After the Tax Court Finds It Lacks CDP Jurisdiction, Seventh Circuit Says It Should Keep Quiet About Other Collection Issues

We welcome back frequent guest blogger, Carl Smith, who discusses a recent 7th Circuit case that rejects a line of cases decided by the Tax Court concerning the scope of its authority when dismissing a Collection Due Process case.  Keith

In a precedential opinion issued on November 18 in Adolphson v. Commissioner, the Seventh Circuit affirmed the Tax Court’s dismissal of a Collection Due Process (CDP) petition under section 6330(d)(1) for lack of jurisdiction. The Tax Court dismissed the petition because the IRS had never issued a notice of determination after a CDP hearing – a ticket to the Tax Court.  But, the Seventh Circuit was unhappy that the Tax Court also went on to consider (though, ultimately reject) the taxpayer’s argument that there had been no CDP hearing and no notice of determination (NOD) only because the IRS failed to send a notice of intention to levy (NOIL) to the taxpayer at the taxpayer’s last known address.  In effect, the Seventh Circuit said that where the Tax Court lacks jurisdiction because of the lack of an NOD, the Tax Court should keep quiet about other potential collection issues – such as, in this case, whether the IRS had issued an NOIL to the taxpayer’s last known address before it had started levying.  The Seventh Circuit particularly rejected a line of Tax Court opinions beginning with Buffano v. Commissioner, T.C. Memo. 2007-32 – which, according to the Seventh Circuit, the Tax Court has only intermittently followed – in which the Tax Court has considered as part of its jurisdictional dismissals, issues going to the validity of NOILs.

This post will discuss Buffano, the unpublished order issued by Judge Carluzzo in Adolphson, and the Seventh Circuit opinion in Adolphson.


Readers are no doubt aware that before the IRS issues a CDP NOD (a ticket to the Tax Court), the IRS Office of Appeals must hold a CDP hearing.  CDP hearings can only be requested after the IRS validly issues an NOIL or NFTL.  One way for the IRS to validly issue an NOIL or NFTL is to send it by certified or registered mail to a taxpayer’s last known address.  Sections 6320(a)(2)(C) and 6330(a)(2)(C).  If certified or registered mail is used for an NOIL, levy is prohibited for the 30-day period in which a taxpayer can request a CDP hearing.  Section 6331(d)(1) and (2).  If a CDP hearing is requested, no levy is allowed and the collection statute of limitations is suspended until the CDP hearing (and any judicial appeals) are over.  Section 6330(e)(1).


In Buffano, the first the taxpayer knew about collection was when the IRS sent a levy to his employer.  The taxpayer was upset that he had not, before then, received an NOIL.  The taxpayer sent a Form 12153 requesting a CDP hearing with respect to the taxes being levied, and the IRS decided that, since it had sent an NOIL to what it had thought was the taxpayer’s last known address (even though the NOIL was returned by the USPS undelivered), the IRS had done all it needed to do to commence levy.  Since the request for a CDP hearing was made more than 30 days after the IRS mailed the NOIL, the IRS instead gave the taxpayer an equivalent hearing.  At the end of the equivalent hearing, the taxpayer was unsatisfied with the equivalent letter, and, within 30 days, filed a petition in the Tax Court under section 6330(d)(1).

The IRS moved to dismiss the case for lack of jurisdiction on the ground that no NOD following a CDP hearing had been issued.  Thus, the taxpayer had not received a ticket to the Tax Court.  The taxpayer cross-moved to dismiss for lack of jurisdiction on a different ground:  No NOIL had validly been sent to his last known address.  The court decided that it had to determine the reason for the jurisdictional dismissal that was inevitable in the case.  The Tax Court held that the NOIL had not been sent to the taxpayer’s last known address.  Thus, it was invalid, and the dismissal was predicated on the NOIL’s invalidity.  Presumably, the Tax Court expected that this holding would mean that the IRS had to send a new NOIL to the taxpayer for the same taxes before the IRS could commence any levy.

In subsequent cases presenting the same fact pattern as Buffano, the Tax Court has sometimes (but not always) followed Buffano and issued a ruling on whether or not the NOIL was mailed to the last known address.  If the NOIL was mailed to the last known address, then the Tax Court has dismissed for lack of jurisdiction on the basis of a lack of an NOD.  If the NOIL was not mailed to the last known address, the Tax Court has dismissed for lack of jurisdiction on the basis of a lack of a validly-mailed NOIL.  See, e.g., Anson v. Commissioner, T.C. Memo. 2010-119; Space v. Commissioner, T.C. Memo. 2009-230; Kennedy v. Commissioner, T.C. Memo. 2008-33.

Adolphson Tax Court Order 

Mr. Adolphson’s fact pattern was quite similar to Buffano – i.e., he first learned of collection from an actual levies on third parties who held his funds, but he had never before received an NOIL. Unlike Buffano, he did not thereafter ask for and get an equivalent hearing, but went straight to the Tax Court.  In the Tax Court, Mr. Adolphson first moved to restrain further levies and for the Tax Court to order the IRS to refund what had already been levied – arguing that the IRS had not sent an NOIL to his last-known address and citing Buffano.  Then, the IRS cross-moved to dismiss for lack of jurisdiction because of the absence of an NOD.  The IRS, however, attempted to show it had mailed an NOIL to his last known address.  Since Mr. Adolphson had not filed returns for many years, there was a serious issue as to which address was his last known address.

In an unpublished order at Docket No. 21816-14L, issued on February 3, 2015, Special Trial Judge Carluzzo granted the government’s motion, first stating:

Petitioner agrees that the Court is without jurisdiction in this matter. That being so, his motion to restrain must be denied as our authority to grant the relief he seeks arises only in cases where our jurisdiction under section 6330(d) has properly been invoked. See sec. 6330(e). Petitioner, however, disagrees with respondent’s ground for the dismissal.

Then, the judge distinguished Buffano as follows (footnote omitted):

Petitioner’s reliance upon Buffano is misplaced. The record in Buffano contained information showing the address shown on the taxpayer’s relevant Federal income tax return, the starting point for purposes of establishing a taxpayer’s last known address. See sec. 301.6212-2(a) Proced. & Admin. Regs.; Kennedy v. Commissioner, 116 T.C. 255 (2001); Abeles v. Commissioner, 91 T.C. 1019 (1988). Petitioner has not established what, if any, address was shown on his Federal income tax return(s) most recently filed before the relevant notices of intent to levy were issued.  Furthermore, under the circumstances before us and contrary to petitioner’s suggestion, the address shown on respondent’s November 5, 2012, letter to him is hardly determinative as to his “last known address” for purposes of section 6330.

Because of the paucity of information as to petitioner’s last known address, we decline to make any finding on the point in resolving the jurisdictional motion before us. To the extent that there are any irregularities in the assessment process giving rise to the above-mentioned liabilities, or to the collection of those liabilities, petitioner’s remedies, if any, lie in a different Federal court.

Adolphson Seventh Circuit Opinion 

The Seventh Circuit affirmed the Tax Court, but using a lot of words criticizing both the Tax Court’s rulings and the DOJ lawyers’ briefs and oral argument.  In a 16-page opinion, the panel took apart Judge Carluzzo’s barely 3-page order.

