Guest blogger Carl Smith offers views on whether taxpayers may challenge a CDP determination even if the petition is filed in Tax Court one day late. Les
Congress has long known that pro se taxpayers have difficulty figuring out from IRS notices the last date to do an act. This is especially true for filings in the Tax Court. In section 3463 of the IRS Restructuring and Reform Act of 1998, Congress (1) directed the IRS to include the last date to file in all notices of deficiency and (2) amended Code section 6213(a) to let taxpayers rely on any last date shown in such notice, even if that date was incorrect. Probably by mere oversight, Congress made no similar directions as to the section 6330(d)(1) Collection Due Process (“CDP”) and section 6015(e)(1) stand-alone innocent spouse notices of determination that were also brought into existence by that act, and the IRS has chosen not to include similar “file by” dates in either of those notices of determination.
In CDP notices of determination, when it comes to stating the time period to file, the IRS has mysteriously chosen to use language that differs from the similar language in section 6015(e)(1) notices of determination. This is to report that there is a particular problem in the time period language used in CDP notices of determination. That language is misleading pro se taxpayers into mailing their petitions to the Tax Court a day late.
I have not made an exhaustive search of all orders of dismissal that can now be found through the Tax Court’s order search function on its website going back to mid-2011. But, just reviewing orders of dismissal over the last 6 months or so, I discovered that, in 2015, in three separate Tax Court cases, pro se taxpayers mailed CDP petitions to the Tax Court a day late, misled, they said, by a sentence in the notices of determination. By contrast, none was misled into filing late by the language in section 6015(e)(1) notices of determination. The Tax Court dismissed all three CDP cases for lack of jurisdiction, noting Tax Court precedent that the time period in which to file a CDP petition is jurisdictional and cannot be extended by the court. Duggan v. Commissioner, Tax Ct. Docket No. 4100-15L (order dated Jun. 26, 2015); Swanson v. Commissioner, Tax Court Docket No. 14406-15S (order dated Jan. 14, 2016) ; Pottgen v. Commissioner, Tax Court Docket No. 1410-15L (order dated Mar. 4, 2016).
At the very least, it is time for the IRS to redraft the CDP notice of determination sentence so that it does not anymore trick pro se taxpayers into filing late.
Prior to its recent amendment by the PATH Act, section 6330(d)(1) provided: “The person may, within 30 days of a determination under this section, appeal such determination to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter).” (Emphasis added.) This former language is what governed in all three cases.
In all three cases, the CDP notice of determination did not quote from the statute in providing the period in which to file a Tax Court petition. Instead, the IRS blended language from Tax Court Rule 25(a)(1) (discussing how to count days) and Reg. § 301.6330-1(f)(1) (“The taxpayer may appeal such determinations made by Appeals within the 30-day period commencing the day after the date of the Notice of Determination to the Tax Court.”) and wrote in the notice: “If you want to dispute this determination in court, you must file a petition with the United States Tax Court within a 30-day period beginning the day after the date of this letter.” (Emphasis added).
To understand how the taxpayers in all three cases read this sentence, let’s use the facts of one of the cases, Duggan. There, the IRS mailed the notice of determination on January 7, 2015. As lawyers with experience in how to count days, we know that the IRS was trying to say that the date of the notice was day 0, the day following the date of the notice would be day 1, and the 30th day would be February 6, 2015 (since January has 31 days). But, like the taxpayers in all three cases, Duggan thought he was being instructed not to count the date of the notice and that January 8, 2015 was the first day of the counting period (day zero, since if you start counting at 12:01 am on that day, a full day hasn’t elapsed until 12:01 am of the following day, January 9, 2015). Under Duggan’s reading (one which I find grammatically plausible), the last date to mail the petition was February 7, 2015 – the day he mailed his petition to the Tax Court. But, like the judge, we lawyers would call February 7, 2015, the 31st day after the date of the notice of determination.
In contrast to the filing period stated in CDP notices of determination, section 6015(e)(1) notices of determination contain language tracking more closely to the statute, stating: “If you disagree with our decision, you can file a petition with the United States Tax Court to review our denial. You must file your petition within 90 days from the date of this letter.” (Emphasis added.)
And the CDP notice of determination also used to track more closely to the statute. A CDP notice of determination issued on January 21, 2004, quoted in Rustam v. Commissioner, T.C. Memo. 2005-42, read: “If you want to dispute this determination in court, you must file a petition with the United States Tax Court for a redetermination within 30 days from the date of this letter.” (Emphasis added.) Whose bright idea was it to change this filing language to the present version?
Clearly, an ideal solution to this problem would be for the IRS to show a last date to file in both the CDP and section 6015 notices of determination. But, there is a problem if the IRS puts in a last date to file and if the date shown is incorrectly late: A taxpayer who relied on such an incorrect date would still have her case dismissed, since the Tax Court has held that these two time periods in which to file are jurisdictional and not subject to equitable tolling.
Twice in the past, Nina Olson has called for legislation similar to section 3463 for the innocent spouse time period. See NTA 2001 Annual Report at pp. 159-160; NTA 2006 Annual Report, Vol. 1, pp. 535-536. In the latter report, she speculated that the IRS won’t put in a date to file in section 6015(e)(1) notices of determination for fear of misleading a taxpayer into filing late in a situation where the courts cannot permit late filing. The IRS knows it will occasionally make mistakes in calculating the last date to file. It likely doesn’t want to be the cause of late filing. But, oddly enough, the language the IRS uses in the current CDP notice is itself causing late filing.
