After the Supreme Court decided the Boechler case last April, the Tax Court decided that it should review its jurisprudence regarding the timely filing of Tax Court petitions as a jurisdictional issue in cases invoking its deficiency jurisdiction. As Boechler involved the language in the Collection Due Process (CDP) basis for the Tax Court’s jurisdiction, the Supreme Court’s decision did not directly impact the timeliness issue in the Court’s other jurisdictional bases.
The Court assigned the writing of the decision reviewing the timeliness to Judge Gustafson in the case of Hallmark v. Commissioner. At the same time, it began holding in abeyance decisions on dismissals of deficiency cases pending the outcome of the Hallmark decision. Last week the Court decided 17-0 that Boechler had no impact on its jurisdiction in deficiency cases and untimely petitions in deficiency cases still required dismissal no matter what reason petitioner had for filing past the 90 (or 150) day time period. It also immediately began dismissing the hundreds of cases awaiting this decision.
Carl Smith was the architect of the arguments advanced by the Tax Clinic at the Legal Services Center of Harvard Law School that eventually led to the Boechler decision which reversed a 17-0 start in the Tax Court ruling that those arguments were wrong. Carl provided significant assistance to Hallmark in the arguments it made to the Tax Court which received the same chilly reception in the Tax Court the CDP arguments received almost seven years ago.
Carl has written an eight part series breaking down the Hallmark decision and explaining how it fails to provide a supportable legal basis for its outcome. We know that many of our readers will not want to take a deep dive into the world of jurisdiction and will run this series as a second post each day for the next week. For those of you with an interest in the issue and an appetite for the technical arguments at issue here, Carl has provided a significant service to the taxpayer community. Keith
This is the first of a multipart post discussing the recent Tax Court opinion in Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (11/29/22, corrected).
Full disclosure: Hallmark’s lawyers on their own decided to make the argument that the deficiency petition filing deadline is not jurisdictional, citing Boechler’s pendency in the Supreme Court. However, after the Tax Court dismissed its petition anyway on April Fools Day and Boehcler was decided on April 21, Hallmark’s attorneys approached me, and I helped them, uncredited, with the arguments that they presented to the Tax Court in their May 2 timely motion to vacate the dismissal. Anyone reading the Hallmark motion to vacate filings can see that they often parallel some of the things Keith and I have posted here before – sometimes verbatim. And, anyone reading the filings in the pending Third Circuit test case, Culp v. Commissioner, Third Circuit Docket No. 22-1789, on which we blogged here, will see that there are verbatim parallels between the Hallmark and Culp filings – particularly in the Center for Taxpayer Rights amicus brief filed in Culp. (By the way, Culp is fully briefed – after the Third Circuit denied the DOJ motion for summary affirmance – but it is not yet clear that the case will get oral argument.)
I am writing this series of posts because I believe that anyone reading the Tax Court’s Hallmark opinion (ruling 17-0 against the taxpayer) would probably think that there is no chance of getting the Tax Court reversed. I concede that, just as in the case of IRC 6330(d)(1), probably most appellate judges would (in my view, incorrectly) vote to affirm the Tax Court’s Hallmark position. Keith and I, though, are of the opinion that if the Hallmark motion could have been presented instead directly to the Supreme Court, Hallmark would have won there, though not necessarily unanimously like that Court ruled for the taxpayer in Boechler (overruling the Tax Court’s earlier 17-0 ruling in Guralnik v. Commissioner 146 T.C. 230 (2016)).
There will be further appellate litigation over whether the deficiency petition filing deadline is jurisdictional or subject to equitable tolling. I think it would be useful that any tax lawyer who winds up with such a late-filed case (whether their client brings in an originally-pro se case or the lawyer volunteers to do an appellate test case) read my series of posts so that they can see what I would argue the Tax Court got wrong in Hallmark.
The first two posts will discuss the taxpayer’s argument that IRC 6214(a), not IRC 6213(a), is the jurisdictional grant to the Tax Court to hear cases involving deficiencies set out in notices of deficiency. This is an argument that would be very helpful for the taxpayers to win. However, even if IRC 6213(a) provides the jurisdictional grant in such cases, I think the taxpayer should win for lack of a clear statement by Congress in IRC 6213(a) (which lacks the word “jurisdiction”, unlike IRC 6330(d)(1) analyzed in Boechler) that the filing deadline is meant to be jurisdictional.