Initially, the panel stated that, if it were going to apply the Buffano line of cases, it disagreed that the IRS had shown that it mailed an NOIL to the taxpayer’s last known address.  In particular, the panel noted that some of the IRS evidence of mailing consisted of improperly-authenticated transcripts that only indicated the issuance of one or more NOILs, but there was no evidence in the record of any mailing or evidence of even the address used.  The panel accused Judge Carluzzo of improperly shifting the burden of proof on mailing to the taxpayer and wrote:  “In other words, had the tax court followed Buffano and required the Commissioner to prove proper mailing, the ‘paucity of information’ should have led to a win for Adolphson.” Slip op. at 10-11.

The panel was also critical of the DOJ lawyers for, among other things, (1) not taking a position on whether the Buffano line of cases was correct, (2) not taking a position on whether Judge Carluzzo correctly distinguished Buffano, (3) making no attempt to justify the IRS collection behavior in the case, and (4) unhelpfully arguing that “Adolphson, proceeding pro se, erred by asking the tax court to enjoin further collection efforts and refund money already collected, rather than asking the court to invalidate the levies.”  Id. at 11.  “Instead, the Commissioner insists that Adolphson is relegated either to an administrative claim before the IRS or a refund suit in district court, while maintaining that ‘whether the IRS mailed a Notice of Intent to Levy to taxpayer’s last known address is not relevant in this case.’” Id.

Turning to the law, the panel wrote:

Notwithstanding this unwillingness to confront the salient issue, the Commissioner is correct that, absent a notice of determination, the tax court lacks jurisdiction under 26 U.S.C. § 6330(d).  A decision invalidating administrative action for not following statutory procedures is a quintessential merits analysis, not a jurisdictional ruling. The Buffano line of cases therefore represents an improper extension of the tax court’s statutorily defined jurisdiction.

Id. at 12 (citations omitted).

The panel blamed the Tax Court’s error in Buffano on its uncritically importing into CDP, from its deficiency jurisdiction case law, the practice of allowing a taxpayer who files a late deficiency petition to ask that the court determine that the notice of deficiency was not sent to the last known address, and, so, the Tax Court lacked deficiency jurisdiction because of an invalid notice.  Calling the deficiency jurisdiction practice “less problematic”, the panel distinguished it from determining whether an NOIL was properly sent to a last known address, since the challenged notice in a deficiency case is the ticket to the Tax Court (the “jurisdictional hook”), whereas an NOIL is not.  In a passage I find confusing, the panel wrote:

Although calling this ground for dismissal [of an improperly-mailed notice of deficiency] “jurisdictional” is a misnomer, the logical underpinning is the same: The tax court is determining whether the IRS has met statutory requirements to proceed with collection, but there isn’t a question of whether or not the jurisdictional hook exists (were there no deficiency, there would be nothing to collect).

Id. at 14.  Earlier in the opinion, the panel had written:

This [Buffano] practice of invalidating collection activity [in a CDP case] where the tax court lacks statutory authority to proceed also violates the Tax Anti‐Injunction Act, 26 U.S.C. § 7421(a), which (with exceptions inapplicable here) provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.” This statute deprives courts of jurisdiction to enter pre‐collection injunctions and “protects the Government’s ability to collect a consistent stream of revenue” by ensuring that “taxes can ordinarily be challenged only after they are paid, by suing for a refund” under 28 U.S.C. § 1346(a)(1). By invalidating levies despite the absence of a notice of determination under § 6330—a taxpayer’s jurisdictional hook to enter tax court—decisions such as Buffano stand in direct opposition to the Act.

Id. at 12-13 (citations omitted).

Ultimately, the panel concluded that a taxpayer in Mr. Adolphson’s position is left only the remedy of a refund suit.  I would call that remedy completely useless, since one can only get a court to order a refund in such a suit if one has overpaid one’s taxes.  Lewis v. Reynolds, 284 U.S. 281 (1932).  It is of no relevance in a refund suit whether the IRS improperly forced all or part of the tax payments by a procedurally-improper levy.

The panel regretted that it saw no statutory remedy for Mr. Adolphson’s plight:

The framework used in Buffano to scrutinize the IRS’s compliance with its statutory obligations does have equitable appeal; a taxpayer to whom the IRS fails to mail a Final Notice of Intent to Levy and, through no fault of her own, misses the 30-day window to request a CDP hearing might otherwise be left without an opportunity to petition the tax court prior to seizure of her assets. This is the system devised by Congress, however . . . .  Troubling though this [refund suit] “remedy” may be, given the expense and potential delays inherent in such a suit, there is no lawful basis for expanding the tax court’s jurisdiction to resolve the perceived problem. Absent a notice of determination, the tax court simply has no lawful authority to hear a taxpayer’s claim under § 6330(d).

Adolphson, at 15-16.


Because Mr. Adolphson was pro se and the DOJ’s briefing was so unhelpful, the panel may have misunderstood certain things about tax procedure when it wrote the opinion.  The opinion conspicuously fails to mention three possible avenues for relief for him.

First, section 6330(e)(1) suspends the collection statute of limitations if a person requests a CDP hearing.  In this case, no CDP hearing was requested because no NOIL was issued to the last known address (probably).  Section 6330(e)(1) goes on to provide:

Notwithstanding the provisions of section 7421(a), the beginning of a levy or a proceeding during the time the suspension under this paragraph is in force may be enjoined by a proceeding in the proper court, including the Tax Court.  The Tax Court shall have no jurisdiction under this paragraph to enjoin any action or proceeding unless a timely appeal has been filed under subsection (d)(1) and then only in respect of the unpaid tax or proposed levy to which the determination being appealed relates.

Since there was no NOD here to which an appeal under subsection (d)(1) could be timely, the Tax Court lacked that injunctive power under subsection (e)(1).  I don’t see the district court having injunctive power under (e)(1), either, since the injunctive power is provided during the period of the suspension.  Since no CDP hearing was requested (probably, since no NOIL was issued to the last known address), no suspension period is in effect.

Second, the Supreme Court acknowledged a judicial, equitable exception to the anti-injunction act in Enochs v. Williams Packing & Navigation Co., 370 U.S. 1 (1962).   To succeed under that exception, a taxpayer must show (1) that under no circumstance could the government prevail, and (2) that there is equity jurisdiction – i.e., that the taxpayer would suffer irreparable harm if the government’s actions were not enjoined.  While I think that an IRS levy made without previously sending a proper NOIL might meet the first requirement, merely being forced to pay money would doubtless not be considered irreparable injury.  However, there might be irreparable injury if, say, the levies would end up forcing the taxpayer’s business into bankruptcy.

Short of injunctive relief, though, Congress has provided in section 7433 a suit for money damages on account of negligent wrongful collection actions.  But, under this section, a taxpayer is limited to actual damages – and I am not sure merely paying taxes prematurely constitutes actual damages.  However, collateral damage – such as the levies ending up causing the taxpayer to lose clients or to go into bankruptcy – would seem to be compensable damages.

I also don’t think the Adolphson court appreciated how the dismissal of a deficiency petition for lack of jurisdiction because of an invalid notice doesn’t amount to an injunction against the IRS.  The Tax Court has jurisdiction to find facts necessary to its jurisdiction. When the Tax Court determines that a notice of deficiency wasn’t valid, that is a jurisdictional fact found by the court that could be used by a taxpayer in later litigation to collaterally estop the IRS from, say, judicially foreclosing on the tax lien that arose from the deficiency.  By contrast, if the Tax Court holds an NOIL was invalid, the court would be deciding an issue not necessary to its CDP jurisdiction, so the discussion would be dicta.  A taxpayer could not use this dicta to collaterally estop the IRS in later litigation from arguing that the NOIL was valid. The result of a ruling in a Buffano-type case that the NOIL wasn’t properly mailed is simply an advisory opinion to the IRS not to pursue collection under that NOIL. The IRS usually follows that advice. But, since the Tax Court shouldn’t be issuing advisory opinions, perhaps that is part of why I agree with the Seventh Circuit that Buffano is incorrect.

