Equitable tolling

Equitable Tolling Case Moving Forward in Tax Court

March 10, 2023 by Keith Fogg 3 Comments

The case of Amanasu Environment Corp. v. Commissioner, Dk. No. 5192-20L is moving forward towards a determination of equitable tolling. This is a Collection Due Process (CDP) case involving a Canadian Corporation that received its CDP determination letter seven days after the 30 day window to file the petition. Carl reported on it in a post here after Judge Carluzzo invoked the Boechler decision and refused to dismiss the case as untimely filed. The facts basically mirror those in Atuke v. Commissioner discussed here. The difference between the treatment of the two cases is Boechler.

After Judge Carluzzo refused to dismiss Amanasu, the IRS filed an answer in the case and then it filed a motion for summary judgement in December. The most recent order, issued by Judge Marvel, denies the motion for summary judgment and sets the case up for a hearing on the facts necessary to prove equitable tolling. Describing the motion the court states:

Respondent argues that he is entitled to summary judgment because petitioner failed timely to file a petition in this case as required by sections 6320(c) and 6330(d) and failed to plead facts sufficient to demonstrate entitlement to equitable tolling that would overcome petitioner’s untimely filing. See Boechler, P.C. v. Commissioner, 142 S. Ct. 1493, 1500-01 (2022). Petitioner makes a number of arguments in response, but we need only address two of them here.

There was a small, but potentially significant error in the typing of petitioner’s address on the notice of determination:

Respondent does not argue that the address to which the Notice of Determination was mailed, 4503 Bellevue Drive, Vanclover BC V6R1E4, Canada (emphasis added), is the same as petitioner’s last known address, 4503 Bellevue Drive, Vancouver BC V6R1E4, Canada. Instead, respondent argues that “the minor typographical error did not stop (or even appear to impede) delivery of the Notice of Determination, as delivery of the Notice of Determination to Petitioner’s last known address was attempted on January 8, 2020, and was successfully completed on January 18, 2020.” Nonetheless, viewed in the light most favorable to petitioner, the fact that the Notice of Determination appears to have taken over a month to be delivered to petitioner supports an inference that the error impeded delivery of the notice and that the notice may have been invalid.

The court then discussed its case law on notices delivered where there was some problem with the address. It went on to point out that the mistake with the address was not the only problem here:

We could also construe respondent’s argument as one that petitioner actually received the Notice of Determination and that the notice is therefore valid notwithstanding whether it was properly sent to petitioner’s last known address. See Bongam v. Commissioner, 146 T.C. 52, 57 (2016) (“[A] notice . . . need not be sent to the taxpayer’s last known address in order to be valid. Rather, the notice will be valid if it is actually received by the taxpayer ‘without prejudicial delay,’ that is, generally in time to file a timely petition in this Court.”). However, our cases only support deeming a notice to be properly addressed upon actual receipt of the notice if the taxpayer has sufficient time to file a petition with this Court. See id. Here, the record discloses facts indicating that petitioner actually received the Notice of Determination after the 30-day statutory deadline to file a petition with this Court had already passed. Even assuming for the sake of argument that attempted delivery was properly made to petitioner’s correct address on January 8, 2020, this attempt was made a mere five days before the statutory deadline for filing a petition with this Court on January 13, 2020, and without any indication in the record that petitioner could have retrieved it from the carrier after the failed delivery.

If the CDP notice of determination (NOD) wasn’t sent to the taxpayer’s last known address, then it is invalid, the case should be dismissed for lack of jurisdiction, and the IRS should have to send a new NOD, allowing the taxpayer to file a new Tax Court petition. On the other hand, if the court finds that the NOD was mailed to the last known address, then the Tax Court keeps jurisdiction and considers the merits issue of whether equitable tolling should forgive the late filing.

The two problems give rise to two issues that doom the granting of the IRS summary judgment motion. The first problem is one that played out before the Boechler decision and the second involves equitable tolling which is now at play in CDP cases. With respect to the first problem the court states:

“Whether a taxpayer has been prejudiced by an improperly addressed notice is a question of fact.” McKay v. Commissioner, 89 T.C. 1063, 1068 (1987), aff’d, 886 F.2d 1237 (9th Cir. 1989). Viewed in the light most favorable to petitioner, the short period between attempted delivery and the statutory deadline gives rise to an inference that there was insufficient time for petitioner to file a petition in this Court, even if the attempted delivery was properly made.

