We have written many posts on jurisdictional issues in Tax Court and other courts. I will not link to them here but wanted to write a short post demonstrating one of the ways jurisdiction matters. Thanks to Carl Smith for bringing this case to my attention.
In the case of Carandang v. Commissioner, Dk. No. 19224-19S the petitioner filed a petition seeking innocent spouse relief. She reached an agreement with the IRS in the Tax Court case conceding the case and the parties filed a joint proposed stipulated decision. Having reached an agreement in the case, the parties filed with the Tax Court a Joint Proposed Stipulated Decision on May 18, 2020. You might expect that where the parties have reached an agreement in a case the Tax Court would sign and file the agreement.
Instead of accepting the agreement, the Tax Court issued a show cause order on May 19, 2020 asking the parties to explain why the Court has jurisdiction. The lawyers reviewing the case for the Chief Judge, who would sign the stipulated decision of a case not on an active calendar, found that the petition appears to have been filed a day late. On May 20, 2020, the IRS responded and provided an explanation of the Court’s basis for jurisdiction. On May 21, 2020, the Tax Court dismissed its order to show cause since the IRS now admits that it failed to send the notice of determination by certified mail. On May 22, the Tax Court entered the Stipulated Decision in the case it had first decline to enter. Very interesting to see docket entries five days in a row and the resolution of an issue so quickly. I don’t know if this efficiency results from the pandemic or just happenstance.
The Tax Court takes the position, upheld by at least three circuit courts the tax clinic at Harvard has visited, that it has jurisdiction of innocent spouse cases only when the petitioner timely files a Tax Court petition. On the face of this case, it appears that the petitioner may have filed the petition late. The Tax Court correctly seeks to make itself certain that it has jurisdiction over the case prior to signing off on the document that will resolve the case. While correct, the raising of the jurisdictional issue by the Court at this stage has the likely effect of dismissing the Tax Court case and moving the parties back into an administrative posture. If the outcome were favorable to the taxpayer in a situation like this, the IRS will almost certainly give the taxpayer the benefit of whatever agreement was reached in the case. Ultimately, the taxpayer and the IRS will end up in the same place although the taxpayer will not have the benefit of a court order approving the agreement. Both the IRS and the Court will spend time and effort finding evidence of the date of mailing of the notice and reviewing the notice before the Court finds the answer to the question of jurisdiction.
Based on reviewing court orders for several years and watching the dismissal of cases, Carl Smith estimates that once or twice each month it happens that a case reaches the stage of settlement and the court raises a jurisdictional issue not previously seen by Chief Counsel’s office or the court. Because the IRS will almost always honor these settlements administratively, the taxpayer receives the benefit of having an attorney for the government work on their case in order to reach a settlement. Perhaps, I should accept that as a good thing and move on; however, it seems like a waste of resources to stop the judicial process and restart the administrative one in cases where the outcome is not a full concession. If the timing of the petition were not considered jurisdictional, Ms. Carandang and the IRS would have the stipulated decision signed by the court and would move on to other affairs of life without having to do a two-step to get there. This provides another policy reason for Congress not to treat the time period as jurisdictional and a reason the Supreme Court has made the determination that time periods for filing in court are only jurisdictional when Congress makes a clear expression it intends the time period to be jurisdictional.
For a case stopped by this process, look at the 2018 order to show cause and the dismissal order in Williams, Docket No. 24954-17. In that case, of course, we can’t see a copy of the proposed decision because the court never entered it. The parties simply had to return to the administrative process to work out the details of the case they had settled through the Tax Court process without knowing the court lacked jurisdiction over the case until they had resolved it.
Special Note about Clerk’s Office at the Tax Court
On May 21, 2020 the Tax Clinic at Harvard received notice that the Tax Court had processed a petition dated March 16, 2020. Earlier indications were that the Court had stopped processing cases about March 9. The receipt of this notice indicates that someone is again working in the clerk’s office. Because of the date of the petition, it would have arrived at the Tax Court before the Court closed the clerk’s office. Unclear if the action on this case just means that a small group is working in the clerk’s office to clean up the 10 days or so of cases received but not processed before the closure of the clerk’s office or if this signals the clerk’s office is about to reopen and the suspension of time to file a petition under Guralnik is about to come to an end.
Additional Resource Regarding the Jurisdictional Issue
If you want more background on the general issue of jurisdiction and the Tax Court just type jurisdiction into the search box on the blog or read the excellent law review article by Bryan Camp “New Thinking About Jurisdictional Time Periods in the Tax Code,” 77 Tax Lawyer 1 (2019).