I am part of the Collection Due Process (CDP) Summit Initiative that Carolyn Lee wrote about in a recent post to Procedurally Taxing. The initiative consists of a group of tax practitioners and others working with the IRS to discuss CDP issues toward the goal of eventual improvements for the IRS and taxpayers. The genesis of that initiative comes from a panel I was on as part of the American Bar Association May Meeting this year in Washington, D.C. Among others, that panel included Carolyn, Keith Fogg, and Judge David Gustafson of the U.S. Tax Court. More information is available here.
Recently, when I read a particular order submitted by Judge Gustafson during a week Samantha Galvin was monitoring Tax Court designated orders, I requested to submit a separate piece focusing on that order. Since I knew Judge Gustafson had an interest in CDP issues and since he spends a good portion of the order’s focus on CDP procedure, I wanted to provide some analysis of its significance.
The designated order in Scott Allan Webber v. C.I.R., here, has facts that on their face can be simply summarized (a CDP request mailed by a taxpayer to the wrong address led to an IRS motion to dismiss in Tax Court), but what makes the order so interesting instead are procedural issues and Judge Gustafson’s analysis.
read more...Procedural Issues
The procedural history for Mr. Webber begins with his 2013 income tax liability. After the IRS assessed a liability which he did not pay, the IRS mailed to Mr. Webber a Notice LT11, the CDP Notice. That notice is a notice of intent to levy and notice of right to a hearing. Judge Gustafson describes the LT11 as performing double duty, because it also serves as a demand for payment by its conspicuous language and larger type.
At the top of page 1 for Mr. Webber’s LT11, the return address showing where the IRS mailed the notice from was a post office box in Philadelphia, Pennsylvania. At the bottom of page 1, with payment information, there was listed a post office box for the IRS in Kansas City, Missouri. The bottom of page 2 also provides the post office box for the Philadelphia address on the reverse side of the Kansas City address. To summarize: two addresses for Philadelphia on pages 1 and 2 with an address for Kansas City on page 1, but on the reverse side of the Philadelphia address on the second page.
Mr. Webber filled out Form 12153 to request a CDP hearing. He filled out his paperwork correctly until it came to how he placed the paperwork in the envelope (with the address showing through the cellophane) on where to mail his form to the IRS. He placed the Kansas City address facing out in the envelope as though he was making payment rather than requesting a CDP hearing, mailing it to the incorrect address for making a CDP request rather than to the Philadelphia address to which the IRS wanted a CDP request to go.
He mailed his Form 12153 on February 22, 2018, for the CDP hearing which had a request deadline of March 4, 2018. March 4 was a Sunday so timely arrival would have been on or before Monday, March 5. The request was received by the IRS in Kansas City on Thursday, March 1. Five calendar days (three business days) later, the Kansas City location faxed the CDP hearing request to the Philadelphia location on Tuesday, March 6. Effectively, the CDP hearing request arrived at the correct location one day after the deadline.
IRS Appeals treated the CDP hearing request as untimely so did not grant a CDP hearing, but an equivalent hearing. The CDP hearing is subject to judicial review by the Tax Court, but an equivalent hearing is not. A CDP hearing produces a Notice of Determination that supports Tax Court jurisdiction. Mr. Webber received a Decision Letter dated June 13 based on his Equivalent Hearing. Mr. Webber timely mailed a Tax Court petition even though he received the equivalent hearing’s form. The case stating the Tax Court can review an equivalent decision letter as if it were a notice of determination is Craig v. Commissioner, 14649-01L, here.
On May 22, 2019, the IRS filed a motion to dismiss for lack of jurisdiction. In the motion, the IRS stance is that the hearing request was timely mailed, but sent to the wrong address. Receipt to the correct address a day late means the taxpayer is not entitled to a CDP hearing.
Judge Gustafson’s Analysis
Judge Gustafson’s order requested a supplemental memorandum from the IRS regarding their motion to dismiss regarding two issues:
1. The addressing of the CDP hearing request
Judge Gustafson cites Question and Answer C6 of Treasury Regulation § 301.6630-1(c)(2), which states the written request for a CDP hearing must be sent to the IRS office and address as directed on the CDP notice. He points out that there were not one, but two addresses on the CDP notice.
