC 6015(f) relief in a refund suit.  But, we had also done a post in May 2019 on a contrary district court opinion in Chandler.  The IRS settled Hockin, so the jurisdictional issue never went up to the Ninth Circuit, as we had hoped it would.

And, last year, we noted in a post on the Bowman case that the only two bankruptcy courts to have addressed the issue have ruled that the bankruptcy courts have jurisdiction to consider IRC 6015 relief.

I am not surprised that the DOJ cited the uniform district court rulings holding the district courts to lack jurisdiction to decide IRC 6015 relief in collection cases.  But, what really shocked me about the Weathers case is the following passage from the DOJ’s motion for summary judgment:

Furthermore, as explained above, to qualify for relief under § 6015, a taxpayer must first present an administrative claim to the IRS within two years of the date on which the IRS first began collection activity against the taxpayer claiming innocent spouse relief. 26 U.S.C. § 6015(b)(1)(E), (c)(3)(B) and 26 C.F.R. § 1.6015-5(b) (setting a two-year statute of limitations for 26 U.S.C. § 6015(f)); Lantz v. Comm’r, 607 F.3d 479 (7th Cir. 2010) (upholding the two-year statute of limitations for relief under § 6015(f)); Jones v. Comm’r, 642 F.3d 459, 465 (4th Cir. 2011) (same). The regulations define collection activity as including a Section 6330 notice, which is a statutory notice of intent to levy. 26 C.F.R. § 1.6015-5 (b)(2)(ii). Melissa Weathers received notification of a levy as early as August 12, 2019, more than two years ago. (Statement of Facts “S.O.F.” ¶ 13; Exhibit 107, Final Notice of Intent Levy attached to Beatriz Saiz Declaration (“Saiz Dec.”); see also Exhibits 101-106, certified Forms 4340 attached to Castor Dec. 1). Therefore, not only does this Court lack subject matter jurisdiction of her purported innocent spouse defense, but she is precluded from seeking innocent spouse relief before the IRS.

PT readers of a certain age will remember the huge uproar that the Lantz and Jones opinions generated in Congress and the IRS’ July 2011 capitulation in Notice 2011-70 that it would no longer enforce the 2-year filing deadline contained in the regulation as applied to IRC 6015(f) relief.  In July 2019, Congress also amended IRC 6015(f) to provide a new paragraph (2) conforming to the Notice and reading:

A request for equitable relief under this subsection may be made with respect to any portion of any liability that—

(A) has not been paid, provided that such request is made before the expiration of the applicable period of limitation under section 6502, or

(B) has been paid, provided that such request is made during the period in which the individual could submit a timely claim for refund or credit of such payment.

How could the DOJ attorneys not know that the Lantz and Jones cases and the regulation were all legislatively overruled?  The attorney for the wife in Weathers says she pointed this out in her papers (though I haven’t looked through her papers).  Yet the court, borrowing from the DOJ motion, wrote:

Finally, as to Melissa’s request that these proceedings be stayed to permit her time to file an administrative claim with the IRS, such a stay would be exceedingly inefficient. Moreover, Melissa has yet to pursue the defense before the IRS, and it appears that the time to raise the defense has passed. See C.F.R. § 1.6015-5(b) (noting that to request innocent spouse relief under the provisions of § 6015(b), (c), and (f), “a requesting spouse must first file Form 8857 or other similar statement with the Internal Revenue Service no later than two years from the date of the first collection activity against the requesting spouse . . ., with respect to the joint tax liability”) (emphasis added); Lantz v. C.I.R., 607 F.3d 479, 482-83 (7th Cir. 2010) (rejecting argument that equitable relief under § 6015(f) carries with it a ten-year limitations period, as opposed to a two-year period).

To avoid this misreading, it would certainly have helped if the IRS had finalized its August 12, 2013 proposed regulations under IRC 6015 (REG-132251-11, 78 FR 49242) that mimicked Notice 2011-70 and the later Congressional amendment.  Keith blogged on those proposed regulations here.  The IRS proposed more regulations under IRC 6015 on November 20, 2015 (REG-134219-08, 80 FR 72649), which I blogged about here and here.  I recall that Keith and I submitted comments to at least one set of those proposed regulations (perhaps both).  Considering the tens of thousands of taxpayers who seek IRC 6015 relief each year, I think it a scandal that the Treasury hasn’t yet finalized either of those proposed regulations.  I think it no excuse that the proposed regulations would need to be modified to reflect statutory changes from 2019.  It’s been more than 3 years since those statutory changes, and I don’t think the IRS has proposed any regulations to reflect the 2019 statute.