With respect to equitable tolling, the court states:

viewing the facts and inferences therefrom in the light most favorable to petitioner, we find that there is a genuine issue of material fact concerning whether or how equitable tolling may be applied. We agree with respondent that the undisputed facts in the record show that petitioner filed its Petition in this case after the 30-day deadline imposed by sections 6320(c) and 6330(d), assuming that the deadline is not equitably tolled. We also agree that the Petition did not set forth any facts concerning whether equitable tolling is warranted, which raises the question of whether the issue of equitable tolling should be deemed conceded. See Rule 331(b)(4). However, concurrently with this Order, we have granted petitioner’s Motion for Leave to File Amended Petition. The Amended Petition pleads facts that, if proven, might entitle petitioner to equitable tolling depending on the entirety of the record developed at trial, so the issue of equitable tolling is not deemed conceded. Petitioner has also submitted a Declaration of Lina Lei in Support of Objection to Motion for Summary Judgment containing facts that, viewed in the light most favorable to petitioner, could support the application of equitable tolling. Therefore, respondent is not entitled to judgment as a matter of law on the issue of equitable tolling.

Because of the factual disputes, the court denies the motion for summary judgment. I am a bit surprised that a petitioner would be required to set forth facts in a petition concerning equitable tolling. I would expect the IRS to have the burden to raise the issue of late filing in its answer as affirmative allegations and then the petitioner to file a response explaining its reason(s) for filing late and how those reasons support a finding of equitable tolling.

Judge Marvel seems to suggest that non-receipt might be a good ground for equitable tolling in the Tax Court. This shows the impact of Boechler. No Tax Court opinion yet so holds, and the Tax Court, pre-Boechler, had said that if a taxpayer is sent an NOD to the last known address, but the taxpayer doesn’t get the notice until after the filing deadline expires, so files late, too bad, no jurisdiction. Weber v. Commissioner, 122 T.C. 258, 261-262 (2004) and Atuke linked above and several other decisions. In Castillo the tax clinic at Harvard filed an amicus brief in which it argued that the pre-Boechler precedent on non-receipt of NODs is no longer good law. Maybe we have reached the point where the Tax Court agrees with that argument.

The Castillo case we have discussed previously where the petitioner did not receive her CDP notice until after the 30 day period for filing a Tax Court petition ended with a concession by the IRS. Where taxpayers can show non-receipt due to no fault of their own until some point past the due date of the petition, it’s hard to believe that equitable tolling would not open the court’s doors. Events beyond the taxpayer’s control is one of the three bases for equitable set out in Mannella v. Commissioner, 631 F.3d 115, 125 (3d Cir. 2011) and discussed here, would seem to apply where the facts support it.

The Court has remanded the case to Appeals at least for now to consider some of the merits issues raised by Amanasu. The remand may turn out to be unnecessary to the resolution of this case if the Tax Court will end up lacking jurisdiction because the NOD wasn’t mailed to the taxpayer’s last known address; however, it might help with the overall resolution of the case.

We are young yet in how equitable tolling will play out in Tax Court cases. I was also a bit surprised given the factual issues the court discusses that the IRS would seek summary judgement in this case but again this is something that will shake out as more of these cases move forward. This is a case to watch as it may be the first or one of the first to provide insight into the Tax Court’s take on equitable tolling.

Filed Under: Collection Due Process, Equitable tolling, Last Date to perform act

Oral Argument in Culp v. Commissioner

March 7, 2023 by Guest Blogger 4 Comments

Guest blogger Anna Gooch brings us this alert.

The oral argument in Culp v. Commissioner before the Third Circuit Court of Appeals will be part of today’s oral argument calendar beginning at 9:00 AM Eastern Time. One case is listed ahead of Culp. The arguments will be livestreamed here.

Keith discussed the case in February, and Carl Smith has written several posts on this case as well, including here and here. The Culps filed an untimely petition with the Tax Court, which dismissed their case for lack of jurisdiction. This dismissal occurred before the recent Hallmark decision. The Culps appealed, arguing that equitable tolling should apply and that they are entitled to a refund. They stated that they never received the Notice of Deficiency and furthermore, when they contacted the Taxpayer Advocate Service for assistance, they were told that no Notice of Deficiency was issued.