From there, Judge Gustafson mentions how he almost mailed a bill payment to an incorrect address in a similar fashion. “That is to say, we sympathize with a taxpayer who is confused by the design of Notice LT11.” He also notes that the IRS has to deal with complex paperwork for the nation and “it is entirely reasonable for the IRS to request a given type of document to be submitted to a given location.”
Judge Gustafson summarizes his position regarding the address issues with Notice LT11 best in this paragraph:
However, where the IRS intends to require that a CDP hearing request be sent to a particular address, and where it takes the position that a CDP hearing request sent to a different address is invalid and ineffectual, and where it argues that the use of the wrong address ultimately deprives the Tax Court of jurisdiction over the case–in such a circumstance, we wonder whether an occasion for confusion is predictably and unfairly created by (a) combining the CDP notice with a gratuitous demand for payment, (b) providing multiple address slips back to back with multiple addresses , (c) putting the wrong address slip on the front page of the notice, and (d) failing to label the CDP address slip with any indication that it is the CDP address slip. It would seem reasonable for the IRS either to insist that a CDP hearing request must be sent to a specific address or to decide to make use of its mailing of a CDP notice for the additional purpose of soliciting payments to be mailed to a different address–but probably not both.
2. The timeliness of the CDP hearing request
Looking at Internal Revenue Code §§ 6330 (a)(3)(B) and (a)(2), Judge Gustafson notes that a taxpayer has the right to request a CDP hearing within the period of “30 days before the day of the first levy” while other statutory language cited by the IRS refers to the “30-day period commencing the day after the date of the CDP notice.”
The judge states he would benefit from the IRS filing the supplement to the motion and would also like them to state how they reconcile the statutory language above with the position taken in the motion to dismiss. Additionally, the judge requested to know when (if ever) the IRS made a “first levy” with respect to Mr. Webber’s liability, and the IRS position whether treating a CDP hearing request as untimely in such a circumstance constitutes an abuse of discretion by Appeals.
Taylor v. C.I.R.
First of all, I would like to take a detour into another Tax Court order that I found when researching CDP for the panel presentation I mentioned above. I came across Rodney A. Taylor v. C.I.R., order here, which is an order by Judge Carluzzo. In the order, we have a similar CDP situation. Here, the Tax Court petitioner timely mailed the CDP hearing request to the IRS, but sent it to the wrong address. By inference, it made it to the correct address after the deadline.
The order is two paragraphs long so I could quote it in its entirety, but I will focus on this:
because respondent has not demonstrated sufficient prejudice resulting from the manner that the request was mailed to insist upon strict compliance with the Treasury Regulations relied upon in support of his motion, we find that petitioner’s request for an administrative hearing was timely made.
The decision letter was treated as an equivalent of a notice of determination to allow for Tax Court jurisdiction. Judge Carluzzo ordered that the IRS motion to dismiss for lack of jurisdiction is denied.
Judge Carluzzo gets to his result in a direct fashion. While he lacks Judge Gustafson’s analysis in this order, he makes the point that the IRS should show how they suffered prejudice by receiving a CDP hearing request at the wrong address within the IRS bureaucracy or he will deny their motion to dismiss for lack of jurisdiction.
Fallout
After the entry of the order requesting that the IRS provide responses regarding its motion to dismiss, Keith Fogg, through the Legal Services Center of Harvard Law School, entered his appearance for Scott Allan Webber. He did not want to comment on current litigation, but shared with me documents filed in the case.
The IRS filed a motion to withdraw the motion to dismiss for lack of jurisdiction. The body of the motion is 2 pages and cites Judge Gustafson’s order, where he ordered them to supplement the motion to dismiss for lack of jurisdiction “unless [the Commissioner] withdraws his motion to dismiss.” Basically, the IRS takes door number two and quietly exits the stage. There is no explanation of IRS reasoning regarding either of the motions.
