In this post I will discuss two cases involving statutes of limitation and CDP, US v Hendrick and Weiss v Commissioner.
US v Hendrick is a recent federal district court opinion out of the Western District of PA that concluded that the statute of limitations on collection was tolled for the 30-day period following a CDP determination even when the taxpayer chose not to challenge the determination in Tax Court. Weiss v Commissioner is a case on appeal in the DC Circuit that addresses when a 30-day period runs requesting a CDP hearing when the date the CDP notice was mailed differs from the date on the notice itself.
read more...First Hendrick. Simplifying somewhat, the case involved trust fund assessments, the taxpayer’s timely filing of a CDP request, and the IRS’s issuing of a Notice of Determination sustaining the proposed levy action which informed the taxpayer of the right to appeal the determination in Tax Court within 30 days (I note, and perhaps will return in a later post, to the possible significance of the 2015 legislative change substituting the word “petition” for “appeal” in Section 6330, a subtle point made in Judge Holmes’ Kasper opinion concerning the relationship of the APA and administrative law generally to the mix of non deficiency cases in Tax Court).
The taxpayer did not file an appeal in the 30-day window. Moving with not much speed, the government waited about ten years to file a suit to reduce the assessment to judgment. (It is possible that the government had made administrative efforts to collect; the opinion is silent on that).
As most readers know, under Section 6502 the government may bring a suit within ten years. The government’s collection suit was outside the ten-year period if you did not include in the tolling period the 30-day period that the taxpayer could have filed a petition for review to the Tax Court. Not surprisingly, the taxpayer argued that the 30-day appeal window should not count when in fact the taxpayer does not exercise his appeal rights and challenge a CDP determination in Tax Court.
Section 6330 essentially states that the ten-year period is suspended while a CDP hearing and any appeal is pending. The case turned on whether the hearing or an appeal was pending in that 30-day window when the taxpayer could have filed a petition to Tax Court. The statute does not define the term pending, though regulations provide that the period when the taxpayer could have appealed the determination is part of the time that the statute is suspended:
[t]he period of limitation under section 6502 (relating to collection after assessment) … [is] suspended until the date the IRS receives the taxpayer’s written withdrawal of the request for a CDP hearing by Appeals or the determination resulting from the CDP hearing becomes final by expiration of the time for seeking judicial review or the exhaustion of any rights to appeals following judicial review. 26 C.F.R. § 301.6330-1(g)(1).
This precise issue was addressed in a 2014 Ninth Circuit case, US v Kollman, that Keith blogged about here. The district court opinion, as did the Ninth Circuit, concluded that the statute itself was not clear and the regulation under a Chevron Step Two analysis was a reasonable interpretation of an ambiguous statute.
In finding for the government, the opinion notes that in analogous areas IRS and courts have taken a consistent approach and concluded that limitations periods are tolled pending periods when appeals could be taken. From a policy perspective, the decision is correct, as apart from offset, the IRS cannot take administrative collection action during that 30-day period.
Weiss: A Case for the Dogs?
Another case involving a CDP statute of limitations issue is percolating its way through the DC Circuit Court of Appeals, Weiss v Commissioner, a case that Keith blogged here. The case involves some colorful facts: the revenue offer attempted to hand deliver the notice of intent to levy but a dog prevented him from making it up the driveway. After failing to successfully hand deliver the notice, when he returned the office two days later, the Revenue Officer mailed it using certified mail but did not change the date on the notice.The taxpayer claimed that the earlier date on the notice governed the 30-day period to make the CDP request.
The taxpayer in Weiss was trying to wait out the SOL on collection, as an equivalent hearing filed outside the 30-day window does not toll the SOL, and if the request was considered an equivalent hearing the IRS was out of time to collect. The Tax Court did not buy the argument, and held that the actual date of mailing controlled the 30-day period, and since Weiss filed within that 30-day period, the request was for a full blown CDP hearing and not an equivalent hearing.
On brief, Weiss also argues in the alternative that the government should be estopped from arguing that the mailing date controls, since it showed the earlier date in the notice of intent to levy. This argument presupposes that the deadline at issue is not jurisdictional, an issue that should be familiar to our readers, though the taxpayer did not press the jurisdictional predicate on brief.
For those wanting a deeper dive, an audio recording of the Weiss oral argument can be found here. Weiss’ brief can be found here; government brief here; and taxpayer’s reply here.
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For those who care about venue on appeal (like me), Weiss lived in Pennsylvania when he filed his Tax Court CDP petition in 2011 challenging collection (including the argument that the SOL on collection had expired). He did not otherwise challenge the amount of the underlying tax liability. So, why is the appeal of the Tax Court case in the D.C. Circuit, rather than in the Third Circuit? Weiss’ lawyers — for reasons that are unexplained — are taking advantage of the D.C. Cir’s opinion in Byers v. Commissioner, 740 F.3d 668 (D.C. Cir. 2014), that held that the D.C. Cir. is the sole correct venue on appeal from the Tax Court under section 7482(b)(1)’s flush language in a CDP case that does not involve a redetermination of the tax liability. Of course, in 2015, Congress added a subparagraph to section 7482(b)(1) directing CDP appeals from the Tax Court to the Circuit of residence, but that amendment only applied for Tax Court cases filed on or after the date of enactment. Weiss is one of the last few cases left that can take advantage of the Byers venue ruling.
“Section 6330 essentially states that the ten-year period is suspended while a CDP hearing and any appeal is pending.”
How is it determined when a CDP hearing stops pending? The usual method is the issuance of a Notice of Determination. But if a taxpayer, not ever having seen a Notice of Determination, doesn’t know if the actual notice is a Notice of Determination or not and petitions anyway, Tax Court might or might not decide to treat the actual notice as if it were a Notice of Determination. But if this taxpayer doesn’t petition, then who gets to decide whether the actual notice should be treated as a Notice of Deficiency?
Or what happens if the IRS issues a Notice of Determination but not to a taxpayer who requested the CDP Hearing? Suppose someone informs the taxpayer that a Notice of Determination was issued and the taxpayer petitions Tax Court. The IRS can move to strike the petitioner from the case. Tax Court issues an order striking the petitioner, but doesn’t mail the order to the petitioner. The Notice of Determination doesn’t apply to the petitioner because the notice wasn’t mailed to the petitioner, but the Tax Court’s order striking the petitioner from the case DOES apply to the petitioner even though the order wasn’t mailed to the petitioner, and somehow the petitioner who doesn’g et informed about it is supposed to know what happened. However, the CDP Hearing is no longer pending. What happens to the ten-year period?