Carl and Keith, along with Audrey Patten of the Legal Services Center of Harvard Law School, wrote an amicus brief on behalf of the Center for Taxpayer Rights. Because the Culps were pro se and their brief did not fully address the issues, the court asked the amicus to participate in the oral argument. Keith will argue today on behalf of the Center for Taxpayer Rights. Pro bono counsel Oliver Roberts of Jones Day will be arguing for the Culps.

Once it is available, I will post a link to the recording.

Update: the oral argument recording may be found here: direct link; main landing page.

Filed Under: Equitable tolling, Federal Courts - Jurisdiction Tagged With: Anna Gooch

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

November 15, 2022 by Carlton Smith 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:

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).
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.

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

Supreme Court Update for Taxes and the October 2022 Term

October 3, 2022 by Keith Fogg 2 Comments

Thanks to Carl Smith, I write to point out the cases accepted for the Supreme Court term starting October 3, 2022, that might have some impact on tax procedure. Three of the cases are related to the issues of jurisdiction and equitable tolling raised in Boechler during the last term and one relates to the calculation of the FBAR penalty.

Boechler Works

September 28, 2022 by Keith Fogg Leave a Comment

In Boechler v. Commissioner, 142 S. Ct. 1493 (2022) the Supreme Court held that the time period for filing a petition in Tax Court in a Collection Due Process (CDP) case is not jurisdictional. The Supreme Court also held that the statute is subject to equitable tolling; however, we have predicted in many blog posts that based on historical patterns the most likely application of the decision would occur when the IRS did not affirmatively raise late filing as a defense. An order entered yesterday in Ahmad v. Commissioner, Dk. No. 37926-21L appears to be the first order holding that the IRS waived the right to raise late filing as a defense and allowing the case to move forward for a merits determination.

In Ahmad the IRS issued a CDP determination letter on November 23, 2021, sustaining the decision to file a notice of federal tax lien (NFTL). He filed a petition challenging the filing of the NFTL because he is unemployed and on public assistance. The IRS filed a motion for summary judgment which the Tax Court grants; however, in doing so it notes that he filed his petition on December 30, 2021. This date is more than 30 days after the notice and appears to create a late filed petition.

In footnote 7 of the order the Court notes that the IRS waived any potential objection based on the timeliness of the petition. In the motion for summary judgment the IRS apparently expressly conceded that he filed the petition on time. The Court states:

Therefore, the timeliness requirement in section 6330(d)(1) poses no bar to the Court’s jurisdiction in this case.

Earlier in footnote 7 the Court explained the impact of Boechler on the jurisdiction of the Court with regard to timely filing and made clear that the IRS must affirmatively raise timeliness in order to have the Court rule on this issue.

Prior to the Boechler decision the Tax Court did not merely rely on the IRS to raise the timeliness of the filing of a petition but it affirmatively analyzed the filing to determine timeliness. Based on the research of the Tax Court’s show cause orders in these situations, Carl Smith determined that the Tax Court raised the timeliness issue in over 200 cases each year where the IRS never objected to the taxpayer’s case as late filed. We predicted that far more taxpayers would benefit from the lack of Tax Court policing timeliness than would benefit from equitable tolling. The Ahmad case doesn’t predict the number of times this will happen but it makes clear that absent an affirmative objection by the IRS the case will move forward to whatever disposition it deserves on the merits.

Here, the Court grants the summary judgment motion so the failure of the IRS to raise timeliness in the filing of the petition serves as a mere pyrrhic victory. Nonetheless, the Ahmad case lets us know that a new era has begun. I blogged earlier about this change in the whistleblower cases because of the DC Circuit’s decision in Myers v. Commissioner, 928 F.3d 1025. Now it happens in CDP cases. Depending on the outcome of Hallmark and other cases challenging the timeliness issue in deficiency cases, it could happen in deficiency cases where 95% of the cases exist.

Filed Under: Collection Due Process, Equitable tolling, Tax Court

Another Update on Boechler Follow-on Litigation – Part 2

August 3, 2022 by Carlton Smith 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.

