Today, we welcome back frequent guest blogger, Carl Smith. The title does not do the post justice because of the many issues raised by the “untimely” petition filed from prison. Carl discusses a range of issues raised by this case including the prison mailing rule, equitable tolling, appellate venue and the Golsen rule. All of these issues come together in this case in which the taxpayer misses his opportunity to obtain a Collection Due Process (CDP) hearing in the Tax Court in part because of bad advice he received from the Appeals Division. While this post does not offer any great answers to taxpayers receiving bad advice from the IRS on a critical issue such as the timely filing of a Tax Court petition, Carl’s discussion of equitable tolling shows the path to overcoming the inequity of bad advice. Allowing equitable tolling in a situation such as this would not hurt the IRS in any material way and would make all taxpayers, not just those with the peculiar problems of prisoners, feel better about the system we have for resolution of tax disputes. In this post, Carl cites to some of the articles he has written on this subject. I have also written on this subject. When Taxpayer Bill of Rights 4 gets passed, this issue should be front and center. Keith
On April 11, Judge Gustafson, in a long unpublished order, “reluctantly” dismissed a CDP case because the petitioner filed his petition late. See Harsh Sharma v. Commissioner, Tax Court Docket No. 5163-11L. To me, the ruling is subject to question on two grounds on which I have written or I have litigated in the past — i.e., (1) what is the correct venue on appeal in CDP cases and (2) can the 30-day period under section 6330(d)(1) in which to file a CDP petition be equitably tolled? But, even if Mr. Sharma prevailed on appeal — such that the appeals court held that Judge Gustafson was wrong on both the grounds that I question — the taxpayer’s petition still would end up being dismissed. So, I wouldn’t recommend he file an appeal.
The first thing about this case (a thing that is amazing) is that it took the IRS until November 2013 to move to dismiss for lack of jurisdiction — more than 2 1/2 years after the petition was filed and after the Tax Court had granted 4 IRS motions to continue scheduled trials (and this case deals with a jeopardy levy!).
The second thing about this case (a thing that is annoying) is that the IRS sent notices of determination sustaining both the jeopardy levy and upholding the filing of a notice of tax lien on January 11, 2011, thus statutorily requiring the taxpayer to file a petition in 30 days (i.e., February 10, 2011). However, the taxpayer wrote to Appeals before February 1, 2011, asking for more time to file a petition. In a February 1, 2011 letter, Appeals wrote back to the taxpayer and warned him that the filing period could not be extended, but incorrectly stated that the petition had to be filed in the Tax Court “within 30 days of this letter” (i.e., March 3, 2011). This error really bothered Judge Gustafson, since the Tax Court received an imperfect petition on March 2, 2011. It had been mailed from the Georgia prison in which the taxpayer was housed, and the envelope in which it came bore a prison stamp of February 24, 2011. The taxpayer testified that he handed the imperfect petition to the prison authorities to mail on February 1, 2011 (apparently not waiting to hear back from Appeals about the extension), but the judge found this testimony uncorroborated and, sadly, irrelevant. Why?
In 1988, the Supreme Court ruled that a prison inmate’s notice of appeal in a habeas corpus case was deemed filed at the time he delivered it to prison authorities for mailing to the court. Houston v. Lack, 487 U.S. 266, 270, 276 (1988). The prison mailbox rule was subsequently extended and codified in Rules 4(c)(1) and 25(a)(2)(C) of the Federal Rules of Appellate Procedure. In Crook v. Commissioner, 173 Fed. Appx. 653, 655 (10th Cir. 2006), the Tenth Circuit held that this prison mailbox rule, however, did not extend to filings in the Tax Court. Rather, the section 7502 rule that timely mailing is timely filing applied, and, under it, the postmark on the envelope is treated as the date of filing. Long before either opinion, in Rich v. Commissioner, 250 F.2d 170 (5th Cir. 1957), the Fifth Circuit had a deficiency case where there was evidence that a taxpayer delivered a Tax Court petition to prison officials for mailing a full 12 days before it was due to be mailed, but then the prison accidentally failed to mail it until contacted by the taxpayer’s lawyer sometime after the 90-day period lapsed. In Rich, the Fifth Circuit, though angry with the government and finding the equities all on the taxpayers’ side, held that the petition was untimely and the case must be dismissed for lack of jurisdiction. As noted by Judge Gustafson, this holding in Rich has never again been cited by the Fifth Circuit. But, as Judge Gustafson also noted, under Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981), the Eleventh Circuit (which encompasses where Mr. Sharma was living) is required to follow the precedent of the Fifth Circuit from before the time the Eleventh Circuit was formed. Judge Gustafson held that, since Mr. Sharma’s case was appealable to the Eleventh Circuit, under the Tax Court’s Golsen doctrine (Golsen v. Commissioner, 54 T.C. 742, 757 (1970), affd. on other issues 445 F.2d 985 (10th Cir. 1971)), the Tax Court was obligated to follow Rich and dismiss the petition because it was deemed mailed on the prison-stamped date of February 24, 2011 — two weeks after it was due to be mailed. (Parenthetically, at least the Fourth Circuit has criticized and declined to follow Rich in the case of an incarcerated Tax Court deficiency-jurisdiction petitioner and has held that delivery to the prison authorities for mailing is the timely filing date — either under section 7502 or principles of equitable tolling. Curry v. Commissioner, 571 F.2d 1306 (4th Cir. 1978)).
