The Coronavirus Shows Why We Need Equitable Tolling Legislation Now for Judicial Tax Filing Deadlines

Note that after this post below was written, at 9 pm March 18, the Tax Court issued a press release stating that its building is closed and that:

Mail will be held for delivery until the Court reopens. Taxpayers may comply with statutory deadlines for filing petitions or notices of appeal by timely mailing a petition or notice of appeal to the Court. Timeliness of mailing of the petition or notice of appeal is determined by the United States Postal Service’s postmark or the delivery certificate of a designated private delivery service. The eAccess and eFiling systems remain operational. Petitions and other documents may not be hand delivered to the Court.

Under Guralnik, this now extends — to the date the Clerk’s Office reopens — the time for filing in person or mailing a Tax Court petition.

Things are moving fast (finally) in D.C.  On March 13, the President sent a letter to three Cabinet Secretaries and the Administrator of FEMA invoking his power under the Stafford Act to declare a national emergency because of the coronavirus.  Part of the letter stated:  “I am also instructing Secretary Mnuchin to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a).”

On March 18, the IRS issued Notice 2020-17, providing for a 3-month extension (from April 15, 2020 to July 15, 2020) to “Affected Taxpayers” to pay 2019 income taxes (i.e., not any other taxes) – limited to $1 million for individuals and $10 million for C  corporations or consolidated groups.  Affected Taxpayers are defined as “any person with a Federal income tax payment due April 15, 2020” – apparently regardless of where in the world the taxpayers are located.

A paragraph in the Notice also reads:

Affected Taxpayers subject to penalties or additions to tax despite the relief granted by this section III may seek reasonable cause relief under section 6651 for a failure to pay tax or seek a waiver to a penalty under section 6654 for a failure by an individual or certain trusts and estates to pay estimated income tax, as applicable. Similar relief with respect to estimated tax payments is not available for corporate taxpayers or tax-exempt organizations under section 6655.

I take this to mean that if, say, an individual taxpayer paid $1.5 million in income taxes on July 15, the IRS will impose a late-payment penalty on $500,000 of the payment, but the IRS encourages the taxpayers to seek abatement of that penalty by explaining why the coronavirus prevented payment of that $500,000, as well.  I assume that the IRS will be liberal in granting abatements, but a taxpayer will have to ask.

The IRS has, to date, has said nothing about extending any filing deadlines, though I expect it will act on that in the near future.  

Section 7508A allows the IRS to grant payment and filing extensions of up to one year (including for making refund claims, filing refund suits, and filing Tax Court petitions and notices of appeal; Reg. § 301.7508A-1(c)(1)(iv)-(vi)) for people affected by a Presidentially-declared disaster.  However, unless the IRS extends filing deadlines to people and entities worldwide (don’t forget our overseas U.S. taxpayers and foreigners who are taxpayers in the U.S.) and with respect to all taxes, this provision would not be sufficient to help all the persons who reasonably would need extensions to file tax cases in court.  Further, even a one-year extension for all taxes may not be enough, given that it is estimated that a vaccine for the coronavirus might not be available for 18 months.

I hope at least one person reading this post is a Congressional staffer, who can get what I propose into the next round of legislation to address the coronavirus pandemic.  Taxpayers dealing with the coronavirus will understandably miss tax judicial filing deadlines, such as the 30-day period to file a Collection Due Process petition in the Tax Court under § 6330(d)(1) or the 90-day (or 150-day) periods to file deficiency or innocent spouse petitions in the Tax Court under §§ 6213(a) and 6015(e)(1)(A).  Those taxpayers should be forgiven for missing those deadlines in appropriate cases, even if they are not covered by any announced extension to file under § 7508A.  However, currently, the power of the courts to forgive late judicial filings in the tax area is, according to most courts, nonexistent.  I ask Congress to change the law to clarify that tax judicial filing deadlines are not jurisdictional and are subject to equitable tolling.

read more...

