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No Equitable Tolling for Deficiency Cases: The Tax Court Holds that the Period of Limitations for Filing a Petition to Redetermine a Deficiency Is Jurisdictional by ROBERT S. HORWITZ

In Boechler v Commissioner, 596 U.S. ___, 142 S.Ct. 1493 (2022), the Supreme Court held that the 30-day period for petitioning the Tax Court to review a collection due process determination was not jurisdictional and, therefore, could be equitably tolled. Following the Boechler decision, several bloggers, including me, questioned whether the time period of filing a petition for redetermination of a deficiency under IRC §6212(a) was jurisdictional.  In Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (Nov. 29, 2022), the Tax Court rejected the notion that the time period is not jurisdictional.  Before discussing the Hallmark Research case, a bit of background.

A. The Supreme Court Cases on Statutory Filing Deadlines

For the past two-plus decades the Supreme Court has endeavored to “bring some discipline” to the use of the term “jurisdictional” for statutory filing deadlines. Gonzalez v. Thaler, 565 U.S. 134, 141 (2012).  Under the Supreme Court’s recent jurisprudence, statutory deadlines are presumptively nonjurisdictional and are subject to equitable tolling unless Congress has made a clear statement that the deadline is jurisdictional. United States v. Kwai Fun Wong, 575 U.S. 402, 409 (2015). Congress must clearly state that a threshold limitation on a statute’s scope shall count as jurisdictional (Gonzalez v. Thaler, 565 U.S. 134, 141 (2012)) and absent such a clear statement, courts shall treat the time restriction as nonjurisdictional. Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 153 (2013)).   While Congress is not required to “incant magic words,” traditional tools of statutory construction must plainly show that Congress imbued a procedural bar with jurisdictional consequences. United States v. Kwai Fun Wong, 572 U.S. 402, 410 (2015).

An exception also exists if the “long line of this Court’s decisions left undisturbed by Congress attached a jurisdictional label to the prescription.” Fort Bend County v. Davis, 587 U.S. __, 139 S. Ct. 1843, 1849 (2019) (internal quotation marks omitted).  The Government must “clear a high bar to establish that a statute of limitations is jurisdictional.”  Kwai Fun Wong, supra

B. The Statutory Provisions Concerning The Tax Court’s Deficiency Jurisdiction

I.R.C. §6213 is entitled “Time for Filing Petition and Restriction on Assessment.”  Subsection (a) states

Within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in Section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6851, 6852, or 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A, or B, chapter 41, 42, 43, or 44 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final.  Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court, including the Tax Court, and a refund may be ordered by such court of any amount collected within the period during which the Secretary is prohibited from collecting by levy or through a proceeding in court under the provisions of this subsection. The Tax Court shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for a redetermination of the deficiency has been filed and then only in respect of the deficiency that is the subject of such petition. Any petition filed with the Tax Court on or before the last date specified for filing such petition by the Secretary in the notice of deficiency shall be treated as timely filed.

Section 6214(a) provides that “the Tax Court shall have jurisdiction to redetermine the correct amount of the deficiency, even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer…”

C. Facts in Hallmark Research

Hallmark Research filed a late return for 2015 and did not file a return for 2016.  Under 6020(c), the I.R.S. prepared a substitute for return for 2016 and issued a notice of deficiency (“NOD”), which was sent by certified mail to Hallmark Research’s last known address.  The NOD listed September 1, 2021, as the last day for petitioning the Tax Court.

Hallmark Research e-filed a petition with the Tax Court on September 2, 2021, one day after the filing deadline.  Its’ petition stated that its’ CPA had contracted COVID.  The Tax Court issued an order to show cause why the petition should not be dismissed.  Hallmark Research requested that the Tax Court defer ruling until the Supreme Court issued its decision in Boechler.  The Commissioner opposed deferral.  The Tax Court did not defer ruling and dismissed the petition on April 1, 2022, for lack of jurisdiction.

On April 22, 2022, the Supreme Court issued its opinion in Boechler.  Relying on Boechler, Hallmark Research filed a motion to vacate the dismissal on the ground that the 90-day period for filing a petition under §6213(a) is not jurisdictional.  The Tax Court has consistently held that to maintain an action for redetermination of deficiency there must be (1) a valid NOD and (2) a timely filed petition.  Hallmark Research asked the Tax Court to review its prior cases in light of Boechler and “issue a new precedent on the section 6213(a) filing deadline.”  The Tax Court did so and concluded that Boechler does not apply to the 90-day deadline of §6213(a).

