Tax Court: 30-Day Deadline to Request CDP Hearing Can Be Equitably Tolled

(Parker Tax Publishing October 2023)

The Tax Court held that the IRS Independent Office of Appeals (Appeals) has authority under Code Sec. 6320 to hold a collection due process (CDP) hearing when the taxpayer files a request after the 30-day period set forth in Code Sec. 6320(a)(3)(B). The court found that the 30-day period is subject to equitable tolling where the circumstances warrant it and held that Kennedy v. Comm'r, 116 T.C. 255 (2001), is overruled to the extent that it holds that Appeals is not authorized to waive the 30-day period under Code Sec. 6320(a)(3)(B) and is not obliged to provide a CDP hearing where the circumstances warrant equitable tolling of the 30-day period. Organic Cannabis Foundation, LLC v. Comm'r, 161 T.C. No. 4 (2023).

Background

Organic Cannabis Foundation, LLC (Organic Cannabis) had unpaid income tax for 2010, 2011, and 2018. The IRS issued notices of federal tax lien filings to Organic Cannabis for all three years. Organic Cannabis timely requested a hearing with the IRS Independent Office of Appeals (Appeals) during the 30-day period for requesting a collection due process (CDP) hearing under Code Sec. 6320(a)(3)(B) (30-day period) for 2010 and 2011. However, Organic Cannabis requested a hearing for 2018 after the 30-day period.

Appeals provided a CDP hearing for 2010 and 2011. Appeals determined that Organic Cannabis's hearing request for 2018 was untimely and provided an equivalent hearing under Reg. Sec. 301.6320-1(i)(1). Appeals issued a Notice of Determination for 2010 and 2011 that did not contain a determination for 2018. Organic Cannabis filed a petition with the Tax Court seeking review for all 3 years. After the petition was filed, Appeals issued a decision letter for 2018.

The IRS filed a motion to dismiss for lack of jurisdiction on the grounds that Organic Cannabis's hearing request was untimely. Organic Cannabis responded by asking the Tax Court to extend the reasoning of Boechler, P.C. v. Comm'r, 2022 PTC 112 (S. Ct. 2022), and apply equitable tolling to the 30-day period for requesting a CDP hearing. In Boechler, the Supreme Court held that held that the 30-day period in Code Sec. 6330(d)(1) for a taxpayer to file a petition with the Tax Court for review of Appeals' determination following a CDP hearing is a nonjurisdictional deadline that is subject to equitable tolling. Organic Cannabis argued that the circumstances warranted equitable tolling and that Appeals should have treated its late hearing request as timely.

Reg. Sec. 301.6320-1 reiterates the 30-day period for requesting a CDP hearing and states that a taxpayer is entitled to a CDP hearing "if the taxpayer timely requests such a hearing." Reg. Sec. 301.6320-1(i)(1) states that if a taxpayer does not request a hearing within the 30-day period, it forgoes the right to a CDP hearing. Under the regulation, such a taxpayer may request an "equivalent hearing," after which Appeals will issue a decision letter rather than a notice of determination. A decision letter contains all the information that must be included in a notice of determination except it states that the taxpayer cannot seek judicial review of the decision letter.

In Kennedy v. Comm'r, 116 T.C. 255 (2001), the Tax Court held that Appeals is not authorized to waive the 30-day period for requesting a CDP hearing and that Appeals is not required to provide a CDP hearing requested after the 30-day period.

Analysis

The Tax Court held that Appeals has authority under Code Sec. 6320 to hold hearings when the taxpayer files a request after the 30-day period set forth in Code Sec. 6320(a)(3)(B). The court further held that the 30-day period is subject to equitable tolling where the circumstances warrant it. The court therefore remanded to Appeals to determine whether the circumstances surrounding Organic Cannabis's late filing warranted equitable tolling. The court overruled Kennedy to the extent that it holds that the 30-day period for requesting a CDP hearing is a fixed deadline that is not amenable to equitable tolling.

The Tax Court found that Code Sec. 6320 contains no clear statement that Appeals' authority to review collection actions is conditioned on the taxpayer submitting a CDP hearing request within the 30-day period. The court reasoned that, while a plausible interpretation of Code Sec. 6320(b)(1) may be that Appeals' authority is limited to timely requested CDP hearings, that was not enough. Under Boechler, the statute must contain a clear statement in order for the 30-day period to be an administrative bar. The court also found that the 30-day deadline for requesting a CDP hearing is amenable to equitable tolling. The court noted that there is a rebuttable presumption that nonjurisdictional deadlines are subject to equitable tolling, and the court found nothing to rebut that presumption. The court noted that the text of Code Sec. 6320 is silent as to equitable tolling. Further, the court saw nothing in the text of the statute that suggests that the 30-day period is an absolute or inflexible deadline.

The court found that none of the provisions in Reg. Sec. 301.6320-1 is a categorical bar to equitable tolling. The court reasoned that, while equivalent hearings can be viewed as an equitable exception to the 30-day period, the existence of an express equitable exception to a filing deadline does not foreclose the application of the broader doctrine of equitable tolling. The court also found that other parts of the regulations allow for equitable considerations and do not interpret the 30-day period as a fixed deadline. For example, the regulations allow taxpayers to perfect defective hearing requests after the 30-day period, which in the court's view is a clear example of equitable tolling permitted by the regulations.

In a dissenting opinion, three judges argued that the text of Reg. Sec. 301.6320-1 clearly establishes that a taxpayer's right to a CDP hearing is conditioned on the filing of a request within the 30-day period and provides that failure to file a timely request means the taxpayer "foregoes the right to a CDP hearing" and an equivalent hearing will instead be offered to the taxpayer.

For a discussion of the rules for requesting a CDP hearing, see Parker Tax ¶260,540.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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