Notice of Deficiency Sent to Last Known Address Valid

[2] Specifically, if this memorandum is addressed to a District Counsel, then only office personnel working the specific case or subject matter may use this document. If this memorandum is addressed to a District Director, then only office personnel working the specific case or subject matter may use this document. This memorandum shall not be disclosed or circulated beyond such office personnel having the requisite "need to know."

[3] This memorandum is in response to your request for formal Field Service advice dated August 5, 1997, a copy of which is attached. Pursuant to telephone conversations between our two offices, your request[ed] has been expedited to meet the September 8, 1997, expiration date of the statute of limitations for assessment.

[4] You have asked whether: (1) remailing and redating a notice of deficiency that had been returned to the Service as undelivered invalidates the original notice of deficiency; and, (2) whether the Service should make an assessment off the original notice if petitioner fails to file a petition in the Tax Court.

[7] We also agree with your conclusion that the mailing of the redated second notice of deficiency would not constitute a recision. However, since it is possible that a court could find a recision to have occurred in order to reach an equitable result for the taxpayer, we recommend that the Service Center stop redating undelivered notices of deficiency.

[8] Undelivered notices should not be redated for another reason as well. You have suggested that under Traxler v. Commissioner, 61 T.C. 97 (1973), the 90 day clock in which to petition the Tax Court would begin to run from the mailing of the first notice. However, we think it is conceivable that a court could find that the taxpayer might have been mislead or reasonably relied to his or her detriment that the date of the second notice was the date of mailing and that the 90 days would begin to run on that date, especially if the taxpayer was unaware that a first notice had been mailed. See Lundy v. Commissioner, T.C. Memo. 1997-14; Eppler v. Commissioner, 188 F.2d 95 (7th Cir. 1951). We note that the stamp "duplicate original" on the second notice of deficiency without more would probably be insufficient to warn the taxpayer that a prior notice of deficiency had been mailed. Under such a scenario, while the petitioner would have additional time in which to petition the Tax Court, the redated second notice of deficiency would not invalidate the first notice of deficiency.

[9] If you have further questions, please contact Jordan Musen at (202) 622-7950 or me at (202) 622-7940.

[11] We have coordinated this request with the Western Region Acting ARC-TL, M. Catherine McKenna, and with National Office Attorney Blaise G. Dusenberry. Both are familiar with the facts of this case.

[13] The notice of deficiency dated * * *, was returned to the IRS on * * * and marked "Returned to Sender UNCLAIMED." Taxpayer filed his * * * income tax return on * * *, listing his address as "Y." On * * *, the Ogden Service Center (the Service Center where the taxpayer filed his * * * return) generated an Automated Information Management Systems ("AIMS") update indicating that the taxpayer's address had changed and was now "Y." Ostensibly, this update was a result of the taxpayer filing his * * * tax return as stated notice of deficiency), the 90-day section of Southwest District of the Internal Revenue Service received a copy of this AIMS update. Upon receiving the update, a 90-day section clerk pulled the taxpayer's case file and forwarded it to a "suspense employee." Generally, if a notice of deficiency is returned undeliverable and then a new address is received by the Service via an AIMS update, it is the suspense employee's responsibility to send a courtesy copy of the notice of deficiency to the taxpayer at this new address. Here, as a result of the high volume of information flooding the Service during * * * and due to understaffing, a copy of the original notice of deficiency was not ready for remailing to the taxpayer at the "Y" address until * * *.

[14] On * * *, the Commissioner remailed a copy of the original notice of deficiency (by certified mail) to the taxpayer at the "Y" address. The remailed notice was dated "* * *," a date beyond the three-year period for assessment. In addition, this remailed notice contained no admonition that the 90-day period for filing a petition had commenced on * * *, as a result of the first mailing of the original notice of deficiency. To the contrary, the remailed notice, dated * * *, contained the standard form language indicating that the taxpayer had 90 days from the date of the notice (i.e., * * *) from which to file a petition with the Tax Court to contest the Commissioner's deficiency determination. The redated and remailed copy of the original notice of deficiency did state, however, that it was a "duplicate original."

[15] To date, the taxpayer has not filed a petition from either the original notice of deficiency dated * * *, or the remailed copy of the original notice of deficiency dated * * *.

2. Whether the IRS should assess the tax deficiency per the original notice of deficiency dated * * * if the taxpayer fails to file a petition with the Tax Court within 90 days from the date of the original notice of deficiency.

[17] The Tax Court's jurisdiction to redetermine a deficiency depends upon the issuance of a valid notice of deficiency and a timely filed petition. T.C. Rule 13(a) and (c); Monge v. Commissioner, 93 T.C. 22, 27 (1989); Normac, Inc., v. Comissioner, 90 T.C. 142, 147 (1988).