Recent Events in the Three Cases
In two prior posts on PT, A Snow Holiday: Not if IRS Can Help It and Matuszak v Com’r: A Tax Court Innocent Spouse Equitable Tolling Case we reported that Keith and I, in two pending Tax Court cases, are questioning whether the time periods in which to file petitions in the Tax Court in a CDP case (Guralnik v. Commissioner) and in a stand-alone innocent spouse case (Matuszak v. Commissioner) can be equitably tolled. They can’t be tolled under current Tax Court precedents that hold that those time periods are “jurisdictional”. Jurisdictional time periods can never be equitably tolled. But, neither the Tax Court nor any appellate court has considered the impact on these two Tax Court filing periods of Supreme Court opinions, issued since 2004, on the subject of equitable tolling and jurisdiction. Those recent Supreme Court opinions hold that time periods to file are now rarely jurisdictional and that Congress can override that potential interpretation of any statute only by a “clear statement” that a time period is intended to be jurisdictional. To date, all four opinions out of the Supreme Court in which a party has argued the “clear statement” exception have held that the time periods there involved were still not jurisdictional. Musacchio v. United States, 136 S. Ct. 709 (2016); United States v. Wong, 135 S. Ct. 1625 (2015); Sebelius v. Auburn Regional Med. Cntr., 133 S. Ct. 817 (2013); Henderson v. Shinseki, 562 U.S. 428 (2011).
Duggan has taken a pro se appeal to the Ninth Circuit, Docket No. 15-73819. His opening brief there is due April 11. In the Tax Court, he primarily argued that it is a violation of his Due Process rights not to let his Tax Court case go forward, since the IRS misled him into filing late. On March 16, 2016, Keith and I, as pro bono counsel for Ms. Matuszak, filed an unopposed motion for leave to file an amicus brief in Duggan’s appeal. In the proposed brief, we argue (instead of Due Process) that the 30-day period in which to file a CDP petition in the Tax Court is not jurisdictional and is subject to equitable tolling. We also point out that a defendant’s misleading the plaintiff into filing late is a common ground for the courts to impose equitable tolling. Glus v. Brooklyn, 359 U.S. 231 (1959).
The Pottgens are now represented by counsel. I have been in touch with that counsel. As a result, on March 22, 2016, I became co-counsel on a motion they filed in the Tax Court to vacate Judge Ruwe’s order of dismissal. The motion and accompanying legal memorandum make the same arguments that are being raised in the Duggan amicus brief that Keith and I drafted for the Ninth Circuit. The Pottgens live in the Third Circuit.
Swanson cannot appeal his dismissal. His case was an S case.
Both Guralnik and Matuszak are appealable to the Second Circuit – absent some argument that a party would raise under Byers v. Commissioner, 740 F.3d 668 (D.C. Cir. 2014), that the cases are appealable to the D.C. Circuit. It is a little unclear to me whether the Pottgens’ case could be appealed to the D.C. Circuit under Byers, since the D.C. Circuit in that case said that regional Circuits are the proper venue where one of the issues in a CDP case is a challenge to the underlying liability. The Pottgens are not arguing that their tax was miscalculated, but among the issues they raised is that the IRS failed to properly credit overpayments from other years to the year involved in the CDP case. Is that petition one “seeking redetermination of tax liability”, within the meaning of section 7482(b)(1)(A) – the provision that directs such cases to the regional Circuit of residence? Matuszak is an innocent spouse case, and no court has yet held whether or not such a case also falls within the language in section 7482(b)(1)(A) about redetermining tax liability. Guralnik, Matuszak, and Pottgen were all filed before the PATH Act amended the venue on appeal statute, for petitions filed after the date of enactment, to overrule Byers and instead direct all CDP and section 6015(e) cases to the regional Circuit of residence by new subparagrpahs (F) and (G) to section 7482(b)(1).
Observations
Because the Ninth Circuit has such a large backlog of cases, I don’t expect an opinion out of that court in Duggan before early 2018. On the other hand, I expect Tax Court opinions in Guralnik, Matuszak, and Pottgen long before then (probably late 2016) – even if one or more of these opinions is forced to go through en banc Tax Court review. For Keith and me to win our arguments in the Tax Court cases, since we are asking the Tax Court to overrule its prior precedents, such proposed opinions would have to be considered en banc.
Thus, the Ninth Circuit opinion in Duggan would only likely precede, and thereby possibly influence, any appeals of the three pending Tax Court cases in other Circuits.
The PATH Act amendments to section 6330(d)(1) were minor and so not likely to produce different jurisdictional or equitable tolling rulings going forward. Section 424 of the PATH Act modified that paragraph, prospectively, to read: “The person may, within 30 days of a determination under this section, petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter).” That is, the Tax Court proceeding is no longer called an “appeal”, and a “petition” is now specifically mentioned. No changes were made to the parenthetical jurisdictional grant. In addition, section 424 added a new Code section 6330(d)(2) that provides for a tolling of the 30-day period while a bankruptcy stay is in effect. Having one statutory exception does not preclude the application of the judicial doctrine of equitable tolling. In Holland v. Florida, 560 U.S. 631 (2010),the federal habeas statute there involved was held subject to equitable tolling, even though it had a single statutory tolling exception that applied during the pendency of state habeas proceedings.