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.
read more...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.
There are nuances here.
1. It was not clear to me what was meant in Weber by the USPS’s indication of “Unclaimed” or the notations on the envelope that the USPS had attempted to deliver the envelope. If USPS leaves a note for the taxpayer at the last known address that they tried to deliver something and the taxpayer ignores it, that is the taxpayer’s fault. But if the IRS mailing required a signature for delivery but no one was there and USPS left no note, then the case should be resolved on the basis that the IRS did not in fact ever mail the letter, in the same way as it would be resolved if the IRS did not put enough postage on the letter or sent it to the wrong address; mailing to the last known address has to mean enabling delivery at that address of the letter or of a notice that there is something at the post office without regard to whether anyone is there to sign for it or home at all when the postal carrier knocks on the door.
2. Delays in postal delivery are frequent and sometimes long. If the statutory period is 30 days and the notice is delivered with 25 days to go, that is withing the bounds of reason. Not if it is delivered with only 5 days to go. And if it is delivered after the response period has passed, that is the same as never having been delivered at all. The Tax Court had better decide that equitable tolling applies in such a case, and the IRS would be wise to concede the point, or the Supreme Court will end up deciding that the statute that in general starts the clock when the IRS mails it is void under Due Process grounds. Conversely, the taxpayer gets, and should continue to get, the benefit of timely filing under the postmark rule despite kinks in the postal system. Although more and more taxpayers are finding that they prefer the certainty of electronic filing, that too has its challenges. For example, if you use certain software and find you need to include a form that was not included in the software, or make manual entries (say, to use the long method to figure quarterly underpayments), or you override any entry, you may not be able to file online via the software. And I have had at least one instance where the software attempted to file online and a message came back that it was not accepted.
‘It was not clear to me what was meant in Weber by the USPS’s indication of “Unclaimed” or the notations on the envelope that the USPS had attempted to deliver the envelope.’
USPS’s indication might be a mapping of Canada Post’s indication. However, Canada Post doesn’t provide tracking of incoming registered mail so, besides uncertainty about whether Canada Post really attempted delivery (see my other comment), I wonder what kind of indication they would have given.
‘But if the IRS mailing required a signature for delivery’
Before Covid, Canada Post was supposed to require a signature for delivery of registered mail even if it was incoming from abroad. However, they delivered a registered package from Japan to my mailbox without attempting to get a signature. In the Covid era, Canada Post delivers registered mail without attempting to get a signature (or sometimes doesn’t deliver, just like USPS sometimes loses registered mail).
‘[…] then the case should be resolved on the basis that the IRS did not in fact ever mail the letter, in the same way as it would be resolved if the IRS did not put enough postage on the letter or […]’
What kind of resolution would it be? The IRS frequently doesn’t put enough postage on letters. Other institutions that frequently don’t put enough postage on letters, after numerous reminders that they didn’t put enough postage on letters, include: US Department of Justice, US District Court for the Central District of California, US Court of Appeals for the 9th Circuit, US Court of Federal Claims, US Court of Appeals for the Federal Circuit, and US Supreme Court. Institutions that appear to make an effort but occasionally slipped up include: US Tax Court and US Court of Appeals for the District of Columbia Circuit. The DOJ even told a court that it doesn’t matter if that they underpaid postage because I got the letter. I suppose USPS wishes they could sue institutions that repeatedly defraud USPS but how would they get a lawyer. Anyway, what is supposed to be the resolution?
‘And if it is delivered after the response period has passed, that is the same as never having been delivered at all. The Tax Court had better decide that equitable tolling applies in such a case, and the IRS would be wise to concede the point, or the Supreme Court will end up deciding that the statute that in general starts the clock when the IRS mails it is void under Due Process grounds.’
I doubt it. You and I know that the statute should be void under due process grounds, but Supreme Court already denied cert.
‘Conversely, the taxpayer gets, and should continue to get, the benefit of timely filing under the postmark rule despite kinks in the postal system.’
Only if the mail has a US postmark. Long ago, post offices used to add their own countries’ postmarks to incoming registered mail, but they don’t any more.
‘Although more and more taxpayers are finding that they prefer the certainty of electronic filing, that too has its challenges.’
For court filings there are challenges. For tax return filings it’s impossible. IRS (and SSA) don’t allow non-residents of the US to create accounts on their sites, even US citizens (which should be another nail in the coffin of Cook v. Tait, should be, so much for shoulds).
‘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.”’
The minor typographical error would not be expected to impede delivery, but the involvement of Canada Post is most certainly expected to impede delivery whether or not this typo occurred. (A typo in the street number would be more likely to add impediments.)
The report of attempted delivery might or might not be accurate. I was home when a notice of attempted delivery was put in my mailbox, when the carrier did not knock or ring the doorbell. In my case the package was available around 30 hours later at a post office near my home, as asserted in the notice of attempted delivery. A former tenant in my house received a notice of attempted delivery and his package was not available around 30 hours later at the same post office and timing asserted in the notice of attempted delivery, but Canada Post did a search and found his package a few days later. It is possible that Amanasu Environment Corp. might not even know if Canada Post really attempted delivery on January 8, 2020 or not.
Covid makes things worse, but was not a factor in January 2020.