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. 8^th 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

Another Update on Boechler Follow-on Litigation – Part 1

August 1, 2022 by Carlton Smith 3 Comments

On June 28, 2022, I did a post summarizing the status of post-Boechler litigation over whether the IRC 6213(a) deficiency petition filing deadline is still jurisdictional and not subject to equitable tolling after Boechler. There have been a few developments in the two cases discussed in the post, and I wanted to update you and provide links to recent filings. The short update is that (1) all briefing has been completed in the Hallmark case before Judge Gustafson, and he is presumably already actively working on a Tax Court opinion, and (2) the Culp case in the Third Circuit survived the government’s motion for summary affirmance, and the Culps have filed their opening brief. The Third Circuit also denied the government’s motion to strike the merits amicus brief of The Center for Taxpayer Rights that had been filed shortly after the government moved for summary affirmance.

I also wanted to do an initial post on what has been happening after Boechler with CDP cases that present the questions resolved by the Supreme Court. The short update here is that the courts have not yet issued any rulings in CDP cases about whether equitable tolling applied on the facts of a particular case, and I don’t expect we will see the first such ruling until 2023.

Because of the length of the update, I am breaking it into two parts. Part 1 discusses the deficiency litigation. Part 2 will discuss the CDP litigation.

Hallmark

In my June 28 post, I wrote that, a few days after Boechler was decided, a taxpayer named Hallmark Research Collective had moved to vacate the Tax Court’s dismissal for lack of jurisdiction of its one-day-late deficiency petition. Even before the Supreme Court decided Boechler, Hallmark had argued that the deficiency filing deadline is no longer jurisdictional and is subject to equitable tolling. Hallmark is seeking COVID-related equitable tolling.

The motion to vacate was assigned to Judge Gustafson, and the Tax Court promptly stopped issuing orders of dismissals for lack of jurisdiction in all other cases where the IRS moved to dismiss a deficiency case for lack of jurisdiction, pending the ruling in Hallmark. In a post Keith did on Hallmark on May 3, 2022, Keith provided links to the taxpayer’s motion to vacate and its 51-page memorandum of law that accompanied the motion. In my July 28 post, I provided a link to the IRS’ 18-page response objecting to granting the motion. On July 15, 2022, the taxpayer filed a 32-page reply to the IRS’ response, which you can find here.

As to why the reply was so long, the main reason is that the taxpayer chose to expand upon its argument that the filing deadline in IRC 6213(a) is not jurisdictional by presenting a more detailed analysis of how the Board of Tax Appeals acquired its deficiency jurisdiction in 1924 and 1926.

The original Board filing deadline for income tax deficiency petitions was in the second sentence of sec. 274(a) of the Revenue Act of 1924. The taxpayer argues that the actual jurisdictional grant to the Board to hear deficiency cases was at sec. 900(e) of that act, though neither provision used the word “jurisdiction”.

In the Revenue Act of 1926, sec. 274(a)’s second sentence was amended to prohibit Sundays from being the end of the filing deadline, but Congress did not, when redrafting the sentence, include the word “jurisdiction”. By contrast, Congress first used the word “jurisdiction” in multiple provision of that act (which made the Board more court-like and provided for Circuit Court direct review of Board rulings). Congress also enacted in that act the predecessors of IRC 6214(a) and (b) and 6512(b)(2), in each case using the word “jurisdiction”.

Hallmark’s reply also contains several pages of quotes from opinions by Tax Court judges (most currently sitting) calling IRC 6214(a) the source of the Tax Court’s deficiency jurisdiction. In its response, the IRS had simply ignored the argument that IRC 6214(a) is the source of the Tax Court’s deficiency jurisdiction, not IRC 6213(a). The IRS argues that IRC 6213(a) is the source of the Tax Court’s deficiency jurisdiction, except in cases where a larger deficiency is sought than is set out in the notice of deficiency, in which case IRC 6214(a) is merely the source of the Tax Court’s jurisdiction for the excess.

Hallmark is now fully briefed. My expectation is that Judge Gustafson will be drafting an opinion that the Chief Judge will send to the full court for review. I would love to be proved wrong and see an earlier opinion, but my guess is that the opinion of the full court in Hallmark will not come out before Christmas, even though hundreds of motions to dismiss are probably already currently sitting in limbo pending the opinion and more will be filed in the interim.

Culp

In my June 28 post, I wrote about a pro se appeal of a Tax Court dismissal of a late-filed deficiency case, Culp, that is before the Third Circuit. The Culps argue that they filed a late Tax Court petition both (1) because before they filed they had never received the original or a copy of the notice of deficiency and (2) because TAS, purporting to help them fight levies, bamboozled them into not going to court. TAS never told them that a notice of deficiency had been sent. The Culps seek equitable tolling and a refund of monies taken by (1) levies on their Social Security benefits and (2) an offset of a later-year overpayment against the deficiency.

