When the IRS concludes that a taxpayer owes additional taxes, it will issue a Notice of Deficiency. If the taxpayer disputes the purported deficiency, the taxpayer may file a petition to the Tax Court. IRC Section 6213(a) provides that a taxpayer has 90 days after a Notice of Deficiency is mailed to file a petition. Because of this rule, a Notice of Deficiency is commonly referred to as a “90-day letter.”
The recent case of Culp v. Commissioner, 2023 WL 4612024 (3rd Cir. July 19, 2023) calls into question the strict 90-day deadline to file a petition. In Culp, the IRS mailed a Notice of Deficiency to the Culps on February 5, 2018. The last day to file a petition was May 7, 2018. After no petition was filed, the IRS issued a Final Notice of Intent to Levy giving the Culps 30 days to respond. When the Culps failed to respond, the IRS levied on their property. Almost three years after the 90-day deadline, the Culps filed a petition to the Tax Court.
The Tax Court issued an order dismissing the Culps’ petition for lack of jurisdiction. The Tax Court reasoned that the Court lacked jurisdiction because the petition was not filed within the 90-day deadline. Additionally, the Court stated that there was no jurisdiction to challenge the collection action because the IRS never issued a Notice of Determination following a collection due process hearing. IRC Section 6330(d) allows a person to file a petition to Tax Court within 30 days to review a Notice of Determination issued by the IRS following a collection due process hearing.
On appeal, the U.S. Court of Appeals for the Third Circuit determined that the 90-day deadline is not jurisdictional. The Court reasoned that the 90-day deadline is only directed at the taxpayer (“within 90 days … the taxpayer may file a petition”) and does not govern the Tax Court’s jurisdiction. The Appeals Court further determined that the 90-day time limit may be equitably tolled and remanded the case back to the Tax Court to determine whether the Culps are entitled to equitable tolling.
The Third Circuit relied on Boechler, P.C. v. Commissioner, 142 S.Ct. 1493 (2022). There, the U.S. Supreme Court ruled that the 30-day deadline to file a petition to Tax Court to challenge a Notice of Determination under IRC Section 6330 is directed only at the taxpayer (“the person may, within 30 days …”) and does not govern the Tax Court’s jurisdiction.
Nevertheless, the Tax Court still views the 90-day deadline as a hard rule. For example, in Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (Nov. 29, 2022), a taxpayer’s case was dismissed where the petition was filed on the 91st day after issuance of the Notice of Deficiency. The taxpayer told the Court that its CPA contracted COVID and they needed additional time to file. The taxpayer filed a Motion to Vacate Order of Dismissal for Lack of Jurisdiction. In a reviewed opinion, the Tax Court reaffirmed its view that the 90-day deadline is jurisdictional and denied the Motion to Vacate.
Further, in Sanders v. Commissioner, 160 T.C. No. 16 (June 20, 2023), the Tax Court dismissed a petition for lack of jurisdiction where the petition was filed using DAWSON, the Court’s electronic filing system, 11 seconds after midnight on December 13, 2022, when the 90-day deadline was December 12, 2022.
While the decision in Culp is not applicable to taxpayers in Illinois, it is likely the hard 90-day deadline issue will be challenged in U.S. Courts of Appeals for other circuits and/or the U.S. Supreme Court. However, taxpayers in the Third Circuit, which covers the states of Delaware, New Jersey and Pennsylvania, may now get the Tax Court to accept a late petition, if some extraordinary circumstance prevented them from timely filing.