Finally, Adolphson may also call into question Craig v. Commissioner, 119 T.C. 252 (2002), where the Tax Court held that it has jurisdiction under section 6330(d)(1) to hear a case where the IRS mistakenly issued an equivalent hearing letter, rather than an NOD.  In Craig, the Tax Court said it would treat the equivalent hearing letter as an NOD.  Adolphson seems to suggest that when no NOD was actually issued, the Tax Court should just keep quiet about any other merits issue, as it lacks jurisdiction under section 6330(d)(1).


Seventh Circuit May Hold 90-day Period to File Deficiency Petition Not Jurisdictional

We welcome back frequent guest blogger, Carl Smith, who discusses a surprising development in the issue of whether a time period to file a Tax Court petition in a deficiency case is jurisdictional. Jurisdictional in this context is a code word for set in stone. Depending on the outcome of this case, jurisdiction in Tax Court cases could get very interesting. Keith

As you may recall from a recent post of mine, Keith and I are in the midst of litigation in the Circuit courts about whether the time periods in which to file Tax Court petitions in Collection Due Process (CDP) (§ 6330(d)(1)) and stand-alone innocent spouse (§ 6015(e)(1)(A)) cases are jurisdictional or subject to equitable tolling under recent non-tax Supreme Court case law that has made time periods to file almost never jurisdictional.  Even though the Supreme Court has been issuing many opinions on its new jurisdictional thinking since 2004, our arguments are, shockingly, ones of first impression in the Circuit courts. In June, the Tax Court, en banc, rejected our arguments in a CDP case named Guralnik v. Commissioner, 146 T.C. No. 15 (June 2, 2016), basically saying that the Supreme Court case law we cited is distinguishable because it does not involve tax law or the Tax Court and because the Tax Court would prefer to stick, by analogy and stare decisis, to its old case law holding the § 6213(a) period to file jurisdictional. See Byran Camp’s post on Guralnik here.

I have done a couple of posts on the case of Tilden v. Commissioner, T.C. Memo. 2015-188, see my posts here and here. It is a deficiency case that was taken up on appeal. On October 6, 2016, the parties did oral argument before the Seventh Circuit in the case, and it appears that at least two judges on the panel, Judge Easterbrook and Chief Judge Wood, (and maybe all three) are inclined to hold that the current non-tax Supreme Court case law on jurisdiction makes the § 6213(a) time period to file a deficiency case non-jurisdictional. If they do this in the deficiency area, it will certainly constitute a revolution in the tax controversy world and a slap at the unanimous Tax Court holding in Guralnik. Yikes!


By way of background on the Tilden case, I quote from one of my earlier posts:

Tilden is a case where a deficiency petition arrived at the Tax Court after the 90th day.  It arrived by certified mail (United States Postal Service (USPS)), but bore no real postmark, just a shipping label from and a certified mail receipt, both dated the 90th day, and the latter only dated in the handwriting of an employee of the taxpayer’s attorney.  Applying regulations under section 7502 and prior Tax Court case law, Judge Armen held that since internal USPS tracking data showed that the USPS first got possession of the envelope after the 90th day, section 7502 did not apply, the petition was untimely, and the Tax Court therefore lacked jurisdiction.

In the appeal, both the taxpayer and the DOJ are arguing that Judge Armen was wrong and that the Seventh Circuit shouldn’t rely on the provision of the § 7502 regulations that he relied on. Both sides now agree that this case should be treated as if the envelope bore a non-USPS postmark, where the regulations would treat the filing as timely if the petition arrived at the Tax Court within a normal period that would apply to regular mail sent by USPS on the last date to file. The parties agree here that the petition arrived 8 days after the last date to file. Given the extra screening done to Tax Court mail since the 2001 anthrax scare, the DOJ and IRS now concedes that 8 days is within the outer edge of the normal period for USPS mail to reach the Tax Court from Utah.

The parties filed briefs in the Seventh Circuit arguing about which was the correct regulation under § 7502, but not discussing, one way or the other, recent non-tax Supreme Court case law on whether time periods to file are jurisdictional. Indeed, the parties at oral argument admitted ignorance of the non-tax Supreme Court case law that appellate judges are applying almost every week to overturn prior holdings.

The parties just assumed that the time period to file a deficiency petition was jurisdictional, as most Circuit courts and the Tax Court had held long ago. But, no one has ever asked the Tax Court or a Court of Appeals to reconsider whether the § 6213(a) period is really still jurisdictional under the Supreme Court’s new case law severely limiting the use of the word “jurisdictional”. Under that new case law, time limits to file in courts are not jurisdictional, unless either (1) Congress has made a “clear statement” in the statute that it wants the time period to be jurisdictional, or (2) the Supreme Court has for over 100 years in its own opinions held the time period jurisdictional (even though the time period wouldn’t be considered jurisdictional under the new Supreme Court rules).

At the oral argument in Tilden on October 6 (which can be heard on the Seventh Circuit’s website and linked above), at least two and maybe all of the judges on the panel spent a large part of each side’s time asking: “Why isn’t the § 6213(a) filing period not jurisdictional under current non-tax Supreme Court case law?”  It is clear that at least two of the judges think that the time period is obviously not still jurisdictional under that case law.  No judge on the panel suggested it was.

The judges were rather shocked that neither party’s lawyer was prepared to discuss the jurisdictional issue under current Supreme Court case law, but Robert Metzler of the DOJ noted to the court that this same issue was being raised in two other cases, Duggan v. Commissioner (a Ninth Circuit CDP case, where Keith and I are amicus) and Matuszak v. Commissioner (a Second Circuit innocent spouse case under § 6015(e), where Keith and I are taxpayer’s counsel and which Meltzer erroneously said was going on in the Third Circuit). Metzler was confused. Keith and I are litigating, as counsel for the taxpayer, a § 6015(e) case named Rubel v. Commissioner in the Third Circuit. Metzler forgot to mention Rubel.  Metzler also failed to mention that none of our cases involve the deficiency time period in § 6213(a), so the issue is not exactly the same, but only similar.

Metzler is counsel for the DOJ in the Duggan case, and only on October 4 (i.e.,2 days before the Seventh Circuit oral argument in Tilden), the Ninth Circuit had accepted Keith and my amicus brief in the Duggan CDP case. At the same time, the Ninth Circuit ordered Metzler to file a response to our amicus brief no later than October 25. (Metzler is not the DOJ counsel in either Matuszak or Rubel.)  Metzler told the Seventh Circuit that he was just beginning to familiarize himself with the issues we raised, but that he was not prepared to make any argument on the jurisdictional point to the Seventh Circuit. He offered, instead, to provide supplemental briefing, but the judges were not interested in more briefing on Supreme Court case law on jurisdiction that they said they already knew quite well.

Metzler also warned that this panel might have to go en banc to overrule Seventh Circuit existing precedent, Petrulis v. Commissioner, 938 F.2d 78, 79 (7th Cir. 1991); Sanders v. Commissioner, 813 F.2d 859, 861 (7th Cir. 1987); and McPartlin v. Commissioner, 653 F.2d 1185, 1188 (7th Cir.1981); that described the filing period as jurisdictional. But, Judge Easterbrook seemed already to have looked at those opinions: The statement in Sanders that timely filing is a jurisdictional defect for a deficiency case was dicta, not the least necessary to the holding. Thus, Sanders is not current Seventh Circuit precedent. While the other two opinions clearly state that the filing period is jurisdictional, the Supreme Court would call those two opinions “drive-by jurisdictional rulings,” deserving of no precedential weight, since it would not have mattered in either case whether the time period was called an element of the claim to be proved, instead of a jurisdictional defect. See Arbaugh v. Y & H Corp., 546 U.S. 500, 511 (2006).

