Last Date to perform act

Equitable Tolling Case Moving Forward in Tax Court

March 10, 2023 by Keith Fogg 3 Comments

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

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

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

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

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

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

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

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

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

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

With respect to equitable tolling, the court states:

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

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

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

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

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

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

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

DOJ and Another 3d Cir. Panel Muddy Waters as to Source of Tax Court’s Deficiency Jurisdiction

March 9, 2023 by Carlton Smith 2 Comments

On March 7, 2023, there was an oral argument before the Third Circuit in Culp v. Commissioner, 3d Cir. Docket No. 22-1789. Here’s a link to the audio. Culp presents the identical issues addressed in Hallmark v. Commissioner, 159 T.C. No. 6 (Nov. 29, 2022) – i.e., whether the deficiency petition filing deadline in the first sentence of I.R.C. § 6213(a) is jurisdictional or subject to equitable tolling. In December, I did an 8-part post on various things I thought the Tax Court got wrong in Hallmark.

In this post, I wanted to highlight a development in the Third Circuit (caused by the DOJ) in a precedential opinion issued yesterday, Skolnick v. Commissioner, 2023 U.S. App. LEXIS 5502 – i.e., a day after the Culp oral argument.

One fight in Culp (perhaps the key fight) is whether the first sentence of I.R.C. § 6213(a) contains a clear statement from Congress that the filing deadline therein is jurisdictional. The Supreme Court has said that filing deadlines are not jurisdictional unless there is a clear statement from Congress making them so. However, also, the Supreme Court “has often explained that Congress’s separation of a filing deadline from a jurisdictional grant indicates that the time bar is not jurisdictional.” United States v. Kwai Fun Wong, 575 U.S. 402, 411 (2015) (citations omitted).

In their briefs, the Culps (like the taxpayer in Hallmark) argued, in the alternative, that (1) if the Tax Court’s jurisdiction to hear deficiencies is in I.R.C. § 6213(a)’s first sentence, then there is no clear statement in the sentence making the filing deadline jurisdictional, and (2) I.R.C. § 6214(a), not I.R.C. § 6213(a), is the true source of the Tax Court jurisdiction to redetermine deficiencies, even those not greater than the deficiency set forth in the notice. Although the Culps need not win the I.R.C. § 6214(a) argument to win their case, certainly, if the jurisdictional grant is held to be in I.R.C. § 6214(a), then Congress has separated the filing deadline from the jurisdictional grant – triggering the Supreme Court’s instruction to treat the filing deadline as not jurisdictional.

For the detailed argument that I.R.C. § 6214(a) provides the basis of the Tax Court’s jurisdiction and the citation of several opinions by three sitting Tax Court judges who signed the Hallmark opinion who have previously stated that I.R.C. § 6214(a) is the source of the Tax Court’s deficiency jurisdiction, see my post on Hallmark here . Both the Hallmark opinion’s holding and the DOJ’s argument in Culp are that I.R.C. § 6214(a) is only the source of the Tax Court’s jurisdiction to redetermine deficiencies in excess of those set out in the notice, while I.R.C. § 6213(a) is the source of the Tax Court’s jurisdiction to redetermine deficiencies to numbers equal to or below those set out in the notice.

In Skolnick v. Commissioner, a hobby loss case, where the IRS was not arguing for an increased deficiency, a 3-judge panel yesterday wrote: “The Tax Court had jurisdiction under 26 U.S.C. §§ 6214 and 7442.” Id., slip op. at 9. The panel got that sentence from the first page of the DOJ’s Skolnick brief, which stated: “The Tax Court had jurisdiction pursuant to Sections 6214 and 7442 of the Internal Revenue Code of 1986 (26 U.S.C.) (I.R.C. or Code).” So much for DOJ consistency on what § 6214(a) does.

The Judges on the Third Circuit panel in Culp are Shwartz, Bibas, and Ambro. The parties had briefed Culp before Hallmark was decided. Shortly before the oral argument, the Culp panel asked for letters from the parties and amicus on the impact of the Hallmark opinion on the Culp case. Keith, Audrey Patten, and I are counsel for amicus, The Center for Taxpayer Rights.

After reading Hallmark and the letters, the panel was skeptical that the Tax Court got Hallmark right. Although judges can and do change their minds after oral argument, both I and others took the oral argument as a sign that the panel is now leaning toward holding that the deficiency petition deadline is not jurisdictional and is subject to equitable tolling. If they do so, this will set up a Circuit split that will take the issues of Tax Court petition deadlines back to the Supreme Court in 2024 or 2025. Last time, in Boechler v. Commissioner, 142 S. Ct. 1493 (2022), the Supreme Court held the Collection Due Process (CDP) petition deadline is not jurisdictional and is subject to equitable tolling. My guess is that it’s about 70% likely that the Supreme Court would come to the same conclusions as to the deficiency filing deadline if Culp went up on cert. Fasten your seatbelts.

The Third Circuit has made previous statements in precedential opinions that I.R.C. § 6213(a) is the source of the Tax Court’s deficiency jurisdiction. See, e.g., Sunoco Inc. v. Commissioner, 663 F.3d 181, 187 (3d Cir. 2011) (“The Tax Court’s principal basis for jurisdiction is I.R.C. § 6213(a), 26 U.S.C. § 6213(a). That section of the Tax Code gives the Tax Court jurisdiction to redetermine a ‘deficiency’. . . .”). Before Skolnick, the Culp panel might have felt bound by those statements, even though they were not based on briefing the issue as between I.R.C. § 6213(a) and I.R.C. § 6214(a), and whether or not either provision of the Code was the source of the Tax Court’s jurisdiction had no impact on how those cases would be decided. In Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 91 (1998), the Supreme Court stated that such statements should be considered “drive-by jurisdictional rulings”, entitled to no weight.

Both the statement in Sunoco and the statement in Skolnick are arguably drive-by jurisdictional rulings. However, even if they are not, they clearly now set up a precedential-opinion conflict within the Third Circuit as to the source of the Tax Court’s deficiency jurisdiction. So, the Culp panel is now free to look deeply into this issue and make its own ruling.

Further, Skolnick’s statement that I.R.C. § 6214(a) is the source of the Tax Court’s deficiency jurisdiction undermines any argument that I.R.C. § 6213(a)’s first sentence contains a clear statement that its filing deadline is jurisdictional.

That the Culp panel was concerned about this issue is evident from the following two questions asked by Judge Shwartz at the oral argument:

How is [the argument that 6214(a) gives the Tax Court jurisdiction to redetermine deficiencies] incorrect, when the specific language of 6214(a) says, quote, that the Tax Court shall have jurisdiction to redetermine the correct amount of the deficiency?

. . . . If it is not in 6214(a) — as Judge Ambro and I are asking you — where is it in 6213 that says that — that gives the Tax Court jurisdiction to review these deficiency notices?

