The Tax Court and every Circuit court has long held the deadline to file a Tax Court deficiency petition at section 6213(a) to be a jurisdictional condition of the suit. Of course, jurisdictional deadlines are never subject to equitable tolling, waiver, estoppel, or forfeiture. But, nearly every court opinion so holding had been issued before the Supreme Court changed the rules in 2004 making filing deadlines now almost never jurisdictional.
In 2016, a panel of the Seventh Circuit, sua sponte, at oral argument, questioned whether the section 6213(a) filing deadline is still jurisdictional under the recent Supreme Court case law. In Tilden v. Commissioner, 846 F.3d 882 (7th Cir. 2017), on which we blogged here, in spite of the Tax Court’s dismissing the petition for lack of jurisdiction as untimely, on appeal, the IRS and taxpayer both agreed that the petition was timely under section 7502. The panel wondered why the IRS was not waiving any untimeliness argument if the filing deadline isn’t still jurisdictional. However, after some post-argument supplemental briefing on the issue of whether the filing deadline is still jurisdictional, the panel ruled that it is. Id. at 886-887. (The panel went on to rule the filing timely.)
No other Circuit had since addressed in a published opinion whether the deficiency filing deadline is still jurisdictional under recent Supreme Court case law. (Though, in an unpublished last known address case, where the parties did not brief the issue, the Third Circuit last year stated that the filing deadline still jurisdictional under recent Supreme Court case law. Garrett v. Commissioner, 798 Fed. Appx. 731, 733.) That changed on June 18, 2020, when the Ninth Circuit issued its opinion in Organic Cannabis Foundation v. Commissioner, ___________, in which it affirmed the Tax Court’s dismissal of two deficiency petitions of California marijuana dispensaries. The Ninth Circuit, aligning with the Seventh Circuit in Tilden, held that untimely petitions should be dismissed for lack of jurisdiction, even under current Supreme Court case law.
As will be discussed below, the fact pattern in Organic Cannabis paralleled that in the CDP case of Guralnik v. Commissioner, 146 T.C.230 (2016) – an opinion that was never appealed. Organic Cannabis adopts and expands upon the Tax Court’s additional analysis in Guralnik of what consequences ensue when the Tax Court Clerk’s Office is inaccessible for filing and what makes the Clerk’s Office inaccessible.
Organic Cannabis Facts
Both Organic Cannabis Foundation LLC and its sister company, Northern California Small Business Assistants, Inc., ran California marijuana dispensaries. On the same date, the IRS issued separate notices of deficiency to the two taxpayers disallowing, under section 280E, all their deductions. (For a Tax Court opinion involving the latter company’s taxes for a different tax year and where the application of section 280E was upheld, see Northern California Small Business Assistants, Inc. v. Commissioner, 153 T.C. 65 (2019).)
A single law firm represented both taxpayers. That law firm sent the petitions jointly in a single envelope by FedEx on the day before the petitions were due. Like the taxpayer in Guralnik, the firm used the FedEx First Overnight Service, which, at the time (as opposed to a few weeks later), was not listed by the IRS as an approved private delivery service under section 7502(f). First Overnight differs from the previously-approved Standard Overnight and Priority Overnight FedEx services only in promising the earliest possible delivery. Thus, even if First Overnight was not an approved service, the petitions still should have gotten to the Tax Court Clerk’s Office on the last date to file.
But, there was a problem. For some reason, the FedEx driver didn’t deliver the envelope on the last date to file, but delivered it a day later. A secretary in the law firm’s office, concerned that she had not received delivery confirmation from FedEx, called FedEx and learned of the non-delivery mid-day on the last date to file. FedEx told her something like that the driver couldn’t get through to the Clerk’s Office because of construction or police activity nearby. Unwisely, the secretary did not think to mail out new petitions that afternoon or evening, say, by certified mail. There would have been no Ninth Circuit opinion had she done so.
