The Supreme Court does not muck around with Tax Court decisions very much. So Boechler, P.C v, Commissioner of Internal Revenue has a small but passionate group of people excited. It was a unanimous opinion delivered by Amy Coney Barrett. She managed to work in a hat tip to the late Justice Antonin Scalia, whom she clerked for and who was a pal of Ruth Bader Ginsburg, whose seat Barrett occupies. The decision is about the deadline for filing an appeal of the IRS decision in a Collection Due Process Hearing.
What Is A Collection Due Process Hearing?
If it has been determined that you owe money to the IRS and you don’t just send them a check, you will at some point hear from the collection people. It starts with annoying mail. It may end there and if ten years goes by you are olly olly oxen free. If you are not so lucky you will at some point get some mail to the effect that they are filing a lien or intend to levy you (i.e. take your stuff). They will inform you that you that you can file Form 12153 Request for a Collection Due Process or Equivalent Hearing where you will get to discuss various options such as paying over time or having them settle for a lower amount.
If you don’t like the result of the CDP hearing, you can appeal the result to the Tax Court which will determine whether the IRS abused its discretion. CDP is a significant part of the Tax Court’s business. According to National Taxpayer Advocate it ranks third in number of opinions and fifth in number of petitions.
There is a very tight deadline for filing a Tax Court petition to appeal a CDP determination – thirty days. There are special rules for when Day 30 lands on a weekend or holiday and a timely mailed timely filed rule, but overall the deadline is very strict. Cases where people are fighting about the deadline are a major source for Reilly’s Seventeenth Law of Tax Planning – Don’t cut your deadlines close and use the US Mail with proof of mailing.
The Issue
On June 5, 2015 IRS sent Boechler P.C. a letter noting a discrepancy between their quarterly payroll returns (Form 941) and the W-2s that they had submitted. Boechler P.C. did not respond to the letter. For that the IRS imposed a 10% intentional disregard penalty in the amount of $19,250.37. Boechler P.C. did not pay the penalty after notice and demand. On October 13, 2016 IRS mailed Boechler P.C. a notice of intent to levy, (That means they will take their stuff most likely money). The levy notice got their attention.
On November 1, 2016, the company requested a CDP hearing. The IRS notified the company that it had to provide copies of W-2s and proof of timely filing or proof that it responded to correspondence from SSA and the IRS. There was some back and forth, but in the end the Office of Appeals mailed Boechler P.C. a notice of determination sustaining the proposed levy on July 28, 2017.
Boechler P.C. filed a petition with the Tax Court contesting the determination. The Tax Court received the petition on September 1, 2017. The postmark was August 29, 2017, which worked out to be a day late.
The Tax Court ruled that they did not have jurisdiction to even consider the petition. Boecler P.C. argued that the due date was not jurisdictional and that they should have the right to argue that they were entitled to “equitable tolling”. The Eighth Circuit agreed with the Tax Court that the thirty day deadline is “jurisdictional”. If you miss the deadline no Tax Court for you.
Words Matter
The whole case is pretty much about how to read one sentence (Section 6330(d)(1)
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 matter).
In the oral arguments, Chief Justice Roberts joked that it might come down to sentence diagramming – something he had not done in a while. Here is how Justice Barrett frames the issue:
The answer depends on the meaning of “such matter,” the phrase marking the bounds of the Tax Court’s jurisdiction. Boechler contends that it refers only to the immediately preceding phrase: a “petition [to] the Tax Court for review of such determination.” If so, the filing deadline is independent of the jurisdictional grant. The Commissioner, by contrast, argues that “such matter” refers to the entire first clause of the sentence, sweeping in the deadline and granting jurisdiction only over petitions filed within that time. On this reading, the deadline is jurisdictional.
This is where the homage to the late Justice Scalia comes in as we get a cite to Reading Law: The Interpretation of Legal Texts which Justice Scalia coauthored. I checked my copy for the relevant rule and here it is.
