On June 28, 2022, I did a post summarizing the status of post-Boechler litigation over whether the IRC 6213(a) deficiency petition filing deadline is still jurisdictional and not subject to equitable tolling after Boechler. There have been a few developments in the two cases discussed in the post, and I wanted to update you and provide links to recent filings. The short update is that (1) all briefing has been completed in the Hallmark case before Judge Gustafson, and he is presumably already actively working on a Tax Court opinion, and (2) the Culp case in the Third Circuit survived the government’s motion for summary affirmance, and the Culps have filed their opening brief. The Third Circuit also denied the government’s motion to strike the merits amicus brief of The Center for Taxpayer Rights that had been filed shortly after the government moved for summary affirmance.
I also wanted to do an initial post on what has been happening after Boechler with CDP cases that present the questions resolved by the Supreme Court. The short update here is that the courts have not yet issued any rulings in CDP cases about whether equitable tolling applied on the facts of a particular case, and I don’t expect we will see the first such ruling until 2023.
Because of the length of the update, I am breaking it into two parts. Part 1 discusses the deficiency litigation. Part 2 will discuss the CDP litigation.
In my June 28 post, I wrote that, a few days after Boechler was decided, a taxpayer named Hallmark Research Collective had moved to vacate the Tax Court’s dismissal for lack of jurisdiction of its one-day-late deficiency petition. Even before the Supreme Court decided Boechler, Hallmark had argued that the deficiency filing deadline is no longer jurisdictional and is subject to equitable tolling. Hallmark is seeking COVID-related equitable tolling.
The motion to vacate was assigned to Judge Gustafson, and the Tax Court promptly stopped issuing orders of dismissals for lack of jurisdiction in all other cases where the IRS moved to dismiss a deficiency case for lack of jurisdiction, pending the ruling in Hallmark. In a post Keith did on Hallmark on May 3, 2022, Keith provided links to the taxpayer’s motion to vacate and its 51-page memorandum of law that accompanied the motion. In my July 28 post, I provided a link to the IRS’ 18-page response objecting to granting the motion. On July 15, 2022, the taxpayer filed a 32-page reply to the IRS’ response, which you can find here.
As to why the reply was so long, the main reason is that the taxpayer chose to expand upon its argument that the filing deadline in IRC 6213(a) is not jurisdictional by presenting a more detailed analysis of how the Board of Tax Appeals acquired its deficiency jurisdiction in 1924 and 1926.
The original Board filing deadline for income tax deficiency petitions was in the second sentence of sec. 274(a) of the Revenue Act of 1924. The taxpayer argues that the actual jurisdictional grant to the Board to hear deficiency cases was at sec. 900(e) of that act, though neither provision used the word “jurisdiction”.
In the Revenue Act of 1926, sec. 274(a)’s second sentence was amended to prohibit Sundays from being the end of the filing deadline, but Congress did not, when redrafting the sentence, include the word “jurisdiction”. By contrast, Congress first used the word “jurisdiction” in multiple provision of that act (which made the Board more court-like and provided for Circuit Court direct review of Board rulings). Congress also enacted in that act the predecessors of IRC 6214(a) and (b) and 6512(b)(2), in each case using the word “jurisdiction”.
Hallmark’s reply also contains several pages of quotes from opinions by Tax Court judges (most currently sitting) calling IRC 6214(a) the source of the Tax Court’s deficiency jurisdiction. In its response, the IRS had simply ignored the argument that IRC 6214(a) is the source of the Tax Court’s deficiency jurisdiction, not IRC 6213(a). The IRS argues that IRC 6213(a) is the source of the Tax Court’s deficiency jurisdiction, except in cases where a larger deficiency is sought than is set out in the notice of deficiency, in which case IRC 6214(a) is merely the source of the Tax Court’s jurisdiction for the excess.
Hallmark is now fully briefed. My expectation is that Judge Gustafson will be drafting an opinion that the Chief Judge will send to the full court for review. I would love to be proved wrong and see an earlier opinion, but my guess is that the opinion of the full court in Hallmark will not come out before Christmas, even though hundreds of motions to dismiss are probably already currently sitting in limbo pending the opinion and more will be filed in the interim.
In my June 28 post, I wrote about a pro se appeal of a Tax Court dismissal of a late-filed deficiency case, Culp, that is before the Third Circuit. The Culps argue that they filed a late Tax Court petition both (1) because before they filed they had never received the original or a copy of the notice of deficiency and (2) because TAS, purporting to help them fight levies, bamboozled them into not going to court. TAS never told them that a notice of deficiency had been sent. The Culps seek equitable tolling and a refund of monies taken by (1) levies on their Social Security benefits and (2) an offset of a later-year overpayment against the deficiency.
