On July 19, 2023, the Third Circuit in Culp v. Commissioner, 2023 U.S. App. LEXIS 18287 broke a 99-year string of opinions of the Board of Tax Appeals, the Tax Court, and the vast bulk of the courts of appeal all holding (or stating) that a taxpayer’s compliance with the 90-day deficiency petition filing deadline (currently at IRC 6213(a)) is necessary to the court’s jurisdiction. Culp, instead, found the deadline not jurisdictional and also subject to equitable tolling. It thus reversed a Tax Court order dismissing the case for lack of jurisdiction and ordered a remand on the question of whether the Culps deserve equitable tolling. The reversed order can be found at Tax Court Docket No. 14054-21 (Feb. 15, 2022).
Many years ago, when judges of the Seventh Circuit raised at oral argument, sua sponte, whether the deficiency petition filing deadline is still jurisdictional under Supreme Court case law since 2004 that restricts the use of the word “jurisdiction”, I told Tax Notes Today, “If the Seventh Circuit rules the way it seems to be going, this will be an earthquake in tax litigation.” Marie Sapirie, “News Analysis: Will the Seventh Circuit Unsettle Tax Court Timing Rules?”, 2016 TNT 205-3 (Oct. 24, 2016). When the Seventh Circuit ruled in Tilden v. Commissioner, 846 F.3d 882, 886-887 (7th Cir. 2017), it held the deadline still jurisdictional. So, there was no earthquake then. But, with Culp, the Third Circuit has created an earthquake – and a case likely to get to the Supreme Court in the October 2024 Term.
This post discusses some interesting things that Culp says and does not say.
The Supreme Court has said that there are two exceptions to the rule that filing deadlines are no longer jurisdictional: First, if Congress makes a “clear statement” in the statute that the deadline is jurisdictional. Second, if a long line of Supreme Court opinions from the era before 2004 held the deadline jurisdictional. Let me discuss the exceptions in reverse order.
Oddly, Culp does not even mention whether there exists a long line of Supreme Court opinions holding the deficiency petition filing deadline jurisdictional. (There are, in fact, no Supreme Court opinions on this point.) With one exception, Culp does not even mention the 99-year history of opinions from other courts or even the Tax Court’s post-Boechler opinion in Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (Nov. 29, 2022), that held the filing deadline jurisdictional. As to Third Circuit precedent, Culp acknowledges that the Third Circuit has often called the filing deadline jurisdictional, but Culp treats these opinions as what the Supreme Court has called “drive-by jurisdictional rulings”, entitled to no weight. Here’s how Culp quickly dispenses with any precedent argument:
Nor are we persuaded by the Commissioner’s argument that relevant historical treatment (that is, our precedent) compels us to treat § 6213(a)’s deadline as jurisdictional. Although we have previously referred to it as such in passing, see, e.g., Sunoco Inc. v. Comm’r, 663 F.3d 181, 187 (3d Cir. 2011), never have we so held. This is the first published opinion to address squarely whether § 6213(a)’s deadline for redetermination petitions is jurisdictional, and we hold it is not.
Slip op. at 11.
Boechler instructs that a “clear statement” can be shown through text, context, and traditional rules of statutory construction.
Culp finds no words in IRC 6213(a) making a clear statement. Culp writes:
If the § 6330(d)(1) deadline in Boechler fell short of being jurisdictional, § 6213(a)’s limit must as well. For one, there is no “clear tie between the deadline and the jurisdictional grant.” Boechler, 142 S. Ct. at 1499. The most pertinent part of § 6213(a) provides that “[w]ithin 90 days . . . after the notice of deficiency . . . is mailed . . . the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency.” Nothing in that language links the deadline to the Court’s jurisdiction. Yet, elsewhere in § 6213(a), Congress specified that “[t]he Tax Court shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for a redetermination of the deficiency has been filed and then only in respect of the deficiency that is the subject of such petition.” 26 U.S.C. § 6213(a). So Congress knew how to limit the scope of the Tax Court’s jurisdiction. It expressly constrained the Tax Court from issuing injunctions or ordering refunds when a petition is untimely. But it did not similarly limit the Tax Court’s power to review untimely redetermination petitions.