Most courts have held that statutory tax judicial filing deadlines are jurisdictional and not subject to equitable tolling.  That’s the case despite the few appellate rulings that Keith and I have yet won holding that certain tax judicial filing deadlines are not jurisdictional and are subject to equitable tolling.  Although we hope for more, we have, to date, only two Circuit Court victories that only apply to tax filing deadlines used by very few people:  The district court wrongful levy filing deadline of § 6532(c); Volpicelli v. United States,  777 F.3d 1042 (9th Cir. 2015); and the Tax Court whistleblower award filing deadline of § 7623(b)(4)Myers v. Commissioner, 928 F.3d 1025 (D.C. Cir. 2019).  Fewer than 200 such petitions/complaints are currently filed each year (combined) in those kinds of cases, and even all the other Circuits to have ruled on the issue of the wrongful levy deadline have ruled the other way. 

Whatever reason that impelled the Supreme Court to hold in United States v. Brockamp, 519 U.S. 347 (1997), that the refund claim filing and payment deadlines of §6511(a) and (b) are not subject to equitable tolling (including administrative problems that might arise because almost a hundred million 1994 returns included claims for refund), the problem of tax judicial filing deadlines is confined to a comparatively very small number of cases.  Currently, fewer than 30,000 tax complaints/petitions are filed annually, and the vast majority of these are filed on time.  It would not be a huge burden on the tax system if equitable tolling could be allowed for the few late-filed complaints/petitions where a plaintiff/taxpayer can give a good excuse for late filing – such as dealing with coronavirus.

If the Article I Court of Appeals for Veterans Claims can employ equitable tolling and district courts can employ equitable tolling in connection with Federal Tort Claims Act suits, I see no reason why tax suits should be excluded from equitable tolling.  So, legislation to change the tax law is urgently needed.

For filings in tax cases in the district courts and the Tax Court, if the clerk’s offices of those courts close during this pandemic, that will give automatic extensions to file initial pleadings until those offices reopen.  See, e.g., Guralnik v. Commissioner, 146 T.C. 230 (2016) (borrowing a rule from the FRCP).  But, it is not clear that clerks offices will have to close during this pandemic.  Indeed, while the Tax Court has canceled certain upcoming trial calendars, it has not (at least yet) closed its clerk’s office to hand-delivered petitions.  Indeed, the Tax Court has announced that its Clerk’s office is still open for filing petitions, though only for four hours a day.  So, Guralnik can’t apply.

Reg. § 301.9100-1 et seq. allows the IRS to extend statutory and regulatory deadlines for making elections.  But, the IRS can’t extend judicial filing deadlines. 

Equitable tolling is generally appropriate only where the defendant [1] has actively misled the plaintiff respecting the cause of action, or [2] where the plaintiff has in some extraordinary way been prevented from asserting his rights, or [3] has raised the precise statutory claim in issue but has mistakenly done so in the wrong forum.

Mazurkiewicz v. New York City Health & Hosps. Corp., 356 Fed. Appx. 521, 522 (2d Cir. 2009) (cleaned up).  Accord Mannella v. Commissioner, 631 F.3d 115, 125 (3d Cir. 2011).  While coronoavirus interference with taxpayer lives (be it illness, quarantine, tending to others who are sick, or simply not being able to access necessary paperwork because of lock-downs) would likely fall into the “extraordinary circumstances” usual reason, equitable tolling is not limited to only those usual reasons.  As the Supreme Court has said:

The “flexibility” inherent in “equitable procedure” enables courts “to meet new situations [that] demand equitable intervention, and to accord all the relief necessary to correct . . . particular injustices.”  [Hazel-Atlas Glass Co. v. Hartford Empire Co., 322 U.S. 238, 248 (1944)] (permitting postdeadline filing of bill of review).  Taken together, these cases recognize that courts of equity can and do draw upon decisions made in other similar cases for guidance.  Such courts exercise judgment in light of prior precedent, but with awareness of the fact that specific circumstances, often hard to predict in advance, could warrant special treatment in an appropriate case.

Holland v. Florida, 560 U.S. 631, 650 (2010).

The former and current National Taxpayer Advocates have agreed with my push to get equitable tolling into judicial tax filing deadlines.  NTA 2017 Annual Report to Congress, Vol. 1, at pp. 283-292 (Legislative Recommendation Number 3); NTA 2018 Annual Report to Congress, 2019 Purple Book at pp. 88-90; NTA 2019 Annual Report to Congress, 2020 Purple Book at pp. 85-87.