In my post, I mentioned the DOJ’s motion for summary affirmance. I also mentioned and provided a link to the merits amicus brief that The Center for Taxpayer Rights filed in the case a few days after the DOJ motion for summary affirmance, but before the Third Circuit had ruled on the motion. The DOJ had also moved to strike the amicus brief as premature. On July 6, 2022, a 3-judge motions panel of the Third Circuit denied both DOJ motions, so the case proceeds to regular briefing.

On July 29, 2022, the Culps filed their opening brief for the appellants, which can be found here. Although the Culps are retired lawyers in their 70s, their specialty was employment discrimination law. Their pro se brief may disappoint some of us who are tax procedure specialists.

The DOJ’s brief for appellee is due in late August or early September. (I am not sure the exact date because the Culps filed their brief a few days early, and I don’t know if that impacts the date that the DOJ’s brief is due.) However, I anticipate that the DOJ will, as usual, ask for and be granted a 21- or 30-day extension to file its brief.

I expect oral argument in Culp will occur in the Third Circuit early next year and an opinion will be issued in the spring. I expect that the Tax Court’s ruling in Hallmark (1) will precede the Third Circuit’s ruling in Culp and (2) will be brought to the attention of the Third Circuit before it rules.

Other Deficiency Cases

Of course, once an opinion in Hallmark is issued, the Tax Court will likely promptly issue hundreds of similarly-ruling orders in cases in which either the IRS had moved to dismiss a late-filed deficiency petition for lack of jurisdiction or the Tax Court had issued an order to show cause why the deficiency case should not be dismissed for lack of jurisdiction on account of late filing.

If the Tax Court in Hallmark rules against the taxpayer, those hundreds of orders will be final and immediately appealable to nearly every Circuit Court of Appeals, except the Federal Circuit. However, I don’t expect many taxpayers to appeal such dismissals. It would only make sense to appeal such a dismissal if the taxpayer thought he or she had good ground for equitable tolling. And, I suspect that only about 5% of such dismissals would involve even a plausible argument for equitable tolling.

Hallmark is appealable to the Ninth Circuit, and I expect that it would be the first case to be appealed. I would be surprised if more than 5-8 deficiency cases got appealed in 2023 to Circuits other than the Ninth Circuit. Over time, though, new orders of dismissal in other case would be issued. If any Circuit disagreed with another Circuit in a post-Boechler ruling, I would anticipate a new Supreme Court opinion to resolve the issue, unless Congress (hopefully) stepped in to resolve the dispute. I do not look forward to so much future appellate litigation.

If the Tax Court in Hallmark holds that the deficiency filing deadline is no longer jurisdictional and is subject to equitable tolling, the court will deny all of the held-up IRS motions to dismiss and discharge any held-up orders to show cause. Such rulings allowing the cases to go forward would be interlocutory rulings, not ordinarily subject to immediate review.

IRC 7482(a)(2)(A) states:

When any judge of the Tax Court includes in an interlocutory order a statement that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation, the United States Court of Appeals may, in its discretion, permit an appeal to be taken from such order, if application is made to it within 10 days after the entry of such order. Neither the application for nor the granting of an appeal under this paragraph shall stay proceedings in the Tax Court, unless a stay is ordered by a judge of the Tax Court or by the United States Court of Appeals which has jurisdiction of the appeal or a judge of that court.

Tax Court Rule 193(a) provides, in part:

For the purpose of seeking the review of any order of the Tax Court which is not otherwise immediately appealable, a party may request the Court to include, or the Court on its own motion may include, a statement in such order that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation. Any such request by a party shall be made by motion which shall set forth with particularity the grounds therefor and note whether there is any objection thereto.

Perhaps being over-confident that it will win the Hallmark case, the IRS has not yet filed any motion under Rule 193(a). It is unclear whether a pro-taxpayer ruling in Hallmark will, without such a motion, contain a statement “that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation.”

It is my hope that, if the Tax Court rules that IRC 6213(a)’s deficiency filing deadline is not jurisdictional and is subject to equitable tolling, both the IRS and DOJ would accept that ruling and would argue in support of that ruling in any appellate court that, on its own, decides to consider the issue. Perhaps my hope is naïve, but one can always hope.