Although it is always dangerous to predict, at the end of the argument, it seemed that the judges were going to hold that the § 6213(a) time period is not jurisdictional and remand the case to the Tax Court.  The judges pointed out that since non-jurisdictional statutes of limitations are subject to waiver, and the IRS was not arguing that the petition was untimely, the Tax Court could just proceed to the merits after a remand if the Seventh Circuit held the time period not jurisdictional.

The day after the oral argument, a fairly desperate Meltzer submitted an FRAP 28(j) letter in which he argued that, just as the Supreme Court in John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008), refused to use its new thinking on jurisdiction to overturn its prior holdings for over 100 years that the 6-year time period in which to file a suit in the Court of Federal Claims under 28 U.S.C. § 2501 is jurisdictional, similar stare decisis grounds should caution the Seventh Circuit from overruling its precedent under § 6213(a). Unfortunately for the government, the Supreme Court has not said there is a stare decisis exception from its current rules on jurisdiction to consistent prior holdings of lower courts. So, I doubt this comment will go anywhere with the Seventh Circuit, though the Tax Court accepted this argument in Guralnik.

Oddly, Meltzer, in his letter, makes no attempt to show that the Congress made a “clear statement” in § 6213(a) that the time period to file is jurisdictional.

Finally, in his letter, Meltzer referred the Seventh Circuit to the Tax Court’s opinion in Guralnik, which, he said, “contains a well-reasoned discussion of whether the jurisdictional status of time limits for Tax Court petitions has been changed by recent Supreme Court cases.”


Even though a good argument could be made that the deficiency jurisdiction time period is not jurisdictional, Keith and I have been careful not to make that argument and to point out to the courts why we aren’t making that argument. While such a holding might benefit individuals who are seeking equitable tolling for a late-filed deficiency petition, we fear the argument’s consequences on people who had no good reason for late filing. Most people have no good reason for late filing.

It has long been held that a person who files a deficiency petition late can, after the case is dismissed for lack of jurisdiction, simply pay the tax and sue for refund in district court. Budlong v. Commissioner, 58 T.C. 850, 854 n.2 (1972); McCormick v. Commissioner, 55 T.C. 138, 142 n.5 (1970). That is because § 7459(d) provides, in relevant part:

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 dismissal is for lack of jurisdiction.

If the § 6213(a) filing period is not jurisdictional, then, if a person files a late Tax Court deficiency petition, § 7459(d) would turn the decision in the case into a decision on the merits upholding the deficiency.  I am not sure that the person could then pay and sue for a refund.  Wouldn’t the Tax Court merits decision be res judicata in the district court for the same tax year?

Further, the point of the Supreme Court making a stare decisis exception to its new rules because of a long history of its case law holding a time period jurisdictional is that Congress, having read that case law, might have legislated on the assumption that the time period was jurisdictional. Even though there is no Supreme Court case law interpreting § 6213(a) or its predecessors, it is clear that Congress has legislated on the assumption that § 6213(a) is jurisdictional. The Committee reports accompanying the 1998 legislation adding a sentence to the end of that subsection allowing taxpayers to rely on the last date to file shown in notices of deficiency state that Congress is making the change because the time period is jurisdictional. See H. Rept. 105-364 (Part 1) at 71, 1998-3 C.B. 373, 443; S. Rept. 105-174 at 90, 1998-3 C.B. 537, 626. Accord H.R. (Conf.) Rept. 105-599 at 289, 1998-3 C.B. 747, 1043-1044.

It would have been helpful if Meltzer had also told the Seventh Circuit about the potential § 7459(d) problem we foresee and the Committee report language noted in the prior paragraph.

Well, if the Seventh Circuit rules § 6213(a)’s time period is not jurisdictional, I suppose the problem we foresee could easily be fixed by a statutory amendment to § 7459(d).


Private Carriers, APA Impact on Notices and New Blog

Les and I each wrote short, essentially follow up posts which we are combing into one.  We anticipate we will be writing more on mailing deadlines and on the APA impact on notices.  Keith

Using Private Carriers to Meet a Filing Deadline

In Notice 2016-30, IRS published a new list of designated private delivery services  (“designated PDSs”) for purposes of the timely mailing treated as timely filing/paying rule of section 7502. The Notice provides rules for determining the postmark date for these services. The Notice updates Notice 2015-38, which had updated Notice 2004-83. This marks the second time IRS has updated the rules in under a year after an eleven or so year run for the original notice.

The main change is that the notice, effective April 11, 2016, adds to the acceptable list a number of DHL-provided services. IRS dropped DHL in last year’s following DHL’s cutback in services.

The Notice reminds people that not all services offered by the anointed carriers qualify as PDS’s. We have discussed numerous times issues taxpayers and practitioners have had meeting petition deadlines. Failing to track which services qualify can have major consequences. Keith has discussed the sad case of Guralnik v Commissioner when the taxpayer used FedEx First Overnight to mail his petition, a service not found within the 2004 notice but one IRS added in 2015. In addition, a summary opinion from a couple of years ago, Sanders v Commissioner, involved a pro se taxpayer who sent in his petition on day 89 using UPS Ground. UPS Ground was then and is still not one of the many UPS services that the IRS treats as a PDS.

In Sanders, the petition arrived at Tax Court after the 90-day period elapsed. IRS moved to dismiss, and the Tax Court held that the petition was untimely “because UPS Ground has not been designated by the Commissioner as a private delivery service.”

Addressing the consequences the Tax Court added:

In so holding we acknowledge that the result may appear harsh, notwithstanding the fact that petitioner had nearly 90 days to file his petition but waited until the last moment to do so However, the Court cannot rely on general equitable principles to expand the statutorily prescribed time for filing a petition.

The Tax Court concluded that Sanders was not without recourse; he could pay the tax and file a refund claim and suit. Given that he deficiency was for two years and totaled over $40,000, with the Flora rule requiring full payment, that option may not have given Sanders much comfort.

Follow up on Statutory Notice and the Administrative Procedure Act Post

One commenter on the post suggested additional links.  After the post was written, QuinetiQ filed its reply to the Government’s brief.  So, this brief post will provide a quick update of documents available for those interested in this case.

In the post I provided a link to the Tax Court opinion; however, the commenter pointed out that the most pertinent document from the Tax Court case was an order, linked here, setting out the Court’s views on the motion to dismiss based on lack of jurisdiction due to the (allegedly) improper notice of deficiency.  The order provides details about the Tax Court’s reasoning in denying the motion that I did not include in the original post.

In the 4th Circuit, QuinetiQ filed the opening brief as the appellant.  For some reason we could not access that brief and did not include it as a link in the post.  It is linked here.  Now that QuinetiQ has filed a reply brief, it is also available and is linked here.  The briefs filed by QuinetiQ make clear that it thinks the notice of deficiency in this case really provided no meaningful notice.  Not having seen that notice I can only imagine from other notices I have seen that the possibility certainly exists that the notice itself was bad.  Then the question is so what?  Must the taxpayer move forward on the substance of the matter gleaning what it can from the notice, from what it knew of the audit and from the information that comes out during the Tax Court case or can it get a court to strike the notice of deficiency as inadequate under provision s of the Administrative Procedure Act.  Do those provisions apply to an informal agency action such as a notice and, if they do, in applying them to this notice, should it be stricken?  Is this just another example of tax exceptionalism that needs to fall or is the notice of deficiency something totally covered by the IRC, outside of the APA, and subject to very relaxed standards for what provides adequate notice.


