Godfrey v. Comm’r: Tax Court CDP Case Presenting Jurisdictional Issues Settles

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We welcome back frequent guest blogger Carl Smith for a quick update on the Godfrey case which raised the issue of the effectiveness of a notice issued in a collection case only to the taxpayer when the taxpayer was a represented party. While the law on this is well settled in deficiency cases, collection cases may reach a different conclusion. Keith

This is to report the settlement of a Tax Court case on which Keith and I did three posts in April, Godfrey v. CommissionerGodfrey was a Collection Due Process (CDP) case that the Tax Court had dismissed for lack of jurisdiction on the grounds that the taxpayer filed her request for a CDP hearing at Appeals too late.  She had filed the request over a year after a notice of intention to levy (NOIL) was mailed to her at her last known address, though the statute gave her only 30 days to file a request.  The IRS had denied the hearing request in a letter, and the taxpayer appealed to the Tax Court within the 30-day period to file a Tax Court appeal of a notice of determination under section 6330(d).  The taxpayer argued that the letter should be treated as a notice of determination for this purpose.  But, the Tax Court held it lacked jurisdiction because the letter was not a notice of determination giving the Tax Court jurisdiction, since the taxpayer had not had and was not entitled to a CDP hearing at Appeals.  Within 30 days of the dismissal of her case, the taxpayer moved to vacate the order of dismissal, but the case settled, even before the IRS filed a response to the motion.

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In her motion, the taxpayer had made two arguments:

First, she argued that the IRS’ mailing of an NOIL to her was insufficient and in violation of section 6304(a)(2), which requires the IRS, with some exceptions, not to communicate with a represented taxpayer in connection with collection of unpaid tax.  She pointed out that she had been represented by counsel at the time the NOIL was issued, and argued that none of the exceptions to the prohibition applied.  In a post on April 9, Keith highlighted the reasons why the taxpayer might be right.  In a post on April 10, I argued that, if section 6304(a)(2) was violated, the correct remedy would be for the Tax Court to equitably toll the 30-day period to request a CDP hearing until at least the taxpayer’s counsel received a copy of the NOIL.  If that were done in this case, she would have been entitled to a CDP hearing, and the letter denying the CDP hearing could be treated, under prior Tax Court precedent, as a deemed notice of determination giving the Tax Court jurisdiction.

Second, in holding against the taxpayer, the Tax Court noted that she had not actually received the NOIL.  But, relying on a regulation under section 6330, the Tax Court held that the NOIL was valid to start the 30-day period running, even without the NOIL’s actual receipt.  In a post on April 13, I argued that the regulation (which the IRS had never cited in its motion to dismiss for lack of jurisdiction) was invalid and contrary to legislative history.  Legislative history suggests that, in a case where a taxpayer does not receive a properly-mailed NOIL, the taxpayer must belatedly be given a regular CDP hearing.

Neither the section 6304(a)(2) issue nor the validity of the regulation had been raised by the taxpayer’s counsel prior to the case first being dismissed, so there was some doubt that the Tax Court would address these issues posed in the motion to vacate.  The IRS was allowed several extensions of time to respond to the motion to vacate.  But, before it filed any response, the IRS counsel recommenced settlement discussions with the taxpayer.  Those discussions led to the IRS abating some of the unpaid liability and the taxpayer agreeing to pay the full remaining liability in a lump sum.  This made further litigation now moot, and the taxpayer withdrew the motion to vacate on July 15.  Case closed.

Godfrey presented two very serious issues of first impression for all lawyers representing taxpayers in CDP matters to be aware of.  However, those issues will have to await another case before they are addressed by any court opinion.

 

About Carlton Smith

Carlton M. Smith worked (as an associate and partner) at Roberts & Holland LLP in Manhattan from 1983-1999. From 2003 to 2013, he was the Director of the Cardozo School of Law tax clinic. In his retirement, he volunteers with the tax clinic at Harvard, where he was Acting Director from January to June 2019.

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