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What Happens After Boechler – Part 4: The IRS Argues That Equitable Tolling Would Not Apply in Deficiency Cases

Posted on Apr. 29, 2022

As discussed in the prior three posts of this series, the Supreme Court decision in Boechler clearly rejected the Tax Court’s position set out in the portion of its opinion in Guralnik v. Commissioner, 146 T.C. 230 (2016) that held the time period for filing a petition in the Tax Court in a Collection Due Process (CDP) case is jurisdictional. Petitioners who file a late Tax Court petition in a CDP case, joining petitioners in whistleblower cases and passport cases, will no longer find themselves tossed from the court automatically based on the date of court filing, but still face significant hurdles. Petitioners seeking relief in the Tax Court outside of the three types of cases where decisions have removed the time period as a jurisdictional barrier still have some work to do in persuading the Tax Court as to how far the Boechler opinion applies. Today’s post, part 4 in a four part series looking at the impact of Boechler, discusses the Supreme Court’s approach to the application of equitable tolling, including what CDP petitioners must do to overcome the hurdle of equitable tolling and the application of equitable tolling to deficiency proceedings once the courts determine the time for filing no longer provides a barrier.

The Tax Clinic at the Legal Services Center of Harvard Law School wrote its entire amicus brief in the Boechler case on the equitable tolling issue. It did so because of the importance that the Supreme Court determine not only that the time for filing a petition pursuant to IRC 6330 does not create a jurisdictional barrier but also that petitioners could demonstrate through equitable factors the right to have the merits of their case heard by the Tax Court. The IRS argued that even if the statute did not create a jurisdictional barrier petitioners should nonetheless still not have the opportunity to come into Tax Court because equitable tolling should not apply to a tax case. The IRS relied on the Supreme Court’s decision in United States v. Brockamp, 519 U.S. 347 (1997). The IRS has cited to Brockamp in every case leading up to and including Boechler, essentially arguing that it created a special exception for tax cases making equitable tolling inapplicable. The Supreme Court soundly rejected this argument.

The Supreme Court started the equitable tolling section of the opinion with a broad statement about the general applicability of equitable tolling:

Equitable tolling is a traditional feature of American jurisprudence and a background principle against which Congress drafts limitations periods. Lozano, 572 U. S., at 10–11. Because we do not understand Con­gress to alter that backdrop lightly, nonjurisdictional limi­tations periods are presumptively subject to equitable toll­ing. Irwin v. Department of Veterans Affairs, 498 U. S. 89, 95–96 (1990).

In a footnote it took a mild swipe at a passing argument by the IRS that equitable tolling only applies in Article III courts, noting that it had already applied equitable tolling to non-Article III courts and citing, inter alia, to its decision in favor of the IRS in Young v. United States, 535 U.S. 43, 47 (2002) in which it, at the request of the IRS, granted equitable tolling to determine that the IRS could have a priority claim in a bankruptcy case. It’s hard to imagine how the IRS could even make a passing argument on this issue given that it sought, and received, equitable tolling in a non-Article III court just two decades ago.

Applying the general principle of equitable tolling to the CDP statute the Supreme Court said:

We see nothing to rebut the presumption here. Section 6330(d)(1) does not expressly prohibit equitable tolling, and its short, 30-day time limit is directed at the taxpayer, not the court. Cf. id., at 94–96 (holding that a statutory time limit with the same characteristics is subject to equitable tolling). The deadline also appears in a section of the Tax Code that is “‘“unusually protective”’” of taxpayers and a scheme in which “‘laymen, unassisted by trained lawyers,’” often “‘initiate the process.’” Auburn, 568 U. S., at 160. This context does nothing to rebut the presumption that nonjurisdictional deadlines can be equitably tolled.

Count on the IRS arguing that the “unusually protective” aspect of CDP prevents equitable tolling from applying in deficiency cases. As I discussed in the first post of this series, however, CDP should not be viewed as a unique provision and the same reasons that equitable tolling applies in a CDP case should also apply to deficiency cases.

The Court spent the next couple paragraphs explaining why Brockamp does not apply to CDP cases. For the same reasons discussed in Boechler, Brockamp should not apply in deficiency cases. Even though far more deficiency cases are filed in Tax Court than CDP cases, the total number of cases bears no comparison to the number of refund claims at issue in Brockamp. One can only hope that this explanation resonates with the IRS, and it will refrain from citing Brockamp every time someone wants equitable tolling. We will soon find out.