Filed Under: Last Date to perform act, Tax Court

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 8

December 15, 2022 by Carlton Smith 2 Comments

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

On page 15 of the slip opinion, Hallmark observes that IRC 6213(a) also contains a requirement that there be a notice of deficiency:

The requirement of a valid NOD and the 90-day deadline are inseparably linked in that sentence. If, as Hallmark contends, the 90-day deadline were not jurisdictional, then we do not see how the requirement of a valid NOD could (as the Supreme Court has held) be jurisdictional. Rather, both prerequisites would then have to be treated as mere claim-processing rules, which might be waived and which, if invoked, would result in dismissal not for lack of jurisdiction but for failure to state a claim—i.e., a merits determination. But that is a thought experiment. No court has ever denied (and Hallmark does not dispute) that the Tax Court’s jurisdiction over a deficiency case depends on the issuance of the NOD.

How do I respond? Well, the Tax Court is right that IRC 6213(a) (which contains both a notice of deficiency and a petition requirement) arguably sets out two more claim-processing rules than just the filing deadline. However, the Hallmark opinion in fact solves the issue by, on the same page, citing Laing v. United States, 423 U.S. 161 (1976), which states: “A deficiency notice is of import primarily because it is a jurisdictional prerequisite to a taxpayer’s suit in the Tax Court for redetermination of his tax liability.” Id. at 165 n.4. My solution is stare decisis: That statement from Laing has existed for almost 50 years, so I think the Supreme Court will follow the statement if the issue is ever presented to the Court.

IRC 6213(a) would not be unique in having a filing deadline that is not jurisdictional but having other predicate requirements in the same sentence that are jurisdictional. (By the way, I have never argued that because IRC 6214(a) is the primary basis of the Tax Court’s deficiency jurisdiction, no other provision of the Code could provide additional jurisdictional requirements.)

There have been other Supreme Court opinions involving statutes containing a filing deadline in a sentence that also contains procedural requirements that certain administrative steps be taken before a petition or complaint may be filed. In these cases, the Supreme Court has treated the administrative steps as jurisdictional, but treated the filing deadline not jurisdictional.

In Weinberger v. Salfi, 422 U. S. 749, 763-764 (1975), the Court interpreted 42 U.S.C. § 405(g), the first sentence of which provides:

Any individual, after any final decision of the Commissioner of Social Security made after a hearing to which he was a party, irrespective of the amount in controversy, may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision or within such further time as the Commissioner of Social Security may allow.

The Supreme Court in Salfi wrote:

Section 405(g) specifies the following requirements for judicial review: (1) a final decision of the Secretary made after a hearing; (2) commencement of a civil action within 60 days after the mailing of notice of such decision (or within such further time as the Secretary may allow); and (3) filing of the action in an appropriate district court, in general that of the plaintiff’s residence or principal place of business. The second and third of these requirements specify, respectively, a statute of limitations and appropriate venue. As such, they are waivable by the parties [read: not jurisdictional], and not having been timely raised below, see Fed. Rules Civ. Proc. 8(c), 12(h)(1), need not be considered here. We interpret the first requirement, however, to be central to the requisite grant of subject-matter jurisdiction – the statute empowers district courts to review a particular type of decision by the Secretary, that type being those which are “final” and “made after a hearing.”

Id. at 763-764. (In Boechler, the Supreme Court cited this passage from Salfi. See 142 S. Ct. at 1499.)

A similar case is Sebelius v. Auburn Regional Med. Cntr., 568 U.S. 145 (2013) (interpreting 42 U.S.C. § 1395oo(a)), also cited by the Supreme Court in Boechler, 142 S. Ct. at 1499. I quote from Auburn:

Amicus urges that the three requirements in [the single sentence of] § 1395oo(a) are specifications that together define the limits of the PRRB’s jurisdiction. Subsection (a)(1) specifies the claims providers may bring to the Board, and subsection (a)(2) sets forth an amount-in-controversy requirement. These are jurisdictional requirements, amicus asserts, so we should read the third specification, subsection (a)(3)’s 180-day limitation, as also setting a jurisdictional requirement.

Last Term, we rejected a similar proximity-based argument.

568 U.S. at 155.

In Auburn, the Court did not contest the amicus’ argument that the conditions in subsections (a)(1) and (a)(2) are jurisdictional.

Further, if you think about Boechler, IRC 6330(d)(1) contains a jurisdictional grant, “(and the Tax Court shall have jurisdiction with respect to such matter)” that is preceded both by the apparent claim-processing requirements that there have been a notice of determination and a Tax Court petition. The opinion is about whether the jurisdictional grant refers to (1) the notice of determination, (2) the petition, and (3) the filing deadline. The Court opts for the holding that the jurisdictional grant does not clearly state that the filing deadline is jurisdictional. The court thereby lets one conclude that it thinks the issuance of a notice of determination and the filing of a Tax Court petition are the jurisdictional prerequisites – though it does not say this explicitly.

There is nothing incongruous about a sentence containing multiple claim-processing rules, some of which are still going to be held jurisdictional.

Filed Under: Last Date to perform act, Tax Court

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 7

December 14, 2022 by Carlton Smith 3 Comments

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

In the sixth part of this post, I had bemoaned the Hallmark court’s failure to consider information that I dug up (and which Hallmark provided to the court). The information was research that led me to estimate that 600 Tax Court deficiency cases would be dismissed for lack of jurisdiction for late filing in a typical year. I also found that if the deficiency filing deadline was held not jurisdictional, then about 150 of such cases would continue in the court undismissed each year because the Tax Court would cease policing the issue of late filing and the IRS would miss late filing in those cases. I estimated that only 30 cases a year would involve taxpayers who would plead equitable tolling in their deficiency cases. It is hard to say how many of those 30 taxpayers would actually get equitable tolling (either from IRS attorneys who did not raise or raised, but later conceded, a late filing merits statute of limitations defense or through court rulings), but let’s assume for now that half would – i.e., 15 taxpayers’ cases continuing in the court via equitable tolling. So, I can estimate that if the filing deadline is considered not jurisdictional and subject to equitable tolling, roughly 165 of the 600 taxpayers each year will benefit in that their Tax Court cases will not be dismissed.

In my research, conversely, I also attempted to estimate how many taxpayers each year are helped by a ruling that the deficiency filing deadline is jurisdictional. In theory, every one of the 600 taxpayers who will have their Tax Court case dismissed for late filing for lack of jurisdiction faces no res judicata problem under current law that might precluded them from, after dismissal, paying and suing for a refund in the district court or Court of Federal Claims (CFC). However, only 188 refund suits were brought, under any circumstances, in the CFC and the district courts, combined, in the fiscal year ended September 30, 2020. IRS Data Book 2020 at 67 (Table 29) – a figure typical of pre-COVID-19 pandemic years. Obviously, not all those 188 refund suits were brought by taxpayers who previously filed late deficiency petitions in the Tax Court. Looking at refund suit opinions all issued in 2021 that I found using the LEXIS search terms “refund and (Tax Court) and dismiss!”, there were 44 total district court and CFC opinions to read. It turned out that none of them set forth a fact pattern of the taxpayer, after having been dismissed from the Tax Court for late filing a deficiency case, later paying in full and suing for a refund.

In a prior post, Keith mentioned how we found one case, Jolly v. United States, 2021 U.S. Claims LEXIS 930, that nearly met my criteria with respect to the 2017 taxable year involved therein because the taxpayer’s prior 2017-year case had been dismissed by the Tax Court for late filing, but Jolly probably won’t fully meet my criteria in the end. The CFC in that case, for the moment, denied a DOJ motion to dismiss the 2017 year from the refund suit for lack of jurisdiction for failure to comply with the Flora full payment rule. The court’s denial stated that, perhaps the Flora rule could be met by moving payments in accounts of other tax years to the 2017 year, and the court later asked for further briefing. Further briefing in the case is still ongoing.

