90-day deadline for filing Tax Court petition in deficiency case is jurisdictional

Despite the Supreme Court’s decision in Boechler, 142 S. Ct. 1493 (2022), holding that the Sec. 6330(d)(1)(a) 30-day deadline to file a petition for review of a Collection Due Process (CDP) hearing was a nonjurisdictional deadline subject to equitable tolling, the Tax Court held, based on the text, context, and relevant historical treatment of Sec. 6213(a), that the 90-day deadline to file a Tax Court petition in a deficiency case is jurisdictional and not subject to equitable tolling.

Background

Hallmark Research Collective is a California corporation. The company filed its 2015 return late and did not file a 2016 return. The IRS prepared a substitute for return for 2016 for Hallmark. On June 3, 2021, the IRS sent the company a statutory notice of deficiency for 2015 and 2016.

The notice of deficiency stated in its front-page caption that the last day to file a petition challenging the IRS’s determinations in the notice of deficiency was Sept. 1, 2021. Despite the IRS’s clear statement of the filing deadline, Hallmark did not file a petition challenging the deficiencies asserted in the notice of deficiency until Sept. 2, one day after the filing deadline. In its petition, Hallmark gave as an excuse for the late filing that its CPA had contracted COVID-19. The Tax Court, following its long-standing precedent that the Sec. 6213(a) filing deadline is jurisdictional, dismissed the case for lack of jurisdiction.

Three weeks after the Tax Court dismissed the case, however, the Supreme Court handed down its decision in Boechler, 142 S. Ct. 1493 (2022). In that case, the Court held that “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.”

In response to the Boechler decision, Hallmark quickly filed a motion to vacate the Tax Court’s decision, in which it argued that the Supreme Court’s reasoning in Boechler compelled the conclusion that the Sec. 6213(a) deadline for deficiency cases is also not jurisdictional and is therefore subject to equitable tolling.

The Tax Court’s decision

The Tax Court denied Hallmark’s motion to vacate, holding that the timely filing of a petition in a deficiency case is a jurisdictional requirement. After reviewing the Supreme Court’s opinion in Boechler, the court found that the reasoning in that case that applied to the 30-day deadline in Sec. 6330(d)(1) for CDP hearings did not apply to the 90-day deadline for filing a petition with the Tax Court in a deficiency case under Sec. 6213(a). Based on an analysis of the text, context, and relevant historical treatment of Sec. 6213(a), the court concluded that the statute clearly states that the deadline is jurisdictional and, consequently, equitable tolling does not apply to it.

Effect of the Boechler decision: Hallmark argued that the Supreme Court’s reasoning in Boechler compelled the conclusion that the 90-day deadline in Sec. 6213(a) for deficiency cases was not jurisdictional because Sec. 6330(d)(1) closely resembles Sec. 6213(a). The Tax Court, however, found that “Boechler emphatically teaches that these are different sections. Each must be analyzed in light of its own text, context, and history.” Therefore, the Tax Court determined it must separately analyze Sec. 6213(a) and could not simply rely on the Supreme Court’s reasoning with respect to whether the deadline in Sec. 6330(d)(1) is jurisdictional to determine whether the deadline in Sec. 6213(a) is jurisdictional.

Standard for Tax Court’s analysis: The Tax Court first discussed the standard for determining whether a deadline is a jurisdictional rule that cannot be tolled or waived, or if it is a claims-processing rule that is subject to equitable tolling. To be a jurisdictional rule, according to the court, “an analysis employing the principles of statutory construction must show that the rule ‘clearly states’ it is jurisdictional.” In performing this analysis, the Supreme Court has held that a court should examine the text, context, and relevant historical treatment of the provision at issue (Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010)).

The Tax Court’s analysis: Applying the standard set out by the Supreme Court, the court concluded that Sec. 6213(a) clearly stated that the 90-day deadline for filing a deficiency case in the statute was jurisdictional.

The Tax Court first observed that Sec. 6213(a) is the provision that confers the Tax Court’s jurisdiction over deficiency cases and that the 90-day deadline is not only in Sec. 6213(a) but is in the same sentence as and is embedded in the jurisdictional grant. Thus, the court found that the placement of the deadline in the jurisdictional statute is an indication that the deadline is jurisdictional.

