Tax Court Holds That 90-Day Deadline is Jurisdictional, Not Subject to Equitable Tolling

(Parker Tax Publishing December 2022)

The Tax Court declined to vacate the dismissal of a deficiency case for lack of jurisdiction in which a taxpayer filed its petition one day after the 90-day deadline in Code Sec. 6213(a) after finding that the deadline to file a deficiency case is jurisdictional and cannot be equitably tolled. The taxpayer argued that its case should be reopened in light of the Supreme Court's decision in Boechler, P.C. v. Comm'r, 2022 PTC 112 (S. Ct. 2022), that the 30-day filing deadline in Code Sec. 6330(d)(1) is not jurisdictional and may be equitably tolled; however, the Tax Court determined that the reasoning of Boechler does not apply to the 90-day deadline of Code Sec. 6213(a). Hallmark Research Collective v. Comm'r, 159 T.C. No. 6 (2022).

Background

Hallmark Research Collective (Hallmark) filed its 2015 tax return late and did not file its 2016 return. The IRS sent a statutory notice of deficiency (NOD) to Hallmark's last known address, by certified mail, on June 3, 2021. The NOD determined deficiencies, additions to tax, and penalties against Hallmark for the years 2015 and 2016 and advised that if it wanted to contest the IRS's final determination, Hallmark had 90 days from the date of the letter to file a petition with the Tax Court. The NOD included on its front page the caption: "Last day to file petition with US tax court: SEP 01 2021." Hallmark electronically filed its petition for redetermination of the deficiencies on September 2, 2021 - one day late. In its petition Hallmark stated: "My CPA . . . contracted COVID/DELTA over the last 40 days and kindly requests additional time to respond."

The Tax Court ordered Hallmark and the IRS to file a response showing cause why the court should not dismiss the case for lack of jurisdiction on the ground that Hallmark's petition was not timely filed. Hallmark filed its response, in which it requested that the court defer ruling until the Supreme Court issued its decision in Boechler, P.C., v. Comm'r, 2022 PTC 112 (S. Ct. 2022). Hallmark argued that the deadline to file a deficiency petition in Code Sec. 6213(a) "is functionally the same" as the Code Sec. 6330(d)(1) 30-day deadline in Boechler to petition the Tax Court for review of a collections due process determination. The IRS responded that there was no cause as to why the court should not, on its own motion, dismiss the case for lack of jurisdiction on the ground that the petition was not timely filed. The Tax Court agreed with the IRS and dismissed the case, holding that the 90-day deadline of Code Sec. 6213)(a) for deficiency cases is jurisdictional.

The first sentence of Code Sec. 6213(a) states that "[w]ithin 90 days...after the notice of deficiency authorized in section 6212 is mailed...the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency." The fourth sentence of the statute reads: "The Tax Court shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subjection 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."

On April 21, 2022, the Supreme Court issued its opinion in Boechler, holding that the 30-day time limit in Code Sec. 6330(d)(1) is an ordinary, non-jurisdictional deadline subject to equitable tolling. In light of that decision, Hallmark filed a motion with the Tax Court to vacate its order dismissing its case. Hallmark argued that the Supreme Court's reasoning in Boechler compelled the conclusion that the 90-day filing deadline in Code Sec. 6213(a) for deficiency cases is not jurisdictional and thus is subject to equitable tolling. Hallmark argued that the Boechler opinion's analysis of Code Sec. 6330(d)(1) - a provision that "closely resembles" Code Sec. 6213(a) - undermined the jurisdictional interpretation of Code Sec. 6213(a).

Analysis

The Tax Court held that Hallmark's case was properly dismissed because the 90-day deadline in Code Sec. 6213(a) is jurisdictional and therefore cannot be equitably tolled. In the court's view, the text, context, and historical treatment of Code Sec. 6213(a) confirm Congress's intention that the deadline to file a deficiency case be jurisdictional.

The court explained that under Arbaugh v. Y&H Corp., 546 U.S. 500 (S. Ct. 2006), Congress must "clearly state" that a filing deadline is jurisdictional, and absent such a clear statement, courts should treat such a restriction as non-jurisdictional in character. The court also noted that in Reed Elsevier, Inc. v. Muchnick, 559 U.S. 157 (2010), the Supreme Court held that the "text, context, and relevant historical treatment" of the provision at issue must be examined in order to determine if Congress has made the necessary clear statement.