The Court then addressed the IRS’s final argument regarding equitable tolling – that creating uncertainty in the timing of the collection injunction of IRC 6330(d)(1) will cause big problems. Here the Court states:

The Commissioner protests that if equitable tolling is available, the IRS will not know whether it can proceed with a collection action after §6330(d)(1)’s deadline passes. The Commissioner acknowledges that the deadline is al­ready subject to tolling provisions found elsewhere in the Tax Code—for example, tolling is available to taxpayers lo­cated in a combat zone or disaster area. Tr. of Oral Arg.37–40. But he says that the IRS can easily account for these contingencies because it continuously monitors whether any taxpayer is in a combat zone or disaster area. Ibid. Tolling the §6330(d)(1) deadline outside these circum­stances, the Commissioner insists, would create much more uncertainty.

In its brief to the Supreme Court the Solicitor General cited unsupported data not in the record of the case about numbers of cases and IRS internal processes. I do not understand how that is allowed. This is not information the Supreme Court could take judicial notice of. In reviewing the information provided, I did not understand how the IRS arrived at the information the Solicitor General cited to the Supreme Court. The information did not seem correct but it’s hard to argue against unsupported information that just magically appears.

Aside from the fact that the Solicitor General feels it is appropriate to raise new information not in the record and not publicly available in its brief, which undermines the whole point of having a record, the data was, in fact, wrong. It later sent a letter to the Supreme Court walking back the information in its brief and stating that the data was wrong but offering new unsupported data. I found this offensive to the system. The Court did not comment on it. Perhaps it’s normal for the Solicitor General and the agency to toss non-public data into a Supreme Court brief, but I cannot understand how that is appropriate.

The IRS has to deal with uncertainty that a Tax Court case has begun and the collection injunction has come into existence all the time. No better example exists than what has happened at the Tax Court during the pandemic. By failing to notify the IRS of the filing of a Tax Court petition for a few months, the Tax Court set the IRS off into collection mode. This has created problems for taxpayers and for the IRS but they are problems that get worked out and this has happened with thousands of cases. Arguing that allowing the taxpayer to raise equitable tolling because it will create a problem when the problem already exists and gets fixed on a regular basis should not serve as a reason for preventing equitable tolling. That solution is anything but equitable for individuals who miss the deadline for a good reason.

In responding to the IRS’s equitable tolling statute of limitations and levy authority uncertainty argument, the Supreme Court avoided discussing the two statutory extensions that the IRS said it could easily deal with (i.e., the IRC 7508 combat zone and IRC 7508A disaster declaration extensions) and simply focused on the more common statutory extension provided in IRC 7502, the timely-mailing-is-timely-filing extension. The Court wrote:

We are not convinced that the possibility of equitable tolling for the relatively small number of petitions at issue in this case will appreciably add to the uncertainty already present in the process. To take the most obvious example, petitions for review are considered filed when mailed. 26 U. S. C. §7502(a)(1). The 30-day deadline thus may come and go before a petition “filed” within that time comes to the IRS’s attention. Presumably, the IRS does not monitor when petitions for review are mailed. So it is not as if the IRS can confidently rush to seize property on day 31 anyway.

Thus, one would expect that the equitable tolling statute of limitations and levy authority uncertainty argument will be rejected as well in a future court case involving equitable tolling of the IRC 6213(a) deficiency petition filing deadline.

The Supreme Court’s decision sends the Boechler law firm back to the Tax Court which will now decide if the late petition meets the equitable tolling tests. Because the Tax Court has previously determined all of its deadlines for hearing cases are jurisdictional, it has not developed a body of law on equitable tolling. Undoubtedly, it will now look to equitable tolling jurisprudence developed in other jurisdictions that did not bar its consideration. What should we expect?

As the Tax Clinic’s brief points out, courts have generally developed three bases for applying equitable tolling: 1) actively misleading taxpayers about the filing deadline as the IRS did in Rubel, Matuszak and Nauflett; 2) extraordinary circumstances which prevent taxpayers from timely filing as occurred in Castillo and Atuke; and 3) timely filing petitions in the wrong forum as regularly happens and as we discussed here.

One of the first cases that the Tax Court may hear is the Castillo case which has been held by the Second Circuit awaiting the decision in Boechler. The Fordham Tax Clinic represents Ms. Castillo who has yet to receive her CDP notice of determination even though it was mailed by the IRS to her last known address more than two years ago. Postal records show it has never been delivered. She filed her CDP petition late after finding out about the CDP notice of determination through an informal channel long after the deadline for filing passed. Castillo should provide the Tax Court with a slam dunk opportunity to grant equitable tolling and begin to develop its jurisprudence on this issue. Undoubtedly petitioners will seek the benefit of equitable tolling without the favorable facts present in the Castillo case and the Tax Court will have the opportunity over the next few years to set the standards it will apply in letting in the handful of cases with deserving facts. If you are bringing an equitable tolling case to the Tax Court look at the factors other courts have developed and bring deserving cases to the Court with well-developed arguments.

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