If my interpretation of the filing deadline as not jurisdictional would be upheld, such a dismissed taxpayer might end up with a res judicata problem precluding a subsequent refund suit because of IRC 7459(d). That subsection provides that all dismissals of Tax Court deficiency suits uphold the deficiency, but exempts jurisdictional dismissals. My research, in effect, shows that none of the 600 deficiency case taxpayers dismissed from the Tax Court for late filing in a typical year will ever actually later file a jurisdictionally-sufficient refund suit – i.e., attempt a second chance to litigate the merits of the deficiency.

I questioned why the courts should be so worried about the theoretical application of IRC 7459(d) under my non-jurisdictional position that might preclude a second chance at litigating the merits in refund courts. Instead, I argued that the courts should consider the harsh and drastic consequences of the jurisdictional interpretation of the filing deadline that regularly precludes about 165 taxpayers from getting their first chance (in the Tax Court) to litigate the merits of the deficiency. After all, it is the harsh and drastic consequences to plaintiffs of finding deadlines jurisdictional that has triggered the Supreme Court to restrict the use of the word “jurisdictional”.

What did the Hallmark court do with my research? Nothing. It did not mention my research in the opinion. However, the court went into an extensive discussion of the theory of how Hallmark’s interpretation could hurt taxpayers under IRC 7459(d) and contended that Congress designed IRC 7459(d) to preclude the result for which Hallmark was contending, and this shows that Congress intended that the filing deadline in IRC 6213(a) is jurisdictional. The rest of this post summarizes the Hallmark opinion’s discussion of IRC 7459(d) and how the Tax Court concluded that IRC 7459(d) provides legislative context for holding the IRC 6213(a) filing deadline jurisdictional.

IRC 7459(d) provides:

If a petition for a redetermination of a deficiency has been filed by the taxpayer, a decision of the Tax Court dismissing the proceeding shall be considered as its decision that the deficiency is the amount determined by the Secretary. An order specifying such amount shall be entered in the records of the Tax Court unless the Tax Court cannot determine such amount from the record in the proceeding, or unless the dismissal is for lack of jurisdiction.

The Hallmark opinion concludes that, for two reasons, the existence of IRC 7459(d) requires the court to reject a reading of the IRC 6213(a) filing deadline as not jurisdictional.

First, “[n]on-jurisdictional dismissals of cases with untimely petitions would produce incongruous results.” Slip opinion at p. 20.

This surprising [res judicata] outcome [prohibiting subsequent refund suits] counsels against the non-jurisdictional construction of section 6213(a) not because it provokes sympathy for a taxpayer for whom this would be an unfavorable result but because it puts section 6213(a) and section 7459(d) at odds with each other and with the manifest purpose of the statutory regime. . . .

It is no answer to this anomaly to point out (as Hallmark does) that “if this unfortunate res judicata result were to happen, it would be a matter for Congress to consider altering by legislation”. It is certainly correct that courts must not choose an interpretation because it brings about a desired outcome, and it is true that defects in a statute are for Congress to fix, not the courts. But choosing desired outcomes is not the same thing as following the principles of statutory construction that counsel against choosing an interpretation that creates a conflict in the legislative regime (and that therefore would require Congress to then address the conflict by corrective legislation).

Id. at 21-22 (footnote and citation omitted). (By the way, the Supreme Court’s recent precedent actually pushes courts to choose the outcome that filing deadlines are not jurisdictional – in an exception to the usual rule that courts should not favor either side’s interpretation.)

Second, “[a]pplying section 7459(d) only to dismissals other than those called for by section 6213(a) would contradict the actual history and intent of section 7459(d).” Id. at 23. The Hallmark opinion notes that the original predecessor of this provision did not appear in the Revenue Act of 1924 that created the Board of Tax Appeals, but that a version of this provision first appeared in § 906(c) of the Revenue Act of 1926, without accompanying legislative explanation. The 1926 provision lacked the final phrase “or unless the dismissal is for lack of jurisdiction”. The court agreed with Hallmark that there is also no committee report that explains why this jurisdictional exception was added in 1928. Hallmark pointed out that there are a number of reasons that a Tax Court petition could be dismissed for lack of jurisdiction beyond late filing. For example, a petition may be dismissed because the notice of deficiency was invalid because not sent to the taxpayer’s last known address or because the taxes had already been paid before the notice of deficiency was issued or because the taxpayer was in bankruptcy, so the bankruptcy stay prohibited a Board proceeding. Excluding dismissals for late filing of the petition from jurisdictional dismissals would not render the jurisdictional dismissal exception of IRC 7459(d) superfluous.

But, the Hallmark opinion responded as follows:

What “jurisdiction[al]” circumstances did Congress address in making this amendment in 1928? The obvious answer is that Congress addressed the very circumstance that the BTA had described in United Paper—i.e., “the Board determines that it has no jurisdiction” because “[t]he petition [was] not . . . filed within the time prescribed”. We find no BTA opinion discussing the issue of sustaining a deficiency in a jurisdictional dismissal in connection with any jurisdictional issue other than the untimeliness of a petition (as in United Paper). With reasonable confidence we also impute to Congress the knowledge that, as the BTA had reported since 1924, it was dismissing for “want of jurisdiction” where there was no valid NOD. We see no reason to suppose that Congress ignored the actual activity of the BTA, left unsolved the timeliness-related conundrum described in United Paper, and instead amended the statute to address as-yet-unrealized difficulties in future cases that might involve lack of corporate capacity. We do see, in the BTA’s appendices, dismissals for lack of jurisdiction because of pending bankruptcies and because taxes not assigned to the BTA were petitioned, and those dismissals, too, would fall within the “lack of jurisdiction” exception of section 906(c). That these, too, involve “lack of jurisdiction” does not at all undermine the obvious congressional intent to address, as cases involving “lack of jurisdiction”, those that were being dismissed because they lacked the prerequisites of section 274(c) (sic; should be (a)) (now section 6213(a)), i.e., a valid NOD and – as in United Paper – a timely petition.
Id. at 27-28.

What’s this United Paper case about? It is a 1926 opinion (4 B.T.A. 257) decided after Congress enacted § 906(c) of the Revenue Act of 1926 – the original predecessor of IRC 7459(d), but without the jurisdictional dismissal exception. The taxpayer (!) in that case had filed a late deficiency petition and argued that under § 906(c), the Board was required to enter a decision upholding the deficiency set out in the notice. The Board, however, refused, noting that, since 1924 it had been entering orders dismissing late-filed cases for lack of jurisdiction and it planned to continue that practice even during the years to which § 906(c) applied.

It seems to me, however, that United Paper undermines the Hallmark opinion’s conclusion that Congress intended in 1928 to fix a problem (inserting jurisdictional dismissal exceptions into the 1926 version of § 906(c)), when the Board had already concluded that § 906(c)’s requirement to enter a decision upholding the deficiency did not apply in the case of late-filed petitions, where the Board had been instead dismissing such cases (and planned to continue dismissing them) for lack of jurisdiction. The Hallmark opinion basically argues that the 1928 amendment’s purpose was to fix a problem that the Board had already fixed with respect to late-filed petitions in United Paper in 1926. Does that make the 1928 amendment superfluous to late-filed deficiency petition cases?