In my post, I mentioned the DOJ’s motion for summary affirmance. I also mentioned and provided a link to the merits amicus brief that The Center for Taxpayer Rights filed in the case a few days after the DOJ motion for summary affirmance, but before the Third Circuit had ruled on the motion. The DOJ had also moved to strike the amicus brief as premature. On July 6, 2022, a 3-judge motions panel of the Third Circuit denied both DOJ motions, so the case proceeds to regular briefing.
On July 29, 2022, the Culps filed their opening brief for the appellants, which can be found here. Although the Culps are retired lawyers in their 70s, their specialty was employment discrimination law. Their pro se brief may disappoint some of us who are tax procedure specialists.
The DOJ’s brief for appellee is due in late August or early September. (I am not sure the exact date because the Culps filed their brief a few days early, and I don’t know if that impacts the date that the DOJ’s brief is due.) However, I anticipate that the DOJ will, as usual, ask for and be granted a 21- or 30-day extension to file its brief.
I expect oral argument in Culp will occur in the Third Circuit early next year and an opinion will be issued in the spring. I expect that the Tax Court’s ruling in Hallmark (1) will precede the Third Circuit’s ruling in Culp and (2) will be brought to the attention of the Third Circuit before it rules.
Other Deficiency Cases
Of course, once an opinion in Hallmark is issued, the Tax Court will likely promptly issue hundreds of similarly-ruling orders in cases in which either the IRS had moved to dismiss a late-filed deficiency petition for lack of jurisdiction or the Tax Court had issued an order to show cause why the deficiency case should not be dismissed for lack of jurisdiction on account of late filing.
If the Tax Court in Hallmark rules against the taxpayer, those hundreds of orders will be final and immediately appealable to nearly every Circuit Court of Appeals, except the Federal Circuit. However, I don’t expect many taxpayers to appeal such dismissals. It would only make sense to appeal such a dismissal if the taxpayer thought he or she had good ground for equitable tolling. And, I suspect that only about 5% of such dismissals would involve even a plausible argument for equitable tolling.
Hallmark is appealable to the Ninth Circuit, and I expect that it would be the first case to be appealed. I would be surprised if more than 5-8 deficiency cases got appealed in 2023 to Circuits other than the Ninth Circuit. Over time, though, new orders of dismissal in other case would be issued. If any Circuit disagreed with another Circuit in a post-Boechler ruling, I would anticipate a new Supreme Court opinion to resolve the issue, unless Congress (hopefully) stepped in to resolve the dispute. I do not look forward to so much future appellate litigation.
If the Tax Court in Hallmark holds that the deficiency filing deadline is no longer jurisdictional and is subject to equitable tolling, the court will deny all of the held-up IRS motions to dismiss and discharge any held-up orders to show cause. Such rulings allowing the cases to go forward would be interlocutory rulings, not ordinarily subject to immediate review.
IRC 7482(a)(2)(A) states:
When any judge of the Tax Court includes in an interlocutory order a statement that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation, the United States Court of Appeals may, in its discretion, permit an appeal to be taken from such order, if application is made to it within 10 days after the entry of such order. Neither the application for nor the granting of an appeal under this paragraph shall stay proceedings in the Tax Court, unless a stay is ordered by a judge of the Tax Court or by the United States Court of Appeals which has jurisdiction of the appeal or a judge of that court.
Tax Court Rule 193(a) provides, in part:
For the purpose of seeking the review of any order of the Tax Court which is not otherwise immediately appealable, a party may request the Court to include, or the Court on its own motion may include, a statement in such order that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation. Any such request by a party shall be made by motion which shall set forth with particularity the grounds therefor and note whether there is any objection thereto.
Perhaps being over-confident that it will win the Hallmark case, the IRS has not yet filed any motion under Rule 193(a). It is unclear whether a pro-taxpayer ruling in Hallmark will, without such a motion, contain a statement “that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation.”
It is my hope that, if the Tax Court rules that IRC 6213(a)’s deficiency filing deadline is not jurisdictional and is subject to equitable tolling, both the IRS and DOJ would accept that ruling and would argue in support of that ruling in any appellate court that, on its own, decides to consider the issue. Perhaps my hope is naïve, but one can always hope.
I am aware of only one other late-filed deficiency case in which the taxpayer is already arguing that the IRC 6213(a) filing deadline is not jurisdictional and is subject to equitable tolling, Gruis v. Commissioner, Tax Court Docket No. 11951-22. I mentioned Gruis in my June 28 post. On May 27, 2022, a lawyer for an LITC who is aware of the Boechler opinion late-filed the petition, which asked for equitable tolling. The case involves HOH status and disallowed EITC and CTC. It will be appealable to the Eighth Circuit – the same Circuit that got the law wrong on CDP in Boechler. As an update, surprisingly, on July 15, 2022, the IRS filed an answer in the case. The IRS has not (yet) moved to dismiss for lack of jurisdiction. I don’t know where this case might be going. It may get resolved a different way, though, since the taxpayer also argues that the IRS sent the notice of deficiency to an address that was no longer her last known address (hence, she did not receive the notice in time to timely petition).