SCOTUS Sides with Taxpayer on Collection Due Process Appeal Deadline
One day can make all the difference in tax lawsuits. But in Boechler PC v Commissioner of Internal Revenue, the Supreme Court of the United States said that filing a request for a collection due process appeal one day late may not have been enough to defeat the taxpayer’s claim. Calling the filing deadline procedural instead of jurisdictional, the Court opened the door for equitable tolling arguments to excuse the missed deadline.
Taxpayer Seeks Collection Due Process Appeal One Day Late
In 2015, the IRS sent a North Dakota law firm, Boechler, PC, a notice of a discrepancy in its tax filings. When the firm didn’t respond, the IRS assessed an “intentional disregard” penalty and started collections by sending Boechler a notice of intent to levy the firm’s property. Boechler responded requesting a “collection due process hearing” before the IRS Appeals Office. The hearing officer upheld the IRS’s penalty.
That started the clock. Boechler had 30 days to file a petition with the Tax Court to review the decision. It filed its petition on day 31. The Tax Court dismissed the firm’s petition for lack of jurisdiction, saying the deadline denied the Court jurisdiction over the appeal and could not be tolled (paused or extended) for equitable reasons.
Taxpayer Wins Jurisdictional Argument Due to Better Grammar
Boechler appealed its case all the way to the U.S. Supreme Court. There, on April 21, 2022, Justice Amy Coney Barrett issued an opinion from a unanimous Court in favor of the taxpayer. In the end, their decision came down to grammar.
The Supreme Court distinguished jurisdictional requirements – that control whether a court has authority to decide a case – from procedural requirements – which lay out how that case should play out. It said procedural rules will only limit the courts’ jurisdiction if Congress “clearly states” that they are jurisdictional in nature. The law allowing for collection due process hearing appeals states:
“The person may, within 30 days of a determination under this section, petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such a matter).”
The jurisdictional part of the law only shows up in the parenthetical at the end, and then only applies to “such a matter.” What matter is that?
Boechler relied on an English grammar rule called the “last-antecedent rule.” It says that a pronoun, like “such a matter,” generally refers back to the nearest reasonable noun preceding it. Here, “such a matter” related back to the determination on appeal. The “Commissioner stretches back one phrase more” to include the filing of a petition for that determination. The Supreme Court said that the grammar rule was “hardly a slam dunk for Boechler,” but it was enough to say that Congress had not clearly tied jurisdiction to meeting the appeal deadline.
The Court also noted that the filing deadline directed the taxpayer to do something, while the parenthetical “speaks to what the Tax Court shall do.” The Court said:
“Where multiple plausible interpretations exist – only one of which is jurisdictional – it is difficult to make the case that a jurisdictional reading is clear.”
The Court also compared the language in the collections due process hearing appeal statute with other parts of the Tax Code relating to jurisdiction. For example, the deadlines for requesting a tax refund have a much clearer link between jurisdiction and the filing deadline.
SCOTUS Opens the Door for Equitable Tolling of Collection Due Process Appeal Deadline
Just reading the collection due process appeal deadline as procedural, rather than jurisdictional, wasn’t enough to save the taxpayer’s case. The Supreme Court also had to take the additional step of allowing a taxpayer to argue equitable tolling should apply. Equitable tolling says that if the taxpayer has a good reason, a deadline can be paused or extended for as long as that reason exists. For example, the IRS tolls deadlines for taxpayers in combat zones or disaster areas.
The Court said that traditionally, American law allows equitable tolling of non-jurisdictional limitation periods. It found no reason to treat the collection due process appeal deadline differently.
- The statute did not expressly prohibit equitable tolling
- The short, 30-day time limit was directed at the taxpayer
- That part of the Tax Code is “unusually protective” of taxpayers
The IRS said allowing equitable tolling to apply to collection due process appeals would be an “administrative problem” because it wouldn’t know when the appeal period had ended. It supported its position with a similar case involving tax refund claims. However, the Supreme Court said that the tax refund case involved more than 200 million tax returns and 90 million tax refunds each year. Comparatively, the collections due process appeal involves a “far more limited and ancillary role in the tax collection system.” Petitions are also deemed filed when they are mailed, not when they are received by the IRS. The Court said:
Presumably, the IRS does not monitor when petitions for review are mailed. So it is not as if the IRS can confidently rush to seize property on day 31 anyway.
The unanimous Court decision follows a trend toward a precise interpretation of the word “jurisdiction” by the Supreme Court dating back to 2004. It isn’t likely to open the floodgates to new collection due process appeals cases, but it might occasionally crack the door open to taxpayers who, through no fault of their own, find themselves a day late in filing their appeal.
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.