However, in my view, even accepting for purposes of discussion that the Hallmark court has the better of this argument, the real question is whether the enactment of IRC 7459(d) – a provision that would possibly provide a strange result under the non-jurisdictional filing deadline interpretation – contributes enough statutory context to require a court to find that Congress made a clear statement in IRC 6213(a) that the filing deadline is jurisdictional. This strikes me as an argument that cannot be maintained after Boechler. Below is what Boechler said about the SG’s argument that the language in the injunctive provision of the CDP legislation (first enacted in 2000 at IRC 6330(e)(1)) could produce a strange result if the IRC 6330(d)(1) deadline to file a CDP petition (enacted in 1998) were not jurisdictional. The Court found that the strange result was probably a point in favor of the SG’s interpretation of the filing deadline, but not enough to meet the clear statement exception.

The Commissioner contends that a neighboring provision clarifies the jurisdictional effect of the filing deadline. Section 6330(e)(1) provides that “if a [collection due process] hearing is requested . . . the levy actions which are the subject of the requested hearing . . . shall be suspended for the period during which such hearing, and appeals therein, are pending.” To enforce that suspension, a “proper court, including the Tax Court,” may “enjoi[n]” a “levy or proceeding during the time the suspension . . . is in force,” but “[t]he Tax Court shall have no jurisdiction under this paragraph to enjoin any action or proceeding unless a timely appeal has been filed undern subsection (d)(1).” § 6330(e)(1).

Section 6330(e)(1) thus plainly conditions the Tax Court’s jurisdiction to enjoin a levy on a timely filing under § 6330(d)(1). According to the Commissioner, this suggests that § 6330(d)(1)’s filing deadline is also jurisdictional. It would be strange, the Commissioner says, to make the deadline a jurisdictional requirement for a particular remedy (an injunction), but not for the underlying merits proceeding itself. If that were so, the Tax Court could accept late-filed petitions but would lack jurisdiction to enjoin collection in such cases. So if the IRS disobeyed § 6330(e)(1)’s instruction to suspend the levy during the hearing and any appeal, the taxpayer would have to initiate a new proceeding in district court to make the IRS stop.

We are unmoved—and not only because the scenario the Commissioner posits would arise from the IRS’s own recalcitrance. The possibility of dual-track jurisdiction might strengthen the Commissioner’s argument that his interpretation is superior to Boechler’s. Yet as we have already explained, the Commissioner’s interpretation must be not only better, but also clear. And the prospect that § 6330(e)(1) deprives the Tax Court of authority to issue an injunction in a subset of appeals (where a petition for review is both filed late and accepted on equitable tolling grounds) does not carry the Commissioner over that line.
142 S. Ct. at 1499.

I think that this passage from Boechler applies equally to the possible strange res judicata result that would be produced by IRC 7459(d) if the deficiency filing deadline is held not jurisdictional. It’s a point in favor of a jurisdictional interpretation of the deficiency petition filing deadline, but the point does not carry the Hallmark court over the line of proving the application of the clear statement exception.

Filed Under: Last Date to perform act, Tax Court

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 6

December 13, 2022 by Carlton Smith Leave a Comment

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

Since 2004, the Supreme Court has attempted to reduce the number of jurisdictional claim-processing rules, including jurisdictional filing deadlines, because of the Court’s concern that holding a rule jurisdictional results in unduly “harsh” and “drastic” consequences to litigants and the courts.

Perhaps my biggest disappointment with the Hallmark opinion is its complete apparent indifference to those harsh and drastic consequences to taxpayers and the Tax Court’s own judges. Hallmark attempted to quantify for the court the number of taxpayers who would likely be adversely affected each year by a holding that the deficiency petition filing deadline is jurisdictional. In its opinion, the court wouldn’t discuss this research.

And, of course, if, say, 30,000 deficiency petitions are filed in the court this year, the judges will have to spend considerable time policing the filing deadline as jurisdictional in every single one of those deficiency cases. (Thankfully, after Myers and Boechler, the judges don’t have to police the filing deadlines for whistleblower award and Collection Due Process (CDP) petitions.)

The judges must compare every deficiency petition filing date (usually by looking at the envelope in which the petition was mailed) to the last date to file shown in the notice of deficiency, since the court is not allowed to leave to the IRS the raising of jurisdictional defects. Parties are not allowed to forfeit or waive jurisdictional defects.

Further, the Tax Court regularly finds late filing when the parties have submitted stipulated decision documents settling a case. If the filing deadline were not jurisdictional, then late filing would be a merits defense that would automatically be forfeited or waived if the IRS signed a decision document settling a case. What a waste it is for the court to have to dismiss a settled case after making its own investigation as to the petition’s timeliness (one including issuing an order to show cause why the case shouldn’t be dismissed for lack of jurisdiction for late filing). Clearly, the IRS will give the taxpayer the agreed settlement administratively if the court refuses to enter a Tax Court decision setting forth the agreed deficiency. Keith has done a post on this stipulated decision jurisdictional problem, which, in my experience typically seems to happen once or twice a month.

In this post, I will remind readers of the information that I dug up, uncredited and pro bono, for Hallmark (and that Hallmark showed to the court) as to how many petitioners are hurt by the Tax Court’s position that the deficiency filing deadline is jurisdictional. For the most detail on this information and how I found it, see the tables of cases listing docket numbers, names, and the dates of dismissal orders or orders to show cause in Hallmark’s memorandum of law in support of its motion to vacate the Tax Court’s April Fool’s Day dismissal in its case. For a less detailed summary (without the tables and missing some information), see an earlier post Keith did here. In this post, I will condense even more the information revealed in Keith’s prior post, but I will supplement the information a bit from the Hallmark case filing.

To show that the Tax Court should have agonized about the harsh and drastic consequences of finding the filing deadline jurisdictional, I first quote from Henderson v. Shinseki, 563 U.S. 428 (2011):

In this case, as in others that have come before us in recent years, we must decide whether a procedural rule is “jurisdictional.” This question is not merely semantic but one of considerable practical importance for judges and litigants. Branding a rule as going to a court’s subject-matter jurisdiction alters the normal operation of our adversarial system. Under that system, Courts are generally limited to addressing the claims and arguments advanced by the parties. Courts do not usually raise claims or arguments on their own. But federal courts have an independent obligation to ensure that they do not exceed the scope of their jurisdiction, and therefore they must raise and decide jurisdictional questions that the parties either overlook or elect not to press.

Jurisdictional rules may also result in the waste of judicial resources and may unfairly prejudice litigants. For purposes of efficiency and fairness, our legal system is replete with rules requiring that certain matters be raised at particular times. Objections to subject-matter jurisdiction, however, may be raised at any time. Thus, a party, after losing at trial, may move to dismiss the case because the trial court lacked subject-matter jurisdiction. Indeed, a party may raise such an objection even if the party had previously acknowledged the trial court’s jurisdiction. And if the trial court lacked jurisdiction, many months of work on the part of the attorneys and the court may be wasted.