Analyzing the text of Code Sec. 6213(a), the Tax Court noted that the statute sets forth two prerequisites for a Tax Court deficiency case: (1) a valid notice of deficiency issued by the IRS, and (2) a petition timely filed by the taxpayer. The court found that both are jurisdictional. The court observed that in Laing v. U.S., 423 U.S. 161 (S. Ct. 1976), the Supreme Court held that a deficiency notice "is of import because it is a jurisdictional prerequisite" to a taxpayer's suit in the Tax Court for redetermination of his tax liability. The court said that the requirement of a valid NOD and the 90-day deadline are inseparably linked in the first sentence of Code Sec. 6213(a) and reasoned that if the 90-day deadline were not jurisdictional, it could not see how the requirement of a valid NOD could be jurisdictional.

The court noted that the only explicit reference to jurisdiction in Code Sec. 6213(a) is in the fourth sentence of the statute, which provides for supplemental injunction or refund jurisdiction where a deficiency petition is before the court, but only if the petition was "timely." In the court's view, if timeliness were a jurisdictional prerequisite for the supplemental injunction or refund but not for the predicate deficiency case, then an oddity might result: Where a deficiency case was filed untimely, the court might nonetheless have deficiency jurisdiction via equitable tolling, but by the statute it could not have jurisdiction over any related injunction or refund claim. The court found that, viewing the statutory text as a whole, the way to avoid this anomaly was to recognize "timely petition" to be a jurisdictional prerequisite for both the injunction power and the underlying deficiency case.

The court also found that from time to time Congress has marginally extended the deadline of Code Sec. 6213(a) to accommodate a variety of potentially sympathetic situations. The court observed that each of these modifications was made to address a scenario that the Tax Court could have addressed with equitable tolling if it had such power. But the court said that Congress recognized that the Tax Court does not have the power to extend the jurisdictional deadline imposed by Code Sec. 6213. Thus, the court concluded that Congress, in the course of its amendments, has treated the deadline of Code Sec. 6213(a) (and its predecessor statutes) as a jurisdictional deadline that the Tax Court cannot alter or toll.

Next, the court found contextual support for the conclusion that the petition filing deadline is jurisdictional in Code Sec. 7459(d), which deals with the effect of a dismissal of a deficiency case. The general rule of Code Sec. 7459(d) is that, in cases where (1) there has been a deficiency determined by the IRS, (2) a petition has been filed by a taxpayer, and (3) the amount of the deficiency is determinable from the record, then the Tax Court's dismissal of the petition is the functional equivalent of a merits decision sustaining the determination of the deficiency. However, Code Sec. 7459(d) makes a specific exception for circumstances where the dismissal is for "lack of jurisdiction." The court found that this exception applies, and the Tax Court should dismiss without entering a decision, either when the NOD is defective or when the petition is untimely. The court rejected Hallmark's contention that the exception in Code Sec. 7459(d) addresses defects other than those in Code Sec. 6213(a), such as a petition that is barred by the automatic stay in bankruptcy. In the court's view, Hallmark failed to show that Congress added the exception not to address circumstances of invalid NODs or untimely petitions, but instead to address such other jurisdictional circumstances.

The court then reviewed the historical treatment of Code Sec. 6213 by Congress and the circuit courts of appeals, which in the court's view demonstrated that the deadline for filing a deficiency case is jurisdictional. The court said that over nearly a 100 years of reenactments and amendments of Code Sec. 6213(a), Congress has left substantially unchanged the wording of its jurisdictional grant, and Congress's additions to Code Sec. 6213(a) have clarified that the deadline is jurisdictional. The court also noted that the deadline to file a deficiency case has been uniformly construed as jurisdictional not only by the Tax Court and its predecessors but also by the circuit courts of appeals. The court reasoned that Congress was presumptively aware of this treatment by the courts but nevertheless has preserved the operative text in Code Sec. 6213 through every reenactment and amendment, thereby carrying forward that interpretation.

The court rejected Hallmark's argument that the Boechler decision compelled the conclusion that the 90-day deadline in Code Sec. 6213(a) is not jurisdictional. The court said that Code Sec. 6330(d)(1) and Code Sec. 6213(a) had to be analyzed in light of their own text, context, and history. The court also found that, unlike Code Sec. 6213(a), there was no history of prior judicial construction of Code Sec. 6330(d)(1) being jurisdictional, nor was there any congressional ratification of that construction of Code Sec. 6330(d)(1) in reenactments.

For a discussion of the Tax Court's jurisdiction to redetermine a deficiency, see Parker Tax ¶263,510.

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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