In making this ruling applying the Golsen rule, Judge Gustafson mysteriously did not cite or discuss the recent case of Byers v. Commissioner, 740 F.3d 668 (D.C. Cir. 2014), in which the D.C. Circuit held that appeals of CDP cases from the Tax Court — where the case does not include a challenge to the underlying liability — are only properly appealable to the D.C. Circuit, not the Circuit of residence. Although the D.C. Circuit has not had a case involving the prison mailbox rule and filings in the Tax Court, the D.C. Circuit has ruled (citing the Supreme Court’s opinion in Houston v. Lack) that an F.R.C.P. 59(e) motion to alter or amend a judgment — one filed in a district court by a prisoner in a 42 U.S.C. section 1983 case — is deemed filed in the district court at the time the motion is handed to prison authorities for mailing. Anyanwutaku v. Moore, 151 F.3d 1053 (D.C. Cir. 1998). Thus, there is a good chance that, if Mr. Sharma appeals the dismissal to the D.C. Circuit, it would extend this prison mailbox rule to Tax Court petitions. One difficulty in Mr. Sharma’s appeal may be what is in his amended petition. Judge Gustafson’s order does not mention whether Mr. Sharma raised a challenge to the underlying liability therein; if he did so, the D.C. Circuit would transfer any appeal to it to the Eleventh Circuit.
Unfortunately, as I see it, even if Mr. Sharma could convince either the D.C. Circuit or the Eleventh Circuit to apply the prison mailbox rule, he would not win his case. Judge Gustafson found no corroborating evidence from the prison that would support Mr. Shamra’s testimony that he gave the imperfect petition to the prison for mailing on February 1, 2011 (which would have been a timely mailing date). Thus, Mr. Sharma will lose this issue either on a legal or factual basis.
Two pages of Judge Gustafson’s order are also addressed to the issue of the letter from Appeals that gave Mr. Sharma incorrect information about when he must file. It was clear that Mr. Sharma’s imperfect petition was filed a day before the due date set out in that letter. A frequent reason for applying the doctrine of equitable tolling is the defendant’s misleading the plaintiff as to the correct filing date. This letter was clearly misleading. Citing Tax Court case law involving deficiency, CDP, and whistleblower jurisdiction cases, however, Judge Gustafson held that the 30-day period in which to file a Tax Court petition under section 6330(d)(1) was jurisdictional. A jurisdictional time period cannot be equitably tolled. I was disappointed to see, however, that Judge Gustafson did not reconsider the CDP authority in light of recent case law from the Supreme Court that has severely limited the “jurisdictional” label generally to subject matter and personal jurisdiction — not “claims processing rules” like time periods in which to file. (For an example of a recent opinion holding a filing period in an administrative agency not to be jurisdictional, see Sebelius v. Auburn Regional Medical Center, 133 S. Ct. 817 (2013).) I have previously written articles in Tax Notes Today making the argument that under this recent Supreme Court case law, the periods in which to file a Tax Court petition under its innocent spouse (section 6015(e)(1)), CDP (section 6330(d)(1)), and whistleblower jurisdictions (section 7623(b)(4)) are not jurisdictional and are subject to equitable tolling. See “Equitable Tolling Innocent Spouse and Collection Due Process Periods”, 2010 TNT 41-8 (March 3, 2010), and “Friedland: Did the Tax Court Blow Its Whistleblower Jurisdiction?”, 2011 TNT 100-10 (May 24, 2011) (Friedland, which I specifically criticized in this article, was one of the opinions that Judge Gustafson relied on in his order). While Judge Gustafson ruled that the CDP-filing time period was jurisdictional — so could not be extended by the equities — he also wrote:
An error of this sort is most unfortunate. An agency charged with broad nation-wide responsibility and necessarily staffed by fallible humans can never avoid such errors entirely; but the discovery of such an error should incline the IRS to take action within its discretion to compensate for the error and to provide reasonable remedies for a taxpayer who has been disadvantaged by the agency error.
I am not sure what remedy the IRS could give Mr. Sharma for this error, since he has already been before Appeals, and the IRS cannot recompense him by offering him Tax Court review. Now, I have an argument that subsequent Appeals CDP retained jurisdiction hearing notices under section 6330(d)(2) are appealable to the Tax Court, notwithstanding a contrary IRS regulation at section 301.6330-1(h)(2)(A-H2), but I am not sure that such an argument will win, even if the IRS were to give Mr. Sharma another hearing at Appeals. Note, though, the recent opinion in SECC Corp. v. Commissioner, 142 T.C. No. 12 (Apr. 3, 2014), in which the Tax Court held that it need not give any deference to an IRS Revenue Procedure that appeared to limit the Tax Court’s jurisdiction to hear employee/independent contractor disputes under its jurisdiction at section 7436 (“We owe no deference to what an administrative agency says about our jurisdictional bounds. See Fox Television Stations, Inc. v. FCC, 280 F.3d 1027, 1038-1039 (D.C. Cir. 2002)”; slip op. at p. 16 n. 5).
Nevertheless, even if Mr. Sharma were to be able to convince an appeals court that the period at section 6330(d)(1) to file a Tax Court petition was not jurisdictional and could be equitably tolled, I don’t think Mr. Sharma could get equitable tolling. It was Mr. Sharma’s testimony that he gave the imperfect petition to the prison on February 1. Thus, he could not have detrimentally relied on the Appeals letter giving him an incorrect later date that was only mailed to him on that same date.
In sum, it is sad that Mr. Sharma has lost his Tax Court case, and disappointing that Judge Gustasfon did not discuss (1) whether Byers affected his Golsen holding or (2) whether Tax Court case law on what is “jurisdictional” is still good after recent Supreme Court case law on the subject, but Mr. Sharma would apparently lose an appeal no matter which way Judge Gustafson ruled on these issues. Now that I am retired, though, I urge other practitioners to make these arguments to the Tax Court for it to consider in appropriate future cases.