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What Happens After Boechler – Part 2: The IRS Argues the Floodgates Will Open if the Tax Court Follows Boechler in Interpreting IRC 6213(a)

Posted on Apr. 26, 2022

Boechler involves the Tax Court’s jurisdiction in Collection Due Process (CDP) cases. The Tax Court Congressional Budget Justification Fiscal Year 2023 (Feb. 28, 2022), at page 19 reports that CDP cases filed in the fiscal year ended 9/30/21 made up 3.29% of its total caseload and deficiency cases made up 96.46% of its total caseload (though the Tax Court overstates the deficiency case figure by apparently including in that deficiency figure all dockets that do not have letters at the end of their docket numbers — which would mean that the deficiency figure erroneously also sweeps in 6015(e) cases and all those cases later dismissed for LOJ because no ticket to the Tax Court under any jurisdiction had been issued). If the Tax Court determines that the time period for filing petitions in deficiency cases is not a jurisdictional time period, many more petitioners will have the opportunity to argue that the Court should hear their late petition than would have the opportunity in CDP cases – almost 20 times as many. What does the floodgate argument really mean here? Should it make a difference?

There are at least two parts to the question of the impact of finding that the time period for filing a Tax Court petition in a deficiency case is not jurisdictional. One, what is the volume of late filed cases? Two, how many of the late filed cases have a marginally meritorious case that will require actual resources at the Court and at Chief Counsel, IRS to resolve? One possible result, discussed below, is that the net effect will cause little if any additional work for the Court or Chief Counsel. If the Tax Court finds or is instructed that 6213(a) is not a statute in which the time for filing creates a jurisdictional bar, the net result of any additional work should not be significant.

The Tax Clinic at the Legal Services Center of Harvard Law School has been looking at Tax Court dismissals for several years, monitoring the cases in search of meritorious cases that might provide a challenge to the Court’s view that all of its bases for jurisdiction have a jurisdictional time frame.  Looking at the cases primarily means Carl Smith reviewing the daily docket, Carl passing to me any cases that look like they were dismissed for a reason based on late filing where the petitioner has raised some type of excuse that seems more than frivolous, me ordering the documents from the Court that led to the Court’s order, Carl and me reviewing the documents to decide if the case has a potentially meritorious argument on the excuse and on the merits, me calling the taxpayers with a potentially meritorious case to get further information and a sense of their interest in pursuing the case further and a follow up discussion between Carl and me on whether to move forward with the case.  We find very few cases that meet our criteria – less than 10 each year in all Tax Court bases for jurisdiction combined.

Backing up from our criteria to the criteria that will cause work for the Court and Chief Counsel, it’s necessary to decide how many cases will have an argument for equitable tolling that requires a hearing of some type. When Chief Counsel identifies a case as late filed, more about why I say only Chief Counsel below, it will make affirmative allegations in its answer that the petition was untimely. It already spends at least as much time as the affirmative allegations will take by filing a motion to dismiss on all of the cases it determines were filed late. So, no additional work there. The taxpayer will, or should, respond to the affirmative allegations setting forth the defense(s) that the petition was timely filed and/or that the time for filing should be equitably tolled. This process saves the Court the time it takes to produce and send out show cause orders. At some point the Court will rule on the effect of late filing. The Court already rules on this issue after the show cause order. So, no additional work there.

Not all taxpayers will file a response to the answer. Taxpayers who do not respond will cause the IRS to file a Rule 37(c) motion. This may cause the Court to give the taxpayers a second chance to respond or may cause the Court to rule at that point. The filing of this motion will cause Chief Counsel a little more work. If the Court issues an order giving taxpayers a second chance to respond, this will cause the Court a little more work.

Taxpayers who do respond will now respond with different/additional information from the information provided in responses prior to a change in the jurisdictional nature of IRC 6213. Some taxpayers will respond with a detailed explanation of the reason for the late filing. Some of these responses will make clear that the taxpayers do not fit into the Court’s criteria for equitable tolling. It will take the Court several opinions in the early years after determining IRC 6213 does not have a jurisdictional time frame for the Court to develop a body of jurisprudence on equitable tolling. It must do so now for IRC 6330 cases. It’s worth noting that the Tax Court could have been building its body of equitable tolling law since the D.C. Circuit’s decision regarding whistleblower petitions in the Myers case. It has not and may have been holding the Myers case in abeyance pending the outcome of Boechler but that is another source of equitable tolling jurisprudence that can inform IRC 6213 cases. There is no indication that in the whistleblower or passport cases, both areas of Tax Court jurisdiction with relatively low filing numbers, that a stampede of equitable tolling requests, or any such requests, has occurred.

So, developing this body of jurisprudence should not add much to the burden of the Tax Court. Once it has established its criteria for reviewing cases for equitable tolling, it will be able to dismiss some cases in which taxpayers response to the affirmative allegations in the answer discloses a reason for filing a late petition that does not fit within the established bases for accepting the case. Making decisions on these cases will not cause much additional work and probably will occur in the office of the Chief Judge with the attorneys who work there. This will cause little or no additional work for Chief Counsel attorneys.

Unquestionably, some cases will respond to the motion and raise enough concerns about the nature of their argument for jurisdiction that the Court will need to schedule a hearing in order to take evidence and to allow further argument. These cases will cause more work for the Court and for Chief Counsel. In order to guess how many cases we might be talking about here, it is necessary to start with the number of cases typically dismissed for lack of jurisdiction based on an untimely petition. No need to look at other bases for dismissal since they are not implicated by the Boechler decisions.

Carl Smith did research on the number of dismissals for lack of jurisdiction based on timeliness and found 103 cases in February and March of 2022. At that pace one might expect about 600 cases in a year. Based on these raw numbers, we need to determine how many of the petitioners filed a response that would require more work of the Court and Chief Counsel. Carl Smith has been reviewing all orders of dismissal for the last four months for late filing under all jurisdictions, and he estimates he has seen only about 30 orders where taxpayers have tried to provide a good excuse for late filing. Assuming that number holds and that similar numbers of articulated excuses in future cases will require the litigation of equitable tolling if the filing deadlines are no longer jurisdictional, that means that about 90 cases a year will involve parties doing filings relating to the assertion of equitable tolling. So, probably there would be 87 cases a year that would require additional work from the Tax Court and Chief Counsel to deal with taxpayer-pleaded equitable tolling defenses if IRC 6213 creates a claims processing rule. Under Boechler, about 3 cases a year will probably be CDP cases in which a taxpayer pleads equitable tolling. That low CDP number may surprise a lot of people who thought Boechler would open floodgates under CDP. Of course, the new legal possibility of equitable tolling under all jurisdictions may bring additional taxpayers to assert facts that can give rise to equitable tolling, but it is hard to believe that these new assertions would any more than double the number of cases each year where equitable tolling would be argued. Further, probably only a third of such cases will actually be granted equitable tolling (30). There will be additional work to Counsel and the Court on the merits in such cases, but 30 cases is only 0.1% of the Tax Court’s docket each year. So, given that over 90% of cases settle on the merits anyway, the additional work will probably not involve more than a single extra merits trial a year.

Tomorrow’s post will explain in more detail why Chief Counsel must make its objection early in the case. Chief Counsel attorneys will also have a time savings because they will no longer need to respond to orders to show cause in cases where they do not raise the issue in the answer. For reasons discussed in the next post, the failure to raise the timing of the filing in the answer will probably end any argument on timing allowing the parties to focus on the merits.

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