Because the consequences that attach to the jurisdictional label may be so drastic, we have tried in recent cases to bring some discipline to the use of this term. We have urged that a rule should not be referred to as jurisdictional unless it governs a court’s adjudicatory capacity, that is, its subject-matter or personal jurisdiction. Other rules, even if important and mandatory, we have said, should not be given the jurisdictional brand.

Id. at 434-435 (citations omitted). Accord United States v. Kwai Fun Wong, 575 U.S. 402, 409 (2015) (“Given those harsh consequences, the Government must clear a high bar to establish that a statute of limitations is jurisdictional.”).

I looked at all orders of dismissal in late-filed deficiency cases during the pre-Boechler months of February and March of this year. (I can’t look at most later months, since, after May 6, the Tax Court put a hold on the dismissal of all late-filed deficiency cases until it issued the Hallmark opinion.) I found about 100 dismissals over those two months. Annualizing that figure (multiplying by 6) gives about 600 people whose cases would be dismissed for lack of jurisdiction for late filing in a typical year.

I then found that about a quarter of dismissals are the result of Tax Court judges issuing orders to show cause why the case should not be dismissed for lack of jurisdiction for late filing. Tax Court judges actually issue orders to show cause in about a third more cases than actually get dismissed after such orders, since, in a substantial minority of cases, the IRS eventually satisfies the Tax Court that, in fact, the petition was timely filed. So, that means that the IRS misses about 150 taxpayers each year (600 x 1/4) who have filed late deficiency petitions, and the Tax Court needlessly issues about 50 orders to show cause where the IRS usually already knows the petition was timely filed. If the filing deadline were not jurisdictional, all of these 150 taxpayers whose cases would otherwise have been dismissed for lack of jurisdiction for late filing would benefit by having the opportunity to litigate their cases on the merits. I have no reason to think that the IRS will ever get better at finding late-filed deficiency petitions, so this number of taxpayers who would benefit from the IRS missing late filing should probably continue in 2023 and thereafter.

I reviewed the 100 or so dismissals from February or March to get a sense of how many cases might also benefit from equitable tolling of the filing deadline if the deadline could be equitably tolled. The vast majority of taxpayers who are asked by the Tax Court to explain their late filing never file responses or file responses that do not address the late filing but just argue the merits of the proposed deficiency. My sense is that only 5% of taxpayers, or about 30 per year (5% of 600), will file responses in which they set forth facts that would plausibly justify making an equitable tolling argument. Of course, not all of these taxpayers would win such an argument if litigated. But, the IRS might simply have its attorneys concede equitable tolling in particularly egregious cases justifying tolling and only contest the cases of the few other people who articulate a plausible, but not wining, equitable tolling argument.

That the IRS lawyers may actually grant equitable tolling themselves, without the court’s ruling, is buttressed by what happened in the Castillo case, which Keith discussed in a post on April 29, 2022, and which I later discussed in a post on August 3, 2022. In Castillo, the taxpayer belatedly filed a CDP petition after her new attorney learned (only from an IRS transcript) that 8 months earlier the IRS had issued a notice of determination. USPS records show that the notice was never delivered to the taxpayer; the notice is still listed as in transit. Castillo’s lawyer argued to the Tax Court that the CDP petition filing deadline is not jurisdictional and is subject to equitable tolling and that non-receipt of the “ticket to the Tax Court” is a proper ground for equitable tolling of the petition filing deadline. When the Tax Court dismissed the case for lack of jurisdiction, Ms. Castillo appealed her case to the Second Circuit, where the parties fully briefed the case. The appeal, though, was then put on hold, awaiting the Supreme Court’s ruling in Boechler. After Boechler held the CDP petition filing deadline not jurisdictional and subject to equitable tolling, the Second Circuit remanded Ms. Castillo’s case to the Tax Court for an inquiry into whether the facts justified equitable tolling.

All along, Ms. Castillo had also argued that the deficiency was clearly incorrect and that she owed no taxes. I have been told that in the remand, the IRS attorneys have simply conceded her case. That means that the IRS attorneys both conceded that the petition was timely filed and that there is no deficiency. A stipulation of settled issues in Castillo was entered by the Tax Court on November 8, 2022 (Docket No. 18336-19). I have not seen it. Presumably, a stipulated decision will follow shortly. I am not sure why no stipulated decision has yet been entered.

On April 17, 2020, I did a post in which I also discussed how IRS attorneys made pointless three ideal test cases that Keith and I had found for challenging whether the deficiency filing deadline is jurisdictional or subject to equitable tolling. In one case, the IRS reissued the notice of deficiency, and the taxpayers timely filed a new petition, so it made no sense to further dispute that the filing deadline in the earlier case should be equitably tolled. In the two other cases, the IRS attorneys looked at the merits of the underlying liability and concluded that the taxpayers had no deficiencies. The IRS was willing to give the taxpayers administratively “no deficiency”, so it made no sense to continue litigating whether their Tax Court cases should be dismissed for lack of jurisdiction. If the deficiency petition filing deadline is ultimately held not jurisdictional, I suspect that these resolutions without court intervention may become a regular practice of IRS attorneys where the arguments for equitable tolling are compelling.

After Hallmark was decided, Anna Gooch of the Center for Taxpayer Rights and I again began monitoring newly-issued orders of dismissal for lack of jurisdiction for late filing in deficiency cases. A considerable number or orders will be issued over the next month or two in what I estimate will be about 350 cases in which the Tax Court had suspended rulings on motions to dismiss and orders to show cause pending the Hallmark ruling. I get to the 350 figure by multiplying the typical figure for annual dismissals of late-filed deficiency cases (600) by 7/12 to account for the roughly 7 months during which the Tax Court suspended issuing dismissal order pending the outcome in Hallmark. In the first six business days after Hallmark was issued, Anna and I found about over 100 dismissals of deficiency cases for lack of jurisdiction for late filing and only one case in which it seemed that a taxpayer had probably-good arguments for equitable tolling. That accords pretty well with my estimate that only about 5% of late-filed deficiency cases would ever argue for equitable tolling. It appears that the Tax Court is primarily first dismissing those cases where taxpayers never responded to the IRS’ motion to dismiss or the Court’s order to show cause. (Orders where a taxpayer responded usually take a page or two more to write.)

So, despite the fears I have heard from tax lawyers that equitable tolling of the deficiency filing deadline would overwhelm the Tax Court in equitable tolling disputes, I think the Tax Court judges each year will have to decide few equitable tolling disputes, perhaps through hearings or motions for summary judgment on the issue filed by the IRS. Offsetting this small extra work where equitable tolling will be alleged in a few cases each year (perhaps 30) is the saving of Tax Court judges’ time in not having to police the timely filing of all 30,000 deficiency petitions that will likely be filed each year.

In summary, each year probably 150 taxpayers would benefit if the deficiency filing deadline is held not jurisdictional (in cases where the IRS simply misses the late filing), and fewer than 30 taxpayers would actually get equitable tolling in their cases either by judicial ruling or from IRS attorneys not wanting to litigate the equitable tolling issue. I simply can’t understand why the Tax Court, when presented with this information in Hallmark about the drastic and harsh impact on the court and litigants of holding the filing deadline jurisdictional, did not mention this data at all in the opinion.