The Tax Court next noted that the fourth sentence of Sec. 6213(a) indirectly indicates that deficiency jurisdiction depends on a timely petition by precluding the court from issuing an injunction or ordering a refund “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.” Having found that a statute must be construed as a whole, the court stated the fourth sentence implied that the deadline in the first sentence was jurisdictional in character. However, the court further stated that while this explicit “jurisdiction” provision in the fourth sentence of Sec. 6213(a) invoking the deadline in the first sentence of the statute strengthened the argument that the deadline was jurisdictional, it did not settle the issue.

The Tax Court then considered the interplay between Sec. 7459(d) and Sec. 6213(a) and determined that it confirmed that the Sec. 6213(a) deadline was jurisdictional. Under the general rule of Sec. 7459(d), a dismissal of a deficiency case sustains the IRS’s deficiency determination. However, in an exception to this rule, the dismissal does not result in the deficiency determination’s being sustained where the dismissal is for lack of jurisdiction. The court concluded, in light of Sec. 7459(d), that treating the deadline in Sec. 6213(a) as nonjurisdictional would be untenable for two reasons.

First, treating the dismissal of an untimely petition as nonjurisdictional would result in the taxpayer’s deficiency amount being the deficiency determined in the notice of deficiency. This outcome, the court stated, would be improper because it would put Sec. 6213(a) and Sec. 7459(d) at odds with each other and with the manifest purpose of the statutory regime. Second, applying the Sec. 7459(d) exception only to dismissals other than those called for by Sec. 6213(a) would in the court’s view contradict the actual history and intent of Sec. 7459(d).

The Tax Court then considered the historical treatment of Sec. 6213(a) and its predecessors. The court reviewed nearly a hundred years of amendments to the statute, from the enactment of Section 274 of the Revenue Act of 1924, P.L. 68-176, to the amendments made to Sec. 6213(a) in the Internal Revenue Service Restructuring and Reform Act of 1998, P.L. 105-206. Based on this review, it found that “Congress has left substantially unchanged the wording of its jurisdictional grant, and Congress’s additions to section 6213(a) have clarified that its deadline is jurisdictional.” In addition, the court found that over the years, the deadline to file a deficiency case had been uniformly construed as jurisdictional not only by the Tax Court and its predecessors but also by the circuit courts of appeals.

In addition, the Tax Court considered whether, as Hallmark argued, that deficiency jurisdiction was actually conferred on the Tax Court by Sec. 6214(a) rather than Sec. 6213(a). As the court explained, if it were, the grant of jurisdiction would be in a different statute than the 90-day filing deadline, lending credence to the argument that the deadline is not jurisdictional.

Hallmark argued that Sec. 6214(a), which it claimed dates back to Section 274(a) of the Revenue Act of 1926, 44 Stat. 9, rather than Sec. 6213(a), is the jurisdictional grant to the Tax Court over deficiency cases because it explicitly mentions jurisdiction, whereas Sec. 6213(a) does not. The Tax Court found Hallmark’s interpretation to be both historically and contextually inaccurate. Hallmark was correct in observing that Sec. 6214(a) traced back to Section 274 of the Revenue Act of 1926, but unlike Sec. 6213(a), it traced back to Section 274(e) rather than Section 274(a). The Tax Court had also previously held that Sec. 6214(a) does not confer deficiency jurisdiction independently but instead supplements the jurisdiction conferred by Sec. 6213(a).

Conclusion: Based on its analysis, the Tax Court held that Sec. 6213(a) clearly states, as indicated by its text, context, and uniform treatment during its long history, that the 90-day deadline for filing a Tax Court petition in deficiency cases is jurisdictional. Consequently, Congress has limited the Tax Court’s deficiency jurisdiction to cases in which a petition has been filed within the Sec. 6213 deadline, and the court must dismiss late-filed deficiency petitions for lack of jurisdiction.

Reflections

This case was reviewed by all the Tax Court judges and all agreed with the opinion. However, Hallmark might take heart in the fact that in Boechler all the Tax Court judges agreed with the court’s holding that the deadline to request a CDP hearing was jurisdictional, and, on appeal to the Supreme Court, the Court held unanimously that the deadline was not jurisdictional. However, even if Hallmark is able to get the Tax Court’s holding reversed on appeal, it will still have to convince the courts that its excuse for not filing its Tax Court petition timely entitles the company to equitable tolling of the filing deadline.

Hallmark Research Collective, 159 T.C. No. 6 (2022)

Contributor

James A. Beavers, CPA, CGMA, J.D., LL.M., is The Tax Adviser’s tax technical content manager. For more information about this column, contact thetaxadviser@aicpa.org.