In a post from last week, I wrote that in light of Culp v. Commissioner, 2023 U.S. App. LEXIS 18287 (3d Cir. July 19, 2023), the Tax Court has apparently temporarily stopped dismissing late-filed deficiency petition cases for lack of jurisdiction until the Tax Court issues another en banc opinion about whether it will follow Culp or stick with Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (Nov. 29, 2022). Culp holds the filing deadline not jurisdictional. Hallmark holds the deadline jurisdictional.
In the post, I also mentioned Salsi v. Commissioner, Tax Court Docket No. 1645-23S (order of dismissal entered on May 9, 2023), where, during the 90-day deficiency petition filing period, the IRS wrote back to the taxpayers and, after reducing the deficiency somewhat, told the taxpayers that if they disagreed, they still must file a Tax Court petition by a date. The date shown in the letter was erroneous – a month later than the last date to file shown in the notice of deficiency. The taxpayers filed their petition after the last date to file shown in the notice of deficiency, but before the last date to file shown in the letter. The taxpayers argue that the IRS misled them into filing late, which is ordinarily a ground for equitable tolling.
I reported that Keith had entered an appearance in Salsi and, on July 20, 2023 (the day after Culp was issued), filed motions for leave to file out of time motions to (1) vacate the dismissal order in light of Culp and (2) remove the small tax case designation. The Salsis live in the Third Circuit, so the Tax Court should follow Culp under Golsen, whether or not the small tax case designation is removed. But, as I also noted, Golsen leaves it up to the Tax Court, when feeling compelled to apply Golsen, to explain why it still thinks it had been right in Hallmark.
This is to report that on July 31, 2023, the Tax Court issued an order in Salsi granting the motions for leave to file out of time, granting the motion to vacate, and granting the motion to remove the small tax case designation.
Oddly, though, the motion does not say the Tax Court is compelled to follow Culp under Golsen, but merely says of Culp: “Subsequently [to the dismissal], the Court of Appeals for the Third Circuit, to which this case might be appealable, issued its opinion in Culp v. Commissioner, 2023 U.S. App. LEXIS 18287 (July 19, 2023), addressing the Court’s jurisdiction over an untimely petition.” And the court explains that it is granting the various motions “[t]o allow further consideration of the jurisdictional issues presented”. What jurisdictional issues are left to consider if the Tax Court is required by Golsen to follow Culp’s holding that the filing deadline is not jurisdictional?
Does this mean that the Tax Court will write its post-Culp en banc opinion now in Salsi? There must be hundreds of other late-filed deficiency cases where, currently, there are pending motions to dismiss for lack of jurisdiction or orders to show cause why the case should not be dismissed for lack of jurisdiction. Any one of those other cases (especially those appealable to Circuits that have no precedent on this question – the First and Fourth) could also provide vehicles for the Tax Court to write an opinion revisiting Hallmark after Culp.
The IRS had moved to dismiss the Salsi’s case for lack of jurisdiction before the IRS filed an answer. Normally, now one would expect the IRS to file an answer, but the order doesn’t direct the IRS to do so. If the IRS files an answer (probably initially lodged with a motion for leave to file the answer out of time), under Tax Court Rule 39, the answer can argue late filing as an affirmative statute of limitations defense. But I wonder whether the answer will contain a statute of limitations defense. Maybe, the IRS attorney will decide that the Salsis will win any equitable tolling argument, so the IRS will not bother the raise the late-filing issue and create bad precedent for the IRS on whether IRS-given incorrect information on the last date to file during the 90-day period qualifies for equitable tolling. If a filing deadline is not jurisdictional, a party can wave making a late-filing defense.
The IRS waiving its potential late-filing defense in a post-Boechler CDP case happened in Castillo, on which we previously blogged here and here.