We welcome back Carl Smith who keeps us updated on the progress of the jurisdiction motions now in litigation regarding deficiency proceedings in the Tax Court. Some might view the IRS response in Hallmark as one that places the Golsen rule regarding circuit court decisions above a Supreme Court decision but we have a link to the IRS response and you can decide for yourself. Keith
On May 3, 2022, and May 17, 2022, we did a couple of posts on the post-Boechler litigation over whether the deficiency petition filing deadline under IRC 6213(a) is still jurisdictional and not subject to equitable tolling. In Hallmark Research Collective v. Commissioner, Tax Court Docker No. 21284-21, the taxpayer timely moved to vacate an April 1, 2022, order dismissing the case for lack of jurisdiction on account of late filing. A link to the taxpayer’s memorandum of law in support of that motion was attached to the May 3, 2022, post. This post is both to provide you with a link to the IRS’ June 22, 2022, response, and to give a little update on where Hallmark and other test cases stand as well as the Tax Court’s actions in similar cases.
I have few comments on the IRS Hallmark response, since you can read it for yourself. It is only 18 pages in length and does not address in detail many of the points raised in the taxpayer’s 50-page memorandum of law. The main thing to note is that there had been speculation (based on comments by the IRS at the May ABA Tax Section meeting) that the IRS was rethinking its position on various non-CDP Tax Court filing deadlines. Whatever the IRS may be thinking as to other filing deadlines, its reconsideration of the deficiency filing deadline has led it to reaffirm the Tax Court’s long-standing position that the deficiency filing deadline is still jurisdictional after Boechler.
There are two more things in the IRS response to note:
Frist, in the taxpayer’s memorandum in Hallmark, the taxpayer argued that the source of the Tax Court’s deficiency jurisdiction is IRC 6214(a), not IRC 6213(a). That is a respectable position because a number of current Tax Court judges have said as much in opinions. The IRS response ignores the mention of IRC 6214(a) and talks only about whether IRC 6213(a), which the IRS believes contains the jurisdictional grant, also contains a jurisdictional filing deadline.
Second, the IRS raises new arguments about how IRC 6213(c) and 6215 are incompatible with a ruling that the deficiency filing deadline is not jurisdictional. I don’t agree, but you can read the IRS argument for yourself.
Judge Gustafson has directed the taxpayer to file a reply to the IRS response by July 22, 2022. We will provide a link to the reply after it is filed.
In my May 17, 2022, post, I noted that, since May 6, 2022, the Tax Court had stopped issuing dismissal orders in response to either (1) IRS motions to dismiss late-filed deficiency petitions for lack of jurisdiction or (2) Tax Court orders to show cause why a late-filed deficiency petition should not be dismissed for lack of jurisdiction. On average, before the Hallmark motion was filed, the Tax Court had dismissed 2 to 3 deficiency petitions a day for lack of jurisdiction for late filing. This halt on dismissals has continued, except for one case (probably an accident) in Saltmarsh v. Commissioner, Tax Court Docket No. 5779-21, where, on June 14, 2022, Judge Urda dismissed a late-filed deficiency case for lack of jurisdiction.
In my May 17, 2022, post, it was only my speculation that this halt was due to the pendency of the Hallmark motion. But, now my speculation has some concrete support. On May 12, 2022, the IRS filed a motion to dismiss a late-filed deficiency case for lack of jurisdiction in Spears v. Commissioner, Tax Court Docket No. 6232-21. On May 18, 2022, Judge Copeland issued an order in Spears striking the case from a trial calendar and wrote: “Before taking further action in this case, we will await the ruling of this Court on the Hallmark motion to vacate.”
If the Tax Court ultimately agrees with Hallmark that the filing deadline is not jurisdictional, then one consequence (probably affecting the largest number of taxpayers) is that the Tax Court will have to stop issuing orders to show cause why a late-filed deficiency case should not be dismissed for lack of jurisdiction. The court will then have no business issuing an order pointing out to one party a non-jurisdictional defense that the party (here, the IRS) had not thought to make. An odd thing is that it appears that a minority of Tax Court judges are continuing to issue orders to show cause why late-filed deficiency cases should not be dismissed for lack of jurisdiction – though the number of orders to show cause has fallen off by well over 50%. Here are two examples of cases in which the Tax Court recently issued such orders to show cause: Madrid v. Commissioner, Tax Court Docket No. 3731-21 (order of Judge Morrison dated June 3, 2022); Murtaza v. Commissioner, Tax Court Docket No. 23342-21S (order of Judge Landy dated June 15, 2022). I think the issuance of such orders while the Hallmark motion is pending does a disservice to taxpayers if Hallmark ends up ruling that the filing deadline is not jurisdictional. In effect, such orders alert the IRS to a possible late filing, which the IRS can later raise as a defense in an amendment to its answer.