The IRS filed answers in both cases. Neither answer raised any issue of untimely filing. About a year later, the IRS moved to dismiss both cases for lack of jurisdiction as having been late filed. When the taxpayers then went back to FedEx for the driver’s written explanation of what had gone wrong, FedEx told the taxpayers that it had deleted all delivery information, which it did not keep for that long a period.
Tax Court Orders
In responses to the motions to dismiss, the taxpayers argued that the petitions were timely filed because FedEx First Overnight should be deemed to be the same service as FedEx Standard Overnight or Priority Overnight, just with a faster delivery feature. In Guralnik, the Tax Court had rejected this very argument, and it did so in the two unpublished orders in which it dismissed the taxpayers’ petitions for lack of jurisdiction as being untimely, here and here.
The taxpayers also argued that the Clerk’s Office was not accessible at the time the FedEx driver arrived, citing Guralnik, so that the last date to file should be moved to the following day, making the petitions timely. In Guralnik, the last date to file turned out to be a day on which the Clerk’s Office was closed all day due to a snowstorm. The Guralnik court borrowed from FRCP 6 and held that when its Clerk’s Office is inaccessible, the last date to file is moved to the next day when the Clerk’s Office is open. In the two taxpayers’ cases, though, the Tax Court distinguished Guralnik as follows: “Unlike the snow emergency closing in Guralnik, here, the Court’s Clerk’s office was open during its normal business hours and was not inaccessible the entire day due to inclement weather, government closings, or other reasons.”
Finally, the taxpayers had contended that the notices of deficiency were not mailed to the taxpayer’s last known addresses, citing discrepancies in the address of one (omission of a P.O. Box, though the box number was shown as part of the 9-digit ZIP Code) and a wrong digit on the Form 3877 proving mailing of the other. The Tax Court said it need not determine whether the deficiency notices were sent to the last known addresses, since the taxpayers clearly got the notices 78 days before the filing date, which was enough to make the notices valid under Tax Court precedent, even if they were not sent to the last known addresses.
Ninth Circuit Holdings
On appeal, the taxpayers made the same arguments (except the taxpayers abandoned the Form 3877 argument). The taxpayers also added the argument that the filing deadline is no longer jurisdictional and is subject to forfeiture, waiver, and equitable tolling. The taxpayers argued that the IRS had waived or forfeited the right to complain about late filing by waiting too long to raise the issue – i.e., at a time when FedEx had deleted the driver’s notes concerning what had happened.
In the Ninth Circuit, the Harvard clinic filed amicus briefs supporting the taxpayers only in the arguments that the filing deadline is no longer jurisdictional and is subject to forfeiture, waiver, and equitable tolling.
The Ninth Circuit began its opinion stating, “This unhappy case presents a cautionary tale about the need for lawyers to ensure that they have done exactly what is statutorily required to invoke a court’s jurisdiction.” Slip op. at 4.
In its 28-page opinion (of which I give only a thumbnail sketch here), the Ninth Circuit first accepted the Tax Court’s Guralnik adoption of FRCP 6 – which the Ninth Circuit was probably compelled to do, since the Tax Court, under section 7453, is entitled to set up its own rules, and its rules (i.e., Rule 1) allow it to borrow FRCP rules in the absence of a Tax Court rule directly on point.
The Ninth Circuit acknowledged that case law under FRCP 6 did not limit the word “inaccessible” only to the situation where the Clerk’s Office was closed for the day – citing the inaccessibility holding of several appellate courts making clear that, even if a Clerk’s Office is technically open, it is still “inaccessible” if it would only be possible to access the office through “heroic” measures. See, e.g., U.S. Leather, Inc. v. H&W P’ship, 60 F.3d 222, 226 (5th Cir. 1995) (where “ice storm . . . temporarily knocks out an area’s power and telephone service and makes travelling dangerous, difficult or impossible,” clerk’s office, even though open, was rendered “inaccessible to those in the area near the courthouse”), abrogated on other grounds by Kontrick v. Ryan, 540 U.S. 443 (2004). The court held that,
for non-electronic filings (such as those at issue here), a clerk’s office is “inaccessible” on the “last day” of a filing period only if the office cannot practicably be accessed for delivery of documents during a sufficient period of time up to and including the point at which “the clerk’s office is scheduled to close.” Fed. R. Civ. P. 6(a)(3), (4)(B). Because, as the Tax Court noted, Appellants presented no evidence to show that the clerk’s office could not be accessed during the substantial remaining portion of the day after FedEx’s unsuccessful earlier delivery attempt, the extension in Rule 6(a)(3) did not apply.
