Taxpayer Bill of Rights Does not Confer Tax Court with Jurisdiction in Collection Due Process

The IRS assessed penalties against the taxpayer under IRC 6698(a) for late partnership information returns and IRC 6038(b) for failing to file information returns with respect to foreign corporations and partnerships. After sending the requisite notice demanding payment and not receiving payment, the IRS eventually filed a notice of federal tax lien and sent a CDP notice to petitioner at its New York address. The court finds that the CDP notice was sent on June 13, 2017, delivered and signed for on June 16, 2017. In a footnote it notes that petitioner disputes delivery and further notes that this fact does not matter. Petitioner’s tax matters partner was not in the United States at the time of delivery and did not sign for the delivery. Petitioner requested a CDP hearing on July 28, 2017 more than 30 days after the mailing of the CDP notice. The address used by petitioner in requesting the CDP hearing matched the address to which the IRS sent the CDP notice.

The IRS responded to the CDP request by notifying petitioner that its request failed to meet the timeliness requirements for a CDP hearing. The IRS offered petitioner an equivalent hearing if it requested one by September 1, 2017. It did this in a letter dated August 28, 2017. Petitioner did not reply to this letter by September 1 and one wonders how it could do so within such a short time frame. This puzzles me as I thought the untimely CDP request submitted within one year of the CDP notice would automatically trigger an equivalent hearing but apparently the taxpayer must make a second request affirming the desire for an equivalent hearing. The IRS automated collection site closed the case without offering an equivalent hearing on September 7, 2017. Because the Tax Court does not have jurisdiction over equivalent hearings, it does not provide a further discussion of this troubling truncation of the equivalent hearing.

Petitioner sent another request for a CDP or equivalent hearing on December 19, 2017, but the court noted that the record contained no indication of a response to this letter from the IRS. Apparently having heard nothing since sending the December letter, petitioner filed its petition on May 2, 2018, requesting review of its case even though it did not have a determination or a decision letter. Petitioner attached to its petition the letter from the IRS dated August 28, 2017.

The Tax Court started its discussion with a general statement of the prerequisite for obtaining jurisdiction to obtain a collection due process review:

Our jurisdiction under section 6330(d)(1) requires a written notice embodying a determination to proceed with the collection of taxes in issue, and a timely petition. Lunsford v. Commissioner, 117 T.C. 159, 164 (2001). The determination does not have to follow any particular format. LG Kendrick, LLC v. Commissioner, 146 T.C. 17, 28 (2016), aff’d, 684 F. App’x 744 (10th Cir. 2017). However, if no written determination is issued, the absence of such a determination is grounds for dismissal of the petition. Id. (citing Offiler v. Commissioner, 114 T.C. 492, 498 (2000)). In deciding whether we have jurisdiction we will not look behind a notice of determination, or lack of notice, to determine whether a hearing was fair or even whether the taxpayer was given an appropriate hearing opportunity. Id. at 31; cf. Lunsford v. Commissioner, 117 T.C. at 164-165.

Since the court decided off the bat it lacked jurisdiction, it next looked to explain why it had no jurisdiction to hear the case. It basically discussed two cases in which it noted the difficulty to reconcile the outcomes in the Tax Court. First, it discussed Buffano v. Commissioner, T.C. Memo. 2007-32. In Buffano, the Tax Court determined that the IRS sent the CDP notice to the wrong address. Because of the error in mailing the CDP notice, the Tax Court invalidated the levy notice as it dismissed the case. Petitioner argued that the court should issue a similar order here. Second, the court discussed Adolphson v. Commissioner, 842 F.3d 478, 484 (7th Cir. 2016) where the Seventh Circuit, in a case with similar facts to Buffano held that “[a] decision invalidating administrative action for not following statutory procedures is a quintessential merits analysis, not a jurisdictional ruling.” The IRS asked the Tax Court to adopt the holding in Adolphson and decline to rule on the administrative action as it dismissed the case. The court declined both invitations and distinguished this case from Buffano because it found that the IRS in this case mailed the CDP notice to the correct last known address.

Since the CDP notice went to petitioner’s last known address and since petitioner failed to make a timely CDP request, the court held that the IRS did not need to issue a notice of determination. Without the notice of determination, the court lacked jurisdiction over petitioner’s collection complaints.

Petitioner did not stop at this point but argued in the alternative that IRC 7803, home to TBOR, offered another path by which the court could obtain jurisdiction. The court declined the invitation to find jurisdiction through TBOR stating:

… section 7803(a)(3) itself does not confer any new rights on taxpayers; it merely lists “taxpayer rights as afforded by other provisions of” the Code. Further, section 7803(a)(3) imposes an obligation on the Commissioner to “ensure that employees of the Internal Revenue Service are familiar with and act in accord with” such rights. It does not independently establish a basis for jurisdiction in this Court.

In a footnote the court cites to the case of Moya v. Commissioner, 152 T.C. __, __ (slip op. at 16-17) (Apr. 17, 2019), where the court held, in the context of a deficiency case, that TBOR provided no new rights and no independent rights on which the taxpayer could rely. We discussed the Moya case here.

The court concludes by noting, as it frequently does, that petitioner still has the remedy of paying the tax and filing a refund claim. No facts were offered on the practicality of this remedy for this taxpayer. I know for the taxpayers I represent, this is not a practical remedy.

The decision here does not come as a surprise to me. Had the court ruled that it had jurisdiction based on TBOR I would have been shocked. The refusal to use TBOR as a basis for jurisdiction does not mean that a violation of taxpayer rights could never play a role in the outcome of a CDP case in Tax Court but conclusively provides, at least at the Tax Court, that TBOR will not open the door of the Tax Court no matter how egregious the violation of taxpayer rights and that the taxpayer must find some other means to obtain jurisdiction.

Here, the taxpayer did not argue that the 30 day period for making a CDP request is not a jurisdictional time period and that its failure to meet the 30 day period resulted from some factor(s) that could form the basis for equitable tolling. The facts do not necessarily support such an argument, but the taxpayer did make some arguments about the absence of the principal of the business at the time of the delivery of the CDP notice. Judge Gustafson recently issued an interesting order raising questions regarding the jurisdiction of the Tax Court based on a failure of the “right” part of the IRS to receive the CDP notice within 30 days. If TBOR does not open the court’s door in the situation presented by Atlantic Management, be sure to look at whether a CDP request submitted to the IRS after the 30 day period might warrant a different type of argument regarding jurisdiction that does not rely on TBOR.