In today’s post, I will show that many judges of the Tax Court (including some judges who voted against the taxpayer’s argument in Hallmark) have previously written in opinions that IRC 6214(a) is the basis of the Tax Court’s deficiency jurisdiction – writing this in opinions where the IRS was not seeking an increased deficiency. In the next post, I will discuss the legislative history undergirding the argument over which provision provides the Tax Court’s deficiency jurisdiction and point out things that the Hallmark opinion oddly decided not to discuss about this legislative history, even though the taxpayer presented this information to the court.
read more...Here is just a partial listing of cases in which Tax Court judges have previously stated that IRC 6214(a) is the source of its deficiency jurisdiction. These quotes appear in opinions that did not involve any attempt by the IRS to seek an increased deficiency under IRC 6214(a).
Judge Morrison has written: “This case arises from Abdi’s timely petition. We have jurisdiction pursuant to section 6214(a).” Abidi v. Commissioner, T.C. Memo. 2015-41 at *2. “We have jurisdiction, pursuant to section 6214, to redetermine the deficiency and the penalty determined in the notice of deficiency. See sec. 6214(a).” Longino v. Commissioner, T.C. Memo. 2013-80 at *3. “Mr. and Ms. Thoma filed a timely petition for redetermination of the income-tax deficiencies and accuracy-related penalties for both years under section 6213(a). We have jurisdiction under section 6214(a).” Thoma v. Commissioner, T.C. Memo. 2020-67 at *4. See Moyer v. Commissioner, T.C. Memo. 2016-236 at *2 (same).
Judge Paris has written: “Petitioner received a notice of deficiency and invoked the Court’s jurisdiction by filing a petition for redetermination of a deficiency under section 6213(a). Section 6214(a) grants the Court jurisdiction to redetermine the correct amount of a deficiency. . . .” Trimble v. Commissioner, T.C. Memo. 2018-36 at *5.
Judge Ashford has written: “Section 6214(a) establishes our deficiency jurisdiction”. Dees v. Commissioner, 148 T.C. 1, 13 (2017) (Ashford, J., concurring in the result only).
Senior Judge Halpern has written: “”Section 6214(a) establishes our jurisdiction to redetermine (i.e., determine de novo) deficiencies determined by the Secretary.” Moya v. Commissioner, 152 T.C. 182, 198 (2019). He also wrote, “We thus conclude that the notices of deficiency respondent issued to petitioners for their 2007 taxable years were valid, so that petitioners’ filing of a petition in response to those notices gave us jurisdiction under section 6214(a) to redetermine the deficiencies reflected in the notices.” Stevens v. Commissioner, T.C. Memo. 2020-118 at *47.
Senior Judge Holmes has written: “Our Court has for decades had the power, when we have jurisdiction over a particular taxpayer for a particular tax year, to determine or redetermine the correct amount of his deficiency – including any penalties. See sec. 6214(a).” Graev v. Commissioner, 149 T.C. 485, 502 (2017) (Holmes, J., concurring in the result).
Former Judge Simpson has written:
Section 6214(a) was initially enacted as part of the Revenue Act of 1926. In addition to authorizing the Court to redetermine a deficiency, the statute provided that the Court had the authority to “determine whether any penalty, additional amount or addition to the tax should be assessed”. Sec. 274(e), Revenue Act of 1926, ch. 27, 44 Stat. 56.
Bregin v. Commissioner, 74 T.C. 1097, 1103 (1980) (emphasis added).
Hallmark cited all of these opinions in its filings. If Judges Morrison, Ashford, and Paris read the filings, I don’t see how they could sign on to an opinion saying the exact opposite – without at least explaining themselves in a mea cupla concurrence.
About Carlton Smith
I think the Tax Court was just looking for an easy way to reduce its already heavy workload. 6213(a) is Bartleby the Scrivener’s ‘I prefer not to.’
Carl,
I feel your passion on this issue. Since I first met you on an ABA Tax Section panel long ago in the foggy mists of time (I think sometime in the 1990s), I have known that you are passionate about the tax law, tax procedure particularly, and helping the little guy who often gets lost in tax discussions. Thank you for that passion and the contributions it has generated in the tax law.