Filed Under: Last Date to perform act, Tax Court

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 5

December 12, 2022 by Carlton Smith 1 Comment

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

As I noted in the last part of this post, the Supreme Court has created a stare decisis exception to the rule that claim-processing rules (including filing deadlines) are no longer jurisdictional. In that part, I gave the citations to nine opinions of the Supreme Court (including Boechler) stating that the exception applies where there is Supreme Court precedent that had previously held the claim-processing rule jurisdictional, even though the claim-processing rule would not meet today’s exception for a “clear statement” from Congress. In the only two opinions since the Supreme Court announced its new thinking no jurisdiction where the Supreme Court applied the stare decisis exception, Bowles v. Russell, 551 U.S. 205 (2007), and John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008), there were multiple Supreme Court precedents going back over 100 years that made the Court feel it should not overturn such precedents because no doubt Congress relied on those precedents in legislating. One might call this a legislative reenactment concern when a long line of Supreme Court opinions are involved.

However, the primary reason that the Tax Court in Hallmark held the deficiency petition filing deadline jurisdictional is not the language of that deadline meeting the “clear statement” exception, but the existence of a 98-year-long string of opinions from courts below the Supreme Court that have uniformly held the filing deadline jurisdictional.

But, that string of opinions is irrelevant under the Supreme Court’s articulated stare decisis exception that applies for purposes of the jurisdictional test. Moreover, the Hallmark opinion fails to seriously confront the Boechler opinion’s disparagement of that deficiency precedent.

In this part of my post, I will discuss (1) how the Hallmark opinion misapplied the stare decisis exception and (2) how the Hallmark opinion misconstrued the Boechler opinion’s disparagement of the very deficiency opinions on which the Hallmark court relied into a comment going to the lack of a long line of precedent under IRC 6330(d)(1).

I begin with the Hallmark court’s conflating the jurisdictional stare decisis exception with the legislative reenactment doctrine that can sometimes be applied where there exists a long line of opinions from courts below the Supreme Court consistently interpreting the statute.

The Hallmark court wrote:

According to the Supreme Court, “[w]hen ‘a long line of this Court’s decisions left undisturbed by Congress,’ . . . has treated a similar requirement as ‘jurisdictional,’ we will presume that Congress intended to follow that course.” Henderson [v. Shinseki], 562 U.S. [428 (2011)] at 436 (quoting Union Pac. R.R. Co. v. Brotherhood of Locomotive Eng’rs & Trainmen Gen. Comm. of Adjustment, Cent. Region, 558 U.S. 67, 82 (2009)). This statement describes the traditional tool of statutory construction known as the “prior-construction canon.” If a statute is reenacted using words or phrases that have already received authoritative construction by the highest court in a jurisdiction, or have been uniformly construed by inferior courts or the responsible agency, then the later version of that statute preserving the wording is presumed to carry forward that interpretation, and they are to be understood according to that construction. See, e.g., Bragdon v. Abbott, 524 U.S. 624, 645 (1998) (citing an “unwavering line of administrative and judicial interpretation” that included no Supreme Court opinions, and holding, “[w]hen administrative and judicial interpretations have settled the meaning of an existing statutory provision, repetition of the same language in a new statute indicates, as a general matter, the intent to incorporate its administrative and judicial interpretations as well”). . . .
Slip opinion at pp. 28-29 (footnote omitted; one citation omitted).

After this quote, the Hallmark opinion went on to establish that, since 1924, the Board of Tax Appeals has treated the deficiency petition filing deadline as jurisdictional and, since 1928, beginning with a D.C. Circuit opinion, 10 of the 12 Courts of Appeals that hear appeals from the Tax Court have issued precedential opinions holding the filing deadline jurisdictional. (The First and Fourth Circuits have no published opinions on this issue, but have agreed with the other Circuits in unpublished opinions.) The Tax Court has also consistently treated the filing deadline as jurisdictional.

The Hallmark court then points out that Congress amended the sentence in Revenue Act of 1924 section 274(a) that contains the filing deadline (currently the first sentence in IRC 6213(a)) many times, beginning in 1926 and all the way up to 1969. Those amendments each lengthened the filing deadline. Then in 1998, Congress amended IRC 6213(a) to add a new final sentence allowing taxpayers to rely on any incorrect date shown on the notice of deficiency as the last date to file. The Hallmark opinion quotes from the “present law” Ways and Means and Conference Committee reports’ discussion of the 1998 amendment where those reports observe that the filing deadline is jurisdictional. However, those quotes are the only instances over the past 98 years where the Congress has even acknowledged the issue of whether the filing deadline is jurisdictional, and the 1998 amendment has the same effect whether or not the filing deadline is jurisdictional. Indeed, each of the amendments over the years that lengthened the deficiency petition filing deadline would have the same effect whether the filing deadline is jurisdictional or not.

I don’t think the Supreme Court would give much attention to those 1998 committee report sentences. Just like judicial statements from the period that the Supreme Court now calls “drive-by jurisdictional rulings” entitled to no weight because the court making the statement had no reason to consider whether a deadline should be jurisdictional or not because it made no difference in the case; See S teel Co. v. Citizens for a Better Environment, 523 U.S. 83, 91 (1998); the committee report statements should be considered “drive-by” statements, also entitled to no weight.

The jurisdictional stare decisis exception is clearly a reluctant exception to the Supreme Court’s preferred rule that filing deadlines are no longer jurisdictional because jurisdictional deadlines produce “harsh consequences” to the parties and the courts. United States v. Kwai Fun Wong, 575 U.S. 402, 409 (2015). While it is true that in Kwai Fun Wong, the Court said that “traditional tools of statutory construction must plainly show that Congress imbued a procedural bar with jurisdictional consequences”; id. at 410 – which sounds like an invitation to apply the legislative reenactment doctrine, perhaps relying on lower court opinions – no post-Kontrick Supreme Court opinion involving a jurisdictional question concerning a claim-processing rule cites opinions from courts below the Supreme Court as relevant to the Court’s decision.

You can read each of the nine Supreme Court opinions cited by me in the last part of this post, and, in every case, the Court refers to a long line of opinions of the Supreme Court or “this Court” as the ones relevant for the stare decisis exception. See, e.g., Union Pacific R. Co. v. Locomotive Engineers, 558 U.S. 67, 82 (2009) (“this Court’s decisions”) (the first Supreme Court jurisdiction opinion after Bowles and John R. Sand created the exception). Indeed, to emphasize the point, note that in the next indented quote below from Boechler, the Court quoted from Fort Bend County v. Davis, 139 S. Ct. 1843, 1849 (2019), where the Court, in quoting from Union Pacific, deliberately modified Union Pacific’s reference to “this Court’s decisions” to “[Supreme] Cour[t] decisions”. Justice Ginsburg, who wrote for a unanimous Court in Davis, made that change as a point of emphasis. In the prior part of this post, I quoted from a Justice Ginsburg concurring opinion in R eed Elsevier v. Muchnick, 559 U.S. 154, 173-174 (2010), where she objected to an amicus citing to the Court over 200 opinions from courts below the Supreme Court.

In my view, the Tax Court in Hallmark gives lip service to the jurisdictional stare decisis exception as articulated by the Supreme Court, but instead unjustifiably applies a legislative reenactment doctrine that allows a court to consider a long line of opinions only from courts below the Supreme Court.