[18] Section 6212(a) authorizes the Secretary or his delegate, upon determining that there is a deficiency in income tax, to send a notice of deficiency "to the taxpayer by certified mail or registered mail." A notice of deficiency is valid, regardless of actual receipt by the taxpayer, if it is mailed to the taxpayer's "last-known address." King v. Commissioner, 857 F.2d 676, 679 (9th Cir. 1988), aff'g 88 T.C. 1042 (1987). Neither I.R.C. section 6212 nor the regulations promulgated thereunder defines what constitutes a taxpayer's "last-known address."

[19] Generally, a taxpayer's last-known address is the address shown on his/her most recently filed and properly processed return, absent clear and concise notice of a different address. Abeles v. Commissioner, 91 T.C. 1019, 1035 (1988); Alta Sierra Vista, Inc., v. Commissioner, 62 T.C. 367, 374 (1974), aff'd without published opinion, 538 F.2d 334 (9th Cir. 1976). The focus is on what the Commissioner knew or should have known at the time the notice of deficiency was mailed. E.g., United States v. Ahrens, 530 F.2d 781 (8th Cir. 1976); Looper v. Commissioner, 73 T.C. 690, 696 (1980).

[20] The taxpayer has the obligation in the first instance to give the IRS "clear and concise notification" of an address change. Crum v. Commissioner, 635 F.2d 895, 898 (D.C. Cir. 1980); Alta Sierra Vista, Inc., v. Commissioner, 62 T.C. 367, 374, aff'd, 538 F.2d 334 (9th Cir. 1976).

[21] At the time the notice of deficiency was issued, the taxpayer's * * * return was his most recently filed return. On that return, he reported "X" as his address. There is nothing suggesting that the taxpayer gave the IRS clear and concise notification of a different address before the date on which the Commissioner mailed the original notice of deficiency (i.e., before * * *). Therefore, the original notice appears properly issued to the taxpayer at his last-known address.

REASONABLE DILIGENCE -- UNDELIVERABLE NOTICE OF DEFICIENCY

[22] The IRS has an obligation to exercise due diligence and reasonable care in ascertaining a taxpayer's last-known address if it becomes aware of an address change before mailing a deficiency notice to a taxpayer's last known address. Monge v. Commissioner, 93 T.C. 22, 33-34 (1989). In Monge, the taxpayers argued that respondent failed to exercise reasonable care and due diligence after the notice of deficiency was returned by the U.S. Postal Service. The Court responded: "this obligation arises only if respondent becomes aware of an address change prior to mailing the deficiency notice to the taxpayer's last known address." Id. at 17. Indeed, nothing in I.R.C. section 6212(b) suggests that the IRS is obligated to take additional steps to effectuate delivery if the notice is returned (undeliverable). A notice mailed to the last known address is sufficient even if it is never received. King v. Commissioner, 857 F.2d 676, 681 (9th Cir. 1988), aff'g 88 T.C. 1042 (1987).

[23] In Tucker v. Commissioner, T.C. Memo. 1989-408, the Tax Court held that where the IRS had a taxpayer's address from a tax return and had no notice or knowledge of taxpayer's new address before it mailed the notice of deficiency, the notice was properly mailed to taxpayer's last-known address and the IRS did not have to take any additional steps to determine taxpayer's new address. Additionally, where the Service sent notices of deficiency to the address shown on taxpayer's returns, even though the mailings were returned as unclaimed or showing that the taxpayer's post office box had been closed, the IRS was not required to check other sources to determine the taxpayer's correct address. Weldon v. United States, 79 AFTR2d 97-967 (D.C.N.C. 1997).

[24] On * * *, the Commissioner received information from the taxpayer's * * * return that the taxpayer's address had changed from "X" to "Y." This information was clearly received after the issuance of the original notice of deficiency. Thus, it appears as though the Service's issuance of its notice of deficiency to the "X" address was proper. If the taxpayer wished to have the notice of deficiency issued to the "Y" address, it was his responsibility to give the IRS clear and concise notification of this desire prior to the issuance of the notice of deficiency. See Eschweiler v. United States, 877 F.2d 634 (7th Cir. 1989), rev'g & rem'g 696 F. Supp. 326 (D.C. Ill. 1988)

[25] However, one could argue that the Service had notification of the taxpayer's address change in sufficient time to "re-issue', the original notice of deficiency to the "Y" address within the three year period prescribed by I.R.C. section 6501, i.e., prior to * * *. That is, as a result of the AIMS update, the Service had some sort of obligation to effectuate notice to the taxpayer at the "Y" address within the three-year period of limitations. In response to that argument, we maintain that in addition to the discussion supra, indicating that respondent has no obligation to take additional steps in ascertaining the taxpayer's address even if the notice of deficiency is returned undeliverable, the Service is entitled to a reasonable amount of processing time before a "new" address is deemed "available" to the Service's agents. See e.g., Ward v. Commissioner, 92 T.C. 949, 955 (1989); Abeles, 91 T.C. at 1030.