New Tax Blog

A group of tax professors, some of whom publish great material on tax procedure, have just started a new blog for those who might be interested.  Check it out at



Statutory Notice Language and the Administrative Procedure Act

Yesterday, Les posted about the Tax Court decision in Ax v. Commissioner holding that the APA did not prevent the IRS from amending its answer to add additional bases for supporting its deficiency determination.  Last year, we failed to write about the case of QinetiQ U.S. Holdings v. Commissioner, T.C. Memo 2015-123 which seeks to significantly change statutory notices issued by the IRS.  Guest blogger Sean Akins, one of petitioner’s counsel at the Tax Court level, made brief mention of the case in his post on sealing the records in the Tax Court but did not address the major procedural issue in the case.  Although the case may significantly change the way the IRS must issue statute notices of deficiency, it only has importance if the petitioner wins the novel argument.  Because the government won in the Tax Court, the case remains obscure.  Due to its potential significance, it bears watching, with other APA cases seeking to change Tax Court practice, as it moves forward.  Petitioner appealed the case to the 4th Circuit where the parties have recently filed their briefs.


Petitioner timely filed a petition in Tax Court and then moved to dismiss the case for lack of jurisdiction arguing that the notice of deficiency was invalid.  The invalidity of the notice, according to petitioner, resulted from the failure of the notice to provide an adequate description of the issues causing the IRS to send the notice.  While other cases (see here, here and here) over the years have attacked the validity of the notice of deficiency on the grounds of insufficiency and the Tax Court has upheld some notices that must have caused it to hold its nose, no petitioner prior to QinetiQ argued that the notice of deficiency lacked validity because it failed to follow the Administrative Procedure Act (APA).

We have published several posts (see here, here and here) on the APA and its impact on tax regulations.    We have not, however, written about the impact of the APA on more day to day notices issued by the IRS and how, if at all, the APA impacts what the IRS must put in those notices.  That is the issue QuinetiQ takes on.  The IRS argument is essentially that the APA does not apply to things such as a notice of deficiency and the Tax Court agreed.  The taxpayer will make its arguments again before the 4th Circuit.  While the taxpayer may have a low chance of success, big changes in the notice process will occur if it does succeed.

The IRS position is that the IRC does not required detailed reasoning in a notice of deficiency and that the specific language of the IRC regarding the notice of deficiency trumps the provisions of the APA.  The IRS points to IRC 7522 which requires only that the notice briefly inform the taxpayer concerning the proposed deficiency for a specific year and amount.  Section 7522(a) also contains a statement that an inadequate description does not invalidate the notice.  This creates a tough hurdle for the taxpayer to overcome in attacking the validity of a notice of deficiency.

With respect to the “reasoned explanation” requirement petitioner argues that the APA imposes on notices of deficiency, the IRS argues that this misinterprets the APA requirement.  Such an explanation must support agency action in the context of formal rulemaking but not in the context of a notice of deficiency which acts more like an informal rulemaking determination.  The Supreme Court has held that the notice of deficiency does not require a detailed explanation although not necessarily in response to an argument such as petitioners make in this case.

Whether the 4th Circuit reverses the Tax Court or simply lets stand a decision that continues with the same rules for the notice of deficiency to which we have become accustomed, the case bears watching if you have interest in what a notice of deficiency should say.  When I started working on tax cases in the 1970s every case on which the IRS sought to issue a notice of deficiency went through the review staff of the examination division.  The revenue agents had a strong dislike for the review staff because it regularly caught their mistakes and required them to redo their work.  The review staff carefully crafted notices of deficiency.  The effort that the IRS put into the notices at that time seems amazing today as I look back on the procedure then and now.  Revenue agent reports were transformed from sometimes loose language about a proposed change to much more descriptive language that had a better chance of standing up to a challenge.  We have come a long way from the days when a review staff crafted the notice of deficiency and from what may have been expected when the statutory provisions and early case law were written.

Today, the vast majority of notices get issued using the 30 day letter attached to the formal notice letter.  Little, if any, review of the notice occurs and most notices concern small cases handled by the correspondence unit.  Even in larger cases the amount of review is quite small given the amount of money at stake.  Because the change over to the notices of deficiency without review and careful language has now existed for over two decades, we are accustomed to notices that do not provide a great deal of notice in many cases.  Whether or not Quinetiq wins the case for APA level descriptions in notices of deficiency, it might be appropriate to think about how we arrived at the current state of “notice” in these notices and whether a better level of notice should exist.  We have posted now on several occasions about correspondence from the IRS that does not adequately advise the taxpayer of what is happening or what will happen.  Poorly written notices of deficiency raise many of the same issues and place on taxpayers the burden of proof in Tax Court cases concerning matters that sometimes contain inadequate or incorrect descriptions.  Of course, if we want the IRS to spend the time to provide better notice, we must also make the commitment to provide adequate staffing.


Tax Court Order Finds Jurisdiction Even When Taxpayer Files a Petition Before the IRS Issues Notice of Deficiency

We have discussed with some frequency on the blog the sad tale of taxpayers and practitioners filing petitions beyond the 30 or 90-day period. We have also discussed the Tax Court’s willingness to accept petitions not perfectly formed or signed when the taxpayer has made a good faith effort to reach out to the Court. What about when a taxpayer jumps the gun and files the petition during the exam before the IRS issues a stat notice? If the notice of deficiency is the “ticket” to Tax Court, what happens to petitioners who file before the IRS issues the ticket? Cases get filed in Tax Court with some frequency from IRS correspondence that does not provide the proper basis for Tax Court jurisdiction. Figuring out whether the Court has jurisdiction based on these filings can be very challenging and was one of the reasons Chief Counsel sought in its request for rule changes last fall that the Court require parties to attach the correspondence to the petition giving the Court jurisdiction.


I came across an order the other day Weiss v Commissioner that raised this issue. The Weisses filed a petition to Tax Court in January of 2016, but the IRS did not issue its notice of deficiency until February. IRS filed a motion to dismiss the petition for lack of jurisdiction in March; the taxpayer, a couple of weeks later, filed a response to the IRS’s motion. Luckily, the taxpayer’s response to the IRS motion was within the 90 days of the statutory notice. That filing within that 90-day period was enough to confer jurisdiction:

Because the notice of deficiency for petitioners’ tax years 2012 and 2013 was issued after the petition in this case was filed, the Court does not have jurisdiction over petitioners’ 2012 and 2013 tax years under the petition was filed. I.R.C. sec. 6213(a). However, inasmuch as petitioners’ Opposition to Motion To Dismiss for Lack of Jurisdiction was received within 90 days of February 12, 2016, the date the notice of deficiency for tax years 2012 and 2013 was sent to petitioners, a copy of the Opposition shall be filed as a petition at Docket No. 7399-16 to commence a separate case regarding petitioners’ 2012 and 2013 tax years.