Next, what does Boechler tell us about this long history of lower court opinions holding the deficiency filing deadline jurisdictional (relied on by Hallmark) and whether such long history can qualify for the stare decisis exception? Here’s from Boechler:

The Commissioner’s weakest argument is his last: He insists that § 6330(d)(1)’s filing deadline is jurisdictional because at the time that deadline was enacted, lower courts had held that an analogous tax provision regarding IRS deficiency determinations is jurisdictional. (That provision says that “[w]ithin 90 days . . . the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency.” 26 U.S.C. § 6213(a).) According to the Commissioner, Congress was aware of these lower court cases and expected § 6330(d)(1)’s time limit to have the same effect. So, he says, the statutory backdrop resolves any doubt that might linger in the text. The Commissioner’s argument misses the mark. The cases he cites almost all predate this Court’s effort to “bring some discipline” to the use of the term “jurisdictional.” Henderson, 562 U.S., at 435. And while this Court has been willing to treat “‘a long line of [Supreme] Cour[t] decisions left undisturbed by Congress’” as a clear indication that a requirement is jurisdictional, Fort Bend County v. Davis, 587 U.S. __, __, 139 S. Ct. 1843 (2019), no such “long line” of authority exists here
142 S. Ct. at 1500.

In other words, the Supreme Court doesn’t think much of the deficiency precedent from the lower courts of which the Solicitor General made the Supreme Court aware in Boechler, and the Supreme Court seems only willing to apply the stare decisis exception to its new jurisdictional rules if someone can show it that it has held the same claim-processing rule jurisdictional in the past. But, no one can for the filing deadline in IRC 6213(a).

Here’s the Hallmark court’s response to this passage from Boechler:

We set out in detail (in Part II.E above and in the attached Appendix) the impressive history—almost a century long—of judicial construction of the 90-day deadline as jurisdictional and of Congress’s repeated perpetuation of that construction by its amendments, reenactments, and codifications. No such history can be mustered for the asserted jurisdictional character of the 30-day deadline in section 6330(d)(1) (a provision which has existed in the Code only since 1998, see Internal Revenue Service Restructuring and Reform Act of 1998, § 3401(b), 112 Stat. at 749). As the Supreme Court said, “no such ‘long line’ of authority exists here” in connection with section 6330(d)(1). Boechler, P.C. v. Commissioner, 142 S. Ct. at 1500.
Slip opinion at p. 41.

I don’t think that is much of a response to the Supreme Court’s disparagement of that lower court deficiency precedent. And while there is some ambiguity in the above quote from Boechler concerning whether, when the Supreme Court was noting the absence of a long line of Supreme Court authority, it was referring to IRC 6330(d)(1) and/or 6213(a), even Hallmark concedes that there is no Supreme Court authority on whether the deficiency filing deadline is jurisdictional, either.

In Hallmark, the opinion also notes that on five occasions the Supreme Court has declined cert. on cases that could have presented the issue of whether the deficiency petition filing deadline is jurisdictional; see slip opinion at p. 37 n. 31; but every lawyer knows that there is nothing precedential in a Supreme Court denial of cert.

Filed Under: Last Date to perform act, Tax Court

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 4

December 9, 2022 by Carlton Smith 1 Comment

Before turning to the latest series in Carl’s discussion of the Hallmark opinion, we pass on from Professor Alice Abreu that the Temple Law School Low Income Taxpayer Clinic, which opened its doors in 2021, is ready to transition from part-time operation to full-time operation and is searching for a full-time Director, to begin as early as next month, but the position will remain open until filled. Further information, including instructions for applying, is here. Les

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

As I noted in the last part of this post, the Supreme Court has created a stare decisis exception to the rule that claim-processing rules (including filing deadlines) are no longer jurisdictional. It appears fair to say that the primary reason that the Tax Court in Hallmark held the deficiency petition filing deadline jurisdictional is not the language of that deadline meeting the “clear statement” exception, but the existence of a 98-year-long string of opinions from courts below the Supreme Court that have uniformly held the filing deadline jurisdictional.

In this part of my post, I will discuss the stare decisis exception in general. Because of the length of the required discussion, I will leave the Tax Court’s misapplication of that exception in Hallmark to the next part of this post.

In Kontrick v. Ryan, 540 U.S. 443, 455 (2004), the Supreme Court noted that both it and lower courts had often carelessly overused the word “jurisdictional”, and the Court sought to bring some discipline to the word by saying that, henceforth, claim-processing rules would not be jurisdictional. In Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), however, the Court admitted that there should be an exception where Congress clearly stated that it wanted a claim-processing rule to be jurisdictional. The Court set out what it called a “readily administrable bright line” test for this exception, to avoid the usual litigation over what Congress intended: “If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue.” Id. at 515-516 (footnote and citation omitted).

In its opinion in Bowles v. Russell, 551 U.S. 205 (2007), the Supreme Court first found a deadline jurisdictional without there being a “clear statement” in the statute that Congress intended the deadline to be jurisdictional. The statute was at 28 U.S.C. § 2107(c), which sets out the deadline to file an appeal from a civil court judgment to the courts of appeal. Bowles was an early opinion in the Supreme Court’s attempt to bring discipline to the use of the word “jurisdictional”. Unfortunately, its language is hard to fully reconcile with everything the Court has said about the stare decisis exception after Bowles. And the Hallmark opinion tries to exploit a bit of Bowles’ imprecise language.

Some things said by Justice Thomas (writing for the majority in Bowles) would likely now shock and offend the Boechler Court. For example, Bowles says, “Jurisdictional treatment of statutory time limits makes good sense.” Id. at 212. In contrast, in Henderson v. Shinseki, 562 U.S. 428 (2011) (involving a statutory filing deadline in the Court of Appeals for Veterans Claims), the Supreme Court (Alito, J.) wrote: “Because the consequences that attach to the jurisdictional label may be so drastic, we have tried in recent cases to bring some discipline to the use of this term.” Id. at 435.

Bowles pointed out that in many prior opinions going back to the 19^th Century (even before the Courts of Appeals were created), the Supreme Court had held that the deadline to file an appeal from a civil judgment is jurisdictional. It also noted, “Reflecting the consistency of this Court’s holdings, the courts of appeals routinely and uniformly dismiss untimely appeals for lack of jurisdiction.” 551 U.S. at 210. Bowles distinguished its holding from Kontrick because Kontrick involved merely a bankruptcy court rule deadline (not a statutory deadline), and from Arbuagh because Arbaugh involved a statutory claim-processing rule that was not a filing deadline.

Further, in response to the dissent’s pointing out language from another Supreme Court opinion, in footnote 2 of Bowles, the Court wrote:

Regardless of this Court’s past careless use of terminology, it is indisputable that time limits for filing a notice of appeal have been treated as jurisdictional in American law for well over a century. Consequently, the dissent’s approach would require the repudiation of a century’s worth of precedent and practice in American courts. Given the choice between calling into question some dicta in our recent opinions and effectively overruling a century’s worth of practice, we think the former option is the only prudent course.
551 U.S. at 209 n.2.

