Sixth Circuit Says Deficiency Petition Deadline is Not Jurisdictional

Everything in IRS tax collection comes with deadlines. This includes the 90-day tax deficiency petition deadline. But is there anything you can do if you miss that deadline and file your petition with the Tax Court late? The Sixth Circuit Court of Appeals’ recent decision in Oquendo v IRS may seem like nothing but legal trivia. But its ruling that the filing deadline is not jurisdictional could provide meaningful relief for some midwestern taxpayers who would otherwise be out of luck.

Tax Court Says Taxpayer Missed her Deficiency Petition Filing Deadline

On May 30, 2023, the IRS sent Naysha Oquendo a Notice of Tax Deficiency for her 2022 tax return. The IRS said that she was not entitled to file as the Head of Household, so she was not allowed to claim earned income and child tax credits on her tax return. Ms. Oquendo disagreed because she had three qualifying children who lived with her for more than six months out of the year in the home she “solely maintained.” The 90-day deadline for her to file a petition with the U.S. Tax Court was August 28, 2023. Unfortunately, Ms. Oquendo did not get notified about the IRS Notice of Tax Deficiency because the IRS sent the notice to her old address. So she did not know about it until her designated representative received a collection notice on October 9, 2023.

Ms. Oquendo hurried to file a deficiency petition with the U.S. Tax Court on November 1, 2023, but the judge said she was too late and dismissed the case. She filed an appeal to the Sixth Circuit, which reversed the decision and instructed the Tax Court to consider whether she had good cause to extend the deadline.

What Does “Jurisdictional” Mean?

To understand the Sixth Circuit’s recent decision in Oquendo v IRS, you need to know the meaning and significance of the legal term “jurisdiction.” Generally speaking, jurisdiction means the Court’s ability to hear and decide a case. There are two kinds of jurisdiction:

• Personal jurisdiction gives the Court authority over a person involved in a lawsuit (usually based on where they live or do business)
• Subject matter jurisdiction gives the Court authority over the type of lawsuit filed (usually based on the language of the statute being enforced)

When a court does not have subject matter jurisdiction over a case, the only thing the court can do is dismiss the case. If a different court has authority, the plaintiff can refile it in the right court. But if no court has jurisdiction over the case, then it is simply over. The Court has no flexibility to consider equitable arguments like lack of notice when a court lacks jurisdiction, the way it does when other kinds of deadlines or procedural requirements haven’t been met. That is why the Sixth Circuit’s decision in this case is so important.

Supreme Court Decision Resets the Clock on the Jurisdictional Question

When the IRS filed its motion to dismiss, it relied on a 1995 decision by the Sixth Circuit that said the deficiency petition deadline was jurisdictional. Ordinarily, that would be the end of the argument. But in the intervening time, the United States Supreme Court issued decisions trying to “bring some discipline” to the issue and keep lower courts from “‘loose[ly]’ using the word ‘jurisdiction.’” In decisions in 2023 and 2024, the Supreme Court “impose[d] a ‘high bar’ on any claim that Congress has deprived the federal courts of subject-matter jurisdiction over a dispute.” In Oquendo, the Sixth Circuit took the Supreme Court’s invitation to reconsider whether its earlier jurisdictional ruling was based on Congress’s clear intent.

Sixth Circuit Says Late Deficiency Petition Could be Excused

Upon taking a closer look at the language of the Internal Revenue Code (IRC), the Sixth Circuit said that the deficiency petition deadline was not jurisdictional at all. The relevant part of the statute said:

“Within 90 days[] … after the notice of deficiency … is mailed …, the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency."

The Court said that the clear language did not contain any directive to courts, but instead spoke to what taxpayers must do. Similar to another recent Supreme Court decision in Boechler PC v Comm’r, the Sixth Circuit held that the statute imposed a deadline for filing, but not a jurisdictional limit. That meant courts could consider arguments for “equitable tolling” in cases where special circumstances applied, such as Ms. Oquendo’s lack of notice.

Sixth Circuit Decision Widens Split Between the Circuits

In reaching its decision, the Sixth Circuit acknowledged that other circuit courts disagreed with it. The Second and Third circuits had reached similar conclusions, that the deficiency petition deadline was not jurisdictional. However the Seventh and Ninth Circuits had older decisions saying the opposite. These kinds of splits between the circuits often signal that a new Supreme Court decision is coming. The IRS could even appeal the Sixth Circuit’s Oquendo decision. If it does, it will invite the Supreme Court to apply its own “high bar” to the jurisdictional question, and it may not like the answer.

Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 35 years experience. If the IRS is trying to collect unpaid taxes and penalties from you or your clients, contact Joe Viola to schedule a free consultation.