And, I long ago drafted legislation to accomplish this.  Here’s my draft.  No doubt Congressional staffers should give it a review, as I am no expert drafter of legislation.  I would:

Amend section 7442 to add new section (b) as follows:

(b) Timely Filing Nonjurisdictional.—Notwithstanding any other provision of this title,

  • all periods of limitations for filing suit in the Tax Court are subject to waiver, forfeiture, estoppel, and equitable tolling; and
  • an order of the Tax Court dismissing a suit for untimely filing shall not be considered a ruling on the merits and shall not preclude the litigation of any later claim or issue brought in the Tax Court or any other court.

Amend section 7459(d)’s last sentence to add before the period:  “or untimely filing”.

Amend section 6532 to add a new subsection (d) reading:

(d) Timely Filing Nonjurisdictional.—The time periods set out in subsections (a) and (c) are subject to waiver, forfeiture, estoppel, and equitable tolling.

Jurisdiction of Wrongful Levy Claims

The case of i3Assembly, LLC v. United States, No. 3:18-cv-00599 (N.D.N.Y 2020) presents a sad outcome for a company taking over a government contract from a delinquent taxpayers and raises issues of jurisdiction discussed here on many occasions.  Because of a snafu, the IRS took money that should have been paid to i3Assembly and used it to satisfy the outstanding tax liability of the company that had the government contract before i3Assembly took it over. 

Although the company raises issues of equitable tolling in litigating the case, it is not clear that either the company or the Department of Justice Tax Division attorney have been closely following the many threads of discussion on jurisdiction present in this blog.  That’s unfortunate for the company, which may have had some arguments that it did not yet present, and disappointing from the government’s perspective if it neglected to cite to on point case law in other circuits adverse to the position it took in this case.

read more...

 In 2015 i3Assembly acquired certain assets from VMR Electronics and it assumed certain liabilities; however, it expressly did not assume VMR’s outstanding liability to the IRS.  i3Assembly had a different EIN, used its own labor to fulfill the contracts and then sent invoices for the work it performed.  Instead of paying i3Assembly, the government sent the money to the IRS in response to a levy.  This levy was a Federal Payment Levy Program levy served on July 18, 2016.  The IRS sent a post-levy CDP notice to VMR, which probably was surprised and delighted to find out its obligation was being paid by i3Assembly.

After the first levy, a second levy occurred on July 22, 2016 and a third on November 16, 2016.  All of the notices were going to VMR.  i3Assembly was probably trying to figure out what was happening and attributed some of the delay in payment to dealing with the Defense Department and the government in general but it was trying to find out what was happening to its invoices.  The VP of i3Assembly had several telephone conversations with IRS officials regarding the wrongful levy of its funds starting in October 2016 and going through July 18, 2017, but i3Assembly never received a notice of levy.

On October 31, 2017, i3Assembly submitted an administrative wrongful levy claim to the IRS.  The IRS disallowed the wrongful levy claim for the first and second seizure stating that the claims were not filed within nine months of the levy.  It subsequently disallowed the claim for the third levy stating that i3Assembly failed to establish that the payment did not belong to VMR or that i3Assembly had an interest in the payment superior to the IRS.

On May 21, 2018 i3Assembly filed suit.  The IRS moved to dismiss and alternatively moved for summary judgment.  The court discussed the Federal Payment Levy (FPL) and the fact that it acts as a continuous levy.  The IRS argued that i3Assembly had to raise its concerns with nine months of the time the IRS put out the FPL, even though it had no idea the FPL existed or that it would take money intended for i3Assembly. 

i3Assembly admitted that it did not file its claim for wrongful levy within nine months of the first and second levies under the FPL but argued that equitable tolling should suspend the time frame for filing the wrongful levy claim.  It argues that its claim was timely for the third levy based on the date the funds were actually seized and i3Assembly put on notice of the seizure.  According to i3Assembly that occurred on July 22, 2017.  The IRS argued that the date of the notice is irrelevant because it had no duty to notify i3Assembly, and the time limit starts to run on the date the person possessing the property received the notice of levy back in July 2016.

i3Assembly pointed out the IRS argument creates an absurd result, because the period for filing a claim could pass before any property was seized or the party whose property was taken would have any idea of the taking.  The IRS responded that the statute and case law do not require notice to the person claiming their property was wrongfully taken and that the Second Circuit in Williams v. United States, 947 F.2d 37, 39 (2d Cir. 1991) had already determined that notice to the third party was unnecessary when calculating the time period.  The levy at issue in Williams, however, was not a continuous levy like the FPL.  When the FPL was served, there was no property to which it attached.  So, i3Assembly would not under any circumstances have received notice at that time.