To perfect the filing, the Tax Court ordered the Weisses to file an amended petition (with no separate filing fee). I suspect the problem of early filing may be fairly common, as there are multiple variations on pre-stat notice correspondence and many types of stat notices. Many are dense. Add to the mix that the high numbers of pro se taxpayers, and you have a recipe for confusion.  While the Tax Court is quite permissive on what it will treat as a petition, the Weisses were lucky that they responded to the IRS motion to dismiss quickly, and that the IRS filed its motion to dismiss close in time to when the IRS issued its notice of deficiency. The case demonstrates that the Tax Court seeks to open its doors to petitioners when possible and also that luck sometimes plays a part in whether someone gets into the Court to argue for relief. We are still waiting to see if the unlucky Mr. Guralnik will have the door opened for him. For discussions of the Guralnik case readers can look here and here.

When is the Statutory Notice of Deficiency Issued by an Authorized Delegate of the Treasury Secretary

Earlier this month, the 8th Circuit, in the case of Leroy Muncy v. Commissioner, vacated the memorandum and order entered in the case by the Tax Court and remanded the case to the Tax Court with instructions to get proof to support the opinion that it issued.  What is somewhat remarkable about the remand is that it appears Mr. Muncy made tax protestor type arguments yet convinced the 8th Circuit to issue the remand.  The reason for the remand was basically lack of proof which I suspect resulted from the presumption that the type of proof now being required by the 8th Circuit was unnecessary.  This type of situation is much more likely to occur in a tax protestor type case where the taxpayer is challenging a basic premise that the IRS and the Tax Court see as a given.  Because cases of this type do not arise with frequency, the reminder that having a simple case remanded for lack of proof will impact the way the IRS and the Tax Court approach the next case in which a tax protestor challenges something basic in the tax process.


The taxpayer received a notice of deficiency signed by Judith Miller, IRS Technical Services Manager, on Treasury Department letterhead.  I suspect that to the IRS and to the Tax Court the notice looked very ordinary.  To Mr. Muncy it did not, and he challenged whether Ms. Miller was duly authorized to sign the notice.  The Tax Court made relatively quick work of his argument.  It no doubt did so because it was comfortable that Ms. Miller was an authorized Treasury official.  Chief Counsel’s office apparently offered little proof of who Ms. Miller was or more precisely how the delegation order from the Secretary of Treasury worked its way down through the Commissioner to the IRS Technical Services Manager.  The lack of proof presented to the Tax Court documenting the chain of authority from the Secretary of Treasury, who is authorized under the statute to send out notices of deficiency, to Judith Miller left the 8th Circuit unsatisfied that the Tax Court had a basis to rule against Mr. Muncy.  In the per curiam opinion the Court ended with “Accordingly, we vacate the December 2014 memorandum and order, and remand this case to the tax court with instructions to determine whether Miller had authority to issue the NOD that is the subject of this case, and for further proceedings consistent with that determination. Cf. Schweiss v. Chrysler Motors Corp., 922 F.2d 473 (8th Cir. 1990) (noting benefit of having trial court address disputed factual issues in first instance).”

I expect the case to go back to the Tax Court where the Chief Counsel attorney will place into the record of the Tax Court the delegations of authority linking the Secretary to IRS Technical Services Managers.  The nswer appears clear.  The IRM, in Delegation Order 4-8, provides precisely who has the authority to issue and rescind notices of deficiency. Delegation Order 4-8 lists many Service employees, including a number of positions in Technical Services.

Is this a waste of time?  Most likely.  Was the Eighth Circuit wrong?  Probably not.  This is why going to trial is time consuming and tedious.  Things must be proven that almost everyone has confidence exist.  The IRS does not need to prove the sky is blue or other matters on which the Tax Court can take judicial notice, but it must prove something like a delegation order chain of authority even when doing so is something that the Tax Court knows is a waste of time.  I have not looked at the record to see exactly what was entered.  Maybe Chief Counsel’s office already provided the necessary information and it simply did not make it into the opinion.  I view the 8th Circuit’s opinion as one saying to the Tax Court you cannot ignore the need for proof of the delegation of authority, or a citation to it, even on a routine matter such as the the chain of authority to issue this notice.  You must have something in the record or the opinion to support your conclusion even if you are confident that the litigant is simply raising this argument to frustrate the IRS and the Court.

The case serves as a good reminder to the parties of the proof they need to present to aid the Court in what seems like a slam dunk decision.  I suspect that the case will move swiftly through the Tax Court during the remand stage and eventually get back to the 8th Circuit because Mr. Muncy will not be satisfied with the Tax Court decision in round two.







Time Stands Still for Snow – Expanding Section 7503 on the Last Day to Timely Complete a Task

We have all prayed for snow days since entering kindergarten. Now, we have another reason to continue those prayers. The Tax Court is posed to turn a snow day from day creating terrible results for those trying to get in its doors to another legal holiday extending the time upon which to act. Let’s hope it succeeds.

Special Trial Judge Armen has issued an extraordinary order in Guralnik v. Commissioner pursuant to Tax Court Rules 182(e) and 183. Depending on what happens to this order in the Tax Court and, on appeal if the Government goes that route, a new basis for getting a petition into the Court on time may have just come into being. The facts in the case cry out for relief. Judge Armen found two possible routes to relief. Perhaps a third exists. The private carrier list update in May 2015 also gets attention in the order and deserves your attention as you read about this case.


The Order

Perhaps the first matter to address is the order itself. Petitioner filed a petition seeking relief in a collection due process case (CDP) following the issuance of a determination letter. The letter was issued on January 16, 2015. The determination letter itself is not at issue. It seems to have been properly mailed and addressed. The last date to file a Tax Court petition in a CDP case runs 30 days after the mailing of a determination letter. In this case it would ordinarily have run on February 15, 2015. That date was a Sunday. The following date was a federal holiday, President’s Day, and the following day was a snow day in Washington, D.C., when all Federal and District offices, including the Tax Court were closed. So, the first day the Tax Court was open after February 15 was Wednesday February 18 and the petition arrived in the Tax Court early that morning.

Unfortunately, petitioner mailed the petition to the Tax Court on Friday, February 13 (an appropriate day for what he has gone through in this case) using FedEx “First Overnight” service – the most expedited and expensive service that FedEx offers. You might be thinking FedEx is an approved private carrier and you would be right; however, not every FedEx delivery service is approved. The “First Overnight” service did not exist in 2004 when the IRS had last published its list of approved private delivery services and so was not on the list. In May 2015, when the IRS next updated the list, this service did make it on the list as it logically should since it is better than all of the other FedEx services already on the list. Now you are starting to get a sense of why you should not send important documents on Friday the 13th. You are also getting a sense of why the Court might want to find a way to help Mr. Guralnik in this situation since he seems to have tried to do the right thing only to have not one but two odd things prevent him from reaching his goal.

The IRS filed a motion to dismiss the petition as untimely. Judge Armen’s order, an order ordinarily issued following such a motion, resolves the motion but in an extraordinary way. This past May 28, the Chief Judge assigned this case to Special Trial Judge Armen “for disposition”. Under 7443A(b)(4) and (c), Special Trial Judges are authorized to enter the decision of the Tax Court in CDP cases. It would appear that Judge Armen could rule on this motion without any further review.  However, he issued a “recommended” ruling that is attached to his order.  The recommended ruling is in the format of a T.C. Opinion (complete with proposed headnote).  The accompanying order says that this is governed by Rules 182 and 183, and that the parties can submit comments on the recommended ruling — the procedure the Tax Court adopted in response to Ballard v. Commissioner. The order itself gives you some sense of the importance of the decision in this case. If the proposed order stands, it may well get issued as a fully reviewed opinion of the Court because of the new ground that it stakes out in the last date to perform an act area. Since the Court started putting up designated orders on its website in 2011, this may be the first order that attached a recommended opinion.

