We welcome back guest blogger Bob Kamman. As mentioned before, Bob practices in Phoenix and does a great job of providing comments to our blog posts, often filling in the “rest of the story.” For those immersed in the filing season, here is an oldie but goody article featuring Bob and the impairment of his eyesight caused by the minuscule entries on the Forms 1099 he must decipher. He has lately been paying a lot of attention to the Tax Court’s orders and he noticed an anomaly – the IRS regularly files answers to petitions that have not been perfected by the petitioner.
There can be several reasons for a petition to be “imperfect” in the language of the Tax Court. Perhaps the most common results from the failure to pay the filing fee. When a taxpayer fails to pay the filing fee, or in some other way files an imperfect petition, the Court does not consider the case perfected until the taxpayer fixes the imperfection, e.g., pays the fee or obtains a fee waiver. The Court’s practice is very taxpayer friendly because the Court treats the receipt of the imperfect petition as the time for calculating whether the taxpayer meets the 90 day period within which to file but also keeps taxpayers who fail to perfect from having the tax periods in the notice deemed resolved by the provisions of IRC 7459. I wrote about this a couple of years ago in an unintentionally suggestive post that does not convey the importance of not gaming the Tax Court’s generosity.
Bob’s post raises, but does not answer, the question of why Chief Counsel attorneys file answers to imperfect petitions. I cannot say why they do in the percentage of cases Bob has tracked. Filing an answer takes resources and even though all too often the Chief Counsel attorneys do not carefully review petitions to admit facts not in dispute, I would expect the Chief Counsel attorneys and paralegals to wait until perfection before filing. The Court issues an order when the case is perfected. It seems that Chief Counsel’s office should do a better job of tracking that order and not the 60 day period from the filing of the petition. Keith
The average price last year for a ticket to a Cleveland Browns football game was $108. NFL fans know, of course, that the Browns did not win a game all season. By comparison, the price of a ticket to the Tax Court is still just $60 — and has stayed the same since the early 1980s, although the “small tax case” filing fee of $10 was eliminated back then.
So filing a Tax Court petition costs next to nothing for most petitioners, and the filing fee can be waived on application and good cause shown. Nevertheless, some petitions don’t include the $60 fee. The Tax Court is remarkably tolerant of these unpaid cases, sending at least one notice and often two to remind petitioners of their debt.
One consequence is that petitions are assigned a docket number and copies are sent to IRS Chief Counsel upon filing, not upon payment. And in many cases, it seems that IRS attorneys file an answer, only to discover later that it was wasted effort. Many observers agree that the IRS has more work every year and not enough resources to do the best possible job. So why are these answers necessary?
For example, in the week ending January 19, 2018 there were eight cases dismissed for failure to pay the filing fee. The orders of dismissal are all the work of Chief Judge L. Paige Marvel, who signs hundreds of orders involving cases that have not yet been assigned for further proceedings to another Tax Court judge. In six of these eight cases, the IRS had filed an answer. Here are the chronologies (all dates are 2017 except dismissal date, and where noted):
Docket: 7257-17
Petition Filed: March 31
Order for Filing Fee: April 5; pay by May 22
IRS Answer: May 2
Second Order for Filing Fee: November 29; extended date December 20
Case Dismissed: January 18 (This case also involved an unsigned petition.)
Docket: 16014-17S
Petition Filed: July 27, with application for fee waiver
Order for Filing Fee: July 31, application denied (no reason stated); pay by September 14
IRS Answer: August 18
Second Order for Filing Fee: November 29; extended date December 20
Case Dismissed: January 18 (This case also involved an unsigned petition.)
Docket: 16917-17
Petition Filed: August 8
Order for Filing Fee: August 15; pay by September 29
IRS Answer: September 1Second Order for Filing Fee: November 29; extended date December 20Case Dismissed: January 18
Docket: 11527-17
Petition Filed: May 22
Order for Filing Fee: May 26; pay by July 10
IRS Answer: June 19, with request for place of trial
Second Order for Filing Fee: November 29; extended date December 20
Case Dismissed: January 18
Docket: 19697-17
Petition Filed: September 18
Order for Filing Fee: September 25; pay by November 9
Amended Petition Filed: October 27
IRS Answer to Amended Petition: November 14
Second Order for Filing Fee: November 30; extended date December 21
Case Dismissed: January 18
Docket: 20587-17
Petition Filed: October 2
Amended Petition Filed: October 4
Order for Filing Fee: October 4; pay by November 20.