The court states that:

On this record, the Court cannot determine what, if any, notice was provided to Plaintiff regarding the continuing levy under FPLP before the statute of limitations [on filing the wrongful levy claim] had run.  Absent any evidence regarding what information was provided to Plaintiff, and further briefing from the Defendant regarding due process, the Court at this time denies the motion to dismiss Count One with prejudice to renewal.

The court then discussed equitable tolling.  It found that i3Assembly had not alleged facts that would support equitable tolling for the first and second levies. With respect to the third levy, the court seems to find it possible that i3Assembly did have facts in the record that could support equitable tolling, but then it shifted to the need for i3Assembly to show that the statute at issue is one to which equitable tolling could apply.  In other words, the court needs to know if the time period for filing a wrongful levy claim is a jurisdictional time period.  In looking at this issue, it cites to cases from the 1990s and ignores all of the law on this issue that has occurred in the past 15 years.

I have not looked at the briefs but even if i3Assembly attorneys did not find the relevant case law, I would have expected the DOJ attorney to cite to the more recent case law.  In particular the 9th Circuit has ruled in Volpicelli v. United States, 777 F.3d 1042 (9th Cir. Jan. 30, 2015) that the time period in the wrongful levy statute is not a jurisdictional time frame.  I would have expected this decision to receive some mention as I would have expected the more recent and relevant law on jurisdiction to receive some mention.  Perhaps, i3Assembly’s attorneys will find the newer case law and find the Volpicelli opinion and file an appeal.  Carl has written a post on the last Second Circuit case, Mottahedeh v. United States, to seek equitable tolling in the context of wrongful levy. In that case, the court declined to grant equitable tolling but did so without citing to the recent Supreme Court case law as well.

For the Second Time in About Five Years, the SG Decides Not to Take a Tax Equitable Tolling Case to SCOTUS

Just another short update on Myers v. Commissioner, 928 F.3d 1025 (D.C. Cir. 2019), on which I blogged here.  In that opinion, the D.C. Circuit held that the 30-day deadline in section 7623(b)(4) in which to file a whistleblower award petition in the Tax Court is not jurisdictional and is subject to equitable tolling under recent non-tax Supreme Court case law.  The DOJ had initially sought en banc rehearing of the Myers opinion, contending that the opinion could not be reconciled with the opinion in Duggan v. Commissioner, 879 F.3d 1029 (9th Cir. 2018), on which I blogged hereDuggan held that the 30-day deadline in section 6330(d)(1) in which to file a Collection Due Process petition in the Tax Court is jurisdictional and not subject to equitable tolling.  Since the 2006 language of section 7623(b)(4) was rather obviously cribbed from the 2000-version language in section 6330(d)(1), I agree with the DOJ that the two opinions cannot be reconciled.

After the D.C. Circuit denied rehearing, the Solicitor General had to consider seeking certiorari in Myers.  Clearly, there was some struggle in the DOJ to figure out what to do, since the SG twice requested extensions of the time to file a cert. petition.  But, the last extension expired on March 2, and no further extension was sought or petition was filed by that date.  Thus, the D.C. Circuit’s opinion in Myers now controls all Tax Court whistleblower award cases under Golsen, since, under section 7482(b)(1), unlike most Tax Court cases, whistleblower award cases are only appealable to the D.C. Circuit.

read more...

This is the second time in about five years that the DOJ, after losing a tax equitable tolling case and being unsuccessful in seeking en banc rehearing because of a conflict among the Circuits, has, in the end, decided not to seek cert.  The prior case was Volpicelli v. United States, 777 F.3d 1042 (9th Cir. 2015), on which I blogged hereVolpicelli held that the then-9-month (now 2-year) deadline in section 6532(c) in which to file a district court wrongful levy complaint is not jurisdictional and is subject to equitable tolling under recent non-tax Supreme Court case law.  Volpicelli is in conflict with several section 6532(c) opinions of other Circuits, including Becton Dickinson and Co. v. Wolckenhauer, 215 F.3d 340 (3d Cir. 2000), but all of the conflicting cases were decided before the new Supreme Court case law on jurisdiction began in 2004.

