Because of the importance of the last known address in so many documents that the IRS mails, the rules surrounding the determination of the last known address have outsized significance. The mundane act of notifying the IRS of a new address takes on overriding importance when it becomes the difference between owing and not owing a large tax liability. Today’s post was brought to my attention and largely framed by Carl Smith.
In an unpublished opinion, the Fifth Circuit, in Williams v. Commissioner, dodged the issue of whether the applicable Revenue Procedure created to enhance the guidance in the regulation under IRC 6212 gives an automatic 45 days after a change of address notice is given to the IRS to reset the last known address. Williams brought a Collection Due Process (CDP) case arguing that he did not receive the Statutory Notice of Deficiency (SNOD) because he had moved. He argued that prior to the move he had properly (or at least sufficiently) advised the IRS of the move such that it should have used his new address rather than his old one in mailing him the SNOD. The failure to receive the SNOD could qualify him to litigate the merits of the underlying liability in the CDP case or, even better, it could cause the SNOD to be invalid which would cause the assessment against him to go away and, depending on the status of the statute of limitations, might cause him to completely win the case if the statute has now expired.
Mr. Williams produced a letter addressed to the National Office in which he informed the IRS of a change of address sent prior to the mailing of the SNOD. However, he has two problems: (1) he could show no proof that the letter was mailed, and (2) the National Office is not the proper place to send such a letter. Below is the entire opinion of the Fifth Circuit on the last known address decision (sans footnotes):
Whether a notice of deficiency is sent to a taxpayer’s last known address is a question of fact we review for clear error. If the IRS fails to properly mail a deficiency notice, any subsequent assessment or collection of the deficiency is invalid. Conversely, if the notice is properly mailed, 26 U.S.C. § 6212 does not require receipt of the notice for it to be valid. Code § 6212(b) provides that a notice of deficiency, “if mailed to the taxpayer at his last known address, shall be sufficient.” The phrase “last known address” is a term of art defined by Treasury Regulations as “the address that appears on the taxpayer’s most recently filed and properly processed Federal tax return, unless the [IRS] is given clear and concise notification of a different address.” The regulations in turn reference Revenue Procedure 90-18 or any subsequent procedures promulgated by the IRS as describing the proper procedure to inform it of a change of address. The IRS must also exercise reasonable diligence to determine the taxpayer’s last known address in light of all relevant circumstances. The proper inquiry for reasonable diligence examines the facts the IRS knew or should have known at the time it sent the notice.
The question before this court is whether Williams had delivered a “clear and concise” notification to the IRS prior to the November 12, 2014 Notice of Deficiency, indicating that he wished his last known address to be the Bedford P.O. Box. The Revenue Procedure in effect at the time provided that taxpayers could update their address (1) electronically through the IRS website, using Form 8822, Change of Address; (2) by written communication to the service center serving the old address; (3) by written communication in response to communications by an IRS agent; or (4) orally by informing an employee who has access to the Service Master File.
Officer West refused to consider the October 1, 2014 notification because it did not include proof of mailing. The Tax Court acknowledged that Williams must have sent some notification of change of address because the IRS mailed subsequent notices to the Bedford P.O. Box in 2015. However, the letter was not addressed to any of the departments of the IRS identified in the Revenue Procedure. Assuming Williams mailed the letter on October 1, that was only 43 days before the Notice of Deficiency, not the 45 days described by the Revenue Procedure.
In Ward v. Commissioner, we previously held that the IRS did not exercise reasonable diligence in determining the taxpayer’s last known address when it did not comply with the change-of-address notification mailed 15 days prior to the notice of deficiency. In that case, the IRS acknowledged receipt of the change-of-address notification and there was no doubt as to when it was received by the IRS. We agreed that the IRS is entitled to a reasonable time to process notifications of change of address from taxpayers but also held that the IRS did not exercise reasonable diligence in that case. That decision predated the regulations and Revenue Procedure on which the Commissioner relies, but we have subsequently applied the “reasonable diligence” requirement. Regardless, Ward is distinguishable because in this case, it is not clear when the IRS received Williams’s letter.
We need not decide whether the Commissioner is automatically entitled to 45 days to process a change-of-address notification based on its Revenue Procedure or whether the regulations and Revenue Procedure entitle the IRS to more time to process notifications. There is doubt as to when Williams mailed his clear and concise notice of change of address. Officer West did not act arbitrarily or capriciously when she found Williams’s evidence insufficient. Accordingly, the Tax Court did not err in affirming the IRS Office of Appeals’ decision and there is not sufficient evidence to overturn the Tax Court’s finding that Williams’s last known address had not changed by November 12, 2014.
In a twist on the normal situation in which a taxpayer seeks to put in evidence not contained in the administrative record, Williams also argued the Tax Court should not have taken evidence beyond the administrative record. This is the Robinette issue (although the court doesn’t cite Robinette). The Fifth Circuit declines to issue a ruling on that question because the administrative record alone contained enough, in its view, for the Tax Court to have ruled against the taxpayer.
The case presents an interesting issue regarding notice to the IRS and deference to the Revenue Procedure but the decision ultimately rests on the absence of information regarding the timing of the mailing of the change of address to the IRS and whether it was ever mailed. Although it did not turn on the place of mailing the address change to the IRS, that too would make a difference. The Fifth Circuit seems willing to consider facts that would support a conclusion the IRS had enough information at the time it sent the SNOD to require it to update Williams address; however, the court cannot get past the lack of information in the record regarding when the IRS found out. The Tax Court made a statement in Gregory v. Commissioner, 152 T.C. No. 7 (2019) that it will follow the regulation and the subsequent published subregulatory guidance on the last known address, as discussed in a post here. The Fifth Circuit does not signal that it will follow the subregulatory guidance; however, it does signal that the IRS needs fair notice and the taxpayer has the burden to prove that the IRS received fair notice of the change in address.