October 3, 2022

Volume XII, Number 276

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September 30, 2022

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Procedural Actions Following the Supreme Court Remand in Boechler

Key Takeaways:

  • In Boechler P.C., v. Commissioner[1] (“Boechler”), the Supreme Court held that the thirty-day period to petition the Tax Court for review of an adverse determination by the IRS Appeals Office in a collection due process hearing could be equitably tolled but not if it should be equitably tolled.          

  • It is likely that the Tax Court will toll the filing period if the taxpayer shows that it pursued its rights diligently and that extraordinary circumstances prevented it from filing timely.

  • Now pending in Tax Court is Hallmark Research Cooperative v. Commissioner,[2] which will consider if Boechler applies to the ninety-day Tax Court filing period to contest a notice of deficiency.

Supreme Court Decision: In Boechler, the taxpayer petitioned the Tax Court for review of an adverse determination by the IRS Appeals Office in a collection due process hearing. The petition was filed one day after the thirty-day filing period expired. At risk for the taxpayer was the seizure of its property to collect payment of an intentional disregard penalty. The Supreme Court held that the filing period could be equitably tolled and remanded the case to determine if the filing period should be equitably tolled.              

Holding Below: In the Eighth Circuit, the taxpayer argued that the thirty-day period for filing a petition to the Tax Court from an adverse IRS determination in a collection due process hearing should be equitably tolled.[3] Treasury Regulations[4] commence the thirty-day filing period from the day after the date of the IRS determination letter rather than from the date of the taxpayer’s receipt of the determination letter. The IRS mailed the determination letter to the taxpayer. The taxpayer asked that the thirty-day period be tolled for the three days that it took the mail to reach it, arguing that it was inequitable to commence the filing period from the date of the determination letter because other taxpayers closer geographically to the mailing location are a preferred class and that counting from the day of mailing is arbitrary and capricious. The Eighth Circuit rejected the taxpayer’s argument, finding that the statutory thirty-day filing period is jurisdictional, meaning that the Tax Court did not have jurisdiction to hear a late-filed case.[5]  

Overruling the Eighth Circuit, the Supreme Court decided only that in proper circumstances the thirty-day filing period could be equitably tolled.

Circumstances Justifying Equitable TollingWhile the Supreme Court did not decide whether the filing period should be tolled for the three-day period for delivery of the mail, the Court cited two previous cases in which it discussed circumstances when a filing period should be equitably tolled. Although the Court cited the cases for another purpose, they are instructive. The cases reason that to be entitled to equitable tolling, a litigant must prove that it diligently and actively pursued its rights, but an extraordinary circumstance prevented timely filing. Examples of diligence are filing a defective pleading during the statutory period and filing late because the adversary’s misconduct tricked the litigant into filing after the filing period expired. An example of lack of diligence is the absence of the lawyer from the office when the notice that commenced the filing period was received.[6]  

Eighth Circuit cases allowed tolling when a litigant’s failure to file timely was out of the litigant’s hands[7] but not if the litigant did not actively pursue its judicial remedies.[8] In Boechler, the three days lost because of mailing was out of the taxpayer’s hands, but the taxpayer still must show that it actively pursued filing the Tax Court petition and explain why the loss of the three days prevented the filing within thirty days. The Tax Court has developed no jurisprudence on this issue because it mistakenly believed that the period was not subject to tolling, so it is possible that on remand it will formulate a different test.

Further Application of BoechlerThe Tax Court now is considering if the ninety-day filing period to contest a deficiency notice is jurisdictional and if it should be equitably tolled.[9] The Tax Court initially dismissed the taxpayer’s petition, but the taxpayer moved to vacate the dismissal in light of Boechler. The motion is pending. The outcome should depend on whether the ninety-day statutory filing period[10] provides clearly that it is jurisdictional.  

Conclusion: It is possible that Boechler will apply to other filing periods in the Tax Court, but even if other Tax Court filing periods are determined to be jurisdictional, the taxpayer must prove equitable circumstances that justify tolling, and, as in the Boechler case, even if it proves that, it must prove that it did not intentionally disregard its obligation to file correct information returns. Equitable tolling is only the first step in gaining relief.     

FOOTNOTES

[1] 2022 WL 1177496 (U.S. April 21, 2022).

[2] No. 21284 (U.S.T.C. Sept. 2, 2021).

[3] 967 F.3d 760 (2020).

[4] Treas. Reg. §6330-1(f)(1).

[5] The Eighth Circuit also rejected the taxpayer’s argument that the statute unconstitutionally discriminated against taxpayers distant from the mailing location, reasoning that the statute did not reflect an underlying suspect classification favoring those near a mailing location and provided the IRS with a workable system to administer the tax laws.    

[6] Lozano v. Montoya Alvarez, 572 U.S. 1, 10–11 (U.S. 2014); Irwin v. Department of Veterans Affairs, 498 U.S. 89, 96 (U.S. 1990).

[7] Heideman v. PFL, Inc., 904 F.2d 1262, 1266 (8th Cir.1990), cert. denied, 498 U.S. 1026 (1991).

[8] Medellin v. Shalala, 23 F.3d 199, 204–05 (8th Cir. 1994).

[9] Hallmark Research Collective v. Commissioner, No. 21284 (U.S.T.C. Sep. 2-2021).

[10] I.R.C. §6213(a).

© 2022 Miller, Canfield, Paddock and Stone PLC National Law Review, Volume XII, Number 151
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About this Author

Loren M. Opper Tax Attorney Miller Canfield Detroit
Of Counsel

When it comes to tax issues, Loren Opper is widely recognized as one of the leading legal experts in the United States with an extensive prior background in both the private and public sectors. 

During a more than 35-year career at Ford Motor Co., most recently as director of IRS Audits, Appeals and Litigation, Loren was responsible for handling all of the automaker's complex federal tax issues. Currently his practice focuses on federal tax controversies, including income and employment taxes in the federal courts and matters within the Internal...

313-496-7858
Christie R. Galinski Tax Lawyer Miller Canfield
Principal

Christie Galinski is a tax attorney with more than 12 years of sophisticated transactional experience providing research and analysis regarding federal, state and international tax issues.

Christie's practice has focused on transactional tax issues, such as investment funds (including RICs and REITs), international tax issues, state tax issues, FATCA, tax-exempt organizations, formation of entities, 1202 stock, mergers and acquisitions, the CARES Act and other COVID relief. She also has experience requesting private letter rulings and closing agreements with the Internal Revenue...

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Samuel L. Parks  Tax Lawyer Employment and Labor Troy, Michigan, Miller Canfield
Associate

Samuel Parks is an associate in Miller Canfield's Corporate Group, with a focus on transactional and particularly tax work. He also has experience advising both public and private sector clients on employee benefit issues, including facilitating corrections of plan documentation and operational compliance failures, as well as drafting plan documentation and participant communications. A graduate of the University of Michigan Law School, he has previously worked at the Michigan Supreme Court and the Washtenaw Public Defender's Office. 

248-267-3361
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