Slip op. at 10. The Tax Court in Hallmark (at *17) had conceded that, based on similar language in the injunctive provision involved in Boechler (IRC 6330(e)(1)), the injunctive provision in the fourth sentence of IRC 6213(a) cannot on its own create the clear statement that the deficiency petition filing deadline is jurisdictional.
As to context, the Tax Court devoted ten pages of its Hallmark opinion to the point that, under IRC 7459(d), any nonjurisdictional dismissal would bar the taxpayer by res judicata from paying and suing for a refund. Hallmark at *19-28. Culp disposes of this concern in one paragraph:
Context does little to bolster the IRS’s case for the deadline being jurisdictional. True, if it is not jurisdictional, and a taxpayer’s redetermination petition is dismissed for untimeliness, the assessed amount would have preclusive effect in a refund suit under 26 U.S.C. § 7422. See 26 U.S.C. § 7459(d) (“If a petition for a redetermination of a deficiency has been filed by the taxpayer, a decision of the Tax Court dismissing the proceeding shall be considered as its decision that the deficiency is the amount determined by the Secretary . . . unless the dismissal is for lack of jurisdiction.”). But this situation presents itself only if a taxpayer files a late petition for redetermination of a deficiency, the Tax Court dismisses his or her petition, the taxpayer then pays the disputed deficiency, files for a refund, gets denied, and then sues in federal court challenging the denial. That theoretical possibility seems seldom, if ever, to occur, see Center for Taxpayer Rights Amicus Br. at 14–16, and therefore does not move the needle. See Boechler, 142 S. Ct. at 1499 (“[T]he Commissioner’s interpretation must be not only better, but also clear.”). But see Organic Cannabis Found., LLC v. Comm’r, 962 F.3d 1082, 1095 (9th Cir. 2019) (interpreting this context to demonstrate that § 6213(a)’s deadline is jurisdictional).
Slip op. at 10-11. The cite to Organic Cannabis is the Culp court’s only acknowledgment that any court has ever held the filing deadline jurisdictional.
The Supreme Court has held that the separation of a filing deadline from the jurisdictional grant is an indication that the filing deadline is not jurisdictional. Because of this, the taxpayer in Hallmark and the Center for Taxpayer Rights in its amicus brief in Culp argued that the true location of the jurisdictional grant for the Tax Court to redetermine deficiencies is in IRC 6214(a), not IRC 6213(a). Hallmark disagreed with this argument. Id. at *38-*40. Culp doesn’t even mention the argument – apparently assuming that the jurisdictional grant is still in the first sentence of IRC 6213(a).
In Hallmark, the Tax Court stated that one traditional tool of statutory construction that it should apply in finding a clear statement is the “prior construction canon”. The Tax Court described that canon as follows:
If a statute is reenacted using words or phrases that have already received authoritative construction by the highest court in a jurisdiction, or have been uniformly construed by inferior courts or the responsible agency, then the later version of that statute preserving the wording is presumed to carry forward that interpretation, and they are to be understood according to that construction. See, e.g., Bragdon v. Abbott, 524 U.S. 624, 645 (1998) (citing an “unwavering line of administrative and judicial interpretation” that included no Supreme Court opinions, and holding, “[w]hen administrative and judicial interpretations have settled the meaning of an existing statutory provision, repetition of the same language in a new statute indicates, as a general matter, the intent to incorporate its administrative and judicial interpretations as well”).
Hallmark at *28-*29. Citing prior cases other than from the Supreme Court, the Tax Court held the deadline jurisdictional.