I don’t feel that same passion that you do about the deficiency jurisdiction/nonjurisdiction issue for deficiency jurisdiction. At the outset, let me say that I think jurisdiction/nonjurisdiction is loaded terminology. The question is whether Congress intended the deficiency petition period to be 90 days or not. As I read the tea leaves (many of the same tea leaves you read), I think that Congress meant the 90-day period to be required. (If that means jurisdictional, then so be it.) While I cannot enter the mind of the various Congresses that legislated and spoke in legislative history (heaven forbid we should even consider such) on aspects of the issue, I do feel confident that the 90-day period was required based on a fair reading of the history of its interpretation and application. (One factor mitigating the “harshness” of that statement is that there are other ways to litigate tax liability, including refund suits, collection suits, and CDP litigation.)
Now, everyone can futz about which tea leaves to focus on, but I just repeat that a fair reading of the history (at least my reading which I deem fair) is that the 90 -day period for deficiency jurisdiction is required. (Jurisdictional if that is the right lingo to use.)
As a bit of an aside, I am concerned that a rule that says that the taxpayer can file a petition anytime upon showing equitable factors might mean that the statute of limitations could be open forever if the IRS can claim that the 90-day period is really an open statute of limitations for the petition. Although I can’t say this is a fully formed thought, I think the statute is open during the period the taxpayer can file a petition for redetermination and if that period is elastic, then periods the statute of limitations might become elastic, to be invoked by the IRS to hurt the small taxpayer. (I can’t imagine that the IRS would pursue that option, but can’t say that it is impossible.)
Thanks again.
Jack Townsend
Jack,
I will only address your SOL concern. Even today, if a taxpayer files a late Tax Court petition that is dismissed for LOJ, she has extended the SOL for collection. 6503(a)(1) provides:
The running of the period of limitations provided in section 6501 or 6502 on the making of assessments or the collection by levy or a proceeding in court, in respect of any deficiency as defined in section 6211 (relating to income, estate, gift and certain excise taxes), shall (after the mailing of a notice under section 6212(a)) be suspended for the period during which the Secretary is prohibited from making the assessment or from collecting by levy or a proceeding in court (and in any event, if a proceeding in respect of the deficiency is placed on the docket of the Tax Court, until the decision of the Tax Court becomes final), and for 60 days thereafter.
She has placed a deficiency proceeding on the docket of the Tax Court.
And, your concern about extending the 6502 SOL applies equally to CDP petitioners who file a late petition and seek equitable tolling (at least if they seek it successfully). I think that is the logical result of Boechler, and it is only fair to the IRS.
Thanks, Carl.
Example 1. IRS sends NOD on the last day of the assessment statute. Taxpayer does not file a timely petition because he is in a coma. Taxpayer comes out of the coma 1 year later. Taxpayer then files an out of time petition on equitable suspension of the 90-day period. What is the assessment statute of limitations? Specifically, was it suspended from the date of its normal expiration (I think 151 days after the NOD) or just from the date he files an out of time petition? If the latter, then the statute would have expired before he filed the petition so suspension during the period the petition was filed would be meaningless.
Example 2. Same, except that taxpayer does not file a petition, but could have if equitable factors suspended the petition period. IRS makes the assessment timely (within that 60 day period after petition not filed). It then looks like the assessment period has expired. IRS then learns of the circumstance taxpayer’s coma and treats the disability as suspending the assessment statute of limitations permitting it to send a second NOD in a much larger amount. What is the assessment statute of limitations?
Jack
I’m going to shamelessly plug a panel that I’m moderating at the upcoming ABA Tax Section’s National Institute on Criminal Tax Fraud and Tax Controversy next week in Las Vegas. I am moderating an all-star panel which will discuss, inter alia, the practical effects of Boechler, APA issues, and the anti-injunction act. The panel will feature the Hon. Mark V. Holmes from the Tax Court, Michael Desmond, former IRS Chief Counsel, and crackerjack tax litigator Antoinette Ellison. We will discuss questions like Jack’s questions here and lots more. The panel is Tuesday afternoon. We hope to see you there.