The Harvard clinic filed a response in support of the IRS motion to withdraw. Basically, their stance is that the 30-day statutory period to request a CDP hearing is a nonjurisdictional claims-processing rule subject to equitable tolling and waiver, which they claim are present in Mr. Webber’s case. I am not going to steal the clinic’s thunder regarding its arguments for equitable tolling and waiver as it will take further space to summarize those pages. I will note that he does disclose adverse legal authority in the Tax Court as Judge Nega granted IRS motions to dismiss in two cases involving the same taxpayer (Nunez v. Commissioner, 2925-17L here and 2946-17L here). I found the response to be well drafted and note that the response was prepared with assistance by law students Michael Waalkes and Silvia Perdochova.
Judge Gustafson granted the IRS motion to withdraw by a court stamp that states “granted” on the motion. While it would have been nice if there was an opinion from Judge Gustafson on the jurisdictional issues, it was not to be. Though the Tax Court has the Webber case scheduled for trial on September 16, the jurisdictional portion is no longer at issue.
Conclusion
It is difficult to draw conclusions from this case regarding positions from the IRS and the Tax Court. The IRS did not say much and the Tax Court says less. From the Tax Court, I noted that some past orders look to be taxpayer-friendly while others seem to favor the IRS. From the IRS in this case, the motion to dismiss took the stance that a day late is not good enough and then backtracked for unstated reasons following Judge Gustafson’s order requesting further explanation.
Overall, my takeaway from the filings in this case are that there are problems with the CDP process affecting everyone involved. Judge Gustafson pointed out several issues with the LT11. It is framed like a billing statement, not a notice for informing taxpayers of their rights. It is confusing for taxpayers on where to mail Form 12153 to request a CDP hearing due to multiple addresses listed on the notice. Perhaps a centralized address would be better. If a taxpayer makes a mistake and timely mails the form to the wrong address within the IRS organization, what should be the result? What should be made of the different 30-day standards Judge Gustafson cites regarding timeliness? In the clinic’s response, it makes several arguments that the 30-day statutory period is a nonjurisdictional claims-processing rule subject to equitable tolling and waiver. I do not know that this case brought answers, but it certainly brought several questions regarding CDP.
I am proud to be part of a CDP Summit initiative that is working to bring improvements to the CDP process. I am glad that we are sparking conversations with various IRS departments, private practitioners, LITC directors, Tax Court judges, and others to develop processes that bring benefit to the tax system and everyone involved. Hopefully we can learn lessons from Webber to improve the CDP process for taxpayers in the future.
About William Schmidt
“A CDP hearing produces a Notice of Determination that supports Tax Court jurisdiction.”
A CDP hearing SOMETIMES produces a Notice of Determination. Or four of them. Or zero of them.
“The case stating the Tax Court can review an equivalent decision letter as if it were a notice of determination is Craig v. Commissioner, 14649-01L, here.”
[https://casetext.com/case/craig-v-commissioner-of-internal-revenue]
That case was overturned. Diamond v. CIR, USTC docket no. 4029-17, aff’d D.C. Cir. docket no. 17-1169, cert. denied:
‘Similarly, the Court’s jurisdiction to review certain collection activity of the Internal Revenus Service depends on (1) the issuance of a valid notice of determination by an Internal Revenue Service Appeals Officer under I.R.C. section 6320 or 6330 and (2) the timely filing by the taxpayere of a petition generally within 30 days of that Appeals Office determination.’
There is no exception for cases where the IRS issues a notice different from what statutes or regulations compel the IRS to issue, nor where the IRS issues no notice at all despite being compelled by statutes or regulations to issue one.
As far as I’ve been able to find, this is the only case where the Craig ruling put to an appeals court. Tax Court’s ruling that Tax Court lacks jurisdiction was upheld. The grant of jurisdiction in Craig’s case is obsolete.
(By the way, in a deficiency case, if the IRS produces an invalid Notice of Deficiency then the IRS has to refund the taxpayer’s overpayments, but if the IRS destroys or refuses to produce the Notice of Deficiency then the IRS gets to keep the overpayments. Refund suits in other courts have other reasons to be dismissed for lack of jurisdiction.)
Dear Mr. Diamond: We probably have much to discuss.
Please write to me at v_liptak@mail.com