At oral argument in Culp, Judges Bibas and Ambro took issue with this use of the prior construction canon:
JUDGE BIBAS: What’s odd is, so we’re supposed to focus on the language here, and here, you know, several sentences, 200 words are separating the relevant parts, and Hallmark never identifies what in the Statute actually is the clear statement. It — instead it spends most of its time on a century of Tax Court case law. But that’s not a clear statement in text.
JUDGE AMBRO: Which has been debunked in Boechler. I mean, you can’t go back —
JUDGE BIBAS: Yes.
JUDGE AMBRO: — and look at stare decisis.
. . . .
JUDGE BIBAS: The only times the Supreme Court has said “Well, all this can matter,” is when its own case law, . . . its own case law, might have been codified. But the Tax Court treats its case law as something that Congress has notice of, and I don’t see the basis for allowing the Tax Court’s cases to substitute for a clear statement in the text.
Oral arg. transcript (Doc. 58) at 20-21.
But, when Judge Ambro wrote the Culp opinion, he included no discussion of the prior construction canon.
Culp doesn’t even bother to quote this very helpful passage from Boechler:
The Commissioner’s weakest argument is his last: He insists that § 6330(d)(1)’s filing deadline is jurisdictional because at the time that deadline was enacted, lower courts had held that an analogous tax provision regarding IRS deficiency determinations is jurisdictional. (That provision says that “[w]ithin 90 days . . . the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency.” 26 U.S.C. § 6213(a).) According to the Commissioner, Congress was aware of these lower court cases and expected § 6330(d)(1)’s time limit to have the same effect. So, he says, the statutory backdrop resolves any doubt that might linger in the text.
The Commissioner’s argument misses the mark. The cases he cites almost all predate this Court’s effort to “bring some discipline” to the use of the term “jurisdictional.” Henderson, 562 U.S., at 435. And while this Court has been willing to treat “‘a long line of [Supreme] Cour[t] decisions left undisturbed by Congress’” as a clear indication that a requirement is jurisdictional, Fort Bend County v. Davis, 587 U.S. ___, ___, 139 S. Ct. 1843 (2019), no such “long line” of authority exists here.
142 S. Ct. at 1500.
As to the argument that the deadline is subject to equitable tolling, Culp says nothing rebuts the common law presumption in favor of equitable tolling, including the three extension provisions already set out in IRC 6213. Culp notes that the deadline is short, and this is a provision that pro se taxpayers use – favorable factors cited in Boechler. And Culp writes:
We also believe the IRS’s arguments that permitting equitable tolling would be inadministrable are overstated. . . . The Commissioner contends that, if we permit equitable tolling, “the United States would never have certainty about the amount of taxes it will collect for a given tax year.” IRS Br. at 47. But after the Commissioner issued approximately two million notices of deficiency in Fiscal Year 2021, taxpayers filed only 34,049 redetermination petitions in the Tax Court. Because taxpayers timely file the vast majority of these petitions, permitting equitable tolling would only affect a small subset of deficiency petitions filed after § 6213(a)’s period. This subset is quite small,5/ therefore indicating § 6213(a)’s deadline “serves a . . . limited and ancillary role in the tax collection system.” Boechler, 142 S. Ct. at 1501. And we doubt our holding will encourage more taxpayers to file untimely petitions in the (longshot) hopes of bringing a successful equitable tolling argument.
5. Amicus Center for Taxpayer Rights concluded, based on its analysis, that the Tax Court dismisses approximately 600 redetermination petitions per year for being untimely. See Center for Taxpayer Rights Amicus Br. at 14–15, 17.
Slip op. at 15-16 (footnote omitted).
The DOJ in Culp never challenged the Center’s estimate that roughly only 600 deficiency cases a year are dismissed for lack of jurisdiction for late filing.
Look for the DOJ to make a motion for en banc reconsideration by the full Third Circuit. That motion would be due by the day after Labor Day. If no reconsideration is given, then look for the Solicitor General to take Culp to the Supreme Court.