D. The Tax Court’s Analysis

The Tax Court began its analysis with a discussion of the distinction between time limits that are jurisdictional and those that are procedural.  If a time limit is jurisdictional, failure to comply strips the court of the power to hear the case.  Such a deadline cannot be waived or tolled, can be raised at any time and the court must enforce the deadline sua sponte.  If a time deadline is procedural and not jurisdictional, failure to file on time does not deprive the court of the power to hear the case; there is a presumption that the deadline can be equitably tolled and the defendant must raise a statute of limitations defense in its answer or it is waived.

Turning to history, the Tax Court noted that in 1919, Congress authorized the Commissioner to establish rules and procedures for administrative appeals of deficiencies and, in 1921, enacted provisions establishing administrative deficiency appeals procedures   This was insufficient, so in 1924, Congress established the Board of Tax Appeals (“BTA”) as an independent administrative agency to be a forum for hearing and resolving deficiency disputes.  The BTA was subsequently renamed the Tax Court of the United States and, in 1969, the Tax Court was made a court of record under Article I of the Constitution.  A deficiency as determined by the Tax Court “shall be assessed and shall be paid upon notice and demand.”  IRC §6215(a).

The Tax Court then turned to the statutory basis of its jurisdiction.  Under §7422, which has its roots in the 1926 Revenue Act, the Tax Court “shall have such jurisdiction as is conferred on them by this title” and by the 1926 Revenue Act and the 1939 Internal Revenue Code.  This statute does not, by itself, confer jurisdiction. 

According to the Tax Court, §6213(a) “does confer jurisdiction over deficiency case… .”  Section 6213 “is Congress’s mandate of the Tax Court’s deficiency authority and of it place within the federal tax system, and we must follow its directive.”  This required an examination of the statutory text.  The statute allows a taxpayer to postpose the assessment of a deficiency by filing a deficiency petition in the Tax Court within the 90-day period “and it thereby gives the Tax Court jurisdiction to adjudicate that petition.”  According to the Tax Court, no court “has ever questioned” the Tax Court’s deficiency jurisdiction or held that the source of that jurisdiction was any statute other than §6213(a).  The statutory text does not contain any statement that filing the petition within 90 days is a jurisdictional requirement.

The Tax Court then looked at the requirement for the mailing of a valid NOD, the “ticket” to Tax Court, which it termed a jurisdictional prerequisite.  Where a valid NOD is not issued, the Tax Court may be deprived of jurisdiction.  The statutory source of this requirement is the same statute that imposes the 90-day limitations period for filing a petition.  As stated in Laing v Commissioner, 423 U.S. 161, 165 n.4 (1976), a “deficiency notice is of import primarily because it is a jurisdictional prerequisite to a taxpayer’s suit in the Tax Court for redetermination of his tax liability.”  If the 90-day time limit is not jurisdictional, there would be no basis for claiming the issuance of a valid NOD is jurisdictional.  If §6213(a) does not contain jurisdictional requirements for a Tax Court deficiency case, then a NOD would not be required for a taxpayer to file a case in Tax Court.  That the 90-day limitation period is embedded in the same sentence as the provision requiring a valid NOD for Tax Court jurisdiction shows that the filing deadline is jurisdictional.  Laing dealt with jeopardy assessments.  While terming the NOD a “jurisdictional prerequisite,” the Court did not identify the statute that imbued it with jurisdictional significance.  It could have been referring to §6214(a), which grants the Tax Court jurisdiction to determine deficiencies and refers to the NOD.

The Tax Court found further support for its determination in the fourth sentence of §6213(a), which gives the Tax Court jurisdiction to enjoin the assessment or collection of tax or order a refund unless a timely petition was filed.  To the Tax Court, it would be odd to require a timely petition for jurisdiction to enjoin assessment or collection or order a refund but not for the predicate deficiency case.  This only strengthened the Court’s conclusion but did not clinch it.  The Tax Court does not discuss that where a time period is equitably tolled, a petition filed after the ninetieth day would be timely.

Turning to Congressional tinkering with §6213(a), the Tax Court noted that Congress amended the statute to provide that Sunday would not count toward the time limit, then extended the time period for taxpayers living abroad, then amended the statute to provide that Saturdays, Sundays and holidays would not count toward the time limit, and, finally, in 1998 added a provision requiring the I.R.S. to include in the NOD the last day for filing a petition and making this date a safe harbor.  According to the Tax Court, this showed that Congress recognized that the Tax Court did not have the power to equitably extend the filing deadline, which indicated that Congress viewed the filing deadline as jurisdictional.

The Tax Court next looked at §7459(d), which holds that where a petition has been filed, a decision dismissing the case “shall be considered as its decision that the deficiency is the amount determined by the Secretary” … “unless the dismissal is for lack of jurisdiction.”  The Court noted that the only times a petition could be dismissed for lack of jurisdiction is if the NOD wasn’t valid or the petition was untimely.  If a dismissal because the petition was not timely was not a dismissal for lack of jurisdiction, then it would be a decision on the merits upholding the deficiency.  While the IRS can still assess a deficiency if a petition is dismissed because the petition wasn’t timely, a taxpayer can pay the tax and sue for a refund.  If a dismissal based on a petition being untimely wasn’t for lack of jurisdiction, the taxpayer would not be able to maintain a subsequent refund suit. 

Section 7459(d) was originally §906(c), which was amended in 1928 to provide that a dismissal for lack of jurisdiction was not to be considered a determination of a deficiency.  This amendment was shortly after a BTA decision that discussed the effect of a dismissal for lack of jurisdiction and how this would not result in a deficiency determination notwithstanding §906(c).  To the Tax Court, it seemed strange for Congress to add this provision to address “as-yet-unrealized” bases for dismissing a case for lack of jurisdiction while ignoring the situations in which the Tax Court had dismissed a case for lack of jurisdiction, i.e., a late petition or no valid NOD.  That Congress reenacted this provision several times against a backdrop of caselaw interpreting the deadline for filing a petition as jurisdictional.

The Court reviewed the various acts that included versions of §6213(a): the 1924 Revenue Act; the 1926 Revenue Act; the 1934 Revenue Act; the 1939 Internal Revenue Code; the 1942 Revenue Act; the 1945 International Organizations Immunities Act; the 1954 Internal Revenue Code; the 1969 Tax Reform Act; the 1986 Tax Reform Act; and the 1998 Internal Revenue Service Restructuring and Reform Act.  After each of these enactments, the Tax Court and the courts of appeal consistently held that the filing of a timely petition was jurisdictional.  The legislative history of the 1998 Act states that if a “petition is not filed within that time period [90 days after issuance of the NOD], the Tax Court does not have jurisdiction to consider the petition.”  The 1998 Act amended §6213(a) to require the I.R.S. to include on NODs the last date for filing the petition, and thus “Congress communicated to taxpayers that the last day to file a deficiency petition is indeed the last day, thereby indicating … that the deadline is imbued with jurisdictional significance and is exempt from equitable exceptions.”  Since then, all the courts of appeal that have considered the issue have held the time limit for filing a petition is jurisdictional.

The Supreme Court in Boechler rejected the Government’s argument that §6330(d) was jurisdictional because it was analogous to §6213(a).  Based on this, Hallmark Research argued that, like §6330(d), §6213(a) was not jurisdictional.  The Tax Court viewed the Supreme Court’s comments as a statement that each statute has to be analyzed in the light of its own text, context and history.  The Tax Court concluded:

Section 6213(a) clearly states that its 90-day deadline is jurisdictional, as indicated by its text, context, and uniform treatment during its long history. Congress has limited the Tax Court’s deficiency jurisdiction to only those cases in which a petition is timely filed, and we do not have authority to extend the deadline in section 6213(a) by equitable tolling. Late-filed deficiency petitions must therefore be dismissed for lack of jurisdiction.

Appended to the Tax Court’s opinion was a chronological listing of enactments, amendments and codifications of statutes creating deficiency procedures, intervening judicial decisions, and select legislative history.

The Hallmark Research case is appealable to the Ninth Circuit, which in Organic Cannabis Foundation, LLC v. Commissioner, 962 F.3d 1082 (2020), held that the 90-day time limit of § 6213(a) is jurisdictional.  I therefore assume that if Hallmark Research appeals, the Ninth Circuit will affirm the Tax Court.  It will probably take several years for there to be a conflict among the circuits on this issue, assuming any circuit holds that §6213(a) is not jurisdictional.  The Tax Court’s opinion is the best exposition of the case for the jurisdictional nature of the time-limit for filing a petition.  Whether any court of appeals will disagree remains to be seen.  For the foreseeable future, however, taxpayers and their representatives will have to do everything possible to ensure that petitions are filed within the requisite time period.

Robert S. Horwitz is a Principal at Hochman Salkin Toscher Perez P.C., former Chair of the Executive Committee of the Taxation Section, California Lawyers’ Association, a Fellow of the American College of Tax Counsel, a former Assistant United States Attorney and a former Trial Attorney, United States Department of Justice Tax Division.  He represents clients throughout the United States and elsewhere involving federal and state administrative civil tax disputes and tax litigation as well as defending clients in criminal tax investigations and prosecutions. In 2022 the Tax Section of the Tax Section of the California Lawyers Association awarded him the Joanne M. Garvey Award for lifetime achievement in and contributions to the field of tax law.

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