I am a little bummed out by the SG’s chickening out on seeking cert. in Myers, since in both Volpicelli and Myers, I wrote or co-wrote amicus briefs in the cases on behalf of tax clinics with which I had been then affiliated (Cardozo and Harvard, respectively).  And, more than the usual amicus, I was otherwise instrumental in pushing these cases forward as test cases.  I guess it is just my luck that any potential Supreme Court case I help generate gets passed on by the SG after much furor and ado below.  Given that I am retired and now just volunteering with the Harvard clinic, Myers was likely my last chance at getting to SCOTUS on an issue I cared strongly about.  But, maybe I should be like Yoda and sigh, “After all, there is another”.  In Boechler, P.C. v. Commissioner, Eight Circuit Docket No. 19-2003, the Eight Circuit has been asked to hold the section 6330(d)(1) filing deadline not jurisdictional and subject to equitable tolling.  Keith and I (on behalf of the Harvard clinic) are amicus there, as well.  Oral argument is expected shortly in Boechler, as the briefing is complete.

In a December post, I pointed out that the Tax Court had been holding back from deciding a number of whistleblower award cases pending the SG’s action regarding cert. in Myers.  See Tax Court orders in Aghadjanian v. Commissioner, Docket No. 9339-18W (dated 9/4/19 and 12/9/19); McCrory v. Commissioner, Docket No. 3443-18W (dated 9/4/19 and 12/6/19); Bond v. Commissioner, Docket No. 5690-19W (dated 10/8/19); Bond v. Commissioner, Docket No. 6267-19W (dated 10/30/19); Bond v. Commissioner, Docket No. 6982-19W (dated 11/5/19).  That has continued in other dockets.  See Tax Court orders in Berleth v. Commissioner, Docket No. 21414-18W (dated 1/22/20 and 2/2/20); Friedel v. Commissioner, Docket No. 11239-19W (dated 2/14/20); Damiani v. Commissioner, Docket No. 14914-19W (dated 2/18/20).

And, in the remand of Myers from the D.C. Circuit, we can all look forward to the Tax Court for the first time being confronted with deciding what constitutes substantive grounds for equitable tolling of a Tax Court filing deadline.  To decide this question, the Tax Court will have to borrow case law from other courts, including the Supreme Court, since the Tax Court has never before believed it had the power to grant equitable tolling.

Mailing the Collection Due Process Request

The IRS recently released a program manager technical assistant (PMTA) memo entitled Treatment of Incorrectly-addressed CDP Hearing Requests.  This memo reverses the advice of a similar memo written in 2013.  The issue concerns the fate of taxpayers seeking to obtain a Collection Due Process (CDP) hearing who timely mail their CDP hearing request to what the IRS considers to be the wrong office.  In the 2013 advice the IRS took the position that if the “wrong” IRS office got the request to the “right” IRS office before the end of the CDP request period (which differs slightly depending on whether it is a lien or levy case but in both instances is a short window of approximately 30 days from the date the IRS sends the notice), then the taxpayer could have a CDP hearing.  If, however, the wrong office did not get the notice to the right office within the 30-day period, the taxpayer lost the right to have a CDP hearing and would receive only an equivalent hearing.

I wrote an article about this issue in Tax Notes in November of 2018 available here.  The article builds on the work of the tax clinic at Harvard concerning jurisdiction and explains that the 30-day time period to request a CDP hearing is not a jurisdictional time period.  We discussed this issue previously here, here and here.  In the PMTA the IRS essentially agrees with the conclusion that the notice need not be received in the “right” IRS office within the 30-day window, though the PMTA does not address the issue using jurisdictional language in the portion of the PMTA made available to the public.  Perhaps the IRS is concerned that taxpayers might litigate about this issue.  Imagine.

read more...