Why do I point to this footnote? Because the DOJ always quotes from that footnote when it urges courts to follow “a century’s worth of precedent and practice in American courts” involving the deficiency filing deadline, even though the cited precedent is only from the Board of Tax Appeals, the Tax Court, and the Circuit Courts of Appeals, not the Supreme Court. Moreover, the Tax Court in Hallmark used that quote from the Bowles footnote on p. 37 of its slip opinion as part of its justification for following “a century’s worth of precedent and practice in American courts” relating to the deficiency filing deadline. That sentence from Bowles has clearly been taken out of its context. Bowles involved a situation where the century of precedent could be found in Supreme Court cases, first. There is no suggestion in any later Supreme Court opinion that precedents only from courts below the Supreme Court would have been followed as part of the stare decisis jurisdictional exception.

The only other case in which the Supreme Court has applied the stare decisis exception to the new rule that filing deadlines are no longer jurisdictional is John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008). There, the Court held that the Tucker Act’s catchall 6-year filing deadline in 28 U.S.C. § 2501 for filing a complaint in the Court of Federal Claims is jurisdictional because a long line of Supreme Court opinions going back over 100 years had held the filing deadline jurisdictional.

In United States v. Kwai Fun Wong, 575 U.S. 402 (2015), the Court held that the deadlines at 28 U.S.C. § 2401(b) to file (1) an administrative claim and (2) a court suit under the Federal Tort Claims Act are not jurisdictional and are subject to equitable tolling. When the government cited John R. Sand in Kwai Fun Wong as support for holding the FTCA filing deadlines jurisdictional, the Court said that what distinguished John R. Sand was “two words: stare decisis”. Id. at 416. “What is special about the Tucker Act’s deadline, John R. Sand recognized, comes merely from this Court’s prior rulings, not from Congress’s choice of wording.” Id.

Note the reference to “this Court’s prior rulings”. In every one of the Supreme Court’s 9 opinions where it has described the stare decisis exception from its recent jurisdictional rules that make claim-processing rule non-jurisdictional, the Court has articulated the exception as applying in the case of Supreme Court precedent. See Boechler, 142 S. Ct. at 1500; Fort Bend Cnty. v. Davis, 139 S. Ct. 1843, 1849 (2019); Hamer v. Neighborhood Housing Servs., 138 S. Ct. 13, 20 n.9 (2017); Kwai Fun Wong, 575 U.S at 416; Sebelius v. Auburn Regional Medical Center, 568 U.S. 145, 153-154 (2013); Gonzalez v. Thaler, 565 U.S. 134, 142 n.3 (2012); Henderson, 562 U.S. at 436 (2011); Reed Elsevier v. Muchnick, 559 U.S. 154, 168 (2010); Union Pacific R. Co. v. Locomotive Engineers, 558 U.S. 67, 82 (2009). The articulated reason for this exception is that Congress no doubt reads Supreme Court case law and considers that case law in legislating. John R. Sand & Gravel Co., 552 U.S. at 139 (“Congress has long acquiesced in the interpretation we have given.”)

Even though Justice Ginsburg (the prime mover for the Court’s new jurisdictional jurisprudence) only wrote it in a concurrence, she objected to any attempt to expand this stare decisis exception to include merely a long line of consistent authority in courts below the Supreme Court. Reed Elsevier, 559 U.S. at 173-174 (Ginsburg, J, concurring, joined by Stevens and Breyer, JJ.) (“[I]n Bowles and John R. Sand & Gravel Co. . . . we relied on longstanding decisions of this Court typing the relevant prescriptions ‘jurisdictional.’ Amicus cites well over 200 opinions that characterize [17 U.S.C.] § 411(a) as jurisdictional, but not one is from this Court. . . .”; emphasis in original; citations omitted). The Supreme Court has never said courts should presume Congress reads appellate court opinions and legislates in reliance on those opinions in interpreting what procedural requirements are jurisdictional. Expanding the stare decisis exception to include a long line of lower court opinions would be to drive a truck through what the Supreme Court no doubt expected to be a very narrow exception.

In the next part of this post, I will explain how the Hallmark court misapplied the stare decisis exception by converting it to a legislative reenactment doctrine exception.

Filed Under: Last Date to perform act, Tax Court

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

December 8, 2022 by Carlton Smith Leave a Comment

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

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

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

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

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

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

The first sentence of IRC 6213(a) provides:

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

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

In Hallmark, the court writes:

“Congress must do something special, beyond setting an exception-free deadline, to tag a statute of limitations as jurisdictional and so prohibit a court from tolling it.” [United States v.] Kwai Fun Wong, 575 U.S. [402 (2015)] at 410. Congress “need not use magic words”, Henderson [v. Shinseki], 562 U.S. [428 (2011)] at 436, and a statutory deadline may be jurisdictional even without the word “jurisdiction”, see, e.g., Bowles [v. Russell], 551 U.S. [205 (2007)] at 208–10 (holding 28 U.S.C. § 2107(a) and (c) to be jurisdictional); United States v. Brockamp, 519 U.S. 347, 350–51 (1997) (holding section 6511 to be jurisdictional); but the “traditional tools of statutory construction must plainly show that Congress imbued a procedural bar with jurisdictional consequences”, Kwai Fun Wong, 575 U.S. at 410.
Slip opinion at p. 8.

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

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

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

Hallmark went on to state as follows:

“To determine whether Congress has made the necessary clear statement, we examine the ‘text, context, and relevant historical treatment’ of the provision at issue.” Musacchio v. United States, 577 U.S. 237, 246 (2016) (quoting Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 166 (2010)). Statutes that meet this standard share several qualities: They speak of a court’s power “in jurisdictional terms or refer in any way to the jurisdiction” of the court. Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 393–94 (1982). They “define a federal court’s jurisdiction . . . , address its authority to hear untimely suits, [and] cabin its usual equitable powers.” Kwai Fun Wong, 575 U.S. at 411. Their context, such as placement within their statutory regime, history of reenactments, or a long-standing judicial interpretation, reflects that Congress imbued a deadline with “jurisdictional consequences”. See, e.g., Kwai Fun Wong, 575 U.S. at 410; Henderson, 562 U.S. at 439; Bowles, 551 U.S. at 209–13; Zipes, 455 U.S. at 394.
Slip opinion at pp. 8-9.

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

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

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

Enough for this post.

Filed Under: Last Date to perform act, Tax Court

Subscribe to our Blog

Equitable Tolling Case Moving Forward in Tax Court

DOJ and Another 3d Cir. Panel Muddy Waters as to Source of Tax Court’s Deficiency Jurisdiction

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 8

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 7

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 6

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 5

What’s Wrong With The Tax Court’s Hallmark Opinion: Part 4

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

Support the Center for Taxpayer Rights

Support TAPS

Leslie Book

Keith Fogg

Christine Speidel

Stephen Olsen

Contributors

Nina Olson

Samantha Galvin

Caleb Smith

Guest Bloggers

Follow Us!

Post Topics

Helpful Links

Subscribe to our Blog

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Support the Center for Taxpayer Rights

Support TAPS

Leslie Book

Keith Fogg

Christine Speidel

Stephen Olsen

Contributors

Nina Olson

Samantha Galvin

Caleb Smith

Guest Bloggers

Follow Us!

Post Topics

Helpful Links

Share this: