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Policing the Settlement; Policing the Case

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The Tax Court Needlessly Expends Considerable Judicial Resources Each Month Incorrectly Policing the Filing Deadline as a Jurisdictional Issue.

Many taxpayers might be affected by a ruling that the Tax Court’s deficiency jurisdiction filing deadline is not jurisdictional (whether or not the filing deadline is also subject to equitable tolling). In the fiscal year ended September 30, 2018, taxpayers filed 24,463 Tax Court petitions. IRS Data Book, 2018 at 62 (Table 27), available at www.irs.gov. These petitions were under about 20 different jurisdictions of the Tax Court. The Tax Court’s position is that the filing deadline of any petition in the Tax Court, under any of its jurisdictions, is a jurisdictional issue for the court. Tax Court Rule 13(c) (“In all cases, the jurisdiction of the Court also depends on the timely filing of a petition.”). (Parenthetically, the D.C. Circuit, which hears all appeals of Tax Court whistleblower actions under § 7623(b)(4), has overruled the Tax Court and held that the filing deadline for such an action is not jurisdictional and is subject to equitable tolling under current Supreme Court authority. Myers v. Commissioner, 928 F.3d 1025 (D.C. Cir. 2019).)

Three jurisdictions of the Tax Court comprise the vast bulk of its petitions (deficiency, CDP, and innocent spouse), but it has long been the case that deficiency petitions make up the overwhelming majority of all petitions filed. Harold Dubroff & Brant Hellwig, “The United States Tax Court: An Historical Analysis” (2d Ed. 2014) at 909 (Appendix B). The Dubroff & Hellwig book is the semi-official history of the Tax Court, available at a link on the “History” page of the court’s website. “Over 75 percent of the petitioners who file with the Court are self-represented (pro se).” U.S. Tax Court Congressional Budget Justification Fiscal Year 2021 (Feb. 10, 2020) at 22, also available at a link on that “History” page.

Because the Tax Court does not publish statistics breaking down filings under each of its jurisdictions, and because that court also does not separately identify in statistics cases dismissed for lack of jurisdiction, in order to get a sense of how many cases in the court each year might be affected by a ruling on whether the deficiency petition filing deadline is jurisdictional, the Center reviewed, using the Tax Court’s DAWSON online system (available on the Tax Court’s website), 1% of a randomly-chosen sample of dockets filed during the fiscal year ended September 30, 2018. The year ended September 30, 2018 was chosen simply to allow likely enough time for jurisdictional issues to be raised and disposed of in all cases. The 245 dockets reviewed were numbers 10001-18 through 10245-18 (as to which petitions were filed between May 21 and 24, 2018, inclusive). Of those 245 dockets, 24 were not deficiency cases.3 Of the remaining 221 dockets that comprised deficiency cases, 38 (17% – i.e., 38/221) were dismissed for lack of jurisdiction. However, there were multiple grounds for the 38 dismissals for lack of jurisdiction:

Number of Cases Dismissal Reason
25 Failure to pay filing fee
10 Late filing
1 Failure to file proper amended petition
1 No original signature on petition
1 Tax paid before notice of deficiency issued

In only one of the 10 dockets where the case was dismissed for late filing was there any suggestion of facts which might give rise to equitable tolling. In Lavery v. Commissioner, Docket No. 10026-18 (order dated Jul. 18, 2018), it appears that there may have been a timely filing in the wrong forum (i.e., a timely mailing to the IRS, instead of the Tax Court).

This review shows that floodgates would not open if equitable tolling were allowed to excuse the late filing of a modest number of deficiency petitions each year.

The greater practical effect of a ruling that the Tax Court’s deficiency suit filing deadline is not jurisdictional would be to benefit taxpayers where the IRS attorneys in the case either had omitted to notice the possible late filing of a petition or had deliberately decided not to argue that a petition was late and so forfeited or sought to waive the late filing argument. As this Court has noted, “[t]he expiration of a ‘jurisdictional’ deadline prevents the court from permitting or taking the action to which the statute attached the deadline. The prohibition is absolute. The parties cannot waive it, nor can a court extend that deadline for equitable reasons.” Dolan v. United States, 560 U.S. 605, 610 (2010) (citation omitted). In contrast, if a filing deadline is not jurisdictional, it is subject to forfeiture and waiver (whether or not it is subject to equitable tolling or estoppel).