Other than Hallmark, there is one case where other taxpayers are currently litigating the issue of whether the deficiency petition filing deadline is jurisdictional post-Boechler. As noted in my May 17, 2022, post, in Culp v. Commissioner, Third Circuit Docket No. 22-1789, the IRS sent a notice of deficiency to the taxpayers, but the taxpayers say they never received the notice of deficiency or a later notice of intention to levy, but only became aware of a notice of deficiency’s possible issuance when the IRS started levying. The Culps had contacted TAS about the mysterious levies, but before TAS had done anything, the IRS satisfied the balance of the deficiency by offset of an overpayment from a later tax year. This put the Culps in a refund posture. TAS did not get them a refund, so the Culps belatedly filed a Tax Court deficiency petition seeking a refund under the court’s IRC 6512(b) overpayment jurisdiction. The Culps also argued that the IRS had never sent a notice of deficiency to their last known address. In response, the IRS produced a copy of the notice and proof of mailing to their last known address. The Tax Court found the proof of mailing sufficient and dismissed the petition for lack of jurisdiction for late filing. On appeal, the Culps argue (1) that no notice of deficiency was sent (which, if true, will actually hurt them because the Tax Court will then lose any overpayment jurisdiction) and (2) if the notice was sent, then the Tax Court has deficiency and overpayment jurisdiction because the filing deadline should be equitably tolled.
In my May 17, 2022, post, I noted that the Tax Clinic of the Legal Services Center of Harvard Law School, acting on behalf of The Center for Taxpayer Rights, planned to file an amicus brief in the Culp case in support of the argument that, since Boechler, the deficiency petition filing deadline is not jurisdictional and is subject to equitable tolling. After showing the DOJ lawyers in Culp a copy of a nearly-6,500-word amicus brief and getting the DOJ’s and the Culps’ consent to file it, the Center filed the amicus brief. The DOJ then moved to strike the brief. Why? A few days before the amicus brief was filed, the DOJ had moved for summary affirmance in the appeal, arguing that there was no significant legal issue for an appeal. The DOJ motion for summary affirmance did not mention Boechler, but merely cited an existing Third Circuit opinion holding that the filing deadline in the Tax Court is jurisdictional. The DOJ objects to the filing of the amicus brief both before the Third Circuit has ruled on the motion for summary affirmance and before the Culps file their opening brief for appellant. The DOJ also argues that an amicus brief at the current stage of the case should be no more than 2,600 words.
The Center for Taxpayer Rights believes that it has done nothing wrong in filing a brief of almost 6,500 words at this stage of the case. Comments to the rules say that the briefing schedule is not suspended when a motion for summary affirmance is filed. The Center’s response to DOJ’s motion to strike its amicus brief also noted that the brief does not specifically address the motion for summary affirmance. A link to the affidavit mentioned in the response can be found here.
The Culps have filed a response to the motion for summary affirmance. The DOJ has filed a reply to the Culps’ response. In it, the DOJ criticizes several of the Culps’ arguments, including alleging that the Culps are making new arguments not presented below. But, crucially, the DOJ also argues (at pp. 10-12) that “neither Boechler nor the doctrine of equitable tolling affects the outcome here”. The DOJ says that Boechler is limited to CDP cases, and there is long-standing Circuit court precedent (including in the Third Circuit) that the IRC 6213(a) filing deadline is jurisdictional. In addition, the DOJ argues that, even if equitable tolling were allowed, the Culps only argue for equitable tolling because of IRS misconduct in 2019, long after the filing deadline in mid-2018 had passed. The DOJ says there is no excuse for the Culps to have waited until 2021 to file a Tax Court petition. (Note: The Culps should also have argued that non-receipt of the notice of deficiency in 2018 was sufficient for equitable tolling purposes, since the Culps never received even a copy of the notice of deficiency until after they filed the Tax Court petition. We recognize that other Tax Court and some appellate precedent would also have to be overruled to make this argument that in the case of mere non-receipt of a notice of deficiency, a late petition may be filed under equitable tolling.)
The Third Circuit has referred both motions to a motions panel for ruling, and it has only now suspended the filing schedule for merits briefs. We will keep you posted on whether the case survives the motion for summary affirmance. If summary affirmance is denied, at worst, if the motion to strike the amicus brief at this time is granted, a similar amicus brief will be filed after the Culps file their first merits brief.
Finally, there is at least one new Tax Court deficiency case, filed on May 31, 2022, where the taxpayer filed late and is seeking equitable tolling, Gruis v. Commissioner, Tax Court Docket No. 11951-22. The petition was filed by a lawyer for an LITC, who is aware of the Boechler case. The case involves HOH status and disallowed EITC and CTC. It will be appealable to the Eighth Circuit – the same Circuit that got the law wrong on CDP in Boechler.