Slip op. at 14-15.
Of course, it is hard to criticize the taxpayers for lack of proof on how long the obstruction to the Clerk’s Office lasted, since, by the time anyone asked about it, FedEx had no evidence of what happened in this case or to other drivers perhaps attempting to deliver envelopes to the Tax Court later in the day.
Next, agreeing with the Tax Court, the Ninth Circuit held that the FedEx First Overnight service was a different service from the other two approved FedEx services, so was not yet an approved delivery service under section 7502(f) on the date of its use.
As to Organic Cannabis’s complaint that its notice was not mailed to its last known address because the address was lacking “P.O. Box 5286”, the Ninth Circuit affirmed the Tax Court, but on different reasoning. The Tax Court held that actual receipt of the notice with 78 days left to file was good enough to make the notice valid, even if the notice might not have been mailed to the last known address. Apparently concerned because the taxpayer had pointed out that the Ninth Circuit had never held an incorrectly-addressed notice to be valid when the taxpayer did not timely file that Tax Court petition, the Ninth Circuit decided to hold that the notice was indeed sent to the taxpayer’s last known address. The panel observed that the first 5 digits of the 9-digit ZIP Code were not only the ZIP Code of the post office, but was only used for post office boxes at that office. The panel observed that the last 4 digits of the 9-digit ZIP Code showed the P.O. Box number. Thus, in this case, the ZIP Code alone could constitute the last known address. Query if this means that any 9-digit ZIP Code that only relates to a single location (e.g., an individual’s apartment number) alone can constitute a last known address if the street address, city, and state are all omitted from the IRS address used?
Finally, the Ninth Circuit faced the question of whether the filing deadline was still jurisdictional. The DOJ asked the court not to rule on the issue, since it had not been properly raised below. However, the Ninth Circuit exercised its discretion to consider this issue, since it was purely a question of law, “[a]nd the issue has been well briefed by both sides, including with the helpful participation of amicus curiae from a law school clinic.” Slip op. at 19 n.6.
Readers of PT know from too numerous posts that current Supreme Court case law begins with the general rule that filing deadlines are no longer jurisdictional. The two exceptions to the rule are (1) if Congress made a clear statement in the statute that it wanted the filing deadline to be jurisdictional, and (2) a stare decisis exception to a long line of Supreme Court case law holding the deadline to be jurisdictional.
The Ninth Circuit found three reasons why the deadline should be still treated as jurisdictional.
First, in the fourth sentence of section 6213(a), the Tax Court is also awarded injunctive jurisdiction to enforce a stay on collection after a notice of deficiency is issued, but only in the case of a petition that is “timely filed”. The Ninth Circuit apparently assumed that a timely filing can’t occur through equitable tolling, forfeiture, or waiver, so said that, if the injunctive jurisdiction was one limited to timely filed petitions, then the regular deficiency jurisdiction must also be limited to timely filed petitions. (I think that a non sequitur, but who am I?) The Ninth Circuit adopted the reasoning of Tilden that the appearance of the word “jurisdiction” in the fourth sentence in section 6213(a) (giving the Tax Court injunctive jurisdiction only in the case of timely filed petitions) meant that the filing deadline in the first sentence – a sentence that does not contain the word “jurisdiction” – must also be jurisdictional. The Ninth Circuit also argued that accepting the taxpayers’ arguments would cause discontinuities in the periods in which the IRS was prohibited from assessment if the Tax Court could later accept a petition under equitable tolling. We addressed this issue in the Harvard clinic amicus brief, arguing that there was no discontinuity, since the word “timely filed” must necessarily include filings made under statutory extensions (such as those allowed by sections 7502, 7508, and 7508A), and we saw no reason why equitable exceptions could not also be considered in whether a Tax Court petition had been timely filed.