We will follow developments in the Weathers case.  I have pointed out to the wife’s attorney that in a prior district court case, Dew, where a magistrate originally held that the court lacked IRC 6015 jurisdiction and the taxpayer responded by filing a Form 8857 before the district court considered the magistrate’s holding, the DOJ had to concede that, under the collection suspension filing provision at IRC 6015(e)(1)(B)(i), the case against the taxpayer now could not go forward.  I attach the DOJ filing in Dew, making that concession.

Filed Under: Federal Courts - Jurisdiction, Innocent Spouse

Another Update on Boechler Follow-on Litigation – Part 2

August 3, 2022 by 1 Comment

This is Part 2 of my post-Boechler litigation update.  Part 1, involving deficiency litigation, ran on August 1, 2022, and can be found here. 

Today’s post addresses what is happening in the many CDP cases (including Boechler) that are before the courts where the IRS had argued to the Tax Court that the cases should be dismissed for lack of jurisdiction on account of late filing.  As I noted in my Part 1 introduction, the courts have not yet issued any rulings in CDP cases about whether equitable tolling applies on the facts of any case, and I expect we won’t see the first such ruling until 2023.

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Boechler

The taxpayer in Boechler did not put into the record any information as to why it filed late and so deserved equitable tolling.  In its opinion dated April 21, 2022, the Supreme Court remanded the case to the Eighth Circuit to address whether equitable tolling applied on the facts.  There is a May 23, 2022, entry on the Tax Court docket sheet for Boechler (Docket No. 18578-17L) stating, “U.S.C.A. 8th Circuit mandate is recalled, and case is reopened”.  But there have been no further filings in the case in the Tax Court since that date. 

Since the IRS moved to dismiss Boechler before the IRS filed an answer, the next step in the case will be for the IRS to file an answer in which, if it wants, it will plead late filing as a statute of limitations defense.  Tax Court Rule 39 provides that statute of limitations defenses and equitable arguments are “special matters” that the parties must plead.  If the IRS in its answer raises a statute of limitations defense, the taxpayer will have to respond by filing a reply in which the taxpayer pleads equitable tolling and sets out some facts in support. 

It is far from clear that Boechler will ever generate a ruling on whether the facts therein justify equitable tolling.  Recall that parties at any time can settle non-jurisdictional issues, such as late filing or the merits.  My hunch is that the Boechler case settles on remand after the IRS attorney for the first time looks at the taxpayer’s proof that it filed W-2s with the Social Security Administration.  Boechler merely involves a penalty for alleged non-filing with that agency.

Castillo

On May 11, 2022, Les did a post on a district court opinion in Castillo.  In that case, the IRS mailed out a CDP notice of determination to the taxpayer and a copy to the taxpayer’s former POA, but not to her current POA.  USPS records reflect that the notice was never delivered to the taxpayer (it’s still listed as “in transit”), and if the prior POA received his copy of the notice, he never alerted the taxpayer or the current POA. 

The current POA is Elizabeth Maresca, the director of the tax clinic at Fordham.  She was puzzled why she hadn’t seen the notice of determination that she had been expecting, so she ordered a transcript of account and discovered thereon an entry for the issuance of such a notice many months before.  Within 30 days after seeing the transcript (but still not having yet seen a copy of the notice), Elizabeth filed a Tax Court petition and sought equitable tolling of the filing deadline.  She also brought suit against the government in district court for the IRS’ wrongful disclosure of tax information to the prior POA.  Les’ post concerns that wrongful disclosure suit.

The IRS in the Castillo Tax Court case (Docket No. 18336-19L) initially filed an answer.  After the court brought to the IRS’ attention the probable late filing of the petition, the IRS then filed a motion to dismiss for lack of jurisdiction.  The Tax Court then dismissed the case for lack of jurisdiction, and Ms. Castillo appealed to the Second Circuit (Docket No. 20-1635).  In the Second Circuit, the parties briefed the issue of whether the CDP petition filing deadline is jurisdictional or subject to equitable tolling, but then asked the Second Circuit to hold the case in abeyance pending the Supreme Court’s ruling in Boechler. 

Five days after the Supreme Court issued its Boechler ruling, Ms. Castillo moved the Second Circuit to rule by summary reversal, that her Tax Court petition was timely under equitable tolling and to remand the case to the Tax Court for it to consider the merits of her CDP arguments.  On April 29, 2022, the DOJ responded to the motion and agreed that Boechler applied and that the case should be remanded to the Tax Court, but the DOJ argued that the Tax Court, in the first instance, should decide whether the facts justified equitable tolling.

On August 2, 2022, a 3-judge motions panel of the Second Circuit (with one judge mysteriously recusing himself) issued an order vacating the Tax Court’s dismissal order, denying summary reversal, and remanding the case to the Tax Court “for further proceedings in light of the Supreme Court’s decision in Boechler”.