One of the biggest hurdles facing taxpayers seeking a CDP hearing is the CDP notice.  Not only is the notice that the IRS sends generally not well-designed to give someone notice of an impending deadline impacting their right to go to court, but the notice provided affirmatively confusing instructions concerning where to send the request for a CDP here.  The IRS acknowledged in the PMTA that the notice was not a model of clarity:

This CDP notice can take many forms depending on, for example, the type of collection action (NFTL filing, levy), the issuing component (Automated Collection, Field Collection), and the type of levy (Federal Payment Levy Program, State Income Tax Levy Program). Some notices, like the LT11, serve the dual purpose of informing the taxpayer of their CDP rights and soliciting payment. To facilitate this dual purpose, the notices have one address for submitting the hearing request printed at the top of the first page, and another address for submitting payment printed on a removable payment voucher at the bottom of the first page. These notices are printed double-sided, and the payment address is printed to appear through the cellophane window on the envelope enclosed with the letter. Because the notices are printed double-sided, in addition to appearing on the top of the first page, the mailing address for the CDP hearing request may also be printed on the reverse side of the payment voucher. The payment voucher and CDP hearing request addresses may be the same, but often times they are not. Thus, for this type of notice, the taxpayer can inadvertently mail the CDP hearing request to the payment voucher address simply by inserting the voucher in the envelope backwards. In addition to the LT11, the CP92, CP77/78, and CP90/297 have the payment address printed on one side of the voucher and the mailing address for the CDP hearing request printed on the other side. Other notices, like the Letter 3172, do not solicit payment, but they do have the originating address at the top of the page and the mailing address for a CDP hearing request at the bottom of the page.

So, the IRS suggested giving taxpayers a CDP hearing if the request for the hearing is mailed to the IRS within the appropriate time frame:

Because of the confusion caused by including multiple addresses on current versions of the CDP notices, we recommend that the Service determine timeliness based on the date the request was mailed to the wrong office, so long as the address of the wrong office was shown on the CDP notice (such as the payment voucher address on the LT11 or the originating office on the Letter 3172). This recommendation does not conflict with Treas. Reg. §§ 301.6320-1(c)(2) Q&A-C6 & 301.6330-1(c)(2) Q&A-C6, which state that taxpayers must send the CDP hearing request to “the IRS office and address as directed on the CDP notice.” Any addresses on the notice should be deemed the “address as directed on the CDP notice.” The June 2013 PMTA should no longer be followed.

This change in advice should open up the CDP process for a number of taxpayers who send their request to the wrong place.  This is not necessarily the end of the story about timeliness and the CDP request.  Certainly, if a taxpayer mails the request late but has a good reason for doing so, the late mailing of the CDP request should not act as an automatic bar to obtaining a CDP hearing.  Taxpayers in this situation should look to the arguments regarding jurisdiction and equitable tolling to fine situations in which even a late mailed request could still result in a CDP hearing.

The PMTA is welcome news.  The CDP summit work, described in prior posts here and here, deserves credit for engaging the IRS to make improvements in this area.  I hope that this is one of many improvements that the IRS can make administratively.  I also hope this effort also suggests that the IRS will take a hard look at the CDP notices that it issues and the location for making a CDP request.  The notices need significant restructuring to make them more appropriate vehicles for informing taxpayers of their right to a CDP hearing.  The current notices place far too much emphasis on seeking payment and too little information on the right to request a hearing.  I know that members of the CDP summit would be happy to work with the IRS to help to write more effective notices that protect and preserve taxpayer rights.

Additionally, the IRS could make it much easier to make the request by picking a single point of contact for the nation.  It could create a single fax number such as the one used by the CAF unit.  It could create a single mailing address.  The process of making the request does not need to be complicated.  The IRS can move the information around from the single point of contact to the offices that need the information.  It does this regularly with Tax Court petitions, powers of attorney and other documents.  Doing so would also be consistent with the practices of other federal agencies who have similar types of hearing requests being received.

Kudos to the IRS for taking this step.  Let’s work together to keep up the momentum.

SG Seeks Extension to File Cert. in Myers

A further quick update:  Today, the Solicitor General asked the Supreme Court to allow it 30 more days (until February 1, 2020) to file a petition for certiorari in Myers.  A copy of the request can be found here.  I am told by people who practice regularly in the Supreme Court that, these days, if the SG is considering filing a cert. petition, he always now first asks for an extension to file.  Thus, the lack of an extension request would indicate that the SG was not going to file a cert. petition.  But, they also tell me that the request for an extension is not always a prelude to an actual cert. petition.  So, stay tuned.

