Fair toll in a corner of the Internal Revenue Code
By Susan C. Morse
April 25, 2022
at 4:03 p.m.
If a taxpayer delays seeking judicial review in a tax proceeding known as a “due process” case, the United States Tax Court has the authority to excuse the missed delay on equitable grounds, a the Supreme Court ruled Thursday in a unanimous decision.
The case, Boechler v. Internal Revenue Commissioner, came after the Internal Revenue Service notified Boechler, PC, a North Dakota law firm, of its intention to levy on Boechler’s property to satisfy a penalty tax. After the IRS Independent Appeals Office upheld the levy, Boechler filed a one-day-late petition seeking a Tax Court review. The deadline for sending such a request for review is indicated in Section 6330(d)(1) of the Internal Revenue Code, which states that a “person may, within 30 days after making a determination under this section, apply to the Tax Court for a review of that determination (and the Tax Court shall have jurisdiction over this matter).”
The government argued that Section 6330(d)(1) is jurisdictional, so fair toll – the legal principle that allows courts to “levy” or extend time limits in certain circumstances – would not apply. not under Irwin v. Department of Veterans Affairs. In an opinion written by Judge Amy Coney Barrett, the court rejected the government’s argument. Rather, he held that the law is not jurisdictional and that fair tolling is an argument available in the Tax Court.
Grammar — or more accurately the lack thereof — was key to the court’s decision. The law provides jurisdiction over “such matter”, but does not say what “such matter” is. The problem is an unclear background. Not only does the law not provide an antecedent “matter” to which “such a matter” relates, but it also does not provide an antecedent noun to which “such a matter” relates. As the court explained, “both parties deal with this awkward structure by treating ‘petition’ as a noun, even though it appears in the provision as a verb.” But this assumption does not solve the problem, not even in conjunction with the application of a nearest antecedent rule. Other features of the layout’s text, structure and context also do not provide clarity. Certain legal penalties may be subject to sentence diagrams. But this one is not.
From this starting point of grammatical confusion, the opinion flows logically to its conclusion — a decision that will allow a principle of fairness to make fine adjustments to at least one corner of a complex modern law.
The tribunal explains that under its case law, including United States vs. Kwai Fun Wong, a procedural requirement is jurisdictional only if the law provides a “clear statement” of jurisdiction. Although the “magic words” are not necessary, under Sebelius Regional Medical Center vs. Auburn, clarity is. “[T]he jurisdictional condition must be precisely that: clear. And… the commissioner’s interpretation is not,” Barrett wrote. The presence of the word “jurisdiction” is not enough. The law must provide “a clear link between the time limit and the attribution of jurisdiction”.
The court rejected a government argument that section 6330(d)(1) must be jurisdictional because a related provision that allows stay of levy actions provides a clearer statement of jurisdiction. He also rejected the argument that Congress intended Section 6330(d)(1) to be jurisdictional because Congress was aware of case law that treated it as jurisdictional IRC. Chapter 6213, which provides a key statute of limitations regarding the Tax Court’s review of deficiency determinations. As the oral argument also revealed, the court seems hopeful that its clear reporting requirement will bring “discipline” to the field and encourage Congress to provide more statutory clarity.
The court went on to explain that because there is no clear statement, the statutory time limit is not jurisdictional. And when a delay is non-jurisdictional, Irwin assumes that it is subject to a fair toll.
The government argued in Boechler that fair toll should not be available for regular collection procedures because it is not available for IRC Chapter 6511 time allowed for taxpayers to file refund claims under United States vs. Brockampa 1997 unanimous decision. But the court rejected the government’s argument. Brockamp, Barrett wrote, implied a law with more “emphatic” language and also with six listed exceptions, which showed that Congress did not intend to subject Section 6511 to additional equity exceptions. Additionally, Section 6511 is relevant in many other cases; it is a “central provision of tax law”.
Boechler shows that the court seeks to find the right line to decide when equity can fit the complex and detailed scheme that is federal tax law. On the one hand, it seeks to follow its case law, according to which limitation periods are presumed to be non-jurisdictional in the absence of a clear declaration of jurisdiction (under Kwai Fun Wong); and that non-jurisdictional periods are presumed to be subject to an equitable toll unless Congress directs otherwise (under Irwin).
On the other hand, the court’s decision in Boechler applies to a “narrow and ancillary” category of tax matters. The court is careful to distinguish the question of whether the equitable toll can apply to broader, more central statutes of limitations – such as the Section 6511 statute of limitations for submitting claims or the statute of limitations of Section 6213 to challenge notices of deficiency. And that leaves open the government’s ability to claim that administrative concerns weigh against a fair toll for more “central” limitation periods.
The fair toll is not easy to obtain. For example, in Irwin, although the court allowed the plaintiff to plead for a fair toll, it declined to levy the statute of limitations. Instead, he explained, the facts in Irwin related to “a garden variety claim for excusable negligence”.
What deserves a fair toll? The Tax Court is about to work on this issue. An amicus memoir presented as a promising example of a fair toll, the case of Josefa Castillo, a taxpayer whose case before the United States Court of Appeals for the 2nd Circuit was stayed pending the outcome in Boechler. According to the memoir, Castillo was unaware (despite diligent efforts to find out) that the IRS was incorrectly assessing her for income tax from a business she had long since sold. Following BoechlerCastillo and other cases should begin to build a body of fair CDP toll precedent.
Boechler thus opens the door to an exercise in fairness worthy of being followed in the Tax Court. The Tax Court concluded several times and unanimously that section 6330(d)(1) was jurisdictional. Now the Supreme Court has ordered the Tax Court to change course, dust off some old books, and rediscover the fair toll law. This is news not only for tax lawyers, but also for private law scholars who advocate the reappropriation by the courts of the tools of fairness beyond the ability to issue injunctions. To post-Boechlerthe Tax Court will test and demonstrate how old fair concepts might adjust the results of modern technical laws.