Suspending the CSED by Pursuing Litigation or Is This the Final Stop for the Weiss Case?

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We have written about the Weiss case on several previous occasions as it wound its way to the Supreme Court and then started anew in the Tax Court.  You can find those posts here with links in the first sentence of that post to the prior three posts on the cases and appeals brought by Mr. Weiss regarding the calculation of the collection statute of limitations.  I write today to briefly discuss the Third Circuit’s affirmance of the District Court for the Eastern District of Pennsylvania’s most recent decision.  Of course, it’s possible that Mr. Weiss will want to try again to go to the Supreme Court.  The government is collecting filing fees from him if not taxes.

The issue here is the effect of the appeal to the Supreme Court in his first stream of litigation, in which he was arguing about whether he made a Collection Due Process (CDP) request, on the statute of limitations on collection.

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The IRS brought a collection suit against Mr. Weiss at the last minute before the statute of limitations on collection expired for the year at issue.  Mr. Weiss argues in his defense against the collection suit that the statute of limitations expired prior to the time of the filing of the collection suit.  He to convince the district court that the IRS improperly calculated the statute of limitations just as he failed in the first round of litigation to show that he had not made a CDP request.  His frustration is no doubt driven in part by the fact that it was his actions that extended the statute. 

Had he not taken the actions suspending the statute, it is possible that the suit would have been brought earlier.  My observation is that the DOJ trial attorneys who bring these suits calculate the time from for bringing them, or rely on the IRS calculation of that time in the referral letter, and wait until near the last minute to bring suit probably because they have too many cases in their inventory and because hopes springs eternal that the taxpayer will pay the liability eliminating the need for the suit.

Mr. Weiss first extended the statute by filing a CDP request.  He argued that he only filed a request for an equivalent hearing which did not extend the statute of limitations but the Tax Court and the subsequent courts found that he filed within 30 days of the issuance of the CDP notice and that resulted in a CDP request rather than a request for an equivalent hearing.  Since he requested a CDP hearing, he suspended the statute of limitations on collection.  He appealed the determination that he had filed a CDP request up to the Supreme Court.  In this second round of cases, he contests that the request for certiorari in the first round of litigation suspended the statute of limitations on collection.

The post linked above discusses his loss at the district court level arguing this issue.  Now, he has an opinion from the Third Circuit affirming the lower court decision that the cert request further extended the collection statute of limitations (CSED).  While the outcome here may impact only a few taxpayers, the analysis provides important insight for those concerned about calculating the CSED.

The Third Circuit described the important facts as follows:

The material facts are undisputed. After the D.C. Circuit issued the mandate, no less than 129 days remained of the ten-year statute of limitations. Weiss filed a petition for a writ of certiorari 62 days later, and 40 days after that, the Supreme Court denied his petition. The date on which government commenced this action was 64 days after the Supreme Court’s denial of Weiss’s petition for a writ certiorari and 166 days after the D.C. Circuit’s mandate.

Using those dates, the timeliness of this case turns on questions of law. If the statute of limitations, which had no less than 129 days remaining, is tolled for either the time between the D.C. Circuit’s mandate and Weiss’s petition (62 days) or the time from Weiss’s filing of that petition to its denial (40 days), then the government’s filing of this case 166 days after the D.C. Circuit’s mandate would be timely. But if both of those increments associated with Weiss’s petition fail to suspend the statute of limitations, then the government’s filing would be too late. As elaborated below, the time associated with Weiss’s petition (a combined total of 102 days) tolls the statute of limitations, and that renders this action timely — without the need to address the applicability of the ‘final determination’ provision relied upon by the District Court.

The Third Circuit points out that Congress “did not define two relevant terms — ‘appeals therein’ and ‘pending.’” It searches for their ordinary meaning finding:

The first of those, ‘appeal,’ had two common meanings when § 6330 was enacted in 1998. Contemporary dictionaries reveal that it could be used, in a general sense, to mean a “[r]esort to a superior (i.e. appellate) court to review the decision of an inferior (i.e. trial) court.” Appeal, Black’s Law Dictionary (6th ed. 1990). Under that general meaning, the term ‘appeal’ would include both appeals and petitions — those filed in court and those filed administratively. See id. But as evidenced by a number of federal statutes and court rules, the term ‘appeal’ could also refer to a narrower class within that larger class: it could mean a method of seeking review of an order that is distinct from other such methods, such as a petition. As used more narrowly, appeals are typically initiated in the court that issued the order,2 while petitions are often commenced through a filing with the reviewing body.3 Cf. Garland v. Ming Dai, 141 S. Ct. 1669, 1677-78 (2021).

The court also found that the word therein had to common meanings creating four possible combinations for the phrase “appeals therein.”  Because it finds that three of those combinations would create a meaningless result, it finds:

The fourth combination, however, does not offend the canon against superfluity. If the term ‘appeals’ receives its broader meaning (to include petitions) and the word ‘therein’ means ‘in such matter,’ then the phrase ‘appeals therein’ refers to any appeals or petitions from a Collection Due Process hearing. That understanding accounts for the entire judicial review process: the Tax Court reviews petitions from the Collection Due Process hearing, see 26 U.S.C. § 6330(d)(1); see also 26 C.F.R. § 301.6330-1(b)(2), (f)(1); the appellate courts review appeals from the Tax Court as well as petitions for panel rehearing and en banc rehearing, see 26 U.S.C. § 7482(a)(1); Fed. R. App. P. 35, 40; and petitions for certiorari from the appellate courts may be filed with the Supreme Court, see 28 U.S.C. § 1254(1).

The court then examines the word “pending.”  It finds two definitions of this word but says

For purposes of § 6330(e)(1), only the second definition works. The tolling clause identifies a singular ‘period’ of suspension. The first definition of ‘pending,’ however, would involve several distinct periods of piecemeal tolling. The statute of limitations would be suspended for the hearing and every appeal, but not for the interim periods between resolution and appeal. If Congress had intended to account for such intermittent tolling, it could have used the word ‘periods.’ But by instead using the singular term, ‘period,’ the statute allows only the second meaning of ‘pending,’ such that it describes a continuous period inclusive of not only the hearing and ‘appeals therein’ but also any intervening periods of indeterminacy during which an appeal or petition could be filed.

Applying the second definition here, the statute of limitations remained tolled for the 62 days between the D.C. Circuit’s mandate and Weiss’s petition for a writ of certiorari.

It then holds that the suit to foreclose brought by the IRS was timely because of the time remaining on the CSED as a result of the statute of limitations suspensions. 

Mr. Weiss got his money’s worth out of filing the appeal from the perspective that the Third Circuit gives an extensive analysis of the impact of bringing litigation on the collection statute of limitations.  Whether this extensive analysis will give Mr. Weiss pause before seeking cert a second time is unknown.  It might also give future taxpayers pause in bringing appeals if they seek to ride out the CSED as their path to defeating payment of the tax.  Of course, just because the IRS can move forward with this suit does not mean it will ultimately collect from Mr. Weiss.  Assuming it wins the foreclosure case, it will have an almost unlimited time period within which to collect but that does not mean it will be able to do so.  Mr. Weiss has lost another battle but until the IRS actually collects, he has not lost the war.

Comments

  1. All I will say is that the issue is considerably more complex than the Third Circuit makes it appear. For example, both the Supreme Court and the Third Circuit have expressly indicated that a petition for certiorari is not an appeal, with the Supreme Court doing so under the Code.

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