Oddly, this issue of a snow day has apparently not come up before in deficiency cases.  Based on (1) the legislative history of 7503, (2) the Federal Rule of Civil Procedure rule governing this circumstance, and (3) a belief that Congress would want this result, Judge Armen recommends finding that the Court has jurisdiction over the case. Therefore, his proposed order restores the case to the general docket for eventual trial.

The Statute

The timely mailing rule of IRC 7502 provides that if a document is mailed timely it may be treated as timely filed. Section 7503 provides that “When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday.” The term legal holiday refers to legal holidays in the District of Columbia. Thus, a petition received by the Tax Court “after the expiration of the statutory filing period … is nevertheless deemed to be timely filed if the date of the U.S. Postal Service postmark stamped on the envelope in which the petition was mailed is within the time prescribed for filing.” Reg 301.7502-1.

If the petition comes to the court through a “designated delivery service”, it may also meet the timely mailing requirement as if it was mailed through the USPS. See 26 U.S.C. § 7502(f)(1). The IRS says what meets the requirements of a designated delivery service and here, for the reasons discussed above, petitioner did not meet that requirement. No dispute exists, however, concerning the date petitioner gave the petition to FedEx and the fact that the petition was delivered to the Court on the first day it was open after petitioner gave the petition to FedEx. Agreeing with the IRS that the delivery service did not meet the statutory requirements, Judge Armen nevertheless found that “we hold that the petition was timely filed and that the Court has jurisdiction to hear petitioner’s case… because section 7503 served to extend the filing deadline to Wednesday, February 18, 2015, thereby making the receipt of the petition on that date timely.” To reach this conclusion, he found that the “official closing of both District and Federal government offices, specifically including the Tax Court, on Tuesday, February 17, 2015, because of a winter snowstorm as a legal holiday in the District of Columbia for purposes of section 7503.”

How did Judge Armen work his way past many decades of the Tax Court not recognizing snow days as legal holidays for purposes of the timeliness of petitions in the Tax Court? He did it by looking back at the long history and purpose of the statute which came into existence as a result of the position that if the last day for performing an act fell on a Sunday and the taxpayer had not performed the act by that date the taxpayer had missed the deadline. See Section 274(a) of the Revenue Act of 1926, ch.27, 44 Stat at 55. See also Satovsky v. Commissioner, 1 B.T.A. 22 (1924). The Sunday rule was changed about a decade later to include legal holidays in the District of Columbia. See Section 272(a), Rev Act of 1934, ch.277, 48 Stat at 741. See also S. Rept No. 558 (1034), 1939-1 C.B. (Part 2) 586. See also S.Cal. Loan Ass’n v. Commissioner, 4 B.T.A. at 237-238. The rule was changed again after another decade to include Saturdays. See Pub. L. No. 79-291, sec. 203, 59 Stat. at 673 (1945). The change in 1945 to add Saturdays to the list of days not counted as the last day to perform an act resulted because the Tax Court closed its docket room on Saturdays after September 8, 1945 to comply with the Federal Employees Pact Act of 1945. See Pub. L. No. 79-106, 59 Stat. at 303. See also Pleasant Valley Wine Co. v. Commissioner 14 T.C. 519 (1950).

In reviewing the changes to the law regarding the days that would no longer count as the last day to perform an act, Judge Armen determined that the reasons for the changes resulted from the fact that the Tax Court was closed for business on those days. He then reasoned that the same basis for not allowing the last day to fall on a day when the Tax Court was not opened because it was not a federal work day also applied when the office was closed due to weather. In some ways it is even more logical to extend the rule to weather related closings because taxpayers cannot predict them. Before the changes to the law concerning the counting of weekend days or federal holidays, taxpayers at least knew that if the last day to perform an act fell on a day the Court would not be open it was incumbent upon them to perform the act on the last day the Court was open before the deadline passed. It is not possible to predict, at least not with certainty, when a weather related closing will occur. Allowing a weather related closing, or any externally created closing, to serve as a day not counted as the last date for filing, gives taxpayers a result that places them in a position to know when to act and does not punish them for a failure caused by an external source.

The Rule

Having worked through the legal basis for interpreting section 7503 to allow a weather closing to push forward the last date to perform an act, Judge Armen circled back to the Tax Court rules. There is no Tax Court rule dealing with this situation, though there is an FRCP that would extend the filing date in these circumstances.  Rule 6(a)(3)(A) of the FRCP addresses the issue of computing and extending time when the clerk’s office is inaccessible. Judge Armen cites In re Swine Flu Immunization Prod. Liab. Litig., where the court held that the last day to file an administrative claim under the Federal Tort Claims Act excluded both Sunday and the following Monday which was a snow day when government offices were closed. The decision looked to the FRCP.

Similarly, Rule 26(a)(3)(A) of the Federal Rules of Appellate Procedure extend the filing time when the clerk’s office is inaccessible. Tax Court Rule 25 is silent regarding inaccessibility of the Tax Court; however, that silence implicates Tax Court Rule 1(b) which provides “Where in any instance there is not applicable rule of procedure, the Court or the Judge before whom the matter is pending may prescribe the procedure, giving particular weight to the Federal Rule of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand.”

Equitable Tolling

If the IRS appeals this decision, petitioner may have another avenue for arguing that the time period should be held open for the filing of this petition – equitable tolling. We have written on equitable tolling many times and will probably write on it many more times. I credit Carl Smith with keeping this issue in our thinking and for many of the thoughts expressed here. Mr. Guralnik’s facts certainly present the type of situation in which one would want to raise equitable tolling. Denying him the opportunity to have his petition heard under these circumstances would not seem equitable. The IRS in its response in this case to the Court’s order to address the impact of the official closing of the Court due to snow acknowledged that dismissal of petitioner’s case “may seem harsh.” With a concession like that how could equitable tolling not apply?

This discussion needs to start by acknowledging that the Tax Court held that section 6330(d)(1)’s 30-day filing deadline is jurisdictional and not subject to extension in Boyd v. Commissioner, 124 T.C. 296, 303 (2005), aff’d 451 F.3d 8 (1st Cir. 2006).  The Tax Court made that ruling based on the since-rejected view of “jurisdictional” as any mandatory deadline.  Since the recent narrowing of the use of the word “jurisdictional” by the Supreme Court, the Tax Court has not revisited that Boyd holding.  Yet, Judge Armen has called the 30-day period jurisdictional in the recommended ruling. Even including the 1st Cir. in Boyd, no Circuit has ruled on the 6330(d)(1) period’s jurisdictional status one way or the other.  See Carlton M. Smith, “Equitably Tolling Innocent Spouse and Collection Due Process Periods”, Tax Notes Today, 2010 TNT 41-8 (Mar. 3, 2010) and several prior posts for a detailed discussion of equitable tolling issues as they might apply to this situation.

Within the last year, the Tax Court in Lippolis v. Commissioner has cited Supreme Court case law for the proposition that proximity of a dollar-amount requirement in whistleblower cases to the jurisdictional grant does not make that other requirement jurisdictional. Raising the equitable tolling argument here may provide another path to success even though it would require overturning the Tax Court’s decision in Boyd.    Since section 7503 does not literally mention snow days or other non-holidays when the federal government in D.C. is closed down, it is possible that the IRS will appeal this decision and seek to limit the scope of section 7503. Opening up another pathway for possible success could not hurt Mr. Guralnik’s chances to ultimately have his CDP argument heard on the merits.