I am aware of only one other late-filed deficiency case in which the taxpayer is already arguing that the IRC 6213(a) filing deadline is not jurisdictional and is subject to equitable tolling, Gruis v. Commissioner, Tax Court Docket No. 11951-22. I mentioned Gruis in my June 28 post. On May 27, 2022, a lawyer for an LITC who is aware of the Boechler opinion late-filed the petition, which asked for equitable tolling. The case involves HOH status and disallowed EITC and CTC. It will be appealable to the Eighth Circuit – the same Circuit that got the law wrong on CDP in Boechler. As an update, surprisingly, on July 15, 2022, the IRS filed an answer in the case. The IRS has not (yet) moved to dismiss for lack of jurisdiction. I don’t know where this case might be going. It may get resolved a different way, though, since the taxpayer also argues that the IRS sent the notice of deficiency to an address that was no longer her last known address (hence, she did not receive the notice in time to timely petition).

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

What’s Happening in Myers and Whistleblower Cases After the Decision the Statute is a Claims Processing Rule

May 4, 2022 by Keith Fogg 4 Comments

In 2019 the D.C. Circuit held in Myers v. Commissioner, 928 F.3d 1025, that the language creating the Tax Court’s basis for jurisdiction to hear whistleblower cases did not create a jurisdictional filing deadline. It also held the time period subject to equitable tolling. So, can the subsequent history of Myers provide insight into how the Tax Court will handle equitable tolling cases in Collection Due Process cases (CDP)? No, it cannot because the Court held off on looking into equitable tolling waiting for the outcome in Boechler, but the post-Myers cases do provide insight into what happens when no one raises the issue of late filing.

Since the Myers decision, it does not appear that the Tax Court has issued any other rulings on whistleblower cases deciding an equitable tolling issue. This signals how rarely equitable tolling issues present themselves. The IRS Whistleblower Office Annual Report to Congress (of which the most recent report posted to IRS.gov is for FYE 2020; see https://www.irs.gov/pub/irs-pdf/p5241.pdf) says in Table 3 on page 24 that there were 118 IRC 7623(b) claims in litigation as of 9/30/20, but then confusingly notes: “There are closed claims that are in litigation. Table 3 identifies only open claims.” Does that mean that Tax Court cases are not in the 118 or are in the 118? This probably means that the 118 cases in litigation are pending Tax Court cases. The Tax Court has reported to Congress that during FYE 2021 there were 63 whistleblower (WB) cases filed. https://www.ustaxcourt.gov/resources/budget_justification/FY_2023_Congressional_Budget_Justification.pdf

The benefit of Myers to taxpayers who file late, however, appears to be in prohibiting the Tax Court from issuing orders to show cause why a whistleblower case should be dismissed for lack of jurisdiction (LOJ). This post will discuss four opinions below, each of which suggests that the Tax Court would have issued orders to show cause to dismiss for lack of jurisdiction due to late filing, had the filing deadline been jurisdictional. This provides a window into what will happen with late filed CDP cases where the IRS does not raise the timing of the filing. In Myers any benefit from the D.C. Circuit opinion as confirmed by the Supreme Court in Boechler will come from the application of equitable tolling.

Looking at the whistleblower cases decided since the Myers decision, Carl Smith found the following cases:

(1) In Whistleblower 15977-18W, T.C. Memo. 2021-143 (12/29/21), the taxpayer lost on summary judgment because the Tax Court upheld a determination by the WB office that the WB did not provide specific enough information. (Query whether the more recent D.C. Circuit case, Li v. Commissioner, would have required the Tax Court to dismiss this case for LOJ because the WB office did not appear to take any action on the claim beyond asking SB/SE to look into the claim. There is no mention of any proceeding done against the taxpayer.) The WB office issued a notice of determination to the WB on Oct. 16, 2017. The WB, who lived overseas, may not have received the notice of determination until after the 30 days to petition expired. In any event, the WB petitioned the Tax Court on Aug. 16, 2018. The IRS did not raise to the Tax Court that the case should be dismissed for late filing. Here’s footnote 3 from the opinion:

Petitioner resided outside of the United States when the petition was filed. In Myers v. Commissioner, 928 F.3d 1025, 1036-1037, 442 U.S. App. D.C. 110 (D.C. Cir. 2019), rev’g and remanding 148 T.C. 438 (2017), the Court of Appeals for the D.C. Circuit held that the 30-day period for filing a petition to initiate a whistleblower action is subject to equitable tolling. The D.C. Circuit is the appellate venue for this case. See sec. 7482(b)(1) (penultimate sentence). We thus follow its precedent. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971). Consistently with Myers, we hold that we have jurisdiction to consider this case. And since neither party has questioned the filing of the petition after the 30-day period or addressed the subject of equitable tolling, we will proceed to consider the pending motions.

The Tax Court did exactly what it should have. It no longer has the right to raise timeliness issues on its own. This will happen more and more now that the CDP cases have entered the pool of cases subject to the claims processing rule.

(2) Similar is Damiani, T.C. Memo. 2020-132, where the court saw that, obviously, the petition was not timely filed. Here’s a bit from the Damiani opinion:

The Office agreed with Mr. Wiggins’ recommendation and on June 14, 2019, issued a final determination letter rejecting petitioner’s claims. The letter stated in pertinent part that “[t]he claim has been rejected because the information submitted did not identify an issue regarding tax underpayments or violations of internal revenue laws.” The letter informed petitioner: “If you disagree with this determination, you have 30 days from the date of this letter to file a petition with the Tax Court.”
Petitioner petitioned this Court for review of the Office’s determination. Her petition was mailed from Germany, postmarked by Deutsche Post on July 31, 2019, and was received and filed by the Court on August 12, 2019.
. . . .
Consistently with Myers, we hold that we have jurisdiction to consider this case. And since neither party has questioned the filing of the petition after the 30-day period or addressed the subject of equitable tolling, we will proceed to consider respondent’s motion for summary judgment.

(3) Also similar is Friedel, T.C. Memo. 2020-131. Here’s a bit from the Friedel opinion:

The Office agreed with both recommendations and issued on April 30 and May 8, 2019, final determination letters rejecting petitioner’s claims. Each letter stated in pertinent part that “[t]he claim has been rejected because the IRS decided not to pursue the information you provided.” The letters informed petitioner: “If you disagree with this determination, you have 30 days from the date of this letter to file a petition with the Tax Court.”
Petitioner petitioned this Court for review of the Office’s determinations. His petition was mailed from Germany, postmarked by Deutsche Post on June 11, 2019, and was received and filed by the Court on June 24, 2019.
. . . .
[S]ince neither party has questioned the filing of the petition after the 30-day period or addressed the subject of equitable tolling, we will proceed to consider respondent’s motion for summary judgment.

(4) Also similar is Stevenson, T.C. Memo. 2020-137, where the court expressed concern that the petition might not have been timely, but did not actually find facts as to the 30-day deadline. The court there wrote:

Section 7623(b)(4) provides that “[a]ny determination regarding an award * * * may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter).” The Office issued its determination letter to petitioner on April 10, 2019. He signed his petition on May 2, 2019, but the mailing date is unclear. See sec. 7502(a). The petition was received and filed by the Court on May 13, 2019, more than 30 days after the date on which the Office issued the determination letter.
. . . .
Since neither party has questioned the filing of the petition after the 30-day period or addressed the subject of equitable tolling, we will proceed to consider respondent’s motion for summary judgment.

In all of these cases, the IRS successfully moved for summary judgment. Perhaps the IRS was so confident it would win on summary judgment that it did not bother to raise the petition untimeliness issues. In the amicus brief the Tax Clinic at the Legal Services Center of Harvard Law School filed for the Center for Taxpayer Rights in Boechler at the cert. stage, we predicted this outcome. It may well turn out that it is more important to taxpayers that the Tax Court can’t raise timeliness issues on its own if a deadline is not jurisdictional than that the taxpayers can also raise equitable tolling.

As the recent post on the application of 7459 pointed out by detailing the number of dismissals in deficiency, CDP, innocent spouse, and WB cases, there will be more (1) cases in which the IRS just misses the late filing and so doesn’t raise the issue than (2) cases where the IRS will raise the issue and the taxpayer will argue for equitable tolling. It may be that the WBs in each of the above cases had an equitable tolling argument (e.g., non-receipt during the 30-day period, like Ms. Castillo), but they never had to present one.

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

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