The Tax Court has long held that non-receipt of a properly-addressed notice of deficiency during the 90-day period to file is no excuse for late filing a Tax Court petition, and all those courts of appeal to have faced the issue have agreed.  See, e.g., Guthrie v. Sawyer, 970 F.2d 733, 737 (10th Cir. 1992); Follum v. Commissioner, 128 F.3d 118, 120 (2d Cir. 1997); United States v. Goldston, 324 F. App’x 835, 837 (11th Cir. 2009) (per curiam) (collecting cases).  In Weber v. Commissioner, 122 T.C. 258 (2004), the Tax Court extended this holding to cover properly-addressed CDP notices of determination not received during the 30-day period to file. 

In her initial Tax Court filings and in the Second Circuit briefing, Ms. Castillo argued that, based on legislative history and the structure of CDP, it was wrong of the Tax Court to extend the deficiency precedent to CDP.  I think that for Ms. Castillo to win on remand, she will also have to get the Tax Court to overrule Weber.  In the Second Circuit, The Center for Taxpayer Rights’ amicus brief was devoted entirely to expanding upon the anti-Weber argument.  While the Second Circuit had once, in an unpublished opinion, followed Weber; Kaplan v. Commissioner, 552 Fed. Appx. 77 (2d Cir. 2014); it did so without discussing whether Congress might have wanted a different rule in CDP cases from the rule in deficiency cases.  And Kaplan was litigated by a pro se taxpayer who never argued that Weber was wrongly decided.  The Weber issue has not yet been addressed in any published opinion of any Circuit court. 

The remand order says nothing about this anti-Weber argument.  I presume that the anti-Weber argument can be considered by the Tax Court under the terms of the Second Circuit’s remand order, but I am not 100% certain, as the order makes no reference to the argument.

In Part 1 of this post, I discussed the Culp case, which is a notice of deficiency case where the taxpayers did not receive the notice during the 90-day period to file.  In their brief to the Third Circuit, the Culps go farther and argue that the deficiency precedent should no longer survive Boechler, since there is precedent outside the tax area that non-receipt or late receipt of governmental “tickets” to court are circumstances beyond the plaintiff’s control that can justify equitable tolling.  See, e.g., Checo v. Shinseki, 748 F.3d 1373 (Fed. Cir. 2014) (en banc) (120-day period to file in the Court of Appeals for Veterans Claims); Kramer v. Commissioner of Soc. Sec., 461 Fed. Appx. 167 (3d Cir. 2012) (60-day period in 42 U.S.C. § 405(g) to challenge denial of Social Security disability benefits in district court).

Amanasu Environment Corp.

 In Amanasu Environment Corp. v Commissioner, Docket No. 5192-20L, on December 13, 2019, the IRS issued a CDP notice of determination to a taxpayer having an address in Vancouver, British Columbia.  Presumably because this was international mail, records of the USPS and Canada Post show that the taxpayer did not receive the notice until January 18, 2020 – several days after the 30-day Tax Court petition filing deadline passed.  On March 13, 2020, the taxpayer mailed a petition to the Tax Court, accompanied by a request for New York City as the place of trial.  On March 17, 2020, the Tax Court received and filed the petition and request.  On September 2, 2020, the IRS surprisingly filed an answer in the case.  (The initial filing of answers in the CDP cases of Castillo and Amanasu and the deficiency case of Gruis — discussed in Part 1 of this post — shows, among other things, how often IRS lawyers miss late filing of petitions.)  On November 19, 2020, the IRS woke up and moved to dismiss the case for lack of jurisdiction for late filing. 

Frank Agostino represents the taxpayer, having picked up the case at a New York City calendar call.  Frank responded to the motion to dismiss by arguing that the CDP filing deadline is not jurisdictional and is subject to equitable tolling and should be tolled in this case.  The Tax Court held the motion in abeyance pending the ruling in Boechler.  On May 18, 2022, Judge Carluzzo issued an order, reading in full:

For the reasons set forth in Boechler, P.C. v. Commissioner, No. 20-1472 (U.S. April 21, 2022), it is

ORDERED that respondent’s motion to dismiss for lack of jurisdiction, filed November 19, 2020 is denied.

It is further ORDERED that jurisdiction in this case is no longer retained by the undersigned.

It is further ORDERED that this case is restored to the general docket for trial or other disposition.

On June 22, 2022, the IRS submitted an unopposed motion for leave to file an amendment to its answer in which it raised the statute of limitations defense.  On July 22, 2022, the Tax Court granted the motion.  Frank will be filing a reply to the amendment to the answer, raising equitable tolling as the taxpayer’s defense to the IRS statute of limitations defense.  Since no one has ever seen what such an amendment to answer pleading a statute of limitations defense on account of a petition’s late filing looks like, I attach a copy of the amendment to answer here, courtesy of Frank.