D.C. Cir. Myers Whistleblower Opinion Status Affecting Some Other Tax Court Cases

Just a short update post.  We blogged here last summer when the D.C. Circuit in Myers v. Commissioner, 928 F.3d 1025 (D.C. Cir. 2019), reversed the Tax Court and held that the petition filing deadline at section 7623(b)(4) for a whistleblower award review proceeding is not jurisdictional and is subject to equitable tolling under recent non-tax Supreme Court case law.  We also reported here when the D.C. Circuit rejected a DOJ petition and refused to rehear the case en banc.  The Solicitor General has not yet decided whether to file a petition for cert. in Myers.  He must do so, if at all, by January 2, 2020.  In the meantime, the Tax Court has put all whistleblower cases involving late filing on hold.

read more...

As a result of Myers, the Tax Court has been put in a bit of a quandary as to what to do with late-filed whistleblower award cases (whether or not the petitioners therein have any argument for equitable tolling).  There are currently five whistleblower cases pending in which the IRS has moved to dismiss the case for lack of jurisdiction for being late filed.  Since all whistleblower cases are appealable to the D.C. Circuit under section 7482(b)(1)(flush language), the Tax Court under Golsen will have to follow whatever happens ultimately in Myers.  If the SG does not seek cert. and the petitioners filed late and do not make any successful equitable tolling argument, then the Tax Court will have to dismiss the cases on the merits, not for lack of jurisdiction.  Given that there is no other court in which such petitioners can litigate such awards (or lack thereof), a loss in the Tax Court on the merits or for lack of jurisdiction is probably of no practical difference to the petitioners.  But, the Tax Court cares about whether it has jurisdiction to rule or not.

So, in each of the five cases, the Tax Court has decided simply not to rule on the IRS motions at this time, but to order the IRS to provide status reports on the progress of the Myers opinion becoming final.  See Tax Court orders in Aghadjanian v. Commissioner, Docket No. 9339-18W (dated 9/4/19 and 12/9/19); McCrory v. Commissioner, Docket No. 3443-18W (dated 9/4/19 and 12/6/19); Bond v. Commissioner, Docket No. 5690-19W (dated 10/8/19); Bond v. Commissioner, Docket No. 6267-19W (dated 10/30/19); Bond v. Commissioner, Docket No. 6982-19W (dated 11/5/19).

Although arguably the language in section 7623(b)(4) is virtually identical to that in the Collection Due Process (CDP) provision at section 6330(d)(1), the Tax Court has not been holding up rulings on similar CDP case motions to dismiss – still following its holding in Guralnik v. Commissioner, 146 T.C. 230, 235-238 (2016), that the CDP filing deadline is jurisdictional and not subject to equitable tolling under recent Supreme Court case law.  The Ninth Circuit agreed with Guralnik in Duggan v. Commissioner, 879 F.3d (9th Cir. 2018).  A case on the CDP filing deadline is currently pending before the Eighth Circuit, where briefing is complete, and the case is awaiting oral argument (not yet scheduled).  Boechler, P.C. v. Commissioner, 8th Cir. Docket No. 19-2003.  In Boechler, the taxpayer asks the court to follow Myers and not Duggan.  Here are links to the briefs filed in the Boechler case:  the brief for the appellant, an amicus brief filed by the Harvard clinic, the brief for the appellee, and the reply brief for the appellant.  No doubt, the existence of the Boechler case will be one of the things that the SG will consider in deciding whether to seek cert. in Myers

Whatever the SG does about Myers, the arguments therein are not going away anytime soon with respect to at least some other Tax Court jurisdictions.

At least one other practitioner has contacted Keith and me and is considering raising the Myers arguments in pending Tax Court CDP cases appealable to a Circuit that hasn’t spoken yet on the arguments.  Further, as we have blogged before, there are two late-filed deficiency jurisdiction cases that were argued to the Ninth Circuit on October 22, 2019 in which the Myers arguments were raised.  Organic Cannabis Foundation LLC v. Commissioner, 9th Cir. Docket No. 17-72874, and Northern California Small Business Assistants, Inc. v. Commissioner, 9th Cir. Docket No. 17-72877.  A ruling in those cases could come any day now.

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

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

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

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

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

read more...

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

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

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

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

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

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

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

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

Observations

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

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

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