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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Observations

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

Extended Tax Court Due Dates – Interplay of Guralnik and Notice 2020-23

Yesterday, the IRS added a new Q & A to its coronavirus page:

Q. How does this notice operate with the Tax Court case of Guralnik v. Commissioner, 146 T.C. 230 (2016), which applied Federal Rule of Civil Procedure Rule 6(a)(3)(A) to provide additional time for the filing of a petition when the clerk’s office was closed due to a snow emergency?  Does the taxpayer get the benefit of both periods?

A. Yes, a taxpayer will get the benefit of both periods.  For example, if the last day for filing a petition fell on March 19, 2020, the date that the Tax Court closed, the taxpayer will get the benefit of Guralnik from March 19, 2020 and the benefit of this notice from April 1, 2020 until July 15, 2020.  If the court were to reopen before the expiration of the notice postponement period, the taxpayer will get the benefit of the postponement until July 15, 2020.  If the court reopens after the notice postponement period (that is, after July 15, 2020), the due date for the taxpayer’s petition is extended to the Tax Court’s reopening date under Guralnik and the relief under Notice 2020-23 does not apply.

When I wrote about the interplay of Tax Court deadlines in a prior post, I hedged on how the two provisions would interact and counseled caution.  While the IRS cannot confer jurisdiction on the Tax Court, the Q&A goes a long way in providing comfort that the extension of the Tax Court due date by Guralnik into the period in which the 7508A extension comes into being causes the potentially longer 7508A period to come into play and provide the taxpayer with the benefit of both extensions.

It is great that the IRS, through the Office of Chief Counsel, has provided this guidance.  If you are interested in hearing more about Tax Court timing issues, tune into the CLE program sponsored by the ABA Tax Section tomorrow.  Details here:

The Agony of a Missed Tax Court Deadline, Or, Was That Deadline Really Missed? | April 29 at 1:00 pm Eastern

This webinar is free for ABA Members, LITC and Government Employees.

This timely webinar will discuss issues associated with what may be missed tax court filing deadlines, missed administrative appeal deadlines, and extended refund claim deadlines in an extraordinary time. Potential issues include those associated with access to the court, returned mail from the court, the closing of the court, and the extend filing and claim relief IRS is providing in Notice 2020-23. The IRS has opened the door to jurisdictional relief, and the panelists will discuss that relief as well as the interplay of court rules and court decisions including and since Guralnik to clarify the complex litigating position in which some petitioners may find themselves.

Keith Fogg, Clinical Professor of Law and Director of Federal Tax Clinic, Legal Services Center, Harvard Law School (Moderator)
Sheri Dillon, Partner, Morgan Lewis & Bockius
Carlton Smith, Volunteer, Tax Clinic at the Legal Services Center, Harvard Law School
Elizabeth Maresca, Clinical Professor of Law, Fordham University School of Law
Drita Tonuzi, Deputy Chief Counsel (Operations), Internal Revenue Service

Tax Court Jurisdiction in Late-Filed Deficiency Cases

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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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.

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 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.

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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.

How the Death of a President Impacts Tax Court Jurisdiction

The ever alert commenter-in-chief and occasional guest blogger, Bob Kamman, brought to my attention a Tax Court order issued on February 21, 2019, as a result of the death of President George H. W. Bush in 2018.  It seems that the petitioner in the case, Ms. Makowski, went to the post office on December 5, 2018, the 90th day to mail her petition to the Tax Court.  When she arrived at the post office, it was closed because President Trump had ordered December 5, 2018 to be a day of national mourning for President Bush.  So, Ms. Makowski had to come back to the post office the next day to mail her petition.  When her petition arrived at the Tax Court, the IRS noticed that it was mailed one day late and filed a motion to dismiss for lack of jurisdiction.

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Ms. Makowski responded to the motion by sending the court a letter explaining the problem she had in trying to mail the letter on the 90th day.  The court then issued the following order:

On February 21, 2019, respondent filed in the above-docketed case a Motion To Dismiss for Lack of Jurisdiction, on the ground that the petition herein was not filed within the time prescribed by section 6213(a) or 7502 of the Internal Revenue Code. Respondent attached to the motion copies of a notice of deficiency and corresponding certified mail list, as evidence of the fact that such notice for the taxable years 2015 and 2016 was sent to petitioner by certified mail on September 6, 2018. On March 26, 2019, the Court received from petitioner a document, initially filed as a letter, that is in the nature of an objection to the motion to dismiss. Therein, petitioner explained, and attached documentation supporting, that she had been unable to mail the petition on the December 5, 2018, due date because of the closure of post offices concomitant with the declaration by President Donald Trump of a National Day of Mourning in honor of former President George H.W. Bush. 

Upon due consideration, it is ORDERED that petitioner’s submission filed March 26, 2018, [sic] as a letter shall be recharacterized as an objection to the pending motion to dismiss. 

It is further ORDERED that, on or before April 18, 2019, respondent shall file a response to petitioner’s just-referenced objection, addressing the impact of the National Day of Mourning declaration for purposes of filing deadlines. 

The IRS withdrew its motion because of the Tax Court’s decision in Guralnik.  The case moved forward to decision where the IRS conceded that she had no deficiency for the two years at issue.  Happy ending.

The case demonstrates another way that the shutdown of the overall federal government (think budget impasse as discussed here) or the Tax Court (think snow as discussed here) can impact a taxpayer’s ability to obtain Tax Court jurisdiction or at least to have a petition deemed timely filed, so that the petitioner need not get into the arguments about whether timely filing creates a jurisdictional issue.

It’s a fairly simple lesson at this point, but the issue of government shutdown resulting from the death of a President reminded me of a problem caused by the death of President Nixon in April of 1994.  This remembrance has absolutely nothing to do with tax procedure so stop reading if you are looking for any meaning here.

At the time of President Nixon’s death, I was the District Counsel for the IRS in Richmond, Virginia which meant I was in charge of the group of attorneys representing the IRS in Virginia.  One of the attorneys in the office was going to a training program in Boulder, Colorado.  As I remember, the program ran from Tuesday morning through Thursday afternoon with Monday and Friday as travel days.  The attorney liked to ski and decided to go to Colorado early in order to get in some skiing over the weekend.  The flight cost to the government was the same, and he picked up his expenses for the time before the training program began. 

After he left Richmond and before the training program began, the government announced that Wednesday of the week of the training program would be a day of national mourning for President Nixon.  That caused the office to cancel the training program since it could not be held on Wednesday and that created a big hole in the programming.  By the time of the decision, the attorney was already on the slopes.  This was an era before cell phones and other forms of instant communication, so I called the ski resort and asked it to leave a message on its message board for the attorney to call me.  That failed.  I called the hotel in Boulder where he was going to stay and did connect with him once he arrived there.  He returned to Richmond after receiving the message at the hotel, and we began the process of putting in a travel voucher for a trip to a training program that was cancelled.

Many memos and phone calls later, the government did cover the cost of his airfare and one night’s lodging, but the exercise forever burned in my memory the fact that the government shuts down when a President dies, even though the consequences of the shutdown can be unexpected.  As bad as it seemed when I was writing and calling on behalf of the employee to obtain his reimbursement, I remember that my counterpart in Chicago had an employee who had a fear of flying and took the train from Chicago to Colorado to attend the training.  So, I was not the only one with this headache. 

Shutting down the government creates many ripples.  If you have a Tax Court matter with a due date on the shutdown, keep Guralnik in mind.  This is yet another situation where it can come in handy.

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.

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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.