Under recent case law, “filing deadlines ordinarily are not jurisdictional.”  Sebelius v. Auburn Regional Med. Center, 133 S. Ct. 817, 825 (2013). The Supreme Court in Auburn wrote:  “”We inquire whether Congress has ‘clearly state[d]’ that the rule is jurisdictional; absent such a clear statement, we have cautioned, ‘courts should treat the restriction as nonjurisdictional in character.’” Id. at 824. In a number of recent cases, the Supreme Court has found filing deadlines not to be jurisdictional. See Henderson v. Shinseki, 131 S. Ct. 1197 (2011) (time to file in Art. I Veterans Appeals Ct.); Auburn (time to file in a Medicare reimbursement contest forum); United States v. Wong, 135 S. Ct. 1625 (4-22-15) (FTCA times to file administrative claims and court suits under 28 usc 2401(b)).


This is an important case changing a long held position on the last day for performing an act. The procedural aspect of the case is interesting as well. Watch closely to see what the Tax Court does and how the IRS reacts. I suspect this is not the last time we write about Mr. Guralnik.





Summary Opinions for May, part 1

May got away from me, and so has much of June.  I’ll post the Summary Opinions for May in two parts, and handle June in the same manner.  Below are some of the tax procedure items in May that we didn’t otherwise cover:

  • The Middle District of Louisiana, after the Fifth Circuit vacated and remanded the case, reversed its prior decision and, under Woods, held that the Section 6662(e) valuation misstatement penalty could be imposed when the underlying transaction had been determined to lack economic substance. Chemtech Royalty Associates, LP v. US.   This case was the result of some crazy tax planning by Dow Chemicals to goose its basis in a chemical plant.  Here is Jack Townsend’s prior coverage of the case.
  • Sticking with substantial valuation misstatement penalty, the Tax Court in Hughes v. Comm’r upheld the penalty against a KPMG partner who claimed a step up in basis in stock when he transferred the shares to his non-resident spouse.  This was based on some informal tax research, and conversations with some co-workers that were also informal.  The Court essentially felt Mr. Hughes should have known better, and tagged him with a big penalty (probably didn’t help he was transferring the shares to try and ensure his ex-wife couldn’t make a claim for the increase in value).
  • IRS has released Chief Counsel Advice regarding abatement of paid tax liabilities.  In taxpayer friendly advice, CCA 201520010 states the language of Section 6404(a) is “permissive” and does not require the liability to be outstanding.  That Section states the “IRS is authorized to abate the unpaid portions of the assessment of any tax or any liability in respect thereor…”  The reference to “unpaid”, according to the CCA, is not binding on the Service.
  • The Service has released CCA 201519029, which provides advice on when preparer penalties can apply in situations where the prepared didn’t sign the return or didn’t file the return, and when a refund claim was made after the statute had expired.  For the third situation, the Service stated that “understatement of liability” does not include claims barred by the statute.  The full conclusions in the CCA are:

Issue 1: Yes. If the return is not filed, a penalty under I.R.C. § 6694(b) may be assessed if the return preparer signed the return and the return preparer’s conduct was willful or reckless.

Issue 2: Yes. Under the language of I.R.C. § 6694(b)(1), the return preparer penalty may be assessed if the tax return preparer prepares any return or claim for refund with respect to which any part of an understatement of liability is due to willful or reckless conduct. There is no requirement that the Service allow the amounts claimed on an amended return before the I.R.C. § 6695(b) penalty may be assessed.

Issue 3. The penalties under I.R.C. §§ 6694(a), 6694(b) or 6701 should not be assessed merely because the return preparer made and filed a claim for refund after the period of limitations for refunds had expired, because an “understatement of liability” does not include claims that are barred by the period of limitations. In addition, there may be extenuating circumstances that weigh against asserting the penalty. The amended return, for example, may be perfecting an earlier timely informal claim for refund.

  • The Service has announced it will be refunding the registered tax return preparer test fees.  There will be a second refund procedure where you can request your time back…but it will be ignored.
  • Professor Andy Grewal in early May had an excellent blog post on Yale’s administrative law blog, Notice and Comment, which highlights more potential penalties on employers attempting to follow the ACA requirements.
  • Another CCA (CCA 201520005) , where the IRS has held that the deficiency procedures apply to the assessment of the penalty under Section 6676 to erroneous refund claims based on Section 25A(i) American Opportunity Credit, since the penalty can only apply to a refund claim based on the credit if that claimed credit is part of a deficiency.  Carlton Smith previously had a blog post touching on this issue, found here, where he persuasively criticized  this position.  You should check out the entire post, but I’ve recreated a portion below:

A third issue discussed by the PMTA is how the section 6676 penalty is to be assessed.  Frankly, I read the Code as providing that the assessment is done like a section 6672 responsible person trust fund penalty — straight to assessment, without the deficiency procedures applying.  That seems to be what section 6671 provides.  But, the PMTA takes the position that only for underlying issues on which the section 6676 penalty applies where there is no jurisdiction in the Tax Court under the deficiency procedures, such as for excessive refund claims regarding employment taxes or the section 6707A reportable transaction penalty, the section 6676 penalty is done by straight assessment, without prior notice to taxpayers.  However, for section 6676 penalties on what would constitute a “deficiency” — and excessive refundable credit claims are clearly part of a deficiency under section 6211(b)(4)‘s special rules — the PMTA concludes that the section 6676 penalty should be asserted in a notice of deficiency.  The PMTA reasons that Tax Court cases have in the past held that a penalty which is computed as a function of a deficiency (which I would point out includes extra late-filing and late-payment penalties on the tax deficiency) are also treated under the deficiency procedures.  This reasoning is all mixed up.  The Tax Court applies the deficiency procedures to penalties like the late-filing and late-payment penalties of section 6651(a) that are imposed on the tax deficiency only because of special language in section 6665(b) that directs the Tax Court to do so.  There is no similar language in section 6671 directing deficiency procedures to apply to any penalties imposed in the following sections.

  • And another CCA (201517005), this one dealing with the statute of limitations for refunds based on foreign taxes deducted.  Specifically, whether a refund claim more than ten years (yr 13) after the tax year in question (yr 2) was timely when it resulted from an NOL (yr 4) where the taxpayer elected to deduct foreign taxes paid instead of taking foreign tax credit.  The IRS concluded that no, Section 6511(d)(2) applied to the NOL and required the claim to be made three years after the NOL year.  Section 6511(d)(3), which allows for a ten year statute for refunds pertaining to foreign tax credits, was not applicable.
  • Apparently, some states are starting to scale back the amount of tax credits available for movie productions.  Two years ago, The Suspect was filed in my building, staring Mekhi Phifer and no one else you have ever heard of.  I think it was “catered” by a fast food joint, and they may have been using our coffee pots to make coffee.  I can’t imagine Pennsylvania dropped the big bucks to land that film.
  • Emancipation day is throwing off filings again next year.  I always assumed that had something to do with the date of the Emancipation Proclamation, but I was wrong. The Emancipation Proclamation went into effect January 1st, 1863.  On April 16th, 1862, President Lincoln signed the Compensated Emancipation Act, freeing the enslaved living in the District of Columbia.  The linked Rev. Ruling explains what those in Massachusetts who are celebrating Boston Marathon Day (Patriots Day-celebrating the shot heard round the world) should do also.
  • Initially when writing this, I was watching the US women’s national team take it to Colombia, and recalling what a jackass Sepp Blatter has been.  Hoping this article is in reference to the shoe dropping on him next.  Even if he didn’t evade taxes, he should have to pay someone money for suggesting he would boost viewership of the women’s game with hot pants.  Or for not knowing who Alex Morgan is…or for making the women play on turf.