IRS Answer to Amended Petition: November 21.
Second Amended Petition Filed: December 4
On December 4, 2017, Judge Marvel ordered IRS to file an answer to the amended petition by January 4, 2017 (sic).
On December 21, IRS filed a motion for more definite statement pursuant to Rule 51 (apparently stating there is no objection by petitioner).
On January 12, 2018, petitioner filed a motion to dismiss.
Case Dismissed: January 16, for failure to pay filing fee. IRS motion for more definite statement and petitioner’s motion to dismiss are denied as moot.
Tax Court Rule 20(d) requires that the filing fee be paid “at the time of filing a petition.” However, this is one of those rules that the court does not consider jurisdictional. It allows more time for payment of the fee, even giving petitioners a second chance to pay if they ignore the first deadline.
The filing fee is authorized by Code Section 7451, but Congress did not provide instructions on when it must be paid: “The Tax Court is authorized to impose a fee in an amount not in excess of $60 to be fixed by the Tax Court for the filing of any petition.”
Meanwhile, Rule 21(b) requires the Clerk of the Court to serve petitions on the IRS. It does not say when this should be done, but apparently a docket number is assigned immediately and the papers are sent (physically, or electronically?) right away.
Rule 36(a) requires that IRS file an answer within 60 days “from the date of service of the petition.”
Or, the IRS has “45 days from that date within which to move with respect to the petition.”
Rule 36 then provides:
(b) Form and Content: The answer shall be drawn so that it will advise the petitioner and the Court fully of the nature of the defense. It shall contain a specific admission or denial of each material allegation int he petition; however, if the Commissioner shall be without knowledge or information sufficient to form a belief as to the truth of an allegation, then the Commissioner shall so state, and such statement shall have the effect of a denial. If the Commissioner intends to qualify or it as is true and shall qualify or deny only the remainder. In addition, the answer shall contain a clear and concise statement of every ground, together with the facts in support thereof on which the Commissioner relies and has the burden of proof. Paragraphs of the answer shall be designated to correspond to those of the petition to which they relate.
(c) Effect of Answer: Every material allegation set out in the petition and not expressly admitted or denied in the answer shall be deemed to be admitted.
If answers are being filed less than a month after an unpaid petition, it is likely that they will consist of specific denials, general denials, and assertions of “without knowledge or information sufficient to form a belief.” So, are answers even necessary? Whether the fee is paid or unpaid, perhaps the rule should be that the IRS acknowledge the petition has been received and that the case will be assigned to an Appeals officer and a lawyer when they get around to it, but not until the fee is paid. This is clerical work, and although the IRS shortage of clerks is probably just as severe as its shortage of lawyers, it would be less expensive.
Such a change would not be needed, though, if Rule 20 required that the fee be paid (or a waiver application filed and approved) before the petition is sent to IRS. The original filing date could still be used for purposes of the 90-day rule.
In a civil case, the party demanding money is usually the plaintiff, and the party not wanting to pay it is usually the defendant. A tight deadline for filing an answer prevents delay by the unwilling party. In Tax Court, it is the IRS that wants money, and therefore has greater urgency to move things along. Answers are required because, I suppose, that’s the way it has always been done.
While changing Rule 20, why not order that in all cases, the Clerk of the Court notify the petitioner that the case will not be docketed until payment is made, or waived, within 30 days? It should not require an order signed by a judge to remind petitioners that payment is required. Of course, if the Tax Court and Chief Counsel want statistics to back up claims of increasing workload, it is better to count cases that are easily and quickly dismissed. That’s part of what bureaucrats call “empire building.” It’s not the type of thing that enters the mind of Tax Court or IRS administrators, I’m sure.