Myers

The filing deadline under IRC 7623(b)(4) for a Tax Court whistleblower award petition was held not jurisdictional and subject to equitable tolling in Myers v. Commissioner, 928 F.3d 1025 (D.C. Cir. 2019).  However, as in CDP, to date, the Tax Court has not issued a ruling on whether equitable tolling applies on the facts of Myers or any other such whistleblower award case. 

It is my understanding that the Tax Court held off on making any ruling on equitable tolling in Myers, just in case the Supreme Court ruled for the IRS in Boechler.  Had the Supreme Court ruled for the IRS in Boechler, effectively, that would likely have overruled the Myers opinion, since the two filing deadline statutes are worded so similarly. 

In June 2020, the IRS filed an amended answer raising late filing as a statute of limitations defense, and the taxpayer filed a reply seeking equitable tolling.  In November 2020, the IRS moved for summary judgment that the facts alleged in the reply do not give rise to equitable tolling.  That motion is currently pending before Judge Ashford.

Other Cases

By an order dated September 30, 2021, the Supreme Court agreed to hear Boechler.  Shortly thereafter, the Tax Court stopped dismissing late-filed CDP cases for lack of jurisdiction, pending the Supreme Court’s ruling in Boechler. 

In May and June 2022, after the Supreme Court decided Boechler, the Tax Court issued orders in all of the cases where the motions had been held in abeyance.  There were about 30 such orders, and they all look like the terse order Judge Carluzzo issued in Amanasu (which was one of the 30-or-so cases). 

That there were only about 30 CDP cases with this issue over 7 months confirms that the IRS and DOJ have always vastly overstated to the courts the number of Tax Court cases that would be affected by Boechler annually.  In oral argument at the Supreme Court, the lawyer arguing the case on behalf of the Solicitor General told Justice Thomas that the government estimated that 300 cases a year would be affected by the Boechler ruling.  That figure was obviously wrong because it was an estimate of how many CDP cases are dismissed each year for lack of jurisdiction for any reason, not how many cases are dismissed for lack of jurisdiction for late filing.  Typically, two-thirds of dismissals for lack of jurisdiction are only for failure to pay the filing fee or obtain a fee waiver. 

Keith and I knew that far fewer than 100 CDP cases each year would be affected by Boechler and that the primary effect of the Boechler ruling would be to eliminate the Tax Court’s sua sponte issuing orders to show cause why a CDP case should not be dismissed for lack of jurisdiction for late filing.  Probably a quarter of all dismissals of late-filed CDP and deficiency cases come after the Tax Court has pointed out to the IRS, in an order to show cause, the probable late filing of the petition – a fact which the IRS hadn’t noticed.  After Boechler, such orders to show cause in CDP will be a thing of the past, and so a small but significant number of taxpayers who filed late will stay in the Tax Court, even without having to argue for, or even having facts plausibly justifying, equitable tolling.

In the roughly 30 CDP cases where the IRS moved to dismiss for lack of jurisdiction or the Tax Court issued an order to show cause, the IRS will now have to file answers or amendments to answers if it wants to argue for dismissal for late filing.  Other than Amanasu, I haven’t looked an any of these cases’ docket sheets to see whether the IRS has yet done so.  It is my expectation that the IRS will again complain of late filing in nearly all of these cases.  And it is my further expectation, based on the usual lack of response by taxpayers to motions to dismiss for late filing, that only about 5% of taxpayers will respond with what could be termed an equitable tolling excuse for late filing.  Five percent of 30 is 1.5 cases, and one of those cases is Amanasu.  So, I expect extremely few of the other 30-or-so cases to become litigating vehicles for equitable tolling.  (The number of deficiency equitable tolling cases, if Hallmark goes the taxpayer’s way, will be an order of magnitude higher, though still not back-breaking for the IRS or Tax Court.) 

I think the Tax Court will issue a precedential opinion the first time that it considers whether the facts in any CDP or whistleblower award case qualify for equitable tolling.  A published opinion is needed because it is unclear what law on equitable tolling would apply in the Tax Court.  There appears to be a federal common law of equitable tolling generated outside the tax law that I suspect the Tax Court will adopt.  Among other things, I hope the Tax Court looks to equitable tolling opinions coming out of the Article I Court of Appeals for Veterans Claims and its reviewing court, the Federal Circuit, that have been applied to late-filed petitions in the Veterans Court for decades. 

My guess is that the initial ruling of how the Tax Court will apply the doctrine of equitable tolling will come in Amanasu or Myers, which are furthest along on the newly-required pleading of the issues.  I also guess that the first equitable tolling ruling will come out in 2023.

Filed Under: Equitable tolling, Federal Courts - Jurisdiction, Tax Court
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