[26] In Rose v. Commissioner, T.C. Memo. 1992-739, the Court held that a deficiency notice was valid even though it was mailed 46 days after the taxpayer had filed a tax return which reflected her new address. Similarly, in Snow v. Commissioner, T.C. Memo. 1996-457, a deficiency notice mailed 34 days after the taxpayers had filed a return which showed their new address was valid where the IRS established that the return was processed after the deficiency notice was sent but within the guidelines for properly processed returns.

[27] Here, the AIMS update indicating that the taxpayer's address had changed first became available to the 90-day section in early- * * * of * * *. The notice of deficiency was remailed on * * *. Because of the abnormally high volume of information that inundates the IRS during April (i.e., tax filing season), this office maintains that under any standard of reasonableness, it is not reasonable to assume that the Service could have updated its records and remailed the original notice of deficiency any quicker than it did in this case.

REMAILING OF THE ORIGINAL NOTICE OF DEFICIENCY

[28] The IRS cannot oust the jurisdiction of the Tax Court by withdrawing its notice of deficiency. However, with the consent of the taxpayer, the IRS may rescind any deficiency notice it has mailed to the taxpayer. If the notice is withdrawn, it is treated as though it was never issued. Thus, the taxpayer cannot petition the Tax Court to decide the issue raised by the rescinded notice. Any notice that is rescinded with the taxpayer's consent is not treated as a deficiency notice for purposes of restrictions on issuing further deficiency letters. I.R.C. section 6212(d). Here, nothing indicates that either the Service or the taxpayer consented to a rescission of the original notice of deficiency. See Hesse v. Commissioner, T.C. Memo. 1997-333.

[29] However, in Eppler v .Commissioner, 188 F.2d 95 (7th Cir. 1951), the Service mailed the taxpayer a notice of deficiency by certified mail to an improper address. When the notice was returned as undeliverable, the Commissioner sent it again, by certified mail, to the proper address. The Court of Appeals for the Seventh Circuit found that by reissuing the notice of deficiency by certified mail, the Commissioner in effect withdrew or abandoned the first notice of deficiency and started a new 90 day period in which the taxpayer could petition the Tax Court. The Seventh Circuit reasoned that the taxpayer was given no notice of the first mailing and was therefore misled into believing that he had 90 days from the second mailing in which to file his Tax Court appeal. Thus, the second notice was the only valid existing notice.

[30] Additionally, both the Ninth Circuit Court of Appeals and the Tax Court have held that if a 90-day letter is sent to an improper address and later returned by the post office and then remailed to the correct address, the validity of the remailed 90-day letter depends upon whether the second mailing was timely. Thus, improperly addressed timely letters, later untimely remailed to the correct address, are invalid. See Welch v. Schweitzer, 106 F.2d 885 (9th Cir. 1939); Reddock v. Commissioner, 72 T.C. 21 (1979).

[31] In this case, the Commissioner initially sent the original notice of deficiency to the "X" address, an address that we believe was the taxpayer's last-known address. After that, the Commissioner redated and remailed a copy of the original notice of deficiency to the "Y" address. We believe that because the first notice was properly sent, it is the notice from which the taxpayer had 90 days with which to file a petition. Additionally, the fact that the Service redated the remailed copy of the original notice should be insufficient to declare that the taxpayer had 90 days from the date of the remailing within which to file a petition with the Court. The Court has held that with respect to determining the proper time within which to file a petition, "it seems best not to make taxpayers dependent on the efficiency of the IRS [in dating the notice of deficiency]." See Traxler v. Commissioner, 61 T.C. 97, 99 (1973).

[32] Nevertheless, this office recognizes the potential for problems. We anticipate a situation where the taxpayer will file a petition from the redated and remailed copy of the original notice of deficiency and argue that according to the notice he/she had 90 days from the date of the notice in which to file a petition. In this situation, the Service may be required to move to dismiss the petition either for being late filed (from the date of the original notice of deficiency) or because the redated and remailed copy of the original notice of deficiency was invalid since it was issued beyond the three-year period of limitations.

[34] Additionally, after the original notice was returned undeliverable, the Service was under no obligation to take additional steps to ascertain a new address for the taxpayer. However, even if, arguendo, the Service was under an obligation of reasonable diligence to ascertain a new address after the notice was returned undeliverable, that standard has been met in this case.

[35] Since there is no case law specifically addressing the issue posited by this request and because of the pervasiveness of this problem, we request your assistance on the issue of whether the remailed and redated copy of the original notice of deficiency effectively invalidated the original notice of deficiency.

[36] Please coordinate this request with National Office Attorney Blaise G. Dusenberry since she has provided assistance and advice in this case. Should you have any questions or need additional information, please contact Attorney Richard A. Rappazzo of this office at (602) 207-8061.