Every month, the Tax Court dismisses multiple deficiency cases only because the filing deadline is currently treated as jurisdictional and so the Tax Court judges, sua sponte, police late filing. The court’s position that the filing deadline is jurisdictional necessitates that judges examine the files in every case for late filing – the judges not being able merely to rely on the IRS to raise all late filing issues. When a judge suspects that a petition in a particular case was filed late, but the IRS attorneys have made no argument to that effect, the judge issues an order to show cause why the case should not be dismissed for lack of jurisdiction. In November and December 2019 (typical recent pre-COVID-19 months), the Tax Court issued orders to show cause to dismiss deficiency petitions for untimely filing four and eight times, respectively.4 All 12 such taxpayers lost their chance to have their deficiencies litigated in the Tax Court only because the judges treated the filing deadline as jurisdictional. If, as the Center believes, the filing deadline is not jurisdictional, judges have been investing considerable resources over the years engaging in needless policing.

Judges do not merely police jurisdiction in the middle of a case, but also when a case settles. About once a month, some taxpayer and the IRS settle a case on the merits and submit to the Tax Court a proposed stipulated decision setting forth the amount of the deficiency, but the Tax Court judge refuses to sign the decision until the parties show cause why the case should not instead be dismissed for lack of jurisdiction on account of a late filing of the petition that the IRS had not noticed. (The decision in the Tax Court is analogous to the judgment in a district court case.) An example of a show cause order issued in this situation is that in Williams v. Commissioner, Docket No. 24954-17 (dated Jan. 26, 2018).

A further example of overuse of judicial resources is where the IRS agrees with the taxpayer that a petition was timely filed, but the Tax Court takes the time to conclude that the petition was not timely filed. For example, in Tilden v. Commissioner, 846 F.3d 882 (7th Cir. 2017), rev’g T.C. Memo. 2015-188, the parties were initially in disagreement over whether a deficiency petition had been timely filed under the rules of § 7502. Section 7502 provides a timely-mailing-is-timely-filing rule applicable to Tax Court petitions. The initial dispute was about which provision of regulations under the Code section applied to the case. By the time the Tax Court wrote its opinion, however, the parties agreed that the petition was timely filed. However, the Tax Court disagreed and dismissed the petition for lack of jurisdiction as untimely. The Tax Court could not merely accept the IRS’ concession that the filing was timely because of the Tax Court’s position that the deficiency suit filing deadline is a jurisdictional issue.

In the Seventh Circuit, both parties again argued that the filing was timely. This led the judges at oral argument, sua sponte, to wonder whether they had to decide the § 7502 issue, since, if the filing deadline at § 6213(a) was not jurisdictional, the government was waiving any untimeliness argument, which was the government’s prerogative. The judges asked the attorneys for each side whether the filing deadline in § 6213(a) is jurisdictional under recent Supreme Court case law, but the attorneys did not know about such case law. Then, two of the judges gave their tentative views that the § 6213(a) filing deadline appeared not to be jurisdictional. See Marie Sapirie, “News Analysis: Will the Seventh Circuit Unsettle Tax Court Timing Rules?”, Tax Notes Today (Oct. 24, 2016) (“ ‘This appears to be a timing rule, but timing rules aren’t jurisdictional,’ [Judge] Easterbrook said. [Chief Judge] Wood observed that for at least the last decade, the Supreme Court has been telling courts not to ‘put everything in the jurisdictional box’ because many rules that may have previously been carelessly referred to as jurisdictional are really claims processing rules. ‘If it’s a claims processing rule, it’s just a fact. You can concede it. The world doesn’t come to an end, and the case goes on,’ Wood said.”). After the oral argument, the parties in Tilden submitted supplementary briefs on the issue of whether the § 6213(a) filing deadline is jurisdictional under current Supreme Court case law. The judges then changed their minds and, in their opinion, held the filing deadline jurisdictional and then proceeded to reverse the Tax Court on the § 7502 issue.

In sum, too much judicial time is being needlessly spent in policing late filing only because of the lower courts’ misunderstanding of how this Court’s presumption that filing deadlines are no longer jurisdictional applies to the deficiency filing deadline.

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