Second, the Ninth Circuit raised a problem with section 7459(d) if the filing deadline is not jurisdictional. Tilden had not discussed this section. Section 7459(d) provides that dismissals from the Tax Court in deficiency cases uphold the deficiency on the merits, except in cases where the dismissal is for lack of jurisdiction. The Ninth Circuit noted the long-standing belief of the courts (which it imputed to Congress) that the jurisdictional dismissal exception allowed a person who had filed a late Tax Court petition to later pay and sue for a refund, without having a res judicata issue of a merits finding from the prior Tax Court dismissal. The Ninth Circuit did not want to undermine that judicial understanding, though I would note that the exception for jurisdictional dismissals was added by the Revenue Act of 1928, and Congress nowhere explained why the jurisdictional exception was being adopted. Dismissals can be for lack of jurisdiction on ground other than untimeliness – e.g., a petition (1) filed challenging the validity of the notice of deficiency, (2) filed by the wrong taxpayer, or (3) filed by the right taxpayer, but who lost corporate capacity or who filed during a bankruptcy stay.
Third, the Ninth Circuit noted the long-standing judicial interpretations of section 6213(a)’s filing deadline being jurisdictional. The Ninth Circuit wrote,
As noted earlier, the circuits have uniformly adopted a jurisdictional reading of § 6213(a) or its predecessor since at least 1928. See supra at 20. Congress presumptively “‘legislates against the backdrop of existing law,’” Parker Drilling Mgmt. Servs., Ltd. v. Newton, 139 S. Ct. 1881, 1890 (2019) (citation omitted), and despite multiple amendments to the Code (including two substantial overhauls in 1954 and 1986), Congress has never seen fit to disturb this long-settled understanding of § 6213(a). Cf. Fort Bend County v. Davis, 139 S. Ct. 1843, 1849 (2019) (“[T]he Court has stated it would treat a requirement as jurisdictional when a long line of Supreme Court decisions left undisturbed by Congress attached a jurisdictional label to the prescription.” (cleaned up)).
Slip op. at 25-26. In response, I would point out (as the Harvard clinic told the court) that the Supreme Court has never ruled one way or the other on whether the deficiency filing deadline is jurisdictional and has 7 times (most recently in the above quote from Fort Bend) stated that the stare decisis exception from the current treatment of claims processing rules (including filing deadlines) as not jurisdictional only applies to a long line of Supreme Court opinions. Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 173-174 (2010) (Ginsburg, J, concurring, joined by Stevens and Breyer, JJ.) (“[I]n Bowles and John R. Sand & Gravel Co. . . . we relied on longstanding decisions of this Court typing the relevant prescriptions ‘jurisdictional.’ Amicus cites well over 200 opinions that characterize § 411(a) as jurisdictional, but not one is from this Court. . . .”; emphasis in original; citations omitted). All the opinions on which the Ninth Circuit relies are opinions of lower courts. Sigh.
Finally, in prior posts, I have mentioned the CDP case dismissed for late filing for lack of jurisdiction that is before the Eighth Circuit, Boechler, P.C. v. Commissioner, Eighth Circuit Docket No. 19-2003. In that case, the parties are litigating whether the CDP Tax Court filing deadline at section 6330(d) is still jurisdictional and not subject to equitable tolling. Oral argument occurred in Boechler the day before the Ninth Circuit ruled in Organic Cannabis. The day Organic Cannabis was issued, the DOJ immediately brought the opinion to the attention of the Eighth Circuit through an FRAP 28(j) letter.