18. Last-Antecedent Canon. A pronoun, relative pronoun, or demonstrative adjective generally refers to the nearest reasonable antecedent
Form that Justice Barrett got
And Boechler links “such matter” to the phrase immediately preceding the jurisdictional parenthetical, while the Commissioner stretches back one phrase more. This is hardly a slam dunk for Boechler, but it is one reason to prefer its reading—or at least to regard the Commissioner’s as not clearly right.
There is more to it, of course, although much to my disappointment no diagram of the sentence, but in the end we get:
Section 6330(d)(1)’s 30-day time limit to file a petition for review of a collection due process determination is an ordinary, nonjurisdictional deadline subject to equitable tolling
For The Little People
On most tax matters it is possible that you might qualify for two trips to Tax Court. The first one will come after you get a statutory notice of deficiency possibly as the result of an audit or not filing a return. That has a 90 day deadline with the same sort of inflexibility that the 30 day limit on a CDP appeal had. The 90 day limit has not changed. It remains jurisdictional, but there is a case in the system seeking to challenge that.
The Boechler case was a little unusual in that the penalty in question did not allow Tax Court review before assessment. So the CDP appeal was the only recourse other than paying the penalty and suing for refund. The nature of the problem that they had – 941s not matching W-2s- is the sort of thing that you can avoid by using a good payroll service like ADP or Paychex
PAYX
My prediction based on just the public record and my years of experience is that Boechler P.C. will end up still owing the penalty when all is said and done. That has happened a couple of times with Supreme Court decisions. The one that comes to mind is Cheek which seemed like a great boon to tax protesters like Kent Hovind who crafted a Cheek defense. It didn’t do Mr. Cheek any good though.
Among the attorneys who won this case are those of The Federal Tax Clinic of the Legal Services Center of Harvard Law School – Keith Fogg and Carlton Smith. Mr. Smith gives credit to several others in a piece title Winning Boechler Took a Village. The tight deadline, with no equitable slack, is a serious hardship for low income people who end up being helped by tax clinics. They are moving forward on another case which will challenge the 90 day limit on deficiency appeals as being jurisdictional.
A Critic
Lew Taishoff, who follows the Tax Court with incredible thoroughness and diligence, is not pleased with this decision. In YA CAN’T MAKE THIS STUFF UP – PART DEUX, he wrote:
If equitable tolling is adopted in CDP cases, then IRS may have started collection, then have collection stayed by Section 6330(e) on the late-filed petition after the original thirty-day jurisdictional cutoff, then unstayed by Tax Court after trial or summary J, and possibly restayed on appeal. This is chaos.
He goes on referring to a case he covered some time ago.
Now they can petition late, play the equivalent hearing game, and when the game is up, ask for equitable tolling. Or even better, file late and then decide which card to play. Judge Albert G (“Scholar Al”) Lauber can expect a bushel basketful of cases from rounders, defiers, protesters, wits, wags, and wiseacres, all playing the Boechler gambit, with variations.
In sympathy a bit with Mr. Taishoff, I will say that I think the collection system overall bends over backwards for people who chose not to pay their taxes. Remember that in most cases, Boechler’s penalty being an exception, there is substantial due process available before tax can be a assessed. But we now have a system in which the assessed tax is sort of a sticker price for people with the gumption to work the collection system.
The Harvard clinic people end up helping people who are probably dealing with problems not of their own making and having to work with a system more complicated than it needs to be, but there is another class of nontaxpayers that merits less sympathy.
Don’t Try This At Home
Despite the liberalization that the Supremes are imposing on the Tax Court, Reilly’s Seventeenth Law remains in effect. Don’t cut the deadline close and use US Mail making sure you bring it to the Post Office and get your proof of mailing stamped. And use a payroll service. Just make sure it is a substantial one that is not going to invest your withholdings in Bitcoin
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